Embratel Reports Second Quarter 2000 Net Revenues
of R$ 1.6 Billion Data Growth of 65 %; Operating
Income Growth of 74 % Year-Over-Year
RIO DE JANEIRO, Brazil, July 24 /PRNewswire/ -- Embratel Participacoes S.A. (Embratel Participacoes or the
``Company'') (NYSE: EMT - news; BOVESPA: EBTP3, EBTP4; BVRJ: EBTP ON, EBTP PN), the Company that holds
98.8 percent of Empresa Brasileira de Telecomunicacoes S.A. (``Embratel''), today announced highlights of results for the
quarter ending June 30, 2000. (All financial figures are in Reais and based on consolidated financial statements in Brazilian
GAAP -- ``Legislacao Societaria'').
Embratel Participacoes' second quarter 2000 net revenues were R$1.6 billion with continued strong growth in data revenues.
EBITDA reached R$443 million. Net income was R$124 million (R$0.37 per 1000 shares) compared to a net income of
R$78 million (R$0.23 per 1000 shares) in the second quarter of 1999. On a year-to-date basis, net revenues and net income
were, respectively, R$3.1 billion and R$274 million (R$0.82 per 1000 shares).
Data and Internet Services
Second quarter data revenues rose 64.7 percent to R$473 million compared to the same quarter of 1999 and 13.9 percent
compared to the first quarter of 2000. The strong data growth in the second quarter was driven by Internet, dedicated data
networks (Topnet) and frame relay (Fastnet). A portion of the data revenues continues to be derived from leases of a short
term nature.
Internet revenues grew 100 plus percent in the second quarter 2000 compared to the second quarter of 1999, resulting from
continued strong growth in the ISP business and Internet access for business customers. Compared to the first quarter of 2000,
Internet revenues grew 39.3 percent. Contributing to this growth was the demand from new ISPs offering free subscription
services. This growth was further fueled by demand for the business dial family of products launched by Embratel at the end of
1999.
On an accumulated basis, data revenues reached R$889 million representing a 61.6 percent growth from R$550 million in the
first half of 1999. Data now represents 22.0 percent of our gross revenues up from 18.0 percent in the first half of the prior
year.
Domestic Long Distance Voice Services
Domestic long distance revenues reached R$1.2 billion in the second quarter of 2000 compared to R$1.0 billion in the second
quarter of 1999, representing a 21.1 percent growth year-over-year. Year-to-date, domestic long distance revenues were
R$2.5 billion, corresponding to a 24.0 percent increase when compared to the first half of 1999. This increase results from line
and traffic growth, entry into the intra-state segment and fixed-to- cellular revenues which the company began receiving as of
July 3, 1999.
While domestic long distance grew year-over-year, it leveled off in the second quarter partially due to seasonality and the
introduction of competition. In early June, Embratel introduced Sempre 21, a calling plan with simplified tariff structured and
attractive rates (see below) and will be introducing regional campaigns. The company also implemented tariff increases in
accordance with regulatory guidelines at the end of June.
International Long Distance Voice Services
International long distance revenues were R$362 million, a 60.1 percent increase compared to R$226 million in the second
quarter of 1999. The majority of this increase derives from a higher ICMS rate. Without the ICMS increase revenues would
have grown 6.0 percent, slightly above our expectations. A small portion of the increase is related to revenues from public pay
phones from prior periods which were recorded in the second quarter of 2000. On an accumulated basis, international long
distance revenues were R$635 million compared to R$448 million in the first half of 1999.
The company remains concerned that the increase in ICMS rate from 13.0 to 25.0 percent will make international calls more
expensive to customers possibly leading to reductions in international revenues as customers choose illegal means of completing
international calls such as bypass and call backs.
EBITDA
EBITDA rose to R$443 million compared to R$315 million in the second quarter of 1999. EBITDA margin was 28.0 percent
this quarter compared to 25.6 percent in the second half of 1999. Second quarter EBITDA margin was achieved despite
increased billing expenses. Year-to-date, EBITDA rose to R$874 million in the first half of 2000 from R$682 million in the
prior year period, with EBITDA margins rising to 28.1 percent from 27.9 percent, respectively. Contributing to the EBITDA
growth has been a relative reduction in interconnection costs and the higher proportion of revenues derived from data. In
anticipation of increased billing, collections and customer service costs, Embratel has implemented and will maintain cost control
measures during this period of transition.
