Provided by MZ Data Products
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
THROUGH FEBRUARY 17, 2005

(Commission File No. 1-15256)
 
 
BRASIL TELECOM S.A.
(Exact name of Registrant as specified in its Charter)
 
BRAZIL TELECOM COMPANY
(Translation of Registrant's name into English)
 

SIA Sul, Área de Serviços Públicos, Lote D, Bloco B
Brasília, D.F., 71.215-000
Federative Republic of Brazil
(Address of Regristrant's principal executive offices)


Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X___ Form 40-F ______

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1)__.

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7)__.

Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):

 

BRTO3: R$13.81 / 1,000 shares
BRTO4: R$11.70 / 1,000 shares
BTM: US$13.78 / ADR
Market Value: R$6,958.3 million
Closing Price: February 15, 2005


Brasil Telecom S.A.

 

Consolidated Earnings
Release


4th Quarter 2004
Non-audited

 

 

  Brasília, February 16, 2005.




TABLE OF CONTENTS

Highlights 3
Income Statements 5
    Table 1: Consolidated Income Statement - Brasil Telecom S.A 5
    Table 2: Consolidated Income Statement - Brasil Telecom GSM 6
Operating Performance 7
Fixed-Line Telephony 7
    Network 7
        Table 3: Network 7
    Traffic 7
        Table 4: Traffic 7
        Graph 1: DLD Market Share* 8
Mobile Telephony 9
    Table 5: Operational Data 9
    Graph 2: Mobile Network 9
Data Communications 10
    Broadband 10
        Graph 3: ADSL Accesses 10
    Internet Providers 10
Financial Performance 11
    Revenues 11
        Table 6: Consolidated Operating Gross Revenues 11
        Graph 4: Gross Revenues Breakdown 11
        Graph 5: Data Communications and Other Services Revenues 13
    Costs and Expenses 14
        Table 7: Consolidated Operating Costs and Expenses 14
        Graph 6: Operating Costs and Expenses Breakdown 15
        Graph 7: Accounts Receivable / Gross Revenues Ratio 17
        Table 8: Gross Accounts Receivable 17
    Ebitda 18
        Table 9: EBITDA Margin – Gains and Losses 18
    Financial Result 18
        Table 10: Consolidated Financial Result 18
    Other Items 19
    Net Earnings 19
Balance Sheets 20
    Table 11: Consolidated Balance Sheet – Brasil Telecom S.A 20
    Table 12: Consolidated Balance Sheet – Brasil Telecom GSM 21
Indebtedness 22
    Table 13: Indebtedness 22
    Table 14: Indebtedness by Currency 23
    Table 15: Amortization Schedule of Long Term Debt 23
Investments in Permanent Assets 24
    Table 16: Breakdown of Investments in Permanent Assets 24
Cash flow 25
    Table 17: Consolidated Cash flow 25
Stock Market 26
    Table 18: Stock Performance 26
    Graph 8: Performance in the 4Q04 – Bovespa and NYSE 26
    Table 19: Weight in the Theoretical Portfolio 26
Shareholding Structure 27
    Table 20: Shareholding Structure 27
Awards 27
Recent Developments 28
2005 Scenario (Guidelines) 29
Selected Data 30
    Table 21: Selected Data 30
Coming Events 31
IR Contacts 31
Media Contact 31


QUARTER
HIGHLIGHTS

535.5 thousand ADSL accesses in service, an increase of 17.4%

622.3 thousand mobile accesses in service

Net revenues grew by 4.5%, reaching R$2.5 billion

Fixed-line ARPU reached R$83.9, a 2.6% growth

Mobile telephony ARPU of R$35

Data communications revenues of R$374.0 million, a growth of 16.4%

EBITDA of R$772.9 million

Total fixed-line CAPEX of R$470.5 million

PCS CAPEX of R$417.9 million

Net earnings adjusted by the goodwill of R$50.5 million

HIGHLIGHTS

Brasília, February 16, 2005 - Brasil Telecom S.A. (BOVESPA: BRTO3/BRTO4; NYSE: BTM) announces its consolidated earnings for the fourth quarter of 2004 (4Q04).

Our clients can now experience the CONVERGENCE concept in practice. With the commercial launch of Brasil Telecom GSM, Brasil Telecom added another service to its portfolio and became a multi-provider of telecommunications solutions offering a whole range of telecommunications services including fixed-line and mobile telephony, data communications, internet connectivity, data center, and other value-added services.

Our financial statements consolidate the operational results of Brasil Telecom GSM since November 2004, and the results of iG since December 2004.
 

Operating Performance
 

Fixed-Line Telephony

Our network had 10,737 thousand lines installed at the end of 2004, an increase of 0.1% and 0.5% compared to 3Q04 and 4Q03, respectively.

At the end of the quarter, we had 9,503 thousand lines in service.

Local traffic increased 1.6% compared to 3Q04.

Inter-network traffic increased 7.5% compared to 3Q04, mainly due to the VC-2 and VC-3 traffic increase of 35.2% and 50.0%, respectively. 		 

Mobile Telephony

After its first quarter of operations, our mobile network had 622.3 thousand accesses in service, of which 33.1% were post-paid.

Data Communications

At the end of 4Q04, we had 535.5 thousand ADSL accesses in service, which represents a growth of 89.9% compared to 4Q03.

BrTurbo consolidated its leadership in Region II, with 266 thousand clients at the end of 4Q04, a 146% increase compared to 4Q03.
Financial Performance

Net revenues of R$2,466.1 million in 4Q04; an increment of 4.5% and 19.0% compared to 3Q04´s and 4Q03´s net revenues, respectively.

Measured service revenues increased by 4.0% compared to 3Q04, reflecting rate adjustments and the increase in traffic.

 

Fixed-line ARPU (net revenues/ Avg. LIS/month) of R$83.9 in 4Q04, compared to R$81.8 in 3Q04.

Mobile telephony revenues (excluding revenues derived from Brasil Telecom S.A.) of R$87.9 million in 4Q04, including R$69.7 million in merchandise sales (handsets and accessories).

Trailing 12M
Highlights

Increase of 89.9% in the ADSL accesses in service

Net revenue grew by 14.5%, to R$9.1 billion

Data communications revenues reached R$1.24 billion, a 49.1% growth

EBITDA of R$3.6 billion, an increase of 8.2%

Net debt 9.0% lower

2004 cost of debt of 11.4% p.a., or 70.7% of the CDI

Free cash flow of R$565.6 million

Net earnings adjusted by goodwill of R$401.0 million, a 306% growth

Interest on shareholder’s equity of R$444.5 million, an increase of 80.5%

Our ISPs´ customer base reached 5 million

 

Inter-network revenues increased 6.1% compared to the previous quarter, mainly due to increase in fixed-to-mobile traffic and the use of the Carrier Selection Code (“CSC”) 14 in calls made by mobile operator clients.

Data communications and other services revenues of R$374.0 million in 4Q04, an increase of 47.8% year-on-year and 16.4% sequentially.

EBITDA in 4Q04 was of R$772.9 million. The EBITDA margin was of 31.3% in 4Q04. The consolidated EBITDA margin, excluding the impact of Brasil Telecom GSM, was of 41.4% in 2004.

As of December 2004, Brasil Telecom’s consolidated total debt was of R$5,281.5 million, 2.6% lower than in the 3Q04.

 

Mobile telephony ARPU of R$35.0 in 4Q04, while the subscriber acquisition cost was of R$205.9 in the same period. Both indicators exceeded expectations.

Interconnection costs totaled R$647.2 million in 4Q04, a 6.1% increase compared to the previous quarter.

The dollar-denominated debt represented 14.3% of the total debt, amounting to R$755.4 million at the end of 4Q04.

Debt denominated in foreign currency represented 30.2% of total debt.

Brasil Telecom hedged 48.1% of its debt denominated in foreign currency, so that 16.1% of its total debt was exposed to exchange rate risk.

 
R$ Million Dec/03 Sep/04 Dec/04 D Quarter D 12 Months
Total Debt 4,635.8 5,421.8 5,281.5 -2.6% 13.9%
(-) Cash 1,465.8 2,598.9 2,397.8 -7.7% 63.6%
Net Debt 3,170.0 2,822.9 2,883.7 2.2% -9.0%
(-) Inter Company with BRP 1,497.8 1,014.7 1,046.5 3.1% -30.1%
Net Debt Ex-Inter Company with BRP 1,672.2 1,808.2 1,837.2 1.6% 9.9%
 
 

2004 cost of debt was 11.4% p.a., equivalent to 70.1% of the domestic inter-bank rate (CDI).

Consolidated net debt (excluding inter-company debt and debentures raised from our parent company) was of R$1,837.2 million, as of December.

Consolidated net debt as a percentage of shareholders’ equity was of 44.5% in 4Q04 compared to 42.1% in 3Q04.

 

In 4Q04, Brasil Telecom generated a positive operating cash flow of R$685.1 million.

The trailing 12-month free cash flow was R$565.6 million, calculated by subtracting from the operating cash flow the cash flow from investment activities and the interest paid.

Net earnings adjusted by goodwill in 4Q04 were R$50.5 million, compared to net losses of R$280 million in 4Q03. In the year, net earnings adjusted by goodwill were R$401.0 million, compared to R$98.7 million in 2003.

 

Financial Indicators
 
Financial Indicators 4Q03  3Q04  4Q04  D Quarter D 12 Months
EBITDA* / Interest Expenses 5.26 6.95 5.27 -24.2% 0.1%
Net Debt** / EBITDA* (x4) 0.44 0.46 0.59 30.4% 34.1%
Total Debt / (EBITDA* + Financial Income) (x4) 1.13 1.30 1.40 7.1% 23.2%
EBITDA* (x4) / Lines in Service R$383 R$413 R$325 -21.2% -15.1%
EBITDA* (x4) / Employees (thousand) R$718 R$627 R$463 -26.2% -35.5%
* EBITDA without effects of non-recurrent itens.
** Net debt excluding inter-company loans with Brasil Telecom Participações.

