Portugal's MEO, the country's largest telecoms operator, registered revenues of €703M in the first quarter of 2026, a modest 0.9% year-on-year increase that masks deeper structural shifts as the company pivots from traditional telephony toward digital services—a transformation now colliding with the most intense competitive pressure in years.
Why This Matters
• EBITDA dropped 7.3% to €226M despite revenue growth, signaling margin compression amid falling average revenue per customer.
• Investment rose 5.5% to €106M, focused on fiber, 5G, and new ventures like MEO Energia, which grew revenues 42% and added 67,000 households.
• The company is exiting traditional telco economics, betting on cloud, cybersecurity, and energy services to offset declining mobile and fixed-line profitability.
• Competitive disruption from DIGI continues to force price cuts across the sector, accelerating the race to diversify revenue streams.
The Pressure Behind the Numbers
MEO's results for the opening quarter reflect a sector in flux. While the headline revenue figure suggests stability, the 7.3% contraction in operating profit exposes the strain on legacy telecoms margins. CEO Ana Figueiredo attributed part of the EBITDA decline to the gradual loss of mobile network subcontracting revenue—a direct consequence of Romanian operator DIGI's acquisition of Nowo in 2024—and underperformance at Altice Labs, the group's R&D arm.
Stripping out those two factors, EBITDA would have fallen 4.3%, driven by declining average revenue per user in core telecoms and inflationary pressure on third-party services. The Portugal telecoms market is grappling with a paradox: prices are falling—down 2.2% year-on-year in February 2026—yet customer complaints are rising, particularly around billing and service failures.
MEO's consumer segment grew revenues 1.7%, while business services climbed 3.4%, but these gains were insufficient to offset the erosion of traditional voice and data profitability. The company ended March with 4.5M active fixed services (up 1%) and saw postpaid mobile clients grow 4.3%, yet the unit economics are deteriorating.
Three Engines for a Post-Telco Future
Figueiredo framed the quarter as evidence that MEO is deliberately constructing three new value drivers beyond connectivity:
Critical Infrastructure Leadership: The operator now covers 6.7M homes with fiber-optic cable and delivers 99.8% 4G and 97.38% 5G geographic coverage. The €106M quarterly investment is intended to cement this infrastructure moat, which Figueiredo described as "a unique competitive advantage" in a market where rivals are also spending heavily. Portugal's telecom operators collectively plan to deploy €4.2B over five years on 5G and satellite infrastructure to support AI workloads and data centers.
Ecosystem Expansion: MEO Energia is the flagship example. The energy arm ended March with 236,000 household clients, up from 169,000 a year earlier, and posted nearly 42% revenue growth. The company bills itself as the world's first operator offering bundled 100% renewable electricity and telecoms. In the enterprise segment, MEO is pushing cloud, cybersecurity, and ICT integration—areas where Portugal's National AI Agenda projects that 75% of companies will use AI and cloud services by 2030.
Operational Reinvention: Simplification, digitalization, and intensive use of artificial intelligence are reshaping workflows, with direct impacts on efficiency and customer experience. In April 2026, MEO won the "Technology of the Year" award for deploying a visual AI solution for customer support. The company is also part of EURO 3C, a €75M European Commission initiative developing a pan-European infrastructure for converged telecoms, edge computing, cloud, and AI services.
What This Means for Residents and Businesses
For households in Portugal, MEO's transformation translates to bundled services increasingly centered on energy and digital content rather than voice minutes. The expansion of MEO Energia offers a hedge against utility inflation, with cross-benefits for customers subscribing to both telecoms and power. However, the company discontinued its personal MEO Cloud storage service on March 15, 2026, signaling a narrower focus on enterprise cloud rather than consumer file-sharing.
For businesses, MEO's push into cloud and cybersecurity is directly relevant. The operator now offers the Cloud Security Pack, which includes data protection, backup, disaster recovery, and threat detection using Acronis technology. This comes as cybercrime tactics shifted in 2025, with a notable rise in ransomware victims and phishing attacks on collaboration apps, according to MEO's own enterprise unit. The regulator ANACOM has been designated Portugal's national AI Act supervisor, with high-risk system rules taking effect August 2, 2026—a timeline that aligns with MEO's AI deployment strategy.
The operator's participation in DarWiN 2026, a talent program focused on engineering, AI, and data science, underscores the skills gap Portugal faces: only 12% of Portuguese companies with more than 10 employees use AI, below the 20% EU average, and adoption growth is slower than the continental benchmark.
Competitive Context: The DIGI Effect
MEO operates in what industry observers describe as Portugal's most competitive telecoms environment in years, primarily due to DIGI's aggressive market entry. The Romanian-backed operator has undercut incumbents on both standalone mobile and triple-play bundles, prompting MEO, NOS, and Vodafone to revise pricing downward. MEO holds 42% of the pay-TV market, but the company has shed 1,200 jobs as part of its restructuring.
The competitive squeeze is compounded by rising costs. MEO's operating margin is under pressure from network maintenance, inflationary labor and service expenses, and the capital intensity of 5G and fiber rollout. The company's strategy is to expand beyond traditional telco revenue streams faster than those legacy sources decline—a race against time that will define profitability over the next two years.
Resilience and Ambition
MEO highlighted its operational resilience during Storm Kristin in the first quarter, when it maintained service continuity despite extreme weather. The episode underscored the strategic importance of network robustness, a selling point for both consumer and enterprise segments.
Figueiredo outlined three priorities going forward: sustainable growth in higher-value segments; rigorous capital allocation and structural cost optimization; and scaling new growth avenues beyond telco. She positioned MEO not merely as a reactive player but as "an active contributor" shaping the sector's future, aiming to become "the orchestrator of an integrated digital ecosystem" linking people, companies, and services.
The rhetoric is ambitious, but the financial reality is sobering. MEO must demonstrate that its investments in energy, cloud, AI, and cybersecurity can generate margin-accretive revenue before the erosion of legacy telco profitability becomes irreversible. The first quarter of 2026 shows the pivot is underway—whether it succeeds will depend on execution speed and the competitive environment over the next 12 to 18 months.
Portugal's spectrum license renewals in 2027 loom as another pressure point, with operators seeking long-term guarantees to justify continued network investment. The European rating agency DBRS forecasts accelerated M&A, partnerships, and asset sales in the telecoms sector this year, driven by persistent competition and sluggish organic growth—a macro trend that could reshape MEO's ownership or strategic alliances.
For now, the operator is betting that diversification, infrastructure scale, and AI-driven efficiency can offset competitive headwinds. The €703M revenue figure suggests the business is stable; the €226M EBITDA figure reveals the margins are not.
