1Q16 Highlights

Table 1.
1Q16 Highlights	1Q15	1Q16	1Q16 / 1Q15
Financial Highlights
Operating Revenues	344.1	370.3	7.6%
Telco Revenues	327.7	352.5	7.6%
EBITDA	127.9	137.9	7.8%
EBITDA Margin	37.2%	37.2%	0.1 _pp
Net Income Before Associates & Non-Controlling Interests	15.9	30.8	94.1%
Net Income	23.2	24.4	5.0%
Operational Highlights
Total RGUs	7,790.4	8,595.0	10.3%
Mobile	3,730.4	4,173.0	11.9%
Pay TV	1,488.6	1,561.5	4.9%
IRIS Subscribers	742.6	899.6	21.1%
Convergent RGUs	2,194.5	2,988.6	36.2%
Convergent Customers	456.8	614.8	34.6%
Convergent Customers as % of Fixed Access Customers	34.0%	42.8%	8.8pp
Residential ARPU / Unique Subscriber With Fixed Access (Euros)	41.4	43.7	5.4%

Highlights 1Q16

Continued quarterly acceleration in yoy financial trends led by strong operational momentum in the core telco business

Operating revenues increased by 7.6% yoy to 370.3 million euros, up from 6.4% in 4Q15 and 5.8% in 3Q15;
Core telco revenues grew by 7.6% yoy to 352.5 million euros, up from 6.8% in 4Q15 and 4.6% in 3Q15;
Cinema exhibition revenues remained very strong up by 13.8% yoy to 15.7 million euros however revenues from the audiovisuals division posted a yoy decline of 3.2% due mainly to a lower yoy share of blockbuster movie distribution in the quarter;
EBITDA grew by 7.8% yoy to 137.9 million euros with core telco EBITDA increasing by 7.6% yoy to 125.8 million euros;
Net income before associates and non-controlling interests grew by 94.1% yoy in 1Q16 to 30.8 million euros;
Total Group CAPEX amounted to 95.1 million euros, just 0.8% higher yoy.

Convergence, success in B2B market and network expansion remain key drivers of growth

Convergent customers grew by 34.6% yoy to 615 thousand, already representing 42.8% of the fixed customer base and supporting an increase in residential ARPU of 5.4% yoy to 43.7 euros;
Pay TV subscribers grew by 4.9% yoy to 1.561 million subscribers with net adds of 17.7 thousand in 1Q16;
The primary driver of net adds continues to be the expansion of the network which covered a further 32.7 thousand households in 1Q16 to reach a total coverage of 3.633 million households; Average customer penetration in new geographies now stands at around 18%;
Continued positive contribution from B2B led by growth in corporate customer market share and growth in Mass Business RGUs.

1. 1Q16 Consolidated Results

1.1 Increasing leadership in Pay TV

NOS is the largest Pay TV provider in Portugal with 1.561 million subscribers and a market share of over 44% at the end of 2015. NOS continues to deliver strong growth in subscribers every quarter with net adds of 17.7 thousand in 1Q16, of which 14.3 thousand over fixed access and the remainder over DTH. In addition to the success of convergent take-up and network expansion, net adds have also benefitted from very good progression in churn levels which are around 20% lower yoy due to a clear focus on proactive retention and maximizing customer satisfaction levels. In addition to the numerous product innovation and customer service awards received over the past year, such as the "Leading operator providing Pay TV, BB, voice and mobile" in November 2015, in 1Q16 NOS was recognized as the "most trusted brand" in the Portuguese telecom sector by consumers.

1.2 Continued strength of convergent growth driving RGU take-up in the consumer segment, albeit at a slower pace due to already high levels of penetration

Total RGUs grew by 10.3% yoy to 8.595 million services in 1Q16, reflecting the continued success of NOS' convergent strategy. Compared with 1Q15, the number of customers subscribing to convergent services has increased by 34.6% to 615 thousand, representing 39.4% of the total Pay TV base. Of the fixed access Pay TV subs, 42.8% already are convergent customers, up from 34% at the end of 1Q15.

Going digital is a key element of product strategy and NOS has been consistently at the forefront of the market when it comes to delivering a richer and more relevant value proposition to customers. In 1Q16 NOS introduced a material increase in the mobile data offer within its flagship convergent package with the launch of "Quatro 3GB" providing 163 TV channels over the IRIS platform, 200 Mbps fixed broadband, unlimited fixed voice, free mobile calls and SMSs and 3GB of mobile data per SIM card, for up to 4 SIM cards and that can be distributed at will between each user. Although still at an early stage of launch, take-up is very encouraging and helping to drive continued growth in smartphone penetration and usage which stand respectively at 63% and 905MB per month. On the content front, guaranteeing access to the best available content for customers is a priority and NOS continuously reviews its channel line-up to ensure a top quality viewing experience. Of the new channels included in the programming grid over the past months, it is worth highlighting the resonating success of CMTV, included in January, which has since jumped from the #9 to the #6 position in terms of pay TV ranking with a share of 2.5%.

Led by strong growth of the Pay TV base, increasing convergent penetration and the increase in the number of B2B accounts and services sold, fixed broadband and voice services also posted strong performance in 1Q16 with net adds of 37.7 thousand and 24.5 thousand respectively.

