RESULTS PRESENTATION 9 MAY 2013 Disclaimer This presentation - - PowerPoint PPT Presentation

9 MAY 2013

1Q13 RESULTS PRESENTATION

This presentation contains forward looking information, including statements which constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and assumptions of our management and on information available to management only as of the date such statements were made. Forward-looking statements include (a) information concerning strategy, possible or assumed future results of our operations, earnings, industry conditions, demand and pricing for

• ur products and other aspects of our business, possible or future payment of dividends and share buy back program; and

(b) statements that are preceded by, followed by or include the words “believes”, “expects”, “anticipates”, “intends”, “is confident”, “plans”, “estimates”, “may”, “might”, “could”, “would”, and the negatives of such terms or similar expressions. These statements are not guarantees of future performance and are subject to factors, risks and uncertainties that could cause the assumptions and beliefs upon which the forwarding looking statements were based to substantially differ from the expectation predicted herein. These factors, risks and uncertainties include, but are not limited to, changes in demand for the company’s services, technological changes, the effects

• f competition, telecommunications sector conditions, changes in regulation and economic conditions. Further, certain forward looking

statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from the plans, strategy, objectives, expectations, estimates and intentions expressed or implied in such forward-looking

• statements. Additionally, some of these statements refer to board proposals to be submitted to ZON - Multimédia – Serviços de

Telecomunicações e Multimédia, SGPS, S.A. (“Multimedia” or “ZON”) AGM and subject to (i) its approval by Multimedia’s shareholders, (ii) the market conditions and (iii) the ZON’s financial and accounting position as revealed in the financial statements approved by Multimedia’s AGM. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to provide reasons why actual results may differ. You are cautioned not to place undue reliance on any forward-looking statements. ZON Multimedia is exempt from filing periodic reports with the United States Securities and Exchange Commission (“SEC”) pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, as amended. The SEC file number for PT Multimedia’s exemption is No. 82-5059. Under this exemption, ZON Multimedia is required to post on its website English language translations, versions or summaries of certain information that it has made or is required to make public in Portugal, has filed or is required to file with the regulated market Eurolist by Euronext Lisbon or has distributed or is required to distribute to its security holders. This presentation is not an offer to sell or a solicitation of an offer to buy any securities.

Disclaimer

 Record Take up of IRIS, with net adds of 50 thousand in 1Q13, reaching 285 thousand subs  IRIS voted the best TV product of the year by consumers and Timewarp the best new TV product in terms of marketing and innovation  ZON voted the best TV, Broadband and Fixed Voice provider by ECSI (European Customer Satisfaction Index)  Strengthened position in Business segment with major new corporate accounts being signed up  Sequential growth in quarterly revenues of core Pay TV, BB and Voice business, +0.9% over the previous quarter  Highest ever quarterly EBITDA and EBITDA-CAPEX  African JV posting very strong growth with revenues in 1Q13 up 56% yoy

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1Q13 Highlights

1Q13 Operating Review

 50 thousand IRIS net-adds in 1Q13, the best quarter since launch. IRIS customers now represent 36% of the Triple Play base  781.5 thousand Triple Play customers, up 9.2% yoy representing 64.6% of cable customers

5

Record net-adds in IRIS, 65% Triple Play penetration

Triple Play Customers and Penetration of Cable Base [Thousands, %] IRIS customers and Penetration of Triple Play Customer Base [Thousands, %]

Net Adds [Thousands]

666.0 715.7 781.5 57.6% 59.4% 64.6%

1Q11 1Q12 1Q13

28.3 46.2 65.0 97.0 118.9 161.5 193.0 234.8 284.4

4% 7% 9% 14% 17% 22% 26% 30% 36%

• 5%

• 35

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

28.3 17.9 18.8 32.1 21.9 42.6 31.4 41.8 49.6

+7.5% +9.2%

 ECSI (European Customer Satisfaction Index) : ZON #1 in customer satisfaction in all 3 services – Pay TV, BB and Voice  Consumers voted IRIS the best Triple Play service of the year and Timewarp the best new TV product in terms of innovation and marketing  TV Connect Industry awards – ZON Online voted the best TV on the move service

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An award winning interface and service – the best Triple Play offer and most satisfied customers

Continuously innovating with the launch of the best content and most relevant features

 Launch of new smartphone APP that automatically identifies available ZON@FON hotspots with simplified login process  ZON customers can access, for free, over 500 thousand WiFi hotspots in Portugal and 7 million around the world  Launch of new channels, some of which exclusive to ZON:  Globo (brazilian series and movies, general entertainment) *  +TVI (national/TVI produced content) *  Disney Junior  Canal Q (portuguese comedy)

