eircom Holdings (Ireland) Limited Third quarter and nine months unaudited results 31 March 2017

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1 Third quarter and nine months unaudited results 31 March 2017

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7 Unaudited third quarter and nine months results to 31 March 2017 Table of contents Page(s) Trading highlights for the third quarter ended 31 March KPIs for the third quarter ended 31 March Trading highlights for the nine months ended 31 March KPIs for the nine months ended 31 March Reconciliation of statutory financial statements to the results presented in the 12 management discussion and analysis section within this quarterly document Reconciliation of EBITDA to operating profit for the quarter and nine months ended 31 March Consolidated Income statement for the quarter ended 31 March Consolidated Income statement for the nine months ended 31 March Group statement of comprehensive Income for the quarter ended 31 March Consolidated balance sheet as at 31 March Consolidated cash flow statement for the quarter ended 31 March Consolidated cash flow statement for the nine months ended 31 March Consolidated statement of changes in shareholders equity for the nine months ended 31 March Selected notes to the condensed interim financial information for the period ended 31 March Commentary on results of operations for the quarter ended 31 March Commentary on results of operations for the nine months ended 31 March

8 Trading highlights for the third quarter ended 31 March 2017* Underlying revenue of 325 million (which excludes the impact of reductions in Mobile Termination Rate ( MTR ) and foreign exchange ( FX ) movements) increased by 4 million or 1% year on year. Reported group revenue of 319 million was stable compared to the corresponding prior year quarter. Group adjusted EBITDA 3 of 131 million was 11 million or 10% higher than the corresponding prior year quarter. Excluding the exceptional prior year storm costs of 5 million, Group adjusted EBITDA growth was 6 million or 5%. Reported fixed line revenue, before intra-company eliminations, of 246 million increased by 1% compared to the corresponding prior year period reflecting the growth in broadband, managed services, TV and bundling of eir sport services. Excluding the impact of MTR reductions and FX movements, fixed line revenue was 249 million, an increase of 2% compared to the corresponding prior year period. Fixed line adjusted EBITDA of 111 million, increased by 10% compared to the corresponding prior year quarter. Excluding the exceptional prior year storm costs, fixed line adjusted EBITDA growth was 5%. Group fixed access paths increased by 11,000 compared to the prior year and were broadly flat quarter on quarter. Growth in standalone broadband of 50,000 more than offset a reduction in fixed line access net losses of 39, The Group broadband customer base 5 stood at 890,000 at 31 March 2017, an increase of 10,000 in the quarter and 54,000 compared to the corresponding prior year period. The retail customer base remained broadly stable while the wholesale base increased by 10,000 in the quarter. At 31 March 2017, there were 530,000 customers availing of our new fibre based high speed broadband services, an increase of 136,000 compared to the corresponding prior year period. Reported mobile revenue of 81 million reduced by 7% compared to the prior year quarter, the reduction due mainly to a reduction in ARPU attributable to MTR price reductions plus increased promotional and bundling discounts. Excluding the impact of MTR reductions, mobile revenue was 86 million and in line with the corresponding prior year period. Mobile EBITDA of 20 million was 2million or 8% higher than the corresponding prior year quarter. Total mobile customers at the end of the quarter were1,065,000 6, including 514,000 postpay customers and 551,000 prepay customers. The postpay customer base increased by 6,000 in the quarter and 11,000 year on year bringing the number of customers on postpay contracts to 48%. The prepay reduced by 15,000 in the quarter and 24,000 year on year due to continued migrations to postpay as well as seasonal factors. Group operating costs 7 of 123 million, reduced by 11 million or 7% compared to the corresponding prior year quarter. Excluding the exceptional prior year storm costs, operating costs reduced by 4%. Total Full Time Equivalent (FTE) staff at the end of March were 3,296, a reduction of 112 FTE compared to the corresponding prior year quarter. Despite continued high levels of capital investment, the Group maintains strong liquidity with cash on hand of 100 million at 31 March *The figures presented above include amounts relating to the Groups 56% share in Tetra Ireland Communication Limited ( Tetra ). Following the adoption of IFRS 11, Joint Arrangements, Tetra is reported in the financial statements under the equity method as opposed to proportionate consolidation. The management discussion and analysis section of this quarterly report presents results on a management accounting basis and therefore includes the results of the Group s joint ventures on a proportionate basis, reflected in Group revenue, operating costs and EBITDA. 3 Adjusted EBITDA is earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, and non-cash pension charges and exceptional items. 4 Combined retail and wholesale access line losses including LLU 5 Combined retail and wholesale excluding LLU and line share, including SABB 6 Mobile base is a combination of handset subscriptions and mobile broadband subscriptions 7 Operating costs are pay and non pay costs before non-cash pension charge and lease fair value credits 8

