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BUSINESS GROWTH WITH CUSTOMER EXPERIENCE

SUSTAINABILITY REPORT 2 017 Algar Telecom - Sustainability Report 2017 1 Contents

03 Message from the Management Social and environmental 05 Purpose and vision, mission and values 48 management 06 Highlights of 2017 49 Sustainable commitment 50 Social performance Algar 52 Environmental performance 09 Telecom 10 Corporate profile 19 Growth strategy Performance 27 Corporate governance 57 in 2017 32 Compliance and risk management 58 Operating performance 60 Economic and financial performance Our 36 People 37 People management Outlook 39 Attraction and engagement for 2018 43 Health and safety 67 68 Vision of the future

Our 44 Network 69 About the report 72 GRI remissive index 45 Relationship with customers 75 Supplementary GRI indicators 47 Relationship with suppliers 78 Credits Algar Telecom - Sustainability Report 2017 2 We posted record results at Algar Telecom in 2017, in spite of economic instability in . Gross MESSAGE FROM revenue totaled $3,557 billion, 7.3% higher than in 2016. Our net profit of R$229.6 million was 25.1% more than in the previous year. These figures show that our strategy – which has been widely THE MANAGEMENT disseminated within the Company, and is based on principles well known to our employees – has enabled all of us to work together and to make an active contribution to achieving our objectives. GRI 102-14 | 102-10 The results show that the Company has continued to expand its corporate customer base, as planned – we started operating in 24 new locations in 2017 – and to add to the range of products and services offered, so that we can meet our customers’ needs for and ICT services. For our personal customers we seek to offer convergent products that will boost customer satisfaction and loyalty. We have therefore invested in expanding the capacity of our 4G networks on the 700 MHz and 1,800 MHz frequencies, and in some regions we are already providing 4.5G technology. We have increased our ultra-broadband coverage, and it now accounts for 46% of the fixed broadband base for B2C customers.

We focus on quality and relationships to provide the best possible experience for our customers, and as part of this effort we introduced new customer service systems in 2017, including Customer Experience Management (CEM), which is based on artificial and cognitive intelligence. We were once again recognized as a benchmark for customer service by the ReclameAQUI portal during the year, proving that our relationship model is head and shoulders above the others in the sector. We also got top marks in the National Telecommunications Agency (Anatel) survey of customer satisfaction, which measures the Service Performance Index (IDA).

Algar Telecom - Sustainability Report 2017 3 We made good headway with our Digital Transformation We ended 2017 with the same level of leverage (the net debt/ Program in 2017. It is aimed at increasing operating efficiency EBITDA ratio) as in the previous year in spite of the additional and improving customer experience. We are committed funding, thanks to a 9.9% increase in EBITDA. It is also notable to innovation and to increased technological automation, that Standard & Poor’s left our credit rating unchanged, with the and this enables us to offer speedy service of the highest outlook improving from “negative” to “stable”. quality, backed by a first-class network and on an increasingly substantial scale. There were important changes in corporate governance during the year. Our preferred shares were converted into We continue to aim for sustainable growth, and for the fifth common shares, independent members were elected to our year in a row we have headed the ranking of benchmark Board, and a Strategy and Innovation Committee was set companies in Brazil published by Exame magazine, the Exame up. In relation to committees, the Strategy and Innovation magazine Telecom Sustainability Guide. This is an important Committee took office. At the end of the year, the GIC - rating, and it confirms that our sustainable business model Singapore’s sovereign fund - signed an investment agreement is effective. As part of our commitment, we have become to acquire a stake in Algar Telecom, which means its share of signatory to the United Nations Global Compact Local total capital will be about 25%. Jean Carlos Borges Luiz Alexandre Garcia Network in Brazil – this is one of the major initiatives for Chief Executive Officer, Chair of the Board of engaging the private sector in sustainability. We see 2018 as a year of further challenges and opportunities. Algar Telecom Directors, Algar Telecom As the Monet submarine cable connecting São Paulo to Florida Another highlight of 2017 was the award of the Época 360o Prize, is completed and it also links Fortaleza to these two points, for the fifth consecutive year, as the best managed telecom we will focus on extending our geographical frontiers to company. These results make us confident that we are supplying the northeastern region of Brazil. At the same time we shall products and services of quality and excellence, and reinforce continue to focus on the efficiency of our business, offering top our company motto: People serving People. quality, differentiated products, as well as on maintaining a close relationship with our customers, motivating our employees and In the area of finance we successfully closed our sixth issue of achieving digital innovation and transformation. These issues are debentures, which raised R$432 million. The book totaled more of the utmost importance if we are to continue to abide by our than R$1 billion – three times the original amount of the offering. company motto: “People serving People”.

Algar Telecom - Sustainability Report 2017 Message from the Management 4 PURPOSE AND VISION, Purpose and Vision MISSION AND VALUES People serving People GRI 102-16 Mission

To serve and integrate people and businesses sustainably

Values

The customer, our reason for existing* Acting with integrity Developing and recognizing talents Being entrepreneurs Being committed to sustainability

(*)A quote from the Founder of the Algar group, Comendator Alexandrino Garcia.

Algar Telecom - Sustainability Report 2017 5 HIGHLIGHTS OF 2017

GRI 102-7

Algar Tech, the subsidiary responsible for the Tech/ Gross revenue from BPO/IT Management segment, is recognized by EBITDA margin Telecom increase 8.0%, The number of B2C Launch of 4.5G Frost & Sullivan as the most innovative company in reaches 38.0% in the including 6.6% in B2B, broadband customers technology for competitive Contact Center strategy, ranked by Valor Telecom segment thanks to an 8.8% rise in with speeds higher than mobile telephony Innovation as one of the most innovative in the and 28.7% for the corporate customers 10 Mbps reaches 46% of for some 45% technology sector, and elected by Exame magazine as consolidated figures. and 8.1% in B2C. the total. of users. one of the 50 largest in the digital world.

