Transcript TNE

TNE
TELE NORTE LESTE
PARTICIPAÇÕES S.A.
Morgan Stanley Dean Witter
Global Communications Conference
March, 2001
The information included herein has already been filed with SEC
and CVM (Brazil) and is also available at www.telemar.com.br
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Overview
TNE
Largest Brazilian Company*
Second Largest Telco in Latin America
Heaviest Weight on IBOVESPA (Jan/01)
First Brazilian Company ADR Volume (Jan/01)
Shareholders’ Equity: US$ 5.1 billion
Market Value: US$ 9.2 billion (Jan/01)
Free Float: 82% of Total Shares
* Privately owned
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Overview
TNE
Covers 65% of Brazilian Territory
Reaches 93 million people
Over 20 million households
12.2 million Fixed Lines in Service (Feb/01)
13% Penetration Rate (Brazil: 21%)
560 Lines in Service/Employee
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Overview: Shareholders’ Structure
TOTAL CAPITAL
BNDESPar
Fiago
AG Telecom
ASSECA Participações
Lexpart Part.
L. F. Tel
BrasilCap
BrasilVeículos
Total Shares: 373,577 million
Preferred:
249,051 million
Common:
124,526 million
25.0%
19.9%
11.3%
11.3%
11.3%
11.3%
5.0%
5.0%
TNE
Preferred Shares -----99.5%
Brazil ------ 52%
ADR ------- 48%
Common Shares ------- 46.0%
17.3%
81.7%
TELEMAR
PARTICIPAÇÕES S.A.
Free Float
Common Shares = 51.8%
RIO DE
JANEIRO
T - 86%
MINAS
GERAIS
T - 79%
ESPÍRITO
SANTO
T - 83%
Tele Norte Leste
Participações S.A.
BAHIA
SERGIPE
ALAGOAS
T - 82%
T - 62%
T - 70%
Shares in Treasury = 1.0%
RIO GRANDE
DO NORTE
T - 69%
PERNAMBUCO
PARAÍBA
T - 76%
T - 64%
CEARÁ
PIAUÍ
MARANHÃO
PARÁ
AMAPÁ
RORAIMA
AMAZONAS
T - 78%
T - 73%
T - 64%
T - 55%
T - 81%
T - 60%
T - 75%
T= TNE´s stake in subsidiary. Subsidiaries have a free float average of 20%
Listed companies
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Overview: Shareholders’ Structure
TELEMAR
PARTICIPAÇÕES S.A.
17.3%
of total
TNE
81.7%
Of total
Free Float
Voting Shares = 51.8%
Tele Norte Leste
Participações S.A.
HiCorp
Outsourcing
RIO DE
JANEIRO
T - 86%
TNL PCS
MINAS
GERAIS
T - 79%
ESPÍRITO
SANTO
T - 83%
WIRELINE
SUBSIDIARIES
CEARÁ
T - 78%
BAHIA
T - 82%
SERGIPE
T - 62%
PIAUÍ
T - 73%
ALAGOAS
T - 70%
MARANHÃO
T - 64%
Shares in Treasury = 1.0%
TNL.Acesso
RIO GRANDE
DO NORTE
T - 69%
PARÁ
T - 55%
PERNAMBUCO
T - 76%
AMAPÁ
T - 81%
Contax
PARAÍBA
T - 64%
RORAIMA
T - 60%
T= TNE´s stake in subsidiary. Subsidiaries have a free float average of 20%
Listed companies
TNext
AMAZONAS
T - 75%
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Recent Developments: Highlights
TNE
Revenue Growth: 31% (00/99)
EBITDA Margin: 49.6% (12M00)
Main Drivers (Revenues) – Dec/00
Line growth: 2.1 million in 2000 +21.7%
Fixed-to-Mobile traffic
Tariff increase – July/00
over
65%
•14% Local Service/Interconnection
•11.9% DLD
•9.5% Fixed-tp-Mobile (VC1) – Feb/01
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Recent Developments: Highlights
TNE
Revenue Growth: 31% (00/99)
EBITDA Margin: 49.6% (12M00)
Main Drivers (Costs)
Cost Savings (R$ 113 million YoY/Ex-interconnection)
•Integration (Data Processing, Network Management
and Call Centers)
•Shared Services Center (Back Office Functions: SAP
and PeopleSoft)
Improving Efficiencies (network upgrade, systems and
processes)
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Recent Developments:
Plant & Digitalization Growth
80.7
84.9
82.1
87.9
TNE
89.6
95.0 18.0
15.8
12.8
10.5
9.7
UTI
%
11.3
10.8
92.2
4Q99
1Q00
12.0
11.8
10.4
10.0
92.9
11.1
92.1
2Q00
Lines in Service
92.3
92.3
88.0
3Q00
4Q00
4Q01E
Lines Installed
(million)
Digitalization Rate
(%)
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Recent Developments: Net Revenue & ARPU
TNE
ARPU (R$)
98: 60.10
99: 62.50
?
