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3rd Quarter 1997 Operational Review.

LISBON, Portugal--(BUSINESS WIRE)--November 6, 1997--Portugal Telecom (NYSE:PT) has today announced the following information on activities in the third quarter 1997.


The number of main lines grew from 3,822 thousand at December 31, 1996 to 3,954 thousand at September 30, 1997, a 5.4% increase from September 30, 1996 level and a 3.5% increase from the 1996 year-end level.

The penetration rate at September 30, 1997 was 39.8 main lines in service per 100 inhabitants, up from 37.8 at September 30, 1996 and 38.5 at December 31, 1996.

The digitalization rate in local switching was 84.6% at September 30, 1997, up from 75.5% at September 30, 1996 and 79.4% at December 31, 1996.


The total number of active TMN card holders reached 565,503, an increase of 128% from the third quarter 1996 and a 70.2% rise from the 1996 year end level i.e. a net growth of 233,240 subscribers).

According to published industry reports, TMN maintained approximately a 50% market share at September 30, 1997, up from 48% at the third quarter 1996. The estimated total Portuguese mobile penetration rate is about 11.4% on the third quarter 1997.


The number of INTERNET accesses in service reached 58,803 at September 30, 1997, up from 35,580 at December 31, 1996 and 25,188 at September 30, 1996.


The Cable TV penetration rate ("connected" as a percentage of "passed") increased substantially to 23.1% at September 30, 1997, up from 18.5% at the end of 1996. The total number of "homes passed" grew 70.6% from the prior-year level, reaching 1,256 thousand at September 30, 1997, up from 736 thousand at September 30, 1996 and 900 thousand at December 31, 1996.

The total number of "connected homes" grew 122% from the prior-year level, passing the 290 thousand mark at September 30, 1997, up from 167 thousand at December 31, 1996 and 131 thousand at September 30, 1996. In September 1997, TV Cabo covered 71 Portuguese counties, 12 more than at the end of 1996.


I - Portugal Telecom Public Offering In October 9 through the third public offering of 49 million Portugal Telecom shares, the Government reduced its holdings from 51% to 25.24%. It was 9.7 times oversubscribed and 11.875 millions shares were bought by our strategic partners, as follows:

-- British Telecommunications plc 1,900,000 shares -- MCI Communications Corporation 950,000 shares -- Telefonica de Espana S.A. 6,650,000 shares -- Telebras Telecomunicacoes Brasileira S.A. 1,425,000 shares -- Alianca Atlantica Holding 950,000 shares

Privatization Process: PT3-Sept/Oct'97

Government stake down to 25.24% 49 million shares sold

Oversubscription: 14.8 times in Retail Tranche

4.6 times in Institutional Domestic Tranche

5.6 times in Institutional International Tranche Price: Pte 7,470 per share; USD 41.81 per ADS

The Offering

International Institutional Tranche 31% Retail in Portugal 36% Domestic Institutional Tranche 9% Strategic Sale 24%

II - Other key events

January -- Rebalancing tariffs - new prices for fixed domestic telephone service -- Interconnection price agreement with complementary operators -- PT Holding in Paginas Amarelas, S.A. ("Yellow Pages")7 -- Participation of Marconi in SEA-ME-WE-3, fiber optic submarine cable

connecting Europe and SE Asia.

February -- E. U. Commission decision on the schedule for the total liberalization of

the telecom's market in Portugal -- Reduction of prices of leased lines -- Launch of PT 2000 - To create a Customer Oriented Business Group Program

March -- Group's 1996 Consolidated Results -- Reduction of prices of international telephone service -- Portugal Telecom Annual Shareholders' Meeting -- Presentation of NetLine, AcessNet and ISDN NetPac products for the

information society -- Launch of TMN's Taco service

April -- Strategic Alignment BT, MCI and Telefonica -- Payment of PT's 1996 dividends -- Announcement of Portugal's inclusion in MSCI index -- PT's launch of Family & Friends service

May -- Cooperation Agreement with Telebras (Brazil)

June -- Launch of "Alianca Atlantica" -- ISDN Cyberkit, low cost multi-feature package -- Launch of PT Futures contracts on BDP

July -- Agreement to launch submarine fiber optic cable Atlantis 2 to connect

Latin America, Africa and Europe -- Nationwide local call tariff to access Internet

August -- Basic Law on Telecom's Networks and Services -- Decree-Law on 3rd Stage of PT privatization (PT3)

September -- Launch of Voice Mail in the Fixed Network -- PT's Extraordinary Shareholders Meeting -- Joint-venture between TV Cabo, SIC (Portuguese TV channel) and GLOBO

(Brazilian TV channel) -- Price Convention 1998/2000 -- Announcement of PT's half year results -- Start of PT's Roadshow

October -- PT's third Public Offering -- Agreement to launch Internet Amigo

Portugal Telecom is listed in Lisbon and on the New York Stock Exchange and a global market capitalization of approximately US$18.3 billion as of November 5, 1997.

CONTACT: Jorge Castela

Portugal Telecom


Fax: 011-351-1-355-66-23


- or -

James P. Prout

Taylor Rafferty Associates

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Date:Nov 6, 1997
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