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Corporate Presentation
July 2010
Investor Relations
AGENDA
Brazilian Telecommunications Market
3
Oi: Profile, Footprint and Strategy
11
Operational and Financial Results
17
Brasil Telecom Acquisition – The Deal
31
Expectations for the Future
35
Investor Relations | 2
Brazil Snapshot
Brazil in Numbers
Economy
2009
• 10th economy in the world
› GDP: US$ 1.6 Trillion (2009)
› GDP per capita PPP = US$ 7.7 Thousand
› Currency – US$ 1.00 = R$ 1.78 (Mar/10)
• After a downward trend since 2008, interest
rates resumed increase in April/10:
› Selic: 13.75% in Dec/08; 8.75% 2009, current
• Land Area
9.5%, 11.75% 2010E* and 11.50% 2011E*
› 8.5 Mn Km2 (80% of European area)
•
• Population
› CPI: 5.9% in 2008, 4.27% in 2009E*, 5.67%
› 190 Mn inhabitants
› 58 Mn households (85% urban) - 2008
Inflation under control for more than 15 years
in 2010E* and 4.80% in 2011E*
•
During the recent crisis, Brazil has been more
resilient than main developed countries in
terms of economy growth
* Central Bank Report (Focus)
Brazilian telecom market is relevant worldwide and is the most
important market in Latin America
Penetration per population %
World
Latin America
Million, December 2009
Million, December 2009
4th
320
Fixed Lines
in Service
206
China
USA
24
67
747
73
Japan
21
9
9
Brazil
Mexico
Colombia
Argentina
21
19
19
22
83
48
41
57
5th
525
Mobile
Users
Fixed
Broadband
Users
40
286
208
176
China
India
USA
Russia
Brazil
56
44
93
147
92
83
70
30
China
USA
6
23
Japan
10th
Mexico
77
10
Brazil
24
Source: ANATEL, IBGE, Teleco, ML Wireless, UNCTAD and Internet World Stats
5
7
Mexico
6
Argentina Colombia
121
83
3
2
Argentina Colombia
8
3
4
Brazilian Telecom Sector Evolution
09
03
Current Scenario
98
Post-Privatization
Focus on competition
Consolidation
Pre-Privatization
State-owned monopoly
Multiple players
Focus on universal and
quality of services
Lack of investments
Expansion of fixed and
mobile
Low quality of services
GSM launch
Huge pent-up demand in
fixed and mobile
Broadband start-up
Mature fixed; mobile
and broadband as
growth drivers
Convergence in early
stages
Launch of 3G
Incipient Internet
Brazilian Telecom Industry
General Plan of Concessions divided the country in 3 Regions, with strong social/economic
differences
Brazil and its Regions
Household Information – PNAD* 2008
RI
RIII
RII
Brazil
704
927
992
820
Population (mm)
104.3
44.8
40.8
190.0
Household (mm)
30.4
14.3
12.9
57.6
Mobile + Fixed - %
Just Fixed - %
Just Mobile - %
No phone - %
30
41
58
39
4
4
8
5
42
45
27
39
24
10
7
17
With computer - %
With internet - %
No internet - %
No Computer - %
24
37
47
32
18
28
37
25
6
9
10
8
76
63
53
68
Income** (R$)
Region I
Region II
Region III
* PNAD: Pesquisa Nacional do Domicílio – IBGE; ** Income per capita per month
Competition: Main Telecom Groups in Brazil
Market Share of Subscribers and Revenues – March 2009
Oi*
Telefonica*
Full Integrated
Telefonica
Vivo
National
National
51%
27%
20%
36%
24%
Revenues market-share
Region III
March / 10
30%
• Oi 31%
Telmex / AMX
Claro
Embratel
TIM
• Telefónica + Vivo 31%
(Pure mobile)
• Claro + Net + Embratel
23%
• TIM: 13%
National
National
• Others: 2%
National
15%
25%
25%
National Market Share - Fixed Lines in Service
24%
National Market Share - Mobile
National Market Share - Fixed Broadband
* Also operates Long Distance and Data Transmission Nationally
Brazilian Telecom Industry
Traditional fixed services face adverse scenario whereas mobile and broadband keep growing
Market Trends
Brazilian Market (Fixed, Mobile and Fixed Broadband)
Access lines (millions)
Fixed
Mature local fixed voice
– Accesses losses (FMS in accesses)
– Lower traffic per terminal (FMS in traffic)
– More competitive market in high-end and
SME (new entrants)
– Penetration: 51% of households
227
Fixed Broadband
Mobile (includes 3G)
202
11
232
12
Fixed
10
168
8
Mobile
Continued expansion in the mobile market
with strong competition
– Strong market evolution, mainly in the prepaid (naked sim-card) market
– ARPU for the industry has been reducing
– Different business models
