TELE NORDESTE CELULAR PARTICIPAÇÕES S.A. ANNOUNCES SECOND QUARTER 2000 RESULTS (UNAUDITED)

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1 Contacts: Tele Nordeste Celular Participações S.A. Thomson Financial IR Mario Roberto Gomes Isabel Vieira Fabíola Almeida Rick Huber HYPERLINKHYPERLINK TELE NORDESTE CELULAR PARTICIPAÇÕES S.A. ANNOUNCES SECOND QUARTER 2000 RESULTS (UNAUDITED) Recife, Brazil (August 1, 2000) Tele Nordeste Celular Participações S.A. (NYSE: TND, BOVESPA: TNEP3, TNEP4) ( Tele Nordeste or the Company ), the holding company controlling the operating companies serving Band A cellular telecommunication clients in the states of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas, announced today its results for the second quarter of 2000 in accordance with Brazilian GAAP (unaudited). The translation to US dollars has been presented solely for the convenience of the reader. This conversion does not imply that real amounts actually represent such US dollar amounts or may be converted to US dollars at the rate indicated. The US dollar amounts have been converted from reais at the commercial selling rate published by the Central Bank of Brazil at June 30, 2000, which was R$1.80 to US$1.00. Operational Highlights Marketing activities during the second quarter 2000 resulted in the gross addition of 165,364 clients (of which 127,953, or 77%, were prepaid). Gross additions for the first half 2000 totaled 349,454, of which 248,707 (71%) were prepaid. Subscribers acquisition cost (SAC) for the second quarter 2000 was R$128, compared with R$139 for the first quarter 2000; SAC for the first half 2000 was R$134, compared with R$157 for the year The Company had 1,362,000 clients at June 30, 2000, of which 843,000 (62%) were contract clients and 519,000 (38%) were prepaid clients. The market share at the end of the second quarter of 2000 was estimated at 65%, compared to 69% at March 31, The new billing system implemented in the second half of 1999 at the six operating companies has now been normalized and collection activities have been strengthened. As a result, management expects better performance in these activities and lower bad debt expenses in the second half of Also, disconnection of overdue accounts has been reinforced. In the second quarter, approximately 50,000 post-paid lines were disconnected due to non-payment. 1

2 At June 30, 2000, Tele Nordeste and its subsidiaries completed a restructuring which resulted in the transfer of the goodwill paid in the privatization auction, from Bitel Participações S.A. to each individual operating company. This restructuring aims at taking advantage of tax reductions estimated at R$200 million over 8 years, until 2008, which will be capitalized by the operating companies and will provide significant financial benefits for the company. The proposal to merge the operating companies is pending approval from the regulatory agency, Anatel. On June 13, 2000, Tele Nordeste formed, together with Tele Celular Sul Participações S.A. (NYSE: TSU) an internet company, TimNet.com S.A., to provide internet-based, value-added services to their respective clients. The initial investment totals US$10 million and this new company will be operational by the end of the third quarter SMS (Short Message System) was launched in July 2000, initially to postpaid clients. For the first two months the service will be offered for free. After the introductory period, SMS will be offered to all clients. The company estimates that WAP technology will be operational by the end of the year, as TDMA WAP handsets become available in the market. Financial Highlights Tele Nordeste s consolidated net income for the second quarter 2000 was R$0.9 million (US$0.5 million) resulting in a consolidated net income of R$12.1 million (US$6.7 million) for the first half of 2000, or R$0.036 (US$0.02) per thousand shares, compared to a consolidated net income of R$2.9 million (US$1.6 million) for the second quarter 1999 and R$16.5 million (US$9.2 million) for the first half of Consolidated net operating revenue for the second quarter 2000 reached R$210.8 million (US$117.1 million), resulting in a total of R$425.3 million (US$236.3 million) for the first half of 2000, compared to R$150.4 million (US$83.6 million) for the second quarter 1999 and R$290.9 million (US$161.6 million) for the first half of Compared with the first quarter 2000, net operating revenues decreased by 1.7%, comprised of a decrease in traffic revenue of 5% and an increase in sales of handsets of 23%. The reduction in traffic revenue was caused by seasonality, and also by more strict credit control implemented in April For the second quarter 2000, the Company reported consolidated EBITDA and EBIT of R$52.9 million (US$29.4 million) and R$21.4 million (US$11.9 million), respectively, representing a n EBITDA margin of 25% and an EBIT margin of 10% over net operating revenues, compared to the R$49.5 million (US$27.5 million) EBITDA and R$20.3 million (US$11.3 million) EBIT, representing an EBITDA margin of 33% and an EBIT margin of 14% over net operating revenues, reported for the second quarter For the first half of 2000, EBITDA and EBIT were R$126.2 million (US$70.1 million) and R$68.7 million (US$38.2 million), representing an EBITDA and EBIT margin over the net operating revenues of 30% and 16%, respectively, compared to the R$110.6 million (US$61.4 million) EBITDA and R$53.1 million (US$29.5 million) EBIT, representing a 38% EBITDA margin and an EBIT margin of 18% over net operating revenues, reported for the first half of EBITDA (in R$000) 80,0 60,0 40,0 20,0 0,0 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 2

