Brasil Telecom Corporate Overview November/2006

Summary Company outlook Convergence What is converging with what 1 Company outlook Convergence What is converging with what Convergence and Brasil Telecom Brasil Telecom’s steps towards convergence Final Comments 2 3 4 5 6

Company outlook - Our Footprint 1 Company outlook - Our Footprint Largest Telecommunications Company in Region II Gross Revenue US$ 6,4 billions 9.4 million lines in service (LIS). 2.8 million mobile accesses (launched out/2004). 1.2 million broadband subscribers. 3.5 million active Internet clients. Metropolitan access networks in São Paulo, Rio de Janeiro and Belo Horizonte. Offers integrated services via 2 ring-system of fiber-optic subsea cables with 22,000 km connecting Brazil, United States, Venezuela and Bermudas. Region II 24% of the Brazilian population 44 million inhabitants and 27% of the country’s GDP (R$420 billion) 1 All information is referent to June 2006

Finance, HR, Marketing, Operations Technology (Network/IT) 1 Company outlook - Integrated Portfolio Brasil Telecom Mobile Service Cyber Data Center Internet Dial-up Access Portal Broadband Data Broadband DLD / ILD Local Finance, HR, Marketing, Operations Technology (Network/IT)

Company outlook - Mobile Telephony 1 Company outlook - Mobile Telephony 3,051 thousand mobile accesses in 3Q06 11.4% of market share and 31% of pos-paid accesses. (thousand) Accesses 3,051 2,772 2,460 2,213 1,676 Pos-paid Pre-paid Pos-paid %

Company outlook - Broadband 1 Company outlook - Broadband Data Communication Services accounts for 16% of the total revenues. ADSL revenue accounts for 43.9% of total data communications revenues. 14.5% penetration of LIS. ADSL Accesses (thousand) CAGR (01-05): 133.7% +40.4% x 3Q05 Net Additions CAGR (01-05): 168.8% Gross Revenue (R$ million) +50.2% x 3Q05

Company outlook - EBITDA (R$ million) 1 Company outlook - EBITDA (R$ million) Reduction of Operating costs and expenses. Affected by increase in revenue in the data and mobile segments. Quarterly Year (accumulated) EBITDA Margin

Company outlook - Strategic Key Messages 1 Company outlook - Strategic Key Messages Defend fixed-line segment: >70% of revenue; Expand mobile operations: adequate scale vs. profitability; Exploit growth opportunities in Data and Internet: increase in revenues and profits; 4. Full convergence: Opex reduction, Capex reduction, churn reduction and ARPU increase; 5. Operational Efficiency; 6. Corporate Governance culture: transparency, ethics and shareholders’ value creation.

Can be hard to increase the added value beyond initial benefit 2 Convergence Can be hard to increase the added value beyond initial benefit Customer Benefit / Value Level of integration The Bundles Source: Ovum

Reduce costs, increases coverage and therefore usage 2 Convergence Reduce costs, increases coverage and therefore usage Customer Benefit / Value Level of integration Network The Bundles Source: Ovum

New applications delivered in new ways to new devices 2 Convergence New applications delivered in new ways to new devices Customer Benefit / Value Level of integration Services Network The Bundles Source: Ovum

Simplifies service delivery for both Service Provider and Customer 2 Convergence Simplifies service delivery for both Service Provider and Customer Customer Benefit / Value Level of integration Devices Services Network The Bundles Source: Ovum

2 Convergence The maximum level of convergence perceived by the customer occurs when an unique access device can be used for all services and applications available (fixed, mobile, internet, TV, etc). Customer Benefit / Value Level of integration Devices Services Network The Bundles Source: Ovum

Convergence is complex and is happening in the following levels: 3 What is converging with what Convergence is complex and is happening in the following levels: Network and Information Technology (IT) Industry sector Services

What is converging with what Network technology & IT 3 Network convergence happens when operators move to an All-IP-Next Generation Network (NGN) to support all telecom traffic efficiently SDH Source: Ovum

What is converging with what Network technology & IT 3 As operators move to a multipurpose NGN’s, the IT systems that support each service and overlay network are integrated into one OSS/BSS system SDH Source: Ovum

What is converging with what Industry sector 3 The former distinct worlds of telecommunications and IT are already merging. We also see that the distinctions between fixed & mobile operators, carriers & service providers and media & telecom are blurring Fixed operators: some are already offering fixed-mobile convergent services, entering the markets previously served by mobile operators; Mobile operators: announced plans to offer content / TV services. Some companies are now offering football video clips to mobile handsets; Media providers: have purchased a number of companies designed to create new distribution channels to theirs content. Some ISP plan to offer VoIP and TV services; IT and software companies: argue that will inevitably be part of the convergent solutions market, particularly providing solutions for the home and office because of the ubiquity of their product; (e.g.. IPTV middleware) Content owners: search an opportunity to identify new channels to market their existing content. These companies see IPTV as a new channel to increase the film’s life time by adding “on-demand” facility.

