Download - ZON OPTIMUS, SGPS, S
ZON OPTIMUS, SGPS, S.A
1 9M13 Consolidated Management Report
Table of Contents
1 - ZON OPTIMUS in Numbers 2
2 - Highlights 5
3 - Governing Bodies 6
4 - Corporate Developments 8
5 - Subsequent Events 9
6 - Management Report 11
7 - Consolidated Financial Statements 28
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 2
1
ZON OPTIMUS in Numbers
Financial Indicators (in millions of Euros):
The Statutory Accounts reflect the financial consolidation of 9 months of ZON and just 1 month of OPTIMUS given that the merger by
incorporation of OPTIMUS into ZON, that led to the creation of ZON OPTIMUS, was completed on 27 August 2013.
Operating Revenues: EBITDA (EBITDA margin as % of Revenues):
590.5636.4
9M12 9M13
+7.8%
231.2257.9
39.2%40.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100 %
0
50
100
150
200
250
300
9M12 9M13
+11.5%
Consolidated Net Income: Net Financial Debt:
31.3
23.9
9M12 9M13
(23.7)%
589.9
957.2
00x
01x
01x
02x
02x
03x
03x
04x
04x
05x
05x
0
200
400
600
800
1,0 00
1,2 00
9M12 9M13
+62.3%
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3 9M13 Consolidated Management Report
Business Indicators (in thousands):
3&4P Subscribers, Ex-ZON: 3&4P Penetration in Cable Customer Base (%),Ex-ZON:
752773 781 786 792
3Q12 4Q12 1Q13 2Q13 3Q13
+5.4%
62.4% 63.9% 64.6% 65.3% 66.5%
3Q12 4Q12 1Q13 2Q13 3Q13
+4.1pp
Basic Subscribers, Ex-ZON: Broadband Subscribers, Ex-ZON:
1,574 1,570 1,559 1,543 1,523
3Q12 4Q12 1Q13 2Q13 3Q13
(3.3)%
766790 800 805 812
3Q12 4Q12 1Q13 2Q13 3Q13
+5.9%
Fixed Voice Subscribers, Ex-ZON: Blended ARPU, Ex-ZON:
960 976 986 990 995
3Q12 4Q12 1Q13 2Q13 3Q13
+3.7%
34.7 34.435.4
34.7 34.9
3Q12 4Q12 1Q13 2Q13 3Q13
+0.5%
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 4
Mobile Customers, Ex-OPTIMUS: Mobile ARPU, Ex-OPTIMUS:
3,566 3,569 3,507 3,435 3,443
3Q12 4Q12 1Q13 2Q13 3Q13
(3.5)%
11.7
10.810.4
10.8 10.8
3Q12 4Q12 1Q13 2Q13 3Q13
(7.7)%
Wireline Total Accesses, Ex-OPTIMUS: Wireline ARPU Per Access, Retail, Ex-OPTIMUS:
344.6 334.9 330.0 339.3 338.0
3Q12 4Q12 1Q13 2Q13 3Q13
(1.9)%
20.9 21.0 21.4 21.620.5
3Q12 4Q12 1Q13 2Q13 3Q13
(2.1)%
ZON OPTIMUS, SGPS, S.A
5 9M13 Consolidated Management Report
2
Highlights
Operating Highlights (000')
Ex-ZON (1)
RGUs 3,438.7 3,485.7 1.4%
IRIS Subscribers 193.0 390.3 102.2%
3&4P Customers 751.7 792.5 5.4%
Fixed Broadband Subscribers 766.2 811.7 5.9%
Fixed Voice Subscribers 960.2 995.4 3.7%
Blended ARPU (euros) 35.1 35.0 (0.2%)
Ex-OPTIMUS - Mobile
Customers (EOP) 3,566.3 3,442.6 (3.5%)
ARPU (euros) 11.6 10.6 (8.2%)
Ex-OPTIMUS - Wireline
Total Accesses (EOP) 344.6 338.0 (1.9%)
ARPU per Access - Retail (euros) 21.8 21.2 (2.9%)
ZON OPTIMUS Pro-Forma Financial Highlights (Millions of Euros)
Operating Revenues 1,114.9 1,083.9 (2.8%)
EBITDA 413.5 418.3 1.2%
CAPEX 216.5 188.8 (12.8%)
EBITDA - Recurrent CAPEX 197.0 234.0 18.8%(1) Portuguese Operat ions.
9M13 / 9M12Highlights of 9M13Results 9M12 9M13
Completion of Merger on 27 August and election of new Management team on 1 October;
Creation of a larger, stronger and more competitive Telco group with a state-of-the-art NGN and
4G network and coverage in Portugal:
7.3 million RGUs
Pro-forma Consolidated Revenues of 1.1 billion euros in 9M13
Pro-forma Consolidated EBITDA margin over 38% in 9M13
The integration project is well underway and on track to capture synergies. The launch of ZON4i
on 22 October, the first integrated communications and entertainment offer by ZON OPTIMUS,
only a few weeks after the merger was completed, is already a reflection of how the new teams
are well integrated and working together as a single company.
Continued strong operating and financial performance with growth in convergent solutions,
resilience in Telco revenues despite the still challenging macro environment and continuing
focus on efficiency and cost control with margins in excess of 38%;
Increase in Pro-Forma Operating Cash Flow of 11.2% to 167,8 million euros and increase in Pro-
Forma Recurrent FCF to 92.4 million euros.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 6
3
Governing Bodies
As of 30 September 2013, the Governing Bodies of ZON OPTIMUS had the following composition:
Board of Directors
Chairman of the Board of Directors
Daniel Proença de Carvalho
Chairman of the Executive Committee
Members of the Executive Committee
Rodrigo Jorge de Araújo Costa
José Pedro Faria Pereira da Costa
Luís Miguel Gonçalves Lopes
Duarte Maria de Almeida e Vasconcelos
Calheiros
Members
Fernando Fortuny Martorell
António Domingues
Joaquim Francisco Alves Ferreira de Oliveira
Mário Filipe Moreira Leite da Silva
Isabel dos Santos
Catarina Eufémia Amorim da Luz Tavira
László Istvan Hubay Cebrian
Miguel Filipe Veiga Martins
André Palmeiro Ribeiro
Chairman of the Audit Committee
Members of the Audit Committee
Vitor Fernando da Conceição Gonçalves
Nuno João Francisco Soares de Oliveira
Sílvério Marques
Paulo Cardoso Correia da Mota Pinto
Officials of the General Meeting of Shareholders
President Júlio de Castro Caldas
Secretary
Maria Fernanda Carqueija Alves de Ribeirinho Beato
ZON OPTIMUS, SGPS, S.A
7 9M13 Consolidated Management Report
Statutory Auditor
In Office Oliveira, Reis & Associados, SROC, Lda.,
representada por José Vieira dos Reis
Alternate Fernando Marques Oliveira
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9M13 Consolidated Management report 8
4
Corporate Developments
On 26 August, the Competition Authority announced their non-opposition to the merger process between ZON and
OPTIMUS and, on 27 August, all legal and administrative procedures were implemented to conclude the process.
The Merger assumed the form of a merger by incorporation, which implied the transfer of all of OPTIMUS’ assets
and liabilities, as the as the absorbed company, into ZON – now ZON OPTIMUS – as the absorbing company.
Following the merger, the corresponding share capital increase of ZON OPTIMUS took place. Its share capital is
now 5,151,613.80 euros, represented by a total of 515,161,380 shares, with a nominal value of 0.01 euros each
(206,064,552 new shares were issued as a result of the share capital increase). A request was submitted to
Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A.for these New Shares to be listed on
the Euronext Lisbon regulated market, which happened on 9 September 2013.
ZON OPTIMUS, SGPS, S.A
9 9M13 Consolidated Management Report
5
Subsequent Events
An Extraordinary General Shareholders’ Meeting of ZON OPTIMUS, SGPS, SA was held on 1 October 2013. The proposals concerning the items of the agenda were all approved as follows:
Approval of the change, by modification, suppression, and / or supplement of all the articles of ZON Optimus’
Articles of Association, except for articles nr. 1, 5, 6 and 8;
Approval of the election of the company’s Corporate Bodies, including the Statutory Auditor, for the term of
office of 2013/2015, as follows:
Board of Directors
Chairman of the Board of Directors Jorge Manuel de Brito Pereira
Chairman of the Executive Committee
Vice-Chairman of the Executive Committee
Members of the Executive Committee
Miguel Nuno Santos Almeida
Luís Miguel Gonçalves Lopes
Ana Paula Garrido de Pina Marques
André Nuno Malheiro dos Santos Almeida
José Pedro Faria Pereira da Costa
Manuel Ramalho Eanes
Miguel Filipe Veiga Martins
Members
Ângelo Gabriel Ribeirinho dos Santos Paupério
António Bernardo Aranha da Gama Lobo Xavier
António Domingues
Catarina Eufémia Amorim da Luz Tavira
Fernando Fortuny Martorell
Isabel dos Santos
Joaquim Francisco Alves Ferreira de Oliveira
Lorena Solange Fernandes da Silva Fernandes
Maria Cláudia Teixeira de Azevedo
Mário Filipe Moreira Leite da Silva
Rodrigo Jorge de Araújo Costa
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 10
Chairman of the Fiscal Board
Members of the Fiscal Board
Paulo Cardoso Correia da Mota Pinto
Eugénio Luís Lopes Franco Ferreira
Nuno Tiago Bandeira de Sousa Pereira
Luís Filipe da Silva Ferreira (Alternate)
Officials of the General Meeting of Shareholders
President Pedro Canastra de Azevedo Maia
Secretary
Tiago Antunes da Cunha Ferreira de Lemos
Statutory Auditor
In Office PriceWaterhouseCoopers & Associados, SROC, Lda.,
representada por (i) Abdul Nasser Abdul Sattar, ou (ii)
Paulo Alexandre Martins Quintas Paixão
Alternate José Manuel Henriques Bernardo
Approval of the appointment of the Remuneration Committee for the term of office 2013/2015, as follows:
Chairman: Ângelo Gabriel Ribeirinho dos Santos Paupério
Member: Mário Filipe Moreira Leite da Silva
ZON OPTIMUS, SGPS, S.A
11 9M13 Consolidated Management Report
6
Management Report
6.1 Business Review
Ex-ZON (1)
Homes Passed 3,224.5 3,286.1 1.9%
RGUs (2)3,438.7 3,485.7 1.4%
Cable RGUs per Subscriber (units) (3)2.42 2.51 3.5%
Basic Subscribers (4) 1,574.4 1,522.6 (3.3%)
o.w. Cable Subscribers 1,204.3 1,191.8 (1.0%)
IRIS Subscribers 193.0 390.3 102.2%
% IRIS 3&4P Subscribers 25.7% 49.2% 23.6pp
3&4P Customers 751.7 792.5 5.4%
% 3&4P Cable Customers 62.4% 66.5% 4.1pp
o.w. DTH Subscribers 370.1 330.8 (10.6%)
Fixed Broadband Subscribers 766.2 811.7 5.9%
Fixed Voice Subscribers 960.2 995.4 3.7%
Mobile Subscribers 138.0 156.0 13.1%
Blended ARPU ( Euros ) 35.1 35.0 (0.2%)
Ex-OPTIMUS Mobile
Customers (EOP) 3,566.3 3,442.6 (3.5%)
Pre-Paid Customers 2,367.3 2,315.6 (2.2%)
Post-Paid Customers 1,199.0 1,127.0 (6.0%)
Data as % of Service Revenues 33.3% 33.5% 0.1pp
Non SMS Data as % Data Revenues 76.4% 79.5% 3.1pp
Total #SMS/month/user 41.5 39.3 (5.1%)
MOU (min.) 122.7 122.6 (0.1%)
ARPU (euros) 11.6 10.6 (8.2%)
Customer Monthly Bill 10.1 9.6 (5.5%)
Interconnection 1.5 1.1 (27.0%)
ARPM (Euros) 0.0945 0.0868 (8.1%)
Ex-OPTIMUS Wireline
Total Accesses (EOP) 344.6 338.0 (1.9%)
Corporates and SMEs 156.9 159.0 1.4%
PTSN/RDIS 113.2 114.9 1.5%
Broadband 31.7 29.9 (5.5%)
Other & Data 12.1 14.2 17.6%
Residential 187.7 179.0 (4.7%)
PTSN/RDIS 79.5 67.0 (15.7%)
Broadband 71.2 75.4 5.9%
TV 37.0 36.5 (1.3%)
ARPU per access - Retail 21.8 21.2 (2.9%)
Cinema (1)
Revenue per Ticket (Euros) 4.9 4.7 (3.8%)
Tickets Sold 5,822.1 5,956.3 2.3%
Screens (units) 210 209 (0.5%)(1) Portuguese Operat ions
9M13
(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 f igures are related to the total number of Pay TV basic customers, including the cable and satellite platforms. ZON OPTIM US offers several
basic services, based on dif ferent technologies, directed to dif ferent market segments (resident ial, real estate and corporate), with a dist inct
geographical scope (mainland Portugal and the Azores and M adeira islands) and with a variable number of channels.
9M13 / 9M12
(2) Total RGUs reported ref lect the sum of Pay TV, Fixed Broadband, Fixed Voice and M obile subscribers.
9M12Business Indicators ('000)
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 12
Another very solid nine months for both ZON and OPTIMUS in their respective stand-alone operations and marked
by the launch of ZON OPTIMUS’ first integrated residential fixed and mobile offer, leveraging the assets and
competences of the combined entity, only 3 weeks after the new organizational structure was put in place.
Operational focus remained very strong in parallel with the transformational corporate developments resulting from
the the merger between ZON and OPTIMUS at the end of August.
ZON4i - the best integrated communications and entertainment service in Portugal
Just three weeks after the new management team of ZON OPTIMUS was elected, we launched the first integrated
communications and entertainment service in Portugal – ZON4i.
ZON4i combines more and better television programming with 116 channels; fixed Internet which gives the highest
speed and most extensive coverage with 100 Mbps to all 3.3 million households covered by ZON OPTIMUS’ next
generation cable network; an unlimited national and international fixed voice service which also includes free use of
the ZON Phone app enabling use of a landline number on mobile devices, benefiting from normal landline tariffs
and integrated billing; free access to the largest network of WiFi hotspots giving instant access to 600,000 hotspots
in Portugal and over 12 million worldwide; unlimited mobile phone use, offering the best 4G solutions available, for
up to four users, mobile Internet with free 200 MB per SIM card which accommodates a flexible top-up facility for
those who occasionally go over their data limit; priority access to the largest network of cinemas in Portugal,
through myZONcard, that also gives one free ticket for every cinema ticket purchased. ZON4i is priced at €79.99
and can be adjusted to suit usage profile and requirements.
Continuing to innovate with new features
We launched “Download to Own” in 3Q13, a feature allowing video content to be downloaded from the ZON
videoclub over the PC and TV, to watch whenever and wherever is needed, with no expiry date and accessible for
viewing offline. Freedom, ease of use and mobility are the main advantages of the service, which allows customers
to create a unique personal video library in the cloud, which can be viewed over multiple platforms and
independent of where the purchase was originated.
In April 2013, OPTIMUS launched wOw, an innovative double play product, based on 4G technologyoffering unlimited fixed voice and unlimited broadband traffic. At the beginning of June 2013, OPTIMUS launched the first own branded 4G smartphone in the Portuguese market, OPTIMUS Boston 4G, an additional step towards increasing the penetration of smartphones and fostering the customers’ data usage.
Recognition from consumers and industry peers
2013 has been an award winning period for ZON OPTIMUS, with widespread recognition from customers and
industry peers.
In 2013, consumers voted IRIS the best Triple Play service of the year.
ECSI Portugal (European Customer Satisfaction Index) ranked ZON the best triple play provider in Portugal.
ZON OPTIMUS, SGPS, S.A
13 9M13 Consolidated Management Report
For the past three years in a row, consumers have voted ZON the best Pay TV operator and this year, ranked ZON
#1 in all three services – Pay TV, BB and Voice. ZON achieved a score of 7.78 in Pay TV, 7.43 in Fixed Internet
and 7.61 in Fixed Voice which compares with an average for other operators of 7.23, 7.15 and 7.39 respectively for
each service. Aware that customer service is a key driver of satisfaction and retention, these results are proof of
the work undertaken to improve operational excellence and continuously innovate in terms of products and service
offers.
In May OPTIMUS won, also for the third year in a row, the APCC Portugal Best Awards 2013, reinforcing the
ambition to lead in customer satisfaction and trust. In July 2013, OPTIMUS won the award for Best Customer
Service EMEA, the most relevant category in the Contact Center World Awards.
In addition, ZON Online was voted the best TV on the move service at Industry awards TV Connect. ZON Online
was launched in 2011 and enables IRIS customers to access the features from their ZON IRIS box at home, over a
number of different devices such as PC, iPad and iPhone, becoming an extension of the award winning IRIS
interface for mobile devices. The ZON Online platform, which replicates the IRIS interface over laptops and tablets,
was extended to smartphones, with the launch of its iPhone app in May last year. It has also become a major
incentive for customers to upgrade to the IRIS bundle.
The best channel line-up
Continuously striving to provide the best content for subscribers, in 9M13 ZON launched a number of new channels,
some of which exclusive to ZON. Globo, Disney Junior and +TVI were launched in 1Q13. Globo is a partnership
between ZON and the Brazilian Media company Globo and this exclusive channel to ZON, aggregates a diversified
line-up of series, soap-operas, and Brazilian movies amongst other general entertainment shows. +TVI is produced
by the Media Capital Group (owner of the leading FTA channel in Portugal, TVI) and targets a young adult
audience with a strong bias towards national and TVI produced content, and includes a number of interactive
functionalities. Canal Q was launched on the ZON network in March, bringing together national entertainment and
comedy shows, starring some of the most well-known and popular comedians in Portugal and also serving as a
launch-pad for bright new talent.
In 2Q13, ZON has increased its programming offer with Benfica TV and 24Kitchen HD. As a result, ZON now has
192 channels in its line-up, 49 of which HD and 45 sold as premium add-on subscriptions.
Premium sports channel subscriptions revert trend
The negative trend of the past quarters in premium channel subscriptions was reverted in 3Q13 with a significant
sequential reduction in the number of net disconnections of the premium sports package Sport TV influenced by
the start of the football season, and a good uptake of the new Benfica TV premium channel, launched in July.
“Benfica TV” was a relevant addition to the channel offering as it broadcasts in exclusive both the 15 Portuguese
League matches that Benfica plays at home, and the English Premier League matches. The total number of
subscribtions to premium sports channels increased by close to 30% compared with the end of 2Q13.
Addressing the youth mobile market with a new brand and value proposition
We launched a new brand in September - “WTF” - targeting the ever more important youth market.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 14
Traditionally, teenagers and young adults are extremely exposed to tribal tariff plans in which they are given
unlimited calls and texts within their own “tribe” of contacts, creating a network effect which limits their freedom to
make and receive calls and text messages to and from friends on other networks.
WTF is a completely innovative tariff which gives back freedom to contact anyone on any network on any platform,
anytime. With a completely new brand and value proposition, WTF is creating a unique relationship with the target
market set to progressively break the power of the network-effect by promoting unlimited use of the best
communication APPS (What’s APP, Skype, etc) and the Internet (Google, Youtube, Facebook, etc) allowing
youngsters to always stay connected using their smartphones, independent of what network they are using or even
in which country they are in.
To accommodate the need to still use traditional communication formats, WTF also includes 500 credits for calls,
over 8 hours of conversation. Take-up of the service is also supported by the fact that this specific target market
has a proportionately higher penetration rate of smartphones than the average of the population – over 55%
compared with around 37% respectively.
To establish a unique relationship the marketing campaign sought out key references and communication styles,
namely through promotion of well known Youtube personalities who are followed closely online by thousands of
youngsters.
All-net tariffs – more freedom, no network restrictions
Conscious of the adverse economic environment and its impacts on available income and spending habits, ZON
OPTIMUS focused commercial efforts on providing relevant offers adapted to consumer usage requirements and
the recognized need to save money. With the launch of “LIGA” in July, ZON OPTIMUS once again led a step
change in the Portuguese market, promoting more straightforward, cheaper tariff plans without any kind of network
constraints. LIGA is an all-net, flat-fee mobile tariff plan, designed for the lower end of the market that gives just the
right measure of usage at a very competitive price – 100 min / SMS / MMS for just 9.99 euros a month. In addition,
subscribers don’t need to worry if they go over their monthly limits as the additional charge outside of the plan is
one of the most competitive in the market. An add-on 200 MB data package is also available for 2.90 euro a month,
providing a very attractive package at very competitive costs.
Reinforced position in the Corporate, SME and SoHo segments
As a result of the merger, ZON OPTIMUS now stands stronger as a technologically superior and fully integrated
fixed and mobile operator, capable of offering relevant and competitive integrated and convergent
telecommunications and data services for the enterprise segments in Portugal. The deep coverage, capillarity and
high capacity of ZON OPTIMUS’ network are core differentiating factors for this segment.
