Net Servicos De Comunicacao S A SC TO-T Third party tender offer statement

Exhibit (c)(i)

Appraisal Report by Banco Itaú BBA, exhibit to Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with theComissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English Translation)

In connection with the proposed transaction, Empresa Brasileira de Telecomunicações S.A. – Embratel (“Embratel”) will file with the U.S. Securities and Exchange Commission (the “SEC”) a Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 (the “Tender Offer Statement”). Investors and security holders are urged to read the Tender Offer Statement and its exhibits regarding the proposed transaction when it becomes available because it will contain important information. You may obtain a free copy of the Tender Offer Statement and its exhibits (when available) and other related documents filed by Embratel with the SEC at the SEC’s website at www.sec.gov.

This document contains certain forward-looking statements that reflect the current views and/or expectations Embratel and its management with respect to its performance, business and future events. We use words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and other similar expressions to identify forward-looking statements, but they are not the only way we identify such statements. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this release. Embratel is under no obligation and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

August, 2010

Appraisal Report

Contracting Party: Empresa

Brasileira

de

Telecomunicações

S.A. -

Embratel

Subject

Matters:

NET

Serviços

de

Comunicações

S.A.

DRAFT

2

Contents

Important Notes

SECTION 1

Executive Summary

SECTION 2

Information on Itaú

BBA

SECTION 3

Telecommunications Industry and Overview of NET

SECTION 4

NET’s

Valuation

APPENDIX A

Glossary of Terms and Definitions

APPENDIX B

Average Target Price

3

Important Notes

MATERIAL

LEGAL

INFORMATION

–

in

having

access

to

this

valuation

report

you

confirm

that

you

have

read

and

that

you

will

comply

with

the

information

set

forth

below:

We,

Banco

Itaú

BBA

(“Itaú

BBA”)

were

hired

by

Empresa

Brasileira

de

Telecomunicações

S.A.

–

Embratel

(“Embratel”)

to

prepare

an

economic-financial

valuation

report

(“Valuation

Report”)

about

Net

Serviços

de

Comunicações

S.A.,

(“Net”

or

“Company”),

in

the

context

of

a

voluntary

tender

offer

by

Embratel

for

preferred

shares

of

Net

(“Tender

Offer”).

The

information

on

this

Valuation

Report

was

obtained

exclusively

from

public

sources.

As

a

result,

we

have

used

(i)

the

audited

consolidated

financial

statements

of

the

Company,

publicly

available

for

the

fiscal

years

ended

on

December

31,

2007,

2008

and

2009

and

for

the

six-month

period

ended

June

30,

2010;

and

(ii)

research

reports

and

financial,

economic

and

market

studies,

as

well

as

other

publications

related

to

the

business

of

the

Company,

the

performance

of

its

shares

and

expected

profitability

of

its

shares,

prepared

by

independent

market

research

analysts,

(jointly

referred

to

as

“Information”).

The

Information

was

obtained

from

public

sources

we

believe

to

be

reliable,

however,

we

have

not

independently

verified

the

Information

and

we

are

not

responsible

for

its

accuracy,

correctness

or

sufficiency.

We

did

not

have

contact

with

the

management

of

the

Company,

nor

any

non-public

information

about

the

Company

and

its

businesses.

Any

estimates

or

projections

presented

here

were

obtained

from

public

sources,

as

no

meetings

or

discussions

about

this

information

were

held

with

the

management

of

the

Company

or

Embratel,

with

no

guarantee

whether

these

estimates

and

projections

will

materialize.

We

do

not

assume

any

responsibility

for

these

estimates

and

projections,

or

the

way

in

which

they

were

obtained.

We

are

not

responsible

for

conducting

and

have

not

conducted

an

independent

verification

of

the

Information

obtained.

This

Valuation

Report

was

prepared

in

accordance

with

Instruction

No.

361

issued

by

the

Brazilian

Securities

Commission

(“CVM”)

and

does

not

constitute

a

proposal,

solicitation,

advice

or

recommendation

from

Itaú

BBA,

whether

to

tender

shares

in

the

Tender

Offer

or

not.

Any

decisions

related

to

the

Tender

Offer

that

are

made

by

Embratel,

its

shareholders

and

holders

of

shares

issued

by

the

Company

addressees

of

the

Tender

Offer

(“Shareholders”)

are

in

their

sole

and

exclusive

responsibilities

according

to

their

own

analysis

of

risks

and

benefits

involved

in

the

Tender

Offer.

As

a

result,

we

are

not

responsible

for

the

decisions

taken

by

Embratel,

its

partners

and

Shareholders

in

relation

to

the

Tender Offer.

Embratel

or

any

third-party

that

we

authorize

to

use

this

Valuation

Report,

will

exempt

us,

our

directors,

officers,

employees

and/or

representatives

from

any

responsibility

for

losses,

damages,

expenses

and

judicial

orders,

which

may

arise,

directly

or

indirectly,

from

the

compilation

of

this

Valuation

Report,

also

agreeing

to

indemnify

us

for

any

losses,

damages,

expenses

and

judicial

orders

resulting

from

this

Valuation

Report.

We

are

not

liable

for

any

direct

or

indirect

losses

and/or

damages,

or

lost

profits

which

may

arise

from

this

Valuation

Report.

The

base

date

used

in

this

Valuation

Report

is

June

30,

2010,

and

it

was

completed

and

delivered

on

August

5,

2010.

Shareholders

must

conduct

their

own

analyses

in

relation

to

the

appropriateness

and

opportunity

of

participating

in

the

Tender

Offer

and

must

consult

their

own

legal,

tax

and

financial

counsel

in

order

to

form

their

own

opinions

about

the

Tender

Offer

independently.

This

Valuation

Report

must

be

read

and

interpreted

in

light

of

its

qualifications

and

restrictions

mentioned

here.

The

reader

must

consider

in

its

analysis,

the

restrictions

and

characteristics

of

the

sources

used.

4

Important Notes

This

Valuation

Repost

must

be

used

exclusively

for

the

Tender

Offer,

which

was

duly

disclosed

to

the

market

through

Material

Fact

dated

August

5,

2010,

released

in

the

Brazilian

Valor

Econômico

newspaper,

published

on

August

5,

2010.

In

the

course

of

our

work,

we

assume

that

the

Information

is

true,

accurate

and

complete

and

that

no

other

information,

which

could

have

been

relevant

with

respect

to

our

work,

was

not

made

available

to

us.

