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ABAMEC* Presentation Rio de Janeiro and São Paulo November 2002

ABAMEC* Presentation Rio de Janeiro and São Paulo November 2002 * Brazilian Analysts Association. Part I. Corporate Structure. CORPORATE STRUCTURE. TELEMAR PARTICIPAÇÕES S.A.*. FREE FLOAT. 18.7%. 79.0%. TELE NORTE LESTE PARTICIPAÇÕES S.A. Treasury.

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ABAMEC* Presentation Rio de Janeiro and São Paulo November 2002

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  1. ABAMEC* Presentation Rio de Janeiro and São Paulo November 2002 * Brazilian Analysts Association

  2. Part I Corporate Structure

  3. CORPORATE STRUCTURE TELEMAR PARTICIPAÇÕES S.A.* FREE FLOAT 18.7% 79.0% • TELE NORTE LESTE • PARTICIPAÇÕES S.A Treasury 2.3% ** 79.5% ** CONTAX TELEMAR Norte Leste Treasury FREE FLOAT 1.6% 19.0% *53% of TNE Voting Shares ** Wholly owned subsidiary

  4. Part II TELEMAR NORTE LESTE

  5. Restructuring 16  1 • Optimization of Resources; • Process Standardization; • Management Centralization; • Merge of wireline companies; Main Achievements 1998 2002 International • RI • RII • RIII Processes Management/Processes 16 Companies 16 IT Systems 15 Network Platforms 23 Network Management Centers 116 Call Centers All Unified Services Local & Advanced Voice Domestic & International LD Nationwide Data Transmission Wireless Call Center Network Management / Internet Services Local Voice and regional LD; Regional Data Communic. Market Approach Market Vision Geographic Customer Segmentation

  6. PLATFORM GROWTH – TMAR Million Lines in Service 15.1 14.8 14.6 +106% 11.8 9.7 7.8 7.2 Jul/98 1998 1999 2000 2001 Sep_01 Sep_02

  7. REVENUE GROWTH - TMAR R$ Millions 13,687 11,573 +97% 11,465 10,851 10,133 9,997 8,516 8,433 8,127 8,480 7,391 6,946 6,222 5,158 1998* 1999* 2000* 2001 9M01 9M02 Gross Revenue Net Revenue * 1998, 1999 and 2000 refer to the Consolidated statement

  8. 483 478 764 761 744 722 717 405 384 385 1998* 1999* 2000* 2001 9M02** 1998* 1999* 2000* 2001 9M02** PRODUCTIVITY RATIOS - TMAR Cash Costs per Average Line in Service - R$ Net Revenue per Average Line in Service - R$ - 20 % 6 % 419 622 379 376 + 60 % 317 266 EBITDA per Average Line in Service - R$ 235 204 * 1998, 1999 and 2000 refer to the Consolidated statement ** 9 months Annualized 1998* 1999* 2000* 2001 9M02**

  9. EMPLOYEE PRODUCTIVITY - TMAR Lines in Service / Employee (R$ Thousands) Net Revenue / Employee (R$ Thousands) 1,069 1,423 + 402 % + 342 % 673 984 563 614 385 560 255 397 322 213 1998* 1999* 2000* 2001 9M01 9M02 1998* 1999* 2000* 2001 9M02** 529 + 657 % EBITDA / Employee (R$ Thousands) 241 191 184 112 70 1998* 1999* 2000* 2001 9M02 ** * 1998, 1999 and 2000 refer to the Consolidated statement ** 9 months Annualized

  10. CONSOLIDATED CAPEX - TNL R$ Millions 5 years R$ 19.0 bn or US$ 9.6 bn 10,060 2,172 7,888 1,334 2,804 2,500 2,244 702 632 1998 1999 2000 2001 9M02 Wireline Wireless

  11. Financial Management • Personnel Management • Suppliers Management • Corporate Management MANAGEMENT MODEL – MAIN PILLARS • Detailed Capex planning, cost and revenue matrix plan. • Strong cost control. • Strong budget control, focusing on return on investment/EVA. • Meritocracy is key. • Talent management and retention of key personnel. • Culture based on corporate values and results oriented. • Formation of leaders and winning teams. • Quality management. • Strategic use of internal communication. • Redesign of supply contracts, including quality and performance targets. • Reduction of the supplier base and centralized management. • Development of strategic suppliers. • Outsoursing of non-core activities (call center, etc). • Consolidation of network technologies. • Specific targets broken-down to all management levels. • Monthly evaluation. • Simple structure with few hierarchic levels. • Redesign and standardization of key processes. • Variable remuneration based on achievement of targets. • Thematic decision making Committees.

