Oi Innovation Ecosystem Jose Rogerio Vargens Executive Consultant PhD on Economics

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Johannesburg, South Africa October 5th 2011

ABOUT BRAZIL AND ABOUT OI

OI INNOVATION ECOSYSTEM

ABOUT BRAZIL AND ABOUT OI

OI INNOVATION ECOSYSTEM

BRAZIL SNAPSHOT

Land Area

Income Classes

ƒ 8.5 Million Km2 (80% of the size of Europe)

Population ƒ 191 Million inhabitants (5th largest) ƒ 57 Million households (84% urban)

2005

2010

Income*

A/B

15%

22%

R$ 2,983

C

34%

53%

R$ 1,338

D/E

51%

25%

R$ 809

7th largest economy in the world ƒ GDP: US$ 2.2 Trillion (2010) ƒ Currency – US$ 1.00 = R$ 1.66 (Dec/10)

Strong expansion in GDP per capita plus record low unemployment rate have resulted in a significant shift in income classes. * Average income per household per month Source: PNAD, O Observador – OPSOS2010, IBGE

BRAZILIAN TELECOM MARKET

BRAZILIAN TELECOM MARKET IS RELEVANT GLOBALLY AND IS THE LARGEST IN LATIN AMERICA Fixed Lines in Service ƒ June/10

Mobile Users

MILLION

4º

ƒ March/11

5º

Fixed Broadband Users

10º

ƒ June/10 Source: ANATEL, IBGE, Teleco, ML Wireless, UNCTAD and Internet World Stats

OI IN BRAZILIAN TELECOM MARKET Economic Group Oi (Brazil)

Telefônica (Spain)

Telmex (Mexico)

TIM (Italy) GVT (France) Others

Vehicle

Service

Clients mkt share

Fixed

48%

Mobile

20%

Fixed Broadband

31%

Telesp

Fixed

27%

Vivo

Mobile

29%

Telesp

Fixed Broadband

23%

Embratel

Fixed

17%

Claro

Mobile

25%

Net

Fixed Broadband

25%

~ pure mobile

Mobile

25%

Fixed

6%

Fixed Broadband

9%

Fully Integrated

~ pure fixed

Fixed

2%

Mobile

1%

Fixed Broadband

12%

Revenue mkt share

Oi telecom clients:

25%

41,5 million mobile access

28%

19,7 million fixed access

23%

4,4 million broadband access

12%

0,3 million pay-TV access

3% 9%

66 million access

(25% of Brazilian access)

OI AMONG MAJOR GLOBAL TELECOM GROUPS

Oi is small among the world largest telecom groups, but big enough to worry about innovation

We believe innovation is crucial to our survival

ABOUT BRAZIL AND ABOUT OI

OI INNOVATION ECOSYSTEM

FOCUS OF INNOVATION

Oi aims innovation in telecom and information services. Industry innovation Develop technologies to make products.

≠

Service innovation Use products and develop technologies of process to serve clients.

Oi innovations main aims: ƒ High operational efficiency and low costs. ƒ Differentiation in products and offers. ƒ Improvement and sustainability in client relationship.

COMPROMISE TO INVEST IN R&D

In 2008, Oi assumed a compromise with Anatel to invest 0,5% of its revenue in R&D until 2025.

In 2010: R&D compromise US$ 40 million R&D invested US$ 60 million

Considering R$ 1,66/US$ in dec/2010

OI INNOVATION LAUNCHED IN 2009

• Acceleration and project foment

• Organization and first projects • Creation of Innovation Management Unit inside Oi, to lead and operate the innovation program. • Partnership with researcher centers and other firms and institutions, to form the innovation ecosystem. • Start-up of the first programs and projects. 2009 - 2010

• Stimulation of new projects using new foment forms • Expansion of the innovation ecosystem. • Creation a Innovation and R&D investment fund.

2011

THE INNOVATION PROCESS Oi

Oi Innovation Management Unit Lead and manage the process

Other Oi Management Units Demands innovation

Brazilian Research Center Development of innovation supervised by or in partnership with Oi.

INNOVATION CALLING INSIDE OI

Calling of innovation projects on the intranet.

Prize for the best innovation projects.

Prêmio inovação “simples assim”

NEW RELATIONSHIP WITH TELEINDUSTRY

Traditional relationship Oi used to buy telecom equipment and solutions calling suppliers and buying from whoever offered the best costbenefit relation.

New relationship For some solutions, Oi calls a strategic technological or equipment supplier to develop a solution in parternship. These solutions are developed jointly with Oi and the partner, in order to better meet Oi necessities. After development, Oi calls all firms in the market to get the best offer. Oi only buys from the initial partner if it has the best commercial condition, but it has a previous advantage of having participated in the development process.

ACTORS ENVOLVED IN THE ECOSYSTEM

SOME OI INNOVATION VECTORS

Convergence

Chip Alone

e-public school

Client has an Oi, not only a mobile phone. Shared mobile and fixed local and large distance voice minutes.

Micro recharge

Solutions to public administration

Oi Total Card “Over the air” micro recharge

Unique card to main telecom services.

On line presence

Transport to school

Mobile payment Food at school

Curriculum

THANK YOU

Jose Rogerio Vargens [email protected]