Corporate Presentation January 2011
Investor Relations
Investor Relations
AGENDA 03.
Brazilian Telecommunications Market
12.
Oi: Profile, Footprint and Strategy
20.
Operational and Financial Results
35.
Expectations for the Future
Investor Relations
Brazil Snapshot
●
Land Area •
●
●
Strong expansion in
8.5 Mn Km2 (80% of the size of Europe)
Population
GDP per capita plus
•
194 Mn inhabitants (5th largest)
•
58 Mn households (85% urban) - 2008
record low
7th largest economy in the world •
GDP: US$ 1.6 Trillion (2009)
•
Currency – US$ 1.00 = R$ 1.66 (Dec/10)
unemployment have
Income Classes (Households) 2005
2009
Income*
15%
16%
R$ 2,534
C
34%
49%
R$ 1,277
D/E
51%
35%
R$ 733
A/B
*Average Income per classes
resulted in a huge shift in income classes
Investor Relations
3
Brazilian Telecom Market Brazilian telecom market is relevant globally and is the largest in Latin America Million 320 206
Fixed Lines in Service
China 805 Mobile Users
China Fixed Broadband Users
83
USA
42
Japan
Brazil
#4
635
India
#5
292
213
192
USA
Russia
Brazil
70 30
China
73
USA
Japan
13
#10
Brazil
Source: ANATEL, IBGE, Teleco, ML Wireless, UNCTAD and Internet World Stats (as of June/10)
Investor Relations
4
Brazilian Telecom Sector Evolution 10 08 03 98
Focus on Competition
Post-Privatization Pre-Privatization ●
Multiple players
●
Focus on universal competition and
monopoly
quality of services
Lack of Investments
●
Low quality of
●
●
State – owned
●
Current Scenario
●
Expansion of fixed and mobile services
services
●
GSM Launch
Huge pent-up
●
Broadband start-up
●
Tough competition
●
Mature Mobile services:
●
Consolidation
multiple chip is a market
●
Mature fixed; mobile
trend (on net-calls)
and broadband as
●
growth drivers
growth drivers ●
Pay-TV and broadband as
Convergence in early
●
3G services is a reality
stages
●
Convergent Players
●
Launch of 3G (2008)
●
Expansion of Pay-TV (Cable TV and DTH)
demand ●
Incipient Internet Investor Relations
5
Competition: Main Telecom Groups in Brazil
Mobile
20%
Fixed Broadband
36%
Telesp
Fixed
27%
Vivo
Mobile
30%
Telesp
Fixed Broadband
23%
Embratel
Fixed
15%
Claro
Mobile
25%
Net
Fixed Broadband
25%
~ pure mobile
Mobile
24%
~ pure fixed
Fixed
4%
Fixed Broadband
7%
Oi Region III
Clients mkt share 50%
Telefonica
Region II
Service Fixed
Telmex/ AMX
Region I
Vehicle
TIM
Economic Group
GVT
Brazil and its Regions
Fully Integrated
Revenue mkt share
31%
30%
24%
13%
2%
Investor Relations
6
Brazilian Telecom Industry
●
●
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)
Continued expansions in the mobile data market with strong competition •
Brazilian Market (Sept/10) Access (million)
Fixed Broadband
Pay TV Wireline
9 13
42
Market evolution, mainly in the pre-paid (naked sim-card) market based in the multiple chip trend
●
•
ARPU for the industry has been reduced
•
Different business models
192
Broadband with strong growth •
Fierce competition in areas that concentrate high-end clients
•
Continuous expansion and falling ARPU
•
3G changes the dynamic of the industry
•
Penetration*: 22% of households
Mobile
CAGR (02-09): Broadband: 49% Mobile: 26%
Wireline: 1% Pay-TV: 19%
Investor Relations * Fixed broadband Source: ANATEL, Teleco and Team analysis; FMS - Fixed to Mobile Substitution; SME - Small & Medium Enterprises
7
Brazilian Telecom Industry: Mobile Market ●
Mobile Market – Includes 3G (million)
Mobile market still growing but at lower rates •
Naked sim-cards continues as a national trend
191.5 174.0
121.0 29
166.1 48
150.6
45
42
38
●
3G (mini modem) has 4.0 million accesses (only 2%
32 59
Multiple chip is a market trend (on net-calls)
●
43
Penetration rate reached 102% in Dec.10
49
45
39
●
85
74
81
of the mobile users)
94 ●
Brazilian mobile ARPU 9M10: US$13.59*
2007
2008
2009 RI
RII
Sep.09
Sep.10
RIII
Source: ANATEL; Team analysis * Considering Feb/09 net adds equal to Feb/10 (during Feb/09 there was a clean-up of mobile clients done by one of our competitors).