– Penetration: 97% of inhabitants (Mar/09)
174
179
42
41
2009
Mar/10
151
75
1
121
35
Broad
band
Broadband growth accelerates
– Fierce competition in areas that concentrate
high-end clients
– Continuous expansion and falling ARPU
– 3G changes the dynamic of the industry
– Penetration*:20% of households
27
7
20
1998
39
2002
41
39
2007
2008
* Fixed broadband
Source: ANATEL, Teleco and Team analysis; FMS - Fixed to Mobile Substitution; SME - Small & Medium Enterprises
Brazilian Telecom Industry – Mobile and Broadband Markets
Net additions resumed growth in 1Q10; broadband market grows at high rates
Mobile Market (Includes 3G)
Broadband Market (Fixed and Mobile)
million customers
million customers
179.1
174.0
150.6
121.0
152.4
39,0
44,7
29,3
38,9
10.6
0,6
45,5 RIII
44,5
37,9
ADSL
Cable & Others
3G Data Cards
7.7
45,9 RII
39,6
15.0
14.1
2,7
11.9
3,2
1,5
3,7
3,0
3,8
3,1
2,1
32,3
59,4
2007
73,8
84,8
2008
2009
87,7 RI
75,1
Mar/09
Mar/10
Mobile market still grows in 2009, but at lower rates
― Net additions of 23,4mn in 2009 are 21% below 2008
7,0
5,6
2007
2008
In 1Q10, mobile market resumed growth (net adds ~
30% higher**)
2009
7,3
8,0
Mar/09
Mar/10
Broadband: Strong growth in accesses
–
Fixed broadband penetration: 20% of
households
–
ADSL corresponds to 68% of total fixed
broadband accesses and 53% of the total
(fixed + 3G Data Cards)
― Naked sim card continues as a national trend
7,7
Source: ANATEL; Team analysis
** Considering Feb/09 net adds equal to feb/10 (during Fev/09 there was a clean-up of mobile clients done by
one of our competitors).
AGENDA
3
11
17
31
35
Current Ownership Structure
AG Telecom
L. F. Tel
Fund. Atlântico
19.325%
19.325%
11.490%
BNDESPar
Previ
Funcef
Petros
31.383%
12.948%
2.790%
2.739%
Public Companies
Telemar
Participações S.A.
54% ON
5.5%
Free Float
% ONs
18% Total
Tele Norte Leste
Participações S.A. (TNE)
Tele Norte Leste (TNE)
Telemar Norte Leste (TMAR)
97% ON
Telemar Norte Leste
S.A. (TMAR)
Oi Mobile
80% ON
BrTO
% Total
46.3%
100%
82.1%
2.6%
20.5%
12.5%
20.4%
66.7%
50.7%
82%
Brasil Telecom S.A. (BrTO)
100%
% PNs
Integrated
49%
Others
* Tickers at Bovespa and NYSE: TNE (TNLP4 and TNE); BRTP (BRTP4 and BTP), BRTO (BRTO4 and BTM), TMAR (TMAR5)
Pursuant to Material Fact disclosed by Telemar Participações on June 21, 2010, shareholder BNDESPAR held a special auction for the purchase
and sale of Telemar Participações S.A. shares on June 17, 2010. FUNDAÇÃO DOS ECONOMIÁRIOS FEDERAIS - FUNCEF and FUNDAÇÃO
PETROBRÁS DE SEGURIDADE SOCIAL - PETROS, as buyers, were the winners of the respective lots. However, Telemar Participações S.A.
awaits ratification by Anatel to transfer the shares.
Oi’s Snapshot
Leading Telecommunications provider in Brazil and the only integrated player offering
nationwide 4-play services
Leader in integrated telecom solutions in the country
– Revenues Generating Units of over 62 million
– First quadruple play operator in Brazil (fixed, mobile, ADSL/cable broadband
accesses and pay-TV)
Strong execution culture in Region I, overcoming targets
– After the launch of new services in Region I, leadership was always obtained in
a very short period of time**
– Highly qualified management team
National coverage in mobile and data businesses meets scale
needed in a capital-intensive type of business
– Oi has the size which is comparable to its main competitors
– Sustained and long term shareholder’s value proposition
Solid financial position
– Balance sheet balanced between growth businesses
(mobile/broadband) with cash cow services (fixed line)
– Debt amortization schedule compatible with cash flow
generation
* Oi Consolidated ** Mobile: the leadership was reached after less than 3 years; leadership in the ISP after 7
months (broadband) and after 10 months in the free dial-up
Investor Relations ||12
12
Business and Domestic Footprint
The New Company: Businesses and Subscribers (Millions; March/09)
Domestic Coverage
Mobile
23.7
7.2
5.7
Fixed
1º
4º
Broadband
13.4
1º
7.6
1º
2.3
1º
Pioneer in mpayment
2.0
1º
4º
Belo
Horizonte
Uberlândia
Poços de
Caldas
Total
36.6
21.1
Share Brazil
20%
51%
Cities*
2.8 th.
