Results presentation2010<br />24 February 2011<br />
Important notice<br />This release contains forward-looking statements within the meaning of the U.S. Private Securities L...
Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
Key Highlights<br />PT’s exposure to high growth markets remains intact after Oi’s transaction and continues to enjoy a so...
Key Highlights<br />In 4Q10, PT has 84 million customers and in the domestic operations Meo continues to drive growth in t...
Key Highlights<br />The transformation of the business model resulted in growth of traffic generating lines after seven ye...
PT in the forefront of fibre roll-out in Europe<br />Key Highlights<br />PT<br />Others<br />PT will have 1.6 million home...
Key Highlights<br />In Voice, increased popularity of tribal plans required a response by TMN but impacted revenue perform...
Key Highlights<br />Value proposition of TMN’s tariff plans for the pre-paid market has been enhanced with the launch of “...
Key Highlights<br />Domestic performance impacted by intense competition in mobile in the youth segment but wireline recov...
Key Highlights<br />Solid revenue and EBITDA growth in international assets driven by marketing and commercial efforts<br ...
Key Highlights<br />Solid balance sheet structure and financial flexibility<br />Value, at the end of 2009 of regulated pe...
Cost of funding of 4.4%
Solid  funding position with Euro 6.3bn of cash and facilities available of which Euro 3.7bn is earmarked for Oi transaction
Receivable of Euro 2bn from Telefonica still pending</li></ul>Net Debt <br />Euro Million<br />Cost of debt<br />Net Debt ...
Exceptional DPS<br />Maximum range<br />Key Highlights<br />Solid and predictable dividend policy offering a yield in 2011...
Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
Strategic Review<br />Business strategy underpinned by innovation and best-in-class operational execution<br />Distinctive...
Convergence</li></ul>SME/SoHo <br /><ul><li>Convergent solutions
SaaS</li></ul>Corporate <br /><ul><li>IT/IS
Virtualisation</li></ul>Brazil <br /><ul><li>Data growth
Conver-gence </li></ul>Africa <br />(selected<br />markets)<br /><ul><li>Oppor-tunistic M&A
Conso-lidation </li></ul>Residential<br /><ul><li>TV experience
3-screen</li></ul>Technology and Innovation<br /><ul><li>Next-generation networks</li></ul>Execution<br /><ul><li>Operatio...
HD and 3D channels
+2,500 VoD titles
On-demand Warner and HBO series
Interactivity over anchor programmes</li></ul>Innovative and exclusive    contents <br /><ul><li>Multiple widgets in App S...
Convenience (e.g. news, pharmacy)
Entertainment (e.g. social networks)
Personal (e.g. online photo storage)</li></ul>Advanced, personalised widgets<br /><ul><li>Interactive functionalities (e.g...
Multiroom DVR with~300 hours capacity
Pause and restart TV</li></ul>Functionalities for total control<br /><ul><li>Video-on-Demand on multiple screens . TV and PC
Mobile TV with >40 channels
Remote TV control (VoD + PVR)</li></ul>Multiscreen (TV, PC, Mobile)<br />
Feb 2010<br />First 3D broadcast<br />Feb 2010<br />Multi-room PVR<br />May 2010<br />World Cup interactivechannel and 3D ...
Strategic Review - Residential<br />Meo’s superior performance has been confirmed by independent studies<br />…and provide...
Strategic Review - Residential<br />Meo enjoys the best customer perception and satisfaction in the market<br />Meo has th...
Strategic Review - Residential<br />Meo has achieved 30% market share in 33 months and is underpinning broadband market sh...
Strategic Review - Residential<br />The transformation of the business model resulted in growth of traffic generating line...
e<br />Strategic Review - Residential<br />Growing importance of fibre in Meo customer base with positive impact in churn ...
Comprehensive strategy anchored on wireless data <br />Strategic Review - Personal<br />Smartphone <br />Distinctive offer...
Exclusive handset models</li></ul>Competitive pricing<br /><ul><li>Own-brand, quality smartphones
Pre-paid and unlimited mobile internet </li></ul>Voice and Data plans<br />Pre-paid<br /><ul><li>Tariff structure to avoid...
Total cost control</li></ul>Innovative services<br /><ul><li>Multiple value-added services to use on-the-go (mobile TV, so...
Dedicated customer support areas</li></ul>Laptop distribution<br /><ul><li>Subsidised laptops with mobile datacard (+780K)
Focus on student population</li></ul>Innovative convergent offers<br /><ul><li>Integrated offers for SMEs with fixed/ mobi...
4P bundles</li></ul>Competitive offer<br /><ul><li>21.6 Mbps speeds
Free access to PT’s national WiFi network</li></ul>Intense communication<br /><ul><li>Strong above-the-line communication
Regular campaigns across the country</li></ul>Mobile broadband <br />
Launch of Music Box<br />Strategic Review - Personal<br />TMN has been implementing a successful and innovative smartphone...
Strategic Review - Personal<br />Distinctive offer addressing market needs<br />TMN has analysed market needs…<br />… to d...
Strategic Review - Personal<br />Competitive equipment pricing<br />… and was the 1st operator to introduce unlimited plan...
Strategic Review - Personal<br />Service offering aligned with innovative market trends<br />TV<br />Applications<br />Mus...
