Forward Looking Statement The information contained in this - - PowerPoint PPT Presentation

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I nvestor Conference 2 0 0 3

W elcom e and Structure of the Day

Jorge Rodriguez President Brazil Day

Em bratel

Daniel Craw ford Chairm an of the Board

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Forward Looking Statement

The information contained in this presentation may be deemed to include forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risk and uncertainty, including business, financial, regulatory environment, strategy, trends and other projections. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. The important factors that could cause actual results to differ materially from those in the forward-looking statements herein include, without limitation, the Company's degree of financial leverage, risks associated with debt service requirements and interest rate fluctuations, risks associated with the announced potential disposition of MCI ownership interest in the Company, and with any acquisitions and the integration thereof, risks of international business, including currency risk, dependence on availability of interconnection facilities, regulation risks, contingent liabilities, collection risks, and the impact of competitive services and pricing, as well as other risks referred in the Company's filings with the CVM and SEC. The Company does not undertake any obligation to release publicly any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Investment Highlights

! Brazil’s premium telecommunications service

provider

! Strong established brand name - “21” PIC code ! Nationwide service coverage ! Strong corporate client franchise ! Unique service offerings and solutions ! State-of-the-art seamless network ! Key improvements in regulation ! Poised to capitalize on growth opportunities

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Business Overview

!

Leading provider of domestic and international long distance voice services

!

Best provider of telecommunications solutions for companies

!

Preferred carrier for small business and residential customers

!

Unparalleled breadth of data services and largest Internet backbone

!

Strong entrant in local services for corporate customers

!

Leading provider of satellite services, using capacity provided by subsidiary, Star One S.A.

2 6% 5 % 1 2%

YTD Sep. 2 0 0 3 Revenue ( R$ 5 ,1 6 9 MM / US$ 1 ,7 6 8 MM)

Domestic Long Distance International Long Distance Data Communication Other Services

5 7%

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Strategic Initiatives

"

Reducing bad debt

"

Improving efficiency

"

Defending high-value segments

"

Offering integrated solutions

"

Developing growth opportunities

"

Optimizing asset productivity

"

Investing in platforms for growth

"

Executing financing strategy

"

Breaking paradigms

"

Shaping regulation

"

Influencing most critical topics

Operations Business Segm ents Com pany-w ide Regulatory

Optim izing Cash Generation

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Segmented Market Approach

More than 9 0 % Approxim ately 8 0 % Approxim ately 6 0 % or m ore Approxim ately 2 0 % Corporate Market Consum er Market

Medium Large Small Residential high-end and middle Residential low end Very Large Very small/ SOHO Providers Government

Em bratel Estim ated Penetration

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Leading Provider to Large Corporate Customers

9 15 11 11 8 4 39 31 34 29 31 16 52 54 55 61 61 80 12 17 9 15 19 30 35 43 34 43 51 50 49 49 45 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 1 0 0 GVT Telem ar I m psat Com sat Equant I ntelig Telefónica Brasil Telecom AT&T LA MetroRED Em bratel

2 0 0 3 Overall evaluation

7 3 % 7 8 % 8 1 % 6 6 % 5 1 % 4 5 % 6 2 % 6 3 % 4 8 % 3 7 % 7 3 %

% good or excellent in 2 0 0 2

Very bad or bad I ndifferent Good or Excellent

Source Yankee Group – August 2003

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Intelligent Access Build-Up

Optim izing CAPEX Targeting high potential custom ers Optim izing resources ( radios) Reducing

• perational costs

( EI LDs) Access Build-up Optical Fiber Copper ( ADE, internal) Satellite Radio ( Point-point, Point-Multipoint) Rational Criteria… Portfolio of Technologies…

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Improving Regulatory Environment

Outcom e

Co-billing

! Anatel arbitration on prices (> 50% reduction) ! Isonomic terms obligation(1)

I nterconnection

! Cost-based (peak vs. off-peak) interconnections–alignment

with international references(1)

Unbundling

! Cost-based unbundling(1) ! Start of arbitration process

Num ber portability

! Mandatory requirem ent (1)

Data access

! Imm ediate application of isonomic prices and conditions–legal

• rders against I LECs m andated

Local areas

! Gradual reduction in the number of the local areas

• Initially to 5,400 in Public Consultation (equal to municipalities)

Note: (1) At contract renewal

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Expected Decrease in Interconnection Costs

Note: (1) Assumes 3.5 minutes calls; 2003 real values without tax; inflation IGP-DI. Initial Anatel proposal defined TU-RL as 60% of local public tariff; Embratel promoting LRIC methodology

