Provided by MZ Data Products
 
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 February, 2007

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 

 
     Results Presentation 
     Full Year 2006 (Unaudited)
 
 
 
 
     8 February 2007 
 

Important notice 

This release contains forward -looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward -looking statements are not statements of historical fact, and reflect goals of the company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts,” "projects" and "targets" and similar words are intended to identify these forward -looking statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, the results of operations of the company to be achieved may be different from the company's current goals and the reader should not place undue reliance on these forward -looking statements. Forward -looking statements speak only as of the date they are made, and the company does not undertake any obligation to update them in light of new information or future developments.

The attached communication has been made public by Portugal Telecom, SGPS, S.A. (the “Company”) . Investors are urged to read the Company’s Solicitation/Recommendation Statement on Schedule 14D-9, which was filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”), as it contains important information, and the amendments thereto. The Solicitation/Recommendation Statement and other public filings made from time to time by the Company with the SEC are available without charge from the SEC’s website at www.sec.gov and at the Company’s principal executive offices in Lisbon, Portugal.

Portugal Telecom is listed on the Euronext and New York Stock Exchanges. Information may be accessed on Reuters under the symbols PTC.LS and PT and on Bloomberg under the symbol PTC PL.

Portugal Telecom | February 2007

2

Highlights 

       
[€mn] 
   
2006 
y.o.y 
     
>  Operating revenues    6,343    -0.7% 
>  EBITDA    2,423    -2.9% 
>  Net Income    867    +32.5% 
>  Operating free cash flow    1,599    +22.5% 
>  Net debt    3,757    +2.3% 
>  After-tax net unfunded    1,216    -36.4% 

Portugal Telecom | February 2007

3

Announced guidance achieved 


    2006 EBITDA    2006 
   
guidance 
   reported 
     
         
Wireline    Flat vs. “normalised” 2005    Flat 
 
TMN    (2%) – (3%)   (2.2%)
 
PTM    5%-10%    8.1% 

Portugal Telecom | February 2007

4


Operational momentum - Wireline 


  >  ULL net adds declining 
 
  >  Recouping pre-selection and WLR lines 
 
  >  Loss of traffic-generating accesses(2) has been decreasing 
 
  >  Improvement in market share of ADSL net adds(4)
 
  >  Stable wireline ARPU 
 
  >  Improvement in efficiency level 
 
     
 
 
(1) Carrier pre-selection + wholesale line rental net adds (2) PSTN/ISDN less pre-selection (3) Traffic generating access net adds 
(4) PT estimate (retail ADSL/(retail ADSL+ULL+wholesale ADSL) (5) Market share (6) Main accesses/wireline employees 

Portugal Telecom | February 2007

5

Operational momentum - TMN


>  Continuing acceleration of net adds, with 45% market share of net adds in 2H06 (vs. 13% in 1H06)
 
>  Resulting in improvement of billing revenues, despite stronger seasonality in Christmas in 2006 
 
>  Data underpinning service revenues , with non-SMS data revenues increasing by 21% yoy 
 
>  Market momentum built against stable SAC 
 
>  Improvement in EBITDA performance in 2H06, despite 67% y.o.y growth in net adds (342k in 2H06 vs. 205k in 2H05)
 
>  Cost discipline underpinned improvement in pre-SARC margin 
 

(1) Change yoy (2) Data/Service Revenues (3) Subscriber Acquisition Costs (4) EBITDA yoy (5) EBITDA pre-SARC/Service Revenues

Portugal Telecom | February 2007

6

Operational momentum - PTM


>  Continued growth in homes passed supports future growth 
 
>  Acceleration of Pay-TV net adds 
 
>  Over 45% of 1.5 million customers are digitally enabled 
 
>  Strong growth in premium sport channel subscribers 
 
>  Recovery on cable broadband net adds 
 
>  Improvement in blended ARPU (up 7% y.o.y)
 

(1) Digital set top boxes (thousand)

