ZON OPTIMUS, SGPS, S.A.

Transcription

1 DISCLAIMER Partial and Unofficial Translation This is a partial and unofficial translation of this Equivalent Document, which has been prepared for information purposes only and does not include the English version of OPTIMUS financial statements attached thereto as Annexes I to VI. In the event of any discrepancy between this translation and the Portuguese version, the Portuguese version shall prevail. ZON OPTIMUS, SGPS, S.A. previously called ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. ( ZON ) up to the registration of the merger by incorporation of OPTIMUS SGPS, S.A. ( OPTIMUS ) into ZON ( Merger ) Public Company Registered office: Rua Ator António Silva, no. 9, Campo Grande, Lisbon Registration number at the Lisbon Commercial Registry and company identification number: Share capital, fully paid up and subscribed: EUR 5,151, INFORMATIVE DOCUMENT FOR THE PURPOSES OF ADMISSION TO TRADING ON EURONEXT LISBON MANAGED BY EURONEXT LISBON SOCIEDADE GESTORA DE MERCADOS REGULAMENTADOS, S.A. OF NEW SHARES WITH A NOMINAL VALUE PER SHARE OF EUR 0.01 ISSUED IN THE CONTEXT OF THE INCREASE IN SHARE CAPITAL MADE FOR THE PURPOSE OF THE MERGER Document deemed by the CMVM to be equivalent to a prospectus for the admission of shares to trading on a regulated market, for the purposes of article 134(2)(a) as provided for in article 236(2)(a), both of the Securities Code 5 September

2 CONTENTS 1. INTRODUCTION DEFINITIONS BACKGROUND NOTICES RESPONSIBILITY RISK FACTORS Risk Factors arising from the Merger Risk factors in relation to the Issuer and to its activity MERGER DESCRIPTION Identification of the participating companies Type, Motives and Objectives Share exchange ratio Effects of the Merger MERGER PROCESS Approval of the Merger Project Resolution on non-opposition to the Merger by the general meetings of bondholders and non-opposition by the creditors CMVM decision waiving the requirement to launch a mandatory takeover bid Authorisations, notifications and administrative formalities applicable or necessary to complete the Merger Non-opposition decision of the Competition Authority Merger Act and Commercial Registration of the Merger Admission to trading of the New Shares TAX FRAMEWORK APPLICABLE TO THE MERGER INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF THE ISSUER ACTIVITY OF THE ISSUER PRO FORMA FINANCIAL INFORMATION OF THE ISSUER OPINION ON THE PRO FORMA FINANCIAL INFORMATION OF THE ISSUER INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF ZON INTRODUCTION ZON S MAIN AREAS OF BUSINESS: PAY TV, BROADBAND AND VOICE Triple Play Television

3 4.2.3 Fixed Broadband Fixed Voice Mobile voice and broadband Business Network and technology The ZON Brand Other business SUMMARY OF ZON S OPERATIONAL PERFORMANCE AS AT 30 JUNE PRINCIPAL INVESTMENTS ZON S FINANCIAL HISTORY ANALYSIS OF ZON S OPERATIONS AND FINANCIAL SITUATION Evolution of the principal financial indicators Interim financial information 1H12 and 1H STATUTORY AUDITING AND EXTERNAL AUDITING Identification of the statutory auditors and external auditors of ZON Auditing of the financial information PERIOD COVERED BY AUDITED FINANCIAL INFORMATION SIGNIFICANT CHANGES IN ZON S FINANCIAL OR COMMERCIAL SITUATION DEPENDENCE ON THE ENTITIES OF THE ZON GROUP INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF OPTIMUS INTRODUCTION OPTIMUS MAIN AREAS OF BUSINESS Personal mobile segment Fixed Residential Segment Corporate Segment SME Segment Wholesale Segment Network Customer Service SUMMARY OF THE OPTIMUS OPERATIONAL PERFORMANCE AS AT 30 JUNE PRINCIPAL INVESTMENTS OPTIMUS FINANCIAL HISTORY ANALYSIS OF OPTIMUS OPERATIONS AND FINANCIAL SITUATION Evolution of the principal financial indicators of OPTIMUS Interim financial information 1H12 and 1H STATUTORY AUDITING AND EXTERNAL AUDITING

4 5.7.1 Identification OPTIMUS statutory auditors and external auditors Auditing of the financial information PERIOD COVERED BY THE AUDITED FINANCIAL INFORMATION SIGNIFICANT ALTERATIONS IN OPTIMUS FINANCIAL OR COMMERCIAL SITUATION DEPENDENCE ON ENTITIES OF THE OPTIMUS GROUP ADDITIONAL INFORMATION ON THE ISSUER ORGANISATIONAL STRUCTURE SHAREHOLDERS WITH QUALIFYING HOLDINGS List of Shareholders with a Qualifying Holding Transactions with related parties SHAREHOLDER AGREEMENT IN RELATION TO ZOPT CORPORATE GOVERNANCE INFORMATION ON THE SHARES OF THE ISSUER IDENTIFICATION, AMOUNT AND FORM OF REPRESENTATION APPLICABLE LEGISLATION INHERENT RIGHTS Right to Information Right to Share in Profits Right to participate in general meetings and right to vote Other rights LIMITATIONS ON THE TRANSFER OF THE SHARES OF THE ISSUER TAKEOVER BIDS TAX RULES APPLICABLE TO THE SHARES OF THE ISSUER General Notice Individuals resident in Portugal for tax purposes Individuals not resident in Portugal for tax purposes Legal entities resident in Portugal for tax purposes Legal entities not resident in Portugal for tax purposes ADDITIONAL INFORMATION Share capital Own shares Convertible securities, exchangeable securities or securities with warrants Articles of association of the Issuer DOCUMENTATION ACCESSIBLE TO THE PUBLIC INFORMATION INSERTED BY REFERENCE

5 8.2 COMMUNICATIONS WHERE TO CONSULT INFORMATION

6 1. INTRODUCTION 1.1 DEFINITIONS Except where there is an express indication to the contrary, the terms set out below have the following meanings in this document: Central Securities Depository or CSD means the centralised system of book entry securities managed by Interbolsa and made up of interconnected sets of accounts, by means of which the securities in those accounts are constituted and transferred and which ensures control over the quantity of securities in circulation and over the rights constituted over them; CMVM means the Portuguese Securities Market Commission; CIT Code means the Corporate Income Tax Code, republished by Decree-Law no. 159/2009, of 13 July, as amended; PIT Code means the Personal Income Tax Code, as approved by Decree-Law no. 442-A/88, of 30 November, as amended; Securities Code means the Securities Code, approved by Decree-Law no. 486/99, of 13 November, as amended; CCC means the Commercial Companies Code, approved by Decree-Law no. 262/86, of 2 September, as amended; Prospectus Directive means Directive 2003/71/EC, of the European Parliament and of the Council, of 4 November 2003, as amended; Equivalent Document means this informative document, deemed by the CMVM to be equivalent to a prospectus for admission of shares to trading for the purposes of article 134(2)(a) as provided for in article 236(2)(a), both of the Securities Code; Issuer means the company ZON OPTIMUS, SGPS, S.A. as it is called and exists after the definitive registration of the Merger; Euro, euro, EUR or means the euro, the single European currency; Euronext Lisbon means Euronext Lisbon - Sociedade Gestora de Mercados Regulamentados, S.A.; - 6 -

7 Merger means the merger by incorporation of OPTIMUS into ZON, by means of the transfer of all the assets of OPTIMUS to ZON and the attribution of shares of the Issuer to the shareholders of OPTIMUS, under article 97(4)(a)(4)(a) of the CCC; OPTIMUS Group means OPTIMUS and the companies that are in a control or group relationship with OPTIMUS; ZON Group means ZON and the companies that are in a control or group relationship with ZON; Interbolsa means Interbolsa - Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A.; New Shares means the 206,064,552 (two hundred and six million sixty-four thousand five hundred and fifty-two) shares issued by ZON OPTIMUS, following the increase in capital arising from the Merger, and attributed to the shareholders of OPTIMUS; OPTIMUS means OPTIMUS SGPS, S.A., previously called Sonae Telecom; SGPS, S.A.; OPTIMUS Comunicações means OPTIMUS Comunicações S.A.; Merger Project means the project for merger by incorporation of OPTIMUS into ZON, approved by the management bodies of ZON and OPTIMUS on 21 January 2013 and subsequently approved by the respective general meetings held on 7 March 2013; Participating Companies means ZON, as the merging company, and OPTIMUS, as the merged company, in the context of the Merger; ZON means the company ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. as it is called and exists up to the definitive registration of the Merger; ZON OPTIMUS means the company ZON OPTIMUS, SGPS, S.A., as it exists after the definitive registration of the Merger

8 1.2 BACKGROUND On 21 January 2013, the governing bodies of ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. ( ZON ) and of OPTIMUS SGPS, S.A. ( OPTIMUS ) approved a merger project ( Merger Project ), by incorporation of OPTIMUS into ZON ( Merger ). Later on 7 March 2013, the Merger Project was approved at the general meetings of ZON and of OPTIMUS. After complying with the formalities, requirements and conditions to which the merger was subject, the commercial registration of the Merger took place on 27 August 2013, and thus took full effect as from this date. The merger was carried out by means of the transfer of all the assets of OPTIMUS - the merged company - to ZON - the merging company, which took the name ZON OPTIMUS, SGPS, S.A. ( Issuer ). The effects of the Merger were that OPTIMUS ceased to exist and that shares of the Issuer were attributed to the shareholders of OPTIMUS under article 97(4)(a) of the Commercial Companies Code ( CCC ). As a consequence, the merger involved the issue of 206,064,552 (two hundred and six million sixty-four thousand five hundred and fifty-two) shares by the Issuer ( New Shares ), by means of an increase in capital and their attribution to the shareholders of the no longer existing OPTIMUS. The Merger is described in the context of Section 2 below and in the Merger Project, which is available in paper format at the registered office of the Issuer and in electronic format and at The issue of the New Shares and their attribution to the shareholders of OPTIMUS does not constitute a public offer of securities under article 109 of the Securities Code ( Securities Code ). The Issuer applied for the New Shares to be admitted for trading on a regulated market, and as such it is obliged to publish either (i) an admission prospectus, under articles 236 and following of the Securities Code, or (ii) a document with information deemed by the Securities Market Commission ( CMVM ) to be equivalent to that contained in a prospectus, under article 134(2)(a) as provided for in article 236(2)(a), both of the Securities Code. The CMVM considered that this informative document contains information equivalent to that of a prospectus ( Equivalent Document ), as described in item (ii) of the previous paragraph, for the purposes of the admission to trading on a regulated market of the New Shares and waived the requirement to publish a prospectus

9 1.3 NOTICES The form and the content of this Equivalent Document follow, with the necessary adaptations in light of its nature as described in Section 1.2 above, the provisions of the Securities Code and the other legislation and regulations applicable to prospectuses. The entities indicated in Section 1.4 below are responsible for ensuring the information or any part of the information contained in this document on the date of its publication is true, up to date, clear, objective and legal, under article 7 of the Securities Code. This means that the persons and entities responsible for the content of the information contained in this Equivalent Document are the Issuer, the members of the management and supervisory bodies of the Issuer, the statutory auditors and the Issuer s external auditor, as well as the members of the management and supervisory bodies, statutory auditor and external auditor of OPTIMUS and the other experts referred to in Sections 1.2 to 1.4 of this Equivalent Document. This Equivalent Document relates to the admission to trading of the New Shares on the Euronext Lisbon regulated market, managed by Euronext Lisbon Sociedade Gestora de Mercados Regulamentados, S.A. ( Euronext Lisbon ), and was deemed by the CMVM, as the competent authority under Directive 2003/71/EC, of the European Parliament and of the Council, of 4 November 2003, as amended ( Prospectus Directive ), to be a document with information equivalent to that of a prospectus for admission to trading, under article 134(2)(a) as provided for in article 236(2)(a), both of the Securities Code. It is available in paper format at the registered office of the Issuer and in electronic format at and at Under article 118 of the Securities Code, applicable with the necessary adaptations to this Equivalent Document in light of its nature as described in Section 1.2 above, the stated position of the CMVM does not involve any guarantee by the latter as to the content of the information, the economic or financial situation of the Issuer or the quality of the securities. The CMVM s position only relates to establishing whether or not this Equivalent Document complies with the requirements for the information to be complete, true, up to date, clear, objective and legal, and to meeting the requirements imposed by Portuguese law. In turn, under article 234(2) of the Securities Code, the decision on admission to trading by Euronext Lisbon does not involve any guarantee by Euronext Lisbon as to the content of the information, the economic and financial situation of the Issuer and the quality of the securities issued. The Issuer applied for the registration of the New Shares in the Central Securities Depository ( CSD ) operated by Interbolsa - Sociedade Gestora de Sistemas de - 9 -

10 Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A. ( Interbolsa ), and that registration and the issue of the New Shares took place on 28 August The Issuer also began the procedure to apply for admission to trading on the regulated market, Euronext Lisbon, of the New Shares, in the terms described in 2.2 above. It is estimated that this will occur on 9 September Besides the Issuer, no entity was authorised to give information or provide any declaration that is not contained in this Equivalent Document or contradicts the information contained in this Equivalent Document. If a third party should come to issue any such information or declaration, the same should not be taken as authorised by, or provided in the name of, the Issuer and, as such, should not be considered trustworthy. Neither the issue of this Equivalent Document, nor the issue of the New Shares, should be taken as confirmation that, since the date of this Equivalent Document, there has been no change in the activities of the Issuer or the companies that depend on it and with which it consolidates accounts, or that the information contained in this Equivalent Document, at any time after the date of this document, has the characteristics required by law for information to be provided to investors. The Equivalent Document does not constitute an offer of the New Shares or an invitation to subscribe to the same or to any shares representing the share capital of the Issuer. In the same way, this Equivalent Document does not amount to an analysis of the quality of the New Shares or of any shares representing the share capital of the Issuer, or to a recommendation of acquisition or subscription. The Equivalent Document contains forecasts ( Forecasts ) and declarations relating to the future (forward looking statements or Declarations ). These Forecasts and Declarations include material that does not amount to historical facts, specifically in relation to the financial situation, revenue and profitability, corporate strategy, prospects, plans and objectives for the activity of the Issuer. The Forecasts or Declarations may use terms such as expects, believes, estimates, hopes, intends, predicts, plans, may, could and might or similar expressions. Furthermore, these expressions are not the only form used to identify Forecasts or Declarations. By their very nature, the Forecasts and the Declarations imply risks and uncertainties because they relate to events, and depend on circumstances, that may or may not occur in the future. Therefore, the Issuer s management body informs investors that the Forecasts and the Declarations, despite having been prepared on the basis of its best knowledge and belief and, also, on the basis of information available on the date on which the same were prepared, do not amount to performance guarantees. Furthermore, the actual results may differ substantially from those expressly or implicitly contained in this Equivalent Document. Additionally, even if those results are in accordance with the Forecasts and Declarations contained in this

11 Equivalent Document, these results or developments may not be indicative of results or developments in future periods. If any of the risks identified in this Equivalent Document or any of the assumptions of the Merger turn out to be incorrect, the Forecasts and the Declarations mentioned in this Equivalent Document may not come about in full or in part and the actual results may be significantly different from those described in this Equivalent Document as expected, hoped for, forecast or estimated. The Forecasts and Declarations are made by reference to the date of this Equivalent Document or the reference date indicated in the same. The Issuer does not assume any obligation or commitment to make available any updates or revisions to any Forecast or Declaration appearing in this Equivalent Document aimed at reflecting any alteration in its expectations arising from changes to the facts, conditions or circumstances on which the same are based. The financial information contained in this Equivalent Document was prepared from accounting records and information of ZON and OPTIMUS in accordance with the International Financial Reporting Standards (IAS/IFRS). The said information refers to the financial years 2010, 2011 and 2012, as well as to 1H2012 and 1H2013. The financial statements of ZON for the financial years 2010 to 2012 were audited and those relating to 1H12 and 1H13 subject to limited revision (and are incorporated in this document by reference) by PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. and subject to statutory auditing by Oliveira, Reis & Associados, SROC, Lda. The individual financial statements of OPTIMUS for the financial years 2010 to 2012 (Annexes I, II and III to this document) were subject to statutory auditing by Deloitte & Associados, SROC, S.A. Despite the waiver of the requirement to present consolidated information by virtue of being a subsidiary and its financial statements being included in Sonaecom s consolidation (entity that produces consolidated financial statements available for public use in accordance with IFRS / IAS), OPTIMUS prepared pro forma consolidated financial statements for the financial year 2012, including comparative data for the financial year 2011 (Annex IV to this document), which were also audited by Deloitte & Associados, SROC, S.A. This OPTIMUS pro forma consolidated financial information was prepared on the assumption that the structure of the OPTIMUS Group as at 1 January 2010 and 2011 corresponded to the structure of the OPTIMUS Group as at 31 December 2012 and this was reflected in the calculation of the goodwill on those dates

