Embratel Participacoes SC TO-C Information about tender offer

Corporate Finance.  May 1, 2006.

Valuation Report pursuant to CVM

Instruction Number

361*

*(Free English Translation of Portuguese Original)

Embratel Participações S.A.

Version

prepared

exclusively

in

order

to

comply

with

(i)

the

requirements

formulated

in

items

2.2

and

2.3

of

Letter

CVM/SRE/GER-1/N

O

1225/2006,

of

June

8,

2006,

and

(ii)

Letter

CVM/SRE/GER-1/N

O

1480/2006,

of

July

18,

2006,

of

the

Comissão

de

Valores

Mobiliários

-

CVM.

This

version

does

not

constitute

an

update,

revision

or

correction

of

the

Valuation

prepared

by

Banco

ABN

AMRO

S.A.

on

May

1  ,

2006

Exhibit 99.2

st

2

Important

Notice

1.

Banco

ABN

AMRO

Real

S.A.

(“ABN

AMRO

”)

was

retained

by

TELÉFONOS

DE

MÉXICO

S.A.

DE

C.V.

(“Offeror”),

the

controlling

shareholder

of

EMBRATEL

PARTICIPAÇÕES

S.A.

(“Embrapar”

or

the

“Company”),

to

render

an

economic-financial

valuation

(“Valuation”)

of

EMBRATEL

within

the

context

of

a

public

tender

offering

for

acquisition

of

shares

for

cancellation

of

Company´s

registration

as

a

public

company,

in

accordance

with

art.

4

§

4

of

Law

6.404/76,

as

amended,

and

of

Instruction

No.

361,

dated

March

5,

2002,

of

the

Comissão

de

Valores

Mobiliários

–

CVM

(the

“Offering”).

2.

The

Valuation

of

the

Company,

subject

to

the

disclaimers

listed

below,

includes

a

valuation

(i)

of

its

direct

and

indirect

subsidiaries,

including

Embratel

S.A.

(“Embratel”),

Vesper

São

Paulo

S.A.

and

Vesper

S.A.

(together,

“Vesper”),

Telmex

do

Brasil

Ltda.

(“TDB”),

Star

One

S.A

(“Star

One

”)

and

Primesys

Soluções

Empresariais

S.A.

(“Primesys”),

hereinafter

collectively

referred

to

as

“Subsidiaries”,

and

(ii)

of

its

affiliated

companies,

GB

Empreendimentos

e

Participações

S.A.

(“GB

Empreendimentos

”)

and

Net

Serviços

de

Comunicação

S.A.

(“Net”),

hereinafter

collectively

referred

to

as

“Affiliates”.

3.

The

Valuation

is

the

intellectual

property

of

ABN

AMRO

and

was

prepared

by

ABN

AMRO

exclusively

pursuant

to

art.

4

O

§

4

O

of

Law

6.404/76,

as

amended,

and

for

no

other

purposes.

Furthermore,

this

Valuation

may

be

used

by

the

Offeror

within

the

framework

of

a

voluntary

offer

to

the

acquisition

of

Embrapar

shares,

according

to

the

provisions

set

forth

in

paragraph

1,

article

31,

instruction

no.

361, as

the

Offeror

is

entitled

in

the

terms

of

letter

CVM/SRE/GER-1/Nº1480/2006

of

July

18,

2006

of

Comissão

de

Valores

Mobiliários

("CVM").

The

Valuation

must

not

be

used

by

third

parties

or

for

any

other

purposes

and

may

not

be

disclosed

or

submitted

to

third

parties,

or

distributed,

reproduced

or

used

for

any

other

purpose

without

prior

written

consent

from

ABN

AMRO,

except

for

the

disclosure

of

the

Valuation,

in

its

entirety,

by

the

Offeror

for

the

purposes

of

the

Offering

and

exclusively

in

order

to

comply

with

applicable

legal

and

regulatory

requirements

including

its

full

disclosure

to

the

CVM

and

to

the

U.S.

Securities

and

Exchange

Commission

(“SEC”)

pursuant

to

applicable

regulations.

The

Valuation

was

prepared

exclusively

in

Portuguese,

and

in

the

case

that

it

is

translated

to

another

language,

the

Portuguese

version

shall

always

prevail

for

all

purposes.

4.

ABN

AMRO

did

not

make

and

will

not

make

any

recommendation,

nor

will

it

express

any

explicit

or

implicit

opinion

with

respect

to

the

terms

and

conditions

of

the

Offering.

5.

The

Valuation

is

based

on

data

from

March

31,

2006.

3

6.

The

Company

and

its

Subsidiaries

were

valued

by

discounted

cash

flow

methodology,

observing

what

is

outlined

in

paragraph

7

below.

To

calculate

the

equity

value

of

the

Company,

the

following

criteria

were

adopted:

(i)

using

Financial

Statements

(as

defined

below)

dated

as

of

March

31,

2006,

net

debt,

net

contingencies,

accrued

liabilities,

dividends

and

interest

on

accrued

capital

stock

(“Net

Indebtedness

”)

were

subtracted

from

the

financial-economic

total

value

(enterprise

value)

of

the

Company

and

its

Subsidiaries;

(ii)

GB

Empreendimentos

was

valued

based

on

the

economic

value

of

its

participation

in

Net,

and

(iii)

Net

Indebtedness

of

GB

Empreendimentos

was

discounted

from

its

enterprise

value. 

7.

For

purposes

of

the

Valuation

of

the

Affiliates

of

the

Company,

ABN

AMRO

used

the

market

value

of

Net

calculated

using

the

weighted

average

price

of

the

preferred

shares

issued

by

Net

on

the

Bolsa

de

Valores

de

São

Paulo

–

BOVESPA

during

the

period

of

90

(ninety)

days

before

April

29,

2006.

8.

The

Company,

its

Subsidiaries

and

Affiliates

were

valued

as

independent,

“stand

alone”

operations,

and

the

subsequent

success

or

failure

of

the

Offering

was

not

considered

in

the

results

of

the

Valuation.

ABN

AMRO

does

not

express

any

opinion

about

any

effect

on

the

Company

that

could

potentially

be

generated

from

the

consummation

of

the

Offering.

9.

The

Valuation

took

the

following

financial

statements

provided

by

the

Company:

(i)

annual

fiscal

year

financial

statements

as

of

December

31,

2005

and

quarterly

financial

statements

as

of

March

31,

2006

of

the

Company,

respectively,

audited

and

revised

by

Ernst

&

Young

Auditores

Independentes

S.S.

(“Ernst

&

Young

”);

(ii)

unaudited

or

revised,

tentative

fiscal

year

balance

sheets

as

at

December

31,

2005

and

from

the

quarter

ending

as

of

March

31,

2006

of

GB

Empreendimentos;

(iii)

annual

fiscal

year

financial

statements

as

of

December

31,

2005

and

quarterly

financial

statements

as

of

March

31,

2006

of

Embratel,

respectively

audited

and

revised

by

Ernst

&

Young;

and

(iv)

annual

fiscal

year

financial

statements

as

of

December

31,

2005

and

quarterly

statements

as

of

March

31,

2006

of

Star

One,

respectively

audited

and

revised

by

Ernst

&

Young

(hereinafter

collectively

referred

to

as

“Financial

Statements

”).

Important

Notice

(cont.)

4

10.

The

Valuation

was

conducted

by

ABN

AMRO

based

on

information

that

was

provided

by

the

Offeror

and/or

by

the

Company

or

discussed

with

representatives

from

the

Offeror

and/or

of

the

Company

who

were

referred

to

ABN

AMRO

by

the

Offeror

(“Designated Representatives”) as well as other available public information in addition to projections, estimates and analyses

derived

by

ABN

AMRO,

based

upon

its

expertise

and

experience.

Estimates

and

projections

that

were

provided

to

ABN

AMRO

or

discussed

with

ABN

AMRO,

especially

those

whose

occurrence

depends

upon

future

or

uncertain

events

(including

projections

of

earnings,

expenses,

investments,

operating

income

or

net

income),

were

based

on

the

opinion

of

the

Designated

Representatives

with

regard

to

these

events.

11.

ABN

AMRO

based

its

Valuation

upon,

among

other

things,

the

following

information

or

documents

that

were

provided

to

ABN

AMRO

up

to

April

28,

2006:

(i)

public

information

about

the

industry

of

the

Subsidiaries

and

Affiliates

of

the

Company;

(ii)

public

information

about

the

macroeconomic

parameters

where

the

Company,

its

Subsidiaries

and

Affiliates

have

a

relevant

presence;

(iii)

business

plans

from

the

Company’s

Subsidiaries

for

the

period

from

2006

to

2015

that

were

developed

and

approved

by

their

respective

management;

(iv)

historical

financial

and

operating

information

of

the

Company,

its

Subsidiaries

and

Affiliates;

(v)

value

of

Net

Indebtedness

of

the

Company

and

its

Subsidiaries,

and

of

GB

Empreendimentos,

and

equity

participation

interests

of

the

Company

and

its

Subsidiaries

and

of

GB

Empreendimentos

and

(vi)

discussions

with

the

Designated

Representatives

regarding

past

performance

of

and

expectations

for

the

Company’s

and

its

Subsidiaries'

future

businesses.

12.

In

preparing

the

Valuation,

ABN

AMRO

reviewed

other

studies

and

financial

and

market

analyses

and

took

into

consideration

other

factors

it

deemed

to

be

necessary,

including

the

assessment

of

economic,

monetary

and

market

conditions.

13.

In

connection

with

the

Valuation

of

Net,

ABN

AMRO

requested

Net’s

business

plan

from

the

Offeror

and

was

informed

by

the

Offeror

and

by

the

Company

that

they

did

not

have

access

to

a

management-approved

business

plan

for

Net

that

reflects

its

current

and

future

financial,

operational

and

commercial

situation,

and

that

they

did

not

have

either

a

budget

for

the

year

2006,

nor

any

other

analyses,

studies

or

projects

after

January

1,

2006.

ABN

AMRO

did

not

have

access

to

representatives

from

Net

for

discussion

of

their

prospects

for

future

performance,

estimates

and

projections.

For

the

purposes

of

the

Valuation

of

Net,

ABN

AMRO

exclusively

used

the

methodology

described

in

paragraph

7

above.

Important

Notice

(cont.)

5

14.