3 Consolidated bad debt expenses, net, for the second quarter 2000, were R$29 million (US$16.1 million), representing 11% of gross revenues for that quarter and reflected adjustments made following the normalization of the new billing system; bad debt expenses are expected to decrease in the second half of this year, after disconnection of post-paid clients and the implementation of new and more effective collection procedures. Also impacting net result for the second quarter was the write off of R$5.2 million of undetected, fraudulent international calls (cloning) that were paid to the long-distance carriers and not billed to the clients. The anti-fraud procedures have also been strengthened during the second quarter to minimize this type of risk. Interest on Equity In accordance with the Annual Shareholders Meeting held on April 27, 2000, the Company has started paying 1999 dividends, in the form of interest on equity, totaling R$9.9 million (US$5.5 million). Interest on Equity (per thousand shares) Net Value (in reais) Exempt Taxable Common Preferred Common Preferred Interest on equity Tele Nordeste s subsidiaries, in accordance with their Annual Shareholders Meetings, started paying dividends and interest on equity based on their results for the year December 31, 1999, on June 26, 2000, totaling R$14.6 million (US$8.1 million). Selected Consolidated Financial Data (in thousands of Reais) 2 nd Qtr. 1 st Half Revenue - Usage charges 120,184 94, , ,307 - Monthly subscription payments 38,523 35,552 90,717 67,367 - Activation fees Network usage charges 66,597 36, ,108 77,048 - Sale of handsets 38,550 23,573 69,925 35,154 - Other 1, ,405 1,838 Subtotal 265, , , ,795 - Value added and other indirect taxes (54,719) (40,858) (119,457) (78,903) Net Operating Revenue 210, , , ,892 Cost of services and of goods sold - Depreciation and amortization (27,368) (28,720) (51,725) (56,662) - Personnel (1,315) (1,178) (4,058) (1,743) - Materials and services (1.692) 1,839 (3,221) (3,302) - Circuit leasing and related expenses (32,652) (23,968) (66,771) (55,292) - Leases and insurance (2,246) (1,507) (4,468) (2,972) - Cellular handset costs (36,793) (27,520) (68,514) (34,353) - Fistel and other 5,616 (5,016) (588) (9,809) Subtotal (96,450) (86,070) (199,345) (164,133) Gross profit 114,342 64, , ,759 Consolidated net operating revenue for the second quarter 2000 increased 40% when compared with the same quarter of the previous year. This increase is primarily due to the substantial increase in the number of clients during the period. The average number of clients in the second quarter 2000 increased 80% (from 729,000 to 1,315,000) over the same quarter of Consolidated net operating revenue for the first half of 2000 increased 46% over the first 3

