EBITDA has been included to provide additional information relating to our ability to generate cash from operations. EBITDA is not a measure of financial performance under Brazilian or U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Our management believes that this measure is useful to an investor in evaluating us because it is widely used in the telecommunications industry as a measure to evaluate a company's operating performance before depreciation and interest income and expense. EBITDA is not calculated identically by all companies and the presentation here may not be comparable to other similarly titled measures of other companies. Our management's discretionary use of funds depicted by EBITDA may be limited by working capital, debt service and capital expenditure requirements and by restrictions related to legal requirements, commitments and uncertainties.

EBITDA increased to R$1,703.6 million in 2000 from R$1,528.6 million in 1999. As a percentage of net revenues, EBITDA declined to 25.4% from 29.5%. The decline in EBITDA as a percentage of net revenue was attributable to the increase in bad debt expense as mentioned above along with the increased costs of billing and customer services.

EBITDA increased to R$1,528.6 million in 1999 or 29.5% of net revenue from R$761.6 million or 19% of net revenue in 1998. The increase was primarily attributable to the increase in net revenues and the lower other operating expenses due to the above-mentioned charges recorded in the third and fourth quarters of 1998.