9 KPIs for the third quarter ended 31 March 2017 (unaudited) As at and for quarter ended As at and for quarter ended 31 Mar Mar 2017 Better/ (Worse) % N1 Access Paths Base ('000) Retail Access Lines (5%) Retail SABB* (8%) Wholesale Access lines % Wholesale SABB* % Wholesale LLU** 11 9 (14%) Total 1,347 1,358 1% Net increase in quarter 5 (0) Retail Voice traffic (m minutes in quarter) (14%) Broadband Lines ('000) Retail (1%) Wholesale % Total % Net Growth in quarter Mobile Customers ('000) Prepaid handsets (4%) Prepaid MBB 10 7 (37%) Total prepaid base (4%) Postpaid handsets % Postpaid MBB % Total postpaid base % Total 1,078 1,065 (1% ) Net Mobile additions/(losses) in quarter ('000) Prepaid base (16) (15) Postpaid base 3 6 Total base movement (13) (9) N2 & N3 ARPU'S Consumer Blended ARPU % WLR PSTN ARPU (11%) Bitstream ARPU (including SABB) % Prepaid ARPU (including MBB post MTR) (10%) Postpaid ARPU (including MBB post MTR) (8%) Prepaid ARPU (including MBB before MTR) (1%) Postpaid ARPU (including MBB before MTR) (2%) Closing Headcount 3,408 3,296 (3% ) *SABB - Standalone Broadband **LLU - Local Loop Unbundled 9

10 Trading highlights for the nine months ended 31 March 2017* Underlying revenue, of 991 million (which excludes the impact of reductions in Mobile Termination Rates ( MTR ) and foreign exchange ( FX ) movements) increased by 17 million or 2% year on year. Reported group revenue of 976 million increased by 2 million compared to the corresponding prior year period. Group adjusted EBITDA 8 of 374 million increased by 17 million or 5% compared to the corresponding prior year period. Reported fixed line revenue, before intra-company eliminations, of 746 million increased by 2% compared to the nine months ended 31 March 2016, reflecting growth in broadband, managed services, TV partially offset by reductions in the retail access base. Excluding the impact of MTR reductions and FX movements, fixed line revenue was 753 million and increased by 3% compared to the corresponding prior year period. Fixed line adjusted EBITDA of 329 million, increased by 17 million or 6% compared to the corresponding prior year period. Excluding the impact of the exceptional storm costs of the prior year, EBITDA increased by 12 million or 4%. Group access paths increased by 8,000 for the nine months ended 31 March Growth in standalone broadband of 42,000 more than offset a reduction in fixed line access net losses of 34,000 9 (primarily driven by retail access net losses). The Group broadband customer base 10 was 890,000 at 31 March 2017, an increase of 36,000 compared to 30 June 2016 which was driven by wholesale connections of 40,000 and partially offset by a reduction in retail lines of 4,000. At 31 March 2017, there were 530,000 customers using our fibre based high speed broadband services, representing a 60% penetration of the Group broadband base, up 13 percentage points compared to the corresponding prior year period. Reported mobile revenue of 257 million for the nine months to March 2017, reduced by 5% compared to the corresponding prior year period, the reduction was mainly due to the impact of MTR reductions plus increased promotional and bundling discounts. Excluding the impact of MTR reductions, mobile revenue was 270 million a reduction of 1% or 2 million compared to the corresponding prior year period. Mobile EBITDA of 45 million remained broadly flat compared to the nine months ended 31 March Total Mobile customers 11 of 1,065,000 as of 31 March 2017 were down by 13,000 compared to the corresponding prior year period. However, the mix of customers continues to improve and the postpay base increased by 11,000 or 2% compared to the corresponding prior year period - 48% of the overall customer base are now on postpay contracts, up from 47% in the prior year. The prepay base declined by 24,000 or 4%. Group operating costs 12 of 379 million were 18 million or 5% lower than the corresponding prior year period. Excluding exceptional storm costs, group operating costs12 were 3% lower than the corresponding prior year period. Total Full Time Equivalent (FTE) staff was 3,296 at 31 March 2017 which represented a reduction of 112 FTE compared to the corresponding prior year period. Despite continued high levels of capital investment, the Group maintains strong liquidity with cash on hand of 100 million at 31 March *The figures presented above include amounts relating to the Groups 56% share in Tetra Ireland Communication Limited ( Tetra ). Following the adoption of IFRS 11, Joint Arrangements, Tetra is reported in the financial statements under the equity method as opposed to proportionate consolidation. The management discussion and analysis section of this quarterly report presents results on a management accounting basis and therefore includes the results of the Group s joint ventures on a proportionate basis, reflected in Group revenue, operating costs and EBITDA. 8 Adjusted EBITDA is earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, non-cash pension charges and exceptional items. 9 Combined Retail and Wholesale access line losses including LLU 10 Combined Retail and Wholesale excluding LLU and line share, including SABB 11 Mobile base is a combination of Handset subscriptions and Mobile Broadband subscriptions 12 Operating costs include pay and non pay costs - excludes non cash pension charge and non-cash lease fair value credits 10

11 KPIs for the nine months ended 31 March 2017 (unaudited) As at and for nine months ended As at and for the nine months ended 31 Mar Mar 2017 Better/ (Worse) % N1 Group Access Paths Base ('000) Retail Access Lines (5%) Retail SABB* (8%) Wholesale Access Lines % Wholesale SABB* % Wholesale LLU** 11 9 (14%) Total 1,347 1,358 1% Net increase year to date 9 8 Retail Voice traffic (m minutes year to date) 1,299 1,120 (14%) Broadband Lines ('000) Retail (1%) Wholesale % Total % Net Growth year to date Mobile Customers ('000) Prepay handsets (4%) Prepaid MBB 10 7 (37%) Total prepaid customer base (4%) Postpay handsets % Postpaid MBB % Total postpaid customer base % Total 1,078 1,065 (1% ) Net Mobile additions/(losses) ('000) Prepaid (33) (10) Postpaid Total base movement (5) 6 N2 & N3 ARPU'S Consumer Blended ARPU % WLR PSTN ARPU (12%) Bitstream ARPU (including SABB) % Prepaid ARPU (including MBB) (5%) Postpaid ARPU (including MBB) (8%) Prepaid ARPU (including MBB before MTR) % Postpaid ARPU (including MBB before MTR) (4%) Closing Headcount 3,408 3,296 3% *SABB - Standalone Broadband **LLU - Local Loop Unbundled 11

