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Brasil Telecom Corporate Overview

Brasil Telecom Corporate Overview. November/2006 . Sum mary. 1. Company outlook Convergence What is converging with what Convergence and Brasil Telecom Brasil Telecom’s steps towards convergence Final Comments. 2. 3. 4. 5. 6. Region II. 24% of the Brazilian population

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Brasil Telecom Corporate Overview

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  1. Brasil Telecom Corporate Overview November/2006

  2. Summary 1 Company outlook Convergence What is converging with what Convergence and Brasil Telecom Brasil Telecom’s steps towards convergence Final Comments 2 3 4 5 6

  3. Region II 24% of the Brazilian population 44 million inhabitants and 27% of the country’s GDP (R$420 billion) 1 Company outlook - Our Footprint • Largest Telecommunications Company in Region II • Gross Revenue US$ 6,4 billions • 9.4 million lines in service (LIS). • 2.8 million mobile accesses (launched out/2004). • 1.2 million broadband subscribers. • 3.5 million active Internet clients. • Metropolitan access networks in São Paulo, Rio de Janeiro and Belo Horizonte. • Offers integrated services via 2 ring-system of fiber-optic subsea cables with 22,000 km connecting Brazil, United States, Venezuela and Bermudas. 1 All information is referent to June 2006

  4. Broadband Mobile Service Portal Cyber Data Center Internet Dial-up Access Internet Broadband Access Data DLD / ILD Local 1 Company outlook - Integrated Portfolio Brasil Telecom Finance, HR, Marketing, Operations Technology (Network/IT)

  5. Accesses (thousand) 1 Company outlook - Mobile Telephony • 3,051 thousand mobile accesses in 3Q06 • 11.4% of market share and 31% of pos-paid accesses. 3,051 2,772 2,460 2,213 1,676 Pos-paid Pre-paid Pos-paid %

  6. ADSL Accesses (thousand) Net Additions Gross Revenue 1 Company outlook - Broadband • Data Communication Services accounts for 16% of the total revenues. • ADSL revenue accounts for 43.9% of total data communications revenues. • 14.5% penetration of LIS. CAGR (01-05): 133.7% +40.4% x 3Q05 CAGR (01-05): 168.8% (R$ million) +50.2% x 3Q05

  7. Year (accumulated) Quarterly 1 Company outlook - EBITDA (R$ million) • Reduction of Operating costs and expenses. • Affected by increase in revenue in the data and mobile segments. EBITDA Margin

  8. 1 Company outlook - Strategic Key Messages • Defend fixed-line segment: >70% of revenue; • Expand mobile operations: adequate scale vs. profitability; • Exploit growth opportunities in Data and Internet: increase in revenues and profits; 4. Full convergence: Opex reduction, Capex reduction,churn reduction and ARPU increase; 5. OperationalEfficiency; 6. Corporate Governance culture: transparency, ethics and shareholders’ value creation.

  9. Customer Benefit / Value Level of integration 2 Convergence • Can be hard to increase the added value beyond initial benefit The Bundles Source: Ovum

  10. Customer Benefit / Value Level of integration 2 Convergence • Reduce costs, increases coverage and therefore usage Network The Bundles Source: Ovum

  11. Customer Benefit / Value Level of integration 2 Convergence • New applications delivered in new ways to new devices Services Network The Bundles Source: Ovum

  12. Customer Benefit / Value Level of integration 2 Convergence • Simplifies service delivery for both Service Provider and Customer Devices Services Network The Bundles Source: Ovum

  13. Customer Benefit / Value Level of integration 2 Convergence The maximum level of convergence perceived by the customer occurs when an unique access device can be used for all services and applications available (fixed, mobile, internet, TV, etc). Devices Services Network The Bundles Source: Ovum

  14. 3 What is converging with what Convergence is complex and is happening in the following levels: • Network and Information Technology (IT) • Industry sector • Services

  15. What is converging with whatNetwork technology & IT 3 Network convergence happens when operators move to an All-IP-Next Generation Network (NGN) to support all telecom traffic efficiently SDH Source: Ovum

  16. What is converging with whatNetwork technology & IT 3 As operators move to a multipurpose NGN’s, the IT systems that support each service and overlay network are integrated into one OSS/BSS system SDH Source: Ovum

  17. What is converging with whatIndustry sector 3 The former distinct worlds of telecommunications and IT are already merging.We also see that the distinctions between fixed & mobile operators, carriers & service providers and media & telecom are blurring • Fixed operators: some are already offering fixed-mobile convergent services, entering the markets previously served by mobile operators; • Mobile operators: announced plans to offer content / TV services. Some companies are now offering football video clips to mobile handsets; • Media providers: have purchased a number of companies designed to create new distribution channels to theirs content. Some ISP plan to offer VoIP and TV services; • IT and software companies: argue that will inevitably be part of the convergent solutions market, particularly providing solutions for the home and office because of the ubiquity of their product; (e.g.. IPTV middleware) • Content owners: search an opportunity to identify new channels to market their existing content. These companies see IPTV as a new channel to increase the film’s life time by adding “on-demand” facility.

