Management meeting gvt_umgi_07.08_v1.2

Managment MeetingSão Paulo, August 8, 2013

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1 Initial PMC Strategy

PMC Product Overview2

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4

PMC Results

Opportunity

Summary

5 New Business Model

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Develop an integrated and unique customer proposition in the Brazilian market taking advantage of:

■GVT’s cutting edge broadband technology and value chain control■Universal Music content catalogue and entertainment service development know how

Empower GVT brands with unique marketing and communication assets

Develop a new revenue stream

■ Innovative music service■ Paid subscription for non GVT customers■Unique content offers (up to unlimited MP3s bundle packages)■ Aggregate more content in the future

Initial PMC Strategy

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#1 Increase Sales Increase the broadband gap offer thru differentiation Give brand stature through association with

important artists

#2 Keep customers for a longer period

Increase customer loyalty

#3 Increase POP´s audience and stickness

Increase audience and time spent in POP portal with new exclusive content

Increase POP´s revenues with new paid services

Expectations on Music adding value to GVT

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#1 Increase Sales Increase the broadband gap offer thru differentiation Give brand stature through association with

important artists

#2 Keep customers for a longer period

Increase customer loyalty

#3 Increase POP´s audience and stickness

Increase audience and time spent in POP portal with new exclusive content

Increase POP´s revenues with new paid services

Expectations on Music adding value to GVT

Main Strategy

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3

4

PMC Results

Opportunity

Summary


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PMC overviewONLINE MUSIC SERVICE FOR GVT BROADBAND CUSTOMERSThe music and video streaming service is available on the web, Mobile, tablet and GVT TV.

News

Music and video playlists

Exclusive shows

Exclusive albums

Radio

Facebook login

Social media updates and interactions

Web

Mob

ile A

ppTV

App

Oct/10

Launch New activation process

Apr/11 Jun/11 Nov/11 Jan/12 Feb/12 Jun/12 Sep/12

New layout

Sony contentConcert

New search

New layout(actual)

Daily PlaylistsFacebook likes

campaign

First live show transmission

New logoFavorites

RadioFacebook login

Nov/11 Mar/12 May/12 Jul/12 Sep/12

Mobile Applaunch

Version1.2

Versions1.31.4

Version1.5

Version 1.6New logo,

Favorites, Radio,Facebook login, Video playlists,

New player

Mar/12 May/12 Sep/12

TV Applaunch

New version with bugfixes

New Version New logo, Shows

and Videos, Favorites, Radio,Video playlists,

Screen saver

PMC development timeline

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Web

Mob

ile A

ppTV

App

Oct/10

Launch New activation process

Apr/11 Jun/11 Nov/11 Jan/12 Feb/12 Jun/12 Sep/12

New layout Sony content Longforms New search

New layout(actual)

Daily Playlists Facebook likes

campaign

First live show New logo Favorites Radio

Facebook login

Nov/11 Mar/12 May/12 Jul/12 Sep/12

Mobile Applaunch

Version1.2

Versions1.31.4

Version1.5

Version 1.6New logo,

Favorites, Radio,Facebook login, Video playlists,

New player

Mar/12 May/12 Dez/12

TV Applaunch

New version with bugfixes

New Version New logo, Shows

and Videos, Favorites, Radio,Video playlists,

Screen saver

PMC development timeline

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Dez/12

Ivete Sangalo live streaming

concert

Dez/12


concert

Sep/12


concert

PMC development timelineW

ebM

obile

App

TV A

pp

2010 2011 2012

Portal Launch

Features New activation process New Look & Feel Sony Content Longform New Search

Mobile App launch

Features Daily Playlists Facebook likes campaign First live show New logo Favorites Radio Facebook login Ivete Sangalo live streaming concert

Features Version 1.2 - bugfixes Version 1.3 - bugfixes Version 1.4 - bugfixes Version 1.5 – bugfixes Version 1.6 - New logo, Favorites, Radio, Facebook login, Video

playlists, New player Version 1.7 - Ivete Sangalo Live Streaming concert

TV App launch

Features New version with bugfixes New Version

New logo, Shows and Videos, Favorites, Radio, Video playlists, Screen saver

Ivete Sangalo live streaming concert

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cost per user

R$ 1,0468Label Pool Clearing

cost per userR$ 0,9030

MKT Content

> 200K active users

Up to 200K active users

UMGI agreement

MKT Fee

MKT Fee 12,25% MKT Fee Net50%

50%

HR Artist image copyright

Marketing Initiatives GVT & PMC Live concerts and showcases Exclusive video or audio Cultural contests

Taxes

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3

4

PMC Results

Opportunity

Summary


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PMC results overview

272,000ACTIVE USERS

DOWNLODED APPS

100,000

6 MILLIONSTREAMS/MONTH

1 MILLIONSTREAMS/MONTH

1 MILLION LIKES ON FACEBOOK

240 KPLUS 1 ON GOOGLE+

1 MILLIONMUSICS

50,000VIDEOCLIPS

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PMC customer base and gross additionsCustomer base evolution (thousands)

