SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

For the month of June 2009

Commission File Number 1-13758

PORTUGAL TELECOM, SGPS, S.A.

(Exact name of registrant as specified in its charter)

Av. Fontes Pereira de Melo, 40
1069 - 300 Lisboa, Portugal

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form

20-F or Form 40-F.

Form 20-F       X      Form 40-F              

Indicate by check mark whether the registrant by furnishing the information contained in this
Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.

Yes              No        X      

Portugal Telecom

First quarter 2009

Public Company- Avenida Fontes Pereira de Melo, 40 ·1069-300 Lisboa - Share capital: Euro 26,895,375
Registered in the Conservatory of the Commercial Registry of Lisbon and Collective Person under no. 503 215 058

Consolidated report

First quarter 2009

The terms “PT”, “Portugal Telecom Group”, “PT Group”, “Group” and “Company” refer to Portugal Telecom and its subsidiaries or any of them as the context.

Financial review

Consolidated income statement

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) The Wireline and domestic mobile operating revenues include the impact of the decline in regulated mobile termination rates (MTRs). At TMN this amounted to Euro 18.8 million in 1Q09. (3) Commercial costs include costs of product sold, commissions (included in income statement caption “Supplies and external expenses”) and  marketing and publicity expenses. (4) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (5) Income from operations = income before financials and income taxes + curtailment costs +net  losses (gains) on disposal of fixed assets + net other costs (gains).

Consolidated operating revenues

In 1Q09 consolidated operating revenues increased by 2.1% y.o.y, driven primarily by growth at the wireline business in Portugal and Vivo, while adjusting for the devaluation of the Real against the Euro and the consolidation of Telemig, consolidated operating revenues would have increased by 4.2% y.o.y. Wireline operating revenues increased in 1Q09 by 3.0% y.o.y. improving once again the sequential quarterly performance. Wireline revenue performance was underpinned by the inflection of retail revenues, which posted a 0.4% growth y.o.y, as a result of the continued strong performance of television and broadband products, and also the continued growth in data & corporate. Vivo’s operating revenues increased by 5.7% y.o.y in Euros and by 22.6% y.o.y in Reais, on the back of continued customer growth (33.0% increase y.o.y in the customer base). Excluding the consolidation of Telemig and the impact of the depreciation of the Real against the Euro, Vivo’s operating revenues would have increased by 10.2% y.o.y. TMN’s operating revenues decreased by 4.2% y.o.y due to the impacts of lower mobile termination rates (MTRs) and lower handset sales, which more than offset the growth in

customer revenues (+2.2% y.o.y in 1Q09), achieved on the back of a 17.4% y.o.y. growth in data revenues, which already account for 22.7% of total revenues. Excluding the impact of lower MTRs, TMN’s operating revenues would have increased by 0.6% y.o.y.

Other revenues, including intra-group eliminations, decreased by 9.1% y.o.y mainly due to: (1) the termination in August 2008 of the management fee contract with Vivo, and (2) lower contribution to consolidated revenues from MTC as a result of the devaluation of the Namibian Dollar, which more than offset the 14.9% y.o.y revenue growth in local currency.

(1) Domestic operations include the wireline segment, TMN, PT Inovação, PT SI, PT Pro and PT Contact.  (2) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. Includes mainly Vivo and Dedic. (3) Includes fully consolidated international assets, namely MTC, CVT, CST and Timor Telecom, and also the holding companies.

The contribution from fully and proportionally consolidated international assets to operating revenues increased from 47.1% in 1Q08 to 48.8% in 1Q09. Brazil accounts for 45.2% of consolidated operating revenues, an increase of 1.7pp from 1Q08, despite being adversely impacted by the depreciation of the Real against the Euro.

Consolidated operating costs, excluding PRBs depreciation and amortization

Consolidated operating costs excluding post retirement benefits (PRBs) and depreciation and amortization, increased by 3.7% y.o.y in 1Q09 to Euro 1,002 million, as compared to Euro 966 million in the same period of last year, primarily explained by higher contributions from (1) the wireline business (Euro 40 million), due to higher programming and commercial costs  related to the roll out of the pay-tv offer, and (2) Vivo (Euro 18 million), reflecting the impact of the consolidation of Telemig (Euro 53 million) and increased commercial activity, notwithstanding the impact of the depreciation of the Real (Euro 71 million). These effects were partially offset by a lower contribution from TMN, primarily explained by the decrease in MTRs. Adjusting for the impacts of the consolidation of Telemig and depreciation of the Real, operating costs excluding PRBs and depreciation and amortization would have increased by 5.9% y.o.y. in 1Q09 to Euro 1,023 million.

