Greetings and welcome to the Portugal Telecom 2011 third quarter results. At this time, all participants are in a 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 may begin.

Thank you very much. Good afternoon, ladies and gentlemen. This is Zeinal Bava here. I’m here with my CFO, Luis Pacheco de Melo and also with our financial team and IR Director. I propose to take you through if you like the operational parts of the business and then I’ll hand you over to our CFO, so he can do a deep dive on the financials. Today, we are going to discuss the results of Portugal Telecom for the third quarter ending in September in nine months 2011. As you know our consolidated operating revenues amounted to roughly €4.416 million. EBITDA reached €1.654 billion as well. Our EBITDA margin consolidated to a profit of 37.5% and with regard to the Portuguese businesses, our margin was 45.7%, which is an increase of 1.3 percentage points. Our net income reached €333 million and basic earnings per share stood at €0.39. Let me perhaps now start just by discussing in more detail how our business is done. As you know Portugal Telecom in 2008 organized itself along business segments. In addition to organizing ourselves along the business segments in Portugal, residential, personal, SMEs, SOHOs, corporate and wholesale. With regard to our international footprint, we basically have engaged ourselves much more actively in the sort of day-to-day and operational management of those businesses as well. As you know opportunistically, Portugal Telecom has businesses in Africa, but our main investment is actually in Brazil. Furthermore, in the last few years Portugal Telecom has invested significant amounts in innovation and in ensuring that we have best-in-class execution capabilities as well. Our investments have not just been directed towards state-of-the-art or future-proof technologies, but the company has also invested significant amounts in integrating its IT systems to deliver convergence, accelerate transformation, essentially use technology as means to…

Thank you, Zeinal. Good afternoon, ladies and gentlemen and I’ll start with a very quick overview of our financial performance by business segments and then move into below EBITDA and net debt and liquidity position. As you have seen this quarter, we changed the way our operating segments are presented. We now present the Telecom Portugal, Telecom Brazil and within Portugal we split revenues by customer segment. We are also presenting financial information under the previous method for your reconciliation and myself and the IR Director, Nuno Vieira will be more than happy to help you reconcile the two methods. With regards to revenues, revenues are up by 58% due to the consolidation of Oi, from the 1st of April. With regards to Portugal, revenues were down 7.7% year-to-date. Equipment sales of course represents a higher percentage as service revenues were down 6.7%. Within Portugal, residential continues to post very strong revenue growth at 5.9% year-to-date, on the back of a substantial market share gain both on TV and on broadband. The personal segment revenues declined by 11.3% year-to-date and 10.8% in the third quarter, with a strong impact of the travel plan, VAT increases and MTR cuts. Internet on the mobile have had good and steady performance, whereas interconnect revenues have declined more than 30% year-on-year. With regards to customer revenues, we are clearly seeing improving trends with revenues in the third quarter declining by 6.8% versus 8.9% in the second quarter and 9.4% in the first quarter. As Zeinal mentioned, recharges on the prepaid have had a steady improvement in the last two quarters. Enterprise segment is still reflecting that in one-off projects with public administration and the aggressiveness on the mobile side. Revenues are down 9.9% year-to-date and 9% in the third quarter, a slight improve in…

Okay. Thank you very much, Luis. So to conclude, what I perhaps like to just reiterate is that our business strategy basically has a customer at the center and we are focused on benefiting from the growth opportunities of the digital world. I think Portugal Telecom, because of the investments we’ve made and because of our positioning vis-à-vis innovation, we are better positioned the most to actually deliver on the ICT growth opportunities in terms of the future. We have a unique global profile, 42% of revenues are from Portugal, but 58% of our revenues are coming from international. We are investors and strategic investors in Oi; Oi has a national footprint and significant potential to grow as an integrated operator in Brazil. Financial performance of Oi reflects secular trends in wireline, but we remain confident that PT and Oi will be able to leverage the benefits of the strategic alliance we have to deliver better results in the future. Africa and rest of the world are posting solid growth and enjoy a sound financial position. In Portugal, we are seeing improving revenue trends, cost reduction and CapEx control are also underpinning free cash flow growth. We are a predictable company, in addition to our track record as management and delivery on all our commitments, our investments in future proof technologies are known and these investments are coming to an end. We have a very solid financial position with maturities and commitments fully funded until the end of 2013. Last but not the least, our shareholder remuneration is known by the market. We are committed to have very competitive and best-in-class shareholder remuneration as well. As you know, we have indicated it for 2011, we will pay a dividend of $0.65 and we’ve also indicated our intension to look at paying an interim dividend based on PT’s financial performance as well. We will remain very confident that with the improvements that we are seeing in terms of free cash flow, we should be able to deliver on all our commitments whether we’re talking about shareholders or whether we’re talking about bondholders. Thank you very much. My team and I are now of course available to answer any questions you may have. Thank you.

