Tele Norte Leste Participacoes S.A. (TNE)

Wireless Services:

Revenues from wireless services rose 28.4% from 1Q08, ending the quarter accounting for 20.2% of the company’s consolidated gross revenue (16.9% in 1Q08). Such performance stems mostly from the increase in the average user base (+47% year-on-year). The main variations are as follows:

• Higher subscription revenues were influenced by the increase in the average post-paid user base, including “Oi Conta Total” subscribers, which climbed almost 80% from 1Q08;
  
  
• Increase in revenues from outgoing calls, resulting from the expansion of the mobile user base mainly in the post-paid segment, which grew by 8.6 million users since 1Q08 boosted by the “Oi Ligadores” campaign and the start-up in São Paulo;
  
  
• Consolidated revenue from mobile network usage also rose due to the expansion of the average user base and to the readjustment of the fixed-to-mobile interconnection tariff that took place in July 2008 (+1.89%). Revenue includes R$525 million in eliminations related to operations among Oi-controlled companies;
  
  
• Higher revenues from data and value added were mostly due to the increase in SMS services, especially in the pre-paid segment, in addition to 3G data subscription and revenues related to additions from the “Oi Ligadores” campaign.

The consolidated average revenue per user (ARPU) in 1Q09 reached R$21.1, lower than 1Q08, mainly due to Region’s II performance, which registered: (a) lower incoming revenue from other mobile operators; (b) lower prepaid volume recharges; and (c) a higher percentage of prepaid customers in the base (82.7% in 1Q09 vs. 81.9% in 1Q08).

The ARPU decline in Region I also results from lower pre-paid recharging and lower incoming traffic.

WIRELESS SERVICES

Gross revenue from wireless services totaled R$1,827 million in the quarter and R$6,401 million in the year, representing increases of 8.0% and 44.3%, respectively. It is worth mentioning that the balance in 2008 includes R$371 million in revenues from the consolidation of TNCP.

We highlight the growth in revenues from “subscriptions”, “outgoing calls” and “network usage” both quarter-on-quarter and year-over-year basis. Also, “data and value added’’ services grew 65.7% in full year 2008.

In the year, wireless service revenue accounted for 23.5% of the total consolidated gross revenue (17.6% in 2007) and represents 96.1% of the yearly growth of total revenue. The main factors that contributed to the wireless revenue performance are highlighted below:

• Revenue from “subscriptions” were 11.5% and 49.3% above 3Q08 and 2007, respectively, due to an increase in the average user base in the post-paid segment, especially customers of “Oi Conta Total” plans;

• Higher revenues from “outgoing calls”, both quarter-on-quarter (+4.5%) and year-over-year (+62.4%), were also due to the expansion of the average customer base, although in this case the strongest impact stemmed from pre-paid customers driven by the “Oi Ligadores” campaign;

• Consolidated revenue from “network usage”, after eliminations of transactions among Oi group companies in the quarter (R$412 million), rose 11.2% compared to the previous quarter (22.3% compared with 2007) due to greater traffic volume. The year-over-year comparison also includes the increase in fixed-to-mobile interconnection tariff that took place in July (+1.89%);

• Revenue from “data and value added” services rose 7.9% in the quarter mostly due to the increase in “SMS” volume and 3G customers subscribing to data. The 65.7% year-over-year variation also stems from the increase in fee-related revenues from the “Oi Ligadores” campaign, in addition to the already mentioned items.

Revenue from “handset sales” were 23.5% higher than in 3Q08 due to the increase in the sales of sim cards, as well as mini modem for wireless internet access through 3G technology. In the year, however, these revenues decreased 10.0% due to the continued strategy of selling just the sim cards aiming at lowering the acquisition cost for customers.

WIRELESS SERVICES

Gross revenue from wireless services totaled R$1,827 million in the quarter and R$6,401 million in the year, representing increases of 8.0% and 44.3%, respectively. It is worth mentioning that the balance in 2008 includes R$371 million in revenues from the consolidation of TNCP.

We highlight the growth in revenues from “subscriptions”, “outgoing calls” and “network usage” both quarter-on-quarter and year-over-year basis. Also, “data and value added’’ services grew 65.7% in full year 2008.