00: 64.20
CAGR
25.5%
R$8.1 B
R$6.2 B
R$5.2 B
1,315
1,342
1,268
1,233
1998
1,700
1,613
1,506
1,403
1999
1Q
2Q
2,234
2,117
1,952
1,824
2000
3Q
2001
4Q
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Recent Developments: Main Services
Gross
Revenue
R$2,996 mm
R$2,288 mm
12%
11%
12%
20%
Other
TNE
Data
5%
12%
DLD
Network Use
12%
Fixed to Mobile
23%
9%
67%
65%
45%
4Q99
Local
44%
4Q00
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Recent Developments: EBITDA
67%
61%
1,090
965
43%
64%
Reduced
by R$135
MM
1,149
56%
829
TNE
54%
49%
49%
45%
35%
599
4Q99
1Q00
EBITDA (R$ million)
2Q00
EBITDA Margin (%)
3Q00
4Q00
Margin ex-interconnection costs (%)
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TNE
Debt Structure - December 2000 (R$ million)
LT DEBT
NET
2005 and
after
36%
2002
27%
DEBT
689.2
LT
2004
17%
2,044.8
2003
20%
CASH
DEBT PROFILE
2,141.5
785.9
ST
•R$1,299 million foreign currency, cost:
LIBOR + [1.1% - 6.6%] p.a., 86% is hedged
•R$1,531 million in Reais, cost:
SELIC+6.48% p.a. and TJLP + [3.85% - 6.48%] p.a.
Total Debt: 2,830.7
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Steps to Maximize Value
TNE
World Class - Global
Operator
Telemar shall
increase its
value as the
company
incorporates
broader
strategies.
Class A - Mobility
Class B - National Coverage
Class C - National Corporate Excellence
Class D - Regional Excellence
2000
2001
2002
2003
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TNE
Main Targets
Data & Corporate Services
Nationwide Coverage
Efficiency
and
Quality
of Services
Mobility
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Nationwide Coverage
TNE
MAIN PRIORITY
Fulfill all 2003
Universalization Targets
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Universalization Targets (Summary)
TNE
2000
2001
2003
Lines Installed (million)
11.9
13.5
N.A.
Service available to
communities larger than
(inhabitants)
N.A.
1,000
600
Covered Localities
40%
60%
100%
Maximum waiting time
for line installation
N.A.
4 weeks
2 weeks
Pay Phones (thousand)
402
483
7.5/1000 Pop
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Nationwide Coverage
TNE
DECEMBER 2001
DECEMBER 2000
TNE had 12.8 million
Lines Installed
2001 CAPEX :
R$ 8.4 Billion
Universalization
Targets
46%
PCS Business
18%
Oper./Maint.
8%
IT Structure
2%
Data
Transmission
17%
TNE will have 18.0
million Lines
Installed*
+5.2 MM
(PCS license included)
Holding
22%
Rio
24%
Pernambuco
11%
Communication
Systems
4%
* Including Public Phones and WLL
Quality Targets
5%
Ceará
12%
Minas
19%
Bahia
12%
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TNE
Nationwide Coverage
Mission
TO BECOME A NATIONAL OPERATOR
FROM 2002 ON
DLD
Data
Services
Challenge
Fulfill and anticipate 2003 Goals
established by Anatel
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TNE
Nationwide Coverage
DLD Traffic Distribution – 2000E
Region I
Originates 35%
Receives 40%
Brazil:
40.5 billion
minutes
28%
2%
3%
5%
9%
20%
Region II
Originates 26%
Receives 27%
Source: Telemar and Mckinsey Co. estimates
5%
3%
25%
Region III
Originates 39%
Receives 33%
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TNE
Nationwide Coverage
Brazilian Market Trends (DLD and ILD)E
Volume
billion minutes/year
CAGR
18%
Revenue
R$ billion/year
94
11.5
38
41
Region III
Region II
Region I
16
10
15
34
2000
2005
Source: Telemar and Mckinsey Co. estimates
8.0
Region III
22
CAGR
7.5%
Region II
Region I
3.0
4.6
2.7
1.9
4.2
3.1
2000
2005
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TNE
Nationwide Coverage
Telemar LD Market Share – 2005E
Other
Telemar
41
94
36
58.5
0.71
1.56
Other
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85
100
18.5
Player A
47
23
2000
2005
National
Billion minutes
Source: Telemar and Mckinsey Co. estimates
Telemar
0
15
2000
2005
International
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TNE
Data Services
Mission
TO BECOME THE LEADER IN
NATIONAL DATA MARKET BY
2005
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TNE
Data Services: Market Share
US$ million
1,973
7,866
CAGR: 31.9%
21%
16.1%
2000
2005
Refers to 3 basic steps of value chain (Traditional and IP Transport and Advanced Services)
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TNE
