Corporate Presentation
July 2010
Investor Relations
AGENDA
Brazilian Telecommunications Market
Oi: Profile, Footprint and Strategy
3
11Oi: Profile, Footprint and Strategy
Operational and Financial Results
Brasil Telecom Acquisition – The Deal
Expectations for the Future
11
17
31
35
Investor Relations | 2
Brazil Snapshot
Brazil in Numbers2009
• 10th economy in the world
› GDP: US$ 1.6 Trillion (2009)
› GDP per capita PPP = US$ 7.7 Thousand
› Currency – US$ 1.00 = R$ 1.78 (Mar/10)
• After a downward trend since 2008, interest
Economy
Investor Relations | 3
• Land Area
› 8.5 Mn Km2 (80% of European area)
• Population
› 190 Mn inhabitants
› 58 Mn households (85% urban) - 2008
• After a downward trend since 2008, interest
rates resumed increase in April/10:
› Selic: 13.75% in Dec/08; 8.75% 2009, current
9.5%, 11.75% 2010E* and 11.50% 2011E*
• Inflation under control for more than 15 years
› CPI: 5.9% in 2008, 4.27% in 2009E*, 5.67%
in 2010E* and 4.80% in 2011E*
• During the recent crisis, Brazil has been more
resilient than main developed countries in
terms of economy growth
* Central Bank Report (Focus)
Brazilian telecom market is relevant worldwide and is the most important market in Latin America
Fixed Lines in Service
Penetration per population %
320 206 73
China USA Japan
6724 2157
4th
21 9 9
Mexico Colombia Argentina
2219 19
Brazil
WorldMillion, December 2009
Latin America
Million, December 2009
40
Investor Relations | 44Source: ANATEL, IBGE, Teleco, ML Wireless, UNCTAD and Internet World Stats
Mobile Users
Fixed Broadband Users
83 48 41
Mexico Argentina Colombia
8377 121
7 3 2
Mexico Argentina Colombia
6 8 3
747525
286 208
China India USA Russia924456 14793
5th
83 7030
China USA Japan
5236 24
10th
Brazil
176
Brazil
10
98 Post-Privatization
Current Scenario
� Focus on competition
� Consolidation
� Mature fixed; mobile
03
09
Brazilian Telecom Sector Evolution
� State-owned monopoly
� Lack of investments
� Low quality of services
� Huge pent-up demand in fixed and mobile
� Incipient Internet
Pre-Privatization � Multiple players
� Focus on universal and quality of services
� Expansion of fixed and mobile
� GSM launch
� Broadband start-up
� Mature fixed; mobile and broadband as growth drivers
� Convergence in early stages
� Launch of 3G
Investor Relations | 5
Brazil and its Regions
Household (mm)
Household Information – PNAD* 2008
Income** (R$)
Population (mm)
30.4
704
57.6
190.0
BrazilRIII
104.3
RII RI
927 992 820
44.8 40.8
14.3 12.9
Brazilian Telecom IndustryGeneral Plan of Concessions divided the country in 3 Regions, with strong social/economic differences
Mobile + Fixed - %
Just Fixed - %
Just Mobile - %
No phone - %
With computer - %
With internet - %No internet - %
No Computer - %
30
4
42
24
24
18
6
76
39
5
39
17
32
25
8
68
37
28
9
63
47
37
10
53
41
4
45
10
58
8
27
7
* PNAD: Pesquisa Nacional do Domicílio – IBGE; ** Income per capita per month
Region I
Region II
Region III
Investor Relations | 6
Competition: Main Telecom Groups in Brazil Market Share of Subscribers and Revenues – March 2009
• Oi 31%
Revenues market-shareMarch / 10
Full Integrated
51%
Oi*
National
Telefonica
27%
30%
Telefonica*
Vivo
National
Region III
36% 24%20%
Investor Relations | 7
National Market Share - Fixed Lines in Service National Market Share - Mobile
• Oi 31%
• Telefónica + Vivo 31%
• Claro + Net + Embratel
23%
• TIM: 13%
• Others: 2%
* Also operates Long Distance and Data Transmission Nationally
Embratel Claro
National
25%
Telmex / AMX
15%
National
TIM
24%
(Pure mobile)
National
National Market Share - Fixed Broadband
25%
� Mature local fixed voice
– Accesses losses (FMS in accesses)– Lower traffic per terminal (FMS in traffic) – More competitive market in high-end and
SME (new entrants)– Penetration: 51% of households
Fixed
� Continued expansion in the mobile market
8
10
11 12
Fixed
Mobile (includes 3G)
Fixed Broadband
168
202
Market Trends Brazilian Market (Fixed, Mobile and Fixed Broadband)
Access lines (millions)
227
Brazilian Telecom IndustryTraditional fixed services face adverse scenario whereas mobile and broadband keep growing
232
Mobile
Broad
band
� Continued expansion in the mobile market with strong competition
– Strong market evolution, mainly in the pre-paid (naked sim-card) market
– ARPU for the industry has been reducing – Different business models– Penetration: 97% of inhabitants (Mar/09)
� Broadband growth accelerates
– Fierce competition in areas that concentrate high-end clients
– Continuous expansion and falling ARPU – 3G changes the dynamic of the industry– Penetration*:20% of households
20 39 39 41 42 41 7
35
121
151174 179
1
* Fixed broadbandSource: ANATEL, Teleco and Team analysis; FMS - Fixed to Mobile Substitution; SME - Small & Medium Enterprises
27
75
1998 2002 2007 2008 2009
Investor Relations | 8
Mar/10
2,1
3,0 3,7
3,1 3,8 0,6
2,7
1,5
3,2ADSLCable & Others3G Data Cards
32,338,9
44,739,6
45,929,3
37,9
44,539,0
45,5
Mobile Market (Includes 3G)
million customers
RII
RIII121.0
150.6
Broadband Market (Fixed and Mobile)
million customers
7.7
10.6
174.0
14.1
Brazilian Telecom Industry – Mobile and Broadband MarketsNet additions resumed growth in 1Q10; broadband market grows at high rates
179.1
152.4
15.0
11.9
5,67,0 7,7 7,3 8,0
59,4 73,8 84,8 75,1 87,7
32,3
Source: ANATEL; Team analysis** Considering Feb/09 net adds equal to feb/10 (during Fev/09 there was a clean-up of mobile clients done by
one of our competitors).
