Embed Size (px)
Citation preview
Annual Report 2008
To The woRld of NeTs
Growth and innovation to brinG an increasinG number of people
contents
2008 Highlights.01 03
Corporate profile.03 06
Business .04 11
Macroeconomic and industry scenario.05 26
Operating and financial performance.06 30
Stock market.07 37
Message from the Management.02 04
.08 Corporate governance 38
.09 Risk management 40
.10 People management 41
.11 Corporate responsibility 43
.12 Glossary 44
.13 Corporate information 46
.3
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
2008 highlights01
Net Vírtua’s client base reached 2.2 million in 2008, making NET the second »largest Brazilian company in number of broadband subscribers. 24% increase in the Pay TV base, reaching 3.1 million clients. »Consolidation of voice services with a 190% growth in Net Fone’s client base. »Launch of Net Digital HD Max, the first digital recorder to store HD »content in Brazil. Launch of Net Fone.com, which marked NET’s entrance into a new consumer »segment, with 166,000 subscriptions at the end of the year. A new Net Vírtua broadband access portfolio with speed options of 3, 6 »and 12 Mbps.Launch of Net Vírtua 5G (60Mbps Docsis 3.0) with speeds of up to 300 Mbps. »New pay TV portfolio, focusing on programming segmentation to cater to the »different needs of Brazilian families. Approval of the BIGTV acquisition, adding a portfolio of over 110,000 »subscribers and 67,000 broadband clients to NET’s existing client base.
Dec/07 Dec/08
24%
Pay TV(in thousands of subscribers)
3,071
2,475
Dec/07 Dec/08
Broadband(in thousands of subscribers)
2,217
1,423
56%
Dec/07 Dec/08
190%
NET Fone(in thousands of subscribers)
1,802
621
.4
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
message from the management 02
2008 will go down in NET’s history as the year when, for the sixth consecutive year, we enjoyed sustained growth, achieving a record increase in our client base while maintaining our business performance, which allowed us to obtain results in line with NET’s commitment to its shareholders.
Throughout the year we continued to seek excellence in the services offered to our clients and launched innovative products that allow us to stand out in a highly competitive market, following a strategy of portfolio diversification in order to cater to our clients’ most specific TV programming, internet access and voice services needs.
Also in 2008, we increased our level of sales and installation. Never in the history of our industry had the number of pay TV users grown as much as it has recently, and our faith in this product’s relevance since the beginning has been largely responsible for this growth.
In December 2008, Anatel approved NET’s acquisition of the companies that operate in the pay TV and broadband internet access markets under the brand name BIGTV. We then began the process of consolidating and integrating BIGTV into NET’s operations, which will allow us to offer, within the operations that are part of BIGTV, more complete programming, high speed and quality broadband, and a voice option. True to our strategy of expanding to supplementary regions, we also announced an agreement to acquire ESC90, a cable company operating in the cities of Vitória and Vila Velha in Espírito Santo State. This acquisition is pending Anatel’s approval.
All this has contributed to increase our trust in the strategy we have developed for the company, as we can see that each of the activities that make up its foundation has proven to be correct, coherent and, above all, has been carried out with great success by our competent team.
.5
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
When we look at 2009, we see the challenging scenario we have ahead of us, mainly considering three factors: Brazil’s economic slowdown, increasingly fierce competition and stricter regulation of customer services. However, we are convinced that we will manage to overcome these obstacles as we always have, supported by our strategy, large product portfolio and the competitive advantages we have developed.
We gear our work toward making sure that our slogan, “The World Belongs to NETs,” always rings true, maintaining our investment plans to support our accelerated growth strategy, since our business’s return on investment is fully aligned to the policy of generating value for our shareholders.
Our mission “To be the best multi-service cable solution, connecting homes to the world” is what guides our decisions and daily tasks. Each day we seek to deliver services that will set us apart from the competition so that our clients feel satisfied in the comfort and convenience of their homes.
We wish to thank all those who were a part of 2008 for their support, and hope to be able to count on you in the future. We also want to reaffirm our commitment to the future in order to ensure the company’s continuity, a greater return to shareholders and to society, and high quality service to all our clients.
The Management
.6
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
corporate profile03
Mission, Values and Quality Policy
Mission
“To be the best multiservice cable provider, connecting homes to the world.”
We want to be known for our high-quality service by:Maintaining a highly motivated, responsible and committed team. »Establishing meaningful, long-term relationships with our clients, leading to »understanding and trust.Keeping in step with technological innovations, always seeking to optimize »internal processes.
Connecting homes to the world:We focus on benefitting people and families by connecting their homes to the world. »A person’s home is the starting point for connecting him to the world. »We want to meet each and every expectation of every member of the family, »striving for customer satisfaction and bringing the world into the comfort of people’s homes.
We do not want to be just another option. We want to be the best solution for our clients, be it for computer, telephone, TV or any other means that may connect them to the world from their homes.
Values“Integrity, results, excellence, team work and practical attitude”
These values are the Company’s pillars and guidelines while striving to reach its goals. A company’s values reveal how it wants to operate each day in order to fulfill its mission.
Integrity: To our Company, integrity is essential to conducting our business »and relationships.Results: To generate value to clients, employees and shareholders, ensuring »the Company’s sustained growth.Excellence: To persist in the continuous improvement of our services and »development of our employees.Teamwork: To exchange knowledge and obtain results based on mutual »cooperation, respecting individuality.Practical attitude: To offer efficient solutions quickly and objectively. »
Quality Policy“We are all responsible for providing high-quality service and striving for excellence”
We measure the success of our quality products and services by the satisfaction of our clients.
The results of our activities and our constant pursuit for excellence are the foundation for the continuous improvement of our quality system. These pillars are constantly measured and their development evaluated. Based on these actions, we outline strategies to constantly drive the improvement process.
.7
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
The Quality Policy must be understood and practiced by everyone in our team. Together as a team, we must take part in the challenge of meeting all our clients’ needs. We must be persistent in our purpose of service excellence.
About NeT
NET Serviços is the largest multi-service cable company in Latin America. Operating in 91 cities including São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Curitiba, Florianópolis, Manaus, Brasília and Goiânia, the company offers pay TV, broadband internet access and voice services through a single cable.
With 49% of the pay TV market and 22% of the broadband segment, NET’s network provides services to more than 10 million households. The Company closed 2008 with 3.1 million pay TV subscribers, 2.2 million broadband subscribers and 1.8 million voice subscribers.
NET invests in the development of integrated solutions, evidenced by the Net Combo and Net Lar packages that offer several options for bundling NET products and services according to clients’ different needs.
Organizational Structure
Executive BoardFinance & Inv. Rel.
