1. Contacts:
Tele Nordeste Celular Participações S.A. Thomson Financial IR
Paulo Narcélio Simões Amaral Isabel Vieira
55.81.216.2591 212.701.1823
Fabíola Almeida isabel.vieira@thomsonir.com
55.81.216.2594 Rick Huber
fabiola.almeida@timnordeste.com.br 212.701.1830
Polyana Maciel richard.huber@thomsonir.com
55.81.216.2593
polyana.maciel@timnordeste.com.br
TELE NORDESTE CELULAR PARTICIPAÇÕES S.A.
ANNOUNCES THIRD QUARTER 2000 RESULTS (UNAUDITED)
Recife, Brazil (November 13, 2000) – Tele Nordeste Celular Participações S.A. (NYSE: TND,
BOVESPA: TNEP3, TNEP4) (“Tele Nordeste Celular” or “the Company”), the holding company
controlling the operating companies serving Band A cellular telecommunication clients in the
states of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas under the TIM
brand name, announced today its results for the third quarter of 2000.
• Client growth up 9% from 2Q00 to 1,482,673
• Market share in the third quarter remained stable at 65%
• EBITDA increased 12% quarter over quarter to R$58.8 million
• Operating expenses decreased 7% quarter over quarter to R$107.1 million
• Bad debt expenses decreased 10% quarter over quarter to R$26.2 million
Operational Highlights
Commercial activities during the third quarter of 2000 resulted in the gross addition of 190,729
clients (of which 136,090, or 71%, were prepaid). Accumulated gross additions through
September 2000 totaled 540,183, of which 384,797, or 71%, were prepaid. Net accumulated
additions through September 2000 totaled 294,761, all prepaid, as a result of the disconnection
of 50,000 clients from the post-paid system during the second quarter of 2000.
The Company had a total of 1,482,673 clients on September 30, 2000, of which 860,097 (58%)
were contract clients and 622,576 (42%) were prepaid clients. The market share at the end of
the third quarter of 2000 was estimated at 65%, identical to the previous quarter.
The subscriber acquisition cost was R$119 in the third quarter of 2000 compared to R$132
during the second quarter of 2000 and R$136 during the third quarter of 1999. The
accumulated subscriber acquisition cost through September 2000 was R$140, compared to
R$121 for the same period the previous year.
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2. With the normalization of the billing system, collections and billing activities were intensified. A
unit wholly dedicated to collections (active and passive) was set up within the Call Center. Since
July, Tele Nordeste Celular, through its operating companies, has adopted rigorous collection
procedures and policies.
As a result, in the last four months (July to October) record amounts of collections were
attained, and management thus expects to see fewer account defaults during the fourth quarter
of 2000.
The Short Message Service – SMS was introduced in July 2000, initially for post-paid clients,
and since September 2000 also for prepaid clients. This type of service has so far been offered
for free. The Company estimates that WAP technology will be in operation when the handsets
are available on the market.
A number of new products and services were introduced during the third quarter, of which we
can highlight the following:
• TIMnet.com – Startup of the operations of our portal, which contains services, information
and personalized content for users. The TIMnet.com portal services that are currently
offered and limited to the post-paid system are: TIMnet Mail, TIMnet Agenda, TIMnet
News;
• Timmy Empresarial – A prepaid product aimed at small and medium-sized companies that
need speedy communication with their employees, and want full control over expenses.
Some advanced services had been offered for free and are now being charged for, such as:
• Post Office Box – Billing for message retrieval, at a rate of R$ 0.25 per minute, was
implemented at the end of the month of September;
• Siga-me (Follow me) – Collected for traffic on the line transfer leg, beginning at the end of
September.
Financial Highlights
Tele Nordeste’s consolidated net income for the third quarter of 2000 was R$1.7 million
compared to consolidated net income of R$0.9 million for the second quarter of 2000.
Accumulated consolidated net income through September 2000 was R$13.8 million, or R$0.04
per 1,000 shares. This compares to a loss of R$3.9 million in the third quarter of 1999 and
R$12.5 million accumulated through September 1999.
