3Q12 RESULTS PRESENTATION - NOS · 3Q12 RESULTS PRESENTATION. This presentation contains forward...

9 NOVEMBER 2012

3Q12

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

our 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

of 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

Resilience of Pay TV, Broadband and Voice revenues

“ZAP” continues to post very positive quarter on quarter growth, reaching Net Income breakeven ahead of schedule

Strong improvement of EBITDA-CAPEX driven by the stable performance of EBITDA and the decrease of CAPEX, as forecast

For the 2nd consecutive year, ZON ranked Best Quality of Service in TV and Broadband by ANACOM versus its largest competitor

The best performing Portuguese company at USA Contact Center World awards: 2 Gold and 2 Silver medals

Leading in innovation with the launch of “Timewarp”

3

3Q12 Highlights

ZON has the best 3P value proposition driven by

IRIS’ innovative, unique features with outstanding

customer feedback and leading broadband

speeds

IRIS – The most advanced features

Over 70 channels for up

to 2 hours

Free RESTART TV Free ZON ONLINE

Television on the PC,

iPad and iPhone

Personalized

Profiles, configure

premium channels,

videoclub and packages

whenever you like

Quick and easy to find

navigation

Advanced Search

Simultaneously record

entire series and

programmes

Advanced recording FREE APPS

Interactive TV APPS The largest and best

HD content offer (43

channels)

HD

Share your

preferences and

your friends’, using

the UI

Facebook

VOD

The largest offer with

the most recent movies

Network PVR 7 days with

simplified record

management

Free TIMEWARP

5

6

IRIS – The Best 3P product in the market

Why choosing IRIS over any other 3P bundle?

1) Only award winning interface for its design and usability

2) Most advanced cloud-based TV solution with innovative and

unique TV features like Timewarp

3) Broadband with 100Mb/s – several times more than ADSL

4) Access to 500,000 hotspots free Wi-FI – by far the largest

network in Portugal

5) Largest number of HD channels in the market

6) Largest VOD library with over 10,000 titles

7) Unlimited calls including 50 countries

8) Watch content on Smartphone, Tablet and PC

6

IRIS – The Best TV Experience

7

8

IRIS – Timewarp is a unique feature

“Choice no

longer depends

on time of day

but on what I

want to watch”

“I only

watch

what I

want”

“I have more

freedom to

watch TV, no

time

restrictions”

“Timewarp is fantastic

and watching TV is cool

again

“The new

way to

record TV”

“I can watch

programmes

recommended

by friends and

colleagues,

after they

were shown

on TV”

“I don’t have to worry

about missing a

programme as I have 7

days to go back and

watch it”

What our customers are saying

8

9

IRIS – The Best TV Experience extended to all

devices

Live TV

Restart TV for 36 channels (PC)

Videoclub rental and viewing (PC)

Schedule recording to watch later on TV

Navigate full EPG

Intelligent search for content

ZON Online - Available on the PC, iPad and iPhone for all IRIS customers

9

10

Free Wi-Fi access to 500,000 hotspots in Portugal, 7 million worldwide

Free for ZON Broadband customers

On a monthly basis, 23% of Broadband customers used the service with an average of

2 sessions per day per user and 69% of hotspots generated traffic

Leading Innovation in Broadband and Voice The largest Wi-Fi network in Portugal

10

11

Unlimited fixed voice calls to 50 countries,

nights and weekends

ZON PHONE APP – Fixed calls from anywhere in

the world using your home phone number and

tariff plan, over a Wi-Fi network

Fixed phone voice messages can be accessed

away from home over a computer

Dual number acount allowing more than one

phone number per household

Leading Innovation in Broadband and Voice Putting Fixed Voice back on the map

11

3Q12

Operating Review

751.7 thousand Triple Play customers, up 9.1% yoy

193 thousand IRIS customers, 16% of cable customer base, 31.4k net adds in 3Q12 13