Multi-screen service available on mobile, PC and TV
Unlimited access to over four million of songs
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PT\'s 4Q10 earnings presentation

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PT\'s 4Q10 earnings presentation

  1. 1. Results presentation2010<br />24 February 2011<br />
  2. 2. Important notice<br />This release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not statements of historical facts, and reflect goals of the company's management. <br />The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts,” "projects" and "targets" and similar words are intended to identify these forward-looking statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, the results of operations of the company to be achieved may be different from the company's current goals and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update them in light of new information or future developments.<br />
  3. 3. Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
  4. 4. Key Highlights<br />PT’s exposure to high growth markets remains intact after Oi’s transaction and continues to enjoy a solid financial position<br />2010 Pro-Forma Oi **<br />Financial highlights<br />Euro million<br />∆% y.o.y<br />2009*<br />2010<br />3,733<br />11.8<br />1,557<br />10.0<br />41.7<br />685<br />848<br />709<br />4,829<br />1,079<br />3,742<br />15.2<br />1,492<br />12.2<br />39.9<br />5,672<br />798<br />693<br />2,100<br />711<br />+0.2%<br />+3.3pp<br />-4.2%<br />+2.2pp<br />-1.8pp<br />n.m.<br />-5.9%<br />-2.2%<br />-56.5%<br />-34.0%<br />Operating revenues<br /> Contribution from international assets (Pct)<br />EBITDA<br /> Contribution from international assets (Pct)<br />EBITDA margin (Pct)<br />Net Income<br />Capex<br />EBITDA minus Capex<br />Net debt<br />After-tax unfunded pension liability<br />55.5<br />48.0<br /> * Adjusted in order to recognise Vivo as a discontinued operation<br /> ** Assuming consolidation of 25.6% of Telemar and 44.4% of Contax for last twelve months 9M10<br /> Note: In 2010, net income includes one-off items related to the capital gain obtained with the disposal of Brasilcel, the accumulated currency translation adjustments that were recognised in net income on the date of disposal, adjustments to the book value of certain assets, provisions for contingencies and other non-recurring costs. In 4Q09 net income includes the capital gain related to the sale of Médi Télécom. <br />
  5. 5. Key Highlights<br />In 4Q10, PT has 84 million customers and in the domestic operations Meo continues to drive growth in traffic generating lines, broadband and pay-TV<br />2010 Pro-Forma Oi**<br />4Q10 net adds<br />Operational highlights <br />Thousand customers<br />∆% y.o.y<br />2010<br />2009<br />83,956<br />Total customers<br />Wireline retail accesses (RGUs)<br /> Fixed lines net adds<br />Retail fixed broadband customers<br /> Fixed broadband net adds<br />Pay-TV customers<br /> Pay-TV Net adds<br />TMN customers<br /> TMN Net adds<br />Data as a pct of service revenues (Pct)<br />21,555<br />4,527<br />-51<br />1,001<br />139<br />830<br />249<br />7,419<br />167<br />24.6<br />20,157*<br />4,189<br />-96<br />862<br />152<br />581<br />269<br />7,252<br />319<br />23.1<br />+6.9%<br />+8.0%<br />+47.1%<br />+16.1%<br />-8.7%<br />+42.9%<br />-7.4%<br />+2.3%<br />-47.7%<br />+1.5pp<br />1<br />37<br />61<br />105<br /> * Adjusted in order to recognise Vivo business as a discontinued operation<br /> ** Assuming PT’s customers in 2010 and Oi customers in 9M09 <br />
  6. 6. Key Highlights<br />The transformation of the business model resulted in growth of traffic generating lines after seven years and residential revenue growth of 5.2% in 4Q10<br />Solid growth in residential revenues and customers<br />Inflection of wireline revenue trend<br />Residential retail revenues<br />Indexed (100=2009)<br />Wireline domestic retail revenues growth* and PSTN/ISDN linesnet adds<br />Percentage<br />Revenues<br />5.2%<br />Lines<br />4Q10<br />4Q09<br />Residential customers<br />Thousand<br />2009<br />2010<br />1,673<br />809<br />775<br />1,662<br />+1%<br />+43%<br />+19%<br />540<br />679<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />2007<br />2010<br />2009<br />2008<br />Fixed lines<br />Fixed broadband<br />Pay-TV<br /> * 1Q10 and 2Q10 adjusted for the change in the recognition of contract penalties <br /> Source: Company reports<br />
  7. 7. PT in the forefront of fibre roll-out in Europe<br />Key Highlights<br />PT<br />Others<br />PT will have 1.6 million homes with FTTH at the end of 2011...<br />... and will position Portugal as a leader in FTTH in Europe<br />FTTH/B homes passed in Portugal<br />Thousands<br />Penetration of FTTH/B<br />Passed/total households. Dec 2010. %<br />2,159*<br />Portugal (2011E)<br />38*<br />28<br />Bulgaria<br />35<br />1,559<br />Denmark<br />+600<br />Sweden<br />1,150<br />Other<br />Portugal (2010)<br />27<br />17<br />1,600<br />France<br />1,000<br />800<br />Finland<br />Norway<br />2011E<br />2010<br />2009<br />Russia<br />PT was awarded the FTTH Council Europe’s innovation prize in "Deployment and Operation of FTTH Networks" in February 2011<br /> * Assumes only additional passed homes for PT, i.e. 600 thousand more until the end of 2011<br /> Note: double-counting may exist in number of passed homes when served by more than one operator; Only countries with more than 2 million households were considered.<br /> Source: FTTH Council; Yankee Group; INE<br />
  8. 8. Key Highlights<br />In Voice, increased popularity of tribal plans required a response by TMN but impacted revenue performance<br />TMN had no choice but to follow the competition...<br />... which impacted revenues<br />Tribal plan timeline<br />Billing revenues<br />%, y.o.y.<br />-2.0<br />-2.6<br />-8.4<br />-4.5<br />Mar 2008<br />Optimus launches TAG<br />Sep 2008<br />Optimus launches TAG without monthly fee<br />Apr 2010<br />TMN launches Moche with no monthly fee<br />-10.2<br />0* cent/min for<br /> all calls, SMS, <br />MMS and<br /> video calls<br />Billing ARPU<br />%, y.o.y.<br />May 2008<br />TMN and Vodafone launch tribal plans<br />Mar 2010<br />Vodafone launches Extreme/Extravagan-za with no monthly fee<br />-6.7<br />-6.9<br />-11.6<br />-12.7<br />-8.9<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />4Q09<br />
  9. 9. Key Highlights<br />Value proposition of TMN’s tariff plans for the pre-paid market has been enhanced with the launch of “e nunca mais acaba”<br />>17,000 e-mails* <br />Unlimited voice and SMS within TMN<br />or<br />>100,000 likes on facebook<br />500 MB included (internet versions only)<br />No mandatory top up – keep talking if you fail to recharge<br />or<br />>1,000 Youtube movies**<br /> * Per month. Excluding attachments (average of 30KB/e-mail)<br /> ** Per month. Average of 500KB/movie<br />
  10. 10. Key Highlights<br />Domestic performance impacted by intense competition in mobile in the youth segment but wireline recovery is robust and cash flow is stable<br />Revenue performance driven by solid execution in wireline and international businesses <br />EBITDA impacted by top-line at TMN and investment in customer growth in wireline<br />Cash-flow is stable reflecting strong cost discipline while still investing in future-proof technology<br />Revenues<br />Euro million<br />EBITDA<br />Euro million<br />EBITDA minus CAPEX<br />Euro million<br />0.2%<br />3,742<br />3,733<br />-4.2%<br />1,557<br />1,492<br />-2.2%<br />-1.0%<br />709<br />693<br />1,929<br />1,948<br />Wireline <br />-6.8%<br />Wireline <br />800<br />745<br />221<br />Wireline <br />234<br />-8.6%<br />-5.3%<br />TMN<br />1,387<br />TMN<br />1,518<br />TMN<br />Other<br />Other<br />108<br />83<br />426<br />-20<br />-33<br />268<br />Other<br />2010<br />2009<br />2010<br />2009<br />2010<br />2009<br />
  11. 11. Key Highlights<br />Solid revenue and EBITDA growth in international assets driven by marketing and commercial efforts<br />EBITDA<br />Proportional. Euro million<br />Revenues<br />Proportional. Euro million<br />0.9%<br />6.4%<br />224.1<br />222.0<br />2010<br />2009<br />2010<br />2009<br />Note: Proportional revenues and EBITDA were calculated by applying the direct equity stake of PT or via Africatel, where PT holds a 75% stake. The 2010 figures were adjusted in order to considerer constant exchange rates and exclude the impacts from changes in the consolidation perimeter and in certain regulatory and accounting issues.<br />
  12. 12. Key Highlights<br />Solid balance sheet structure and financial flexibility<br />Value, at the end of 2009 of regulated pensions that were transferred to C.G.A.<br />747<br /><ul><li>2.1x net debt/EBITDA post Oi and pension transaction
  13. 13. Cost of funding of 4.4%
  14. 14. Solid funding position with Euro 6.3bn of cash and facilities available of which Euro 3.7bn is earmarked for Oi transaction
  15. 15. Receivable of Euro 2bn from Telefonica still pending</li></ul>Net Debt <br />Euro Million<br />Cost of debt<br />Net Debt to EBITDA<br />2.5x <br />5.0%<br />Reported<br />5,528<br />747<br />31 Dec 2009<br />3.6x<br />747<br />4.3%<br />Ex-Vivo<br />4,829<br />1.4x <br />4.4%<br />2,100<br />31 Dec 2010<br />Proforma*<br />2.1x<br />5,568<br />* Including Vivo and Oi transaction<br />
  16. 16. Exceptional DPS<br />Maximum range<br />Key Highlights<br />Solid and predictable dividend policy offering a yield in 2011 of 15.8%<br />PT is offering a solid, predictable and credible remuneration policy<br />PT is already delivering on its commitments<br />1.575<br />1.300<br />1.000<br />0.650<br />0.752<br />0.717<br />0.683<br />0.650<br />0.710<br />0.690<br />0.670<br />0.650<br />0.575<br />Paid in year…<br />2012<br />2011<br />2010<br />2015<br />2014<br />2013<br />Dividend yield<br />15.8%<br />9.4%<br />* Subject to Annual Shareholders’ Meeting approval<br />Note: The exceptional cash dividend and the remuneration package proposal are subject to market conditions, PT’s financial condition, applicable law regarding the distribution of net income, including additional shareholder approvals, as applicable, and other factors considered relevant by the Board at the time.<br />
  17. 17. Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
  18. 18. Strategic Review<br />Business strategy underpinned by innovation and best-in-class operational execution<br />Distinctive offers for all market segments<br />Internationalisation<br />Personal<br /><ul><li>Mobile data
  19. 19. Convergence</li></ul>SME/SoHo <br /><ul><li>Convergent solutions
  20. 20. SaaS</li></ul>Corporate <br /><ul><li>IT/IS
  21. 21. Virtualisation</li></ul>Brazil <br /><ul><li>Data growth
  22. 22. Conver-gence </li></ul>Africa <br />(selected<br />markets)<br /><ul><li>Oppor-tunistic M&A
  23. 23. Conso-lidation </li></ul>Residential<br /><ul><li>TV experience
  24. 24. 3-screen</li></ul>Technology and Innovation<br /><ul><li>Next-generation networks</li></ul>Execution<br /><ul><li>Operations, distribution and customer care</li></li></ul><li>Strategic Review - Residential<br />PT developed the “TV experience of the future”<br /><ul><li>>120 channels w/ exclusive content
  25. 25. HD and 3D channels
  26. 26. +2,500 VoD titles
  27. 27. On-demand Warner and HBO series
  28. 28. Interactivity over anchor programmes</li></ul>Innovative and exclusive contents <br /><ul><li>Multiple widgets in App Store
  29. 29. Convenience (e.g. news, pharmacy)
  30. 30. Entertainment (e.g. social networks)
  31. 31. Personal (e.g. online photo storage)</li></ul>Advanced, personalised widgets<br /><ul><li>Interactive functionalities (e.g. vuvuzelas off during football matches)
  32. 32. Multiroom DVR with~300 hours capacity
  33. 33. Pause and restart TV</li></ul>Functionalities for total control<br /><ul><li>Video-on-Demand on multiple screens . TV and PC
  34. 34. Mobile TV with >40 channels
  35. 35. Remote TV control (VoD + PVR)</li></ul>Multiscreen (TV, PC, Mobile)<br />
  36. 36. Feb 2010<br />First 3D broadcast<br />Feb 2010<br />Multi-room PVR<br />May 2010<br />World Cup interactivechannel and 3D broadcast<br />Oct 2010<br />First worldwide operator to broadcast a surf event in 3D<br />Strategic Review - Residential<br />Meo is driving innovation and offers a comprehensive range of services and the best customer experience in the pay-TV market<br />Nov 2010<br />Launch of Meo online (VoD at PC) and Music Box<br />Nov 2010<br />Launch of Games- on-demand service<br />2010<br />2009<br />2010<br />Jul 2010<br />New apps: Facebook, Flickr, Oceanlook and Sapo<br />Sep 2010<br />New local channel included<br />Sep -Oct 2010<br />More interactivity over killer shows: Widget Ídolos and “Secret Story”<br />Dec 2010<br />Meo Remote launch<br />
  37. 37. Strategic Review - Residential<br />Meo’s superior performance has been confirmed by independent studies<br />…and provides the best service<br />Meo leads on functionalities and performance…<br />Views from experts:<br />“…Victory goes to Meo service. Meo is technologically more developed...”<br />“… (Meo) offers higher performance and more functionalities.”<br />“… if you are an advanced user who values internet performance , you can only choose Meo Fibra”<br />Fibre customers survey*<br />Score (1-10)<br />Image quality<br />Internet bandwidth<br />DVR<br />VOD<br />Cable Operator<br />Cable Operator<br />Cable Operator<br />Cable Operator<br />Sound quality<br />Content<br />STB<br />Energy consumption<br />Cable Operator<br />Cable Operator<br />Cable Operator<br />Cable Operator<br /> * Excludes Scores with “Router” and “Cabling” to FTTH vs. DOCSIS (FTTN) different topology<br /> Source: Exame Informática (Feb 2011)<br />