Completion of installation of some 11,000 km of submarine cable connecting the cities of Praia Grande Broadening of (SP) and Fortaleza (CE) with Boca Raton (Florida, USA). Algar Telecom is awarded the ANEFAC/FIPECAFI/ the SME small The cable, which is planned to start operating in the first Algar Telecom SERASA Transparency Trophy. Also, for the fifth company market quarter of 2018, will help us expand our services to the becomes a signatory consecutive year, elected the most sustainable company customer base north-east of the country, as well as reducing leasing costs to the UN Global in the telecommunications sector by the Exame outside the for international connections. Compact. magazine Sustainability Guide. concession area.

Algar Telecom - Sustainability Report 2017 6 Operational data - B2B (units) 2 0131 2 0141 2 015 2 016 2 017 Δ 2016/2017 Number of customers N/A N/A 100,015 108,686 95,377 (12.2%) Corporate N/A N/A 7,884 10,000 10 , 919 9.2% SME N/A N/A 92,131 98,686 84,4582 (14.4%)

1 In 2013 and 2014, the Company adopted different segmenting criteria so the numbers are not directly comparable. 2 The number of SME customers fell from 2016 to 2017. This was due to 23,724 customers being reallocated as from January 2017, when B2C started to serve them. The purpose of this move was to provide a customer service channel more suitable to these customers’ profiles and needs.

B2C operating data (thousands of units) 2 013 2 014 2 015 2 016 2 017 Δ 2016/2017 Revenue-generating units 1, 771 1,968 2,098 2,188 2,267 3.6% Fixed broadband 307 322 356 389 436 12.1% Up to 10 MB 292 263 248 240 236 (1.7%) More than 10 MB 15 59 10 9 14 9 200 34.2% Fixed telephony 499 485 492 507 535 5.5% Mobile telephony 836 1,050 1,15 4 1,204 1,206 0.2% Post-paid accounts 16 3 206 235 285 302 6.0% Pre-paid accounts 672 844 919 919 904 (1.6%) Pay TV 13 0 111 96 88 90 2.3% ARPU cell phones (R$) 26.8 25.1 22.5 21. 2 21. 5 1.6%

Algar Telecom - Sustainability Report 2017 Highlights of 2017 7 Consolidated financial 2 013 2 014 2 015 2 016 2 017 Δ 2016/2017 indicators (R$ million) Gross revenue 2,458 2,850 3,092 3,314 3,557 7.3% Net revenue 1,902 2,238 2,418 2,545 2,716 6.7% Consolidated EBITDA 477 543 642 710 780 9.9% EBITDA margin % 25% 24% 27% 28% 29% 1 p.p. EBITDA Telecom 400 450 537 634 717 13.1% EBITDA margin % 28% 30% 33% 36% 38% 2.4 p.p. EBITDA Tech - BPO/IT Management 76 93 10 5 76 63 (17.1%) EBITDA margin % 13 % 12 % 13 % 9% 7% (2 p.p.) Net income 13 8 14 2 15 4 18 4 230 25.0% Net margin % 7% 6% 6% 7% 8% 1 p. p. Investments3 3 71 572 501 508 542 6.7% Net debt4 882 1,118 1,18 2 1,263 1,401 10.9% Net debt/EBITDA (times) 1. 8 2.1 1. 8 1. 8 1. 8 -

3 The amount of investments in the Tech - BPO/ IT Management Segment for 2016 has been restated. 4 Net debt is calculated on the basis of the following balances: R$7.1 million in 2015, R$7.6 million in 2016 and R$5.9 million in 2017 for the purchase of Optitel (registered in the accounts “Notes payable – current liabilities” and “Other obligations – non-current liabilities”) and, in 2017, the balance of R$41.6 million on the account “Liability for purchase of a corporate interest”.

Corporate indicators 2 013 2 014 2 015 2 016 2 017 Δ 2016/2017 Associates (employees) 13 , 813 17,573 16,187 16 ,115 15,646 (2.9%) Men 6,316 8,955 8,371 8,616 8,557 (0.7%) Women 7,497 8,618 7, 816 7,499 6,966 (7.1%) Training hours (thousands) 761 690 865 1,045 838 (19.8%) Average training hours 11 39 53 65 54 (16.9%)

2 013 2 014 2 015 2 016 2 017 Δ 2016/2017 Environmental indicators (tCO2e) Greenhouse gas emissions - direct - scope 16 3,146 3,840 4 ,115 4,961* 5,930 19.5% Greenhouse gas emissions - indirect - scope 27 8,321 12,008 11,302 7,214* 8,061 11.7% Total biogenic emissions 2,740 5,635 6,459 5,509* 5,430 (1.4%)

6 Figures corrected during an audit after the publication of the 2016 Sustainability Report. 7 Refers to the following greenhouse gases (GHGs) regulated under the Kyoto Protocol: CO2, CH4, N2O and the family of hydro fluorocarbons (HFCs).

Algar Telecom - Sustainability Report 2017 Highlights of 2017 8 Algar Telecom

Having been in the market for over 60 years, we have a modern infrastructure supported by a network of approximately 48,500 km of optic fiber

Algar Telecom - Sustainability Report 2017 9 CORPORATE Algar Telecom is a Brazilian company handling telecommunications and services to corporate PROFILE customers (business-to-business or B2B) – from small and micro companies to major corporations – and retail (business-to-consumer or B2C). We are an unlisted publicly-held GRI 102-1 | 102-2 | 102-4 | 102-5 | 102-6 | 102-10 company based in Uberlândia (MG), operating throughout Brazil. We also provide BPO and IT Management services in three other Latin American countries: Argentina, Colombia and . With over 60 years in the market, we have a modern infrastructure, supported by a network of Share of consolidated gross revenue approximately 48,500 km of optic fiber.

Our Telecom services cover a wide range of data, voice and IT solutions for corporate 55% customers. We offer packages combining fixed and mobile phone services, fixed and mobile 27% 45% broadband internet and pay TV in the retail market. Apart from the Telecom segment, we 73% also operate in the Tech segment (solutions for Business Process Outsourcing – BPO and IT Environment Management). The Telecom and Tech segments accounted for 73% and 27% of our gross revenue in 2017, respectively.

