PT has managed to sustain modest top-line growth despite witnessing intense competition in its overall market and lower Average Revenue Per User (ARPU) due to a decline in Mobile Termination Rates (MTR) in Portugal. Going forward, we expect the company to benefit from network-upgrades and expansion initiatives in Brazil and Portugal, positively impacting the company’s long term growth prospects. Through Vivo’s acquisition of Telemig and commencing operations in the North-east region of Brazil, we expect PT to witness exponential growth in the long run. In addition, Vivo’s launch of 3.5G services in Brazil will enhance the company’s reach to provide better services to a wider customer base. Moreover TMN, despite an anticipated decline in ARPU, is expected to see steady growth in revenues on account of increasing subscriber-base. Nevertheless, we believe the growing popularity of pay-TV and growth in ADSL retail customers for broadband in PT’s domestic wire-line business will support overall revenue growth despite witnessing erosion in revenues. Thus going forward, although we expect PT to continue to face intense competition both on the domestic front and in Brazil, taking into account PT’s solid market position in the Portuguese and Brazilian telecom industry, at current levels the stock offers an attractive investment opportunity.

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