Good Triple Play take-up

High take-up of high-end IRIS bundles continues

Triple Play Customers and Penetration of Cable

Base [Thousands, %]

IRIS customers and Penetration of Cable Base [Thousands, %]

603.5688.8

751.7

51.9%

59.3%

62.4%

30%

50%

70%

90%

110%

130%

150%

00

100

200

300

400

500

600

700

800

3Q10 3Q11 3Q12

Net Adds

[Thousands]

28.346.2

65.0

97.0118.9

161.5

193.0

2.4%4.0%

5.6%8.2%

9.9%

13.3%16.0%

00%

05%

10%

15%

20%

25%

30%

00

50

100

150

200

250

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

28.3 17.9 18.8 32.1 21.9 42.6 31.4

766.2 thousand Broadband subs

63.6% penetration of customer base

57% offers greater than 20 Mbps

and 38% higher or equal to 30 Mbps

14

Robust net additions in Broadband and Fixed Voice

Broadband Subscribers [Thousands, % of Penetration of Cable Base]

Fixed Voice Subscribers [Thousands; % of Penetration of Cable Base]

960.2 thousand Fixed Voice subs

77.9% penetration of cable customer

base

666.4725.0

766.2

57.3%

62.4% 63.6%

30%

35%

40%

45%

50%

55%

60%

65%

70%

200

300

400

500

600

700

800

3Q10 3Q11 3Q12

732.3844.0

960.2

61.7%

70.7%

77.9%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

00

200

400

600

800

1,000

3Q10 3Q11 3Q12

Basic ARPU from core TV, BB and Voice

services decreased 3% yoy

Adjusting for the impact of entry level

offers, basic ARPU would have remained

nearly flat – a 0.9% decrease

Success of lower ARPU, entry level,

offers and continued pressure from

discretionary premium ARPU (-14.3%) led

to decline in Blended ARPU of 4.8%

≈ 50 thousand new entry-level customers

between 3Q11 and 3Q12, due to

analogue switch-off

15

ARPU under pressure from less premium channel

subscriptions

Basic, Premium and Blended ARPU [3Q11 = Base 1]

-4.8%

-3.0%

-14.3%

0.80

0.85

0.90

0.95

1.00

1.05

1.10

3Q11 4Q11 1Q12 2Q12 3Q12

Blended ARPU Basic ARPU Premium ARPU

Cinema Exhibition: 3Q12 performance improvement,

above the remainder of the market

Source: ZON, ICA

Cinema tickets sold and revenue per ticket [Thousands, Euros]

3Q12 Performance of Gross Revenues and Attendance

[%]

Average revenue per ticket: -3.9% in 3Q12

Cinema Exhibition gross revenues were up 2.9% in 3Q12, with the market as a whole

growing by 0.4% yoy

16

2.9%

0.5%0.4%

-3.2%

Gross Revenue Attendance

ZON Market

2,372 2,260

1,725 1,714

2,383

5.1

4.8 4.84.9

4.9

04

05

05

05

05

05

05

05

05

05

05

0

500

1000

1500

2000

2500

3000

3Q11 4Q11 1Q12 2Q12 3Q12

Source: ZON, ICA

17 17

ZON Audiovisuais:

Reinforcing leadership in Cinema Distribution

Cinema Gross Revenues by Distributor - Market Share 3Q12 [%]

ZON distributed 7 of the Top 10 movies

shown in cinemas in Portugal in 9M12

63.6% market share of cinema

distribution gross revenues in 3Q12

Sale of content rights to FTA channel

operators pressured by the cutbacks on

their programming grids

ZON63.6%

Columbia17.7%

Big Picture 2

14.1%

Others4.7%

18

ZAP – strong performance, above expectations

Very strong operational performance

EBITDA breakeven reached in 1Q12

Net Income breakeven reached in 3Q12, ahead of schedule

ZAP Customers

3Q11 4Q11 1Q12 2Q12 3Q12

19

ZAP’s success is based on (1): more advanced

technology, strong local presence...