Portugal Telecom | February 2007

7

Operational momentum - Vivo


>  Net adds showing recovery… 
 
>  … with billing ARPU growing q.o.q… 
 
>  …driven out of campaigns to stimulate traffic 
 
>  Focus on reducing bad debt levels, with substantial reduction of cloning cases (down 95% y.o.y)
 
>  Combined with tight control of commercial costs (SAC)
 
>  Resulting in improvement in EBITDA performance… 
 
>  …and also in free cash flow 
 

(1) Excluding database cleanup (2) R$ (3)Minutes of Use (4) Provision/Revenues and excluding one-off (5) Subscriber Acquisition Costs in R$ (6) R$million

Portugal Telecom | February 2007

8

Other main international assets performed strongly 


[2006] [Euro million, EBITDA in local currency] 
                                             
Africa    Stake    EBITDA    D EBITDA    Asia    Stake    EBITDA    D EBITDA    Brazil    Stake   EBITDA    D EBITDA 
       
Unitel    25%    346    41%    CTM    28%    81    1.3%   UOL    29%    n.a.    n.a. 
Meditel    32%    188   

20% 

   Timor 
Telecom 		   41%    7.5     70%                 
MTC    34%    68    14%                                 
CVT    40%    40    26%                                 
CST    51%    3.1    24%                                 

9

Revenue and EBITDA performance by division 


 

 

  

>  Vivo (Real appreciation), PTM and consolidation of MTC had positive contribution to consolidated revenues. 

 

>  Line loss and lower traffic impacted negatively Wireline revenues. 

 

>  MTR cuts had negative impact of €49mn in TMN revenues. 

     
 

>  Cost cutting allowed wireline to offset partially top line pressure at EBITDA level. 

 

>  Excluding MTR cuts (€26mn), TMN EBITDA would have increased by 1.6% yoy. 

 

>  PTM EBITDA rose by 8.1% yoy, underpinned by Pay TV ARPU. 


Portugal Telecom | February 2007

10

Strong cash flow performance 


>  OpFCF up by 22% yoy to €1.6bn, underpinned by working capital improvement

>  FCF before net financial investments increased by 35% yoy

>  Net divestments of €365mn in 2005 (Lusomundo, Primesys, UOL IPO) vs. net investments of €143mn in 2006 (MTC, BES)

Portugal Telecom | February 2007

11

Net income reached historical high 

 

 

>  Net income increased by 33% yoy to €867mn. 

>  Increase in net income resulted from primarily: 

   
 

–  Lower income taxes: capital gain in 1Q06 (€53mn), adoption voluntary taxation on capital gains (€142mn), and recognition of tax credit at Vivo (€134mn). 

– Lower curtailment cost: redundancy programme encompassed less employees and impact of termination SNS protocol. 

Portugal Telecom | February 2007

12

Solid debt profile 

>  Net debt down €352mn in 4Q06 as a result of FCF generated. 

>  Cash plus undrawn facilities totalled €2.5bn at the end of Dec 2006. 

>  Average cost of debt (excl. Vivo and PTM swaps) stood at 3.8% in 2006. 

>  Debt maturity excluding Brazil is 7.9 yrs. 

 

Portugal Telecom | February 2007 

13

Significant reduction in unfunded post retirement obligations 

 

   
   
   
   
   
   
   
   
  >  Combination of several factors resulted in strong reduction of unfunded post retirement obligations. 
   
  >  Adjustment to PT’s healthcare plan and decision not to sign new protocol with SNS lowered PBO by €367mn. 
   
  >  After tax net unfunded amounted to €1.2bn at the end of 2006. 
   
  >  Pension funds outperformed expected rate of return in all of the past 4 years. 
   
   
   
   
   
   
   
   
   
   
   

Portugal Telecom | February 2007

14

Strong increase in distributable reserves 


>  Distributable reserves totalled €2.8bn at the end of Dec 06, following:

      – Share capital reduction (€1.1bn),

      – Internal corporate restructuring (€0.8bn) .