In mobile, net adds in 1Q16 were 50.0 thousand, composed of 70.3 thousand net adds in post-paid mobile services and a net decline in pre-paid users of 20.4 thousand. The pace of growth in convergent mobile services is naturally starting to slow down due to the already high levels of convergent penetration at 42.8% of fixed Pay TV customers. Pre-paid mobile subscribers fell primarily due to seasonal pre-paid disconnections that tend to occur following the strong build up to Christmas.

1.3 – Positive contribution of large corporate accounts and solid RGU growth in Mass Business

New accounts won in the large corporate segment over past quarters continue to translate into material yoy revenue growth. Key business accounts were won across all sectors, ranging from financial, to health, public sector, retail and transport, amongst others, and further reinforcing NOS' position as a leading and reliable provider of integrated telecom and IT services for the large corporate world driving customer revenue growth from this segment of 11.4% in 1Q16. On the mass business front, NOS is keeping up a strong pace of RGU growth and yoy revenue trends have starting to approach a more encouraging trend and getting close to positive territory in 1Q16 at negative 1.0% compared with negative 9.8% in 1Q15, due to the fact that volume growth in services and accounts is getting close to compensating for the like-for-like decline in revenues per account, consequence of the still challenging pricing environment in this segment.

1.4 - Residential Fixed ARPU growth of 5.4% yoy led by continued RGU growth per household

Average revenues per household continue to grow as a result of the continued growth in convergent bundles and cross-selling of services to the residential customer base. Residential Fixed ARPU increased by 5.4% yoy to 43.7 euros in 1Q16. In the business segment, ARPU per RGU was still negative yoy although the pace of decline has improved significantly due to the progressively lower level of backbook repricing that has been affecting the Mass Business segment in particular.

Table 2.
Operating Indicators ('000)	1Q15	4Q15	1Q16	1Q16 / 1Q15	1Q16 / 4Q15
Telco ⁽¹⁾
Aggregate Indicators
Homes Passed	3,393.0	3,600.1	3,632.8	7.1%	0.9%
Total RGUs	7,790.4	8,464.8	8,595.0	10.3%	1.5%
Mobile	3,730.4	4,123.1	4,173.0	11.9%	1.2%
Pre-Paid	2,025.0	2,075.5	2,055.2	1.5%	$(1.0\%)$
Post-Paid	1,705.4	2,047.5	2,117.9	24.2%	3.4%
ARPU / Mobile Subscriber (Euros)	8.8	8.6	8.5	$(4.0\%)$	$(0.9\%)$
Pay TV	1,488.6	1,543.8	1,561.5	4.9%	1.1%
Fixed Access ⁽²⁾	1,174.0	1,215.3	1,229.7	4.7%	1.2%
DTH	314.6	328.5	331.8	5.5%	1.0%
Fixed Voice	1,522.0	1,623.3	1,647.9	8.3%	1.5%
Broadband	1,027.3	1,144.7	1,182.4	15.1%	3.3%
Others and Data	22.0	29.9	30.2	37.2%	0.9%
3,4&5P Subscribers (Fixed Access)	878.1	968.4	995.4	13.4%	2.8%
% 3,4&5P (Fixed Access)	74.8%	79.7%	80.9%	6.2 _pp	1.3 _pp
Convergent RGUs	2,194.5	2,853.7	2,988.6	36.2%	4.7%
Convergent Customers	456.8	590.8	614.8	34.6%	4.0%
Fixed Convergent Customers as % of Fixed Access Customers	34.0%	41.9%	42.8%	8.8 _pp	0.9 _pp
% Convergent Customers	30.7%	38.3%	39.4%	8.7pp	1.1 _pp
IRIS Subscribers	742.6	865.0	899.6	21.1%	4.0%
IRIS as % of 3,4&5P Subscribers (Fixed Access)	84.6%	89.3%	90.4%	5.8 _pp	1.0 _pp
Net Adds
Homes Passed	67.3	56.6	32.7	(51.4%)	(42.2%)
Total RGUs	164.8	188.2	130.2	$(21.0\%)$	$(30.8\%)$
Mobile	87.2	98.0	50.0	(42.7%)	$(49.0\%)$
Pre-Paid	(36.2)	9.9	(20.4)	(43.7%)	n.a.
Post-Paid	123.4	88.1	70.3	$(43.0\%)$	(20.1%)
Pay TV	11.9	21.8	17.7	49.2%	$(19.0\%)$
Fixed Access ⁽²⁾	7.4	17.2	14.3	93.5%	$(16.8\%)$
DTH	4.5	4.6	3.4	(24.5%)	(27.1%)
Fixed Voice	29.3	28.6	24.5	(16.3%)	(14.2%)
Broadband	34.4	39.0	37.7	9.6%	(3.4%)
Others and Data	2.0	0.8	0.3	(86.2%)	(62.7%)
3,4&5P Subscribers (Fixed Access)	26.4	31.7	27.0	2.0%	$(14.9\%)$
Convergent RGUs	341.3	188.8	134.8	(60.5%)	(28.6%)
Convergent Customers	72.2	35.2	23.9	$(66.9\%)$	(32.0%)
IRIS Subscribers	49.0	39.9	34.5	(29.6%)	(13.4%)

