Form 425

Filed by Brasil Telecom S.A.

Pursuant to Rule 425 of the Securities Act of 1933

Subject Company: Brasil Telecom Participações S.A.

Commission File No.: 001-14477

Subject Company: Coari Participações S.A.

Commission File No.: 132-02657

Subject Company: Brasil Telecom S.A.

Commission File No.: 001-15256

THE FOLLOWING ARE MATERIALS MADE PUBLIC BY TELE NORTE LESTE PARTICIPAÇÕES S.A., TELEMAR NORTE LESTE S.A., COARI PARTICIPAÇÕES S.A., BRASIL TELECOM PARTICIPAÇÕES S.A. AND/OR BRASIL TELECOM S.A. RELATING TO THE PROPOSED MERGER OF BRASIL TELECOM PARTICIPAÇÕES S.A. WITH AND INTO BRASIL TELECOM S.A.

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Additional Information and Where to Find It:

This communication contains information with respect to:

 

   

the proposed merger (incorporação) of Brasil Telecom Participações S.A. (“Brasil Telecom Holding”) with and into Brasil Telecom S.A. (“Brasil Telecom”);

 

   

the proposed share exchange (incorporação de ações) between Brasil Telecom and Coari Participações S.A. (“Coari”); and

 

   

the proposed merger (incorporação) of Coari with and into Telemar Norte Leste S.A. (“Telemar”).

In connection with the merger of Brasil Telecom Holding with and into Brasil Telecom, Brasil Telecom (1) has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement on Form F-4, containing a prospectus which will be mailed to the shareholders of Brasil Telecom Holding, and (2) has filed and will file with the Commission other documents regarding the merger.

In connection with the proposed share exchange between Brasil Telecom and Coari, Coari plans to file with the Commission (1) a registration statement on Form F-4, containing a prospectus which will be mailed to the shareholders of Brasil Telecom, and (2) other documents regarding the proposed share exchange.

In connection with the proposed merger of Coari with and into Telemar, Telemar plans to file with the Commission (1) a registration statement on Form F-4, containing a prospectus which will be mailed to the shareholders of Coari, and (2) other documents regarding the proposed merger.

We urge investors and security holders to carefully read the relevant prospectuses and other relevant materials when they become available as they will contain important information about the proposed share exchange and mergers.

Investors and security holders will be able to obtain the documents filed with the Commission regarding the proposed share exchange and mergers, when available, free of charge on the Commission’s website at www.sec.gov or from the issuer of the relevant securities, Brasil Telecom, Coari or Telemar, as applicable.

Special Note Regarding Forward-Looking Statements:

This communication contains certain forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. The words “anticipates”, “believes”, “estimates”, “expects”, “plans” and similar expressions, as they relate to Tele Norte Leste Participações S.A., Telemar, Coari, Brasil Telecom Holding and Brasil Telecom, are intended to identify forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. Undue reliance should not be placed on such statements. Forward-looking statements speak only for the date they are made.

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EXHIBITS

 

Exhibit
Number

  

Description of Document

1    Earnings Release of Tele Norte Leste Participações S.A., Telemar Norte Leste S.A., Brasil Telecom Participações S.A. and Brasil Telecom S.A. for the Second Quarter of 2009, dated August 13, 2009.
2    Investor Presentation dated August 13, 2009 to accompany Earnings Call of Tele Norte Leste Participações S.A., Telemar Norte Leste S.A., Brasil Telecom Participações S.A. and Brasil Telecom S.A. held on August 14, 2009.

 

2


Exhibit 1

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UPCOMING EVENTS: CONFERENCE CALLS

 

PORTUGUESE          ENGLISH   
DATE:   

Friday, August 14, 2009

 

11:00am (Rio) - 10:00am (NY)

      DATE:   

Friday, August 14, 2009

 

1:00pm (Rio) - 12:00pm (NY)

ACCESS:   

Phone: (55 11) 2188-0188

 

Code: Oi

 

Replay: (55 11) 2188-0188

 

      Available until August 22, 2009

 

Code: Oi

      ACCESS:   

Phone: 800–860–2442 (U.S.)

 

1 412–858–4600 (Brazil / other countries)

 

Code: Oi

 

Replay: 877–344–7529 (U.S.)

 

      1 412 317 0088 (Brazil / other countries)

 

     Available until August 22, 2009 (code 432108 #)

WEBCAST:    Click Here       WEBCAST:    Click Here
         

A complementary presentation will be available before the start of the conference call at http://www.oi.com.br/ir

CONTENTS

 

  1    HIGHLIGHTS    4
  2    OPERATING PERFORMANCE    5
  3    CONSOLIDATED RESULTS    7
  4    DEBT AND CAPITAL EXPENDITURE    15
  5    ADDITIONAL INFORMATION    18
  6    FINANCIAL STATEMENTS    25

 

Tele Norte Leste Participações

  

Telemar Norte Leste

Outstanding shares (‘000): 382,425

   Outstanding shares (‘000): 238,391

TNLP3: R$34.92

   TMAR3: R$61.22

TNLP4: R$29.22

   TMAR5: R$50.90

TNE: US$14.87 ADR

   TMAR6: R$38.02

Market Capitalization (Million): R$12,697; US$6,506

   Market Capitalization (Million): R$14,045 US$7,197

Brasil Telecom Participações

  

Brasil Telecom

Outstanding shares (‘000): 362,488

   Outstanding shares (‘000): 547,719

BRTP3: R$33.99

   BRTO3: R$55.50

BRTP4: R$15.31

   BRTO4: R$13.05

BRP: US$38.40 ADR

   BTM: US$19.57 ADR

Market Capitalization (Million): R$8,026; US$4,112

   Market Capitalization (Million): R$17,743 US$9,092

Notes: (1) Prices at the end of 2Q09; (2) Outstanding ex-treasury shares; (3) Market Value based on unadjusted shares.

 

 

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Rio de Janeiro, August 13, 2009: Tele Norte Leste Participações S.A. (Bovespa: TNLP4 and TNLP3), Telemar Norte Leste S.A. (Bovespa: TMAR3, TMAR5 and TMAR6), Brasil Telecom Participações S.A. (Bovespa: BRTP3 and BRTP4) and Brasil Telecom S.A. (Bovespa: BRTO3 and BRTO4) are pleased to announce their results for the second quarter of 2009. This release contains the consolidated results of Tele Norte Leste Participações and its direct and indirect subsidiaries as of June 30, 2009. In order to better understand the results and view the progression form past performance, we present the pro-forma 2Q08 consolidated figures for TNLP (Oi) and BrTP.

Message to our Shareholders:

With the aim of updating our shareholders and the market on the integration of Oi and Brt, we wish to share the status of this important moment.

From a corporate standpoint: (i) As of the end of June, the acquisition of Brasil Telecom ON shares was completed by means of a Mandatory Tender Offer. After this stage, a total of R$12.4 billion had been disbursed for the acquisition of a 55% stake in Brasil Telecom Participações and an 11% interest in Brasil Telecom S.A.. Considering the stake that BrTP already held in BrTO, the latter will have a 22% free float. (ii) As of the end of July, following the end of the quarter, we carried out the first stage of the corporate simplification plan, during which several shareholders’ meetings were held to approve the incorporation of many holdings into BrTP and BrTO, without affecting current shareholding ownership.

From an operating perspective, shortly after the BrT’s acquisition we began to integrate both companies, seeking to achieve immediate synergies and to consolidate commercial practices. The priority of the Company’s management team is to quickly obtain benefits from the integration and to generate as much cash as possible in order to reduce Oi’s net debt. The main actions that we carried out include:

 

 

Management: Oi’s senior managers are concentrated in Rio de Janeiro in a single and integrated organization that covers all operations. In addition, there were the unification of many departments such as accounting, supply planning, legal, treasury, human resources, auditing, investor relations, among others;

 

 

Unification of the Network Operating Center in Rio de Janeiro: The operational integration of the Telecom networks was finalized, in order to provide the best technical quality in the market. Therefore, the old network operating centers were merged into one single unit in Rio de Janeiro, in addition to several processes in use at both companies, the data centers, IT-Information Technology areas and contracts for computer support and services, among others.

 

 

Review of the internal and external plant maintenance model: By targeting an improvement in the quality of services and a reducing spending on network maintenance, the internal and external plant maintenance model was reviewed. The new model was applied to the internal plant leading to significant synergy gains (to be incorporated just in the second half of the year), while the review of the external plant has yet to be conducted;

 

 

Launch of the “Oi” brand in Region II: During the initial months of the year, all of Brasil Telecom’s brand impressions were mapped and the migration process started. In less than one month about 10 thousand public

 

 

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telephones, 80 stores and kiosks, more than 700 authorized stores and roughly 1,000 sales counters had been migrated. Additionally, every call center attendant and field technician has been re-trained and their service routines altered.

In support of this migration, many marketing campaigns supporting the launch of the Oi brand in the Brasil Telecom region was conducted. These campaigns conveyed Oi-brand messages such as freedom and simplicity.

 

 

“Oi” offers launched in the wireless segment: In May Oi entered Region II and offered the “Oi Ligadores” prepaid plan, migrating 100% of sales to naked sim card sales. This offer enabled Oi to add one million customers in just one month. The company kept working to align its mobile portfolios and launched the post paid plans “Oi Controle” (the “control” post paid plan) and “Oi Conta” (the post paid plan) in June.

 

 

Implementation of a single sales and service model: A single model for sales and service operations for all of Oi’s channels is being implemented. The “retail” market area was restructured in order to focus on small-scale retail channels with exclusive distributors, thus guaranteeing greater efficiency and expanding the company’s distribution. This action was followed by an expansion of virtual recharge through the launch of Oi PDV.

The company’s stores are being migrated to Oi’s franchise model, which will enable more sales, better relationship with clients and a gain in distribution. As for the authorized agents, the focus is being redirected to the post-paid segment. The “corporate” segment is aiming to consolidate a nationwide approach to customers.

 

 

Other initiatives: In all, more than 40 actions directed to boost efficiency in the two companies’ combined operations have already been implemented. Some of these actions have already generated savings, while others will only amount to lower costs in the coming months. In addition to these described measures, we highlight actions adopted to curb roaming costs, costs of goods sold (sim cards mostly), interconnection costs and the review of the company’s logistics.

The project started six months ago and we now have a better perception of what is feasible for the full year. Our analysis point to cost savings and CAPEX-synergy benefits for 2009.

The two companies will fully integrate by the start of 2010. This process will prepare Oi for a new operating level, whose results will only start being felt next year. In 2010 the company will stop having non-recurring impacts linked to the integration process and to the start-up in São Paulo.

 

 

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1) HIGHLIGHTS IN 2Q09:

 

   

59.8 million Revenue Generating Units (RGUs) at the end of June 2009, with 2.2 million net additions in the quarter.

 

   

Oi Mobile ended the period with almost 34 million customers, boosted by the start of the portfolio integration with Brasil Telecom through the launch of the “Oi Ligadores” campaign in Region II, in addition to the São Paulo operation. Oi’s nationwide market share in this segment rose from 19.0% in June 2008 to 21.3% in June 2009.

 

   

224 thousand new customers in fixed broadband and 3G mini modems in 2Q09, of which 128 thousand were via ADSL/cable and 96 thousand via mini modems. Additionally, approximately 44 thousand new customers were added to the mobile broadband (3G) services via data plans. The total of new broadband customers (fixed and mobile) added to 268 thousand in the quarter.

