1. FOR IMMEDIATE RELEASE
Contacts:
Tele Nordeste Celular Participações S.A. Thomson Financial IR
Mario Gomes Peter Firestein
55.81.216.2592 Isabel Vieira
Fabíola Almeida 212.701.1823
55.81.216.2594
Octavio Muniz
55.81.216.2593
TELE NORDESTE CELULAR PARTICIPAÇÕES S.A.
ANNOUNCES FIRST QUARTER 2000 RESULTS
Recife, Brazil (May 2, 2000) – Tele Nordeste Celular Participações S.A. (NYSE: TND) (“Tele
Nordeste,” or “The Company”), the holding company controlling the operating companies
serving Band A cellular telecommunication customers in the states of Piauí, Ceará, Rio Grande
do Norte, Paraíba, Pernambuco and Alagoas, announced today its results for the first quarter of
2000 in accordance with Brazilian GAAP. The translation to US dollars has been presented
solely for the convenience of the reader. This conversion does not imply that reais amounts
actually represent such US dollar amounts or may be converted to US dollars at the rate
indicated. The US dollar amounts have been converted from reais at the commercial selling
rate published by the Central Bank of Brazil at March 31, 2000, which was R$1.75 to US$1.00.
Operational Highlights
Marketing activities during the first quarter 2000 resulted in the net addition of 125,340
customers, representing a 10.5% increase compared to the customer base at December 31,
1999. The Company had 1.3 million customers at March 31, 2000, of which 886,000 (67.5%)
were contract customers and 427,000 (32.5%) were prepaid customers. Postpaid and prepaid
churn for the quarter was 4.3% and 5.5%, respectively. The market share at the end of the first
quarter of 2000 was estimated at 69%.
Financial Highlights
Tele Nordeste’s net income for the first quarter of 2000 was R$11.2 million (US$6.4 million) or
R$0.033 (US$0.019) per thousand shares, compared to R$13.6 million (US$7.8 million) for the
first quarter 1999. Consolidated net operating revenues for the first quarter of 2000 reached
R$215.5 million (US$123.1 million), compared to R$141.7 million (US$80.9 million) for the first
quarter of 1999. The Company reported consolidated EBITDA of R$74.9 million (US$42.8
million) for the first quarter of 2000, representing a 34.8% EBITDA margin over net operating
revenues, compared to the R$63.8 million (US$36.5 million) EBITDA and 45.4% EBITDA
margin reported for the first quarter of 1999. EBIT for the first quarter of 2000 increased to
R$48.9 million (US$27.9 million) while EBIT margin dropped to 22.7% compared to EBIT of
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2. R$35.5 million (US$20.3 million) and EBIT margin of 25.5% reported for the first quarter of
1999.
Select Consolidated Financial Data (in thousands of Reais)
First Quarter
2000 1999 % Inc
Revenue
- Usage charges 131,388 94,020 39.7
- Monthly subscription payments 52,194 31,815 64.1
- Network usage charges 61,511 39,935 54.0
- Sale of goods and other revenues 34,123 12,809 166.4
Subtotal 279,216 178,579 56.4
- Value added and other indirect taxes (64,738) (38,045) 70.2
Net Operating Revenue 214,478 140,534 52.6
Cost of Services and Goods Sold
- Depreciation and amortization 24,357 27,942 -12.8
- Personnel 2,743 565 385.5
- Material and services 1,529 5,141 -70.3
- Lease of circuits and related costs 34,119 31,324 8.9
- Leasing and insurance 2,222 1,465 51.7
- Handsets and accessories 31,721 6,833 364.2
- Fistel and others 6,204 4,793 29.4
Subtotal 102,895 78,063 31.8
Gross Profit 111,583 62,471 78.6
Net operating revenue for the first quarter of 2000 increased 52.6% when compared with the
same quarter of the previous year. This is primarily due to the substantial increase in the
average number of customers, which reached 92.1% quarter-over-quarter (from 667,000 to
1,283,000), and the increase in sales of handsets. Excluding sales of handsets, net operating
revenues increased 45% quarter-over-quarter.
The interconnection rate increased by 15% on December 1, 1999, and the VC1 rate increased
by 12% as of February 1, 2000. These two rate increases have positively impacted net
revenues for the first quarter of 2000.
The lease of circuits and related costs increase of 8.9% reflects higher usage of other operators’
network by our clients, offset by discounts on leased circuits as compared to the first quarter of
1999.
