Lisbon, 17 June 2010 Telefónica’s offer for 50% of Brasilcel Zeinal Bava Chief Executive Officer

This release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not statements of historical fact, and reflect goals of the company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts,” "projects" and "targets" and similar words are intended to identify these forward-looking statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, the results of operations of the company to be achieved may be different from the company's current goals and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update them in light of new information or future developments. Important notice

PT’s response to Telefónica's new offer Telefónica's Views on Vivo PT’s Board Response (1) (2) Based on article from Wall Street Journal online 17 May 2010 Based on article from Financial Times, 10 July 2007 “Request a Shareholder’s Meeting so that PT’s Shareholders may come to a decision on the offer” “The offer does not reflect the strategic value of this asset for Telefónica” “In accordance with the law and the Articles of Association, I hereby call a General Meeting of the Shareholders of Portugal Telecom, SGPS S.A. to be held [...] on 30 June 2010, at 10:00 a.m., with the following agenda: To resolve on the proposal received from Telefónica on 1 June 2010 regarding the acquisition of the shares held by companies of the Portugal Telecom Group in Brasilcel, N.V., under the terms and at the price of the current offer or at a higher price presented” PT Board referred the revised offer to shareholders due to its magnitude and strategic relevance BUT €1.9bn €3.0bn €6.5bn €5.7bn -2006- -2007- -May 2010- -June 2010

What is the upside in Brazil?

0 % ’09-15 CAGR 2009A 2015E World LatAm 1 5 Population (m) IMF. Dec 2009 Gross Domestic Product (US$trn) IMF. Current Price - Dec 2009 – Dec 2015 World LatAm 1 8 4.2% 3.4% 11.5% 1.7% 2.5% 4.5% 2.1% 8.7% 1.4% 6.7% 2009 2015 1 7 1 2 3 A very large market set to outpace Western European Economies Source: World Economic Outlook April 2010 1,335 1,199 307 232 191 China India USA Indo Brazil 5.1 4.9 3.4 2.7 2.2 2.1 1.6 6.2 9.4 3.7 3.1 2.8 2.4 2.6 1.6 2.0 1.5 1.3 14.3 18.2 United States Japan China Germany France United Kingdom Italy Brazil Spain Canada

Increasingly stable investment environment Brazilian CDS Close from 5-Year Low Brazil 5-year CDS (USD) Bloomberg. June 2010 Dec 2008 BRL has Gained Momentum vs. Euro and Expected to Stabilize EUR/BRL evolution FactSet & Broker Projections. June 2010 Last 12 months Evolution Broker Projections Inflation is Under Control Inflation evolution (%) EIU. May 2010 (%) Source: Bloomberg, FactSet, Economist Intelligence Unit 2.22 2.22 2.23 2.23 2.30 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 0 100 200 300 400 500 600 700 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 4.9 5.3 4.6 4.6 4.3 0 2 4 6 2009 2010 2011 2012 2013

Strong economic growth and a growing middle class Income Classes 2000 2009 Unemployment Unemployed as % of Economic Active Population Note: Average Monthly Income by Class: A and B (R$4,591+), C (R$1,064-4,591), D (R$768-1,064) and E (R$0-768) Source: IBGE, Bacen and Cetelem (2009) Strong expansion in GDP per capita plus record low unemployment have resulted in a dramatic shift in income classes 11.7 12.3 11.5 9.9 10 9.3 7.9 8.1 7.5 6.5 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E A+B 16% C 49% D+E 35% A+B 8% C 36% D+E 56%

The Brazilian telecoms market in perspective Value of #1 Domestic Mobile Player (USDbn) Domestic Telecom Sector - Total Revenue (2009) Source: Euromonitor (USDbn) Subs. Market Share 32% 70% 49% 43% 36% 35% 42% 44% 29% 51% 1. 2. 3. 4. 5. 6. 8. 7. 10. 9. 1. 2. 3. 4. 5. 6. 8. 7. 10. 9. Verizon Wireless China Mobile Docomo TEF Moviles ES T-Mobile DE TIM IT Orange UK + T-Mobile UK Orange FR Vivo SK Telecom Note: - EV of #1 mobile operator in each country per selected brokers average valuations - Vivo valuation based on TEF’s announced €3.6bn value for PT’s stake in Brasilcel Source: - Brokers estimates for valuation, Market share at year-end 2009 as per BofAML Wireless Matrix 2010 17 17 20 24 28 30 31 74 192 197 Brazil Rep. of Korea United Kingdom France Italy Germany Spain Japan China United States 38 65 66 73 80 84 90 124 178 410 Rep. of Korea France Brazil Spain Italy United Kingdom Germany China Japan United States

