RELEASE

Portugal Telecom provides comments on recent statements
of Portuguese Competition Authority

Lisbon, Portugal, 17 February, 2006 – In response to recent comments from the Portuguese Competition Authority (“AdC”), Portugal Telecom would like to clarify the following:

• With regard to access network concentration, Portugal Telecom has been submitted to, and has complied with, the full range ex ante remedies provided for in both the European and national regulatory frameworks to ensure an appropriate level playing field for all retail telecom operators;
• On the issue of barriers-to-entry to the local network, PT has one of the lowest unbundled local loop prices in Europe. Local loop unbundling increased by 720% during 2005 according to ICP-ANACOM;
• In what concerns access to content, the Portugal Telecom Group, already grants third-party non discriminatory access to premium sport and film content and also to the most popular locally produced pay-tv channels;
• What the AdC referred to as “monopoly rent” is in fact limited by cost oriented price controls adopted by ICP- ANACOM both at the wholesale and retail levels and by increasing competition. Portugal Telecom makes significant investments in innovation and the development of the information society both in Portugal and in other Portuguese speaking countries.

In this regard, since last October, Portugal Telecom has been conducting a strategic review of its activities taking into account technological and regulatory considerations. One of the options under review is the creation of a separate wholesale company within its fixed line division, PT Comunicações S.A.

The benefits of such a separate wholesale wireline company within Portugal Telecom include: establishing the basis for rapid investment and migration to next generation networks; increasing the scope for competition and investment in the Portuguese telecommunications services market; offering customers increased choice, products and services; allowing PT greater flexibility to manage its consumer and retail businesses; and providing monetisation opportunities to enhance shareholder value.

In this process, Portugal Telecom shall seek the views of the relevant competent authorities and Consumer Groups as well as other telecoms operators in the Portuguese market.

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This information is also available on PT’s IR website http://ir.telecom.pt.

The attached communication has been made public by Portugal Telecom, SGPS, S.A. (the “Company”). Investors are urged to read the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 when it is filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”), as it will contain important information. The Solicitation/Recommendation Statement and other public filings made from time to time by the Company with the SEC are available without charge from the SEC’s website at www.sec.gov and at the Company’s principal executive offices in Lisbon, Portugal.

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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.