40. Operating segments

The Group operates in the following two segments:

1. services to individual and business customers segment which relates to the provision of services to the general public, including digital television transmission signal, mobile services, the Internet access services, the mobile TV services, the online TV services and production of set-top boxes,
2. broadcasting and television production segment.

The Group conducts its operating activities primarily in Poland.

The activities of the Group are grouped into segment with distinguishable scope of operations where services are rendered and merchandise delivered in a specific economic environment. Activities of defined segments are characterized by different risk levels and different investment returns from those of the Group’s other segments. The operating segments also represent reportable segments of the Group.

Services to individual and business customers segment includes:

• digital pay television services which primarily relate to direct distribution of technologically advanced pay-TV services and revenues are generated mainly by pay-TV subscription fees,
• mobile telecommunication services (postpaid and mix) which generate revenues mainly from interconnection revenues, settlements with mobile network operators and subscription fees,
• mobile telecommunication prepaid services which generate revenues mainly from interconnection revenues and settlements with mobile network operators,
• providing access to broadband Internet which generates revenues mainly from traffic and subscription fees;
• telecommunication wholesale services, including international and domestic roaming as well as telecommunication infrastructure sharing services,
• online TV services (IPLA) available on computers, smartphones, tablets, SmartTV, game consoles and other TV equipment which generate revenues mainly from subscription fees and advertising on the Internet,
• Premium Rate services based on SMS/IVR/MMS/WAP technology,
• production of set-top boxes,
• sale of telecommunication equipment and production of set-top boxes.

Broadcasting and television production segment consists mainly of production, acquisition and broadcasting of information and entertainment programs as well as TV series and feature films broadcasted on television and radio channels in Poland. The revenues generated by the broadcasting and television production segment relate mainly to advertising and sponsorship revenues as well as revenues from cable and satellite operators.

Management evaluates the operating segments’ results based on EBITDA. The EBITDA reflects the Group’s ability to generate cash in a stable environment. The Group defines EBITDA as profit from operating activities increased by depreciation, amortization, impairment and liquidation. The EBITDA is not an EU IFRS measure and thus its calculations may differ among the entities.

The table below presents a summary of the Group’s revenues, expenses, acquisition of property, plant and equipment, reception equipment and other intangible assets as well as assets by operating segment for the year ended 31 December 2016:

All material revenues are generated in Poland.

It should be noted that the year ended 31 December 2016 is not comparable to the year ended 31 December 2015 as Radio PIN was acquired on 27 February 2015 (allocated to the Broadcasting and television production segment), Orsen Holding Limited was acquired on 1 April 2015 (allocated to the Services to individual and business customers segment), Litenite Ltd. was acquired on 29 February 2016 (allocated to the Services to individual and business customers segment) and IT Polpager S.A. was acquired on 30 September 2016 (allocated to the Services to individual and business customers segment).

The table below presents a summary of the Group’s revenues, expenses, acquisition of property, plant and equipment, reception equipment and other intangible assets as well as assets by operating segment for the year ended 31 December 2015:

Reconciliation of EBITDA and Net profit for the period: