2Q16 Highlights

Table 1.
2Q16 Highlights	2Q15	2Q16	2Q16 / 2Q15	1H15	1H16	1H16 / 1H15
Financial Highlights
Operating Revenues	355.9	372.8	4.8%	699.9	743.1	6.2%
Telco Revenues	338.3	357.9	5.8%	666.0	710.4	$6.7\%$
EBITDA	138.5	148.7	7.3%	266.4	286.5	7.6%
EBITDA Margin	38.9%	39.9%	1.0 _pp	38.1%	38.6%	0.5 _pp
Net Income Before Associates & Non-Controlling Interests	23.4	29.7	27.1%	39.3	60.6	54.2%
Net Income	24.1	26.5	10.0%	47.3	50.9	7.6%
Operational Highlights
Total RGUs	8,029.3	8,746.4	8.9%	8,029.3	8,746.4	8.9%
Mobile	3,861.2	4,270.3	10.6%	3,861.2	4,270.3	10.6%
Pay TV	1,502.5	1,574.4	4.8%	1,502.5	1,574.4	4.8%
IRIS & UMA Subscribers	784.2	927.3	18.3%	784.2	927.3	18.3%
Convergent RGUs	2,443.2	3,156.8	29.2%	2,443.2	3,156.8	29.2%
Convergent Customers	509.8	644.0	26.3%	509.8	644.0	26.3%
Convergent Customers as % of Fixed Access Customers	37.5%	44.4%	6.9 _pp	37.5%	44.4%	6.9 _pp
Residential ARPU / Unique Subscriber With Fixed Access (Euros)	42.0	43.0	2.3%	41.7	43.4	3.9%

Highlights 2Q16

Strong yoy growth in core telco operating revenues and EBITDA. Slowdown in yoy Cinema and Audiovisuals growth, as expected after extraordinarily high growth in 2015.

Consolidated Revenues increased in 2Q16 by 4.8% to 372.8 million euros, with core telco revenue growth being dampened by negative yoy growth in audiovisuals and cinema business as expected in comparison with the extraordinarily strong performance recorded throughout 2015;
Core telco revenues grew by 5.8% yoy to 357.9 million euros, and were 1.5% higher than 1Q16;
EBITDA posted yoy growth of 7.3% to 148.7 million euros, recording an increase in EBITDA margin to 39.9%, compared with 38.9% in 2Q15. Core telco margin grew by 3 basis points yoy to 38.4%, and by 2.8 pp in comparison with 1Q16;
Net income before associates and non-controlling interests grew by 27.1% yoy in 2Q16 to 29.7 million euros;
Total Group CAPEX amounted to 101 million euros in 2Q16, in line with 2Q15. Telco CAPEX remained flat yoy at 92.7 million euros.

Continued strong growth in RGUs across all core telco operations

Launch of new UMA TV interface in June reinforces NOS' position at the forefront of telecom innovation;
Pay TV subscribers grew by 4.8% yoy to 1.574 million customers, with 12.9 thousand net adds in 2Q16;
Convergent customers as a percentage of the fixed customer base grew to 44.4%, up from 37.5% in 2Q15;
In 2Q16, NOS extended its fixed footprint to an additional 68.2 thousand homes bringing total coverage to 3.7 million households; Average fixed network penetration stands at 33.5%, with penetration in new network build already at 19%;
Residential ARPU grew by 2.3% yoy to 43 euros;
B2B customers continued to post relevant growth with the number of RGUs increasing by 13.1% to 1.346 million.

1. 2Q16 Consolidated Results

1.1 Growing market share across all services supported by strong RGU growth in a mature market

The solid quarterly growth in NOS' subscriber base is driving consistent market share gains across all core telecom services, according to the latest data provided by the regulator and operators for 1Q16, the most significant of which in mobile which grew by an additional 2.2 pp since 1Q15 to 25.3%. In Pay TV, NOS has also reversed the negative trend of previous years posting a 0.2 pp increase yoy in market share to 44% by the end of 1Q16.

Total RGUs grew by 8.9% yoy to 8.746 million in 2Q16, with net adds of 717 thousand over the past 4 quarters. In 2Q16, RGU net adds were 151.4 thousand, up 16.3% from 1Q16.

NOS' position as the largest pay TV operator in Portugal continues to grow with net additions over the past year of 72 thousand, an increase of 4.8% yoy. Growth in Pay TV is an important driver of fixed broadband and voice services and of convergent bundles as these are sold together with Pay TV services.

In addition, lower churn in residential fixed Pay TV services has been supportive of net growth over the past year, having reduced by a further 6%, due to pro-active retention programmes and customer service quality. NOS ranks best in class in terms of service quality and customer choice having received a number of independent awards to that effect namely "Leading operator providing Pay TV, BB, voice and mobile" in November 2015, and "most trusted brand" in the Portuguese telecom sector by consumers in 1Q16. In June 2016, at the 2016 Contact Center World Awards for Europe, Africa and the Middle East, NOS received 3 gold medals for "Best Customer Service", "Best Service to Sales", and "Best Social Network Support" becoming the first company to receive the "Best Customer Service" award four times.

In June NOS launched "UMA", a new generation of TV with a whole new customer interface and cutting edge features such as Ultra HD 4K viewing, content personalization with each user's preferences mapped in individual profile settings, voice remote control, multi device/screen viewing and launch of a new NOS TV online app, allowing a seamless viewing experience over any device. Tariffs that include the new UMA interface are positioned as higher value bundles with triple play priced at 49.99 euros (UMA TV, 200 Mbps and unlimited fixed voice) and convergent UMA bundles including one mobile SIM with 3GB of data priced at 59.99 euros. Additional SIM cards can be added to the bundle for 10.9 euros and mobile data traffic can be shared between all SIM cards in the bundle.

The number of convergent customers grew by 26.3% to 644 thousand in 2Q16, representing 40.9% of the total pay TV base and 44.4% of fixed access households, up from 33.9% and 37.5% respectively at the end of 2Q15. Although convergence continues to be an important growth driver for NOS, the pace of additional take-up is inevitably slowing down yoy given the already high levels of penetration. NOS's market share of bundle accounts, both in terms of subscribers and revenues, has also posted material growth yoy. According to data published by the regulator for 1Q16, NOS' market share of subscribers with bundled services grew by 1.6 pp yoy to 39.5% and of revenues by 2.3pp to 40%.

Total mobile subscribers increased by 10.6% yoy to 4.27 million, with net adds in 2Q16 of 97.3 thousand, a marked recovery from seasonally lower net adds in 1Q16. The number of SIM cards in convergent bundles by the end of 2Q16 reached 1.26 million, up from 0.94 million in 2Q15, representing an average of 2 cards per account and driving an increase in the proportion of contract mobile users to 52%, compared 47.7% in 2Q15. Mobile data take-up was also stronger in 2Q16 stimulated by more generous data allowances within convergent and stand alone tariffs and due to seasonally lower mobile data disconnections. The launch of more attractive mobile data tariffs has been a catalyst for smartphone penetration and data usage. As a percentage of the total handset base, smartphones now

represent 65% and of these, 38% are 4G enabled and in terms of data usage, the monthly average on smartphones has grown by 181% to 1,021 MB and by 145% to 1,295 MB for 4G enabled devices.

