Presentation of Portugal Telecom CEO Zeinal Bava

Portugal Telecom | Technology & Innovation Conference | 0

THE INNOVATION IMPERATIVE Zeinal Bava | Chief Executive Officer

Lisbon, 29 & 30 October 2012


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 facts, 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.


AGENDA

BUILDING THE NEXT GENERATION ORGANISATION

EXECUTING TO CREATE VALUE

A SECTOR IN TRANSFORMATION


CONSUMER AND BUSINESS TRENDS DRIVING NETWORK SCARCITY


CHANGING CONSUMER HABITS

DIGITALISATION VIRTUALISATION MOBILITY


CONTENT AND ENTERTAINMENT GO DIGITAL…

Online Offline

MUSIC

-14%

+12%

GAMES

+3%

+15%

VIDEO

+1%

+31%

Growth of usage time 2007-2011

SOURCE: PwC

DIGITALISATION


… ACROSS ALL USER TYPES DIGITALISATION

Segments

TV Consumers Audiophiles Digital Tecnophiles Online communicators

-12%

7%

15%

-3% Readers

Share of population

Media consumption time. Delta 2011-2012

Physical Digital

94%

6%

SOURCE: iConsumer – Emerging consumer behaviours and a changing of the guard, McKinsey & Company

US


0

10

20

30

40

50

60

70

80

90

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85

Researched online1 Percent

Footwear

Furniture

Home décor

DIY

Office supplies Household products

Health and beauty products Clothing

Grocery

Video games

DVD/Videos Books

Electronics Computer HW/SW

Purchased online1 Percent

BUYERS GOING ONLINE DIGITALISATION

1 As a percentage of those who bought a product in the respective category in the last 6 months NOTE: Based on data from 8 European countries

SOURCE: iConsumer 2010 – RT1, RT2, RT7

2010

Gone to digital

Still in store

Digital battleground

Europe


0

10

20

30

40

50

60

70

80

90

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85

Researched online1 Percent

Purchased online1 Percent

Footwear

Home décor

Furniture

DIY Office supplies Household products

Health and beauty products

Clothing

Grocery

Video games

DVD/Videos Books

Electronics

Computer HW/SW

MORE BUYERS GOING ONLINE

Gone to digital Digital battleground

Still in store

DIGITALISATION

SOURCE: iConsumer 2010 – RT1, RT2, RT7

2010 2011 Europe

1 As a percentage of those who bought a product in the respective category in the last 6 months NOTE: Based on data from 8 European countries


