SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
THROUGH JULY 21, 2005
(Commission File No. 1-15256) BRASIL TELECOM S.A.
(Exact name of Registrant as specified in its Charter)
BRAZIL TELECOM COMPANY
(Translation of Registrant's name into English)
SIA Sul, Área de Serviços Públicos, Lote D, Bloco B
Brasília, D.F., 71.215-000
Federative Republic of Brazil
Brasília, D.F., 71.215-000
Federative Republic of Brazil
(Address of Regristrant's principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1)__.
in paper as permitted by Regulation S-T Rule 101(b)(1)__.
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7)__.
in paper as permitted by Regulation S-T Rule 101(b)(7)__.
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ______ No ___X___
If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
registrant in connection with Rule 12g3-2(b):
| Brasil Telecom S.A. | Página 2 de 30 |
RESULTS’ HIGHLIGHTS
FOCUS ON THE
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Brasília, July 20, 2005 -
Brasil Telecom S.A. (BOVESPA: BRTO3/BRTO4; NYSE: BTM)
announces its consolidated results for the second quarter of 2005 (2Q05). |
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Operating Performance |
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|
Wireline Telephony |
Local traffic recovery has been observed in the 2Q05, and totaled 2.5 billion billed pulses, representing a 7.3% growth as compared to the 1Q05. Mobile Telephony |
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Financial Performance |
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Net revenues
reached R$2,522.9
million in the 2Q05, a 16.7% growth as compared to 2Q04´s net revenues. |
Mobile
telephony gross revenues (excluding revenues obtained with Brasil
Telecom S.A.) reached R$150.7 million in the 2Q05, including R$66.7 million from sale of handsets
and accessories. |
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1.35 million wireless accesses
in service, a 34.0% increase | Brasil Telecom S.A. | Página 3 de 30 |
FOCUS ON 12 |
|
At the end of June, 2005, Brasil Telecom’s total consolidated debt was of R$5,000.6 million, 2.0% lower than the one recorded in the 1Q05. The consolidated net debt was of R$3,224.6 million at the end of June. The cost of debt accumulated in 2005 was equal to 10.9% p.a.,
or 59.6% of the CDI in the period. |
The dollar-denominated debt
represented 13.0% of the total debt, totaling R$651.1 million at the
end of 2Q05. |
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Net Debt  |
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| R$ Million | Jun/04 | Mar/05 | Jun/05 | D Quarter | D 12 Months | ||||||
| Total Debt | 5,155.0 | 5,104.6 | 5,000.6 | -2.0% | -3.0% | ||||||
| (-) Cash | 1,970.7 | 1,853.1 | 1,776.0 | -4.2% | -9.9% | ||||||
| Net Debt | 3,184.3 | 3,251.5 | 3,224.6 | -0.8% | 1.3% | ||||||
| (-) Inter Company with BRP | 1,475.3 | 1,005.8 | 1,040.3 | 3.4% | -29.5% | ||||||
| Net Debt Ex-Inter Company with BRP | 1,709.0 | 2,245.7 | 2,184.2 | -2.7% | 27.8% | ||||||
Investments in the wireline segment totaled R$352.5 million in the 2Q05, of which 37.3% were invested in the data network, intelligent network and information technology. |
Mobile telephony segment investments
reached R$87.4 million, against R$85.9 million in the 1Q05. |
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Financial Indicators |
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| Financial Indicators | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | ||||||
| EBITDA* / Interest Expenses | 5.73 | 5.51 | 6.87 | 24.7% | 19.9% | ||||||
| Net Debt** / EBITDA* (x4) | 0.45 | 0.68 | 0.66 | -3.0% | 45.3% | ||||||
| Total Debt / (EBITDA* + Financial Income) (x4) | 1.15 | 1.31 | 1.11 | -15.5% | -3.9% | ||||||
| EBITDA* (x4) / Lines in Service | R$ 393 | R$ 349 | R$ 349 | 0.0% | -11.1% | ||||||
| EBITDA* (x4) / Employees (thousand) | R$ 704 | R$ 503 | R$ 501 | -0.5% | -28.8% | ||||||
| * EBITDA without effects of non-recurrent itens. | |
| ** Net debt excluding inter-company loans with Brasil Telecom Participações. |
| Brasil Telecom S.A. | Página 4 de 30 |
INCOME STATEMENT
Table 1: Consolidated Income Statement – Brasil Telecom S.A.
| R$ Million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| GROSS REVENUES | 3,037.4 | 3,468.7 | 3,642.4 | 5.0% | 19.9% | |||||
| Fixed Telephony | 2,746.0 | 2,901.1 | 3,040.2 | 4.8% | 10.7% | |||||
| Local Service | 1,115.7 | 1,195.7 | 1,226.8 | 2.6% | 10.0% | |||||
| Public Telephony | 119.1 | 86.9 | 124.1 | 42.7% | 4.2% | |||||
| Long Distance Service | 418.3 | 430.2 | 445.6 | 3.6% | 6.5% | |||||
| Inter-network Calls | 738.1 | 832.5 | 866.7 | 4.1% | 17.4% | |||||
| Interconnection | 179.4 | 164.6 | 175.3 | 6.5% | -2.3% | |||||
| Lease of Means | 63.5 | 65.9 | 77.7 | 17.8% | 22.4% | |||||
| Supplementary and Value Added Services | 104.1 | 114.7 | 115.4 | 0.5% | 10.9% | |||||
| Other | 7.8 | 10.4 | 8.6 | -17.1% | 10.7% | |||||
| Mobile Telephony | - | 147.0 | 150.7 | 2.5% | N.A. | |||||
| Data Transmission | 291.4 | 420.6 | 451.6 | 7.4% | 54.9% | |||||
| Deductions | (874.8) | (1,021.2) | (1,119.5) | 9.6% | 28.0% | |||||
| NET REVENUES | 2,162.6 | 2,447.6 | 2,522.9 | 3.1% | 16.7% | |||||
| COSTS & OPERATING EXPENSES | (1,241.2) | (1,616.7) | (1,689.8) | 4.5% | 36.1% | |||||
| Personnel | (100.3) | (151.1) | (157.0) | 3.9% | 56.6% | |||||
| Materials | (24.8) | (78.6) | (119.2) | 51.6% | 380.4% | |||||
| Subcontracted Services | (358.5) | (489.8) | (536.4) | 9.5% | 49.6% | |||||
| Interconnection | (545.3) | (576.1) | (600.7) | 4.3% | 10.1% | |||||
| Advertising and Marketing | (24.5) | (62.0) | (59.2) | -4.6% | 141.3% | |||||
| Provisions and Losses | (135.1) | (140.2) | (127.8) | -8.9% | -5.4% | |||||
| Other | (52.6) | (118.8) | (89.6) | -24.6% | 70.1% | |||||
| EBITDA | 921.4 | 830.9 | 833.1 | 0.3% | -9.6% | |||||
| Depreciation and Amortization | (599.7) | (670.5) | (665.0) | -0.8% | 10.9% | |||||
| OPERATING PROFIT BEFORE FINANCIAL | ||||||||||
| RESULT | 321.8 | 160.3 | 168.1 | 4.8% | -47.8% | |||||
| Financial Result | (140.1) | (123.1) | (342.7) | 178.4% | 144.7% | |||||
| Financial Revenues | 172.3 | 144.1 | 297.6 | 106.5% | 72.7% | |||||
| Financial Expenses | (312.4) | (267.2) | (400.2) | 49.8% | 28.1% | |||||
| Interest on Shareholders' Equity | - | - | (240.1) | N.A. | N.A. | |||||
| OPERATING PROFIT AFTER FINANCIAL | ||||||||||
| RESULT | 181.7 | 37.2 | (174.6) | N.A. | N.A. | |||||
| Non-Operating Revenues (Expenses) | (97.0) | (35.6) | (37.0) | 4.1% | -61.8% | |||||
| Goodwill Amortization - CRT Acquisition | (31.0) | (31.0) | (31.0) | 0.0% | 0.0% | |||||
| Other | (66.0) | (4.6) | (6.0) | 31.8% | -90.9% | |||||
| EARNINGS BEFORE INCOME AND SOCIAL | ||||||||||
| CONTRIBUTION TAXES | 84.7 | 1.7 | (211.6) | N.A. | N.A. | |||||
| Income and Social Contribution Taxes | (49.2) | 2.3 | 19.2 | N.A. | N.A. | |||||
| EARNINGS BEFORE PROFIT SHARING | 35.5 | 4.0 | (192.4) | N.A. | N.A. | |||||
| Profit Sharing | (14.7) | - | - | N.A. | N.A. | |||||
| Minority Interest | 0.0 | (1.2) | (5.5) | 360.4% | N.A. | |||||
| EARNINGS BEFORE REVERSION OF | ||||||||||
| INTEREST ON SHAREHOLDERS' EQUITY | 20.7 | 2.8 | (197.8) | N.A. | N.A. | |||||
| Reversion of Interest on Shareholders' Equity | - | - | 240.1 | N.A. | N.A. | |||||
| NET EARNINGS (LOSSES) | 20.7 | 2.8 | 42.3 | N.A. | 103.8% | |||||
| Goodwill Amortization - CRT Acquisition | 31.0 | 31.0 | 31.0 | 0.0% | 0.0% | |||||
| NET EARNINGS (LOSSES) ADJUSTED BY | ||||||||||
| GOODWILL AMORTIZATION | 51.7 | 33.8 | 73.3 | 116.7% | 41.6% | |||||
| Net Earnings (Losses)/1,000 shares - R$ | 0.0377 | 0.0050 | 0.0761 | N.A. | 101.7% | |||||
| Net Earnings (Losses)/ADR - US$ | 0.0364 | 0.0057 | 0.0972 | N.A. | 166.7% | |||||
| Brasil Telecom S.A. | Página 5 de 30 |
Table 2: Income Statement – Brasil Telecom GSM
| R$ Million | 1Q05 | 2Q05 | D Quarter | |||
| GROSS REVENUES | 182.5 | 211.0 | 15.6% | |||
| Subscription | 34.6 | 44.3 | 27.9% | |||
| Utilization | 57.4 | 29.8 | -48.0% | |||
| Interconnection | 41.3 | 67.9 | 64.3% | |||
| Other Revenues | 1.2 | 0.9 | -22.6% | |||
| Data Transmission | 0.6 | 1.3 | 123.7% | |||
| Merchandise Sales (Handsets and Accessorie | 47.4 | 66.7 | 40.8% | |||
| Deductions | (50.9) | (59.8) | 17.5% | |||
| NET REVENUES | 131.6 | 151.2 | 14.8% | |||
| COSTS & OPERATING EXPENSES | (279.4) | (309.0) | 10.6% | |||
| Personnel | (21.9) | (22.7) | 3.5% | |||
| Materials | (59.7) | (94.5) | 58.2% | |||
| Subcontracted Services | (61.4) | (80.4) | 30.9% | |||
| Interconnection | (37.3) | (30.3) | -18.7% | |||
| Advertising and Marketing | (35.5) | (28.1) | -20.8% | |||
| Provisions and Losses | (6.2) | (8.7) | 40.8% | |||
| Other | (57.4) | (44.4) | -22.8% | |||
| EBITDA | (147.8) | (157.9) | 6.8% | |||
| Depreciation and Amortization | (53.1) | (59.1) | 11.2% | |||
| OPERATING PROFIT BEFORE FINANCIAL | ||||||
| RESULT | (200.9) | (216.9) | 8.0% | |||
| Financial Result | (10.0) | (5.1) | -49.5% | |||
| Financial Revenues | 4.0 | 10.7 | 165.4% | |||
| Financial Expenses | (14.1) | (15.7) | 12.0% | |||
| EARNINGS BEFORE INCOME AND SOCIAL | ||||||
| CONTRIBUTION TAXES | (210.9) | (222.1) | 5.3% | |||
| Income and Social Contribution Taxes | 85.7 | 57.3 | -33.2% | |||
| NET EARNINGS (LOSSES) | (125.2) | (164.8) | 31.6% | |||
Note: The amounts shown in this income statement do not consider the eliminations of the inter-company transactions with Brasil Telecom S.A.
