Depreciation and amortization expenses are not reported separately in the financial statements but are included as components of cost of services and commercialization of services, and general and administrative expenses. We are discussing depreciation separately as we view this as a distinct category of expense. Depreciation and amortization expenses were R$856.8 million, R$733.3 million, and R$678.9 million in 2000, 1999, and 1998, respectively. The increase in 2000 was attributable to completion of several strategic capital projects such as the new digital submarine cable system - Americas II connecting Brazil with North America and the successful launching of a 28 transponder C-Band satellite - B4 in August 2000. New infrastructure of urban rings, points of presence, network capacity and broadband and intelligent voice networks further contributed to the overall increase in depreciation. The new billing system and related hardware also increased depreciation expense in 2000. This was partially offset by assets that became fully depreciated during the year.

Depreciation increased in 1999 by R$44.3 million related to new equipment (primarily digital equipment) installed to expand and improve the existing network, offset in part by equipment that became fully depreciated during the year. The depreciation in 1999 also reflected R$77 million of accelerated depreciation, an increase of R$10.5 million in accelerated depreciation compared to 1998. This resulted from our Board of Directors' resolution in the first quarter of 1998 to depreciate the remaining book value of our analog transmission equipment on a straight-line basis from January 1, 1998 to December 31, 1999.