SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

For the month of May 2009

Commission File Number 1-13758

PORTUGAL TELECOM, SGPS, S.A.

(Exact name of registrant as specified in its charter)

Av. Fontes Pereira de Melo, 40
1069 - 300 Lisboa, Portugal

(Address of principal executive office)

Lisbon, Portugal, 14 May 2009

In 1Q09 consolidated operating revenues amounted to Euro 1,604 million, an increase of 2.1% y.o.y. Adjusting for the effects of the consolidation of Telemig and the devaluation of the Real against the Euro, consolidated operating revenues would have increased by 4.2% y.o.y. EBITDA amounted to Euro 603 million, equivalent to a margin of 37.6%. Excluding the effects of the consolidation of Telemig and devaluation of the Real against the Euro, consolidated EBITDA would have increased by 1.4% y.o.y. Considering the nature of post retirement benefit costs (PRBs) and in order to facilitate the analysis of PT’s operating performance and its comparability with the industry, PT reported EBITDA excluding PRBs (for comparative purposes, previous quarters were adjusted accordingly). Income from operations reached Euro 254 million. Net income amounted to Euro 166 million, an increase of 19.1% y.o.y while basic earnings per share increased by 31.1% y.o.y. Operating cash flow amounted to Euro 76 million, compared to Euro 304 million in 1Q08, mainly due to the increase in capex of 57.1% related to the rollout of the TV service, 3G and 3.5G investments in Brazil and to higher working capital investment in 1Q09.

As at 31 March 2009, net debt amounted to Euro 5,741 million and after-tax unfunded post retirement benefit obligations totalled Euro 1,368 million. At the domestic level, financial flexibility remains solid and was further reinforced by the recently completed Euro 1 billion bond issue. Liquidity including cash, unused underwritten commercial paper and standby facilities stood at Euro 2,178 million.

Portugal Telecom announced that the Board of Directors has approved the intention to submit for shareholders’ approval a Euro 0.575 dividend for the fiscal years ending 31 December 2009, 2010 and 2011, subject to market conditions, PT’s financial condition and other factors considered relevant by the Board at the time.

(1) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (2) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + net other costs (gains). (3) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in 1Q09). (4) EBITDA margin = EBITDA / operating revenues. (5) Earnings per share computed using net income less the costs associated with the convertible bonds divided by the diluted number of shares.

Income Statement

In 1Q09 consolidated operating revenues increased by 2.1% y.o.y, driven primarily by growth at the wireline business in Portugal and Vivo. Adjusting for the effects of the consolidation of Telemig and the devaluation of the Real against the Euro, consolidated operating revenues would have increased by 4.2% y.o.y. Wireline operating revenues increased in 1Q09 by 3.0% improving once again the sequential quarterly performance. Wireline revenue performance was underpinned by the inflection of retail revenues, which posted a 0.4% growth y.o.y, as a result of the continued strong performance of pay-TV and broadband, and continued growth in data & corporate.

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) The Wireline and domestic mobile operating revenues include the impact of the decline in regulated mobile termination rates (MTRs). At TMN this amounted to Euro 18.8 million in 1Q09. (3) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (4) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + other costs (gains).

Vivo’s operating revenues increased by 5.7% y.o.y in Euros and by 22.6% y.o.y in Reais, on the back of continued customer growth (33.0% increase y.o.y in the customer base). Excluding the consolidation of Telemig and the impact of the depreciation of the Real against the Euro, Vivo’s operating revenues would have increased by 10.2% y.o.y. TMN’s operating revenues decreased by 4.2% y.o.y due to the impact of lower mobile termination rates (MTRs) and lower handset sales, which more than offset the growth in customer revenues (+2.2% y.o.y in 1Q09), achieved on the back of over 17.4% y.o.y growth in data revenues,

which already account for 22.7% of total revenues. Excluding the impact of lower MTRs, TMN’s operating revenues would have increased by 0.6% y.o.y.