What is converging with what Industry sector 3 Industry sectors are converging with adjacent sectors around the edge and in the middle. Hence the boundaries & differences between each sector in the convergent space will be difficult to detect. Source: Ovum

What is converging with what Services 3 Convergent services – User perspective Video Voice Mobility Data Integrated selling and customer relation services (One Stop Shop) One bill Reduction on the cost of services

What is converging with what Services on Broadband 3 Fixed voice, data and video services are converging, enabling bundles Communication VoIP Video Telephony Mobility PC VPN Firewall Parental discretion Amusement Video on demand Music on demand R á dio via Internet Monitoring Security, home surveillance and health monitoring Personal Computer Entertainment

What is converging with what Fixed – Mobile Services 3 A dual mode mobile handset that acts as a normal GSM phone outside the home, inside the home, routes calls through a device called access point connected to conventional fixed line

Integrated management of the client Agile and flexible OSS/BSS 4 Convergence and Brasil Telecom The new scenery demands a infra-structure with specific characteristics: Agnostic to devices Flexible Adaptable Integrated control Integrated management of the client Agile and flexible OSS/BSS

4 Convergence and Brasil Telecom The possibility of service convergence (SoIP) and network convergence stimulates the adoption of IMS architecture. The future is the implementation of a totally integrated network, all-IP, based on TISPAN architecture (Telecoms & Internet converged Services & Protocols for Advanced Networks).

Convergence and Brasil Telecom - Network Evolution 4 Convergence and Brasil Telecom - Network Evolution NGN Data GSM e EDGE PSTN Mobile NGN (3GPP Rel4) IMS/ TISPAN NGN

Convergence – Architecture Today 4 Convergence – Architecture Today Applications and Services HLR AS AS AS AS SCP SS7 Internet Internet Internet SS7 Internet SMSC AAA BRAS/AAA BRAS/AAA BRAS/AAA Core nNetwork and Control GGSN PLMN Internet Internet PSTN Headend SSP LOCAL SGSN DSLAM CMTS MSC Access CM BSC BSC Access Router Modem xDSL Wi-Fi AP GSM GPRS WiFi xDSL POTS CMTS

4 Convergence - NGN Application Control Media PSTN IP Transport Access Application Servers IP Corporate Residential

Messenger and Media Stream 4 Convergence - IMS Business Applications VAS e IN Presence Mobilility Convergence Flexibility Confort Otimization New Services Etc. Messenger and Media Stream Push-To-Talk Games Etc. IP Multimedia Subsystem Billing Security QoS IP Network SBC MGCF PGF MGW/SGW SGSN/GGSN DSLAM CMTS LOCAL CM BSC BSC Access Router Modem xDSL Wi-Fi AP Access Point Bluetooth CTP Seamless Mobility GSM GPRS WiFi xDSL POTS CMTS

Brasil Telecom’s steps towards convergence 5 Brasil Telecom’s steps towards convergence Starting a process aiming to change the company’s skill: moving from connectivity provider onto solution’s provider integrating the Information and Network Technology people Developing technical and market capabilities through a program focused initially on network and market teams. Intensifying the company´s participation in international forums such as ETSI and Fixed-Mobile Convergence Alliance (FMCA), which Brasil Telecom is a member since 2003. Consolidating the operation of the three Brasil Telecom’s ISP, with more than 3,5 million customers. Merging the fixed and mobile operations. Developed and implement convergent networks (NGN), services and systems associated.

6 Final Comments The network evolution shouldn’t occur because of the need of keeping up-to-date with technology. The evolution drive is the need of offering news services or the improvement of operational efficiency. The speed of the implementation will be defined mainly by the market. Don’t implement a new technology just to offer the same “old” services. Regulatory and legal issues may accelerate or restrain evolution.

Thank You! Dante Nardelli Junior danten@brasiltelecom.com.br