4 0 % 1 2 8 % 5 0 % 8 1 % 9 9 % 1 1 8 % 20 40 60 80 100 120 140 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 TU-RL ( R¢ / m in 2 0 0 3 ) TU-RL as % of the local public tariff ( 1 ) Cost Based

TU-RL, a major cost for Embratel, will be significantly reduced with the final version of the local contract

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2 ,6 9 9 2 ,3 6 5 2,000 2,200 2,400 2,600 2,800 3,000 9 M20 0 2 9 M20 0 3

Enhanced Operating Performance

I m proving A/ R Reduction in Telco Costs Decreasing SG&A Reduction in Bad Debt

4 9 0 2 7 1 200 300 400 500 600 9 M20 0 2 9 M20 0 3 1 .7 7 9 1 .5 6 4 1.000 1.200 1.400 1.600 1.800 2.000 9 M20 0 2 9 M20 0 3 9 1 9 8 2 5 800 850 900 950 9 M20 0 2 9 M20 0 3 ( R$ MM) ( R$ MM) ( R$ MM) ( R$ MM)

• 1 2 %
• 1 2 %
• 4 5 %
• 1 0 %

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Continuous Decline in Telco Ratios

Telco Costs Evolution

!

Last mile network expansion

!

Local services offer

!

Mandated interconnection tariff reductions

!

Other regulatory developments

Key Factors

826 749 910 789 840 874 915 600 650 700 750 800 850 900 950 1 Q 2 2 Q 2 3 Q 2 4 Q 2 1 Q 3 2 Q 3 3 Q 3 49,1% 48,5% 47,3%47,0% 46,2% 45,0% 46,0%

( % Net Revenues) ( R$ MM)

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(100) 100 200 300 400 500 600 700 1 Q0 2 2 Q0 2 3 Q0 2 4 Q0 2 1 Q0 3 2 Q0 3 3 Q0 3

( 1 .3 ) %

26,0% 32,6% 32,5% 36,2% 29,6% 32,4% 33,4%

Decreasing SG&A Expenses

2 5 .3 %

SG&A Evolution

!

Personnel expenses under strict control

!

Third party services impacted by reduction in co-billing costs (beginning of 2003)

!

Continuous improvement is allowance for doubtful accounts

Key Factors

( % Net Revenues) ( R$ MM)

Personnel Third Party Services Bad Debt Taxes & Other

2 4 .9 % 2 8 .1 % 2 7 .4 % 2 7 .1 % 3 1 .1 % 3 1 .7 % 3 6 .2 % 3 6 .4 % 4 5 .3 % 4 2 .9 % 4 2 .0 % 4 2 .3 % 4 6 .4 % 2 8 .1 % 2 6 .6 % 2 7 .9 % 2 1 .3 % 1 9 .1 % 1 5 .5 % 1 7 .3 %

6 1 9

1 0 .4 % 1 2 .0 % 8 .4 % 1 1 .9 % 1 1 .1 % 4 .5 %

6 1 2 5 4 8 6 4 6 5 5 5 5 4 4 4 6 6

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Substantial Reduction in Bad Debt Expenses

Bad Debt Evolution

! Largest billing implementation in

Latin America

! Largest database in Brazil ! Call by call selection ! Difficult co-billing negotiation

#

Cost and availability

! Information asymmetry ! Establish new customer

relationship infrastructure

#

Billing

#

Collections

#

Call center

#

Call management

Key Factors

81 84 106 137 153 163 174 20 40 60 80 100 120 140 160 180 200 1 Q 2 2 Q 2 3 Q 2 4 Q 2 1 Q 3 2 Q 3 3 Q 3

( % Gross Revenues) ( R$ MM)

3,4% 3,9% 4,9% 6,1% 6,4% 6,6% 7,3%

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200 400 600 800 1.000 1.200 1 Q0 2 2 Q0 2 3 Q0 2 4 Q0 2 1 Q0 3 2 Q0 3 3 Q0 3

Significant Improvement in Accounts Receivable

# Extensive collections network — Banks and lottery booths — Internet bill payment — Autom atic debit

campaigns

# Active call management # Co-billing # Improved customer file

information

Key Factors Net A/ R Evolution (Voice)

Current 1 -6 0 days 6 1 -1 2 0 days

6 5 .2 %

( R$ MM)

6 4 .2 % 6 1 .4 % 6 7 .9 % 7 2 .4 % 7 5 .7 % 8 0 .9 % 2 5 .0 % 2 6 .9 % 2 9 .3 % 2 3 .1 % 2 0 .3 % 1 8 .0 % 1 3 .8 % 9 .8 % 8 .9 % 9 .3 % 7 .3 % 6 .3 % 5 .3 % 9 .0 %

1 ,0 4 3 1 ,0 2 8 9 1 9 7 8 9 7 4 4 7 2 8 8 2 5

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Consistently Improving Operating Income Before Depreciation

