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3 rd Annual Global Emerging Markets Conference

3 rd Annual Global Emerging Markets Conference. September 8-10, 2004. www.telemar.com.br/ir. Part I - Overview 1.1 Brazilian Telecom Market 1.2 Telemar . Part II - Recent Developments and Growth Prospects 2.1 Highlights 2003/2004 2.2 Growth of the Business

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3 rd Annual Global Emerging Markets Conference

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  1. 3rd Annual Global Emerging Markets Conference September 8-10, 2004 www.telemar.com.br/ir

  2. Part I - Overview 1.1 Brazilian Telecom Market 1.2 Telemar Part II - Recent Developments and Growth Prospects 2.1 Highlights 2003/2004 2.2 Growth of the Business 2.3 Review of Operating Results 2.4 Financial Position

  3. Part I - Overview 1.1 Brazilian Telecom Market 1.2 Telemar

  4. Embratel (DLD & ILD) Telefonica Telemar 1.1 Wireline Sector 2002 Jun/04 1998 2001 2003 38.8 39.3 LIS (Million)* 20.0 37.4 39.2 Fixed Lines in Service have doubled since privatization 23 23 Penetration (%) 11 21 23 Brasil Telecom Lines in Service Largest Incumbents 15.2 M 32% 9.6 M 20% Revenue Share (Brazil: R$ 29.1 bn - 1H04) 12.2 M 31% 17% * Source: Company´s Information * Includes smaller incumbents and mirror companies (CTBC, Sercomtel, Vesper and GVT).

  5. TIM (TDMA/GSM) 1.1 Wireless Market 2002 Jun/04 1998 2001 2003 34.9 54.0 LIS (Million)* 7.4 28.7 46.4 20 30 Penetration (%) 5 17 26 Vivo – TEL/PT (CDMA) Claro -AMX (TDMA/GSM) Largest Groups 10.4 m 19% 11.1 m 23.5 m 21% 44% Oi - Telemar (100% GSM) Opportunity (TDMA/GSM)* Total Subscribers National Market Share 5.1 m 9% 3.6 m 7% * Other groups such as Nextel, CTBC and Sercomtel had 0.3 m subscribers (0.5% market share). * Source: Company´s Information

  6. 1.1 Growth in Customer Base Fixed-line platform – LIS (million) Mobile platform – Subscribers (million) Penetration Rate Brazil (%) Penetration Rate Brazil (%) Brazil Brazil Region I Region I 03 Jul/04 02 01 981 99 00 03 Jul/04 02 01 981 99 00 • After doubling in size after privatization in 1998, further expansion of fixed-line platform more closely linked performance of Brazilian economy (current household penetration ~55%). • Brazilian subscriber base still growing at a rapid pace (over 30% p.a.). 1Privatization (Jul/98) * Source: Company Information

  7. 1.1 Mobile Penetration Rate – Jul/04 Brazil – 30.4% Region III – 36.5% Region II – 37.3% Region I – 25.0% • In jul/02, the penetration rate in Region I was 15% and in Brazil 18%; • Wireless penetration in Region I (25%) still offers room for growth; • According to Pyramid´s forecast, penetration will reach 40% by 2006. * In July/04, population was estimated by IBGE.

  8. 1.1 Mobile Penetration - Projections Brazil (%) July/2004: 30.4% 40% 39% 20% 2004 2005 2006 2003 2002 Ovum Pyramid

  9. 1.1 ADSL Market in Brazil Market Share – Brazil* Jun/04 Dec/03 (Cable) (ADSL) • Brazil has 1.4 million broadband accesses (Jun/04); • ADSL has 84% market share of the Brazilian broadband subscriber base; • Broadband penetration is expected to represent 30% of total internet access in Brazil in the next five years. (ADSL) (ADSL) *Source: Teleco & Telemar estimates. PC Penetration (% of households)** * 2003 *Source: Pyramid Research ** Brazil has approximately 42 million households

  10. 1.2 Telemar – Overview (June/2004) Region I= • Concession for fixed line services • License for Wireless services (GSM) • Integrated Telecom Service Provider • 15.2 million wirelines in service • 5.3 million wireless subscribers (Jul/04) • 345,000 ADSL subscribers • Concession Area (Region I) - Local Service and PCS • 65% of Brazilian territory/94 million people • 40% of country’s GDP • Over 20 million households • Leadership in local and long distance services (Region I) • PCS Mobile services (GSM) in Region I Nationwide • Authorization for fixed line services • Data, Corporate & Call Center Services (nationwide) • Telemar shares heavily traded at Bovespa (TNLP4): ~ US$ 47 m / day and at the NYSE (TNE): ~ US$ 22 m / day (Jul/04) • High Free Float: 82% of total shares • Market value: US$ 5.1 billion (Jul/04)

