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 August 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 o

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 o No x

Portugal Telecom

Portugal

Main international assets

(*) These stakes are held by Africatel, which is controlled 75% by PT.

Support companies

Systems and IT [PT Sistemas de Informação 100%]; Innovation, research and development [PT Inovação 100%];

Backoffice and shared services [PT PRO 100%]; Procurement [PT Compras 100%];

Call centres and telemarketing services [PT Contact 100%]; Pension funds management [Previsão 82.05%]

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01

Financial review

Consolidated income statement

(1) Considering a Euro/Real average exchange rate of 2.5946 in 1H08 and 2.9214 in 1H09.

(2) The wireline and domestic mobile operating revenues include the impact of the decline in regulated mobile termination rates (MTRs). At TMN this impact amounted to Euro 40.3 million in 1H09 and Euro 21.5 million in 2Q09.

(3) EBITDA = income from operations + post retirement benefits + depreciation and amortisation.

(4) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + other costs (gains).

Consolidated operating revenues

In 1H09, consolidated operating revenues decreased by 0.3% y.o.y to Euro 3,231 million, driven by the decrease in TMN, as a result of a 40% decline in MTRs, which more than offset growth in Wireline and Vivo. Adjusting for the effects of the consolidation of Telemig, lower MTRs and using constant exchange rate, consolidated operating revenues would have increased by 4.4% y.o.y.

Wireline operating revenues increased in 1H09 by 1.2% y.o.y, supported by the inflection of retail revenues, which posted a 1.2% growth y.o.y, as a result of the continued strong performance of pay-TV and broadband.

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The success of PT’s pay-TV offer (“Meo”) is demonstrated by strong growth in retail net additions, which reached 137 thousand in 1H09, underpinned by decelerating line loss and growth in flat fee broadband customers. Line loss in 1H08 reached 110 thousand lines compared to 65 thousand in 1H09. At the same time, PT continued to gain broadband market share as flat fee broadband net additions reached 78 thousand in 1H09 compared to 30 thousand in 1H08. As a result of this improved performance, PT had 443 thousand pay-TV customers at the end of 1H09, with 131 net additions during 1H09, and equivalent to 56.7% penetration of the ADSL customer base. The ADSL retail customer base increased by 19.9% y.o.y to 781 thousand customers.

TMN’s operating revenues decreased by 4.6% y.o.y due to the impact of lower MTRs (Euro 40 million), which more than offset the continued growth in customer revenues (+1.9% y.o.y in 1H09). Data revenues increased by 13.7% y.o.y in 1H09, and already account for 22.7% of service revenues. Excluding the impact of lower MTRs, TMN’s operating revenues would have increased by 0.6% y.o.y in 1H09, underpinned by growth in service revenues and customer revenues of 1.3% and 1.9% y.o.y, respectively.

Revenues from domestic operations decreased by 1.5% y.o.y in 1H09 partially due to substantially lower equipment sales. The financial performance of the domestic operations was negatively impacted by lower MTRs. Excluding this adverse impact, revenues from the domestic operations would have increased by 1.1% y.o.y.

Vivo’s operating revenues increased by 0.8% y.o.y in Euros and by 13.5% y.o.y in Reais, on the back of continued customer growth (15.8% 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 7.7% y.o.y with service revenues growing by 9.6% y.o.y.

Other revenues, including intra-group eliminations, increased by 5.5% y.o.y mainly due to improved performance of revenues of PT’s call centre business in Brazil and MTC in Namibia and Timor Telecom, which more than offset the loss resulting from termination of the management fee contract with Vivo in August 2008.

The contribution from fully and proportionally consolidated international assets to operating revenues increased from 48.8% in 1H08 to 49.8% in 1H09. Brazil accounts for 46.1% of consolidated operating revenues, an increase of 0.7pp from 1H08, despite being adversely impacted by the depreciation of the Real against the Euro.

(1) Domestic operations include the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact.

(2) Considering a Euro/Real average exchange rate of 2.5946 in 1H08 and 2.9214 in 1H09. Includes mainly Vivo and Dedic. (3) Includes fully consolidated international assets, namely MTC, CVT, CST and Timor Telecom, and also the holding companies.

