Further investments to improve revenue momentum Investments focused on Ziggo WifiSpots, launch of mobile offerings and customer retention

Transcription

1 Utrecht, July 18, 2013 Ziggo N.V. Q Results Further investments to improve revenue momentum Investments focused on Ziggo WifiSpots, launch of mobile offerings and customer retention Successful launch of our popular Ziggo WifiSpots with 850,000 hotspots to be activated in August Ziggo prepares to launch an MVNO-based mobile offering in 2nd half of 2013 Newly introduced campaigns in Q2 targeted on customer retention B2B continues to record strong organic revenue growth; first contribution from acquisition of Esprit Telecom Revised outlook for full year 2013 due to higher investments Operational highlights Q All-in-1 bundle subscribers up 20,000 in Q2, resulting in 1.4% q-o-q growth and 7.1% y-o-y growth; All-in-1 bundle penetration reaches 53.7% of our consumer customer base Internet subscribers up 20,000 in Q2, representing 1.1% q-o-q growth and 4.6% y-o-y growth Telephony usage revenue down 5.2% y-o-y (down 1.3% excluding FTA rate reduction) Digital pay TV, including Video on Demand, up 1.0% y-o-y B2B adds over 3,500 subscriptions for its business bundles 150,000 set-top boxes made interactive through SGUI, supporting another quarter of strong growth in Video-on-Demand transactions Financial highlights Q Revenues up 1.4% y-o-y to million (down 0.2% excluding Esprit Telecom). Underlying revenues excluding set-top box sales and other revenues up 0.6% organically, despite a 5.2% decline in telephony usage revenues. Adjusted EBITDA million, up 0.8% y-o-y. Excluding Esprit Telecom, EBITDA up 0.3% Free cash flow 95.0 million, down 40.1% y-o-y due to growth in capital expenditure and acquisition of Esprit Telecom Net profit up to 88.9 million, from 64.4 million in Q Earnings per share 0.44 Leverage ratio down to 3.41x compared to 3.42x at year-end 2012 CEO Bernard Dijkhuizen: During the second quarter we experienced similar market dynamics as in the last few quarters. Our sales campaigns for the All-in-1 bundle were successful and continued to deliver good results, taking into account Q2 seasonality. At the same time, churn levels continued to be relatively high historically, particularly for lower spending customers, having an impact on revenue growth in the consumer market. In order to reduce churn we have developed and launched several programs during the second quarter targeting to improve customer retention. Our focus on sales of All-in-1 bundles and retention had an adverse effect on marketing initiatives for premium TV, contributing to a limited growth in digital pay TV this quarter. ziggo.com

2 In addition to our loyalty campaigns, we prepared the increase of internet speeds and started to roll out the popular Ziggo WifiSpots. Ziggo WifiSpots creates through the public channel of the modems from all Ziggo internet customers a large number of Wifi-hotspot access points in our footprint for Ziggo customers. The roll out will result in over 850,000 hotspots by the end of the third quarter and close to 1 million before the end of the year. This new service strongly supports the appeal and attractiveness of our services to our customers and the response by customers and media has been overwhelming. To further leverage the benefits of the Ziggo WiFiSpots we will also launch an MVNO-based mobile offering for existing customers in the second half of this year. This proposition will offer an attractive price for a bundle of call minutes/sms and mobile data in combination with high quality internet access through the Ziggo WifiSpots. This proposition will grow over time to a fully converged mobile offering. While in consumer markets RGUs and revenue growth came in below our expectations, we were pleased to see continued strong organic revenue growth in our B2B operations. On top of that we benefited from a first contribution from our acquisition Esprit Telecom. This acquisition will stimulate organic revenue growth in the SME market (small and medium-sized enterprises) going forward, in addition to growth in the small and home offices market through our office bundles. Outlook Following the decision to further step up our campaigns and investments in customer retention, our Ziggo WifiSpots and the launch of our mobile offering, and taking into consideration the higher than anticipated churn in the first half year, our outlook for the full year 2013 will change. We now anticipate 2013 organic revenue growth (excluding revenues from other sources ) to be around 1%, whilst adjusted EBITDA is expected to be in line with last year. Our capital expenditure for 2013 is expected to increase to a range of million primarily due to higher investment in customer premises and equipment to support customer retention and investments for the launch of Ziggo mobile. In line with the dividend policy, Ziggo intends to pay an interim dividend of 190 million, equal to 0.95 per share, in September Important dates This year, Ziggo expects to publish its quarterly results on the following dates: Q October 18, 2013 FY and Q January 23, 2014 Interim dividend 2013: September 3, 2013 Ex-dividend (at opening) September 5, 2013 Record date (after close) September 10, 2013 Payment date 2

