01. ZON in Numbers Highlights - First Half Governing Bodies Management Report... 8

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2 Table of Contents 01. ZON in Numbers Highlights - First Half Governing Bodies Management Report Events in 1H10 and Recent Developments Capital Markets Governing Bodies Shareholdings Qualified Shareholdings Transactions of Own Shares Business Review Consolidated Financial Review Risks and Uncertainties for Future Periods Consolidated Financial Statements Report and Opinion of the Statutory Auditor Limited Review Report Prepared by Auditor Registered in CMVM Statement under the terms of Article 246, paragraph 1, c), of the Securities Code ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 2/76

3 01. ZON in Numbers Business Indicators (in thousands): Triple Play Subscribers: riple Play Penetration in Cable Customer Base (%): +46.3% +15.9pp % 37% 41% 46% 49% 2Q09 3Q09 4Q09 1Q10 2Q10 RGUs: 2Q09 3Q09 4Q09 1Q10 2Q10 RGUs per Subscriber (units): +13.6% +14.7% ,02 2,10 2,17 2,26 2,31 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 Blended ARPU (Euros): Basic Subscribers: +6.2% (0.9%) 33,6 34,0 35,0 35,2 35, Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 3/76

4 , 0 % 3 8, 0 % 3 6, 0 % 3 4, 0 % 3 2, 0 % 3 0, 0 % 2 8, 0 % 2 6, 0 % 2 4, 0 % 2 2, 0 % 2 0, 0 % BroadBand Subscribers: Voice Subscribers: +13.6% +44.6% Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 Mobile: Digital Funtastic" Subscribers: % +18.7% Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 Financial Indicators (in millions of Euros): Operating Revenues*: EBITDA* (EBITDA margin as % of Revenues): +8.8% +16.5% ,5% 34,8% 1H09 1H10 1H09 1H10 * Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 4/76

5 Consolidated Net Income: CAPEX: (21.2)% +21.6% H09 1H10 1H09 1H10 Financial Net Debt: Net Financial Debt / EBITDA [x]: +3.2% ,3x 2,2x H H10 ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 5/76

6 02. Highlights - First Half 2010 Focus on profitable growth o Revenues increased by 8.8% y.o.y. in 1H10 to million euros; o EBITDA grew by 16.5% in 1H10 to million euros, representing an EBITDA margin of 34.8%; o Adjusted Net Income increased by 36.2% in 1H10 to 22.9 million euros. Almost 50% penetration of Triple Play Services, driving strong ARPU growth o thousand customers now buy Triple Play bundles, 49.0% of ZON s cable customer base (+46.3% y.o.y.); o Blended ARPU increased to 35.4 euro (+6.9% y.o.y), led by the continued strong take-up of new services and Triple Play penetration. Leadership in Next generation services supported by investment in technological innovation, network independence and efficiency o 100 thousand ZON fibre subscribers reached in July 2010; o Eurodocsis 3.0 upgrade of ZON s HFC network practically complete; Over 2.8 million households able to receive high speed broadband of up to 200 Mbps; o Launch of ZON data centre in 2Q10 and start of project to relocate ZON hubs onto own infrastructure. Highlights of 1H10 Results 1H09 1H10 1H10 / 1H09 Operational ('000) Triple Play Customers % Triple Play Penetration (%) 33.2% 49.0% 15.9pp RGUs (1) % Blended ARPU (Euros) % Financial (Millions of Euros) Operating Revenues (2) % EBITDA (2) % EBITDA Margin (2) 32.5% 34.8% 2.3pp Net Income (21.2%) (1) Revenue Generating Units correspond to the sum of Pay TV basic customers, plus "Funtastic" Digital, Fixed Broadband, Fixed Voice and Mobile customers. (2) Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 6/76

7 03. Governing Bodies As at the date of this report, 16 August 2010, the Governing Bodies of ZON had the following composition: Board of Directors Chairman of the Board of Directors Chairman of the Executive Committee Members of the Executive Committee Members Chairman of the Audit Committee Members of the Audit Committee Daniel Proença de Carvalho Rodrigo Jorge de Araújo Costa José Pedro Faria Pereira da Costa Luis Miguel Gonçalves Lopes Duarte Maria de Almeida e Vasconcelos Calheiros Fernando Fortuny Martorell António Domingues Luis João Bordallo da Silva László Istvan Hubay Cebrian Norberto Emílio Sequeira da Rosa Jorge Telmo Maria Freire Cardoso Joaquim Francisco Alves Ferreira de Oliveira João Manuel Matos Borges de Oliveira Mário Filipe Moreira Leite da Silva António da R. S. Henriques da Silva 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 Secretary Júlio de Castro Caldas Maria Fernanda Carqueija Alves de Ribeirinho Beato Statutory Auditor In Office Alternate Oliveira, Reis & Associados, SROC, Lda., represented by José Vieira dos Reis Fernando Marques Oliveira ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 7/76