Fixed Broadband and Voice services track the performance of the pay TV base and growth in the B2B segment. Since 2Q15, NOS gained 92.8 thousand net adds in fixed voice and 139.5 thousand net adds in fixed broadband, of which 17.1 thousand and 24 thousand respectively in 2Q16.

In B2B, NOS continues to capture major accounts in the large corporate sector, in all areas of the private and public sector, ranging from financial, to health, public sector, retail and transport, thus driving yoy revenue growth of 6%. In small and mid sized businesses, NOS has been gaining significant market share and revenues from this sub-segment of the B2B market are already recording positive yoy growth, of 1.7%, in 2Q16 compared with negative 9.8% in 2Q15. Total B2B RGUs increased by 13.1% yoy to 1.346 million.

Average revenues per fixed access residential household continue to grow as a result of the growing penetration of convergent bundles and upselling of additional services, with ARPU in 2Q16 reaching 43 euros, up by 2.3% over 2Q15. In the B2B market, Average Revenue per RGU declined by 10.2% to 16.4 euros, due to continued backbook deflation and lower marginal revenues per new RGU.

Operating Indicators ('000)	2Q15	1Q16	2Q16	2Q16 / 2Q15	2Q16 / 1Q16	1H15	1H16	1H16 / 1H15
Telco ⁽¹⁾
Aggregate Indicators
Homes Passed	3,468.0	3,632.8	3,701.0	6.7%	1.9%	3,468.0	3,701.0	6.7%
Total RGUs	8,029.3	8,595.0	8,746.4	8.9%	1.8%	8,029.3	8,746.4	8.9%
Mobile	3,861.2	4,173.0	4,270.3	10.6%	2.3%	3,861.2	4,270.3	10.6%
Pre-Paid	2,030.1	2,055.2	2,048.3	0.9%	$(0.3\%)$	2,030.1	2,048.3	0.9%
Post-Paid	1,831.1	2,117.9	2,222.0	21.3%	4.9%	1,831.1	2,222.0	21.3%
ARPU / Mobile Subscriber (Euros)	9.2	8.5	8.5	(7.8%)	0.4%	9.0	8.5	$(5.9\%)$
Pay TV	1,502.5	1,561.5	1,574.4	4.8%	0.8%	1,502.5	1,574.4	4.8%
Fixed Access ⁽²⁾	1,183.6	1,229.7	1,240.0	4.8%	0.8%	1,183.6	1,240.0	4.8%
DTH	318.9	331.8	334.4	4.8%	0.8%	318.9	334.4	4.8%
Fixed Voice	1,572.1	1,647.9	1,665.0	5.9%	1.0%	1,572.1	1,665.0	5.9%
Broadband	1,066.9	1,182.4	1,206.4	13.1%	2.0%	1,066.9	1,206.4	13.1%
Others and Data	26.6	30.2	30.3	13.9%	0.4%	26.6	30.3	13.9%
3,4&5P Subscribers (Fixed Access)	904.9	995.4	1,018.2	12.5%	2.3%	904.9	1,018.2	12.5%
% 3,4&5P (Fixed Access)	76.5%	80.9%	82.1%	5.7 _pp	1.2 _PP	76.5%	82.1%	5.7pp
Convergent RGUs	2,443.2	2,988.6	3,156.8	29.2%	5.6%	2,443.2	3,156.8	29.2%
Convergent Customers	509.8	614.8	644.0	26.3%	4.8%	509.8	644.0	26.3%
Fixed Convergent Customers as % of Fixed Access Customers	37.5%	42.8%	44.4%	6.9 _pp	1.6 _pp	37.5%	44.4%	6.9 _pp
% Convergent Customers	33.9%	39.4%	40.9%	7.0pp	1.5 _pp	33.9%	40.9%	7.0 _pp
IRIS & UMA Subscribers	784.2	899.6	927.3	18.3%	3.1%	784.2	927.3	18.3%
IRIS & UMA as % of 3,4&5P Subscribers (Fixed Access)	86.7%	90.4%	91.1%	4.4pp	0.7 _PP	86.7%	91.1%	4.4pp
Net Adds
Homes Passed	75.0	32.7	68.2	$(9.0\%)$	108.7%	142.3	100.9	(29.1%)
Total RGUs	239.0	130.2	151.4	(36.7%)	16.3%	403.8	281.5	(30.3%)
Mobile	130.8	50.0	97.3	(25.7%)	94.6%	218.0	147.2	(32.5%)
Pre-Paid	5.1	(20.4)	(6.8)	(234.3%)	n.a.	(31.1)	(27.2)	(12.6%)
Post-Paid	125.7	70.3	104.1	(17.2%)	47.9%	249.1	174.4	$(30.0\%)$
Pay TV	13.9	17.7	12.9	$(7.0\%)$	(27.1%)	25.7	30.6	18.9%
Fixed Access ⁽²⁾	9.6	14.3	10.3	8.1%	(27.8%)	17.0	24.7	45.4%
DTH	4.3	3.4	2.5	(40.6%)	(24.3%)	8.7	5.9	(32.4%)
Fixed Voice	50.1	24.5	17.1	$(65.8\%)$	(30.2%)	79.4	41.7	(47.6%)
Broadband	39.5	37.7	24.0	(39.4%)	$(36.4\%)$	73.9	61.7	(16.6%)
Others and Data	4.6	0.3	0.1	(97.2%)	(54.6%)	6.7	0.4	$(93.8\%)$
3,4&5P Subscribers (Fixed Access)	26.8	27.0	22.9	$(14.6\%)$	(15.3%)	53.2	49.8	(6.4%)
Convergent RGUs	248.7	134.8	168.2	(32.4%)	24.8%	589.9	303.1	$(48.6\%)$
Convergent Customers	53.0	23.9	29.2	$(44.9\%)$	22.1%	125.2	53.1	(57.6%)
IRIS & UMA Subscribers	41.6	34.5	27.7	(33.2%)	(19.7%)	90.6	62.3	(31.3%)

