PORTUGAL. Merger brings cash flow boost, but competitive dynamics are tough COMPANY UPDATE

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1 Millennium investment banking TELECOM PORTUGAL Zon Optimus 21 Feb 2014 Zon Optimus Valuation update Merger brings cash flow boost, but competitive dynamics are tough COMPANY UPDATE Alexandra Delgado, CFA Equity Analyst Neutral (Medium Risk) Target ( ) YE14 : 5.65 Price ( ): PF 2013E 2014E 2015E Upside: 6% No. Shares (mn): 515 Financials Market Cap ( mn): 2,756 Revenue ( mn) 1,489 1,442 1,409 1,432 Avg Daily Vol 3m (k): 838 EBITDA ( mn) EPS 5Y CAGR: 9% Net Income ( mn) YTD change: -1% EPS ( ) Bloomberg: ZONOP PL CEPS ( ) Prices as at DPS ( ) Ratios RoIC (%) RoE (%) Net Debt/EV (%) Net Debt/EBITDA (x) Valuation P / E (x) EV / Revenues (x) EV / EBITDA (x) ZON Optimus PSI20 Dividend Yield (%) Feb-13 May-13 Aug-13 Nov-13 We have fine-tuned our estimates for Zon Optimus. We value Zon Optimus at 5.65 per share (YE14), revised from our previous calculation of 5.30, meaning a 7% upward revision. Given the 6% upside on the stock we rate it as Neutral (Medium Risk). The upward revision of our price target is due to the increase in value resulting from a lower sovereign yield (to 5% from 7%) being partially absorbed by a more difficult competitive environment in telco. Our valuation entails: revenue CAGR 12-16E of -0.3%, EBITDA (inc. synergies) CAGR 12-16E of 2.2% and FCF to equity CAGR 12-16E of 14.7%. Telco business will suffer in 2014, as Vodafone s triple play pricing continues to take a toll on subscriber figures, pressure down ARPU and demand higher commercial costs. A good execution on the 4P front can be a powerful tool in minimizing impact of the 3P battle, as well as the success of Zon Optimus in growing market share in the enterprise segment. We re forecasting Telco revenue will decline 2.4% in 2014 (-3.2% in FY13), i.e. we believe weakness on triple play will be only partially offset by growth in mobile and in business segment. We do expect consolidated EBITDA to remain flat YoY in 2014 (at 535 mn), with merger synergies offsetting the increased topline pressure. Capex should also be flat YoY. As synergies build up and topline recovers, FCF should benefit significantly. With run rate savings reaching c. 50 mn from FY16, we calculate Zon Optimus free cash flow may reach c. 230 mn in FY16, which compares to 133 mn in FY12 (pro forma, exc. spectrum payment and securitization). In summary, Zon Optimus enjoys a strong position in the market, cemented on its wide wireline coverage and Pay TV client base, now allied to Optimus mobile network and potential to drive convergent offers for both the consumer and the business markets. At current price we do not find much upside in the stock, although we don t see much downside either. We highlight that Zon Optimus trades at 7.2x EV/EBITDA 2014E, which compares to EU cable average of 11.1x (undergoing a very strong momentum due to M&A appeal) and EU incumbent average of 6.1x. All prices are those of the end of the trading session unless otherwise indicated. For important Disclosure and Disclaimer go to the second last page.

2 Index Investment case 3 Valuation changes breakdown Zon Optimus Headlines Zon Optimus EBITDA Zon Optimus EBITDA margin Main valuation drivers Capex revision Valuation drivers Zap (Africa) Mib Merger synergies vs. Merger project Synergies included in Zon Optimus model Free Cash Flow DPS estimates Net Debt E 4Q13 Income Statement Valuation 14 Sum-of-The-Parts Sum-of-The-Parts revision DCF Portugal DCF Zap (Africa) DCF assumptions - Portugal DCF assumptions - Africa Estimates Revisions 18 Domestic business KPIs revision Income statement revisions Main Headlines revisions Consolidated Balance Sheet revisions African business revisions Operating Performance 22 Consolidated income statement Main Headlines Operating & Financial margins Financial Balance Sheet 4Q13 Earnings Preview 24 Consolidated income Statement KPIs - Portugal Cash Flow Items Quarter Schedule Quarter Seasonality Sector Multiples 26 Consolidated Figures 27 Income Statement Financial Balance Sheet Cash Flow Statement Leverage Indicators Disclosures and Disclaimer 28 Page 2 of 29