8 04. Management Report 4.1. Events in 1H10 and Recent Developments Shareholder remuneration in 2010 ZON is committed to delivering attractive shareholder remuneration relative to its peers. On 19 April 2010, the Shareholders Meeting of ZON approved a 16 cents per share dividend, 49.5 million euros in total, which was paid on 13 May With this dividend, ZON places itself at the forefront of its European peer group with one of the most significant pay-out ratio and dividend yields of the sector, 112% and 4.1% respectively. Governing Bodies On 19 April 2010, ZON s Annual General Shareholders Meeting approved the election of its Governing Bodies for the period between 2010 and 2012 as follows: Officials of the General Meeting of Shareholders: President: Júlio de Castro Caldas Secretary: Maria Fernanda Carqueija Alves de Ribeirinho Beato Board of Directors: Chairman: Daniel Proença de Carvalho Members: Rodrigo Jorge de Araújo Costa José Pedro Faria Pereira da Costa Duarte Maria de Almeida e Vasconcelos Calheiros Luís Miguel Gonçalves Lopes Fernando Fortuny Martorell António Domingues László Istvan Hubay Cebrian Luís João Bordallo da Silva Norberto Emílio Sequeira da Rosa Jorge Telmo Maria Freire Cardoso Joaquim Francisco Alves Ferreira de Oliveira João Manuel Matos Borges de Oliveira Mário Filipe Moreira Leite da Silva ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 8/76

9 António da R. S. Henriques da Silva Audit Committee: Chairman: Vítor Fernando da Conceição Gonçalves Members: Paulo Cardoso Correia Mota Pinto Nuno João Francisco Soares de Oliveira Silvério Marques Statutory Auditor: In Office: Oliveira, Reis & Associados, SROC, Lda., represented by José Vieira dos Reis Alternate: Fernando Marques Oliveira. The Company s Board of Directors held a meeting after the afore-mentioned General Shareholders Meeting, and approved the creation of the Executive Committee, for the same period, which maintains its members, as follows: Chairman: Rodrigo Costa Members: José Pedro Pereira da Costa Chief Financial Officer Luís Gonçalves Lopes Duarte Maria de Almeida e Vasconcelos Calheiros. Corporate Developments On 29 January 2010, ZON Multimedia s Shareholder Meeting approved the disposal of an amount of 14,006,437 own shares, representing 4.53% of the Company s share capital, to Kento Holding Limited (a company wholly owned by Ms Isabel dos Santos), for 5.30 per share, in a global amount of 74,234, As a result of this resolution, the conditions precedent to the sale and purchase agreement entered into between ZON Multimédia and Kento Holding Limited and subject to public disclosure by ZON Multimédia on 20 December 2009 were verified. This disposal of own shares was completed and disclosed to the market on 5 February Subsequent Events On 5 July 2010, ZON TV Cabo Portugal signed a contract with Liga Portuguesa de Futebol Profissional, ensuring co-sponsorship with Sociedade Central de Cervejas, for four sporting seasons (from 2010/2011 to 2013/2014) of the premier football league, named as from this contract LIGA ZON SAGRES (formerly LIGA SAGRES ). ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 9/76

10 On 22 July 2010, ZON announced that its Next Generation Broadband Services had reached 100 thousand customers, thus reinforcing its position as the leading provider of high speed Internet services. It was also announced that ZON s Fixed Voice service had overcome the 700 thousand customer mark, thereby reinforcing its leadership amongst the main challengers to the incumbent operator Capital Markets ZON s Share Performance On 30 June 2010, ZON Multimedia s shares closing price was euros, which represents a 26.65% decrease since the beginning of the year, compared with a 16.52% decrease from the main Portuguese stock market index, PSI20. In 1H10, a total of more than 70 million ZON Multimedia shares were traded, amounting to a daily average volume of 551 thousand shares per market session. This average daily volume represents 0.18% of the total number of ZON shares, and 0.68% of the free float 1. 10% ZON and PSI20 Performance - 1H10 5% % -5% -10% % -20% % -30% -35% ZON Volume ZON PSI20 1 Free Float calculated according to Qualified Shareholdings Table. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 10/76

11 Main Announcements in 1H10 Date Announcement General Shareholders' Meeting ZON informs on Completion of Sale of Own Shares Earnings Announcement General Shareholders' Meeting ZON shares ex-div date First Quarter 2010 Earnings Announcement Fiscal year 2009 dividend payment Below we present the major Investor Relation Events which took place in 1H10. The activity developed by the Investor Relations Office also provides permanent and updated information to the financial community about the activities of ZON Multimedia, through regular press releases, presentations and communications on the quarterly, half-yearly and annual results, as well as any other relevant events that may occur. It also provides all clarifications to the financial community in general - shareholders, investors (both institutional and retail) and analysts, also assisting and supporting the exercise of the shareholders rights. The Investor Relations Office promotes regular meetings of the executive management team with the financial community through the participation in specialized conferences, roadshows, both in Portugal or in major international financial centers, and often meets with investors who visit Portugal. Date Event Location 14 Jan ESN Mid & Small Cap Conference London 10 Feb Santander Seminar - SMC Conference Madrid 3 Mar Madrid Roadshow 4 Mar Lisbon 8 Mar Frankfurt 9 Mar London 10 Mar Roadshow Edinburgh 11 Mar Paris 12 Mar Milan 24 Mar Citigroup 10th Annual European and Emerging Telecom Conference London 25 Mar 26 Mar Roadshow New York 13 May 14 May Roadshow Lisbon 25 May Toronto 26 May Roadshow 27 May New York 9 Jun Crédit Suisse Cable Conference London 18 Jun XVII Annual Santander Telecommunications Conference Lisbon ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 11/76

