corporate presentation corporate presentation november, 2004
TRANSCRIPT
Corporate Presentation
Corporate Presentation
www.telemar.com.br/ir November, 2004
2Corporate Presentation / November 2004Corporate Presentation / November 2004 www.telemar.com.br/ir
Telemar Presentation - Contents
3. Operating Results 12
2. Growth of Customer Base 3
1. Highlights 1
4. Debt Position and Financial Ratios 21
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Highlights
Region I
= Concession areafor Wireline services
= Mobile license for Wireless services
Nationwide
= Authorization areafor Long-Distance and Data services
• Integrated Telecom Service Provider (Sep/04)– 15.2 million fixed lines in service – 5.7 million mobile subscribers– 429 thousand ADSL subscribers
• Concession Area (Region I) - Local Service and PCS– 65% of Brazilian territory/94 million inhabitants– 40% of country’s GDP– Over 20 million households
• Leadership in local and long distance services
• After only 2 years of launching, already #2 position in mobile subs (Region 1)
• Data, Corporate & Call Center Services (nationwide)
• High Free Float: 81.1% of total shares
• Market value of US$ 5 billion (Oct/04)
• Most heavily traded shares at Bovespa (TNLP4): US$ 41 million/day (Oct/04);
• Strong liquidity at the NYSE (TNE): US$ 15 million/day (Oct/04)
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100%
Contact Center
100%
•(TNL)
Fixed line
Tele Norte Leste Participações S.A.
(TNL)
Data Transmission Mobile
100%
80.9%
Telemar Participações S.A.
18.9%
BNDESPar - 25%
Fiago – 19.9%
AG Telecom – 10.28%
ASSECA Participações – 10.27%
L.F. Tel - 10.27%
BrasilCap - 5%
Brasil Veículos - 5%
Lexpart Part. – 10.28%
Fundação SISTEL - 4%
Shareholder Structure – TNE
Total Shares: 387.9 million
Free Float 79.5% / Treasury 1.6%
Total Shares: 241.7 million
Free Float 18.7% / Treasury 0.4%
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Main growth drivers:
Ability to anticipate the growth potential of mobile technology and keep on expanding customer base;
Capacity to maintain and increase market share in a changing technological and market environment.
Main growth drivers:
Ability to anticipate the growth potential of mobile technology and keep on expanding customer base;
Capacity to maintain and increase market share in a changing technological and market environment.
million customers
*Company’s acquisition
Expansion of Customer Base
Fixed Line Mobile ADSL
CAGR (98-03) 19.7%
19.2
16.5
~22.421.3
6Corporate Presentation / November 2004Corporate Presentation / November 2004 www.telemar.com.br/ir
Main investments for expansion of fixed line network already completed;
Fully digital platform in service;
Fixed line penetration still ~50% of households in Region I;
With an 88% utilization rate, Telemar has some 2 million lines spare capacity;
Challenge: Increase in fixed line penetration subject to Brazilian GDP sustained growth and regulatory changes.
Main investments for expansion of fixed line network already completed;
Fully digital platform in service;
Fixed line penetration still ~50% of households in Region I;
With an 88% utilization rate, Telemar has some 2 million lines spare capacity;
Challenge: Increase in fixed line penetration subject to Brazilian GDP sustained growth and regulatory changes.
million lines
Fixed Lines in Service
growth maintenance
CAGR (98/01)
23.8%
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Fixed Line Sector in Brazil – Sep/2004
Brasil Telecom
9.6 M 20.3%
Telemar
32.7%
Telefonica
12.4 M 30.4%
Embratel (LD Carrier)
15.2 M Fixed Lines in Service
% of Total Gross Revenue:
T= R$ 43.6 bn / 9M04
* Includes smaller incumbents and mirror companies (CTBC, Vesper, GVT and Sercomtel).
2001
37.4
1998
20.0
2003
39.2LIS (million)*
2002
38.8
Sep/04
39.1
16.6%
Region I
Region IVRegion III
Region II
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Broadband Market in Brazil
Market Share BrazilMarket Share Brazil
PC Penetration (% of households)PC Penetration (% of households)
*
*Pyramid Research2003
Broadband clients in Brazil are 1.9 million (Sep/04);
ADSL accounts for 85% of total broadband access in Brazil;
Broadband penetration is expected to grow to 30% of total internet access in Brazil by 2008*;
Challenge: Growth in broadband services in the medium/long term relies on increasing PC penetration in Brazil.
Broadband clients in Brazil are 1.9 million (Sep/04);
ADSL accounts for 85% of total broadband access in Brazil;
Broadband penetration is expected to grow to 30% of total internet access in Brazil by 2008*;
Challenge: Growth in broadband services in the medium/long term relies on increasing PC penetration in Brazil.