The Brazilian mobile opportunity Brazilian Telecoms revenue breakdown (US$bn) BofAML Wireless & Wireline Matrix. Dec 2009 % Mobile Revenues Mobile Revenues Wireline Revenues Projected mobile penetration % Population Growing market from increasing penetration and fixed-to-mobile substitution Source: BofAML global wireless matrix Q1 2010, BofAML global wireline matrix 2010 2009 Penetration 56% 88% 92% 93% 96% 99% 102% 104% 107% 120% 129% 132% 141% 147% 147% 156% China Japan Brazil 2009A US France Korea Venezuela Chile Brazil 2011E Argentina UK Germany Spain Russia Italy Portugal 15 20 25 31 35 43 50 54 60 41 45 50 53 53 55 58 61 62 27% 31% 34% 37% 40% 44% 46% 47% 49% 2002 2003 2004 2005 2006 2007 2008 2009 2010

Vivo is the rising star in Brazil Operating performance comparison(1) Note: Claro Capex not available Source: Company filings (1) Vivo metrics as per Vivo reporting (2) Defined as EBITDA - Capex Best Performing Mobile Operator Vivo TIM Claro Oi LTM EBITDA Margin – Brazilian Mobile Operators % LTM OpFCF(2) Margin - Brazilian Mobile Operators % Profitability in Brazil remains low vs. international benchmark Market consolidation has not happened yet and should improve profitability (10%) 0% 10% 20% 30% 40% Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 (40%) (30%) (20%) (10%) 0% 10% 20% 30% Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10

Large upside remaining on voice revenues Monthly MOU Per subscriber Source: BofAML global wireless matrix Q1 2010 2009 MOU 87 94 100 105 110 126 135 146 147 152 189 193 242 309 431 Brazil 2009A Brazil 2011E Venezuela Germany Argentina Portugal Italy Chile Japan Spain Russia UK France Korea China

Mobile data with high growth potential Mobile and fixed broadband accesses Million Source: National regulators; IDC; European commission; Pyramid Research Potential penetration of mobile broadband % population. 2009 Fixed Mobile 2015 104 2014 86 2013 67 2012 54 2011 44 2010 29 2009 14 Portugal Europe Brazil x10 +16% 2014 66.8 2013 58.2 2012 49.9 2011 42.7 2010 36.6 2009 31.3 PC’s penetration potential in Brazil Million personal computers Anatel forecasts that from 2011 mobile broadband accesses will overtake fixed accesses 10.9 5.1 0.5

Vivo will cover 85% of the Brazilian population with 3G by December 2011 Increase in coverage: 2,832 municipalities with 3G coverage in 2011 vs. 600 currently 85% of population covered with 3G in 2011 vs. 61% currently

Vivo investment highlights Significant optionality in the Brazilian economy Vivo to benefit from increasing penetration of mobile and voice and data growth Leadership in voice and data despite aggressive competitive market conditions Country’s largest network with coverage of more than 2,900 municipalities Customer net additions and MOUs showing sequential improvement Wireless data is driving growth Improved profitability due to higher efficiency and scale Strong cash flow generation and attractive dividend payments

Breakdown of Telefónica’s Offer

Telefónica’s most recent statements continue to ignore the intrinsic value arguments Several metrics indicate that the intrinsic value of Vivo is significantly in excess of €3.6bn Why doesn’t Telefónica use the latest business plan approved by the Board of Vivo? Why doesn’t Telefónica use, at least, the market consensus WACC (9.8%) and perpetual growth rate (2.5%)? If TIM Brasil is a better comparable, at what valuation does Telefónica believe it could acquire control?

