ZON announces 1H08 Consolidated Results

LISBON, Portugal — Today ZON Multimédia (Lisbon:ZON) announces unaudited results for the First Half of 2008.

Operational Highlights

ZON continues to post strong operational momentum in 1H08, with impressive performance in key operational drivers. Executing the strategy announced at the beginning of the year, ZON is actively promoting the uptake of Triple Play bundles, additional services and functionalities:

• 14% penetration of Triple Play services, with over 153 thousand cable Pay TV customers already subscribing to both Broadband and Voice Services;
• Record time to launch the new “ZON Box” in May 2008, a new TV set-top box for cable and satellite customers, enabled with PVR (Personal Video Recorder), a revamped EPG (Electronic Programming Guide) and HD (High Definition) channel viewing; more than 20 thousand boxes activated by the end of June;
• RGU growth of 195.6 thousand (17.1% higher y.o.y.) in 1H08 (93.7 thousand in 2Q08), compared with 115.8 thousand in 1H07. RGUs per subscriber grew to 1.68 compared with 1.49 in 1H07 reflecting ZON’s efforts to up-sell additional services to the customer base;
• Blended ARPU increased to 31.7 euros, representing growth of 3.7% from 30.6 euros in 1H07, driven mostly by the increase in RGU’s per subscriber;
• Despite the increased competitive environment, ZON achieved solid growth of its Pay TV subscriber base of 9.9 thousand in 1H08, with positive results in 1Q08 (+13.4 thousand) and neutral performance in 2Q08 (-3.6 thousand); market data shows that the Portuguese Pay TV sector continues to post healthy growth rates quarter on quarter;
• Strong net adds in Broadband of 30.6 thousand in 1H08 (14.9 thousand in 2Q08), reaching a total of 430.8 thousand customers at the end of June, supported by the fastest and most competitive offer in the market at each pricing level, enabling ZON to become the fastest growing company in the Broadband segment

Pay TV (TV Cabo)

ZON launched its new “ZON Box”, a TV powerbox, at the end of May, providing enhanced features and functionalities such as HD viewing, pause live TV, PVR (personal video recorder) and a new EPG (electronic programming guide). ZON’s Pay TV service offers a significant advantage versus competing offers as it provides a true multi-room viewing experience – the basic pay TV service may be broadcast to various rooms in the house through distribution of the analogue signal. In addition, the new ZON set-top box is currently the only one in the market capable of providing enhanced functionalities and features to both cable and satellite customers. Take up of the new box has been significant with 20 thousand boxes activated since its launch.

During 1H08, ZON’s Pay TV customer base grew by 9.9 thousand customers to 1,557 thousand. Despite the significant increase in the competitive dynamics during 2Q08, marked by the nationwide re-launch of a competing Triple Play offer in 2Q08, net adds were only marginally negative in 2Q08, by 3.6 thousand. With the launch of the new “ZON Box”, albeit only towards the end of 2Q08, ZON today has one of the most attractive Pay TV offers in the market and therefore expects to continue to capture a relevant part of the market growth going forward, in line with the strategic objectives presented in January 2008.

Premium channel subscriptions declined by 20 thousand subscribers in 1H08 to 821 thousand, due to the seasonal disconnection of Sport TV subscribers at the end of the Portuguese Football Championship. However, the number of subscribers was 5.8% higher than at the end of 1H07. Pay TV ARPU therefore increased by 2.3% to 25.6 euros per customer in 1H08, when compared with 25 euros in 1H07.

Business Indicators (‘000):

                                                    2Q08/    2Q08/                      1H08/
                          2Q07     1Q08     2Q08     2Q07     1Q08     1H07     1H08     1H07
                       -------  -------  -------  -------  -------  -------  -------  -------
Homes Passed           2,698.8  2,773.7  2,795.4     3.6%     0.8%  2,698.8  2,795.4     3.6%
Basic Subscribers(1)   1,495.1  1,560.5  1,557.0     4.1%   (0.2%)  1,495.1  1,557.0     4.1%
of which
 Digital Extended Basic  327.8    399.8    416.9    27.2%     4.3%    327.8    416.9    27.2%
 Premium Pay TV          775.9    832.6    820.9     5.8%   (1.4%)    775.9    820.9     5.8%
Net Additions
 Basic Subscribers         6.7     13.4    (3.6) (153.4%) (126.5%)     15.0      9.9  (34.3%)
 Digital Extended Basic   24.5     17.7     17.1  (30.1%)   (3.6%)     57.4     34.8  (39.3%)
 Premium Pay TV         (11.0)    (8.0)   (17.4)    58.5%   116.0%    (4.1)   (25.4)     n.a.

1. These figures are related to the total number of Pay TV basic customers, including the cable and satellite platforms. ZON Multimedia offers several basic services, based on different technologies, directed to different market segments (residential, real estate and hotels), with a distinct geographical scope (mainland Portugal and the Azores and Madeira islands) and with a variable number of channels.

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