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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

For the month of April 2011

Commission File Number 1-13758

PORTUGAL TELECOM, SGPS, S.A.

(Exact name of registrant as specified in its charter)

Av. Fontes Pereira de Melo, 40
1069 - 300 Lisboa, Portugal

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F    x    Form 40-F   o

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  o   No  x

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Annual Report

2010

Portugal Telecom, SGPS, S.A.

Public Company - Avenida Fontes Pereira de Melo, 40 ·1069-300 Lisboa - Share capital: Euro 26,895,375

Registered in the Conservatory of the Commercial Registry of Lisbon and Collective Person under no. 503 215 058

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Annual Report

2010

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Management Report

Introduction

The 2010 consolidated annual report of Portugal Telecom, SGPS, S.A. (“Company”) provides a detailed explanation of its consolidated activity and the evolution of its businesses during 2010 and, as such, we propose to the shareholders the analysis of that report in conjunction with this report.

The Company, as mentioned in Note 2 to the standalone financial statements, since 1 January of 2010 adopted the Normas Contabilísticas e de Relato Financeiro (“NCRF”), established by the Sistema de Normalização Contabilística (“SNC”), while the consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), which are applicable to the listed companies in the European Union. The reconciliation of the shareholders’ equity as at 31 December 2010 and net income for the year then ended, attributable to the Company’s shareholders, between the standalone (under NCRF) and the consolidated financial statements (under IFRS), is as follows (amounts in Euro million):

Business overview

Apart from management of investments, Portugal Telecom SGPS, S.A. did not conduct any other activity.

Legal Information

·      There are no amounts due to the Portuguese State and the Portuguese Social Security System.

·      The Company and the members of it board of Directors and Audit committee did not enter into any material businesses or transactions, except for those mentioned in Note 45 of the 2010 Consolidated Annual Report.

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Proposal for application of profits

Considering that:

A)   During the financial year ending on 31 December 2010, the net profit was in the amount of 5,124,694,888 Euros, of which 4,279,794,322 Euros are distributable profit for the fiscal year under the law, after coverage of accumulated losses;

B)    As at 3 November 2010, the Board of Directors resolved to submit to Portugal Telecom shareholders’ a new dividend distribution policy consistent with the Company’s financial profile following the disposal of its shareholding in Brasilcel N.V. and taking into account the proposed investment in Oi, the potencial transfer to the Portuguese State of all pension liabilities and pension fund and the commitment to a solid investment grade rating;

C)    According to the shareholder remuneration policy then outlined by the Board of Directors, a 1.65 Euro per share dividend that was deemed exceptional would be distributed to shareholders, of which 1.00 Euro per share was paid on 28 December 2010 (as an advance of 2010 profits), and the remaining 0.65 Euro per share should be paid in 2011 after approval by the General Meeting of Shareholders;

D)    Such policy further comprised the payment of an ordinary 0.65 Euro per share dividend for the fiscal years ending on 31 December 2010 and 2011, which represents a 13% increase as compared to the original commitment of 0.575 Euro per share for that same period (subject to approval by the competent General Meetings of Shareholders);

E)    The amount corresponding to the advance of 2010 profits resolved by the Board of Directors in December 2010 amounted to 896,515,500 Euros, and the sum actually distributed was fixed in 875,872,500 Euros, upon deduction of the amount corresponding to shares held through equity swaps.

The Board of Directors proposes:

1.     That 413,661,880 Euros of the net profit for the fiscal year be used to cover accumulated losses;

2.     That, considering the distributable profit for the financial year under the law, in addition to the advance of year profits made in December 2010, an overall amount of 1,165,466,250 Euros be paid to the shareholders, corresponding to 1.30 Euro per share in respect of the total number of issued shares, divided as follows:

a)     an amount of 582,733,125 Euros, corresponding to 65 Euro cents per share in respect of the total number of issued shares, for the balance of the dividend deemed exceptional as abovementioned and not yet paid; and

b)    an additional amount of 582,733,125 Euros, corresponding to an ordinary dividend of 65 Euro cents per share in respect of the total number of issued shares, which arises following the resolution of the Board of Directors dated 3 November 2010 towards

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submitting to approval by PT shareholders a new dividend distribution policy consistent with the Company’s financial profile;

The remaining net profit for the fiscal year be transferred to retained earnings;

