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GRI 1.1; 1.2; 2.2; 2.3; IO7; IO8; SO8; SO8; PR9
Algar Telecom has adopted its own management model, named Network Company, since 1990. Under this model, the Company is structured as a series of small internal units called Results Centers. Each has its own goals and budget, and contributes to the execution of the Company’s strategic plan. The Executive Board, in turn, manages the Results Centers strategically by aligning them with the goals set jointly with the Board of Directors.
The Network Company concept requires a democratic corporate culture, in which everyone is prepared to give suggestions, receive criticisms and, above all, learn. This is because the main feature of this model is participative management. At all Company levels, commitment and autonomy with responsibility are encouraged, thus allowing each associate, regardless of his or her position, to monitor and participate effectively in the decisions made by the Executive Board. Therefore, each associate feels, during his or her day-to-day activities, that he or she participates actively in the Company’s business, and this increases commitment, responsibility and dedication, and strengthens the sense of satisfaction for a job well done.
In 2011, the Network Company model served once more as a basis for the Company to continue expanding and delivering top-quality services with a distinct feature that was clearly perceived by clients, increases brand value and has a direct impact on the Company’s economic and financial performance: the way Algar Telecom interacts with its clients. The combination of a regional focus, with business adapted to the specific features and culture of each area, and the management model that allows making strategic decisions quickly results in a much greater closeness to the client.
To continue growing in its strategic markets, Algar Telecom also sets priority on undertaking sustainability initiatives, investing in its associates’ development, enhancing its corporate governance practices and disseminating its culture of innovation – fostered since the foundation of the Company, which has played a pioneering role many times in its history. Having complementary businesses is also part of the Company’s strategic planning. The synergy among the three business segments – Telecom, Business Process and Outsourcing Technology and Complementary Business – helps the Company grow in a sustainable manner and serves as a guideline for the investment policy, whose purpose is to make Algar Telecom even more competitive and better prepared to serve a large number of people.
The Company’s efficient management model was approved by Standard & Poor’s, a century-old agency providing information for the global financial market that upgraded Algar Telecom for the second straight year. Based on Algar’s cash generation, business diversification and adequate debt levels, the risk ratings agency upgraded the Company from “brA+” to “brAA-” Brazilian Scale. In 2010, the Company’s rating had been raised from “brA” to “brA+”.
The Company will be focusing on the opportunities offered by both the corporate and the retail market in coming years. There has been a sharp increase in voice and data services for medium-sized and large companies in the authorization area – which recorded 32.9% higher revenues in 2011 and are the main driver of growth for Company.
Even though the Company is allowed to offer these services throughout Brazil, Algar Telecom’s strategy has been concentrating on providing top-quality speedy data services through a modern IP network in the best areas around its backbone from a commercial perspective. The circular long-distance optical fiber network is 12,000 km long and reaches the main business and industrial areas in the States of Goiás, Minas Gerais, Rio de Janeiro, São Paulo and Paraná, in addition to the Federal District, covering a total of 51 cities and towns. It is supported by cutting-edge technology that allows delivering speedy services in a reliable manner, which is of utmost importance for the corporate segment.
Another distinct feature that enables the Company to offer top-quality speedy services is the regional offices, which focus on client relationships. Being closer to clients, field agents assess the real needs of the companies that they serve, serving as consultants, before offering a customized package of solutions that may include voice, data, Internet access and even IT services, which are delivered in conjunction with Algar Tecnologia.
In the retail segment, Algar Telecom’s main strategic focus for the coming years is Expansão Minas, the name adopted for the expansion of Band H in the Company’s traditional operating area. Band H is the last frequency band available for 3G telecom services in Brazil. Acquired at an auction held by Anatel in December 2010, Band H covers new areas in the State of Minas Gerais (area codes 34, 35 and 37) adjacent to the Company’s operating area, in which Algar was already authorized to provide voice and data services.
