2004 Portugal Telecom CSR Report

SUSTAINABILITY REPORT
sharing value
Portugal Telecom
The current report concerns the activities of Portugal Telecom Group in Portugal.
The social and economic data included in it result from the consolidation
of the Group’s accounts for 2004, and they were calculated according
to existent accountability rules.
The environmental data included in this report concern PT Comunicações and TMN,
companies that represent a total of 80% of PT’s operational results in Portugal.
PT’s commitments for 2005, regarding other companies of the Group,
are also advanced.
Contacts
Abílio Martins
Head of Corporate Communications
Av. Fontes Pereira de Melo, 40
1069-300 Lisboa • Portugal
Tel: + (351) 21 500 1621
E-mail: dcc@telecom.pt
Portugal Telecom Site: www.telecom.pt
Portugal Telecom
SUSTAINABILITY REPORT
sharing value
2004
The terms “PT”, “Portugal Telecom Group”, Global Reporting Initiative (GRI)
“PT Group”, “Group” and “Company” refer This first sustainability report was elaborated in accordance
to Portugal Telecom and its subsidiaries, with the guidelines of the Global Reporting Initiative, under the highest
or any of them as the context may require. standards of quality.
GRI Table
The table referring to GRI’s indicators and its index can be found
in page 117 of this report.
Analysis Period
This report comprises the data of 2004. References to actions
and commitments established during the first quarter of 2005 are also
included. Since PT Group is formed by several companies with rather
different existence terms, the time series divulged in this report do not
always comprise the same periods of time. This is due to the longer record
that some of the group’s companies possess, having therefore a greater
amount of information.
Auditing and accuracy of the included data

All the information included in this report has undergone a process
of examination, according to GRI’s directives concerning the credibility
and quality of the report’s contents, as well the auditing guidance
provided by an independent body.
Criteria and definitions used in costs and economic,

environmental and social benefits accounting
Concerning economic and social data, costs and benefits account
is based on Portuguese accounting rules, fiscal system and labour rights
legislation. As far as environmental benefits are concerned,
PT Comunicações and TMN have created their own internal methodologies.
These methodologies are the basis of the values displayed,
regarding the investment made in this area.
www.telecom.pt
A channel that is always available, for your suggestions.
So that we may continue to improve our Sustainability Report.
we will continue
to share value
that is our commitment
Miguel Horta e Costa CHIEF EXECUTIVE OFFICER
Far from being a management fashion, business

sustainability is undoubtedly a theme that will be
highlighted in our agendas for the next couple
of years, perhaps even for the next decades or centuries,
if we work hard enough. This is not a new theme
for Portugal Telecom, but it is one to which we pledge
to double our efforts every day.
Accuracy was our main concern not only through direct employment relation with stakeholders a serious
in the elaboration of PT Group’s and investment, but also through the investment is being made, with a
management sustainability report. economic activity created in other view to enhance dialogue and find
Besides being a valuable guide of sectors, related with the output of PT’s new ways of communication.
our involvement with society, this services and production of goods.
Nowadays, more than ever, thinking
document was worked out under From this point of view we get
of the future means thinking on the
the strictest respect for international to indicators that give us a new
environment. To recycle, to manage
guidelines. perspective – and a new responsibility
waste, to rationalise expenses and
as well – about our involvement in
Our business is built over a solid reuse materials, but most of all,
our national economy.
basis of relations that have been to promote, perceive and consolidate
established with our customers, associates, awareness about environmental
This is our way of sharing value,
investors, suppliers, partners issues. Many products of the
in the economic sense of the word.
and civic society. It is our goal to telecommunications sector can
Still from an economic perspective,
strengthen and reinforce those be reused or recycled: from mobile
our management model and our
relations even more. To us the future phones to copper wires, from
relation with stakeholders are themes
is a reality we will build together. film to power box cards, there are
of the utmost importance. As far
environment-friendly solutions
as the management model (which
That is also the orientation that some which can be applied to products no
we were the first to implement
determinant organisations of our life longer useful. Both in Portugal and
in Portugal) is concerned, current
together – such as the United Nations in Brazil, environmental concerns
indicators show that we are on the
(through Global Compact), the World are something that we implement,
right track. The group undertook,
Bank and the European Commission trying to keep up with technological
as structuring practice, a separation
– have encouraged, making resources evolutions and the spirit of the age.
between the inherent functions
available so that
of shareholder power and executive Environmental policies of several
we may achieve that goal.
power. The progress made in this companies of the Group are being
The importance of our business to field during the last two years implemented in a consistent manner.
the Country’s economy is measurable was extremely significant. In our In some cases those policies are
Portugal Telecom SUSTAINABILITY REPORT 2004 4

already consolidated, which is why a global scholarship programme involved in this project try to get to
a significant number of the group’s to benefit our employees’ children, know the real needs of the customers
companies already possess an according to each family’s income. in every district.
environmental certificate.
Intrinsically related with the Among its numerous customers,
information business, our group has PT pays particular attention and
As far as the environment is concerned,
strived to promote the Information gives priority to those that have
this is our way of sharing value.
Society in an active way. In 2004, special needs, having created a
Our goals regarding social
the same year in which the group Telecommunication Solutions Office
responsibility and sustainable
was actively engaged in the search for those customers specifically.
management can only be fulfilled
for solutions that would allow more Our concern is not only about
if people are at the centre of every
people to have access to the Internet philanthropy or social welfare – it is
initiative that we take. And that is a
concern that Portugal Telecom has and allow more people to buy their much more than that. Our goal is to
been carrying out exhaustively, both own computers, we took another step make all our customers equal and
internally and externally. Business- further by implementing a similar act consciously and trustworthily
related citizenship has been a crucial programme for the benefit of our towards those who have some kind
area of operation, regarding the internal community. of disability, by offering them special
exterior sphere. Today, all employees of PT Group communication solutions.
have access to broadband services This is a continuous work that will
The telecommunications market has and can purchase their own be now carried out by the Portugal
powerful resources to draw people computers in rather advantageous Telecom Foundation.
closer to one another and to improve terms.
their quality of life, namely of those In Portugal Telecom, knowing how On a social level, we share value
who need it the most. That is the we can have an influence in people’s through many different actions.
way we believe technology should lives and knowing how we can This 2004 management sustainability
be used to better people’s lives. It is improve them has been the subject report represents the set of initiatives
something that is not achieved until of a profound consideration. and, most of all, the commitment
all people are involved it in, either As the Company grew, our we have assumed with society and
through the development of internal responsibilities as a social, cultural our partners. It is a new stage of
social welfare programmes, in such
and scientific agent also became affairs to a management group
areas as health, education and
bigger. The establishment of the with a history of social, cultural and
leisure, either through community-
Portugal Telecom Foundation scientific involvement. A group with
oriented actions, using innovation
is exactly our way of meeting an intrinsic good practices attitude,
and voluntary work as our privileged
those increasing needs, since the that walks steadily towards the future.
means of intervention.
Foundation’s structure integrates all
the different ways through which we For all these reasons, PT made its first
At the same, in terms of internal
share value with the community. Sustainability Report. This report was
organisation we have been working
elaborated in accordance with the 2002
persistently and systematically to turn
In the last two years the Foundation Global Reporting Initiative guidelines
PT Group into the best company to
has developed a set of changes whose and it presents a poised and correct
work in. To achieve that purpose we
goal is to serve our customers better balance of our group’s economic,
have developed programmes to attract
by promoting closeness. New ways of environmental and social performance.
and keep talented employees and we
creating a dialogue between us and
consistently bet on their training.
our customers have been developed.
Providing a good quality of life Since the end of 2004, one of the
for the Company’s Human Assets ways found to promote closeness
involves not only employees, but was to have a truck fully-equipped
their families as well, especially their with the latest communications and
children, who are our main priority. multimedia technologies touring the Miguel Horta e Costa
Chief Executive Officer
Having this in mind, we launched country. All members of the team 31 May 2005

9 } Vision and strategy for sustainability
11 } Our commitments
17 } Group’s presentation and profile
22 } Decentralization of the Group’s businesses
23 } Management model designed for sustainability
24 } Statutory bodies
31 } Global and integrated risk assessment

34 } Shareholders
38 } Shareholder structure
39 } Key financial figures
42 } Cost structure and indirect production of wealth in the Portuguese economy
46 } Customers
50 } Financial community
52 } Regulatory and supervisory bodies
54 } Employees
70 } Suppliers
73 } Society
78 } New markets and new needs
83 } Environmental management policies

86 } PT Comunicações and the environment
96 } TMN and the environment
105 } Landscape impact of our business activities
107 } Development in Portugal

108 } Our contribution
111 } PT projects
115 } Research & Development
117 } Index of Global Report Initiative [GRI] indicators
122 } Verification statement by SGS/ICS, Serviços Internacionais de Certificação, Lda.
Portugal Telecom
8
Sustainable Company
sharing value for the future
30
Business sustainability
sharing value with the shareholder
44
Involvement with the community
sharing value with everyone
82
Relationship with the environment
sharing value with the environment
106
Information society
sharing the value of Knowledge
SUSTAINABILITY REPORT 2004

sharing
value
for the
future

Ñ Sustainable
Company
Publishing
4 Vision and strategy for sustainability
our first Twenty-first century society has made us aware of the economic value that certain
Sustainability ethic and reputational concerns have in a company’s medium/long-term financial
Report
performance. Nowadays there is an increasing set of actions by sustainability rating
Portugal Telecom Group has decided
to publish its first Sustainability agencies, investors, socially responsible investment funds or stock market indices
Report to share the commitments
– such as the Dow Jones Sustainability Index and the FTSE4GOOD – that make clear
it has assumed in the sustainable
management area. how valuable, in terms of business strategy, these new themes are and how they should
With a national scope, this document be part of that business strategy. Even so, the risks, to a company’s financial stability,
was elaborated in accordance
with Global Reporting Initiative of incorporating these new themes should not be ignored.
guidelines and comprises a set
of indicators which allows us to The European Union assumes its commitment to promoting sustainability through
analyse the sustainability of the
Group’s performance in three areas: the European Strategy for Sustainable Development, in which the part that the private
the economic, the social and the sector will play in the pursuit of that strategy’s goals is emphasized. This document is
environmental area. This report also
describes the commitments that PT closely related with the Lisbon Strategy, whose goal is to make Europe the world’s most
has assumed with its stakeholders or
competitive zone. The information Society and social cohesion are two relevant variables
interested parties. While elaborating
this report, PT made every effort to achieve that level of competitiveness. Plans, documents and guidelines about those
to follow the GRI guidelines
in terms of inclusion, auditing, two variables are being outlined and applied in each one of the Member States.
comprehensiveness, relevance,
accuracy, neutrality, comparability, Apart from the work made by Member States Governments’, industrial associations of
clearness and periodicity, to make
this set of information easy to read. those economic sectors that are more sensitive to sustainability have been implementing
Over the years PT has been developing a set of policies and specific measures in this area.
a set of actions which are, in many
ways, a set of good practices. The PT has an active participation in various international movements in the
publication of this first Sustainability
Report is, therefore, an important telecommunications sector, movements that seek to contribute to sustainable
landmark in the creation of mid/
development. ETNO – European Telecommunications Network Operator’s Association
long-term value for shareholders.
– is a distinguished association that works in the environmental risks management
A profound internal consulting
process was also present in the area. In 1996, ETNO published its Environmental Charter, that in 2004 became the
elaboration of this report, namely,
a consultation of the main boards Sustainability Charter. Recognising the importance of those two initiatives, PT signed the
of directors in several of PT Group’s charters on the same years they were published. In these charters the main, European
companies, whose task is to represent
PT in the communication with several operators committed themselves to develop and include environmental and sustainable
interested parties.
development issues in their businesses’ daily activities. Since the establishment of ETNO,
For that reason, this report
is at the same time a proof
in 1992, Portugal Telecom has always been elected as an Executive Board member.
of PT Group’s practices and actions
in the sustainability area In response to the challenges of the telecommunications sector, the Company’s
and a commitment to continue,
in the future, to share value.
management has also been introducing environmental and social issues in its business
strategy. Therefore, financial growth took into account a concern for respecting and

Ñ Sustainable
Company
Summary of the Code of Ethics

“Companies’ Identity and image are more and more the result not only
of their economical and financial performance, but also of the set
of principles, values, behaviour and options that prevail in them.
A company’s ethic comes, beforehand, from its employees’ ethic,

that must follow a set of conduct rules and principles, consubstantiating
an irreprehensible behaviour model.”
Values to maintain
> Performance principles: honesty, integrity, dignity, professional
rectitude and diligence, impartiality and equity
> Loyalty duty
> Legislation observance
Conduct rules
> Responsibilities
> International Relations
> Professional perfecting and merit
> Professional confidentiality and secrecy
> Conflict of interests
> Movable values transactions’
> Resource to illegal activities
> Personal transactions made by employees
> Using companies’ resources
> Relations with suppliers
> Relationship with competitors
contributing in a positive way to society and the environment. surety. Portugal Telecom still perceives its Human Assets
The Code of Ethics in effect since 2002 presents the training as a priority, having direct consequences in
framework, the values and a set of conduct rules that all the employees’ professional mobility and value to the
Group employees must respect and follow in their work and Company.
in their interactions with other agents.
Externally, the Group has a history that includes a vast
On a social level, the Group has always been developing set of social responsibility practices: from developing
a set of internal and external practices that show its products for disabled citizens to developing special services
management responsibility. The strong bet made on its to senior citizens and families with a low income. These
employees’ merit shows that the Company’s management are examples of a company’s responsible actions and also
policy acknowledges that employees are the Group’s most show that company’s attempts to make its services available
valuable asset. to a larger number of people. A strong cultural patronage

policy, community support and voluntary work are other
Still in effect in 2005, PT’s Commitgment-letter for the examples that show the Group’s responsible way of making
strategic management of Human Assets, signed by Miguel business. In 2003 this company’s commitment to society
Horta e Costa, Chief Executive Officer, and by Carlos was made clear with the creation of the Portugal Telecom
Vasconcellos Cruz, Executive Director responsible for Human Foundation, whose goal is precisely to promote access to
Assets, is the symbol of an important stage and is a proof of information for underprivileged citizens and those with
the investment we will continue to develop as far as Human special needs.
Assets are concerned.
PT’s fundamental role in digital inclusion has considerable
Training is another area to which we pay special attention economic and social impacts. By giving society access to
and is included in the Company Agreement as an employees’ telecommunication services, the Company becomes a

Ñ Sustainable
Company
driving force of the economy, namely through new sources Other companies, such as PT Inovação, PT Contact and
of information and education. The creation of a Universal PT PRO are actively promoting the environment in their
Service that guarantees citizens, regardless of their current activities’ management.
location, access to a phone line, is an example of that
It should also be pointed out that the services provided by
commitment.
Portugal Telecom have positive ecologic impacts, since their
We are increasing our investment in the environmental activities produce, indirectly, a decrease in travelling and
management area and in the environmental impacts that journeys and therefore diminish the negative environmental
result from our activity. This is a concern related with the impacts that spring from it.
search for a greater efficiency in energy, water and fuel areas, Apart from the environmental management that comes from
as well as a greater attention to waste management. This the activities developed by the companies, a management
work in the environmental area has been developed mostly by system was implemented that intends to minimise the
PT Comunicações and TMN, companies certified according environmental impacts of the companies’ suppliers, by
to the NP EN ISO 14001 standard. PT Comunicações began taking into consideration suppliers’ attitude towards the
in 1995 its first environmental surveys. environment as a selection criterion.
4 Our commitments
> Portugal Telecom is committed to integrate in its strategy an orientation to promote
sustainable development in the economic, environmental and social areas by respecting,
informing, training, communicating and dialoguing with its associates, customers,
partners, regulatory bodies, the media, financial analysts and the general public. The
Company will therefore reinforce the channels through which it communicates with
all the different publics.
> Throughout 2004, the creation of a Sustainability Committee was planned; presently,
that Committee integrates its management model, of which all members of the Executive
Commission, among other representatives, are part of.
> The development of the Information Society and of knowledge (internal and external)
is and will continue to be one of the Group’s priorities, not only in its position as a
telecommunications’ operator, but also as an active agent of social modernisation.
> Customer satisfaction, quality, trust, integrity, know-how, innovation and respect and
social intervention are values that we will continue to promote and are present in the
Code of Ethics, that serves as guide to our performance.
> The streamlining of community support programmes and voluntary management will
continue to be a part of Portugal Telecom’s plan of activities through the Foundation.
> In 2005 PT will continue to promote and reinforce face to face dialogue between
PT’s managers and their associates, customers and ‘living forces’ of each region of the
country.
> A greater energy efficiency and waste management, as well as setting up I&D
partnerships to study the environmental impact of the telecommunications’ business are
also primary areas for the Group, that is committed to continue to invest in them.
> In 2005 the Company will also continue to develop programmes to attract and keep
talented employees.

Ñ Sustainable
Company
Our new management strategy, in which social and environmental areas are definite
factors to create value, is presented in the table below:
Area Management goals Management implements
Social Internally > Employees Individual Performance Analysis

> To maximise Human Assets value Model
> Training model
Externally > Benefits policy for associates
> To promote Digital Inclusion > Company Agreement
in all market areas, creating solutions > Code of Ethics
for groups of customers with special > Product Research and Development
needs > Communication and Information
> To abet the quality and the access for Employees
to cultural activities through > PT Foundation – areas of strategic action:
arts patronage Knowledge society
> To develop strategic social Community
responsibility projects designed Customers with Special Needs
for communities with special needs Arts Patronage
History and Heritage
Environmental To manage the environmental impacts > Environmental Management

that result from the telecommunications > Environmental Certification
business > Management of energy consumption levels
> Management of water consumption levels
> Management of resource consumption levels
> Waste management
> Management of suppliers’ environmental
impacts through the inclusion of an
“environment” criterion in suppliers selection
Economic To maximise shareholders’ profit > Financial and commercial marketing

> Planning and control
> Technology and innovation
> Human Assets Management
Considering Portugal Telecom’s social role – its sphere of 1.4%(1) of the national investment – numbers that already
action, its shareholder and economic dimension and the reveal PT’s positive impact on national economy. PT’s
amount of work it creates – sustainability issues were regarded management takes into account, of course, its responsibility
as crucial to the continuance of a responsible leadership. In towards the society it belongs to.
2004 PT became the direct employer of 15,107 people in Sustainability being a key issue to business management,
Portugal and 14,376 people in other countries. As far as a study began to be made in 2004 with a view to the creation
national economy is concerned, the Company is responsible of a Sustainability Commission directly connected to the
for 0.3% of the national employment, 3.2% of the GDP and Board of Directors.
(1) Source: Instituto Nacional de Estatística.

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Company
Participation in national and international organisations
PT has a very active participation in several associations, discussion forums and foundations that work towards the development
of activities in several social areas. The following tables identify the main organisations in which the Group’s companies
have an active participation.
International associations
– Information Society Purpose
ETNO – European Telecommunication Its goal is to promote a constructive dialog between its associate companies and other economic agents involved
Network Operator’s Association in the development of the Information Society. It is this association’s intention to contribute to the development
of policies that create an effective regulation environment for the European telecommunications market
and to promote the development and implementation the Information Society.
ETSI – European Telecommunications Independent and non-profit making organisation whose mission is to produce telecommunications standards.
Standards Institute It is officially responsible for the development of a set of rules and technical documentation that constitute
the European contribution for the ICT’s (Information and Communication Technology) world standards. It is officially
acknowledged by the European Commission and by EFTA’s Secretariat.
EUROTEAM – Telefonica Euroteam Supports international cooperation in the management training area, particularly in the telecommunications field.
EUSIDIC – The European Association Forum to study, debate and share knowledge among professionals of the information industry business.
of Information Services
FORINO – Associação para a Escola Training in the areas of telecommunications and networks, industrial organisation, energy and mechanization,
de Novas Tecnologias electricity/electronics and management and business.
ICANN – Internet Corporation Global organisation responsible for the establishment of rules regarding Internet use. An international, non-profit
for Assigned Names and Numbers making organisation, responsible for the “Internet Protocol” ( IP) numbers distribution, naming protocol identifications,
control of the generic Top-Level Domains (gTLD) and country code Top-Level Domains (ccTLD). Being a mixed capital
society, ICANN works for the maintenance of the Internet’s operational stability, for the promotion of competition
and for the achievement of a wide representation of the global communities gathered in the Internet.
IEP – Instituto Electrotécnico Português Organisation that works in the standardisation, quality control, certification, metrology, scientific and technological
investigation and development areas.
IT – Instituto de Telecomunicações It is the purpose of this institute to create and divulge scientific knowledge in the telecommunications area,
by developing the necessary research and applying it an international context as a way to increase the teaching
and training levels of both undergraduates and postgraduates and to increase the competitiveness of the Portuguese
industry and telecommunications operators.
Telemanagement Forum It is the purpose of this forum to identify, develop and implement practical solutions, directed towards standardisation
and coherence of the operational activities of the telecommunications operators, mainly in the network management
and telecommunications operators’ areas.
ITU – International Independent and international organisation that promotes team work between Governments and the private sector
Telecommunications Union to explore network services and telecommunication services and develop communication technologies. UIT’s goals are:
to maintain and extend international cooperation between Member States and to improve the rational use
of all telecommunications classes; to promote technical support in the telecommunications area for underdeveloped
countries and to the development of technical means to; increase the profitability of telecommunications services and
to promote the extension of telecommunications benefits to all the inhabitants of the planet.
WWRF – Wireless World Research It is the purpose of this forum to contribute to the development of an integrated vision of a ‘wireless’ world and to
Forum assemble efforts in the definition of relevant research for the future of wireless and mobile communications.

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Company
National Associations – Information Society Purpose
Associação Aveiro Digital To promote the creation of a digital community by uniting all agents towards sustainable
development in social, economic and cultural terms and therefore contributing to improve citizens’
quality of life and well-being.
ADSI – Associação Distrital para a Sociedade To divulge and show the companies of that district the benefits of new technologies.
de Informação (Guarda Digital) To promote and support new projects concerning the Information Society.
ADT – Associação Portuguesa para o Desenvolvimento To promote TIO’s and communication perspectives and to make known the problems and techniques
da Telemedicina for telemedicine and telematics when applied to the health area.
AFCEA PORTUGAL – Associação para as Comunicações To ensure connections to NATO’s HQ, as well as to their respective commands and agencies.
e Electrónica nas Forças Armadas It also ensures the connection to the community telecommunications organisations.
AICEP – Associação dos Operadores de Correios To promote a closer binding in relations between associates, so as to contribute to the harmony,
e Telecomunicações dos Países de Língua Oficial development and modernisation of communications inside each organisation.
Portuguesa
ANETIE – Associação Nacional das Empresas To stand up for the electronics and information technologies management sector interests
das Tecnologias de Informação e Electrónica and to promote its sustainable development.
APCT-P – Associação para o Parque de Ciência To promote, build and develop a science and technology park located in Porto’s district. This park’s
e Tecnologia do Porto purpose is to contribute to the country’s scientific research and development and particularly
to the development of that specific region.
APDC – Associação Portuguesa para o Desenvolvimento To promote and contribute to the reality and future prospects of the telecommunications sector.
das Comunicações To study, debate and divulge the problems and techniques in the communications sector
and in other sciences and techniques related with that sector. To promote scientific and professional
improvement among our associates, as well as acquaintanceship and exchange of experiences
between associates. Finally, it is the purpose of this association to establish the interchange
of activities and services with similar associations.
APDSI – Associação para a Promoção e Desenvolvimento To promote and develop the Information and Knowledge Society in Portugal.
da Sociedade da Informação
APDT – Associação Portuguesa para o Desenvolvimento To promote telecommuting in a balanced and socially sustainable way, to increase the economic
do Teletrabalho growth and create more jobs.
APCC – Associação das Empresas de “Contact Center” Employer association that seeks to promote sustainable development in the contact centres’ market.
APGC – Associação Portuguesa de Gestão To study and promote knowledge management, contributing to perfect organisations’ performance,
do Conhecimento the country’s competitiveness and people’s quality of life.
APIDEA Association of companies and laboratories that participate in the PIDEA Programme – they give
a label to the R&D projects that make an application to get national or community funding.
APRITEL – Associação de Operadores To promote dialogue and exchange experiences among the several telecommunications operators
de Telecomunicações and to promote dialogue between those operators and public institutions, namely the ICP
and the DGCC.
To encourage the creation of conditions that make an efficient connection between operators
and competition easier.
ASSOFT – Associação Portuguesa de Software To promote, defend and diffuse the lawfulness, quality and integrity of software in Portugal.
CITMA – Centro de Ciência e Tecnologia da Madeira To support technological research and development activities on a regional level.
EGIDE – Economia e Gestão, Associação To research and develop Economics and Management teaching.
para a Investigação e Desenvolvimento do Ensino
da Electrotecnia, Electrónica e dos Computadores

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Company
National Corporate Associations Purpose
AIP – Associação Industrial Portuguesa To develop Portuguese economical activities and particularly its associates activities’ in the technical, economic,
commercial, associative and cultural domains.
AEP – Associação Empresarial de Portugal To promote, develop and defend management and associative activities.
APQ – Associação Portuguesa To promote and make known theoretical knowledge and practical experience in the Quality field,
para a Qualidade so as to engage all agents in the continuous improvement of Portuguese competitiveness and economy.
BCSD PORTUGAL – Conselho Empresarial To make the principles that characterise sustainable development known. To articulate cooperation between the
para o Desenvolvimento Sustentável management community, governments and civic society so as to promote sustainable development. To promote
educational activities and training to make the principles of sustainable development known. To participate
in or promote other initiatives that may contribute to the sustainable development of Portuguese management.
COTEC PORTUGAL – Associação Empresarial To make the relationship between any agents that intervene in the National Innovation System more active.
para a Inovação To arrange innovation policies in degrees. To abet and make companies aware of research and development
investment, as well as practicing all legal acts related with the pursuit of this associative purpose.
ELO – Associação Portuguesa para To promote and develop economic, social, scientific and cultural interchange between Portugal
o Desenvolvimento Económico and underdeveloped countries, particularly Portuguese-speaking countries.
e a Cooperação
ICAP – Instituto Civil da Autodisciplina To defend its associates interests. To offer support by providing legal, economic and financial consulting.
da Publicidade To establish protocols to gain special conditions for its associates.
Other Associations/National Foundations Purpose
Associação Portuguesa contra a Leucemia To contribute, on a national level, to increase the efficiency in the treatment of leukaemia and other similar
haematological neoplasias. To provide support for patients and their families. To promote scientific investigation
about the nature, prevention and treatment of these illnesses.
Liga Portuguesa contra a Sida To carry out studies about AIDS. To invest in AIDS tracking and prophylaxis. To make campaigns against AIDS
more active. To support all people affected by AIDS in some way.
AMTC – Associação para o Museu To create and manage a transportation and communications museum. To preserve infrastructures
dos Transportes e Comunicações with a historical interest. To create a documentation centre and develop public interest in that area.
Fundação do Desporto To support the progress and development of sports, particularly high competition sports.
Fundação Económicas To carry out, promote and sponsor scientific research, innovation and development about economic, financial
or management studies.
Fundação Luso-Brasileira To promote or support cultural, educational, scientific, management and assisting initiatives in Portugal,
in Brazil and in other Portuguese-speaking countries or territories.
Fundação Luso-Espanhola To increase and develop cooperation between the Spanish and Portuguese people by supporting, promoting
or valuing cultural, economic, technical, scientific and sportive activities.
Fundação Portugal África Contribute to carry out, increase and develop cultural, scientific and educational initiatives in Portugal
and Africa, namely in African Portuguese-speaking countries. Those initiatives seek to value the continuance
of historical and civilizational relations between Portugal and African countries, looking forward for future
progress and development.
Fundação Portuguesa das Comunicações To promote the study, preservation and diffusion of historical, scientific and technological heritage
in the communications field.
Serralves Foundation To promote cultural activities on all the Arts.