3 Financial highlights (unaudited) Q2 YTD June million Change Change Subscriptions + usage (0.1%) % Other revenues (23.9%) (31.1%) Total consumer revenues (0.9%) (0.8%) Business services revenues % % Total revenues % % Cost of goods sold (1.6%) (5.4%) Gross margin % % % of total revenues 80.6% 80.0% 81.1% 79.9% Operating expenses % % Marketing & Sales % % Total operating expenses % % % of total revenues 24.2% 23.3% 24.2% 23.6% Adjusted EBITDA % % % of total revenues 56.4% 56.7% 56.9% 56.3% IPO related costs EBITDA % % Depreciation and amortization (3.3%) (4.2%) Operating income % % Share based payments (100.0%) Movement in provisions (3.4) (1.0) 249.5% (4.7) (1.3) 245.8% Change in net working capital (25.3) (6.7) 279.4% (16.7) 22.1 (175.6%) Cash flow from operating activities (9.1%) (3.2%) Capital expenditure (Capex) % % % of total revenues 20.3% 13.1% 18.7% 15.6% Acquisition Interest received 0.0 (0.2) (100.3%) (0.0) (0.4) (98.1%) Change in financial assets (0.1) Funding joint venture % (40.1%) Free cash flow (40.1%) (16.8%) % of total revenues 24.2% 41.1% 32.7% 39.6% Adjusted EBITDA - Capex (16.1%) (5.4%) % of total revenues 36.1% 43.7% 38.2% 40.7% Net result % % Outstanding shares (# m) Earnings per share ( ) % % 3

4 Operational highlights (in thousands) (unaudited) Footprint 3 (thousands) 30 Jun Mar 2013 Change 30 Jun 2012 Change Homes passed 4,234 4, , % Analog TV only (39) 716 (22.9%) Analog and digital TV 4 2,265 2, , % Total TV customers 2,818 2,851 (33) 2,959 (4.8%) Digital pay TV subscribers (47) 951 (9.4%) Internet subscribers 1,832 1, , % Telephony subscribers 1,549 1, , % Total RGUs 5 7,060 7,097 (37) 7,104 (0.6%) Total RGUs consumer 6,845 6,891 (46) 6,935 (1.3%) of which bundle subscribers 6 1,446 1, , % RGUs per customer (#) % ARPU in Q ( per month) % ARPU YTD ( per month) % Total RGUs B2B % 4

5 Note Please note that the results published in this press release are the consolidated results of Ziggo N.V. ( Ziggo ), and not those of Ziggo Bond Company B.V., the entity that we reported on prior to Q As a consequence of the initial public offering of 25% of its ordinary shares on March 21, 2012, Ziggo is now reporting quarterly results at the level of the entity that issued the ordinary shares at NYSE Euronext Amsterdam, referred to as Ziggo. A reconciliation of the results for Ziggo N.V. to Ziggo Bond Company B.V. is attached as a separate schedule to this earnings release, and an explanation of the most important reconciling items is provided at the end of this release. Ziggo was incorporated on April 1, 2011 and indirectly acquired all of the issued and outstanding shares of Ziggo Bond Company B.V. on March 20, Definitions/Footnotes (1) Adjusted EBITDA refers to EBITDA, adjusted to eliminate the effects of operating expenses incurred in connection with the initial public offering of ordinary shares of the company on March 21, 2012, which were 0.0 million respectively 0.0 million for the quarter and half year ended June 30, 2013 and 0.0 million respectively 39.7 million for the quarter and half year ended June 30, (2) EBITDA represents operating income plus depreciation and amortization. Although EBITDA should not be considered a substitute for operating income and net cash flow from operating activities, we believe that it provides useful information regarding our ability to meet future debt service requirements. (3) Operating data relating to our footprint and RGUs are presented as at the end of the period indicated. (4) Digital television RGUs equals the total number of standard TV subscribers who have activated a smart card as at the end of the periods indicated. As a result, digital TV RGUs represents the number of subscribers who have access to our digital TV services. In any given period, not all of these digital TV RGUs will have subscribed to additional digital pay TV services. As at June 30, 2013, 862,000 of our total digital TV RGUs subscribed to one or more of