November 17, 2004

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November 17, 2004November 17, 2004

UBS Global Conference Presentation

2

AGENDA

• Brazilian Telecom Market

• Telemar Overview

• Financial Results

1

3

From State Monopoly to Privatization and Competition

RIII

RI

RII

Up to 1998

(State Monopoly)

• One Holding Company• 26 state companies (fixed/mobile)

1998

(Duopoly)

Fixed line

Mobile

• 4 incumbents• 4 Mirror Co’s.

Telemar

Telefonica

Brasil

TelecomRIV Embratel

(Long Distance)

• 10 incumbents• 10 Mirror Co’s

I & II

III

IX

X

IV

VI

V

VII

VIII

Local Fixed line

Long Distance

Broadband

Mobile

Data (Corporate)

: Low

: Medium-High

: Low-Medium

: High

: High

2004

(Competition)

Degree of Competition (per service)

Major Players

Lo

cal

LD

Mo

bile

Da

ta

Telemar

Telefonica

Brasil Telecom

Telmex/AMX

TIM

Vivo

4

Major Telecom Players in Brazil – September/2004

Brasil Telecom

9.6 M 25%

Telemar

39%15.2 M

Lines in Service

(Brazil: 39 million*)

National Market Share

Region I

Region II

Oi

5.7 M 10% 4.0 M 7%

Opportunity & BRT(GSM)

(TDMA/GSM)(TDMA/GSM)

TIM

11.7 M 20%


Embratel (LD Carrier)Telefonica Vivo(CDMA)


Claro

12.2 M 31% 24.6 M 42%

Region IV

12.0 M 21%

Region III Subscriber Base (Brazil: 58 million**)

National Market Share

Fixed line

Mobile

* Includes smaller incumbents and mirror companies.

** Includes other groups

5

Mobile

Penetration (%)

Growth of Customer Base

94 95 96 999897 00 02 03 04*01

* September 04

Fixed Line

Penetration (%)

Fixed Line & Mobile Customer Base – Brazil (millions)Fixed Line & Mobile Customer Base – Brazil (millions)

PrivatizationPCS Entrants

Growth depends on Brazilian economic uptake going forward

Mobile users already surpassed fixed lines in service, posting an annual growth rate in excess of 30% (1999 – 2003)

Mobile subscribers

Fixed Lines in Service

6

Penetration Figures and Forecasts

Mobile penetration still has a lot of room to grow;

Market estimates between 62.8 / 69.8 m subs by 2004YE;

Estimated mobile penetration for 2008YE ranges from 42% to 58% (80 to 100 m subs);

Fixed line penetration should be more or less stable, relying on GDP growth.

58%

42%

Fixed Line** 23%

* Estimates from: Citigroup, Goldman Sachs, JP Morgan, Merryll Lynch, Pyramid Research.** Estimates from Yankee Group

Mobile*

Max.

Min.

23%

33%

Fixed: 39 M (Sep/04)

Mobile: 58 M (Sep/04)

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Broadband Market

Broadband Market BrazilBroadband Market Brazil

Source: Estimates Teleco e Telemar

Broadband Access – ( thousands)Broadband Access – ( thousands)

1,199

130 326694

1,490

3,1483,547

3,831

1,874

2,591

CAGR

46%

Source: *Pyramid Research Estimates

Broadband penetration still low in Brazil (1.9 m accesses by Sep/04)

ADSL is the dominant technology (~85% market share);

Cable has ~10% market share

Broadband penetration is expected to grow to 30% of total internet accesses by 2008*;

Telemar has a target to increase broadband penetration from 2% of fixed lines to 5% by 2006.

*2003

PC Penetration (% of households)PC Penetration (% of households)

8

AGENDA




9

100%

Contact Center

100%

•(TNL)

Fixed line

Tele Norte Leste Participações S.A.

(TNL)

100%

80.9%

Telemar Participações S.A.

18.9%

Free Float: 81.1%

Shareholder Structure

TNLP

Data Transmission Mobile

Free Float: 19.1%

TMAR

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Telemar – Overview

• Integrated Telecom Service Provider (Sep/04)– 15.2 million fixed lines in service – 5.7 million mobile subscribers– 429 thousand ADSL subscribers

• Concession Area (Region I) - Local Service and PCS– 65% of Brazilian territory/94 million inhabitants– 40% of country’s GDP– Over 20 million households

• Leadership in local and long distance services

• After only 2 years of launching, already #2 position in mobile subs (Region 1)

• Data, Corporate & Call Center Services (nationwide)

• High Free Float: 81.1% of total shares

• Market value of US$ 5.1 billion (Sep/04)

Region I =

• Concession for fixed line services

• License for Wireless services (GSM)

Nationwide

• Authorization for fixed line services, DLD, ILD and Data

• Most heavily traded shares at Bovespa (TNLP4): US$ 48 million/day (Sept/04);

• Strong liquidity at the NYSE (TNE): US$ 18 million/day (Sep/04)

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Main Achievements

Processes

Services

Market Approach

- Optimization of Resources;- Process Standardization;- Management Centralization;- Merger of wireline companies;

Restructuring 16 116 Companies / Brandies16 IT Systems 60 Network Platforms50 Network Management Centers116 Call Centers

