Transcript Titulo

7th Annual Latin America Conference
www.telemar.com.br/ir
September 13-14, 2004
Part I - Overview
1.1 Brazilian Telecom Market
1.2 Telemar
Part II - Recent Developments and Growth Prospects
2.1 Highlights 2003/2004
2.2 Growth of the Business
2.3 Review of Operating Results
2.4 Financial Position
7th Annual Latin America Conference - September/2004
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Part I - Overview
1.1 Brazilian Telecom Market
1.2 Telemar
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1.1 Wireline Sector
LIS (Million)*
Penetration (%)
1998
2001
2002
2003
Jun/04
20.0
37.4
38.8
39.2
39.3
11
21
23
23
23
Telemar
Fixed Lines in Service
have doubled since
privatization
Brasil Telecom
Lines in Service
Largest
Incumbents
15.2 M
32%
Telefonica
12.2 M
9.6 M
20%
Revenue Share
(Brazil: R$ 29.1 bn - 1H04)
Embratel (DLD & ILD)
31%
17%
* Source: Company´s Information
* Includes smaller incumbents and mirror companies (CTBC, Sercomtel, Vesper and GVT).
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1.1 Wireless Market
LIS (Million)*
Penetration (%)
1998
2001
2002
2003
Jun/04
7.4
28.7
34.9
46.4
54.0
5
17
20
26
30
Vivo – TEL/PT (CDMA)
23.5 m
Largest
Groups
Claro -AMX (TDMA/GSM)
11.1 m
44%
Oi - Telemar (100% GSM)
TIM (TDMA/GSM)
10.4 m
21%
19%
Opportunity (TDMA/GSM)*
Total Subscribers
National Market
Share
5.1 m
9%
3.6 m
7%
* Other groups such as Nextel, CTBC and Sercomtel had 0.3 m subscribers (0.5% market share).
* Source: Company´s Information
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1.1 Growth in Customer Base
Fixed-line platform – LIS (million)
Penetration
Rate Brazil
(%)
23
37
14
39
22
39
38
26
20
Brazil
55
Brazil
21
25
Region I
03
Jul/04
46
17
31
11
30
Penetration
Rate Brazil
(%)
23
21
18
Mobile platform – Subscribers (million)
14
25
9
20
35
29
23
5
15
8
981
10
99
12
00
15
01
15
02
15
03
15
7
Region I
Jul/04
3
7
10
12
981
99
00
01
16
02
 After doubling in size after privatization in 1998,
further expansion of fixed-line platform more
closely linked performance of Brazilian
economy (current household penetration
~55%).
1
Privatization (Jul/98)
 Brazilian subscriber base still growing at a
rapid pace (over 30% p.a.).
* Source: Company Information
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1.1 Mobile Penetration Rate – Jul/04
Penetration per Region
Jun-03 Sep-03
Region I
18.1% 19.5%
Region II
25.4% 27.3%
Region III
25.8% 27.6%
Brazil
21.5% 23.1%
Dec-03
21.9%
31.2%
31.5%
26.2%
Mar-04
22.8%
33.2%
33.0%
27.5%
Jun-04
24.8%
36.9%
36.4%
30.2%
Brazil – 30.4%
Source: Anatel
Region III – 36.5%
Region I – 25.0%
Region II – 37.3%
In jul/02, the penetration rate in Region I was 15% and in Brazil 18%;
 Wireless penetration in Region I (25%) still offers room for growth;
 According to Pyramid´s forecast, penetration will reach 40% by 2006.

* In July/04, population was estimated by IBGE.
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1.1 Mobile Penetration - Projections
Brazil (%)
45%
40%
July/2004: 30.4%
40%
39%
35%
30%
25%
20%
20%
15%
2003
2002
Pyramid
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2004
2005
2006
Ovum
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1.1 ADSL Market in Brazil
Market Share – Brazil*
Jun/04
Dec/03
Other
(ADSL)
Br Turbo
10%
Virtua (Cable)
8%
Br Turbo
Other
Virtua
8%
8%
24%
24%
Velox (ADSL)
Velox
18%
22%
broadband accesses (Jun/04);
 ADSL has 84% market share
(ADSL) Speedy
Speedy
40%
 Brazil has 1.4 million
of the Brazilian broadband
subscriber base;
38%
*Source: Teleco & Telemar estimates.
