Portugal Telecom (”PT”) announces that it has reached agreement with the Portuguese State for the transfer to Caixa Geral das Aposentações (“CGA”) of the pension liabilities, which are guaranteed by PT Comunicações S.A. (“PT Comunicações”), relating to part of its active and former employees, and of associated pension funds that cover such liabilities. The proposed transfer includes the “Plano de Pensões do Pessoal da Portugal Telecom/CGA”, the “Plano de Pensões Regulamentares da Companhia Portuguesa Rádio Marconi” and the liabilities associated with the survival benefit included in the “Plano de Pensões Marconi” (together the “Regulated Pension Plans”). The transfer of the “Plano de Pensões do Pessoal da Portugal Telecom/CGA” will be as from 1 December 2010 and the transfer of the “Plano de Pensões Regulamentares da Companhia Portuguesa Rádio Marconi” and “Plano de Pensões Marconi” will be executed on 31 December 2010.
The present value of past liabilities associated with the Regulated Pension Plans, as of the date of transfer, amounted to Euro 2,804 million and this was determined by an independent actuary using actuarial assumptions that comply with the recommendations of the 2005 report by “Tribunal de Contas” and best practices of similar transactions. As of the date of transfer, the unfunded liabilities amounted to Euro 1,004 million, equivalent to Euro 713 million net of taxes.
Portugal Telecom will fully fund the past liabilities with the transfer of the assets held by the Pension Funds established by PT Comunicações, which had a market value, as of 30 November, of Euro 1,800 million, and with additional payments up to 31 December 2010, and on 20 December 2011, and 20 December 2012 of Euro 100 million, Euro 450 million and Euro 454 million respectively.
After the transfer of the liabilities associated with the Regulated Pension Plans, Portugal Telecom will continue to provide to part of its active and former employees certain retirement benefits, which include pension supplements and health care services ("Health Plan"), which, as of 30 September 2010, amounted to Euro 455 million and were fully funded.