# Grow by exploring new

markets and segments

# Further reduce costs —

Telco costs

—

SG&A expenses

Opportunities

( % Net Revenues)

Operating Income Before Depreciation*

( R$ MM)

3 2 5 3 5 5 4 4 2 3 1 6 3 6 9 3 7 9 5 5 3 1 0 0 2 0 0 3 0 0 4 0 0 5 0 0 6 0 0 7 0 0 1 Q0 2 3 Q0 2 1 Q0 3 3 Q0 3 30,8% 17,5% 18,8% 24,0% 17,7% 21,6%22,7%

* Reconciliation on the next page

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Reconciliation of Operating Income Before Depreciation and Amortization to Operating Income*

R$ m illion 1 Q0 2 2 Q0 2 3 Q0 2 4 Q0 2 1 Q0 3 Operating I ncom e Depreciation and Am ortization 3 2 5 3 5 5 4 4 2 3 1 6 3 6 9 (+ ) Depreciation and Amortization 272 281 289 301 292 Operating I ncom e 5 2 7 4 1 5 4 1 5 7 7 2 Q0 3 3 7 9 287 9 1 3 Q0 3 5 5 3 286 2 6 7

* Based on Brazilian Corporate Law operating income before net financial expenses

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Disciplined Approach for Acquisitions

!

Acquired free of debt and for nominal consideration

!

Competitive local services provider to small corporate, SOHO and residential clients (Regions I and III)

!

Broaden services and products offering

#

Broadband products and services (EV-DO technology)

#

Lim ited mobility

!

Enhance and protect Embratel franchise

!

Expansion of asset capacity and local access coverage

!

Cost reduction through synergies

!

Leverage asset position to fuel integrated entity growth Vésper exemplifies Embratel’s selective criteria to pursue acquisition

• pportunities

Vésper Acquisition

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Platform for Growth

Enhancem ent

Objective Key Levers

Improve internal levers

# Bad debt # Telco costs # Capex # Asset productivity # Co-Billing # Billing system and

blocking functionality

# PPIs expansion # Organization alignment

and effectiveness

# Customer base

segmentation Grow th Leverage platform for growth

# Traditional businesses # New businesses # Intra-regional attack # Local expansion # DSL down market

• ffer

# VoIP # Viable mobile

• pportunities

# Broadband/

convergence services Transform ation Enhance/ protect business platform

# Customers # Capabilities # Assets # Access build-up # Fully segmented

• ffers/ approach

# ISP launch # Outsourcing and

corporate services

# Acquisitions

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1 4 % 2 1 % 2 7 % 2 5 % 1 0 % 1 7 % 3 2 % 4 8 % 9% 20% 24% 18% 6 % 1 % 2 5 % 3 5 % 2 9 % 2 9 % 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 E

Others Star One Data and Internet services Network infrastructure Access and local infratructure ( R$ M)

1 ,6 5 2 1 ,4 1 3 1 ,4 7 0 1 ,0 3 5 ~ 6 0 0

Capex Evolution

Intelligent Capex Management Enabling Rational Growth

9 M0 3 283

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Financial Highlights

R$ MM Net Revenues Operating I ncome before Depreciation* Operating I ncome Net Income Total Assets Shareholders’ Equity Cash & Cash Equivalents Total Debt 9 M0 2 9 M0 3 5,586 5,169 1,122 1,301 281 436 (738) 155 12,916 11,877 4,608 4,879 756 685 5,183 3,977 Operating I ncome before depreciation as a percentage of revenues 20% 25%

* Reconciliation on the next page

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R$ m illion 9 M0 2 9 M0 3 Operating I ncom e Before Depreciation and Am ortization 1 .1 2 2 1 .3 0 1 (+ )Depreciation and Amortization 842 865 Operating I ncom e 2 8 1 4 3 6

* Based on Brazilian Corporate Law operating income before net financial expenses

Reconciliation of Operating Income Before Depreciation and Amortization to Operating Income*

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Debt Composition

2 8 % 2 5 % 4 7 % 1 0 0 % Japanese Yen 1 9 .1 % Euro 3 .8 % BR Real 2 8 .4 % U.S. Dollar 4 6 .8 % Outstanding Debt in September 2003 Debt In R$ Foreign currency hedged Foreign currency French Franc 1 .7 % Germ an Mark 0 .3 %

FX Exposure by Currency FX Hedging

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Investment Highlights

! Brazil’s premium telecommunications service

provider

! Strong established brand name - “21” PIC code ! Nationwide service coverage ! Unique service offerings and solutions ! State-of-the-art seamless network ! Key improvements in regulation ! Poised to capitalize on growth opportunities

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