In

addition,

we

have

analyzed

the

consistency

of

the

Information

based

on

our

experience

and

good

sense,

but

we

do

not

assume

any

responsibility

for

independent

evaluations

of

any

Information

or

independent

verification

or

assessment

of

any

assets

or

liabilities

(contingent

or

not)

of

the

Company

and

we

have

not

received

any

such

assessment.

We

have

not

been

asked

to

conduct,

and

have

not

conducted

any

physical

inspection

of

the

properties

or

facilities

of

the

Company.

Finally,

we

have

not

assessed the solvency or fair value of the Company.

In

light

of

the

limitations

mentioned

above,

we

do

not

make,

and

will

not

make,

either

expressly

or

implicitly,

any

representation

or

warranty

regarding

any

Information

used

in

the

preparation

of

this

Valuation

Report

and

there

are

no

provisions

that

could

be

interpreted

as

a

representation

in

relation

to

the

past,

present

or

future.

The

analysis

contained

in

this

Valuation

Report

involves

complex

considerations

and

judgments

in

relation

to

the

financial

and

operational

characteristics

and

other

factors

that

could

affect

the

acquisition,

public

negotiation

and

other

assets

of

the

Company,

as

well

as

considerations

about

the

business

segments

or

the

analyzed

operations,

the

appropriate

and

material

methods

of

the

financial

analysis

and

the

application

of

these

methods

to

specific

circumstances.

The

estimates

contained

in

the

analysis

and

the

resulting

variation

of

any

analysis

is

not

indicative

of

real

amounts

or

indicative

of

future

results

or

amounts,

which

may

be

more

or

less

favorable

than

the

ones

suggested

by

the

referred

analysis.

In

addition,

the

analyses

referring

to

business

evaluations

and

securities

do

not

constitute

valuations

or

reflect

the

prices

in

which

the

business

were

actually

acquired

or

sold,

the

real

value

of

the

shares

in

the

moments

of

issuance

in

a

transaction

or

the

prices

by

which

the

shares

may

be

negotiated

at

any

time.

In

case

any

of

these

premises

do

not

materialize,

or

than

in

any

way,

the

Information

proves

to

be

incorrect,

incomplete

or

imprecise,

the

conclusions

may

alter

in

a

substantial

way.

Additionally,

for

our

analysis

based

on

the

discounted

cash

flow

methodology,

we

assumed

a

macroeconomic

scenario

as

compiled

and

published

by

the

Brazilian

Central

Bank,

which

may

be

substantially

different

from

future

results.

Given

that

the

analysis

and

amounts

are

based

on

forecasts

of

future

results,

they

are

not

necessarily

indicative

of

the

real

and

future

financial

results

of

the

Company,

which

may

be

materially

more

or

less

favorable

than

the

ones

suggested

by

this

Valuation

Report.

In

addition,

given

that

these

analyses

are

intrinsically

subject

to

uncertainties,

and

are

based

on

several

events

and

factors

which

are

out

of

our

control,

the

control

of

the

Company

and

Embratel,

we

are

not

responsible

in

any

way

if

the

results

of

the

Company,

differ

substantially

from

the

results

presented

in

this

Valuation

Report.

There

is

no

guarantee

that

the

future

results

of

the

Company

will

correspond

to

the

financial

projections

we

based

our

analysis

on

and

that

the

differences

between

the

projections

used

and

the

financial

results

of

the

Company

are

not

material.

The

future

results

of

the

Company

may

also

be

affected

by

economic

and

market

conditions.

The

preparation

of

this

Valuation

Report

is

in

no

way

a

commitment

to

result

from

Itáu

BBA.

The

preparation

of

a

financial

analysis

is

a

complex

process,

which

involves

various

definitions

in

respect

to

the

most

appropriate

and

relevant

financial

analysis

methods,

and

the

application

of

these

methods.

We

arrived

at

a

final

conclusion

based

on

the

results

of

the

analysis

performed

by

us

as

a

whole,

and

we

did

not

reach

individual

conclusions

based

on

or

related

to

any

of

the

factors

or

methods

of

our

analysis.

Therefore,

we

believe

our

analysis,

must

be

considered

as

a

whole

and

that

the

examination

of

parts

of

our

analysis

and

specific

factors

without

considering

the

full

context

of

our

analysis

and

conclusions

may

lead

to

incomplete

and

incorrect

interpretations

of

the

processes

used

in

our

analyses and conclusions.

5

Important Notes

This

Valuation

Report

provides

only

an

estimate,

according

to

our

criteria,

of

the

value

derived

from

the

discounted

cash

flow

evaluation

methodology

or

from

having

prices

of

for

comparable

companies,

as

the

case

may

be,

which

are

methodologies

largely

used

in

financial

evaluations

of

companies

that

do

not

evaluate

any

other

aspect

or

implication

of

the

Tender

Offer

or

any

contract,

agreement

or

understanding

entered

into

in

connection

with

the

Tender

Offer.

We

do

not

express

any

opinion

on

the

value

for

which

the

shares

related

to

the

Tender

Offer

could

be

traded

on

any

securities

market

at

any

time.

Additionally,

this

Valuation

Report

is

not

and

must

not

be

used

as

(i)

a

fairness

opinion

about

the

Tender

Offer

or

(ii)

a

recommendation

of

any

aspects

of

the

Tender

Offer.

Additionally,

this

Valuation

Report

is

not

about

the

strategy

and

commercial

merits

of

the

Tender

Offer,

nor

the

eventual

strategic

or

commercial

decision

of

Embratel

and

its

partners

or

the

shareholders

of

the

Company

of

undergoing

the

Tender

Offer.

This

Valuation

Report

does

not

constitute

a

judgment,

opinion

or

recommendation

to

the

Company,

its

shareholders

or

any

third-parties

about

the

convenience,

fairness

of

price

or

opportunity

about

the

Tender

Offer,

and

it

also

does

not endorse any investment decision.

Our

Valuation

Report

is

necessarily

based

on

information

provided

to

us

as

of

the

date

of

this

Valuation

Report

and

takes

into

account

economic

and

market

conditions

and

other

conditions

as

they

are

and

as

can

be

evaluated

on

this

date.

Although

future

events

and

other

developments

could

affect

the

conclusions

presented

in

this

Valuation

Report,

we

do

not

have

any

obligation

to

update,

revise,

rectify

or

revoke

this

Valuation

Report,

wholly

or

partly,

as

a

result

of

any

subsequent

development

or

for

any

other

reason.

Our

analysis

does

not

distinguish

any

type

or

class

of

representative

shares

of

the

Company’s

share

capital

and

does

not

include

benefits

or

operational,

tax

or

any

other

losses,

including

spreads,

nor

any

synergy,

additional

value

or/and

costs,

existing,

at

the

closing

of

the

deal,

if

effected,

or

any

other

operation.

