Greetings and welcome to the Portugal Telecom 2012 First Quarter Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Zeinal Bava, CEO for Portugal Telecom. Thank you. Mr. Bava, you may begin.

Okay, thank you. Good afternoon, ladies and gentlemen. Thank you very much for being on this call. I’m here with my CFO, Luís Pacheco de Melo, our IR Director, Nuno Vieira, and the rest of our finance team as well. In the first quarter of 2012, consolidated operating revenues of Portugal Telecom amounted to €1,716 million while EBITDA reached €572 million. Our consolidated EBITDA margin stood at 33.3% underpinned by the solid margin of the Portuguese telecoms businesses, which stood at 45.2%. Our net income reached €56 million and basic earnings per share stood at €0.07. In the first quarter of 2012, our CapEx amounted to €259 million. That’s equivalent to 15.1% of our revenues. In the first quarter, our EBITDA minus CapEx amounted to about €313 million while EBITDA minus CapEx of the Portuguese businesses amounted to €193 million. In the first quarter 2012, our operating cash flow stood at €113 million. Free cash flow was negative €158 million and it was impacted by a number of events, which our CFO will take you through in a lot more details. With regard to our debt, our cost of gross debt was 4.6%. That compares to 4.2% in the first quarter 2011. The liquidity position excluding the consolidation of Oi and Contax in Brazil and including cash, underwritten commercial paper lines and facilities was €3.4 billion as at 31st March 2012. In the first quarter, we continued to see strong RGU momentum across various regions. Let me perhaps start with Portugal. We ha6 an incredible quarter in terms of retail fixed broadband, retail fixed pay-TV as well. As you no doubt will have seen, we had 69,000 net adds in our pay-TV service in the first quarter. This is the best quarter out of the last nine quarters of Portugal…

Thank you, Luís. So, to conclude, we’re facing a challenging economic environment in Portugal. We are focused on execution, not just in Portugal, but also in Brazil. The challenges are different. In Portugal, we are poised to grow as our modernization program and transformation of our business model has been completed. In Brazil, Oi’s management needs to invest in a turnaround to deliver on targets. The benefits of investments that are being made both in Portugal and in Brazil are beginning to come through. The first quarter results of Oi were encouraging, showed encouraging signs. In Portugal, non-voice revenues account for 50% of our revenues. Residential is growing. Personal segment is stabilizing. Corporate – our Corporate segment has some lumpiness, but of course the environment remained challenging as insolvencies are picking up. As such, cost discipline, financial discipline, cash flow discipline will remain a key focus, albeit that we are confident that we can continue to grow RGUs and enhance our competitive position in the future. We also would like to make sure that everybody understands that we will always want to have the best value offers in our market. This is a competitive market as well, both here and in Brazil and we need to ensure that we have enough discipline at the cost level so we can continue to underpin, if you like, the RGU growth, considering the options for growth that exist. CapEx is being invested as long as it delivers returns and in Portugal, the modernization already coming to an end. We are leading on innovation and we will continue to differentiate our offers in the market on the back of that innovation. With regard to dividends in the future, as was mentioned by Luís, it will be addressed by the board in due course and we will revert to the market as and when we have the final decision by the board. Thank you very much. And of course, my team and I are now available to answer questions you may have.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions) Our first question is coming from the line of Georgios Ierodiaconou with Citi. Please state your question.

Hi. I have two questions, please. One of them on dividend. The first one on – as you just stated, would have to be around dividend. If I believe – if I remember correctly in the full year results, you mentioned the fact that you are waiting for Oi to announce its dividend, for the new board to be elected. Given that these two events have taken place, why are we seeing a delay in making the decision for your own shareholder return policy? And what would be a reasonable time to expect an announcement on that? And my second question is on associate dividend. And I know there’s seasonality on when you tend to receive the dividends from your toman associates, but can you update us to whether you expect it in Q2 or maybe later in the year? Thank you.

Okay, thank you very much for your question. I’ll answer the first one and Luís perhaps can complement. The new board was elected on the 27th of April. So we need to, I would say, I think we will need a bit of time to review some of these issues with the new board. Albeit, it’s pretty much the same, but it’s a new mandate. So I wouldn’t like to speak on behalf of the board in that regard, other than to confirm what I’ve just said, that the board will consider what is it that Portugal Telecom should do in terms of the future. Luís, I think was – expressed, I think, the frustration that he has, that I have, that the board has, with the way our shares are trading and with the implicit yield associated. So we will look at these signs as well when we discuss these matters in our board. When is it that the board will convene to discuss this matter? I don’t have any specific information that I can share with you, because this is a matter for the board and it will depend very much on when the board decides to actually schedule this discussion. With regard to the associate dividends, Luis? Luís Pacheco de Melo: Okay, thank you. Some of the dividends we will receive in the second quarter, some later in the year, depends on the associate. The biggest one, as you might recall, the dividend was declared and is awaiting the approval by the Central Bank of Angola to be paid. So, as usual, we expect to receive it. A specific date, I cannot compromise at this moment.

