Connected to the world inspiring the future ANNUAL MANAGEMENT REPORT & ACCOUNTS 2020 Connected to the world inspiring the future We are NOS. We are NOS. A brand of many and for many, Building a more digital, connecting people, companies and places, more sustainable and closer world. and in step with the latest global trends. 01 02 03 04 05 MANAGEMENT NON-FINANCIAL CONSOLIDATED INDIVIDUAL CORPORATE REPORT STATEMENTS FINANCIAL FINANCIAL GOVERNANCE STATEMENTS STATEMENTS REPORT We are the inspiration We are the inspiration We are the inspiration We are the inspiration We are the inspiration for a digital future for a sustainable future for a humane future for an optimistic future for a near future MANAGEMENT REPORT 01 We are the inspiration We transform people’s lives with our technology. We connect families, for a digital future businesses and the country with state-of-the-art telecommunications services, and we innovate every day to deliver the best customer experience. PAG 01 1. About NOS 06 MANAGEMENT REPORT 1.1 Message from the Chief Executive Officer 02 1.2 About NOS 03 1.3 Our Year 04 2. NOS Next Generation 31 05 2.1 Strategic Priorities 2.2 At the forefront of digital transformation 2.3 5G – A Generation Without Limits 2.4 A Forefront and Innovative Telecommunications Market 3. 2020 in Review 43 3.1 NOS’ Activity in 2020 3.2 Lead in Next Generation Network 3.3 How we managed the Pandemic 3.4 Macroeconomic Context 3.5 Operacional and Financial Results 3.6 Risk Management 3.7 Shareholder Remuneration Proposal 3.8 Subsequent Events MANAGEMENT REPORT MANAGEMENT 5 1. 01 ABOUT 02 03 04 05 NOS MANAGEMENT REPORT MANAGEMENT 6 1. ABOUT NOS 1.1 MESSAGE 01 FROM THE ear stakeholders, companies connected and with access to critical public services. We extended material support and benefits 02 When I wrote to you this time last year, I to health care institutions, public aid workers and more CHIEF EXECUTIVE shared our vision for NOS at the forefront vulnerable communities in general, working side by side Dof technological advancement, contributing towards with the Portuguese authorities to provide real time 03 a more productive, socially just and environmentally data during all phases of the pandemic. We also strived 04 conscious society. Digital competencies, the best and to support our economy wherever feasible by extending OFFICER most widely available next generation networks and more lenient contractual and financial terms during the 05 seamless integration of emerging digital technologies, duration of the lockdown. are the key enablers to deliver that vision and provide the best possible experience to our customers. Our ability to adapt and maintain business continuity with minimal levels of disruption has brought us Little could I have imagined the extent to which closer to our customers further reinforcing a sense of that vision would be put to the test during the community and belonging. Despite the challenging unprecedented social and economic upheaval caused by economic environment, we continued to invest millions COVID-19 over the past year and that still persists into in deploying and upgrading our communications 2021. During the initial lockdown in March, businesses, networks and platforms, continuously innovating schools, and other public and government services through product and service rollout. We maintained the were forced to go to remote work mode at breakneck pace of internal talent transformation and recruitment, speed. Companies were forced to respond to major strengthening our organization for the challenges of disruptions to their supply chains and operational the future. The past year has shown, beyond a doubt, procedures, whilst trying to keep their businesses up that we cannot control every risk factor, however and running. At NOS, the transformation programme well prepared, but it has also presented a unique that we have been implementing since early 2018, opportunity to reassess how we run our businesses placed us at a unique advantage to not only take our and institutions, how efficient we are in allocating own operations to full remote mode, in less than a our resources and ultimately how capable we are of week, but to also share our knowledge and experience assessing and managing risks. Adoption of online and with our customers and help them to adjust quickly to digital technologies by consumers and businesses has the new reality. Internally our core priority was to make exploded and although some of this digital momentum MANAGEMENT REPORT MANAGEMENT sure that our staff and families stayed in good physical may subside once life starts to return to normal, it is Miguel Almeida and mental health, and to ensure continuity of the reasonable to assume that much of the change is truly Chief Executive 7 Officer essential services that keep Portuguese families and structural in nature. 