� Mobile market still grows in 2009, but at lower rates
― Net additions of 23,4mn in 2009 are 21% below 2008
― Naked sim card continues as a national trend
� In 1Q10, mobile market resumed growth (net adds ~
30% higher**)
RI
2007 2008
� Broadband: Strong growth in accesses
– Fixed broadband penetration: 20% of households
– ADSL corresponds to 68% of total fixed broadband accesses and 53% of the total (fixed + 3G Data Cards)
2009 2007 2008 2009
Investor Relations | 9
Mar/10Mar/09 Mar/09 Mar/10
AGENDA
Brazilian Telecommunications Market
Oi: Profile, Footprint and Strategy
3
11Oi: Profile, Footprint and Strategy
Operational and Financial Results
Brasil Telecom Acquisition – The Deal
Expectations for the Future
Investor Relations | 10
11
17
31
35
TelemarParticipações S.A.
Tele Norte LesteParticipações S.A. (TNE)
BNDESPar 31.383%Previ 12.948%Funcef 2.790%Petros 2.739%
AG Telecom 19.325%L. F. Tel 19.325%Fund. Atlântico 11.490%
Public Companies
Current Ownership Structure
Free Float
% ONs % PNs % Total
Tele Norte Leste (TNE) 46.3% 100% 82.1%5.5%
18% Total54% ON
* Tickers at Bovespa and NYSE: TNE (TNLP4 and TNE); BRTP (BRTP4 and BTP), BRTO (BRTO4 and BTM), TMAR (TMAR5)
100%
IntegratedTelemar Norte LesteS.A. (TMAR)
Others
Participações S.A. (TNE)
49%
Oi Mobile BrTO
Investor Relations | 11
Tele Norte Leste (TNE) 46.3% 100% 82.1%
Telemar Norte Leste (TMAR) 2.6% 20.5% 12.5%
Brasil Telecom S.A. (BrTO) 20.4% 66.7% 50.7%82%97% ON
80% ON
Pursuant to Material Fact disclosed by Telemar Participações on June 21, 2010, shareholder BNDESPAR held a special auction for the purchaseand sale of Telemar Participações S.A. shares on June 17, 2010. FUNDAÇÃO DOS ECONOMIÁRIOS FEDERAIS - FUNCEF and FUNDAÇÃO PETROBRÁS DE SEGURIDADE SOCIAL - PETROS, as buyers, were the winners of the respective lots. However, Telemar Participações S.A. awaits ratification by Anatel to transfer the shares.
� Leader in integrated telecom solutions in the country
– Revenues Generating Units of over 62 million
– First quadruple play operator in Brazil (fixed, mobile, ADSL/cable broadband
accesses and pay-TV)
� Strong execution culture in Region I, overcoming targets
– After the launch of new services in Region I, leadership was always obtained in
a very short period of time**
Oi’s SnapshotLeading Telecommunications provider in Brazil and the only integrated player offering nationwide 4-play services
– Highly qualified management team
* Oi Consolidated ** Mobile: the leadership was reached after less than 3 years; leadership in the ISP after 7 months (broadband) and after 10 months in the free dial-up Investor Relations | 12| 12
� National coverage in mobile and data businesses meets scale
needed in a capital-intensive type of business
– Oi has the size which is comparable to its main competitors
– Sustained and long term shareholder’s value proposition
� Solid financial position
– Balance sheet balanced between growth businesses
(mobile/broadband) with cash cow services (fixed line)
– Debt amortization schedule compatible with cash flow
generation
� Pioneer in m-payment
Globenet� 22,000 km of
submarine cable linking Brazil, Venezuela,
Belo Horizonte
Uberlândia
Poços de Caldas Barbacena
Pay-TV Other businessesBroadband
1º
1º
Domestic Coverage Fixed Mobile
4º 1º
1º 1º
4º
Business and Domestic FootprintThe New Company: Businesses and Subscribers (Millions; March/09)
23.7 13.4 2.3
7.2 7.6 2.0
5.7
Source: Anatel and Companies;* 2009
Venezuela, Bermuda and USA
ISP/Portal� Largest Brazilian
ISP� Leading ISP in
regions I and II
• Recent launch of DTH in 8 states of Brazil
• 4 cities in cable (MG)
Caldas Barbacena
� 62 million clients (RGUs)
� More than 26% of total clients in Brazil
� Higher group in revenues, with over 30% of all revenues in the sector
36%
2.9 th.Cities*
Share Brazil
Total 4.3
51%
4.8 th.