  12. MANAGEMENT MODEL – PLANNING PROCESS • Negotiated / Discussed / Validated; • Board + Top Management; • Annually. Guidelines of the Annual Plan • STRATEGIC PLANNING • Negotiated / Discussed / Validated; • Board / Management • Annually. Contract of Company’s targets • BUSINESS PLAN Evaluation and adjustments to Annual Plan • Matrix follow up per Business Unit / Region; • Thematic Committees; • Monthly. • FOLLOW UP • Incentives / Remuneration based on results achieved; • Annually. • BALANCE OF RESULTS Meritocracy

  13. Part III

  14. Achievements and Challenges

  15. Achievements • Better than expected launching of a huge GSM startup; • Launching of a new brand, with a strong appeal to life style, with a different proposition to the market; cellular treated as a personal consumer product, instead of a telecommunication product; • 500,000 clients in three months attracted by innovative marketing campaigns; • First GSM company in Brazil, with advantages in relation to incumbents such as worldwide handset scale, higher flexibility and security to customer, more sophisticated products and services; • Focus on innovative products and services (voice and data).

  16. Coverage Distribution Channels Optimization of Resources PRE-LAUNCHING ROLLOUT Launching at the end of June, 2002 • 200 cities covered; 30 million people • GPRS coverage in six main capitals • Record of site installation per month • CAPEX optimization • International Roaming (more than 50 countries) • Coverage focused on profitable areas • 1,600 points of sales in Region I (breaking exclusivity of A & B Bands distribution channel) • Diversified channel with high presence: • Retail, specialized agents, stores, telesales • Corporate sales effort combined with Telemar. • Consumer and corporate focus through high points of sales presence and diversity of channels • Tight headcount structure: ~660 employees • Infrastructure Sharing • Outsourcing (including “call centers”) • Synergies with Telemar. • Focus on profitable growth, minimizing OPEX and optimizing CAPEX

  17. BRANDING EVOLUTION: New Entrants with a new Focus • Strong connection with technology (“cell”, “tel”) A and B Band Operators + • Based on life style New entrants Functionality Emotion / Life Style - +

  18. Oi BRANDING Instead of emphasizing Tel and Cell... ... focused on goods and emotions

  19. POST LAUNCHING RESULTS Initial Targets First Achievements • 500,000 clients in 12 months • 500,000 clients in three months • Innovative Campaign: 31 Years • Diferentiated Service Plans • Diversified Handset Offer • ARPU of R$ 26 • ARPU of R$ 36 • MIX Pre / Post: 90% / 10% • MIX Pre / Post: 80% / 20% • Market share and gross adds below market fair share • Market share and gross adds above market fair share

  20. GSM TECHNOLOGY ADVANTAGES • GSM technology is the most used in the world. European operators all use GSM 1800 • Handset diversity • Competitive Prices – up to 20% lower than TDMA / CDMA (low end) • Large handset variety • State of the art handsets with camera devices, GPRS, etc. • The SIM card contains customer’s basic data • More flexibility and security to customers • Security • Clone Proof • Payments On-Line (Banking Certified) • Higher flexibility • Easier handset substitution • Download and storage of small data aplications • Higher storage capacity • Advanced Data Applications • Higher speed • “Always on” • Better Graphic resources • Higher variety of applications

  21. Oi MTV Product Handsets • Increased customer base • Stimulated Voice Usage • Stronger SMS usage • Brand Name Consolidation • Very positive initial results Devices Services Plans Packs / Bundles

  22. VOICE: Oi XUXA Product Concept • Target: children and family • Strategy: offer an exclusive product, that only Oi can develop • Features: Educational Products & Games • Focus: Continued Service

  23. DATA GPRS: COVERAGE AND SPEED Real Speed Download time for 1 Mb 14.5 Kbps 9.5 min GPRS coverage in six capitals Rio de Janeiro, Vitória, Belo Horizonte, Salvador, Recife and Fortaleza Fixed Line 56Kbps Modem = 24.2 Kbps 5.8 min S45 – IrDA GPRS = GPRS Coverage - Rio de Janeiro - Launch 30.4 Kbps 4.6 min T68 – IrDA GPRS = 3.3 min 41.6 Kbps PCMCIA Card GPRS – Globe Trotter = 1.3 min 110.9 Kbps LAN Oi =

  24. WIRELESS DATA APPLICATIONS “Oi is cellular and credit card clone proof” “Credit Card at the beach, street markets, in the cab ...”