our digital pay TV services. (5) Total RGUs are calculated as the sum of total standard TV subscribers, digital pay TV subscribers, internet subscribers and telephony subscribers which are serviced by our coaxial products for both the consumer and the business markets. Total consumer RGUs excludes the subscriptions for our products Office Basis (31,909), Office Plus (1,291) and Internet Plus (10,143) targeted at SOHO and small businesses and our collective TV contracts TOM and TOMi (representing 80,000 RGUs), as these coaxial products are serviced by our business division and revenues generated through these products are recognized as business service revenues. These products represent 124,000 TV RGUs, 14,000 digital pay TV RGUs, 43,000 internet RGUs and 33,000 telephony RGUs. (6) Besides 1,446,000 subscribers who subscribed to the All-in 1 bundle, 12,000 customers subscribed to standard TV, internet and telephony on an individual product basis instead of an All-in-1 bundle. (7) RGUs per customer is the total number of consumer RGUs (6,845,000 as at June 30, 2013) divided by the total number of consumer standard TV subscribers (2,694,000 as at June 30, 2013). (8) Average Revenue per User (ARPU) for the consumer market is calculated as the sum of total standard TV, digital pay television, internet, telephony (including call charges and interconnection revenue) and All-in-1 bundle subscription revenues generated in the consumer market for the period divided by the number of months used and divided by the period s average monthly total standard TV RGUs. It excludes revenue from other sources, including installation fees and set-top box sales. (9) We have changed the definition of net debt for the calculation of the leverage. Net debt is defined as the outstanding balance of the principal amount of our borrowings plus the accrued interest on these borrowings and the market-to-market value of the derivative financial instruments, reduced by the balance for cash and cash equivalents. Before the balance of accrued interest and the market-to-market value of the derivative financial instruments was not included in the calculation of net debt. About Ziggo Ziggo is a Dutch provider of entertainment, information and communication through television, internet and telephony services. The company serves around 2.8 million households, with over 1.8 million internet subscribers, almost 2.3 million subscribers for digital television and 1.5 million telephony subscribers. Businessto-business subscribers use services such as data communication, telephony, television and internet. The company owns a next-generation network capable of providing the bandwidth required for all future services currently foreseen. More information on Ziggo can be found on: Not for publication For more information please contact: Press Martijn Jonker Deputy Corporate Communications Director +31 (0) Martijn.Jonker@office.ziggo.nl Analysts and Investors Wouter van de Putte Corporate Finance & Investor Relations Director +31 (0) investorrelations@office.ziggo.nl 5

6 Consumer products & services Detail consumer thousands 30 Jun Mar 2013 Change 30 Jun 2012 Change Analog TV only (38) 630 (27.3%) Analog and digital TV 2,236 2, , % Total TV customers 2,694 2,729 (35) 2,853 (5.6%) Digital pay TV subscribers (48) 940 (9.9%) Internet subscribers 1,788 1, , % Telephony subscribers 1,516 1, , % Total RGUs 6,845 6,891 (46) 6,935 (1.3%) of which bundle subscribers 1,446 1, , % RGUs per customer (#) % ARPU for the quarter ( per month) % ARPU YtD ( per month) % The second quarter of 2013 showed similar trends for RGUs as the previous quarters. Although sales and marketing efforts were again successful, continued strong competition in the consumer market kept churn ahead of our own targets and ahead of the level for the comparable period in the previous year. Churn is relatively higher among subscriptions to TV-only and the lower tier internet (Z1) and lower tier All-in-1 bundle subscriptions. In order to address churn we announced certain improvements in our propositions during the quarter, including an increase in internet speeds, the launch of WifiSpots and attractively priced dual-play propositions. Furthermore, we launched a number of campaigns focusing on customer retention to address churn. The effects of these campaigns should become visible in the second half of During Q2, customer churn for the All-in-1 bundles was 4.8% in total, compared to 6.2% for the previous quarter and 4.3% for the comparable quarter in These percentages are based on yearly churn rates. At the end of June 2013, total RGUs