MULTI-TASKING IS BECOMING THE NORM

1.2

Asia-Pacific 2.11

Western Europe 6.6

North America 7.8

2.8

Middle East and Africa

Eastern Europe 2.6

Latin America

2016E. Networked devices per person

SOURCE: Cisco

MOBILITY

1 China 2.2; India 1.5


4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

TV

PC

Mobile phone

2012 2011 2010 2009 2008

26% CAGR

0% CAGR

61%47%

33% 31%22%

Other

2012

14%

13%

10%

10% 7%

14%

2011 2010 2009 2008

Voice

Listening

Browsing

Gaming

Social

Watching

10% Messaging

Time spent using devices Hours per day

Share of time on mobile platform Percentage

EVERYTHING IS GOING MOBILE MOBILITY

SOURCE: iConsumer US


Personal cloud subscriptions World. Billion

51

CONSUMERS MOVING TO THE CLOUD VIRTUALISATION

1.5

1.0

0.5

0

2-3x

2017 2016 2015 2014 2013 2012

SOURCE: IHS iSuppli Research, October 2012


BUSINESSES ALSO MOVING TO THE CLOUD

7x

Public

Private

2015E 2010

11

Cloud revenues Billion USD

15x

9x

5x

Corporate

Growth 2010-2015 76

SME Public

VIRTUALISATION

Priv

ate

Pub

lic

SaaS PaaS IaaS

Weight within public / private cloud

30-40% 10-20% 40-50%

0-10% 90-100%

SOURCE: Cloud Computing Survey; IDC; Forrester; McKinsey SME


CHANGING CONSUMER HABITS DIGITALISATION VIRTUALISATION MOBILITY

DATA TSUNAMI


HUGE TRAFFIC GROWTH BY CONSUMERS AND ENTERPRISES…

DATA TSUNAMI

IP traffic Exabytes per month

Consumer Enterprises

Total

Mobile data

976026

2014E 2011 2016E

3.8x 1395

2016E 2014E 2011

2.7x

2016E

8.3

2014E

3.1

2011

0.4 1.1 0.2

2014E

2.5

2016E 2011

20.7x 12.8x

SOURCE: Cisco VNI


…LARGELY DRIVEN BY MOBILE AND VIDEO

Total Fixed internet + managed IP + mobile data

2011

0.6

2016E

10.8

2014E

4.2

1106931

2016E 2014E 2011

18.1x

3.5x

Data tsunami driven by mobile… … due to exponential growth of video

48%31% 29%

Video

Other

2016E

10.8

71%

2014E

4.2

69%

2011

0.6

52%

DATA TSUNAMI

Mobile data

IP traffic Exabytes per month

SOURCE: Cisco VNI


VIDEO REPRESENTS THE LARGEST TRAFFIC VOLUME

Peak of video data traffic on PT’s mobile network

IPTV

Internet

14x

Peak of data traffic on PT’s fixed network (IPTV customers)

Video

DATA TSUNAMI

39x

2008 Set12 2009 2010 2012 2011 2008 Set 12 2009 2010 2012 2011


NETWORK IS NOT A COMMODITY


SHIFTING VALUE CHAIN

Aggregation Connectivity / Transport Equipments

Advertising

Facilitators (e.g., Payment, Authorisation)

Content creation

Consumers becoming content creators

Traditional telcos

Cable operators

Equipment manufacturers

Media players

Apps developers

Going into Pay-TV Launching own

brand EOM

Launching own brand EOM

Entering TV business Developing Apps

Entering the mobile-phones / tablet business Developing Apps Search engines / internet players

Developing Apps

Consumers


NETWORK SCARCITY DRIVING HIGHER MARGINS

1 Growth figures taken from 2006-2011 due to a large one-time write-off in 2007 by Nokia Siemens Networks 2 Includes tablets

Components Mobile Network Infra.1

Device OEMs 2 Carriers Apps & mobile web players

5%

1.1 pp

29%

0.8 pp

49%

N.a. -0.3 pp

-6%

-0.2 pp

28%

7

18066

734

-14%

18% 15% 14% 9%

EXAMPLE

Revenues 2011 $ bn

EBIT margin 2011 $ bn

Δ 2007-2011

Δ 2007-2011

SOURCE: iSuppli; Gartner; Strategy Analytics; IDC; Yankee Group; Bank of America; Veronis Suhler Stevenson,;Annual Reports


FTTx homes passed 2011. Percentage

SOURCE: Yankee Group; FTTH Council; Screen Digest

0%

6%

1%

3%

13%

37%

74%

9% 2

1

-4

-6

-6

-5

-1

5

Operator 4

Operator 3

Operator 6

Operator 1

Operator 5

Operator 7

Operator 2

Variation in broadband market share 2009-2011. Percentage points

European incumbents

NETWORK INVESTMENT IS CRITICAL


INVESTMENT IN BANDWIDTH CAPACITY HAS LONGER LEAD-TIMES Average rate of evolution of infrastructure capacity

Months needed to double capacity

BANDWIDTH PROCESSING STORAGE

18 20 12

(Moore’s law) (Kryder’s law) (Nielsen’s law)

SOURCE: Scientific American





AGENDA


UNLEASHING AND DELIVERING ON PT’S TECHNOLOGICAL AND INNOVATION POTENTIAL

Innovation Reach global relevance through a balanced ecosystem of partnerships with leading industry players to maintain a technological edge

Network & Infrastructure Rely on a unique set of engineering skills and a new level of infrastructure to create value as “manager” of bandwidth (scarcity)

Organisation Develop an integrated customer-centric organisation

IT & Operations Excel in customer experience through convergent and efficient operations, and enable superior service through an efficient IT function


BUILDING A FUTURE PROOF NETWORK NETWORK & INFRASTRUCTURE

High capacity transport network

Leading edge storage & processing

Data centre network

State-of-the-art access network

Fibre (FTTH) 4G, 3G, 2G Wi-Fi National backbone IP/ MPLS


FIBRE BRINGS VALUE TO ALL SEGMENTS

Residential

• Advanced services through STB

• RF-overlay allows multiple TVs w/o STB

• Higher and guaranteed speed

• Download and upload symmetry

• Lower latency

Personal

Capex reduction on LTE migration through backhaul cost optimisation

NETWORK & INFRASTRUCTURE

Enterprise

Widespread access to advanced connectivity solutions on fibre (specially for SMEs)

Community

Dissemination of public services through the internet (e.g., e-education, e-government, e-health)


FIBRE BRINGS VALUE TO ALL SEGMENTS

Residential Personal


Enterprise Community

1.6 MILLION HOMES PASSED

WITH FTTH

46%+ POPULATION

COVERAGE

92% MOBILE

STATIONS CONNECTED WITH FIBRE

36% OF ENTERPRISE CUSTOMERS

PASSED WITH FIBRE (~90% OF

REVENUES1)