 

   

Consolidated gross revenue totaled R$11.2 billion, stable as compared to the previous quarter and 2.9% higher than that in 2Q08. During this period, the company was not very active in marketing in Region II, which was reflected in the performance of wireline and broadband services in that region. “Oi” offers will be launched during the second half for these services.

 

   

Consolidated adjusted EBITDA totaled R$2.4 billion in the quarter, 6.6% lower year-over-year mostly due to the São Paulo operation, which is still in its launch phase. Recurring EBITDA rose 3.0% in the quarter.

 

   

Consolidated Net Debt at Oi ended June 2009 at R$21.6 billion, or 2.2x consolidated adjusted EBITDA for the past 12 months, following the disbursement for the acquisition of shares held by the minority shareholders of Brasil Telecom in the Mandatory Tender Offer.

 

   

In addition to non-recurring operating impacts, the R$146 million loss (R$-0.38 per share and US$-0.18 per ADR) stems, mainly, from a temporary fiscal distortion due to the amortization of premium related to the BrT acquisition. We highlight that throughout 2Q09 this premium was still on the balance sheets of the holding companies that were created to acquire BrTP, thus not generating fiscal saving yet.

 

 

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Table 1 – Consolidated Financial Indicators

 

     Quarter     Half-Year  

TNL Consolidated - R$ million

   2Q08
Pro forma*
    1Q09     2Q09     QoQ     YoY     1H08
Pro forma*
    1H09     YoY  

Net Revenue

   7,478      7,487      7,302      -2.5   -2.4   14,709      14,789      0.5

EBITDA

   2,435      2,192      2,323      6.0   -4.6   5,019      4,515      -10.0

EBITDA Margin (%)

   32.6   29.3   31.8   2.5 p.p.    -0.8 p.p.    34.1   30.5   -3.6 p.p. 

Adjusted EBITDA

   2,623      2,377      2,449      3.0   -6.6   5,207      4,826      -7.3

Adjusted EBITDA Margin (%)

   35.1   31.7   33.5   1.8 p.p.    -1.6 p.p.    35.4   32.6   -2.8 p.p. 

Net Earnings

   288      11      -146      -1427.3   -150.7   852      -135      -115.8

Net Debt

   7,905      19,196      21,638      12.7   173.7   7,905      21,638      173.7

Available Cash

   10,497      6,676      7,968      19.4   -24.1   10,497      7,968      -24.1

CAPEX

   2,599      905      940      3.9   -63.8   3,406      1,845      -45.8

Net Debt / Adjusted EBITDA

   0.8      1.9      2.2      15.8   175.0   0.8      2.2      175.0

TMAR Consolidated - R$ million

   2Q08
Pro forma*
    1Q09     2Q09     QoQ     YoY     1H08
Pro forma*
    1H09     YoY  

Net Revenue

   7,460      7,469      7,284      -2.5   -2.4   14,671      14,754      0.6

EBITDA

   2,450      2,204      2,333      5.9   -4.8   5,056      4,537      -10.3

EBITDA Margin (%)

   32.8   29.5   32.0   2.5 p.p.    -0.8 p.p.    34.5   30.8   -3.7 p.p. 

Adjusted EBITDA

   2,638      2,389      2,459      2.9   -6.8   5,244      4,848      -7.6

Adjusted EBITDA Margin (%)

   35.4   32.0   33.8   1.8 p.p.    -1.6 p.p.    35.7   32.9   -2.8 p.p. 

Net Earnings

   411      2      -178      -9000.0   -143.3   1,043      -175      -116.8

BRTP Consolidated - R$ million

   2Q08     1Q09     2Q09     QoQ     YoY     1H08     1H09     YoY  

Net Revenue

   2,857      2,768      2,648      -4.3   -7.3   5,655      5,415      -4.2

EBITDA

   1,152      461      -574      -224.5   -149.8   2,107      -113      -105.4

EBITDA Margin (%)

   40.3   16.7   -21.7   -38.4 p.p.    -62.0 p.p.    37.3   -2.1   -39.4 p.p. 

Adjusted EBITDA

   1,007      910      1,030      13.2   2.3   1,962      1,940      -1.1

Adjusted EBITDA Margin (%)

   35.2   32.9   38.9   6.0 p.p.    3.7 p.p.    34.7   35.8   1.1 p.p. 

Net Earnings

   268      -23      -449      -1852.2   -267.5   518      -473      -191.3

BRTO Consolidated - R$ million

   2Q08     1Q09     2Q09     QoQ     YoY     1H08     1H09     YoY  

Net Revenue

   2,858      2,768      2,648      -4.3   -7.3   5,656      5,415      -4.3

EBITDA

   1,126      468      -571      -222.0   -150.7   2,072      -102      -104.9

EBITDA Margin (%)

   39.4   16.9   -21.6   -38.5 p.p.    -61.0 p.p.    36.6   -1.9   -38.5 p.p. 

Adjusted EBITDA

   981      917      1,033      12.6   5.3   1,927      1,951      1.2

Adjusted EBITDA Margin (%)

   34.3   33.1   39.0   5.9 p.p.    4.7 p.p.    34.1   36.0   1.9 p.p. 

Net Earnings

   321      -80      -722      -802.5   -324.9   645      -802      -224.3

 

* The pro-forma consolidation was made from Invitel consolidated, the parent company of BrTP.

2) CONSOLIDATED OPERATING PERFORMANCE:

Following the acquisition of Brasil Telecom Participações in January 2009, below are the consolidated pro forma figures related to 2Q08 for comparison purposes.

The company ended 2Q09 with 59.8 million Revenue Generating Units (RGUs), 3.7% higher quarter-over-quarter and 17.6% above the 2Q08 level. Once again, the result was influenced by the expansion of the wireless user base and fixed broadband internet services.

 

 

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Wireline – Oi Fixed

The fixed lines in service were stable quarter-over-quarter and year-over-year. The fixed to mobile substitution and the increase in competition in some markets are being offset by the rise in offers of converging products (“Oi Conta Total”) and alternative plans, which help retain clients. At the end of 2Q09, alternative plans reached 11,332 thousand users, or 52.1% of fixed lines in service (50.8% in 1Q09).

Broadband – Oi Velox

The fixed broadband accesses totaled 4,066 thousand, 3.2% and 15.7% higher than those in 1Q09 and 2Q08, respectively, accounting for 18.5% of fixed lines in service in the quarter (17.8% in 1Q09). Although net additions exceeded those in the previous quarter by 9%, it is worth mentioning that this performance was not backed by marketing actions in the first five months in Region II, while offers for broadband services similar to those in Region I will only be launched in the second half of this year.

In addition to fixed broadband, we understand that additions to the broadband service through mini-modems must be part of this analysis, because this is a broadband alternative ofered to our clients. In 2Q09, 96 thousand users joined this segment.

The expansion of the broadband user base (ADSL + cable + 3G mini modems) totaled 224 thousand in 2Q09, in a 21.7% growth over 2Q08.

Wireless – Oi Mobile

The wireless base added 2,097 thousand users to end the quarter with 33.9 million customers, accounting for 56.7% of all revenue generating units. In the last 12 months, the mobile segment grew by 8,618 thousand customers (+34.0%), being 3,621 thousand in Region III (SP) where operations began at the end of October of last year and 4,997 thousand from organic growth in Regions I and II (+19.7%).

The prepaid user base rose 7.0% in the quarter and 35.2% since 2Q08, mostly influenced by the successful “Oi Ligadores” campaign. The start of the “Oi Cartão” prepaid offer in Region II in May 2009 contributed positively to the addition of 761 thousand users in the quarter. The performance of the prepaid segment in Region II accounts for 40.2% of net additions in the segment.

The post-paid client base rose by 205 thousand quarter-over-quarter and 1,131 thousand since 2Q08, ending June with 5,183 thousand users (15.3% of the total). The “Oi Conta Total” plan, with 1,276 thousand customers at the end of 2Q09, already amounts to 31% of the post-paid base (29% in 1Q09) in Region I, the only area where it is available.

The 3G mobile internet base, including mini modems and data plans, ended June 2009 with 327 thousand users, with 140 thousand net additions in the quarter.

Oi’s market share and penetration rates in June 2009 by region were:

 

   

Region I: 30.3% and penetration of 74.0%;

 

   

Region II: 16.2% and penetration of 91.8%;

 

 

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Region III: 9.0% and penetration of 98.6%;

Table 2 – Consolidated Operational Indicators

 

     2Q08
Pro forma
    1Q09     2Q09     QoQ     YoY  
Wireline Services - “Oi Fixo”           

(a) Lines in Service (‘000)

   21,993      21,826      21,753      -0.3   -1.1

Residential

   15,872      15,576      15,459      -0.8   -2.6

Commercial

   5,263      5,396      5,442      0.9   3.4

Public Telephones

   858      854      852      -0.2   -0.7

Alternatives Plans (‘000)*

   9,061      11,084      11,332      2.2   25.1

Proportion of Lines in Service (%)

   41.2   50.8   52.1   1.3 p.p.    10.9 p.p. 

ARPU Oi Fixo (R$)

   60.8      58.7      57.3      -2.4   -5.8

Broadband Services - “Oi Velox”

          

(b) Broadband Subscribers (‘000)

   3,514      3,938      4,066      3.2   15.7

Proportion of Lines in Service (%)

   15.7   17.8   18.5   0.7 p.p.    2.8 p.p. 

ARPU Broadband (R$)

   48.1      45.1      43.1      -4.4   -10.4

Wireless Services - “Oi Móvel”

          

(c) Mobile Subscribers (‘000)

   25,314      31,835      33,932      6.6   34.0

Pre-Paid Plans

   21,263      26,857      28,749      7.0   35.2

Post-Paid Plans

   4,052      4,978      5,183      4.1   27.9

Oi Conta Total (‘000)

   783      1,161      1,276      9.9   63.0

Market Share Oi (%) - Brazil

   19.0   20.7   21.3   0.6 p.p.    2.3 p.p. 

Proportion of Net Additions in Brazil (%)

   46.3   60.7   35.3   -25.4 p.p.    -11.0 p.p. 

Monthly Churn rate (%)

   2.5   2.3   3.5   1.2 p.p.    1.0 p.p. 

ARPU Oi Móvel (R$)

   24.7      21.1      21.0      -0.5   -15.0

Vídeo - “Oi TV”

          

(d) Pay TV Subscribers (‘000)

   59      61      62      1.6   5.1

RGU - Revenue Generating Unit (a+b+c+d) (‘000)

   50,880      57,660      59,813      3.7   17.6
 
  * Alternative plans include “Planos de Minutos”, “Plano Economia”, “Digitronco”, “PABX Virtual” and others.

3) CONSOLIDATED FINANCIAL RESULTS:

3.1) Revenue:

Consolidated gross revenue fell slightly compared with the previous quarter (-0.5%) and grew year-over-year (+2.9%). Again, annual expansion was fueled by the increase in revenues from data services (in spite of aggressive competition mostly in Region II) and from the mobile segment, partly offset by a small reduction in revenue from the traditional wireline segment.

Data and mobile segment revenues became more relevant, presently accounting for 39.3% of the company’s consolidated gross revenue.