Ñ Sustainable
Company
Apart from its own Code of Ethics, PT subscribes several charters of principles and
good practices, thereby reinforcing its commitment with sustainability practices.
Declarations and codes of principles subscribed Year
ETNO’s Environmental Charter(1) 1996
Portugal Telecom’s Code of Ethics 2002
United Nations Global Compact 2004
ETNO’s Sustainability Charter(1) 2004
(1) European Telecommunications Network Operators’ Association.
PT commits itself to following the Global Compact principles concerning:
Human rights
> To support and respect international human rights protection within its sphere of action.
> To make sure that its corporations have no part in the violation of human rights.
Work
> To support associative freedom and recognise the effective right to collective negotiation.
> To support the elimination of all forms of forced and compulsory work.
> To support the complete eradication of child labour.
> To support the end of job and position discrimination.
Environment
> To adopt a preventive approach towards environmental challenges.
> To take initiatives that promote a greater environmental responsibility.
> To encourage the development and diffusion of environmentally sustainable
technologies.
Anticorruption
> Management activities must oppose all forms of corruption, including extortion and
bribery.
Global Compact is a set of universal management conduct principles developed by

the United Nations in 1999. They were created after an initiative by Kofi Annan, then
the United Nations Secretary-General. Kofi Annan made an appeal to all management
directors, civic society and governments to unite in a collective action that promotes a
more sustainable and participative world economy.
The companies that have subscribed voluntarily to those principles make a commitment
to apply them in their management actions and to make them known to their interested
parties.
By subscribing the Global Compact principles, PT has committed itself to include

them in its strategy and actions and to diffuse the Pact’s message among stakeholders,
thereby actively participating in the value chain.

Ñ Sustainable
Company
4 Group’s presentation and profile
Structure and management
Portugal Telecom is now structured by business areas which correspond to five large core
areas: Wireline Business in Portugal, Mobile Business in Portugal (TMN), Multimedia
Business (PT Multimedia), International Business, which includes Vivo (the joint-venture
with Telefónica Móviles for the mobile business in Brazil) and, finally, Instrumental
Companies. The Business Units are coordinated by the holding of the Group, led by
its Executive Committee, with the support of the Corporate Centre. The subsidiaries
companies’ reporting is functional, not based on hierarchy and, therefore, effective
articulation becomes possible.
Portugal Telecom, the holding of the Group, was founded on 23 June 1994 through
the merger of the following companies: Telecom Portugal, Telefones de Lisboa e Porto
and Teledifusora de Portugal. Through a public deed signed on 12 December 2000,
Portugal Telecom changed its name to Portugal Telecom SGPS and its operation to a
capital management company.
This change was approved in an extraordinary general meeting of shareholders on

14 June 2000 and is part of PT Group’s restructuring, which divided its businesses
between several sub-holdings. Portugal Telecom SGPS and its subsidiary and associated
companies operate mainly in the telecommunications field in Portugal and abroad.
Portugal Telecom
Wireline Domestic Mobile Multimedia International Instrumental Companies

Business Business Business Business and Other Businesses
At national level, strategic orientation is made of four vectors:

> On network management, the Group aims to decisively move forward on getting
operational synergies between companies.
> On “Personal” sector, will continue to bet unmistakably on mobile business which
will assume the major offer of voice and personalized data service for the individual.
> On “Residential and SoHo” (small offices, home offices) sector, to give a step forward
in order to increase the development of voice, broadband and video offer.
> On “Business” sector, stronger bets on integrated business solutions (voice and data;
wireline, mobile and systems) offer.
At international level, PT is more active in strategic orientation for its position

development on mobile markets, as Brazil, where Vivo’s main challenges are maintaining
a profitable market leadership and getting improvement potential, result of operational
integration, and continuing to explore growth opportunities in North Africa, Portuguese
Africa and other geographies.
The so called instrumental companies are oriented towards transversal processes to

PT Group: companies from the Group working for the Group.

Ñ Sustainable
Company
Portugal Telecom
Wireline Business 100.00% PT Comunicações

100.00% PT Corporate
100.00% PT Prime
100.00% PT.COM
Domestic Mobile Business 100.00% TMN

100.00% PT Wi-Fi
Multimedia Businesses 57.56% PT Multimedia 100.00% TV Cabo

100.00% Lusomundo Audiovisuais
100.00% Lusomundo Cinemas
75.00% Lusomundo Media
International Businesses 50.00% Vivo 65.12% Telesp Celular

65.12% Global Telecom
51.42% Tele Centro Oeste
68.33% Celular CRT
90.89% Tele Sudeste
50.58% Tele Leste
100.00% PT Brasil 100.00% PrimeSys

56.96% Mobitel
32.18% Médi Télécom

40.00% CVT
51.00% CST
28.00% CTM
Key Companies 100.00% PT Sistemas de Informação

100.00% PT Inovação
100.00% PT PRO
100.00% PT Compras
100.00% PT Contact
78.12% Previsão

Ñ Sustainable
Company
Where we are
France
Marconi France Télécommunications > Telecommunications
Switzerland
Marconi Suisse > Telecommunications
Hungary
Hungaro Digitel HDT > VSAT operation
Morocco
Médi Télécom > Mobile
Macao [RAEM-China]
CTM > Wireline, mobile, Internet and data
TV Cabo Macau > Pay-TV
Telesat > Satellite broadcast
Directel Macau > Directories
East Timor
Brazil Timor Telecom > Wireline, mobile, Internet and data
Vivo > Mobile
UOL > ISP, Internet contents
Kenya
PrimeSys > Business communications
São Tomé e Príncipe Kenya Postel Directories > Directories
Mobitel > Call center services
CST > Wireline, mobile, Internet and data
Tradecom > e-commerce Angola
Guinea-Bissau Unitel > Mobile
Guiné Telecom > Wireline Elta > Directories
Guinetel > Mobile Multitel > ISP and data
Cape Verde Islands Mozambique

CVT > Wireline, mobile, Internet and data LTM > Directories
Directel Cabo Verde > Directories Teledata > ISP and data

Ñ Sustainable
Company
Organisation
Portugal Telecom, the Group’s holding, is responsible for the definition of policies and
for normalisation and harmonization of procedures, which ensure the implementation
of strategic guidelines defined by management bodies.
Thus, each business area works in accordance with principles of management autonomy,
guided by a common policy, under coordination of a System of Corporate Planning
and Control.
Corporate Centre is oriented several businesses coordination, reporting to PT’s Executive

Committee.
Board of Directors
Executive Committee > General Secretariat
CORPORATE CENTRE
> Regulation > Report and Consolidation

> Competition > Finance
> Communication > Investor Relations
> Internal Audit > Human Resources
> Institutional Relations > Know-How Management and Training
> Quality Analysis > Planning and Management Control
and Customer Satisfaction > Businesses Development
> Security > Legal Services

Ñ Sustainable
Company
The Corporate Centre responsibilities aim to represent the functional needs of the PT Group and of its participated companies.
We hereby summarize the units and the Corporate Centre responsibilities:
General Secretariat > to ensure administrative support to PT’s Finance > to organize and follow up operations in the debt
Board of Directors and to the remaining social bodies and capital market, to manage currency exposure and optimise the
ensure their communication with the company’s bodies and use of PT Group’s own financial resources.
with external institutions.
Investor Relations > to ensure adequate relations with the
Regulation > to follow up and influence the regulatory financial community (investors, shareholders, analysts and
environment in order to maximise PT’s businesses and to market regulation authorities), namely by providing PT’s financial
explore new opportunities in a competitive context. and corporate data and by organizing conferences and individual
meetings with financial investors, in order to maximize
Competition > to ensure support relating to politic and
shareholder value.
competition rules, to develop a culture of competition among
the PT Group companies. Human Resources > to attract, motivate, develop and retain the
best professionals and ensure the existence of capacities to
Communication > to articulate and coordinate communication
fulfil critical positions.
inside the PT Group, in the sense of creating a motivating
spirit of belonging to leverage the creation of value, as well as Know-How Management and Training > to ensure optimisation
to coordinate the institutional communication with the media. of know-how, competences and knowledge within the PT Group,
through adequate management of training.
Internal Audit > to ensure the efficiency and effectiveness
evaluation of PT’s companies internal control systems. Planning and Management Control > to assist the Executive
Committee in the establishment of the strategic goals regarding
Institutional Relations > to ensure corporate responsibility
the business units of the PT Group, conducting the planning
concerning relations with all entities, having in view the
and budgeting process and controlling the business and plan
improvement of PT Group’s business relation and image with
performance, in order to contribute to the development and
institutional clients, by evaluating the requests received and
adjustment of the PT Group’s targets and incentive system and
local sensitivity to competition.
ensuring correct development of strategic and/ or structuring
Quality Analysis and Customer Satisfaction > to develop and initiatives and by reporting the situation of the business to the
implement a management system to continuously evaluate the Board of Directors of the PT Group.
customers’ level of satisfaction, as well as the quality of the
Business Development > to assist the Executive Committee in
services provided.
taking strategic decisions with a high impact on the performance
Security > to plan, organize, direct, control and inspect and configuration of the Group, namely through the
PT Group’s safety activities. implementation of transversal and structuring projects, as well
as to direct, support and promote the development of the
Report and Consolidation > to ensure that the PT Group has
businesses of the PT Group.
an effective and efficient financial reporting procedure, as well
as to ensure internal control for an adequate, operational and Legal Services > to ensure legal support to PT operations.
more efficient financial reporting.

Ñ Sustainable
Company
Geographical presence 4 Businesses’ decentralisation
> 18 Contact Centres
> 2,666 Attending Positions The national companies of PT Group have their businesses spread throughout the
> Multi-site Contact Centre
> 1,525 attending positions managed
Portuguese mainland, taking into consideration the specific needs of their markets,
totally in outsourcing customers and operations.
> six million inbound and outbound
calls a month
National companies are:
> PT Comunicações | TMN | TV Cabo | PT Contact | PT SI | PT PRO | PT Inovação
PT Contact, a company of PT Group responsible for managing and operating call centres,
Attending positions has been decentralizing some of its operations to several national and international
districts.
32 This decentralization of some of PT Contact’s activities has also created jobs in some of
Bragança
[1 centre] the country’s districts. In 2004, several job posts were created in the cities of Bragança
238
Porto and Beja.
[3 centres]
194 The decentralized services are the following:

Coimbra > PT Comunicações – Operator services – Lisbon, Porto, Coimbra, Bragança, Beja and the Cape Verde Islands.
[2 centres]
> PT Comunicações – 16,200 Customer support service and Faults – Lisbon, Oporto and Coimbra.
> PT.COM – Customer support service – Lisbon, Beja and Évora.
> Yellow Pages – Beja.
1,853
Lisbon
[9 centres] The decentralization of these PT Contact activities was based on a balanced analysis
60
Évora of costs, benefits and impact on the local community. A survey concluded that there
[1 centre]
116 are several arguments in favour of these decentralization operations. The following
Beja
[1 centre] are the most important:
> A working force with a good cultural level (and, in the case of the Cape Verde Islands,
with a good linguistic level and awareness of the Portuguese reality).
> Scarce work opportunities in the concerned districts, with low levels of employee
rotation.
> An easy recruitment of working force.
> Receptiveness of local entities and local governmental institutions to investment.
> The existence of telecommunications structures with enough capacity to assure the
connection between different call centres (on an international level).
> The existence of spaces and infrastructures available in PT.
> The existence of local partners with experience in the management of call centres.
> An easier technical implementation resulting of synergies with existing platforms
and technologies, particularly the use of Voice-over-IP.
173
Cape Verde Islands,
Cidade da Praia
[1 centre]

Ñ Sustainable
Company
4 Management model designed for sustainability
Over the years PT Group has come to assume as one of its greatest concerns the creation
of a Corporate Governance in accordance with the best national and international
practices, thereby fulfiling the needs of transparency and quality in its internal actions
and in terms of the information disclosed to investors, to financial markets and to the
supervising authorities.
During 2004 the measures that the Board of Directors of PT Group had discussed in
2002 and 2003 were consolidated and developed, namely:
> To redefine the Auditing Committee’s functions.
> To identify a suitable profile for members of the Auditing Committee, according to
the provisions of the Sarbanes-Oxley Act.
> To define the nature of the relation between the Auditing Committee and the
Supervisory Board, according to what is established in Portuguese legislation and in
the Sarbanes-Oxley Act.
> To define future measures to be taken by PT Group in terms of the internal control
system.
Also in 2002 the Governance Committee and the Strategy Committee were created,
PT Group’s Code of Ethics was approved and disclosed, which established and clarified
the rules of conduct and the values thate serve as guidelines to all partners of the Group.
Still related with the new governance model, in 2003 the new statutes and acting rules
of the Auditing Committee were approved according with NYSE rules. These rules will
be in effect in all companies of the Group in 2005. In addition, new pre-approval rules
for services barred to external auditors were established in accordance with Securities
and Exchange Commission (SEC) rules, so as to ensure the necessary independence
of external auditors.
In 2004 the Auditing Committee consulted and hired external auditors for the biennium
2004-2005 and supervised the development and carrying out of the Internal Control
Programme in progress, apart from its ordinary Auditing supervision activities and functions.
2004 was also the year in which the Corporate Governance Committee, now Governance
Committee, was restructured. The Governance Committee also defined and established
the Code of Ethics for Financial Officers, thereby reinforcing the 2002 Code of Ethics
regarding the inherent characteristics of preparation functions and market information
reporting functions.
In 2004 PT’s good management practices were recognised by the Heidrick&Struggles

Consultancy Agency. In the study made by this agency were included 296 European
companies of several different sectors. According to the evaluation made, PT had 14.5
out of 15, which puts PT on the same position as British Telecom and KNP, leading
companies in the telecommunications sector. According to this ranking, PT is the
company with the best management in the Iberian Peninsula.

Ñ Sustainable
Company
4 Statutory bodies
General Meeting
Composition and operating rules

The General Meeting is constituted by the shareholders The result of the resolutions of the General Meeting is made
with voting rights, the meeting occurs once a year or public by PT through its website, as well as through the
whenever required to the General Meeting Chairman by Investor Relations Office.
the Board of Directors, the Supervisory Board or by
shareholders representing at least 5% of the share capital. Main responsibilities of the General Meeting
The responsibilities of the General Meeting are established
At present, the board of PT’s General Meeting, elected on
in the Articles of Association of Portugal Telecom.
4 April 2003 for a period of three years, has the following
composition:
Resolutions of the 2004 General Annual Meeting
CHAIRMAN: Armando Marques Guedes
The resolutions of the 2004 General Meeting are available
VICE-PRESIDENT: Miguel Galvão Teles
at the Company’s website.
SECRETARY: Luís Sousa de Macedo
Remuneration Committee
Participation and exercise of the right to vote
Every shareholder with the right to vote, a vote corresponding The Shareholders General Meeting resolved to delegate on
to every Euro 500 of capital (e.g. to every 500 shares, at a Remuneration Committee the responsibility for the
present) can participate in the General Meeting. The holders determination of the remuneration of the the members of
of American Depositary Shares (ADS), each ADS representing the corporate bodies. The Remuneration Committee is
a common share, are entitled to the same rights as the composed by the following members:
holders of common shares. These rights shall be exercised Armando Marques Guedes
through their respective representative. Augusto Athayde D’Albergaria
João Mello Franco

Proposals to be submitted by the Board of Directors to the
General Meeting as well as the reports that should legally
Supervisory Board
accompany them and further preparatory information are
made available to the shareholders in the company’s Portugal Telecom has a Supervisory Board composed by the
registered offices at least 15 days prior to the meeting. Its following elements:
contents are also disclosed in PT’s website. CHAIRMAN: Pedro Matos Silva
MEMBER: Gonçalo Vaz Botelho

In order to facilitate the access to those documents, especially
MEMBER: Ascenção, Gomes, Cruz & Associado, represented by Mário Gomes
to foreign shareholders, the Investor Relations Office, when
RESERVE MEMBER: José Vieira dos Reis
requested, shall send such information by mail, fax or e-mail.
There are no restrictions whatsoever regarding the vote by Powers and responsibilities
correspondence, which may fall on all legally foreseen Proceed to the supervisory of the company, in the terms of
matters. the Portuguese Code of Commercial Companies.

Ñ Sustainable
Company
Board of Directors
Powers and responsibilities Delimitation of responsibilities between the Board

The Board of Directors is responsible for the global leadership of Directors and the Executive Committee
of PT Group and for its strategic guidelines, as well as In order to better ensure the performance of its functions,
for the management (through the Executive Committee) PT’s Board of Directors created an Executive Committee,
and the supervision functions, being also its responsibility delegating in it functions of daily management, and
to ensure the balance between medium and long-term goals maintaining the supervision and control functions.
and short-term goals, in the pursuit of the interests of the
The Chief Executive Officer is the leader of the Group’s
company and of its shareholders.
management team. Thus, the CEO is responsible for the
The main responsibilities of the Board of Directors are operational management of the Group. On the other hand,
established in PT’s Articles of Association. the Chairman of the Board of Directors, in accordance with
the law and the articles of association, has namely to:
Composition and operating rules } Coordinate the activity of the Board of Directors and
PT’s Board of Directors is comprised of an uneven number distribute matters among directors, whenever required by
of members, between 15 and 23, elected by the shareholders management conveniences.
in a general meeting by a majority of the issued votes, with } Watch over the correct implementation of the resolutions
a term of three years. of the Board of Directors.
} Watch over the correct exercise of the Board of Directors’
Any shareholder, regardless of the capital held, may
functions of surveillance and control of the Executive
individually submit proposals for election of the Board of
Committee’s activity.
Directors.
On the other hand, and in accordance with the articles of Remuneration of the directors
association, a minimum of shareholders representing at The Remuneration Committee is, by shareholders’ delegation,
least 10% of the share capital, having voted against in the the statutory body responsible for the establishment of the
election of the Board of Directors, may appoint a member remuneration policy of the directors and for the definition
of the administration body. of the remuneration of the Board of Directors. This
Committee is directly elected by shareholders, and is mostly
The Board of Directors meetings are called by the Chairman,
composed by independent personalities. None of the
or in extraordinary cases, by two directors or by the
Executive Directors are members of this committee, and
Supervisory Board. Board Members have equal voting rights
they exercise no influence in the process of setting
and all resolutions of the Board of Directors are adopted
remuneration. The Remuneration Committee may use
based on a majority of votes. The Chairman is entitled to
external specialized consultants.
a casting vote, should parity occur.
The variable remunerations attributed to the Chairman of
The composition of the Board of Directors of PT is available
the Board of Directors and to the members of the Executive
at its website and the directors’ curricula are presented in
Committee do not include any attribution plans of share
Corporate Governance Report.
acquisition options. The remaining non-executive directors
do not receive any variable remuneration.
The fixed and variable remunerations ascribed to PT’s

directors in 2004 are disclosed in the Corporate Governance
Report.

Ñ Sustainable
Company
Executive Committee
Responsibilities
Under the terms of the articles of association and in harmony with the established in commercial law,
PT’s daily management belongs to an Executive Committee, comprised of five or seven directors. Members have
equal voting rights and all resolutions of the Executive Committee require a majority of votes. The Chief Executive
Officer (CEO) is entitled to a casting vote, should parity occur. The Executive Committee meets once a week.
Composition and operating rules

The Executive Committee sets the dates and frequency of its ordinary meetings. Extraordinary meetings
can take place when called by the CEO, by two members of the Executive Committee or by the
Supervisory Board. The Executive Committee may not operate without the presence of the majority
of its acting members, which can be ensured through vote by correspondence or by proxy.
To the CEO is due the coordination of the Executive Committee activities and distribution of matters to
other members, to call and chair the Executive Committee’s meetings and to assure the execution of
the adopted resolutions. The Executive Committee is comprised of the following directors:
CEO: Miguel Horta e Costa EXECUTIVE OFFICERS: Zeinal Bava | Carlos Vasconcellos Cruz | Iriarte Esteves | Paulo Fernandes
The following organization chart shows the allotment of responsibilities to the members of the
Executive Committee:
Executive Committee Executive Committee Executive Functions
} General Secretariat PT Comunicações

} Strategy Lusomundo Media
} Internal Audit Portugal Telecom Foundation
} Regulation
} Competition
Miguel Horta e Costa
Chief Executive Officer
} International Relations
} Communication
} Social Responsability
} Security
} Client Quality Analysis and Satisfaction
} Capital and Financial Market Relations PT Comunicações

} Accounting, Consolidation and Financial Reporting PT Multimedia
} Treasury TV Cabo
} Corporate Finance PT PRO
Previsão
Zeinal Bava
Executive Officer
} Human Resources PT Investimentos Internacionais

Vivo | PT Móveis | Unitel | CTM
Médi Télécom | PrimeSys | CST
Cabo Verde Telecom | Directel
Guiné Telecom | Timor Telecom | PT Ásia
Carlos Vasconcellos Cruz
Other International Businesses
Executive Officer
} Technology and Network Development TMN

} Innovation PT Wi-Fi
PT Comunicações
PT Corporate
PT Inovação
Iriarte Esteves
Executive Officer
} Planning and Management Control PT Sistemas de Informação

} Information Systems PT Compras
} Business Development PT ACS
} Real Estate Simarc
} Purchases
Paulo Fernandes
Executive Officer

Ñ Sustainable
Company
Corporate bodies supporting the Executive Committee
Advisory Board
The Advisory Board analyses, in conjunction with the Executive Committee, areas of
special importance for PT, namely matters regarding regulation and competition,
international investments, mergers, acquisitions and alienations. The Advisory Board
is chaired by Estanislau Mata Costa and further includes the following personalities:
Manuel Pinto Barbosa, Diogo Lucena, Aníbal Santos, José Manuel Neves Adelino,
José Manuel Tribolet, João Confraria, Luís Todo Bom and Luís Nazaré.
Disclosure Committee
The Disclosure Committee has been created to provide support to the Executive
Committee in the process of disclosure of information to the markets. This committee
has the purpose of ensuring the quality and reliability of the information disclosed
to the financial markets and ensuring the fulfilment of all the national and international
regulatory requirements relating to this matter. It is therefore the responsibility of
this committee to approve and execute the procedures and controls necessary to
ensure that the disclosure of information by Portugal Telecom to the shareholders
and investors (i) fulfils the applicable laws and regulations, (ii) is accurate, complete
and timely and (iii) represents with reliability the financial condition and the results
of the Group’s operations in all aspects that are materially relevant to the adequate
knowledge of its financial condition and performance.
The disclosure procedures and controls referred above are fully described in the
attached Corporate Governance Report.

Ñ Sustainable
Company
Other Committees of the Board of Directors
Name Functions Members
Governance Committee(1) To study, revise and evaluate the corporate governance principles Ernâni Rodrigues Lopes CHAIRMAN
applicable to PT Group, namely those regarding the Directors’ Miguel Horta e Costa
responsibilities, the relations between directors and shareholders, João Mello Franco
relations with the stakeholders and the general evaluation of the Henrique Granadeiro
government terms of the Group in the performance of the Board Jorge Tomé
of Directors and its Committees. Jorge Bleck
Carlos Blanco de Morais
To advise and propose to the Board of Directors the adoption
and revision of the governance model of the holding of the Group,
namely regarding internal rules and procedures related
to corporate governance principles and practices, its articulation
and relation with the management structure, the shareholders,
the other stakeholders and the market, the prevention of conflicts
of interest and the information discipline.
To supervise and apply the Code of Ethics of PT Group,

following its implementation and, when necessary or convenient,
interpreting its rules and integrating the cases not provided for,
as well as issuing opinions on the matters referred in the preceding
and other similar matters, when demanded by the Board
of Directors.
Audit Committee(2) To assist the Board of Directors and the Executive Committee João Mello Franco CHAIRMAN
in (1) supervising the quality and integrity of the financial Nuno Silvério Marques
information in the financial reporting documents, (2) evaluating Thomaz Paes de Vasconcellos
the Company’s External Auditors’ independence and capability,
(3) assessing the quality, integrity and efficiency of the internal
control system, (4) evaluating the external auditors’
and the Internal Audit Department’s performance and (5)
evaluating the compliance with legal provisions and regulations,
as well as recommendations and guidelines issued by the relevant
authorities. Ensuring the definition and/or implementation
of policies aiming at compliance with national and international
laws and regulations to which PT is bound.
Strategy Committee(3) To debate, analyse and present recommendations on the Group’s Ernâni Rodrigues Lopes CHAIRMAN
Strategic Plan. To deem the impact and efficiency of the Strategic Miguel Horta e Costa
Plan and the great strategic decisions made, suggesting possible Zeinal Bava
adjustments. To study and prepare for further discussion Carlos Vasconcellos Cruz
at a meeting of the Board of Directors, issues suggested Iriarte Esteves
by the Chairman and/or the CEO, related with strategic topics that Paulo Fernandes
may arise during the year. Joaquim Goes
Carlos Oliveira Cruz
Fernando Ulrich
António Viana-Baptista
Patrick Monteiro de Barros
(1) Meets quarterly or whenever called by the Chairman.

(2) Meets at least once every two months, and whenever necessary.
(3) Meets quarterly.