3 Investment Case Summary: Zon Optimus will have a decisive year. Telco business will suffer, as Vodafone s triple play pricing continues to take a toll on subscriber figures, pressure down ARPU and demand higher commercial costs. The evolution of competitive dynamics, namely Vodafone behaviour, is the key factor in this year s performance. A good execution on the 4P front can be a powerful tool in minimizing impact of the 3P battle, not only because it increases retention but more importantly because it brings significant additional revenue 1. On this topic, the company has already signalled that it intends to launch other convergent bundles throughout the year, in order to cover a wider spectrum of the market, not just the high-end. Last but not least, the success of Zon Optimus in growing market share in the enterprise segment 2 can be key to a better performance on the topline front. We do not expect Vodafone to stop this aggressive push into triple play anytime soon (not this year at least), so we re forecasting significant pressure over triple play business, being only partially offset by mobile revenue growth (new customers brought by Zon4i) and growth in the enterprise segment. We re forecasting Telco revenue will decline 2.4% in 2014 (following this year s -3.2% YoY). Assuming c. 75% of Telco revenues come from consumer and 25% come from the business segment, our 2.4% decline in FY13 is the result of: -6% YoY in consumer combined with +10% in business. We do expect consolidated EBITDA to remain flat YoY in 2014 (at 535 mn), with merger synergies offsetting the increased topline pressure. Capex should also be broadly flat. As synergies build up and topline recovers, FCF should benefit significantly. With run rate savings reaching c. 50 mn 3 from FY16, we calculate Zon Optimus free cash flow may reach c. 230 mn in FY16, which compares to 133 mn in FY12 (pro forma, exc. spectrum payment and securitization). Zon Optimus has a conservative capital structure (2.0x Net debt on EBITDA 2013E) and FCF boost gives headroom for more attractive shareholder remuneration. We re estimating Zon will pay 0.19/ share on 2013 Earnings in 2014 (3.4% yield at current prices) and keep a 100% payout beyond We highlight that the Board has room to be more generous though: from a FCF standpoint, dividend is only an average of 60% of FCF and the company already has a low leverage relatively to peers. Zon Optimus will hold a Strategy Day on February 28th, the day after the 4Q13 Earnings release, and therefore an update on strategy, market dynamics, targets and synergies should be provided. Although we do not expect the company to release guidance in the strict sense of the term, this meeting will be definitely important to set the tone for the next quarters and to understand what the company s ambitions are. Our price target YE14 has been revised to 5.65 from 5.30, as the increase in value resulting from a lower sovereign yield (to 5% from 7%) was partially absorbed by a more difficult competitive environment in telco. Our valuation entails: revenue CAGR 12-16E of -0.3%, EBITDA (inc. synergies) CAGR 12-16E of 2.2% and FCF to equity CAGR 12-16E of 14.7%. In summary, Zon Optimus enjoys a strong position in the market, cemented on its wide wireline coverage and Pay TV client base, now allied to Optimus mobile network and potential to drive convergent offers for both the consumer and the business markets. Assuming integration goes as expected, benefits should be sizable. Zap is a success story, potentially starting to pay dividends this year. And a further replication of this model into other geographies is a wildcard, even if this topic should be put on a shelf until integration is well underway. At current price we do not find much upside in the stock, although we don t see much downside either. Zon Optimus trades at 7.2x EV/EBITDA 2014E, which compares to EU cable average of 11.1x (undergoing a very strong momentum due to M&A appeal) and EU incumbent average of 6.1x. 1 85% of mobile net adds are new for Zon Optimus disclosed the company in the 3Q13 Earnings. 2 Zon Optimus has c. 26% of domestic market share, but only c. 15% share in the business/enterprise segment. The business/ enterprise segment is estimated to represent 2.2 bn (out of 5.5 bn total telecom market): a 1p.p. increase in market share can represent approx. 22 mn in revenues. 3 Top of interval provided by companies when merger plan was disclosed. Page 3 of 29

4 Our valuation: We have fine-tuned our estimates for Zon Optimus. We value Zon Optimus at 5.65 per share (YE14), revised from our previous calculation of 5.30, meaning a 7% upward revision. Given the 6% upside on the stock we rate it as Neutral (Medium Risk). Our price target implies a 7.3x adjusted EV/EBITDA 2014E 4. Main changes in our estimates: Valuation changes breakdown Old Target YE14 WACC revision (domestic business) Estimates fine-tuning (Portugal) Estimates fine-tuning (Africa) Other revisions New Target YE The revision of WACCs applied to the domestic business valuation resulted in a 0.60 upward revision of our price target. This resulted from the decrease of the Portugal sovereign yield to 5% from 7% (current yield is c. 4.8%) and consequent decrease of country risk premiums applied to the explicit period estimates. We are now considering: a WACC of 10.55% applied to (previous WACC was 13.02%) and a WACC of 9.38% to (previous WACC was 10.62%). WACC applied to perpetuity has remained at 8.22%. Please refer to page 16 to see the revision of parameters used in domestic business WACC calculation. We have fine-tuned our operating estimates for Portugal. On the revenue side, we have revised downwards our estimates for the Telecom business by an average of 5.5%, reflecting the impact of Vodafone s aggressive triple play price point. We are now forecasting for Telco revenue: -3.2% YoY in FY13 and -2.4% in FY14. As for the audiovisual & cinema segment, we expect a slight revenue growth in 2014, following this year s stabilization of topline. EBITDA estimates beyond 2015 were also revised downwards but by an average of 4.0%, meaning we expect the company to be able to partially compensate for the additional pressure on topline through increased efficiency. We re now forecasting EBITDA to drop 1.2% in 2013 to 535 mn, staying then stable at this level in 2014 thanks to merger synergies. On a positive note, capex estimates (like-for-like) were decreased by an average of 6%, a reflection of the lower commercial activity and more efficiency on this front. In summary, weaker EBITDA not fully offset by lower investment led to a 0.25/ share decrease of our price target. 4 Assuming 40 mn run rate opex synergies flowing into 2014 EBITDA. Page 4 of 29

5 We fine-tuned our estimates for African Zap (Finstar), namely lowering revenues while increasing EBITDA margin (30.0% in 2013 vs. previous estimate of 27.5%). These revisions did not have a material impact on our valuation. We attribute a value of 107 mn to Zon s equity stake in Zap. Zap s enterprise value stands for a 7.6x EV/EBITDA 2014E. We value the 50% stake in Sport TV at 30 mn equity value, as in the previous valuation, which stands for a 1.8x EV/EBITDA 2014E multiple 5. Please refer to tables in pages 18 to 21 for a detailed analysis of our estimate revisions. Please note Zon Optimus has restated its accounts in 3Q13 to reflect the capitalization of certain movie rights in the audiovisual segment following IAS 38 (no valuation impact). In addition, restructuring costs related to the merger ( 40 mn split between 2013 and 2015) were accounted for in our previous estimates above the EBITDA line, whereas Zon Optimus reports these expenses under the EBITDA line. Therefore, revision tables show like-for-like evolution, i.e. new estimates vs. old estimates restated for capitalization of movie rights and for restructuring costs below EBITDA 6. Valuation drivers: - Revenue: we forecast the new company will generate 1,442 mn pro-forma 7 revenue in 2013, minus 3.2% than the previous year, as a consequence of increasing pressure in the telco business combined with the stabilization of the audiovisual segment. For FY14 we estimate a further 2.3% revenue decline on the back of the further weakness in telco driven by competition forces (-2.4% YoY) and a slight growth in the audiovisuals segment (+1.2% YoY). Revenue CAGR E entailed by our model is 1.3%. - EBITDA margin: we estimate merger synergies will allow margin to advance to 40.1% in FY16 from last year s 36.4%; in the subsequent years we do not forecast a significant change in margin (41.4% EBITDA margin in perpetuity). We highlight that we estimate a margin of 40.6% for the telecom business in perpetuity, which compares to 43.5% for PT s domestic business. - Telecom capex: we estimate capex as % of revenues dropping to c. 15% in FY22 from 16.4% in FY14. 5 Estimated EBITDA in 2014: 80 mn, Net debt 2013E of 81 mn. Please refer to our Company Update: Zon Optimus - Valuation Update - Avoiding euphoria but downside is limited published on November 7th 2013, for more details on the basis for this figure. 6 We remind that the deconsolidation of joint ventures (Zap, Sport TV and Dreamia) was already incorporated into our figures (EBITDA impact of mn in 9M12, mn impact in 9M13). The capitalization of customer acquisition costs at Zon in order to align with Optimus policy was already reflected as well (EBITDA impact of mn in 9M12, mn impact in 9M13). 7 Figures assuming: 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Page 5 of 29