Financial

Statements,

public

information,

estimates,

projections,

business

plans,

budgets,

discussions

and

all

other

information

referred

to

in

paragraphs

9

to

14

above

and

in

this

paragraph

13,

such

as

public

market

information

about

volumes

and

trading

prices

of

shares

issued

by

Net

are

hereinafter

collectively

designated

as

“Information”.

15.

The

preparation

of

economic/financial

valuations

is

a

complex

process

that

involves

subjective

judgment

and

is

not

susceptible

to

a

partial

analysis

or

brief

description.

ABN

AMRO

did

not

attribute

specific

importance

to

certain

factors

considered

in

the

Valuation,

but,

on

the

contrary,

undertook

a

qualitative

analysis

of

the

importance

and

relevance

of

all

factors

considered

herein.

As

such,

the

Valuation

must

be

analyzed

as

a

whole,

and

the

analysis

of

selected

parts,

summaries

or

specific

aspects

of

the

Valuation

without

knowledge

and

analysis

of

the

Valuation

in

its

entirety

could

result

in

an

incomplete

or

incorrect

understanding

of

the

analysis

undertaken

by

ABN

AMRO

and

of

the

conclusions

contained

in

the

Valuation.

16.

Information

on

the

demographics,

macroeconomic

scenario,

regulations,

the

telecommunications

market

in

Brazil

and

the

BOVESPA

stock

market

mentioned

in

the

Valuation

were

taken

from,

among

others,

recognized,

reliable

public

sources

(trade

associations,

government

organizations

and

specialized

publications)

such

as

Instituto

Brasileiro

de

Geografia

e

Estatística

–

IBGE

(Brazilian

Institute

of

Geography

and

Statistics),

Agência

Nacional

de

Telecomunicações

–

ANATEL

(National

Telecommunications

Agency),

Banco

Central

do

Brasil

(Central

Bank

of

Brazil),

Comissão

de

Valores

Mobiliários

–

CVM

(Securities

and

Exchange

Commission),

Bloomberg,

Economática,

Global

Investment

Return

Yearbook

2006

(ABN

AMRO

and

London

Business

School)

and

the

ABN

AMRO

Economic

Department. 

17.

Based

on

the

assertions

from

the

Designated

Representatives,

ABN

AMRO

made

the

following

assumptions:

that

(i)

the

financial

projections

provided

reflect

the

best

estimates

for

the

period

in

which

they

were

provided

as

well

as

the

best

judgment

of

the

management

from

the

Company

and

its

Subsidiaries

with

regard

to

expected

future

performance

of

the

Company

and

its

Subsidiaries

and

(ii)

the

estimates

and

projections

that

were

provided

to

ABN

AMRO

or

discussed

among

ABN

AMRO

and

the

Company,

especially

those

whose

occurrence

depends

upon

future

or

uncertain

events

(including

projected

earnings,

expenses,

investments,

operational

profit

or

net

profit)

were

based

on

the

best

judgment

of

the

management

of

the

Company

and

its

Subsidiaries.

Important

Notice

(cont.)

6

18.

Estimates and projections contained in this Valuation are intrinsically subject to uncertainties and various events or factors that are

beyond the control of the Offeror, Company, its Subsidiaries as well as ABN AMRO, especially those whose occurrence depends

upon future or uncertain events. There is no guarantee that the estimates and projections used in the Valuation will be  realized.

Actual future results could significantly diverge from those suggested in the Valuation. As such, ABN AMRO does not assume any

liability or obligation for indemnification in the case that future results differ from the estimates and projections presented in the

Valuation and does not make any declaration or warranty regarding those estimates or projections. ABN AMRO does not assume

any responsibility regarding the referred estimates and projections, nor regarding the form in which they were elaborated.

19.

ABN AMRO assumes that the Information is true and complete, without any independent verification and, hence, does not assume

any responsibility for the content, exactness, veracity, integrity, consistency, sufficiency or precision of such Information, including,

without limitation, the statements related to projections or forecasts of the Company, of its Subsidiaries, the assumptions and

estimates on which these statements and projections were based and of the information discussed with the Designated

Representatives. ABN AMRO did not conduct (i) any appraisal of the assets and liabilities (contingent or not) of the Company, its

Subsidiaries and Affiliates; (ii) any revision or audit of financial statements from the Company, its Subsidiaries and Affiliates and of

Net

Indebtedness;

(iii)

any

technical

audit

of

operations

of

the

Company,

its

Subsidiaries

and

Affiliates;

(iv)

any

valuation

of

the

solvency of the Company, its Subsidiaries and Affiliates in accordance with any legislation regarding bankruptcy, insolvency or

similar issues; or (v) any physical inspection of the properties, installations or assets of Company, its Subsidiaries and Affiliates.

Important

Notice

(cont.)

7

20.

ABN AMRO presumes and relies upon the exactness, veracity, integrity, consistency, sufficiency and precision of all Information

used

in

the

preparation

of

the

Valuation.

ABN

AMRO

was

informed

by

the

Offeror

and

by

the

Company

that

all

Information

provided

to ABN AMRO or in some way made available to or discussed with ABN AMRO is correct; that all financial projections provided to

ABN AMRO or in some way made available to or discussed with ABN AMRO were prepared in a reasonable manner and that they

reflect

the

best

estimates

and

valuations

from

the

period

in

which

they

were

made

available;

and

that,

from

the

time

of

delivery

of

the Information, documents and reports provided up to the delivery of the Valuation, to our knowledge there has not been any

material alteration in the businesses, nor in the financial situation, assets, liabilities, business prospects, commercial transactions or

in the number of stocks or options of the Company, its Subsidiaries and Affiliates, nor with respect to any other material factor that

could alter the Information and financial projections either provided to ABN AMRO or in some way made available or discussed with

ABN AMRO, or make them incorrect or imprecise in any material respect or that could have a material effect on the conclusions

presented in the Valuation.

21.

ABN AMRO does not make, nor will it make, expressly or implicitly, any representation, declaration or warranty with relation to the

Information used for the preparation of the Valuation, nor does it assume any liability or obligation for indemnification related to the

content, exactness, veracity, integrity, consistency, sufficiency and precision of such Information, each of which are the sole and

exclusive

responsibility

of

the

Offeror

and/or

the

Company.

ABN

AMRO

did

not

provide

any

auditing,

accounting

or

legal

consulting

services and the preparation of the Valuation by ABN AMRO does not include any service or opinions of such nature.

22.

ABN

AMRO

does

not

take

liability

for

any

direct

or

indirect

losses

or

decreased

revenues

that

could

occur

as

a

result

of

the

use

of

the Valuation.

23.

ABN AMRO does not express through means of the Valuation any judgment regarding the distribution of economic value among the

various

types

and/or

classes

of

shares

of

the

Company,

or

of

its

Subsidiaries

or

Affiliates.

Important

Notice

(cont.)

8

24.

The

Valuation

does

not

constitute

a

judgment,

opinion

or

recommendation

to

the

management

of

the

Offeror

and/or

the

Company,

to

the

shareholders

of

the

Offeror

and/or

the

Company

or

to

any

third

party

with

respect

to

the

appropriateness

or

opportunity

of

the

Offering or regarding the decision of making or accepting the Offering (including the decision of the Company shareholders in

accepting

or

not

accepting

the

Offering).

In

addition,

the

Valuation

is

not

meant

to

be

the

basis

for

any

decision

of

investment

or

disinvestment.

25.

Except where another date is specifically indicated, the Valuation reflects the financial and accounting conditions of the Company,

its Subsidiaries and Affiliates as of March 31, 2006 and is based on Information available up to April 28, 2006, such that any

alteration

in

such

conditions

and

Information

after

to

such

date

could

alter

the

results

that

have

been

presented

herein.

ABN

AMRO

is not obligated, at any time, to update, revise, correct or reaffirm any information contained in the Valuation nor to provide any

additional information related to the Valuation.

26.

Other valuations of companies and sectors prepared by ABN AMRO could treat market assumptions in a different way than was

framed in this Valuation; the research departments and other departments of ABN AMRO and its affiliated companies may use

other

analyses,

reports

and

publications,

estimates,

projections

and

different

methodologies

than

those

used

in

the

Valuation,

as

well as such analyses, reports and publications may contain different conclusions from those set out in the Valuation.

27.

ABN AMRO has provided, directly or through its affiliated companies, certain financial and investment banking services to the

Company, its Subsidiaries and Affiliates, as well as to its controlling shareholders, for which it received remuneration, continues to

provide these services and could, at any time, provide them again. ABN AMRO, directly or through its affiliated companies, is or

could

become

a

creditor

of

the

Offeror

and

the

Company, its

Subsidiaries

and

Affiliates

as

well

as

of

the

controlling shareholder of

the Offeror

in certain financial operations.

28.

In

the

normal

course

of

its

activities,

ABN

AMRO

could,

directly

or

through

its

affiliated

companies,

trade

in

securities

of

the

Company

and

of

the

Offeror

and

of

their

respective

controlling

shareholders, subsidiaries

and

affiliates, on

its own behalf or on

behalf of its clients and, consequently, could, at any time, retain buying or selling positions with respect to such securities.

Important

Notice

(cont.)

9

29.

ABN

AMRO

declares

that

the

Offeror,

its

controlling

shareholder

and

its

management

did

not

direct,

interfere,

limit,

render

difficult

nor undertake any action that compromised the access to, utilization or attainment of the information, goods, documents or working

methodologies relevant to the quality of the conclusions presented herein, nor did they either determine or restrict the capacity of

ABN AMRO to determine the methodology used to reach the conclusions presented in the Valuation or restrict the capacity of ABN

AMRO to determine the conclusions presented in the Valuation.

São Paulo, May 1, 2006

BANCO ABN AMRO REAL S.A.

___________________________                                    ___________________________                           

Waldo Edwin Perez Leskovar

Joel Michael Roberto

Executive Superintendent

Executive Superintendent

Important

Notice

(cont.)

10

30.

In

order

to

comply

with

the

dispositions

of

article

8

o

,

paragraph

3

o

of

CVM´s

Instruction

n

o

361,

of

March

5

2002,

ABN

AMRO

states

that the professionals responsible for the Valuation Report are Mr. Joel Michael Roberto and Mr. Waldo Edwin Perez Leskovar.

Important

Notice

(cont.)