João Elek
Executive BoardLegal and Inst. Rel.André Muller Borges
Executive BoardOrganiz. Develop.José Paulo Freitas
Executive BoardADM & ServicesLeandro Santos
Executive BoardSales & MarketEduardo Aspesi
Chief ExecutiveOfficer
José Felix
Infrastructure &Engineering Department
Marcelo Parraga
Information TechnologyDepartment
Miguel Marioni
AuditingRicardo Barretto
Technology & ProjectsRodrigo Ducios
Accounting &Internal Controls
Financ. Planning & New Business
Development
Treasury
Investor Relations
Supply &Logistics
Sales VivaxTelecom
Engineering VivaxTelecom
Contracts & Corporate
Ligation &Operation Support
Ombudsman
Quality
Processes
Wages &Benefits
Personnel
Training & Development
Communication & Social
Responsibility
Call Center
Field Services
Invoicing
IT - Production
Administration
São PauloRegional Office
EastRegional Office
Central BrazilRegional Office
SouthReginal Office
CampinasRegional Office
BaseManagement
Sales andCommunication
Products &Services
MarketIntelligence
Programming
Media
.8
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Operations Map
FlorianópolisCriciúmaJoinvilleBlumenauChapecó
SC
Porto Alegre (cable and MMDS)
BagéBento GonçalvesCaxias do SulCruz AltaErechimFarroupilhaLajeado
Novo HamburgoPasso Fundo
RS
BrasíliaGoiâniaAnápolis
GO
Manaus
AM
Recife
PE
João Pessoa
PB
Maceió
AL
Uruguaiana
PelotasRio GrandeSanta Cruz do SulSanta Maria
Campo Grande
MS
ArapongasPonta GrossaCascavelCianorteGuarapuava
LondrinaMaringáSão Bernardo
São CaetanoSão VicenteSão J. do Rio PretoSanta B. OesteSumaréTaubatéJaúMaríliaSertãozinhoValinhosBotucatuGuarulhos
Rio de JaneiroBarra MansaResende
RJ
Curitiba (cable)
PR
Belo Horizonte
MG
ItuJacareíLimeiraMauáMogi das CruzesMogi-GuaçuMogi-MirimPindamonhangabaPraia GrandeRio ClaroSanta Branca
Santo André
AraraquaraArarasAtibaiaBertioga BragançaCaçapavaCubatãoDiademaGuarujáHortolândiaItapetininga
SorocabaPiracicabaAmericanaAraçatuba
São PauloSantosCampinasIndaiatuba Ribeirão PretoFrancaSão CarlosSão José dos CamposBauruJundiaí
SP
history
NET’s history is marked by a continuous diversification of its product portfolio and its growth through acquisitions, efficiently promoting the operational and administrative integration of acquired networks. The timeline below shows the most important events in the Company’s history.
Timeline
1991
NET begins operations after acquiring small cable TV operators and receiving operational licenses in several regions.
1993 & 1994
Globopar and Ralph Partners II join Mr. Antônio Dias Leite, distributing the Company’s voting capital equally among the three partners.
1996
Net Serviços, then called Multicanal Participações S.A., lists ADSs on the NASDAQ Global Market.
.9
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
1997
The main shareholders sell their shares to Globo.
1998
Multicanal Participações S.A. acquires Globo’s cable assets and respective liabilities, changing its name to Globo Cabo S.A., and becomes the holder of 50% of Unicabo and 100% of Net São Paulo, Net Rio and Net Brasília.
2000
Acquisition of the remaining 50% of Unicabo.
Acquisition of Vicom, an important step for the Company to enter the data transmission market, offering the Company’s products to Vicom’s corporate client base.
Conclusion of the acquisition of Net Sul Holding S.A., Brazil’s second largest cable operator, which substantially increased the Company’s client base and provided access to markets in Brazil’s southern region, offering services with higher added value.
2001
NET joins Level 1 of Corporate Governance practices of BOVESPA (São Paulo Stock Exchange).
2002
Globo Cabo S.A. changes its name to Net Serviços de Comunicação S.A..
NET joins Level 2 of Corporate Governance practices of BOVESPA, becoming one of the first companies in the sector to adopt stricter transparency practices.
2003
NET resumes advertising in the media with improvement in its sales infrastructure and customer service.
2004
Sale of its stake in Vicom and beginning of a financial restructuring through a new share issue.
2005
Conclusion of the financial restructuring. Telmex acquired a 49% stake in GB Participações, a special purpose company with a 51% interest in Organizações Globo, joining Globo Participações in the new controlling bloc of NET Serviços.
Reinforcement of the growth strategy through new sales and marketing channels, including telemarketing, Internet, door-to-door sales, e-mail marketing, retail sales, sales in apartment buildings and outsourced customer service centers.
.10
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
2006
Launch of Net Fone via Embratel in partnership with Empresa Brasileira de Telecomunicações S.A. – Embratel, marking NET’s entry in the triple play market.
2007
Conclusion of the Vivax acquisition and expansion of the bidirectional network, covering 6.7 million households, compared to 3 million households in 2006.
NET becomes the first Brazilian company to open the trading floor of the NASDAQ electronic stock market in New York.
2008
Launch of NetFone.com, marking the beginning of triple-play service packages.
Launch of Net Vírtua 5G (60Mbps Docsis 3.0), the fifth generation of NET broadband Internet services.
Approval of the BIG TV acquisition, providing NET with a portfolio of over 100,000 pay TV subscribers and 56,000 broadband Internet subscribers through a network of more than 400,000 households across the states of São Paulo, Paraná, Alagoas and Paraíba.
Awards and acknowledgments
In 2008 NET’s performance was acknowledged by the public, technology specialists and opinion-makers.
Brand Survey conducted by Info magazine
In the seventh edition of the Brand survey published in the March issue of Editora Abril’s Info magazine, readers elected Net Vírtua as the best broadband service in the country. The service was rated “excellent” or “good” by 69% of respondents.
2008 Info Exame Award
Nominated by Info Exame magazine journalists and technicians, Net Vírtua was named best broadband service by the magazine’s readers with 45% of the vote.
.11
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
business04
Business description
Net Serviços operates with 93 licenses, 90 of which are for cable services and 3 for MMDS services, serving over 10 million households in regions producing a significant share of Brazilian GDP. The expansion of operations is based on a well-defined corporate strategy, combined with a diversified portfolio of products and services, state-of-the-art technologies and the construction of transparent and stable relationships with clients.
Over the past years, the Company has been focusing its efforts on improving its infrastructure to allow network expansion, aiming to obtain gains in triple play offerings, digital services and bidirectional connections.
These efforts were reflected in the results achieved in 2008 when NET got a head start on high definition transmission and proved itself technically prepared to comply with the new regulations regarding telephone number portability as well as the demand for broadband access, a result of income stability and the increase in the number of Brazilian households with internet access.
With a view to keeping up with this growth and the market segmentation, in 2008 NET diversified its offerings in its three operating segments, installing more than 3 million revenue-generating units and reaching over 1 million digital homes—all with the support of a comprehensive quality control program, QualiNET, launched in 2008.
strategy
NET’s goal is to become the leading provider of entertainment and triple play communication services in the Brazilian residential market, being acknowledged as the best option with multiple combinations for different tastes and needs. In order to achieve this goal, NET relies on three strategic pillars: Accelerated Growth, Sustained Profitability and Service Excellence.