Table 3.
Operating Indicators ('000)	2Q15	1Q16	2Q16	2Q16 / 2Q15	2Q16 / 1Q16	1H15	1H16	1H16 / 1H15
Telco ⁽¹⁾
Indicators per Segment
Consumer
Total RGUs	6,839.7	7,285.7	7,400.6	8.2%	1.6%	6,839.7	7,400.6	8.2%
Pay TV	1,404.5	1,448.8	1,458.1	3.8%	0.6%	1,404.5	1,458.1	3.8%
Fixed Access	1,110.6	1,144.9	1,152.1	3.7%	0.6%	1,110.6	1,152.1	3.7%
DTH	293.9	303.9	306.0	4.1%	0.7%	293.9	306.0	4.1%
IRIS & UMA Subscribers	753.7	859.0	883.3	17.2%	2.8%	753.7	883.3	17.2%
Broadband	969.9	1,072.4	1,093.2	12.7%	1.9%	969.9	1,093.2	12.7%
Fixed Voice	1,306.7	1,354.5	1,365.6	4.5%	0.8%	1,306.7	1,365.6	4.5%
Mobile	3,158.6	3,409.9	3,483.7	10.3%	2.2%	3,158.6	3,483.7	10.3%
% 1P (Fixed Access)	9.2%	7.0%	6.4%	(2.7 _PP )	(0.5 _pp )	9.2%	6.4%	(2.7 _PP )
% 2P (Fixed Access)	15.1%	12.8%	12.0%	(3.1 _PP )	(0.7 _PP )	15.1%	12.0%	(3.1 _PP )
% 3,4&5P (Fixed Access)	75.7%	80.3%	81.5%	5.8pp	1.2 _PP	75.7%	81.5%	5.8pp
ARPU / Unique Subscriber With Fixed Access (Euros)	42.0	43.7	43.0	2.3%	$(1.6\%)$	41.7	43.4	3.9%
Net Adds
Total RGUs	167.9	105.2	114.9	(31.5%)	9.3%	293.7	220.1	(25.1%)
Pay TV	8.5	13.3	9.2	9.1%	(30.3%)	13.2	22.5	70.9%
Fixed Access	5.5	10.6	7.2	n.a.	(32.1%)	8.0	17.7	120.5%
DTH	3.0	2.7	2.1	$(31.0\%)$	(23.6%)	5.1	4.8	(6.9%
IRIS & UMA Subscribers	38.7	30.6	24.3	(37.4%)	(20.6%)	85.3	54.8	(35.8%)
Broadband	34.4	33.3	20.8	(39.5%)	(37.4%)	66.1	54.1	(18.2%)
Fixed Voice	16.3	17.7	11.1	(32.3%)	(37.4%)	30.1	28.7	$(4.6\%)$
Mobile	108.6	41.0	73.8	(32.1%)	80.0%	184.3	114.7	(37.7%)
Business
Total RGUs	1,189.5	1,309.3	1,345.8	13.1%	2.8%	1,189.5	1,345.8	13.1%
Pay TV	98.0	112.7	116.3	18.7%	3.2%	98.0	116.3	18.7%
IRIS & UMA Subscribers	30.5	40.6	44.1	44.6%	8.6%	30.5	44.1	44.6%
Broadband	123.6	140.2	143.5	16.1%	2.3%	123.6	143.5	16.1%
Fixed Voice	265.3	293.3	299.4	12.8%	2.1%	265.3	299.4	12.8%
Mobile	702.6	763.1	786.6	12.0%	3.1%	702.6	786.6	12.0%
ARPU per RGU (Euros)	18.3	16.7	16.4	(10.2%)	(1.5%)	18.5	16.6	(10.0%)
Net Adds
Total RGUs	71.0	25.0	36.5	(48.6%)	45.8%	109.8	61.5	$(44.0\%)$
Pay TV	5.4	4.4	3.6	(32.2%)	(17.6%)	12.5	8.1	(35.7%)
IRIS & UMA Subscribers	2.8	4.0	3.5	23.5%	(12.6%)	5.3	7.5	42.2%
Broadband	9.7	4.7	3.3	$(66.4\%)$	(30.6%)	14.4	8.0	(44.7%)
Fixed Voice	33.7	6.9	6.1	$(82.0\%)$	(11.8%)	49.2	12.9	(73.7%)
Mobile	22.2	90	23.5	5.8%	161.1%	33.7	32.5	(3.6%)

Table 4.
Operating Indicators ('000)	2Q15	1016	2016	2016 / 2015	2Q16 / 1Q16	1H15	1H16	1H16 / 1H15
$Cinema^{(1)}$
Revenue per Ticket (Euros)	4.7	4.8	4.7	0.8%	(1.4%)	4.6	4.7	1.9%
Tickets Sold	2,003.6	2,400.3	1,715.5	(14.4%)	(28.5%)	3,984.9	4,115.8	3.3%
Screens (units) $(4)$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{R}$ $\rightarrow$ $\mathbb{$	215	215	215	0.0%	$0.0\%$	215	215	$0.0\%$

1.2 – Cinemas and Audiovisuals

NOS' Cinema ticket sales posted a yoy decline of 14.4% to 1.7 million tickets in 2Q16, in line with the performance of the market as a whole, which declined by 14.2%¹ . We should note that the Easter holiday period took place almost fully in 1Q16, whereas in 2015 it fell both in 1Q15 and 2Q15. In 1H16, NOS' cinema ticket sales rose by 3.3% to 4.1 million tickets, whereas the market as a whole improved by 2.5%.

The most successful films shown in 2Q16 were "Captain America: Civil War", "Angry Birds – The Movie", "X-Men: Apocalypse", "Jungle Book" and "Batman v Superman: Dawn of Justice"

NOS opened the first IMAX® DMR - Digital 3D screen in Lisbon in June 2013, with a second screen opening in Oporto in April 2015. Having now completed 3 years of operation, this premium cinema experience continues to prove very successful.

Average revenue per ticket posted a yoy improvement of 0.8% to 4.7 euros in 2Q16.

NOS' gross box-office revenues decreased by 14.8% in 2Q16, which compares with 15.2% for the market as a whole, as NOS continues to maintain its leading market position, with a market share of 63.0% in terms of gross revenues in 2Q16. Total Cinema Exhibition revenues fell by 9.2% yoy in 2Q16 to 11.7 million euros. For 1H16, NOS' total Cinema Exhibition revenues increased by 2.4% to 27.3 million euros.

Revenues in the Audiovisuals division declined by 6.3% yoy to 16.9 million euros in 2Q16. This decline in revenues was driven primarily by the performance in Cinema Distribution and Homevideo, partially offset by an improvement in the VoD and rights and television management areas. Of the top 10 cinema box-office hits in 2Q16, NOS distributed 8, "Captain America: Civil War", "Jungle Book", "Batman v Superman: Dawn of Justice", "Neighbors 2: Sorority Rising", "Now You See Me 2", "The Huntsman: Winter's War", "Finding Dory" and "The Conjuring 2", therefore maintaining its leading position, albeit with a smaller market share yoy.

¹ Source: ICA – Portuguese Institute For Cinema and Audiovisuals

1.3 – ZAP

The continued success of its commercial operations has enabled ZAP to become a reference operator in Angola and Mozambique. Currently its commercial footprint is present in all the Angolan and Mozambican provinces through own stores and authorized agents, enabling the population of 50 million people in these countries to have access to ZAP's services.

Following the launch of "ZAP Fibra", a TV and internet bundle based on an FTTH solution, in the first quarter of 2015, ZAP is now engaged in growing its FTTH subscribers and increasing the footprint of its network. During this quarter, the focus remained on the expansion of its network in the city centre of Luanda, although very gradually and opportunistically.

The operational performance of ZAP remains very solid however the challenging macroeconomic backdrop driven by the worldwide decline in oil prices has been the cause of a material currency devaluation, with the kwanza down by 26.8% against the USD and the Euro (2Q16 vs 2Q15) although it was down only 3.1% and 0.8% in the last quarter, which compares with double digit quarterly declines in previous quarters. The financial implications for ZAP have been a strong yoy decline in operating margin due to the fact that a number of relevant supplier contracts are priced in USD and Euros, and there have been difficulties felt in payments to suppliers as a consequence of limitations placed on foreign currency payments by the Central Angolan Bank. The financial contribution of ZAP to NOS results declined significantly yoy as explained in the financial review ahead however some improvement was felt in 2Q16 due to the slightly more stable currency situation.