11

Concerning

the

requirement

found

in

item

2.3

of

letter

CVM/SRE/GER-1/N.

o

1225/2006, referring

to

the

presentation

of

comments

to

CVM

with

respect

to

the

valuation

report

of

Embrapar

prepared

by

Banco

Bradesco

S.A.

in

August

2004,

ABN

AMRO

clarifies,

first

of

all,

that

the

values

per

lot

of

one

thousand

shares

in

the

two

evaluations

must

not

be

compared,

because

Embrapar

conducted

significant

transactions

after

August

2004,

which

had

a

great

impact

on

its

stockholding

base.

In

May

2005,

Embrapar

implemented

a

capital increase of approximately 1.8 billion by issuing 423,906,976 thousand new shares at a price of R$ 4.30 per lot of one thousand

shares,

increasing

its

stockholding

base

by

127%.

In

addition,

Embrapar

completed

the

merger

of

Telmex

do

Brasil

and

of

the

participation

of

Telmex

in

the

Net, whose

impact

was

an

increase

by

approximately

230,452,650

thousand

Embrapar

shares.

Thus,

the

total

number

of

shares

issued

by

Embrapar

increased

from

334,399

thousand

shares

in

August

2004

to

987,726,487

thousand

shares

in May 2006.

In addition, the evaluations were prepared at a time when the competitive scenario of the telecommunications industry was different.

Therefore, it

was

not

appropriate

for

ABN

AMRO

to

make

any

value

judgment

concerning

the

premises

adopted

at

the

time

by

Banco

Bradesco

S.A. in its study.

ABN

AMRO

based

its

evaluation

on

the

updated

business

plan

of

Embrapar

and

under

the

current

market

conditions

and

competitive

scenario,

which

may

therefore

be

different

from

those, used

as

reference

by

Banco

Bradesco

S.A. in

its

evaluation.

Thus,

ABN

AMRO

believes that the price comparison analyzed by CVM may present distortions in light of the aforementioned events.

Furthermore, ABN

AMRO

declares

that, in

preparing

its

Valuation, did

not

review

or

conduct

any

independent

audit

of

the

information

contained

in

the

evaluation

done

by

Banco

Bradesco

S.A.

in

August

2004,

because

it

was

not

included

in

the

scope

of

the

work

for

which it was retained by the Offeror. ABN AMRO does not assume any liability concerning said evaluation prepared by Banco

Bradesco

S.A.,

or

for

the

form

in

which

it

was

prepared.

The

preparation

of

economic-financial

evaluations

is

a

complex

process

that

involves subjective judgments and cannot be analyzed partially. In this sense, the analysis of select parts, summaries or specific

aspects

of

the

evaluation

made

by

Banco

Bradesco

S.A.,

without

knowing

the

premises

adopted

and

the

analysis

of

said

evaluation

in

its entirety may lead to an incomplete and incorrect understanding of said analysis and its conclusions.

Compliance with the requirement formulated in item 2.3 of

Letter

CVM/SRE/GER-1/N

o

1225/2006

12

Executive Summary

13

Executive Summary

The Valuation is for the purpose of determining the financial-economic value of Embrapar in the context

of the Offering

Pursuant to instruction CVM No. 361 of March 2002, ABN AMRO conducted an analysis employing the

following methodologies:

–

Economic value, based on an analysis of Discounted Cash Flow (“DCF”)

–

Weighted average share price per volume traded during the last twelve months

–

Shareholders’

equity per share value of the shares

To determine the fair price of the Embrapar shares, ABN AMRO employed a methodology of economic

value based on

–

the

DCF

in

relation

to

the

Subsidiaries,

based

on

business

plans

of

the

operating

companies

–

The

weighted

average

price

per

volume

traded

of

preferred

shares

of

Net

in

the

last

90

days

and

the net debt of GB Empreendimentos

Purpose of the

study by ABN

AMRO

Current simplified corporate structure

(1)

ONs: 49,00%

Total: 83,00%

Total: 98,99%

Total: 99,99%

ONs: 37,44%

ONs: 51,00%

Total: 19,81%

Total: 20,80%

Total: 100,00%

Total: 80,01%

Total: 98,00%

Total:100,00%

Total: 99,99%

Total: 100,00%

Total: 100,00%

Vésper S.A.

Vésper São Paulo

S.A.

Embratel Soluções

Ltda.

Click 21 Com. de

Publicidade Ltda.

Primesys Soluções

Empresariais S.A.

Net Serviços de

Comunicação S.A.

Embratel S.A.

Embratel

Participações S.A.

Star One S.A.

BrasilCenter

Comunicações

Ltda.

(2)

GB Empreendimentos e

Participações S.A.

Telmex do Brasil

Ltda.

Legend

Operational

Not operational

Holding

Notes: (1) only includes Brazilian companies and does not consider non-operating companies being dissolved, with the exception of Embratel Soluções Ltda., which is

also in the process of being dissolved; (2) Embratel Participações S.A. has a direct share of 2.00% in BrasilCenter Comunicações Ltda. (“BrasilCenter”)

Source: Embrapar

Affiliates

Subsidiarie

s

14

Executive Summary (cont.)

The

calculation

for

determining

the

Equity

Value

of

Embrapar

is

summarized

as

follows:

Subsidiaries

–

Economic value of the assets determined based on the DCF methodology for the operating

companies. A value of zero was assigned to the non-operating companies (holding companies)

–

The consolidated Net Indebtedness of the Company was deducted from the value calculated

above

Affiliates

–

Net:

Equity

Value

determined

based

on

the

market

value

of

preferred

shares

in

the

last

90

days

(details on page 32)

–

GB

Empreendimentos:

Equity

Value

calculated

based

on

the

economic

value

of

its

participation

in

Net

(Equity

Value

calculated

based

on

its

market

value)

deducted

from

its

Net

Indebtedness

Share participations of the Company and Affiliates used in the Valuation refer to the stock ownership

as of March 31, 2006

Summary of the

Valuation

methodology

Embratel

StarOne

TDB

Primesys

Others

(1)

Subsidiaries

=

Equity value

of Embrapar

Embrapar

Consolidated

Net indebtedness

(2)

-

+

Affiliates

GB

Empreendimentos

Net

Enterprise Value

Equity Value

Note: (1) includes BrasilCenter, Vésper, Click 21; (2) consolidates the Net Indebtedness of all the Subsidiaries

15

Executive Summary (cont.)

Result of

Embrapar

Valuation

Analysis of the economic value of the Affiliates based on the market value

Analysis of the economic value of the Subsidiaries based on the DCF

Enterprise value,

excluding Net (R$ million)

Equity value,

excluding Net (R$ million)

Notes: (1) Nominal dollars; (2) weighted average price per traded volume of preferred shares (PN) of Net for the 90 days prior to April 29, 2006 (3) total number of Net

shares

(excluding

Treasury

Shares)

at

March

31,

2006;

(4)

number

of

shares

held

directly

or

indirectly

by

Embrapar

through

GB

Empreendimentos

at

March

31,

2006

(1,466,390,024

shares);

(5)

calculated

based

on

the

position

of

March

31,

2006;

(6)

participation

of

Embrapar

in

GB

Empreendimentos

on

March

31,

2006

1,666

I=(E-H)

Total

Value

of

Embrapar’s

Ownership

Interest

in

Affiliates

0.036

H=(F*G)

Net debt of GB Emprendimentos relative to its stock participation in Embrapar

83.00%

G

Embrapar

stock

participation

in

GB

Emprendimentos

(6)

0.044

F

Net

debt

of

GB

Emprendimentos

(5)

1,666

E=(A*D)

Equity value

of Net held by Embrapar

1,466

D

Number of direct and indirect Net shares held by Embrapar (million) (4)

4,493

C=(A*B)

Equity value

of Net

3,955

B

Total number of Net shares (million) (3)

1.136

A

Price of Net shares considered for the Valuation (R$ per share) (2)

Value

in

millions

of

Reais

(except

where

indicated

otherwise)

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

7,477

7,336

7,200

3.67%

0.61%

7,536

7,390

7,251

3.93%

0.86%

7,598

7,448

7,305

WACC

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

5,280

5,138

5,002

3.67%

0.61%

5,338

5,193

5,053

3.93%

0.86%

5,400

5,250

5,107

WACC

(1)

(1)

16

Executive Summary (cont.)

Result of

Embrapar

Valuation

Analysis of the total economic value of Embrapar

Notes: (1) it already considers the 80.01% share held by Embratel in Star One; (2) calculated in accordance with the definition of Net Indebtedness described in the

Important

Notice

on

page

3.

The

80.01%

of

Net

Indebtedness

of

Star

One

is

being

considered;

(3)

calculated

based

on

the

weighted

average

price

per

volume

traded over the last 90 days of the PN shares multiplied by the number of Net shares as of March 31, 2006 (3,954,663,665 shares); (4) ABN AMRO considered the

number of shares issued by the company and outstanding on March 31, 2006. As reported by the representatives of the Company, there were no changes in the

number of shares issued by the Company and outstanding since March 31, 2006.

Values in million of Reias

(except where indicated otherwise)

Mínimo

-

Máximo

Enterpriese

value of operating Controlled Companies

(1)

A

7,200

7,598

Net debt of Embrapar

Consolidated

(2)

B

2,198

2,198

Equity value of Embrapar

and its Controled

Companies

C=(A-B)

5,002

5,400

Net total Equity Value

D

4,493

4,493

Equity value of Net shares held by Embrapar

(1,466 million shares)

(3)

E

1,666

1,666

Total Equity Value

F=(C+E)

6,668

7,066

Number of Embrapar

shares (million)

(4)

G

987,726

987,726

Price per share (R$ one thousand lot)

F/G

6.75

-

7.15

17

Summary of Embrapar Valuations

The value of the shares

of the  Company

determined by ABN

AMRO is between R$

6.75 per lot of one

thousand shares and R$

7.15 per lot of one

thousand shares

Value per share (R$ per lot of one thousand shares )

5.29

4.83

6.75

7.15

7.59

Value of

Shareholders’

Equity

Weighted Average

Price of

PN Shares

Weighted Average

Price of

ON Shares

Valuation

range

18

1

Declarations and qualifications of the Financial Advisor

17

2

Description of Embrapar and Net

21

3

Financial-economic valuation of Embrapar

27

a

Methodology

28

b

Valuation of Embrapar (excluding stock ownership in Net)

43

c

Valuation of stock ownership in Net

52

d

Valuation of Embrapar (including stock ownership in Net)

56

4

Valuation by average weighted price of shares

59

5

Valuation

by

value

of

shareholders’

equity

per

share

64

6

Summary of valuation of Embrapar shares 

66

7

Glossary

68

Table of contents

19

1

Financial Advisor Information

20

In

compliance

with

the

provisions

of

article

8

o

of

Instruction

No.