6 Zon Optimus Headlines million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E Revenue 1,489 1,442 1,409 1,432 1,470 1,507 1,688 YoY -3% -2% 2% 3% 3% 2% Cash costs EBITDA EBITDA mg 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% Net Income EPS Capex Capex as % of revenues 20.0% 17.4% 17.7% 17.4% 17.1% 17.0% 16.4% Telecom capex Telecom capex as % of Telco 19.1% 16.1% 16.4% 16.1% 15.7% 15.6% 15.1% EBITDA - Capex WC Interest & Taxes Integration costs LT contracts Other FCF (1) Dividends Net debt 1,162 1,086 1, EV/EBITDA 5.0x 7.3x 7.2x 6.8x 6.5x 6.2x 5.4x adj EV/EBITDA (2) 5.0x 7.0x 7.0x 6.7x 6.5x 6.2x 5.4x PER Net debt/ EBITDA 2.1 x 2.0 x 1.9 x 1.7 x 1.5 x 1.3 x 0.8 x FCF p/ share FCF yield 5% 4% 6% 7% 9% 9% 10% (1) FCF excludes securitization and spectrum payment (2) Assuming 40 mn run rate opex synergies from 2013 Zon Optimus EBITDA PF 2013PF 2014E 2015E 2016E 2017E Synergies EBITDA exc. synergies Page 6 of 29

7 Zon Optimus EBITDA mg 50% 40% 30% 41.4% 40.1% 38.0% 39.2% 36.4% 37.1% 40.6% 39.2% 38.2% 35.4% 36.1% 36.9% 34.5% 34.0% 34.5% 35.0% 35.3% 36.1% 20% 2012PF 2013PF 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Consolidated EBITDA margin Telecom EBITDA margin Audiovisual EBITDA margin Domestic business Consolidated revenue was revised downwards (average of -5.5%), on the back of the worse competitive environment in the triple play arena. Vodafone is more aggressive than ever on the triple play front as a way to defend its mobile base, selling triple play for 25/ monthly. We highlight that Zon Optimus has currently a campaign offering triple play for 25 for 6 months to new customers, in response to Vodafone. We do not expect Vodafone to stop this aggressive push into triple play anytime soon (not this year at least), and so we believe pressure will remain high for Zon Optimus and PT. We re now forecasting Telco revenues to decline 2.4% in 2014, following an estimated 3.2% decline in 2013; we expect this business to resume growth in Assuming c. 75% 8 of Telco revenues come from consumer and 25% come from the business segment, our 2.4% decline in FY13 is the result of: -6% YoY in consumer combined with +10% in business. In the audiovisual segment, lower pro-forma revenues in 2012 (triggered by deconsolidation of SportTv and Dreamia) led to lower estimates ahead, but outlook has improved. We now forecast a stable YoY topline in 2013 (vs. previous estimate of -3.0%) and a slight growth in 2014 (+1.2%). EBITDA beyond 2015 was also revised downwards (average of -4.0%). This means we expect the company to be able to only partially compensate for the additional pressure on topline through increased efficiency. We also remind that the new cinema law approved by the government early this year is less harmful than the previous version for the operator s EBITDA. We re now forecasting EBITDA to drop 1.2% in 2013 to 535 mn, staying then stable at this level in 2014 thanks to merger synergies. 8 Not disclosed by the company Page 7 of 29

8 Main valuation drivers million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E New Estimates Consolidated revenue Telco Audiovisuals & Cinema EBITDA EBITDA mg 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% Consolidated revenue growth -3.2% -2.3% 1.6% 2.7% 2.5% 2.3% Telco revenue growth -3.2% -2.4% 1.5% 2.6% 2.4% 2.2% Audiovi. & Cin. revenue growth -0.1% 1.2% 3.1% 3.1% 2.9% 3.0% EBITDA growth -1.2% 0.0% 4.8% 5.2% 3.8% 2.4% EBITDA mg increase (pp) 0.7pp 0.9pp 1.2pp 1.0pp 0.5pp 0.1pp Revisions Consolidated revenue -2% -2% -5% -6% -6% -6% -6% Telco -1% -2% -5% -6% -6% -6% -6% Audiovisuals & Cinema -8% -5% -5% -5% -5% -5% -4% EBITDA 0% 2% -1% -5% -5% -5% -4% EBITDA mg 0.8pp 1.4pp 1.3pp 0.5pp 0.2pp 0.5pp 0.6pp Consolidated revenue growth 0.5% -3.3% -1.0% 0.0% 0.0% 0.0% Telco revenue growth 0.1% -3.5% -1.1% 0.0% 0.0% 0.0% Audiov. & Cin. revenue growth 2.9% 0.1% 0.2% 0.2% 0.1% 0.1% EBITDA growth 2.5% -3.8% -3.9% -0.8% 0.7% -0.1% EBITDA mg increase (pp) 0.8pp -0.1pp -0.9pp -0.2pp 0.3pp 0.0pp Note: 2012 figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Source: Company data and Millennium investment banking In what capex is concerned, our figures increased due to a change in accounting policy: the capitalization of certain movie rights in the audiovisuals segment 9. Removing this effect, our capex figures were lowered on average by 6% (refer to LfL revisions in the table below), meaning we re forecasting the company will invest c. 250 mn annually between 2013 and We expect telecom capex to amount to 16.1% of revenues this year, 16.4% in 2014, then slowly decreasing to c. 15% of revenues in perpetuity. Capex revision million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Capex % -1% Telecom Audiovisuals & Cinema Capex % on revenues 20.0% 17.4% 17.7% 17.4% 17.1% 17.0% 16.4% -0.6pp -0.4pp Telecom 16.1% 16.4% 16.1% 15.7% 15.6% 15.1% Audiovisuals & Cinema 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% Revisions Capex 0% -1% 0% 0% 2% 4% Capex % on revenues 1.0pp 1.4pp 1.6pp 1.6pp 1.8pp 1.7pp LfL Revisions Capex -7% -8% -8% -8% -6% -6% Capex % on revenues -1.0pp -0.5pp -0.3pp -0.3pp -0.1pp 0.0pp Source: Company data and Millennium investment banking 9 IAS 38; we estimate the capitalization of movie rights to have a 26 mn impact in Page 8 of 29