Table 3.
Operating Indicators ('000)	1Q15	4Q15	1Q16	1Q16 / 1Q15	1Q16 / 4Q15
Telco ⁽¹⁾
Indicators per Segment
Consumer
Total RGUs	6,671.8	7,180.5	7,285.7	9.2%	1.5%
Pay TV	1,396.0	1,435.6	1,448.8	3.8%	0.9%
Fixed Access	1,105.2	1,134.3	1,144.9	3.6%	0.9%
DTH	290.9	301.2	303.9	4.5%	0.9%
IRIS Subscribers	715.0	828.4	859.0	20.1%	3.7%
Broadband	935.5	1,039.2	1,072.4	14.6%	3.2%
Fixed Voice	1,290.4	1,336.9	1,354.5	5.0%	1.3%
Mobile	3,050.0	3,368.9	3,409.9	11.8%	1.2%
% 1P (Fixed Access)	10.2%	7.6%	7.0%	(3.2pp)	(0.6 _pp )
% 2P (Fixed Access)	15.8%	13.4%	12.8%	(3.0 _pp )	(0.7 _PP )
% 3,4&5P (Fixed Access)	74.1%	79.0%	80.3%	6.2 _pp	1.3 _pp
ARPU / Unique Subscriber With Fixed Access (Euros)	41.4	42.6	43.7	5.4%	2.5%
Net Adds
Total RGUs	125.9	147.6	105.2	$(16.4\%)$	(28.8%)
Pay TV	4.7	17.0	13.3	182.5%	(22.1%)
Fixed Access	2.6	13.0	10.6	n.a.	(18.7%)
DTH	2.1	4.0	2.7	27.0%	$(33.0\%)$
IRIS Subscribers	46.6	36.6	30.6	(34.5%)	(16.5%)
Broadband	31.7	34.4	33.3	4.9%	(3.2%)
Fixed Voice	13.8	18.4	17.7	28.4%	$(3.9\%)$
Mobile	75.7	77.9	41.0	$(45.9\%)$	(47.4%
Business
Total RGUs	1,118.5	1,284.3	1,309.3	17.1%	1.9%
Pay TV	92.6	108.2	112.7	21.7%	4.1%
IRIS Subscribers	27.7	36.6	40.6	46.7%	10.9%
Broadband	113.9	135.5	140.2	23.1%	3.5%
Fixed Voice	231.6	286.4	293.3	26.6%	2.4%
Mobile	680.4	754.1	763.1	12.2%	1.2%
ARPU per RGU (Euros)	18.7	16.8	16.7	(11.1%)	(0.6%)
Net Adds
Total RGUs	38.9	40.5	25.0	(35.6%)	(38.3%)
Pay TV	7.2	4.8	4.4	(38.2%)	$(8.0\%)$
IRIS Subscribers	2.4	3.3	4.0	63.9%	20.7%
Broadband	4.7	5.4	4.7	0.1%	(12.7%)
Fixed Voice	15.5	10.2	6.9	(55.6%)	(32.9%)
Mobile	11.5	20.1	9.0	(21.7%)	(55.2%)

Table 4.
Operating Indicators ('000)	1015	4015	1Q16	1016 / 1015	1016 / 4015
Cinema ⁽¹⁾
Revenue per Ticket (Euros)	4.6	4.8	4.8	2.8%	$(0.9\%)$
Tickets Sold	1,981.4	2,190.6	2,400.3	21.1%	9.6%
Screens (units)	214	215	215	0.5%	$0.0\%$
$(1)$ Denteros exp. On another a

1.5 – Cinemas and Audiovisuals

NOS' Cinema ticket sales posted a yoy increase of 21.1% to 2.4 million tickets, which compares with an increase in total market ticket sales of 19.0%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.

The most successful films shown in 1Q16 were "Deadpool", "Zootopia", "The Revenant", "Kung Fu Panda 3" and "Star Wars: The Force Awakens".

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.

Maintaining its track record as a pioneering cinema operator, NOS opened two 4DX screens in greater Oporto (GaiaShopping) and Lisbon (Almada Forum) in March and April 2016, respectively. This state-of-the-art technology provides a completely immersive and multidimensional premium cinema experience, through 20 different effects, such as movement and environmental effects including wind, rain, scent or smoke, synchronised with the images on the screen.

Average revenue per ticket sold posted a yoy improvement of 2.8% to 4.8 euros in 1Q16.

NOS' gross box-office revenues increased by 19.6% in 1Q16, which compares with 18.9% for the market as a whole, as NOS continues to maintain its leading market position, with a market share of 60.5% in terms of gross revenues in 1Q16. Total Cinema Exhibition revenues improved by 13.8% yoy in 1Q16 to 15.7 million euros.

Revenues in the Audiovisuals division declined by 3.2% yoy to 16.1 million euros in 1Q16. This decline in revenues was driven primarily by the performance in Cinema Distribution and Homevideo, partially offset by an improvement in the rights and television management area. Of the top 10 cinema box-office hits in 1Q16, NOS distributed 6, "Zootopia", "Star Wars: The Force Awakens", "London Has Fallen", "Batman V Superman: Dawn of Justice", "The Big Short" and "Dirty Grandpa", therefore maintaining its leading position, albeit with a smaller market share yoy.

¹ Source: ICA – Portuguese Institute For Cinema and Audiovisuals

1.6 – ZAP

ZAP is a reference operator in Angola and Mozambique, with continued success of its commercial operations. 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 was to expand the network in the city centre of Luanda.

During this quarter ZAP inaugurated a new cinema complex in Luanda, with 7 screens and 1,360 seats. This is a fully digital complex equipped with state-of-the-art technology including the first IMAX theatre in Angola.

