Consolidated Management Report
Total Page:16
File Type:pdf, Size:1020Kb
Consolidated Management Report 1 Table Of Contents 1. Management Report 3 2. Consolidated Financial Statements 99 3. Individual Financial Statements 210 4. Corporate Governance Report 276 2 3 1. Introduction 5 1.1. Message from the CEO 7 1.2. NOS 9 1.3. Strategy 15 1.4. 2014 Main Events 16 1.5. 2014 in Numbers 21 1.6. Management Team 24 2. NOS 2014 27 2.1. Residential Segment 28 Convergence 28 Innovation is IRIS 30 IRIS Bundles 33 Wireless Technology 37 2.2. Personal Segment 39 2.3. Business Segment 42 2.4. Distribution Strategy 45 2.5. Communication Strategy 47 2.6. The most sophisticated next generation networks 50 2.7. Information Systems 55 3. Leadership in Customer Satisfaction 57 4. Other Businesses 61 4.1. Cinemas 62 4.2. Audiovisuals 65 4.3. ZAP 66 5. 2014 Results Review 68 5.1. Macroeconomic Environment 69 5.2. Sector/Regulatory Framework 72 5.3. Operational Results 76 5.4. Financial Results 85 6. Sustainability 95 4 5 6 The past year has been a remarkable one. A review We have achieved very significant operational results of the many milestones that we have achieved and across all of our strategic growth axes which has led surpassed is evidence that we are on the right track to growth in market share of RGUs of more than and encourages us to keep up the intense pace of 1p.p.. I would like to highlight in particular the growth growth and continuous innovation. in the convergent customer base to over 385 thousand subscribers which already represent almost Against a challenging backdrop, NOS has reinforced 30% of our customer base, the very material increase its leadership position in innovation and service in mobile subscribers of more than 12% driving market delivery, in the quality and coverage of its next share growth of close to 2.5p.p., the reversal of the generation network and in its range of convergent negative trend in the Pay TV subscriber base with a and integrated service offers for both the consumer return to net growth in the last quarter of the year, and business segments. the very important flagship accounts won in the corporate segment. This has been achieved in the midst of a merger. We have successfully integrated the teams from two In our audiovisuals and cinema business, we kept a organizations with minimal turbulence or cultural strong focus on business development and service shocks and have established the foundations of a excellence and despite a negative trend in new culture – a culture of leadership and ambition. revenues, in line with lower box-office sales around the world, we posted very good relative Our new brand, NOS, was born in May 16 in a performance in our domestic market, sustaining our campaign that has proven to be one of the most leading market share in both cinema sales and successful brand launches ever in the Portuguese distribution. market with almost 100% brand awareness after just six months and more than 90% association of the new Operational progress throughout the year is reflected brand with all core service territories. in sequential quarterly improvement in financial performance. In 2014, revenues declined by 3%, Business continuity was secured with very marginal however, by 4Q14, the yoy decline had reduced to impact on service quality; we implemented a well under 1%. The strategic focus on achieving RGU completely new market approach based on a and market share growth led to a natural radically different mix of products and service offers deterioration in operational margin (EBITDA) due to and we have built a reputation in the business market increased commercial and growth related costs and with a leading brand image recognized by all investment, however sequential quarterly stakeholders. performance was again positive and the trend will continue to improve throughout the coming year. 7 A further measure of market recognition of our performance and strategy is that we successfully renegotiated the terms and costs of some of our debt facilities and by the end of the year had significantly reduced our cost of funds. The numerous objectives and milestones achieved during 2014 demonstrate our strong execution capabilities and that we have established the right growth strategy to reinforce competitive position in our core domestic markets. We have already made significant investments to support that growth, which has resulted in reinforced market share and competitive position, and I am very confident that we have the best assets and team in place to continue to support our future growth ambitions. 