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ABAMEC* Presentation Rio de Janeiro and São Paulo November 2002 * Brazilian Analysts Association. Part I. Corporate Structure. CORPORATE STRUCTURE. TELEMAR PARTICIPAÇÕES S.A.*. FREE FLOAT. 18.7% . 79.0% . TELE NORTE LESTE PARTICIPAÇÕES S.A.

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ABAMEC* Presentation

Rio de Janeiro and São Paulo

November 2002

* Brazilian Analysts Association


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Corporate Structure


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CORPORATE STRUCTURE

TELEMAR

PARTICIPAÇÕES S.A.*

FREE FLOAT

18.7%

79.0%

  • TELE NORTE LESTE

  • PARTICIPAÇÕES S.A

Treasury

2.3%

**

79.5%

**

CONTAX

TELEMAR

Norte Leste

Treasury

FREE FLOAT

1.6%

19.0%

*53% of TNE Voting Shares ** Wholly owned subsidiary


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TELEMAR NORTE LESTE


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Restructuring 16  1

  • Optimization of Resources;

  • Process Standardization;

  • Management Centralization;

  • Merge of wireline companies;

Main Achievements 1998 2002

International

  • RI

  • RII

  • RIII

Processes

Management/Processes

16 Companies

16 IT Systems

15 Network Platforms

23 Network Management Centers

116 Call Centers

All Unified

Services

Local & Advanced Voice

Domestic & International LD

Nationwide Data Transmission

Wireless

Call Center

Network Management / Internet

Services

Local Voice and regional LD;

Regional Data Communic.

Market Approach

Market Vision

Geographic

Customer Segmentation


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PLATFORM GROWTH – TMAR

Million Lines in Service

15.1

14.8

14.6

+106%

11.8

9.7

7.8

7.2

Jul/98

1998

1999

2000

2001

Sep_01

Sep_02


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REVENUE GROWTH - TMAR

R$ Millions

13,687

11,573

+97%

11,465

10,851

10,133

9,997

8,516

8,433

8,127

8,480

7,391

6,946

6,222

5,158

1998*

1999*

2000*

2001

9M01

9M02

Gross Revenue

Net Revenue

* 1998, 1999 and 2000 refer to the Consolidated statement


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483

478

764

761

744

722

717

405

384

385

1998*

1999*

2000*

2001

9M02**

1998*

1999*

2000*

2001

9M02**

PRODUCTIVITY RATIOS - TMAR

Cash Costs per Average Line in Service - R$

Net Revenue per Average Line in Service - R$

- 20 %

6 %

419

622

379

376

+ 60 %

317

266

EBITDA per Average Line in Service - R$

235

204

* 1998, 1999 and 2000 refer to the Consolidated statement

** 9 months Annualized

1998*

1999*

2000*

2001

9M02**


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EMPLOYEE PRODUCTIVITY - TMAR

Lines in Service / Employee

(R$ Thousands)

Net Revenue / Employee

(R$ Thousands)

1,069

1,423

+ 402 %

+ 342 %

673

984

563

614

385

560

255

397

322

213

1998*

1999*

2000*

2001

9M01

9M02

1998*

1999*

2000*

2001

9M02**

529

+ 657 %

EBITDA / Employee

(R$ Thousands)

241

191

184

112

70

1998*

1999*

2000*

2001

9M02 **

* 1998, 1999 and 2000 refer to the Consolidated statement

** 9 months Annualized


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CONSOLIDATED CAPEX - TNL

R$ Millions

5 years

R$ 19.0 bn

or

US$ 9.6 bn

10,060

2,172

7,888

1,334

2,804

2,500

2,244

702

632

1998

1999

2000

2001

9M02

Wireline

Wireless


Management model main pillars l.jpg

  • Personnel Management

  • Suppliers Management

  • Corporate Management

MANAGEMENT MODEL – MAIN PILLARS

  • Detailed Capex planning, cost and revenue matrix plan.

  • Strong cost control.

  • Strong budget control, focusing on return on investment/EVA.

  • Meritocracy is key.

  • Talent management and retention of key personnel.

  • Culture based on corporate values and results oriented.

  • Formation of leaders and winning teams.

  • Quality management.

  • Strategic use of internal communication.

  • Redesign of supply contracts, including quality and performance targets.

  • Reduction of the supplier base and centralized management.

  • Development of strategic suppliers.

  • Outsoursing of non-core activities (call center, etc).

  • Consolidation of network technologies.

  • Specific targets broken-down to all management levels.

  • Monthly evaluation.

  • Simple structure with few hierarchic levels.

  • Redesign and standardization of key processes.

  • Variable remuneration based on achievement of targets.

  • Thematic decision making Committees.


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MANAGEMENT MODEL – PLANNING PROCESS

  • Negotiated / Discussed / Validated;

  • Board + Top Management;

  • Annually.