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INCOME STATEMENT

Table of Contents

Table 1: Consolidated Income Statement - Brasil Telecom S.A.

R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
GROSS REVENUES 2,899.8  3,315.2  3,502.0  5.6% 20.8% 11,077.4  12,763.4  15.2%
    Fixed Telephony 2,646.7  2,993.8  3,040.1  1.5% 14.9% 10,247.5  11,438.1  11.6%
        Local Service 1,162.7  1,218.3  1,262.5  3.6% 8.6% 4,432.6  4,710.8  6.3%
        Public Telephony 115.4  128.4  123.2  -4.0% 6.8% 394.5  478.8  21.4%
        Long Distance Service 377.1  478.3  444.9  -7.0% 18.0% 1,450.5  1,723.7  18.8%
        Inter-network Calls 613.9  805.5  854.4  6.1% 39.2% 2,536.0  3,100.2  22.2%
        Interconnection 215.7  182.6  178.1  -2.4% -17.4% 835.3  731.3  -12.5%
        Lease of Means 60.9  53.9  66.7  23.6% 9.5% 215.5  239.1  11.0%
        Supplementary and Value Added Services 94.0  117.2  100.7  -14.1% 7.0% 356.4  421.0  18.1%
        Other 7.0  9.7  9.7  -0.7% 38.3% 26.7  33.2  24.4%
    Mobile Telephony -  -  87.9  N.A.  N.A.  -  87.9  N.A. 
    Data Transmission 253.1  321.3  374.0  16.4% 47.8% 829.9  1,237.4  49.1%
Deductions (826.6) (954.3) (1,036.0) 8.6% 25.3% (3,162.2) (3,698.6) 17.0%
NET REVENUES 2,073.2  2,360.9  2,466.1  4.5% 19.0% 7,915.2  9,064.9  14.5%
COSTS & OPERATING EXPENSES (1,494.5) (1,369.2) (1,693.2) 23.7% 13.3% (4,601.2) (5,479.7) 19.1%
        Personnel (144.6) (104.5) (124.0) 18.7% -14.2% (429.8) (422.9) -1.6%
        Materials (24.6) (23.5) (137.3) 483.3% 458.1% (89.7) (208.7) 132.6%
        Subcontracted Services (363.6) (367.9) (484.3) 31.6% 33.2% (1,288.9) (1,571.9) 22.0%
        Interconnection (461.3) (610.2) (647.2) 6.1% 40.3% (1,772.1) (2,298.9) 29.7%
        Advertising and Marketing (28.3) (31.4) (53.5) 70.3% 89.3% (85.5) (133.6) 56.2%
        Provisions and Losses (410.4) (163.7) (253.7) 55.0% -38.2% (657.8) (662.5) 0.7%
        Other (61.8) (68.0) 6.7  N.A.  N.A.  (277.4) (181.1) -34.7%
EBITDA 578.6  991.7  772.9  -22.1%  33.6% 3,314.0  3,585.2  8.2%
Depreciation and Amortization (505.2) (626.8) (639.4) 2.0% 26.6% (2,082.4) (2,464.9) 18.4%
OPERATING PROFIT BEFORE FINANCIA RESULT 73.4  364.9  133.5  -63.4%  81.8% 1,231.6  1,120.3  -9.0% 
Financial Result (198.3) (141.5) (361.7) 155.7% 82.4% (1,091.0) (1,024.0) -6.1%
        Financial Revenues 78.6  48.1  172.7  258.9% 119.7% 302.6  493.3  63.0%
        Financial Expenses (276.9) (189.6) (328.0) 73.0% 18.5% (1,147.4) (1,072.8) -6.5%
        Interest on Shareholders' Equity -  -  (206.4) N.A.  N.A.  (246.2) (444.5) 80.5%
OPERATING PROFIT AFTER FINANCIAL RESULT (124.9) 223.4  (228.2) N.A.  82.8% 140.6  96.3  -31.5% 
Non-Operating Revenues (Expenses) (360.5) (33.4) 10.6  N.A.  N.A.  (469.0) (160.1) -65.9%
        Goodwill Amortization - CRT Acquisition (31.0) (31.0) (31.0) 0.0% 0.0% (124.0) (124.0) 0.0%
        Other (329.5) (2.4) 41.6  N.A.  N.A.  (345.0) (36.1) -89.5%
EARNINGS BEFORE INCOME AND SOCIAL
CONTRIBUTION TAXES (485.4) 190.0  (217.7) N.A.  -55.1%  (328.5) (63.8) -80.6% 
Income and Social Contribution Taxes 140.3  (73.0) 50.9  N.A.  -63.7% 58.0  (43.7) N.A. 
EARNINGS BEFORE PROFIT SHARING (345.1) 117.0  (166.8) N.A.  -51.7%  (270.4) (107.5) -60.3% 
Profit Sharing 33.9  (13.1) (13.8) 5.1% N.A.  (1.1) (53.8) N.A. 
Minority Interest 0.0  0.0  (6.3) N.A.  N.A.  0.0  (6.3) N.A. 
EARNINGS BEFORE REVERSION OF
INTEREST ON SHAREHOLDERS' EQUITY (311.2) 103.9  (186.9) N.A.  -40.0%  (271.5) (167.5) -38.3% 
Reversion of Interest on Shareholders' Equity - - 206.4  N.A. N.A. 246.2 444.5 80.5%
NET EARNINGS (LOSSES) (311.2) 103.9  19.5  -81.2%  N.A.  (25.3) 277.0  N.A. 
Goodwill Amortization - CRT Acquisition 31.0  31.0  31.0  0.0% 0.0% 124.0  124.0  0.0%
NET EARNINGS (LOSSES) ADJUSTED BY GOODWILL AMORTIZATION (280.2) 134.9  50.5  -62.6%  N.A.  98.7  401.0  306.2%
 
Net Earnings (Losses)/1,000 shares - R$ (0.5709) 0.1891  0.0355  -81.2% N.A.  (0.0464) 0.5038  N.A. 
Net Earnings (Losses)/ADR - US$ (0.5928) 0.1984  0.0401  -79.8% N.A.  (0.0482) 0.5694  N.A. 

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Table 2: Consolidated Income Statement - Brasil Telecom GSM

R$ Million 4Q04 
GROSS REVENUES 102.3
    Subscription 10.2
    Utilization 5.7
    Roaming 0.2
    Interconnection 16.0
    Other Revenues 0.2
    Data Transmission 0.3
    Merchandise Sales (Handsets and Accessorie 69.7
Deductions (23.3)
NET REVENUES 79.0
COSTS & OPERATING EXPENSES (223.6)
    Personnel (11.5)
    Materials (116.0)
    Subcontracted Services (43.9)
    Interconnection (7.8)
    Advertising and Marketing (24.2)
    Provisions and Losses (1.9)
    Other (18.3)
EBITDA (144.6)
Depreciation and Amortization (28.7)
OPERATING PROFIT BEFORE FINANCIAL
RESULT (173.3)
Financial Result (6.5)
    Financial Revenues 11.1
    Financial Expenses (17.6)
EARNINGS BEFORE INCOME AND SOCIAL
CONTRIBUTION TAXES (179.8)
Income and Social Contribution Taxes 60.7
NET EARNINGS (LOSSES) (119.1)
Note: Statement does not consider inter-company eliminations with Brasil Telecom S.A.

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OPERATING PERFORMANCE

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FIXED-LINE TELEPHONY

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         NETWORK

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Table 3: Network

PLANT 4QO3  3QO4  4QO4  D Quarter D 12 Months
Lines Installed (Thousand) 10,686.5 10,725.4 10,737.2  0.1% 0.5%
Additional Lines Installed (Thousand) 8.9 13.8 11.8  -14.1% 33.0%
Lines in Service - LIS (Thousand) 9,850.9 9,604.3 9,503.1  -1.1%  -3.5% 
    Residential 7,166.1 6,685.4 6,444.9  -3.6% -10.1%
    Non-Residential 1,565.6 1,451.5 1,433.0  -1.3% -8.5%
    Public Telephones 296.3 296.0 295.9  0.0% -0.1%
    Pre-paid 266.4 284.6 297.1  4.4% 11.5%
    Hybrid Terminals 10.8 267.2 408.3  52.8% N.A. 
    Other (including PBX) 545.7 619.5 623.9  0.7% 14.3%
Additional LIS (Thousand) 41.7 (42.4) (101.2) 138.6% N.A. 
Average LIS (Thousand) 9,830.0 9,625.5 9,553.7  -0.7%  -2.8% 
LIS/100 Inhabitants 23.4 22.7 22.4  -1.3% -4.3%
Public Telephones/ 1,000 Inhabitants 7.0 7.0 7.0  -0.3% -1.0%
Public Telephones/100 Lines Installed 2.8 2.8 2.8  -0.1% -0.6%
Utilization Rate 92.2% 89.5% 88.5% -1.0 p.p.  -3.7 p.p. 
Digitization Rate 99.0% 99.6% 99.7% 0.1 p.p.  0.7 p.p. 


Fixed-line Network

In 4Q04, Brasil Telecom installed 11.8 thousand lines, closing the quarter with 10.7 million terminals, an increase of 50.7 thousand lines from the same period in 2003.

The plant in service totaled 9.5 million lines in 4Q04. Brasil Telecom continued the process of detecting delinquent lines, disconnecting lines without prospects of returning to the active base in the medium term and transferring some of the clients who negotiated their obligations to the hybrid plan (LigMix).

Additionally, the increase of 52.8% in the number of hybrid terminals was a result of the Company’s initiative to encourage the migration of clients that were on default or who subscribed to alternative plans. Over the past quarters, Brasil Telecom has been concentrating its efforts to identify the usage profile of its clients, allocating them to the appropriate plan with the objective of reducing delinquency and increasing fixed-line telephony ARPU.

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         TRAFFIC

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Table 4: Traffic

TRAFFIC 4QO3  3QO4  4QO4  D Quarter D 12 Months
Exceeding Local Pulses (Million) 2,927.4 2,730.0 2,772.5 1.6% -5.3% 
Long Distance Minutes (Million) 1,559.4 1,638.0 1,436.5 -12.3% -7.9% 
Fixed-Mobile Minutes (Million) 991.0 1,098.4 1,180.3 7.5% 19.1%
Exceeding Pulses/Average LIS/Month 99.3 94.5 96.7 2.3% -2.5%
LD Minutes/Average LIS/Month 52.9 56.7 50.1 -11.6% -5.2%
Fixed-Mobile Minutes/Average LIS/Month 33.6 38.0 43.2 13.6% 28.5%


Billed Pulses

Billed pulses traffic (exceeding local pulses) increased by 1.6% compared to 3Q04, to 2.8 billion. Local traffic has increased for the third quarter in a row.


Long Distance
Traffic

Since September, a new regulation approved by Anatel has been effective, establishing a new division of the fixed-line telephony local areas in the country. According to this regulation, calls between close localities (conurbations), which were previously considered long distance calls, are now considered local calls. Although this change has affected long distance traffic, it did not have the same impact on billed pulses traffic, as the majority of this local traffic is used as part of the monthly free minutes to which subscribers are eligible. As a result long distance traffic decreased by 12.3% quarter-on-quarter, to 1.4 billion minutes.


LD Market Share

Brasil Telecom closed the fiscal year 2004 well positioned in the long distance segment, with a 48.9% and 26.6% (quarterly average) market share in the interregional and international long distance segments, achieved in last than one year of operations.

Sequentially, our quarterly average long distance market share increased 0.4 p.p. in the intra-state segment and 1.4 p.p. in the inter-state segment, to 91.2% and 82.3%, respectively.


Table of Contents

Graph 1: DLD Market Share*




* Historical data has been updated to reflect the exclusion of traffic generated by administrative-use terminals and public telephones.


Inter-Network
Traffic

Inter-network traffic increased by 7.5% in 4Q04 compared to 3Q04, mainly due to the 16.3% increase in the number of mobile phones in the Region in the quarter, to 19.7 million mobile accesses in service at the end of 2004, of which 3.2% were part of Brasil Telecom GSM’s network.

The use of the CSC 14 in calls made from mobile phones and the use of the CSC 14 in calls terminating outside Region II resulted in a change of profile in the inter-network traffic throughout the year. Of the total inter-network traffic in the 4Q04, 76.8% corresponded to VC-1 calls, while 15.1% corresponded to VC-2 calls and 8.2% to VC-3 calls. A year ago, VC-2 and VC-3 calls corresponded to only 6.4% and 1.5%, respectively.

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MOBILE TELEPHONY

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Table 5: Operational Data

Key Operational Data 4Q04 
Clients 622,295 
    Post-Paid 205,716 
    Pre-Paid 416,579 
Gross Additions 626,526 
    Post-Paid 209,497 
    Pre-Paid 417,029 
Cancellations 4,231 
    Post-Paid 3,781 
    Pre-Paid 450 
Annualized Chum 1.4%
Market Share 3.2%
Served Localities 626 
Base Stations 1,632 
Switches 3 
Employees 881 


Mobile Network

The launch of Brasil Telecom GSM was a success, exceeding all expectations in its first quarter of commercial operations. At the end of 4Q04, the mobile network had 622.3 thousand accesses in service. Christmas sales, leveraged by the Pula-Pula launch promotion, resulted in net adds of 368.4 thousand in December.



Table of Contents

Graph 2: Mobile Network



Client Base Mix

The mobile network had 205.7 thousand post-paid subscribers at the end of 4Q04, or 33.1% of the client base. This mix reflects good brand awareness in the corporate segment and the attentiveness of our clients to the benefits of convergence.


Market Share

At the end of 4Q04, Brasil Telecom GSM achieved a 3.2% market share in its operational area.


Coverage

In deciding to initiate its commercial operations with a wide GSM coverage, Brasil Telecom covered 626 localities with its mobile operations at the end of 4Q04, which represented 81.2% of the population of Region II.


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DATA COMMUNICATIONS

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    BROADBAND

ADSL Accesses

Brasil Telecom increased its ADSL accesses in service by 89.9% in one year, to 535.5 thousand accesses at the end of 4Q04.



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Graph 3: ADSL Accesses



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         INTERNET PROVIDERS

 

Together, our internet service providers - iG, iBest and BrTurbo - served approximately 5 million clients at the end of 4Q04, which make us the largest internet service provider in Latin America and one of the 15 largest providers worldwide.


BrTurbo

BrTurbo consolidated its broadband market leadership in Region II, with 266 thousand clients at the end of 4Q04, 146% higher than in 4Q03. As a result, approximately 50% of the ADSL accesses we provide in Region II are to our BrTurbo customers.


iBest

iBest is the leading free internet company in Region II with a 43% market share at the end of 4Q04. With 1.6 million active users, iBest is the second largest dial-up internet access provider in Brazil. In 2004, iBest generated 16.6 billion minutes and organized the largest Internet Award in Brazil, the “Prêmio iBest”, with more than 25 thousand registered websites.


iG

At the end of 4Q04, iG had more than three million active users and 7.7 million active email accounts. Besides being the largest dial-up internet access provider in Brazil, iG is also the largest wireless content portal, with a market share of more than 30%.


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FINANCIAL PERFORMANCE

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         REVENUES

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Table 6: Consolidated Operating Gross Revenues

R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
GROSS REVENUES 2,899.8  3,315.2  3,502.0  5.6% 20.8% 11,077.4  12,763.4  15.2%
FIXED TELEPHONY 2,646.7  2,993.8  3,040.1  1.5% 14.9% 10,247.5  11,438.1  11.6%
    Local Service 1,162.7  1,218.3  1,262.5  3.6% 8.6% 4,432.6  4,710.8  6.3%
        Activation 8.9  7.7  7.3  -5.2% -17.7% 35.5  33.5  -5.8%
        Basic Subscription 745.8  800.6  832.2  3.9% 11.6% 2,858.0  3,110.0  8.8%
        Measured Service 378.7  386.7  402.0  4.0% 6.1% 1,427.2  1,474.5  3.3%
        Lease of Lines 0.4  0.4  0.4  -4.1% -1.8% 1.7  1.6  -4.0%
        Other 28.9  22.8  20.5  -10.0% -28.8% 110.2  91.1  -17.3%
    Public Telephony 115.4  128.4  123.2  -4.0% 6.8% 394.5  478.8  21.4%
    Long Distance Service 377.1  478.3  444.9  -7.0% 18.0% 1,450.5  1,723.7  18.8%
        Intea-Region 376.9  404.1  358.4  -11.3% -4.9% 1,450.0  1,435.1  -1.0%
        Inter-Region -  67.0  74.3  11.0% N.A.  -  214.8  N.A. 
        International / Borderline 0.1  7.2  12.1  68.0% 8308.3% 0.6  31.6  5523.6%
    Inter-Network Calls 613.9  805.5  854.4  6.1% 39.2% 2,536.0  3,100.2  22.2%
        VC-1 525.8  562.8  553.4  -1.7% 5.3% 2,062.8  2,180.9  5.7%
        VC-2 69.5  156.1  183.7  17.6% 164.3% 399.9  613.8  53.5%
        VC-3 18.6  86.3  115.4  33.7% 520.8% 73.2  303.0  313.8%
        International - 0.2  2.0  844.1% N.A.  - 2.4  N.A.
    Interconnection 215.7  182.6  178.1  -2.4% -17.4% 835.3  731.3  -12.5%
        Fixed-Fixed 151.3  114.9  111.7  -2.8% -26.1% 607.1  468.0  -22.9%
        Mobile-Fixed 64.5  67.7  66.4  -1.9% 3.0% 228.2  263.3  15.4%
    Lease of Means 60.9  53.9  66.7  23.6% 9.5% 215.5  239.1  11.0%
    Supplementary and Value Added Services 94.0  117.2  100.7  -14.1% 7.0% 356.4  421.0  18.1%
    Other 7.0  9.7  9.7  -0.7% 38.3% 26.7  33.2  24.4%
MOBILE TELEPHONY -  -  87.9  N.A.  N.A.  -  87.9  N.A. 
    Subscription -  -  10.2  N.A.  N.A.  -  10.2  N.A. 
    Utilization -  -  5.5  N.A.  N.A.  -  5.5  N.A. 
    Roaming -  -  0.2  N.A.  N.A.  -  0.2  N.A. 
    Interconnection -  -  2.1  N.A.  N.A.  -  2.1  N.A. 
    Other Services -  -  0.2  N.A.  N.A.  -  0.2  N.A. 
    Merchandise Sales (Handsets and Accessories) -  -  69.7  N.A.  N.A.  -  69.7 N.A. 
DATA COMMUNICATIONS 253.1  321.3  374.0  16.4% 47.8% 829.9  1,237.4  49.1%
    Fixed 253.1  321.3  373.7  16.3% 47.7% 829.9  1,237.1  49.1%
    Mobile -  -  0.3  N.A.  N.A.  -  0.3  N.A.
Deductions (826.6) (954.3) (1,036.0) 8.6% 25.3% (3,162.2) (3,698.6) 17.0%
NET REVENUES 2,073.2  2,360.9  2,466.1  4.5% 19.0% 7,915.2  9,064.9  14.5%
Note: Revenues previously recorded as Other were reclassified as Data Communications Revenues.

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Graph 4: Gross Revenues Breakdown

Local Service

Gross local service revenues reached R$1,262.5 million in 4Q04, 8.6% higher than in 4Q03 and 3.6% higher compared to 3Q04, mainly as a result of an increase in billed pulses (measured service) and basic subscription fees.

Gross line activation revenues totaled R$7.3 million in 4Q04, 5.2% lower than in 3Q04, primarily due to the 6.5% reduction in the number of lines activated in the quarter, partially offset by the rate adjustment of 3.4%, effective from November 01, 2004 onwards. Brasil Telecom installed 337 thousand lines in the 4Q04, compared to 403 thousand lines in the previous quarter.

