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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___

 

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Topic		Presenter
Introduction and Brasil Telecom strategy review		Ricardo Knoepfelmacher
Business operations		Francisco Santiago
• Fixed voice
• IP (DSL and Internet businesses)
• Data
• Mobile
Regulatory challenges		Luiz Perrone
Operating effectiveness and financials		Charles Putz

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		Transition safely held
		Auditing processes moving – first results already presented
		Concerns about OpEx
		•	We found expenses growing (above 14% up to September, excluding the mobile business)
		New business plan developed focuses on concerns
		•	Total revenue slightly growing – fixed voice erosion compensation with other growth engines
		•	Interrupted growth trend of expenses
		Strategic directions established

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		• Strategic guidelines approved by controlling shareholders
		• Operating cost reduction and 2006 budget approved
		• Integration of fixed and mobile sales forces  • Launch of new products: VoIP phone, multi-conference, “Pula-Pula” improvements and Brasil Virtual Net
		• Signature of concession contracts  • “Social Phone/AICE”
		• “Open Channel” program successfully released  • Revision of organizational structure
		• Corporate Governance Officer position created  • Commitment with transparency

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		• Integration of network and IT operations concluded  • Revision and reduction of CAPEX and cost structure being implemented
		• Integration of ISPs in progress
		• Bid processes for major supply categories in progress • Revision of purchase organization and processes
		• Initial diagnosis yielded important results  • Filing of complaint at CVM
		• Mapping and managing of litigations related to the company

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Source: Brasil Telecom; BCG analysis

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Fonte: Brasil Telecom; Análise BCG

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Brasil Telecom Fixed Voice Net Revenues

Source: Brasil Telecom

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(1) Selected countries are Austria; Belgium; Denmark; Finland; France; Germany; Italy; Netherlands; Portugal; Spain; Sweden; Switzerland; UK; USA (except for minutes per line).
Source: InfoCom; BCG analysis

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Source: PNAD

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Excess pulses decline – break-down of drivers

(1) Other include mobile pre-paid. economic and customer behavioral effect. etc.
Source: Brasil Telecom.

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Total vs. Consistent Voice Revenues

Source: Brasil Telecom

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Mitigate fixed lines erosion		• Low income offers  • 2nd line offer  • More aggressive retention strategy  • Pro-active retention – churn forecast model
Mitigate traffic erosion		• Minute plans  • Flat fee offers  • Traffic incentives  • Cordless project
Defend high value customers		• Clustered bundled offers
Defend / grow corporate customers		• Win-back initiatives
Attack and consolidate LD market		• Minute plans  • Traffic campaigns

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(1) Example of real offer launched before the clustering model. Model will facilitate and speed up creation of customized offers to customers.
Source: Brasil Telecom

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Lines in service				• Increased demand for low income terminals  • Mobile substitution driving lower overall demand • Compensation effect of initiatives to mitigate terminals’ erosion
Local revenue				• Stable prices driven by low tariff adjustment (deflation in 2nd semester of 2005)   • Lower MoU due to mobile substitution and dial-up - broadband substitution
LD revenue				• Lower MoU due to mobile substitution  • Increasing competitive pressures  • Increasing market share in inter-regional DLD and ILD
F-M revenue				• Stable to slightly growing traffic relative to 2005  • Stable market share
Interconnection				• Decrease in fixed interconnection rates  • Termination of transportation agreements in mobile operators in Region II
Total fixed voice revenue				• Overall revenue decline

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Brasil Telecom IP Net Revenues

Source: Brasil Telecom

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(1) Estimated PC penetration for Brazil of 18% in 2005 and 23% for 2008

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Source: Brasil Telecom 3Q-05 figures

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DSL accesses				• 30% to 40% of DSL subscribers’ growth
DSL ARPU				• Slight growth expected due to upselling initiatives and segmented customer approach
ISP clients				• Stabilization of dial up traffic – broadband migration compensated by new users for dial up • More focus on ISP broadband subscribers
IP total revenue				• Significant revenue growth expected

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Brasil Telecom Corporate Data Net Revenues

Source: Brasil Telecom

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Evolution of Corporate data communication revenues evolution in Brazil

Fonte: Brasil Telecom; Press Releases; IDC

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Corporate data market in Region II