For the third quarter of 2000, the Company reported consolidated EBITDA and EBIT of R$58.8
million and R$20.2 million, respectively, and an EBITDA margin of 29.1% and an EBIT margin
of 10.0% over the net operating revenues, compared to EBITDA of R$52.4 million and EBIT of
R$21.0 million, representing an EBITDA margin of 24.9% and EBIT margin of 10.0% over net
operating revenues reported for the second quarter of 2000, and EBITDA of R$41.8 million and
EBIT of R$11.6 million, representing an EBITDA margin of 24.4% and an EBIT margin of 6.8%
over net operating revenues reported for the third quarter of 1999.
For the first nine months of 2000, EBITDA and EBIT were R$184.6 million and R$88.4 million,
representing an EBITDA margin and EBIT margin over net operating revenues of 29.4% and
14.1%, respectively, compared to EBITDA of R$155.9 million, EBIT of R$68.2 million, EBITDA
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3. margin of 33.7% and an EBIT margin of 14.7% over net operating revenues during the first nine
months of 1999.
EBITDA (in R$000)
80,0
60,0
40,0
20,0
0,0
1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00
Consolidated net operating revenues in the third quarter of 2000 reached R$202.1 million,
compared to R$210.8 million in the second quarter of 2000, resulting in a total of $627.3 million
for the first nine months of 2000, compared to R$171.6 million in the third quarter of 1999 and
R$462.5 million in the first nine months of 1999. Compared to the second quarter of 2000, the
net operating revenues declined 4.3%, due to a reduction of 32.8% in handsets and a reduction
of 2.8% in traffic revenue (usage) due to the partial blocking of lines in an attempt to combat
payment defaults.
Net Revenue (in R$000)
250,0
200,0
150,0
100,0
50,0
0,0
1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00
Consolidated bad debt expenses in the third quarter of 2000 of R$26.2 million represented
10.2% of gross revenues for that quarter and reflected adjustments made following the
normalization of the new billing system; compared to the second quarter of 2000, bad debt
expenses declined 9.7% (from R$29.0 million to R$26.2 million), and bad debt expenses should
also decline in the fourth quarter of the year after the disconnection of post-paid clients and the
implementation of new and more effective collection procedures. Bad debt expenses
accumulated during the year reached R$76.0 million, representing 9.5% of gross revenues.
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4. Selected Consolidated Financial Data (in thousands of Reais)
2000 1999 Accumulated for the
Year
3rd Qtr 2nd Qtr 3rd Qtr 2000 1999
Gross Revenues
- Usage charges 118,475 121,879 99,897 374,504 288,204
- Monthly subscription payments 39,647 38,525 36,679 130,363 104,046
- Activation fees 71,366 66,597 44,159 199,475 121,035
- Sale of handsets and accessories 25,889 38,549 44,547 95,813 80,095
- Other 641 (42) (1,659) 590 38
Subtotal 256,018 265,511 223,623 800,745 593,418
- Taxes (53,948) (54,719) (52,017) (173,405) (130,920)
Net Operating Revenue 202,070 210,792 171,606 627,340 462,498
Cost of services and of goods sold
- Depreciation and amortization (27,597) (27,368) (29,493) (79,322) (86,155)
- Personnel (2,420) (1,315) (2,736) (6,479) (4,479)
- Materials (221) (92) 2,192 (425) (228)
- Circuit leasing (7,939) (8,631) (10,368) (24,558) (26,634)
- Leases and insurance (2,830) (2,246) (1,746) (7,477) (4,718)
- Handsets and accessories (23,304) (36,793) (45,439) (91,816) (79,792)
- Fistel (234) 5,617 (5,194) (634) (14,999)
- Plant Support and maintenance (4,748) (95) - (4,998) -
- Interconnection (22,044) (24,022) (21,101) (72,196) (60,203)
- Other (2,372) (1,505) (1,704) (5,150) (2,584)
Subtotal (93,709) (97,457) (115,659) (293,055) (279,792)
Gross profit 108,361 113,300 55,947 334,285 182,706
Gross Profit (in R$000)
120
100
80
60
40
20
0
1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00
Consolidated net operating revenue for the third quarter of 2000 was 4.3% lower compared to
the second quarter of 2000. This reduction was due mainly to the decrease of 32.8% in the
sales of handsets and a reduction of 2.8% in outgoing traffic, compensated by an increase of
7.2% in revenue from incoming (interconnection) traffic. The reduction in outgoing traffic
occurred as a result of the partial blocking carried out as of April 2000 as one of the methods
used to combat payment defaults. The growth of incoming traffic was a result of an increase in
the base of prepaid clients, who normally receive more calls than they make.