12 Additionally, on 31 December 2010 and 2011, OPTIMUS considered the accounting policies and the measurement criteria adopted on 31 December OPTIMUS also prepared individual and pro forma consolidated financial statements for 1H13, including comparative data for 1H12 (Annexes V and VI to this document), which were subject to simplified examination by Deloitte & Associados, SROC, S.A. This OPTIMUS pro forma consolidated financial information was prepared on the assumption that the structure of the OPTIMUS Group as at 30 June 2012 corresponded to the structure of the OPTIMUS Group as at 31 December 2012 and this was reflected in the calculation of the goodwill on that date. Additionally, on 30 June 2012, OPTIMUS considered the accounting policies and the measurement criteria adopted on 31 December The financial information for ZON, OPTIMUS and the Issuer is presented in Euros except where there is an indication to the contrary or if a determined context so requires. References to euro, Euro, EUR or refer to the single currency of the Member States of the European Union that are parties to the third phase of European Economic and Monetary Union. The Merger is governed by the provisions of the CCC and complementary legislation and will occur exclusively in Portugal. This Equivalent Document does not contain all the information provided to the market on the Issuer or on the Merger. Therefore, investors are recommended to consult the information made available in the context of the Merger, prior communications to the market, publications and financial information made available by the Issuer, in all cases available at at and at RESPONSIBILITY As mentioned in Section 1.3 above, the form and content of this Equivalent Document follow, with any adaptations necessary in light of its nature as described in Section 1.2 above, the provisions of the Securities Code and other applicable legislation and regulations. The following entities are responsible for any inconsistencies in the content of this Equivalent Document or part(s) of it (as explained in more detail below) with the provisions of article 7 of the Securities Code, in the following terms: (i) Issuer ZON OPTIMUS, SGPS, S.A

13 (ii) Members of the management and supervisory bodies of the Issuer The members of the Board of Directors of the Issuer are (1) : Daniel Proença de Carvalho Rodrigo Jorge de Araújo Costa José Pedro Pereira da Costa Luís Miguel Gonçalves Lopes Duarte Maria de Almeida e Vasconcelos Chairman of the Board of Directors Chairman of the Executive Committee Member of the Executive Committee Member of the Executive Committee Member of the Executive Committee Calheiros Fernando Fortuny Martorell António Domingues Lázló Hubay Cebrian Joaquim Francisco Alves Ferreira de Non-executive Member Non-executive Member Non-executive Member Non-executive Member Oliveira Mário Filipe Moreira Leite da Silva Isabel dos Santos Miguel Filipe Veiga Martins Catarina Eufémia Amorim da Luz Tavira André Palmeiro Ribeiro Vítor Fernando da Conceição Gonçalves Paulo Cardoso Correia Mota Pinto Nuno João Francisco Soares de Oliveira Non-executive Member Non-executive Member Non-executive Member Non-executive Member Non-executive Member Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee Silvério Marques (1) On the date of approval of the financial information relating to the financial year 2012 and to 1H13, the said persons were already members of the ZON Board of Directors and the same was the case in relation to the dates of approval of the

14 financial information for the financial years 2010 and 2011 and to 1H12, with the exception of the non-executive members Isabel dos Santos, Miguel Filipe Veiga Martins, Catarina Eufémia Amorim da Luz Tavira and André Palmeiro Ribeiro, who were co-opted to the Board of Directors in a meeting that took place on 27 November 2012 (co-opting ratified by the general meeting of ZON on 7 March 2013). In turn, on the date of approval of the financial information for the financial years 2010 and 2011 and to 1H12, Luís Bordalo da Silva, Norberto Emílio Sequeira da Rosa and Jorge Telmo Maria Freire Cardoso performed the duties of non-executive directors on the ZON Board of Directors, having resigned from their positions after the end of that half year. On the date of approval of the financial information relating to the financial year 2010, João Manuel Matos Borges de Oliveira and António Henriques da Silva were members the ZON Board of Directors, having resigned from their positions as nonexecutive directors during the second half of (iii) Statutory Auditor and External Auditor of the Issuer The statutory auditing company Oliveira, Reis & Associados, SROC, Lda., represented by José Vieira dos Reis, in his capacity as permanent statutory auditor, or by Fernando Marques Oliveira, in his capacity as alternate statutory auditor, is responsible for the legal certification of accounts in relation to the individual and consolidated financial information of ZON for the financial years 2010, 2011 and 2012, as well as for the revision of the accounts relating to 1H12 and 1H13. The statutory auditing company PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda., currently represented by Abdul Nasser Abdul Sattar, in its capacity as external auditor, is responsible for (i) the audit report on the individual and consolidated financial information of ZON for the financial years 2010, 2011 and 2012, as well as for the limited audit report on the consolidated financial information of ZON relating to 1H12 and 1H13, and (ii) the opinion on the pro forma consolidated financial information appearing in Section 3.3 of this document. (iv) The Issuer s Legal Representatives The law firm A.M. Pereira, Sáragga Leal, Oliveira Martins, Júdice e Associados, Sociedade de Advogados, R.L., in its capacity as the Issuer s legal representatives, is responsible for the information appearing in Sections 7.3 and 7.6 of this document

15 (v) Members of the management and supervisory bodies, statutory auditor and external auditor of OPTIMUS The following members of the Board of Directors of OPTIMUS are responsible for the financial information appearing in Section 5: Ângelo Gabriel Ribeirinho dos Santos Paupério (Chairman) Miguel Nuno Santos Almeida Maria Cláudia Teixeira de Azevedo António Bernardo Aranha da Gama Lobo Xavier Paulo Joaquim dos Santos Plácido Ana Paula Garrido de Pina Marques David Pedro de Oliveira Parente Ferreira Alves Manuel António Neto Portugal Ramalho Eanes José Manuel Pinto Correia The statutory auditing company Deloitte & Associados, SROC, S.A., represented by Jorge Manuel Araújo de Beja Neves, in his capacity as permanent statutory auditor and sole auditor, or by Paulo Alexandre Rocha Silva Gaspar, in his capacity as alternate statutory auditor and sole auditor, is responsible for the report and opinion of the sole auditor and for the legal certification of accounts relating to the individual financial information of OPTIMUS for the financial years 2010, 2011 and The statutory auditing company Deloitte & Associados, SROC, S.A., represented by Jorge Manuel Araújo de Beja Neves, in his capacity as external auditor, is responsible (i) for the audit report on the pro forma consolidated financial information of OPTIMUS relating to the financial year 2012 and (ii) for the simplified examination report on the individual and pro forma consolidated financial information of OPTIMUS relating to 1H13. (vi) Independent statutory auditor appointed by the Order of Statutory Auditors to carry out the examination of the Merger Project under article 99 of the CCC José Rodrigues de Jesus, statutory auditor no. 201, with professional address at Rua Arquiteto Marques da Silva, no. 285, 3 Dto, Porto, in his capacity as statutory auditor appointed by the Order of Statutory Auditors to carry out the examination of the Merger Project under article 99(2) to (4) of the CCC

16 1.5 RISK FACTORS Risk Factors arising from the Merger Challenges to corporate resolutions The Issuer is a public company governed by Portuguese law and the rights of the holders of its ordinary shares are those established in the CCC, in the Securities Code and in the articles of association of the Issuer, as presented in more detail in Section 7.3 below. In this context, and by way of example, the shareholders may seek a declaration of nullity or annulment of resolutions passed by the corporate bodies of the Issuer that breach provisions of the law or the articles of association. Such actions may arise, for example, with respect to resolutions adopted in relation to increases or reductions in capital and any other alterations to the articles of association, as well as resolutions relating to mergers or spin offs. Such actions, in the case of a merger and accompanying increase in share capital of a public company, may lead to a situation in which the shares issued as a consequence of the said increase in capital are not fungible with those already existing, until the question is resolved, as established in article 25(b) of the Securities Code Challenges to corporate resolutions after the commercial registration of the merger Once the respective commercial registration has been carried out, only a declaration of nullity or annulment of the resolutions of general meetings approving the merger project or the failure to observe the legally required form may give rise to the nullity of the merger, in the event the same is declared by the courts in an action brought within 6 months of publication of the definitive registration of the merger or of the publication of the final (not subject to appeal) decision of the court that declares null or annuls any of the said resolutions, under article 117 of the CCC Joint and several liability In light of its retroactive effect, the declaration of nullity of a merger implies the reconstitution of the no longer existing merged company and the accompanying loss of standing as shareholders of the merging company by the shareholders of the merged company. Additionally, although such declaration of nullity does not affect the results of any acts done by the merging company after the registration of the merger at the commercial

17 registry that precede the said declaration, the merged company becomes jointly and severally responsible for the obligations undertaken by the merging company during this period Synergies The cost and investment synergies that the management bodies of ZON and of OPTIMUS estimate may result from the Merger, as described in below, make up the Forecasts and Declarations, under the terms set out in 1.3 above. Therefore, despite the fact that the estimates of the synergies prepared by the management bodies of ZON and of OPTIMUS have been prepared to the best of their knowledge and belief, on the basis of information available at the date of the Merger Project, that estimate of synergies does not amount to any guarantee of performance, and the actual results may differ substantially from those estimated, particularly as a result of factors outside the control of the Issuer Commitments assumed in the context of the non-opposition decision of the Competition Authority No substantial risks are anticipated for the operation of OPTIMUS Comunicações arising from the implementation of the commitments imposed by the Competition Authority. However, it should be noted that compliance with the third commitment (described in below) to release existing OPTIMUS Comunicações triple play customers from their loyalty commitments on the date of the decision 1 on the fibre optic networks of OPTIMUS and Vodafone Portugal, Comunicações Pessoais, S.A. ( Vodafone Portugal ) subject to the OPTIMUS / Vodafone sharing agreement, increases the probability of loss of the said customers and, in some cases, it may not be possible to recover the any subsidies granted to them. It should be noted, however, that the commitment provides that customers that wish to terminate the said service must return the equipment supplied to them by OPTIMUS Comunicações, which minimises this risk. It should also be noted that the implementation of the fourth and fifth commitments (described in below), relating to the negotiation of wholesale access to the Optimus Shareable Network 2 and to the purchase option on the Optimus Transferable 1 Date of signature by the Board of Directors of the Competition Authority of the non-opposition decision in respect of the operation. 2 OPTIMUS FTTH network, located in the municipalities of Matosinhos, Porto, Vila Nova de

18 Network 3, respectively, requires the creation - in the context of negotiations with third parties - of the necessary technical, operational and economic-financial terms and conditions. Despite the fact that, in both cases, the commitments already specify a set of terms and conditions, one cannot, however, exclude the possible existence of divergences and consequent disagreement in their definitive negotiation. If this occurs, it may give rise to the intervention of an arbitral committee and OPTIMUS Comunicações is bound to accept the decision of the arbitral committee as to what the most appropriate terms of agreement are, even if these terms are not the ones that OPTIMUS Comunicações considers most appropriate. Finally, it should also be added that the implementation of the fourth commitment (as described in Section below) may imply increased competition in the areas where the Optimus Transferable Network is installed Value of the goodwill and other assets associated with OPTIMUS The Merger involved an increase in ZON s share capital through the issue of 206,064,552 New Shares, the value of which was EUR 856,404, (eight hundred and fifty-six million four hundred and four thousand two hundred and seventy-eight euros), reflecting the acquisition cost attributed to OPTIMUS. Although the allocation of the acquisition cost is only concluded after obtaining all the information necessary to identify and measure all the said assets and liabilities (with a maximum limit of one year after the date of the operation), the final goodwill to be ascertained may be of a very significant amount. The value of the goodwill and other assets associated with OPTIMUS will, in the future, have to be subject to impairment testing and an impairment may have to be recorded in the accounts if the present value of the future cash flows generated by the respective business areas is lower than the carrying value for these same assets. Gaia, Odivelas, Lisbon, Oeiras and Sintra, to which the fourth commitment appearing in the non-opposition decision refers. 3 OPTIMUS FTTH network, located in the municipalities of Matosinhos, Porto, Vila Nova de Gaia, Odivelas, Lisbon, Oeiras and Sintra, to which the fifth commitment appearing in the nonopposition decision refers

19 1.5.2 Risk factors in relation to the Issuer and to its activity Competition risks The Issuer faces competition in the telecommunications and entertainment markets in which it operates. In the case of the triple play business, despite the increase in competition, which has resulted in a reduction (although not material) in the market share of the Issuer, the company has managed to maintain a profile of material growth in terms of the number of services subscribed, its revenue and its EBITDA. In the mobile business, despite the strong competition witnessed in the Portuguese market that has led to a material fall in average revenue per customer, the Issuer has obtained significant increases in EBITDA. However, a potential additional increase in the levels of competition may result in a reduction in the profitability of the markets in which the Issuer carries on its activities and this may impact the results of operations Regulatory risks Most of the activities carried on by the companies in a control or group relationship with the Issuer are subject to regulation in that they are subject to supervision by various authorities on a national and European level. Any changes in the regulations or the position of the authorities may have an adverse effect on the Issuer s area of business. For example, they may prevent the sale of certain products or services, impose additional administrative and operating costs, or limit revenue from operating the companies that make up the Issuer s business group Technological risks The activities and operations of the Issuer and its capacity to develop and offer competitive products and services are dependent on technological developments that may be difficult to foresee and keep up with. The possible inability of the Issuer to keep up with technological advances or to anticipate the levels of adhesion to new products and services offered to its customers may affect the business of the Issuer or i the results of operations Operational risks In its activity, the Issuer is subject to certain operational risks, including service interruptions, errors, fraud attributable to third parties, omissions and delays in the provision of services and in the implementation of requirements for risk management. Despite these risks being monitored by the Issuer, it is not possible to guarantee that the monitoring and prevention of these risks will be fully effective in preventing such

20 risks from materialising. Material faults in operational risk management and control policies may affect the business of the Issuer and the results of operations. 2. MERGER 2.1 DESCRIPTION The Merger Project describes the terms and conditions of the Merger in detail and it is available in paper format at the registered office of the Issuer and in electronic format at and at Nevertheless, below is a brief description of the Merger with specific details on certain issues described in the Merger Project Identification of the participating companies As described in Section 1.2 above, the following commercial companies are parties to the Merger ( Participating Companies ): (i) (ii) ZON, a public company, with its registered office at Rua Ator António Silva, no. 9, Campo Grande, parish of Lumiar, municipality of Lisbon, company no , registered at the Lisbon Commercial Registry under the same number, with the share capital of EUR 3,090, (three million ninety thousand nine hundred and sixty-eight euros and twenty-eight cents) at the moment prior to the Merger, in its capacity as merging company; and OPTIMUS, a joint stock company, which had its registered office at Via Norte-Espido, parish of Maia, municipality of Maia, and had the company number , which was registered at the Maia Commercial Registry under the same number and had a share capital of EUR 115,000, (one hundred and fifteen million euros), in its capacity as the merged company Type, Motives and Objectives Type of Merger The Merger was completed by means of definitive registration on 27 August 2013, in the form of a transfer of all the assets of OPTIMUS to ZON, under the terms of article 97(4)(a) of the CCC. The merger was thus made by the incorporation of OPTIMUS into ZON