Brazil
*Source: Estimates Teleco e Telemar
Dec/03 Sep/04
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480 Velox is already available in 140
cities of Region I (more than 10x the coverage of alternative technologies);
Subscribers reached 429K in Sep/04, with a penetration of 2.8% of total fixed lines in service;
In 9M04, revenues from Velox grew by by 254% compared to the same period of 2003;
Target: Increase Velox´s penetration within Region I to consolidate customer´s loyalty and enhance the fixed line ARPU.
Velox is already available in 140 cities of Region I (more than 10x the coverage of alternative technologies);
Subscribers reached 429K in Sep/04, with a penetration of 2.8% of total fixed lines in service;
In 9M04, revenues from Velox grew by by 254% compared to the same period of 2003;
Target: Increase Velox´s penetration within Region I to consolidate customer´s loyalty and enhance the fixed line ARPU.
ADSL – Telemar (Velox)
ADSL - thousand lines
Gross Revenue
(R$ million)
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Mobile Market in Brazil
*Includes other operators: Nextel, CTBC, SERCOMTEL, Telemig and Tele Norte Celular
** Oct/04
Market Share (Brazil v. Region I) – Sep/04
Market Share (Brazil v. Region I) – Sep/04
Mobile Penetration (%) – Oct/04Mobile Penetration (%) – Oct/04
*
*Source: Pyramid Research
Annual growth rate in mobile subscribers is currently over 40% in Brazil;
33% mobile penetration in Brazil and especially in Region I (27%) still offer significant growth potential;
Oi´s market share in its region reached 23% Oct/04;
Challenge: Increase Oi´s subscriber base to 6.7 million (+72%) in 2004, with positive EBITDA margin.
Annual growth rate in mobile subscribers is currently over 40% in Brazil;
33% mobile penetration in Brazil and especially in Region I (27%) still offer significant growth potential;
Oi´s market share in its region reached 23% Oct/04;
Challenge: Increase Oi´s subscriber base to 6.7 million (+72%) in 2004, with positive EBITDA margin.
Brazil
Brazil Region I**
Vivo
42%
TIM
20%
Other*
7%
Claro
21%
Oi
10%
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In spite of the increased competition, Oi has been able to maintain its leadership in net additions in its region (market share of ~35% in 3Q04);
Oi´s annual growth as of Sep/04 around 2.9 million subscribers (+101% on Sep/03);
Total revenue in 3Q04 increased by 60% over 3Q03, while revenue from services (ex-handset sales) improved by 82%.
In spite of the increased competition, Oi has been able to maintain its leadership in net additions in its region (market share of ~35% in 3Q04);
Oi´s annual growth as of Sep/04 around 2.9 million subscribers (+101% on Sep/03);
Total revenue in 3Q04 increased by 60% over 3Q03, while revenue from services (ex-handset sales) improved by 82%.
Mobile Platform - Oi
Prepaid Post-paid
Subscriber base (thousand)
Gross Revenue
(R$ million)
2,849
3,893
~6,700
4,4085,093
5,740
80%20% 83%
17%
15%
85%85%
15%
85%
15%
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Focus on profitability: EBITDA positive since inception;
61% CAGR (01/03) in attendant positions, in line with increase in customer base and revenues (70% CAGR)- Contax has conquered important customers, including major banks, utilities, insurance, media and retail.
Focus on profitability: EBITDA positive since inception;
61% CAGR (01/03) in attendant positions, in line with increase in customer base and revenues (70% CAGR)- Contax has conquered important customers, including major banks, utilities, insurance, media and retail.
Call Center Services
Attendant Positions
7,337
4,947
12,907
Gross Revenues
(R$ million)
240
459
159
15,952
500
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40%
9% 9%
17%
7%
5%13%
Consolidated Gross Revenue Breakdown – 9M04
The Company’s four main lines of business combine strong cash generation and new growth opportunities.
Local58%
Inter-Connection
Data
Long Distance(includes VC2/3)
Fixed to Mobile (VC1)
Wireline
Moderate Growth
Long Distance
High Growth
Wireless
High Growth
Data & Corporate
High Growth
Others(*)
(*) Includes advanced voice, public telephones, additional services and Contact Center.
Mobile
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Telemar holds leadership in LD services in Region I.
Growth in Long Distance Services
LD Gross Revenue - R$ millionLD Gross Revenue - R$ million LD as a % of Total Revenues*LD as a % of Total Revenues*
+26.8%
* Includes F2M (VC2/3)
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Key corporate and government contracts achieved during 2003;
The annual growth in revenues from data services has been consistently above 30%;
ADSL services accounted for 23% of total data revenue in 9M04 (+8% in 9M03);
Target: Expand Telemar´s offer of data services and market share in Brazil.
