Portugal's meo TV adds 59k subscribers in 2Q09

2009 First Half Results

LISBON, Portugal — Portugal Telecom (Lisbon: PTC; NYSE: PT) announced today its first half results ended 30 June 2009.

Wireline

Retail revenues increased by 2.0% y.o.y in 2Q09, the best performance of the last eighteen quarters, to Euro 243 million, underpinned by the growth in RGUs of 52 thousand, namely in pay-TV customers (+59 thousand net additions in the quarter) and high quality broadband net adds (+33 thousand flat fee net adds).

2Q09 marks the first year of Meo’s nationwide launch. One year after, in triple-play and pay-TV, Meo is the reference as the most solid and the most innovative pay-TV offer in the Portuguese market. Meo offers new features and functionalities not available to date: (1) real video on demand, with DVD-like functionalities and a catalogue of more than 2,000 movies; (2) catch-up TV; (3) video recording; (4) electronic programming guide; (5) on-line games and internet access through the TV set, and (6) customised offers for kids.

Meo provides access to a comprehensive content offering, with more than 110 TV channels and over 2,000 real video-on-demand (VoD) titles. The VoD offer, which includes blockbusters from five Hollywood studios, continues to be a successful and differentiating feature of the service, as more than 50% of Meo’s IPTV customers have already used it on a paid basis (+5pp, as compared to 1Q09), consuming on average 2.7 movies per month.

PT has been continuously strengthening its Meo offer with new features and content, namely through the development of partnerships with key content producers and suppliers. On 6 April 2009, PT launched the AXN channel in high definition (“HD”), available through IPTV and Satellite. On 24 July, PT announced a partnership with free-to-air channel SIC, which enhances its competitive position in pay-TV as well as internet. Additionally, PT also reinforced its offer with international channels aimed at ethnic communities and launched new features like on-TV games and karaoke.

Furthermore, and as part of the continuous investment in innovation in pay-TV, PT launched new mobile features, thus making available to all Meo customers, which are simultaneously TMN customers, the access through the mobile phone to the TV guide (EPG). Meo’s mobile TV service, already with an offer of 40 channels, now offers higher definition due to a significant increase in quality provided in audio and video streaming.

Wireline operating data (‘000):

                 2Q09  2Q08    y.o.y  1H09  1H08    y.o.y
                 ----  ----  -------  ----  ----  -------
TV customers      443   116   280.8%   443   116   280.8%
 Net additions     59    70  (15.7%)   131    96    37.0%

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