With a new and fully integrated team, ZON OPTIMUS is already addressing the market as a single entity, capable
of providing tailor made solutions for the largest corporate and public sector customers, and reaching out to SME
and SoHo companies with specific solutions adapted to usage profile and geographic spread, leveraging the best
national NGN Fixed and Mobile footprint.
Teams have already been set-up to address the Corporate, SME and SoHo segments of the market. As an
example, an early initiative for the small to medium size segment was the launch of targeted quad play solutions for
almost residential-like user profiles that require reliable and cost oriented communication and TV services.
ZON OPTIMUS, SGPS, S.A
15 9M13 Consolidated Management Report
In the more demanding larger corporate segment, we have been growing consistently with integrated solutions for
an ever more convergent customer base and have been able to deliver high quality, robust and complex voice and
data communication services whilst also strengthening the extent of our existing and potential partnerships in this
field.
7.3 million RGUs
The combined fixed and mobile businesses of ZON OPTIMUS together have 7.3 million RGUs, of which 3.6 million
are mobile subscribers and close to 3.7 million fixed. With the completion of the merger and the implementation of
the new organizational structure and strategy, the stand-alone operations are being integrated. An immediate
example of this integration process is the migration of mobile customers from ZON, previously provisioned by an
MVNO agreement with Vodafone, onto the OPTIMUS network.
IRIS packages still growing strong
IRIS continues to post very strong numbers with an additional 155.4 thousand new subscribers taking these high-
end packages in 9M13. In total, we now have 390 thousand IRIS subscribers, 49% of ZON’s 3&4P base, equipped
to access this award winning service where leading edge design and usability have made non-linear viewing a key
differentiating factor from our competitors.
Initially with the launch of Restart TV in 2011 and then with the pioneering development in 2012 of Timewarp, a 7
day automatic recording feature for over 80 channels in the programming guide, non-linear viewing has become a
mainstream experience. Usage statistics show how essential this platform has become, with over 14 thousand
programmes available for viewing at any given time. Voted the most innovative TV service by consumers last year,
98% of IRIS customers have used this service at least once, and the large majority use the service every day.
ZON RGUs up by 1.4% to 3,485.7 thousand
In the Pay TV area underlying trends of previous periods were maintained with relatively flat cable customer
numbers and negative DTH.
The essential public services law imposed a change to the disconnection policy which was enforced upon all
operators, whereby customers that do not pay one month’s bill must be disconnected. In the past, ZON applied a
two unpaid bill policy and therefore implementation of the new rule led to a one-off pick-up in churn at the start of
the quarter. As a result basic subscriber net adds were impacted by around ten thousand one-off disconnections
mostly felt in the cable base.
Broadband and Fixed Voice subscribers continued to post solid yoy performance although lower than in previous
periods. Broadband subscribers grew by 5.9% yoy to 811.7 thousand and Fixed Voice subscribers grew by 3.7% to
995.4 thousand, respectively achieving a 68% and 82% penetration of the cable base.
ZON’s total number of RGUs grew by 1.4% yoy to 3,485.7 thousand with cable customers on average subscribing
to 2.51 services.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 16
Sequential quarterly increase in mobile subscribers at OPTIMUS
OPTIMUS’ mobile subscriber base posted an improvement at the end of 9M13, with a qoq increase of 8 thousand
subscribers in 3Q13 to 3,442.6 thousand impacted by seasonal improvement in the holiday months and revealing
signs that the negative impact of the end of the e-schools initiative on subscriber disconnections witnessed in past
quarters, is beginning to subside. However, in 9M13 as a whole net adds were still negative in 126 thousand
subscribers. Pre-paid customers remain the most significant of mobile subscribers at 67% of the base. Mobile data
revenues represented 33.8% of service revenues, up 0.4pp compared with 3Q12 and 79.7% of data revenues were
generated by non SMS data revenues, up by 3.4 pp yoy.
OPTIMUS’ previous stand-alone residential and corporate wireline business posted a decline of 1.9% in accesses
however this was a combination of a higher number of accesses in the enterprise segment (up by 1.4%) and a
decline of 4.7% in the number of residential accesses.
Increase in ZON ARPU of 0.5%, supported by IRIS and premium channels
Despite the difficult macroeconomic environment in Portugal and increased price competition in particular from one
of our competitors in the fixed residential market, the continued take-up of higher value fixed TV, Broadband and
Voice IRIS bundles, together with initial signs of recovery in premium channel subscription, led to an increase in
ARPU for ZON of 0.5% to 34.9 euros in 3Q13, while remaining practically flat in 9M13 at 35.0 euros, a marginal
decrease of 0.2% in comparison with 9M12.
At OPTIMUS, mobile ARPU recorded a yoy decline of 7.7% to 10.8 euros however sequential quarterly ARPU
actually remained flat in comparison with 2Q13, led by an increase in interconnection related ARPU revenues of
19% to 1.3 euros per subscriber due to higher roaming related revenues in the summer months. In 9M13
OPTIMUS mobile ARPU amounted to 10.6 euros.
The best and most extensive NGN fixed and mobile network in Portugal
ZON OPTIMUS has a clear network and technological advantage given that it is able to provide speeds of up to
360 Mbps to the 3.3 million homes passed by its HFC footprint, by far the largest Next Generation Network
coverage in Portugal.
We are well ahead in deploying our 4G network over the 800Mhz and 1.800Mhz bands and have already reached
80% population coverage, over 50% of which can benefit from speeds of up to 150Mbps. 4G is a key driver of
future leadership in mobile data, as well as for the continued development of even more sophisticated convergent
fixed-mobile solutions and to efficiently take our network architecture into a fully integrated and autonomous all-IP
future.
Universal Service
It was announced on 18 July by the Council of Ministers, that ZON was chosen, in a public contest, to provide the
Universal Service of connection to a public communications network in a fixed location and telephony services,
available to the public, in the South of mainland Portugal and in the Madeira and Azores Archipelagos. OPTIMUS
was the winner of the contest for the North and Center regions of Portugal.
ZON OPTIMUS, SGPS, S.A
17 9M13 Consolidated Management Report
This decision represents the acknowledgement of ZON OPTIMUS’ technological and commercial capabilities, in
providing electronic communications nationwide, at a significantly lower cost and with clear advantages to all
consumers, telecommunications operators, and the country.
Cinemas and Audiovisuals
In 9M13, ZON OPTIMUS’ Portuguese Cinema ticket sales posted a positive performance, increasing by 2.3% to
5.956 million tickets which compares with a decline in total market ticket sales of 10.1%1. The most successful films
shown in 9M13 were “The Gilded Cage”, “Fast & Furious 6”, “Despicable Me 2”, “The Hangover Part III”, and “The
Croods”.
3Q13 was the first full quarter since ZON Lusomundo opened the first IMAX® DMR - Digital 3D screen in Lisbon.
This premium cinema experience is proving very successful, having achieved around 40 thousand spectators in
this quarter.
Despite the good performance in the number of tickets sold average revenue per ticket decreased by 3.8% from
4.9 to 4.7 euros yoy, albeit posting sequential qoq growth of 1.8%, affected by comparatively lower 3D movie ticket
sales. Revenues from the sale of 3D movie tickets represented close to 15% of ZON OPTIMUS’ revenue from
ticket sales in 9M13, whereas they had represented around 24% in 9M12 and 36% in 9M11, which is due to the
lower number of movies in 3D and to customers choosing lower-cost 2D alternatives more than in the past.
Total Cinema revenues therefore decreased by 0.5% yoy in 9M13, with the 3.8% decline in the average revenue
per ticket more than offsetting the 2.3% improvement in the number of tickets sold.
As regards Cinema gross ticket revenues, ZON OPTIMUS’ relative performance was also stronger in comparison
with the market as a whole, posting a 1.5% decrease in 9M13 whilst the total market’s gross revenues decreased
by 12.6%. This performance has meant that ZON Lusomundo continues to strengthen its market position, with a
market share of 64.8% in terms of gross revenues in 9M13.
In 9M13, revenues in the Audiovisuals division improved by 0.1% to 43.3 million euros. ZON Audiovisuais
maintained its leading position in the distribution of movies for cinema exhibition, content and VoD distribution and
sale of homevideo content in Portugal.
Of the top 10 box-office hits in 3Q13, ZON Lusomundo distributed 7, “The Gilded Cage”, “Fast & Furious 6”,
“Despicable Me 2”, “Monsters University”, “Now You See Me”, “The Impossible” and “World War Z”, maintaining its
strong leading position with a 60.2% market share in terms of gross revenues.
International Growth - Africa
During 9M13, ZAP continued to expand its distribution network and is now present in most of the Angolan
Provinces through its own stores, ensuring a very strong representation across the whole country.
ZAP also continues to strengthen its product and content offering. During this quarter ZAP launched the Benfica TV
channel in Angola and Mozambique in exclusive. Benfica TV broadcasts all the live home matches of the main
football team of SL Benfica in the Portuguese League and therefore it is a very relevant addition to the portfolio of
sports channels.
1 Source ICA – Portuguese Institute for Cinema and Audiovisuals
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 18
6.2 Consolidated Financial Review
The merger by incorporation of OPTIMUS into ZON that led to the creation of ZON OPTIMUS was completed on
27 August 2013. As from this quarter, ZON OPTIMUS’ statutory financial statements reflect the financial
consolidation of 9 months of ZON and 1 month of OPTIMUS.
Resulting primarily from the merger, a number of accounting policies, practices and estimates have had to be
aligned. The primary changes to accounting policies, with the correspondent restatement of the prior period
accounts were the capitalization of customer acquisition costs at ZON in order to align with OPTIMUS’ policy also
followed by other telecom operators (EBITDA impact of +16.1 million euros in 9M12, +13.6 million euros in 9M13)
and capitalization of certain movie rights in the audiovisuals division following IAS 38, which were restated since
1Q12 in the statutory accounts (EBITDA impact of +17.8 million euros in 9M12, +19.4 million euros in 9M13).
In addition and in anticipation of the mandatory implementation of IFRS 11 as from 1Q14, whereby joint ventures
may no longer be consolidated proportionately, ZON OPTIMUS has proceeded to deconsolidate the three joint
ventures in which it holds stakes, ZAP (30%), Sport TV (50%) and Dreamia (50%) and has restated prior period
financial statements to reflect their recognition through the equity method (EBITDA impact of -40.9 million euros
9M12, -40.6 million euros in 9M13).
The financial statements reflect the impact in depreciation and amortization of the provisional calculation of the fair
value of OPTIMUS’ assets and liabilities which was used for the purposes of purchase price allocation resulting
from the consolidation of OPTIMUS.
ZON OPTIMUS, SGPS, S.A
19 9M13 Consolidated Management Report
Statutory Consolidated Financial Statements
Operating Revenues 590.5 636.4
ZON Telco 539.7 531.4
OPTIMUS 0.0 56.7
Audiovisuals 43.2 43.3
Cinema (1)39.9 39.6
Others and Eliminations (32.3) (34.6)
Operating Costs Excluding D&A (359.3) (378.4)
W&S (40.3) (41.0)
Direct Costs (167.5) (183.1)
Commercial Costs (2) (23.4) (24.6)
Other Operating Costs (128.0) (129.7)
EBITDA (3) 231.2 257.9
EBITDA Margin 39.2% 121.7%
Depreciation and Amortization (152.2) (159.4)
Income From Operations (4) 79.1 98.5
(Other Expenses) / Income (0.5) (31.7)
Operating Profit (EBIT) (5) 78.6 66.7
(Financial Expenses) / Income (29.5) (34.9)
Income Before Income Taxes 49.0 31.8
Income Taxes (16.8) (7.3)
Income From Continued Operations 32.2 24.5
o.w. Attributable to Non-Controlling Interests (0.9) (0.6)
Net Income 31.3 23.9(1) Includes operat ions in M ozambique.
(2) Commercial costs include commissions, market ing and publicity expenses and costs of equipment sold.
(3) EBITDA = Income From Operat ions + Depreciat ion and Amort izat ion.
(5) EBIT = Income Before Financials and Income Taxes.
(4) Income From Operat ions = Income Before Financials and Income Taxes + work force reduct ion programme costs + impairment of goodwill +
Losses/Gains on disposal of f ixed assets + Other costs/ income.
9M12 9M13Statutory Profit and Loss Statement (Millions of Euros)
Operating Revenues grew by 7.8% in 9M13 in comparison with 9M12, to 636.4 million euros.
In 9M13 EBITDA was driven by the aforementioned increase in Operating Revenues. Operating Costs grew by
5.3%. Therefore, EBITDA grew by 11.5% to 257.9 million euros in 9M13, representing an EBITDA Margin of 40.5%,
which compares with an EBITDA Margin of 39.2% in 9M12.
Net Income posted a yoy decrease of 23.7% in 9M13, amounting to 23.9 million euros, as a result of non-recurrent
Other Expenses of 32.3 million euros related with restructuring costs and to the increase in non cash which took
place in 3Q13.
It should be noted that the items above mentioned, relative to 9M13, are not directly comparable with 9M12, due to
the fact that, as previously mentioned, due to the merger and subsequent incorporation of OPTIMUS into ZON, the
statutory financial statements reflect the financial consolidation of 9 months of ZON and 1 month of OPTIMUS
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 20
Current Assets 476.1 453.9
Cash and Equivalents 273.2 57.6
Accounts Receivable, Net 158.0 329.1
Inventories, Net 31.6 33.9
Taxes Receivable 2.6 1.9
Prepaid Expenses and Other Current Assets 10.8 31.4
Non-current Assets 1,074.5 2,446.2
Investments in Group Companies 36.8 34.4
Intangible Assets, Net 323.6 1,096.3
Fixed Assets, Net 618.2 1,127.6
Deferred Taxes 52.2 164.2
Other Non-current Assets 43.7 23.7
Total Assets 1,550.6 2,900.1
Current Liabilities 574.3 635.3
Short Term Debt 295.3 85.0
Accounts Payable 210.5 313.0
Accrued Expenses 50.3 183.9
Deferred Income 5.2 27.9
Taxes Payable 12.5 22.5
Current Provisions and Other Liabilities 0.5 3.0
Non-current Liabilities 756.9 1,191.6
Medium and Long Term Debt 712.0 1,064.4
Non-current Provisions and Other Liabilities 44.9 127.3
Total Liabilities 1,331.2 1,826.9
Equity Before Non-Controlling Interests 210.0 1,063.5
Share Capital 3.1 5.2
Issue Premium 0.0 854.2
Own Shares (0.9) (0.9)
Reserves, Retained Earnings and Other 168.3 181.1
Net Income 39.5 23.9
Non-Controlling Interests 9.4 9.7
Total Shareholders' Equity 219.4 1,073.2
Total Liabilities and Shareholders' Equity 1,550.6 2,900.1
Balance Sheet (Millions of Euros) 2012 9M13
Note: Balance Sheet prepared considering the results corresponding to the consolidation of 9 months of ZON and 1 month of OPTIMUS. The
merger of ZON and OPTIMUS implied a capital increase of 206,064,552 new shares, issued at market close on the merger registry date, 27
August 2013. The nominal value of the shares is 0.01 euros each, and as such, a share issue premium of 854 million euros was generated.
Goodwill of 386 million euros was recorded as a result of the fair value calculation of OPTIMUS’ assets and liabilities, and may be revised over
the 12 months following the merger.
ZON OPTIMUS, SGPS, S.A
21 9M13 Consolidated Management Report
Pro-Forma Consolidated Financial Statements
To facilitate comparison between current and prior period results for the new ZON OPTIMUS, the following pro-
forma consolidated financial statements have been prepared, reflecting not only the statutory accounts restatement
due to the changes to accounting policies, but also the consolidation of 9 months of OPTIMUS’ results.
Operating Revenues 1,114.9 1,083.9 (2.8%)
Telco 1,064.3 1,034.7 (2.8%)
ZON Telco 548.7 538.0 (1.9%)
OPTIMUS 522.0 504.9 (3.3%)
Audiovisuals 43.2 43.3 0.1%
Cinema (1)39.9 39.6 (0.5%)
Others and Eliminations (38.9) (41.9) 7.9%
Operating Revenues Including 30% ZAP Contribution 1,136.3 1,115.1 (1.9%)
Operating Costs Excluding D&A (701.4) (665.6) (5.1%)
W&S (75.2) (71.5) (5.0%)
Direct Costs (316.2) (319.3) 1.0%
Commercial Costs (2) (78.9) (66.2) (16.1%)
Other Operating Costs (231.0) (208.7) (9.7%)
EBITDA (3) 413.5 418.3 1.2%
EBITDA Margin 37.1% 38.6% 1.5pp
Telco 385.3 392.0 1.7%
EBITDA Margin 36.2% 37.9% 1.7pp
Cinema Exhibition and Audiovisuals 28.1 26.3 (6.6%)
EBITDA Margin 37.5% 35.1% (2.4pp)
EBITDA Including 30% ZAP Contribution 416.4 428.6 2.9%
EBITDA Margin Including 30% ZAP Contribution 36.6% 38.4% 1.8pp
Depreciation and Amortization (254.5) (252.6) (0.7%)
Income From Operations (4) 159.0 165.7 4.2%
(Other Expenses) / Income (0.8) (34.1) n.a.
Operating Profit (EBIT) (5) 158.2 131.6 (16.8%)
(Financial Expenses) / Income (43.0) (50.6) 17.7%
Income Before Income Taxes 115.3 81.1 (29.7%)
Income Taxes (21.7) (4.0) (81.6%)
Income From Continued Operations 93.6 77.1 (17.7%)
o.w. Attributable to Non-Controlling Interests (0.9) (0.6) (33.8%)
Net Income 92.7 76.5 (17.5%)(1) Includes operat ions in M ozambique.
(2) Commercial costs include commissions, market ing and publicity expenses and costs of equipment sold.
(3) EBITDA = Income From Operat ions + Depreciat ion and Amort izat ion.
(5) EBIT = Income Before Financials and Income Taxes.
9M13Pro-Forma Profit and Loss Statement
(Millions of Euros)9M13 / 9M129M12
(4) Income From Operat ions = Income Before Financials and Income Taxes + work force reduct ion programme costs + impairment of goodwill + Losses/Gains on disposal of f ixed
assets + Other costs/ income.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 22
Pro-Forma Operating Revenues
Consolidated Operating Revenues reached 1,083.9 million euros in 9M13, a decline of 2.8% in comparison with
9M12. Adding back the contribution from the 30% stake in ZAP, Consolidated revenues posted a decline of 1.9% to
1,115.1 million euros.
Combined Revenues for the Telco business declined by 2.8% to 1,034.7 million euros. ZON Telco Revenues
posted a 1.9% yoy reduction to 538 million euros. The pace of decline in 3Q13 (-1.9%) reflected an inflexion in
3Q13 in comparison with 2Q13 (-2.8%). This was driven by an improvement in sequential quarterly performance of
premium channel Revenues, and an improving mix of customers due to the increased penetration of higher value
packages with IRIS throughout 9M13. However these positive trends were somewhat dampened by increased
promotional and retention activity particularly in 3Q13 in response to the aggressive triple play pricing campaign
initiated by one of our competitors. Basic ARPU revenues were relatively flat y.o.y. (-0.3%) and premium ARPU
revenues posted a yoy decline of 13.7%, however monthly premium ARPU revenues started to improve with the
increase in the average premium channel subscriptions throughout 3Q13. At OPTIMUS, Revenues declined by
3.3% yoy to 504.9 million euros, again showing a sequential yoy improvement in 2Q13 (-1.7%) and 3Q13 (-1.6%)
in comparison with 1Q13 (-6.6%). Service Revenues fell by 3.9% yoy to 477.7 million euros, resulting from lower
customer revenues, down 8.5% yoy due to the still challenging macro environment which was partially
compensated by an almost 12% increase in Operator Revenues due to the seasonal boost in roaming in the
summer months in 3Q13 and to a good performance of wholesale revenues and mass calling services throughout
9M13.
Revenues from the Audiovisuals business in 9M13 grew by 0.1% yoy to 43.3 million euros also recording a
sequential improvement in quarterly yoy trends, with 3Q13 posting yoy growth of 5.0%. In 1Q13 and 2Q13 the yoy
growth rates had been 0.1% and -4.2%, respectively. Cinema Exhibition revenue trends posted a yoy decline of
0.5% to 39.6 million euros in 9M13. Despite the fact that the number of tickets sold was 2.3% higher y.o.y. average
revenue per ticket fell by 3.8% due primarily to a decline in the proportion of 3D ticket sales. In contrast, when
compared with 2Q13, cinema exhibition revenues increased significantly in 3Q13 by 30.5% led by the larger
number of box office hits.
ZON OPTIMUS’ 30% stake in ZAP, its international Pay TV operation in Angola and Mozambique, continued to
post good growth in revenues and operations are still performing very well with growth in the subscriber base and
stable ARPU levels.
Pro-Forma EBITDA
Consolidated EBITDA grew by 1.2% in 9M13 to 418.3 million euros generating an EBITDA margin of 38.6% and
representing growth of 1.5pp in margin in comparison with 9M12. Including the contribution from ZON OPTIMUS’
30% stake in ZAP, Consolidated EBITDA would have posted growth of 2.9%. Telco EBITDA grew by 1.7% in 9M13
to 392 million euros and EBITDA from the Audiovisuals and Cinema operations decreased by 6.6% to 26.3 million
euros.