Our

analysis

is

not

and

will

not

be

considered

a

recommendation

regarding

the

manner

how

Embratel,

the

shareholders

and/or

management

should

vote

or

decide

regarding

the

transaction.

Besides

acting

as

an

intermediate

institution

regarding

the

deal,

we

may

render

other

financial

advising

services

to

Embratel

or

to

the

Company

regarding

the

deal.

This

Valuation

Report

cannot

be

reproduced

or

publicized

without

our

prior

written

consent,

except

the

use

of

those

interested

in

the

offer

in

accordance with the terms of CVM Instruction No. 361.

We declare that:

–

On the date of this Valuation Report, we, our controlling shareholders and related persons are not owners of the shares issued by the

Company

or

Embratel,

except

that

persons

related

to

us

posses,

under

their

discretionary

decision,

1,968,736

preferential

shares

issued

by

the

Company

and

412,

873

common

shares

issued

by

Embratel

Participações

S.A.

–

We

do

not

present

any

conflict

of

interest

with

Embratel

or

the

Company,

its

controlling

shareholders

and

management,

reducing

its

independence

necessary

to

its

position’s

performance

elaborating

this

Valuation

Report.

–

We

will

receive

from

Embratel,

the

fixed

value,

in

reais,

at

the

date

of

the

liquidation

of

the

Tender

Offer,

US$400,000.00.

–

We

received

from

the

Company

US$466,000

for

coordination

and

distribution

services

of

Unsecured

and

Unsubordinated

Notes

issued

by

the

Company

on

January

2010.

We

did

not

receive

other

amounts

from

Embratel

or

the

Company

regarding

compensation

for

consultant

services,

valuation,

auditing

or

similar

services

12

months

prior

to

this

date.

Itaú

BBA

and

other

companies

from

the

Itaú

Unibanco

Group

maintain

commercial

relations

in

the

ordinary

course

of

business

of

commercial

and

investment

banking

with

Embratel,

the

Company

and

other

companies

of

the

group,

by

which

they

receive

and

expect

to

receive

future

compensation.

6

Important Notes

Embratel

and

its

partners

agreed

to

reimburse

our

expenses

and

indemnify

us

and

certain

other

persons

as

a

result

of

the

contracting

of

our

services.

We

receive

a

commission

regarding

the

preparation

of

this

Valuation

Report

independently

of

the

launch

of

the

transaction.

Our

internal

approval

process

regarding

the

Itaú

BBA’s

Valuation

Report

includes

revising,

by

an

Internal

Valuation

Committee,

of

the

independent

analysis

made

by

the

execution

team

of

the

Valuation

Report.

We

have

provided,

from

time

to

time,

in

the

past,

investment

banking

services

and

other

financial

services

to

Embratel,

its

controlling

shareholders,

subsidiaries

and

companies

under

common

control

(“Affiliates”)

for

which

we

were

remunerated,

and

may,

in

the

future,

provide

these

services

to

Embratel,

the

Company

and

its

affiliates,

for

which

we

expect

to

be

remunerated.

We

are

a

financial

institution

that

provides

a

variety

of

financial

services

and

other

services

related

to

securities,

brokerage

and

investment

banking.

In

the

normal

course

of

our

activities,

we

may

acquire,

hold

or

sell,

on

our

behalf

or

on

the

behalf

of

our

clients,

shares,

debt

instruments

and

other

securities

and

financial

instruments

(including

bank

loans

and

other

obligations)

of

Embratel,

the

Company

and/or

its

affiliates

involved

in

this

transaction,

as

well

as

provide

investment

banking

services

to

such

companies,

controlling

shareholders

or

affiliates.

The

professionals

in

the

research

departments

of

the

Itaú

Unibanco

Group,

including

Itaú

BBA,

may

base

their

analyses

and

publications

on

different

operational

and

market

assumptions

and

on

different

analysis

methodologies

compared

with

those

used

in

the

preparation

of

this

Valuation

Report,

with

the

result

that

the

research

reports

and

other

publications

prepared

by

them

may

contain

different

results

and

conclusions

when

compared

with

those

herein

presented.

We

also

adopted

policies

and

procedures

for

preserving

the

independence

between

investment

baking

and

other

areas

and

departments

of

Itaú

BBA

and

other

companies

of

the

Itaú

Unibanco

Group,

including,

but

not

limited

to

asset

management

and

the

proprietary

desk

for

trading

shares,

debt

instruments,

securities

and

other

financial

instruments.

We do not render any accountability, auditing, legal or tax services related to this Valuation Report.

The financial calculation included in this Valuation Report may not always result in an exact number due to rounding.

This

Valuation

Report

is

an

intellectual

property

of

Itaú

BBA.

Banco

Itaú

BBA S.A.

Fernando Meira

Pedro Garcia de Souza

SECTION

1

Executive Summary

8

The estimated value ranges of NET were calculated based on the methodologies most frequently

used for economic-financial valuation of companies in the telecommunications sector

Valuation Methodology and Main Assumptions

Main methodologies used

Historical Average

Share Prices

We

analyzed

NET’s

historical

share

price

on

the

period

of

12

months

prior

to

this

appraisal

report

–

We

used

the

historical

average

weighted

by

the

trading

volume

at

BM&F

Bovespa

in

the

last

1,

3,

6

and

12 months

Book Value

We

calculated

the

company’s

book

value

per

share

based

on

the

financial

statements

as

of

June

30th,

2010

–

The book value may not indicate accordingly the future profit generation potential of the company

Discounted

Cash Flow

Present value of free cash flows to firm, based on public information (market consensus) on NET and on the

telecommunications market in Brazil

–

We discounted the cash flows using a WACC in nominal US dollars and we also assumed a perpetuity

growth rate after 2020 (last year in the projection period)

Trading Multiples of

Comparables

Companies

We have analyzed the current trading multiples of Brazilian companies in the telecommunications sector

–

We believe that the multiple that best estimates the company’s value is the EV/EBITDA

Multiples of

Precedent

Transactions

We have analyzed the multiples of precedent transactions in the Brazilian Pay TV sector

–

Multiples of precedent transactions are used to estimate the company’s value in the case of a strategic

transaction

–

Main metric is the EV/EBITDA multiple

9

15,057

10,674

4,162

6,304

7,238

6,688

3,610

7,238

8,866

2,000

7,000

12,000

17,000

Discounted Cash Flow

Historical Average Price

Book Value

Multiples of Comparable Companies

Multiples of Precedent Transactions

Valuation Summary

NET’s

valuation analysis contemplated five different methodologies

NET’s

Valuation

Results

–

Equity

value

and

implied

EV

/

EBITDA

10E

multiple

6

(R$

mm)

Notes:

1

Based

on

public

information

about

NET.