12 Basis of preparation This financial information has been prepared to make available certain unaudited condensed consolidated financial information to the holders of the group's Senior Secured Notes. Accordingly, the group has not prepared this financial information in accordance with IAS 34 Interim Financial Information and has not carried out an impairment review of the carrying value of goodwill and other non-current assets as at 31 March This condensed interim financial information has been prepared on the going concern basis, which assumes that eircom Holdings (Ireland) Limited will continue in operational existence for the foreseeable future. The financial information, as at and for the period ended 31 March 2017, in respect of the group has been prepared using the same accounting policies as applied for the year ended 30 June For a more complete discussion of our significant accounting policies and other information, including our critical accounting judgements and estimates, this report should be read in conjunction with the financial statements of EHIL for the year ended 30 June Reconciliation of statutory financial statements 1 to the results presented in the management discussion and analysis section within this quarterly document In the quarter ended 31 March 2016 In the quarter ended 31 March 2017 Reported Adjusted Statutory Reported Adjusted Statutory Revenue 321 (4) (4) 315 Operating costs excluding non-cash pension charge and fair value lease credits (201) 2 (199) (188) 1 (187) Adjusted EBITDA 120 (2) (3) 128 Closing Cash 163 (7) (4) 96 In the nine months ended 31 March 2016 In the nine months ended 31 March 2017 Reported Adjusted Statutory Reported Adjusted Statutory Revenue 974 (12) (12) 964 Operating costs excluding non-cash pension charge and fair value lease credits (617) 5 (612) (602) 4 (598) Adjusted EBITDA 357 (7) (8) 366 Closing Cash 163 (7) (4) 96 eircom Holdings (Ireland) Limited 1 The statutory financial statements are prepared in accordance with IFRS accounting principles and include the results of the group s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis. The management discussion and analysis section of this quarterly report presents results on a management accounting basis and therefore includes the results of the group s joint ventures on a proportionate basis, reflected in group revenue, operating costs and EBITDA. 12

13 Reconciliation of earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment to operating profit Third quarter ended March 2016 Third quarter ended March 2017 Nine months ended March 2016 Nine months Ended March 2017 Operating profit Profit on disposal of property, plant and equipment ("PPE") (2) Exceptional items Non-cash pension charge Operating profit before non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment Depreciation Amortisation EBITDA before non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment IFRS 3 unfavourable lease fair value adjustment (2) (1) (6) (5) Adjusted EBITDA before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment EBITDA of joint ventures using proportionate consolidation Reported EBITDA* before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment Reported EBITDA* before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment is split as follows: Fixed line Mobile * Reported EBITDA includes the results of the Group s joint ventures on a proportionate basis. The statutory basis includes the results of the Group s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis. 13

14 Consolidated Income Statement unaudited For the third quarter ended 31 March 2017 Notes 31 March March 2017 Revenue Operating costs excluding amortisation, depreciation and exceptional items (201) (190) Amortisation 3 (23) (28) Depreciation 3 (68) (68) Exceptional items 3, 4 (3) (17) Operating profit Finance costs net 5 (46) (34) Share of profit of joint venture - 2 Loss before tax (24) (20) Income tax credit Loss for the period (23) (18) 14

15 Consolidated Income Statement unaudited For the nine-month period ended 31 March 2017 Notes 31 March March 2017 Revenue Operating costs excluding amortisation, depreciation and exceptional items (617) (606) Amortisation 3 (59) (80) Depreciation 3 (205) (201) Exceptional items 3, 4 (27) (56) Profit on disposal of property, plant and equipment - 2 Operating profit Finance costs net 5 (138) (132) Share of profit of joint venture 1 9 Loss before tax (83) (100) Income tax credit Loss for the period (79) (95) Group statement of comprehensive income unaudited For the nine-month period ended 31 March March March 2017 Loss for the financial period attributable to equity holders of the parent (79) (95) Other comprehensive income/(expense): Items that will not be reclassified to profit or loss Defined benefit pension scheme remeasurement gains: - Remeasurement gain in period Tax on defined benefit pension scheme remeasurement gains (12) (7) Items that may be reclassified subsequently to profit or loss Net changes in cash flow hedge reserve: - Fair value gain in period 1 - Currency translation differences - (1) 1 (1) Other comprehensive income, net of tax Total comprehensive income/(expense) for the financial period 2 (45) The accompanying notes form an integral part of the condensed interim financial information. 15