Net Income
Net income for the second quarter of R$124 million increased 59.4 percent from R$78 million in the same period of 1999. On
an accumulated basis, net income reached R$273 million in the first half of 2000 compared to R$9 million in the first half of
1999.
Financial Position
Embratel Participacoes ended the quarter with a cash position of R$325 million. Total debt outstanding as of June 30, 2000
was R$2.2 billion of which R$1.3 billion is long term. Most (98.7 percent) of Embratel's debt is denominated in foreign
currencies. The average interest on this debt is US dollar plus 10.6 percent p.a. On June 30, 2000, Embratel's debt/equity ratio
was 0.36. Approximately R$850 million of US dollar and yen short-term debt was obtained in the quarter. These short-term
debt positions have been hedged against currency devaluation. The increase in short term indebtedness results from higher
working capital needs associated primarily with the judicial deposit (see below on Development of Tax Matters).
Accounts Receivables
The Company's net receivable position on June 30, 2000 was R$2,442 million compared to R$2,144 million in March 31,
2000. The increase in outstanding receivables is related both to the introduction of our new billing system as explained in the
first quarter earnings release, as well as past receivables from other telecommunications providers. The overall level of accrued
bills rose as the company continues with the billing system implementation.
The company anticipates accounts receivables will continue to require close scrutiny and management throughout the third
quarter.
Fixed to Cellular Revenues Prior to July 3, 1999
Anatel decided unanimously in favor of Embratel's right to fixed to cellular revenues during the period between June 6, 1998
and July 2, 1999. As these revenues relate to prior periods, Embratel has taken a conservative position on this matter and will
recognize them upon collection. The Company will separately report such amounts on a net basis in future periods.
This ruling further supports their earlier decision that these revenues, post July 3, 1999, belonged to Embratel and have been
recognized in the periods that were earned.
Developments on Tax Matters
On June 1, 2000, Embratel made a judicial deposit of R$ 433 million (corresponding to the assessed amount and interest)
related to a tax assessment of R$ 411 million received on December 31, 1999 for not withholding tax on remittances to foreign
administrations for the payment of settlement rates. Embratel continues to believe that ultimately we will prevail on this matter
and this deposit has been recorded as a non-trade receivable. The decision to make the judicial deposit was to protect the
company from further penalties while it continues to dispute in the courts the above assessment.
Sempre 21
Early in June, Embratel launched Sempre 21, a different calling plan that simplifies tariff structure when compared to the basic
tariff plan. Under Sempre 21 tariff differentiation is based only on geographic areas with the same tariffs applying for all times of
the day. Four tariff areas have been established: intra-state, intra-region, inter-region and inter-state capitals. This plan is
available for business and residential clients and we have experienced excellent response from both to date.
Other Highlights
Call Centers: During the quarter Embratel opened two call centers - Ribeirao Preto (Sao Paulo) and Vila Velha (Espirito
Santo) each of which with 1000 jobs positions. Embratel now has a total of 4 call centers. Since start of operations, our call
centers have created new employment opportunities in telecommunications for more than 3,000 people.
Managed Security Services for Internet: In August, Embratel will be the first to market with managed security services for
Internet to protect businesses' networks from unauthorized entry, sabotage and accidental corruption. Managed security
services are intended for mid-size businesses who realize they need security services but lack internal resources to design,
implement and managed those services.
Embratel provides long distance and international telecommunications services, in addition to 40 other communication services.
Embratel is uniquely positioned to be the all-distance telecommunications network of Latin America and owns the only national
and international Brazilian telecommunications network directly connected to thousands of companies. It is the main provider of
high-speed data transmission and Internet in Brazil, with the largest network of broadband optical fiber cables, covering over
26,000 kilometers.
