August 21, 2012 / 9:38 AM / 5 years ago

TEXT-S&P summary: Portugal Telecom SGPS S.A.

(The following statement was released by the rating agency)

Aug 21 -

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Summary analysis -- Portugal Telecom SGPS S.A. -------------------- 21-Aug-2012

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CREDIT RATING: BB+/Negative/B Country: Portugal

Primary SIC: Communications

services, nec

Mult. CUSIP6: 737273

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Credit Rating History:

Local currency Foreign currency

20-Jan-2012 BB+/B BB+/B

03-Jun-2011 BBB-/A-3 BBB-/A-3

21-Apr-2009 BBB/A-2 BBB/A-2

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Rationale

The rating on telecommunications operator Portugal Telecom SGPS S.A. reflects Standard & Poor's Ratings Services' assessment of the group's business risk profile as "fair" and its financial risk profile as "significant." We think its business risk profile is constrained by the tough economic and financial conditions in Portugal (Republic of Portugal, BB/Negative/B), resulting in intense price competition and adverse consumer and corporate behaviors. These weaknesses are cushioned by its solid and well-sustained positions in the Portuguese fixed-line, pay-TV, and mobile telecommunications markets. Portugal Telecom's 26% proportionately consolidated Brazilian subsidiary Oi only modestly cushions the company's exposure to, and impact of the domestic economy, in our view. In addition, we note that dividends upstreamed from Oi in the future will be exposed to currency fluctuations.

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