1Q10 RESULTS ANNOUNCEMENT PRESENTATION
12 MAY 2010
11 DISCLAIMER
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.
2 1. Continued Strong Operating Performance
3 Key Highlights
+ 45.6% Triple Play Penetration
Leaders in Next Generation Services: 64%64%64% Share, 80 thousand ZON Fibra customers
2,8 million homes with Eurodocsis 3.0
1/31/31/3 of the customer complaints of our main competitor (Anacom)
4 101010 ththth Consecutive Quarter of Growth
(Millions of euros) 1Q10 1Q10 / 1Q09
Revenues 2 13.5 8 .2% EBITDA 73 .3 17.0 % EBITDA Margin 3 4 .3 % 2.6pp Adjusted Net Incom e * 9 .3 28 .8 % Net Incom e 9 .3 (52.3%)
* Adjusted Net Income is adjusted for the impact of the pre-tax capital gain of 16.9 million euros due to the sale in 1Q09 of a 40% stake in Lisboa TV.
5 #1 or #2 in all Key Markets
2009 Market Ranking 1Q10 Customers Share Triple Play # 1 n.a. 537 thousand Pay TV # 1 64% 1,6 million Broadband # 2 32% 635 thousand Fixed Voice # 2 17% 646 thousand
6 Strong Operational Momentum
RGU –––Revenue Generating Units [thousands]
+16.6%
[Net Adds - thousands] +134.2 +134.4 +134.5 +121.3 +126.0
7 3Play Penetration Over 45% of Cable Subscriber Base
Triple Play Subscribers Triple Play Subscribers Penetration of Cable Base RGUs per Subscriber [thousands] [units]
+57.9%+57.9%+57.9% +16.7pp +16.3%+16.3%+16.3%
[Net Adds thousands] +64.5 +51.1 +44.9 +48.5 +52.3
Triple Play penetration increased by 4.6 percentage points to 45.6 %, with 537 thousand customers subscribing to all three services
Each customer now subscribes to 2.26 services, on average, compared with 1.94 a year ago
8 Pay TV –––maintaining leadership in the Portuguese market
Basic Subscribers Cable Subscribers DTH Subscribers [thousands] [thousands] [thousands]
(0.4%)(0.4%)(0.4%) +0.0%+0.0%+0.0% (1.8)%(1.8)%(1.8)%
(18.2) (3.9) +3.3 +0.1 (6.4) +0.2 +3.1 +2.4 (1.0) (4.1) (18.4) (7.0) +0.8 +1.2 (2.3) [Net Adds thousands]
Basic Customers posted a solid performance in 1Q10 with a marginal decline of 6 thousand
In 1Q10, ZON launched an entry level Pay TV offer of 15 channels for 9.99 euros a month, targeting new market segments within the ZON footprint and that are currently not Pay TV subscribers
Double Play and Triple Play entry level offers were launched later in 1Q10 for 14.98 euros and 24.98 euros respectively
9 Continued taketake----upup of higher value digital services
“Funtastic” Digital Subscribers ZON Boxes Installed, Penetration of Digital Cable Base [thousands] [thousands, %]
+26.4%+26.4%+26.4% +3.6x+3.6x+3.6x
> 50% without PVRPVRPVR
[Net Adds thousands] +43.7 +35.3 +38.2 +35.0 +34.0
Continued strong take-up of higher value digital services: 26.4% increase in sales of “Funtastic” to 682 thousand
663 thousand ZON Boxes installed enabling HD viewing, VoD, Pause live TV and catch-up TV, amongst other innovative TV features, reaching 54% penetration rate of the digital customer base
10 Leadership in HD content
Reinforced leadership in HD content, currently with 13 channels in the programming grid
Partnerships established with main FTA channels to simultaneously broadcast SD and HD transmissions of major UEFA Champions League and UEFA Europa League matches
Launch of a dedicated channel in “True 3D” available to all subscribers on ZON’s cable footprint and with a ZONBox installed
11 Broadband, Fixed Voice and Mobile Very Strong Momentum Maintained
Broadband Subscribers Fixed Voice Subscribers Mobile Subscribers [thousands] [thousands] [thousands]
+16.4%+16.4%+16.4% +54.1%+54.1%+54.1% 5.0x5.0x5.0x
[Net Adds thousands]
+27.0 +26.5 +21.9 +16.3 +24.7 +72.8 +59.2 +50.6 +54.9 +62.0 +8.8 +17.4 +20.5 +15.0 +11.7