  11. 1.2 Telemar - Shareholder Structure Holding Co. TNLP ADR Tele Norte Leste Participações (TNE) 81.0% Contact Center Wireline (TMAR) Data Wireless

  12. Part II - Recent Developments and Growth Prospects 2.1 Highlights 2003/2004 2.2 Growth of the Business 2.3 Review of Operating Results 2.4 Financial Position

  13. 2.1 Highlights –2003/2004 • Building a fully integrated telecom service provider • Change, adaptation and consolidation • Market share gains in relevant segments • Selective growth (new markets) • Consolidation of investments made in the network • Growth in highly competitive markets: • Long Distance (domestic and international) • Data & Corporate (nationwide) • GSM Mobile Services (Region I) • Exploring new opportunities: • Broadband • Bundled services • Satellite services • Agreements and Partnerships • Target: Ensure a sound financial position, with increasing returns to our shareholders.

  14. 2.2 Expansion of Customer Base million 22.2 • Ability to anticipate mobile traffic migration presenting an outstanding performance in customer base; • Capacity to maintain stable fixed line platform while increasing market share in new businesses (LD,Data, ADSL and Mobile). 20.6 CAGR (98-03) 19.5% 19.2 16.4 0.5 1 0.3 0.2 Wireless ADSL Wireline 1Target: 450,000 ADSL subscribers by YE 2004. * Company’s acquisition

  15. 2.2 TMAR Fixed Lines in Service million lines • Investments for expansion of fixed line network essentially completed; • Fully digital platform:  78% household lines  18% business lines 4% public phones • Wireline penetration: ~55% of households (Region I); • Obstacles: Further increases in wireline penetration subject to GDP growth and regulatory changes. maintenance growth

  16. 2.2 Oi´s Subscriber Base million subscribers ~6.5 5.3 • Most successful GSM launch globally  5.3 million subs in 25 months; • 21% market share (Region I); • Share of mobile revenue in total consolidated business grew from 3% in 2002 to 8% in 1H04. 4.4 85% 3.9 85% 83% 2.8 2.2 80% 1.7 80% 78% Post paid Pre paid Gross Revenue (R$ million)

  17. 2.2 Oi´s Market Position Market Share (Brazil v. Region I) – Jun/04 Region I Brazil • Even with increased competition, Oi remains a high growth player in its operating market (35% of all net adds in 2Q04); • Wireless penetration in Region I (25%) still offers significant growth potential; • Challenge: Grow subscriber base by 65% in 2004, with positive EBITDA margins. ^Includes other operators:Telemig Celular, Tele Norte Celular, Nextel, CTBC, and SERCOMTEL. Source: Teleco /Morgan Stanley. Wireless Penetration (%) – Jul/04 * *Source: Pyramid Research

  18. 2.2 ADSL Thousand lines 450 • Highest ADSL growth in Brazil (~37% of net adds/2003); • Annual revenue growth of 288% in 1H04, but still a low portion of fixed line revenues (1.6%); • Target: Increase ADSL penetration from 1.9% of fixed lines to 5% in 2-3 years. Gross revenue (R$ million)

  19. 2.2 Call Center Services Attendant Positions >15,000 14,887 12,907 • Focus on profitability: EBITDA positive since inception; • Growth in attendant positions, in line with increase in customer base and net revenues - Contax currently has 29 customers, including major banks, utilities, insurance, media, telecom, retail, excluding Telemar. 7,337 4,947 Net Revenues (R$ million) 421 286 223 146

  20. DLD / ILD Contact Center Wireline Concession Area High Growth High Growth Moderate Growth 2.3 Revenue Drivers Data, Internet & Corporate Wireless High Growth Integrated Strategy High Growth • The Company’s five main lines of businesses provide a healthy balance between stable cash flow and growth opportunities.

  21. 2.3 Consolidated Gross Revenue Breakdown 2002 R$ 16,091 million 2003 R$ 19,427 million 1H04 R$ 10,460 million F- M 13% F- M 17% F- M 15% Local 44% Local 40% Local 42% • Local Service decreased its share from 61% in 2002 to 53% in 1H04; • Real growth has been driven by competitive and less regulated segments of mobile, long distance and data:  LD services increased its share from 13% in 2002 to 17% in 1H04;  Mobile service rose from 3% in 2002 to 8% in 1H04 and  Data increased its share from 6% in 2002 to 7% in 1H04. F- M 13% Local 40%

  22. 2.3 Consolidated Gross Revenue R$ million • Revenue growth driven by less regulated/ highly competitive business (Mobile, LD & Data); • Revenue growth in regulated services basically driven by tariff increases; • Share of less regulated/competitive services increased from 27% to 32% of total revenues (1H03/1H04); • Expected growth in wireless, data and LD in 2004 should further increase that share. 10,460 +16% 9,023 Less regulated* +40% +7% Regulated 1H04 1H03 * Services offered in highly competitive markets, less affected by regulation.