(Operator Instructions) Our first question is coming from the line of Robin Bienenstock with Sanford Bernstein. Please state your question.

I guess I have two questions if I may, the first is, is there any chance of Oi moving eventually to [novo mercado]? And the second is that given that we’ve now had and look at what MTR is likely to look like over the next couple of years in Brazil. Can you tell how you think Oi can get the scale and how indeed Brazil might have a better wireline infrastructure given that the wireline businesses will continue to sub-size the wireless businesses given the regulatory regime there?

With regard to Oi and perhaps just referring to the simplification of the corporate structure that we announced, which we think and we continue to believe is a critical step for the turnaround of the business. We indicated to the market that we have three key principles and one was that team part had to retain control. That was one of the three principles. So with regard to that, your question about the [novo mercado] is just worth mentioning that the principle underlying any future restructuring of the company has to always take into account the fact that team part wants to retain control and that control isn't for sale. With regard to regulation, we believe that clearly in terms of mobile, there is work to be done. They are certainly is the impact from regulation as a result of low MTRs and so on, but equally important is the fact that Oi has to reposition itself in that market, perhaps look at the mobile market differentially to what it has done in the past. In the past Oi has been mainly, if you like a player in the SIM cards markets. We are of course going to bring to bear the fact that Portugal Telecom has extensive experience, not just in Portugal, but also in Brazil to work together with Oi management team, which has been doing an incredible job in the last three months if you like positioning the company in order to evaluate what other things needed to be done and that may include looking at terminal equipment, that may also include the beefing up the number of distribution channels that Oi is using and can be using in order to position itself in that market to improve its performance. If you look at the third quarter performance of Oi in terms of mobile net adds were encouraging. Having said that, I think there is lot of work to be done and before Oi can start posting a solid performance quarter-after-quarter. So the weight of the wireline is pretty significant, the secular trends, all the trends we are seeing there are very similar to other trends in other markets, in terms of wireline. But we remain very confident that as a result of the strategic partnership, we will bring to bear the plusses of Oi and the plusses of Portugal Telecom and reposition ourselves in that market, particularly in mobile where being number four is clearly not satisfactory..

Our next question is coming from the line of Mathieu Robilliard with Exane. Please state your question.

I had two questions, first on Portugal, can you give us a little bit of color in terms of fiber-to-the-home or fiber-to-the-basement pick ups from customers you have been giving numbers in the last two quarters. I wanted to know how it is trending in Q3 and possible into Q4? And then going back to Oi, given the importance of the dividend policy of Oi, obviously it’s going to be helpful when we know exactly what the dividend policy is? Can you give us a little bit of color in terms of when we can expect such an announcement?

Let me just start with the second part of your question. As we’ve indicated to the market that as and when we have completed the corporate simplification we will announce the dividend policy for Oi. Clearly we believe that it has to be a competitive dividend policy because it’s a listed entity and it has to provide the market with visibility. And therefore as we’ve indicated, we will certainly come back to the markets with some information on that. Once we have executed the corporate simplification. With regard to fiber in Portugal, I would say that things are progressing according to plans. In the presentation we put out today, I didn't want to put back slides where we were showing the positive impacts of fiber in terms of OpEx, a lot of those slides we have shared with you in the past. If anything we’ve seen the benefits of fiber come through the P&L in terms of fall back certainly. In terms of pick up, we are not giving out exactly all the numbers, but I can say that we have in excess of 200,000 fiber subs already in the Portuguese market. As you know in our case is fiber-to-the-home which is are different to DOCSIS 3.0 that our cable competitor has. They don't have fiber-to-the-home. We have fiber-to-the-home. And I would say that, that pick up continues to be roughly 50% or between 40% and 50% of all the sales that we're doing every single month. So if anything, word of mouth is leading us to sell more than we thought it was possible. And therefore, we believe that as we start rolling out more interactive services, as we bring to light if you like the delivery of services across different screens and anywhere and the advent of LTE,…

Our next question is coming from the line of Tim Boddy with Goldman Sachs. Please state your question.