361,

dated

as

of

March

05,

2002

issued

by

the

Securities

Exchange

Comission

(Comissão

de

Valores

Mobiliários

-

CVM)

ABN

AMRO renders the following representations:

ABN

AMRO

does

not

own

shares

issued

by

the

Company,

either

directly

or

through

its

controlling

or

controlled

companies

or

persons

associated

therewith,

in

its

own

name

or

under

its

discretionary

administration, except as stated below:

–

ABN

AMRO

FI

AÇÕES

IBOVESPA:

75,750,000

preferred

Embrapar

shares

(position

as

of

04/28/2006)

–

SUDAMERIS

FI

AÇÕES

INDEX:

76,000,000

preferred

Embrapar

shares

(position

as

of

04/28/2006)

–

SUDAMERIS FI AÇÕES SUL ENERGY (position as of 04/28/2006)

In

compliance

with

the

provisions

of

article

8,

V,

“b”

of

Instruction

CVM

No.

361,

dated

as

of

March

05,

2002, among the valuation criteria set forth in the Valuation, ABN AMRO considers the discounted

cash flow methodology the most appropriate method for purposes of its valuation of the Company and

its Subsidiaries, provided that the valuation of the Company’s minority interest (37,08%) in Net was

based on historical market value according to the weighted average trading price of Net’s preferred

shares on BOVESPA,  in the period of 90 (ninety) days prior to April 29, 2006

ABN AMRO has no conflict of interest with respect to the Offeror, the Company, their controlling

stockholders and their management, that would diminish the autonomy necessary for the performance

of its functions with respect to the preparation of the Valuation

Representations of the Financial Advisor

21

For the services relating to the Valuation, regardless of the outcome of the Offering, ABN AMRO will

receive

US$

500,000.00

(five

hundred

thousand

dollars)

from

the

Offeror.

The

Offeror

has

agreed

to

indemnify ABN AMRO and its affiliates for certain liabilities that may arise from the performance of the

Valuation services, and has agreed to reimburse ABN AMRO for legal fees of its advisors incurred in

the preparation of the Valuation

Pursuant

to

article

8

o

,

§6

o

,

of

CVM

Instruction

361,

ABN

AMRO

declares

that

during

the

12

(twelve)

months

prior

to

the

date

of

the

Valuation

it

received

from

the

Offeor

and

from

the

Company

an

amount

equivalent

in

Reais

to

Euro

838,000.00

(eight

hundred

thirty-eight

thousand

Euros),

as

compensation

for consulting, evaluation, audit and similar services (in compliance with the request made in item 2.2

of

Letter

CVM/SRE/GER-1/N

o

1225/2006)

This Valuation presents:

–

Information on Embrapar

shares, including the stock composition, the accounting net worth value

per share, and the average weighted price per traded volume of Company shares on BOVESPA

over the last 12 months

–

Economic value of the shares based on the Discounted Cash Flow (DCF)

–

Information tables with the assumptions used in the DCF valuation

Representations of the Financial Advisor (cont.)

22

The ABN AMRO Corporate Finance department in Brazil is headquartered in São Paulo and has 14

duly certified professionals. The department also has the support of the Corporate Finance global

department of the ABN AMRO Group, through sector teams in London, Amsterdam and Hong Kong,

with approximately 350 professionals

Recent experiences involving the valuation of publicly traded companies in Brazil include, among

others, the valuation of TIM Celular S.A. (2006), TIM Participações S.A. (2006 and 2005), TIM Sul S.A.

(2005), TIM Nordeste Telecomunicações S.A. (2005), Embratel Participações S.A. (2005), Tele

Celular Sul Participações S.A. (2004), Tele Nordeste Celular Participações S.A. (2004), Telpe Celular

S.A.(2004). Telasa Celular S.A. (2004), Telepisa Celular S.A. (2004), Telern Celular S.A. (2004),

Telpa Celular S.A. (2004), Teleceara Celular S.A. (2004), Zivi S.A (2003), Eberle S.A.(2003), Biobrás

S.A. (2002), Copene (2002), Copesul (2002) and Trikem (2002).

The internal approval process of the Valuation independently issued by ABN AMRO includes a review

by an internal committee, which includes professionals outside the Corporate Finance department of

ABN AMRO

Qualifications of ABN AMRO

23

2

Description of Embrapar and

Net

24

Embrapar: history of the industry

In

1998,

the

Brazilian

government

dismantled

the

Telebras

system

and

privatized

the

sector,

which

up

to that time had been controlled by the government. Fixed telephony operations were divided in four

regions:

Region

I

(North/Northeast/part

of

Southeast),

Region

II

(South/Center-West),

Region

III

(State

of São Paulo) and Region IV (all the national territory). In regions I through III, the right to explore fixed

telephony services in local and long distance forms, intra-state and intra-region, was granted to a

single company (Telemar in Region I, Brasil Telecom in Region II, Telefónica in Region III). Fixed

telephony services in national and international long distance forms (Region IV) were also granted to a

single company, Embratel

Embrapar is the holding company created in 1998 to retain control of Embratel upon its privatization.

Since 2002, Embratel is also authorized to operate a fixed telephony service in local form. Its

subsidiary Star One is authorized to offer signal transmission services via satellite to the entire nation

Immediately after privatization, ANATEL auctioned, for each of the four regions, additional licenses for

fixed telephony services in intra-state and intra-region long distance forms, as well as national and

international long distance services

In 1999, the Brazilian government opened the market of inter-urban calls with the introduction of the

compulsory selection of a long distance operator. Initially, operators of fixed telephony in the local and

long

distance

intra-state

and

intra-region

forms

were

not

allowed

to

carry

long

distance

calls

among

the

three

regions

defined

in

the

privatization

process.

In

2002,

two

of

the

three

fixed

telephony

operators

(Telefónica and Telemar) received from ANATEL the authorization to operate inter-regional and

international long distance calls; the third one (Brasil Telecom) was authorized in 2004

Source: 20F 2004 Embrapar Report

25

Embrapar: competitive scenario

Subsequently, providers of personal mobile service began to require their clients to select an operator

for long distance calls originated from their mobile phones

In

the

area

of

international

long

distance

calls,

Embratel

faces

competition

from

the

so-called

resalers

of telephony services operating outside Brazil. Using different technology, these companies offer

international calls services at significantly lower rates

Currently, Embratel has other businesses beyond long distance calls, including data, local telephony

(recently also through VoIP technology), communication via satellite and services of information

technology, among others

The increase in the number of players acting in the same segments where the Company operates

meant an intensification of the competition in those markets

The

telecommunication

industry

is

subject

to

rapid

technological

changes

that

may

have

an

adverse

impact on the operations of Embratel

Source: 20F 2004 Embrapar Report

26

Legend

Operational

Not operational

Holding

Embrapar

simplified

corporate

structure

(1)

,

according

to

information

received

by

its

Designated

Representatives,

is

shown

in the following diagram:

Embrapar: simplified corporate structure

Notes: (1) only includes Brazilian companies and does not consider non-operating companies in the process of being dissolved, with the exception of Embratel Soluções Ltda., which is also in the

process of being dissolved; (2) Embratel Participações S.A. has a direct share of 2.00% in BrasilCenter Comunicações Ltda.

Source: Embrapar

Affiliates

Subsidiaries

ONs: 49.00%

Total: 83.00%

Total: 98.99%

Total: 99.99%

ONs: 37.44%

ONs: 51.00%

Total: 19.81%

Total: 20.80%

Total: 100.00%

Total: 80.01%

Total: 98.00%

Total:100.00%

Total: 99.99%

Total: 100.00%

Total: 100.00%

Net Serviços

de

Comunicação

S.A.

Embratel

S.A.

Embratel

Participações

S.A.

Star One S.A.

BrasilCenter

Comunicações

Ltda.

(2)

GB Empreendimentos

e

Participações

S.A.

Telmex

do Brasil

Ltda.

Primesys

Soluções

Empresariais

S.A.

Embratel

Soluções

Ltda.

Click 21 Com. de

Publicidade

Ltda.

Vésper

S.A.

Vésper

São

Paulo

S.A.

27

Net: history of the industry

In Brazil, Pay-TV services are provided through cable TV systems, MMDS and DTH via satellite, which

are granted and regulated by ANATEL

In accordance with Law No. 8,977/95 and Decree No. 2,206/97, cable TV operators must obtain a

concession from ANATEL to be able to provide such services in Brazil. None of the concessions to

provide cable TV services in a specific area are exclusive. Concessions are granted by ANATEL for a

period

of

15

years

and

they

are

subject

to

renewal

for

equal

and

successive

periods.