Other costs reflect the overall increase in operations.
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3. Operating Expenses (in thousands of Reais)
First Quarter
2000 1999 % Inc
Operating expenses
- Selling expenses 46,565 16,894 176%
- General and administrative expenses 18,247 12,047 51%
- Other operating income (366) (1,822)
Subtotal 64,446 27,119 138%
Net financial expenses 20,973 6,467 224%
Total operating expenses 85,419 33,586 154%
Net operating expenses increased 154% compared to the same quarter of the prior year, from
R$33.6 (US$19.2 million) in 1999, to R$85.4 million (US$48.8 million) in 2000.
Selling expenses in 2000 reflect the more intense marketing and distribution activities and
higher bad debt expenses.
Consolidated bad debt expenses for the first quarter of 2000 amounted to R$20.7 million
(US$11.8 million), representing 7.4% of gross revenue, compared with R$6.2 million for the first
quarter of 1999, which represented 3.4% of gross revenue for that quarter. The Company has
taken measures to reduce bad debt expenses, following the normalization of the new billing
system. These measures include the outsourcing of collection activities as well as the
disconnection and/or migration to the prepaid system.
General and administrative expenses in 2000 were higher because of the increase in headcount
when compared to the same period in 1999, when most of the administrative positions had not
been filled.
Financing expenses reflect the higher debt levels when compared to the first quarter of 2000
and financing costs related to sales of handsets in installments.
Consolidated Statistics
2000 1999
st
Contract customers at March 31 886,085 689,739
st
Prepaid customers at March 31 427,167 -
Total customers 1,313,252 689,739
Growth over same quarter of the previous year 90.4% 48.5%
Estimated population of region (in millions) 26.2 25.8
st
Cellular penetration at March 31 7.2% 3.3%
Average monthly incoming minutes of use per
customer during first quarter 94 101
Average monthly outgoing minutes of use per
customer during first quarter 76 94
The blended average revenue per user (ARPU), net of taxes, for the first quarter of 2000, was
R$51 per month, compared to R$67 per month for the first quarter of 1999. Postpaid and
prepaid ARPU were R$63 and R$24, respectively, for the first quarter of 2000.
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4. Competition
The Company estimates that its market share at the end of the first quarter of 2000 was
approximately 69%.
General handset subsidies have been discontinued as of March 1, 2000. As a result, the
immediate effect was a 44% reduction in gross additions of contract and prepaid customers in
March. New tariff plans are being offered to contract customers, with one-year contracts, which
may include some type of subsidy on the handset price. Management understands that the
retention of heavy (contract) users is the key to profitability, therefore, the marketing and
distribution efforts have now been redirected towards those clients.
Balance Sheet
Consolidated debt at March 31, 2000, was R$377 million (US$215 million). This balance was
fully comprised of Real-denominated debt, following the Company’s policy of no exposure to
currency risk.
The bad debt provision amounted to R$30.9 million (US$17.6 million), representing 15% of
accounts receivable at March 31, 2000.
Capital Expenditures
During the first three months of 2000, Tele Nordeste and its subsidiaries invested R$36.1 million
(US$20.6 million), mainly on network digitalization. The capex program for 2000 amounts to
R$215 million and includes enhancements to the Company’s systems, new services and
Internet facilities.
Human Resources
The number of employees at March 31, 2000, totaled 1,277, including full-time, interns and
temporary employees. The customer/employee ratio increased from 711 at March 31, 1999, to
1,028 at March 31, 2000.
Subsequent Events
The shareholders of the operating companies approved, at their respective Annual
Shareholders’ Meetings held between April 24-26, 2000, the financial statements for 1999 as
well as the payment of interest on equity (dividends) as proposed by the respective
management of Telasa Celular, Telpa Celular, Teleceará Celular and Telepisa Celular..
Tele Nordeste’s shareholders approved, at the Annual Shareholders’ Meeting held on April 27,
2000, the financial statements for 1999 and the payment of interest on equity (dividends) in the
amount of R$8.4 million, net of withholding income tax (R$0.0251 per 1,000 shares).