Wages and salaries increased by 3.1% y.o.y. in 1Q09 to Euro 162 million, primarily explained by higher contributions from Vivo (Euro 4 million), mainly related to the impact of the consolidation of Telemig (Euro 6 million), and from our call centre operation in Brazil (Euro 3 million). Wages and salaries accounted for 10.1% of consolidated operating revenues.

Direct costs increased by 7.4% y.o.y to Euro 261 million in 1Q09 and accounted for 16.3% of consolidated operating revenues with this increase being primarily explained by Vivo and the wireline business. Direct costs at Vivo increased by 9.5% y.o.y (Euro 11 million), reflecting the impact of the consolidation of Telemig (Euro 18 million) and the increases in traffic and lease costs related to continued customer growth and the roll out of the 3G services, whose effects were partially offset by the depreciation of the Real (Euro 18 million). At the wireline business, direct costs increased by 19.6% (Euro 17 million), primarily as a result of higher programming costs related to the pay-TV service. These effects were partially offset by a reduction in direct costs from our domestic mobile business, following the decrease in MTRs.

Commercial costs _ Commercial costs remained stable at Euro 263 million and accounted for 16.4% of consolidated operating revenues. The increase at the Wireline business (Euro 4 million) and Vivo (Euro 7 million), reflecting higher commercial activity and the impact of the consolidation of Telemig (Euro 14 million), were offset by the decrease at TMN (Euro 13 million), primarily due to lower equipment sales. The increase at Vivo was partially offset by the depreciation of the Real (Euro 25 million).

Other operating costs _ Other operating costs, which mainly include support services, supplies and external services, indirect taxes and adjustments and provisions, increased by 4.4% y.o.y to Euro 316 million in 1Q09, primarily explained by the consolidation of Telemig (Euro 15 million). In addition, the impact of the  depreciation of the Real was offset by the increase of other operating costs in the wireline business, due to increased commercial activity and higher support services related to the strong take up of pay-tv service.

EBITDA

EBITDA decreased by 0.6% y.o.y to Euro 603 million, equivalent to a margin of 37.6%. Excluding the effects of the consolidation of Telemig and devaluation of the Real against the Euro, consolidated

EBITDA would have increased by 1.4% y.o.y. EBITDA performance in the period was underpinned by growth at TMN and Vivo, which was partially offset by the decrease in the wireline business.

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) EBITDA = income from operations + post retirement benefits + depreciation and amortisation.  (3) Domestic operations includes the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact. (4) Includes mainly Vivo and Dedic. (5) Includes only fully consolidated international assets, namely MTC, CVT, CST and Timor Telecom, and also the holding companies.

Wireline EBITDA amounted to Euro 208 million, equivalent to a 42.3% margin. The quarterly sequential trend improved again, with wireline’s EBITDA declining by only 1.0% q.o.q (Euro 2 million), notwithstanding intense commercial activity, and also higher programming costs and customer care and support service costs related to the pay-TV service.

TMN’s EBITDA in 1Q09 increased by 2.0% y.o.y to Euro 170 million, equivalent to a 45.9% margin, driven by customer growth and strict cost control. TMN’s EBITDA performance was achieved against a backdrop of higher customer care and support costs required to support strong growth in data services. Excluding the negative impact of Euro 9.7 million due to lower MTRs, TMN’s EBITDA would have increased by 7.8% in 1Q09.

Vivo’s EBITDA increased by 10.9% y.o.y, equivalent to 28.6% y.o.y in local currency, on the back of the strong increase in revenues and consolidation of Telemig, as referred to previously. Excluding the effects of the consolidation of Telemig and devaluation of the Real against the Euro, Vivo’s EBITDA would have increased by 17.1% y.o.y. Vivo’s EBITDA margin reached 28.9% in 1Q09, an improvement of 1.3pp versus 1Q08.

Other EBITDA decreased by 4.3% y.o.y to Euro 21 million in 1Q09, mainly as a result of the termination of Vivo’s management fee as from August 2008, notwithstanding the improved performance from MTC in local currency, which offset the  impact of the devaluation of the Namibian Dollar, and from Timor Telecom.