| Brasil Telecom S.A. | Página 6 de 30 |
OPERATING PERFORMANCE
WIRELINE TELEPHONY
Network
Table 3: Plant
| PLANT | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| Lines Installed (Thousand) | 10,711.6 | 10,778.3 | 10,807.0 | 0.3% | 0.9% | |||||
| Additional Lines Installed (Thousand) | 10.9 | 41.1 | 28.7 | -30.2% | 164.3% | |||||
| Lines in Service - LIS (Thousand) | 9,646.7 | 9,512.3 | 9,540.1 | 0.3% | -1.1% | |||||
| Residential | 6,840.5 | 6,379.5 | 6,298.6 | -1.3% | -7.9% | |||||
| Non-Residential | 1,450.7 | 1,440.2 | 1,449.0 | 0.6% | -0.1% | |||||
| Public Telephones | 296.2 | 296.4 | 295.8 | -0.2% | -0.1% | |||||
| Pre-paid | 276.1 | 311.2 | 314.4 | 1.0% | 13.9% | |||||
| Hybrid Terminals | 159.4 | 465.5 | 556.9 | 19.6% | 249.3% | |||||
| Other (including PBX) | 623.8 | 619.6 | 625.3 | 0.9% | 0.2% | |||||
| Additional LIS (Thousand) | (77.1) | 9.2 | 27.7 | 201.2% | N.A. | |||||
| Average LIS (Thousand) | 9,685.3 | 9,507.7 | 9,526.2 | 0.2% | -1.6% | |||||
| LIS/100 Inhabitants | 22.9 | 22.4 | 22.4 | 0.0% | -2.1% | |||||
| Public Telephones/1,000 Inhabitants | 7.0 | 7.0 | 6.9 | -0.5% | -1.1% | |||||
| Public Telephones/100 Lines Installed | 2.8 | 2.7 | 2.7 | -0.4% | -1.0% | |||||
| Utilization Rate | 90.1% | 88.3% | 88.3% | 0.0 p.p. | -1.8 p.p. | |||||
| Digitization Rate | 99.5% | 99.3% | 99.6% | 0.3 p.p. | 0.1 p.p. | |||||
| Wireline network | In the 2Q05, Brasil Telecom installed 28.7 thousand lines, ending the quarter with 10.8 million terminals. The plant in service totaled 9.5 million lines in the 2Q05, as a result of a net increase of 27.7 thousand lines in the quarter. Following the strategy of client base segmentation, aiming at improving profitability and avoiding delinquency, we kept encouraging the migration of subscribers from alternative plans and/or of delinquent customers to the hybrid plan. This initiative increased the number of such terminals by 19.6% in the quarter. |
Traffic
Table 4: Traffic
| TRAFFIC | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| Exceeding Local Pulses (Million) | 2,715.2 | 2,304.8 | 2,472.7 | 7.3% | -8.9% | |||||
| Long Distance Minutes (Million) | 1,624.2 | 1,334.4 | 1,339.1 | 0.4% | -17.6% | |||||
| Fixed-Mobile Minutes (Million) | 1,035.6 | 1,089.0 | 1,121.9 | 3.0% | 8.3% | |||||
| Exceeding Pulses/Average LIS/Month | 93.4 | 80.8 | 86.5 | 7.1% | -7.4% | |||||
| LD Minutes/Average LIS/Month | 55.9 | 46.8 | 46.9 | 0.2% | -16.2% | |||||
| Fixed-Mobile Minutes/Average LIS/Month | 35.6 | 38.2 | 39.3 | 2.8% | 10.1% | |||||
| Billed Pulses | Throughout the 2Q05, Brasil Telecom observed a recovery in the local traffic, which totaled 2.5 billion of billed pulses, representing a 7.3% growth as compared to the 1Q05. |
| Long-distance Traffic | In the 2Q05, the LD traffic increased 0.4% as compared to the 1Q05, primarily influenced by the inter-regional long-distance traffic increase. |
| Brasil Telecom S.A. | Página 7 de 30 |
| LD Market Share | At the end of 2Q05, Brasil Telecom is well positioned in the long distance market, having reached a 54.8% market share in the interregional segment and a 31.2% market share in the international segment (quarterly average). This performance reflects the success of our marketing campaigns focused on “Mother’s Day” and “Valentine’s Day” and the strength of Brasil Telecom’s brand in the Region. |
| In the 2Q05, Brasil Telecom’s quarterly average long distance market share increased 1.2 p.p. in the intra-region segment as compared to the previous quarter, reaching 84.1%. Brasil Telecom reached a 91.4% market share in the intra-sector segment, representing a 0.4 p.p. increase as compared to the previous quarter. | |
Graph 1: Long Distance Market Share – Quarterly Average
| Inter-Network Traffic |
Inter-network traffic increased by 3.0% as compared to the 1Q05, primarily as a result of the mobile plant increase in the Region, which reached 22.9 million accesses, exceeding by 9.5% the previous quarter’s plant. |
Rates
| Rate Adjustments | Brasil Telecom has been authorized by Anatel to adjust the rates for the Basic Plans for Local and National Long Distance Services, pursuant to the provisions of the Concession Agreements. The authorized average adjustments for the local and national long distance baskets were of 7.27% and 2.94%, respectively. The TU- RL (Tarifa de Uso de Rede Local – Local Network Usage Rate) was adjusted in –13.33% and the TU-RIU (Tarifa de Uso de Rede Interurbana – Intercity Network Usage Rate) was adjusted in 2.93%. |
| As of June 12, 2005, Brasil Telecom readjusted its VC-1 tariff by 7.99%, according to Anatel’s authorization. | |
| Below are the maximum average rates authorized to Brasil Telecom, effective as of July 3, 2005. | |
| Brasil Telecom S.A. | Página 8 de 30 |
Table 1: Local Service Rates (in R$)
| Maximum Values | ||||||
| Local Service1 | Effective since | Effective since | Change (%) | |||
| 11/1/2004 | 7/3/2004 | |||||
| Installation Fee | 30.68 | 32.91 | 7.27% | |||
| Residential Monthly Fee | 25.54 | 27.39 | 7.25% | |||
| Non-residential Monthly Fee | 37.77 | 40.52 | 7.27% | |||
| PBX Monthly Fee | 37.53 | 40.26 | 7.27% | |||
| Local Pulse | 0.10293 | 0.11042 | 7.27% | |||
| Address Change | 114.19 | 114.19 | 0.00% | |||
| Public Telephone Credit | 0.10850 | 0.11650 | 7.37% | |||
| Local Basket | 7.27% | |||||
Table 2: Long Distance Service Rates (in R$)
| Effective since 11/01/2004 | ||||||||
| DLD Service1 | Super | |||||||
| Normal | Differentiated | Reduced | Reduced | |||||
| D1 | 0.11767 | 0.20510 | 0.05881 |
0.02938 | ||||
| D2 | 0.19614 | 0.30094 | 0.09803 |
0.04899 | ||||
| D3 | 0.23137 | 0.34856 | 0.14707 |
0.07351 | ||||
| D4 | 0.27393 | 0.37540 | 0.20046 |
0.09803 | ||||
| Effective since 07/03/2004 | ||||||||
| DLD Service1 | Super | |||||||
| Normal | Differentiated | Reduced | Reduced | |||||
| D1 | 0.12112 | 0.21112 | 0.06053 |
0.03024 | ||||
| D2 | 0.20190 | 0.30978 | 0.10091 |
0.05042 | ||||
| D3 | 0.23816 | 0.35880 | 0.15139 |
0.07567 | ||||
| D4 | 0.28197 | 0.38642 | 0.20634 |
0.10091 | ||||
1 Tariffs net of taxes, per minute, for calls between fixed terminals.
| Adjustment Percentage Change2 | ||||||||
| DLD Service | Super | |||||||
| Normal | Differentiated | Reduced | Reduced | |||||
| D1 | 2.93% | 2.94% | 2.92% |
2.93% | ||||
| D2 | 2.94% | 2.94% | 2.94% |
2.92% | ||||
| D3 | 2.93% | 2.94% | 2.94% |
2.94% | ||||
| D4 | 2.94% | 2.94% | 2.93% |
2.94% | ||||
2 The percentage change of the adjustment associated to D4 considers a weighted average of all rates applied in our Region, which differ from State to State.
Table 3: Network Usage Rates (in R$)
| Network Usage | Previous | Adjusted | ||||
| Tariff 1 3 | Tariff 2 3 | Change (%) | ||||
| TU-RL | 0.05248 | 0.04548 |
-13.33% | |||
| TU-RIU | 0.11083 | 0.11408 |
2.93% | |||
1Tariff effective since November 01, 2004.