I’ve interest in your views on the regulation Portugal’s MTR proposals, I guess in October. And whether you think they will enacted and indeed if that 60% plus next year is enacted, what will be the effect in your business? Obviously overall I imagine the impact on profitability will be limited, but is there a risk with then see some sort of spiraling effect which could actually lead to TMN revenue trends worsening once again?

When we discuss TMN revenues, we of course discuss customer revenues and therefore we try and highlight to you what those customer revenues are and what the interconnection revenues are. What the regulator has actually indicated, he has indicated to the market what his views in terms of how interconnection should evolve in Portugal. We think that that decision doesn’t make any sense whatsoever, considering if you like the impact it has in the balance of payments of Portugal. We think it doesn’t make any sense whatsoever considering the fact that operators are going to be asked to invest in spectrum and to rollout the LTE which in my view is perhaps more of a priority in terms of the development of the Portuguese economy in the sector than it is to lower termination rates well in excess of what for example even the European market is doing. So we as Portugal Telecom have already indicated what our views are. We have asked one extension in order for us to formally present our views in that regard. We think that the indication of what maybe a potential decision by the regulator is disproportionate. It's out of context and in our view it's going to be detrimental for the job creation and investments in our market. We have indicated that in the past, Portugal Telecom will only invest if it's profitable. We are in this business of course to ensure that we maintain to create jobs, but we are also equally committed to creating value for our shareholders. So we believe that the right balance has to be struck between the interest of the citizen and the interest of the consumer. And with this kind of undue pressure in terms of termination rates in Portugal, we think we are going to have to revise a lot of our investments in the future.

Thank you. Our next question is coming from the line of Madeleine King with Credit Suisse, please state your question.

I noticed earlier that you made a comment about being committed to having a robust balance sheet as well as to shareholder returns, could you just a expand a little bit on exactly what you mean by robust and also could you talk a bit about your credit rating, which is obviously on negative outlook there with the rating agencies and would you consider sacrificing the dividend if you thought that would be sufficient to maintain an investment rate?

Just before that I think in the earlier question I didn’t answer what was potentially the impact of termination rates. I think we will come back to the market as and when we understand what the final decision of the regulator will be at the stage. I think it would be premature to give to the market any guidance as to what the impact will be because we don’t know what the definitive or the final decision of the regulators may end up being in terms of termination rates. With regard to robust, I mean essentially the main message we want to provide you with is that, we deliver on all our commitments at Portugal Telecom. With regard to our dividend policy, as we’ve indicated in the past we are committed to the €0.65 payments and to the announcement we’ve already made. Of course as you will have seen in our announcement, it is subject to financial conditions and market conditions and so on. But at this stage, based on how our business is progressing, we remain very confident about the ability of our company to continue to honor all of its commitments, whether it is for shareholders or for bondholders? We are today of course engaged in discussions with rating agencies about how business is performing, but we are also equally very satisfied that we are continuing to deliver on all the financial targets that we had proposed to ourselves and also to outside parties. So when you look at the free cash flow improvement at Portugal Telecom in the third quarter. When you take into account the fact that we have made all our modernization investments already and that next year perhaps we should be able to reduce CapEx further compared to where CapEx was this year. I think you will of course conclude that the company has financial flexibility, not only to continue to deliver on the dividends to shareholders, but also to ensure that all our bondholders actually believe that this company will continue to honor all of its payments as well. We are fully funded, as I indicated and as my CFO indicated up until the end of 2013 with significant financial flexibility either by way of cash, credit facilities and so on and so forth. So we think that the refinancing decisions taken in our company in the last two to three years were very timely and therefore we continue to see the future, if you like with confidence, with financial flexibility to continue to invest in the business in Portugal and in Brazil particularly, but also to honor all the commitments.