 

 

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Table 3 – Breakdown of Consolidated Gross Revenue

 

     Quarter    Half-Year    %

R$ million

   2Q08
Pro forma
   1Q09    2Q09    QoQ
(%)
   YoY
(%)
   1H08
Pro forma
   1H09    YoY
(%)
   1H08
Pro forma
   1H09

Wireline

   8,784    8,972    8,830    -1.6    0.5    17,447    17,802    2.0    81.9    79.4

Local (exc. - VC1)

   3,291    3,289    3,278    -0.3    -0.4    6,609    6,567    -0.6    31.0    29.3

Local Fixed-to-Mobile (VC1)

   1,131    1,151    1,129    -1.9    -0.2    2,271    2,281    0.4    10.7    10.2

Long Distance FF + PCS*

   1,309    1,222    1,141    -6.6    -12.8    2,553    2,362    -7.5    12.0    10.5

LD Fixed-to-Mobile (VC2/3)*

   363    379    349    -7.9    -3.9    745    728    -2.3    3.5    3.2

Network Usage

   242    230    192    -16.5    -20.7    448    422    -5.8    2.1    1.9

Data

   1,795    2,079    2,114    1.7    17.8    3,446    4,193    21.7    16.2    18.7

Public Phones

   270    249    250    0.4    -7.4    615    499    -18.9    2.9    2.2

Additional Services

   233    247    244    -1.2    4.7    468    491    4.9    2.2    2.2

Advanced Voice / Other

   150    126    133    5.6    -11.3    291    259    -11.0    1.4    1.2

Wireless

   2,085    2,270    2,354    3.7    12.9    3,853    4,624    20.0    18.1    20.6

Services

   1,974    2,180    2,254    3.4    14.2    3,654    4,434    21.3    17.2    19.8

Subscriptions

   433    534    542    1.5    25.2    823    1,076    30.7    3.9    4.8

Outgoing Calls

   818    863    885    2.5    8.2    1,476    1,748    18.4    6.9    7.8

Domestic/Inter. Roaming

   42    34    27    -20.6    -35.7    81    62    -23.5    0.4    0.3

Network Usage

   520    517    566    9.5    8.8    970    1,082    11.5    4.6    4.8

Data / Value Added

   160    233    234    0.4    46.3    304    466    53.3    1.4    2.1

Handset Sales

   111    89    100    12.4    -9.9    199    190    -4.5    0.9    0.8

Wireline

   8,784    8,972    8,830    -1.6    0.5    17,447    17,802    2.0    81.9    79.4

Wireless

   2,085    2,270    2,354    3.7    12.9    3,853    4,624    20.0    18.1    20.6

Total Gross Revenue

   10,869    11,242    11,184    -0.5    2.9    21,300    22,426    5.3    100.0    100.0

Consolidated Net Revenue

   7,478    7,487    7,302    -2.5    -2.4    14,709    14,789    0.5    69.1    65.9

 

* Adjusted to adequately reflect revenue from fixed-to-mobile traffic (VC2/3).

Wireline Services:

Gross revenue from wireline services rose 0.5% from 2Q08. Year to date, revenue climbed especially as a result of growth in data revenue (+17.8%), partially offsetting the reduction in long-distance services and remuneration for network use. It must be noted that in general, the sharp reduction in marketing campaigns in Region II in the first five months of the year hit revenue growth in the wireline segment at that region in the quarter.

Local Service:

 

Fixed-to-Fixed

(subscription,
traffic,
connection
fee)

   Revenues from fixed-to-fixed local service were stable compared with 1Q09 and 2Q08. The slight reduction in fixed lines in service was partially offset by greater minute packages in the alternative plans, in an attempt to widen recurring revenue. Compared with 2Q08, revenues were positively influenced by the tariff readjustment of July 2008 (Region I: 2.76%; Region II: 3.0%).
Fixed-to-Mobile:

(VC1)

   Smaller traffic had a major impact on revenue for this service compared with the previous quarter. The tariff readjustment of July 2008 kept revenue stable (-0.2%) in the last 12 months.

 

 

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Long Distance Services (LD) – FF + SMP + VC2 and 3:

The 10.9% reduction in long-distance revenue results from a decrease in year-over-year traffic and a reduction in SMP traffic. We point out that in 2Q08 this type of traffic had been positively influenced by an incentive for Oi-originated long-distance calls, with the inclusion of long distance selection code 31 in the bonus of Oi Ligadores.

Remuneration for Network Usage:

Remuneration for fixed network usage, after R$117 million eliminations in transactions among group companies, fell R$38 million in the quarter and R$50 million from 2Q08, basically due to a decrease in traffic. Comparing with 2Q08, it is evident that during that period calls originated on mobile networks and ended on fixed networks were also included in the mobile bonuses.

Data Communication Services:

“Oi Velox” revenues were the highlight in the fixed revenue, helping the quarter-over-quarter (+R$69 million) and year-over-year comparisons (+R$349 million). This result stems from growth in the Oi Velox ADSL access base, which has expanded 15.7% year-to-date. We highlight that these services could have performed better were it not for the sharp reduction in marketing campaigns in Region II during this period.

Wireless Segment:

Gross revenue from wireless services grew R$84 million and R$269 million quarter-over-quarter and year-over-year, respectively. The following factors influenced this result:

 

   

Subscription revenues increased compared with 1Q09 (+R$8 million) and with 2Q08 (+R$109 million), reflecting growth in the average user base and greater minute packages in the post-paid segment;

 

   

Revenues from outgoing calls rose due to a strong expansion in the prepaid client base (7.0% quarter-over-quarter and 35.2% year-over-year), boosted by the “Oi Ligadores” campaign, which began in May in Region II through the prepaid offer “Oi Cartão”;

 

   

Consolidated revenue for mobile network usage ended the quarter at R$566 million, after eliminating R$535 million related to intercompany transactions, thus 9.5% and 8.8% higher than the results posted in 1Q09 and 2Q08, respectively, due to a greater average user base;

 

   

Data and value-added services revenues were stable in the quarter (+0.4%) but rose 46.3% compared with 2Q08 mostly due to the increase in 3G data subscription services and SMS services. The latter rose due to growth in the average client base, especially the prepaid base.

Average ARPU in the mobile segment (R$21.0) was similar to that in the previous quarter and 15.0% lower as recorded in 2Q08. The annual reduction was basically driven by the recent relevant increase in Oi’s customer base.

 

 

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3.2) Operating Expenses:

Operating expenses in the quarter (excluding depreciation/amortization) fell R$316 million in the quarter mainly as a result of lower spending on personnel, handset costs and other operating expenses, partially offset by an increase in marketing, third-party services and non-recurring expenses.

There were non-recurring expenses both in 2Q08 and 2Q09. In addition, there were costs and expenses accounted for this quarter that were not present one year ago (non-comparable items), as follows:

(1) Non-recurring costs and expenses in 2Q09 (R$126 million) amounting to: consulting expenses related to the acquisition of Brasil Telecom, end of the deferral of subsidies on post-paid handsets, as detailed in the item Handset Costs/ Other COGS), as well as expenses linked to the integration of Oi and BrT;

(2) Non-comparable items in 2Q09 vs. 2Q08 (R$287 million) consisting of: start-up in São Paulo and standardization of accounting policies at BrT and Oi.

Excluding the non-recurring effects in 2Q09 and 2Q08, consolidated operating expenses in the quarter vs. 2Q08 would have been stable. Excluding the recurring effects, there would have been a decrease of R$289 million (-5.9%).

Table 4 – Breakdown of Operating Expenses

 

     Quarter    Half-Year

Item - R$ million

   2Q08
Pro forma*
   1Q09    2Q09    QoQ
(%)
   YoY
(%)
   1H08
Pro forma
   1H09    YoY
(%)

Interconnection

   1,346    1,321    1,320    -0.1    -1.9    2,720    2,642    -2.9

Personnel

   395    469    476    1.5    20.5    803    945    17.7

Materials

   91    97    116    19.6    27.5    198    213    7.6

Handset Costs/Other (COGS)

   131    194    150    -22.7    14.5    227    344    51.5

Third-Party Services

   1,626    1,745    1,770    1.4    8.9    3,108    3,515    13.1

Marketing

   154    129    153    18.6    -0.6    288    283    -1.7

Rent and Insurance

   322    389    394    1.3    22.4    626    783    25.1

Provision for Bad Debts

   321    398    377    -5.3    17.4    663    776    17.0

Other Operating Expenses (Revenue), Net

   657    553    221    -60.0    -66.4    1,056    774    -26.7

TOTAL

   5,043    5,295    4,979    -6.0    -1.3    9,690    10,275    6.0

 

* The pro-forma consolidation was made from Invitel consolidated, the parent company of Brasil Telecom Participações.

Interconnection:

Consolidated interconnection costs were stable compared with the previous quarter, and were lower by 1.9% compared with 2Q08 mainly stemming from a reduction in outgoing traffic seen in Region II, given the wireless market share gain in this region (+1.9 percentage point).

Personnel:

Higher personnel expenses in the quarter (1.5%) due to the administrative restructuring that had taken place during the period. Compared with 2Q08, growth of 20.5% is basically due to: (a) an increase in the number of employees, which rose 11% in twelve months, especially in the call center (b) salary readjustment that took place at the end of last year; (c) an increase in spending generated by the integration with Brasil Telecom.

 

 

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The increase in employees compared with 2Q08 stems from the launch and expansion of operations in São Paulo, as well as from Decree 6,523 (customer service regulation) in force since December 2008.

 

Personnel

   2Q08    1Q09    2Q09

TNL

   10,363    10,940    11,113
              

BRT

   17,828    20,581    20,125
              

Fixed / Mobile

   5,809    5,417    4,685

Call Center

   12,019    15,164    15,440
              

Total

   28,191    31,521    31,238
              

Handset Costs and Others (COGS):

Cost of goods sold (COGS) were affected by the “non-cash” cost when deferral of subsidies ended on post-paid handsets starting at the beginning of this year. Previously, the subsidy on post-paid handsets sold in the “retail” market was deferred at an average unit cost of R$300, which was feasible due to the penalty customers paid for early cancellations or for migrating to a prepaid plan. This subsidy used to be amortized in 12 months. Currently, only the post-paid handsets sold in the corporate segment follow this procedure.

Third-Party Services:

Spending on third-party services rose R$25 million in the quarter and R$144 million compared with 2Q08.

Compared with the previous quarter, growth stemmed from:

 

   

Higher spending on plant maintenance;

 

   

A rise in commissions, basically as a result of higher “Oi Velox” sales.

Compared with 2Q08 there was:

 

   

Higher spending on plant maintenance, in addition to growth in the broadband user base and the increase generated by the mobile start-up in São Paulo;

 

   

Greater spending on commissions, mostly linked to the rise in “Oi Velox” and “Oi Conta Total” sales, and to the mobile start-up in São Paulo;

 

   

Higher call center expenses in Regions I and III stemming from the start-up in São Paulo, in addition to the impact of the demands brought by Decree 6,523.

 

 

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Marketing:

Marketing expenses climbed R$24 million in the quarter mostly due to spending on offers and the unification of the Oi brand in Region II. This expense was stable year-over-year.

Provisions for Bad Debts:

Provision for bad debts shrank 5.3% in the quarter, mostly as a result of an improvement in the “corporate” segment, and accounted for 3.4% of consolidated gross revenue. Year to date, 17.4% growth was fueled by the standardization of accounting policies of Oi and BrT.

Other Operating Expenses (Income):

Other operating expenses fell R$332 million and R$436 million compared with 1Q09 and 2Q08, respectively. Excluding the non-recurring effects in 2Q08, there was a year-over-year reduction due to smaller “provisions for contingencies”, especially civil and tax contingencies, and the reversion of the provision for employee profit sharing.

This item’s reduction in the quarter also stems from smaller contingencies (mainly labor and tax-related) and from the reversion effect mentioned previously.