2 Tariff effective since July 03, 2005.
3 Tariffs net of taxes.
2 Tariff effective since July 03, 2005.
3 Tariffs net of taxes.
| Brasil Telecom S.A. | Página 9 de 30 |
MOBILE TELEPHONY
Table 5: Operating Data
| Key Operational Data | 4Q04 | 1Q05 | 2Q05 | D Quarter | ||||
| Clients | 622,295 | 1,003,658 | 1,345,155 | 34.0% | ||||
| Post-Paid | 205,716 | 322,486 | 356,574 | 10.6% | ||||
| Pre-Paid | 416,579 | 681,172 | 988,581 | 45.1% | ||||
| Gross Additions | 626,526 | 405,616 | 407,216 | 0.4% | ||||
| Post-Paid | 209,497 | 122,801 | 47,307 | -61.5% | ||||
| Pre-Paid | 417,029 | 282,815 | 359,909 | 27.3% | ||||
| Cancellations | 4,231 | 24,253 | 65,719 | 171.0% | ||||
| Post-Paid | 3,781 | 6,031 | 13,219 | 119.2% | ||||
| Pre-Paid | 450 | 18,222 | 52,500 | 188.1% | ||||
| Annualized Churn | 1.4% | 11.9% | 22.4% | 10.5 p.p. | ||||
| Post-Paid | 3.7% | 9.1% | 15.6% | 6.4 p.p. | ||||
| Pre-Paid | 0.2% | 13.3% | 25.2% | 11.9 p.p. | ||||
| Market Share | 3% | 5% | 6% | 1.1 p.p. | ||||
| Served Localities | 626 | 626 | 766 | 22.4% | ||||
| Base Stations | 1,632 | 1,695 | 1,881 | 11.0% | ||||
| Switches | 3 | 6 | 6 | 0.0% | ||||
| Employees | 881 | 918 | 937 | 2.1% | ||||
| Mobile network | In less than nine months of operations, Brasil Telecom GSM conquered 1.35 million mobile accesses in service. At the end of 2Q05, Brasil Telecom GSM’s subscriber base was 34.0% superior than the one in the 1Q05. |
Graph 2: Mobile Network Evolution
| Client Mix | At the end of 2Q05, our mobile operations had 356.6 thousand post-paid subscribers, representing 26.5% of our mobile customer base, a percentage that is above the market average. This mix reflects god perception of the Brasil Telecom brand in the corporate segment and the attentiveness by our clients of the benefits of convergence. |
| Coverage | During the 2Q05, Brasil Telecom GSM increased its coverage to 766 localities, what meant making the service available in 140 new localities. Currently, the coverage reaches 85.3% of the Region’s population. |
| Our competitors have been operating in the Region for 2 to 10 years, and it is important to highlight that in some states our coverage is equal | |
| Brasil Telecom S.A. | Página 10 de 30 |
| to our main competitor’s. | |
| New Products and Services |
During the 2Q05, we entered into interoperability agreements with the main mobile carriers in the country for SMS (short text messages) exchange, thus enabling data revenues expansion. |
| Market Share | At the end of 2Q05, Brasil Telecom GSM reached a 6% market share in its area of operations. |
DATA
Broadband
| ADSL Accesses | The continued and aggressive growth in the data network lead the Company to reach 747.4 thousand ADSL accesses in service at the end of 2Q05. |
Graph 3: ADSL Accesses
Internet Providers
| BrTurbo | BrTurbo reached 398.7 thousand customers at the end of 2Q05, 19.4% more than in 1Q05. |
| iG and iBest | iG and iBest have been achieving positive results in their commercial strategy of offering value-added products. At the end of 2Q05, iG and iBest had 206.9 thousand paying products’ customers, a 4.7% increase in comparison to the 1Q05. In addition, iG and iBest are leaders in the Internet dial-up markets of Regions I, II and III. |
| At the end of 2Q05, Brasil Telecom’s internet providers had 537.4 thousand broadband customers. | |
| Brasil Telecom S.A. | Página 11 de 30 |
FINANCIAL PERFORMANCE
REVENUES
Table 6: Consolidated Gross Operating Revenues
| R$ Million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| GROSS REVENUES | 3,037.4 | 3,468.7 | 3,642.4 | 5.0% | 19.9% | |||||
| FIXED TELEPHONY | 2,746.0 | 2,901.1 | 3,040.2 | 4.8% | 10.7% | |||||
| Local Service | 1,115.7 | 1,195.7 | 1,226.8 | 2.6% | 10.0% | |||||
| Activation | 9.3 | 7.7 | 7.1 | -7.8% | -24.2% | |||||
| Basic Subscription | 732.5 | 830.8 | 866.3 | 4.3% | 18.3% | |||||
| Measured Service | 349.5 | 337.7 | 334.2 | -1.0% | -4.4% | |||||
| Lease of Facilities | 0.4 | 0.4 | 0.4 | 11.5% | 0.6% | |||||
| Other | 24.0 | 19.1 | 18.8 | -1.2% | -21.7% | |||||
| Public Telephony | 119.1 | 86.9 | 124.1 | 42.7% | 4.2% | |||||
| Long Distance Service | 418.3 | 430.2 | 445.6 | 3.6% | 6.5% | |||||
| Intra-Region | 359.5 | 347.4 | 354.2 | 2.0% | -1.5% | |||||
| Inter-Region | 52.2 | 70.1 | 78.3 | 11.7% | 49.9% | |||||
| International / Borderline | 6.5 | 12.8 | 13.2 | 3.4% | 101.7% | |||||
| Inter-Network Calls | 738.1 | 832.5 | 866.7 | 4.1% | 17.4% | |||||
| VC-1 | 536.9 | 507.7 | 533.7 | 5.1% | -0.6% | |||||
| VC-2 | 140.1 | 191.7 | 192.5 | 0.4% | 37.3% | |||||
| VC-3 | 60.8 | 130.9 | 137.0 | 4.7% | 125.5% | |||||
| International | 0.3 | 2.3 | 3.5 | 52.8% | 1141.7% | |||||
| Interconnection | 179.4 | 164.6 | 175.3 | 6.5% | -2.3% | |||||
| Fixed-Fixed | 113.0 | 101.0 | 109.1 | 8.0% | -3.4% | |||||
| Mobile-Fixed | 66.4 | 63.6 | 66.2 | 4.0% | -0.3% | |||||
| Lease of Means | 63.5 | 65.9 | 77.7 | 17.8% | 22.4% | |||||
| Supplementary and Value Added Services | 104.1 | 114.7 | 115.4 | 0.5% | 10.9% | |||||
| Other | 7.8 | 10.4 | 8.6 | -17.1% | 10.7% | |||||
| MOBILE TELEPHONY | - | 147.0 | 150.7 | 2.5% | N.A. | |||||
| Subscription | - | 34.6 | 44.3 | 27.9% | N.A. | |||||
| Utilization | - | 57.4 | 29.8 | -48.0% | N.A. | |||||
| Interconnection | - | 6.4 | 8.9 | 39.7% | N.A. | |||||
| Other Services | - | 1.2 | 0.9 | -22.6% | N.A. | |||||
| Merchandise Sales (Handsets and Accessories) | - | 47.4 | 66.7 | 40.8% | N.A. | |||||
| DATA COMMUNICATIONS AND OTHER | 291.4 | 420.6 | 451.6 | 7.4% | 54.9% | |||||
| Fixed | 291.4 | 420.0 | 450.3 | 7.2% | 54.5% | |||||
| Mobile | - | 0.6 | 1.3 | 123.7% | N.A. | |||||
| Deductions | (874.8) | (1,021.2) | (1,119.5) | 9.6% | 28.0% | |||||
| NET REVENUES | 2,162.6 | 2,447.6 | 2,522.9 | 3.1% | 16.7% | |||||
Graph 4: Gross Revenues Breakdown
| 1Q05 R$3,469 milion |
2Q05 R$3,642 million |
 |
 |
| Brasil Telecom S.A. | Página 12 de 30 |
| Local Services | Gross revenues from local services reached R$1,226.8 million in 2Q05, 2.6% greater than 1Q05’s, basically reflecting the traffic recovery. |
Gross revenues from activation fees totaled R$7.1 million in 2Q05, 7.8% lower than gross revenues recorded in 1Q05, due to the decrease in the number of activated lines in the period. In 2Q05, 373.4 thousand lines were activated, against 378.5 thousand in 1Q05. | |
Gross revenues from basic subscription charges reached R$866.3 million in the quarter, a 4.3% increase as compared to the R$830.8 million booked in the 1Q05. | |
Gross revenues from measured service totaled R$334.2 million in the 2Q05, a 1% reduction as compared to the previous quarter’s gross revenues. Despite the traffic recovery in the quarter, which increased by 7.3% as compared to the 1Q05, measured service revenues’ reduction was influenced by the reclassification of R$22 million to the basic subscription line. | |
| Public Telephony | Gross revenues from public telephony reached R$124.1 million in the 2Q05, exceeding by 42.7% the revenues achieved in the 1Q05. This variation is associated to the suspension of the Brasil Virtual Cel, a service through which calls originated from public phones destined to mobile phones were carried through Brasil Telecom GSM’s mobile network. Thus, in the 1Q05 revenues from calls made from public phones to mobile phones, in the amount of R$42.6 million, were recognized as Brasil Telecom GSM’s revenues and in the 2Q05 they started to be recorded again in public telephony. |
| Long Distance | Gross revenues from LD calls reached R$445.6 million in 2Q05, representing a 3.6% increase in comparison to the previous quarter and a 6.5% increase in comparison to the 2Q04. |
| Inter-Networks | Gross revenues from inter-network calls reached R$866.7 million in the 2Q05, a 4.1% increase as compared to the previous quarter. That increase is primarily associated with the 3.0% growth in fixed- mobile traffic, as well as the 7.99% increase in VC-1 rates authorized by Anatel as of 06/10/2005. |