Note: Except for the historical information contained herein, this news release may be deemed to include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that involve risk and uncertainty, including financial, regulatory environment and trend
projections. Although the Company believes that its expectations are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. The important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include, without limitation, the Company's degree of financial leverage, risks
associated with debt service requirements and interest rate fluctuations, risks associated with any possible acquisitions and the
integration thereof, risks of international business, including currency risk, dependence on availability of interconnection facilities,
regulation risks, contingent liabilities, and the impact of competitive services and pricing, as well as other risks referred in the
Company's filings with the CVM and SEC. The Company does not undertake any obligation to release publicly any revisions
to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Embratel Participacoes SA
Corporate Law
Consolidated Balance Sheet
R$ Thousands June 30, March 31,
2000 2000
Assets
Cash and cash equivalents 325,048 303,148
Other current assets 3,029,109 2,611,956
Other 866,057 404,918
Net property, plant & equipment 7,265,947 7,174,542
Total assets 11,486,161 10,494,564
Liabilities
Short term debt and current portion
of long term debt 791,577 462,708
Other current liabilities 2,866,137 2,689,389
Long term debt 1,376,983 1,006,099
Others 462,045 470,334
Shareholders' equity 5,989,419 5,866,034
Total liabilities and shareholders' equity 11,486,161 10,494,564
Embratel Participacoes SA
Corporate Law
Consolidated Income Statement
R$ Thousands
Quarter Quarter
ending ending YoY
Jun 30, % June 30, % % change
2000 1999
Revenues
Domestic
Long
Distance 1,223,355 57.7% 1,010,370 63.8% 21.1%
International
Long
Distance 362,417 17.1% 226,391 14.3% 60.1%
Data
Communications 473,208 22.3% 287,359 18.1% 64.7%
Other
Services 62,027 2.9% 59,758 3.8% 3.8%
Gross
Revenues 2,121,007 100.0% 1,583,878 100.0% 33.9%
Taxes &
other
deductions (540,652) -25.5% (355,197) -22.4% 52.2%
Net revenues 1,580,355 100.0% 1,228,681 100.0% 28.6%
Lines costs
(Intercon-
nection
/facilities) (755,711) -47.8% (611,689) -49.8% 23.5%
Selling,
general and
admini-
strative
expenses (287,420) -18.2% (214,049) -17.4% 34.3%
Others (*) (94,211) -6.0% (88,481) -7.2% 6.5%
EBITDA 443,013 28.0% 314,462 25.6% 40.9%
Depreciation
and
amortization (211,854) -13.4% (181,839) -14.8% 16.5%
Operating
income
(EBIT) 231,159 14.6% 132,623 10.8% 74.3%
Financial
income
(including
monetary and
exchange
variation) 57,780 3.7% 82,913 6.7% -30.3%
Financial expense
(including
monetary and
exchange
variation)(*) (93,679) -5.9% (122,715) -10.0% -23.7%
Other non-
operating
income(expense) (244) 0.0% 2,297 0.2% -110.6%
Net income
before tax,
employee
profit
sharing and
minority
interest 195,016 12.3% 95,118 7.7% 105.0%
Inc. tax, s.