Valuation

range

based

on

a

WACC

of

8.9%

and

9.9%

in

nominal

US$.

It

considers

a

perpetuity

growth

rate

of

3.5%

2

Average

price

weighted

by

NET’s

trading

volume

at

stock

exchange

in

the

last

3

months

prior

to

August

3rd,

2010

and

in

the

last

12

months

prior

to

August

3rd,

2010

3

Book

value

based

on

financial

statements

as

of

June

30th,

2010

4

Trading

multiples

of

Brazilian

companies

in

the

telecommunications

sector.

Range

based

on

sample’s

minimum

and

maximum

values

5

EV

/

EBITDA

LTM

(last

twelve

months)

multiples

of

precedent

transactions

in

the

Brazilian

Pay

TV

sector.

Range

based

on

sample’s

minimum

and

maximum

values

6

EBITDA

10E

of

R$1.5

billion,

based

on

projections

of

the

discounted

cash

flow

analysis

1

2

3

4

5

5.5x

6.5x

21.10

25.85

Legend

EV / EBITDA 10E

Price per Share

4.9x

5.5x

18.38

21.10

3.1x

10.53

3.5x

5.1x

12.13

19.50

7.7x

10.6x

31.12

43.90

10

SECTION

2

Information on Itaú

BBA

11

Itaú

BBA Qualifications

Itaú

BBA’s experience with valuation is proved by its consistent participation as financial advisor

in M&A transactions

Company

Transaction

Date

Financial

advisor

to

Cetip

in

the

sale

of

30%

of

its

capital

stock

to

Advent

International,

in

the

amount

of

US$170

million

May/2009

Financial

advisor

to

Nova

América

in

the

sale

to

Cosan

Mar/2009

Financial

advisor

to

Duretex

in

the

merger

of

Duratex

and

Satipel,

in

the

amount

of

US$1.9

billion

Jun/2009

Financial

advisor

to

the

shareholders

of

Kroton

and

Advent

in

the

sale

of

50%

of

Advent’s

control,

in

the

amount

of

US$200

million

Jun/2009

Financial

advisor

to

Grupo

Suzano

in

the

merger

of

insurance

brokerage

operationswith

Sonae

Jun/2009

Preparation

of

the

Valuation

Report

in

the

merger

with

Perdigão,

in

the

amount

of

US$4.6

billion

Aug/2009

Financial

advisor

to

Santelisa

Vale

in

the

sale

of

60%

of

its

capital

stock

to

Louis

Dreyfus

Commodities

Nov/2009

Financial

advisor

of

Vivendi

in

the

acquisition

of

GVT

Financial

advisor

to

JHSF

in

the

sale

of

Shopping

Metrô

Santa

Cruz

to

BR

Malls

Oct/2009

Financial

advisor

to

Brazilian

Finance

&

Real

Estate

in

the

sale

of

21%

of

its

capital

stock

to

Equity

International

Financial

advisor

to

Usina

Moema

Participações

in

the

its

sale

to

Bunge,

in

the

amount

of

US$1

billion

Financial

advisor

to

Brenco

in

its

merger

with

ETH,

in

the

amount

of

US$2.3

billion

Financial

advisor

to

Iuni

in

its

sale

to

Kroton,

in

the

amount

of

US$293

million

Financial

advisor

to

Renuka

in

the

acquisition

of

interest

in

Equipav,

in

the

amount

of

US$1.5

billion

Financial

advisor

to

Alupar

in

capitalization

by

FI-FGTS,

in

the

amount

of

US$400

million

Sep/2009

Feb/2010

Feb/2010

Jan/2010

Dec/2009

Apr/2010

Mar/2010

12

Company

Transaction

Date

Financial

Advisor

to

MMX

in

the

sale

of

49%

of

interest

in

MMX

Minas-Rio

to

Anglo

American,

in

the

amount

of

US$1.58

billion

Jan/2008

Financial

advisor

to

the

shareholders

of

Rodovia

das

Cataratas

in

its

sale

to

Ecorodovias,

in

the

amount

of

US$245

million

Jan/2008

Financial

advisor

to

the

shareholders

of

Big

TV

in

its

sale

to

Net,

in

the

amount

of

US$1.24

billion

Dec/2007

Financial

Advisor

to

Klabin

Segall

in

the

merger

with

Setin,

in

the

amount

of

US$112

million

Oct/2007

Financial

Advisor

to

the

shareholders

of

Suzano

Petroquímica

in

its

merger

with

Petrobras,

in

the

amount

of

US$1.24

billion

Aug/2007

Financial

Advisor

to

Santos

Brasil

in

the

merge

with

Mesquita,

in

the

amount

of

US$51

million

Aug/2007

Financial

Advisor

to

Energisa

in

the

sale

of

the

generation

assets,

including

11

PCHs

and

4

projects,

in

the

amount

of

US$156

million

Jul/2007

Financial

Advisor

to

the

shareholders

of

Serasa

in

the

sale

of

65%

of

Serasa’s

interest

to

Experian,

in

the

amount

of

US$1.78

billion

Jun/2007

Financial

Advisor

in

the

process

of

deverticalization

of

CEEE’s

generation

and

distribution

assets

in

the

amount

of

US$179

million

Dec/2006

Financial

Advisor

to

International

Paper

in

the

sale

of

Amcel,

in

the

amount

of

US$56

million

Nov/2006

Financial

advisor

to

Grupo

Rede

in

the

asset

swapwith

EDB

involving

Lajeado

and

Enersul,

in

the

amount

of

US$782

million

Jun/2008

Preparation

of

the

Valuation

Report

in

the

merger

of

petrochemical

assets

with

Petrobrás,

in

the

amount

of

US$1.7

billion

May/2008

Preparation

of

the

Valuation

Report

in

the

sale

of

Oi/Telemar’s

interest,

in

the

amount

of

US$3.0

billion

Apr/2008

Financial

Advisor

to

the

shareholders

of

Vivax

in

the

mergerwith

Net,

in

the

amount

of

US$676

million

Oct/2006

Financial

Advisor

to

Fertibrás

in

the

sale

of

Fertibrás’

control

to

Yara

International,

in

the

amount

of

US$339

million

Jul/2006

Financial

Advisor

to

CEMIG,

Andrade

Gutierrez,

JLA

Part.

and

Pactual

in

the

merger

with

Light,

in

the

amount

of

US$2.1

billion

Mar/2006

Itaú

BBA Qualifications (cont’d)

Itaú

BBA’s experience with valuation is proved by its consistent participation as financial advisor

in M&A transactions

13

Background of the Evaluators

Fernando

Henrique

Meira

de

Castro,

Senior

Vice

President

Fernando

Meira

advises

companies

in

M&A

transactions,

segment

where

he

has

worked

for

about

12

years,

having

participated

in

more

than

100

projects

with

this

nature.