20%
2.8 th.
21.136.6
Investor Relations | 13
National and International Backbone
� The new company now has a total of:
− 138th. Km of fiber optical cable
° 73 thousand km from BrT: BrT/Metrored
(51 th. Km) and GlobeNet¹ (22 th. Km)
Data Backbone FootprintThe biggest and most widespread backbone nationwide
° 65 thousand km from Oi
− 30.4 th. Km of metropolitan rings
° 8.4 thousand km from BrT and Metrored
° 22 thousand km from Oi
� Through the national and international
backbone, the new company can fight
for the leadership of Corporate Data
segment
1. Globenet connects Brazil, USA, Bermuda and VenezuelaInvestor Relations | 14
Operational GuidelinesTo face the current market scenario, Oi aims to utilize integrationtowards achieving the goal of differentiation
Keep the focus on convergence� Quadruple play: Expand Pay TV offering
� Cross sell and up sell
� Reduce churn
� Key element in the offering of integrated services
� Expansion of coverage, availability and speed
� 3G expansion nationwide
Increase the offering ofbroadband services
� Differentiated offers
› Sim-card only model: very low acquisition cost
› Focus on bundled services for post-paid
Increase the growth opportunitiesof our mobile businessmaintaining profitability
� Use the biggest (and more widespread) national data backbone to leverage corporate businesses
� Leverage international data businesses through Globenet
Expand data business
� Internal processes improvements
� Implementation of best practices
� Capture all synergies with BrT ASAP
Increasing efficiency and costcontrol
Investor Relations | 15
AGENDA
Brazilian Telecommunications Market
Oi: Profile, Footprint and Strategy
3
11Oi: Profile, Footprint and Strategy
Operational and Financial Results
Brasil Telecom Acquisition – The Deal
Expectations for the Future
Investor Relations | 16
11
17
31
35
0,06
0,20,06
0,3
� RGUs totaled 62.2 MM in March/10, with 4.6 MM YoY net additions:
� Mobile: 4.8MM
Revenue Generating Units
61.9
8.0%
Revenue Generating UnitsRGU growth remain robust in the 1Q10, reaching more than 62 million clients at the end of March/10 (+8.0% vs 1Q09)
Total Revenue Generating Units – RGUs*
Million
55.9
62.2
57.7
20,330,0
36,1 31,836,6
3,1
3,8
4,23,9
4,322,2
22,1
21,321,8
21,1
0,06
2007 2008 2009 Mar/09 Mar/10
Fixed Broadband Fixed LISMobile (includes 3G)
* Pro-forma numbers in 2006 to 2008 (Considering Brasil Telecom)
� Mobile: 4.8MM
� Broadband: 629th
� Pay-TV: 283th
� Mobile customers already account for 58.8% of all RGUs at the end of 1Q10 (55.2% in 1Q09)
Investor Relations | 17
45.6
Pay TV
Pre-Paid
- 82% of net additions since March/09- 84% of total client base
36.1
15.0%
Mobile Client BaseThe pre-paid and control segments have been the major growth drivers, representing almost 97% of the group’s net adds since March/09
Mobile Clients – Mix of subscribers*
Million
30.031.8
36.6
Control
- 15% of net additions since March/09- 12% of total client base
Post-Paid
3,5 3,5 4,3 3,7 4,41,3 1,5 1,4 1,5
16,8
25,2
30,326,7
30,7
2007 2008 2009 Mar/09 Mar/10
Pre-PaidPost-Paid
Investor Relations | 18
Controlled
20.3
* Pro-forma numbers in 2006 to 2008 (Considering Brasil Telecom); ** Controlled plans included in the post-paid from 2007
Post-Paid
- 3% of net additions since March/09- 4% of total client base- Oi Conta Total amounts to 1.5
million, 39% of Region I post-paid base
Market-Share at the end of 1Q10
- RI: 27.0%
- RII: 15.8%
- RIII: 12.6%
- National: 20.4%
“Oi Conta Total” Customer base
Thousand users
1.061
1.449 1.249
1.453
Oi Mobile: Bundle offers in the post paid segment for both companiesOi will reinforce BrT’s bundle strategy, aiming to boost net additions as it happened in Region I since 2007; Bundle should be available in RII in 3Q10