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 32.8% against the USD and 35.1% against the Euro (1Q16 vs 1Q15). The financial implications for ZAP have been a strong 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. As such, the financial contribution of ZAP to NOS results has declined significantly as explained in the financial review ahead.

2. Consolidated Financial Statements

2.1 – Consolidated Income Statement

Table 5.
Profit and Loss Statement	1Q15	4Q15	1Q16	1Q16 / 1Q15	1Q16 / 4Q15
(Millions of Euros)
Operating Revenues	344.1	376.4	370.3	7.6%	$(1.6\%)$
Telco	327.7	358.7	352.5	7.6%	(1.7%)
Consumer Revenues	210.2	217.1	223.5	6.3%	2.9%
Business and Wholesale Revenues	92.3	104.0	99.6	8.0%	$(4.2\%)$
Equipment Sales	8.3	16.7	12.7	52.1%	(24.2%)
Others and Eliminations	16.9	20.9	16.7	$(0.8\%)$	$(19.9\%)$
Audiovisuals	16.7	18.4	16.1	$(3.2\%)$	(12.6%)
Cinema ⁽¹⁾	13.8	14.9	15.7	13.8%	5.3%
Others and Eliminations	(14.0)	(15.6)	(14.0)	0.0%	$(10.1\%)$
Operating Costs Excluding D&A	(216.2)	(253.2)	(232.4)	7.5%	$(8.2\%)$
W&S	(21.6)	(23.8)	(23.8)	10.3%	0.2%
Direct Costs	(101.2)	(117.0)	(108.8)	7.5%	$(7.0\%)$
Commercial Costs ⁽²⁾	(21.2)	(29.5)	(25.6)	20.8%	(13.2%)
Other Operating Costs	(72.1)	(82.9)	(74.1)	2.8%	(10.5%)
EBITDA	127.9	123.3	137.9	7.8%	11.9%
EBITDA Margin	37.2%	32.7%	37.2%	0.1 _pp	4.5pp
Telco	116.9	109.9	125.8	7.6%	14.5%
EBITDA Margin	35.7%	30.6%	35.7%	0.0 _pp	5.1 _pp
Cinema Exhibition and Audiovisuals	11.0	13.4	12.1	9.2%	$(9.9\%)$
EBITDA Margin	40.4%	44.4%	41.5%	1.0 _pp	(2.9 _pp )
Depreciation and Amortization	(87.7)	(98.8)	(95.3)	8.7%	(3.5%)
(Other Expenses) / Income	(6.1)	(3.6)	(2.4)	$(60.1\%)$	(32.3%)
Operating Profit (EBIT) ⁽³⁾	34.1	20.9	40.2	17.6%	92.0%
Share of results of associates and joint ventures	7.3	(1.4)	(6.4)	n.a.	n.a.
(Financial Expenses) / Income	(11.8)	(6.0)	(5.4)	(54.5%)	(11.1%)
Income Before Income Taxes	29.7	13.5	28.4	$(4.2\%)$	110.5%
Income Taxes	(6.5)	(4.4)	(4.0)	(38.5%)	$(9.9\%)$
Net Income Before Associates & Non-Controlling Interests	15.9	10.5	30.8	94.1%	194.3%
Income From Continued Operations	23.2	9.1	24.5	5.3%	168.7%
o.w. Attributable to Non-Controlling Interests	0.0	0.1	(0.0)	n.a.	n.a.
Net Income	23.2	9.2	24.4	5.0%	165.7%

2.2 - Operating Revenues

Consolidated Operating Revenues grew by 7.6% in 1Q16 to 370.3 million euros, accelerating yoy growth from 5.8% in 3Q15 and 6.4% in 4Q15, propelled by the very strong operational momentum in the core telco operation, which increased revenues by the same amount at 7.6% yoy to 352.5 million euros, and strong yoy growth in cinema exhibition revenues which increased by 13.8% yoy to 15.7 million euros. The audiovisuals division posted a yoy decline of 3.2% mainly due to the fact that in 1Q16 NOS posted a lower than usual share of movie distribution in the quarter.

The pace of growth recorded in core telco revenues is a key enabler for NOS' strategic revenue market share target. In 4Q15, according to data published by the operators, NOS had already achieved a 29.5% share of revenues of the Portuguese telecom market, up 3.5 pp from 4Q13, the first full quarter after completion of the merger. Importantly, NOS is the only operator in the market to be growing telco revenues and subsequently market share.

Within the telco segment, trends remained on the same track as in previous quarters. Consumer telco revenues posted a 6.3% increase yoy to 223.5 million euros driven by the very strong operational momentum in this segment. Residential customer revenues increased by 9% yoy and now represent over 85% of total consumer segment revenues. Stand alone personal revenues posted a decline of 6.9% yoy reflecting primarily 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. Business and wholesale telco revenues increased by 8% yoy to 99.6 million euros as a result of higher revenues from corporate customers, up by 11.4% yoy, reflecting NOS' increased market share in this segment and also of the improving yoy trends in Mass Business, which declined by just 1% yoy compared with a decline of 9.8% in 1Q15, thus managing to offset still falling average revenues per RGU with good growth in volume. Wholesale revenues recorded a 14.3% increase yoy in 1Q16.

