Ono 3q13 full_results
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Ono 3q13 full_results Document Transcript

  • 1. Third quarter 2013 results 14 November 2013
  • 2. Data in EUR million, unless otherwise stated 3Q 2013 Results Report Content 1. REPORTING STRUCTURE ............................................................................................ 3 2. OVERVIEW OF GRUPO CORPORATIVO ONO ................................................................ 4 2.1. Key operating and financial events .......................................................................... 5 2.2. Financial highlights ................................................................................................ 7 2.3. Operating highlights............................................................................................... 7 3. GRUPO CORPORATIVO ONO ..................................................................................... 10 3.1. Condensed Consolidated Financial Statements ....................................................... 10 3.2. Notes to the condensed Consolidated Balance Sheet .............................................. 21 3.3. Notes to the Condensed Consolidated Cash Flow ................................................... 23 4. ONO MIDCO ............................................................................................................... 25 5. CABLEUROPA ............................................................................................................ 27 5.1. Condensed Consolidated Financial Statements ....................................................... 27 5.2. Debt and liquidity ................................................................................................ 29 6. DISCLOSURE ABOUT MARKET RISK........................................................................... 30 6.1. Quantitative and qualitative disclosure about market risk .......................................... 30 6.2. Interest rate sensitivity ......................................................................................... 30 6.3. Currency fluctuation sensitivity .............................................................................. 30 7. GLOSSARY ................................................................................................................ 32 7.1. Operational Definitions ......................................................................................... 32 7.2. Financial Definitions ............................................................................................ 32 7.3. Total Homes and Businesses Data ........................................................................ 33 8. DISCLAIMER .............................................................................................................. 34 DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 2
  • 3. Data in EUR million, unless otherwise stated 3Q 2013 Results Report 1. REPORTING STRUCTURE Current simplified financing structure We are reporting the consolidated results of Grupo Corporativo ONO, S.A. (“GCO”) and its subsidiaries for the quarter ended September 30, 2013. The financial information included in this document has been prepared under IFRS. This financial information is unaudited and, therefore, subject to potential future modifications. Certain numerical figures included in this document have been rounded. Therefore, discrepancies in tables between totals and the sums of the amounts listed may occur due to such rounding. In addition, the term "pp" means percentage points when describing the change in a percentage between two periods. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 3
  • 4. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 2. OVERVIEW OF GRUPO CORPORATIVO ONO ONO is the second largest provider of broadband Internet, pay television and fixed telephony services and a fast growing provider of mobile services in Spain. Through our proprietary state-of-the-art network, we offer our services to over 7 million homes across the country, including the nine largest cities. ONO is the only fiber operator in Spain with national coverage. As of September 30, 2013, we provided 5 million fixed and mobile services under the ONO brand to more than 1.7 million residential customers and 118 thousand small offices and home offices (“SoHo”). We also offer products and services to large corporations and public sector entities as well as to the wholesale market. We are the principal competitor to the incumbent telecommunications and pay television operators in Spain. Through our recently upgraded network, we believe we are able to offer the most advanced broadband Internet and pay television services in the Spanish market. For the quarter ended September 30, 2013, we generated revenues of €384 million, EBITDA of €172 million, €109 million of Operating Free Cash Flow and €51 million of Free Cash Flow. Residential ('000) Homes in Spain(1) Homes in areas covered by ONO's fiber network (1) % of Homes in Spain 18,084 15,203 84% Homes released to marketing % of Homes in areas covered by ONO's fiber network 7,139 Residential Fixed Fiber customers Fiber penetration 1,665 23% 47% Residential Fixed ADSL and Indirect access customers SoHo Fixed customers(2) 77 118 Total Residential Fixed customers 1,861 INE; main homes (2011) Include fiber, ADSL and Indirect access (1) (2) Grupo Corporativo ONO Cableuropa Sep-13 % of debt Debt/ EBITDA LTM Sep-13 % of debt Debt/ EBITDA LTM Short-term debt with banks 1 0.0% 0.00x 1 0.0% 0.00x Senior Facility Senior Secured Notes Senior Subordinated Notes State subsidies and other Long-term debt 824 2,230 462 2 3,518 23.4% 63.4% 13.1% 0.1% 100.0% 1.15x 3.11x 0.64x 0.00x 4.91x 824 2,230 462 2 3,518 23.4% 63.4% 13.1% 0.1% 100.0% 1.15x 3.11x 0.64x 0.00x 4.91x Total debt Cash and cash equivalents Total net debt 3,519 189 3,330 4.65x 3,519 188 3,331 EUR million EBITDA LTM 716 4.65x 716 Note: These are notional amounts which differ from the balance sheet due to the discount effect DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 4
  • 5. Data in EUR million, unless otherwise stated 3Q 2013 Results Report 2.1. Key operating and financial events  ONO renews its strategy to better compete in current macro and industry environments In October 2013, during our First Capital Markets Day, we announced the launching of our renewed strategy to better compete in current macro and industry environments with the ambition of becoming the preferred option for households and SoHos as provider of communication and entertainment services in Spain. Our renewed strategy will focus in three strategic drivers: (i) reach more customers to accelerate sustainable growth; (ii) increase customer loyalty to reduce churn and create more value; and (iii) improve our profitability while increasing targeted investments to continue generating cash. In order to achieve these strategic goals, we have identified five pillars on which to build our renewed strategy: 1) Development of a differentiated commercial offering with special focus in super high broadband speeds (>50Mbps) and mobile (Multi-Sims) in order to increase the share of wallet of our customers while we improve our go-to-market effectiveness and we selectively increase our marketing investments. 2) Increase customer satisfaction and loyalty to reduce churn through the commercialization of bundled products (3P/4P), providing free speed upgrades and other product upgrades to customers as well as providing a superior customer experience. 3) Continuous product innovation in order to reach more customers and provide a superior customer experience (i.e. TiVo, TV online, WiFi public network, other entertainment services). 4) Fully digitalize customer life cycle to improve customer experience and reduce costs through the development of a full eServices functionality and the improvement of our eCare and eSales platforms. 5) Maximize process efficiency in order to improve our cost structure from good to best in class through business optimization initiatives (building optimizations, contract renegotiations, improving call center metrics, reducing field repairs and increasing selfinstallation amongst other initiatives) and organizational optimizations. We believe that ONO is the telecom company best positioned to fully take advantage of a stabilization of the Spanish macroeconomic environment and that through the implementation of our renewed strategy we will be able to achieve (i) faster growth; (ii) strong cash generation and (iii) sustained deleveraging which we believe will provide a compelling return proposition for investors.  Further advances in high-speed Internet We continue to lead the market in super-fast broadband. At present we have the capability to deliver broadband speeds of up to 200Mbps to over 7 million homes in Spain which makes us the only telecom operator able to market these products on a broad scale. On the back of our state-of-the-art infrastructure we have developed a superior offering with real broadband speeds of up to 100 Mbps for residential customers and up to 200Mbps for SoHos (we expect to launch 500 Mbps broadband speeds in the near future) that compares favorably to the high-end packages with up to 30 Mbps speeds offered by the DSL players on a non-homogenous basis. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 5
