SC TO -C 1 dsctoc.htm SCHEDULE TO -C UNITED STATES ... · under no. 17.298.092/0001-30, as...

SC TO-C 1 dsctoc.htm SCHEDULE TO-C

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Schedule TO TENDER OFFER STATEMENT UNDER SECTION 14(D)(1)

OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934

NET SERVIÇOS DE COMUNICAÇÕES S.A. (Name of Subject Company)

EMPRESA BRASILEIRA DE TELECOMUNICAÇÕES S.A. – EMBRA TEL (Offeror)

Preferred Shares, no par value, and American Depositary Shares, each representing one Preferred Share

(Title of Class of Securities)

N/A (Preferred Shares) 64109T201 (American Depositary Shares)

(CUSIP Number of Class of Securities)

Isaac Berensztejn Chief Financial Officer

Empresa Brasileira de Telecomunicações S.A. – Embratel Av. Presidente Vargas, n° 1012

20071-002 Rio de Janeiro, RJ, Brazil Telephone: (55) 21 2121-3636

with copies to

Daniel Sternberg, Esq. Nicolas Grabar, Esq.

Duane McLaughlin, Esq. Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza New York, NY 10006

Telephone: (212) 225-2000 (Name, Addresses and Telephone Numbers of Persons Authorized to Receive Notices and Communications on Behalf of Filing Persons)

CALCULATION OF FILING FEE

Amount Previously Paid:

Form or Registration No:

Filing Party:

Date Filed:

Check the appropriate boxes below to designate any transactions to which the statement relates:

Transaction Valuation Amount of Filing Fee

N/A N/A

� Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

⌧ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the following box if the filing is a final amendment reporting the results of the tender offer: �

⌧ third-party tender offer subject to Rule 14d-1.

� issuer tender offer subject to Rule 13e-4.

⌧ going-private transaction subject to Rule 13e-3.

� amendment to Schedule 13D under Rule 13d-2.

In connection with the proposed transaction, Empresa Brasileira de Telecomunicações S.A. – Embratel (“Embratel”) will file with the U.S. Securities and Exchange Commission (the “SEC”) a Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 (the “Tender Offer Statement”). Investors and security holders are urged to read the Tender Offer Statement and its exhibits regarding the proposed transaction when it becomes available because it will contain important information. You may obtain a free copy of the Tender Offer Statement and its exhibits (when available) and other related documents filed by Embratel with the SEC at the SEC’s website at www.sec.gov.

This document contains certain forward-looking statements that reflect the current views and/or expectations Embratel and its management with respect to its performance, business and future events. We use words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and other similar expressions to identify forward-looking statements, but they are not the only way we identify such statements. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this release. Embratel is under no obligation and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

On August 19, 2010, Embratel Participações S.A. (“Embrapar”), on behalf of its subsidiary Empresa Brasileira de Telecomunicações S.A. – Embratel (“Embratel”), filed with Comissão de Valores Mobiliários, the Brazilian Securities Commission, a Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A. (other than the preferred shares held by Embrapar) made by Embratel.

ITEMS 1-11. Not applicable.

ITEM 12. Exhibits. EX-99.1: Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with the Comissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English translation).

EX-99.2: Appraisal Report by Banco Itaú BBA, exhibit to Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with the Comissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English translation).

Not applicable.

EXHIBIT INDEX

EX-99.1: Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with the Comissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English translation).

EX-99.2: Appraisal Report by Banco Itaú BBA, exhibit to Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with the Comissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English translation).

ITEM 13.

EX-99.1 2 dex991.htm NOTICE OF VOLUNTARY PUBLIC TENDER OFFER Exhibit 99.1



REPUBLICATION OF THE NOTICE PUBLISHED ON 9 AUGUST 2010 FOR PURPOSES OF MODIFYING TERMS AND CONDITIONS OF THE PUBLIC OFFER

NOTICE OF VOLUNTARY PUBLIC TENDER OFFER FOR ACQUISI TION OF ALL PREFERRED SHARES OF

NET SERVIÇOS DE COMUNICAÇÃO S.A. Publicly Held Corporation

CNPJ/MF no. 00.108.786/0001-65 N.I.R.E. 35.300.177.240

Code ISIN BRNETCACNPR3

ON ACCOUNT AND ORDER OF

EMPRESA BRASILEIRA DE TELECOMUNICAÇÕES S.A. – EMBRATEL CNPJ/MF no. 33.530.486/0001-29

N.I.R.E. 333.0000340-1

BANCO ITAÚ BBA S.A. , financial institution with registered office in the City and State of São Paulo, at Av. Brigadeiro Faria Lima, no. 3.400, 3 to 8 , 11 and 12 floors, enrolled at CNPJ/MF (Brazilian Register of Corporate Taxpayers of the Ministry of Finance) under no. 17.298.092/0001-30, as intermediary financial institution (“Intermediary Institution”), by way of ITAÚ CORRETORA DE VALORES S.A., financial institution with registered office in the City and State of São Paulo, at Avenida Brigadeiro Faria Lima, 3.400, 10 floor, enrolled at CNPJ/MF under no. 61.194.353/0001-64 (“Itaú Corretora”), on account and order of EMPRESA BRASILEIRA DE TELECOMUNICAÇÕES S.A. – EMBRATEL , a corporation with registered office in the City and State of Rio de Janeiro, at Av. Presidente Vargas, no. 1012, Centro, enrolled at CNPJ/MF under no. 33.530.486/0001-29 (“Offeror”), hereby presents to the

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owners of the preferred shares (“Shareholders”) issued by NET SERVIÇOS DE COMUNICAÇÃO S.A. , a publicly held corporation with registered office in the City and State of São Paulo, at Rua Verbo Divino, no. 1356, 1 floor, Chácara Santo Antônio, (“NET” or the “Company”) a voluntary public tender offer for acquisition of up to 199,124,767 (one hundred and ninety-nine million, one hundred and twenty-four thousand and seven hundred and sixty-seven) preferred shares issued by NET, corresponding to all issued preferred shares of NET, including the preferred shares underlying the American Depositary Shares (“ADSs”) (with the exception of those indicated on item 1.3. below), in accordance with the Instruction of the Brazilian Securities and Exchange Commission (the “CVM”) no. 361/02, as amended (“CVM Instruction no. 361/02”) and pursuant to the conditions set forth below (the “Offer”).

1.1. Legal Basis and Notice to Investors. On August 5, 2010, EMBRATEL PARTICIPAÇÕES S.A. , a publicly-held corporation with registered office in the City and State of Rio de Janeiro, at Rua Regente Feijó, no. 166/1687- B, Centro, enrolled at CNPJ/MF under no. 02.558.124/0001-12 (“EMBRAPAR”) disclosed a notice to investors announcing to the market the decision of its subsidiary, the Offeror, to make a voluntary public tender offer for the acquisition of Shares Object of the Offer (as defined on item 1.3. below), based on article 2, item IV, and on article 31 of CVM Instruction no. 361/02. On August 19, 2010, EMBRAPAR released a notice to investors, informing that the Offeror would republish the Notice for the purpose of (i) including certain procedures provided in CVM Instruction 361/02, (ii) informing that the Offer is also being presented in the United States of America and (iii) informing that the auction date was rescheduled for September 29, 2010.

1.2. No Requirement to Register. Under article 2, paragraph 1, of CVM Instruction no. 361/02, the Offer is not subject to registration before CVM. The Offer shall comply, when applicable, with the general procedure set forth in articles 4 to 8 and 10 to 12 of CVM Instruction no. 361/02.

1.3. Shares Object of the Offer. The Intermediary Institution, by way of Itaú Corretora, shall acquire, at the Auction, on account and order of the Offeror, up to 199,124,767 (one hundred and ninety-nine million, one hundred twenty- four thousand, seven hundred and sixty seven) preferred shares issued by NET, including the preferred shares underlying the ADSs corresponding up to 100% (one hundred per cent) of the preferred shares issued by NET on August 4, 2010, with the exception of the shares held by EMBRAPAR (“Shares Object of the Offer”).

1.3.1 Acceptance of the Offer. The Offeror declares with regard to the outstanding preferred shares, including the preferred shares underlying the ADSs, as defined in CVM Instruction no. 361/02 (“Outstanding Shares”), that;

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1. Offer

(i) if Shareholders owners of less than 1/3 of the Outstanding Shares accept the Offer, the Offeror will acquire all of the

Outstanding Shares that accept the Offer;

(ii) If Shareholders owners of more than 1/3 and less than 2/3 of the Outstanding Shares accept the Offer, the Offeror will

acquire up to 1/3 of the Outstanding Shares held by such Shareholders who accept the Offer, followed by a proration among the owners of the Outstanding Shares who accepted the Offer.

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1.3.2 The limits of the purchase and proration described above do not apply to the Shares Object of the Offer held by the controlling shareholder of the Company, and, irrespective of the volume of Outstanding Shares tendered, the Offeror shall acquire all of the Shares Object of the Offer held by the controlling shareholder and offered for sale in the Offer.

1.3.3 Additional Obligation of the Offeror. Notwithstanding the provisions of item 1.3.1 above, at the termination of the Offer and in case the Offeror acquires more than 2/3 (two thirds) of the Outstanding Shares, the Offeror shall be required to purchase all the remaining Outstanding Shares held by the Shareholders that wish to sell them, within a period of three (03) months as from the Auction Date, for the same Acquisition Price, as defined below, which shall be adjusted by the variation of the monthly Brazilian Taxa Referencial – TR, pro rata temporis as of the Date of Settlement of the Auction, as defined below, up to the date of actual payment. Payment shall be made within no later than 15 (fifteen) days as of the exercise of this option by the Shareholder.

1.4. No Restrictions on the Exercise of the Ownership Right over the Shares Object of the Offer. The Shares Object of the Offer, in order to be transferred under the terms of this Offer, shall be free and clear from any liens, guarantee rights, usufructs or other forms of encumbrance or restrictions of any nature to the free transfer or which prevent the immediate exercise by Offeror, of the full ownership of the Shares Object of the Offer or the full compliance with the rules for the trading of the shares contained in the transactions regulation of the Bovespa Sector of BM&FBOVESPA S.A. – Stock, Goods and Futures Exchange (“BM&FBOVESPA”).

1.5. Dividends. In case NET declares the payment of dividends or interest on equity capital up to the Auction Date, as defined below, the Shareholders registered as owners or usufructuaries of the NET shares, on the date of the act of declaration of dividends or interest on equity capital, shall be entitled to payment of the declared dividends or interest on equity capital.

1.6. Auction. This Offer shall be accepted by way of auction (“Auction”) in the Bovespa Sector of BM&FBOVESPA. This Offer is not conditioned to any minimum number of acceptors.

1.7. Validity. The Offer shall remain valid for the period of forty (40) days counted from the date of the publication of this Notice, that is, the effectiveness of the Offer shall begin on August 20, 2010 (excluding), and shall end on the Auction Date (including), (as defined on item 4.10. below).

