Greetings. And welcome to the Portugal Telecom 2011 First Quarter Results hosted by CEO, Zeinal Bava; and CFO, Luís Pacheco de Melo. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zeinal Bava, CEO for Portugal Telecom. Thank you, Mr. Bava, you maybe begin.

Okay. Thank you very much. Good afternoon, ladies and gentlemen on behalf of my team and I. I would like to thank you for being on this call. We are going to take you through the press release and the presentation, which we made available in our site. In the numbers that we just put out and following the Vivo transaction on 27 of September 2010, we’ve adjusted our 2010 financial statements in order to recognize Vivo as a discontinued operation and following the acquisition on 28 of March 2011 of a 25.3% stake in Oi and a 14.1% stake in Contax, PT’s statement of financial position at 31 of March 2011 proportionally consolidated the assets and liabilities of these stakes. In first quarter of 2011, consolidated operating revenues amounted to €871 million, down by 3.9% year-on-year. EBITDA reached €357 million, down by 5.2% year-on-year. Consolidated EBITDA margin stood at 41%. Our net income increased by 29.3% to €130 million and our basic earnings per share stood at about €0.15. In first quarter 2011, our CapEx decreased 25%, as you know there is some seasonality in CapEx and a decrease year-on-year to €122 million, equivalent to about 14% of revenues. And as you are aware, our CapEx is being primarily directed to the investment in the rollout of new technologies and services, namely the FTTH network and TV service, and to investments in 3G and 3.5G. In the first quarter 2011, our EBITDA minus CapEx amounted to €235 million, that’s an increasing of 9.9% year-on-year. EBITDA and this is what highlighting, the EBITDA minus CapEx of the Portuguese businesses notwithstanding challenging economic conditions amounted to €229 million, increasing by 7.4% year-on-year. The operating cash flow and my CFO, Luís Pacheco de Melo will take you through that in a lot…

Okay. Thank you very much Luís. So just to wrap up and perhaps, I’ll just highlight a few points. The first is, we are comfortable with the consensus. Although, we understand that the economic environment is very challenging and that we have the commitment to remain as competitive as we can in this market, we are now prepared to loss share in mobile. We actually want to continue to build market share in pay-TV and broadband. So with that caveat, I’ll say that we’re very comfortable with the consensus. In the Portuguese market we believe that, we’ve seen what the impact of the austerity measures are likely to be, we have elections on the 5th of June. So post that, I think, we will have to maintain close dialogue with you so that you can be up to speed as to what’s going on in our market here. Having said that, 58% of our revenues are generated outside Portugal and almost 40 odd percent of our EBITDA is generate also outside Portugal, so that means that our geographic exposure hedges us against any potential headwinds that we may have in the Portuguese market that may end up being unexpected. And you have seen in this quarter, our determination, our results to cut costs and all cost lines have come down in the fixed line operating costs were down 10.5%, in mobile cost were down 12.5%, you saw margin improvements in fixed line about 200 basis points, you saw margins in mobile at 47%. We also saw our cash flow reach €453 -- free cash flow reached €453.5 million and our EBITDA minus CapEx reached €235 million in the domestic market. Our EBITDA minus CapEx in our fixed line business was up more than 38%, this I think boost the unreasonable…

(Operator Instructions) Our first question comes from Daniel Morris with JP Morgan. Please state your question.

Yeah. Good afternoon. A couple of questions please. Firstly, the CapEx run rate in the first quarter seem to suggest, you might be holding back a bit on the fibre investment in terms of the services under household, as well as benefiting from the lower customer investment. Could you update us on you fibre plans and what the key investments was given the economic backdrop and also expectation to domestic CapEx this year? Secondly, could you comment on the spectrum auction from those from those Managem when do you expect the auction to occur, which you bid on a little block under the current pricing and how do you feel about the implied megahertz for pop pricing, which I think is around €0.50, if I remember? Thank you.