We have 15,646 employees who are committed to maintaining close relations with our customers and to supplying high quality service, with sustainable, innovative products. We are a member of the Algar group, which also operates in the tourism, service and agribusiness sectors and whose business philosophy is “People serving People”, a proposal which connects people Telecom B2C and businesses in close, lasting relationships. We control the operations of four subsidiaries: Tech B2B Algar Multimídia, Algar Celular, Algar TI (Algar Tech) and Algar Soluções. Details of the corporate structure are given below.

Algar Telecom - Sustainability Report 2017 Algar Telecom 10 OWNERSHIP Algar S/A STRUCTURE

92.80%

Landline Algar Telecom telephony, broadband, data and Pay TV

82.71% 100% 86.41% 100% 99.97%

17,29% 13,59% Algar Multimídia Algar Celular Algar TI Algar Soluções Algar Mídia

Data products Mobile telephony Tech – BPO/IT Management Data products News Internet provider Satellite TV 100%

IPPI network

100% 100% 100% 100% 100% 100%

Algar Tecnologia Algar Tecnologia Mexico Engeset Chile Argentina Branch Office SAS (Colombia) Branch Office Consultoria S.A. Branch Office

Algar Telecom - Sustainability Report 2017 Algar Telecom 11 OUR TRAJECTORY

1954 1960s 1970s 1980s 1990s

Our story begins in 1954, in the city of Uberlândia, , when Alexandrino Garcia founded CTBC, which is now Algar Telecom; We expanded operations to a We continued under private We expanded the We built the first fiber thousand lines in Uberlândia control, at a time when most of range of our services optic network; (MG); the telephone companies were in the interior of His idea was to facilitate being taken over by the Brazilian Brazil. We started providing pay TV; communications for people We set up an intercity service, government. living in regions which at the with 24 channels via radio; We invested in multimedia; time were considered to be remote; We absorbed the phone We started contact company of Patos de Minas (MG); center operations. As time passed, the Company grew and acquired a number We pioneered the use of of municipal concessions a microwave system in the in neighboring cities, and interior of Brazil. eventually it became a Telecom services provider covering the whole country. OUR TRAJECTORY

2000s 2010s

We added long-distance calls to our portfolio; We exported our BPO/IT Management segment to Latin America; We launched satellite TV; We received authorization to expand our fixed phone services countrywide; We introduced the H Band (3G) into 19 more cities in Minas Gerais and expanded our retail operations; We started providing internet access; We acquired Synos and Asyst; We launched our Big Data offer; We started offering data center services; We entered into a contract to build a submarine cable; We purchased a metropolitan network in the city of São Paulo (SP); We purchased the 700 MHz frequency to provide 4G/LTE services; We renewed our concession agreements for a further 20 years; We acquired Optitel, in 2015, giving us coverage of 237 cities in three Brazilian states; In 2016, we launched a 4G service (700 MHz frequency); We purchased a 3G license and started providing services; We entered into a partnership with Nokia to be able to offer more 4G mobile services We opened our capital with the first public issue of debentures; on the 1800 MHz frequency; We started BPO/IT operations in Mexico; We changed our name from CTBC to Algar Telecom. We launched our prototype project Cidades Conectadas (“Connected Cities”), an initiative intended to foster innovations related to public services; We opened Latin America’s first data center powered entirely by solar energy, and joined the UN Global Compact; In 2017 we participated, as founding member, in the incorporation of “Brain,” a private science and technology institute; We completed laying the Monet submarine cable, and we increased our share of business in the southern region of Brazil. OPERATING Telecom Segment We are part of the everyday lives of individual consumers, small and micro enterprises (SME), SEGMENTS large corporations and Brazil’s telecommunications industry, providing safe, modern and robust integrated solutions with backup always close at hand. Our fiber optics network today GRI 102-4 | 102-6 stretches for some 48,500 km across eight states (São Paulo, Minas Gerais, , Goiás, do Sul, Paraná, and ) and the Federal District, serving a total of 336 cities.

With our modern infrastructure and the quality of our service, we have achieved a high level of customer satisfaction. We renewed 88.5% of our corporate contracts in 2017; and a two- yearly survey carried out by the consultants Expertise showed that, in 2016, 94% of our large and medium-sized B2B customers were satisfied or very satisfied with our products and services. Our retail business (B2C) shows similar results, and the ReclameAQUI website (for consumer complaints) recognized us, for the second consecutive year, as the Best Company for Consumers in the Telecom Sector, among internet, fixed phone and mobile phone services providers and servicers. In 2017, Anatel rated us as the telecom services provider with the highest Service Performance Index (IDA) in mobile and local fixed telephony and Pay TV.

Algar Telecom - Sustainability Report 2017 Algar Telecom 14 Map showing our operations Consolidated gross revenue for the Telecom segment rose to R$2,606 million in 2017, 8% higher than in 2016. The EBITDA margin was 38%, 2 p.p. up on the previous year.

Corporate customers (B2B)

Data links with dedicated IP Collocation VOIP services Videoconference Ethernet services Managed services Clear channel Virtual PABX Network security services Anti-DDoS (Distributed Denial Cloud of Service) Hosting

We provide an extensive infrastructure, built with modern technology, supported by a network of about 48,500 km of optic fiber, consisting of approximately: • 37,500 km of land cables, with capillarity and access in Brazil’s southeast, south and Midwest regions, including 17,000 km in metropolitan areas, with more than 3,300 on-net buildings;

Submarine cable – Algar Telecom • 11,000 km of submarine cable connecting the cities of Praia Grande (SP) and Fortaleza (CE) with Algar Telecom Network Commercial Offices Boca Raton (Florida, USA). Commercial Offices in 2018 Cities We have 26 regional offices; sales and advisory services operate separately, to ensure that we can keep close to our customers.