In

the

last

12

months,

Fernando

Meira

advised

Iuni

Educacional

in

its

sale

to

Kroton,

Moema’s

shareholders

in

its

sale

to

Bunge,

Brenco

in

the

merger

with

ETH

of

Odebrecht

Group,

Suzano’s

shareholders

in

the

merger

of

its

insurance

brokerage

operations

with

Sonae,

Nova

América

in

the

merger

with

Cosan

and

Santa

Elisa

Vale

in

its

sale

to

Louis

Dreyfus.

Additionally,

Fernando

Meira

has

participated

in

several

relevant

transactions

involving

control

restructuring

and

acquisitions

/

stock

exchange

of

listed

companies,

including:

BR

Distribuidora’s

delisting,

Atlas-Schindler’s

delisting

and

Cosipa’s

delisting.

Among

the

companies

which

Fernando

has

advised

in

M&A

transactions

in

previous

years,

we

highlight

Suzano

Petroquímica,

Energisa,

Serasa,

Vivax,

Cemig,

Andrade

Gutierrez,

Ampla

Energia,

Petrobras,

Petrobras

Distribuidora,

Petrobras

Química,

Electrolux,

Elevadores

Atlas-Schindler,

Ipiranga

Group,

Jereissati

Group

/

Iguatemi,

Lorentzen

Group,

Rede,

Vicunha

Group,

Multibrás,

Petroquímica

União

-

PQU,

Promon,

Tubos

and

Conexões

Tigre,

Votorantim

Cimentos

and

Pão

de

Açúcar.

Prior

to

Itaú

BBA,

Fernando

worked

in

the

strategic

planning

department

of

Esso

for

5

years,

where

he

was

part

of

Exxon

Corporation’s

M&A

team.

Fernando

holds

a

degree

in

Mechanical

Engineering

and

a

Marter’s

Degree

in

Finance

from

Fundação

Getúlio

Vargas

and

in

Marketing’s from UC Berkeley.

Pedro

Garcia

is

an

Associate

Director

of

Itaú

BBA’s

Investment

Banking

team.

Before

joining

Itaú

BBA,

he

worked

as

Associate

for

Merrill

Lynch’s

and

UBS

Pactual’s

Investment

Banking

teams.

Pedro

is

fluent

in

Portuguese

and

English

and

holds

a

degree

in

business

administration

from

Fundação

Getulio

Vargas

as

first

student

of

his

class.

Pedro

has

participated

in

the

origination

and

execution

of

several

transactions

involving

bonds

and

equity

offerings

and

mergers

and

acquisitions,

such

as

Energias

do

Brasil

IPO

and

debt

capitalization

in

the

amount

of

US$507

million,

Tractebel

Energia

follow-on

offering

in

the

amount

of

US$423

million

and

CESP

primary

equity

offering

in

the

amount

of

US$1.5

billion,

among

others.

He

has

also

participated

in

Endesa

Brasil’s

restructuring,

in

Usiminas

corporate

bond

offering

in

the

amount

of

US$200

million,

in

the

acquistion

of

Usina

Santa

Luiza

by

São

Martinho,

Santa

Cruz

and

Cosan

for

US$130

million

and

in

the

sale

of

CMS

Energy

Brazil

to

CPFL

Energia

for

US$211

million,

among

others.

Pedro Garcia de Souza, Associate Director

Felippe

Bento

joined

Itaú

BBA

Investment

Banking

in

October,

2009.

Before

joining

Itaú

BBA,

Felippe

worked

as

analyst

in

Vergent

Partners,

a

M&A

boutique.

In

2009,

he

executed

the

incorporation

of

Tenda

by

Gafisa

and

the

capitalization

of

Gol’s

Smiles

Program

by

Banco

Bradesco

and

Banco

do

Brasil

in

the

amount

of

R$252

million.

He

has

also

executed

the

appraisal

reports

for

Sadia-Perdigão

and

Itaú-Unibanco

mergers.

In

2008,

he

advised

NEOgás

do

Brasil

in

its

sale

to

Global

Environment

Fund

in

the

amount

of

R$60

million.

In

2007,

Felippe

participated

in

the

sale

of

Providência

to

a

consortium

led

by

AIG

Capital

in

the

amount

of

R$1

billion.

Felippe

is

fluent

in

Portuguese

and

English

and

holds

a

degree

as

of

2007

in

business

administration

from

Fundação

Getulio

Vargas.

Felippe

Andrade Ferreira Bento, Analyst

14

SECTION

3

Telecommunications

Industry and NET’s

Overview

15

Overview of the Global Telecommunications Industry

Overall Description  (Broadband)

Broadband

As of the end of 2009, there was a total of 477 mm broadband

subscriptions in the world:

–

Growth of 14.8% against 2008 (415 mm subscriptions)

China

is

in

1st

place

by

number

of

subscriptions

with

22%

market

share,

USA

in

2nd

(18%),

Japan

in

3rd

(7%)

and

Brazil,

with

2.4%,

in

10th

Among the OECD member countries, as of the end of 2009,

there were 23.3 subscribers on average for each 100

inhabitants, of which 6.7 (29%) were cable technology

Fixed

Telephony

1

As of the end of 2009, there was a total of 1,220 mm fixed

telephone lines in the world:

–

Reduction of 2.6% compared to 2008, mainly because of

the reduction of 27 mm lines in China

China

is

in

the

1st

place

by

number

of

fixed

telephone

lines

with

26%

market

share,

USA

in

2nd

(13%),

Germany

in

3rd

(4%)

and

Brazil,

with

3.4%,

in

6th

Sector Highlights (Broadband)

Broadband -

Subscriptions (mm) -

2009

Fixed

Telephony

–

Access

Lines

(mm)

–

2009

1

104

85

32

25

19

18

16

13

12

11

Source: Teleco

and International Telecommunication Union

Note:

1

Considerers analog fixed telephones, ISDN, public payphones and VoIP

49

45

44

41

37

36

34

34

155

314

Main Highlights of the Market in the World

World Market Evolution

Brazil still represents a small portion of the sector in the world…

…

and there are high expectations for growth in its market share on the upcoming years