In Broadband, the pace of growth remains strong with 24.7k net adds in 1Q10. Importantly, latest operating data reveals that 12% of all broadband subscribers in 1Q10 subscribed to ZON Fibra offers, almost 80 thousand customers ZON achieved 62k net adds in Fixed Voice during 1Q10, taking the total Fixed Voice customer base to almost 650k subscribers, overtaking Broadband for the first time. Voice penetration now stands at 54.3% of the cable base, supported by ZON’s continuous innovation in features and attractive tariff plans, unmatched by any of its domestic competitors Mobile subscribers continued to grow in 1Q10, to 81 thousand, with much of the growth coming from mobile broadband connections
12 Strong Operating Momentum Driving ARPU growth
Blended ARPU Multiple Service ARPU Differentiation [euros] [Single Play ARPU = 1]
+7.6%+7.6%+7.6%
ZON’s Strong RGU and 3P penetration growth is delivering value reflected in an increase in ARPU of 7.6% y.o.y. to 35.2 euros
Triple Play customers on average generate an ARPU of over 50 euros, representing a premium to Single Play customers of 116%
In 1Q10, ZON announced a price increase of 2-3% across the board in both individual services and bundles, which came into effect in May 1, 2010
13 Leadership in Customer Service
According to ANACOM, in its 2009 Report on Complaints and Information Requests, Cable TV customers present the lowest number of complaints in the market.
ZON’s services post less than 1.8 complaints per thousand customers, which compares with between 1.8 to 4.9 complaints per thousand customers for IPTV services.
14 Leadership in 3D and Digitalization
Cinema tickets sold increased by 26.7% to 2.5 million in 1Q10 and average revenue per ticket grew by 7.1% to 4.6 euros.
ZON Lusomundo Cinemas is at the leading-edge of technological developments in movie exhibition worldwide, as regards its level of digitalization ant roll-out of 3D projection systems.
ZON has the largest number of digitalized screens (77% of the market total) and 3D projection systems in Portugal, which helped drive increase in cinema market share to 53.4% in 1Q10.
15 Leadership in Cinema Distribution
1Q10 Market Share of Cinema Distribution Revenues [%]
Others 7,6%
ZON Castello Lopes 46,7% 26,7%
Columbia 19,0 %
ZON Lusomundo Audiovisuais distributed 4 of the 5 Top movies in 1Q10.
Market share of revenues increased to 46.7%.
24 movies premiered in 1Q10.
16 2. Supported by Solid Financial Indicators
17 Revenues driven by RGU and ARPU growth
Operating Revenues Pay TV, Broadband and Voice Revenues [millions of euros] [millions of euros]
+8.2%+8.2%+8.2% +8.4%+8.4%+8.4%
18 Improving Sequential Trends in Audiovisuals and Cinema Revenues
Audiovisuals Revenues Cinema Revenues [millions of euros] [millions of euros]
+8.8%+8.8%+8.8% +24.3%+24.3%+24.3%
19 Operational Profitability –––Solid EBITDA growth
Operating Costs EBITDA and EBITDA Margin [millions of euros] [millions of euros, %]
+4.0%+4.0%+4.0% +17.0%+17.0%+17.0%
Operating Costs 1Q10 ∆ % Drivers (millions of euros)
Marginal y.o.y. decrease of 1,6% W&S 14,3 (1,6%) Slightly lower headcount due to reorganization of companies acquired in 2008 Higher fixed and mobile traffic interconnection charges and telecom capacity due to higher volume of traffic Direct Costs 61,6 14,7% Higher programming costs related with the introduction of new channels and some new HD content Increase in royalty charges at Audiovisuals and Cinemas due to increase level of activity Lower sales commission charges, due to better mix of sales channels Commercial Costs 16,7 (10,4%) Decrease in COGS due to a higher proportion of terminal equipment being rented to customers rather than sold
Other Operating Costs 47,5 (0,6%) Remained flat over 1Q09
20 Net Income
Total Net Results of 9.3 Million Euros in 1Q10
D&AD&AD&A Adjusted Net Income [millions of euros] [millions of euros]
+15.4%+15.4%+15.4% +28.8%+28.8%+28.8%