Thank you.

Our next question is coming from the line of Tim Boddy with Goldman Sachs. Please state your question.

Yes, thanks for the question. I wanted to ask a couple of things. Just on Portugal, if you could give us any update on trends since the quarter ended, has there been any change? And are you still comfortable with consensus forecasts, which I think are around 1.2 billion in EBITDA for Portugal this year? Secondly, in terms of Oi, the company has given quite remarkably optimistic guidance, which is unusual. As a shareholder of Oi, what are the risks that you’re concerned about in terms of the ability to achieve that growth? And then lastly, you’re making aggressive and unusually large investments in data centers in your Smart Cloud platform. Can you talk us through the returns you think you can achieve on that investment, which I think is the sixth largest data center in the world, from your presentation in Q4? Thanks very much.

Okay. Thank you very much. With regard to trends in the Portuguese market; with regard to triple-play, we continue to see, I would say, good momentum behind Meo. As you know, we differentiate our service on the back of innovation, HD channels, better quality of sound, image; a lot of interactivity. And as such – and we have fiber-to-the-home which is very different, as you know, to DOCSIS 3.0. So in that regard, I think the Portuguese consumer is beginning to understand that there are significant differences and advantages in joining Meo and in basically adhering to a triple play. That’s why I showed you that in the slide in our presentation that our RGUs were up 9%. It is this upselling of services which is underpinning our, if you like, ARPU growth, which was very healthy in the first quarter. So April and so far May, the trends would seem to point in the same direction. And therefore, we remain quite happy with the rate at which we are growing in the case of Meo. And whilst we are quite happy already also with the fact that we have gone above 1.1 million customers, we think that leadership is on sight, and it will be achieved not by competing on price and by having irrational commercial behavior in the market. It will be achieved on the back of what I think is sustainable long term, which is providing a unique customer experience and a differentiated customer experience. With regard to mobile, very erratic behavior. I would say limited elasticity. And therefore, with regard to mobile, we are, of course, all over, if you like, promotions in order to ensure that one customer perceive, if you like, price leadership from TMN. We’re also doing more and more segmentation in order…

Our next question is coming from the line of Paul Marsch with Berenberg. Please state your question.

Hi, thank you very much. I have three questions, actually. The first is on shareholder remuneration. I just wanted to understand in more detail what’s behind your comments on the dividend. I know this is the second time that you’ve made similar comments now. Is your concern all about the lack of your share price reflecting what you see as being a sustainable commitment to payout? In which case, does it make sense to maybe take a significant proportion of your payout and buy back your stock instead of paying it all out as dividends? Or, is there an element of your thinking that sees a need for a more cautious or conservative stance on shareholder remuneration, given the uncertain backdrop? That’s my first question. The second question is on customer revenue trends in the Personal segment, where I think we’ve seen another slight worsening of the trend there. I’m just wondering if you would be expecting the pace of that decline to stabilize through the rest of the year. Is there any reason to expect that? And then finally if there’s anything you can say on signs – early signs of customer take-up from your new 4G service offerings? Thanks.

Our next...

Okay. Thank you very much. With regard to shareholder remuneration, we believe that we need to address the issue at the board level. I would very much like to answer the question. I think it’s very valid and, I think, a very good question. But I think at this stage, I prefer to have a discussion at our board level. Of course, we look at the dividend yield of our stock. Of course, that is a mathematical calculation. But we also have to look at the environment and I think it’s best that we discuss these things with the board. But as we said, we are confident about the financial flexibility that we have in our balance sheet. We are fully funded until the end of 2013. And as such, I would say, that whilst the financial flexibility is there, the board obviously needs to consider this, because it’s a new board and we have a new three-year term. And as such, that is something that needs to be on the agenda. Having said that, the fact that Oi has announced its own dividend policy which will underpin our cash flow in the future was also very good news. That was something that the market had as a concern, because Oi wasn’t able to come back and we didn’t want Oi to actually come back with a dividend policy until the corporate simplification – corporate restructuring was completed. That is out of the way now. I think the fact that today we have one listed entity will facilitate, if you like, the turnaround effort that needs to happen in that company. But I think with regard to our shareholder remuneration and notwithstanding the fact that Oi will contribute with over €130 million as dividends to our cash flow, we think…

Thank you. Our next question is coming from the line of Daniel Morris with JP Morgan. Please state your question.