� Fixed line, mobile and Internet bundle
� 5 plans*
� Unlimited local calls between fixed lines
� Unlimited access to internet
� Free long distance minute packages
% Post-paid**
537
1.061
20.7
*OCT Light, OCT 1, OCT2, OCT3 e OCT4, from 50 to 1,000 fixed minutes per month, dial-up internet to OiVelox 1 mega, Oi Mobile shared with up to 4 people.** Post-paid base from Oi Region I (area where the plan is available)
2007 2008
27.8
2009
38.3
Investor Relations | 19
Mar/09 Mar/10
32.2 38.7
Millions, % of Fixed Lines in Service
1,521,96 2,22 2,22 2,30
0,050,05
0,050,05
1,57 1,81 1,92 1,94 2,00
10,7%
14,1% 16,4%14,7% 16,8%
19,5% 22,2%25,1%
25,6%
2.01Broadband
Clients and
Penetration
on LIS
Millions, % of Fixed Lines in Service
Region IIRegion I
2.27
Fixed Broadband Client BaseIn the broadband market, there’s more room to growth in Region I due to lower penetration as compared to Region II
2.272.35
Coverage**1.585Cities with coverage 1.361
85%44%% of total
2007 2008* 2007 2008
Cities with coverage
% of total
* The broadband penetration on fixed lines in service considers just the ADSL accesses ** Numbers of December/09
on LIS
� Broadband CAGR of 25.2% (2006 to 2009) � Broadband CAGR of 13.7% from 2006 to 2009
2009* 2009
Investor Relations | 20
• Oi Velox Ultra, a new Ultra High-Speed Fixed Broadband portfolio, was launched in the metropolitan region of Recife in Sept/09 and will be expanded to other states 2010
• Fixed broadband grew 8.3% since March/09 and already represents 20.0% of all fixed line in service (17.8% in 1Q09)
1Q09* 1Q10* 1Q09 1Q10
Fixed
Mobile
Total
Regions I + III
25.127.2
New Oi Consolidated
45.744.0
� Mobile and broadband segments as main growth drivers, offsetting lower
+4.0%
1Q10 vs 1Q09
Oi Financial Highlights: Consolidated Gross RevenueR$ billion
4,4 6,4
20,7 20,8
+8.4%
8,5 9,9
2,3 2,6
0,20,2
0,1 0,1
35,335,6
8,9 8,8
2008* 2009 1Q09 1Q102,0 2,1
14,0 14,9
2007 2008
Mobile
* 2008 pro-forma **Pay TV and Paggo
Fixed
Mobile
Total 16.0 17.0
Region II
drivers, offsetting lower revenues from the traditional wireline segment
� Mobile and data already accounts for 22.5% and 19.7% of total revenues, respectively (20.2% and 18.5% in 1Q09)
Investor Relations | 21Mobile Other
Services** Fixed
4,4 6,4
2007 2008
11,511.2
+2.7%
+6.3%
3.786
Oi BrT
10,134 10,249
Consolidated EBITDA**
R$ Million • 6.5% increase in EBITDA shows the synergies gains resulting from the integration of Oi and BrT
• 1Q10 had lower operational expenses, even when compared with recurring expenses of 1Q09, mainly related to:
Oi Financial Highlights: Consolidated EBITDA and MarginR$ billion
9,864
1Q10 vs 1Q09
6.348
2007 2008*
EBITDA Mg Oi 36.1%
2009
34.2% 33.0%
EBITDA Mg BrT 34.2%
• Handset Cost / Others
• Third-party Services
• Personnel
• Provision for Bad Debt
• The negative impact of São Paulo in the 1Q10 EBITDA was R$35 MM (R$84 MM in 1Q09)
* 2008 Pro-forma; ** Recurring EBITDA and EBITDA margin in 2008, 2009 and 1Q09
Investor Relations | 22
2,377 2,532
1Q09 1Q10
31.7% 33.9%
+6.5%
Regions I + III
2,318
1,154 1,087
� Huge growth in net income YoY due to lower:
� Lower operating Expenses
� Better financial results
� Reduced depreciation and amortization
1Q09 was impacted by:
New Oi Consolidated
Oi Financial Highlights: Consolidated Net IncomeR$ Million
1Q10 vs 1Q09
2007 2008
* 2008 Pro-forma
2007 2008
673
782
Region II
� 1Q09 was impacted by:
� non-recurring costs of R$185 million
� Fiscal distortion as the goodwill generated in BrT’sacquisition had been amortized since January/09 and could not be used to reduce tax payments up to the end of 3Q09.