16

39.2

39.6

39.8

38.8

39.4

41.2

41.5

49.8

50.0

50.5

51.2

57.9

59.6

52.7

21.8

21.7

21.6

20.8

20.9

21.7

21.6

2003

2004

2005

2006

2007

2008

2009

As of the end of 2009, there was a total of 59.6 mm installed fixed

telephony access lines in Brazil, of which 41.5 mm (70%) were in

service

While the total number of installed accesses presented a compound

annual growth rate of 3.0% between 2003 and 2009, the number of

accesses in service increased 1.0% per annum on average

The fixed telephony system in Brazil is divided in 3 regions:

–

Region I: Southeast, except the state of São Paulo, Northeast

and North, except for the states of Acre, Rondônia

and

Tocantins

–

Region II: states of Acre, Rondônia

and Tocantins, Mid-West

and South

–

Region III: state of São Paulo

As of the end of 2009, main operators were Oi, with 64% accesses in

service, and Telefónica, with 34%

1.0

1.9

3.2

4.3

5.6

7.0

7.7

8.0

0.3

0.6

1.2

1.8

2.6

3.1

3.2

0.1

0.1

0.1

0.4

0.4

0.6

0.6

0.2

2003

2004

2005

2006

2007

2008

2009

1T10

ADSL

Pay TV (Cable Modem)

Other (Wireless)

Total Accesses (mm)

Overview of the Brazilian Telecommunications Industry

Brazilian Broadband Market

As of March 2010, Brazil had a total of 11.8 mm installed connections

and density of 6.12 connections per 100 inhabitants:

–

ADSL: 8 mm connections (68% of total)

–

Pay TV (Cable Modem): 3.2 mm (27%)

–

Other (Wireless): 0.6 mm (5%)

As of April 2010, there were 28.7 mm active internet users, of which

72.4% had a connection with downstream speeds between 128 kbps

and 2 MB and 13.4% with downstream speeds greater than 2 MB

Main broadband connection providers are Oi, with 36% access lines,

NET with 25%, and Telefónica

with 24% (data as of Mar/2010)

Broadband -

Connections (mm)

Source: Teleco

Brazilian Fixed Telephony Market

Fixed Telephony –

Installed Accesses (mm)

Accesses in Service (mm)

Accesses in Service / 100

Inhabitants

1.2

2.3

3.9

5.7

7.7

10.0

11.4

11.8

High growth market in the broadband and pay TV segments…

…and relatively stagnated in the fixed telephony segment

17

Net

47%

Sky / Directv

26%

Telefónica

6%

Abril

2%

Embratel

6%

Oi

4%

Other

9%

2,270

2,511

2,842

3,220

3,811

4,314

4,463

1,351

1,438

1,479

1,762

2,092

2,780

3,085

230

227

258

347

347

355

397

22

24

24

3,851

4,176

4,579

5,341

6,322

7,473

7,919

2004

2005

2006

2007

2008

2009

2010

Cable

DTH

MMDS

Pay TV

Overview of the Brazilian Pay TV Market

Brazilian Pay TV Market

As of March 2010, there was a total of 7.9 mm Pay TV subscribers

in

Brazil, distributed among 4 technologies:

–

Cable TV (56.4% of subscribers)

–

DTH (39.0%)

–

MMDS (4.4%)

–

Pay TV (0.3%)

The number of operators remained almost stable between 2003 and

Mar/2010, from 178 to 173 operators, with 63%, on average, operating

in the Cable TV technology

As of March 2010, 91% of the market was distributed among 6

operators, with NET holding a 47% market share by number of

subscribers

Number of Operators by Technology

Source: Teleco

and Anatel

Market Evolution in Brazil –

Number of Subscribers (‘000)

Market Share by Number of Subscribers –

1Q10

175

176

172

173

173

173

173

The Brazilian Pay TV market presented historically high growth rates…

…

and is currently substantially concentrated

111

112

109

111

108

109

109

10

10

10

10

14

13

13

28

28

27

27

26

26

26

21

21

21

22

22

22

22

4

4

4

3

3

3

3

1

1

1

2004

2005

2006

2007

2008

2009

2010

Cable

DTH

MMDS

Pay TV

MMDS and Cable

MMDS and Pay TV

18

3.4

5.1

8.0

10.1

9.3

10.8

2006

2007

2008

2009

2Q09

2Q10

0.2

0.6

1.8

2.6

2.3

2.8

2006

2007

2008

2009

2Q09

2Q10

Overview of NET

Overview of NET

Founded in 1991, NET Serviços

is Latin America's largest multi-service

cable company, operating in 93 cities in Brazil

Services: pay TV, programming packages, pay-per-view, broadband

internet and voice

Network with more than 47 thousand km of cables that connect more

than 10.7 mm homes

According

to

2nd

quarter

2010

numbers,

the

company

had:

–

3.9 mm Pay TV clients (NET)

–

3.1 mm broadband internet subscribers (NET Virtua)

–

2.8

mm

voice

services

subscribers

(NET

Fone

through

Embratel)

In 2010, the company introduced new downstream speeds in

broadband internet access, becoming a providers of downstream

speeds of 5Mb, 10Mb, 20Mb, 50Mb and 100Mb

Consolidated 2Q10 ARPU (Average Revenue per User) was R$135.44,

an increase of 2% against R$132.54 as of 2Q09

Client Base Evolution

Geographic Presence

Pay TV and Broadband (mm)

Fixed Telephony –

Service Lines (mm)

Revenue Generating Units –

RGUs

(mm)

Source: Company

AM

PB

PE

AL

MG

GO

MT

SP

RJ

PR

SC

RS

ES

States where the company

has operations

NET operates in the broadband, Pay TV and fixed telephony segments, with approximately 10.8

million revenue generating units

2.1

2.5

3.1

3.7

3.5

3.9

0.9

1.4

2.2

2.9

2.6

3.1

2006

2007

2008

2009

2Q09

2Q10

Clients -

Pay TV

Clients -

Broadband

19

2,267

2,902

3,690

4,613

2,183

2,571

2006

2007

2008

2009

6M09

6M10

639

804

979

1,242

572

744

28%

28%

27%

27%

26%

29%

2006

2007

2008

2009

6M09

6M10

EBITDA  (R$ mm)

EBITDA Margin (%)

Overview of NET: Financial Highlights

Gross

Revenue

Breakdown

–

6M10

(R$

mm)

Net Revenues (R$ mm)

Source: Company

EBITDA (R$ mm) and EBITDA Margin (%)

Capex

(R$ mm)