in the consumer market reached 6.8 million. In Q2 2013, Ziggo lost 46,000 RGUs as a result of a net churn of 35,000 subscribers and a decline in RGUs for digital pay TV of 48,000. This decline was partly offset by an increase in RGUs for internet and telephony, driven by the growth in subscriptions to the All-in-1 bundle. The decline in RGUs for digital pay TV was driven by the end of the Dutch football season in May, the depressed consumer confidence as a result of the decline in the economy and also by the focus of our marketing activities on customer retention and the sales of All-in-1 instead of premium pay TV. In Q2 the number of subscribers to the All-in-1 bundle grew by 20,000 (or 1.4%) to 1.45 million and by 7.1% compared to the prior-year quarter. The number of internet subscribers grew by 16,000 to 1.79 million during the quarter and by 3.9% compared to the prior-year quarter, again increasing our market share for broadband internet. The number of digital TV subscribers increased slightly by 3,000 to 2.24 million, representing a penetration of 83.0% of our consumer customer base. The number of TV-only subscribers decreased by 21.4% compared with the same quarter last year, to a total of 848,000 as at June 30, The decrease was mainly caused by the up-selling of the All-in-1 bundle to our TV-only subscribers as well as by churn among TV-only subscribers. Churn among TV-only subscribers was higher compared to last year as a result of the market moving towards triple-play and increased competition. Churn on all other product lines, and for All-in-1 in particular, is significantly lower compared to churn among TV-only subscribers. We will continue to focus on upgrading customers to our All-in-1 bundle from a penetration of 53.7% today. 6

7 The total number of telephony subscribers rose to 1.52 million at the end of the second quarter, an increase of 6.7% compared to the same period in This increase is mainly the result of the increase in All-in-1 subscriptions. RGUs per customer grew to 2.54, up 4.5% compared to last year, following a 1.3% decline in RGUs combined with a lower number of TV-only subscribers. Excluding digital pay TV as a separate RGU, Ziggo recorded an average of 2.23 RGUs per customer or a 6.0% growth compared to the previous year. Blended ARPU rose by 5.7% y-o-y, benefiting from a further penetration of All-in-1 bundles in our customer base, a relative higher churn among lower ARPU TV-only customers and ARPU growth for digital pay TV, partly offset by a decline in the ARPU for telephony usage. Marketing and sales The successful sales campaign for new bundle subscribers launched in February ( Kies je Voordeel ) was continued during the second quarter. In addition to an introduction discount or a free or discounted set-top box in combination with a minimum contract period of twelve months, new subscribers to All-in-1 have been given the option, since May, to receive a free tablet, subject to a minimum contract period of twelve months as well. The campaign focuses on triple play and dual play. During the second quarter we also launched a number of new campaigns focusing on customer loyalty and customer retention. With these campaigns, existing customers can purchase an interactive HD receiver or an interactive HD recorder at an attractive discount. We also launched campaigns targeted on customer retention in areas where FttH is being launched to highlight the strength and future readiness of the HFC network, the quality and attractiveness of the Ziggo product offering and the high internet speeds that we offer (150Mb across our footprint). In addition, we have started targeted win-back campaigns in areas where FttH has been rolled out over the past years, supported by an attractive offer for a high quality product and service compared to the FttH experience. These targeted retention and win-back campaigns are supported by special retention offers granting a free interactive receiver or recorder, in combination with a twelve or twenty-four months contract, respectively. On June 16, a very popular live concert from the Ziggo Dome ( Holland Zingt Hazes ) was broadcasted for our customers via the Ziggo TV App and via the Ziggo Event Channel. The event was viewed by approximately 300,000 Ziggo customers. Later that month, the Ziggo Dome celebrated its first anniversary with a contest in which Ziggo customers could win golden seats, enabling them to attend all concerts in the Ziggo Dome for a whole year. Approximately one million people have attended a concert or event since the Ziggo Dome was opened in June On June 30, the