16 Consolidated Balance Sheet unaudited As at 31 March 2017 Notes 30 June March 2017 Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment 1,451 1,440 Investment in joint venture 4 7 Deferred tax assets 4 3 Other assets ,115 2,070 Current assets Inventories Trade and other receivables Restricted cash Cash and cash equivalents Total assets 2,507 2,422 Liabilities Non-current liabilities Borrowings 8 2,140 2,134 Derivative financial instruments 7 1 Trade and other payables Deferred tax liabilities Retirement benefit liability Provisions for other liabilities and charges ,795 2,741 Current liabilities Derivative financial instruments 6 5 Trade and other payables Current tax liabilities - 10 Provisions for other liabilities and charges Total liabilities 3,289 3,244 Equity Equity share capital - - Capital contribution Cash flow hedging reserve 2 2 Retained loss (836) (882) Total equity (782) (822) Total liabilities and equity 2,507 2,422 The accompanying notes form an integral part of the condensed interim financial information. 16

17 Consolidated cash flow statement unaudited For the third quarter ended 31 March 2017 Notes 31 March March 2017 Cash flows from operating activities Cash generated from operations Interest paid (24) (13) Income tax (paid)/refund (7) 9 Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment (PPE) (41) (60) Purchase of intangible assets (30) (13) Proceeds from sale of PPE - 2 Dividend received - 5 Restricted cash 1 (12) Net cash used in investing activities (70) (78) Cash flows from financing activities Debt modification fees (1) - Net cash used in financing activities (1) - Net (decrease)/increase in cash, cash equivalents and bank overdrafts (21) 3 Cash, cash equivalents and bank overdrafts at beginning of period Cash, cash equivalents and bank overdrafts at end of period

18 Consolidated cash flow statement unaudited For the nine-month period ended 31 March 2017 Notes 31 March March 2017 Cash flows from operating activities Cash generated from operations Interest paid (88) (68) Income tax (paid)/refund (12) 9 Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment (PPE) (187) (201) Purchase of intangible assets (40) (53) Proceeds from sale of PPE - 8 Dividend received - 5 Restricted cash - (11) Net cash used in investing activities (227) (252) Cash flows from financing activities Dividends paid to equity shareholders (1) (1) Repayment on borrowings (2,367) (252) Proceeds from loan borrowings 2,367 - Proceeds from issuance of 4.5% Senior Secured Notes Premium on issuance of 4.5% Senior Secured Notes - 3 Debt issue costs - (2) Debt modification fees (4) (4) Net cash used in financing activities (5) (56) Net decrease in cash, cash equivalents and bank overdrafts (30) (52) Cash, cash equivalents and bank overdrafts at beginning of period Cash, cash equivalents and bank overdrafts at end of period The accompanying notes form an integral part of the condensed interim financial information. 18

19 Consolidated statement of changes in shareholders equity unaudited For the nine-month period ended 31 March 2017 Equity share capital Capital contribution Cash flow hedging reserve Retained loss Total equity m Balance at 30 June (774) (727) Loss for the period (79) (79) Defined benefit pension scheme remeasurement gain Tax on defined benefit pension scheme remeasurement gain (12) (12) Net changes in cash flow hedge reserve: - Fair value gain in period Total comprehensive income Capital contribution in respect of MIP equity value event Dividends relating to equity shareholders (1) (1) Balance at 31 March (774) (721) Balance at 30 June (836) (782) Loss for the period (95) (95) Defined benefit pension scheme remeasurement gain Tax on defined benefit pension scheme remeasurement gain (7) (7) Currency translation differences (1) (1) Total comprehensive expense (45) (45) Capital contribution in respect of MIP equity value event Dividends relating to equity shareholders (1) (1) Balance at 31 March (882) (822) The accompanying notes form an integral part of the condensed interim financial information. 19

20 Selected notes to the condensed interim financial information unaudited 1. General information eircom Holdings (Ireland) Limited ("the company or EHIL") and its subsidiaries together ( the group or eircom Holdings (Ireland) Limited group or EHIL Group ), provide fixed line and mobile telecommunications services in Ireland. This condensed consolidated interim financial information was approved for issue on 28 April Basis of preparation This financial information has been prepared to make available certain unaudited condensed consolidated financial information to the holders of the group's Senior Secured Notes. Accordingly, the group has not prepared this financial information in accordance with IAS 34 Interim Financial Information and has not carried out an impairment review of the carrying value of goodwill and other noncurrent assets as at 31 March This condensed interim financial information has been prepared on the going concern basis, which assumes that eircom Holdings (Ireland) Limited will continue in operational existence for the foreseeable future. The financial information, as at and for the period ended 31 March 2017, in respect of the group has been prepared using the same accounting policies as applied for the year ended 30 June For a more complete discussion of our significant accounting policies and other information, including our critical accounting judgements and estimates, this report should be read in conjunction with the financial statements of EHIL for the year ended 30 June Segment information The group provides communications services, principally in Ireland. The group is organised into two main operating segments: fixed line and mobile. The segment results for the nine-months period ended 31 March 2017 are as follows: Fixed line m Mobile m Inter-segment m Reported* m Adjusted m Statutory* m Revenue (27) 976 (12) 964 EBITDA ** (8) 366 Non-cash lease fair value credits Non-cash pension charges (13) - - (13) - (13) Amortisation (62) (18) - (80) - (80) Depreciation (178) (21) - (199) (2) (201) Exceptional items (56) - - (56) - (56) Profit on disposal of PPE Operating profit (10) 23 The segment results for the nine-months period ended 31 March 2016 are as follows: Fixed line m Mobile m Inter-segment m Reported* m Adjusted m Statutory* m Revenue (32) 974 (12) 962 EBITDA ** (7) 350 Non-cash lease fair value credits Non-cash pension charges (11) - - (11) - (11) Amortisation (40) (19) - (59) - (59) Depreciation (190) (21) - (211) 6 (205) Exceptional items (27) - - (27) - (27) Operating profit (1) 54 * Reported EBITDA includes the results of the group s joint ventures on a proportionate basis. The statutory basis includes the results of the group s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis. ** EBITDA is earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment. 20