  23. 2.3 Long Distance Services LD Gross Revenue - R$ million LD Traffic (billion minutes) CAGR 37.5% 2,963 9.5 +31.7% 8.2 CAGR 17.9% 2,066 1,774 1,568 7.1 1,347 Contribution to Total Revenues (includes F2M) 17% 15% 15% 13% 11% • Telemar continues gaining market share and holding its market leadership in Region I.

  24. 2.3 Data Services Data Revenues (gross) - R$ million CAGR 22.7% +31.6% • Key corporate and government contracts won in 2003; • Data revenue growth driven by ADSL and IP services; • Target: Increase market share in data services for Region I and extend comprehensive offer on nationwide basis. Major Clients won in 2003

  25. 2.3 Mobile Services Revenue* R$ million • Outstanding revenue increase (69% yoy); • Services growth driven by subscriptions, outgoing calls & data services (mainly SMS); • EBITDA breakeven reached in Dec/03, after 18 months of operations; • Target: Maintain a high revenue growth rate with increasingly positive EBITDA margins. 511 866 Handsets Services 1H04 1H03 * Refer to gross consolidated revenues (excluding Intercompany transactions).

  26. Net Revenues EBITDA EBITDA Margin 2.3 Consolidated Net Revenues and EBITDA R$ million • Delivering consistent revenue and EBITDA growth in spite of huge expansion of fixed line platform and startup of mobile business; • Recurring margins stable over time, in the mid-40’s  EBITDA 2001 impacted by extraordinary provisions; • Target 2004: Keep consolidated EBITDA margin at ~43% in spite of a higher growth in mobile revenues.

  27. 2.4 Consolidated CAPEX R$ billion 10.1 • CAPEX 2003: ~12% of net revenues (v. 17% in 2002); • CAPEX 1H04: R$ 534 million (7.1% of net revenues); • Consolidated CAPEX since 1998: US$10.4 billion; • Target: Stabilize CAPEX at ~15% of net revenues to support growth in mobile and other services (broadband, long distance). 2.2 Wireless 7.9 2.8 2.5 2.2 2.0 2.0 1.7 40% Wireline 0.9 0.6 0.5 60% 1.1 1.1 Anatel Targets/ Mobile License (R$1.1 bn)

  28. 2.4 Free Cash Flow after CAPEX R$ million CAGR (99-03)69.1% 1H04 1H03 2003 2002 2000 2001 1999 • Having met fixed line universal service goals and successfully rolled out GSM services, our FCF is expected to remain strong in the coming years.

  29. 2.4 Dividend Payments - 1999/2003 R$ million * Dividend yield Dividend Policy • All shares have the right to receive a minimum annual payment of 25% of adjusted net income; • Preferred Shares and ADR are entitled to a minimum dividend of:  6% of the Company´s Capital;  3% of the Company´s Shareholders´ Equity Whichever is higher. Dividend/ Interest on Capital * Based on stock prices at 08/31/04. • Our goal is to continue to provide high cash returns to our shareholders.

  30. 12.1 22.6 28.0 11.4 6.4 19.5 2.4 Debt Position R$ billion Repayment Schedule – Jun/04 Net Debt – Jun/04 R$ 7.4 billion Total Debt: R$ 12.2 billion Net Debt/ EBITDA (x) ~ % of total • Given our strong cash generation, we estimate net debt to be less than 1x EBITDA by year end 2004.

  31. 2.4 Key Financial Ratios Net Debt / EBITDA Amortization*/ EBITDA (%) (*) 12 - Month EBITDA * Principal and interest Dividends* / EBITDA (%) CAPEX / EBITDA (%) * * Early attainment of universal service targets. * includes JCP (interest on capital)

  32. 2.4 Key Financial and Valuation Ratios Enterprise Value / EBITDA Market Cap / EBITDA EBITDA / Net Interest Expense EBITDA / Total Debt Service

  33. “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 Fax: (55 21) 3131-1155 E-mail: invest@telemar.com.br Visit our website: http://www.telemar.com.br/ir

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