1.8 ADSs. The Offer is also being directed to owners of preferred shares issued by the Company underlying the ADSs (“ADSs Shareholders”). To such effect, the Offeror will disclose the Offer in the United States of America, establishing the procedures for those shareholders to participate

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(iii) If Shareholders owners of more than 2/3 of the Outstanding Shares accept the Offer, the Offeror will acquire all of the

Outstanding Shares held by such Shareholders that accept the Offer.

in the Offer, it being necessary for the preferred shares underlying the ADSs to be dissociated from the respective ADSs for tendering in the Offer. Such procedures shall be detailed in a Communiqué of Offer to Purchase, and shall be presented in compliance with US regulations and made available, upon its release, at the following electronic addresses: http:ri.netservicos.com.br, www.sec.gov, www.cvm.gov.br and www.embratel.com.br) (“Offer to Purchase – ADSs”). The ADSs Shareholders wishing to participate in the Offer must have their preferred shares dissociated from the ADSs at JPMorgan Chase Bank, as the ADSs Depositary, or at The Bank of New York Mellon, as receiving agent, and take all actions necessary for qualification for the Auction, in accordance with the terms established in the Offer to Purchase – ADSs.

2.1. Conditions of the Offer. This Offer is conditioned to the non-occurrence of any of the following events until and including the Auction Date (as defined on item 4.10 below):

(i) any change in the businesses, conditions, income, transactions or share ownership of NET or any of its direct or indirect controlled companies which results in a materially adverse change to NET or to its direct or indirect controlled companies, or the Offeror becomes aware of any circumstance which results in a materially adverse change with respect to either the value of NET or any of its direct or indirect controlled companies or the value of the common or preferred shares of the Offeror or any of its affiliates, and such change or circumstance results from any of the following events:

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2. Conditions of the Offer

• the issuance of any act by any governmental authority of the Executive, Legislative or Judiciary branches,

which:

(a) questions, restricts or limits the ability of the Offeror to carry out the Offer, hold shares of NET, acquire

additional shares of NET, exercise the rights inherent thereof or receive distributions related thereto;

(b) determines the termination of or the amendment to the terms and conditions of any license, authorization

or concession granted for the conduction of the businesses of NET or of its direct or indirect controlled companies;

(c) determines the expropriation, confiscation or limitation to the free disposal of the assets of NET or of any

of its direct or indirect controlled companies;

(d) determines the reduction of the charges, rates or prices charged on the provision of services by NET or by any of its direct or indirect controlled companies, or imposes additional obligations to make investments, provide services or implement measures which excessively burden NET or its direct or indirect controlled companies;

(ii) the generalized suspension, or the limitation of trading, securities in general, including shares issued by NET at BM&FBOVESPA, for more than 24 (twenty-four) hours; (iii) the drop of 20% (twenty percent) or more in the closing of transactions on any date of the exchange market (according to the purchase and sale average indicated in the transaction PTAX 800, option 5, published by the Central Bank of Brazil, through the Sisbacen system at 7 p.m., Brasilia time, of such date), of the value of the US dollar in relation to the real, in relation to that verified on August 04, 2010, which was of R$1.7559 (one real point seven, five, five, nine) per US dollar; (iv) drop in the closing of any trading floor, of the value of the BM&FBOVESPA index (IBOVESPA), by, at least, 20% (twenty percent) in relation to the value of the IBOVESPA verified on August 04, 2010, which was 68,272 (sixty-eight thousand, two hundred and seventy-two) points; (v) drop of 20% (twenty percent) or more, at the closing of the trading floor of BM&FBOVESPA, on any date, of the trading price of the Shares Object of the Offer, comparatively to the price verified on August 04, 2010, which was of R$19.99 (nineteen Reais and ninety-nine cents); (vi) the occurrence of a substantial change in the rules applicable to the Brazilian or US securities market, or increase in the rate of taxes, which adversely affects or prevents consummation of the Offer by the Offeror; or

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(e) suspends, restricts or limits transactions in the foreign exchange market or the entrance or exit of funds to

or from Brazil;

• the occurrence of war or serious civil or political disturbance, in Brazil or abroad;

• the occurrence of natural event, such as, for example, earthquake, flood or other similar event, or some other

external factor which causes substantial damages:

(a) to the infra-structure, the communication system, or the provision of public services in the States where

NET or any of its direct or indirect controlled companies provide service or in other relevant areas of Brazil; or

(b) to the assets of NET and/or of any of its direct and indirect controlled companies, so as to affect the normal

course of its respective businesses;

(vii) revocation of any governmental authorization necessary for the implementation of the Offer or issue of any act by an authority preventing the Offeror from making the Offer or imposing the obligation to purchase or sell shares issued by NET.

2.2. Occurrence of Condition. If, at any time after the date of publication of this Notice and until 9 a.m. of the Auction Date, as defined below, one verifies the occurrence of any of the events mentioned above, the Offeror shall immediately disclose a communication clarifying if it shall maintain the Offer (with Offeror having waived the conditions pursuant to item 2.3 below) or if the Offer shall be cancelled, thus immediately ceasing to have effect.

2.3. Waiver of Condition. Even prior to the occurrence of the respective condition(s), the Offeror may, at its sole discretion, waive any of the conditions contemplated above, in which case the Offer shall continue to be valid and effective. Any and all waiver of any of the conditions contemplated above shall be expressly disclosed by Offeror, by communication, in accordance with item 2.2 above.

2.4. Irrevocability of the Offer. In compliance with the established conditions, the Offer is irrevocable and immutable from the date of publication of this Notice until the beginning of the Auction, being provided, however, that, if any of the conditions indicated above or other substantial change occurs, which is subsequent and unforeseeable, in the actual circumstances existing on this date, which leads to a relevant increase in the risks assumed by the Offeror, inherent to the Offer, the Offeror may modify or revoke the Offer, and shall disclose a communication which shall clarify if it shall maintain the Offer, describing the terms and conditions for such, or if the Offer shall be cancelled.

2.5. Subsequent Offer. The Offeror, the Company, the controlling shareholder of the Company or any related person thereto shall not be able to make a new public tender offer for shares of NET except after the expiry of 1 (one) year as from the Auction Date, except if they are required to do so for any reason or if they extend to those accepting this Offer the same terms of an eventual new public tender offer, paying them the adjusted difference, if any, of the price.

2.6 Subsequent Commitment. The Offeror undertakes to pay the Shareholders who accept the Offer a positive difference, if any, between the Acquisition Price, adjusted by the changes to the number of shares resulting from share bonuses, splitting, grouping and conversions eventually occurred; and (i) the price per share that would be due, or comes to be due, upon the occurrence within 1 (one) year of the Auction Date, of a fact that would or comes to require a mandatory public tender offer for purchase of shares, among those facts listed in items I to III of article 2 of CVM Instruction no. 361/02; and (ii) the amount to which they would be entitled, if they were still a shareholder of the Company and were to disagree with the decision of the general shareholders meeting of the Company that came to approve any corporate event that would allow the owners of shares to exercise the right to withdraw , upon the occurrence of such event within 1 (one) year as from the Auction Date.

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2.6.1 The Offeror shall not be required to make the payment to which item 2.6 above refers if the information on the future mandatory public offer or corporate event has already been disclosed prior to the release of this Notice, either by way of a notice to investors, communiqué to the market and notice to shareholders.

3.1. Price. The purchase price of each Share Object of the Offer (preferred share of NET) is R$ 23.00 (twenty-three Reais), which shall be (i) deducted from the value of dividends and/or interest on equity capital per share eventually declared by NET between the date of the publication of this Notice and the Auction Date, to which its Shareholders are entitled, pursuant to item 3.1.1 below and/or (ii) adequate pursuant to the provisions in 3.1.2 below (“Acquisition Price”). This Acquisition Price corresponds to a premium of 23.1% (twenty-three point one percent) on the weighted average by volume of closing prices of the trading floors occurred between July 04, 2010 and August 04, 2010.

3.1.1. The deduction of the value of the dividends and/or interest on equity capital declared or paid by the Auction Date shall apply to the shareholders holders of preferred shares of NET who are registered as owners or beneficiaries of the respective shares on the date of the declaration or payment of the dividends, as established by the Company. . 3.1.2. In the event of share bonuses, groupings or splits of shares, the Acquisition Price shall be adequate in accordance with the number of shares of NET, resulting from the bonuses, grouping or split, as the case may be. In this case, the Offeror shall disclose the new values for the Offer in a communication to the market.

3.2. Payment of the Price. The Acquisition Price shall be paid in cash, in domestic currency, to the Shareholders who accept the Offer, on the Date of Settlement of the Auction, as defined below.

3.3. Variation of Price. There shall be adopted, in the Auction, procedures that ensure the right of the Offeror to raisethe Acquisition Price during the Auction, being the new price extended to all the respective Shareholders accepting the previous bids.

4.1. Qualification of Shareholders. The Shareholders wishing to participate in the Auction shall, by 6 p.m. (Brasilia time) of September 28, 2010, sign up for such, registering Itaú Corretora or any other brokerage company authorized to act in the BOVESPA Sector of BM&FBOVESPA (each of them a “Brokerage Company” and, collectively “Brokerage Companies”) to represent them in the Auction.

4.1.1. Documents Necessary for Registration. The Shareholders wishing to register the Brokerage Company to represent them in the Auction shall appear at the Brokerage

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3. Price

4. Procedures for the Auction

Company in person or by a duly appointed attorney-in-fact, furnishing a certified copy of the following documents: (a) ID Card (RG); (b) Individual Taxpayer Register Number (CPF); (c) proof of residence and (d) other documents required by the Brokerage Company. The representatives of legal entities, estates and other legal universalities, minors, interdicted persona and attorneys-in-fact shall present, moreover, the original counterparts or certified copies of the documentation granting powers of representation (including the corporate documentation, corporate taxpayer register CNPJ/MF card and other personal documents listed above of the persons authorized to act for the company, as the case may be), without prejudice to other documents required by the Brokerage Company. 4.1.2. Additional documents for Qualification of Investments Made under Resolution No. 2.689 of the National Monetary Council (“CMN Resolution 2,689”). The Shareholder who invested in Shares Object of the Offer by way of a mechanism established by CMN Resolution 2,689 (“Investor via CMN Resolution 2,689”), shall, moreover, furnish to its registered Brokerage Company, before the Auction Date, in addition to the documents described in item 4.1.1., a document attesting its registration number at CVM and at the Central Bank of Brazil (in the last case, the so-called number of RDE-Portfolio), as well as its statement of legal custody, attesting the number of Shares Object of the Offer which it holds and which it shall offer in the Auction. If the Investor via CMN Resolution 2,689 is a foreign natural person, he shall present, in addition to the documents indicated here, a certified copy of his Individual Taxpayer Register (CPF). 4.1.3. Holders of Shares that do not submit the Documents Required for Qualification. The holder of Shares Object of the Offer who does not timely deliver all the documents for qualification in the Auction or does not transfer his Shares Object of the Offer for custody by the Depositary Center of BM&FBOVESPA, according to the provisions of this Notice, shall not be qualified to take part in the Auction.