Okay. Thank you, Daniel. With regard to CapEx, we as you know have revised our guidance from early indication of €725 to roughly having a CapEx inline with what we’ve spend last year, which was roughly $657 million for the Portuguese businesses. Of course, if you look at the run rate in the first quarter, it will seem to suggest that we can reduce CapEx well below €657. But I think I would not advise you to do that right now. I think we continue to stick to the €657 million guidance we’ve provided, perhaps more robust now than in the past, we’ve set in the past €650 to €700, I think now it’s probably going to be €650, €650 sort of €657. With regard to our fibre investments, we continue to believe that it is an investment that creates value. We have intention to build an extra 600,000. We would like to construct most of those 600,000 this year, by the end of the year. Having said that, as we have indicated in the past, the ability and the agility of Portugal Telecom allows us to alter any plans that we have in pretty short notice. So looking at things as they are today, we continue to believe that we should progress those investments also because what we are seeing is that in those areas where we have copper and fibre people are buying more fibre. We also believe that the value proposition of fibre is allowing us win back customers that move from Portugal Telecom to a cable service in the past few years. So in those urban areas where you have more GDP per capita we are gaining market share and very important and valuable market share. So, and also when I look at the maintenance and…

Thanks very much.

Our next question comes from Georgios Ierodiaconou with Citi. Please state your question.

Thank you. Good afternoon. I have two questions. The first one on OpEx in the guideline, we’re seeing around 12% reduction in the employee expenses this quarter, for what I understood during the presentation, you expect this to carry on the similar pace for the rest of the year. Is that consistent with worth you would expect to see going forward or is it – is project that will exhaust this year? And perhaps, if you could give us an indication whether in the past you commented that by the end of 2011, you hope to be delivering positive EBITDA in fixed is that still something you believe is achievable? And my second question is on mobile, during the fourth quarter conference call, you kind of prepare does for an increase in commercial costs or maybe decline in margins. Do I sense that this has changed over the last three month and is there chance that carries out the competitive environment has improved or is it just something that you’re trying to be a bit more conscious perhaps earlier? Thank you.

Okay. Thank you. With regard to the adjustment that we wanted to do in wages and salaries, I think we have done those. And as you know, we are believers in business process reengineering and bottom up cost cutting and therefore, what we like to do is to, number one, ensure that we simplify processes so that – simplify processes so that we can reduce costs. I think what we’re doing in customer care is one very good example of it. The fact that we have launched our healthcare platform, we believe that is one interesting avenue for us to reduce substantially customer care cost in terms of future. So our priorities to do business process reengineering. Number two, is to reduce cash cost at Portugal Telecom, so if there are function activities that have been outsourced that we can insource and use that to crystallize efficiency gains that we are seeing. We will prefer to do that instead. So I think with regard to adjustments that we wanted to do, in terms in the wages and salaries line, I think we have done what we have to do. We will of course continue to work costs down in all other areas and I think as you’ll have seen in our press release in all areas you have seen cost reductions and we have already launched a number of initiatives in the last, I would say we started this process, seven, eight months ago, which is, in our company a very continue -- is a continuous process, we have always been very cost conscious, but we have accelerated some of the decisions in the last six, seven months, we have launched few of this three months ago. And again, just for you to know, next couple of days I’ll be…

Thank you. Our next question comes from Jesus Romero with Merrill Lynch. Please state your question.

Yeah. I have two questions. The first one on fibre, you have a 147,000 customers, I’m wondering, you can give us the indication of what are the ARPU for this customer pace, I know you don’t disclose that in the press release, but as you could give us some sense of what the numbers could be and what kind of penetration you expect at the end of the year when you get to the 1.6 million plus home spot? And then the second one on mobile, we’re seeing a very improvement in the customer revenue in the first quarter you still have difficult comparisons in the next couple of quarters. But in the relation is a bit of a, do you see a bit of an improvement in the next couple of quarters, have we seen the worse in service revenue decline with 12% in Q1? Thanks.

