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Tele Nordeste Celular Participações S.A.               Thomson Financial IR
Mario Roberto Gomes                                    Isabel Vieira
55.81.216.2591                                         212.701.1823
Fabíola Almeida                                        isabel.vieira@thomsonir.com
55.81.216.2594                                         Rick Huber
fabiola.almeida@timnordeste.com.br                     212.701.1830
                                                       richard.huber@thomsonir.com

      HYPERLINKHYPERLINK

               TELE NORDESTE CELULAR PARTICIPAÇÕES S.A.
           ANNOUNCES SECOND QUARTER 2000 RESULTS (UNAUDITED)
     Recife, Brazil (August 1, 2000) – Tele Nordeste Celular Participações S.A. (NYSE: TND,
     BOVESPA: TNEP3, TNEP4) (“Tele Nordeste” or “the Company”), the holding company
     controlling the operating companies serving Band A cellular telecommunication clients in the
     states of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas, announced
     today its results for the second quarter of 2000 in accordance with Brazilian GAAP (unaudited).
     The translation to US dollars has been presented solely for the convenience of the reader. This
     conversion does not imply that real amounts actually represent such US dollar amounts or may
     be converted to US dollars at the rate indicated. The US dollar amounts have been converted
     from reais at the commercial selling rate published by the Central Bank of Brazil at June 30,
     2000, which was R$1.80 to US$1.00.

      Operational Highlights

      Marketing activities during the second quarter 2000 resulted in the gross addition of 165,364
      clients (of which 127,953, or 77%, were prepaid). Gross additions for the first half 2000 totaled
      349,454, of which 248,707 (71%) were prepaid. Subscribers’ acquisition cost (SAC) for the
      second quarter 2000 was R$128, compared with R$139 for the first quarter 2000; SAC for the
      first half 2000 was R$134, compared with R$157 for the year 1999. The Company had
      1,362,000 clients at June 30, 2000, of which 843,000 (62%) were contract clients and 519,000
      (38%) were prepaid clients. The market share at the end of the second quarter of 2000 was
      estimated at 65%, compared to 69% at March 31, 2000.

      The new billing system implemented in the second half of 1999 at the six operating companies
      has now been normalized and collection activities have been strengthened. As a result,
      management expects better performance in these activities and lower bad debt expenses in the
      second half of 2000. Also, disconnection of overdue accounts has been reinforced. In the
      second quarter, approximately 50,000 post-paid lines were disconnected due to non-payment.



www.timnordeste.com.br                                                                                    1
At June 30, 2000, Tele Nordeste and its subsidiaries completed a restructuring which resulted in
      the transfer of the goodwill paid in the privatization auction, from Bitel Participações S.A. to each
      individual operating company. This restructuring aims at taking advantage of tax reductions
      estimated at R$200 million over 8 years, until 2008, which will be capitalized by the operating
      companies and will provide significant financial benefits for the company. The proposal to merge
      the operating companies is pending approval from the regulatory agency, Anatel.

      On June 13, 2000, Tele Nordeste formed, together with Tele Celular Sul Participações S.A.
      (NYSE: TSU) an internet company, TimNet.com S.A., to provide internet-based, value-added
      services to their respective clients. The initial investment totals US$10 million and this new
      company will be operational by the end of the third quarter 2000.

      SMS (Short Message System) was launched in July 2000, initially to postpaid clients. For the
      first two months the service will be offered for free. After the introductory period, SMS will be
      offered to all clients. The company estimates that WAP technology will be operational by the
      end of the year, as TDMA WAP handsets become available in the market.

      Financial Highlights

      Tele Nordeste’s consolidated net income for the second quarter 2000 was R$0.9 million
      (US$0.5 million) resulting in a consolidated net income of R$12.1 million (US$6.7 million) for the
      first half of 2000, or R$0.036 (US$0.02) per thousand shares, compared to a consolidated net
      income of R$2.9 million (US$1.6 million) for the second quarter 1999 and R$16.5 million
      (US$9.2 million) for the first half of 1999.

      Consolidated net operating revenue for the second quarter 2000 reached R$210.8 million
      (US$117.1 million), resulting in a total of R$425.3 million (US$236.3 million) for the first half of
      2000, compared to R$150.4 million (US$83.6 million) for the second quarter 1999 and R$290.9
      million (US$161.6 million) for the first half of 1999. Compared with the first quarter 2000, net
      operating revenues decreased by 1.7%, comprised of a decrease in traffic revenue of 5% and
      an increase in sales of handsets of 23%. The reduction in traffic revenue was caused by
      seasonality, and also by more strict credit control implemented in April 2000.

      For the second quarter 2000, the Company reported consolidated EBITDA and EBIT of R$52.9
      million (US$29.4 million) and R$21.4 million (US$11.9 million), respectively, representing a n
      EBITDA margin of 25% and an EBIT margin of 10% over net operating revenues, compared to
      the R$49.5 million (US$27.5 million) EBITDA and R$20.3 million (US$11.3 million) EBIT,
      representing an EBITDA margin of 33% and an EBIT margin of 14% over net operating
      revenues, reported for the second quarter 1999.

