Stra r t a eg e ic i Pa P r a t r ne n r e s r hi h p i wi w t i h Portugal Telecom January 2011

Transcription

1 Strategic Partnership with Portugal Telecom January 2011

2 SECTION 1 Transaction Rationale

3 Growth of Income Class C : Relevant Opportunities in the Brazilian Telecom sector Land area 8.5 million km 2 Population 194 mn inhabitants (5 th largest country) 58 mn of households (85% urban) th largest economy in the world GDP: US$1.6 trillion (2009) Exchange US$ 1.00 = R$ 1.66 (Dec/10) Income Classes (Households) Strong growth in GDP per capita combined with low unemployment rate resulted in a major change in income classes Income* A/B 15% 16% R$ 2,534 C 34% 49% R$ 1,277 D/E 51% 35% R$ 733 *Iincome per social class 2

4 Brazilian Market: Oi Group: One of the Leaders of the Telecom Sector in Brazil The first step of Company s strategic growth Plan the leadership in the domestic market - was already conquered Brazil and Regions Sept.10 Economic Group Vehicle Services Mkt Share of Clients Mkt Share of Revenues Fixed 50% Oi Fully Integrated Mobile 20% Fixed Broadband 36% 30% Region II Region I Telefonic ca Telesp Fixed 27% Vivo Mobile 30% Telesp Fixed Broadband 23% 30% Region III Telmex/ AMX Embratel Fixed 15% Claro Mobile 25% Net Fixed Broadband 25% 24% TIM ~ only mobile Mobile 24% 13% GVT ~ only fixed Fixed 4% Fixed Broadband 7% 2% 3

5 Oi Group: One of the Leaders of the Telecom Sector in Brazil Oi Group is one of the leaders of the telecommunications sector in Brazil, with leading positions in some of its main services 2º DTH Service launched in July, states % 51% 36% Cable 4 cities in MG Oi TV reached 280,000 users 3.1 k 4.8 k 4.2 k 63 million clients (RGUs) More than 26% of total clients in Brazil Largest group in revenues, with over 30% of total sector revenues Source: Anatel and Companies ** November

6 Brazilian Competitive Landscape brings several new opportunities for the next years The capital increase of Group Oi, will give financial strength to stand the challenges of the Brazilian Telecom Sector 4G and New Technologies Faster technological changes brings uncertainties about the maturity of the investments made Demand for Data and Transmission Capacity Strong demand for Data requires high investments. Broadband and Paid TV Low Penetration on Income Classes C and D brings new growth opportunities Quadruple-Play Regulatory review will allow Oi to provide Paid TV (IPTV) through its existing network adding more service offerings in converged Consolidation of the Brazilian Telecom Sector Telecom is a scale business: consolidation is expected 3G Expansion 5

7 The Company: Oi Leader in integrated telecom solutions in Brazil and largest fixed telecommunications provider in Latin America Oi s Highlights Largest telecommunications provider in Brazil National coverage in mobile, 3G (mobile broadband) and data transmission : 138th. of fiber optical cable and 30.4 th. km of metropolitan rings Only true full integrated and pioneer on the offering of convergence services Quadruple play operator (fixed, mobile, ADSL/cable broadband accesses and pay-tv) Revenues Generating Units of 63 million 20.4 million fixed lines in service, 4.3 million fixed broadband users (cable and ADSL) and 37.4 million mobile users Focused on profitability in Region I and in strong growth in Regions II and III Diversified Portfolio allowing market segmentation in offered products, with the objective of increasing average revenue per user and cash flows Most valuable brand in the Brazilian Telecommunications Sector Integration with BRT The acquisition of BrT complemented a national coverage strategy and strengthened Oi Group Increase on scale on a capital intensive operation Processes and resources optimization, with the absorption of synergies, already completed Well positioned to capture growth in mobile services in Regions II and III, broadband in Region I, and corporate services and new ventures Financial Highlights Telemar Norte Leste (TMAR) has a Market Cap of US$ 7.4 billion 2009 Highlights (R$ million) Revenues 29,881 EBITDA 9,864 EBITDA Margin 33.0% Revenue Breakdown (% - 9M10) Data 23% Mobile voice 15% Other 11% Fixed voice 51% 6

8 The Partner: Portugal Telecom Leading telecommunications services provider in Portugal, with an extensive expertise in fixedmobile convergence globally One of the leading telecom providers in Europe Fixed-Mobile Converge: leader in the Portuguese market in several segments, especially fixed and mobile Technological and innovation: PT Inovação, company responsible for the development of innovative solutions globally Broadband: strong contribution on the process that lead to Portugal being a global reference for new generation networks Portugal has one of the largest Fiber-To-The-Home penetration PT considered the provider with the best coverage and best 3G services, and superior performance and mobile broadband reliability PT contributed significantly to Portugal having the second largest mobile penetration in all Europe Pay-TV : Unique expertise in IPTV. Successful integrated operator on pay-tv and Triple Play in Europe Internationalization: fixed and mobile operations all over the world; especially in PALOPS (Portuguese-speaking African Countries) Leading mobile player in Brazil through its stake in Vivo Joins Sustainability Index in world level: DJ Sustainability and FTSE4GOOD Strategic Fundamentals International footprint spread to Portugal, Brazil and Sub-Saharan Africa Solid client growth both domestically and internationally Focus in areas of rapid growth opportunities, such as mobile voice, data services and broadband internet access Operations through partnerships and strategic agreements with key companies in the sectors Active management of the talents of its employees and social responsibility Financial Highlights Portugal Telecom has a Market Cap of US$11.9 billion (1) 2009 Highlights (EUR million) Revenues 6,785 EBITDA 2,502 EBITDA Margin 36.9% Revenue Breakdown (2009) Vivo 46% Other 3% Fixed 29% TMN 22% With a diversified business portfolio and geographic reach, Portugal Telecom operates in fixed, mobile, multimedia, data and corporate solutions in Portugal, Brazil and emerging markets (1): As of December 9 th,