Ñ Sustainable
Company
Sustainability Committee
Throughout the year 2004 PT studied the best way to ensure the integration of corporate sustainability into the Group’s
management model. In the beginning of 2005 the Executive Committee approved the creation of a Sustainability Committee
that takes a high stand in PT’s management model.
Sustainability Committee ÉÑ Board of Stakeholders

Executive Committee
Corporate Centre
Members > To reinforce the Group’s performance as a sustainable

The Sustainability Committee is composed by the following company, making it known as such, both internally and
members: externally.
Miguel Horta e Costa [CHIEF EXECUTIVE OFFICER]
Zeinal Bava [EXECUTIVE OFFICER] Responsibilities

Iriarte Esteves [EXECUTIVE OFFICER] > To develop a coherent corporate sustainability strategy
Carlos Vasconcellos Cruz [EXECUTIVE OFFICER] common to all companies of the Group.
Paulo Fernandes [EXECUTIVE OFFICER] > To ensure the creation, within the Group, of the necessary
Luís Sousa de Macedo [SECRETARY] conditions to its sustainable economical, environmental and
Francisco Nunes [ACCOUNTING, CONSOLIDATION AND FINANCIAL REPORTING] social growth, according to international standards.
Luís Moura [HUMAN ASSETS] > To develop, promote and supervise projects and actions
Nuno Prego [INVESTOR RELATIONS] and to identify, define and control the teams responsible for
Miguel Amaro [INTERNAL AUDIT] carrying out those projects.
Abílio Martins [COMMUNICATION] > To reinforce the actions of the Portugal Telecom Foundation,
namely citizenship and philanthropy-related actions.
Operating rules > To ensure internal and external communication, reinforcing
The Sustainability Committee will be chaired by Miguel Horta the Group’s performance as a sustainable company and
e Costa, who will be in charge of the general coordination of making it known as such.
operations. Director Carlos Vasconcellos Cruz will ensure the > To control and evaluate the action plan established and
internal coordination with other members of the Executive integrated in the sustainability strategy.
Committee. The secretary Luís Sousa Macedo will ensure
The Sustainability Committee will be integrated in PT Group’s
the coordination and connection to the Portugal Telecom
corporate governance, reporting directly to the Executive
Foundation. Other members have delegated in Abílio
Committee and having a direct and tight relation with the
Martins the responsibility for operational coordination of
Board of Stakeholders.
this implementation. If necessary, other members shall be
included in this Sustainability Committee. This Committee ensures transparency and exactness in PT’s
relation with its stakeholders through the improvement of
Main goals dialog channels and avoiding any conflict of interests. In that
> To ensure that corporate sustainability is coherent and is sense, PT does not have any lobbying activity and/or makes
part of the Group’s strategy and is common to all companies any monetary contribution to organisations which do not fit
of the Group. into PT’s sponsorship, philanthropy and patronage policies.

Shareholders’ remuneration remains a priority for Portugal Telecom.
sharing The Company’s solid financial structure allowed us to share value

with our shareholders through dividends paid which totalled
value approximately Euro one billion in 2004.
with the
shareholder

Ñ Business
Sustainability
Shareholders’ pay out remains a priority for Portugal Telecom. Risk management is assured through the various Corporate
The Company’s solid financial structure allowed us to share Centre Units, Business Units and Service Units, which, based
value with our shareholders through dividends paid, which, on beforehand identification and scaling of critical risks, develop
in 2004, totalled approximately Euro one billion. risk management strategies for establishing adequate controls
This concern with the shareholder’s pay out can be seen and ensuring that risks are lowered to an acceptable level.
in the Company’s risk assessment and in the way new Considering how business risk management is a responsibility
challenges and opportunities are met. of all employees, PT has been developing a set of methodologies
Business risk management has become increasingly with the purpose of creating a culture of risk-awareness,
important in today’s global and highly dynamic market, establishing a common ground for identifying, scaling,
where the various business areas of PT are developed. assessing and controlling risks critical for the business.
4 Global and integrated risk assessment

The business of PT Group is liable to a great number of risk factors: while some remain
outside management control, others should be managed proactively to ensure the
positive performance of the Group. The latter exert their influence over the operations,
the revenues, the results, the assets, the liquidity and the resources of the Group and,
therefore, the Company’s share value.
The employed risk management strategies aim at ensuring that:

> The systems and procedures of control, as well as the policies developed, allow us to
meet the expectations of shareholders, management bodies and the general public.
> The systems and procedures of control, as well as the policies developed, are in
accordance with every applicable law and regulation.
> The financial and operational information is thorough, reliable, secure and reported
periodically in a timely fashion.
> The resources of PT Group are used efficiently and rationally.
> The share value is maximised.
> The operational management has taken the necessary steps to correct issues previously
reported.

Ñ Business
Sustainability
The main risk factors present in PT Group’s business which were subject to analysis are:
Regulation > ensuring the compliance with all regulatory Retaining talent > ensuring the capacity to allocate employees
changes, given the threats and opportunities they with the right skills, properly motivated, in the right jobs. The
represent to the Group’s competitive position within its management of this risk factor is one of the duties of PT’s
business activities. Regulatory risk management is assured Directorate of Human Assets, which will identify the Group’s
through the Directorate of Regulation and Competition of key elements so that it may implement retaining strategies
Portugal Telecom, whose duties include being up to date adequate to the segments set by its management.
on new applicable regulations issued forth by national
as well as international legislative bodies which may affect Financial markets > changes in the expected revenues obtained
the Group. from external investments, as a result of several variables,
namely, interest and exchange rates. This particular risk
Competition > a potential decrease in wireline revenues as a management is assured through the Directorate of Finance.
result of the progressive replacement of wireline for mobile PT Group hires a set of derived financial instruments,
and the increase of the number of competitors in the wireline with the purpose of minimising the risks of fluctuations
business. The management of this risk factor and its effects in the interest and exchange rates. The hiring of financial
on Portugal Telecom and its shared companies is a constant investments is conducted after careful analysis of the risks
concern for the Executive Committee, seeking to develop new and potential benefits, and after consulting several entities
and improved products and services, providing innovation which play a role in this market. These operations are subject
and greater value when compared to their competitors, whose to prior approval by the Executive Committee and will entail
goal is, ultimately, to consolidate the Group’s image as a a constant monitoring of the evolution of financial markets
leader and pioneer in the telecommunications market. and of the positions held by the Company. The fair value of
these instruments is regularly determined throughout the
Technological evolution > the need to invest in increasingly year, in order to allow a continuous assessment of these
competitive areas with a recent history of very rapid instruments and its economic and financial implications.
technological changes. PT Inovação is one of the Group’s
companies. Its goal is the technological development of the Inspection > the evolution of tax legislation and potential
Group’s several businesses with regards to applied research, interpretations of the different applications of tax and related
engineering services and the development of innovative regulations. This risk management is carried out by the
solutions and services, both in the local and international Directorate of Reporting and Consolidation of PT, which
markets. will analyse every tax regulation and the opportunities arising
PT Sistemas de Informação is another company of PT Group through fiscal planning. This department may make use of
which has been developing the implementation of policies and external consulting whenever the issues under analysis are
procedures that will ensure, consistently, a continuing services considered critical and, therefore, requiring the interpretation
offer from the Group’s several companies. The implementation of an independent body.
of a disaster recovery programme is an example of that.
Ethical, social and environmental risks > through the Sustainability
Strategic partnerships > ensuring partnerships, joint-ventures Committee, the Board of Directors constantly carries out the
and any other kind of efficient relations that will positively identification and monitoring of social, environmental and
influence our competitiveness. The Executive Committee ethical risks and analyses their impact on PT’s businesses.
of PT and of its shared companies has played a key role in This risk factor now encompasses all other risk factors and
the management of this particular risk, developing existing is, as of 2005, and in agreement with PT’s strategy for
opportunities. sustainability, associated to the Group’s strategical analysis.

Ñ Business
Sustainability
Through the Sustainability Committee, the Board of Directors constantly carries out the
identification and monitoring of social, environmental and ethical risks and analyses
their impact on the Group’s several businesses.
Internal control
In order to meet the regulatory demands to which it is subject, both on a national
and international level, Portugal Telecom has been developing a project of Internal
Control, headed by the Directorate of Corporate Reporting and Consolidation,
aimed at guaranteeing the compliance with the established goals, policies and
procedures, guaranteeing the reliability of the financial information, minimising the
occurrence of frauds, and ensuring that critical risks will be monitored and lowered
to an acceptable level.
This project, in line the best practices carried out on an international level and in
accordance with the Sarbanes-Oxley Act, is being undertaken in the principal shared
companies, but its implementation in all of the Group’s companies has already been
decided. This programme foresees not only the introduction of Internal Control
procedures, but also its reviewing, verification and continous improvement. On a
quarterly basis, the disclosure controls and procedures are analysed with regards to
their adequacy, efficiency and operation.
In 2003, PT Group implemented a cascading model for certifications, with the purpose
of guaranteeing the accountability of the chief participants in the process of Financial
Reporting, based on Annual Certifications, Management Questionnaires and liability
statements, prepared according to templates defined on a corporate level and respectively
carried out annually, monthly and quarterly. The aforementioned certifications aim at
making the chief participants, including the CEO and the CFO, accountable for the
process of divulging information, as well as ensuring that all relevant financial and
non-financial information has been reported to the Corporate Centre and is accurate.
PT Group has several resources, including a corporate Directorate of Internal

Auditing, which oversee the performance of the established policies and procedures
for control.

Ñ Business
Sustainability
+ 52%
CAGR
35
22
16
10
2002 2003 2004 2005
Dividend per share [Euro cents]
4 Shareholders
Shareholder return, giving preference to a progressive increase in dividends, continues
to be a top priority to PT. PT’s solid financial position allowed for around Euro 1 billion
being returned to shareholders in 2004, through a combination of the share buyback
programme and an improved dividend payout.
PT distributed Euro 0.10 per share in 2002, Euro 0.16 per share in 2003, and Euro
0.22 per share in 2004, an increase of 38% on the previous year. In 2005, the
dividend per share for the year ended 31 December 2004 increases by almost 60%
y.o.y to Euro 0.35.
(1) Includes Euro 190 million related 952952

to equity swaps held by PT at year-end 2004,
equivalent to 1.72% of share capital. 685685
(1) (1)
397397
196196
267267
125125 201201
2002
2002 2003
2003 2004
2004
Dividends
Dividends ShareShare
buyback
buyback Shareholders’ remuneration
Shareholders’ remuneration
[Euro[Euro
million]
million]

Ñ Business
Sustainability
Portugal Telecom’s shareholders obtained an absolute return of 17% in 2004, which
outperforms the return in the European telecommunication’s sector and in the
Portuguese market.
Telecom Italia 33.4
Telenor 29.1
Telefónica 22.9
KPN 20.5
Portugal Telecom 16.8
Deutsche Telekom 14.8
British Telecom 13.7
Swisscom 13.4
TeliaSonera 9.2 Telecom Europe

DJ Stoxx
14.7
France Télécom 8.9
Total shareholder return(1) of European telecoms in 2004 [%]
Source: Bloomberg (local currency).

(1) Price performance and dividends reinvested in the shares of the Company.
PT outperformed the market

PT shares outperformed both the DJ Stoxx Telecom Europe and the Euronext PSI-20
indices in 2004, by 2.1pp and 1.4pp respectively, increasing 14% on the beginning of the
year to close at Euro 9.10. This performance was even more impressive given PSI-20
for 2004 positioned as the third best performing among the major equity markets.
9.80
9.40
9.00
8.60
8.20
7.80
7.40
Jan. 04 Feb. 04 Mar. 04 Apr. 04 May 04 Jun. 04 Jul. 04 Aug. 04 Sep. 04 Oct. 04 Nov. 04 Dec. 04
Source: Bloomberg (local currency). PT performance vs DJ Stoxx Telecom Europe and PSI-20 in 2004 PT DJ Stoxx Telecom Europe PSI-20

Ñ Business
Sustainability
Telecom Italia 28.1
Telenor 26.4
Telefónica 19.1
Deutsche Telekom 14.7
KPN 14.2
Swisscom 9.8
TeliaSonera 8.7
Telecom Europe
British Telecom 7.8
DJ Stoxx
11.9
France Télécom 7.5
European telecoms share price performance in 2004 [%]
Among the major financial markets, the Bovespa registered the best performance in
2004 (+17.8%), followed by the IBEX (+17.4%) and the PSI-20 (+12.6%).
Bovespa 17.8
IBEX 17.4
PSI-20 12.6
DJ Stoxx Telecom Europe 11.9

S&P 500 9.0
NASDAQ 8.6
Footsie 7.5
CAC 7.4
DAX 7.3
Dow Jones 3.1
Performance of major stock market indices in 2004 [%]

Ñ Business
Sustainability
PT continues to be the most heavily traded company in Portugal
PT continues to be the domestic market leader in terms of liquidity and market
capitalisation. Around 1,173 million PT shares were traded in 2004, equivalent to a
daily average of 4.5 million, with the trading volume accounting for approximately 40%
of the total trading volume of Euronext Lisbon. PT represented 19.3% of the PSI-20
index at the end of 2004, being the highest weight of the Portuguese major index.
With approximately Euro 11 billion, PT is also the largest company in terms of market
capitalisation in Portugal.
EDP 8.2
BCP 6.2
Brisa 4.0
BES 4.0
PT Multimedia 2.9
Cimpor 2.8
BPI 2.3
Sonae 2.1
Jerónimo Martins 1.2
Market capitalisation of major Portuguese companies in 2004 [Euro billion]
Source: Bloomberg.

Ñ Business
Sustainability
4 Shareholder structure
Diversified shareholder base
PT’s shareholder structure is characterised by a great diffusion: no shareholder holds more than 10% of our share capital
and only nine shareholders hold more than 2% of shares, with a strong presence of national and international institutions,
as can be seen in the following charts containing qualified participations and their geographical distribution (as of
31 December 2004):
UK/Ireland 8.8%
Portugal 26.6%
31.9% USA
The influence any of these shareholders may exert upon
the society is balanced and evened out, with a very
0.1% Rest of the World
limited representation in the Board of Directors, which
is a non-executive body. There are no elements that
Continental Europe 31.8% point to a concentration of shareholders positions or to a
0.8% Not identified
disproportionate influence by any group of shareholders.
Share capital geographical distribution
The participation of the only shareholder which holds the
power to veto – the Portuguese state –, being very limited
in quantity (500 shares), represents in itself a link to one
of the most important relations centres for the Company’s
Institution No. of shares % of capital
activity and is, therefore, a positive element of interest for
Telefónica 113,085,650 9.7
shareholders. As such, there are no signs that it may undertake
Grupo Banco Espírito Santo 107,593,232 9.2
actions contrary to the Company’s best interests and share
Brandes Investment Partners 83,572,177 7.2
value. In fact, its power to veto is indeed limited and mostly
Capital Group Companies 63,193,870 5.4
protective, not applicable to management issues.
Grupo Caixa Geral de Depósitos 57,875,682 5.0
Grupo Banco Português de Investimento 28,741,615 2.5 Regarding minority shareholders, the devaluing of their
Cinveste 28,338,141 2.4 positions is prevented by a strong legislative and regulatory
Fidelity Group 23,592,185 2.0 background, as well as through the presence and supervision
Telexpress* 23,000,000 2.0 of a significant number of independent administrators in
* Holding pursuant to the terms of Article 447 of the Portuguese Commercial Companies Code. PT’s Board of Directors.

Ñ Business
Sustainability
4 Key financial figures
The stock capitalisation has grown. This was mainly due to the positive performance
of the Company’s activity. The net income, the operating revenues and the dividends
per share evidence this very same reality.
KEY FIGURES Euro million
2004 2003 2002
Operating revenues 6,023 5,776 5,582
EBITDA 2,326 2,268 2,230
Operating income 1,369 1,314 1,267
Net income 500 240 391
Research and development* 41 35 38
Net assets 12,963 13,558 13,726
Shareholders equity 2,705 2,941 3,111
Share capital 1,166 1,254 1,254
Net debt 3,123 3,216 4,037
Market cap 10,615 9,781 8,216
Earnings per share (Euro) 35 22 16
Pay out Ratio 53% 84% 32%
* Operating costs of PT Inovação.
OPERATING REVENUES BY BUSINESS Euro million
2004 2003 2002
Wireline business 2,124 2,138 2,274
Domestic mobile business • TMN 1,444 1,347 1,267
Mobile Brazil • Vivo 1,503 1,362 1,218
Multimedia business • PT Multimedia 729 683 622
Other 223 246 202
6,023 5,776 5,582

35% Wireline
35%
4% Wireline
Other
4% Other
12% PT Multimedia
12% PT Multimedia
25% Vivo
25% Vivo
24% TMN
Operating revenues by business 24% TMN
Operating revenues by business
25% Brazil
25% Brazil
75% Portugal
Operating revenues by region 75% Portugal
evenues by region
Operating revenues

Ñ Business
Sustainability
EBITDA BY BUSINESS UNIT [Main brands and their financial performance] Euro million
2004 2003
Wireline 902 907
Retail [PT Comunicações and PT.COM]
Wholesale [PT Comunicações]
Data and corporate solutions [PT Prime]
Other wireline operations [PT Comunicações and PT.COM]
Domestic mobile 747 690
TMN
Brazilian mobile 496 509
Vivo1
Multimedia 192 135
Pay-TV and cable Internet [TV Cabo and PT Conteúdos]
Audiovisuals [Lusomundo Audiovisuais and Lusomundo Cinemas]
Media [Lusomundo Serviços and Lusomundo Media]
Other multimedia operations [PTM holding company]
Other (11) 27
(1) Considering a Euro/Real average exchange rate of 3.6359 in 2004 and 3.4849 in 2003.
SUSTAINABILITY REPORT 2004 41

Ñ Business
Sustainability
[Euro million] 2,021

1,879 1,911
1,275
1,210 1,204
930 890
879
685
619
557
2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004
Cost of sold merchandise Supplies Costs with personnel Other costs
and consumed material and external services and operating losses
4 Cost structure and indirect production

of wealth in the Portuguese economy
The importance of PT’s activity for the Portuguese economy is measured not only
by the number of jobs it provides and the direct investment made, but also by the
economic activity generated in other sectors as a result of PT’s services performance
and production of goods.
The Company’s cost structure can be seen as a structure for generating revenues for
others or, in other words, as the Added Value PT’s activity creates in the economy.
Personnel costs become revenues for employees and for the State; costs related to sold
goods and resources spent become another company’s sales; supply costs and those
resulting from outside services are provided to PT by other companies and, as such,
are presented in the section concerning revenues and earnings of those companies
financial accounts.
41% Supplies and external services
14% Costs of sold merchandise

and consumed material
27% Other costs and operating losses
18% Costs with personnel
Costs structure > 2004

Ñ Business
Sustainability
Regarding costs directly associated with employees, in 2004 there was an increase of
6% in the total remuneration paid to employees. This number is mainly due to the
creation of new jobs in the foreign economies where PT conducts its activity. Between
2003 and 2004, the Company generated an increase of 26% in the number of jobs
available in developing countries, contributing to the growth of their economies.
297 343 269
582 587 621
2002 2003 2004
Evolution of costs with employees [Euro million]

Remunerations Social responsibilities
Social responsibilities include retirement benefits
Portugal Telecom, like any other law-abiding company or citizen, fulfils every fiscal
obligation during the course of its activities. Therefore, the amount of taxes paid since
2002 is divided as follows:
110
89
127
377
344
176
2002 2003 2004
Evolution of taxes paid [Euro million]

Income taxes Other taxes paid
Applications for Community funds

Concerning applications for Community funds, in 2004, PT received a total of
Euro 5,225,035 in subsidies.

sharing Ñ Involvement
value
with
with the
Community
everyone
Responsible market
leadership towards
stakeholders
In its various business areas, Given PT’s contribution to the Portuguese economy and bearing in mind that the promotion of a sustainable
PT is the leading company development is one of the main goals for the Company, a strong interaction has been created between
in the Portuguese market. The activity the Group and the various economic agents: investors, regulatory bodies, the media, employees, customers,
of the electronic communications sector, suppliers and the community – i.e., PT’s stakeholders. They are the ones who have a say in the Group’s
where it operates, is followed by Anacom activity, the ones entitled to make demands about this very same activity, in other words,
– Autoridade Nacional das Comunicações, they are what we call the “interested parties”. It is only through dialogue, through a close relationship
the Portuguese regulatory body and the value PT continuously shares between all its stakeholders that we can guarantee the maximisation
for this sector, and also by the Autoridade of the Company’s value.
da Concorrência, the regulatory body
for the issues related to competition.
Customers Society
Financial Regulating
Portugal Telecom
community entities
Employees Suppliers

Operating revenues [Euro million]
Domestic Brazilian
Wireline Mobile Mobile Pay-TV
2,266 1,588 1,503 496
Our stakeholders
Stakeholders contribute to the sustainable growth of Portugal Telecom through:
> The development of products and services supplied by the Company:
• Customers: demand quality and direct the development of new technologies towards
the satisfaction of their ever increasing requirements in the field of communication
and information technologies.
• Employees: crucial to the development and implementation of innovative solutions.
• Financial community: values PT’s assets and believes that the strategies employed will lead
to increasing returns, justifying the initial investment.
• Suppliers: they are the cornerstone in the life cycle of the services and products sold,
and must abide by the ethical and environmental principles promoted by PT.
> The acceptance of the economic activity generated by the Company endorsed by a number of key agents,
promoting a continuous growth of the business, among them:
• Financial community: Analyses the way PT conducts its activities, evolving throughout the years
according to the values held by society. Today, besides the usual financial risks, there are many
other risk factors who may, indirectly, influence the Company’s dividends. The international
market has been compelling companies towards the development of procedures and practices
that compensate for the environmental and reputational risks. In order to maintain the trust
placed by current and potential investors, PT needs to prove that its strategy encompasses
long-term actions and the new challenges and demands of the market.
• Regulatory bodies: their responsibility is to supervise the electronic communications sector.

In order to meet the new demands of a recently liberalised market, PT established
the Directorate of Competition Policy, thus highlighting the importance of fulfilling
the current legislation and rules for the market.
• Society: With the purpose of, directly or indirectly, creating new jobs, PT also acknowledges
its strong responsibility towards the Portuguese society. Such responsibility manifests itself
especially in the promotion of digital inclusion, that is, in helping those who, for financial reasons,
reasons of health or any other reason, do not usually have access to information services,
thus forwarding the development of their professional activities.
In this chapter we would like to present the effort PT has made in the fostering of these relations, while
trying to keep pace with the new demands of the market. Thus, this concept of dialogue and sharing value
with the stakeholders includes the whole value chain of products and services offered by the Company.
Portugal Telecom
Wireline
2004 4.4 million

2003 4.2 million
Mobile business
2004 31.6 million

2003 25.5 million
Pay-TV
4 Customers
The strengthening of PT’s leadership in its economic sector is evident in the number
2004 1.6 million of new customers in the Group’s various businesses, which increased between 2003
2003 1.4 million and 2004. This rate of growth in customers is lowest in the wireline business, which
is already in a more mature stage, contrary to the mobile and broadband businesses,
which, from 2003 to 2004, registered a growth of 23.7% and 77.7%, respectively.
Broadband
PT’s relationship with its customers is based on transparency, trust and a service
which strives to meet all of their needs. Because business growth and the creation
2004 695 thousand of long-term value can only be achieved through consumer satisfaction, PT Group is
committed to establishing a dialogue with its customers, so that it may know their
2003 391 thousand
real expectations.
A policy of respect for consumer privacy

Today, the advancements in the field of information technology In Portugal, the National Committee for the Protection
make it easier to process and exchange personal data. In of Data, which began its activity in 1994, stands as the
order to respect the freedom and the basic rights of every independent administrative body tasked with regulating and
individual, PT Group, as the leader in the telecommunications supervising the process of personal data, so as to assure
sector, has conducted its activity under a strict adherence to the safeguarding of the freedom, the guarantees and the
national, European and business legislation which provides Human Rights provided for in the Constitution and in the
for the protection of personal data. Law, regarding this matter.
The confidentiality and safety of consumer data, access Besides fulfilling the requirements of all legislation in effect,
security and the exchange of information between databases, in PT Group there is also a strong involvement of legal
as well as the confidentiality of telecommunications contents, entities in the analysis of relevant situations.
are some of the aspects we must safeguard.

Ñ Involvement
with the
Community
Focusing on the customer
In addition to the strategies, initiatives and commercial commitments undertaken by
the Group’s companies towards their customers, related to their specific performance in
each market, PT Group has carried out a number of consumer studies on a corporate
level.
Periodically, the Directorate of Customer Satisfaction carries out market studies with
the purpose of correcting weaknesses and strengthening positive aspects.
The results of the last market study, concerning the image of the Group, show us that:
> The “honesty” and “transparency” depend, largely (62%), on the “honesty” of the
Group’s various companies.
> The “credibility and trustworthiness” depend, largely (58%), on the “credibility and
trustworthiness” of the Group’s various companies.
> The image of “better prices” presents a very strong relation (55%) to the pricing
image of PT Comunicações.
> The image of “speed and efficiency” presents an average relation (41%) to the image
of speed of PT Comunicações.
> The image of “proximity to the customer” presents an average relation (45%) to the
image of proximity of PT Comunicações and TMN.
> The image of “human team and initiative” presents an average relation (47%) with
the image of PT Comunicações and TMN.
In the following chart we present the awareness of the Group’s companies in the
residential and non-residential segments. In the matrices below the positive and negative
aspects that customers attribute to PT Group can be seen.
Residential market
Prices Covertures
Information Know-how
Dimension Solid
Bureaucratic Innovating
Trust
- +
Deadlines Economically solid

Prices Variety of services
Bureaucratic Innovating
Dimension Trust
Politicised Leader
Non-residential market
Axles of customer satisfaction

Ñ Involvement
with the
Community
In 2004, PT launched a campaign under an agreement A structure focused on the customer
with Deco, the Portuguese Consumer Rights Association, The Directorate of Customer Satisfaction, whose duties
established after a lengthy negotiation process. This agreement include serving as Customer Ombudsman, was created in
denotes the matching interests of Portugal Telecom and Deco 2004 inside the holding with the purpose of assuring the
regarding the satisfaction of consumer interests. normal operation of the interaction between customers and
the Group’s companies.
Under the aforementioned agreement, PT committed itself
to having PT Comunicações provide, free of charge: This body, like those in all of the Group’s companies, works
> Calls made by its customers to and from wireline numbers, towards strengthening the relationship between PT and its
for 13 consecutive Sundays, beginning on 21 March 2004 customers.
and ending on 13 June 2004, for the duration of the whole
day (national, regional and local calls). Under the agreement,
1.2 million customers made approximately 16 million calls,
with an average duration of 15 minutes each, for a total of
approximately 143 million minutes.
> Calls made by its customers to and from wireline numbers
on 15 March 2004, World Consumer Day, between 7 pm and
12 am (national, regional and local calls).
> The monthly subscription for the month of September,
2004, to pensioners and retired people, who benefit from a
special discount plan. Customer support
> A credit in the amount of Euro 25 to all consumers who All of the Group’s companies have customer support centres
subscribed to an ADSL Internet service, from any service designed to provide help and answers to customer queries
provider, from 15 March to 15 September. in a more streamlined way.
Realising the efficiency that consumer integration affords

Assurance of continuous service
towards obtaining good company management results,
Throughout 2004, PT Group developed a series of processes
PT Group intends to develop, in 2005, a number of consumer
that assure the continuity of the services provided through the
inquiries. Under the guidance of the recently instituted
implementation of policies and infrastructures for disaster
Directorate of Customer Satisfaction, this process of
recovery. To that effect, PT SI has certified professionals
consultation will take place as a series of informal meetings
through the Disaster Recovery Institut and completed a data
in several district capitals throughout the country, with the
centre in Porto, which will serve as support structure to
following goals:
these systems.
> Measuring the value that consumers attribute to the
different assets of the Company (tangible and intangible). Given the importance of information systems to the Group’s
> Correcting the Company’s strategic actions which may various businesses, most systems – those deemed as critical
constitute a risk to its reputation. – are located in this data centre, which, besides its high
> Understanding the expectations of consumers. reliability and capability, was built and is maintained in
accordance with the best practices at an international level.
PT SI will begin, in 2005, a process of certification in

compliance with the BS 7799 standard (certification of
information security).