PC Penetration (% of households)**
 Broadband penetration is
expected to represent 30% of
total internet access in Brazil
in the next five years.
*
2003
*Source: Pyramid Research
** Brazil has approximately 42 million households
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1.2 Telemar – Overview (June/2004)
Region I =
• Concession
for fixed line services
• License for
Wireless services
(GSM)
• Integrated Telecom Service Provider
– 15.2 million wirelines in service
– 5.3 million wireless subscribers (Jul/04)
– 345,000 ADSL subscribers
• 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 and long distance services (Region I)
• PCS Mobile services (GSM) in Region I
Nationwide
• Authorization for
fixed line services
• Data, Corporate & Call Center Services (nationwide)
• Telemar shares heavily traded at Bovespa (TNLP4): ~ US$ 47
m / day and at the NYSE (TNE): ~ US$ 22 m / day (Jul/04)
• High Free Float: 82% of total shares
• Market value: US$ 5.1 billion (Jul/04)
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1.2 Telemar - Shareholder Structure
Holding Co.
TNLP
ADR
Tele Norte Leste
Participações (TNE)
81.0%
Contact Center
Wireline
(TMAR)
Data
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Wireless
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Part II - Recent Developments and Growth Prospects
2.1 Highlights 2003/2004
2.2 Growth of the Business
2.3 Review of Operating Results
2.4 Financial Position
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2.1 Highlights –2003/2004
Building a fully integrated telecom
service provider
 Change, adaptation and consolidation
 Market share gains in relevant segments
 Selective growth (new markets)
 Consolidation of investments made in
the network
 Growth in highly competitive markets:
 Long Distance (domestic and
international)
 Data & Corporate (nationwide)
 GSM Mobile Services (Region I)
 Exploring new opportunities:
 Broadband
 Bundled services
 Satellite services
 Agreements and Partnerships
Target: Ensure a sound financial position,
with increasing returns to our
shareholders.
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2.2 Expansion of Customer Base
million
22.2
20.6
CAGR (98-03)
19.5%
19.2
14.8
16.4
 Ability to anticipate mobile
6.5
5.1
3.9
1.4
0.5
0.3
0.2
11.8
1
traffic migration presenting an
outstanding performance in
customer base;
9.7
7.8
15.0
1998
1999
2000
Wireline
2001
2002
15.1
2003
Wireless
15.2
Jun_04
15.2
 Capacity to maintain stable
fixed line platform while
increasing market share in new
businesses (LD,Data, ADSL and
Mobile).
2004E
ADSL
1Target:
450,000 ADSL subscribers by YE 2004.
* Company’s acquisition
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2.2 TMAR Fixed Lines in Service
million lines
 Investments for expansion of
fixed line network essentially
completed;
14.8
15.0
15.1
15.2
~15.2
 Fully digital platform:
 78% household lines
 18% business lines
 4% public phones
11.8
9.7
7.8
 Wireline penetration: ~55% of
households (Region I);
1998
1999
2000
growth
2001
2002
2003
Jun 04
maintenance
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2004E
 Obstacles: Further
increases in wireline
penetration subject to GDP
growth and regulatory
changes.
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2.2 Oi´s Subscriber Base
million subscribers
~6.5
5.3
4.4
3.9
2.8
1.7
2.2
85%
85%
83%
 Most successful GSM launch
globally
 5.3 million subs in 25 months;
80%
80%
78%
Mar_03 Jun_03 Sep_03 Dec_03 Mar_04 Jul_04 Dec_04E
Post paid
Pre paid
 Share of mobile revenue in
Gross Revenue
(R$ million)
699
625
496
314
 21% market share (Region I);
564
total consolidated business
grew from 3% in 2002 to 8% in
1H04.
391
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
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2.2 Oi´s Market Position
Market Share (Brazil v. Region I) – Jun/04
Region I
Brazil
Other^
8%
TIM
Claro
Other^
21%
16%
Claro
16%
19%
Vivo 43%
Oi
TIM
9%
22%
Oi
21%
Vivo 25%
^Includes other operators:Telemig Celular, Tele Norte Celular, Nextel, CTBC,
and SERCOMTEL.
Source: Teleco /Morgan Stanley.