AcceleratedGrowth
Focus on triple play strategy
Acquisitions that expand broadband and cable TV coverage
Consolidated the company’s share in the low-income segment
More diverse and flexible product offers in every segment
Continue to innovation in the high-income segment, taking advantage of the opportunies for consolidating the high-definition market
Initiatives for financing business growth
Optimize capital expeditures with the proper investment focus
Develop high added value products
Maintain efforts focused on corporate governance
Seek becoming a quality benchmark
Offer reliable products backed by efficient and helpful customer service
Constantly develop new services
SustainedProfitability
Excellence inServices
.12
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
sales & Marketing
NET’s commercial initiatives are carried out by marketing specialists who dedicate themselves to each region where the Company operates, developing action plans for the main operations. Commercial planning is guided by the constant monitoring of each region’s specific traits, such as subscriber perception, local consumers’ preferences, and prices, among other factors.
Regional activities are carried out by a team responsible for supervising sales and marketing actions in accordance with NET’s long-term goals of increasing market penetration and ensuring subscriber loyalty, increasing revenues per household.
NET’s long-term marketing strategies
Use the NET, NET Vírtua, NET Digital and NET Fone
Via Embratel brands to promote subscriber
awareness and loyalty
Introduction of new value-added services
Identify marketing opportunities based on
demographic data
Design products and/or services to give subscribers
different entertainment options
Telemarketing Internet Direct mail Retail sales
Sales channels in residential buildings Door-to-door sales
Outsourced customer services centers
Coordinated sales and customer services channel to increase the penetration rate and level of services used by clients:
NET’s long-term marketing strategies
Creation of product packages to promote the sales of premium services and niche programming, in addition to offering
options with an attractive cost-benefit ratio
.13
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Products and services
NET employs cutting-edge technology, investing continuously in research and development to provide its clients with evolution and innovation in each of its three segments: pay TV, broadband internet access and fixed telephone services.
As a means of improving its relationship with clients, NET offers its products and services in multiple combinations that cater to different consumer profiles. The goal is to offer integrated communication and entertainment products to meet various household needs.
In 2008 NET stood out for its innovative new products, portfolio diversification and increase in the number of options for combining its products and services, keeping up with the evolution of market demands.
Pay TV
NET is the largest pay TV operator in Brazil and was the first to introduce high-definition TV services in the country, offering the greatest variety of channels and acclaimed quality programming produced in Brazil and abroad, with excellent image and sound quality.
NET digital TV subscribers enjoy resources such as an electronic programming guide, mosaics, and content purchases via remote control, among others. At the end of 2008, the company held 49% of the pay TV market in Brazil, setting itself apart from the competition with the following innovations:
Transmission of the Beijing Olympic Games in high definition for NET subscribers. »The first operator to launch a digital recorder (decoder) capable of storing HD »content, affording clients the freedom to watch whatever they want whenever they want. Increasingly flexible pay TV programming options in line with the slogan » A package for each NET, aiming to adjust offers to the different profiles of Brazilian households. Inclusion of 10 new channels in the pay TV portfolio. »
.14
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Adult
HD Channels
Sports
Information
Documentaries
Educational
Relationship channels
Audio Channels
Films and TV Series
Kids
Interests
International
NET digital channels
.15
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Films Open channels
Music
NET digital channels
PPV
PPV Films
continuation
.16
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Adults
Open channels
Relationship channels
Kids
Information
Music
Interests
Documentaries
Educational
Sports
Films
Films and TV series
NET analog channels
Broadband internet accessThe pioneer in high-speed internet access in Brazil, NET is the fastest-growing company in this market nationwide, with a variety of connection speeds to meet different needs. In 2008, NET launched its first economic package of integrated high-speed internet access and fixed telephone services, Net Fone.com. It also unveiled Net Vírtua 5G (60Mbps Docsis 3.0), the fifth generation of its broadband internet service, which allows speeds of up to 300Mbps and is the first integrated high-definition video transmission experience for both TV and computer in Brazil.
Another innovation in the segment was the increase in Net Vírtua’s speeds to 3, 6 and 12Mbps, affording the company greater competitiveness in the segment and ensuring average revenue per user (ARPU) levels.
.17
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Fixed telephone servicesBacked by the technological convergence that has allowed voice and data services to be provided through the same network as pay TV, NET used a basic and effective recipe in the voice market – offering an option for what was, until then, an untapped market. Net Fone is the result of a partnership with Embratel, which provides the service through NET’s cable network.
Aiming to offer economical voice transmission services, in 2008 NET launched the innovative Net Fone.com, which combines fixed telephone and high-speed internet access in economical packages and marked the company’s entrance into a new consumer segment.
Thanks to these launches, NET has been growing substantially in the fixed telephony market, increasing its subscriber base by 190% in 2008.
Net Lar
In line with the goal of being the only communication services solution for Brazilian households, Net Lar provides support to solve day-to-day problems that may interfere in the quality of digital TV, internet and telephone products, as well as options to further optimize these products. Net Lar also offers different plan options that cater to different needs.
Pay TV
NET Integrated Services
Cable TV services with a wide variety of programming
Several options for programming packages
Additional programming with pay-per-view packages
Present in 91 Brazilian cities
Digital cable TV in 38 cities, with more programming, better transmission quality and video on demand. The NET digital HD cable services is available in 22 cities
Faster connection speed
Synchrony between download and upload speeds
Connection speeds from 200 Kbps to 8 Mbps
NetFone.com: voice and broadband services at 100 Kbps
Net Vírtua 5G: speeds of up to 300Mbps for high-definition video transmission
Present in 84 cities
Net Fone via Embratel: residential fixed telephone service
Coverage in 75 cities
Approximately 1.8 million residential subscribers
Broadband Voice
.18
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Net Lar Conforto: special technical support, such as audio and video equipment connection, telephone extensions, and moving the connection point, among others.
Net Lar Cyber Rede: wired or wireless domestic network for sharing megaspeed with Net Vírtua with up to four computers. Installation, support and maintenance are conducted by specialized technicians.
Net Lar Cyber Anjo: safety for using the internet in banking transactions, music downloads, email exchanges, and others. The service also offers access monitoring for greater control of internet use by children, for example.
Quality
Everybody is responsible for assuring quality and the continuous pursuit of excellence. This sums up NET’s Quality Policy, aligned with its corporate strategy. With this in mind, the company has developed a comprehensive quality management program involving all of NET’s departments with the goal of ensuring the excellence of products and services and, consequently, surprising and pleasing clients.
Established in 2008, QualiNET instituted a department responsible for providing all the company’s managers with tools for more efficient management of their challenges and teams, aiming to introduce the concept of and zeal for quality into the corporate culture. Program implementation included workshops in every department to train employees within the scope of QualiNET and raising people’s awareness of the importance of customer service.
Among the management tools developed by QualiNET, the Management Control Item (Item de Controle Gerencial – ICG), which provides support to the sector strategy by means of targets and monitoring of economic, performance and quality indicators, has proven essential. This monitoring is discussed in monthly meetings, generating specific action plans.
Based on the concept that excellence starts in solving problems at their root, QualiNET also developed the Method for Analyzing and Solving Problems (Método de Análise e Solução de Problemas - MASP), whereby working groups of employees at the operational level and specialists are formed to improve very specific indicators.