12 ZON Multimédia s legal representative for Capital Markets is Maria João Carrapato. Any interested parties are invited to request information from the Investor Relations Office, using the following contacts: Avenida 5 de Outubro, n.º Lisboa (Portugal) Tel. / Fax: +(351) / +(351) ir@zon.pt 4.3. Governing Bodies Shareholdings Under the terms and for the purposes of Article 9, Paragraph a) and numbers 6 and 7 of Article 14 of CMVM Regulation 5/2008, and according to the information provided to the Company by the Governing Bodies, ZON Multimedia hereby informs on the shareholdings of the members of its Governing Bodies, including the Audit Committee and the Alternate and In Office Statutory Auditors, at 30 June 2010: ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 12/76

13 Name Position Shares held at Shares held at Purchased Disposed Price per Share Date Daniel Proença de Carvalho Chairman of the Board of Directors Spouse Rodrigo Jorge de Araújo Costa José Pedro Faria Pereira da Costa Chief Executive Officer Member of the Executive Committee 506,313 48,062 3,646 2, ,000 40, ,959 90,186 Luís Miguel Gonçalves Lopes Member of the Executive Committee 47,062 2, , ,186 Duarte Maria de Almeida e Vasconcelos Calheiros Member of the Executive Committee 22,413 1, , ,749 Fernando Fortuny Martorell Member of the Board of Directors António Domingues (1) Member of the Board of Directors Grupo BPI 28,106,494-3,720, ,386,293 Luís João Bordallo da Silva (2) Member of the Board of Directors Grupo Cinveste 17,882,962-9,175, ,707,136 László Istvan Hubay Cebrian Member of the Board of Directors Norberto Emílio Sequeira da Rosa (3) Member of the Board of Directors Grupo CGD 53,799, ,600 17,898, ,326,470 Jorge Telmo Maria Freire Cardoso (4) Member of the Board of Directors Caixa Banco de Investimento - 9,892, ,892, Joaquim Francisco Alves Ferreira de Oliveira (5) Member of the Board of Directors Controlinveste International, Sarl 7,965, ,965,980 Gripcom, SGPS, SA. 6,989, ,989,704 João Manuel Matos Borges de Oliveira (6) Member of the Board of Directors Grupo COFINA 15,190, ,190,000 Vítor Fernando da Conceição Gonçalves Chairman of the Audit Committee Nuno João Francisco Soares de Oliveira Silvério Marques Member of the Audit Committee Paulo Cardoso Correia da Mota Pinto Member of the Audit Committee Mário Filipe Moreira Leite da Silva (7) Member of the Board of Directors Kento Holding Limited 0 30,909, ,909,683 António da R.S. Henriques da Silva Member of the Board of Directors 0 0 José Vieira dos Reis (8) Statutory Auditor Metalgest - Sociedade de Gestão, SGPS, SA 3,985, ,985,488 Fernando Marques Oliveira (9) Alternate Statutory Auditor Metalgest - Sociedade de Gestão, SGPS, SA 3,985, ,985,488 Adriano José de Seabra Duarte Neves Manager in the terms of CVM Article 248-B 12,641 1, ,901 10, Paulo Manuel Moura Ribeiro Gonçalo João Figueira Morais Soares Manager in the terms of CVM Article 248-B Manager in the terms of CVM Article 248-B 3,628 3, ,075 3, ,633 7,348 Jorge Filipe Santos Graça Manager in the terms of CVM Article 248-B 2, ,276 2, Tomás Maria de Morais Sarmento Pinto Gonçalves Manager in the terms of CVM Article 248-B 12,257 1, , ,388 1, José Antunes João Manager in the terms of CVM Article 248-B 43,842 15, ,108 2, Miguel Augusto Chambel Rodrigues Manager in the terms of CVM Article 248-B 6,827 3, , ,876-2, (1) António Domingues is a member of the Board of Directors of companies which are part of Grupo BPI which, by 30 June 2010, held 24,386,293 ZON Multimedia shares. (2) Luís João Bordallo da Silva is a member of the Board of Directors and a manager of companies which are a part of Grupo Cinveste which, by 30 June 2010 held 8,707,136 ZON Multimedia shares. (3) Norberto Emílio Sequeira da Rosa is a member of the Board of Directors of Caixa Geral de Depósitos, SA, which, by 30 de June 2010, held, directely and indirectely, 36,326,470 ZON Multimedia shares. (4) Jorge Telmo Maria Freire Cardoso is a member of the Board of Directors of Caixa Banco de Investimento, SA. (5) Joaquim Francisco Alves Ferreira de Oliveira indirectely controls more than half of the share capital of Controlinveste International, Sarl, which held, by 30 June 2010, a total of 7,965,980 ZON Multimedia shares. Joaquim Francisco Alves Ferreira de Oliveira indirectely controls more than half of the share capital of Gripcom - SGPS, S.A., which held, by 30 de June 2010, 6,989,704 ZON Multimedia shares. (6) João Manuel Matos Borges de Oliveira a member of the Board of Directors of Cofina-SGPS, S.A., which by 30 June 2010, held 15,190,000 ZON Multimedia shares. (7) Mário Filipe Moreira da Silva is a member of the Board of Directors of Kento Holding Limited, which held, by 30 June 2010, 30,909,683 ZON Multimedia shares. (8) José Vieira dos Reis is the Alternate Statutory Sole Supervisor of Metalgest - Sociedade de Gestão, SGPS, SA, which by 30 June 2010, held 3,985,488 ZON Multimedia shares. (9) Fernando Marques Oliveira is, in representation of Sociedade Oliveirea, Reis & Associados, SROC, Lda, the Statutory Sole Supervisor of Metalgest - Sociedade de Gestão, SGPS, SA, which held, by 31 December 2009, 3,985,488 ZON Multimedia shares. Transactions in 1H10 ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 13/76

