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Transcript of 0 Corporate Presentation August/2003. Corporate Presentation 1 General Overview.
1
Corporate Presentation
August/2003
2Corporate Presentation
General Overview
3Corporate Presentation
HIGHLIGHTS
• Integrated Telecom Service Provider– 14.9 million wirelines in service– 2.6 million wireless clients (August/03)
• Concession Area (Region I) - Local Service and PCS– 65% of Brazilian territory/94 million people– 40% of country’s GDP– Over 20 million households
• Leadership in local services (97% market share – Region I)
• Domestic and international long distance services
• PCS Mobile services (GSM)
• Data, Corporate & Call Center Services
• Most liquid stock in Brazilian market (TNLP4)• One of Most liquid Latam ADR (NYSE: TNE)
• High Free Float: 80% of total shares/ADR: 27%
• Market value: US$ 5 billion (August/03)
4Corporate Presentation
SHAREHOLDERS’ STRUCTURE
TelemarParticipações S.A.*
Free float
Treasury
Tele Norte Leste Participações S.A. (TNE)
*Controlling Shareholder (55% voting shares)
Free float 19.2%
100.0%
80.8%100.0%
(TMAR)
100.0%
Note: % of holdings excluding treasury stock
5Corporate Presentation
CAPITAL STRUCTURE
Tele Norte Leste (TNE)
Telemar Participações
Free float
17.9% 79.9%
BNDESPar
Fiago
AG Telecom
ASSECA Participações
L.F. Tel
BrasilCap
Brasil Veículos
Lexpart Part.
Capital
R$ 4,644 million
Common shares
Preferred shares
Total shares
130,186 m
390,557 m
260,371 m
1/3
2/3
Total outstanding shares (ex-treasury)
381,777 m
* 13.1% - Annex IV
Treasury Stock
2.2%
Bovespa
NYSE (ADR/TNE)
6Corporate Presentation
PERSONNEL
Fixed & mobile businesses
Contact center
full-time employees
1998 1999 2000 2001 2002 Jun_2003
27,47128,736
31,393
Jul_1998
7Corporate Presentation
Jul_1998* 1998 1999 2000 2001 2002 Jun_2003
*Company’s acquisition
WIRELINE PLATFORMmillion lines
Lines in service
Lines installed
Universalization goals24% CAGR
8Corporate Presentation
BROADBAND ACCESS
ISDN
ADSL
thousand lines
Jun_2002
92
19%
81%
Sep_2002
93
23%
77%
Dec_2002
120
42%
58%
Mar_2003
125
47%
53%
Jun_2003
140
59%
41%
Increasing focus on ADSL
9Corporate Presentation
Natal
Recife
Maceió
RR
AMPA
MA
AC
RO
MT
MS
RS
PR
SP
MGGO
TO
BA
PI
CE
PBPE
Porto Alegre
Florianópolis
Curitiba
Goiânia
Brasília
SE
São Luís
Rio de Janeiro
Vitória
Salvador
Aracajú
Terezina
Fortaleza
Paracatu
Patrocínio
ES
Belém
RN
AL
Uberlândia
SC
Belo Horizonte
São Paulo
Campinas RJ
AP
Montes Claros
• Coverage of 80% of Brazilian Industrial GDP
• Interstate and intrastate transport network
• 18,000 km of fiber optical cables
• 20 integrated metropolitan rings in 18 states
• 350 remote satellite stations
• – 8 Satellite Hubs
• ATM, TDM/SDH and IP Networks
Main features
LONG DISTANCE AND DATA TRANSMISSION NETWORK
International connections
International connections
Rio – location of our Network Operations Center (NOC)
João Pessoa
10Corporate Presentation
WIRELESS PLATFORM
Prepaid
Post-paid
thousand subscribers
Oi – 2.2 million subscribers in just 12
months
78%22%
80%
20%
502
1,401
78%
22%
1,722
35
2,236
80%
20%
2,648
80%
20%
11Corporate Presentation
Oi’s OPERATING & FINANCIAL PERFORMANCE – 2Q03
Net additions - Oi
thousand subscribers
4Q02 1Q03 2Q03
900 321 514
Post-paid
Prepaid
3Q02
500
4Q02 1Q03 2Q033Q02
Net additions – Region I
thousand subscribers
902
470
1,517
1,115
Oi´s market share (net adds)
12Corporate Presentation
