Portugal Telecom Reports Results1 For the Nine Month Period Ended September 30, 1999.LISBON Lisbon (lĭz`bən), Port. Lisboa, ancient Olisipo, city (1991 pop. 677,790), W Portugal, capital of Portugal and of Lisboa dist., on the Tagus River where it broadens to enter the Atlantic Ocean. , Portugal--(BUSINESS WIRE)--Oct. 29, 1999-- Portugal Telecom Portugal Telecom (Euronext: PTC, NYSE: PT) is the biggest telecommunications operator in Portugal. It operates mainly in Portugal and Brazil. It also has a significant presence in Morocco, Guinea-Bissau, Cape Verde, Mozambique, Timor-Leste, Angola, Kenya, the People's Republic (NYSE NYSE See: New York Stock Exchange : PT; BVL BVL bovine viral leukosis. : PTCO.IN), the Portuguese telecommunications company See telecom company. , today announced its results for the nine month period ended September September: see month. 30, 1999. 0. SYNOPSIS A summary; a brief statement, less than the whole. A synopsis is a condensation of something—for example, a synopsis of a trial record. - Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Operating Revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. increased 12.1% reaching Euro(2) 2,340.9 (PTE PTE The ISO 4217 currency code for the Portugese Escudo. 469.3 billion or US$(3) 2,491.4 million). - EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. + Depreciation and Amortization) pre-curtailment costs grew by 11%, reaching Euro 1,141.6 million (PTE 228.9 billion or US$ 1,215.0 million). - EBITDA (Operating Income + Depreciation and Amortization) including curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. costs increased by 4.6%, reaching Euro 1,037.3 million (PTE 208.0 billion or US$ 1,104.0 million). - Consolidated Operating Income pre-curtailment costs increased by 14% to Euro 681.9 million (PTE 136.7 billion or US$ 725.7 million). Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: pre-curtailment costs evolved favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to 29.1%. - Consolidated Operating Income including curtailment costs grew by 2.7%, reaching Euro 577.6 million (PTE 115.8 billion or US$ 614.8 million). - Consolidated Net Income for the nine-month period ended September 30, 1999 reached Euro 295.1 million (PTE 59.2 billion or $ 314.1 million). - Excluding the increased impact of investments in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. (PTE 13.8 billion), the positive effect of the gain resulting from the capital increase of TV Cabo Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the (PTE 16.9 billion) and the exceptional effect of the workforce reduction (an additional PTE 13.3 billion over the nine month period ended September 1998), Consolidated Net Income would have reached PTE 69.4 billion, which represents a 13.5% increase over the same period last year. - Fixed network usage (in minutes) grew by 14% reaching 12,114 million minutes, with an 11.5% increase on traffic originating in the fixed network (8.7% increase per line). - The total number of employees in Wireline Businesses decreased by 10% (or 1,816 employees) when compared to September 1998. - As of September 30, 1999, PT managed 9.7 million clients/accesses, of which 7.2 million were domestic customers and 2.5 million international. This corresponds to 4.3 million in fixed telephone services, 4.3 million in cellular businesses and 719 thousand in the cable television business. - Since September 30, 1998, TMN's customer base has increased by 65.4% with 765 thousand net adds, Telesp Telesp - Telecomunicações de São Paulo S.A. (NYSE: TSP) is a telecommunications company in São Paulo state, Brazil. The company was originally formed as part of Telebrás, the state-owned telecom monopoly at the time. Celular registered a net increase of around 783 thousand customers (up 49.2%) and TV Cabo's customer base grew by 35.4%, representing 188 thousand new clients. Each of these companies has reinforced re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. its leadership in its own market. (1) Unaudited (2) Euro 1 = PTE 200.482. (3) US$ 1 = PTE 188.370. 1. MANAGEMENT REMARKS "In the third quarter of 1999, several initiatives were implemented by PT to reinforce re·in·force v. 1. To give more force or effectiveness to something; strengthen. 2. To reward an individual, especially an experimental subject, with a reinforcer subsequent to a desired response or performance. 3. its competitiveness and position the company to take advantage of full liberalization lib·er·al·ize v. lib·er·al·ized, lib·er·al·iz·ing, lib·er·al·iz·es v.tr. To make liberal or more liberal: "Our standards of private conduct have been greatly liberalized . . . in 2000. Several subsidiary companies were created to focus on different business segments and customers: PT Multimedia, PT Innovation and PT Prime. Furthermore, this reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. enabled PT to establish strategic partnerships with Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. , SIBS (the Portuguese banking clearing house and ATM network provider) and IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) . In the short term, PT is being transformed into a holding company that will be responsible for the strategic control of the operating companies operating company A business that engages in transactions with outsiders. . A new privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned phase of PT occurred, together with a rights issue, intended to strengthen PT's capital structure while maintaining a flexible financial position. The different businesses continued to perform quite well, with the cellular business experiencing significant growth: TMN (Telecommunications Management Network) A set of international standards for network management from the ITU. It is used by large carriers such as Sprint, Verizon and AT&T. subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. base was up 65.4% to over 1.9 million. In the Multimedia arena, we acquired SAPO sapo [L.] soap; a compound of fatty acids with an alkali. , the leading Portuguese Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the portal, and launched a free Internet service An ISP that provides access to the Internet without charge to the user. The service is supported by advertising which appears on a special version of the user's browser and cannot be eliminated. NetZero (www.netzero. called NetSapo. In the wireline businesses, total traffic showed good performance with a 14% increase over the same period last year. PT's integrated and market-oriented product offerings, coupled with cost improvement measures, contributed to significant growth of Operating Revenues (+12.1%), EBITDA (+11%) and EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). (+14%), both pre-curtailment costs. These results show PT's ability to face the challenges of a changing information and communications world while creating value for shareholders." 2. THIRD QUARTER MAIN EVENTS - On July July: see month. 5, the Medi Telecom consortium led by Portugal Telecom (34.5%) and Telefonica (34.5%), and including the Moroccan groups BMCE BMCE Baptist Medical Center East (Montgomery, AL) and Afriquia, won the second GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. mobile license in Morocco Morocco, country, Africa Morocco (mərŏk`ō), officially Kingdom of Morocco, kingdom (2005 est. pop. 32,726,000), 171,834 sq mi (445,050 sq km), NW Africa. . The actual delivery of the license to the consortium, as well as payment for it, took place on August 6. - On July 12, the fourth phase of PT's privatization took place along with a share capital increase. The Portuguese State sold 25.65 million shares and, at the same time, a 10% share capital increase was implemented through the issuance of 19 million new shares with a nominal value Nominal Value The stated value of an issued security that remains fixed, as opposed to its market value, which fluctuates. Notes: When referring to fixed-income securities, the nominal value is also the face value. of Euro 5 each. - PT Multimedia was created on July 15 to incorporate PT's media and Internet businesses. PT Multimedia now oversees cable television, Interactive Digital TV, web-TV, Internet access See how to access the Internet. by high speed cable modem cable modem Modem used to convert analog data signals to digital form and vise versa, for transmission or receipt over cable television lines, especially for connecting to the Internet. , interactive communications, e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. , TV and Internet contents, as well as PT's stake in a Yellow Pages company. - PT Innovation was launched on July 21, to develop new products and services. - By the end of July, PT had successfully concluded a real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. test of its telecoms infrastructure for the year 2000 transition. The test lasted for 33 hours and involved 35 thousand clients. - On August 17, Telesp Celular launched a new pre-paid product - "Peg&Fale Fale is an islet of Nukufetau, Tuvalu. Islands and atolls of Tuvalu  Islands: Nanumanga | Niulakita | Niutao Atolls " - especially designed for the Sao Paulo Paulo is the Portuguese form of the given name Paul:
- On August 26, an agreement with Texto Editora was announced for the acquisition of the leading Portuguese Internet portal, SAPO. - On September 15, PT Prime (PT's subsidiary handling corporate clients and large accounts) and SIBS reached agreement for a commercial and strategic partnership. - An extraordinary Shareholders' Meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. was held on September 27. Shareholders approved the creation of a holding company called PT Investments, which was funded by the transfer of Portugal Telecom's holdings in other companies. - On September 27, Portugal Telecom acknowledged ICP's position regarding PT's interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. offer to other telecom operators. We should also mention some events which took place after the end of the third quarter: - Telepac (networking) TELEPAC - The Swiss PTT X.25 network. , PT's ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. , announced the launch of NetSapo, which began offering free Internet access on October October: see month. 15. - Portugal Telecom's local switching digitalization digitalization /dig·i·tal·iza·tion/ (dij?i-tal-i-za´shun) the administration of digitalis or one of its glycosides in a dosage schedule designed to produce and then maintain optimal therapeutic concentrations of its cardiotonic reached 100%. 3. CONSOLIDATED RESULTS AND MARGINS Consolidated Net Income for the nine month period ended September 30, 1999 amounted to Euro 295.1 million (PTE 59.2 billion or US$ 314.1 million) and Earnings Per Share (or ADS(4)) reached Euro 1.41 (PTE 283 or US$ 1.50). Investments in Brazil had an increased impact of PTE 13.8 billion compared to the same period last year (which basically included one quarter impact only, amounting to PTE 6.3 billion). Excluding this additional impact, as well as the exceptional effect of the work force reduction (an additional PTE 13.3 billion over the nine-month period ended September 1998) and the positive effect of the gain resulting from the capital increase of TV Cabo Portugal (PTE 16.9 billion), Consolidated Net Income for the period would have reached PTE 69.4 billion, representing a 13.5% increase over the same period last year. (4) Each ADS represents one ordinary share. -0-
PORTUGAL TELECOM AND SUBSIDIARIES
(amounts stated in millions of Portuguese Escudos - PTE - and
millions of Euros- Euro, excluding (a))
----------------------------------------------------------------------
Nine month period ended Sept. 99 Sept. 98
%
---------- ---------- ------------
Euro PTE PTE Change
----------------------------------- ---------- ------------ ----------
Operating Revenues 2,340.9 469,301 418,745 12.1
EBITDA pre
curtailment cost 1,141.6 228,870 206,129 11.0
EBITDA post
curtailment cost 1,037.3 207,967 198,898 4.6
Operating Income
pre curtailment
cost 681.9 136,705 119,954 14.0
Operating Income
post curtailment
cost 577.6 115,802 112,723 2.7
Operating Income
pre curtailment
cost and excluding
Telesp Celular 653.3 130,977 119,954 9.2
Extraordinary Items
(TV Cabo) 84.4 16,925 0 -
Net Income 295.1 59,171 61,095 (3.2)
Adjusted Net
Income (1) 346.0 69,362 61,095 13.5
----------------------------------- ---------- ------------ ----------
Earnings Per Share
(a) (Euro/PTE) 1.41 283 322 (12.1)
----------------------------------- ---------- ------------ ----------
Adjusted Earnings
Per Share (a)(Euro/PTE) 1.66 332 322 3.1
----------------------------------- ---------- ------------ ----------
Margins (a)
EBITDA Margin pre
curtailment cost (%) - 48.8 49.2 (0.6)
Operating Margin pre
curtailment cost (%) - 29.1 28.6 0.3
EBITDA/Net Interest
(number of times) - 8.3 11.3 (26.5)
----------------------------------------------------------------------
EBITDA = Operating Income + Depreciation and Amortization
EBITDA Margin = EBITDA / Consolidated Operating Revenues
Operating Margin = Operating Income / Consolidated Operating Revenues
(1) Adjusted by the increased impact of Brazilian investments (PTE
13.8 billion), by the increased effects of the workforce reduction
(PTE 13.3 billion) and by the financial gain from TV Cabo share
capital increase (PTE 16.9 billion).
Consolidated EBITDA pre-curtailment costs amounted to Euro 1,141.6 million (PTE 228.9 billion or US$ 1,215.0 million), equivalent to a 11% increase. Extraordinary Items reflect the Euro 84 million (PTE 16.9 billion or US$ 90 million) gain from the share capital increase of TV Cabo Portugal (entirely subscribed Subscribed Newly issued securities that an investor has agree to, or stated his intent to, buy in a public offering prior to the issue date. When an investor uses rights, he expects to own the designated number of shares they have subscribed to once the offering is completed. by third parties). Brazil's investment impact, amounting to PTE 20.1 billion, is reflected in both Interest and Related Expenses (and Income), and Equity in Earnings of Affiliated Companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. , other than consolidated operating income from Telesp Celular. This includes related loan interests, equity accounting of stakes in CRT (1) (C RunTime) See runtime library. (2) (Cathode Ray Tube) A vacuum tube used as a display screen in a computer monitor or TV. The viewing end of the tube is coated with phosphors, which emit light when struck by electrons. and Telesp (fixed) and the amortization of goodwill concerning these two companies, as well as the goodwill amortization of Telesp Celular. 4. CONSOLIDATED OPERATING REVENUES Consolidated Operating Revenues totaled Euro 2,340.9 million (PTE 469.3 billion or US$ 2,491.4 million), which represents an increase of 12.1% compared to the same period last year. -0-
CONSOLIDATED OPERATING REVENUES (1)
(amounts stated in billions of Portuguese Escudos - PTE -
and millions of euros- Euro)
------------------------------------------------------------------
Nine month period ended Sept. 99 Sept. 98
% Change
---------- --------- ----------
Euro PTE PTE
------------------------------------- --------- ---------- ---------
1. DOMESTIC BUSINESSES 2,155.4 432.1 406.7 6.2
1.1. Wireline Businesses,
of which: 1,541.5 309.1 317.6 (2.7)
Fixed Telephone
Services (2) 1,164.7 233.5 249.3 (6.3)
Wholesale (3) 132.9 26.6 21.1 26.2
Data and Integrated
Solutions (4) 102.2 20.5 19.6 4.4
Directories 91.7 18.4 18.1 1.8
Sales and
Other Revenues 50.0 10.0 9.4 6.1
1.2. Cellular Business,
of which: 506.7 101.6 75.8 33.9
Services Rendered 425.1 85.2 65.0 31.1
Sales 81.6 16.4 10.9 50.7
1.3. Cable Television 101.0 20.2 12.4 62.7
1.4. Other Businesses 6.2 1.2 0.9 42.7
------------------------------------- --------- ---------- ---------
2. INTERNATIONAL
ACTIVITIES 185.5 37.2 12.0 209.3
2.1. Brazil (5) 155.1 31.1 10.5 197.4
2.2. Other Countries (6) 30.4 6.1 1.6 288.5
------------------------------------- --------- ---------- ---------
TOTAL 2,340.9 469.3 418.7 12.1
------------------------------------- --------- ---------- ---------
(1) Does not include intra-group transactions.