3.3) Other Items in the Consolidated Result:

EBITDA:

Table 5 – Adjusted EBITDA and Adjusted EBITDA Margin

 

     Quarter     Half-Year  

TNL Consolidated

   Adjusted
2Q08

Pro forma
    Adjusted
1Q09
    Adusted
2Q09
    QoQ     YoY     Adjusted
1H08

Pro forma
    Adjusted
1H09
    YoY  

EBITDA (R$ Mn)

   2,623      2,377      2,449      3.0   -6.6   5,207      4,826      -7.3

Margin %

   35.1   31.7   33.5   1.8  p.p.    -1.6  p.p.    35.4   32.6   -2.8  p.p. 

TMAR Consolidated

   Adjusted
2Q08
Pro forma
    Adjusted
1Q09
    Adusted
2Q09
    QoQ     YoY     Adjusted
1H08
Pro forma
    Adjusted
1H09
    YoY  

EBITDA (R$ Mn)

   2,638      2,389      2,459      2.9   -6.8   5,244      4,848      -7.6

Margin %

   35.4   32.0   33.8   1.8  p.p.    -1.6  p.p.    35.7   32.9   -2.8  p.p. 

BrTP Consolidated

   Adjusted
2Q08
    Adjusted
1Q09
    Adusted
2Q09
    QoQ     YoY     Adjusted
1H08
    Adjusted
1H09
    YoY  

EBITDA (R$ Mn)

   1,007      910      1,030      13.2   2.3   1,962      1,940      -1.1

Margin %

   35.2   32.9   38.9   6.0  p.p.    3.7  p.p.    34.7   35.8   1.1  p.p. 

BrTO Consolidated

   Adjusted
2Q08
    Adjusted
1Q09
    Adusted
2Q09
    QoQ     YoY     Adjusted
1H08
    Adjusted
1H09
    YoY  

EBITDA (R$ Mn)

   981      917      1,033      12.6   5.3   1,927      1,951      1.2

Margin %

   34.3   33.1   39.0   5.9  p.p.    4.7  p.p.    34.1   36.0   1.9  p.p. 

 

* The pro-forma consolidation was made from Invitel consolidated, the parent company of BrTP.

 

 

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Consolidated adjusted EBITDA totaled R$2,449 million, 6.6% less compared with the pro-forma consolidated EBITDA for 2Q08 and 3.0% higher than that in the previous quarter. The year-over-year decrease was mainly a result of higher costs due to the São Paulo start-up and to the standardization of the accounting policies at Oi and BrT. These items did not exist last year. Excluding such effects, EBITDA would have remained stable compared with 2Q08.

TNL PCS (Oi Mobile) reported a R$399 million EBITDA, an amount that includes non-recurring (and non-cash) items of R$60 million, related to the end of the post paid handset subsidies. Still, this is R$109 million higher than the amount recorded in the previous quarter due to growth in revenue generated by the increase in the user base combined with stable costs. However, there was a year-over-year reduction stemming from the São Paulo start-up and the end of the deferral of subsidies on post-paid handsets (retail). Excluding these effects, EBITDA would have reached R$556 million (32.6% margin), equaling 13.9% growth.

Net Financial Income (Expenses):

Consolidated net financial expenses amounted to R$496 million in 2Q09, representing a R$134 million decrease in the quarter. However, it rose by R$427 million compared with 2Q08. In the quarter, the result was influenced mainly by a foreign exchange gain over not hedged debt, given the real appreciation versus the U.S. dollar (15.7%) and the Japanese Yen (13.2%). Compared with 2Q08, growth occurred due to a greater average debt volume, combined with higher borrowing costs in the Brazilian market since 3Q08.

Table 6 – Net Financial Income (Expenses)

 

     Quarter     Half-Year  

R$ Million

   2Q08
Pro forma
    1Q09     2Q09     1H08
Pro forma
    1H09  

Financial Income

   420      407      455      892      862   

Interest on financial investments

   245      205      206      485      411   

Other financial income

   175      203      248      407      451   

Financial Expenses

   (490   (1,037   (951   (1,130   (1,988

Interest on loans and financing

   (317   (625   (650   (597   (1,275

Foreign exchange effect on loans and financing

   94      (85   10      (15   (75

Monetary and Exchange Variations

   387      184      795      243      979   

Currency Swap Results

   (293   (269   (785   (259   (1,054

Other Financial Expenses

   (267   (328   (310   (518   (638

Banking Fees (including CPMF)

   (30   (47   (57   (64   (104

Monetary restatement of provisions for contingencies

   (102   (125   (109   (195   (234

IOF, PIS and Cofins taxes on financial income

   (22   (15   (8   (43   (23

Others

   (112   (141   (136   (215   (277
                              

Net Financial Income (Expenses)

   (69   (630   (496   (237   (1,126
                              
 
  * The pro-forma consolidation was made from Invitel consolidated, the parent company of BrTP.

Depreciation/Amortization:

Depreciation and amortization in the wireline segment climbed 14.9% and 17.4% from 1Q09 and 2Q08, respectively. The increase in amortization resulted mainly from the reassessment of BrTP’s shareholders’ equity at market prices. The preliminary report defined that part of the premium was based on goodwill,

 

 

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therefore without amortization. According to new analyses, this should represent “a concession surplus” for the rendering of telephony services, thus amortized over 17 years, as stableshed by the corporate and fiscal legislation. This revaluation led to the recording of past amounts.

Depreciation in the wireless segment rose 14.2% compared with 2Q08 due to higher investments made since 2008 for the start-up in São Paulo and the beginning of amortization of 2G and 3G licenses.

Table 7 – Depreciation and Amortization

 

     Quarter    Half-Year

R$ million

   2Q08
Pro forma*
   1Q09    2Q09    QoQ (%)    YoY
(%)
   1H08
Pro forma
   1H09    YoY
(%)

Fixed Line / TNL

   914    934    1,073    14.9    17.4    1,818    2,007    10.4

Depreciation

   807    868    855    -1.5    5.9    1,690    1,723    2.0

Amortization of Goodwill

   107    67    218    225.4    103.7    128    284    121.9

Mobile Business

   332    372    379    1.9    14.2    618    751    21.5

Depreciation

   235    293    301    2.7    28.1    440    594    35.0

License/Deferred Amortization

   97    78    78    0.0    -19.6    178    157    -11.8

Total

   1,246    1,306    1,452    11.2    16.5    2,436    2,758    13.2

 

* The pro-forma consolidation was made from Invitel consolidated, the parent company of BrTP.

Net Earnings:

The company recorded net losses earnings in the amount of R$146 million in 2Q09. This result was hit mainly by temporary fiscal effects due to amortizations of the goodwill generated by the acquisition of BrT, which was caused by our corporate ownership structure then. This “distortion” will disappear when BrT’s corporate structure is streamlined, in accordance with the Material Fact of July 15, 2009.

Table 8 – Net Earnings

 

     Quarter     Half-Year  

TNL

   2Q08
Pro Forma
    1Q09     2Q09     QoQ     YoY     1H08
Pro forma
    1H09     YoY  

Net Earnings (R$ Mn)

   288      11      -146      -1427.3   -150.7   852      -135      -115.8

Net Margin

   3.9   0.1   -2.0   -2.1 p.p.    -5.9 p.p.    5.8   -0.9   -6.7 p.p. 

Earnings per Share (R$)

   0.755      0.028      -0.382      -1464.3   -150.6   2.230      -0.353      -115.8

Earnings per ADR (US$)

   0.435      0.016      -0.184      -1250.0   -142.3   1.315      -0.161      -112.2

TMAR

   2Q08
Pro Forma
    1Q09     2Q09     QoQ     YoY     1H08
Pro forma
    1H09     YoY  

Net Earnings (R$ Mn)

   411      2      -178      -9000.0   -143.3   1,043      -175      -116.8

Net Margin

   5.5   0.0   -2.4   -2.4 p.p.    -7.9 p.p.    7.1   -1.2   -8.3 p.p. 

Earnings per Share (R$)

   1.725      0.010      -0.745      -7550.0   -143.2   4.376      -0.735      -116.8

BrTP

   2Q08     1Q09     2Q09     QoQ     YoY     1H08     1H09     YoY  

Net Earnings (R$ Mn)

   268      -23      -449      -1852.2   -267.5   518      -473      -191.3

Net Margin

   9.4   -0.8   -17.0   -16.2 p.p.    -26.4 p.p.    9.2   -8.7   -17.9 p.p. 

BrTO

   2Q08     1Q09     2Q09     QoQ     YoY     1H08     1H09     YoY  

Net Earnings (R$ Mn)

   321      -80      -722      -802.5   -324.9   645      -802      -224.3

Net Margin

   11.2   -2.9   -27.3   -24.4 p.p.    -38.5 p.p.    11.4

  -14.8

  -26.2 p.p. 

 

* The pro-forma consolidation was made from Invitel consolidated, the parent company of BrTP.

 

 

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4) DEBT AND CAPITAL EXPENDITURE:

4.1) Debt:

Consolidated net debt rose by R$2,442 million in 2Q09 to end the quarter at R$21,638 million, or 2.2x adjusted EBITDA in the last 12 months. This growth results from a cash disbursement made during the quarter for the payment of ON shares acquired in the Mandatory Tender Offer taken place on June 23, 2009, which led to a total payment of R$2,656 million to minority shareholders of Brasil Telecom.

Debt borrowed in foreign currencies and swaps accounted for 21.6% of total debt at the end of June 2009. However, at the end of the quarter the company’s consolidated exposure to foreign exchange was 1.7% of total gross debt, equaling US$225 million, or R$498 million in June 2009, due to hedging operations. We note that debt payments through February 2011 are covered by hedging contracts and a cash balance kept in dollars.

The average cost of debt in the second quarter 2009 equaled 115% of the CDI interbank rate for local currency debt and USD Libor + 5% p.a. for debt in foreign currencies. For the quarter, however, the effective debt cost including hedging operations was 11.45% p.a., equating to 105% of the CDI rate. In the quarter, debt costs were influenced by the real rising against other currencies, which contributed to reduce the cost of debt that was still exposed to foreign exchange variation. The reduction in interest rates in 2009 also had a positive impact on debt costs, provided that after hedging operations much of the debt was linked to floating rates (about 97% of total debt).