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Consolidated operating costs, excluding PRBs and depreciation and amortization

Consolidated operating costs excluding post retirement benefits (PRBs) and depreciation and amortization (D&A), decreased by 0.7% y.o.y in 1H09 to Euro 2,034 million, as compared to Euro 2,049 million in the same period of last year, primarily explained by lower contributions from (1) Vivo (Euro 60 million), reflecting the impact of the depreciation of the Real (Euro 122 million) partially offset by the  impact of the consolidation of Telemig (Euro 55 million), and (2) TMN (Euro 30 million), primarily explained by the reduction in MTRs. These effects were partially offset by the increase in the wireline business (Euro 63 million) due to increased commercial activity. Adjusting for the impacts of the consolidation of Telemig, lower MTR’s and using constant exchange rate, operating costs would have increased by 4.3% y.o.y in 1H09 to Euro 2,137 million.

Wages and salaries increased by 8.9% y.o.y in 1H09 to Euro 339 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 8 million). Wages and salaries accounted for 10.5% of consolidated operating revenues.

Direct costs increased by 3.2% y.o.y to Euro 535 million in 1H09 and accounted for 16.5% of consolidated operating revenues. This growth is primarily explained by the increase in programming costs (Euro 31 million) related to the pay-TV service from our wireline business, and by a higher contribution from Vivo (Euro 8 million), reflecting the impact of the consolidation of Telemig (Euro 19 million) and an increase in lease costs 3G related, partially offset by impact of the depreciation of the Real (Euro 33 million). These effects were partially offset by a reduction in direct costs from our domestic mobile business, primarily explained by the decrease in MTRs (Euro 20 million).

Commercial costs decreased by 9.4% y.o.y. to Euro 524 million in 1H09 and accounted for 16.2% of consolidated operating revenues. The decreases at TMN (Euro 19 million) and Vivo (Euro 36 million)are primarily explained by lower equipment sales, Vivo commercial costs were also impacted by the effects of the depreciation of the Real (Euro 41 million), and consolidation of Telemig (Euro 15 million).

Other operating costs, which mainly include support services, supplies and external services, indirect taxes and provisions, decreased by 0.7% y.o.y to Euro 636 million in 1H09. Adjusting for the effects of the consolidation of Telemig (Euro 15 million), and the depreciation of the Real (Euro 38 million), other operating costs would have increased by 2.9% y.o.y in 1H09 to Euro 659 million, primarily explained 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 increased by 0.5% y.o.y to Euro 1,197 million, equivalent to a margin of 37.1%. Excluding the effects of the consolidation of Telemig, lower MTRs and, consolidated EBITDA would have increased by 4.5% y.o.y. EBITDA performance in the period was supported by growth at Vivo and other international assets, which was partially offset by the decrease in the domestic businesses and termination of Vivo’s management fee.

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Wireline EBITDA amounted to Euro 409 million in 1H09, equivalent to a 42.3% margin, impacted primarily by higher programming costs and customer care and support service costs related to the roll-out of PT’s pay-TV service. In 1H09, wages and salaries in the wireline segment increased by 1.5% y.o.y as a result of the decision to halt the redundancy programme and focus on insourcing, which in turn led to the reduction of the obligations related to salaries to pre-retired and suspended employees (Euro 53 million in 1H09) and corresponding cash payments.

(1) Considering a Euro/Real average exchange rate of 2.5946 in 1H08 and 2.9214 in 1H09.

(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.

In 1H09 TMN’s EBITDA decreased by 1.7% y.o.y to Euro 331 million, equivalent to a 45.0% margin, mainly as a result of the decrease in MTRs. Excluding the negative impact of Euro 20.6 million due to lower MTRs, TMN’s EBITDA would have increased by 4.4% y.o.y in 1H09, on the back of strict cost control and growth in service revenues.

Vivo’s EBITDA increased by 20.4% y.o.y in 1H09, underpinned by subscriber growth and strict cost control. Excluding the consolidation of Telemig and devaluation of the Real against the Euro, Vivo’s EBITDA would have increased by 29.5% y.o.y. Vivo’s EBITDA margin reached 29.0% in 1H09, an improvement of 4.7pp versus 1H08.