Monthly Payment

87%

Adhesion and

Other

13%

551

770

993

1,100

465

477

2006

2007

2008

2009

6M09

6M10

20

SECTION

4

NET’s Valuation

21

SECTION 4A

Volume Weighted

Average Price

22

0

5

10

15

20

25

30

35

40

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Jul-10

0

20

40

60

80

100

120

140

160

180

Volume (R$ mm)

Weighted Price (R$/share)

Volume Weighted Average Price

NET: Volume Weighted Average Share Price (R$/share)

Source:

Bloomberg

as

of

August

3rd

2010

Weighted Average (R$ / share)

Last 6 Months

Last 12 Months

20.19

21.10

The

volume

weighted

average

price

of

NET’s

shares

was

R$18.38/share

on

the

last

three

months

and R$21.10/share on the last twelve months

Last Month

Last 3 Months

18.62

18.38

23

SECTION 4B

Book Value per Share

24

Book Value per Share

Book Value per Share

Source: Company’s Reports

The

book

value

per

NET’s

share

is

R$10.53,

according

to

the

financial

statements

as

of

June

30

th

,

2010

Book Value per Share Calculation (R$ mm)

30-Jun-2010

Total Assets

8,440.3

(-) Total Liabilities

4,830.4

(-) Minority Interest

0.0

Shareholders' Equity

3,609.9

Shares Outstanding (mm)

343.0

Book Value per Share (R$)

10.53

25

SECTION 4C

Discounted Cash Flow

26

5,332

5,987

6,588

7,217

7,864

8,524

9,190

9,855

10,511

11,150

11,763

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Operating and Financial Projections

General Assumptions

Source: Research

Reports

The

DCF

valuation

was

based

on

public

information

as

released

by

equity

research

analysts

Net Revenues (R$ mm)

Valuation base date of June 30th, 2010

Cash flows projected in nominal R$, converted to US$ and

discounted at a nominal US$ discount rate

Projection period until 2020

Exchange rate until 2014 projected according to Focus

report, released weekly by the Brazilian Central Bank.

After 2014, exchange rate projected assuming PPP

(Purchasing Power Parity)

Net Revenues based on public market information (market

consensus)

–

Market consensus until 2013

–

After 2014, considers convergence of the growth rate

to 5.5% in 2020

Assumptions

27

37.2%

33.0%

31.9%

23.5%

Source:

Research

Reports

and

Companies’

Reports

EBITDA

(R$ mm)

EBITDA was based on public market information (market

consensus)

–

Market consensus until 2013

–

After 2014, considers convergence of the EBITDA

margin to the average 2009 EBITDA margin of the

following comparable companies: Oi, Vivo, Tim and

Telesp

Long Term EBITDA Margin Assumption

(Average 2009 EBITDA Margin of the Comparables)

Telesp

Average: 31.4%

Operating and Financial Projections (cont’d)

Assumptions

1,540

1,746

1,986

2,231

2,436

2,647

2,860

3,074

3,286

3,494

3,694

28.9%

29.2%

30.2%

30.9%

31.0%

31.1%

31.1%

31.2%

31.3%

31.3%

31.4%

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

EBITDA (R$ mm)

EBITDA Margin (%)

The

DCF

valuation

was

based

on

public

information

as

released

by

equity

research

analysts

28

17.1%

16.4%

14.5%

14.1%

CAPEX

(R$ mm)

CAPEX based on public market information (market

consensus)

–

Market consensus until 2013

–

After 2014, considers convergence of the CAPEX to

Net Revenues ratio to the average 2009 CAPEX to

Net Revenues ratio of the following comparable

companies: Oi, Vivo, Tim and Telesp

Telesp

Average: 15.5%

Operating and Financial Projections (cont’d)

Assumptions

Source:

Research

Reports

and

Companies’

Reports

1,181

1,126

1,152

1,151

1,250

1,349

1,449

1,548

1,645

1,738

1,826

22.1%

17.5%

16.0%

15.9%

15.8%

15.8%

15.7%

15.6%

15.6%

15.5%

18.8%

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

CAPEX (R$ mm)

% of Net Revenues

Long Term CAPEX Assumption

(Average 2009 CAPEX/Net Revenues of the Comparables)

The

DCF

valuation

was

based

on

public

information

as

released

by

equity

research

analysts

29

Source:

Research

Reports

and

Companies’

Reports

Note:

1

Considers

amortization

of

the

leasing

contract

with

Embratel

over

the

next

5

years, following a straight-line method

Working Capital Variation (R$ mm)

Working Capital based on market estimates, converging to

0.5% of Net Revenues in 2020

Straight-line depreciation based on the estimated life of the

companies’

assets

–

Average depreciation rate of 5.5% per year

Amortization¹

based

on

public

information

Income tax rate of 34%

Depreciation and Amortization (R$ mm)

Operating and Financial Projections (cont’d)

Assumptions

804

870

934

998

1,064

860

937

1,021

1,109

1,203

1,302

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

35.7

(57.4)

(23.3)

1.5

7.0

13.4

20.8

29.0

38.1

48.1

58.8

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

The

DCF

valuation

was

based

on

public

information

as

released

by

equity

research

analysts

Discount Rate –

Weighted Average Cost of Capital

Cost of

Equity

Market Risk Premium

7.1% ³

Risk Free Rate

4.2% ¹

Cost of Equity

(US$, nominal)

11.1%

Re-levered Regional

Beta

0.664

4

Brazil Risk Premium

2.3% ²

The

discount

rate

was

calculated

based

on

the

“Capital

Asset

Pricing

Model”

(CAPM),

resulting

in

a 9.4% rate in nominal US$

Notes:

1

Based

on

the

3-month

average

of

the

30-year

US

Treasury

YTM

-

Source:

Bloomberg

2

Based

on

the

3-month

average

of

the

Brazil

EMBI

-

Source:

Bloomberg

3

Based

on

the

arithmetic

average

of

the

historical

difference

between

the

return

of

the

S&P

500

and

the

Treasury

bonds

(1935

–

2009)

-

Source:

Ibbotson

Associates’

Stocks, Bonds, Bills and Inflation 2010 Yearbook

4

Based

on

the

average

of

the

peers

universe.

Source:

Bloomberg.