21 With this step, all assets and liabilities held by OPTIMUS on the date of the commercial registration of the Merger, including the rights and obligations arising from its activity, were transferred in full to the Issuer. The Merger was carried out in accordance with the accounting principles in force in Portugal and under the legal provisions governing merger operations in general Motives and Objectives The Merger Project contains a detailed presentation of the motives and objectives of the Merger. This section sets out a brief overview: (i) (ii) (iii) (iv) (v) Creation of a telecommunications group of significant size and with capacity to increase the projection of the Portuguese capital market; Potential for growth resulting from the complementarity and convergence of the infrastructures owned by ZON and OPTIMUS, with the consequent development of innovative and wider-ranging products and services in Portugal; Promoting competition, productivity and innovation by creating an operator with significant presence and size in all market segments in Portugal, with a positive impact on a global level in terms of prices practised in all market segments, and with clear benefits for consumers; Creating a more solid and stronger operator, as a result of a larger scale operation, obtaining synergies of an operational, administrative, financial and functional nature; and The possibility of increasing the international exposure and growth of the company resulting from the Merger. As to the expected gains in operational, administrative, financial and functional synergies resulting from the Merger mentioned in (iv) above, the following costs and investment synergies are worthy of note: (i) (ii) (iii) Optimisation of investment in infrastructures; Integrated management and planning of the mobile and fixed network, with the respective exploitation of the convergence of networks; Reduction in dependence on the infrastructures of competing operators;

22 (iv) (v) (vi) Reduction in costs inherent to the investment of the ZON Group in the mobile segment, and of the OPTIMUS Group in the fixed segment and the Pay TV project, with the reciprocal gain in value of the core businesses of each of the groups; Optimisation of the strategy to approach the market segments in which each one of the companies individually has more experience; Optimisation resulting from the combined negotiation of contracts and purchases; and (vii) Offer of integrated and converging products and solutions. These costs and investment synergies were identified by means of a joint project of the management teams of ZON and OPTIMUS in which they compared the cost and investment base of the business plan of both the entities and identified savings in a number of functional areas. These areas included, in particular, marketing, distribution channels, customer care and other support services, fixed and mobiles networks and other infrastructures, information systems and other direct costs of the residential and business segments. The identified synergies take into account the discounted future value of the gains resulting from the Merger less the respective integration costs, assuming that the vast majority of the synergies (reduction in costs and investments) will be achieved in full in a period of between 3 and 5 years and that, in the subsequent years, it will maintain the achieved level of reduction in costs and investments. Besides these synergies, it is important to emphasise the strength that comes from the joining of the two teams and of their vast experience in the sector, as well as the opportunity that results from the exploitation of a broader customer base and from a set of infrastructures of undeniable quality and coverage, the potential value of which is not included above. To summarise, the Merger makes it possible to create a communications group that we consider to be stronger and more solid, benefitting from a greater capacity to follow a strategy of sustainable growth, internationalisation and efficient management, in which the sharing of the experience and skills of its teams will be a decisive and fundamental factor. The Merger also results in a group capable of investing as well as generating value and creating new opportunities for the shareholders, employees, customers and suppliers

23 Such a group will bring benefits to society in general and help to defend the country s economic interests Share exchange ratio The share exchange ratio that served as the basis for the determining the number of shares to be issued by the Issuer and attributed to the shareholders of OPTIMUS was established by agreement between ZON and OPTIMUS on the basis of the following valuation criteria listed in the Merger Project: (i) Valuation by means of the discounted cash flows, applied to the ZON Group and to the OPTIMUS Group; and (ii) Valuation by means of the application of various capital markets multiples, including the EBITDA and EBITDA-CAPEX multiples. This share exchange ratio was supported and confirmed by the analysis of the economic and financial reasonableness of the defined exchange terms (fairness opinions) prepared by Banco Português de Investimento, S.A. and by Banco Santander Totta, S.A., addressed to the OPTIMUS Board of Directors and also by the analysis of the economic and financial reasonableness of the defined exchange terms (fairness opinions) prepared by Banco Espírito Santo de Investimento, S.A. and by Caixa Banco de Investimento, S.A., addressed to the ZON Board of Directors. The banks carried out the analysis of the relative valuations of ZON and OPTIMUS using the valuation methods common for such transactions, namely, discounted cash flow, comparison of capital markets multiples, historical evolution of the share price and analysis of reports by capital market analysts. The four fairness opinions then concluded that the proposed exchange ratio fell within a reasonable range of relative valuation between ZON and OPTIMUS. On the basis of the results obtained by applying the said valuation criteria to ZON and OPTIMUS, a share exchange ratio with a quotient between the value of ZON and of OPTIMUS was calculated at 1.5. As a consequence, and taking into account that ZON Multimédia s share capital was of EUR 3,090,968.28, represented by 309,096,828 shares, each with a nominal value of EUR 0,01 and that OPTIMUS share capital was of EUR 115,000,000.00, represented by 115,000,000 shares, each with a nominal value of EUR 1.00, at the time of issue of the New Shares and their respective registration, the shareholders of OPTIMUS received, by reason of the Merger, shares of the Issuer for each share then representing the share capital of OPTIMUS

24 The difference between OPTIMUS equity and the total nominal value of the New Shares will be registered as the premium for the New Shares Effects of the Merger As a result of the commercial registration of the Merger, the Issuer, as merging company, took on all the assets and liabilities arising from contracts previously entered into by OPTIMUS, including any guarantees given. As communicated to the market by the Issuer, the latter assumed the position of issuer under (i) the bond issue issued by private subscription and designated as SONAECOM 2010/2015, in the amount of 40,000,000 (forty million euros) organised and set up by Caixa Banco de Investimento, S.A., and of (ii) the bond issue issued by private subscription and designated as 100,000, FLOATING RATE UNSUBORDINATED NOTES DUE 2015 in the amount of 100,000,000 (one hundred million euros) organised, set up and subscribed by the banks BNP Paribas Sucursal em Portugal, ING Belgium SA/NV Sucursal em Portugal and WestLB AG (currently Portigon AG), following the transfer by Sonaecom of its rights and obligations under the said bond issues to OPTIMUS, and of the Merger. It should be noted that the above mentioned transactions did not give rise to any change in the total net financial debt of the Issuer because, at the same time as the said transfers of the position of issuer, Sonaecom transferred to OPTIMUS and, as a consequence to the Issuer, the funds associated with these bond issues in the total amount of 140,000,000. Therefore, from an accounting point of view, OPTIMUS operations were considered as being made on account of the Issuer as from the date of definitive registration of the Merger. 2.2 MERGER PROCESS Approval of the Merger Project As mentioned in 1.2 above, the Merger Project was approved by the management bodies of ZON and of OPTIMUS on 21 January 2013, and subsequently approved by the respective general meetings on 7 March

25 2.2.2 Resolution on non-opposition to the Merger by the general meetings of bondholders and non-opposition by the creditors In face of the legal right of the creditors of the Participating Companies to oppose the Merger in the courts within one month of the publication of the registration of the Merger Project, under articles 101-C and 355 of the CCC, two general meetings of the bondholders of the Issuer were called relating to the Obrigações ZON Multimédia and Obrigações Zon Multimédia 2012/2015 bond issues, respectively. In the context of the said general meetings of bondholders, both of which took place on 21 February 2013, resolutions were passed not to exercise the right of opposition to the Merger. On the same date, ZON issued a communication to the market in this respect, as privileged information. It should be added that no creditor, either of ZON or of OPTIMUS, had presented any judicial opposition to the Merger by the deadline mentioned. This means there is no impediment to the definitive registration of the Merger at the commercial registry under articles 101-B and 111 of the CCC CMVM decision waiving the requirement to launch a mandatory takeover bid On 19 April 2013, ZON received a communication from the shareholders of Kento Holding Limited and Unitel International Holdings, B.V. informing it about the decision of the CMVM to approve the request for a waiver of the requirement for the Issuer to launch a mandatory takeover bid under article 189(1)(c) of the Securities Code, subject to confirmation by the company ZOPT, SGPS, S.A. ( ZOPT ) that, as at the date of completion of the Merger, there were no alterations to the assumptions of fact on which the said decision was grounded. In turn, on 27 August 2013, ZON was informed by the company ZOPT that there had been no alterations to the said assumptions, for instance, in respect of (a) ZOPT s ultimate beneficial owners (who are still Belmiro Mendes de Azevedo and Isabel dos Santos), (b) the shareholdings held by Sonaecom, by Kento Holding Limited and by Unitel International Holdings, B.V. in ZOPT (respectively, of 50%, 17.35% and 32.65%), and (c) the documents made available to the CMVM prior to the decision waiving the requirement to launch a mandatory takeover bid. On the same day, the CMVM issued an official notice confirming the full effect of the said decision to approve the request for waiver of the requirement for the Issuer to launch a mandatory takeover bid

26 2.2.4 Authorisations, notifications and administrative formalities applicable or necessary to complete the Merger On 28 March 2013, the Cabinet of the Secretary of State for Public Works, Transport and Communications issued a decision authorising the change in ownership of the share capital of OPTIMUS for the purposes of the national licensing of the UMTS systems attributed to OPTIMUS Non-opposition decision of the Competition Authority On 27 August 2013, the Competition Authority issued the respective decision of nonopposition to the Merger and this was communicated to the market by ZON on the same day as privileged information. The said non-opposition decision provides for the following commitments to be made by the notifying companies (Sonaecom, Kento Holding Limited and Unitel International Holdings, B.V.): (i) 1 st Commitment: To ensure that OPTIMUS Comunicações extends the duration of the reciprocal network sharing agreement between OPTIMUS Comunicações and Vodafone Portugal; (ii) 2 nd Commitment: To ensure that OPTIMUS Comunicações amends the reciprocal network sharing agreement between OPTIMUS Comunicações and Vodafone Portugal in order for the limitation of liability in the event of unjustified termination by OPTIMUS Comunicações or justified termination by Vodafone Portugal for a reason attributable to OPTIMUS Comunicações not to apply; (iii) (iv) 3 rd Commitment: To ensure that OPTIMUS Comunicações will not charge its customers of the triple play service - on FTTH (Fibre to the Home) technology supported in the networks that are subject to the OPTIMUS Comunicações / Vodafone Portugal sharing agreement - the amounts due under the loyalty clauses in the event of any request for disconnection made by the said customers during a period of 6 months; 4 th Commitment: To ensure that OPTIMUS Comunicações will negotiate in good faith and under non-discriminatory terms with any third parties that request it, an agreement that will allow wholesale access to the OPTIMUS Comunicações FTTH network that is subject to the OPTIMUS Comunicações / Vodafone Portugal sharing agreement, for a minimum period of 5 (five) years, with adequate levels of service and reasonable remuneration

27 conditions and in which any disagreement between the parties will be submitted to arbitration. This negotiation obligation ends on 31 October 2015; and (v) 5 th Commitment: To ensure that OPTIMUS Comunicações will negotiate and enter with Vodafone Portugal into a call option agreement in respect of the OPTIMUS Comunicações FTTH network located in the metropolitan areas of Lisbon and Porto. The purchase price will be the book value of the network, net of amortisation Merger Act and Commercial Registration of the Merger (i) (ii) The Merger act for the purposes of article 106 of the CCC and the presentation of the commercial registration of the Merger and of the inherent increase in share capital of the Issuer took place on 27 August 2013; The definitive commercial registration of the Merger and the said increase in share capital took place on 27 August As the corporate merger process and the said increase in share capital have been concluded by means of the commercial registration, the registration of the New Shares in the CSD operated by Interbolsa and the respective issue took place on 28 August Admission to trading of the New Shares On 28 August 2013, the Issuer presented the application for admission to trading of the New Shares to the regulated market Euronext Lisbon, and it is estimated this will take place on 9 September The Merger does not involve or imply any public offer of securities under the provisions of the Securities Code. 2.3 TAX FRAMEWORK APPLICABLE TO THE MERGER All the elements that make up the assets and liabilities of OPTIMUS, as appear in the balance sheet annexed as Annex II to the Merger Project, were transferred in full to the Issuer under the special rules applicable to mergers, spin offs, transfers of assets and exchanges of shares ( tax neutrality regime ) provided for in article 73 and following of the Corporate Income Tax Code ( CIT Code ). These provisions of the CIT Code determine that, for tax purposes, the Issuer maintains the assets subject to transfer at the same values that they had in OPTIMUS prior to the merger taking place. These values should

28 be considered as the ones that result from the application of the provisions of the said Code or from revaluations carried out under tax legislation

29 3. INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF THE ISSUER 3.1 ACTIVITY OF THE ISSUER Following the Merger, the Issuer headed a more solid and larger telecommunications business group, with a turnover of 1584 million euros, operating profits (EBITDA) of 555 million euros (pro forma values at 31 December 2012, as per Section 3.2 below and a revenue share estimated at around 26% of the national telecommunications market (calculated on the basis of the financial information for 2012). As a consequence of the Merger by incorporation of OPTIMUS, the Issuer becomes a company with a relevant presence in the principal segments of the telecommunications market in Portugal, as may be seen in the following pro forma market share charts (considering the addition of the customers bases of ZON and OPTIMUS), for 1Q13. (1) Source: ZON calculations based on ANACOM data for 1Q13, i.e: Pay TV Report - Broadband Report - Fixed Voice Report - (2) Market shares estimated on the basis of the number of subscribers reported in the respective financial statements by the companies on question

30 Given the strong complementarity and convergence of the infrastructures of ZON and of OPTIMUS, there is significant potential in the joint operation of the businesses with the consequent development of innovative products / services with broader coverage and the achievement of operational synergies as described in Section Besides the significant added values that the Merger brings described above, the base business of the Issuer results from the joining of the activities of ZON Group and OPTIMUS Group. For this reason, and in light of the fact that, up to the Merger, ZON and OPTIMUS carried on their activity and published their respective financial information as independent entities, a detailed analysis of the evolution of each of the Participating Companies is presented in Sections 4 and 5 below. 3.2 PRO FORMA FINANCIAL INFORMATION OF THE ISSUER The pro forma information of the Issuer below corresponds (i) to the consolidated balance sheets prepared by reference to 31 December 2012 and 30 June 2013 and (ii) to the consolidated income statements for the financial years 2011 and 2012 and to 1H12 and 1H13. Given its nature, the said pro forma financial information, which appears below, relates to a hypothetical situation, which means that it does not represent the actual financial situation of the Issuer, nor its results. On a pro forma basis the Issuer s Operating Revenue stood at 1,583.8 million euros in 2012, representing a decrease of 2.0% compared with EBITDA rose to million euros, representing an increase of 2.3% compared with the million euros for The Issuer s pro forma Net Income for 2012 stood at million euros, an increase of 16.8% compared with the previous year

31 ZON OPTIMUS, SGPS, S.A. PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

32 PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEARS ENDED ON 30 JUNE 2013 AND 2012 (Amounts stated in millions of euros) ZON OPTIMUS Adjustments ZON OPTIMUS 1H 12 1H 13 1H 12 1H 13 1H 12 1H 13 1H 12 1H 13 Operating Revenues (3.6) (4.5) Operating costs excluding depreciation and amortization (3.6) (4.5) Wages and salaries Direct costs (3.6) (4.5) Commercial costs Other operating costs EBITDA Depreciation and amortization Income from operations Other expenses / (income) 0.9 (0.5) (0.5) EBIT (Financial expenses) / income (1 9.0) (25.5) (3.9) (1 1.6) (22.9) (37.1 ) Income before income taxes Income taxes (1 0.5) (1 0.2) (6.3) (6.3) (1 6.8) (1 6.5) Income from continued operations Non-controlling interests (0.6) (0.4) (0.6) (0.4) Net income The notes to the pro forma consolidated financial statements form an integral part of the pro forma consolidated statement of comprehensive income for the half year ended 30 June PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (Amounts stated in millions of euros) ZON OPTIMUS Adjustments ZON OPTIMUS Operating Revenues (5.3) (6.9) 1, ,583.8 Operating costs excluding depreciation and amortization (5.3) (6.9) 1, ,028.3 Wages and salaries Direct costs (5.3) (6.9) Commercial costs Other operating costs EBITDA Depreciation and amortization Income from operations Other expenses / (income) EBIT (Financial expenses) / income (43.0) (42.4) (9.1 ) (1 1.3) (52.1 ) (53.7 ) Income before income taxes Income taxes (1 4.8) (1 8.0) (7.7 ) (3.5) (22.5) (21.5) Income from continued operations Non-controlling interests (0.6) (0.9) (0.6) (0.9) Net income The notes to the pro forma consolidated financial statements form an integral part of the pro forma consolidated statement of comprehensive income for the year ended 31 December