Fully and proportionally consolidated international assets contributed to 39.8% of PT’s consolidated EBITDA in 1Q09, an increase from 35.4% in 1Q08. Brazilian businesses accounted for 34.1% of EBITDA in 1Q09, which compares to 30.7% in 1Q08. The EBITDA performance of the fully consolidated African assets in 1Q09 accounted for 4.5% of consolidated EBITDA.

Net income

Post retirement benefit costs amounted to Euro 22 million in 1Q09, compared to Euro 11 million in 1Q08, primarily as a result of the decrease in the value of the pension funds during 2008.

Depreciation and amortisation costs increased by 10.0% y.o.y to Euro 326 million, reflecting higher contributions from: (1) Vivo, which accounts for 80% of the increase in D&A, as a result of the acquisition and consolidation of Telemig and higher depreciation rates for the CDMA network, following the GSM network rollout, and (2) wireline business in Portugal, resulting from the investments in the rollout of Pay-TV, and also from the revaluation of ducts and certain real estate assets undertaken in 2008. Excluding the effects of the consolidation of Telemig and the devaluation of the Real against the Euro, consolidated depreciation and amortization costs would have increased by 8.6% y.o.y.

Net losses on disposal of fixed assets amounted to Euro 0.5 million in 1Q09, as compared to net gains of Euro 9 million in the same period of last year. Gains recorded in 1Q08 are related to real estate disposals, which generated a cash inflow of Euro 9 million in the period.

Net interest expenses increased by 43.7% y.o.y. to Euro 72 million primarily due to (1) the increase in PT’s average net debt in the period, related to the share buyback programme completed in 2008 and to the acquisitions of Telemig and 3G licenses in Brazil, and (2) the increase in the average cost of debt in Portugal and Brazil. Consolidated average cost of debt of PT was 5.1% in 1Q09 (4.4% in 1Q08). Excluding Brazil, the average cost of debt was 4.1% (3.9% in 1Q08).

Equity in earnings of affiliates includes primarily PT’s share in the earnings of Unitel, CTM, Médi Télécom and UOL and amounted to Euro 49 million in 1Q09, compared to Euro 34 million in 1Q08.

Net other financial gains, which include net foreign currency gains, net gains on financial assets and other financial expenses, amounted to Euro 5 million in 1Q09, as compared to net losses of Euro 26 million in 1Q08. Net foreign currency gains amounted to Euro 6 million in 1Q09 (losses of Euro 12 million in 1Q08) due to the evolution of the Euro / US Dollar exchange rate. Net gains on financial assets amounted to Euro 5 million in 1Q09 (losses of Euro 8 million in 1Q08) and primarily relate to the change in fair value of free-standing cross currency derivative instruments. Other financial expenses, which include banking services, commissions, financial discounts and other financing costs, amounted to Euro 7 million in 1Q09, compared to Euro 6 million in 1Q08.

Provision for income taxes decreased from Euro 79 million in 1Q08 to Euro 56 million in 1Q09 corresponding to an effective tax rate of 23.8% in 1Q09 and 32.3% in 1Q08. The decrease in the

effective tax rate is primarily explained by the recognition of tax losses from previous periods by certain international companies.

Income attributable to minority interests decreased to Euro 11 million in 1Q09, compared to Euro 25 million in 1Q08. The reduction in this caption is primarily attributable to the decrease in minority interests from (1) Vivo, which amounted to Euro 5 million in 1Q09 compared to Euro 12 million in 1Q08, and (2) Africatel, which amounted to Euro 4 million in 1Q09 compared to Euro 13 million in 1Q08.

Net income increased by 19.1% y.o.y in 1Q09 to Euro 166 million, compared to Euro 140 million in 1Q08.

Earnings per Share

Basic earnings per share increased by 31.1% y.o.y in 1Q09 to Euro 19 cents, benefiting from the reduction in the number of shares following the completion of the share buyback program.

The average number of shares outstanding decreased by 9.2% to 876 million in 1Q09, whilst the diluted average number of shares outstanding over the same period declined by 8.6% to 941 million. As at the end of March 2009, the number of shares outstanding, adjusted for the 20.6 million own shares recognised in the statement of financial position, was 876 million.

(1) Diluted shares are calculated assuming the full exercise of convertible bonds. (2) Diluted earnings are computed adjusting for the costs of convertible bonds.