Basic subscription revenues reached R$832.2 million in the quarter, an increase of 3.9% compared to 3Q04, due to the rate adjustment of 4.7%, effective from November 01, 2004.

Billed pulses revenues totaled R$402.0 million in the 4Q04, an increase of 4.0% compared to 3Q04. This increase is a result of a 1.6% increase in local traffic compared to 3Q04 and the rate adjustment of 3.6%, effective from November 01, 2004.


Public Telephony

Public telephony revenues reached R$123.2 million in 4Q04, a decrease of 4.0% compared to 3Q04, explained by sales seasonality, and an increase of 21.4% year-on-year.


Long-Distance

Long distance revenues reached R$444.9 million in 4Q04, a decrease of 7.0% compared to 3Q04. This was mainly due to the 12.3% decrease in traffic, which in turn, was a result of new regulation established by Anatel with a new division of the fixed-line telephony local areas in the country and seasonal variations, typical of the last quarter of the year, with fewer business days. Such effects were partially offset by the rate adjustment of 4.7% in the DLD basket, effective from November 01, 2004.


Inter-Network

Gross revenue from inter-network calls reached R$854.4 million in 4Q04, a 6.1% increase compared to 3Q04, reflecting the 7.5% increase in inter-network traffic and the increase of VC-2 and VC-3 traffic in the inter-network call mix.


Interconnection

Interconnection revenues decreased by 2.4% compared to 3Q04, due to the increase in our market share in the long distance segments. This reduction was partially offset by the rate adjustment effective on November 01, 2004, which adjusted the Local Network Usage Rate (TU-RL) and the Intercity Network Usage Rate (TU-RIU) by 5.1%.


Data
Communications

In 4Q04, data communications and other services revenues reached R$374.0 million, an increase of 16.4% compared to the previous quarter, due to the growth in data communications services such as VPN, Vetor, and Interlan, and also by the 17.4% increase in ADSL accesses.

Data communications revenues have been increasing as a percentage of total revenues. The segment increased its share from 8.7% of total revenues a year ago to 10.7% in 4Q04.


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Graph 5: Data Communications and Other Services Revenues




Mobile Telephony

Mobile telephony revenues totaled R$87.9 million in 4Q04, of which R$18.2 million were service revenues and R$69.7 million were revenues from the sale of handsets and accessories. Due to the quality of the client base mix (33.1% post-paid) 56.0% of total mobile telephony revenues derived from subscription revenues.


Gross Revenue
Deductions

Gross revenue deductions reached R$1,036.0 million in 4Q04, representing 29.6% of the quarter’s gross revenue, compared to 28.7% in the previous quarter. The R$14.6 million increment in the quarter is explained by the application of a new ICMS (a state value-added tax) tax rates on internet ports, retroactive to January 2004.


Fixed-line ARPU

Fixed-line ARPU (net revenue/Average LIS/month) increased 2.6% in 4Q04, to R$83.9, compared to R$81.8 in 3Q04.


Mobile Telephony
ARPU

Mobile telephony ARPU was of R$35.0 in 4Q04. Post-paid ARPU was of R$64.0, while pre-paid ARPU was of R$16.0.


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COSTS AND EXPENSES

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Table 7: Consolidated Operating Costs and Expenses

R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
NET REVENUES 2,073.2 2,360.9 2,466.1 4.5% 19.0% 7,915.2 9,064.9 14.5%
    Costs (1,247.9) (1,480.7) (1,623.4) 9.6% 30.1% (4,853.4) (5,829.2) 20.1%
        Personnel (42.0) (30.1) (32.2) 7.1% -23.3% (129.4) (120.2) -7.1%
        Materials (23.2) (22.0) (113.4) 416.8% 389.0% (84.3) (180.3) 113.9%
        Subcontracted Services (623.9) (774.0) (831.2) 7.4% 33.2% (2,370.5) (2,959.7) 24.9%
            Interconnection (461.3) (610.2) (647.2) 6.1% 40.3% (1,772.1) (2,298.9) 29.7%
            Other (162.6) (163.8) (184.0) 12.3% 13.2% (598.3) (660.7) 10.4%
        Depredation and Amortization (462.2) (541.6) (560.9) 3.6% 21.4% (1,916.2) (2,185.3) 14.0%
        Other (96.7) (113.1) (85.6) -24.3% -11.4% (353.0) (383.8) 8.7%
GROSS PROFIT 825.2 880.1 842.7 -4.3%  2.1% 3,061.8 3,235.7 5.7%
    Sales Expenses (158.4) (145.4) (257.4) 77.1% 62.6% (521.9) (675.6) 29.4%
        Personnel (44.9) (36.1) (46.9) 29.8% 4.3% (140.0) (146.4) 4.6%
        Materials (0.6) (0.4) (22.5) N.A.  N.A.  (2.0) (23.8) N.A. 
        Subcontracted Services (110.8) (106.7) (178.4) 67.3% 61.0% (369.9) (488.2) 32.0%
            Advertising and Marketing (28.3) (31.4) (53.5) 70.3% 89.3% (85.5) (133.6) 56.2%
            Other (82.5) (75.2) (124.9) 66.0% 51.3% (284.4) (354.6) 24.7%
        Depredation and Amortization (1.3) (1.3) (3.1) 138.6% 134.8% (5.3) (7.2) 34.9%
        Other (0.7) (0.9) (6.6) N.A.  N.A.  (4.7) (10.0) 111.1%
    General and Administrative Expenses (155.1) (144.9) (185.3) 27.9% 19.5% (497.4) (614.3) 23.5%
        Personnel (47.7) (31.4) (35.4) 12.9% -25.7% (134.2) (128.3) -4.4%
        Materials (0.5) (0.7) (0.7) 7.0% 29.3% (2.2) (2.5) 13.9%
        Subcontracted Services (95.9) (103.6) (138.5) 33.7% 44.4% (327.0) (446.8) 36.7%
        Depredation and Amortization (7.2) (6.1) (7.2) 17.5% -0.2% (20.7) (24.0) 16.3%
        Other (3.8) (3.1) (3.5) 10.2% -8.4% (13.4) (12.6) -6.0%
    Information Technology (84.1) (84.4) (106.8) 26.5% 26.9% (297.9) (354.0) 18.8%
        Personnel (9.9) (6.9) (9.5) 36.6% -4.5% (26.2) (28.0) 6.8%
        Materials (0.3) (0.5) (0.7) 38.0% 142.1% (1.3) (2.2) 67.5%
        Subcontracted Services (22.6) (25.2) (36.8) 45.9% 63.1% (79.2) (109.7) 38.5%
        Depredation and Amortization (40.1) (46.6) (53.8) 15.6% 34.3% (139.6) (187.4) 34.3%
        Other (11.3) (5.1) (5.9) 15.1% -47.4% (51.7) (26.8) -48.2%
    Provisions and Losses (410.4) (163.7) (253.7) 55.0% -38.2% (657.8) (662.5) 0.7%
        Doubtful Accounts (102.6) (97.9) (129.5) 32.3% 26.2% (298.0) (410.3) 37.7%
        Contingencies (307.8) (65.8) (124.2) 88.8% -59.7% (359.7) (252.2) -29.9%
    Other Operating Revenues (Expenses) 56.2 23.1 94.0 307.0% 67.3% 144.8 191.0 31.9%
        Goodwill Amortization 5.5 (31.2) (14.3) -54.1% N.A.  (0.6) (61.0) N.A. 
        Other 50.6 54.3 108.3 99.5% 113.9% 145.4 252.0 73.4%
OPERATING PROFIT BEFORE FINANCIAL RESULTS 73.4 364.9 133.5 -63.4% 81.8% 1,231.6 1,120.3 -9.0% 
 
R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
COSTS AND OPERATING EXPENSES (1,999.8) (1,996.0) (2,332.6) 16.9% 16.6% (6,683.6) (7,944.6) 18.9%
    Depredation and Amortization (505.2) (626.8) (639.4) 2.0% 26.6% (2,082.4) (2,464.9) 18.4%
    Interconnection (461.3) (610.2) (647.2) 6.1% 40.3% (1,772.1) (2,298.9) 29.7%
    Subcontracted Services (363.6) (367.9) (484.3) 31.6% 33.2% (1,288.9) (1,571.9) 22.0%
    Personnel (144.6) (104.5) (124.0) 18.7% -14.2% (429.8) (422.9) -1.6%
    Provisions and Losses (410.4) (163.7) (253.7) 55.0% -38.2% (657.8) (662.5) 0.7%
    Materials (24.6) (23.5) (137.3) 483.3% 458.1% (89.7) (208.7) 132.6%
    Advertising and Marketing (28.3) (31.4) (53.5) 70.3% 89.3% (85.5) (133.6) 56.2%
    Other (61.8) (68.0) 6.7 N.A.  N.A.  (277.4) (181.1) -34.7%
 
R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
COSTS AND OPERATING EXPENSES (1,999.8) (1,996.0) (2,332.6) 16.9% 16.6% (6,683.6) (7,944.6) 18.9%
(+) Depreciation and Amortization 505.2 626.8 639.4 2.0% 26.6% 2,082.4 2,464.9 18.4%
(+) Provisions and Losses 410.4 163.7 253.7 55.0% -38.2% 657.8 662.5 0.7%
(+) Other 61.8 68.0 (6.7) N.A.  N.A.  277.4 181.1 -34.7%
(=) CASH COST (1,022.4) (1,137.5) (1,446.3) 27.1% 41.5% (3,666.0) (4,636.0) 26.5%

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Graph 6: Operating Costs and Expenses Breakdown
(Excluding Depreciation, Provisions, Losses and Other)



Operating Costs
and Expenses

Operating costs and expenses were impacted by the start-up of mobile operations, which makes a comparison of 4Q04 with previous quarters biased.

Operating costs and expenses totaled R$2,332.6 million in 4Q04, compared to R$1,996.0 million in the previous quarter.