Source: Anatel
Brasil
GSM - Region I Region I
Oi’s MARKET SHARE – AUGUST/2003
13Corporate Presentation
WIRELESS PENETRATION – AUGUST/03 % - States in Region I
Source: Anatel
Region I – 17%Region I – 17%Region III– 27%Region III– 27% Region II– 25%Region II– 25%Brazil – 23%Brazil – 23%
14Corporate Presentation
WIRELESS PROJECT ROLLOUT Oi
• ~ 400 cities covered; 48 million people• GPRS coverage in 6 main capitals• 2,680 sites (BTS)• CAPEX optimization (co-siting: 971 in / 531 out)• International roaming• Main suppliers: Nokia, Siemens, Alcatel, Ericsson
• 1,824 points of sales (breaking exclusivity of A & B band agreements)
• Diversified channels with high capillarity– Retail, specialized agents/dealers, stores, telesales
• Corporate sales effort combined with Telemar
• Tight headcount structure: 933 employees• Infrastructure sharing• Outsourcing (including call centers)• Synergies with Telemar• Strong brand name
Coverage
Distribution
Resource optimization
Coverage focused on profitable areas
Consumer and corporate focus through high capillarity and diversity of channels
Focus on profitable growth, minimizing OPEX and CAPEX
15Corporate Presentation
1998 1999 2000 2001 2002 1H02 1H03
REVENUE GROWTHR$ million
Gross revenue
Net revenue
23.4% CAGR
+19.8%
*Wireless startup from 2H02
16Corporate Presentation
1998 1999 2000 2001 2002 1H02 1H03
COSTS & EXPENSESR$ million
17.4% CAGR
+21.3%
*Recurring costs (excluding extraordinary rev. of R$ 153 million /Sistel)
17Corporate Presentation
EBITDAR$ million
*Recurring EBITDA (ex-Sistel)
EBITDA Margin
1998 1999 2000 2001 2002 1H02 1H03
*
1H0398 99 00 01 02 1H02
*
18Corporate Presentation
EMPLOYEE PRODUCTIVITY – TMAR
* Annualized
Lines in Service/Employee
+398%
Net Revenue/Employee
R$ Thousand
+541%
EBITDA/Employee
R$ Thousand
+777%
1998 1999 2000 2001 2002
1.604 1.605
1998 1999 2000 2001 2002 1H03* 1998 1999 2000 2001 2002 1H03*
939
1.281
1H03
19Corporate Presentation
WIRELINE PRODUCTIVITY – TMARR$
Costs & Expenses /ALIS EBITDA/ALISNet Revenue/ ALIS
1998 1999 2000 2001 2002
+14%
-10%
+63%
1998 1999 2000 2001 20021998 1999 2000 2001 2002 1H03* 1H03* 1H03*
*Annualized
ALIS: Average Lines in Service
20Corporate Presentation
CAPITAL EXPENDITURES (CAPEX)R$ million
Wireline
Wireless
1998 1999 2000 2001 2002 1H02 1H03
447 198378 282
2,500 2,2442,804
10,060
2,031825 480
1H0398 99 00 01 02 1H02
CAPEX/Sales
21Corporate Presentation
CAPITAL EXPENDITURES (CAPEX)US$ million
1998 1999 2000 2001 2002 Total1H03
22Corporate Presentation
Quarterly Results
23Corporate Presentation
GROSS REVENUE BREAKDOWNR$ million
*Wireless startup from 2H02
Wireline
Local (including VC1)
Long distance (including VC2/3)
Network Usage
Data
Public phones
Other
Wireless
Services
Subscription
Outgoing calls
Domestic/inter. roaming
Network usage
Other SMP services
Handset sales
Total Gross revenue
Wireline
Wireless
Contact center
Consolidated net revenue
2Q03 1Q03 2Q02QoQ
Gross revenueYoY
%%%% Change
4,256
2,617
681
317
289
195
158
292
174
43
58
13
52
8
118
4,570
4,256
292
22
3,343
100
61
16
7
7
5
4
100
59
15
20
4
18
2
41
100
93
6
1
4,214
2,592
666
330
271
196
160
219
137
32
52
12
35
6
82
4,453
4,214
219
20
3,218
100
61
16
8
6
5
4
100
63
15
24
6
16
3
37
100
95
5
0
3,764
2,378
464
395
223
159
146
–
–
–
–
–
–
–
3,774
3,764
–
10
2,780
100
63
113
10
6
4
4
–
–
–
–
–
–
–
–
100
100
–
–
1
1
2
-4
7
-1
-1
33
26
34
13
3
47
22
45
3
1
33
6
4
13
10
47
-20
30