(2) Does not include interconnection traffic.
(3) Includes interconnection traffic, leased lines to other operators
and telecast.
(4) Includes data communications, leased lines to end customers and
Internet.
(5) Includes Mobitel and, in 3Q99, 12.6% economic interest in Telesp
Celular.
(6) In 3Q98, it does not include Cabo Verde Telecom.
Cellular and cable television businesses continued to show significant growth (33.9% and 62.7% respectively). This increase reflects PT's commercial initiatives and its position as the only integrated telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. provider in Portugal. Internet revenues showed significant growth, with an increase of 68.2%, while wholesale revenues rose 26.2%. During the third quarter, PT increased its stake in Telesp Celular, by acquiring a 2.6% economic interest in Telesp Celular (operating company), thus consolidating 12.6% of this company as of September 30, 1999. By the end of the third quarter, international businesses represented around 8% of consolidated operating revenues, compared to 3% in the same period last year. DOMESTIC WIRELINE BUSINESSES For detailed information concerning this business area, see Table 3. Total traffic increased by 14.0% between September 30, 1998 and 1999, to 12,114 million minutes. Traffic originating in the fixed network grew by 11.5% relative to the same period last year, with domestic and international components growing by 11.7% and 6.2%, respectively. Usage per fixed line increased by 8.7% when compared to same period last year, reaching 9.3 minutes per day per line (8.6 minutes per day per line in nine-month period last year). Fixed-mobile traffic (+48%) and Internet traffic Internet traffic is the flow of data around the Internet. It includes web traffic, which is the amount of that data that is related to the World Wide Web, along with the traffic from other major uses of the Internet, such as electronic mail and peer-to-peer networks. (+212%) were the main drivers of this growth. Internet traffic represented 17.8% of traffic originated in the fixed network during the first nine months of 1999. -0-
FIXED NETWORK USAGE
(Millions of minutes, excluding(a))
--------------------------------------- ------------- -----------
Nine month period ended Sept. 99 Sept. 98 % Change
--------------------------------------- ------------- -----------
Total Traffic, of which: 12,114 10,622 14.0
Incoming Traffic 993 863 15.0
Transit Traffic 557 284 96.1
Outgoing Traffic 10,564 9,475 11.5
--------------------------------------- ------------- -----------
Outgoing Traffic
per Line (a) (minutes) 2,543 2,339 8.7
Outgoing Traffic per
Line per Day (a) (minutes) 9.3 8.6 8.7
--------------------------------------- ------------- -----------
FIXED TELEPHONE SERVICES PT continued to market new and tailored products to both residential and corporate clients. Products for residential customers, such as "PT Comfort 2" and voice mail showed strong demand. Corporate customers are offered a diversified diversified (di·verˑ·s and integrated list of products and services, which are now marketed by PT Prime. Together with these offerings, a new price package of PTE 17 per minute to every destination in the country was launched in October, reinforcing re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. PT's competitiveness in this market segment. The number of main lines increased to 4.195 million (+2.6%) fuelled by the increase in ISDN ISDN in full Integrated Services Digital Network Digital telecommunications network that operates over standard copper telephone wires or other media. accesses (+53.1%), which reached 428 thousand lines by the end of September 1999 (or 10.2% of the total number of lines). In October 1999 local switching achieved 100% digitalization. PT's rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting policy continued through price cuts in national trunk A communications channel between two points. It generally refers to a high-bandwidth, fiber-optic line between telephone switching centers (central offices). Telephone "trunks" handle thousands of simultaneous voice and data signals, whereas telephone "lines" are the wires from the calls (-12.6% in average) and in international calls (-20.7% in average). During the nine-month period ended September 30, 1999, the price basket basket filled with treats, representative of feast on Easter Sunday. [Folklore: Misc.] See : Easter decreased by 2.8% (-5.4% in real terms) compared to the 1998 period. -0-
FIXED TELEPHONE SERVICES CONSOLIDATED
OPERATING REVENUES (amounts stated in millions of
Portuguese Escudos - PTE - and millions of Euros- Euro)
---------------------------------------------- ------------ ----------
Nine month period ended Sept. 99 Sept. 98
--------------------- ------------ %
Euro PTE PTE Change
--------------------------------- ------------ ------------ ----------
DOMESTIC SERVICES 959.9 192,437 194,383 (1.0)
Fixed Fees 432.7 86,741 84,860 2.2
Traffic 527.2 105,696 109,523 (3.5)
Local 212.5 42,611 41,309 3.2
Regional 134.2 26,903 27,342 (1.6)
Trunk 180.5 36,181 40,871 (11.5)
INTERNATIONAL SERVICES 204.9 41,074 54,936 (25.2)
--------------------------------- ------------ ------------ ----------
TOTAL 1,164.8 233.511 249,319 (6.3)
--------------------------------- ------------ ------------ ----------
WHOLESALE The total number of leased lines A private communications channel leased from a common carrier. Most digital lines require four wires (two pairs) for full-duplex transmission. (communications, networking) leased line to telecoms operators (64 KBPS equivalent) increased by 67% compared to September 30, 1998, reflecting both the quality of service and the pricing strategy. In the last twelve months, prices decreased an average of 16.4%. Interconnection traffic grew 103% domestically and 70% internationally (45% in outgoing and 99% in incoming Incoming is a 3-D shooter developed by Rage Software and published by Interplay. The PC version was released in late 1998, and the Dreamcast version, a launch title for the console, was released in 1998 in Japan and in 1999 in the rest of the world. ), reflecting PT's pricing policy. -0-
WHOLESALE CONSOLIDATED OPERATING REVENUES
(amounts stated in millions of Portuguese Escudos - PTE -
and millions of Euros- Euro)
--------------------------------------------- ------------- ----------
Nine month period ended Sept. 99 Sept. 98
%
--------------------- -------------
Euro PTE PTE Change
-------------------------------- ------------ ------------- ----------
Traffic 48.8 9,777 8,263 18.3
Leased Lines 54.7 10,975 7,042 55.9
Telecast 29.4 5,884 5,805 1.4
-------------------------------- ------------ ------------- ----------
TOTAL 132.9 26,636 21,110 26.2
-------------------------------- ------------ ------------- ----------