Operating costs and expenses excluding depreciation, amortization, provisions, losses and other were of R$1,446.3 million in 4Q04, compared to R$1,137.5 million in 3Q04, an increase of 19.4% compared to the previous quarter. Costs and expenses in connection with mobile operations were fully accounted for in 4Q04. The increase in costs was mainly a result of an increase in material costs (+483.3%), advertising and marketing (+70.3%) and costs with subcontracted services (+31.6%).


Number of
Employees

At the end of 4Q04, Brasil Telecom’s fixed telephony operation had 5,799 employees, compared to 5,503 in the previous quarter. This increase was mainly due to the consolidation of iG, which added 204 employees to our personnel.

As of December 2004, Brasil Telecom GSM had 881 employees, compared to 822 in 3Q04.


Personnel

Personnel costs and expenses reached R$124.0 million, an increase of 18.7% compared to the previous quarter, due to the consolidation of iG and the increase in the number of mobile telephony employees.


Subcontracted
services

Costs and expenses with subcontracted services, excluding interconnection and advertising & marketing, totaled R$484.3 million in 4Q04, a 31.6% increase compared to the previous quarter.

This increase is explained by items related to our mobile operations and by an increase in commission charges associated with ADSL sales and subcontracted stores, and rate adjustments in internal and external network maintenance contracts, call center contracts, and energy expenses.


Interconnection

Interconnection costs totaled R$647.2 million in 4Q04, a 6.1% increase compared to the previous quarter. The increase is a result of (i) inter-network traffic intensification, (ii) the increase of VC-2 and VC-3 traffic in the inter-network traffic mix, (iii) our growing market share in long distance calls terminating outside Region II, and (iv) the rate adjustment in connection with the TU-RL (Local Network Usage Rate) and the TU-RIU (Inter-city Network Usage Rate).


Advertising
& Marketing

Expenses with advertising & marketing totaled R$53.5 million in 4Q04, an increase of 70.3% from the previous period, mainly associated with Brasil Telecom GSM’s Christmas campaigns.


Losses with
Accounts
Receivable/Gross
Revenue

Losses with accounts receivable reached 3.7% in percentage of gross revenues terms in 4Q04 and 3.2% in 2004. Provisions for doubtful accounts totaled R$129.5 million in 4Q04, an increment of R$31.6 million compared to the previous quarter, mainly due to increased delinquency and risk of co-billing with mobile companies.


Accounts
Receivable

Gross accounts receivable as a percentage of gross revenues fell from 68.9% in 3Q04 to 67.2% in 4Q04, the lowest value in the last 15 months, given that the increase in gross revenues was higher than the increase in accounts receivable in the period. Despite the rate adjustments applied during the quarter, gross accounts receivable as a percentage of gross revenues fell significantly, mainly due to our efforts to recover overdue balances through campaigns promoted during 4Q04.

Deducting provision for doubtful accounts in the amount of R$243.2 million, Brasil Telecom’s net accounts receivable totaled R$2,111.6 million at the end of 4Q04.


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Graph 7: Accounts Receivable / Gross Revenues Ratio



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Table 8: Gross Accounts Receivable

  Dec/03  Mar/04  ]un/04  Sep/04  Dec/04 
Total (R$ Million) 2,042.7 2,099.0 2,145.9 2,284.4 2,354.8
    Due 63.7% 60.6% 60.1% 61.5% 64.5%
    Overdue (up to 30 days) 15.3% 16.2% 15.7% 17.3% 16.4%
    Overdue (between 31-60 days) 4.9% 6.2% 6.3% 5.8% 5.7%
    Overdue (between 61-90 days) 4.1% 4.4% 3.6% 3.5% 3.7%
    Overdue (over 90 days) 12.1% 12.6% 14.3% 11.9% 9.7%

Provisions for
Contingencies

In 4Q04, provisions for contingencies totaled R$124.2 million. During the quarter, we reevaluated labor, civil and legal tax proceedings due to recent judicial decisions.


Materials

Costs and Expenses with materials totaled R$137.3 million in 4Q04, an increase of 483.3% in comparison with 3Q04, mainly associated with costs of merchandise sold by Brasil Telecom GSM (handsets and accessories), which totaled R$113.6 million in the quarter.


Other Operating
Costs and
Expenses/Revenues

Other Operating Costs and Expenses/Revenues totaled R$6.7 million in the 4Q04. Despite the increase in expenses of R$60 million in connection with the application of the ICMS tax on IP ports, retroactive to January 2004, we had revenues of R$125 million in the quarter, associated with the agreement entered into with Embratel and the recovery of other expenses.


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EBTIDA

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Table 9: EBITDA Margin – Gains and Losses
R$ Million 4Q03  Vertical 3Q04  Vertical 4Q04  Vertical
GROSS REVENUES 2,899.8 139.9% 3,315.2 140.4% 3,502.0 142.0%
    Fixed Telephony 2,646.7 127.7% 2,993.8 126.8% 3,040.1 123.3%
        Local Service 1,162.7 56.1% 1,218.3 51.6% 1,262.5 51.2%
        Public Telephony 115.4 5.6% 128.4 5.4% 123.2 5.0%
        Long Distance Service 377.1 18.2% 478.3 20.3% 444.9 18.0%
        Fixed-Mobile Calls 613.9 29.6% 805.5 34.1% 854.4 34.6%
        Interconnection 215.7 10.4% 182.6 7.7% 178.1 7.2%
        Lease of Means 60.9 2.9% 53.9 2.3% 66.7 2.7%
        Supplementary and Value Added 94.0 4.5% 117.2 5.0% 100.7 4.1%
        Services
        Other 7.0 0.3% 9.7 0.4% 9.7 0.4%
    Mobile Telephony -  0.0% -  0.0% 87.9 3.6%
    Data Transmission 253.1 12.2% 321.3 13.6% 374.0 15.2%
Deductions (826.6) -39.9% (954.3) -40.4% (1,036.0) -42.0%
NET REVENUES 2,073.2 100.0% 2,360.9 100.0% 2,466.1 100.0%
COSTS & OPERATING EXPENSES (1,494.5) -72.1%  (1,369.2) -58.0% (1,693.2) -68.7% 
        Personnel (144.6) -7.0% (104.5) -4.4% (124.0) -5.0%
        Materials (24.6) -1.2% (23.5) -1.0% (137.3) -5.6%
        Subcontracted Services (363.6) -17.5% (367.9) -15.6% (484.3) -19.6%
        Interconnection (461.3) -22.2% (610.2) -25.8% (647.2) -26.2%
        Advertising and Marketing (28.3) -1.4% (31.4) -1.3% (53.5) -2.2%
        Provisions and Losses (410.4) -19.8% (163.7) -6.9% (253.7) -10.3%
        Other (61.8) -3.0% (68.0) -2.9% 6.7 0.3%
EBITDA 578.6 27.9% 991.7 42.0% 772.9 31.3%

EBITDA of R$772.9 million

Brasil Telecom’s EBITDA was R$772.9 million in 4Q04, R$194.2 million above 4Q03’s EBITDA, an increase of 33.6% year-on-year.


EBITDA Margin

In 4Q04, Brasil Telecom’s EBITDA margin reached 31.3%. The EBITDA margin for the fiscal year was of 39.6%. Excluding the negative impact of 1.8 p.p. of our mobile operations, the EBITDA margin for 2004 would have been 41.4%.


EBITDA/Avg LIS/month

In 4Q04, EBITDA/Average LIS/month reached R$27.0, 37.8% higher than in 4Q03.

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         FINANCIAL RESULT

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Table 10: Consolidated Financial Result
R$ million 4Q03  3Q04  4Q04  D Quarter D 12 Months 12M03  12M04 
Financial Revenue 78.6 48.1 172.7 258.9% 119.7% 302.6 493.3
    Local Currency 66.9 66.4 106.0 59.7% 58.3% 231.8 387.2
    Foreign Currency 11.7 (18.2) 66.8 -466.4% 471.1% 70.8 106.1
Financial Expense (276.9) (189.6) (328.0) 73.0% 18.5% (1,147.4) (1,072.8)
    Local Currency (259.7) (191.2) (223.4) 16.8% -14.0% (1,050.9) (860.7)
    Foreign Currency (17.2) 1.7 (104.7) -6426.6% 508.3% (96.4) (212.1)
Interest on Shareholders' Equity – – (206.4) N.A.  N.A.  (246.2) (444.5)
Financial Result (198.3) (141.5) (361.7) 155.7% 82.4% (1,091.1) (1,024.0)

Financial Result

In 4Q04, Brasil Telecom reported a negative net financial result of R$361.7 million, of which R$206.4 million refer to interest on shareholder’s capital. Excluding interest on shareholder’s capital, the financial result would have been negative R$155.3 million, compared to the negative result of R$141.5 million reported in 3Q04.


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         OTHER ITEMS

Amortization of Reconstituted Goodwill

In 4Q04, Brasil Telecom amortized R$31.0 million in reconstituted goodwill regarding the acquisition of CRT (with no impact on cash flow and dividends distribution), accounted for as non-operating expenses.


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         NET EARNINGS

 

Net earnings totaled R$19.5 million in 4Q04 (R$0.0355/1,000 shares). Net earnings/ADR in the same period were of US$0.0401.


 

Net earnings adjusted by goodwill totaled R$50.5 million in 4Q04, reverting 4Q03´s net losses of R$280.2 million.

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BALANCE SHEETS

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Table 11: Consolidated Balance Sheet – Brasil Telecom S.A.