21 Selected notes to the condensed interim financial information unaudited (continued) 4. Exceptional items 31 March March 2017 Restructuring programme costs 4 13 Management incentive plan 5 6 Onerous lease contracts 3 27 Re-branding and strategic review costs 18 5 Other exceptional items (3) The group has adopted an income statement format which seeks to highlight significant items within group results for the period. The group believe that this presentation provides additional analysis as it highlights one-off items. Judgement is used by the group in assessing the particular items, which by virtue of their scale and nature are disclosed in the group income statement and related notes as exceptional items. Restructuring programme costs The group included an exceptional charge of 13 million (31 March 2016: 4 million) for restructuring programme costs in respect of staff exits in the period ended 31 March The exceptional charge reflects those staff that had either exited the business, or was committed to exiting the business at 31 March Management incentive plan During the period ended 31 March 2017, the group recognised a charge of 6 million (31 March 2016: 5 million) in its income statement, with a corresponding increase in equity, in respect of contractual rights under the MIP awarded by the holding company, eircom Holdco S.A., to the group's employees, for which the group has no obligation to make any payment. Onerous lease contracts During the period ended 31 March 2017, the group recognised an exceptional charge of 27 million (31 March 2016: 3 million) in respect of onerous contracts on its leasehold properties. The group no longer requires these properties as a result of the rationalisation of the group s accommodation requirements and provision has been made in respect of the estimated cash flow required to settle the group s obligation under these leases. Strategic review costs The group recognised an exceptional charge of 5 million costs (31 March 2016: 18 million) for strategic review costs in the period ended 31 March Other exceptional items During the period ended 31 March 2017, the group included an exceptional charge of 4 million in respect of certain legal matters arising in the period and 1 million for the deferred consideration arrangement following the acquisition of a subsidiary undertaking in the prior year. During the period ended 31 March 2016, the group recognised exceptional credits of 3 million, 2 million as a result of the release of dilapidation provisions in respect of Telephone House that were carried forward from the previous year and 1 million credit in respect of a legal related matter. 21

22 Selected notes to the condensed interim financial information unaudited (continued) 5. Finance costs net 31 March March 2017 (a) Finance costs: Interest payable on bank loans and other debts Interest amortisation on non-current borrowings Revolving credit facility (RCF) commitment fee - 3 Net interest cost on net pension liability 5 5 Amortisation of debt issue costs on bank loans and debt modification fees 3 3 Other unwinding of discount 1 1 Amortisation of Cash Flow Hedge Reserve derivatives - 1 Fair value movements on derivatives not qualifying for hedge accounting 12 (7) Loss on extinguishment of debt - 26 Write off of debt issue costs and debt modification fees (b) Finance income: Interest income Finance costs net In August 2016, the group issued 200 million in additional Senior Secured Notes at a coupon rate of 4.5%, and at an offering price of 101.5%. The 200 million issue, for which cash proceeds of 203 million were received before deduction of transaction costs, was structured as a tap issue to the 500 million Senior Secured Notes issued in June The group used the proceeds of the tap issue to repay 201 million of the pre-existing Facility B3 borrowings during August 2016, thereby maintaining its total borrowings at similar pre-existing levels. In October 2016, the group used its existing cash to repay 51 million of its Senior Facility borrowings and in addition, the group agreed amendments to the terms of its Senior Facilities Agreement, which resulted in the total outstanding Facility B borrowings of 1,611 million being transferred to a new Facility B5, with interest at EURIBOR plus 4% (a reduction from EURIBOR plus 4.5% applicable to the Facility B4 borrowings). The prepayment of 201 million of Facility B3 borrowings and 51 million of Facility B4 borrowings was accounted for as an extinguishment under IAS 39 resulting in an accounting loss of 26 million in the income statement within finance costs. 6. Income tax credit The tax on the group s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the loss of the group as follows: - 31 March March 2017 Loss before tax (83) (100) Tax calculated at Irish standard tax rate of 12.5% (10) (12) Effects of:- Non-deductible expenses 7 8 Income taxable at higher rate 1 - Utilisation of losses carried forward (1) (1) Adjustments in respect of prior periods (1) - Tax credit for the period (4) (5) 7. Trade and other receivables During the period ended 31 March 2017, the group recognised a provision for impaired receivables of 6 million (31 March 2016: 6 million), reversed provisions for impaired receivables of Nil (31 March 2016: Nil) and utilised provisions for impaired receivables of 6 million (31 March 2016: 12 million). The creation and reversal of provisions for impaired receivables have been included in operating costs in the income statement. 22

