Eircom Holdings (Ireland) Limited

Eircom Holdings (Ireland) Limited

1 eircom Holdings (Ireland) Limited First Quarter unaudited results 30 September 2017

  

eircom Holdings (Ireland) Limited Unaudited first quarter results to 30 September 2017 Table of contents Page(s) Trading highlights for the first quarter ended 30 September 2017 8 KPIs for the first quarter ended 30 September 2017 9 Reconciliation of statutory financial statements to the results presented in the 10 management discussion and analysis section within this quarterly document Reconciliation of EBITDA to operating profit for the quarter ended 30 September 2017 11 Consolidated income statement for the quarter ended 30 September 2017 12 Group statement of comprehensive income for the quarter ended 30 September 2017 12 Consolidated balance sheet as at 30 September 2017 13 Consolidated cash flow statement for the quarter ended 30 September 2017 14 Consolidated statement of changes in shareholders’ equity for the quarter ended 30 September 2017 15 Selected notes to the condensed interim financial information for the quarter ended 30 September 2017 16-21 Commentary on results of operations for the quarter ended 30 September 2017 22-29

8 eircom Holdings (Ireland) Limited Trading highlights for the third quarter ended 30 September 2017*  Underlying revenue of €322 million (which excludes the impact of reductions in Mobile Termination Rate (“MTR”) and foreign exchange (“FX”) movements) decreased by €7 million or 2% year on year.  Reported group revenue of €316 million decreased by €11 million or 3.5% compared to the corresponding prior year quarter mainly due to MTR reductions coupled with a reduction in low margin eir business revenue.  Group adjusted EBITDA3 of €125 million was €3 million or 2% higher than the corresponding prior year quarter driven by operating cost savings.

 Reported fixed line revenue, before intra-company eliminations, of €239 million decreased by 4% compared to the corresponding prior year period. Broadband and TV growth was offset by the impact of MTR reductions, retail traffic usage decline coupled with reductions in low margin eir business revenue.  Fixed line adjusted EBITDA of €110 million was broadly flat compared to the corresponding prior year quarter.  Group fixed access paths decreased by 9,000 compared to the prior year and were broadly flat quarter on quarter. Growth in standalone broadband of 30,000 partially offset a reduction in fixed line access net losses of 39,0004 .

 The Group broadband customer base5 at 30 September 2017 was 903,000, an increase of 7,000 in the quarter and 36,000 compared to the corresponding prior year period. The retail customer base remained broadly stable while the wholesale base increased by 36,000 compared to the corresponding prior year period. At 30 September 2017, there were 574,000 customers availing of fibre based high speed broadband services, an increase of 111,000 compared to the corresponding prior year period.  Reported mobile revenue of €85 million reduced by 3% compared to the corresponding prior year quarter due to MTR reductions.

Excluding the impact of MTR reductions, mobile revenue of €91 million increased by 1% compared to the corresponding prior year period mainly due to an increase in higher value postpay customers.  Mobile EBITDA of €15 million was €2 million or 20% higher than the corresponding prior year quarter.  Total mobile customers at the end of the quarter were 1,057,0006 including 515,000 postpay customers and 542,000 prepay customers. The postpay customer base increased by 18,000 year on year bringing the number of customers on postpay contracts to 49%. The prepay base reduced by 27,000 year on year mainly due to continued migrations to postpay as well as increased competition in the market.

 Group operating costs7 of €121 million, reduced by €5 million or 4% compared to the corresponding prior year quarter.  Total Full Time Equivalent (FTE) staff at the end of September were 3,235, a reduction of 179 FTE compared to the corresponding prior year quarter.  Despite continued high levels of capital investment, the Group maintains strong liquidity with cash on hand of €126 million at 30 September 2017. *The figures presented above include amounts relating to the Groups 56% share in Tetra Ireland Communication Limited (“Tetra”). Following the adoption of IFRS 11, Joint Arrangements, Tetra is reported in the financial statements under the equity method as opposed to proportionate consolidation.

The management discussion and analysis section of this quarterly report presents results on a management accounting basis and therefore includes the results of the Group’s joint ventures on a proportionate basis, reflected in Group revenue, operating costs and EBITDA. 3 Adjusted EBITDA is earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, and non-cash pension charges and exceptional items. 4 Combined retail and wholesale access line losses including LLU 5 Combined retail and wholesale excluding LLU and line share, including SABB 6 Mobile base is a combination of handset subscriptions and mobile broadband subscriptions 7 Operating costs are pay and non pay costs before non-cash pension charge and lease fair value credits

