0 Brasil Telecom Corporate Overview November/2006.

1

Brasil Telecom Corporate Overview

November/2006

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Summary

Company outlook

Convergence

What is converging with what

Convergence and Brasil Telecom

Brasil Telecom’s steps towards convergence

Final Comments

1

2

3

4

5

6

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Company outlook - Our FootprintCompany outlook - Our Footprint1

Largest Telecommunications Company in

Region II

1 All information is referent to June 2006

Region II24% of the Brazilian population

44 million inhabitants and

27% of the country’s GDP (R$420 billion)

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.

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Company outlook - Integrated PortfolioCompany outlook - Integrated Portfolio1

CyberData

Center

MobileService

Brasil Telecom

Finance, HR, Marketing, Operations

Technology (Network/IT)

DLD / ILD LocalInternetDial-upAccess

Portal InternetBroadband

Access

DataBroadband

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Company outlook - Mobile TelephonyCompany outlook - Mobile Telephony1

457 693 821 900 947

1.220

1,8721,640

1,520

2,104

31%33%33%31%

27%

3Q05 4Q05 1Q06 2Q06 3Q06

3,051 thousand mobile accesses in 3Q06

11.4% of market share and 31% of pos-paid accesses.

Pos-paid Pre-paid

(thousand) Accesses

Pos-paid %

1,676

2,2132,460

2,7723,051

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Company outlook - BroadbandCompany outlook - Broadband1

ADSL AccessesADSL Accesses(thousand)

Gross RevenueGross Revenue(R$ million)

180214 220

245270

3Q05 4Q05 1Q06 2Q06 3Q06

34141

282

536

1.014

2001 2002 2003 2004 2005

1371

217

388

679

2001 2002 2003 2004 2005

CAGR (01-05): 168.8%

CAGR (01-05): 133.7%

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.

+40.4% x 3Q05

+50.2% x 3Q05

892

1,2521,1551,0841,014

121.770.2

70.897.6

3Q05 4Q05 1Q06 2Q06 3Q06

Net Additions

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Company outlook - EBITDA (R$ million)Company outlook - EBITDA (R$ million)1

2,3972,480 2,547

33.7%

31.8%32.9%

9M05 9M05 (Adjusted) 9M06

EBITDA Margin

744.6 827.9 813.6 907.9

28.9%32.1% 33.2% 34.5%

3Q05 3Q05(Adjusted)

2Q06 3Q06

Quarterly Year (accumulated)

Reduction of Operating costs and expenses.

Affected by increase in revenue in the data and mobile segments.

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Company outlook - Strategic Key MessagesCompany outlook - Strategic Key Messages1

1. Defend fixed-line segment: >70%

of revenue;

2. Expand mobile operations:

adequate scale vs. profitability;

3. Exploit growth opportunities in

Data and Internet: increase in

revenues and profits;

5. Operational Efficiency;

4. Full convergence: Opex

reduction, Capex reduction,

churn reduction and ARPU

increase;

6. Corporate Governance culture: transparency, ethics and shareholders’

value creation.

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Cu

sto

mer

Ben

efit

/ V

alu

e

Level of integration

The Bundles

• Can be hard to increase the added value beyond initial benefit

Source: OvumSource: Ovum

ConvergenceConvergence2

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Network

Cu

sto

mer

Ben

efit

/ V

alu

e


The Bundles

• Reduce costs, increases coverage and therefore usage



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Services

Network

Cu

sto

mer

Ben

efit

/ V

alu

e


The Bundles

• New applications delivered in new ways to new devices



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Devices

Services

Network

Cu

sto

mer

Ben

efit

/ V

alu

e


The Bundles

• Simplifies service delivery for both Service Provider and Customer



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Devices

Services

Network

Cu

sto

mer

Ben

efit

/ V

alu

e


The Bundles



The maximum level of convergence perceived by the customer The maximum level of convergence perceived by the customer occuroccurss when an unique access device can be when an unique access device can be usused for all services ed for all services and applications available (fixed, mobile, internet, TV, etc).and applications available (fixed, mobile, internet, TV, etc).

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Convergence is complex and is happening in the following Convergence is complex and is happening in the following levels:levels:

What is converging with what What is converging with what

• Network and Information Technology (IT)

• Industry sector

• Services

3

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Network convergence happens when operators move to an All-IP-Next Network convergence happens when operators move to an All-IP-Next Generation Network (NGN) to support all telecom traffic efficientlyGeneration Network (NGN) to support all telecom traffic efficiently

SDH


3What is converging with whatWhat is converging with whatNetwork technology & IT Network technology & IT

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As operators move to a multipurpose NGN’s, the IT systems that As operators move to a multipurpose NGN’s, the IT systems that support each service and overlay network are integrated into one support each service and overlay network are integrated into one OSS/BSS systemOSS/BSS system

SDH


3What is converging with whatWhat is converging with whatNetwork technology & IT Network technology & IT

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• 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.

The The former former distinct worlds of telecommunications and IT are distinct worlds of telecommunications and IT are alreadyalready merging.merging. We also see that the distinctions between fixed & mobile We also see that the distinctions between fixed & mobile operators, carriers & service providers and media & telecom are blurringoperators, carriers & service providers and media & telecom are blurring

3What is converging with whatWhat is converging with whatIndustry sectorIndustry sector

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Industry sectors are converging with adjacent sectors around the Industry sectors are converging with adjacent sectors around the edge and in the middle.edge and in the middle. Hence Hence the the boundaries & boundaries & differences between differences between each sector in the convergent space will be difficult to detect.each sector in the convergent space will be difficult to detect.