Capex

Total capex increased by 57.1% in 1Q09 to Euro 224 million, equivalent to 13.9% of revenues, as a result of growth in wireline and Vivo, which more than offset capex reductions in TMN and other international assets. Wireline capex increased from Euro 49 million in1Q08 to Euro 101 million in 1Q09, primarily as a result of: (1) investments in network upgrades for all IP transformation, to provide increased bandwidth, in great part related to the continued success of IPTV services; (2) transponder capacity, and (3) a surge in pay-TV net additions resulting in increased customer-related capex (Euro 24 million) during this period. TMN’s capex decreased by 22.0% y.o.y to Euro 25 million in 1Q09. The

decrease in TMN’s capex is primarily explained by the investments in the continued deployment of 3G/3.5G networks, both in terms of capacity and coverage, carried out in 2008, which resulted in improved quality of mobile voice and data services in Portugal. As a result, in a recent study undertaken by the Portuguese telecoms regulator, TMN was considered as having the best wireless broadband and reliability and network performance.

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in 1Q09).

Capex at Vivo increased from Euro 48 million in 1Q08 to Euro 87 million in 1Q09 and continued to be directed towards increasing network coverage and capacity, including the Northeast states where Vivo launched the service in October, and building capacity, namely in GSM/EDGE and 3G. The GSM/EDGE network already has nationwide coverage, while the 3G network covers 3,000 cities. Excluding the consolidation of Telemig (Euro 7 million) and the effect of the devaluation of the Real against the Euro, capex at Vivo would have increased by 94.4% y.o.y. In 1Q09, other capex decreased to Euro 11 million, compared to Euro 15 million in 1Q08, primarily due to the decrease in capex related to the call centre operation in Brazil, and also due to the impact of the depreciation of local currencies of other international businesses.

Cash flow

Operating cash flow decreased to Euro 76 million in 1Q09, compared to Euro 304 million in 1Q08, primarily due to (1) an increase in working capital investment and (2) a reduction in EBITDA minus Capex, as a result of the 57.1% increase in capex. The increase in working capital investment is mainly explained by: (1) one-off cash receipts in 1Q08 from Zon and settlement with the Portuguese State of discounts granted to retirees; (2) Vivo’s management fees received in 1Q08 (Euro 15 million), and (3) higher capex in 4Q08 compared to 4Q07, resulting in higher payments to fixed asset suppliers.

Free cash flow was negative in Euro 92 million in 1Q09, primarily due to the decrease in operating cash flow described above, and also to an increase of Euro 45 million in interest paid as compared to 1Q08, explained by the increase in net debt and also by the increase in the average cost debt in Portugal and Brazil. A significant amount (52.3%) of PT’s interest payments on publicly issued bonds occurs in the first quarter of the year.

Consolidated statement of financial position

As at 31 March 2009, the net exposure (assets minus liabilities) to Brazil amounted to Euro 2,419 million. The assets denominated in Brazilian Reais in the statement of financial position as at 31 March 2009 amounted to Euro 5,626 million, equivalent to 39.7% of total assets.

The increase in intangible assets in 1Q09 is primarily explained by the impact of the appreciation of the Real against the Euro, whilst the increase in total liabilities is primarily explained by the dividends

attributed to shareholders following the AGM of 27 March 2009 (Euro 504 million) and also the impact of the appreciation of the Real against the Euro.

Consolidated net debt

Consolidated net debt amounted to Euro 5,741 million as at 31 March 2009, compared to Euro 5,571 million as at 31 December 2008. The increase in net debt is primarily explained by the negative free cash flow in 1Q09 and the appreciation of the Real against the Euro during the quarter, which was reflected on the 50% share of Vivo’s net debt in PT’s consolidated debt.

As at 31 March 2009, total consolidated gross debt amounted to Euro 7,010 million, of which 68.0% was medium and long-term and 62.1% was set at fixed rates. As at 31 March 2009, 83.7% of total debt was denominated in Euros and 16.3% in Brazilian Reais. Vivo’s debt is either Real-denominated or has been hedged into Reais.

(1) In 1Q08, PT contracted equity swaps over 68.6 million own shares under the share buyback programme concluded in December 2008. (2) This caption includes mainly Euro 20 million related to dividends paid by Vivo to minority shareholders, net of Euro 13 million related to the cash contribution of minority shareholders to a share capital increase at Vivo Participações.