The success of PT’s pay-TV offer (“Meo”) is demonstrated by strong growth in retail net additions, which reached 84 thousand in 1Q09, underpinned by decelerating line loss and improved trends in flat fee broadband customers. Circa 60% of IPTV gross additions continued to be new customers to PT. Line loss trends have been improving markedly. While in 1Q08 59 thousand lines were lost, in 1Q09 line loss fell to 30 thousand. At the same time, PT has also seen an inflection in the trends of its flat fee broadband net additions, which reached 45 thousand in 1Q09 compared to 14 thousand in 1Q08. As a result of this improved performance, PT reached 384 thousand pay-TV customers at the end of 1Q09 whilst the ADSL retail customer base increased by 17.3% y.o.y to 752 thousand customers, the best performance in the last fourteen quarters. Pay-TV penetration of the ADSL customer base stood at 51.1% at the end of March 2009 (+ 7.1pp q.o.q).

Revenues from domestic operations decreased only by 0.4% y.o.y (circa Euro 3 million) in 1Q09. The financial performance of the domestic operations was negatively impacted by lower mobile MTRs. Excluding this adverse impact, revenues from the domestic business would have increased by 2.0%, whilst TMN’s service revenues would have increased by 2.2% y.o.y in 1Q09.

Other revenues, including intra-group eliminations, decreased by 9.1% y.o.y mainly due to: (1) the termination in August 2008 of the management fee contract with Vivo, and (2) lower contribution to consolidated revenues from MTC as a result of the devaluation of the Namibian Dollar, which more than offset the 14.9% y.o.y revenue growth in local currency.

The contribution from fully and proportionally consolidated international assets to operating revenues increased from 47.1% in 1Q08 to 48.8% in 1Q09. Brazil accounts for 45.2% of consolidated operating revenues, an increase of 1.7pp from 1Q08, despite being adversely impacted by the depreciation of the Real against the Euro.

(1) Domestic operations include the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact.  (2) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. Includes mainly Vivo and Dedic. (3) Includes fully consolidated international assets, namely MTC, CVT, CST and Timor Telecom, and also the holding companies.

EBITDA decreased by 0.6% y.o.y to Euro 603 million, equivalent to a margin of 37.6%. Excluding the effects of the consolidation of Telemig and devaluation of the Real against the Euro, consolidated EBITDA would have increased by 1.4% y.o.y. EBITDA performance in the period was underpinned by growth at TMN and Vivo, which was partially offset by the decrease in the wireline business. Wireline EBITDA amounted to Euro 208 million, equivalent to a 42.3% margin. The quarterly sequential trend improved again, with wireline’s EBITDA declining by only 1.0% q.o.q (a Euro 2 million EBITDA loss q.o.q), notwithstanding intense commercial activity and also higher programming costs and customer care and support service costs relating to PT’s pay-TV service. In 1Q09, TMN’s EBITDA increased by 2.0% y.o.y to Euro 170 million, equivalent to a 45.9% margin, driven by customer growth and strict cost control. TMN’s EBITDA

performance was achieved against a backdrop of higher customer care and support costs required to support strong growth in data services. Excluding the negative impact of Euro 9.7 million due to lower MTRs, TMN’s EBITDA would have increased by 7.8% y.o.y in 1Q09.

Vivo’s EBITDA increased by 10.9% y.o.y, equivalent to 28.6% y.o.y in local currency, on the back of the strong increase in revenues and consolidation of Telemig, as referred to previously. Excluding the effects of the consolidation of Telemig and devaluation of the Real against the Euro, Vivo’s EBITDA would have increased by 17.1% y.o.y. Vivo’s EBITDA margin reached 28.9% in 1Q09, an improvement of 1.3pp versus 1Q08.

Other EBITDA decreased by 4.3% y.o.y to Euro 21 million in 1Q09, mainly as a result of the termination of Vivo’s management fee as from August 2008, notwithstanding the improved performance from MTC in local currency, which offset the impact of the devaluation of the Namibian Dollar, and from Timor Telecom.