Pro-Forma Consolidated Operating Costs Excluding D&A
Consolidated Operating Costs declined by 5.1% to 665.6 million euros in 9M13, a reflection of the group wide
effort to contain and adjust the cost structure to the challenging macroeconomic environment. Important savings
were achieved in practically all relevant cost items.
ZON OPTIMUS, SGPS, S.A
23 9M13 Consolidated Management Report
Wages and Salaries fell by 5.0% to 71.5 million euros in 9M13 as a result mainly of a lower average level of
headcount at the telco division in comparison with 9M12. Where possible ZON OPTIMUS has made efforts to
accommodate normal staff attrition levels and this average reduction in salary costs yoy does not yet reflect any
material impact of ongoing restructuring measures post-merger.
Direct Costs increased by 1.0% to 319.3 million euros in 9M13 mainly due to a higher level of traffic related costs
from mass-calling services and an increase in wholesale activity throughout 9M13 and to increased traffic costs led
by the higher yoy MVNO customer base at ZON, in 3Q13.
Commercial Costs fell by 16.1% in 9M13 to 66.2 million euros led mainly by an effort to contain marketing related
costs and by a decline in handset equipment sales.
Other Operating Costs reduced by 9.7% to 208.7 million euros in 9M13 with continued strong cost discipline
driving savings in areas such as support services, maintenance and repairs and other SGA.
Pro-Forma Net Income
Net Income amounted to 76.5 million euros in 9M13. Despite the positive yoy EBITDA performance, non-recurrent
Other Expenses of 32.8 million euros in 3Q13 related with restructuring costs and to the increase in non cash
provisions fully explain the decline in Net Income.
Depreciation and Amortization posted a yoy decline of 0.7% to 252.6 million euros.
Other Expenses* incorporate restructuring costs resulting from the merger of approximately 16 million euros in
3Q13 and reflect primarily the cash out and provisions for curtailment costs as well as some other restructuring
related charges. The remaining costs are related with one-off non-cash increase in provisions in 3Q13 that result
from alignment of estimates between the two companies. In 9M13, Other Expenses amounted to 34.1 million euros.
Net Financial Expenses were 17.7% higher in 9M13 at 50.6 million euros compared with 43.0 million euros in
9M12, although the amount recorded in 3Q13 is in line with 2Q13. The yoy increase is a result of a progressively
higher average cost of interest as some of the older and less expensive financing lines matured and with the
entrance of the new retail bonds issued in June 2012. This effect is partially compensated by the lower average
level of consolidated debt.
Income Taxes amounted to 4.0 million euros in 9M13 mainly on the back of a gain of 12.5 million euros in 3Q13,
due primarily to (i) a reduction in EBT of 85% to 6.1 million euros; (ii) recognition of incremental deferred tax assets
generated by application of state tax surcharge (approximately 4%) and (iii) recognition of deferred tax assets on
investment related tax benefits. The last two impacts are non recurrent and exceptional in nature.
* In accordance with IAS 1, the caption “Other expenses” reflects material and unusual expenses that should be disclosed separately from usual
line items, to avoid distortion of the financial information from regular operations, namely restructuring costs resulting from the merger (including
curtailment costs) as well as one-off non-cash items that result from alignment of estimates between the two companies.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 24
Pro-Forma CAPEX
Telecoms 194.9 162.4 (16.7%)
Infrastructure 94.2 67.5 (28.4%)
Customer Related CAPEX 94.5 89.2 (5.5%)
Other 6.2 5.7 (7.2%)
Audiovisuals and Cinema Exhibition 21.6 21.9 1.2%
Recurrent CAPEX 216.5 184.3 (14.9%)
Non-Recurrent CAPEX 0.0 4.5 n.a.
Total CAPEX 216.5 188.8 (12.8%)
Pro-Forma CAPEX (Millions of Euros) 9M13 / 9M129M12 9M13
Telco CAPEX reduced by 16.7% yoy to 162.4 million euros in 9M13 representing 15.7% of Telco Operating
Revenues. This is explained almost entirely by a reduction in network related CAPEX due to lower LTE deployment
in comparison with previous years.
The increase in Telco customer related CAPEX was due to a slightly higher level of investment in customer
premise equipment driven by the continued increase in penetration of triple play IRIS services.
Audiovisuals and Cinemas recorded CAPEX of 21.9 million euros in 9M13, reflecting the capitalization as from this
quarter and restated to 1Q12, of certain movie rights in the Audiovisuals division.
Total CAPEX declined by 12.8% in 9M13 to 188.8 million euros representing 17.4% of Total Operating Revenues.
Pro-Forma Operating Free Cash Flow
EBITDA 413.5 418.3 1.2%
Recurrent CAPEX (216.5) (184.3) (14.9%)
EBITDA - Recurrent CAPEX 197.0 234.0 18.8%
Non-Cash Items Included in EBITDA - Recurrent
CAPEX(1) and Change in Working Capital (46.0) (66.1) 43.6%
Operating Cash Flow After Investment 150.9 167.8 11.2%
Long Term Contracts (16.5) (18.2) 10.6%
Net Interest Paid and Other Financial Charges (36.6) (46.7) 27.5%
Income Taxes Paid (9.2) (11.1) 21.2%
Other Cash Movements (0.1) 0.7 n.a.
Recurrent Free Cash-Flow 88.5 92.4 4.5%
LTE Payments (83.0) (6.0) (92.8%)
Non-Recurrent CAPEX 0.0 (4.5) n.a.
Cash Restructuring Payments 0.0 (6.5) n.a.
Total Free Cash Flow 5.5 75.5 n.a.(1) This capt ion includes non-cash provisions included in EBITDA.
9M13 / 9M12Pro-Forma Cash Flow (Millions of Euros) 9M12 9M13
ZON OPTIMUS, SGPS, S.A
25 9M13 Consolidated Management Report
EBITDA – Recurrent CAPEX increased by 18.8% to 234.0 million euros in 9M13 as a result of the solid
performance in EBITDA and the 14.9% decline in Recurrent CAPEX.
Operating Cash Flow After Investment recorded an increase of 11.2% to 167.8 million euros in 9M13. For the
YTD period, non-cash items in EBITDA – Recurrent CAPEX and Change in Working Capital reflect the impact of
an outflow at OPTIMUS in January 2013 related with 2012 ICP-Anacom fees representing around 12 million euros
that under normal circumstances would have occurred in 2012.
Pro-Forma Total Free Cash Flow
Recurrent FCF increased by 4.5% in 9M13 to 92.4 million euros, reflecting the continued good FCF momentum in
the business. Additional non-recurrent cash outflows occurred in the period as a result of the ongoing restructuring
cash payments due to the merger process, to part of the remaining payments related with the LTE licence and to
some non-recurrent CAPEX from set-top-box substitution due to the migration to MPEG4 compression technology
in the DTH operation, as explained in previous reporting periods.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 26
Pro-Forma Consolidated Balance Sheet
Current Assets 704.3 453.9
Cash and Equivalents 306.6 57.6
Accounts Receivable, Net 326.3 329.1
Inventories, Net 43.2 33.9
Taxes Receivable 2.7 1.9
Prepaid Expenses and Other Current Assets 25.4 31.4
Non-current Assets 2,532.6 2,446.2
Investments in Group Companies 36.8 34.4
Intangible Assets, Net 1,121.8 1,096.3
Fixed Assets, Net 1,164.5 1,127.6
Deferred Taxes 162.3 164.2
Other Non-current Assets 47.3 23.7
Total Assets 3,236.9 2,900.1
Current Liabilities 1,005.5 635.3
Short Term Debt 424.1 85.0
Accounts Payable 372.7 313.0
Accrued Expenses 166.3 183.9
Deferred Income 23.2 27.9
Taxes Payable 18.8 22.5
Current Provisions and Other Liabilities 0.5 3.0
Non-current Liabilities 1,181.4 1,191.6
Medium and Long Term Debt 1,044.4 1,064.4
Non-current Provisions and Other Liabilities 137.0 127.3
Total Liabilities 2,186.9 1,826.9
Equity Before Non-Controlling Interests 1,040.6 1,063.5
Share Capital 5.2 5.2
Issue Premium 854.2 854.2
Own Shares (0.9) (0.9)
Reserves, Retained Earnings and Other 67.9 128.5
Net Income 114.3 76.5
Non-Controlling Interests 9.4 9.7
Total Shareholders' Equity 1,050.0 1,073.2
Total Liabilities and Shareholders' Equity 3,236.9 2,900.1
Pro-Forma Balance Sheet (Millions of Euros) 2012 9M13
ZON OPTIMUS, SGPS, S.A
27 9M13 Consolidated Management Report
Pro-Forma Capital Structure
At the end of 9M13, Net Financial Debt stood at 957.2 million euros, representing a decline of 1.4% in comparison
with the end of 2012.
At the time of the merger, OPTIMUS’ Net Financial Debt was mainly comprised of shareholder loans which were
repaid using (i) credit facilities pushed down from Sonaecom to ZON OPTIMUS, (ii) liquidity position available at
ZON and (iii) two new commercial paper lines with 4-year maturity, therefore increasing the average maturity of
ZON OPTIMUS’ Net Financial Debt to 1.9 years. ZON OPTIMUS is now financed until 1H15.
The total interest rate hedging operations in place at the end of 9M13 amounted to 257.5 million euros. Taking into
account the bonds issued in June 2012 - 200 million euros bearing interest at a fixed rate of 6.85% - the proportion
of ZON OPTIMUS’ Net Financial Debt that is protected against variations in interest rates is 48%.
Total financial debt at the end of 9M13 amounted to 1,021.3 million euros, which was offset with a cash and short-
term investments position on the balance sheet of 64.1 million euros. The all-in average cost of ZON OPTIMUS’
Net Financial Debt at the end of 9M13 was 5.15%. Pro-forma cost of debt for 9M13 was 5.61%.
The change in Net Financial Debt in 9M13 is explained by FCF generation of 75.5 million euros deducted of the
2012 dividend payment of 62 million euros.
Net Financial Gearing reduced to 47.1% at the end of 9M13 compared with 48.0% at the end of 2012, and Net
Financial Debt / EBITDA (last 4 quarters) stands at 1.7x.
Short Term 404.6 68.1 (83.2%)
Bank and Other Loans 395.0 58.3 (85.2%)
Financial Leases 9.6 9.9 2.8%
Medium and Long Term 927.7 953.2 2.8%
Bank and Other Loans 916.6 943.6 2.9%
Financial Leases 11.1 9.6 (13.5%)
Total Debt 1,332.3 1,021.3 (23.3%)
Cash, Short Term Investments and Intercompany Loans 361.6 64.1 (82.3%)
Net Financial Debt 970.7 957.2 (1.4%)
Net Financial Gearing (1) 48.0% 47.1% (0.9pp)
Net Financial Debt / EBITDA 1.8x 1.7x n.a.(1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).
Pro-Forma Net Financial Debt (Millions of Euros) 2012 9M13 / 20129M13
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 28
7
Consolidated Financial Statements
ZON OPTIMUS, SGPS, S.A. Consolidated Statement of Comprehensive Income
for the nine and three months ended 30 September 2013 and 2012
and 30 September 2012 restated (Amounts stated in thousands of euros)
Notes 3º Quarter 12 9M 12 3º Quarter 12 9M 12 3º Quarter 13 9M 13
Reported Reported Restated Restated(Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a)
REVENUES:
Services rendered 205,100 615,154 189,848 569,121 240,586 611,733
Sales 8,987 24,651 6,737 18,440 8,678 19,925
Other operating revenues 4 1,221 4,098 792 2,963 2,329 4,694
4 and 5 215,308 643,903 197,377 590,524 251,594 636,351
COSTS, LOSSES AND GAINS:
Wages and salaries 4 14,899 44,288 13,511 40,284 16,892 41,028
Direct costs 4 and 6 62,296 180,021 55,276 167,544 75,188 183,116
Costs of products sold 4,560 12,739 1,911 5,496 4,407 6,860
Marketing and advertising 5,590 17,080 4,945 14,962 4,125 13,614
Support services 7 14,144 44,833 13,926 44,175 15,522 42,138
Supplies and external services 4 and 7 30,436 95,005 24,583 75,938 31,644 79,291
Other operational costs 159 743 133 339 338 422
Taxes 1,836 4,722 1,690 4,301 2,400 4,731
Provisions and adjustments 4 and 8 1,659 6,238 1,699 6,238 (198) 7,220
Depreciation, amortisation and impairment losses 4 and 9 52,620 160,076 51,057 152,175 59,845 159,445
Reestructuring costs 21 (4) 977 (4) 977 15,926 16,133
Losses/(gains) on sale of assets, net (400) (629) (397) (626) 156 (667)
Other losses/(gains) non-recurring, net 21 42 213 42 161 16,193 16,275
187,836 566,305 168,372 511,963 242,438 569,607
Income before financial results and taxes 27,472 77,598 29,005 78,561 9,156 66,744
Financial costs 10 8,024 19,744 6,845 16,059 8,629 22,263
Net foreign exchange losses/(gains), net (173) (301) (142) (175) 51 93
Net losses/(gains) on financial assets, net 27 628 10 628 805 1,330
Equity in earnings of affiliated companies, net 11 33 198 1,666 974 (681) (2,335)
Net other financial expenses/(income) 10 3,973 10,636 4,290 12,040 4,823 13,586
11,885 30,905 12,670 29,525 13,627 34,936
Income before taxes 15,588 46,693 16,336 49,037 (4,471) 31,808
Income taxes 4 and 12 5,751 16,202 5,991 16,835 (3,290) 7,335
Net consolidated income 9,837 30,490 10,344 32,200 (1,181) 24,474
Attributable to:
Non-controlled interests 245 860 245 860 211 570
ZON Optimus Group shareholders 9,592 29,630 10,099 31,340 (1,393) 23,904
Earnings per share
Basic - euros 13 0.03 0.10 0.03 0.10 (0.00) 0.07
Diluted - euros 13 0.03 0.10 0.03 0.10 (0.00) 0.07
(a) As standard practice, only annual accounts are audited; quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the nine months ended
30 September 2013.
Chartered Accountant Board of Directors
ZON OPTIMUS, SGPS, S.A
29 9M13 Consolidated Management Report
ZON OPTIMUS, SGPS, S.A. Consolidated Statement of Comprehensive Income
for the nine and three months ended 30 September 2013 and 2012
and 30 September 2012 restated (Amounts stated in thousands of euros)
3º Quarter 12 9M 12 3º Quarter 12 9M 12 3º Quarter 13 9M 13
Reported Reported Restated Restated
(Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a)
Net income for the year 9,837 30,490 10,344 32,200 (1,181) 24,474
Other Income
Itens that may be reclassified subsequently to the income statement
Fair value of interest rate swap (Note 23) (1,548) (3,732) (1,548) (3,732) (725) 1,336
Deferred income tax - interest rate swap (Note 23) 411 989 411 989 205 (354)
Fair value of exchange rate forward (Note 23) (187) (528) (187) (528) (176) (87)
Deferred income tax -exchange rate forward (Note 23) 54 153 54 153 38 25
Currency translation differences (129) (271) (129) (271) 103 84
Other comprehensive income (1,399) (3,389) (1,399) (3,389) (556) 1,003
Total comprehensive income for the year 8,438 27,101 8,945 28,811 (1,737) 25,477
Attributable to:
Share owners of ZON Optimus Group 8,193 26,241 8,700 27,951 (1,949) 24,907
Non-controlling interests 245 860 245 860 211 570
8,438 27,101 8,945 28,811 (1,737) 25,477
(a) As standard practice, only annual accounts are audited; quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the statement of comprehensive income for the nine months ended September
30, 2013.
Chartered Accountant Board of Directors
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 30
ZON OPTIMUS, SGPS, S.A. Consolidated Statement of Financial Position as of 30 September 2013,
31 December 2012 and 30 September 2012
and 30 September 2012 and 31 December 2012 restated (Amounts stated in thousands of euros)
Notes 30-09-2012 31-12-2012 30-09-2012 31-12-2012 30-09-2013
Reported Reported Restated Restated
(Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a)
Assets
Current assets:
Cash and cash equivalents 4 and 15 324,525 308,251 300,110 273,179 57,586
Accounts receivable - trade 16 123,113 130,522 113,351 119,147 290,229
Accounts receivable - other 53,802 41,901 59,800 38,826 38,830
Inventories 4 51,210 44,317 37,573 31,581 33,913
Taxes receivable 4,301 4,669 1,555 2,556 7,576
Non-current assets held-for-sale 678 678 678 678 678
Prepaid expenses 15,706 11,930 10,976 9,886 30,618
Other current assets - - 461 242 129
Derivative financial instruments 23 3 - 3 - -
Total current assets 573,338 542,269 524,508 476,094 459,560
Non-current assets:
Accounts receivable - other 32,573 25,455 1,624 1,700 5,400
Tax receivable - - 17 1 -
Investments in participated companies 234 222 35,089 35,079 32,489
Investments held-to-matutrity 21,444 22,187 21,444 22,187 -
Available-for-sale financial assets 20,629 20,629 20,629 20,629 19,329
Intangible assets 4 and 17 309,277 319,155 298,454 323,621 1,115,286
Tangible assets 4 and 18 629,789 632,047 615,652 618,238 1,108,653
Investment property 853 842 853 842 812
Deferred income tax assets 4 and 12 50,153 48,146 55,379 52,193 164,219
Total non-current assets 1,064,951 1,068,685 1,049,140 1,074,490 2,446,187
Total assets 1,638,289 1,610,953 1,573,647 1,550,584 2,905,747
Liabilities
Current liabilities:
Borrowings 19 442,958 363,254 373,128 295,328 84,988
Accounts payable-trade 20 139,671 157,052 138,711 158,133 245,764
Accounts payable-other 38,190 57,076 35,617 52,350 67,273
Accrued expenses 4 60,233 51,628 56,119 50,274 183,882
Deferred income 7,783 9,514 5,227 5,232 27,909
Taxes payable 24,031 12,800 22,308 12,525 28,141
Provisions for other liabilities and charges 4 and 21 20 420 20 420 2,850
Derivative financial instruments 23 - 45 - 45 132
Total current liabilities 712,885 651,788 631,131 574,307 640,939
Non-current liabilities:
Borrowings 4 and 19 691,931 721,219 686,239 711,994 1,064,350
Accounts payable-other - 90 - - -
Accrued expenses 4 - - - - 16,887
Defered income 1,485 1,385 1,485 1,385 2,206
Provisions for other liabilities and charges 4 and 21 9,197 8,411 29,009 29,951 94,820
Deferred income tax liabilities 4 and 12 3,468 2,776 8,052 7,488 8,623
Derivative financial instruments 23 6,308 6,051 6,308 6,051 4,715
Total non-current liabilities 712,390 739,931 731,093 756,869 1,191,602
Total liabilities 1,425,275 1,391,719 1,362,224 1,331,175 1,832,541
Shareholder's equity
Share capital 22.1 3,091 3,091 3,091 3,091 5,152
Capital issued premium 22.2 - - - - 854,219
Treasury shares 22.3 (916) (914) (916) (914) (896)
Legal reserve 22.4 3,556 3,556 3,556 3,556 3,556
Other reserves 22.4 163,843 164,381 163,843 164,382 173,311
Retained earnings 32,925 39,723 31,334 39,898 28,129
Equity before non-controlled interests 202,499 209,838 200,908 210,013 1,063,470
Non-controlled interests 10,515 9,396 10,515 9,396 9,736
Total equity 213,014 219,234 211,423 219,409 1,073,207
Total liabilities and shareholder's equity 1,638,289 1,610,953 1,573,647 1,550,584 2,905,747
(a) As standard practice, only annual accounts are audited; quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as of 30 September 2013.
Chartered Accountant Board of Directors
ZON OPTIMUS, SGPS, S.A
31 9M13 Consolidated Management Report
ZON OPTIMUS, SGPS, S.A. Consolidated Statement of Changes in Shareholders' Equity for the nine months ended
30 September 2013 and 2012 (restated) (Amounts stated in thousands of euros)
Notes Share capital
Premium for
issue of
shares
Own shares
Premium Own shares
Legal
reserve
Other
reserves
Retained
earnings
Non-controlled
interests Total
Balance as at 1 January 2012 (Reported) 3,091 - (552) (3) 3,556 162,919 56,019 9,984 235,013
Changes in accounting policies 2 - - - - - - (3,302) - (3,302)
Balance as at 1 January 2012 (Restated) (a) 3,091 - (552) (3) 3,556 162,919 52,717 9,984 231,713
Dividends attributed to non-controlled interests - - - - - - - (329) (329)
Dividends paid 14 - - - - - (14,730) (34,708) - (49,438)
Undistributed profit - - - - - 18,016 (18,016) - (0)
Aquisition of own shares 22.3 - - (902) (4) - - - - (906)
Distribuition of own shares 22.3 - - 542 3 - (544) - - -
Share Plan 27 - - - - - 1,540 - - 1,540
Comprehensive income for the period - - - - - (3,389) 31,340 860 28,811
Consolidation differences - - - - - 31 - - 31
Balance as at 30 September 2012 (Restated) (a) 3,091 - (912) (4) 3,556 163,843 31,334 10,515 211,423
Balance as at 1 January 2013 (Reported) 3,091 - (910) (4) 3,556 164,381 39,723 9,396 219,234
Changes in accounting policies 2 - - - - - - 175 - 175
Balance as at 1 January 2013 (Restated) (a) 3,091 - (910) (4) 3,556 164,381 39,898 9,396 219,407
Dividends attributed to minority interests - - - - - - - (229) (229)
Dividends paid 14 - - - - - (1,371) (35,673) - (37,045)
Capital increase by incorporation of Optimus SGPS in ZON 22.2 2,061 854,344 - - - - - - 856,404
Costs related to the capital increase 22.2 - (125) - - - - - - (125)
Aquisition of own shares 22.3 - - (1,486) (4) - - - - (1,490)
Distribuition of own shares 22.3 - - 1,502 6 - (1,508) - - -
Share Plan 4 and 27 - - - - - 1,223 - - 1,223
Comprehensive income for the period - - - - - 1,003 23,904 570 25,477
Consolidation differences - - - - - 1,037 - - 1,037
Balance as at 30 September 2013 (a) 5,152 854,219 (895) (2) 3,556 173,311 28,129 9,736 1,073,207
(a) As standard practice, only annual accounts are audited; quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity for the nine
months ended 30 September, 2013.