In order to enter the new areas – in which four other global players are also present now – Algar Telecom developed its work plans based on their closeness and on the cost-benefit ratio, considering price, quality and service. The Company’s value proposition is not only to expand geographically, but also operate in clusters. In other words, this means valuing the culture and industry aspects of the area that it knows so well; after all, the Company has strong ties with the State of Minas Gerais, by means of a close relationship with its clients and the communities in which it is present. In order to highlight this attitude, the slogan of Expansão Minas is “Orgulhosamente Daqui” (Proudly from Here).
Pioneering technology initiatives are one of the key pillars of Expansão Minas. Following a global trend, the Company has adopted the HSPA+ technology, an evolution of the 3G standard that allows connections of up to 84 megabits per second. It is a cutting-edge technology based on an infrastructure built around sustainable principles. The innovative technologies employed in the infrastructure and equipment of the 79 sites are going to consume 30% less power when compared with the sites currently used in the structures. These savings are related to Grupo Algar’s strategy of investing continuously in improvements to reduce the environmental impact of its activities.
Establishing regional offices – even in small towns – is another policy that gives Algar Telecom a competitive edge and provides a superior experience for clients. The facilities and excellent service make it easier to build closer and more lasting relationships with clients. In line with the sustainable vision of Grupo Algar as a whole, hiring local talents is an integral part of the expansion plans.
In 2011, R$ 47 million was invested in Expansão Minas to buy the Band H license, purchase equipment, install the HSPA+ technology-based network and adapt the infrastructure. Once the operational and staff challenges – which involved hiring 37 new associates as well as associates and partners’ attending a total of 560 class/hours at UniAlgar in a single month – had been overcome, Algar arrived at nineteen towns in November 2011: Patrocínio, Monte Carmelo, São Gotardo, Coromandel, Araxá, Sacramento, Ibiá, Perdizes, Divinópolis, Itaúna, Bom Despacho, Santo Antônio do Monte, Cláudio, Pompéu, Itapecerica, Carmo do Cajuru, Oliveira, Araguari and Abaeté. The packages offered at competitive prices and by means of active sales include combinations between Internet access, fixed-line and mobile phone services, and pay television.
Telecom
The Telecom segment comprises (fixed-line and mobile) phone services, broadband Internet access, data communication, Internet and pay television.
Fixed-Line Phone Services – local calls, domestic and international long-distance phone calls (with Carrier Selection Code (CSC) 12), public and Voice over Internet Protocol (VoIP) phone services.
Mobile Phone Services – pre-paid, post-paid and third generation (3G) plans, with video call and Internet access services.
Broadband – (Type I and Type II) ADSL, HFC and GPON access, with maximum speed of 1 gb per second, and 3G mobile broadband services, which Algar Telecom was the first to offer in its operating area. In late 2011, the Company added to its portfolio Ultra Broadband Internet access plans able to transmit data at up to 100 Mbps per second through Hybrid Fiber-Coaxial (HFC) cable and GPON networks.
Data Communication – high-speed data for small, medium-sized and large companies are offered through a modern IP network.
Pay Television – satellite TV plans, covering 103 cities and towns in the operating area in 2011, and cable TV plans through a 930-km network in Araguari and Uberlândia, State of Minas Gerais. In 2011, the Company launched packages with HDTV resolution.
Concession
Algar Telecom complies with the local, state and federal legislation governing the construction and implementation of antennas by consulting with Anatel, Comar (Regional Air Command) and other competent bodies. The Company prioritizes sharing antennas with other companies, as well as adapting the structures it already has.
The Company has an inventory of all its physical structures, such as antennas, towers and buildings – also informing which of them are shared with other carriers and/or installations (rentals). At the close of 2011, 65% of the 350 physical structures were shared. Algar Telecom’s goal is to share 100% of its installations by 2012. The unfinished inventory showed that figure to be 54% by the time this report was concluded.