4.8 th.
Other businesses
Pay-TV
Barbacena
4.3
36%
2.9 th.
• Recent launch of
DTH in 8 states of
Brazil
• 4 cities in cable
(MG)
Globenet
22,000 km of
submarine cable
linking Brazil,
Venezuela,
Bermuda and USA
ISP/Portal
Largest Brazilian
ISP
Leading ISP in
regions I and II
62 million clients (RGUs)
More than 26% of total clients in Brazil
Higher group in revenues, with over 30% of all revenues in the sector
Source: Anatel and Companies;
* 2009
Data Backbone Footprint
The biggest and most widespread backbone nationwide
National and International Backbone
The new company now has a total of:
− 138th. Km of fiber optical cable
° 73 thousand km from BrT: BrT/Metrored
(51 th. Km) and GlobeNet¹ (22 th. Km)
° 65 thousand km from Oi
− 30.4 th. Km of metropolitan rings
° 8.4 thousand km from BrT and Metrored
° 22 thousand km from Oi
Through the national and international
backbone, the new company can fight
for the leadership of Corporate Data
segment
1. Globenet connects Brazil, USA, Bermuda and Venezuela
Operational Guidelines
To face the current market scenario, Oi aims to utilize integration
towards achieving the goal of differentiation
Quadruple play: Expand Pay TV offering
Keep the focus on convergence
Cross sell and up sell
Reduce churn
Increase the offering of
broadband services
Increase the growth opportunities
of our mobile business
maintaining profitability
Expand data business
Increasing efficiency and cost
control
Key element in the offering of integrated services
Expansion of coverage, availability and speed
3G expansion nationwide
Differentiated offers
› Sim-card only model: very low acquisition cost
› Focus on bundled services for post-paid
Use the biggest (and more widespread) national data
backbone to leverage corporate businesses
Leverage international data businesses through
Globenet
Internal processes improvements
Implementation of best practices
Capture all synergies with BrT ASAP
AGENDA
3
11
17
31
35
Revenue Generating Units
RGU growth remain robust in the 1Q10, reaching more than 62 million clients at the end
of March/10 (+8.0% vs 1Q09)
Total Revenue Generating Units – RGUs*
Million
Revenue Generating Units
8.0%
61.9
55.9
0,2
0,3
Mobile: 4.8MM
21,1
21,3
Pay-TV: 283th
4,3
4,2
3,9
3,8
Mobile customers already account for
58.8% of all RGUs at the end of
1Q10 (55.2% in 1Q09)
3,1
30,0
Broadband: 629th
21,8
22,1
22,2
57.7
0,06
0,06
45.6
RGUs totaled 62.2 MM in March/10,
with 4.6 MM YoY net additions:
62.2
36,1
36,6
31,8
20,3
2007
2008
Mobile (includes 3G)
2009
Mar/09
Fixed Broadband
* Pro-forma numbers in 2006 to 2008 (Considering Brasil Telecom)
Mar/10
Fixed LIS
Pay TV
Mobile Client Base
The pre-paid and control segments have been the major growth drivers, representing
almost 97% of the group’s net adds since March/09
Pre-Paid
Mobile Clients – Mix of subscribers*
82% of net additions since March/09
84% of total client base
-
Million
Control
15.0%
36.6
36.1
31.8
30.0
20.3
-
Post-Paid
30,7
30,3
-
26,7
25,2
Oi Conta Total amounts to 1.5
million, 39% of Region I post-paid
base
16,8
Market-Share at the end of 1Q10
1,5
3,5
1,3
3,5
1,5
4,3
1,4
3,7
4,4
2007
2008
2009
Mar/09
Mar/10
Post-Paid
Controlled
-
RI: 27.0%
-
RII: 15.8%
-
RIII: 12.6%
-
National: 20.4%
Pre-Paid
* Pro-forma numbers in 2006 to 2008 (Considering Brasil Telecom);
** Controlled plans included in the post-paid from 2007
Oi Mobile: Bundle offers in the post paid segment for both companies
Oi will reinforce BrT’s bundle strategy, aiming to boost net additions as it happened in
Region I since 2007; Bundle should be available in RII in 3Q10
“Oi Conta Total” Customer base
Thousand users
1.449
1.061
1.453
537
Fixed line, mobile and
Internet bundle
5 plans*
Unlimited local calls
between fixed lines
1.249
% Post-paid**
2007
2008
2009
Mar/09
Mar/10
20.7
27.8
38.3
32.2
38.7
Unlimited access to
internet
Free long distance
minute packages
*OCT Light, OCT 1, OCT2, OCT3 e OCT4, from 50 to 1,000 fixed minutes per month, dial-up internet to Oi
Velox 1 mega, Oi Mobile shared with up to 4 people.