2. Consolidated Financial Statements

2.1 – Consolidated Income Statement

raule J. Profit and Loss Statement
(Millions of Euros)	2Q15	1Q16	2Q16	2Q16 / 2Q15	2Q16 / 1Q16	1H15	1H16	1H16 / 1H15

Operating Revenues	355.9	370.3	372.8	4.8%	0.7%	699.9	743.1	6.2%
Telco	338.3	352.5	357.9	5.8%	1.5%	666.0	710.4	6.7%
Consumer Revenues	213.3	223.5	220.7	3.5%	(1.2%)	423.4	444.2	4.9%
Business and Wholesale Revenues	102.4	100.3	105.7	3.2%	5.3%	194.7	206.0	5.8%
Equipment Sales	9.8	12.7	10.5	6.8%	(17.5%)	18.1	23.1	27.6%
Others and Eliminations	12.9	16.1	21.0	63.1%	30.9%	29.8	37.1	24.6%
Audiovisuals	18.0	16.1	16.9	$(6.3\%)$	4.9%	34.7	33.0	(4.8%
Cinema $(1)$	12.9	15.7	11.7	$(9.2\%)$	(25.5%)	26.7	27.3	2.4%
Others and Eliminations	(13.4)	(14.0)	(13.7)	2.1%	(2.7%)	(27.5)	(27.7)	0.8%
Operating Costs Excluding D&A	(217.4)	(232.4)	(224.2)	3.1%	$(3.6\%)$	(433.5)	(456.6)	5.3%
W&S	(20.3)	(23.8)	(21.9)	7.9%	$(8.1\%)$	(41.9)	(45.7)	9.1%
Direct Costs	(110.7)	(108.8)	(110.4)	$(0.3\%)$	1.4%	(211.9)	(219.2)	3.4%
Commercial Costs ⁽²⁾	(19.2)	(25.6)	(18.7)	(2.3%)	$(27.0\%)$	(40.4)	(44.4)	9.9%
Other Operating Costs	(67.2)	(74.1)	(73.2)	8.8%	(1.3%)	(139.3)	(147.3)	5.7%
EBITDA	138.5	137.9	148.7	7.3%	7.8%	266.4	286.5	7.6%
EBITDA Margin	38.9%	37.2%	39.9%	1.0 _pp	2.6 _pp	38.1%	38.6%	0.5 _pp
Telco	129.0	125.8	137.6	6.6%	9.4%	245.8	263.4	7.2%
EBITDA Margin	38.1%	35.7%	38.4%	0.3 _pp	2.8 _pp	36.9%	37.1%	0.2 _pp
Cinema Exhibition and Audiovisuals	9.5	12.1	11.1	17.0%	$(8.2\%)$	20.6	23.1	12.4%
EBITDA Margin	35.1%	41.5%	42.8%	7.7 _pp	1.3 _pp	37.9%	42.1%	4.2 _pp
Depreciation and Amortization	(90.7)	(95.3)	(98.5)	8.7%	3.4%	(178.4)	(193.8)	8.7%
(Other Expenses) / Income	(5.4)	(2.4)	(3.6)	(33.3%)	47.4%	(11.5)	(6.0)	(47.6%)
Operating Profit (EBIT) ⁽³⁾	42.4	40.2	46.5	9.7%	15.9%	76.6	86.7	13.2%
Share of results of associates and joint ventures	0.5	(6.4)	(3.3)	n.a.	(48.3%)	7.9	(9.7)	n.a.
(Financial Expenses) / Income	(10.8)	(5.4)	(6.9)	(36.5%)	28.1%	(22.6)	(12.2)	$(45.9\%)$
Income Before Income Taxes	32.2	28.4	36.4	13.2%	28.0%	61.8	64.8	4.8%
Income Taxes	(8.2)	(4.0)	(9.9)	21.0%	150.3%	(14.7)	(13.9)	(5.2%)
Net Income Before Associates & Non-Controlling Interests	23.4	30.8	29.7	27.1%	(3.5%)	39.3	60.6	54.2%
Income From Continued Operations	23.9	24.5	26.5	10.5%	8.2%	47.2	50.9	7.9%
o.w. Attributable to Non-Controlling Interests	0.1	(0.0)	0.0	$(79.1\%)$	n.a.	0.1	(0.0)	n.a.
Net Income	24.1	24.4	26.5	10.0%	8.5%	47.3	50.9	7.6%

2.2 - Operating Revenues

Consolidated Operating Revenues grew by 4.8% in 2Q16 to 372.8 million euros, reflecting a combination of 5.8% yoy growth in core telco revenues and negative, as expected, yoy growth in audiovisuals and cinema revenues, of -6.3% and -9.2% respectively. Growth in core telco revenues remains strong yoy albeit it is showing some deceleration given the lower level of net RGU growth and the higher basis for quarterly comparison in 2015. Excluding the impact of lower termination rates yoy, telco revenues would have grown by 7.3%. The negative yoy performance in audiovisuals and cinemas results from the extraordinarily strong sales across the movie industry worldwide in 2015 and that have now reverted to more normalized levels, although still better than in 2014.

Within core telco revenues, the Consumer segment posted yoy growth of 3.5% to 220.7 million euros representing 62% of total telco revenues. Within the consumer segment, the residential segment posted growth in revenues of 6.2%, slightly lower than in the previous quarter due to the higher base of comparison after the very strong growth recorded throughout the previous year. Personal revenues declined by 9.9% yoy, a significant improvement over 2Q15 although still impacted by some continued migration of services to residential convergent packages and the continued change in stand-alone customer mix reflecting a higher proportion of lower monthly bill pre-paid subscribers. It is worth highlighting that voice MTRs declined in mid-August 2015 from 1.27 cents to 0.83 cents per minute, with a further MTR decline in July 2016 to 0.81 cents. Another slight decline is expected for 2017. Also, in April 2016 SMS MTRs declined, from 1.27 cents to 0.83 cents per SMS. Without the impact of lower termination rates in 2Q16, Consumer revenues would have grown by 5.5% yoy. Business and Wholesale revenues grew by 3.2% yoy in 2Q16, again slightly less than in previous quarters given the high basis for comparison in 2015. Revenues from large corporate accounts grew by 6% as a result of continued activation and start of billing of new accounts captured over previous months. Mass Business revenues continued the improving trajectory of past quarters, delivering positive yoy growth of 1.7% with volume growth more than compensating for remaining backbook repricing in this segment. Wholesale revenues posted growth of 2.8% in 2Q16. The impact of lower termination rates yoy is smaller in Business and Wholesale revenues, which would have grown by 4.0% yoy, excluding this impact.

According to data reported by operators for 1Q16, importantly, the overall telecom market in Portugal has started to show a less negative trend and actually posted marginal yoy growth of 0.2% in 1Q16, compared to negative 3.7% in 1Q15 and negative 3.8% in FY15. Against this backdrop, NOS has recorded very material yoy growth in revenues, and has almost achieved its long term market share of revenues target ahead of schedule. In 1Q16, NOS' market share of telecom revenues already stood at 29.6%, compared to its 2018 target of 30%, having grown by 3.5 pp when compared with 4Q13, the first full quarter after the merger was completed.