Algar Telecom - Sustainability Report 2017 Algar Telecom 15 International backbone

Our portfolio of services includes data links with dedicated IP, We are the leading service providers in 87 municipalities in VOIP and Ethernet services, clear channel, network security the states of Minas Gerais, São Paulo, Goiás and Mato Grosso do and standard technological products such as cloud, hosting, Sul, where we have been operating for more than 60 years. collocation, videoconference, managed services, virtual PABX In these cities we have a market share of 77% in fixed broadband, and Anti-DDoS (Distributed Denial of Service). 36% in pay TV and 33% in mobile telephony, according to Anatel reports issued in December 2017. Our convergent x-play B2B customers are the main focus of growth for Algar strategy, with duo-play, triple-play and quadruple-play options Telecom. As well as expanding our networks to regions with (fixed and mobile broadband, fixed and mobile telephony, pay potential for growth in corporate business, we have also TV and value added services), serves more than 1.2 million B2C invested in more intensive use of existing networks by offering customers, supported by a modern mobile network (3G, 4G products and services to smaller B2B customers, enabling us and 4.5G) on the 700 MHz, 850 MHz, 1,800 MHz and 2,100 MHz to gain scale and efficiency from better usage of the assets and frequencies. We also have an extensive fixed broadband network, structure already installed. with 436,000 customers, 46% of them using UBL services (with speeds varying from 10 Mbps to 200 Mbps), with xDSL, HFC and GPON technologies. Retail customers (B2C) Submarine Cable - Algar Telecom International Backbone Redundancy Fixed and mobile telephony Broadband internet (XDSL, 3G and 4G) Pay TV (cable and satellite)

Algar Telecom - Sustainability Report 2017 Algar Telecom 16 TECH segment – BPO/IT Management Customer Relationship Management

Our Tech – BPO (Business Process Outsourcing)/IT Management Customer service – with 7.5 thousand work stations we get Segment serves more than 4,100 cities in Latin America. In Brazil we close to our customers and modernize their daily activities, have 73 offices, three data centers and four software factories. We with multi-channel services (telephone, chat, WhatsApp, SMS, also have sales offices in Mexico, Colombia and Argentina. Telegram, email, Skype and social networks) operating 24x7. Sales – our digital strategy and analytical tools permit assertive In 2017 we took fourth place in the Valor Newspaper Innovation approaches, through intelligent use of communications Ranking, in the Technology sector; we were recognized by Frost channels, to optimize sales conversion. & Sullivan as the leading and most innovative company in Retention – we analyze customers’ past records and use competitive Contact Center strategy; and we were placed first in analytical intelligence to create strategies consistent with their customer satisfaction for business process outsourcing by the profiles and degree of satisfaction. These strategies range from Institute of Best Companies for Customer Satisfaction (Mesc) 8. problem solving to loyalty offers. Back Office – we seek to identify problems and correct the Our business is divided into three operating fronts: Customer root cause. We have control and management systems for Relationship Management, Technology Environment requests and queues, organizing processes so that they are Management and Telecom Services Management. Our handled more quickly, and digital channels to keep customers principal services are the following: informed of progress. Credit and collection – we have a dedicated portal where we can set the parameters for non-invasive negotiation, and an analytical system which segments customer mailing in accordance with record data and behavior. We use various contact channels to approach customers and attract them with offers of credit or debit renegotiation. Analytical solutions – we analyze data and deliver relevant information, simply and accessibly, using analytical platforms

8 Market research institute specializing in customer relations. Owners of the patent for the in the cloud which are a benchmark in the market. We Customer Satisfaction Pentagram® method, which uses the foremost methodologies to have a firm approach to decision-making, so as to offer our obtain customer satisfaction indices worldwide, including Net Promoter Score (NPS), ACSI and BCSI indices and the requirements of ISOs 9001, 9004 and 10002. customers the best results in sales, collections and retention.

Algar Telecom - Sustainability Report 2017 Algar Telecom 17 Digital solutions – we provide Virtual Agents and smart, life-like Audio Response Units (ARUs) that are non-invasively integrated into legacy systems to validate and supply information. We offer flexible business models resulting in significant productivity gains and a higher level of customer satisfaction and loyalty. centers and technological parks (hardware and software). We are one of Brazil’s largest fiber optics and cell phone network maintenance companies, with an intelligence center to monitor Information Technology and Communications alarms, take preventive action, analyze indicators and execute (ITC) Services Management action plans. We have a professional service team to manage and supervise projects, with solutions offering much a much Cloud services – we have three Tier III-certified data centers faster, more secure ITC environment, with enhanced availability. of our own, and we have strategic connectivity with the main Support for end users – we provide preventive maintenance, providers. We provide a stable, safe environment for storing applications and systems installation, equipment checks and mission applications. We are also a MultiCloud provider, replacements, and speedy service close at hand. assuring our customers of autonomy in using public and NOC (Network Operations Center) – our operations center private clouds belonging to themselves or third parties, with is equipped to monitor servers, applications and services, and the best technical solutions and pricing. to create models that are rapid, automatic and smart. Environment maintenance – we offer a whole range of SOC (Security Operations Center) – with a computerized, technologies for maintenance and prevention of failures, to interconnected structure, we can offer made-to-measure ensure that business applications operate 24 x 7 day. protection for customers’ businesses and applications. We Installation projects – we can provide made-to-measure have global partners and a development and innovation projects for installing optical and twisted-pair networks for center which keeps up with the latest trends in the new digital ITC. We also have options for installing or modernizing data economy era.

Algar Telecom - Sustainability Report 2017 Algar Telecom 18 Geographical expansion, more usage GROWTH of the network and new products (B2B)

STRATEGY Our strategy for growth in B2B (corporate customers) is focused on expanding our networks to regions of interest, so that we can offer our products and services in areas where there is less competition. We identify these regions by georeferencing the numbers of target customers. We also boost usage of our existing networks, so as to optimize the return on investment with scale and efficiency gains in service. We shall continue to construct backbones and metropolitan networks of high strategic value for access to new customers. With the completion of the submarine cable, we hope to access new markets, primarily in the northeastern region of the country, as well as enhancing the quality and competitiveness of our products and services.