9 eircom Holdings (Ireland) Limited KPIs for the first quarter ended 30 September 2017 (unaudited) 30 Sept 2016 30 Sept 2017 Better/ (Worse) % N1 Access Paths Base ('000) Retail Access Lines 702 670 (5%) Retail SABB* 38 35 (9%) Wholesale Access lines 502 496 (1%) Wholesale SABB* 117 151 29% Wholesale LLU** 9 8 (19%) Total 1,368 1,360 (1% ) Net increase (decrease) in quarter 19 (3) Retail Voice traffic (minutes in quarter) 388 336 (13%) BroadbandLines ('000) Retail 443 443 - Wholesale 424 460 9% Total 867 903 4% Net Growth in quarter 13 7 Mobile Customers ('000) Prepaid handsets 562 533 (5%) Prepaid MBB 7 9 18% Total prepaid base 569 542 (5%) Postpaid handsets (including M2M) 461 477 3% Postpaid MBB 36 38 8% Total postpaid base 497 515 4% Total 1,066 1,057 (1% ) Net Mobile additions/(losses) in quarter ('000) Prepaid base 8 (5) Postpaid base (1) 1 Total base movement 7 (4) ARPU'S € N2 & N3 Consumer Blended ARPU 45.5 47.6 5% WLR PSTN ARPU 15.8 16.1 2% BitstreamARPU (including SABB) 14.7 16.3 11% Prepaid ARPU (including MBB post MTR) 15.6 15.0 (4%) Postpaid ARPU (including MBB/M2M post MTR) 36.2 33.8 (6%) Prepaid ARPU (including MBB before MTR) 16.0 16.2 1% Postpaid ARPU (including MBB/M2M before MTR) 36.9 36.0 (2%) Closing Headcount 3,414 3,235 (5% ) *SABB - Standalone Broadband **LLU - Local Loop Unbundled

10 eircom Holdings (Ireland) Limited Basis of preparation This financial information has been prepared to make available certain unaudited condensed consolidated financial information to the holders of the group's Senior Secured Notes. Accordingly, the group has not prepared this financial information in accordance with IAS 34 – “Interim Financial Information” and has not carried out an impairment review of the carrying value of goodwill and other non-current assets as at 30 September 2017.

This condensed interim financial information has been prepared on the going concern basis, which assumes that eircom Holdings (Ireland) Limited will continue in operational existence for the foreseeable future.

The financial information, as at and for the period ended 30 September 2017, in respect of the group has been prepared using the same accounting policies as applied for the year ended 30 June 2017. For a more complete discussion of our significant accounting policies and other information, including our critical accounting judgements and estimates, this report should be read in conjunction with the financial statements of EHIL for the year ended 30 June 2017.

Reconciliation of statutory financial statements(1) to the results presented in the management discussion and analysis section within this quarterly document In the quarter ended 30 September 2016 In the quarter ended 30 September 2017 Reported Adjusted Statutory Reported Adjusted Statutory €m €m €m €m €m €m Revenue 327 (4) 323 316 (4) 312 Operating costs excluding non-cash pension charge and fair value lease credits (205) 1 (204) (191) 1 (190) Adjusted EBITDA 122 (3) 119 125 (3) 122 Closing Cash 141 (10) 131 126 (7) 119 (1) The statutory financial statements are prepared in accordance with IFRS accounting principles and include the results of the group’s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis.

The management discussion and analysis section of this quarterly report presents results on a management accounting basis and therefore includes the results of the group’s joint ventures on a proportionate basis, reflected in group revenue, operating costs and EBITDA.

11 eircom Holdings (Ireland) Limited Reconciliation of earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment to operating profit Three months ended Sept 2016 Three months ended Sept 2017 €m €m Operating profit 23 24 Profit on disposal of property, plant and equipment ("PPE") (2) - Exceptional items 3 2 Non-cash pension charge 5 3 Operating profit before non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment 29 29 Depreciation 66 70 Amortisation 26 25 EBITDA before non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment 121 124 IFRS 3 unfavourable lease fair value adjustment (2) (2) Adjusted EBITDA before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment 119 122 EBITDA of joint ventures using proportionate consolidation 3 3 Reported EBITDA* before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment 122 125 Reported EBITDA* before non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment is split as follows: Fixed line 109 110 Mobile 13 15 122 125 * Reported EBITDA includes the results of the group’s joint ventures on a proportionate basis.

The statutory basis includes the results of the group’s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis.

12 eircom Holdings (Ireland) Limited Consolidated Income Statement – unaudited For the three-month period ended 30 September 2017 Notes 30 Sept 2016 30 Sept 2017 €m €m Revenue 3 323 312 Operating costs excluding amortisation, depreciation and exceptional items (207) (191) Amortisation 3 (26) (25) Depreciation 3 (66) (70) Exceptional items 3, 4 (3) (2) Profit on disposal of property, plant and equipment 2 - Operating profit 3 23 24 Finance costs – net 5 (58) (25) Share of profit of joint venture 1 2 (Loss)/profit before tax (34) 1 Income tax credit/(charge) 6 1 (1) Loss for the period (33) - Group statement of comprehensive income – unaudited For the three-month period ended 30 September 2017 30 Sept 2016 30 Sept 2017 €m €m Loss for the financial period attributable to equity holders of the parent (33) - Other comprehensive (expense)/income: Items that will not be reclassified to profit or loss Defined benefit pension scheme remeasurement (losses)/gains: - Remeasurement (loss)/gain in period (127) 22 - Tax on defined benefit pension scheme remeasurement losses/(gains) 16 (3) (111) 19 Items that may be reclassified subsequently to profit or loss Net changes in cash flow hedge reserve: - Fair value loss in period - (1) Currency translation differences (1) - (1) (1) Other comprehensive (expense)/income, net of tax (112) 18 Total comprehensive (expense)/income for the financial period (145) 18 The accompanying notes form an integral part of the condensed interim financial information.