It is worth emphasizing that QualiNET’s initiatives are guided by the clients’ perception of the company: every two months, points for improvement are revealed to the quality department through a customer satisfaction survey. Thus the program is extended to partners and service providers, such as installation companies and call centers, to ensure NET quality standards throughout the service chain.
.19
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
For 2009 the program will focus on decreasing the number of undesired calls, increasing client satisfaction in addition to cutting company costs.
It is like a pinwheel:
Technology
Net Serviços is constantly seeking innovation in its products and services by taking full advantage of available technology, as well as developing new technology.
For cable TV and voice transmission services, NET uses a network of coaxial cables and optical fiber in an HFC (hybrid fiber-coaxial) network, with cell areas encompassing up to 2,000 homes that can be divided into smaller areas according to the need bandwidth needs of the area. A coaxial cable is a conductor used to transmit signals (with a wide frequency spectrum) over long distances while maintaining the quality of signal distribution within the cells because it is protected against electric or magnetic interference, affording the operation greater stability. The optical fiber network combines efficiency and low cost, allowing the transmission of optical signals from the headend to the cell’s core (where there is a device that converts the optical signals into electric ones) through tiny glass filaments, which are also protected against electromagnetic interference, as they are made up of insulating material and use light to transmit their signals.
.20
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
CGPO
HE
HUB
CGPO
CGPO
HOMESOFFICES
BUILDINGS
HOTELS. MUD
Coaxial Cable
Optical Fiber
Optical Fiber
Studio, programmer, Play-off-center
Multi-service Center
Center for distribution and transmission of signal to the optical cable
Each analog signal takes up 6MHz of bandwidth, and networks usually have a total bandwidth of at least 550MHz, with a minimum of 77 available channels. In the case of digital channels, each 6 MHz channel can transmit approximately 10 programs.
A mixed optical/coaxial cable network such NET’s can transmit data at a rate of up to 6,300 Megabits/second with the current technologies and an HFC network with 1GHz of bandwidth.
.21
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
HFC really is broadband!
This is Broadband!
Shared BandwidthBandwidth is defined by the node size and the number of subscribers
Dial-UpModem
DSL/CableModem
VDSL Wimax 100 Base TEthernet
GigabitEthernet
HFC
100 Mbps75 Mbps
50 Mbps 1-1,6 Mbps
68 Kbps
1,000 Mbps
6,300 Mbps
A network’s frequency is upgraded by simply exchanging the existing amplifiers’ modules with new ones that have greater bandwidth. NET makes these upgrades whenever necessary and also during periodic maintenance carried out on the network equipment. This represents a considerable advantage over conventional technologies – especially compared to telephone lines – since the physical network remains the same and only the “active” elements are upgraded.
The technology adopted by NET in broadband internet services (NET Vírtua) allows high-speed data transmission both down- and upstream. The speeds available – from 150kbps to 60Mbps – offer a fantastic internet browsing experience.
NET Vírtua’s cable modems use Docsis specification, which is an open technology standard adopted worldwide. This specification, which is used in cable TV operations around the world, affords the product more dependability, robustness and better performance.
During 2008 NET began migrating its internet service structure to DOCSIS 3.0. With the addition of some equipment to the current network and a cable modem upgrade it is possible to reach speeds of up to 150Mbps.
.22
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
PC - MODEM - TV
METROPOLITAN NETWORK INTERNET
VÍRTUA OPERATION CENTER
CONTENT AND SERVICE
PROVIDERS
Innovation and convergence
NET intends to develop and introduce new services, such as video-on-demand, expanding the number of high definition (HDTV) channels transmitted, and videoconferencing, in order to maximize the use of its cable network and streamline the services offered to its clients.
NET has introduced new technologies both in signal transmission and in the services offered to its subscribers. Examples include: the use of CWDM, which multiplies the content transmitted through the optical cables; the launch of new optical fiber cables, allowing the fiber to get increasingly closer to the user; HDTV, which brings DVD-quality image and sound to TV programs; VOD, which brings the features of a video recorder or DVD to cable TV programs; and new VOIP features. All this uses the same network as cable TV.
.23
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
TELEVISION
CONNECTIVITY
INTERACTIVE
DIGITAL
CONTENT TRANSACTION CONNECTION
Pay TV
PAY TV
CONNECTION
CARRIER
PT-PT DATA COMMPT-PT DATA COMM
TELEPHONY
VIDEO CONFERENCE
INTERNET
PPU
MVOB
VOD
Multimedia broadband E-commerceE-finance
MULTIMÍDIAON DEMAND
Capital needs and strategic partners
.24
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Client relationship
NET’s relationship with its clients is its main asset; therefore, the company strives to expand the availability of electronic customer service and sales channels, to be able to respond to our clients more quickly and easily.
At the end of 2008, electronic relationship tools accounted for over 20% of demand with great potential to increase due to the educational campaigns targeting consumers that teach how to use these relationship channels and emphasizing their advantages, such as greater comfort and discounts in product acquisition, among others.
NET’s primary competitive edge in relationship tools is the Audible Response Unit (Unidade de Resposat Audível – URA). This has proven to be an efficient, low cost customer service and sales alternative, currently accounting for 13% of all relationship events by providing the following services:
Confirmation of technical visit scheduling. »Notice of downtime with estimate of when service should resume. »Confirmation of invoice payment after the due date. »Sale of pay-per-view products, such as Big Brother Brasil – last year, 32% »of this product’s sales were made through URA.
In addition to URA, NET offers other electronic relationship tools:
Web: Information on programming, questions, customer service via email and sales.
SMS: notices of preventive maintenance sent directly to clients’ cell phones.
Voicer: notices of preventive maintenance sent to clients.
Remote control: NET sales, with 900,000 transactions made in 2008.
Self-service stations: pilot program started in 2008 for issuing second copies of invoices.
Client base management as a tool for increasing profitability and client loyalty
In 2008 NET consolidated the client base management area to implement a set of initiatives to get closer to clients, an essential element of the company’s strategy of increasing ARPU and the triple play base, as well as managing the churn rate within an environment of increased competitiveness with the entrance of telecommunications operators into the TV and internet markets, and higher default levels due to the macroeconomic scenario.
All this shows NET’s special attention to providing satisfactory customer service with the purpose of increasing the stability of its client base and consequently ensuring the continuity of its business.
.25
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
In order to meet this requirement, NET has established a flow for the requests and demands of clients, in addition to setting ambitious targets for the customer service teams, so as to ensure a quick and satisfactory response.
Client satisfaction with the products and services results in a low churn rate and helps increase the client base since clients end up recommending the service, allowing the company to grow faster while controlling expenses with new client acquisitions. Additionally, satisfied clients open even more possibilities for up-selling and cross-selling products and services, raising the average revenue per user (ARPU) and generating a virtuous cycle of profitability and client loyalty.
New rules for service provided by call centers
On December 1, 2008 the new regulation for phone service at client relationship centers became effective, expanding service requirements and targets.
In addition to relying on efficient automated service options and expanding the number of employees working in their own relationship website, NET sought to adapt itself to the new regulation by increasing its service capacity and qualification training. Furthermore, a second service provider was hired, adding approximately 1,200 operators to face the new requirements.