3.     That, in this way and taking into account the amount corresponding to advance of year profits made in December 2010, the total sum to be paid as dividend in respect of the 2010 fiscal year be fixed in 2,061,981,750 Euros, corresponding to a dividend of 2.30 Euros per share;

4.     That, taking into account the proposal as set out in item [6] on the agenda, it will not be possible to accurately determine the number of own shares that will be in treasury on the date of the abovementioned payment without limiting the Company’s intervention ability, we propose that, in the distribution of the overall sum of 1,165,466,250 Euros as provided for in the foregoing paragraphs, calculated on the basis of an unit amount per issued share (in this case, 1.30 Euro per share), the following be observed:

a)     Each issued share be paid the unit amount of 1.30 Euros;

b)    The amount corresponding to the shares that, on the payment day of the abovementioned amount, belong to the Company itself (calculated on the said unit amount of 1.30 Euros per issued share) not be paid, but be transferred to retained earnings;

5.     That, considering the right to the abovementioned payment pertaining to the shares resulting from the exercise of the right to conversion of convertible bonds issued:

a)     Each share entitled to dividend resulting from the conversion of convertible bonds be paid the said unit amount of 1.30 Euros;

b)    The payment to each share resulting from the conversion of convertible bonds be made by using retained earnings.

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2010 events and recent developments

The 2010 events and recent developments are described in the 2010 Consolidated Annual Report of Portugal Telecom.

Lisbon, 24 March 2011

Henrique Granadeiro, Chairman of the Board of Directors

Zeinal Bava, Chief Executive Officer

Luís Pacheco de Melo, Executive Director, Chief Financial Officer

Carlos Alves Duarte, Executive Director

Manuel Rosa da Silva, Executive Director

Shakhaf Wine, Executive Director

Francisco Manuel Marques Bandeira, Non-Executive Director

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José Guilherme Xavier de Basto, Non-Executive Director

João Manuel de Mello Franco, Non-Executive Director

Joaquim Aníbal Brito Freixial de Goes, Non-Executive Director

Mário João de Matos Gomes, Non-Executive Director

Gerald Stephen McGowan, Non-Executive Director

Rafael Luís Mora Funes, Non-Executive Director

Maria Helena Nazaré, Non-Executive Director

Amílcar Carlos Ferreira de Morais Pires, Non-Executive Director

Francisco Teixeira Pereira Soares, Non-Executive Director

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Jorge Humberto Correia Tomé, Non-Executive Director

Paulo José Lopes Varela, Non-Executive Director

Milton Almicar Silva Vargas, Non-Executive Director

Nuno Rocha dos Santos de Almeida e Vasconcellos, Non-Executive Director

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Financial statements

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INDEX

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PORTUGAL TELECOM, SGPS, S.A.

BALANCE SHEET

31 DECEMBER 2010 AND 2009

Euro

The accompanying notes form an integral part of these financial statements.

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PORTUGAL TELECOM, SGPS, S.A.

INCOME STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

Euro

The accompanying notes form an integral part of these financial statements.

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PORTUGAL TELECOM, SGPS, S.A.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED 31 DECEMBER 2009 AND 2010

Euro

The accompanying notes form an integral part of these financial statements.

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PORTUGAL TELECOM, SGPS, S.A.

STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009

Euro

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PORTUGAL TELECOM, SGPS, S.A.

Notes to the Standalone Financial Statements

As at 31 December 2010

(Amounts in Euro)

1.             Introduction

Portugal Telecom, SGPS, S.A. (“Portugal Telecom” or “Company”) and its subsidiaries and associated companies (Note 8), which represent its corporate Group (“Portugal Telecom Group” or “Group”), operate primarily in the telecommunications sector, in Portugal and in foreign countries. The corporate purpose of the Company is the management of investments. In September 2010, Portugal Telecom Group, through PT Móveis, concluded the disposal of the 50% stake in Brasilcel (the joint venture that controls Vivo).

On 26 January 2011, Portugal Telecom signed the definitive purchase, subscription and shareholders agreements with Oi (mobile and fixed services operator in Brazil) and its controlling shareholders. With the signing of these agreements in connection with this strategic investment, Portugal Telecom will continue to benefit from scale and geographic diversification in high-growth markets (Note 29).