Chartered Accountant Board of Directors
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 32
ZON OPTIMUS, SGPS, S.A. Statements of Cash Flows for the nine months ended 30 September 2013 and 2012
and 30 September 2012 restated (Amounts stated in thousands of euros)
Notes 9M 12 9M 12 9M 13
Reported Restated
(Unaudit ) (a) (Unaudit ) (a) (Unaudit ) (a)
OPERATING ACTIVITIES
Collections from clients 796,934 737,417 766,709
Payments to suppliers (480,512) (452,959) (453,795)
Payments to employees (43,473) (39,492) (47,889)
Payments relating to income taxes (13,213) (12,725) (8,560)
Other cash receipts / payments related with operating activities (70,010) (60,989) (46,569)
Cash flow from operating activities (1) 189,726 171,252 209,896
INVESTING ACTIVITIES
Cash receipts resulting from
Financial investments - - 35
Tangible fixed assets 1,267 1,263 2,222
Loans granted 2,415 3,450 27,316
Financial aplications - - 24,343
Interest and related income 13,285 11,571 2,903
16,968 16,285 56 821
Payments resulting from
Financial investments (6) (6) -
Tangible fixed assets (72,827) (70,651) (68,001)
Intangible assets (3,005) (22,479) (21,240)
Loans granted (6,313) (9,018) (21)
(82,152) (102,154) (89,262)
Cash flow from investing activities (2) (65,183) (85,869) (32,442)
FINANCING ACTIVITIES
Cash receipts resulting from
Loans obtained 1,989,562 1,965,000 1,157,525
Subsidies - - 47
1,989,562 1,965,000 1 157 572
Payments resulting from
Loans obtained (2,075,386) (2,044,802) (1,481,050)
Lease rentals (principal) (27,950) (18,323) (16,824)
Interest and related expenses (45,340) (42,692) (31,258)
Dividends 14 (49,767) (49,767) (37,273)
Acquisition of own shares 22 (906) (906) (1,490)
Other financial activities (116) (116) (692)
(2,199,466) (2,156,605) (1,568,587)
Cash flow from financing activities (3) (209,903) (191,605) (411,015)
Change in cash and cash equivalents (4)=(1)+(2)+(3) (85,359) (106,222) (233,561)
Effect of exchange differences 95 95 (19)
Cash and cash equivalents at the beginning of the period 15 407,362 406,237 273,179
Changes in the consolidated scope 4 2,427 - 17,987
Cash and cash equivalents at the end of the period 15 324,525 300,110 57,586
(a) As standard practice, only annual accounts are audited; quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of cash flows for the nine months ended 30
September 2013.
Chartered Accountant Board of Directors
ZON OPTIMUS, SGPS, S.A
33 9M13 Consolidated Management Report
ZON OPTIMUS, SGPS, S.A. Notes to the Consolidated Financial Statements as of 30 September 2013
Index of notes to the consolidated financial statements
1. Introductory note 34
2. Accounting Policies 35
3. Judgments and estimates . 38
4. Changes in the consolidation perimeter 38
5. Segment Reporting 41
6. Direct Costs 43
7. Support services and provision of external services 43
8. Provisions and adjustments 44
9. Depreciation, amortisation and impairment losses 44
10. Financing costs and other costs / (income), net 45
11. Losses / (gains) of affiliated companies 45
12. Income tax expense 45
13. Earnings per share 47
14. Dividends 47
15. Cash and cash equivalents 48
16. Accounts receivable – customers 48
17. Intangible assets 48
18. Tangible Assets 50
19. Borrowings 50
20. Accounts payable - suppliers 52
21. Provisions 53
22. Shareholder’s equity 55
23. Derivatives 57
24. Guarantees and financial undertakings 59
25. Related Parties 61
26. Ongoing litigation and contingent assets and liabilities 64
27. Shares incentive scheme 66
28. Subsequent Events 68
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 34
ZON OPTIMUS, SGPS, S.A. Notes to Consolidated Financial Statements as of 30 September 2013
(Amounts stated in thousands of euros)
1. Introductory note
ZON Optimus, SGPS, SA ("Zon Optimus" or "Company"), formerly named of Zon Multimédia – Serviços de
Telecomunicações e Multimédia, SGPS, S.A., with Company headquartes registered at Rua Actor Antonio Silva, 9,
Campo Grande, was established by Portugal Telecom, SGPS, SA ("Portugal Telecom") on July 15, 1999 for the
purpose of implementing its multimedia business strategy.
During the 2007 financial year, Portugal Telecom proceeded with the spin-off of ZON through the attribution of its
shares in the company to its shareholders, resulting in it becoming fully independent from Portugal Telecom.
During the 2013 financial year, Zon Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A.,
("ZON") and Optimus, SGPS, S.A. ("Optimus SGPS") have merged through the incorporation of Optimus SGPS
into ZON. Thereafter, the Company adopted the current designation of ZON Optimus, SGPS, S.A..
The business operated by ZON Optimus and its associated companies, which together form the "ZON Optimus
Group" or "Group", includes cable and satellite television services, voice and Internet access services, video
production and sale, advertising on Pay TV channels, cinema exhibition and distribution, and the production of
channels for Pay TV.
ZON Optimus shares are listed on the Euronext Lisbon market.
Cable and satellite television in Portugal is mainly provided by ZON TV Cabo Portugal , S.A. ("ZON TV Cabo") and
its subsidiaries, ZON TV Cabo Açoreana, S.A. ("ZON TV Cabo Açoreana") and ZON TV Cabo Madeira, S.A. ("ZON
TV Cabo Madeira") . These companies carry out: a) cable and satellite television distribution; b) the operation of
electronic communications services, including data and multimedia communication services in general; c) IP voice
services ("VOIP" - Voice over IP); d) Mobile Virtual Network Operator (“MVNO”), and e) the provision of
consultancy and similar services directly or indirectly related to the above mentioned activities and services. The
business of ZON TV Cabo, ZON TV Cabo Açoreana and ZON TV Cabo Madeira is regulated by Law no . 5/2004
(Electronic Communications Law) , which establishes the legal regime governing electronic communications
networks and services.
ZON Conteúdos – Atividade de Televisão e de Produção de Conteúdos, S.A. (“ZON Conteúdos”) and ZON
Lusomundo TV, Lda. (“ZON Lusomundo TV”) operate in the television and content production business, and
currently produce films and series, which are distributed, among other operators, by ZON TV Cabo and its
affiliates. ZON Conteúdos also manages the advertising space on Pay TV channels and in the cinemas of ZON
Lusomundo Cinemas, S.A. (“ZON LM Cinemas”).
ZON Lusomundo Audiovisuais, S.A. (“ZON LM Audiovisuais”) and ZON LM Cinemas together with their associated
companies operate in the audiovisual sector, which includes video production and sale, cinema exhibition and
distribution, and the acquisition/negotiation of Pay TV and VOD (video-on-demand) rights.
On 27 August 2013, the Company completed a merger operation by incorporation of Optimus SGPS into ZON.
Optimus SGPS was a parent company of a group of companies which includes Optimus - Comunicações S.A.
which operates a next generation mobile communication networks, GSM/UMTS/LTE, with extensive coverage in
the national territory, as well as latest next generation wireline network, which includes a transmission component,
a backbone component and local access fiber components. As a result of the merger, all Optimus SGPS
subsidiaries were included in the consolidation scope: Be Artis – Concepção, Construção e Gestão de Redes de
Comunicação, S.A. (“Be Artis”), which operates in the design, construction, management and exploitation of
electronic communications networks and their equipment and infrastructure, management of technologic assets
ZON OPTIMUS, SGPS, S.A
35 9M13 Consolidated Management Report
and rendering of related services; Be Towering – Gestão de Torres de Telecomunicações, S.A. (“Be Towering”),
which operates in the implementation, installation and exploitation of towers and other sites for the installation of
telecommunications equipment; Optimus - Communications , SA ("Optimus") , which operates in the
implementation, operation, exploitation and offer of networks and rendering services of electronic communications
and related resources; offer and commercialization of products and equipments of electronic communications; Per-
mar – Sociedade de Construções, S.A. (“Per-mar”), which operates in the purchase, sale, renting and operation of
property and commercial establishments, and Sontária – Empreendimentos Imobiliários, S.A. (“Sontária”), which
operates in the undertaking of urbanization and building construction, planning, urban management, studies,
construction and property management, purchase and sale of properties and resale of properties purchased for
that purpose.
These Notes to the Consolidated Financial Statements follow the order in which the items are shown in the
consolidated financial statements.
The consolidated financial statements for the nine month period ended 30 September 2013 were approved by the
Board of Directors and their publication authorized on 13 November 2013.
2. Accounting Policies
2.1. Basis of presentation
The consolidated financial statements were prepared on a going concern basis from the books and accounting
records of the companies included in the consolidation (Annex I), using the historical cost convention, adjusted
where applicable by the valuation of financial assets and liabilities (including derivatives) at fair value.
The consolidated financial statements of ZON Optimus have been prepared using accounting policies consistent
with International Financial Reporting Standards ("IAS / IFRS") as adopted in the European Union on 1 January
2013, and in accordance with IAS 34 - Interim Financial Reporting.
Changes in accounting policies
During the period of nine months ended 30 September 2013, the Group has anticipated the impact of IFRS 11 -
Joint Arrangements (issued by IASB and endorsed by the European Union with mandatory application for annual
periods beginning on or after 1 January 2014, however early adoption is permitted), starting to record jointly
controlled companies according to the equity method. Jointly controlled entities are disclosed in the Annex I.
Additionally, during the period of nine months ended 30 September 2013, the Group, in line with best practices in
the sector and, particularly, considering the necessary standardization of policies with Optimus SGPS subsidiaries,
changed its accounting criteria for costs related to customers’ loyalty contracts. To date, these were recorded as an
expense in the year they occurred.
From 1 January 2013, the costs incurred for customers’ loyalty contracts, which include compensation clauses in
the event of early termination, are capitalized as "Intangible assets" and amortized over the period of their
contracts, since it is possible to apply a reliable cost allocation to the respective contracts, as well as the revenue
generated by each contract, thus fulfilling the criteria for capitalization required by IAS 38 - Intangible Assets. When
a contract is terminated, the net value of intangible assets associated with that contract is immediately recognized
as an expense in the consolidated statement of comprehensive income. This accounting policy allows a more true,
fair and reliable presentation of the financial position and the financial performance of the Group, as it allows the
alignment between costs incurred with customer’s loyalty contracts and the revenue generated.
Additionally, at the date of each statement of financial position and whenever an event or change of circumstances
indicates that the recorded amount of an asset may not be recoverable, impairment tests are carried out to ensure
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 36
that the current value of the estimated revenues associated with each contract is greater than the amount that is
capitalized.
During the period of nine months ended 30 September 2013, the Group changed the accounting policy regarding
the future rights of use of movies and series. To date, these were recorded as an expense in the year they
occurred. The costs are capitalized as "Intangible assets" once it is possible to measure, reliably, the costs incurred
with each contract as well as the revenue generated, meeting the criteria for capitalization as required by IAS 38 -
Intangible assets. Additionally, the model of amortization and impairment of those rights has been adjusted,
reflecting the business and how the rights are used more reliably.
Additionally, at the date of each statement of financial position and whenever an event or change of circumstances
indicates that the recorded amount of an asset may not be recoverable, impairment tests are carried out to ensure
that the current value of the estimated revenues associated with each right is greater than the amount that is
capitalized.
As provided under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, these policy changes
were applied retrospectively. Therefore changes were made to the consolidated statement of financial position of 1
January 2012, 30 September 2012 and 31 December 2012, to the consolidated statements of comprehensive
income for the period of nine months ended 30 September 2012 and for the year ended 31 December 2012 and to
the consolidated statement of cash flows for the period of nine months ended 30 September 2012 .
The effects of these changes on the consolidated statement of financial position are presented in the tables below.
Joint Subscriber Rights on
1 JANUARY 2012 Reported arrangements acquisition costs movies and series Restated
Assets
Intangible assets 314,666 (29,848) 12,338 18,518 315,675
Tangible assets 647,126 (8,524) - - 638,602
Deferred income tax assets 49,895 (141) - 5,047 54,801
Inventories 46,741 (6,034) - (2,345) 38,362
Investments in participated companies 470 34,554 - - 35,024
Accounts receivable and other assets 319,349 (62,680) - (33,281) 223,388
Cash and cash equivalents 407,362 (1,125) - - 406,237
Total assets 1,785,611 (73,799) 12,338 (12,061) 1,712,089
Liabilities
Provisions for other liabilities and charges 27,240 (76) - - 27,164
Deferred income tax liabilities 4,207 - 3,578 - 7,785
Borrowings 1,229,385 (69,407) - - 1,159,978
Accounts payable and other liabilities 289,766 (4,316) - - 285,450
Total liabilities 1,550,597 (73,799) 3,578 - 1,480,376
Shareholder's equity
Equity before non-controlled interests 225,030 - 8,760 (12,061) 221,730
Non-controlled interests 9,984 - - - 9,984
Total equity 235,014 - 8,760 (12,061) 231,713
Total liabilities and shareholder's equity 1,785,611 (73,799) 12,338 (12,061) 1,712,089
Joint Subscriber Rights on
30 SEPTEMBER 2012 Reported arrangements acquisition costs movies and series Restated
Assets
Intangible assets 309,277 (45,979) 15,808 19,348 298,454
Tangible assets 629,789 (14,138) - - 615,651
Deferred income tax assets 50,153 (136) - 5,362 55,379
Inventories 51,210 (10,637) - (3,000) 37,573
Investments in participated companies 234 34,855 - - 35,089
Accounts receivable and other assets 273,100 (7,185) - (34,524) 231,391
Cash and cash equivalents 324,525 (24,415) - - 300,110
Total assets 1,638,289 (67,635) 15,808 (12,814) 1,573,647
Liabilities
Provisions for other liabilities and charges 9,217 19,812 - - 29,029
Deferred income tax liabilities 3,468 - 4,584 - 8,052
Borrowings 1,134,889 (75,522) - - 1,059,367
Accounts payable and other liabilities 277,701 (11,924) - - 265,776
Total liabilities 1,425,275 (67,635) 4,584 - 1,362,224
Shareholder's equity
Equity before non-controlled interests 202,499 - 11,223 (12,814) 200,908
Non-controlled interests 10,515 - - - 10,515
Total equity 213,014 - 11,223 (12,814) 211,423
Total liabilities and shareholder's equity 1,638,289 (67,635) 15,808 (12,814) 1,573,647
ZON OPTIMUS, SGPS, S.A
37 9M13 Consolidated Management Report
Joint Subscriber Rights on
31 DECEMBER 2012 Reported arrangements acquisition costs movies and series Restated
Assets
Intangible assets 319,155 (32,563) 16,249 20,781 323,621
Tangible assets 632,047 (13,809) - - 618,238
Deferred income tax assets 48,146 (706) - 4,753 52,193
Inventories 44,317 (10,154) - (2,582) 31,581
Investments in participated companies 222 34,857 - - 35,079
Accounts receivable and other assets 258,815 (7,807) - (34,315) 216,693
Cash and cash equivalents 308,251 (35,072) - - 273,179
Total assets 1,610,953 (65,256) 16,249 (11,363) 1,550,584
Liabilities
Provisions for other liabilities and charges 8,831 21,540 - - 30,371
Deferred income tax liabilities 2,776 - 4,712 - 7,488
Borrowings 1,084,473 (77,151) - - 1,007,322
Accounts payable and other liabilities 295,639 (9,645) - - 285,994
Total liabilities 1,391,719 (65,256) 4,712 - 1,331,175
Shareholder's equity
Equity before non-controlled interests 209,838 - 11,537 (11,363) 210,013
Non-controlled interests 9,396 - - - 9,396
Total equity 219,234 - 11,537 (11,363) 219,409
Total liabilities and shareholder's equity 1,610,953 (65,256) 16,249 (11,363) 1,550,584
The effects of these changes on the consolidated statements of comprehensive income are presented in the tables
below.
Joint Subscriber Rights on
30 SEPTEMBER 2012 Reported arrangements acquisition costs movies and series Restated
REVENUES:
Sales and Services rendered 639,805 (52,244) - - 587,561
Other operating revenues 4,098 44 - (1,179) 2,963
643,903 (52,199) - (1,179) 590,524
COSTS, LOSSES AND GAINS:
Wages and salaries 44,288 (4,004) - - 40,284
Direct costs 180,021 6,497 - (18,973) 167,544
Supplies and external services 95,005 (2,948) (16,119) - 75,938
Provisions and adjustments 6,238 - - - 6,238
Depreciation, amortisation and impairment losses 160,076 (39,414) 12,650 18,863 152,175
Other losses/(gains), net 80,678 (10,893) - - 69,785
566,306 (50,763) (3,469) (111) 511,963
Income before financial results and taxes 77,597 (1,436) 3,469 (1,068) 78,561
Equity in earnings of affiliated companies, net 198 776 - - 974
Net other financial expenses/(income) 30,707 (2,155) - - 28,552
Income before taxes 46,692 (58) 3,469 (1,068) 49,036
Income taxes 16,202 (58) 1,006 (315) 16,835
Net consolidated income 30,490 - 2,463 (753) 32,200
Attributable to:
Non-controlled interests 860 - - - 860
ZON Optimus Group shareholders 29,630 - 2,463 (753) 31,340
Joint Subscriber Rights on
31 DECEMBER 2012 Reported arrangements acquisition costs movies and series Restated
REVENUES:
Sales and Services rendered 852,086 (69,694) - - 782,392
Other operating revenues 6,514 (194) - (1,579) 4,741
858,600 (69,888) - (1,579) 787,133
COSTS, LOSSES AND GAINS:
Wages and salaries 59,783 (5,385) - - 54,398
Direct costs 243,401 7,993 - (26,843) 224,551
Supplies and external services 126,351 (4,053) (21,026) - 101,271
Provisions and adjustments 8,941 (102) - - 8,839
Depreciation, amortisation and impairment losses 214,580 (51,850) 17,116 24,273 204,119
Other losses/(gains), net 108,231 (14,986) - - 93,245
761,287 (68,384) (3,911) (2,570) 686,422
Income before financial results and taxes 97,313 (1,504) 3,911 991 100,710
Equity in earnings of affiliated companies, net 217 1,845 - - 2,062
Net other financial expenses/(income) 42,231 (3,249) - - 38,982
Income before taxes 54,865 (102) 3,911 991 59,666
Income taxes 17,978 (102) 1,134 293 19,303
Net consolidated income 36,887 - 2,777 698 40,363
Attributable to:
Non-controlled interests 869 - - - 869
ZON Optimus Group shareholders 36,018 - 2,777 698 39,494
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 38
The effects of these changes on the consolidated statement of cash flows are presented in the tables below.
Joint
30 SEPTEMBER 2012 Reported arrangements Restated
STATEMENT OF CASH FLOWS
Operating activities 189,726 (18,474) 171,252
Investing activities (65,183) (20,686) (85,869)
Financing activities (209,903) 18,298 (191,605)
Change in cash and cash equivalents (85,359) (20,862) (106,222)
Effect of exchange differences 95 - 95
Cash and cash equivalents at the beginning of the period 407,362 (1,125) 406,237
Changes in the consolidated scope 2,427 (2,427) -
Cash and cash equivalents at the end of the period 324,525 (24,414) 300,110
The accounting policies adopted, including the policies of financial risk management, are consistent with those
used in the preparation of financial statements for the year ended 31 December 2012, with the exception of the
above mentioned.
3. Judgments and estimates
During the nine months ended 30 September 2013, no significant changes occurred in the accounting estimates
compared with those used in the preparation of the financial statements for the year ended 31 December 2012, nor
were any material errors relating to previous financial years recognized.