** Post-paid base from Oi Region I (area where the plan is available)
Fixed Broadband Client Base
In the broadband market, there’s more room to growth in Region I due to lower
penetration as compared to Region II
Region I
Region II
Millions, % of Fixed Lines in Service
14,1%
16,4%
14,7%
Millions, % of Fixed Lines in Service
16,8%
2.01
Broadband
25,6%
25,1%
10,7%
0,05
2.27
0,05
2.27
0,05
2.35
19,5%
22,2%
0,05
Clients and
Penetration
on LIS
1,52
2007
Coverage**
1,96
2,22
2,22
2,30
2,00
1,57 1,81 1,92 1,94
2008* 2009* 1Q09* 1Q10*
2007
Cities with coverage 1.361
% of total
Broadband CAGR of 25.2% (2006 to 2009)
44%
2008
2009 1Q09
1Q10
Cities with coverage
1.585
% of total
85%
Broadband CAGR of 13.7% from 2006 to 2009
• Oi Velox Ultra, a new Ultra High-Speed Fixed Broadband portfolio, was launched in the metropolitan region of Recife in
Sept/09 and will be expanded to other states 2010
• Fixed broadband grew 8.3% since March/09 and already represents 20.0% of all fixed line in service (17.8% in 1Q09)
* The broadband penetration on fixed lines in service considers just the ADSL accesses
** Numbers of December/09
Oi Financial Highlights: Consolidated Gross Revenue
R$ billion
Regions I + III
New Oi Consolidated
+8.4%
Total
25.1
+4.0%
27.2
Fixed
20,7
20,8
Mobile
4,4
6,4
2007
2008
44.0
35,3
45.7
1Q10 vs 1Q09
Mobile and broadband
segments as main growth
drivers, offsetting lower
revenues from the traditional
wireline segment
35,6
Region II
+2.7%
+6.3%
Total
Fixed
Mobile
16.0
14,0
17.0
0,2
14,9
2,0
2,1
2007
2008
Mobile
* 2008 pro-forma **Pay TV and Paggo
8,5
2008*
Other
Services**
11.2
11,5
8,9
8,8
0,2
9,9
2009
Fixed
0,1
Mobile and data already
accounts for 22.5% and
19.7% of total revenues,
respectively (20.2% and
18.5% in 1Q09)
0,1
2,3
2,6
1Q09
1Q10
Oi Financial Highlights: Consolidated EBITDA and Margin
R$ billion
1Q10 vs 1Q09
Consolidated EBITDA**
R$ Million
Oi
10,134
10,249
BrT
9,864
• 6.5% increase in EBITDA shows
the synergies gains resulting from
the integration of Oi and BrT
• 1Q10 had lower operational
expenses, even when compared
with recurring expenses of 1Q09,
mainly related to:
3.786
+6.5%
• Handset Cost / Others
• Third-party Services
2,377
6.348
2,532
• Personnel
• Provision for Bad Debt
2007
2008*
2009
EBITDA Mg Oi
36.1%
34.2%
33.0%
EBITDA Mg BrT
34.2%
* 2008 Pro-forma;
** Recurring EBITDA and EBITDA margin in 2008, 2009 and 1Q09
1Q09
31.7%
1Q10
33.9%
• The negative impact of São Paulo
in the 1Q10 EBITDA was R$35 MM
(R$84 MM in 1Q09)
Oi Financial Highlights: Consolidated Net Income
R$ Million
Regions I + III
1Q10 vs 1Q09
New Oi Consolidated
Huge growth in net income YoY due
to lower:
2,318
Lower operating Expenses
1,154
Better financial results
1,087
Reduced depreciation and
amortization
1Q09 was impacted by:
2007
496
2008
Region II
11
782
2008*
2009
673
1Q09
1Q10
non-recurring costs of R$185
million
Fiscal distortion as the
goodwill generated in BrT’s
acquisition had been
amortized since January/09
and could not be used to
reduce tax payments up to
the end of 3Q09.