 

Table 9 - Debt - TNL Consolidated*

 

  

R$ million

   Jun/08     Mar/09     Jun/09     % Gross
Debt
 

Short Term

   2,186      5,919      6,760      22.8

Long Term

   10,966      19,952      22,847      77.2

Total Debt

   13,152      25,872      29,607      100.0

In Local Currency

   9,535      21,127      23,198      78.4

In Foreign Currency

   2,452      4,053      5,152      17.4

Swaps

   1,166      692      1,256      4.2

(-) Cash and ST investments

   (7,430   (6,676   (7,968   26.9

(=) Net Debt

   5,723      19,196      21,638      73.1

 

  * Data for June 2008 does not include the consolidation of BrT

 

 

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Table 10 - Debt - TMAR Consolidated*

 

R$ million

   Jun/08     Mar/09     Jun/09     % Gross
Debt
 

Short Term

   1,570      5,560      6,404      21.7

Long Term

   10,305      20,201      23,165      78.3

Total Debt

   11,875      25,761      29,569      100.0

In Local Currency

   9,535      21,790      24,916      84.3

In Foreign Currency

   1,633      3,458      3,613      12.2

Swaps

   707      514      1,040      3.5

(-) Cash and ST investments

   (6,657   (6,137   (7,523   25.4

(=) Net Debt

   5,218      19,624      22,046      74.6
 
  * Data for June 2008 does not include the consolidation of BrT

Table 11 - Debt - BrTP Consolidated

 

R$ million

   Jun/08     Mar/09     Jun/09     % Gross
Debt
 

Short Term

   517      921      957      19.8

Long Term

   3,702      3,983      3,867      80.2

Total Debt

   4,219      4,904      4,824      100.0

In Local Currency

   3,301      4,019      3,999      82.9

In Foreign Currency

   547      678      587      12.2

Swaps

   371      208      237      4.9

(-) Cash and ST investments

   (3,080   (1,857   (1,867   38.7

(=) Net Debt

   1,140      3,047      2,957      61.3

Table 12 - Debt - BrTO Consolidated

 

R$ million

   Jun/08     Mar/09     Jun/09     % Gross
Debt
 

Short Term

   517      921      957      19.8

Long Term

   3,702      3,983      3,867      80.2

Total Debt

   4,219      4,904      4,824      100.0

In Local Currency

   3,301      4,019      3,999      82.9

In Foreign Currency

   547      678      587      12.2

Swaps

   371      208      237      4.9

(-) Cash and ST investments

   (1,702   (1,603   (1,614   33.5

(=) Net Debt

   2,517      3,301      3,210      66.5

The schedule for the amortization of long-term consolidated gross debt is shown in the table below:

Table 13 - Schedule for the Amortization of Long-Term Consolidated Gross Debt

 

(R$ million)

   2010    2011    2012    2013    2014    2015
onwards
   Total

Gross Debt amortization

   4,696    5,436    4,087    3,092    1,843    3,693    22,847

Foreign Currency Amortization

   380    699    378    586    699    2,230    4,972

Local Currency Amortization

   4,316    4,737    3,709    2,506    1,144    1,463    17,875

 

 

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The March 23, 2009 Ordinary General Meeting approved the public issuance by TMAR of simple non-convertible debentures. The issuance took place on April 6, 2009 and was effected in May 2009 in the amount of R$2,571,677 thousand. The issuance involved 2,571,677 debentures in two series at a unit price of R$1,000.00, as detailed below:

 

     Nbr. of Debentures    Total Issued
(R$ million)
  

Rate

   Maturity

1st series

   964,409    R$ 964.4    115% of CDI    May 2011

2nd series

   1,607,268    R$ 1,607.3    120% of CDI    April 2012

Total

   2,571,677    R$ 2,571.7      

This issuance aimed to extend TMAR’s debt, whereas before, maturities were concentrated in 2009 and 2010 due to short-term borrowings carried out to help acquire Brasil Telecom Participações.

4.2) Capital Expenditure:

Consolidated capital expenditure totaled R$940 million in 2Q09, 3.9% higher than that in the previous quarter and 63.8% smaller than that in 2Q08. Capex in 2Q09 accounted for 13% of consolidated net revenue, of which R$466 million were earmarked to the mobile segment (49.6%) and R$473 million to the fixed segment (+50.4%).

Capital expenditure in the fixed segment was 40.2% lower than that in 2Q08, basically as a result of the high sum invested in the expansion of coverage and capacity of the broadband platform, as well as an investment to adapt the network to number portability, which started in September 2008.

In the wireless segment, capital expenditure rose 21.4% in the quarter, especially for the expansion and improvement of the network. Year-over-year, the reduction (-74.2%) was influenced by the registration of licenses in April 2008 for the exploration of 3G network in regions I, II and III of the PGA (General Plan of Authorizations), and by investments directed to the São Paulo start-up.

Table 14 – Capital Expenditure

 

     Quarter    Half-Year

R$ million

   2Q08
Pro forma*
   1Q09    2Q09    QoQ
(%)
   YoY
(%)
   1H08
Pro forma*
   1H09    YoY
(%)

Wireline

   791    521    473    -9.2    -40.2    1,446    995    -31.2

Growth & Quality

   310    230    214    -7.0    -31.0    508    444    -12.6

Data / Communic. Systems / Other

   481    291    259    -11.0    -46.2    938    551    -41.3

Wireless

   1,808    384    466    21.4    -74.2    1,959    850    -56.6

Expansion and Quality

   453    384    466    21.4    2.9    604    850    40.7

2G / 3G Licenses

   1,355    0    0    —      —      1,355    0    —  

TOTAL

   2,599    905    940    3.9    -63.8    3,406    1,845    -45.8

 

 

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5) ADDITIONAL INFORMATION:

5.1) Acquisition of Brasil Telecom Participações – Events Taken Place in 2Q09

a) Outcome of the Tag Along Offer

On June 23, 2009 TMAR acquired R$2,655.9 million in common shares of BrTP and BrTO through its indirect subsidiaries Copart 1 Participações S.A. and Copart 2 Participações S.A. at Voluntary Tender Offers:

 

     BrTP     BrTO  

ONs

     40,452,227        630,872   

% of ONs

     78.61     27.67

Price per Share

   R$ 64.71      R$ 60.64   

Total Amount (R$ million)

     2,617.66        38.26   

Following the Public Offerings, the total amount spent on the acquisition of BrTP is below:

 

Cash disbursement and total value

   Amount

Acquisition of preferred shares in the market

   R$ 2.3 billion

Acquisition of preferred shares at Tender Offer for preferred shares

   R$ 1.0 billion

Acquisition of control

   R$ 5.4 billion

Mandatory Tender Offer

   R$ 2.7 billion

Total paid

   R$ 11.4 billion

Invitel debt

   R$ 1.0 billion

Total

   R$ 12.4 billion

The capital of both companies is thus composed as follows:

 

BRTP

   Capital    Capital exc.-
treasury
   Controlling
shareholders
   %    Shares
outstanding
   %

Common

   134,031,688    132,550,888    121,545,213    91.7    11,005,675    8.3

Preferred

   229,937,525    229,937,525    76,645,842    33.3    153,291,683    66.7

Total

   363,969,213    362,488,413    198,191,055    54.7    164,297,358    45.3

BRTO

   Capital    Capital exc.-
treasury
   Controlling
shareholders
   %    Shares
outstanding
   %

Common

   249,597,049    249,597,049    247,948,052    99.3    1,648,997    0.7

Preferred

   311,353,240    298,121,684    179,867,686    60.3    118,253,998    39.7

Total

   560,950,289    547,718,733    427,815,738    78.1    119,902,995    21.9

Shareholder structure as of June 23, 2009

The absence of the holders of 8.3% in Brasil Telecom Participações S.A. common shares and of 0.7% in Brasil Telecom S.A. amounted to R$812.2 million in savings for the company.

 

 

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b) Goodwill generated in the Acquisition

As a result of the payments for the acquisition of Brasil Telecom Participações and Brasil Telecom S.A., a total original value of R$8,282,349,832.80 was accounted for as premium. In June 2009 this amount was accounted for at the holding companies created specifically for the acquisition – Copart 1 and Copart 2. The existing premium at Invitel and Solpart (original value of R$690,834,984.31 million) must be added to the premium described above, thus leading the total premium the group will amortize to R$8,973,184,817.11.

When the holding companies are incorporated by BrTP, the premium originally registered at Copart 1, Invitel and Solpart in the amount of R$8,235,520,378.00 will be amortized at BrTP. The premium that was originally recorded at Copart 2 in the amount of R$737,664,439.11 will be amortized at BrTO.

Premiums are based on the surplus value of the fixed assets on BrTO’s concession right to provide wireline services (STFC). The amount related to the surplus value of the fixed assets, which accounts for R$2,105,290,148.56 (23.5%) will be amortized in 7 years for accounting and fiscal purposes. The amount related to the licenses, in the amount of R$6,867,894,668.55 (76.5%) will be amortized in 17 years, either for accounting and tax purposes, or until the end of the STFC concession contract at BrTO.

c) First Stage of the Corporate Structure Simplification

Extraordinary General Meetings took place at many holding companies on July 31, 2009, setting off the corporate reorganization process announced in a Material Fact of April 25, 2008 (when the acquisition of Brasil Telecom was announced). In the end, this will concentrate all remaining shareholders of BrTP and BrTO in Telemar.

This first stage had the goal of removing certain intermediary companies that were indirectly controlled by Telemar from the control structure of BrTP and BrTO (see organization chart on the following page), pursuant to the following stages concluded on July 31, 2009:

(i) incorporation of Invitel by its subsidiary Solpart Participações S.A., with Solpart absorbing Invitel and the subsequent termination of Invitel;

(i) incorporation of Invitel by its parent company Copart 1 Participações S.A., with Copart 1 absorbing Solpart and the subsequent termination of Solpart;

(iii) incorporation of Copart 1 by BrTP, with BrTP absorbing Copart 1, without an increase in the capital of BrTP, through which Coari, which had all Copart 1 shares, received shares of BrTP in exchange for its shares of Copart 1, which was terminated; and

(iv) incorporation of Copart 2 Participações S.A. (“Copart 2”) by BrTO, absorbing Copart 2 without increasing the capital of BrTO. It thus owns all Copart 2 shares and received BrTO shares in exchange for shares of Copart 2, which was terminated.

 

 

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Shareholder Structure Before Meetings of July 31 2009    Shareholder Structure after Meetings of

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*The numbers don’t contemplate tresuary’s shares

More information is available at:

http://www.novaoi.com.br/ArquivosEstaticos/RI/documentos/comunicados/2009.07.15_Fato%20Relevante_incorporacoes%20intermediarias_ingles.pdf

The Incorporations did not change the number of shares in the capital of BrTP and BrTO. The substitution of BrTP and BrTO shares for Telemar shares, already announced on April 25, 2008 are also maintained (already adjusted to dividends and IoC declared from April 25, 2008 through July 31, 2009).

 

Substitution

1 BRTO3 receives

   0.4388445 TMAR3

1 BRTP3 receives

   0.5349947 TMAR3

1 BRTO4 receives

   0.2764830 TMAR5

1 BRTP4 receives

  

0.0754842 TMAR3

0.2514940 TMAR5

 

 

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D) Next steps In the Groups’s Corporate ReStructuring

On August 12, 2009 a Material Fact informed that in the coming 45 days Extraordinary General Meetings will be assembled for the incorporation of BrTP by BRTO, pursuant to the Material Fact of April 25, 2008.

The documents can be viewed at:

http://www.novaoi.com.br/ArquivosEstaticos/RI/documentos/comunicados/2009.08.12_FATO%20RELEVANTE_%20INCORPORACAO%20BRTP%20BRTO_ING.pdf

http://www.novaoi.com.br/ArquivosEstaticos/RI/documentos/comunicados/2008.25.04_Fato%20Relevante%20TNL_TMAR-TmarPart_Ingles.pdf

E) Launch of Oi Mobile Offers in Region II

Following the successful launch of prepaid plans on April 24, 2009 through the “Ligadores” campaign, which introduced the “Oi” brand in Region II, “Oi Controle” post-paid offer was launched on June 22, 2009 and the “Oi Conta” offer was launched on July 5, 2009.

Oi Controle is a hybrid plan with a R$34.90 allowance (R$1.04 per additional minute). When the allowance ends, it switches to a prepaid plan and the client recharges the account as needed. In the launch offer, advantages such as monthly bonus between R$600 and R$750 were given on local and long-distance calls to any Oi (via codes 31 and 14), SMS to any operator and R$150 credit in 10 credit card installments for any purchase or in order to decrease the allowance amount.

The launch campaign for the “Oi Conta” plans, valid for additions up to September 1, 2009, with allowances from R$49.90 to R$319.90 and monthly bonus of 1000 minutes on calls within Oi’s fixed and mobile networks and 1000 SMS. In addition, customers are entitled to credits from R$300 to R$650 in 10 installments depending on the plan.