23 Selected notes to the condensed interim financial information unaudited (continued) 8. Borrowings The maturity profile of the carrying amount of the group s borrowings is set out below. Within Between Between After 1 Year 1 & 2 Years 2 & 5 Years 5 Years Total m As at 31 March 2017 Bank borrowings (Facility B) ,611 1,611 Unamortised fair value difference on borrowings (151) (151) Debt modification fees (18) (18) ,442 1, % Senior Secured Notes due Debt issue costs (8) (8) ,134 2,134 As at 30 June 2016 Bank borrowings (Facility B) ,863 1,863 Unamortised fair value difference on borrowings (196) (196) Debt modification fees (18) (18) ,649 1, % Senior Secured Notes due Debt issue costs (9) (9) ,140 2,140 At 31 March 2017, the group has Senior Bank borrowings of 1,611 million with a maturity date of 31 May 2022 and 4.5% Senior Secured Notes of 700 million with a maturity date of 31 May The borrowings under the Senior Facilities Agreement were recognised initially in accordance with IAS 39 at their fair value on the date of recognition, 11 June 2012, which was estimated to be 77% of the par value of the liability. The difference between the fair value on initial recognition and the amount that was payable on the maturity date is being amortised over the expected life of the borrowings through finance costs in the income statement using the effective interest method under IAS 39. The remaining unamortised amount at 31 March 2017 was 151 million. In August 2016, the group issued 200 million in additional Senior Secured Notes at a coupon rate of 4.5%, and at an offering price of 101.5%. The 200 million issue, for which cash proceeds of 203 million were received before deduction of transaction costs, was structured as a tap issue to the 500 million Senior Secured Notes issued in June The group used the proceeds of the tap issue to repay 201 million of the pre-existing Facility B3 borrowings during August 2016, thereby maintaining its total borrowings at similar pre-existing levels. Separately, during August 2016, the group agreed amendments to the terms of its Senior Facilities Agreement, which resulted in the total outstanding Facility B3 borrowings of 1,662 million being transferred to a new Facility B4, with identical interest (EURIBOR plus 4.5%) and repayment terms. In October 2016, the group used its existing cash to repay 51 million of its Senior Facility borrowings and in addition, the group agreed amendments to the terms of its Senior Facilities Agreement, which resulted in the total outstanding Facility B4 borrowings of 1,611 million being transferred to a new Facility B5, with interest at EURIBOR plus 4% (a reduction from EURIBOR plus 4.5% applicable to the Facility B4 borrowings). The prepayment of 201 million of Facility B3 borrowings and 51 million of Facility B4 borrowings was accounted for as an extinguishment under IAS 39 resulting in an accounting loss of 26 million in the income statement within finance costs. Interest accrued on borrowings at 31 March 2017 is 19 million (30 June 2016: 5 million). This is included in trade and other payables. 23

24 Selected notes to the condensed interim financial information unaudited (continued) 9. Pensions The group's pension commitments are funded through separately administered Superannuation Schemes and are principally of a defined benefit nature. The group undertakes a full review of the retirement benefit liability at each quarter end in accordance with IAS 19 (Revised). The balance sheet presented as at 31 March 2017 reflects the IAS 19 (Revised) deficit of 313 million as at 31 March Pension scheme obligation The status of the principal scheme at 31 March 2017 is as follows: 30 June March 2017 Present value of funded obligations 4,730 4,496 Fair value of scheme assets (4,384) (4,183) Liability recognised in the Balance Sheet Assumptions of actuarial calculations The main financial assumptions used in the valuations were: At 30 June 2016 At 31 March 2017 Rate of increase in salaries 1.40% 1.40% Rate of increase in pensions in payment 1.40% 1.40% Discount rate 1.65% 1.95% Inflation assumption 1.50% 1.50% Mortality assumptions Pensions in payment Implied life expectancy for 65 year old male 88 years 88 years Mortality assumptions Pensions in payment Implied life expectancy for 65 year old female 90 years 90 years Mortality assumptions Future retirements Implied life expectancy for 65 year old male 91 years 91 years Mortality assumptions Future retirements Implied life expectancy for 65 year old female 93 years 93 years The above assumptions reflect the imposition of a cap on the increases in pensionable pay to the lower of CPI, salary inflation or agreed fixed annual rates. 24

25 Selected notes to the condensed interim financial information unaudited (continued) 10. Provisions for other liabilities and charges TIS Annuity Scheme Onerous Contracts Asset Retirement Obligations Deferred consideration Other Total At 30 June Charged to consolidated income statement: - Additional provisions Unused amounts reversed - (1) (1) Increase in provision capitalised as ARO Utilised in the financial period (3) (5) (1) - (6) (15) At 31 March Provisions have been analysed between non-current and current as follows: 30 June March 2017 Non-current Current Cash generated from operations 31 March March 2017 Loss after tax (79) (95) Add back: Income tax credit (4) (5) Share of profit of joint venture (1) (9) Finance costs net Operating profit Adjustments for: - Profit on disposal of property, plant and equipment - (2) - Depreciation and amortisation Non-cash lease fair value credits (6) (5) - Non cash retirement benefit charges Restructuring programme costs Non cash exceptional items Other non-cash movements in provisions 1 1 Cash flows relating to restructuring, onerous contracts and other provisions (13) (35) Cash flows relating to construction contracts - (1) Changes in working capital Inventories (3) (1) Trade and other receivables (4) (5) Trade and other payables (11) (5) Cash generated from operations