Thanks very much for taking the questions. I’ve got two, please. First of all, I just wondered in the Other and Eliminations line, where you did about €250 million of revenues this quarter. There have obviously been quite a few consolidation changes there and I just wanted to check if that’s now the right base to model on for the future quarters in this year? And then second of all, I just wanted to ask a follow-up on your comments around the balance sheet. Should we take it that whatever the decision on the dividend, you’re comfortable with the current leverage and therefore would consider either doing other things with the cash or might you prudently de-lever, should you cover dividend? I’m just trying to understand that. Thanks very much. Luís Pacheco de Melo: With regards to the first question, it’s Luís. Yes, you’re right. Basically from now on, voice is probably the right model or the right way to model going forward.

With regards to your second part or the second part of your question, of course, as was so rightly put, we need to take into account the fact that we are going through, if you like, from a capital market standpoint, a period of significant volatility. And therefore, when I was referring earlier that we will maintain cost discipline and that we will maintain financial discipline and we will maintain huge amounts of focus on the cash flow generation in our company, has to do with the fact that we believe that in this environment, we need to have financial flexibility and use that financial flexibility as a competitive and comparative advantages in the market. For us, having a good balance and a good, if you like, refinancing schedule, is not just a matter of finance. It’s also a matter of market. Those companies that are funded will be able to compete in the market and will be able to continue to invest in innovation. And as such, we, at Portugal Telecom, need to continue to strike that balance, as we have done in the past. And therefore, financial flexibility is also one of the utmost, if you like, concerns that we will continue to have in the company. We are comfortable with the fact that we are fully funded until the end of 2013. Worth mentioning, also the fact that we have a diversified group of banks that have extended credit facilities to Portugal Telecom. Almost all of those banks are international banks and therefore, from that standpoint, our CFO and our finance team has done an impeccable job in ensuring that until the end of 2013, we have the financial flexibility that we think we need in order to cater for the needs not just of our business, but also to live up to the commitments we’ve made to the market. Thank you.

Thanks very much.

Our next question is coming from Nuno Matias with Espirito Santo Investment Bank. Thank you.

Thank you. Just a couple of questions on your cash flow performance. Firstly on the variation of working capital in Q1, quite high value. Understand that this is more or less seasonal. But do you expect this value to revert fully this year? And secondly, and if I understood correctly, your interest payments were biased towards Q1. So what – expect, Luís, that going forward for the remaining of the year, we should expect lower interest costs at least in terms of the – of your payments for 2012? Thank you. Luís Pacheco de Melo: Okay. Thank you, Nuno. Let me see. As I mentioned, the normal first quarter cash flow is a quarter where you see significant working capital investments. Why? Because normally, you pay the supplier for the investments that you do towards the end of the year. And normally, if you revert back some years at Portugal Telecom, that has been the case, except last year, when, as I mentioned, since we had received a substantial amount from this acquisition of FISTEL by Telefonica, we decided to anticipate significant amounts of payments to suppliers to the fourth quarter of 2010. And therefore, we had a, I would say, negative working capital investment in the first quarter of last year. Normally, what we see is that we tend to recover most, if not all, of these investments throughout the year, throughout the remaining parts of the year. With regards to interest, what I said is, as our debt structure, most of the yearly interest are focused on the first quarter. What I’ve said is that the first quarter normally, there is approximately 50% of all the interest that I paid for the full year. So going forward, although in the P&L, it’s not like that. But from a cash perspective, for the remaining three quarters of the year, we will have lower interest cash payments in the second, third and fourth quarter.

Okay, that’s great. Thank you.

Our next question comes from the line of Frederic Boulan with Nomura. Please state your question.

Hi, good afternoon. A question on spectrum in Brazil. Can you share with us your views on this and any discussion you have with Oi? And can you provide some guidance and views on value of spectrum over there or that’s a decision they take on their own? And also, can you comment on the couple of headlines we saw on Tuesday about Oi that may look to increase their stake in Portugal Telecom? Thank you very much.

With regard to the second part of your question, as was stated in Oi’s conference call, the acquisition of 10% of PTU was part of the agreement that was signed when we did our strategic partnership. And as was stated in the Oi’s conference call, the agreement has to be fulfilled. So I have nothing more to add other than what Oi has already said in that call. With regards to the spectrum in Brazil, of course, this is part of the discussion that we have in various committees and the discussions that we have within Oi. For obvious reasons, as you can imagine, I wouldn’t like to discuss that, also because it’s a competitive process. Thank you.

As this brings us to the end of our Q&A session, I will turn the floor back to management for closing remarks.

Okay, thank you very much for being on this call. My management team and I, of course, are always available to answer any questions you may have offline, particularly our IR director, Nuno Vieira. So, if there are any questions that were not answered or – please feel free to send us an email and we’ll get back to you. And as we will be starting a road show shortly, and particularly spending some time in London, we hope to see you there in London and perhaps in some other cities where we will certainly also do a road show over the next three to four weeks. Thank you very much and I look forward to seeing you. Bye-bye.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time and we thank you for your participation.