      For the first half of 2000, EBITDA and EBIT were R$126.2 million (US$70.1 million) and R$68.7
      million (US$38.2 million), representing an EBITDA and EBIT margin over the net operating
      revenues of 30% and 16%, respectively, compared to the R$110.6 million (US$61.4 million)
      EBITDA and R$53.1 million (US$29.5 million) EBIT, representing a 38% EBITDA margin and an
      EBIT margin of 18% over net operating revenues, reported for the first half of 1999.

                                                                  E B I T D A (i n R $ 0 0 0 )

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www.timnordeste.com.br                                                                                                           2
Consolidated bad debt expenses, net, for the second quarter 2000, were R$29 million (US$16.1
      million), representing 11% of gross revenues for that quarter and reflected adjustments made
      following the normalization of the new billing system; bad debt expenses are expected to
      decrease in the second half of this year, after disconnection of post-paid clients and the
      implementation of new and more effective collection procedures. Also impacting net result for
      the second quarter was the write off of R$5.2 million of undetected, fraudulent international calls
      (cloning) that were paid to the long-distance carriers and not billed to the clients. The anti-fraud
      procedures have also been strengthened during the second quarter to minimize this type of risk.

      Interest on Equity

      In accordance with the Annual Shareholders’ Meeting held on April 27, 2000, the Company has
      started paying 1999 dividends, in the form of interest on equity, totaling R$9.9 million (US$5.5
      million).

      Interest on Equity (per thousand shares)

                                                         Net Value (in reais)
                                                  Exempt                      Taxable
                                           Common     Preferred     Common         Preferred
      Interest on equity                     0.0299        0.0299       0.0254          0.0254

      Tele Nordeste’s subsidiaries, in accordance with their Annual Shareholders’ Meetings, started
      paying dividends and interest on equity based on their results for the year ended December 31,
      1999, on June 26, 2000, totaling R$14.6 million (US$8.1 million).

      Selected Consolidated Financial Data (in thousands of Reais)
                                                        nd                          st
                                                        2    Qtr.                  1 Half
                                                 2000               1999    2000            1999
      Revenue
      - Usage charges                           120,184          94,287      251,572        188,307
      - Monthly subscription payments             38,523         35,552       90,717          67,367
      - Activation fees                                -              -            -              81
      - Network usage charges                     66,597         36,941      128,108          77,048
      - Sale of handsets                          38,550         23,573       69,925          35,154
      - Other                                      1,657            863        4,405           1,838
      Subtotal                                  265,511        191,216       544,727        369,795
      - Value added and other indirect taxes    (54,719)       (40,858)    (119,457)        (78,903)
      Net Operating Revenue                     210,792        150,358       425,270        290,892
      Cost of services and of goods sold
      - Depreciation and amortization           (27,368)       (28,720)     (51,725)      (56,662)
      - Personnel                                (1,315)        (1,178)       (4,058)       (1,743)
      - Materials and services                   (1.692)          1,839       (3,221)       (3,302)
      - Circuit leasing and related expenses    (32,652)       (23,968)     (66,771)      (55,292)
      - Leases and insurance                     (2,246)        (1,507)       (4,468)       (2,972)
      - Cellular handset costs                  (36,793)       (27,520)     (68,514)      (34,353)
      - Fistel and other                           5,616        (5,016)         (588)       (9,809)
      Subtotal                                  (96,450)       (86,070)    (199,345)     (164,133)
      Gross profit                              114,342          64,288      225,925       126,759

      Consolidated net operating revenue for the second quarter 2000 increased 40% when
      compared with the same quarter of the previous year. This increase is primarily due to the
      substantial increase in the number of clients during the period. The average number of clients in
      the second quarter 2000 increased 80% (from 729,000 to 1,315,000) over the same quarter of
      1999. Consolidated net operating revenue for the first half of 2000 increased 46% over the first

www.timnordeste.com.br                                                                                       3
half of 1999. Incoming traffic revenues (network usage charges) increased 80% year-over-year,
      due to the substantial increase in prepaid clients.

                                                              N e t R e v e n u e (i n R $ 0 0 0 )

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      Consolidated gross profit increased 78% when compared to the second quarter of 1999 and
      78% over the first half of last year, primarily as a result of higher usage by the clients (incoming
      and outgoing calls). Fistel tax was reclassified to marketing expenses in the second quarter
      2000.

                                                               G r o ss P r o fi t (i n R $ 0 0 0 )

                              1 2 0 ,0
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      Selected Consolidated Financial Data (in thousands of Reais)
                                                                                                      nd                                      st
                                                                                                  2         Qtr                              1 Half
                                                                                      2000                          1999              2000            1999
      Operating Expenses
        - Selling                                                                      62,768                           24,928        109,333          41,822
        - General and administrative                                                   24,221                           19,134         42,468          31,181
        - Other operating expenses, net                                                 6,306                            (630)          5,940          (2,452)
      Subtotal                                                                         93,295                           43,432        157,741          70,551
      - Net financing expenses                                                         22,363                            9,627         43,336          16,094
      Total                                                                           115,658                           53,059        201,077          86,645

      Consolidated net operating expenses increased substantially during the second quarter
      compared to the same period of the prior year, to R$115.7 million (US$64.3 million) from
      R$53.1 million (US$29.5 million) in 1999. This increase in operating expenses resulted
      primarily from higher bad debt expenses, write off of fraudulent international calls and higher
      financing expenses.