13 eircom Holdings (Ireland) Limited Consolidated Balance Sheet – unaudited As at 30 September 2017 Notes 30 June 2017 30 Sept 2017 €m €m Assets Non-current assets Goodwill 212 212 Other intangible assets 355 350 Property, plant and equipment 1,434 1,438 Investment in joint venture 3 5 Deferred tax assets 3 2 Other assets 15 15 2,022 2,022 Current assets Inventories 16 16 Trade and other receivables 7 196 224 Restricted cash 18 5 Cash and cash equivalents 142 119 372 364 Total assets 2,394 2,386 Liabilities Non-current liabilities Borrowings 8 2,236 2,238 Derivative financial instruments - 1 Trade and other payables 128 124 Deferred tax liabilities 44 43 Retirement benefit liability 9 258 243 Provisions for other liabilities and charges 10 110 106 2,776 2,755 Current liabilities Derivative financial instruments 5 4 Trade and other payables 438 434 Current tax liabilities 10 14 Provisions for other liabilities and charges 10 67 63 520 515 Total liabilities 3,296 3,270 Equity Equity share capital - - Capital contribution 54 54 Cash flow hedging reserve 2 1 Retained loss (958) (939) Total equity (902) (884) Total liabilities and equity 2,394 2,386 The accompanying notes form an integral part of the condensed interim financial information.

14 eircom Holdings (Ireland) Limited Consolidated cash flow statement – unaudited For the three-month period ended 30 September 2017 Notes 30 Sept 2016 30 Sept 2017 €m €m Cash flows from operating activities Cash generated from operations 11 92 75 Interest paid (22) (15) Net cash generated from operating activities 70 60 Cash flows from investing activities Purchase of property, plant and equipment (PPE) (72) (73) Purchase of intangible assets (20) (23) Proceeds from sale of PPE 6 - Restricted cash 1 13 Net cash used in investing activities (85) (83) Cash flows from financing activities Repayment on borrowings (201) - Proceeds from issuance of 4.5% Senior Secured Notes 200 - Premium on issuance of 4.5% Senior Secured Notes 3 - Interest advanced on issuance of 4.5% Senior Secured Notes 1 - Debt issue costs (2) - Debt modification fees (3) - Net cash used in financing activities (2) - Net decrease in cash, cash equivalents and bank overdrafts (17) (23) Cash, cash equivalents and bank overdrafts at beginning of period 148 142 Cash, cash equivalents and bank overdrafts at end of period 131 119 The accompanying notes form an integral part of the condensed interim financial information.

15 eircom Holdings (Ireland) Limited Consolidated statement of changes in shareholders’ equity – unaudited For the three-month period ended 30 September 2017 Equity share capital Capital contribution Cash flow hedging reserve Retained loss Total equity €m €m €m €m €m Balance at 30 June 2016 - 52 2 (836) (782) Loss for the period ( 33) (33) Defined benefit pension scheme remeasurement loss ( 127) (127) Tax on defined benefit pension scheme remeasurement loss - 16 16 Currency translation differences ( 1) (1) Total comprehensive expense ( 145) (145) Capital contribution in respect of MIP equity value event - 2 - - 2 Balance at 30 September 2016 - 54 2 (981) (925) Balance at 30 June 2017 - 54 2 (958) (902) Loss for the period - Defined benefit pension scheme remeasurement gain - 22 22 Tax on defined benefit pension scheme remeasurement gain ( 3) (3) Cash flow hedges: - Fair value loss in year ( 1) - (1) Total comprehensive (expense)/income ( 1) 19 18 - - Balance at 30 September 2017 - 54 1 (939) (884) The accompanying notes form an integral part of the condensed interim financial information.

16 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited 1. General information eircom Holdings (Ireland) Limited ("the company’ or “EHIL") and its subsidiaries together (“the group” or “eircom Holdings (Ireland) Limited group” or “EHIL Group”), provide fixed line and mobile telecommunications services in Ireland. This condensed consolidated interim financial information was approved for issue on 3 November 2017. 2. Basis of preparation This financial information has been prepared to make available certain unaudited condensed consolidated financial information to the holders of the group's Senior Secured Notes.

Accordingly, the group has not prepared this financial information in accordance with IAS 34 – “Interim Financial Information” and has not carried out an impairment review of the carrying value of goodwill and other non- current assets as at 30 September 2017.

This condensed interim financial information has been prepared on the going concern basis, which assumes that eircom Holdings (Ireland) Limited will continue in operational existence for the foreseeable future. The financial information, as at and for the period ended 30 September 2017, in respect of the group has been prepared using the same accounting policies as applied for the year ended 30 June 2017. For a more complete discussion of our significant accounting policies and other information, including our critical accounting judgements and estimates, this report should be read in conjunction with the financial statements of EHIL for the year ended 30 June 2017.

3. Segment information The group provides communications services, principally in Ireland. The group is organised into two main operating segments: fixed line and mobile. The segment results for the three-months period ended 30 September 2017 are as follows: Fixed line €m Mobile €m Inter-segment €m Reported* €m Adjusted €m Statutory* €m Revenue 239 85 (8) 316 (4) 312 EBITDA ** 110 15 - 125 (3) 122 Non-cash lease fair value credits 2 - - 2 - 2 Non-cash pension charges (3 ( 3) - (3) Amortisation (19) (6) - (25) - (25) Depreciation (63) (8) - (71) 1 (70) Exceptional items (2 ( 2) - (2) Operating profit 25 1 - 26 (2) 24 The segment results for the three-months period ended 30 September 2016 are as follows: Fixed line €m Mobile €m Inter-segment €m Reported* €m Adjusted €m Statutory* €m Revenue 249 88 (10) 327 (4) 323 EBITDA ** 109 13 - 122 (3) 119 Non-cash lease fair value credits 2 - - 2 - 2 Non-cash pension charges (5 ( 5) - (5) Amortisation (20) (6) - (26) - (26) Depreciation (61) (7) - (68) 2 (66) Exceptional items (3 ( 3) - (3) Profit on disposal of PPE 2 - - 2 - 2 Operating profit 24 - - 24 (1) 23 * Reported EBITDA includes the results of the group’s joint ventures on a proportionate basis.

