Edgar Filing: BRASIL TELECOM SA

Brazil Telecom Holding Company — 6-K — EDGAR Services by St Ives Burrups

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

THROUGH NOVEMBER 7, 2002

(Commission File No. 1-15256)

BRASIL TELECOM S.A.
(Exact name of Registrant as specified in its Charter)

BRAZIL TELECOM COMPANY
(Translation of Registrant’s name into English)

SIA Sul, Área de Serviços Públicos, Lote D, Bloco B
Brasília, D.F., 71.215-000
Federative Republic of Brazil
(Address of Registrant’s principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F checked box Form 40-F empty box

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): empty box .

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): empty box .

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

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BRTO3: R$11.60/1,000 shares
BRTO4: R$11.87/1,000 shares
BTM: US$9.60/ADR
MARKET CAPITALIZATION: R$6,334 MILLION
Closing Price: November 6, 2002

Brasil Telecom S.A.

Consolidated Earnings
Release

Third Quarter of 2002
Non-audited

Brasília, November 7^th, 2002.

TABLE OF CONTENTS

Highlights of the Results	4
Consolidated Income Statement	5
Table 1: Consolidated Income Statement	5
Operating Performance	6
PLANT	6
Table 2: Plant	6
Graph 1: Plant Evolution	6
Graph 2: ADSL Lines	8
Table 3: ADSL Residential Plans	8
Table 4: ADSL Corporate Plans	8
QUALITY TARGETS	9
Graph 3: Quality Goals Achieved	9
TRAFFIC	9
Table 5: Traffic	9
Graph 4: DLD Market Share	10
Financial Performance	11
REVENUE	11
Table 6: Consolidated Gross Operating Revenues	11
Graph 5: Gross Revenue Breakdown	11
Graph 6: Data Communication Revenue	13
COSTS AND EXPENSES	14
Table 7: Consolidated Operating Costs and Expenses	14
Graph 7: Costs and Operating Expenses Breakdown (Excluding Depreciation)	15
Graph 8: LIS/Employee	16
Graph 9: Losses with Accounts Receivable	17
Table 8: Gross Accounts Receivable	17
EBITDA	18
Table 9: EBITDA Margin – Gains and Losses	18
FINANCIAL RESULT	19
Table 10: Consolidated Financial Result	19
Table 11: Interest on Shareholders’ Equity Credited in 2002	19
OTHER ITEMS	19
NET EARNINGS	20
Balance Sheet	20
Table 12: Consolidated Balance Sheet	20
Indebtedness	21
Table 13: Indebtedness	21
Table 14: Amortization Schedule of Long Term Debt	22
Investment in Permanent Assets	22
Table 15: Investment in Permanent Assets Breakdown	22
Cash flow	23
Table 16: Consolidated Cash Flow	23
EVA	24
Table 17: EVA	24
Corporate Governance	25
Stock Market	25
Table 18: Stock Performance	25
Graph 10: Stock Performance in 3Q02– Bovespa and NYSE	26
Table 19: Participation in Indexes	26
Shareholders Structure	26
Table 20: Shareholders Structure	26
Recent Developments	27
Picture 1: Brasil Telecom’s Corporate Structure	27
Table 21: Board of Directors	27
Main Indicators	30
Table 22: Evolution of Operating and Financial Indicators	30
Next Events	31
IR Contacts	31
Media Contacts	31

Page 3 of 32

		Plant– At the end of 3Q02, Brasil Telecom’s installed plant reached 10,544 thousand lines, stable in relation to the plant observed at the end of 2Q02. Lines in service (LIS) reached 9,228 thousand lines at the end of 3Q02, 3.2% above the plant of 2Q02, contributing to the growth of utilization rate in the quarter, that reached 87.5% at the end of September, 2.4 p.p. above the levels registered in 2Q02.

		ADSL lines – At the end of 3Q02, Brasil Telecom reached 118.3 thousand ADSL lines sold, representing an increase of 92.5 thousand in relation to the 3Q01 plant. Considering the ADSL lines in service, the Company reached 108.4 thousand, representing the highest ratio in service/sold since the beginning of the year: 91.6%.

		Net revenue in 3Q02 reached R$1,820.9 million, a growth of 4.8% in relation to the revenue registered in 2Q02. In relation to the net revenue of the 3Q01, the increase was 15.4%. Net revenue/Avg. LIS/month grew 2.6% in 3Q02, reaching R$66.8.

		Data communication revenue in 3Q02 reached R$142.3 million, 21.4% above 2Q02, representing 5.6% of total gross revenue. In relation to the 3Q01, data communication revenue grew 66.1%.

		Losses with accounts receivable reached R$68.8 million in 3Q02, representing 2.7% of gross revenue, stable in relation to the presented in 2Q02, and can be attributed to the actions implemented by Brasil Telecom to recover losses and reduce bad debt.

		EBITDA – In 3Q02, EBITDA was R$863.0 million, 4.4% above the R$826.8 million posted in 2Q02, a growth mainly fueled by the increase of revenue and cost control. EBITDA margin reached 47.4% and EBITDA/Avg. LIS/month reached R$31.7, representing an increase of 2.3% in relation to 2Q02.

		The consolidated net debt (excluding inter-company loan and debentures with the parent company) was R$2,374.4 million in 3Q02, representing a financial leverage of 34.5%. Dollar denominated debt totaled R$408.8 million at the end of 3Q02. Brasil Telecom had hedge mechanism for 38.1% of that debt, being all the debt due until December 2003 hedged against foreign exchange variations. By the end of September, debt average cost was 15.73% p.a. and payment average term was approximately 56 months.

		Productivity of 1,599 LIS/employee at the end of 3Q02, against 1,460 (+9.5%) in 2Q02. The increase in the productivity ratio was due to the increase of the plant in service combined with the net reduction of 349 employees in the quarter.