4.2. Shares Held in Custody at Banco Bradesco S.A. The Shareholders holders of Shares Object of the Offer in the custody of Banco Bradesco S.A., depositary institution of the book shares of the Company, shall sign up for the Auction, registering any Brokerage Company, pursuant to the terms of item 4.1. above, and shall take the necessary steps so that said Shares Object of the Offer by Banco Bradesco S.A. are previously deposited in the custody of the Depositary Center of Assets of BM&FBOVESPA, according to the rules, terms and procedures of BM&FBOVESPA, which procedures shall be finalized by 6 p.m. of the business day immediately prior to the Auction Date.

4.2.1. Shares in Custody at the Depositary Center of Assets of BM&FBOVESPA. The Shareholders holders of Shares Object of the Offer which are already in custody at the Depositary Center of Assets of BM&FBOVESPA must sign up with one of the Brokerage Companies of their choice by 6 p.m. of the business day immediately prior to the Auction Date.

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4.3. Transfer of Shares to Specific Portfolio. The Shareholder wishing to sell Shares Object of the Offer deposited at the Depositary Center of Assets of BM&FBOVESPA shall, by way of his custody agent at the Depositary Center BM&FBOVESPA, transfer the Shares Object of the Offer to the portfolio 7105-6 opened in its name and held by the Depositary Center of Assets of BM&FBOVESPA exclusively for this purpose, by 12:00 p.m. of the Auction Date.

4.4. The registered sale orders which do not have the corresponding Shares Object of the Offer deposited in the portfolio held by the Depositary Center of Assets of BM&FBOVESPA shall be cancelled.

4.5. It shall be at the sole and exclusive responsibility of the Shareholders to take all the applicable steps so that the transfer of the Shares Object of the Offer which they intend to sell to the Offeror, to the custody by the Depositary Center of Assets of BM&FBOVESPA, be timely made so as to allow qualifying in the Auction in the manner and terms set forth in this Notice.

4.6. The Offeror advises NET Shareholders that the procedures for verification of documents and transfer of the Shares Object of the Offer described above are subject to the internal rules and procedures of Brokerage Companies, depositary institutions and of the Depositary Center of Assets of BM&FBOVESPA, so that each Shareholder shall take all the steps in advance in order to qualify and participate in the Auction.

4.7 Qualification of ADSs Shareholders. The ADSs Shareholders are advised to read carefully the Offer to Purchase - ADSs, which shall contain a detailed description of the specific terms and procedures to be followed by such shareholders in order to qualify for the Auction.

4.8. Interferences. Eventual interfering buyers wishing to participate in the Auction must qualify, filing their interference requests at BM&FBOVESPA by 6 p.m. (Brasilia time) of the last business day prior to the Auction Date, specifying if the interference is total or partial and, in the latter case, indicate the number of Shares Object of the Offer in connection with which it intends to make the interference.

4.9. Acceptance of the Offer. Acceptance of the Offer shall be made by the Brokerage Companies, at the order of the Shareholders who have met the qualification requirements set out in 4.1 of this Notice and its sub-items, by registering the sale offer in the name of their Shareholder clients.

4.9.1. By 12:00 p.m. (Brasilia time) of the Auction Date, the Brokerage Companies shall have registered the sales orders with the number of Shares Object of the Offer of the Shareholders accepting the Offer that shall be presented by them in the Auction, in the MegaBolsa System, under the code NETC4L. 4.9.2. By the start of the Auction, the Brokerage Companies may cancel or reduce the sales orders registered under the terms of item 4.9.1 above by means of a letter addressed to the BM&FBOVESPA Operations Director. After the start of the Auction, the sales orders that are not canceled and not reduced shall be considered irrevocable and irreversible.

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4.9.3. Acceptance of the Offer shall imply an obligation by the accepter to transfer to the Offeror the Shares Object of the Offer under their ownership, in the manner and under the terms and conditions set out in this Notice of public tender offer, free and clear of any and all liens or restrictions of any nature.

4.10. Auction. The Auction shall be held on September 29 , 2010 (“Auction Date”), at 3 p.m. (Brasilia time), in the BM&FBOVESPA negotiation system –BOVESPA Sector.

4.10.1. The Auction shall only be started if the Offeror has declared by no later than 9:00 a.m. (Brasilia time) of the Auction Date, by means of a communication disclosed to the market, that the Offer is not subject to any conditions. 4.9.2. The first bid given by an interfering buyer, total or partial, shall be, at the minimum, 5% (fiver percent) greater than the Acquisition price. Subsequent bids should be, at the minimum, R$ 0.01 (one centavo of a Real) greater than the highest bid then offered.

4.11. Representation in the Auction. The Offeror shall be represented in the Auction by an Intermediary Institution that shall act by way of Itaú Corretora.

4.12. Costs, Brokers’ Commissions and Fees. All the costs, brokers’ commissions and fees related to the sale of the Shares Object of the Offer shall be borne by the respective Shareholders and those related to the purchase shall be borne by the Offeror or the respective interfering parties. The expenses with holding the Auction, such as brokerage, fees and charges instituted by BM&FBOVESPA, shall comply with the listed prices in force at the time of the Auction and with other legal provisions in force.

4.13. BOVESPA Transactions Regulation. The Shareholders who wish to accept the Offer by means of sale of their Shares Object of the Offer in the Auction shall comply with the requirements for the negotiation of shares contained in the BM&FBOVESPA Transactions Regulation – BOVESPA Sector.

5.1. Settlement of the Auction. Settlement of the Auction shall be held on the 3rd (third) business day after the Auction Date (“Auction Settlement Date”).

5.2. Form of Settlement of the Acquisition Price. The financial settlement of the Auction shall be done in accordance with the rules established by the Compensation and Settlement Chamber of BM&FBOVESPA, in the gross settlement modality, as defined in Chapter VII of the Operational Procedures of the Compensation and Settlement Chamber of BM&FBOVESPA. The Compensation and Settlement Chamber of BM&FBOVESPA shall not act as a central guarantee counterpart of the settlement of the Auction. The Compensation and Settlement Chamber of

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5. Settlement

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BM&FBOVESPA shall act as a facilitator of the settlement of the Auction, including (a) receiving the funds from the Offeror and the Shares Object of the Offer from the Shareholders who sold their Shares Object of the Offer in the Offer, by means of their custody agents; (b) forwarding the funds of the Offeror to the Shareholders that offered their Shares Object of the Offer in the Offer; and (c) transferring to the Offeror the acquired Shares Object of the Offer.

5.3. Offeror’s Obligation. Under the terms of the intermediation contract executed between the Intermediary Institution and the Offeror (“Intermediation Contract”), the Offeror’s settlement obligations established in this Notice shall be complied with directly by the Offeror and the Offeror shall remain fully responsible for complying with all the obligations attributed to it in relation to the Offer and established in this Notice.

5.4. Guarantee. In accordance with paragraph 4 of article 7 of the CVM Instruction no. 361/02, the Intermediary Institution shall guarantee the financial settlement of the Offer.

6.1. Valuation. The Offeror engaged the Intermediary Institution to prepare a valuation report of NET, which is dated August 5, 2010 (“Valuation Report”) as a reference directed to the Offeror for making the Offer. Considering that the offer is voluntary and not registered at CVM, the Valuation Report was based exclusively on public information on NET. The Valuation Report contains a calculation of the values of the NET shares considering the following methodologies: (i) average weighted market price; (ii) asset value per share; (iii) market multiples; and (iv) discounted cash flow based on public data.

6.2. Before deciding whether to participate in the Offer, the Shareholders should take all measures they deem necessary to ensure the understanding of the transaction in all its aspects and make an independent valuation of its suitability and purpose, mainly in relation to the risks and benefits of participating in the Offer. They shall also seek guidance from their specialized advisers (financial, tax, legal, amongst others) when making said valuation.

The Offeror warns that the information on NET contained in this item 7 is information provided by NET on its website and on the Securities and Exchange Commission website.

7.1. Headquarters, Jurisdiction and Corporate Object and Purpose. NET is headquartered in the City and State of São Paulo, at Rua Verbo Divino1356, 1 floor, Chácara Santo Antônio. The Company has as its corporate purpose to act directly or hold shares in the capital of other companies that act in: (a) the local distribution of pay-television and other value-added services to subscribers; (b) the provision of telecommunications services; (c) the distribution of signals of any kind, through local cable networks; and (d) the dissemination of information on local channels, as well as the direct performance in these activities. It also includes as its corporate purpose the provision of all services to its subsidiaries. We provide our operating subsidiaries with administrative, financial and consultancy support. We may, without restriction, acquire or hold quotas or shares in other companies which carry on activities similar to ours and to those of our subsidiaries, or which engage in trade commerce and representation.

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6. Valuation Report

7. Information on NET

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7.2. NET Share Capital. NET’s share capital, as of June 30, 2010, was R$ 5,612,242,940.97 (five billion, six hundred and twelve million, two hundred and forty-two thousand, nine hundred and forty Reais and ninety-seven cents), of which R$ 5,599,319,502.62 (five billion, five hundred and ninety-nine million, three hundred and nineteen thousand, five hundred and two Reais and sixty-two cents) was paid up, divided into 114,459,685 (one hundred and fourteen million, four hundred and fifty-nine thousand, six hundred and eighty-five) common shares and 228,503,916 (two hundred and twenty-eight million, five hundred and three thousand, nine hundred and sixteen) preferred shares, all nominal, in book-entry form with no par value.

7.3. Shareholders Composition. NET’s shareholder composition, as of March 31, 2010, was the following:

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Shareholder Common

shares % Preferred

shares % Total % Total GB Empreendimentos e Participações S.A. 58,374,440 51.0% 0 0.0% 58,374,440 17.0% Globo Comunicações e Participações S.A. 2,398,841 2.1% 1,888,314 0.8% 4,287,155 1.3% Distel Holding S.A. 9,457,106 8.3% 0 0.0% 9,457,106 2.8% Embratel Participações 40,928,400 35.8% 12,242,351 5.4% 53,170,751 15.5% Empresa Brasileira de Telecomunicações S.A. 2,580,655 2.1% 17,136,798 7.5% 19,717,453 5.7% FMR LLC 0 0.0% 13,563,707 5.9% 13,563,707 4.0% Dodge & Cox 0 0.0% 22,528,688 9.9% 22,528,688 6.6% Cyrte Investments 0 0.0% 12,534,300 5.5% 12,534,300 3.7% Black Rock, INC 0 0.0% 11,602,210 5.1% 11,602,210 3.4% Other 720,243 0.6% 137,007,548 59.9% 137,727,791 40.0%

Total 114,459,685 100.0% 228,503,916 100.0% 342,963,601 100.0%

7.4. Selected NET Financial Indicators. The table below contains some of the financial indicators for NET, based on the consolidated financial statements for the indicated periods:

7.5. Financial Statements. NET’s annual and periodic financial statements are available at the following websites: http://ri.netservicos.com.br, www.cvm.gov.br and www.bmfbovespa.com.br.