The

license

may

only be granted to Brazilians who are citizens by birth or who have been naturalized for more than 10

years or to companies regularly incorporated under Brazilian laws. headquartered in Brazil and for

whom

51%

of

whose

voting

capital

stock

is

held

by

Brazilians

who

are

citizens

by

birth

or

who

have

been naturalized for more than 10 years

In 1999, ANATEL provided through Resolution No. 190, that subscription television providers may also

offer audio and video signals through their cable networks, and that they may thereby offer high speed

Internet access

The Brazilian subscription television market witnessed profound growth beginning in the second half of

the

90’s,

achieving

by

the

end

of

2005

the

equivalent

of

4,101

thousand

subscribers

Source:

Net

annual

report

for

2005

and

Brazilian

Association

of

Television

by

Subscription

(Associação

Brasileira

de

Televisão

por

Assinatura

-

ABTA)

28

Sky

21%

DirecTV

11%

TVA

8%

Vivax

7%

Net

36%

TV

Cidade

2%

Outros

15%

Net: competitive scenario

Net is the main provider of Pay-TV in Brazil. At December 31, 2005, Net subscribers represented 60%

of the entire cable television structure in Brazil (6.7 million homes reached) and 36% of the total Pay-

TV subscribers

Starting in 2002, Net also increased its offerings of broadband services. reaching a market share of

approximately 11% by the end of 2005

Net operates in a select demographic region. As of the end of 2005 it was present in 44 cities which,

according

to

IBGE

data,

represent

in

aggregate,

more

than

45%

of

the

Brazilian

GDP

and

comprise

close to one-third of Class A and B households

Market share of Pay-TV

operators

(end of 2005)

Market share of broadband Internet providers           

(end of 2005)

Source: presentation by Net based on 2005 annual results

Speedy

33%

BrTurbo

27%

Velox

22%

Vírtua

11%

Outros

7%

As of March 31, Net had

1,599.5 thousand cable

television subscribers

and 451.6 thousand

broadband subscribers

29

3

Financial-economic

valuation of Embrapar

30

3a

Methodology

31

Methodological considerations

The weighted average quotation of a stock is the result of the daily financial volume trades in a specific period,

divided by the number of shares trades in that same period

This

methodology

is

most

applicable

in

cases

where

(i)

necessary

information

(mainly

long-term

projections)

to

make a valuation based on the DCF method is not available and (ii) the shares have liquidity (presence in

Ibovespa)

and

dispersion

(free

float

higher

than

50%)

The value of the company is determined by the expectations of its future results, measured by its capacity for

cash generation and the risk associated with that generation, discounted to present value by an appropriate

discount rate

This method captures the growth potential and future profit prospects, adequately reflecting the expected return

in

light

of

the

country-risk

and

the

risk

intrinsic

to

this

type

of

business;

it

is

also

appropriate

for

adequately

capturing business opportunities and for adjustment for extraordinary events

The

shareholders’

equity

per

share

value

is

determined

by

dividing

the

net

worth

of

the

company,

at

the

date

of

the valuation, by its respective share base

This methodology does not necessarily reflect the growth potential or possibilities of future profit, nor the intrinsic

risk of the business

It may also be distorted by the accounting policy adopted by the

company

Methodology

Description

Average weighted

price of the

shares

Discounted Cash

Flow

Value of the

shareholders’

equity per share

32

Methodological considerations

The

calculation

for

determining

the

Equity

Value

of

Embrapar

is

summarized

as

follows:

Subsidiaries

–

economic value of the assets determined based on the DCF methodology for the operating

Subsidiaries. A value of zero was assigned to the non-operating companies (holding

companies)

–

The consolidated Net Indebtedness of the Company was deducted from the value calculated

above

Affiliates

–

Net:

Equity

Value

determined

based

on

the

market

value

of

preferred

shares

over

the

last

90

days (details on page 32)

–

GB

Empreendimentos:

Equity

Value

calculated

based

on

its

participation

in

Net

(Equity

Value

calculated based on its market value) deducted from its Net Indebtedness

Share participations of the Company and Affiliates used in the Valuation refer to the stock ownership

as of March 31, 2006

Summary of the

valuation

methodology

Embratel

StarOne

TDB

Primesys

Others

(1)

Subsidiaries

=

Equity Value

of Embrapar

Embrapar

Consolidated

Net Indebtedness

(2)

-

+

Affiliates

GB

Empreendimentos

Net

Enterprise Value

Equity Value

Note:

(1)

includes

BrasilCenter,

Vésper,

Click

21;

(2)

consolidates

the

Net

Indebtedness

of

all

the

Subsidiaries

33

Calculation Methodology of the value of Subsidiaries

ABN AMRO believes that the DCF methodology should be the most appropriate, should the

information

necessary

for

the

preparation

of

a

DCF

be

available,

since

DCF

takes

the

operational

cash

flow of the enterprises into consideration discounted by the respective projected cost of capital. In that

manner, the risk profile and the cash generation potential are projected in greater detail

Cash flow projections were made in nominal Reais and converted to nominal Dollars in accordance

with the average exchange rates expected for each year of the projected period in conformity with the

table of macroeconomic projections indicated on page 44. The conversion of cash flow to nominal

Dollars was made to adjust such flows to the WACC, which was expressed in nominal Dollars

The net present value of the tax benefit related to the utilization of the tax losses and the negative

Embratel C.S.L.L. base as of March 31, 2006 (VPL calculated on the basis on a WACC of 11.95%)

was

also

added

to

the

calculation

of

the

Enterprise

Value

of

the

Subsidiaries

After the net present value of the Subsidiaries was calculated in Dollars, the amount was converted

into Reais at the Ptax rate 800 of R$/US$ 2.17 on March 31, 2006

The result of the valuation of the Subsidiaries is presented in an interval manner on the basis of the

following variables:

–

WACC, in nominal Dollars, varying by 0.25 percentage points; and

–

Rate of growth in perpetuity, in nominal Dollars, varying by 0.255 percentage points; it is 0.61% in

the base scenario for the Subsidiaries, except for Star One where it was 3.67%

The base date utilized for this Valuation is March 31, 2006 and the projection horizon includes the

period from 2006 to 2015

Subsidiaries

34

Calculation Methodology of the Interval of Value of the

Operational Subsidiaries (Net)

For the valuation of Embrapar’s holdings in Net, the utilization of Net's market value was chosen

because:

–

ABN AMRO did not have access to the business plan of Net that reflects its financial,

operational and commercial situation, present and future, and which was approved by its

administration, or access to the budget for the year 2006 or other analyses, studies and

projections as of January 1, 2006

–

ABN AMRO did not have access to Net representatives for discussions in regard to Net

prospects, estimates and projections of future performance

–

The class of shares used to value Net presents broad liquidity (presence on the IBOVESPA)

and

dispersion

(preferred

shares

have

a

free

float

greater

than

50%)

–

CVM 361 instruction and Article170 the Corporation Law provide the possibility of the adoption

of such methodology

The quotes of Net preferred shares were adopted as the market reference because:

They have greater liquidity than the common shares. Net PN shares form a part of the

BOVESPA Index that groups the 30 most liquid securities on the Market, ON shares do not

form a part of that index;

–

At

the

same

time,

they

do

not

present

any

loss

of

value

because

of

a

tag

along

difference

since

Net, present at level 2 of the BOVESPA Differentiated Corporate Governing Practices,

guarantees

100%

of

tag

along

for

preferred

shares

–

PN dispersion is greater than 50%

Weighted average price by the daily traded volume of Net preferred shares were analyzed over

periods of 1 year, 6 months and 3 months

Operational

Subsidiaries

(Net)

35

The economic-financial valuations of the Embrapar Subsidiaries were based on the

DCF methodology

Non-leveraged operational cash flow utilized in the DCF valuation method was

constituted in the following manner:

(+) Earnings Before Interest and Taxes (EBIT)

(-) Income Tax and Corporate Contribution based on EBIT

(+) Depreciation and Amortization

(-) Capital Expenditures (investments in fixed assets)

(+ -) Changes in Working Capital

(=) Unleveraged Operating Free Cash Flow of the Business

Discounted Cash Flow Method (DCF)

Components of

the

Cash Flow

36

The DCF valuation model calculates the value of a business by discounting future cash flows based on

the

WACC

(Weighted

Average

Cost

of

Capital).

WACC

is

determined

by

the

weighted

average

cost

of

debt

and

cost

of

equity

within

the

optimal

capital

structure

for

the

Company

and

is

directly

related

to

the risk associated with future cash flows

WACC is determined by the weighted average cost of equity and debt of the Company. Such costs are

weighted by the respective equity and debt proportions in the Company’s capital structure, in

accordance with the following formula:

D : Value of the total debt of the business

E : Value

of

Shareholders’

Equity

Re : Cost of Equity

Rd : Cost of Debt* (1-T)

T :    IR and CSLL

Once the WACC was calculated in nominal Dollars and the financial projections were made in nominal

Reais. the free non-leveraged cash flow of the business was converted into nominal Dollars

Discounted Cash Flow Method (DCF)

FCD Method

Weighted

Average Cost of

Capital (WACC)

Rd

E

D

D

Re

E

D

E

WACC

37

The

following

adjustments

to

the

CAPM

model

(Capital

Asset

Pricing

Model)

are

used

to

calculate

the

cost of equity of the Company:

Re :

Cost of equity of the Company

Rf :

Risk-free rate of return on investment in the US

Rm -

Rf : Average expected return on the stock market

ß

: beta estimated for a business acting in the Subsidiaries’

industry

Z : Additional

risk

factor

for

businesses

that

operate

in

Brazil

(“Country

Risk”)

The methodology considered to calculate the cost of equity of the Company was based on data

obtained

from

companies

operating

in

the

same

segment

in

the

USA

and

Europe,

to

which

a

country

risk premium was added

Cost of the equity capital

Cost of equity

Z

Rf)

-

(Rm

Rf

Re

38

We believe that the best estimate for the risk-free rate of return is the yield of the United States

Treasury Bond. We  considered the 10-year bond since it is the long-term bond with the closest

duration to the Brazilian Global 27 bond, which will be used to estimate the country risk of Brazil

The average yield over the last 12 months of the 10-year United States Treasury bond is 4.39% per

annum

Risk-Free Rate

Risk-Free Rate

Note: average of the last 12 months prior to April 29, 2006

Source: Bloomberg

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1-year average

4.39%

39

We believe that the best estimate of Brazilian country risk is given by the difference (spread)

between

(i)

the

return

on

the

Global

27

bond

–

the

Brazilian

sovereign

long-term

bond,

denominated

in U.S. Dollars and (ii) the return on the 10-year U.S. Treasury bond, since the two have a similar

duration.

The graph below shows the behavior of Brazilian country risk over the last twelve months. Given

Brazil's macroeconomic stability and the country risk tendency observed, we consider that a historic

series of spreads over a longer term has become less applicable and we therefore utilize the

average

spread

for

the

last

twelve

months,

calculated

at

3.75%

per

annum.

Country Risk

Country Risk

Premium

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1-year average

3.75%

Note: average of the last 12 months prior to April 29, 2006

Source: Bloomberg

40

Beta is a measurement of market risk / system risk / non-diversiable risk. The beta coefficient attempts

to indicate the sensitivity of the price of the stock to the variation in the price of the market portfolio,

i.e., a stock that has a beta equal to 2 would tend to rise 2% when the market rises 1%

That coefficient is calculated by means of a linear regression between a series of variations in the

company's

stock

price

and

a

series

of

variations

in

the

price

of

the

market

portfolio

In order to estimate the beta, we considered a sample of businesses operating in the Subsidiaries'

industry.