These financial statements, which are related to the Company on a standalone basis, were prepared in accordance with accounting principles generally accepted in Portugal (Note 2), and, as such, the financial investments were accounted for under the equity method, as explained in Note 3.4. The Company prepared and presented separately its consolidated financial statements, which include the financial statements of the companies controlled by Portugal Telecom. In these standalone financial statements, the shareholders’ equity as at 31 December 2010 and the net income for the year then ended include the effect of the consolidation of the shareholders’ equity and net income of the Portugal Telecom’s affiliated companies, based on their respective financial statements, but do not include the effect of the fully proportionally consolidation of their assets, liabilities, costs and revenues.

As a result of the privatization process between 1 June 1995 and 4 December 2000, Portugal Telecom’s share capital is held mainly by private shareholders.

The shares of Portugal Telecom are listed on the Euronext and on the NYSE - New York Stock Exchange.

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2.             Basis of presentation

These financial statements were prepared based on Decree-law nº. 158/2009, doted 13 July, and in accordance with the conceptual structure, Normas contabilísticas e de Relato Financeiro (“NCRF”) and Interpretative Standards, as approved by Notices nº 15652/2009, 15655/2009 and 15653/2009, doted 27 August 2009, which make up the New Portuguese accounting system, named Sistema de Normalização Contabilística (“SNC”),

The Company adopted NCRF for the first time in 2010 and applied for this purpose the “NCRF 3 Adoption For The First Time Of NCRF” (“NCRF 3”), with the transition date being 1 January 2009 for the purposes of the presentation of these financial statements. Consequently, the balance sheet as at 31 December 2009, the income statement, the statement of changes in shareholders’ equity for the year then ended and the notes thereto present, were adjusted in accordance to NCRF for comparative purpose. Previously, the Company’s standalone financial statements were prepared in accordance with the former accounting system in Portugal (Plano Oficial de Contabilidade — “POC”) and other complementary legislation, which were replaced by SNC. The conversion adjustments made to the financial statements as at 1 January 2009 were computed retrospectively, as determined by NCRF 3, except for business combinations.

As permitted by Decree-Law nº. 158/2009, the Company also applies the International Financial Reporting Standards (“IAS/IFRS”) and related interpretations (“SIC/IFRIC”) issued by IASB, in order to fill in the gaps or omissions in SNC regarding specific situations of certain transactions.

The consolidated financial statements of Portugal Telecom were prepared, since 1 January 2005, in accordance with IFRS, as adopted by the European Union. Therefore, the shareholders’ equity as at 31 December 2010 and 2009 and the net income for the years then ended, which are included in the consolidated financial statements of Portugal Telecom, differ from the amounts presented in these standalone financial statements.

2.1.         Main differences between NCRF and POC

The transition from POC to NCRF resulted in the change of several accounting policies. The main changes occurred in Portugal Telecom’s affiliated companies, which are reflected in the Company’s standalone financial statements through the equity method of accounting, as well as the changes in Portugal Telecom itself are described below.

2.1.1.       Asset retirement obligations

In accordance with NCRF, the acquisition cost of tangible assets should include the net present value of liabilities related to the dismantling or removal of assets installed in properties of third parties, if those obligations can be reliably estimated and the cash outflow is likely to occur. This situation was applied to certain TMN’s (TMN — Comunicações Móveis Nacionais, S.A.) assets

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installed in properties of third parties. In accordance with POC, those liabilities were recognised when the cost was incurred.

2.1.2.       Sale and Lease Back transactions

PT Comunicações has entered into sale and lease back transactions over certain of its buildings in previous years. The gains obtained with these transactions, which under POC were recognized in earnings prior to the transition date to SNC in 1 January 2009, are still being recognized in earnings under SNC for the period of the related rental contracts.

2.1.3.       Post-retirement benefits

In accordance with the options permitted by NCRF regarding the accounting for post retirement benefits, PT Comunicações S.A. and PT Sistemas de Informação S.A. chose to recognize actuarial gains and losses directly in shareholders’ equity, instead of recognizing them over the average period of working life of active employees, the procedure that was applied under POC. The net actuarial losses recognized directly in shareholders’ equity as at 1 January 2009, net of the related tax effect, amounted to approximately Euro 1,441 million.

2.1.4.       Goodwill amortization

Under NCRF, goodwill recognized in the acquisition of financial investments is not amortized, and is subject to periodic impairment tests. In accordance with POC, goodwill was amortized through income, although it was also subject to periodic impairment tests. NCRF 3 establishes that this rule should be applied only after the transition date (1 January 2009) and, as such, the conversion adjustment consists only of the reversal of the amortization recognized in 2009.