Ñ Involvement
with the
Community
CRM
The basic concept for Customer Relationship Management is “treating different
Customers differently”.
PT invests in a corporate philosophy that is based on knowing its customers and

developing a specific relationship with each and every one of them.
Our CRM policy stands on four pillars:

> Knowing: it is not possible to establish a relationship with someone we don’t know.
PT tries to know each customer individually.
> Sorting: PT sorts its customers according to their needs.
> Interacting: PT invests in the continuous improvement of the efficiency of its
customers interactions, using them to collect information useful to the strengthening
of that relationship.
> Customising: that is, treating each customer with respect for its individuality and
specific needs.
Electronic invoice
In 2005, PT launched an innovative service that allows its customers to monitor and
analyse their consumptions in a safe and convenient way.
The electronic invoice service will allow customers to receive invoices from the Group’s
different companies in an electronic format, through e-mail. This way, customers
will be able to replace paper invoices by going online and accessing the invoices and
consumptions for the last three months.
The electronic invoice offers the following benefits:
> A convenient way to access invoice information.
> An e-mail notice whenever you receive a new invoice.
> Getting rid of paper invoices.
> Access to detailed consumption information.
Customer support numbers [in Portugal]
Wireline 16 200 Customer support

PT Comunicações 16 206 Company support
16 208 Technical support
Mobile 1696 Customer support

TMN 12 033 Invoice
800 96 2021 Pricing plans
Pay-TV 707 299 499 Customer support

TV Cabo 808 200 400 Commercial support
Sapo ADSL 707 227 276 Customer support
PT Wi-Fi 800 200 181 Customer support
Main services: 24 hours a day | 365 days a year
+ 100 stores
+ 500 agents
www.telecom.pt

Ñ Involvement
with the
Community
4 Financial community
PT holds a policy of providing clear and transparent information, on a regular basis,
to its shareholders and other members of the financial community. To that end, it has
developed a very active programme of investor relations.
Investor website: http://ir.telecom.pt
PT possesses a team dedicated specifically to the relationship with analysts, rating

agencies and investors. A constant dialogue has been established between the Company
and all these agents, resulting in the identification of issues relevant to the market and
requiring more detailed information.
PT stepped up their investor relations activities in 2004, participating in several events

including investor roadshows, analyst and investor presentations, one-on-one meetings
and conference calls, as well as investor conferences in Europe and in the us.
In 2004, PT held a total of approximately 380 contacts with analysts and investors. 220
of these contacts were one-on-one meetings hosted during roadshows and 90 were at
investor conferences, while the remaining 70 were at PT’s offices through one-on-one
meetings and conference-calls.
During the year, PT held four roadshows in Europe and the us, of which the two most
significant were held in March 2004, after the announcement of the full year results,
and in October 2004 after the announcement of the first half results. The first roadshow
covered 8 cities in 6 countries, while the second involved meetings with investors in
13 cities in 10 countries.
PT hosted two presentations to the financial community in Lisbon to present and

discuss the company’s group and divisional strategy and prospects. The presentations,
hosted by a range of PT’s senior management, included a profound discussion over
several other issues including regulation, pensions funds, corporate governance and
shared services.

Ñ Involvement
with the
Community
Investor relations awards
The domestic and international financial community continues to recognise PT as a
reference in terms of investor relations. This was recognised domestically by the awards
PT received in July in the 2004 Investor Relations Awards, promoted by Deloitte,
Semanário Económico and Diário Económico, namely:
Best Global Investor Relations Programme – PSI-20.
Best Usage of Technology in terms of Investor Relations.
Annual Report (non-financial) – Honourable Mention.
Internationally, PT won 2 major prizes at the IR Magazine Eurozone Awards, which

is widely recognised as leading international IR awards event:
Grand Prix for Best Overall Investor Relations.
Best Use of the Internet for Investor Relations.

Ñ Involvement
with the
Community
4 Regulatory and supervisory bodies
The electronic communications sector has been completely liberalised since 2000. In this
context, its legal framing has been developed towards a scenario of free competition.
The year 2002 saw the adoption of a new legal framing for electronic communications
networks and services, composed by a set of European directives regarding the
telecommunications sector(1). These directives were implemented in Portuguese law
with Law no. 5/2004 in 10 February (Electronic Communications Law).
In January 2003, the Autoridade da Concorrência was created (Decree-Law no. 10/2003,
18 January), replacing the Directorate-General of Commerce and Competition and
the Council for Competition as economic bodies with the mandate and the power to
enforce legislation regarding the safeguard of competition in national territory. In that
same year, the new Law for Competition (Law no. 18/2003, 11 June) was issued. This
legislation is applicable throughout every sector of Portuguese economy.
In Portugal, there are two bodies in charge of the regulation of the market and
commercial relations in the area of telecommunications:
> Autoridade Nacional de Comunicações, Anacom (national regulatory body), whose
regulatory duties have two objectives: the promotion of competition in the services
offered by electronic communications; contributing to the development of the European
Union’s internal market; and also the safeguard of the interests of citizens.
> Autoridade da Concorrência (the national authority for competition), whose main
purpose is to ensure the observance of competition rules towards the efficient operation
of the markets, an effective allocation of resources and the safeguard of the interests
of consumers.
PT, as the leader of the Portuguese market for the telecommunications sector, is
obviously subject to various scrutinies by the Autoridade da Concorrência. However,
we must bear in mind that PT’s leading position was not obtained instantly, but is
instead the result of a strong investment in infrastructures across the country.
Furthermore, the Company maintains an attitude of cooperation with the regulatory

body for the telecommunications sector – Anacom – actively participating in the various
initiatives promoted by this entity.
(1) Directive 2002/21/CE, 7 May – framework directive; Directive 2002/19/CE, 7 March – access directive; Directive 2002/20/CE, 7 March
– authorisation directive; Directive 2002/22/CE, 7 March – universal service directive; Directive 2002/58/CE, 12 July – directive concerning
privacy and electronic communications.

Ñ Involvement
with the
Community
Creation of the Directorate of Competition Policy
Mission of the
In light of this new legal framing, concerning market laws in the Portuguese
Directorate of
telecommunications sector, the management of matters associated to the Regulation and
Competition Policy
Defence of Competition has become one of the main risk factors for the business. Being
Accompanying and assisting
PT Group in matters of competition aware that a free market based on competition stimulates innovation and efficiency
policy and legislation, in the more, PT began working on the best way to meet this challenge.
application of the principles
and the rules of community
and national law issued by Therefore, in light of the entry in effect of Law no. 18/2003 (Competition Law) and
regulatory bodies Law no. 5/2004 (Electronic Communications Law) it has become essential to not only
and the compliance
by the Group’s companies maintain the assurance of compliance with the regulatory framing, but also to ensure
in matters of competition law,
with the purpose of developing
a permanent conformation of the Group’s activity before competition rules.
a culture of competition within
the Group that safeguards The observance of competition rules frequently involves complex economic and legal
the interests of the Group
and of its customers.
considerations which must be the subject of careful analysis, in order to ensure that
the Company’s activity is conducted in accordance with such rules, in a coherent and
coordinated manner.
Towards that end, within the previously established Directorate of Regulation and
Corporation, the issues related to competition defence were assigned to a new,
autonomous body, the Directorate of Competition Policy, established in April 2004,
whose mission is to accompany and assist PT Group in matters of competition policy
and defence legislation, as well as to implement a programme of conformation before
competition rules for the activity of the Group’s companies, aimed at fostering a culture
of competition within PT Group.
Some of its duties include:

> Creating a programme of compliance of the activity of the Group’s companies.
> Preparing internal advisory reports on commercial offers, in order to guarantee their
conformity with current legislation.
> Determining the consequences for the Company of prospective changes in competition
law and policy, in Portugal and in the European Union.
> Analysing the competitiveness and the behaviour of PT’s competitors.
> Sensitising the Group’s employees regarding matters of competition.
> Promoting a culture of competition within the Company, for the interest of the
Company and of its customers.
> Promoting training actions specific to this area.
Thus, PT has been developing a strong effort towards the adoption of the best practices
with regards to the compliance with existing regulation. In order to attain the creation
of a culture of competition within the whole Group, this Directorate foresees, for 2005,
training 400 employees in this specific area.

4 Employees short-term goals and requirements. Promoting a culture of
transparency among all of PT’s companies and employees,
Considering the domestic market, PT stands as the leader
this model was developed with the purpose of contributing
in all its operational sectors. This position is the result of
to a Group culture, with strategic and competent teams and
a model for Human Assets management that seeks the
employees that know their individual development plan,
continuous and increasing development of the capabilities
as well as their career prospects.
of its employees. Attracting and retaining talent, besides
continuous innovation and improvement, are the exemplary The year 2003, when the model was first implemented on a
commitments that make PT a company with a management global scale, will become a major milestone in PT’s History
committed to excellence. of Human Assets.
The growth and evolution that characterise the history of Already of great value for the efficiency of Human Assets
Portugal Telecom over the last decade have been accompanied management, the model even affords the possibility of
by a intense and increasing investment made by the Group in identifying competence gaps when compared to international
Human Assets management, following a model based on a practices and creating training maps directly related to the
culture of merit and the creation of value for the shareholder. needs of employees.
Realising that employees are the most important and the In 2005, PT will once again manifest its pioneering spirit
most valuable asset of its companies, PT has since 2003 in matters of strategic management of Human Assets,
implemented a model for Strategic Management of Human by signing a letter of commitment with its employees,
Assets across all of the companies of PT’s Universe, in which addressing the main vectors of the strategic management
the “Performance.PT” solution constitutes a fundamental of Human Assets, reaffirming and raising the level of
unifying aspect, unique on a national level and one of the few responsibility and commitment before its Human Assets.
existing on an international level. This solution has turned
The signing of the “commitment letter for the strategic
PT into an example of good practices and of excellence
management of Human Assets of Portugal Telecom Group”
regarding Human Assets management.
by the CEO and the chairman of the Human Assets division is
Envisioning the sustained development of competences, intended to guarantee to our employees, from 2005 onwards,
the model for Strategic Management of Human Assets in addition to their statutory rights, the following terms:
sets goals and evaluates competences in an integrated way, > A periodical analysis, through regular assessment or
thus optimising synergies. Although centred on a medium- self-assessment, of their management and technical
term perspective, this model also takes into consideration competences.

Ñ Involvement
with the
Community
> A periodical analysis of individual and team goals.
> Regular feedback from their superiors concerning the analysis of their individual
performance.
> The development of prospects of personal in order to support the sustained promotion
of their levels of proficiency.
> Regular information of occurrences and strategic decisions with a direct impact on
global, coherent and sustained development of Human Assets.
> The development of mechanisms which streamline the communication between
employees and the management of PT Group.
> Periodic and anonymous access to mechanisms for measuring employee
satisfaction.
> Access to intervention programmes at the level of social responsibility and citizenship,
set out and approved by PT Group.
The signing of this letter shows the continuance of the Group’s strategy of Human
Assets management, which shall be dealt with in this chapter and is made up, among
others, of the following items:
> Model for the strategic management of Human Assets.
> Career management.
> Training.
> Benefits.
> Communication with employees.
The table and the charts below represent the evolution in the number of employees
over the last two years, according to business, region, gender, age group and average
seniority, as well as the type of contract, on a national and international level.
EMPLOYEES BY BUSINESS
Portugal 2004 2003
Wireline 8,311 9,075
Mobile Portugal • TMN 1,133 1,109
Multimedia • PT Multimedia 2,523 2,588
Other 3,140 2,450
Total 15,107 15,222
International
Mobile Brazil • Vivo 3,176 3,500
Mobitel 9,772 4,768
Cabo Verde Telecom 451 456
Other 9,778 926
Total 14,376 9,650
National and international total 29,483 24,872

Human Assets
29,483
35.5% 33.2%
24,872
14,376
9,650
64.5% 66.8%
15,222 15,107
Percentage of women
in management functions > 16%
2003 2004 2003 2004
Number of employees Employees by gender

Portugal International Male Female
43 43
16.4
15.8
33 34
32 32
2003 2004 2003 2004 2003 2004 2003 2004

Wireline Mobile Multimedia
Average seniority
Average age in main businesses
3% Term 1% Term
97% Effective 99% Effective
Type of work contract Type of work contract

in Portugal [FTE] > 2004 abroad [FTE] > 2004

Ñ Involvement
with the
Community
New performance model
Creating the best management teams and developing strategies for talent rotation
affords the enrichment, the motivation and the development of Human Assets, making
PT Group more competitive and fair. These are the concepts on which PT’s new model
of Individual Performance Analysis is based. Its goals are: promoting mobility, investing
in training and attracting talent.
It was in 2003 that PT created a system for the management of Human Assets across
the whole Group: a new model shared by all the companies that make up PT’s corporate
universe, which would be based on important management vectors regarding Human
Assets. Towards that end, the Individual Performance Analysis model was developed
and has been in constant evolution, seeking to correspond to both the needs of the
management and the expectation of PT’s employees.
The model for Individual Performance Analysis of PT’s employees – “Performance.

PT” – has undergone a series of improvements, throughout 2004, compared to the
assessment models of previous years, with the purpose of endowing PT with a truer
knowledge of each employee’s potential, namely through the inclusion of technical
competences, in terms of the Group, affording more accurate data about the required
development and training plans. This model, which possesses an operational structure
based on three types of competences – core, management, complementary and technical –,
presupposes the participation of employees in determining and accepting the goals set
out by the Administration. Clarity, measurability and specificity are the main features
which, year after year, characterise the established goals, so as to afford transparency
and clarity to the subsequent process of evaluation. In 2004, this evaluation comprised
98% of PT Group’s workforce.
The “Performance.PT” platform manages the integration, validation and assessment

of all the Group’s employees, including interfaces for all those interacting with the
platform: employee, assessor and hierarchical superior.
The platform contextualises the assessment model, determining the rank held by the
employee in its comparison range. It also has the benefit of storing the information
obtained during the process of evaluation and not just the final result. Employees can
also access the portal and view the goals assigned to them. The goals are structured
according to the four vectors of the Business Balanced Score Card, “Customer/Market”,
“Development and Capability”, “Financial” and “Process/Project”.

Ñ Involvement
with the
Community
Benefits One of the innovations resulting from this model was the introduction, in
of the “Performance.PT” 2004, of self-assessment and the evaluation of the technical competences of
solution employees. These two variables will allow PT to produce a more detailed map
> Managing all the data regarding employee of technical competences and consolidate a Knowledge Resource Directory,
information and professional development
through a single channel. streamlining mobility and adjusting development/training plans in light of
> Affording a single basis of analysis of the PT Group’s strategy for the future. This affords the creation of a dynamic of
Group’s talent, based on competences defined
according to the strategic goals of the Group efficient detection, development and retaining of talent.
and in line with the market’s best practices.
> Affording a set of tools that will allow

The rescheduling of these procedures has made possible for evaluations to
talent segmentation based take place in the same year to which they pertain, and for subsequent feedback
on the potential for development
and the effective contribution for to be available in the first month of the following year.
the management of every concerned
employee. In each specific segment, different Assessors conduct an objective analysis of the competences of each of their
development and motivational techniques
are available/implemented, ensuring a greater employees, contributing in this way to training and development plans which
cost-benefit rate for the Group are adequately suited to actual needs. On the other hand, the self-assessment
and its employees.
undertaken by employees was also marked by an important objectivity, making
> Affording a benchmark for the actual profile
of employees, in line with the market’s best the process of talent search more dynamic.
practices, determining the level of agreement
and allowing the Company to act upon gaps.
From a conceptual point of view and in terms of positioning, this model is
> Operationalising individual and team
development plans taking into consideration
ranked among the best in Portugal and the world. It allows for a complete
development needs (gaps) specific evaluation, where the each person is assessed by those above, by those below
to the employee and to the goals of the
Group’s business, stimulating a “guided” and by its peers.
growth.
> Managing the professional mobility The total participation reached 98%.
and progression of employees, according
to the requirements of the Group By introducing a standard platform for the evaluation of employees in
and the employee’s expectations
and “maturity”. PT Group’s several companies, this type of management affords an improvement
> Supporting succession management, in performance and productivity, whilst creating a competitive edge, as well
determining the requirements of the Group, as a clear strategic differentiation.
potential candidates and which actions
to undertake in order to prepare them.
The analysis of the individual performance of PT Group’s employees, which
> Operationalising a system of performance
assessment, based on segmentation, began in October 2004 with an initial stage of self-assessment (with a total
on the assessment of the Company’s
participation of 30%), was concluded in December of that same year.
performance (according to business
indicators) and the analysis of individual
performance (according to management A total of fourteen management competences were considered for the evaluation
competences and leadership capabilities,
which took place in 2004, being divided into two major blocs:
technical competences and individual
indicators).
> Supporting a system of variable

remuneration that interfaces with Core Complementary
the established system of performance competences competences
analysis and the measured performance.
Competences whose assessment, along with Competences whose assessment, along with
> Strengthening a culture of performance
goals, contribute to the final mark technical competences, is meant solely for
(attaining goals) and excellence, determining
in individual performance. development purposes.
the potential for development, as well
as identifying development opportunities
(rotation base and professional mobility),
managing remuneration and identifying future
leaders of the organisation are the general
aims of this new model.

Ñ Involvement
with the
Community
Distribution of the employees’ strategic profile according to segment
The strategic profile of employees in the segment “Staff” reveals the existence of a
great concentration of employees with a high potential, and an important effective
contribution to the management as well.
100%
Development potential
Strategic
High potential
90%
80% High potential in development
70%
60%
50%
40%
30%
20%
Operational High contribution
10%
0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Effective contribution to management
Employee satisfaction survey

In 2002, related to PT’s Strategic Management of Human Assets, the Company began
taking the first steps towards knowing, in a systematic way, the actual motivation of its
employees, being nevertheless aware that such a complex group of companies like Portugal
Telecom requires a few years to adjust its organisational environment to the desired level.
In 2003 and 2004, we continued to carry out yearly employee satisfaction survey,
allowing once more the direct involvement of all those who, in a strictly anonymous
way, agreed to express their opinions and concerns.
The results of the queries are analysed from a statistical perspective and subject to
the appreciation of the Executive Committee, which, in turn, deliberates upon the
implementation of measures for correcting those aspects considered the least favourable.
In terms of organisational environment, the employee satisfaction survey has known

a significant increase in the number of answers. The rise in all the figures became
an indicator of the level of excellence of our practices regarding Human Assets.
Furthermore, we may conclude that this survey is an important tool for knowing the
actual motivations of our employees and pointing out aspects of improvement which
make PT an agreeable place to work. The high number of answers indicates that
the survey was adopted internally by PT’s culture. The anonymity of all answers is
assured and the survey is available on the corporate intranet when it is taking place.
All employees are asked to participate, as this is the most important tool for knowing
the opinion of PT’s employees available to the Executive Committee.

Ñ Involvement
with the
Community
With a level of participation above 50%, the employees of PT Group have manifested
their interest in contributing to the development of a company more suited to their
needs and the demands of the market.
The following table shows how employees evaluate the different areas and activities
of the Group:
Performance level Performance level
Good Average
Leadership
Work environment Expectations
Service / Product / Market Career
> Knows competition
Training
> Serves customers well
Wages and benefits
Company
> Recommends Communication
> Sense of pride at work > Strategic disclosure
> Dynamic, competitive > Good communication between
the Company and its employees
Institutional communication
> The media
> Relevance of information
> Themes promote the values of PT Group
Results of the employee survey – future measures

In light of the results obtained from the several employee satisfaction survey, a number
of measures were set out for 2005:
> Furthering the development of “Performance.PT”, in order to make it more
comprehensive and user friendly.
> Strengthening the mechanisms for promoting, encouraging and monitoring the
implementation of feedback inquiries by the companies, so as to ensure their adequate
and timely fulfilment.
> Conducting an anonymous survey of all Group employees, similar to the pilot survey
of 2004, regarding the quality of the feedback inquiries. Available in March.
> Signing a Commitment-Letter for the Human Assets of PT Group, which was already
sent to all permanent employees.
> Preparing Team Building actions designed for the companies and areas which have
shown themselves to be more delicate in terms of the Index of Employee Satisfaction.
The importance of new talent

Considering how the Group values its Human Assets, PT has been consolidating its
policy for staff recruitment, which includes a number of roadshows at the best Portuguese
universities to which top students are invited, followed by screening interviews. The
recruitment programme “Top Students” benefits not only from the commitment and
the presence of members of the Administrations of the Group’s companies, but also
from the participation of employees recruited in past years within the programme. In
2005, the Group intends to launch a development plan for junior staff with high levels
of commitment termed Programa para Jovens com Elevado Potencial.

Ñ Involvement
with the
Community
“It is the duty of the Company: Company Agreement
(...) Another aspect that defines our Human Assets management is present in the Company
b) to provide its employees with good Agreement, a document resulting from a process of consultation with all syndicates,
work conditions
which have endorsed it, and establishing the conduct, the rights, the duties and the
c) to treat and respect the employee
as a collaborator and ensure that guarantees of both the Company and its employees.
any observations and reprimands are
done with respect for his/her dignity
Taking into consideration the Portuguese work legislation, seen throughout Europe as
(...)
one of the most protective regarding the rights of workers, the Company Agreement
h) to assign to each employee work
compatible with (...) his/her physical
is, by itself, a relevant act of transparency and promotion of equity in the management
and psychological capabilities of employees. Subjects such as professional mobility, training, professional categories
i) to provide adequate work conditions and remuneration, admittance, progression, work schedule, extra work and night
to employees with limited work capability
work, temporary lay off, vacations, absenteeism and retirement are some of the issues
(...)
discussed in full throughout this document.
It is forbidden to the Company:
To oppose by any means the exercise

In it you may also find references to the policy of free association granted to the
of the rights of the employee provided
for in the Constitution, in the Law Group’s employees, as well as to the added rights for employees who have union offices.
and in the present agreement, as well
as firing him/her, applying sanctions
At PT Comunicações, 52% of employees are registered in trade unions.
and harming him/her as a result
of that same exercise.” The communication and participation of employees in the management of the Company
are also safeguarded in this document, which describes the role and operation of the
Parity Commission. Meeting on a monthly basis, unless an extraordinary meeting is
requested by one of the parties, the Commission is composed of eight representatives
of the trade unions who signed the document and an equal number of Company
representatives. The Parity Commission has the power to interpret the clauses of
the Company Agreement and carry out any assignments explicitly provided for in the
present agreement or added through mutual agreement by all parties.
In the excerpt from 2004’s Company Agreement, reproduced above, it is clear the
commitment that PT assumes with its employees with regards to the conditions of
their workplace, their individuality and their dignity, with the purpose of safeguarding
all Human Rights and observing Portuguese work legislation.
In addition to the Company Agreement, PT has implemented its own Code of Ethics,
approved on 18 December 2001, which serves as a reference framework for all employees,
establishing a set of guiding values for their conduct. The strict ethical behaviour
expected from all Group employees is also included in this document, describing in a
clear way the correct procedures that employees must upheld, in light of PT Group’s
policy for fighting corruption.
“PT Group must conduct its activity according to strict principles of honesty, integrity, dignity,
rectitude, professional diligence, impartiality and equity, which must be evidenced, namely,
in the relationship with customers, suppliers, shareholders, employees, authorities,
media and the general public; this behaviour should be accomplished through the individual compliance
of every employee of Portugal Telecom Group.”
in Code of Ethics

Ñ Involvement
with the
Community
The fight against corruption and the upholding of fundamental The size of the Group and the subsequent lack of knowledge by
Human Rights are principles that guide PT’s activity. By its employees of the operating lines set out by their respective
signing, in 2004, the ten principles of Global Compact, the companies justified the need to create a set of media for
Group has strengthened the importance already given to communicating across the whole Group. So, in 2003, éPT!
issues of Human Rights, to the fight against corruption and was born, an internal brand created intended to become an
to safeguarding fundamental values, eschewing child labour, essential tool for communicating with all Group employees.
forced labour and discrimination at the workplace, regardless
The concern manifested by the Group regarding the
of its criteria.
availability of means of communicating with its employees
comes to fruition in the publication of a set of different
Employee risk management
media suited to the heterogeneity of the positions held by
The management of work risks affecting PT’s employees is
PT’s employees, who also afford a deeper knowledge of the
assured through an internal contingency plan and prevention
current state of these same positions. This concern extends
plans, which comprise a set of procedures which must be
itself to larger departments in each company.
applied whenever there is an accident. This is a procedure
that is part of the employee risk management developed The Sesimbra meeting, a communication workshop, brought
by PT. together, for the first time, representatives of the areas of
communication, marketing, human resources and investor
Business Labour Accidents with Lost days relations of every company of the Group, in Portugal and
accidents sick leave
Brazil, under the theme: “Communication as a Management
Wireline 298 164 6,643
Tool”. In an initiative sponsored by the Executive Committee,
Mobile 21 12 416
the Group’s CEO, Miguel Horta e Costa, began the procedures,
Multimedia 54 26 629
defining the goals of the new philosophy of communication:
Other 11 5 140
“More important than doing away with past cultures is
Total 384 207 7,828
creating a new culture, fresh, dynamic, of a company with
Absenteeism rates in Portugal: a design for leadership and wanting to assert itself as a
> Wireline: 5.7%
> Mobile: 4.02% Group of excellence, not only on a national level, but in an
> Multimedia: 4.75%
international context as well. These are strategic goals that
require an enormous cultural strength.”
Communicating for developing a group culture
As it strengthened its position as the largest private corporate There was a need to innovate and make every member of
group in Portugal, PT has been innovating its practices and Portugal Telecom know the business as a whole and feel
modernising its processes. However, every company of the that they are part of this world of communications, which
Group was working separately, with different sets of tools, is Portugal Telecom Group.
and so a true sense of Group manifested itself solely on the
Therefore, included in the Group’s Human Assets
legal framework of the companies.
management is a vast set of communication media, on
It was in this scenario that, in September 2002, PT Group which companies invest in order to strengthen employee
began a real revolution in the way it communicated with involvement in strategic decisions and establish goals for
its employees. each and every one of them.