4. Changes in the consolidation perimeter
On 27 August 2013, the merger operation by incorporation of Optimus SGPS into ZON occurred, through the
transfer of all assets of the company Optimus SGPS to ZON, under the terms of the subparagraph a) of paragraph
4 of the Article 97 of the CSC, with effect from the date of the merger.
Following the merger, the Company performed a preliminary assessment of the fair value of assets acquired and
assumed liabilities through this operation. The allocation of the acquisition price is still subject to changes until the
conclusion of a period of one year from the date of acquisition, in accordance with IFRS 3 - Business
Combinations. Nevertheless, the Company does not expect significant changes in its financial position as a result
from any changes to the allocation made. The detail of Optimus Group's net assets and Goodwill identified under
this transaction are as follows:
The contribution the consolidated statement of financial position, at the date of the merger, is as follows:
Book Adjustments Fair
value to fair value value
Acquired assets
Intangible assets 353,331 45,244 398,575
Tangible assets 569,441 (37,110) 532,331
Deferred income tax assets 100,976 13,227 114,203
Inventories 19,125 (1,384) 17,741
Accounts receivable and other assets 224,165 - 224,165
Cash and cash equivalents 17,987 - 17,987
Total assets 1,285,025 19,976 1,305,001
Acquired liabilities
Provisions for other liabilities and charges (35,224) (33,215) (68,439)
Borrowings (452,362) - (452,362)
Share Plan (6,469) (2,077) (8,546)
Accounts payable and other liabilities (288,510) (17,252) (305,762)
Total do passivo (782,565) (52,544) (835,109)
Total net assets acquired 502,460 (32,567) 469,892
Goodwill (Note 17) 386,512
Acquisition price (Note 22) 856,404
ZON OPTIMUS, SGPS, S.A
39 9M13 Consolidated Management Report
The fair value of net assets acquired was determined through several valuation methodologies for each type of
asset or liability, based on the best information available. The main fair value adjustments made in this process
were: (i) customer portfolio (34.6 million euros), which will be amortized linearly based on the estimated average
time of customer retention; (ii) infrastructure reconstruction and replacement equipment costs and other
adjustments on basic equipment in the amount of 4.1 million euros; (iii) adjustment of 27.7 million euros to carrying
amount of the assets falling within by the commitments made to the Competition Authority, under the merger
operation, in particular, the agreement on an option to acquire the fiber network of Optimus; (iv) contingent
liabilities related to present obligations in the amount of 33.2 million euros, as permitted by IFRS 3, and (v)
contractual obligations in the amount of 17.3 million euros related to long-term contracts whose prices are different
from market prices.
For the remaining assets and liabilities were not identified significant differences between the fair value and their
book value.
As usual on mergers and acquisitions, also in this operation, there was a part of the acquisition price which was not
possible to allocate to the fair value of some identified assets and liabilities that was considered as Goodwill and
recorded in “Intangible Assets”. This Goodwill is related to a number of different elements, which cannot be
individually quantified and isolated in a viable way and include, for example, synergies, qualified workforce and
technical skills.
The contribution of Optimus group companies to the consolidated income for the period ended 30 September 2013,
was positive, of 2,486 thousand euros. This contribution differs from the net income in the financial statements
prepared by these entities, mainly because of the impacts in amortization related to fair value adjustments and the
standardization of certain accounting policies.
The detail of the referred contribution is as follows:
Amount
REVENUES:
Sales and Services rendered 54,826
Other operating revenues 1,168
55,994
COSTS, LOSSES AND GAINS:
Wages and salaries 7,491
Direct costs 17,601
Supplies and external services 7,223
Provisions and adjustments (3,507)
Depreciation, amortisation and impairment losses 9,920
Other losses/(gains), net 6,183
44,910
Income before financial results and taxes 11,084
Financial results 1,688
Income before taxes 9,396
Income taxes 6,910
Net consolidated income 2,486
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 40
If the merged companies had been consolidated from 1 January 2013, the amounts of consolidated operating
revenues and net income before non-controlling interests for the period ended 30 September 2013, would be as
follows:
Pro-forma and
Unaudit
Amount
REVENUES:
Sales and Services rendered 490,653
Other operating revenues 8,872
499,524
COSTS, LOSSES AND GAINS:
Wages and salaries 34,653
Direct costs 151,118
Supplies and external services 70,988
Provisions and adjustments (9,426)
Depreciation, amortisation and impairment losses 103,036
Other losses/(gains), net 73,086
423,454
Income before financial results and taxes 76,070
Financial results 17,324
Income before taxes 58,746
Income taxes 3,555
Net consolidated income 55,190
The contribution of the companies merged in the consolidated statement of financial position of ZON Optimus on
30 September 2013, excluding the goodwill generated as a result of the merger, are as follows:
Amount
Assets
Intangible assets 396,360
Tangible assets 526,861
Deferred income tax assets 107,451
Inventories 16,565
Accounts receivable and other assets 216,161
Cash and cash equivalents 6,914
Total assets 1,270,312
Liabilities
Provisions for other liabilities and charges 62,054
Borrowings 26,013
Accrued expenses 137,192
Share Plan 9,920
Accounts payable and other liabilities 154,893
Total liabilities 390,071
Total net assets 880,241
The main changes in the several items of the consolidated financial statements, as a result of the abovementioned
contributions, result mainly from the entrance in the consolidation scope of the companies merged on 27 August
2013 (Note 1).
At 31 October 2012, ZON Optimus carried out Grafilme – Sociedade impressora de legendas, Lda. (“Grafilme”).
The impact on its statement of financial position and statement of comprehensive income for the consolidation
perimeter is not relevant.
ZON OPTIMUS, SGPS, S.A
41 9M13 Consolidated Management Report
5. Segment Reporting
The business segments are as follows:
Telco – the supply of TV, Internet (fixed and mobile) and voice (fixed and mobile) services and includes the
following companies: Be Artis, Be Towering, Optimus, Per-mar, Sontária, ZON Optimus, ZON Televisão por
Cabo, SGPS, S.A. (“ZON Televisão por Cabo”), ZON TV Cabo, ZON TV Cabo Açoreana, ZON TV Cabo
Madeirense, ZON Conteúdos, ZON Lusomundo TV, ZON Finance B.V., Teliz Holding B.V..
Audiovisual – the supply of video production services and sales, cinema exhibition and distribution and the
acquisition/negociation of Pay TV and VOD (video-on-demand) rights and includes the following companies:
ZON Audiovisual, SGPS, SA, ZON Cinemas, SGPS, S.A., ZON LM Audiovisual, ZON LM Cinemas,
Lusomundo Moçambique, Lda ("Lusomundo Moçambique"), Lusomundo España, SL ("Lusomundo España"),
Lusomundo Imobiliária 2, S.A. ("Lusomundo Imobiliária 2"), Lusomundo Sociedade de Investimentos
Imobiliários, SGPS, S.A. (“Lusomundo SII”), Empracine – Empresa Promotora de Atividades Cinematográficas,
Lda (“Empracine”).
The results by segment for the nine months ended 30 September 2012 and 2013 are shown below:
3º Quarter 12 9M 12 3º Quarter 12 9M 12 3º Quarter 12 9M 12
Total segment revenue 177,743 541,458 25,775 74,996 203,518 616,454
Inter-segment revenue (4,339) (12,967) (1,802) (12,963) (6,141) (25,930)
Sales and services rendered 173,404 528,491 23,974 62,034 197,377 590,524
Operational income by segment 28,065 75,040 942 3,521 29,005 78,561
Net interest expense and other 10,621 27,131 373 792 10,994 27,924
Loss / (Gains) in financial assets - 1,200 10 (572) 10 628
Share of loss/(profit) from associates 2,163 2,125 (497) (1,151) 1,666 974
Income before taxes 15,281 44,584 1,055 4,452 16,336 49,037
Income tax expense 6,021 16,008 (30) 828 5,991 16,835
Net income 9,260 28,576 1,084 3,624 10,344 32,200
Other costs:
Depreciation, amortisation and impairment 42,795 129,380 8,261 22,794 51,056 152,175
Provisions and adjustments 2,382 6,508 (683) (270) 1,699 6,238
Costs / (revenues) non-recurrent (416) 399 58 113 (358) 512
Group
Restated
Telco
Restated
Audiovisuals
Restated
3º Quarter 13 9M 13 3º Quarter 13 9M 13 3º Quarter 13 9M 13
Total segment revenue 233,874 588,961 26,915 74,824 260,789 663,785
Inter-segment revenue (5,044) (14,161) (4,152) (13,272) (9,195) (27,433)
Sales and services rendered 228,830 574,800 22,763 61,552 251,594 636,351
Operational income by segment 7,372 64,322 1,784 2,423 9,156 66,744
Net interest expense and other 12,450 33,789 1,053 2,153 13,503 35,941
Loss / (Gains) in financial assets 800 1,300 5 30 805 1,330
Share of loss/(profit) from associates (1,605) (2,304) 924 (30) (681) (2,335)
Income before taxes (4,273) 31,538 (198) 270 (4,471) 31,808
Income tax expense (3,339) 6,741 49 593 (3,290) 7,335
Net income (934) 24,797 (247) (323) (1,181) 24,474
Other costs:
Depreciation, amortisation and impairment 52,683 137,934 7,162 21,511 59,845 159,445
Provisions and adjustments (217) 4,346 18 2,874 (198) 7,220
Costs / (revenues) non-recurrent 31,338 30,933 938 809 32,276 31,741
Telco Audiovisuals Group
Resulting from the changes in accounting policies described in note 2, the net income of jointly controlled
companies is recorded in the caption "Losses / (gains) from associates". The net income of Dreamia – Serviços de
Televisão, S.A. and Dreamia Holding B.V. is included in the segment "Audio" while the net income of Sport TV
Portugal, S.A., MSTAR, S.A., Upstar Comunicações S.A. and FINSTAR - Sociedade de Investimentos e
Participações, S.A. is included in the segment "Telco".
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 42
Inter-segment transactions are effected on market terms and conditions in a comparable way to transactions
effected with third parties.
Assets and liabilities by segment, and investments in tangible fixed assets at 31 December 2012, are shown below:
Telco
Restated
Audiovisuals
Restated
Eliminations
Restated
Not allocated
Restated
Group
Restated
Assets 1,430,017 124,949 (136,059) 96,599 1,515,505
Investment in associated companies 33,146 1,933 - - 35,079
Total assets 1,463,163 126,882 (136,059) 96,599 1,550,584
Liabilities 334,760 116,746 (136,059) 1,015,728 1,331,175
Investment in tangible assets 115,071 2,806 - - 117,877
Investment in intangible assets 52,477 26,536 - - 79,014
At 31 December 2012, assets and liabilities allocated to segments are reconciled with total assets and liabilities as
follows:
Assets Liabilities
Not allocated:
Deferred tax 52,193 7,488
Income tax expense 70 918
Borrowings - current (Note 19) - 295,328
Borrowings - non current (Note 19) - 711,994
Available-for-sale financial assets 20,629 -
Non-current assets held-for-sale 678 -
Investment property 842 -
96,599 1,015,728
Assets and liabilities by segment, and investments in tangible fixed assets at 30 September 2013, are shown
below:
Telco Audiovisuals Eliminations Not allocated Group
Assets 2,701,353 122,443 (141,293) 190,755 2,873,258
Investment in associated companies 30,401 2,088 - - 32,489
Total assets 2,731,754 124,531 (141,293) 190,755 2,905,747
Liabilities 697,249 118,624 (141,293) 1,157,960 1,832,541
Investment in tangible assets 85,047 2,136 - - 87,183
Investment in intangible assets 19,508 19,941 - - 39,449
At 30 September 2013, assets and liabilities allocated to segments are reconciled with total assets and liabilities as
follows:
Assets Liabilities
Not allocated:
Deferred tax 164,219 8,623
Income tax expense 5,716 -
Borrowings - current (Note 19) - 84,987
Borrowings - non current (Note 19) - 1,064,350
Available-for-sale financial assets 19,329 -
Non-current assets held-for-sale 678 -
Investment property 812 -
190,755 1,157,960
The changes in assets and liabilities of the Telco’s segment, result mainly from the entrance in this segment of the
contributions of the companies merged on 27 August 2013 (Note 4).
ZON OPTIMUS, SGPS, S.A
43 9M13 Consolidated Management Report
6. Direct Costs
In the nine months and three months ended 30 September 2012 and 2013, this item was composed as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Exhibition costs 41,598 123,401 39,447 118,334
Telecommunications costs 10,452 33,705 32,055 54,535
Shared advertising revenues 2,210 7,702 2,262 7,016
Others 1,016 2,736 1,424 3,230
55,276 167,544 75,188 183,116
The main changes in the item telecommunications costs result mainly from the entrance in the consolidation scope
of the companies merged on 27 August 2013 (Note 4) in the amount of approximately of 16,849 thousand euros.
7. Support services and provision of external services
In the nine months and three months ended 30 September 2012 and 2013, this item was composed as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Support services:
Call centers and customer support 5,299 17,667 5,430 15,256
Information systems 4,076 12,548 4,694 12,242
Administrative support and other 4,552 13,960 5,398 14,641
13,926 44,175 15,522 42,138
Supplies and external services:
Commissions 1,076 2,964 2,395 4,115
Maintenance and repair 6,309 20,651 11,987 24,929
Rentals 5,650 16,633 7,175 17,671
Professional services 3,477 11,273 271 7,253
Communications 1,694 5,260 1,814 4,823
Installation and removal of terminal equipment 1,190 3,787 1,256 3,444
Other 5,185 15,369 6,746 17,056
24,583 75,938 31,644 79,291
The positive changes in the items Support services and provision of external services result mainly from the
entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4) in the amount of
approximately of 7,223 thousand euros.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 44
8. Provisions and adjustments
In the nine months and three months ended 30 September 2012 and 2013, provisions and adjustments were
composed as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Provisions (Note 21) (100) (100) (3,807) (4,177)
Provision for impairment of trade receivable 1,800 6,344 3,490 11,313
Provision for impairment of other receivable - - 122 89
Debts recovery (2) (6) (2) (6)
1,699 6,238 (198) 7,220
9. Depreciation, amortisation and impairment losses
In the nine months and three months ended 30 September 2012 and 2013, depreciation, amortisation and
impairment losses were composed as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Intangible assets:
Industrial property and other rights 16,904 48,527 19,438 51,271
Other intangible assets 455 1,404 415 1,229
17,359 49,931 19,853 52,500
Tangible assets:
Buildings and other constructions 858 2,559 1,508 3,215
Basic equipment 28,636 82,179 34,618 93,612
Transportation equipment 364 1,161 276 957
Tools and dies 1 3 1 2
Administrative equipment 3,577 12,164 3,702 10,880
Other tangible assets 598 1,824 581 1,738
34,034 99,890 40,687 110,404
Depreciation and amortisation 51,393 149,821 60,540 162,904
Impairment losses (337) 2,353 (695) (3,458)
51,057 152,175 59,845 159,445
The positive changes in the items depreciation, amortisation and impairment losses result mainly from the entrance
in the consolidation scope of the companies merged on August 27, 2013 (Note 4) in the amount of approximately of
9,920 thousand euros.
Additionally, during the period ended 30 September 2013, the useful lives of the cable and fiber network were
reviewed, with prospective effect. The change in depreciation, amortisation and impairment losses resulting from
this impact are approximately 790 thousand euros.
ZON OPTIMUS, SGPS, S.A
45 9M13 Consolidated Management Report
10. Financing costs and other costs / (income), net
In the financial nine months and three months ended 30 September 2012 and 2013, finance costs and other net
financial costs were composed as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Interest expense:
Borrowings 9,626 27,877 8,886 24,250
Finance leases 1,339 3,106 1,565 4,502
Other 55 193 53 98
11,019 31,176 10,505 28,850
Interest earned (4,174) (15,117) (1,877) (6,588)
6,845 16,059 8,629 22,263
Other financial costs:
Comissions and guarantees 3,117 8,734 3,708 11,135
Other 1,175 3,313 1,115 2,451
4,292 12,047 4,823 13,586
Other financial income:
Other (1) (6) - -
4,290 12,040 4,823 13,586
The changes in these items result mainly from the entrance in the consolidation scope of the companies merged on
27 August 2013 (Note 4) and reduction of the interest earned with deposits as a result of the decrease of the
deposits.
11. Losses / (gains) of affiliated companies
In the nine months and three months ended 30 September 2012 and 2013, this item was as follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Equity accounting:
Sport tv 2,881 990 710 2,627
Dremia (537) (1,357) 858 (254)
Finstar (794) 878 (2,145) (4,609)
Mstar 85 255 (166) (311)
Upstar (9) 10 (3) (12)
Other 40 198 66 224
1,666 974 (681) (2,335)
12. Income tax expenses
ZON Optimus and its associated companies are subject to IRC - Corporate Income tax - at the rate of 25% (17.5%
for ZON TV Cabo Açoreana), plus IRC surcharge at the maximum rate of 1.5% on taxable profit, giving an
aggregate rate of approximately 26.5%. Following the introduction of austerity measures approved by Law no. 66-
B/2012 of 31 December which sets out the 2013 State Budget, this rate is raised by 3% on taxable profit for
companies with more than 1.5 million euros and less than 7.5 million euros, and by 5% on taxable profit for
companies exceeding 7.5 million. In the calculation of the taxable income, to which the above tax rates apply,
amounts which are not fiscally allowed are added to and subtracted from the book results. These differences
between accounting income and taxable income may be of a temporary or permanent nature.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 46
ZON Optimus is taxed in accordance with the special taxation regime for groups of companies (RETGS), which
includes companies which it directly or indirectly holds at least 90% of their share capital and which fulfill the
requirements of Article 69 of the IRC Code, with the exception of the companies incorporated during the year 2013
(Note 4) which are detailed as follows:
Be Artis
Be Toweing
Optimus
Per-mar
Sontária
The companies covered by the RETGS in 2013 are:
ZON Optimus
ZON Lusomundo TV
Empracine
Lusomundo SII
ZON Cinemas SGPS
ZON Audiovisuais SGPS
ZON TV Cabo
ZON Televisão por Cabo SGPS
Lusomundo Imobiliária 2
ZON LM Audiovisuais
ZON LM Cinemas
ZON Conteúdos
Under current legislation, tax declarations are subject to review and correction by the tax authorities for a period of
four years (five years in the case of Social Security), except where tax losses have occurred (where the period is
five or six years) or tax benefits have been obtained or inspections, appeals or disputes are in progress, in which
case, depending on the circumstances, the periods are extended or suspended.
The tax rate applied on 30 September 2012 and 30 September 2013 was 34.33% and 23.06% respectively. The
variation occurred results mainly from the recognition of deferred tax assets related to tax credits related to
incentives to investment. As stated in IAS 34, this rate corresponds to the most accurate estimate of average tax
owed on expected returns for the current financial year.
The Board of Directors for ZON Optimus, based on information from its tax advisers, believes that these and any
other revisions and corrections to these tax declarations, as well as other contingencies of a fiscal nature, will not
have a significant effect on the consolidated financial statements as of 30 June 2013, except for situations which
were the subject to recording provisions (Note 21).
The changes in the items deferred income tax assets and liabilities result mainly from the entrance in the
consolidation scope of the companies merged on 27 August 2013 (Note 4).
ZON OPTIMUS, SGPS, S.A
47 9M13 Consolidated Management Report
13. Earnings per share
Earnings per share in the nine months and three months ended 30 September 2012 and 2013, were calculated as
follows:
3º Quarter 12 9M 12 3º Quarter 13 9M 13
Restated Restated
Net income attributable to equity holders of the parent 10,099 31,340 (1,393) 23,904
Weighted average number of ordinary shares in issue 308,692,909 308,868,457 384,975,709 334,425,187
Basic earnings per share - euros 0.03 0.10 (0.00) 0.07
Diluted earnings per share - euros 0.03 0.10 (0.00) 0.07
As of 30 September 2012 and 2013, there were no diluting effects on the net earnings per share, thus the diluted
earnings per share is equal to the basic earnings per share.
14. Dividends
The General Meeting of Shareholders held on 24 April 2013 approved a proposal by the Board of Directors for
payment of an ordinary dividend per share of 0.12 euros, totaling 37,093 thousand euros, relating to the reported
net profit of 35,720 thousand euros plus free reserves totaling 1,371 thousand euros for the year ended 31
December 2012. The dividend attributable to own shares, totaling 48 thousand euros, was transferred to retained
earnings.
Dividends 37,093
Dividends of treasury shares (48)
37,045
In the first half of 2013, dividends totaling 229 thousand euros were paid to the minority shareholders of TV Cabo
Madeirense.
The General Meeting of Shareholders held on 27 April 2012 approved a proposal by the Board of Directors for
payment of an ordinary dividend per share of 0.16 euros, totaling 49,455 thousand euros, relating to the reported
net profit of 34,726 thousand euros plus free reserves totaling 14,730 thousand euros for the year ended 31
December 2011. The dividend attributable to own shares, totaling 17 thousand euros, was transferred to retained
earnings.