  • 6. Data in EUR million, unless otherwise stated 3Q 2013 Results Report In August 2013 we took a step forward in our strong commitment towards super high speeds. On the one hand we fully redefined our retail offering to include exclusively super high broadband speeds packages of 50,100 & 200 Mbps (we continue to marginally sell 20Mbps broadband packages through the on-line channel for most price sensitive customers). On the other hand, we launched a loyalty campaign by which we are seeking to migrate existing customers to our new super high speeds product offering either for free or for a small incremental price. As of September 2013, 818 thousand residential customers subscribed to our high and super-high speed Internet packages, representing 60% of our residential broadband customer base and almost 600 thousand broadband customers had already been migrated to our new product offerings. We believe that these commercial results position ONO as the market leader in highspeed Internet in Spain.  Further advances in mobile We have increased our total mobile services by 587 thousand in the last twelve months to reach 902 thousand as of September 2013 on the back of our competitive price plans. We believe this to be an excellent commercial result. During 2012, we redefined our mobile proposition with the aim of adapting our tariffs to new customers’ needs and markets dynamics. This included the development of more compelling fixed-mobile convergent and bundled offers and the introduction of selective handset financing. In August 2013 we further improved our mobile proposition and we launched a renewed multi-SIM mobile package by which customers can subscribe to a 200min/200Mbps product for €5 per month. We expect this service to continue delivering positive results in the future on the back of our competitive price plans.  Further advances in pay TV In October 2011, we officially launched our next generation TV service (TiVo) to customers in Madrid and Barcelona and since then we have made this service available in our entire network. This innovative product, which we believe is unmatched in Spain, provides our customers with a high quality interactive experience and a wide variety of content combining 37 HD channels (HD leadership in Spain), 3D functionalities and broadband connectivity with a powerful and personalized search engine and a PVR (Personal Video Recorder). As of September 2013, we had over 259 thousand TiVo services which represent 31% of our TV customer base. We believe that the TiVo results so far suggest positive market acceptance as showcased by the positive momentum in customer acquisitions, low churn levels and high satisfaction metrics. With the aim of continuing to improve our pay TV offering, in October 2013 we upgraded our TiVo service with new functionalities that include an improved user interface, an improved search engine, the ability to share content between different TiVo boxes within a household and a new energy saving mode amongst other. We intent to continue improving our pay TV offering in the near future with the development of new products and services such as TV online. We believe this will help us to increase the number of our TV customers and revenues going forward. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 6
  • 7. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 2.2. Financial highlights Financial highlights EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change Net Revenues Gross profit Gross margin Normalized EBITDA Normalized EBITDA margin EBITDA EBITDA margin Capex Operating FCF FCF Result for the period Total net debt Total Net debt / EBITDA LTM 384 264 68.7% 170 44.4% 172 44.8% (62) 109 51 4 3.330 4,65x 392 282 72.0% 182 46.6% 189 48.3% (73) 116 43 (6) 3.435 4,55x (2.0%) (6.5%) (3.3 pp) (6.7%) (2.2 pp) (9.3%) (3.6 pp) (14.8%) (5.8%) 18.6% na (3,1%) 0,10x 1,183 814 68.8% 525 44.3% 529 44.7% (184) 345 89 (15) 3.330 4,65x 1,164 860 73.9% 544 46.8% 565 48.5% (205) 359 70 39 3.435 4,55x 1.7% (5.4%) (5.1 pp) (3.6%) (2.4 pp) (6.3%) (3.8 pp) (10.3%) (4.1%) 27.4% na (3,1%) 0,10x 3Q 13 3Q 12 % change 9M 13 9M 12 % change 297 272 25 86 59 27 1 384 302 280 21 89 60 29 1 392 (1.6%) (2.9%) 16.4% (3.4%) (0.6%) (9.3%) (6.0%) (2.0%) 905 835 71 275 192 83 3 1.183 922 858 64 239 148 91 2 1.164 (1.8%) (2.8%) 10.6% 14.9% 29.5% (9.0%) 31.9% 1.7% Revenue split EUR million Retail Residential SoHo Business Wholesale Large Accounts and Corporations Other Total net revenues 2.3. Operating highlights Operating highlights (´000) 3Q 13 2Q 13 % change 3Q 12 % change Services: Fixed Residential(1) Fixed SoHo(1) Mobile(2) Total 3,874 236 902 5,012 3,946 228 756 4,930 (1.8%) 3.4% 19.2% 1.6% 4,144 198 314 4,656 (6.5%) 19.2% 186.9% 7.6% Customers: Residential(1) SoHo(1) Total 1,742 118 1,861 1,773 115 1,888 (1.7%) 3.1% (1.4%) 1,858 102 1,960 (6.2%) 16.0% (5.1%) Other data – Residential Fixed Fiber: Homes released to marketing (HRTM) Penetration ARPU (€) Services per customer(3) Net churn 7,139 23.3% 52.5 2.76x 22.2% 7,107 23.8% 53.2 2.67x 23.2% 0.5% (0.5 pp) (1.3%) 0.09x (0.9 pp) 7,058 24.9% 51.0 2.43x 18.4% 1.1% (1.6 pp) 3.0% 0.33x 3.9 pp Residential Fixed Fiber services (RGUs): Internet as % of customers Television as % of customers Telephony as % of customers 1,353 81.3% 795 47.7% 1,590 95.5% 1,375 81.2% 818 48.3% 1,611 95.2% (1.6%) 0.0 pp (2.8%) (0.6 pp) (1.3%) 0.3 pp 1,418 80.5% 882 50.1% 1,674 95.1% (4.6%) 0.7 pp (9.9%) (2.4 pp) (5.0%) 0.4 pp Residential Fixed Fiber penetration: Internet Television Telephony 19.0% 11.1% 22.3% 19.3% 11.5% 22.7% (0.4 pp) (0.4 pp) (0.4 pp) 20.1% 12.5% 23.7% (1.1 pp) (1.4 pp) (1.4 pp) Include fiber, ADSL and indirect access Include voice and mobile broadband (BAM) of Residential and SoHo (3) Including Fixed and Mobile services For certain definitions, see section 7 of this document. (1) (2) DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 7
  • 8. Data in EUR million, unless otherwise stated 3Q 2013 Results Report We ended September with over 5 million services taken by 1.9 million retail customers. Our push into mobile has allowed us to grow the services we provide to our retail customers by 1.6% in the quarter or 81 thousand services. The third quarter of 2013 was marked by the continuation of the challenging macroeconomic environment (although slightly improving) but more importantly, by the tough market competition. From a macroeconomic perspective during the quarter consumers continued to lose spending power on the back of reinforced fiscal pressures and real and nominal wage reductions; this, combined with an absence of visibility on the future, has continued to negatively impact consumption. From a competitive landscape the quarter confirmed the market trend towards convergent offers and price based competition. On convergence, we have been an early promoter of this concept. Early success is proving stable and we now have over 902 thousand mobile customers with a very considerable impact on revenues and churn. We fully expect convergence to be a dominant force going forward as more and more households see this as a positive product solution for their entire telecommunication needs based on simplicity and significant savings. But convergence puts a lot of pressure on telecommunication companies as all operators are trying to defend their customer base even at high price discounts. In this environment, we increasingly see a polarization between those customers willing to pay more for better products and services and those who are more price sensitive and ready to give away quality in exchange for price. We have seen this trend taking a toll on our pay television services that decreased by almost 23 thousand in the quarter. The polarization of the market is also impacting our fixed telephony service where the most price sensitive customers within our customer base, mainly single play, are dropping the service and going “mobile” only which has resulted in 20 thousand fixed telephony loses in the quarter. Also although we have seen a strong performance of high and super-high speed internet customers (95% of our new customers acquisition during the quarter were in high speeds), the aggressive pricing movements from our competitors have negatively impacted our low speeds broadband customers leading to a loss of almost 22 thousand services in the quarter. In order to better compete in current macro and market environments in October 2013 we announced the launch of a renewed strategy with a focus in three strategic drivers: (i) reach more customers to accelerate sustainable growth; (ii) increase customer loyalty to reduce churn and create more value; and (iii) improve our profitability while increasing targeted investments to continue generating cash. In order to achieve these strategic goals, we have identified five pillars on which to build our renewed strategy: (i) Development of a differentiated commercial offering with special focus in super high broadband speeds (>50Mbps) and mobile (Multi-Sims); (ii) Increase customer satisfaction and loyalty to reduce churn; (iii) Continuous product innovation in order reach more customers and provide a superior customer experience (i.e. TiVo, TV online, WiFi public network, other entertainment services); (iv) Fully digitalize customer life cycle to improve customer experience and reduce costs; and (v) Maximize process efficiency in order to improve our cost structure from good to best in class. We expect that as results of the implementation of our renewed strategy we will be able to reverse the negative trends experienced in our operating metrics in the past quarters and to achieve future customer and services growth. Residential fiber ARPU increased by €1.5 as compared with the same quarter of the previous year to reach €52.5. ARPU has continued to be negatively impacted by the challenging macro environment and the increased price pressures described above. Nevertheless, this decrease has been fully offset by the good performance of TiVo and mobile. We believe the high quality of our customer base and our superior product offering (including high-speed Internet, mobile and TiVo) have proven to be extremely useful tools to increase ARPU in the current environment in which consumption based products are heavily affected. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 8
  • 9. Data in EUR million, unless otherwise stated 3Q 2013 Results Report Our focus on providing bundled services, the continuous up-sale and cross-sale campaigns to our customer base as well as our push into mobile have enabled us to increase our residential fiber services per customer by 0.3x in the last twelve months to reach 2.76x as of September. In addition, in the third quarter of 2013, 86% of our residential fiber customers subscribed to a bundled package (47% Double, 39% Triple) and 13% subscribed to a quadruple play package which makes us the leading provider of bundled services in Spain. Residential fiber net churn decreased by 1% in the quarter to reach 22.2% as of September 2013. The negative macro and industry environments have continued to negatively impact our most price sensitive customers, typically those that subscribe to a single service or to a low tier double or triple play packages. Nevertheless we believe that the new initiatives we have developed on the back of our renewed strategy that include: (i) free speeds upgrades and product repositioning (over 600 thousand customers migrated as of September 2013); (ii) high quality customers acquisition; and (iii) improved prevention and retention processes are already delivering positive results and will continue to help us reduce churn going forward. Our SoHo segment continued to perform well and we managed to add over 8 thousand services and 4 thousand customers in the last quarter to reach 236 thousand and 118 thousand, respectively. These good results were mainly driven by: (i) our strong product offerings and competitive price plans that include broadband speeds of up to 200 Mbps (500 Mbps in the near future), mobile, multi-site services as well as other value added services (including domain registration, housing, hosting and cloud computing; (ii) our successful channel mix strategy; (iii) the improvement of our brand awareness (through brand recognition activities and direct marketing efforts amongst other initiatives); and (iv) the improvement of customer experience and churn levels as result of our improved multi-skill platforms. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 9