5.2) Corporate Restructuring of TMAR Participações

Telemar Participações S.A. advanced its restructuring process by informing that on July 3, 2009 the dissolution of Fiago Participações S.A. was approved, with the assets partitioned among its shareholders Previ, Fundação Atlântico de Seguridade Social (FASS), Petros and Funcef.

Following the approval of the dissolution of Fiago, the capital of TmarPart is thus divided as follows:

 

     % of Total
Capital
 

AG Telecom Participações S.A. / Luxemburgo Participações S.A.

   19.325

LF Tel S.A.

   19.325

FASS

   11.490

BNDESPar

   31.383

Previ

   12.948

Funcef

   2.790

Petros

   2.739

Total

   100.00

 

 

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5.3) Dividends – Dates for TNLP and TMAR

TNLP and TMAR shares started to be traded ex- dividends from July 1, 2009, as approved at the Ordinary General Meetings of April 14, 2009. Investors who owned shares on June 30, 2009 will be entitled to receive dividends, whose payment will be announced by the companies up to the end of the fiscal year.

 

     R$ per share
(accrued until
June 30, 2009)
   Nbr. of
shares (*)
   Total Amount
(R$)

TNLP3 (ON)

   2.07931191    127,575,583    265,269,429.02

TNLP4 (PN)

   2.07931191    254,849,168    529,910,910.00
            

TOTAL

      382,424,751    795,180,339.02
            
     R$ per share
(accrued until
June 30, 2009)
   Nbr. of
shares (*)
   Total Amount
(R$)

TMAR3 (ON)

   3.27691779    107,063,093    350,836,954.10

TMAR5 (PN)

   3.60460957    130,263,795    469,550,122.08
            

TOTAL

      237,326,888    820,387,076.29
            

5.4) BRTP and BRTO – payment of Interest on Capital

On August 7, 2009, the Board of Directors of Brasil Telecom Participações and Brasil Telecom approved the beginning of the payment of Interest on Capital credited to shareholders during 2008 in the total gross amounts of R$264.8 million for BRTP and R$324.3 million for BRTO. Payment started on August 10, 2009.

BRTP – R$264.8 million

 

Declaration Date

   Date of
Exc-IOC
   Gross
Amount
per share

(R$)
   Amount
Net of
Income Tax

per share
(R$)
   Total Gross Amount
(R$)
          ON /PN    ON /PN     

March 31, 2008

   April 9, 2008    0.5159    0.4385    187,000,000.00
                 

December 29, 2008

   December 30, 2008    0.2146    0.1824    77,800,000.00
                 

 

 

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BRTO – R$324.3 million

 

Declaration Date

   Date of Exc.-IOC    Gross
Amount
per share
(R$)
   Amount
Net of
Income Tax
per share

(R$)
   Total Gross Amount
(R$)
      ON /PN    ON /PN   

March 31, 2008

   April 9, 2008    0.4476    0.3805    245,000,000.00

December 29, 2008

   December 30, 2008    0.1448    0.1231    79,300,000.00

5.5) Form 20-F

On July 13, 2009, Tele Norte Leste Participações, Brasil Telecom Participações and Brasil Telecom S.A. filed the 20-F form with the Securities Exchange Commission and Comissão de Valores Mobiliários. The report is available in English at:

TNE:

http://www.novaoi.com.br/ArquivosEstaticos/RI/documentos/relatoriosfinanceiros/20F/portugues/TNL_%2020-F%202008_FINAL.pdf

BRP:

http://www.mzweb.com.br/brasiltelecom/web/arquivos/BRP_20F_20090715_eng.pdf

BTM:

http://www.mzweb.com.br/brasiltelecom/web/conteudo_en.asp?idioma=1&tipo=5765&conta=44&id_arquivo=29944&extensao=pdf

5.6) DTH Launch

On July 15, 2009, the company’s DTH services were officially launched commercially, initially available only in the State of Rio de Janeiro. It exceeded the company’s expectations. The service is available through a main package where 26 channels are offered for R$29.90 (regular price is R$49.90) and it may reach as many as 57 channels. During the first week sales exceeded the original forcast, which led us to reassess the original business plan.

After the launch in Rio de Janeiro, Oi expects to expand the service across the country gradually. Within one year Oi TV is expected to be offered in the whole of Brazil.

5.7) LAW # 11,638/2007 – RELATED TO THE ELABORATION AND DISCLOSURE OF FINANCIAL STATEMENTS

On December 28, 2007, Law 11,638/07 was put into effect and added new provisions to and modified Corporate Law 6,404/1976. This Law set a number of alterations to accounting practices and to the preparation of financial statements, aiming to align them with International Financial Reporting Standards (“IFRS”). Therefore, it attributed to the CVM the power to issue accounting norms and procedures for joint stock companies.

 

 

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On December 3, 2008, the Provisional Measure 449/2008, with the force of law, instituted the RTT – Transitional Tax Regime for the accounting of earnings, which deals with tax adjustments stemming from new accounting methods and criteria introduced by Law 11,638/2007, and introduces changes to Law 6,404/1976.

The following table shows the reconciliations of the financial and income statements announced on June 30, 2008, pursuant to Law 11,638/2007 in order to allow its comparison with the quarter ended June 30, 2009.

 

TNL Consolidated (R$ million)

   Shareholder’s
Equity on
June 30, 2008
   Result on
June 30, 2008

Original balance

   11,408    734
         

Financial instruments

   8    18

Financial lease

   13    3

Grants and government support

   86    86

Stock-based remuneration

      -27

Income tax and social contribution on the total adjustment

   -7    -7

Minority interest effect

   -12    -12

Equity accounting on the adjustments of Law 11,638/07 and Provisional Measure 449/08

   -4    58
         

Balance after Law 11,638/07

   11,492    853
         

BrTP Consolidated (R$ million)

   Shareholder’s
Equity on
June 30, 2008
   Result on
June 30, 2008

Original balance

   5,605    517
         

Financial instruments

   -1    -2

Financial lease

   -6    2

Grants and government support

     

Stock-based remuneration

   -26    -12

Income tax and social contribution on the total adjustment

   25    -6

Minority interest effect

   22    -1

Equity accounting on the adjustments of Law 11,638/07 and Provisional Measure 449/08 Deferred Assets

   -60    20
         

Balance after Law 11,638/07

   5,559    518
         

 

 

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6) FINANCIAL STATEMENTS

6.1) Tele Norte Leste Participações – TNLP Consolidated

 

                      

R$ Million

 

 

Income Statement

   2Q08
Pro forma
    1Q09     2Q09     1H08
Pro forma
    1H09  

Wireline Services Revenues

   8,783.9      8,972.3      8,829.6      17,446.8      17,801.9   
                              

Local Services

   4,421.8      4,440.5      4,407.2      8,879.7      8,847.7   
                              

Subscription Charges

   2,711.8      2,762.3      2,751.3      5,428.3      5,513.6   

Local Traffic

   549.4      505.8      494.8      1,121.2      1,000.6   

Installation Fees

   23.7      18.6      29.6      47.6      48.2   

Collect Calls

   2.2      1.6      1.8      4.3      3.4   

Other Local Revenues

   3.6      0.7      0.7      7.7      1.4   

Fixed-to-Mobile (VC1)

   1,131.2      1,151.5      1,129.1      2,270.5      2,280.6   

Long Distance

   1,672.0      1,600.4      1,489.6      3,297.7      3,090.1   
                              

Intra-State

   778.2      703.2      665.2      1,514.6      1,368.4   

Inter-State

   164.8      144.9      144.0      325.6      288.9   

Inter-Regional

   337.9      352.2      311.3      658.9      663.4   

International

   27.6      21.6      20.1      53.7      41.6   

Fixed-to-Mobile (VC2 and VC3)

   363.4      378.6      349.1      744.9      727.7   

Advanced Voice

   87.2      80.6      66.9      175.0      147.5   
                              

Public Telephones

   269.8      249.1      250.0      615.3      499.1   
                              

Additional Services

   232.7      247.1      243.6      468.3      490.7   
                              

Network Usage Remuneration

   241.9      229.8      192.5      448.2      422.2   
                              

Data Transmission Services

   1,795.4      2,079.3      2,113.7      3,446.3      4,193.0   
                              

ADSL (Velox)

   818.0      1,097.7      1,167.4      1,528.4      2,265.1   

Leased Lines (EILD)

   228.1      239.2      234.9      458.3      474.1   

Leased Lines (SLDD/SLDA)

   152.0      150.3      144.5      296.6      294.8   

IP Services

   217.1      238.8      235.5      426.7      474.3   

Packet switch and frame relay

   122.4      104.9      108.1      247.4      212.9   

Other Data Services

   257.8      248.5      223.2      488.9      471.7   

Other Wireline Services

   63.2      45.4      66.1      116.3      111.5   
                              

Wireless Services Revenues

   2,084.9      2,269.6      2,354.1      3,853.0      4,623.7   
                              

Subscription Charges

   433.2      534.0      541.9      822.8      1,075.9   

Outgoing Calls

   817.6      862.6      885.0      1,476.5      1,747.6   

Domestic/International Roaming

   42.3      34.4      27.4      81.1      61.8   

Network Usage Remuneration

   520.2      516.6      565.6      969.7      1,082.2   

Data / Value Added Services

   160.2      232.6      233.8      303.6      466.4   

Handset Sales

   111.4      89.5      100.3      199.4      189.8   
                              

Gross Operating Revenue

   10,868.9      11,241.9      11,183.6      21,299.8      22,425.6   
                              

Taxes and Deductions

   (3,391.2   (3,754.7   (3,881.5   (6,591.0   (7,636.2
                              

Net Operating Revenue

   7,477.7      7,487.2      7,302.1      14,708.8      14,789.4   
                              

Operating Expenses

   (5,043.0   (5,295.3   (4,979.5   (9,689.6   (10,274.8

Cost of Services

   (1,360.0   (1,552.0   (1,652.0   (2,663.3   (3,204.0

Cost of Goods Sold

   (131.0   (194.0   (150.0   (226.9   (344.0

Interconnection Costs

   (1,345.6   (1,321.4   (1,320.5   (2,720.4   (2,641.9

Selling Expenses

   (1,158.4   (1,347.4   (1,333.7   (2,266.9   (2,681.1

General and Administrative Expenses

   (579.1   (573.3   (563.5   (1,122.9   (1,136.8

Other Operating (Expenses) Revenue, net

   (468.8   (307.1   40.1      (689.2   (267.0
                              

EBITDA

   2,434.7      2,191.9      2,322.7      5,019.2      4,514.5   
                              

Margin %

   32.6   29.3   31.8   34.1   30.5

Depreciation and Amortization

   (1,246.1   (1,305.9   (1,452.3   (2,436.0   (2,758.2
                              

EBIT

   1,188.5      885.9      870.4      2,583.1      1,756.3   
                              

Equity Accounting

   (16.8   (1.1   8.2      76.1      7.0   

Financial Expenses

   (489.9   (1,037.5   (950.6   (1,129.5   (1,988.1

Financial Income

   419.9      407.4      454.6      891.6      862.1   
                              

Income Before Tax and Social Contribution

   1,101.8      254.7      382.6      2,421.3      637.3   
                              

Income Tax and Social Contribution

   (418.7   (91.1   (349.3   (752.9   (440.5

Minority Interest

   (394.6   (152.8   (179.3   (816.0   (332.0
                              

Net Income

   288.5      10.8      (146.0   852.4      (135.2
                              

Margin %

   3.9   0.1   -2.0   5.8   -0.9

Outstanding Shares - Thousand (exc.-treasury)

   382,289      382,289      382,425      382,289      382,425   

Income per share (R$)

   0.755      0.028      (0.382   2.230      (0.353

Income per ADR (US$)

   0.435      0.016      (0.184   1.315      (0.161

 

* The pro forma consolidation was made from Invitel consolidated, the parent company of Brasil Telecom Participações.