Cinema revenues posted still a very strong quarter yoy, up by 13.8% yoy to 15.7 million euros, with a very good yoy performance in terms of attendance growth of 21.1%. A more positive consumer sentiment in Portugal and popular movie slate have translated into consistently higher levels of movie going. Audiovisuals revenues posted a yoy decline of 3.2% to 16.1 million euros mainly due to the fact that in 1Q16, some of the more successful movies exhibited were not distributed by NOS and therefore led to a reduction in share of overall distribution during the quarter.

Revenues from ZAP, the African Pay TV joint venture increased by 24.1% in local currency but declined by 5.7% yoy to 16.5 million euros for NOS' 30% stake. As explained in the operational review, ZAP continues to record good subscriber growth yoy however the challenging macroeconomic situation reflected in the severe devaluation in local currency resulting from the fall in oil prices is leading to a general deterioration in business activity.

2.3 – EBITDA

Consolidated EBITDA grew by 7.8% yoy to 137.9 million euros representing an EBITDA margin for the quarter of 37.2%, reflecting the positive revenue momentum described above. The telco business recorded a 7.6% yoy growth in 1Q16 and Audiovisuals and Cinemas were also strong contributors to consolidated EBITDA growth with EBITDA up by 9.2% yoy in 1Q16 to 12.1 milion euros.

The EBITDA of NOS' 30% stake in ZAP declined by 70% yoy to 2.2 million euros representing an EBITDA margin of 13.2% compared with 41.5% in 1Q15. Operating Costs at ZAP continue under pressure due the fact that a significant proportion of supplier contracts are USD and Euro based, thus putting pressure on margins.

2.4 – Consolidated Operating Costs Excluding D&A

Consolidated Operating Costs grew by 7.5% yoy to 232.4 million euros impacted by intense commercial activity related costs and focus on growth. A number of structural intregration and transformational projects namely within the IT arena are underway and within the planned timeframe, however given their long time to develop, test and deploy, will only start to have a more material impact towards the end of this year and into 2017.

Wages and Salaries posted a 10.3% increase yoy to 23.8 million euros however in line with the levels of 4Q15, reflecting the increased average headcount of 30 FTEs to 2.507 thousand impacted primarily by increased recruitment in telco operations to support the growth momentum of the business.

Direct Costs grew by 7.5% yoy to 108.8 million euros influenced primarily by the higher activity related interconnection and telecom costs, up 7.8% yoy. As in previous quarter, Interconnection costs were also much higher year on year as a result of the significant increase in mobile customers who are subscribing to all-net mobile tariffs included in convergent tariff plans, thus driving higher termination costs from increased volumes of calls made to other operator networks. Programming costs grew by 12.7% yoy however the increase was offset by a similar absolute decline in cinema distribution royalties due to the previously mentioned decline in audiovisuals market share in 1Q16.

Commercial Costs increased by 20.8% yoy to 25.6 million euros due primarily to a 44.5% increase in COGS led by much higher volumes of terminal equipment sold in comparison with the previous year as a result of the focus on increasing smartphone penetration across the base. Recurrent marketing and publicity costs also increased yoy by 26.9% driven by investment in raising awareness to the NOS brand and new product and service launches.

Other Operating Costs increased 2.8% to 74.1 million euros with the main components posting relatively stable performance in comparison with 1Q15 and with 4Q15 with the exception of a decline in provisions qoq.

2.5 – Net Income

Net Income before Associates and Non-Controlling interests increased by 94.1% yoy to 30.8 million euros in 1Q16, compared with 15.9 million euros in 1Q15 and with 10.5 million euros in 4Q15.

NOS' Share of Associates and Joint Ventures declined significantly to negative 6.4 million euros in 1Q16 as a result of the reduction in the contribution of the 30% stake in ZAP and of Sport TV. Net Income contribution from ZAP reduced from 6.5 million euros to negative 4.2 million euros, as a result of the aforementioned currency devaluation in Angola driving lower operating margins, with EBITDA down by 70% yoy, and due to the negative below EBITDA charge of the foreign exchange impact on USD trade accounts, in the amount of 4.9 million euros. Sport TV's contribution to Net income also declined to negative 2.6 million euros due to non-recurrent charges in 1Q16.

Depreciation and Amortization increased by 8.7% yoy to 95.3 million euros due, as in previous periods, to the higher level of investment in both network assets and customer related costs.

Other Expenses* of 2.4 million euros in 1Q16 relate to non-recurrent costs, with merger related integration costs representing just 1.4 million euros of this amount, compared with 2.6 million euros in 1Q15.

^* 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.

Net Financial Expenses fell by 54.5% in 1Q16 to 5.4 million euros as a result of the lower average cost of new debt arising from lower funding costs on refinancing activity during 2015. Further details on funding developments are presented in the capital structure section below.

Income Tax provision amounted to 4 million euros in 1Q16 representing 14% as a percentage of Income before Income Taxes, down from 21.8% in 1Q15 explained primarily by the recognition of deferred tax assets in the quarter.

3. CAPEX and Cash Flow

3.1 – CAPEX

Table 6.
CAPEX (Millions of Euros)	1015	4Q15	1016	1016 / 1015	1016 / 4015

Telco	84.8	102.8	84.9	0.1%	(17.4%)
Baseline Telco	22.8	34.2	27.5	21.0%	(19.6%)
Customer Related	47.3	49.9	43.0	(9.1%)	$(13.9\%)$
Network Expansion / Substitution and Integration Projects and Others	14.8	18.7	14.4	$(2.8\%)$	(23.1%)
Audiovisuals and Cinema Exhibition	9.5	10.9	10.2	7.3%	$(6.1\%)$
Total Group	94.3	113.7	95.1	0.8%	(16.3%)

To better explain the underlying trends and potential for reduction in total CAPEX at NOS, this quarter's reporting has been adapted to make a clearer distinction between what is effectively baseline investment required to run the operation, without any consideration of customer related CAPEX and total CAPEX.