DATA AND INTEGRATED SOLUTIONS As of September 30, 1999, the total number of Internet accesses totaled 163 thousand, a 65% increase in the last twelve-month period, showing further signs of consolidating market leadership. NetSapo was launched on October 15, offering free Internet access. As of October 21, this service already had 12,000 applications from existing clients and 2,000 from new clients, in addition to 5,500 mailbox A simulated mailbox in the computer that holds e-mail messages. Mailboxes are stored on disk as a file of messages, a database of messages or as an individual file for each message. The standard mailboxes are usually In, Out, Trash and Junk (Spam). requests. Leased lines to end users also showed good performance, totaling 17,500 at the end of September 1999. This performance was supported by the usage of digital lines, which increased by 38% in the last twelve months. Total data customers grew by 4.9%, with a 77% increase in frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. . DATA AND INTEGRATED SOLUTIONS CONSOLIDATED OPERATING REVENUES (amounts stated in millions of Portuguese Escudos Noun 1. Portuguese escudo - formerly the basic monetary unit of Portugal; equal to 100 centavo escudo centavo - a fractional monetary unit of several countries: El Salvador and Sao Tome and Principe and Brazil and Argentina and Bolivia and Colombia and Cuba - PTE - and millions of euros- Euro) ---------------------------------------------- ----------- ----------- Nine month period ended Sept. 99 Sept. 98 % ----------------------- ----------- Euro PTE PTE Change ---------------------------------- ----------- ----------- ----------- Data 40.2 8,055 8,336 (3.4) Leased Lines 41.7 8,371 8,874 (5.7) Internet 20.3 4,071 2,420 68.2 ---------------------------------- ----------- ----------- ----------- TOTAL 102.2 20,497 9,630 4.4 ---------------------------------- ----------- ----------- ----------- DOMESTIC CELLULAR BUSINESS For detailed information concerning this business area, see Table 4. At the end of September 1999, the total number of TMN subscribers was 1,934 thousand, an increase of more than 65% since the end of the third quarter in 1998. Net additions since December December: see month. 31, 1998 were around 509 thousand, representing an increase of 24.8% over the first 9 months of 1998. TMN added 227 thousand new customers in the third quarter of 1999 as a result of an aggressive marketing approach based on price and quality of service, as well as on product innovation. Two new services launched in this quarter were automatic roaming The ability to use a communications device such as a cellphone or PDA and be able to move from one cell or access point to another without losing the connection. service to prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. customers on Telefonica's network and SMS (1) (Storage Management System) Software used to routinely back up and archive files. See HSM.(2) (Systems Management Server) Systems management software from Microsoft that runs on Windows NT Server. service, also for prepaid customers. ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. in the third quarter was PTE 5,982, reflecting an increase of 6.5% from first half of 1999 (PTE 5,618). CCPU CCPU Continuous Computing Corporation (stock symbol) CCPU Cash Cost Per User (Sprint) CCPU China Criminal Police University CCPU Cryptographic Central Processing Unit amounted to PTE 3,339, reflecting a 19.1% decrease over the same period last year. Capital expenditures totaled PTE 36.3 billion, up 35.9% from the first nine months of 1998. This was a result of the increase in service coverage and quality, following the installation of a significant number of BTS's both in the GSM900 and GSM1800 frequencies. CABLE TELEVISION For detailed information concerning this business area, see Table 5. In the first nine months of 1999, the number of subscribers of TV Cabo increased by 122 thousand. On September 30, 1999, the number of TV Cabo subscribers was 719 thousand, up 35.4% over one year ago. At the end of the third quarter of 1999, there were 1,8 million homes passed. As of September 30, 1999, premium service penetration The successful unauthorized breach of a security perimeter. See penetration test. , both cable and satellite, was 33.7% compared to 8.8% at the end of the third quarter of 1998. As part of PT Multimedia business development strategy, TV Cabo will launch the "Net Cabo" service in November November: see month. 1999 and "Net TV" in 2000, in association with Microsoft. TELESP CELULAR For detailed information concerning this business area, see Table 6. Telesp Celular estimates that the total cellular market in Sao Paulo reached roughly 3.65 million subscribers as of September 30, 1999, equivalent to a total penetration rate of 10.2%. Telesp Celular's total number of subscribers increased by 783 thousand in the last 12 months to 2,376 thousand. Net adds in the first nine months of 1999 were 572 thousand, up 83.9% from the corresponding period in 1998. Telesp Celular estimates that its market share is around 65%. Of the total number of Telesp Celular subscribers, 35% are using the digital network. At the end of the third quarter, prepaid customers totaled 356 thousand, representing about 15% of total customer base. Prepaid product "Baby" was launched last May followed by "Peg&Fale" in August. 5. CONSOLIDATED OPERATING COSTS operating costs npl → gastos mpl operacionales PT continued its efforts in the third quarter to further improve efficiency and productivity, particularly in the Wireline Businesses. At the end of the third quarter 1999, Consolidated Operating Costs totaled Euro 1,763.2 million (PTE 353.5 billion or US$ 1,876.6 million), compared to Euro 1,526.4 million on September 30, 1998. Excluding the increased cost of workforce reduction efforts in the first nine months of 1999 (PTE 13.7 billion), consolidated operating costs would have increased by 11.0%, compared to the 12.1% growth in consolidated operating revenues. Taking out the increase in curtailment costs and the impact of consolidating Telesp Celular, consolidated operating costs would have increased by 3.9%, compared to a 5.8% increase in revenues. Wages and Salaries rose by Euro 9.3 million to Euro 389.5 million (PTE 78.1 billion or US$ 414.5 million), representing 16.6% of consolidated operating revenues, down from 18.2% in the first nine months of 1998. This reflects an increase in salaries and other employee-related compensation plans, as well as the impact of the Telesp Celular consolidation, offset by a reduction in headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. . Post-retirement Benefits totaled Euro 174.0 million (PTE 34.9 billion or US$ 185.2 million), reflecting the increase in curtailment costs (PTE 13.7 billion) associated with pre-retirement and early retirement of employees. The increases in Taxes other than Income Taxes (an additional PTE 6.7 billion) and in Provisions for Doubtful Receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , Inventories and Other (up PTE 2.8 billion) was mainly due to the impact of the proportional proportional values expressed as a proportion of the total number of values in a series. proportional dwarf the patient is a miniature without disproportionate reductions or enlargements of body parts. consolidation of Telesp Celular. As a result of investments to prepare for full market liberalization, and the growth of capital expenditure in domestic cellular business, as well as the effects of the proportional consolidation of Telesp Celular, Depreciation and Amortization increased by PTE 6.0 billion. The increase in Costs of Products Sold (PTE 13.2 billion) reflects the increase in equipment sales, namely in the domestic cellular business. Other General and Administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. have grown by PTE 6.9 billion, due to an increase in subcontracts and specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. work (PTE 7 billion), offset by a decrease in commissions paid (PTE 1 billion). At Portugal Telecom, the parent company, initiatives aimed at reducing costs already shown a significant impact on results (see Table 2). Other General and Administrative expenses decreased by 6.6%, Costs of Telecommunications by 11.7% and Amortization by 6.1%. Wages and Salaries, up 2.6%, reflect an increase in salaries and other employee-related compensation programs, partially offset by a reduction in the number of employees. There were 1,613 fewer employees as of September 30, 1999, compared to September 30, 1998. Excluding curtailment costs, operating costs performance, down 6.4%, would have resulted in an Operating Income increase of 11.6%. 6. CONSOLIDATED BALANCE SHEET consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. AND FINANCIAL STRUCTURE -0-
PORTUGAL TELECOM, S.A. AND SUBSIDIARIES