The amount of cash available in PT’s domestic operations plus the undrawn amount of PT’s committed commercial paper lines and standby facilities totalled Euro 2,178 million at the end of March 2009, of which Euro 1,475 million was undrawn committed commercial paper and standby facilities. In April 2009, PT repaid Euro 880 million in an existing bond and issued a Euro 1 billion 4-year bond, thus increasing its liquidity position and average maturity of its debt.

In 1Q09, PT’s average cost of debt was 5.1%, with maturity of 4.8 years as at 31 March 2009. Excluding Brazil, PT’s average cost of debt was 4.1% in 1Q09, with a maturity of 4.8 years as at 31 March 2009. Post the Euro 1 billion bond issue maturity was extended to 5.2 years. In 1Q09, the net debt to EBITDA ratio was 2.4x (2.0x in 1Q08) and EBITDA cover stood at 8.3x (12.0x in 1Q08).

In April 2009, S&P announced its review of the credit rating attributed to Portugal Telecom, raising the long-term rating to BBB from BBB- and the short-term rating to A-2 from A-3. The outlook is stable. According to the note released by S&P, the upgrade recognises improving dynamics in PT’s domestic wireline business, strengthening performance in Brazil, allowing for the payment of dividends, and

consistently sound domestic mobile operations. Fitch also reaffirmed PT’s rating at BBB, upgrading the outlook to stable. According to the note released by Fitch, the rating acknowledges (1) PT’s continued strong competitive position in all segments of operation; (2) the stabilisation of the domestic wireline business; (3) the improvement in the domestic mobile business, and (4) the improved performance of Vivo, which started to pay dividends.

Post retirement benefits

As at 31 March 2009, the projected benefit obligations (PBO) of PT’s post retirement benefits related to pensions and healthcare amounted to Euro 3,039 million. The market value of assets amounted to Euro 2,060 million. In addition, PT has liabilities with salaries to suspended and pre-retired employees amounting to Euro 882 million, which are not subject to any legal funding requirement. These monthly salaries are paid directly by PT to the beneficiaries until the retirement age. Therefore, gross unfunded obligations amounted to Euro 1,861 million, while after-tax unfunded obligations stood at Euro 1,368 million. PT’s post retirement benefits plans for pensions and healthcare are closed to new participants.

(1) The decline in the market value of funds resulted from the payment of pensions and supplements of Euro 35 million and the negative return of assets under management of Euro 40 million (equivalent to -1.9%), partially offset by the contributions made by beneficiaries and by PT totalling Euro 3.4 million.

Total unfunded obligation increased by Euro 51 million in 1Q09 to Euro 1,861 million, as a result of: (1) net actuarial losses of Euro 73 million; (2) PRB costs amounting to Euro 23 million and (3) curtailment costs of Euro 2 million. These effects were partially offset by payments and contributions of Euro 47 million made in the period.

(1) In 1Q09, this caption includes: (i) payments of salaries to pre-retired and suspended employees amounting to Euro 38.6 million; (ii) termination payments, under the workforce reduction programme, amounting to Euro 1 million; (iii) payments of healthcare expenses amounting to Euro 6.9 million, and (iv) contributions to the pension funds of Euro 0.3 million.  (2) In 1Q09, this caption relates to the difference between the actual return on assets (-1.9%) and the expected return on assets (6% on an annual basis).

(1) The decrease in the expected return on assets is explained by the devaluation of plan assets occurred through 2008.

Shareholders’ equity (excluding minority interests)

Shareholders’ equity excluding minority interests amounted to Euro 13 million as at 31 March 2009. The decrease of Euro 219 million in 1Q09 is explained by: (1) the dividends attributed to shareholders, paid on 24 April 2009, amounting to Euro 504 million, and (2) the net actuarial losses related to post retirement benefits amounting to Euro 54 million (net of taxes). These effects more than offset (1) the Euro 166 million net income generated in the period, and (2) the positive currency translation adjustments amounting to Euro 173 million, mainly related to the appreciation of the Real against the Euro during the period.

(1) Dividends paid on 24 April 2009.