Note: SOW = Share of wallet
Source: Annual reports; Brasil Telecom and BCG analysis and estimates

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85% of churn⁽¹⁾ come from clients with no more than 2 products

(1) Clients that had revenue in 2005 and didn’t have data revenue in July. August and September 2005
Source: Brasil Telecom; BCG Analysis

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Source: Marketing BRT. BCG analysis

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Market size				• Market growing, but less accelerated than 2005  • Major growth coming from IP VPN and dedicated IP  • Slight decrease in dedicated lines and frame-relay
Market share				• Corporate and government clients retention  • Growth in SME
Prices				• Higher competitive pressures than in 2005 • Continued shift towards advanced services minimizing price pressures
Total Corporate  data revenues				• Lower growth than in 2005

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Brasil Telecom Mobile Net Revenues

Source: Brasil Telecom

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(1) Values do not include marginal market share of other players Source: Company estimates.

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Fontes: Merrill Lynch, Global Mobile Report

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Source: Brasil Telecom estimates

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Aggressive growth in high value  customers		• Leverage customer relationships to attract high value customers • Grow market share and penetrate corporate market
Achieve critical scale		• Capture profitable pre-paid customers
Maintain average customer life  time value		• Monitor and manage value drivers to acquire customers with positive life time value
Grow with adequate CapEx		• Staggered CapEx on network expansion to reduce risk  • Optimize and prioritize expenditures

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		• Pulse-minute conversion  • Universal services and quality obligations  • Lower fixed interconnection rate  • New productivity factor  • New tariff readjustment index (IST) • Low income fixed lines
		• Number portability  • Resale  • MVNO  • Mobile interconnection

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Note: Benchmark data from 2004; PPP adjustment realized via Big Mac index calculated by The Economist. For European countries. Itcx tariffs are for Single Transit
Source: European commission: European Electronic Communications Regulation and Markets 2004; COFETEL; The Economist

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		•		Ensure positive margins for F-M traffic
		•		Minimize the gap between Brazilian context and international reference(1)
		•		Work proactively with regulator to explore economically viable solutions to increase universalization of services and quality
		•		Ensure market viability in fixed resale and MVNO – avoid value destruction for infrastructure based players
		•		Shape regulatory environment in the future to create new opportunities

(1) Average mobile interconnection in international references is ~25% lower than Brazil’s level
Source: European Electronic Communications Regulation and Markets 2004

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Total revenue				• Slight growth – increase in corporate data, IP and mobile offset by decline in fixed voice
Operating costs				• Slight increase – mitigate cost pressure
EBITDA margin				• EBITDA margin expected to be stable or slightly lower, already considering the negative impact of mobile operation below 5 p.p.
CapEx				• Increased CapEx due to regulatory requirements
Capital structure				• Slight increase in debt to reduce WACC

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Fixed voice				• Local, LD and interconnection revenues decreasing  • F-M revenues stable to slight increase
IP				• 30% to 40% of DSL subscribers’ growth expected in 2006  • Stabilization in dial up traffic  • More focus on ISP broadband subscribers
Corporate data				• Growth with emphasis in SMEs  • Shift in mix minimizes price pressure
Mobile				• Expected subscriber base of 3 million by end of 2006  • Significant revenue growth expected in 2006
Total revenues				• Fixed voice decline compensated by other businesses growth  • Slight overall revenue growth expected relative to 2005 levels

 

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Operational Costs and Expenses for Brasil Telecom

Source: Brasil Telecom analysis

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Evolution of contract volumes in R$M

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Interconnection				• Reduction in fixed interconnection costs  • Market share growth in mobile business
Third parties				• Contracts renewed in August 2005  • Contracts readjustment triggers  • Call center expansion for mobile and broadband growth
Personnel				• Salary adjustments following union negotiations  • New hires during 2005
Bad debt				• Slight increase of bad debt
Other				• Lower level of other operating revenues  • Higher demand for national and international circuits
Total operating expenses				• Stable or slightly higher than 2005 levels without non recurring items

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CapEx Evolution – 1998 to 2006e (R$B)

(1) Investments include CRT acquisition (R$1.4B) (2) Companies acquisition of R$476M
Source: BrT network management; BrT IT management; BrT finance department

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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.

 

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