Combined offer of ultra-broadband fixed and mobile services

We are market leaders for B2C in our region of origin and have the highest Service Performance Index (IDA) of companies in the sector, according to the Anatel ranking in 2017. Our strategy is to maximize our market penetration, optimize the usage of our network and maintain barriers to entry by our competitors, strengthening our position in the concession area. To achieve this, we are investing in updating the fixed and mobile broadband network core, so that we can offer convergent fixed UBL services (with speeds from 10 Mbps to 200 Mbps) and mobile services (using 3G, 4G and 4.5G technologies on the 700 MHz, 1,800 MHz and 2,100 MHz frequencies, supported by the capillarity of our fixed network), voice and pay TV.

Algar Telecom - Sustainability Report 2017 Algar Telecom 19 Focus on the highest return Taking advantage of the submarine on invested capital cable to open up new markets and cut costs We have effective processes for enhancing our business efficiency and our customer relations. Our aim is to blaze a trail We are going to extend our fiber optic network to the northeast in the digital transformation of our customer relations and to regions of the country with the submarine cable coming on be a benchmark in technology management, providing the best stream (it has 12 Tbps per pair of fibers on the basis of current possible experience for end users, more efficient processes and technology), connecting Praia Grande (SP) and Fortaleza (CE) with a good return on invested capital. The key initiatives currently in Boca Raton (Florida, USA). It will enable us to access new B2B progress include: (a) sales efficiency; (b) process automation; (c) markets and cut our IP band costs, making us more competitive network efficiency; and (d) digital multichannels. and improving the quality of our products and services.

In 2017, we completed the first cycle of prioritizing strategic projects using Value-Based Management (VBM), selecting criteria with the highest potential for growth and development. To define our goals we use the concept of economic profit, representing return on invested capital (whether shareholder or third party capital). This metric permits an assessment of whether the capital employed in a business is returning more or less than its opportunity cost, supposing that it was invested elsewhere. This means that there are internal and external We aim to be parameters to be analyzed, in order to use the metric of value generation, such as the skills of the Company in relation to its precursors for the competitors, its risk exposure and industry indicators. digital transformation of customer

Algar Telecom - Sustainability Report 2017 Algar Telecom 20 INTANGIBLE ASSETS

Brand

Algar Telecom is part of the Algar group, which is well known as a sound Brazilian group of companies which has a history going back 87 years. It originated as a family-owned Company, and enjoys professional, sustainable management. Since the Company was founded in 1954, we have become pioneers in the telecommunications sector in Brazil and have expanded the Telecom business to new markets, maintaining our principles of high quality service and Project with Mães da Sé uses customer satisfaction. The Tech segment, which is handled by our subsidiary Algar TI, has “lost links” on the internet to become increasingly important in its market, and has won major awards in the technology sector for its innovative focus (see “Awards and Recognition"). find missing persons

In 2017 we continued to reinforce the brand by stressing other attributes of the organization: our commitment to service, innovation and reliability. This involved marketing campaigns focusing on In 2017 we launched the “Lost Links” project, in the digital media, sponsorship and other initiatives. partnership with the NGO Mães da Sé (“Mothers of the Sé” – a square in downtown São Paulo) to A highlight was the marketing campaign we launched in 2017 with the catchphrase “#EmaEmaEma help find missing persons. Each time someone cada um tem seu problema [everyone’s got their own problem] and Algar has new ideas tries to access a page of the Algar Telecom to solve your company’s problems”, with sketches showing that Algar can provide innovative website on the internet and enters the wrong solutions for its customers in their respective areas of business, underlining our capacity for address, instead of being shown an error message innovation. Click here to watch our video. they are redirected to a page with photos of missing persons. To increase the chances of Another important brand-building initiative, with a countrywide reach but focusing mainly on São reuniting missing persons with their families, we Paulo state, has been our continued sponsorship of Santos Football Club, with our brand being entered into a partnership with Santos Football highly visible on the team’s uniform, merchandising materials, social networks, electronic media Club to show the address Links Perdidos on the and in the Vila Belmiro press room (which has been renamed the Algar Room), in addition to players’ shirts in matches against their traditional relationship initiatives with current and potential customers. rivals Grêmio and Vasco.

Algar Telecom - Sustainability Report 2017 Algar Telecom 21 People serving People

“People serving People” is our business purpose, our special way of serving; it underpins our culture, our activities and our business strategy. It means that our priority is human relations, in everything we do. We build ethical, respectful and transparent relationships with our employees, and the same attitude is naturally replicated with everyone else with whom we have dealings. Because we adopt a coherent posture towards our internal and external stakeholders 9, we are recognized as being one of the Best Companies to Work For in Brazil and Minas Gerais and, at the same time, one of the best in customer satisfaction – in a survey carried out in 2016 by an outside, independent organization, 94% of our corporate Telecom business customers gave us a satisfactory rating for our services and solutions. The survey is undertaken every two years and will be repeated in 2018 (see under “Awards and Recognition”).

One of the reasons why we are recognized as being one of the best companies to work for is that we strive to offer an environment for human and intellectual development, which is of value to our employees and enables us to provide quality solutions for the market. An important resource in this context is UniAlgar, a corporate university and distance learning institution which is a reference throughout Brazil. It was founded in 1998 to develop talents and increase business competitiveness. Initiatives such as this, allied to attractive talent management policies, are reflected in the working environment which, in 2017, was even more positive than in the previous year, rising from 77% to 83% workforce satisfaction in the Telecom area, and from 70% to 76% in Tech, according to an Organizational Climate Survey addressed to our employees.

