Portugal Telecom (Meo) 2008 first nine month results

Portugal Telecom (Lisbon: PTC; NYSE: PT) announced today its results for the first nine months ended 30 September 2008, which include Telemig as from 2Q08.

Operating Review

In the quarter, PT continued to focus its marketing efforts in the promotion of its pay-TV service, Meo, both through IPTV and satellite, which was commercially launched only in April of this year.

On 7 June 2008, Portugal Telecom, in an exclusive partnership with the local free-to-air TVI, broadcasted the first free-to-air programme in high-definition (HD) to all Meo customers, making available the Euro 2008 football championship in this format. Meo also broadcasted the Olympic Games in HD, in partnership with Eurosport.

Meo also enhanced its catch-up TV service by including content from SIC (free-to-air) in addition to RTP (free-to-air) thus providing additional flexibility to its customers and improving the “Meo my-TV” experience.

Meo continues to provide access to a comprehensive content offering, with more than 110 TV channels and over 1500 real video-on-demand (VOD) titles. The VOD offer, which include blockbusters from five Hollywood studios, is proving to be a successful and differentiating feature, as circa 40% of Meo’s IPTV customers have already used it on a paid basis, consuming on average 2.8 movies per month.

Meo’s offer is very flexible with channels tiered in packages, or available à la carte, and that can be subscribed directly through the TV set in real time. In addition, Meo also provides access to advanced features such as digital recording and pause live-TV. Without legacy constraints, the set-top boxes in the Meo service are all HD compliant, using MPEG-4.

YTD net adds in the pay-TV service reached 191 thousand (95 thousand net adds in the quarter), with PT surpassing the threshold of 200 thousand customers on 23 September and reaching 211 thousand customers by the end of September. The pay-TV subscribers already represent 7.9% of traffic-generating lines and 30.4% of the total ADSL customer base, an encouraging performance taking into consideration that the IPTV service was launched in 4Q07 and the satellite service in April 2008.

Wireline operating data: TV customers (‘000)

               3Q08  3Q07  9M08  9M07
               ----  ----  ----  ----
Main accesses   211     6   211     6
Net additions    95     6   191     6

In October 2008, PT was notified of the final decision of the Portuguese telecoms regulator, ANACOM, endorsing the Draft Final Decision of the Committee of Evaluation to allocate to PT the frequency usage rights associated with Mux A (transport of free-to-air signal) and Muxes B to F (pay-TV service). The election of PT in both DTT contests confirms PT’s commitment towards the successful rollout of DTT in Portugal as well as towards the implementation of its multi-platform pay-TV strategy, based on IPTV, DTH, DTT and mobile, which aims to be a growth lever of the domestic operations of PT in the future.

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