(amounts in millions of Portuguese Escudos - PTE, millions of Euros -
Euro and millions of US dollars - US$)
----------------------------------------------------------------------
Sept. 30, 99 Dec. 31, 98 Difference
------------------------------------------------
------------------------------------------------
US$ EUR PTE PTE PTE
----------------------------------------------------------------------
----------------------------------------------------------------------
Current Assets: 1,151.7 1,082.1 216,940 434,400 (217,460)
Investments, net 1,522.7 1,430.7 286,822 262,065 24,757
Fixed Assets, net 3,939.3 3,701.3 742,040 737,178 4,862
Intangible
Assets - Post 337.1 316.7 63,500 68,720 (5,220)
Retirement Benefits
Intangible Assets,
net - Other 1,389.0 1,305.1 261,639 348,288 (86,649)
Other Non-Current
Assets, net 53.2 49.9 10,014 9,305 709
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Assets 8,392.8 7,885.8 1,580,955 1,859,956 (279,001)
----------------------------------------------------------------------
Current Liabilities 1,968.0 1,849.1 370,712 989,470 (618,758)
Medium and
long-term Debt 2,663.5 2,502.6 501,721 203,880 297,841
Accrued Post
Retirement Liability 866.7 814.3 163,259 166,356 (3,097)
Deferred Income - Post 38.3 35.9 7,207 7,800 (593)
Retirement Benefits
Other Non-Current
Liabilities 209.1 196.4 39,382 52,343 (12,961)
Total Liabilities 5,745.5 5,398.4 1,082,281 1,419,849 (337,568)
Minority Interests 48.6 45.7 9,161 6,016 3,145
Total Equity 2,598.7 2,441.7 489,513 434,092 55,421
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Liabilities
and Equity 8,392.8 7,885.8 1,580,955 1,859,956 (279,001)
----------------------------------------------------------------------
The decrease registered in Investment and Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. reflects the effect of the Brazilian Real The real (IPA: [xe'aw] or [ʁe'aɫ], symbol: R$, ISO 4217 code: BRL, plural: reais) is the currency of Brazil. It is also the name of the earliest Brazilian currency (see from the Colonial period to 1942. devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. , partially offset by a reduction in corresponding liabilities. This resulted in an equity reduction of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. Euro 552.5 million (PTE 110.8 billion or US$ 588 million). The decrease registered in Current Assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. (PTE 217.5 billion) resulted mainly from PT's decision to repay in advance the BNDES BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Development Bank) BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brasil) loans, using the Brazilian State notes subscribed by Portugal Telecom for this purpose in October 1998. This also resulted in a reduction in Liabilities. The share capital increase that took place on July 12, 1999 amounted to PTE 143 million. The proceeds were used as follws: (1) to repay a portion (US$ 280 million) of the short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. incurred to finance Brazilian investments; (2) to subscribe To sign up for a service. Contrast with unsubscribe. See opt-in and syndication format. (messaging) subscribe - To request to receive messages posted to a mailing list or newsgroup. In contrast to the mundane use of the word this is often free of charge. a share capital increase (US$ 371.5 million) in SP Telecomunicacoes Holding, in order to repay a loan related to the acquisition of Telesp (fixed); and (3) to partially finance the investment in a GSM license in Morocco. By September 30, 1999, Equity represented 31% of total Assets, compared to 23.3% on December 31, 1998. -0-
7. INDEBTNESS
DEBT STRUCTURE
(amounts stated in millions of Portuguese Escudos - PTE -
and millions of euros- Euro)
----------------------------------------------------------------------
Sept. 30, 99 Dec. 31, 98 %
------------------------- -------------
Euro PTE PTE Change
--------------------------------- ------------- ------------- --------
Domestic Indebtedness,
of which: 686.0 137,519 63,400 116.9
Short Term 370.2 74,217 423 17,445.4
Medium and
Long Term 315.8 63,303 62,976 0.5
Foreign Indebtedness,
of which: 2,593.9 520,039 920,584 (43.5)
Short Term 407.1 81,620 779,680 (89.5)
Medium and
Long Term 2,186.8 438,418 140,904 211.1
Total Indebtedness 3,279.9 657,558 983,983 (33.2)
--------------------------------- ------------- ------------- --------
Cash and Short
Term-Investments 158.2 31,721 254,122 (87.5)
--------------------------------- ------------- ------------- --------
Net Debt 3,121.7 625,837 729,861 (14.3)
--------------------------------- ------------- ------------- --------
On September 30, 1999, the gearing ratio Gearing Ratio A general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. Gearing is a measure of financial leverage, demonstrating the degree to which a firm's activities are funded by owner's funds versus creditor's funds. , equal to net debt/(net debt+equity), was 56.1% (62.7% on December 31, 1998), reflecting the share capital increase that took place on July 12. During the first half of 1999, PT implemented a number of refinancing Refinancing An extension and/or increase in amount of existing debt. initiatives, including loans denominated in Euros (the Eurobonds and the convertible bonds) that were covered by swap agreements into US dollars, in order to hedge Brazilian investments. Decrease in Net Debt mainly reflects the use of part of the proceeds from the TV Cabo and Portugal Telecom share capital increases. The remaining debt from the US dollar-denominated loan contracted in September 1998, amounting to approximately US$ 337.3 million (PTE 63.4 billion), will be paid using part of the proceeds from the forecasted sale of shares of PT Multimedia. By the end of the third quarter, the average cost of debt was around 5.15%, which compares with 6.73% by the end of 1998, reflecting the above-mentioned A`bove´-men`tioned a. 1. Mentioned or named before; aforesaid; mentioned or named earlier in the same text (in written documents). Adj. 1. refinancing initiatives together with interest rates evolution. As of September 30, 1999, total dollar-denominated debt represented about 62% of the total debt portfolio (approximately PTE 410 billion), corresponding to 100% hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. of all Real-denominated assets. 8. INVESTMENTS Investments have decreased significantly, down 67.3% compared to the first nine months of 1998, reflecting both the decreases in financial investments in the period and in capital expenditure in the wireline businesses. -0-
INVESTMENTS
(amounts stated in billions of Portuguese Escudos - PTE -
and millions of Euros- Euro)
---------------------------------------------- ------------ ----------
Nine month period ended Sept. 99 Sept. 98 % Change
---------------------- ------------
Euro PTE PTE
---------------------------------- ----------- ------------ ----------
Wireline Businesses 274.2 55.0 64.7 (15.0)
Domestic Cellular
Business 180.9 36.3 27.0 35.9
Cable TV Businesses 30.1 6.0 8.8 (31.3)
Brazil 484.0 97.0(1) 583.6(2) (83.4)
Others 177.8 35.7(3) 19.1(4) 86.3
--------------------------------- ------------ ----------- -----------
TOTAL 1,147.0 230.0 702.9 (67.3)
--------------------------------- ------------ ----------- -----------
(1) Includes the subscription of SPTH and CRT share capital increases
(PTE 71.1 billion and PTE 2.1 billion, respectively), the
acquisition of Telesp Celular shares (PTE 14.3 billion) and PT's
proportion in Telesp Celular investment (PTE 9.2 million).
(2) Includes the acquisition of stakes in CRT (PTE 68.9 billion),
Telebras (PTE 13.8 billion) and TBS (PTE 115.8 billion) and
Telesp Celular goodwill (PTE 341.5 billion).
(3) Includes the investment in Medi Telecom (PTE 33.2 billion).
(4) Includes the acquisition of Telefonica shares (PTE 17.5 billion).