Dividends 49,455
Dividends of treasury shares (17)
49,438
In the first half of 2012, dividends totaling 329 thousand euros were paid to the minority shareholders of TV Cabo
Madeirense.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 48
15. Cash and cash equivalents
At 31 December 2012 and 30 September 2013, this item was composed as follows:
31-12-2012 30-09-2013
Restated
Cash 1,430 1,730
Deposits 4,663 10,856
Other deposits i) 267,086 44,999
273,179 57,586
i) At 31 December 2012 and 30 September 2013, term deposits have short-term maturities and bear interest at
normal market rates.
16. Accounts receivable – customers
At 31 December 31 and 30 September 2013, this item was as follows:
31-12-2012 30-09-2013
Restated
Trade receivables 107,361 228,667
Doubtful accounts for trade receivables 135,679 215,334
Unbilled revenues 7,870 63,639
250,910 507,640
Impairment of trade receivable (131,763) (217,411)
119,147 290,229
The main changes in the items trade receivables and unbilled revenues result mainly from the entrance in the
consolidation scope of the companies merged on 27 August 2013 (Note 4) of balances in the amount of 170.6
million euros.
17. Intangible assets
At 31 December 2012 and 30 September 2013, this item was as follows:
31-12-2012 30-09-2013
Restated
Cost
Industrial property and other rights 507,134 1,323,640
Goodwill 175,497 562,009
Other intangible assets 10,502 11,416
Intangible assets in-progress 332 22,771
693,466 1,919,836
Accumulated amortization
Industrial property and other rights 361,526 795,026
Other intangible assets 8,319 9,524
369,845 804,550
323,621 1,115,286
ZON OPTIMUS, SGPS, S.A
49 9M13 Consolidated Management Report
The increase in the item Intangible Assets results mainly from the entrance in the consolidation scope of the
companies merged on 27 August 2013 (Note 4), as well as the Goodwill recognized under the merger between
ZON and Optimus.
At 30 September 2013, the item "Industrial property and other rights" includes mainly:
(1) A net amount of 76,582 thousand euros (2012: 74,995 thousand euros) relating to the contract for the exclusive
acquisition of satellite capacity between ZON TV Cabo and Hispasat, which is recorded as a finance lease;
(2) A net amount of 163,971 thousand euros, mainly related to the investment, net of depreciation, made in the
development of the UMTS network by Optimus, including: (i) 55,175 thousand euros related to the license, (ii)
17,293 thousand euros related to the agreement signed in 2002 between Oni Way and the other three mobile
telecommunication operators with activity in Portugal, (iii) 5,311 thousand euros related to the “Fundação para
as Comunicações Móveis’’, established in 2007, under an agreement entered with ‘MOPCT’ and the three
mobile telecommunication operators in Portugal; and (iv) 85,189 thousand euros related with the programme
“Initiatives E”;
(3) A net amount of 106,235 thousand euros corresponding to the current value of future payments related with the
acquisition of rights of use for frequencies (spectrum) bands of 800 MHz, 1800 MHz, 2600 MHz, which will be
used to develop 4th generation services (LTE - Long Term Evolution). At the end of the period of nine months
ended 30 September 2013 and considering the availability of LTE technology, although subject to restrictions in
some areas of the country, and the start of commercial operation of the same, a fraction of the present value of
future payments related to the acquisition of rights of use for 4th generation frequencies service 4th generation
(LTE - Long Term Evolution), in the amount of 17,485 thousand euros, is still recorded in intangible assets in-
progress;
(4) A net amount of approximately 59,492 thousand euros corresponding to the valuation of Optimus customer
portfolio under the fair value allocation process resulting from the merger (Note 4);
(5) Net amounts of approximately 16,273 thousand euros and 22,928 thousand euros corresponding to the
capitalized costs related to customers’ loyalty contracts and future rights to use movies and series, respectively
(Note 2).
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
31-12-2012 30-09-2013
Restated
Goodwill by segment
Telco 98,896 485,408
Audiovisuals 76,601 76,601
175,497 562,009
The changes in Goodwill are related to part of the acquisition price which was not possible to allocate to the fair
value of the identified assets and assumed liabilities under the merger described in Note 4.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 50
18. Tangible Assets
At 31 December 2012 and 30 September 2013, this item was composed as follows:
31-12-2012 30-09-2013
Restated
Cost
Land 388 1,244
Buildings and other constructions 49,380 292,562
Basic equipment 1,404,843 2,161,182
Transportation equipment 11,995 12,135
Tools 340 1,222
Administrative equipment 145,705 292,365
Other tangible assets 32,316 39,240
Tangible assets in-progress 29,895 20,024
1,674,861 2,819,974
Accumulated depreciation
Buildings and other constructions 33,960 134,983
Basic equipment 863,752 1,262,568
Transportation equipment 5,993 6,235
Tools 339 1,201
Administrative equipment 122,271 269,354
Other tangible assets 30,308 36,980
1,056,623 1,711,322
618,238 1,108,653
The significant increase in the item “Tangible Assets” results mainly from the entrance in the consolidation scope of
the subsidiaries of Optimus SGPS merged on 27 August 2013 (Note 4). It includes the following tangible assets
acquired:
(1) Buildings and all the structural component of towers and rooftops where telecommunications antennas are
installed, recorded in the caption “Buildings and other constructions” amounting to 114.7 million euros; and
(2) The entire network and telecommunications infrastructure (fiber optic network and cabling, network equipment,
and other equipment), included in the caption of “Basic equipment” amounting to 371 million euros.
19. Borrowings
At 31 December 2012 and 30 September 2013, the composition of borrowings was as follows:
Restated
Current Non Current Current Non Current
Loans 275,000 605,843 50,264 946,295
Debenture loan - 357,500 - 497,500
Commercial paper 275,000 150,000 45,000 350,000
Foreign loans - 98,343 - 98,795
Internal loans - - 5,000 -
Bank overdrafts - - 264 -
Loans - Accruals anda deferrels (5,183) (4,414) 8,007 (2,685)
Financial Leases 24,737 110,565 25,634 120,741
Long Term Contracts 17,600 102,878 15,205 111,163
Other 7,137 7,687 10,428 9,578
Financial Leases - Accruals and deferrels 775 - 1,083 -
295,328 711,994 84,988 1,064,350
30-09-201331-12-2012
ZON OPTIMUS, SGPS, S.A
51 9M13 Consolidated Management Report
19.1 Debenture Loans
The Company has bonds issued via three banks totaling 157 million euros maturing in 2014, with half-yearly
payments of interest and repayment at par at the end of the contract.
In June 2012, ZON Optimus launched a Public Offer for Subscription of Bonds for the general public, called "ZON
Multimédia Bonds 2012-2015”, under which it issued 200 million euros with a maturity of three years and half yearly
payment at a fixed rate.
During the period ended 30 September 2013, and following the merger (Note 4), a bond loan of 40 million euros
hired by Sonaecom in March 2010 was transferred to ZON Optimus. The loan bears interest at variable rates,
indexed to Euribor and paid semiannually. This issue was organized and mounted, respectively, by Banco Espírito
Santo de Investimento and Caixa - Banco de Investimento.
After the merger a bond loan of 100 million euros hired by Sonaecom in September 2011was also transferred to
ZON Optimus. The loan bears interest at variable rates, indexed to Euribor and paid semiannually. This issue was
organized and mounted by BNP Paribas, ING Belgium SA/NV and Portigon AG (formerly known as WestLB AG).
During the period ended 30 September 2013, Portigon AG transferred its entire stake of 33.3 million euros in bonds
to Erste Abwicklungsanstalt ("EAA"), a German state entity.
The amount of 111 thousand euros, corresponding to interest and commissions, was deducted from this amount
and recorded in the caption “Loans - accruals and deferrals”.
19.2. Commercial Paper
The Company has borrowings of 395,000 thousand euros, in the form of commercial paper contracted with six
banks, corresponding to six programs, earning interest at market rates. Grouped commercial paper programmes
with maturities over 1 year totaling 350,000 thousand euros are classified as non-current, since the Company has
the ability to unilaterally renew the current issues on or before the programmes’ maturity dates and because they
are underwritten by the organizer. This amount, although it has current maturity, was classified as non-current for
purposes of presentation in the statement of financial position. The remaining programmes, given the schedule
settlement dates, are classified as current.
An amount of 3,163 thousand euros, corresponding to interest and commissions, was deducted from this amount.
19.3 Foreign Loans
In September 2009 ZON Optimus and ZON TV Cabo signed a Next Generation Network Project Finance Contract
with the European Investment Bank in the amount of 100 million euros. This contract matures in September 2015
and is intended for investments relating to the implementation of the next generation network. An amount of 1,205
thousand euros was deducted from this amount, corresponding to the benefit associated with the fact that the loan
is at a subsidized rate.
19.4 Financial Leases
On 31 December 2012, the long-term contracts are mainly related to contracts signed by ZON TV Cabo for the
acquisition of exclusive satellite use and for the purchase of rights to use the distribution network and contracts
signed by ZON LM cinemas regarding the acquisition of digital equipment.
On 30 September 2013, the long-term contracts are mainly related to contracts signed by ZON TV Cabo for the
acquisition of exclusive satellite use, contracts signed by ZON TV Cabo and Be Artis for the purchase of rights to
use the distribution network and contracts signed by ZON LM cinemas regarding the acquisition of digital
equipment.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 52
Financial Leases
31-12-2012 30-09-2013
Restated
Financial leases - payments:
Until 1 year 30,851 32,314
Between 1 and 5 years 63,957 71,924
Over 5 years 76,754 79,494
171,562 183,733
Future financial costs (35,485) (36,276)
Present value of finance lease liabilities 136,077 147,457
31-12-2012 30-09-2013
Restated
The present value of the finance lease liabilities:
Until 1 year 25,512 26,716
Between 1 and 5 years 47,202 53,919
Over 5 years 63,363 66,821
136,077 147,457
All bank borrowings (with the exception of ZON Multimédia bonds 2012-2015) and finance leases contracted are
negotiated at variable short term interest rates and their book value is therefore broadly similar to their fair value.
Maturity of loans
Until 1 year
Between 1 and 5
years Over 5 years Until 1 year
Between 1 and 5
years Over 5 years
Debenture loan (1,607) 353,579 - 1,708 495,680 -
Commercial paper 271,502 149,537 - 42,686 349,151 -
Foreign loans (78) 98,312 - (36) 98,778 -
Internal loans - - - 13,649 - -
Financial Leases 25,512 47,202 63,363 26,716 53,919 66,821
295,328 648,631 63,363 84,988 997,529 66,821
30-09-2013
Restated
31-12-2012
The item “Internal loans”, includes accruals and deferrals, in the amount of 8,593 thousand euros, related to
interest and commissions to be paid to Sonaecom related to loans obtained by Optimus SGPS prior to the merger.
20. Accounts payable - suppliers
At 31 December 2012 and 30 September 2013, this item was composed as follows:
31-12-2012 30-09-2013
Restated
Accounts payable trade 157,551 245,650
Advances from customers 582 115
158,133 245,764
The main changes in the item “Accounts payable trade” result mainly from the entrance in the consolidation scope
of the companies merged on August 27, 2013 (Note 4) of balances in the amount of 105.2 million euros.
ZON OPTIMUS, SGPS, S.A
53 9M13 Consolidated Management Report
21. Provisions
At 31 December 2012 and 30 September 2013, the breakdown of provisions between current and non-current was
as follows:
31-12-2012 30-09-2013
Restated
Current provision
Litigation 20 20
Other 400 2,830
420 2,850
Non-current provision
Taxes 563 563
Litigation 2,130 4,557
Investments in participated companies - i) 21,540 16,265
Other 5,718 73,435
Asset retirement obligation - ii) 4,910 16,735
Contingent liabilities - iii) - 33,215
Contigencies - other - iv) 807 26,316
29,951 94,820
30,371 97,670
i) The amount under the item "Investments in participated companies" corresponds to the equity method record of
jointly controlled and associated companies with a negative equity;
ii) The amount under the item "Assets retirement obligation" refers to the estimated future costs discounted to the
present value, related with the termination of the use of the space where there are telecommunication towers
and cinemas. The significant increase in this caption, mainly results from the inclusion of asset retirement
obligations related to telecommunication towers of subsidiaries of Optimus SGPS merged on August 27, 2013
(Note 4);
iii) The amount in the item "Contingent liabilities" refers to several provisions recorded for present but not likely
obligations, related to the merger by incorporation of Optimus SGPS (Note 4). Highlights, in the amount of 28,2
million euros, are:
a. Future credits transferred: for the year ended at 31 December 2010, the subsidiary Optimus was notified of
the Report of Tax Inspection, where it is considered that the increase, when calculating the taxable profit for
the year 2008, of the amount of 100 million euros, with respect to initial price of future credits transferred to
securitization, is inappropriate. Given the principle of periodization of taxable income, Optimus was
subsequently notified of the improper deduction of the amount of 20 million euros in the calculation of taxable
income for the years 2009 (Report of the Tax Inspection and tax settlement notice received in December
2011 and January 2012, respectively) and 2010 (Report of the Tax Inspection and the tax settlement notice
received in January and May 2013, respectively). Given that the increase made in 2008 was not accepted
due to not complying with Article 18 of the CIRC, also in the years following, the deduction corresponding to
credits generated in that year, will eliminate the calculation of taxable income, to meet the annual
amortization hired as part of the operation (20 million per year during 5 years). Optimus challenged the
decisions regarding 2008 and 2009 fiscal years and will challenge, in time, the decision regarding 2010 fiscal
year;
b. Other tax proceedings: which the Board of Directors are convinced that there are strong arguments to obtain
a favorable decision for Optimus, but considers that they correspond to a contingent liability under the fair
value allocation of assumed liabilities related to the merger operation;
c. Administrative offense due to an alleged failure, by Optimus, to apply the resolutions taken by ANACOM on
26 October 2005, concerning termination rates for fixed calls. Following a deliberation of Board of Directors
of the regulator, in April 2012, a fine of approximately 6.5 million euros was applied to Optimus;
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 54
d. The amount under the caption "Contingencies - other" refers to provisions for risks related to miscellaneous
events/disputes of various kinds, the settlement of which may result in outflows of cash, and other likely
liabilities related to several transactions from previous periods, and whose outflow of cash is probable,
namely, costs charged to the current period or previous years, for which it is not possible to estimate reliably
the time of occurrence of the expense. The significant increase in this caption, result mainly from the
inclusion in the consolidation scope of the subsidiaries of Optimus SGPS merged on 27 August 2013 the
Company (Note 4).
For the nine months ended 30 September 2012 and 30 September 2013, the movements in provisions were as
follows:
31-12-2011
Restated Increases Decreases
Changes of
scope Other
30-09-2012
Restated
Taxes 563 - - - - 563
Legal actions 2,258 - (100) - - 2,158
Investments in participated companies 18,778 1,842 - - - 20,620
Other risks 5,565 124 - - - 5,689
Asset retirement obligation 4,758 124 - - - 4,882
Contigencies - other 807 - - - - 807
27,164 1,966 (100) - - 29,029
31-12-2012
Restated Increases Decreases
Changes of
scope
(Note 4) Other 30-09-2013
Taxes 563 - - - - 563
Legal actions 2,150 - - 2,427 - 4,577
Investments in participated companies 21,540 - (5,275) - - 16,265
Other risks 6,118 10,951 (3,892) 66,012 (2,923) 76,265
Asset retirement obligation 4,910 64 - 14,261 (2,500) 16,735
Contingent liabilities - - - 33,215 - 33,215
Contigencies - other 1,207 10,888 (3,892) 18,536 (423) 26,316
30,371 10,951 (9,168) 68,439 (2,923) 97,670
The net movements for the nine months ended 30 September 2012 and 30 September 2013 reflected in the
statement of comprehensive income, under “Provisions” are composed as follows:
9M 12 9M 13
Restated
Other liabilities and charges (100) (4,177)
Provisions (Note 8) (100) (4,177)
Interest paid 124 64
Investments in participated companies - i) 1,842 (5,275)
Reestructuring costs - ii) - 2,830
Other losses/(gains) non-recurring, net - iii) - 8,057
Other losses/(gains), net - 284
1,966 5,960
Provision for other liabilities and charges 1,866 1,783
i) The item “Investments in participated companies” corresponds to changes in equity and income of the
companies recorded accordingly to the equity method;
ii) Restructuring costs mainly correspond to provisions for severance costs resulting from the merger. The total
amount of these charges of the nine months ended 30 September 2013 amounted to approximately 16 million
euros;
iii) Non-recurring costs are related with an increase in provisions due to the alignment of estimates between the
Group companies as a result of changes in the consolidation scope (Note 4).
ZON OPTIMUS, SGPS, S.A
55 9M13 Consolidated Management Report
22. Shareholder’s equity
22.1. Share capital
At 30 September 2013 the share capital of ZON Optimus was 5,151,613.80 euros, represented by 515,613,380
shares registered book-entry shares, with a nominal value of 1 euro cent per share.
During the period ended 30 September 2013, ZON Optimus, formerly named ZON Multimédia, completed a merger
operation by incorporation of Optimus SGPS into ZON, which resulted in the issue of 206,064,552 registered
shares for delivery to previous shareholders of Optimus SGPS, which corresponded to a capital increase in the
amount of 2,060,646 euros.
The main shareholders as of 31 December 2012 and 30 September 2013 are:
NO.Of Shares % Voting Rights NO.Of Shares % Voting Rights
ZOPT, SGPS, SA (1) - - 257,632,005 50.01%
Sonaecom, SGPS, SA - - 37,489,324 7.28%
Banco BPI, SA 23,344,798 7.55% 23,344,798 4.53%
Fundação José Berardo e Metalgest - Sociedade de Gestão, SGPS, SA(2) 13,408,982 4.34% 17,999,249 3.49%
Espírito Santo Irmãos, SGPS, SA (3) 15,455,000 5.00% 15,455,000 3.00%
Joaquim Alves Ferreira de Oliveira (4) 14,955,684 4.84% 14,955,684 2.90%
Unitel International Holdings, B.V. 58,147,094 18.81% - -
Kento Holding Limited 30,909,683 10.00% - -
Total 156,221,241 50.54% 366,876,060 71.22%
31-12-2012 30-09-2013
Shareholder
(1) In accordance with subparagraphs 1.b) and 1.c) of Article 20 and Article 21 of the Security Code, a qualified
shareholding of 57.29% of the share capital and voting rights of company, calculated in accordance with Article
20. of the Security Code, is attributable to ZOPT, Sonaecom and the following entities:
a. Kento Holding Limited and Unitel International Holdings B.V., as well as Isabel dos Santos, being (i) Kento
Holding Limited and Unitel International Holdings, B.V., companies directly and indirectly controlled by Isabel
Santos, and (ii) ZOPT, a jointly controlled company by its shareholders Kento Holding Limited, Unitel
International Holdings B.V. and Sonaecom under the shareholder agreement signed between them;
b. Entities in a control relationship with Sonaecom, namely, Sontel B.V., Sonae Investments B.V., Sonae,
SGPS, S.A., Efanor Investimentos, SGPS, S.A. and Belmiro Mendes de Azevedo, also due of such a control
and the shareholder agreement mentioned in a.
(2) The “Fundação José Berardo” holds 14,013,761 shares representing 2.72% of the share capital of the
Company. In turn, the Metalgest - Sociedade de Gestão, SGPS, S.A. holds 3,985,488 shares representing
0.774% of the share capital of the Company. The position of the “Fundação José Berardo” is reciprocally
attributed to Metalgest - Sociedade de Gestão, SGPS, S.A..
(3) The voting rights corresponding to Espírito Santo Irmãos, SGPS, SA are attributable to Espírito Santo Industrial,
S.A., Espírito Santo Resources Limited, and Espírito Santo International, S.A., companies that control Espírito
Santo Irmãos in that order.
(4) The voting rights corresponding to 2.90% of the share capital are attributed to Joaquim Francisco Alves Ferreira
de Oliveira, as he controls GRIPCOM, SGPS, SA, and Controlinveste International S.à.rl, which holds,
respectively, 1.36% and 1.55% of the share capital of ZON Optimus.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 56
22.2 Premium for issue of shares
On 27 August 2013, and following the completion of the merger between ZON and Optimus SGPS, the Company's
share capital was increased by 856,404,278 euros, corresponding to the total number of issued shares (Note 22.1),
based on the closing market price of August 27. The capital increase is detailed as follows:
i) Share capital in the amount of 2,060,646 euros;
ii) Premium for issue of shares in the amount of 854,343,632 euros.
Additionally, the premium for issue of shares was deducted in the amount of 125 thousand euros related to costs
with the respective capital increase.
22.3 Own Shares
Company law regarding own shares requires the establishment of a non-distributable reserve of an amount equal
to the purchase price of such shares, which becomes frozen until the shares are disposed of or distributed. In
addition, the applicable accounting rules determine that gains or losses on the disposal of own shares are stated in
reserves.
At 30 September 2013 there were 250,696 own shares, representing 0.000487% of the share capital (30
September 2012: 402,792 own shares, representing 0.13031% of the share capital).