In the year, wireless service revenue accounted for 23.5% of the total consolidated gross revenue (17.6% in 2007) and represents 96.1% of the yearly growth of total revenue. The main factors that contributed to the wireless revenue performance are highlighted below:

• Revenue from “subscriptions” were 11.5% and 49.3% above 3Q08 and 2007, respectively, due to an increase in the average user base in the post-paid segment, especially customers of “Oi Conta Total” plans;

• Higher revenues from “outgoing calls”, both quarter-on-quarter (+4.5%) and year-over-year (+62.4%), were also due to the expansion of the average customer base, although in this case the strongest impact stemmed from pre-paid customers driven by the “Oi Ligadores” campaign;

• Consolidated revenue from “network usage”, after eliminations of transactions among Oi group companies in the quarter (R$412 million), rose 11.2% compared to the previous quarter (22.3% compared with 2007) due to greater traffic volume. The year-over-year comparison also includes the increase in fixed-to-mobile interconnection tariff that took place in July (+1.89%);

• Revenue from “data and value added” services rose 7.9% in the quarter mostly due to the increase in “SMS” volume and 3G customers subscribing to data. The 65.7% year-over-year variation also stems from the increase in fee-related revenues from the “Oi Ligadores” campaign, in addition to the already mentioned items.

Revenue from “handset sales” were 23.5% higher than in 3Q08 due to the increase in the sales of sim cards, as well as mini modem for wireless internet access through 3G technology. In the year, however, these revenues decreased 10.0% due to the continued strategy of selling just the sim cards aiming at lowering the acquisition cost for customers.

2.3 Wireless Services

Oi had a total of 12,034 thousand subscribers at the end of the 2Q06 (+48.3% in relation to the 2Q05), representing a net increase of 817 thousand customers during the quarter (approximately 38% of the net additions in Region I).

Figure 2 - Oi Subscribers and Market Share

The wireless penetration rate in Region I had reached 42.7% by the end of June/06 (compared to 40.8% at the end of March/06) and Oi’s market share in the region increased to 27.8%.

Of the net additions during the quarter, approximately 38% were in post-paid plans, while 62% were in prepaid plans. At the end of the quarter, Oi had 80% of its subscribers on prepaid plans and 20% on post-paid plans.

Oi’s average subscriber base during the quarter was 11,626 thousand (+51.4% on the 2Q05). The 745 thousand disconnections (“churn”) during the period represented 6.4% of the average subscriber base for the 2Q06. The increase in the quarter’s churn is due to the strong Christmas sales season, notably in the prepaid segment.

Figure 3 - Oi: Average Subscriber Base and Churn Rate

3.1.2 Wireless Services

Consolidated gross revenue from wireless services declined by 22.4% during the quarter, largely as a result of a seasonal drop in handset sales (-73.5%). However, subscription revenues maintained their growth trend (+14.5%). In relation to 1Q05, revenue was up 35.2%, driven by the growth in outgoing calls (53.6%, or +R$ 105 million), subscriptions (47.8% or + R$ 50 million) and in data and value added services (53.4%, or +R$ 20 million).

Remuneration for mobile network usage was down 10.5% in 1Q06 to R$ 61 million – after excluding
R$ 176 million related to TMAR – staying at the same level as in 1Q05. The decrease over 4Q05 was mainly a result of gains arising from claims settled during 4Q05.

Oi’s gross revenue in the quarter amounted to R$ 1,019 million while net revenue came to R$ 751 million (-15.4% against 4Q05 but +32.5% over 1Q05).

Average monthly revenue per user (ARPU), at R$ 17.90 in the quarter, was down 11.4% in relation to the figure for the previous quarter (R$ 20.20) as a result of the slower activity in 1Q06, a reduction in fixed to mobile traffic and the mix of net subscriber additions (69% on pre-paid plans). The reduction of 15.2% in comparison with 1Q05 figure is basically due to the strong expansion of the subscriber base mainly in the pre-paid segment (72% of the net additions during the period).

It’s worth mentioning that data and value added services revenues already represent 6.6% of total wireless revenues.

The sale of 413 thousand handsets during the quarter generated a net revenue of R$ 53 million
(-75.9% in relation to 4Q05).

2.4 WIRELESS SERVICES

At the end of the quarter, Oi had 8,981 thousand customers (+10.7% on Jun/05 and 56.5% on Sep/04), of which 1,369 users were activated and 500 thousand disconnected, with net additions of 869 thousand customers. In the quarter 1,291 thousand handsets were sold (2Q05 – 1,117 thousand).