Distributable reserves _ Pursuant to Portuguese legislation, the amount of distributable reserves is determined according to the standalone financial statements of the Company prepared in accordance with Portuguese GAAP. Distributable reserves decreased by Euro 376 million to Euro 392 million as at 31 March 2009, as the Euro 128 million net income generated in 1Q09 under Portuguese GAAP was more than offset by the dividends attributed in the amount of Euro 504 million, following the approval at the AGM of 27 March 2009.

(1) The main differences between net income under Portuguese GAAP and IFRS are related to the recognition of post retirement benefits, the goodwill amortisation and the recognition of fair value of financial instruments and derivatives.

Business performance

Domestic operations

Revenues from domestic operations, which include wireline and TMN, were penalised by lower MTRs, namely at TMN, and decreased by 0.4% to Euro 827 million in the first quarter of 2009, notwithstanding the strong performance of the wireline segment, which increased revenues by 3.0% y.o.y in the first quarter of 2009, thus consolidating the inflection point confirmed in the fourth quarter of 2008. The marked improvement in the performance of the wireline segment is explained by the continued strong take-up of pay-TV and broadband, decelerating line loss and solid performance of data and corporate services. Accordingly, retail revenue generating units (“RGUs”) increased by 84 thousand in the first quarter of 2009, compared to a loss of 28 thousand in the first quarter of 2008. The continued success of pay-TV is underpinning the performance of PT’s wireline segment even though it was only launched on a nationwide basis in April 2008 and has not yet reached critical mass. Customer revenues at TMN continued to post strong growth in the first quarter of 2009 (+2.2% y.o.y), as data revenues increased by 17.4% y.o.y and now account for 22.7% of mobile service revenues, an improvement of 4.0pp y.o.y. As of 1 January 2009, mobile termination rates were reduced from Euro 7.5 cents to Euro 7 cents, which compares to Euro 11 cents in the first quarter of 2008, thus leading to a decline of 29.7% y.o.y in interconnection revenues at TMN in the first quarter of 2009. As such, in the first quarter of 2009, revenue performance of the domestic operations was negatively impacted by MTRs in the total amount of Euro 19.6 million and Euro 18.8 million at TMN. Excluding this adverse impact, revenues from the domestic business would have increased by 2.0%, whilst TMN’s service revenues would have increased by 2.2% y.o.y in the first quarter of 2009.

(1) Domestic operations includes the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact. (2) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (3) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + net other costs. (4) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in the first quarter of 2009).

EBITDA declined by 5.6% y.o.y in the first quarter of 2009 to Euro 376 million, equivalent to a margin of 45.5%. This performance was achieved against a backdrop of: (1) strong growth in the pay-TV service, which resulted in higher programming costs; (2) increased customer care and support costs, due to

strong take up of pay-TV and wireless broadband; (3) the impact of lower MTRs, and (4) halting of the redundancy programme. On a sequential basis, EBITDA increased by 0.7% q.o.q, driven by lower operating costs, namely direct and commercial costs.

Wireline

Wireline operating revenues increased by 3.0% y.o.y in the first quarter of 2009 to Euro 492 million, the best performance of the last seventeen quarters and confirming the sustained recovery observed since the third quarter of 2008, despite the decline in MTRs. Excluding this effect, operating revenues would have increased by 4.1%. Notwithstanding continued pressure on the traditional voice business, revenues of pay-TV and of data and corporate services have been increasing in line with PTs’ stated strategy of addressing the residential market by offering triple-play and dual-play services and the corporate market by offering more integrated solutions and value added services to its customers.

(1) Includes intragroup transactions. (2) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (3) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + net other costs.

Retail revenues increased by 0.4% y.o.y in the first quarter of 2009, for the first time in the last seventeen quarters, to Euro 245 million, underpinned by the growth in RGUs of 84 thousand, namely in pay-TV customers (+72 thousand net additions in the quarter) and high quality broadband net adds (+45 thousand flat fee net adds). The increasing number of RGUs per subscriber contributed to the 1.6% increase in ARPU. The improvement in the performance of retail revenues occurred notwithstanding strong competition from other fixed and cable operators as well as from mobile operators, both in voice and broadband.

Wholesale revenues increased by 5.5% y.o.y in the first quarter of 2009, mostly due to higher traffic revenues, which increased by 9.5% y.o.y.