33 PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2013 AND 31 DECEMBER 2012 (Amounts stated in millions of euros) ZON OPTIMUS Adjustments ZON OPTIMUS H H H H 13 Total assets 1, , , ,828.3 (194.1) (202.7) 3, ,997.3 Current assets (3.1) (2.4) Accounts receiv able, net (3.1 ) (2.4) Cash and equiv alents Other Ativo não corrente 1, , , ,585.7 (191.0) (200.3) 2, ,440.7 Fixed assets, net and Intangible assets, net excluding Goodwill , ,658.2 Goodwill (1 91.0) ( ) Investments in group companies Deferred taxes Other Shareholder's equity , ,056.7 (191.0) (200.3) 1, ,063.5 Total liabilities 1, , (3.1) (2.4) 2, ,933.9 Current Liabilities (3.1) (2.4) 1, Short term debt Accounts pay able (2.5) (1.9) Other (0.6) (0.5) Non-current liabilities , ,138.5 Medium and long term debt , ,051.8 Prov isions Other Total Liabilities and Shareholder's equity 1, , , ,828.3 (194.1) (202.7) 3, ,997.4 The notes to the pro forma consolidated financial statements form an integral part of the pro forma consolidated statement of financial position as of 30 June

34 NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AT 30 JUNE Basis of preparation Following the agreement between Sonaecom SGPS, S.A. (Sonaecom), Kento Holding Limited and Unitel International Holdings, B.V., the merger project relating to the merger by incorporation of Optimus SGPS, S.A. ( OPTIMUS ) into ZON Multimédia SGPS, S.A. ( ZON Multimédia ) was approved by the boards of directors and by the general meetings of both companies on 21 January and 7 March 2013, respectively. Under the said merger project, as the merging company ZON Multimédia as of today named ZON OPTIMUS, SGPS, S.A., increased its share capital from EUR 3,090,968 to EUR 5,151,613 through the issue of 206,064,552 new shares maintaining the nominal value per share of EUR The pro forma consolidated financial statements are based on the consolidated financial statements of ZON Multimédia and pro forma consolidated financial statements of OPTIMUS for the half year ended 30 June 2013 and for the year ended 31 December 2012, prepared in accordance with International Financial Reporting Standards as adopted by the European Union and in force as at 1 January 2013 and 2012, respectively, which have been adjusted to take into account the merger between ZON Multimédia and OPTIMUS registered on 27 August Therefore, these pro forma consolidated financial statements should be read together with the consolidated financial statements of ZON Multimédia and pro forma 1 consolidated financial statements of OPTIMUS for the half year ended 30 June 2013 and for the year ended 31 December The pro forma adjustments are based on assumptions and estimates, which the board of directors believes to be reasonable and are described in Note 2. These pro forma consolidated financial statements have been prepared for illustration purposes only and are not intended to represent the consolidated financial position or consolidated operating results that would have resulted if the merger had occurred on that date or in the future. Therefore, these financial statements do not reflect, for example, the costs of

35 integrating the operations of ZON Multimédia and OPTIMUS, any cost synergies that may occur with the merger and any benefits generated by the combined growth of the two entities. Additionally, ZON OPTIMUS, SGPS, S.A. has not yet completed a detailed analysis of the fair value of the assets and liabilities of OPTIMUS. 2. Notes to the pro forma adjustments The pro forma adjustments are based on assumptions and estimates, which the board of directors believes to be reasonable and are detailed bellow: Elimination of balances (ii) Elimination of goodwill and Shareholder s capital of OPTIMUS (iii) and (iv) Increase of share capital and calculation of the new entity's goodwill (iii) and (iv) Total adjustments H H H H 13 Total assets (3.1) (2.4) (565.1) (565.1) (194.2) (202.7) Current assets (3.1) (2.4) (3.1) (2.4) Accounts receiv able, net (3.1 ) (2.4) (3.1 ) (2.4) Cash and equiv alents Other Ativo não corrente (565.1) (565.1) (191.1) (200.3) Fixed assets, net and Intangible assets, net excluding Goodw Goodwill (565.1 ) (565.1 ) ( ) (200.3) Investments in group companies Deferred taxes Other Shareholder's equity (1,047.5) (1,056.7) (191.1) (200.3) Total liabilities (3.1) (2.4) (3.1) (2.4) Current Liabilities (3.1) (2.4) (3.1) (2.4) Short term debt Accounts pay able (2.5) (1.9) (2.5) (1.9) Other (0.6) (0.5) (0.6) (0.5) Non-current liabilities Medium and long term debt Prov isions Other Total Liabilities and Shareholder's equity (3.1) (2.4) (1,047.5) (1,056.7) (194.2) (202.7) The pro forma consolidated statement of comprehensive income was only adjusted by the elimination of the transactions between ZON Multimédia and OPTIMUS. (i) Inclusion of the results generated by the operations of OPTIMUS The results generated by the operations of OPTIMUS in half year ended 30 June 2013 and the year ended 31 December 2012 were incorporated into the pro forma consolidated statement of comprehensive income for the half year and year periods ended on the above mentioned dates. (ii) Elimination of balances and transactions between ZON Multimédia and OPTIMUS

36 Elimination of the transactions performed between ZON Multimédia and OPTIMUS in the half year ended 30 June 2013 and for the year ended 31 December 2012, amounted to EUR 4.5 million and EUR 6.9 million, respectively, of operating revenues and direct costs. Elimination of EUR 2.4 million and EUR 3.1 million as of 30 June 2013 and December 2012, respectively, of balances between ZON Multimédia and OPTIMUS related to operating revenues and direct costs. (iii) Share capital increase The merger implied an increase in the share capital of ZON Multimédia through the issuance of 206,064,552 new shares. The pro forma adjustment in shareholder equity on 30 June 2013, in the amount of EUR 200 million, represents the elimination of the shareholder capital of OPTIMUS on this date (EUR 1,056.7 million) and the increase in share capital of ZON Multimédia in the amount of EUR million, which was done on the basis of the closing price of ZON Multimédia shares on 27 August 2013 (EUR per share). (iv) Calculation of goodwill As mentioned in the bases of preparation of the pro forma financial statements, ZON OPTIMUS, SGPS, S.A. has not yet completed a detailed analysis on the fair value of assets and liabilities of OPTIMUS, and the negative pro forma adjustment of EUR 200 million corresponds to the write-off of OPTIMUS goodwill on 30 June 2013 (EUR million) and the calculation of the new entity's goodwill considering the carrying amounts of assets and liabilities of the OPTIMUS on 30 June 2013 (goodwill of EUR million). Considering that ZON OPTIMUS, SGPS, SA has not yet completed a detailed analysis on the fair value of assets and liabilities of OPTIMUS, the pro forma consolidated accounts present the assets and liabilities of OPTIMUS at their original book value. As a result, the goodwill appears as the difference between the consideration transferred to ZON Multimédia and the carrying amounts of assets and liabilities of OPTIMUS. When the analysis of the fair value of the assets and liabilities of OPTIMUS is completed, the following assets and liabilities, among others, are expected to be identified: Difference between the fair value of tangible assets and their book value; Fair value of licences; Fair value of customer portfolio; Contingent liabilities; and Associated deferred taxes

37 3.3 OPINION ON THE PRO FORMA FINANCIAL INFORMATION OF THE ISSUER PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. prepared the following opinion on the pro forma consolidated information referred to in Section 3.2 above:

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40 4. INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF ZON 4.1 INTRODUCTION As explained throughout this Section, ZON leads a telecommunications and multimedia business group operating in the areas of pay TV, broadband (fixed and mobile) and voice communications (fixed and mobile), advertising and production of pay TV channels, cinema exhibition and distribution, video distribution and television rights. These activities of ZON have been carried on through a number of entities, infrastructures and platforms, which include the largest hybrid fibre-coaxial network ( HFC ) existing in Portugal, a digital satellite platform and 29 multiplex cinema complexes, with 210 screens. ZON also has a presence in the pay TV business in Angola and Mozambique through a joint venture operating under the ZAP brand. On 31 March 2013, ZON was the largest pay TV service provider in Portugal, with a market share of 49.7% 4. In turn, on 30 June 2013, ZON had around 1,543,000 pay TV customers - including 338,700 IRIS by ZON Fibra customers and 786,100 triple play customers 805,300 fixed broadband customers and 989,800 fixed voice customers 5. Over recent years, through investment in the improvement of the network, ZON today has the largest Next Generation Network ( NGN ) 6 in the country, available in 98% of the 3.2 million homes covered by the HFC network. This has made it possible to develop and promote the ZON Fibra and IRIS by ZON Fibra offers and ZON s new generation multi-platform TV products launched by the company in January 2011 and enables provision of very high speed broadband services. ZON complements its HFC network with a satellite platform to ensure nationwide pay TV coverage. As at 31 March 2013, ZON, through ZON Lusomundo Cinemas, is also the largest cinema operator in Portugal with a market share of audience of 62.1% and a 62.3% share of gross revenue 7. ZON was also, at 31 March 2013, the largest film distributor, with a market share of revenue of 55.8% 6. ZON also produces and distributes television programmes, including sports, film and TV series channels. In 2010, ZON began operations in Africa through ZAP, a joint venture in which ZON has a 30% shareholding and SOCIP Sociedade de Investimentos e Participações, S.A. which holds 70%. The aim of this joint venture is to develop a satellite pay TV 4 Source: ANACOM ( ACHED_FILE Pay TV Service Report 1Q2013). 5 Source: Report and Accounts of ZON for 1H Source: Public information made available by the operators. 7 Source: ICA Newsletter for 1Q

41 service in the region. Having launched commercial activity in Angola in July 2010, ZAP expanded operations to Mozambique in As at 31 December 2012 the ZON Group had annual operating revenues of million euros and earnings before interest, taxes, depreciation and amortisation (EBITDA) of million euros 8. For more detailed financial information in relation to the evolution of ZON s business, see Section 4.6 below. For detailed information on the structure of the ZON Group and its holdings in the more relevant subsidiaries, see Section 6.1 below. The analysis presented below should be read in conjunction with ZON s financial statements, including balance sheets, income statements and respective notes, inserted into this Equivalent Document by reference, under the terms of Section 8.1 below. The source of all the information appearing in this Section 4 for which the sources are not expressly indicated in this section will be ZON s said financial statements. 8 Source: Report and Accounts of ZON for the years 2010, 2011 and

42 4.2 ZON S MAIN AREAS OF BUSINESS: PAY TV, BROADBAND AND VOICE Triple Play Television Market share 43% Market share 50% Fixed Broadband Fixed Voice Market share 33% Market share 26% (1) The market shares indicated in the charts above refer to number of customers of ZON and are calculated by reference to 31 March (2) Source: ANACOM reports referred to below and calculations made by ZON on the basis of ANACOM s fixed voice data: Pay TV Report - Broadband Report - Fixed Voice Report Triple Play As at 30 June 2013, ZON is one of the largest triple play pay TV, broadband and voice operators with 786,100 customers who contract the three services from ZON representing 65.3% penetration of the cable customer base

43 Additionally, ZON is leader in the pay TV market in Portugal, according to the data published by the operators of the sector, and one of the largest pay TV operators in Europe 9, with around 1,543,000 customers on 30 June Furthermore, as at 30 June 2013, ZON also led the Portuguese market in the offer of HD channels, as it made a greater number of HD channels available than any other operator in Portugal 10. In the ECSI (European Customer Satisfaction Index) for , ZON was named the best triple play service provider in Portugal. Consumers voted ZON the best pay TV operator for the third consecutive year and this year ZON achieved first place in the three services pay TV, broadband and fixed voice. In January 2011, ZON launched its new TV platform IRIS by ZON Fibra and, in October 2011, consolidated its multi-platform strategy with the launch of ZON Online for laptops, tablets and smartphones. In September 2012, ZON launched the Timewarp functionality on this platform. This is a simplified recording service on a data server that allows customers to automatically record, browse and watch programmes from the last 7 days. This consolidates the position of these services as ZON s triple play reference offer. At the end of June 2013, the number of IRIS by ZON Fibra customers had risen to 338,700. In 2007, ZON expanded its services to include a telephone service and as at 30 June 2013 this service had 989,800 subscribers. ZON s fixed telephone service currently includes unlimited calls to national fixed networks and 50 international destinations at night-time during the week and 24 hours at weekends. In May 2013, ZON launched its integrated quadruple play service, which includes ZON s pay TV service, including the IRIS interface, fixed broadband with a speed of 100 Mbps, fixed voice with unlimited calls to national fixed networks and 50 international destinations and the offer of unlimited mobile voice. All these services, with exception of the mobile virtual network ( MVNO ), are supported by one of the most advanced telecommunications networks in Europe, which is the result of significant upgrade investments made by ZON over the last 5 years. 9 Source: Report and Accounts of ZON for 1Q2013, ZON website ( and public information published by other operators in Europe. 10 Source: Website of the Issuer ( and public information made available by other operators in Portugal. 11 Source: _ECSI_2012_16julho

44 Between 2010 and 1H13, average monthly revenue per user ( ARPU ) experienced a slight average annual decrease of 1.0% to EUR This was still a resilient performance in light of the combination of a competitive context and challenging macroeconomic situation. It is also a testament to the success of the strategy of increasing the number of services subscribed by each customer and of the launch of new functionalities. As at 30 June 2013, ARPU for cable subscribers, excluding revenue from premium channels, had grown 0.6% compared with 1H12, which it noteworthy. This reflects the greater value of the bundled service proposals and the improvement in customer mix, with the growth in penetration of IRIS triple and quadruple play bundles Television Through ZON TV Cabo group, ZON is leader in the Pay TV market in Portugal, with around 1,543,000 customers as at 30 June Of these customers, according to reports published by operators, 338,700 use the IRIS by ZON Fibra platform. As at 30 June 2013, the HFC network owned and operated by ZON is available in approximately 3.2 million homes, with the remainder of homes in Portugal estimated at 2.7 million served by the DTH (satellite) service operated by ZON. With further reference to the half year ended 30 June 2013, ZON presented a record level of 54,300 net new IRIS by ZON Fibra customers with this service already representing 43.1% of the triple play subscriber base, the vast majority being broadband services with access speeds equal to or higher than 100 Mbps. The number of triple play customers saw an annual increase of 7.6%, representing 65.3% penetration of the cable customer base, one of the highest levels in the sector in Europe 13. The ZON Box, launched in May 2008, marked a decisive stage in the growth of ZON. The decoding equipment, available to cable and satellite customers, was one of the most advanced in Europe and is compatible with the most recent HD technology. At the same time, the ZON Box was introduced with an incorporated digital recorder with capacity to record up to 400 hours. This makes it possible to control programming (to pause and restart the programme whenever you want, or go back to the beginning of a programme being broadcast at the time). 12 Source: Report and Accounts of ZON for the years 2010 to 2012 and to 1Q Sources: B Sky B Annual Review 2012 ; Ziggo 1Q13 Results Press Release; Comhem Comhem s First Quarter 2013 results ; Liberty Global Liberty Global Reports First Quarter 2013 Results