Chart 3 - Oi Subscribers and Market Share

Approximately 31% of the net additions were in postpaid plans, better than the 18% average for the Brazilian market. The customer mix at the end of 3Q05 comprised 84% under prepaid and 16% under postpaid plans (86% / 14% in 2Q05).

Oi reached a market share in its region of 24.9% at the end of September (2Q05 – 24.1%). In the quarter, Oi accounted for approximately 37.2% of net additions in the region (2Q05 – 26.7% and 3Q04 – 35.1%). The wireless service penetration rate in Oi's region reached 35.9% (33.7% in Jun/05 and 26.6% in Sep/04).

The average customer base totaled 8,546 thousand (+11.3% on 2Q05 and +57.8% on 3Q04). The churn rate represented 5.9% of that base in 3Q05, in line with 2Q05 (5.8%).

Chart 4 - Oi: Average Customer Base and Churn Rate

3.1.2 Wireless Services

Revenues from wireless services, on a consolidated basis, totaled R$ 662 million in the quarter, increasing by 31.3% (+R$ 158 million) from 1Q05, primarily as a result of the expansion in "handset sales" (+R$ 127 million) and "outgoing calls" (+R$ 26 million). Consolidated service revenues grew by 7.2% in the quarter.

When compared to 2Q04, the revenue increase was 34.3%. Revenues from services grew by 46.3% (with an average customer base expansion of 61.7%), while handset sales increased by 44.5%.

Revenues from mobile interconnection in 2Q05 amounted to R$ 69 million (+13.2% on 1Q05) – after elimination of R$ 153 million relating to TMAR.

Oi's gross revenues in the quarter amounted to R$ 891 million. Service revenues (excluding handset sales) added up to R$ 616 million, approximately 5.0% above 1Q05 levels, primarily due to the growth in outgoing calls. Net revenues totaled R$ 685 million (+20.9% on 1Q05 and +25.6% on 2Q04).

During 2Q05, ARPU reached R$ 20.80, down 1.4% from the previous quarter (R$ 21.10), reflecting the strong growth in the customer base for the period.

Revenues from wireless data services totaled R$ 33 million, increasing by 3.1% on 1Q05 and accounting for 5.4% of total wireless service revenues for the quarter.

Net revenues from the sale of 1,117 thousand handsets in the quarter (+216.4% on 1Q05) amounted to R$ 145 million (+222.2% on 1Q05).

3.1.2 Wireless Services

3.1.2 Wireless Services

Oi's gross revenues amounted to R$ 936 million in the quarter, of which R$ 852 million was from wireless services. Revenues from services, excluding handset sales, totaled R$ 608 million, growing by approximately 25.0% in comparison with 3Q04. Revenue from services was positively impacted by the increase in outgoing calls and additional services, in particular wireless data and network remuneration charges (R$ 39 million of which relate to adjustments from prior periods). Excluding such adjustments, revenue services rose by 17.0% during the quarter, slightly above the average increase in customer base (16.3%).

In fact, the average revenue per user (ARPU) reached R$ 23.50 on a recurring basis, up 0.9% from the previous quarter (R$ 23.30 when adjusted for the portion of network remuneration in that quarter).

Revenues from wireless data services added up to R$ 32 million (+18.5% from 3Q04), accounting for 5.3% of Oi's total service revenues in the quarter.

Net revenues from the sale of 1,201 thousand handsets in the quarter (+6.6% from 3Q04) amounted to R$ 187 million (+8.7% from 3Q04).

Gross revenues from wireless services, on a consolidated basis, totaled R$ 658 million in the quarter, growing by 11.7% (R$ 69 million) when compared to 3Q04, chiefly due to increased revenues from outgoing calls (R$ 41 million) and handset sales (R$ 13 million).

When compared to 4Q03, consolidated wireless revenues grew by 37.2%, representing a 69.6% increase in service revenues and a 3.6% increase in handset sales.

Revenues for 2004 amounted to R$ 2,112 million, a 56.0% rise from 2003. All revenue lines posted a strong expansion, in particular outgoing calls (+105.9%).

Consolidated revenues from the remuneration of the wireless network amounted to R$ 61 million in 4Q04, after elimination of R$ 193 million relating to TMAR, up 3.4% from 3Q04, in spite of the migration of wireless companies (Telemig and Tele Norte) to the bill & keep rules in 3Q04.