Ñ Involvement
with the
Community
Knowing how to listen and communicate éPT! magazine
became the basis for the creation of This bimonthly magazine, with a print run
a concept founded on the sharing of 50,000 copies, is distributed among
of information and projects, on the the employees, shareholders, partners and
development of a group spirit. This concept suppliers of PT Group. The éPT! magazine
comes to fruition in the brand éPT!, which is published in Portugal and Brazil. The role
translates all the aspects shared by the played by this magazine is fundamental, as
Group’s employees, operating in different it allows employees from all companies to
business areas and geographical realities. get to know the activities of the Group and
have acess to the messages and goals issued
éPT! stands as verging point of a number
by the Executive Committee.
of projects of internal communication,
ranging from the éPT! corporate portal to
the magazine itself, and including a card éPT! Júnior magazine
for employees, a monthly newsletter and This magazine is designed especially for
short messages highlighting key moments of the children of employees and is published
the Group’s activity. In the following lines, every two months in collaboration with éPT! Corporate Messages
we shall describe the main channels for magazine. Inside, readers may find several With the help of TMN, corporate messages
communicating with PT’s employees. entertaining and educational activities, as are sent through SMS to PT Group’s
well as the latest news about children’s employees with the following objectives:
cinema. > as additional information regarding
the current communication actions;
> to serve as a channel for communicating
news about the Group.
At the same time, PT has favoured upward
communication, by giving all of its
employees the possibility of intervening
in the Company’s strategic management,
namely in the development of new services
and products.
éPT! card The programmes “Ideias para Inovar”
This card ensures real and tangible benefits
(Ideas for Innovation) and “Novas Ideias
to employees, giving access to a number
mais Inovação” (New Ideas, more Innovation)
of offers involving products and services
stand as two examples of communication
provided by the Group’s companies.
devices created by PT for its employees.
Discounts range from areas such as the
Internet to cinema, newspapers, magazines,
cable TV and mobile phones. In 2004, Roadshow:
the investment made reached Euro 1.5 “A PT perto de si”
million. In February 2005, in a total of The national roadshow “A PT perto de si”
14,882 employees, cards were issued to (PT close to you), which includes the active
14,457 of them. The éPT! portal – described involvement of the Administration,
below – brings together in a single place all is another programme designed
the information related to the éPT! card. with the purpose of drawing employees
and the Management closer together.
éPT! portal (intranet) Newsletter This programme includes a tour
The éPT! corporate portal of Portugal The newsletter consists of a news release by the Executive Committee through
Telecom Group works as a common point sent every month to all employees together 18 district capitals, organising workshops
of entry for all employees. Its purpose is to with their pay sheet. Its aim is to provide with employees about the strategy
further group culture between companies, a monthly summary of the most important and the goals of the Group and affording
without disregard for the specific character information concerning the Group, providing a close interaction with the “living forces”
of each business unit, and provide a glimpse at future events as well. of each region.
information in an efficient manner, so as to
increase the Group’s competitiveness.
Infomail
Infomail is an informative piece sent daily
through e-mail and containing the main
news published about the Group in the
Portuguese and Brazilian press.
Welcome Kit
Prepared for new employees, the Welcome
Kit was designed to convey, from their
first day at work, the Group’s philosophy
and to provide important information
about the Group and the company
where they will be working, besides
promoting a sense of pride for belonging
to the Portugal Telecom Group.

Ñ Involvement
with the
Community
The importance of training for the Group’s competitiveness
Training, one of the strategic axis of Human Assets management at PT, has been the
subject of increasing attention, since it is perceived as one of the most effective ways of
valuing company resources, contributing to a growth in performance and, as a result,
to the growth of the Group’s value.
As such, PT has implemented several formats of attendance training, b-learning and

e-learning. This heterogeneity affords a more complete training for its employees.
The charts below demonstrate the investment made by the Group in the area of
training. The rise in training costs between 2003 and 2004 is followed by an increase
of the number of total training hours, as well as of the number of training hours per
employee.

Training + 71.5% + 72.5%
11,757 330,871
6,856 191,803
2003 2004 2003 2004
Total number of participants Training volume [hours x participants]
+ 1.7% + 66.9%
4 ,735.7 4 ,816.9 22.2
13.3
2003 2004 2003 2004
Total investment [Euro million] Average training time

per employee [hours]
+ 103.4% + 65.8% + 82.7%
29,741 78.9% 3,286
47.6%
14,623 1,799
2003 2004 2003 2004 2003 2004
Total number of participations Percentage of participants Total number

of the total population of training actions
- 40.5% + 0.4% + 3.4%

23.2 28.1 14,402 14,898
28
13.8
2003 2004 2003 2004 2003 2004
Training investment/ Average training time Considered population

/volume [Euro/hours x participations] per participant [hours]

Ñ Involvement
with the
Community
In addition to the actions and the courses included in the Corporate Global Training
Plan, developed as a response to the training needs evidenced in Individual Performance
Analyses and the new challenges in the various businesses, we highlight the following
programmes:
Skipper > A b-learning programme, available through CAMPUS PT, with the purpose
of developing management and leadership skills. Another of its objectives is to bring
into consonance a number of basic contents, deemed crucial for developing a common
corporate culture and a true group spirit.
After an initial test phase, with the collaboration of employees from several PT
companies, this training model was made available to all employees in October 2004.
By associating Skipper with the system of competence assessment, we may address
individual knowledge and behaviour gaps, contributing to the creation of a competence
development plan customised and adjusted to every employee.
Projep > Created in 1998, its main purpose is to develop the capabilities and the
leadership skills of PT’s staff, up to 32 years of age. By stimulating their strong
points, and improving weaker aspects, this programme is aimed at the development
of competences by employees, so that they may become future leaders.
The last edition incorporated employees from Vivo, a Brazilian company. At the end
of 2004, PT launched yet another programme within this project focused on the
preparation of young managers for MBAs.
SWAP > Started in November 2003, this mobility programme for the employees of
companies based in Portugal and Vivo, in Brazil, is already used by ten employees.
The programme allows for an enrichment of the companies’ performance in light of
different experiences brought by employees from their country of origin to the country
of their SWAP programme.

Ñ Involvement
with the
Community
Benefits for employees Share distribution
Parallel to a structure of remuneration greater than the As part of its plan for motivational development, loyalty
average wages in Portugal, employees of PT Group enjoy a and employee alignment with shareholder goals, PT has
series of benefits centred on a discount policy for products been promoting a policy of share distribution among its
and services provided by the Group’s companies. employees. With regards to 2004, and after a proposal by
the Group’s Executive Committee, the Board of Directors
Clube PT decided to present before the General Meeting a proposal
Clube PT is a centre for culture, sports and leisure, for the distribution of 45 shares among the employees of
independent from the Group on administrative and financial Portugal Telecom. To those employees who, by the end of
levels. This club provides its associates with a number of 2004, possessed these shares, an additional five shares were
activities for their free time in the aforementioned areas, distributed. For those who, by December 2005, hold the 50
which constitute its field of operation. shares distributed in 2003, and the 45 shares distributed this
year, an additional five shares will be attributed, as a bonus
PT’s social care association for their shareholder loyalty. This decision reflects a strong
On a social level, PT’s Social Care Association has been bet on strengthening group spirit and aligning the whole of
playing an important role for its 9,000 associates Established PT’s family in the same direction.
in 1985, this association provides a wide range of services and
activities in very different areas such as training, travelling, End of career management
day-care centre, centre for elderly people, physiotherapy and Employee’s end of career management is another area which
recovery, among others. has deserved PT’s attention. As the Group grows, and there is
a need for reorganising certain companies, PT has developed
an end of career management programme, which affords
beforehand planning of the final years of their active life to
its employees. This programme incorporates a set of benefits
granted to those employees that are part of it.
Offers provided to employees

Services and products provided by PT
> The annual subscription of their wireline service

> Euro 38.20 in calls made from their wireline number
> Discounts for the purchase of wireline and mobile devices
> PT 1.ª Vez (PT’s kit for new customers)
> Sapo ADSL Kit and its installation
> 50% discount in every TMN subscription plan
> The initial subscription of Pay-TV service [TV Cabo]
> The first three monthly fees when joining Premium cable channels
such as Sport TV, Lusomundo channels and the Disney Channel
> Netcabo Kit and the first monthly fee of our internet cable service
> The first annual fee of our interactive television service
> 32% discount in Lusomundo and Warner-Lusomundo cinemas,
when purchasing two tickets, every day of the week
> Discounts in various publications by Lusomundo Media

Ñ Involvement
with the
Community
Health Care Plan > Providing psychosocial support.
Our Health Care Plan is one of the benefits, not required by > Managing clinical procedures.
law, that PT Group offers its employees. There are several > Procedures related to the enrolment of beneficiaries.
types of health care plans – PT Comunicações Health Care > Mechanisms for communicating with beneficiaries.
Plan, Corporate Health Plans, type I and II – which make > Permanent supervision and intervention throughout the
up a framework of systems established (through collective whole health care system.
negotiation) for the prevention of health issues and support
PT ACS relies also on the participation of all beneficiaries in
during rehabilitation, which PT Group provides to its
the management of health care plans. Theirs is an important
employees and, in certain cases, to their relatives.
contribution, as it allows for:
These plans are managed by PT ACS, a non-profit making a) The observance the provisions regarding a better
association whose purpose is the promotion and safeguard implementation of PT’s Health Care Plan.
of health care by providing direct or indirect services of b) The correct and rational allocation of the available services,
preventive medicine, curative medicine and rehabilitation. namely, by preventing waste and inadequate consumption.
This area reflects a financial effort made by PT Group in c) A connection to PT ACS and all service providers in a
order to provide a service of excellence which includes correct and suitable way.
periodical exams, monitoring and accompanying of work d) Maintaining PT ACS informed of all changes in their
accidents, and also a regular analysis of the environmental personal and family situation.
and ergonomic impact risks. e) Cooperation between employees and PT ACS, which may
then respond to all requests for information and report any
The activity of PT ACS is developed in the following areas:
anomalies in the use and access to the services rendered.
> Health care services rendered directly by PT ACS.
> Establishing certain conventions. Employees also have the opportunity to sign up for plans
> Interfacing with the National Health Service. which include treatment for HIV.
23% Assets 111.5 108.5
26% Children
2% Parents
23% Spouses
26% Pre-retirement after

suspension of work contract 2003 2004
Beneficiaries per kind [December 2004] Beneficiaries’ evolution [thousand]

Ñ Involvement
with the
Community
PT Group stands as a pioneer in the creation of a model of social or shared economy,
namely for to the management of the health care plan of PT Comunicações, which uses
a system of shared control, integrating organisations who serve as representatives of the
beneficiaries (unions) both in its Technical Committee and its Inspection Committee,
through an appointed representative from the Workers Committee.
In the previous charts, we may observe the great level of employee participation in
PT Group, as well as the use being made of our health care plan, both by family
members and employees in retirement or early retirement.
Scholarships, excellence awards and traineeships for employees and their children
A good quality of life involves not only the employees, but also their families and
particularly their children, which are our main priority in life. Both on a personal
and social level, the development of new generations is an important concern for all.
In light of this and of the sense of responsibility in the training and education of its
human assets and their sons, PT Group launched a global programme for granting
scholarships, excellence awards and traineeships in the Group’s companies, benefiting
those who distinguish themselves for their academic performance and, at the same
time, those families with lower income.
This is a crucial axis of our performance in terms of social responsibility. As an active

player with a deep involvement in the community on a social, cultural, sporting and
scientific level, PT believes that all these actions can only make sense when they begin
at home, improving the life and taking care of our families.
We hope that by granting these incentives we may open new paths to knowledge
and making available effective conditions for the development of competences and
academic resources.
This is an initiative we perceive as a partnership for the future between PT, its employees
and their families.

Ñ Involvement
with the
Community
Mission 4 Suppliers
Optimising the Investment and
Procurement of PT Group, ensuring
PT Compras
the best result and positioning, The importance given to procuring goods and services by Portugal Telecom Group
through systematic monitoring
and interpretation of the domestic has led to the creation of PT Compras, Negociação e Consultoria, S.A., a company
and foreign supply market. which centralises the procurement of goods and services for all the Group, both in
the domestic and the foreign markets where PT Group operates. However, its activity
Structure
does not include the procurement of certain goods and services, such as legal and tax
PT Compras centres its structure
around five Directorates of services, insurance, financial products, legal certification for accounting and audits,
Negotiations and Acquisitions: four fixed assets, traffic and interconnection agreements, acquisition of companies, etc., as
areas grouped according to acquisition
categories – Telecommunication described in the Procurement Model, available at www.ptcompras.pt.
Systems, Information Systems, Market
Products, and Services, Marketing PT Compras conducts its activity in strict adherence to ethical and professional
and Advertising – and a common area,
specialised in acquisitions for corporate principles, which afford the creation of a solid base of trust and earnestness towards
customers and companies.
the supplier market and the companies of PT Group.
PT Compras plays an essential role in the Group’s strategy, allowing for the creation
of value, not only through significant savings, both in OPEX and CAPEX in areas
with a strong impact on business, but also due to the incorporation of added value
generated by a direct collaboration with suppliers. The figures attributed to PT Compras
on the domestic market have known an increase of 30% in 2004, partly due to the
incorporation of more companies in our Procurement Model and the expansion of the
categories negotiated through PT Compras.
Guidelines of the Group’s procurement model

Given the importance of the Group’s centralised management > Procurement Committee/Procurement Table – the
of corporate acquisitions, a Procurement Model was decision making process regarding procurement in PT
established, ensuring the cohesion, transparency and fairness Group is undertaken by the Procurement Committee at
in the tendering criteria of PT Group. This model is based the Procurement Table and always through an unanimous
on the following guidelines: approval of all its members. This body, which reports directly
> Centralisation of the procurement function – in areas to the Executive Committee of PT SGPS, is composed of
especially suited for procurement. According to this principle, members of PT Compras and the company or companies of
only procurement departments are suited to perform PT Group taking part in procurement processes.
procurement duties. > Specialisation and professionalism – all planning,
> Separation of responsibilities – this implies, during the procurement and negotiation activities are carried out by
course of procurement processes, a formal separation between specialised buyers, who have specific training in negotiation
specifying of the need of procurement, negotiating with and procurement.
suppliers and paying for the goods and services acquired. > Unique approach to the market – a unique and systematic
It is the responsibility of each company (user) within the method of approaching the market, by means of a matrix-
Group to specify the good or service it intends to acquire based structure common to the whole Group and made up of
and carry out a technical analysis of all proposals. It is the Product Lines and support areas, whose purpose is to meet
responsibility of PT Compras to manage a survey of the the challenges of different business segments and countries.
market and the negotiations with suppliers within the scope These guidelines aim to ensure a transparent, rigorous and
of the Procurement Process. impartial procurement activity.

Relationship with suppliers
As mentioned in the first chapter of this report, PT conducts its activity according to
principles of honesty, integrity, dignity, professional rectitude and diligence, impartiality
and equity. These principles are evidenced in our relationship with the various
stakeholders, namely with suppliers. In this sense, all relationships with suppliers
generally abide by the Group’s Code of Ethics, which states that:
“Portugal Telecom Group companies should fully honour their commitments with
products or services suppliers...”
“In selecting suppliers or providers of services, consideration should not only be given
to economic and financial indicators, commercial terms and quality of the proposed
products or services, but also the ethical conduct of the supplier or service provider
in the eyes of the general public.”
“Information on gifts received from third parties, including presents or participation in

leisure-related events, which do not clearly create value for Portugal Telecom Group, if
worth more than Euro 100 each, should always be submitted to higher consideration
and always refused if the acceptance thereof raises any doubts over their givers’
intentions.”
in Code of Ethics, available at www.telecom.pt
The application of the Group’s Procurement Model in trade relations with suppliers is
present in the following practices:
> Transparency – all information should be made formally available to potential
suppliers in the course of a Procurement Process, ensuring a transparent access to
information.
> Equal opportunities – during the process of negotiation, equal opportunities are
assured for all suppliers who meet the same criteria, affording a more open relationship
between the Group and all suppliers.
> Access to information – every supplier is granted access to any information and
explanation pertaining to the negotiations in a clear, complete and cordial way.
> Reciprocity and strictness – both parties must detail the conditions regarding deadlines,
prices, payments, purchases and accountability.
> Loyalty – all parties involved in the negotiation should take into consideration the
goals of the company, striving to meet its requirements in the most profitable and
credible manner.
> Mutual procurement – mutual procurement must not condition or interfere with the
result of any process of negotiation.
> Confidentiality – PT Group and its suppliers should maintain strict confidentiality
regarding all information exchanged in the course of the Procurement Process.

Ñ Involvement
with the
Community
What we expect from our suppliers Impact of PT’s stand on the Portuguese economy
In order to ensure a transparent and reciprocal relationship The activity of PT Group’s Business Units gives rise to
in the course of our procurement processes, any benefit to the necessary synergies in other sectors of the Portuguese
PT Group should always be pointed out in the supplier’s economy, as can be ascertained from the following table,
proposal, through a better bargain or service, without where the structure of PT’s suppliers for 2004 is presented,
resorting to presents, gifts or any other form of influence. according to procurement area. Therefore, the repercussions
that the implementation of new demands to our suppliers
In addition to this, the Group’s companies should encourage
produce in the various business segments in Portugal are
suppliers and service providers to comply with ethical
clear and obvious. The number of suppliers contracted
principles in line with the principles and values of PT Group,
in 2004 has risen to 384, which is 37% more than in the
namely those concerning confidentiality in the information
previous year, and we point out the fact that only one supplier
pertaining to the Group and conflicts of interest which may
is responsible for more than 10% of the total procurement
arise whenever they act as suppliers and service providers
managed by PT Compras.
of competing companies.
Below is the structure of domestic tenders, by business area,
Environmental issues in 2004:
In the Procurement Manual, PT has stated its concern for
environmental issues as a requirement when dealing with TOTAL DOMESTIC TENDERS %
Market products 45
suppliers:
Services, marketing and advertising* 21
“With regards to procurement processes for goods and services Information systems 13
where it may apply – namely those related to consumables – Telecommunication systems 19
compliance with current environmental legislation should be Corporate 2
observed, especially in the case of hazardous waste. * Doesn’t include media.
Providing assurances of ‘good environmental practices’

Future prospects
shall constitute a favoured selection criterion for suppliers,
Even though we realise that there is still a long way to go in the
safeguarding, among others, the following requirements:
optimisation of our relations with suppliers, there are some
1. The supplier should provide information concerning the
pioneering projects currently in development in Portugal
final destination and the suitable method for disposing of
which foresee, among other things, the establishment of an
all waste produced in the company.
integrated model for supplier management.
2. The supplier should ensure the collection of the
supplied consumables after their use to guarantee their Also currently being implemented is the creation of a preferred
adequate treatment (reuse, recycling or environmentally safe channel for communication between PT Compras and
disposal).” PT Group suppliers, through our Procurement website.

Ñ Involvement
with the
Community
In a corporate group where communication is the main business,

the involvement and the sharing with our stakeholders and society
in general become two central goals which PT continues to pursue.
4 Society
Throughout the past decade, PT has not only contributed to the development and the
expansion of new technologies, but has also realised how much they contribute to
improve our quality of life and draw us closer together.
For this reason, and along with concerns of a more commercial nature, PT has developed
a vast set of initiatives which seek to eliminate info-exclusion among citizens with
lower income, disabled citizens and elderly citizens.
This behaviour towards society has been worthy of public recognition by national and
international bodies, which have bestowed several awards and honourable mentions
upon PT, among them:
> Honourable Mention “Most Innovative Project for the Information Society in
Portugal” – Jornal Expresso (1997).
> European Telework Award – Best Contribution to European Sustainability – the
European Union (1998).
> Agostinho Roseta Award, in the category “Good Practices” – awarded by the Instituto
de Emprego e Formação Profissional (Portuguese Institute for Employment and
Professional Training) – the Ministry of Work and Solidarity (2001).
> CNOD 2003 Award, awarded for the contributions and the work developed within
the scope of the European Year for Disabled People.
The various initiatives in the area of citizenship in which PT has been involved have
taken on a more systematic and thought out character through the recent institution
of the Portugal Telecom Foundation.
Created in 2003, the Foundation has as its main purposes to centralise the actions
implemented dispersedly by the several companies of the Group and, through this,
ensuring a more efficient way of sharing with the community.

Ñ Involvement
with the
Community
Strategic areas of activity by the Portugal Telecom Foundation:
> Information Society (which is the subject of a separate chapter in this report)
> History and heritage
> Citizens with special needs
> Patronage
Throughout 2004, in addition to the launch of multiple areas and actions as part
of its programmatic project, the Portugal Telecom Foundation has been integrating
departments and services of the Group’s companies which carried out actions in
the areas under the purview of the Foundation. This transitional process should be
concluded in 2005 and its operational goals are the following:
> Incentives to the development of the Information Society – providing special conditions
for partaking in the Information Society, favouring those citizens with lower income
or specific needs and institutions who have proven themselves to be valuable social
agents, as well as research and technological centres. Part of this goal is also to promote
structural actions for the modernisation of the interfaces between users and public
utility services, namely in the areas of education, health, welfare, civil protection and
safety.
> Programmes for citizens with special needs – these programmes, by providing
several innovative products and services, aim at making telecommunications and new
technologies for communication and information available to citizens with special needs,
namely those with disabilities, severe illness and elderly people at risk.
> Cultural and social patronage – supporting high quality artistic expressions in the
field of music, theatre, cinema, painting, among others, in addition to promoting social
voluntary services and granting donations to charity institutions.
> History and heritage – studying, preserving and promoting the historical, technological
and documental heritage of PT Group, as well as developing and publishing the “History
of Portugal Telecom Group”, as a contribution to the history of telecommunications
in Portugal.
> Encouraging the development of personal skills and socially innovating applications
in the areas of Information Society and social use of information and communication
technologies. This goal foresees the possibility of granting fellowships and traineeships
in collaboration with teaching and professional training institutions, awarding the
Grand Prix Portugal Telecom – whose purpose is to distinguish socially relevant works
regarding innovative applications of the Information Society – and supporting special
programmes which seek to fulfil the national objectives for the promotion of the
Information Society and also initiatives by associations, foundations, schools, etc., in
projects that contribute to the goals of the Portugal Telecom Foundation.

Ñ Involvement
with the
Community
The impact of PT on the community
PT Group sees its relationship with society in a rigorous, earnest and transparent
way, believing that its impact will be greater if the policy of social responsibility is
concentrated on the technological resources and the know-how it possesses as the
leader in the area of communications.
Throughout 2004, the Portugal Telecom Foundation assigned Euro 783 thousand in
grants and donations (as described in the Annual Report).
In addition to these interventions, we must take into consideration those carried out
by PT Comunicações during the time when the Office for Customers with Special
Needs was still ascribed to that company. These investments totalled Euro 37.500
thousand, to which we must add the related exploration account in the amount of
Euro 140.187. Moreover, PT Comunicações donated Euro 64.778 to charity and civil
protection associations.
History and heritage

The history of telecommunications in Portugal overlaps with the history of
PT Group since, until recently, the companies that make up the Group were the only
telecommunication service providers operating in the country.
The Portugal Telecom Foundation is conducting a survey of documentation and products

which make up the estate of the Group’s different companies, in order to rebuild, based
on these testimonies, the history of telecommunications in Portugal. At the same time,
the Foundation is preparing the edition of the “History of Portugal Telecom Group”
– a project supported through a protocol established with the Universidade Nova de
Lisboa in 31 October 2003.
PT believes that this work shall become useful to the community, as new data and
information regarding this area of activity and compiled systematically will become
available in the near future.

Ñ Involvement
with the
Community
Volunteer programme
PT Group’s Volunteer Programme foresees that each employee uses 35 work hours every
year to do volunteer service in the community, without affecting their remuneration
and seniority. These services are essentially related to a policy of digital inclusion for
citizens with special needs, including such areas as:
> Training
> Consulting and management
> “Webization”
> Entertainment and support
> Culture
> Environment
PT looks at its relationship with the community as a determinant vector in its

sustainability policy and, therefore, incorporates this relationship as a way of living
in society and with society. In this area, PT has been preparing and streamlining
two volunteer programmes – “Mão-na-Mão” (hand-in-hand) and “Aurora”. Through
these programmes, PT involved around 550 volunteer employees in 2004 1, totalling
approximately 4,000 work hours.
As an example, through Fundação do Gil, PT contributed to a universe of 60,000

beneficiaries in 554 institutions.
Mão-na-Mão
Initiatives
> A visit to the Oceanarium for the children of the SOL and AMI associations
> Tracking of cardiovascular diseases carried out by the Doctors of the World
> Painting of the Portas Amigas centre for homeless people
> Reforestation of the Tapada do Mouco preserve, in Sintra
> Preparing supper for homeless people on Christmas Eve
> Collecting Christmas presents for the Fundação do Gil
> A web show at the Portuguese Association of Families for the Integration of Disabled People
> Bom Dia Palhaço – a play for children
> Fund-raising for CEDEMA (a centre for adult mental patients)
> A matinée of Fado singing and ballroom dancing
> A safari at Badoca Park
> Feira dos Malandrecos – a play for everyone
> Holiday camp in Alcoitão
> “Webization” of ACAPO’s website (the Portuguese association for the sight impaired)
1 These data will be subject to greater accuracy in 2005, as tracking and monitoring systems are currently under construction.

Ñ Involvement
with the
Community
Patronage
PT Group has been fostering a policy of Cultural Patronage that encompasses a number
of different cultural and artistic activities worthy of recognition.
D. Maria II National Theatre

The signing, in 1998, of a protocol of exclusive patronage marked the beginning of PT
Group’s history with the D. Maria II National Theatre, an institution that is one of the
main cultural centres of the Portuguese art scene. For the past 150 years, this theatre has
served as a stage for the most important national and international theatrical events.
Serralves Foundation
This foundation, set in the northern region of the country, has benefited from the
interest and the support of PT, through a cultural patronage agreement involving the
activities promoted by the Auditorium of the Museum of Modern Art, a place where
the performing arts, cinema, concerts and conferences come together.
Teatro da Luz
This theatre, currently named Teatro da Luz, was established 100 years ago under
the name Príncipe Real D. Luiz Filipe de Bragança Theatre, whose patron at the time
was King D. Carlos. A century later, PT has helped to rebuild the theatre, which is
equipped with 200 seats and a diversified programming of seminars and workshops,
in addition to the performing arts.
Portuguese cinema
PT Multimedia and the Ministry of Culture have signed a framework agreement with
the purpose of encouraging and developing domestic film production. To that end,
PT Multimedia promises to make an investment of Euro 25 million over a period of
five years to establish a fund for the creation of new products, to improve those already
created and to provide for subtitling and dubbing services in Portuguese.