4 half of Incoming traffic revenues (network usage charges) increased 80% year-over-year, due to the substantial increase in prepaid clients. Net Revenue(in R$000) 250,0 200,0 150,0 100,0 50,0 0,0 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 Consolidated gross profit increased 78% when compared to the second quarter of 1999 and 78% over the first half of last year, primarily as a result of higher usage by the clients (incoming and outgoing calls). Fistel tax was reclassified to marketing expenses in the second quarter Gross Profit (in R$000) 120,0 100,0 80,0 60,0 40,0 20,0 0,0 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 Selected Consolidated Financial Data (in thousands of Reais) 2 nd Qtr 1 st Half Operating Expenses - Selling 62,768 24, ,333 41,822 - General and administrative 24,221 19,134 42,468 31,181 - Other operating expenses, net 6,306 (630) 5,940 (2,452) Subtotal 93,295 43, ,741 70,551 - Net financing expenses 22,363 9,627 43,336 16,094 Total 115,658 53, ,077 86,645 Consolidated net operating expenses increased substantially during the second quarter compared to the same period of the prior year, to R$115.7 million (US$64.3 million) from R$53.1 million (US$29.5 million) in This increase in operating expenses resulted primarily from higher bad debt expenses, write off of fraudulent international calls and higher financing expenses. Consolidated bad debt expense for the second quarter 2000 reached R$29 million (US$16.1 million), compared with R$11.6 million (US$6.4 million) in the same quarter of 1999, representing 11% of gross revenue for the quarter. Year-to-date bad debt expenses amount to R$49.8 million (US$27.7 million), or 9% of gross revenues. Financing expenses reflect the higher level of indebtedness to finance the expansion projects. Consolidated debt-to-equity ratio at June 30, 2000, was

5 Consolidated Statistics 2Q, Q, Q, Q, Q, 1999 Clients - Postpaid 842, , , , ,388 - Prepaid 519, , , ,704 55,134 - Total 1,361,669 1,313,252 1,187, , ,522 Growth over same period of the previous year (%) Estimated population of region (in millions) Penetration rate (%) - Tele Nordeste Total Switches Radio base stations Mini-cells Employees (full-time, interns and temporary) 1,646 1,277 1,283 1,275 1,177 Clients per employee 827 1, The digitalization project reached 66% of voice channels at June 30, 2000, and 82% of the customer base were already using digital handsets. The total coverage reached 74% of the population and 28% of the area. ARPU The bl average revenue per user (ARPU), net of taxes, for the second quarter of 2000, was R$45 (US$25) per month, compared to R$62 (US$34) per month for the second quarter of This reduction was caused by the addition of low use, prepaid clients as of May, 1999, and the stricter credit control procedures which were resumed in April 2000 (i.e. call blocking). The bl ARPU for the first half of 2000 was R$48 (US$27), compared to R$65 (US$36) for the same period of the prior year. Postpaid ARPU in 2000 has been negatively affected by the increase in blocked lines for credit reasons, which was resumed at the end of the second quarter. Blocking is done on a partial basis, and therefore, just incoming traffic revenues are generated by those clients. Competition The Company estimates that its market share at the end of the second quarter of 2000 was approximately 65%, in terms of number of lines. The penetration rate in the region at the end of June 2000 was estimated at 8%, compared to Brazil s penetration rate of approximately 11% (18.5 million accesses). In the second quarter 2000 two promotional campaigns (Mothers Day and Valentines Day) featured interest-free financing of handsets and subsidies linked to one-year contracts with minimum usage. General subsidies have been discontinued as of March, Debt Consolidated debt at June 30, 2000, was R$392.7 million (US$218.1 million), with R$350.7 (US$194.8 million) maturing in the short-term. The debt is totally denominated in Reais, in line with the Company s policy of minimizing exposure to foreign currency fluctuations. 5

6 i The Company is in the process of closing long-term financing contracts with the European Investment Bank EIB (third quarter) and Banco Nacional de Desenvolvimento Econômico e Social BNDES (fourth quarter). Capital Expenditures During the second quarter of 2000, Tele Nordeste and its subsidiaries invested R$80.4 million (US$44.7 million), totaling R$116.5 million (US$64.7 million) for the first half of the year. These investments are primarily focused on network digitalization. The capex program for 2000 amounts to R$215 million and includes enhancements to the Company s systems, new services and Internet facilities. This press release contains forward-looking statements. The Company and its representatives may also make forwardlooking statements in press releases and oral statements. Statements that are not statements of historical fact, including statements about the beliefs and expectations of the Company s management, are forward-looking statements. The words anticipates, believes, estimates, expects, forecasts, predicts, projects and similar words are int to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties, some of which are discussed at pages herein, include those resulting from the short history of the Company s operations as an independent, private sector, as well as those relating to the cost and availability of financing, the performance of the Brazilian economy generally, the levels of exchange rates between Brazilian and foreign currencies and the Federal Government s telecommunications policy. Accordingly, the actual results of operations of the Company may be different from the Company s current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments. 6