Consolidated Net Income was 9.3 million euros in 1Q10, which represented y.o.y. growth of 28.8% adjusted for the impact of a pre-tax capital gain of 16.9 million euros in 1Q09, due to the sale in February 2009 of ZON’s 40% stake in Lisboa TV
21 CustomerCustomer----DrivenDriven CAPEX y.o.y. Increase
Total CAPEX [millions of euros]
+17.9%+17.9%+17.9%
Increase mostly due to upgrade to Eurodocsis 3.0 and cell splitting
Increase mostly due to the installation of a greater amount of terminal equipment
CAPEX increased 17.9% y.o.y. to 53.9 million euros however posted a 22.6% decline when compared with the previous quarter. The sequential decline is explained primarily by the higher proportion of less-expensive non-PVR set-top boxes in the sales mix and an increase in the number of refurbished set-top boxes that were injected back into the distribution chain
22 Sound Capital Structures and Adequate Debt Maturity
Net Financial Debt Net Financial Debt / EBITDA [millions of euros] [x]
23 Launch of ZAP in Angola
24 Launch of ZAP in Angola
Strong element of tailor-made, Portuguese speaking content
Opportunity for ZON to leverage key position in content production
Sale to Angolan market of “TVCine” movie channels, Dreamia channels (Panda, Panda Biggs, Hollywood and MOV)
Exclusive distribution of SportTV Africa as from the next football season, starting in August 2010 with the Portuguese football league
Strong HD differentiation with competitive pricing at launch
Proportionate consolidation of 30% stake in JV as from 2Q10
Two main packages :
“MaxMaxMaxMax“ around 50 channels (approx.30 USD/ month)
“PremiumPremiumPremium“ around 80 channels (approx.60 USD/ month)
25 3. Wrap Up
26 Wrap Up
•Operational KPIs continue to show very strong performance: Triple Play penetration now at 45.6%
•Leading roll-out of Next Generation Networks and Services: 2.8 million homes covered, 200 Mbps Triple Play bundles for almost all the network
•Still one of the highest growth companies of the peer group: +8.2% y.o.y. growth in Revenues, +8.4% in core Pay TV, Broadband and Voice business
•Continued focus on profitable growth with EBITDA increasing significantly above Revenues: + 17.0% in 1Q10
•Customer driven growth CAPEX is successfully securing market share with attractive returns on investment, leveraging scalability of HFC network while leading in technological innovation
27 Appendix
Financial Highlights Operational Highlights
28 Financial Highlights
(Millions of Euros) 1Q09 1Q10 ∆ y.o.y.
Operating Revenues 197,4 213,5 8 ,2% Pay TV, Broadband and Voice 177,7 192,7 8,4% Audiovisuals 14,3 15,5 8,8% Cinema Exhibition 12,6 15,7 24,3% Other (7,2) (10,4) 44,7% EBITDA 62,6 73,3 17,0 % Income from Operations 16,7 20,3 21,5% NET INCOME 7,2 9,3 28 ,8 % CAPEX 45,7 5 3,9 17,9% EBITDA minus CAPEX 16,9 19,5 n.a. Net Financial Debt 5 24,9 5 77,2 10,0 %
EBITDA margin (%) 31,7% 34,3% 2,6pp CAPEX as % of Revenues 23,2% 25 ,2% 2,1pp Net Financial Debt / EBITDA [x] 2,4x 2,1x n.a.
29 Operational Highlights
1Q09 1Q10 ∆ y.o.y.
Homes Passed ('000) 3,058 3,144 2.8 % RGUs ('000) 3,116 3,632 16.6% Triple Play Custom ers 340 537 57.9% Basic Subscribers 1,595 1,58 8 (0 .4%) "Funtastic" Digital Subscribers 540 68 2 26.4% Fixed Broadband 546 635 16.4% Fixed Voice 419 646 54.1%
Mobile 16 8 1 n.a. Net Adds RGUs ('000) 134 126 (6.1%) Triple Play Custom ers 64 52 (18.9%) Basic Subscribers (18) (6) n.a. "Funtastic" Digital Subscribers 44 34 (22.3%) Fixed Broadband 27 25 (8 .5%) Pay TV, Broadband and Voice Fixed Voice 73 62 (14.8 %)
Mobile 9 12 32.7%
Blended ARPU (€) 32.7 35 .2 7.6%
Revenues per ticket (€) 4.3 4.6 7.1% Tickets sold ('0 0 0 ) 1,95 0 .1 2,472 26.7%
30 Contacts
José Pedro Pereira da Costa CFO
Maria João Carrapato Head of Investor Relations
ZON Multimedia Avenida 5 de Outubro, 208 1069-203 Lisboa, Portugal
Tel.: +351 21 782 47 25 Fax: +351 21 782 47 35
31