| Interconnection | Gross revenues from interconnection fees in the 2Q05 were of R$175.3 million, a 6.5% increase as compared to the previous quarter. |
| Data Communications | In 2Q05, gross revenues from data communications and other services reached R$451.6 million, a 7.4% increase as compared to the previous quarter, the growth in network formation services (VPN, Vetor, Interlan) and a 19.5% expansion in ADSL accesses in service being worth noting. |
One year ago, data communications revenues represented 9.6% of total revenues, while in the 2Q05 the segment began to represent 12.4% of total revenues. | |
| Brasil Telecom S.A. | Página 13 de 30 |
Graph 5: Data Communication and Other Services Revenues
| Mobile Telephony | In the 2Q05, gross revenues from mobile telephony totaled R$150.7 million, of which R$84.0 million were related to services and R$66.7 million to the sale of handsets and accessories. The quality of our client-mix (26.5% post-paid) caused the revenues from franchise to account for 52.7% of Brasil Telecom GSM’s service revenues. |
| Wireline ARPU | Wireline ARPU (net revenues/Avg. LIS/month) was of R$84.6 in the 2Q05, against R$83.2 in the 1Q05. |
| Mobile ARPU | The blended mobile ARPU recorded in the 2Q05 was of R$27.5. The post-paid ARPU was of R$49.5 and the pre-paid ARPU was of R$18.5. |
Table 7: ARPU Calculation – Mobile Telephony
| R$ Thousands | 1Q05 | 2Q05 | ||
| (+) Gross Revenues | 182,531 | 210,975 | ||
| (-) Handsets | (47,404) | (66,723) | ||
| Gross Service Revenues | 135,127 | 144,253 | ||
| (-) Taxes and Deductions | (36,170) | (39,190) | ||
| Net Service Revenues | 98,956 | 105,063 | ||
| (-) Net Revs Public Payphones + | ||||
| Roaming | (27,348) | (8,262) | ||
| Quarterly Net Revenues | 71,608 | 96,801 | ||
| Monthly Net Revenues | 23,869 | 32,267 | ||
| Average Number of Clients | 812,977 | 1,174,407 | ||
| ARPU (R$) | 29.36 | 27.48 | ||
| Brasil Telecom S.A. | Página 14 de 30 |
COSTS AND EXPENSES
Table 8: Consolidated Operating Costs and Expenses
| R$ Million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| NET REVENUES | 2,162.6 | 2,447.6 | 2,522.9 | 3.1% | 16.7% | |||||
| Costs | (1,387.8) | (1,587.0) | (1,646.8) | 3.8% | 18.7% | |||||
| Personnel | (29.9) | (37.3) | (38.8) | 4.1% | 30.1% | |||||
| Materials | (23.0) | (69.0) | (105.1) | 52.3% | 356.4% | |||||
| Subcontracted Services | (700.4) | (770.2) | (797.2) | 3.5% | 13.8% | |||||
| Interconnection | (545.3) | (576.1) | (600.7) | 4.3% | 10.1% | |||||
| Other | (155.1) | (194.0) | (196.5) | 1.3% | 26.7% | |||||
| Depreciation and Amortization | (541.4) | (572.0) | (571.6) | -0.1% | 5.6% | |||||
| Other | (93.1) | (138.6) | (134.1) | -3.3% | 44.0% | |||||
| GROSS PROFIT | 774.8 | 860.5 | 876.2 | 1.8% | 13.1% | |||||
| Sales Expenses | (138.9) | (265.8) | (291.8) | 9.8% | 110.0% | |||||
| Personnel | (32.3) | (60.9) | (61.8) | 1.5% | 91.4% | |||||
| Materials | (0.7) | (7.7) | (8.4) | 9.9% | N.A. | |||||
| Subcontracted Services | (103.5) | (190.4) | (216.6) | 13.8% | 109.2% | |||||
| Advertising and Marketing | (24.5) | (62.0) | (59.2) | -4.6% | 141.3% | |||||
| Other | (79.0) | (128.3) | (157.4) | 22.6% | 99.3% | |||||
| Depreciation and Amortization | (1.5) | (4.0) | (4.1) | 4.7% | 175.0% | |||||
| Other | (0.9) | (2.9) | (0.8) | -72.4% | -10.9% | |||||
| General and Administrative Expenses | (140.6) | (193.8) | (210.5) | 8.6% | 49.7% | |||||
| Personnel | (31.8) | (42.0) | (45.5) | 8.3% | 43.0% | |||||
| Materials | (0.6) | (1.3) | (5.2) | 292.3% | N.A. | |||||
| Subcontracted Services | (100.7) | (136.2) | (149.5) | 9.8% | 48.4% | |||||
| Depreciation and Amortization | (5.7) | (9.5) | (6.5) | -31.4% | 14.2% | |||||
| Other | (1.8) | (4.9) | (3.7) | -23.6% | 107.8% | |||||
| Information Technology | (80.8) | (109.8) | (111.1) | 1.2% | 37.5% | |||||
| Personnel | (6.3) | (10.9) | (10.9) | -0.7% | 71.8% | |||||
| Materials | (0.5) | (0.6) | (0.4) | -35.8% | -19.8% | |||||
| Subcontracted Services | (23.7) | (31.2) | (32.9) | 5.4% | 38.9% | |||||
| Depreciation and Amortization | (45.2) | (60.9) | (61.1) | 0.2% | 35.2% | |||||
| Other | (5.1) | (6.1) | (5.8) | -4.0% | 14.2% | |||||
| Provisions and Losses | (135.1) | (140.2) | (127.8) | -8.9% | -5.4% | |||||
| Doubtful Accounts | (95.3) | (104.9) | (83.2) | -20.7% | -12.7% | |||||
| Contingencies | (39.7) | (35.3) | (44.6) | 26.2% | 12.3% | |||||
| Other Operating Revenues (Expenses) | 42.3 | 9.5 | 33.1 | 249.3% | -21.9% | |||||
| Goodwill Amortization | (5.9) | (24.2) | (21.8) | -10.1% | 266.5% | |||||
| Other | 48.3 | 33.7 | 54.9 | 62.9% | 13.6% | |||||
| OPERATING PROFIT BEFORE FINANCIAL | 321.8 | 160.3 | 168.1 | 4.8% | -47.8% | |||||
| RESULTS | ||||||||||
| R$ Million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| COSTS AND OPERATING EXPENSES | (1,840.8) | (2,287.2) | (2,354.8) | 3.0% | 27.9% | |||||
| Depreciation and Amortization | (599.7) | (670.5) | (665.0) | -0.8% | 10.9% | |||||
| Interconnection | (545.3) | (576.1) | (600.7) | 4.3% | 10.1% | |||||
| Subcontracted Services | (358.5) | (489.8) | (536.4) | 9.5% | 49.6% | |||||
| Personnel | (100.3) | (151.1) | (157.0) | 3.9% | 56.6% | |||||
| Provisions and Losses | (135.1) | (140.2) | (127.8) | -8.9% | -5.4% | |||||
| Materials | (24.8) | (78.6) | (119.2) | 51.6% | 380.4% | |||||
| Advertising and Marketing | (24.5) | (62.0) | (59.2) | -4.6% | 141.3% | |||||
| Other | (52.6) | (118.8) | (89.6) | -24.6% | 70.1% | |||||
| R$ Million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| COSTS AND OPERATING EXPENSES | (1,840.8) | (2,287.2) | (2,354.8) | 3.0% | 27.9% | |||||
| (+) Depreciation and Amortization | 599.7 | 670.5 | 665.0 | -0.8% | 10.9% | |||||
| (+) Provisions and Losses | 135.1 | 140.2 | 127.8 | -8.9% | -5.4% | |||||
| (+) Other | 52.6 | 118.8 | 89.6 | -24.6% | 70.1% | |||||
| (=) CASH COST | (1,053.5) | (1,357.7) | (1,472.4) | 8.5% | 39.8% | |||||
| Brasil Telecom S.A. | Página 15 de 30 |
Graph 6: Operating Costs and Expenses Breakdown
(Excludes Depreciation, Provisions, Losses and Others)
| 1Q05 R$ 1,358 million |
2Q05 R$ 1,472 million |
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 |
| Operating Costs and Expenses | Operating costs and expenses totaled R$2,354.8 million in the 2Q05, against R$2,287.2 million in the previous quarter. | ||
Cash costs (operating costs and expenses excluding depreciation, amortization, provisions, losses and other) was of R$1,472.4 million in the 2Q05, as compared to R$1,357.7 million in the 1Q05. The main items that influenced that performance were: subcontracted services (+9.5%) and materials (+51.6%). | |||
| Number of Employees | At the end of the 2Q05, 5.719 Employees worked in Brasil Telecom’s wireline segment, against 5,685 employees in the previous quarter. | ||
Brasil Telecom GSM ended the 2Q05 with 937 Employees, against 918 in the 1Q05. | |||
| Personnel | Total personnel costs and expenses reached R$157.0 million, a 3.9% increase as compared to the previous quarter. Approximately R$18.6 million correspond to profit sharing. | ||
| Subcontracted Services |
Costs and expenses with outsourced services, excluding interconnection costs and advertising and marketing expenses, totaled R$536.4 million in the 2Q05, exceeding by 9.5% the costs and expenses reported in the previous quarter. This variation is partially explained by the following items: • Network maintenance • Call center • Commissions | ||
| Interconnection | Interconnection costs totaled R$600.7 million in the 2Q05, a 4.3% increase as compared to the previous quarter, due to (i) a 4.5% adjustment in the VU-M as of June 12, 2005, which resulted from the agreements settled between STFC and SMP providers for fixed-to-mobile local calls, (ii) 3.0% growth in fixed-mobile traffic and (iii) Brasil Virtual Cel’s suspension. | ||
| Brasil Telecom S.A. | Página 16 de 30 |
| Advertising and Marketing |
