Statement on Portugal Telecom, S.A.'s cost Accounting System, for the purposes of Paragraph 5 of Ministry of Equipment, Planning and Territorial Administration' Order no. 15021/99 (2nd Series) Article 35(2) Regulations for the Operation of FTS

Considering that:

i. In December 1996, after ICP defined the general principles of Portugal Telecom, S.A.'s accounting system, this operator officially informed ICP that it had implemented cost accounting system within the framework of the Concession Contract of the Public Telecommunications Service;

ii. ICP conducted audits of the said system for the 1996, 1997 and 1998 financial years;

iii. Such audits were carried out by entities independent of Portugal Telecom, S.A.;

iv. In the context of the recently completed audit of the 1998 financial year, a statement of compliance of the said system with the obligations contained in Article 13 of Directive 95/62/CE, Article 18 of Directive 98/10/CE, Paragraph 3 of the Order of the Ministry of Equipment, Planning and Territorial Administration no15021/99 (2nd Series) and the Telecommunications Prices Convention,

ICP declares, for the purposes of Paragraph 5 of the Order of the Ministry of Equipment, Planning and Territorial Administration no. 15021/99 (2nd Series) and point 2 of article 35 of the Regulations of the Operation of the Fixed Telephone Service, that the results of Portugal Telecom, S.A.'s cost accounting system for the 1998 financial year were produced in accordance with the rules defined in Paragraph 3 of the Order of the Ministry of Equipment, Planning and Territorial Administration no 15021/99 (2nd Series) and Article 34 of the Regulations of the Operation of Fixed Telephone Service.