The local service revenue reached R$1,063.5 million in the 1Q03, 4.1% below the obtained in the 4Q02.

The installation revenue totaled R$5.9 million in the 1Q03, 1.6% higher than the amount registered in the 4Q02. In the 1Q03, the selling of promotional and alternative plans was intensified, representing 38% of the lines added during the period.

Revenues from monthly subscription in the 1Q03 reached R$702.7 million, 11.6% higher than the 1Q02. This performance is due to growth of plant in service and to tariff readjustment.

The measured service revenue reached R$328.8 million in the 1Q03, 4.9% lower than the one observed in the previous quarter. The better revenue performance, when compared to the variation in traffic in the same period, is due to the higher tariff charged for exceeding pulses in the promotional plans, which can be up to 60% higher than the one charged in the basic plan.

Brasil Telecom sold 1.6 million credits throughout 1Q03, 6.7% above the number sold in the 4Q02. Public telephony revenue reached R$83.8 million in the 1Q03, a reduction of 3.8% when compared to the 4Q02, due to the higher revenue transferred to other operators on account of school vacation.

The domestic long distance revenue in the 1Q03 was R$325.6 million, against R$339.8 million in the previous quarter. This slight reduction was due to the lower traffic registered in the 1Q03.

Fixed-mobile revenue grew 4.6% in the 1Q03, reaching R$607.3 million, result of the average impact of 14.2% from tariff readjustment, which came into effect for 58 of the 90 days in the 1Q03, combined with a 7.5% reduction in the fixed-mobile traffic. The fixed-mobile tariff readjustment authorized by Anatel was 23.5% for VC-1 calls and 22% for VC-2 and VC-3 calls, and became effective on February 8, 2003.

Interconnection revenue in the 1Q03 remained stable in relation to the 4Q02. Mobile-fixed revenue increased by 11.3% in comparison to the 4Q02 reaching R$55.8 million, due to the increase in the fixed and mobile plants in Brasil Telecom's concession area. Cell phones in Brasil Telecom's region totaled 9.9 million at the end of March, according to Anatel's database.

Lease of means revenue in the 1Q03 was R$53.2 million, 2.9% below the R$54.8 million registered in the previous quarter, due to a reduction in the average number of leased circuits.

Data communication revenue in the 1Q03 grew 20.6% to R$171.4 million, which reflects Brasil Telecom's strategy to expand in data transmission.

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17.4% growth in the number of ADSL lines in service;

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13.7% growth in the number of IP accesses billed;

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12.1% growth in the number of Frame-Relay accesses billed;

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4.5% growth in the number of ATM accesses billed;

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22.8% reduction of Dialnet accesses billed; and

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2.3% reduction of SLDD billed.

During Telexpo 2003, Brasil Telecom launched services in an innovative way, aimed at keeping itself as reference in the data communication business.

The Smart Wi Fi is an Internet access services and Wireless LAN (Local Area Network) building package, which uses Wireless Fidelity (Wi Fi) technology. The launching, together with the Turbo Wireless solution, allows Brasil Telecom to become a Wireless LAN solution provider, using Wi Fi technology, and Wireless MAN (Metropolitan Area Network), using 1xEVDO, that is, in average, 10 times faster than the 1xRTT technology. The broadband access provider BrTurbo (Wireless Internet Service Provider) will offer to executives in travel or out of their offices, in airports, hotels or convention centers, the typical hot spot solution, with no limitations, since the metropolitan footprint will be based in Turbo Wireless.

The E-lite is a complete solution for large corporations and government. With the E-lite, the costs of acquisition and maintenance of the IT environment are reduced, since the solution is based on Thin Client terminals - a regular PC with virtual disk - with storing and program running centralized in the Cyber Data Centers of Brasil Telecom.

Through the Internet, the clients of Brasil Telecom can monitor, from any place in the world, if the SLA - Service Level Agreement is being achieved. The client can configure its web page, determining the name to be used in its network and the type of charts and reports to be shown.

This service allows the interconnection between local networks, with high quality and security, combining the Frame Relay, ATM and xDSL technologies. Brasil Telecom innovates with InterLAN since is the only company in Brazil and one of the three in the world to offer that solution. The InterLAN is focused mainly on the mid-size companies and can be used in applications of private corporate networks (VPNs) building, combining simple installation, configuration and maintenance.

Total number of intelligent services activated at the end of March 2003 - virtual answering machine, follow-me, call waiting, caller ID, among others - reached 4.6 million, compared to 4.1 million on December 2002, an increase of 13.0%. 29.7% of the lines in service at the end of 1Q03 had at least one intelligent service activated, compared to 27.5% in the previous quarter.

Revenues from supplementary and value-added services decreased 9.3% in the 1Q03, basically due to a 21.4% reduction in 0800 DDG traffic.