26 Selected notes to the condensed interim financial information unaudited (continued) 12. Post Balance Sheet Events During April 2017, the group repaid 11 million of its Senior Bank Borrowings from its cash reserves and entered into a new 1,600 million Senior Facilities Agreement (SFA) with a maturity date of April 2024 to replace the existing Senior Facilities Agreement. The new borrowings are subject to EURIBOR plus 3.25% margin (a reduction from EURIBOR plus 4% applicable to the Facility B5 borrowings). The terms of the agreement have also been improved by reducing the covenant compliance framework which will allow the group greater operational flexibility in the future. The group also renegotiated and repriced the revolving credit facility (EURIBOR plus 2.75% margin, reduction from EURIBOR plus 3.5% margin) as part of the refinancing process. There have been no other significant events affecting the group since the period ended 31 March Contingent liabilities There have been no material changes in our contingent liabilities since the publication of the financial statements of EHIL in the bondholder s report for the year ended 30 June Guarantees There have been no material changes in our credit guarantees and in derivatives since the publication of the financial statements of EHIL in the bondholder s report for the year ended 30 June Seasonality Fixed line The group does not believe that seasonality has a material impact on our fixed line business. Mobile The group s mobile business tends to experience an increase in sales volumes in the weeks approaching Christmas due to the seasonal nature of its retail business. The group s mobile business experiences significant postpay and prepay subscriber growth and related costs of handset subsidies and commissions in November and December. Visitor roaming revenues are also seasonally significant because Ireland is a popular tourist destination during the summer months. 16. Commitments Operating lease commitments The group s operating lease contractual obligations and commitment payments were 328 million at 31 March 2017 (30 June 2016: 340 million). The payments due on operating leases are in respect of lease agreements in respect of properties, vehicles, plant and equipment for which the payments extend over a number of years. Capital commitments The group s capital contractual obligations and commitment payments were 53 million at 31 March 2017 (30 June 2016: 76 million). 17. Related party transactions Management incentive plan The management incentive plan ("MIP") was introduced in the year ended 30 June 2013 by the group s parent company, eircom Holdco SA, for certain directors and senior executives in the group. During the period ended 31 March 2017, the group recognised a charge of 6 million in its income statement, with a corresponding increase in equity, in respect of contractual rights under the MIP awarded by the parent company, eircom Holdco S.A., to the group's employees, for which the group has no obligation to make any payment. There have been no other material changes in our related party transactions since the publication of the financial statements of EHIL in the bondholder s report for the year ended 30 June

27 Management discussion and analysis on results of operations for the quarter ended 31 March 2017 The amounts and commentary presented in the management discussion below include the results of the group s joint venture in Tetra Ireland Communications Limited ( Tetra ) on a proportionate consolidation basis. In accordance with IFRS 11 Joint Arrangements the EHIL consolidated financial statements for the quarter ended 31 March 2017 applies the equity method of accounting for the investment in Tetra. Certain comparative figures have been re-grouped and re-stated where necessary on the same basis as those for the current financial quarter. Revenue The following table shows a segmental split of revenues for the period from our fixed line and mobile businesses: In the quarter ended Mar 31, 2016 (unaudited) Mar 31, 2017 (unaudited) % Change 2016/2017 Fixed line services and other revenue Mobile services revenue (7) Total segmental revenue (1) Intracompany eliminations (11) (8) (23) Total revenue (1) Reported group revenue of 319 million for the quarter was broadly flat compared to the corresponding prior year period. Underlying revenue of 325 million, which excludes the impact of reductions in Mobile Termination Rates ( MTRs ) and foreign exchange ( FX ) movements, increased by 4 million or 1% year on year. Fixed line services and other revenue The following table shows revenue from the fixed line segment, analysed by major products and services, and the percentage change for each category, for the periods indicated: For the quarter ended Mar 31, Mar 31, (unaudited) (unaudited) % Change 2016/2017 m m Access (Rental and Connections) (3) Voice Traffic (1) Data Services Foreign Inpayments 3 2 (23) Other Products and Services Total fixed line services and other revenue Total fixed line services and other revenues for the quarter ended to 31 March 2017, before intra company eliminations, increased by 1% compared to the corresponding prior year period. Growth was driven by an increase in data services and other products and services of 4% and 13% respectively compared to the corresponding prior year period. 27