45 The services made available by the new generation of decoding equipment are currently a determining factor in pay TV services. On 30 June 2013, more than 60% of customers were equipped with a ZON Box, for which ZON offers the largest range of HD channels (more than 40), leading the high definition market in Portugal 14. The service IRIS by ZON Fibra was launched in January This service is innovative in terms of its interface and design and because of the fact that its subscription packages can easily be reconfigured to match the preferences of each customer. The service, which immediately positioned itself as the ZON Group s reference triple play service, has turned out to be an enormous success, achieving 100,000 customers in less than a year. This service, which has already received international awards 15, is based on a user interface that places the focus on content and was conceived from the start for multiple platforms. It is the first service in Portugal to offer a truly integrated experience through the set-top-box, PC and tablet. The service is offered to the user as part of a bundle of triple play or quadruple play services, with linear and on-demand content, and the bundle can be personalised in accordance with the preferences of the customer was a year of consolidation for IRIS by ZON Fibra. After the launch of Restart TV in September 2011 (a service that provides the user with the possibility to restart television programmes that have finished in the last two hours), 2012 saw the launch of the Timewarp service a functionality that makes it possible to record and later watch the last 7 days of television programming on more than 70 channels in a simple and effective way. This service leverages ZON s investment in a hybrid cable and fibre optic network, which is at the cutting edge globally, and in latest generation data centres. The first half of 2013 has already seen unprecedented levels of recognition for IRIS by customers and the market in general, and Timewarp was voted product of the year in marketing and innovation by consumers Fixed Broadband ZON had 805,300 broadband Internet customers as at 30 June 2013 and was the second largest operator in Portugal with a share of 33% 17 as at 31 March Source: Website of the Issuer ( and public information made available by other operators. 15 Janus Award, from the Institut Français du Design (November/2010) and 'Most Innovative Design or User Interface', from the TV of Tomorrow Show (June/2011). 16 Source: 17 Source: Anacom ( D_FILE) Statistical information on Internet Access Service 1Q

46 The levels of performance and quality of experience in using the network operated by ZON, including the NGN, were the catalyst for the growth of the broadband customer base (805,300 customers on 30 June 2013, representing an increase of 7.2% compared with 1H12 and a net growth in the customer base of 15,300 subscribers compared with 31 December ). Since 2010, ZON has added around 115,000 customers for this service, a growth of 16.7% 17. Penetration of broadband services in the cable customer base was 66.9% as at 30 June In turn, at the end of 2012, more than 30% of ZON s customers had speeds equal to or higher than 100 Mbps and more than 90% had speeds above 12 Mbps. Among new customers, more than 40% have speeds equal to or greater than 100 Mbps 19. ZON s strong technological advantage in terms of the capacity of its network enables it to offer NGN services to practically the whole of its customer base. As at 30 June 2013, ZON was also leader in the supply of Wi-Fi 20. With ZON@FON, customers of the ZON internet service have free access to more than 500,000 Wi-Fi hotspots in Portugal and more than 7 million around the world, through the FON partner networks. The service is totally free and use is unlimited, and it has witnessed an exponential growth in use. As at 31 December 2012, the service ZON@FON was used regularly by around 25% of ZON customers and traffic tripled in In 2013, ZON launched a new smartphone application which, after being downloaded from the App Store, automatically identifies ZON@FON hotspots in Portugal and abroad and provides a very simple login Fixed Voice The product ZON Phone, which offers fixed voice communication services, exceeded 989,800 customers as at 30 June 2013, having maintained a strong rhythm of growth in subscribers since its launch in 2007 (see 4.4 below). As at 30 June 2013, the total fixed voice customer base represented an 80.7% penetration of the cable customer base, with a net gain of 13,400 customers between 31 December 2012 and 30 June The most recent data made available by ANACOM on fixed voice market shares shows that ZON s market share continued to grow, reaching 25.9% at the end of 1Q13, 18 Source: Report and Accounts of the ZON for the years 2010 to 2012 and 1Q Source: Report and Accounts of ZON for the year Source: Website of the Issuer ( and public information made available by other operators in Portugal

47 compared with 25.7% at the end of with ZON the only one of the main operators to register growth in the number of fixed voice customers 21. An innovative service was presented on 15 December 2011: the ZON Phone App. With this innovation, ZON increased its efforts to complement its products with OTT (overthe-top) services. After the FON partnership for internet access and the launch of ZON Online, a version of ZON Phone for smartphones and tablets (ios and Android operating systems) was also launched. This application makes it possible to make and receive calls using the ZON Phone fixed number with exactly the same tariff and functions configured for the home telephone. The app works with any Wi-Fi connection and benefits from the more than 7 million FON hotspots around the world. ZON s fixed telephone offer currently includes unlimited calls to national fixed networks and 50 international destinations, at night-time during the week and 24 hours at weekends Mobile voice and broadband ZON has also been supplying mobile voice and internet broadband services under an MVNO agreement with Vodafone. In May 2013, ZON launched its quadruple play offer, which includes the ZON pay TV service with the IRIS user interface, fixed broadband with a speed of 100 Mbps, fixed voice with unlimited calls to national fixed networks and 50 international destinations and the offer of unlimited mobile voice Business In recent years ZON has been consolidating its offer and presence in the markets for large companies ( Large Companies ) and SoHo (Small Office Home Office), as well as SMEs ( Small and Medium Enterprises ). In the area of Large Companies and by reference to 2012, ZON increased its market penetration with data services (VPN MPLS, dedicated Ethernet circuits and dedicated Internet access up to 10 Gbps) and voice (unified communications solutions, direct 21 Source: ANACOM report on Statistical Information on Fixed Telephone Services for 1Q ( D_FILE)

48 access to SIP, intelligent services 800, 808, 707, etc.). ZON also increased its capacity to respond to the needs of its Managed Services customers 5. In order to ensure national coverage of the commercial effort, ZON expanded its sales and pre-sales teams and made partnerships with suppliers and aggregators dedicated exclusively to the Large Companies market. ZON serves customers in a range of sectors including banking, industry, construction and the public sector. Additionally, ZON has been focusing on broadening market penetration in carrier services for other telecommunications operators (for example, point-to-point Ethernet connections and backhauling). ZON has also seen sustained growth in the SoHo and SME segments, having boosted its efforts by means of the ZON Office product (IP-PBX telephone exchange integrated in the ZON HUB) and the introduction of Cloud Apps (applications in the cloud for invoicing, helpdesk, medical prescriptions, etc.). The entry level bundles for small companies like STARTUP and the introduction of a modular logic to the offer have made it possible to better meet the needs of customers. In 1Q2013, ZON won a very important contract with one of the main retail banks in Portugal, with a presence in mainland Portugal and the archipelagos of Madeira and the Azores. This contract contributed to strengthening the reputation of ZON as a competitive supplier of telecommunications services to the business sector, leveraging the capillarity and sophistication of its network Network and technology ZON has made one of the most advanced telecommunications networks in Europe available to its customers. In fact, principally due to the effort to modernise and upgrade the network made between 2008 and 2012 (which resulted in a total investment of 832 million euros over these 5 years), ZON has built an NGN that is available in almost all the 3.2 million homes covered by the HFC network. The HFC network built by ZON enables high Internet access speeds in Portugal and the largest offer of HD channels and advanced video-on-demand services. Additionally, the network investment by ZON in recent years was made in light of the expected growth in Internet traffic consumption. ZON is currently owner of the vast majority of the said HFC network due to the significant investment made in the context of the ZON IN project. This project

49 involved the construction of its own fibre on the level of the primary network and the relocation of hubs in its infrastructure The ZON Brand ZON is a leading brand in the triple play and pay TV markets and this has contributed to strengthening its customers loyalty and preference was characterised by a new more high-tech and sophisticated phase in ZON s communication strategy. This strategy was leveraged in the launch of a pioneering and innovative service in the market the IRIS by ZON Fibra system. This launch made it possible to strengthen communication of the core values of the brand, especially on the level of innovation, youth and modernity, reinforcing confidence and credibility in the company, as well as in service quality and customer support. ZON s advertising has been awarded silver and bronze medals in the last three years at the CAP Awards set up by the European section of CTAM, The Cable & Telecommunications Association for Marketing. In 2011, the launch campaign for ZON IRIS received the gold medal in the New Brand Launches and Rebrands category. In 2012, the brand s fame reached the highest levels ever, with values above 88%. For the launch of the Timewarp functionality, hundreds of posts were made on social networks and they impacted more than 220,000 users. According to the study Leading Brands on Facebook by elife, in October ZON even appeared in the Top 2 brands with most engagement on Facebook in Portugal. This was thanks to the launch of Timewarp and the references to the Liga ZON Sagres (the first division in Portuguese football). At the end of the year, the communication for IRIS by ZON Fibra was awarded the Gold Award in the Telecommunications and Media category of the APAN/Consultancy Group Effectiveness Awards, a distinction rewarding creativity and innovation in the communication area launched in This was all in addition to the business and brand results achieved Other business Cinemas Through ZON Lusomundo Cinemas 100% owned by ZON ZON operates the leading cinema chain in the Portuguese market with 210 screens in 29 shopping centres across Portugal. In 1Q13, ZON Lusomundo Cinemas had a market share of audience of 62.1% in terms and a 62.3% share of gross revenue Of the whole of its HFC network, ZON owns 98.2% of the total of pairs of fibres and 100% of the coaxial cable

50 ZON has responded to the needs of cinemagoers by introducing new technologies that have made it possible to improve the cinema experience, with the introduction of better sound and image quality. 100% of the company s screens have digital projection equipment and, of these, 40% have 3D Real D 9 projection technology. The introduction of HFR (High Frame Rate) technology in December 2012 has made it possible to introduce more immersive, clearer and more realistic images by increasing the number of frames per second (from 24 to 48). Besides commercial film exhibition, ZON has also started to show alternative sports, music and dance, either live or recorded in 2D or 3D. In June 2013, ZON Lusomundo Cinemas, in partnership with IMAX Corporation and Sonae Sierra, opened the first IMAX@DMR Digital 3D cinema in Portugal. This new technology is characterised by: (i) the use of giant screens; (ii) the highest image resolution, which makes it possible to reduce the distance between spectators and the screen; (iii) use of a broader range of sound effects; and (iv) special seating design. In 2012, ZON Lusomundo Cinemas sold 7,815 million tickets and showed 307 films in a total number total of around 345,000 cinema screenings Audiovisuals and content ZON also distributes audiovisual products and content through the companies ZON Lusomundo Audiovisuais, ZON Conteúdos, ZON Lusomundo TV, Dreamia and Sport TV. ZON Lusomundo Audiovisuais distributes films for cinema, videos for sale (DVD and Blue-Ray format) and video-on-demand products. This activity is carried on under distribution agreements made both with leading film producers (for example, Universal, Disney, Paramount/Dreamworks), and independent producers (Icon, Revolution Studios and Spyglass, among others). In cinema film distribution, ZON Lusomundo Audiovisuais is leader in Portugal, having registered a market share of audience of 56.9% and a 55.8% share of revenue. In 1Q13 it was also the distributor of four of the top ten box office hits in Portugal 6. In the television content business, through ZON Lusomundo TV and ZON Conteúdos, ZON produces and distributes the TV Cine premium film channels and the series channel, TV Séries

51 Through the company DREAMIA, a joint venture between ZON and Chello-Multicanal, ZON also produces four of the pay TV channels with the largest audience in Portugal. These are: Panda, Panda Biggs, MOV and Hollywood 23. Within the framework of a partnership with the company Sportinveste, ZON holds a 50% shareholding in the company Sport TV the company that produces the leading premium channels in the sports segment in Portugal. In December 2012, ZON reached an agreement with PT and Sportinveste to consolidate the shareholdings these companies held in Sport TV Portugal S.A., ( Sport TV ), in Sportinveste Multimédia, SGPS, S.A., and in PPTV Publicidade de Portugal e Televisão, S.A., and of their respective operations, into a single entity that would manage the TV and multimedia sports rights held by the said entities. As a result of the transactions necessary to consolidate these operations, ZON reduced its shareholding in Sport TV to 25%, receiving a cash payment of around 46 million euros. The completion of this agreement is dependent on approval by the Competition Authority and on Sport TV obtaining independent financing ZAP ZAP has been operating in the Angolan market since 2010 and in Mozambique since It is a joint venture, 30% owned by ZON Multimedia and 70% by SOCIP - Sociedade de Investimentos e Participações, S.A., an Angolan company controlled by Isabel dos Santos. ZAP operates in the pay TV markets in Angola and Mozambique providing DTH technology through the Eutelsat W7 satellite. In 2012, the Angola and Mozambique markets witnessed strong economic growth resulting in the development of growing middle class with purchasing power and an appetite for the consumption of pay TV services. According to the latest IMF estimates (October 2012), in 2012 the real GDP of Angola and Mozambique is considered to have grown 3.9% and 7.5%, respectively 8. The pay TV market has followed the growth of the economies of these countries and, since its launch, ZAP has been one of the most active players. This position has been achieved thanks to a range of innovative products especially designed for different segments of consumers with communication targeted at local needs and a business strategy focused on operational growth objectives. All of this is strongly grounded in local resources and synergies with ZON s operation in Portugal. 23 Source: GfK Audiences

52 ZAP currently offers its customers the channel bundles: ZAP Mini, with around 40 channels, ZAP Max, with around 90 channels, and ZAP Premium, with around 110 channels available (15 of which are in HD). It also offers the bundle ZAP Plus with 10 additional channels sold as an add-on to the rest of the bundles. A strong focus on advertising campaigns on TV, radio and in the written press has made it possible for ZAP to consolidate its position as one of the highest profile brands in the market. Increasing the coverage of its commercial network has also been one of ZAP s priorities since its launch. In Angola at the end of 2012, the ZAP distribution network had 13 of its own stores, 700 authorised agents and about 200 door-to-door salespeople. In Mozambique, ZAP had 5 of its own stores and around 120 authorised agents at the end of In late 2012, the ZAP team had a total of about 360 employees in Angola and Mozambique and this has been one of the main pillars of the successful growth of the operation. In addition to direct jobs, ZAP has contributed to the development of local economies through the creation of more than 1,300 indirect jobs (call centre, door-todoor salespeople, etc.) 8 In 2012, ZAP launched a bundle with around 10 French language channels as an addon to the basic bundles which includes the Tiji, France 2, France 3, France 5 and LCI channels, among others. In addition, some significant internationally recognised channels have been included in the existing bundles such as FOX HD, FOX Life HD, Discovery Science, 24 Kitchen, TLC, Disney Channel and Disney Junior, with the further enhancement of Portuguese channels with the introduction of ZAP Viva, Porto Channel, Afromusic Concerts and Sport TV Africa 2. In September 2012, ZAP made the ZAP Pay-Per-View service available to its customers

53 4.3 SUMMARY OF ZON S OPERATIONAL PERFORMANCE AS AT 30 JUNE 2013 Business Indicators ('000) H / 2010 (5) 1H13 / 2010 (5) Pay TV, Broadband and Voice Homes Passed (1) 3, , , , % 1.0% RGUs (2) 3, , , , % 4.1% Cable RGUs per Subscriber (units) (3) % 4.1% Basic Subscribers (4) 1, , , ,543.3 (0.0%) (0.7%) o.w. Cable Subscribers 1, , , , % 1.3% Triple Play Customers % 8.4% % Cable Triple Play Customers 55.2% 60.1% 63.9% 65.3% 4.3pp 4.1pp o.w. DTH Customers (6.0%) (7.0%) Fixed Broadband % 6.4% Fixed Voice % 10.1% Mobile % 11.0% Blended ARPU (Euros) (1.3%) (1.0%) Cinema Exhibition Revenue Per Ticket (Euros) % (0.4%) Tickets Sold 9, , , ,542.8 (7.3%) n.a. Screens (units) (0.7%) (0.6%) (1) The number of homes passed was corrected in 3Q11, consisting of a database cleanup of around 86.5 thousand homes. Data for the previous quarters was not restated. (2) Total RGUs reported reflect the sum of Pay TV, Broadband, Fixed Voice and Mobile services. (3) Cable RGUs per Subscriber correspond to the sum of Cable Pay TV, Broadband and Voice Subscribers, divided by the number of Cable Pay TV Customers. (4) These figures are related to the total number of Pay TV basic customers, including the cable and satellite platforms. ZON M ultimedia offers several basic services, based on different technologies, directed to different market segments (residential, real estate and corporate), with a distinct geographical scope (mainland Portugal and the Azores and Madeira islands) and with a variable number of channels. (5) Yearly average growth rate. Note: These business indicators are relative to ZON's Portuguese Operations. 4.4 PRINCIPAL INVESTMENTS Between 2010 and 2012, ZON s CAPEX went up to million euros saw the end of a period of accelerated growth in CAPEX that allowed ZON to digitalise a significant part of its cable customer base (77% of cable customers had digital services in December 2010), significantly increase the penetration of triple play services (55.2% of its cable customer base) and install a Next Generation Network in more than 3 million homes that is capable of offering its customers Internet connections with speeds of 360Mbps and interactive and innovative television services. This cycle of investment was of great importance for the launch of the IRIS platform in the following year. This service has received a number of international awards 14 for its innovative character and best-in-class functionalities. The years 2008 to 2010 were, therefore, marked by heavy investment in ZON s pay TV business involving (i) a significant increase in penetration of digital television services and triple play bundles and (ii) improvements in networks and infrastructures by means 24 The information appearing in this Section 4.4 in based on ZON s reports and accounts for the years 2010 to