Jun 2013:10% penetration over broadband customer base53% penetration over TV customer base

Gross additions (thousands)

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

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36 3337

2225 27

21

28

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Taylor Swift project

User activation was boosted by the projects with UMGI

Ivete Sangaloproject

Highlights■ Gross additions is composed of 83% TV’s customer

■ Exclusive content and highlight at Pay TV increase the customer base

■ Taylor Swift and Ivete Sangalo Projects boosted the gross additions

■ The lack of excluvsive content in 2013 lower the gross additions


188211

241 249 253 261 270 275 285272

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PMC: active User ExperienceMusic and video streams (thousands)


4,977

3,864 3,9084,214

3,6333,109

3,711

3,060 2,733

2,166

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1,133 1,064 1,158 956 697

1,000 794 780 767

Music Video

Video release on Pay TV

Unique Login (thousands)

sep/13 oct/13 Nov-13 dec/13 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

7991 98

120

8391

8274

84

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Ivete Sangaloproject

6 MM MUSICSTREAMS PER MONTH

DOWNLOADED MOBILE APPS

100.0001 MM VIDEO

STREAMS PER MONTH

PMC in social mediaFACEBOOK

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+256.417PLUS+1 ON GOOGLE +

+1.186.987LIKES ON FACEBOOK

+8.417SEGUIDORES ON TWITTER

GOOGLE PLUS

TWITTER

250AVERAGE REACHMIL USERS

2,5AVERAGE REACHMILLIONS USERS

150AVERAGE REACHMIL USERS

Marketing Initiatives

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PMC Key Takeaways

#1

#2

#3

#4

PMC TV is the most important factor for PMC activation

PMC helps improve GVT customer engagement

The investment on promotions are not bringing the desired activations and buzz results

Exclusive and relevant content drives PMC activations like Justin Bieber pre-listening , Ivete Sangalo Project and Taylor Swift showcase

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PMC Results

Opportunity

Summary


PMC StrenghtsST

REN

GTH

PMC customer base relationship 300K active users

Strong presence in social media More than 1 million likes on Facebook and more than 190K plus 1 on Google Plus

3 years product and delevop experienceStrong relationship with record labelsConsistent platform

Young audience proximitySpecialists journalist in musicMusic drives young audience

High cost of actual modelCost per active user turn the current business model unhealthy

Create Value Added for GVT customers

Give proper value to a priceless asset Add a new revenue

PRO

BLEM

S

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Music is a TOP interest on the target consumer: 20 – 35 years in Brazil GVT is a well known brand scoring 90% of ‘aided brand awareness’ Despite that fact, the brand awareness decrease to 31% on ‘unaided awareness’ However, GVT is ahead of NET and Embratel (28%) and Telefonica (16%) PMC is a excellent sales driver – 36% of PMC users define it as important/much important on choosing GVT GVT is a strong brand – recognized by being the best offer and best service PMC users registered a positive perception, higher level of satisfaction with the provider and are more likely to

recommend to friends and family Recommendation is a key factor when choosing a telecom offer

GVT Brand Consideration

GVT Customer - PMC User

GVT Customer - Not PMC User

Non-GVT Customer - Music Important

Non-GVT Customer - Music Unimportant

95%

92%

74%

61%

GVT Brand Recommendation

Satisfaction with current provider

Loyalty to current provider

90%

90%

53%

48%

95%

92%

77%

83%

74%

68%

44%

57%

GVT and music relationship

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PMC on Facebook has more likes than others online music player like XBOX music and Rdio 2nd brazilian online music service in Brazil on Facebook likes (Radio UOL is the first) Less than a year, PMC grew more than 1 million likes with Facebook Ads campaign and interactions

PMC is gaining relevance in social media

Portal Pop GVT TV GVT PMC

1.6 MM

0.056 MM 0.3 MM

Likes on Facebook’s GVT Produts (MM)

XBOX Music

Rdio Deezer worldwide

Spotify Worldwide

Itunes Worldwide

0.8 MM

2 MM

3.7 MM

30 MM

… compare with others worldwide music services (MM)

1.2 MMPMCPMC 0.4 MM

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PMC

Global recorded music industry’ growth

■ In 2012, the brazilian music market grew 5% comparing with 2012 with R$ 392,8 MM

■ Brazil digital sales took off in 2012, following the launch of itunes at the end of 2011, with revenues expected to have nearly doubled in the past 12 months

■ The total recorded music market grew by 11.2% in the first half of 2012 and by 8.6% in 2011

■ In 2013, Deezer, Xbox Music, Tim Music, Unlimited Music were launched in Brazil

■ Spotify is expected to be launched in Brazil on September 2013

Brazil: A market set to surge

Global music revenues (US$ billion)

2007 2008 2009 2010 2011 2012

24 44 43 54 61

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Digital

Share on market

+28%

Brazil digital music revenues (R$ million)