Consolidated net operating revenue for the third quarter of 2000 grew 37.5% when compared to
the same quarter last year. This increase was mainly due to the substantial growth in the
number of clients over the period. The average number of clients in the third quarter of 2000
grew 63.8% (from 864,602 to 1,416,165) over the same quarter of 1999. However, since this
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5. growth occurred mainly on the prepaid side, which characteristically represents a lower ARPU
than the post-paid side, revenue growth was somewhat slower than the growth in the client
base.
Consolidated net operating revenue for the first nine months of 2000 grew by 35.6% over the
same period of 1999. During this same period, incoming traffic grew 64.8%, due mostly to the
substantial increase in the number of prepaid clients.
Consolidated gross profit for the third quarter of 2000 declined 4.4% compared to the second
quarter, but increased 93.7% compared to the third quarter of 1999. The fall quarter-on-quarter
was due to a decline of 4.3% in the net operating revenue for the period. In the first nine
months of 2000, consolidated gross profit increased 83.0% over the same period a year earlier.
This increase was principally due to a greater use of our network on the part of clients,
associated with a policy for reducing costs. It is important to point out that the Fistel tax was
reclassified to sales expenses in the second quarter of 2000.
Selected Financial Data (in thousands of Reais)
2000 1999 Accumulated for
the year
3rd Qtr 2nd Qtr 3rd Qtr 2000 1999
Operating Expenses
- Selling 60,815 62,768 31,776 170,148 73,598
- General and administrative 20,548 24,222 16,146 63,016 47,326
- Other operating expenses, net 6,756 6,306 (3,628) 12,696 (6,409)
Subtotal 88,119 93,296 44,294 245,860 114,515
- Net financing expenses 19,003 22,363 23,405 62,339 39,499
Total 107,122 115,659 67,699 308,199 154,014
Consolidated net operating expenses decreased 7.4% compared to the second quarter of 2000
as a result of a policy of cost reductions and controls. When compared to the third quarter of
1999, they increased substantially, by 58.2%, mainly because of higher bad debt expenses, an
intensification of marketing and selling activities, and the amortization of the premium financing.
In the first nine months of 2000, consolidated net operating expenses grew 100.1% in relation
to the same period in 1999. This growth derived from a significant increase in bad debt
expenses, greater marketing expenses (promotional advertising campaigns) and sales
(commissions), amortization of the premium financing and higher financing charges.
Operating Expenses (in R$000)
150
100
50
0
1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00
The consolidated bad debt expenses during the third quarter of 2000 reached R$26.2 million,
representing 10.2% of gross revenues and showing a reduction of 9.7% when compared to the
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6. second quarter of 2000 and an increase of 114.8% when compared to the third quarter of 1999.
Accumulated for the year, the consolidated bad debt expenses totaled R$76.0 million,
representing 9.5% of gross revenues. Management believes that the controls it has adopted for
overdue bills since the second quarter of this year will continue to reduce the expenses related
to bad debts, even more strongly during the fourth quarter. Among the measures that have
been adopted are the disconnection of overdue post-paid clients, the application of more
effective collection procedures and the stimulation of migration to the prepaid system.