  38. 38. Strategic Review - Residential<br />Meo enjoys the best customer perception and satisfaction in the market<br />Meo has the highest brand notoriety in Portugal…<br />… and has the best service attributes recognised by its customers<br />Top-of-mind of Portuguese TV operators<br />%. 2010 <br />Best service attributes<br />% of respondents*. Nov 2010<br />45.1<br />Pay-TV operator 1<br />25.4<br />Pay-TV operator 2<br />3.1<br />Pay-TV operator 3<br />3.0<br />Pay-TV operator 4<br />2.2<br />Cable operator<br /> * Customers of each operator assessing the following attributes: pricing, advertisement, promotions, support, SAC, channel offering, TV functionalities, image quality and internet access.<br /> Source: Publivaga<br />
  39. 39. Strategic Review - Residential<br />Meo has achieved 30% market share in 33 months and is underpinning broadband market share gains<br />… leading to solid market share gains<br />Sustained growth since launch…<br />Pay-TV market share <br />Percentage <br />Pay-TV customer base and net adds<br />Thousand<br />Net adds TV<br />100<br />100<br />100<br />PT<br />14<br />23<br />30<br />19<br />Other<br />14<br />14<br />Cable<br />Operator<br />67<br />61<br />63<br />56<br />4Q10*<br />4Q09<br />4Q08<br />4Q10<br />2Q10<br />4Q09<br />2Q09<br />4Q08<br />2Q08<br />Broadband customer base and net adds<br />Thousand<br />Broadband market share <br />Percentage <br />Net adds BB<br />100<br />100<br />100<br />1,001<br />PT<br />43<br />46<br />48<br />37<br />Other<br />21<br />19<br />28<br />Cable <br />Operator<br />33<br />33<br />29<br />4Q10*<br />4Q09<br />4Q08<br />4Q10<br />2Q10<br />4Q09<br />2Q09<br />4Q08<br />2Q08<br />10 consecutive quarters of market share gains<br />Pay-TV customer growth supporting take up of broadband <br /> * PT estimates based on companies reports<br />
  40. 40. Strategic Review - Residential<br />The transformation of the business model resulted in growth of traffic generating lines after seven years and residential revenue growth of 5.2% in 4Q10<br />Solid growth in residential revenues and customers<br />Inflection of wireline revenue trend<br />Residential retail revenues<br />Indexed (100=2009)<br />Wireline domestic retail revenues growth* and PSTN/ISDN linesnet adds<br />Percentage<br />Revenues<br />5.2%<br />Lines<br />4Q10<br />4Q09<br />Residential customers<br />Thousand<br />2009<br />2010<br />1,673<br />809<br />775<br />1,662<br />+1%<br />+43%<br />+19%<br />540<br />679<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />Q2<br />Q1<br />Q4<br />Q3<br />2007<br />2010<br />2009<br />2008<br />Fixed lines<br />Fixed broadband<br />Pay-TV<br /> * 1Q10 and 2Q10 adjusted for the change in the recognition of contract penalties <br /> Source: Company reports<br />
  41. 41. e<br />Strategic Review - Residential<br />Growing importance of fibre in Meo customer base with positive impact in churn and net adds<br />… driving pay-TV growth and reducing churn<br />Fibre already represents ~15% of Meo customers…<br />Meo customers and fibre weight<br />Thousand<br />Meo Net Adds**<br />2010s. 2010*<br />830<br />702<br />Fibre<br />42%<br />581<br />58%<br />ADSL + DTH<br />443<br />Meo churn rate**<br />Avg 2010. %<br />ADSL+ DTH<br />-10pp<br />15%<br />Fibre<br />10%<br />4%<br />0%<br />2Q09<br />4Q09<br />2Q10<br />4Q10<br />Fibre customers already account for ~21% of commercially available homes* and ~14% of total passed homes<br />Fibre<br />ADSL<br /> * Average commercially available households 2009-2010<br /> ** Residential segment<br />
  42. 42. Comprehensive strategy anchored on wireless data <br />Strategic Review - Personal<br />Smartphone <br />Distinctive offer<br /><ul><li>Comprehensive portfolio (~30 smartphones)
  43. 43. Exclusive handset models</li></ul>Competitive pricing<br /><ul><li>Own-brand, quality smartphones
  44. 44. Pre-paid and unlimited mobile internet </li></ul>Voice and Data plans<br />Pre-paid<br /><ul><li>Tariff structure to avoid migration to low-end tribal plans</li></ul>Post-paid<br /><ul><li>Unlimited voice and data plans targeted at high-value segments</li></ul>MBB plan<br /><ul><li>Unlimited data plan
  45. 45. Total cost control</li></ul>Innovative services<br /><ul><li>Multiple value-added services to use on-the-go (mobile TV, social network aggregator, music, etc)</li></ul>Strong sales presence<br /><ul><li>Innovative packaging
  46. 46. Dedicated customer support areas</li></ul>Laptop distribution<br /><ul><li>Subsidised laptops with mobile datacard (+780K)
  47. 47. Focus on student population</li></ul>Innovative convergent offers<br /><ul><li>Integrated offers for SMEs with fixed/ mobile voice & data and PC
  48. 48. 4P bundles</li></ul>Competitive offer<br /><ul><li>21.6 Mbps speeds
  49. 49. Free access to PT’s national WiFi network</li></ul>Intense communication<br /><ul><li>Strong above-the-line communication
  50. 50. Regular campaigns across the country</li></ul>Mobile broadband <br />
  51. 51. Launch of Music Box<br />Strategic Review - Personal<br />TMN has been implementing a successful and innovative smartphone and wireless data strategy<br />TMN demos 3D content by phone through LTEproject<br />Launch of TMN’s customer care support through Facebook and Twitter<br />TMN announces launch of Samsung Omnia 7, the first Windows 7 phone in Portugal <br />Broadcast of FIFA World Cup Games Live on Meo Mobile<br />Iphone 4 launch <br />Jan<br />Mar<br />May<br />Jul<br />Sep<br />2010<br />Nov<br />Launch of TMN A1, first own brand phone with Android <br />TMN launches Samsung Galaxy S the most advanced Android Smartphone<br />TMN launches Samsung Blue Earth, a solar rechargeable phone with the first ecological SIM card in the world<br />Galaxy Tab launch with access to main <br />weekly <br />newspaper<br />TMN launches “unlimited” pricing plan<br />Launch of Sapo A5 the first<br /> own brand handset with Android<br /> OS<br />
  52. 52. Strategic Review - Personal<br />Distinctive offer addressing market needs<br />TMN has analysed market needs…<br />… to define its portfolio of smartphones<br />Focus groups participants<br />OS included in mobile offer<br />~4,400 interviewees<br />2010<br />2009<br />2008<br />2007<br />2006<br />Number of handsets tested<br />386 handsets analysed<br />Number of smartphones offered<br />2010<br />2010<br />2009<br />2008<br />2007<br />2006<br />Operator 2<br />Operator 1<br />Regular market studies to analyse behaviours and equipment preferences <br />Source: operators’ corporate websites<br />