14 4.4. Qualified Shareholdings Under the terms of paragraph c) of number 1 of article 9 of the Regulation 5/2008 of the Portuguese Securities Committee (CMVM), ZON Multimedia hereby informs on its qualified shareholdings held by third parties, which had been reported to the Company until the date of this report. The structure of ZON Multimedia s Social Qualified Shareholdings disclosed to the company, was, in 30 June 2010, as follows: Shareholders Nr Of Shares % Voting Rights Caixa Geral de Depósitos, SA 36,326, % Kento Holding Limited (1) 30,909, % Banco BPI, SA 24,386, % Telefónica, SA 16,879, % Espírito Santo Irmãos, SGPS, SA (2) 15,455, % Cofina, SGPS, SA 15,190, % Joaquim Alves Ferreira de Oliveira (3) 14,955, % Fundação José Berardo (4) 13,408, % Ongoing Strategy Investments, SGPS, SA (5) 10,649, % Banco Espírito Santo, SA 7,414, % Cinveste, SGPS, SA 8,707, % Grupo Visabeira, SGPS, SA (6) 6,641, % SGC, SGPS, SA (7) 6,182, % ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA 6,088, % BES Vida - Companhia de Seguros, S. A. 5,721, % Credit Suisse Group AG 5,649, % Metalgest - Sociedade de Gestão, SGPS, SA (4) 3,985, % Total Identified 228,552, % (1) According to Articles 20(1)(b) and 21 of the Cód.VM the qualified holding is attributable to Ms. Isabel José dos Santos, in her capacity of shareholder of Kento Holding Limited. (2) Espírito Santo Irmãos, SGPS, SA's voting rights are attributed to Espírito Santo Industrial, SA, Espírito Santo Resources Limited, and Espírito Santo Internacional, SA, companies which dominate Espírito Santo Irmãos, in that order. (3) Mr. Joaquim Francisco Alves Ferreira de Oliveira is attributed the voting rights corresponding to 4.84% of the share capital since he controls GRIPCOM, SGPS, SA, and Controlinveste International S.à.r.l., who hold respectively 2.26% and 2.58% of ZON Multimedia's share capital. (4) Fundação José Berardo's shareholding and voting rights are reciprocal with the shareholding and voting rights of Metalgest - Sociedade de (5) The voting rights of Ongoing Strategy Investments, SGPS, SA are attributable to RS Holding, SGPS, SA, its holder in 50.01%. RS Holding, SGPS, SA is 99.9% held by Ms. Isabel Maria Alves Rocha dos Santos. Therefore, its voting rights are attributed to her. (6) Visabeira Investimentos Financeiros,SGPS,SA holds 0.99% of ZON Multimedia's share capital. 1.16% are held directly by Grupo Visabeira, SGPS, SA. Visabeira Investimentos Financeiros,SGPS,SA is 100% held by Visabeira Estudos e Investimentos,SA, which is 100% held by Visabeira Serviços,SGPS,SA, which is owned by Grupo Visabeira,SGPS,SA. The latter is % held by Mr. Fernando Campos Nunes. (7) SGC, SGPS, SA's holding is attributed to its majority shareholder, Mr. João Pereira Coutinho. Note: The Qualified Shareholdings of Caixa Geral de Depósitos, SA, of Banco BPI, SA, and of Banco Espírito Santo, SA, have been updated as of 30 June 2010, based on information they provided for the purposes of section 4.3 of this Management Report. The following table presents the qualified holding of Caixa Geral de Depósitos, SA ( CGD ) calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 14/76

15 Shareholders Nr of Shares % Voting Rights Caixa Geral de Depósitos, SA 33,369, % Companhia de Seguros Fidelidade-Mundial, SA 2,450, % Fundo de Pensões da CGD e Outras Empresas do Grupo 417, % Império Bonança - Companhia de Seguros, SA 77, % Via Directa - Companhia de Seguros, SA 5, % Multicare - Seguros de Saúde, SA 4, % Total 36,326, % The following table presents the qualified holding of Banco Português de Investimento, SA ( BPI ) calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Fundo de Pensões do Banco BPI 23,287, % BPI Vida - Companhia de Seguros de Vida, SA 1,098, % Total 24,386, % The following table presents the qualified holding of Banco Espírito Santo, SA ( BES ) calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Fundo de Pensões do BES 7,399, % Elementos dos Órgãos Sociais 13, % Sociedades em relação de domínio ou de grupo com o BES 1, % Total 7,414, % The following table presents the qualified holding of Telefónica, SA, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Telefónica, SA 14,838, % Telesp, SA 1,196, % Aliança Atlântica Holding BV 844, % Total 16,879, % The following table presents the qualified holding of Joaquim Alves Ferreira de Oliveira, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Gripcom, SGPS, SA 6,989, % Controlinveste International, S.à.r.l. 7,965, % Total 14,955, % ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 15/76