9. EMPLOYEES For the 12-month period between September 30, 1998 to September 30, 1999, total group employees in service decreased by 971. In the wireline businesses, the decrease amounted to 1,816 employees, of which 1,851 were in fixed telephone services (-10.6%). -0-
EMPLOYEES ENGAGED BY BUSINESS AREA AND PRODUCTIVITY RATIOS
----------------------------------------------------------------------
Sept. 30, Sept. 30, Change %
1999 1998
----------------------------------------------------------------------
Group Employees (in service) 20,513 21,484 (971) (4.5)
Domestic Businesses 18,237 19,414 (1,177) (6.1)
Wireline Businesses 16,149 17,965 (1,816) (10.1)
Cellular Business 794 695 99 14.2
Cable TV Businesses 827 598 229 38.3
Other Businesses 467 156 311 199.4
International Market 2,276 2,070 206 10.0
----------------------------------------------------------------------
Employees engaged in
the Fixed Telephone Service - 15,621 17,472 (1,851) (10.6)
Portugal
Employees engaged in Fixed
Telephone and Cellular 16,415 18,167 (1,752) (9.6)
Services - Portugal
----------------------------------------------------------------------
Fixed main lines per
employee - Portugal 269 234 35 15.0
Cellular Accesses per
employee - Portugal 2,436 1,682 754 44.8
Fixed and Cellular
Accesses per
employee - Portugal 373 289 84 29.1
----------------------------------------------------------------------
10. TRANSITION TO THE EURO AND YEAR 2000 Since 1997, PT has been taking the necessary steps towards the introduction of the Euro The introduction of the euro took place principally between 31 December 1998, when the exchange rates between the euro and legacy currencies in the Eurozone became fixed, and early 2002, when euro notes and coins were introduced and the legacy currencies withdrawn. and the transition to the year 2000. With regards to the Euro, since January January: see month. 1999, information systems have been adapted and employee-specific training programs have been implemented, to accept payments in Euros. A dual price system on the commercial network is in place to include the corresponding Euro amounts on invoices. It is also possible to deal with suppliers in Euros. By July 4, 1999, PT had re-denominated and redefined its share capital into Euros, becoming one of the first major listed companies listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → on the Lisbon Stock Exchange Lisbon Stock Exchange (LSE) Stock exchange trading stocks, bonds, and unit trusts. The BVL general index is the exchange's official index. to conclude this process. Until January 1, 2002, PT will adjust its tariffs This is a list of tariffs and trade legislation:
Regarding the Year 2000 transition, as of September 30, 1999, PT had substantially completed its Year 2000 preparedness pre·par·ed·ness n. The state of being prepared, especially military readiness for combat. Noun 1. preparedness - the state of having been made ready or prepared for use or action (especially military action); "putting them activities, thereby strengthening its confidence in reaching its goal of providing customers with normal service levels during and after the new year transition. Progress toward completion of all activities, except those concerning compliance and testing of third-party (suppliers) equipment and products, was 95% completed. Unfinished tasks were the result of unsatisfactory answers given by a small number of suppliers. None of these is business mission-critical. Portugal Telecom Group's Year 2000 transition costs amount to PTE 4 billion. With many of Portugal Telecom's Year 2000 efforts nearing completion, we are now looking at providing a period of stability in the network before the New Year, by monitoring and cautiously cau·tious adj. 1. Showing or practicing caution; careful. 2. Tentative or restrained; guarded: felt a cautious optimism that the offer would be accepted. planning and testing software upgrades into our network and its components. This is meant to minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability and reduce any risks associated with transition from December 31, 1999 to January 1, 2000. Portugal Telecom believes that the primary Year 2000 risks are related to external dependencies, including: - Third-party supply breakdowns or failures of international systems or services operators; - Potential public network congestion In data networking and queueing theory, network congestion occurs when a link or node is carrying so much data that its quality of service deteriorates. Typical effects include queueing delay, packet loss or the blocking of new connections. due to increased demand over New Year's; - Internal or external small failures occurring simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics that may have an amplified effect. To deal with these potential problems, PT has been implementing contingency plans A plan involving suitable backups, immediate actions and longer term measures for responding to computer emergencies such as attacks or accidental disasters. Contingency plans are part of business resumption planning. since the second Quarter of 1999 for all processes and mission-critical functions, in order to integrate the year 2000 issue in our existing network and infrastructure contingency plans. With regard to potential risks and uncertainties associated with the change over to the Year 2000, PT has completed negotiations with an insurance company to provide coverage through an Overall Insurance Program. This information is also available on PT's website www.telecom.pt. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such 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 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. ---------------------------------------------------------------------- Portugal Telecom is listed on the Lisbon and New York Stock Exchanges New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. and traded on London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. SEAQ SEAQ See: Stock Exchange Automated Quotation System International. Information may be accessed on the Reuters Reuters British cooperative news agency. Founded in 1851 by Paul Julius Reuter, it was initially concerned with commercial news but began to serve a growing newspaper clientele after the London Morning Advertiser subscribed in 1858. 2000 Service under the symbols PT and PTCO.IN, on Bloomberg Bloomberg A major global provider of 24-hour financial news and information including real-time and historic price data, financials data, trading news and analyst coverage, as well as general news and sports. and Quotron under the symbol PT. ---------------------------------------------------------------------- TABLES TO FOLLOW: Table 1: Consolidated Profit and Loss Statement for the Nine-month Period ended September 30, 1999 and 1998 Table 2: Stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." Profit and Loss Statement for the Nine-month Period ended September 30, 1999 and 1998 Table 3: Wireline Businesses - Portugal Table 4: Cellular Business - Portugal Table 5: Cable TV Business - Portugal Table 6: Cellular Business - Brazil -0-
TABLE 1: CONSOLIDATED PROFIT AND LOSS STATEMENT FOR
THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998
PORTUGAL TELECOM, S.A. AND SUBSIDIARIES
(amounts in millions of Portuguese Escudos - PTE, millions of
Euros - Euro and millions of US dollars - US$)
----------------------------------------------------------------------
SEPTEMBER 30, 1999 SEPT. 30, % Change
1998
----------------------------------------------------
US$ EUR PTE PTE
----------------------------------------------------------------------
Consolidated Operating
Revenues, of which: 2,491.4 2,340.9 469,301 418,745 12.1
----------------------------------------------------------------------
Services rendered 2,248.5 2,112.7 423,552 382,747 10.7
Sales of merchandise
and products 145.2 136.5 27,359 17,929 52.6
Telephone directory 97.6 91.7 18,390 18,069 1.8
----------------------------------------------------------------------
Operating Costs and
Expenses, of which: 1,876.6 1,763.2 353,499 306,022 15.5
----------------------------------------------------------------------
Wages and salaries 414.5 389.5 78,087 76,227 2.4
Post retirement
benefits, of which: 185.2 174.0 34,888 21,458 62.6
Normal cost for
the period 74.2 69.8 13,985 14,227 (1.7)
Curtailment costs
(early and
pre-retirements) 111.0 104.3 20,903 7,231 189.1
Depreciation and
amortization 489.3 459.7 92,165 86,175 7.0
Other general and
administrative 291.4 273.8 54,890 47,972 14.4
Costs of
telecommunications 127.2 119.5 23,959 23,353 2.6
Costs of products sold 169.5 159.3 31,936 18,777 70.1
Marketing and publicity 51.6 48.5 9,723 9,585 1.4
Provision for doubtful
receivables, inventories
and other 46.7 43.9 8,793 5,978 47.1
Others 101.2 95.1 19,058 16,497 15.5
----------------------------------------------------------------------
Operating Income 614.8 577.6 115,802 112,723 2.7
----------------------------------------------------------------------
Operating Income without
Curtailment 725.7 681.9 136,705 119,954 14.0
----------------------------------------------------------------------
Other Expenses (Income),
net of which: 116.0 109.0 21,857 17,020 28.4
----------------------------------------------------------------------
Interest and related
expenses 320.9 301.6 60,456 22,888 164.1
Interest and related
income (145.5) (136.7) (27,411) (5,483)(399.9)
Losses on sales and
disposals of fixed
assets, net 1.5 1.4 285 2,903 (90.2)
Extraordinary Items
(gains on sale of
TV Cabo Portugal (89.8) (84.4) (16,925) 0 -
shares)
Others 28.9 27.2 5,450 (3,288) 265.8
----------------------------------------------------------------------
Income Before Income Taxes 498.7 468.6 93,945 95,703 (1.8)
----------------------------------------------------------------------
Provision for income
taxes (183.3) (172.2) (34,519) (34,512) 0.0
Loss/(Income) applicable
to minority interests (1.4) (1.3) (256) (96)(166.8)
----------------------------------------------------------------------
Consolidated Net Income
for the Period 314.1 295.1 59,171 61,095 (3.1)
----------------------------------------------------------------------
-0-
TABLE 2: STAND-ALONE PROFIT AND LOSS STATEMENT
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND 1998
PORTUGAL TELECOM, S.A.