40% OF SCHOOLS

CONNECTED WITH FIBRE

1 Estimate based on spending with PT ; excludes SoHo and considers that an enterprise is passed with fibre when at least one of its "sites/locations” is passed


• Certified Security management policies

• Fibre bandwidth with 99.99% services availability

• Solid technological partnerships

BUILDING A WORLD CLASS DATA CENTRE NETWORK & INFRASTRUCTURE

Leading-edge infrastructure Superior value proposition

6th largest data centre in the world (75,500 m2)

LEED Gold Certification

30 Pbytes capacity

IaaS PaaS

CaaS SaaS


• Integrated management for F-M network with unified network planning and operations, and common service platforms

• Seamless service delivery everywhere

• Cross network optimisation – WiFi off-load – LTE residential coverage – 2G / 3G / 4G traffic

optimisation


CONVERGENT NETWORK PROVIDING THE BEST COVERAGE, BEST SPEEDS, HIGHEST RELIABILITY

Fibre transport network

Storage and processing (data centre network)


Fibre transport network

Storage and processing (data centre network)


ALL-IP NETWORK

COST COMPETITIVE ALL-IP TECHNOLOGY

• Support of differentiated service levels and advanced traffic management (opportunity for optimisation of capacity investments)

• More availability and flexibility

• Increased cost efficiency

• 100Gbps connections in the transport network (Lisbon-Oporto and international)


Marketing

Stores

Customer Care

Self-care

Operations

CROSS FUNCTIONAL COLLABORATION TO DELIVER THE BEST CUSTOMER EXPERIENCE

Integration of customer touch points

ORGANISATION

Residential Personal SMEs Corporate

Product & Pricing

Business

Intelligence

Sales Channels

Product & Pricing

Business

Intelligence

Sales Channels

Business

Intelligence

Sales Channels

Business

Intelligence

Sales Channels

Product & Pricing

B2C B2B

Portugal Telecom | Technology & Innovation Conference | 32 SOURCE: DDL

EMPLOYEES ASKED TO SUBMIT VIEWS ANNUALLY ORGANISATION

86%81%

65%55% + 31 pp

2011 2010 2009 2008

76%73%69%66% + 10 pp

2011 2010 2009 2008

Participation Percentage of employees

Global Satisfaction Index Percentage

Challenging backdrop Shared objectives and more engagement is leading to greater satisfaction

• Strict cost discipline in challenging economic context imposing policy of no salary increases for the past two years

• New careers model, promoting meritocracy (e.g., no tenure-based promotions)

• Increased accountability with variable compensation strictly linked to performance


St

INTEGRATED VIEW OF CUSTOMER TOUCHPOINTS UNDERPINNED BY COMMON IT PLATFORM

Efficiency & effectiveness

IT & OPERATIONS

• Real time tools and forecast systems

• Improved third party management and HR incentives

• Multi-year transformation programme with convergence of systems to increase flexibility and lower time-to-market

Self-Care Unique self-care portal for all customers

Field Force Integrated operations management

Stores Convergent stores (PT Bluestore)

Call Centres Integrated call centres, with merged FO/BO

Integration & convergence

CRM Convergent CRM system ONE

• Focus on sales effectiveness tools and processes

• New incentive schemes for commercial staff

OPERATIONS

IT

SALES CHANNELS


TECHNOLOGY, PROBLEM SOLVING SKILLS AND INTEGRATED APPROACH INCREASING EFFICIENCY

IT & OPERATIONS

• 15% reduction in call centre opex

in 3 years

• Convergence of systems for CRM, collections, field force, self-care

• 13% IT cost reduction in 3 years

NOTE: Variations ending in 2011 or 2012 (annualised base d on 1H12)

Efficiency & effectiveness

St

12% penetration on PT client self-care portal

Integrated management of fixed and mobile field forces

30% of mobile sales in former fixed stores and 26% of fixed sales in former mobile stores

30% reduction in call centre redo rate in 2 years

Integration & convergence

Convergent CRM system for all PT customers

• 30% decrease in fibre installation time in 3 years

• 41% increase in technician productivity in 5 years

OPERATIONS

IT

SALES CHANNELS


MAKING IT EASIER FOR CUSTOMERS

Stores

2008

Call Centre

2010 - Launch of PT Cliente portal

Manage data profile Contacts, accounts, users

Products and services Coverage, orders, manage products and services

Invoices and payments 2nd invoice, detailed invoice, electronic and online invoice, direct debit, manage invoices and payments, account movements