      Consolidated bad debt expense for the second quarter 2000 reached R$29 million (US$16.1
      million), compared with R$11.6 million (US$6.4 million) in the same quarter of 1999,
      representing 11% of gross revenue for the quarter. Year-to-date bad debt expenses amount to
      R$49.8 million (US$27.7 million), or 9% of gross revenues.

      Financing expenses reflect the higher level of indebtedness to finance the expansion projects.
      Consolidated debt-to-equity ratio at June 30, 2000, was 0.7.




www.timnordeste.com.br                                                                                                                                           4
Consolidated Statistics

                                                     2Q, 2000     1Q, 2000     4Q, 1999    3Q, 1999    2Q, 1999
      Clients
       - Postpaid                                      842,569      886,085      860,529    782,353    737,388
       - Prepaid                                       519,100      427,167      327,383    169,704     55,134
       - Total                                       1,361,669    1,313,252    1,187,912    952,057    792,522
      Growth over same period of the previous             71.8         90.4         93.4       86.3       69.8
      year (%)
      Estimated population of region (in millions)        26.2         26.1         26.1       26.0        26.0
      Penetration rate (%)
       - Tele Nordeste                                      5.2          5.0         4.6         3.7         3.0
       - Total                                              8.0          7.3         6.6         4.8         4.1
      Switches                                               12           12          12         12          12
      Radio base stations                                  773          762         737         652         640
      Mini-cells                                             63           62          59         58          58
      Employees (full-time, interns and temporary)       1,646        1,277       1,283       1,275       1,177
      Clients per employee                                 827        1,028         926         747         673

      The digitalization project reached 66% of voice channels at June 30, 2000, and 82% of the
      customer base were already using digital handsets. The total coverage reached 74% of the
      population and 28% of the area.

      ARPU

      The blended average revenue per user (ARPU), net of taxes, for the second quarter of 2000,
      was R$45 (US$25) per month, compared to R$62 (US$34) per month for the second quarter of
      1999. This reduction was caused by the addition of low use, prepaid clients as of May, 1999,
      and the stricter credit control procedures which were resumed in April 2000 (i.e. call blocking).
      The blended ARPU for the first half of 2000 was R$48 (US$27), compared to R$65 (US$36) for
      the same period of the prior year.

      Postpaid ARPU in 2000 has been negatively affected by the increase in blocked lines for credit
      reasons, which was resumed at the end of the second quarter. Blocking is done on a partial
      basis, and therefore, just incoming traffic revenues are generated by those clients.

      Competition

      The Company estimates that its market share at the end of the second quarter of 2000 was
      approximately 65%, in terms of number of lines. The penetration rate in the region at the end of
      June 2000 was estimated at 8%, compared to Brazil’s penetration rate of approximately 11%
      (18.5 million accesses).

      In the second quarter 2000 two promotional campaigns (Mothers’ Day and Valentines’ Day)
      featured interest-free financing of handsets and subsidies linked to one-year contracts with
      minimum usage. General subsidies have been discontinued as of March, 2000.

      Debt

      Consolidated debt at June 30, 2000, was R$392.7 million (US$218.1 million), with R$350.7
      (US$194.8 million) maturing in the short-term. The debt is totally denominated in Reais, in line
      with the Company’s policy of minimizing exposure to foreign currency fluctuations.




www.timnordeste.com.br                                                                                        5
The Company is in the process of closing long-term financing contracts with the European
      Investment Bank – EIB (third quarter) and Banco Nacional de Desenvolvimento Econômico e
      Social – BNDES (fourth quarter).
i

      Capital Expenditures

      During the second quarter of 2000, Tele Nordeste and its subsidiaries invested R$80.4 million
      (US$44.7 million), totaling R$116.5 million (US$64.7 million) for the first half of the year. These
      investments are primarily focused on network digitalization.

      The capex program for 2000 amounts to R$215 million and includes enhancements to the
      Company’s systems, new services and Internet facilities.




        This press release contains forward-looking statements. The Company and its representatives may also make forward-
      looking statements in press releases and oral statements. Statements that are not statements of historical fact, including
      statements about the beliefs and expectations of the Company’s management, are forward-looking statements. The words
      “anticipates,” “believes,” “estimates,” “expects,” forecasts,” predicts,” “projects” and similar words are intended to
      identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and
      uncertainties, some of which are discussed at pages 14-17 herein, include those resulting from the short history of the
      Company’s operations as an independent, private sector, as well as those relating to the cost and availability of financing,
      the performance of the Brazilian economy generally, the levels of exchange rates between Brazilian and foreign currencies
      and the Federal Government’s telecommunications policy. Accordingly, the actual results of operations of the Company
      may be different from the Company’s current expectations, and the reader should not place undue reliance on these
      forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does
      not undertake any obligation to update them in light of new information or future developments.




www.timnordeste.com.br                                                                                                           6
Balance Sheet

