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CS Global Media Communications Convergence
Conference Pedro Ripper Strategic Planning New
Business Director June 10, 2009
Investor Relations
Tele Norte Leste Participações S.A.
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Agenda
Brazilian Telecommunications Market 2 Oi
Profile and Results 8 Expectations for the
Future and Strategy 13
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Brazil Snapshot
Brazil assumes increasing importance in the
international economic environment

• 10th economy in the world
• Declining interest rates, although still one the
  highest worldwide
• Selic 13.75 in December 2008 10.25 current
  9.0 2009E
• Inflation under control for more than a decade
• CPI 5.9 in 2008 4.33 2009E
• During the recent crisis, Brazil has been more
  resilient than main developed countries in terms
  of economy growth

• Land Area
• 8.5 million Km2 (e.g England3 of Brazilian
  area)
• Population
• 190 million inhabitants
• 56 million households (85 urban)
• Economy
• GDP US 1.5 Trillion (2008)
• GDP per capita PPP US 7.7 thousand
• Currency US 1,00 R 1.95 (May/09)

Source ANATEL, IBGE, Teleco, ML Wireless,
UNCTAD and Internet World Stats FOCUS Report
Brazilian Central Bank
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Brazilian Telecom Sector
Sectors Evolution
09
03
Current Scenario
98

• Focus on competition
• Consolidation
• Mature fixed mobile and broadband as growth
  drivers
• Convergence in early stages
• Launch of 3G

Post-Privatization

• Multiple players
• Focus on universal and quality of services
• Expansion of fixed and mobile
• GSM launch
• Broadband start-up

Pre-Privatization

• State-owned monopoly
• Lack of investments
• Low quality of services
• Huge pent-up demand in fixed and mobile
• Incipient Internet

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Brazilian Telecom Sector
Performance of the Brazilian Market Fixed and
Mobile
Fixed Market Million, Lines in Service
Mobile Market Million, Mobile Users
CAGR06-08 22.8
153.7
150.6
121.0
CAGR06-08 3.1
99.9
41.3
41.9
39.4
38.8
38.8
34.9
Dec07
Dec08
Dec06
Dec02
Dec07
Dec08
Dec06
Dec02
Mar09
Mar09

• Market has accelerated growth in 2008, but
  started 2009 at a lower rhythm (22 in 1Q09 vs
  23 in 1Q08).
• Net additions of 3.0 mn in 1Q09 are 37 below
  1Q08 due to the clean-up of subscribers base
• Naked sim card continues as national trend
• Penetration 81 of inhabitants

• After being stable from 2002-06, the fixed market
  had a slight growth in the past 2 years due to
  new entrants (specially high-end and SMEs)
• Incumbents share losses to new entrants at
  significant lower pace as compared to developed
  markets
• Penetration 51 of households

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Brazilian Telecom Sector
Performance of the Brazilian Market Broadband
and Pay-TV
Broadband Market Million, Users
Pay-TV Market Million, Users
CAGR06-08 17.0
CAGR06-08 37.6
13.6
6.6
10.6
6.3
5.3
4.6
7.7
5.6
3.6
0.6
Dec08
Mar09
Dec08
Mar09
Dec07
Dec02
Dec07
Dec06
Dec06
Dec02

• Continuous expansion in 2008 (38)
• 3G changes the industrys dynamic 3G data cards
  as major trigger for a new wave of growth in 1Q09
• Fierce competition in areas that concentrate
  high-end clients and falling ARPU
• Penetration of 18 of households (fixed broadband)

• Strong pent-up demand (still of high cost
  service)
• Cable-TV accounts for 63 and DTH for 33 of the
  acesses

Fixed broadband offered by 6 ADSL, 2 main
cable, 1 main DTH, 11 major radio and other
smaller providers. Mobile broadband offered by
the 4 major mobile players Pay-TV is offered
by 7 major providers in Brazil and other smaller
companies.
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Competition Main Telecom Groups in Brazil
Market Share of Wireline and Wireless Subscribers
and Revenues March 2009

Spanish Group
Telefonica
Vivo (JV TEFPT)
Revenues market-share March/09
National

• New Oi (Oi BrT)
• 33
• Telefónica Vivo
• 29
• Claro Net Embratel
• 24
• TIM 12
• Others 2