ParkPop concert was broadcasted live via the Ziggo Event Channel. During this music festival in The Hague, Ziggo WifiSpots were placed in the concert area for the concertgoers, and a social media campaign was launched offering participants the chance to win backstage passes for the event. Products and services At the end of April, we launched the roll-out of our WiFi Homezone concept in our footprint, called Ziggo WifiSpots, starting with the activation of 65,000 Ziggo WifiSpots in the city of The Hague. By August, we expect to have activated 850,000 WifiSpots, increasing to approximately one million by the end of The WiFi Hotspot concept utilizes the public channel of our WiFi EuroDocsis 3.0 modems at the customer s premises, enabling all Ziggo internet customers to access high speed internet in the vicinity of an activated Ziggo modem. The introduction was supported by a special communication campaign through television commercials, advertising and mailings to explain the concept and communicate the benefits for Ziggo customers: mobility and high quality internet access on any device, anywhere in our footprint. Our first step on our way to a fully converged offering was warmly welcomed in the Dutch media and by our customers. 7

8 We plan to launch our MVNO-based mobile offering for Ziggo customers in the second half of This will be an attractively priced SIM-only based proposition for a bundle of call minutes/sms and mobile data in combination with high quality internet access through the Ziggo WifiSpots. On May 14, we announced the increase of our internet speeds for various subscriptions. In the course of July 2013, approximately 800,000 internet subscribers will have access to higher internet speeds at no additional cost. The internet speed for the lowest tier internet subscriptions will be raised from 8/1 MBit/s to 20/2 MBit/s and that for All-in-1 Basis will be raised from 10/1 MBit/s to 20/2 MBit/s. This increase further widens the gap with DSL-based offerings, particularly when the actual speed delivered is being considered. In addition, the highest internet speed for internet Z3 and All-in-1 Extra will increase to 150/15 MBit/s. In March, we introduced the first fully cloud-based interactive DVB-C TV service in the world. By combining the IP protocol with the DVB-C television standard, even set-top boxes without built-in hardware functionality for interactivity, are able to provide interactive services via a cable. This new streaming graphical user interface (SGUI) has been nominated for the innovation award by the International Broadcast Convention (IBC) in the Content Delivery category. The number of activated decoders with the SGUI grew from 60,000 in the first quarter to approximately 150,000 decoders in the second quarter, and they currently account for approximately one-third of the VOD activity. As at June 30, we have over 480,000 customers with interactive receivers or recorders, up from 410,000 at the end of the first quarter of On July 12, the first CI+ 1.3 module was introduced. A common interface module in combination with a CI+ certified television enables digital TV subscribers to watch digital TV without a decoder and use a single remote control. The new 1.3 standard provides optional access to interactive services, which will become available for our customers in the course of the second half of This introduction will further increase the number of interactive receivers in our customer base and thus stimulate growth of our video-on-demand services and revenues. Currently, over 900,000 of our customers watch digital TV using a legacy version of the common interface. Only those customers who have purchased a certified CI+ 1.3 TV in 2013 will be able to use the interactive services associated with the new CI+ 1.3 module. B2B products & services Detail B2B thousands 30 Jun Mar 2013 Change 30 Jun 2012 Change Analog TV only (0) % Analog and digital TV % Total TV customers % Digital pay TV subscribers % Internet subscribers % Telephony subscribers % Total RGUs % Of which: - Office Basis % - Office Plus % - Internet Plus % During the second quarter, over 3,500 new subscribers were added to our Office Basis, Office Plus and Internet Plus business bundles, bringing the total B2B bundle subscribers to more than 43,300. Our focus on the small and home offices with business bundles is driving growth for B2B. Following the go-ahead from the Dutch Authority for Consumers and Markets (ACM), we finalized the previously announced acquisition of Esprit Telecom, which was consolidated as of May 1,