  • 10. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3. GRUPO CORPORATIVO ONO 3.1. Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations EUR million Net Revenues Cost of sales Net opex EBITDA Depreciation and amortization Other results Other revenues Over provisions Impairment and gains or losses on disposal of fixed assets EBIT / Operating result Net financial result EBT / Result before income tax Income tax Result before non-controlling interest Non-controlling interest Result for the period 3Q 13 3Q 12 % change 9M 13 9M 12 % change 384 (120) (92) 172 (107) 0 - 392 (110) (93) 189 (104) 0 0 0 (2.0%) 9.6% (0.8%) (9.3%) 2.7% na na na 1,183 (369) (286) 529 (301) 0 0 2 1,164 (303) (296) 565 (293) 54 0 0 1.7% 21.6% (3.5%) (6.3%) 2.8% na na na (1) (22) na (17) (25) na 64 (64) (0) 5 63 (72) (9) 3 0.4% (12.2%) na na 214 (241) (27) 13 301 (245) 56 (17) (29.0%) (1.7%) na na 4 (6) na (15) 39 na (0) 4 (0) (6) na na (0) (15) (0) 39 na na 3.1.1. Revenues Our revenues are derived primarily from: (i) retail services, which involve providing our residential and SoHo customers with a combination of internet, pay television, telephony and mobile services, either through our fiber network, ADSL or through our MVNO agreement; and (ii) business services, which involve providing large corporations and public entities with fixed and mobile voice and data services, as well as other value-added services, and providing other telecommunications operators with wholesale access to our excess capacity and certain other products and services, such as carrier services, voice traffic services, leased and dedicated lines and Internet-service provider solutions. The following table sets forth ONO’s revenue split and the percentage change from period to period for each of the periods indicated: Revenue split EUR million Retail Residential SoHo Business Wholesale Large Accounts and Corporations Other Total net revenues 3Q 13 3Q 12 % change 9M 13 9M 12 % change 297 272 25 86 59 27 1 384 302 280 21 89 60 29 1 392 (1.6%) (2.9%) 16.4% (3.4%) (0.6%) (9.3%) (6.0%) (2.0%) 905 835 71 275 192 83 3 1,183 922 858 64 239 148 91 2 1,164 (1.8%) (2.8%) 10.6% 14.9% 29.5% (9.0%) 31.9% 1.7% DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 10
  • 11. Data in EUR million, unless otherwise stated 3Q 2013 Results Report We recorded revenues of €384 million in the quarter, a decrease of 2.0% if compared to the same quarter of the previous year. Retail revenues, which represent 77% of our total revenues, decreased by 1.6% in the quarter to €297 million: (i) residential revenues decreased by 2.9% in the quarter to reach €272 due to the negative macro and industry dynamics discussed above that have led to fixed customer and services losses and continued price pressure. Nevertheless, the good quality of our customer base and the uptake of our high-speed Internet products, mobile and TiVo have helped us to partially offset the negative revenue trend in the quarter: and (ii) SoHo revenues increased by 16.4% in the quarter to reach €25 million on the back of our continued focus in this business unit that resulted in the redefinition of our price plans, the enhancement of our product portfolio to make it more appealing to our customers and the development of new sales channels. Business revenues, which represent 22% of our total revenues, decreased by 3.4% in the quarter to €86 million: (i) Wholesale revenues remained broadly stable in the quarter at €59 million as result of our decision to limit top line growth of this segment to focus on margin improvement; and (ii) Large Accounts and Corporations revenues decreased by 9.3% in the quarter to reach €27 million as result of continued contracts renegotiations prompted by the economic downturn, coupled with Telefónica’s aggressive commercial approach that have continued to negatively impact this business segment. We intend to continue to evolve and seek out new revenue streams (e.g. broadening our broadband and mobile offerings) and to develop new products and services (e.g. WiFi public network, Online TV and other entertainment services) that we believe will help us to improve our overall revenue figures going forward. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 11
  • 12. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.1.2. Retail fixed services (´000) 3Q 13 2Q 13 % change 3Q 12 % change Residential SoHo Total Retail 3,874 236 4,110 3,946 228 4,173 (1.8%) 3.4% (1.5%) 4,144 198 4,342 (6.5%) 19.2% (5.3%) (´000) 3Q 13 2Q 13 % change 3Q 12 % change Fiber ADSL and Indirect access Total Residential Fixed services 3,738 136 3,874 3,804 143 3,946 (1.7%) (4.4%) (1.8%) 3,974 170 4,144 (5.9%) (19.7%) (6.5%) 3.1.2.1. a) Residential Fixed services Residential Fixed Fiber The residential fixed fiber services segment provides us with revenues from monthly fees and initial activation and connection charges from residential bundled and individual services; usage charges from residential telephony services; customer premise equipment rental charges; incoming interconnection; variable fees for pay-per-view and video-on-demand (VoD) services from fiber television services, revenues from our mobile business and other minor items. We currently offer our residential customers double-play and triple-play packages of services which consist of telephony and either internet or television, or both services as well as mobile services. The following table sets forth information on residential fixed fiber services and the percentage change from period to period: Residential Fixed Fiber (´000) 3Q 13 2Q 13 % change 3Q 12 % change HRTM Services Customers Penetration Net churn ARPU (€) Services per customer 7,139 3,738 1,665 23.3% 22.2% 52,5 2.76x 7,107 3,804 1,692 23.8% 23.2% 53,2 2.67x 0.5% (1.7%) (1.6%) (0.5 pp) (0.9 pp) (1,3%) 0.09x 7,058 3,974 1,761 24.9% 18.4% 51,0 2.43x 1.1% (5.9%) (5.4%) (1.6 pp) 3.9 pp 3,0% 0.33x (1) (1) Including Fixed and Mobile services We ended September 2013 with 3.7 million residential fixed fiber services subscribed by 1.7 million residential fiber customers. The performance of our residential fixed fiber business declined in the third quarter by 66 thousand services and 27 thousand customers primarily as a result of the macroeconomic and industry dynamics discussed above. In order to better compete in current macro and market environments in October 2013 we announced the launch of a renewed strategy with a focus in three strategic drivers: (i) reach more customers to accelerate sustainable growth; (ii) increase customer loyalty to reduce churn and create more value; and (iii) improve our profitability while increasing targeted investments to continue generating cash. We expect that as results of the implementation of our renewed strategy we will be able to reverse the negative trends experienced in our operating metrics in the past quarters and to achieve future customer and services growth. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 12
  • 13. 3Q 2013 Results Report Data in EUR million, unless otherwise stated Residential fiber ARPU increased by €1.5 as compared with the same quarter of the previous year to reach €52.5. ARPU has continued to be negatively impacted by challenging macro environment and the increased price pressures described above. Nevertheless, this decrease has been fully offset by the good performance of TiVo and mobile. We believe the high quality of our customer base and our strong product offering (including high-speed Internet, mobile and TiVo) have proven to be extremely useful tools to increase ARPU in the current environment in which consumption based products are heavily affected. Our focus on providing bundled services, the continuous up-sale and cross-sale campaigns to our customer base as well as our push into mobile have enabled us to increase our residential fiber services per customer by 0.3x in the last twelve months to reach 2.76x as of September 2013. In addition, in the third quarter of 2013, 86% of our residential fiber customers subscribed to a bundled package (47% Double, 39% Triple) and 13% subscribed to a quadruple play package which makes us the leading provider of bundled services in Spain. Residential fiber net churn decreased by 1% in the quarter to reach 22.2% as of September 2013. The negative macro and industry environments have continued to negatively impact our most price sensitive customers, typically those that subscribe to a single service or to a low tier double or triple play packages. Nevertheless we believe that the new initiatives we have developed on the back of our renewed strategy that include: (i) Free speeds upgrades and product repositioning (over 600 thousand customers migrated as of September 2013); (ii) High quality customers acquisition; and (iii) improved prevention and retention processes are already delivering positive results and will continue to help us reduce churn going forward.  Internet The following table sets forth certain information with respect to ONO's Internet services and the percentage change from period to period: Internet services (´000) 3Q 13 2Q 13 % change 3Q 12 % change Services Proportion of total customers Penetration 1,353 81.3% 19.0% 1,375 81.2% 19.3% (1.6%) 0.0 pp (0.4 pp) 1,418 80.5% 20.1% (4.6%) 0.7 pp (1.1 pp) Internet services decreased by 22 thousand as compared to the previous quarter to 1.35 million as of September 30, 2013. Internet customers as a proportion of total customers reached 81.3%. Although this service has proven to be very resilient to the negative environment on the back of our compelling high speeds offerings, the increasing price pressure in the low end has led to internet customer losses in the quarter. We continue to lead the market in super-fast broadband. At present we have the capability to deliver broadband speeds of up to 200Mbps to over 7 million homes in Spain which makes us the only telecom operator able to market these products on a broad scale. On the back of our state-of-the-art infrastructure we have developed a superior offering with real broadband speeds of up to 100 Mbps for residential customers and up to 200Mbps for SoHos (we expect to launch 500 Mbps broadband speeds in the near future) that compares favorably to the high-end packages with up to 30 Mbps speeds offered by the DSL players on a non-homogenous basis. As of September 2013, 818 thousand residential customers subscribed to our high and super-high speed Internet packages, representing 60% of our residential broadband customer base. We believe that these commercial results position ONO as the market leader in high-speed Internet in Spain. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 13