The

following

companies

were

considered:

Telemar

Norte

Leste,

Vivo,

Telesp,

Tim

e

NET

5

NET’s

long term marginal cost of debt in US$ estimated based on the Global Notes 2020 YTM

6

Based

on

the

NET’s

income

tax

rate

7

Estimated current capital structure of NET

Effective Tax Rate

34.0%

6

Cost of Debt

Cost of Debt Before

Taxes

6.8%

5

Cost of Debt after Taxes

(US$)

4.5%

Nominal Discount

Rate (US$)

9.4%

74%

7

26%

7

30

31

DCF Valuation Results

Discounted Cash Flow to Firm (R$ mm) 

Discounted Cash Flow Results (R$ mm) 

Price per Share (R$) 

Perpetuity Growth (%) –

Nominal US$

R$ mm

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

EBITDA

1,540

1,746

1,986

2,231

2,436

2,647

2,860

3,074

3,286

3,494

3,694

(-) Depreciation and Amortization

(804)

(870)

(934)

(998)

(1,064)

(860)

(937)

(1,021)

(1,109)

(1,203)

(1,302)

EBIT

736

876

1,053

1,233

1,372

1,787

1,923

2,053

2,177

2,290

2,392

Income Tax and Social Contribution

(250)

(298)

(358)

(419)

(467)

(608)

(654)

(698)

(740)

(779)

(813)

Income Tax and Social Contribution Rate

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

34.0%

NOPLAT

486

578

695

814

906

1,180

1,269

1,355

1,437

1,512

1,578

(+) Depreciation and Amortization

804

870

934

998

1,064

860

937

1,021

1,109

1,203

1,302

(-) Working Capital Variation

(36)

57

23

(1)

(7)

(13)

(21)

(29)

(38)

(48)

(59)

(-) Capex

(1,181)

(1,126)

(1,152)

(1,151)

(1,250)

(1,349)

(1,449)

(1,548)

(1,645)

(1,738)

(1,826)

Free Cash Flow

73

379

500

659

713

676

737

799

863

929

996

Present Value of Free Cash Flows (US$ mm)

2,141.7

Present Value of Terminal Value (US$ mm)

3,057.4

Firm Value (US$ mm)

5,199.1

Firm Value (R$ mm)

9,186.3

Net Debt (R$ mm)

1,203.8

Equity Value (R$ mm)

7,982.5

Number of Shares (mm)

343.0

Price per Share (R$)

23.27

Implied EV/EBITDA 2010E

6.0x

Implied EV/EBITDA 2011E

5.3x

23.3

2.5%

3.0%

3.5%

4.0%

4.5%

10.4%

17.60

18.37

19.25

20.27

21.46

9.9%

19.12

20.04

21.10

22.35

23.83

9.4%

20.86

21.97

23.27

24.82

26.67

8.9%

22.88

24.24

25.85

27.79

30.17

8.4%

25.25

26.94

28.96

31.45

34.57

32

SECTION

4D

Comparable

Companies

Trading Multiples

33

Companies

Price per Share

Market Cap

EV

EV / EBITDA

P / E

(R$)

(R$ mm)

(R$ mm)

2010E

2011E

2010E

2011E

Telemar Norte Leste

45.90

10,942

37,711

3.6x

3.5x

7.5x

7.0x

Vivo Participações

46.35

18,521

21,876

3.9x

3.7x

13.5x

9.7x

TELESP

37.66

19,050

19,929

3.5x

3.6x

9.1x

8.5x

TIM Participações

5.03

12,453

14,973

4.1x

3.6x

27.1x

12.8x

Net Serviços

19.50

6,688

7,892

5.1x

4.5x

19.4x

14.3x

Minimum

3.5x

3.5x

7.5x

7.0x

Maximum

5.1x

4.5x

27.1x

14.3x

Source:

Earnings

Releases,

Capital

IQ

and

Bloomberg

as

of

August

3rd,

2010

Notes:

1

Based

on

NET’s

consensus

EBITDA

projection

for

2010

of

R$1.5

billion

2

Based

on

net

debt

as

of

June

30th,

2010

Comparable Companies Trading Multiples

Trading Multiples

Trading Multiples Valuation

1,2

1

EV/EBITDA 2010E

Firm Value

(R$ mm)

Equity Value

(R$ mm)

Value per Share (R$)

Minimum

3.5x

5,366

4,162

12.13

Maximum

5.1x

7,892

6,688

19.50

34

SECTION

4E

Precedent

Transactions

Multiples

35

Source:

Companies’

Reports

1

Based

on

NET’s

LTM

EBITDA

as

of

June,

2010,

of

R$1.4

billion

2

Based

on

NET’s

net

debt

as

of

June

30th,

2010

Precedent Transactions Multiples

Precedent Transactions Multiples

Precedent

Transactions

Multiples

Valuation

1,2

Date

Acquirer

Target

EV / LTM EBITDA

2006

Telefónica

TVA

9.3x

2006

Net Serviços

Vivax

11.5x

2007

Net Serviços

Big TV

8.4x

Minimum

8.4x

Maximum

11.5x

EV/EBITDA LTM

Firm Value

(R$ mm)

Equity Value

(R$ mm)

Value per Share (R$)

Minimum

8.4x

11,878

10,674

31.12

Maximum

11.5x

16,261

15,057

43.90

36

APPENDIX

A

Glossary of Terms

and Definitions

37

Glossary of Terms and Definitions

EBITDA

Earnings Before Interest , Taxes, Depreciation and Amortization

Firm Value or

Enterprise

Value

Enterprise Value / Firm Value, or sum of Equity Value, Net Debt and Minority Interest 

Capex

Capital Expenditures, or Investments for maintenance and/or capacity expansion

CAGR

Compounded Average Growth Rate

EBIT

Earnings Before Interest and Taxes

WACC

Weighted Average Cost of Capital

ADSL

Asymmetric Digital Subscriber Line

ARPU

Average Revenue per User

38

MMDS

Multichannel Multipoint Distribution Service

VoIP

Voice over Internet Protocol

DTH

Direct to Home

Broadband

Refers to downstream speed transmission capacity greater than that of ISDN of 1.5 or 2 Megabits per second

ISDN

Integrated Services Digital Network

WLL

Wireless Local Loop

Cable TV

Cable

TV

Service

is

the

telecommunications

service

that

consists

in

the

distribution,

to

subscribers,

through

physical means of transportation

Market

Consensus

Includes

projections

from

the

research

departments

of

the

following

institutions:

Itaú

Securities,

Morgan

Stanley,

Credit

Suisse,

JP

Morgan,

Santander,

BofA

Merrill

Lynch,

Deutsche

Bank

and

Goldman

Sachs

Glossary of Terms and Definitions (cont’d)

39

APPENDIX B

Average Target Price

40

29.78

27.15

26.00

25.50

24.53

23.00

22.50

20.00

Research Analysts’

Target Price for NET

Source: Bloomberg

Target Price for NET (R$/share)

Minimum target price: R$20.00

Maximum target price: R$29.78

Average target price: R$24.81

Average: R$24.81