Transcript Titulo

Presentation at the
ABN AMRO Investors Conference
November 08th , 2004
www.telemar.com.br/ir
Telemar Presentation - Contents
1. Telemar Overview
2. Brazilian Telecom Market
3. Operating and Financial Review
ABN AMRO Investors Conference / November 2004
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5
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Shareholder Structure – TNE
BNDESPar - 25%
Fiago – 19.9%
AG Telecom – 10.28%
Telemar
Participações S.A.
ASSECA Participações – 10.27%
Lexpart Part. – 10.28%
L.F. Tel - 10.27%
18.9%
BrasilCap - 5%
Tele Norte Leste
Participações S.A.
(TNL)
•(TNL)
Brasil Veículos - 5%
Fundação SISTEL - 4%
Total Shares: 387.9 million
Free Float 79.5% / Treasury 1.6%
80.9%
Total Shares: 241.7 million
Free Float 18.7% / Treasury 0.4%
100%
Mobile
ABN AMRO Investors Conference / November 2004
100%
Fixed line
Contact Center
100%
Data Transmission
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Telemar History
1998
2002
International
RI
RII
RIII
Processes
16 Companies
16 IT Systems
60 Network Platforms
50 Network Management Centers
116 Call Centers
Services
Local Voice and regional LD;
Regional Data Communic.
Market Approach
Geographic
ABN AMRO Investors Conference / November 2004
Management/Processes/IT
All Unified
Restructuring 16  1
- Optimization of Resources;
- Process Standardization;
- Management Centralization;
- Merger of fixed line companies;
Services
Local & Advanced Voice
Domestic & International LD
Nationwide Data Transmission
Mobile
Call Center
Network Management / Internet
Market Vision
Customer Segmentation
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Highlights
Region I
= Concession area
for Wireline services
= Mobile license
for Wireless services
Nationwide
= Authorization area
for Long-Distance
and Data services
Target: Develop a fully integrated
telecom service provider
 Change, adaptation and consolidation
 Market share gains
 Selective growth (New Services)
 Consolidation of investments
 Growth in highly competitive markets:
 Long Distance (Nationwide and
International)
 Data & Corporate (Nationwide)
 PCS Mobile (Region I – GSM)
 Exploring new opportunities:
 Broadband (ADSL)
 Bundled Services
 New Products (residential/SME)
 Segmented offer (mobile services)
Goal: Ensure a sound financial position,
with increasing returns to investors.
ABN AMRO Investors Conference / November 2004
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Telemar Presentation - Contents
1. Telemar Overview
1
2. Brazilian Telecom Market
5
3. Operating and Financial Review
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Brazilian Telecom Market – Customer Base (in millions)
Fixed Line
Mobile
33
Penetration
Rate (%)
23
23
23
Penetration
Rate (%)
Brazil
21
26
18
20
14
17
11
31
Brazil
37
39
39
39
58
14
46
9
25
35
5
20
29
23
15
7
981
99
00
01
02
03
Jun/04
 After doubling in size after privatization
in 1998, further growth of fixed-line
platform more closely linked to the
performance of Brazilian economy.
1
981
99
00
01
02
03
Sep/04
 Brazilian subscriber base still growing
at over 30% p.a., with further room to
increase penetration levels.
Privatization.
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Fixed Line Sector in Brazil – June/2004
LIS (million)*
1998
2001
2002
2003
Jun/04
20.0
37.4
38.8
39.2
39.3
Telemar
Brasil Telecom
Region II
Region I
15.2 M
32%
9.6 M
20%
Fixed Lines in Service: 37 m
(Main Incumbents)
% of Total Gross Revenue:
Telefonica
Embratel (LD Carrier)
Region III
12.2 M
31%
T= R$ 29.1 bn / 1H04
Region IV
17%
* Includes smaller incumbents and mirror companies (CTBC, Vesper, GVT and Sercomtel).
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Mobile Subscribers in Brazil - Sep/2004
Vivo – TEL/PT (CDMA)
24.6 m
TIM (TDMA/GSM)
Claro - AMX (TDMA/GSM)
12.0 m
42%
Oi - Telemar (100% GSM)
11.7 m
21%
20%
Opportunity & BRT (TDMA/GSM)*
Subscriber Base Brazil: 58 m
Market Share
5.7 m**
10%
4.0 m
7%
* Other groups with 0.2 m subscribers (~0.3% market share)
** Oi announced 6 million subs in Oct/04.
Source: Company´s Information
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Brazilian Telecom Market - Penetration Figures
Fixed: 39 m (Jun/04)
23%
Mobile: 58 m (Sep/04)
33%
 Mobile penetration still has a lot of room
to grow, helped by economic recovery;
70
60
50
58%
 Anatel estimates between 62.8 / 69.8 m
42%
 Estimated mobile penetration for 2008YE
Max.
ranges from 42% to 58%;
Min.
40
subs by 2004YE;
30
Mobile*
Fixed Line** 23%
 Fixed line penetration should be more or
less stable, following GDP growth.
20
02
03
04E
05E
06E
07E
08E
* Estimates from: Citigroup, Goldman Sachs, JP Morgan, Merryll Lynch, Pyramid Research.
** Estimates from Yankee Group
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Brazilian Telecom Market - Broadband
Broadband Access – ( thousands)
3,547
3,831
3,148
2,591
ADSL
1,874
1,199
technology in Brazil (over 80% market
share);
694
130
00
326
01
02
03
 ADSL has become the dominant
04E
05E
06E
07E
PC Penetration (% of households)
08E
 Broadband subscriber base expected
to increase by 2.5x through 2008 (from
1.5 m in Jun/04);
 Telemar has a target to increase
broadband penetration from 2.8% of
fixed lines in service to 5% by 2006.