      At June 30, and March 31, 2000
      (In thousands of Reais)
                                                         Parent Company            Consolidated
                                                      06.30.2000 03.31.2000   06.30.2000 03.31.2000


     Assets


     Current assets
     Cash and cash equivalents                              524       1,424      10,475       7,624
     Trade accounts receivable – Clients                      -           -     182,022     169,630
     Inventories                                             37          15      13,678      44,578
     Telecommunications companies                             -           -      30,670      36,462
     Trade accounts receivable – Subsidiaries            14,456           -           -           -
     Recoverable taxes                                    2,957       1,937      44,077      14,758
     Deferred income and social contribution taxes          332       1,082      24,970      21,677
     Dividends and interest on shareholders’ equity       4,079       9,632           -           -
     Prepaid expenses                                        66          17      10,728           -
     Other assets                                         1,634       1,597      16,783      67,505
                                                         24,084      15,704     333,405     362,234

     Noncurrent assets
     Loan to subsidiaries                                 5,293      27,232           -           -
     Tax incentives                                           -           -       2,791       2,746
                                                          5,293      27,232       2,791       2,746

     Permanent assets
     Investments                                        544,312     341,111           1           -
     Property, plant and equipment                        5,297       4,901     704,239     654,269
     Deferred asset                                           -           -     202,300           -
                                                        549,609     346,012     906,540     654,269

                                                        578,987     388,948    1,242,736   1,019,250




www.timnordeste.com.br                                                                                 7
Balance Sheet

      At June 30, and March 31, 2000
      (In thousands of Reais)
                                                         Parent Company            Consolidated
                                                      06.30.2000 03.31.2000   06.30.2000 03.31.2000


     Liabilities and Shareholders’ Equity


     Current liabilities
     Suppliers                                              926         504      74,753      76,898
     Loans and financing                                      -           -     350,740     332,370
     Taxes payable                                          902         594      51,098      45,796
     Salaries and vacation pay                            1,573       1,205       7,322       5,885
     Subsidiaries                                           100      10,641           -           -
     Telecommunication companies                              2           3      14,118       9,843
     Dividends and interest on shareholders’ equity       2,400      10,373       7,586       4,401
     Other liabilities                                    1,459         376      19,979      32,161
                                                          7,362      23,698     524,415     507,354

     Noncurrent liabilities
     Loans and financing                                       -          -      41,920      45,376
     Other liabilities                                         -          -       1,972          93
                                                               -          -      43,892      45,469

     Minority interest                                         -          -     101,623     101,176


     Shareholders’ equity
     Capital                                            108,843     108,943     108,843     108,943
     Special reserves                                   204,068           -     204,068           -
     Earnings reserves                                  178,922     178,922     178,922     178,922
     Retained earnings                                   79,792      77,386      79,792      77,386
                                                        571,625     365,251     571,625     365,251

                                                        578,987     388,948    1,242,736   1,019,250




www.timnordeste.com.br                                                                                 8
Statement of Income

        For the quarters and semesters ended June 30, 2000 and June 30, 1999
        (In thousands of Reais)

                                                   Parent Company                                           Consolidated
                                    Quarter      Semester       Quarter      Semester       Quarter     Semester      Quarter     Semester
                                     ended         ended         ended         ended         ended        ended        ended        ended
                                   06.30.2000    06.30.2000    06.30.1999    06.30.1999    06.30.2000   06.30.2000   06.30.1999   06.30.1999

Revenue
Telecommunications services and
sale of goods                                -             -             -             -     265,511      544,727      191,216      369,795

Deductions
(taxes and discounts)                        -             -             -             -     (54,718)   (119,457)      (40,858)     (78,903)

Net Revenue                                  -             -             -             -     210,793      425,270      150,358      290,892

Cost of goods sold and
services rendered                            -             -             -             -     (96,450)   (199,345)      (86,070)   (164,133)

Gross profit                                 -             -             -             -     114,343      225,925       64,288      126,759

Operating revenues (expenses)
Selling expenses                             -             -             -             -     (62,768)   (109,333)      (24,928)     (41,822)
Administrative and general
expenses                              (1,156)       (2,963)       (7,345)      (10,597)      (24,221)     (42,469)     (19,134)     (31,181)
Financial expenses                      (173)         (230)         (499)       (1,189)      (22,827)     (47,832)     (12,272)     (26,179)
Financial income                        1,409         2,143         1,799         4,119           464        4,496        2,645       10,085
Equity in income of subsidiaries        3,866       15,774          8,938        24,155             -            -            -            -
Other operating income                      -             -              -             -        2,872        3,690        2,579        5,635
Other operating expenses              (1,085)       (1,159)            (7)           (7)      (9,178)      (9,629)      (1,949)      (3,183)

Operating income (loss)                 2,861       13,565          2,886       16,481        (1,316)      24,848       11,229       40,114

Nonoperating income                       (17)             -             -             -          724       1,029             -            -
Nonoperating expenses                        -             -             -             -        (347)       (545)         (558)      (3,106)

Income before income and
social contribution taxes               2,844       13,565          2,886       16,481          (939)      25,332       10,671       37,008