16 The following table presents the qualified holding of Ongoing, Strategic Investments, SGPS, SA, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Insight Strategic Investments, SGPS, SA 5,688, % Ongoing Strategy Investments, SGPS, SA 4,019, % Investoffice - Investimentos e Consultoria Financeira, SA 925, % James Risso-Gill 12, % Nuno Vasconcellos 4, % Total 10,649, % The following table presents the qualified holding of Grupo Visabeira, SGPS, SA, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Grupo Visabeira, SGPS, SA 3,574, % Visabeira Investimentos Financeiros, SGPS, SA 3,067, % Total 6,641, % The following table presents the qualified holding of Crédit Suisse Group AG, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code. Shareholders Nr of Shares % Voting Rights Credit Suisse AG (em nome de clientes) 5,244, % Neue Aargauer Bank (em nome de clientes) % Clariden Leu AG (em nome de clientes) 1, % Credit Suisse AG 185, % Credit Suisse International % Credit Suisse Securities (USA) LLC 43, % CS Securities (Europe) Ltd 174, % Total 5,649, % A detailed record of the qualified shareholdings communications can be found at ZON Multimedia s corporate website, at ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 16/76

17 4.5. Transactions of Own Shares By the end of 2009, within the scope of its Share Buyback Program, ZON held 14,006,370 own shares, representing 4.53% of its share capital 399,358 of these shares, representing 0.13% of its share capital, were directly held by ZON Multimedia and the remaining 13,607,079 shares, representing 4.4% of the share capital, were held through equity swaps. The transactions involving ZON Multimedia own shares which took place in the first half of 2010 are summed up in the following table. The acquisitions and disposals of own shares which were carried out are related to ZON s Employee Share Plan and Share Savings Plan. The table also shows the sale of 14,006,437 own shares, representing 4.53% of ZON s share capital, to Kento Holding, as disclosed to the market on 5 February Number of Shares % Share Capital Balance as of ,006, % Acquisitions (Employee Share Plan and Share Savings Plan) Disposals (Employee Share Plan and Share Savings Plan) 398, % -392, % Sale of Own Shares to Kento Holding -14,006, % Balance as of , % ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 17/76

18 4.6. Business Review Business Indicators ('000) 2Q09 2Q10 2Q10 / 2Q09 1H09 1H10 1H10 / 1H09 Pay TV, Broadband and Voice Homes Passed 3, , % 3, , % RGUs (2) 3, , % 3, , % RGUs per Subscriber (units) % % Basic Subscribers (1) 1, ,576.9 (0.9%) 1, ,576.9 (0.9%) o.w. Cable Subscribers 1, ,166.3 (1.1%) 1, ,166.3 (1.1%) Triple Play Customers % % % Triple Play Cable Customers 33.2% 49.0% 15.9pp 33.2% 49.0% 15.9pp Double Play Customers (30.4%) (30.4%) % Double Play Cable Customers 22.7% 16.0% (6.7pp) 22.7% 16.0% (6.7pp) Single Play Customers (21.6%) (21.6%) % Single Play Cable Customers 44.1% 35.0% (9.1pp) 44.1% 35.0% (9.1pp) o.w. DTH Subscribers (0.4%) (0.4%) Blended ARPU (Euros) % % Cinema Exhibition Revenue per Ticket (Euros) % % Tickets Sold 1, ,716.6 (0.8%) 3, , % Screens (units) (1.8%) (1.8%) (1) These figures are related to the total number of Pay TV basic customers, including the cable and satellite platforms. ZON Multimedia offers several basic services, based on different technologies, directed to different market segments (residential, real estate and corporate), with a distinct geographical scope (mainland Portugal and the Azores and Madeira islands) and with a variable number of channels. (2) Revenue Generating Units correspond to the sum of Pay TV basic customers, plus "Funtastic" Digital, Fixed Broadband, Fixed Voice and Mobile customers. Triple Play continues to be a key driver of growth and profitability Almost 1 out of 2 cable customers subscribe to Triple Play bundles. By the end of 1H10, thousand customers were taking Triple Play services, 49% of the cable customer base and representing growth of thousand (+46.3%) in comparison with 1H09. ZON s customer base has been migrating more and more to multiple play bundles, the most relevant of which are Triple Play offers whose penetration of the cable customer base has been increasing rapidly quarter on quarter. On the contrary, Single Play penetration has been declining as a percentage of the cable base every quarter, now representing just 35% compared with over 50% just two years ago. The remaining customers are opting for Double Play solutions (TV + Voice and TV + Broadband) which today represent around 16% of the cable customer base. On average, each ZON customer is taking significantly more services, 2.31 RGUs per sub, up from 2.02 a year before and bringing the total number of RGUs to 3,693.7 (+13.6% yoy). ZON has successfully defended its customer base of almost 1.6 million pay TV subscribers. The market remains very competitive and characterized by still relatively aggressive levels of promotional activity. However, within this challenging competitive environment, ZON has focused on acquiring ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 18/76