 

 

August 13, 2009    www.oi.com.br/ir    25


LOGO

 

 

 

6.1) Tele Norte Leste Participações – TNLP Consolidated (Continued)

 

    

R$ Million

 

 

Balance Sheet

   6/30/08     3/31/09     6/30/09  

TOTAL ASSETS

   35,012      56,856      58,885   

Current

   13,461      18,736      19,224   

Cash

   5,645      5,676      6,466   

Financial investments

   1,761      976      1,478   

Accounts Receivable

   3,471      6,078      6,115   

Recoverable Taxes

   1,619      3,455      3,363   

Inventories

   160      182      164   

Assets in Escrow

   0      1,103      496   

Other Current Assets

   804      1,266      1,141   

Non-Current Assets

   21,551      38,120      39,661   

Long Term

   4,231      8,134      8,135   

Recoverable and Deferred Taxes

   2,341      3,965      4,226   

Accounts Receivable

   24      23      24   

Assets in Escrow

   1,242      3,588      3,320   

Other

   624      558      564   

Investments

   2,372      55      55   

Property Plant and Equipment

   12,076      20,048      20,136   

Intagible Assets

   2,537      9,543      11,019   

Deferred Assets

   335      340      317   

Balance Sheet

   6/30/08     3/31/09     6/30/09  

TOTAL LIABILITIES

   35,012      56,856      58,885   

Current

   6,717      15,067      16,659   

Suppliers

   2,888      3,112      3,320   

Loans and Financing

   2,186      5,919      6,760   

Payroll and Related Accruals

   177      452      334   

Pension Fund Provision

   0      43      52   

Payable Taxes

   1,157      2,133      2,267   

Dividends Payable

   163      1,937      1,937   

Other Accounts Payable

   146      1,470      1,989   

Non-Current Liabilities

   14,029      26,944      28,567   

Long Term

   14,029      26,944      28,567   

Loans and Financing

   10,966      19,952      22,847   

Payable and Deferred Taxes

   722      575      594   

Contingency Provisions

   2,060      3,465      2,797   

Pension Fund Provision

   0      607      608   

Outstanding authorizations

   120      1,525      1,547   

Other Accounts Payable

   160      819      175   

Minority Interest

   2,775      6,438      5,395   

Shareholders’ Equity

   11,491      8,406      8,263   

Capital Stock

   5,449      5,449      5,449   

Capital Reserve

   36      40      41   

Surplus Reserve

   5,564      3,276      3,275   

Treasury shares

   (369   (369   (367

Retained Earnings

   810      11      (135

 

 

August 13, 2009    www.oi.com.br/ir    26


LOGO

 

 

 

6.2) Telemar Norte Leste – TMAR Consolidated

 

                

R$ Million

 

 

Income Statement

   2Q08
Pro forma
    1Q09     2Q09     1H08
Pro forma
    1H09  

Wireline Services Revenues

   8,759.7      8,962.1      8,793.1      17,397.8      17,755.2   
                              

Local Services

   4,421.8      4,440.5      4,407.2      8,879.7      8,847.7   
                              

Subscription Charges

   2,711.8      2,762.3      2,751.3      5,428.3      5,513.6   

Local Traffic

   549.4      505.8      494.8      1,121.2      1,000.6   

Installation Fees

   23.7      18.6      29.6      47.6      48.2   

Collect Calls

   2.2      1.6      1.8      4.3      3.4   

Other Local Revenues

   3.6      0.7      0.7      7.7      1.4   

Fixed-to-Mobile (VC1)

   1,131.2      1,151.5      1,129.1      2,270.5      2,280.6   

Long Distance

   1,672.0      1,600.4      1,489.6      3,297.7      3,090.1   
                              

Intra-State

   778.2      703.2      665.2      1,514.6      1,368.4   

Inter-State

   164.8      144.9      144.0      325.6      288.9   

Inter-Regional

   337.9      352.2      311.3      658.9      663.4   

International

   27.6      21.6      20.1      53.7      41.6   

Fixed-to-Mobile (VC2 and VC3)

   363.4      378.6      349.1      744.9      727.7   

Advanced Voice

   87.2      80.6      66.9      175.0      147.5   
                              

Public Telephones

   269.8      249.1      250.0      615.3      499.1   
                              

Additional Services

   232.7      247.1      243.6      468.3      490.7   
                              

Network Usage Remuneration

   241.9      229.8      192.5      448.2      422.2   
                              

Data Transmission Services

   1,796.4      2,080.2      2,114.8      3,448.2      4,195.0   
                              

Other

   38.0      34.3      28.5      65.4      62.8   
                              

Wireless Services Revenues

   2,084.9      2,257.0      2,366.7      3,853.0      4,623.7   
                              

Subscription Charges

   433.2      534.0      541.9      822.8      1,075.9   

Outgoing Calls

   817.6      862.6      885.0      1,476.5      1,747.6   

Domestic/International Roaming

   42.3      34.4      27.4      81.1      61.8   

Network Usage Remuneration

   520.2      516.6      565.6      969.7      1,082.2   

Data / Value Added Services

   160.2      220.0      246.4      303.6      466.4   

Handset Sales

   111.4      89.5      100.3      199.4      189.8   
                              

Gross Operating Revenue

   10,844.6      11,219.2      11,159.7      21,250.8      22,378.9   
                              

Taxes and Deductions

   (3,384.8   (3,749.7   (3,875.3   (6,579.4   (7,625.1
                              

Net Operating Revenue

   7,459.8      7,469.4      7,284.4      14,671.3      14,753.8   
                              

Operating Expenses

   (5,009.9   (5,265.2   (4,951.3   (9,615.6   (10,216.5

Cost of Services Provided

   (1,347.8   (1,538.9   (1,635.7   (2,638.6   (3,174.6

Cost of Goods Sold

   (131.0   (194.0   (150.0   (226.9   (344.0

Interconnection Costs

   (1,345.6   (1,321.4   (1,320.5   (2,720.4   (2,641.9

Selling Expenses

   (1,153.2   (1,276.3   (1,271.6   (2,258.7   (2,547.9

General and Administrative Expenses

   (571.6   (630.7   (613.4   (1,109.5   (1,244.0

Other Operting (Expenses) Revenue, net

   (460.7   (303.9   39.8      (661.5   (264.1
                              

EBITDA

   2,449.9      2,204.2      2,333.1      5,055.8      4,537.4   
                              

Margin %

   32.8   29.5   32.0   34.5   30.8

Depreciation and Amortization

   (1,253.9   (1,313.6   (1,460.6   (2,451.3   (2,774.2
                              

EBIT

   1,196.0      890.6      872.6      2,604.4      1,763.2   
                              

Equity Accounting

   17.9      (4.8   2.3      42.6      (2.4

Financial Expenses

   (471.1   (1,046.4   (939.8   (1,096.3   (1,986.2

Financial Income

   419.6      401.0      454.4      893.1      855.4   
                              

Income Before Tax and Social Contribution

   1,162.4      240.5      389.5      2,443.8      630.0   
                              

Income Tax and Social Contribution

   (427.4   (85.8   (355.4   (767.8   (441.1

Minority Interest

   (323.7   (152.3   (211.8   (632.9   (364.1
                              

Net Income

   411.3      2.4      (177.6   1,043.1      (175.3
                              

Margin %

   5.5   0.0   -2.4   7.1   -1.2

Outstanding Shares Thousand (exc.-treasury)

   238,391      238,391      238,391      238,391      238,391   

Income per share (R$)

   1.725      0.010      (0.745   4.376      (0.735

 

* The pro forma consolidation was made from Invitel consolidated, the parent company of Brasil Telecom Participações.

 

 

August 13, 2009    www.oi.com.br/ir    27


LOGO

 

 

 

6.2) Telemar Norte Leste –TMAR Consolidated (Continued)

 

          

R$ Million

 

 

Balance Sheet

   6/30/08     3/31/09     6/30/09  

TOTAL ASSETS

   34,060      56,302      58,408   

Current

   12,332      17,896      18,476   

Cash

   4,908      5,140      6,022   

Financial investments

   1,725      975      1,476   

Accounts Receivable

   3,468      6,082      6,123   

Recoverable and Deferred Taxes

   1,284      3,155      3,059   

Inventories

   160      182      164   

Assets in Escrow

   0      1,103      496   

Other Current Assets

   787      1,260      1,136   

Non-Current Assets

   21,728      38,406      39,933   

Long Term

   4,342      8,380      8,388   

Recoverable and Deferred Taxes

   2,094      3,772      4,026   

Financial investments

   24      23      24   

Assets in Escrow

   1,234      3,579      3,311   

Other

   990      1,006      1,026   

Investments

   2,365      47      47   

Property Plant and Equipment

   12,260      20,197      18,285   

Intagible Assets

   2,457      9,470      12,923   

Deferred

   304      312      290   

Balance Sheet

   6/30/08     3/31/09     6/30/09  

TOTAL LIABILITIES

   34,060      56,302      58,408   

Current

   5,981      14,657      16,254   

Suppliers

   2,880      3,108      3,316   

Loans and Financing

   1,576      5,560      6,404   

Payroll and Related Accruals

   174      448      331   

Pension fund Provision

   0      43      52   

Payable Taxes

   1,130      2,116      2,248   

Dividends Payable

   72      1,908      1,909   

Other Accounts Payable

   149      1,473      1,994   

Non-Current Liabilities

   13,154      27,012      28,720   

Long Term

   13,154      27,012      28,720   

Loans and Financing

   10,305      20,201      23,165   

Payable Taxes

   579      462      483   

Contingency Provisions

   2,059      3,467      2,813   

Pension fund Provision

   0      607      608   

Outstanding authorizations

   120      1,525      1,547   

Other Accounts Payable

   90      749      104   

Minority Interest

   108      4,639      3,613   

Shareholders’ Equity

   14,818      9,994      9,821   

Capital Stock

   7,419      7,419      7,434   

Capital Reserve

   2,187      2,206      2,211   

Treasury shares

   (17   (17   (17

Surplus Reserve

   4,224      383      368   

Retained Earnings

   1,006      3      (175

 

 

August 13, 2009    www.oi.com.br/ir    28


LOGO

 

 

 

6.3) TNL PCS – Oi

R$ Million

 