Investor Relations | 23
2008* 2009
-436
11
496
1Q09 1Q10
3,52,61,8
2,0
Fixed
Total
Regions I + III
2.3
4.6
5.1
7.3
-30.2% Consolidated CAPEX in 1Q10
� 78% directed to growth businesses
� 42% in data / broadband
� 36% in mobile
� In wireline, Capex was concentrated in:
New Oi Consolidated
Oi Financial Highlights: Consolidated CAPEXR$ billion
0,31,21,1
1,5
3,8
2,4
0,4 0,1
2,7
0,50,2
2008* 2009 1Q09 1Q10
0,5
2007 2008
Mobile
* 2008 Pro-forma
2007 2008
Fixed
Mobile
Total
1.4
2.7
5.1
Region II
in:
� Digital inclusion schools
� Expansion of fixed broadband
� Data package offers for corporate clients
� In wireless, the allocation focused on:
� Coverage expansion, especially in Region III and II
Investor Relations | 24
Fixed
Mobile
0.40.9
-58.9%
21,1 24,1 24,1
4,14,7 5,10,71,1 0,8
Consolidated Gross Debt
R$ Billion
25,929.9
Local Currency Foreign Currency Hedge
29.9
Oi Financial Highlights: Consolidated DebtAfter an increas with the consolidation of Invitel/BrT, net debt decrease during 1Q10
9777
312
CDI
TJLPLibor
BRL Fixed
USD*
BRL
Total Debt Profile (After hedge)
%
19,2
21,9 21,3
21,1 24,1 24,1
Mar/09 Dec/09 Mar/10
Mar/09 Dec/09 Mar/10
Consolidated Net Debt
R$ Billion
Investor Relations | 25
Currency Interest
*Includes Cash USD
� Effective cost of debt in 1Q10: 100.5% of CDI
accumulated (107% in 2009)
� Cost of debt (contracted) in 1Q10:
- Local Currency: 116% of the CDI
- Foreign Currency: Libor + 5.7%
7,5
6,4
Gross Debt Amortization Flow – Currency*
R$ Billion
2%3% 2%
2%
3%
3% 8% 7% 14%24%
43%
BRL JPY USD
Gross Debt Amortization
R$ Billion
100%
Oi Financial Highlights: Consolidated DebtDebt Profile and Maturity Flow
5,0
4,0
2,7
4,2
95% 89% 92% 84%73%
51%
3%
6%
43%
10 11 12 13 From 2015 on
2010 2011 2012 2013From 2015 on
*Cash-Flow Impact of the Amortizations Investor Relations | 26
201414
0,41,5
2,2 1,9 2,1
Net debt/Recurring EBITDA
x
Interest Coverage Ratio*
x
7,3
4,93,9 4,0 3,9
Oi Financial Highlights: Consolidated DebtKey Ratios
2007 2008 2009 1Q09 1Q10 2007 2008 2009 1Q09 1Q10
0,31,0
2,7 2,3 2,5
Net debt/Equity
x
EBITDA – CAPEX**
R$ billion
6,4
2,9
4,8
1,52,2
* Considers Recurring EBITDA for 2008 and 2009 LTM** Considers numbers from Oi + BrT (2006 to 2009) and uses recurring EBITDA in 2008 and 2009
2007 2008 2009
Investor Relations | 27
1Q09 1Q10
2007 2008 2009 1Q09 1Q10
2007 2008 2009 1Q09 1Q10
2007 2008 2009 1Q09 1Q10
Dividends - TNE
Payout
Evolution of Dividends TNE
R$ Million
1.100
2.675
1.1141.310
2.318
1.155
Net ResultsDividends
233%
35%
216%
376%
146%
70% 25%29%
232%
Statutory Dividends:
• All of the shares: right to receive minimum dividends of 25% of adjusted net profit
• Preferred shares and ADRs: minimum 6% of Capital or 3% of Shareholder’s Value, whichever is higher
Historically:
• R$ 7.6 billion in Dividends and Interest on Equity were paid in the last 10 years
• TNE paid an average of 103% of profits generated in the last 10 years
• A value equivalent to 79% of Shareholder’s Equity (dec/08) was distributed in the last 10 years
224 251 303500
8001.100
785330
671
96
709
140
-416
213
7511.114
1.310 1.155
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investor Relations | 28
Dividends – TMAR
Payout
Evolution of Dividends TMAR
R$ Million
5.357
1.114
240%
123% 131% 147%
64% 40%98%
408%
Net ResultsDividends
Statutory Dividends:
• All of the shares: right to receive minimum dividends of 25% of adjusted net profit
• PNA shares have the right to receive dividends 10% higher than the ones distributed to ON shares
• PNB shares has priority in the receivement of dividends, which shall be fixed per year and equivalent to 10% of the division of the Capital per total number of shares.