Income and social contribution
taxes                                   (439)              -             -             -       1,407      (10,183)      (5,077)     (13,355)
Reversal of interest on
shareholders’ equity                         -             -             -             -       1,227        1,227             -             -

Net income before minority
interest                                2,405       13,565          2,886       16,481         1,695       16,376        5,594       23,653

Minority interest                            -             -             -             -        (779)      (4,300)      (2,708)      (7,172)

Net income (loss)                       2,405       13,565          2,886       16,481           916       12,076        2,886       16,481

Net income (loss) per lot of a
thousand shares (R$)                  0.0072        0.0406       0.00863        0.0493

Number of shares at
June 30, 2000 (thousands)          334,399,028   334,399,028   334,399,028   334,399,028




www.timnordeste.com.br                                                                                                                  9

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Press Release 2 Q00 Tele Nordeste Celular En

  • 1. Contacts: Tele Nordeste Celular Participações S.A. Thomson Financial IR Mario Roberto Gomes Isabel Vieira 55.81.216.2591 212.701.1823 Fabíola Almeida isabel.vieira@thomsonir.com 55.81.216.2594 Rick Huber fabiola.almeida@timnordeste.com.br 212.701.1830 richard.huber@thomsonir.com HYPERLINKHYPERLINK TELE NORDESTE CELULAR PARTICIPAÇÕES S.A. ANNOUNCES SECOND QUARTER 2000 RESULTS (UNAUDITED) Recife, Brazil (August 1, 2000) – Tele Nordeste Celular Participações S.A. (NYSE: TND, BOVESPA: TNEP3, TNEP4) (“Tele Nordeste” or “the Company”), the holding company controlling the operating companies serving Band A cellular telecommunication clients in the states of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas, announced today its results for the second quarter of 2000 in accordance with Brazilian GAAP (unaudited). The translation to US dollars has been presented solely for the convenience of the reader. This conversion does not imply that real amounts actually represent such US dollar amounts or may be converted to US dollars at the rate indicated. The US dollar amounts have been converted from reais at the commercial selling rate published by the Central Bank of Brazil at June 30, 2000, which was R$1.80 to US$1.00. Operational Highlights Marketing activities during the second quarter 2000 resulted in the gross addition of 165,364 clients (of which 127,953, or 77%, were prepaid). Gross additions for the first half 2000 totaled 349,454, of which 248,707 (71%) were prepaid. Subscribers’ acquisition cost (SAC) for the second quarter 2000 was R$128, compared with R$139 for the first quarter 2000; SAC for the first half 2000 was R$134, compared with R$157 for the year 1999. The Company had 1,362,000 clients at June 30, 2000, of which 843,000 (62%) were contract clients and 519,000 (38%) were prepaid clients. The market share at the end of the second quarter of 2000 was estimated at 65%, compared to 69% at March 31, 2000. The new billing system implemented in the second half of 1999 at the six operating companies has now been normalized and collection activities have been strengthened. As a result, management expects better performance in these activities and lower bad debt expenses in the second half of 2000. Also, disconnection of overdue accounts has been reinforced. In the second quarter, approximately 50,000 post-paid lines were disconnected due to non-payment. www.timnordeste.com.br 1
  • 2. At June 30, 2000, Tele Nordeste and its subsidiaries completed a restructuring which resulted in the transfer of the goodwill paid in the privatization auction, from Bitel Participações S.A. to each individual operating company. This restructuring aims at taking advantage of tax reductions estimated at R$200 million over 8 years, until 2008, which will be capitalized by the operating companies and will provide significant financial benefits for the company. The proposal to merge the operating companies is pending approval from the regulatory agency, Anatel. On June 13, 2000, Tele Nordeste formed, together with Tele Celular Sul Participações S.A. (NYSE: TSU) an internet company, TimNet.com S.A., to provide internet-based, value-added services to their respective clients. The initial investment totals US$10 million and this new company will be operational by the end of the third quarter 2000. SMS (Short Message System) was launched in July 2000, initially to postpaid clients. For the first two months the service will be offered for free. After the introductory period, SMS will be offered to all clients. The company estimates that WAP technology will be operational by the end of the year, as TDMA WAP handsets become available in the market. Financial Highlights Tele Nordeste’s consolidated net income for the second quarter 2000 was R$0.9 million (US$0.5 million) resulting in a consolidated net income of