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Year ended

December 31, 2008 Year ended

December 31, 2009 Six months ended

June 30, 2010 (In millions of R$, unless otherwise specified)

Share capital 5,540.346 5,599.320 5,599.320 Shareholders’ equity 2,771.567 3.507.515 3,609.865 Net sales 3,690.409 4,613.389 2,570.508 Operating profit 485.537 623.469 308.560 Profit from continuing operations 20.254 735.948 102.350 Total liabilities 3,624.364 4,826.275 4,830.411 Total current liabilities 936.071 1,111.941 1,156.408 Long term liabilities 2,688.292 3,714.335 3,674.001 Number of shares 338,739,120 342,963,601 342,963,601 Profit (loss) per share(R$) 0.06 2.15 0.30 Asset value per Share (R$) 8.18 10.23 10.52 Total liabilities / net equity (%) 130.8% 137.6% 133.8% Net profit/ net equity (%) 0.7% 21.0% 2.84% Net profit / net Income (%) 0.5% 16.0% 4.0% Net profit / share capital (%) 0.4% 13.1% 1.8%

7.6. Historical Share Sales Information. The table below shows the volumes traded, number of shares and weighted average prices observed in cash market negotiations in the BOVESPA Sector of the BM&FBOVESPA, of the preferred shares issued by NET in the last 12 (twelve) months:

Source: Economática

7.7. NET share rights. Each holder of NET common shares is entitled to one vote per common share at the ordinary and extraordinary general shareholders’ meetings; each holder of NET preferred shares is entitled to vote per preferred share with respect to the following matters: (a) transformation, takeover, merger or spin-off of the Company; (b) valuation of assets used in determining increases in the Company’s capital; (c) selection of a specialized firm to determine the fair market value of the Company shares, under the terms of article 9º, “iv”, of the Company’s statutes; (d) change or repeal of the provisions of the Company’s By-laws that result in the Company’s non-compliance of the requirements set forth in Section IV, item 4.1, of the Special Corporate Governance Level 2 of the BOVESPA; and (e) approval of certain specified agreements between the Company and its controlling shareholder, directly or through third parties, as well as other companies in which the controlling shareholder has an interest, whenever that, in the future, by force of legal or statutory provisions, the approval of these agreements is decided at General Meetings. The preferred shares, not having fixed or minimum dividends, shall not acquire the exercise of the right to vote if the Company does not pay any dividends, being inapplicable the provisions of paragraph 1º of article 111 of Law no. 6.404/76.

In accordance with NET’s by-laws and the Corporation Law, it is granted to the holders of the shares the right to the receipt of the obligatory dividend of 25% (twenty five percent) of the net profit for the financial year, adjusted under the terms of article 202 of the Corporation Law. It is assured to the preferred shares: (a) the receipt of dividends in cash 10% (ten percent) greater than those paid to the common shares; (b) priority in reimbursement in the event of the Company’s liquidation, without premium, for the asset value; and (c) treatment equal to that given to the shareholders who exercise the power to conduct the Company activities and guide the functioning of the Company’s bodies, in a direct or indirect manner, in actuality or by right (“Controlling Power”), in the event of transfer of such Controlling Power, under the terms of

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Month Total volume traded

(in R$) Number of shares

traded

Weighted average price (in R$) of theshare quotations

August 2010 44,793,400 1.008.598.949 19.6July 2010 30,254,800 549,453,893 18.2June 2010 28,353,400 514,926,368 18.2May 2010 26,776,900 505,356,281 18.9April 2010 29,441,400 630,177,253 21.4Marche 2010 27,216,900 638,573,848 23.5February 2010 21,694,100 476,289,308 22.0January 2010 32,406,400 740,073,470 22.8December 2009 26,717,700 631,054,606 23.6November 2009 22,926,400 547,612,005 23.9October 2009 31,472,500 699,703,941 22.2September 2009 28,864,100 568,605,431 19.7August 2009 35,301,500 702,038,399 19.9

Accumulated data up to August 18, 2010 1.

article 27, head clause, of the By-laws of the Company. The preferred shares shall participate under equal conditions with the common shares in the distribution of bonuses and may represent up to 2/3 (two thirds) of the total shares issued by the Company, and may upon its issuance have the prior proportion changed between common and preferred shares.

8.1. Information on the Offeror. The Offeror is headquartered in the City and State of Rio de Janeiro, at Avenida Presidente Vargas, no. 1.012, Centro. The corporate purpose of the Offeror is to (i) operate, exploit and provide Services of Switched Land Line, in compliance with the terms and conditions of Concession Agreements currently in force, as well as those to be implemented; (ii) operate, exploit and promote any and all telecommunication services in accordance with parameters, terms and conditions of the Authorization Terms currently in force, as well as those to be implemented; (iii) implement, expand and operate, among others: (a) Interstate and intrastate wires for integrated transport of telecommunication services and multiplex equipment related thereto; (b) the Centrals of Interurban Automatic Phone Switch; (c) Earth stations required for satellite communications and multiplex equipment related thereto; (d) Means which constitute international connections of the Country; (e) The international Centrals (automatic or manual) of Phone Switch , Telex, Telegrams, Data Transmission and other services which use digital techniques; (f) TV Centrals; (g) Coastal Stations of Maritime Mobile Service; (h) Means which constitute the National Network of Telex; and (i) Means which constitute the National Network of Data Transmission; (iv) exploit: (a) Telecommunication means operated by it, as described in item iii, parts “a”, “b”, “c”, “d” and “e”, including satellites and dedicated line, on industry basis; (b) Services of TV signals transmission among the TV Centrals operated by it; (c) Maritime Mobile Service of Coastal Stations; and (d) National and International Telex services, of lease of telegraphic circuits, of Data Transmission and others which use digital techniques, except for telegram; (v) coordinate activities related to exploitation of services and operations of international telecommunication means of the Country; (vi) the implementation, exportation, marketing, leasing and rental of goods and equipment, and the provision of services, related to activities included on its corporate purpose, as well as services of added value; and (vii) hold interest of the capital of other companies, entities, associations and/or consortiums, in Brazil and abroad.

8.2. Shareholding Structure of the Offeror on August 5, 2010.

9.1 The Offer is also being directed to ADSs Shareholders. Each ADS represents one preferred share issued by the Company.

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8. Information on the Offeror

Shareholders Common % Embratel Participações S.A. 7,209,719,309 99.2% Others 58,019,235 0.8%

Total 7,267,738,544 100.0%

9. Communiqué to ADSs Holders

9.2 The ADSs Shareholders who wish to participate in the Offer must read carefully the Offer to Purchase - ADSs, which shall contain a detailed description of the specific terms and procedures to be followed by such shareholders in order to qualify for the Auction, it being necessary for such purpose that the preferred shares underlying the ADSs be dissociated from the respective ADSs for tendering in the Offer. Such Offer to Purchase – ADSs shall be available at no cost, upon its release, on the SEC website at www.sec.gov, on CVM website at www.cvm.gov.br, on the Company’s website at http://ri.netservicos.com.br and on the website of the Offeror at www.embratel.com.br.

9.3 The Valuation Report was prepared in Portuguese and a version of such Valuation Report was translated into English and is available on the SEC website. In the event of discrepancy between the Portuguese and English versions, the Portuguese version shall always prevail.

10.1. Update of Registration of Public Company. The Offeror hereby represents that, to the best of its knowledge, NET’s registration as a public held company is duly updated in accordance with article 21 of Law no. 6.385 of December 7 , 1976, as amended.

10.2. No Undisclosed Material Facts or Circumstances. The Intermediary Institution and the Offeror represent that, to their knowledge, there are no facts or circumstances undisclosed to the public that may have a relevant influence on the results of NET or on the pricing and market prices of the Shares.

10.3. Ownership of Shares of NET by the Intermediary Institution. The Intermediary Institution represents it does not hold any share of NET. Companies of the conglomerate of the Intermediary Institution had under their discretionary management, on August 5, 2010 1,968,736 (one million nine hundred and sixty-eight thousand seven hundred and thirty-six) preferred shares of the Company, which may be assigned in the scope of the Offer.

10.4. Ownership of Shares of the Offeror and/or EMBRAPAR by the Intermediary Institution. The Intermediary Institution represents it does not hold any share issued by the Offeror. The Intermediary Institution represents that companies of its conglomerate had under their discretionary management, on August 5 , 2010, 412,873 (four hundred and twelve thousand, eight hundred and seventy-three) common shares of the EMBRAPAR.

10.5. Representation of the Offeror. The Offeror represents that: (i) it is liable for the truth, quality and sufficiency of information supplied to the market, as well as for eventual damage caused to NET, its shareholders and third parties, by will or negligence, due to the untruth of such information, (ii) it did not adopt any measure aiming (or which caused or may cause or result) the stabilization or manipulation of the price of shares issued by the Company; (iii) the acquisition of Shares Object of the Offer by means of the Offer is not motivated by any relevant information on NET, its businesses, on its controlled companies and subsidiaries not disclosed to the market; (iv) the scope of the Offer is only to acquire Shares Object of the Offer, thereby making it possible for

16

10. Other Information

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th

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Offeror to increase its equity interest in the capital stock of NET, in result of the confidence Offeror and its shareholders have in the growth of the cable TV and broadband consumer markets as well as in NET’S management and business model; (v) it holds, together with its controlling EMBRAPAR, 29,379,149 (twenty-nine million, three hundred and seventy-nine thousand, one hundred and forty-nine) preferred shares issued by the Company, (vi) it did not distribute any material regarding the Offer, except for the Notice; (vii) it is not aware of any facts or circumstances undisclosed to the public that may have a relevant influence on the results of the Company, its controlled companies and subsidiaries, and/or on the pricing of shares of the Company; and (viii) it is not the controlling shareholder of the Company for all legal purposes.

10.6. Representation of the Intermediary Institution. The Intermediary Institution represents that (a) it took every precaution and acted in high diligence standards to ensure that the information supplied by the Offeror was true, consistent, correct and sufficient, and it shall be liable for the omission of its obligation, as well as that it verified the sufficiency and quality of information supplied to the market during the Offer procedure, necessary for the Shareholders to make their decision as well as those set out in this Notice ; (b) it provided, last year, and may provide, together with its affiliates, several services of investment bank, financial advice, credit operation and other services related to the Offeror, the Company and its affiliates, for which they were and intend to be compensated; and (c) it shall receive from the Offeror, on the Date of Settlement of the Auction, the amount of R$ 702,480.00 (seven hundred and two thousand, four hundred and eighty Reais) to prepare and present the Valuation Report. The Intermediary Institution shall assure the financial settlement of such Offer hereunder and payment of the Acquisition Price.

10.7. Authorization by BM&FBOVESPA. The Offer object hereof is not subject to registration with CVM. BM&FBOVESPA authorized the performance of the Auction on its trading system MEGABOLSA.

10.8. Access to Valuation Report, to the Notice and to the List of Shareholders. The Offeror informs that this Notice, the Valuation Report and the list of names of all shareholders of NET, with their respective addresses and quantities of shares owned by type and class, are available for interested parties at the address of the Offeror, at the head offices of NET, at the head offices of the Intermediary Institution, at CVM and at BM&FBOVESPA, as well as by electronic means Alternatively, the Valuation Report and the Notice may be accessed on-line, on information pages set forth below. IT IS IMPORTANT TO READ CAREFULLY ALL IMPORTANT NOTES INCLUDED IN THE VALUATION REPORT.