IT & OPERATIONS

+


IMPROVING SATISFACTION ACROSS ALL CUSTOMER INTERACTION TOUCH POINTS

2010

2012

1.0

0.6 75%

65% 1.0

1.8

7.5

7.8

Average request handling time Days. Indexed

Self-care operations Units. Indexed

First time resolution Percentage

Satisfaction with call centre 1-10 scale

IT & OPERATIONS

7.91

8.52

Satisfaction with store service Units. 1-10 scale

1 Data for 1Q11 2 Data for 3Q12


ACHIEVEMENT ELEVATES THE VISION NON-EXHAUSTIVE

Top Ranking

Performers Awards

Troféu Call Centre

Global Business

Excellence Awards

World Awards Top Performers

APCC Award

European Business Awards

Stevie Awards for

Sales & Customer

Service

World Commu-nication Awards

Human Capital Masters

• 2011 – Gold “Best Technology Innovation”

• 2011 – Silver “Best Contact Centre Technology Innovation"

• 2010 - One of the winners in “Customer Focus”

• 2010 – One of 10 Country Representatives for Portugal

• 2011 – Finalist “Users’ Choice Awards”

• 2012 – Winner “Outstanding Customer Service Initiative”

• 2010 – 2nd “Best Customer Relationship Centre – Telecommunications”

• 2010 – 3rd “Best Customer Relationship Centre – OutSourcing”

• 2011 – Finalist “IVR or Web Service Solution”

• 2011 – Finalist “Customer Service Department of the year” – IT & Telecommunications

• 2010 – 2nd “Best contact centre”

• 2010 – 3rd “Best contact centre of professional support”

• 2011 – Winner “Personalidade do ano”

• 2010 – Winner “Espaço Contact Centre”

• 2012- Finalist

IT & OPERATIONS


“It’s impossible to learn how to innovate” Innovation should be fostered and benefits from a structured approach

INNOVATION BELIEFS

“More seniority and experience translate into a greater ability to innovate” Employees with innovation skills can be found in all areas of an

organisation: leverage the Wisdom of the Crowds

“Innovation is a topic for the R&D departments only” One should work closely linked with the business units to

incorporate the “voice of customers”

“Innovation should occur within the organisation” An extensive network of partners brings new perspectives and

access to complementary competences, both crucial in innovation

“The sole purpose of innovation is to generate new products and services” Innovation goes beyond products, focusing on all aspects of the

business model (e.g., customer experience, operational efficiency)

MYTH OUR BELIEFS

INNOVATION


CONTINUOUS REALLOCATION OF MINDSHARE, PEOPLE AND CAPITAL

PT project portfolio

Exploratory factory

Disrupting projects

Planned factory Business

development

Incremental factory

Continuous improvement

Low

M

ediu

m

Hig

h

Ris

k

Term

Short Medium Long

Structured approach to innovation… … leveraging internal and external stakeholders

INNOVATION

All PT employees

Inn

ova

tio

n la

bs

Un

iver

sity

an

d R

&D

par

tner

s

Business segments

Technological partners


Alignment of innovation strategy with major social and technological trends

Promotion of a structured, time-framed approach to innovation

Identification and development of cross-segment, structural opportunities

Overview on innovation budget vs. defined priorities and delivery on results

MORE PEOPLE INVOLVED IN THE INNOVATION DIRECTION SETTING

INNOVATION

Mission Structured approach to innovation

Exploratory Innovation

Incremental Innovation

“Market of ideas” platform leveraging the wisdom of the crowd

Medium-term roadmap planning with business segments

Identification of long-term, disruptive areas of innovation (R&D)

Planned Innovation


EXPERIMENTATION AND LEARNING

Specialised internal development labs… … materialising innovative solutions

ONT adapted to PT FTTH strategy

Innovate social network on TV

Multi-platform access to content

WDM-PON to massify bandwidth above 2 Gbps

INNOVATION

Home networking

Internal app development unit, serving all segments with multi-platform apps

Innovation subsidiary, serving PT and international clients developing software and network solutions

Designing innovative solutions for customers with home networking and DVD systems

Managing the customer access platforms and services engineering

Platforms


IMPROVING TIME-TO-MARKET AND SHARING RISKS AND REWARDS WITH PARTNERS

INNOVATION

R&D and UNIVERSITIES

… new products and solutions Relying on a large network of partners to develop…

NETWORK EQUIPMENT

FIBRE SOLUTIONS

DEVICES

APPS & SERVICES PLATFORM

NATIONAL COMPANIES

TECHNOLOGICAL

http://images.google.com/imgres?imgurl=http://thegiftedsoul.com/blog/wp-content/uploads/2009/09/zte_logo1.jpg&imgrefurl=http://thegiftedsoul.com/blog/tag/zte/&usg=__nIDgLH81yfDLo8Uz1N8WXzCWb8s=&h=312&w=926&sz=24&hl=en&start=15&um=1&tbnid=UNyfnL5hTOg8yM:&tbnh=50&tbnw=147&prev=/images?q=zte&hl=en&sa=N&um=1�





AGENDA


Consumer Explore convergence to grow market share based on simplicity, convenience and value-for-money

MONETISATION IN EACH BUSINESS SEGMENT

Personal Move to flat voice and continue to explore data opportunity

Enterprise Increase penetration of IT/IS services (Cloud, Outsourcing and BPO) to increase share of wallet of ICT spending

Residential Transformation leveraged on advanced Pay-TV and bundled offerings


NON LINEARITY VOD, Pause and Restart TV

MULTI-SCREEN/OTT Music streaming and TV experience on multiplatform

RESIDENTIAL

USER GENERATED CONTENT

Personal channels with private and public content

COMPLETE APP ECOSYSTEM Games, utilities, social

networks, music

INTERACTIVE FEATURES Access to on-demand TV-related content

MEO IS RESHAPING THE TV EXPERIENCE

http://www.meo.pt/conhecer/tv/experienciatv/interactivo/pages/facebook.aspx�

http://www.meo.pt/conhecer/tv/experienciatv/interactivo/pages/meokids.aspx�

http://www.meo.pt/conhecer/tv/experienciatv/interactivo/Pages/MeoLikeMusic.aspx�


MULTI-SCREEN/OTT More than 80 thousand MEO Go! clients with 500 thousand accesses per month

RESIDENTIAL

MEO IS THE TV OF THE FUTURE

NON LINEARITY 75% of client penetration with 60 recording hours per client in a total of 50 million recordings per month

USER GENERATED CONTENT MEO Kanal with 25k channels and 20k hours of contents with a total of 24 million views

COMPLETE APP ECOSYSTEM More than 40 apps with 50% of client penetration and

more than 2.5 M MEO Interativo visits per month

INTERACTIVE FEATURES 65% of client penetration and interactive channels among the top 5 of channels share


EASE OF USE OF INTERACTIVITY AND APPS Interactivity content Apps on TV

Partnerships with key content owners to develop interactive TV experience

Partnerships

Interactive applications for news, sports, music and many others

RESIDENTIAL


WINNING THE 3P MARKET WITH FIBRE

PT’s Broadband market share PT’s 3P market share vs. largest competitor

RESIDENTIAL

2Q12

51%

2Q10

46%

2Q08

40%

NOTE: A 3P client is defined as a subscriber of the three services (TV, Internet and voice) from the same operator SOURCE: ANACOM; Companies’ reports

Residential Net adds 1H2012. Thousands RGUs

TV Net adds 1H2012. Percentage

1P

-68

2P

-5

3P

230

Total

157

DTH

12%

ADSL 31% Fibre 57%

51%

2Q12 4Q11

49%

2Q11

46%


DTH SERVICE IS NOW INTERACTIVE RESIDENTIAL

8 HD CHANNELS

DIGITAL RECORDING

VIDEO-ON-DEMAND

ACCESS TO INTERACTIVE APPS THROUGH ADSL CONNECTION

MULTI-SCREEN TV (MEO GO)


-4pp

1H12 1H10

IMPROVING CUSTOMER RETENTION RESIDENTIAL

Residential Churn (IPTV Customers) Percentage

-8pp

3P 2P

-5pp

FTTH ADSL

Residential churn by type Total residential churn


Product 6 Product 5

Product 3 Product 4

Product 2 Product 1

Product 6

Product 5

Product 3 Product 4

Product 2 Product 1

CONTINUOUS PORTFOLIO OPTIMISATION

Product 2 Product 1

Product 4

Product 3 Product 2

Product 1 Client life cycle NPV

PT threshold of minimum value creation

Discontinued products

Split by bundle type

Product family 1 Product family 2

Split by high-end / low-end

Product family 1 Product family 2

RESIDENTIAL


STRATEGY FOCUSED ON MOBILE DATA USAGE AND TIERED PRICING PLANS

PERSONAL

SMARTPHONES DATA

MOBILE BROADBAND

Promote smartphone penetration (and data consumption) through a competitive offer at affordable prices

DATA VOICE

• Reinforce post-paid value proposition

• Exhaust “on-net” effect through enhanced pre-paid

• Segment-specific strategies

Increase customer base through superior product quality (coverage) and convergent and innovative offerings addressing needs of digital consumer


Broadest smartphone offer in Portugal 11 exclusive models in a portfolio of 42 smartphones representing the major mobile platforms