Network Expansion / Substitution and Integration Projects telco CAPEX includes primarily investment in network expansion and replacement and some remnants of integration related investments required to materialize operational synergies and efficiencies in the long-run. Customer related CAPEX's main three components are customer premise terminal equipment, sales commissions and installation fees.

NOS is currently undergoing a period of high total CAPEX due firstly to the investment being made in new network rollout that, since effective launch of civil works in the second half of 2014, has already covered an additional 380 thousand households. On the commercial front, NOS is growing its customer base well ahead of what can be deemed a recurrent pace of customer acquisition and as such is incurring a higher than run-rate level of investment in customer acquisition costs. Both of these investment drivers are set to reduce significantly as the network expansion project reaches conclusion by the end of 2016 and as the pace of customer growth eventually starts to taper away to more normalized levels in the longer term.

In 1Q16, Telco CAPEX was 84.9 million euros representing an increase of 0.1% in comparision with 1Q15. Baseline Telco CAPEX increased by 21.0% to 27.5 million euros. As a percentage of telecom revenues, baseline telco CAPEX was 7.8% in 1Q16, whereas Telco CAPEX represented 24.1% of Telco Revenues, a decrease in comparison with 25.9% as of 1Q15.

Investment in Customer Related CAPEX recorded a yoy decline of 9.1% in 1Q16 due to the lower comparative volume of RGU growth recorded in comparison with 1Q15 as shown in the operating tables earlier in this report. As a percentage of telco revenues, Customer Related CAPEX represented 12.2% in 1Q16 and as a percentage of Total Group CAPEX, 45.2%.

Audiovisuals and Cinema Exhibition CAPEX of 10.2 million euros relates essentially to the Audiovisuals division and reflects capitalization of certain movie rights. Accompanying the yoy growth in cinema and audiovisual activity this item also recorded growth to the effect of 7.3%.

Total Group CAPEX increased by just 0.8% yoy to 95.1 million euros, representing 25.7% of Consolidated Revenues, down yoy from 27.4%.

3.2 – Cash Flow

Table 7.
Cash Flow (Millions of Euros)	1015	4Q15	1Q16	1016 / 1015	1016 / 4015

EBITDA	127.9	123.3	137.9	7.8%	11.9%
Total CAPEX	(94.3)	(113.7)	(95.1)	0.8%	(16.3%)
Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital	(24.9)	16.1	(19.8)	(20.3%)	n.a.
Operating Cash Flow	8.7	25.7	22.9	163.7%	(10.6%)
Long Term Contracts	(4.1)	(4.0)	(3.8)	(6.7%)	$(4.3\%)$
Cash Restructuring Payments	(6.1)	(6.1)	(3.4)	$(43.9\%)$	$(43.6\%)$
Interest Paid	(5.3)	(2.7)	(5.5)	2.4%	105.1%
Income Taxes Paid	(1.9)	(1.4)	(0.9)	(53.5%)	(39.5%)
Disposals	0.2	1.7	0.4	103.6%	(76.2%)
FCM Receivables	0.0	0.0	0.0	n.a.	n.a.
Other Movements	0.0	0.2	0.0	30.8%	(85.3%)
Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition	(8.6)	13.3	9.7	n.a.	$(26.9\%)$
Acquisition of Own Shares	0.0	(3.6)	(7.3)	n.a.	105.8%
Foreign Currency Debt Exchange Effect	(0.0)	0.0	0.0	n.a.	n.a.
Dividends	0.0	0.0	0.0	n.a.	n.a.
Free Cash Flow	(8.6)	9.8	2.4	n.a.	(75.5%)
Debt Variation Through Financial Leasing, Accruals & Deferrals & Others	(7.2)	(7.5)	(1.7)	$(76.0\%)$	(77.1%)
Change in Net Financial Debt	(15.7)	2.3	0.7	n.a.	(70.3%)

Cash Flow reporting has also been adjusted this quarter to reflect the clarification in CAPEX reporting.

Total Operating Cash Flow posted a yoy increase to 22.9 million euros in 1Q16 led by the strong growth in EBITDA and relatively stable level of CAPEX yoy. The level of working capital and non-cash items in total CAPEX was also supportive of the improvement in OCF with a yoy decline of 20.3% to 19.8 million euros.

Total FCF before dividend payments, financial investments and own share acquisitions posted a material improvement from negative 8.6 million euros in 1Q15 to 9.7 million euros in 1Q16, due to higher OCF and due to the decrease in cash restructuring payments associated with the merger (lower by 2.7 million euros yoy), and decrease in cash income tax payments (lower by 1 million euros yoy).

Free Cash Flow improved from negative 8.6 million euros in 1Q15 to positive 2.4 million euros in 1Q16 as a result of the aforementioned effects and impacted by an increase in own share acquisition of 7.3 million euros in 1Q16 led by ongoing share repurchases in the market to cover share plan obligations and that were accelerated over the past few months taking advantage of recent share price weakness.