Algar Tecnologia
In the corporate market since 1998, Algar Tecnologia provides technology solutions for business processes through Business Process Outsourcing (BPO), Information Technology (IT) and Consulting Services. Its diversified client based includes 200 companies from the health care, financial, education, manufacturing, utility, media and entertainment industries, in addition to the government. Its parent company and original source of its business expertise, Algar Telecom, is one of the main clients even though it accounts about no more than 12% of the total client base.
The Business process outsourcing segment employs almost 9,000 associates in collection (focusing on receivable recovery), customer services, phone sales, back-office services and Client Experience Management (CEM). In the IT segment, the Company offers infrastructure services from three strategically located data centers – two in Uberlândia, State of Minas Gerais, and one in Campinas, State of São Paulo – that serve clients throughout Brazil and abroad, in addition to the managed services, consisting of a service desk, IT asset management and a software factory. Consulting Services develops customized projects according to the client’s needs.
Engeset – Engenharia de Redes e Telecomunicações
Founded in 1991, Engeset provides consulting services, develops projects and installs and maintains telecom networks. The company has installed over 20,000 km of optical fiber networks and is currently in charge of maintenance works on 23,000 km. It has 23 business units throughout Brazil in the Cities of São Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Campinas, Recife, Fortaleza, Brasília, Macaé, Goiânia, Curitiba, Porto Alegre, Uberlândia, Uberaba and Franca.
Algar Mídia – Soluções Transmídia
Created 42 years ago, Algar Mídia offers transmedia solutions designed to meet the needs of a changing market. It currently produces and markets the Sabe phone directory, Sei and Netsabe guides, the Correio de Uberlândia newspaper, in print and online versions, and the Tudo Já newspaper. Its new business, Rede Alooh, resulted from a strategy of allocating part of the investments to digital media.
Rede Alooh, an Out-of-Home Digital Media solution, was created in 2011 and is present in eight cities. As early as its first year, it hit the mark of 600 monitors installed in supermarkets, bus terminals, gyms, lottery retailers, clinics and hospitals, reaching 500,000 people per day. Also on the digital media front, Netsabe is one of the largest business information portals in Brazil. It was upgraded in 2011 so that it is now more user-friendly and offers advertisers more benefits and opportunities.
In keeping with the best corporate governance practices and Grupo Algar’s guidelines, Algar Telecom has a Risk Audit and Management Committee to manage the process of identifying, assessing and rating the different risks inherent to the Company’s business operations, in addition to deliberating on the action plans to mitigate them.
In general lines, the model is based on the Enterprise Risk Management (ERM) methodology, adopted by the Committee of Sponsoring Organizations (COSO), a global organization that establishes and disseminates the best business practices.
After strategic risks in the field of Telecom were mapped in 2010, the focus shifted to mapping internal controls and introducing action plans (programs, projects and subprojects) in 2011 to enhance risk management. In parallel, risk identification started at Algar Tecnologia.
In 2012, our goal is to finish identifying Key Performance Indicators (KPIs) to manage all strategic risks and mapping operational risks in all areas, an effort that involves enhancing the risk management culture in all Algar Telecom’s subsidiaries.
The Company has an Information Security Team dedicate to fighting fraud. No corruption cases were found between 2005 and 2011.
Network Company
Algar Telecom has adopted its own management model, named Network Company, since 1990. Under this model, the Company is structured as a series of small internal units called Results Centers. Each has its own goals and budget, and contributes to the execution of the Company’s strategic plan. The Executive Board, in turn, manages the Results Centers strategically by aligning them with the goals set jointly with the Board of Directors.
The Network Company concept requires a democratic corporate culture, in which everyone is prepared to give suggestions, receive criticisms and, above all, learn. This is because the main feature of this model is participative management. At all Company levels, commitment and autonomy with responsibility are encouraged, thus allowing each associate, regardless of his or her position, to monitor and participate effectively in the decisions made by the Executive Board. Therefore, each associate feels, during his or her day-to-day activities, that he or she participates actively in the Company’s business, and this increases commitment, responsibility and dedication, and strengthens the sense of satisfaction for a job well done.