Portugal Telecom | February 2007

15

Financial highlights 

 

Euro million    4Q06    4Q05    y.o.y    2006    2005    y.o.y 
 
Operating revenues    1.635    1.715    (5%)   6.343    6.385    (1%)
Wireline    505    540    (6%)   2.072    2.214    (6%)
TMN    387    397    (3%)   1.502    1.557    (4%)
Vivo    535    620    (14%)   2.105    2.037    3% 
PTM    177    158    12%    666    628    6% 
EBITDA    738    710    4%    2.423    2.496    (3%)
Wireline    352    360    (2%)   1.073    1.129    (5%)
TMN    166    167    (0%)   659    674    (2%)
Vivo    160    124    29%    496    507    (2%)
PTM    53    51    2%    211    195    8% 
Income from operations    428    395    8%    1.214    1.375    (12%)
Net income    340    293    16%    867    654    33% 
Capex    423    361    17%    1.001    943    6% 
EBITDA - Capex    315    349    (10%)   1.423    1.552    (8%)
Net debt    3.757    3.672    2%    3.757    3.672    2% 
EBITDA margin (%)   45,2    41,4    3,8 pp    38,2    39,1    (0,9 pp)
Capex as % revenues    25,9    21,1    4,8 pp    15,8    14,8    1,0 pp 
EBITDA - Capex margin (%)   19,3    20,4    (1,1 pp)   22,4    24,3    (1,9 pp)
EBITDA = income from operations + depreciation and amortisation. 
Income from operations = income before financials and taxes + goodwill impairment + curtailment costs + losses (gains) on disposal of fixed assets + net other costs. 

Portugal Telecom | February 2007

16

Operating highlights 

 

        4Q06    4Q05    y.o.y    2006    2005    y.o.y 
 
Wireline    Main accesses (k)   4,404    4,478    (2%)   4,404    4,478    (2%)
  Main accesses net adds (k)   (14)   7    n.m.    (74)   101    n.m. 
  ADSL retail (k)   685    585    17%    685    585    17% 
  ADSL Retail net adds (k)   27    38    (29%)   100    204    (51%)
  Pricing Plans (k)   2,827    1,795    58%    2,827    1,795    58% 
  Total Traffic (mn minutes)   3,314    3,641    (9%)   13,442    14,818    (9%)
  ARPU (Euro)   30    30    1%    30    30    (1%)
               
TMN    Customers (k)   5,704    5,312    7%    5,704    5,312    7% 
  Net Adds (k)   211    97    117%    391    259    51% 
  MOU    120    123    (2%)   120    122    (1%)
  ARPU (Euro)   21    22    (7%)   21    23    (8%)
 
   Customer bill 
   17    18    (5%)   17    18    (5%)
     Interconnection    4    4    (16%)   4    5    (19%)
               
Vivo    Customers (k)   29,053    29,805    (3%)   29,053    29,805    (3%)
  Net Adds (k)   327    964    (66%)   (752)   3,262    n.m. 
  MOU    82    74    11%    74    78    (5%)
  ARPU (R$)   31    29    6%    27    29    (5%)
               
PTM    Pay TV Customers (k)   1,480    1,479    0%    1,480    1,479    0% 
  Pay TV Net Adds (k)   29    (6)   n.m.    1    30    (96%)
  Cable Broadband Accesses (k)   362    348    4%    362    348    4% 
  Cable Broadband Net Adds (k)   13    7    95%    14    43    (68%)
  Pay-Tv Blended ARPU (Euro)   30    27    7%    29    28    6% 
               

Portugal Telecom | February 2007

17

Portugal Telecom 

 
     Nuno Prego 
     Investor Relations Director 
     +351 21 500 1701 
     nuno.prego@telecom.pt 
 
 
       www.telecom.pt 
 

 

 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 09, 2007

 
PORTUGAL TELECOM, SGPS, S.A.
By:
/S/  Nuno Prego
Nuno Prego
Investor Relations Director
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.