●
Pre-Paid: represents 82% of the total access
Investor Relations
8
Brazilian Telecom Industry: Broadband Market ●
Broadband Market – Fixed and Mobile (million)
Broadband: Strong growth in accesses •
Fixed broadband penetration: 21% of households (12.2 MM
16.6
access)
14.1 13.3 10.6
2,7
0,6 7.7 3,0
3,7
3,8
•
67% of total fixed
2,3
broadband accesses and
4,2 3,5
53% of the total (fixed + 3G Data Cards)
2,1
5,6
ADSL corresponds to
7,0
7,7
7,5
8,6
●
3G becomes an alternative for broadband access •
84% growth in last 12 months (1.6 MM access)
2007
2008 ADSL
Source: ANATEL;
2009
Sep.09
Cable and Others
Sep.10
3G
Investor Relations
9
Brazilian Telecom Industry: Pay-TV ●
Pay-TV Market (million)
PAY-TV: Strong growth in accesses •
Penetration: 16%
•
DTH represents for 73% of net additions in the
9.1 0,4 7.5 0,4
6.3 5.4
0,4
7.1 0,4
•
Pay-TV: More growth opportunities in classes
3,9
2,8
2,4
4,3
4,3
4,8
3,2
3,8
2007
2008
2009
Sep.09
Sep.10
0,4
last 12 months
C and D due to lower households penetration.
2,1
1,8
Cable
* Others: MMDS and UHF
DTH
Others*
Investor Relations
10
AGENDA 03.
Brazilian Telecommunications Market
12.
Oi: Profile, Footprint and Strategy
20.
Operational and Financial Results
35.
Expectations for the Future
Investor Relations
Current Ownership Structure •
AG Telecom
19.34%
•
BNDESPar
16.86%
•
LF Telecom
19.34%
•
Previ
12.96%
•
Fund.Atlântico 11.50%
•
Petros
10.00%
•
Funcef
10.00%
Telemar Participações
Listed Companies
18%
TNL (Bovespa & NYSE) Shares
Capital Mn shares
Controlling %
Free Float %
ON
127.6
53.7
46.3
PN
255.0
0
100
Total
382.6
17.9
82.1
TMAR (Bovespa)
5.5% Tele Norte Leste Participações (TNE)
82% Telemar Norte Leste (TMAR)
d
100%
100%
49% Oi Mobile
Brasil Telecom (BTM)
100% BRT Mobile
Others
100% Globenet
* Tickers at Bovespa and NYSE: TNE (TNLP4/TNLP3 and TNE); BRTO (BRTO4/BRTO3 and BTM), TMAR (TMAR3/TMAR5/TMAR6)
Shares
Capital Mn shares
Controlling %
Free Float %
ON
107.1
97.4
2.6
PN
131.3
79.3
20.7
Total
238.4
87.4
12.6
BRTO (Bovespa & NYSE) Shares
Capital Mn shares
Controlling %
Free Float %
ON
203.4
79.6
20.4
PN
386.4
33.3
66.7
Total
589.8
49.3
50.7 Investor Relations
12
Oi´s Snapshot ●
●
●
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 and pay-TV)
Strong execution culture in Region I, outperforming targets •
Company managed to reach leadership for its new services launched within a period no longer than 2 years
•
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
in Brazil •
●
Sustainable and long term shareholder’s value proposition
Sound Balance Sheet •
Revenue balanced between growth businesses (mobile/broadband/Pay-TV) with strong cash flow generating services (fixed line)
•
Debt amortization schedule compatible with cash flow generation
Leading Telecommunication provider in Brazil and the only integrated player offering quadruple play services in Brazil
Investor Relations
13
Business and Domestic Footprint September/10
Mobile (million) RIII
6
#4
7
#4
RII
Fixed
Broadband
(million)
(million) #1
8
RII
2
Pay-TV
#1
●
Recent launch of DTH in 14 states of
RII RI
24
Brazil RI
#2
RI
13 #1
2
#1
●
4 cities in cable (Minas Gerais)
37.4 million RGUs
4.3 million RGUs
20.4 million RGUs
●
Share Brazil: 20%
●
Share Brazil: 51%
●
Share Brazil: 36%
●
Cities: 3.1 th
●
Cities: 4.8 th
●
Cities: 4.2 th
280 thousand RGUs
●
63 million RGUs (More than 26% of total users in Brazil)
●
Higher market share of revenues (30%), in the Brazilian sector
●
Other Business:
Source: Anatel and Companies; * 2009
●
Globenet: 22,000 km of submarine cable