We

therefore

considered

the

average

of

the

unleveraged

betas

of

the

businesses

in

the

sample as a proxy

for the Subsidiaries' betas

In order to make those betas comparable, we took the beta of each business excluding the

corresponding degree of indebtedness, which results in the unleveraged betas

In order to take into account the risk derived from the Subsidiaries capital structure, we calculated the

beta of the companies by means of the following formula:

The leveraged beta considered in the valuations of the Embrapar Subsidiaries were:

–

Embratel: 1.28

–

Star One: 1.02

Beta

Beta

Note: (1)marginal income tax and CSLL rate

T

Equity

Debt

1

1

(1)

unleveraged

41

Market risk premium is the additional return required by investors to compensate for an element of

greater

uncertainty

(risk)

in

investments

in

stocks

versus

investments

considered

risk

free

The estimate used for overall market risk is the long-term historic average (1900 to 2005) of the

differences between the return on an index representing the global stock market denominated in

Dollars and the return on an overall index of long-term sovereign bonds of credit risk-free countries

ABN AMRO favors a longer period (since 1900) because that period reflects a more diverse set of

economic environments such as wars, depressions and periods of expansion, that are not

satisfactorily reflected in shorter periods

ABN AMRO favors the historic focus rather than the focus on the future due to the fact that it does not

believe that the market risk premium is predictable within a period of 3 to 4 years. Since the market

risk

premium

is

a

random

value,

historic

data

represent

a

better

estimate

for

the

future.

The

value

of

the market risk premium utilized in the valuation of the Embrapar Subsidiaries is 5.10% (that value is

the

result

of

the

“Global

Investment

Return

Yearbook

2006”

study

carried

out

by

ABN

AMRO

in

conjunction with the London Business School)

Market Risk Premium

Market Risk

Premium

42

The cost of debt is estimated based on the average long term cost observed in capital raising

operations

by

enterprises

with

a

credit

profile

similar

to

those

of

the

Company’s

Subsidiaries.

Thus

the

cost of future debt must represent the cost that the enterprise would pay should it issue long term

bonds. That cost is directly connected to the enterprise’s risk profile

Since interest paid is deductible from income tax and the corporate contribution, we must reduce the

cost of debt before taxes by the long term income tax and the corporate contribution rate in order to

arrive at a post-tax cost of debt

The weight assigned to equity in the calculation of the average weighted cost of capital must be based

on the (estimated) market value of the equity and debt, since the cost of capital must reflect the

remuneration required by investors in accordance with the business risk of the enterprise

The target financial leverage (total debt / total capital) used in the valuations of the Embrapar

Subsidiaries were:

–

Embratel: 32.41%

–

Star One: 21.93%

Cost of Debt and the Capital Structure

Cost of the Debt

(cost capital of

third parties)

Capital

Structure

43

The life of a business is theoretically infinite. Nevertheless, we are not able to project future cash flows

in a precise manner beyond a certain period. Therefore, a part of the value of the business, known as

the terminal value, will be generated by the cash flows of the years that follow the last year of the

period of projection

The

calculation

of

the

terminal

value

is

adjusted

to

standardize

the

Star

One

Capex.

Each

year,

until

infinity, the free cash flow will grow in conformity with its growth rate, which is referred to as the

perpetuity growth rate

The financial projections were prepared in nominal Reais and then converted into nominal Dollars in

accordance with the average exchange rates expected for each of the period projected, in accordance

with the table of macroeconomic projections indicated on page 44. In that manner the perpetuity

growth rate of free cash flows should, coherently, be a rate in nominal Dollars.  The nominal rate of

growth in perpetuity utilized by ABN AMRO is 0.61% in nominal Dollars for the Subsidiaries, except for

Star One which was 3.67% in nominal Dollars

Terminal value and perpetuity growth rate

Terminal value

and perpetuity

growth rate

44

WACC

Weighted Average Capital Cost (WACC)

WACC

11.19%

WACC (nominal US$)

13.33%

Cost of Equity Adjusted for

Country Risk (US$)

3.53%

78.07%

21.93%

Cost of Debt after IR and

CSLL (US$)

Capital Structure:

% of equity

% of third party

0.86

34.00%

28.08%

1.02

Non-leveraged Beta of the Sector

Income Tax

D/E

Leveraged Beta

Star One

11.95%

WACC (nominal US$)

14.65%

Cost of Equity Adjusted for

Country Risk (US$)

6.32%

67.59%

32.41%

Cost of Debt after IR and CSLL

(US$)

Capital Structure:

% of equity

% of third party

0.97

34.00%

47.95%

1.28

Non-leveraged Beta of the Sector

Income Tax

D/E

Leveraged Beta

Embrapar (including Subsidiaries. but not Star One)

4.39%

5.10%

3.75%

Return on Ten-Year United States Treasury Bond (T-Bond)

Stock Market Risk Premium

Country Risk Premium

Cost of Capital for the Company (US$)

45

3b

Embrapar Valuation

(excluding participation in

Net)

46

Macroeconomic Assumptions

Principal Macroeconomic Assumptions

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Inflation (IPCA)

4.24%

3.97%

3.38%

3.32%

3.42%

3.55%

3.67%

3.74%

3.74%

3.74%

Inflation (IGPM)

3.46%

4.02%

3.88%

3.83%

5.88%

4.43%

4.07%

3.97%

3.97%

3.97%

Exchange Rate -

end of period (R$/US$)

2.35

2.45

2.55

2.65

2.86

2.98

3.10

3.22

3.27

3.33

Average Exchange Rate during the period (R$/US$)

2.20

2.40

2.50

2.60

2.76

2.92

3.04

3.16

3.21

3.30

Selic

Rate (average for the year)

15.15%

13.48%

13.01%12.03%10.86%

8.96%

8.96%

9.04%

9.04%

9.04%

Real GDP Growth

3.97%

4.03%

4.44%

4.64%

4.52%

4.48%

4.34%

4.12%

4.12%

4.12%

47

Embrapar Subsidiaries: main operational assumptions

The Valuation of Embrapar is based on: (i) public information about the sector in which the Company Subsidiaries are active;

(ii)

public

information

with

regards

to

macroeconomic

parameters

where

the

Company

and

its

Subsidiaries

have

a

relevance;

(iii) business plans of the Company Subsidiaries for the period from 2006 to 2015 prepared and approved by their respective

managements; (iv) historical, financial and operational information about the Company and its Subsidiaries and (v) discussions

with the Designated Representatives in relation to past performance and the expectations for the future of the Company and its

Subsidiaries.

Growth in national long distance traffic services in line with GDP, mainly coming from cellular connections, VIP phone and 0800

services

and

a

decrease

in

international

long

distance

traffic

services

as

a

result

of

the

competition

in

relation

to

tariffs

and

a

decrease in unit prices per minute is expected in long distance as a result of the stimulus of competition

In general terms, the services of the Embrapar Subsidiaries in Data and Internet segments are growing in line with the market

There is an expectation of the introduction of VoIP service beginning in 2006 with a strong growth on the basis of subscribers

according to  information furnished by the Designated Representatives

Interconnection tariffs show a reduction in the years beginning in 2006 as a result of new regulatory developments

Operational expenses are growing as a function of inflation and present no significant improvements in real terms

Beginning in 2006 a biannual concession rate of 2% will be charged on revenues from long distance services

Capex refers principally to the expansion of local services, maintenance of infrastructure for data transmission, internet services and

VoIP services

In relation to Primesys, growth is expected in its activities in line with the GDP and the maintenance of margins

In relation to Star One, accelerated growth of revenue is predicted with respect to broadband Internet services and a greater area of

coverage with the new Q-band satellites

The

costs

of

interconnection

and

of

renting

transponders

is

stabilizing

in

terms

of

percentages

of

net

revenues

Investments in new satellites to replace and maintain the present fleet were considered in the projection

Summary of the Operational Assumptions for the Valuation of Embrapar

48

12,902

12,917

13,312

13,623

14,080

14,565

15,139

15,715

16,336

16,973

26,151

26,918

28,042

29,088

30,713

32,515

34,356

35,905

37,534

39,187

1,964

1,932

1,902

1,908

1,892

1,866

1,886

1,901

1,904

2,034

11,215

12,098

12,829

13,578

14,767

16,058

17,309

18,288

19,267

20,250

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

DLD

ILD

Local services

Traffic (Millions of Minutes)

Growth in local and

national long distance

telephone traffic and

modest drop in

international long

distance telephone

traffic

Reduction in national

and international long

distance rates and

increase in local

telephone rates

Embrapar: operational variables

Traffic (million of minutes)

Net average tariff (R$ nominal / minute)

0.33

0.32

0.31

0.29

0.27

0.26

0.25

0.24

0.23

0.22

0.30

0.31

0.30

0.29

0.29

0.28

0.28

0.27

0.27

0.26

0.08

0.07

0.07

0.07

0.07

0.07

0.07

0.07

0.07

0.08

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

DLD

ILD

Local service

Average Net Rates (nominal R$ / minute)

49

4,874

4,750

4,670

4,479

4,341

4,335

4,299

4,272

4,230

4,189

2,195

2,312

2,410

2,516

2,629

2,784

2,883

3,022

3,264

3,405

1,941

2,117

2,298

2,486

1,401

1,579

1,762

1,234

1,068

899

268

301

331

358

393

428

467

507

549

593

10,673

10,341

9,918

9,590

9,310

8,942

8,754

8,644

8,431

8,235

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Long distance

Data and Internet

Local services

Other services

Revenues for long

distance telephone

service represents the

largest part of Embrapar

revenues but their

relative contribution

decreases over the

years. Data

transmission. Internet.

local and other services

grow over the years

Note:

Values

of

net

revenues

consider

the

integral

consolidation

of

Star

One

revenues,

with

the

elimination

of

intercompany

operations

Embrapar: Net Revenues

Composition of Net Revenues (R$ nominal millions)

50

Interconnection costs are

the greatest portion of

Embrapar costs

Personnel and third party

expenses are the

greatest portion of

Embrapar expenses

Embrapar: Costs and Expenses

Composition of Expenses (R$ nominal millions)

Composition of Costs (R$ nominal millions)

Note: Cost and expenses values consider the integral consolidation of Star One receipts, eliminating intercompany operations