R$ Million Dec/03  Dec/04 
 
CURRENT ASSETS 3,985.5 5,802.0
Cash and Equivalents 1,465.8 2,397.8
Accounts Receivables (Net) 1,865.2 2,111.6
Deferred and Recoverable Taxes 501.3 735.7
Other Recoverable Amounts 107.4 327.0
Inventory 8.0 174.0
Other 37.8 55.9
LONG TERM ASSETS 1,363.1 1,299.5
Loans and Financing 7.5 8.2
Deferred and Recoverable Taxes 736.4 729.7
Other 619.2 561.6
PERMANENT ASSETS 9,977.4 10,300.9
Investment (Net) 286.4 477.5
Property, Plant and Equipment (Net) 9,046.0 8,897.2
    Property, Plant and Equipment (Gross) 22,915.0 24,562.4
    Accumulated Depreciation (13,869.1) (15,665.2)
Deferred Assets (Net) 645.0 926.2
TOTAL ASSETS 15,326.0 17,402.4
 
CURRENT LIABILITIES 3,957.8 4,808.4
Loans and Financing 1,990.3 1,103.1
Suppliers 935.7 1,769.2
Taxes and Contributions 462.1 799.2
Dividends Payable 296.2 472.1
Provisions 76.5 357.1
Salaries and Benefits 61.6 73.2
Consignment for Third Parties 51.7 114.2
Authorization for Services Exploration   44.1
Other 83.7 76.2
LONG TERM LIABILITIES 4,693.9 6,008.2
Loans and Financing 2,645.6 4,178.4
Provisions 1,128.3 883.2
Taxes and Contributions 633.1 665.0
Authorization for Services Exploration 211.8 261.5
Other 75.1 20.2
DEFERRED INCOME 11.4 74.0
MINORITY INTEREST -  30.3
SHAREHOLDERS' EQUITY 6,662.8 6,481.6
Capital Stock 3,373.1 3,401.2
Capital Reserves 1,579.8 1,552.0
Profit Reserves 273.2 273.2
Retained Earnings 1,512.3 1,347.6
Treasury Shares (75.6) (92.5)
TOTAL LIABILITIES 15,326.0 17,402.5

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Table 12: Consolidated Balance Sheet – Brasil Telecom GSM

R$ Million Dec/03  Dec/04 
 
CURRENT ASSETS 15.3 633.2
    Cash and Equivalents 3.2 214.7
    Accounts Receivables (Net) -  91.2
    Deferred and Recoverable Taxes 0.8 149.6
    Other Recoverable Amounts 2.5 8.8
    Inventory 8.7 166.2
    Other 0.0 2.7
LONG TERM ASSETS 3.1 112.0
    Deferred and Recoverable Taxes 3.1 109.8
    Other 0.0 2.3
PERMANENT ASSETS 303.3 1,450.3
    Property, Plant and Equipment (Net) 281.0 1,149.1
        Property, Plant and Equipment (Gross) 281.0 1,169.1
        Accumulated Depreciation -  (20.0)
    Deferred Assets (Net) 22.3 301.2
TOTAL ASSETS 321.6 2,195.5
 
CURRENT LIABILITIES 46.4 834.0
    Suppliers 43.6 687.0
    Taxes and Contributions 0.4 81.5
    Dividends Payable 1.2 4.8
    Salaries and Benefits 0.9 6.6
    Consignment for Third Parties 0.3 6.7
    Authorization for Services Exploration -  44.1
    Other -  3.4
LONG TERM LIABILITIES 211.8 250.8
    Loans and Financing -  0.4
    Authorization for Services Exploration 211.8 250.3
SHAREHOLDERS' EQUITY 63.4 1,110.7
    Capital Stock 63.4 1,218.0
    Capital Reserves -  11.8
    Retained Earnings -  (119.1)
TOTAL LIABILITIES 321.6 2,195.5

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INDEBTEDNESS

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Table 13: Indebtedness

R$ Million

Currency

Annual Cost

Maturity

% Total

Balance Dec/04

Short Term       20.9 1,103.1
    Private Debenture (BRP) R$ 100% CDI Jul/2006   452.0
    Inter Company (BRP) US$ 1.75% Jul/2014   8.3
    BNDES R$ TJLP + 6.5% Dec/2007   15.6
    BNDES R$ TJLP + 3.85% Dec/2007   347.9
    BNDES R$ TJLP + 3.85% Oct/2007   82.1
    BNDES R$ Basket + 6.5% Dec/2007   36.0
    BNDES R$ Basket + 3.85% Nov/2007   12.4
    BNDES R$ Basket + 5,5% Apr/2011   2.0
    BNDES R$ TJLP + 5,5% Apr/2011   8.3
    BRDE R$ IGP-M + 12.0% Sep/2006   9.5
    BB R$ 14% Jan/2008   5.2
    Public Debentures - 3rd Issuance R$ CDI + 1,0% Jul/2009   41.7
    Bonds - US$ 200 MM US$ 9.38% Feb/2014   21.0
    Financial Institutions I US$ Lib6 + 4.0% Mar/2006   11.7
    Financial Institutions II US$ Lib6 + 2.4% Dec/2005   9.5
    Financial Institutions III US$ Lib6 + 0.5% Jul/2008-Jul/2011   11.2
    Financial Institutions IV Yen$ Jibor6 + 1.92% Mar/2011   3.5
    Financial Institutions V Yen$ 3.65% Feb/2009   0.6
    Suppliers I US$ Lib3 + 2.95% Jun/2007   0.6
    Suppliers II US$ 1.75% Feb/2014   0.2
    Hedge Adjustmest         23.8
Long Term       79.1% 4,178.4
    Private Debenture (BRP) R$ 100% CDI Jul/2006   520.0
    Inter Company (BRP) US$ 1.75% Jul/2014   66.2
    BRB R$ 2.47% Jul/2015   0.4
    BNDES R$ TJLP + 6.5% Dec/2007   30.3
    BNDES R$ TJLP + 3.85% Dec/2007   765.1
    BNDES R$ TJLP + 3.85% Oct/2007   154.8
    BNDES R$ Basket + 6.5% Dec/2007   71.5
    BNDES R$ Basket + 3.85% Nov/2007   24.5
    BNDES R$ Basket + 5,5% Apr/2011   129.1
    BNDES R$ TJLP + 5,5% Apr/2011   608.4
    BRDE R$ IGP-M + 12.0% Sep/2006   7.2
    BB R$ 14% Jan/2008   10.4
    Public Debentures - 3rd Issuance R$ CDI + 1,0% Jul/2009   500.0
    Bonds - US$ 200 MM US$ 9.38% Feb/2014   530.9
    Financial Institutions I US$ Lib6 + 4.0% Mar/2006   5.7
    Financial Institutions III US$ Lib6 + 0.5% Jul/2008-Jul/2011   61.2
    Financial Institutions IV Yen$ Jibor6 + 1.92% Mar/2011   559.5
    Financial Institutions V Yen$ 3.65% Feb/2009   2.0
    Financial Institutions VI US$ 0.00% Dec/2015   26.4
    Suppliers I US$ Lib3 + 2.95% Jun/2007   0.8
    Suppliers II US$ 1.75% Feb/2014   1.7
    Hedge Adjustmest         102.3
Total Debt       100.0% 5,281.5


Total Debt

As of December 2004, Brasil Telecom’s consolidated total debt was of R$5,281.5 million, 2.6% lower than the amount reported in 3Q04. In 4Q04, the Company paid R$400 million in principal and R$33.8 million in interest, in connection with the 2nd public debentures of Brasil Telecom, which matured on December 01. On October 26, Brasil Telecom received another tranche of the loan raised with BNDES in the amount of R$342.4 million, of which R$282.7 million bear interest of TJLP + 5.5 p.a. and R$59.7 million bear interest of Cesta de Moedas (Currency Basket) + 5.5 p.a. With this tranche, we have raised a total of R$ 742.4 million from BNDES in 2004.


Net Debt

Net debt totaled R$2,883.7 million, a 2.2% increase from September 2004, due to a R$201.1 million reduction in the cash and cash equivalent. In 2004, the net debt decreased by 19.2%.

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Table 14: Indebtedness by Currency

Debt BTM (R$ Million) Dec 2003 Sep 2004 Dec 2004 D Quarter D Year
Short Term 1,990.3 1,442.9 1,103.1 -23.6% -44.6%
In R$ 1,865.3 1,316.0 962.3 -26.9% -48.4%
In US$ 46.4 51.0 62.6 22.6% 34.9%
In Yen 0.0 0.8 4.0 391.9% N.A. 
In Currency Basket 55.0 53.5 50.4 -5.8% -8.3%
Hedge Adjustment 23.6 21.6 23.8 10.2% 1.1%
Long Term 2,645.6 3,978.8 4,178.4 5.0% 57.9%
In R$ 2,271.0 2,410.3 2,596.6 7.7% 14.3%
In US$ 189.4 751.4 692.8 -7.8% 265.7%
In Yen 0.0 562.7 561.4 -0.2% N.A. 
In Currency Basket 154.0 190.4 225.2 18.3% 46.2%
Hedge Adjustment 31.1 63.9 102.3 60.1% 228.8%
Total Debt 4,635.8 5,421.8 5,281.5 -2.6%  13.9%
(-) Cash 1,465.8 2,598.9 2,397.8 -7.7% 63.6%
Net Debt 3,170.1 2,822.9 2,883.7 2.2% -9.0% 
(-) Inter Company with BRP 1,497.8 1,014.7 1,046.5 3.1% -30.1%
Net Debt Ex-Inter Company with BRP 1,672.2 1,808.2 1,837.2 1.6% 9.9%
Long term debt

As of December 2004, 79.1% of the total debt was long-term debt, compared to 57.1% in December 2003, reflecting the Company’s success in increasing debt maturity. Brasil Telecom’s debt had the following amortization schedule:

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Table 15: Amortization Schedule of Long Term Debt

Maturity % Long Term Debt
2006 29.6%
2007 18.9%
2008 9.2%
2009 19.0%
2010 7.0%
2011 and after 16.3%
Foreign currency
Denominated Debt

As of December 2004, debt exposed to exchange variation amounted to R$1,576.5 million, of which R$755.4 million were denominated in US dollars, R$275.6 million were currency basket denominated and R$565.5 million were denominated in yens.

As of December 30, 2004, Brasil Telecom S.A. had 48.1% of the debt exposed to exchange rate variation hedged.


