 Strengthening and synergy.
In another demonstration of trust in the country, in 2006 the Telmex group bought an additional share from the minority stockholders in an Agreed Takeover Bid. Embrapar went private with this operation of over R$ 1,7 billion, concluded in November of 2006. Telmex then held 98% of the common stock and 94.7% of the preferred capital stock of Embratel, totaling 96.4% of its capital stock.
With the presence of Telmex, and the resulting management recovery and significant volume of investments, Embratel reversed its previously unfavorable situation and envisaged new prospect business solutions.
From 2004 to 2006, the group bought interests in other corporations summing up nearly R$ 6.3 billion. Further to reducing its debts, the financial resources solved the liability problem, cut tax and legal exposure and got new leases of life. With these resources, Embratel resumed its investment plan and its competitive edge power.
In order to end the legal disputes involving the Value-Added Tax on Sales and Services - ICMS, Embratel entered into agreements with several states in 2006. As a result, Embratel obtained tax benefits thanks to the firm decision of the controlling group to reduce the volume of tax contingencies. Consequently, two goals were attained: the restoration of a political-institutional condition that favored the business evolution and the improvement of its operations.
With the settlement of these tax and legal debts, Embratel resumed its growing path and was seen with respect and interest by the marketplace. During this redesign process, Embratel became a more and more competitive alternative in the provision of wireline services - including local voice and broadband connection to the Internet.
In 2006, Embratel invested over R$ 1,4 billion in the expansion of systems, development of new technologies, new generation of satellites and improvement of customer care service. Embratel's operational performance reflected the positive impacts of its strengthening process.
A significant improvement was registered in the long distance domestic, data transmission and local calling services. A major highlight was the growth of local voice services, due to the creation of Net fone - a triple play solution with TV, broadband internet and wireline calling subscription - in partnership with Net. Launched in March, by the end of the year the service had 181,9 thousand subscribers.
These new local calling customers from the residential, small and medium-sized company segments joined the 940 thousand users of Livre, a local residential calling solution that grew by 32% in comparison with 2005. The long distance domestic traffic came to 14.49 billion minutes - raising 16.2%.
In the data communication area, Embratel ended 2006 with 2.2 million lines of 64 Kbps providing services to corporate customers - an increase of 34.5% over the previous year.
In the business market, Embratel increased its share from 38% to 47% in 2006. This development was boosted by the offer of convergent solutions (wireline calling, Internet and voice over IP network), including the private virtual network services (VPN) with multiprotocol label switching (MPLS) technology.
Leader in the field of 0800 services with 39% of share, Embratel held its strong position - 22% of market share - in the provision of long distance domestic and international calling service for the corporate market.
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