Cinema and Audiovisuals revenues posted a decline of 9.2% yoy to 11.7 million euros and of 6.3% to 16.9 million euros respectively due primarily to the comparison with an extraordinarily strong year for the movie industry in 2015. When compared with 2014, both audiovisual and cinema revenues are higher by 18.7%, and 2.0% respectively in 2Q16 over 2Q14. Consumer sentiment in Portugal is demonstrating some underlying recovery, thus supportive of more movie going, however the movie slate this year is not as rich in blockbuster hits as it was in 2015 leading to the yoy decline.

Revenues from NOS' 30% stake in ZAP fell yoy by 6.2% to 16.9 million euros however due to a stabilization in the exchange rate environment during 2Q16, posted an increase of 2.2% when compared with 1Q16.

2.3 – EBITDA

Consolidated EBITDA grew 7.3% yoy to 148.7 million euros representing an EBITDA margin for the quarter of 39.9%, up by 1pp from 2Q15, benefitting essentially from the good revenue momentum described above. The telco business recorded a 6.6% yoy growth in EBITDA in 2Q16 to 137.6 million euros and Audiovisuals and Cinemas were also strong contributors to consolidated EBITDA growth with EBITDA up by 17% yoy in 2Q16 to 11.1 milion euros. The cinema and audiovisuals division posted an improvement in absolute EBITDA and margin of 17% yoy to 11.1 million euros due to the reduced weight of lower margin movie distribution in the sales mix and an increase in sales of the TVCine packages over past quarters.

The EBITDA of NOS' 30% stake in ZAP declined yoy by 59.1% yoy to 2.6 million euros representing an EBITDA margin of 15.7% compared with 36% in 2Q15.

2.4 – Consolidated Operating Costs Excluding D&A

Consolidated Operating Costs increased by 3.1% yoy to 224.2 million euros however posted a decline of 3.6% qoq. The higher yoy costs reflect the greater scale of the operation and still intense comercial activity.

Wages and Salaries grew by 7.9% yoy to 21.9 million euros, reflecting increased average headcount over 2Q15 to support the growth momentum of the telecom operation, a yearly increase in salaries and costs related with employee share plans.

Direct Costs overall were in line with levels recorded in 2Q15, resulting from the combination of a 3.6% decline in traffic and capacity related costs, reflecting like for like savings from lower mobile termination rates and efficiencies in leased line rentals, which were offset by a 11.0% yoy increase in programming costs due to additional channels included in the line up at the end of 2015, however this increase was almost entirely compensated by a yoy decline in cinema distribution royalties.

Commercial Costs fell by 2.3% yoy to 18.7 million euros explained by a 5.8% yoy decline in COGS to 10.7 million euros due to less intense handset centric promotional campaigns. Recurrent marketing and publicity costs grew by 3% yoy, this being the other main item in commercial costs.

Other Operating Costs increased 8.8% yoy to 73.2 million euros as a result mainly of higher costs with supplies and external services to support the strong operating activity and increased levels of provisions.

2.5 – Net Income

Net Income before Associates and Non-Controlling interests increased by 27.1% to 29.7 million euros in 2Q16 and total Net Income increased by 10.0% yoy to 26.5 million euros.

NOS' Share of Associates and Joint Ventures posted a decline to negative 3.3 million euros in 2Q16 compared with a positive contribution of 0.5 million euros in 2Q15. Although comparing negatively against 2Q15, the contribution of the 30% stake in ZAP improved qoq to negative 258 thousand euros in 2Q16 compared with negative 4.2 million euros in 1Q16, an improvement driven by a more stable exchange rate environment in Angola during the quarter. As regards Sport TV, increased content costs drove further deterioration in contribution to net results posting a decline to negative 3.2 million euros in 2Q16 compared with negative 290 thousand euros in 2Q15 and negative 2.6 million euros in 1Q16.

Depreciation and Amortization increased by 8.7% yoy to 98.5 million euros due, as in previous periods, to the higher level of investment in both network assets and customer related costs.

Other Expenses* of 3.6 million euros in 2Q16 relate to non-recurrent costs, explained almost entirely by merger related integration costs of 2.8 million euros.

Net Financial Expenses were 36.5% lower yoy at 6.9 million euros in 2Q16, reflecting the significantly improved average cost of debt after a number of lines were refinanced during 2015 and 1H16. Further details on financing are presented in the capital structure section below.

Income Tax provision amounted to 9.9 million euros in 2Q16 representing 27.3% as a percentage of Income before Income Taxes, compared with 25.5% in 2Q15. P&L effective tax rate tends to vary from quarter to quarter depending on a number of factors of which the most relevant being accounting of deferred taxes and the contribution of the Share of Associates and Joint Ventures line.

^* In accordance with IAS 1, the caption "Other expenses" reflects material and unusual expenses that should be disclosed separately from usual line items, to avoid distortion of the financial information from regular operations, namely restructuring costs resulting from the merger (including curtailment costs) as well as one-off non-cash items that result from alignment of estimates between the two companies.

3. CAPEX and Cash Flow

3.1 – CAPEX

Table 6.
CAPEX (Millions of Euros)	2Q15	1Q16	2Q16	2016 / 2015	2016 / 1016		1H16	1H16 / 1H15

Telco	92.6	84.9	92.7	0.2%	9.2%	177.4	177.6	0.1%
Baseline Telco	32.2	27.5	35.0	8.7%	27.0%	54.9	62.5	13.8%
Customer Related	50.6	43.0	46.8	$(7.6\%)$	8.8%	97.9	89.7	$(8.3\%)$
Network Expansion / Substitution and Integration Projects and Others	9.8	14.4	11.0	11.9%	(23.5%)	24.6	25.4	3.1%
Audiovisuals and Cinema Exhibition	9.8	10.2	8.2	(15.7%)	(19.3%)	19.3	18.4	$(4.3\%)$
Total Group	102.4	95.1	101.0	$(1.4\%)$	6.2%	196.7	196.1	$(0.3\%)$

In 2Q16, Telco CAPEX was 92.7 million euros, practically in line with the level recorded in 2Q15. Baseline Telco CAPEX increased by 8.7% to 35 million euros and as a percentage of telecom revenues, represented 9.8% in 2Q16. Total Telco CAPEX represented 25.9% of Telco Revenues, which compares with 27.4% in 2Q15.

Investment in Customer Related CAPEX recorded a yoy decline of 7.6% in 2Q16 due to the lower comparative volume of RGU growth versus 2Q15 as can be seen in the operating tables earlier in this report. As a percentage of telco revenues, Customer Related CAPEX represented 13.1% in 2Q16, down from 15% in 2Q15 and as a percentage of Total Group CAPEX, 46.3% in 2Q16.

Audiovisuals and Cinema Exhibition CAPEX of 8.2 million euros, down by 15.7% yoy, relates essentially to the Audiovisuals division and reflects capitalization of certain movie rights. The yoy decline in Audiovisuals related CAPEX is the direct effect of lower sales yoy in this segment.

