1. Global Emerging Markets Investor Forum June 16-18, 2004 Global Emerging Markets Investor Forum June 16-18, 2004

2. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 1 Regulatory Framework 20 Growth Strategy & Revenue Drivers11 Industry Overview3 Financial Performance 23 Contents Company Highlights 2

3. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 2 Goal: Building a fully integrated telecom service provider Change, adaptation and consolidation  Market share gains  Selective growth (new markets)  Consolidation of investments Growth in highly competitive markets  GSM Mobile Services (Region I)  Long Distance (domestic and international)  Data & Corporate (nationwide)  Contact Center Services (nationwide) Exploring new opportunities:  Broadband Rollout (ADSL)  Bundling Services  Enhanced Services for high end residential and SME markets (voice / data) Target: Ensure a sound market and financial position, with increasing returns to our shareholders Goal: Building a fully integrated telecom service provider Change, adaptation and consolidation  Market share gains  Selective growth (new markets)  Consolidation of investments Growth in highly competitive markets  GSM Mobile Services (Region I)  Long Distance (domestic and international)  Data & Corporate (nationwide)  Contact Center Services (nationwide) Exploring new opportunities:  Broadband Rollout (ADSL)  Bundling Services  Enhanced Services for high end residential and SME markets (voice / data) Target: Ensure a sound market and financial position, with increasing returns to our shareholders Company Highlights Region I Fixed-line and GSM Mobile Services Nationwide Long Distance, Data Transmission and Contact Center Services

4. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 3 Telecom Industry in Brazil – Growth of Customer Base *Source:Company´s Information Fixed-line platform – LIS (million)  Having met universalization goals (1998- 2001), fixed-line platform growth tends to rely on the performance of Brazilian GDP. Penetration Rate Brazil (%) Region I Brazil 98 1 9900 01 02 03Mar/04 Mobile platform – Subscribers (million) 98 1 9900 01 02 03Mar/04  Since privatization and introduction of competition, mobile growth in Brazil has largely exceed the most optimistic scenarios (over 30% CAGR through 2003). Brazil Penetration Rate Brazil (%) Region I 1 Privatization (Jul/98).

5. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 4 Telecom Industry in Brazil – Net Revenues 2002 – R$ 50.6 bn 2003 – R$ 57.0 bn  Growth of telecom service revenues in 2003 was ~13% yoy;  Revenue growth was driven by the mobile sector (+18% yoy);  Given stability of fixed-line platform, mobile sector should continue to drive revenue growth in 2004. 1 Net Revenues of Incumbent Telcos (Telemar, Telesp, Brasil Telecom, Embratel) – excluding CTBC, Vesper, Intelig, GVT. 2 Net Revenues of main groups: Vivo, Claro, Oi, TIM and Opportunity, including handset sales (excluding: CTBC, Nextel, Sercomtel, etc.). 1 2 2 1

6. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 5 Telecom Industry in Brazil - Fixed Line Services Telemar 32% 15.1 M Brasil Telecom 9.7 M 20% Telefonica 12.2 M 31% Embratel (DLD & ILD) 17% 2001 37.4 1998 20.0 2003 39.2LIS (million)* 2002 38.8 Mar/04 38.9 Lines in Service Revenue Share Fixed Line Incumbents (R$ 14.6 bi 1Q04) * Including mirror companies.

7. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 6 Telecom Industry in Brazil - Mobile Services Subscribers - Mar/04 Brazil: 49.1 m National Market Share * Other groups (Opportunity, CTBC, Sercomtel and Nextel) Vivo (CDMA) 21.9 m 44% TDMA/GSM / Other* 3.8 m 8% TIM (TDMA/GSM) 9.1 m 19% Claro (TDMA/GSM) 10.0 m 20% Oi (100% GSM) 4.4 m 9% Startup (BRP) Incumbents Main Groups

8. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 7 TMAR Others EMT TMAR Others EMT TMAR Others EMT TMAR Others EMT TMAR Others Fixed Line Market in Brazil – Gross Revenue / Incumbents 2002 – R$ 18.4 bi 2003 – R$ 20.7 bi Local Services (ex-VC1) 2002 – R$ 12.7 bi 2003 – R$ 14.5 bi Long Distance Services 2002 – R$ 7.0 bi 2003 – R$ 7.9 bi Fixed to Mobile Services (VC1) TMAR Average Tariff increase: 12.3% Average Tariff increase: 24% Average Tariff increase: 8.7% 2002 – R$ 4.4 bi 2003 – R$ 5.1 bi Data Services 1 +12.5% +12.8% +13.7% +15.9% Others 1 Excludes leased lines to other telecom service providers (EILD).

9. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 8 Telemar is the market share leader in LD calls originated in Region I; Regional incumbents conquered market share from LD carriers in 2002, as new markets were opened for competition; Telemar increased its market share from 2000 to 2003, mainly as a result of entry into new markets; Since 2H03 there has also been a significant contribution of revenues derived from mobile LD calls (SMP); Challenge: sustaining market share in home market and preserving profitability (avoiding price war/irrational competition). Telecom Industry in Brazil - Long Distance (1) Incumbents only (rounding %). Source: Company reports. Brazil – Revenue Market Share (1)

10. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 9 Brazilian mobile subscriber base is growing over 30% annually; Oi is still the fastest growing player in its home market; Wireless penetration in Region I (23%) still offers room for growth. Telecom Industry in Brazil - Mobile Services ^Includes other groups: Opportunity, Nextel, CTBC and Sercomtel. Brazil Region I Wireless Penetration (%) – April/04 * *Source: Pyramid Research Dec/03 Mar/04 Dec/03 Mar/04

11. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 10 Telecom Industry in Brazil - Broadband Services PC Penetration (% of households) * *Source: Pyramid Research ** Total households= 41.5 mn (IBGE- PNAD/2002) 2003 ADSL represents 82% of total 1.2 mn broadband accesses in Brazil (Dec/03); Broadband penetration in Brazil expected to reach to 30% of internet users in the next five years; Broadband subscribers in Brazil expected to increase by 2.5x through 2006*; Challenge: Develop sales channels to increase offer to SME clients, bundling with other services (LD, wireless). ADSL represents 82% of total 1.2 mn broadband accesses in Brazil (Dec/03); Broadband penetration in Brazil expected to reach to 30% of internet users in the next five years; Broadband subscribers in Brazil expected to increase by 2.5x through 2006*; Challenge: Develop sales channels to increase offer to SME clients, bundling with other services (LD, wireless). Brazil Region I Dec/03

12. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 11 Wireline Concession Area Moderate Growth Data, Internet & Corporate High Growth Wireless High Growth DLD / ILD High Growth Contact Center High Growth Integrated Strategy Growth Strategy & Revenue Drivers

13. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 12 (million) Customer Base Growth Ability to anticipate wireless growth and traffic migration (F to M); Capacity to maintain / increase market share in a rapid changing scenario; Capacity to increase offer of ADSL to our customers and protect our home market; Keep delivering customer growth; Developing advanced and segmented services; Offering innovative and bundled plans. CAGR 19.5% Wireline Wireless 19.0 16.4 19.8 21.6 ADSL 0.5 1 0.3 1 Target: 450K ADSL subscribers.

14. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 13 Subscribers (thousand) Highly successful GSM rollout  4.4 million subs in 21 months (20% market share; Market share gains at Oi help to reduce consolidated interconnection costs; Almost 50% share of all net adds in home market since launching in Jun/02; Share of total revenues increased from 3% in 2002 to 7% in 2003; Target: consolidate and increase market share in Region I, reaching # 2 position by 2004 YE, with positive EBITDA margins. Pre paid Post paid 1,722 2,236 3,893 80% 83% 85% Mobile Services 6,000 4,408 2,849 80% 78% +80% yoy Revenues (R$ million)

15. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 14 Local Services 6,122 7,098 8,119 Local Revenues (ex- VC1) - R$ million Local Traffic – F to F (billion pulses) 21.3 22.9 22.6 2,093 1,881 1Q03 1Q04  Local traffic impacted by low GDP growth and F-M traffic migration (to a lesser extent);  Local revenues growing basically in line with tariffs (no real growth expected);  Outstanding performance of mobile, long distance and data services have caused a decrease in the share of local services in total consolidated revenues;  Target: protection of home market leadership / retention of high-end clients (customer care / bundling/ADSL). 44.8% 44.1% 41.8% % of total revenues

16. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 15 Long Distance Services 1,568 2,066 2,963 Revenues - R$ million Traffic (billion minutes) 7.1 8.2 9.5 LD revenues growing over 30% yoy, mainly driven by market share gains:  New DLD/ ILD markets (Jul/02) and  Mobile originated LD calls (Jun/03); LD Market leadership in Region I and “Top of Mind” carrier in Brazil for two consecutive years; Over three million customers in loyalty programs; Targets: increase efficiency & quality, keeping revenue growth (2004 ~20%) preserving profitability. % of total revenues 11.5% 12.8% 15.3% 885 666 1Q03 1Q04

17. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 16 Subscribers (thousands) - EoP Broadband rollout (ADSL) 41 6 217 33 128 450 Fastest growing subscriber base in Brazil (~37% of all net adds in 2003); Presence in 110 of the largest cities in Region I (~10x larger than other technologies, including cable); Revenue growth of almost 4x in 2003 (and still significant room to grow in coming periods); Target: Increase our broadband penetration in Region I from 2% of LIS to 5% in 2-3 years. Revenues (R$ million) 284 59 1Q03 1Q04 69 17 1Q03 1Q04

18. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 17 Data revenues (ex-broadband) growing at a 16% annual rate; Sustainable real growth driven by relevant long term corporate contracts; High quality network and services (SLA/ End-to-end); Target: Increasingly provide integrated nationwide solutions to top corporate customers in Brazil. Data Services Revenues (R$ million) Major Clients 787 873 1,056 295 255 1Q03 1Q04

19. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 18 Based on full digitalization of our network, VAS revenues are increasing more than 20% annually; Besides adding to basic fixed line revenues, services like “follow me”, ‘’call forwarding” and “voice mail” help sustain fixed line traffic; Total services sold increased from 25% of our LIS in 2001 to 40% in 2003; Target: develop new services to foster penetration traffic and revenues. Value Added Services (VAS) Revenues (R$ million) 258 303 423 117 94 1Q04 1Q03

20. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 19 Focus on profitability: EBITDA positive since inception; Customized solutions for all areas of customer relationship; Leverage traffic to Telemar´s network; Contax customers include major banks, utilities, insurance, media, telecom, retail; Target: Consolidate #1 position among call center operators in Brazil. Contact Center Services 7,337 4,947 12,907 223 146 >15,000 Attendant Positions Net Revenues (R$ million) 421 12,543 8,270 1Q03 1Q04 125 82 1Q03 1Q04

21. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 20 Regulatory Framework – Main Issues 2003 IGP- DI (30.05%) x IPC-A (17.24%) Tariffs have been adjusted based on IPC-A Still pending “merit” judgment by the Courts 2004 Tariff increase most likely based on 12 month IGP-DI (7.97%) and not IPC-A (5.15%) Base for tariff increase: Currently authorized prices (based on Court injunction / 2003) Productivity factors: Local Basket – 1% Long Distance Basket – 4.5% Local Interconnection – 17.5% 2005 Most likely based on IGP-DI 2006 on Tariff increases based on: IST – A “Telecom Sector” price index (TBD) “K” – New Productivity factors (TBD) Interconnection: a) Defined as a % of local tariff (60%-2006; 50%-2007) b) From 2008 on based on a “Long Range Incremental Cost Model” (TBD) 1. Tariffs – Annual Revisions

22. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 21 Regulatory Framework Reduction of Local Areas LD calls between neighboring areas to be considered local calls (local areas from 4,289 to 2,920); To be implemented in up to 90 days after June 07, 2004; Change already expected: Telemar has been rebalancing its rates = local ~ neighboring. Fixed to Mobile Interconnection Rate Free negotiation scheduled to start as of July, 2004; Currently F-M local calls is a non profitable business for Telemar; Target:Recover margins on this business Share the uncollectibles with mobile operators 1. Tariffs

23. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 22 Regulatory Framework Unbundling In May 2004, Anatel established the overall conditions for: a) Line Sharing: setting maximum reference values, such as monthly rental prices, at R$ 15.42 / pair and b) Full unbundling: determining that prices should be set by the incumbents, based on the overall conditions defined by Anatel. 2. Competition Co-Billing System already in place between all telecom operators in Brazil Fixed line Number Portability To be implemented as of 2006 (TBD) 3. Transparency Local Traffic in Minutes Conversion of local traffic billing: Pulses to Minutes (to be implemented as of 2006 / the frame and extension of adjustments) (TBD)

24. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 23 Revenue Growth  Telemar continues delivering real revenue growth in spite of a slowdown in Brazilian economy. Net Revenue Growth – R$ million Changes in Revenue Mix CAGR 17.7%  Real growth has been driven by competitive and less regulated segments of mobile, long distance and data. 2003 2001

25. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 24 Costs & Expenses Costs & Expenses: R$ million Main Cost Items (% of Total Costs)  After the huge expansion of fixed line platform and installation of our GSM network costs & expenses are being kept under strict control.  In line with the growth of our mobile operations, associated costs, such as handsets and dealer commissions increased their stakes in total costs, as opposed to consolidated interconnection costs. Intercon. 3rd Party Headcount Handsets Marketing Bad Debt 2003 2002 6,545 6,521 7,782 CAGR 9.0% 2,009 1,733 1Q03 1Q04

26. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 25 (R$ million) EBITDA  Recurring EBITDA margins have been stable over time, in the mid- forties 1 ;  For 2004 we expect an EBITDA margin of ~43%. 35% 45% 44% 1,680 1,486 1Q04 1Q03 1 EBITDA for 2001 was impacted by extraordinary provisioning.

27. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 26 CAPEX  CAPEX / 2003: c.12% of net revenues (17% in 2002);  Main investments in fixed line network expansion already made;  Total CAPEX since 1998 of R$ 21.3 bn (US$ 10.4 bn);  Target: Stabilize CAPEX at ~15% of sales to support growth in mobile subscribers and in less regulated services. (R$ billion) 10.1 2.0 1.7 Wireline Wireless Anatel Targets Mobile License 2.0/2.3 1.1 0.9 1.1 2.8 2.2 2.5 0.6 60% 40% 2.2 7.9

28. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 27 Operating Cash Flow after Capex (R$ million) 19992000200120022003 Given our level of EBITDA generation and strict control over CAPEX, our Free Cash Flow is expected to remain strong in the coming years.

29. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 28 Net Debt Position and Repayment Schedule – Mar/04 % of total 16.722.5 27.5 10.05.8 Net Debt – R$ billion Debt Repayment Schedule R$ billion  Given our current strong cash generation, we expect to reduce our net debt to around 1x EBITDA by year end 2004. 17.5 Net Debt/EBITDA (x) ~ Total Debt = R$ 12. bn

30. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 29 Cash Position x Short Term Debt (R$ million)  Our cash position has largely exceeds our short-term debt, giving Telemar a cushion against unfavorable shifts in global financial markets. Short Term Debt Cash & Equivalents

31. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 30 Net Financial Expenses  Our foreign currency debt is 74% of our total debt (mar/04);  Given that 96% of our foreign debt is hedged, we swap our currency exposure to Brazilian interest rates;  Reduction in Brazilian interest rates have helped us reduce our net financial expenses;  Our average cost of debt is 16% (mar/04). Net Financial Expenses – R$ million 3Q03 4Q03 1Q04 2Q03 1Q03 Average Interest Rate (SELIC)

32. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 31 Debt Amortization (Cash Expenses) (R$ million) 1,525 2,932 3,094 1,072 Principal Interest

33. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 32 Dividend Payments - 1999/2003 Dividend yield Dividend** (R$ million) Our goal is to provide high cash returns to shareholders * Based on June/04, stock prices **Includes interest on capital *

34. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 33 Key Financial Ratios Net Debt / EBITDA Amortization*/ EBITDA Dividends* / EBITDA CAPEX / EBITDA * Includes interest on capital (*) 12- Month EBITDA * Principal and interest

35. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 34 Key Financial Ratios Enterprise Value / EBITDA Market Cap / EBITDA EBITDA / Net Financial Expenses

36. Merrill Lynch – GEM Investor Forum – June/04 www.telemar.com.br/ir 35 “Safe Harbor” Statement This presentation contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements and involve inherent risks and uncertainties. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events Investor Relations Rua Humberto de Campos, 425 / 8º andar Leblon Rio de Janeiro -RJ Phone: ( 55 21) 3131-1314/1313/1315/1316 Fax: (55 21) 3131-1155 E-mail: invest@telemar.com.br Visit our website: http://www.telemar.com.br/ir