R$ Million	3Q01		2Q02		3Q02		Change in Quarter	Change in 12 Months

GROSS REVENUES	2,180.1		2,412.2		2,540.9		5.3%	16.6%
Local Service	1,018.5		976.8		1,064.7		9.0%	4.5%
Public Telephony	12.2		88.8		86.6		-2.5%	607.5%
Long Distance Service	296.8		354.7		365.4		3.0%	23.1%
Fixed-Mobile Calls	454.6		544.4		563.0		3.4%	23.9%
Interconnection	208.1		195.8		181.5		-7.3%	-12.8%
Lease of Means	46.3		57.1		51.4		-10.0%	10.9%
Data Communication	85.7		117.2		142.3		21.4%	66.1%
Supplementary and Value Added Services	47.0		70.7		73.7		4.2%	56.9%
Other	10.9		6.6		12.3		87.4%	12.4%

Deductions	(602.8	)	(674.3	)	(720.0	)	6.8%	19.4%
NET REVENUES	1,577.3		1,737.9		1,820.9		4.8%	15.4%

COSTS & OPERATING EXPENSES	(833.6	)	(911.2	)	(957.9	)	5.1%	14.9%
Personnel	(117.6	)	(108.5	)	(95.7	)	-11.8%	-18.6%
Materials	(25.7	)	(24.5	)	(19.3	)	-21.2%	-24.6%
Subcontracted Services	(176.4	)	(275.0	)	(285.6	)	3.9%	61.9%
Interconnection	(310.3	)	(383.6	)	(382.7	)	-0.3%	23.3%
Advertising and Marketing	(32.5	)	(23.3	)	(36.5	)	56.8%	12.2%
Provisions and Losses	(79.2	)	(74.8	)	(78.4	)	4.9%	-0.9%
Lay-offs	(37.9	)	(3.1	)	(0.2	)	-94.9%	-99.6%
Other	(54.0	)	(18.3	)	(59.4	)	225.3%	10.1%

EBITDA	743.7		826.8		863.0		4.4%	16.0%
Depreciation and Amortization	(471.8	)	(490.8	)	(509.1	)	3.7%	7.9%

OPERATING PROFIT BEFORE FINANCIAL RESULT	271.9		336.0		353.9		5.3%	30.1%

Financial Result	(87.5	)	(198.6	)	(312.7	)	57.5%	257.3%
Financial Revenues	49.9		59.7		64.9		8.7%	30.1%
Financial Expenses	(137.4	)	(218.3	)	(263.0	)	20.5%	91.4%
Interest on Shareholders’ Equity	–		(40.0	)	(114.6	)	186.5%	N.A.

OPERATING PROFIT AFTER FINANCIAL RESULT	184.4		137.4		41.2		-70.0%	-77.7%

Non-Operating Revenues (Expenses)	(29.2	)	(32.6	)	(31.2	)	-4.2%	6.9%
Goodwill Amortization - CRT Acquisition	(31.0	)	(31.0	)	(31.0	)	0.0%	0.0%
Other	1.8		(1.6	)	(0.2	)	-86.4%	N.A.

EARNINGS BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES	155.2		104.8		10.0		-90.5%	-93.6%

Income and Social Contribution Taxes	(55.3	)	(44.7	)	(11.7	)	-73.9%	-78.9%

EARNINGS BEFORE PROFIT SHARING	99.9		60.1		(1.7	)	N.A.	N.A.

Profit Sharing	(20.0	)	(9.5	)	(8.7	)	-7.8%	-56.4%

EARNINGS BEFORE REVERSION OF INTEREST ON SHAREHOLDERS’ EQUITY	79.9		50.6		(10.4	)	N.A.	N.A.

Reversion of Interest on Shareholders’ Equity	–		40.0		114.6		186.5%	N.A.

NET EARNINGS	79.9		90.6		104.2		14.9%	30.4%

Goodwill Amortization - CRT Acquisition	31.0		31.0		31.0		0.0%	0.0%

NET EARNINGS ADJUSTED BY GOODWILL AMORTIZATION	110.9		121.6		135.2		11.1%	21.9%

Net Earnings (Losses)/1,000 shares - R$	0.1500		0.1681		0.1932		14.9%	28.8%
Net Earnings (Losses)/ADR - US$	–		0.1790		0.1550		-13.4%	N.A.


Lines Installed	The addition of 39 thousand lines to the installed plant in 3Q02, against 63 thousand in the previous quarter, reflects Brasil Telecom’s strategy to meet the demand and comply with universalization and quality goals established in the concession contracts.

	Graph 1: Plant Evolution


Lines in Service	The plant in service grew 3.2% in 3Q02, to 9.2 million lines, reflecting the net addition of 288 thousand lines.

	During the quarter, 86 thousand pre-paid phones were added to the plant in service. The pre-paid lines have an important role in bad debt control and are only available in switching centers with idle capacity. Besides that, these terminals are not object of marketing campaigns.

New cancellation policy	Beginning on July 2002, Brasil Telecom changed its line disconnection policy in switching centers with idle capacity, with the objective of increasing traffic and reducing expenses with lines disconnection and installation.

	According to the previous policy, with the revocation of the contract, which is expected to occur from the 90º day of payment overdue on, pursuant to Anatel’s Resolution 85, the client had its line disconnected. After paying his debt, the client usually requested a new line.

	With the new policy, the contract is cancelled, but Brasil Telecom does not disconnect the line. At this moment, the only obligation of the client with Brasil Telecom is the payment of his debt.

	Besides the cost reduction, with the new policy Brasil Telecom returns the status of the non-disconnected line to partial block on the 105º day of payment overdue, with the objective of increasing incoming traffic.

Utilization rate	The stability of the installed plant, combined with the growth of the plant in service, resulted in the increase of 2.4 p.p. in the utilization rate.

ADSL	At the end of 3Q02, Brasil Telecom reached 118,3 thousand ADSL lines sold, an increase of 16.6% in relation to 2Q02.

	Since it is part of the strategy of shielding clients’ base, Brasil Telecom increased the efforts in selling ADSL to high-income residential clients (classes A and B neighborhoods), attending SOHO (Small Office Home Office) segment.