Algar Telecom - Sustainability Report 2017 Algar Telecom 22 Creation of the Institute of Science and Technology

The major highlight of 2017 in the field of innovation was the creation of Brain, an Institute of Science and Technology of which Algar Telecom was a founding partner, located Innovation in Uberlândia (MG), to promote connections between ideas and people – inspired on Algar Telecom is committed to seeking out new trends and new technologies; creating the model of open innovation – to develop opportunities for collaboration with other companies, both partners and customers, and with disruptive solutions for the creation of new institutions and the community; undertaking quick trials and analyzing them consistently; and products, services and business models. There posting results that allow us to innovate in our internal processes and in solutions for customers are four main themes: Internet of Things (IoT), and their value chains. Our offers are aligned with digital transformation, multiconnection, Cyber Security, Cloud (SaaS) and Digital. Brain automation and artificial intelligence, and are applicable to various business segments. uses Scrum methodology to implement the Agile Method of collaboration, self-organization and In the Tech segment, we reinforced our positioning as front-runners in digital transformation, interdisciplinary teams (see here). In practice, and launched the first cognitive agent for customer service/debt renegotiation and other applied teams of multidisciplinary professionals are artificial intelligence solutions. With our partners in technology, we initiated new digital service created to develop new solutions within a operations. We also developed an exclusive method for digital transformation known as Customer period of four to six months. It is a creative, Experience Improvement, which can systematically reduce the number of dockets opened dynamic environment, with fast deliveries. For by the call centers and so increase company performance and efficiency. We also launched the Algar Telecom, Brain also acts as a focus for “Repense Possibilidades” (“Rethink Possibilities”) campaign, and inaugurated our Innovation Lab. innovation culture and a change of mindsets.

Algar Telecom - Sustainability Report 2017 Algar Telecom 23 Sustainability GRI 102-13

Our vision on sustainability is based on how our business we have become a signatory. Today the Company contributes can contribute to resolving current and future challenges directly or indirectly to 27 of the Sustainable Development to society, and how we relate to our stakeholders. We aim Goals, and this is now monitored in a more structured way. to maintain strict ethical business standards; to present As a way of mobilizing people to support these and other high value-added solutions to the market; to be connected, commitments, we have a Sustainability Committee with simple, speedy and smart in the way we work; and to representatives in all the regions where we operate. There are take responsibility for the impact of our activities on the also independent members with proven experience of the issues environment and on people’s lives. We believe that all this is of sustainability which are relevant to the Company. We also related to sustainability. So our sustainability initiatives, campaigns support the Algar Institute, a non-profit organization which and projects are based on four strategies: social projects, coordinates the group’s investments (with our own funds and climate governance, sustainable influence (related to our through tax incentives) in social and environmental projects, ability to make our relationship network aware of sustainable especially those of an educational nature – more details can be practices) and compliance. found in the chapter “Social and environmental management”.

As guidance for our sustainable management, we use The maturity of our management of sustainability was recognized international references and publicly assume commitments to for the fifth consecutive year by awards given to Algar Telecom, global development agenda such as the Global Compact, an such as “the most sustainable” according to the Exame magazine initiative of the United Nations Organization (UNO) to which Sustainability Guide – for more details see “Awards and Recognition”.

Algar Telecom - Sustainability Report 2017 Algar Telecom 24 AWARDS AND RECOGNITION

Throughout our history we have been awarded significant recognition of our outstanding performance in the areas of corporate governance, people management, sustainability, innovation and customer service. The key awards in 2017 were the following.

INNOVATION CORPORATE GOVERNANCE

ALGAR TELECOM ALGAR TELECOM

• Valor Newspaper Innovation Ranking - 2nd place in the Telecommunications sector • Época Negócios 360º Magazine - Best managed company in the Telecommunications • Best Innovator A. T. Kearney - Selected as one of the 20 most innovative companies in Brazil sector for the fifth consecutive year • Amanhã Magazine Ranking of Champions of Innovation - The most innovative • 21 st Anefac/Fipecafi/Serasa Experian Prize - Transparency Trophy company in the south of Brazil in the Telecommunications sector • Tele.síntese Yearbook 2017 Innovation in Communications - Highlighting the innovative ALGAR TECH study “Bitcoin, a new payment model” • Frost & Sullivan - Best Practices Award - Leading and most innovative company in competitive Contact Center strategy ALGAR TECH • Valor Newspaper Innovation Ranking - 4th place in the Technology sector • Exame Magazine Best and Biggest - 46th place in the Digital World category

Algar Telecom - Relatório de Sustentabilidade 2017 A Algar Telecom 25 CUSTOMER SERVICE PEOPLE MANAGEMENT

ALGAR TELECOM ALGAR TELECOM Época Reclame Aqui Prize - Best companies for consumers - Winner in the Época Magazine - Best Companies to Work For (GPTW) - among the Services category best in Brazil (for the fifth consecutive year) and the best in Minas Gerais (with more than 1,000 employees) ALGAR TECH Mesc - Best Companies in Customer Satisfaction - 1st place in the Business Process ALGAR TECH Outsourcing Services/Call Center segment Época Magazine - Best Companies to Work For (GPTW) - best companies to work for in the IT sector - 12th place in the national ranking (with more than 1,000 employees)

SUSTAINABILITY AND SOCIAL RESPONSIBILITY SECTOR YEARBOOKS/ MISCELLANEOUS HIGHLIGHTS

ALGAR TELECOM ALGAR TELECOM Exame Magazine Sustainability Guide - Most sustainable telecommunications Telecom Yearbook - Telecommunications Company of the Year company in Brazil Telecom Yearbook - Highlight of the Year

ALGAR TECH ALGAR TECH Isto É Dinheiro Magazine Best Companies - Technology Category - 1st place in Telecom Yearbook – Editorial Forum - 36th place in the overall ranking social Responsibility Informática Hoje Yearbook - 82nd place in the overall ranking of service providers Informática Hoje Yearbook - 6th place among champions of growth Informática Hoje Yearbook - 19 th place in the integrators ranking

Algar Telecom - SustainabilityRelatório de SustentabilidadeReport 2017 2017 A Algar Telecom 26 CORPORATE GOVERNANCE GRI 102-5 | 102-12 | 102-13 | 102-16 | 102-18