Cost of Debt

Brasil Telecom’s consolidated debt had a year-to-date cost of 11.4% p.a. , equivalent to 70.7% of CDI.


Financial Leverage

As of December 30, 2004, Brasil Telecom’s financial leverage - net debt to shareholders’ equity ratio - was equal to 44.5%, compared to 47.6% in December 2003.


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INVESTMENTS IN PERMANENT ASSETS

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Table 16: Breakdown of Investments in Permanent Assets

R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
Network Expansion 159.0  107.2  240.5  124.4% 51.3% 674.3  571.5  -15.3% 
    Conventional Telephony 62.7  20.0  95.4  378.2% 52.3% 302.8  179.7  -40.7%
    Transmission Backbone 5.4  10.3  22.2  116.0% 308.9% 57.3  49.2  -14.2%
    Data Network 61.2  74.1  108.7  46.7% 77.7% 264.9  300.0  13.2%
    Intelligent Network 19.8  0.6  5.2  702.6% -73.8% 28.8  26.3  -8.8%
    Network Management Systems 7.6  0.1  2.9  2039.3% -62.3% 14.7  4.3  -70.7%
    Other 2.3  2.0  6.0  198.0% 160.0% 5.9  12.0  104.9%
Network Operation 68.2  71.9  85.3  18.6% 25.0% 251.6  270.2  7.4%
Public Telephony 0.2  0.7  0.9  37.2% 434.8% 8.3  3.1  -63.1% 
Information Technology 81.8  41.2  106.0  157.5% 29.6% 210.1  216.1  2.8%
Expansion Personnel 18.5  19.8  19.1  -3.7%  3.5% 83.0  80.5  -3.0% 
Other 23.0  13.4  162.0  1110.7% 605.2% 367.9  541.9  47.3%
Expansion Financial Expenses (0.2) (17.6) 6.5  N.A.  N.A.  61.3  8.0  -86.9% 
Total - Fixed Telephony 350.4  236.5  620.3  162.2% 77.0% 1,684.8  1,691.2  0.4%
 
R$ Million 4QO3 3QO4 4QO4 D Quarter D 12 Months 12MO3  12MO4  D Year
Brasll Telecom GSM 39.3  486.4  415.2  -14.6%  956.3% 72.3  1,099.6  1421.0%
Expansion Financial Expenses PCS 9.2  16.3  2.7  -83.5%  -70.9%  36.9  76.1  106.4%
Total - Mobile Telephony 48.6  502.7  417.9  -16.9%  760.7% 109.2  1,175.7  977.1%
 
Investimento Total 398.9  739.2  1,038.2  40.4% 160.2% 1,794.0  2,866.9  59.8%


Investments in
permanent assets

Brasil Telecom investments totaled R$1,038.2 million in 4Q04, of which R$470.5 million relate to fixed telephony, R$417.9 million to mobile telephony, and R$149.8 million to the acquisition of iG.

In 2004, Brasil Telecom invested R$2,866.9 million, an increase of 59.8% compared to 2003, due to the implementation of the mobile network and acquisitions. Regarding fixed-line telephony, investments were 8.7% lower than in 2003, totaling R$1,215.1 million in 2004. Investments in mobile telephony amounted to R$1,175.7 million in 2004 (of which R$171 million relate to pre-operational costs and expenses); since part of 2005´s investments were spent in 2004, so as to offer a wide GSM coverage in Region II. Lastly, R$476.1 million were invested in the acquisitions of MetroRed, Vant, and iG.

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CASH FLOW

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Table 17: Consolidated Cash flow

R$ Million 4Q03  3Q04  4Q04  12M03  12M04 
OPERATING ACTIVITIES
(+) Net Income of the Period (311.2) 103.9 19.5 (25.3) 277.0
(+) Minority Participation (0.0) (0.0) 6.3 (0.0) 6.3
(+) Items with no Cash Effects 1,528.8 946.0 1,069.2 4,205.4 4,231.6
        Depreciation and Amortization 535.3 657.9 671.1 2,205.4 2,589.6
        Losses with Accounts Receivable from Services 67.8 95.5 69.0 268.8 353.8
        Provision for Doubtful Accounts 34.8 5.7 50.0 29.3 56.6
        Provision for Contingencies 309.5 51.6 124.2 361.4 252.2
        Deferred Taxes 50.5 (52.0) 90.8 126.7 270.0
        Result from the Write-off of Permanent Assets 329.9 17.8 (25.7) 347.9 54.4
        Financial Expenses 211.2 158.7 85.0 869.9 649.0
        Other Expenses/Revenues with no Cash Effects (10.0) 10.8 4.7 (3.9) 6.0
(-) Equity Changes 239.7 232.0 409.9 935.7 1,369.5
(=) Cash Flow from Operating Activities 977.8 817.9 685.1 3,244.4 3,145.4
INVESTMENT ACTIVITIES
        Financial Investments (1.2) (0.5) 3.9 3.7 3.4
        Investment Suppliers 56.7 416.6 299.4 13.6 765.8
        Funds from Sales of Permanent Assets 2.2 2.3 1.3 19.1 7.4
        Investments in Permanent Assets (361.9) (756.8) (930.5) (1,662.4) (2,754.1)
        Other Investment Flows 0.0 (0.4) 5.0 (4.0) 0.0
(=) Cash Flow from investment Activities (304.2) (339.0) (620.8) (1,630.0) (1,977.5)
 
FINANCING ACTIVITIES
    Dividens/Interests on Shareholders' Equity paid in the Period (3.9) (0.5) (2.2) (269.1) (208.1)
    Loans and Financing (345.4) 136.6 (229.2) (1,268.5) (1.5)
        Loans Obtained 0.8 804.1 454.4 84.6 2,427.0
        Loans Paid (175.1) (522.0) (544.4) (574.0) (1,826.3)
        Interest Paid (171.1) (145.5) (139.2) (779.0) (602.2)
        Change in Shareholders' Equity (0.0) 5.5 5.2 (0.0) 11.6
    Acquisition of Own Shares -  (2.0) (35.6) (33.0) (37.6)
    Other Financing Flows 3.0 9.7 (3.6) (1.0) (0.2)
(=) Cash Flow from Financing Activities (346.3) 149.2 (265.4) (1,571.5) (235.8)
CASH FLOW OF THE PERIOD 327.3 628.2 (201.1) 42.8 932.0
 
    Cash and Cash Equivalents - current balance 1,465.8 2,598.9 2,397.8 1,465.8 2,397.8
    Cash and Cash Equivalents - previous balance 1,138.4 1,970.7 2,598.9 1,422.9 1,465.8
    Variation in Cash and Cash Equivalents 327.3 628.2 (201.1) 42.9 932.0
 
        OPERATING CASH FLOW 977.8 817.9 685.1 3,244.4 3,145.4
(-) Investments on Permanent Assets (includes Investment Suppliers) (304.2) (339.0) (620.8) (1,630.0) (1,977.5)
(-) Interest Paid (171.1) (145.5) (139.2) (779.0) (602.2)
(=) FREE CASH FLOW 502.5 333.5 (74.8) 835.4 565.6


Operating Cash
Flow in the 4Q04
was of
R$685.1 million

Brasil Telecom generated operating cash flows of R$685.1 million in 4Q04 and R$3,145.4 million in 2004.


Free cash flow

Brasil Telecom’s free cash flow in 4Q04 was of negative R$74.8 million. Excluding acquisitions, the free cash flow in the quarter would have been R$75.0 million.

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STOCK MARKET

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Table 18: Stock Performance

  Closing Price
as of
Dec/31/04 		Performance
  In 4Q04 In 12 months In 24 months
Common Shares (BRT03) (in R$/1,000 shares) 14.37  17.8% -9.9% 27.2%
Preferred Shares (BRT04) (in R$/1,000 shares) 13.70  20.5% -9.9% 16.8%
ADR (BTM) (in US$/ADR) 15.30  27.6% -2.9% 46.8%
Ibovespa (points) 26,196  12.7% 17.8% 132.5%
Itel (points) 919  14.8% 3.5% 72.7%
IGC (points) 2,545  22.1% 37.9% 147.8%
Dow Jones (points) 10,783  7.0% 3.1% 29.3%

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Graph 8: Performance in the 4Q04 – Bovespa and NYSE
(Base 100 = September 30, 2004)



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Table 19: Weight in the Theoretical Portfolio

  Ibovespa Itel IGC
BRT03 - - 0.019%
BRT04 2.293% 7.640% 1.343%

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SHAREHOLDING STRUCTURE

Share Buyback
Program

In a meeting held on September 13, 2004, the Board of Directors of Brasil Telecom S.A. approved a Share Buyback Program of Preferred Stock issued by the Company, whether for the purpose of cancellation or otherwise, or future sale. In 4Q04, Brasil Telecom S.A. repurchased 3,079,600,000 preferred shares.

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Table 20: Shareholding Structure

Dec 2004 Common Shares  %  Preferred Shares %  Total  % 
Brasil Telecom Participações 247,276,380,758  99.1% 112,516,718,089  37.5% 359,793,098,847  65.5%
ADR -  0.0% 16,083,237,000  5.4% 16,083,237,000  2.9%
Treasury -  0.0% 8,106,882,322  2.7% 8,106,882,322  1.5%
Other 2,320,668,784  0.9% 163,411,457,990  54.4% 165,732,126,774  30.1%
Total 249,597,049,542  100.0% 300,118,295,401  100.0% 549,715,344,943  100.0%
Sep 2004 Common Shares  %  Preferred Shares %  Total  % 
Brasil Telecom Participações 247,276,296,466  99.1% 112,516,802,381  37.5% 359,793,098,847  65.5%
ADR -  0.0% 19,214,463,000  6.4% 19,214,463,000  3.5%
Treasury -  0.0% 5,027,282,322  1.7% 5,027,282,322  0.9%
Other 2,320,753,076  0.9% 163,359,747,698  54.4% 165,680,500,774  30.1%
Total 249,597,049,542  100.0% 300,118,295,401  100.0% 549,715,344,943  100.0%

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AWARDS

I-Gov – Corporate
Governance Index

Brasil Telecom was featured among the top Brazilian companies with regards to corporate governance best practices, and was designated a constituent of the Igov (Corporate Governance Index), as reported by Valor Economico in an article published on January 18, 2005.

