2009 Earnings Release

SAO PAULO, Feb. 10 /PRNewswire-FirstCall/ -- Net Servicos de Comunicacao S.A. (BM&FBOVESPA: NETC3 and NETC4); (Nasdaq: NETC); and (Latibex: XNET), the largest cable company in Brazil and one of the largest in Latin America with integrated services that include Pay TV ("NET"), Digital Video ("NET Digital"), High Definition Digital Video ("NET Digital HD"), bidirectional broadband internet access ("NET Virtua") and voice ("NET Fone via Embratel"), today announces its results for the fourth quarter of 2009 ("4Q09").

The Company is reporting its consolidated financial statements for the fiscal year ended December 31, 2009, according to IFRS, 1 year before required. As of this moment, the Company ceases to present its financial statements according to BR GAAP and US GAAP.

In November 2009, Net issued Notes amounting to US$ 350 million, maturing in January 2020 ("Global Notes 2020"). It may use the proceeds for continuing its inorganic growth strategy, early settlement of debt and general business investments.

Given the growth of broadband services' share in the product portfolio, its strategic importance, the prospects of constant growth in the long term and the high cost of constructing its own network, NET acquired Embratel's transmission capacity through an Indefeasible Right of Use (IRU) agreement. The objective is to guarantee the right of use of this network in the long term to provide broadband services. In exchange, NET entered into an IRU agreement allowing Embratel to use its transmission capacity in local accesses in its Hybrid Fiber-Coax (HFC) network to provide fixed telephony services. This transaction increases the Company's EBITDA margin, since a portion of the Internet access costs will be amortized as a result of the recognition of a long-term asset - "Prepaid Right of Use". The agreement came into force in December 2009 and therefore affected only one month's result.

Pay TV client base totaled 3,690,000 in 2009, 20% higher than the 3,071,000 in 2008. Broadband base ended 2009 with 2,882,000 clients, 30% up on the 2,217,000 in 2008. Lines in service at the end of 2009 totaled 2,557,000 lines, 42% up on the 1,802,000 lines in 2008. This increase shows that Net's current growth strategy is once again in line with the industry scenario in Brazil, which is still marked by low penetration and, consequently, presents Net growth opportunities in the markets where it operates.

Net Revenue rose 21%, from R$ 1,021.8 million in 4Q08 to R$ 1,234.7 million in 4Q09. In annual terms, net revenue rose 25%, from R$ 3,690.4 million in 2008 to R$ 4,613.4 million in 2009, mainly driven by the growth in the subscriber base.

Operating Costs stood at R$ 611.9 million in 4Q09, 29% higher than the R$ 475.6 million in 4Q08, and came to R$ 2,274.9 million in 2009, 30% up on the R$ 1,749.4 million in 2008. As a percentage of net revenue, they rose from 46.5% in 4Q08 to 49.6% in 4Q09 and from 47.4% in 2008 to 49.3% in 2009. The main items of increase were Internet access, programming, and the call center.

Selling, General and Administrative Expenses totaled R$ 266.1 million in 4Q09, 2% up on the R$ 260.6 million recorded in 4Q08, and totaled R$ 1,055.5 million in 2009, 15% up on the R$ 922.1 million in 2008. As a percentage of net revenue, these expenses dropped from 25.5% in 4Q08 to 21.6% in 4Q09 and from 25.0% in 2008 to 22.9% in 2009. Selling Expenses rose 10% in 4Q09 over 4Q08 and 19% in 2009 over 2008, in line with the strategy of growth and exploring new markets. As a percentage of net revenue, these expenses dropped from 10.3% in 4Q08 to 9.4% in 4Q09 and from 10.6% in 2008 to 10.1% in 2009. General and Administrative Expenses dropped 10% in 4Q09 in relation to 4Q08 and rose 3% in the annual comparison. As a percentage of net revenue, these costs decreased from 15.1% in 4Q08 to 11.2% in 4Q09 and from 14.0% in 2008 to 11.5% in 2009, showing that the Company has managed to keep its costs under control.

EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) totaled R$ 347.9 million in 4Q09 for EBITDA margin of 28%. In relation to the 4Q08 amount of R$ 274.5 million, EBITDA increased by 27%, proving that the Company's growth strategy has been generating returns that are adequate for the investments made. Excluding the impact of the IRU agreement, the 4Q09 EBITDA margin would be 27%. In 2009, EBITDA margin also increased by 27% to R$ 1,242.2 million from R$ 978.9 million in 2008.

Capex totaled R$ 1.1 billion in 2009, an increase of 10% over 2008, mainly due to the acquisition of a higher volume of high definition decoders and adjustments to the ESC90 network for launching NET products. Note that Capex is still largely related to growth. Of the total investments, the variable portion represented 77% and was allocated to purchase equipment and residential installations, both related to subscriber acquisitions and infrastructural adjustments such as node breakings.

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SOURCE Net Servicos de Comunicacao S.A.