Other EBITDA decreased by 16.7% y.o.y to Euro 39 million in 1H09, mainly as a result of the termination of Vivo’s management fee as from August 2008, notwithstanding the improved performance from MTC in Namibia and Timor Telecom.

Fully and proportionally consolidated international assets contributed to 41.1% of PT’s consolidated EBITDA in 1H09, an increase from 34.6% in 1H08. Brazilian businesses accounted for 35.3% of EBITDA in 1H09, which compares to 29.8% in 1H08. The EBITDA performance of the fully consolidated African assets in 1H09 accounted for 4.7% of consolidated EBITDA, up 0.6pp y.o.y.

Net income

Post retirement benefit costs amounted to Euro 45 million in 1H09, compared to Euro 22 million in 1H08, primarily as a result of the reduction in expected return on assets (Euro 20 million), following the devaluation of fund assets occured in 2008.

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Depreciation and amortisation costs increased by 9.6% y.o.y to Euro 668 million, reflecting higher contributions from: (1) Vivo, which accounts for approximately 78% 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, partially offset by the impact of the depreciation of the Real against the Euro in 1H09, and (2) wireline business in Portugal, resulting from the investments in the rollout of Pay-TV service, and also from the revaluation of ducts and certain real estate assets undertaken in 2008. Excluding the effects of the consolidation of Telemig and using constant exchange rate, consolidated D&A would have increased by 11.8% y.o.y.

Curtailment costs amounted to Euro 3 million in 1H09, as compared to Euro 78 million in the same period of last year, due to the halting of the redundancy programme.

Net losses on disposal of fixed assets amounted to Euro 0.1 million in 1H09, as compared to net gains of Euro 13 million in the same period of last year. Gains recorded in 1H08 related to real estate disposals, which generated a cash inflow of Euro 15 million in the period.

Net interest expenses increased to Euro 145 million, equivalent to an increase of 25.2%  of which (1) Euro 22 million due to 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) Euro 5 million due to the increase in the average cost of debt in Brazil. Consolidated average cost of debt of PT was 4.9% in 1H09 (4.6% in 1H08). Excluding Brazil, the average cost of debt was 4.0% (4.0% in 1H08).

Equity in earnings of affiliates includes primarily PT’s share in the earnings of Unitel, CTM, Médi Télécom and UOL and amounted to Euro 102 million in 1H09, compared to Euro 74 million in 1H08, up by 37.3% y.o.y, primarily driven by Unitel.

Net other financial losses, which include foreign currency gains, net gains on financial assets and other financial expenses, amounted to Euro 12 million in 1H09, as compared to Euro 32 million in 1H08. Net foreign currency gains amounted to Euro 2 million in 1H09, an improvement over the net losses of Euro 13 million in 1H08 mainly related to the impact of the depreciation of the US Dollar against the Euro on net assets denominated in US Dollars. Net gains on financial assets amounted to Euro 7 million in 1H09 (losses of Euro 4 million in 1H08) due 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, increased to Euro 21 million in 1H09, compared to Euro 15 million in 1H08.

Provision for income taxes increased from Euro 114 million in 1H08 to Euro 118 million in 1H09 corresponding to an effective tax rate of 28.6% in 1H09 and 28.0% in 1H08.

Income attributable to minority interests decreased to Euro 38 million in 1H09, compared to Euro 42 million in 1H08. The reduction in this caption is primarily attributable to the decrease in minority interests from (1) Vivo, which amounted to Euro 13 million in 1H09 compared to Euro 16 million in 1H08, and (2) Africatel, which amounted to Euro 21 million in 1H09 compared to Euro 24 million in 1H08. The reduction in Vivo’s minority interest is mainly related to the increase in D&A costs, partially related to the acquisition of Telemig, which more than offset the impact of the improvement in EBITDA.