7 Balance Sheet At June 30, and March 31, 2000 (In thousands of Reais) Parent Company Consolidated Assets Current assets Cash and cash equivalents 524 1,424 10,475 7,624 Trade accounts receivable Clients , ,630 Inventories ,678 44,578 Telecommunications companies ,670 36,462 Trade accounts receivable Subsidiaries 14, Recoverable taxes 2,957 1,937 44,077 14,758 Deferred income and social contribution taxes 332 1,082 24,970 21,677 Dividends and interest on shareholders equity 4,079 9, Prepaid expenses ,728 - Other assets 1,634 1,597 16,783 67,505 24,084 15, , ,234 Noncurrent assets Loan to subsidiaries 5,293 27, Tax incentives - - 2,791 2,746 5,293 27,232 2,791 2,746 Permanent assets Investments 544, , Property, plant and equipment 5,297 4, , ,269 Deferred asset , , , , , , ,948 1,242,736 1,019,

8 Balance Sheet At June 30, and March 31, 2000 (In thousands of Reais) Parent Company Consolidated Liabilities and Shareholders Equity Current liabilities Suppliers ,753 76,898 Loans and financing , ,370 Taxes payable ,098 45,796 Salaries and vacation pay 1,573 1,205 7,322 5,885 Subsidiaries , Telecommunication companies ,118 9,843 Dividends and interest on shareholders equity 2,400 10,373 7,586 4,401 Other liabilities 1, ,979 32,161 7,362 23, , ,354 Noncurrent liabilities Loans and financing ,920 45,376 Other liabilities - - 1, ,892 45,469 Minority interest , ,176 Shareholders equity Capital 108, , , ,943 Special reserves 204, ,068 - Earnings reserves 178, , , ,922 Retained earnings 79,792 77,386 79,792 77, , , , , , ,948 1,242,736 1,019,

9 Statement of Income For the quarters and semesters June 30, 2000 and June 30, 1999 (In thousands of Reais) Parent Company Consolidated Quarter Semester Quarter Semester Quarter Semester Quarter Semester Revenue Telecommunications services and sale of goods , , , ,795 Deductions (taxes and discounts) (54,718) (119,457) (40,858) (78,903) Net Revenue , , , ,892 Cost of goods sold and services rendered (96,450) (199,345) (86,070) (164,133) Gross profit , ,925 64, ,759 Operating revenues (expenses) Selling expenses (62,768) (109,333) (24,928) (41,822) Administrative and general expenses (1,156) (2,963) (7,345) (10,597) (24,221) (42,469) (19,134) (31,181) Financial expenses (173) (230) (499) (1,189) (22,827) (47,832) (12,272) (26,179) Financial income 1,409 2,143 1,799 4, ,496 2,645 10,085 Equity in income of subsidiaries 3,866 15,774 8,938 24, Other operating income ,872 3,690 2,579 5,635 Other operating expenses (1,085) (1,159) (7) (7) (9,178) (9,629) (1,949) (3,183) Operating income (loss) 2,861 13,565 2,886 16,481 (1,316) 24,848 11,229 40,114 Nonoperating income (17) , Nonoperating expenses (347) (545) (558) (3,106) Income before income and social contribution taxes 2,844 13,565 2,886 16,481 (939) 25,332 10,671 37,008 Income and social contribution taxes (439) ,407 (10,183) (5,077) (13,355) Reversal of interest on shareholders equity ,227 1, Net income before minority interest 2,405 13,565 2,886 16,481 1,695 16,376 5,594 23,653 Minority interest (779) (4,300) (2,708) (7,172) Net income (loss) 2,405 13,565 2,886 16, ,076 2,886 16,481 Net income (loss) per lot of a thousand shares (R$) Number of shares at June 30, 2000 (thousands) 334,399, ,399, ,399, ,399,