Historically:
• R$ 12.1 billion of Dividends and Interest on Equity were distributed in the last 8 years
• 116% of payout in the period
708 850 1.000 1.350 1.100651
1090295
687 761 9171.717 1.614
1.114
1.310
2001 2002 2003 2004 2005 2006 2007 2008
Investor Relations | 29
AGENDA
Brazilian Telecommunications Market
Oi: Profile, Footprint and Strategy
3
11Oi: Profile, Footprint and Strategy
Operational and Financial Results
Brasil Telecom Acquisition – The Deal
Expectations for the Future
Investor Relations | 30
11
17
31
35
Cash Disbursements and Total Equity Value
R$ billion
(1) Purchase of preferred shares in the open market
(2) Purchase of preferred shares in the Tender Offer
2,3
1,0
5,4 (3) Acquisition of the
Shares Purchases BRTP BRTO
# shares % # shares %
PN Shares 76,645,842 21.1 58,956,565 10.7
Open Market 55,819,400 15.4 45,590,200 8.3
Tender Offer 20,826,442 5.7 13,366,365 2.4
ON Shares 121,545,213 33.6 630,872 0.0
Control* 81,092,986 22.4 -
Tag Along 40,452,227 11.2 630,872 0.0
The Acquisition of Brasil TelecomAcquisition value and funding sources
Funding Sources
R$ 4.3 billion in Bank Credit Certificates (July 2008)
R$ 3.6 billion in Commercial Papers (August 2008)
R$ 2.0 billion in Commercial Paper (December 2008)
R$ 1.5 billion in Cash
R$ 11.4 billion
*Considers common shares that were subject to shareholders’ agreements governing the relationship among the controlling shareholders;
(5) Invitel Debt
(4) Mandatory Tender Offer (Tag Along)
5,4
2,7
11,4
1,0
12,4
(3) Acquisition of the Control
(=) Total Cash Paid
(=) Total Equity Value
TOTAL 198,191,055 54.7 59,587,437 10.7
Investor Relations | 31
Oi and BrT Integration The operational integration process practically concluded at the end of 2009, absorbing the expected synergies
• Objective: begin 2010 with a completely restructured company, focused on quickly absorbing synergies
• Assumption: adoption of best practices from both companies
Engineering and Network Marketing and Channels Opex
• Integration of newly planned and operating
network
• Single brand model – “Oi”
– Migration of public phones, own stores
and kiosks
• Implementation of administrative
restructuring
• Renegotiation of suppliers’ contracts
32
* Network Operating Center
• Implementation of new operational
philosophy , geared towards quality
improvement as perceived by customers
• Unification of NoC*
• Unification of internal plant’s management
model (RI/II) and centralization of external
plant maintenance contract (RII)
• Integration of switch network, expansion of
2G/3G networks reach, unification of core
voice and data network, and consolidation
of SMS/MMS platforms
– Training for call center attendants and
field technicians
• Integration of Oi and BrT portfolios
• Implementation of single model for sale
channels and distribution
– “Retail” distribution was restructured,
focusing on small retailers and
expansion of virtual recharge
– Migration of owned stores to franchises
– SMEs channels adopted model to cater
to different customer profiles and
corporates with national approach
• Use of internal infra-structure to substitute
services provided by other telecom service
providers
• Adoption of naked sim-card strategy in
Region II
• Employees:
– Culture unification
– Single management model
– Unified organizational structure
Investor Relations |
The Acquisition of Brasil TelecomAmortization of the Goodwill
Previous Situation Current Situation - Details
Tax Deductible License (R$6.9 bn)
Network(R$2.1bn)
� Before the 2 steps of the simplification of the structure
� Still done in 17 years (~R$400 mn per year)
� According to the assets lifetime
� Amortization per year in R$ MM
� License (R$6.87 billion)
- 17 years of amortization
� Network (R$2.10 billion)
- Amortization in 7 years (average)
� Amortization of ~R$700mn per year
Investor Relations | 33
Current Situation
� Total of Amortization is composed of 2 parts:
1 Tax deductible (done in BrT) – R$8.9 billion;
+
2 Not tax deductible (done in Coari) – R$6.9 bn
Not Tax Deductible
� Resulted from the additional provisions needed
License (R$5.3 bn)
Network(R$1.6bn)
� Still done in 17 years (~R$320 mn per year)
� Amortization in 7 years (average)
(~R$250 mn per year)
AGENDA
Brazilian Telecommunications Market
Oi: Profile, Footprint and Strategy
3
11Oi: Profile, Footprint and Strategy
Operational and Financial Results
Brasil Telecom Acquisition – The Deal
Expectations for the Future
Investor Relations | 34
11
17
31
35
Long termShort / Medium term
� Increase of Internet penetration� Mobile reaching maturity with increased VAS
relevance � Increase of Pay TV penetration
Strong competition in mobility (traffic) with � More competition in broadband with 3G/LTE
� Continuation of main trends- Slight reduction in fixed lines and focus on
alternative plans- Mobile and broadband as growth drivers� Fixed companies consolidating DTH offers� Triple Play ›› Quadruple Play
Market
Future scenario brings challenge and opportunitiesBenefits of the Deal
Auction for LTE (4G) frequency bandsRegulation of new pro competitive actions (PGR)Mobile Interconnection Rates based on cost
models (VU-M)
� WiMax as possible access solution Next Generation Networks (NGN) / VoIPFTTX access becomes significant
Incumbents permitted to provide IPTV broadcasting and/or to buy cable companies through approval of:- PL #29 and/or- New auction for cable licenses
Auction for WiMax frequency bands
Strong competition in mobility (traffic) with portability and 3G
3G becomes an alternative access for broadband in the retail
� More competition in broadband with 3G/LTE (4G) and WiMax
� New competition with alternatives ways of access (Skype, for example)
Competition
Regulation
Technology
Investor Relations | 35
AttachmentsAttachments
Investor Relations | 36
General Concessions Plan (PGO)*Telebrás Break-up and Privatization
Competition intensifies: incumbents allowed to offer new services (long distance and data) nationwide New mobile start-up companies
Full Billing for mobile companies
Approval of Cable Law
1995 1997 1998 2000 2002 2005 2006 2007 2008..2008..