9 The acquisition enables Ziggo to further expand its services for the business market. Esprit Telecom is a leading provider of voice and data services for the SME market in the Netherlands and has an active sales channel of dealers across the country. The acquisition includes Zoranet, an ICT service provider that focuses on the retail sector. Other On April 26, we announced that our private equity shareholders, Cinven Cable Investments S.à r.l. and WP Holdings IV B.V. ("Cinven" and "Warburg Pincus", respectively) and their co-investors had successfully placed approximately 34 million ordinary shares of Ziggo N.V. at a price of per share. After the completion of this transaction, Cinven, Warburg Pincus and their co-investors do no longer have an equity interest in Ziggo. On April 18, Ziggo N.V. 's Annual General Meeting of Shareholders took place. All voting items were adopted, including the 2012 financial statements, the dividend proposal and the appointment of Ms. Pamela Boumeester as a member of the Supervisory Board. 9

10 Financial performance Revenue In Q Ziggo generated revenues of million, an increase of 1.4% compared to the same quarter of 2012 ( million) and down 0.2% excluding the revenue contribution from Esprit Telecom. Esprit Telecom is consolidated as of May 1, 2013 and contributed 6.3 million in revenues during these first two months. Excluding Esprit Telecom and revenue from other sources, revenues increased by 0.6%, despite a 5.2% ( 2.4 million) decline in revenues from telephony usage. The most important drivers for revenue growth were: 1. continued growth in RGUs for internet and telephony driven by a further uptake of the All-in-1 bundle; 2. revenue growth from video-on-demand; 3. a price increase for the consumer market effective as of February 1; and 4. continued growth in subscriptions to business bundles. Revenue growth was partly offset by continued elevated churn and a revenue decline for telephony usage revenue. Business services again reported strong organic growth of 9.2% in the business market, primarily driven by the sale of business bundles to the SME and SoHo markets. Consumer revenues for Q amounted to million, down 0.9% on Q Excluding revenue from other sources, consumer revenues were flat. This was mainly driven by the February price increase and a further uptake of our All-in-1 bundle during the year, offset by a decline in telephony usage of 5.2% and churn among TV-only customers in particular. In addition, as part of our promotional offers, new subscribers can opt for an introduction discount for a sixmonth period which is recognized net of revenues in each of the six months. This discount represents approximately 0.3% lower growth of consumer revenues from subscription and usage. Subscriptions to All-in-1 grew by 20,000 additions on balance during the quarter, or 7.1% y-o-y. This resulted in annual growth in both internet and telephony RGUs by 3.9% and 6.7% respectively, with RGUs for standard TV reporting a net annual decline of 5.6% (5.4% for Q and 4.2% for Q2 2012). Revenue from subscriptions to standard TV, internet and telephony increased by 0.7%. The February 1 price increase and the positive revenue effect from the increase in All-in-1 subscriptions were partly offset by the 4.0% decline in revenue for standard TV subscriptions. In addition, the company recorded revenue growth in digital pay TV (including VOD) of 1.0% y-o-y despite a decline in the number of subscribers to digital pay TV by 93,000 compared to previous year. The decline in RGUs for digital pay TV was driven by the end of the Dutch football season in May, the depressed consumer confidence as a result of the decline in the economy and also by the focus of our marketing activities on customer retention and the sales of All-in-1 instead of premium pay TV. In addition, in the prior year period the subscriber base benefited from a promotional offer for the HBO package, which was introduced in February Revenues from telephony usage decreased by 5.2% compared to Q2 last year. Revenues generated through our All-in-1 bundle increased by 7.8%, from million in Q to million in Q2 2013, now representing 50.6% of total consumer revenues, versus 46.5% in Q Digital pay TV ARPU increased by 9.3% from in Q to in Q2 2013, driven predominantly by an increase in the number of premium TV packages per subscriber and growth in VOD. In Q2 we again experienced a strong y-o-y increase in VOD transactions of more than 56%. In addition to the growing popularity of VOD, growth was also supported by the rise in the number of customers with an interactive set-top box to almost 482,000 at the end of Q2 2013, compared to 275,000 at the end of Q As a result of the program to upgrade part of the existing settop boxes in our customer base to enable the interactive functionality through a cloud-based streaming graphic user interface (SGUI), we added another 90,000 boxes during the quarter, which means there are now more than 150,000 set-top boxes that use the SGUI. 10