Advertising and marketing expenses totaled R$59.2 million in the 2Q05, a 4.6% reduction as compared to the previous period. |
| Losses from Accounts Receivable as a Percentage of Gross Revenues |
Losses from Accounts Receivable as a percentage of gross revenues in the 2Q05 were of 2.3%, against 3.0% in the 1Q05. Losses from accounts receivable totaled R$83.2 million in the 2Q05, a 20.7% decrease as compared to the previous quarter. |
| Accounts Receivable |
Brasil Telecom’s net accounts receivable totaled R$2,250.2 million at the end of the 2Q05, after the deduction of the provision for doubtful accounts in the amount of R$266.8 million. |
Graph 7: Accounts Receivable / Gross Revenues Ratio
Table 9: Gross Accounts Receivable
| Jun/04 | Sep/04 | Dec/04 | Mar/05 | Jun/05 | ||||||
| Total (R$ Million) | 2,145.9 | 2,284.4 | 2,354.8 | 2,456.8 | 2,517.0 | |||||
| Due | 60.1% | 61.5% | 64.5% | 63.3% | 65.0% | |||||
| Overdue (up to 30 days) | 15.7% | 17.3% | 16.4% | 15.7% | 15.6% | |||||
| Overdue (between 31-60 days) | 6.3% | 5.8% | 5.7% | 6.4% | 5.8% | |||||
| Overdue (between 61-90 days) | 3.6% | 3.5% | 3.7% | 4.3% | 3.5% | |||||
| Overdue (over 90 days) | 14.3% | 11.9% | 9.7% | 10.3% | 10.1% | |||||
| Provision for Contingencies | In the 2Q05, provisions for contingencies totaled R$44.6 million, an increase by R$4.9 million as compared to the 2Q04. |
| Materials | Costs and expenses with materials totaled R$119.2 million in the 2Q05, a 51.6% increase as compared to the previous quarter. That performance is primarily explained by the higher costs with handsets and accessories in Brasil Telecom GSM, which totaled R$86.9 million in the 2Q05, against R$58.7 million in the previous quarter, due to Mother’s Day and Valentine’s Day, when our dealers increase their inventories. |
| Brasil Telecom S.A. | Página 17 de 30 |
| Other Operating Costs and Expenses/ Revenues |
Other operating costs and expenses totaled R$89.6 million in the 2Q05, a 24.6% reduction as compared to the 1Q05. |
EBITDA
Table 10: EBITDA Margin – Gains and Losses
| R$ Million | 2Q04 | Vertical | 1Q05 | Vertical | 2Q05 | Vertical | ||||||
| GROSS REVENUES | 3,037.4 | 140.5% | 3,468.7 | 141.7% | 3,642.4 | 144.4% | ||||||
| Fixed Telephony | 2,746.0 | 127.0% | 2,901.1 | 118.5% | 3,040.2 | 120.5% | ||||||
| Local Service | 1,115.7 | 51.6% | 1,195.7 | 48.9% | 1,226.8 | 48.6% | ||||||
| Public Telephony | 119.1 | 5.5% | 86.9 | 3.6% | 124.1 | 4.9% | ||||||
| Long Distance Service | 418.3 | 19.3% | 430.2 | 17.6% | 445.6 | 17.7% | ||||||
| Fixed-Mobile Calls | 738.1 | 34.1% | 832.5 | 34.0% | 866.7 | 34.4% | ||||||
| Interconnection | 179.4 | 8.3% | 164.6 | 6.7% | 175.3 | 6.9% | ||||||
| Lease of Means | 63.5 | 2.9% | 65.9 | 2.7% | 77.7 | 3.1% | ||||||
| Supplementary and Value Added Services | 104.1 | 4.8% | 114.7 | 4.7% | 115.4 | 4.6% | ||||||
| Other | 7.8 | 0.4% | 10.4 | 0.4% | 8.6 | 0.3% | ||||||
| Mobile Telephony | - | 0.0% | 147.0 | 6.0% | 150.7 | 6.0% | ||||||
| Data Transmission | 291.4 | 13.5% | 420.6 | 17.2% | 451.6 | 17.9% | ||||||
| Deductions | (874.8) | -40.5% | (1,021.2) | -41.7% | (1,119.5) | -44.4% | ||||||
| NET REVENUES | 2,162.6 | 100.0% | 2,447.6 | 100.0% | 2,522.9 | 100.0% | ||||||
| COSTS & OPERATING EXPENSES | (1,241.2) | -57.4% | (1,616.7) | -66.1% | (1,689.8) | -67.0% | ||||||
| Personnel | (100.3) | -4.6% | (151.1) | -6.2% | (157.0) | -6.2% | ||||||
| Materials | (24.8) | -1.1% | (78.6) | -3.2% | (119.2) | -4.7% | ||||||
| Subcontracted Services | (358.5) | -16.6% | (489.8) | -20.0% | (536.4) | -21.3% | ||||||
| Interconnection | (545.3) | -25.2% | (576.1) | -23.5% | (600.7) | -23.8% | ||||||
| Advertising and Marketing | (24.5) | -1.1% | (62.0) | -2.5% | (59.2) | -2.3% | ||||||
| Provisions and Losses | (135.1) | -6.2% | (140.2) | -5.7% | (127.8) | -5.1% | ||||||
| Other | (52.6) | -2.4% | (118.8) | -4.9% | (89.6) | -3.5% | ||||||
| EBITDA | 921.4 | 42.6% | 830.9 | 33.9% | 833.1 | 33.0% | ||||||
| EBITDA of R$833.1 million |
Brasil Telecom’s EBITDA was of R$833.1 million in the 2Q05, which represents a 0.3% increase as compared to the previous quarter. |
Consolidated EBITDA margin reached 33.0%, mainly affected by higher interconnection costs and by the subsidies granted by Brasil Telecom GSM in the Mother’s Day and Valentine’s Day, when competition adopted an aggressive pricing policy. | |
Wireline’s EBITDA Margin reached 40.2%. | |
| EBITDA/AVG. LIS/month |
In the 2Q05, the EBITDA/Avg. LIS/month reached R$29.2, stable as compared to that recorded in the 1Q05. |
| Brasil Telecom S.A. | Página 18 de 30 |
FINANCIAL RESULT
Table 12: Consolidated Financial Result
| R$ million | 2Q04 | 1Q05 | 2Q05 | D Quarter | D 12 Months | |||||
| Financial Revenue | 172.3 | 144.1 | 297.6 | 106.5% | 72.7% | |||||
| Local Currency | 124.5 | 112.1 | 109.8 | -2.0% | -11.8% | |||||
| Foreign Currency | 47.9 | 32.0 | 187.8 | 486.3% | 292.4% | |||||
| Financial Expense | (312.4) | (267.2) | (400.2) | 49.8% | 28.1% | |||||
| Local Currency | (216.4) | (190.6) | (187.0) | -1.9% | -13.6% | |||||
| Foreign Currency | (95.9) | (76.6) | (213.2) | 178.4% | 122.2% | |||||
| Interest on Shareholders' Equity | - | - | (240.1) | N.A. | N.A. | |||||
| Net Financial Expenses | (140.1) | (123.1) | (342.7) | 178.4% | 144.7% | |||||
| Financial Result | In the 2Q05, Brasil Telecom recorded a negative consolidated financial result of R$342.7 million, which included R$240.1 million of interest on shareholders’ equity (JSCP). Excluding the JSCP, the financial result relating to the 2Q05 totaled R$102.6 million in expenses, 16.7% lower than 1Q05’s results. |
OTHER ITEMS
| Reconstituted Goodwill Amortization |
In the 2Q05, we amortized R$31.0 million of goodwill in connection with the acquisition of CRT (with no impact on cash flows and dividend distributions), which was accounted for as non-operational expense. |
NET INCOME
Net income totaled R$42.3 million in the 2Q05 (R$0.0761/1,000 shares). Net income/ADR in the same period was of US$0.0972. Net income adjusted by goodwill totaled R$73.3 million in the 2Q05. |
| Brasil Telecom S.A. | Página 19 de 30 |
BALANCE SHEET
Table 13: Consolidated Balance Sheet – Brasil Telecom S.A.
| R$ Million | Mar/05 | Jun/05 | ||
| CURRENT ASSETS | 5,298.6 | 5,194.8 | ||
| Cash and Equivalents | 1,853.1 | 1,776.0 | ||
| Accounts Receivables (Net) | 2,186.8 | 2,250.2 | ||
| Deferred and Recoverable Taxes | 780.2 | 798.7 | ||
| Other Recoverable Amounts | 268.6 | 228.5 | ||
| Inventory | 137.5 | 73.5 | ||
| Other | 72.3 | 68.0 | ||
| LONG TERM ASSETS | 1,395.5 | 1,538.2 | ||
| Loans and Financing | 8.3 | 8.2 | ||
| Deferred and Recoverable Taxes | 790.1 | 878.9 | ||
| Other | 597.2 | 651.1 | ||
| PERMANENT ASSETS | 9,874.6 | 9,571.5 | ||
| Investment (Net) | 450.1 | 400.8 | ||
| Property, Plant and Equipment (Net) | 8,527.4 | 8,326.8 | ||
| Property, Plant and Equipment (Gross) | 24,757.2 | 25,126.5 | ||
| Accumulated Depreciation | (16,229.9) | (16,799.7) | ||
| Deferred Assets (Net) | 897.1 | 843.8 | ||
| TOTAL ASSETS | 16,568.7 | 16,304.4 | ||
| CURRENT LIABILITIES | 4,092.1 | 4,228.8 | ||
| Loans and Financing | 1,044.4 | 1,158.3 | ||
| Suppliers | 1,514.6 | 1,522.8 | ||
| Taxes and Contributions | 811.4 | 827.5 | ||
| Dividends Payable | 41.5 | 50.4 | ||
| Provisions | 339.0 | 327.0 | ||
| Salaries and Benefits | 116.1 | 125.4 | ||
| Consignment for Third Parties | 102.4 | 85.5 | ||
| Authorization for Services Exploration | 45.6 | 46.8 | ||
| Other | 77.1 | 85.1 | ||
| LONG TERM LIABILITIES | 5,935.0 | 5,721.0 | ||
| Loans and Financing | 4,060.3 | 3,842.3 | ||
| Provisions | 895.5 | 903.2 | ||
| Taxes and Contributions | 685.6 | 672.1 | ||
| Authorization for Services Exploration | 270.6 | 278.2 | ||
| Other | 23.1 | 25.2 | ||
| DEFERRED INCOME | 88.1 | 90.0 | ||
| MINORITY INTEREST | 31.6 | 33.3 | ||
| SHAREHOLDERS' EQUITY | 6,421.9 | 6,231.4 | ||
| Capital Stock | 3,435.8 | 3,435.8 | ||
| Capital Reserves | 1,517.6 | 1,517.6 | ||
