Worldreginfo - 102C94b6-B9f2-40Fb-Aba5-5D1c547744be ZON Multimédia – Serviços De Telecomunicações E Multimédia, SGPS, S.A
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WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. TABLE OF CONTENTS 2 Consolidated Report and Accounts 2011 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. LETTER FROM THE CHAIRMAN OF THE BOARD AND THE CHIEF EXECUTIVE OFFICER 4 01 BUSINESSES 7 Business Indicators 8 Financial Indicators 10 Main Events in 2011 11 Triple Play Business 14 Pay TV 14 Broadband 15 Fixed Voice 16 Corporate 17 Communication Strategy 18 Technology 21 Distribution Channels 23 Logistics and Procurement 24 Other Businesses 25 Cinema 25 Audiovisuals 27 ZAP 28 02 PERFORMANCE 29 Macroeconomic Background 30 Sector / Regulation 33 2011 Operational Performance 40 2011 Financial Performance 47 03 SUSTAINABILITY 55 04 FINANCIAL STATEMENTS 97 Consolidated Financial Statements 98 Annexes 178 Documents of Appreciation of Consolidated Accounts 181 05 CORPORATE GOVERNANCE 189 STATEMENT UNDER THE TERMS OF ARTICLE 245, PARAGRAPH 1, C) OF THE PORTUGUESE SECURITIES CODE 270 Consolidated Report and Accounts 2011 3 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Letter from the Chairman of the Board and the Chief Executive Officer Dear investor, At the end of 2010, it was not possible to predict the scale of the challenges that the country and ZON were set to face. However, despite these challenges, we are very pleased about how things turned out for us in 2011, not only due to our good operational performance, but also due to our ability to adapt to the difficult macro and micro economic environment. We have centred our strategy on very simple concepts and priorities: Customer Service, Innovation, Leadership, Technology, Team Spirit and Financial Discipline. Underlying our strategy is a core principal, transparency, both internal and external. During the course of 2011, we are very proud to have received external recognition of our transparency and discipline when we were considered to be on the eight best performing companies in Portugal as regards corporate governance. We have redesigned our company over the past few years, our network, our systems and processes. Our core concern is to enrich our customers’ experience by innovating all the way through the organization – the changes we introduce always have one clear purpose – to improve the value we deliver to our customers, to enthral them with our brand. We are today a reference in our sector in terms of both technological capacity and innovation, and have received numerous awards, both in Portugal and abroad, in recognition of the quality of our services and offers. In 2011 we launched our next generation user interface, “IRIS”. This new premium service has proven a resounding success and by the end on 2011 around 100 thousand customers had already signed up. The interface has a completely new user platform developed from the outset as a platform to be rolled out to other screens beyond the TV set. Towards the end of the year we launched IRIS online for laptops, tablets and smartphones, enabling customers to benefit from a truly seamless experience, be they at home or on the move. We grew in all our main markets. We are clear leaders in Pay TV with 1,567 customers, over 60% of which subscribing to triple play bundles (TV + Broadband + Voice). We are amongst the operators with the highest level of triple play penetration in Europe. Innovation, quality of service and technological leadership have sustained our consistent ability to grow our broadband customer base. At the end of 2011, 63% of our cable customers had broadband and, of these, over 50% were taking offers greater than 24 Mbps. Our voice offers continue to be a very strong value proposition and in 2011 we captured 100 thousand additional voice customers. We again launched a very innovative service at the end of 2011, “ZON Phone”, an App that can be downloaded for iPhone, Android and iPad and that enables users to make internet calls, when on the move and within Wi-Fi coverage, using their home fixed telephone number whilst benefiting from the same tariff plan. We have been at the forefront of innovation as regards our cinema business, with all of our screens digitalized and 40% with 3D projection technology. Our leadership position in audiovisual distribution is supported by the strength of our TV and Cinema businesses and by the distribution of content to other domestic and international operators. 