19 and retaining higher quality customers which translate into higher levels of profitability and return on investment for the company. The marginal slowdown in subscriber growth in 2Q10 was also due to the across the board price increase of 2-3%, but has been more than compensated by a significant improvement in profitability due to higher ARPU and also to a more efficient approach to customer acquisition. Average subscriber acquisition costs are coming down, led by a more rational sales-mix between the various sales channels. In particular, the proportion of sales made through more effective and less expensive distribution channels has increased significantly and, in some instances, overtaken the weight of sales over more expensive and typically more volatile door-to-door sales channels, that also tend to generate more churn. In addition, efforts are being taken to ensure that reactive sales channels are leveraged by taking advantage of contacts made to in-coming customercare platforms. The best HD offer with a leading position in content and at the forefront of innovation High definition remains an important differentiating factor in the ZON Pay TV offer, which today already has 15 channels being broadcast in HD, the largest offer in the Portuguese market. Particular focus was given to ZON s sports HD offer during the World Cup in June and July with a campaign dedicated to communicating ZON s position as the operator with the most comprehensive and best quality HD offer in the market. An additional 3 HD channels were launched in 2Q10, one of which, a dedicated financial news channel Económico TV HD exclusive to ZON, in addition to Nat Geo Wild HD and Discovery Showcase HD. In addition, further exploiting the superior technological capabilities and coverage of its HFC network, ZON launched a dedicated true 3D channel in 1Q10, putting itself at the forefront of TV innovation worldwide. The channel may be viewed by anyone with a 3D enabled television set at home living within the ZON cable footprint. The technology used is True 3D thereby enabling spectators to enjoy a seamless 3D experience, similar to that experienced in cinema theatres. In 2Q10, this channel exclusively broadcast two friendly matches of the Portuguese team in preparation for the World Cup, in 3D. Further raising the profile of ZON s brand positioning, in the past weeks, ZON became a joint primary sponsor of the Portuguese premier football league, together with Sagres, the leading beer brand in Portugal. The premier league will now be called Liga ZON Sagres. With this sponsorship, ZON aims to reinforce its leadership in the Pay TV market by supporting a sport that motivates thousands to go to stadiums and always ranks at the top of TV audiences. Brand awareness is set to increase significantly with this initiative, leveraging ZON s innovative positioning in terms of the high definition and 3D viewing experience. As regards the entry level Pay TV product launched at the beginning of the year, it has had good progress in terms of subscriber take-up, with around 20 thousand subscribers after six months, by end 2Q10. The marketing of the new tariff plans was very selective, with campaigns being directed to morning or afternoon FTA TV shows, focusing on market segments that currently do not receive Pay TV services and therefore reducing the potential for customers downgrading from higher value propositions. The proportion of customers that now receive digital services continues to increase. By the end of 1H10, 740 thousand ZON HD Boxes had been installed, thereby enabling an ever increasing number of customers to benefit from a digital HD experience and numerous functionalities launched over the Pay TV platform. Further efforts to reduce the average cost of terminal equipment installed on customer premises were taken, both through continued renegotiation of purchasing terms and through an increase in the level of equipment that is refurbished and injected back into the system. Further enhancing its offer, in 2Q10 ZON launched a number of Internet based widgets adapted for its cable TV platform, allowing customers to access useful functionalities and information with one push of a button on the TV control, whilst simultaneously watching a TV broadcast. Amongst the first widgets to be launched were Mundial with continuous World Cup updates, Quiosque with news updates and headlines, Photo providing access to pictures on the Picasa or Flickr platforms, in ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 19/76

20 addition to widgets with weather updates (Accuweather), TV programming guides and entertainment quizzes. The new widgets have proven extremely popular: over 270 thousand ZON Boxes accessed the service in the first month, with over 5.5 million clicks spread over 23 hours of use. ZON s VoD platform, currently with a library of over 3 thousand titles, continues to post very interesting quarterly progress, albeit representing a relatively small proportion of total customer revenues. On average, each film downloaded represents additional revenue of 3 euros. New content and functionalities being launched and many more in the pipeline, are set to stimulate additional VoD usage and subsequently generate incremental TV revenue. The largest next generation network operator in Portugal ZON s clear advantage in terms of next generation network coverage and widespread technological superiority is reflected in its results: as from July, 100 thousand customers, 15% of the broadband customer base, currently take offers higher than 50 Mbps. According to data published by the regulator for the end of 1Q10, ZON s implied market share of Next Generation services was already 59% implying that all other broadband operators together had less NGN subscribers than ZON. In total, the number of broadband subscribers increased by 13.6% to thousand, representing a 56% penetration rate of the cable base. In 2Q10, ZON launched an upgraded ZON HUB, its leading-edge gateway for voice and broadband connections of up to 200 Mbps, that enables high speed wireless connectivity all around the house, in addition to providing PBX-like features adaptable to the needs of small enterprises. On the WiFi front, ZON s customer supported solution, ZON FON is proving to be a huge success. There are already more than 100 thousand access points across the country, providing the most extensive wireless networks in Portugal, and free access to all ZON broadband users. Customers can also access almost 2 million international access points supported by FON s partner network as is the case of British Telecom in the UK. The next generation ZON HUB now integrates ZON FON hotspot technology, thus providing an easy platform for ZON FON s WiFi network to expand significantly in coming quarters. Also in 1H10 ZON launched an Internet Protection system, in partnership with F-Secure, one of the leading computer safety companies in the world. For a 1.99 euros monthly fee, the service provides an integrated security solution, sharable with 3 home computers, including antivirus, anti-spyware, anti-spam, firewall and parental control functionalities. Continued growth in fixed voice uptake The number of customers taking ZON s fixed voice services continues to increase, reaching 692 thousand by the end of 1H10 and representing 58% of the cable subscriber base. In July 2010, the 700 thousand customer mark had already been reached. Traffic profiles remain very strong, supported by the strength of attractive tariff plans that include unlimited fixed line traffic to 30 international destinations. The market power of this offer led other main competitors to also launch similar tariff plans during the quarter. Previously, the total fixed voice market was stagnant. After the ZON Fixed Voice service was launched and indeed for the past 6 quarters, the number of total subscribers has actually inverted the negative trend of previous years, with ZON being the only relevant fixed voice operator posting a significant contribution to net market growth. Progressive growth in mobile Subscribers of ZON s mobile voice and broadband service increased to 92.3 thousand by the end of 1H10, almost three times more than at the end of 1H09. In terms of mobile broadband, a new tariff structure was introduced whereby subscribers are allowed unlimited traffic and time usage of their mobile broadband card at no additional charge, with full or reduced levels of mobility. The advantage of the new tariff plans is that they reduce the uncertainty associated with monthly bills, thus ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 20/76