-436
2007
* 2008 Pro-forma
2008
Oi Financial Highlights: Consolidated CAPEX
R$ billion
Regions I + III
New Oi Consolidated
-30.2%
4.6
Consolidated CAPEX in 1Q10
7.3
Total
78% directed to growth businesses
42% in data / broadband
2,0
36% in mobile
2.3
Fixed
1,8
Mobile
3,5
2,6
In wireline, Capex was concentrated
in:
5.1
Digital inclusion schools
0,5
2007
Expansion of fixed broadband
2008
Region II
Data package offers for
corporate clients
2,7
Fixed
-58.9%
3,8
Total
Fixed
Mobile
2.7
1.4
1,5
1,1
0,3
1,2
2007
2008
2,4
Mobile
2008*
2009
Coverage expansion,
especially in Region III and II
0.9
0,5
0,4
1Q09
In wireless, the allocation focused
on:
0.4
0,2
0,1
1Q10
* 2008 Pro-forma
Oi Financial Highlights: Consolidated Debt
After an increas with the consolidation of Invitel/BrT, net debt decrease during 1Q10
Total Debt Profile (After hedge)
Consolidated Gross Debt
R$ Billion
Local Currency
Foreign Currency
Hedge
%
BRL Fixed
3
USD*
25,9
0,7
4,1
29.9
1,1
4,7
2
1
29.9
0,8
5,1
BRL
97
77
21,1
24,1
24,1
Mar/09
Dec/09
Mar/10
Libor
TJLP
Currency
CDI
Interest
*Includes Cash USD
Consolidated Net Debt
R$ Billion
Effective cost of debt in 1Q10: 100.5% of CDI
21,9
accumulated (107% in 2009)
21,3
19,2
Cost of debt (contracted) in 1Q10:
- Local Currency: 116% of the CDI
- Foreign Currency: Libor + 5.7%
Mar/09
Dec/09
Mar/10
Debt Profile and Maturity Flow
Gross Debt Amortization
Gross Debt Amortization Flow – Currency*
R$ Billion
R$ Billion
JPY
BRL
100%
7,5
3%
2%
8%
3%
7%
2%
6,4
14%
2%
USD
24%
3%
43%
5,0
4,2
4,0
6%
95%
2,7
89%
92%
84%
73%
51%
2010
2011
2012
*Cash-Flow Impact of the Amortizations
2013
2014
From
2015 on
10
11
12
13
14
From
2015 on
Key Ratios
Net debt/Recurring EBITDA
Interest Coverage Ratio*
x
x
7,3
4,9
1,5
2,2
1,9
2,1
2009
1Q09
1Q10
3,9
4,0
3,9
2009
1Q09
1Q10
0,4
2007
2008
2007
2008
Net debt/Equity
EBITDA – CAPEX**
x
R$ billion
6,4
4,8
2,9
0,3
2007
2,7
2,3
2,5
2009
1Q09
1Q10
1,5
1,0
2008
2007
2008
* Considers Recurring EBITDA for 2008 and 2009 LTM
** Considers numbers from Oi + BrT (2006 to 2009) and uses recurring EBITDA in 2008 and 2009
2009
1Q09
2,2
1Q10
Dividends - TNE
Evolution of Dividends TNE
R$ Million
Net Results
Dividends
376%
Payout
233%
216%
232%
146%
35%
70%
25%
29%
2.675
2.318
709
224 96
1999
251
2000
303
500
140
2001
2002
-416
800
1.100
751
1.114
785
330
213
2003
Statutory Dividends:
1.310
2004
2005
2006
1.155
671
2007
2008
Historically:
•
All of the shares: right to receive minimum dividends of
25% of adjusted net profit
•
R$ 7.6 billion in Dividends and Interest on Equity
were paid in the last 10 years
•
Preferred shares and ADRs: minimum 6% of Capital
or 3% of Shareholder’s Value, whichever is higher
•
TNE paid an average of 103% of profits generated
in the last 10 years
•
A value equivalent to 79% of Shareholder’s Equity
(dec/08) was distributed in the last 10 years
Dividends – TMAR
Evolution of Dividends TMAR
R$ Million
Net Results
Dividends
408%
Payout
240%
123%
131%
147%
5.357
98%
64%
40%
1.114
708
295
850 687
2001
2002
1.000 761
2003
1.350
917
2004
Statutory Dividends:
1.717
1.100
2005
1.614
651
2006
1.310
1090
2007
2008
Historically:
•
All of the shares: right to receive minimum dividends of
25% of adjusted net profit
•
R$ 12.1 billion of Dividends and Interest on
Equity were distributed in the last 8 years
•
PNA shares have the right to receive dividends 10% higher
than the ones distributed to ON shares
•
116% of payout in the period
•
PNB shares has priority in the receivement of dividends,
which shall be fixed per year and equivalent to 10% of the
division of the Capital per total number of shares.