	Besides that, Brasil Telecom has been repositioning its product portfolio, promoting the substitution of access technologies with high costs (e.g. Frame Relay) for ADSL technology, in order to attend the corporate segment (SME – Small and Medium Enterprises Corporate Market). This repositioning has the objective of increasing current product portfolio competitiveness, leading to a cost reduction and, consequently, to a margin increase.

	At the end of September, the Turbo Empresas product (corporate ADSL) corresponded to approximately 4% of ADSL lines in service.

Table 3: ADSL Residential Plans
Old Plans			New Plans

Name	Speed	Montlhy Fee¹	Name	Speed	Montlhy Fee¹

Rápido	Up to 256 Kbps	R$ 59.00	Turbo 300	Up to 300 Kbps	R$ 69.90
Super Rápido	Up to 512 Kbps	R$ 175.00	Turbo 600	Up to 600 Kbps	R$ 99.00
			Mega Turbo	Up to 1.0 Mbps	R$ 179.00

¹Prices refer to AC, RO, MS, SC, RS and DF branches.


Table 4: ADSL Corporate Plans

	Name	Speed	Montlhy Fee¹

	Rápido	Up to 256 Kbps	R$ 99.00
	Super Rápido	Up to 768 Kbps	R$ 209.00
	Profissional	Up to 1.5 Mbps	R$ 490.00

¹Prices refer to AC, MS, SC, RS and DF branches.

	Graph 3: Quality Goals Achieved


Quality Goals	In 3Q02, Brasil Telecom complied with all quality targets established in the concession contracts, reflecting the company focus in the quality of services rendered to its customers.


Exceeding Local Pulses	Exceeding local pulses in 3Q02 were stable in relation to 2Q02. This stability, compared to the 2,1% growth of the average lines in service, is explained by the profile of new subscribers, since the majority of them use only the monthly franchise of 100 pulses.

	Another factor with impact in exceeding pulses is the sale of ADSL, because it reduces the number of dialed accesses to Internet connection. The counterpart of this loss of traffic is reflected in data communication revenue, which grew 21.4% in 3Q02.

Domestic Long- Distance Traffic		DLD traffic remained stable in 3Q02 in relation to 2Q02, reaching 1.9 billion minutes.

		DLD traffic/Avg. LIS/Month traffic dropped from 72.1 minutes in 2Q02 to 70.5 in 3Q02, reflecting the higher Brasil Telecom’s higher penetration in lower-income classes.


		Graph 4: DLD Market Share


DLD Market Share		Brasil Telecom’s market share in the DLD intra-region segment grew 0.6 p.p., reflecting the higher number of corporate advertising campaigns, with the objective of reinforcing Brasil Telecom’s “14” DLD code.

Fixed-Mobile Traffic		Fixed-mobile traffic increased 2.3% in 3Q02, in relation to 2Q02,reflecting the 2.1% growth in the average plant in service.

		Differently from what occurs in exceeding pulses and DLD calls, the penetration in lower income classes results in an increase of fixed-mobile traffic, once the pre-paid mobile plant is higher in these classes.

Local Service		Local service revenue grew 9.0% in 3Q02, due to the average tariff readjustment of 8.3% in the local service basket and to the growth of the average plant in service.

		Installation revenue totaled R$7.1 million in 3Q02, resulting from the lower number of installation billed in the quarter. During 3Q02, 541 thousand lines were activated. In relation to this revenue, we must exclude 130 thousand address changes and 167 thousand alternative plans, free of installation fee. Therefore, 243 thousand installations generated revenue in 3Q02, compared to 253 thousand in 2Q02. In addition to the lower number of installations billed, installation average fee was reduced by 8.8%.

		Basic subscription revenue reached R$682.7 million in the quarter, an increase of 10.7% in relation to R$616.6 millions in 2Q02. This variation is due to the increase of 1.1% in the average lines in service (excluding promotional plans that are free of or offer a discount in basic subscription), combined with an average readjustment of 14% in the residential basic subscription fee.

		Measured services revenue reached R$345.6 million in 3Q02, a growth of 7.6% in relation to the registered in 2Q02, reflecting the increase of 7.95% in the local pulse tariff.

		Other local service revenues were derived from address changes - R$9.7 million, local collect calls – R$15.9 million and rural telephony – R$2.7 million, which dropped 4.0%, 0.6% and 3.6% in 3Q02, respectively.

Public Telephony		Public telephony revenue reached R$86.6 million in 3Q02, a drop of 2.5% in relation to the registered in the previous quarter. This drop reflects the reduction of 10.4% in sold credits during the quarter, which reached 1.4 billion combined with a readjustment of 8.4% in the credit tariff.

		The drop in sold credits is explained by the card inventories that retailers accumulated in June, advancing the tariffs readjustment.

Domestic Long Distance		The 3.0% increase in domestic long distance revenue in 3Q02 reflects mainly the 9.8% growth in the intra-region revenue, which is explained by the combination of the 0.6 p.p. gain in the market share in this segment with the average tariff readjustment of 4.97% in the DLD basket.

Fixed-Mobile		Fixed-mobile call revenue grew 3.4% in 3Q02, reaching R$563.0 million, resulting from higher fixed-mobile traffic in the quarter (+2,3%).

Interconnection		Interconnection revenue registered a drop of 7.3% in the quarter, resulting from the 7.5% drop in billed interconnection traffic. This drop reflects network expansion of the other operators in the Region II.

Lease of Means		In 3Q02, lease of means revenue was R$51.4 million, against R$57.1 million in the previous quarter, reflecting the drop of 9.8% in the average number of leased circuits during the quarter.