| Profit Reserves | 287.7 | 287.7 | ||
| Retained Earnings | 1,335.6 | 1,145.0 | ||
| Treasury Shares | (154.7) | (154.7) | ||
| TOTAL LIABILITIES | 16,568.7 | 16,304.4 | ||
| Brasil Telecom S.A. | Página 20 de 30 |
Table 14: Balance Sheet – Brasil Telecom GSM
| R$ Million | Mar/05 | Jun/05 | ||
| CURRENT ASSETS | 465.6 | 378.7 | ||
| Cash and Equivalents | 2.3 | 9.8 | ||
| Accounts Receivables (Net) | 128.4 | 178.8 | ||
| Deferred and Recoverable Taxes | 182.9 | 103.6 | ||
| Other Recoverable Amounts | 8.8 | 11.0 | ||
| Inventory | 132.0 | 68.4 | ||
| Other | 11.3 | 7.1 | ||
| LONG TERM ASSETS | 179.6 | 249.8 | ||
| Deferred and Recoverable Taxes | 177.3 | 247.5 | ||
| Other | 2.3 | 2.3 | ||
| PERMANENT ASSETS | 1,483.1 | 1,511.4 | ||
| Property, Plant and Equipment (Net) | 1,166.3 | 1,203.4 | ||
| Property, Plant and Equipment (Gross) | 1,224.3 | 1,305.1 | ||
| Accumulated Depreciation | (58.0) | (101.7) | ||
| Deferred Assets (Net) | 316.8 | 307.9 | ||
| TOTAL ASSETS | 2,128.3 | 2,139.9 | ||
| CURRENT LIABILITIES | 618.1 | 513.4 | ||
| Loans and Financing | 0.0 | 0.1 | ||
| Suppliers | 451.4 | 389.0 | ||
| Taxes and Contributions | 90.4 | 31.3 | ||
| Dividends Payable | 4.5 | 2.9 | ||
| Provisions | 0.0 | 0.1 | ||
| Salaries and Benefits | 8.9 | 11.0 | ||
| Consignment for Third Parties | 10.8 | 16.7 | ||
| Authorization for Services Exploration | 45.6 | 46.8 | ||
| Other | 6.6 | 15.5 | ||
| LONG TERM LIABILITIES | 342.6 | 623.8 | ||
| Loans and Financing | 5.6 | 11.2 | ||
| Provisions | 0.1 | 0.3 | ||
| Taxes and Contributions | 0.0 | 0.1 | ||
| Authorization for Services Exploration | 259.0 | 266.2 | ||
| Capitalized Resources | 78.0 | 346.0 | ||
| SHAREHOLDERS' EQUITY | 1,167.5 | 1,002.7 | ||
| Capital Stock | 1,400.0 | 1,400.0 | ||
| Capital Reserves | 11.8 | 11.8 | ||
| Retained Earnings | (244.3) | (409.1) | ||
| TOTAL LIABILITIES | 2,128.3 | 2,139.9 | ||
| Brasil Telecom S.A. | Página 21 de 30 |
INDEBTEDNESS
Table 15: Indebtedness
| R$ Million | Currency | Annual Cost | Maturity | % Total | Balance Jun/05 | |||||
| Short Term | 23.2% | 1,158.3 | ||||||||
| Private Debenture (BRP) | R$ | 100% CDI | Jul/2006 | 457.8 | ||||||
| Inter Company (BRP) | US$ | 1.75% | Jul/2014 | 7.3 | ||||||
| BNDES | R$ | TJLP + 6.5% | Dec/2007 | 15.8 | ||||||
| BNDES | R$ | TJLP + 3.85% | Dec/2007 | 352.3 | ||||||
| BNDES | R$ | TJLP + 3.85% | Oct/2007 | 82.7 | ||||||
| BNDES | R$ | Basket + 6.5% | Dec/2007 | 31.8 | ||||||
| BNDES | R$ | Basket + 3.85% | Nov/2007 | 10.9 | ||||||
| BNDES | R$ | Basket + 5,5% | Apr/2011 | 6.6 | ||||||
| BNDES | R$ | TJLP + 5,5% | Apr/2011 | 49.8 | ||||||
| BRDE | R$ | IGP-M + 12.0% | Sep/2006 | 9.3 | ||||||
| BB | R$ | 14% | Jan/2008 | 5.1 | ||||||
| Public Debentures - 3rd Issuance | R$ | CDI + 1,0% | Jul/2009 | 46.2 | ||||||
| Bonds - US$ 200 MM | US$ | 9.38% | Feb/2014 | 18.5 | ||||||
| Financial Institutions I | US$ | Lib6 + 4.0% | Mar/2006 | 10.3 | ||||||
| Financial Institutions II | US$ | Lib6 + 2.4% | Dec/2005 | 4.2 | ||||||
| Financial Institutions III | US$ | Lib6 + 0.5% | Jul/2008-Jul/2013 | 12.0 | ||||||
| Financial Institutions IV | Yen$ | Jibor6 + 1.92% | Mar/2011 | 2.8 | ||||||
| Financial Institutions V | Yen$ | 3.35% | Feb/2009 | 0.5 | ||||||
| Suppliers I | US$ | Lib3 + 2.95% | Jun/2007 | 0.3 | ||||||
| Suppliers II | US$ | 1.75% | Feb/2014 | 0.2 | ||||||
| Hedge Adjustmest | 33.8 | |||||||||
| Long Term | 76.8% | 3,842.3 | ||||||||
| Private Debenture (BRP) | R$ | 100% CDI | Jul/2006 | 520.0 | ||||||
| Inter Company (BRP) | US$ | 1.75% | Jul/2014 | 55.2 | ||||||
| BRB - GSM | R$ | 2.47% | Jul/2015 | 11.2 | ||||||
| BRB - Fixed-line | R$ | 2.47% | Jul/2015 | 0.6 | ||||||
| BNDES | R$ | TJLP + 6.5% | Dec/2007 | 23.1 | ||||||
| BNDES | R$ | TJLP + 3.85% | Dec/2007 | 606.9 | ||||||
| BNDES | R$ | TJLP + 3.85% | Oct/2007 | 118.1 | ||||||
| BNDES | R$ | Basket + 6.5% | Dec/2007 | 46.5 | ||||||
| BNDES | R$ | Basket + 3.85% | Nov/2007 | 15.9 | ||||||
| BNDES | R$ | Basket + 5,5% | Apr/2011 | 108.2 | ||||||
| BNDES | R$ | TJLP + 5,5% | Apr/2011 | 577.9 | ||||||
| BRDE | R$ | IGP-M + 12.0% | Sep/2006 | 2.5 | ||||||
| BB | R$ | 14% | Jan/2008 | 7.9 | ||||||
| Public Debentures - 3rd Issuance | R$ | CDI + 1,0% | Jul/2009 | 500.0 | ||||||
| Bonds - US$ 200 MM | US$ | 9.38% | Feb/2014 | 470.1 | ||||||
| Financial Institutions III | US$ | Lib6 + 0.5% | Jul/2008-Jul/2013 | 47.8 | ||||||
| Financial Institutions IV | Yen$ | Jibor6 + 1.92% | Mar/2011 | 457.2 | ||||||
| Financial Institutions V | Yen$ | 3.35% | Feb/2009 | 1.4 | ||||||
| Financial Institutions VI | US$ | 0.00% | Dec/2015 | 23.4 | ||||||
| Suppliers I | US$ | Lib3 + 2.95% | Jun/2007 | 0.5 | ||||||
| Suppliers II | US$ | 1.75% | Feb/2014 | 1.4 | ||||||
| Hedge Adjustmest | 246.5 | |||||||||
| Total Debt | 100.0% | 5,000.6 | ||||||||
| Total Debt | At the end of June, 2005, Brasil Telecom’s consolidated total debt was of R$5,000.6 million, 2.0% lower than the amount recorded at the end of March, 2005. |
| Net Debt | Net debt totaled R$3,224.6 million, a 0.8% decrease as compared to the previous quarter. Excluding the loan and the private debenture with the controlling shareholder, the net debt at the end of June was of R$2,184.2 million. |
| Brasil Telecom S.A. | Página 22 de 30 |
Table 16: Indebtedness by Currency
| Debt BTM (R$ Million) | Jun 2004 | Mar 2005 | Jun 2005 | D Quarter | D Year | |||||
| Short Term | 1,475.7 | 1,044.4 | 1,158.3 | 10.9% | -21.5% | |||||
| In R$ | 1,331.1 | 916.0 | 1,019.1 | 11.2% | -23.4% | |||||
| In US$ | 72.4 | 49.5 | 52.8 | 6.7% | -27.0% | |||||
| In Yen | 2.8 | 0.8 | 3.3 | 327.2% | 18.8% | |||||
| In Currency Basket | 57.4 | 52.5 | 49.3 | -6.2% | -14.2% | |||||
| Hedge Adjustment | 12.1 | 25.6 | 33.8 | 32.4% | 179.2% | |||||
| Long Term | 3,679.3 | 4,060.3 | 3,842.3 | -5.4% | 4.4% | |||||
| In R$ | 2,078.6 | 2,493.3 | 2,368.3 | -5.0% | 13.9% | |||||
| In US$ | 836.7 | 677.9 | 598.3 | -11.7% | -28.5% | |||||
| In Yen | 619.3 | 538.2 | 458.6 | -14.8% | -25.9% | |||||
| In Currency Basket | 137.8 | 211.7 | 170.6 | -19.4% | 23.8% | |||||
| Hedge Adjustment | 6.9 | 139.2 | 246.5 | 77.1% | N.A. | |||||
| Total Debt | 5,155.0 | 5,104.6 | 5,000.6 | -2.0% | -3.0% | |||||
| (-) Cash | 1,970.7 | 1,853.1 | 1,776.0 | -4.2% | -9.9% | |||||
| Net Debt | 3,184.3 | 3,251.5 | 3,224.6 | -0.8% | 1.3% | |||||
| (-) Inter Company with BRP | 1,475.3 | 1,005.8 | 1,040.3 | 3.4% | -29.5% | |||||
| Net Debt Ex-Inter Company with BRP | 1,709.0 | 2,245.7 | 2,184.2 | -2.7% | 27.8% | |||||
| Long-term debt | As of June, 2005, 76.8% of the total debt corresponded to long- term debt, against 71.4% in June, 2004, reflecting the success in the strategy of improving our debt profile, which presents the following amortization schedule: |
Table 17: Long-term Debt Amortization Schedule
| Maturity | % Long Term Debt | |
| 2006 | 23.7% | |
| 2007 | 21.1% | |
| 2008 | 10.3% | |
| 2009 | 20.9% | |
| 2010 | 7.8% | |
| 2011 and after | 16.2% | |
| Foreign Currency Debt |
At the end of June 2005, the foreign-currency-denominated debt totaled R$1,332.8 million, of which R$651.1 million were denominated in US dollars, R$219.8 million in currency basket and R$461.9 million in Yens. |
On June 30, 2005, 61.7% of our debt affected by exchange rate variation was hedged against exchange rate risk. Of our total debt excluding hedge adjustments, 11.3% was exposed to exchange rate variations. | |
| Year-to-date Debt Cost |
Brasil Telecom’s consolidated debt had a year-to-date cost equivalent to 10.9% p.a., or 59.6% of the CDI. |
| Leverage Ratio | As of June 30, 2005, Brasil Telecom’s financial leverage ratio, represented by the ratio of its net debt and shareholders’ equity, was equal to 51.7%, against 50.6% in March, 2005. |
| Brasil Telecom S.A. | Página 23 de 30 |
INVESTMENT IN PERMANENT ASSETS
Table 18: Permanent Assets Investments Breakdown
| R$ Million | 2Q04 | 3Q04 | 4Q04 | 4Q05 | 2Q05 | D Quarter | D 12 Months | |||||||