EMPRESA BRASILEIRA DE TELECOMUNICAÇÕES S.A. – EMBRA TEL Av. Presidente Vargas, no. 1012, Centro, Rio de Janeiro, RJ

www.embratel.com.br

NET SERVIÇOS DE COMUNICAÇÃO S.A. Rua Verbo Divino, no. 1356, 1st Floor, Chácara Santo Antônio, São Paulo, SP

http://ri.netservicos.com.br

17

COMISSÃO DE VALORES MOBILIÁRIOS Rua Cincinato Braga, no. 340, 2 Floor, Centro, São Paulo, SP

Rua Sete de Setembro, no. 111, 2nd Floor, “Centro de Consultas”, Rio de Janeiro, RJ www.cvm.gov.br

BM&FBOVESPA S.A. – BOLSA DE VALORES MERCADORIAS E F UTUROS Praça Antonio Prado, no. 48, 2nd Floor, Centro, São Paulo, SP

www.bmfbovespa.com.br

BANCO ITAÚ BBA S.A. Av. Brigadeiro Faria Lima, no. 3.400, 4th Floor, part, São Paulo, SP

www.itaubba.com.br

10.9. Documents of the Offer. The owners of Shares Object of the Offer should carefully read this Notice and other documents related to the Offer published by the Offeror, considering that such documents contain important information.

10.10. Holders of Shares Domiciled Abroad. The owners of Shares Object of the Offer domiciled abroad may be subject to restrictions imposed by their countries’ laws regarding the acceptance of this Offer, participation in Auction and sale of Shares Object of the Offer. Such owners of Shares Object of the Offer non resident in Brazil are fully responsible for the compliance with such applicable laws.

XAVIER, BERNARDES, BRAGANÇA, SOCIEDADE DE ADVOGADOS Av. Rio Branco no. 1, 14 Floor, Wing A Rio de Janeiro, Brazil

10.12. Considerations on future statements and estimative. Certain affirmations included herein may consist of estimates on future events. The use of any of the following expressions “believe”, “expect”, “may”, “intend” and “estimate” and similar expressions have the purpose of identifying estimates. However, future statements and estimates may be not identified by such expressions. In particular, this Notice has future statements and estimates related, but not limited to, the procedure to be followed for the completion of the Offer, terms of many steps to be followed regarding the Offer and expected shares of the Offeror, Company and certain third parties, including brokerage companies, regarding the Offer. Future statements and estimates are subject to risks and uncertainties, including, but not limited to, the risk of parties involved on the Offer not perform necessary requirements for the completion of the Offer. Future statements and estimates are also based on assumptions that, as far as considered reasonable by the Offeror, are subject to uncertainties related to businesses, economic and competitive aspects. Offeror’s assumptions included herein, which may be proven to be incorrect, include, but are not limited to, the assumption that laws and rules of the capital market applicable to the Offer shall not be amended prior to the completion of the Offer. Except to the extent required by law, the Offeror does not undertake any liability of updating future statements and estimates included herein.

18

10.11.Identification of Legal Advisors.

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EX-99.2 3 dex992.htm APPRAISAL REPORT BY BANCO ITAU BBA Exhibit 99.2

Appraisal Report by Banco Itaú BBA, exhibit to Notice of Voluntary Public Tender Offer for Acquisition of All Preferred Shares of Net Serviços de Comunicações S.A., filed with the Comissão de Valores Mobiliários, the Brazilian Securities Commission, on August 20, 2010 (English Translation)



August, 2010

Appraisal ReportContracting Party: Empresa Brasileira de Telecomunicações S.A. - EmbratelSubject Matters: NET Serviços de Comunicações S.A.

DRAFT

2

Contents

Important Notes

SECTION 1 Executive Summary

SECTION 2 Information on Itaú BBA

SECTION 3 Telecommunications Industry and Overview of NET

SECTION 4 NET’s Valuation

APPENDIX A Glossary of Terms and Definitions

APPENDIX B Average Target Price

3

Important Notes

MATERIAL LEGAL INFORMATION – in having access to this valuation report you confirm that you have read and that you will comply with the information set forth below:

We, Banco Itaú BBA (“Itaú BBA”) were hired by Empresa Brasileira de Telecomunicações S.A. – Embratel (“Embratel”) to prepare an economic-financial valuation report (“Valuation Report”) about Net Serviços de Comunicações S.A., (“Net” or “Company”), in the context of a voluntary tender offer by Embratel for preferred shares of Net (“Tender Offer”).

The information on this Valuation Report was obtained exclusively from public sources. As a result, we have used (i) the audited consolidated financial statements of the Company, publicly available for the fiscal years ended on December 31, 2007, 2008 and 2009 and for the six-month period ended June 30, 2010; and (ii) research reports and financial, economic and market studies, as well as other publications related to the business of the Company, the performance of its shares and expected profitability of its shares, prepared by independent market research analysts, (jointly referred to as “Information”). The Information was obtained from public sources we believe to be reliable, however, we have not independently verified the Information and we are not responsible for its accuracy, correctness or sufficiency. We did not have contact with the management of the Company, nor any non-public information about the Company and its businesses. Any estimates or projections presented here were obtained from public sources, as no meetings or discussions about this information were held with the management of the Company or Embratel, with no guarantee whether these estimates and projections will materialize. We do not assume any responsibility for these estimates and projections, or the way in which they were obtained. We are not responsible for conducting and have not conducted an independent verification of the Information obtained.

This Valuation Report was prepared in accordance with Instruction No. 361 issued by the Brazilian Securities Commission (“CVM”) and does not constitute a proposal, solicitation, advice or recommendation from Itaú BBA, whether to tender shares in the Tender Offer or not. Any decisions related to the Tender Offer that are made by Embratel, its shareholders and holders of shares issued by the Company addressees of the Tender Offer (“Shareholders”) are in their sole and exclusive responsibilities according to their own analysis of risks and benefits involved in the Tender Offer. As a result, we are not responsible for the decisions taken by Embratel, its partners and Shareholders in relation to the Tender Offer.

Embratel or any third-party that we authorize to use this Valuation Report, will exempt us, our directors, officers, employees and/or representatives from any responsibility for losses, damages, expenses and judicial orders, which may arise, directly or indirectly, from the compilation of this Valuation Report, also agreeing to indemnify us for any losses, damages, expenses and judicial orders resulting from this Valuation Report. We are not liable for any direct or indirect losses and/or damages, or lost profits which may arise from this Valuation Report. The base date used in this Valuation Report is June 30, 2010, and it was completed and delivered on August 5, 2010.

Shareholders must conduct their own analyses in relation to the appropriateness and opportunity of participating in the Tender Offer and must consult their own legal, tax and financial counsel in order to form their own opinions about the Tender Offer independently. This Valuation Report must be read and interpreted in light of its qualifications and restrictions mentioned here. The reader must consider in its analysis, the restrictions and characteristics of the sources used.

4

Important Notes

This Valuation Repost must be used exclusively for the Tender Offer, which was duly disclosed to the market through Material Fact dated August 5, 2010, released in the Brazilian Valor Econômico newspaper, published on August 5, 2010.

In the course of our work, we assume that the Information is true, accurate and complete and that no other information, which could have been relevant with respect to our work, was not made available to us. In addition, we have analyzed the consistency of the Information based on our experience and good sense, but we do not assume any responsibility for independent evaluations of any Information or independent verification or assessment of any assets or liabilities (contingent or not) of the Company and we have not received any such assessment. We have not been asked to conduct, and have not conducted any physical inspection of the properties or facilities of the Company. Finally, we have not assessed the solvency or fair value of the Company.

In light of the limitations mentioned above, we do not make, and will not make, either expressly or implicitly, any representation or warranty regarding any Information used in the preparation of this Valuation Report and there are no provisions that could be interpreted as a representation in relation to the past, present or future. The analysis contained in this Valuation Report involves complex considerations and judgments in relation to the financial and operational characteristics and other factors that could affect the acquisition, public negotiation and other assets of the Company, as well as considerations about the business segments or the analyzed operations, the appropriate and material methods of the financial analysis and the application of these methods to specific circumstances. The estimates contained in the analysis and the resulting variation of any analysis is not indicative of real amounts or indicative of future results or amounts, which may be more or less favorable than the ones suggested by the referred analysis. In addition, the analyses referring to business evaluations and securities do not constitute valuations or reflect the prices in which the business were actually acquired or sold, the real value of the shares in the moments of issuance in a transaction or the prices by which the shares may be negotiated at any time. In case any of these premises do not materialize, or than in any way, the Information proves to be incorrect, incomplete or imprecise, the conclusions may alter in a substantial way.

Additionally, for our analysis based on the discounted cash flow methodology, we assumed a macroeconomic scenario as compiled and published by the Brazilian Central Bank, which may be substantially different from future results. Given that the analysis and amounts are based on forecasts of future results, they are not necessarily indicative of the real and future financial results of the Company, which may be materially more or less favorable than the ones suggested by this Valuation Report. In addition, given that these analyses are intrinsically subject to uncertainties, and are based on several events and factors which are out of our control, the control of the Company and Embratel, we are not responsible in any way if the results of the Company, differ substantially from the results presented in this Valuation Report. There is no guarantee that the future results of the Company will correspond to the financial projections we based our analysis on and that the differences between the projections used and the financial results of the Company are not material. The future results of the Company may also be affected by economic and market conditions. The preparation of this Valuation Report is in no way a commitment to result from ItáuBBA.

The preparation of a financial analysis is a complex process, which involves various definitions in respect to the most appropriate and relevant financial analysis methods, and the application of these methods. We arrived at a final conclusion based on the results of the analysis performed by us as a whole, and we did not reach individual conclusions based on or related to any of the factors or methods of our analysis. Therefore, we believe our analysis, must be considered as a whole and that the examination of parts of our analysis and specific factors without considering the full context of our analysis and conclusions may lead to incomplete and incorrect interpretations of the processes used in our analyses and conclusions.

5

Important Notes

This Valuation Report provides only an estimate, according to our criteria, of the value derived from the discounted cash flow evaluation methodology or from having prices of for comparable companies, as the case may be, which are methodologies largely used in financial evaluations of companies that do not evaluate any other aspect or implication of the Tender Offer or any contract, agreement or understanding entered into in connection with the Tender Offer. We do not express any opinion on the value for which the shares related to the Tender Offer could be traded on any securities market at any time. Additionally, this Valuation Report is not and must not be used as (i) a fairness opinion about the Tender Offer or (ii) a recommendation of any aspects of the Tender Offer. Additionally, this Valuation Report is not about the strategy and commercial merits of the Tender Offer, nor the eventual strategic or commercial decision of Embratel and its partners or the shareholders of the Company of undergoing the Tender Offer. This Valuation Report does not constitute a judgment, opinion or recommendation to the Company, its shareholders or any third-parties about the convenience, fairness of price or opportunity about the Tender Offer, and it also does not endorse any investment decision.