NET has also increased its customer service options by means of alternative channels, such as purchases via remote control, a new website (www.netcombo.com.br) and notices of preventive maintenance via SMS and email.
.26
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
macroeconomic and industry scenario05
Macro-economy
During the first months of 2008 Brazil’s main economic indicators remained stable, with jobs and income at good levels and abundant credit, which kept domestic demand high.
In the second half of the year, however, developing markets, including in Brazil, felt the impact of the financial crisis more intensely with the withdrawal of investors and a slowdown in several economic sectors. Nevertheless, the results obtained through the third quarter sustained positive indicators, and the country closed the year with 5.1% GDP growth and the inflation within the government targets with the Extended Consumer Price Index (IPC-A) closing the year at 6%. The target overnight interest (Selic) rate reached 13.75% in December, following successive increases to curb demand and prevent prices from skyrocketing.
The future of the world economy in the short term is uncertain, but a slowdown in market growth rates is expected. Brazil should follow the same trend, even though it is better prepared to face the current crisis than it was to face previous ones. In this scenario, NET’s challenge is to outperform the competition by complying with regulations, relying on its competitive advantages and on the strategy of marketing diversified product combinations for different needs while remaining financially prudent.
Industry performance
According to data from Anatel, in 2008 140 pay TV service providers covered 200 Brazilian municipalities, serving a total of 6.3 million subscribers. The industry grossed sales of R$2.5 billion in the year, including advertising revenues, and was responsible for 16,000 direct jobs.
Internet access reached 18% of Brazilian households and broadband internet access closed 2008 with 2.4 million subscribers. The number of telephones was 160.4 million in the year.
2007
60%
35%
5%
2008
TV - subscriber base(million)
6.05.3
2007
Cable DTH MMDS
2008
High speed internet subscriber base(milion)
TV - subscriber base by type(Dec/2008)
2.4
1.8 48%
36%
2%6%
1% 7%
Programming
Broadband (internet and voice)
Pay-per-view
Gross sales by source - Cable and MMDS operators
Addtional connection point
Adhesion
Other
.27
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
2007
60%
35%
5%
2008
TV - subscriber base(million)
6.05.3
2007
Cable DTH MMDS
2008
High speed internet subscriber base(milion)
TV - subscriber base by type(Dec/2008)
2.4
1.8 48%
36%
2%6%
1% 7%
Programming
Broadband (internet and voice)
Pay-per-view
Gross sales by source - Cable and MMDS operators
Addtional connection point
Adhesion
Other
Industry outlook
Even though the global economy is going through a period of turmoil and uncertainty, the Brazilian telecommunications market should remain stable in comparison to other sectors. The number of subscribers should continue to increase since there is still considerable demand for telecommunications services in the country, in addition to the government incentive for increasing telephony and internet penetration as a tool of economic and social development.
NET will focus on the strategy of benefitting from the opportunities and overcoming the challenges presented by this scenario, optimizing time and costs and involving all its employees in the commitment to business continuity. The company is optimistic in relation to 2009 based on the country’s increased stability, the population’s confidence, and on factors such as the increase in income and computer sales, which constitute opportunities for growth.
In 2008 NET established itself as the fastest-growing company in the three segments where it operates and proved that it is ready to repeat this achievement in 2009 with the support of the advantages it has built over the course of its history:
Offer of products and services at competitive prices »Continuous quality management »Experience »Product mix diversification »Innovation in internet speeds »
.28
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Industry regulations
The sector in which NET operates is regulated by the Brazilian Telecommunications Agency (Agência Nacional de Telecomunicações - Anatel), a government agency in charge of overseeing the privatization of telecommunications services, with permanent responsibility for supervising and regulating concession agreements, fee collection and norms standardizing services.
Thus, areas such as Accounting, Ombudsman and Legal are responsible for complying with the agency’s rules and requirements. Among the matters subject to regulation, the key issues in 2008 were number portability, telephone customer service, the additional pay TV connection point and Bill 29.
Bill 29 (PL 29)
Bill 29, presented in 2007, proposes requirements for pay TV operators, such as the distribution of a minimum number of TV programs produced in Brazil and standard must-carry channels among all the pay TV operators.
Additionally, PL 29 would allow telecommunications concessionaires to provide cable services and would also eliminate restrictions on foreign ownership of telecommunications companies that distribute content by means of a subscription contract.
The changes that will be introduced with the approval of PL 29 are still not entirely defined and will be applicable to regulations of the sector in which NET operates.
Number portability
In 2008 number portability was made available, allowing fixed and mobile telephony clients to keep their telephone numbers if they move within the same local area or switch operators or service plans.
This new regulation represents a growth opportunity for the company’s fixed telephone service, as evidenced by the fact that NET is the fastest-growing fixed telephony company in the country, with 1.8 million subscribers in 2008.
Service provided by call centers
On December 1, 2008 the new regulations concerning telephone service at client relationship centers came into force, expanding the requirements and service targets, the most important of which are:
.29
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Wait times should not exceed 60 seconds; »Direct contact with a representative must be the first option on the service menu; »The service must be available 24 hours a day, seven days a week; »The client must be able to follow up on his/her request on the internet; »The client may not be transferred from one representative to another. »
The options offered by NET’s automated service (URA) had been simplified and implemented even before the new regulations came into force. Additionally, in order to adapt to the new requirements, NET earmarked investments for the expansion of the service capacity of both its own and outsourced websites, and offered training to all its representatives so that they can solve the clients’ problems on the first call. Also as a part of this strategy, NET retained a second service provider, which, in addition to supporting the company’s growth, added around 1,200 operators in order to comply with the new rules. Furthermore, NET has its own customer service center located in Americana, São Paulo State that was expanded and now has 570 employees.
Additional connection point
Another issue that has been discussed among analysts and pay TV operators is the introduction of a new regulation that, among other measures, prohibits the operator from charging clients for additional connection points.
NET has sought a conciliatory position in case the new regulation is approved, since it believes it is possible to add value to the current products in a way that makes up for the possible loss of this revenue, demonstrating the company’s commitment with its shareholders and creditors while reinforcing its respect for its clients.
.30
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
NET closed 2008 with 7,977,000 Revenue Generating Units (RGUs), a 56% increase in relation to 2007. This increase is the result of growth in sales driven by the launch of Net Fone.com, in addition to the continued performance of the business segments in which the Company operates. The following analysis shows the Company’s results according to various indexes.
Client base
The Pay TV client base closed the year at 3,071,000 subscribers, a 24% increase in relation to 2007. The Digital Video client base reached 887,000 subscribers, a 47% upturn in relation to 2007 and accounting for 29% of the total Pay TV client base. The churn rate in the past 12 months was 14.9%, reflecting the return to levels reached before the increase provoked by Vivax’s consolidation. Voluntary churn accounted for 60% of the total number of disconnections, and change of address to areas where the Company does not provide service was the main reason cited by clients upon terminating their accounts.