Guidelines of the Annual Plan

  • STRATEGIC PLANNING

  • Negotiated / Discussed / Validated;

  • Board / Management

  • Annually.

Contract of Company’s targets

  • BUSINESS PLAN

Evaluation and adjustments to Annual Plan

  • Matrix follow up per Business Unit / Region;

  • Thematic Committees;

  • Monthly.

  • FOLLOW UP

  • Incentives / Remuneration based on results achieved;

  • Annually.

  • BALANCE OF RESULTS

Meritocracy




Achievements l.jpg
Achievements

  • Better than expected launching of a huge GSM startup;

  • Launching of a new brand, with a strong appeal to life style, with a different proposition to the market; cellular treated as a personal consumer product, instead of a telecommunication product;

  • 500,000 clients in three months attracted by innovative marketing campaigns;

  • First GSM company in Brazil, with advantages in relation to incumbents such as worldwide handset scale, higher flexibility and security to customer, more sophisticated products and services;

  • Focus on innovative products and services (voice and data).


Pre launching rollout l.jpg

Coverage

Distribution Channels

Optimization of Resources

PRE-LAUNCHING ROLLOUT

Launching at the end of June, 2002

  • 200 cities covered; 30 million people

  • GPRS coverage in six main capitals

  • Record of site installation per month

  • CAPEX optimization

  • International Roaming (more than 50 countries)

  • Coverage focused on profitable areas

  • 1,600 points of sales in Region I (breaking exclusivity of A & B Bands distribution channel)

  • Diversified channel with high presence:

    • Retail, specialized agents, stores, telesales

  • Corporate sales effort combined with Telemar.

  • Consumer and corporate focus through high points of sales presence and diversity of channels

  • Tight headcount structure: ~660 employees

  • Infrastructure Sharing

  • Outsourcing (including “call centers”)

  • Synergies with Telemar.

  • Focus on profitable growth, minimizing OPEX and optimizing CAPEX


Branding evolution new entrants with a new focus l.jpg
BRANDING EVOLUTION: New Entrants with a new Focus

  • Strong connection with technology (“cell”, “tel”)

A and B Band Operators

+

  • Based on life style

New entrants

Functionality

Emotion / Life Style

-

+


Oi branding l.jpg
Oi BRANDING

Instead of emphasizing Tel and Cell...

... focused on goods and emotions


Post launching results l.jpg
POST LAUNCHING RESULTS

Initial Targets

First Achievements

  • 500,000 clients in 12 months

  • 500,000 clients in three months

  • Innovative Campaign: 31 Years

  • Diferentiated Service Plans

  • Diversified Handset Offer

  • ARPU of R$ 26

  • ARPU of R$ 36

  • MIX Pre / Post: 90% / 10%

  • MIX Pre / Post: 80% / 20%

  • Market share and gross adds below market fair share

  • Market share and gross adds above market fair share


Gsm technology advantages l.jpg
GSM TECHNOLOGY ADVANTAGES

  • GSM technology is the most used in the world. European operators all use GSM 1800

  • Handset diversity

  • Competitive Prices – up to 20% lower than TDMA / CDMA (low end)

  • Large handset variety

  • State of the art handsets with camera devices, GPRS, etc.

  • The SIM card contains customer’s basic data

  • More flexibility and security to customers

  • Security

    • Clone Proof

    • Payments On-Line (Banking Certified)

  • Higher flexibility

    • Easier handset substitution

    • Download and storage of small data aplications

    • Higher storage capacity

  • Advanced Data Applications

  • Higher speed

  • “Always on”

  • Better Graphic resources

  • Higher variety of applications


Oi mtv product l.jpg
Oi MTV Product

Handsets

  • Increased customer base

  • Stimulated Voice Usage

  • Stronger SMS usage

  • Brand Name Consolidation

  • Very positive initial results

Devices

Services

Plans

Packs / Bundles


Voice oi xuxa product l.jpg
VOICE: Oi XUXA Product

Concept

  • Target: children and family

  • Strategy: offer an exclusive product, that only Oi can develop

  • Features: Educational Products & Games

  • Focus: Continued Service


Data gprs coverage and speed l.jpg
DATA GPRS: COVERAGE AND SPEED

Real Speed

Download time for 1 Mb

14.5 Kbps

9.5 min

GPRS coverage in six capitals

Rio de Janeiro, Vitória, Belo Horizonte, Salvador, Recife and Fortaleza

Fixed Line

56Kbps Modem

=

24.2 Kbps

5.8 min

S45 – IrDA

GPRS

=

GPRS Coverage - Rio de Janeiro - Launch

30.4 Kbps

4.6 min

T68 – IrDA

GPRS

=

3.3 min

41.6 Kbps

PCMCIA Card

GPRS – Globe Trotter

=

1.3 min

110.9 Kbps

LAN Oi

=


Wireless data applications l.jpg
WIRELESS DATA APPLICATIONS

“Oi is cellular and

credit card clone proof”

“Credit Card at the beach,

street markets, in the cab ...”