| Network Expansion | 128.8 | 107.2 | 240.5 | 65.0 | 195.3 | 200.5% | 51.6% | |||||||
| Conventional Telephony | 19.3 | 20.0 | 95.4 | 16.5 | 81.0 | 390.6% | 320.0% | |||||||
| Transmission Backbone | 11.4 | 10.3 | 22.2 | 3.9 | 15.8 | 307.5% | 37.9% | |||||||
| Data Network | 76.2 | 74.1 | 108.7 | 42.0 | 88.9 | 111.3% | 16.6% | |||||||
| Intelligent Network | 19.6 | 0.6 | 5.2 | 0.4 | 4.7 | 1155.1% | -75.7% | |||||||
| Network Management Systems | 1.0 | 0.1 | 2.9 | - | 1.6 | N.A. | 59.7% | |||||||
| Other | 1.4 | 2.0 | 6.0 | 2.2 | 3.3 | 52.4% | 146.4% | |||||||
| Network Operation | 62.8 | 71.9 | 85.3 | 58.3 | 58.1 | -0.3% | -7.5% | |||||||
| Public Telephony | 0.9 | 0.7 | 0.9 | 1.2 | 0.7 | -43.7% | -23.1% | |||||||
| Information Technology | 29.0 | 41.2 | 106.0 | 19.7 | 37.9 | 92.7% | 30.8% | |||||||
| Expansion Personnel | 20.6 | 19.8 | 19.1 | 21.0 | 21.6 | 2.9% | 5.0% | |||||||
| Other | 356.2 | 13.4 | 162.0 | 26.4 | 37.2 | 40.6% | -89.6% | |||||||
| Expansion Financial Expenses | 19.1 | (17.6) | 6.5 | 4.6 | 1.7 | -63.1% | -91.1% | |||||||
| Total - Fixed Telephony | 617.4 | 236.5 | 620.3 | 196.2 | 352.5 | 79.6% | -42.9% | |||||||
| R$ Million | 2Q04 | 3Q04 | 4Q04 | 4Q05 | 2Q05 | D Quarter | D 12 Months | |||||||
| Brasil Telecom GSM | 158.1 | 486.4 | 415.2 | 85.9 | 87.4 | 1.7% | -44.7% | |||||||
| Expansion Financial Expenses PCS | 42.6 | 16.3 | 2.7 | - | - | N.A. | -100.0% | |||||||
| Total - Mobile Telephony | 200.7 | 502.7 | 417.9 | 85.9 | 87.4 | 1.7% | -56.5% | |||||||
| Total Investments | 818.1 | 739.2 | 1,038.2 | 282.2 | 439.9 | 55.9% | -46.2% | |||||||
| Investments in Permanent Assets |
Brasil Telecom’s investments totaled R$439.9 million in the2Q05, of which R$352.5 million were invested in the wireline networkand R$87.4 million in the mobile network. |
| Brasil Telecom S.A. | Página 24 de 30 |
CASH FLOW
Table 19: Consolidated Cash Flow
| R$ Million | 2Q04 | 1Q05 | 2Q05 | |||
| OPERATING ACTIVITIES | ||||||
| (+) Net Income of the Period | 20.7 | 2.8 | 42.3 | |||
| (+) Minority Participation | (0.0) | 1.2 | 5.5 | |||
| (+) Items with no Cash Effects | 1,061.2 | 1,240.8 | 1,051.5 | |||
| Depreciation and Amortization | 630.7 | 701.8 | 696.3 | |||
| Losses with Accounts Receivable from Services | 91.8 | 77.6 | 86.0 | |||
| Provision for Doubtful Accounts | 7.2 | 27.3 | (2.8) | |||
| Provision for Contingencies | 53.9 | 35.3 | 44.6 | |||
| Deferred Taxes | 5.4 | 219.1 | 102.0 | |||
| Result from the Write-off of Permanent Assets | 53.2 | 6.7 | 7.0 | |||
| Financial Expenses | 227.7 | 183.4 | 108.1 | |||
| Other Expenses/Revenues with no Cash Effects | (8.6) | (10.3) | 10.3 | |||
| (-) Equity Changes | 206.0 | 473.3 | 400.1 | |||
| (=) Cash Flow from Operating Activities | 875.9 | 771.5 | 699.2 | |||
| INVESTMENT ACTIVITIES | ||||||
| Financial Investments | (0.0) | (0.2) | (0.3) | |||
| Investment Suppliers | (70.0) | (257.4) | 24.5 | |||
| Funds from Sales of Permanent Assets | 3.0 | 0.5 | 0.8 | |||
| Investments in Permanent Assets | (793.6) | (268.6) | (447.1) | |||
| Other Investment Flows | (3.5) | - | - | |||
| (=) Cash Flow from Investment Activities | (864.1) | (525.7) | (422.0) | |||
| FINANCING ACTIVITIES | ||||||
| Dividens/Interests on Shareholders' Equity paid in the | ||||||
| Period | (205.0) | (369.7) | (200.1) | |||
| Loans and Financing | (174.0) | (358.6) | (185.9) | |||
| Loans Obtained | 581.4 | 5.3 | 6.4 | |||
| Loans Paid | (627.4) | (147.0) | (132.8) | |||
| Interest Paid | (128.0) | (216.9) | (59.6) | |||
| Change in Shareholders' Equity | 0.9 | - | - | |||
| Acquisition of Own Shares | - | (62.3) | - | |||
| Other Financing Flows | (6.5) | 0.1 | 31.7 | |||
| (=) Cash Flow from Financing Activities | (384.5) | (790.5) | (354.4) | |||
| CASH FLOW OF THE PERIOD | (372.8) | (544.7) | (77.2) | |||
| Cash and Cash Equivalents - current balance | 1,970.7 | 1,853.1 | 1,776.0 | |||
| Cash and Cash Equivalents - previous balance | 2,343.5 | 2,397.8 | 1,853.1 | |||
| Variation in Cash and Cash Equivalents | (372.8) | (544.7) | (77.2) | |||
| - | 0.0 | 0.1 | ||||
| OPERATING CASH FLOW | 875.9 | 771.5 | 699.2 | |||
| (-) Investments on Permanent Assets (includes Investment Suppliers) | (864.1) | (525.7) | (422.0) | |||
| (-) Interest Paid | (128.0) | (216.9) | (59.6) | |||
| (=) FREE CASH FLOW | (116.2) | 29.0 | 217.7 | |||
| Brasil Telecom S.A. | Página 25 de 30 |
STOCK MARKET
Table 20: Stock Market Performance
| Closing Price | Performance | |||||||
| as of | In 2Q05 | In 12 | In 24 | |||||
| Jun/30/05 | months | months | ||||||
| Common Shares (BRTO3) (in R$/1,000 shares) | 15.60 | 16.0% | 40.7% | 27.3% | ||||
| Preferred Shares (BRTO4) (in R$/1,000 shares) | 10.10 | -6.9% | -11.0% | -21.4% | ||||
| ADR (BTM) (in US$/ADR) | 12.82 | 4.8% | 15.0% | -4.8% | ||||
| Ibovespa (points) | 25,051 | -5.9% | 18.5% | 93.1% | ||||
| Itel (points) | 828 | -3.7% | -3.6% | 33.9% | ||||
| IGC (points) | 2,507 | -4.5% | 41.0% | 116.2% | ||||
| Dow Jones (points) | 10,275 | -2.2% | -1.5% | 14.4% | ||||
Graph 8: Stock Market Performance in the 2Q05 – Bovespa and NYSE
(Base 100 = March 31, 2005)
Table 21: Theoretical Portfolio Participation – May / August
| Ibovespa | Itel | IGC | ||||
| BRTO3 | - | - | 0.019% | |||
| BRTO4 | 2.385% | 6.065% | 0.924% | |||
| Brasil Telecom S.A. | Página 26 de 30 |
SHAREHOLDING STRUCTURE
Table 22: Shareholding Breakdown
| Jun 2005 | Common Shares | % | Preferred Shares | % | Total | % | ||||||
| Brasil Telecom Participações | 247,276,380,758 | 99.1% | 116,685,184,225 | 38.2% | 363,961,564,983 | 65.5% | ||||||
| ADR | - | 0.0% | 19,216,455,000 | 6.3% | 19,216,455,000 | 3.5% | ||||||
| Treasury | - | 0.0% | 13,679,382,322 | 4.5% | 13,679,382,322 | 2.5% | ||||||
| Other | 2,320,668,784 | 0.9% | 156,120,209,742 | 51.1% | 158,440,878,526 | 28.5% | ||||||
| Total | 249,597,049,542 | 100.0% | 305,701,231,289 | 100.0% | 555,298,280,831 | 100.0% | ||||||
| Mar 2005 | Common Shares | % | Preferred Shares | % | Total | % | ||||||
| Brasil Telecom Participações | 247,276,380,758 | 99.1% | 112,516,718,089 | 36.8% | 359,793,098,847 | 64.8% | ||||||
| ADR | - | 0.0% | 17,489,415,000 | 5.7% | 17,489,415,000 | 3.1% | ||||||
| Treasury | - | 0.0% | 13,679,382,322 | 4.5% | 13,679,382,322 | 2.5% | ||||||
| Other | 2,320,668,784 | 0.9% | 162,015,715,878 | 53.0% | 164,336,384,662 | 29.6% | ||||||
| Total | 249,597,049,542 | 100.0% | 305,701,231,289 | 100.0% | 555,298,280,831 | 100.0% | ||||||
RECENT EVENTS
| Anatel’s Act 51,450 | Anatel’s Directive Council issued Act 51,450, on July 7, 2005, declaring that the 18-month term provided for in articles 8 and 9 of Act 41,780/2004 “begins on the date of the effective return of Telecom Italia International N. V. to Brasil Telecom S.A.’s control group”. |
Act 41,780/2004 established a maximum 18-month term for the companies of Telecom Italia group and of Brasil Telecom group to take the measures regarding the overlapping of licenses of the Serviço Móvel Pessoal (PCS – Personal Communication System) in Region II of the General PCS Plan, and of the DLD (domestic long-distance) and ILD (international long-distance) Fixed-Line Switched Telecommunications Services in Regions I, II and III of the General Concession Plan. | |
| Brasil Telecom S.A. | Página 27 de 30 |
2005 SCENARIO (GUIDELINES)
| Disclaimer | This item contains forward-looking statements. Such statements do not constitute facts occurred in the past and reflect the expectations of the Company's managers only. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "aims", as well as other similar words, are intended to identify those forward-looking statements, which obviously involve risks or uncertainties predicted or not by the Company. Accordingly, the future results of the Company’s operations may differ from the current expectations, and the reader should not rely exclusively on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments. |