  • 14. 3Q 2013 Results Report Data in EUR million, unless otherwise stated In August 2013 we took a step forward in our strong commitment towards super high speeds. On the one hand we fully redefined our retail offering to include exclusively super high broadband speeds packages of 50,100 & 200 Mbps (we continue to marginally sell 20Mbps broadband packages through the on-line channel for most price sensitive customers). On the other hand, we launched a loyalty campaign by which we are seeking to migrate existing customers to our new super high speed product offering either for free or fore a small incremental price. We expect that as results of the implementation of our renewed strategy we will be able to reverse the negative trend experienced in our broadband customer numbers in the past quarters and to achieve future broadband customer growth.  Television The following table sets forth certain information with respect to ONO’s television services and the percentage change from period to period: Television services (´000) 3Q 13 2Q 13 % change 3Q 12 % change Services Proportion of total customers Penetration 795 47.7% 11.1% 818 48.3% 11.5% (2.8%) (0.6 pp) (0.4 pp) 882 50.1% 12.5% (9.9%) (2.4 pp) (1.4 pp) Fiber television services decreased by 23 thousand as compared to the previous quarter to 795 thousand as of September 30, 2013. We believe this service continues to be impacted by the negative macroeconomic environment, the significant price increase experienced in football and the VAT increase which we believe is motivating our most price sensitive customers to drop the service and switch to “free to air” services in order to preserve their disposable income. To proactively address the weakness on this service, we are promoting TiVo, a unique product that has positioned ONO at the forefront of the TV market in Spain. This innovative product, which we believe is unmatched in Spain, provides our customers with a high quality interactive experience and a wide variety of content combining 37 HD channels (HD leadership in Spain), 3D functionalities and broadband connectivity with a powerful and personalized search engine and a PVR (Personal Video Recorder). We believe these unique functionalities will help us to increase the number of our TV customers and revenues going forward. As of September 2013, we had over 259 thousand TiVo services which represent 31% of our TV customer base. We believe that the TiVo results so far suggest positive market acceptance showcased by the positive momentum in customer acquisitions, low churn levels and high customer satisfaction metrics. With the aim of continuing to improve our pay TV offering, in October 2013 we upgraded our TiVo product with new functionalities that include an improved user interface, an improved search engine, the ability to share content between different TiVo boxes within a household and a new energy saving mode amongst other. We intend to continue improving our pay TV offering in the near future with the development of new products and services such as online TV services what we believe will help us to increase the number of our TV customers and revenues going forward. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 14
  • 15. 3Q 2013 Results Report Data in EUR million, unless otherwise stated  Telephony The following table sets forth certain information with respect to ONO’s telephony services and the percentage change from period to period: Telephony services (´000) 3Q 13 2Q 13 % change 3Q 12 % change Services Proportion of total customers Penetration 1,590 95.5% 22.3% 1,611 95.2% 22.7% (1.3%) 0.3 pp (0.4 pp) 1,674 95.1% 23.7% (5.0%) 0.4 pp (1.4 pp) Telephony services decreased by 20 thousand as compared to the previous quarter to 1.6 million as of September 30, 2013. This service has been impacted by the negative macro and market environments discussed above that have taken a toll in a portion of our most price sensitive customers within our base, mainly single play telephony customers that are going “mobile only” to preserve their disposable incomes. b) Residential Fixed ADSL and Indirect access Residential Fixed ADSL includes services offered through full unbundling of the local loop (ULL). These services provide us with revenues from monthly fees from telephony and broadband Internet services and usage charges from telephony services. The following table sets forth information on residential ADSL and Indirect access services and the percentage change from period to period: Residential Fixed ADSL and Indirect access 3Q 13 Customers Services Services per customer 2Q 13 % change 3Q 12 % change 77 136 1.76x (´000) 81 143 1.76x (4.4%) (4.4%) 0.00x 97 170 1.75x (20.3%) (19.7%) 0.01x Residential Fixed ADSL and Indirect access services decreased by 6 thousand as compared to previous quarter to reach 136 thousand services as of September 30, 2013. Residential Fixed ADSL and Indirect access customers also decreased by 4 thousand as compared to previous quarter to reach 77 thousand customers as of September 30, 2013 mainly due to the industry dynamics and negative macroeconomic environment discussed above. 3.1.2.2. SoHo fixed services Revenues from SoHo services are derived from fees paid by small and medium sized enterprises for fixed and mobile voice and data services, offered individually or as a bundle and from incoming interconnection revenues within this segment. SoHo (´000) Customers Services Services per customer Revenues (€m) 3Q 13 2Q 13 % change 3Q 12 % change 118 236 1.99x 25 115 228 1.98x 24 3.1% 3.4% 0.01x 5.5% 102 198 1.93x 21 16.0% 19.2% 0.05x 16.4% SoHo services increased by more than 8 thousand as compared to previous quarter to 236 thousand services as of September 30, 2013. Our SoHo customer base also performed well and increased by almost 4 thousand in the quarter to reach 118 thousand customers. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 15
  • 16. 3Q 2013 Results Report Data in EUR million, unless otherwise stated These good results were mainly driven by: (i) our strong product offering and competitive price plans that include broadband speeds of up to 200 Mbps (500 Mbps in the near future), mobile, multi-site services as well as other value added services (including domain registration, housing, hosting and cloud computing; (ii) our successful channel mix strategy; (iii) the improvement of our brand awareness (through brand recognition activities and direct marketing efforts amongst other initiatives); and (iv) the improvement customer experience and churn levels as result of our improved multi-skill platforms. 3.1.2.3. Retail mobile services The following table sets forth certain information with respect to ONO’s retail mobile services and the percentage change from period to period: Mobile (´000) 3Q 13 2Q 13 % change 3Q 12 % change 902 35 756 32 19.2% 10.1% 314 13 186.9% 170.5% Mobile services Revenues (€m) Includes voice and mobile broadband (BAM) of Residential and SoHo We have managed to increase our mobile services by 145 thousand as compared to previous quarter and by 587 thousand in the last twelve months to reach 902 thousand services as of September 30, 2013. Revenues increased by 10% compared to the previous quarter and by 2.7x in the first nine months of 2013 compared to first nine months of last year. Since mobile is fundamental element in the Spanish telecom market we believe we are extremely well positioned to take advantage of this market trend. Mobile broadens our ability to deliver superior value to our customers which in turn leads to incremental revenues. Also mobile is not only a growth driver, but also a very powerful loyalty and customer satisfaction tool as showcased by the extremely low churn levels we experience on convergent offers. In May 2012, we substantially improved our mobile offerings in order to make our mobile products more appealing to our customers. In September 2012, we began financing handsets as a complement to our SIM card. In addition, in October 2012, we further redefined our mobile offerings and began bundling our fixed and mobile products in a single package in order to improve our offerings and adapt to current market trends and customers' needs. We believe this will help us to further grow our mobile business over the medium term. In April 2013, we renewed our MVNO agreement with Telefonica for 2.5 additional years on satisfactory terms. We believe this agreement enables us to provide a compelling mobile proposition to our current customers and provides the foundation on which we can continue to grow and improve our convergent offerings while we work in future solutions to support our growth in mobile. In August 2013 we further improved our mobile proposition and launched a renewed multi-SIM mobile package by which customers can subscribe to a 200min/200Mbps product for €5 per month. We expect this service to continue delivering positive results in the future on the back of our renewed product offering and to maintain the low churn levels achieved. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 16