691

711

726

741

757

774

793

812

831

851

620

631

638

649

667

684

702

719

737

1,203

2,453

2,538

2,554

2,571

2,610

2,666

2,714

2,777

2,824

2,878

610

1,152

1,207

1,198

1,192

1,224

1,238

1,263

1,274

1,290

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Personal Expenses

Third part services

Others

2,396

2,466

2,451

2,372

2,306

2,417

2,393

2,387

2,501

2,453

774

759

721

684

649

618

587

558

530

503

477

372

479

579

676

877

991

1,111

1,239

1,375

110

20

113

98

84

72

61

55

42

29

3,355

3,469

3,588

3,648

3,721

3,974

4,105

4,266

4,558

4,701

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Interconnection

Data and Internet

Local services

Others

51

The EBITDA margin

remains stable during the

period of the projection

The value observed in

2006 principally reflects

investments in Star One

satellites and

investments for the

expansion of local

telephone services

Embrapar: EBITDA and Capex

Note: EBITDA and Capex values consider the integral consolidation of Star One EBITDA and Capex. with the elimination of intercompany operations

Capex (R$ nominal millions)

EBITDA (R$ nominal millions)

EBITDA

2,427

2,424

2,502

2,535

2,611

2,670

2,771

2,875

2,959

3,094

29.5%

28.7%

28.9%

29.0%

29.2%

28.7%

28.9%

29.0%

28.6%

29.0%

0

1,000

2,000

3,000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

50%

100%

EBITDA margin

1,464

881

864

889

1,054

1,218

1,219

1,068

1,140

1,161

17.8%

10.4%

10.0%

10.2%

11.8%

13.1%

12.7%

10.8%

11.0%

10.9%

0

1,000

2,000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

50%

100%

Capex

Capex as % of net revenues

52

Embrapar: Results of Operations and Cash Flows

Note: Simplified financial statements consider the integral consolidation of Star One. with the elimination of intercompany operations

For the perpetuity

calculation it was

assumed: (i) an EBITDA

adjustment to reflect a

long term annual

concession rate (1% per

year versus 2% biannual)

and (ii) an average Capex

to reflect the

maintenance and

renovation of the current

fleet of Star One

satellites

DRE (R$ nominal millions )

Free Cash Flow  (R$ nominal millions)

Ending on December 31

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Net revenues

8,235

8,431

8,644

8,754

8,942

9,310

9,590

9,918

10,341

10,673

Operational Costs and Expenses

(5,808)

(6,007)

(6,143)

(6,219)

(6,330)

(6,639)

(6,819)

(7,043)

(7,382)

(7,579)

EBITDA

2,427

2,424

2,502

2,535

2,611

2,670

2,771

2,875

2,959

3,094

Margin (%)

29.5%

28.7%

28.9%

29.0%

29.2%

28.7%

28.9%

29.0%

28.6%

29.0%

Earnings before Taxes

880

555

641

715

588

734

918

1,025

1,056

1,221

Net profit

852

532

629

698

570

710

884

966

992

1,142

Ending on December 31

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

EBIT

1,349

1,025

1,126

1,208

1,099

1,254

1,532

1,714

1,731

1,928

Taxes on EBIT (IR and CSLL)

(459)

(348)

(383)

(411)

(374)

(426)

(521)

(583)

(589)

(655)

Depreciation and Amortization

1,078

1,399

1,375

1,327

1,512

1,417

1,239

1,161

1,228

1,166

Capex

(1,464)

(881)

(864)

(889)

(1,054)

(1,218)

(1,219)

(1,068)

(1,140)

(1,161)

Changes in Working Capital

(213)

(83)

(66)

(20)

(91)

(116)

(104)

(111)

(109)

(108)

Free Cash Flow of the Subsidiaries

291

1,112

1,189

1,216

1,092

909

927

1,113

1,121

1,169

53

Notes: (1) Nominal Dollars; (2) ABN AMRO considered the number of shares issued and outstanding by the Company on March 31, 2006. As reported by Company representatives, there were no changes in the

number of shares issued and outstanding by the Company during the period since March 31, 2006

Embrapar

Subsidiaries (ex-Net): Discounted Cash Flow -

Interval of Value

Sensitivity of the value of Enterprise value

The financial-economic equity value of Embrapar takes into

account its share of 80.01% in Star One and its respective

Net Indebtedness as of March 31, 2006. In the case of

Embrapar, the Net Indebtedness also includes the

deduction of the participation of the minority shareholders

in Embratel

The valuation was conducted in nominal Dollars converted

into nominal Reais at the PTAX 800 rate of exchange of

R$/US$ 2.17 on base date of March 31, 2006

The number of Embrapar shares

(2)

on March 31, 2006 was

987,726,487,230 (not including 1,032,167,077 treasury

shares as of March 31, 2006)

General Comments

Sensitivity of the value of Equity value

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

7,477

7,336

7,200

3.67%

0.61%

7,536

7,390

7,251

3.93%

0.86%

7,598

7,448

7,305

WACC

(1)

WACC

(1)

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

5,280

5,138

5,002

3.67%

0.61%

5,338

5,193

5,053

3.93%

0.86%

5,400

5,250

5,107

54

3c

Valuation of the

Participation in Net

55

100,000

60

-

20,000

40,000

60,000

80,000

04/28/2005

06/28/2005

08/28/2005

10/28/2005

12/28/2005

02/28/2006

04/28/2006

0

10

20

30

40

50

PN

ON

Analysis of Changes in the Trading Volume of ON and PN

Shares

Daily Trading Volume of PNs versus ONs

Source: Economática

The daily trading volume

of preferred shares is

more than 9,000 times

higher than the volume of

common shares

Quotes of Net preferred shares were adopted as market references

because:

They have greater liquidity than common shares. Net PN shares form a part of the BOVESPA

Index that groups the 30 most liquid securities of the market. ON shares do not participate in

that Index.

–

At the same time they do not present a loss of

value

due

to a difference in tag along rights,

since Net guarantees 100%  tag along rights for preferred shares, consistent with level 2 of

BOVESPA's Differentiated Corporate Governance Practices

–

PN dispersion is greater than 50%

56

Analysis of the Evolution of ON and PN Share Prices

Evolution of the Price per Share Adjusted for dividends (R$ per share)

Source: Economática

Preferred and common

shares are generally

trade at similar prices

Price of shares (R$ per share)

PN

ON

Minimum

0.54

0.55

Maximum

1.26

1.19

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

04/28/2005

06/282005

08/28/2005

10/28/2005

12/28/2005

02/28/2006

04/28/2006

PN

ON

Volume

(R$ thousand)

Weighted volume

(thousand)

1 year

31,076

33,264

180 days

38,677

35,120

90 days

40,901

36,000

1.101

1.136

Daily average

Weighted average

(R$ per share)

0.934

Last 90 days

57

Valuation of Participation in Net

ABN AMRO believes that the best reference period to value Net shares corresponds to the 90 days prior

to April 29, 2006, for the following reasons:

–

During the past 12 months Net concluded a financial restructuring process that had a significant

impact on the value of its shares

–

Terms of the agreement with Embratel for offering joint services

has continued to evolve in recent

months

–

The recovery movement of the market for cable TV continues and the strong expansion of the

broadband residential market in 2006

Period Chosen as Reference

Calculation of the Value of Net

Notes: (1) Corresponds to the average price weighted by the trading volume of PN shares of Net during the last 90 days prior to April 29, 2006; (2) Total

number of Net shares excluding treasury shares on March 31, 2006; (3) Direct and indirect participation (through Empreendimentos) of Embrapar in Net as of

March 31, 2006; (4) Calculated based on the position on March 31, 2006 ; (5) Embrapar participation in GB Empreendimentos as of March 31, 2006

1,666

I=(E-H)

Total Value of Affiliates Belonging to Embrapar

0,036

H=(F*G)

Net debt of GB Empreendimentos in proportion to Embrapar ownership interest

83.00%

G

Embrapar participation in GB Empreendimentos

(5)

0,044

F

Net Debt of GB Empreendimentos

(4)

1,666

E=(A*D)

Equity value of Net held by Embrapar

1,466

D

Number of shares held directly or indirectly by Embrapar

(millions)

(3)

4,493

C=(A*B)

Equity Value of Net

3,955

B

Total number of shares of Net (millions)

(2)

1.136

A

Price of shares of Net considered in the Valuation (R$ per share)

(1)

Value in Millions of Reais (except when indicated to the contrary)

58

3d

Embrapar Valuation

(including participation in

Net)

59

Result of the Valuation of Embrapar’s

Subsidiaries and

Affiliates

Result of the

Valuation of

Embrapar

Analysis of the Economic Value of the Affiliates on the basis of

Market Value

Analysis of the Economic Value of the Subsidiaries on the basis of DCF

Enterprise value,

excluding Net (R$

millions)

Equity value,

excluding Net (R$ millions

(1)

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

7,477

7,336

7,200

3.67%

0.61%

7,536

7,390

7,251

3.93%

0.86%

7,598

7,448

7,305

WACC

Notes:

(1)

Nominal

Dollars;

(2)

Corresponds

to

the

average

price

weighted

by

the

trading

volume

of

PN

shares

of

Net

during

the

last

90

days

prior

to

April

29,

2006;

(3)

Total

number

of

Net

shares

excluding

treasury

shares

as

of

March

31,

2006;

(4)

Number

of

shares

held

directly

or

indirectly

by

Embrapar

through

GB

Empreendimentos

as

of

March

31,

2006;

(5)

Calculated

on

the

basis

of

the

March

31,

2006

position;

(6)

Embrapar

participation

in

GB

Empreendimentos

as

of

March

31,

2006

Star One

10.94%

11.19%

11.44%

Embrapar

11.70%

11.95%

12.20%

3.42%

0.35%

5,280

5,138

5,002

3.67%

0.61%

5,338

5,193

5,053

3.93%

0.86%

5,400

5,250

5,107

WACC

(1)

Values in million of Reais

(except when indicated to the contrary)

Net share price considered in Valuation (R$ per share)

(2)

A

1.136

Total number of shares of Net (millions)

(3)

B

3,955

Equity valueof Net

C=(A*B)

4,493

Number of shares held directly or indirectly by Embrapar

(millions)

(4)

D

1,466

Equity valueof Net held by Embrapar

E=(A*D)

1,666

Net Debt of GB Empreendimentos

(5)

F

0.044

Embrapar

participation in GB Empreendimentos

(6)

G

83.00%

Net Debt of GB Empreendimentos

in proportion to Embrapar

participation

H=(F*G)

0.036

Total value of Subsidiaries belonging to Embrapar

I=(E-H)

1,666

60

Results of the Valuation of Embrapar’s

Subsidiaries and

Affiliates (cont.)

