GENERAL MEETING OF SHAREHOLDERS
PORTUGAL TELECOM, SGPS S.A.
30 June 2010
PROPOSAL OF THE BOARD OF DIRECTORS
SOLE ITEM ON THE AGENDA:
(To resolve on the proposal received from Telefónica, S.A. on 1 June 2010 regarding the acquisition of the shares held by companies of the Portugal Telecom Group in Brasilcel, N.V., under the terms and at the price of the current offer or at a higher price presented)
Whereas:
A) Telefónica, S.A. (“Telefonica”) has submitted to the Board of Directors of Portugal Telecom, SGPS S.A. (“Portugal Telecom”), on 1 June 2010, a revised binding offer (the “Offer”) that contemplates, among other things, the acquisition by Telefonica, directly or through any of its affiliates, of the shares representing 50% of the share capital of Brasilcel, N.V. (‘Brasilcel”), owned directly or indirectly by Portugal Telecom;
B) The full terms and conditions of the Offer are attached hereto and have been duly disclosed by Portugal Telecom through the Portuguese Securities Commission website (www.cmvm.pt);
C) The Offer comprises two alternatives. Under Alternative A, Telefonica proposes to acquire 50% of the total number of shares of Brasilcel owned directly or indirectly by Portugal Telecom for an aggregate purchase price of Euros 6,500 million (six thousand and five hundred million Euros). The consideration would be payable in cash, in immediately available funds on the date of completion of the transaction. Under Alternative B, Telefonica proposes to acquire one third of the 50% of the total number of shares of Brasilcel owned directly or indirectly by Portugal Telecom, for an aggregate purchase price of Euros 2,166,666,667 (two thousand one hundred and sixty six million six hundred and sixty six thousand and six hundred and sixty seven Euros), equivalent to one third of Euros 6,500 million (six thousand and five hundred million Euros). Additionally, Telefonica proposes to offer to Portugal Telecom the right to put all or part of the two thirds of the 50% of the total number of shares of Brasilcel owned directly or indirectly by Portugal Telecom, during a period of three years, for an aggregate purchase price, for each relevant transfer, equivalent to an amount equal to Euros 6,500 million (six thousand and five hundred million Euros) multiplied by the percentage that the number of such shares transferred from time to time represent over fifty percent (50%) of the total number of shares of Brasilcel, plus accrued guaranteed dividend payments.
D) The Board of Directors decided, at the meeting held on 1 June 2010, to request that a general meeting of shareholders be convened to resolve on the above mentioned proposal, under the terms and at the price of the current Offer or at a higher price presented until the date of the general meeting, under the terms and for the purposes of article 373, paragraph 3, of the Portuguese Companies Code.
E) Certain information relevant to the Offer may, from time to time, be made available on the website of Portugal Telecom at www.telecom.pt.
We propose:
That, under the terms and for the purposes of article 373, paragraph 3, of the Portuguese Companies Code, the general meeting of shareholders resolve whether to accept or reject the Offer received from Telefonica on 1 June 2010 on the terms and at the price of such Offer or at any higher price presented by Telefonica any time before the date of the general meeting of shareholders.
Lisbon, 7 June 2010
The Board of Directors,