21 eliminating barriers to entry for more price sensitive customer segments. In addition, a new entry level tariff of euros per month was launched, ideal for moderate usage patterns. Strong ARPU performance reflecting strategic focus on value of customer base Blended ARPU continues to record strong growth. In 1H10, ARPU increased by 7% to 35.4 euros, reflecting the value associated with ZON s strategy to upsell new services and Triple Play bundles. In addition, ZON led the market with its announced price increase of between 2-3% across the board which became effective as from 1 May In ZON s higher revenue generating, multiple-play cable customer base, ARPU grew by 7.5% to 38.8 euros in 2Q10, compared with an increase of 0.8% in its DTH customer base. Upgrade of network to Eurodocis 3.0 practically complete, cell splitting and backhaul roll-out underway ZON s Eurodocsis 3.0 upgrade is practically complete, thus enabling delivery of very high broadband speeds of up to 200 Mbps to almost the entire cable footprint. In 2Q10, ZON successfully migrated all its systems to a single data centre, located in own infrastructure thus enabling greater systems optimization, flexibility and cost rationalization without interrupting current operations. ZON is progressing with the rollout of own network infrastructure to relocate hubs onto its own sites. Of a total of around 40 sites spread across Portugal, around 10% have already been successfully moved to own infrastructure and negotiations are underway regarding contracts with key suppliers to enable the relocation of remaining sites over the course of the next two years, while at the same time ZON is discussing the terms of a partial renewal of the current infrastructure contract with the incumbent operator which expires on 31 December The upfront investment required to develop this project is more than compensated in the medium term with the clear improvement in operational flexibility and the reduction in cash-outflow associated with telecom infrastructure costs, currently contracted from the incumbent operator. Audiovisuals and Cinemas 1H10 was the best ever semester for ZON s cinema exhibition business. By the end of 1H10, all of ZON s cinema screens had been digitalized and 3D projection technology was present in over 60, an average of more than 2 3D screens per theatre. Given that the number of 3D movies launched is increasing significantly, ZON is able to exhibit more than one 3D movie at a time in the same cinema theatre, putting it at a significant advantage to its main competitors. In 1H10, 26% of tickets sold by ZON were for 3D movies. The total market grew by 7.3% 1H10 compared with 1H09, representing an additional 532,450 tickets. ZON was responsible for 95% of this growth, 508,216 tickets, with the rest of the market remaining flat and main competitors losing market share. Overall, the number of cinema tickets sold at ZON in 1H10 was 13.8% higher than in 1H09, reaching almost 4.2 million, and representing an increase in market share of 3.1 pp to 53.7% from 50,6% in 1H09. 1Q10 was marked by some very successful movies in terms of box-office sales, namely Avatar, Alice in Wonderland, It s Complicated and Up in the Air, however sales fell-off slightly in 2Q10 due to comparatively lower number of blockbuster movies. ZON s y.o.y. increase was greater than that of the total market due to its significant head-start in terms of technological innovation, thus enabling it to show content that others players don t have the capacity to show. As a result, ZON continues to gain market share in attendances and revenues, without the need for investment in new sites. On the Audiovisuals front, 1H10 was also very positive for revenues and share evolution as ZON was responsible for distributing many of the blockbuster movies that premiered in the period. Of the films distributed in 1H10, only 10 exceeded the 200 thousand spectator threshold and of these, 8 ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 21/76

