Greetings and welcome to the Portugal Telecom 2011 Full Year Results. At this time all participant are in a listen-only mode. A brief 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 Mr. Zeinal Bava, CEO of Portugal Telecom. Thank you. You may begin.

Thank you very much. Good afternoon ladies and gentlemen. On behalf of my team, thank you very much for being on this call. I am here with my CFO, Luís Pacheco de Melo, our IR Director, Nuno Vieira and our finance team as well. Today, of course we will be discussing our 2011 numbers. In 2011 Portugal Telecom reported consolidated operating revenues of Euro 6.147 million while EBITDA reached Euro 2.188 million. Consolidated EBITDA margin was 35.6% and it was underpinned by solid margin of the Portuguese telecommunication businesses that reached 45.1%, which is an increase of about 1.1% point year-on-year and I will go through that in a lot more detail later on in my presentation. Net income reached Euro 339 million and our basic earnings per share stood at about Euro 0.39. In 2011 our CapEx amounted to Euro 1.24 million that is about 20% of revenues. It is only a decrease compared to the previous year, very much in line with previous statements we made at the modernization program of Portugal Telecoms network and technology investments are coming to an end. CapEx in Portuguese telecommunication businesses stood at about 647 million and was primarily directed to the investment in the rollout of new technologies and services mainly our fiber-to-the-home network and our TV service, as well as investments we have made in swapping our 2G network to deploy the LTE network as well and of course customer growth. In 2011, EBITDA minus CapEx reached Euro 964 million, while EBITDA minus CapEx of the Portuguese businesses is amounted to Euro 659 million. In 2011 operating cash flow stood at Euro 1185 million. Free cash flow adjusted for the investment in Oi and Contax and the last installment that we received from Telefónica in relation to the Vivo transaction…

Okay. Thank you, Luís. So in short, Portugal Telecom has a diversified business profile, with international investments accounting for 60% almost of our revenues. We have scale with more than 93 million subs and we are fully funded until the end of 2013. We are of course not immune to the Portuguese economy, but the residential segment is doing well. Actually, better than expected and we are trying to compensate pressure on all other segments by maintaining cost discipline. We will not be competing in this market based on price. The prices in this market in our view are already very low. We think that we can grow share of wallet, but we will be rational. We can grow the share of wallet because we have made not just the right investments in technologies, but we’ve also been able to transform if you like ability of this company to underpin these investments and generate by innovating new services for our customers and therefore we believe that we will continue to gain share across the board in this market in the future. These are of course uncertain times and whilst we are not immune to the economy, but we think that our business is more predictable and we think that the investments we’re making in broadband, pay-TV and ICT are defensive. We believe that we’ve done all the right things in terms of investments in technology. It was countercyclical compared to what was going on and what’s going on in our sector, but even if you take in to account the investments we’ve made in 4G, we think that in the future it will underpin also our ability to bank on convergence which in our view will become one of the key differentiating factor of Portugal Telecom in this market. With…

We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Georgios Ierodiaconou of Citi. Please proceed with your question.

I have two questions please. The first one is on your decision for the dividend. A lot of your peers decided to cut their dividends because they were not getting enough credit from the market. Why didn't you follow that example? And can you share your views around buyback going forward instead of paying a dividend potentially? And my second question is around the first quarter, given that we are on the last day of the quarter, can you give us some color about how you think it went particularly Portugal? Thank you.

Okay. Thank you very much Georgios for your questions. We've had a long history of delivering a premium shareholders remuneration for the last two mandates. This Board and this management team, we've worked hard to return cash to shareholders, in the form of rising dividends and/or share buybacks. Our current dividend and what we've said in the past about future dividends was solidly based on our expected free cash flow. We continue to believe that the free cash flow of Portugal Telecom underpins our flexibility to pay dividends in line with what the sector is doing and what is expected by if you like the consensus. We are fully funded until the end of 2013. Having said that, I would like may be to take this opportunity to say that we are of course frustrated with our low share price and we look on the resulting high yield offered by the shares with some dismay. The yield on our shares exceeds that of junk bonds of companies with much less dependable cash flows and less record in delivering strong operating performance. So we have confirmed a 65 cents in line with the promises we have made in the past. We now have a shareholder’s meeting on the 27th of April that will appoint the new Board of Directors, which pretty much is the same as the current one but we will have a formal, if you like, appointment and I am confident that this new Board of Directors in the future will reflect on the shareholder remuneration strategy when it convenes. So I prefer not to actually elaborate on this point anymore simply because on 27th we will be appointing a new Board and we should expect the Board to then consider what is the right remuneration strategy, when it…

Our next question comes from Luigi Minerva of HSBC. Please proceed with your question.

