Shareholder value is the guiding principle
IN TOUCH THE TELECOMMUNICATIONS SECTOR IS THE MOST DYNAMIC IN THE PORTUGUESE ECONOMY. IN THE NEW COMPETITIVE ENVIRONMENT, FOLLOWING LIBERALIZATION, PORTUGAL TELECOM REMAINS THE DOMINANT PLAYER

WINNING STRATEGY A commitment to innovation, quality, and reliability is helping the company to stay ahead of its rivals in the market

LIBERALIZATION of Portugal’s telecom market began two years ago and is due to be completed this year. This has prompted all Portuguese telecom companies to make large investments in order to increase their competitive levels. So far those investments amount to around $5 billion.
Portugal is way ahead of the European average in terms of telecom penetration, which is rated at 76 percent. In particular, the Portuguese have taken to mobile phones in a big way and—notwithstanding the high level of penetration already achieved, at about 80 percent—the cellular sector continues to show strong growth.

Internet services are fully liberalized and have expanded rapidly. Growth in internet use has been slower than in other western European countries, but this is changing as more and more Portuguese service providers (ISPs) offer free access.
The government is investing $500 million to close the “digital divide” and bring internet access to the majority of Portuguese. European Union structural and cohesion funds should account for around $150 million of this investment. Meanwhile, revenues from e-commerce are forecast to increase substantially.

The equipment market is expected to grow at an annual rate of 20 percent over the next two years. Imports constitute 73 percent of the market and there are many opportunities for American companies, the most promising subsectors being
cellular terminals, switching equipment and fixed terminals.
The telecom sector is dominated by Portugal Telecom (PT), which has retained an overall share of more than 90 percent of fixed telephone services two years after the liberalization process started. The company, which is listed on the Lisbon and New York stock exchanges, boasts a diversified business portfolio, ranging from fixed communications to multimedia. Significantly, in the new competitive environment, it has reinforced its position as the benchmark operator for the top corporate sector.

In 2001, PT increased its customer base by three million to 16.5 million, 61 percent of whom are subscribers to the group’s mobile services. One of three players in the Portuguese cellular arena, PT boasts around half the market share.
In pay television, PT has more than 85 percent of market share and it is the leading company in broadband and in ISP portal space. Telepac, a PT-owned company, is the country’s principal ISP and controls more than 78 percent of the market.
PT has invested in several Portuguese-speaking countries, notably Brazil, where last year it launched a 50/50 joint venture with Spain’s Telefonica Moviles, creating the largest wireless operator in South America. The venture has already attracted almost 13 million subscribers.

MIGUEL HORTA E COSTA President of Portugal Telecom

“We are the undisputed market leader in all the segments of our business,” says Miguel Horta e Costa, PT’s President.
The company is committed to a strategy of differentiating itself from its competitors through innovation and the quality and reliability of its services. Mr. Horta e Costa believes this has enabled it to stay ahead despite the difficulties suffered by the industry worldwide.
“Our strategy has been paying off and so we intend to continue with more of the same, but with increased focus on cost cutting, capital investment control, debt reduction and maximization of cash flow,” he says.
Formed from the merger of three companies—the then state-owned Telecom Portugal, Telefones de Lisboa and Teledifusora de Portugal—PT underwent privatization between 1995 and 1999. Today, it is a fully private company, run by independent managers appointed by its private shareholders, with the state retaining a 1.5 percent share.

Shareholder value is the company’s lodestar and Mr. Horta e Costa believes that even faster growth can be achieved. He talks of an “aggressive restructuring program” aimed at heightening the company’s ability to face the challenges to come and to react to opportunities in a pro-active way.
“Not only our shareholders, but our customers are aware that the company is changing its image and its style,” he says.
Among those opportunities will be the third generation mobile technology UMTS (Universal Mobile Telecommunications System) which brings together info-communications and broadband.
“The Portuguese like state-of-the-art technologies,” says Mr. Horta e Costa. “For many people it was a surprise how the Portuguese reacted to mobile phones—we became one of the leading European countries in mobile communications. I believe UMTS will also be a success. It will bring new services to our users and revenue opportunities for us.”