Our Valuation Report is necessarily based on information provided to us as of the date of this Valuation Report and takes into account economic and market conditions and other conditions as they are and as can be evaluated on this date. Although future events and other developments could affect the conclusions presented in this Valuation Report, we do not have any obligation to update, revise, rectify or revoke this Valuation Report, wholly or partly, as a result of any subsequent development or for any other reason. Our analysis does not distinguish any type or class of representative shares of the Company’s share capital and does not include benefits or operational, tax or any other losses, including spreads, nor any synergy, additional value or/and costs, existing, at the closing of the deal, if effected, or any other operation. Our analysis is not and will not be considered a recommendation regarding the manner how Embratel, the shareholders and/or management should vote or decide regarding the transaction. Besides acting as an intermediate institution regarding the deal, we may render other financial advising services to Embratel or to the Company regarding the deal.

This Valuation Report cannot be reproduced or publicized without our prior written consent, except the use of those interested in the offer in accordance with the terms of CVM Instruction No. 361.

We declare that:

– On the date of this Valuation Report, we, our controlling shareholders and related persons are not owners of the shares issued by the Company or Embratel, except that persons related to us posses, under their discretionary decision, 1,968,736 preferential shares issued by the Company and 412, 873 common shares issued by Embratel Participações S.A.

– We do not present any conflict of interest with Embratel or the Company, its controlling shareholders and management, reducing its independence necessary to its position’s performance elaborating this Valuation Report.

– We will receive from Embratel, the fixed value, in reais, at the date of the liquidation of the Tender Offer, US$400,000.00.

– We received from the Company US$466,000 for coordination and distribution services of Unsecured and Unsubordinated Notes issued by the Company on January 2010. We did not receive other amounts from Embratel or the Company regarding compensation for consultant services, valuation, auditing or similar services 12 months prior to this date.

Itaú BBA and other companies from the Itaú Unibanco Group maintain commercial relations in the ordinary course of business of commercial and investment banking with Embratel, the Company and other companies of the group, by which they receive and expect to receive future compensation.

6

Important Notes

Embratel and its partners agreed to reimburse our expenses and indemnify us and certain other persons as a result of the contracting of our services. We receive a commission regarding the preparation of this Valuation Report independently of the launch of the transaction.

Our internal approval process regarding the Itaú BBA’s Valuation Report includes revising, by an Internal Valuation Committee, of the independent analysis made by the execution team of the Valuation Report.

We have provided, from time to time, in the past, investment banking services and other financial services to Embratel, its controlling shareholders, subsidiaries and companies under common control (“Affiliates”) for which we were remunerated, and may, in the future, provide these services to Embratel, the Company and its affiliates, for which we expect to be remunerated. We are a financial institution that provides a variety of financial services and other services related to securities, brokerage and investment banking. In the normal course of our activities, we may acquire, hold or sell, on our behalf or on the behalf of our clients, shares, debt instruments and other securities and financial instruments (including bank loans and other obligations) of Embratel, the Company and/or its affiliates involved in this transaction, as well as provide investment banking services to such companies, controlling shareholders or affiliates. The professionals in the research departments of the Itaú Unibanco Group, including Itaú BBA, may base their analyses and publications on different operational and market assumptions and on different analysis methodologies compared with those used in the preparation of this Valuation Report, with the result that the research reports and other publications prepared by them may contain different results and conclusions when compared with those herein presented. We also adopted policies and procedures for preserving the independence between investment baking and other areas and departments of ItaúBBA and other companies of the Itaú Unibanco Group, including, but not limited to asset management and the proprietary desk for trading shares, debt instruments, securities and other financial instruments.

We do not render any accountability, auditing, legal or tax services related to this Valuation Report.

The financial calculation included in this Valuation Report may not always result in an exact number due to rounding.

This Valuation Report is an intellectual property of Itaú BBA.

Banco Itaú BBA S.A.

Fernando Meira Pedro Garcia de Souza

SECTION 1

Executive Summary

8

The estimated value ranges of NET were calculated b ased on the methodologies most frequently used for economic -financial valuation of companies in the telecommuni cations sector

Valuation Methodology and Main Assumptions

Main methodologies used

Historical Average Share Prices

We analyzed NET’s historical share price on the period of 12 months prior to this appraisal report

– We used the historical average weighted by the trading volume at BM&F Bovespa in the last 1, 3, 6 and

12 months

Book ValueWe calculated the company’s book value per share based on the financial statements as of June 30th, 2010

– The book value may not indicate accordingly the future profit generation potential of the company

Discounted Cash Flow

Present value of free cash flows to firm, based on public information (market consensus) on NET and on the

telecommunications market in Brazil

– We discounted the cash flows using a WACC in nominal US dollars and we also assumed a perpetuity

growth rate after 2020 (last year in the projection period)

Trading Multiples of Comparables Companies

We have analyzed the current trading multiples of Brazilian companies in the telecommunications sector

– We believe that the multiple that best estimates the company’s value is the EV/EBITDA

Multiples of Precedent

Transactions

We have analyzed the multiples of precedent transactions in the Brazilian Pay TV sector

– Multiples of precedent transactions are used to estimate the company’s value in the case of a strategic

transaction

– Main metric is the EV/EBITDA multiple

9

15,05710,674

4,162

6,304

7,238

6,688

3,610

7,238

8,866

2,000 7,000 12,000 17,000


Historical Average Price

Book Value

Multiples of Comparable Companies

Multiples of Precedent Transactions

Valuation SummaryNET’s valuation analysis contemplated five different meth odologies

NET’s Valuation Results – Equity value and implied EV / EBITDA 10E multiple 6 (R$ mm)

Notes:1 Based on public information about NET. Valuation range based on a WACC of 8.9% and 9.9% in nominal US$. It considers a perpetuitygrowth rate of 3.5%2 Average price weighted by NET’s trading volume at stock exchange in the last 3 months prior to August 3rd,2010 and in the last 12 months prior to August 3rd,20103 Book value based on financial statements as of June 30th,20104 Trading multiples of Brazilian companies in the telecommunications sector. Range based on sample’s minimum and maximum values5 EV / EBITDA LTM (last twelve months) multiples of precedent transactions in the Brazilian Pay TV sector. Range based on sample’s minimum and maximum values6 EBITDA 10E of R$1.5 billion, based on projections of the discounted cash flow analysis

1

2

3

4

5

5.5x 6.5x

21.10 25.85

Legend

EV / EBITDA 10EPrice per Share

4.9x 5.5x18.38 21.10

3.1x

10.53

3.5x 5.1x12.13 19.50

7.7x 10.6x31.12 43.90

10

SECTION 2

Information on ItaúBBA

11

Itaú BBA QualificationsItaú BBA ’s experience with valuation is proved by its consis tent participation as financial advisor in M&A transactions

Company Transaction Date

Financialadvisor to Cetip in the sale of 30% of its capital stock to Advent International,in the amount of US$170 million May/2009

Financialadvisor to NovaAmérica in the sale to Cosan Mar/2009

Financialadvisor to Duretex in the merger of Duratexand Satipel, in the amountof US$1.9 billion Jun/2009

Financialadvisor to the shareholdersof Kroton and Advent in the sale of 50% of Advent’s control, in the amount of US$200million Jun/2009

Financialadvisor to Grupo Suzano in the merger of insurancebrokerage operationswith Sonae Jun/2009

Preparationof the Valuation Report in the mergerwith Perdigão,in the amountof US$4.6billion Aug/2009

Financialadvisor to Santelisa Vale in the sale of 60% of its capital stock to Louis Dreyfus Commodities Nov/2009

Financialadvisor of Vivendi in the acquisition of GVT

Financialadvisor to JHSFin the sale of Shopping Metrô Santa Cruz to BR Malls Oct/2009

Financialadvisor to BrazilianFinance & Real Estate in the sale of 21% of its capital stock to Equity International

Financialadvisor to Usina Moema Participações in the its sale to Bunge, in the amountof US$1billion

Financialadvisor to Brenco in its mergerwith ETH,in the amount of US$2.3billion

Financialadvisor to Iuni in its sale to Kroton, in the amountof US$293 million

Financialadvisor to Renukain the acquisition of interest in Equipav, in the amount of US$1.5 billion

Financialadvisor to Alupar in capitalizationby FI-FGTS,in the amount of US$400million Sep/2009

Feb/2010

Feb/2010

Jan/2010

Dec/2009

Apr/2010

Mar/2010

12

Company Transaction Date

FinancialAdvisor to MMXin the sale of 49% of interest in MMXMinas-Rioto Anglo American, in the amount of US$1.58billion Jan/2008

Financialadvisor to the shareholdersof Rodovia das Cataratas in its sale to Ecorodovias, in the amountof US$245 million Jan/2008

Financialadvisor to the shareholdersof Big TV in its sale to Net, in the amount of US$1.24billion Dec/2007

FinancialAdvisor to KlabinSegall in the mergerwith Setin, in the amountof US$112 million Oct/2007

FinancialAdvisor to the shareholders of Suzano Petroquímicain its mergerwith Petrobras, in the amount of US$1.24billion Aug/2007

FinancialAdvisor to Santos Brasil in the mergewith Mesquita, in the amountof US$51 million Aug/2007

FinancialAdvisor to Energisa in the sale of the generationassets, including11 PCHsand 4 projects, in the amountof US$156million Jul/2007

FinancialAdvisor to the shareholders of Serasa in the sale of 65% of Serasa’s interest to Experian, in the amountof US$1.78billion Jun/2007

FinancialAdvisor in the process of deverticalizationof CEEE’sgeneration and distribution assets in the amount of US$179million Dec/2006

FinancialAdvisor to InternationalPaper in the sale of Amcel, in the amount of US$56 million Nov/2006

Financialadvisor to Grupo Rede in the asset swapwith EDBinvolving Lajeado and Enersul, in the amountof US$782 million Jun/2008

Preparationof the Valuation Report in the merger of petrochemicalassets with Petrobrás, in the amount of US$1.7billion May/2008

Preparationof the Valuation Report in the sale of Oi/Telemar’sinterest, in the amountof US$3.0billion Apr/2008

FinancialAdvisor to the shareholders of Vivax in the mergerwith Net, in the amountof US$676 million Oct/2006

FinancialAdvisor to Fertibrás in the sale of Fertibrás’control to Yara International,in the amountof US$339 million Jul/2006

FinancialAdvisor to CEMIG,Andrade Gutierrez, JLA Part. and Pactual in the mergerwith Light, in the amountof US$2.1 billion Mar/2006

Itaú BBA Qualifications (cont ’d)Itaú BBA ’s experience with valuation is proved by its consis tent participation as financial advisor in M&A transactions

13

Background of the Evaluators

Fernando Henrique Meira de Castro, Senior Vice President

Fernando Meira advises companies in M&A transactions, segment where he has worked for about 12 years, having participated in more than 100 projects

with this nature. In the last 12 months, Fernando Meira advised Iuni Educacional in its sale to Kroton, Moema’s shareholders in its sale to Bunge, Brenco in the

merger with ETH of Odebrecht Group, Suzano’s shareholders in the merger of its insurance brokerage operations with Sonae, Nova América in the merger

with Cosan and Santa Elisa Vale in its sale to Louis Dreyfus. Additionally, Fernando Meira has participated in several relevant transactions involving control

restructuring and acquisitions / stock exchange of listed companies, including: BR Distribuidora’s delisting, Atlas-Schindler’s delisting and Cosipa’s delisting.