●
ISP/Portal: Largest Brazilian ISP
Investor Relations
14
Data Backbone Footprint
Oi has a total of: 138,000 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 30,400
Km
of
metropolitan rings
8.4 thousand km from BrT and Metrored
1. Globenet connects Brazil, USA, Bermuda and Venezuela
22 thousand km from Oi
Through the national and international backbone, the company can reach leadership of Corporate Data segment Investor Relations
15
Strategic Priorities for 2010 e 2011 Growth
Cash Generation/Profitability 2011
2010
Capex 2010
2011
2010
Quality 2011
Small
2010
Partial
Intense
2011
Absolute
Investor Relations
16
Strategic Guidelines Focus on convergence
Increase the offering of broadband services Increase the growth opportunities of our mobile business maintaining profitability
Data Business Expansion
Increase efficiency and cost control
2010 Targets
Focus on quality
•Quadruple play: Expand Pay TV offering •Cross sell •Reduce Churn •Key element in the offering of integrated services •Accelerate 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 largest (and more widespread) national data backbone to leverage corporate businesses •Leverage international data businesses through Globenet •Internal processes improvements •Implementation of best practices •Improvement of Quality Perception •Improve margin and profitability •Continuing deleveraging process
•Creation of a new department to improve quality and efficiency Investor Relations
17
Integration with BrT: Sinergies are already evident
Operational Integration
Market and Channels
Integration of Oi and BrT portfolio for mobile segment Single model for sale and distribution channels Bundle Product “Oi Conta Total” was launched in Sept/10
Step 1 07/31/2009
Corporate Simplification
.
.
Coparts >Invitel/Solpart Merger of the holdings companies into BrTO
*Network Operating Center
Engineering and Network
.
Unification of NoC* and integration of switch network and integration of newly planned and operating network
Step 2 09/30/2009 BRTO>BRTP (incorporation/share exchange) Since 4Q09, 100% of the goodwill amortization started to generate fiscal benefits
Opex
.
Major actions aiming to capture synergies and optimize OPEX and CAPEX R$ 1.2 billion of synergies already captured
.
Step 3 06/16/2010 TMAR>BRTO (share exchange) Minority shareholders rejected the share swap ratio Simplification of corporate structure is suspended indefinitely Investor Relations
18
AGENDA 03.
Brazilian Telecommunications Market
12.
Oi: Profile, Footprint and Strategy
20.
Operational and Financial Results
35.
Expectations for the Future
Investor Relations
Revenue Generating Units (RGUs) Total Revenue Generating Units – RGUs*
●
(million) +3.1%
55.9 0,1 45.6
22
61.9 0,2
60.5 0.1
62.4 0.3
20
21
21
4
4
36
35
37
2009
Sep.09
Sep.10
22 4
4
3 30
●
Mobile customers already accounts for 59.9% of all RGUs at the end of 2Q10 (57.5% in 3Q09) RGUs totaled 62 million in Sep.10 with 1.9 MM YoY net additions: • Mobile:2.6 MM • Broadband: 182,000 • Pay-TV: 167,000 Offsetted by a decrease in: • Fixed LIS: -1 MM
20
2007
2008
Mobile (includes 3G)
Fixed Broadband
Fixed LIS
* Pro-forma numbers in 2007 to 2008 (Considering Brasil Telecom)
Pay TV Investor Relations
20
Mobile Client Base Post-Paid
Mobile Clients – Mix of subscribers (million)
Post-paid and Oi Controlled rose from 16% in Sep.09 to 17% in
+7.4% 36
35
Sep.10. In line with our current 37
strategy
of
addition
of
focusing post
paid
on
the
clients,
especially high end ones.