22
8
–
–
–
–
–
–
–
–
21
13
0
115
16
*
24Corporate Presentation
LOCAL SERVICES
2Q03/2Q02 – YoY
Monthly subscription
Pulse
Fixed to mobile(F-M)
Other
Installation
Total 239
2
-22
• Local rate increase (Jun/02)
• F-M rate increase (Feb/03)
+ R$ 239 million
(+10.0%)
2Q03/1Q03 – QoQ
Main drivers
Monthly subscription
Pulse
Fixed to mobile (F-M)
Other
Installation
Total
• F-M rate increase (Feb/03)+ R$ 26 million
(+1.0%)0
-3
35
25Corporate Presentation
Domestic
International
Fixed to mobile (F-M)
Total
17
LONG DISTANCE SERVICES2Q03/2Q02 – YoY Main drivers
• Market share gains (new services: R$ 86 million), rateincrease and traffic growth
+ R$ 217 million
(+46.9%)
2Q03/1Q03 – QoQ
• DLD: market share gains
• ILD: backlog cleanup/1Q03• F-M rate increase (Feb/03)
+ R$ 15 million
(+2.2%)
Domestic
International
Fixed to mobile (F-M)
Total
-8
26Corporate Presentation
DATA SERVICES2Q03/2Q02 – YoY
IP
SLDD/SLDA*
EILD*
Packet/frame relay
Other
Total
-16
Main drivers
Market growth, market share gains (new long term contracts) and increasing sales of IP & ADSL services
+ R$ 67 million
(+30.2%)
2Q03/1Q03 – QoQ
IP
SLDD/SLDA*
EILD*
Packet/frame relay
Other
Total
+ R$ 18 million
(+6.6%)
-8
-12
*Leased lines to companies and other telcos
27Corporate Presentation
WIRELESS SERVICES
2Q03/1Q03* – QoQ Main drivers
Handset sales
Outgoing calls
Network usage
Subscription
Other
Total
• Aggressive growth:2.2m subscribers injust 12 months (514K net adds-2Q03)
+ R$ 73 million
(+33.2%)
*Startup as of 3Q02
1
Handsets
+R$ 37 million
Services
+R$ 36 million
28Corporate Presentation
COSTS & OPERATING EXPENSES* – 2Q03
2Q02 1Q03 2Q03
R$ million
*Excluding depreciation & amortization
2Q03
1Q03
Cost of services
Interconnection
Selling
G&A/other
Cost of services
Interconnection
Selling
G&A/other
Special sales campaigns
Cleanupof outstanding
payments
29Corporate Presentation
COSTS & OPERATING EXPENSES – MAIN CHANGES (2Q03/1Q03)R$ million
Interconnection
Personnel
Third Party Services
Handset Costs
Rent/Insurance
Marketing
Provisions for Doubtful Accounts (PDA)
Other Operating Exp. (Revenues)
Total
ItemR$ m %
Change
2Q03 1Q03
TNEComments
621
219
501
156
108
37
152
70
1,864
654
204
475
82
115
16
141
56
1,743
(33)
15
26
74
(7)
21
11
14
121
-5.0
7.4
5.5
90.2
-6.1
131.3
7.8
25.0
7.0
• Backlog cleanup in 1Q03
• Headcount/severance costs/sales commissions
• Dealers’ commissions/consultancy
• Handset sales (+85.7%)
• Lower costs with leased lines
• Marketing campaigns (mothers and valentine days)
• Stable level in spite of macro environment - PDA/Sales: 3.3% (3.2% in 1Q03)
• Lower infrastructure rental revenues
30Corporate Presentation
PROVISIONS FOR DOUBTFUL ACCOUNTS% of gross revenue
2Q032Q02 3Q02 4Q02 1Q03
31Corporate Presentation
EBITDAR$ million
*Startup of wireless business
EBITDA Margin
2Q02 3Q02 4Q02 1Q03 2Q03
2Q02 3Q02 4Q02 1Q03 2Q03
*
32Corporate Presentation
FINANCIAL RESULT – 2Q03
Financial revenues
Financial expenses
Interest on loans/debentures
Monetary & exchange variations
Banking Fees & contingencies
Premium amortization, PIS & Cofins
Other
Net Financial result
1Q03 2Q03
R$ million
133
(586)
(265)
(164)
(108)
(31)
(18)
(452)
134
(651)
(232)
(220)
(126)
(29)
(44)
(518)
Interest on currency swaps (+R$ 54 m);
Restatement of provisions & liabilities (+R$ 29m)
33Corporate Presentation
DEBT POSITION
Total Debt
• Short term
• Long term
(-) Cash
(-) Long term financial invest.