Region III
28
30

Mexican Group
Embratel (Telmex)
Claro (Am. Moviles)
Region IV
26
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National Market Share - Mobile Users
National Market Share - Fixed Lines in Service
Also operates Long Distance and Data
Transmission Nationally
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Agenda
Brazilian Telecommunications Market 2 Oi
Profile and Results
6 Expectations for the Future and
Strategy 13
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Businesses and Domestic Footprint
The New Company Businesses and
Subscribers Millions March/09
Pay-TV
Other businesses
Domestic Coverage
Fixed
Mobile
Broadband

• Pioneer in m-payment
• Globenet
• 22,000 km of submarine cable linking Brazil,
  Venezuela, Bermuda and USA
• ISP/Portal
• Largest Brazilian ISP

1º
1º
1º
Belo Horizonte
4º
1º
1º
Uberlândia
Poços de Caldas
Barbacena
21.8
31.8
Total
3.9

• 4 cities (cable)
• Future national DTH operations

• 52
• 4.8 th.

• 21
• 2.3 th.

• 38
• 1.9 th.

share Brazil
Cities

• 58 million clients (RGUs)
• 28 of total clients in Brazil
• Higher group in revenues, with 33 of all
  revenues in the sector

Source Anatel and Companies December/2008
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Oi - Operating Highlights
Revenue Generating Units
Revenue Generating Units (Million)
Broadband
Total RGUs Million, Users

• 14.7 of Fixed Lines in Service in Region I and
  23.1 in Region II
• Focus of investments, mainly in Region I, where
  the numbers of cities covered accounts for just
  14 of total (versus 80 in Region II)

57.7
55.9
0.06
0.06
45.6
41.7
Mobile Mix Million, Users
31.8
30.0
20.3
16.5
Pre-paid
Post-paid
1Q09
2008
2007
2006
1Q09
2006
2007
2008
Oi TV clients (Video)
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Oi - Financial Highlights
Consolidated Gross Revenue and EBITDA (R billion)
Consolidated EBITDA Oi (TNE) R Million Margin

Consolidated Gross Revenues R million

• Non Recurring items in 1Q09
• Consultancy firms expenses related to BrT
  operation
• End of subsidies deferral to retail post-paid
  handsets (related to end of the fine)
• Integration with BrT
• Non Comparable items in 1Q09 vs 1Q08
• Start-up in São Paulo and acquisition of
  Amazônia Celular
• Standardization of Ois and BrTs accounting
  practices

D1Q08
7.8
11,242
2,377
10,431
28.4
3.6
1Q08
1Q09 Rec.
1Q08
1Q09
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Oi Financial Highlights
Consolidated CAPEX and Debt
Revenue Generating Units (Million)
Consolidated Gross Debt R Billion
Consolidated CAPEX Million, Users
Local Currency
Foreign Currency
25.9

• Foreign exchange exposure 2.2
• Effective cost of debt 11.65 (97 of CDI)

20.5
7.3
9.0
Mar/08
Dec/08
Mar/09

• 12.1 of 1Q09 net revenue (vs 11.2 in 1Q08)

3.8
3.7
Consolidated Net Debt R Billion

• Net Debt/adjusted EBITDA 1.9x

0.8
0.9
1Q09
2008
2007
2006
1Q08
Mar/08
Dec/08
Mar/09
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Agenda
Brazilian Telecommunications Market 2 Oi
Profile and Results
6 Expectations for the Future and
Strategy 13
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Ois Recent Evolution and Strategy
In the last 10 years Oi has faced important
challenges and focused on its incumbent Region to
sustain its growth
Key points
Competition increasing and consolidation
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• Customer segmentation
• Fast growth and network expansion of
• Mobile
• Broadband
• Service convergence
• New services
• Pay TV
• Mobile payment
• MAs and consolidation

New businesses and competition
02

• Launch of new services
• Mobile
• Long distance
• Broadband
• ISP
• Counter attack against new entrants

Integration and obligations
99

• Integration of regional operations
• Fixed network expansion to fulfill regulatory
  obligations

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Future scenario
The short and long term market evolution bring
some challenges

• Increase of Internet penetration
• Mobile reaching maturity with increased VAS
  relevance
• Increase of Pay TV penetration

• Continuation of main trends
• Consolidation
• Slight reduction in fixed lines
• Mobile and broadband as growth drivers
• Fixed companies launching DTH services
• Triple Play Quadruple Play