Our next question is coming from the line of Georgios Ierodiaconou with Citigroup. Please state your question.

I have got two questions. The first one is a bit technical on the cash flow for the fourth quarter. If I remember correctly last year we had a typically weak 4Q cash flow because of working capital, is it fair to assume that this will not repeated and should we expect positive working capital which was the norm with exception of 2010? And perhaps you could also comment a bit on the CapEx for the full year, whether you think you could get away with investing a bit less than 650 in the Portugal, given the current run rate? And my second question is on Brazil. You made a comment earlier on the mobile communication termination rate decision, but there’s been a number of decisions coming out in Brazil both in fixed and Pay TV and mobile. Are these decisions broadly in line what you wanted to see earlier in the year and if not can you highlight to us how that may impact your decisions for the investment there?

With regards to the working capital, what I would say is just remind you what happened last year as you might recall. We had sold Vivo. We had received significant – the first tranche of the payment by Telefónica and as we recall at the end of the year we anticipated some payments to some of the suppliers, some of them also gave us small discount which we thought was a good investment also for our company. So I don’t foresee that this year we’ll have the same trend as last year, so it will be a normal fourth quarter as it used to be before 2009 and 2008. With regards to CapEx, we’re not changing guidance in terms of CapEx right now. We will see, we’ll keep going on the CapEx front and we will see where we stand. But at this stage, we prefer not to change any guidance in terms of the CapEx at this moment. With regards to MTR Zeinal?

I think with regard to Brazil, and we are broadly inline or let’s look to the slide, we prefer not to speak publicly about how our regulatory agenda if you can imagine for obvious reasons. And what we can say is that clearly there are significant improvements that can be made in that market particularly if one is thinking about broadband penetration and pay-TV penetration compared to where the market is today. Moreover, even data contribution if you like in terms of mobile can actually improve significantly. We think that a lot of that will be achieved if you like and on the back of the two major sporting events that you will see in that market, which is the World Cup in 2014 and Olympic Games in 2016. Recently, I was actually in the conference in Brazil and it is our belief the 2014 considering the number of personal devices that are being sold right now and the way that the smartphone penetration is increasing, it will be a World Cup of – video on personal devices, as a result LTE may be an opportunity for all of us. So we will continue to monitor a number of these regulatory decisions. Suffice it to say that we continue to see Oi's future footprint as a positive for the company. We are very happy with the work that the management team is doing right now. We are fully engaged with our two Brazilian partners and with Oi's management team to deliver on if you like on the operational turnaround. It's going to take a bit of time, because Brazil is a very competitive market. Having said that, I think the two companies together have what it takes to actually make Oi a successful company in the future. Thank you.

Our next question is coming from the line of Luis Prota with Morgan Stanley. Please state your question.

I have a question on Brazil on whether the corporate restructuring and whether you are expecting any kind of delay in the process taken into account that independent expert has left the process and also what is the risk of Norte Leste having to pay in cash material amount of money as part of the process and with overwrite taken into account the valuations made by Citi which are published and what would be the implications for T&E CapEx plan financial position and obviously dividend payment? Thank you.

With regard to the time table, you know that we’ve had to appoint a new financial advisor which certainly has impacted the time table a bit, but its part of the process and as far as we are concerned it is very important that Oi, BRT, all shareholders that are part of that structure understand beyond reasonable doubt that this corporate restructuring is absolutely key for us to be able to execute the operational turnaround of the company. If we are not able to simplify the corporate structure, it will be extremely difficult for the company to deliver on the corporate restructuring that is on the operational turnaround which I think is a priority considering the options that exist for Oi to grow in that market in the future namely in broadband, pay-TV but also in mobile. With regard to dividend policy, one of the main reasons why we’ve indicated that we will only make that dividend policy public once we’ve got the corporate restructuring done, because some of the things that you just mentioned rightly will have an impact on Oi’s balance sheet. And therefore, as and when we have a simplified structure of the company, a clear view on what the balance sheet is going to look like, we will then come back to the market with a dividend policy, which will be predictable and will be visible. And therefore we’ll allow you to look beyond just one year and understand what this company will be able to do, not just in terms of its own business development, but also for its shareholders and of course lenders and bond holders. So I think we just have to allow a bit of time in order for us to come back to the market. We were as you know accounting on getting the restructuring done by year end. It is unlikely that it will be done by year end. But I think that once we have simplified the corporate structure, which I think is a priority, if we are to execute successfully the operational turnaround of the company, we will then come back to the market with further information and of course satisfy some of the questions that you have just posed, which are very material and relevant. But I think we will only be able to answer once we've got the corporate restructuring out of the way. Thank you.