In 2011, the Network Company model served once more as a basis for the Company to continue expanding and delivering top-quality services with a distinct feature that was clearly perceived by clients, increases brand value and has a direct impact on the Company’s economic and financial performance: the way Algar Telecom interacts with its clients. The combination of a regional focus, with business adapted to the specific features and culture of each area, and the management model that allows making strategic decisions quickly results in a much greater closeness to the client.
To continue growing in its strategic markets, Algar Telecom also sets priority on undertaking sustainability initiatives, investing in its associates’ development, enhancing its corporate governance practices and disseminating its culture of innovation – fostered since the foundation of the Company, which has played a pioneering role many times in its history. Having complementary businesses is also part of the Company’s strategic planning. The synergy among the three business segments – Telecom, Business Process and Outsourcing Technology and Complementary Business – helps the Company grow in a sustainable manner and serves as a guideline for the investment policy, whose purpose is to make Algar Telecom even more competitive and better prepared to serve a large number of people.
The Company’s efficient management model was approved by Standard & Poor’s, a century-old agency providing information for the global financial market that upgraded Algar Telecom for the second straight year. Based on Algar’s cash generation, business diversification and adequate debt levels, the risk ratings agency upgraded the Company from “brA+” to “brAA-” Brazilian Scale. In 2010, the Company’s rating had been raised from “brA” to “brA+”.
Growth Strategies
The Company will be focusing on the opportunities offered by both the corporate and the retail market in coming years. There has been a sharp increase in voice and data services for medium-sized and large companies in the authorization area – which recorded 32.9% higher revenues in 2011 and are the main driver of growth for Company.
Even though the Company is allowed to offer these services throughout Brazil, Algar Telecom’s strategy has been concentrating on providing top-quality speedy data services through a modern IP network in the best areas around its backbone from a commercial perspective. The circular long-distance optical fiber network is 12,000 km long and reaches the main business and industrial areas in the States of Goiás, Minas Gerais, Rio de Janeiro, São Paulo and Paraná, in addition to the Federal District, covering a total of 51 cities and towns. It is supported by cutting-edge technology that allows delivering speedy services in a reliable manner, which is of utmost importance for the corporate segment.
Another distinct feature that enables the Company to offer top-quality speedy services is the regional offices, which focus on client relationships. Being closer to clients, field agents assess the real needs of the companies that they serve, serving as consultants, before offering a customized package of solutions that may include voice, data, Internet access and even IT services, which are delivered in conjunction with Algar Tecnologia.
In the retail segment, Algar Telecom’s main strategic focus for the coming years is Expansão Minas, the name adopted for the expansion of Band H in the Company’s traditional operating area. Band H is the last frequency band available for 3G telecom services in Brazil. Acquired at an auction held by Anatel in December 2010, Band H covers new areas in the State of Minas Gerais (area codes 34, 35 and 37) adjacent to the Company’s operating area, in which Algar was already authorized to provide voice and data services.
In order to enter the new areas – in which four other global players are also present now – Algar Telecom developed its work plans based on their closeness and on the cost-benefit ratio, considering price, quality and service. The Company’s value proposition is not only to expand geographically, but also operate in clusters. In other words, this means valuing the culture and industry aspects of the area that it knows so well; after all, the Company has strong ties with the State of Minas Gerais, by means of a close relationship with its clients and the communities in which it is present. In order to highlight this attitude, the slogan of Expansão Minas is “Orgulhosamente Daqui” (Proudly from Here).
Pioneering technology initiatives are one of the key pillars of Expansão Minas. Following a global trend, the Company has adopted the HSPA+ technology, an evolution of the 3G standard that allows connections of up to 84 megabits per second. It is a cutting-edge technology based on an infrastructure built around sustainable principles. The innovative technologies employed in the infrastructure and equipment of the 79 sites are going to consume 30% less power when compared with the sites currently used in the structures. These savings are related to Grupo Algar’s strategy of investing continuously in improvements to reduce the environmental impact of its activities.
