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Portugal Telecom challenged on pension accounts

PORTUGAL - Sonaecom has reaffirmed its take-over offer price for Portugal Telecom (PT) in spite of claims that the target may have €920m more in pension deficit than stated.

Sonaecom, telecommunications subsidiary of Sonae, Portugal's largest private employer, is sticking to an offer price of €9.5 a share, valuing PT at €11.1bn. The offer closes on March 9th.

The PT pension fund has assets of €2.1bn, according to International Pension Funds and Their Advisers.

Pension accounting differences centre on the mortality tables used, the discount rate and the growth rate of long—term healthcare costs.

Sonaecom would like PT to use more Iberian data for mortality rates. It also questions PT's decision to increase the discount rate from 4.5% to 5% last June, in a period of falling rates across Europe. Sonaecom claims the rate rise alone knocked more than €300m off of the scheme's liabilities and should be disregarded.

Sonaecom has made its claims after commanding a report on pensions from PricewaterhouseCoopers. PT management accused the stock market regulator of bias for not making the report available to both sides in the hostile process.

The regulator has retaliated by beginning a legal process against senior individuals in PT for accusations of partiality. A spokesman for the regulator emphasised that the case, which started this week, has been brought against the individuals and not the company itself.

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