AGENDA
3
11
17
Brasil Telecom Acquisition – The Deal 31
35
The Acquisition of Brasil Telecom
Acquisition value and funding sources
Cash Disbursements and Total Equity Value
Shares Purchases
BRTP
R$ billion
# shares
%
# shares
%
76,645,842
21.1
58,956,565
10.7
Open Market
55,819,400
15.4
45,590,200
8.3
Tender Offer
20,826,442
5.7
13,366,365
2.4
121,545,213
33.6
630,872
0.0
Control*
81,092,986
22.4
-
Tag Along
40,452,227
11.2
630,872
0.0
198,191,055
54.7
59,587,437
10.7
PN Shares
(1) Purchase of preferred
shares in the open market
(2) Purchase of preferred
shares in the Tender Offer
(3) Acquisition of the
Control
2,3
ON Shares
1,0
5,4
TOTAL
(4) Mandatory Tender
Offer (Tag Along)
2,7
(=) Total Cash Paid
11,4
BRTO
Funding Sources
R$ 4.3 billion in Bank Credit Certificates (July 2008)
R$ 3.6 billion in Commercial Papers (August 2008)
(5) Invitel Debt
1,0
R$ 2.0 billion in Commercial Paper (December 2008)
R$ 1.5 billion in Cash
(=) Total Equity Value
12,4
R$ 11.4 billion
*Considers common shares that were subject to shareholders’ agreements governing the relationship
among the controlling shareholders;
Oi and BrT Integration
The operational integration process practically concluded at the end of 2009, absorbing the expected
synergies
• Objective: begin 2010 with a completely restructured company, focused on quickly absorbing synergies
• Assumption: adoption of best practices from both companies
Engineering and Network
Marketing and Channels
• Single brand model – “Oi”
• Integration of newly planned and operating
network
• Implementation of new operational
philosophy , geared towards quality
improvement as perceived by customers
• Unification of NoC*
• Unification of internal plant’s management
model (RI/II) and centralization of external
plant maintenance contract (RII)
• Integration of switch network, expansion of
2G/3G networks reach, unification of core
voice and data network, and consolidation
of SMS/MMS platforms
– Migration of public phones, own stores
and kiosks
– Training for call center attendants and
field technicians
• Integration of Oi and BrT portfolios
• Implementation of single model for sale
channels and distribution
– “Retail” distribution was restructured,
focusing on small retailers and
expansion of virtual recharge
– Migration of owned stores to franchises
Opex
• Implementation of administrative
restructuring
• Renegotiation of suppliers’ contracts
• Use of internal infra-structure to substitute
services provided by other telecom service
providers
• Adoption of naked sim-card strategy in
Region II
• Employees:
– Culture unification
– Single management model
– Unified organizational structure
– SMEs channels adopted model to cater
to different customer profiles and
corporates with national approach
* Network Operating Center
Amortization of the Goodwill
Previous Situation
License (R$6.87 billion)
- 17 years of amortization
Network (R$2.10 billion)
- Amortization in 7 years
(average)
Amortization of
~R$700mn per year
Current Situation - Details
Tax Deductible
Before the 2
steps of the
simplification
of the
structure
License
(R$6.9 bn)
Network
(R$2.1bn)
Still done in 17 years
(~R$400 mn per year)
According to the assets lifetime
Amortization per year in R$ MM
Current Situation
Total of Amortization is
composed of 2 parts:
1 Tax deductible (done in
BrT) – R$8.9 billion;
+
2 Not tax deductible (done
in Coari) – R$6.9 bn
Not
Tax Deductible
Resulted
from the
additional
provisions
needed
License
(R$5.3 bn)
Network
(R$1.6bn)
Still done in 17 years
Amortization in 7 years (average)
AGENDA
3
11
17
31
35
Future scenario brings challenge and opportunities
Benefits of the Deal
Short / Medium term
Market
Competition
Regulation
Technology
Long term
Continuation of main trends
- Slight reduction in fixed lines and focus on
alternative plans
- Mobile and broadband as growth drivers
Fixed companies consolidating DTH offers
Triple Play ›› Quadruple Play
Increase of Internet penetration
Mobile reaching maturity with increased VAS
relevance
Increase of Pay TV penetration
Strong competition in mobility (traffic) with
portability and 3G
3G becomes an alternative access for
broadband in the retail
More competition in broadband with 3G/LTE
(4G) and WiMax
New competition with alternatives ways of
access (Skype, for example)
Incumbents permitted to provide IPTV
broadcasting and/or to buy cable companies
through approval of:
- PL #29 and/or
- New auction for cable licenses
Auction for WiMax frequency bands
Auction for LTE (4G) frequency bands
Regulation of new pro competitive actions (PGR)
Mobile Interconnection Rates based on cost
models (VU-M)
WiMax as possible access solution
Next Generation Networks (NGN) / VoIP
FTTX access becomes significant
Attachments
Regulation: Brazilian Telecom Market has experienced important
changes in its institutional/regulatory
General
Concessions
Plan (PGO)*
Telebrás Breakup and
Privatization
Approval
of Cable
Law
1995
1997
1998
General Law of
Telecom: creation of
ANATEL
Auction of licenses
for 2nd players or
Mobile
2000
Competition
intensifies:
incumbents allowed to
offer new services
(long distance and
data) nationwide
New mobile start-up
companies
2002
2005
Full Billing for
mobile
companies
2006
2007
2008..
