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Embratel Reports Third Quarter 2000 Net Revenues of R$ 1.8 Billion; Data Growth of 60% Year-Over-Year Nine Months Net Revenue Growth Of 31%.

Business Editors

RIO DE JANEIRO, Brazil--(BUSINESS WIRE)--Oct. 24, 2000

Embratel Participacoes S.A. (Embratel Participacoes or the "Company") (NYSE: EMT; BOVESPA: EBTP3, EBTP4), the Company that holds 98.8 percent of Empresa Brasileira de Telecomunicacoes S.A. ("Embratel"), today announced highlights of results for the quarter ending September 30, 2000. (All financial figures are in Reais and based on consolidated financial statements in Brazilian GAAP - "Legislacao Societaria").

Embratel Participacoes' third quarter 2000 net revenues were R$1.8 billion with continued strong growth in both data and voice revenues. EBITDA reached R$475 million. Net income was R$145 million (R$0.44 per 1000 shares) compared to net income of R$209 million (R$0.63 per 1000 shares) in the third quarter of 1999. On a year-to-date basis, net revenues and net income were, respectively, R$4.9 billion and R$418 million (R$1.26 per 1000 shares).

Data and Internet Services

Data revenues rose to R$501 million in the third quarter of 2000, representing a 60.6 percent increase when compared to the corresponding 1999 quarter. Year-over-year growth continues to be driven by innovative Internet services and strong demand for national networks, reflecting Embratel's continued leadership in dedicated and switched data services like frame relay and ATM. A portion of the data revenues continues to be derived from leases of a short term nature to other carriers. A small portion of the short term leases terminated in the quarter and were replaced by new corporate sales. Many clients signed long term contracts during this quarter. These clients are primarily corporate and Internet service users.

Internet has sustained its 100 plus percent growth fueled by continued growth in the ISP business and Internet access for business customers. New Internet services such as dial-up for businesses and ISPs, webhosting and intranets/extranets for businesses, introduced in the latter part of 1999 are beginning to represent meaningful portions of Internet revenues.

Earlier this year, the Brazilian market was stimulated by the advent of free Internet services. The effects of this stimulation continues to drive subscriber growth despite the repositioning of ISPs away from free Internet services. Embratel's Internet strategy is to increase the range of its value added service offerings. In pursuit of this strategy Embratel launched managed security services in September and initiated BcomB operations on a pilot phase. Embratel is in the process of increasing its data center capacity in Sao Paulo to enhance webhosting services it already provides.

On an accumulated basis, data revenues reached R$1.4 billion representing a 61.0 percent growth from R$862 million in the first nine months of 1999. Data represents 21.4 percent of our total gross revenues compared to 18.0 percent in the equivalent period of 1999.

Domestic Long Distance Voice Services

Domestic long distance voice revenues reached R$1.5 billion in the third quarter of 2000 compared to R$1.1 billion in the third quarter of 1999, representing a 38.4 percent growth year-over-year. In the nine months ending September 30, 2000, domestic long distance revenues were R$3.9 billion, representing a 28.9 percent increase relative to the nine months period of 1999. This increase results from line growth, entry into the intra-state segment and fixed to cellular revenues which the company began receiving as of July 3, 1999.

Compared to the previous quarter, domestic long distance voice revenues rose 18.9 percent. Contributing to the increase is the fact that the third quarter is seasonally stronger than the second and tariffs increased for basic services late in June 2000. This growth took place despite extremely competitive activity at the intra-regional level.

International Long Distance Voice Services

International long distance revenues in the third quarter of 2000 were R$332 million compared to R$233 million in the corresponding 1999 quarter. Part of this increase results from higher ICMS taxes. Excluding the effect of the tax increase, international revenues would have grown 9.1 percent. On an accumulated basis, international long distance revenues were R$967 million compared to R$681 million in the first nine months of 1999. This market sector continues to experience strong downward price pressure.