	3Q01		2Q02		3Q02		Change in Quarter	Change in 12 Months

Lines Installed (Thousand)	9,864		10,505		10,544		0.4%	6.9%
Additional Lines Installed (Thousand)	26		63		39		-38.0%	52.0%

Lines in Service - LIS (Thousand)	8,368		8,940		9,228		3.2%	10.3%
Residential	6,046		6,529		6,695		2.5%	10.7%
Non-Residential	1,529		1,530		1,556		1.7%	1.7%
Public Telephones	273		291		290		-0.1%	6.5%
Pre-paid	–		59		145		145.9%	N.A.
Other (including PBX)	520		531		542		2.1%	4.2%
Additional LIS (Thousand)	157		85		288		238.6%	83.9%

Average LIS (Thousand)	8,290		8,897		9,084		2.1%	9.6%

LIS/100 Inhabitants	20.9		22.0		22.6		2.6%	8.2%
Public Telephones/1,000 Inhabitants	6.8		7.2		7.1		-0.7%	4.6%
Public Telephones/100 Lines Installed	2.76		2.77		2.75		-0.4%	-0.3%

Utilization Rate	84.8	%	85.1	%	87.5	%	2.4 p.p.	2.7 p.p.

Digitization Rate	96.5	%	98.7	%	98.8	%	0.1 p.p.	2.4 p.p.


	3Q01	2Q02	3Q02	Change in Quarter	Change in 12 Months

Exceeding Local Pulses (Million)¹	3,469	3,312	3,298	-0.4%	-4.9%

Domestic Long Distance Minutes (Million)	1,435	1,924	1,922	-0.1%	33.9%

Fixed-Mobile Minutes (Million)	986	1,086	1,111	2.3%	12.7%
VC-1	903	979	1,001	2.2%	10.8%
VC-2	73	95	99	4.0%	35.3%
VC-3	10	12	12	-1.1%	26.9%

Exceeding Pulses/Avg. LIS/Month	139.5	124.1	121.0	-2.5%	-13.3%
DLD Minutes/Avg. LIS/Month	57.7	72.1	70.5	-2.2%	22.2%
Fixed-Mobile Minutes/Avg. LIS/Month	39.6	40.7	40.8	0.2%	2.9%

¹2Q02 exceeding local pulses were reclassified.


R$ Million	3Q01		2Q02		3Q02		Change in Quarter		Change in 12 Months

GROSS REVENUES	2,180.1		2,412.2		2,540.9		5.3	%	16.6	%

Local Service	1,018.5		976.8		1,064.7		9.0	%	4.5	%
Installation	17.9		8.6		7.1		-17.6	%	-60.2	%
Basic Subscription	628.0		616.6		682.7		10.7	%	8.7	%
Measured Service	339.7		321.1		345.6		7.6	%	1.8	%
Lease of Lines	2.2		1.5		1.0		-32.6	%	-54.6	%
Other	30.7		28.9		28.3		-2.4	%	-7.9	%

Public Telephony	12.2		88.8		86.6		-2.5	%	607.5	%

Long Distance Service	296.8		354.7		365.4		3.0	%	23.1	%
Intra-Sector	220.7		270.2		272.6		0.9	%	23.5	%
Intra-Region	75.9		84.3		92.6		9.8	%	21.9	%
Borderline	0.2		0.2		0.2		27.6	%	20.1	%

Fixed-Mobile Calls	454.6		544.4		563.0		3.4	%	23.9	%
VC1	387.0		450.0		464.0		3.1	%	19.9	%
VC2	59.3		82.9		87.2		5.2	%	47.2	%
VC3	8.3		11.5		11.8		2.4	%	42.5	%

Interconnection	208.1		195.8		181.5		-7.3	%	-12.8	%
Fixed-Fixed	164.5		152.5		139.1		-8.8	%	-15.4	%
Mobile-Fixed	43.6		43.3		42.4		-1.9	%	-2.7	%

Lease of Means	46.3		57.1		51.4		-10.0	%	10.9	%

Data Communication	85.7		117.2		142.3		21.4	%	66.1	%

Supplementary and Value Added Services	47.0		70.7		73.7		4.2	%	56.9	%

Other	10.9		6.6		12.3		87.4	%	12.4	%

Deductions	(602.8	)	(674.3	)	(720.0	)	6.8	%	19.4	%
NET REVENUES	1,577.3		1,737.9		1,820.9		4.8	%	15.4	%


R$ Million	3Q01		2Q02		3Q02		Change in Quarter	Change in 12 Months

NET REVENUES	1,577.3		1,737.9		1,820.9		4.8%	15.4%

Costs	(961.8	)	(1,109.7	)	(1,137.3	)	2.5%	18.3%
Personnel	(45.3	)	(45.5	)	(31.2	)	-31.3%	-31.1%
Materials	(23.5	)	(23.3	)	(17.6	)	-24.8%	-25.2%
Subcontracted Services	(382.2	)	(512.2	)	(526.7	)	2.8%	37.8%
Interconnection	(310.3	)	(383.6	)	(382.7	)	-0.3%	23.3%
Other	(71.8	)	(128.6	)	(144.0	)	12.0%	100.5%
Depreciation and Amortization	(460.8	)	(471.5	)	(487.3	)	3.3%	5.7%
Other	(50.0	)	(57.1	)	(74.6	)	30.6%	49.1%

GROSS PROFIT	615.5		628.3		683.6		8.8%	11.1%

Sales Expenses	(102.6	)	(118.7	)	(131.3	)	10.7%	28.0%
Personnel	(35.1	)	(27.5	)	(28.8	)	4.9%	-17.9%
Materials	(0.7	)	(0.3	)	(0.8	)	190.4%	19.1%
Subcontracted Services	(65.1	)	(85.7	)	(101.1	)	18.0%	55.3%
Advertising and Marketing	(32.5	)	(23.3	)	(36.5	)	56.8%	12.2%
Other	(32.6)		(62.4	)	(64.6	)	3.5%	98.2%
Depreciation and Amortization	(1.0)		(0.9	)	(1.0	)	6.3%	-2.4%
Other	(0.6)		(4.3	)	0.4		N.A.	N.A.