Total Group CAPEX declined marginally by 1.4% yoy to 101 million euros in 2Q16, representing 27.1% of Consolidated Revenues, down yoy from 28.8% in 2Q15.

3.2 – Cash Flow

Table 7.
Cash Flow (Millions of Euros)	2Q15	1Q16	2Q16	2Q16 / 2Q15	2016 / 1016	1H15	1H16	1H16 / 1H15

EBITDA	138.5	137.9	148.7	7.3%	7.8%	266.4	286.5	7.6%
Total CAPEX	(102.4)	(95.1)	(101.0)	$(1.4\%)$	6.2%	(196.7)	(196.1)	$(0.3\%)$
Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital	(32.3)	(19.8)	(18.9)	$(41.4\%)$	$(4.6\%)$	(57.2)	(38.8)	(32.2%)
Operating Cash Flow	3.9	22.9	28.8	n.a.	25.5%	12.6	51.7	n.a.
Long Term Contracts	(4.3)	(3.8)	(4.4)	4.2%	15.2%	(8.4)	(8.3)	$(1.2\%)$
Cash Restructuring Payments	(4.0)	(3.4)	(2.3)	(42.5%)	(32.9%)	(10.1)	(5.7)	(43.4%
Interest Paid	(10.4)	(5.5)	(4.2)	$(59.6\%)$	(23.3%)	(15.7)	(9.7)	(38.5%)
Income Taxes Paid	(1.8)	(0.9)	(4.5)	147.0%	n.a.	(3.7)	(5.4)	45.1%
Disposals	0.4	0.4	0.4	16.2%	(0.4%	0.6	0.8	48.1%
FCM Receivables	0.0	0.0	0.0	n.a.	n.a.	0.0	0.0	n.a.
Other Cash Movements	(0.1)	0.0	0.4	n.a.	n.a.	(0.1)	0.4	n.a.
Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition	(16.4)	9.7	14.1	n.a.	45.0%	(24.9)	23.9	n.a.
Acquisition of Own Shares	(0.4)	(7.3)	(13.3)	n.a.	81.5%	(0.4)	(20.7)	n.a.
Foreign Currency Debt Exchange Effect	0.0	0.0	0.0	n.a.	n.a.	(0.0)	0.0	$(100.0\%)$
Dividends	(72.2)	0.0	(82.1)	13.7%	n.a.	(72.2)	(82.1)	13.7%
Free Cash Flow	(89.0)	2.4	(81.3)	$(8.6\%)$	n.a.	(97.5)	(78.9)	$(19.1\%)$
Debt Variation Through Financial Leasing, Accruals & Deferrals & Others	(10.5)	(1.7)	(7.2)	$(31.9\%)$	n.a.	(17.7)	(8.9)	(49.8%)
Change in Net Financial Debt	(99.5)	0.7	(88.5)	$(11.0\%)$	n.a.	(115.2)	(87.8)	(23.8%)

Operating Cash Flow increased yoy from 3.9 million euros in 2Q15 to 28.8 million euros in 2Q16, led by the strong EBITDA growth yoy and a reduction in Working Capital and Non-cash items included in EBITDA-CAPEX, which fell to 18.9 million euros in 2Q16 from 32.3 million euros in 2Q15.

Total FCF before dividends, financial investments and own shares acquisitions was 14.1 million euros, a big increase from negative 16.4 million euros in 2Q15, reflecting stronger Operating Cash Flow and the significant reduction of 59.6% in interest paid to 4.2 million euros in 2Q16. Lower interest payments are due to the much cheaper average cost of debt in 2Q16 resulting from refinancing deals closed throughout 2015 and 1H16. These will be discussed in more detail in the next section on capital structure. Almost all other cash items declined yoy with the exception of cash tax payments which grew to 4.5 million euros.

Free Cash Flow was negative by 81.3 million euros, an improvement over 2Q15 of 8.6%. In 2Q16, NOS paid FY15 dividends of 82.1 million euros, an additional 10 million euros over the previous year's payout. In addition, NOS purchased 13.3 million euros of own shares during 2Q16 to cover share plan obligations and accelerated buying on the market in 2Q16, taking advantage of recent share price weakness.

4. Consolidated Balance Sheet

Table 8.
Balance Sheet (Millions of Euros)	2015	1H ₁₆

Non-current Assets	2,510.1	2,457.4
Current Assets	466.4	525.8
Total Assets	2,976.5	2,983.2
Total Shareholders' Equity	1,063.5	1,011.3
Non-current Liabilities	1,150.7	1,346.0
Current Liabilities	762.2	625.9
Total Liabilities	1,913.0	1,971.9
Total Liabilities and Shareholders' Equity	2,976.5	2,983.2

4.1 – Capital Structure

At the end of 1H16, Net Financial Debt stood at 1,136.2 million euros.

Total financial debt was 1,137.5 million euros, which was offset with a cash and short-term investment position on the balance sheet of 1.3 million euros. At the end of 1H16, NOS also had 200 million euros of non-issued commercial paper programmes. The all-in average cost of NOS' Net Financial Debt stood at 2.30% for 2Q16, down from 3.41% in 2Q15 and from 2.38% in 1Q16. For 1H16, the all-in average cost of NOS' Net Financial Debt amounted to 2.34%.

Net Financial Gearing was 52.9% at the end of 1H16 and Net Financial Debt / EBITDA (last 4 quarters) now stands at 2.1x. The average maturity of NOS' Net Financial Debt at the end of 1H16 was 3.59 years.

Taking into account the loans issued at a fixed rate and the interest rate hedging operations in place the proportion of NOS' issued debt that is protected against variations in interest rates is approximately 51%.

In line with NOS' global financing strategy to extend average debt maturity, diversify financing sources and reduce average cost of debt, in June NOS entered into three new financing lines:

New "NOS SGPS S.A. €60,000,000 Floating Rate Notes due 30 June 2023", organized and placed by ING with a bullet maturity in June 2023 (7 year maturity), paying interest at a floating rate with a spread of 180 bps plus Euribor 6 Months and with the first coupon due in December 2016;
Two new commercial paper lines in the amount of 20 million euros each, contracted with Caixa Geral de Depósitos/Caixa Banco de Investimento and Banco Santander Totta, which mature in June 2021 (5 year maturity).

With these transactions, NOS is fully financed until the second half of 2017.

Table 7.
Net Financial Debt (Millions of Euros)	2015	1H ₁₆	1H16 / 2015

Short Term	160.0	71.9	$(55.1\%)$
Bank and Other Loans	141.7	52.8	(62.8%)
Financial Leases	18.3	19.1	4.6%
Medium and Long Term	898.3	1,065.6	18.6%
Bank and Other Loans	862.6	1,033.2	19.8%
Financial Leases	35.8	32.4	$(9.5\%)$
Total Debt	1,058.3	1,137.5	7.5%
Cash and Short Term Investments	9.9	1.3	(87.3%)
Net Financial Debt	1,048.4	1,136.2	8.4%
Net Financial Gearing ⁽¹⁾	49.6%	52.9%	3.3 _pp
Net Financial Debt / EBITDA	2.0x	2.1x	n.a.
74) Max Fissonial Academic Max Fissonial Pate 77Max Fissonial Pate + Taxal About discriptioning

5.1 – Subsequent Events

The sports content agreement reached initially in May with Vodafone Portugal was extended to Cabovisão in early July, with the parties agreeing to share, on a reciprocal basis, all sports events broadcasting rights and distribution and broadcasting rights of sports and club channels, currently owned or that come to be owned by the parties, with proportionate sharing of costs associated with this content.