In 2008, 794,000 net new subscribers joined the Broadband client base, totaling 2,217,000 subscribers, a 56% increase in relation to 2007. As a result, broadband service in bidirectional households reached the 31% mark and, for the Pay TV client base, 72%. The churn rate in the past 12 months increased from 17.1% in 2007 to 18.1% in 2008. This increase can be explained by the combination of two factors: (i) more accounts are cancelled during the first months of subscription in the adjustment period; and (ii) NET has increasingly focused on bundled services, so when a client requests cancellation, all products in his household are disconnected. Therefore, although the absolute numbers of disconnections may be similar among the products, the total churn rate increases because the Broadband client base is smaller than the Pay TV client base.
The Fixed Telephony client base closed the year with 1,802,000 subscribers, a 190% increase in relation to the previous year. The percentage of clients who subscribe both to NET Fone and broadband Internet access reached 81%. The Net Fone.com client base closed the year with 166,000 subscribers.
operating and financial performance06
.31
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Dec/07 Dec/08
24%
Pay TV(in thousands of subscribers)
3,071
2,475
Dec/07 Dec/08
Broadband(in thousands of subscribers)
2,217
1,423
56%
Dec/07 Dec/08
190%
NET Fone(in thousands of subscribers)
1,802
621
Churn rate - past 12 months
Pay TV Broadband
2007 1Q08 2Q08 3Q08 4Q08
17.1%
15.4% 15.9% 15.4% 14.5% 14.9%
17.9% 17.9% 17.1% 18.1%
Net revenue
In 2008, the Company’s net revenue totaled R$3,690.4 million, 27% higher than the R$2,901.8 million recorded in 2007. This is largely a result of the 4% increase in ARPU, which surged from R$131.34 in 2007 to R$136.24 in 2008, and the aforementioned 56% increase in RGUs.
.32
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Operating costs
Operating costs reached R$1,749.9 million in 2008, 27% higher than the total recorded in 2007. Despite the nominal increase, as a percentage of net revenue, operating costs remained stable at 47%. The primary reason for this increase was the greater consumption of bandwidth for Internet access due to a larger Broadband client base and the change in the consumption profile. In addition, higher expenses with customer service centers resulting from a larger Net Combo client base, which requires more complex customer service, and with programming due to a larger Pay TV client base, were also major factors contributing to the increase in operating costs. It is worth noting that the Company’s costs were not affected by the foreign exchange rate fluctuation, since they are (including programming) denominated in reais.
2007 2008
Net Revenue (R$ million)
3,690
2,902
2007 2008
ARPU(R$)
136.2131.3
2007 2008
Operating costs(R$ million)
1,750
1,380
22%
4%
6%
15%
Programming and franchise
Network maintenance and subscriber
Labor and benefits
Operating costs / Net revenue(Dec 2008 = 47%)
Other
.33
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Expenses
Selling, general, administrative and other expenses totaled R$918.8 million, a 25% increase when compared to the R$735.6 million recorded in 2007. As a percentage of net revenue, expenses remained at 25%. Selling expenses surged 50% in 2008 chiefly due to higher costs with personnel, sales commissions, and more intense marketing campaigns. General and administrative expenses rose 23% due to higher costs with consulting services and infrastructure adjustments necessary to meet the Company’s new reality.
Expenses with Provision for Doubtful Accounts
In 2008, the provision for doubtful accounts stood at R$40.0 million, up 6% year-on-year. As a percentage of gross revenue, it dropped from 1.0% in 2007 to 0.8% in 2008, showing that the credit portfolio remains sound even while the Company entered a new business segment.
EBITDA and EBITDA margin
In 2008, EBITDA before selling expenses totaled R$1,371.2 million, up 29% year-on-year, with an EBITDA margin of 37%. EBITDA totaled R$981.7 million in 2008, 22% higher than the R$804.3 million recorded in 2007, with an EBITDA margin of 26.6%.
2007 2008
Selling, general and administrative expenses
(R$ million)
Selling, general and administrative expenses / Net revenue
(Dec 2008 = 25%)
918.8
735.6
10%
15%
General administrative and other
Selling
.34
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
2007 2008
EBITDA (R$ million) and EBITDA margin (%)
982804
28.0% 27.2%
Expenses with depreciation and amortization
In 2008, expenses with depreciation and amortization totaled R$607.2 million, a 25% increase in relation to the R$485.5 million recorded in 2007. This increase is mainly due to higher expenses with digital receiver depreciation. In 2008, 42% of NET clients used this type of receiver, a 59% increase in relation to 2007. Expenses with amortization surged due to higher expenses with the goodwill amortization from the Vivax acquisition and with service installation as a consequence of the growing number of subscribers.
Financial result
In 2008, the Company’s financial result was negative R$318.5 million, compared to a negative result of R$114.8 million in 2007, as financial expenses climbed from R$195.0 million in 2007 to R$431.0 million in 2008. This result is a consequence of the depreciation of the Brazilian real against the U.S. dollar reflected in the Company’s debt denominated in dollars. In 2008, NET did not perform any speculative transactions on the foreign exchange market. Therefore, these expenses are for accounting purposes and do not affect the Company’s cash position.
In addition, there was a positive result from the foreign exchange hedge, used to protect the cash flow from disbursements for financial obligations and equipment purchase, of R$4.6 million in 2008, versus the negative result of R$85.4 million in 2007, and the elimination of the CPMF tax in 1Q08, which lowered financial expenses by approximately R$30.2 million.
Financial revenues increased 40%, from R$80.3 million in 2007 to R$112.5 million in 2008, as a reflex of the higher average cash balance in the period due to the resources inflow resulting from the Banco Inbursa loan. It is important to note that 100% of the Company’s cash is invested in fixed-income securities issued by premier financial institutions.
.35
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Debt
Gross debt, including recognized interests and principal, closed 2008 at R$1,759.8 million, a 56% increase in relation to the amount recorded at the end of 2007. This increase is a result of the loan contracted from Banco Inbursa in 2Q08 and the net fundraising via Finame of R$54.6 million in the course of the year. Additionally, the depreciation of the Brazilian real against the U.S. dollar also increased debt. Short-term debt accounts for only 3% of total debt, indicating that risk of short-term refinancing is close to zero.
In 2008, net debt amounted to R$1,022.9 million, compared to R$555.0 million in 2007, an 84% increase. The net debt/EBITDA ratio increased from 0.69x to 1.04x in 2008, still within a range considered adequate by the Company’s management.
CAPEX
Total investment (CAPEX) in 2008 was R$99.0 million, 29.1% higher than in the previous year. This increase is a result of the higher number of service installations in 2008, to which R$720.3 million of the total investment was allocated.
The Company invests the most in new client acquisition, whether to pay workers for service installation, purchase equipment, or to make the necessary infrastructure adjustments so that the Company can keep up with the growing number of subscribers. In other words, NET’s CAPEX varies according to the number of installations. Within this scenario, it is important to point out that investments allocated to the acquisition of new subscribers have a quick return, bringing a positive and attractive net present value. In view of that, the Company is comfortable in continuing with its investment plans in line with its accelerated growth strategy, since the return on investment is absolutely adequate to its policy of generating return to shareholders.