Establishing regional offices – even in small towns – is another policy that gives Algar Telecom a competitive edge and provides a superior experience for clients. The facilities and excellent service make it easier to build closer and more lasting relationships with clients. In line with the sustainable vision of Grupo Algar as a whole, hiring local talents is an integral part of the expansion plans.
In 2011, R$ 47 million was invested in Expansão Minas to buy the Band H license, purchase equipment, install the HSPA+ technology-based network and adapt the infrastructure. Once the operational and staff challenges – which involved hiring 37 new associates as well as associates and partners’ attending a total of 560 class/hours at UniAlgar in a single month – had been overcome, Algar arrived at nineteen towns in November 2011: Patrocínio, Monte Carmelo, São Gotardo, Coromandel, Araxá, Sacramento, Ibiá, Perdizes, Divinópolis, Itaúna, Bom Despacho, Santo Antônio do Monte, Cláudio, Pompéu, Itapecerica, Carmo do Cajuru, Oliveira, Araguari and Abaeté. The packages offered at competitive prices and by means of active sales include combinations between Internet access, fixed-line and mobile phone services, and pay television.
Business Segment
Telecom
The Telecom segment comprises (fixed-line and mobile) phone services, broadband Internet access, data communication, Internet and pay television.
Products and Services
Fixed-Line Phone Services – local calls, domestic and international long-distance phone calls (with Carrier Selection Code (CSC) 12), public and Voice over Internet Protocol (VoIP) phone services.
Mobile Phone Services – pre-paid, post-paid and third generation (3G) plans, with video call and Internet access services.
Broadband – (Type I and Type II) ADSL, HFC and GPON access, with maximum speed of 1 gb per second, and 3G mobile broadband services, which Algar Telecom was the first to offer in its operating area. In late 2011, the Company added to its portfolio Ultra Broadband Internet access plans able to transmit data at up to 100 Mbps per second through Hybrid Fiber-Coaxial (HFC) cable and GPON networks.
Data Communication – high-speed data for small, medium-sized and large companies are offered through a modern IP network.
Pay Television – satellite TV plans, covering 103 cities and towns in the operating area in 2011, and cable TV plans through a 930-km network in Araguari and Uberlândia, State of Minas Gerais. In 2011, the Company launched packages with HDTV resolution.
Business Operations
Concession
- Operating since 1954.
- 87 cities and towns in the States of Minas Gerais, São Paulo, Goiás and Mato Grosso do Sul.
- An area with 2.9 million inhabitants and per capita consumption 13% higher than the national average.
- Services: fixed-line and mobile phone, broadband Internet access, Internet provider (DTH and cable) and pay television services, in addition to domestic and international long-distance calls with CSC 12.
- Services for the residential and corporate markets.
Authorization
- In 2003, Algar Telecom was authorized by Anatel to offer fixed-line phone and data services throughout Brazil.
- Currently present in 51 cities and towns in the States of São Paulo, Rio de Janeiro, Minas Gerais, Goiás and Paraná, as well as in the Federal District.
- Services: voice, data and IT solutions.
- Services for small, medium-sized and large companies.
Expansão Minas
- Entry into 19 cities and towns in 2011.
- Places in area codes 34, 35 and 37 in areas adjacent to the Company’s operating area.
- Services: fixed-line phone and 3G mobile phone services, broadband Internet access and pay television.
- Services for the residential market .
Backbone
A 12,000-km long circular long-distance optical fiber network reaching major cities in the States of Goiás, Minas Gerais, Rio de Janeiro, São Paulo and Paraná, in addition to Brasilia, in the Federal District The Southeast Region, in which most of the network is, accounts for 55% of Brazil’s GDP.
NAP of the Americas
Since 2010, the Company has had an international point of presence (POP) at the NAP of the Americas, appointed to connect Brazil to the rest of the world.