30
Bundle Offers Oi Conta Total amounts to 1.4 21
30
29
31
million, 39% of Region I postpaid base.
25
Market-Share at the end of 3Q10:
17 2 4
1 4
2
4
1 4
2007
2008
2009
Sep.09
Sep.10
Post-Paid
Controlled
Pre-Paid
* Pro-forma numbers in 2007 to 2008 (Considering Brasil Telecom); ** Controlled plans included in the post-paid from 2007
5
RI: 24.9%
RII: 15.6%
RIII: 13.2% (2 years after launch)
National: 19.5%
Investor Relations
21
Oi Mobile: Bundle offers in the post paid segment In September/10 Region II started to replicate Oi´s bundle strategy, aiming to boost net additions as it happened in Region I since 2007
“Oi Conta Total” Customer base (thousand users)
Fixed line, mobile and Internet bundle 5 plans* Unlimited local calls between fixed lines
1,449
1,448
1,423
1,061 537
Unlimited access to internet Packages of minutes including national long distance
2007
2008
2009
Sep.09
Sep.10
% Postpaid** 20.7
27.8
38.3
37.1
39.5
*OCT Light, OCT 1, OCT2, OCT3 e OCT4, from 50 to 1,000 fixed minutes per month, dial-up internet to Oi Velox 14 mega, Oi Mobile shared with up to 4 people. ** Post-paid base from Oi Region I (area where the plan is available)
Investor Relations
22
Fixed Broadband Client Base
Broadband Clients
Penetration
(million)
(% of fixed lines in service)
CAGR (06-09): RI: 25.2% RII: 13.7%
1,5
1,6
2007
2,0 1,8
2,3
1,9
2,4 2,0
22
20
16
14
27
25 16
18
11
2008
2009
Region I
●
1,9
2,2
25
Sep.09
Sep.10
2007
2008
Region II
2009
Region I
Sep.09
Sep.10
Region II
In the Broadband market, there´s more room to growth in Region I due to lower penetration as compared to Region II
●
Oi Velox Ultra, a new Ultra High-Speed Broadband portfolio, was launched in the metropolitan region of Recife in Sept/09 and will be expanded to other states in 2010 Investor Relations
23
3G Clients 3G Becomes an Alternative for Broadband
Mobile Broadband (thousand clients) +55%
629 ●
+297%
469
“3G Oi Velox” had 629 thousand customers in Sep.10
167
(462th via mini modems and 40
167th data plans)
405
55
118
Strong growth in last
12
months
462
429 350
1
117 2008*
2009 Mini Modem
* 2008 pro-forma
Sep.09
Sep.10
Data Plans Investor Relations
24
New Business: Pay TV Pay-TV Clients (thousand users)
280 234 113 61 2008
2009
Sep.09
Sep.10
●
280 Pay-TV subscribers. In the last 12 months, 167 th customers were added
●
DTH technology offers was launched in July in Rio de Janeiro and despite the small investment in marketing, it proved successful
●
In Sep.10 this service was available in 10 states: Rio de Janeiro, Goiás, Ceará, Minas Gerais, Espirito Santo, Rio Grande do Sul, Bahia, Sergipe, Parana and Santa Catarina Investor Relations
25
Consolidated Gross Revenue
Consolidated Gross Revenues
9M10 vs 9M09
(R$ billion)
+4%
45.6
43.9
services
0,2
0,2
Mobile
+1.5%
and are
drivers,
broadband main
growth
offsetting
lower
revenues from the traditional 34.0
34.5
0.2
0.3
36
35
wireline segment
27
26
Mobile account 20.2%
and
data
for of
respectively
already
23.9%
total
and
revenues,
(21.1%
and
18.8% in 9M09) 9
10
2008*
2009 Mobile
Fixed
* 2008 pro-forma for Brasil Telecom **Pay TV and Paggo
7
8
9M09
9M10
Other Services** Investor Relations
26
Consolidated EBITDA and Margin
2009 figures are impacted by non-recurring effects in a total