Among the companies which Fernando has advised in M&A transactions in previous years, we highlight Suzano Petroquímica, Energisa, Serasa, Vivax,

Cemig, Andrade Gutierrez, Ampla Energia, Petrobras, Petrobras Distribuidora, Petrobras Química, Electrolux, Elevadores Atlas-Schindler, Ipiranga Group,

Jereissati Group / Iguatemi, Lorentzen Group, Rede, Vicunha Group, Multibrás, Petroquímica União - PQU, Promon, Tubos and Conexões Tigre, Votorantim

Cimentos and Pão de Açúcar. Prior to Itaú BBA, Fernando worked in the strategic planning department of Esso for 5 years, where he was part of Exxon

Corporation’s M&A team. Fernando holds a degree in Mechanical Engineering and a Marter’s Degree in Finance from Fundação Getúlio Vargas and in

Marketing’s from UC Berkeley.

Pedro Garcia is an Associate Director of Itaú BBA’s Investment Banking team. Before joining Itaú BBA, he worked as Associate for Merrill Lynch’s and UBS

Pactual’s Investment Banking teams. Pedro is fluent in Portuguese and English and holds a degree in business administration from Fundação Getulio Vargas

as first student of his class. Pedro has participated in the origination and execution of several transactions involving bonds and equity offerings and mergers

and acquisitions, such as Energias do Brasil IPO and debt capitalization in the amount of US$507 million, Tractebel Energia follow-on offering in the amount of

US$423 million and CESP primary equity offering in the amount of US$1.5 billion, among others. He has also participated in Endesa Brasil’s restructuring, in

Usiminas corporate bond offering in the amount of US$200 million, in the acquistion of Usina Santa Luiza by São Martinho, Santa Cruz and Cosan for US$130

million and in the sale of CMS Energy Brazil to CPFL Energia for US$211 million, among others.

Pedro Garcia de Souza, Associate Director

Felippe Bento joined Itaú BBA Investment Banking in October, 2009. Before joining Itaú BBA, Felippe worked as analyst in Vergent Partners, a M&A boutique.

In 2009, he executed the incorporation of Tenda by Gafisa and the capitalization of Gol’s Smiles Program by Banco Bradesco and Banco do Brasil in the

amount of R$252 million. He has also executed the appraisal reports for Sadia-Perdigão and Itaú-Unibanco mergers. In 2008, he advised NEOgás do Brasil in

its sale to Global Environment Fund in the amount of R$60 million. In 2007, Felippe participated in the sale of Providência to a consortium led by AIG Capital in

the amount of R$1 billion. Felippe is fluent in Portuguese and English and holds a degree as of 2007 in business administration from Fundação Getulio Vargas.

Felippe Andrade Ferreira Bento, Analyst

14

SECTION 3

Telecommunications Industry and NET ’sOverview

15

Overview of the Global Telecommunications Industry

Overall Description (Broadband)

Broadband

As of the end of 2009, there was a total of 477 mm broadband subscriptions in the world:

– Growth of 14.8% against 2008 (415 mm subscriptions)

China is in 1st place by number of subscriptions with 22% market share, USA in 2nd (18%), Japan in 3rd (7%) and Brazil, with 2.4%, in 10th

Among the OECD member countries, as of the end of 2009, there were 23.3 subscribers on average for each 100 inhabitants, of which 6.7 (29%) were cable technology

Fixed Telephony1

As of the end of 2009, there was a total of 1,220 mm fixed telephone lines in the world:

– Reduction of 2.6% compared to 2008, mainly because of the reduction of 27 mm lines in China

China is in the 1st place by number of fixed telephone lines with 26% market share, USA in 2nd (13%), Germany in 3rd (4%) and Brazil, with 3.4%, in 6th

Sector Highlights (Broadband)

Broadband - Subscriptions (mm) - 2009

Fixed Telephony – Access Lines (mm) – 20091

10485

32 25 19 18 16 13 12 11

Source: Teleco and International Telecommunication UnionNote:1 Considerers analog fixed telephones, ISDN, public payphones and VoIP

49 45 44 41 37 36 34 34

155

314

Main Highlights of the Market in the World World Market Evolution

Brazil still represents a small portion of the sect or in the world …

… and there are high expectations for growth in its m arket share on the upcoming years

16

39.2 39.6 39.8 38.8 39.4 41.2 41.5

49.8 50.0 50.5 51.257.9 59.6

52.7

21.8 21.7 21.6 20.8 20.9 21.7 21.6

2003 2004 2005 2006 2007 2008 2009

As of the end of 2009, there was a total of 59.6 mm installed fixed telephony access lines in Brazil, of which 41.5 mm (70%) were inservice

While the total number of installed accesses presented a compound annual growth rate of 3.0% between 2003 and 2009, the number of accesses in service increased 1.0% per annum on average

The fixed telephony system in Brazil is divided in 3 regions:

– Region I: Southeast, except the state of São Paulo, Northeast and North, except for the states of Acre, Rondônia and Tocantins

– Region II: states of Acre, Rondônia and Tocantins, Mid-West and South

– Region III: state of São Paulo

As of the end of 2009, main operators were Oi, with 64% accesses in service, and Telefónica, with 34%

1.0 1.93.2

4.35.6

7.0 7.7 8.0

0.3

0.6

1.2

1.8

2.63.1 3.2

0.1

0.1

0.1

0.4

0.40.6 0.6

0.2

2003 2004 2005 2006 2007 2008 2009 1T10

ADSL Pay TV (Cable Modem) Other (Wireless)

Total Accesses (mm)

Overview of the Brazilian Telecommunications Indust ry

Brazilian Broadband Market

As of March 2010, Brazil had a total of 11.8 mm installed connections and density of 6.12 connections per 100 inhabitants:

– ADSL: 8 mm connections (68% of total)

– Pay TV (Cable Modem): 3.2 mm (27%)

– Other (Wireless): 0.6 mm (5%)

As of April 2010, there were 28.7 mm active internet users, of which 72.4% had a connection with downstream speeds between 128 kbps and 2 MB and 13.4% with downstream speeds greater than 2 MB

Main broadband connection providers are Oi, with 36% access lines, NET with 25%, and Telefónica with 24% (data as of Mar/2010)

Broadband - Connections (mm)

Source: Teleco

Brazilian Fixed Telephony Market Fixed Telephony –Installed Accesses (mm)

Accesses in Service (mm) Accesses in Service / 100 Inhabitants

1.2

2.33.9

5.7

7.7

10.011.4

11.8

High growth market in the broadband and pay TV segm ents …

…and relatively stagnated in the fixed telephony seg ment

17

Net47%

Sky / Directv26%

Telefónica6%

Abril2%

Embratel6%

Oi4%

Other9%

2,270 2,511 2,842 3,220 3,811 4,314 4,4631,351 1,438

1,4791,762

2,092

2,780 3,085

230 227258

347

347355

39722

2424

3,8514,176

4,579

5,341

6,322

7,473 7,919

2004 2005 2006 2007 2008 2009 2010

Cable DTH MMDS Pay TV

Overview of the Brazilian Pay TV Market

Brazilian Pay TV Market

As of March 2010, there was a total of 7.9 mm Pay TV subscribers in Brazil, distributed among 4 technologies:

– Cable TV (56.4% of subscribers)

– DTH (39.0%)

– MMDS (4.4%)

– Pay TV (0.3%)

The number of operators remained almost stable between 2003 and Mar/2010, from 178 to 173 operators, with 63%, on average, operating in the Cable TV technology

As of March 2010, 91% of the market was distributed among 6 operators, with NET holding a 47% market share by number of subscribers

Number of Operators by Technology

Source: Teleco and Anatel

Market Evolution in Brazil –Number of Subscribers ( ‘000) Market Share by Number of Subscribers –1Q10

175 176

172 173 173 173 173

The Brazilian Pay TV market presented historically high growth rates …

… and is currently substantially concentrated

111 112 109 111 108 109 109

10 10 10 10 14 13 1328 28 27 27 26 26 26

21 21 21 22 22 22 224 4 4 3 3 3 31 1 1

2004 2005 2006 2007 2008 2009 2010

Cable DTH MMDS Pay TV MMDS and Cable MMDS and Pay TV

18

3.45.1

8.0

10.19.3

10.8

2006 2007 2008 2009 2Q09 2Q10

0.20.6

1.8

2.62.3

2.8

2006 2007 2008 2009 2Q09 2Q10

Overview of NET

Overview of NETFounded in 1991, NET Serviços is Latin America's largest multi-service cable company, operating in 93 cities in BrazilServices: pay TV, programming packages, pay-per-view, broadband internet and voiceNetwork with more than 47 thousand km of cables that connect more than 10.7 mm homesAccording to 2nd quarter 2010 numbers, the company had:

– 3.9 mm Pay TV clients (NET)– 3.1 mm broadband internet subscribers (NET Virtua)– 2.8 mm voice services subscribers (NET Fone through Embratel)

In 2010, the company introduced new downstream speeds in broadband internet access, becoming a providers of downstream speeds of 5Mb, 10Mb, 20Mb, 50Mb and 100MbConsolidated 2Q10 ARPU (Average Revenue per User) was R$135.44, an increase of 2% against R$132.54 as of 2Q09

Client Base Evolution

Geographic Presence

Pay TV and Broadband (mm)

Fixed Telephony – Service Lines (mm)

Revenue Generating Units – RGUs (mm)

Source: Company

AMPBPEAL

MGGO

MTSP

RJPR

SCRS

ES

States where the companyhas operations

NET operates in the broadband, Pay TV and fixed tel ephony segments, with approximately 10.8 million revenue generating units

2.12.5

3.13.7 3.5

3.9

0.91.4

2.22.9 2.6

3.1

2006 2007 2008 2009 2Q09 2Q10

Clients - Pay TV Clients - Broadband

19

2,267

2,902

3,690

4,613

2,1832,571

2006 2007 2008 2009 6M09 6M10

639804

979

1,242

572744

28% 28% 27% 27% 26%29%

2006 2007 2008 2009 6M09 6M10

EBITDA (R$ mm) EBITDA Margin (%)

Overview of NET: Financial Highlights

Gross Revenue Breakdown – 6M10 (R$ mm) Net Revenues (R$ mm)

Source: Company

EBITDA (R$ mm) and EBITDA Margin (%) Capex (R$ mm)

Monthly Payment87%

Adhesion andOther13%

551

770

9931,100

465 477

2006 2007 2008 2009 6M09 6M10

20

SECTION 4

NET’s Valuation

21

SECTION 4A

Volume Weighted Average Price

22

0

5

10

15

20

25

30

35

40

Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Jul-10

0

20

40

60

80

100

120

140

160

180

Volume (R$ mm) Weighted Price (R$/share)

Volume Weighted Average Price

NET: Volume Weighted Average Share Price (R$/share)

Source: Bloomberg as of August 3rd 2010

Weighted Average (R$ / share)