11 We expect to further increase the penetration of interactive set-top boxes which will support the growth of VOD and enhance customer experiences. In line with previous quarters, we saw a decline in revenues from telephony usage of 5.2%, or 2.4 million, from 45.9 million in Q to 43.5 million in Q Excluding revenues from interconnection, telephony usage revenues declined by approximately 1.4%. The February price increase for telephony usage contributed approximately 1.5% to revenue growth. Growth in the number of telephony subscribers of 6.7% was more than offset by a lower ARPU for telephony usage, due to (1) an FTA rate reduction as at August 1, 2012 from to per minute, (2) more subscribers selecting a flat-fee subscription, and (3) a higher share of free on-net calls following growth in the number of All-in-1 subscribers. When a Ziggo telephony customer makes a fixed line call to another Ziggo telephony customer, the call qualifies as on-net and no costs are charged. Both trends result in a higher percentage of non-billable call minutes compared to the previous year, in addition to an overall decline in average call minutes per telephony subscriber. In the second quarter, call minutes declined by almost 2% compared to the same quarter last year, whereas on-net calling grew by almost 4%. However, average call minutes per user (AMPU) decreased by 8.7%. The reduction in FTA rates at August 1, 2012 negatively affected ARPU and revenues compared to Q by 0.35 and 1.8 million respectively. Despite the decline in revenues from telephony usage, the gross margin on total telephony improved slightly, both in absolute terms and as a percentage of revenue, due to growth in the number of subscribers and reduced FTA and MTA rates. Other revenues, predominantly consisting of set-top box sales, declined by 23.9% to 9.7 million in Q Although we shipped a higher number of set-top boxes, a lower average sales price per set-top box resulted in a decline of other revenues. During Q we supplied 65,000 itv recorders, 31,000 itv receivers and 4,000 CI+ modules, versus 60,000 itv, 13,000 HD and 4,000 CI+ modules in the same quarter in In addition, as part of our retention campaigns during the quarter, we provided customers with an interactive set-top box for a one- or two-year contract extension and, as a result, 7,000 set-top boxes of those shipped during the quarter were capitalized. Blended ARPU for consumers in Q was 42.75, up 2.32 (5.7%) from Q This increase was driven by growth in the number of subscribers to the All-in-1 bundle which, combined with churn in TV-only subscribers, resulted in a 4.5% increase in RGUs per customer to 2.54 (based on a maximum of 4 RGUs per customer). Excluding digital pay TV as a separate RGU, Ziggo recorded an average of 2.23 RGUs per customer. Additionally, blended ARPU was positively affected by (1) the price increase which became effective on February 1, and (2) higher revenues from digital pay TV services, whereas it was negatively affected by lower revenues from telephony usage. Blended ARPU in Q2 showed an increase of 1.0% compared to Q1 2013, due to 0.6% growth in RGUs per customer and the February price increase being fully reflected in the subscription fees for the second quarter. Our business market activities generated revenues of 34.7 million in Q2 2013, up 33.4% compared to 26.0 million in the same period last year. Esprit Telecom contributed 6.3 million in revenue. Excluding revenues from Esprit Telecom, the acquisition which has been consolidated as of May 1, revenues grew by 9.2%. Growth was primarily the result of the increase in the number of subscriptions to our business bundles for home offices and small businesses. The reduction in FTA rates as at August 1, 2012 negatively affected revenues by almost 0.3 million per quarter. In Q2, Ziggo added over 3,500 new subscribers to its main B2B bundles products, Internet Plus, Office Basis and Office Plus bundle, reaching a total of 43,300 subscribers by June 30, Total revenues from the coaxial products TOM and TOMi, our collective TV contracts, and business bundles grew by almost 43% in Q compared to the previous year, landing at 12.0 million, now representing 42.3% of total B2B revenues (32.4% in Q2 2012). 11