9 Africa (Zap) We fine-tuned our estimates for African Zap (Finstar), a joint venture held by Angolan businesswoman Isabel dos Santos 10 (70%) and Zon Multimédia (30%). We lowered revenues ahead while increasing EBITDA margin (30.0% in 2013 vs. previous estimate of 27.5%). We now forecast revenue of 148 mn and an EBITDA of 45 mn in 2013 for the African operator, which compares to 108 mn and 34 mn in 9M13, respectively. The fine-tuning did not have a material impact on our valuation. Our valuation of Zap is based on a DCF in Euro (refer to page 16). We value Zap s equity at 356 mn, derived from a 436 mn enterprise value deducted from a net debt YE13E of 80 mn. We then attribute a value of 107 mn to Zon s equity stake in Zap. Zap s enterprise value stands for a 7.6x EV/EBITDA 2014E. Our DCF-based valuation is based on the following assumptions: - Subscribers grow to circa 919k by YE14 and ARPU declines throughout the explicit period (CAGR 12-22E of minus 3.8%); - Revenue CAGR E is 6.5%; - EBITDA margin reaches 30.0% in 2013 (9M13 = 31.9%), peaking at 32.5% in 2017 & beyond; - Capex is set at 7% of revenues. Valuation drivers Zap (Africa) million E 2014E 2015E 2016E 2017E 2021E 2022E CAGR CAGR Pay TV Subscribers (th, EoP) ,007 1,028 1,112 1,135 14% 8% Blended ARPU ( ) % -4% Revenues % 6% EBITDA % 16% Margin 13.5% 30.0% 31.0% 31.5% 32.0% 32.5% 32.5% 32.5% 3.8pp 1.9pp Capex % 9% As % of Revenues 5.7% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 0.3pp 0.1pp EBITDA - Capex % 20% As % of Revenues 7.8% 23.0% 24.0% 24.5% 25.0% 25.5% 25.5% 25.5% 3.5pp 1.8pp Source: Company data and Millennium investment banking Merger synergies included in valuation Our valuation includes 400 mn in merger synergies, therefore the top of the interval provided by the companies ( mn). These synergies result from run rate savings of 50 mn from FY16 and integration costs of 40 mn (between 2013 and 2015). Zon Optimus will disclose its strategic plan on February 28th, and therefore an update on the synergies topic should be provided. 10 Isabel dos Santos shares control of Zon Optimus with Sonaecom through vehicle ZOPT (each holds a 50% stake); ZOPT holds 50.1% of Zon Optimus share capital. Page 9 of 29

10 Mib Merger synergies vs. Merger project mn Synergies NPV Run rate savings % on combined opex & capex Criteria Integration costs Mib valuation % Only cost & capex savings 40 Merger Project %-4.5% Only cost & capex savings Other assumptions related to merger impact: We assume 80% of savings would be opex and 20% would be capex; We consider 100% of run rate synergies would be achieved in year 4, as guided in the merger project (therefore, in 2016). In the road until year 4, we assumed 15% of run rate synergies would be achieved in year 1 (2013), 55% in year 2 (2014), 85% in year 3 (2015); We assume integration costs would be split between 3 years: 62.5% in , 32.5% in 2014 and 5% in Please refer to the next table for a detailed analysis of synergies & integration costs included in our Zon Optimus model: Synergies included in Zon Optimus model million 2013E 2014E 2015E 2016E 2017E 2022E Synergies Opex Capex Integration costs (opex) Impact on: Opex/ EBITDA Capex Net income Free cash flow FCF, Dividend and Net Debt: Pro-forma 12 Free Cash Flow should be circa 77 mn in FY13 according to our estimates, which turns into 154 mn this year as securitization payments cease and restructuring costs decrease. Beyond 2015, as synergies start boosting EBITDA and Capex is stable around 250 mn, free cash flow should grow considerably mn in restructuring or integration costs booked in 3Q13; we forecast 9 mn in 4Q13, hence 25 mn in Assuming 12 months consolidation of Optimus and stakes in Zap, SportTV and Dreamia consolidated through equity. Page 10 of 29

11 Free Cash Flow FY12PF FY13E FY14E FY15E FY16E FY17E EBITDA minus Op. Capex Change in Working Capital + non-cash item Operating Cash Flow Net Interest Paid & other fin. Charges Income taxes paid Spectrum auction Restructuring costs Long Term Contracts Securitisation transaction Dividends received from Zap & Others Other Cash movements Free Cash Flow Dividends paid Free Cash Flow minus Dividends Cons. Zap's Net Debt (YE11) Decons. Zap, Sport TV & Dreamia net debt 41.1 Securitisation transaction Net Fin. Debt decrease (increase) Zon Multimédia paid a 0.12/ share dividend on 2012 Earnings (payment on May 24 th, 2013), which stood for a 103% payout. We re estimating Zon will pay 0.19/ share on 2013 Earnings in 2014 (3.4% yield at current prices); this DPS stands for a 130% payout, but net income last year is negatively impacted by restructuring costs (our estimate is 25 mn) and by other merger related effects 13. We re assuming the company will keep a 100% payout beyond We highlight that the Board has room to be more generous though: from a FCF standpoint, dividend is only an average of 60% of FCF 14 and the company already has a low leverage relatively to peers. DPS estimates million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR DPS % 15.3% YoY growth 58.3% 21.1% 13.0% 15.4% 13.3% 4.2% Payout ratio 54% 129% 113% 100% 100% 101% 100% Dividend as % of FCF (1) 165% 80% 64% 64% 58% 61% 90% (1) DPS paid in a given year over FCF of that year Following FCF and DPS estimates, we estimate Net Debt will be reduced by circa 56 mn in 2014 and 68 mn in Without M&A and/or expansion into other geographies, Net debt / EBITDA 2015E ratio should be low, at 1.7x. Net Debt E million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E Net Debt 1,162 1,086 1, NetDebt/ EBITDA 2.1 x 2.0 x 1.9 x 1.7 x 1.5 x 1.3 x 0.8 x 13 Non-cash provision for alignment of accounting practices between the 2 companies: 17 mn booked in 3Q Difference between payout and % on FCF is justified by net income being impacted by significant D&A resulting from heavy investment in the last years. Page 11 of 29