ZAP has the most advanced set-top-boxes in the market: Zapper HD+DVR, Zapper

HD+ and Zapper SD

Strong local presence:

o Angolan company, with a local team of 260 people

o In Angola, 10 own stores, 200 door-to-door salespeople, 610 agents, call-centre

20

ZAP’s success is based on (2): ...more Portuguese

content, strong investment in marketing

ZAP offers more Portuguese-spoken content, for all pockets, and is supplied by the

major national and international content suppliers:

o ZAP Mini: 40 channels, 21 of which in Portuguese 15 USD / month

o ZAP Maxi: 86 channels, 42 of which in Portuguese 30 USD / month

o ZAP Premium: 117 channels, 61 of which in Portuguese 60 USD / month

Strong investment in marketing and communication, locally developed, turning ZAP

into one of the most recognized brands in the Angolan market

3Q12

Financial Performance

22 22

Solid revenue performance

Consolidated Operating Revenues [Millions of Euros]

Positive consolidated revenue performance yoy: +0.8%

African JV (30%) reaching revenues of 9.1 million euros in 3Q12

213.7 215.3

3Q11 3Q12

+0.8% +0.7%

639.2 643.9

9M11 9M12

23 23

Pay TV, BB and Voice revenues continue to show

good resilience in face of the difficult macro context

Pay TV, Broadband and Voice Revenues [Millions of Euros]

Pay TV, Broadband and Voice Revenues down 3.2% yoy in 3Q12 and 1.8% in 9M12, in a

very challenging macroeconomic context

191.4 185.4

3Q11 3Q12

(3.2)%

578.6568.2

9M11 9M12

(1.8)%

24

ARPU Revenues Growth [3Q11 = Base 1]

24

Growth in underlying core ARPU revenues

ARPU Revenues split [%]

Basic ARPU revenue decrease of 1.5%

Premium revenues down 13% yoy putting pressure on total revenues

Premium revenues now represent 14% of ARPU revenues down from 16% in 3Q11

-3.3%

-1.5%

-13.0%

0.80

0.85

0.90

0.95

1.00

1.05

3Q11 4Q11 1Q12 2Q12 3Q12

Total Basic Premium

84% 86%

16% 14%

3Q11 3Q12

Basic Revenues Premium Revenues

25 25

Audiovisuals and Cinema revenues: performance

ahead of the market

Despite the difficult macroeconomic environment placing pressure on the number of

spectators, the more appealing films exhibited during 3Q12 enabled an improvement in

revenue trends

The Audiovisuals business was negatively affected by the reduction in sales to FTA

channel operators, who have been cutting back on their programming grids

Cinema Revenues [Millions of Euros]

Audiovisuals Revenues [Millions of Euros]

16.5 16.2

3Q11 3Q12

17.6

15.7

3Q11 3Q12

(2.1)% (10.7)%

52.3 50.4

9M11 9M12

(3.7)%

44.5

39.9

9M11 9M12

(10.5)%

26 26

Costs savings materializing

Excluding proportionate consolidation of Angolan JV, OPEX fell by 3.1% to 129.9 million

euros in 3Q12 and to 389.3 million euros in 9M12

Consolidated Operating Costs Excluding African Operation [Millions of Euros]

134.1129.9

3Q11 3Q12

(3.1)%

401.6 389.3

9M11 9M12

(3.1)%

27

15.3 14.3

3Q11 3Q12

27

Operating Costs excluding African Operation [Millions of Euros]

Cost savings materializing

W&S Direct Costs Commercial

Costs

Other Op.