Ñ Involvement
with the
Community
4 New markets and new needs
Communication for everyone
The progress in the telecommunications sector, together with the progress in the
computer sector, has afforded society a widespread access to information, with a
subsequent result for the promotion of citizens’ digital inclusion.
PT has committed itself to increase the connectivity and the access to telecommunications
and, as such, has been investing in the optimisation of the use of its services, contributing
to the creation of a digital society that is more informed and well prepared and also to
a technologically more advanced economy, dynamic and competitive.
The Universal Service provided by PT Comunicações, which grants any citizen access
to a telephone service, regardless of their location, is a good example of the significant
contribution that PT makes to the fulfilment of digital inclusion goals.
In addition to this service, PT has been providing an increasingly diversified and

competitive offer to the market, in order to ensure that it is suited to the needs of
consumers and still conform to the individual aspects of each consumer. We hope
that, through this, we may balance out social, economical and cultural differences in
the Portuguese society.
Communication without barriers

Since 1989, PT has defined investment policies for the research and development of
products aimed at Customers with Special Needs, making telecommunications and
new information technologies available to all.
Aware of the limitations of elderly people at risk and citizens with handicaps or suffering
from severe illness, PT begins the development of a number of services and products
suited to the real needs of these citizen groups, promoting and contributing to their
personal and professional integration.
Fifteen years later, the result of this experiment has made us realise that the use of new
technologies by citizen groups has played a crucial role in the improvement of their
quality of life, contributing to the creation of a new social logic based on educational,
professional and social inclusion of people with special needs.
PT will continue to maintain the sharing of resources as a strategic axis in order

to reach an even greater number of citizens and provide them with the benefits of
communication services.
The absence of digital gaps in Portugal, as the country is fully covered by a network of
fibre optics, demonstrates the effort and the investment made by PT and its contribution
to the digital inclusion of the entire Portuguese population.

Ñ Involvement
with the
Community
Services and products for disabled people
Products/Services Features and benefits
Programa Aladim Special conditions for RDIS and ADSL networks for disabled citizens
and their associations, special teaching facilities or other regular teaching schools
with projects aimed at students with special needs. Free initial subscription.
50% discount on the monthly service subscription.
Cyberkit Aladim Allows access to Internet through RDIS with special conditions for users
of Programa Aladim. Free added Internet connection rates. First monthly
subscription offered. Up to 68% discount on the monthly subscription. Up to 56%
discount on the Internet service. Free installation and subscription to this service.
Fixed Destination Line Allows citizens with special needs who cannot type a number to make
an automatic call to a pre-programmed number.
Green Number Specific number for a specific support service for people with special needs
and the elderly, giving support and dealing with subscription requests
and suggestions for new products and services.
PT Conversas Service designed for the hearing impaired. Makes communication possible through
a text phone, regardless of phone model and maker. It also allows one
to send faxes, send and receive e-mails and SMS. Comes with a private mailbox
for accessing text messages. This service was entirely financed
by PT and developed with Portuguese technology. Free service to the beneficiaries
of PT’s Special Solutions.
PT Comunicar Virtual card for hearing and voice impaired people. Its use is 30% subsidised
for wireline calls by PT Conversas.
PT Conversas Voz Allows hearing or voice impaired people to communicate with listeners.
Free access through the number 12 130.
Portable Speaker Small portable device which applies over the speaker of any phone
for Headsets (wired, cordless and mobile). You may increase the volume by up to 10 times
the communication volume. This product is offered to people with hearing
impairment, namely elderly people with reduced hearing capability.
Q90 Textphone Specially suited for the communication between the hearing impaired and their
listeners, this phone has a keyboard and a screen, which displays what each
person is writing in real time. 25% financed by the PT Foundation.
PT Decibel Specially suited for people with reduced hearing capability, this advanced
analogue phone allows one to increase the volume of the call by up to 95 dB
and control the sound of the speaker. So that you may know a call is inbound,
the phone has a light or even a pillow-shaking device that vibrates to the rhythm
of the phone ring.
Fax device Special conditions for the purchase of a fax device. The PT Foundation finances
the purchase of low end devices by up to 25% of retail price, which can also
be made through monthly payments.

Services and products for sight impaired people
PT Voz activa Designed for blind and weak-sighted people, allows access
to the internet and to the Windows operating system through an integrated
voice solution in a special screen for blind people.
Invoice and Correspondence To the beneficiaries of PT’s special solutions for blind people and people
in Braille with weak-sightedness, invoices are sent into two different formats: printed
and in Braille. Correspondence is also sent in Braille. Free service provided
by the PT Foundation.
PT 118 Braille Service Grants 20 free calls to this information service. Service provided
by the PT Foundation, developed in collaboration with ACAPO.
Services and products for people with neuro-motor, speech or cognitive disorder
PT Minha Voz GRID Allows users with motor and cognitive disorder or assisted communication
access to a computer and Internet software. The user may speak what he/she
has written through a synthesised voice. 65% of this service is subsidised
PT Minha Voz GRID – Intelli Educational software designed for users with assisted communication or cognitive
disorder. Allows access, through a PC, to various features related to multimedia,
mathematics, drawing, among others. 65% of this service is subsidised
Services for elderly or disabled people
PT Emergência Remote domestic support service for people in risk situations, that sometimes
stay at home for a long period of time. The service may be used by people
with disabilities or suffering from severe illness. It features a phone base
and a portable headset with a range of up to 50 metres that allows one
to automatically make an alarm call to one of five pre-programmed numbers.
The headset may still be used as a loudspeaker to make a hands free call to one
of six pre-programmed numbers, identified by photos or pictograms on the keys.
Therefore, it is especially useful for people with cognitive disorder, elderly people
and people with mental disorders.
Service for pensioners Reduced fare service for pensioners and retired people whose family income
and retired people is equal to or lower than the national minimal wage.
Serviço TeleAlarme Designed for elderly or disabled people or people at risk, this service consists
of the installation of a device with a permanent connection to the Portuguese
Red Cross. Whenever help is required, a call is automatically made
to the Red Cross dispatch, which then takes the necessary measures
to respond to the problem.
Support for Hot Lines The Portugal Telecom Foundation has assumed a commitment to the various
social support institutions, by supporting their hot lines. PT offers or lends for
an indefinite period of time telecommunication devices and infrastructures
and communication costs.

Fund raising campaigns carried out in 2004
Southeast Asia tsunami

PT joined the fund raising campaign for the victims of the Southeast Asia tsunami.
Through the numbers that were made available by PT Comunicações and TMN,
on 7 January, RTP and TVI viewers were invited to make calls whose costs would
then go to humanitarian organisations working in the field.
Gala Pirilampo Mágico

Following on the support given in previous years, the PT Foundation made possible
the organisation of a special TV show and SMS campaign through which Portuguese
viewers were given a chance to contribute to a fund raising programme on behalf of
FENACERCI.
PT SI donates computers to the Fundação do Gil and the Red Cross

PT SI donated five personal computers to the Fundação do Gil and six to the Portuguese
Red Cross, contributing to a more professional and efficient activity carried out by these
institutions, which have thus gained the technical means to access new information
technologies.
Charity line – PT, SIC and Sport Lisboa e Benfica

PT Comunicações and SIC Esperança joined efforts with Sport Lisboa e Benfica in
the celebration of the football club’s one hundredth anniversary. Through a special
telephone number created by PT Comunicações, fans of the club were able to send
along their congratulations and contribute in this way to associations dedicated to
helping children in need in the southern region of Portugal.
PT employees donate more than six tons of clothing

In 3 December 2004, PT Group began a campaign for collecting clothing which would
then go to CAIS, an association that helps homeless people. The initial expectations
regarding this operation were not very high, given the poor results of a previous
campaign for the victims of the great summer fires in Portugal. However, in spite of
this, the Christmas campaign for CAIS gathered a total of 6.5 tons of clothing, which
surpasses the results of the previous years by two tons.
This campaign, which was part of PT’s Aurora Volunteer Programme, relied on
the participation of several representatives from across the country, who have thus
contributed to bringing a happier Christmas to people in need.

sharing
value
with the
environment
PT companies certified
by the ISO 9001:2000 standard
PT Comunicações | TMN | PT SI | PT Contact | PT Inovação
PT PRO > In the area of advisory services, administration and corporate
management of the service process for wireline business and Internet customers.
PT companies certified
by the NP EN ISO 14001:1999 standard
PT Comunicações | TMN
Commitments for 2005

PT PRO > To have all its organisations certified by standards ISO 90001:2000,
NP EN ISO 14001:1999 and environment and OHSAS 18001
[health and safety for the Entrecampos centre].
TV Cabo > To get the ISO 9001:2000 standard certificate.
PT Inovação > To get the NP EN 14001:1999 standard certificate,
concerning the Environment.
PT SI >To begin the process to get the NP EN ISO 14001:1999 standard certificate.

Ñ Relationship
with the
Environment
4 Environmental management policies
For several years now PT has been incorporating in its practices a concern for
environmental protection and its increasingly greater importance. PT has therefore
been defining policies and mobilized several of its resources to keep up with new legal
demands and European directives and recommendations about this subject.
In 1995, the first stage of this process was concluded as PT Comunicações made its first
study about the environmental impact of the wireline telecommunications business.
This first study would, during the following year, result in the formal constitution of
PT Comunicações’ Directorate of Environment.
PT Comunicações and TMN later gained their Environmental Certificate, in acoordance

with the NP EN ISO 14001:1999 standard. Despite being already an example of
good environmental practices, PT PRO and PT Inovação are still hoping to get their
Environmental Certificates in 2005.
The increasingly greater importance of the environment for PT is reflected in its

concern with several environmental issues: energy management, fuels, recycling, water
consumption and electromagnetic radiation. The implementation of good environmental
practices in the Company resulted in a total absence of environmental penalties.
Summary of the main actions developed by PT Comunicações in terms of its environmental responsibility policies
Energetic efficiency Control of produced impacts

> Investment in more efficient technologies > An effective waste management
> Pollution prevention and decrease > Walking towards an increasing environmental
> A decrease of CO2 gas emissions importance
> A decrease in electricity, water and fuel > Selective gathering of cell phones and wireless
consumption levels phones through recycling centres
Impacts of transmission aerials To promote training and communication

> Electromagnetic radiations below the established > To develop environmental responsibility
limits
Other good environmental practices Environmental system certification

> Use of recycled paper > Environmental management system through
> Decrease of colour printing the international ISO 14001:1999 standard

Ñ Relationship
with the
Environment
TMN is another PT Group company, apart from PT Comunicações, that has its
environmental certificate in accordance with the NP EN ISO 14001:1999 standard.
TMN has encouraged the development of internal policies and R&D partnerships so
as to control and reduce the effects of the main environmental impacts that spring
from its business.
Main initiatives developed by TMN in terms of its environmental responsibility policy
Impacts of transmission aerials: electromagnetic radiations and landscape issues

Waste management
Energy Efficiency
In 2003, the wireline service implemented an environmental management system, with

reference to the international ISO 14001:1999 standard. Since then the implementation
and monitoring of the environmental system has been developed according to this
standard’s rules and principles, namely in terms of decrease and rationalisation of:
> Produced waste
> Automobile fuel consumption
> CO2 gas emissions
> Electricity consumptions
> Water consumptions
In 2005, PT PRO will be concerned about the following environmental goals:

> To analyse the causes of the increase of water and detergent consumptions.
> To re-examine the environmental survey and evaluation in face of the detailed analysis
of the building’s maintenance plan.
> To ensure that environmental requirements specific to service providers are fulfilled,
including the delivery of calibration certificates or the examination of measuring
equipment.
> To improve the logistics of used batteries’ delivery through battery recycling
centres.
> To make sure that electric and electronic equipment’s waste is disposed of
properly.
> To certify PT PRO in accordance with the NP EN ISO 14001:1999 standard.
> To reflect about the need to acquire waste weighing tools.
On 6 November 1996 PT formally committed itself to guide its management towards

environmental respect and protection. By signing ETNO’s Environmental Charter,
PT committed itself to follow these principles:
> An effective waste management system
> To control negative environmental impacts
> To prevent and reduce pollution
> To encourage training and communication
> To develop environmental responsibility
> To continually improve its performance

Ñ Relationship
with the
Environment
In 2004 ETNO’s Sustainability Charter came to reinforce PT’s complete engagement and
commitment to environmental issues. The charter, subscribed by several international
telecommunications companies, including PT, is particularly relevant in terms of
recognising that sustainability must be at the centre of all business affairs.
By signing the charter, companies have committed to:

> Produce sustainable goods and services with significant social, environmental and
economic benefits.
> Integrate, whenever possible, environmental, social and economic responsibilities
into their businesses, minimising, whenever possible, any negative impact that their
businesses might create.
Apart from that, all companies that have signed the Charter have committed themselves
to continually improve and share the best practices in the following areas:
> Updated information about all environmental impacts.
> To act in conformity with current legislation.
> To support investigation and innovation in products and services that might contribute
towards sustainable development.
> To make an efficient use of natural resources.
> To act in conformity with human rights and labour rights.
> To act frankly with stakeholders, giving them any information they may ask for.
> To develop partnerships with several societal groups.
> To implement sustainability in the Company’s internal management.
> To be on good terms with employees, contributing to their contentment, motivation
and progress.
Although several PT companies have already integrated good environmental practices

into their policies, the information reported in the following pertains only to
PT Comunicações and TMN, not only because they are the most advanced companies
in terms of environmental policies, but also because they represent, both, a total of
80% of PT’s business in Portugal. They also hold 62.5% of PT’s national employees
and are responsible for managing national wireline and mobile businesses, therefore
being a good example of the Group’s total impact.
Year Intervention
1995 > First environmental survey
1996 > Signing of ETNO’s Environmental Charter

> Creation of the Environment Department
1998-1999 > Environmental impacts survey, in accordance with the ISO 14001:1999 standard
> Selective gathering plan to collect waste from PT’s buildings
> Procurement policy of recycled products
2000 > Environmental management system consolidation plan
2001 > Approval of the environmental policy

> Actions to make employees more aware of and committed to environmental policies
2003 > Implementation of the Environmental Management System, in accordance with the ISO 14001:1999 standard
2004 > Signing of ETNO’s Sustainability Charter

Ñ Relationship
with the
Environment
4 PT Comunicações and the environment
PT Comunicações, due to its business area, creates environmental impacts that have
already been identified and have been systematically controlled, which allows PT to develop
all the necessary efforts to attempt to minimise environmental consequences.
Environmental issues Environmental impact
AA1 Waste production AA1.1 Scrap-iron and non scrap-iron Soil occupancy and contamination. Decrease on the
AA1.2 Paper and paperboard scraps visual appeal of landscapes. Decrease of the value of soils.
AA1.3 Plastic scrap Contamination of exterior and subsoil waters, due to spilling.
AA1.4 Moulded fibreglass scrap
AA1.5 Wood scrap
AA1.6 Used toners and ink-jets
AA1.7 Used oils Contamination of soils, exterior and subsoil waters,

due to spilling.
AA1.8 Battery scraps Soil contamination, due to spilling.
AA1.9 Used fluorescent light-bulbs Soils contamination because of mercury.
AA1.10 Used ionic fire detectors If detectors are broken they release a radioactive tablet,
with consequent radioactive radiation emission.
AA1.11 Gardening waste Contamination of soils, exterior and subsoil waters,

due to spilling.
AA1.12 Cloths and other cleaning items Soil occupancy and contamination. Decrease on the visual
contaminated with dangerous substances appeal of landscapes. Decrease of the value of soils. Spilling.
AA2 Noise pollution Decline of the quality of life of the communities affected
by it. Disturbance of people’s daily activities, with subsequent
physiological, psychological and/or social effects.
AA3 Fuels AA3.1 Fuel consumption Renewable fuels.
AA3.2 Pollutive gases emission Atmospheric pollution and diminishing density of the ozone
layer. Contamination of exterior and subsoil waters,
due to spilling. Disturbance of water and land ecosystems.
Accumulation of polluting elements in food chains. Corrosion
of materials, due to acid rains.
AA4 Energy consumption Decrease of natural resources available. Atmospheric pollution,

with an increasing greenhouse effect.
AA5 Water AA5.1 Water consumption Decrease of water resources.
AA5.2 Production of residual waters Contamination of watercourses, with a consequent excessive

increase of aquatic vegetable life, shortness of oxygen,
bad taste and smell. Marine ecosystems are also endangered.
AA6 Use of halons Diminishing density of the ozone layer, with negative
consequences on human health and on water and land
ecosystems.
AA7 Emission of electromagnetic radiations Natural habitats.

Ñ Relationship
with the
Environment
Concerning the emission of electromagnetic radiations, in 2001 PT Comunicações and
TMN commissioned PT Inovação (one of the companies of PT Group concerned with
the development of new technologies) a study about the effective emission of radiations
and their probable consequences. It is worth pointing out that this study was made
before the conjoint dispatch no. 8/2002 of 7 January about the establishment of a set
of basic restrictions and reference levels for exposing people to electromagnetic fields.
This dispatch included the previous recommendation of the European Council no.
519/CE/1999 of 12 July, which later originated into the decree-law no. 11/2003 of 18
January, regulated by decree no. 1421/2004 of 23 November. The Group’s willingness
to anticipate and keep up with market risks became clear.
This study focused on analysing the radiations of several PT Group’s buildings,

namely those where GSM aerials and their respective BTS containers were installed.
Telecommunication towers with Hertzian shafts link systems on the upper terraces
were also examined. This study also measured radiation levels on several floors of the
buildings, on terraces and on ground level.
Tests were made on several buildings, chosen according to several basic criteria: a greater
administrative activity (number of people) and technological activity (electromagnetic
fields radiator equipment), buildings located in residential areas or with a big commercial
activity. The purpose of the study was to analyse environmental impacts on society.

Ñ Relationship
with the
Environment
PT Comunicações environmental management system
PT Comunicações environmental impact has been systematically and continuously
monitored since 1998. Data analysis led us to conclude that PT’s effort to control and
reduce the main negative impacts of its business met with success. Communication
campaigns about environmental impacts, in which PT’s employees were involved, also
played a part in the consolidation of the results obtained.
These awareness campaigns are conducted in a cascade scheme, starting with the
responsible for the campaign and/or the environmental interlocutor that will, in due
time, reveal the goals and results that have already been settled to other employees.
In 2004 these actions made up a total of 2,100 training hours.
In PT Comunicações, 36 interlocutors that work jointly with the Directorate of Quality

in the implementation and application of previously defined environmental policies
have the following responsibilities:
Functions common to all interlocutors

Implementation and control of operational and/or organisational procedures applicable to the Directorate.
Control of environmental programmes in the areas applicable to the Directorate.
Organisation of training and awareness actions for the other employees of the Directorate.
To identify and evaluate new Environmental Issues and their respective environmental impacts,
regarding activities developed by the Directorate.
Control of the operationalization and efficiency of corrective and preventive measures established
by higher authorities.
Interlocutors specific functions, according to their business areas

To promote the inclusion of environmental clauses in contracts related with the purchase of goods and services.
To make known, internally and externally, PT Comunicações Environmental Policy and Goals.
To design/create bills and other means of environmental awareness.
To look up environmental legislation and regulations that can be applied to the company’s business.
To ensure that all legislation and regulations are followed internally and by suppliers of goods and services.
Competences: Minimum required competences for interlocutors, to be established by the Directorate

Conference training in accordance with the environmental modules in effect.
Properly registered SAP-RH training.
PT Comunicações has an environmental management manual which is available to all

employees. By reading it, employees will be able to examine thoroughly the environmental
goals of the company as well as examine procedures to inspect non-measurable features,
such as the different stages of internal auditing and environmental verifications. These
documents are valid and applicable to PT Comunicações, its suppliers, customers or
any other entities that are somehow related to the company.
PT Comunicações environmental impacts
Energy consumption
PT Comunicações energy policy has been directed in such a way as to ensure a greater
efficiency and a decrease on expenses. In 2004, energy consumption increased, although
in the last few years the average of energy consumption has suffered a decrease. Average
energy consumption per employee has also decreased.

548,999
525,113
497,251
463,932
455,794
448,036
1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004
Energy consumption [GJoules]
108.3
104.7
97.2
10.5 9.7 11.1
2002 2003 2004

Consumption due to executive activities
Consumption due to technical equipments Annual energy consumption per employee [GJoules/employee]
0.30 0.30
0.29 0.29
0.28 0.28
0.27
0.04 0.04 0.04 0.04 0.04 0.04 0.04
1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004 2005

Goals
Accumulated average of energy consumption per employee/day [GJoules/employee per day]

Ñ Relationship
with the
Environment
Fuel consumption and resulting gas emissions
PT Comunicações environmental indicator concerning fuel consumption is related
to PT’s automobile average fuel consumption, since absolute consumption depends
solely on the amount of on-site activities carried out and those strongly depend on the
business’ activities.
On the graphic below we can see the results of the control of average fuel levels. One
can also see a continuous decrease of consumption levels.
0.29
0.28 0.28
0.27 0.27 0.27 0.27 0.27
0.26 0.26
0.24 0.26
0.23 0.23 0.25
62,5066 mm
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005
Total Goals Diesel Goal Petrol Goals
Fuel consumption average > vehicles related with operating activities [GJoules/100 km]
153,277
144,323 144,776
138,011
130,841
124,574 127,208
108,655
15,919 17,115 15,269 13,935
2001 2002 2003 2004 2001 2002 2003 2004 2001 2002 2003 2004
Total Diesel Petrol
Consumed GJoules

Ñ Relationship
with the
Environment
11,285
10,612 10,661
10,227
9,695
9,155 9,426
8,051
1,103 1,186 1,058 966
2001 2002 2003 2004 2001 2002 2003 2004 2001 2002 2003 2004
Total Diesel Petrol
CO2 emitted [tons]
Gas emissions and greenhouse effects

PT’s CO2 emissions are mainly produced by the Company’s automobiles. In this chapter we will
only make reference to gas emissions which are a direct consequence of PT Comunicações business
activities.
As it is stated on the graphic above, CO2 emissions have had a slow decrease. This is due mostly
to the fact that the Company’s buildings are located in several different areas and therefore team
members must travel more to carry on with the business.
Concerning efforts made to ensure a bigger energy efficiency, by using renewable sources of energy,
an auditing was made to the buildings that presented higher consumption levels – namely, the ones
in Picoas and Rua Andrade Corvo, in Lisbon. From that auditing a rationalization plan was issued,
approved by the Board of Directors and the Directorate-General of Power. It is the purpose of this
plan to decrease energy consumption by 5%, between 2004 and 2009.
In 2004, the goals for buildings mentioned above were not attained. The main reasons for this were,
on the one hand, the fact that more than 800 people began to work in the Picoas building in 2004;
on the other hand, PT had to, due to an Anacom decision, make room for the instalment of other
operators equipment.

Ñ Relationship
with the
Environment
Some internal policies to reduce energy consumption were nevertheless implemented:
> Correcting the power factor
> Increasing set points of air-conditioning of switching and transmission equipments
> Including frequency variations
> Light sensors
> Photoelectric cells to detect light
> Reducing air-conditioning leaks to a minimum
An increase on equipment efficiency was also encouraged and consequently all energy
consumptions previously mentioned and included on the previous graphic are later
proportionally altered. We estimate that energy-consuming equipments have an average
efficiency of 70%.
37.2
34.6
181.1
169.8 172.1
29.7
155.3
138.5 137.4
1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004 2002 2003 2004
Water consumption [thousand m3] Water consumption per employee [m3]

Ñ Relationship
with the
Environment
Water consumption
PT Comunicações’ water consumption figures refer only to daily water consumptions that
take place in its buildings and are not therefore too relevant in terms of environmental
impacts. It is however a field in which the company intends to reduce consumption
by making its employees aware of the importance of water and encourage them to use
this natural resource in a more rational way.
PT is aware, nevertheless, that impacts that its business might have on ecosystems
largely depend on the treatment and effluents produced by government bodies in which
Company buildings are included.
One way or another, PT is always controlling water consumptions in its buildings and,
as was said before, intends to decrease water consumptions even further.
141
133 136
130 129 128
110
1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004 2005

Purposes
Water consumption > cumulative average of litres per employee/day

Ñ Relationship
with the
Environment
Waste and reusing RECYCLED WASTE Kg
Regarding its environmental 2004 2003 2002 2001
management policies, Iron 166,475 164,085 283,289 –
PT Comunicações has ways Copper alloys (copper, bronze, brass) 7,037 560 560 –
to measure the amount Aluminium – 670 531 –
of waste the Company Plastic 6,955 50,290 12,300 –
produces. Equipments 166,619 242,185 225,819 –
Copper and lead cables 9,779 23,205 35,385 19,947
Self-supported copper cables 429,281 499,070 430,720 528,567
Copper and plastic cables 25,879 56,070 31,620 47,087
Built-up copper cables – 140 50 –
Fibre-optic cables 67,280 48,020 69,260 32,777
TEDS+TE1SE cables 193,581 298,615 354,585 467,234
Wooden posts – 7,300 162,313 –
Batteries 30,327 54,468 2,304 –
Used oils 2,970 1,875 4,580 –
Used fluorescent light-bulbs 940 1,463 3,111 –
Paper and paperboard 67,803 126,096 65,545 –
Used toners and ink-jets 488 5,797 5,344 –
Furniture 34,280 33,891 – –
The company has also made an effort to reuse components that integrate its activity,
such as cables, helping in this way to prevent and reduce pollution.
On the graphic below we can see the percentage of reused cables. Notice also that the
2002 and 2003 decreases were a consequence of fires that occurred in Portugal in
those two years.
12.8
11.3
10.1 10.4
2001 2002 2003 2004
Reused cables [%]

Ñ Relationship
with the
Environment
Costs and benefits analysis of PT Comunicações’ Environmental Management System
Without excluding the possibility of adopting a new monitoring system for the Company’s
environmental impacts, PT Comunicações has a method to evaluate costs and benefits
of its environmental investments.
In order to push on an environmental policy coherent with its business, its attitude
and its respectful commitment to the environment, PT has invested in human assets
and materials. It is important to keep count and evaluate those investments in terms
of cost/benefit.
COSTS AND BENEFITS RELATED WITH EMS

Internal workforce (activities per in hour/employee) 2004 2003 2002
Training (trainers and trainees) 1,985 820 10,000

Internal and external auditing 190 1,104 600
Environmental tests 616 468 400
Document elaboration and revising 616 480 2,000
EMS planning, action and control 192 480 3,000
External workforce (activities per in hour/employee)

External trainers and auditors 42 72 128
Internal costs (Euro)

Workforce 125,843 107,793 378,000
Travels, stays and other materials (retention containers,
absorbent dust, etc.) 13,626 30,000 10,000
External costs (Euro)

External training and actions to maintain certificates 4,200 10,000 15,000
Waste alienation (fluorescent light-bulbs, superflat batteries, etc.) 14,352 20,000 –
Fixed halons alienation 98,924 – –
Profits (Euro)
Waste valuing 253,493 576,000 750,000
Other accounted profits (Euro)

Cost difference between recycled paper and white paper purchase 7,325 17,494 34,000
Fuel saving because of a decrease in automobile fuel consumption 18,029 92,973 –
Water saving because of a decrease in average consumption
per employee 52,194 6,106 –
Energy saving because of a decrease in average consumption
per employee 828,278 263,000 –
Uncounted profits
Valuing the Company’s image – – –
Possible effects in insurances – – –
Benefits in service profider tenders – – –
Environmental advantages as a result of gas emission and other natural
resources (iron metals) rationalization – – –
Final outcome (Euro)

PT Comunicações had a positive balance, even without including
uncounted profits which are very important. PT’s balance is therefore
higher than 902,374 750,000 370,000

Ñ Relationship
with the
Environment
4 TMN and the environment
A passage from TMN’s
TMN’s business activity is related to PT’s mobile services and has gradually attained a
environmental policy
“…TMN intends to promote
superior environmental policy, at the same time that its network expansion, number of
and maintain an Environmental accesses and customers were also increasing. TMN’s environmental impacts are mostly
Management System and instil
in its employees, business partners related to the increase of low-cost communications, mobile phones and batteries reuse
and suppliers an environmental culture and aerials installed in several areas of the national territory.
of respect and positive environmental
actions, going even further than what
is established in the law.” Like PT Comunicações in the wireline business, TMN has committed itself to analyse
the impacts of electromagnetic waves which result from mobile network aerials. In
2001, PT Inovação developed a study about the radiation that is in fact emitted by
aerials and its probable consequences. PT Inovação was, at the time, one step ahead
of market risks and of decree law no. 11/2003 of 18 January, regulated by decree no.
1421/2004 of 23 November, which establishes a chart of basic restrictions and reference
levels for human exposure to electromagnetic fields.
This study analysed the radiation emitted by one of PT’s buildings, where both GSM
aerials and a BTS container were installed. A telecommunication tower, with minilinks
and hertzian beams was also installed. For this study radiation measurements were
made in several floors of the building and on the terrace.
In 2001, TMN rendered its environmental management structure formal, by which

TMN has come to steadily improve its environmental performance. In 2004, decrease
of environmental impacts concerned mainly the three operational commitments present
in the Company’s environmental policy.
TMN has identified the following environmental impacts in its business area:
Issues Environmental Impact
Electromagnetic fields Negative perception of interested parties concerning potential risks

for human health.
Impact on landscape Decrease on the quality of natural and urban landscape.
Electricity consumption Indirect impacts related with electricity production.