  53. 53. Strategic Review - Personal<br />Competitive equipment pricing<br />… and was the 1st operator to introduce unlimited plans**<br />TMN has been lowering equipment costs…<br />Smartphone prices<br />Euro<br />Cost per data traffic*<br />Euro per MB<br />First mass market smartphone in Portugal allowing for a 50% price reduction<br />8.50<br />QTEK S100<br />QTEK S200<br />TMN launched the first unlimited voice and data pricing plan (flat rates)<br />HTC Dual Touch<br />Bluebelt<br />Soft Stone<br />-56%<br />TMN A1<br />7 Million customers campaign<br />0.03<br />* Plan cost divided by total data included<br />**Fair usage policy <br />
  54. 54. Strategic Review - Personal<br />Service offering aligned with innovative market trends<br />TV<br />Applications<br />Music<br /><ul><li>40 TV channels: Information, Sports, Entertainment, Children, Music and Adult
  55. 55. Multi-screen service available on mobile, PC and TV
  56. 56. Unlimited access to over four million of songs
  57. 57. Customised playlist that can be shared with network of friends</li></ul>Sports and news<br />Channels<br /><ul><li>Dedicated application
  58. 58. Premium usability experience
  59. 59. Remote home recording via mobile phone
  60. 60. SMS reminders of show starting times</li></ul>Entertain-ment<br />Quality<br /><ul><li>From €0.99/day…
  61. 61. … up to €8.06/month with unlimited channels</li></ul>Utilities<br />Price<br />
  62. 62. Strategic Review - Personal<br />In Voice, increased popularity of tribal plans required a response by TMN but impacted revenue performance<br />TMN had no choice but to follow the competition...<br />... which impacted revenues<br />Tribal plan timeline<br />Billing revenues<br />%, y.o.y.<br />-2.0<br />-2.6<br />-8.4<br />-4.5<br />Mar 2008<br />Optimus launches TAG<br />Sep 2008<br />Optimus launches TAG without monthly fee<br />Apr 2010<br />TMN launches Moche with no monthly fee<br />-10.2<br />0* cent/min for<br /> all calls, SMS, <br />MMS and<br /> video calls<br />Billing ARPU<br />%, y.o.y.<br />May 2008<br />TMN and Vodafone launch tribal plans<br />Mar 2010<br />Vodafone launches Extreme/Extravagan-za with no monthly fee<br />-6.7<br />-6.9<br />-11.6<br />-12.7<br />-8.9<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />4Q09<br />
  63. 63. Strategic Review - Personal<br />Value proposition of TMN’s tariff plans for the pre-paid market has been enhanced with the launch of “e nunca mais acaba”<br />>17,000 e-mails* <br />Unlimited voice and SMS within TMN<br />or<br />>100,000 likes on facebook<br />500 MB included (internet versions only)<br />No mandatory top up – keep talking if you fail to recharge<br />or<br />>1,000 Youtube movies**<br /> * Per month. Excluding attachments (average of 30KB/e-mail)<br /> ** Per month. Average of 500KB/movie<br />
  64. 64. Strategic Review - Personal<br />TMN’s offers include a broad range of options for voice and data for post and pre-paid market<br />Main Stream<br />Pre-paid<br /><ul><li>Cost control with free unlimited on-net communications
  65. 65. Simple and clear pricingfrom 10-25€
  66. 66. Dedicated free IVR number and store specialist</li></ul>Post-paid<br /><ul><li>Targeted at high-value segments
  67. 67. Unlimited voice and data, Traffic for all national networks
  68. 68. Pricing range from 15-100€</li></ul>Niches<br />Pre-paid<br /><ul><li>Targeted at the youth segment
  69. 69. With or without monthly feefrom 12.5-15€
  70. 70. Free calls inside the tribal network
  71. 71. Targeted at the Kids segment
  72. 72. With monthly fee of 5€
  73. 73. Low-cost MVNO
  74. 74. Low-cost calls for all networks* with €15 monthly top-up</li></ul>* Available trough a mandatory monthly top-up of €15<br />
  75. 75. 8<br />Strategic Review - Personal<br />Best national mobile broadband network and ample choice of equipments<br />Best 3G network with up to 21 Mbps speeds<br />Comprehensive equipment offering<br /><ul><li>Coverage of 94% of the Portuguese population (~10 million people)
  76. 76. Best download/upload speed according to an independent study*
  77. 77. 93% coverage of national territory (best among national operators)</li></ul>Characteristics<br />Price (Euros)<br />3.6 Mbps<br />7.2 Mbps<br />21.6 Mbps<br />WiFi Router<br />29.90<br />49.90<br />79.90<br />99.90<br />3G territory coverage<br />November 2009. %<br />Includes free access to nationwide <br />PT WiFi over 1,600 hot spots<br />Operator 2<br />Operator 3<br /> * Study published by Exame Informática (January 2010) made by P3 consulting <br /> Source: Anacom study evaluating QoS in urban areas and main roads (Nov 2009)<br />
  78. 78. Strategic Review – Corporate and SME/SoHo<br />PT is well positioned to lead the offering of cloud computing services<br />Description<br />Superior fixed and mobile networks<br /><ul><li>Broad FTTH network serving 1,700 corporate sites
  79. 79. First operator to demo and launch a LTE pilot in Portugal</li></ul>Nationwide data centre infrastructure<br /><ul><li>Widest nationwide data centre network with full redundancy
  80. 80. Biggest Portuguese data centre (12.000 m2) already announced with state-of-the-art design to increase energy efficiency </li></ul>Unique knowledge of national companies<br /><ul><li>Leading operator in all corporate and enterprise segments
  81. 81. “One-stop shop” for all ICT services</li></ul>Advanced skills and know-how<br /><ul><li>High expertise in service platform management and security policy
  82. 82. More than 2,000* professionals with advanced skills in terms of design, implementation and management of IT services</li></ul>Strategic partnerships network<br /><ul><li>Several strategic partnerships with leading companies in the world (equipments, networks, applications)
  83. 83. Key partnership with Cisco and Microsoft for cloud computing</li></ul> * Including ~500 network and OAM supervision professionals (Operations Administration Management), +300 assistants at the Call Centre and ~400 field force technicians <br />
  84. 84. Strategic Review – Corporate and SME/SoHo<br />PT is leveraging technological know-how and infrastructure to strengthen its ICT offers and innovation leadership<br />Advanced energy management technology<br />Biggest data centre in Portugal with competitive <br />dimension across Europe<br />Data centres size in Portugal*<br /> Thousand sqm<br />Utilisation of renewable energy sources<br />Free cooling system<br />Installed <br />capacity<br />New<br />data centre<br />Control and monitoring<br />Energy efficiency<br />15,0 – 17,0**<br />Player 2<br />Player 3<br />Energy efficiency<br />PUE*<br />Energy consumption<br />Player 4<br />2.1<br />-40%<br />1.2<br />1.2<br />Player 5<br />Other<br />New PT’s data centre<br />Best worldwide practices<br />Portugal current average<br />New PT’s data centre<br />Existing Data centres<br />*Server areas only i.e. Excludes technical and office areas<br />**Depends on relocation of already installed capacity <br />*** “Power Usage Effectiveness”: Total energy consumed by actual energy spend in the equipment<br />