Consolidated EBITDA
amount of R$ 2.5 bn (R$1.9bn in
(R$ million)
1H09) related to the integration
10,249
of BrT 7,315
7,494
7,921
9M10 vs 9M09: Excluding the non-recurring effects, the 9M10 EBITDA would have increased 6% in relation to 9M09 showing the
synergies
gains
resulting
from the integration of Oi/BrT
9M10
had
lower
operational
expenses, even when compared with recurring expenses of 9M09, mainly related to:
EBITDA Mg Oi
2008*
2009
34.2%
24.5%
* 2008 Pro-forma for Brasil Telecom
9M09 33.5%
9M10 35.7%
Handset
Cost
Third-party
/
Others; Services;
Personnel; Provision for Bad Debt and Interconnection Investor Relations 27
Net Income 9M10 vs 9M09
Net Income
(R$ million)
Huge growth in net income YoY due to:
1.367 1.087
Lower operating Expenses
Better financial results
Reduced depreciation and amortization
9M09 was impacted by lower EBITDA (including non-recurring and
non-comparable
costs),
higher net financial expenses and due to the amortization of the goodwill generated by the 2008*
2009
9M09
9M10
acquisition of BrT
-71 -436
* 2008 Pro-forma
Investor Relations
28
Consolidated CAPEX Consolidated CAPEX in 9M10
Consolidated CAPEX
(R$ billion) 7.3
78% directed to growth businesses (43% in data/broadband and 35% in
-30%
mobile) 3,5
concentrated in:
5.1 -56% 2,7
3.2
3,8
1,5
0,9 0,5
2009 Mobile
9M09
Digital inclusion schools
Fixed broadband
Data package offers for
9M10
Fixed
In wireless: allocation focused on coverage expansion,
1.4 2,4
corporate clients
1,7
2008*
In wireline, Capex was
especially in Regions II and III
2010 Goals: Focus on optimizing the combined network of Oi and BrT, in order to seize the synergies on mobile and data networks
* 2008 Pro-forma was impacted by non-recurring investments of R$ 2 billion regarding 3G licences and portability
Investor Relations
29
Financial Highlights: Consolidated Debt Consolidated Debt (R$ billion)
Gross Debt
Net Debt
31,3
29,9 21,9
20,5
19,3
9,8
Dec.08
Dec.09
Total Debt Profile
(After hedge) Currency
Foreign 4%
Interest Others 10%
After an increase following the consolidation of BrT, net debt decrease during 9M10
TJLP 20%
Effective cost of debt in 9M10: 102% of CDI accumulated
BRL 96%
Sep.10
Exposure to foreign currency was 4% of the total debt at the end of Sep.10
CDI 70% Investor Relations
30
Consolidated Debt: Debt Profile Gross Debt Amortization
Debt composition by main creditors:
(R$ billion)
(R$ billion)
7.5
7.4
Foreign Banks
5.6
4.3
4.7
2.9
BNDES Development Banks
6,2 0,6 6.8 Others
1.7
Domestic Banks
7.8
Bond 2010
2011
2012
2013
2014
From 2015 on
Capital Market
3,9
13.9
10,0
Commercial Paper Investor Relations
31
Consolidated Debt: Key Ratios Interest Coverage Ratio
Net debt/EBITDA
(x)
(x) 4,9
2,2
2,1
2009*
Sep.09
3,9
1,9
4,5
4,8
Sep.09
Sep.10
1,5
2008*
Sep.10
2008
Net debt/Equity (x) 2,7
7,5 2,5
2009
EBITDA – TAX –Financial Expenses (R$ billion) 7,2 5,5
2,3 3,5
1,0
2008
2009
Sep.09
* Considers Recurring EBITDA for 2008 and 2009
Sep.10
2008
2009
9M09
9M10
Investor Relations
32
Dividends: TNE Statutory Dividends
Evolution of Dividends TNE
(R$ billion)
All shares: right to receive minimum dividends of 25% of adjusted net profit
127%
Preferred shares: minimum 6% of Capital or 3% of Shareholder´s
2,7
equity, whichever is higher.
