Presentation at the 9 th Annual Asia Pacific / GEM Conference Presentation at the 9 th Annual Asia Pacific / GEM Conference October 04, 2004 New York

JP Morgan GEM Conference – NY, October/ Contents 2. Company Overview 7 1. Brazilian Telecom Market 1

JP Morgan GEM Conference – NY, October/ Brazilian Telecom Market – Customer Base (in millions) 1 Privatization. Fixed Line  After doubling in size after privatization in 1998, further growth of fixed-line platform more closely linked to the performance of Brazilian economy. Penetration Rate (%) Brazil Mobile  Brazilian subscriber base still growing at over 30% p.a., with further room to increase penetration levels. Brazil Penetration Rate (%) Jun/ Aug/04

JP Morgan GEM Conference – NY, October/ Fixed Line Sector in Brazil – June/2004 Brasil Telecom 9.6 M 25% Telemar 39% Telefonica 12.2 M 31% Embratel (LD Carrier) 15.2 M Fixed Lines in Service (Brazil: 39 m*) Market Share Region I Region III Region II Region IV * Includes smaller incumbents and mirror companies.

JP Morgan GEM Conference – NY, October/ Mobile Subscribers in Brazil - June/2004 Subscriber Base - Brazil: 54 m** Market Share * Other groups with 0.3 m subscribers (~0.5% market share) ** Oi announced 5.5 million subs in Aug/04 - Brazil: 57 m subs Vivo – TEL/PT (CDMA) 23.5 m 44% Opportunity & BRT (TDMA/GSM)* TIM (TDMA/GSM) 10.4 m 19% Claro - AMX (TDMA/GSM) 11.1 m 21% Oi - Telemar (100% GSM) 5.1 m** 9% Main Groups 3.6 m 7%

JP Morgan GEM Conference – NY, October/ Brazilian Telecom Market - Penetration Figures  Mobile penetration still has a lot of room to grow, helped by economic recovery;  Anatel estimates between 62.8 / 69.8 m subs by 2004YE;  Estimated mobile penetration for 2008YE ranges from 42% to 58%;  Fixed line penetration should be more or less stable, following GDP growth. 58% 42% Fixed Line** 23% * Estimates from: Citigroup, Goldman Sachs, JP Morgan, Merryll Lynch, Pyramid Research. ** Estimates from Yankee Group Mobile* Max. Min. 23% 32% Fixed: 39 m (Jun/04) Mobile: 57 m (Aug/04)

JP Morgan GEM Conference – NY, October/ Brazilian Telecom Market - Broadband Source: Anatel / Teleco / Pyramid Research estimates* Broadband Access – ( thousands) 1, ADSL has become the dominant technology in Brazil (over 80% market share); Broadband subscriber base expected to increase by 2.5x through 2008; Telemar has a target to increase broadband penetration from 2% of fixed lines to 5% by ,490 3,148 3,547 3,831 1,874 2,591 ADSL PC Penetration (% of households) 2003

JP Morgan GEM Conference – NY, October/ Contents 2. Company Overview 7 1. Brazilian Telecom Market 1

JP Morgan GEM Conference – NY, October/  TELEMAR is an Integrated Telecom Player - Leadership in local and long distance services (15.2 million fixed lines) - Over 5 million mobile subscribers (GSM) - Data, Corporate & Value Added services  Most Liquid stock in Brazil – BOVESPA TNLP4: US$ 47 m / day ; TNLP3: US$ 3 m / day  Free Float: 82% of total shares (27% traded at NYSE: US$ 22 m / day)  Market value: US$ 5.0 billion (Sep/04) Region I Region III Region I I Telemar Overview – June/2004

JP Morgan GEM Conference – NY, October/ Operating  Stable fixed-line platform;  Strong growth in mobile and ADSL subscribers;  Consistent market share gains in long distance services;  Strong segmented offer and a large distribution network;  A state-of-art fiber & satellite backbone reaching main cities of Brazil, supporting voice, data and internet services. Operating and Financial Highlights Financial  Consistent top line growth;  Mid 40’s EBITDA margins;  Low CAPEX required;  Strong cash generation;  Execution of deleverage policy;  High dividend yield.

