20110322 Zonconsolidatedma
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TABLE OF CONTENTS ZON IN NUMBERS Business Indicators ............................................................................................................................ 4 Financial Indicators ............................................................................................................................ 6 1 – LIGHT 1.1 Joint message from the Chairman of the Board and the CEO .................................................... 7 1.2 ZON Group .................................................................................................................................. 9 1.2.1 ZON Group companies’ description ............................................................................ 9 1.2.2 Organigram ................................................................................................................. 10 1.2.3 ZON Group Vision, Mission and Values ..................................................................... 10 2 – SPEED 2.1 Main events in 2010 ..................................................................................................................... 12 2.2 Businesses ................................................................................................................................... 13 2.2.1 Pay TV ........................................................................................................................ 13 2.2.2 Broadband ................................................................................................................... 16 2.2.3 Fixed Voice ................................................................................................................. 18 2.2.4 Mobile .......................................................................................................................... 19 2.2.5 Corporate .................................................................................................................... 19 2.2.6 Communication Strategy ............................................................................................. 20 2.3 Technology .................................................................................................................................. 24 2.4 Distribution channels .................................................................................................................... 26 2.5 Logistics and procurement ........................................................................................................... 27 2.6 Customer service ......................................................................................................................... 28 2.7 Other businesses ......................................................................................................................... 31 2.7.1 Cinema ......................................................................................................................... 31 2.7.2 Audiovisuals ................................................................................................................. 33 2.7.3 ZAP .............................................................................................................................. 33 3 – BRILLIANCE 3.1 Strategy ........................................................................................................................................ 35 4 – UNIVERSES 4.1 ZON and the World ...................................................................................................................... 36 4.1.1 Management ............................................................................................................... 36 4.1.2 Employees .................................................................................................................. 38 4.1.3 Community .................................................................................................................. 42 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 2/224 5 – CHANGE 5.1 Macroeconomic background ........................................................................................................ 44 5.2 Sector/Regulation ........................................................................................................................ 46 5.3 Operating Performance in 2010 ................................................................................................... 50 5.4 Financial Performance in 2010 .................................................................................................... 54 5.5 Share performance ...................................................................................................................... 62 STATEMENT UNDER THE TERMS OF ARTICLE 245, PARAGRAPH 1, C) OF THE PORTUGUESE SECURITIES CODE .......................................................................................... 64 6 – PROGRESS 6.1 Consolidated financial statements ............................................................................................... 66 6.2 Annexes ....................................................................................................................................... 134 7 – CORPORATE GOVERNANCE REPORT ............................................................................ 137 8 – DOCUMENTS OF APPRECIATION OF CONSOLIDATED ACCOUNTS ...................... 218 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 3/224 ZON in Numbers Business Indicators (thousands): Triple Play Customers: % Cable Triple Play Customers: +32.6% +14.1pp 642 55% 484 41% 2009 2010 2009 2010 RGUs: Cable RGUs per Subscriber (units): +10.1% +11.7% 3.147 2,25 2.858 2,01 2009 2010 2009 2010 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 4/224 Blended ARPU: Pay TV Subscribers: +4.8% (1.5)% 35,4 1.595 1.572 33,8 2009 2010 2009 2010 Broadband Subscribers: Fixed Voice Subscribers: +13.0% +33.1% 690 778 611 584 2009 2010 2009 2010 Mobile Subscribers: +56.7% 108 69 2009 2010 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 5/224 Financial Indicators (millions of Euros) : Operating Revenues*: EBITDA* (EBITDA Margin as % of revenues): +7.3% +15.2% 3 5 0 1 0 0 % 302,4 9 0 % 872 3 0 0 813 262,6 8 0 % 2 5 0 7 0 % 6 0 % 2 0 0 5 0 % 1 5 0 4 0 % 34,7% 3 0 % 1 0 0 32,3% 2 0 % 5 0 1 0 % 0 0 % 2009 2010 2009 2010 Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 2009 resulted in a reduction in revenues of 9.8 million euros, in costs of 5.3 million euros and in EBITDA of 4.4 million euros, and an increase of 4.4million euros in Other Expenses / (Income), thus not affecting Net Income. Adjusted Net Income**: CAPEX: +20.4% +16.1% 35 248 214 29 8 70 206 178 2009 2010 2009 2010 Baseline CAPEX Non Recurrent CAPEX * * 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. Net Financial Debt: Net Financial Debt / EBITDA [x]: +3.9% 616 640 2,3x 2,1x 2009 2010 2009 2010 ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 6/224 1. LIGHT 1.1. Joint Message from the Chairman and the CEO Dear Investor, 2010 was a year full of challenges, challenges that we were able to overcome. Once again, we have achieved growth in all our activities, surpassing the operational targets we had set a year ago. As a team, we are particularly proud that our company has established itself as a reference for our sector in all areas of business. We are regarded, both domestically and abroad, as a company with great technological and innovative capabilities, and with a strong management approach. In 2010, we grew our telecommunications business, cinema exhibition and content distribution. We launched our first telecoms business abroad and a new business area dedicated to the corporate segment. All this was accompanied by strong progress in financial KPIs. The total number of Pay TV subscribers remains stable, whilst we delivered strong growth in telecom revenues largely driven by the increase in the number of customers who subscribe to all three services (Pay TV, Broadband and Voice). Today, we already have 642 thousand customers who subscribe to these triple play bundles. We also recorded great progress in Fixed Broadband and Fixed Voice services, reaching 690 thousand and 778 thousand customers respectively. In Pay TV, most of our customers (84%) already use our digital services, thus enjoying a significant improvement in the way they watch television, with increasingly attractive and sophisticated features and more High Definition (HD) content – an area where ZON leads the Portuguese market. In 2010, we prepared the launch of a new TV user interface – IRIS - that is being rolled out to the homes of thousands of customers since the start of this year. It is considered to be one of the most advanced in the world and has been widely praised in both the domestic and international press. We have also achieved great progress in customer support. Our efforts have achieved recognition from official entities that monitor the quality of service provided by telecom operators and we rank #1 or #2 in all