4 Consolidated Report and Accounts 2011 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. We are very excited about the performance of our first initiative outside of Portugal, a joint-venture in which we hold 30%, to broadcast satellite Pay TV for the Angolan market. The Angolan pay TV market more than doubled in 2011, and ZAP, our commercial brand for Angola, took the greater part of that growth. We are confident that this market still has significant potential for future growth and that ZAP is well positioned to capture a significant proportion of it. 2011 marks a turnaround for ZON. Revenue growth slowed with the already quite high levels of triple play penetration achieved. However, we have focused in improving cost structure and processes and that has enabled us to significantly improve operating results and margins. As we had forecast, 2011 represents an inflection point in ZON’s free cash flow generation. At the same time that we are improving operating profitability, we significantly reduced the level of CAPEX by around 100 million euros due to the completion of all the large network investments and customer equipment upgrades in 2010. As such, we generated enough cash flow in 2011 to remunerate all our sources of capital, including payment of dividends, and still reduce debt marginally. We are very pleased with our performance in 2011 albeit prudent about the prospects for what we still expect to be a challenging 2012. We will continue to seek ways of reaching out to our customers and the market in general with even better value propositions and service quality, whilst focusing on operational excellence and financial discipline. We would like to thank all our employees for their dedication and hard work in pursuit of the targets established for the organization. We would also like to thank our customers, commercial and technical partners and our shareholders for their continuous support throughout the year. Daniel Proença de Carvalho Chairman of the Board of Directors of ZON Multimédia Rodrigo Costa Chief Executive Officer of ZON Multimédia Lisbon, 26 March 2012 Consolidated Report and Accounts 2011 5 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 6 Consolidated Report and Accounts 2011 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 01 BUSINESSES Consolidated Report and Accounts 2011 7 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Business Indicators (in thousands): Triple Play Customers (Thousands): % Triple Play Cable Customers: 709 60% 642 55% 484 41% 2009 2010 2011 2009 2010 2011 RGUs (Thousands): RGUs per Subscriber (units): 3,315 3,147 2.25 2.36 2,858 2.01 2009 2010 2011 2009 2010 2011 Blended ARPU (Euros): Pay TV Customers (Thousands): 35.4 35.7 1,595 1,572 1,567 33.8 2009 2010 2011 2009 2010 2011 8 Consolidated Report and Accounts 2011 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Broadband Customers (Thousands): Fixed Voice Customers (Thousands): 739 884 690 778 611 584 2009 2010 2011 2009 2010 2011 Mobile Customers (Thousands): 125 108 69 2009 2010 2011 Consolidated Report and Accounts 2011 9 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Financial Indicators (Millions of Euros): Operating Revenues: EBITDA [EBITDA Margin as % of Revenues]: 872 330 855 311 37% 813 302 280 263 36.4% 35% 230 34.7% 33% 180 32.3% 31% 130 29% 80 27% 30 25% 2009 2010 2011 2009 2010 2011 Net Income: CAPEX: 44 248 214 35 70 34 8 150 9 206 178 141 2009 2010 2011 2009 2010 2011 Recurrent CAPEX Non-Recurrent CAPEX Net Financial Debt: Net Financial Debt / EBITDA [x]: 640 638 616 2.3x 2.1x 2.0x 2009 2010 2011 2009 2010 2011 10 Consolidated Report and Accounts 2011 WorldReginfo - 102c94b6-b9f2-40fb-aba5-5d1c547744be ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Main Events in 2011 January IRIS by ZON Fibra Launch ZON Lusomundo announces Home Premiere service ZON was, once again, elected as one of the best companies to work in Portugal, according to the study of EXAME magazine Excellence at Work Award (a Heidrick & Struggles, ISCTE Business School and Económico Newspaper partnership): ZON ranks first in the Technology, Media and Telecommunication sector and third in the Large Companies Top 5 ZON TVCabo is the first company in Portugal to receive the 100R certificate by Sociedade Ponto Verde for all its buildings and shops February ZON Lusomundo Audiovisuais wins Paramount award for the movie “Shrek Forever After” Launch of TV Cine 1 and TV Cine 2 HD channels ZON launches Glooq, an exclusive and innovative marketing tool March Broadcast of NBA games in 3D ZON launches on