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) EBITDA = income from operations + post retirement benefits + depreciation and amortisation.  (3) Domestic operations includes the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact. (4) Includes mainly Vivo and Dedic. (5) Includes only fully consolidated international assets, namely MTC, CVT, CST and Timor Telecom, and also the holding companies.

Fully and proportionally consolidated international assets contributed to 39.8% of PT’s consolidated EBITDA in 1Q09, an increase from 35.4% in 1Q08. Brazilian businesses accounted for 34.1% of EBITDA in 1Q09, which compares to 30.7% in 1Q08. The EBITDA performance of the fully consolidated African assets in 1Q09 accounted for 4.5% of consolidated EBITDA.

Post retirement benefit costs amounted to Euro 22 million in 1Q09, compared to Euro 11 million in 1Q08, primarily as a result of the decrease in the value of the pension funds during 2008.

Depreciation and amortisation costs increased by 10.0% y.o.y to Euro 326 million, reflecting higher contributions from: (1) Vivo, which accounts for 80% of the increase in D&A, as a result of the acquisition and consolidation of Telemig and higher depreciation rates for the CDMA network, following the GSM network rollout, and (2) wireline business in Portugal, resulting from the investments in the rollout of Pay-TV, and also from the revaluation of ducts and certain real estate assets undertaken in 2008. Excluding the effects of the consolidation of Telemig and the devaluation of the Real against the Euro, consolidated D&A would have increased by 8.6% y.o.y.

Net losses on disposal of fixed assets amounted to Euro 0.5 million in 1Q09, as compared to net gains of Euro 9 million in the same period of last year. Gains recorded in 1Q08 related to real estate disposals, which generated a cash inflow of Euro 9 million in the period.

Net interest expenses increased by 43.7% to Euro 72 million primarily due to (1) the increase in PT’s average net debt in the period, related to the share buyback programme completed in 2008 and to the acquisitions of Telemig and 3G licenses in Brazil, and (2) the increase in the average cost of debt in Portugal and Brazil. Consolidated average cost of debt of PT was 5.1% in 1Q09 (4.4% in 1Q08). Excluding Brazil, the average cost of debt was 4.1% (3.9% in 1Q08).

Equity in earnings of affiliates includes primarily PT’s share in the earnings of Unitel, CTM, Médi Télécom and UOL and amounted to Euro 49 million in 1Q09, compared to Euro 34 million in 1Q08.

Net other financial gains, which include net foreign currency gains, net gains on financial assets and other financial expenses, amounted to Euro 5 million in 1Q09, as compared to net losses of Euro 26 million in 1Q08. Net foreign currency gains amounted to Euro 6 million in 1Q09 (losses of Euro 12 million in 1Q08) due to the evolution of the Euro / US Dollar exchange rate. Net gains on financial assets amounted to Euro 5 million in 1Q09 (losses of Euro 8 million in 1Q08) and primarily relate to the change in fair value of free-standing cross currency derivative instruments. Other financial expenses, which include banking services, commissions, financial discounts and other financing costs, amounted to Euro 7 million in 1Q09, compared to Euro 6 million in 1Q08.

Provision for income taxes decreased from Euro 79 million in 1Q08 to Euro 56 million in 1Q09 corresponding to an effective tax rate of 23.8% in 1Q09 and 32.3% in 1Q08. The decrease in the effective tax rate is primarily explained by the recognition of tax losses from previous periods by certain international companies.

Income attributable to minority interests decreased to Euro 11 million in 1Q09, compared to Euro 25 million in 1Q08. The reduction in this caption is primarily attributable to the decrease in minority interests from (1) Vivo, which amounted to Euro 5 million in 1Q09 compared to Euro 12 million in 1Q08, and (2) Africatel, which amounted to Euro 4 million in 1Q09 compared to Euro 13 million in 1Q08.

Net income increased by 19.1% y.o.y in 1Q09 to Euro 166 million, compared to Euro 140 million in 1Q08.

Earnings per Share

On a per share basis, basic earnings increased by 31.1% y.o.y in 1Q09 to Euro 19 cents, benefiting from the reduction in the number of shares following the completion of the share buyback programme.

