Fitch affirms Portugal Telecom

Fitch Ratings said it affirmed Portugal Telecom's long-term issuer default rating at BBB, following news of the company's proposed distribution policy, which includes the payment of a special dividend of €1.65 per share.

Fitch also said it affirmed the senior unsecured rating of Portugal Telecom Finance International BV's bonds at BBB.

The outlook is stable.

The news is consistent with comments previously made by the company over the use of proceeds from the Vivo disposal, Fitch said.

Combined with a potential restructuring of pension liabilities and the completion of the proposed Telemar investment, Fitch said it expects net debt-to EBITDA to increase to about 2.5x to 2.6x in 2011, before trending down moderately in the following two years.

The company's domestic businesses continue to perform well relative to its European peers notwithstanding a tougher domestic environment compared to many in the peer group, the agency said.

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