Okay. Thank you. With regard to fibre – thank you Jesus. With regard to fibre and we are seeing penetration of like 23% if you take into account that not all homes are available for sales day one. So 23% is extremely encouraging. I mean in the industry, I would say that that’s a very good benchmark, considering that we have made fibre available in this market and it’s being like 14, 15 months. And we offer three speeds in terms of for fibre customer, 100 megs, 50 megs and 24 megs. Clearly, the most popular speed is 24 megs. Having said that, I would like to say that as people understand the advantages of having more bandwidth, more speed as they become a custom to having 3D content, more HD content, we have no doubts in our mind that we will enable those customers, with much higher speeds in the future. And also the churn of this customers is extremely encouraging, if I may perhaps some of the churn that we are seeing is explained by, I would say not very good quality sales that we have done, sales to those customers that are incapable of paying for such a premium service, but if you were to adjust for that. I would say that the churn of the fibre service is significantly better to that of our ADSL copper, perhaps I would say kind of 10 percentage points lower, which in my view is very good, if you thinking along the lines of customer lifetime value. What is the ARPU enhancement, somewhere between €3 and €5, it depends also on the promotions. Now this is the first year of the fibre rollout and of course, we have promotions out there with these early adaptors of this new technology. And…

Thank you.

Our next question comes from Matthew Robilliard with Exane BNP Paribas. Please state your question.

Good afternoon. Two questions for you. First, with regard to Timor, I know its early days, but, maybe if you could talk a little about what you think some of the priorities, you mentioned corporate restructuring but thinking more about the market, you think from a regulatory point of view there are some evolutions that could be needed, interesting in the Brazilian market? Second, with regards to financial expenses, Luis highlighted very low financial expenses, financial interest that you paying and I wanted to know with regards to what was coming to for the Q2 the €4.3, is that included the financial costs that will be related to Timor, which I would have expected to be quite materially high and bringing the average higher. So, just wanted to clarify if the €4.3, you’re talking about for Q2 and the rest of the year doing through to the financial expenses of -- that will consolidate with Timor? And finally, just a point of -- just to check, you mentioned you’re comfortable with the consensus, if you could maybe just give us a few numbers to where you think the consensus is? Thank you.

Okay. Thank you. With regard Timor and I think as I have mentioned before, we see that clearly, there are three levers in terms of unleashing value. Clearly, one of them relates to the restructuring for -- if aren’t simplifying the corporate structure, is one very big step in the right direction. I think the fact that we were able to announce this restructuring so fast, I think it confirms how good the relationship is between, for example, Portugal Telecom, iG, La Fonte and the Fundo. So I think the fact that we have been able to kind of the next – the last six weeks been able to get our heads together and then come out with such an important announcement, just make to sure that the termination, the result of all shareholders of Oi is to enhance value in the future and to reposition the company, so that it can be and it can reclaim the leadership position that it should command in-depth market. The second lever is clearly regulations. You certainly know that in the telecoms market, regulation has a direct impact on whatever strategy you may want or you may not want to implement. If regulations doesn’t allows you to offer T.V., you can now move from double-play to triple-play, if terminations rates in mobile are extremely high, you are likely to face significant fixed mobile cannibalization, which could threaten the sustainability of the business model of the fixed line. If you weigh too much on the Universal Service Obligations of income operators, like in Portugal. I mean, we are the guys that actually provide Universal Service Obligations and that can take away a lot of flexibility of the company to invest in new technologies. If you don’t make those obligations more flexible then you are…

Thank you. Luís Pacheco de Melo: Thank you very much.

Thank you. Our next question comes from Jonathan Dann with Barclays Capital. Please state your question.

Two parts. First, could you walk; you mentioned that dividend from and a dividend policy from Oi. Could you provide some clarity about whether that’s a payout ratio of earnings or cash flow? And secondly, could you provide some more color around the sort of the eventual economic stake you could end up with in Oi post the reorganization and any scenarios around take up or otherwise of the local rights?