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* Exclusive

Growth in Corporate and SME

 Technical offer and commercial team have been strengthened  Tendering for relevant contracts in Public and Corporate sectors  Differentiated, integrated services at very competitive costs  Leveraging capillarity and sophistication of ZON’s Next Generation Network  In 1Q13 an important contract to provide fixed communications to a large retail bank in Portugal was won

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 Broadband net adds of 10 thousand, bringing the total customer base to 800 thousand  66.2% penetration of cable base  63% subscribe offers greater than 20 Mbps and 45% higher or equal to 30 Mbps

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Growing in Broadband and Fixed Voice

Broadband Subscribers

[Thousands, % of Penetration of Cable Base]

Fixed Voice Subscribers

[Thousands; % of Penetration of Cable Base]

 Fixed Voice net adds of 9.4 thousand, bringing the total customer base to 986 thousand  79.9% penetration of cable customer base

704.7 748.6 799.9 61.0% 62.1% 66.2%

1Q11 1Q12 1Q13 807.5 921.4 985.8 68.2% 74.9% 79.9%

1Q11 1Q12 1Q13

 Basic ARPU from core Pay TV, BB and Voice services increased 1.3% yoy and by 3.4% in comparison with the previous quarter  Adjusting for the impact of entry level

• ffers, basic ARPU would have grown by

2.9% yoy  Premium channel subscriptions, primarily sports, still weighing negatively on ARPU  Positive impact of price increase in 1Q13

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Sequential improvement in ARPU

Basic, Premium and Blended ARPU

[1Q12 = Base 1]

• 0.4%

+1.3%

• 10.6%

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1Q12 2Q12 3Q12 4Q12 1Q13

Blended ARPU Basic ARPU Premium ARPU

Cinema Exhibition: a tough market, ZON performing better than sector in terms of revenues

Source: ZON, ICA

Cinema tickets sold and revenue per ticket

[Thousands, Euros]

1Q13 Performance of Gross Revenues and Attendance

[%]

 Ticket sales increased yoy by 3.5% although average revenue per ticket fell -4.1% in 1Q13 mainly due to lower mix of 3D movies and less bar sales  Cinema Exhibition gross revenues were down 0.7% in 1Q13, with the market as a whole declining by 10.8% yoy

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1,725 1,714 2,383 1,992 1,784 4.8 4.9 4.9 4.7 4.6

1Q12 2Q12 3Q12 4Q12 1Q13

Tickets Sold

• Avg. Revenue Per Ticket
• 0.7%

3.5%

• 10.8%
• 8.9%

Gross Revenue Attendance

ZON Market

Source: ZON, ICA

12 12

ZON Audiovisuais: Reinforcing leadership in Cinema Distribution

Cinema Gross Revenues by Distributor - Market Share 1Q13

[%]

 Audiovisuals revenues remained stable and ZON maintained leading position  ZON distributed 4 of the Top 10 movies shown in cinemas in Portugal in 1Q13  55.8% market share of cinema distribution gross revenues in 1Q13

ZON 55.8% Columbia 12.4% Big Picture 2 22.8% Others 9.0%

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ZAP – Strong performance

 ZAP continues to post a very positive performance in terms of customer growth  Ranks as one of the leading brands in Angola: #4  Increased distribution network:  Present in 10 of the largest Angolan provinces  Almost 1,000 distribution agents  200 door-to-door sales people  New channels launched: Bola TV, +TVI, ZAP Viva and Fight Network

1Q13 Financial Performance

15 15

Very encouraging revenue performance (1)

Consolidated Operating Revenues

[Millions of Euros]

 Marginally positive consolidated revenue performance yoy: +0.1% in 1Q13  Stable quarterly revenue trends with slight qoq decrease of 0.2% in 1Q13

+0.1%

214.2 214.3 1Q12 1Q13

(0.2)%

214.7 214.3 4Q12 1Q13

16 Pay TV, Broadband & Voice Revenues

[Millions of Euros]

16

Very encouraging revenue performance (2)

 Sequential quarterly growth of 0.9% in Pay TV, BB and Voice and a reduction in pace of yoy decline to -1.8%

(1.8)%

191.9 188.4 1Q12 1Q13

+0.9%

186.8 188.4 4Q12 1Q13

17 ARPU Revenue Growth

[1Q12 = Base 1]

17

Improvement in ARPU revenue trends

ARPU Revenue split

[%]

 Encouraging sequential improvement in basic flat-fee ARPU revenues, supported by price increase in 1Q13, resilience of core subscriptions  Continued pressure from premium subscription revenues although pace of yoy decline slowed in 1Q13 to -11.5% (compared with -13.8% in 4Q12)