Regulation: Brazilian Telecom Market has experienced important changes in its institutional/regulatory
Pulse-minute conversionNum. portability3G AuctionGeneral Law of
Telecom: creation of ANATELAuction of licenses for 2nd players or Mobile
Competition: Licenses for fixed line mirror companies
Concession contract renewal for incumbent fixed line telcos (25 years)
1995 1997 1998 2000 2002 2005
(*) – The General Concession Plan determines that M&A among fixed-line incumbents is not permitted.
New billing rules (pulses to minutes) interconnection rates
2006 2007 2008..2008..
Cable law revisionPGO revisionFull convergence(Fixed, Mobile, Broadband, Video)
Investor Relations | 37
30,8%
34,0%36,8%
39,7%
44,7%46,2%
44,5%
46,1%45,9%
Brazilian Telecommunication Gross Revenues
R$ billion
� Whereas fixed telecom
revenue has grown at an107
115
131
146 148
Market: As access grows, mobile becomes relevant in sector’s total revenues
49 55 60 65 66 72 78 82
19 20
22 28
35 43 49
58 67 66
16 17
2002 2003 2004 2005 2006 2007 2008 2009 1T09 1T10
revenue has grown at an
average of 7.6% annually,
mobile revenues has reached
a rate of 17.0% per year
between 2002 and 2009.
Mobile as % of TotalFixedMobile
Source: Company reports (Tele Norte Leste, Brasil Telecom, Telesp, Embratel, GVT, Net, Tim Brasil, Vivo, Claro, Telemig and Tele Norte Celular) and Telecom
7183
95107
115
Investor Relations | 38
3735
107%
92%99%
90% 88% 90%
110%
161%
108%
99% 98%93%
97%103%
89%
Region I: 83% Region II: 101%
Region III: 110%
Brazil: 93%
Mobile Penetration rates in the Brazilian States% March 2010
78%73%
68%
84%88%
75% 76% 74% 73%
61%
47%
89%
79% 80%
RJ MG ES AM RR PA AP PE RN SE AL CE PB BA PI MA SP DF MS MT GO PR SC RS RO AC TO
Source: Anatel
Region I Region III Region II
Investor Relations | 39
Dial-Up Access
Local Internet dial-up access: Increase dial-up access availability for local STFC mode to have 56%
of the 2,995 municipalities in Region I under this service following Anatel’s schedule
Alternative long distance plan – For the municipalities not covered by the local dial-up access schedule there will be an alternative National Long Distance (NLD) plan offer with non-geographic access code up until December 31, 2010
Expand broadband commercial retail offer to all municipalities in Regions I and II (4.8 thousand municipalities)
Expand optical fiber network in Northern Region to all municipalities of Boa Vista (RR), Manaus (AM) and Macapá (AP)
Broadband and Data
The Acquisition of Brasil TelecomCommitments with ANATEL (1/3)
(AM) and Macapá (AP)Increase the number of municipal head offices in Regions I and II through optical fiber in addition
to those already existing
Fixed
Public telephony
– Region I: Payphone cards acquisition of cards with tariffs previously approved by Anatel printed on the cover. Exclusive commercialization of payphone cards with tariffs printed in authorized sales posts from Dec31, 2009
– Region II: conduct a viability study on the above actions to implement in Region II
Mobile
Extend offering of all existing offers that have national coverage in Region I to Region II until Dec31, 2009.
Environmental actions
Investor Relations | 40
Supply over 2 thousand sets of antenna, decoders and TV sets to public institutions.Offer on the DTH and cable operations’ basic schedule an independently- produced national
channel until December 31, 2010.Focus on efforts to popularize Pay Tv through available offers.
Pay Tv
National Security
Supply to the Military Forces a voice and data communication system, including notebooks and CPEs, in 66 border posts in Region I and II, for up to 18 months after Anatel’s approval.
Propose Memorandum of Understanding with the Brazilian Spatial Agency, Ministry of Communications and Defense Ministry, up to 90 days, in order to collaborate in the Brazilian Geostationary System Project.
The Acquisition of Brasil TelecomCommitments with ANATEL (2/3)
Geostationary System Project.
Research & Development
Increase the financial resources available for research and development purposes in
Brazil.