12 4Q13 Preview: Zon Optimus will disclose its 4Q13 Earnings on February 27th 2014, before the market opening. 4Q13 Income Statement million FY12 FY13E YoY 4Q12 1Q13 2Q13 3Q13 4Q13E YoY QoQ Revenues 1, , % % -2% Telco 1, , % % -2% Audiovisuals & cinema % % 1% Other nm nm nm Cash Costs % % 7% EBITDA % % -17% Margin 36.4% 37.1% 0.7pp 34.2% 38.7% 38.8% 38.3% 32.6% -1.6pp -5.6pp D&A % % 2% Income from Operations % % -45% Margin 13.3% 13.7% 0.4pp 10.4% 14.3% 16.1% 15.4% 8.8% Other expenses / income nm nm -72% EBIT % % -6% Net Financial Expenses % % -9% Income before Taxes % % 3% Taxes nm nm nm Minority Interests nm nm nm Net Profit % nm nm Margin 7.7% 5.2% -2.4pp 5.8% 7.7% 8.5% 5.0% -0.3% Note: Figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). For 4Q13 we estimate revenues to drop 4.3% YoY to mn. Telco business should show a worse YoY trend (- 4.3% YoY in 4Q13 vs. -1.9% YoY in 3Q13), on the back of additional pressure on triple play prices. We re estimating Audiovisuals & Cinema to stabilize YoY, as in previous quarters (+0.4% YoY). We estimate EBITDA should decline 8.8% YoY, to mn, reflecting a weaker topline as well as additional marketing efforts (Zon4i launch). We expect EBITDA margin to decrease 1.6pp YoY to 32.6%. We estimate restructuring costs of 9 mn in the quarter ( 16 mn booked in 3Q13) and a slightly negative net profit due to lower EBITDA and integration expenses. Please refer to Section 4Q13 Earnings Preview of this report for a more detailed view of our quarterly estimates. Page 12 of 29

13 Other topics: We ll make a quick update on the main topics that came up since last company update on Zon Optimus, issued last November: Zon Optimus will hold a Strategy Day on February 28th, the day after the 4Q13 Earnings release. The company should disclose its strategic plan, give the market some operational targets going forward, and update its view on merger synergies. The Portuguese Government has backed down on the Cinema Law. We remind this Law established an annual tax applied to Pay TV operators: 3.50 per Pay TV client, growing yearly by 10% until it reached 5.00 per client; the money raised by this tax will be used to support the film sector. On January 2nd, the government approved that the tax will stabilize at 3.5 per subscriber and that it will be supported by both Pay TV operators and by Anacom starting this year. In 2014, Pay TV operators will pay 1.75 per subscriber and Anacom will pay 1.75; the operators contribution will increase until it reaches 2.00 (updated each year in line with inflation), meaning Anacom will contribute with 1.50 at that point. The 3.5 per subscriber related to 2013 will be fully paid by operators. Last September, Portugal's Cinema and Audiovisual Institute (ICA) had started an official settlement procedure against the five major Portuguese Pay-TV operators, as these refused to pay about 12.5 million due under the Law on Cinema and the Audiovisual Sector. The new Cinema Law was published in the Diário da República (Official State Gazette) on September 6th The deadline for payment expired on July 31st 2013; Zon failed to pay 6.3 million, Portugal Telecom (Meo) 4.7 million, Cabovisão owes 1 million, while Vodafone and Optimus owe 166,000 and 148,000, respectively. This decision is obviously positive for telcos, as it entails a 60% reduction over the fees approved in Assuming Zon Optimus will maintain its 1.56 mn Pay TV customers, then it could expected to pay a maximum of 7.8 mn in fees in some years ( 5.00 per subscriber), now it will pay a maximum of 3.1 mn ( 2.00 per subscriber). Zon Optimus announced in the last day of 2013 that Luís lopes has resigned as member of the Board of Directors of Zon Optimus. He joined Vodafone Internacional in early February. We remind that Luis Lopes was Zon Multimédia s COO, therefore in charge of the cable operators network. Last October, after the completion of the merger between Zon Multimédia and Optimus, Luís Lopes was elected vice-ceo of Zon Optimus. His departure was a surprise and potentially negative for Zon Optimus, as it won t be easy to replace such an influent executive at a critical time for Zon Optimus when it integrates two different companies. Zon Optimus and Portugal Telecom have announced in the beginning of December 2013 they would increase prices as of January 1st, like in previous years. The price increase averages 2.5%, above inflation, and does not affect the prices of quadruple play offerings. Both players have published the new tariffs in their websites. Vodafone has also raised prices, as of February 1 st. Page 13 of 29

14 Valuation Sum-of-The-Parts Sum of the Parts Economic Enterprise Value Per Contribution Valuation Implied Sector Previous Value Contribution Interest Value for ZON share to Target Method Multiple Multiple for zon to Target Revision Domestic business % 4,024 4, % DCF 7.5x EV/EBITDA x EV/EBITDA 14 3, % 5% Enterprise Value 4, % 7.5x EV/EBITDA x EV/EBITDA 14 3, % 5% Other Investments % % 0% African business (Zap) 30.0% % DCF 7.6x EV/EBITDA % 0% Sport TV 50.0% % Transaction value 1.8x EV/EBITDA % 0% Other % Mkt Multiple 3.4x P/BV % 0% Net Debt -1, % -1, % 2% Consolidated Net Debt YE13-1, % -1, % 2% Dividends to be paid in % % 0% Cash outlay with spectrum acquisition % % 0% Minority Interests % 3.4.x P/BV x P/BV % -1% Equity Value 2, % 27.9x PER x PER 14 2, % 7% Outstanding Shares (mn) x EV/EBITDA x EV/EBITDA Price Target ( ) Page 14 of 29