The statutory basis includes the results of the group’s joint ventures using the equity accounting basis rather than on a proportionate consolidation basis. ** EBITDA is earnings before interest, taxation, amortisation, depreciation, non-cash lease fair value credits, non-cash pension charges, exceptional items and profit on disposal of property, plant and equipment.

17 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited (continued) 4. Exceptional items 30 Sept 2016 30 Sept 2017 €m €m Restructuring programme costs 1 1 Management incentive plan 2 - Strategic review costs - 1 3 2 The group has adopted an income statement format which seeks to highlight significant items within group results for the period. The group believe that this presentation provides additional analysis as it highlights significant or one-off items. Judgement is used by the group in assessing the particular items, which by virtue of their scale and nature are disclosed in the group income statement and related notes as exceptional items.

Restructuring programme costs The group included an exceptional charge of €1 million for restructuring programme costs in respect of staff exits in the period ended 30 September 2017 (30 September 2016: €1 million). The exceptional charge of €1 million at 30 September 2017 is an IAS 19 (Revised) defined benefit pension charge in relation to past service costs of €1 million. Management incentive plan During the period ended 30 September 2016, the group recognised a charge of €2 million in its income statement, with a corresponding increase in equity, in respect of contractual rights under the MIP awarded by the holding company, eircom Holdco S.A., to the group's employees, for which the group has no obligation to make any payment.

Strategic review costs The group recognised an exceptional charge of €1 million for strategic review costs incurred in the period ended 30 September 2017. 5. Finance costs – net 30 Sept 2016 30 Sept 2017 €m €m (a) Finance costs: Interest payable on bank loans and other debts 29 23 Interest amortisation on non-current borrowings 6 1 Net interest cost on net pension liability 1 1 Amortisation of debt issue costs and debt modification fees 1 1 Fair value movements on derivatives not qualifying for hedge accounting (2) (1) 35 25 Loss on extinguishment of debt 21 - Write off of debt issue costs and debt modification fees 2 - 58 (b) Finance income: Interest income - - - - Finance costs – net 58 25 6.

Income tax credit The tax on the group’s (loss)/profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the (loss)/profit of the group as follows: - 30 Sept 2016 30 Sept 2017 €m €m (Loss)/profit before tax (34) 1 Tax calculated at Irish standard tax rate of 12.5% (4) - Effects of:- Non-deductible expenses 3 1 Tax (credit)/charge for the period (1) 1

18 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited (continued) 7. Trade and other receivables During the period ended 30 September 2017, the group recognised a provision for impaired receivables of €2 million (30 Sept 2016: €2 million), reversed provisions for impaired receivables of €Nil (30 Sept 2016: €Nil) and utilised provisions for impaired receivables of €1 million (30 Sept 2016: €1 million). The creation and reversal of provisions for impaired receivables have been included in “operating costs” in the income statement.

8.

Borrowings The maturity profile of the carrying amount of the group’s borrowings is set out below. Within 1 Year Between 1 & 2 Years Between 2 & 5 Years After 5 Years Total €m €m €m €m €m As at 30 Sept 2017 Bank borrowings (Facility B - 1,600 1,600 Unamortised fair value difference on borrowings ( 43) (43) Debt modification fees ( 12) (12) - 1,545 1,545 4.5% Senior Secured Notes due 2022 - - 700 - 700 Debt issue costs ( 7) - (7) - - 693 - 693 - - 693 1,545 2,238 As at 30 June 2017 Bank borrowings (Facility B - 1,600 1,600 Unamortised fair value difference on borrowings ( 44) (44) Debt modification fees ( 13) (13) - 1,543 1,543 4.5% Senior Secured Notes due 2022 - - 700 - 700 Debt issue costs ( 7) - (7) - - 693 - 693 - - 693 1,543 2,236 At 30 September 2017, the group has Senior Bank borrowings of €1,600 million with a maturity date of 18 April 2024 and 4.5% Senior Secured Notes of €700 million with a maturity date of 31 May 2022.

The borrowings under the Senior Facilities Agreement were recognised initially in accordance with IAS 39 at their fair value on the date of recognition, 11 June 2012, which was estimated to be 77% of the par value of the liability. The difference between the fair value on initial recognition and the amount that was payable on the maturity date is being amortised over the expected life of the borrowings through finance costs in the income statement using the effective interest method under IAS 39. The remaining unamortised amount at 30 September 2017 was €43 million.

Interest accrued on borrowings at 30 September 2017 is €14 million (30 June 2017: €6 million).

This is included in trade and other payables.

19 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited (continued) 9. Pensions The group's pension commitments are funded through separately administered Superannuation Schemes and are principally of a defined benefit nature. The group undertakes a full review of the retirement benefit liability at each quarter end in accordance with IAS 19 (Revised). The balance sheet presented as at 30 September 2017 reflects the IAS 19 (Revised) deficit of €243 million as at 30 September 2017.