Key corporate and government contracts achieved during 2003;
The annual growth in revenues from data services has been consistently above 30%;
ADSL services accounted for 23% of total data revenue in 9M04 (+8% in 9M03);
Target: Expand Telemar´s offer of data services and market share in Brazil.
Data Transmission Services
Major ClientsMajor Clients
Data Revenues (gross) - R$ millionData Revenues (gross) - R$ million
+32%
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Accumulated annual growth of 66% (9M04), driven by the increase in revenues from mobile services - subscriptions, outgoing calls & SMS - up 85% yoy;
Recurring positive EBITDA since 1Q04;
Target: Maintain the expansion of service revenues while increasing EBITDA margin.
Accumulated annual growth of 66% (9M04), driven by the increase in revenues from mobile services - subscriptions, outgoing calls & SMS - up 85% yoy;
Recurring positive EBITDA since 1Q04;
Target: Maintain the expansion of service revenues while increasing EBITDA margin.
Consolidated Gross Revenue from Mobile Telephony
Services
Handsets
R$ million
875 1,454
9M03 9M04
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Delivering consistent revenue and EBITDA growth in spite of strong expansion in the customer base;
High EBITDA margins, despite the faster growth of mobile services (where margins are still below company´s average);
Target 2004: reach a consolidated EBITDA margin of ~43% for the year.
Delivering consistent revenue and EBITDA growth in spite of strong expansion in the customer base;
High EBITDA margins, despite the faster growth of mobile services (where margins are still below company´s average);
Target 2004: reach a consolidated EBITDA margin of ~43% for the year.
R$ million
Consolidated Net Revenues and EBITDA
Net Revenues EBITDA EBITDA Margin
45% 43%
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Consolidated Net Income
1999 2000 2001 2002 20031998 9M04
R$ million
9M03
Increase in EBITDA and reduction in net debt, with lower financial expenses, had a positive effect on year to date results (9M04).
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CAPEX 2003: ~12% of net revenues, compared to 17% in 2002;
Consolidated CAPEX since 1998: R$ 22 billion;
Target: Stabilize CAPEX below 15% of net revenues over the next years.
CAPEX 2003: ~12% of net revenues, compared to 17% in 2002;
Consolidated CAPEX since 1998: R$ 22 billion;
Target: Stabilize CAPEX below 15% of net revenues over the next years.
10.1
2.01.7
Wireline
Consolidated CAPEX
Wireless
R$ billion
Anatel Targets and Mobile License (R$1.1 bn)
2.0
1.1
0.9
1.1
2.8
2.22.5
0.6
60%
40%
2.2
7.9
1.1
0.7
0.4
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Consolidated Operating Cash Flow after CAPEX
R$ million
1999 2000 2001 2002 2003
Having met our main fixed line universalization targets and mobile rollout,our cash generation is expected to remain strong
CAGR (99-03)69.1%
9M049M03
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TNE: Dividend Payments - 1999/2003
1999 2000 2001 2002 2003
* Dividend yield
Dividend / Interest on Capital
US$ million
Our goal is continue to provide high cash returns to investors
* Based on stock prices at 10/29/04.
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Net Debt Position and Repayment Schedule
R$ million
% of total
Net Debt – Sep/04 Net Debt – Sep/04 Gross Debt Repayment Schedule –
Sep/04
Gross Debt Repayment Schedule – Sep/04
Given our strong cash generation, we expect to reduce net debt to less than 1x EBITDA by year end 2004
R$ 7,000 million R$ 11,863 million
4.2 24.1 29.7 13.1 7.4 7.3 14.2* To this figure should be added the amount disbursed by the Company on its stock buyback program.
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Key Financial Ratios
Net Debt* / EBITDANet Debt* / EBITDA Amortization*/ EBITDA (%)Amortization*/ EBITDA (%)
Net Debt /Enterprise Value*Net Debt /Enterprise Value*CAPEX / EBITDA (%)CAPEX / EBITDA (%)
* Principal and interest *EOP
** 12 - Month EBITDA
*EOP
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Key Financial and Valuation Ratios
Enterprise Value* / EBITDAEnterprise Value* / EBITDA Market Cap* / EBITDAMarket Cap* / EBITDA
EBITDA / Net Interest ExpenseEBITDA / Net Interest ExpenseDividends / EBITDADividends / EBITDA
*EOP
** 12 - Month EBITDA
*EOP
** 12 - Month EBITDA
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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
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
“Safe Harbor” Statement