  18. What is converging with whatIndustry sector 3 Industry sectors are converging with adjacent sectors around the edge and in the middle. Hence the boundaries & differences between each sector in the convergent space will be difficult to detect. Source: Ovum

  19. Voice Mobility Data Video What is converging with whatServices 3 Convergent services – User perspective • Integrated selling and customer relation services (One Stop Shop) • One bill • Reduction on the cost of services

  20. Amusement Communication Communication Entertainment VoIP VoIP Video on demand Video on demand Video Telephony Video Telephony Music on demand Music on demand Mobility Mobility R R á á dio dio via Internet via Internet PC Monitoring Monitoring Personal Computer VPN VPN Security, home Security, home Firewall Firewall surveillance and surveillance and Parental discretion Parental discretion health monitoring health monitoring What is converging with whatServices on Broadband 3 Fixed voice, data and video services are converging, enabling bundles

  21. What is converging with whatFixed – Mobile Services 3 A dual mode mobile handset that acts as a normal GSM phone outside the home, inside the home, routes calls through a device called access point connected to conventional fixed line

  22. 4 Convergence and Brasil Telecom The new scenery demands a infra-structure with specific characteristics: • Agnostic to devices • Flexible • Adaptable • Integrated control • Integrated management of the client • Agile and flexible OSS/BSS

  23. 4 Convergence and Brasil Telecom • The possibility of service convergence (SoIP) and network convergence stimulates the adoption of IMS architecture. • The future is the implementation of a totally integrated network, all-IP, based on TISPAN architecture (Telecoms & Internet converged Services & Protocols for Advanced Networks).

  24. PSTN NGN Data Mobile NGN (3GPP Rel4) GSM e EDGE 4 Convergence and Brasil Telecom - Network Evolution IMS/ TISPAN NGN

  25. SS7 SS7 Internet Internet Internet Internet Internet Internet HLR Applications and Services PSTN SMSC GGSN PLMN Headend SSP CMTS DSLAM Access Router SCP Core nNetwork and Control Modem xDSL LOCAL CM SGSN Wi-Fi AP BSC BSC Access BRAS/AAA BRAS/AAA AAA AS AS AS AS 4 Convergence – Architecture Today BRAS/AAA MSC GSM GPRS WiFi xDSL POTS CMTS

  26. Application Servers Application Control Media PSTN IP Transport Access Corporate Residential 4 Convergence - NGN

  27. IP Multimedia Subsystem Billing Security QoS IP Network Access Router Modem xDSL CMTS DSLAM CM SGSN/GGSN Wi-Fi AP BSC BSC 4 Convergence - IMS • Mobilility • Convergence • Flexibility • Confort • Otimization • New Services • Etc. Business Applications VAS e IN Presence Messenger and Media Stream Push-To-Talk Games Etc. SBC MGCF PGF MGW/SGW LOCAL Access Point Bluetooth CTP Seamless Mobility GSM GPRS WiFi xDSL POTS CMTS

  28. 5 Brasil Telecom’s steps towards convergence • Starting a process aiming to change the company’s skill: • moving from connectivity provider onto solution’s provider • integrating the Information and Network Technology people • Developing technical and market capabilities through a program focused initially on network and market teams. • Intensifying the company´s participation in international forums such as ETSI and Fixed-Mobile Convergence Alliance (FMCA), which Brasil Telecom is a member since 2003. • Consolidating the operation of the three Brasil Telecom’s ISP, with more than 3,5 million customers. • Merging the fixed and mobile operations. • Developed and implement convergent networks (NGN), services and systems associated.

  29. 6 Final Comments • The network evolution shouldn’t occur because of the need of keeping up-to-date with technology. • The evolution drive is the need of offering news services or the improvement of operational efficiency. • The speed of the implementation will be defined mainly by the market. • Don’t implement a new technology just to offer the same “old” services. • Regulatory and legal issues may accelerate or restrain evolution.

  30. Thank You! Dante Nardelli Junior danten@brasiltelecom.com.br Tel: +55 61 3415-1249

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