Pension scheme obligation The status of the principal scheme at 30 September 2017 is as follows: 30 June 2017 30 Sept 2017 €m €m Present value of funded obligations 4,455 4,459 Fair value of scheme assets (4,197) (4,216) Liability recognised in the Balance Sheet 258 243 Assumptions of actuarial calculations The main financial assumptions used in the valuations were: At 30 June 2017 At 30 Sept 2017 Rate of increase in salaries 1.55% 1.55% Rate of increase in pensions in payment 1.55% 1.55% Discount rate 2.10% 2.10% Inflation assumption 1.65% 1.65% Mortality assumptions – Pensions in payment – Implied life expectancy for 65 year old male 88 years 88 years Mortality assumptions – Pensions in payment – Implied life expectancy for 65 year old female 90 years 90 years Mortality assumptions – Future retirements – Implied life expectancy for 65 year old male 91 years 91 years Mortality assumptions – Future retirements – Implied life expectancy for 65 year old female 93 years 93 years The above assumptions reflect the imposition of a cap on the increases in pensionable pay to the lower of CPI, salary inflation or agreed fixed annual rates.

20 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited (continued) 10. Provisions for other liabilities and charges TIS Annuity Scheme Restructuring Costs Onerous Contracts Asset Retirement Obligations Deferred consideration Other Total €m €m €m €m €m €m €m At 30 June 2017 14 34 43 50 4 32 177 Charged to consolidated income statement: - Additional provisions - Utilised in the financial period (1) (3) (2 ( 2) (8) At 30 September 2017 13 31 41 50 4 30 169 Provisions have been analysed between non-current and current as follows: 30 June 2017 30 Sept 2017 €m €m Non-current 110 106 Current 67 63 177 169 11.

Cash generated from operations 30 Sept 2016 30 Sept 2017 €m €m Loss after tax (33) - Add back: Income tax (credit)/charge (1) 1 Share of profit of joint venture (1) (2) Finance costs – net 58 25 Operating profit 23 24 Adjustments for: - Profit on disposal of property, plant and equipment (2) - - Depreciation and amortisation 92 95 - Non-cash lease fair value credits (2) (2) - Non cash retirement benefit charges 5 3 - Restructuring programme costs 1 1 - Non cash exceptional items 2 - Cash flows relating to restructuring, onerous contracts and other provisions (12) (10) Changes in working capital Inventories (2) - Trade and other receivables (9) (38) Trade and other payables (4) 2 Cash generated from operations 92 75

21 eircom Holdings (Ireland) Limited Selected notes to the condensed interim financial information – unaudited (continued) 12. Post Balance Sheet Events There have been no significant events affecting the group since the period ended 30 September 2017. 13. Contingent liabilities There have been no material changes in our contingent liabilities since the publication of the financial statements of EHIL in the bondholder’s report for the year ended 30 June 2017. 14. Guarantees There have been no material changes in our credit guarantees and in derivatives since the publication of the financial statements of EHIL in the bondholder’s report for the year ended 30 June 2017.

15. Seasonality Fixed line The group does not believe that seasonality has a material impact on our fixed line business. Mobile The group’s mobile business tends to experience an increase in sales volumes in the weeks approaching Christmas due to the seasonal nature of its retail business. The group’s mobile business experiences significant postpay and prepay subscriber growth and related costs of handset subsidies and commissions in November and December. Visitor roaming revenues are also seasonally significant because Ireland is a popular tourist destination during the summer months.

16.

Commitments Operating lease commitments The group’s operating lease contractual obligations and commitment payments were €318 million at 30 September 2017 (30 June 2017: €327 million). The payments due on operating leases are in respect of lease agreements in respect of properties, vehicles, plant and equipment for which the payments extend over a number of years. Capital commitments The group’s capital contractual obligations and commitment payments were €54 million at 30 September 2017 (30 June 2017: €53 million).

17. Related party transactions Management incentive plan The management incentive plan ("MIP") was introduced in the year ended 30 June 2013 by the group’s parent company, eircom Holdco SA, for certain directors and senior executives in the group. During the period ended 30 September 2017, the group recognised a charge of €Nil (30 September 2016: €2 million) in its income statement, with a corresponding increase in equity, in respect of contractual rights under the MIP awarded by the parent company, eircom Holdco S.A., to the group's employees, for which the group has no obligation to make any payment.

There have been no material changes in our related party transactions since the publication of the financial statements of EHIL in the bondholder’s report for the year ended 30 June 2017.

22 Management discussion and analysis on results of operations for the quarter ended 30 September 2017 The amounts and commentary presented in the management discussion below include the results of the group’s joint venture in Tetra Ireland Communications Limited (“Tetra”) on a proportionate consolidation basis. In accordance with IFRS 11 ‘Joint Arrangements’ the EHIL consolidated financial statements for the quarter ended 30 September 2017 applies the equity method of accounting for the investment in Tetra.

Certain comparative figures have been re-grouped and re-stated where necessary on the same basis as those for the current financial quarter. Revenue The following table shows a segmental split of revenues for the period from our fixed line and mobile businesses: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Fixed line services and other revenue 249 239 (4) Mobile services revenue 88 85 (3) Total segmental revenue 337 324 (4) Intracompany eliminations (10) (8) (16) Total revenue 327 316 (4) Reported group revenue of €316 million for the quarter decreased by 4% when compared to the corresponding prior year period.