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Net income increased by 1.7% y.o.y in 1H09 to Euro 256 million, compared to Euro 252 million in 1H08. In addition to the EBITDA increase in the period, PT benefited from lower curtailment costs and higher income from affiliates which more than offset higher post retirement benefits, depreciation and amortisation and interest costs.

Earnings per Share

Basic earnings per share increased by 9.6% y.o.y in 1H09 to Euro 29 cents, benefiting from the reduction in the number of shares following the completion of the share buyback programme.

The average number of shares outstanding decreased by 7.2% to 876 million in 1H09, whilst the diluted average number of shares outstanding over the same period declined by 6.8% to 941 million. As at the end of June 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

(1) Considering a Euro/Real average exchange rate of 2.5946 in 1H08 and 2.9214 in 1H09.

(2) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in 1H09).

(3) Excludes the acquisition of 3G licenses in Brazil (Euro 227 million in 2Q08).

Total capex increased by 41.1% in 1H09 to Euro 506 million, equivalent to 15.7% of revenues, as a result of growth in wireline and Vivo, which more than offset capex reductions at TMN.

Wireline capex increased from Euro 126 million in 1H08 to Euro 227 million in 1H09, primarily as a result of: (1) FTTH rollout and investments in network upgrades to provide increased bandwidth, related to the continued success of IPTV services; (2) non cash investment in transponder capacity, and (3) a surge in pay-TV net additions resulting in increased customer-related capex (Euro 35 million) during 1H09.

TMN’s capex decreased by 27.6% y.o.y to Euro 58 million in 1H09. The decrease in TMN’s capex is primarily explained by the investments carried out in 2008 in the continued deployment of

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3G/3.5G networks, both in terms of capacity and coverage, 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 most reliable performance and stable wireless broadband network in Portugal.

Capex at Vivo increased from Euro 128 million in 1H08 to Euro 191 million in 1H09. Excluding the consolidation of Telemig (Euro 7 million) and the devaluation of the Real against the Euro (Euro 23 million), capex at Vivo would have increased by 61.7% y.o.y. Capex at Vivo was primarily directed towards: (1) increasing network capacity, to support the accelerated growth experienced by Vivo, namely in GSM / EDGE; (2) expanding coverage of WCDMA / HSUPA network; (3) continued expansion of coverage in the Northeast states following the launch of the service in October 2008, and (4) network quality to accomplish the objectives set forth by the local regulator.

In 1H09, other capex increased to Euro 29 million, compared to Euro 24 million in 1H08, primarily due to the increase in capex related to PT’s businesses in Africa, namely MTC, CVT, and in Timor Telecom, which more than offset the decrease in capex of call centre business in Brazil.

Cash flow

Operating cash flow decreased to Euro 476 million in 1H09, compared to Euro 717 million in 1H08, primarily due to the reduction in EBITDA minus Capex, as a result of the 41.1% increase in capex, and an increase in working capital investment, mainly explained by: (1) one-off cash receipts in 1H08 from Zon and settlement with the Portuguese State of discounts granted to retirees; (2) Vivo’s management fees received in 1H08 (Euro 15 million), and (3) higher capex in 4Q08 as compared to 4Q07, resulting in higher payments to fixed assets suppliers.

(1) In 1H08, PT paid Euro 64 million in Portugal regarding the fourth and last instalment of income taxes related to 2007. In 1H09 there were no ordinary taxes paid in the domestic businesses, as the fourth and last instalment regarding 2008 will be a refund of Euro 11 million, which is expected to be received in 4Q09.

(2) In 1H08, this caption included Euro 15 million of cash proceeds from real estate asset disposals.

Free cash flow amounted to Euro 135 million in 1H09, which compares to Euro 7 million in 1H08. This increase is primarily explained by the investment in the acquisition of Telemig in 1H08 (Euro 327 million), the decrease in income taxes paid (Euro 66 million), and the decrease in contributions and payments related to PRBs, following the decision, at the end of 2008, to halt the redundancy programme. These effects more than offset: (1) the reduction in operating cash flow described above, (2) the increase in interest paid (Euro 23 million), due to higher average net debt

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and an increase in the average cost of debt in Brazil, and (3) the disposal of the investment in Banco Best in 1H08 (Euro 16 million).

