Sao Paulo, Brazil. 12 May 1999. TELE SUDESTE CELULAR PARTICIPA€OES
S.A.(NYSE: TSD; BOVESPA: TSEP4). We herewith announce the Consolidated
Financial results for the First Quarter of 1999, based on Brazilian
Accounting Law. The figures are given in nominal values and Reais for
the
first quarters of 1999 and 1998, in accordance with the Corporate Law.
Relevant Aspects
The first three months of 1999 saw important events taking place at TELE
SUDESTE CELULAR PARTICIPA€OES S.A. and its subsidiary companies, Telerj
Celular S.A. and Telest Celular S.A.. The number of terminals rose from
772,000 at year-end 1998 to 930,000 by the end of the quarter. These
additional 158,000 units are equivalent to an expansion of 20.4% in its
customer base during the first three months of the year. This quarter
also
saw the telephone line waiting list cleared up in Rio de Janeiro, with
promotions and new service plans reflecting the dynamic drive and
creative
flair of a group that strives tirelessly to offer its customers a broad
range
of options, meeting their individual needs and sized to their personal
budgets.
Since last year, all new customers in the Rio de Janeiro Metropolitan
Region have been connected through digital technology. However, the
first
three months of the year saw the launch of digitalized services in the
State
of Esp¡rito Santo, with digital coverage in the Greater Vit¢ria area
already
widespread. At the plant level, digitalization rose from 33% at year-end
1998
to over 40% by the close of the quarter, reflecting the efforts of our
technical staff to provide high-quality services that are steadily
becoming
more reliable. Our target is to have 1,5 million terminals installed by
the
end of this year.
Customer satisfaction continues to rate as top priority at Tele Sudeste.
This quarter ushered in significant improvements in quality at the
Cellular
System Service Center ( C.A.S.C.), which is providing fast, accurate
information more efficiently every day. The distribution channels remain
an
important part of our strategy, as we are constantly seeking to offer
top
quality services to our customers, wherever they may be. We continue to
accredit new dealers, always on an exclusive basis, and we already have
over
500 accredited agents in these two States.
This quarter also witnessed a steady supply of handsets, thanks to
dedicated efforts under way since last year, focused on negotiations in
international markets that ensured a wide variety of models while
forcing
prices down.
Our staff increased 10.6% during the quarter, with 84 new employees
joining the headcount of 795 posted at the end of last year. This was
due to
plant expansion and efforts to upgrade customer services. We continue to
maintain our standard of one employee for every 1,000 lines.
Our Net Operating Revenues rose 34% over the first quarter of 1998, due
to plant expansion and the sale of handsets launched in November 1998.
However, profits plummeted, as this increase in revenues was offset by
four
negative factors listed below:
Increased "Costs of Services Rendered and Goods Sold", due to plant
expansion and the sale of handsets;
Increased "Costs for Services Rendered and Goods Sold," due to
alterations in the depreciation rates implemented since the time of the
Telebr s System. Previously, the working life of switching equipment was
thirteen years, with ten years for transmission equipment. Now, both
have a
depreciation rate of 14.9%, equivalent to seven years. This alteration
complies with the provisions of Instruction N. 162 issued by Federal
Revenue
Bureau ( S.R.F.), with the absolute depreciation value for the quarter
at
these new rates reaching R$ 40.3 million. These new criteria guarantee
renovation of assets in a more realistic manner, in terms of their
effective
working life;
Marketing expenses also rose, due to expansion and commissions paid to
accredited representatives;
Another factor that forced profits down compared to the first quarter of
1998 was the variation in the foreign exchange rate. In January this
year,
the Brazilian Government decided to eliminate the foreign exchange band
system, letting the rates float freely. The total impact of this
variation in
the foreign exchange rate over the quarter, in absolute terms, reached
R$
14.9 million, and was entered in full under expenses.
The company plans to invest some R$ 377.0 million during the coming
year, earmarked largely for upgrading and expanding its plant. The next
quarter will see the launch of Pre-Paid Calling Card services in Rio de
Janeiro and Esp¡rito Santo, seeking out new market niches. We will also
continue to offer new service plans and promotions, keeping right in
step
with our customers, both current and future.
Particularly noteworthy are the handset supply contracts signed with
Motorola and Nokia, as well as the agreement that will shortly be signed
with
Maxon, which will guarantee supplies for the next twelve months.
Concurrently, the contract with Lucent is about to be formalized, and
this
company is already working on the expansion of the digital plant.
Institutional Background
Established under Brazilian law, TELE SUDESTE CELULAR PARTICIPA€OES S.A.
was spun off from the corporate split up of Telecomunica‡oes Brasileiras
S.A.
- Telebras, which took place on 22 May 1998. Each of its operators -
Telerj
Celular S.A. in Rio de Janeiro and Telest Celular S.A. in Esp¡rito Santo
-
were incorporated from 5 January 1998 through the split up of the State
operators, as determined by the General Meetings held on 30 January
1998.
Expiring on 30 November 2005 for Telerj Celular at 30 November 2008 for
Telest Celular, the concessions are open to renewal for successive
periods of
fifteen years. With the introduction of new telecommunications
regulations in
Brazil, a regulatory agency was also set up - ANATEL - which supervises
the
businesses, services and tariffs of Brazil's telecommunications
companies
after privatization.
At a public auction held on 29 July 1998 on the Rio de Janeiro Stock
Exchange, the Federal Government disposed of its stock control in TELE
SUDESTE CELULAR PARTICIPA€OES S.A. to the private sector. The winning
bidder
was the Sudestecel Consortium, which become the new controller of this
company. Headed by Telef¢nica Internacional S.A., it consists of
Iberdrola
Investimentos Sociedade Unipessoal Ltda., NTT Mobile Communication
Network
Inc., and Itochu Corporation.
(am) SP
-END-
-0- (CRL) May/17/ 99 11:59
(MKS
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