I-Gov evaluated 159 companies, selecting companies with significant liquidity in the period between 1998 and 2002, before making a final decision based on 20 strict criteria, including the degree to which the company gives access to important information, the content of available information, its transparency policy, and the structure of its Board of Directors and Corporate Governance.


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RECENT DEVELOPMENTS

Pula-Pula de Verão

In response to our customers´ and commercial partners´ requests, Brasil Telecom GSM launched the “Pula-Pula de Verão” (Summer Pula-Pula). This new promotion allowed a greater number of people to subscribe to our Pula-Pula promotion and was guaranteed until 2009. The “Pula-Pula de Verão” was valid for all handsets that were activated between January 1 and February 8, 2005.


Brasil Telecom GSM
and Oi agree to
exchange SMSs

Since January 19, 2005, Brasil Telecom GSM and Oi have enabled their networks to offer the exchange of SMSs between their clients. As a result, clients in the ten states covered by Brasil Telecom GSM and the 16 states covered by Oi can communicate via text messages.

Currently, SMS is the favored communication method used by the youth, due to its price attractiveness and user friendliness. Additionally, people of all ages are increasingly adopting the technology as a fast and discrete way to communicate. Offering SMS between different operators significantly encourages traffic, as was already observed in the Brazilian market.

Brasil Telecom GSM clients who activated their handsets during the Pula-Pula or Pula-Pula de Verão promotions will also be able to enjoy SMSs further. In the post-paid plans, the amount billed in one month is added as credits to be used in the following month, including for SMSs. For pre-paid phones, the amount of minutes received in one month is credited in the following month, whether for talk time or text messaging. Brasil Telecom GSM is also the only operator to offer SMS credits every time clients purchase calling cards, regardless of the face value or type of the card.

Every handset used by a Brasil Telecom GSM or Oi client is enabled to offer text messaging between the two operators, as both operators use GSM technology in 100% of their networks.


Brasil Telecom
launches integrated
Corporate IP
Telephony solution

On February 1st, we began offering our corporate and government clients, world-class voice and data integrated solutions based on IP technology. Our services range from IP equipment rental to the installation and maintenance of the client’s IP telephony solution, including on-line management tools. A monthly subscription fee is charged for the service and our clients do not have to pay for IP calls made within their own private network. Other benefits include cost reduction, mobility, flexibility, and security. Quality, of course, is guaranteed.

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2005 SCENARIO (GUIDELINES)

Disclaimer

This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. 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.


Broadband

We expect to have 1.0 million ADSL accesses in service by the end of 2005, virtually doubling our client base in this period.


Mobile Operations

We anticipate that Brasil Telecom GSM’s client base will total 1.7 million at the end of 2005, of which 77% will be pre-paid. We expect to achieve an 8% market share. We also expect to have an average ARPU of R$22 and an average SAC of R$220 by the end of 2005.


Revenues

We anticipate a healthy growth in revenues from data, mobile, internet and value-added services throughout 2005. Consequently revenues in 2005 should experience a similar growth pattern as the one observed in 2004.


Costs

Cost control will continue to be one of the strengths of our management in 2005. We expect a nominal increase in fixed-line telephony costs in-line with the Brazilian inflation rate.


Provision for
Doubtful Accounts

We expect to report relatively lower provisions for doubtful accounts compared to 2004, as internal controls improve and economic conditions continue to thrive, positively impacting income and employment figures. We anticipate below industry average delinquency rates in our mobile operations in 2005.


EBITDA Margin

The EBITDA margin for the fixed-line segment should remain in-line with 2004 and we expect a negative impact of 6 p.p. from mobile telephony on the consolidated figure.


Debt

We expect to overcome the challenge of extending our debt maturity further, as well as to optimize our capital structure, and maintain a conservative leverage ratio and a rich liquidity, so as to participate in possible consolidation opportunities in the sector, and to meet all of our obligations during the year.


CAPEX

2005´s fixed-line Capex should be in-line with 2004´s Capex, excluding expenditures associated with the Universalization Targets established by Anatel for the year 2005. Mobile telephony Capex will be marginal, focusing on the increase of our coverage in Region II.

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SELECTED DATA

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Table 21: Selected Data

PLANT 4QO3  1Q04  2QO4  3QO4  4QO4 
Lines installed (thousand) 10,686  10,701  10,712  10,725  10,737 
Additional lines installed (thousand) 9  14  11  14  12 
Lines in service - LIS (thousand) 9,840  9,724  9,647  9,604  9,503 
    Residential (thousand) 7,166  6,988  6,840  6,685  6,445 
    Non-residential (thousand) 1,566  1,468  1,451  1,451  1,433 
    Public phones (thousand) 296  296  296  296  296 
    Pre-paid (thousand) 266  282  276  285  297 
    Hybrid (thousand) 11  59  159  267  408 
    Other (including PBX) (thousand) 546  631  624  620  624 
Additional lines in service (thousand) 33  (127) (77) (42) (101)
Average lines in service (thousand) 9,824  9,782  9,685  9,626  9,554 
Utilization rate 92.1% 90.9% 90.1% 89.5% 88.5%
Teledensity (LIS/100 inhabitants) 23.4  23.1  22.9  22.7  22.4 
ADSL lines in service (thousand) 281.9  324.9  382.5  456.1  535.5 
 
TRAFFIC 4QO3  1Q04  2QO4  3QO4  4QO4 
Exceeding local pulses (million) 2,927  2,586  2,715  2,730  2,773 
Domestic long distance - OLD (million minutes) 1,559  1,534  1,624  1,638  1,437 
Fixed-mobile (million minutes) 991  1,037  1,036  1,098  1,180 
    VC-1 (million minutes) 909  879  869  902  906 
    VC-2 (million minutes) 66  125  119  132  178 
    VC-3 (million minutes) 16  34  48  64  97 
 
PRODUCTIVITY 4QO3  1Q04  2QO4  3QO4  4QO4 
# of employees - Fixed Telephony 5,189  5,206  5,386  5,503  5,799 
Average # of employees 5,231  5,198  5,296  5,445  5,651 
LIS/employee 1,896  1,868  1,791  1,745  1,639 
Net revenue/average # of employees/month (R$ thousand) 132.1  133.0  136.1  144.5  145.5 
EBITDA/average # of employees/month (R$ thousand) 36.9  57.7  58.0  60.7  45.6 
Net earnings/average # of employees/month (R$ thousand) (19.8) 8.5  1.3  6.4  1.2 
Exceeding local pulses/average LIS/month 99.3  88.1  93.4  94.5  96.7 
OLD minutes/average LIS/month 52.9  52.3  55.9  56.7  50.1 
Fixed-mobile minutes/average LIS/month 33.6  35.3  35.6  38.0  41.2 
Net revenue/average LIS/month (R$) 70.3  70.6  74.4  81.8  83.9 
EBITDA/average LIS/month (R$) 19.6  30.6  31.7  34.3  27.0 
Net earnings/average LIS/month (R$) (10.6) 4.5  0.7  3.6  0.7 
 
QUALITY 4QO3  1Q04  2QO4  3QO4  4QO4 
Quality goals achieved 35/35/35 33/35/35 35/35/35 35/35/35 35/35/35
Digitization rate 99.0% 99.5% 99.5% 99.6% 99.7%
 
PROFITABILITY 4QO3  1Q04  2QO4  3QO4  4QO4 
EBITDA margin 27.9% 43.3% 42.6% 42.0% 31.3%
Net margin -15.0% 6.4% 1.0% 4.4% 0.8%
Return on equity - ROE -4.7% 2.0% 0.3% 1.6% 0.3%
 
CAPITAL STRUCTURE 4QO3  1Q04  2QO4  3QO4  4QO4 
Cash and cash equivalents (R$ million) 1,466  2,344  1,971  2,599  2,398 
Total debt (R$ million) 4,636  5,061  5,155  5,422  5,281 
    Short term debt 42.9% 38.7% 28.6% 26.6% 20.9%
    Long term debt 57.1% 61.3% 71.4% 73.4% 79.1%
Net debt (R$ million) 3,170  2,717  3,184  2,823  2,884 
Debt with BRP (inter-company + debenture) (R$ million) 1,498  1,420  1,475  1,015  1,047 
Net debt excluding debt with BRP (R$ million) 1,672  1,297  1,709  1,808  1,837 
Shareholders' equity (R$ million) 6,663  6,558  6,591  6,698  6,482 
Net debt/shareholders' equity 47.6% 41.4% 48.3% 42.1% 44.5%
Net debt excluding debt with BRP/shareholders' equity 25.1% 19.8% 25.9% 27.0% 28.3%

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COMING EVENTS

Teleconference: 4Q04 Earnings Result
Tel: (1 719) 457-2727
Date: February 17, 2005 (Thursday)
Time: 09:00 a.m. (New York); 12:00 p.m. (Brasília); 02:00 p.m. (London)

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IR CONTACTS

Marcos Tourinho (Diretor) (55 61) 415-1052 marcos.tourinho@brasiltelecom.com.br
Renata Fontes (Gerente) (55 61) 415-1256 renatafontes@brasiltelecom.com.br
Flávia Menezes (55 61) 415-1411 flaviam@brasiltelecom.com.br
Cristiano Pereira (55 61) 415-1291 cpereira@brasiltelecom.com.br
Alex Veloso (55 61) 415-1122 alex.veloso@brasiltelecom.com.br
 
   
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MEDIA CONTACT
 
Ivette Almeida (1 212) 983-1702 ivette.almeida@annemcbride.com


This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. 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.

 

 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 17, 2005

 
BRASIL TELECOM S.A.
By:
/S/  Carla Cico
 
Name:   Carla Cico
Title:     President and Chief Executive Officer