Results of the

Valuation of

Embrapar

Analysis of the Total Economic Value of Embrapar

Notes:

(1)

The

80.01%

share

that

Embratel

holds

in

Star

One

has

already

been

considered;

(2)

Calculated

in

conformity

with

the

definition

of

Net

Indebtedness

described

in

the

Important

Notice

on

Page

3.

The

80.01%

Net

Debt

of

Star

One

is

being

considered;

(3)

Calculated

on

the

basis

of

the

average

price

weighted

by

the

trading

volume

over

the

last

90

days

of

PN

shares

multiplied

by

the

base

Net

shares

as

of

March

31,

2006

(3,954,663,665

shares);

(4)

ABN

AMRO

considered

the

number

of

shares

issued

by

the

Company

and

in

circulation

as

of

March

31,

2006.

As

reported

by

Company

representatives.

there

were

no

changes

in

the

number

of

shares

issued

by

the

Company

and

in

circulation

as

of

March

31,

2006

Values in million of Reias

(except where indicated otherwise)

Mínimo

-

Máximo

Enterpriese

value of operating Controlled Companies

(1)

A

7,200

7,598

Net debt of Embrapar

Consolidated

(2)

B

2,198

2,198

Equity value of Embrapar

and its Controled

Companies

C=(A-B)

5,002

5,400

Net total Equity Value

D

4,493

4,493

Equity value of Net shares held by Embrapar

(1,466 million shares)

(3)

E

1,666

1,666

Total Equity Value

F=(C+E)

6,668

7,066

Number of Embrapar

shares (million)

(4)

G

987,726

987,726

Price per share (R$ one thousand lot)

F/G

6.75

-

7.15

61

4

Valuation by the Average

Weighted Price of Shares

62

Valuation by the Average Weighted Price of ON Shares of

Embrapar

Source: Economática

Price Evolution of Embrapar ON Shares and Trading Volume (EBTP3)

Volume

Closing -

ON

0

250

500

750

1,000

1,250

1,500

apr/05

jun/05

aug/05

oct/05

dec/05

feb/06

apr/06

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

EBTP 3

Number of

titles (thd)

Volume

(R$ thousand)

Share price

(R$ / 1,000 shares)

Daily average for last month

33,050

164

4.98

Daily average for last six months

26,983

140

5.20

Daily average for last twelve months

24,612

115

4.87

63

Valuation by the average weighted price of Embrapar PN

Shares

Price Evolution of Embrapar PN shares and Trading Volume (EBTP4)

Source: Economática

Volume

Closing PN

0

20,000

40,000

60,000

80,000

apr/05

jun/05

aug/05

oct/05

dec/05

feb/06

apr/06

0.00

2.00

4.00

6.00

8.00

EBTP 4

Number of

titles (thd)

Volume

(R$ thousand)

Share price

(R$ / 1,000 shares)

Daily average for last month

3,509,068

17,884

5.10

Daily average for last six months

2,997,701

16,872

5.63

Daily average for last twelve months

3,087,640

16,254

5.29

64

0

2,000

4,000

6,000

8,000

apr/05

jun/05

aug/05

oct/05

dec/05

feb/06

apr/06

0.00

4.00

8.00

12.00

16.00

Volume

Closing -

ADR

Valuation by the Average Weighted price of Embrapar ADRs

Source: Economática

Note: (1) One ADR represents 5 lots of one thousand preferred shares per lot

Evolution of the Prices of Embrapar ADR

(1)

s and the Volume Negotiated (EBT)

EBT

Number of

titles (thd)

Volume

(US$ thousand)

Share price

(US$ / 5,000 shares)

Daily average for last month

230

2,747

11.94

Daily average for last six months

153

1,931

12.65

Daily average for last twelve months

160

1,844

11.53

65

Valuation by the Average Weighted Price of Embrapar

Shares (cont.)

Note: (1) Average weighted price during the 12 months prior to April 29, 2006. (2) One ADR represents 5 lots of one thousand preferred shares

Results Obtained by Valuation of the Average Weighted Price of Shares

The average weighted price of Embrapar shares on the BOVESPA during the last 12 months prior to

April 29, 2006 and the daily average trading volume were, respectively:

–

EBTP 3: R$ 4.83 per lot of one thousand shares and approximately

R$ 115 thousand per day

–

EBTP 4: R$ 5.29 per lot of one thousand shares and approximately

R$ 16,254 thousand per

day

The average weighted price of Embrapar ADRs during the last 12 months prior to April 29, 2006 and

the daily average of ADR negotiations were. respectively:

–

EBT

(2)

: US$ 11.53 per lot of five thousand shares and approximately US$ 1,844 thousand per

day

66

5

Valuation by the value of

Shareholders’

Equity

67

Valuation by the Value of Shareholders’

Equity

Embrapar –

Shareholders’

Equity

Source: Company information

Note

(1):

The

number

of

Company

shares

considered

for

the

calculation

of

Shareholders’

Equity

of

Embrapar

excludes

treasury

shares

The

value

of

Shareholders’

Equity

on

the

basis

of

the

Company's

balance

sheet

as

of

March 31, 2006 is R$ 7.59 per lot of one thousand shares

Equity Shares -

March 31, 2006

Equity value of Embrapar

at March 21, 2006 (in millions R$)

7,493

Number of shares of Embrapar

(millions)

(1)

987,726

Equity of value of Embrapar

(R$/  thousand shares)

7.59

68

6

Summary of the Valuation

of Embrapar Shares

69

Summary of Embrapar Valuations

The value of the shares

of the  Company

determined by ABN

AMRO is between R$

6.75 per lot of one

thousand shares and R$

7.15 per lot of one

thousand shares

Value per share (R$ per lot of one thousand shares )

5.29

4.83

6.75

7.15

7.59

Value of

Shareholders’

Equity

Weighted Average

Price of

PN Shares

Weighted Average

Price of

ON Shares

Valuation

Range

70

7

Glossary

71

Glossary

We include the glossary below in order to facilitate the understanding of this document by persons

unfamiliar with the methodology of valuing enterprises by discounted cash flow methodology. In this

manner, the clarification given for each term was couched in didactic language to facilitate the

understanding of the concepts utilized

Beta:

is a measure of market risk / system risk / non-diversifiable risk. The Beta coefficient indicates

the sensitivity of the stock price to changes in the price of the market portfolio. The index is measured

by means of a linear regression between a series of variations in the price of the enterprise's stock and

a series of variations in the price of the market portfolio

Capital Asset Pricing Model (CAPM):

The CAPM model is utilized to calculate the Cost of the

Company's Capital or the Cost of the Shareholder's Equity. The model follows the financial premise of

risk and return, so that the greater the risk, the greater the return on investment required by the

shareholder. The calculation considers the beta, the risk-free rate and the market premium

Capital Expenditures (Capex):

investments in fixed assets

72

Glossary (cont.)

Cost

of

Equity:

The

cost

of

equity

is

the

return

required

by

the

shareholder

in

regard

to

the

capital

invested. The calculation considers that a specific asset must pay the invester the cost of opportunity

plus a risk premium

Cost of Debt:

This is a measure of the cost associated with capital that comes from third parties in the

form of loans, financing and market funding, among others

Weighted

Average

Cost

of

Capital

(WACC):

This

is

a

measure

of

the

cost

of

a

company’s

capital. 

WACC is determined by a weighted average on the basis of the long term capital structure, the costs

of debt and equity.  It is directly related to the risk associated with future cash flows

Dispersion:

free

float

greater

than

50%

of

the

class

of

share

analyzed

Dollar:

United States of America Dollar

DTH:

Direct-To-Home Technology

“Earnings

Before

Interests,

Taxes,

Depreciation

and

Amortization”

(EBITDA):

These

are

the

operational earnings generated by the company that effectively generate cash for the company, thus

the calculation of EBITDA considers only the expenses that generate outflows of cash

“Earnings

Before

Interests

and

Taxes”

(EBIT):

These

are

the

operational

earnings

generated

by

the

company,

i.e.,

the

EBITDA

after

the

expenses

of

depreciation

and

amortization

have

been

deducted.

73

Glossary (cont.)

Operational

Cash

Flow:

Operational

cash

flow

only

takes

into

consideration

revenues

and

expenses

actually received or disbursed as the result of company operations. Thus financial receipts and

expenses and other non-operational items are not considered in the calculation

Liquidity:

In

the

context

of

this

valuation,

liquidity

refers

to

the

shares

that

form

a

part

of

the

BOVESPA Index

MDS:

Multipoint

Distribution

System

technology

Market

Risk

Premium:

market

risk

premium

is

the

additional

return

that

investers

require

to

compensate for the greater element of uncertainty (risk) in investment in stocks as opposed to risk-free

investments

Country

Risk:

This

is

the

premium

paid

for

the

political

uncertainty

and

instability

of

a

specific

country. A method frequently utilized to estimate this premium is the difference (spread) between the

sovereign

securities

of

the

country

in

question

and

the

sovereign

bonds

of

the

U.S.A.

Risk Free Rate:

This is the interest rate paid for a risk-free asset. In practice, U.S.A. Treasury Bonds

are utilized as a parameter for risk free interest rates

Equity Value:

The value of the capital of the business for the shareholder

Terminal Value:

Considering that, in theory, the life of a company is infinite and that it is not possible

to precisely project future cash flows beyond a certain period, a part of the company's value will be

generated by cash flows in years subsequent to the last year of the period of the projection. That

estimate

of

value

is

called

the

terminal

value.

Determination

of

the

terminal

value

is

based

on

the

principle that in the long run the company will reach its stage of maturity and that it must then grow at a

constant rate

VoIP:

Voice over Internet Protocol technology

VPL:

Present líquid value

Neither Teléfonos de México, S.A. de C.V. nor any of its affiliates has commenced the tender offer to which this communication relates. Shareholders of Embratel Participações S.A. are advised to read the Tender Offer Statement, the Offer to Purchase and the other documents relating to the tender offer that are filed with the SEC when they become available, because they will contain important information. Shareholders of Embratel Participações S.A. may obtain copies of these documents free of charge, when they become available, at the SEC’s website at www.sec.gov or from the Information Agent to be appointed in connection with the tender offer.

74