Under POC, deferred capital gains resulting from the disposal of subsidiaries and associated companies within the Group were recognized in earnings on the same proportion that goodwill recorded by the acquirer was amortized. Under NCRF, the amounts recognized in earnings in 2009 were reversed and since goodwill is no longer amortized the deferred capital gain is no longer recognized up to the sale of the investment.

2.1.5.       Financial instruments

In accordance with NCRF, financial instruments held by the Company are measured at fair value, with the change in the fair value being recognized either in net income or shareholders’ equity, depending on the possibility of applying hedge accounting. Under POC, only changes in the fair value of financial instruments that were not clearly identified as hedges were recognized in earnings.

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2.1.6.       Equity swaps on own shares

In accordance with NCRF, the equity swaps on own shares entered into by the Company comply with the requirements to be recognized as a liability related with the acquisition of treasury shares. Under POC, the Company only recorded a provision whenever the fair value of the equity swaps was negative.

2.1.7.       Exchangeable bonds

In accordance with NCRF, exchangeable bonds are initially recognized in two components: (1) the present value of the debt is recorded as a liability; and (2) the market value of the exchange option in recorded directly in shareholders’ equity. The liability is subsequently measured at amortized cost. Under POC, exchangeable bonds were recognized as a liability until the maturity date.

2.1.8.       Investment subsidies

In accordance with NCRF, non-refundable investment subsidies related to tangible fixed assets should be initially recognized in shareholders’ equity and, subsequently, recorded in earnings on the same proportion that related assets are depreciated. This situation was applied to certain investment subsidies obtained by PT Comunicações in previous years. Under POC, these investment subsidies were accounted for as deferred income and, subsequently, recorded in earnings on the same proportion that related assets were depreciated.

2.1.9.       Equity accounting

The equity method of accounting applied to affiliated companies was adjusted in line with the conversion adjustments made by these companies resulting from the transition from POC to NCRF, some of them describe above.

2.1.10.     Reclassifications

In accordance with NCRF and the models of financial statements included in SNC, some reclassifications were made to the previously reported financial statements under POC, such as:

·      Assets are now presented only on a net basis in the balance sheet, and therefore the information regarding the gross amounts and related accumulated depreciations and adjustments is presented in the notes to the financial statements;

·      Goodwill resulting from the acquisition of associated companies was included in the value of the related financial investment, while goodwill resulting from the acquisition of subsidiaries was classified under a specific caption for that purpose;

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·      Provisions for financial investments with a negative shareholders’ equity were deducted to assets related to those investments, such as loans;

·      Gains and losses in affiliated companies were included under a specific caption included in the operating income;

·      Supplies and external services were split taking into account the nature of the related costs; and

·      Extraordinary results are not subject to the individual disclosure in the income statement prepared in accordance with NCRF and, as such, the extraordinary costs and gains previously reported under POC were included in several captions within operation income based on their nature.

2.2.         Impacts of the transition from POC to NCRF

The reconciliation between shareholders’ equity as at 1 January and 31 December 2009 prepared under POC and prepared under NCRF is as follows (amounts net of tax effect):

Euro

(i)    As at 31 December 2009, adjustments made in affiliated companies, by applying the equity method of accounting, are mainly related to the following accounting policies explained above: (1) Post-retirement benefits (negative impact of Euro 804 million); sale and lease back transaction (negative impact of Euro 23 million); (3) Asset retirement obligations (negative impact of Euro 21 million); (4) goodwill amortization (positive impact of Euro 98 million); and investment subsidies (positive impact of Euro 15 million).

The reconciliation between net income for the year ended 31 December 2009 prepared under POC and prepared under NCRF is as follows (amounts net of tax effect):

Euro

(i)    During 2009 adjustments made in affiliated companies, by applying the equity method of accounting, are mainly related to the following accounting policies explained above: (1) goodwill amortization (positive impact of Euro 99 million); (2) Post- retirement benefits (positive impact of Euro 60 million); (3) sale and lease back transaction (positive impact of Euro 6 million); e (4) asset retirement obligations (positive impact of Euro 3 million).

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The reconciliation between balance sheets as at 1 January and 31 December 2009 prepared under POC and prepared under NCRF is as follows:

Euro