Consolidated statement of financial position

As at 30 June 2009, the net exposure (assets minus liabilities) to Brazil amounted to Euro 2,686 million. The assets denominated in Brazilian Reais in the balance sheet as at 30 June 2009 amounted to Euro 6,128 million, equivalent to 41.6% of total assets.

The increase in total assets in 1H09 is primarily related to the impact of the appreciation of the Real against the Euro, whilst the increase in total liabilities is primarily explained by the increase in gross debt resulting mainly from the dividend 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 6,156 million as at 30 June 2009, compared to Euro 5,571 million as at 31 December 2008, an increase of Euro 585 million mainly due to the dividends paid by PT amounting to Euro 504 million and the appreciation of the Brazilian Real against the Euro, leading to an increase in net debt of Euro 128 million, thus offsetting the cash flow generated in the period.

As at 30 June 2009, total consolidated gross debt amounted to Euro 7,577 million, of which 85.6% was medium and long-term and 59.2% was set at fixed rates. As at 30 June 2009, 85.2% of total debt was denominated in Euros and 14.8% in Brazilian Reais. Vivo’s debt is either Real-denominated or has been hedged into Reais.

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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 1,779 million at the end of June 2009, of which Euro 906 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 addition, during 1H09, PT issued Euro 450 million, which includes a tap of the 2012 Euro Bond, new bilateral lines and private placements.

(1) PT settled an Euro-Dollar derivative in April, 7 which resulted in a payment of Euro 38 million. As such PT no longer holds any free standing derivatives - on its domestic businesses.

(2) In 1H08, PT contracted equity swaps over 89.2 million own shares under the share buyback programme concluded in December 2008.

(3) This caption includes mainly Euro 45 million related to dividends paid by PT’s fully consolidated subsidiaries to minority shareholders (Euro 12 million in 1H08), net of Euro 14 million related to the cash contribution of minority shareholders to a share capital increase at Vivo Participações.

In 1H09, PT’s average cost of debt was 4.9%, with a maturity of 5.2 years as at 30 June 2009. Excluding Brazil, PT’s average cost of debt was 4.0% in 1H09, with a maturity of 5.1 years as at 30 June 2009. In 1H09, the net debt to EBITDA ratio was 2.6x (2.4x in 1H08) and EBITDA cover stood at 8.3x (10.3x in 1H08).

Post retirement benefits

As at 30 June 2009, PT’s projected post retirement benefits obligations (PBO) related to pensions and healthcare amounted to Euro 3,046 million and the market value of assets amounted to Euro 2,143 million. In addition, PT has liabilities with salaries to suspended and pre-retired employees amounting to Euro 855 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. Thus, gross unfunded total obligations amounted to Euro 1,757 million, while after-tax unfunded obligations amounted to Euro 1,291 million. PT’s post retirement benefits plans for pensions and healthcare are closed to new participants. PT did not make any change to the actuarial assumptions used in December 2008 to compute the 1H09 post retirement obligations.

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(1) The change in the market value of funds resulted from the positive performance of assets under management of Euro 81.4 million (equivalent to 3.9% in 1H09) and the contributions made by beneficiaries and by PT totalling Euro 10.2 million,which were partially offset by the payment of pensions and supplements of Euro 70.0 million and healthcare benefits of Euro 10.0 million.

Total gross unfunded obligations decreased by Euro 53 million to Euro 1,757 million in 1H09, as a result of declining responsibilities related with salaries to suspended and pre-retired employees, while responsibilities towards pension and healthcare benefits remained flat with the positive performance of plan assets (3.9% in 1H09) offsetting the time value effect on the unfunded gap. The decrease in the liability concerning salaries to suspended and pre-retired employees is related to the halting of the redundancy programme. In addition, PT approved an extraordinary contribution of up to Euro 150 million to the pension funds to be carried out during 2009 through transfer of real estate assets.

(1) In 1H09, this caption includes: (i) payments of salaries to pre-retired and suspended employees amounting to Euro 78.3 million; (ii) termination payments, under the workforce reduction programme, amounting to Euro 2 million; (iii) net payment of healthcare expenses made by PT amounting to Euro 1.2 million, and (iv) contributions to the pension funds of Euro 5.1 million.