15 Sum-of-The-Parts revision million Previous Estimates WACC revision Domestic business African business (domestic business) revision revision Other revisions Domestic business 3,814 4,129 4,024 4,024 4,024 Enterprise Value 3,814 4,129 4,024 4,024 4,024 Other Investments Net Debt/ Minorities -1,220-1,220-1,239-1,239-1,239 Equity Value 2,731 3,046 2,922 2,922 2,922 million WACC revision Domestic business African business (domestic business) revision revision Other revisions Total change Domestic business 8.3% -2.5% 0.0% 0.0% 5.5% Enterprise Value 8.3% -2.5% 0.0% 0.0% 5.5% Other Investments 0.0% nm 0.0% 0.0% 0.4% Net Debt/ Minorities 0.0% -1.6% 0.0% 0.0% -1.6% Equity Value 11.5% -4.1% 0.0% 0.0% 7.0% Page 15 of 29

16 DCF Portugal million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR Operating Income % 7% (+) Non-Cash Items % -1% (-) Taxes % 13% (-) Tax Shield on Interest % -5% (-) Capital Expenditure % -1% (-) Working Capital Changes nm nm FCFF % 4% Discount Factor Discounted Cash Flow PV FCFF 1,784 1,630 Terminal Value 2,394 2,394 Enterprise Value 4,178 4,024 Note: Capital Expenditure includes payments with Long Term contracts DCF Zap (Africa) million E 2014E 2015E 2016E 2017E 2022E CAGR CAGR Operating Income % 15% (+) Non-Cash Items % 20% (-) Taxes nm nm (-) Tax Shield on Interest % -23% (-) Capital Expenditure % 9% (-) Working Capital Changes % 6% FCFF % 24% Discount Factor Discounted Cash Flow PV FCFF Terminal Value Enterprise Value DCF Assumptions - Portugal Old Explicit Period Terminal Explicit Period Terminal Value Value Risk-Free Rate 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% Country risk premium 4.00% 3.00% 2.00% 7.00% 4.50% 2.00% Market Premium 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Levered Beta Cost of Equity* 12.56% 11.39% 10.22% 16.09% 13.15% 10.22% Cost of Debt** 8.25% 6.62% 5.00% 8.25% 6.62% 5.00% Corporate Tax Rate 29.0% 29.0% 29.0% 29.0% 29.0% 29.0% After-tax Cost of Debt 5.86% 4.70% 3.55% 5.86% 4.70% 3.55% Leverage 30% 30% 30% 30% 30% 30% WACC 10.55% 9.38% 8.22% 13.02% 10.62% 8.22% Perpetuity Growth Rate 2.26% 2.26% Real perpetuity growth rate 0.75% 0.75% LT Inflation 1.50% 1.50% WACC - G 5.96% 5.96% *Cost of equity is calculated as the sum of the risk free rate plus country risk premium and market risk premium, the latter two multiplied by the levered beta. Risk free rate is the German 10-year Government bond yield. Country risk premium results from the difference between the local Sovereign yield and the German 10-year Government bond yield multiplied by a volatility factor (ratio that relates equity with bonds volatility). For country risk premium in perpetuity, we assume that the German and local 10- year sovereign yields will converge to respective last 10-year averages. Market risk premium is set at 5%. **Cost of debt before tax is the debt spread (long-term issuances) over the German 10-year sovereign rate. Page 16 of 29

17 DCF Assumptions - Africa Explicit Period Terminal Value Risk-Free Rate 2.00% 2.00% Country risk premium 5.00% 5.00% Market Premium 5.00% 5.00% Levered Beta Cost of Equity* 13.51% 13.51% Cost of Debt** 6.50% 6.50% Corporate Tax Rate 35.0% 35.0% After-tax Cost of Debt 4.23% 4.23% Leverage 30% 30% WACC 10.72% 10.72% Perpetuity Growth Rate 2.26% Real perpetuity growth rate 0.75% LT Inflation 1.50% WACC - G 8.46% *Cost of equity is calculated as the sum of the risk free rate plus country risk premium and market risk premium, the latter two multiplied by the levered beta. Risk free rate is the German 10-year Government bond yield. Country risk premium results from the difference between the local Sovereign yield and the German 10-year Government bond yield multiplied by a volatility factor (ratio that relates equity with bonds volatility). For country risk premium in perpetuity, we assume that the German and local 10- year sovereign yields will converge to respective last 10-year averages. Market risk premium is set at 5%. **Cost of debt before tax is the debt spread (long-term issuances) over the German 10-year sovereign rate. Page 17 of 29

18 Estimates Revisions Domestic business KPIs revision million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Pay TV Subscribers (th, EoP) 1,603 1,607 1,520 1,476 1,484 1,491 1,531-1% 0% Internet Subscribers (th, EoP) % 1% Voice subscribers (th, EoP) 1,098 1,164 1,180 1,177 1,179 1,185 1,202 2% 1% Wireline ARPU ( ) % 1% Mobile Subscribers 3,764 3,699 3,626 3,735 3,829 3,906 4,315 1% 1% Mobile ARPU ( ) % -1% Revenues 1,489 1,442 1,409 1,432 1,470 1,507 1,688 0% 1% Telco 1,420 1,375 1,342 1,362 1,397 1,430 1,593 0% 1% Audiovisuals & Cinema % 3% Other % 1% Revisions Pay TV Subscribers (th, EoP) 0% 0% -3% -6% -6% -6% -6% Internet Subscribers (th, EoP) 0% 0% 0% -1% -1% -1% -1% Voice subscribers (th, EoP) 0% 0% -1% -1% 0% 0% 0% Wireline ARPU ( ) 0% 0% 2% -1% -2% -2% -2% Mobile Subscribers 0% 0% -1% -1% -1% -1% -1% Mobile ARPU ( ) 0% 0% 0% 1% 1% 1% 1% Revenues -2% -2% -5% -6% -6% -6% -6% Telco -1% -1% -4% -5% -5% -5% -6% Audiovisuals & Cinema -8% -5% -5% -5% -5% -5% -4% Other 7% 7% 8% 8% 8% 8% 8% Source: Company data and Millennium investment banking Page 18 of 29