  • 17. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.1.3. Business services 3.1.3.1. Wholesale Revenues from the wholesale business unit are derived from carrier services, voice traffic services, leased and dedicated lines and ISP solutions, provided to other telecommunications operators and from the provision of intelligent network services. Wholesale 3Q 13 3Q 12 % change 9M 13 9M 12 % change 59 EUR million 60 (0.6%) 192 148 29.5% Revenues Wholesale revenues remained broadly stable as compared to the previous quarter reaching €59 million as a result of our decision to limit top line growth of this segment to focus in margin improvement The strong performance experienced in this segment in the past quarters is the result of a carefully planned set of initiatives launched in the last two years to boost voice services revenues. In 2010, we laid the foundations for growth by setting up a VoIP platform to help us manage prepaid services, implementing a LCR tool (Least-Cost Routing) and reengineering the whole delivery process to make it more efficient and faster. Since 2011, we added new IP traffic termination providers to improve our commercial offer and we strengthened the team by hiring an experienced sales representative and a routing manager. Going forward we expect to continue growing our wholesale business albeit at a slower pace while we seek to increase the margin contribution of this business segment. 3.1.3.2. Large Accounts and Corporations Revenues within the Large Accounts and Corporations business segment are derived from customized solutions designed to satisfy the communication needs (voice, Internet, data solutions and equipment) of large corporate groups, institutions and central and autonomous government agencies, through an integrated range of tailored services. The following table sets forth revenues from the Large Accounts and Corporations segment and the percentage change from period to period: Large Accounts and Corporations EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change 27 29 (9.3%) 83 91 (9.0%) Revenues Large Accounts and Corporations revenues decreased by 9.3% as compared to previous quarters to €27 million as a result of continued contracts renegotiations prompted by the economic downturn, coupled with Telefónica’s aggressive commercial approach have continued to negatively impact this business segment. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 17
  • 18. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.1.4. Cost of sales and Gross profit The following table sets forth ONO's gross profit and the percentage change for the periods indicated: Cost of sales and Gross Profit EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change Total net revenues Cost of sales PPA Gross profit (1) Gross margin 384 (120) (1) 263 68.5% 392 (110) (2) 280 71.4% (2.0%) 9.6% (69.5%) (6.0%) (2.9 pp) 1,183 (369) (2) 812 68.6% 1,164 (303) (7) 854 73.3% 1.7% 21.6% (69.5%) (4.8%) (4.7 pp) Adjusted for the PPA provision (1) Cost of sales principally consists of interconnection and backbone network costs for telecommunications services, Internet connectivity costs, circuit rental expenses and programming costs for fiber television services. Interconnection costs for telephony services are generated by calls made by our customers that terminate outside our network. Internet connectivity costs mainly consist of fees for the bandwidth used for our Internet transit outside of Spain. Fiber television programming fees consist primarily of fees paid to television content owners to distribute their fiber television content and fees paid to distribute movies and football on a pay-per-view basis. Our cost of sales increased by 9.6% as compared to the same quarter of 2012 to €120 million as a consequence of increased interconnection costs related with our wholesale activity as well as costs related with our growing mobile business. 3.1.5. Operating expenses (“Opex”) The following table sets forth ONO's Opex and the percentage change from period to period for each of the periods indicated: Operating expenses EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change Gross opex PPA Capitalised costs Net opex (1) % of revenues (105) (1) 13 (93) 24.1% (107) (5) 14 (97) 24.8% (2.3%) (84.7%) (11.9%) (4.7%) (0.7 pp) (326) (2) 40 (288) 24.3% (340) (14) 44 (309) 26.6% (4.1%) (84.7%) (8.4%) (7.1%) (2.3 pp) Adjusted for the PPA provision (1) Gross opex consists principally of expenses related to wages and salaries and other operating expenses, including professional services, marketing and selling expenses, network operation and maintenance, information systems, administrative overhead and billing costs. Capitalized costs relate to, inter alia, direct labour costs associated with the development and upgrade of our network and the installations carried out at customer premises. Our net operating expenses decreased by 4.7% as compared to the same quarter of 2012 to €93 million. Improving our cost structure and our efficiency is a key priority for the company. We believe this is helping us to support our profitability and adapt to the challenging economic environment. This crisis is creating opportunities to introduce greater flexibility in our cost structures and we are taking advantage of these opportunities by being more selective both internally and externally to adjust to the downward pressures on our margins. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 18
  • 19. 3Q 2013 Results Report Data in EUR million, unless otherwise stated During the year, our strict cost control policies coupled with continuous optimization and transformation initiatives have led to sustained Opex savings across the entire organization despite the increased price pressures resulting from higher CPI levels. Examples of the initiatives that we have implemented so far include: (i) renegotiation of our collective bargaining agreement in order to link salaries evolution to the profitability of the business; (ii) increase the number of sales through our most cost efficient channels (on-line); (iii) improving network maintenance and fault resolution to reduce costs; and (iv) building optimization. Although we have made noticeable the progress made so far we believe that there is a lot more to do in the next quarters to make our business more efficient, resilient and capable of withstanding the hostile environment in which we operate. We have identified two levers to continue improving our cost structure and that we believe will help us to take it from good to best in class: (i) Fully digitalize customer life cycle through the development of a full eServices functionality and the improvement of our eCare and eSales platforms; and (ii) maximize process efficiency through optimization initiatives (building optimizations, contract renegotiations, improving call center business metrics, reducing field repairs and increasing self-installation amongst other initiatives) and organizational optimizations. 3.1.6. EBITDA The following table sets forth ONO's EBITDA and the percentage change from period to period for each of the periods indicated: EBITDA and EBITDA Normalized EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change Net Revenues Cost of sales Net opex Normalized EBITDA Normalized EBITDA margin PPA Adjustment EBITDA EBITDA margin 384 (121) (93) 170 44.4% 1.39 172 44.8% 392 (112) (97) 182 46.6% 6.82 189 48.3% (2.0%) 7.9% (4.7%) (6.7%) (2.2 pp) (79.6%) (9.3%) (3.6 pp) 1,183 (371) (288) 525 44.3% 4.18 529 44.7% 1,164 (310) (309) 544 46.8% 20.46 565 48.5% 1.7% 19.6% (7.1%) (3.6%) (2.4 pp) (79.6%) (6.3%) (3.8 pp) Normalized EBITDA (EBITDA adjusted for the PPA provision) decreased by 6.7% as in the quarter to reach €170 million and reported EBITDA decreased 9.3% this quarter to reach €172 million as results of the challenging macro and industry environments described before. The PPA provision is a non-cash adjustment that relates to the release of onerous contract provisions which arose on the acquisition of Auna. In 2005, the realizable value of the Auna net assets acquired exceeded the acquisition price. In writing down the value of book assets acquired in line with the acquisition price, a provision was recorded on the balance sheet. This amount was assigned to the network maintenance and rental contracts acquired with Auna as these contracts were deemed to be stuck at a higher value than market. In the period 2006-2012, we took the following accounting approach attending to the relevant accounting rules in place: – Profit & Loss Statement: PPA provision was applied from 2006 to 2012 as a contra expense within Cost of sales and Opex thereby benefiting reporting EBITDA. – Cash Flow Statement: Payments of the onerous contracts were recorded under the “other” line of the cash flow in order to arrive to FCF. Although we utilized the majority of the PPA provision in the period 2006-2012, approximately €1.4 million has yet to be used in 2013 (the PPA impact was €27 million in 2012). DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 19
  • 20. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.1.7. Depreciation and amortization The following table sets forth our depreciation and amortization and the percentage change for each of the periods indicated: Depreciation and amortization EUR million Depreciation and amortization 3Q 13 3Q 12 % change 9M 13 9M 12 % change (107) (104) 2.7% (301) (293) 2.8% Depreciation and amortization is related to the depreciation of our network, customer premise equipment and installation costs incurred in connection with the addition of new subscribers and to the amortization of intangible assets. 3.1.8. Net financial result The following table sets forth ONO's net financial result and the percentage change for each of the periods indicated: Net financial result EUR million Net financial result 3Q 13 3Q 12 % change 9M 13 9M 12 % change (64) (72) (12.2%) (241) (245) (1.7%) Net financial result consists principally of interest expenses derived from our financing agreements. Net financial result decreased by 12% as compared to the same quarter of 2012 to €64 million mainly as result of the 3.2% depreciation of the USD/EUR exchange rate that resulted in positive impact of close to €17 million in our financial expenses. 3.1.9. Income tax expenses The following table sets forth ONO’s income tax expenses and the percentage change from period to period for each of the periods indicated: Income tax expenses EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change 5 3 48.6% 13 (17) na Income tax We recorded €5 million of positive income taxes in the third quarter of 2013 which compares with the positive €3 million recorded in the same quarter of 2012. In 2013, the Spanish Government decided to extend to 2015 the temporary tax measures adopted in 2012, specifically (i) carry forward losses may only be used to offset up to 25% of the taxable income before application of the carry forward; and (ii) important restrictions on the deductibility of accounting depreciation of tangible and intangible assets and real estate investments. In this regard, the depreciation for tax purposes is generally reduced to 70% of the accounting depreciation registered. As a result of these changes, we paid €9 million cash corporate taxes in 2012 and expect to pay cash corporate taxes in the range of €30-50 million in the 2013-2015 period. Thereafter, unless there are additional law changes, we would be entitled to once again deduct our historic tax losses to offset our cash corporate tax obligations until our historic tax losses are exhausted. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 20