1. ABOUT NOS 1.1 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER 01 As a key player in the Portuguese corporate and sport channels in particular, we would have continued I would like to extend my heartfelt thanks to all on the technological ecosystem, we take our environmental to grow our overall business. Although we implemented NOS team and to my executive colleagues on the board for 02 and social responsibility very seriously, having stepped a number of efficiency measures, it was unfortunately working so hard to make sure we delivered on our promise up our commitment to achieve the United Nations not possible to compensate the reduction in revenues to customers under extremely strenuous circumstances. 03 Sustainable Development Goals and adoption of the with cost savings and, as such, we saw a yearly decline in I would like to thank our customers, suppliers and partners principles of the Global Compact. Our commitment to operating profitability. In spite of the negative economic for continuing to put their trust in our business and our 04 sustainability is built on the firm conviction that only environment, during 2020 we accelerated the pace of governing bodies for so wisely steering and unanimously socially responsible companies, that proactively work to our network deployment further expanding our next supporting us throughout the year. 05 combat climate change and develop inclusive, fair and generation fixed network capabilities and coverage and diverse communities, will create long term value and already preparing the way for 5G deployment. We also Miguel Almeida ultimately, generate more attractive returns and prosperity pioneered a strategic mobile network sharing deal which, for all stakeholders. We have a pivotal role as an enabler in addition to delivering significant enhancement in of more sustainable practices, with an ambition to coverage, will translate into material efficiencies through transform lives through digitalization, ensure broadband avoidance of future network investment and running costs access for all, and the promotion of digital literacy and and make a significant contribution to environmental competency programmes that will help consumers and protection with the reduction in number of sites to be companies take full advantage of this transformation deployed and sharing of current infrastructure. potential. It goes without saying that strong governance and responsible management systems are at the very The past year was marred by an inexplicable degree of heart of our organization, embedded in a culture of antagonism from the Portuguese telecom regulator which meritocracy, recognition of individual value and continuous materialized in the confirmation of an unfair and legally development of our talent base. questionable framework for the 5G auction process and, although the auction was ultimately conducted under The operating and financial results we achieved such unfair terms, we will continue to pursue all legal in 2020 bear testament to the resilience of our and regulatory avenues at our disposal to ensure that a telecommunications business and to the strength of level playing field is restored. Despite this unfathomable our operating model. They demonstrate that the very regulatory hostility, we remain firmly committed to nature of the services we provide, to individuals, families, our strategic ambition to unequivocally lead in 5G companies and public institutions alike, are absolutely and to the delivery of the very best digital customer MANAGEMENT REPORT MANAGEMENT core to day to day life. Were it not for travel and social experience, whilst building the foundations for long-term distancing restrictions which impacted our regular stream competitiveness and for an organizational model that is 8 of revenues from roaming, cinema going and premium fully equipped for this new era. 1. ABOUT NOS 1.2 ABOUT NOS 01 WHO WE ARE 02 NOS Group OS is the biggest communications €1,346M TELECOM 03 and entertainment group in Portugal. €574M BUSINESS It offers latest generation fixed and mobile €1,368M 04 phone, television, Internet, voice and €603M Ndata solutions for all market segments. In the business 05 market, it offers a broad portfolio of products and services with tailor made solutions for each sector € M Revenues 2020 € M EBITDA 2020 and for businesses of different sizes, complementing this with ICT, IoT and Cloud services. €54M MEDIA & ENTERTAINMENT €30M BUSINESS DREAMIA ZAP SPORT TV €22M €136M €189M JOINTVENTURES (equity consolidation) (equity consolidation) (equity consolidation) (50%) (30%) (25%) MANAGEMENT REPORT MANAGEMENT 9 1. ABOUT NOS 1.2 ABOUT NOS We work every day to build an increasingly competent, efficient Mission and innovative NOS, prepared he context resulting from the pandemic Our mission is to connect people, companies 01 to lead in the new technological crisis demanded a decisive focus and institutions, to everything and everyone, wave that is coming. 02 on crisis management, on supporting enabling the most advanced technologies our customers, our employees, society, to deliver the best experience, surprising NOS will be an increasingly Tand the country in general. and building empathetic and transparent 03 customer-centric company, with a relationships with our customers.