Net Servicos de Comunicacao S.A. 2008 Earnings Release

SAO PAULO, Brazil, Feb. 11  /PRNewswire-FirstCall/ -- Net Servicos de Comunicacao S.A. (Bovespa: NETC3 and NETC4; Nasdaq: NETC; and Latibex: XNET), today announces its results for the fourth quarter of 2008 ("4Q08") and fiscal year 2008.

The year 2008 will be marked in the Company's history as the year of the record growth in the subscriber base, combined with the maintenance performance levels considered satisfactory by Management and the Board of Directors. It was a year of several launches such as Net Digital HD Max, which combines the best of high-definition programming with the convenience of a recorder; Net Fone.com, a triple-play offering that marked the Company's entry in a new and important segment of the population, taking digital inclusion to thousands of Brazilian households; the new Net Virtua broadband portfolio, featuring speeds of 3, 6 and 12 Mbps; NET Virtua 5G, the fifth generation broadband service providing ultra-high access speeds through the new network frequency management system, Docsis 3.0; and the new pay TV portfolio, providing segmented programming assortments capable of meeting the most diverse individual and family needs.

The Pay TV base closed the year with 3,071,000 subscribers, 24% more than in 2007. The Broadband base reached 2,217,000 subscribers in 4Q08, 56% more than in 2007. The number of fixed-line subscribers jumped 190% over 2007 to 1,802,000 subscribers.

The Company's financial result continued to show that it is possible to combine subscriber base growth with a satisfactory performance for its shareholders. Net Revenue was R$ 1,021.8 million in 4Q08, up 28% from R$ 798.7 million in 4Q07, and R$ 3,690.4 million in 2008, 27% up over R$ 2,901.8 million in 2007. Base growth and the higher ARPU (average revenue per user) fueled revenue growth. In 4Q08, ARPU came to R$ 136.24, 3.7% up on the R$ 131.34 recorded in 4Q07. The slowdown in ARPU growth is due to the Company's strategy of seeking expansion opportunities in a new market segment. Note that the reduction in ARPU is not, as yet, related to the migration to lower value-added packages or any reduction in the prices of packages.

Operating Costs rose by 24% year-on-year, from R$ 383.7 million in 4Q07 to R$ 475.7 million in 4Q08 and by 27% in the full year, from R$ 1,379.7 million in 2007 to R$ 1,749.9 million. As a percentage of net revenue, these costs remained flat at 47% between 2007 and 2008 and edged down from 48% in 4Q07 to 47% in 4Q08. The higher bandwidth consumption resulting from the growth of the broadband subscriber base and the change in the consumption profile was the main reason behind this cost increase. In addition, the increase in call center costs due to the growth of the Net Combo base, which generates more complex customer care, and higher programming costs due to the expansion of the pay-TV base, pushed up operating costs in the fourth quarter and in the full year.

Selling, General and Administrative Expenses totaled R$ 258.8 million in 4Q08, 36% up on the R$ 190.8 million recorded in 4Q07, and R$ 920.7 million in 2008, 25% up on the R$ 735.6 million in 2007. As a percentage of net revenue, these expenses edged up from 24% to 25% between 4Q07 and 4Q08 and remained virtually stable at 25% between 2007 and 2008. Selling expenses climbed by 51% in the quarter and 50% in the year, chiefly due to the increase in commissions and personnel expenses, as well as the intensification of marketing campaigns. General and administrative expenses rose 41% in the quarter and 23% in the year as a result of increased consultancy costs and infrastructure adjustments to meet the Company's current needs.

EBITDA before Selling Expenses was R$ 383.6 million in 4Q08, 34% up on the R$ 285.6 million in 4Q07, and R$ 1,371.2 million, up 29% over 2007. EBITDA Margin before Selling Expenses came to 37% in 4Q08 and in 2008, slightly higher than the 36% in 4Q07 and remaining stable in comparison with 2007. This margin level shows that the Company's EBITDA margin may rise if there is a slowdown in growth. EBITDA totaled R$ 278.2 million in 4Q08, an increase of 29% compared to R$ 215.6 million In 4Q07, and R$ 981.7 million in 2008, 22% up on the R$ 804.3 million recorded in 2007, with the EBITDA margin remaining at 27%.

The Company's Investments (Capex) has been mainly targeted at acquiring a client that has a fast payback and a positive net present value and hence the Company is comfortable about continuing its investment plans and moving forward with its accelerated growth strategy, since return on investment is fully in line with the policy on shareholder value creation. In 2008, Capex totaled R$ 992.9 million, 29% up on 2007. This increase was due to the higher number of installations last year, which used up R$ 720.3 million, or 73%, of total Capex. This variable Capex was spent mainly in materials related to subscriber acquisition and adjustments to infrastructure, such as data center expansion and node breakings. Discretionary projects accounted for 27% of the total and were mainly allocated to improving network quality.

The Company continued with its foreign-exchange hedge policy in order to protect its cash flow in regard to the payment of its financial commitments and the purchase of imported equipment. It should be emphasized that NET did not undertake any speculative operations in the FX market.

The new call center regulations have been in effect since December 1, 2008, with new service requirements and targets. Call centers must now provide clients with the option to contact an operator as in the first electronic menu, be available 24/7, and respond to clients' complaints within five days. Compliance with the new regulations required investments in infrastructure, IT systems and hiring and training of call center operators, thus pushing up Capex and operating costs.

  Upcoming Events
  Conference Call - 4th Quarter 2008 Earnings Release

  Date: February 11, 2009
  BR GAAP (in Portuguese)
  07:00 a.m. (NY Time)
  Telephone: [phone]
  Replay till February 19, 2009: + 55 (11) 2188-0188
  Conference ID: NET Servicos
  Live webcast at: http://ir.netservicos.com.br/

  BR GAAP (In English):
  09:00 a.m. (NY Time)
  Telephone: [phone]
  Conference ID: NET Servicos
  Replay till February 19, 2009: (1 412) 317-0088
  Conference ID for replay: 427410#
  Live webcast at: http://ir.netservicos.com.br/

  Public Meetings
  Sao Paulo - APIMEC
  Venue: Gran Hyatt Sao Paulo
  Av. Nacoes Unidas, 13.301
  Date: February 17, 2009
  Time: 8:30 a.m. (Brasilia)

  Rio de Janeiro - APIMEC
  Venue: Casa Julieta de Serpa
  Av. Praia do Flamengo, no. 340
  Date: February 18, 2009
  Time: 8:30 a.m. (Brasilia)

  Expected Dates for Upcoming Results
  (1st quarter 2009) -- April 28, 2009
  (2nd quarter 2009) -- July 21, 2009
  (3rd quarter 2009) -- October 20, 2009

  IR Contact:
  Adriana Godinho / IR Manager
  Sandra Firmino Santos / IR Analyst
  http://ir.netservicos.com.br/
  Phone: [phone]


DATASOURCE: Net Servicos de Comunicacao S.A.



CONTACT:  Investors: Adriana Godinho, IR Manager, or Sandra Firmino

Santos, IR Analyst, both of Net Servicos de Comunicacao S.A,

(55 11) 2111-2721, 



Web site:  http://ir.netservicos.com.br/ 

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