• Strong competition in mobility (traffic) with
  portability and 3G
• 3G becomes an alternative access for broadband
  retail

• More competition in broadband with 3G/4G and
  WiMax
• New competition with alternatives ways of access

• Auction for 4G frequency bands
• Regulation of new pro competitive actions (PGR)
• Mobile Interconnection Rates based on cost models
  (VU-M)

• 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

• Next Generation Networks (NGN)
• FTTX access becomes significant

• WiMax as possible access solution

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Strategy
To face the future scenario and the limited
outlook for long-term expansion, Oi decided to
analyze the adoption of new growth levers

• Increase market share

• Increase ARPU

• New services and business

• Include new clients

• Geographical expansion

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Strategy
Oi decided to focus on strengthening its
convergent offer and on its strong presence at
the low income segment

• Differentiation as the only player with
  integrated and convergent services
• Launch of new services to strengthen Ois
  convergent position (e.g. Pay TV)

Include new services in a convergent portfolio

• Differentiation with innovative strategy for the
  low income segment
• Creation of new business models (e.g. no handset
  subsidies with sale of standalone chips)

Include new clients with focus on low income
segment
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Strategy
The company adopted an aggressive strategy at the
low income segment that now represents a growth
opportunity in the expansion to the other two
Brazilian regions
Oi

• Bundles for premium customers
• Discount in services or credit instead of handset
  subsidies
• Fixed-Mobile convergent offering for the corporate

Others

• No handset subsidies SIM card-only with free on
  net and fixed to mobile calls
• Broaden pre-paid recharge base through allowing
  recharges of R1

Jan/07
Set/08

• Region II
• Pre-paid leverage base through the successful
  model of Region I
• Post-paid broaden convergent offerings

• Region III
• Focus on pre-paid though aggressive offerings
• Bundles with national long distance

• Corporate
• Leverage presence with the national coverage and
  convergence

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Strategy
In three years, Oi will consolidate its national
leadership in the coverage of broadband services
Ois fixed broadband coverage
RIRII
(thou)
87 of Brazil
77 of Brazil
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Strategy
Oi continued its expansion to new businesses with
the acquisition of Way TV and the future launch
of Satellite Pay TV services is an important
market opportunity

• Acquisition of Way TV in 2006 allowed Oi to
  become the first quadruple-play company in Brasil
  (four cities)
• Oi has developed expertise in the cable TV
  business (marketing, sales, operations, economics)

• The launch of Ois satellite pay TV services
  focusing B/C segments in 2009 it is an
  opportunity to
• Exploit a large customer base that is not covered
  by the current players with a suitable offer
• Fulfill Ois convergence portfolio gaps
• Get scale to support the satrtegy of cost
  leadership
• Develop operational expertise

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Strategy
Internet and mobile payment are others key
elements in this expansion to new business

• Leader in broadband and dial up ISP Services
  (market share of 35 and 68)
• Vice-leader in the national portal business
  (audience only 8 lower than the national portal
  leader

• First and innovative mobile payment plataform in
  Brazil
• Strong synergies with Oi mobile business (data
  services platform, credit information,
  relationship)
• High upside potential related to credit
  card/electronic payment market dynamics

• Become the national leader monetizing its
  audience and leveraging sinergies with other
  businesses
• Leverage new services such as online music and
  multiplatform advertising
• Fulfill current gaps through partnerships and MA
  opportunities

• Exploit synergies with telco and other businesses
• Exploit new payment opportunities
• Operational focus on selected markets
• Focus on partnerships to increase the acceptance
  and customer base

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Strategy
Integration of BrT is a key point in the company
strategy of expanding to new regions besides
increasing operational and financial efficiency

• Synergies
• Establishment of a national company from two
  regional companies, which rapidly captures
  potential synergies
• Integration of the two companies started since
  day zero
• Management structure has already been defined
• Prioritize the identification of quick-wins based
  on the best practices of each company
• Market
• Reinforce the strategy of differentiation through
  convergence in a segmented manner
• Portfolio integration and single brand

Synergies
R600 mn
R 5 to 6 billion
CAPEX
Oi Fixed
Oi Velox (Broadband)
Oi Mobile
Net Debt/ EBITDA
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Thank You !
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