The transactions which occurred during the nine months ended 30 September 2012 and 2013 were as follows:
Quantity Value
Balance as at 1 January 2012 265,612 554
Acquisition of own shares 392,317 906
Distribution of own shares (255,137) (544)
Balance as at 30 September 2012 402,792 916
Balance as at 1 January 2013 401,523 914
Acquisition of own shares 420,973 1,490
Distribution of own shares (571,800) (1,508)
Balance as at 30 September 2013 250,696 896
22.4 Reserves
Legal Reserve
Company law and ZON Optimus’s Articles of Association establish that at least 5% of the Company’s annual net
profit must be used to build up the legal reserve until it corresponds to 20% of the share capital. This reserve
cannot be distributed except in the event of liquidation of the company, but it may be used to absorb losses after all
other reserves have been exhausted, or for incorporation in the share capital.
ZON OPTIMUS, SGPS, S.A
57 9M13 Consolidated Management Report
Other reserves
Movements in the nine months ended 30 September 2012 and 2013 and the composition of “Other reserves” are
as follows:
Free reserves
Non-distributable
reserves Other reserves
Balance as at 1 January 2012 134,621 28,298 162,919
Distribuition of own shares 544 (1,088) (544)
Aquisition of own shares (906) 906 -
Dividends (Note 14) (14,730) - (14,730)
Undistributed profit - 18,016 18,016
Share plan - 1,540 1,540
Interest rate derivatives (Note 23) - (2,743) (2,743)
Exchange rate derivatives (Note 23) - (375) (375)
Other - (240) (240)
Balance as at 30 September 2012 119,529 44,314 163,843
Balance as at 1 January 2013 114,504 49,877 164,381
Distribuition of own shares 1,508 (3,016) (1,508)
Aquisition of own shares (1,490) 1,490 -
Dividends (Note 14) (1,371) - (1,371)
Share plan (Note 27) - 1,223 1,223
Share Plan - Changes of scope (Note 4 and 27) - 8,546 8,546
Interest rate derivatives (Note 23) - 982 982
Exchange rate derivatives (Note 23) - (62) (62)
Other - 1,121 1,121
Balance as at 30 September 2013 113,149 60,161 173,311
23. Derivatives
23.1. Exchange rate derivatives
Exchange rate risk is mainly related to exposure resulting from payments made to certain producers of audiovisual
content and equipment for the Pay TV, broadband and voice business. Business transactions between the Group
and these suppliers are mainly denominated in US dollars.
Depending on the balance of accounts payable resulting from transactions denominated in a currency different
from the Group’s operating currency, the ZON Optimus Group may contract financial instruments, namely short-
term foreign currency forwards, in order to hedge the risk associated with these balances. At the date of the
statement of financial position there were foreign currency forwards open for 9,368 thousand Dollars (31 December
2012: 2,288 thousand Dollars), the fair value amounts to a loss of about 132 thousand euros (31 December 2012:
a negative amount of 45 thousand euros) which is stated in liabilities as a contra entry in shareholder’s equity.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 58
23.2. Interest rate derivatives
At 30 September 2013, ZON Optimus had contracted three interest rate swaps totaling of 257,500 thousand euros
(31 December 2012: 257,500 thousand euros), with maturities at two years from the reference date. The fair value
of interest rate swaps, in the negative amount of 4,715 thousand euros (31 December 2012: negative amount of
6,051 thousand euros) is stated in liabilities, with a contra entry for this amount stated in shareholder’s equity.
Notional Current Non Current Current Non Current
Derivative Financial instruments
Interest rate swaps 257,500 - - - 6,051
Exchange rate forward 1,734 - - 45 -
259,234 - - 45 6,051
31-12-2012
Asset Liability
Notional Current Non Current Current Non Current
Derivative Financial instruments
Interest rate swaps 257,500 - - - 4,715
Exchange rate forward 6,937 - - 132 -
264,437 - - 132 4,715
LiabilityAsset
30-09-2013
Movements during the first nine months ended 30 September 2012 and 2013 are as follows:
31-12-2011 Result Equity 30-09-2012
Fair value interest rate swaps (2,577) - (3,731) (6,308)
Fair value exchange rate forward 532 - (529) 3
Cashflow hedge derivatives (2,045) - (4,260) (6,305)
Deferred income tax liabilities (154) - 153 (1)
Deferred income tax assets 683 - 989 1,672
529 - 1,142 1,671
(1,516) - (3,118) (4,634)
31-12-2012 Result Equity 30-09-2013
Fair value interest rate swaps (6,051) - 1,335 (4,715)
Fair value exchange rate forward (45) - (87) (132)
Cashflow hedge derivatives (6,095) - 1,248 (4,847)
Deferred income tax liabilities - - - -
Deferred income tax assets 1,616 - (329) 1,288
1,616 - (329) 1,288
(4,479) - 920 (3,559)
ZON OPTIMUS, SGPS, S.A
59 9M13 Consolidated Management Report
24. Guarantees and financial undertakings
24.1. Guarantees
At 31 December 2012 and 30 September 2013, the Group had furnished guarantees in favour of third parties
corresponding to the following situations:
31-12-2012 30-09-2013
Restated
Bank guarantees given to other entities:
Financial instituitions i) 100,164 100,180
Tax authorities ii) 23,779 28,122
Suppliers iii) - 24,000
Other iv) 21,546 18,292
145,489 170,594
i) At 30 September 2013 and 2012, this amount relates to guarantees furnished by ZON Optimus in connection
with the loan from EIB (Note 19).
ii) At 30 September 2013 and 2012, this amount relates to guarantees demanded by the tax authorities in
connection with tax proceedings contested by the Company and its subsidiaries (Note 26).
iii) At 30 September 2013, this amount relates to guarantees furnished by Optimus on the acquisition of spectrum
for the 4th generation.
iv) At 30 September 2013 and 2012, this amount mainly relates to guarantees provided in connection with
Municipal Wayleave Tax proceedings and guarantees provided to cinema owners (Note 26).
At 30 September 2013, in connection with the finance obtained by Upstar from BES, totaling 20 million euros, ZON
Optimus signed a promissory note in the total amount of the loan. Furthermore, it includes a promissory note
signed by ZON Optimus, responsible for up to 30% of Finstar’s financing along with BFA, to the sum of 1,500
million AKZ.
In connection with the finance obtained by Finstar from Banco Caixa Totta, Banco BIC, Banco BNI, Banco
Finibanco, BFA and BMA, totaling 2,430 million AKZ, 1,849 million AKZ, 980 million AKZ, 1,000 million AKZ, 1,500
million AKZ and 950 million AKZ, respectively, ZON Optimus signed six comfort letters accepting liability for up to
30% of the total amount of the loan. The comfort letter from the Banco Caixa Totta also covers 30% of 7.5 million
USD of back to back letters of credit for importing goods.
The following guarantees were furnished in connection with the finance obtained by Sport TV totaling 13 million
euros: a security financial collateral arrangement in respect of the shares and new shares held by ZON Optimus
and Sportinveste, SGPS, S.A., a mortgage on the Sport TV building, a lien on rights arising from Sport TV
contracts, 5 promissory notes and assignment of credits in guarantee.
In addition to the guarantees required by the Tax Authorities were set up sureties for the current fiscal processes.
The Sonaecom consisted of Optimus surety for the amount of 10,529,619 euros and ZON Optimus consisted of
Optimus surety for the amount of 1.212.933 euros.
At 30 September 2013, the Board of Directors of the Group believes that the decision of the court proceedings and
ongoing tax assessments in progress will not have significant impacts on the consolidated financial statements,
except for situations which were the subject to recording provisions (Note 21).
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 60
24.2. Operating Leases
The rentals due on operating leases have the following maturities:
Automatically
renewable
Less than 1
year
Between 1 and
5 years
More than 5
years
Automatically
renewable
Less than 1
year
Between 1 and
5 years
More than 5
years
Stores, movie theatre, pipelines and other buildings 2,369 25,004 79,167 63,832 4,997 43,978 127,410 50,073
Telecommunication towers and rooftops - - - - 8,371 6,008 15,443 13,708
Equipamentos - - 82 - - 124 283 56
Viaturas - 51 35 - - 2,159 3,715 -
2,369 25,056 79,284 63,832 13,369 52,268 146,852 63,837
31-12-2012 (Restated) 30-09-2013
24.3. Other undertakings
In July 2010, ZON TV Cabo Portugal signed a contract with the Portuguese Professional Football League as co-
sponsor with the brewing company Sociedade Central de Cervejas, covering four football seasons (2010/2011 to
2013/2014) of the first and second division competitions, to be known henceforth as the “LIGA ZON SAGRES”
(formerly the “LIGA SAGRES”) and the “Segunda LIGA” (formerly the “LIGA VITALIS”).
On 21 November 2008, the Competition Authority approved the acquisition by ZON TV Cabo of exclusive control of
TVTel, Bragatel, Pluricanal Leiria and Pluricanal Santarém, subject to a series of undertakings, of which the
following are the most significant:
An undertaking to vacate the areas in secondary and tertiary network infrastructures by removing or selling
integrated cables in network cells that are not included in the previous commitment, or that have not been disposed
of under the terms of the previous commitment;
An undertaking to provide a wholesale national coverage satellite television offer by means of which any third
party can offer Pay TV services nationwide via satellite platforms without the need for network infrastructures.
The EIB loan totaling 100 million euros with a maturity of 5 years is intended exclusively to finance the next
generation network investment project. This amount may not in any circumstances exceed 50% of the total cost of
the project.
Covenants
Management regularly monitors the forecasts of the Group’s liquidity reserves, including the amounts of unused
credit lines and the amounts of cash and cash equivalents, on the basis of estimated cash flows and compliance
with any covenants usually associated with borrowings.
Of the loans obtained (excluding finance leases), in addition to being subject to the Group complying with its
operating, legal and fiscal obligations, all contracts are subject to cross-default clauses, 92% to pari passu clauses,
49% to ownership clauses, and 68% to negative pledge clauses.
In addition, approximately 39% of the total loans obtained require that the consolidated net financial debt does not
exceed 3 times consolidated EBITDA, and approximately 9% of the total loans obtained require that net interest
does not exceed 4 times consolidated EBITDA.
Commitments under the merger between ZON and Optimus SGPS
Following the final decision of the Competition Authority not to oppose the merger between ZON and Optimus
SGPS were made the following commitments:
a) To ensure that Optimus extends the contract's period of validity for the reciprocal sharing of the Optimus S.A.
and Vodafone Portugal ("Vodafone") network;
ZON OPTIMUS, SGPS, S.A
61 9M13 Consolidated Management Report
b) To ensure that Optimus modifies the reciprocal sharing contract for the Optimus and Vodafone network so that
the limitation of liability in the event that the resolution is unjustified or justified because it is attributable, does not
apply;
c) To ensure that Optimus, for a determined period of time, will not charge its fiber optic triple play service clients
the payment due because of loyalty clauses in place, in the event of a disconnection request;
d) To ensure that Optimus will be open to negotiate, for a determined period of time, with a requested third party, a
contract which allows wholesale access to its fiber network;
e) To ensure that Optimus will present to and negotiate with Vodafone, for a determined period of time, a contract
that gives the option of buying its fiber network.
25. Related Parties
25.1. Summary list of Related Parties
Detailed summary of Related Parties as of 30 September 2013:
Related Parties
Apor - Agência para a Modernização do Porto PCJ - Público, Comunicação e Jornalismo, S.A.
Banco BPI, SA Praesidium Services Limited
Banco Espírito Santo, SA Público – Comunicação Social, S.A.
BES Vida - Companhia de Seguros, S. A. Saphety – Transacciones Electronicas SAS
Big Picture 2 Films, SA Saphety Brasil Transações Eletrônicas Ltda.
Blackrock, Inc. Saphety Level – Trusted Services, S.A.
Caixa Geral de Depósitos, SA SGC, SGPS, SA
Caixanet – Telecomunicações e Telemática, SA Sociedade Independente de Radiodifusão Sonora, S.A.
Canal 20 TV Sonae com – Sistemas Informação, SGPS, S.A.
Cape Technologies Limited Sonaecom - Serviços Partilhados, S.A.
Cinveste, SGPS, SA Sonaecom – Sistemas de Información España, S.L.
Companhia de Pesca e Comércio de Angola (Cosal), SARL Sonaecom BV
Digitmarket – Sistemas de Informação, S.A. Sonaecom, SGPS, S.A.
Distodo, Lda Sonaetelecom BV
Dreamia - Serviços de Televisão, SA Sport TV
Dreamia Holding BV SSI Angola, S.A.
ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA Tecnológica Telecomunicações LTDA.
Espírito Santo Irmãos, SGPS, SA Telefónica, SA
Estêvão Neves - SGPS, SA Turismo da Samba (Tusal), SARL
Filmes Mundáfrica, SARL Unipress – Centro Gráfico, Lda
FINSTAR - Sociedade de Investimentos e Participações, SA Unitel International Holdings, B.V.
Fundação José Berardo Upstar Comunicações SA
Fundo Investimento para Cinema e Audiovisual We Do Technologies Panamá S.A.
Gesgráfica - Projectos Gráficos, Lda We Do Technologies Singapore PTE. LTD.
Grupo Visabeira, SGPS, SA WeDo Consulting – Sistemas de Informação, S.A.
Infosystems-Sociedade de Sistemas de Informação,S.A. WeDo do Brasil – Soluções Informáticas, Ltda
Joaquim Alves Ferreira de Oliveira WeDo Poland Sp. Z.o.o.
Kento Holding Limited WeDo Technologies (UK) Limited
Lugares Virtuais, S.A. WeDo Technologies Americas, Inc.
Lusitânia - Companhia de Seguros, SA WeDo Technologies Australia PTY Limited
Lusitânia Vida - Companhia de Seguros, SA WeDo Technologies BV
Mainroad – Serviços em Tecnologias de Informação, S.A. WeDo Technologies BV – Sucursal Malaysia
Metalgest - Sociedade de Gestão, SGPS, SA WeDo Technologies Egypt LLC
Miauger – Organização e Gestão de Leilões Electrónicos., S.A. WeDo Technologies Mexico, S de R.L.
Mstar, SA ZON II - Serviços de Televisão SA
Norges Bank ZON III - Comunicações electrónicas S.A.
Ongoing Strategy Investments, SGPS, SA
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 62
25.2. Balances and transactions between related parties
a) Transactions and balances between ZON Optimus and companies of the ZON Optimus Group were eliminated
in the consolidation process and are not subject to disclosure in this Note.
The balances at 31 December 2012 and 30 September 2013 and transactions in the first nine months ended 30
September 2012 and 30 September 2013 between ZON Optimus Group and its associated companies, joint
ventures and other related parties are as follows:
2012:
Accounts
receivable -
trade
Accounts
receivable -
other
Accounts
payable - trade
Accounts
payable - other
Accruals and
deferred assets
Accruals and
deferred
liabilities
BES - - - - - -
Big Picture 2 Films 2 - 7 - - 164
BPI - - - - - -
Dreamia Holding BV 942 1,856 - - - -
Dreamia SA 1,898 1,506 2,148 - - 192
Finstar 6,457 - - - - -
Fundo Invetimento para Cinema e Audiovisual - - - 17,500 - -
Sport TV 52 (298) 26,480 - 30 3,258
Upstar 4,113 31,156 640 - - 1,811
Outras 112 790 1 - - -
13,576 35,010 29,276 17,500 30 5,425
Balances Loan obtained
Other financial
aplications
Derivatives
assets
Derivatives
liabilities Financial leases
Banco Espírito Santo 267,830 203,387 - - 3,185
Banco BPI 95,482 - - 994 78
363,312 203,387 - 994 3,263
Balances at 31 December 2012
Sales and
services rendered
Fornecimento e
serviços externos
Interest income /
(expenses) and bank
expenses
Supplementary
income
BES - 1,418 (6,542) -
Big Picture 2 Films 13 2,038 - -
BPI 1 179 (5,288) -
Caixa Geral de Depósitos 15 - (3,786) -
Distodo 1 462 - -
Dreamia BV 320 - 138 -
Dreamia SA 3,130 604 - -
Fundo Investimento para Cinema e Audiovisual - - - -
Sport TV 492 48,934 - -
Upstar 6,806 - 2,124 -
10,778 53,635 (13,354) -
Transactions during the period ended 30 September 2012
ZON OPTIMUS, SGPS, S.A
63 9M13 Consolidated Management Report
2013:
Accounts
receivable -
trade
Accounts
receivable -
other
Accounts
payable - trade
Accounts
payable - other
Accruals and
deferred assets
Accruals and
deferred
liabilities
BES 14 - - - - -
Big Picture 2 Films 6 - 398 - - 85
BPI - - 675 - 1 4
Dreamia BV 941 2,264 - - - -
Dreamia SA 2,907 3,669 3,528 - - 323
Finstar 6,248 693 - - - -
Fundo Investimento para Cinema e Audiovisual - - - 17,500 - -
Mainroad 248 1 479 - 395 45
Saphety 263 1 80 - 19 1
Sonaecom 2,067 6,503 14,311 - 172 85
Sport TV 645 44 17,832 - - 7,832
Upstar 3,774 5,115 173 - - -
WeDo 193 - 856 - 247 146
Outras 301 6 197 - 171 (1)
17,608 18,297 38,528 17,500 1,005 8,520
Balances Loan obtained
Other financial
aplications
Derivatives
assets
Derivatives
liabilities Financial leases
Banco Espírito Santo 148,942 30,663 - - 1,659
Banco BPI 117,337 1,649 - 481 -
266,279 32,313 - 481 1,659
Balances at 30 September 2013
Sales and
services rendered
Fornecimento e
serviços externos
Interest income /
(expenses) and bank
expenses
Supplementary
income
BES - 20 (6,629) -
Big Picture 2 Films 15 2,086 - 1
BPI 1 - (4,970) -
Dreamia BV 252 - 156 -
Dreamia SA 2,298 78 - 547
Finstar 511 - - -
Fundo Investimento para Cinema e Audiovisual - - - -
Mainroad 39 194 - 17
Sonaecom 5 88 (1,468) 71
Sport TV 198 42,709 - -
Upstar 5,012 - 946 546
Distodo - 460 - 2
WeDo 239 359 - 63
Outras 88 141 - 57
8,657 46,134 (11,964) 1,303
Transactions during the period ended 30 September 2013
The Company regularly performs transactions and signs contracts with several parties within the ZON Optimus
Group. Such transactions were performed on normal market terms for similar transactions, as part of the
contracting companies' current activity.
The Company also regularly performs transactions and enters into financial contracts with various credit institutions
which hold qualifying shareholdings in the Company. However, these are performed on normal market terms for
similar transactions, as part of the contracting companies' current activity.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 64
26. Ongoing litigation and contingent assets and liabilities
26.1. Municipal Wayleave Tax (TMDP) proceedings
In February 2004, pursuant to Article 13 of the Authorization Directive (Directive 2002/20/EC of 7 June), Law no.
5/2004 of 10 February (Electronic Communications Law) established in its Article 106 the Municipal Wayleave Tax
(TMDP) as consideration for the “rights and costs of the installation, passage and crossing, in a determined area, of
the public and private municipal domain" by the systems, equipment and other resources of companies offering
public electronic communications networks and services. The TMDP charge is levied on “each invoice issued by
the companies offering public electronic communications networks and services at a fixed location to all end
customers within the respective municipality", and is calculated at a maximum percentage of 0.25% of the amount
of each invoice. Some municipalities, despite the TMDP approval, have continued to collect Occupancy Taxes,
while others have opted to maintain the latter taxes to the detriment of the TMDP.
In light of legal advice on the matter, the Group is of the view that the TMDP is the only tax that should be collected
considering the above mentioned rights, namely the right of installation, for which reason it has challenged the
public highway Occupancy Taxes charged to it by municipalities, since it deems such taxes illegal. It must also be
highlighted that under the scope of an administrative complaint, a decision has been made by some municipalities,
which have either subscribed to the Group's interpretation or decided that they may only opt for one rate or the
other, as it is not possible for the TMDP and public road Occupancy Rates to overlap.
Meanwhile, various judicial decisions have been issued on the issue, including by the Supreme Administrative
Court, that uphold the position and understanding of ZON TV Cabo, with the result that there are good prospects
that this dispute will be definitively resolved in favour of ZON TV Cabo by the majority of municipalities. Two
appeals were made to the Constitutional Court in two proceedings by Lisbon Town Hall, it was decided that one of
them did not have the right to appeal.
With the entry into force of Decree-Law 123/2009, this matter has been superseded for the future. This law clearly
states (in line with ZON’s interpretation of the previous legislation) that the TMDP is payable for the use of goods in
the public or private municipal domain which involves the construction or installation, by companies that offer public
electronic communications networks and services, of infrastructures for housing electronic communications in
accordance with the terms of the Electronic Communications Law, and that no other taxes, official fees or
consideration are due.
26.2. Legal actions with regulators
On 8 July 2009, ZON TV Cabo was notified by the Competition Authority (AdC) about administrative offence
proceedings relating to the ZON triple-play offer, requesting ZON TV Cabo comment on the content of the
notification, which it did in good time. The case is currently at the fact-finding stage in AdC and various
information has been requested, to which ZON has responded. If it is concluded that an infringement has
occurred, the AdC may levy a fine not exceeding 10% of the company’s turnover in last year of infringement.
ICP-ANACOM instituted regulatory infringement proceedings against ZON TV Cabo, as it did against the
majority of Portuguese electronic communications operators, for infringement of the portability regulations.