  • 21. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.2. Notes to the condensed Consolidated Balance Sheet Condensed Consolidated Balance Sheet Sep-13 Jun-13 Dec-12 ASSETS Property, plant and equipment Intangible assets Deferred income tax assets Derivative financial instruments Other financial assets Non-current assets 3,831 122 1,113 15 5,081 3,880 119 1,093 2 14 5,108 3,976 110 1,076 8 14 5,184 Inventories Trade and other receivables Other financial assets Derivative financial instruments Prepayments and accrued income Cash and cash equivalents Current assets TOTAL ASSETS 1 143 11 4 4 189 352 5,433 1 149 11 11 5 140 317 5,425 1 152 12 1 2 97 265 5,449 LIABILITIES AND SHAREHOLDERS' EQUITY Share Capital Share Premium Own Shares Other reserves Retained earnings Result for the period Shareholders' equity Non-controlling interests Net equity 1,817 363 (28) (6) (662) (15) 1,469 6 1,475 1,817 363 (28) (0) (662) (19) 1,470 5 1,476 1,817 363 (28) (3) (715) 52 1,486 5 1,492 Senior Bank Facility (1) Senior Secured Notes (1) Senior Subordinated Notes (1) Other Long- term debt Loan Shareholders' Loan Deferred income tax liabilities Derivative financial instruments Other non-current liabilities Deferred income Provisions for other liabilities and charges Government deferred grants Non-current liabilities 792 2,144 452 2 3,390 31 31 43 32 1 0 39 0 3,536 790 2,171 457 2 3,420 31 31 40 13 1 0 45 0 3,550 987 1,905 455 3 3,349 30 30 38 16 1 0 49 0 3,483 Trade and other payables Short-term debt with banks (1) Interest payable Short-term debt Derivative financial instruments Other current liabilities Deferred income Provisions for other liabilities and charges Current liabilities TOTAL LIABILITIES AND NET EQUITY 299 1 73 74 4 43 1 422 5,433 296 2 50 52 4 45 3 400 5,425 337 40 42 82 2 3 46 5 475 5,449 EUR million (1) The difference between these amounts and notional amounts correspond to the discount effect DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 21
  • 22. 3Q 2013 Results Report Data in EUR million, unless otherwise stated Shareholders’ equity EUR million Balance Dec 31, 2012 Previous year result distribution Net loss for the period Change in fair value Transfer to income statements Balance Sep 30, 2013 Share Capital Share premium Own shares Other reserves Retained earnings Result for the period Noncontrolling interests Total 1,817 363 (28) (3) (715) 52 5 1,492 - - - - 52 (52) - - - - - (2) - (15) - (15) (2) 0 0 6 1,475 1,817 363 (28) (6) (662) (15) Debt and liquidity As of 30 sep 2013. EUR million Maximum available Short term debt Long term debt Total debt Availability 924 2,230 3 3,157 1 1 824 2,230 0 3,054 824 2,230 1 3,055 100 3 103 462 3 464 3,622 0 0 1 462 2 464 3,518 462 3 464 3,519 189 3,330 103 189 291 Debt with credit entities: Senior Facility Senior Secured Notes Other credit facilities Total debt with credit entities Other debt: Senior subordinated notes State subsidies Total other debt Total debt Cash and cash equivalents Total net debt EBITDA LTM Total net debt/EBITDA LTM 716 4.65x Debt by maturity (amounts drawn) EUR million 2013 2014 2015 2016 2017 2018 2019 ≥2020 Total 0 0 1 1 0 0 238 238 0 239 401 401 0 401 185 700 300 741 230 2,155 0 2,155 462 0 462 260 260 1 261 639 185 700 300 741 230 260 3,054 462 3 3,519 Debt with credit entities: Term Loan A (“TLA”) Term Loan B (“TLB”) Revolving Credit Facility (“RCF”)(1) Tranche SPV 1 Tranche SPV 2 Tranche SPV 3 Tranche SPV 4 Tranche SPV 5 Total Senior Facility Senior Subordinated Notes Other credit facilities Total gross debt €100 million of RCF available but not drawn. Note: (1) The difference between these amounts and notional amounts correspond to the discount effect (1) Our liquidity requirements arise primarily to meet our on-going debt service obligations and to fund working capital and capital expenditure requirements. Our principal sources of funds have been cash flow from operations, cash and cash equivalents on our balance sheet, borrowings under our credit facilities and borrowings under other financing agreements. As of September 30, 2013 we had €189 million of cash and cash equivalents and €103 million available lines under undrawn credit facilities (including the €100 million Revolving Facility under the New Senior Bank Facility Agreement), for a total liquidity of €292 million. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 22
  • 23. 3Q 2013 Results Report Data in EUR million, unless otherwise stated As a result of our refinancing process completed in June 2012 and the issuance of the €260 million Senior Secured Notes in February 2013, the maturity profile of our debt has been significantly improved and currently we have no relevant debt maturities before 2017. We expect the maturities of the Bank Tranches of our Senior Facility (Term Loan A, Term Loan B and RCF (if drawn)) to be met through available cash and cash equivalents and operating cash flow. However, we expect that we will be required to refinance a substantial portion of the indebtedness under the Notes Tranches of the New Senior Facility on or before their maturity in 2018. We may incur additional indebtedness in the future principally to fund our interest expenses, working capital needs and, to the extent not covered by operating cash flows, capital expenditures. Any drawings under the New Senior Bank Facility Agreement are subject to the satisfaction of certain conditions precedent and compliance with covenants, including the maintenance of certain ratios. In order to reduce interest expense in the future, we may elect to use available cash to repay debt or purchase our bonds in the market from time to time. 3.3. Notes to the Condensed Consolidated Cash Flow Condensed Consolidated Cash Flow EUR million EBITDA Capex OPERATING FREE CASH FLOW Change in working capital Other (1) Corporate Income Tax FREE CASH FLOW (pre-interest) Paid interests, net (2) FREE CASH FLOW AFTER DEBT SERVICE FINANCING ACTIVITIES Senior Facility Senior Secured Notes State Subsidies Credit lines Short-term investments Financial assets Other financing items CASH FLOW FROM FINANCING ACTIVITIES NET CASH FLOW CASH BEGINNING OF PERIOD CASH END OF PERIOD 3Q 13 3Q 12 % change 9M 13 9M 12 % change 172 (62) 109 (1) (8) 100 (49) 51 189 (73) 116 (5) (6) 105 (62) 43 (9.3%) (14.8%) (5.8%) (71.3%) 23.8% na (4.6%) (20.7%) 18.6% 529 (184) 345 (44) (12) (7) 282 (193) 89 565 (205) 359 (40) (21) (1) 296 (227) 70 (6.3%) (10.3%) (4.1%) 7.9% (45.6%) na (4.9%) (14.8%) 27.4% (1) 0 (1) (0) (2) (1) (0) 3 (2) (0) (2) (252) 257 (1) 0 1 (1) (0) 3 (1,061) 951 (7) (1) 1 (8) (1) (126) 49 140 189 41 87 128 92 97 189 (57) 185 128 For certain definitions, see section 7 of this document. (1) Includes commitments & contingencies and other one-off items. (2) Includes the payment of refinancing fees and expenses. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 23
  • 24. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 3.3.1. Capital Expenditure (“Capex”) Our Capex has historically been related to network build-out, set-top box purchases, installations, network upgrades, computer hardware/software and other investments. Capex EUR million Capex 3Q 13 3Q 12 % change 9M 13 9M 12 % change (62) (73) (14.8%) (184) (205) (10.3%) Capex in the quarter decreased by €11 million as compared to the same quarter in 2012 to reach €62 million. Our overall capex levels have decreased in the quarter as a consequence of the completion in 2012 of our broadband, pay television and telephony network upgrades. Nevertheless this decrease has been partially offset by the good performance of high speeds, TiVo and SoHos that have increased our investments in equipment and installations in the quarter. Although we plan to continue investing selectively in assets that that we believe will improve our product proposition such as the ongoing upgrade of our mobile core and the development of our TV online platform, going forward we expect the evolution of our capex to be primarily linked to the commercial success of our business. 3.3.2. Working capital variation The change in working capital includes the variation of the captions “accounts payable and other current liabilities”, “inventories”, “prepayments and accrued income”, “deferred income” and “accounts receivable and other current assets”. The working capital excludes the reclassification of amounts between accounts payable or in our cash flow statement receivables to other lines within the balance sheet. Working capital variation EUR million 3Q 13 3Q 12 % change 9M 13 9M 12 % change (1) (5) (71.3%) (44) (40) 7.9% Working capital variation Although we have continued to improve on our average collection periods, certain timing differences, the ongoing implementation of the bad-debt law, by which the payment periods for new agreements have been capped at 60 days and the success of our handset financing proposition, our working capital figures have been negatively impacted in the quarter. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 24
  • 25. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 4. ONO Midco In this section, we are reporting the Condensed Consolidated Financial Statements of ONO Midco S.A.U. and its subsidiaries for the quarter ended September 30, 2013. For a detailed analysis of the trends observed in the indicated periods, please see information on GCO in section 3 of this document. Condensed Consolidated Balance Sheet (ONOMidco) Sep-13 Jun-13 Dec-12 ASSETS Property, plant and equipment Intangible assets Deferred income tax assets Derivative financial instruments Other financial assets Non-current assets 3,831 122 1,074 15 5,042 3,880 119 1,054 2 14 5,069 3,976 110 1,037 8 14 5,146 Inventories Trade and other receivables Other financial assets Derivative financial instruments Prepayments and accrued income Cash and cash equivalents Current assets TOTAL ASSETS 1 144 19 4 4 188 360 5,402 1 150 18 11 5 140 325 5,394 1 156 20 1 2 96 276 5,422 LIABILITIES AND SHAREHOLDERS' EQUITY Share Capital Share premium Participative loan Other reserves Retained earnings Result for the period Shareholders' equity Non-controlling interests Net equity 131 1,088 18 (6) 269 (14) 1,487 6 1,492 131 1,088 18 (0) 269 (19) 1,488 5 1,493 131 1,088 18 (3) 211 59 1,503 5 1,509 Senior Bank Facility(1) Senior Secured Notes(1) Senior Subordinated Notes(1) Other(1) Long- term debt Deferred income tax liabilities Derivative financial instruments Other non-current liabilities Deferred income Provisions for other liabilities and charges Government deferred grants Non-current liabilities 792 2,144 452 2 3,390 20 32 8 0 39 0 3,490 790 2,171 457 2 3,420 17 13 8 0 45 0 3,504 987 1,905 455 3 3,349 15 16 8 0 49 0 3,437 Trade and other payables Short-term debt with banks(1) Interest payable Short-term debt Derivative financial instruments Other current liabilities Deferred income Provisions for other liabilities and charges Current liabilities TOTAL LIABILITIES AND NET EQUITY 297 1 73 74 4 43 1 420 5,402 294 2 50 52 4 45 3 397 5,394 338 40 42 82 2 3 46 5 476 5,422 EUR million (1) The difference between these amounts and notional amounts correspond to the discount effect DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 25