54 of the creation of a HFC Next Generation Network based on Eurodocsis 3.0, the process of cell splitting, the ZON IN project (in which ZON developed its own primary network substituting the infrastructure previously rented from the incumbent operator) and the construction of a new New Generation data centre capable of consolidating all ZON s information systems infrastructure and all the business support application component. Besides the high level of network CAPEX in this period and the nonrecurrent investments associated with the spin-off process from the Portugal Telecom Group, ZON also implemented a CAPEX programme oriented towards the customer and associated with increasing the number of set-top boxes and EMTAs installed in customer s homes. This was done by increasing functionality and including high definition (ZON Boxes HD and EMTAs) was also marked by the successful implementation of a process of recovery and reinjection of deactivated equipment into customers homes. This approach, together with the already high levels of penetration of New Generation set-top boxes, caused a reversal in the trend of investment in terminal equipment. Accordingly, Total CAPEX stood at million euros in 2010, while Baseline CAPEX fell to million in From 2011 there was a sharp reduction in ZON s CAPEX to levels closer to those of international cable network operators, standing at 17.5% of revenue in 2011 and 14.3% of revenue in The annual evolution of ZON s CAPEX for the period 2010 to 2012 is presented in the following chart. Total CAPEX (Millions of Euros) As stated above, the level of CAPEX reduced gradually and significantly in 2011 and 2012 compared with Total CAPEX in 2011 stood at million euros and

55 Baseline CAPEX stood at million euros while, in 2012, total CAPEX fell to million euros, a reduction of 17.9% from Terminal equipment, in the amount of 332 million euros, represented 27% of CAPEX in 2012, a much lower level than in previous years. This decrease is a reflection of the combined effect of the already high penetration of digital services and triple play and, consequently, of the reduced need for customer CAPEX, with the success of the process of recovery, reconditioning and reinjection of equipment. Total CAPEX represented 16.3% of the revenue from Pay TV, Broadband and Voice and 14.3% of the total operating revenue of ZON in This reflected the necessary investments in maintenance and also some investment directed towards growth. ZON s investment over the last 2 years continued to translate into a strong capacity for technological innovation. At the beginning of 2011, the previously mentioned IRIS by ZON Fibra service was launched. This is an entirely new reference triple play offer that provides a revolutionary televisual experience. The new user interface was developed by NDS on the basis of the award-winning Snowflake software and had its world debut on the ZON platform. This new interface has various functions that set it apart from other systems. These include advanced recording management, Restart TV, smart search and cross search, recommendations based on preferences and personalisation of additional services. During 4Q2011, the IRIS interface was also made available on laptops, tablets and smartphones, thus making it possible to have remote access to TV programming and the EPG functionalities such as programme recording and access to the archive and the video club by means of the ZON Online platform. At the end of 2011, the IRIS customer base had already grown to 97,000 customers. In 1Q12, ZON launched a new and innovative functionality for its fixed voice customers - the ZON Phone application which allows them to use their smartphones to make and receive calls using their fixed telephone numbers and tariffs, wherever they are, as long as they have access to a Wi-Fi network. In May 2012, the ZON Online platform was also extended to smartphones with the launch of its application for the iphone. The great development of 2012 took place in August with the launch of the Timewarp functionality for the IRIS customer base. ZON was the first operator in the world to offer a service of this type. It is a simplified recording service that makes it possible for customers to browse and watch the programming from the last 7 days, which is recorded, after the customer chooses this option, on a central data server. Customers can watch their favourite programmes that have been broadcast over the last week using the award-winning and easy to use IRIS TV interface. At the end of 2012, ZON had already registered 235,000 IRIS customers, a growth of 138,000 customers compared with the end of At the end of 1H13, the number of IRIS customers had already risen to 338,

56 In 1H13, CAPEX stood at 55.8 million euros, a decrease of 2.6% compared with 1H12, remaining at normalised levels of around 15% of Pay TV, Broadband and Voice core revenue in 1H13. These recurring levels reflect the necessary investment in the network and maintenance and they also include some CAPEX related to growth. Total CAPEX as a percentage of Operating Revenue was 13.1% in 1H13. In summary, ZON has built a modern and independent Next Generation Network with sufficient capacity and flexibility to accommodate expected requirements for development of the business in the coming years and by means of which it can make the most advanced and innovative television and Internet services available to its customers. 4.5 ZON S FINANCIAL HISTORY The analysis presented below should be read in conjunction with the following financial statements of ZON (inserted into this Equivalent Document by reference in the terms described in 8.1 below), which may be consulted at the websites of the CMVM ( and of ZON ( (i) (ii) Annual individual and consolidated reports and accounts of ZON for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012, including reports and opinions of the Audit Committee, reports of the auditors, the legal certification of accounts and the notes to the financial statements; The publication of the consolidated results, subject to limited revision, relating to 1H13, presented by ZON on 24 July 2013; and (iii) Consolidated reports and accounts with reference to 30 June 2012 and 30 June 2013, including limited revision reports by the auditors, the legal revision of the accounts and the notes to the financial statements. 4.6 ANALYSIS OF ZON S OPERATIONS AND FINANCIAL SITUATION The analysis in this chapter is presented in millions of euros, except where there is an indication to the contrary, and was prepared from the financial information referred to above and made available by ZON on the respective website and on the website of the CMVM as mentioned above. The information on ZON in relation to the financial period covered by this Equivalent Document (financial years 2010, 2011 and 2012 and first halves of 2012 and 2013),

57 was based on the said ZON financial statements. These statements were subject to auditing in the case of the financial years 2010, 2011 and 2012 and to limited revision in the case of 1H12 and 1H13. The information was prepared in accordance with the International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ), as adopted in the European Union. For more information on the accounting policies adopted by ZON at the time of preparation of the financial information now being analysed, consult the notes to the consolidated financial statements for the said the periods, which are inserted here by reference. Certain values presented in this Equivalent Document, including financial and operational information presented in millions, were subject to rounding off and, as a result, the totals of the said values may vary slightly from the real mathematical totals for such information. The variations in financial and other data expressed as an amount and/or percentage are calculated using the numerical data from the financial statements included in this Equivalent Document or the presentation of other data in tables (subject to rounding off) contained in this Equivalent Document, as applicable, and not using the numerical data in the narrative description of the same

58 4.6.1 Evolution of the principal financial indicators (Millions of Euros) H / 2010 (4) Profit and Loss Statement Operating Revenues (0.8%) Pay TV, Broadband and Voice (2.0%) Audiovisuals (2.1%) Cinema (7.3%) International n.a. Others and Eliminations (48.0) (49.2) (50.8) (26.1) 3.0% Operating Costs Excluding D&A (570.0) (543.6) (545.7) (261.4) (2.2%) W&S (58.3) (59.3) (59.8) (27.0) 1.3% Direct Costs (251.7) (243.9) (243.4) (120.3) (1.7%) Commercial Costs (1) (74.8) (62.1) (66.0) (28.3) (6.1%) Other Operating Costs (185.1) (178.3) (176.5) (85.8) (2.4%) EBITDA (2) % EBITDA Margin 34.7% 36.4% 36.4% 38.5% 0.4pp Depreciation and Amortisation (219.6) (217.6) (214.6) (103.6) (1.1%) Income From Operations (3) % (Other Expenses) / Income (0.6) (1.0) (1.0) % Operating Profit (EBIT) % (Financial Expenses) / Income (28.2) (32.7) (42.4) (25.5) 22.6% Equity in Earnings of Affiliate Companies, Net (7.9) (10.3) (0.2) (0.2) (83.4%) Income Before Income Taxes % Income Taxes (9.3) (14.8) (18.0) (10.2) 38.7% Income From Continued Operations % o.w. Attributable to Non-Controlling Interests (1.3) (0.6) (0.9) (0.4) (19.7%) Net Income % (1) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold. (2) EBITDA = Income From Operations + Depreciation and Amortization. (3) Income From Operations = Income Before Financials and Income Taxes + work force reduction programme costs + impairment of goodwill + Losses/Gains on disposal of fixed assets + Other costs/income. (4) Yearly average growth rate. (Millions of Euros) H13 Balance Sheet Current Assets Non-current Assets 1, , , ,005.1 Total Assets 1, , , ,371.7 Current Liabilities Non-current Liabilities 1, Total Liabilities 1, , , ,164.6 Total Shareholders' Equity Total Liabilities and Shareholders' Equity 1, , , ,371.7 (Millions of Euros) H13 Other Financial Indicators CAPEX Free Cash Flow (47.8) Net Financial Debt Net Financial Debt / EBITDA 2.1x 2.0x 1.9x 1.9x

59 Between 2010 and 2012, ZON achieved a very positive performance in terms of its principal financial indicators and this revealed a significant capacity for resilience in terms of its revenue, growth and level of profitability. In this period, ZON managed to limit the decrease in its revenue to a yearly average of 0.8% and achieve growth in terms of EBITDA of a yearly average of 1.7%. This is the fruit of the resilience of revenue from its domestic business, the good performance of its international business and its financial discipline. This performance is even more impressive when one takes into consideration the situation in terms of competition and the global macroeconomic situation of the market in which ZON operates. The trend for ZON s net income was also relatively stable from 2010 to 2012, having grown at an average annual rate of 0.8% Operating Revenue ZON s Operating Revenue stood at million euros in 2012, representing an increase of 0.4% compared with In 2011, Operating Revenue registered a decrease of 2.0% compared with In 2012, revenue from Pay TV, Broadband and Voice fixed tariffs had a positive performance. However, overall revenue was adversely affected by the decrease of 13.4% in revenue from premium channels for the year and this led to overall operating revenue falling by 2.3% to million euros. Excluding the effect of the revenue premium from ARPU, in 2012, the core revenue from Pay TV, Broadband and Voice remained stable compared with The revenue from Pay TV, Broadband and Voice fell by 1.7% in 2011 in comparison with In 2012, the ARPU from cable subscribers, excluding the revenue from premium channels, increased by 1.3% compared with This reflected the greater stability of the customer base and the greater value of the service bundle proposals, principally through the increased penetration of IRIS. The Basic ARPU, excluding the effect of the lower level of revenue from subscription to premium channels, which is of an arbitrary nature, registered an annual decrease of 1.3% in 2012, as a result of the combination of the stability of the triple play services, the growth of RGUs, and the increase in subscription to top of the range IRIS bundles, with the dilution caused by entry level bundles. Excluding the impact of these offers at the lower end of the range, Basic ARPU grew marginally by 0.5%. The performance of triple play Basic ARPU in 2012 confirmed the resilience of these services to the challenging economic scenario. However, consumers have shown more cautious consumption patterns in relation to the more discretionary elements of their monthly bills. These include premium channels and this has led to the creation of greater pressure on this revenue

60 Revenue from ZON s Audiovisuals division registered a decrease of 3.3% in 2012 from 72.4 million euros to 70 million euros as it continued to be affected by the decrease in sales of home video, as well as by the reduction in revenue from the sale of rights to free-to-air channels. In 2011, revenue from the Audiovisuals division had shown a slight fall of 0.8%. Revenue from cinema exhibition fell by 10.8% in 2012 in relation to 2011, to 52.8 million euros, essentially reflecting the impact of the 10.6% reduction in the number of tickets sold. During 2011, revenue from cinema exhibition registered a fall of 3.7%. In 1H13, ZON registered a decrease of 0.8% in its revenue compared with 1H12, to 425 million euros. This performance was heavily influenced by the difficult macroeconomic environment in Portugal, which has a significant effect on revenue from premium channels EBITDA In 2012, EBITDA grew by 0.5% to million euros, maintaining the EBITDA margin (36.4%) compared with 2011, a year in which EBITDA grew by 2.9% compared with 2010, to million euros, representing a 1.7% growth in the EBITDA margin. EBITDA (million euros) and EBITDA Margins (%) The annual improvement in EBITDA in the context of major downturn in consumption underlines the strong focus on cost control and reduction. This has been achieved by efforts to guarantee greater efficiency in the costs structure and to the environment of lower customer turnover. Consolidated operating costs, excluding depreciation and amortisation, fell by 4.6% in 2011 and saw a marginal increase of 0.4% in In 1H13, ZON s consolidated EBITDA stood at million euros, representing a growth of 3.2% compared with 1H12. Also in 1H13, ZON s EBITDA margin stood at 38.5%, which represented a growth of 1.5 percentage points compared with 1H

61 Consolidated operating costs Consolidated operating costs registered marginal growth of 0.4% to million euros in However, these values are not directly comparable, due to the proportionate consolidation of the African joint venture, ZAP, from 1Q2012. Excluding the impact of the consolidation of ZAP, operating costs fell by 3.8% in Wages and salaries remained relatively stable at 59.8 million euros in 2012, in comparison with the 59.3 million euros registered in 2011, a year in which they had grown by 1.7% compared with Excluding the effect of the consolidation of ZAP, comparable wages and salaries fell by 3.5%. Direct costs stood at million euros in 2012, 0.2% below the value registered in Excluding the impact of the consolidation of ZAP, direct costs fell by 1.8% in Over the year, relevant savings were achieved in some contracts related to programming costs and also as a result of the continuation of the efforts to optimise use of the telecommunications infrastructure. In 2011, direct costs had fallen by 3.1% compared with After a significant decrease of 17% in commercial costs in 2011 compared with 2010, these costs increased in 2012 by 6.3% from Commercial costs, excluding the impact of the consolidation of ZAP, fell by 13.2% in 2012, as a result of a decrease in the level of commissions paid and marketing costs. Total costs commercial totals saw growth of 6.3% in 2012 and, excluding the impact of the consolidation of ZAP, commercial costs fell by 13.2%, continuing the trend seen in the previous year. The reduction in commercial costs between 2010 and 2012 in Portugal resulted from a more efficient use of sales channels and the less aggressive competitive and advertising environment, which led to lower levels of disconnections and costs related to sales. Other operating costs fell by 1.0% in 2012 compared with 2011, to million euros, after a fall of 3.7% in 2011 compared with Excluding the impact of the proportionate consolidation of ZAP, other operating costs fell by 3.4% in Significant savings were achieved in relevant areas of the domestic business, including support services, as a result of the implementation of various measures in terms of contact centres, maintenance and repairs and other general and administrative costs. In 1H13 a strict discipline of cost containment was maintained and the reduction was seen in the significant growth in ZON s EBITDA margin, which reached 38.5%

62 Net Income Net income of the ZON Group stood at 36.0 million euros in 2012, registering an increase of 5.3% and 1.7% for 2011 and 2010, respectively. In 2012 depreciation and amortisation stood at million euros, representing a decrease of 1.4% compared with 2011, when they had fallen by 0.9% compared with Depreciation and amortisation still remained at a relatively high level due to the significant cycle of accelerated CAPEX for the period Net financial expenses stood at 42.4 million euros in 2012, which represents an improvement of 1.4% in 2012 compared with Excluding the effect of the consolidation of ZAP, net financial expenses fell by 9.2 million euros and this is, in essence, explained by the increase in the average cost of financing. In 2011, net financial expenses stood at 43 million euros, an increase of 19.2% compared with Income taxes amounted 18.0 million euros in 2012, an increase of 21.6% compared with 2011 and that represented an effective tax rate of 32.8%. This value was slightly higher than the CIT rate of 29.5% due to non-recurrent effects that impacted the effective tax rate for In relation to 1H13, ZON achieved growth in its net income of 21.6% compared with the first half of the previous year and this was, to a great extent, the result of the growth in EBITDA seen in this period CAPEX As explained in Section 4.4 above, the level of CAPEX fell significantly in 2011 and In 2012, Total CAPEX stood at million euros, representing a fall of 17.9% compared with 2011 and it represented around 16.3% of the core revenue from Pay TV, Broadband and Voice in In 2011, Total CAPEX stood at million euros, a significant decrease of 39.6% compared to the value of million euros registered in In 1H13, Total CAPEX total stood at 55.8 million euros, a reduction of 2.6% compared with the same period of the previous year