EILD* andCorporate
Maintain and increase in each PGO Region the same existing conditions in offers available to
the corporate segments of Oi and BrT. Lower the numbers of special requests in Region I to the same level EILD requests in BrT’s Region
within 12 months. Maintain or lower the percentage of Special EILD in Region II.
*Special industrial exploration of dedicated lineInvestor Relations | 41
Transparency
of offers
Develop specific processes to speed up commercial service for the corporate segment
(with the requirer name, required item and date of request) by making available quarterly reports to Anatel.
Adopt a system to announce in the internet corporate segment offers for 3 months in Regions I and II.
Create a commercial corporate unit in Regions I and II by developing a speed-up process in 3 months.
Develop a data system for Anatel that features offers, plans, promotions, benefits and
disadvantages of specific offers to the final customer through quarterly electronic reports.
The Acquisition of Brasil TelecomCommitments with ANATEL (3/3)
Number of
employees
Maintain the consolidated number of employees at the companies until April 25, 2011
(taking as reference the number of employees on February 01, 2008).
Lawsuits
with Anatel
Renounce in 30 days to the lawsuits made against Anatel (regarding Fistel) by Amazônia
Celular .Discuss with Anatel other open judicial and administrative lawsuits.
International
Expansion
Inform Anatel about Oi’s operation in the international market through quarterly reports.
Investor Relations | 42
Shareholder Rights
Dividends
� Common shares have a tag along right of 80% of the value paid upon acquisition of control under existing Corporate Law.
� The Preferred shares do not have tag along rights.
Tag along
Voting Rights� Common shares have full rights to vote at shareholder meetings.
� All shares: right to receive a minimum 25% of adjusted annual net income.
� Preferred Shares and ADR (254.9mn): minimum of 6% of Capital (R$217.9 million - Dec/09) or 3% of Shareholders’ Equity (R$161.1 million – Dec/09), whichever higher.
Corporate StructureShareholders Rights
� Five members, appointed by:- Controlling Shareholder (Telemar Participações) - 3- Minority Shareholders (voting shares) -1- Minority Shareholders (preferred shares) -1
Voting Rights
Board Members
Fiscal Committee Members
Redemption Rights
� Common shares have full rights to vote at shareholder meetings.� Preferred shares have right to vote only under specific circumstances (a).
� Minority shareholders have the right to appoint two board members (within of 11).
� Shareholders have the right to redeem under certain special circumstances (b)
(a) Approval of long term agreements with related parties; redemption of preferred shares; full right to vote if the Company does not pay dividends for three consecutive years.
(b) Issuance buy the Company of a new class of preferred shares; change in preference right of shares; redemption of shares; reduction on statutory dividend; merger of the company; change in corporate purpose. Investor Relations | 43
CVM Instruction n 358, art.12: Shareholders owning a direct or indirect controlling stake in the
company, shareholders who elect the members of the Board of Directors or the Fiscal Council, or any
private individual, legal entity or group of same, acting jointly or representing a common interest,
that attains a direct or indirect stake equivalent to 5% (five percent) or more of the company’s
types or class of shares, must immediately inform the Company, under the terms this article.
TNL - Tele Norte Leste Participações
Capital Treasury Control Free-Float
Common 130,611,732 3,036,149 68,504,187 59,071,396
BRTO – Brasil Telecom S.A.
Capital Treasury Control Free-Float
Important Notice to TMAR and TNE ShareholdersMarch 2009
In compliance with the terms of article 12 of CVM Instruction n° 358, art.12, TELEMAR advises itsshareholders that the Company cannot be held responsible for any public disclosure of information bythird parties regarding the acquisition or disposal of equity stakes equivalent to 5% or more of eachclass of shares or of the rights pertaining to these shares or other securities issued by the Company.
TMAR - Telemar Norte Leste
Capital Treasury Control Free-Float
Common 107,063,093 - 104,227,873 2,835,220
Preferred A 130,487,295 223,500 104,329,417 25,934,378
Preferred B 1,063,967 - 6 1,063,961
TOTAL 238,614,355 223,500 208,557,296 29,833,559
Preferred 261,223,463 6,262,730 - 254,960,733
TOTAL 391,835,195 9,298,879 68,504,187 314,032,129
Capital Treasury Control Free-Float
Common 203,423,176 - 161,990,001 41,433,175
Preferred 399,597,370 13,231,556 128,675,049 257,690,765
TOTAL 603,020,546 13,231,556 290,665,050 299,123,940
Investor Relations | 44
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
IR Contacts
Roberto Terziani 55 21 3131-1211
Bayard Gontijo 55 21 3131-1211
Carolina Gava Silveira 55 21 3131-1314
Bernardo Guttmann 55 21 3131-1316
45
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
Rua Humberto de Campos, 425 / 7th floor Leblon - Rio de Janeiro - RJ
E-mail: [email protected]
Bernardo Guttmann 55 21 3131-1316
Patricia Frajhof 55 21 3131-1315
Michelle Costa 55 21 3131-2918
Visit our website: www.oi.com.br/ir
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