+83%

2007 2008 2009 2010 2011 2012

16.4 13.9 12.2 10.4 11.1 16.5

3.1 4.3 4.7 4.8 5.15.6

19.5 18.2 16.9 15.2 16.1722.1

Physical + others Digital

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Online music playersSubscribers Catalog Business Model

n/a 12 MM 7 days trial

Unlimited Web

Streaming R$ 8,99

Mobile + off-line

R$ 14,90 R$ 22,90*R$ 29,90*

Highlights

Oi PartnershipSolid multi screen plataform

6 MM paid subs

24 MM total subs

20 MM Free – Ad supported

UnlimitedStreaming

$4,99

Streaming +Mobile Offline $9,99

4 MM paid subs

10 MM total subs

20 million 15 days Trial

Streaming Ilimited R$ 8,90

Mobile + off-line

R$ 14,90

n/a 28 MM Download a la carte: US$ 0.99/ US$ 1.29Album a la carte: R$ 18

63% share digital music revenue29% share global music revenue

Orange partnership4 million pay subscription

150 countriesBrazil launched in January 2013

Worldwide expansion with 28 territoriesWill be launch in September 2013

SFR Partnership

n/a n/aUnlimited streaming + download(Mobile, PC and Game Console)

$10 a month

• Launched in late October 2012• Windows 8 will have shipped 350 million

units by the end of 2012.

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3

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PMC Results

Opportunity

Summary


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Develop a new service

Current business

model discontinued

Convert PMC base to a

subscription paid music

service base

High added-value features and catalog

Add Warner, EMI and Som Livre + New

Features

Change the cost model to a new revenue stream model

New identity: new brand, new look & feel... Only the paid

subscription model available

Assumptions adopted

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New Business model offers

R$ 4,90 R$ 6,90 R$ 12,90

PMC Base OTT service Base

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R$ 6,90 R$ 12,90

OTT service Base


Exclusive offer for PMC userFeatures:

• audio• videoclip• offline Mode• SVOD (15 titles catalog)• Available on web, mobile,

tablet and GVT TV

R$ 4,90

Eliminate the current cost business model

PriceFeatures

R$ 4,90

PMC Base

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R$ 4,90 R$ 12,90

PMC Base OTT service


New GVT costmers offer para novos

Features:• audio• Videoclip• Offline Mode• SVOD (15 title catalog)• Available on web, mobile,

tablet and GVT TV

Generate new revenue

Features Price

R$ 6,90

R$ 6,90

Base

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R$ 4,90 R$ 6,90

PMC Base Base


OTT clientsFeatures:

• Audio• Videoclip• Offline Mode• Available on web, mobile,

tablet, Connected TV e Game Console)

Add Value for GVT customers

Features Price

R$ 12,90

Market Price

R$ 12,90

OTT service

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Revenue x Costs

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Revenue x Costs

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Agreements statusReceived Propostal Waiting Proposal Project Presentation

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Launch requirementsRecord Label’s Agreements

Copyright’s Agreement

Develop Plataform

Payment Method

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HR Organizational Structure

Gerente de música

Editorial

Analista Sênior / GP Pleno

Programador da Rádio Jornalista - Editor

Jornalista Jornalista

Comunicação & Relacionamento

Coordenação Comunicação e Relacionamento

Analista sênior de comunicação

Analista pleno de comunicação

Analista de rede sociais

Analista de Relacionamento

AnalistaWeb design

Produto

GP Sênior Analista de marketing Sênior

Analista de marketing Pleno

Comercial &Novos Negócios

GP Sênior

Estratégia & Marketing

GP Sênior

Áreas do novo serviço

Manutenção da equipe atual (em cinza no organograma) – 1 HC + 5 terceiros

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Development timeline

Quality Assurance(~1 mês)Assinatura

Contrato(~2 meses)

ProductDesc.

(~1 mês)

M0 M2 M7 M8

Launch

M4

Integração STB (~5 meses)

Desenvolvimento IT (~5 meses)

Implementação (~3 meses)

RFQ & Compra Serv.(~2 meses)

Status

Riscos

Ponto de Atenção

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Development timeline – Expected Launch Q1 13’

Q2

New

Mui

sc B

usin

ess

Business

Product

Strategy

BP development

BP Approval

Q3 Q4 Q1

Features development

Record Deals Agreements

Launch strategy

Headcount

4 - 6 months

Layout development

IT developmentLaunch

New Music Service

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#1

#2

#3

#4

#5

The new revenue stream model offsets content costs with revenue e keeps the GVT customer loyalty

The revenue share model offers a business division risk

The low capex involved makes this new model very attractive

The music industry is expanding and 2013 will be an important year for digital music in Brazil with the release of worldwide player such as Deezer and Spotify

With 3 years music product experience makes easier to ensure a more consistent and assertive development

New Business Model Key Takeaways

Management meeting gvt_umgi_07.08_v1.2

Business

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