  85. 85. Strategic Review – Corporate and SME/SoHo<br />PT’s international strategic partnerships will allow for the roll-out of a complete and attractive offer of “cloud” services<br />Advanced XaaS solutions to the corporate segment...<br />... and productivity tools for national SMEs<br />Tool<br />Description<br />Office<br /><ul><li>All main tools included in Microsoft Office suite, namely Word, Excel and PowerPoint
  86. 86. Complete and integrated management of corporate emails, contacts and calendar
  87. 87. Easy search and sharing of content among company employees
  88. 88. Communication through instant messaging and web based video conference services</li></ul>Exchange<br />+<br />Tested cloud architecture and unique know-how in the development of cloud based services<br />PT’s unique capacity of data centre services supported by next generation fibre opticalnetwork <br />Sharepoint<br />Lync<br />Portuguese SMEs first in the world to access Microsoft new SaaS software<br />1ªphase: IaaS (servers/ virtual desktops) and Webex<br />2ªphase: UCaaS (Unified Communications as a Service)<br />
  89. 89. 9<br />Strategic Review – Corporate and SME/SoHo<br />SME customers are being offered integrated fixed and mobile and voice and data services<br />Highlights<br />OfficeBox workstations<br />Mobile broadband customers<br /><ul><li>Customized solutions to address sector-specific needs (e.g. WinRest for Restaurants)
  90. 90. Integrated F-M convergent offers including equipments and software (e.g. Office 2010 in Office Box package)
  91. 91. Single point-of-contact for customer support
  92. 92. Advanced training to guarantee solid knowledge of solutions and customer needs
  93. 93. Focus on mobile broadband penetration to increase number of services per customer
  94. 94. Dedicated area in stores and support line available 24x7</li></ul>+157%<br />+96%<br />2010<br />2009<br />2008<br />2010<br />2009<br />2008<br />Internet on mobile phones<br />TV customers<br />+129%<br />+83%<br />2010<br />2009<br />2008<br />2010<br />2009<br />2008<br />
  95. 95. Strategic Review – Corporate and SME/SoHo<br />Advanced IT solutions are driving growth and customer loyalty in the Corporate segment<br />Highlights<br />Total Managed Services**<br />IT* weight in total PT’s Corporate revenues<br /><ul><li>Fibre on the VPN offer
  96. 96. Focus on Managed Services and outsourcing solutions for large corporations
  97. 97. Changing the business to IT/IS driving Cloud Computing services
  98. 98. Focus on mobile data (smart-phones, tablets and notebooks)
  99. 99. Vertical end-to-end solutions on specific markets</li></ul>+5%<br />+2pp<br />4Q10<br />4Q09<br />4Q10<br />4Q09<br />+16%<br />+22%<br />4Q10<br />4Q09<br />4Q10<br />4Q09<br />Mobile broadband data cards<br />High bandwidth VPN accesses<br /> * IT/IS, Outsourcing and Managed Services<br /> ** WAN, LAN and Voice Managed Services + Data Centre and Security Managed Services. Data includes total installed base <br />
  100. 100. PT in the forefront of fibre roll-out in Europe<br />Strategic Review – Technology and Innovation<br />PT<br />Others<br />PT will have 1.6 million homes with FTTH at the end of 2011...<br />... and will position Portugal as a leader in FTTH in Europe<br />FTTH/B homes passed in Portugal<br />Thousands<br />Penetration of FTTH/B<br />Passed/total households. Dec 2010. %<br />2,159*<br />Portugal (2011E)<br />38*<br />28<br />Bulgaria<br />35<br />1,559<br />Denmark<br />+600<br />Sweden<br />1,150<br />Other<br />Portugal (2010)<br />27<br />17<br />1,600<br />France<br />1,000<br />800<br />Finland<br />Norway<br />2011E<br />2010<br />2009<br />Russia<br />PT was awarded the FTTH Council Europe’s innovation prize in "Deployment and Operation of FTTH Networks" in February 2011<br /> * Assumes only additional passed homes for PT, i.e. 600 thousand more until the end of 2011<br /> Note: double-counting may exist in number of passed homes when served by more than one operator; Only countries with more than 2 million households were considered.<br /> Source: FTTH Council; Yankee Group; INE (5.7 million households for Portugal)<br />
  101. 101. Strategic Review – Technology and Innovation<br />Fibre will also play a key role in the modernisation of TMN network ahead of LTE launch<br />TMN base stations connected with fibre<br />Preparing for LTE/4G<br />Modernisation of 2G network<br />Traffic off-load via WiFi network<br /><ul><li>~85% (~3,300) of mobile stations already connected with fibre
  102. 102. ~80% of fibre mobile stations connected with IP/Ethernet technology at the end of 2011
  103. 103. TMN is one out of 61 mobile operators (~7% of world total) with LTE roll-out already planned or in implementation
  104. 104. Modernisation of all 2G network allowing for quality improvement, increased network capacity and enabling of 4G
  105. 105. Using national hot-spot network (~1.600) to off-load data traffic from the mobile network </li></ul>Source: 3G Americas<br />
  106. 106. Competitive position<br />Strategic Review – Brazil<br />Oi is the only operator with a fully integrated service offering under a single brand in Brazil<br />Oi operates in all markets under a single brand…<br />…and with a nationwide coverage<br />Customer per region<br />Millions.Sep 2010<br />Fixed <br />Mobile <br />Broadband <br />Pay-TV <br />Region I<br />I<br />II<br />Telefónica <br />III<br />Broadband<br />Fixed<br />Mobile<br />2º<br />1º<br />1º<br />Telmex<br />Region II<br />Region III<br />Mobile<br />Broadband<br />Fixed<br />Mobile<br />4º<br />1º<br />1º<br />4º<br />Source: Company reports<br />
  107. 107. Strategic Review – Brazil<br />PT will be the strategic telecoms partner of Oi<br />PT stake at Oi after deal completion<br />PT stake at Contax after deal completion <br />35%<br />35%<br />35%<br />35%<br />AG Telecom<br />LF Tel<br />Fundação<br />Atlântico<br />BNDES/ Funds<br />AG Telecom<br />LF Tel<br />Fundação<br />Atlântico<br />10.2%<br />35%<br />35%<br />19.9%<br />37.7%<br />11.5%<br />19.4%<br />19.4%<br />12.1%<br />Telemar Participações (TmarPart)<br />CTX Participações S.A.<br />PT’s direct and indirect stake of 25.6%<br />PT’s direct and indirect stake of 44.4%<br />TBD<br />Tele Norte Leste Participações (TNL)<br />Contax Participações S.A. (CTAX)<br />TBD<br />Telemar Norte Leste (TMAR)<br />Contax<br />PT’s direct and indirect stake minimum of 22.38%<br />PT’s direct and indirect stake of 19.5%<br />25.6% stake at Telemar Participações with decision power over strategic issues and active role in Oi’s management:<br /><ul><li>Participation in board of TNL/TmarPart and appointment of Oi’s CEO
  108. 108. Appointment of chairman of Engineering & Network, Technology & Innovation and Product Offering committee