Local Voice data and regional LD;

Geographic

Local & Advanced VoiceDomestic & International LD

Nationwide Data Transmission Wireless

Call CenterNetwork Management / Internet

Management/Processes/IT

Services

Market VisionCustomer Segmentation

All Unified

International

RIII

RIRII

20041998

Market ApproachProduct and Service

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Largest Telco Player with Integrated Operations

The Company’s six main business lines provide a healthy balance between stable cash flow and growth opportunities. Telemar is the leader or second major player in five out of its six main businesses

The Company’s six main business lines provide a healthy balance between stable cash flow and growth opportunities. Telemar is the leader or second major player in five out of its six main businesses

Fixed line

Data, Internet &

Corporate Wireless

DLD / ILD

Contact Center

Broadband

National Coverage

• Customer loyalty

• Cross-selling

• Convergent services

• Operating / Financial synergies

• Scale

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Sources of Growth: New Customers and New Services

Penetration Growth

Wallet

Share

Growth

New Services

New Customers

ExistingCustomers

& Services

• Bundles• One Stop Shop• Cross Selling

• Video & VOD• Fixed-mobile phone

Convergence

Synergy

Innovation

Full

TelecomServiceProvider

• CLM (Customer Lifetime Value Management)

• Up Selling

Growth Strategy

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Integrated and Convergent Services

• Velox Wi-Fi• Velox + Oi• Hotspots

• Wireline SMS

• Voice Net + (virtual PBX integrated with Mobile trunks)• Prepaid Mobile recharge on Fixed Line Bill• Oi + Public Phone (single card)• “Oi Family” (reduced tariff from mobile to family’s fixed line)

• Wireless banking

transactions

• Wireless payment

authorizations

• Oi World (Video)

+

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Some Integrated and Convergent Services

Buy a Velox (DSL) and get an Oi (Mobile)

100 minutes free from Oi (Mobile) to fixed

Recharge Prepaid Mobile

on Fixed line Bill

Single Card for Mobile and Public Phone

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Innovation: House of the future

Existing

Client Expenditure Breakdown

New

Content&

Services

+

Up Selling

+

Cross Selling

Broadband

+

Fixed line

+

Mobile

Kitchen

US

B IP Telephony

Fixed Mobile Handset

GamingSecuritySystem

IntegratedEntertainment

WirelessAccess

Video Telephony

VOD

Living Room

Kid’s Room

Kitchen

Home Office

Telemar is piloting new revenue generating

services in its “House of the Future”

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Main drivers:

Ability to anticipate the growth potential of mobile technology and keep on expanding customer base;

Capacity to maintain and increase market share in a changing technological and market environment.

Main drivers:

Ability to anticipate the growth potential of mobile technology and keep on expanding customer base;

Capacity to maintain and increase market share in a changing technological and market environment.

In millions

Growth of Customer Base

Fixed Line Mobile ADSL

19.2

16.5

~22.421.3

CAGR (98-03)

19.7%

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AGENDA




19

CONSOLIDATED NET REVENUE(R$ million)

+ 12% yoy

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EBITDA – ANNUAL EVOLUTION(R$ million)

EBITDA Margin

+ 6% yoy

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CAPEX 2003: ~12% of net revenues, compared to 17% in 2002;

CAPEX 9M04: R$ 1,134 million (9.8% of sales);

CAPEX since 1998: R$ 22 billion;

CAPEX should stay below 15% of net revenues in the medium term.

CAPEX 2003: ~12% of net revenues, compared to 17% in 2002;

CAPEX 9M04: R$ 1,134 million (9.8% of sales);

CAPEX since 1998: R$ 22 billion;

CAPEX should stay below 15% of net revenues in the medium term.

Consolidated CAPEX

R$ billion

10.1

2.01.7Wireline

Wireless

Anatel Targets and Mobile License (R$1.1 bn)

2.0

1.1

0.9

1.1

2.8

2.22.5

0.6

60%

40%

2.2

7.9

1.1

0.7

0.4

98 99 00 01 02 03 9M04

CAPEX / NET REV.

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Consolidated Operating Cash Flow after CAPEX R$ million

1999 2000 2001 2002 2003

Having met our main fixed line universalization targets and mobile rollout,our cash generation is expected to remain strong

CAGR (99-03)69.1%

9M049M03

+25% yoy

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Net Debt Evolution (R$ million)Net Debt Evolution (R$ million)

Based on a strong cash generation, we expect to reduce our net debt level to below 1x EBITDA by 2004YE.

Net Debt/ EBITDA

Debt Position

x

* To this figure should be added the amount disbursed by the Company on its stock buyback program

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TNE: Dividend Payments - 1999/2003

1999 2000 2001 2002 2003

Dividend yield*

Dividend / Interest on Capital

US$ million

Our goal is to continue to provide high cash returns to investors

* Based on stock prices at 10/29/04 .

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Closing remarks

• Ability to timely adjust to market changes, searching for new opportunities

• Re-shaping competition in the mobile market

• Continued increase in market share and revenues

• Sound financial position & increasing returns to shareholders

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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/ir

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

This Presentation is also available in our website at:

www.telemar.com.br/ir

Documents

November 17, 2004