Glimmers of Hope for PT

With little sign of any imminent recovery in the Portuguese economy, Portugal Telecom SGPS SA (NYSE: PT) is having a rough ride in its domestic market as its half-year trading update shows.

But while many of the numbers in the report point to a downward trend (most notably fixed and wireless ARPUs and mobile customer numbers), there are a few signs of encouragement for the operator with regards to some of the services in which it has been investing during the past few years, namely pay TV (IPTV and satellite TV) and fiber-to-the-home (FTTH).

Its customers continue to sign up for its pay-TV services, with a further 44,000 coming onboard during the second quarter of this year, taking the total to 919,000 (up by more than 30 percent from this time last year). In total there are about 4.1 million households in Portugal, so PT has its TV services in more than 22 percent of them.

PT is also still adding fixed broadband customers -- a further 21,000 during the second quarter, taking the total to 1.04 million. An impressive 173,000 of those are hooked up to the carrier's FTTH service, with 26,000 new fiber access customers added during the three months to the end of June.

And despite the macro economic pressures, PT continues to invest in next-generation technologies, namely FTTH, fiber-based mobile backhaul, its Service Provider Information Technology (SPIT) assets ("the modernisation of IT platforms and servers and in storage capacity and backup") and Long Term Evolution (LTE).

The carrier is on target to pass 1.6 million homes with its FTTH offer by the end of the year, up from 1 million at the end of 2010. (See PT Uses Huawei for FTTH and AlcaLu's GPON Goes Portuguese.)

In addition, the modernization of its mobile network -- making all base stations ready for Long Term Evolution (LTE) -- is set to be completed by the end of 2011. The operator is currently testing live LTE services in Braga and Cascais and has 3,300 mobile sites (about 85 percent of its total) hooked up with fiber backhaul connections to provide better mobile data service quality and prepare for full LTE service launch.

The net result of this is that PT believes its major capex investment cycle for next-generation services (FTTH, LTE and cloud services for enterprises) is nearly over and it will be able to reap the rewards in the coming years. Of course, that's somewhat dependent on the recovery of the Portuguese economy.

— Ray Le Maistre, International Managing Editor, Light Reading