  109. 109. Rights attributed to PT enable proportional consolidation</li></ul>Merger of Contax and Dedic / GPTI, allowing PT to consolidate 44.4%, and creating synergies / aligning interests of all stakeholders: <br /><ul><li>Generation of substantial synergies, thus benefiting all shareholders of Dedic/GPTI and Contax
  110. 110. Crystallisation of the value of Dedic/GPTI</li></li></ul><li>Strategic Review – Brazil<br />PT’s experience in the transformation of its business model will underpin Oi’s strong market and customer franchise<br />Opportunities<br />PT’s track record<br /><ul><li>High growth potential on the back of favourable demographics and improving economics
  111. 111. Still low broadband penetration
  112. 112. High potential to up-sell pay-TV through bundling
  113. 113. Strong wireline footprint
  114. 114. Unique network enabling the sale of 3P and 4P services, also leveraging on F2M convergence
  115. 115. Largest backbone in Brazil
  116. 116. Opportunity to increase presence in the corporate and SME/SOHO markets
  117. 117. Increase share of wallet through telecoms/IT convergent offers
  118. 118. Additional upside potential
  119. 119. Mobile penetration should continue to grow
  120. 120. Mobile broadband becoming increasingly more popular
  121. 121. Smartphone still showing high potential
  122. 122. Potential to increase usage of data services
  123. 123. Share of best practices with TMN’s and SAPO’s experience </li></ul>Wireline<br /><ul><li>Successful turnaround of wireline business
  124. 124. Leading operator in fibre deployment and successful launch of Meo (27% market share 27 months after launch), turning PT into a case-study
  125. 125. Largest backbone in Portugal and leadership in all business segments, namely in corporate data traffic
  126. 126. PT awarded the best fibre network by FTTH Council
  127. 127. Mobile market leadership in a highly competitive market, with EBITDA margin of 49.1% (vs European average of 36.7%)
  128. 128. Successful deployment of mobile data strategy based on smartphone and mobile broadband leadership
  129. 129. Successful experience in the turnaround of Vivo and development of new business lines</li></ul>Wireless<br />
  130. 130. Strategic Review – Africa and other<br />Several new campaigns were launched throughout the year to increase penetration and boost usage<br />Africa <br />Angola<br />(Unitel)<br />Promotions with roaming data<br />Bonus campaigns to increase mobile data usage<br />Implementation of a fibre backbone<br />Namibia<br />(MTC) <br />New broadband brand launched in November<br />(Netman)<br />Handset campaign discounts/ Christmas specials<br />New pricing plans “Tango zero” and “back to school”<br />Christmas promotion<br />Contemplating a car draw (BMW 116d)<br />New wireline campaigns free calling on weekends and nights<br />New TV channels bundle to increase market momentum<br />Cape Verde<br />(CVT)<br />Campaigns to stimulate pre-paid top-ups<br />Christmas promotion based on SMS bonuses for the main top-ups<br />Celebration of the 100,000 customers with a handset promotion<br />São Tomé<br />(CST)<br />ROW <br />Timor<br />(TT) <br />Christmas promotion focused of pre-paid customers acquisition<br />Promotion campaigns “TT Barato” with price reduction on the 2nd minute <br />Promotion campaign with free on-net usage<br />Macau<br />(CTM)<br />Push mobile data and voice subscription through pre-registration of income requests<br />Campaigns to simulate the subscription and usage of services<br />Rolled out the 100m fibre broadband upgrade<br />
  131. 131. Strategic Review – Africa and other<br />Solid revenue and EBITDA growth in international assets driven by marketing and commercial efforts<br />EBITDA<br />Proportional. Euro million<br />Revenues<br />Proportional. Euro million<br />0.9%<br />6.4%<br />224.1<br />222.0<br />2010<br />2009<br />2010<br />2009<br />Note: Proportional revenues and EBITDA were calculated by applying the direct equity stake of PT or via Africatel, where PT holds a 75% stake. The 2010 figures were adjusted in order to considerer constant exchange rates and exclude the impacts from changes in the consolidation perimeter and in certain regulatory and accounting issues.<br />
  132. 132. Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
  133. 133. Fixed Broadband<br />Pay-TV<br />Quarter Operational Review<br />Traffic generating lines grew after seven years and Meo is also leading to broadband market share gains<br />… and underpinning the turnaround of the wireline segment <br />TV and broadband with solid growth …<br />Residential customer base<br />Thousand<br />Net adds and Retail RGU’s net adds <br />Thousand<br />PSTN<br />TV<br />Fixed broadband<br />26<br />5<br />-14<br />-14<br />-15<br />-17<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />Market share<br />percentage<br />BB + pay-TV penetration in total residential accesses<br />Percentage<br />48.6<br />30*<br />48*<br />47.3<br />45.7<br />44.2<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />4Q10<br />3Q10<br />2Q10<br />1Q10<br />Pay-TV<br />Fixed BB<br /> * PT estimates<br /> Source: Operator reports <br />
  134. 134. Quarter Operational Review<br />Retail revenues of residential segment up more than 5% and EBITDA and cash flow trends are also improving<br />Residential retail revenues showing healthy growth leading to…<br />… solid resilience of wireline retail revenues<br />Residential wireline retail revenues<br />base 100 (index 100=4Q09)<br />Retail revenue growth<br />%. y.o.y<br />5.2%<br />3.9<br />2.0<br />1.2*<br />1.1<br />0.7*<br />0.4<br />0.4<br />0.2<br />-4.1<br />-6.1<br />-8.3<br />-8.6<br />3Q10<br />1Q10<br />3Q09<br />1Q09<br />3Q08<br />1Q08<br />4Q10<br />4Q09<br />Continued sequential improvement of EBITDA trends<br />Lower capex notwithstanding FTTH coverage and continued customer growth<br />Wireline capex<br />Euro million<br />EBITDA delta y.o.y<br />Euro million<br />-7.3%<br />FY<br />4Q<br />3Q<br />2Q<br />1Q<br />FY<br />4Q<br />3Q<br />2Q<br />1Q<br />4Q08<br />2Q08<br />4Q10<br />2Q10<br />4Q09<br />2Q09<br />2009<br />2010<br /> * Adjusting for the change in the recognition of contract penalties <br />
  135. 135. Quarter Operational Review<br />Top line pressure as a result of challenging competitive conditions, but focus has been on profitability<br />Operating revenues and Service revenues growth<br />Euro.% y.o.y<br />ARPU<br />Euro<br /><ul><li>Economy reflecting the effects of the sovereign risk crisis
  136. 136. Increased fiscal consolidation efforts
  137. 137. VAT increase
  138. 138. Freeze of new admissions
  139. 139. 5% average reduction in public wages
  140. 140. Cuts in social security spending</li></ul>-13%<br />-3<br />-4<br />-4<br />-5<br />-5<br />-6<br />-9<br />4Q10<br />2Q10<br />4Q09<br />2Q09<br />4Q10<br />2Q10<br />4Q09<br />2Q09<br />EBITDA margin<br />%<br />Operating cash flow margin <br />%<br /><ul><li>Focus on cash flow and profitability