Yes. Good afternoon. The first question is on mobile pricing. On page 11, you mentioned about the economy and I was wondering if with the dramatic increasing data the result may lead pressure on the mobile capacity. Would a natural development be some form of pricing power for the operator to reflect the higher demand for data. I was wondering if you can share your views on these where you see some form of evidence with it? And second point is on happening we are seeing in Spain, Telefónica and partially Vodafone removing handsets subsidies. I was wondering on what are your views on about it and if you believe that an approach that would be applicable to other market like Portugal? Thanks

Okay, thank you Luigi. Let me start with the second question. With regard to handset subsidies, we have no intention of changing our own policies in this market. I think each market has a different story to tell. In this market, we will continue to subsidize the way we have. Having said that, as you know, in the last few years, the mobile sector in Portugal has become more rational, when it comes to subsides particularly in the prepaid segment of the market and therefore if you look at the subscriber acquisition cost of our mobile business in Portugal, it has been coming down over the last few years in great part because subsidies have come down. Having said that, we will not be changing our policies and our strategy in that regard and I understand that our competitors in Portugal have also indicated that they have no intention of changing their policies as well. So this market will continue to operate as it has been in the past. With regard with the date of tsunami two or points. First and foremost we have made all the investments necessary for and part of the benefits of the Portugal Telecom as an integrated operator is that we will be able to offload traffic from mobile to fix using not just, if you like, the routers that we have in the homes of all our customers but also on the back of Wi-Fi hot spots that we have, pretty much in the all the key places here in Lisbon and therefore Portuguese consumers know that if they are clients of Portugal Telecom they stand to benefit. They stand to benefit not just because we will be able to provide them the best quality of service, because of the ability, if you like…

Our next question comes from Ivon Leal of BBVA. Please proceed with your question.

Just a couple of questions on Brazil, it's a bit ahead of in custody of Oi, but may be you could share with us if there is any clue where you are reversing the fixed-to-mobile substitution price. Actually, it looks there have been acceleration in Brazil for the latest quarter’s instead of decelerating? And the second one, it looks Oi has already made some significant efforts in fourth quarter in order to recover commercial traction on the mobile. Do you think the company is in a hurry to recover market share even at due to high MTR rates, I guess beyond that traffic is much more attractive for subscribers?

And with regard to mobile, and I think to be very consistent with comments I have made previously, we, Portugal Telecom, believe that in order for an integrated Telco to do well, you need to be strong in mobility. Also if you look at the range of handsets and devices that are being increasingly bought by customers, they are more and more mobile centric and therefore being number four in mobile as I have said in the past is not in our comfort zone, because we fundamentally believe that in order for you to do well in the future in telecoms, you have to lead the way in terms of convergence, but also of course have an important role in everything that has to do with mobility. So therefore if you like the focus on mobile has to do fundamentally with a view that you need to do well in mobility in order to do well long-term. And when you think about Brazil, two things worth highlighting is that penetration of mobile is already very high. Having said that, with the advent of the World Cup and the Olympic Games, we will see some disruption happen in that market, also understanding that 4G is out there now and that market is likely to leapfrog simply because the fixed-line infrastructure from that standpoint has lagged in terms of speeds and so on and so forth. With regard to fixed-mobile cannibalization and the challenges in Brazil, they are not very dissimilar to what you’ve seen in other markets. We ourselves, for example, in Portugal, went through very similar sort of trends in the past and that’s why today I know I was very pleased in including a slide in our presentation where we showed to you that 85% of our fixed-line or…

Our next question comes from Tim Boddy of Goldman Sachs. Please proceed with your question.