General and Administrative Expenses	(112.2)		(107.9	)	(101.5	)	-5.9%	-9.5%
Personnel	(30.6)		(29.8	)	(29.2	)	-2.1%	-4.5%
Materials	(0.9)		(0.6	)	(0.7	)	19.3%	-20.1%
Subcontracted Services	(75.7)		(73.0	)	(65.6	)	-10.1%	-13.4%
Depreciation and Amortization	(2.7)		(3.6	)	(3.8	)	5.5%	40.8%
Other	(2.3)		(0.9	)	(2.2	)	153.1%	-3.3%

Information Technology	(31.8)		(48.5	)	(45.4	)	-6.4%	42.8%
Personnel	(6.7)		(5.7	)	(6.5	)	13.1%	-2.4%
Materials	(0.5)		(0.3	)	(0.2	)	-34.6%	-64.3%
Subcontracted Services	3.7		(11.0	)	(11.5	)	3.8%	N.A.
Depreciation and Amortization	(7.3)		(14.8	)	(17.1	)	15.8%	132.9%
Other	(21.0)		(16.7)		(10.2	)	-39.0%	-51.4%

Provisions and Losses	(79.2)		(74.8	)	(78.4	)	4.9%	-0.9%

Data communication	Data communication revenue reached R$142.3 million in the quarter, an increase of 21.4% in relation to 2Q02. As percentage of gross revenue, data communication revenue reached 5.6% against 4.9% in the previous quarter.

	The improved performance in the quarter was due to the growth of:

	•	20.7% in the number of ADSL lines in service, totaling 108,4 thousand by the end of 3Q02;
	•	*23.0% in the number of Dialnet* accesses** billed;
	•	18.5% in the number of Frame Relays in service; and
	•	24.4% in the number of IP accesses sold.



Supplementary and Value-Added Services		Supplementary and value-added services revenue increased 4.2% in 3Q02 to R$73.7 million, reflecting, mainly, the growth of 2.4% in activated intelligent services.

		Activated intelligent services, among which virtual voice mail, follow-me, call waiting and caller ID are pointed out, totaled 3.9 million by the end of 3Q02, an increase of 3.7% in relation to the end of June. Considering the number of lines in service that have at least one intelligent service activated, the penetration of this service was 26.7% by the end of September, against 26.3% by the end of June.

Gross Revenue Deductions		Gross revenue deductions reached R$720.0 million in 3Q02, an increase of 6.8% in relation to 2Q02.

		As a percentage of gross revenue, excluding interconnection and lease of means (revenues that do not apply the ICMS tax), deductions represented 31.1% in the quarter, stable in relation to the previous quarter.

NOR/Avg LIS/month		The net operating revenue/Avg. LIS/month registered in 3Q02 was R$66.8, an increase of 2.6% in relation to 2Q02.

Net reduction of 349 employees in the quarter	Brasil Telecom had 5,773 employees at the end of September, against 6,122 at the end of June. The net reduction of 349 employees is a result of 489 dismissals and 140 admissions in the quarter. Out of the total number of employees at the end of 3Q02, 29% were in network operations, 26% in commercial activities, 22% in administrative functions, 9% in information technology and 13% in expansion. In 2Q02, it was broken down as follows: 30% in network operations, 28% in commercial activities, 22% in administrative functions, 8% in information technology and 12% in expansion.

Personnel	Personnel costs and expenses dropped 11.8% in 3Q02, reaching R$95.7 million. The 489 lay-offs during 3Q02 generated costs with unemployment compensation of R$4.9 million, accounted for as personnel expenses, and R$0.2 million, accounted for as lay-off expenses.

	The reduction of 11.8% in personnel costs and expenses reflects the conjunction of two factors:
	•	Lower costs with unemployment compensation (R$4.9 million in 3Q02 against R$14.9 million in 2Q02); and
	•	Drop of 10.0% in the average number of employees, from 6,612 in 2Q02 to 5,948 in 3Q02.

Productivity	Brasil Telecom reached a productivity ratio of 1,599 LIS/employee in 3Q02, representing an increase of 9.5% in relation to the presented in 2Q02. This improved performance reflects the net reduction of 349 employees in the quarter, combined with the growth of 3.2% in the plant in service.

	Graph 8: LIS/Employee


Materials	Material costs and expenses reached R$19.3 million in 3Q02, representing a drop of 21.2% in relation to the costs and expenses registered in 2Q02. This drop is a result of the lower public phone cards sales, due to the fact that retailers increased their inventories before tariff readjustment.

Subcontracted services	Costs and expenses with subcontracted services, excluding interconnection and advertising & marketing,reached R$285.6 million in 3Q02,representing a growth of 3.9% in relation to 2Q02. However, its participation in net revenue dropped to 15.7% in the period, in relation to the 15.8% registered in 2Q02.

Interconnection	Interconnection costs totaled R$382.7 million in 3Q02, stable in relation to 2Q02. A drop of 7.8% occurred in the fixed-fixed interconnection costs, resulting from agreements with internet access providers and the partnership with iBEST. These agreements increase dialed internet access traffic that ends in Brasil Telecom’s network, reducing traffic unbalance with the mirror-company.

Losses with Accounts Receivable/Gross Operating Revenue stable at 2.7%	Losses with accounts receivable reached R$68.8 million. As a percentage of gross revenue, losses with accounts receivable reached 2.7%, stable in relation to 2Q02. This stability may be due to several actions implemented by Brasil Telecom, among which we highlight:
	•	Average of 82 thousand tele-notices/day during 3Q02; and
	•	By the end of September, 145 thousand pre-paid phones were in service. Such telephones are offered to the customers with credit problems, are available only in switching centers with idle capacity and are not subject of advertising campaign.

	Graph 9: Losses with Accounts Receivable


Effective Losses	Effective losses in 3Q02 reached R$65.2 million in relation to the R$62.0 million in 2Q02. Therefore, effective losses accounted for 2.6% of gross revenue in 3Q02. Deducting the provision for doubtful accounts of R$156.6 million, Brasil Telecom net accounts receivable totaled R$1,519.9 million at the end of September 2002.