contrib. and
employee
profit
sharing (69,977) -4.4% (16,681) -1.4% 319.5%
Minority
interest (1,551) -0.1% (980) -0.1% 58.3%
Net income 123,488 7.8% 77,457 6.3% 59.4%
End of period
shares
outstanding
(000) 332,915,828 333,058,928
Earnings per
1000 shares 0.37 0.23
Embratel Participacoes SA
Corporate Law
Consolidated Income Statement
R$ Thousands
Quarter
ending QoQ
Mar 31, 2000 (**) % % change
Revenues
Domestic Long Distance 1,265,945 62.7% -3.4%
International Long Distance 272,354 13.5% 33.1%
Data Communications 415,628 20.6% 13.9%
Other Services 65,420 3.2% -5.2%
Gross Revenues 2,019,347 100.0% 5.0%
Taxes & other deductions (488,569) -24.2% 10.7%
Net revenues 1,530,778 100.0% 3.2%
Lines costs
(Interconnection
/facilities) (752,272) -49.1% 0.5%
Selling, general and
administrative expenses (242,317) -15.8% 18.6%
Others (*) (104,731) -6.8% -10.0%
EBITDA 431,458 28.2% 2.7%
Depreciation and amortization (201,858) -13.2% 5.0%
Operating income (EBIT) 229,600 15.0% 0.7%
Financial income
(including monetary
and exchange variation) 13,033 0.9% 343.3%
Financial expense
(including monetary
and exchange variation)(*) (1,807) -0.1% 5084.2%
Other non-operating
income(expense) 12,129 0.8% -102.0%
Net income before tax,
employee profit sharing
and minority interest 252,955 16.5% -22.9%
Inc. tax, s. contrib. and
employee profit sharing (101,087) -6.6% -30.8%
Minority interest (1,885) -0.1% -17.7%
Net income 149,983 9.8% -17.7%
End of period shares
outstanding (000) 332,915,828
Earnings per 1000 shares 0.45
Embratel Participacoes SA
Corporate Law
Consolidated Income Statement
R$ Thousands
Half year Half year
ending ending YoY
Jun 30, % June 30, % % change
2000 1999
Revenues
Domestic
Long
Distance 2,489,300 60.1% 2,008,162 64.4% 24.0%
International
Long
Distance 634,771 15.3% 447,575 14.3% 41.8%
Data
Communications 888,836 21.5% 550,044 17.6% 61.6%
Other
Services 127,447 3.1% 114,742 3.7% 11.1%
Gross
Revenues 4,140,354 100.0% 3,120,523 100.0% 32.7%
Taxes &
other
deductions(1,029,221) -24.9% (675,397) -21.6% 52.4%
Net revenues3,111,133 100.0% 2,445,126 100.0% 27.2%
Lines costs
(Intercon-
nection/
facilities)(1,507,983) -48.5% (1,232,931) -50.4% 22.3%
Selling,
general and
administrative
expenses (529,737) -17.0% (349,069) -14.3% 51.8%
Others (*) (198,942) -6.4% (181,461) -7.4% 9.6%
EBITDA 874,471 28.1% 681,665 27.9% 28.3%
Depreciation
and
amortization(413,712) -13.3% (356,336) -14.6% 16.1%
Operating
income (EBIT)460,759 14.8% 325,329 13.3% 41.6%
Financial
income
(including
monetary and
exchange
variation) 70,813 2.3% 270,355 11.1% -73.8%
Financial
expense
(including
monetary and
exchange
variation)(*)(95,486) -3.1% (538,270) -22.0% -82.3%
Other non-
operating
income(expense)11,885 0.4% 2,570 0.1% 362.5%
Net income
before tax,
employee
profit
sharing and
minority
interest 447,971 14.4% 59,984 2.5% 646.8%
Inc. tax, s.
contrib. and
employee
profit
sharing (171,064) -5.5% (51,018) -2.1% 235.3%
Minority
interest (3,436) -0.1% (99) 0.0% 3370.7%
Net income 273,471 8.8% 8,867 0.4% 2984.1%
End of period
shares
outstanding
(000) 332,915,828 333,058,928
Earnings
per 1000
shares 0.82 0.03
(*) Includes labor, maintenance and other expenses allocated to cost of
services as well as other operating expenses and income
(**) First quarter 2000 domestic, international, data and other gross
revenues were restated to accommodated new criteria of revenue
classification; overall gross and net revenue amounts did not change
Embratel Participacoes SA
Quarter Quarter Change
ending (**) ending relative to
(millions of minutes) 3/31/2000 6/30/2000 6/30/99
Domestic Long Distance (*) 4803.4 4,682.6 21.0%
International Long Distance
Outbound 162.1 160.1 10.6%
Inbound 267.4 281.9 40.6%
Embratel Participacoes SA
Change Half Year Increse
relative to ending relative to
(millions of minutes) 3/31/00 6/30/2000 6/30/99
Domestic Long Distance (*) -2.5% 9,486.0 24.0%
International Long Distance
Outbound -1.2% 322.2 10.0%
Inbound 5.4% 549.3 42.2%
(*) This minute series includes domestic long distance traffic, domestic
long distance fixed to cellular traffic, cellular to fixed and cellular to
cellular traffic and advanced telephony traffic
(**) Minutes have been restated to adjust series to current methodology
SOURCE: Embratel Participacoes S.A. |