I have two questions. The first is just around how you think about sort of back-up plan and scenarios for the significant disruption in the Euro-zone and question marks around membership privacy of currency. What are your options to dramatically de-lever and reduce risk for shareholders in that scenario and how does the dividend play into that? And then secondly, a more operational question, you’ve now managed to get more TV subs than broadband subs broadly overall, can you help us understand the trend looking forward for those businesses; as you keep growing in TV, how many of those are satellites and how many are IPTV and is there a constraint on your growth as a result of that catch-up on TV?

And with regard to your first question, and I think if you like the measures that we’ve taken as a company has already been referred to by our CFO, you know, we are fully funded until 2013. And if you look at the presentation we put out today, we also showed to you that in 2011 we were able to refinance some of the existing credit lines that we have and it also has been very encouraging to see that the Portuguese Republic has been able to fund itself in the market at much, much better or more attractive rates than it used to a few months ago. So I think all these signs are very encouraging and when you look at the measures that are being taken in that regard, by the Portuguese government to live up to the expectations of whatever the, if you like the refinancing plan was, would seem to be getting good level of support in Europe. So we would like to think that all that is happening right now on the back of what's being done in this market is encouraging for companies such as ourselves that will have to eventually, not now, not next year, but then maybe the year after next will have to refinance themselves in the international capital market. So the recent events or the events of the recent weeks have been extremely encouraging in that regard. So the measures we've taken is that we have funded ourselves until the end of 2013. We have increased substantially the scrutiny as to where we spend our money and here we have the benefit of having made significant modernization investments already. So, therefore contrary to a lot of our peer group companies that are still debating whether to do fiber, when to…

Our next question comes from the line of John Daniel with Barclays Capital. Please proceed with your question.

Hi, there I have three very quick questions. The first one, can you just walk us through a sensible free cash flow estimate for 2012. Secondly, was there a one-off in enterprise revenue in the fourth quarter? And then a final question, I know, you don’t need to choose funding anytime but can you comment on the cost of funding if you were to do it, you know, if you look at funding?

Luís, would like to answer these questions please? Luís Pacheco de Melo: Thank you. Let's start with the cost of funding. At this stage, I mentioned, we are fully funded. In the way our average cost of debt will tend to go up slightly this year that is basically due to because we have less cash in deposits, which we’re getting a good remuneration vis-à-vis our average cost of debt, as you have seen. We’ve stated that our cost of debt gross was around 4.3% and the average over the net debt is around 3.3%. So with the reduction of cash balances it should come down and average costs should go up slightly. On the other hand, we have repaid now one of the bonds which have higher costs than the average cost of debt that we have and therefore we also get some benefit from there. But all-in-all, our average cost of debt should go up, but it shouldn't for the full year, it shouldn't reach the 4.3% as our average cost of debt. In terms of the free cash flow, you would have to pick-up the consensus numbers both on EBITDA and CapEx. In addition to that, in taxes we should have around Euro 30 million for the year; interest something around Euro 200 million for the year; PRBs at around Euro 165 million for the year and dividends coming from international companies, as we’ve seen we will have around Euro 130 million from Oi and around Euro 150 million for the rest of the company. So around Euro 130 million from Oi and an additional Euro 150 million for the remaining companies and from which we received the [dividend].

Was there a one-off in enterprise revenues?

No, no.

There are no further questions at this time. I would like to hand the floor back over to management for closing comments.

Okay, thank you very much. Perhaps just add a couple of things on what Luís just mentioned, with regard to enterprises, there were no one-offs. Having said that, there is some seasonality as I mentioned, because some of these contracts that we win on the enterprises segment usually they do involve installation and therefore sometimes you may see some peaks in one quarter. But I would say that no one-offs, but you can actually expect some seasonality in those revenues. So I would like to thank very much to you for being on this call. And as usual, my IR Director, my CFO and myself are available to answer any further questions you may have offline. And as I said in my concluding remarks, whilst we believe that the economic environment remains very challenging, the management team and employees of Portugal Telecom remain very committed with the strategy that we have already established for this company. So we know where we are, we know where we have to get to and we do continue to enjoy also significant support from our Board which in this sort of environment is fully backing us. So we remain, I would say mobilized and we will continue to work to create value for all our shareholders. And again, thank you very much for being on this call. Thank you. Bye-bye.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.