19 Income Statement revisions million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Revenues 1,489 1,442 1,409 1,432 1,470 1,507 1,688 0% 1% EBITDA % 3% Margin 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% 0.9pp 0.5pp EBIT % 7% Margin 13.2% 10.7% 12.9% 15.7% 17.4% 18.1% 22.3% 1.0pp 0.9pp Net Income % 8% Margin 7.7% 5.2% 7.4% 9.3% 10.6% 11.5% 15.3% 0.8pp 0.8pp Capex % -1% As % of Revenues 20.0% 17.4% 17.7% 17.4% 17.1% 17.0% 16.4% -0.6pp -0.4pp EBITDA - Capex % 6% As % of Revenues 16.4% 19.7% 20.3% 21.7% 23.1% 23.7% 25.0% 1.5pp 0.9pp Revisions Revenues -2% -2% -5% -6% -6% -6% -6% EBITDA 0% 2% -1% -5% -5% -5% -4% Margin 0.8pp 1.4pp 1.3pp 0.5pp 0.2pp 0.5pp 0.6pp EBIT 2% -13% -10% -12% -11% -10% -8% Margin 0.5pp -1.3pp -0.8pp -1.0pp -1.1pp -0.8pp -0.5pp Net Income -8% -21% -13% -18% -19% -16% -11% Margin -0.5pp -1.3pp -0.7pp -1.4pp -1.8pp -1.4pp -0.9pp Capex 11% -7% -8% -8% -8% -6% -6% As % of Revenues 2.4pp -1.0pp -0.5pp -0.3pp -0.3pp -0.1pp 0.0pp EBITDA - Capex -11% 12% 5% -2% -3% -3% -3% As % of Revenues -1.6pp 2.4pp 1.9pp 0.8pp 0.6pp 0.6pp 0.6pp Note: Revisions are LfL, i.e. after taking into account the capitalization of certain movie rights in the audiovisuals division (IAS 38) and restating restructuring costs (related to the merger) to below the EBITDA line. Source: Company data and Millennium investment banking Page 19 of 29

20 Main headlines revisions million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Revenues 1,489 1,442 1,409 1,432 1,470 1,507 1,688 0% 1% Telco 1,420 1,375 1,342 1,362 1,397 1,430 1,593 0% 1% Audiovisuals & Cinema % 3% Others & Eliminations % 1% EBITDA % 3% Telco % 3% Audiovisuals & Cinema % 3% Margins 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% 0.9pp 0.5pp Telco 35.4% 36.1% 36.9% 38.2% 39.2% 39.7% 40.6% 0.9pp 0.5pp Audiovisuals & Cinema 34.5% 34.0% 34.5% 35.0% 35.3% 35.6% 36.1% 0.2pp 0.2pp Capex % -1% As % of Revenues 20.0% 17.4% 17.7% 17.4% 17.1% 17.0% 16.4% 0.0pp 0.0pp EBITDA - Capex % 6% As % of Revenues 16.4% 19.7% 20.3% 21.7% 23.1% 23.7% 25.0% 1.5pp 0.9pp Revisions Revenues -2.1% -1.6% -4.8% -5.8% -5.8% -5.8% -5.8% Telco -1.4% -1.0% -4.4% -5.5% -5.5% -5.5% -5.6% Audiovisuals & Cinema -7.8% -5.0% -5.0% -4.8% -4.7% -4.6% -4.0% Others & Eliminations 7.1% 7.5% 7.7% 7.7% 7.7% 7.7% 7.9% EBITDA 0.2% 2.3% -1.4% -4.6% -5.2% -4.6% -4.4% Telco 0.3% 2.9% -1.0% -4.6% -5.3% -4.6% -4.4% Audiovisuals & Cinema -1.4% -5.5% -5.4% -5.3% -5.1% -5.0% -4.4% Margins 0.8pp 1.4pp 1.3pp 0.5pp 0.2pp 0.5pp 0.6pp Telco 0.6pp 1.4pp 1.3pp 0.4pp 0.1pp 0.4pp 0.5pp Audiovisuals & Cinema 2.2pp -0.2pp -0.2pp -0.2pp -0.2pp -0.2pp -0.2pp Capex 11.3% -6.9% -7.7% -7.6% -7.5% -6.4% -5.8% As % of Revenues 2.4pp -1.0pp -0.5pp -0.3pp -0.3pp -0.1pp 0.0pp EBITDA - Capex -10.7% 12.0% 4.9% -2.1% -3.5% -3.2% -3.5% As % of Revenues -1.6pp 2.4pp 1.9pp 0.8pp 0.6pp 0.6pp 0.6pp Note: Revisions are LfL, i.e. after taking into account the capitalization of certain movie rights in the audiovisuals division (IAS 38) and restating restructuring costs (related to the merger) to below the EBITDA line. Source: Company data and Millennium investment banking Consolidated Balance Sheet revisions million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Fixed Assets 2,370 2,257 2,190 2,128 2,066 2,005 1,841-3% -2% Working Capital % -8% Invested Capital 2,212 2,150 2,101 2,049 1,974 1,896 1,772-3% -2% Net Debt 1,162 1,086 1, % -7% Minorities % 2% Equity 1,041 1,054 1,061 1,077 1,098 1,116 1,203 1% 1% Capital Employed 2,212 2,150 2,101 2,049 1,974 1,896 1,772-3% -2% Revisions Fixed Assets -7% -7% -8% -9% -10% -11% -16% Working Capital 19% 51% 29% -6% -5% -3% -18% Invested Capital -8% -9% -9% -9% -11% -12% -15% Net Debt 2% 2% 3% 8% 7% 4% -7% Minorities -4% 0% -1% -1% -1% -1% -2% Equity -17% -18% -19% -21% -21% -20% -19% Capital Employed -8% -9% -9% -9% -11% -12% -15% Source: Company data and Millennium investment banking Page 20 of 29

