Portugal's ZON installs 100k HD boxes in 2Q09

Friday, July 31st, 2009

More and more customers are taking new HD ZON boxes with 285.4 thousand installed by the end of 1H09, an increase of 101.5 thousand in 2Q09 alone

LISBON — ZON Multimedia Serviços de Telecomunicações e Multimédia, SGPS, S.A. (Lisbon:ZON) has released its results for the second quarter of 2009.

The fastest growing Triple Play operator in Europe

ZON continues to deliver strong growth in the number of customers that subscribe to 3P services. By the end of 2Q09, 391 thousand ZON customers had Pay TV, Broadband and Voice services installed, compared with just 153.3 thousand at the end of 2Q08.

Triple Play subscribers now represent 33% of ZON’s cable customer base, and around 23% subscribe to Pay TV plus Broadband or Pay TV plus voice services.

The growth in 3P customers is a direct result of ZON’s strategic focus on up-selling additional services to its cable customers, primarily through bundling of Pay TV, Broadband and Voice offers, providing the best available value proposition for home entertainment and communication – 110 channels, offering the best interactive HD TV offer with 9 HD channels, electronic programming guide, personal video recording, pause-live and catch-up TV and the most extensive video club available, together with the fastest broadband speeds in the market and unlimited fixed domestic calls and international to 20 countries, at around € 49.9 per month (VAT included).

Consumer enthusiasm with ZON’s Triple Play bundles is reflected in the increasing proportion of new customers that are subscribing directly to Triple Play solutions over the past quarters, which increased to 61% in 2Q09, compared with just 35% in 2Q08.

Continued leadership and reversing trend in Pay TV, growing in cable and reducing pace of decline in satellite

ZON is the leading Pay TV operator in Portugal, with a 70% share of the market, according to the latest data published by the regulator, ANACOM. ZON’s Pay TV subscriber base has remained stable over the past quarters, at around 1.6 million, albeit reflecting a combination of growth in higher revenue generating, multiple service cable customers and a decline in the number of single play satellite customers, outside the footprint of ZON’s cable network. In 2Q09, total pay TV subscribers were 1.591 million, of which 1.179 subscribed to cable services. This reflects a relatively immaterial loss of 3.9 thousand Pay TV customers, which is a marked improvement over the trends of the three most recent quarters, when quarterly average losses of 16-17 thousand Pay TV subscribers took place after the entry of a new competitor in the market.

These results demonstrate the competitiveness of ZON’s Pay TV offer and may show a reversal of the trends ZON has experienced in the previous three quarters. The cable customer base increased by 3.1 thousand customers, reinforcing ZON’s position as the preferred Triple Play operator in higher revenue generating and more profitable areas of the country. Despite the reduction in the number of satellite customers, the pace of decline has slowed significantly, reducing from a loss of 18.4 thousand in 1Q09 to a loss of 7 thousand in 2Q09 and notwithstanding very aggressive promotional activity from competing offers in the satellite areas.

Innovation in content and functionalities are stimulating customers to upgrade their Pay TV offers to more value enhanced packages. The number of subscribers that take ZON’s top-of-the-range Pay TV offer, “Funtastic” increased 37.9% to 574.9 thousand in 1H09, which represents 36.1% of ZON’s total customer base, compared with 26.8% in 2Q08. In addition, take-up of the new HD ZON Boxes rose to 285.4 thousand, 61% of which include PVR functionalities. Premium subscriptions recorded a significant increase due primarily to the launch of a number of new channels such as “Festa Brava” (bull fighting channel), Brava TV (classical arts and music channel) and with the inclusion of the TVCine movie channels in one of ZON’s leading triple play bundles – “ZON Filmes”.

Since the launch of a non-PVR HD ZON Box in 1Q09, more than half of the new HD ZON boxes installed do not include a PVR, translating into a lower monthly rental charge for the customer and a lower investment in terminal equipment for ZON, despite providing all the revenue generating features, such as Video-On-Demand and allowing subscribers to view channels in HD.

ZON’s video club, launched in 1Q09, is proving to be a very attractive feature. After only a few months of being available, 79% of our VoD enabled customers have already accessed the service and of these, 37% have used it, generating additional average monthly revenue of more than 3 euros. The premiere of “Twilight” was a major success with 6.1 thousand rentals.

Business Indicators (‘000):

                           1Q08     2Q08     3Q08     4Q08     1Q09     2Q09
                        -------  -------  -------  -------  -------  -------
Basic Subscribers       1,560.5  1,557.0  1,539.1  1,613.5  1,595.4  1,591.4
  of which
  Digital "Funtastic"     399.8    416.9    445.9    495.8    539.6    574.9

Net Additions
  Basic Subscribers        13.4    (3.6)   (17.9)   (14.0)   (18.2)    (3.9)
  Digital "Funtastic"      17.7     17.1     29.0     50.0     43.7     35.3

More: Earnings Releases