8 NOS is the result of the merger of ZON and OPTIMUS, The launch of NOS embodies the integration of all completed on August 27, 2013, the new telecommunications and entertainment needs into management team having been elected on a single, convergent point of access, based on a October 1. customer experience of total commitment and excellence. NOS was born to provide the best NOS is presently a major player in the Portuguese telecommunications and entertainment experience telecommunications market, with Operating for everyone, everywhere, for all services, contents, Revenues of about €1,400 million, more than 3.6 devices and platforms, from television to mobile, million mobile customers, around 1.5 million Pay TV including the Internet, telephone, cinema and subscribers and Fixed Voice customers, and convergence. The brand name focuses on the approximately 1 million fixed broadband customers, needs of a world that increasingly works in network totalling more than 7.6 million RGUs (of which more and collaboratively. than 1.8 million are currently convergent RGUs). With the launch of NOS, the teams can now focus The merger of ZON and OPTIMUS in August 2013 fully on increasing sales efforts and on restructuring leveraged the results of both companies the operations of the entity created by the merger. individually, strengthening their combined position in All operational and commercial efforts are now the domestic market and reinforcing their growth directed at a single brand. To date, the results of the ambitions. The strategy set is one of strong growth launch of the new brand are well above and consolidation of the competitive position in the expectations with a brand awareness of nearly domestic market. It was defined on the basis of a 100%, and association of the NOS brand with all the combination of complementing infrastructure, core services standing at more than 90%. greater distribution capacity, human and financial resources, and a strong potential to generate NOS has a unique set of assets that provides an synergies. extremely solid platform for its growth ambitions: our network is the most modern, in terms both of In short, NOS is currently a Group with the capacity coverage and of capacity; our Pay TV offer is the to invest and foster its competitiveness and that of most advanced, with unique features and the best the telecommunications industry, to generate user interface; and our offers tear down the barriers shareholder value and to create new opportunities of the network effect. for its employees, customers and suppliers. A new group able to foster a sustainable growth strategy, internationalisation and efficient management, in which sharing the experience and know-how of its teams will be a decisive and fundamental factor. A very important milestone of the merger between ZON and OPTIMUS was achieved in 2Q14 with the launch on May 16 of the new NOS brand. This was a logical step, essential to the development of a strategy of ambitious growth, increasing the potential for generating synergies. 9 10 Companies and Businesses 11 NOS Comunicações NOS Lusomundo Cinemas NOS Communications offers latest generation fixed and NOS Lusomundo Cinemas is the portuguese leader in mobile solutions for television, Internet, voice and data cinema exhibition and alternative content exhibition in for all market segments - Residential, Personal, Business movie theatres (live and deferred exhibition of opera, and Wholesale, and is leader in Pay TV, New Generation ballet, theatre, football, concerts and other events), Broadband services and in cinema distribution and becoming the first chain in Europe and one of the first exhibition in Portugal. worldwide to become fully digital. NOS is an operator with convergent multi-device NOS Lusomundo Cinemas also leads in technology, product offers, whose key primary goal is to provide a every cinema theatre is digitally enabled with a 2k good user experience across the whole country. It resolution in 2D, and 86 out of the 210 movie theatres combines the TV interface, IRIS, which has been it holds are also 3D enabled. recognised nationally and internationally by being Having opened its first IMAX theatre in 2013 awarded various prizes and which offered the first (Colombo Shopping Centre, with a capacity of automatic recording system on the market, with the around 400 seats), it foresees opening at least two fastest broadband speeds (360 Mbps), better coverage more theatres with this state of the art technology in (including the biggest Wi-Fi network in Portugal and in terms of sound and image. the world) and unlimited 4G mobile services across all networks. NOS Lusomundo TV NOS Lusomundo TV is a programming aggregator on a NOS Lusomundo Audiovisuais linear and non-linear model, providing channels and NOS Audiovisuais operates in the audiovisual distribution services to other operators. Currently, the company holds market, either in Portugal as well as in the Portuguese in its channel portfolio the TVCine and TVSéries channels, speaking countries, namely Angola and Mozambique. It is which are a reference in its thematic. These channels are the leading content provider and it ensures, through the available in Portugal and in Portuguese speaking management and acquisition of rights, the distribution of countries.