The Company believes that the increase in ICMS rate from 13.0 to 25.0 percent has made international calls more expensive to customers and may lead 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$475 million compared to R$415 million in the third quarter of 1999. EBITDA margin was 27.0 percent this quarter compared to 32.5 percent in the third quarter of 1999. Excluding the one-time recovery related to the COFINS tax in the third quarter of 1999 EBITDA margin would have been 27.6 percent (see the Company's 1999 third quarter earnings release for details). Considering the third quarter of 1999 EBITDA margin without the one-time item, Embratel was able to maintain EBITDA margins relatively stable while absorbing a new element in its cost structure - billing.

Compared to the previous 2000 quarter, EBITDA rose 7.3 percent. EBITDA margin, however, declined one percentage point due to increased billing expenses and provision for bad debt. Embratel increased the number of bills sent to clients, consequently, more of the billing costs were incurred. Also the company decided to increase the level of bad debt provisions (see accounts receivables below). Embratel notes that its strategy to increase the number of points-of-presence has enabled it to maintain line costs at a stable percentage of net revenues even with voice revenues growing quite strongly during the quarter.

EBITDA rose to R$1.3 billion in the first nine months of 2000 from R$1.1 billion in the prior year period, with EBITDA margins declining to 27.7 from 29.5 percent, respectively. The decline is explained primarily by the aforementioned COFINS recovery of the prior year quarter.

Net Income

Net income for the third quarter of 2000 was R$145 million representing a decrease from R$209 million in the same period of 1999. In the third quarter of 1999, as similarly pointed out on the Company's earning release of the period, Embratel benefited from a reduction in social contribution tax which resulted in a R$110 million social contribution credit - for further details please refer to the third quarter 1999 earnings release and the company's financial statements of the same period.

On an accumulated basis, net income reached R$418 million in the first nine months of 2000 compared to R$218 million in the comparable 1999 period.

Financial Position

Embratel Participacoes ended the quarter with a cash position of R$585 million. Total debt outstanding as of September 30, 2000 was R$2.2 billion of which R$1.4 billion is long term. Virtually all - 98.7 percent - of Embratel's debt is denominated in foreign currencies. The average interest on this debt is US dollar plus 10.2 percent p.a.. On September 30, 2000, Embratel's debt/equity ratio was 0.36. The company has approximately R$798 million of US dollar and yen short term debt. Approximately, 67.2 percent of these short term debt positions have been hedged against currency devaluation. The increase in short term indebtedness results from higher working capital needs.

Accounts Receivables

The Company's net receivable position on September 30, 2000 was R$2.4 billion remaining flat relative to the previous 2000 quarter. Days receivables have improved by 8 percent in the third quarter. The Company has made progress in negotiations with other telecommunications providers and has been able to improve its receivables position. In relation to the Company's own billing system continuous improvements have been achieved, however, the billing platform and the quality of information received by the Company is not yet up to the desired standards. We continue to manage the billing system with scrutiny and are turning our focus to collections. Embratel has increased the level of provision for bad debt in the current quarter recording a provision of approximately R$90 million. This increase has put some pressure on SG&A in the current quarter. The allowance for doubtful accounts at the end of the third quarter of 2000 was R$306 million. The company will continue to closely monitor the collections process in order to ensure the appropriate provisioning level.

The company anticipates days receivables will continue to improve throughout the fourth quarter.

Capex

During the quarter capital expenditures were R$ 308 million. Year-to-date capex adds to R$900 million as the Company continues to build its infrastructure of urban rings, points of presence, network capacity and broadband and intelligent voice networks.

Americas II

In early September, the Americas II submarine cable became operational. This cable connects Brazil to the United States with a transmission capacity of 80Gbps. Embratel is the largest investor in this cable. Together, Atlantis II - which began operations in March - and Americas II have increased Embratel's international transmission capacity from 18,000 at the end of 1999 to 594,000 voice equivalent circuits. We anticipate the capacity of this cable will be used to enable further growth of Internet traffic.