The average number of shares outstanding decreased by 9.2% to 876 million in 1Q09, whilst the diluted average number of shares outstanding over the same period declined by 8.6% to 941 million. As at the end of March 2009, the number of shares outstanding, adjusted for the 20.6 million own shares recognised in the statement of financial position, was 876 million.

(1) Diluted shares are calculated assuming the full exercise of convertible bonds. (2) Diluted earnings are computed adjusting for the costs of convertible bonds.

Dividends

Portugal Telecom announced that the Board of Directors has approved the intention to submit for shareholders’ approval at the next AGM the payment of a cash dividend of Euro 0.575 per share for the fiscal year ending 31 December 2009, subject to market conditions and PT’s financial condition at the time.

The Board has also approved the intention to submit to the corresponding AGMs the same level of dividends per share (Euro 0.575) for the years ending 31 December 2010 and 2011, subject to market conditions, PT’s financial condition and other factors considered relevant by the Board at the time.

PT reinforces its commitment to deliver compelling returns to its shareholders, whilst retaining the financial flexibility to continue investing in its core markets, new products and services, and maintaining its long term competitive position.

Capex

Total capex increased by 57.1% in 1Q09 to Euro 224 million, equivalent to 13.9% of revenues, as a result of growth in wireline and Vivo, which more than offset capex reductions in TMN and other international assets. Wireline capex increased from Euro 49 million in 1Q08 to Euro 101 million in 1Q09, primarily as a result of: (1) investments in network upgrades to provide increased bandwidth, in great part related to the continued success of IPTV services; (2) transponder capacity, and (3) a surge in pay-TV net additions resulting in increased customer-related capex (Euro 24 million) during 1Q09. TMN’s capex decreased by 22.0% y.o.y to Euro 25 million in 1Q09. The decrease in TMN’s capex is primarily explained by the investments in the continued deployment of 3G/3.5G networks, both in terms of capacity and coverage, carried out in 2008, which resulted in improved quality of mobile voice and data services in Portugal. As a result, in a recent study undertaken by the Portuguese telecoms regulator, TMN was considered as having the most reliable and stable wireless broadband network performance in Portugal.

(1) Considering a Euro/Real average exchange rate of 2.6012 in 1Q08 and 3.0168 in 1Q09. (2) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in 1Q09).

Capex at Vivo increased from Euro 48 million in 1Q08 to Euro 87 million in 1Q09 and continued to be directed towards increasing network coverage and capacity, including in the Northeast states where Vivo launched the service in October, and building capacity, namely in GSM/EDGE and 3G. The GSM/EDGE network already has nationwide coverage, while the 3G network covers 3,000 cities. Excluding the effects of the consolidation of Telemig (Euro 7 million) and the devaluation of the Real against the Euro, capex at Vivo would have increased by 94.4% y.o.y. In 1Q09, other capex decreased to Euro 11 million, compared to Euro 15 million in 1Q08, primarily due to the decrease in capex related to call centre operations in Brazil and to the impact of the depreciation of local currencies of other international businesses.

Cash Flow

Operating cash flow decreased to Euro 76 million in 1Q09, compared to Euro 304 million in 1Q08, primarily due to (1) increase in working capital investment, and (2) a reduction in EBITDA minus Capex, as a result of the 57.1% increase in capex. The increase in working capital investment is mainly explained by: (1) one-off cash receipts in 1Q08 from Zon and settlement with the Portuguese State of discounts granted to retirees; (2) Vivo’s management fees received in 1Q08 (Euro 15 million), and (3) higher capex in 4Q08 as compared to 4Q07, resulting in higher payments to fixed assets suppliers.

Free cash flow was negative in Euro 92 million in 1Q09, primarily due to the decrease in operating cash-flow describe above and also to an increase of Euro 45 million in interest paid as compared to 1Q08 due to the increase in net debt and also to the increase in the average cost of debt in Portugal and Brazil. A significant amount (52.3%) of PT’s interest payments on publicly issued bonds occurs in the first quarter of the year.