9 Transaction Rationale Strategic Partnership between Grupo Oi and Portugal Telecom creates an unparalleled platform for international growth Strengthening and speeding up of expansion plans Significant reduction of leverage Opportunities to apply technologies and cross-selling Creation of the largest Portuguese speaking business group, with full international expansion capacity Possibility of capturing synergies in various fronts The alliance with Portugal Telecom is extremely beneficial for the Company and its shareholders 8

10 Benefits of the Capital Increase The capital increase of the Company, together with the alliance with a strategic player, are important steps towards the access to international markets, based on a strengthened balance sheet Additional cash availability of up to R$12.0 billion, improving Company s agility and financial position to pursue strategic investments Comfortable position to fund its growth plans through the next years Reduction on Company s indebtedness Support to the Company s next step: International growth focused on emerging markets 9

11 SECTION 2 Transaction Steps

12 Strategic Partnership between Oi and Portugal Telecom Simplified structure of the transaction Step 1 Capital increase in Telemar Participações; Portugal Telecom to become shareholder Step 2 Capital increase in TNL of up to R$12.0 billion Step 3 Capital increase in TMAR of up to R$12.0 billion Step 4 Acquisition of a stake in Portugal Telecom Portugal Telecom to hold directly and indirectly aproximately 22.4% of TMAR 11

13 Strategic Partnership between Oi and Portugal Telecom Step 1: Capital increase in Telemar Participações; Portugal Telecom to become shareholder Corporate Restructuring and Capital Increase in Telemar Participações Transaction resulting in Portugal Telecom becoming a shareholder of Telemar Participações, through 3 stages: A PT becoming a shareholder of holdings AG Telecom and L.F. Tel, acquiring 35% of each holding B Capital increase in Telemar Participações C Resulting in a 12.1% direct shareholding in Telemar Participações after the Capital Increase Shareholding Structure of Telemar Participações Resulting from the Transaction 35.0% 35.0% Portugal Telecom AG Telecom L.F. Tel FASS Other 12.1% 19.4% 19.4% 11.5% 37.7% TMAR Part 12

14 Strategic Partnership between Oi and Portugal Telecom Step 2: Capital increase in TNL Capital increase in TNL of up to R$12.0 billion Shareholding Structure after step 2 Capital increase in TNL of up to R$12.0 billion Capital increases at market values, calculated taking into consideration the volume weighted average price (VWAP), based on TNL s share prices at Bovespa over the 60 days between May 28 th and July 27 th, 2010 Float TNL TMAR Part PT R$ for TNLP3 R$ for TNLP4 TNL Float TMAR TMAR Note (1): the split of the R$3.25 billion Portugal Telecom s capital injection between TNL and TMAR may change depending on unsubscribed rights in both capital increases. 13

15 Strategic Partnership between Oi and Portugal Telecom Step 3: Capital increase in TMAR Capital increase in TMAR of up to R$12.0 billion Shareholding Structure after steps 2 and 3 Capital increase in TMAR of up to R$12.0 billion Capital increases at market values, calculated taking into consideration the volume weighted average price (VWAP), based on TMAR s share prices at Bovespa over the 60 days between May 28 th and July 27 th, 2010 Float TNL TMAR Part PT R$ for TMAR3 R$ for TMAR5 Float TMAR TNL PT TMAR Note (1): the split of the R$3.25 billion Portugal Telecom s capital injection between TNL and TMAR may change depending on unsubscribed rights in both capital increases 14

16 Strategic Partnership between Oi and Portugal Telecom Step 4: Acquisition of a stake in Portugal Telecom Acquisition of a stake in Portugal Telecom Shareholding Structure after steps 2, 3 and 4 Using a portion of the proceeds from the capital increase, the company will seek the acquisition of up to 10% of Portugal Telecom. TMAR Part Float TNL PT TNL Float TMAR PT TMAR Float PT PT 15

17 Strategic Partnership between Oi and Portugal Telecom Final Structure Current Shareholder Structure Shareholder Structure Post Transaction 35% 35% AG Telecom 19.4% LF Tel 19.4% Fundação Atlântico 11.5% BNDES/ Pension funds 49.9% Portugal Telecom 12.1% AG Telecom 19.4% LF Tel 19.4% Fundação Atlântico 11.5% BNDES/ Pension funds 37.7% 100% 100% TMAR Part TMAR Part TNL TMAR TNL TMAR Capital increase in TNL and TMAR up to R$ 12 billion 16

18 Final Remarks Positioning in Brazil Largest integrated Brazilian telecom player and the only one with national scale Entrance of a strategic shareholder, fostering the exchange of best practices in corporate governance and telecom strategies Potential synergies created through the strategic partnership between the two companies Positioning in Portugal Stake of up to 10% in one of the Europe s most relevant telecommunications player Active participation in the Company s board of directors Positioning in other markets Capitalized company with low leverage, creating financial strength and agility for potential acquisitions and international expansion Alliance with Portugal Telecom, a company with strong track record in cross-border acquisitions and partnerships Financial Aspects Reduction of leverage Strong balance sheet for domestic and international growth Strategic minority stake in a company with attractive profitability 17