Telemar will continue to reduce net debt

Brazilian telecom company Tele Norte Leste (Telemar) (NYSE: TNE) will continue to reduce its net debt instead of making an acquisition or dividend payout, Telemar chief financial officer Marcos Grodetzky said. "We are very close to an optimal debt level but we want to make sure that we are operating under a stable scenario in Brazil so that we don't face interest rate issues," Grodetzy said to reporters during a press conference on Friday (July 30). Although the company has not yet calculated the specific amount of investments it will make next year, 2005 capital expenditure should represent approximately 15% of net revenues. The company will also consider dividends should the Brazilian economy continue to grow. Except for special holiday campaigns, the company does not expect to see a big marketing promotion or a large reduction of handset prices in the second half of the year. Due to billing problems, the company is discounting a portion of its revenues from interconnection fees. The company will increase its long distance revenue should the issue be resolved. Telemar's American Depositary Receipts (ADRs) were trading at US$13.10 each late Friday, down 0.91% from Thursday's close of US$13.17. The company launched a 30-day promotion based upon reduced mobile interconnection fees with mobile operator Oi in Minas Gerais three weeks ago. The company has not yet decided whether or not to follow up with another 90-day promotion, according to Grodetzy. However, Telemar issued a press release Friday afternoon stating that it plans to extend the promotion for 90 days. Later on Friday, Telemar and mobile unit Oi said they would extend for another 30 days the agreement for lower interconnection fees which reduces the cost for end consumers. The agreement started July 1 and is only valid in Minas Gerais state. The companies are also considering extending the agreement to other parts of their concession area and said they are in talks with other Brazilian operators to sign similar agreements.