21 African business revisions million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR New Estimates Pay TV Subscribers (th, EoP) ,007 1,028 1,135 14% 8% Blended ARPU ( ) % -4% Revenues % 6% EBITDA % 16% Margin 13.5% 30.0% 31.0% 31.5% 32.0% 32.5% 32.5% 3.8pp 1.9pp Capex % 9% As % of Revenues 5.7% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 0.3pp 0.1pp EBITDA - Capex % 20% As % of Revenues 7.8% 23.0% 24.0% 24.5% 25.0% 25.5% 25.5% 3.5pp 1.8pp Exc rate AOA/ (AoP) Exc rate AOA/ (EoP) Revisions Pay TV Subscribers (th, EoP) 0% 0% 0% 0% 0% 0% 0% Blended ARPU ( ) 0% -4% 0% 0% 0% 0% -3% Revenues 0% -4% 0% 0% 0% 0% -3% EBITDA 0% 5% 7% 5% 3% 1% -3% Margin 0.0pp 2.5pp 2.0pp 1.5pp 1.0pp 0.5pp 0.0pp Capex 0% -4% 0% 0% 0% 0% -3% As % of Revenues 0.0pp 0.0pp 0.0pp 0.0pp 0.0pp 0.0pp 0.0pp EBITDA - Capex 0% 8% 9% 6% 4% 2% -3% As % of Revenues 0.0pp 2.5pp 2.0pp 1.5pp 1.0pp 0.5pp 0.0pp Exc rate AOA/ (AoP) -6.0% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% Exc rate AOA/ (EoP) 3.0% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% Source: Company data and Millennium investment banking Page 21 of 29

22 Operating Performance Consolidated income statement million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR Operating Revenues 1,489 1,442 1,409 1,432 1,470 1,507 1,688 0% 1% Telco 1,420 1,375 1,342 1,362 1,397 1,430 1,593 0% 1% Audiovisuals & Cinema % 3% Others & Eliminations % 1% Operating Costs 1,291 1,245 1,214 1,206 1,215 1,234 1,311-1% 0% Wages and Salaries % 2% Direct Costs % 1% Commercial Costs % 0% Other Opex % -1% D&A % -1% EBITDA % 3% Margin 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% 0.9pp 0.5pp Income from Operations % 7% Margin 13.3% 13.7% 13.9% 15.8% 17.4% 18.1% 22.3% 1.0pp 0.9pp Other Non-Operating nm nm EBIT % 7% Margin 13.2% 10.7% 12.9% 15.7% 17.4% 18.1% 22.3% 1.0pp 0.9pp Net Interest Income % -6% Other Financing Expenses % -12% Equity in Earnings of Affiliates nm nm Income before Taxes % 10% Margin 9.1% 6.1% 9.0% 12.2% 14.5% 15.8% 21.2% 1.3pp 1.2pp Taxes % 17% Effective Tax Rate 14.9% 12.6% 16.7% 23.1% 26.7% 26.8% 27.6% 2.4pp 1.3pp Minorities % 0% Net Income % 8% Margin 7.7% 5.2% 7.4% 9.3% 10.6% 11.5% 15.3% 0.8pp 0.8pp Note: 2012 & 2013 figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Source: Company data and Millennium investment banking Page 22 of 29

23 Main Headlines million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR Revenues 1,489 1,442 1,409 1,432 1,470 1,507 1,688 0% 1% Telco 1,420 1,375 1,342 1,362 1,397 1,430 1,593 0% 1% Audiovisuals & Cinema % 3% Others & Eliminations % 1% Weights 100% 100% 100% 100% 100% 100% 100% 0.0pp 0.0pp Telco 95% 95% 95% 95% 95% 95% 94% -0.1pp -0.1pp Audiovisuals & Cinema 8% 8% 8% 8% 8% 8% 9% 0.1pp 0.1pp Others & Eliminations -3% -3% -3% -3% -3% -3% -3% 0.0pp 0.0pp EBITDA % 3% Telco % 3% Audiovisuals & Cinema % 3% Margins 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% 0.9pp 0.5pp Telco 35.4% 36.1% 36.9% 38.2% 39.2% 39.7% 40.6% 0.9pp 0.5pp Audiovisuals & Cinema 34.5% 34.0% 34.5% 35.0% 35.3% 35.6% 36.1% 0.2pp 0.2pp Capex % -1% As % of Revenues 20.0% 17.4% 17.7% 17.4% 17.1% 17.0% 16.4% 0.0pp 0.0pp EBITDA - Capex % 6% As % of Revenues 16.4% 19.7% 20.3% 21.7% 23.1% 23.7% 25.0% 1.5pp 0.9pp Note: 2012 & 2013 figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Source: Company data and Millennium investment banking Operating & Financial Margins million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR EBITDA 36.4% 37.1% 38.0% 39.2% 40.1% 40.6% 41.4% 0.9pp 0.5pp EBIT 13.3% 13.7% 13.9% 15.8% 17.4% 18.1% 22.3% 1.0pp 0.9pp Net Income 7.7% 5.2% 7.4% 9.3% 10.6% 11.5% 15.3% 0.8pp 0.8pp Effective Tax Rate 14.9% 12.6% 16.7% 23.1% 26.7% 26.8% 27.6% 2.4pp 1.3pp Note: 2012 & 2013 figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Source: Company data and Millennium investment banking Financial Balance Sheet million 2012PF 2013E 2014E 2015E 2016E 2017E 2022E CAGR CAGR Fixed Assets 2,370 2,257 2,190 2,128 2,066 2,005 1,841-3% -2% Working Capital % -8% Invested Capital 2,212 2,150 2,101 2,049 1,974 1,896 1,772-3% -2% Net Debt 1,162 1,086 1, % -7% Minorities % 2% Equity 1,041 1,054 1,061 1,077 1,098 1,116 1,203 1% 1% Capital Employed 2,212 2,150 2,101 2,049 1,974 1,896 1,772-3% -2% Note: 2012 & 2013 figures are pro-forma, i.e., assuming 12 months consolidation of Optimus, stakes in Zap, SportTV and Dreamia consolidated through equity (IFRS11), and the capitalization of certain movie rights in the audiovisuals division (IAS 38). Source: Company data and Millennium investment banking Page 23 of 29