The billing of calls made in the 3Q02 influenced the 0800 traffic of the 4Q02. In 4Q02, 32% of the 0800 service billed was rendered in the 3Q02, while in the 1Q03 only 25% of the service billed was rendered in the 4Q02. This represents a reduction of 7.7 million minutes.

Gross revenue deductions reached R$735.6 million in the 1Q03, representing 28.2% of the gross revenue in the quarter, against 28.4% in the 4Q02.

Net operating revenue/Average LIS/month registered in the 1Q03 was R$65.5, against R$62.4 in the 1Q02.

Costs and operating expenses totaled R$1,522.1 million in the 1Q03, against R$1,468.8 million in the previous quarter.

The cash cost (costs and operating expenses excluding depreciation and amortization) was R$1,001.5 million in the 1Q03, an increase of 5.6% in relation to the 4Q02.

Brasil Telecom payroll was comprised of 5,543 employees at the end of 1Q03, against 5,565 at the end of December 2002. The net reduction of 22 employees in the quarter is a result of 190 dismissals and 168 admissions.

Personnel costs and expenses increased 8.5% in the 1Q03 in relation to the 4Q02, reaching R$93.1 million. This increase was due mainly to the dismissal costs of approximately R$3.4 million and to the average salary readjustment of 5.0%, which became effective on February 2003.

Brasil Telecom reached a productivity ratio of 1,731 LIS/employee in 1Q03, representing an increase of 38.8% in relation to the presented in the 1Q02.

Material costs and expenses reached R$20.3 million in the 1Q03, a reduction of 1.6% in relation to the previous quarter.

Costs and expenses with subcontracted services, excluding interconnection and advertising & marketing, reached R$290.3 million in 1Q03, representing a reduction of 3.4% in relation to the 4Q02, mainly due to the improved management over the contracts.

The main reduction were (i) R$1.4 million with security and receptionist services, (ii) R$2.1 million with consulting services, (iii) R$1.1 million with training, (iv) R$2.0 million with collection services, e (v) R$1.1 million with employees' transportation.

The costs with interconnection totaled R$424.9 million in the 1Q03, an increase of 4.6% in relation to the 4Q02. This variation is explained mainly by the average readjustment of 22% in the TU-M, combined with the 7.5% reduction in the fixed-mobile traffic in the 1Q03.

Losses with accounts receivable as a percentage of gross revenue reached 2.6%, stable in relation to the previous quarter. In the 1Q03, these losses amounted to R$67.9 million.

In the 1Q03, there was a reversal of R$1.2 million in the provision for doubtful accounts. The Christmas Campaign, that aimed the recovery of losses, was concluded on April 25, 2003, with a recovered balance of R$22.0 million. Total amount recovered in the 1Q03 reached R$11.0 million.

Deducting the provision for doubtful accounts of R$152.5 million, Brasil Telecom's net accounts receivable totaled R$1,737.6 million at the end of March of 2003.

Table 6: Gross Accounts Receivable

Provisions for contingencies in the 1Q03 increased by R$18.7 million due to monetary correction. In the 4Q02, the provisions for contingencies registered a positive net result of R$7.5 million due to agreements related to labor lawsuits.

Other costs and operating expenses/revenues in the 1Q03 totaled a net expense of R$76.8 million.

The main reduction were (i) R$1.1 million in revenues with billing/collection for third parties, (ii) R$4.8 million in revenues with rents, (iii) R$4.8 million in expenses with lease of means.

The main increases were (i) R$6.6 million in expenses with rental of domain ranges in highways to backbone passage, (ii) R$1.0 million in expenses with FISTEL, (iii) R$1.5 million in expenses with IPTU (real estate tax), (iv) R$1.8 million in expenses with dedicated lines services.

Brasil Telecom EBITDA was R$872.2 million in the 1Q03, representing a growth of 18.2% in relation to the 1Q02.

Brasil Telecom's EBITDA margin in the 1Q03 reached 46.5%, reflecting the 14.3% growth in net revenue, in conjunction with the 11.2% increase in cash cost, in relation to the amounts registered in the 1Q02.

EBITDA/Average LIS/month reached R$30.5, 8.5% higher than the amount registered in the 1Q02.

Financial revenue in local currency in the 1Q03 was R$72.8 million, resulting from the investment of cash position during the quarter.

Financial expenses in local currency reached R$238.8 million in the 1Q03, compared to R$208.1 million in the 4Q02. The R$30 million difference is related to the interest of the debentures, being R$8.0 million from the issuance of December 2002 and R$22.0 million from the debentures issued on May 2002.

The Interest on Shareholders' Equity of R$246.2 million accounted for as financial expenses in 1Q03 refer to the credits relative to the period of 2003, as approved in the Brasil Telecom S.A. Board of Directors Meeting held on January 28, 2003.

In 1Q03, Brasil Telecom amortized R$31.0 million in reconstituted goodwill from CRT acquisition (which has no impact on cash flow and on the distribution of dividends), accounted for as non-operating expenses.

