Portugal Telecommunications Report Q4 2012

BMI View: While the Portuguese market has the second-highest penetration rate in the region, it lags behindother markets in terms of postpaid percentage, ARPU value and mobile broadband penetration. The marketstruggles to generate revenue on the same level as many of the European markets, given the lower GDP percapita than many other countries in the region.

Key Data

The mobile market lost 149,000 subscribers in Q212, according to data published by the operators. Inthe year to June 2012, net additions were positive – 112,000. The market grew by 0.1% y-o-y.

Data from ANACOM show that, at the end of Q212, there were 4.5mn fixed-line accesses in Portugal,a 0.9% y-o-y increase from Q211. Analogue lines fell by 5.8% from Q211 to 2.24mn at the end ofQ212. The number of public payphones also fell, at a rate of 18.7% between Q211 and Q212.

ANACOM data show that fixed broadband customers total 2.307mn, up 6.3% y-o-y. Dedicatedmobile broadband subscribers decreased by 11.5% y-o-y, to1.045mn.

In September 2012, it was revealed that ZON Multimedia and Optimus will likely merge, Optimusparent company Sonaecom deputy CEO, Miguel Almeida, said. A change in the shareholder structurehas made the deal more attractive.

Risk/Reward Ratings

The Portuguese market enjoys a high level of penetration, over 160% at the end of Q212. However, it alsosuffers from the lowest ARPUs in the region. With a high proportion of subscribers on prepaid contracts, themarket has struggled to develop in the same manner as many of its Western European peers. This keepsIndustry Rewards score low – Portugal has the joint lowest score in this category, alongside Denmark.

Key Trends & Developments

Optimus selected Huawei to provide UMTS/LTE multi-frequency antennas for its 4G network. Optimuswill deploy Huawei's multi-band (1,800MHz/2,100MHz/2,600MHz) antennas.

Sonaecom asked the European Investment Bank (EIB) to provide funds for the development of its 4Gmobile network. The operator has asked for EUR60mn (US$74.3mn) to fund an investment programmeestimated to be worth EUR222mn (US$274.93mn). The investment will be directed towards thedevelopment of its 4G mobile network and upgrading of its 3G network.

In July 2012, Portugal Telecom's financial restructuring plans were commended by Moody's InvestorsServices. Moody's said Portugal Telecom has successfully alleviated its liquidity risk, as well as making astrong impact in terms of deleveraging.

ANACOM approved a draft decision on the list of municipalities without mobile broadband coverage, aspart of the mobile broadband spectrum allocation. The main mobile operators are obliged to serve 480named municipalities as part of their licence conditions.