  • 26. 3Q 2013 Results Report Data in EUR million, unless otherwise stated Condensed Consolidated Statements of Operations 3Q 13 % change 9M 13 9M 12 % change 392 (112) (97) 182 7 189 (104) 0 0 (2.0%) 7.9% (4.8%) (6.6%) (79.6%) (9.2%) 2.7% na na na 1,183 (371) (288) 525 4 529 (301) 0 0 2 1,164 (310) (310) 544 20 564 (293) 54 0 0 1.7% 19.6% (7.1%) (3.6%) (79.6%) (6.3%) 2.8% na na na (1) (22) na (17) (25) na 63 (63) 0 4 5 63 (68) (5) 2 (3) 0.6% (7.5%) na na na 214 (240) (26) 12 (14) 301 (237) 64 (19) 45 (29.0%) 1.0% na na na (0) 5 (0) (3) na na (0) (14) (0) 44 na na 3Q 13 3Q 12 % change 9M 13 9M 12 % change 172 (62) 109 (1) (8) 100 (49) 51 189 (73) 116 (4) (6) 0 105 (62) 43 (9.2%) (14.8%) (5.7%) (69.4%) 23.8% (100.0%) (4.9%) (20.7%) 17.8% 529 (184) 344 (44) (12) (7) 282 (193) 89 564 (205) 359 (40) (21) (1) 297 (227) 70 (6.3%) (10.3%) (4.1%) 8.9% (45.6%) 602.9% (5.0%) (14.7%) 26.8% (1) 0 (0) (1) (0) (1) (0) 2 (2) (0) (252) 257 (1) 0 1 (1) (0) (1,061) 951 (7) (1) 0 (8) (1) (2) (2) 4 (127) 49 140 188 Net Revenues Cost of sales (1) Net opex (1) Normalized EBITDA PPA EBITDA Depreciation and amortization Other results Other revenues Over provisions Impairment and gains or losses on disposal of fixed assets EBIT / Operating result Net financial result EBT / Result before income tax Income tax Result before non-controlling interest Non-controlling interest Result for the period 3Q 12 384 (121) (93) 170 1 172 (107) 0 - EUR million 41 86 128 92 96 188 (57) 185 128 Adjusted for the PPA provision (1) Condensed Consolidated Cash Flow EUR million EBITDA Capex OPERATING FREE CASH FLOW Change in working capital Other (1) Corporate Income Tax FREE CASH FLOW (pre-interest) Paid interests, net (2) FREE CASH FLOW AFTER DEBT SERVICE FINANCING ACTIVITIES Senior Facility Senior Secured Notes State subsidies Credit lines Short-term investments Financial assets Other financing items CASH FLOW FROM FINANCING ACTIVITIES NET CASH FLOW CASH BEGINNING OF PERIOD CASH END OF PERIOD (1) (2) Includes commitments & contingencies and other one-off items. Includes the payment of refinancing fees and expenses. Shareholders’ equity EUR million Balance December 31, 2012 Previous year result distribution Net loss for the period Change in fair value Transfer to income statements Balance September 30, 2013 Share Share Participative Other Retained Capital premium loan reserves earnings 131 131 1,088 1,088 18 18 (3) (2) (6) 211 59 269 Result Nonfor the controlling period interests 59 (59) (14) (14) 5 0 6 Total 1,509 (14) (2) 0 1,492 DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 26
  • 27. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 5. CABLEUROPA 5.1. Condensed Consolidated Financial Statements In this section, we are reporting the Condensed Consolidated Financial Statements of Cableuropa S.A.U. and its subsidiaries for the quarter ended September 30, 2013. For a detailed analysis of the trends observed in the indicated periods, please see information on GCO in section 3 of this document. Condensed Consolidated Balance Sheet (Cableuropa) Sep-13 Jun-13 Dec-12 ASSETS Property, plant and equipment Intangible assets Deferred income tax assets Derivative financial instruments Other financial assets Non-current assets 3,831 122 1,074 15 5,042 3,880 119 1,054 2 14 5,069 3,976 110 1,037 8 14 5,145 Inventories Trade and other receivables Other financial assets Derivative financial instruments Prepayments and accrued income Cash and cash equivalents Current assets TOTAL ASSETS 1 144 19 4 4 188 360 5,402 1 150 18 11 5 140 325 5,394 1 156 20 1 2 96 276 5,422 263 2,725 18 (6) (1,499) (14) 1,487 6 1,493 263 2,725 18 (0) (1,499) (19) 1,488 5 1,493 263 2,725 18 (3) (1,558) 59 1,504 5 1,509 Senior Bank Facility (1) Senior Secured Notes (1) Senior Subordinated Notes (1) Other Long- term debt Deferred income tax liabilities Derivative financial instruments Other non-current liabilities Deferred income Provisions for other liabilities and charges Government deferred grants Non-current liabilities 792 2,144 452 2 3,390 20 32 8 0 39 0 3,490 790 2,171 457 2 3,420 17 13 8 0 45 0 3,504 987 1,905 455 3 3,349 15 16 8 0 49 0 3,437 Trade and other payables Short-term debt with banks(1) Interest payable Short-term debt Derivative financial instruments Other current liabilities Deferred income Provisions for other liabilities and charges Current liabilities TOTAL LIABILITIES AND NET EQUITY 297 1 73 74 4 43 1 419 5,402 294 2 50 52 4 45 3 397 5,394 338 40 42 82 2 3 46 5 476 5,422 EUR million LIABILITIES AND SHAREHOLDERS' EQUITY Share Capital Share premium Participative loan Other reserves Retained earnings Result for the period Shareholders' equity Non-controlling interests Net equity (1) The difference between these amounts and notional amounts correspond to the discount effect DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 27
  • 28. 3Q 2013 Results Report Data in EUR million, unless otherwise stated Condensed Consolidated Statements of Operations 3Q 13 % change 9M 13 9M 12 % change 392 (112) (97) 182 7 189 (104) 0 0 (2.0%) 7.9% (4.8%) (6.6%) (79.6%) (9.2%) 2.7% na na na 1,183 (371) (288) 525 4 529 (301) 0 0 2 1,164 (310) (310) 544 20 564 (293) 54 0 0 1.7% 19.6% (7.1%) (3.6%) (79.6%) (6.3%) 2.8% na na na (1) (22) na (17) (25) na 63 (63) 0 4 5 63 (68) (5) 2 (3) 0.6% (7.5%) na na na 214 (240) (26) 12 (14) 301 (237) 64 (19) 45 (29.0%) 1.0% na na na (0) 5 (0) (3) na na (0) (14) (0) 44 na na 3Q 13 3Q 12 % change 9M 13 9M 12 % change 172 (62) 109 (1) (8) 100 (49) 189 (73) 116 (4) (6) 0 105 (62) (9.2%) (14.8%) (5.7%) (69.4%) 23.8% (100.0%) (4.9%) (20.7%) 529 (184) 344 (44) (12) (7) 282 (193) 564 (205) 359 (40) (21) (1) 297 (227) (6.3%) (10.3%) (4.1%) 8.9% (45.6%) 602.9% (5.0%) (14.7%) 51 43 17.8% 89 70 26.8% (1) 0 (0) (1) (0) (2) (1) (0) 2 (2) (0) (2) (252) 257 (1) 0 1 (1) (0) 4 (1,061) 951 (7) (1) 0 (8) (1) (127) 49 140 188 Net Revenues Cost of sales (1) Net opex (1) Normalized EBITDA PPA EBITDA Depreciation and amortization Other results Other revenues Over provisions Impairment and gains or losses on disposal of fixed assets EBIT / Operating result Net financial result EBT / Result before income tax Income tax Result before non-controlling interest Non-controlling interest Result for the period 3Q 12 384 (121) (93) 170 1 172 (107) 0 - EUR million 41 86 128 92 96 188 (57) 185 128 Adjusted for the PPA provision (1) Condensed Consolidated Cash Flow EUR million EBITDA Capex OPERATING FREE CASH FLOW Change in working capital Other (1) Corporate Income Tax FREE CASH FLOW (pre-interest) Paid interests, net (2) FREE CASH FLOW AFTER DEBT SERVICE FINANCING ACTIVITIES Senior facility Senior Secured Notes State subsidies Credit lines Short-term investments Financial assets Other financing items CASH FLOW FROM FINANCING ACTIVITIES NET CASH FLOW CASH BEGINNING OF PERIOD CASH END OF PERIOD (1) (2) Includes commitments & contingencies and other one-off items. Includes the payment of refinancing fees and expenses. Shareholders’ equity EUR million Balance December 31, 2012 Previous year result distribution Net loss for the period Change in fair value Transfer to income statements Balance September 30, 2013 Share Share Participative Other Retained Capital premium loan reserves earnings 263 263 2,725 2,725 18 18 (3) (2) (6) (1,558) 59 (1,499) Result Nonfor the controlling period interests 59 (59) (14) (14) 5 0 6 Total 1,509 (14) (2) 0 1,493 DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 28
  • 29. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 5.2. Debt and liquidity Debt and liquidity As of 30 sep 2013. EUR million Maximum available Short-term debt Long-term debt Total debt Availability 924 2,230 3 3,157 1 1 824 2,230 0 3,054 824 2,230 1 3,055 100 3 103 462 3 464 3,622 0 0 1 462 2 464 3,518 462 3 464 3,519 188 3,331 103 188 291 Debt with credit entities: Senior Facility Senior Secured Notes Other credit facilities Total debt with credit entities Other debt: Senior Subordinated Notes State subsidies and other Total other debt Total debt Cash and cash equivalents Total net debt EBITDA LTM Total net debt/EBITDA LTM 716 4.65x Note: The difference between these amounts and notional amounts correspond to the discount effect Debt by maturity (amounts drawn) EUR million 2013 2014 2015 2016 2017 2018 2019 ≥2020 Total 0 0 1 1 0 0 238 238 0 239 401 401 0 401 185 700 300 741 230 2,155 0 2,155 462 0 462 260 260 1 261 639 185 700 300 741 230 260 3,054 462 3 3,519 Debt with credit entities: Term Loan A (“TLA”) Term Loan B (“TLB”) Revolving Credit Facility (“RCF”)(1) Tranche SPV 1 Tranche SPV 2 Tranche SPV 3 Tranche SPV 4 Tranche SPV 5 Total Senior Facility Senior Subordinated Notes Other credit facilities Total gross debt €100 million of RCF available but not drawn. Note: The difference between these amounts and the book value of the debt instrument corresponds to the capitalized costs of their issue. (1) DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 29
