Portugal Telecom and Microsoft Announce Strategic Agreement to Accelerate Implementation of Interactive Video and Data Services

REDMOND, Wash., and LISBON, Portugal, March 30, 1999 — Portugal Telecom SA and Microsoft Corp. today announced that they have reached a strategic agreement to jointly develop interactive video and data services. The objective of the agreement is to accelerate the deployment of new broadband and wireless technology and services for delivery to customers in Portugal.

In addition, Microsoft will invest $38.6 million (PTE 7.2 billion) for an equity stake of 2.5 percent in TV Cabo, Portugal Telecom’s cable and satellite television services company, which plans to launch broadband Internet services to residential customers later this year.

The agreement provides for a wide range of joint initiatives including the development of new business opportunities in the area of interactive services over the Internet, interactive digital television and wireless services.

“The agreement with Portugal Telecom reaffirms Microsoft’s commitment to the development and delivery of broadband and wireless technologies and services to customers around the European region,” said Michel Lacombe, president of Microsoft Europe, Middle East and Africa. “Microsoft has chosen to work with a company whose strategic vision, product delivery and customer service match our vision for the industry.”

“Multimedia services will be a key component of our future growth. TV Cabo will be the backbone of our multimedia strategy, and our broadband network provides a unique platform for the development of these services in Portugal,” said Francisco Murteira Nabo, chairman of Portugal Telecom. “Microsoft shares our vision of the way in which interactive services can be brought to the Portuguese market. We have set the foundation for a strong working relationship that will be focused on the timely development of new and exciting services for our customers. Portugal Telecom is looking forward to a strong relationship with Microsoft.”

Portugal Telecom (NYSE:PT; BVL:PTCO.IN) is Portugal’s leading and only full telecommunications service provider. The company offers wireline, cellular, cable and multimedia services and has significant international operations.

TV Cabo is a subsidiary of Portugal Telecom and is the leading pay-television operator in Portugal with a broadband Hybrid-Fibre-Coax cable network covering 1.6 million homes and with full national coverage through a digital satellite platform. By year-end 1998, TV Cabo had approximately 568,400 cable subscribers and 28,700 satellite customers. The company has seen annual growth in excess of 100 percent in subscriber numbers over the last three years.

As required by Item 1.a of Article 344 of the Portuguese Capital Market Code, Portugal Telecom SA, with headquarters at Avenida Fontes Pereira de Melo, 40, in Lisbon, Company no. 503 215 058 enrolled in the Public Commercial Registry of Lisbon under no. 3602, with a fully subscribed share capital of PTE 190,000,000,000, notifies that it will increase the share capital of its subsidiary CATVP – TV CABO PORTUGAL SA (“TV CABO”), from PTE 5,319,146,000 to PTE 5,717,646,000 through the issue of 398,500 new ordinary shares (representing 7.5 percent of the share capital before the capital increase), each with a nominal value of PTE 1,000 and a subscription price of PTE 50,000.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.

Microsoft is a registered trademark of Microsoft Corp. in the United States and/or other countries.

Other product and company names herein may be trademarks of their respective owners.

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