4. Consolidated Balance Sheet

Table 8.
Balance Sheet (Millions of Euros)	2015	1Q16

Non-current Assets	2,510.1	2,459.7
Current Assets	466.4	521.0
Total Assets	2,976.5	2,980.7
Total Shareholders' Equity	1,063.5	1,080.8
Non-current Liabilities	1,150.7	1,164.6
Current Liabilities	762.2	735.3
Total Liabilities	1,913.0	1,899.9
Total Liabilities and Shareholders' Equity	2,976.5	2,980.7

4.1 – Capital Structure

At the end of 1Q16, Net Financial Debt stood at 1,047.7 million euros.

Total financial debt was 1,049.5 million euros, which was offset with a cash and short-term investment position on the balance sheet of 1.8 million euros. At the end of 1Q16, NOS also had 260 million euros of non-issued commercial paper programmes. The all-in average cost of NOS' Net Financial Debt stood at 2.38% for 1Q16, down from 3.70% in 1Q15 and from 2.48% in 4Q15.

Net Financial Gearing was 49.2% at the end of 1Q16 and Net Financial Debt / EBITDA (last 4 quarters) now stands at 1.9x. The average maturity of NOS' Net Financial Debt at the end of 1Q16 was 3.3 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 55%.

Table 9.
Net Financial Debt (Millions of Euros)	2015	1Q16	1Q16 / 2015

Short Term	160.0	144.4	$(9.8\%)$
Bank and Other Loans	141.7	123.9	(12.6%)
Financial Leases	18.3	20.5	12.0%
Medium and Long Term	898.3	905.1	0.8%
Bank and Other Loans	862.6	873.1	1.2%
Financial Leases	35.8	32.1	$(10.4\%)$
Total Debt	1,058.3	1,049.5	$(0.8\%)$
Cash and Short Term Investments	9.9	1.8	$(81.9\%)$
Net Financial Debt	1,048.4	1,047.7	$(0.1\%)$
Net Financial Gearing (1)	49.6%	49.2%	(0.4 _pp )
Net Financial Debt / EBITDA	2.0x	1.9x	n.a.

Appendix

Appendix I

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

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

Appendix II

Table TZ.
Profit and Loss Statement (Millions of Euros)	1Q15	2Q15	3Q15	4Q15	2015	1Q16
Operating Revenues	344.1	355.9	367.9	376.4	1,444.3	370.3
Telco	327.7	338.3	347.6	358.7	1,372.3	352.5
Consumer Revenues	210.2	213.3	215.0	217.1	855.5	223.5
Business and Wholesale Revenues	92.3	102.4	104.0	104.0	402.7	99.6
Equipment Sales	8.3	9.8	13.2	16.7	48.0	12.7
Others and Eliminations	16.9	12.9	15.4	20.9	66.0	16.7
Audiovisuals	16.7	18.0	18.2	18.4	71.3	16.1
Cinema ⁽¹⁾	13.8	12.9	16.9	14.9	58.4	15.7
Others and Eliminations	(14.0)	(13.4)	(14.7)	(15.6)	(57.7)	(14.0)
Operating Costs Excluding D&A	(216.2)	(217.4)	(224.5)	(253.2)	(911.2)	(232.4)
W&S	(21.6)	(20.3)	(23.4)	(23.8)	(89.1)	(23.8)
Direct Costs	(101.2)	(110.7)	(107.8)	(117.0)	(436.7)	(108.8)
Commercial Costs ⁽²⁾	(21.2)	(19.2)	(28.2)	(29.5)	(98.1)	(25.6)
Other Operating Costs	(72.1)	(67.2)	(65.1)	(82.9)	(287.2)	(74.1)
EBITDA	127.9	138.5	143.5	123.3	533.1	137.9
EBITDA Margin	37.2%	38.9%	39.0%	32.7%	36.9%	37.2%
Telco	116.9	129.0	129.8	109.9	485.5	125.8
EBITDA Margin	35.7%	38.1%	37.3%	30.6%	35.4%	35.7%
Cinema Exhibition and Audiovisuals	11.0	9.5	13.7	13.4	47.6	12.1
EBITDA Margin	40.4%	35.1%	45.2%	44.4%	41.5%	41.5%
Depreciation and Amortization	(87.7)	(90.7)	(89.3)	(98.8)	(366.4)	(95.3)
(Other Expenses) / Income	(6.1)	(5.4)	(4.9)	(3.6)	(19.9)	(2.4)
Operating Profit (EBIT) ⁽³⁾	34.1	42.4	49.3	20.9	146.8	40.2
Share of results of associates and joint ventures	7.3	0.5	(2.9)	(1.4)	3.6	(6.4)
(Financial Expenses) / Income	(11.8)	(10.8)	(7.1)	(6.0)	(35.7)	(5.4)
Income Before Income Taxes	29.7	32.2	39.3	13.5	114.6	28.4
Income Taxes	(6.5)	(8.2)	(13.1)	(4.4)	(32.1)	(4.0)
Net Income Before Associates & Non-Controlling Interests	15.9	23.4	29.2	10.5	78.9	30.8
Income From Continued Operations	23.2	23.9	26.2	9.1	82.5	24.5
o.w. Attributable to Non-Controlling Interests	0.0	0.1	(0.0)	0.1	0.2	(0.0)
Net Income	23.2	24.1	26.2	9.2	82.7	24.4
Telco CAPEX	84.8	92.6	88.4	102.8	368.6	84.9
Total Group CAPEX	94.3	102.4	97.9	113.7	408.3	95.1
Working Capital and Non-Cash Items included in EBITDA - CAPEX	(24.9)	(32.3)	14.3	16.1	(26.8)	(19.8)
Operating Cash Flow	8.7	3.9	59.8	25.7	98.0	22.9
Long Term Contracts	(4.1)	(4.3)	(5.5)	(4.0)	(17.9)	(3.8)
Cash Restructuring Payments	(6.1)	(4.0)	(4.4)	(6.1)	(20.7)	(3.4)
Interest Paid	(5.3)	(10.4)	(5.8)	(2.7)	(24.2)	(5.5)
Income Taxes Paid	(1.9)	(1.8)	0.9	(1.4)	(4.2)	(0.9)
Disposals	0.2	0.4	1.7	1.7	3.9	0.4
FCM Receivables	0.0	0.0	6.5	0.0	6.5	0.0
Other Cash Movements	0.0	(0.1)	(0.2)	0.2	(0.1)	0.0
Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition	(8.6)	(16.4)	53.1	13.3	41.5	9.7
Net Financial Debt	1.001.2	1.100.7	1.050.6	1.048.4	1.048.4	1.047.7