63 Total CAPEX (Millions of Euros) Operating Cash Flow EBITDA-CAPEX increased by 17.6%, in 2012, to million euros, principally as a result of a reduction of 17.9% in CAPEX compared to the corresponding period, and to the slight annual growth of EBITDA. In 2011, EBITDA -CAPEX almost tripled to million euros, compared with a value of 54.3 million euros in Operating Cash Flow After Investment registered an annual increase of 25.9%, from million euros in 2011 to million euros in In 2012, the Non-Cash Items Included in EBITDA-CAPEX and Change in Working Capital made a positive contribution to Operating Cash Flow, standing at a negative value of 1.1 million euros, which compares with the negative value of 11.5 million euros registered in Free Cash Flow (FCF) In 2012, the Total FCF stood at million euros, representing more than double the amount generated in This increase was the result of the solid operational performance, cost discipline, the reduction in CAPEX to more normalised levels and a reduction in the annual payments related to long-term contracts. In 2011, the Total FCF stood at 51.5 million euros, which compares with a value of (47.8) million euros in In 1H13, Free Cash Flow total was 37.2 million euros, a reduction of 25.5% compared with the same period of the previous year

64 Capital Structure (Millions of Euros) H13 Net Financial Debt Short Term Bank and Other Loans Financial Leases Medium and Long Term Bank Loans Financial Leases Total Debt , Cash, Short Term Investments and Intercompany Loans Net Financial Debt Net Financial Gearing (1) 71.9% 73.1% 73.4% 74.5% Net Financial Debt / EBITDA 2.1x 2.0x 1.9x 1.9x (1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity). At the end of December 2011, ZON Group s Net Financial Debt stood at million euros, corresponding to a decrease of 2.2 million euros compared with the end of In turn, at the end of December 2012, Net Financial Debt stood at million euros, a decrease of 32.6 million euros compared with the end of The reduction in net debt was possible due to the strong generation of Free Cash Flow addressed above. As at 31 December 2012, ZON was fully financed up to the end of 2014, as the average maturity of its Net Financial Debt was 1.98 years. The total financial debt at the end of 2012 stood at million euros, which was offset with a cash and short-term investments position on the balance sheet of 353 million euros. The all-in average cost of ZON s Net Financial Debt was 5.67% in Net financial gearing increased slightly to 73.4% at the end of 2012 compared with 73.1% at the end of 2011, and the Net Financial Debt / EBITDA (last 4 quarters) ratio stood at 1.9x as at 31 December At the end of 1H13, net financial debt stood at million euros, a slight increase of 0.2 million euros compared with the end of

65 4.6.2 Interim financial information 1H12 and 1H13 (Millions of Euros) 1H12 1H13 1H13 / 1H12 Financial Highlights Operating Revenues (0.8%) Pay TV, Broadband and Voice Revenues (2.8%) EBITDA % EBITDA Margin 37.0% 38.5% 1.5pp Net Income % CAPEX (2.6%) Free Cash Flow (25.5%) The consolidated financial statements for the interim periods ended 30 June 2012 and 30 June 2013 were presented in accordance with the provisions of article 9 of CMVM Regulation no. 5/ STATUTORY AUDITING AND EXTERNAL AUDITING Identification of the statutory auditors and external auditors of ZON ZON s statutory auditors during the 2010 to 2012 three-year term, elected by the general meeting on the recommendation of the Audit Committee, are the following: Permanent: Oliveira, Reis & Associados SROC, with its registered office in Lisbon, at Avenida da Liberdade, no. 245, 8 A, B and C, registered with the Order of Statutory Auditors under no. 23 and registered at the CMVM under no. 329, represented by José Vieira dos Reis (ROC - no. 359); Alternate: Fernando Marques Oliveira (ROC no. 207). During the same period, PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda., with its registered office in Lisboa, at Palácio Sottomayor, in Rua Sousa Martins, no. 1, 3 rd floor, registered with the Order of Statutory Auditors under no. 183 and registered at the CMVM under no. 9077, performed the role of external auditor to ZON, and was represented by Abdul Nasser Abdul Sattar in the financial years ended 31 December 2011 and 31 December 2012, as well as in the half years ended 30 June 2012 and 30 June 2013, and by Ricardo Filipe de Frias Pinheiro in the financial year ended 31 December Auditing of the financial information The financial information for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012 was subject to auditing, under article 8 of the

66 Securities Code, done by PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. In turn, the financial information for the half years ended 30 June 2012 and 30 June 2013 was subject to limited revision, under article 8 of the Securities Code, also done by PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. 4.8 PERIOD COVERED BY AUDITED FINANCIAL INFORMATION The financial year ended 31 December 2012 was the last one for which ZON financial information - whether consolidated or individual - was actually audited. The financial information for the financial year 2012 was, therefore, subject to a report and opinion of the Audit Committee, to legal certification of the consolidated accounts prepared by the Oliveira, Reis Associados, SROC, Lda. and to an auditing report on the consolidated financial information prepared by PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. In turn, the report and consolidated accounts for the half years ended 30 June 2012 and 2013 were subject to a legal opinion / revision prepared by the Oliveira, Reis Associados, SROC, Lda. and to a limited revision report prepared by PricewaterhouseCoopers & Associados Sociedade de Revisores Oficiais de Contas, Lda. 4.9 SIGNIFICANT CHANGES IN ZON S FINANCIAL OR COMMERCIAL SITUATION There were no significant changes in the financial or commercial situation of the Issuer from the end of the last financial period in relation to which audited financial information was published (reported on 30 June 2013), besides those arising from the Merger and addressed in this Equivalent Document DEPENDENCE ON THE ENTITIES OF THE ZON GROUP As a holding company, ZON has not directly carried on any activity of an operational nature and, to meet the obligations it has assumed, it depends on the cash flows generated by the companies it holds. As a holding company ZON, had as its main assets, the shares representing the share capital of the companies it holds. ZON and, as of this date the Issuer, therefore depends on any distribution of dividends by the companies it holds, on the payment of interest, on the repayment of loans granted and on other cash flows generated by these companies

67 5. INFORMATION ON THE ACTIVITY AND FINANCIAL SITUATION OF OPTIMUS 5.1 INTRODUCTION At the end of 1H13, OPTIMUS, an integrated telecommunications operator, had 3.4 million mobile customers and 330,000 fixed voice customers - companies and individuals - with state-of-the-art solutions. Launched in 1998 after winning the third GSM licence in Portugal, OPTIMUS mobile business now offers a vast range of mobile communications services to residential and corporate customers, including traditional voice, data, mobile television services, and a broad set of mobile solutions and roaming services, as well as wholesale services to third parties. Through its fixed-mobile convergence product, OPTIMUS Home, the mobile broadband service, Kanguru, as well as its product aimed at a younger public, TAG (which allows free calls within the community), OPTIMUS has been consolidating its position in the Portuguese market, reaching a market share of subscribers of around 20% at the end of 1Q13, the date of the most recent public information reported by the Portuguese mobile operators. In terms of fixed communication activities, OPTIMUS has been present in both the residential and corporate markets, offering voice, data and television services. Fixed operations were introduced after liberalisation of the fixed communications market in Portugal in It was the subsidiary Novis Telecom, S.A. that carried on the activities in this segment until In 2007, Novis Telecom, S.A. was subject to a merger becoming part of Optimus Telecomunicações, S.A. and adopted the name Sonaecom Serviços de Comunicações, S.A. Also in 2007, OPTIMUS strengthened its fixed communication services by acquiring the Tele2 Portugal and the residential customer base and SoHo of one of its competitors. Some services shared between the fixed and mobile teams were created in 2001 with the objective of achieving synergies. Later, OPTIMUS was a pioneer in technical convergence when it merged the network infrastructure and the respective teams. As an alternative to the incumbent, and in anticipating the needs of the corporate and SME segment, OPTIMUS has presented fully integrated commercial and marketing teams, simultaneously providing mobile and fixed services in this segment. Following the Long Term Evolution ( LTE ) spectrum auction that took place at the end of 2011, OPTIMUS ensured an ideal spectrum combination in three bands: 800MHz,

68 1800MHz and 2600MHz. This made it possible to achieve maximum network efficiency and development. At the end of 1H13, 80% of the Portuguese population was already covered by OPTIMUS 4G network which had the widest coverage with debits up to 150Mbps 25, a fundamental step contributing to OPTIMUS leadership in the future of mobile data. OPTIMUS had, as at 31 December 2012, annual operating revenue of million euros, earnings before interest, taxes, depreciation and amortisation (EBITDA) of million euros and a mobile EBITDA margin of 43.1%, a benchmark in the universe of European mobile operators. At the end of 1H13, OPTIMUS operating revenue stood at million euros and EBITDA at million euros. The mobile EBITDA margin stood at 48.4%. To obtain more detailed financial information in relation to the evolution of OPTIMUS business, see Section OPTIMUS MAIN AREAS OF BUSINESS Personal mobile segment In this segment, OPTIMUS has been focused on its principal pillars of activity. Firstly, it is focused on increasing revenue per user by investing in 4G, smartphones, mobile Internet services and an ever greater range of tariffs that include data. Secondly, it is focused on creating and exploiting new growth opportunities in the postpaid (contract) universe and in cross-selling. Thirdly, it is focused on improving retention and value in essential prepaid products and developing the offer in the youth segment. Finally, it is developing a solid base in terms of value and loyalty management, putting renewed emphasis on the quality of the customer experience G OPTIMUS launched its 4G services in March Since then, OPTIMUS has developed its strategy in order to increase data use, contributing to an ever richer customer experience. Over the last year, a growing number of 4G smartphones were made available and new prepaid and postpaid (contract) offers were launched. 25 Source: Sonaecom Consolidated Results Document for 1Q

69 SMART Given the high level of prepaid penetration in Portugal, postpaid (contract) solutions area a relevant area for growth, and one in which OPTIMUS has invested by offering unlimited voice tariffs to all mobile networks, data bundles and a competitive range of smartphones. This value proposal currently includes 1 GB per month of broadband, making more intensive use of Internet and applications possible Mobile Internet Mobile Internet services continue to grow rapidly, both in terms of adoption and revenue. This growth has been achieved with products that already include data bundles as part of their value proposal and by means of increasing the penetration of smartphones and other data devices. Besides this, significant advances have been made in order to improve the mobile Internet user experience, and this has had a positive impact in terms of service retention TAG In 2012, in the context of the commemorations of the 4 th anniversary of the launch of TAG, various campaigns were launched aimed at increasing customer satisfaction, retention and acquisition on the basis of recommendation. These and other campaigns have made a significant contribution to increasing retention levels. To increase the youth segment, OPTIMUS launched specific value proposals: "TAG<25" for the under-25 segment and "TAG First" for the under-13 segment, thus developing specific approaches for each age group Prepaid products Throughout 2012, OPTIMUS carried out a large number of initiatives aimed at improving its position in this market, improving communication and its presence in the POP discount segment, developing a new technical platform for fixed monthly payment products and exploring options to generate value in products with no top up requirements and in migrations between products. After the end of 1H13, OPTIMUS launched OPTIMUS Liga, a prepaid tariff that allows you to speak to any national mobile or fixed network, with 100 minutes of talk time, SMSs or MMSs, for 9.90 euros a month

70 Smartphones Throughout 2012 and in 1H13, various differentiation campaigns were launched based on smartphones, including the unlocked phones campaign. In portfolio management, OPTIMUS carried out a number of improvements in terms of management of the lifecycle of the product, the selection of products and inventory management. These improvements resulted in a more efficient supply process, reduction in stocks and optimised investment OPTIMUS Kanguru 2012 saw a turning point in mobile broadband. If, on the one hand, there was a downturn in demand for this type of access in 2011 following the end of the e-initiatives programme, on the other hand, the start of the roll out of 4G technology made it possible to give high-speed connectivity to Internet consumers in Portugal. Despite this, in 2012 the evolution of the customer base was conditioned by a significant erosion of the customer base coming from the e-initiatives programme, as well as by the prevailing macroeconomic environment in Portugal. However, it should be noted that there have been no repercussions in terms of unit revenue, which has remained stable over the year, reflecting strong stability in the mix of tariffs that make up the customer base. By way of summary, three important aspects that best demonstrate the activity of Optimus Kanguru are worthy of mention: (i) the launch of 4G, (ii) the investment in traffic sharing equipment and (iii) the focus on the whole customer experience Fixed Residential Segment In this segment, OPTIMUS has been making bundles available including TV, fixed voice and fixed broadband services. In 2012, OPTIMUS main objective was to broaden its Fibre to the Home ( FTTH ) customer base and to manage its Unbundled Local Loop ( ULL ) customer base. At the end of 2012, the OPTIMUS fibre offer was present in around 400,000 Homes Passed, in the more densely populated areas of the country. This provides a superior quality TV experience: a complete selection with more than 150 channels with digital quality that includes the Portuguese and international channels with the largest audience

71 In 2012, OPTIMUS FTTH customer base saw a two digit increase compared with the previous year, largely because of the commercial effort in the areas of coverage. However, this movement did not compensate for the reduction in the ULL customer base, for which customer acquisition ended in To promote mobility and availability of content in any place, 2012 was a year of great improvements for the OPTIMUS Clix Mobile TV service. The service was extended from mobile devices to tablets and PCs, becoming a true multiscreen and multi-device experience. At the same time, the TV experience is already available on any device, not only with3g/4g, but also via Wi-Fi. In April 2013, OPTIMUS launched wow, an innovative double-play product based on 4G technology aimed at the residential market. This product offers unlimited fixed voice and unlimited broadband traffic and is a simple and instant solution which only depends on a single electrical socket to work Corporate Segment OPTIMUS Corporate has been positioning itself as a supplier of integrated solutions, providing an integrated, convergent and technologically advanced portfolio of products and services that is capable of delivering maximum value to its customers. OPTIMUS principal objective has been to be the best communications operator for large companies in Portugal, leading corporate market convergence with a global offer. In more demanding segments of the market, as is the case of the large companies and public administration segment, OPTIMUS has grown consistently through integrated offers and a growing base of converging customers (that is, customers that subscribe to both mobile services and fixed services), registering around 45% of converging customers at the end of In this segment, OPTIMUS has been able to deliver high quality, robust, complex telephony and data solutions, increasing the solidity and potential of its partnerships and achieving growing levels of commercial productivity. In less than three years, OPTIMUS has doubled the number of circuits and equipment under its management and was a pioneer in flagship Private Branch Exchange ( PBX ) virtualisation projects, in data networks and in network management (of which Wi-Fi is an example). 26 Source: OPTIMUS Consolidated Results Document for

72 5.2.4 SME Segment The integrated and convergent approach to the needs of companies under a single brand with dedicated teams and with fully convergent state-of-the-art network architecture, has enabled OPTIMUS to lead consistently in the movement of Portuguese companies to integrated and converging solutions, which are more efficient and lead to greater productivity, and are also effective sources of added value for their businesses. At the end of 2012, 42.8% of the business customer base already had integrated fixedmobile offers with OPTIMUS, a very significant growth when compared with the 29.2% for The success registered in the offer of integrated and converging solutions was also due to heavy leverage of its own infrastructure (fibre, 2G and 3G mobile and, more recently, 4G), resulting from the integration of the network architecture. In 2012, 40% of the base and 60% of the acquisition for fixed business was already done on its own infrastructure, with significant improvements in the quality of delivery and service, and with an important impact on the fixed business profitability margin Wholesale Segment OPTIMUS Wholesale has sought to maximise the value of one of OPTIMUS most important assets: the network. Making an extensive portfolio of voice communications, broadband and data services available to fixed and mobile operators, OPTIMUS Wholesale has been meeting the needs of global communications suppliers. With this objective, OPTIMUS has consistently been establishing relationships with a range of commercial partners, in particular, international partners, as well as carrying out a number of initiatives to supply its customers with different and innovative solutions tailored to their specific needs. Despite the regulatory pressure on termination and roaming, in 2012 and during 1H13, it was possible to reach record levels of traffic and make an important contribution to OPTIMUS growth in the fixed market for the first time since It is also important to highlight the partnerships with Tier 1 operators and the launch of its first MVNO, as well as the objectives achieved by OPTIMUS in the Machine To Machine ( M2M ) segment. 27 Source: OPTIMUS Consolidated Results Document for

