1. Contacts:
Stock Exchange at September 30, 1999:
In Brazil TCSL3: R$ 2.40 /1,000 shares
Ruggero Caterini TCSL4: R$ 3.65 / 1,000 shares
Joana Dark Fonseca Serafim TSU: US$ 19.13 (ADR = 10,000 PN shares)
Phone #: +55 41 312-6862 Market Value: R$ 1,065,095 million
E-mail: jserafim@timsul.com.br US$ 554,073 million
Web site: www. timsul.com.br
TELE CELULAR SUL PARTICIPAÇÕES S.A.
ANNOUNCES ITS FOR THE FOURTH QUARTER AND YEAR-END
RESULTS 1999
Curitiba, March 24, 2000 – Tele Celular Sul Participações S.A. (NYSE: TSU; BOVESPA:
TCLS3;TCLS4), the Holding Company of Telepar Celular S.A., Telesc Celular S.A. and CTMR
Celular S.A., leading providers of cellular telecommunications services in southern Brazil, announces
its results for the fourth quarter and year-end of 1999.
CEO Statement
“For Tele Celular Sul, 1999 was a particularly challenging year because it demanded great
effort on the part of management both to organize the company and to carry out the
activities that allowed it to maintain its leading position in the market. As a result, the
Company achieved a solid increase in its customer base, surpassing 1 million clients, or
approximately 70% more than the figure recorded in December 1998, maintaining its
Market Share of 86%, which is the best within the Brazilian cellular telephone
industry.”
3Q99 4Q99 1999 1998
Total Gross Revenue 206,344 262,992 857,599 644,007
Net Operating Revenue 125,734 149,480 531,256 504,201
Net Cell Phone Sales Revenue 39,544 61,595 149,191 0
Total Net Revenue 165,278 211,075 680,447 504,201
EBITDA 23,188 32,196 170,387 267,980
EBITDA Margin 14% 15% 25% 53%
EBITDA Margin, excluding cell phone sales 18% 22% 32% 53%
Depreciation 33,672 32,727 100,781 87,102
Net Profit (6,926) 10,062 34,332 123,995
Profit per Share (0.20) 0.30 0.10 0.38
2. Market Share
The Company maintains a leadership position in its market, closing the year with an
approximate 86% Market Share.
The total market penetration rate was estimated at 8.4 cell phones per 100 inhabitants,
demonstrating that there is room for the growth in cell telephone services. Additionally,
Tele Celular Sul’s churn rate was 10%.
Operating Revenue
The Company’s gross operating revenue was R$857.6 million in 1999, 33% higher than
70% growth in 1998. For the fourth quarter of 1999, gross operating revenue totaled R$ 263.0 million, a
the total
subscriber 27% increase in relation to the third quarter.
base
The total net revenue for the year was R$ 680.4 million, with R$211.1 million recorded for
the fourth quarter of 1999. Net operating revenue with handsets sales reached R$ 149.2
million and R$61.6 million, in those same periods.
Gross Operating Revenue Breakdown Gross Operating Revenue Breakdown
Dec. 31 1999 - R$ 857.6 million Dec. 311998 - R$ 644.1 million
Other Hanset Sales
Use of Network Other Connection Fee
Use of the Network 12,8
166,6 99,1 5,4 20,9
136,6
42,7
Rental
17,1
Rental 158,7 317,3
167,4 357,1
Use
Use
Subscription Subscription
In 1999, the Company expanded its total subscriber base by 70%, reaching 1,034,266
subscribers, representing 423,885 new subscribers, of which 279,092 were prepaid users.
Operating Costs and Expenses
The costs of the services for 1999 amounted to R$234.9 million, a 39% increase in relation
to 1998. For 4Q99, this item amounted to R$ 65.0 million, compared to R$ 62.6 million for
the third quarter of 1999. The increase in these expenses during the year is primarily due to
network growth and the change in the depreciation rates (R$29.4 million).
Composition of the Cost of Services Rendered Composition of the Cost of Services Rendered
Dec/31/99 - R$ 234.9 million Dec/31/98 - R$ 169.1 million
Third party Third Party
Fistel Payroll Services
Payroll services
11,7 3,5 8,4
Fistel 6,2 12,3
22,7
47,8
54,0
Depreciation
Use of 53,2
98,7 41,0 Network 44,5 Use of
Network
Depreciation Interconnection Interconnection
Cost of handsets sales for the year amounted to R$ 204.8 million, of which R$ 92.0 million
was for the fourth quarter of 1999.