2003
Source: Anatel / Teleco / Pyramid Research estimates*
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Telemar Presentation - Contents
1. Telemar Overview
1
2. Brazilian Telecom Market
5
3. Operating and Financial Review
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Operating and Financial Highlights
Operating
Financial
 Stable fixed-line platform;
 Strong
growth
subscribers;
in
 Consistent top line growth;
mobile
and
ADSL
 Consistent
market share gains in long
distance services;
 Strong
segmented offer
distribution network;
and
a
large
 A state-of-the-art fiber & satellite backbone
 Mid-40 EBITDA margins;

Low CAPEX required;
 Strong cash generation;
 Execution of deleverage policy;
 High dividend yield.
reaching main cities of Brazil, supporting
voice, data and internet services.
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Growth of Customer Base
Fixed Line (million lines)
14.8
15.0
Mobile (million subs)
15.2
15.1
~15.2
~6.7
5.7
11.8
5.1
9.7
3.9
7.8
4.4
2.8
1998
1999
2000
2001
2002
2003
Sep_04 2004E
Sep_03
Dec_03
Mar_04
Jun_04
Sep_04 Dec_04E
~480
429
ADSL (thousand subs)
217
6
2001
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2002
2003
Sep_04
2004E
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Revenue Growth & Key Drivers
Net Revenue Growth – R$ million
14,003
11,874
 Telemar has been delivering strong
11,571 +12% yoy
10,103
revenue growth in spite of the
modest performance of Brazilian
economy.
Key Revenue Drivers
New
Services1
Traditional
Services2
 Real growth driven by new segments of
24%
76%
9M 02
31%
69%
9M 03
37%
63%
9M 04
mobile, data, broadband and long
distance.
 Revenues from traditional services
broadly in line with inflation (no real
growth).
1 Domestic
2 Local
and International Long Distance, Mobile, Data and Value Added Services.
voice (fixed), network usage and public phones.
ABN AMRO Investors Conference / November 2004
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EBITDA
R$ million
45%
44%
EBITDA Margin
 Recurring EBITDA margins stable
35%
over time1;
6,221
 Given strong revenue growth in
5,353
3,558
2001
4,645
2002
2003
ABN AMRO Investors Conference / November 2004
4,939
9M03 9M04
more competitive segments, we
expect a slight reduction in
consolidated EBITDA margin to
~43% in 2004.
1EBITDA 2001 impacted by non recurring items.
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Consolidated CAPEX
R$ billion
10.1
Wireless
2.2
 CAPEX 2003: ~12% of net revenues,
compared to 17% in 2002;
7.9
 CAPEX 9M04: R$ 1,134 million (9.8% of
sales);
 Consolidated CAPEX since 1998: R$ 22
2.8
2.5
billion;
2.2
2.0
2.0
0.9
Wireline
1.7
0.6
1.1
1.1
40%
revenues over the next years.
1.1
0.4
 Target: Stabilize CAPEX at ~15% of net
60%
0.7
1998
1999
2000
2001
2002
2003
9M04
2004E
Anatel Targets and Mobile License (R$1.1 bn)
ABN AMRO Investors Conference / November 2004
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Free Cash Flow after CAPEX
R$ million
CAGR (99-03)
69.1%
4,025
2,302
3,097
2,487
492
1,233
9M03
9M04
-5,906
1999
2000
2001
2002
2003
Having met our main fixed line universalization targets and mobile rollout,
our cash generation is expected to remain strong
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Debt Position
R$ million
Gross Debt Repayment Schedule – Sep/04
Net Debt – Sep/04
R$ 7,000 million
R$ 11,863 million
3,519
9,121
2,863
7,834
7,703
7,000
6,300 *
1,692
1,550
877
869
493
4Q04
2001
2002
2003
Sep_04
2004E
4.2
2005
24.1
2006
29.7
2007
13.1
2008
7.4
2009 2010+
7.3
14.2
% of
total
* To this amount should be included the disbursement
throughout at the year regarding the Buyback Program.
Given our strong cash generation, we expect to reduce net debt to less
than 1x EBITDA by year end 2004
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Hedge Position (Sep/04)
Debt by Currency before Hedging
Hedging Instruments
Local
33%
Currency
Basket
5%
Off-Shore 17%
US$
50%
Yen
12%
Currency
swap to
maturity
72%
ST Currency Swap 11%
Total = R$ 10.9 bn
Currency Exposure after Hedging
Local
97%
1
USD
3%
Excluding inter-company loans
Telemar has hedged 95% of its Foreign Currency Exposure
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Key Financial Ratios
Net Debt* / EBITDA
*EOP
Amortization*/ EBITDA (%)
* Principal and interest
** 12 - Month EBITDA
EBITDA / Net Interest Expense
Net Debt /Enterprise Value*
*EOP
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“Safe Harbor” Statement
This presentation contains forward-looking
statements. Statements that are not
historical facts, including statements about
our beliefs and expectations, are forwardlooking 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
ABN AMRO Investors Conference / November 2004
Investor Relations
Rua Humberto de Campos, 425 / 8º andar
Leblon
Rio de Janeiro -RJ
Phone: ( 55 21) 3131-1314/1313/1315/1316/1317
Fax: (55 21) 3131-1155
E-mail: [email protected]
Visit our website:
http://www.telemar.com.br/ir
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