Prospects
The Company is aware that 2009 will be a challenging year, especially considering three factors: the slowdown in economic activities in Brazil, an increasingly competitive environment, and a more rigid regulatory framework. However, NET has the ability to overcome these challenges due to its ample product portfolio, competitive edges, and corporate strategy.
In 2009, the Company will continue focusing on the bundled offer of broadband Internet access, Pay TV and Net Fone (NET Combo) aimed at the growth of its subscriber base. In addition, NET will continue taking advantage of its key competitive edges, such as its advanced infrastructure that provides clients with innovative services, including ultra-high speed Internet access and high definition video. One example of this is the recent trial launch of NET Vírtua 5G (60Mbps Docsis 3.0) in the cities of São Paulo and Rio de Janeiro, since it makes speeds of 60 Mega and the possibility of high definition video on demand available.
.36
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
NET has already made plans for 2009 and will follow its sustained and accelerated growth strategy. The Company will continue to expand its product portfolio, creating offers to fulfill the various financial and entertainment needs of Brazilian families in spite of the tendency toward deceleration in the macroeconomic scenario, always with financial and market prudence.
.37
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
stock market07
NET is a publicly-held company listed on the São Paulo Stock Exchange (Bovespa), NASDAQ and the Spanish stock exchange (Latibex).
Despite the fact that 2008 was marked by the high volatility of the capital markets, NET shares maintained good liquidity on BOVESPA and NASDAQ. The average daily trading volume on BOVESPA was R$31 million in 2008, decreasing 45% in relation to 2007, while on NASDAQ the average daily trading volume surged from US$7 million in 2007 to US$9 million in 2008.
In 2008, NETC4 shares depreciated 39%, versus a 41% depreciation of the BOVESPA index, listed at R$13.29 on December 31, 2008. On NASDAQ, the ADR (NETC) closed the year at US$5.82. The share price corresponds to a market value of R$4.5 billion.
In 2008, NET’s Board of Directors approved the capital increase upon capitalization of the tax benefit resulting from the goodwill incorporated by the Company. The total amount capitalized will be R$59.0 million through which common and preferred shares will be issued at the price of R$13.96 per share.
At the end of the year, NET’s capital structure was slightly leveraged with an amortization schedule that was free of pressure for the amortization of the principal in the short term. The Company’s ratings remained stable at “brAA-” on the national scale and “BB” on the global scale by S&P, and “Aa3.br” on the national scale and “Ba2” on the global scale by Moody’s, both with a stable trend.
CONTROL
Globo Embratel/Telemax
FreeFloat
Globo: 7%Embratel/Telemax: 35%Market: 58%
Preferred Shares
Common Shares
51% 49%CommonShares
CommonShares
CommonShares
CommonShares
CommonShares
CommonShares
PreferredShares
PreferredShares
PreferredShares
PreferredShares
38%51%10%
1% 0% 13% 86%
1% 100% Common Shares 113,051,524 shares
100% Preferred Shares225,687,596 shares
TOTAL = 338,739,120 shares
ECONOMIC VALUE
GB
Ownership structure on December 31,2008
.38
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
corporate governance08
Net Serviços de Comunicação S.A. has been listed on Bovespa’s Level 2 Corporate Governance since June 2002, and was one of the first companies to adopt more rigid practices of transparency in its relationship with the capital markets and its internal and external audiences. In addition, NET has granted tag-along rights to all shares and strives to constantly reaffirm its commitment to the best corporate governance practices with the goal of joining Bovespa’s Novo Mercado corporate governance segment in the near future.
NET’s management model is based on assertiveness, the purposes and principles of corporate governance and on the practice of the Company’s mission and values, which guide the main business goals. The organization’s interests must also guide the attitude of each employee, the pursuit of profitability, the compliance with laws and regulations and equal treatment for coworkers and partners.
According to the Company’s Bylaws, NET is managed by the Board of Directors and the Board of Executive Officers, with a permanent Fiscal Council.
Board of Directors
The Company’s Board of Directors is composed of twelve members – two of which are independent – elected by the Annual General Meeting to one-year term of office, reelection permitted. Supported by a Financial Committee, the Board of Directors is a joint committee whose duty is to establish the Company’s business policy and strategy, appoint the members of the Board of Executive Officers and monitor its activities, among other duties.
Board of DirectorsName PositionRoberto Irineu Marinho Chairman
Stefan Alexander Sitting Member
Rossana Fontenele Berto Sitting Member
Juarez de Queiroz Campos Jr. Sitting Member
Marcos da Cunha Carneiro Sitting Member
Sérgio Lourenço Marques Sitting Member
Augusto César Roxo de Urzedo Rocha Filho Sitting Member
Carlos Henrique Moreira Sitting Member
José Formoso Martinez Sitting Member
Edgard Lobão dos Santos Sitting Member
Issac Berensztejn Sitting Member
Mauro Szwarcwald Sitting Member
The CVs of the Board of Directors members are available on NET’s Investor Relations website (ri.netservicos.com.br).
.39
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
The CVs of the Board of Executive Officers members are available on NET’s Investor Relations website (ri.netservicos.com.br).
Fiscal Council
Permanently established in 2005 and simultaneously functioning as Audit Committee, NET’s Fiscal Council is composed of three independent members who work in sync with the Board of Directors in the relevant areas, contributing to fast joint decisions in internal and external audit processes, as well as reviewing and approving Financial Statements.
The CVs of the Fiscal Council members are available on NET’s Investor Relations website (ri.netservicos.com.br).
Internal Audit
Provides technical and independent auditing services in compliance with the best professional practices aimed at continuously improving and strengthening NET’s control policy.
To guarantee its independence, the internal audit reports to the Fiscal Council and, administratively, to the Company’s Chief Executive Officer.
Annual General Meeting
Responsible for resolving on all matters involving the Company such as financial statements presented by the managers, mergers and acquisitions, and other procedures, the Annual General Meeting is empowered to elect and dismiss its managers. General Meetings may be called by the Board of Directors, Fiscal Council, Board of Executive Officers or the shareholders.
Executive Officers and Senior ManagementName PositionJosé Antônio Guaraldi Félix Chief Executive Officer
João Adalberto Elek Jr. Chief Financial and Investor Relations Officer
André Müller Borges Chief Legal Officer
José Paulo de Freitas Human Resources and Organizational Development Officer
Fiscal Council:Name PositionMartin Roberto Glogowsky Chairman
Charles Barnsley Holland Sitting Member
Antonio José Alves Júnior Sitting Member
Board of Executive Officers
Composed of four members elected by the Board of Directors to two-year term of office, reelection permitted, the Board of Executive Officers is responsible for executing the Board of Directors’ definitions in their respective business sectors.
.40
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
risk management09
NET understands that planning and discipline in all activities manages risks that naturally threaten its ability to compete, its financial health and image, as well as the quality of its products and services.
Therefore, the Company directs efforts at identifying, analyzing, and managing internal and external risks, which are essential to protecting corporate interests and generate sustainable value to shareholders.
In this process, all departments report risks that may hamper or compromise the efficiency of the Company’s activities. In the scope of management, risks are assessed and control mechanisms are adopted. Some examples of control mechanisms are: financial analysis procedures for new investments, the process of creating and decision to launch a new product or offer, new client credit analysis and debate on the implementation of a new sales channel.