(=) Net debt
Jun/02 Dec/02 Mar/03 Jun/03
R$ million
9,700
1,220
8,481
(573)
–
9,128
10,774
1,769
9,006
(1,513)
(141)
9,121
11,616
2,053
9,563
(1,479)
(132)
10,005
11,394
2,264
9,130
(1,789)
(86)
9,519
A 5% reduction in 2Q03
34Corporate Presentation
DEBT PROFILE – CURRENCY & INTEREST (JUNE/03)
Currency Interest index
Local*
2%
US$
CDI
2%TJLP**
Libor
* After currency swaps** BNDES long term lending rate (12% p.a.)
35Corporate Presentation
DEBT REPAYMENT SCHEDULE (JUNE/03)R$ million
20072H2003 2004 2005 2006 2008 2009+
Total debt = 11,394
% of total 9.7 20.5 21.2 27.3 9.1 4.5 7.7
FC:8,306
LC:3,088
36Corporate Presentation
CAPEXR$ million
Wireline
Wireless
2Q02 3Q02 4Q02 1Q03 2Q03
2Q02 3Q02 4Q02 1Q03 2Q03
386
509
697
185
295
CAPEX/SALES
37Corporate Presentation
CASH FLOW: EBITDA & CAPEX
2Q032Q02 3Q02 4Q02 1Q03
1,311 1,260
1,476 1,479
1,285
R$ million
EBITDA
CAPEX
EBITDA (-)
CAPEX
38Corporate Presentation
Growth Strategy & Outlook 2003
39Corporate Presentation
Local Wireline
Wireless (GSM)
Data & Corporate
Long Distance
Integrated Offer of Telecom
Services
GROWTH STRATEGY
40Corporate Presentation
Data & corporate
Long distance
Wireless services
Local service
• Leadership in home market
• Advanced voice services (corporate/middle market)
• Increase ARPU (V.A. Services)
• Reduce interconnection costs (F-M)
• Customized Offer (Regulation)
WIRELINE LOCAL SERVICESPlatform and traffic growth (GDP/Regulation)
41Corporate Presentation
Local service
Data & corporate
Wireless services
Long distance
LONG DISTANCE SERVICESNew services (increase market share): DLD, ILD and SMP(mobile)
• Leadership in home market
• Retail – loyalty/retention programs + promotions
• Corporate – best quality (call completion/billing) + competitive service plans (discounts/volume)
• Conquer new markets (domestic/international/SMP)
• Leverage on relationship & brand
• Increase efficiency & quality (low cost + high quality service provider)
• Avoid price wars
42Corporate Presentation
Local service
Long distance
Wireless services
Data & corporate
DATA & CORPORATE SERVICESGrowth above market average (market share gains)
• Increase penetration in SME (home market)
• ADSL (high end residential/so-ho/small businesses)
• Nationwide services (corporate level)
• Best Service Provider (quality end to end / SLA)
43Corporate Presentation
Local service
Data & corporate
Long distance
Wireless services
WIRELESS (GSM)Aggressive growth / Enhance competitive position
• Market segmentation/innovative plans (MTV & Celebrities/Oi Family)
• Streamline product portfolio
• Leverage on competitive advantages: GSM, regional coverage, synergies with Telemar
• Optimize distribution channels
• Positive EBITDA in 2004
44Corporate Presentation
OUTLOOK 2003
• Network– Wireline ~14.9 million lines in service– Wireless ~3.0 million subscribers
• Revenue drivers– Mobile, DLD and Data– Rate increases (2H03)
• Net debt ~R$ 8.5 billion (2003 YE)
• Bad debt ~3.8% of annual gross revenues
• EBITDA Margin in the mid- 40’s
• Capex ~R$ 1.7 billion for 2003
45Corporate Presentation
“SAFE HARBOR” STATEMENT
Investor Relations
Rua Humberto de Campos, 425 / 8º andar
Leblon
Rio de Janeiro -RJ
Phone: ( 55 21) 3131-1314/1313/1315
Fax: (55 21) 3131-1155
E-mail: [email protected]
Visit our website: http://www.telemar.com.br/ri
This presentation contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements and involve inherent risks and uncertainties. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events