2,3
Historically 1,1 0,8
0,7 0,2
0,1
0,3
0,3 0,1
1,1 0,8
0,5 0,2
1,2 1,2
1,3
0,8
R$8.8 billion in Dividends and Interest on Equity
0,7 0,3
were paid in the last 11 years
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -0,4
-0,4
TNE paid an average of 127% of profits generated in the last 11 years
Dividends
Net Results
Payout average in the last 11 years Investor Relations
33
AGENDA 03.
Brazilian Telecommunications Market
12.
Oi: Profile, Footprint and Strategy
20.
Operational and Financial Results
35.
Expectations for the Future
Investor Relations
Future scenario brings challenge and opportunities Short/Medium term
Market
Competition
Regulation
Technology
Continuation of main trends Slight reduction in fixed lines Mobile data & broadband: growth drivers Fixed companies consolidating DTH offers Triple Play ›› Quadruple Play Increase of Internet penetration
Long term 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 fixed 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 Mobile Interconnection Rates based on cost models (VU-M)
Auction for LTE (4G) frequency bands Regulation of new pro competitive actions (PGR)
WiMax as possible access solution
Next Generation Networks (NGN) / VoIP FTTX access becomes significant Investor Relations 35
Attachments
Investor Relations
The Acquisition of Brasil Telecom 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
License (R$6.9 bn)
Tax Deductible
Still done in 17 years (~R$400 mn per year)
Before the 2 Network steps of the (R$2.1bn) simplification of the structure 550 392 238 176 125 85 10
11
12
13
14
15
According to the assets lifetime Amortization per year in R$ MM
51
33
19
1,7
0,01
16
17
18
26
34
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 (~R$320 mn per year) Amortization in 7 years (average) (~R$250 mn per year)
Investor Relations
37
2010 Capex Purchasing Power of Capex Budget for 2010 (R$ billion)
0,7 1,0
5,2
5,1
3,5
Budget Capex, 2010 cash effect
Optimization of Mobile Network
Optimization of Purchasing Power of Broadband Network 2010 Capex
2009 Capex
Due to the gains in scale following the combination of the mobile networks of Oi and BrT, it was possible to provide more than 6 million accesses without new investments and without hampering network quality.
Elimination of the overlap in data communication at Oi and BrT, leading part of the 2010 expansion to be made without additional investment, making available 1.5 million accesses in 2H10.
Investor Relations
38
Regulation: Brazilian Telecom Market has experienced important changes in its institutional/regulatory
General Law of Telecom: creation of ANATEL Auction of licenses for 2nd players or Mobile
Competition: Licenses for fixed line mirror companies
1997 1995 Approval of Cable Law
2000 1998 General Concessions Plan (PGO)* Telebrás Break-up and Privatization
Concession contract renewal for incumbent fixed line telcos (25 years)
- Interconnection discussion - PL29 - Band H auction - MVNO
- Full Billing for mobile companies Pulse-minute conversion - Num. portability 3G Auction
2005 2002 Competition intensifies: incumbents allowed to offer new services (long distance and data) nationwide
2010
2007 2006
2008
New billing rules Cable law (pulses to revision minutes) interconnection PGO revision rates Full convergence (Fixed, Mobile, Broadband, Video)
New mobile start-up companies Investor Relations
39
The Increasing Relevance of Mobile Revenues
Brazilian Telecommunication Gross Revenues (R$ billion)
43%
45%
46%
45%
45%
47%
40% 37% 34% 31%
49
65
60
55
72
66
43
78
82
67
66
58
62
60 50
49
Whereas fixed telecom revenue has grown at an average annual rate of 7.6% since 2002, mobile revenue has averaged 17.0% annual growth between 2002 and 2009
55
35 28 22
2002 2003 2004 2005 2006 2007 2008 2009 Fixed
Mobile
9M09 9M10
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