R$12.1 million (US$6.7 million) for the first half of 2000, or R$0.036 (US$0.02) per thousand shares, compared to a consolidated net income of R$2.9 million (US$1.6 million) for the second quarter 1999 and R$16.5 million (US$9.2 million) for the first half of 1999. Consolidated net operating revenue for the second quarter 2000 reached R$210.8 million (US$117.1 million), resulting in a total of R$425.3 million (US$236.3 million) for the first half of 2000, compared to R$150.4 million (US$83.6 million) for the second quarter 1999 and R$290.9 million (US$161.6 million) for the first half of 1999. Compared with the first quarter 2000, net operating revenues decreased by 1.7%, comprised of a decrease in traffic revenue of 5% and an increase in sales of handsets of 23%. The reduction in traffic revenue was caused by seasonality, and also by more strict credit control implemented in April 2000. For the second quarter 2000, the Company reported consolidated EBITDA and EBIT of R$52.9 million (US$29.4 million) and R$21.4 million (US$11.9 million), respectively, representing a n EBITDA margin of 25% and an EBIT margin of 10% over net operating revenues, compared to the R$49.5 million (US$27.5 million) EBITDA and R$20.3 million (US$11.3 million) EBIT, representing an EBITDA margin of 33% and an EBIT margin of 14% over net operating revenues, reported for the second quarter 1999. For the first half of 2000, EBITDA and EBIT were R$126.2 million (US$70.1 million) and R$68.7 million (US$38.2 million), representing an EBITDA and EBIT margin over the net operating revenues of 30% and 16%, respectively, compared to the R$110.6 million (US$61.4 million) EBITDA and R$53.1 million (US$29.5 million) EBIT, representing a 38% EBITDA margin and an EBIT margin of 18% over net operating revenues, reported for the first half of 1999. E B I T D A (i n R $ 0 0 0 ) 8 0 ,0 6 0 ,0 4 0 ,0 2 0 ,0 0 ,0 1 Q9 8 2 Q9 8 3 Q9 8 4 Q9 8 1 Q9 9 2 Q9 9 3 Q9 9 4 Q9 9 1 Q0 0 2 Q0 0 www.timnordeste.com.br 2
  • 3. Consolidated bad debt expenses, net, for the second quarter 2000, were R$29 million (US$16.1 million), representing 11% of gross revenues for that quarter and reflected adjustments made following the normalization of the new billing system; bad debt expenses are expected to decrease in the second half of this year, after disconnection of post-paid clients and the implementation of new and more effective collection procedures. Also impacting net result for the second quarter was the write off of R$5.2 million of undetected, fraudulent international calls (cloning) that were paid to the long-distance carriers and not billed to the clients. The anti-fraud procedures have also been strengthened during the second quarter to minimize this type of risk. Interest on Equity In accordance with the Annual Shareholders’ Meeting held on April 27, 2000, the Company has started paying 1999 dividends, in the form of interest on equity, totaling R$9.9 million (US$5.5 million). Interest on Equity (per thousand shares) Net Value (in reais) Exempt Taxable Common Preferred Common Preferred Interest on equity 0.0299 0.0299 0.0254 0.0254 Tele Nordeste’s subsidiaries, in accordance with their Annual Shareholders’ Meetings, started paying dividends and interest on equity based on their results for the year ended December 31, 1999, on June 26, 2000, totaling R$14.6 million (US$8.1 million). Selected Consolidated Financial Data (in thousands of Reais) nd st 2 Qtr. 1 Half 2000 1999 2000 1999 Revenue - Usage charges 120,184 94,287 251,572 188,307 - Monthly subscription payments 38,523 35,552 90,717 67,367 - Activation fees - - - 81 - Network usage charges 66,597 36,941 128,108 77,048 - Sale of handsets 38,550 23,573 69,925 35,154 - Other 1,657 863 4,405 1,838 Subtotal 265,511 191,216 544,727 369,795 - Value added and other indirect taxes (54,719) (40,858) (119,457) (78,903) Net Operating Revenue 210,792 150,358 425,270 290,892 Cost of services and of goods sold - Depreciation and amortization (27,368) (28,720) (51,725) (56,662) - Personnel (1,315) (1,178) (4,058) (1,743) - Materials and services (1.692) 1,839 (3,221) (3,302) - Circuit leasing and related expenses (32,652) (23,968) (66,771) (55,292) - Leases and insurance (2,246) (1,507) (4,468) (2,972) - Cellular handset costs (36,793) (27,520) (68,514) (34,353) - Fistel and other 5,616 (5,016) (588) (9,809) Subtotal (96,450) (86,070) (199,345) (164,133) Gross profit 114,342 64,288 225,925 126,759 Consolidated net operating revenue for the second quarter 2000 increased 40% when compared with the same quarter of the previous year. This increase is primarily due to the substantial increase in the number of clients during the period. The average number of clients in the second quarter 2000 increased 80% (from 729,000 to 1,315,000) over the same quarter of 1999. Consolidated net operating revenue for the first half of 2000 increased 46% over the first www.timnordeste.com.br 3