28 Access (rental and connections) The following table shows rental, connection and other charges and the percentage changes for the periods indicated: In the quarter ended Mar 31, Mar 31, (unaudited) (unaudited) % Change 2016/2017 Total access revenue Retail PSTN/ISDN rental and connection (8) Wholesale PSTN/ISDN/LLU rental and connection (8) Broadband rental and connection Total access revenue (3) Access paths (in thousands at period end, except percentages) Retail Access Lines (5) Wholesale Access Lines Wholesale LLU 11 9 (14) SABB Total PSTN/ISDN/LLU/SABB 1,347 1,358 1 Broadband and Bitstream (in thousands at period end, except percentages) Retail Broadband (1) Wholesale Broadband Total Broadband (including SABB) Access revenues for the quarter ended 31 March 2017 of 120 million decreased by 3% compared to the corresponding prior year quarter. Lower retail and wholesale access revenues were partially offset by growth in broadband revenues. Broadband revenues for the quarter ended 31 March 2017 were 8% higher compared to the corresponding prior year period. Retail line rental and connection revenues decreased by 8% in the quarter ended 31 March 2017, compared to the corresponding prior year quarter, mainly due to a decline in PSTN and ISDN lines, which have been impacted by the continuing migration of customers to standalone broadband, to other operators and to mobile. Retail access lines at 31 March 2017 were 686,000, a reduction of 5% compared to the 31 March Wholesale access lines remained broadly flat year on year when compared to the prior year quarter ended 31 March 2016 with Wholesale access revenues decreasing by 8%. This was driven by a reduction in the regulated price of PSTN Wholesale line rental ( WLR ) from to Broadband revenue for the quarter of 43 million increased by 8% compared to the corresponding prior year quarter. The wholesale broadband base of 446,000, increased by 57,000 year on year and by 10,000 in the quarter. The retail broadband customer base was 444,000 at 31 March 2017, which represented a decrease of 3,000 year on year, but remained broadly flat in the quarter. We continue to address retail fixed line losses and broadband churn with a number of programmes, including rolling out high speed broadband and offering bundled telecommunications services including broadband, TV, mobile and telephony. As at 31 March 2017, the rollout of our high speed fibre network had passed over 69% of Irish premises and 530,000 retail and wholesale customers were connected to high speed broadband services. In the same period, 67,000 customers were availing of TV, up 18,000 subscriptions year on year and 42% of the consumer broadband base was availing of exclusive eir sport content. As of 31 March 2017, 24% of eir s consumer households were taking 3 or more services from eir s offerings across broadband, mobile, TV and telephony. 28

29 Traffic The following table shows total traffic revenue and volumes and the percentage changes for the periods indicated: In the quarter ended Mar 31, Mar 31, (unaudited) (unaudited) % Change 2016/2017 Revenue Retail traffic Wholesale traffic (17) Total traffic revenue (1) Traffic (in millions of minutes, except percentages) Retail (14) Wholesale 1, (11) Total traffic minutes 1,494 1,315 (12) Overall Group traffic revenue was stable in the quarter ended 31 March 2017 compared to the prior year. Retail voice traffic revenue increased by 6% for the quarter ended 31 March 2017, compared with the corresponding prior year quarter. This was primarily driven by the introduction of new higher valued bundled offerings, including eir sport, resulting in a 8% uplift in consumer blended ARPU during the quarter to 31 March 2017 compared to the corresponding prior year quarter. This was partially offset by a reduction in traffic usage. Wholesale traffic revenues decreased by 17% in the quarter ended 31 March 2017 compared to the corresponding quarter in the prior year. Excluding the impact of the MTR reductions which are neutral on Gross Margin, wholesale traffic revenues decreased by 10% in the quarter ended 31 March 2017 compared to the corresponding quarter in the prior year. The underlying revenue decline is driven by lower wholesale traffic minutes. Data communications The following table shows information relating to revenue from data communications products and services and the percentage change for the periods indicated: In the quarter ended % Change Mar 31, 2016 (unaudited) Mar 31, 2017 (unaudited) 2016/2017 Data services revenue Leased lines (1) Switched data services 5 5 (5) Next generation data services Total data services revenue Revenue from data communications increased by 4% compared to the corresponding prior year period. Revenue from Switched Data and Leased Lines remained stable while next generation data services increased by 21% compared to the corresponding prior year quarter reflecting a move from legacy products to next generation services. 29

30 Foreign Inpayments The following table shows information relating to revenue and traffic from foreign inpayments and the percentage change for the periods indicated: For the quarter ended Mar 31, Mar 31, (unaudited) (unaudited) m m % Change 2016/2017 Foreign terminating traffic revenue 3 2 (23) (minutes, million) Foreign terminating traffic minutes (17) Revenue from foreign terminating traffic for the quarter ended 31 March 2017 reduced by 23% compared to the corresponding prior year quarter. Excluding the impact of the MTR which are neutral on Gross Margin, foreign terminating traffic revenue decreased by 6% compared to the corresponding prior year quarter. The underlying revenue decline is driven by lower foreign terminating traffic minutes. Other products and services Other products and services revenue includes our 56% share of revenue from Tetra, eir sports (consolidated from April 2016), our operations in UK/NI, operator services, managed services, data centres and other revenue. The following table shows information relating to revenue from other products and services, and the percentage change for the periods indicated: In the quarter ended Mar 31, Mar 31, (unaudited) (unaudited) m m % Change 2016/2017 Operator services 3 2 (26) Managed services and solutions Tetra 5 5 (1) UK Data centre 4 2 (36) Other revenue Other products and services revenue Revenue from other products and services for the quarter ended 31 March 2017, increased by 13% compared to the corresponding prior year quarter mainly driven by eir sport revenue (included in other revenue). Operator Services revenue decreased by 26% as a result of reduced calls to our directory enquiries service. Managed services revenue increased by 23% due to new contracts in eir Business which were delivered in the quarter ended 31 March Tetra revenue of 5 million was stable year on year. Underlying UK/NI revenue increased by 9% notwithstanding a weakness in sterling which affected the translation of reported revenues by 1million compared to the corresponding prior year quarter. Datacentre revenues of 2 million decreased by 36% compared to the prior year quarter due to changing market trend whereby multinationals are investing in their own portfolio of data centres. The increase in other revenue was principally driven by content and TV growth. 30