Underlying revenue of €322 million, which excludes the impact of reductions in Mobile Termination Rates (“MTRs”) and foreign exchange (“FX”) movements, decreased by €7 million or 2% year on year driven mainly by a reduction in low margin revenues within the eir business segment.

Fixed line services and other revenue The following table shows revenue from the fixed line segment, analysed by major products and services, and the percentage change for each category, for the periods indicated: For the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m € m Access (Rental and Connections) 119 121 2 Voice Traffic (including Foreign Inpayments) 60 53 (12) Data Services 24 24 (2) Other Products and Services 46 41 (12) Total fixed line services and other revenue 249 239 (4) Total fixed line services and other revenues for the quarter ended to 30 September 2017, before intra company eliminations, decreased by 4% compared to the corresponding prior year period.

The decrease was driven by traditional voice revenue declines of 12% as well as a decrease in other products and services revenue of 12% when compared to the corresponding prior year period. This was offset by an increase in access rental and connections driven by growth in broadband.

23 eircom Holdings (Ireland) Limited Access (rental and connections) The following table shows rental, connection and other charges and the percentage changes for the periods indicated: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Total access revenue Retail PSTN/ISDN rental and connection 52 49 (5) Wholesale PSTN/ISDN/LLU rental and connection 27 27 - Broadband rental and connection 40 45 13 Total access revenue 119 121 2 Access paths (in thousands at period end, except percentages) Retail Access Lines 702 670 (5) Wholesale Access Lines 502 496 (1) Wholesale LLU 9 8 (19) SABB 155 186 20 Total PSTN/ISDN/LLU/SABB 1,368 1,360 (1) Broadband and Bitstream (in thousands at period end, except percentages) Retail Broadband 443 443 - Wholesale Broadband 424 460 9 Total Broadband (including SABB) 867 903 4 Access revenues for the quarter ended 30 September 2017 of €121 million increased by 2% compared to the corresponding prior year quarter.

Growth was driven by an increase in broadband revenues, partially offset by a decrease in retail line rental and connection revenues.

Retail line rental and connection revenues decreased by 5% in the quarter ended 30 September 2017, compared to the corresponding prior year quarter, mainly due to continuing declines in PSTN and ISDN lines. Retail access lines at 30 September 2017 were 670,000, a reduction of 5% compared to 30 September 2016. Wholesale access lines and revenue remained broadly flat year on year when compared to the prior year quarter ended 30 September 2016. Broadband revenue for the quarter of €45 million increased by 13% compared to the corresponding prior year quarter. The wholesale broadband base of 460,000, increased by 36,000 compared to the corresponding prior year period.

The retail broadband customer base was 443,000 at 30 September 2017, remaining broadly flat compared to the prior year period. We continue to address retail fixed line losses and broadband churn with a number of programmes, including rolling out high speed broadband and offering bundled telecommunications services including broadband, TV, mobile, telephony and eir sport content. As at 30 September 2017, the rollout of our high speed fibre network had passed 72% of Irish premises and 574,000 retail and wholesale customers were connected to high speed broadband services, up 111,000 customers when compared to the corresponding prior year period.

In the same period, 74,000 customers were availing of TV, up 16,000 subscriptions year on year and 48% of the consumer broadband base was availing of exclusive eir sport content. As of 30 September 2017, 26% of eir’s consumer households were taking 3 or more services, an increase of 4 percentage points compared to the corresponding prior year period.

24 eircom Holdings (Ireland) Limited Traffic The following table shows total traffic revenue and volumes and the percentage changes for the periods indicated: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Revenue Retail traffic 42 37 (12) Wholesale traffic (including Foreign Inpayments) 18 16 (12) Total traffic revenue 60 53 (12) Traffic (in millions of minutes, except percentages) Retail 388 336 (13) Wholesale 1,154 1,018 (12) Total traffic minutes 1,542 1,354 (12) Overall Group traffic revenue decreased by 12% in the quarter ended 30 September 2017 compared to the corresponding prior year period.

Retail and wholesale voice traffic revenue for the quarter ended 30 September 2017 both decreased by 12% respectively, compared to the corresponding prior year quarter reflecting a reduction in traffic usage and MTRs (impact to wholesale only). Excluding the impact of MTR’s (Gross Margin neutral) wholesale traffic revenue decreased by 3% compared to the corresponding prior year period. Data communications The following table shows information relating to revenue from data communications products and services and the percentage change for the periods indicated: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Data services revenue Leased lines 14 13 (8) Switched data services 4 4 (8) Next generation data services 6 7 17 Total data services revenue 24 24 (2) Revenue from data communications remained broadly stable compared to the corresponding prior year period.

Revenue from Leased Lines decreased by 8% compared to the corresponding prior year quarter which was offset by an increase in next generation data services reflecting the shift from legacy products to next generation services.

25 eircom Holdings (Ireland) Limited Other products and services Other products and services revenue includes our 56% share of revenue from Tetra, eir sports, our operations in UK/NI, operator services, managed services, data centres and other revenue. The following table shows information relating to revenue from other products and services, and the percentage change for the periods indicated: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 € m € m Operator services 2 2 (12) Managed services and solutions 14 12 (19) Tetra 5 5 2 UK 7 6 (10) Data centre 4 2 (39) Other revenue 14 14 (2) Other products and services revenue 46 41 (12) Revenue from other products and services for the quarter ended 30 September 2017, decreased by 12% compared to the corresponding prior year quarter.