Net earnings increased 115.9% in the 1Q03 in relation to the 1Q02, totaling R$138.3 million (R$0.2537/1,000 shares). Net earnings/ADR was US$0.2270 in the 1Q03.

At the end of March 2003, total consolidated debt of Brasil Telecom was R$5.0 billion, 1.7% lower than the one registered in the 4Q02.

In the 1Q03, Brasil Telecom's debt had an average cost of 20.8% p.a., equal to 79.2% of the CDI (interbank rate), and a medium payment term of approximately 27 months.

Net debt totaled R$3,608.2 million, a drop of 1.4% in relation to December 2002. Excluding the inter-company loan and the private debenture with Brasil Telecom Participações, the net debt at the end of March 2003 was R$2,147.7 million.

At the end of 1Q03, 85.8% of total debt was allocated in the long term, presenting the following amortization schedule:

In March 2003, the dollar denominated debt totaled R$338.7 million (R$337.9 million net of hedge). As a percentage of total debt, dollar denominated debt accounted for 6.8% against 7.1% at the end of 2002.

Brasil Telecom had hedge for 37.4% of the indebtedness in dollar, being all debt maturing until December 2004 hedged against exchange variations.

On March 31, 2003 Brasil Telecom's financial leverage ratio, represented by net debt (excluding the debt with the parent company)/ shareholders' equity, was 31.4%.

Brasil Telecom invested R$441.4 million in the 1Q03, 45.7% below the amount registered in the 4Q02.

In the last 12 months, Brasil Telecom invested R$296.4 million in data network and R$346.0 million in information technology, leading to the implementation of its strategy related to the corporate market: to be the reference in the provision of telecommunications integrated solutions.

The operations of Brasil Telecom generated R$693.9 million in the 1Q03. The Cash Flow from Investments of R$425.7 million combined with the negative flow of R$302.6 million from Financing Activities consumed a cash flow of R$728.3 million.

Brasil Telecom generated a free cash flow (operating activities - investment activities) of R$268.2 million in the 1Q03.

On February 06, 2003, Anatel approved the readjustment of fixed-mobile tariffs, which became effective on February 8, 2003. The difference between this readjustment and those of previous years was the approval of differentiated tariffs for VC-1 depending on the mobile carrier called.

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Financial Statements and Management Report referent to 2002;

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Management Proposal related to the allocation of the Net Profit of the Year, realization of the Profit Reserves, constitution of the Legal Reserve and the Distribution of Dividends and Interest on Shareholders' Equity, referent to the year of 2002, as well as the allocation of the Profit Reserves

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Election of title members and alternates in the Fiscal Board;

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Election of title members and the alternate members of the Board of Directors to complement the mandate.

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Establishment of global remuneration of the Administrators and of the members of Fiscal Board;

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Amend article 5 of the Corporate Bylaw, to reflect the new amount of the Capital Stock and the number of shares of the Company, as a result of the capital increase approved in 2003.

In a meeting held on April 11, 2003, the Board of Directors of Brasil Telecom S.A. approved a Preferred Shares Buyback Program, to be kept in treasury or for posterior alienation or canceling. According to the program, the Company may acquire 18,078,192,282 preferred shares, accounting for 10% of the total preferred shares in circulation, for a three months period, beginning on April 14, 2003. On April 10, 2003, Brasil Telecom S.A. had 5,175,010,503 preferred shares in treasury.

The amortization of 12/60 of the goodwill resulting from the acquisition/merger of CRT in the fiscal year of 2002 consolidated a fiscal benefit of R$64.4 million. The preemptive right predicted in article 171 of Law 6,404/76 was assured with the issuance of 6,032,919,747 common shares. The issuance and subscription price was R$10.67 per lot of 1,000 common shares and the term for the preemptive right extended from March 18, 2003 to April 16, 2003.

Brasil Telecom's e-learning program won the 2003 Brazil e-learning Award (Prêmio e-Learning Brasil 2003), promoted by the São Paulo Association for Human Resource Management (Associação Paulista de Administração de Recursos Humanos - APARH), affiliated to the National Human Resource Association (Associação Nacional de Recursos Humanos - ABRH), and by Micropower, an e-learning technological solution provider.

This is the most important award in the e-learning area and brings together the main cases of the Country, by evaluating it from the structure to the results achieved.

In 2002, the Programa e-ducação offered to Brasil Telecom's employees around 60 online courses, among which can be highlighted: english, information technology and basic telecommunication principles, besides training users of systems under implementation, such as SAP, Peoplesoft and CRM. The courses, which were offered through the Portal e-ducação, correspond to 16% of the total training programs offered by the Company.

Brasil Telecom launched in April 2003, the Fale.com service, which enables the users of dial up Internet access to surf and answer calls simultaneously. Whenever the user is surfing and receives a call, a message appears on the screen of the computer informing the user that there is a call. Based on the message, the customer can choose one of the following options:

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To keep the connection and answer the call through the Microsoft Netmeeting program;

This document contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. 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.