Appendix III

Note: Given that this quarter the reporting format of CAPEX and Free Cash Flow has been changed, we provide these tables so as to enable comparisons to the previous reporting format. As from the next quarter, only the new reporting format will be provided.

Table 13.
CAPEX - Previous Reporting Format (Millions of Euros)	1Q15	2Q15	3Q15	4Q15	2015	1Q16

Telco	59.3	62.6	67.6	69.1	258.5	59.6
Infrastructure	22.5	29.5	31.8	26.1	109.8	25.6
Customer Related CAPEX	36.1	30.7	34.4	34.9	136.1	32.0
Other	0.7	2.4	1.4	8.2	12.7	1.9
Audiovisuals and Cinema Exhibition	9.0	9.8	9.5	10.6	38.8	9.8
Recurrent CAPEX	68.2	72.3	77.1	79.7	297.3	69.4
Non-Recurrent CAPEX	26.1	30.0	20.9	34.0	111.0	25.7
Total CAPEX	94.3	102.4	97.9	113.7	408.3	95.1
Table 14.
Free Cash Flow - Previous Reporting Format	1Q15	2Q15	3Q15	4Q15	2015	1Q16
(Millions of Euros)
EBITDA	127.9	138.5	143.5	123.3	533.1	137.9
Recurrent CAPEX	(68.2)	(72.3)	(77.1)	(79.7)	(297.3)	(69.4)
EBITDA - Recurrent CAPEX	59.7	66.2	66.4	43.5	235.8	68.5
Non-Cash Items Included in EBITDA - Recurrent CAPEX ⁽¹⁾ and
Change in Working Capital	(26.9)	(38.5)	6.0	2.0	(57.4)	(31.2)
Operating Cash Flow After Investment	32.8	27.7	72.4	45.5	178.4	37.3
Long Term Contracts	(4.1)	(4.3)	(5.5)	(4.0)	(17.9)	(3.8)
Net Interest Paid and Other Financial Charges	(5.3)	(10.4)	(5.8)	(2.7)	(24.2)	(5.5)
Income Taxes Paid	(1.3)	(0.6)	(2.1)	(1.5)	(5.4)	(0.9)
Other Cash Movements	0.2	0.3	(0.7)	0.2	(0.1)	0.0
Recurrent Free Cash-Flow	22.3	12.7	58.2	37.5	130.8	27.1
Taxes Paid	(0.6)	(1.2)	3.0	0.0	1.2	0.0
Disposals	0.0	0.0	2.2	1.7	3.9	0.4
Non-Recurrent CAPEX	(24.1)	(24.2)	(16.7)	(23.4)	(88.4)	(21.7)
Cash Restructuring Payments	(6.1)	(4.0)	(4.4)	(6.1)	(20.7)	(3.4)
FCM Receivables	0.0	0.0	6.5	0.0	6.5	0.0
Other	0.0	0.0	0.0	0.0	0.0	0.0
Free Cash Flow Before Dividends & Financial Acquisitions	(8.6)	(16.8)	49.0	9.8	33.4	2.4
Foreign Currency Debt Exchange Effect	(0.0)	0.0	0.0	0.0	(0.0)	0.0
Acquisitions of Financial Investments	0.0	0.0	0.0	0.0	0.0	0.0
New Companies' Net Debt	0.0	0.0	0.0	0.0	0.0	0.0
Dividends	0.0	(72.2)	0.0	0.0	(72.2)	0.0
Total Free Cash Flow	(8.6)	(89.0)	49.0	9.8	(38.8)	2.4
Debt Variation Through Accruals & Deferrals & Others	(7.2)	(10.5)	1.1	(7.5)	(24.0)	(1.7)
Change in Net Financial Debt	(15.7)	(99.5)	50.1	2.3	(62.9)	0.7

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.

Enquiries

Chief Financial Officer: José Pedro Pereira da Costa Phone: (+351) 21 799 88 19

Analysts/Investors: Maria João Carrapato Phone: (+351) 21 782 47 25 / E-mail: [email protected]

Press: Isabel Borgas / Irene Luis Phone: (+351) 21 782 48 07 / E-mail: [email protected]

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