Operator Services revenue decreased by 12% as a result of reduced calls to our 11811 directory enquiries service. Managed services revenue decreased by 19% due to a reduction in low margin revenue related to eir Business. Tetra revenue of €5 million was stable year on year. Reported UK/NI revenue decreased by 10% driven by a weakness in sterling – underlying revenue was broadly stable compared to the corresponding prior year period. While datacentre revenues decreased by 39% compared to the prior year quarter, the contribution margin was largely neutral. Other revenue remained broadly stable year on year; growth in TV income was offset by a decrease in eir sport revenue due to the loss of a wholesale contract during the corresponding prior year quarter.

26 eircom Holdings (Ireland) Limited Mobile services revenue The following table shows revenue from Mobile services, analysed by major products and services: In the quarter ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Prepay handset 26 24 (7) Postpay handset (incl. M2M) 52 50 (4) Mobile broadband 2 3 9 Roaming 2 3 102 Other 6 5 (5) Total mobile services revenue 88 85 (3) Total subscribers (‘000) Prepay handset customers 562 533 (5) Postpay handset customers (incl. M2M) 461 477 3 Mobile broadband customers 43 47 9 Of which are prepay customers 7 9 18 Of which are postpay customers 36 38 8 Total subscribers 1,066 1,057 (1) Mobile services revenue comprises prepay and postpay revenues including interconnect, mobile broadband and machine to machine.

Other revenue is derived mainly from device sales and wholesale foreign roaming revenue. Mobile revenues for the quarter include the impact of regulatory MTR reductions of €6 million, which compares to a €2 million impact during the corresponding prior year quarter. MTR reductions are broadly EBITDA neutral for the Group. Reported mobile revenue of €85 million for the quarter ended 30 September 2017 decreased by 3% when compared to the corresponding prior year quarter. Adjusting for the impact of the reduction in MTRs, underlying mobile revenue of €91 million for the quarter ended 30 September 2017 increased by 1% compared to the same period in the prior year.

Reported postpay handset revenue decreased by 4% mainly due to MTR reductions. Underlying postpay revenue increased by 1% when adjusted for the impact of MTR reductions compared to the corresponding prior year period mainly due to a year on year increase in postpay subscribers of 3%. Reported prepay handset revenue declined by 7% (revenue decline of 2% when adjusted for the impact of MTR reductions) when compared to the corresponding prior year period. Excluding the effect of MTRs, the decline in prepay handset revenues was mainly due to a decline in prepay customers of 5% as a result of customers migrating to postpay as well as increased competition.

At 30 September 2017 there were 1,057,000 total mobile subscribers. While the overall base reduced by 9,000 compared to the prior year, the mix of customers continues to improve. The proportion of postpay customers (including mobile broadband and M2M) within our base has increased from 47% at 30 September 2016 to 49% at 30 September 2017, representing an increase of 18,000 net additional postpay subscribers (including mobile broadband and M2M).

27 eircom Holdings (Ireland) Limited Operating costs before amortisation, depreciation and exceptional items The following table shows information relating to our operating costs before amortisation, depreciation, and exceptional items, and the percentage change for the periods indicated.

In the quarter year ended Sept 30, 2016 (unaudited) Sept 30, 2017 (unaudited) % Change 2017/2018 €m €m Cost of sales Foreign outpayments 2 2 - Interconnect 28 24 (15) Equipment cost of sales 19 17 (11) Other including subsidiaries and new business 30 27 (10) Total cost of sales 79 70 (12) Pay costs Wages and salaries and other staff costs 57 57 (1) Social welfare costs 3 3 (5) Pension cash costs—defined contribution plans 1 1 17 Pension cash costs—defined benefit plans 4 4 22 Pay costs before non-cash pension charge and capitalisation 65 65 1 Capitalised labour (16) (18) 14 Total pay costs before non-cash pension charge 49 47 (4) Non pay costs Materials and services 4 4 (12) Other network costs 4 4 8 Accommodation 25 23 (8) Sales and marketing 18 17 (5) Bad debts 1 2 N/M Transport and travel 3 3 (3) Customer services 10 9 (3) Insurance and compensation 1 1 (1) Professional and regulatory fees 3 2 (31) IT costs 6 7 11 Other non-pay costs 2 2 21 Total non-pay costs 77 74 (4) Operating costs before non-cash pension charge, amortisation, depreciation, and exceptional items 205 191 (7) Non cash pension charge/(credit) 5 3 (40) Non cash fair value lease credits (2) (2) - Operating costs before, amortisation, depreciation, and exceptional items 208 192 (8) Total operating costs for the quarter ended 30 September 2017 before non-cash pension charge, non-cash lease fair value credits, amortisation, depreciation and exceptional items decreased by 7%, compared with the corresponding quarter of the prior year.

Cost of Sales Cost of sales decreased by 12% in the quarter ended 30 September 2017 compared to the corresponding prior year quarter. Movements include:  Interconnect payments to other telecommunications operators decreased by 15% when compared to the prior year reflecting MTR reductions.  Equipment costs of sales decreased by 11% when compared to prior year due to timing of commercial investment.  Other cost of sales were 10% lower compared to the prior year, driven mainly by a corresponding reduction in eir Business ICT and datacentre revenues.