• 1.5%

+0.3%

• 11.5%

0.80 0.85 0.90 0.95 1.00 1.05 1Q12 2Q12 3Q12 4Q12 1Q13

Total Basic Premium

85% 86% 15% 14% 1Q12 1Q13

Basic Revenues Premium Revenues

18 18

 Audiovisuals and Cinema revenues remained stable yoy at 17.1 million and 11.8 million euros respectively  The market environment remains very tough in this segment however ZON is posting better performance than the market as a whole, thus reinforcing its market share

Cinema Revenues

[Millions of Euros]

Audiovisuals Revenues

[Millions of Euros]

17.1 17.1 1Q12 1Q13

+0.1%

11.8 11.8 1Q12 1Q13

+0.2%

Audiovisuals and Cinema revenues: performance ahead of the market, despite challenging environment

19 19

ZAP already making relevant contribution

 Revenues from ZON’s African JV in Angola in Mozambique grew by 55.8% to 33.4 million euros in 1Q13 (ZON’s 30% stake represented 10 million euros)

International Revenues (30% stake in ZAP)

[Millions of Euros]

6.4 7.3 9.1 8.8 10.0 1Q12 2Q12 3Q12 4Q12 1Q13

+55.8%

20 20

Cost savings materializing

 Group-wide efforts to contain and adjust the cost structure to the challenging environment are delivering results  OPEX fell by 2.5% to 131.2 million euros in 1Q13 with important savings being achieved in practically all relevant cost lines  Excluding consolidation of ZAP, consolidated operating costs would have fallen further by 3%

Consolidated Operating Costs

[Millions of Euros]

134.5 131.2 1Q12 1Q13

(2.5)%

21 21 Operating Costs

[Millions of Euros]

Cost savings materializing

W&S Direct Costs Commercial Costs Other Op. Costs

Operating Costs (millions of euros) 1Q13 Δ % Drivers

Other Operating Costs 43.9 (3.8%) 3.8% decrease thanks to continued cost discipline driving savings in areas such as support services, maintenance and repairs and other SGA Commercial Costs 14.3 (11.5%) Decrease of 11.5% explained by a continued decrease in the level of sales commissions and marketing costs led by cost saving initiatives W&S 13.3 (6.5%) Direct Costs 59.6 2.0% ZON is making efforts to accommodate normal staff attrition levels without hiring. In the cinema business in particular, the number of employees per multiplex has been adjusted down, along with the implementation of other cost and efficiency measures. Increase mainly due to a higher level of traffic and capacity related costs and some increased cost of programming due to the launch of some new exclusive channels and higher operating activity yoy. However sequential quarterly trends reflect a decline of 6% in Direct Operating costs as a result of the efforts in recent quarters to achieve savings in these areas.

14.3 13.3 1Q12 1Q13

(6.5)%

58.4 59.6 1Q12 1Q13

+2.0%

16.2 14.3 1Q12 1Q13

(11.5)%

45.7 43.9 1Q12 1Q13

(3.8)%

22 22

Best quarterly EBITDA ever

 Core Pay TV, Broadband and Voice margin grew by 3pp yoy to 42.2%, the best ever quarterly level and a reflection of the ability to contain costs and improve efficiency  Group Margin grew by 1.6pp despite dilution from the other lower margin domestic

• businesses. Although dilutive, ZAP’s EBITDA margin of almost 30% was already

remarkable given that breakeven was achieved just one year ago

Group EBITDA, EBITDA Margin

[Millions of Euros, %]

Pay TV, Broadband and Voice EBITDA and EBITDA Margin [Millions of Euros, %] EBITDA Margin

[%]

79.7 83.1

37.2% 38.8%

1Q12 1Q13

+4.4%

75.3 79.5

39.2% 42.2%

1Q12 1Q13

+5.6%

37.3% 42.2% 37.1% 38.8% 21.5% 12.3% 2.6% 29.9%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Pay TV, BB and Voice Group Aud + Cin * International

* Adjusted for 2.9 million euros one-off provision

23 Net Income

[Millions of Euros]

Strong Net Income Growth of 12.5% yoy

(millions of euros)

1Q13 Δ % Drivers

Yoy decline of 2.3% to 54.6 million euros however in line with the previous quarter D&A 54.6 (2.3)% Income Taxes 4.3 (7.4%) Income Taxes amounted to 4.3 million euros, representing an effective P&L tax rate of 27% which is slightly less than the normal corporate tax rate of close to 29% due to the fact that the Angolan operation does not generate corporate tax Net Financial Expenses 12.3 46.9% Net Financial Expenses higher in 1Q13 at 12.3 million euros compared with 8.3 million euros in 1Q12, although just 6.2% higher than in

