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Embratel Outsources Technology and Information Infrastructure

Agreement Anticipates Savings of over 30% in Embratel's IT Costs

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RIO DE JANEIRO, Brazil - 09 Apr 2003: Embratel and IBM signed an agreement on April 7th for outsourcing services.

In winning this bid, IBM will now operate Embratel's entire IT infrastructure.

By closing this agreement, Embratel successfully executed a strategy to reduce costs, offer higher quality services and concentrate its efforts on its core business of telecommunications. While IBM is improving efficiency of the IT infrastructure, Embratel will focus its efforts on developing value added products with a view to reinforcing its leadership position in the market.

The 10-year contract is one of the largest ever closed for IBM in Brazil. Embratel will save over 30% of its IT costs, while continuing to have the latest technologies in the IT environment. The value of the contract can be as much as $1 billion reais over a 10-year period, depending on the investments made and the services that are delivered.

In addition to the savings, this outsourcing contract will provide Embratel with better internal service quality, including a contingency service environment for critical applications as well as an environment for testing and acceptance of new services. Applications, ranging from e-mail to billing, are part of the outsourced infrastructure services provided by IBM under Embratel's management. Embratel's IT department will continue to be responsible for the development of systems and products.

IBM's services will include Embratel central and internal data processing operations. During the first year, the services will continue to be operated within Embratel's facilities. From the second year on, the central site will move to IBM's Service Megacenter in Hortolandia, in the State of Sao Paulo.

Through this outsourcing agreement Embratel strengthens its business relationship with IBM, by providing additional telecommunications services to the Information Technology Company and its clients. In September 2002 Embratel executed an agreement, which was awarded in a public bid, the right to provide local, long distance, and 0800 telephone services to IBM.

"The partnership between Embratel and IBM unites two large companies that are also leaders in their respective markets. With the increasing convergence between communication, computing and content, our clients will benefit from state of the art services, which is the hallmark of both our companies", states Shamim Khan, Embratel's Strategic Development Vice-President.

"In IBM's view, this partnership with Embratel represents an important milestone in both companies' business relationship. This will allow us the chance to utilize all of our know-how in IT, and all of our skills in managing IT infrastructures, in order to aid Embratel in becoming even more focused on its core business," adds Rogerio Oliveira, President of IBM Brazil.

Details regarding service:
The operating IT infrastructure is comprised of different platforms for hardware and software: large (1040 Mips), medium and low platform (224 servers), a 110 Tb storage infrastructure, and 27,000 items which include PCs, laptops, printers, and network equipment.

This implies servicing roughly 11,500 users within Embratel, including four call centers in various parts of the country.

In addition to Embratel's head office facilities in Rio de Janeiro, there are five regional offices; Sao Paulo, which centralizes the carrier's services for the state with the same name; Brasilia, for Northern and Center-West regions; Recife, for the Northeast; Belo Horizonte, for Minas Gerais and Espirito Santo; and Curitiba, for the Southern region. This translates into a presence in twenty-two different sites, providing remote services to a further 101 locations, which totals 151 buildings.

"Embratel is always seeking to improve its services, internal as well as external. We anticipate that this agreement with IBM will have impact on our main goal: a constant increase in efficiency of our customer services," sums up Aloysio Maggessi, Embratel's director for Information Technology.

"We believe that by creating and managing a safe, reliable, and resilient IT infrastructure for Embratel, we will be contributing to the company's ability to concentrate entirely on the telecommunications business. We also believe that as a result, we will be helping it to become even more flexible and competitive, in addition to enabling Embratel to respond more easily to the challenges and fluctuations of the telecom market," adds Antonio Papalardo, Director for Outsourcing at IBM Brazil.

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