28 eircom Holdings (Ireland) Limited Pay costs Total pay costs, before non-cash pension charges, decreased by 4% in the quarter ended 30 September 2017 compared to the corresponding prior year quarter.

The decrease is mainly due to a combination of lower FTE headcount, lower contractor costs and savings from outsourcing of activities in the group. FTE headcount at 30 September 2017 was 3,235 FTE, representing a net reduction of 179 FTE compared to 30 September 2016. Total non-pay costs Non-pay costs decreased by 4% in the quarter ended 30 September 2017 compared to the corresponding prior year quarter. Key movements include:  Accommodation costs decreased by €2 million compared to the corresponding prior year quarter primarily due to lower rent costs as part of optimisation of our property portfolio.

 Customer service costs were €1 million better than the prior year quarter due to efficiencies achieved by outsourcing customer care.  Professional and regulatory fees were €1 million lower due to lower consultancy costs.  IT costs were €1 million higher, mainly driven by a focus on enhancing legacy IT systems. The remaining costs in the quarter ended 30 September 2017 were broadly in line with the corresponding prior year period. Non-cash pension charge/ (credit) The non-cash pension charge represents the difference between the amount of cash contributions that the company has agreed to make to the fund during the period, on an accruals basis, and the accounting charges recognised in operating profit in accordance with IAS 19 (Revised).

The IAS 19 (Revised) accounting charge is not aligned with the principles that the company applies in measuring its EBITDA. Therefore the non-cash pension charge is included as an adjustment in the reconciliation of EBITDA to operating profit.

Non-cash lease fair value credits The non-cash lease fair value credit included in the income statement during the period is in respect of the unfavourable lease fair value adjustment which arose on acquisition of eircom Limited. At the date of acquisition, the group was required to recognise a liability for the difference between the amount of future rental payments that had been contractually committed to and the market rent that would have been payable if those contracts had been entered into at that date. The liability is released as a credit to the income statement over the period of the relevant leases.

The IFRS accounting treatment is not aligned with the principles that the company applies in measuring its EBITDA. Therefore an adjustment for the non-cash fair value credit is included in the reconciliation of EBITDA to operating profit. Amortisation Amortisation charges for the quarter ended 30 September 2017 were €25 million, €1 million lower than the prior year quarter, due to lower amortisation on computer software.

Depreciation of property, plant and equipment The depreciation charges for the quarter ended 30 September 2017 were €71 million, €3 million higher than the prior year quarter, due to higher depreciation on Next Generation Assets (fibre). Exceptional costs The exceptional charges in the quarter ended 30 September 2017 of €2 million includes €1 million for restructuring programme costs and €1 million for strategic review costs. The restructuring programme costs of €1 million are in relation to IAS 19 (Revised) defined benefit pension past service costs on staff exits.

The exceptional charges in the quarter ended 30 September 2016 of €3 million includes €1 million for restructuring staff exits and €2 million for the management incentive plan (“MIP”).

29 eircom Holdings (Ireland) Limited Finance costs (net) The group’s net finance costs for the quarter ended 30 September 2017 of €25 million were €33 million lower than the prior year corresponding quarter, mainly due to the prior year corresponding quarter accelerated amortisation on the fair value debt adjustment of €21 million as a result of the €201 million Facility B repayment in August 2016. Also in the quarter, there were lower finance costs on amortisation on the fair value debt adjustment of €5 million and interest costs on bank borrowings and other debt of €6 million as a result of the various refinancing of Facility B borrowings in the year ended 30 June 2017.

Taxation The tax charge for the quarter ended 30 September 2017 was €1 million, compared to the prior year corresponding quarter tax credit of €1 million. The increase in tax reflects the reduction in operating charges and finance costs coupled with a reduction in the deferred tax credit year on year. Liquidity Net cash generated from operating activities Our primary source of liquidity is cash generated from operations, which represents operating profit adjusted for non-cash items which are principally depreciation, amortisation, impairment, non-cash pension charge, non-cash lease fair value credits and certain non-cash exceptional items.

Cash flows from operating activities are also impacted by working capital movements and restructuring and other provision payments.

During the quarter ended 30 September 2017, net cash generated from operating activities was €62 million compared with €72 million in the prior year corresponding quarter, a decrease of €10 million. The decrease is mainly due to an increase in net working capital (receivables) partially offset by lower interest payments of €7 million. Cash flows from investing activities Total cash used in investing activities was €83 million for the quarter ended 30 September 2017, compared with €85 million for the prior year corresponding quarter, a decrease of €2 million, due to refunds on restricted cash deposits partially offset by higher capital expenditure payments.

In addition, there were no proceeds received in the quarter from sale of properties. Cash flows from financing activities In prior year quarter ended 30 September 2016, the group issued €200 million in additional 4.5% Senior Secured Notes at an offering price of 101.5%. The €200 million issue, for which cash proceeds of €203 million were received before deduction of transaction costs, was structured as a tap issue to the €500 million Senior Secured Notes issued in June 2016. The group used the proceeds of the tap issue to repay €201 million of the pre-existing Facility B3 borrowings. Debt issue costs of €2 million on the 4.5% Senior Secured Notes and debt modification fees of €3 million on the facility B borrowings were paid in relation to the various refinancing transactions.