  • 4. half of 1999. Incoming traffic revenues (network usage charges) increased 80% year-over-year, due to the substantial increase in prepaid clients. N e t R e v e n u e (i n R $ 0 0 0 ) 2 5 0 ,0 2 0 0 ,0 1 5 0 ,0 1 0 0 ,0 5 0 ,0 0 ,0 1 Q9 8 2 Q9 8 3 Q9 8 4 Q9 8 1 Q9 9 2 Q9 9 3 Q9 9 4 Q9 9 1 Q0 0 2 Q0 0 Consolidated gross profit increased 78% when compared to the second quarter of 1999 and 78% over the first half of last year, primarily as a result of higher usage by the clients (incoming and outgoing calls). Fistel tax was reclassified to marketing expenses in the second quarter 2000. G r o ss P r o fi t (i n R $ 0 0 0 ) 1 2 0 ,0 1 0 0 ,0 8 0 ,0 6 0 ,0 4 0 ,0 2 0 ,0 0 ,0 1 Q9 8 2 Q9 8 3 Q9 8 4 Q9 8 1 Q9 9 2 Q9 9 3 Q9 9 4 Q9 9 1 Q0 0 2 Q0 0 Selected Consolidated Financial Data (in thousands of Reais) nd st 2 Qtr 1 Half 2000 1999 2000 1999 Operating Expenses - Selling 62,768 24,928 109,333 41,822 - General and administrative 24,221 19,134 42,468 31,181 - Other operating expenses, net 6,306 (630) 5,940 (2,452) Subtotal 93,295 43,432 157,741 70,551 - Net financing expenses 22,363 9,627 43,336 16,094 Total 115,658 53,059 201,077 86,645 Consolidated net operating expenses increased substantially during the second quarter compared to the same period of the prior year, to R$115.7 million (US$64.3 million) from R$53.1 million (US$29.5 million) in 1999. This increase in operating expenses resulted primarily from higher bad debt expenses, write off of fraudulent international calls and higher financing expenses. Consolidated bad debt expense for the second quarter 2000 reached R$29 million (US$16.1 million), compared with R$11.6 million (US$6.4 million) in the same quarter of 1999, representing 11% of gross revenue for the quarter. Year-to-date bad debt expenses amount to R$49.8 million (US$27.7 million), or 9% of gross revenues. Financing expenses reflect the higher level of indebtedness to finance the expansion projects. Consolidated debt-to-equity ratio at June 30, 2000, was 0.7. www.timnordeste.com.br 4
  • 5. Consolidated Statistics 2Q, 2000 1Q, 2000 4Q, 1999 3Q, 1999 2Q, 1999 Clients - Postpaid 842,569 886,085 860,529 782,353 737,388 - Prepaid 519,100 427,167 327,383 169,704 55,134 - Total 1,361,669 1,313,252 1,187,912 952,057 792,522 Growth over same period of the previous 71.8 90.4 93.4 86.3 69.8 year (%) Estimated population of region (in millions) 26.2 26.1 26.1 26.0 26.0 Penetration rate (%) - Tele Nordeste 5.2 5.0 4.6 3.7 3.0 - Total 8.0 7.3 6.6 4.8 4.1 Switches 12 12 12 12 12 Radio base stations 773 762 737 652 640 Mini-cells 63 62 59 58 58 Employees (full-time, interns and temporary) 1,646 1,277 1,283 1,275 1,177 Clients per employee 827 1,028 926 747 673 The digitalization project reached 66% of voice channels at June 30, 2000, and 82% of the customer base were already using digital handsets. The total coverage reached 74% of the population and 28% of the area. ARPU The blended average revenue per user (ARPU), net of taxes, for the second quarter of 2000, was R$45 (US$25) per month, compared to R$62 (US$34) per month for the second quarter of 1999. This reduction was caused by the addition of low use, prepaid clients as of May, 1999, and the stricter credit control procedures which were resumed in April 2000 (i.e. call blocking). The blended ARPU for the first half of 2000 was R$48 (US$27), compared to R$65 (US$36) for the same period of the prior year. Postpaid ARPU in 2000 has been negatively affected by the increase in blocked lines for credit reasons, which was resumed at the end of the second quarter. Blocking is done on a partial basis, and therefore, just incoming traffic revenues are generated by those clients. Competition The Company estimates that its market share at the end of the second quarter of 2000 was approximately 65%, in terms of number of lines. The penetration rate in the region at the end of June 2000 was estimated at 8%, compared to Brazil’s penetration rate of approximately 11% (18.5 million accesses). In the second quarter 2000 two promotional campaigns (Mothers’ Day and Valentines’ Day) featured interest-free financing of handsets and subsidies linked to one-year contracts with minimum usage. General subsidies have been discontinued as of March, 2000. Debt Consolidated debt at June 30, 2000, was R$392.7 million (US$218.1 million), with R$350.7 (US$194.8 million) maturing in the short-term. The debt is totally denominated in Reais, in line with the Company’s policy of minimizing exposure to foreign currency fluctuations. www.timnordeste.com.br 5