Algar Telecom complies with the local, state and federal legislation governing the construction and implementation of antennas by consulting with Anatel, Comar (Regional Air Command) and other competent bodies. The Company prioritizes sharing antennas with other companies, as well as adapting the structures it already has.
The Company has an inventory of all its physical structures, such as antennas, towers and buildings – also informing which of them are shared with other carriers and/or installations (rentals). At the close of 2011, 65% of the 350 physical structures were shared. Algar Telecom’s goal is to share 100% of its installations by 2012. The unfinished inventory showed that figure to be 54% by the time this report was concluded.
Business Process and Technology Outsourcing Services
Algar Tecnologia
In the corporate market since 1998, Algar Tecnologia provides technology solutions for business processes through Business Process Outsourcing (BPO), Information Technology (IT) and Consulting Services. Its diversified client based includes 200 companies from the health care, financial, education, manufacturing, utility, media and entertainment industries, in addition to the government. Its parent company and original source of its business expertise, Algar Telecom, is one of the main clients even though it accounts about no more than 12% of the total client base.
The Business process outsourcing segment employs almost 9,000 associates in collection (focusing on receivable recovery), customer services, phone sales, back-office services and Client Experience Management (CEM). In the IT segment, the Company offers infrastructure services from three strategically located data centers – two in Uberlândia, State of Minas Gerais, and one in Campinas, State of São Paulo – that serve clients throughout Brazil and abroad, in addition to the managed services, consisting of a service desk, IT asset management and a software factory. Consulting Services develops customized projects according to the client’s needs.
Complementary Businesses
Engeset – Engenharia de Redes e Telecomunicações
Founded in 1991, Engeset provides consulting services, develops projects and installs and maintains telecom networks. The company has installed over 20,000 km of optical fiber networks and is currently in charge of maintenance works on 23,000 km. It has 23 business units throughout Brazil in the Cities of São Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Campinas, Recife, Fortaleza, Brasília, Macaé, Goiânia, Curitiba, Porto Alegre, Uberlândia, Uberaba and Franca.
Algar Mídia – Soluções Transmídia
Created 42 years ago, Algar Mídia offers transmedia solutions designed to meet the needs of a changing market. It currently produces and markets the Sabe phone directory, Sei and Netsabe guides, the Correio de Uberlândia newspaper, in print and online versions, and the Tudo Já newspaper. Its new business, Rede Alooh, resulted from a strategy of allocating part of the investments to digital media.
Rede Alooh, an Out-of-Home Digital Media solution, was created in 2011 and is present in eight cities. As early as its first year, it hit the mark of 600 monitors installed in supermarkets, bus terminals, gyms, lottery retailers, clinics and hospitals, reaching 500,000 people per day. Also on the digital media front, Netsabe is one of the largest business information portals in Brazil. It was upgraded in 2011 so that it is now more user-friendly and offers advertisers more benefits and opportunities.
Risk Management
In keeping with the best corporate governance practices and Grupo Algar’s guidelines, Algar Telecom has a Risk Audit and Management Committee to manage the process of identifying, assessing and rating the different risks inherent to the Company’s business operations, in addition to deliberating on the action plans to mitigate them.
In general lines, the model is based on the Enterprise Risk Management (ERM) methodology, adopted by the Committee of Sponsoring Organizations (COSO), a global organization that establishes and disseminates the best business practices.
After strategic risks in the field of Telecom were mapped in 2010, the focus shifted to mapping internal controls and introducing action plans (programs, projects and subprojects) in 2011 to enhance risk management. In parallel, risk identification started at Algar Tecnologia.
In 2012, our goal is to finish identifying Key Performance Indicators (KPIs) to manage all strategic risks and mapping operational risks in all areas, an effort that involves enhancing the risk management culture in all Algar Telecom’s subsidiaries.
The Company has an Information Security Team dedicate to fighting fraud. No corruption cases were found between 2005 and 2011.