Telemetric industrial applications l.jpg
TELEMETRIC & INDUSTRIAL APPLICATIONS

GSM/GPRSWireless internet Solutions

WAP “Wide Area Protocol” applications


Partnerships l.jpg

OPERATORS

PARTNERSHIPS

  • Network Access Providers

  • TARGET:

    • Increase market share and ARPUs

EQUIPMENT SUPPLIERS

CONTENT PROVIDERS

  • Non Tech companies and Internet Big Players.

  • Ex: Banks, Portals

  • TARGET:

    • New channels with their clients

    • Increase content offer

  • PDA and handsets suppliers.

  • Ex: Siemens, Nokia, Ericsson..

  • TARGET:

    • Create own interface with the client.

    • Create new demand for technology and handset replacement

SOLUTION PROVIDERS

  • ASPs, System Integrators, System Developers

  • Ex: Promon IP, Oracle, Microsoft

  • TARGET:

    • Potential revenues from new services and products

    • Establish technological standards and increase application sales.


Oi s 2003 perspectives l.jpg
Oi’s 2003 PERSPECTIVES

Strategic Guidance

Actions

  • Profitable Growth Focus

  • Capture additional clients and market share

  • Focus on profitable clients

  • Growth of corporate segments and SMS revenue

  • Continuous Cost Control

  • Optimized structure, outsourcing non-core services

  • Reduction of SAC

  • Capturing synergies with TMAR

  • Offer integrated corporate solutions

  • Shared services (under analysis)

  • Capex control

  • Focused expansion based on value addition

  • Reinforce ongoing infrastructure sharing initiatives (sharing, instead of building, whenever possible)

  • New projects based on solid business plans

  • Data Focus

  • Stimulate the use of SMS - interoperability

  • Portfolio of corporate applications



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FINANCIAL RESULTS


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CONSOLIDATED INCOME STATEMENT – TNE

R$ Millions

3Q01

3Q02

Va. %

9M01

9M02

Va. %

Gross Revenue

3,570

4,206

18%

9,976

11,739

18%

Net Revenue

2,626

3,083

17%

7,370

8,648

17%

Operating Costs and Expenses

(2,188)

(1,798)

-18%

(4,811)

(4,618)

-4%

EBITDA

437

1,285

194%

2,559

4,030

57%

(787)

(975)

24%

(2,221)

(2,882)

30%

Depreciation

(354)

(859)

143%

(572)

(1,552)

171%

Financial Results

(429)

(382)

-11%

(137)

(315)

130%

Net Result

17%

42%

35%

47%

EBITDA Margin


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INCOME STATEMENT – TMAR

R$ Millions

3Q01

3Q02

Va. %

9M01

9M02

Va. %

Gross Revenue

3,577

4,042

13%

9,997

11,574

16%

Net Revenue

2,633

2,951

12%

7,392

8,516

15%

Operating Costs and Expenses

(2,134)

(1,515)

-29%

(4,744)

(4,304)

-9%

EBITDA

499

1,436

188%

2,648

4,213

59%

Depreciation

(750)

(872)

16%

(2,118)

(2,673)

26%

Financial Results

(193)

(571)

196%

(278)

(1,218)

338%

Net Result

(342)

(21)

-94%

191

185

-3%

EBITDA Margin

19%

49%

36%

49%


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CONSOLIDATED REVENUE & EBITDA - TNE

R$ Millions

47%

8,648

35%

7,370

4,030

2,559

9M01

9M02

Net Revenue

EBITDA

EBITDA Margin


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CAPEX / Net Revenue (%)

100%

96%

48%

15%

35%

36%

17%

1998

1999

2000

2001

9M01

9M02

2002E

CONSOLIDATED CAPEX - TNE

R$ Millions

10,103

10,060

8,648

8,122

7,370

7,058

6,222

5,158

2,804

2,500

2,000

2,244

1.334

1998

1999

2000

2001

9M01

9M02

2002E

Capex

Net Revenue


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CONSOLIDATED NET DEBT - TNE

R$ Millions

9,128

9,006

8,317

7,702

7,036

3,997

2,091

Mar_01

Jun_01

Sep_01

Dec_01

Mar_02

Jun_02

Sep_02


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CONSOLIDATED DEBT – CURRENCY AND COST (SEP/02)

Currency

Interest

10%

Domestic

CDI

13%

33%

11%

US$

TJLP

20%

52%

Yen (Swap to US$)

Fixed Rate (US$)

Currency

Basket

15%

Floating Rate (US$)

46%

Cost of Debt

Currency

Cost (% p.a.)

US$

Libor + 5

Yen

1.7

Basket

12.3

Real

16.0


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CONSOLIDATED DEBT - AMORTIZATION SCHEDULE (SEP/02)

29%

21%

18%

18%

11%

4%

2002

2003

2004

2005

2006

2007

onwards


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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 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.

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/ri


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