Helps to worsen global warming because of CO2 emissions.
Natural resources depletion because of fossil fuel consumption.
Impacts related with waste Using landfills to put waste implies soil occupation and potential soil
elimination contamination. It also implies methane production, a gas that can cause climatic
changes by increasing the greenhouse effect. Pollution of exterior and subsoil
waters because of lye-related substances production. Inconvenience caused
by odours of waste decomposing.
Waste incineration, which helps to increase global warming and air pollution
by burning waste with CO2, CO and NOX emissions.

Ñ Relationship
with the
Environment
TMN’s environmental management system
TMN implemented an environmental management system that was, in December 2003,
certified by APCER in accordance with the NP EN ISO 14001:1999 standard. Regarding
its main environmental impacts, the issues of TMN’s environmental management
policy are the following:
Impacts of transmission stations: electromagnetic radiations

Within its environmental management system, TMN developed actions whose
purpose was to lessen society’s concerns with the impacts of transmission stations,
namely impacts concerning electromagnetic radiations. Apart from answering its
stakeholders’ concerns, TMN also measured radiation levels of its electromagnetic fields
to meet national reference limits and to follow the European Council’s 1999/519/CE
recommendation.
TMN supports the monIT project, launched in May 2004 by the Portuguese
Telecommunications Institute, whose purpose is to conduct systematic measurements
of electromagnetic fields in transmission stations throughout the whole country. It is
this project’s intention to, afterwards, check all data and make them public by displaying
the results on the Internet, at www.lx.it.pt/monit.
Impacts of transmission stations: landscape issues

TMN developed measures with the purpose of lessening visual impacts that spring
from installing transmission stations, presenting solutions that were adapted to both
rural and urban environments.
In planning the location of new transmission stations the following environmental aspects
were considered: protected areas, national ecological and agricultural preserves.
The proximity to important places for communities, such as schools and hospitals, is
analysed in detail and is part of the guidelines in planning processes.
TMN is committed to increase sharing of transmission stations with other mobile

operators, so that it would be possible to decrease the number of transmission stations
and, consequently, their visual impact. It is also with that purpose in mind that TMN
identifies local constructions, to avoid building new support infrastructures. New
network elements of the third mobile generation, the UMTS, are being implemented
in already existent infrastructures, to prevent further environmental impacts associated
with new structures.
TMN has committed itself to fulfil the GSM Association recommendations regarding
mobile operators. TMN has also, with the same level of excellence, committed itself
to act in accordance with Portuguese legislation.

Ñ Relationship
with the
Environment
Some of the GSM Association recommendations Accomplished
To increase dialogue between local communities and other interested parties to improve the understanding of local planning
x
and requirements of local network infrastructures.
To use clear and coherent documents while exchanging information with planning and regulatory bodies. x
To ponder sharing transmission stations with other already existent radio installations or infrastructures. x
To take into account the chosen location and design of transmission stations, in order to reduce visual impacts and reduce the concerns
x
of interested parties. The environmental impact of transmission stations should be as little as possible.
To make sure that all transmission stations fulfil national exposure limits, based on International Commission
x
of Non-Ionizing Radiation Protection (ICNIRP) guidelines.
To present a written statement claiming that the planning, installation and functioning of transmission stations are in accordance
x
with all legal requirements in effect.
To implement a clear process to reply to complaints and questions about transmission stations. x
This costs and benefits analysis of the environmental management system can not yet
be carried out in TMN since it is a fairly recent company and does not yet have all the
necessary information to make these calculations.
Waste management
Waste management is included in TMN’s environmental policy. TMN tries to select the
best waste management solutions through competent and properly certified entities.
Having now control over waste produced by the company, TMN seeks to improve its
waste management system in order to eliminate, reduce or redefine a better solution
for waste.
One of TMN’s environmental goals is the reuse of its products; to achieve that, the
company developed communication actions to apprise people of its programme to
collect used mobile phones and accessories. Any citizen can therefore leave their old
mobile phone in any TMN shop, knowing that it will have an adequate end. Should
they wish to purchase a new mobile phone they may have a discount if they deliver
their old mobile phone in good conditions. All mobile phones that fulfil minimum
functioning requirements (battery, non-damaged display and network login capability)
are accepted.
In order to ensure a greater efficiency in used equipment’s collection, in 2004 TMN

began to expand this concept to all its authorised commercial agents, hoping to increase
by 113% the number of recovered and reused mobile phones in 2005.

Ñ Relationship
with the
Environment
Energetic efficiency
One of the means used by TMN to reduce energy consumption was the investment
in technologies with greater energetic efficiency.
At TMN headquarters, an auditing began with the purpose of evaluating energetic

consumptions and design a five-year consumption-reduction plan.
Other relevant environmental issues for TMN

Apart from fulfilling the commitments stated in TMN’s environmental policy, which
have already been mentioned in this report, other actions were carried out, with the
purpose of reducing the company’s impacts in the places where its business activities
occur. Some of those actions were about:
Biodiversity
Storks’ nests were identified on the network infrastructures interfering with maintenance
activities of transmission stations. After contacting the Instituto de Conservação da
Natureza (ICN), TMN took full responsibility for dislocating the nests under the
supervision of the Institute.
Communication and awareness

TMN developed methods that allow its stakeholders to have access to information about
TMN’s environmental actions. Stakeholders can contact TMN through the website
www.tmn.pt, through the e-mail 1696@tmn.pt or through helpline 1696.
In 2004, TMN improved communication about the environment with its business
partners and suppliers, following its activities systematically. TMN was pleased to see
that two of its three transmission stations network maintenance suppliers were certified
by the NP EN ISO 14001:1999 standard.

Ñ Relationship
with the
Environment
TMN’s environmental impacts
Energy consumption
In 2004, 96% of TMN’s total electricity consumption was associated to the
telecommunications network, particularly transmission stations. Only 4% of electricity
consumption was associated to stores and the executive area. In 2004, total energy
consumption, including fuel consumption, amounted to 783,000 GJ.
3.55 Fuel Energy consumption
TMN
Offices and stores 8.12 GWh
Telecommunications network (aerials and commutators)(1) 201.76 GWh
Diesel 344,094 litres
Petrol 456,277 litres
Suppliers
Electricity – production warehouses 0.111 GWh
Diesel distribution – technical assistance 57,588 litres
(1) Data concerning energy consumption of transmission stations

were calculated based on the real average consumption of a sample.
96.45 Electricity
TMN energy consumption [%] Fuel consumption and consequent emissions

Direct gas emissions are related with fuel consumption, used in transports and
generators. In 2004, 943.84 CO2 tons, gas that causes greenhouse effect, were emitted.
Those 943.84 tons were related with diesel consumption, while emission of another
1041.67 CO2 tons were related with petrol consumption. CO2’s indirect emissions,
which spring from TMN’s electricity consumption, were also accounted for.
Origin of TMN’s direct CO2 emissions Emitted CO2 [t]
Diesel consumption 934.84

Petrol consumption 1,041.67
Source: IPCC and IPCC/PNAC.
Origin of TMN’s indirect CO2 emissions Emitted CO2 [t]
Electricity from offices and stores 3,321.80

Electricity from telecommunications network 82,509.27
Source: DGE.
Water consumption
Water consumption is not included in TMN’s main environmental impacts, since it is
associated with the daily functioning of offices. We do however wish to state that the
indicator for annual water consumption reached 26,818 m 3 in 2004.

Ñ Relationship
with the
Environment
Use of materials Total use of materials per type Tons
In 2004, electric and electronic equipments Plastic 320.14
were still the main type of materials used in Digital cards without chip
TMN’s egg packages
TMN. Plastics were the second most used TMN’s wallet packages
material, mainly because of plastic packages Original film packages
used in commercialised TMN products. 9.88 AT plastic envelopes

Bags
tons of recycled paper were consumed.
Paper 233.66
Recycled paper represents 84% of all paper
Cardboard boxes
used in TMN’s offices, with white paper Pamphlets included in TMN products
accounting for only 16%. Stickers included in TMN products
AT repairing package
Sharing transmission stations or using Cardboard boxes for technical assistance
White paper
already existent infrastructures (in places
Recycled paper
such as water reservoirs, buildings, lighting
Electric and electronic equipments 58.82
posts, among others) prevented the use Digital cardboard chips
of, for instance, metal (posts) to support Terminals without battery
Battery chargers
electronic equipments.
BTS
Rectifier
TMN was able to significantly decrease its
Electric board
cardboard consumption by reusing a large Aerials
amount of packages, either for carrying Outdoor closet
products or for providing technical mobile Metal – Steel(1) 58.82

Metal container
assistance. Through its effort to increase
Posts
material reuse, the company intends to Tower+ anchor bolt
reduce its impacts on the production of
Metal – aluminium(1) 5.78
consumed materials that result from TMN’s Metal container
suppliers’ activities. Batteries 38.08

Lead batteries
Mobile phone batteries
Cables 0.80
Cables
Fibreglass(1) 40.80
Fibre container
(1) Calculated values based on real weight average.

Ñ Relationship
with the
Environment
116.97 Recycling Waste and reuse
7.13 Landfills
Regarding waste produced in 2004, 43.8% was recycled,
15.53% was reused and 2.61% was disposed of in sanitary
landfills.
112.04 Incinerating
TMN intends to reduce the amount of incinerated waste,
which is mainly composed of mixed urban waste and
represents 41.03% of the total of produced waste.
TMN has made an effort to control all waste produced by

36.95 Reusing
its business activity, products and services and to reduce
Produced waste destination [tons] waste production by reusing used products.
Waste produced in and managed by TMN’s business activities Type Bound for Tons
Paper/cardboard(1) Non-dangerous Recycling 58.29
RUM(1) Incineration 111.36
Toners and ink-jets Reuse 1.59
Computer scrap 2.67
Mobile phones 10.97
Mobile phones Recycling 0.14
Fluorescent light-bulbs Dangerous 0.29
Batteries 1.29
Batteries Reuse 1.55
(1) Values calculated in m3, with a 0.24 density for paper/cardboard and a 0.131 density for urban mixed waste. 253 work days were considered
in 2004 and 0.24 m3 municipal containers.
Suppliers’ participation in a common effort was obvious in 2004, going even beyond
the control over waste produced by its business activities, as data related with waste
produced by TMN and its suppliers show.
Waste produced in and managed by suppliers’ activities Type Bound for Tons
Metal scrap Non-dangerous Recycling 36.76
Plastic 4.79
Construction waste Landfill 4.80
Timber Reuse 2.00
Paper/cardboard Reuse 17.20
Paper/cardboard Recycling 3.94
Several road construction materials Dangerous Landfill 0.13
Absorbent cleaning materials Incineration 0.71
Batteries Recycling 21.20
Fluorescent light-bulbs 0.24
Contaminated packages Landfill 0.53

25.71 Dangerous Network 64.98
Commercial 36.15
254.37 Non-dangerous Executive 171.96
Total produced waste Total produced

per classification [tons] waste per activity [tons]
Continuous executive activity Products recovered at the end of their life cycle
was mainly responsible In the mobile business area, one of the main environmental issues concerns the
for waste production, durability of mobile phones and batteries. TMN has been trying to make its products
due to the great amount last for two use cycles before being recycled.
of packages reused
With that in mind, TMN established a partnership with a company that receives
for commercial purposes.
mobile phones collected in TMN stores and authorised agents. Mobile phones are
later reconditioned and reinserted in the market. In 2004, 5.88% of all commercialised
mobile phones were collected. This process intends to find an answer for the increasingly
bigger issue of electronic equipment waste and what to do with them. This issue is
regulated by the European Directive 2003/108/CE of 8 December.
0.14 Recycle mobile phones Products collected at the end of their life cycle(1) %
Electric and electronic equipment

Collected mobile phones 5.88
Reused mobile phones 5.80
Recycled mobile phones 0.07
Batteries
Collected batteries 5.88
Reused batteries 3.48
Recycled batteries 2.39
Collected amounts of commercialised materials(1) Tons

10.97 Reused mobile phones
Electric and electronic equipment
Reused mobile phones 10.97
Collected mobile phones’ destination [tons] Recycled mobile phones 0.14
Cardboard
Reused packages 17.64
Batteries
Reused batteries 1.55
Recycled batteries 1.06
(1) Collected in TMN stores.

Goals for 2005 Energy
> To intervene in yet another 100 transmission stations in order to decrease energy consumption
TMN considers environmental by 30%.
issues to be crucial > To define a detailed five-year plan in order to decrease energy consumption in TMN’s headquarters.
for the Company’s success,

Waste
therefore has selected > To reduce mixed urban waste production by changing consumables used by employees.
> To get all employees to adhere to used mobile phones collection, in order to achieve
a set of environmental goals the following figures:
that it hopes to achieve
in 2005. Mobile phones and batteries collection Tons
Collected mobile phones 24

Reused mobile phones 22
Recycled mobile phones 1
Collected batteries 6
Reused batteries 3
Recycled batteries 2
> To increase mobile phones and batteries collection by 113%.
Landscape impact
> To control landscape impact by intervening in 10 transmission stations.
Training and awareness actions

> To develop awareness actions for TMN’s employees.
> To continue to develop awareness initiatives and coaching for employees, in order to develop
environmental management in their activities.
Communication
> Internal disclosure of the first Environmental Report – 2004.
> To improve information available to all interested parties.
Environmental performance
> In 2004, TMN followed the Global Reporting Initiative guidelines to define its indicators.
Biodiversity
> To consult the ICN to identify country areas where it is possible to increase stork nidification
and to identify areas where nidification should be avoided, because there are already too many
storks in those areas.
SUSTAINABILITY REPORT 2004 104

Ñ Relationship
with the
Environment
4 Landscape impact of our activities
Most buildings used by the company are located in urban areas, although some
telecommunications infrastructures, such as aerials and cable planning are located
inside natural preserves.
Although changes in natural habitats, as a consequence of the Company’s business

activity, are not significant, PT Comunicações does have a programme to protect and
recreate ecosystems and native animal species from damaged areas. This programme
uses PT Comunicações’ infrastructures, for instance, to increase nidification in several
areas of the country.
While planning where to install new aerials, phone cables and other necessary products
in public places, PT Group’s companies establish local partnerships to find the most
suitable solution for each case.
PT Comunicações established a protocol with the Associação Nacional de Municípios

Portugueses with the purpose of adjusting procedures to be followed in its relations
concerning construction work and installation work, remodelling, telecommunications
infrastructures maintenance and alteration, including equipment installation. In some
specific cases, air planning was replaced by underground planning, so as to decrease
landscape impact in historical areas or preserved areas.
TMN and the Instituto de Conservação da Natureza developed initiatives together to

relocate storks that had nested in telecommunications network infrastructures.

sharing the value
of knowledge

Ñ Information
Society
The Information Society can be defined as a society in which Action Plan was approved and that was the beginning of
information and knowledge play a crucial role in all human an integrated European policy for the Information Society.
activities. The Information Society is a society in which all Concerning the Lisbon Strategy, the eEurope 2002 was an
forms of digital connectivity, specially the Internet, have led essential step to accomplish the European Union’s goal
to the creation of a new economic and social organisation, of “becoming the world’s most dynamic and competitive
as is referred in the Diagnosis Report for the Information economic zone, based on knowledge and able to ensure a
Society and Electronic Government in Portugal, published sustainable economic growth, with more and better jobs and
by the UMIC in 2003. In 2000, the eEurope European a greater social cohesion.”
4 Development in Portugal
In 1996, the Missão para a Sociedade de Informação [Mission for the Information
Society] was instituted and that led to the launch of the National Initiative for Information
Society that, in turn, was the basis of the 1997 publishing of the Green Paper for the
Information Society.
Guidelines of the Green Paper for the Information Society

> Democratic spirit in the Information Society, Electronic Democracy and Electronic Government
and the use of IT (Information Technologies) in the public sector.
> Info-exclusion and social implications for the Information Society.
> Basic, professional and advanced qualifications.
> Using IT in schools.
> Using IT in companies, digital-based economy and employment in the Information Society.
> Scientific, cultural and educational contents.
> Law regulation in the Information Society, R&D in the Information Society and R&D for technologies
in the Information Society.
> IT sector.
> National information infrastructure.
To continue the efforts made as a member of the European for implementing numerous Information Society projects
Union and as a result of the 2002 eEurope project, Portugal in families, companies and Government institutions. The
designed its first two documents about the Information National Statistics Institute, through an inquiry regarding
Society in Portugal – the Internet Initiative and the Operational the use of IT in Portuguese households concluded that in
Programme for the Information Society – whose goal is to the last few years there has been a significant growth in this
provide mass access to the Internet. In this context, the UMIC sector. In 2004, 79% of the Portuguese population had a
– Unidade de Missão, Inovação e Conhecimento [Mission, mobile phone, 41.3% had a computer and 26% had access
Innovation and Knowledge Unit] – has been responsible to the Internet.

Ñ Information
Society
4 Our contribution
Information Society was, is and will continue to be a priority for PT and the whole telecommunications sector. Widespread use
of IT, the increasing range of broadband products available, the implementation of support programmes for the community
and for citizens with special needs and a continuous effort in research and development are just some examples of PT’s
investment and commitment in building a Knowledge Society that promotes digital inclusion.
Portugal 72
Belgium 71
Holland 42
Spain 39
Italy 36
France 35
Denmark 30
Austria 29
Finland 25
Norway 25
United Kingdom 25
Switzerland 24
Sweden 22
Germany 20
Greece 6
Broadband penetration in households with computers [%]
+ 78%
Today Portugal has one of the best broadband access

infrastructures of all Europe. PT Group’s contribution in
695
achieving this was very important, because PT is the leading
company in several broadband access platforms and has
continued to invest in upgrading the network and launching
391
new broadband services.
This continuous investment has in fact resulted in one of the 184

best European infrastructures, with a high network coverage. 66
It has also allowed Portugal to stand side by side with some of
the most developed economies regarding telecommunication 2001 2002 2003 2004
services penetration. Broadband customers [thousand]

Ñ Information
Society
Along with economic changes and progresses achieved in telecommunications and
in computer science, Portugal has displayed an increasing access to information and
social problems related with info-exclusion have steadily decreased. PT Comunicações’
Universal Service, that gives any citizen, regardless of their location in national territory,
access to a phone line, also helped in the achievement of these positive results. Today,
education and training are therefore available to a larger number of people, regardless
of their social and economic background and/or place of residence.
PT’s customer base has been increasing mainly in broadband services, as is displayed
on the chart below:
CUSTOMER BASE
2004 2003 2002
Wireline
Main accesses (000) 4,368 4,225 4,196
PSTN/RDIS 3,948 4,037 4,143
ADSL wholesale 420 188 53
ADSL retail 380 161 43
Multimedia
Previous houses 2,551 2,472 2,390
Bidirectional (000) 2,418 2,221 2,048
Pay-TV customers (000) 1,553 1,442 1,307
Cable 1,160 1,094 1,017
Satellite TV 393 348 290
Broadband Accesses by cable (000) 315 230 140
We can therefore see how important PT is for the development of the Knowledge Society in Portugal.
The number of broadband access by cable customers has reached 315000, which means an increase of
37% compared to the 2003 figures.
The growth is even more obvious in ADSL accesses: in 2004 there was an increase of 123% in the ADSL
wholesale service and a 136% increase in ADSL retail.

31,596
25,543
21,236
4,196 4,225 4,368
1,307 1,442 1,553 695

187 391
2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004
Wireline Mobile Pay-TV Broadband [ADSL+cable]
Customers by business [thousand]
PT Group’s contributions for the Information Society are a fact in all business areas,
although the biggest investments have been made in the wireline area. The wireline
has been adapted, prepared and improved to be able to support broadband services,
making ADSL services available in all parts of the country. Investments in wireline have
totalled Euro 3,000 million in the last decade and the Company now has completely
updated and digitalized infrastructures, able to include ADSL and Voice-over-IP. Also
in the last ten years, PT spent Euro 1,800 million in the mobile business to expand
and modernise the network. Cable and new technologies are also part of the Group’s
interests to create more ways to access broadband, in accordance with the goals defined
by the European Committee.
26,534
20,656
16,809
4,887 5,053
4,426
2002 2003 2004 2002 2003 2004

Portugal Brazil
Customers > mobile [thousand]

Ñ Information
Society
4 PT projects
The Internet comes to you downloads of up to 384 Kbits/s for accessing the Internet
In order to promote Internet access to groups of adults who and a multimedia portal.
have a harder time dealing with new technologies PT has
TMN was also the first Portuguese operator, and the third
develop a national campaign – Internet comes to you – using a
European operator, to launch a video call service, associated
bus fully equipped with computers that works as a classroom.
with 3rd generation services. Video answering through a video
Inhabitants of more remote areas of the country and senior
call was made available right after.
citizens have thus a chance to get to know the possibilities
offered by telecommunications services. A few months later TMN proved again to be innovating by
launching the video mail service that allows any user of the
Broadband investment video call service to leave video messages in the mail box
In 2004, PT had invested more than 100 million euros in of TMN customers they’ve called to. This is an innovating
developing the broadband project through ADSL in Portugal. service worldwide, because for the first time an integrated
This investment shows PT’s concern and the importance voice-video box was created, allowing the video message voice
given to making its services available to all citizens. to be heard even without a 3rd generation coverage.
The i9 andÐ myTMN portals, accessible from any place

Projecto Bibliociência [Scientific-library Project]
and without schedule restrictions, make a set of services
PT and Lisbon’s City Hall have made a commitment,
and contents available, to reinforce the mobility of TMN
according to which PT provides the necessary Internet
customers.
connections to the Bibliociência project. This project is set in
a laboratory-bus equipped with material for making scientific These innovating mobile services, besides approaching
experiments and backup multimedia documentation. This customers’ needs in a more detailed way, also help to
bus is to be used by students. The Bibliociência project reduce the company’s environmental impacts, by enabling
began on 1 March and toured Lisbon schools from March to decrease travels and therefore decrease fuel consumption
to May. PT’s way of cooperating in this project was to provide and CO2 emissions.
Internet access infrastructures, giving students a chance to
use broadband through ADSL Sapo and access their subjects’ PT Inovação launches new mobile technology
contents in a fast way. This is a very important project for PT Inovação was once again in a leading position in the
PT, since supporting and encouraging young people to use research and development of new solutions by conceiving a
IT, either for leisure or for educational purposes, is part of technological solution that allows mobile telecommunication
PT’s strategic options. operators worldwide to accept payments for pre-paid cards,
through Visa International. In the 1990s, PT Inovação was
TMN launches Video Answering responsible for developing the technology of the worldwide
TMN was once again the pioneering national company, and concept of pre-paid card for telecommunications. It was after
one of the first in the world, to launch products for the the creation of this concept that TMN launched MIMO, the
consumer market and for the corporate market that allow world’s first pre-paid mobile service card.