Consolidated Net Debt

Consolidated net debt amounted to Euro 5,741 million as at 31 March 2009, compared to Euro 5,571 million as at 31 December 2008, an increase of Euro 169 million due to the negative free cash flow in 1Q09 and the appreciation of the Real against the Euro during the quarter (Euro 56 million), which impacted PT’s 50% share of Vivo’s net debt.

As at 31 March 2009, total consolidated gross debt amounted to Euro 7,010 million, of which 68.0% was medium and long-term and 62.1% was set at fixed rates. As at 31 March 2009, 83.7% of total debt was denominated in Euros and 16.3% in Brazilian Reais. Vivo’s debt is either Real-denominated or has been hedged into Reais.

The amount of cash available in PT’s domestic operations plus the undrawn amount of PT’s committed commercial paper lines and standby facilities totalled Euro 2,178 million at the end of March 2009, of which Euro 1,475 million was undrawn committed commercial paper and standby facilities. In April 2009, PT repaid Euro 880 million in an existing bond and issued a Euro 1 billion 4-year bond, thus increasing its liquidity position and average maturity of its debt.

In 1Q09, PT’s average cost of debt was 5.1%, with a maturity of 4.8 years as at 31 March 2009. Excluding Brazil, PT’s average cost of debt was 4.1% in 1Q09, with a maturity of 4.8 years as at 31 March 2009. Post the Euro 1 billion bond issue maturity was extended to 5.2 years. In 1Q09, the net debt to EBITDA ratio was 2.4x (2.0x in 1Q08) and EBITDA cover stood at 8.3x (12.0x in 1Q08).

(1) In 1Q08, PT contracted equity swaps over 68.6 million own shares under the share buyback programme concluded in December 2008. (2) This caption includes mainly Euro 20 million related to dividends paid by Vivo to minority shareholders, net of Euro 13 million related to the cash contribution of minority shareholders to a share capital increase at Vivo Participações.

In April 2009, S&P announced its review of the credit rating attributed to Portugal Telecom, raising the long-term rating to BBB from BBB- and the short-term rating to A-2 from A-3 with a stable outlook. According to the note released by S&P, the upgrade recognises improving dynamics in PT’s domestic wireline business, strengthening performance in Brazil thus allowing for the payment of dividends, and consistent sound performance of domestic mobile operations. Fitch also reaffirmed PT’s rating at BBB, upgrading the outlook to stable. According to the note released by Fitch, the rating acknowledges: (1) PT’s continued strong competitive position in all of its businesses; (2) the stabilisation of the performance of the domestic wireline business; (3) the improvement in the domestic mobile business, and (4) the improved performance of Vivo, which now has started paying dividends.

Post Retirement Benefits Obligations

As at 31 March 2009, PT’s projected post retirement benefits obligations (PBO) related to pensions and healthcare amounted to Euro 3,039 million. The market value of assets amounted to Euro 2,060 million. In addition, PT has liabilities with salaries to suspended and pre-retired employees amounting to Euro 882 million, which are not subject to any legal funding requirement. These monthly salaries are paid directly by PT to the beneficiaries until the retirement age. Thus, gross unfunded obligations amounted to Euro 1,861

million, while after-tax unfunded obligations amounted to Euro 1,368 million. PT’s post retirement benefits plans for pensions and healthcare are closed to new participants.

(1) The decline in the market value of funds resulted from the payment of pensions and supplements of Euro 35 million and the negative return of assets under management of Euro 40 million (equivalent to -1.9%), partially offset by the contributions made by beneficiaries and by PT totalling Euro 3.4 million.

Total gross unfunded obligations increased by Euro 51 million in 1Q09 to Euro 1,861 million, as a result of: (1) net actuarial losses of Euro 73 million; (2) PRB costs amounting to Euro 23 million, and (3) curtailment costs of Euro 2 million. These effects were partially offset by payments and contributions of Euro 47 million made in the period.

