TELEMAR: CHALLENGES FOR 2002 UBS Warburg Brazil rd Annual CEO´s Roundtable Conference January 22, 2002

- 1 - IN 2001, TELEMAR PREPARED ITSELF FOR COMPETITION IN THE SECTOR. MAIN STRATEGIC OBJECTIVES ACHIEVED: ANTICIPATION OF ANATEL´S 2003 TARGETS; ACQUISITION OF PCS LICENSE FOR REGION I; CORPORATE RESTRUCTURING (“16 1”).

WITH A VOLATILE ECONOMIC ENVIRONMENT IN Slowdown of the world economy; Decrease in stock prices, including the telecom sector; Energy crisis in Brazil; Devaluation / High volatility of the Real; Inflation above expectations (10.4% IGP-DI in 2001); Increase in bad debts; Deterioration of Argentina crisis

million Lines installed (12.8 million in 2000); 720,000 Public Phones (428,000 in 2000); 15,560 locations covered; US$ 9.7 billion CAPEX since privatization.... TELEMAR COMPLETED THE 2003 ANATEL TARGETS PROGRAM,...

- 4 - Acquisition of PCS license for Region I (March/2001); Structuring of the new company; Beginning of Roll-out; ~ R$ 2 billion CAPEX in 2001 (R$ 1.1 bn for license).... DECIDED TO BE PRESENT THE MOBILE PHONE BUSINESS,...

- 5 - Consolidation “16 1”; Efficiency improvements - operational and administrative; Better utilization of Fiscal Credits (R$ 890 million); Process was considered a success by the market.... AND CONCLUDED THE CORPORATE RESTRUCTURING.

- 6 - Moderate economic growth: ~ 3%; Lower inflation than 2001; Lower interest rate in 2001; Lower volatility in Real e xchange rate; Presidencial elections will not cause major disruptions in the economic policies. FOR 2002, TELEMAR FORECASTS A LESS VOLATIL SCENARIO...

AND AN INCREASE IN COMPETITION. Long Distance: - More companies operating nationally and internationally ; - Traffic Increase, prices reduction; Corporate Market: - Few companies with a national and integrated offering; - Several companies with a limited offering; Local Service: - Entrance of new players in a selective manner; Mobile: - Consolidation of existing players (SMC SMP); - Introduction of new services (mainly GSM).

- 8 - TELEMAR´S CHALLENGES FOR 2002: TMAR RESIDENTIAL MARKET: - Become the “lowest cost provider” in local service; - Client focus product; - Continuous improvement in service quality; - Enter national and international long distance markets. CORPORATE MARKET: - Offer of an integrated product line on a national basis; - Segmentation of client base / Sales force: Strategic (200) - direct/focused, Large accounts (4,800) - direct, and SMEs (170,000) - channels; - Integrated solution for each business segment - focus on the client; - Entrance in Regions 2 and 3 - with partnerships.

- 9 - TELEMAR´S CHALLENGES FOR 2002: MOBILE Launch in 2nd Quarter; New technology GSM/GPRS, with new services; Synergies with TMAR (fixed wireline) ; I ntegrated operator (fixed+mobile); Target of 500,000 clients (market-share: ~ 2.5%) in 2002; Sharing of infrastructure lower Capex.

TELEMAR´S CHALLENGES FOR 2002: 2nd contact center in the market, in the 1st year of operation; Continuous revenue growth; 6,000 Service Stations; 8 sites: 3 RJ + BH + Salvador + Recife + Fortaleza + SP; Currently has 20+ clients 40+ until Dec/02; Revenue growth with of client base expantion; Traffic generator for TMAR.

Optimization of investments already made; Increase in Lines in Service (14.8 M in 2001), with a higher utilization (82% Dec/01 90%+ Dec/02); New Services: - national and international Long Distance; - Data in Regions 2 and 3; Impact of TMAR headcount and of outsourced services reduction; (23,653 Sep/01 14,926 Dec/01); Increase in operating efficiency; Plant maintenance: Reduction of unit cost (R$/terminal); Reduction of the bad debts. TELEMAR´S DRIVERS FOR 2002: End of compulsory investments and focus on strategic investments with a return analysis.