At the Extraordinary Shareholders’ Meeting held on April 28, 2000, the shareholders of Tele
Nordeste approved the merger of 1B2B Participações S.A., the current controlling shareholder,
into the Company, according to the Relevant Fact published on April 13, 2000. 1B2B
Participações S.A. was formed by Bitel Participações S.A., the controlling shareholder, to allow
the transfer to the Company, and later to its operating companies, of the goodwill premium paid
by Bitel. This merger will be followed by another proposal to merge the six operating
companies, once the necessary approval has been obtained from ANATEL. The Relevant Fact
is accessible at our web site: www.timnordeste.com.br or by calling the Company’s contacts
mentioned above.
*****Tables to Follow*****
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5. Tele Nordeste Celular Participações S.A.
Balance sheets
March 31, 2000, and December 31, 1999
(In thousands of reais)
Parent Company Consolidated Parent Company Consolidated
Assets 03.31.2000 12.31.1999 03.31.2000 12.31.1999 Liabilities, Minority Interest and Shareholders' Equity 03.31.2000 12.31.1999 03.31.2000 12.31.2000
Current assets Current liabilities
Cash equivalents 1,297 283 7,624 7,768 Accounts payable to suppliers 504 1,079 76,898 94,886
Trade accounts receivable 127 - 169,630 168,542 Financing and loans - 332,370 270,586
Inventories 15 25 44,578 28,284 Taxes payable 594 1,002 45,796 45,917
Telecommunications companies - - 36,462 32,491 Salaries and vacation pay 1,205 554 5,885 4,313
Subsidiaries 15,991 12,039 Subsidiaries 10,641 10,295 - -
Taxes and contributions receivable 2,441 3,890 14,758 49,494 Telecommunications companies 3 3 9,843 7,520
Deferred income and social contribution taxes 578 173 21,677 18,088 Dividends and interest on shareholders' equity
Dividends and interest on shareholders' equity - Law,9.249/95 10,373 10,340 4,401 16,751
- Receivable according to Law 9,249/95 9,632 9,568 - - Other liabilities 376 3,502 32,161 25,050
Loan to subsidiaries 11,241 18,621 - -
Prepaid expenses 17 - - 6,449 23,698 26,775 507,354 465,023
Other rights 1,597 2,472 67,505 12,317
42,936 47,071 362,234 323,433
Noncurrent assets Noncurrent liabilities
Financing and loans - - 45,376 53,278
Other liabilities - - 93 90
Tax incentives - - 2,746 2,679
- - 45,469 53,368
Permanent assets
Minority interest - - 101,176 97,650
Investments 341,111 329,186 1 -
Property, plant and equipment 4,901 4,609 654,269 644,020
Shareholders' equity
346,012 333,795 654,270 644,020 Capital stock 108,943 108,943 108,943 108,943
Profit reserves 178,922 178,922 178,922 178,922
Retained profits 77,385 66,226 77,386 66,226
365,250 354,091 365,251 354,091
388,948 380,866 1,019,250 970,132 388,948 380,866 1,019,250 970,132
6. Tele Nordeste Celular Participações S.A.
Income Statement
For the quarters ended March 31, 2000, and March 31, 1999
(In thousands of reais)
Parent Company Consolidated
03.31.2000 03.31.1999 03.31.2000 03.31.1999
Revenues
Telecommunications services and sale of goods - - 279,216 178,579
Deductions
Sales Taxes (ICMS, PIS and Cofins) - - (64,739) (38,045)
Net revenues - - 214,477 140,534
Cost of goods sold and services rendered - - (102,895) (78,063)
Gross profit - - 111,582 62,471
Operating revenues (expenses)
Selling expenses - - (46,565) (16,894)
Administrative and general expenses (1,807) (3,252) (18,247) (12,047)
Financial expenses (57) (690) (25,005) (13,907)
Financial income 734 2,320 4,032 7,440
Equity in income of subsidiaries 11,908 15,217 - -
Other operating income - - 818 3,056
Other operating expenses (74) - (451) (1,234)
Operating income (loss) 10,704 13,595 26,164 28,885
Nonoperating income 17 - 305 1
Nonoperating expenses (198) (2,549)
Income before income and social contribution taxes 10,721 13,595 26,271 26,337
Income and social contribution taxes 439 - (11,590) (8,278)
Net income before minority interest 11,160 13,595 14,681 18,059
Minority interest - - (3,521) (4,464)
Net income for the quarter 11,160 13,595 11,160 13,595
Net income per lot of a thousand shares - R$ 0.03 0.04
Number of shares at March 31 (thousands) 334,399,028 334,399,028