Costs

(6.7)% 61.2 61.2

3Q11 3Q12

+0.0%

13.1 13.0

3Q11 3Q12

(0.8)% 44.541.4

3Q11 3Q12

(7.0)%

Operating Costs ex Africa

(millions of euros) 3Q12 Δ % Drivers

Other Operating Costs 41.4 (7.0%)

Excluding the costs from consolidation of the African JV, other operating costs fell by 7% yoy. Some relevant savings were achieved in

core areas of the domestic business such as support services, as a result of the implementation of a number of efficiency improvement

measures at the contact center level, maintenance and repairs and other SGA

(6.7%)

Direct Costs 61.2 0.0%

The decline in W&S is explained mostly by a reduction in the average number of employees of 5.4%, which occurred mostly within the

cinema division on the back of the weaker operating environment as discussed earlier in this report, and of an ongoing process of

optimization of the number of employees per multiplex

Excluding the impact of the consolidation of the African Operation, Direct Costs would have remained flat, due to a combination of

higher Programming costs related to the UEFA Euro 2012, higher royalty fees paid for Cinema Distribution on the back of a stronger

3Q12 and lower telecom costs due to efforts to optimize the use of telecom infrastructure

Commercial Costs 13.0 (0.8%) Excluding the impact of the African Operation, commercial costs would have decreased by 0.8%

W&S 14.3

28 28

Improvement in core Pay TV, BB and Voice EBITDA

margin

Core Pay TV, Broadband and Voice margin grew by 1.5pp yoy to 39.9%

Group Margin remained relatively flat due to lower contribution from other domestic

businesses and consolidation of Angolan JV, whose contribution was already remarkable

Group EBITDA, EBITDA Margin [Millions of Euros, %]

Pay TV, Broadband and Voice EBITDA

and EBITDA Margin [Millions of Euros, %]

EBITDA Margin [%]

79.6 79.7

37.2% 37.0%

30%

31%

32%

33%

34%

35%

36%

37%

38%

39%

40%

30

40

50

60

70

80

90

3Q11 3Q12

+0.2%

73.6 74.0

38.4%

39.9%

30%

32%

34%

36%

38%

40%

42%

30

35

40

45

50

55

60

65

70

75

80

3Q11 3Q12

+0.6%

35.3%39.9%

34.3%37.0%

17.1%

11.2%

2.6%

23.5%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Pay TV, BB and Voice Group Aud + Cin International

29

Net Income [Millions of Euros]

Net Income Growth

9.19.6

3Q11 3Q12

+5.1%

(millions of euros) 3Q12 Δ % Drivers

In 3Q11 ZON had a negative contribution from the consolidation of the African Operation of 2.0 million euros, which does not appear in this

line anymore. For comparative purposes, the equivalent impact for 3Q12 was a positive contribution at the EBT level of 0.7 million euros,

with 3Q12 thus representing the first quarter of break even at the Net Income level for the African Operation

D&A somewhat lower at 52.6 million euros, compared with 55.5 million euros in 3Q11 although D&A is still relatively high due to the

significant accelerated CAPEX cycle of the 2008-2010 investment cycleD&A 52.6 (5.1)%

Income Taxes 5.8 46.8%

Income Taxes in 3Q12 were 5.8 million euros representing an effective P&L tax rate of 36.9%, above the general corporate tax rate of

29.5% due to a few one-off corrections in 3Q12. The accumulated tax rate for 9M12 is 34.7%, in line with expectations for the effective tax

rate for FY12

Net Financial Expenses 11.9 13.4%

Net Interest costs and other financial charges registered an increase of 41% led by a combination of higher average cost of debt and

financing charges as a result of refinancing secured

28.5 29.6

9M11 9M12

+3.9%

30

Continued reduction of CAPEX to more normalized

levels as forecast

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

CAPEX as percentage of total revenues at 11.7% in 3Q12, and at 13.6% as percentage

of Pay TV, BB and Voice revenues, in line with the sector average for maintenance and still

including some growth related investment

19.915.9

10.3

6.6

1.4

2.7

3.4

35.1

25.2

3Q11 3Q12

Pay TV, BB and Voice Infr. Terminal Equipment

Other Baseline CAPEX Non-Recurrent CAPEX

(28.1)%

109.3

82.518.9%

14.5%

00%

05%

10%

15%

20%

25%

00

20

40

60

80

100

120

9M11 9M12

(24.5)%

31

Strong improvement in OCF

EBITDA - CAPEX [Millions of Euros]