Pulse-minute
conversion
Num. portability
3G Auction
Competition:
Licenses for fixed
line mirror
companies
Concession
contract
renewal for
incumbent
fixed line
telcos (25
years)
New billing
rules (pulses to
minutes)
interconnection
rates
(*) – The General Concession Plan determines that M&A among fixed-line incumbents is not permitted.
Cable law
revision
PGO revision
Full
convergence
(Fixed, Mobile,
Broadband,
Video)
Market: As access grows, mobile becomes relevant in sector’s total
revenues
Brazilian Telecommunication Gross Revenues
R$ billion
46,2%
44,7%
46,1%
45,9%
44,5%
39,7%
36,8%
34,0%
30,8%
146
148
67
66
Whereas
131
115
71
22
49
83
28
55
average of 7.6% annually,
58
43
49
mobile revenues has reached
35
60
telecom
revenue has grown at an
107
95
fixed
a rate of 17.0% per year
65
66
72
78
82
2002 2003 2004 2005 2006 2007 2008 2009
Mobile
Fixed
35
37
16
17
19
20
between 2002 and 2009.
1T09 1T10
Mobile as % of Total
Source: Company reports (Tele Norte Leste, Brasil Telecom, Telesp, Embratel, GVT, Net, Tim Brasil, Vivo, Claro,
Telemig and Tele Norte Celular) and Telecom
Mobile Penetration rates in the Brazilian States
% March 2010
161%
Brazil: 93%
Region III: 110%
Region II: 101%
Region I: 83%
110%
107%
108%
103%
99% 98%
99%
92%
84%
93%
90% 88% 90%
78%
97%
89%
79% 80%
75% 76% 74% 73%
73%
68%
61%
47%
RJ
MG
ES
AM
RR
PA
AP
PE
RN
Region I
Source: Anatel
SE
AL
CE
PB
BA
PI
MA
SP
DF
Region III
MS
MT
GO
PR
SC
RS
RO
AC
TO
Region II
Commitments with ANATEL (1/3)
Dial-Up
Access
Broadband
and Data
Mobile
Fixed
Local Internet dial-up access: Increase dial-up access availability for local STFC mode to have 56%
of the 2,995 municipalities in Region I under this service following Anatel’s schedule
Alternative long distance plan – For the municipalities not covered by the local dial-up access
schedule there will be an alternative National Long Distance (NLD) plan offer with non-geographic
access code up until December 31, 2010
Expand broadband commercial retail offer to all municipalities in Regions I and II (4.8
thousand municipalities)
Expand optical fiber network in Northern Region to all municipalities of Boa Vista (RR), Manaus
(AM) and Macapá (AP)
Increase the number of municipal head offices in Regions I and II through optical fiber in addition
to those already existing
Extend offering of all existing offers that have national coverage in Region I to Region II until
Dec31, 2009.
Environmental actions
Public telephony
– Region I: Payphone cards acquisition of cards with tariffs previously approved by Anatel
printed on the cover. Exclusive commercialization of payphone cards with tariffs printed in
authorized sales posts from Dec31, 2009
– Region II: conduct a viability study on the above actions to implement in Region II
Pay Tv
Supply over 2 thousand sets of antenna, decoders and TV sets to public institutions.
Offer on the DTH and cable operations’ basic schedule an independently- produced national
channel until December 31, 2010.
Focus on efforts to popularize Pay Tv through available offers.
National
Security
Supply to the Military Forces a voice and data communication system, including notebooks
and CPEs, in 66 border posts in Region I and II, for up to 18 months after Anatel’s approval.
Propose Memorandum of Understanding with the Brazilian Spatial Agency, Ministry of
Communications and Defense Ministry, up to 90 days, in order to collaborate in the Brazilian
Geostationary System Project.
Research &
Development
Increase the financial resources available for research and development purposes in
Brazil.
EILD* and
Corporate
Maintain and increase in each PGO Region the same existing conditions in offers available to
the corporate segments of Oi and BrT.