  25. TELEMETRIC & INDUSTRIAL APPLICATIONS GSM/GPRSWireless internet Solutions WAP “Wide Area Protocol” applications

  26. OPERATORS PARTNERSHIPS • Network Access Providers • TARGET: • Increase market share and ARPUs EQUIPMENT SUPPLIERS CONTENT PROVIDERS • Non Tech companies and Internet Big Players. • Ex: Banks, Portals • TARGET: • New channels with their clients • Increase content offer • PDA and handsets suppliers. • Ex: Siemens, Nokia, Ericsson.. • TARGET: • Create own interface with the client. • Create new demand for technology and handset replacement SOLUTION PROVIDERS • ASPs, System Integrators, System Developers • Ex: Promon IP, Oracle, Microsoft • TARGET: • Potential revenues from new services and products • Establish technological standards and increase application sales.

  27. Oi’s 2003 PERSPECTIVES Strategic Guidance Actions • Profitable Growth Focus • Capture additional clients and market share • Focus on profitable clients • Growth of corporate segments and SMS revenue • Continuous Cost Control • Optimized structure, outsourcing non-core services • Reduction of SAC • Capturing synergies with TMAR • Offer integrated corporate solutions • Shared services (under analysis) • Capex control • Focused expansion based on value addition • Reinforce ongoing infrastructure sharing initiatives (sharing, instead of building, whenever possible) • New projects based on solid business plans • Data Focus • Stimulate the use of SMS - interoperability • Portfolio of corporate applications

  28. EASY AS IT IS!

  29. Part IV FINANCIAL RESULTS

  30. CONSOLIDATED INCOME STATEMENT – TNE R$ Millions 3Q01 3Q02 Va. % 9M01 9M02 Va. % Gross Revenue 3,570 4,206 18% 9,976 11,739 18% Net Revenue 2,626 3,083 17% 7,370 8,648 17% Operating Costs and Expenses (2,188) (1,798) -18% (4,811) (4,618) -4% EBITDA 437 1,285 194% 2,559 4,030 57% (787) (975) 24% (2,221) (2,882) 30% Depreciation (354) (859) 143% (572) (1,552) 171% Financial Results (429) (382) -11% (137) (315) 130% Net Result 17% 42% 35% 47% EBITDA Margin

  31. INCOME STATEMENT – TMAR R$ Millions 3Q01 3Q02 Va. % 9M01 9M02 Va. % Gross Revenue 3,577 4,042 13% 9,997 11,574 16% Net Revenue 2,633 2,951 12% 7,392 8,516 15% Operating Costs and Expenses (2,134) (1,515) -29% (4,744) (4,304) -9% EBITDA 499 1,436 188% 2,648 4,213 59% Depreciation (750) (872) 16% (2,118) (2,673) 26% Financial Results (193) (571) 196% (278) (1,218) 338% Net Result (342) (21) -94% 191 185 -3% EBITDA Margin 19% 49% 36% 49%

  32. CONSOLIDATED REVENUE & EBITDA - TNE R$ Millions 47% 8,648 35% 7,370 4,030 2,559 9M01 9M02 Net Revenue EBITDA EBITDA Margin

  33. CAPEX / Net Revenue (%) 100% 96% 48% 15% 35% 36% 17% 1998 1999 2000 2001 9M01 9M02 2002E CONSOLIDATED CAPEX - TNE R$ Millions 10,103 10,060 8,648 8,122 7,370 7,058 6,222 5,158 2,804 2,500 2,000 2,244 1.334 1998 1999 2000 2001 9M01 9M02 2002E Capex Net Revenue

  34. CONSOLIDATED NET DEBT - TNE R$ Millions 9,128 9,006 8,317 7,702 7,036 3,997 2,091 Mar_01 Jun_01 Sep_01 Dec_01 Mar_02 Jun_02 Sep_02

  35. CONSOLIDATED DEBT – CURRENCY AND COST (SEP/02) Currency Interest 10% Domestic CDI 13% 33% 11% US$ TJLP 20% 52% Yen (Swap to US$) Fixed Rate (US$) Currency Basket 15% Floating Rate (US$) 46% Cost of Debt Currency Cost (% p.a.) US$ Libor + 5 Yen 1.7 Basket 12.3 Real 16.0

  36. CONSOLIDATED DEBT - AMORTIZATION SCHEDULE (SEP/02) 29% 21% 18% 18% 11% 4% 2002 2003 2004 2005 2006 2007 onwards

  37. “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) 3131-1314/1313/1315/1316/1317 Fax: (55 21) 3131-1155 E-mail: invest@telemar.com.br Visit our website: http://www.telemar.com.br/ri

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