Satellite

In late July, Embratel entered into an agreement with Societe Europeenne des Satellites S.A. (SES), the Luxemburg-based operator of Astra, Europe's leading Direct-to-Home (DTH) satellite system, to sell 20 percent equity in the satellite space-segment business for US$ 135 million. In addition to operating the largest satellite fleet in Latin America, this subsidiary will launch broadband Internet services to businesses and to homes.

In August, the satellite unit successfully launched a 28 transponder C-band satellite - B4.

The transaction is in the final phase of completion and will be closed as soon as we receive Anatel authorization.

Embratel is the premier communications provider in Brazil offering a wide array of advanced communications services over its own state of the art nationwide network and is the leading provider of data and Internet services in the country. Embratel provides domestic and international long distance telecommunication services as well as over 40 other communications services, including: advanced voice, high-speed data communication services, Internet, satellite data communications and corporate networks. 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, comprising more than 981,609 of fiber km, reaching over 26,600 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
 Income Statement Quarter ending
 --------------
R$ Thousands Sep 30, 2000 % Sep 30, 1999 %
 ------------ --- ------------ ---
Revenues
 Domestic long
 distance 1,454,215 62.1% 1,050,499 63.3%
 International
 long distance 331,894 14.2% 233,605 14.1%
 Data communications 501,289 21.4% 312,148 18.8%
 Other services 55,874 2.4% 64,179 3.9%
 Gross Revenues 2,343,272 100.0% 1,660,431 100.0%
 Taxes & other
 deductions (581,486) -24.8% (380,186) -22.9%
----------------------------------------------------------------------
Net revenues 1,761,786 100.0% 1,280,245 100.0%
 Lines costs (incl
 interconnection &
 facilities) (843,210) -47.9% (606,453) -47.4%
 Other cost of
 services (excl
 depreciation) (96,406) -5.5% (95,215) -7.4%
 Selling, general
 and administrative
 expenses (excl
 depreciation) (353,102) -20.0% (210,216) -16.4%
 Other operating
 income/(expense) 5,918 0.3% 47,600 3.7%
 EBITDA 474,986 27.0% 415,961 32.5%
 Depreciation and
 amortization (216,833) -12.3% (187,624) -14.7%
 Operating
 income (EBIT) 258,153 14.7% 228,337 17.8%
 Financial income
 (including
 monetary and
 exchange
 variation) 117,312 6.7% 73,201 5.7%
 Financial expense
 (including
 monetary and
 exchange
 variation) (146,334) -8.3% (137,613) -10.7%
 Other non-operating
 income/(expense) (16,727) -0.9% (4,940) -0.4%
 Net income before
 tax, employee
 profit sharing
 and minority
 interest 212,404 12.1% 158,985 12.4%
 Income tax and
 social
 contribution (52,805) -3.0% 61,903 4.8%
 Employee profit
 sharing (12,710) -0.7% (9,000) -0.7%
 Minority interest (1,822) -0.1% (2,654) -0.2%
 Net income 145,067 8.2% 209,234 16.3%
----------------------------------------------------------------------
End of period shares
 outstanding (000) 332,919,028 332,905,228
Earnings per 1000
 shares 0.44 0.63
----------------------------------------------------------------------