Ñ Information
Society
Formare – global e-learning solutions
Developed by PT Inovação, this e-learning programme Medigraf system makes Teleconsultations possible, besides
has several advantages: cost reduction, flexibility and being an important training tool for doctors and specialists.
accostumation in access to contents and pedagogical results. Access to the Medigraf platform from a PC, through UMTS,
It also allows students to share group work among them and makes it completely mobile, saving healthcare a great deal
make synchronized presentations, using text, images and of expenses.
audio. This e-learning programme combines both technology
and pedagogy and is therefore very important in the building Support and participation in conferences
process of the Information, Knowledge and Learning Society. In 2004, PT attended a vast set of conferences and meetings
about telecommunications challenges and their importance
PT Compras becomes the model for the National in the development of today’s economy and society. The
Electronic Commerce Programme international conference on broadband, held in the Broadband
PT Compras was launched in June 2003 as a way of showing Week, promoted by UMIC; the 14th Communication Congress;
important is the purchase of goods and services for PT. The the APDC’s (Portuguese Association for the Development of
success of PT Compras and PT’s know-how were the basis Communications) Communication Congress and the XII
for signing a protocol with the Portuguese government. The AICEP Forum (Mail and Telecommunications Operators of
purpose of this protocol is to promote and make procurement Portuguese-speaking Countries Association) were some of
practices and electronic commerce known, according to the the most relevant events, where PT participated in the debate
goals of the National Electronic Commerce Programme. about telecommunications.
Partnership with the Euro 2004 PT Wi-Fi – wireless broadband Internet

PT was the technological partner of the Euro 2004, the PT provides access to wireless Internet in Wi-Fi public places.
biggest and most important sports event ever organised in This service, also known as WLAN (Wireless LAN) is a short-
Portugal. The organisation of this event was praised both reach wireless technology (up to 300 metres) that allows
nationally and internationally and PT provided backstage access to broadband wireless Internet (up to 54Mbps).
support, with an excellent performance.
Presently, PT is the leader in extending Wi-Fi service, with
458 access points, at least one in every district capital of
Minho Campus Party
the country.
The fourth edition of the Minho Campus Party was considered
a sucessful event by the 1,500 cybernauts who attended this PT has hotspots in places its target customers often go
computer science fair. For this Campus Party PT provided the to. PT’s target customers are people with a great need for
largest broadband ever granted and tested in Portugal. mobility, such as business executives, moving workers,
tourists and students. Airports, hotels, restaurants such as
PT develops a Medigraf Platform accessible through UMTS McDonald’s or Pizza Hut, shopping centres, post-offices and
Developed by PT Inovação, Medigraf is a cooperative diagnosis conference centres are the kind of places that need access
platform and a breakthrough product worldwide. The to information.

Ñ Information
Society
Mobility, convenience, security, information access
The WLAN and UMTS technologies, developed by PT, are complementary. They fulfil
customers’ ultimate needs in different ways, not only because of the broadband available,
but also for the increased level of mobility they allow customers to have.
Through PT’s Wi-Fi service, Portugal Telecom, in a complementary way, along with
other broadband and mobility services, ensures access to all kinds of information in
a quick, comfortable and safe way in a strategically selected place, to allow mobile
workers access to the Internet.
At the same time, PT encourages roaming partnerships, not only to provide national
customers abroad with Internet services, but also to ensure Internet services for foreign
professionals during their stay in Portugal.
Benefits
Public access Wi-Fi products provide Internet access and access to a user’s work
environment (e.g. e-mail, documents, applications) in public places with Wi-Fi coverage,
called Hot Spots.
> Productivity – Access your business’ essential information as quickly as possible.

> Flexibility and Mobility – You do not need to sit at your desk to work; carry your
office with you.
> Speed and Accessibility – Always online, wherever you are.
> Broadband Internet – Downloads of up to 11 Mbps.
Particularly useful for companies, Wi-Fi helps to consistently increase corporate

productivity, loyalty and the number of customers.
To sum up, Wi-Fi products main quality is the fact that it makes the ‘always on’ concept
a reality. ‘Always on’ provides broadband users mobility, flexibility and advantages in
Internet access, regardless of the amount of time they stay in one public place.

Ñ Information
Society
PT Escolas
PT Group, because of its leading role as a national operator and To meet the contest’s demands, a new specific portal was
because of the responsibilities it has assumed to modernise launched, within the Sapo portal: the Turma Sapo, featuring
the Portuguese society, also has an active and specific role special contents in areas such as ‘Learn’, ‘Communicate’ and
in the design, implementation and diffusion of programmes ‘Have Fun’. Without making contents included in there any
that are efficient in the fight against info-exclusion. This fight less precise, we also intend the portal to have an entertaining
will become even more important considering that 2005 will tone, along with competition elements that make it easier
be the European Year of Citizenship for Education. for students of this age group to relate to.
Several national and international studies have shown that In the online competition, teams of students (named ‘clans’)
there is a gap in the Portuguese Internet, namely in providing from every school will compete in one of five categories (named
information sources and contents that meet pedagogical and ‘tribes’), each one related with school subjects and life styles – art
training needs of the School Community. Having that in and literature, science and technology, sports, music and video.
mind, PT worked in the creation of a favourable environment
This online competition serves as a qualifying stage for the
for diffusing quality contents that pass on positive and
final competition between selected teams, which will be
healthy values to Portuguese teenagers. PT developed the
broadcasted in several programmes in one of the national
project PT Escolas – A Aventura do Conhecimento [The
television networks.
Adventure of Knowledge] to attempt to dwindle district
disparities by bringing Internet and Knowledge experience On the project’s first stage there will be a tour to make the
to the whole country. This unprecedented initiative, devised project known. This tour will visit all district capitals’ schools,
for young students, from 12 to 18 year olds (7th to 12th grade), trying to make both parents and students interested in a ‘big
has three main phases: an online competition, a qualification event’. This ‘big event’ will be a place where physical activities
tour through all district capitals and, finally, a TV show. and Internet-related activities will be held, in a competitive
The ‘School of the Future’ will be the school of the TV-like environment. In this event, the team that will represent
winning team. that district in the final national competition wil be selected.

Ñ Information
Society
4 Research & Development
44
The challenges posed by the Knowledge Society change as 41
technology and knowledge evolve. Keeping that in mind, 38
35
PT will maintain its partnership with several international
organisations with which the Company had been developing
some work, so as to always be one step ahead of challenges
and solutions. PT Group sees itself as a company very
committed in innovating and developing new products and
services that fulfil customers’ expectations and meet the
needs of every specific market.
The research and development area is essential to

increase the business, since this sector is the centre of all
2001 2002 2003 2004
technological development present in global economy. Along
with PT Inovação, a company that was specially designed Total investments on research and development [Euro million]
Operating costs of PT Inovação
for R & D activities in the telecommunications market,
many other companies of PT Group have a know-how
obtained through decades of business and experience in
the telecommunications sector. The basis of the Group’s Commercial application of services, products and solutions
economic growth is a continuous innovating attitude, developed by PT Group has already made several projects
gathering knowledge, creating value and developing real. Those projects, once put into practice, made a decisive
synergies in several of Portugal Telecom’s business areas. contribution for the development of the sector and Portugal
Telecom’s growth as an integrated corporate group of the
PT Inovação’s activity is strongly directed, although not
telecommunications sector. Among other contributions,
exclusively, to the development of the Group’s businesses,
we would like to emphasise the creation of the world’s
in terms of applied research, providing engineering services,
first pre-paid mobile phone, Mimo, launched in 1995 by
developing services and solutions in national and international
TMN and a decisive step in mobile globalisation. It was
markets.
also TMN that in 2003 became one the first companies
In the applied research area, PT Inovação has focused its worldwide to commercially launch 3 rd generation mobile
activity on innovation, including Innovation Contract projects, services.
community projects, IST (Information Society Technologies)
Continuous search for new solutions is also achieved through
projects, EURESCOM and national programmes to encourage
the cooperation with national and international scientific
innovation.
communities. In the research and development area,
Every year PT Inovação launches several dozen products PT Inovação is the link between universities and the industry,
and services, but all of them are directed to IR and NetBand getting advanced technologies and solutions into the market.
management platforms – PT Inovação’s two main core areas. Universities, Institutes and Research Centres are, along
PT Inovação’s Net Results represent 0.676% of the Group’s with customers and suppliers, PT Inovação’s partners for
Net Results. cooperation in sharing telecommunications knowledge.

Ñ Information
Society
Innovation to improve healthcare
It is possible, through a RDIS line, to have a general PT’s investment in healthcare is not made only in
practitioner triaging patients and performing all necessary telemedicine. In fact, PT Medicina perceives telemedicine as
tests. This general practitioner will then pass on that a natural intervention area to implement an e-health concept
information to a specialist that may be some hundred miles based on information technologies.
away and that specialist will then be in charge of patients’
BabyCare is another project created and developed by PT.
analysis, consultation and prescriptions.
Nowadays BabyCare has a partnership with the Alfredo da
Telediagnosis can be made online, without any recording, or Costa Maternity in Lisbon. The BabyCare ensures that all
in a higher degree, where every procedure done is recorded parents and relatives of premature babies or babies who need
so that afterwards the specialist can access information special care are permanently in touch with their baby.
about a particular patient whenever necessary. In Portugal
The link is made through a colour video camera installed
the growth of the telemedicine network has been gradual.
in the baby’s incubator. At home, parents and relatives can
In 1999 telemedicine services could be found in Leiria,
see their baby’s images.
Covilhã, Guarda and Coimbra; three years later the list had
increased with the cities of Castelo Branco, Évora, Beja, The only necessary equipment is a TV, which is then
Portalegre, Vila da Feira and Coimbra’s suburbs. Nowadays connected to another device, provided by the Maternity. With
ten different districts have regular telemedicine sessions, in this system parents can then record their child’s images in
a total of 35 units working with several different specialties, video.
namely Physiatrists, Gastroenterology, Orthopaedics,
Neurology, Endocrinology, Psychiatry, Pneumology and
others.
Some innovating projects

Formare – Global e-learning solutions
Formare is an integrated and flexible e-learning and b-learning (blended-learning) service developed by PT Inovação to serve
as basis for training and educational solutions in Internet/Intranet environments and to diffuse multimedia/hypermedia contents.
Net@utarquia
The Information Society comes closer to its citizens with a web interface that allows City Halls to have their services available
on the Internet. A new relationship channel between City Halls and citizens, with a single access point – www.netautarquia.pt
Twenty-four hours a day, 365 days a year, with no geographic limitations. Net@utarquia, developed by PT Inovação,
presents a customised website on the Internet, through which each City Hall can update all information daily.
Medigraf® – Platform of cooperative diagnosis

Developed by PT Inovação, Medigraf® platform presents a telematic solution to support remote medical services.
By putting together data communication, image and other videophone facilities, this platform allows health professionals
to work cooperatively in a diagnosis.
Telemedicine based on this technology is used in several national hospitals, with dozens
of platforms working regularly in teleconsultation of several clinical specialties.
This is an innovating platform worldwide and it was designed with the help of many healthcare professionals of different areas,
who have all cooperated and given a hand in the development of this healthcare solution.

Index of
Global Reporting Initiative
[GRI] indicators

GRI INDICATORS SUSTAINABILITY REPORT
Vision and strategy page
1.1 Vision and Strategy 9, 10, 11, 12
1.2 Chief Executive Officer’s Statement 4, 5
Corporate profile
2.1 Name of the organisation 17
2.2 Main products or services 17, 18, 19
2.3 Organisation’s operating structure 20, 21, 22
2.4 Organisational structure 17, 18, 19
2.5 Countries in which the organisation is present 19
2.6 Nature of ownership 17
2.7 Nature of markets served 18, 19, 39, 40, 41, 45, 46
2.8 Organisation’s dimension 17, 18, 19, 36, 37, 39, 40, 41, 45, 46
2.9 Stakeholders 44, 45
Relationship with the financial community 50, 51
Relationship with regulatory and supervisory bodies 52
Relationship with employees 54
Relationship with customers 46
Relationship with suppliers 70
Involvement with the community 73
2.10 Contact person(s) for the report 2
2.11 Reporting period 3
2.12 Date of most recent previous report n.a.
2.13 Boundaries of report 9
2.14 Significant changes compared to previous reports n.a.
2.15 Subsidiaries 18
2.16 Reformulations n.a.
2.17 Reasons for the application of GRI’s principles 9
2.18 Criteria and definitions 3
2.19 Changes to previous measurements n.a.
2.20 Policies and internal practices 3, 10, 29, 33
2.21 Independent assurance for the full report 3, 122
2.22 Additional information 2
Governance Structure and Management Systems
3.1 Governance Structure 20 to 22, 23 to 29
3.2 Independent and non-executive directors 24 to 27
3.3 Directors’ expertise 26 to 29
3.4 Procedures at Board level regarding risk management 28, 29, 31, 32, 33
3.5 Board’s remuneration 25
3.6 Organisational structure 29
3.7 Mission, values, codes, principles and policies 9 to 11, 16, 61, 62, 70 to 72
3.8 Mechanisms available to shareholders 24
Stakeholder Engagement
3.9 Identification criteria 44, 45
3.10 Consultation methods 47, 49, 50, 52, 53, 59, 62, 63, 70, 71, 72
3.11 Type of information 47, 48, 52 to 55, 60, 61
3.12 Use of information 47, 48, 52 to 55, 57, 58, 60

Comprised policies and management systems page
3.13 Precaution principle 31 to 33
3.14 Charters of international principles 9, 16
3.15 Principal memberships in industry and business associations 13 to 15
3.16 Policies to manage impacts in the productive chain 70 to 72, 88 to 90, 86, 105
3.17 Management of indirect impacts 42, 43, 111 to 114
3.18 Main changes in operations n.a.
3.19 Programmes and procedures regarding economic, 11, 12
social and environmental performance
3.20 Existing certifications 83 to 85
GRI Content Index
4.1 Table identifying location of each element of the GRI Report 118, 119, 120
Content by section and indicator
Economic Performance Indicators
EC 1 Net sales 39
EC 2 Geographic breakdown of markets 40
EC 3 Cost of assets, materials and acquired services 42
EC 4 Percentage of paid contracts according to the established n.a.
EC 5 Total payments to employees 43, 67
EC 6 Distributions to investors 34, 39
EC 7 Increase/decrease in earnings 35
EC 8 Paid taxes 43
EC 9 Received subsidies 43
EC 10 Discriminated donations 75, 76
EC 13 Indirect economic impacts 42, 43, 107 to 114
Environmental Performance Indicators
EN 1 Total materials consumption by type 100*, 101*
EN 2 Percentage of used materials that are waste n.r.
EN 3 Direct energy consumption 88, 89, 100
EN 4 Indirect energy consumption n.r.
EN 5 Total water consumption 92, 100
EN 6 Location of areas with a habitat rich in biodiversity n.a.
EN 7 Impacts on biodiversity 83 to 86, 96, 97, 105
EN 8 Greenhouse gas emissions 91, 100
EN 9 Use and emission of ozone-depletive substances n.r.
EN 10 NOx, SOx and other significant atmospheric emissions by type n.r.
EN 11 Total waste amount by type and destination 94, 102, 103
EN 12 Significant discharges in the water n.r.
EN 13 Significant spills n.r.
EN 14 Significant environmental impacts of main products and services 88, 96
EN 15 Reclaimable percentage of sold products 94, 102, 103
EN 16 Incidents or fines 83
EN 17 Initiatives for eco-efficiency and renewable energies 92, 99
EN 25 Impacts of activities over protected areas 97, 99, 105
EN 35 Total environmental expenditures by type 95

Social Performance Indicators: Labour Practices and Work Conditions page
LA 1 Employees 55, 56
LA 2 Net employment creation 55
LA 3 Union Representation 61
LA 4 Labour Relationships 61, 62
LA 5 Registration practices of occupational accidents and diseases 62
LA 6 Formal Committees 61, 62
LA 7 Lesions, lost days and casualities 62
LA 8 Policies or programs regarding HIV/AIDS 68
LA 9 Average training hours per year 64, 65
LA 10 Policies of diversity and opportunity 64, 65
LA 11 Diversity in company’s management bodies 56
LA 12 Employees’ benefits beyond the ones required by law 67 to 69
LA 13 Formal employee representation in decision making 61
LA 16 Programmes’ description in order to ensure employees’ jobs 67
and manage the final stage of their careers
LA 17 Specific policies and programmes of knowledge or training 57, 58
management
Human Rights
HR 1 Human Rights policies 16, 61, 62
HR 2 Impacts over Human Rights 16, 61, 62
HR 3 Suppliers chain n.a.
HR 4 Non-discrimination 16, 61, 62
HR 5 Freedom of association and collective negotiation 16, 61, 62
HR 6 Child labour 16, 61, 62
HR 7 Forced and compulsory labour 16, 61, 62
Society
SO 1 Policies of impact management over communities 75 to 81
SO 2 Bribery and corruption 61, 62, 71, 72
SO 3 Lobbies and political contributions 29
SO 4 Awards for ethical, social and environmental areas 73
SO 7 Policies and procedures to prevent anti-competitive behaviours 53
Product Responsibility
PR 1 Consumer’s health and safety 46, 47, 48
PR 2 Products and services 46, 47, 48
PR 3 Respect for privacy 46
* Given the nature and size of PT’s activity, it was always possible to get systematic information about this indicator regarding TMN.
Being an important indicator, PT will develop every effort to introduce more consistent information in the next report for 2005.
n.r. Indicator considered irrelevant.

n.a. Indicator for which information is not available.

GRI INDICATORS: EXPLANATION REGARDING UNDISCLOSED INFORMATION
2.12; 2.14; 2.16; 2.19; 3.18 (n.r.) EN 9 – Use and emission of ozone depletive
As this is the first sustainability report substances (n.r.)
published by PT, there is no need to include EN 10 – NOx, SOx and other significant
any changes to the methodologies implemented atmospheric emissions (n.r.)
in previous years. The information pertaining to EN 9 is already
disclosed in EN 8, since primary atmospheric
EC 4 – Percentage of paid contracts according emissions resulting from PT’s activity
to the established (n.a.) are related to CO2 emissions. With regards
PT began an information gathering process to EN 10, several conversions would
regarding this indicator in the end of 2004 be required. However, given the specific
and, therefore, does not yet have a solid requirements of such conversions – concerning
database that would allow the disclosure the type of fuel and related emissions –
of such values. We foresee that next year’s PT has chosen not to determine the values
sustainability report will already include for this indicator.
this information.
EN 12 – Significant discharges in the water (n.r.)
EN 2 – Percentage of used materials EN 13 – Significant spills (n.r.)
that are waste (n.r) During the course of its activities, PT does not
Given the nature of PT’s services and products, produce significant discharges or spills into
it is not possible to integrate significant watercourses. As a result, these indicators were
amounts of used materials in its operations. considered non-relevant for PT’s impact
on the environment.
EN 4 – Indirect energy consumption (n.r.)
PT has chosen not to determine the value HR 3 – Suppliers chain (n.d)
of indirect consumption related to its overall PT has a Code of Ethics and a procurement
energy consumption, as this is already manual where it is stated that suppliers must
calculated by the power company. comply with a set of environmental and social
principles. However, there is no specific
EN 6 – Location of areas with a habitat rich reference to the safeguard of Human Rights
in biodiversity (n.a.) because these are already provided for
PT does not hold large areas with habitats rich in Portuguese law.
in biodiversity, but our presence is nevertheless
noticeable throughout the country. This PR 1 – Consumer’s health and safety (n.a.)
presence is felt mainly through the aerials PT recognises the importance of this indicator
and cables installed. However, PT has been and, as such, our multimedia truck touring
implementing a number of policies concerning the country is already carrying out a campaign
this matter, as described in the EN 7 indicator. among the younger public which addresses
the right way to use the Internet.
PT will develop several activities in this area,
whose initial results will be included
in the next sustainability report.

VERIFICATION STATEMENT
SGS ICS
To the Board of Directors to PT Group, its subsidiaries and interested statements and/or evidence from external
of Portugal Telecom, SGPS, SA parties. interested parties, (iii) carrying out a sample
The members of the verification team were of certain procedures for consolidating
Nature and Scope of the Verification selected according to their knowledge, the information concerning the reported
By request of Portugal Telecom, SGPS, SA, experience and qualifications regarding environmental and social performance,
SGS ICS performed an independent verification the proposed verification. The team included (iv) comparing the included financial information
of the Sustainability Report 2004. auditors registered with the Institute with the information contained
The scope of the verification, based on SGS’s of Environmental Management and Assessment in the financial reports from where it was
methodology for Sustainability Reports (IEMA), the International Register of Certified retrieved, (v) interviewing the managers
Verification, included the text, the data, Auditors (IRCA), Social Accountability responsible for preparing the information
the charts and the declarations contained herein. International (SAI) and also EMAS Verifiers. (vi) providing evidence that the fundamental
Data from the legally certified financial reports The participating verifiers have coordinating principles of the GRI reporting guidelines (2002)
of PT Group’s various organisations were auditor qualifications for the performance have been considered and applied,
not verified at the source. of certification audits to ISO 9001 quality and (vii) verifying the fulfilment of the terms
management systems, ISO 14001:1999 required for stating that this report
Responsibilities environmental management systems, was prepared “in accordance with”
The Board of Directors of Portugal Telecom OSHAS 18001 systems for safety and health GRI guidelines (2002).
Group is responsible for the information management at work, and SA8000 social
disclosed and for setting evaluation criteria. responsibility management systems. Conclusions
The Board is also responsible for establishing Based on the methodology described above
the systems for gathering, classifying, validating Verification Criteria and Methodologies and the work carried out, it is the opinion
and reporting the information. SGS Group developed a set of protocols of SGS ICS that the information and the data
SGS ICS did not participate in the treatment for the verification of sustainability reports included in the verified report is accurate,
of any information comprised in this report. (Sustainability Report Assurance) based comprehensive, reliable and provides
It is the responsibility of SGS ICS to issue on the best practices established an adequate representation of the activities
an opinion regarding the suitability by the 2002 Sustainability Reporting Guidelines of Portugal Telecom Group, in Portugal,
of the aforementioned information, based of the Global Reporting Initiative (GRI) throughout a period of twelve months
on the independent verification protocol which and the AA1000 Assurance Standard (2003). ended in 31 December 2004.
was carried out with regards to the scope These protocols are classified into different SGS ICS states that the Sustainability Report
and the purpose of the verification commitment. verification levels, according to the reporting 2004, the object of this verification,
history and the organisational capacity was prepared in accordance with GRI Guidelines
Independence and Competence Statement of the reporting company. (2002), fulfilling the five requirements necessary
SGS Group is a world leader in inspection, The Sustainability Report 2004 was verified for that purpose.
assessment and verification services, operating in accordance with the level 2 protocol,
In representation of SGS ICS
in more than 140 countries, with an offer that consisting of (i) the identification
includes the certification of services, of quality, of the existence of management control systems Lisbon, 20 July 2005
environmental and social management systems, supported by organisational policies
of auditing procedures concerning ethical issues, and resources, (ii) the assessment
as well as the verification of environmental, of the efficiency of the procedures
social and sustainability reports. SGS ICS and systems for gathering, classifying, validating
asserts its independence before favours, outside and reporting information contained herein,
Maria João Nascimento
influence and conflicts of interests related including, whenever necessary, corroborative Executive Officer

This report is printed on chlorine-free paper.
Published by
Corporate Communications
Portugal Telecom, SGPS, SA
Consulting: Triple Value Sustentare
Design: José Brandão | Paulo Falardo [Atelier B2]

Illustrations: José Brandão
Photographic credits:
PT corporate ads > PAGES 3, 10, 47, 49, 53, 69, 87, 104
Ideias Revistas > PAGES 4, 26, 41, 48, 51, 54, 55, 63, 64, 73, 74, 77, 78, 83, 85, 90, 94
Rui Ochôa > PAGE 46
Printed: Textype
Legal deposit no. 232 479/05
www.telecom.pt

2004 Portugal Telecom CSR Report

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SUSTAINABILITY REPORT

Auditing and accuracy of the included data

Criteria and deﬁnitions used in costs and economic,

Far from being a management fashion, business

Portugal Telecom SUSTAINABILITY REPORT 2004 4

Portugal Telecom SUSTAINABILITY REPORT 2004 5

31 } Global and integrated risk assessment

83 } Environmental management policies

107 } Development in Portugal

117 } Index of Global Report Initiative [GRI] indicators

122 } Veriﬁcation statement by SGS/ICS, Serviços Internacionais de Certiﬁcação, Lda.

SUSTAINABILITY REPORT 2004

Portugal Telecom SUSTAINABILITY REPORT 2004 8

Portugal Telecom SUSTAINABILITY REPORT 2004 9

Summary of the Code of Ethics

A company’s ethic comes, beforehand, from its employees’ ethic,

valuable asset. to a larger number of people. A strong cultural patronage

Portugal Telecom SUSTAINABILITY REPORT 2004 10

Portugal Telecom SUSTAINABILITY REPORT 2004 11

Area Management goals Management implements

Social Internally > Employees Individual Performance Analysis

Environmental To manage the environmental impacts > Environmental Management

Economic To maximise shareholders’ proﬁt > Financial and commercial marketing

(1) Source: Instituto Nacional de Estatística.

Portugal Telecom SUSTAINABILITY REPORT 2004 12

Portugal Telecom SUSTAINABILITY REPORT 2004 13

Portugal Telecom SUSTAINABILITY REPORT 2004 14

Other Associations/National Foundations Purpose

Serralves Foundation To promote cultural activities on all the Arts.

Portugal Telecom SUSTAINABILITY REPORT 2004 15

Declarations and codes of principles subscribed Year

ETNO’s Environmental Charter(1) 1996

Portugal Telecom’s Code of Ethics 2002

United Nations Global Compact 2004

ETNO’s Sustainability Charter(1) 2004

(1) European Telecommunications Network Operators’ Association.

PT commits itself to following the Global Compact principles concerning:

Global Compact is a set of universal management conduct principles developed by

By subscribing the Global Compact principles, PT has committed itself to include

Portugal Telecom SUSTAINABILITY REPORT 2004 16

This change was approved in an extraordinary general meeting of shareholders on

Wireline Domestic Mobile Multimedia International Instrumental Companies

At national level, strategic orientation is made of four vectors:

At international level, PT is more active in strategic orientation for its position

The so called instrumental companies are oriented towards transversal processes to

Portugal Telecom SUSTAINABILITY REPORT 2004 17

Wireline Business 100.00% PT Comunicações

Domestic Mobile Business 100.00% TMN

Multimedia Businesses 57.56% PT Multimedia 100.00% TV Cabo

International Businesses 50.00% Vivo 65.12% Telesp Celular

100.00% PT Brasil 100.00% PrimeSys

32.18% Médi Télécom

Key Companies 100.00% PT Sistemas de Informação

Portugal Telecom SUSTAINABILITY REPORT 2004 18

Cape Verde Islands Mozambique

Portugal Telecom SUSTAINABILITY REPORT 2004 19

Corporate Centre is oriented several businesses coordination, reporting to PT’s Executive

> Regulation > Report and Consolidation

Portugal Telecom SUSTAINABILITY REPORT 2004 20

Portugal Telecom SUSTAINABILITY REPORT 2004 21

194 The decentralized services are the following:

Portugal Telecom SUSTAINABILITY REPORT 2004 22

In 2004 PT’s good management practices were recognised by the Heidrick&Struggles