Telefónica continues to rely on market estimates for the value of synergies If precedents are not applicable, shouldn’t Telefónica provide a detailed analysis on synergies? Operators usually give information to the market on synergies, not the reverse. TIM Brasil said they could generate R$1.2bn of synergies over the first three years only! In the acquisition of O2 and of Bell South´s assets in Latam, Telefónica provided guidance on synergies. Why is this case different? Value of synergies are unambitious at €2.8bn What is Telefónica’s bottom up synergies analysis including tax, opex, capex and revenues? Telefónica knows both companies. On synergies, why hide behind research reports?

 Services are existing and essential to Vivo and need to be delivered by PT Dedic has a stand-alone value and cannot be seen as an upside on Vivo VWAP is an appropriate methodology for buying shares in the market 5% return is lower than Telefónica´s current funding cost(1) and only means that PT would fund Telefónica with no value upside for example from higher synergies (1) “Interest expenses for 2010 are expected to be around 5.5%-5.75% (<6% guided in October 2009)” - Telefónica presentation dated June 8th 2010 Telefónica’s “value proposition” is erroneous How much is Telefónica paying if not €6.5bn?

Implied intrinsic EBITDA multiples of Telefónica’s offer are low €6,500m Synergies (€m) 2,800 3,000 4,000 5,000 Minority Share of Synergies 25% (€m) 700 750 1,000 1,250 Telefónica's Share (€m) 2,100 2,250 3,000 3,750 Price Paid for 50% of Brasilcel ex. Synergies (€m) 4,400 4,250 3,500 2,750 EV/EBITDA 2010E 6.6x 6.4x 5.4x 4.4x 2011E 6.2x 6.0x 5.1x 4.1x EV/EBITDA (PN Averaged Down) 2010E 5.7x 5.6x 5.0x 4.4x 2011E 5.4x 5.3x 4.7x 4.2x Note: EBITDA projections excluding synergies as per FactSet consensus as of 04/06/2010 (EBITDA2010E:R$5.6bn and 2011E: R$5.9bn), Net debt as reported in Q1 10 of R$3.9bn BRL:EUR exchange rate of 0.452 In PN averaged down case, minority ON shares are assumed purchased at 80% of the value offered for the controlling ON shares. Minority PN shares are assumed purchased at a value implied by TEF’s “intrinsic value” of €3.6bn for 50% of Brasilcel

Telefónica has tried to intimidate PT shareholders to force them to accept the offer and failed Telefónica has no response PT Clarification Statements "There is no obligation on us to act favourably in Brasilcel". "The money could stay in Brasilcel indefinitely.“ Financial Times, 25 May 2010 “Analysts said Telefónica might ask the courts to dissolve Brasilcel if Portugal Telecom's shareholders rejected the Spanish group's €6.5bn offer” Financial Times, 3 June 2010 "It [a hostile takeover bid] could always be revisited," he told the Financial Times Financial Times, 25 May 2010 “No consideration should be given to Telefónica’s suggestions that it could seek dissolution of Brasilcel. Based on the advice of its legal advisors, Portugal Telecom rejects these suggestion” “After the declarations made by Telefónica's CFO, he should quit the PT board as he failed his duty of loyalty to PT and has a conflict of interests” “Portugal Telecom would have a strong case against Telefónica if Telefónica were to block dividends solely in order to put undue pressure on Portugal Telecom. We believe there are solid reasons to affirm that by acting in such a manner Telefónica would be abusing its position as a 50% shareholder”

but is still trying to intimidate investors What guarantee does Telefónica give you that PT shares will trade over 60% of PT’s unaffected share price if you accept the offer? If you vote against the Telefónica proposal, the investment case of PT will remain intact while Telefónica will still need to find a strategic solution for Brazil

Strategic value of Vivo for Telefónica Brazilian market offers strong growth potential Vivo is the leading mobile operator and has value upside from increasing fixed-to mobile migration and mobile broadband penetration Considering market consensus, announced synergies lack ambition Excluding synergies, implied acquisition multiples are low PT’s Board: “The offer does not reflect the strategic value of this asset for Telefónica”