We have been an unlisted publicly-held company since 2007, when we held our first public issue New partner of debentures. We believe that good corporate governance increases the value generated by the Company and market perception, as well as contributing to the efficient management of our capital. At the end of 2017 GIC – Singapore’s sovereign wealth fund – signed an investment agreement We have therefore introduced principles and practices that are aligned with the best benchmarks, to take an interest in Algar Telecom, which after certain conditions precedent have been met and we are constantly improving them. The basic principles which guide our governance are will give it a 25% shareholding. We thus have a new partner which has investment offices in nine transparency, equity, accountability and corporate responsibility. To this end we have tools for other countries, apart from Brazil. This step will not just help us modernize our management, but identifying, measuring, controlling and managing corporate risks, thus ensuring safe decision making. will also contribute to accelerating Algar Telecom’s expansion plans. At the time of writing this We use modern, up-to-date systems, controls, policies and management indicators. report, all we need to close the deal is Anatel’s consent.

Examples of the good practices we have adopted include the composition of our Board of Directors, which must have 2 or 20% (whichever is higher) of independent members. Other Corporate restructuring examples are a ban on accumulating positions of executive, director or committee member, and the introduction of three advisory committees: Audit and Risk Management, Human Talents and In 2017 we restructured the company in two stages, converting all our shares into common voting Corporate Governance, and Strategy and Innovation. See our website for more details. shares. Of the total of 267.5 million shares issued as at December 31, 2017, Algar SA, our parent company, held 92.8%.

New department

We set up a department dedicated exclusively to Investor Relations. The team is available to handle relations with the market, and there is a website for investors (ri.algartelecom.com.br) providing important information in Portuguese and English. The email contact address is: [email protected].

Algar Telecom - Sustainability Report 2017 Algar Telecom 27 GOVERNANCE STRUCTURE

Shareholders’ Meeting

Fiscal Council Strategy and Innovation

Advisory Committees Board Human Talents and of Directors Corporate Governance Internal Audit

Governance Secretariat Audit and Risk Management External Audit

Chief Executive Officer

Executive Board

Algar Telecom - Sustainability Report 2017 Algar Telecom 28 Network learning

Fiscal Council The Algar group is a member of international corporate organizations aimed at enhancing The Fiscal Council was set up in 1997. It does not function on business management, such as the Latin American a full-time basis, and its members are elected at the Annual Companies Circle for Corporate Governance10, Shareholders’ Meeting. It currently consists of four full members created by the Organization for Economic and three alternates. The members hold office for one year, until Board of Directors Cooperation and Development (OECD) and the the next Annual Shareholders’ Meeting. The responsibilities of International Finance Corporation (IFC); and the the Fiscal Council are set forth in the Corporate Law (Law No. The highest management body was created to ensure a Family Businesses Network (FBNI)11, in which it 6404/76), the company bylaws and its own internal regulations. professional and sustainable business, to make decisions and to chairs the Brazilian network (known as “Brasil Four meetings were held in 2017. define and monitor strategies. It consists of six board members, Chapter”) and has a seat on the organization’s two of them independent. Board of Directors at the international level. Members as of December 31, 2017: Dilson Dalpiaz Dias | Full member Members as of December 31, 2017: Geraldo Batista Caetano | Full member Luiz Alexandre Garcia | Chair

Gilberto Saramago Gatti | Full member Eliane Garcia Melgaço | Vice Chair Manuel Jeremias Leite Caldas | Full member Luiz Alberto Garcia | Member 10 The group currently consists of 13 leading Latin American companies which follow good corporate governance practices, as a contribution by the private Marissa Rose Vegelle Renaud | Alternate member Divino Sebastião de Souza | Member sector to the regional development of governance. Ozório Marques Ferreira Neto | Alternate member Luiz Eduardo Falco Pires Correa | Independent member 11 International relationship network for corporate families, to promote successful business for member companies over the generations. It was set up Rogério Montalvão Elian | Alternate member Thilo Helmut Georg Mannhardt | Independent member in Switzerland and today has more than 8,000 members in over 60 countries.

Algar Telecom - Sustainability Report 2017 Algar Telecom 29 Advisory Committees

The Board of Directors has three advisory committees reporting to it, without decision-making powers, consisting of external specialists and board members: Audit and Risk Management, Human Talents and Corporate Governance, and Strategy and Innovation. These committees help the board make its decisions, by carrying out in-depth analysis of specific issues. Their activities and responsibilities are defined by Internal Regulations.

Strategy and Innovation Committee Human Talents and Corporate Audit and Risk Management Committee Governance Committee Promotes and assists discussions by the Board of Directors Its job is to ensure the quality, integrity, transparency and of important issues with major impact on the Company, such Its mission is to ensure that Human Talents are strategically credibility of financial disclosures, the efficacy of audit procedures as strategic guidelines, innovation, investments (including managed and that this should be seen by the stakeholders as (internal and independent) and of internal controls, and acquisitions), new business and budgeting, as well as defining a competitive differential of Algar Telecom; and to ensure that compliance with the law, as well as overseeing appropriate performance targets based on value creation.. the best practices of corporate governance are adopted and policies for the strategic management of corporate risks. constantly upgraded, to reinforce the Company’s vision of the Members as of December 31, 2017: future and its long-term prospects. Members as of December 31, 2017: Divino Sebastião de Souza | Board member and Thilo Helmut Georg Mannhardt | Independent Board Member Committee Coordinator Members as of December 31, 2017: and Committee Coordinator Clau Sganzerla | External member Eliane Garcia Melgaço | Vice-chair of the Board of Directors Carlos Biedermann | Independent specialist Silvio José Genesini Júnior | External member and Committee Coordinator Gilberto Loureiro | Independent specialist José Luciano Duarte Penido | External member Silvio José Genesini Júnior | External member

Algar Telecom - Sustainability Report 2017 Algar Telecom 30 Executive Board

The executive board of Algar Telecom is a joint body responsible for managing the organization so that it complies with its business purpose and its social function. It executes the strategy and overall guidelines approved by the Board of Directors, manages the organization’s assets and directs the business in line with the purposes, principles and values of Algar Telecom.