(Stand Alone Accounts, includes intra-group transactions)
(amounts in millions of Portuguese Escudos - PTE,
millions of Euros - Euro and millions of US dollars - US$)
----------------------------------------------------------------------
SEPTEMBER 30, 1999 SEPT. 30, % Change
1998
-----------------------------------
US$ EUR PTE PTE
----------------------------------------------------------------------
Operating Revenues,
of which: 1,603.7 1,506.8 302,088 305,128 (1.0)
----------------------------------------------------------------------
Services rendered 1,471.8 1,382.9 277,239 281,526 (1.5)
Sales of merchandise
and products 34.3 32.2 6,459 5,529 16.8
Telephone directory 97.6 91.7 18,390 18,073 1.8
----------------------------------------------------------------------
Costs and Expenses,
of which: 1,169.9 1,099.3 220,380 220,807 (0.2)
----------------------------------------------------------------------
Wages and salaries 328.7 305.7 61,920 60,370 2.6
Post retirement benefits,
of which: 167.0 156.9 31,458 18,643 68.7
Normal cost for
the period 61.1 57.4 11,500 11,900 (3.4)
Curtailment costs
(early and
pre-retirements) 106.0 99.6 19,958 6,743 196.0
Depreciation and
amortization 355.4 333.9 66,947 71,291 (6.1)
Other general and
administrative 119.5 112.3 22,519 24,099 (6.6)
Costs of
telecommunications 126.9 119.3 23,911 27,070 (11.7)
Costs of products sold 48.7 30.8 6,174 5,008 23.3
Marketing and publicity 14.7 13.8 2,776 3,727 (25.5)
Provision for doubtful
receivables,
inventories and other 17.8 16.7 3,353 2,859 17.3
Others 7.0 6.6 1,322 7,740 (82.9)
----------------------------------------------------------------------
Operating Income 433.8 407.6 81,708 84,321 (3.1)
----------------------------------------------------------------------
Operating Income
without Curtailment 539.7 507.1 101,666 91,064 11.6
----------------------------------------------------------------------
Other Expenses (Income),
net of which: 8.5 8.0 1,594 (486) 428,0
----------------------------------------------------------------------
Interest and related
expenses 168.3 158.1 31,703 16,885 87.8
Interest and
related income (28.7) (27.0) (5,406) (3,303) (63.7)
Losses on sales and
disposals of fixed
assets, net 2.5 2.4 476 2,868 (83.4)
Extraordinary Items
(gains on sale of TV
Cabo Portugal shares) (89.8) (84.4) (16,925) 0 -
Others (43.8) (41.2) (8,254) (16,936) 51.3
----------------------------------------------------------------------
Income Before Income Taxes 425.3 399.6 80,114 84,807 (5.5)
----------------------------------------------------------------------
Net Income for the Period 314.0 295.1 59,157 60,871 (2.8)
----------------------------------------------------------------------
-0-
TABLE 3: WIRELINE BUSINESSES- PORTUGAL (a)
(amounts in millions of Portuguese Escudos)
======================================================================
PROFIT AND LOSS STATEMENTS Sept. 99 Sept. 98 % Change
======================================================================
Services Rendered 299,739 306,876 (2.3)
Sales 6,543 5,792 13.0
Telephone Directory 18,389 18,072 1.8
======================================================================
Operating Revenues 324,671 330,740 (1.8)
======================================================================
Wages and Salaries 68,580 67,387 1.8
Post-retirement Benefits 34,600 21,458 61.2
Normal Cost for the Period 13,697 14,227 (3.7)
Curtailment Costs (early and
pre-retirements) 20,903 7,231 189.1
Costs of Telecommunications 18,321 21,426 (14.5)
Depreciation and Amortization 72,402 76,757 (5.7)
Marketing and Publicity 4,196 4,946 (15.2)
Other Net Operating Costs 41,580 46,252 (10.1)
======================================================================
Operating Costs and Expenses 239,679 238,227 0.6
======================================================================
Operating Income 84,993 92,514 (8.1)
======================================================================
Pre-curtailment Operating Income (1) 105,896 99,745 6.2
======================================================================
Interest and Related Expenses 11,346 7,037 61.2
Interest and Related Income (3,833) (4,535) 15.5
Other Non Operating Expenses / (Income) 1,095 2,982 (63.3)
======================================================================
Income Before Income Tax 76,385 87,030 (12.2)
======================================================================
Net Income 47,574 57,032 (16.6)
======================================================================
Pre-curtailment Net Income (1) 68,477 64,263 6.6
======================================================================
FINANCIAL DATA Sept. 99 Sept. 98 % Change
======================================================================
EBITDA (Operating Income + Depreciation
and Amortization) 157,395 169,270 (7.0)
Pre-curtailment EBITDA (1) 178,298 176,501 1.0
Interest Cover (EBITDA / Net Interests) 15.8x 28.3x -
Return on Sales (Net Income / Operating
Revenues) 14.7% 17.2% -
Operating Margin (Operating Income /
Operating Revenues) 26.2% 28.0% -
Pre-curtailment Operating Margin (1) 32.6% 30.2% -
EBITDA / Operating Revenues 48.5% 51.2% -
Pre-curtailment EBITDA / Operating
Revenues (1) 54.9% 53.4% -
======================================================================
OPERATING DATA Sept. 99 Sept. 98 % Change
======================================================================
Main Lines in Service (`000),
of which: (2) 4,195 4,088 2.6
Equivalent ISDN Lines (`000) 428 280 53.1
Main Lines per 100 inhabitants 42.0 41.0 1 p.p.
Public Payphones in Service (`000) 43 39 11.0
Total Traffic (Incoming, Outgoing and
Transit)
(million of minutes) 12,114 10,622 14.0
Outgoing Traffic (million of minutes) 10,564 9,475 11.5
Local + Regional + Trunk 7,517 7,947 (5.4)
International 304 286 6.2
Internet 1,882 603 212.0
Other Operators 861 639 34.7
Outgoing Traffic per Line per Day
(minutes) 9.3 8.6 8.7
Digitalization of Local Switching (%) 99.9 93.2 6.7 p.p.
Leased Lines Equivalent 64 Kbps Capacity
(`000), of which: 420 271 55
Digital (%) 391 240 63
Internet Accesses (`000) 163.4 99.3 64.6
----------------------------------------------------------------------
(1) Excluding curtailment costs.