3. General and administrative expenses totaled R$62.1 million for the year compared to R$
39.5 million recorded in 1998. The increase in these expenses are mostly due to the
following: 1) billing expenses (the cost of issuing bills), increased with subscriber growth;
2) expenses related to billing systems which was was replaced in October/99 by in-house
systems; 3) increase in staff to 1,024 (358 employees in 1998).
Marketing expenses were R$117.3 million for the year, compared to R$ 68.2 million in
1998. During the fourth quarter of 1999, marketing expenses amounted to R$35.1 million,
a 9% growth as compared to the previous quarter.
For 1999, expenses related to doubtful accounts, listed under selling and administrative,
represented R$ 50.3 million (R$46.9 million in 1998), or 6% of the Company’s total
revenue. In the third quarter the Company adopted more realistic criteria for the provision
for doubtful accounts, which increase expenses by R$ 2.8 million for the period.
The new Billing System, implemented during the fourth quarter of 1999, will allow the
Company to establish better credit and collection control measures through the
centralization of its Central de Tele Cobrança (Automated Billing Unit).
Marketing and advertising expenses for 1999 reached R$ 35.1 million (R$ 5.1 million in
1998) reflecting the transition into a more competitive environment.
Tele Celular Sul has been encouraging its customers to migrate from the analogue to the
digital system, thereby amassing an inventory of used analog devices. This inventory was
marked to market so as to reflect the effective selling expenses; such adjustment was
provisioned for under other operating expenses and represented a cost of R$ 6.3 million.
Financing Expenses
97% are short-
term debts Financing expenses for the year were R$ 72 million, a 52% increase in relation to 1998.
97% of the This increase is primarily due to: R$ 16.9 million expenses relating to interest on own
Total debt is capital (accrued during the fourth quarter) and the R$ 31.9 million due to the impact of the
Hedged Real devaluation that occurred in early 1999.
Tele Celular Sul’s interest-bearing indebtedness at December 31,1999 was 222.2 million,
representing 40% of stockholders’ equity.
Foreign
Currency
26,1
The EBITDA for
the 4Q/99 was
R$32.2 million
196,1
Local Currency
EBITDA
EBITDA and EBITDA margin for the year represented R$ 170.4 million and 25%
respectively, over net revenue - or 32%, excluding subsidies, but including the sale of cell
phones. The decrease in relation to 1998 (R$ 268.1 million and a 53% margin) is basically
due to the increase in marketing costs, the practice of subsidizing the sale of handsets and
the migration of customers from the analogue to the digital system, as well as to
adjustments previously mentioned.
4. As of October 1999, the Company raised the selling price of its cell phones, in order to
reduce the impact of subsidies on the results. The full effect of this new policy did not
impact 4Q99 results due to the special marketing strategy adopted during the Christmas’s
season, which is characterized by a high volume of sales, as well as a high level of
migration from analogue to the digital system.
As a strategy to obtain customer loyalty, the Company persuaded 194,921 subscribers to
migrate to the digital system, with 64,893 migrations occurring during the fourth quarter.
Non-Operating Income
The Company replaced some of its equipment and technology in order to digitalize its
network. Fixed assets were therefore written-off in the quarter, resulting in an expense of
R$ 5.4 million – the net value of the provisions made for future sales.
Net Profit
Consolidated net profit for the year was R$ 34 million, a decrease of 72% when compared
with R$ 124 million for 1998. The main factors contributing to the decrease in margins
and, consequently, to the decrease in net profit were: 1) strong expansion under increased
competition, handsets sale subsidies and of the migration to the digital system; 2) expenses
incurred due to aggressive marketing and a greater volume of commissions paid to dealers;
3) the effects of the currency devaluation; 4) change in the depreciation rates; 5) change in
the doubtful accounts provisioning criteria.
Investment
The Company invested R$ 298.4 million during 1999, 46% more than in 1998 (R$ 192 million),
prioritizing network expansion and digitalization, in addition to the development of new systems to
meet customers’ demands and maintain a leading position as a mobile telephone provider in the
region.