Finally, on 26 July, an agreement was announced in which this sports content reciprocal sharing agreement was extended to include Altice Picture, PT – Portugal and MEO – Serviços de Comunicações e Multimédia, under the same terms for all signatory parties.

With the successful negotiation of this agreement, conditions are now in place for all operators to provide their customers full and equal access to the best sports related content available.

Appendix

Appendix I

Table 10.
Operating Indicators ('000)	1Q15	2Q15	3Q15	4Q15	1Q16	2Q16
Telco ⁽¹⁾
Aggregate Indicators
Homes Passed	3,393.0	3,468.0	3,543.5	3,600.1	3,632.8	3,701.0
Total RGUs	7,790.4	8,029.3	8,276.7	8,464.8	8,595.0	8,746.4
Mobile	3,730.4	3,861.2	4,025.1	4,123.1	4,173.0	4,270.3
Pre-Paid	2,025.0	2,030.1	2,065.7	2,075.5	2,055.2	2,048.3
Post-Paid	1,705.4	1,831.1	1,959.4	2,047.5	2,117.9	2,222.0
ARPU / Mobile Subscriber (Euros)	8.8	9.2	9.2	8.6	8.5	8.5
Pay TV	1,488.6	1,502.5	1,522.0	1,543.8	1,561.5	1,574.4
Fixed Access ⁽²⁾	1,174.0	1,183.6	1,198.1	1,215.3	1,229.7	1,240.0
DTH	314.6	318.9	323.9	328.5	331.8	334.4
Fixed Voice	1,522.0	1,572.1	1,594.7	1,623.3	1,647.9	1,665.0
Broadband	1,027.3	1,066.9	1,105.7	1,144.7	1,182.4	1,206.4
Others and Data	22.0	26.6	29.2	29.9	30.2	30.3
3,4&5P Subscribers (Fixed Access)	878.1	904.9	936.7	968.4	995.4	1,018.2
% 3,4&5P (Fixed Access)	74.8%	76.5%	78.2%	79.7%	80.9%	82.1%
Convergent RGUs	2,194.5	2,443.2	2,665.0	2,853.7	2,988.6	3,156.8
Convergent Customers	456.8	509.8	555.6	590.8	614.8	644.0
Fixed Convergent Customers as % of Fixed Access Customers	34.0%	37.5%	40.2%	41.9%	42.8%	44.4%
% Convergent Customers	30.7%	33.9%	36.5%	38.3%	39.4%	40.9%
IRIS & UMA Subscribers	742.6	784.2	825.1	865.0	899.6	927.3
IRIS & UMA as % of 3,4&5P Subscribers (Fixed Access)	84.6%	86.7%	88.1%	89.3%	90.4%	91.1%
Net Adds
Homes Passed	67.3	75.0	75.5	56.6	32.7	68.2
Total RGUs	164.8	239.0	247.3	188.2	130.2	151.4
Mobile	87.2	130.8	163.9	98.0	50.0	97.3
Pre-Paid	(36.2)	5.1	35.6	9.9	(20.4)	(6.8)
Post-Paid	123.4	125.7	128.3	88.1	70.3	104.1
Pay TV	11.9	13.9	19.5	21.8	17.7	12.9
Fixed Access	7.4	9.6	14.6	17.2	14.3	10.3
DTH	4.5	4.3	5.0	4.6	3.4	2.5
Fixed Voice	29.3	50.1	22.6	28.6	24.5	17.1
Broadband	34.4	39.5	38.8	39.0	37.7	24.0
Others and Data	2.0	4.6	2.5	0.8	0.3	0.1
3,4&5P Subscribers (Fixed Access)	26.4	26.8	31.9	31.7	27.0	22.9
Convergent RGUs	341.3	248.7	221.7	188.8	134.8	168.2
Convergent Customers	72.2	53.0	45.8	35.2	23.9	29.2
IRIS & UMA Subscribers	49.0	41.6	41.0	39.9	34.5	27.7

Table 11.
Operating Indicators ('000)	1Q15	2Q15	3Q15	4Q15	1Q16	2Q16
Telco ⁽¹⁾
Indicators per Segment
Consumer
Total RGUs	6,671.8	6,839.7	7,032.9	7,180.5	7,285.7	7,400.6
Pay TV	1,396.0	1,404.5	1,418.5	1,435.6	1,448.8	1,458.1
Fixed Access	1,105.2	1,110.6	1,121.4	1,134.3	1,144.9	1,152.1
DTH	290.9	293.9	297.2	301.2	303.9	306.0
IRIS & UMA Subscribers	715.0	753.7	791.9	828.4	859.0	883.3
Broadband	935.5	969.9	1,004.8	1,039.2	1,072.4	1,093.2
Fixed Voice	1,290.4	1,306.7	1,318.5	1,336.9	1,354.5	1,365.6
Mobile	3,050.0	3,158.6	3,291.0	3,368.9	3,409.9	3,483.7
% 1P (Fixed Access)	10.2%	9.2%	8.3%	7.6%	7.0%	6.4%
% 2P (Fixed Access)	15.8%	15.1%	14.2%	13.4%	12.8%	12.0%
% 3,4&5P (Fixed Access)	74.1%	75.7%	77.5%	79.0%	80.3%	81.5%
ARPU / Unique Subscriber With Fixed Access (Euros)	41.4	42.0	42.0	42.6	43.7	43.0
Net Adds
Total RGUs	125.9	167.9	193.2	147.6	105.2	114.9
Pay TV	4.7	8.5	14.0	17.0	13.3	9.2
Fixed Access	2.6	5.5	10.7	13.0	10.6	7.2
DTH	2.1	3.0	3.3	4.0	2.7	2.1
IRIS & UMA Subscribers	46.6	38.7	38.1	36.6	30.6	24.3
Broadband	31.7	34.4	34.9	34.4	33.3	20.8
Fixed Voice	13.8	16.3	11.8	18.4	17.7	11.1
Mobile	75.7	108.6	132.4	77.9	41.0	73.8
Business
Total RGUs	1,118.5	1,189.5	1,243.8	1,284.3	1,309.3	1,345.8
Pay TV	92.6	98.0	103.4	108.2	112.7	116.3
IRIS & UMA Subscribers	27.7	30.5	33.3	36.6	40.6	44.1
Broadband	113.9	123.6	130.1	135.5	140.2	143.5
Fixed Voice	231.6	265.3	276.2	286.4	293.3	299.4
Mobile	680.4	702.6	734.1	754.1	763.1	786.6
ARPU per RGU (Euros)	18.7	18.3	17.4	16.8	16.7	16.4
Net Adds
Total RGUs	38.9	71.0	54.3	40.5	25.0	36.5
Pay TV	7.2	5.4	5.5	4.8	4.4	3.6
IRIS & UMA Subscribers	2.4	2.8	2.8	3.3	4.0	3.5
Broadband	4.7	9.7	6.5	5.4	4.7	3.3
Fixed Voice	15.5	33.7	10.9	10.2	6.9	6.1
Mobile	11.5	22.2	31.4	20.1	9.0	23.5
Cinema ⁽¹⁾
Revenue per Ticket (Euros)	4.6	4.7	4.6	4.8	4.8	4.7
Tickets Sold	1,981.4	2,003.6	2,676.8	2,190.6	2,400.3	1,715.5
Screens (units)	214	215	215	215	215	215