Wireless Penetration (%) – Jul/04
 Even with increased
competition, Oi remains a
high growth player in its
operating market (35% of all
net adds in 2Q04);
 Wireless penetration in
Region I (25%) still offers
significant growth potential;
 Challenge: Grow subscriber
base by 65% in 2004, with
positive EBITDA margins.
*
*Source: Pyramid Research
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2.2 ADSL
Thousand lines
450
345
 Highest ADSL growth in Brazil
217
(~37% of net adds/2003);
6
2001
41
 Annual revenue growth of
2002
2003
Jun_04
2004E
Gross revenue
(R$ million)
155
288% in 1H04, but still a low
portion of fixed line revenues
(1.6%);
 Target: Increase ADSL
penetration from 1.9% of fixed
lines to 5% in 2-3 years.
128
33
2001
2002
2003
1H04
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2.2 Call Center Services
Attendant Positions
14,887
>15,000
12,907
 Focus on profitability: EBITDA
7,337
positive since inception;
4,947
 Growth in attendant positions,
2001
2002
2003
2Q04
2004E
Net Revenues
(R$ million)
421
in line with increase in
customer base and net
revenues
- Contax currently has 29
customers, including major banks,
utilities, insurance, media,
telecom, retail, excluding Telemar.
286
223
146
2001
2002
2003
1H04
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2.3 Revenue Drivers
Data, Internet &
Corporate
High Growth
Wireless
High Growth
Integrated
Strategy
DLD / ILD
Contact Center
High Growth
High Growth
Wireline
Concession Area
Moderate Growth
 The Company’s five main lines of businesses provide a healthy balance between stable
cash flow and growth opportunities.
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2.3 Consolidated Gross Revenue Breakdown
2002
2003
1H04
R$ 16,091 million
R$ 19,427 million
R$ 10,460 million
Other 8%
Wireless 3%
Network 9%
Wireless 7%
F- M
17%
F- M
Local 61%
Data 6%
Local
LD 13%
Other 9%
Other 9%
Network 6%
15%
Wireless 8%
Local 57%
Local
44%
Data 7%
Local
40%
42%
LD 15%
Local 53%
13%
Network 6%
Data 6%
F- M
LD 17%
 Local Service decreased its share from 61% in 2002 to 53% in 1H04;
 Real growth has been driven by competitive and less regulated segments of mobile, long
distance and data:
F- M
13%
 LD services increased its
share from 13% in 2002 to 17% in 1H04;
 Mobile service rose fromLocal
3% in 2002 to 8% in 1H04 and
40%
 Data increased its share from 6% in 2002 to 7% in 1H04.
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2.3 Consolidated Gross Revenue
R$ million
 Revenue growth driven by less
+16%
10,460
9,023
Less
regulated*
Regulated
3,377
2,418
6,605
+40%
+7%
regulated/ highly competitive
business (Mobile, LD & Data);
 Revenue growth in regulated
services basically driven by tariff
increases;
7,083
 Share of less regulated/competitive
services increased from 27% to 32%
of total revenues (1H03/1H04);
 Expected growth in wireless, data
1H03
1H04
and LD in 2004 should further
increase that share.
* Services offered in highly competitive markets, less affected by regulation.
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2.3 Long Distance Services
LD Gross Revenue - R$ million
LD Traffic (billion minutes)
2,963
CAGR
9.5
37.5%
2,066
+31.7%
1,568
2001
8.2
2003
1H03
17.9%
7.1
1,347
2002
CAGR
1,774
2001
1H04
2002
2003
Contribution to Total Revenues (includes F2M)
13%
11%
2001
2002
15%
2003
15%
1H03
17%
1H04
 Telemar continues gaining market share and holding its market leadership
in Region I.
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2.3 Data Services
Data Revenues (gross) - R$ million
CAGR
22.7%
787
1,184
906
+31.6%
737
government contracts won in
2003;
560
2001
2002
2003
1H 0 3
Major Clients won in 2003
 Key corporate and
1H 0 4
 Data revenue growth driven
by ADSL and IP services;
 Target: Increase market
share in data services for
Region I and extend
comprehensive offer on
nationwide basis.