 Quarter ending % change
 -------------- --------
R$ Thousands Jun 30, 2000 % Y-o-Y Q-o-Q
 ------------ --- ----- -----
Revenues
 Domestic long
 distance 1,223,355 57.7% 38.4% 18.9%
 International
 long distance 362,417 17.1% 42.1% -8.4%
 Data communications 473,208 22.3% 60.6% 5.9%
 Other services 62,027 2.9% -12.9% -9.9%
 Gross Revenues 2,121,007 100.0% 41.1% 10.5%
 Taxes & other
 deductions (540,652) -25.5% 52.9% 7.6%
----------------------------------------------------------------------
Net revenues 1,580,355 100.0% 37.6% 11.5%
 Lines costs (incl
 interconnection &
 facilities) (755,711) -47.8% 39.0% 11.6%
 Other cost of
 services (excl
 depreciation) (97,393) -6.2% 1.3% -1.0%
 Selling, general
 and administrative
 expenses (excl
 depreciation) (287,526) -18.2% 68.0% 22.8%
 Other operating
 income/(expense) 3,182 0.2% -87.6% 86.0%
 EBITDA 442,907 28.0% 14.2% 7.2%
 Depreciation and
 amortization (211,748) -13.4% 15.6% 2.4%
 Operating
 income (EBIT) 231,159 14.6% 13.1% 11.7%
 Financial income
 (including
 monetary and
 exchange
 variation) 57,780 3.7% 60.3% 103.0%
 Financial expense
 (including
 monetary and
 exchange
 variation) (93,679) -5.9% 6.3% 56.2%
 Other non-operating
 income/(expense) (244) 0.0% 238.6% 6755.3%
 Net income before
 tax, employee
 profit sharing
 and minority
 interest 195,016 12.3% 33.6% 8.9%
 Income tax and
 social
 contribution (62,267) -3.9% -185.3% -15.2%
 Employee profit
 sharing (7,710) -0.5% 41.2% 64.9%
 Minority interest (1,551) -0.1% -31.3% 17.5%
 Net income 123,488 7.8% -30.7% 17.5%
----------------------------------------------------------------------
End of period shares
 outstanding (000) 332,915,828
Earnings per 1000
 shares 0.37
----------------------------------------------------------------------

----------------------------------------------------------------------
Embratel Participacoes SA
Corporate Law - Consolidated Income Statement

 Nine months ending % change
 ---------------------------------------- --------
R$ Thousands Sep 30, 2000 % Sep 30, 1999 % Y-o-Y
----------------------------------------------------------------------
Revenues
 Domestic
 long distance 3,943,515 60.8% 3,058,661 64.0% 28.9%
 International
 long distance 966,664 14.9% 681,181 14.2% 41.9%
 Data
 communications 1,387,873 21.4% 862,192 18.0% 61.0%
 Other services 185,573 2.9% 178,922 3.7% 3.7%
 Gross Revenues 6,483,625 100.0% 4,780,956 100.0% 35.6%
 Taxes & other
 deductions (1,610,707) -24.8% (1,055,582) -22.1% 52.6%
----------------------------------------------------------------------
Net revenues 4,872,918 100.0% 3,725,374 100.0% 30.8%
 Lines costs
 (incl. inter-
 connection &
 facilities) (2,351,193) -48.3% (1,839,384) -49.4% 27.8%
 Other cost of
 services
 (excl.
 depreciation) (281,840) -5.8% (259,469) -7.0% 8.6%
 Selling, general
 & admini-
 strative
 expenses
 (excl.
 depreciation) (882,839) -18.1% (559,286) -15.0% 57.9%
 Other operating
 income/
 (expense) (7,588) -0.2% 30,392 0.8% -125.0%
 EBITDA 1,349,458 27.7% 1,097,627 29.5% 22.9%
 Depreciation
 and
 amortization (630,547) -12.9% (543,959) -14.6% 15.9%
 Operating
 income (EBIT) 718,911 14.8% 553,668 14.9% 29.8%
 Financial
 income
 (including
 monetary and
 exchange
 variation) 183,767 3.8% 343,555 9.2% -46.5%
 Financial
 expense
 (including
 monetary and
 exchange
 variation) (237,462) -4.9% (675,881) -18.1% -64.9%
 Other non-
 operating income/
 (expense) (4,842) -0.1% (2,370) -0.1% 104.3%
 Net income
 before tax,
 employee
 profit sharing
 and minority
 interest 660,374 13.6% 218,972 5.9% 201.6%
 Income tax and
 social
 contribution (208,449) -4.3% 28,885 0.8% -821.7%
 Employee profit
 sharing (28,130) -0.6% (27,000) -0.7% 4.2%
 Minority
 interest (5,258) -0.1% (2,751) -0.1% 91.1%
 Net income 418,537 8.6% 218,106 5.9% 91.9%
----------------------------------------------------------------------
End of period
 shares
 outstanding
 (000) 332,919,028 332,905,228
Earnings per
 1000 shares 1.26 0.66
----------------------------------------------------------------------