Network Digitalization
ERB´S Voice Channel
Digital Analogue Digital Analogue
556 106 16.917 18.326
84% 16% 48% 52%
Funding
Most of the investment program carried out in 1999 was funded by the Company’s own
cash generation. However, to complement the amount needed Tele Celular Sul carried out
two major funding efforts in 1999, through its controlled companies: Telepar Celular and
Telesc Celular. The first, amounting to R$ 144 million (net amount of R$ 122 million)
consisted of an issue of Promissory Notes due in 360 days at an approximate cost of 103%
of the Interbank Deposit Certificate (CDI). The second, amounting to R$ 73 million
64.8 thousand
migrated to the
(approximately US$ 40 million) was entered into with the Export-Import Bank of the
digital system United States - “Eximbank”. As the funds were received in January 2000, they are not
included in the Company’s indebtedness account for December 1999.
As part of the hedging policy, the first operation had a floating interest rate covered by a
5. swap operation, thus becoming a fixed rate loan of 23.85% per annum. An exchange rate
swap operation was arranged for the second funding effort, converting the debt to Reais.
Expectations
For 2000, Tele Celular Sul believes that technological progress and increased competition
by companies operating in the PCS (Personal Computer Service) frequencies will continue
stimulating the growth of the industry and, at the same time, will pose new challenges,
leading to continuous improvement in the quality of services.
The consolidation of the Company, its technological infrastructure and new information
systems, in conjunction with its experienced work force, favor a continuously innovative
strategy with the launching of added-value products, in order to increase the competitive
advantages.
The Company will continue striving to maintain its leadership position in the market,
focusing efforts on the recovery of the profitability margin and on the improvement of
services, as an aspect that will contribute to the success of the customer loyalty efforts. The
expectation is for the customer acquisition cost to decrease during 2000.
Tele Celular Sul will pursue the goal of generating value to its shareholders, customers and
employees, and overcoming new challenges brought by the market.
xxxxxxxxxxxxxxxxxxxx
6. Selected Data
Operating Income
3Q99 4Q99 4Q98 1999 1998
Sale of cellular phones 45.819 65.250 - 166.592 0
Usage charges 83.007 99.179 81.106 357.099 317.340
Monthly subscription fee 40.577 47.677 35.580 167.377 158.660
Rental 2.888 1.070 9.704 17.075 42.743
Interconnection charge 34.395 42.648 27.591 136.663 99.091
Activation Fee 0 0 4.687 0 20.789
Others (342) 7.169 1.431 12.793 5.384
GROSS OPERATING INCOME 206.344 262.993 160.099 857.599 644.007
Taxes on Gross Revenue (41.066) (51.918) (34.958) (177.152) (139.806)