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2.3 Mobile Services Revenue*
R$ million
 Outstanding revenue increase
(69% yoy);
511
866
 Services growth driven by
39%
32%
Handsets
subscriptions, outgoing calls
& data services (mainly SMS);
 EBITDA breakeven reached in
61%
68%
Services
Dec/03, after 18 months of
operations;
 Target: Maintain a high
1H03
1H04
revenue growth rate with
increasingly positive EBITDA
margins.
* Refer to gross consolidated revenues (excluding Intercompany transactions).
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2.3 Consolidated Net Revenues and EBITDA
R$ million
50%
44%
45%
44%
 Delivering consistent revenue
35%
and EBITDA growth in spite of
huge expansion of fixed line
platform and startup of mobile
business;
14,003
11,874
10,103
 Recurring margins stable over
time, in the mid-40’s
8,122
6,221
6,222
5,353
4,032
7,487
6,561
3,558
2,735
3,225
2,974
 EBITDA 2001 impacted by
extraordinary provisions;
 Target 2004: Keep
consolidated EBITDA margin
at ~43% in spite of a higher
growth in mobile revenues.
1999
2000
2001
Net Revenues
2002
EBITDA
2003
1H03
1H04
EBITDA Margin
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2.4 Consolidated CAPEX
R$ billion
10.1
Wireless
 CAPEX 2003: ~12% of net
2.2
revenues (v. 17% in 2002);
 CAPEX 1H04: R$ 534 million
7.9
(7.1% of net revenues);
 Consolidated CAPEX since
1998: US$10.4 billion;
2.5
2.8
2.2
2.0
Wireline
1998
0.9
1999
2000
2001
2.0
1.7
40%
0.6
1.1
1.1
2002
2003
0.5
1H04
60%
2004E
 Target: Stabilize CAPEX at
~15% of net revenues to
support growth in mobile and
other services (broadband,
long distance).
Anatel Targets/
Mobile License
(R$1.1 bn)
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2.4 Free Cash Flow after CAPEX
R$ million
CAGR (99-03)
69.1%
4,025
2,302
2,247
492
1,233
1,064
1H03
1H04
-5,906
1999
2000
2001
2002
2003
 Having met fixed line universal service goals and successfully rolled out GSM services,
our FCF is expected to remain strong in the coming years.
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2.4 Dividend Payments - 1999/2003
R$ million
5.0%
Dividend yield
5.1%
*
2.4%
1.7%
Dividend Policy
800
1.8%
500
224
251
1999
2000
Dividend/
Interest on
Capital
303
2001
2002
• All shares have the right to receive a
minimum annual payment of 25% of
adjusted net income;
• Preferred Shares and ADR are entitled
to a minimum dividend of:
 6% of the Company´s Capital;
 3% of the Company´s Shareholders´
Equity
Whichever is higher.
2003
* Based on stock prices at 08/31/04.
 Our goal is to continue to provide high cash returns to our shareholders.
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2.4 Debt Position
R$ billion
Net Debt/
EBITDA (x)
Net Debt – Jun/04
Repayment Schedule – Jun/04
R$ 7.4 billion
Total Debt: R$ 12.2 billion
2.2
3.4
1.7
1.3
9.1
1.1
2.8
~ 1.0
7.8
7.7
2.4
1.5
7.3
1.4
6.3
2001
2002
2003
Jun_04
0.8
2H04
2005
2006
2007
2008
2009+
12.1
22.6
28.0
11.4
6.4
19.5
% of
total
2004E
 Given our strong cash generation, we estimate net debt to be less than 1x EBITDA by year
end 2004.
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2.4 Key Financial Ratios
Net Debt / EBITDA
(*) 12 - Month EBITDA
Amortization*/ EBITDA (%)
* Principal and interest
CAPEX / EBITDA (%)
Dividends* / EBITDA (%)
*
* Early attainment of universal service targets.
7th Annual Latin America Conference - September/2004
* includes JCP (interest on capital)
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2.4 Key Financial and Valuation Ratios
Enterprise Value / EBITDA
EBITDA / Total Debt Service
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Market Cap / EBITDA
EBITDA / Net Interest Expense
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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
7th Annual Latin America Conference - September/2004
Investor Relations
Rua Humberto de Campos, 425 / 8º andar
Leblon
Rio de Janeiro -RJ
Phone: ( 55 21) 3131-1314/1313/1315/1316
Fax: (55 21) 3131-1155
E-mail: [email protected]
Visit our website:
http://www.telemar.com.br/ir
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