Last 6 Months

Last 12 Months

20.19

21.10

The volume weighted average price of NET’s shares was R$18.38/share on the last three months and R$21.10/share on the last twelve months

Last Month

Last 3 Months

18.62

18.38

23

SECTION 4B

Book Value per Share

24



Source: Company’s Reports

The book value per NET’s share is R$10.53, according to the financial statements as of June 30th

, 2010

Book Value per Share Calculation (R$ mm) 30-Jun -2010

Total Assets 8,440.3

(-) Total Liabilities 4,830.4

(-) Minority Interest 0.0

Shareholders' Equity 3,609.9

Shares Outstanding (mm) 343.0

Book Value per Share (R$) 10.53

25

SECTION 4C


26

5,332

5,987

6,588

7,217

7,864

8,524

9,190

9,855

10,511

11,150

11,763

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Operating and Financial Projections

General Assumptions

Source: Research Reports

The DCF valuation was based on public information as released by equity research analysts

Net Revenues (R$ mm)

Valuation base date of June 30th, 2010

Cash flows projected in nominal R$, converted to US$ and discounted at a nominal US$ discount rate

Projection period until 2020

Exchange rate until 2014 projected according to Focus report, released weekly by the Brazilian Central Bank. After 2014, exchange rate projected assuming PPP (Purchasing Power Parity)

Net Revenues based on public market information (market consensus)

– Market consensus until 2013

– After 2014, considers convergence of the growth rate to 5.5% in 2020

Assumptions

27

37.2%

33.0% 31.9%

23.5%

Source: Research Reports and Companies’ Reports

EBITDA (R$ mm)

EBITDA was based on public market information (market consensus)


– After 2014, considers convergence of the EBITDA margin to the average 2009 EBITDA margin of the following comparable companies: Oi, Vivo, Tim and Telesp

Long Term EBITDA Margin Assumption(Average 2009 EBITDA Margin of the Comparables)

Telesp

Average: 31.4%

Operating and Financial Projections (cont ’d)

Assumptions

1,540

1,746

1,986

2,231

2,436

2,647

2,860

3,074

3,286

3,494

3,694

28.9% 29.2%

30.2%30.9% 31.0% 31.1% 31.1% 31.2% 31.3% 31.3% 31.4%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EBITDA (R$ mm) EBITDA Margin (%)


28

17.1%16.4%

14.5% 14.1%

CAPEX (R$ mm)

CAPEX based on public market information (market consensus)


– After 2014, considers convergence of the CAPEX to Net Revenues ratio to the average 2009 CAPEX to Net Revenues ratio of the following comparable companies: Oi, Vivo, Tim and Telesp

Telesp

Average: 15.5%


Assumptions


1,181 1,126 1,152 1,1511,250

1,3491,449

1,5481,645

1,7381,826

22.1%

17.5%

16.0% 15.9% 15.8% 15.8% 15.7% 15.6% 15.6% 15.5%

18.8%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CAPEX (R$ mm) % of Net Revenues

Long Term CAPEX Assumption(Average 2009 CAPEX/Net Revenues of the Comparables )


29


Note:

1 Considers amortization of the leasing contract with Embratel over the next 5 years, following a straight-line method

Working Capital Variation (R$ mm)

Working Capital based on market estimates, converging to 0.5% of Net Revenues in 2020

Straight-line depreciation based on the estimated life of the companies’ assets

– Average depreciation rate of 5.5% per year

Amortization¹ based on public information

Income tax rate of 34%

Depreciation and Amortization (R$ mm)


Assumptions

804 870 934 9981,064

860937

1,0211,109

1,2031,302

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

35.7

(57.4)

(23.3)

1.57.0

13.4

20.8

29.0

38.1

48.1

58.8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020


Discount Rate – Weighted Average Cost of Capital

Cost of Equity

Market Risk Premium7.1% ³

Risk Free Rate4.2% ¹

Cost of Equity(US$, nominal)

11.1%

Re-levered Regional Beta

0.664 4

Brazil Risk Premium2.3% ²

The discount rate was calculated based on the “ Capital Asset Pricing Model ” (CAPM), resulting in a 9.4% rate in nominal US$

Notes:1 Based on the 3-month average of the 30-year US Treasury YTM - Source: Bloomberg2 Based on the 3-month average of the Brazil EMBI - Source: Bloomberg3 Based on the arithmetic average of the historical difference between the return of the S&P 500 and the Treasury bonds (1935 – 2009) - Source: Ibbotson

Associates’ Stocks, Bonds, Bills and Inflation 2010 Yearbook4 Based on the average of the peers universe. Source: Bloomberg. The following companies were considered: Telemar Norte Leste, Vivo, Telesp, Tim e NET5 NET’s long term marginal cost of debt in US$ estimated based on the Global Notes 2020 YTM 6 Based on the NET’s income tax rate7 Estimated current capital structure of NET

Effective Tax Rate34.0% 6

Cost of DebtCost of Debt Before

Taxes6.8% 5

Cost of Debt after Taxes (US$)4.5%

Nominal Discount Rate (US$)

9.4%

74% 7

26% 7

30

31

DCF Valuation Results

Discounted Cash Flow to Firm (R$ mm)

Discounted Cash Flow Results (R$ mm) Price per Share (R$)

Perpetuity Growth (%) –Nominal US$

R$ mm 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EBITDA 1,540 1,746 1,986 2,231 2,436 2,647 2,860 3,074 3,286 3,494 3,694

(-) Depreciation and Amortization (804) (870) (934) (998) (1,064) (860) (937) (1,021) (1,109) (1,203) (1,302)

EBIT 736 876 1,053 1,233 1,372 1,787 1,923 2,053 2,177 2,290 2,392

Income Tax and Social Contribution (250) (298) (358) (419) (467) (608) (654) (698) (740) (779) (813)

Income Tax and Social Contribution Rate 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%

NOPLAT 486 578 695 814 906 1,180 1,269 1,355 1,437 1,512 1,578

(+) Depreciation and Amortization 804 870 934 998 1,064 860 937 1,021 1,109 1,203 1,302

(-) Working Capital Variation (36) 57 23 (1) (7) (13) (21) (29) (38) (48) (59)

(-) Capex (1,181) (1,126) (1,152) (1,151) (1,250) (1,349) (1,449) (1,548) (1,645) (1,738) (1,826)

Free Cash Flow 73 379 500 659 713 676 737 799 863 929 996

Present Value of Free Cash Flows (US$ mm) 2,141.7

Present Value of Terminal Value (US$ mm) 3,057.4

Firm Value (US$ mm) 5,199.1

Firm Value (R$ mm) 9,186.3

Net Debt (R$ mm) 1,203.8

Equity Value (R$ mm) 7,982.5

Number of Shares (mm) 343.0

Price per Share (R$) 23.27

Implied EV/EBITDA 2010E 6.0x

Implied EV/EBITDA 2011E 5.3x

23.3 2.5% 3.0% 3.5% 4.0% 4.5%

10.4% 17.60 18.37 19.25 20.27 21.46

9.9% 19.12 20.04 21.10 22.35 23.83

9.4% 20.86 21.97 23.27 24.82 26.67

8.9% 22.88 24.24 25.85 27.79 30.17

8.4% 25.25 26.94 28.96 31.45 34.57

32

SECTION 4D

Comparable CompaniesTrading Multiples

33

Companies Price per Share Market Cap EV EV / EBITDA P / E

(R$) (R$ mm) (R$ mm) 2010E 2011E 2010E 2011E

Telemar Norte Leste 45.90 10,942 37,711 3.6x 3.5x 7.5x 7.0x

Vivo Participações 46.35 18,521 21,876 3.9x 3.7x 13.5x 9.7x

TELESP 37.66 19,050 19,929 3.5x 3.6x 9.1x 8.5x

TIM Participações 5.03 12,453 14,973 4.1x 3.6x 27.1x 12.8x

Net Serviços 19.50 6,688 7,892 5.1x 4.5x 19.4x 14.3x

Minimum 3.5x 3.5x 7.5x 7.0x

Maximum 5.1x 4.5x 27.1x 14.3x

Source: Earnings Releases, Capital IQ and Bloomberg as of August 3rd, 2010Notes:1 Based on NET’s consensus EBITDA projection for 2010 of R$1.5 billion2 Based on net debt as of June 30th, 2010

Comparable Companies Trading Multiples

Trading Multiples

Trading Multiples Valuation 1,2

1

EV/EBITDA 2010EFirm Value

(R$ mm)Equity Value

(R$ mm) Value per Share (R$)

Minimum 3.5x 5,366 4,162 12.13

Maximum 5.1x 7,892 6,688 19.50

34

SECTION 4E

Precedent TransactionsMultiples

35

Source: Companies’ Reports1 Based on NET’s LTM EBITDA as of June, 2010, of R$1.4 billion2 Based on NET’s net debt as of June 30th, 2010

Precedent Transactions Multiples

Precedent Transactions Multiples

Precedent Transactions Multiples Valuation 1,2

Date Acquirer Target EV / LTM EBITDA

2006 Telefónica TVA 9.3x2006 Net Serviços Vivax 11.5x

2007 Net Serviços Big TV 8.4x

Minimum 8.4xMaximum 11.5x

EV/EBITDA LTMFirm Value

(R$ mm)Equity Value

(R$ mm)Value per Share (R$)

Minimum 8.4x 11,878 10,674 31.12

Maximum 11.5x 16,261 15,057 43.90

36

APPENDIX A

Glossary of Terms and Definitions

37

Glossary of Terms and Definitions

EBITDA Earnings Before Interest , Taxes, Depreciation and Amortization

Firm Value or Enterprise

ValueEnterprise Value / Firm Value, or sum of Equity Value, Net Debt and Minority Interest

Capex Capital Expenditures, or Investments for maintenance and/or capacity expansion

CAGR Compounded Average Growth Rate

EBIT Earnings Before Interest and Taxes

WACC Weighted Average Cost of Capital

ADSL Asymmetric Digital Subscriber Line

ARPU Average Revenue per User

38

MMDS Multichannel Multipoint Distribution Service

VoIP Voice over Internet Protocol

DTH Direct to Home

Broadband Refers to downstream speed transmission capacity greater than that of ISDN of 1.5 or 2 Megabits per second

ISDN Integrated Services Digital Network

WLL Wireless Local Loop

Cable TVCable TV Service is the telecommunicationsservice that consists in the distribution,to subscribers, through physical means of transportation

Market Consensus

Includesprojections from the research departmentsof the following institutions: ItaúSecurities, Morgan Stanley,Credit Suisse, JP Morgan,Santander, BofA Merrill Lynch, Deutsche Bank and Goldman Sachs

Glossary of Terms and Definitions (cont ’d)

39

APPENDIX B

Average Target Price

40

29.78

27.1526.00 25.50

24.5323.00 22.50

20.00

Research Analysts ’ Target Price for NET

Source: Bloomberg

Target Price for NET (R$/share)

Minimum target price: R$20.00

Maximum target price: R$29.78

Average target price: R$24.81

Average: R$24.81

Date post:	02-Dec-2018
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