73 5.2.6 Network Modernisation of platforms (2G and 3G) In 2012, OPTIMUS completed the process of modernising access to the 2G and 3G network. This led to a significant reduction in the cost of ownership, to a substantial reduction in levels of energy consumption and to considerable improvements in the performance and capacity of the radio network. In general, the new equipment installed has led to a significant increase in 2G and 3G traffic, providing new radio functionalities and an improvement in quality which will ultimately improve the experience of the customer and lead to a reduction in the network s carbon footprint Optimisation of energy and site leases In line with the sustainability plan outlined, OPTIMUS reviewed its energy supply contracts, seeking to achieve a reduction in consumption, as well as new electricity tariffs. It made a considerable effort to renegotiate the leases of spaces/sites, having reviewed existing contracts and negotiated special agreements with the owners of the sites. Together with other energy conservation initiatives in respect of radio equipment, OPTIMUS implemented energy saving functionalities with very positive results Migration of IP and own transport network Throughout 2012, OPTIMUS continued to install its fibre and high capacity microwave network, replacing rented connections and investing more in own transport/access networks. Thanks to the modernisation of the 2G and 3G network and to the introduction of the LTE, the IP migration was broadened and this made it possible to leverage important synergies and supply connectivity solutions for the three technologies using a single transport tool. Besides using fibre as a natural solution for LTE in urban and suburban areas, OPTIMUS also updated its high-capacity microwave network in order to support LTE requirements, especially in rural areas. It increased capacity but minimised spectrum licensing costs. Significant developments in the design and footprint of the OPTIMUS packet-backhaul network were concluded and the metro Ethernet network was extended. At the end of 2012, OPTIMUS was the owner of infrastructure compatible with Gbps at a large number of mobile sites. This will enable it to meet that challenges in terms of capacity that it will face over the coming years

74 5.2.7 Customer Service In 2011, OPTIMUS redefined its service strategy on the basis of a single principle - Make it Easier to simplify the contact process to the maximum extent possible in order to achieve customer satisfaction. Following this strategy significant steps were already taken in 2012 to restructure the operational model, taking action in respect of teams, processes and systems. The awards achieved, such as Best Customer Service - EMEA won in July 2013 for the third consecutive year and the Best Customer Service in the World award won in 2012, both awarded by Contact Center World, have proved that OPTIMUS is on the right path in terms of the quality of its services. Contact Center World The Global Association for Contact Center Best Practices & Networking annually honours the companies that stand out in all industries in the sector on a global level Voice of the Customer as a starting point for operational improvements The Voice of the Customer programme was launched in 2011 and its objective is to gather feedback from customers in relation to service processes and, thus, guarantee that the continuous actions to improve operations take the customer s point of view into account. The key indicator Customer Effort Score ( CES ) was included with the aim of sustaining OPTIMUS strategy of service to the customer. An integrated monitoring system was implemented in 2012 and it combines operational indicators and indicators of the Voice of the Customer programme. This integrated monitoring system is the basis for the Continuous Improvement Cycles ( CIC ), which are intended to achieve a structured improvement in operations focused on the customer. As a consequence, the CES indicator registered a fall of 5% Revision of processes from the moment of contact with the customer To give greater consistency to service delivery, OPTIMUS began an exhaustive revision of its processes from the moment of contact. Step-by-step guides were designed to simplify the resolution process for assistants, to improve the quality of information made available to customers and to promote next issue avoidance. Initially conceived for the telephone support channel, this initiative made it possible to evaluate the processes in the different contact channels and, as a result, to increase the overall consistency of the service experience provided to customers. Throughout 2012, the first-call resolution rate reached 94%. New multidisciplinary teams were set up that centralise a broad set of technical and procedural areas and which are fully focused on resolution quality. This change in

75 organisation made it possible to significantly improve the quality of complaint resolution and ensure a faster response to customers. As a consequence, the rate of repeat complaints fell by 5% and resolution time by 31%. OPTIMUS continued to make efforts to reduce the number of applications it has made available to customer support service assistants to manage interaction with customers. One of the most significant results was the integration of the principal applications into a single one, which brings together a set of relevant information on the customer, including their personal information, the history of contacts through different channels, the portfolio of services subscribed and the payment profile. Making this integrated view available to the assistants enables them to see the customer s context in advance and this makes the interaction experience at the moment of contact easier Promotion of customer autonomy through self-servicing In 2012, OPTIMUS launched the converging customers area, which makes it possible to manage the different services subscribed by the customer in an integrated way through a single login. This new area provides the previous functionalities with a user experience that is improved in terms the presentation of information, navigation and usability. Using the Voice of the Customer programme, OPTIMUS continued to identify opportunities for improvement in terms of navigation and the quality of content and to consider the inclusion of new relevant functionalities. The growing need for easy access to information combined with the increase in the use of smartphones led OPTIMUS to design and implement mobile customer support applications for the private and business segments. By means of the OPTIMUS Customer application, customers are able to manage their accounts in a convenient way - monitoring use of voice and data services, controlling top ups or payment of bills and checking or altering tariffs wherever and whenever it suits them best

76 5.3 SUMMARY OF THE OPTIMUS OPERATIONAL PERFORMANCE AS AT 30 JUNE 2013 OPTIMUS MOBILE H / H13 / 1H12 Customers (EOP) ('000) 3, , , ,434.6 (1.0%) (3.7%) Pre-paid Customers ('000) 2, , , ,283.7 (1.6%) (3.4%) Post-paid Customers ('000) 1, , , , % (4.1%) Net Additions ('000) (70.7) (134.0) % Data as % Service Revenues 30.6% 32.5% 31.8% 31.7% 1.1pp (0.4)pp Non SMS Data as % Data Revenues 75.1% 76.0% 76.3% 79.4% 1.2pp 2.9pp Total #SMS/month/user (12.6%) (5.1%) MOU (1) (min.) (8.0%) (0.8%) ARPU (2) (euros) (12.4%) (7.3%) Customer Monthly Bill (7.4%) (4.0%) Interconnection (38.1%) (32.0%) ARPM (3) (euros) (4.8%) (6.6%) OPTIMUS WIRELINE Total Accesses 417, , , ,281 (19.7%) (4.3%) Corporate and SMEs 151, , , , % 3.3% PTSN/RDIS 107, , , , % 4.9% Broadband 37,366 34,681 30,998 30,039 (17.0%) (7.5%) Other & Data 6,735 10,125 12,676 13, % 17.8% Residential 265, , , ,013 (33.6%) (10.2%) PTSN/RDIS 131, ,254 72,505 69,585 (45.0%) (21.1%) Broadband 102,924 81,654 67,542 70,678 (34.4%) (4.8%) TV 31,118 35,469 36,420 38, % 4.9% Average Revenue per Access - Retail (4.8%) (4.2%) (1) Minutes of use per customer per month; (2) Average monthly revenue per user; (3) Average revenue per minute. 5.4 PRINCIPAL INVESTMENTS Between 2010 and 2012, the Total CAPEX made by OPTIMUS stood at million euros. In the same period, Operating CAPEX amounted to million euros, with million euros relating to 2010, million euros relating to 2011 and million euros relating to In 2010, OPTIMUS concentrated its investment on the expansion and coverage of the mobile network, having adopted a capital light positioning in the fixed business. This investment was centred on seeking alternative ways to expand OPTIMUS in terms of fibre coverage without additional investments. Throughout 2011, OPTIMUS focused on the development of projects that would make it possible to reduce backhaul costs in the mobile business, as well as to reduce dependence on third-party infrastructure. In November 2011, following the 4G spectrum auction that had taken place in Portugal, OPTIMUS acquired spectrum for 113 million euros (corresponding to an updated net

77 value of million euros). OPTIMUS acquired a total of 9 lots in three frequency bands: 2 lots of 2x5MHz in the 800MHz band, 2 lots of 2x5MHz and 1 lot of 2x4MHz in the 1800MHz band and 4 lots of 2x5MHz in the 2.6GHz band. Between 2011 and 2012, the OPTIMUS Operating CAPEX fell by 45%. However, excluding the investment related to the acquisition of 4G spectrum, Operating CAPEX increased by 3.8% in the same period. This increase was the result of the development of the 4G network in the mobile business, where the objective initially set for the year was exceeded and OPTIMUS ended 2012 with a coverage level of 80% (of the Portuguese population). In the context of OPTIMUS adoption of solutions that make it possible to optimise mobile operation costs, reducing dependence on rented infrastructures, an effort that continued throughout 2012, OPTIMUS ended 2012 with 80% of its sites connected by its own infrastructure, using fibre in areas of greater density and microwave in rural areas. NOTE: Operating CAPEX for 2011 includes an investment of million euros related to the acquisition of 4G spectrum that took place in November At the end of 1H13, OPTIMUS Operating CAPEX stood at 49.4 million euros, of which 39.3 million euros relate to mobile business and 10.1 million euros to fixed business. In the same period of 2012, Operating CAPEX was 58.8 million euros. It should be noted that, following the investment effort carried out up to the end of 2012, OPTIMUS Operating CAPEX is now at normal levels. 5.5 OPTIMUS FINANCIAL HISTORY The OPTIMUS historical financial information presented below can be found in the following Annexes to this Equivalent Document: (i) Individual annual reports and accounts of OPTIMUS for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012,

78 including the report and opinion of the sole auditor, the legal certification of accounts and the notes to the financial statements (Annexes I to III); (ii) (iii) Pro forma consolidated annual report and accounts of OPTIMUS relating to the financial year ended 31 December 2012 (with the respective comparisons to 31 December 2011), including opinions of the auditors and the notes to the financial statements (Annex IV); and Individual and pro forma consolidated reports and accounts of OPTIMUS relating to the half year end 30 June 2013 (with the respective comparisons to 30 June 2012), including notes to the financial statements and the simplified examination report by the auditor in relation to the half year ended 30 June 2013 (Annexes V and VI). The said documents annexed to this Equivalent Document contain the information available on OPTIMUS as at their respective dates and their publication as annexes to this Equivalent Document does not, under any circumstances, means that there have not been any changes in the businesses of OPTIMUS since the respective reference date or that the information is correct at any moment subsequent to this date. 5.6 ANALYSIS OF OPTIMUS OPERATIONS AND FINANCIAL SITUATION The analysis presented below should be read in conjunction with the financial statements of OPTIMUS, including balance sheets, income statements and respective notes, and annexes to this Equivalent Document. The analysis carried out in this chapter is presented in millions of euros, except when the contrary is indicated. The information on OPTIMUS in relation to the financial period covered by this Equivalent Document (financial years 2010, 2011 and 2012, and 1H12 and 1H13) was prepared in accordance with the International Financial Reporting Standards (IFRS/IAS) issued by the International Accounting Standards Board ( IASB ), as adopted by the European Union. The pro forma consolidated financial information of OPTIMUS in relation to the financial year 2012 was prepared on the assumption that the structure of the OPTIMUS Group on 1 January 2010 and 2011 corresponded to the structure of the OPTIMUS Group on 31 December 2012, and this was reflected in the calculation of the goodwill on those dates. Additionally, on 31 December 2010 and 201, OPTIMUS considered the accounting policies and the measurement criteria adopted on 31 December

79 As already mentioned, the pro forma consolidated financial information of OPTIMUS in relation to 1H13 was prepared on the assumption that the structure of the OPTIMUS Group on 30 June 2013 corresponded to the structure of the OPTIMUS Group on 31 December 2012, and this was reflected in the calculation of the goodwill on that date. Additionally, also on 30 June 2012, OPTIMUS considered the accounting policies and the measurement criteria adopted on 31 December For more information on the accounting policies adopted by OPTIMUS at the time of preparation of the financial information now subject to analysis, consult the notes to the said financial information contained in the annexes to this document. Certain values presented in this Equivalent Document, including financial and operational information presented in millions, were subject to rounding off and, as a result, the totals of the said values may vary slightly from the real mathematical totals for such information. Any variations in financial and other data expressed in an amount and/or a percentage are calculated using the numerical data from the financial statements included in this Equivalent Document or the presentation in tables of other data (subject to rounding off) contained in this Equivalent Document, as applicable, and not using the numerical data in the narrative description of the same

80 5.6.1 Evolution of the principal financial indicators of OPTIMUS Million euros H / 2010 INCOME STATEMENT Turnover (7.7)% Service Revenues (7.6)% Customer Revenues (9.6)% Operating Revenues (0.1)% Equipment Sales (8.0)% Other Revenues % Operating Costs (15.4)% Personnel Costs (13.9)% Direct Servicing Costs (1) (14.0)% Commercial Costs (2) (22.7)% Other Operating Costs (3) (13.3)% EBITDA % EBITDA Margin 27.1% 30.7% 33.7% 35.5% 6.5pp Depreciation & Amortisation (3.0)% EBIT % Net Financial Results (9.7) (9.1) (11.3) (11.6) 17.0% Financial Income % Financial Expenses % EBT % Tax Results (13.2) (7.7) (3.5) (6.3) (73.5)% Net Results % (1) Direct Servicing Costs = Interconnection and Content + Leased Lines + Other Network Operating Costs; (2) Commercial Costs = COGS + M ktg & Sales Costs; (3) Other Operating Costs = Outsourcing Services + G&A + Provisions + others

81 Million euros H / 2011 CONSOLIDATED BALANCE SHEET Total Net Assets 1, , ,828.2 (4.2)% Non Current Assets 1, , ,585.6 (0.8)% Tangible and Intangible Assets (1.3)% Goodwill % Deferred Tax Assets (3.6)% Others Current Assets (21.8)% Trade Debtors (2.4)% Liquidity (66.4)% Others % Shareholder's Funds 1, , ,056.7 (0.9)% Total Liabilities (8.1)% Non Current Liabilities (14.4)% Loans (12.6)% Provisions for Other Liabilities and Charges (15.0)% Others (22.5)% Current Liabilities (0.4)% Loans Trade Creditors (0.9)% Others (43.6)% Operating CAPEX (1) (45.0)% Operating CAPEX as % of Turnover 31.1% 17.9% 14.4% (1319.0)% Total CAPEX (44.6)% EBITDA - Operating CAPEX (2.8) Operating Cash Flow (2) 83.3 (3.2) 15.7 (103.9)% FCF (3) 55.4 (29.1) (6.0) (152.6)% Gross Debt % Net Debt % Net Debt / EBITDA last 12 months 1.2x 1.7x 1.8x 0.5x EBITDA / Interest Expenses (4) last 12 months 16.7x 17.5x 11.3x 0.8x Debt / (Debt + Shareholders' Funds) 26.4% 29.6% 29.7% 3.2pp (1) Operating CAPEX excludes Financial Investments; (2) Operating CashFlow =EBITDA - Operating CAPEX - Change inwc - NonCashItem & Other; (3) FCF Levered after Financial Expenses but before Capital Flows and Financing related up-front Costs; (4) Interest Cover. Between 2010 and 2012, the principal financial indicators of OPTIMUS saw positive evolution and OPTIMUS operational profitability is particularly worthy of note. Due to the on-going transversal efficiency programme, which is clearly reflected in the main lines of the company s operating costs, OPTIMUS EBITDA increased by 14.6% between 2010 and 2012, to million euros, reaching an EBITDA margin of almost 34% in This performance assumes even greater importance given the Portuguese macroeconomic environment

82 Turnover In 2012, consolidated turnover reached million euros, in other words, 7.7% lower than in This evolution was caused by the 7.6% decrease in service revenue and by the 8.0% reduction in equipment sales. OPTIMUS evolution has been affected by Portugal s environment of austerity, which continues to have a negative impact on consumption levels, and by regulated tariffs (mobile termination and roaming tariffs). In 1H13, OPTIMUS turnover registered a fall of 3.9% compared with the equivalent period of the year before. This performance is justified by the impact of regulated tariffs (mobile termination and roaming tariffs) and by the environment of austerity existing in Portugal which continues to have negative effects on consumption EBITDA