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Transcript of 0 November 17, 2004 UBS Global Conference Presentation.
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%
(TDMA/GSM)(TDMA/GSM)
Embratel (LD Carrier)Telefonica Vivo(CDMA)
(TDMA/GSM)(TDMA/GSM)
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)
7
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)
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
10
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)
11
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
12
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
13
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
14
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)
+
15
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
16
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”
17
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%
21
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$1.1 bn)
2.0
1.1
0.9
1.1
2.8
2.22.5
0.6
60%
40%
2.2
7.9
1.1
0.7
0.4
98 99 00 01 02 03 9M04
CAPEX / NET REV.
22
Consolidated Operating Cash Flow after CAPEX R$ 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
23
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
24
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 .
25
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
26
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