Strong improvement in EBITDA-CAPEX led by solid EBITDA performance and the decline

in CAPEX, as forecast

44.5

33.1

50.1 51.154.5

3Q11 4Q11 1Q12 2Q12 3Q12

+22.6%

32 32

Solid Capital Structure,

2.1x Net Financial Debt / EBITDA

Change in Net Financial Debt [Millions of Euros]

Net Financial Debt of 650.5 million euros on 3Q12

Net Financial Debt / EBITDA of 2.1x

Average cost of financing of 4.87% in 9M12

2.01 years of average maturity

650.5

0.5

8.4

9.9

6.2

20.6

54.5

660.4

3Q12

Other Items

Income TaxesPaid

Net Interest Paid

Long TermContracts

Non-Cash Itemsand Working

Capital

EBITDA-CAPEX

2Q12

33

Good operational performance of the core Triple Play business with

strong take-up of higher value-added bundles, IRIS, despite

continued pressure in premium channel subscriptions;

Leading in innovation: the first operator in the World to launch the 7-

day recording functionality: Timewarp;

Strong growth in ZAP, generating revenues of 9.1 million euros (30%)

and an EBITDA margin of 23.5% in 3Q12;

EBITDA-CAPEX growing as forecast – focus on Cash Flow

improvement.

Wrap-up

Appendix Financial Highlights

Operational Highlights

35 35

Financial Highlights

(Millions of Euros) 3Q11 3Q12 ∆ y.o.y. 9M11 9M12 ∆ y.o.y.

Operating Revenues 213.7 215.3 0.8% 639.2 643.9 0.7%

Pay TV, Broadband and Voice 191.4 185.4 (3.2%) 578.6 568.2 (1.8%)

Audiovisuals 17.6 15.7 (10.7%) 52.3 50.4 (3.7%)

Cinema Exhibition 16.5 16.2 (2.1%) 44.5 39.9 (10.5%)

International - 9.1 n.a. - 22.8 n.a.

Other (11.9) (11.1) (7.0%) (36.3) (37.4) 3.2%

EBITDA 79.6 79.7 0.2% 237.6 238.2 0.3%

EBITDA Margin 37.2% 37.0% (0.2)pp 37.2% 37.0% (0.2)pp

Pay TV, Broadband and Voice 73.6 74.0 0.6% 220.1 223.6 1.6%

EBITDA Margin 38.4% 39.9% 1.5pp 38.0% 39.3% 1.3pp

Cinema and Audiovisuals 6.0 3.6 (40.4%) 17.5 11.8 (32.8%)

EBITDA Margin 17.6% 11.2% (6.4)pp 18.1% 13.0% (5.0)pp

International - 2.1 n.a. - 2.9 n.a.

EBITDA Margin n.a. 23.5% n.a. n.a. 12.6% n.a.

Income from Operations 24.1 27.1 12.4% 73.3 78.2 6.6%

Net Income 9.1 9.6 5.1% 28.5 29.6 3.9%

CAPEX 35.1 25.2 (28.1%) 109.3 82.5 (24.5%)

EBITDA minus CAPEX 44.5 54.5 22.6% 128.3 155.7 21.4%

Net Financial Debt 668.3 650.5 (2.7%) 668.3 650.5 (2.7%)

CAPEX as % of Revenues 16.4% 11.7% (4.7)pp 17.1% 12.8% (4.3)pp

Net Financial Debt / EBITDA [x] 2.1x 2.1x n.a. 2.1x 2.1x n.a.

36 36

Operational Highlights

Note: Figures refer to Portuguese Operations

37

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