Revenues from data and corporate services increased by 18.2% y.o.y in the first quarter of 2009 as a result of signing of new contracts and continued successful migration of customers from traditional voice and data services to more advanced and integrated solutions, which include: (1) the provision of more bandwidth for end-users based on Ethernet and IP technologies, and (2) convergent and customised solutions combining telecoms and IT. In addition, PT gained new business in data centres and IT systems, which further reinforced its position in the business segment. As such, revenues from network management, outsourcing and IT increased by 63.6% in the quarter, including the positive impact of educational related projects.

Other revenues decreased by 11.1% y.o.y in the first quarter of 2009, as a result of the decrease in the directories business and also in equipment sales.

It is worth highlighting that, since the launch of PT’s pay-TV services, the wireline EBITDA’s delta loss has been decreasing sequentially. In the third quarter of 2008, EBITDA’s delta loss was Euro 9 million, while in the fourth quarter of 2008 was Euro 7 million and in the first quarter of 2009 was Euro 2 million. EBITDA declined by 1.0% q.o.q in the first quarter of 2009 (Euro 2 million), while operating expenses decreased by 0.3% q.o.q, primarily as a result of the decrease in direct costs, mainly due to lower MTRs, notwithstanding the growth in pay-TV subscribers and the launch of new channels to reinforce the pay-TV offer which increased programming costs. Other operating costs increased by +9.1% q.o.q, on the back of higher provisioning, customer care and support costs related to the launch and growth of pay-TV services. Notwithstanding the investments being done in rolling out the pay-TV service, which has not yet reached critical mass, PT continued focusing on the control of addressable costs and on streamlining of domestic operations to extract benefits from further integration of business units. It is also important to highlight that the improved performance in this segment occurred notwithstanding the halting of the redundancy programme, as the company is now focused on redeploying staff to reduce outsourcing. As a result, wages and salaries were flat both y.o.y and q.o.q.  EBITDA margin stood at 42.3% in the first quarter of 2009 and at 42.5% in the fourth quarter of 2008.

Capex increased from Euro 49 million in the first quarter of 2008 to Euro 101 million in the first quarter of 2009. Capex was directed mainly towards: (1) customer-related investments, which increased by Euro 24 million in the first quarter of 2009, in TV terminal equipment for residential clients and equipment for corporate clients as part of the outsourcing contracts; (2) increased transponder capacity; (3) service platforms to provide greater bandwidth to customers, and (4) increased network capacity to provide pay-TV services.

For the fourth time in the last fifteen consecutive quarters, the first quarter of 2009 showed a positive trend in retail RGUs. Retail net additions in the quarter reached 84 thousand, as a result of the significant growth of the pay-TV service, which accounted for 72 thousand net additions. Underpinned

by pay-TV bundles, ADSL net additions in the quarter reached 42 thousand, with post paid net additions of 45 thousand, the best performance in the last fourteen quarters. The decline in traffic generating lines of 19 thousand in the quarter represented the best performance in any quarter since the fourth quarter of 2009. This clearly shows the benefits of the continued success of the triple-play Meo offer to PT’s competitive position in the retail market and its positive impact on both ADSL and voice line sales. Voice lines in the quarter had 30 thousand net disconnections, despite being negatively affected by the 11 thousand net disconnections of carrier pre-selection lines. This performance marks a clear improvement in relation to the same period last year which saw 59 thousand net disconnections. Competitors’ accesses, which include wholesale accesses and carrier pre-selection, fell by 25 thousand in the first quarter of 2009, reflecting a decrease in unbundled local loop lines (-4 thousand), carrier pre-selection (-11 thousand) and wholesale line rental (-7 thousand).

As in 2008, during the first quarter of 2009, PT continued to focus its marketing efforts in the promotion of Meo, which is being offered through IPTV and satellite.

Meo provides access to a comprehensive content offer, 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, as circa 50% of Meo’s IPTV customers have already used it on a paid basis (+3pp, as compared to the fourth quarter of 2008), consuming on average 2.8 movies per month. “Mamma Mia” and “Batman” were a success, driving this strong performance. In only four days, more than 5 thousand customers rented these two movies.

PT has been strengthening the Meo offer with new features and content, namely through the development of partnerships with key content producers and suppliers. On 2 April 2009, PT launched Meo Kids, a new children’s interactive service with unique content, karaoke, videos and news. Meo Kids is available for all PT’s pay-TV customers with an interface designed for two distinctive groups: children between four and seven years and children between seven and ten, providing them an improved and targeted experience of next generation television.