  141. 141. Cost reduction
  142. 142. Efficient management of SAC
  143. 143. Lower capex as a result of convergence trends and synergies</li></ul>29.4<br />+3.8pp<br />+18.0pp<br />43.7<br />43.6<br />24.2<br />39.9<br />11.4<br />4Q10<br />4Q09<br />4Q08<br />4Q10<br />4Q09<br />4Q08<br />
  144. 144. Quarter Operational Review<br />PT maintained cash and cost discipline which allowed for a decrease in operating expenses<br />TMN - Opex excl. D&A<br />Thousand<br />Wireline - Opex excl. D&A<br />Thousand<br />First opex decrease since Pay-TV launch (2Q08)<br />-4.8%<br />-10.9%<br />1<br />15<br />4Q10<br />4Q09<br />4Q10<br />Other opex<br />Direct costs <br />4Q09<br /><ul><li>Cost reduction at TMN reflects strict cost control and lower SARC
  145. 145. Other opex down 31.8% reflecting benefits of F-M mobile convergence
  146. 146. Total opex lower by Euro 15 million notwithstanding an increase of Euro 10 million in programming costs
  147. 147. Lower value for “Other opex” reflects strict cost discipline (Euro -15 million vs 4Q09)</li></li></ul><li>FTTH requires less customer support and less maintenance<br />Meo ADSL<br />Meo Fiber<br />Meo ADSL<br />Meo Fibre<br />Avg. Repairs<br /> Meo ADSL<br />Quarter Operational Review<br />Fibre is significantly more reliable…<br />…and is less exposed to weather conditions<br />Technicians dispatched per customer<br />%. (N+5= October 2010)<br />Monthly Repairs in the Braga area <br />Nov 09 to May 10<br />-16%<br />81%<br />-35%<br />Aug 09<br />Aug 10<br />N<br />N+1<br />N+2<br />N+3<br />N+5<br />N+4<br />Month<br />Feb 09<br />
  148. 148. Quarter Financial Review<br />Domestic performance impacted by intense competition in mobile in the youth segment but wireline recovery is robust and cash flow is stable<br />Revenue performance driven by solid execution in wireline and international businesses <br />EBITDA impacted by top-line at TMN and investment in customer growth in wireline<br />Cash-flow is stable reflecting strong cost discipline while still investing in future-proof technology<br />Revenues<br />Euro million<br />EBITDA<br />Euro million<br />EBITDA minus CAPEX<br />Euro million<br />0.2%<br />3,742<br />3,733<br />-4.2%<br />1,557<br />1,492<br />-2.2%<br />-1.0%<br />709<br />693<br />1,929<br />Wireline <br />1,948<br />-6.8%<br />Wireline <br />800<br />745<br />221<br />Wireline <br />234<br />-8.6%<br />-5.3%<br />TMN<br />1,387<br />TMN<br />TMN<br />1,518<br />Other<br />Other<br />108<br />83<br />426<br />-20<br />-33<br />268<br />Other<br />2010<br />2009<br />2009<br />2010<br />2010<br />2009<br />
  149. 149. Quarter Financial Review<br />Capex intensity driven by FTTH and Meo customer growth<br />Lower wireline capex following significant rollout of FTTH and higher efficiency of customer investments<br />Wireline CAPEX and CAPEX to sales<br />Euro million<br />29.0%<br />27.2%<br />-1.9pp<br />565<br />524<br />Capex continues to be directed to FTTH and 3G and innovative services<br />Other<br />377<br />343<br />Consolidated CAPEX and CAPEX to sales<br />Euro million<br />Customer<br />-1.4pp<br />22.7%<br />21.3%<br />2010<br />2009<br />-5.9%<br />3G and 3.5G investments undertaken in 2008 and 2009 ensure wide coverage and quality of service<br />848<br />798<br />TMN CAPEX and CAPEX to sales <br />Euro million<br />2010<br />2009<br />11.9%<br />9.6%<br />-2.3pp<br />-26.1%<br />180<br />133<br />2010<br />2009<br />
  150. 150. Quarter Financial Review<br />Solid balance sheet structure and financial flexibility<br />Value, at the end of 2009 , of regulated pensions that were transferred to C.G.A.<br />747<br /><ul><li>2.1x net debt/EBITDA post Oi and pension transaction
  151. 151. Cost of funding of 4.4%
  152. 152. Solid funding position with Euro 6.3bn of cash and facilities available of which Euro 3.7bn is earmarked for Oi transaction
  153. 153. Receivable of Euro 2bn from Telefonica still pending</li></ul>Net Debt <br />Euro Million<br />Cost of debt<br />Net Debt to EBITDA<br />2.5x <br />5.0%<br />Reported<br />5,528<br />747<br />31 Dec 2009<br />3.6x<br />747<br />4.3%<br />Ex-Vivo<br />4,829<br />1.4x <br />4.4%<br />2,100<br />31 Dec 2010<br />Proforma*<br />2.1x<br />5,568<br />* Including Vivo and Oi transaction<br />
  154. 154. Quarter Financial Review<br />Following the transfer of regulated pension plans, PT’s balance sheet risk profile has improved <br />Salaries to suspended employees have an average maturity of 4 years and pensions of 13 years<br />Unfunded pension obligations of Euro 0.7bn<br />Unfunded obligations<br />Euro million<br />Change in gross unfunded obligations<br />Euro million<br />Discount rate: Euro 352 mn, o.w. Euro 262mn related to regulated pensions *<br />Mortality table: Euro 100 mn, o.w. Euro 83 mn related to regulated pensions *<br />Pensions and healthcare oblig.<br />13 years duration<br />1 Jan 2010<br />1,467<br />MKT value of funds<br />PRB cost<br />39<br />Net actuarial losses<br />Unfunded pensions and healthcare oblig.<br />4 years duration<br />Curtailment<br />149<br />-35.4%<br />Net reimbursement<br />Salaries to suspended pre-retired empl.<br />26<br />Payments<br />161<br />Total gross unfunded oblig.<br />Setlement<br />1,022<br />Gross<br />949<br />After-tax unfunded oblig.<br />711<br />31 Dec 2010<br />Net after tax<br />711<br />*liabilities associated to regulated pension plans were transferred Caixa Geral de Aposentações<br />
  155. 155. Agenda<br />2010 Key Highlights <br />Strategic Review<br />Quarter Review<br />Shareholder Remuneration<br />
  156. 156. Exceptional DPS<br />Maximum range<br />Shareholder Remuneration<br />Solid and predictable dividend policy offering a yield in 2011 of 15.8%<br />PT is offering a solid, predictable and credible remuneration policy<br />PT is already delivering on its commitments<br />1.575<br />1.300<br />1.000<br />0.650<br />0.752<br />0.717<br />0.683<br />0.650<br />0.710<br />0.690<br />0.670<br />0.650<br />0.575<br />Paid in year…<br />2012<br />2011<br />2010<br />2015<br />2014<br />2013<br />Dividend yield<br />15.8%<br />9.4%<br />* Subject to Annual Shareholders’ Meeting approval<br />Note: The exceptional cash dividend and the remuneration package proposal are subject to market conditions, PT’s financial condition, applicable law regarding the distribution of net income, including additional shareholder approvals, as applicable, and other factors considered relevant by the Board at the time.<br />
  157. 157. For further information:<br />Nuno Vieira<br />Investor Relations Director<br />+351 21 500 1701<br />nuno.t.vieira@telecom.pt<br />www.telecom.pt<br />

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