(2) Doesn't include leased lines, data communications accesses and
PABX's connections.
(a) Includes intra-group transactions and excludes patrimonial
equivalence effects, net interest costs related to the
investments made in Brazil and the capital gain resulting from
the issuance of shares by TV Cabo.
-0-
TABLE 4: CELLULAR BUSINESS - PORTUGAL (a)
(amounts in millions of Portuguese Escudos)
----------------------------------------------------------------------
PROFIT AND LOSS STATEMENTS Sept. 99 Sept. 98 % Change
----------------------------------------------------------------------
Services Rendered 85,556 65,257 31.1
Sales 18,471 11,985 54.1
----------------------------------------------------------------------
Operating Revenues 104,027 77,242 34.7
----------------------------------------------------------------------
Wages and Salaries 2,987 2,585 15.6
Costs of Telecommunications 18,071 13,562 33.2
Depreciation and Amortization 9,477 5,519 71.7
Own Work Capitalized 698 (5) 14060.0
Marketing and Publicity 3,889 3,242 20.0
Other Net Operating Costs 42,303 28,893 46.4
----------------------------------------------------------------------
Operating Costs and Expenses 77,425 53,796 43.9
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating Income 26,602 23,446 13.5
----------------------------------------------------------------------
Interest and Related Expenses 351 394 (10.9)
Interest and Related Income (130) (118) (10.2)
Other Non Operating
Expenses / (Income) 165 49 236.7
----------------------------------------------------------------------
Income Before Income Tax 26,216 23,121 13.4
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Income 16,021 14,754 8.6
----------------------------------------------------------------------
----------------------------------------------------------------------
FINANCIAL DATA Sept. 99 Sept. 98 % Change
----------------------------------------------------------------------
EBITDA (Operating Income +
Depreciation and Amortization) 36,079 28,965 24.6
Interest Cover
(EBITDA / Net Interests) 259.7x 145.7x -
Return on Sales
(Net Income / Operating Revenues) 15.4% 19.1% -
Operating Margin
(Operating Income / Operating Revenues) 25.6% 30.4% -
EBITDA / Operating Revenues 34.7% 37.5% -
----------------------------------------------------------------------
----------------------------------------------------------------------
OPERATING DATA Sept. 99 Sept. 98 % Change
----------------------------------------------------------------------
Cellular Telephones in Service (`000) 1,934 1,169 65.4
Net Adds(`000) 509 408 24.8
ARPU (PTE) 5,752 7,646 (24.8)
----------------------------------------------------------------------
(1) 45.7% in the 2Q99 and 38.2% in the1Q99.
(a) Includes intra-group transactions.
-0-
TABLE 5: CABLE TELEVISION BUSINESS - PORTUGAL(a)
(amounts in millions of Portuguese Escudos)
----------------------------------------------------------------------
PROFIT AND LOSS STATEMENTS Sept. Sept. %
99 98 Change
----------------------------------------------------------------------
Services Rendered 20,112 12,398 62.2
Sales 134 46 191.3
----------------------------------------------------------------------
Operating Revenues 20,246 12,444 62.7
----------------------------------------------------------------------
Wages and Salaries 1,783 1,399 27.4
Costs of Telecommunications 1,240 1,204 3.0
Depreciation and Amortization 3,780 2,857 32.3
Own Work Capitalized (300) (214) (40.2)
Marketing and Publicity 594 711 (16.5)
Other Net Operating Costs 14,507 8,317 74.4
----------------------------------------------------------------------
Operating Costs and Expenses 21,604 14,274 51.4
----------------------------------------------------------------------
Operating Income (1,358) (1,830) 25.8
----------------------------------------------------------------------
Interest and Related Expenses 361 174 107.5
Interest and Related Income (106) (74) (43.2)
Other Non Operating Expenses / (Income) 1,231 9 13,577.8
----------------------------------------------------------------------
Income Before Income Tax (2,844) (1,939) (46.7)
----------------------------------------------------------------------
Net Income (3,113) (2,195) (41.8)
----------------------------------------------------------------------
----------------------------------------------------------------------
FINANCIAL DATA Sept. Sept. %
99 98 Change
----------------------------------------------------------------------
EBITDA (Operating Income + Depreciation
and Amortization) 2,422 1,027 135.8
Interest Cover (EBITDA / Net Interests) 212.4x (50.0x) -
Return on Sales (Net Income / Operating
Revenues) (15.4%) (17.6%) -
Operating Margin (Operating Income /
Operating Revenues) (6.7%) (14.7%) -
EBITDA / Operating Revenues 12.0% 8.3% -
----------------------------------------------------------------------
----------------------------------------------------------------------
OPERATING DATA Sept. Sept. %
99 98 Change
----------------------------------------------------------------------
Homes Passed ('000) 1,801 1,589 13.3
Clients ('000), of which: 719 531 35.4
Cable Clients('000) 663 528 25.7
DTH Clients ('000) 56 4 1,400.0
Premium Clients ('000) 242 47 418.5
Sport TV ('000) 144 27 436.4
Telecine ('000) 52 20 164.8
Others ('000) 46 - -
Pay to Basic Ratio ((cable premium clients
+ DTH Clients) / total clients) 33.7 8.8 24.9 p.p.
----------------------------------------------------------------------
(a) Includes intra-group transactions.
-0-
TABLE 6: CELLULAR BUSINESS - BRAZIL(a)
(amounts in millions of Portuguese Escudos)
----------------------------------------------------------------------
PROFIT AND LOSS STATEMENTS(a) Sept.
99
----------------------------------------------------------------------
Services Rendered 22,298
Sales 3,986
----------------------------------------------------------------------
Operating Revenues 26,285
----------------------------------------------------------------------
Wages and Salaries 704
Post-retirement Benefits 65
Costs of Telecommunications 2,581
Depreciation and Amortization 4,172
Marketing and Publicity 881
Other Net Operating Income 13,601
----------------------------------------------------------------------
Operating Costs and Expenses 22,004
----------------------------------------------------------------------
Operating Income 4,281
----------------------------------------------------------------------
Interest and Related Expenses 3,346
Interest and Related Income (410)
Other Non Operating Expenses / (Income) 405
----------------------------------------------------------------------
Income Before Income Tax 1,750
----------------------------------------------------------------------
Net Income 770
----------------------------------------------------------------------
----------------------------------------------------------------------
FINANCIAL DATA Sept.
99
----------------------------------------------------------------------
Operating Revenues, Net 16,093
EBITDA (Operating Income + Depreciation and 8,453
Amortization)
Interest Cover (EBITDA / Net Interests) 14.2
Return on Sales (Net Income / Operating Revenues, 2.9%
Net)
Operating Margin (Operating Income / Operating 16.3%
Revenues, Net)
EBITDA / Operating Revenues, Net 52.5%
----------------------------------------------------------------------
----------------------------------------------------------------------
OPERATING DATA Sept.
99
----------------------------------------------------------------------
Clients ('000), of which: 2,376
Digital (%) 35
Prepaid clients ("Baby" and "Peg&Fale") ('000) 356
Net Adds ('000) 572
Market Share (Concession area) (%) 65
ARPU (Reais) 69
Penetration Rate (Concession area) (%) 10.2
----------------------------------------------------------------------
(a) Corresponding to an economic interest of 12.6%.
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