(2) In 1H09, this caption relates to the difference between the actual return on assets (3.9% in 1H09) 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 in 2008.

Equity (excluding minority interests)

Equity excluding minority interests amounted to Euro 440 million as at 30 June 2009. The increase of Euro 208 million in 1H09 is explained by: (1) the net income generated in the period of Euro 256 million, (2) net actuarial gains related to post retirement benefits amounting to Euro 11 million (net of taxes), and (3) positive currency translation adjustments amounting to Euro 432 million,

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mainly related to the appreciation of the Real against the Euro. These effects more than offset the dividends paid by PT to shareholders amounting Euro 504 million.

(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 280 million to Euro 488 million as at 30 June 2009, as the Euro 186 million net income generated in 1H09 under Portuguese GAAP was more than offset by the dividends paid by PT amounting Euro 504 million.

(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.

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02

Business performance

Domestic Operations

Revenues from domestic operations, which include wireline and TMN, decreased by 1.5% y.o.y in 1H09 to Euro 1,633 million, as a result of the severe decline in MTRs and the substantial decrease in equipment sales, despite the strong performance of wireline retail revenues, which increased by 1.2% y.o.y in 1H09, and TMN customer revenues, which increased by 1.9% y.o.y. Revenue performance of the domestic operations was negatively impacted by lower MTRs in the amount of Euro 42.8 million. Excluding this adverse impact, revenues from the domestic business would have increased by 1.1% y.o.y. Adjusting for the impact of lower MTRS, TMN’s service revenues would have increased by 0.6% y.o.y in 1H09.

Wireline revenues increased by 1.2% y.o.y in 1H09, impacted by a marked decrease in equipment sales in 2Q09 (-45.1% y.o.y). The improvement in retail revenues, the best performance in the last eighteen quarters, is explained by the robust take-up of pay-TV and postpaid broadband, decelerating line loss and by a solid performance of data and corporate services. Accordingly, retail revenue generating units (RGUs) increased by 132 thousand in 1H09, compared to nil in 1H08. The continued success of pay-TV is underpinning the performance of the 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 resilient growth in 1H09 (+1.9% y.o.y), driven by data revenues, which increased by 13.7% y.o.y and account for 22.7% of mobile service revenues, an improvement of 3.8 pp y.o.y. As of 1 January 2009, MTRs were reduced from Euro 7.5 cents to Euro 7 cents, and then as of 1 April 2009 were reduced to Euro 6.5 cents, which compares to Euro 11 cents in 1H08, equivalent to a decline in interconnection revenues of 34.2% y.o.y in 1H09.

(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 +

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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 1H09).

EBITDA declined by 7.2% y.o.y in 1H09 to Euro 737 million, equivalent to a margin of 45.1%. This performance was achieved against a backdrop of: (1) strong growth in the pay-TV service, which resulted in higher programming and commercial costs; (2) increased customer care and support costs, due to growth in pay-TV and wireless broadband; (3) lower MTRs, and (4) the halting of the redundancy programme in favour of insourcing.

Wireline

Wireline operating revenues increased by 1.2% y.o.y in 1H09 to Euro 965 million, confirming the sustained recovery observed since 3Q08, despite the impact of the decline in equipment sales in 2Q09 (-45.1% y.o.y) and in MTRs. Excluding the negative effect of MTRs, operating revenues would have increased by 2.1%. Notwithstanding continued pressure on the traditional voice business, revenues of pay-TV and ADSL retail have been increasing (+65.7% y.o.y) in line with the stated strategy of addressing the residential market by offering triple-play and dual play services.

Retail revenues increased by 1.2% y.o.y in 1H09, to Euro 487 million, underpinned by the growth in RGUs of 137 thousand, namely in pay-TV customers (+131 thousand net additions in the semester) and high quality broadband net adds (+78 thousand flat fee net adds). The growth in number of RGUs per subscriber contributed to the increase in retail ARPU of 1.3% y.o.y. 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, and notwithstanding challenging economic conditions.