Home Latin America III 1997 Portugal Telecom:A World Class Telecommunications Company

Portugal Telecom:A World Class Telecommunications Company

by david.nunes
M. Jorge Cardoso CastelaIssue:Latin America III 1997
Article no.:7
Topic:Portugal Telecom:A World Class Telecommunications Company
Author:M. Jorge Cardoso Castela
Organisation:Investor Relations Office at Portugal Telecom
PDF size:20KB

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Article abstract

As the main telecommunications provider in Portugal, Portugal Telecom offers a full range of services, from basic telecommunications services to mobile telephones, data communications and cable television. In Latin America, it has a strong presence in Brazil, with the two countries enjoying economic, historical and cultural connections. For Portugal Telecom, its on going strategic alliances with other telecommunications operators signals its intention to remain a world class telecommunications company.

Full Article

Portugal Telecom (PT) is the country’s telecommunications provider, offering a full range of services, including local, domestic long distance and international telephone services throughout Portugal, as well as a wide range of other telecommunications services, such as mobile telephone, data communications and cable television. At the end of June 1997, PT had an 82% digitised network of approximately 3.9 million fixed main lines (a penetration rate of 39.3%) servicing residential and business customers, as well as 432,000 mobile telephone subscribers. With operating revenues of US $3.1 billion in 1996, PT is one of the largest enterprises in Portugal. The consolidated net income for 1996 was US$354.1 million, an increase of 51.5% over 1995. Fixed Telephone Services Fixed telephone service continues to represent the largest component of total operating revenue (72.4% in 1996 versus 76.2% in 1995). Digitalisation rate in local switching reached 82.3% by the end of June 1997 as compared to 74.3% in 1996. PT is on track to reach its objective of a 97% digitalisation rate by 1998. This high degree of digitalisation has allowed PT to enhance the accrued quality of the network as well as develop new features such as Call Forwarding, Call Waiting, Three Party Conference, Itemized Invoicing and Voice Mail (currently being tested). In 1996, in line with the good economic environment in Portugal, the number of main lines increased steadily by 4.9% and the traffic per main line grew by 2.5%. Mobile Services Mobile services grew beyond all expectations. Under Telecomunicacaoes Moveis Nacionais (TMN), mobile services continued to benefit from its competitive attitude in this business. Its operating revenues in 1996 increased by 65.6% to US$230.9 million or 7.5% of the consolidated total (5.0% in 1995). The total domestic mobile market on June 30, 1996 is estimated to be more than double the same period the previous year (+102%). TMN’s total subscribers were 432,000 by the end of June 1997, compared to 214,000 in June 1996. The volume of traffic in 1996 also increased considerably, by more than 70% over 1995. It is expected by 1998 that TMN will be allowed to operate beyond the GSM900 frequency, with a DCS1800 system thereby increasing the quality and coverage of the service offered. Data Communications Data communications activities through Telepac recorded an increase in operating revenues to US$89.1 million or 2.9% of the consolidated total, the same as last year. The growth in Internet services continued to surpass expectations. Since mid 1996 the number of clients increased significantly (+189%), primarily fuelled by the launching of a new product, NETPAC. As of June 1997, the number of Internet subscribers was 52,000. Cable TV Cable television services, through TV Cabo Portugal’s nine subsidiaries, recorded a 233% increase in operating revenue to US$31.5 million, or 1.0% of the consolidated total. The number of homes connected by June 1997 was roughly 242,000, more than double the June 1996 figure. Penetration rate reached 21.1% in March 1997. Other Activities Other activities, such as publishing and distributing telephone directories, broadcasting television signals, telex services and videoconferencing, reach US$314.8 million, or 10.2% of the consolidated total. International investments grew by 53.3% to US$60.1 million in 1996, or 2.0% of total operating revenues. PT Group’s presence is focused predominantly in Macao, Brazil and Africa, areas where Portugal has had economic, historical and cultural connections. Strategic Alliances PT’s Strategic Alignment was announced on 14 April 1997 between PT, BT and MCI. This strategic alignment is specially oriented to the telecommunications market in Portugal and Latin America. With this agreement, PT becomes the exclusive distributor for Concert communications services’ voice products in Portugal, enabling it to offer the most advanced portfolio of global communication services to multinational businesses in Portugal. PT and MCI will also explore opportunities in Latin America’s largest communications market, Brazil, where the former has an alliance with Telebras, the country’s leading telecommunications holding company. In addition, the companies will also seek other opportunities in the US$36 billion Latin American communications market, which is expected to exceed US$60 billion by the year 2000. To reinforce the alliance, BT and MCI will take 1% and 1.5% equity stakes in PT, respectively, during its next stage of privatisation, expected in the second half of 1997. Conclusion In addition, on April 16 PT signed a Cooperative Agreement with Telefonica. The main focus of the cooperation will be in the areas of international expansion, and the development of service quality. Since June 2, 1997, PT and Telebras have been equal partners and shareholders in the Alianca Atlantica BV, a joint venture cooperation formally approved by the Brazilian Congress and the President of Brazil in December 1996. Meanwhile, following discussions with Brazilian officials, negotiations are taking place with the Portuguese government to sell shares in PT to Telebras, cementing the relationship between the two firms.

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