3What is converging with whatWhat is converging with whatIndustry sectorIndustry sector

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What is converging with whatWhat is converging with whatServicesServices

Convergent servicesConvergent services – User perspective – User perspective

Video

Voice Mobility

Data

• Integrated selling and customer relation services (One Stop Shop)• One bill• Reduction on the cost of services

3

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What is converging with whatWhat is converging with what Services on BroadbandServices on Broadband

Fixed voice, data and video services are converging, enabling bundlesFixed voice, data and video services are converging, enabling bundles

Communication

VoIP

Video Telephony

Mobility

PC

VPN

Firewall

Parental discretion

Amusement

Video on demand

Music on demand

Rádiovia Internet

Monitoring

Security, home

surveillance and

health monitoring

Communication

VoIP

Video Telephony

Mobility

Personal ComputerVPN

Firewall

Parental discretion

Entertainment

Video on demand

Music on demand

Rádiovia Internet

Monitoring

Security, home

surveillance and

health monitoring

3

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Fixed Line

GSM Network

Fixed Line

Dual-ModeGSM-Bluetooth-CTPGSM Network

Access

Central Switch

PSTN

Fixed Line

GSM Network

Fixed Line


Access

Central Switch

Fixed Line

GSM Network

Fixed Line


Access

Central Switch

PSTN

What is converging with whatWhat is converging with whatFixed – Mobile Services Fixed – Mobile Services

A dualA dual mode mode mobile handset that acts as a normal GSM phone outside mobile handset that acts as a normal GSM phone outside the home, inside the home, routes calls through a device called the home, inside the home, routes calls through a device called access point connected to conventional fixed lineaccess point connected to conventional fixed line

3

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Convergence and Brasil TelecomConvergence and Brasil Telecom4

The new scenery demands a infra-structure with specific The new scenery demands a infra-structure with specific characteristics:characteristics:

• Agnostic to devices

• Flexible

• Adaptable

• Integrated control

• Integrated management of the client

• Agile and flexible OSS/BSS

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• The possibility of service convergence (SoIP) and The possibility of service convergence (SoIP) and

network convergence stimulates the adoption of IMS network convergence stimulates the adoption of IMS

architecture.architecture.

• The future is the implementation of a totally integrated The future is the implementation of a totally integrated

network, all-IP, based on TISPAN architecture network, all-IP, based on TISPAN architecture

(Telecoms & Internet converged Services & Protocols (Telecoms & Internet converged Services & Protocols

for Advanced Networks).for Advanced Networks).

Convergence and Brasil TelecomConvergence and Brasil Telecom4

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IMS/

TISPAN NGN

NGN

Data

GSM eEDGE

PSTN

Mobile NGN

(3GPP Rel4)

Convergence and Brasil Telecom - Network EvolutionConvergence and Brasil Telecom - Network Evolution4

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Internet Internet

InternetInternetInternet SS7

BSCBSC

SS7

Access Router Wi-Fi

APWi-FiAP

Modem xDSLBSCBSC

DSLAM

SGSN

GGSN

HLRSCP

SMSC

InternetAS

AAA

AS

BRAS/AAA

AS

BRAS/AAA

PSTN

LOCAL

SSP

AS

BRAS/AAA

Headend

CMTS

CM

Acc

ess

Cor

e nN

etw

ork

and

Con

trol

App

licat

ions

and

Ser

vice

s

GSM GPRS WiFi xDSL POTS CMTS

PLMN

MSC

Convergence – Architecture TodayConvergence – Architecture Today4

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Convergence - NGNConvergence - NGN4

STFC

PTSPTS

PTSPTS

PCSPCS

RPR

Corporativo Residencial

OSS/BSSCamada de

Aplicação

Camada de

Controle

Camada de Transporte

Camada de

Mídia

Camada de

Acesso

Softswitch /MSC Server

Media GatewayMedia Server SNOC

BandwithBroker

TrafficEngineer

LDAPServer

Radius Server

Agregador

M

M

Servidores de Aplicação

Service Broker

PROVISIONING

BILLING

RNC

Application

Control

Media

PSTN

Transport

Access

Application Servers

IP

Corporate Residential

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Billing

Security

QoS

IP Network

BSCBSCAccess Router Wi-Fi

APWi-FiAP

Modem xDSLBSCBSC

CM

GSM GPRS WiFi xDSL POTS CMTS

SGSN/GGSN

LOCALDSLAM CMTS

PGFPGFPGFPGF

MGW/SGWMGW/SGWMGW/SGWMGW/SGW

SBCSBCSBCSBC

Access PointBluetooth CTP

Mobilility

Convergence

Flexibility

Confort

Otimization

New Services

Etc.

IP Multimedia Subsystem

Messenger and Media

Stream

BusinessApplications

VAS e IN

Push-To-Talk

MGCFMGCFMGCFMGCF

SeamlessSeamlessMobilityMobility

PresenceGame

sEtc.

Convergence - IMSConvergence - IMS4

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Brasil Telecom’s steps towards convergenceBrasil Telecom’s steps towards convergence5

• 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.

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• 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.

Final CommentsFinal Comments6

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Thank You!Thank You!

Dante Nardelli Junior

[email protected]

Tel: +55 61 3415-1249

0 Brasil Telecom Corporate Overview November/2006.

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