• 4Q12. The yoy increase is a result of a progressively higher average cost of interest as some of ZON’s older and less expensive financing

lines matured and with the entrance of the new retail bonds issued in June 2012. This effect is partially compensated by the lower average level of consolidated debt

10.3 11.6 1Q12 1Q13

+12.5%

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CAPEX stable at between 13-15% of Pay TV, Broadband and Voice revenues

Total CAPEX

[Millions of Euros]

Total CAPEX, Total CAPEX / Pay TV, BB and Voice Revenues

[Millions of Euros, %]

 CAPEX levels significantly down on previous years as forecast  As percentage of Pay TV, BB and Voice revenues, CAPEX was 13.6% in 1Q13, still including some growth related investment as well as non-recurrent CAPEX due to the upgrade to MPEG4 in the DTH business

19.2 12.2 9.1 9.6 1.3 1.9

29.6 25.7

2.0

1Q12 1Q13

Pay TV, BB and Voice Infr. Terminal Equipment Other Baseline CAPEX Non-Recurrent CAPEX

29.6 25.7

15.4% 13.6%

1Q12 1Q13

(13.1)% (13.1)%

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Strong improvement in FCF generation

EBITDA - CAPEX

[Millions of Euros]

 Strong improvement in EBITDA-CAPEX led by the continously resilient EBITDA performance and the decline in CAPEX, as forecast  Free Cash Flow generation was 15.6 million euros. Adjusted for the one-off, upfront payment of 20 million euros under the renewal of the Portuguese Football League contract for 3 additional football seasons ending July 2016, FCF would have more than doubled to 35.6 million euros

Free Cash Flow

[Millions of Euros]

50.1 51.1 54.5 34.1 57.4 1Q12 2Q12 3Q12 4Q12 1Q13

+14.7%

16.3 33.6 9.9 46.7 15.6 35.6 20.0 1Q12 2Q12 3Q12 4Q12 1Q13

+118.8%

Portuguese Football League Contract renewal upfront payment

26 26

Solid Capital Structure, deleveraging to 1.9x Net Financial Debt / EBITDA

Change in Net Financial Debt

[Millions of Euros] 589.7 1.6 1.5 10.2 24.9 4.0 57.4 605.0 1Q13 Other Items Income Taxes Paid Net Interest Paid Long Term Contracts Non-Cash Items and Working Capital EBITDA-CAPEX 2013

 Net Financial Debt of 589.7 million euros at the end

• f 1Q13

 Net Financial Debt / EBITDA of 1.9x  Average cost of debt of 5.55% in 1Q13  1.7 years of average maturity

27 27

Wrap-up

 Excellent financial and operating performance. Sequential improvement in core 3P revenues and very strong take-up of IRIS  Best ever quarter in terms of EBITDA and Operating FCF generation, led by efforts to adjust the cost structure and improve operating efficiency  Continued strong pace of growth in African JV  Important milestones achieved in merger process with almost unanimous approval by ZON’s Shareholder Meeting and waiver by CMVM of mandatory tender offer. Pending non-opposition from the Competition Authority (AdC)

Appendix

Financial Highlights Operational Highlights

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Financial Highlights

(Millions of Euros) 1Q12 1Q13 ∆ y.o.y. Operating Revenues 214.2 214.3 0.1% Pay TV, Broadband and Voice 191.9 188.4 (1.8%) Audiovisuals 17.1 17.1 0.1% Cinema Exhibition 11.8 11.8 0.2% International 6.4 10.0 55.8% Other (13.0) (13.0) 0.0% EBITDA 79.7 83.1 4.4% EBITDA Margin 37.2% 38.8% 1.6pp Pay TV, Broadband and Voice 75.3 79.5 5.6% EBITDA Margin 39.2% 42.2% 3.0pp Cinema and Audiovisuals 4.2 0.7 (84.5%) EBITDA Margin 14.6% 2.3% (12.3)pp International 0.2 3.0 n.a. EBITDA Margin 2.6% 29.9% 27.2pp Income from Operations 23.7 28.5 20.1% Net Income 10.3 11.6 12.5% CAPEX 29.6 25.7 (13.1%) EBITDA minus CAPEX 50.1 57.4 14.7% Net Financial Debt 644.6 589.7 (8.5%) CAPEX as % of Revenues 13.8% 12.0% (1.8)pp Net Financial Debt / EBITDA [x] 2.1x 1.9x n.a.

30 30

Operational Highlights

Note: Figures refer to Portuguese Operations

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José Pedro Pereira da Costa CFO Maria João Carrapato Head of Investor Relations ir@zon.pt ZON Multimedia Rua Ator António Silva, 9 1600-404 Lisboa, Portugal Tel.: +351 21 782 47 25 Fax: +351 21 782 47 35

Operational Highlights