| Broadband | We maintain our estimates of achieving 1.0 million ADSL accesses in service by the end of 2005, virtually doubling the customer base throughout the year. |
| Wireless Operations |
We estimate that Brasil Telecom GSM’s customer base should total 2.1 million customers by the end of 2005, 77% of which will be post-paid. We also estimate an ARPU of R$26 and an average SAC of R$220 in 2005. We expect a churn rate equivalent to 50% of the market’s average in our post- paid client base. |
| Revenues | We anticipate a healthy growth in revenues from data, mobile, internet and value-added services throughout 2005. Consequently, 2005 revenues may grow at a similar rate as 2004 revenues. |
| Costs | We expect an increase in operational costs and expenses in 2005 due to the maintenance of the mobile interconnection regime. Additionally, since the Brasil Virtual Cel was suspended, we expect that Brasil Telecom shall present a growth in interconnection costs in comparison to our planning. |
| Provision for Doubtful Accounts |
We expect to report relatively lower provisions for doubtful accounts in 2005 as compared to 2004, as internal controls improve and economic conditions continue to thrive, positively impacting income and employment figures. |
| EBITDA Margin | Due to higher costs, as mentioned above, we expect our 2005 wireline EBITDA margin to be slightly lower than the one presented in the previous year. We believe that the mobile segment will cause a 6 p.p. negative impact in Brasil Telecom consolidated EBITDA margin. |
| Debt | We will keep following our challenge of further improving our debt profile, optimizing Company’s capital structure, and trying to maintain a conservative leverage ratio and good liquidity, in order to participate in possible consolidation opportunities in the sector and to comply with all our obligations along the year. |
| Capex | 2005’s fixed-line Capex should be in line with 2004’s, excluding the Universalization Targets established by Anatel for the year. Mobile operations’ Capex should be marginal and targeted at the increase of our coverage in Region II. |
| Brasil Telecom S.A. | Página 28 de 30 |
SELECTED DATA
Table 23: Indicators’ Evolution
| WIRELINE NETWORK | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| Lines installed (thousand) | 10,712 | 10,725 | 10,737 | 10,778 | 10,807 | |||||
| Additional lines installed (thousand) | 11 | 14 | 12 | 41 | 29 | |||||
| Lines in service - LIS (thousand) | 9,647 | 9,604 | 9,503 | 9,512 | 9,540 | |||||
| Residential (thousand) | 6,840 | 6,685 | 6,445 | 6,379 | 6,299 | |||||
| Non-residential (thousand) | 1,451 | 1,451 | 1,433 | 1,440 | 1,449 | |||||
| Public phones (thousand) | 296 | 296 | 296 | 296 | 296 | |||||
| Pre-paid (thousand) | 276 | 285 | 297 | 311 | 314 | |||||
| Hybrid (thousand) | 159 | 267 | 408 | 465 | 557 | |||||
| Other (including PBX) (thousand) | 624 | 620 | 624 | 620 | 625 | |||||
| Additional lines in service (thousand) | (77) | (42) | (101) | 9 | 28 | |||||
| Average lines in service (thousand) | 9,685 | 9,626 | 9,554 | 9,508 | 9,526 | |||||
| Utilization rate | 90.1% | 89.5% | 88.5% | 88.3% | 88.3% | |||||
| Teledensity (LIS/100 inhabitants) | 22.9 | 22.7 | 22.4 | 22.4 | 22.4 | |||||
| ADSL lines in service (thousand) | 382.5 | 456.1 | 535.5 | 625.3 | 747.4 | |||||
| MOBILE NETWORK | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| Clients (thousand) | - | - | 622 | 1,004 | 1,345 | |||||
| Post-paid (thousand) | - | - | 206 | 322 | 357 | |||||
| Pre-paid (thousand) | - | - | 417 | 681 | 989 | |||||
| Gross Additions | - | - | 627 | 406 | 407 | |||||
| Cancellations | - | - | 4 | 24 | 66 | |||||
| Anualized churn | - | - | 1.4% | 11.9% | 22.4% | |||||
| # of employees - Mobile Telephony | 758 | 822 | 881 | 918 | 937 | |||||
| TRAFFIC | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| Exceeding local pulses (million) | 2,715 | 2,730 | 2,773 | 2,305 | 2,473 | |||||
| Domestic long distance - DLD (million minutes) | 1,624 | 1,638 | 1,437 | 1,334 | 1,339 | |||||
| Fixed-mobile (million minutes) | 1,036 | 1,098 | 1,180 | 1,126 | 1,122 | |||||
| PRODUCTIVITY | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| # of employees - Fixed Telephony | 5,386 | 5,503 | 5,799 | 5,685 | 5,719 | |||||
| Average # of employees | 5,296 | 5,445 | 5,651 | 5,742 | 5,702 | |||||
| LIS/employee | 1,791 | 1,745 | 1,639 | 1,673 | 1,668 | |||||
| Net revenue/average # of employees/month (R$ thousand) | 136.1 | 144.5 | 145.5 | 142.1 | 147.5 | |||||
| EBITDA/average # of employees/month (R$ thousand) | 58.0 | 60.7 | 45.6 | 48.2 | 48.7 | |||||
| Net earnings/average # of employees/month (R$ thousand) | 1.3 | 6.4 | 1.2 | 0.2 | 2.5 | |||||
| Exceeding local pulses/average LIS/month | 93.4 | 94.5 | 96.7 | 80.8 | 86.5 | |||||
| DLD minutes/average LIS/month | 55.9 | 56.7 | 50.1 | 46.8 | 46.7 | |||||
| Fixed-mobile minutes/average LIS/month | 35.6 | 38.0 | 41.2 | 39.5 | 39.4 | |||||
| Net revenue/average LIS/month (R$) | 74.4 | 81.8 | 83.9 | 83.2 | 84.6 | |||||
| EBITDA/average LIS/month (R$) | 31.7 | 34.3 | 27.0 | 29.1 | 29.2 | |||||
| Net earnings/average LIS/month (R$) | 0.7 | 3.6 | 0.7 | 0.1 | 1.5 | |||||
| PROFITABILITY | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| EBITDA margin | 42.6% | 42.0% | 31.3% | 33.9% | 33.0% | |||||
| Net margin | 1.0% | 4.4% | 0.8% | 0.1% | 1.7% | |||||
| Return on equity - ROE | 0.3% | 1.6% | 0.3% | 0.0% | 0.7% | |||||
| CAPITAL STRUCTURE | 2Q04 | 3Q04 | 4Q04 | 1Q05 | 2Q05 | |||||
| Cash and cash equivalents (R$ million) | 1,971 | 2,599 | 2,398 | 1,853 | 1,776 | |||||
| Total debt (R$ million) | 5,155 | 5,422 | 5,281 | 5,105 | 5,001 | |||||
| Short term debt | 28.6% | 26.6% | 20.9% | 20.5% | 23.2% | |||||
| Long term debt | 71.4% | 73.4% | 79.1% | 79.5% | 76.8% | |||||
| Net debt (R$ million) | 3,184 | 2,823 | 2,884 | 3,251 | 3,225 | |||||
| Debt with BRP (inter-company + debenture) (R$ million) | 1,475 | 1,015 | 1,047 | 1,006 | 1,040 | |||||
| Net debt excluding debt with BRP (R$ million) | 1,709 | 1,808 | 1,837 | 2,246 | 2,184 | |||||
| Shareholders' equity (R$ million) | 6,591 | 6,698 | 6,482 | 6,422 | 6,231 | |||||
| Net debt/shareholders' equity | 48.3% | 42.1% | 44.5% | 50.6% | 51.7% | |||||
| Net debt excluding debt with BRP/shareholders' equity | 25.9% | 27.0% | 28.3% | 35.0% | 35.1% | |||||
| Brasil Telecom S.A. | Página 29 de 30 |
COMING EVENTS
Teleconference: 2Q05 ResultsPhone #: (1 303) 205-0066
Date: July 21 (Thursday)
Time: 11 a.m. (New York time)
IR CONTACTS
| Marcos Tourinho (Director) | Phone: (55 61) 3415-1052 | marcos.tourinho@brasiltelecom.com.br |
| Renata Fontes (Manager) | Phone: (55 61) 3415-1256 | renatafontes@brasiltelecom.com.br |
| Gustavo Nunes (Manager) | Phone: (55 61) 3415-8181 | gustavon@brasiltelecom.com.br |
| Flávia Menezes | Phone: (55 61) 3415-1411 | flaviam@brasiltelecom.com.br |
MEDIA CONTACTS
| Cesar Borges | Phone: (55 61) 3415-1378 | cesarb@brasiltelecom.com.br |
This document contains forward-looking statements. Such statements do not constitute facts occurred in the past and reflect the expectations of the Company's managers only. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "aims", as well as other similar words, are intended to identify those forward-looking statements, which obviously involve risks or uncertainties predicted or not by the Company. Accordingly, the future results of the Company's operations may differ from the current expectations, and the reader should not rely exclusively on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments. |
| Brasil Telecom S.A. | Página 30 de 30 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 21, 2005
BRASIL TELECOM S.A. |
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By: |
/S/ Carla Cico
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Name: Carla Cico
Title: President and Chief Executive Officer |
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