22 were distributed by ZON. Some of the main box office hits distributed by ZON in 1Q10 were Alice in Wonderland, The Princess and the Frog, How to Train your Dragon, It s Complicated and Shutter Island. 2Q10 was marked by the launch of movies such as Law Abiding Citizen, Iron Man 2, Robin Hood, Prince of Persia: Sands of Time and Eclipse, the Twilight Saga. The new movie for the Twilight Saga, launched on 30 June, was the best opening day ever for an independent movie in Portugal, with over 50 thousand spectators. As regards own channels, a strong performance was recorded in terms of audience in 1H10 with total audience for the Dreamia channels (a JV with Chello Media for the production of two movie and series channels Hollywood and MOV and two children s channels Panda and Panda Biggs) increasing to a share of 5.4% out of the total at the end of 1H10, compared with 4.7% in 1H09. As regards the children s channels, Panda and Panda Biggs, they are clear market leaders in their segment with a 61.7% share of total children s channel audience in 1H10, which in turn represents 13.7% of total cable audience. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 22/76

23 4.7. Consolidated Financial Review Profit and Loss Statement (Millions of Euros) 2Q09 2Q10 2Q10 / 2Q09 1H09 1H10 1H10 / 1H09 Operating Revenues % % Pay TV, Broadband and Voice % % Audiovisuals % % Cinema % % Others and Eliminations (6.8) (12.4) 83.2% (14.0) (22.8) 63.4% Operating Costs Excluding D&A % % W&S % % Direct Costs % % Commercial Costs (1) (12.4%) (11.4%) Other Operating Costs (0.6%) (0.6%) EBITDA (2) % % EBITDA Margin 33.4% 35.3% 1.8pp 32.7% 34.8% 2.2pp Depreciation and Amortization % % Income From Operations (3) (9.8%) (1.5%) Other Expenses / (Income) (74.3%) (72.9%) Operating Profit (EBIT) (4) (5.5%) % Financial Expenses (Income) (7.5%) (0.0) 16.2 n.a. Income Before Income Taxes (4.5%) (36.1%) Income Taxes (6.2) (1.5) (75.6%) (13.3) (3.9) (70.4%) Income From Continued Operations % (21.0%) o.w. Attributable to Minority Shareholders (0.5) (0.5) (10.3%) (1.1) (0.9) (17.3%) Net Income % (21.2%) Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. (1) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold; (2) EBITDA = Income From Operations + Depreciation and Amortization; (3) Income From Operations = Income Before Financials and Income Taxes + work force reduction programme costs + impairment of goodwill + Losses/Gains on disposal of fixed assets + Other costs/income. (4) EBIT = Income Before Financials and Income Taxes In order to make comparisons with previous periods, the 2009 figures presented below were adjusted to better explain the ongoing performance. Therefore, adjustments have been made to 2009 operating revenue and cost lines in the table Profit and Loss Statement Pro-Forma, to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators, and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. As such, all comparisons and explanations were based on the 2009 pro-forma figures you will find on the table Profit and Loss Statement Pro-Forma, below. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 23/76

24 Above, you may find the table Profit and Loss Statement, which presents 2009 numbers without any sort of adjustment. Profit and Loss Statement - Pro-Forma (Millions of Euros) 2Q09 2Q10 2Q10 / 2Q09 1H09 1H10 1H10 / 1H09 Operating Revenues % % Pay TV, Broadband and Voice % % Audiovisuals % % Cinema % % Others and Eliminations (6.8) (12.4) 83.2% (14.0) (22.8) 63.4% Operating Costs Excluding D&A % % W&S % % Direct Costs % % Commercial Costs (1) (12.4%) (11.4%) Other Operating Costs (0.6%) (0.6%) EBITDA (2) % % EBITDA Margin 33.3% 35.3% 1.9pp 32.5% 34.8% 2.3pp Depreciation and Amortization % % Income From Operations (3) (7.2%) % Other Expenses / (Income) (52.2%) (0.8) 0.4 (154.0%) Operating Profit (EBIT) (4) (5.5%) % Financial Expenses (Income) (7.5%) (0.0) 16.2 n.a. Income Before Income Taxes (4.5%) (36.1%) Income Taxes (6.2) (1.5) (75.6%) (13.3) (3.9) (70.4%) Income From Continued Operations % (21.0%) o.w. Attributable to Minority Shareholders (0.5) (0.5) (10.3%) (1.1) (0.9) (17.3%) Net Income % (21.2%) Adjusted Net Income (5) % % Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. (1) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold; (2) EBITDA = Income From Operations + Depreciation and Amortization; (3) Income From Operations = Income Before Financials and Income Taxes + work force reduction programme costs + impairment of goodwill + Losses/Gains on disposal of fixed assets + Other costs/income. (4) EBIT = Income Before Financials and Income Taxes (5) Adjusted Net Income is adjusted for the impact of the pre-tax capital gain of 16.9 million euros due to the sale in 1Q09 of a 40% stake in Lisboa TV. Operating Revenues Operating Revenues posted an 8.8% y.o.y. increase in 1H10, to million euros, with progressive acceleration in revenue growth quarter on quarter. Whereas in 1Q10, Operating Revenues grew by 8.2% yoy, growth in 2Q10 accelerated to 9.5% y.o.y.. The increase in revenues was led by a 9.3% increase in core Pay TV, Broadband and Voice revenues to million euros in 1H10, resulting from a 15.9pp increase in Triple Play penetration, a 13.6% increase in RGUs and a 6.9% increase in Blended ARPU. ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, S.A. 24/76