	Table 8: Gross Accounts Receivable

		Sep/01	Dec/01	Mar/02	Jun/02	Sep/02

	Total (R$ Million)	1,308.4	1,374.5	1,478.2	1,538.3	1,676.5
	Due	58.0%	56.5%	56.3%	57.7%	58.8%
	Overdue (up to 30 days)	20.3%	20.9%	18.3%	18.1%	17.7%
	Overdue (between 31-60 days)	6.8%	7.8%	9.1%	7.3%	5.6%
	Overdue (between 61-90 days)	4.6%	4.7%	4.7%	4.4%	4.3%
	Overdue (over 90 days)	10.2%	10.0%	11.6%	12.5%	13.5%


Other Costs and Operating Expenses	Other costs and operating expenses/revenues in 3Q02 were composed of R$86.6 million in expenses and R$27.2 million in revenues, resulting in net expenses of R$59.4 million.

	The revenues were mainly comprised of:

		•	Fines related to the delay in the payment of bills totaling R$19.5 million.
		•	Revenues with billing and collection totaling R$3.5 million.

		The expenses were mainly comprised of:
		•	Internet international connection amounting to R$26.7
		•	Electric polls rental, totaling R$17.9 million.
		•	Rental of domain ranges in highways to backbone passage in the amount of R$17.6 million.
		•	Financial Lease of R$10.6 million.


R$ Million	3Q01		Vertical		2Q02		Vertical		3Q02		Vertical		Var. Quarter	Var. 12 Months

GROSS REVENUES	2,180.1		138.2	%	2,412.2		138.8	%	2,540.9		139.5	%	0.7 p.p.	1.3 p.p.
Local Service	1,018.5		64.6	%	976.8		56.2	%	1,064.7		58.5	%	2.3 p.p.	-6.1 p.p.
Public Telephony	12.2		0.8	%	88.8		5.1	%	86.6		4.8	%	-0.4 p.p.	4.0 p.p.
Long Distance Service	296.8		18.8	%	354.7		20.4	%	365.4		20.1	%	-0.3 p.p.	1.2 p.p.
Fixed-Mobile Calls	454.6		28.8	%	544.4		31.3	%	563.0		30.9	%	-0.4 p.p.	2.1 p.p.
Interconnection	208.1		13.2	%	195.8		11.3	%	181.5		10.0	%	-1.3 p.p.	-3.2 p.p.
Lease of Means	46.3		2.9	%	57.1		3.3	%	51.4		2.8	%	-0.5 p.p.	-0.1 p.p.
Data Communication	85.7		5.4	%	117.2		6.7	%	142.3		7.8	%	1.1 p.p.	2.4 p.p.
Supplementary and Value Added Services	47.0		3.0	%	70.7		4.1	%	73.7		4.0	%	0.0 p.p.	1.1 p.p.
Other	10.9		0.7	%	6.6		0.4	%	12.3		0.7	%	0.3 p.p.	0.0 p.p.

Deductions	(602.8	)	-38.2	%	(674.3	)	-38.8	%	(720.0	)	-39.5	%	-0.7 p.p.	-1.3 p.p.
NET REVENUES	1,577.3		100.0	%	1,737.9		100.0	%	1,820.9		100.0	%	–	–

COSTS & OPERATING EXPENSES	(833.6	)	-52.8	%	(911.2	)	-52.4	%	(957.9	)	-52.6	%	-0.2 p.p.	0.2 p.p.
Personnel	(117.6	)	-7.5	%	(108.5	)	-6.2	%	(95.7	)	-5.3	%	1.0 p.p.	2.2 p.p.
Materials	(25.7	)	-1.6	%	(24.5	)	-1.4	%	(19.3	)	-1.1	%	0.4 p.p.	0.6 p.p.
Subcontracted Services	(176.4	)	-11.2	%	(275.0	)	-15.8	%	(285.6	)	-15.7	%	0.1 p.p.	-4.5 p.p.
Interconnection	(310.3	)	-19.7	%	(383.6	)	-22.1	%	(382.7	)	-21.0	%	1.1 p.p.	-1.3 p.p.
Advertising and Marketing	(32.5	)	-2.1	%	(23.3	)	-1.3	%	(36.5	)	-2.0	%	-0.7 p.p.	0.1 p.p.
Provisions and Losses	(79.2	)	-5.0	%	(74.8	)	-4.3	%	(78.4	)	-4.3	%	0.0 p.p.	0.7 p.p.
Lay-offs	(37.9	)	-2.4	%	(3.1	)	-0.2	%	(0.2	)	0.0	%	0.2 p.p.	2.4 p.p.
Other	(54.0	)	-3.4	%	(18.3	)	-1.1	%	(59.4	)	-3.3	%	-2.2 p.p.	0.2 p.p.

EBITDA	743.7		47.2	%	826.8		47.6	%	863.0		47.4	%	-0.2 p.p.	0.2 p.p.

EBITDA in 3Q02 totaled R$863 million	Brasil Telecom EBITDA totaled R$863.0 million in 3Q02, surpassing by R$36.2 million the amount registered in 2Q02, representing a growth of 4.4%.

EBITDA Margin	EBITDA margin reached 47.4% in 3Q02, stable in relation to 2Q02. The main accounts that impacted EBITDA margin were:

	•	Growth of 9.0% of local service revenue, which was mainly fueled by the increase of the average plant in service, combined with the average tariff readjustment of 8.30% in the local basket;
	•	Growth of 21.4% of data communication revenue;
	•	Drop of 11.8% in personnel expenses, reflecting the reduction of unemployment compensation costs and 10.0% in the average number of employees;
	•	Growth of 56.8% in advertising and marketing, due to the increase of corporate advertising campaigns.

Adjusted EBITDA	EBITDA in 3Q02 was adjusted by: (i) provisions for contingencies –R$9.6 million, (ii) unemployment compensation costs – R$4.9 million and (iii) lay-off expenses – R$0.2 million, totaling R$877.7 million, 4.9% higher than the obtained in 2Q02. Calculating the EBITDA margin from the adjusted EBITDA, Brasil Telecom reached an adjusted EBITDA margin of 48.2% in 3Q02, compared to the 48.1% obtained in the previous quarter.

