It is a different market. The younger generations don't use their phones to make calls. They use their phones to text and send pictures to each other. For a flat rate of €9,99 you get 1500 text messages and 500 MMS. Add €10 and you will get a 250MB data plan that includes unlimited access to MSN (meaning that MSN access doesn't get taken from the 250MB). The flat rate includes, most of the times, free calls between people that have the same plan.
Calling other networks can be as high as 45 cents per minute and landlines even more expensive.

The business is all about volume: Portugal has a mobile penetration ratio of 3 mobile phones per inhabitant.

So, of course operators are giving stuff for "free". They are investing in the younger generations that will probably stick with the same operator since all of their RL social network is using it as well.