Lower the numbers of special requests in Region I to the same level EILD requests in BrT’s Region
within 12 months.
Maintain or lower the percentage of Special EILD in Region II.
*Special industrial exploration of dedicated line
Transparency
of offers
Number of
employees
Lawsuits
with Anatel
International
Expansion
Develop specific processes to speed up commercial service for the corporate segment
(with the requirer name, required item and date of request) by making available quarterly reports
to Anatel.
Adopt a system to announce in the internet corporate segment offers for 3 months in
Regions I and II.
Create a commercial corporate unit in Regions I and II by developing a speed-up process in 3
months.
Develop a data system for Anatel that features offers, plans, promotions, benefits and
disadvantages of specific offers to the final customer through quarterly electronic reports.
Maintain the consolidated number of employees at the companies until April 25, 2011
(taking as reference the number of employees on February 01, 2008).
Renounce in 30 days to the lawsuits made against Anatel (regarding Fistel) by Amazônia
Celular .
Discuss with Anatel other open judicial and administrative lawsuits.
Inform Anatel about Oi’s operation in the international market through quarterly reports.
Corporate Structure
Shareholders Rights
Shareholder Rights
All shares: right to receive a minimum 25% of adjusted annual net income.
Dividends
Preferred Shares and ADR (254.9mn): minimum of 6% of Capital (R$217.9 million
- Dec/09) or 3% of Shareholders’ Equity (R$161.1 million – Dec/09), whichever higher.
Tag along
Common shares have a tag along right of 80% of the value paid upon acquisition of
control under existing Corporate Law.
The Preferred shares do not have tag along rights.
Voting Rights
Common shares have full rights to vote at shareholder meetings.
Preferred shares have right to vote only under specific circumstances (a).
Board Members
Minority shareholders have the right to appoint two board members (within of 11).
Fiscal Committee
Members
Five members, appointed by:
- Controlling Shareholder (Telemar Participações) - 3
- Minority Shareholders (voting shares) -1
- Minority Shareholders (preferred shares) -1
Redemption
Rights
Shareholders have the right to redeem under certain special circumstances (b)
(a) Approval of long term agreements with related parties; redemption of preferred shares; full right to vote if the Company
does not pay dividends for three consecutive years.
(b) Issuance buy the Company of a new class of preferred shares; change in preference right of shares; redemption of shares;
reduction on statutory dividend; merger of the company; change in corporate purpose.
Important Notice to TMAR and TNE Shareholders
March 2009
CVM Instruction n 358, art.12: Shareholders owning a direct or indirect controlling stake in the
company, shareholders who elect the members of the Board of Directors or the Fiscal Council, or any
private individual, legal entity or group of same, acting jointly or representing a common interest,
that attains a direct or indirect stake equivalent to 5% (five percent) or more of the company’s
types or class of shares, must immediately inform the Company, under the terms this article.
TNL - Tele Norte Leste Participações
Capital
Treasury
Control
Free-Float
Common
130,611,732
3,036,149
68,504,187
59,071,396
Preferred
261,223,463
6,262,730
-
254,960,733
TOTAL
391,835,195
9,298,879
68,504,187
314,032,129
TMAR - Telemar Norte Leste
Capital
Treasury
Control
Free-Float
Common
107,063,093
-
104,227,873
2,835,220
Preferred A
130,487,295
223,500
104,329,417
25,934,378
Preferred B
1,063,967
-
6
1,063,961
238,614,355
223,500
208,557,296
29,833,559
TOTAL
BRTO – Brasil Telecom S.A.
Capital
Treasury
Control
Free-Float
Common
203,423,176
-
161,990,001
41,433,175
Preferred
399,597,370
13,231,556
128,675,049
257,690,765
TOTAL
603,020,546
13,231,556
290,665,050
299,123,940
In compliance with the terms of article 12 of CVM Instruction n° 358, art.12, TELEMAR advises its
shareholders that the Company cannot be held responsible for any public disclosure of information by
third parties regarding the acquisition or disposal of equity stakes equivalent to 5% or more of each
class of shares or of the rights pertaining to these shares or other securities issued by the Company.
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. Forwardlooking 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
IR Contacts
Roberto Terziani
55 21 3131-1211
Bayard Gontijo
55 21 3131-1211
Carolina Gava Silveira
55 21 3131-1314
Bernardo Guttmann
55 21 3131-1316
Patricia Frajhof
55 21 3131-1315
Michelle Costa
55 21 3131-2918
Rua Humberto de Campos, 425 / 7th floor
Leblon - Rio de Janeiro - RJ
E-mail: invest@oi.net.br
Visit our website:
www.oi.com.br/ir
45

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