Appendix II

Table 12.
Profit and Loss Statement (Millions of Euros)	1Q15	2Q15	3Q15	4Q15	2015	1Q16	2Q16

Operating Revenues	344.1	355.9	367.9	376.4	1,444.3	370.3	372.8
Telco	327.7	338.3	347.6	358.7	1,372.3	352.5	357.9
Consumer Revenues	210.2	213.3	215.0	217.1	855.5	223.5	220.7
Business and Wholesale Revenues	92.3	102.4	104.0	104.0	402.7	100.3	105.7
Equipment Sales	8.3	9.8	13.2	16.7	48.0	12.7	10.5
Others and Eliminations	16.9	12.9	15.4	20.9	66.0	16.1	21.0
Audiovisuals	16.7	18.0	18.2	18.4	71.3	16.1	16.9
Cinema ⁽¹⁾	13.8	12.9	16.9	14.9	58.4	15.7	11.7
Others and Eliminations	(14.0)	(13.4)	(14.7)	(15.6)	(57.7)	(14.0)	(13.7)
Operating Costs Excluding D&A	(216.2)	(217.4)	(224.5)	(253.2)	(911.2)	(232.4)	(224.2)
W&S	(21.6)	(20.3)	(23.4)	(23.8)	(89.1)	(23.8)	(21.9)
Direct Costs	(101.2)	(110.7)	(107.8)	(117.0)	(436.7)	(108.8)	(110.4)
Commercial Costs ⁽²⁾	(21.2)	(19.2)	(28.2)	(29.5)	(98.1)	(25.6)	(18.7)
Other Operating Costs	(72.1)	(67.2)	(65.1)	(82.9)	(287.2)	(74.1)	(73.2)
EBITDA	127.9	138.5	143.5	123.3	533.1	137.9	148.7
EBITDA Margin	37.2%	38.9%	39.0%	32.7%	36.9%	37.2%	39.9%
Telco	116.9	129.0	129.8	109.9	485.5	125.8	137.6
EBITDA Margin	35.7%	38.1%	37.3%	30.6%	35.4%	35.7%	38.4%
Cinema Exhibition and Audiovisuals	11.0	9.5	13.7	13.4	47.6	12.1	11.1
EBITDA Margin	40.4%	35.1%	45.2%	44.4%	41.5%	41.5%	42.8%
Depreciation and Amortization	(87.7)	(90.7)	(89.3)	(98.8)	(366.4)	(95.3)	(98.5)
(Other Expenses) / Income	(6.1)	(5.4)	(4.9)	(3.6)	(19.9)	(2.4)	(3.6)
Operating Profit (EBIT) ⁽³⁾	34.1	42.4	49.3	20.9	146.8	40.2	46.5
Share of results of associates and joint ventures	7.3	0.5	(2.9)	(1.4)	3.6	(6.4)	(3.3)
(Financial Expenses) / Income	(11.8)	(10.8)	(7.1)	(6.0)	(35.7)	(5.4)	(6.9)
Income Before Income Taxes	29.7	32.2	39.3	13.5	114.6	28.4	36.4
Income Taxes	(6.5)	(8.2)	(13.1)	(4.4)	(32.1)	(4.0)	(9.9)
Net Income Before Associates & Non-Controlling Interests	15.9	23.4	29.2	10.5	78.9	30.8	29.7
Income From Continued Operations	23.2	23.9	26.2	9.1	82.5	24.5	26.5
o.w. Attributable to Non-Controlling Interests	0.0	0.1	(0.0)	0.1	0.2	(0.0)	0.0
Net Income	23.2	24.1	26.2	9.2	82.7	24.4	26.5
Telco CAPEX	84.8	92.6	88.4	102.8	368.6	84.9	92.7
Total Group CAPEX	94.3	102.4	97.9	113.7	408.3	95.1	101.0
Working Capital and Non-Cash Items included in EBITDA - CAPEX	(24.9)	(32.3)	14.3	16.1	(26.8)	(19.8)	(18.9)
Operating Cash Flow	8.7	3.9	59.8	25.7	98.0	22.9	28.8
Long Term Contracts	(4.1)	(4.3)	(5.5)	(4.0)	(17.9)	(3.8)	(4.4)
Cash Restructuring Payments	(6.1)	(4.0)	(4.4)	(6.1)	(20.7)	(3.4)	(2.3)
Interest Paid	(5.3)	(10.4)	(5.8)	(2.7)	(24.2)	(5.5)	(4.2)
Income Taxes Paid	(1.9)	(1.8)	0.9	(1.4)	(4.2)	(0.9)	(4.5)
Disposals	0.2	0.4	1.7	1.7	3.9	0.4	0.4
FCM Receivables	0.0	0.0	6.5	0.0	6.5	0.0	0.0
Other Cash Movements	0.0	(0.1)	(0.2)	0.2	(0.1)	0.0	0.4
Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition	(8.6)	(16.4)	53.1	13.3	41.5	9.7	14.1
Net Financial Debt	1,001.2	1,100.7	1,050.6	1,048.4	1,048.4	1,047.7	1,136.2

Disclaimer

This presentation contains forward looking information, including statements which constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and assumptions of our management and on information available to management only as of the date such statements were made. Forward-looking statements include: (a) information concerning strategy, possible or assumed future results of our operations, earnings, industry conditions, demand and pricing for our products and other aspects of our business, possible or future payment of dividends and share buyback program; and (b) statements that are preceded by, followed by or include the words "believes", "expects", "anticipates", "intends", "is confident", "plans", "estimates", "may", "might", "could", "would", and the negatives of such terms or similar expressions. These statements are not guarantees of future performance and are subject to factors, risks and uncertainties that could cause the assumptions and beliefs upon which the forwarding looking statements were based to substantially differ from the expectation predicted herein. These factors, risks and uncertainties include, but are not limited to, changes in demand for the company's services, technological changes, the effects of competition, telecommunications sector conditions, changes in regulation and economic conditions. Further, certain forward looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from the plans, strategy, objectives, expectations, estimates and intentions expressed or implied in such forward-looking statements. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to provide reasons why actual results may differ. You are cautioned not to place undue reliance on any forward-looking statements. NOS is exempt from filing periodic reports with the United States Securities and Exchange Commission ("SEC") pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, as amended. Under this exemption, NOS is required to post on its website English language translations of certain information that it has made or is required to make public in Portugal, has filed or is required to file with the regulated market Eurolist by Euronext Lisbon or has distributed or is required to distribute to its security holders. This document is not an offer to sell or a solicitation of an offer to buy any securities.

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