EBITDA/Avg. LIS/month	In 3Q02, EBITDA/Avg. LIS/month achieved R$31.7, 2.2% and 8.9% above the R$31.0 and R$29.1 recorded in 2Q02 and 3Q01, respectively. Compared to 3Q01, EBITDA/Avg. LIS/month in 3Q02 presented a quarterly compound growth of 2.2%, which means that EBITDA growth was higher than the 2.3% compound growth in the average plant in service, reflecting Brasil Telecom’s improved operational performance.

Table 10: Consolidated Financial Result
R$ million	2Q02		3Q02		Change in

Financial Revenue	59.7		64.9		8.7%
Local Currency	36.1		36.0		-0.1%
Foreign Currency	23.6		28.8		22.0%
Financial Expense	(218.3	)	(262.9	)	20.4%
Local Currency	(150.2	)	(177.4	)	18.1%
Foreign Currency	(68.1	)	(85.6	)	25.6%
Interest on Shareholders' Equity	(40.0	)	(114.6	)	186.5%

Financial Result	(198.6	)	(312.7	)	57.4%


Financial Revenue	Financial revenue in foreign currency increased 22.0% in 3Q02 to R$28.8 million, reflecting mainly the gain with swap contracts.

Financial Expense	The higher financial expense in foreign currency reflects the increase in losses with exchange variation, due to the devaluation of the real in relation to the dollar in the quarter.

Interest on Shareholders’ Equity	The interest on shareholders’ equity of R$114.6 million accounted for as financial result in 3Q02, refer to the credit relative to fiscal year 2002, approved in the Brasil Telecom S.A.’s Board of Directors Meeting held on March 27, 2002.

	On a meeting held on October 30^th, 2002, Brasil Telecom S.A.’s Board of Directors approved the complementary credit of interest on shareholders’ equity relative to fiscal year 2002. The amount credited was R$50 million.

	As of October 30^th, 2002, Brasil Telecom credited a total of R$284.7 million in interest on shareholders’ equity, relative to fiscal year 2002. Payment shall be established in the General Shareholders' Meeting of 2003.

Table 11: Interest on Shareholders’ Equity Credited in 2002

Date of Deliberation	Date of Credit	Brazilian "Ex-Date"	Total Amount Credited (R$)	Gross Amount per 1,000 Shares (R$)	Net Amount per 1,000 Shares (R$)

3/27/2002	3/31/2002	4/10/2002	80,056,000	0.149116544573	0.126749062887
3/27/2002	5/31/2002	5/31/2002	40,000,000	0.074492493818	0.063318619745
3/27/2002	8/30/2002	9/6/2002	114,594,000	0.213298691236	0.181303887551
10/30/2002	10/31/2002	11/12/2002	50,000,000	0.093120621072	0.079152527911

	Net earnings grew 14.9% in 3Q02 compared to 2Q02, totaling R$104.2 million (R$0.1932/1,000 shares). Comparing with the same period of 2001, net earnings grew 30.4%.

	Net earnings/ADR reached US$0.1550, a drop of 13.4% compared to 2Q02, reflecting the growth of 14.9% in net earnings combined with the real devaluation.

R$ Thousand	Currency	Cost	Maturity	% Total	Balance Sep/02

Short Term				12.5%	552,949
Private Debenture (BRP)	R$	CDI	Jul/2006		38,747
Inter Company	US$	1.75% p.a.	Jul/2014		11,798
BNDES	R$	TJLP + 3.85% p.a.	Dec/2007		321,037
BNDES	R$	TJLP + 3.85% p.a.	Oct/2007		77,742
BNDES	R$	3.85% p.a. + 8.96% p.a.	Nov/2007		18,151
BRDE	R$	IGP-M+12.0% p.a.	Sep/2006		4,832
Public Debenture	R$	109% CDI	May/2004		39,399
Financial Institutions I	US$	15.50% p.a.	Jun/2002-Jun/2003		40,943
Financial Institutions II	US$	Lib6 + 4.0% p.a.	Jun/2002-Mar/2006		16,783
Financial Institutions III	US$	Lib6 + 2.4% p.a.	Dec/2005		14,532
Financial Institutions IV	US$	Lib6 + 0.5% p.a.	Jul/2008-Jul/2010		14,773
Suppliers	R$	Lib6 + 11.0% p.a.	Nov/2002		102
Suppliers I	R$	19.56% p.a.	Oct/2002		864
Suppliers II	US$	Lib3 + 2.95% p.a.	Jun/2007		460
Suppliers III	US$	1.75% p.a.	Feb/2014		347
Hedge Adjustment					(47,563	)
Long Term				87.5%	3,881,214
Private Debenture (BRP)	R$	CDI	Jul/2006		1,300,000
Inter Company	US$	1.75% p.a.	Jul/2014		119,998
BNDES	R$	TJLP + 3.85% p.a.	Dec/2007		1,383,837
BNDES	R$	TJLP + 3.85% p.a.	Oct/2007		298,586
BNDES	R$	3.85% p.a. + 8.96% p.a.	Nov/2007		71,330
BRDE and Others	R$	IGP-M+12.0% p.a.	Sep/2006		18,330
Public Debenture	R$	109% CDI	May/2004		500,000
Financial Institutions II	US$	Lib6 + 4.0% p.a.	Jun/2002-Mar/2006		41,730
Financial Institutions III	US$	Lib6 + 2.4% p.a.	Dec/2005		34,778
Financial Institutions IV	US$	Lib6 + 0.5% p.a.	Jul/2008-Jul/2010		106,627
Suppliers II	US$	Lib3 + 2.95% p.a.	Jun/2007		2,991
Fornecedores III	US$	1.75% p.a.	Feb/2014		3,011
Total Debt				100.0%	4,434,163


Total Debt	At the end of September 2002, the total consolidated debt of Brasil Telecom was R$4.4 billion, stable in relation to end of the June.

Average cost of the debt	At the end of September 2002, the consolidated debt of Brasil Telecom had an average cost of 15.73% p.a. and an average term of approximately 56 months.

Net Debt	Net debt totaled R$3,844.9 million, practically stable in relation to June Excluding the inter-company loan and the private debentures with Brasil Telecom Participaçoes, the net debt at the end of September was R$2,374.4 million.