Data Services: Value Chain
Description
E-market
Place
ASP
Hosting
New Businesses
B2B commerce through portals and
related infrastructure
Complex applications with
Customization and integration
Co-location and hosting services
Application and software hosting
Advanced
Services
Value added services
VoIP, security, management and other
IP
Transport
IP Connectivity
Dial-up and broadband connection
Traditional
Transport
Traditional data communication services
Access to IP backbone
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TNE
Mobility
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Introduction
TNE
Main Messages
Opportunities
Competitive
Advantages
• Market growing
quickly
• Operating
synergies
• High Value
Consumers
• Commercial
Synergies and
fixed-to-mobile
complement
• New applications
due to rapid
technological
development –
GPRS
• Opportunity to buy
license at low price
Quick Decisions
• Aggressive
competitors already
established
• Aggressive Targets:
• Subscribers
• Revenue
• Largest roll-out in
the world
Coverage
• Need for capillarity
• Network quality
linked to number of
cell sites
• R$ 2 billion CAPEX in
3 years, vendor
financing
Cellular telephony operations represent an excellent opportunity for
Telemar, and the company is prepared for the challenges involved.
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The Cellular Market Opportunity
TNE
2.5G/GPRS Advantages and Benefits for the Client
GPRS 2.5G Technology Advantages
 Larger data transmission capacity 14 - 40
kbps initially: according to the network
and equipment transmission, vs. 9.6 GSM
Benefits for the client
 Faster access to data
 Enables the visualization of complex
information (charts, tables, figures, etc.)
 No need to dial-up (packet switching)
 Better network utilization, leading to
smaller transmission costs than the
previous system (circuit-switched).
 Billing connected to effective
information transmission
 Possibility of permanent connection
 Open to IP and Internet
Telemar will be able to offer more advanced data transmission than its
competitors since the first day of operations, on its way to 3G.
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Telemar’s Competitive Advantages
TNE
Comparing License Prices
US$ / POPRegião III Banda B
104
46
Turquia Abril 2000
37
Região II Banda B
34
Marrocos Julho 99
Região III Banda B m ínim o
31
Região I Banda B
31
22
Áustria Agosto 97
Austrália Março 2000
20
Região II Banda B m ínim o
20
Argentina Buenos Aires Junho 99
17
Região I Banda B m ínim o
17
16
Holanda Fevereiro 98
14
Região III Banda D
Holanda Agosto 98
8
Itália Março 94
8
Peru Março 2000
7
Região II Banda D
7
Argentina Sul Junho 99
Argentina Norte Junho 99
4
Telemar: US$ 6/inhabitant
3
Note: Total price of 2G license
Source: Merrill Lynch November 2000, Anatel, DiamondCluster.
Telemar bought the D Band license at a low cost when
compared to other prices paid.
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Telemar’s Competitive Advantages
TNE
Synergies between Fixed and Cellular Operations
Operating Synergies
• Network structure:
– Some WLL sites can be shared with PCS
operations
– Maintenance costs can be shared
between both operations
• Customer care and billing can be shared
with Telemar’s fixed operations
• Backbone
Commercial Synergies
• Sales structure of Telemar Fixed
– Own stores
– Direct sales force
• Brand recognition
– Reduced efforts required to insert a new
brand
• Customer base
– 12 million Telemar customers (data base)
• National “31 code”
Telemar shall take advantage of its significant synergies to leverage its
position in the Brazilian telecommunications market.
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“Safe Harbor” Statement
TNE
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. Forward-looking
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.
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TNE
Investor Relations
Rua Lauro Müller, 116 / 22º andar - Botafogo
Rio de Janeiro -RJ
Phone: ( 55 21) 279-3220/ 279-3221
Fax: (55 21) 279-3229
E-mail: [email protected]
Visit our website: http://www.telemar.com.br
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