Our next question is coming from the line of Nuno Matias with Espirito Santo Investment Bank. Please state your question.

Just going back a little bit to your comments short (inaudible) and looking to your presentation on page 32. And you’re not making an indication of any interim dividend payment this year. So just to clarify what we should expect or if you are still that way I think that possibility for this year? And on another front in Portugal, in Q3 we saw some improvement in terms of debt revenue performance. So just trying to understand a little bit of trends here, is this related to any roaming effect that say in Q3 is usually higher, or is this an impact of the new tariff plans that you have just launched and basically they are driving this improvement turn of that revenue performance? Thank you.

With regard to our dividend, our dividend commitments, we’ve indicated $0.65 for 2012, and then beyond that dividend policy we’ve also indicated our intension to pay an interim dividend based on PT’s financial performance. Now of course, that is a Board decision. We’ve indicated our intension to pay that dividend in two – if you like in two stages, but you probably are familiar, but for others that are on the call that may not be as familiar as you, in Portugal if you pay an interim dividend, that interim dividend has to be paid on the back of the net income that you have booked, but only half of that net income can actually be used to pay the dividends. So for argument’s sake, if you have a net income of say a 100 then you can only distribute 50 to shareholders. So the Board will certainly consider the situation and as we indicated, we have the intention to pay an interim dividend. This has not been yet considered by the Board. But we are of course committed to having an interim dividend and therefore we will come back to the market as and when the Board addresses this issue and we have something to report. With regard to your second part of the question, Luis please.

If I recall, you have regarding the new roaming tariff or [Euro] tariff on the roaming side. It will have any impact both this year and next year; we haven’t seen a greater impact yet. But it will certainly have an impact because it takes the roaming in and roaming out on those fronts. We are still trying to figure out what could be the impact for next year, but at this stage I think its too early to comment on the full impact. But as soon as we have a better view on what's going to be the impact our IR Director also will comment on that as well.

Our last question is coming from the Jonathan Dann with Barclays Capital. Please state your question.

It's a clarification, so the annual dividend could be 50% of the 333 million nine months earnings and do you think the timing wise you could have the Board meeting approve it and distribute before the end of this year?

The interim dividend has to be paid on the back of the net income of our Portuguese businesses. And end of September, our net income just in the Portuguese businesses alone was 315 million, okay. So lets say if you were to take the 315 million for arguments sake then you could actually distribute half of that amount, okay. If the Board let's say convenes, say in December, I am just for argument’s sake again, if they were to say convene in September then you could actually look at the net income up to November and if the Board so decided, they could actually distribute or we could distribute half of the net income cumulative until the end of November or if you like until the end of October. So the Board has not yet decided when it will adjust this issue, but it is our intention to pay an interim dividend and based on our financial performance and therefore as and when the Board decides to discuss this, we will of course make the information available to the market. At this stage, there is nothing on agenda, but the intention to pay an interim dividend is there as stated previously. Thank you. Okay. Thank you very much for being on this call. My team and I are very grateful and I hope you found the call useful. And of course my IR Director, Nuno Vieira offline and myself or my CFO are available to take any further questions you may have. And I look forward to seeing you in the future, as we are planning to start a Road Show in a couple of weeks and therefore we may come across some of you and hope to take that opportunity to give you further insight as to what Portugal Telecom is doing. And of course, convey the confidence that we have in terms of the future performance of our company. Thank you very much. Bye, bye.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time and we thank you for your participation.