Offering shaped by insights from primary market research on consumer preferences

A broad smartphone offering based on consumer preferences…

… including exclusive own-branded models

PERSONAL

Own brand smartphones to increase penetration and data usage

• Launch of the first mass market smartphone (TMN Bluebelt) with price 50% below comparable equipments

• Customised Android features, targeted to the consumer preferences, at a competitive price

SUPERIOR SMARTPHONE OFFERING


iOS, ANDROID AND WINDOWS 8 PERSONAL

Personal and professional OS philosophy Convergence among equipments through a comprehensive experience across multiple devices (smartphones, tablets and PC’s) Simplicity of usage with intuitive and friendly screen touch utilisation Compatibility with the low-power ARM platform allowing higher autonomies and more stylish formats


Cu

sto

mer

s w

ho

ac

qu

ired

a s

mar

tph

on

e SMARTPHONES ARE DRIVING HIGHER DATA USAGE AND ARPU

PERSONAL

Voice Data

9.8% 4.0% 5.8%

4.6%

-1.0%

NOTE: Universe of customers that have maintained the same tariff plans between 1Q11 and 1Q12, based on purchasing behaviour during the 4Q11

Delta ARPU 1Q11-1Q12. %

Indexed ARPU 1Q12

Customers who kept a basic phone

Low traffic phone

High traffic phone

Voice Data

2.6

1.2

1.0

+

-

+

Usa

ge


MOBILE PHONE INTERNET USAGE DRIVES RETENTION

-4 pp Customers with mobile internet

Customers without mobile internet

Churn on pre-paid customers1

August 2012

1 Customer with tenure >12 months, based on 12 months ending August 2012

PERSONAL


UNIQUE MOBILE BROADBAND OFFERING

Mobile internet included with 3P offer

Monthly traffic sharing

Same account for all data cards and screens

Unlimited data traffic above €20/month

Superior technological offering

3G and 4G up to 150Mbps (broadest 4G coverage in Portugal)

PERSONAL


TIERED MOBILE BROADBAND OFFER PERSONAL

Pre-paid

Regular Plus Soft 10 Light Hiper Mega

Speed

3G Post-paid 4G Post-paid

Traffic

Sharing

Wi-Fi

1 Mbps 2 Mbps 5 Mbps 14.4 Mbps 50 Mbps 150 Mbps

10 hours1 720 MB2 1 GB 4 GB Unlimited

1 Expires in 90 days 2 Expires in 24 days

Simultaneous use in 2 devices (optional) N.a.

Free and unlimited N.a.

Free and unlimited for MEO customers N.a.

Free and unlimited Add-on

Add-on


GENERATING NEW SERVICE OFFERINGS AND REVENUES

PERSONAL

Music Box Unlimited music downloads

Sapo Desporto Live results and videos

Sapo Tempo Weather updates for the whole country

Meo Go Anywhere and any device TV

TMN Drive Mobile GPS

TMN Wallet Mobile Payments

NON - EXHAUSTIVE


TMN Wallet Mobile payments





PERSONAL

NON - EXHAUSTIVE

+58,000 users

+200,000 mobile accesses/month

+24,000 monthly subscribers

+10,000 videos rented









PERSONAL

NON - EXHAUSTIVE

100,000 users

61.4% of users access by more than one platform (e.g., PC and smartphone)

+12 million songs available with +100 million of streamed tracks









PERSONAL

NON - EXHAUSTIVE

300,000 active users, 60% of which used during the last month

~150,000 users from competitive MNOs

# 1 downloaded app in Android markets during release

Average monthly usage of 4h

Average of 20 accesses per month









PERSONAL

NON - EXHAUSTIVE

Internal pilot that allows for mobile payment with 2,000 users

Pilot usage:

• 50% QR

• 10% NFC

• 40% SMS e USSD




Moche fence to youth

FLAT FEE BASED OFFER TO PROTECT CUSTOMER VALUE

PERSONAL

Simple offer design with data included

Price

€100

€25

€12.5

All-net

Tribe/group

On-net

Pre-paid Post paid

Unlimited

500 MB

100 MB

Included data Upgraded design to youth (Moche sub-25):

• Exclusive promotion and website

• Free SMS to all-net vs. on-net

• 150MB/month of free data vs. no data

• Discount of 5€/month (-40%)


PERSONALISED TARIFF PLANS GAINING TRACTION AND SHARE Flat rate plan subscribers Percentage of mobile subscribers from personal segment

2011

21%

2%

6%

11%1

3%

2010

20%

1% 4%

12%1

2%

2009

15%

0% 0%

13%1

2%

Variation 2009-2011 Percentage points

- 2 pp1

+6 pp

+2 pp

PERSONAL

Others +1 pp

1 Includes old tribal plans that may include customers older than 25 year old NOTE: Percentage of flat rates includes only plans with monthly payment