Embratel Participacoes SA
Corporate Law - Consolidated Balance Sheet
R$ Thousands Sep 30, 2000 June 30, 2000
----------------------------------------------------------------------
----------------------------------------------------------------------
Assets
 Cash and cash equivalents 585,347 325,048
 Account receivables, net 2,413,455 2,442,561
 Deferred and recoverable taxes 395,529 378,712
 Other current assets 154,590 207,836
 Current assets 3,548,921 3,354,157
 Deferred and recoverable taxes 186,597 186,597
 Legal deposits 240,508 646,318
 Other non-current assets 31,982 33,142
 Non-current assets 459,087 866,057
 Investments 122,818 118,501
 Net property, plant & equipment 7,188,285 7,147,446
 Permanent assets 7,311,103 7,265,947
 Total assets 11,319,111 11,486,161
----------------------------------------------------------------------
Liabilities
 Personnel, charges and social
 benefits 120,770 101,021
 Accounts payable and accrued
 expenses 1,125,271 1,709,024
 Taxes and contributions 923,227 766,835
 Dividends and interest on
 capital payable 14,982 14,850
 Proposed dividends and interest
 on capital 0 0
 Short term debt and current
 portion of long term debt 804,938 791,577
 Provisions for contigencies 21,433 23,127
 Pension plan -Telos 64,219 62,964
 Employee's profit sharing 32,076 18,113
 Subsidiaries and associated
 companies 51,020 34,693
 Other current liabilities 154,581 135,511
 Current liabilities 3,312,517 3,657,715
 Taxes and contributions 44,206 45,244
 Long term debt 1,421,336 1,376,983
 Pension plan - Telos 216,683 225,128
 Other non-current liabilities 2,636 4,344
 Non-current liabilities 1,684,861 1,651,699
 Deferred income 110,951 112,659
 Minority interest 76,415 74,670
 Paid in capital 2,134,427 2,134,427
 Income reserves 2,089,925 2,089,925
 Treasury stock (41,517) (41,411)
 Retained earnings 1,951,532 1,806,477
 Shareholders' equity 6,134,367 5,989,418
Total liabilities and
 shareholders' equity 11,319,111 11,486,161
----------------------------------------------------------------------
Total borrowed funds 2,226,274 2,168,560
Net debt 1,640,927 1,843,512
TBF/Shareholders equity 0.36 0.36
----------------------------------------------------------------------

Embratel Participacoes SA
 Nine
 Change months Increase
 Quarter ending relative to ending vis-a-vis
 ----------------------- -------------- ------- -------
(millions
 of minutes) Mar 31, Jun 30, Sep 30, Sep 30, Jun 30, Sep 30, Sep 30,
 2000 2000 2000 1999 2000 2000 1999
----------------------------------------------------------------------
Domestic Long
 Distance(1) 4803.4 4,682.6 4,862.9 26.3% 3.9% 14,348.9 24.8%
International
 Long
 Distance
 Outbound 162.1 160.1 154.8 6.4% -3.3% 477.0 8.8%
 Inbound 267.4 281.9 313.6 42.9% 11.2% 862.9 42.5%
----------------------------------------------------------------------
(1) 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
COPYRIGHT 2000 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Publication:Business Wire
Geographic Code:3BRAZ
Date:Oct 24, 2000
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