We are focused on shareholder value

We asked you to back us before and we did not let you down even though capital markets are down 30% in the interim period Rejected Sonaecom Offer 2006 Dividend Sale of PTM 2007 Dividend 2008 Dividend 2009 Dividend Offer Price Excl. Distribution Current Share Price Total Distribution Total Value +10% +15% € / Share (1) PSI index performance between 2 March 2007 and 10 May 2010 (2) Pre-offer PT share price as at 10 May 2010 (2) (1) €10.5 €6.7 €7.7 €11.5 €0.5 €1.6 €0.6 €0.6 €0.6 €3.8

3 Relative Share Price Performance since Lehman Collapse(1) Total Shareholder Return since Lehman Collapse(1) Best performing telco in EMEA (9.4%) (7.7%) +9.3% Source: Bloomberg, Market data from FactSet until 10 May 2010, Company information (1) 15 September 2008 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 5 6 7 8 Share Price (In EUR rebased to PT share price) PT PSI Index EURO STOXX Telecom 20.6% 10.2% 5.6% 1.1% (3.9%) (8.9%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% PT Operator 1 Operator 2 Operator 3 Operator 4 Operator 5

PT investment highlights Focused strategy in developing its businesses in Portugal, Brazil and sub-saharan Africa, which ensures diversification and thus lower execution and financial risks Solid customer growth in the domestic and international markets against intense competition and a challenging economic environment Strong financial flexibility and predictable and attractive shareholder remuneration Management is committed to maintaining strict cost, financial, operational and strategic discipline to deliver on results and shareholder remuneration Board of PT is fully aligned with and supportive of business strategy Long-term shareholders of PT have always been supportive of the company since privatisation and even in challenging times

Shareholders of Portugal Telecom have two options: Forgo optionality and crystallise value of PT’s investment in Brazil now OR Empower Portugal Telecom to continue to create value by leveraging on Brazilian and Vivo exposure in the future

Frequently Asked Questions

Frequently Asked Questions Could Telefónica increase its Offer? Telefónica is free to increase its offer at any time. It can raise it prior to the EGM, in which case shareholders would vote on the increased offer. It can also make a higher offer after the EGM, in which case Portugal Telecom would take necessary action to allow shareholders to opine on the revised proposal What will happen if the Offer is rejected? Could Telefónica frustrate PT (dissolution of Brasilcel; blocking of dividend)? No Consideration Should Be Given to Telefónica's Suggestions Relating to Brasilcel. In assessing the Offer and forming a view as to whether the Offer should be accepted or rejected, no consideration should be given to Telefónica's suggestions over the past few weeks that Telefónica could or would seek dissolution/liquidation of Brasilcel and/or block dividends payment at Brasilcel Based on the advice of its legal advisors, Portugal Telecom's board of directors rejects these suggestions. Portugal Telecom’s board of directors is convinced that Telefónica's suggestions are intimidating in nature and any resulting action would amount to an unreasonable attempt to frustrate its joint venture partner What will happen to Portugal Telecom if the Offer is rejected? Portugal Telecom will continue to contribute to the success of Vivo through Brasilcel. We will remain open to any discussion on the joint venture that maximizes value to Portugal Telecom and Vivo shareholders What would the use of proceed be? In the event of a disposal of PT’s stake in Brasilcel, Portugal Telecom expects to use the proceeds of the sale for general corporate purposes, including future investments, financing of capital expenditure, repayment of existing indebtedness, repurchase of shares and distribution to shareholders. Decisions regarding the use of such proceeds will be taken with a view to furthering the best interests of Portugal Telecom and maximizing value for its shareholders. No assurances can be made that all or a part of the proceeds from the sale of Brasilcel will be returned to shareholders. Portugal Telecom's track record in delivering value to shareholders over time stands for itself

Frequently Asked Questions What is the timing of the Shareholders Meeting? The EGM is expected to take on June 30th, 2010 What will be the voting threshold? The decision will be taken by a simple majority (50% of present) Can the Golden Share veto the transaction? This is not a Golden Share matter What is the minimum Quorum for the decision? No quorum required for meeting to be held Will Telefónica be allowed to vote at the EGM? This is a question for the Chairman of the EGM What alternative will the Board implement if the decision is made to accept ? If shareholders vote in favor of the offer, the board will review the merits of alternatives A and B in the best interest of shareholders

For further information: Nuno Vieira Investor Relations Director +351 21 500 1701 nuno.t.vieira@telecom.pt www.telecom.pt