ZON TV Cabo brought an action for judicial review of Anacom's decision to order it to pay a fine, and the court
ruled that Anacom’s decision was null and void, there having been no further developments to date. ZON TV
Cabo, ZON TV Cabo Açoreana and ZON TV Cabo Madeirense appealed against Anacom's decision to
demand payment of fines for breach of number portability rules, these proceedings are still under way.
ZON TV Cabo, ZON TV Cabo Açoreana and ZON TV Cabo Madeirense brought actions for judicial review of
ICP-ANACOM’s decisions concerning the Annual Fee payment (for 2009, 2010, 2011 and 2012) for carrying on
ZON OPTIMUS, SGPS, S.A
65 9M13 Consolidated Management Report
the business of Electronic Communications Services Networks Supplier in the amounts, respectively, of (i)
1,087 thousand euros, 2,325 thousand euros, and 3,580 thousand euros and 3,447 thousand euros; (ii) 42
thousand euros, 79 thousand euros, 123 thousand euros and 113 thousand euros, 55 thousand euros, 109
thousand euros, 169 thousand euros and 156 thousand euros, and seek reimbursement of the amounts
meanwhile paid in connection with the enforcement proceedings. This fee is a percentage decided annually by
ANACOM (in 2009 it was 0.5826%) of operators’ electronic communications revenues. The scheme is being
introduced gradually: 1/3 in the first year, 2/3 in the second year and 100% in the third year. ZON TV Cabo,
ZON TV Cabo Açoreana and ZON TV Cabo Madeirense claim, in addition to defects of unconstitutionality and
illegality, that only revenues from the electronic communications business per se, subject to regulation by
ANACOM, should be considered for the purposes of the application of the percentage and the calculation of
the fee payable, and that revenues from television content should be excluded.
On 18 December 2012 a ruling was passed on the proceedings instigated by ZON TV Cabo Portugal for 2009,
for which the appeal was upheld, with no prior hearing, condemning ICP-ANACOM to pay the costs, with the
decision still subject to appeal by ICP-Anacom.
The remaining cases are awaiting trial and decision.
ZON Optimus tendered in an auction for licenses for a nationwide free view generalist programme service, to
be broadcast via terrestrial television. The Regulator of Social Communication decided on 23 March 2009 to
disqualify ZON Optimus’s bid, along with that of another bidder. ZON Optimus has applied for judicial review of
the decision. The outcome of these proceedings is yet to be decided.
26.3. Tax authorities
During the course of the 2003 to 2013 financial year, certain companies of the ZON Optimus Group were the
subject of tax inspection for the 2001 to 2010 financial year. Following these inspections, ZON Optimus, as the
controlling company of the Tax Group, and companies not covered by tax group, were notified by the Tax
Inspection Service of corrections made to the Group tax loss and to make payments corresponding to the
corrections made to those financial years. The total value of the notifications amounted to 30.7 million euros. The
Group considered that the corrections were unfounded, and contested the amounts mentioned. The Group
provided the bank guarantees demanded by the Tax Authorities in connection with these proceedings, as stated in
Note 24.
The Board of Directors of the group, based on information from its lawyers and tax advisers, the risk of losing these
proceedings is not likely and the outcome thereof will not have a significant effect on the consolidated financial
statements.
26.4. Actions by Portugal Telecom against ZON TV Cabo Madeirense and ZON TV Cabo Açoreana
PT brought an action in Funchal Judicial Court against ZON TV Cabo Madeirense, claiming payment of 1,608
thousand euros, plus accrued interest until the date of full settlement, for the alleged use of ducts, supply of the
MID service, supply of video and audio channels, operating, maintenance and management costs of the
Madeira/Porto Santo undersea cable and the use of two fiber optic circuits.
The company contested the action, in particular the prices concerned, the services and PT’s legal capacity in
respect of the ducts.
At the end of July 2013, a favorable decision was given to ZON TV Cabo Madeira, which, however, PT
appealed. The case is pending normal development.
In April 2012, following the decision made on 19 July 2011 in which ZON TV Cabo Açoreana was acquitted, PT
brought two new actions against ZON TV Cabo Açoreana, one relating to the MID service and the other to the
supply of video and audio channels, claiming payment of 222 thousand euros and 316 thousand euros
respectively, plus interest. They are awaiting decision.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 66
26.5. Cinema Law
Law n.º 55/2012, which establishes the principles of state action under the promotion, development and protection
of cinema and cinematographic and audiovisual activities in Portugal, was published on September 6, 2012. This
Law was enacted in 2013 (DL 9/2013) for the sole purpose of liquidating and charging publicity rates for showing
films and charging television distribution operators.
ZON Optimus is currently analysing this issue, as well as its impact on the financial statements and potential
actions which it may result in, namely a legal appeal, based, amongst other reasons, on (i) the illegal and
unconstitutional nature of the rate, namely, due to violating the principles of tax equality and fair taxation and not on
back-dated taxation and on (ii) violation of the European directives that cover the virtual communication services
and networks.
ZON TV Cabo Portugal has already been notified of the settlement of amounts payable to the Institute of Cinema
and Audiovisual, which will be challenged, as legally allowed. The same goes with ZON TV Cabo Açoreana and
ZON TV Cabo Madeira.
This process is also being carried out by APRITEL.
26.6. Actions against Sport TV
Sport TV Portugal, SA was fined by the Competition Authority to the value of 3.730 million euros for the alleged
abuse of its dominant position in the domestic market of subscription channels with premium sport content.
Sport TV is not in agreement with the decision and has therefore decided to appeal against the same to the
competent judicial authorities.
26.7. Contractual Penalties
The general conditions that affect the agreement and termination of this contract between ZON Optimus and its
clients, establish that if the products and services provided by the client can no longer be used prior to the end of
the binding period, the client is obliged to immediately pay damages to ZON TV CABO. As of September 2013,
damages were charged to a total of 19,631 thousand euros, of which 792 thousand euros were received and
recorded in the first nine months in profits and loss under 'Other invoices'.
26.8. Interconnection tariffs
At 30 September 2013, accounts receivable and accounts payable include 37,550,902 euros and 29,913,608
euros, respectively, resulting from a dispute between the subsidiary Optimus – Comunicações, S.A. and,
essentially, the operator TMN – Telecomunicações Móveis, S.A., in relation to the indefinition of interconnection
tariffs, recorded in the year ended at 31 December 2001. In the lower court, the decision was favorable to Optimus.
The “Tribunal da Relação” (Court of Appeal), on appeal, rejected the intentions of TMN. However, TMN again
appealed to the “Supremo Tribunal de Justiça” (Supreme Court), for final and permanent decision, who upheld the
decision of the “Tribunal da Relação” (Court of Appeal), thus concluding that the interconnection prices for 2001
were not defined. The settlement of outstanding amounts will depend on the price that will be established.
27. Shares incentive scheme
The Share Incentive Schemes approved by the General Meetings of Shareholders on 27 April 2008 and 19 April
2010 with the aim of promoting employee loyalty, aligning their interests with the Company’s objectives and
creating more favorable conditions for the recruitment of staff of high strategic value, have been implemented in
accordance with the principles agreed at those meetings.
ZON OPTIMUS, SGPS, S.A
67 9M13 Consolidated Management Report
These incentive plans comprise a Standard Plan and a Senior Executive Plan. The Standard Plan is aimed at
eligible members selected by the responsible bodies, regardless of the roles they perform. In this plan the vesting
period for the assigned shares is five years, starting twelve months after the period to which the respective
assignment relates, at a rate of 20% a year. The Senior Executive Plan is aimed at eligible members classed as
Senior Executives, also selected by the responsible bodies. The Senior Executive Plan, implemented following
approval by the General Meeting of Shareholders in April 2010, has a vesting period of 3 years following the
attribution of the shares.
The maximum number of shares assigned each year to these plans is approved by the Board of Directors and
depends exclusively on fulfillment of the performance objectives established for ZON Optimus and on the
assessment of the individual’s performance.
The number of shares vested in 2013 under the Share Plans approved in 2008, 2009, 2010, 2011 and 2012 was
571,800 shares.
In addition, the Group recognized liabilities in respect of the 2008, 2009, 2010, 2011, 2012 and 2013 Plans, which
extend until 2017, totaling 10,847 thousand euros – 1,951 thousand euros in 2008, 1,592 thousand euros in 2009,
1,401 thousand euros in 2010, 1,862 thousand euros in 2011, 2,053 thousand euros in 2012 and 1,989 thousand
euros in 2013.
In addition, in the first half of 2013 ZON Optimus implemented the Share Savings Plan, also established in the
Regulation approved by the General Meeting of Shareholders. This plan is open to all employees who, if they meet
internally decided criteria, may invest up to 10% of their annual salary in this plan, up to a maximum of 7,500 euros
per annum, with the benefit of purchasing shares at a 10% discount.
Under the Share Savings Plan launched in 2013, ZON Optimus employees bought 28,298 shares.
The Optimus Group companies had implemented since 2000, a share incentive scheme for more senior employees
based on Sonaecom shares, subsequently converted into Optimus SGPS shares. The vesting occurs three years
after the award of each plan, assuming that the employees are still employed in the Group, during that period.
Following the merger process (Note 4), the share plans assigned to more senior Optimus Group employees, and in
the form of Optimus SGPS’s shares, were converted into Zon Optimus share plans, based on the ratio disclosed in
the merger project.
The number of shares outstanding is 1,518,073 for the 2010 plan, 1,563,856 for the 2011 plan and 1,202,408 for
the 2012 plan.
The costs of the share plans are recognized throughout the year that mediates the attribution and the vesting of the
same. At 30 September 2013, the outstanding liability related to these plans is 9,220 thousand euros,
corresponding to 5,033 thousand euros for the 2010 plan, 3,146 thousand euros for the 2011 plan and 1,041
thousand euros for the 2012 plan.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 68
28. Subsequent Events
On 1 October 2013, in the Extraordinary General Shareholder’s Meeting of ZON Optimus was approved:
1) The change, by modification, suppression, and/or supplement of the majority of the Zon Optimus’ Articles of
Association;
2) Election of corporate bodies for the term of office of 2013/2015, with the following composition:
Board of Directors:
Chairman of the Board of Directors:
Jorge Brito Pereira
Executive Committee:
Miguel Nuno Santos Almeida (Chief Executive Officer)
Luís Miguel Gonçalves Lopes (Vice- Chief Executive Officer)
Ana Paula Garrido de Pina Marques
André Nuno Malheiro dos Santos Almeida
José Pedro Faria Pereira da Costa
Manuel António Neto Portugal Ramalho Eanes
Miguel Filipe Veiga Martins
Members of the Board of Directors:
Ângelo Gabriel Ribeirinho dos Santos Paupério
António Bernardo Aranha da Gama Lobo Xavier
António Domingues
Catarina Eufémia Amorim da Luz Tavira
Fernando Fortuny Martorell
Isabel dos Santos
Joaquim Francisco Alves Ferreira de Oliveira
Lorena Solange Fernandes da Silva Fernandes
Maria Cláudia Teixeira de Azevedo
Mário Filipe Moreira Leite da Silva
Rodrigo Jorge de Araújo Costa
Board of the General Meeting:
Chairman: Pedro Canastra de Azevedo Maia
Secretary: Tiago Antunes da Cunha Ferreira de Lemos
Fiscal Board:
Chairman: Paulo Cardoso Correia da Mota Pinto
Member: Eugénio Ferreira
Member: Nuno Sousa Pereira
Alternate Member: Luís Filipe da Silva Ferreira
On 18 October 2013, Goldman Sachs Group, Inc. announced it held a qualified shareholding in the share capital of
ZON Optimus after purchasing 1,722,129 shares and holding after the acquisition, 10,666,988 shares representing
2.07% of the capital. On 31 October 2013, Goldman Sachs Group, Inc. sold 436,885 shares. After this disposal the
company no longer holds a qualified shareholding in ZON Optimus.
ZON OPTIMUS, SGPS, S.A
69 9M13 Consolidated Management Report
On 29 October 2013, Sonaecom has announced it will make a partial and voluntary tender offer for the acquisition
of a maximum of 88,479,803 shares representing 24.16% of its own share capital, giving the option to its
shareholders to sell, in equal standing conditions, their Sonaecom shares for consideration of the directly held
37,489,324 ZON Optimus shares.
These financial statements are a translation of financial statements originally issued in Portuguese in accordance
with International Financial Reporting Standards (IAS / IFRS) as adopted by the European Union and the format
and disclosures required by those Standards, some of which may not conform to or be required by generally
accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version
prevails.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 70
ANNEX I
a) Companies included in the consolidation by the full consolidation method
b) Associated companies
c) Jointly controlled companies
d) Companies recorded at cost
ZON OPTIMUS, SGPS, S.A
71 9M13 Consolidated Management Report
ANNEXES
a) Companies included in the consolidation by the full consolidation method
Effective Direct Effective
31-12-2012 30-09-2013 30-09-2013
ZON Optimus, SGPS, S.A. (a) Lisbon Management of investments - - -
Be Artis – Concepção, Construção e Gestão
de Redes de Comunicações, S.A. ('Artis') (b) Maia
Design, construction, management and exploitation of electronic
communications networks and their equipment and infrastructure,
management of technologic assets and rendering of related services
ZON Optimus 0.00% 100.00% 100.00%
Be Towering – Gestão de Torres de
Telecomunicações, S.A. (‘Be Towering’) (b)Maia
Implementation, installation and exploitation of towers and other sites
for the instalment of telecommunications equipmentZON Optimus 0.00% 100.00% 100.00%
Empracine - Empresa Promotora de
Atividades Cinematográficas, Lda.Lisbon Movies exhibition Lusomundo SII 99.87% 100.00% 99.87%
Grafilme - Sociedade Impressora de
Legendas, Lda. (c)Lisbon Providing services on audiovisual subtitling
ZON LM
Audiovisuais55.56% 55.56% -
Lusomundo - Sociedade de investimentos
imobiliários SGPS, SALisbon Management of Real Estate ZON Optimus 99.87% 99.87% 99.87%
Lusomundo España, SL MadridManagement of investments relating to activities in Spain in the
audiovisuals businessZON Optimus 100.00% 100.00% 100.00%
Lusomundo Imobiliária 2, S.A. Lisbon Management of Real Estate Lusomundo SII 99.68% 99.80% 99.68%
Lusomundo Moçambique, Lda. Maputo Movies exhibition and commercialization of other public events ZON LM Cinemas 100.00% 100.00% 100.00%
Optimus - Comunicações, S.A. ('Optimus')
(b) Maia
Implementation, operation, exploitation and offer of networks and
rendering services of electronic comunications and related resources;
offer and commercialisation of products and equipments of electronic
communications
ZON Optimus 0.00% 100.00% 100.00%
Per-Mar – Sociedade de Construções, S.A.
('Per-Mar') (b) MaiaPurchase, sale, renting and operation of property and commercial
establishmentsZON Optimus 0.00% 100.00% 100.00%
Sontária - Empreendimentos Imobiliários,
S.A. ('Sontária') (b) Maia
Realisation of urbanisation and building construction, planning, urban
management, studies, construction and property management, buy
and sale of properties and resale of purchased for that purpose
ZON Optimus 0.00% 100.00% 100.00%
Teliz Holding B.V. Amstelveen Management of group financing activities ZON Optimus 100.00% 100.00% 100.00%
ZON Audiovisuais, SGPS S.A. Lisbon Management of investmentsZON LM
Audiovisuais100.00% 100.00% 100.00%
ZON Cinemas, SGPS S.A. Lisbon Management of investments ZON LM Cinemas 100.00% 100.00% 100.00%
ZON Conteúdos - Actividade de Televisão e
de Produção de Conteúdos, S.A.Lisbon Comercialization of cable tv contents
ZON Televisão
por Cabo100.00% 100.00% 100.00%
ZON FINANCE B.V. Amsterdam Management of group financing activitiesZON TV Cabo /
ZON Optimus100.00% 50% / 50% 100.00%
ZON Lusomundo Audiovisuais, S.A. LisbonImport, distribution, commercialization and production of audiovisual
productsZON Optimus 100.00% 100.00% 100.00%
ZON Lusomundo Cinemas , S.A. Lisbon Movies exhibition and commercialization of other public events ZON Optimus 100.00% 100.00% 100.00%
ZON Lusomundo TV, Lda. LisbonMovies distribution, editing, distribution, commercialization and
production of audiovisual products
ZON Audiovisuais
SGPS S.A.100.00% 100.00% 100.00%
ZON Televisão por Cabo, SGPS, S.A. Lisbon Management of investments ZON TV Cabo 100.00% 100.00% 100.00%
ZON TV Cabo Açoreana, S.A. Ponta DelgadaDistribution of television by cable and satellite and operation of
telecommunications services in the Azores areaZON TV Cabo 83.82% 83.82% 83.82%
ZON TV Cabo Madeirense, S.A. FunchalDistribution of television by cable and satellite and operation of
telecommunications services in the Madeira areaZON TV Cabo 77.95% 77.95% 77.95%
ZON TV Cabo Portugal, S.A. LisbonDistribution of television by cable and satellite and operation of
telecommunications servicesZON Optimus 100.00% 100.00% 100.00%
Company Head Office Activity Shareholder
Percentage of Ownership
(a) Company changed its designation from ZON Multimédia – Telecomunicações e Multimédia, SGPS, S.A. to ZON Optimus, SGPS, S.A.
(b) Subsidiaries of Optimus SGPS, which was merged into ZON Optimus on 27 August 2013
(c) Company wound up in October 2012
b) Associated companies
Effective Direct Effective
31-12-2012 30-09-2013 30-09-2013
Distodo - Distribuição e Logística, Lda.
("Distodo") Lisbon Stocking, sale and distribution of audiovisuals material
ZON LM
Audiovisuais50% 50% 50%
Canal 20 TV, S.A. Madrid Production, distribution and sale of contents rights for television films ZON Optimus 50% 50% 50%
ZON II - Serviços de Televisão S.A. (a) LisbonConception, production, realization and commercialization of
audiovisual contents and provision of publicity servicesZON Optimus 100% 100% 100%
Big Picture 2 Films, S.A. LisbonImport, distribution, commercialization and production of audiovisual
products
ZON Audiovisuais
SGPS S.A.20% 20% 20%
ZON III - Comunicações electrónicas S.A. (a) Lisbon Network operator and provider of eletronic communication services ZON Optimus 100% 100% 100%
Company Head Office Activity
Percentage of Ownership
Shareholder
(a) Companies with no activity.
ZON OPTIMUS, SGPS, S.A
9M13 Consolidated Management report 72
c) Jointly controlled companies
Effective Direct Effective
31-12-2012 30-09-2013 30-09-2013
Sport TV Portugal, S.A. Lisbon
Conception, production, realization and commercialization of sports
programs for telebroadcasting, purchase and resale of the rights to
broadcast sports programs for television and provision of publicity
services
ZON Optimus 50% 50% 50%
Dreamia - Serviços de Televisão, S.A. LisbonConception, production, realization and commercialization of
audiovisual contents and provision of publicity services
Dreamia Holding
BV50% 100% 50%
Dreamia Holding B.V. Amsterdam Management of investmentsZON Audiovisuais
SGPS S.A.50% 50% 50%
MSTAR, SA MaputoDistribution of television by satellite, operation of telecommunications
servicesZON Optimus 30% 30% 30%
Upstar Comunicações S.A. Vendas Novas
Electronic communications services provider, production,
commercialization, broadcasting and distribution of audiovisual
contents
ZON Optimus 30% 30% 30%
FINSTAR - Sociedade de Investimentos e
Participações, S.A.Luanda
Distribution of television by satellite, operation of telecommunications
servicesTeliz Holding B.V. 30% 30% 30%
Activity
Percentage of Ownership
ShareholderCompany Head Office
(a) Financial investments whose participation is less than 50% were considered as joint arrangements due to shareholder agreements that confer joint control.
d) Companies recorded at cost
Effective Direct Effective
31-12-2012 30-09-2013 30-09-2013
Turismo da Samba (Tusal), SARL (a) Luanda n.a. ZON Optimus 30% 30% 30%
Filmes Mundáfrica, SARL (a) Luanda Movies exhibition ZON Optimus 24% 24% 24%
Companhia de Pesca e Comércio de Angola
(Cosal), SARL (a)Luanda n.a. ZON Optimus 16% 16% 16%
Caixanet – Telecomunicações e Telemática,
S.A.Lisbon Telecommunication services ZON Optimus 5% 5% 5%
Apor - Agência para a Modernização do Porto Porto Development of modernizing projects in Oporto ZON Optimus 4% 4% 4%
Lusitânia Vida - Companhia de Seguros, S.A
("Lusitânia Vida")Lisbon Insurance services ZON Optimus 0% 0% 0%
Lusitânia - Companhia de Seguros, S.A
("Lusitânia Seguros")Lisbon Insurance services ZON Optimus 0% 0% 0%
Head Office Activity
Percentage of Ownership
ShareholderCompany
(a) The financial investments in these companies are fully provisioned.
ZON OPTIMUS, SGPS, S.A
73 9M13 Consolidated Management Report