(1) In 1Q09, this caption includes: (i) payments of salaries to pre-retired and suspended employees amounting to Euro 38.6 million; (ii) termination payments, under the workforce reduction programme, amounting to Euro 1 million; (iii) payments of healthcare expenses amounting to Euro 6.9 million, and (iv) contributions to the pension funds of Euro 0.3 million.  (2) In 1Q09, this caption relates to the difference between the actual return on assets (-1.9%) and the expected return on assets (6% on an annual basis).

(1) The decrease in the expected return on assets is explained by the devaluation of plan assets occurred through 2008.

Shareholders’ Equity

Shareholders’ equity excluding minority interests amounted to Euro 13 million as at 31 March 2009. The decrease of Euro 219 million in 1Q09 is explained by: (1) the dividends attributed to shareholders, paid on 24 April 2009, amounting to Euro 504 million, and (2) the net actuarial losses related to post retirement benefits amounting to Euro 54 million (net of taxes). These effects more than offset (1) the Euro 166 million

net income generated in the period, and (2) the positive currency translation adjustments amounting to Euro 173 million, mainly related to the appreciation of the Real against the Euro during the period.

(1) Dividends paid on 24 April 2009.

(1) The main differences between net income under Portuguese GAAP and IFRS are related to the recognition of post retirement benefits, the goodwill amortisation and the recognition of fair value of financial instruments and derivatives.

Pursuant to Portuguese legislation, the amount of distributable reserves is determined according to the standalone financial statements of the Company prepared in accordance with Portuguese GAAP. Distributable reserves decreased by Euro 376 million to Euro 392 million as at 31 March 2009, as the Euro 128 million net income generated in 1Q09 under Portuguese GAAP was more than offset by the dividends attributed in the amount of Euro 504 million, following the approval at the AGM of 27 March 2009.

Consolidated Statement of Financial Position

As at 31 March 2009, the net exposure (assets minus liabilities) to Brazil amounted to Euro 2,419 million. The assets denominated in Brazilian Reais in the statement of financial position as at 31 March 2009 amounted to Euro 5,626 million, equivalent to 39.7% of total assets.

The increase in intangible assets in 1Q09 is primarily explained by the impact of the appreciation of the Real against the Euro, whilst the increase in total liabilities is primarily explained by the dividend attributed to shareholders following the AGM of 27 March 2009 (Euro 504 million) and also the impact of the appreciation of the Real against the Euro.

Domestic Operations

Revenues from domestic operations, which include wireline and TMN, were penalised by lower MTRs, namely at TMN, decreased by 0.4% to Euro 827 million in 1Q09, notwithstanding the strong performance of the wireline segment, which increased revenues by 3.0% y.o.y in 1Q09, thus consolidating the inflection point in 4Q08. The marked improvement in the performance of the wireline segment, is explained by the continued strong take-up of pay-TV and broadband, decelerating line loss and solid performance of data and corporate services. Accordingly, retail revenue generating units (RGUs) increased by 84 thousand in 1Q09, compared to a loss of 28 thousand in 1Q08. The continued success of pay-TV is underpinning the performance of PT’s wireline segment even though it was only launched on a nationwide basis in April 2008 and has not yet reached critical mass. Customer revenues at TMN continued to post strong growth in 1Q09 (+2.2% y.o.y), as data revenues increased 17.4% y.o.y and now account for 22.7% of mobile service revenues, an improvement of 4.0pp y.o.y. As of 1 January 2009, mobile termination rates were reduced from Euro 7.5 cents to Euro 7 cents, which compares to Euro 11 cents in 1Q08, thus leading to a decline of 29.7% y.o.y in interconnection revenues at TMN in 1Q09. As such, in 1Q09, revenue performance of the domestic operations was negatively impacted by MTRs in the amount of Euro 19.6 million and Euro 18.8 million at TMN. Excluding this adverse impact, revenues from the domestic business would have increased by 2.0%, whilst TMN’s service revenues would have increased by 2.2% y.o.y in 1Q09.