Okay. Thank you. I think, with regard to the dividend policy, it’s only we are actually having a discussion about this, once we have restructured the company and Oi then just becomes one listed company with two classes of share boosting numbers in, where there is clarity and the cash flow is visible, so that we then can come back to the market with a statement, which we can then of course honor and then you can hold against us. I think until we have done that, it is difficult to provide you a guidance or how it is that you should look at it. If I prefer to be at this stage cautious other than to say that one of the positive or benefits of doing the restructuring is that it will allow us to define a dividend policy. A define a dividend policy so that Oi can be looked at and treated like any other corporate entity that has been trading or is trading in the market. I think that predictability and that visibility of dividends in my view will also enhance the perceived value and the valuation multiples of that company. With regard to economic stage after the simplification of the structure, we think that it depends on the assumptions that you may have on the [direct] effects, but we think that our stake would be at least 21.5%, possibly more. And I would say perhaps, likely more than 21.5% and you also have – you also know the deal is likely to be accretive for us in terms of revenues and EBITDA and also dividend payments. But I think that more exact numbers will very much depend on your assumptions on the sale of the minorities shares to the companies, which is the right that they have in that market, but I would say that 21.5% is the minimum and most likely higher than that and accretive for Portugal Telecom.

Thank you. Our next question comes from [Luis Jimnera] with HSBC. Please state your question.

Yeah. Good afternoon. The first question is on the Portuguese mobile business. You mentioned about data tsunami and I was wondering how does this reconcile with your unlimited data tariffs, we’ve seen other of your peers in Europe were shifting to tier data plans and also wanted to ask, if you had seen any signal of sort of KPN effect in your performance with out of then those revenues been cannibalized by, for example, instant messaging? And the second question is on the fixed line side. Obviously, good numbers on the residential revenues and then more benign competitive environment with (inaudible) trying to stabilize or increased pricing. Do you think this is sustainable and also do you see as an icon and the other embundler are being more rational along the pricing side as well? Thanks.

Okay. Thank you. And as you know in the Portuguese market, SMSes, essentially, if you are thinking about the heavy users, the used segment, there have been pretty much free for the past 12 to 18 months. So we -- if you want, have already felt that impact sometime ago and that was part of the irrational behavior of the Portuguese mobile market. So, from that standpoint, I think, we have gone through that and so when we talk about, for example, tribal plans, SMSes are for free, only SMSes are for free and as you know these tribal plans essentially work on the basis of the network effect as oppose to off net traffic. We are of course seeing some impact, especially for those that are not so heavy users of SMS, some impact but I would say it’s less material. I would say the benefits of actually being able to get them buying an internet, a mobile internet service in our view, in our case is accretive because of the legacy of the SMSes been free in this market. Also, worth highlighting is that, as we say, with regard to data, the Portuguese market has been very rational. So mobile internet or broadband for that matter has been rationally priced and I think that happen also with the fact that everyone acknowledge and they understand that 3G may not be the best technology to actually offer a data service and perhaps, they may change to long-term evolution. But then, again, long-term evolution is likely to have much lower costs in terms of operations, so once you go right over the year, will be much, much cheaper to carry that it is for 3G right now. With regard to Zon, to be honest with you, we, Portugal Telecom were,…

Okay. Thank you.

Thank you. I will now turn the conference back over to management for closing remarks. Thank you.

Okay. Thank you very much for being on this call and on behalf of my team and I, we are of course available to answer any questions you may have through our IR Director, Nuno Vieira, by e-mail or by call. And we hope to see you. We are starting our road show next week and we will be also attending some Investor conferences as well. So we certainly hope to see you there and if there are any further questions, we will be very happy to take them on those Investor meetings or Analysts meetings as well. Again, thank you very much and bye-bye.

Thank you. This concludes today's conference. All parties may now disconnect. Have a great day.