MIGRATIONS TO POST-PAID AND “e” IMPROVING ARPU AND REDUCING CHURN

Migration to post-paid Migration from pre-paid “non-e" to "e"

LTV1

Percentage Churn Percentage

ARPU Euro

+18%

2012 2011

-20%

2012 2011

+47%

2012 2011

ARPU Euro

+6%

2012 2011

PERSONAL

1 Life Time Value


SHIFT OF REVENUE MIX TOWARDS DATA AND HIGHER VALUE VOICE PLANS

Shift to data Flat fees gaining share

Weight of flat-fees on Personal revenues Percentage

2Q12

32%

2Q10

23%

2Q08

19% 22%

2Q12

30%

2Q11

PERSONAL

Weight of data on Personal service revenues Percentage






Entreprise Increase penetration of IT/IS services (Cloud, Outsourcing and BPO) to increase share of wallet of ICT spending





LEADING POSITION IN CONSUMER SEGMENTS

19%

12% 6%

6%

Pay-TV

37%

51%

12%

Broadband

51%

33%

7% 5% 5%

Voice

58%

Operator 1

Operator 2

Operator 3

Others

Mobile Fixed

1 Mobile broadband market share in number of users with dongle SOURCE: ANACOM; Companies’ reports

Subscriber market share 2Q12. Percentage

Operator 1

Operator 2

Others

Broadband1

40%

28%

28%

4%

Voice

45%

41%

13% 1%

CONSUMER


4-PLAY DEMAND EXPECTED TO GROW CONSUMER

…that are likely to be accelerated by sector dynamics

• Dilution of on-net effects due to MTR removes barriers to adoption of F-M offerings

• Shift to all-net flat rate increases price comparability and risks “price wars”

• Merge of VoIP / IM / Social networks with traditional media

• IT convergence to offer seamless services

LOWER BARRIERS TO CHANGE

LOWER TECHNOLOGICAL BARRIERS

Consumer trends require convergent offers...

• Multi-access connectivity (3G / 4G / Wi-Fi, Ethernet)

• Interaction with different types of content

• Increased media consumption in multiple screens

• Access to “fixed” content via mobile devices

• Consumers increasingly multi-tasking

MULTI-SCREEN APPS

MULTI-FUNCTIONAL DEVICES


STRONG INTEREST ON 4P OFFER “How do you rate an integrated 4P offer by a single brand?” Percentage

Very interested

24.8%

Interested

56.4%

Little interest

8.8%

Not interested

8.7%

CONSUMER

81% are interested in

4P offer

SOURCE: My Brand “Estudo de mercado do Grupo PT”, Novembro 2011 (N=1671)






Entreprise Increase penetration of IT/IS services (Cloud, Outsourcing and BPO) to increase share of wallet of ICT spending



FROM SILOS TO SERVICES – THREE-TIER APPROACH TO B2B MARKET

• Unified communications • ICT services outsourcing • Application integration • M2M and specific IT/IS solutions • Business process outsourcing

Integrated+

• Multi-employee connectivity • Mobility solutions for

“itinerant” employees • Simple software solutions

Connected+

• Voice (F/M) • Broadband

Residential+

ENTERPRISE

Main enterprise needs per sub-segment


RESIDENTIAL+ OFFER FOR SOHO ENTERPRISE

Upgrade portfolio for Residential+ segment…

• Voice (fixed & mobile) • Broadband (fixed & mobile) • TV (fibre, ADSL, satellite) • Bundle offers and access to

connected+ segment offer

• Specific services for – Security and management

services (IT assistance and clean access)

– Web services (instant web page) • Access to connect+ segment offer

(e.g., specific business applications, hosting and storage, communication and collaboration)

Core services

Non-core services

… with dedicated services and increased QoS

• Advanced network equipment

• Replacement equipment

• Dedicated sales force with customised support

• Delivery of equipment

• Premium customer care with technical assistance for equipment and hardware

Residential offer with improved SLAs

Equipment Sales Customer care

Residential+


BUNDLED AND VERTICAL OFFERS FOR SMALL ENTERPRISES

Bundled offer – Pay-per-employee Vertical solutions

Connectivity

Mobile and fixed voice and fixed BB

Equipments

PCs, Phones and cell-phones, routers and switches

Cloud

Customised domains, 5 e-mail accounts, hosting site and optional software (Office 365)

ENTERPRISE

Sectorial solutions including sector-specific software, payments solutions and TV on top of OfficeBox