NET OPERATING INCOME 165.278 211.075 125.141 680.447 504.201
Net Operating Income from Services 125.734 149.480 125.141 531.256 504.201
Net Operating Income from Sales 39.544 61.595 - 149.191 0
Operating Costs and Expenses
3Q99 4Q99 4Q98 1999 1998
Costs of Goods and Services 119.833 156.985 52.244 439.681 183.618
Costs of Services 62.561 64.991 52.244 234.888 169.113
Costs of Goods 57.272 91.994 0 204.793 14.505
Operating Expenses 67.744 84.378 76.020 268.498 158.736
Selling Expenses 32.086 35.055 24.644 117.314 68.176
General Administrative Expenses 16.198 18.489 8.790 62.108 39.549
Financing Expenses 11.860 23.205 41.618 72.447 47.716
Other Operating Expenses 7.600 7.629 968 16.629 3.295
Costs and Operating Expenses 187.577 241.363 128.264 708.179 342.354
Expenses Related to Doubtful Accounts 16.892 13.961 28.763 50.263 46.900
8. TELE CELULAR SUL PARTICIPAÇÕES S.A.
BALANCE SHEET AS OF DECEMBER 31, 1999 AND DECEMBER 31,1998
(Expressed in thousands of Brazilian Reais)
(Translation of the original in Portuguese)
ASSETS
Parent Company Consolidated
1999 1998 1999 1998
ASSETS
CURRENT ASSETS 37.683 126.436 292.711 268.441
Cash and cash equivalents 673 3.894 2.084 151.495
Accounts receivable from subscribers - - 191.566 78.970
Loans to subsidiaries - 94.436 - -
Deferred and recoverable taxes 2.993 291 33.829 24.598
Inventories - - 44.993 3.718
Other assets 34.017 27.815 20.239 9.660
LONG-TERM ASSETS 114.803 6.503 50.452 13.218
Loans to subsidiaries 114.008 6.503 - -
Deferred and recoverable taxes 795 - 40.521 13.168
Judicial Deposits - - 9.781 50
Other assets - - 150 -
PERMANENT ASSETS 439.952 440.179 809.361 623.519
Investments 439.922 440.163 20 20
Property, plant and equipment, net 30 16 791.022 623.093
Deferred charges - - 18.319 406
TOTAL ASSETS 592.438 573.118 1.152.524 905.178
9. TELE CELULAR SUL PARTICIPAÇÕES S.A.
BALANCE SHEET AS OF DECEMBER 31, 1999 AND DECEMBER 31,1998
(Expressed in thousands of Brazilian Reais)
(Translation of the original in Portuguese)
LIABILITIES AND SHAROLDERS EQUITY
Parent Company Consolidated
1999 1998 1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES 29.056 32.182 440.098 213.485
Salaries and social charges 3.934 9 5.980 4.095
Accounts payable and accrued expenses 4.397 115 169.316 97.037
Direct and Indirect taxes 1.606 533 27.127 18.623
Dividends and Profit sharing 15.575 31.525 21.164 41.034
Loans to subsidiaries 2.908 - - -
Loans and financing 5 - 214.991 50.124
Provision for contingencies 631 - 1.520 2.572
LONG-TERM LIABILITIES 2.341 - 22.757 11.773
Loans and financing - - 7.207 10.070
Provision for private pension plan 1.839 - 1.880 1.702
Indirect taxes - - 10.150 -
Provision for contingencies 502 - 3.520 1
MINORITY INTERESTS - - 128.628 138.984
SHAREHOLDERS' EQUITY 560.966 540.861 560.966 540.861
Capital stock 175.872 175.872 175.872 175.872
Profit reserves 143.399 157.435 143.399 157.435
Retained earnings 241.695 207.554 241.695 207.554
CAPITALIZABLE FUNDS 75 75 75 75
TOTAL LIABILITIES 592.438 573.118 1.152.524 905.178
10. TELE CELULAR SUL PARTICIPAÇÕES S.A.
STATEMENTS OF INCOME FOR THE YEARS
ENDED ON DECEMBER 31,1999 AND 1998
(In thousands of Brazilian Reais)
(Translation from the original in Portuguese)
Parent Company Consolidated
1999 1998 1999 1998 (*)
GROSS REVENUE - - 857.599 644.007
Deductions - - (177.152) (139.806)
NET REVENUES - - 680.447 504.201
Cost of services rendered - - (439.681) (183.618)
GROSS PROFIT - - 240.766 320.583
OPERATING INCOME (EXPENSES) 6.811 110.921 (173.148) (101.470)
Selling expenses - - (117.314) (68.176)
General and administrative expenses (6.004) (873) (62.108) (39.549)
Equity on subsidiarie`s results 13.658 111.752 - -
Other net operating income (expenses) (843) 42 6.274 6.255
OPERATING INCOME BEFORE FINANCIAL EFFECTS 6.811 110.921 67.618 219.113
Net financial income (expenses) 37.191 (7.778) (49.056) (15.692)
OPERATING INCOME 44.002 103.143 18.562 203.421
Non-operating income (expenses) - 9 (5.823) (38.241)
INCOME BEFORE TAXES, PROFIT SHARING,
MINORITY INTEREST AND REVERSAL OF
INTEREST ON STOCKHOLDERS´ EQUITY 44.002 103.152 12.739 165.180
Income and social contribution taxes (9.939) (7.284) (529) (48.507)
Provision for employee profit sharing (1.233) - (2.103) (965)
Minority interest 7.357 (32.059)
INCOME BEFORE REVERSAL OF INTEREST
ON STOCKHOLDERS´ EQUITY 32.830 95.868 17.464 83.649
Reversal of interest on stockholders´ equity 1.502 30.741 16.868 40.346
NET INCOME FOR THE PERIOD 34.332 126.609 34.332 123.995
Oustanding shares at the balance sheet date (in millions) 334.399 334.399