Amortization of Goodwill
On June 30, 2000 Tele Nordeste Celular and its operating companies completed a restructuring
that resulted in the transfer of the premium paid during the privatization process from Bitel
Participações S.A., the parent company of Tele Nordeste Celular, to each one of the operating
companies. This restructuring is aimed at taking advantage of a fiscal benefit estimated at
R$200 million over 8 years, through to 2008, which will be incorporated into their share capital
by the operating companies, with significant financial benefits for them. A proposal for the
merger of the operating companies is awaiting Anatel approval.
On September 30, 2000 the consolidated amortization of the premium, net of reversal of the
provision for making it a part of shareholder's equity, was R$6.8 million, of which R$6.0 million
was in the third quarter, generating a fiscal benefit on the order of R$5.5 million.
ARPU
The blended average revenue per user (ARPU), net of taxes, for the third quarter of 2000 was
R$42.46 per month, compared to R$45.63 per month in the second quarter of 2000, and
R$52.52 per month for the third quarter of 1999. This reduction was caused by the addition of
low use, prepaid clients as of May 1999.
The combined accumulated ARPU for 2000 was R$46.22 compared to R$59.05 for the same
period a year earlier. The post-paid ARPU in 2000 has been negatively affected by the increase
in blocked lines for credit reasons, which was resumed at the end of the second quarter.
Blocking is carried out on a partial basis, and as a result, only incoming traffic revenues are
generated by these clients
Competition
The Company estimates that its market share at the end of the third quarter of 2000 was
approximately 65% in terms of number of accesses. The penetration rate in the region at the
end of September 2000 was estimated at 8.7%, compared to Brazil’s penetration rate of
approximately 12.1% (20.4 million lines).
In the third quarter of 2000, the operating companies held a promotional campaign (Father's
Day) that featured additional dealers’ commission, and interest-free financing of handsets
linked to one-year contracts with minimum usage. General subsidies have been discontinued
as of March 2000.
Debt Profile
Consolidated debt at September 30, 2000, was R$368.0 million, with R$294.0 million maturing
in the short-term.
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7. Tele Nordeste Celular, through its Telpe Celular operating company, signed a long-term
financing contract with the European Investment Bank (EIB) in the amount of US$50 million at
the beginning of October. This debt was totally converted to Reais and with pre-fixed costs, in
line with the Company’s policy of minimizing exposure to foreign currency risks and interest rate
fluctuations.
Another measure to lengthen the consolidated debt profile that is in the process of being
finalized is the issue of simple debentures, not convertible into shares, to be carried out by the
Telpe Celular operating company, in the amount of R$200 million (November 2000). For
another source of long-term financing, Tele Nordeste Celular has had a letter of consultation
approved by and now is in the project preparation phase for financing from the National
Economic and Social Development Bank - BNDES (first quarter of 2001).
Capital Expenditures
During the third quarter of 2000, Tele Nordeste and its subsidiaries invested R$87.6 million,
totaling R$204.1 million accumulated during the year. These investments are primarily focused
on network expansion and digitalization.
The investment program for the year 2000 totals R$215 million and includes improvements to
the Company's information systems, new services and Internet access facilities.
On September 30 the Company had 734 radio base stations (RBEs), of which 16 were mobile
and provided service in 307 municipalities that corresponded to coverage of 75% of the
population. Network digitalization was on the order of 73%; that is, 73% of voice channels were
digital, with 83% of its clients using digital handsets.
Annexes:
- Selected historical statistics
- Balance sheet as of September 30 and June 30, 2000
- Statement of income for the quarters and nine-month periods ending Sept. 30, 2000 and
1999.
This press release contains forward-looking statements. Statements that are not statements of historical fact only reflect the beliefs and
expectations of the Company’s management. The words “anticipates,” “believes,” “estimates,” “expects,” forecasts,” predicts,” “plans, ”
“projects,” and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties,
forecast or not by the Company. Accordingly, the actual results of operations of the Company may be different from the Company’s current
expectations, and the reader should not place undue reliance 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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