  • 6. The Company is in the process of closing long-term financing contracts with the European Investment Bank – EIB (third quarter) and Banco Nacional de Desenvolvimento Econômico e Social – BNDES (fourth quarter). i Capital Expenditures During the second quarter of 2000, Tele Nordeste and its subsidiaries invested R$80.4 million (US$44.7 million), totaling R$116.5 million (US$64.7 million) for the first half of the year. These investments are primarily focused on network digitalization. The capex program for 2000 amounts to R$215 million and includes enhancements to the Company’s systems, new services and Internet facilities. This press release contains forward-looking statements. The Company and its representatives may also make forward- looking statements in press releases and oral statements. Statements that are not statements of historical fact, including statements about the beliefs and expectations of the Company’s management, are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” forecasts,” predicts,” “projects” and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties, some of which are discussed at pages 14-17 herein, include those resulting from the short history of the Company’s operations as an independent, private sector, as well as those relating to the cost and availability of financing, the performance of the Brazilian economy generally, the levels of exchange rates between Brazilian and foreign currencies and the Federal Government’s telecommunications policy. Accordingly, the actual results of operations of the Company may be different from the Company’s current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments. www.timnordeste.com.br 6
  • 7. Balance Sheet At June 30, and March 31, 2000 (In thousands of Reais) Parent Company Consolidated 06.30.2000 03.31.2000 06.30.2000 03.31.2000 Assets Current assets Cash and cash equivalents 524 1,424 10,475 7,624 Trade accounts receivable – Clients - - 182,022 169,630 Inventories 37 15 13,678 44,578 Telecommunications companies - - 30,670 36,462 Trade accounts receivable – Subsidiaries 14,456 - - - Recoverable taxes 2,957 1,937 44,077 14,758 Deferred income and social contribution taxes 332 1,082 24,970 21,677 Dividends and interest on shareholders’ equity 4,079 9,632 - - Prepaid expenses 66 17 10,728 - Other assets 1,634 1,597 16,783 67,505 24,084 15,704 333,405 362,234 Noncurrent assets Loan to subsidiaries 5,293 27,232 - - Tax incentives - - 2,791 2,746 5,293 27,232 2,791 2,746 Permanent assets Investments 544,312 341,111 1 - Property, plant and equipment 5,297 4,901 704,239 654,269 Deferred asset - - 202,300 - 549,609 346,012 906,540 654,269 578,987 388,948 1,242,736 1,019,250 www.timnordeste.com.br 7
  • 8. Balance Sheet At June 30, and March 31, 2000 (In thousands of Reais) Parent Company Consolidated 06.30.2000 03.31.2000 06.30.2000 03.31.2000 Liabilities and Shareholders’ Equity Current liabilities Suppliers 926 504 74,753 76,898 Loans and financing - - 350,740 332,370 Taxes payable 902 594 51,098 45,796 Salaries and vacation pay 1,573 1,205 7,322 5,885 Subsidiaries 100 10,641 - - Telecommunication companies 2 3 14,118 9,843 Dividends and interest on shareholders’ equity 2,400 10,373 7,586 4,401 Other liabilities 1,459 376 19,979 32,161 7,362 23,698 524,415 507,354 Noncurrent liabilities Loans and financing - - 41,920 45,376 Other liabilities - - 1,972 93 - - 43,892 45,469 Minority interest - - 101,623 101,176 Shareholders’ equity Capital 108,843 108,943 108,843 108,943 Special reserves 204,068 - 204,068 - Earnings reserves 178,922 178,922 178,922 178,922 Retained earnings 79,792 77,386 79,792 77,386 571,625 365,251 571,625 365,251 578,987 388,948 1,242,736 1,019,250 www.timnordeste.com.br 8
  • 9. Statement of Income For the quarters and semesters ended June 30, 2000 and June 30, 1999 (In thousands of Reais) Parent Company Consolidated Quarter Semester Quarter Semester Quarter Semester Quarter Semester ended ended ended ended ended ended ended ended 06.30.2000 06.30.2000 06.30.1999 06.30.1999 06.30.2000 06.30.2000 06.30.1999 06.30.1999 Revenue Telecommunications services and sale of goods - - - - 265,511 544,727 191,216 369,795 Deductions (taxes and discounts) - - - - (54,718) (119,457) (40,858) (78,903) Net Revenue - - - - 210,793 425,270 150,358 290,892 Cost of goods sold and services rendered - - - - (96,450) (199,345) (86,070) (164,133) Gross profit - - - - 114,343 225,925 64,288 126,759 Operating revenues (expenses) Selling expenses - - - - (62,768) (109,333) (24,928) (41,822) Administrative and general expenses (1,156) (2,963) (7,345) (10,597) (24,221) (42,469) (19,134) (31,181) Financial expenses (173) (230) (499) (1,189) (22,827) (47,832) (12,272) (26,179) Financial income 1,409 2,143 1,799 4,119 464 4,496 2,645 10,085 Equity in income of subsidiaries 3,866 15,774 8,938 24,155 - - - - Other operating income - - - - 2,872 3,690 2,579 5,635 Other operating expenses (1,085) (1,159) (7) (7) (9,178) (9,629) (1,949) (3,183) Operating income (loss) 2,861 13,565 2,886 16,481 (1,316) 24,848 11,229 40,114 Nonoperating income (17) - - - 724 1,029 - - Nonoperating expenses - - - - (347) (545) (558) (3,106) Income before income and social contribution taxes 2,844 13,565 2,886 16,481 (939) 25,332 10,671 37,008 Income and social contribution taxes (439) - - - 1,407 (10,183) (5,077) (13,355) Reversal of interest on shareholders’ equity - - - - 1,227 1,227 - - Net income before minority interest 2,405 13,565 2,886 16,481 1,695 16,376 5,594 23,653 Minority interest - - - - (779) (4,300) (2,708) (7,172) Net income (loss) 2,405 13,565 2,886 16,481 916 12,076 2,886 16,481 Net income (loss) per lot of a thousand shares (R$) 0.0072 0.0406 0.00863 0.0493 Number of shares at June 30, 2000 (thousands) 334,399,028 334,399,028 334,399,028 334,399,028 www.timnordeste.com.br 9