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Dividends: TMAR Statutory Dividends
Evolution of Dividends TMAR
(R$ billion)
All of the shares: right to receive minimum dividends
154%
of 25% of adjusted net profit 5,4
PNA shares: right to receive dividends 10% higher than the ones distributed to ON shares
PNB shares: priority in the receiving of dividends, which shall be fixed per year and
1,7 1,4 0,7 0,3
2001
0,9
1,0 0,7
2002
0,8
2003
0,9
2004
1,6
1,1
1,1
1,1
equivalent to 10% of the
1,3
division of the Capital per
0,7
2005
2006
total number of shares
2007
2008
0,0
Historically
2009
-0,6
Dividends
Net Results
Payout average in the last 9 years
R$ 12.1 billion of Dividends and Interest on Equity were distributed in the last 9 years
154% of payout in the period Investor Relations
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Mobile Penetration rates in the Brazilian States
Region I:92%
% November 2010
Region II:110% Brazil: 102%
173
119
112 98
104
97 88 85
78
103
99 98 84 87 86 82
Region III:119%
116
108 109
102 104
109 106 89
97
77 58
RJ MG ES AM RR PA AP PE RN SE AL CE PB BA PI MA SP DF MS MT GO PR SC RS RO AC TO Region I
Region III
Region II
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42
Corporate Structure - TNE Shareholders Rights
Dividends All shares: right to receive a minimum 25% of adjusted annual net income Preferred Shares and ADR (254.9mn): minimum of 6% of Capital (R$217.91 million Jun/10) or 3% of Shareholders’ Equity (R$154.81 million – Jun/10), whichever higher
Board Members Minority shareholders have the right to appoint two board members (within of 11)
Tag along
Fiscal Committee Members
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
Five members, appointed by: - Controlling Shareholder (Telemar Participações) - 3 - Minority Shareholders (voting shares) -1 - Minority Shareholders (preferred shares) -1
Voting Rights
Redemption Rights
Common shares have full rights to vote at shareholder meetings Preferred shares have right to vote only under specific circumstances (a)
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.
Investor Relations
43
Important Notice to Shareholders September 2010 CVM
TNL- Tele Norte Leste Participações Capital
Treasury
Control
Free Float
ON
130,611,732
3,020,880
68,504,187
59,086,665
PN
261,223,463
6,182,160
-
255,041,303
391,835,195
9,203,040
68,504,187
314,127,968
Total
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
TMAR - Telemar Norte Leste Capital
Treasury
Control
Free Float
ON
107,063,093
-
104,227,873
2,835,220
PN A
130,703,927
223,500
104,329,417
26,151,010
PN B
1,063,967
-
6
1,063,961
Total
238,830,987
223,500
208,557,296
30,050,191
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. In compliance with the terms of article 12 of CVM Instruction n° 358, art.12, TELEMAR advises its shareholders that the Company
BRTO – Brasil Telecom S.A. Capital
Treasury
Control
Free Float
ON
203,423,176
-
161,990,002
41,433,174
PN
399,597,370
13,231,556
128,675,049
257,690,765
603,020,546
13,231,556
290,665,051
299,123,939
Total
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
pertaining
of
shares
or
of
to
these
shares
the rights or
other
securities issued by the Company. Investor Relations
44
Investor Relations IR Contacts Bayard Gontijo
55 21 3131-1211
This presentation contains forward-looking statements.
Marcelo Ferreira
55 21 3131-1314
Statements
Bernardo Guttmann
55 21 3131-1316
Patricia Frajhof
55 21 3131-1315
Matheus Guimarães
55 21 3131-2871
Michelle Costa
55 21 3131-2918
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
R. Humberto de Campos, 425/7th floor Leblon - Rio de Janeiro - RJ E-mail:
[email protected] [email protected] [email protected] [email protected] [email protected] Visit our website: www.oi.com.br/ir Twitter: www.twitter.com/oi_investors Investor Relations
45