This is a dynamic, interactive process that is often integrated with the organization’s tactical and strategic planning.
.41
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
people management10
NET is aware that employees are fundamental in executing the corporate strategy for the company to be able to reach its goals. Therefore, its people management policy targets attracting and retaining professionals, and also encourages professional development and the creation of an ethical environment. NET’s people management is focused on enhancing the Company’s competitive edges with employees committed to the Company’s performance and aware of their role as part of a successful strategy.
NET closed 2008 with a total of 12,227 employees, a 50% increase over the previous year. This growth was primarily centered in the sales and installation departments. The attraction of professionals that are a good fit with the Company’s strategy is accomplished through fixed compensation on par with the rest of the market, in addition to a variable compensation plan that is extended to all employees, encouraging work for team goals.
Moreover, NET develops training courses and programs to prepare its employees and help them meet market and business demands, and technical and administrative staffs receive continuous training geared towards customer relations, operational efficiency, and product and business understanding.
To maintain a qualified personnel profile, each manager is responsible for motivating and acknowledging his or her team through evaluation tools developed by the Company and providing the team with constant feedback.
Leaders play an essential role in managing assets, people, processes and the environment. For that, they need to be inspiring, encouraging employee commitment to the Company’s targets and setting a good example.
To NET, training is teaching people how to perform tasks completely and responsibly. Therefore, the Company invests in continuous training and development of its employees. The capabilities that NET wishes to perpetuate within the organization are:
Understanding of the business; »Teamwork; »Initiative; »Pleasure in serving clients; »Commitment; »Technical knowledge. »
Supporting the continuous development of the Company’s staff, the process of Capabilities Evaluation provides guidance and helps employees set priorities.
.42
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Capabilities Evaluation
Results
Training programs/Courses/E-learning
On-the-job Training
Job Rotation
Structured Meetings
Structured Guidance Processes
Self-development Actions
Training Strategies
In addition to medical and dental insurance, payroll deductible loans, life insurance and funeral and childcare stipends, NET provides its employees with a variable compensation plan, the Profit Sharing Plan, established according to the annual targets approved by the Board of Directors (to reach a certain target number of Pay TV and broadband Internet subscribers, free cash flow generation and customer satisfaction).
.43
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
corporate responsibility11
NET seeks to exercise its corporate citizenship by means of actions that contribute to the community’s well being, developing projects in the educational, cultural, environmental and social arenas.
Net Educação (Education) is a department that has been training public school teachers across the country since 2004, offering academic support through an exclusive portal, in addition to broadcasting an educational program. The project also promotes traveling events in the Brazilian capital cities with debates between specialists in the subject on relevant issues concerning education.
In 2008 NET created yet another important social program in the Batan community in Rio de Janeiro State. In a partnership with the state government and state public safety department, NET developed a cable TV product specifically for that audience, providing the local community with TV programming with good image and sound quality at affordable prices.
Installation started in the first half of December 2008 with approximately 500 pre-registered people on the waiting list. In addition to supplying the network infrastructure, NET trained the Batan residents association to manage the pay TV business, and the association has four employees who work in client management, acquisition, maintenance, invoicing and installation. The installation capacity is 70 new clients/month and the client base has already reached 200.
.44
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
Glossary12
ABTA – Associação Brasileira de Telecomunicações por Assinatura (Brazilian Subscriber Telecommunications Association)
Broadband – wide range of frequencies, used for video and integrated services in general, with sound, image and data.
Cable - the headend receives the signals from the satellite and these are processed and prepared to be delivered to clients’ homes over a network of coaxial or optical fiber cables installed at utility poles. To receive cable signal, the cable network must be installed on the street.
Coaxial cable – insulated signal conductor (shielded).
Channels à la carte – channels with 24-hour programming that clients may add to their selections. Examples: Sex Hot, Playboy TV and Canal Coréia.
CATV – Community Antenna or Cable TV – a term that today is often used interchangeably with cable TV.
DTH - Direct-to-Home – a service that receives signals directly from the satellite through a small satellite dish.
Decoder – a device that decrypts coded signals.
Optical fiber – glass fibers of micrometric width that carry laser-generated light, allowing the traffic of a large amount of information.
Headend – a facility for receiving, processing, generating and retransmitting signal for subscribers. This term is used in cable and MMDS.
MMDS – Multichannel Multipoint Distribution System, a system that distributes multiple channels to several locations. In the process of channel distribution there is the headend, a facility for distributing, processing, generating and retransmitting signal for subscribers. The headend has a central antenna that receives the signals from the satellite and transmits them to clients through radio waves, which reach households through another antenna and go through a small cable until they reach the decoder.
MSO – Multiple System Operator. A company that has or operates more than one pay TV system.
NET Digital – a TV experience with interactive resources and more programming options, with digital quality audio and video transmission.
NET Fone via Embratel – a VOIP telephone service that combines the technologies of Embratel and NET.
.45
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
NET Vírtua – broadband internet access with speeds of 200 Kbps and 3, 6 and 12 Mbps without the need to use a telephone line.
Node – the point where several cables meet.
Operator – provider of transmission services, i.e., delivers the signal received to the final consumer. The operator is responsible for securing new clients, sending invoices, providing technical support and other product-related services.
Pay-Per-View – additional TV service, whereby subscribers can watch events, soccer championships and concerts. Each channel or event has a pre-established price and sales are made through the relationship channel or the internet.
PPR – Plano de Participação nos Resultados (Profit Sharing Plan)
Programmer – responsible for producing the TV channels in terms of scheduling programs, conducting consumer satisfaction surveys and determining commercial breaks.
SETA – Sindicato das Empresas de TV por Assinatura (Pay TV Companies Union)
Wireless cable – Pay TV distribution systems that do not use cable. This term is usually synonymous with MMDS.
.46
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
corporate information13
Net Serviços de Comunicação S.A.
Rua Verbo Divino, 1356
Chácara Santo Antonio – São Paulo - SP
CEP 04719-002
Phone: (55 11) 2111-2785
Fax: (55 11) 2111-2780
Investor Relations
Marcio Minoru Miyakava
Adriana Godinho
Maria Siqueira
Sandra Firmino
E-mail: [email protected]
Shareholder Services
Banco Itaú S.A
Cláudio Ribeiro
Independent auditors
Ernst & Young Auditores Independentes
.47
NET
Serv
iços
de
com
unic
ação
S.A
. | A
nnua
l Rep
ort
2008
credits
General Coordination
Net Serviços
Text, editing and translation
MZ Comunicação Corporativa Integrada
Graphic design, page layout and programming
MZ Technologies
![[Final] Morgan Stanley - Reg S Offering Circular 26.06](https://img.pdfslide.us/doc/110x75/61f7d50043b8ee1c237f5ce3/final-morgan-stanley-reg-s-offering-circular-2606.jpg)
![[03.03] Splitting Item Specifications](https://img.pdfslide.us/doc/110x75/623d85ebe8554f5e037a5045/0303-splitting-item-specifications.jpg)