  • 30. 3Q 2013 Results Report Data in EUR million, unless otherwise stated 6. DISCLOSURE ABOUT MARKET RISK 6.1. Quantitative and qualitative disclosure about market risk Market risk represents the risk of changes in the value of financial instruments, derivative or nonderivative, caused by fluctuations in the markets. It is our treasury policy to monitor and manage exposure to variable interest rate risk and currency fluctuation risk by managing the amount of our outstanding debt bearing variable interest and the amount of debt denominated in U.S.$. In order to reduce such risks, and as market conditions warrant, we may vary our position on hedging transactions and may purchase or trade outstanding debt securities or other financial debt from time to time in privately negotiated or open market transactions using funds available to us. 6.2. Interest rate sensitivity As of September 30, 2013, borrowings under our New Senior Bank Facility bore interest at a floating rate determined by reference to Euribor plus a margin, which ranged from 4.50% to 5.25% depending on the tranche. Our main financial agreements, excluding the Senior Secured Notes and the Senior Notes, are linked to variable interest rates. Total debt at redemption value exposed to risk due to fluctuation of interest rates amounted to €825 as of September 30, 2013. The table below shows our variable interest debt main agreement as of September 30, 2013: Variable interest debt As of September 30, 2013 EUR million Senior bank facility (Euribor+4.50%-5.25%) Other debt Total 2013 2014 2015 2016 2017 2018 ≥2019 Total 0 0 1 1 0 0 238 238 401 401 185 185 0 0 824 1 825 6.3. Currency fluctuation sensitivity While the vast majority of our business is conducted in euro, all payments in respect of the U.S.$1,535 million aggregate principal amount of notes issued since January 2011 are denominated in U.S. dollars. This exposes us to the risk of currency fluctuation to the extent that we do not hedge against such risk. If the value of the euro relative to the U.S. dollar declines, payments on the Notes and the Dollar Denominated Subordinated Notes will effectively become more expensive for us, and our results of operations and financial condition could be materially affected. To reduce this exposure, we have entered into currency hedge arrangements with respect to the interest payments under the Dollar Denominated Subordinated Notes due through January 2016 and the total amount of the principal payment obligation under the Dollar Denominated Subordinated Notes until January 2014. We have also entered into currency hedge arrangements with respect to the interest payments under the Dollar Denominated Senior Secured Notes until December 2015 and approximately 62% of the aggregate principal amount of the Dollar Denominated Senior Secured Notes of which 56% has been hedged until December 2014 and 5% until December 2015. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 30
  • 31. 3Q 2013 Results Report Data in EUR million, unless otherwise stated The table below shows our currency heading instruments currently in place: Currency heading instruments Issuance US$ 225m Senior Subordinated Notes due 2019 US$ 1,000m Senior Secured Notes due 2018 100% Hedging Instrument FX Forward Blended EUR/US$ exchange rate 1.32 Principal 100% FX Forward 1.39 Jan 2014 Coupons 100% FX Forward 1.30 Dec 2015 Flow % Hedged Coupons Maturity Jan 2016 US$ 310m Senior Secured Notes due 2018 Principal 50% Collar 1.20-1.40 Dec 2014 Coupons 100% FX Forward 1.30 Dec 2015 Principal 77% FX Forward 1.25 Dec 2014 Principal 23% FX Forward 1.23 Dec 2015 DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 31
  • 32. Data in EUR million, unless otherwise stated 3Q 2013 Results Report 7. GLOSSARY In this Report, the following defined terms have the meanings indicated below: 7.1. Operational Definitions “ADSL” means Asymmetric Digital Subscriber Line, a data communications technology that enables faster data transmission over copper telephone lines than a conventional voiceband modem can provide by utilizing frequencies not used by a voice telephone call. “ARPU” means monthly average revenue per user, and is calculated by dividing total revenues generated from our Internet, fiber television and telephony services provided to customers that are directly connected to our network in the last quarter of the relevant period by the average number of customers in that quarter, the result of which is divided by three. The average number of customers for any period is calculated by adding the number of customers at the beginning of the period to the number of customers at the end of the period and dividing by two. “Homes released to marketing” or “HRTM” means homes to which we can provide broadband Internet, fiber television and telephony services within an average of four days, which occurs after the customer tap and drop have been installed. “Net churn” means the percentage obtained by dividing the number of customers (without the customers moving from one ONO home to another ONO home) who cease to receive any of our services (either voluntarily or involuntarily) in the last quarter of the relevant period by the average total number of customers during that quarter, multiplied by four. The average number of customers for any period is calculated by adding the number of customers at the beginning of the period to the number of customers at the end of the period and dividing by two. “Penetration“ is the percentage of customers over homes released to marketing in our areas of operation, and with respect to any particular service, penetration is the percentage of RGUs of that service over homes released to marketing in our areas of operation. 7.2. Financial Definitions “EBITDA” represents earnings before interests, taxes, depreciation and amortization, extraordinary, restructuring and other non-cash items and minority interests. “EBITDA LTM” is the aggregate amount of EBITDA for the last four consecutive calendar quarters. “EBITDA margin” is calculated by dividing EBITDA for a particular period by the total revenues for that period. “Normalized EBITDA” is EBITDA adjusted for the PPA provision. “PPA” is a non-cash adjustment that relates to the release of onerous contract provisions which arose on the acquisition of Auna. In 2005, the realizable value of the Auna net assets acquired exceeded the acquisition price. In writing down the value of book assets acquired in line with the acquisition price, a provision was recorded on the balance sheet. This amount was assigned to the network maintenance and rental contracts acquired with Auna as these contracts were deemed to be stuck at a higher value than market. “Opex (Operating Expenses)” are comprised of cost of service, staff cost, other operating expense, costs capitalized as property and equipment, depreciation and amortization, and impairments. “Capex (Capital Expenditures)” refer to purchases of tangible and intangible assets, consisting principally of set-top box purchases and other customer capital expenditure, installations, network DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 32
  • 33. Data in EUR million, unless otherwise stated 3Q 2013 Results Report build-out, upgrades, maintenance and other investments, computer hardware and software and content rights. “Operating free cash flow” means EBITDA less capital expenditure. “Free cash flow after debt service” means EBITDA, less capital expenditures, changes in working capital, disbursements and net cash interest expense paid. “Shareholder’s contributions” represent subordinated loans from GCO to Cableuropa in the form of Participative loans. For the purpose of capitalization calculations under Spanish corporate law, Participative loans are treated as shareholders’ equity. “Total debt” is short-term and long-term debt. Total debt does not include subordinated participative loans granted by GCO or accrued interest expenses. “Net debt” means total debt less cash and cash equivalents. 7.3. Total Homes and Businesses Data Total homes for each of our franchise areas are derived from the 2011 Spanish national census published by the National Statistics Institute of Spain (Instituto Nacional de Estadística or "INE"). Total businesses for each of our franchise areas are derived from the 2012 businesses central directory, which is also published by INE. Although we accept responsibility for the accurate extraction of such data, we accept no further responsibility with respect to such data. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 33
  • 34. Data in EUR million, unless otherwise stated 3Q 2013 Results Report 8. DISCLAIMER The financial and other information in this release contains forward-looking statements (all statements other than those made solely with respect to historical facts) based upon management's beliefs and data currently available to management. These forward-looking statements are based on a variety of assumptions that may not be realized and are subject to significant business, economic, legal and competitive risks and uncertainties, including those set forth below, many of which are beyond ONO’s (“the Company”) control. The Company's actual operations, financial condition, cash flows and operating results may differ materially from those expressed or implied by any such forward-looking statements and the Company undertakes no obligation to update or revise any such forward-looking statements. Parts of the financial and other information contained in this release are based on certain estimates with respect to the Company's liquidity, capital resources, results of operations and projections for future periods that are subject to a number of risks and uncertainties including, but not limited to, the following: the ability of the Company to continue as a going concern; the ability of the Company and its subsidiaries to fulfill their obligations under, service and operate pursuant to the terms of, their existing credit facilities and arrangements; the state of the Spanish and global economy and its impact on the Company’s business; the ability to fund, develop and execute the Company's business plan; competitive pressures from other companies in the same or similar lines of business as the Company; trends in the economy as a whole which may affect subscriber confidence and demand for the goods and services supplied by the Company; the ability of the Company to predict consumer demand as a whole, as well as demand for specific goods and services; the acceptance and continued use by subscribers and potential subscribers of the Company's services; changes in technology and competition; the Company's ability to achieve expected operational efficiencies and economies of scale and its ability to generate expected cash flow, revenue and achieve assumed margins; the ability of the Company to attract, retain and compensate key executives and other personnel; the Company’s ability to successfully integrate acquired businesses; the ability of the Company to maintain existing arrangements and/or enter into new arrangements with third party providers and contract partners; changes in applicable law, regulations or interpretation thereof; continued presence of a fair, competitive market; potential adverse publicity; as well as other factors detailed from time to time in the Company's public reports. Given these and other uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements contained in this release. The financial information contained in this document has been prepared under IFRS. DISCLAIMER: Please see important disclaimer in section 8 of this document ONO – Third quarter 2013 results (unaudited) - 34
  • 35. FURTHER INFORMATION Investor Relations E-mail: investor.relations@ono.es Website: www.ono.es/sobreono/ – Investor Relations