Restaurants

Clinics

Hotels

Retail

Connected+


ENTERPRISE

COMMUNICATIONS AND IT/IS SOLUTIONS FOR MEDIUM AND LARGE CORPORATES

Connectivity

Voice & Data Enterprise Networks Security

Basic Services & Products

Outsourcing & Managed Services

Value Added Services

Computing

Data Centre

Advanced M2M solutions

Security solutions

Apps & Business Processes

Applications Processes

SaaS & application outsourcing

PaaS & hosted App MGMT

Outsourcing and BPO

Fixed, mobile & convergent solutions

WAN/LAN & internet connectivity

DC Outsourcing

IaaS & web hosting

Server virtualisation

Integrated+


CLOUD WILL UNLOCK THE BUSINESS VALUE IN BIG DATA AND DRIVE EFFICIENCY

ENTERPRISE

Strategy focused on private and public cloud, specially PaaS and IaaS…

…to crystallise the benefits for customers of consolidation, virtualisation and standardisation

• Leverage on partners’ network of customers

• Recognised world class offer

• Expand to international markets

Partnerships

Sales Force

• Specialised teams with industry expertise

• National coverage through commercial partnerships

• Consulting for cloud to minimise customer pain points

@Internet Public Cloud

SP Virtual Datacentre On Premises

@VPN Private Cloud

Platform as a Service

Infrastructure as a Service

Software as a Service


PRIVATE CLOUD NEEDED TO ENSURE FEASIBILITY OF SOLUTIONS

Trust assessment

Functional assessment

Economic evaluation

E-mail

CRM

ERP

Supply chain

Analytics

Application development

Services

Legacy architecture

Public cloud

Private cloud

…

ENTERPRISE


A SECURE CLOUD OFFER ENTERPRISE

Comprehensive offering of web, apps, resources, and security solutions

Full range of solutions available online, through self-provisioning portal


BUSINESSES ARE DEMANDING TECHNOLOGY CONVERGENCE AND IT TRANSFORMATION

ENTERPRISE

Main service/ Products extension

Revenue uplift vs. core telecom services

Hospital customer

• Cloud services including storage and servers, workstation and e-mail

• Network services MPLS integrated IP VPN and internet access expansion

• Centralisation of operations maintenance and management by PT

• Unified voice and communications

+334%

Town Hall customer

• Cloud services including: virtual private server, mailing and SaaS SW licencing

• IT and database consolidation through a migration and consoli-dation plan, outsourcing mgmt, maintenance and monitoring services

• Security services • Network services

+400%

Retail bank customer

• Cloud datacentre services including control of IT capacity with SLAs for demand resources

• Security solutions

+190%

Sports enterprise customer

• Cloud services including virtualisation of apps and commercial/ transactional portal, data back-up and mailing services

• Security solutions including full security operation centre on PT’s datacentre

+87%

REAL CORPORATE CUSTOMER EXAMPLES


SMEs Corporate

NEW SERVICE MODELS AND NEW MARKETS ARE TRANSFORMING PT’S BUSINESS

1H12

32%

1H10

25% Weight of data revenues (non-voice) Percentage

70%65%

1H12 1H10

1H12

66%

1H10

62% Commercial effectiveness

23%15%

1H12 1H10

Revenues from convergent clients Percentage

Revenues from value-added services1

Percentage

1 Outsourcing, Managed Services, IT/IS, BPO, Cloud

ENTERPRISE


PROCESS TRANSFORMATION TO DRIVE EFFICIENCY, AGILITY AND GROWTH

ENTERPRISE

Time reduction Average

End-to-end

-6%

After Before

Corporate

SMEs -28%

After Before

Pre-Decision

Target Current

-15%

-27%

Target Current

Post-Decision

-17%

Target Current

-9%

Target Current

Target Evolution since diagnosis







TRANSFORMATION OF THE BUSINESS MODEL FROM VOICE TO DATA


DELIVERING ON RESULTS Weight of data on revenues Percentage

51%

38%

29%

1.8x

2Q12 2009 2007


AGENDA Presentation Speaker(s) Network and infrastructure

Innovation management

Leading in brand management

Business to Consumer

Business to Business

Operations

Wrap-up and Q&A

Pedro Falcão, José Salas Pires

Ana Dias

Luís Avelar

Luís Nascimento, Vera Pinto Pereira, Celso Martinho, João Epifânio

João Paulo Cabecinha

Pedro Sardo, Jason Inácio, Nuno Vieira

Zeinal Bava


THE INNOVATION IMPERATIVE Zeinal Bava | Chief Executive Officer

Lisbon, 29 & 30 October 2012

Presentation of Portugal Telecom CEO Zeinal Bava

Documents

Transcript of Presentation of Portugal Telecom CEO Zeinal Bava