Debt with Long Term Profile	At the end of the third quarter of 2002, 87.5% of the total debt was allocated in the long term, presenting the following amortization schedule:

Table 14: Amortization Schedule of Long Term Debt

	Maturity	% Long Term Debt

	2003		3.3
	2004		35.2
	2005		22.2
	2006		25.1
	2007 and after		14.2

Debt in Dollar		In September, the dollar denominated debt totaled R$408.8 million (R$361.2 million net of hedge). As a percentage of total debt, the dollar denominated debt represented 9.2% (8.1% net of hedge) against 7.0% (6.6% net of hedge) at the end of June, resulting from the Real devaluation of 32.7% in relation to the US dollar in 3Q02.

		Brasil Telecom had hedge for 38.1% for the indebtedness in dollar, being all debt with due term until December 2003 hedged against exchange variation.

Financial Leverage		On September 30^th, 2002 Brasil Telecom’s financial leverage, represented by the net debt (excluding the debt with the holding company)/shareholders’ equity,was 34.5%.

Debenture issuance		On November 4^th, 2002, Brasil Telecom S.A.’s Board of Directors approved the issuance of a R$400 million non-convertible debentures to finance the company’s 2003 investment program. The issuance is expected to be on December 1^st, 2002, with a 2-year maturity and cost equivalent to 109% of the CDI (inter-bank rate).


R$ Million	1Q02		2Q02		3Q02

OPERATING ACTIVITIES
(+) Net Income of the Period	64.1		90.6		104.2
(+) Items with no Cash Effects	827.8		734.4		820.0
Depreciation and Amortization	482.2		490.8		509.1
Losses with Accounts Receivable from Services	59.6		58.5		59.0
Provision for Doubtful Credits	5.5		3.8		3.6
Provision for Contingencies	14.2		7.9		7.1
Deferred Taxes	9.2		11.1		11.4
Goodwill Amortization - CRT Acquisition	31.0		31.0		31.0
Result from the Write-off of Permanent Assets	13.1		3.5		7.8
Financial Expenses	131.5		172.6		213.8
Other Expenses/Revenues with no Cash Effects	81.5		(44.9	)	(22.9	)
(-) Equity Changes	334.5		68.0		153.0
(=) Cash Flow from Operating Activities	557.4		757.0		771.2


INVESTMENT ACTIVITIES
Financial Investments	(0.7	)	(2.0	)	(5.5	)
Investment Suppliers	(82.4	)	(211.6	)	(102.9	)
Funds from Sales of Permanent Assets	3.7		4.9		6.7
Investments in Permanent Assets	(415.0	)	(355.1	)	(282.2	)
Other Investment Flows	10.0		10.0		(13.0	)
(=) Cash Flow from Investment Activities	(484.4	)	(553.9	)	(396.9	)


FINANCING ACTIVITIES
Dividens/Interests on Shareholders' Equity paid in the Period	(0.8	)	(161.3	)	(26.9	)
Loans and Financing	(199.3	)	278.0		(282.3	)
Loans Obtained	3.7		522.0		6.1
Loans Paid	(32.3	)	(168.0	)	(125.2	)
Interest Paid	(170.8	)	(76.0	)	(163.2	)
Increases in Shareholders' Equity	(0.0	)	0.1		0.1
Other Financing Flows	-		0.5		(0.5	)
(=) Cash Flow from Financing Activities	(200.1	)	117.3		(309.6	)



CASH FLOW OF THE PERIOD	(127.2	)	320.4		64.7



Cash and Cash Equivalents - current balance	204.1		524.5		589.3
Cash and Cash Equivalents - previous balance	331.4		204.1		524.5
Variation in Cash and Cash Equivalents	(127.2	)	320.4		64.7

The best company of the sector in Corporate Governance		In a research held by Institutional Investor magazine and published in the Brazilian September 2002 edition, Brasil Telecom was elected the best company of the Brazilian telecommunication sector in Corporate Governance. The opinion of 132 institutional investors and Brazilian pension fund managers was considered and indicated the best Corporate Governance companies of each sector.

“Troféu Transparência Finalista” (Finalist Transparence Award)		Brasil Telecom was granted the “Finalist Transparence Award”, an award offered by the Brazilian Association of Finance, Administration and Accounting Executives – ANEFAC, by the Foundation Institute of Accounting, Actuarial and Financial Research –FIPECAFI and by SERASA (credit rating agency).

		The award is granted to companies selected among the 500 largest and best private companies in Brazil in the areas of trading, industry and services (except financial services) and the 50 largest government-owned companies.

		This recognition ratifies Brasil Telecom’s commitment with transparency, quality and information consistency.

Shares Buyback Program		On a meeting held on October 1^st, 2002, Brasil Telecom S.A.’s Board of Directors approved a Preferred Shares Buyback Program issued by the Company, to be kept in treasury and later alienation or canceling. According to the Program, the Company can acquire up to 18,078,192,281 preferred shares, which represents 10% of the total preferred shares in the market. On September 30^th, 2002, Brasil Telecom had 1,860,870,028 preferred stocks in treasury.


		Performance
	Closing Price
	as of								Since
	Sep/30/02		In 3Q02		In 2002		12 months⁽¹⁾		Privatization⁽²⁾

Common Shares (BRTO3) (in R$/1,000 shares)	9.70		3.2	%	-7.6	%	21.3	%	51.3	%
Preferred Shares (BRTO4) (in R$/1,000 shares)	10.85		-4.0	%	-17.8	%	10.7	%	8.7	%
ADR (BTM) (in US$/ADR)	8.35		-28.9	%	-53.0	%	-50.8	%	-
Ibovespa (points)	8,623		-22.6	%	-36.5	%	-18.9	%	-18.2	%
Itel (points)⁽³⁾	444		-14.0	%	-33.5	%	-9.4	%	-
IGC (points)⁽⁴⁾	792		-19.6	%	-21.7	%	-2.7	%	-
Dow Jones (points)	7,592		-17.9	%	-25.1	%	-14.2	%	-14.8	%