Worldreginfo - A88e25c1-5F0a-4525-B130-950551E6a840 ZON Multimédia – Serviços De Telecomunicações E Multimédia, SGPS, S.A
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WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. Table of Contents 1 Management Report 3 2 Corporate Governance Report 102 3 Consolidated Financial Statements 212 Statement Under the Terms of Article 245, Paragraph 1, C) of the Portuguese Securities Code 312 2 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 Annual Report and Accounts 2012 Management Report 3 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 0 Introduction 6 Message to our Shareholders 6 About ZON 10 Organogram 11 The ZON Network – Key Facts 12 Key Performance Indicators 14 The ZON Team 17 1 A Year marked by Innovation 20 Residential Segment 20 IRIS 20 Leader in Broadband and Fixed Voice innovation 22 More HD 24 Offers for all segments 24 Corporate Segment 26 Distribution strategy 29 Communication strategy 30 2 The most sophisticated Next Generation communications network 32 3 The most satisfied customers 38 4 Other businesses 42 Portugal 42 Cinemas 42 Audiovisuals 45 International 46 5 2012 results - activity report 48 Macroeconomic Environment 48 Sector and Regulatory Framework 51 Operational and Financial Results 55 4 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 Annual Report and Accounts 2012 6 Sustainability 72 Corporate Sustainability 72 Our Conduct: Corporate and Individual Ethics 73 Our Customers: From Satisfaction to Confidence 74 Our People: Developing the Best Asset 78 Our Shareholders: Complying with Best Practices 82 Our suppliers: Partnerships for Innovation 83 Environment: Respect for and Protection of Nature 85 Corporate Responsibility: Contributing to Communities 95 Regulators and Media: Transparency and Openness 98 Our Prizes, Awards, Certifications and Standards 100 5 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 0 Introduction Message to our Shareholders Dear Shareholders, At the end of another year of activity, regarding which we draw up a very positive balance of our work and results, we are pleased to share with you the Annual Report and Accounts for 2012. The year under review saw many challenges both for ZON and for the majority of Portuguese companies – we were operating in a difficult economic environment, characterized by high unemployment, a decline in private consumption and extremely limited business investment. This was not a surprise, yet it confirmed the fears that constituted the basis of the plan for the year now ended. Our turnover (National and International) grew from 854.8 million euros in 2011 to 858.6 million euros in 2012, with EBITDA* increasing from 311.2 million euros to 312.9 million euros. The FCF** more than doubled from 51.5 million euros in 2011 to 106.5 million euros. The telecommunications market in Portugal suffered a decrease of approximately 5% and ZON was not immune to this, with revenues in the domestic market falling by 2.3%. However, with the inclusion of proportional revenues from ZAP, there was an aggregate growth of 1.8%. Not all areas showed the same positive evolution. Cinema business decreased by about 11%, due to the downturn in consumption and the increase of the VAT rate to 13% at the start of 2012. Even so, our market share increased slightly, as some of our competitors saw their business come under even greater pressure. In the Audiovisuals business, the sale of movie rights and other contents suffered greater impact (-15%). In the Contents segment, the premium component continued to be most affected by the reductions in consumption, and revenue from these channels declined by 13.4% during 2012. However, despite the particular macroeconomic framework underpinning the year, ZON overall showed very considerable resilience in terms of its products and services, positively reflected, as we have seen, in its operating and financial results. 6 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 Annual Report and Accounts 2012 Our strategy is based on simple principles and the approach to these adverse market conditions was undertaken pragmatically. We know we have to achieve gains in efficiency in operational areas without compromising our image, our business results and the commitment of our teams. Our plans reflect the following strategic principles: Discipline in the fulfillment and control of annual business plans; Permanent focus on innovation as a way to be more appreciated by Customers and respected by competitors and by our industry; Ongoing search for gains in efficiency across the board – improvement of processes, simplification of systems, purchasing, establishment of partnerships; Ongoing search and focus on alternatives for growth; Social responsibility; Development of a positive in-house environment - open communication, professional development, internal mobility, working conditions, objective-based remuneration -and profit sharing; Transparency of management actions in the light of Employees, the Board of Directors and the Capital Market. Without wishing to be exhaustive, we would merely like to draw your attention to some of our key milestones in 2012, which resulted from the implementation of our strategy. After a cycle (2008-2011) of major extraordinary investments in the strengthening of our residential and corporate telecommunications network, during the year now ended ZON impacted the market with: The launch last summer of Timewarp, a feature that enables customers to watch the past 7 days of dozens of television channel programs simply and effectively. This feature, which is based on new technologies and server concepts, was launched as a world premiere by ZON and has led to great recognition by our Industry and our Customers; The strengthening of our service portfolio for businesses. We reorganized our teams and increased our technical and commercial staff, reinforcing our focus that is succeeding in increasingly making us an alternative to the traditional providers; The enrichment of our applications portfolio, such as ZON@FON, which is the leading Wi Fi network platform in Portugal, with more than 500,000 hotspots throughout the country, or the ZON Phone, an app that enables our customers to use a mobile phone to make calls where ZON landline charges are applied. We continue to increase the number of interactive applications on our IRIS platform; 7 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. The ongoing commitment to ZAP has led to extremely important steps being taken as part of its unquestionable success. Our commitment in this joint venture remains a priority, although the company is completely independent of and separate from ZON. We are continuing to develop our support and the search for synergies in all areas of the company. ZAP is a fundamental part of our growth strategy and its future potential is very interesting; Improving our service to our Customers in keeping with what we have been doing. We continue to see significant progress. The number of customer contacts dropped around 8% in the past year, while the number of services sold rose by 4.6%. The enthusiasm of our internal and external teams, as well as improvements we have made to our IT systems and network infrastructure, have had a positive impact on our profitability and image for our residential and business customers; The fourth quarter of 2012 saw the conclusion of a very important project. We moved to a new centrally, located headquarters in Lisbon, bringing together almost all our employees within a single, more economical, modern, functional and eco-friendly location. In addition to a saving of about 15% in the overall cost of buildings, it is also an important driver of satisfaction, motivation and productivity for our employees. Lastly, and as is publicly known, our Board of Directors and Shareholders considered and approved the proposed merger of ZON with Optimus. The merits and goals of this merger have been widely reported and are detailed in the Merger Project drawn up jointly by executives of both companies. Without wishing to anticipate and minimize the risks that can arise in projects of this type, it is our firm belief that this merger will be very positive in terms of generating value. This operation will merge two companies whose business is significantly complementary, providing them with the opportunity to become a telecommunications operator of greater dimension and increased technical and financial capacity. The quality and capacity of the technical infrastructure that will be brought together, the diversity of the markets covered, the competence and diversity of the existing human capital, the long- term commitment of many of our shareholders together provide an extraordinarily interesting formula and opportunity for the new company to grasp. The telecommunications sector is very interesting. It is one of the most important sectors for the development of any society. Tomorrow, as today, we shall need high-performance communication networks, vast geographical coverage, technology and technical resources. 8 WorldReginfo - a88e25c1-5f0a-4525-b130-950551e6a840 Annual Report and Accounts 2012 Our company consists of hundreds of employees and is supported by an extensive partner network. Our success is due to the collaboration of all, to their ability to innovate and to the Energy and Commitment with which we work together on a daily basis. We are grateful