JP Morgan GEM Conference – NY, October/ Telemar Customer Base ~ Fixed Line (million lines) Mobile (million subs) ADSL (thousand subs)

JP Morgan GEM Conference – NY, October/ Revenue Growth & Key Drivers  Telemar has been delivering strong revenue growth in spite of a modest performance of Brazilian economy. Net Revenue Growth – R$ million Key Revenue Drivers  Revenues from traditional services broadly in line with inflation (no real growth). 10,103 11,874 14,003 Traditional Services 2 New Services 1 1 Domestic and International Long Distance, Mobile, Data and Value Added Services. 2 Local voice (fixed), network usage and public phones.  Real growth driven by new segments of mobile, data, broadband and long distance.

JP Morgan GEM Conference – NY, October/ R$ million EBITDA  Recurring EBITDA margins stable over time 1 ;  Given strong revenue growth in more competitive segments, we expect a slight reduction in consolidated EBITDA margin to ~43% in % 45% 44% 1 EBITDA 2001 impacted by non recurring items. 3,225 2,974 1H04 1H03 EBITDA Margin

JP Morgan GEM Conference – NY, October/ Free Cash Flow after Capex R$ million Having met universal service goals and successfully rolled out mobile business, our Free Cash Flow is expected to remain strong in the coming years H04 1H03 2,247 1,064 - Turning point (fixed line targets/mobile startup)

JP Morgan GEM Conference – NY, October/ Debt Position Net Debt Evolution Debt Repayment Schedule (Total Debt: R$ 12.2 bn - Jun/04) Debt Repayment Schedule (Total Debt: R$ 12.2 bn - Jun/04)  Based on a strong cash generation, we expect to reduce our net debt level to below 1x EBITDA by 2004YE. Net Debt/ EBITDA (x) ~ R$ million

JP Morgan GEM Conference – NY, October/ CAPEX  CAPEX / 2003: 12% of sales (17% in 2002);  Main investments in fixed line platform already made;  Total CAPEX since 1998: ~R$ 22 bn (nearly US$ 11 bn);  Target: Stabilize CAPEX at up to 15% of sales to support growth in new segments (mobile, data, broadband and LD). R$ billion Fixed Line Mobile % 40%

JP Morgan GEM Conference – NY, October/ R$ million Dividend Payments /2003 Dividend yield Our goal is to continue to provide high cash returns to our shareholders. * Based on stock prices on 08/31/04. * Dividend Policy  All shares have the right to receive a minimum annual payment of 25% of adjusted net income;  Preferred Shares and ADR entitled to a minimum dividend (higher of):  6% Capital; or  3% of Shareholder’s Equity Dividend Policy  All shares have the right to receive a minimum annual payment of 25% of adjusted net income;  Preferred Shares and ADR entitled to a minimum dividend (higher of):  6% Capital; or  3% of Shareholder’s Equity

JP Morgan GEM Conference – NY, October/ Growth Opportunities  Increase of PC penetration, broadband access and internet traffic;  Sustained growth rates in the mobile market should leverage our total customer base to exceed 25 million clients;  Our fixed and mobile integrated strategy helping to increase our sales and retain our clients.  Increase of PC penetration, broadband access and internet traffic;  Sustained growth rates in the mobile market should leverage our total customer base to exceed 25 million clients;  Our fixed and mobile integrated strategy helping to increase our sales and retain our clients.

JP Morgan GEM Conference – NY, October/ Our view on what the market considers as most relevant threats  Traffic migration;  New technologies / Alternative products;  Competition;  Regulatory Environment.  Traffic migration;  New technologies / Alternative products;  Competition;  Regulatory Environment.

JP Morgan GEM Conference – NY, October/ “Safe Harbor” Statement This presentation contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements and involve inherent risks and uncertainties. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events Investor Relations - Telemar Rua Humberto de Campos, 425 / 8º andar Leblon Rio de Janeiro -RJ Phone: ( 55 21) /1313/1315/1316 Fax: (55 21) Visit our website: