LISBON, Portugal -- Portugal Telecom, SGPS, S.A. (“Portugal Telecom” or “PT”) announced today that it intends to spin off its 58.43% interest in its subsidiary PT Multimédia - Serviços de Telecomunicações e Multimedia, SGPS, S.A. (“PTM” or PT Multimedia) and to increasethe shareholder remuneration package already announced for the 2006-2008 period from Euro 3.0billion to Euro 3.5 billion, in addition to the distribution of PTM shares. The implementation ofthese proposals is subject to shareholder approval at an Extraordinary General Meeting (“EGM”) tobe called for that purpose and these proposals will only be executed if the Sonaecom tender offerlapses or ceases.

After the technological and regulatory review of different alternatives to address the concernsregarding access network concentration, PT’s management has concluded that the separation ofthe networks through the implementation of an Access Service Division (as described in the reportof the Board of Directors disclosed to the market and filed with the CMVM on 6 March 2006 andwith the SEC on 7 March 2006) would be lengthy, complex from a legal standpoint and wouldcarry significant costs. The separation of PT Multimedia can be executed in a shorter timeframeand with lower execution risk, creating at the same time an alternative operator to the PT Groupwith critical size in Portugal and the ability to expand internationally.

Portugal Telecom SGPS SA (NYSE: PT)