(1) Domestic operations includes the wireline segment, domestic mobile, PT Inovação, PT SI, PT Pro and PT Contact. (2) EBITDA = income from operations + post retirement benefits + depreciation and amortisation. (3) Income from operations = income before financials and income taxes + curtailment costs + losses (gains) on disposal of fixed assets + net other costs. (4) Excludes additional commitments under the terms of the UMTS licence (Euro 11.5 million in 1Q09).

EBITDA declined by 5.6% y.o.y in 1Q09 to Euro 376 million, equivalent to a margin of 45.5%. This performance was achieved against a backdrop of: (1) strong growth in the pay-TV service, which resulted in higher programming costs; (2) increased customer care and support costs, due to strong take up of pay-TV and wireless broadband; (3) the impact of lower MTRs, and (4) halting of the redundancy programme. On a sequential basis, EBITDA increased by 0.7% q.o.q, driven by lower operating costs, namely direct and commercial costs.

Wireline

Wireline operating revenues increased by 3.0% y.o.y in 1Q09 to Euro 492 million, the best performance of the last seventeen quarters and confirming the sustained recovery observed since 3Q08, despite the decline in MTRs. Excluding this effect, operating revenues would have increased by 4.1%. Notwithstanding continued pressure on the traditional voice business, revenues of pay-TV and of data and corporate services have been increasing in line with PTs’ stated strategy of addressing the residential market by offering triple-play and dual-play services and the corporate market by offering more integrated solutions and value added services to its customers.

Retail revenues increased by 0.4% y.o.y in 1Q09, for the first time in the last seventeen quarters, to Euro 245 million, underpinned by the growth in RGUs of 84 thousand, namely in pay-TV customers (+72 thousand net additions in the quarter) and high quality broadband net adds (+45 thousand flat fee net adds). The increasing number of RGUs per subscriber contributed to the 1.6% increase in ARPU. The improvement in the performance of retail revenues occurred notwithstanding strong competition from other fixed and cable operators as well as from mobile operators, both in voice and broadband.

Wholesale revenues increased by 5.5% y.o.y in 1Q09, mostly due to higher traffic revenues, which increased by 9.5% y.o.y.

Revenues from data and corporate services increased by 18.2% y.o.y in 1Q09 as a result of signing of new contracts and continued successful migration of customers from traditional voice and data services to more advanced and integrated solutions, which include: (1) the provision of more bandwidth for end-users based on Ethernet and IP technologies, and (2) convergent and customised solutions combining telecoms and IT. In addition, PT gained new business in data centres and IT systems, which further reinforced its position in the business segment. As such, revenues from network management, outsourcing and IT increased by 63.6% in the quarter, including the positive impact of educational related projects.

Other revenues decreased by 11.1% y.o.y in 1Q09, as a result of the decrease in the directories business and also in equipment sales.

It is worth highlighting that, since the launch of PT’s pay-TV services, the wireline EBITDA’s delta loss has been decreasing sequentially. In 3Q08, EBITDA’s delta loss was Euro 9 million, while in 4Q08 was Euro 7 million and in 1Q09 was Euro 2 million. EBITDA declined by 1.0% q.o.q in 1Q09 (Euro 2 million), while operating expenses decreased by 0.3% q.o.q, primarily as a result of the decrease in direct costs, mainly due to lower MTRs, notwithstanding the growth in pay-TV subscribers and the launch of new channels to reinforce the pay-TV offer which increased programming costs. Other operating costs increased by +9.1% q.o.q, on the back of higher provisioning, customer care and support costs related to the launch and growth of pay-TV services. Notwithstanding the investments being done in rolling out the pay-TV service, which has not yet reached critical mass, PT continued focusing on the control of addressable costs and on streamlining of domestic operations to extract benefits from further integration of business units. It is also important to highlight that the improved performance in this segment occurred notwithstanding the halting of the redundancy programme, as the company is now focused on redeploying staff to reduce outsourcing. As a result, wages and salaries were flat both y.o.y and q.o.q.  EBITDA margin stood at 42.3% in 1Q09 and at 42.5% in 4Q08.