Income Statement

   2Q08     1Q09     2Q09     1H08     1H09  

Wireless Services Revenues

   1,656.7      2,112.0      2,283.3      3,169.2      4,395.4   

Subscription

   304.6      417.1      434.3      597.1      851.3   

Outgoing Calls

   604.3      680.0      722.6      1,128.5      1,402.6   

Domestic/Internacional Roaming

   32.0      30.1      24.7      65.4      54.7   

Network Usage Remuneration

   545.4      757.0      846.5      1,047.8      1,603.6   

Data / Value Added

   122.0      166.2      188.6      233.3      354.8   

Other SMP Services

   (1.6   0.0      0.0      (2.1   0.0   

Handset Sales

   50.0      61.7      66.7      99.1      128.4   

LD/Advanced Voice Service/Network* Revenues

   104.2      113.9      93.4      210.7      207.3   
                              

Gross Operating Revenue

   1,760.9      2,225.9      2,376.7      3,379.9      4,602.6   
                              

Taxes and Deductions

   (538.2   (653.2   (669.5   (1,008.5   (1,322.7
                              

Net Operating Revenue

   1,222.8      1,572.7      1,707.2      2,371.4      3,279.9   
                              

Operating Expenses

   (801.7   (1,283.1   (1,308.4   (1,570.5   (2,591.5

Cost of Services Provided

   (135.6   (345.8   (343.8   (301.5   (689.7

Cost of Goods Sold

   (54.7   (148.1   (112.2   (99.7   (260.3

Interconnection Costs

   (341.5   (358.5   (362.8   (657.1   (721.3

Selling Expenses

   (240.3   (367.7   (436.6   (463.2   (804.3

General and Administrative Expenses

   (44.3   (106.8   (107.7   (90.5   (214.4

Other Operating (Expenses) Revenue, net

   14.6      43.8      54.8      41.5      98.6   
                              

EBITDA

   421.0      289.6      398.8      800.9      688.5   
                              

Margin %

   34.4   18.4   23.4   33.8   21.0

Depreciation and Amortization

   (190.0   (233.5   (244.9   (368.8   (478.4
                              

EBIT

   231.0      56.1      154.0      432.1      210.1   
                              

Equity Accounting

   (36.8   (41.1   (23.1   (58.6   (64.2

Financial Expenses

   (42.7   (58.2   (58.0   (75.1   (116.2

Financial Income

   102.9      92.1      81.7      198.7      173.8   
                              

Income Before Tax and Social Contribution

   254.4      48.9      154.5      497.1      203.4   
                              

Income Tax and Social Contribution

   (88.7   15.3      (96.3   (176.4   (81.0
                              

Net Income

   165.7      64.3      58.2      320.7      122.4   
                              

Margin %

   13.6   4.1   3.4   13.5   3.7

 

Balance Sheet

   6/30/08    3/31/09    6/30/09

TOTAL ASSETS

   11,183    12,515    12,498
              

Current

   4,006    2,988    2,909

Cash

   904    215    168

Financial investments

   1,597    251    679

Accounts Receivable

   516    955    926

Recoverable and Deferred Taxes

   380    695    470

Inventories

   123    102    90

Other Current Assets

   486    768    576

Non-Current Assets

   7,177    9,527    9,588

Long Term

   1,485    2,713    2,637

Recoverable and Deferred Taxes

   876    821    714

Loans and Financing

   465    1,720    1,760

Financial investments

   1    2    2

Other

   143    170    161

Investments

   0    0    0

Property Plant and Equipment

   3,487    4,517    4,746

Intagible Assets

   1,916    1,990    1,919

Deferred Assets

   290    308    286
              

TOTAL LIABILITIES

   11,183    12,515    12,498
              

Current Liabilities

   1,971    1,841    1,615

Suppliers

   1,562    1,017    910

Loans and Financing

   12    27    51

Payroll and Related Accruals

   28    56    33

Payable Taxes

   350    441    266

Other Accounts Payable

   20    300    355

Non-Current Liabilities

   700    1,675    1,824

Long Term

   700    1,675    1,824

Loans and Financing

   454    601    724

Contingency Provisions

   96    145    112

Payable Taxes

   5    5    28

Outstanding authorizations

   120    882    895

Other Accounts Payable

   24    42    65

Shareholders’ Equity

   8,512    8,999    9,059

 

 

August 13, 2009    www.oi.com.br/ir    29


LOGO

 

 

 

6.4) Brasil Telecom Participações – BrTP Consolidated

R$ Million

 

Income Statement

   2Q08     1Q09     2Q09     1H08     1H09  

Wireline Services Revenues

   3,664.3      3,876.2      3,873.2      7,236.0      7,749.4   
                              

Local Services

   1,697.6      1,631.5      1,601.1      3,371.5      3,232.6   
                              

Subscription Charges

   1,005.4      962.9      956.1      2,002.6      1,919.0   

Local Traffic

   220.8      194.2      185.6      429.9      379.8   

Installation Fees

   3.2      2.2      2.5      5.5      4.7   

Collect Calls

   0.9      0.6      0.9      1.7      1.5   

Other Local Revenues

   3.4      3.1      2.9      7.6      6.0   

Fixed-to-Mobile (VC1)

   463.9      468.5      453.0      924.3      921.5   

Long Distance

   647.5      696.1      627.3      1,345.9      1,323.4   
                              

Intra-State

   289.0      192.3      197.8      598.9      390.1   

Inter-State

   67.0      55.2      57.9      125.3      113.2   

Inter-Regional

   125.4      52.8      52.4      271.5      105.2   

International

   11.7      8.1      7.2      21.6      15.4   

Fixed-to-Mobile (VC2 and VC3)

   154.5      387.7      311.9      328.5      699.6   

Advanced Voice

   33.6      32.6      33.3      68.1      65.9   
                              

Public Telephones

   120.4      84.2      116.8      254.5      201.0   
                              

Additional Services

   68.0      84.1      95.4      134.3      179.6   
                              

Network Usage Remuneration

   97.0      83.1      81.6      173.6      164.7   
                              

Data Transmission Services

   973.5      1,258.0      1,311.6      1,841.5      2,569.6   
                              

ADSL

   479.2      722.4      788.4      870.2      1,510.8   

Leased Lines (EILD)

   106.8      108.6      111.3      212.0      219.9   

Leased Lines (SLDD/SLDA)

   86.6      97.6      94.1      171.8      191.6   

IP Services

   130.5      159.4      150.4      249.0      309.8   

Packet switch and frame relay

   47.2      42.8      38.7      94.2      81.5   

Other Data Services

   123.2      127.2      128.8      244.3      256.0   

Other Wireline Services

   26.6      6.6      6.1      46.5      12.6   
                              

Wireless Services Revenues

   514.9      501.0      518.4      979.2      1,019.4   
                              

Subscription Charges

   98.4      105.4      107.6      195.5      213.1   

Outgoing Calls

   150.8      167.4      162.8      285.5      330.2   

Domestic/International Roaming

   7.2      3.1      3.3      12.9      6.4   

Network Usage Remuneration

   169.1      139.0      147.6      324.4      286.6   

Data / Value Added Services

   30.1      58.3      63.4      62.1      121.6   

Handset Sales

   59.2      27.8      33.7      98.7      61.4   
                              

Gross Operating Revenue

   4,179.1      4,377.2      4,391.6      8,215.2      8,768.8   
                              

Taxes and Deductions

   (1,321.8   (1,609.5   (1,743.9   (2,560.2   (3,353.4
                              

Net Operating Revenue

   2,857.3      2,767.7      2,647.7      5,655.0      5,415.4   
                              

Operating Expenses

   (1,705.6   (2,306.9   (3,221.3   (3,548.1   (5,528.2

Cost of Services

   (493.4   (535.1   (590.2   (986.5   (1,125.2

Cost of Goods Sold

   (90.0   (64.3   (46.1   (150.7   (110.4

Interconnection Costs

   (554.8   (513.4   (497.0   (1,118.4   (1,010.4

Selling Expenses

   (289.5   (417.2   (350.1   (628.4   (767.3

General and Administrative Expenses

   (282.6   (229.6   (247.4   (543.7   (477.0

Other Operating (Expenses) Revenue, net

   4.7      (547.3   (1,490.5   (120.4   (2,037.9
                              

EBITDA

   1,151.7      460.8      (573.6   2,106.9      (112.8
                              

Margin %

   40.3   16.7   -21.7   37.3   -2.1

Depreciation and Amortization

   (520.1   (495.9   (496.5   (1,056.3   (992.4
                              

EBIT

   631.6      (35.1   (1,070.2   1,050.6      (1,105.2
                              

Equity Accounting

   13.7      4.7      (0.1   13.4      4.6   

Financial Expenses

   (219.8   (212.2   (189.1   (438.3   (401.3

Financial Income

   164.2      181.2      217.7      375.7      398.9   
                              

Income Before Tax and Social Contribution

   589.8      (61.4   (1,041.7   1,001.3      (1,103.0
                              

Income Tax and Social Contribution

   (216.9   12.0      355.5      (272.4   367.5   

Minority Interest

   (105.0   26.0      236.7      (211.1   262.7   
                              

Net Income

   267.9      (23.4   (449.5   517.8      (472.8
                              

Margin %

   9.4   -0.8   -17.0   9.2   -8.7

Outstanding Shares - Thousand (exc.-treasury)

   362,488      362,488      362,488      362,488      362,488   

Income per share (R$)

   0.739      (0.064   (1.240   1.429      (1.304

Income per ADR (US$)

   0.446      (0.037   (0.749   0.843      (0.769

 

 

August 13, 2009    www.oi.com.br/ir    30


LOGO

 

 

 

6.4) Brasil Telecom Participações – BrTP Consolidated (Continued)

 

         

R$ Million

 

Balance Sheet

   30/6/08    12/31/09    6/30/09

TOTAL ASSETS

   17,820    19,507    18,990

Current

   7,361    6,041    6,488

Cash

   106    1,305    1,549

Financial investments

   2,973    552    318

Accounts Receivable

   2,249    2,123    2,092

Recoverable Taxes

   1,289    1,062    1,362

Inventories

   53    52    49

Assets in Escrow

   453    730    868

Other Current Assets

   237    217    249

Non-Current Assets

   10,460    13,466    12,502

Long Term

   3,615    6,239    5,625

Recoverable and Deferred Taxes

   1,889    2,097    2,455

Assets in Escrow

   1,634    2,462    1,433

Loans to Related Parties

   0    1,523    1,574

Other

   92    157    163

Investments

   3    5    5

Property Plant and Equipment

   5,263    5,510    5,229

Intagible Assets

   1,578    1,712    1,644

Balance Sheet

   30/6/08    12/31/09    6/30/09

TOTAL LIABILITIES

   17,820    19,507    18,990

Current

   4,718    4,676    5,041

Suppliers

   1,409    1,586    1,362

Loans and Financing

   542    921    957

Payroll and Related Accruals

   188    130    125

Payable Taxes

   1,127    952    1,043

Dividends Payable

   338    412    412

Other Accounts Payable

   1,113    674    1,142

Non-Current Liabilities

   5,602    7,057    6,861

Long Term

   5,602    7,057    6,861

Loans and Financing

   3,704    3,983    3,867

Payable and Deferred Taxes

   249    464    557

Contingency Provisions

   710    1,161    937

Outstanding authorizations

   185    643    652

Other Accounts Payable

   754    805    849

Minority Interest

   1,940    2,023    1,786

Shareholders’ Equity

   5,559    5,752    5,302

 

 

August 13, 2009    www.oi.com.br/ir    31


LOGO

 

 

 

6.5) Brasil Telecom – BrTO Consolidated

 

    

R$ Million

 

 

Income Statement

   2Q08     1Q09     2Q09     1H08     1H09  

Wireline Services Revenues

   3,651.4      3,876.2      3,873.2      7,223.1      7,749.4   
                              

Local Services

   1,528.5      1,631.5      1,601.1      3,202.4      3,232.6   
                              

Subscription Charges

   799.2      962.9      956.1      1,796.5      1,919.0   

Local Traffic

   257.6      194.2      185.6      466.6      379.8   

Installation Fees

   3.2      2.2      2.5      5.5      4.7   

Collect Calls

   0.9      0.6      0.9      1.7      1.5   

Other Local Revenues

   2.8      3.1      2.9      7.0      6.0   

Fixed-to-Mobile (VC1)

   464.7      468.5      453.0      925.2      921.5   

Long Distance

   778.2      696.1      627.3      1,476.6      1,323.4   
                              

Intra-State

   117.5      192.3      197.8      427.5      390.1   

Inter-State

   67.0      55.2      57.9      125.3      113.2  &n