Furthermore, and as part of the investment in innovation in pay-TV, PT launched “My Meo”, thus making available, through internet, the TV guide, suggestions lists, VOD offer and premieres.

Meo marketing campaigns continue to enjoy high notoriety. In effect, proved ad recall stood close to 35% and spontaneous ad recall was close to 40% at the end of March, well ahead of any other competing brands in the sector.

(1) Retail accesses per PSTN/ISDN line.

In the first quarter of 2009, net additions in the pay-TV service reached 72 thousand bringing the total customers to 384 thousand. Pay-TV subscribers already represent 14.5% of traffic-generating lines and 51.1% of the ADSL customer base, a solid performance considering that the TV service was launched, on a nationwide basis, in April 2008.

It is worth highlighting that the number of retail RGU per access, measured by the number of retail accesses per PSTN/ISDN line, continues to increase with the rollout of the pay-TV offer and stands at 1.40 in the first quarter of 2009, as compared to 1.36 in the fourth quarter of 2008 and 1.23 in the first quarter of 2008.

In the first quarter of 2009, blended ARPU increased by 1.6% y.o.y to Euro 29.9 with the growth in data and other ARPU, which increased by 42.1% y.o.y against a backdrop of strong growth in the customer base during the quarter.

Domestic Mobile - TMN

In the first quarter of 2009, operating revenues amounted to Euro 370 million decreasing by 4.2% when compared to the first quarter of 2008, mainly due to the negative impact of Euro 18.8 million as a result

of lower MTRs. Service revenues decreased in the quarter by 3.2% y.o.y as the increase in customer revenues, which were up by 2.2% y.o.y, was insufficient to offset the decrease in interconnection revenues (-29.7% y.o.y) due to the regulated cuts in MTRs. Excluding lower MTRs, service revenues would have increased by 2.2%. Operating revenues were also impacted by lower sales of terminal equipment but, nevertheless, excluding the impact of MTRs would have increased by 0.6% y.o.y.

Customer revenues increased by 2.2% y.o.y to Euro 285 million on the back of customer growth, namely in wireless broadband. It is worth highlighting that this marks the nine consecutive quarter of growth in customer revenues at TMN. Interconnection revenues declined by 29.7% y.o.y in the first quarter of 2009 to Euro 43 million, as a result of the decrease in MTRs from Euro 7.5 cents to Euro 7 cents as at 1 January 2009, which compares to Euro 11 cents in the first quarter of 2008. Data revenues continued to be an important source of growth. All wireless data applications from PDAs and BlackBerrys to laptop wireless data cards contributed to data revenue growth, which in the quarter was up by 17.4% y.o.y. Sales decreased by 24.3% y.o.y to Euro 30 million.

(1) Includes intragroup transactions. (2) EBITDA = income from operations + depreciation and amortisation. (3) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + net other costs. (4) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in the first quarter of 2009).

EBITDA increased by 2.0% y.o.y to Euro 170 million in the first quarter of 2009 notwithstanding the decline in MTRs, which had a negative impact of Euro 9.7 million in the quarter. Adjusting for this negative effect, EBITDA would have increased by 7.8%, a significant growth from previous quarters. This performance was achieved on the back of strict cost control, which is reflected in the 8.9% y.o.y decline of operating costs. Direct costs decreased by 10.0% y.o.y in the first quarter of 2009 due to the positive impact of lower MTRs. Wages and salaries decreased by 4.2% y.o.y in the first quarter of 2009, thus reflecting efficiency gains as a result of the reorganisation of PT’s domestic businesses and fixed-mobile integration. Unitary SARC, which includes marketing, handset subsidies and commissions, fell by 2.7%

y.o.y in the first quarter of 2009, on the back of lower subsidisation and commissions. EBITDA margin increased by 2.8pp y.o.y and stood at 45.9% in the first quarter of 2009.

Capex decreased by 22.0% y.o.y in the first quarter of 2008 to Euro 25 million. The decrease in TMN’s capex is explained primarily by the investments in the continued deployment of 3G/3.5G networks, both in terms of capacity and coverage, carried out in 2008, which resulted in improved quality of mobile voice and data services in Portugal. Capex continued to be directed primarily towards expanding network capacity and coverage, as a result of increased voice and data usage, and improving mobile voice and data services to customers. Approximately 60% of network capex is being directed towards 3G and 3.5G networks.