Members: Jean Carlos Borges | Chief Executive and Investor Relations Officer* Márcio Estefan | Executive Vice-president for Business and Wholesale Business Officer* Luciene Gonçalves | Chief Financial Officer* Luiz Antônio Andrade Lima | Executive Officer for Operations (Technology)* Maria Aparecida Garcia | Executive Office for Operations (Human Talents)* Renato Paschoareli | Executive Officer for Operations (Strategic and Regulatory)* Luciana Ferreira | Investor Relations Officer Eduardo Rabboni | Digital Transformation Projects Officer Ana Paula Rodrigues | Customer Relationship Officer

*Statutory Board

For details of each member of the Executive Board, go to Algar Telecom’s IR website.

Algar Telecom - Sustainability Report 2017 Algar Telecom 31 COMPLIANCE AND Ethical conduct and management tools To support compliance and integrity, Algar Telecom has a Code of Conduct and a number of RISK MANAGEMENT corporate policies, such as Internal Controls, Relations with Government Agencies, Spokesmen, Institutional Representation, Giveaways and Tax Incentives. In addition, internal audits are carried GRI 102-11 | 102-16 | 205-3 out to check the level of compliance with existing controls, training is given on ethics and integrity (in the classroom and online), and communication and awareness campaigns are conducted. The executives have a crucial role to play in the Compliance Program, leading by example and showing how theory and practice combine.

Our Code of Condut outlines the behavior expected in relationships with different counterparts, and employees are given a copy to read when they join the Company and annually thereafter. They must sign a document each year to confirm that they have read the Code, so that any amendments made from time to time are not ignored. In 2017 the Board of Directors of Algar S/A approved a revised document, which will be ratified and published by the board of Algar Telecom. The document covers matters such as combating corruption, rules for online behavior, working relationships and human rights, including non-acceptance of child labor and labor analogous to slavery by the Company and our partners.

Anyone who becomes aware of practices that could represent a violation of the Code of Conduct or of laws and regulations can report the fact through our Whistleblowing Channel which is managed by independent auditors who are responsible for analyzing the background and the importance of each report. Confirmed violations are submitted to a commission which investigates them and takes the necessary measures. We guarantee confidentiality and anonymity, and will not tolerate any kind of reprisal.

Algar Telecom - Sustainability Report 2017 Algar Telecom 32 Compliance and audits No significant fines or sanctions were imposed on us in One of the instruments we use to prioritize risks is the Risk GRI 102-12 I 419-1 I 307-1 I 416-2 2017 for non-compliance with laws or regulations, and no Matrix, which presents and typifies risks and divides them proceedings were initiated for failure to observe the into categories and subcategories. The major risks for Algar We monitor laws and regulations relating to our business to specific regulations applying to the supply and use of Telecom are shown below, and these are the ones we protect ensure that we comply with them. Our policies and procedures products and services. ourselves against. comply with the Anticorruption Law (No. 12.846/2013), the Bidding Law (No. 8.666/1993), the Auction Law (No. 10.520/2002) and the Differentiated Public Procurement Regime Law (No. 12.462/2011), among others. The Algar group is also a signatory to the Business Corporate risks Pact for Integrity and Against Corruption (Ethos Institute), which means that we follow the best practices and our activities are Risk management is handled by Algar Telecom’s Financial strictly controlled. Office, which coordinates the work with the other areas and is supervised by the Audit and Risk Management For an effective, transparent assessment of our internal controls Committee, one of the advisory committees to the Board Strategic Financial and compliance with regulations, standards and internal and of Directors. Algar Telecom’s Corporate Risk Management Competition Debt acceleration Concentration of EBIT external policies, our Internal Audit department is responsible for Policy defines the overall guidelines for this work, based on Digital disruption defining an annual plan, based on the risks of each line of business, standards such as those of the internationally recognized obtaining board approval of the plan, auditing each process and, COSO-ERM (Committee of Sponsoring Organizations of the in cases of non-compliance, recommending and monitoring Treadway Commission). MAP action plans. To supplement this, the External Auditors examine OF RISKS the financial statements, our systems and transaction records, The procedure is in four stages: identification of the factors standards of information and accounting and tax compliance, (causes) of the risks of objectives and their implications; Operational Compliance Access and Regulatory to ensure that they are in line with the law and with Brazilian assessment (calculation of the impact on the projected results confidentiality Labor and international accounting standards. Both audit teams are and the probability of occurrence); definition of the risk appetite Tax Operational capacity autonomous and independent, and report directly to the Board of shareholders; and development of action plans. The process and efficiency of Directors through the Audit and Risk Management Committee. is cyclical and is constantly updated.

Algar Telecom - Sustainability Report 2017 Algar Telecom 33 TELECOM BUSINESS COMMON BUSINESS RISKS Regulatory – The regulatory risk is monitored from three viewpoints, which feed into each other: Digital disruption – we operate in a highly globalized and developed business sector, where regulatory changes (legislative issues affecting the sector); management of grants (obligations technological transformation can disrupt consolidated markets. Changes in consumer behavior do to be met which are subject to oversight); and management of penalties imposed by the sector not only affect the supply of new products, but can also modify the entire dynamic of a market – regulatory agencies, Anatel and Ancine (administrative and judicial proceedings). We should as has been the case with collaborative platforms for public transport and hotel accommodation. mention that 2017 saw some major debate on the future of telecommunications, such as an update This is why we are aligned with digital changes and attuned to innovation. We have an Innovation of the concession model, studies undertaken by the Ministry of Science, Technology, Innovation Management area, a Digital Transformation department and an ITC Services Routines area. In and Communications for regulating the IoT (internet of Things) and new Public Policies. These 2017, we participated, as founding member, in the incorporation of Brain, an Institute of Science and discussions will continue into 2018, and important decisions will be taken which may change the Technology inspired in the model of open innovation. current model of telecommunications in Brazil. Algar Telecom will continue to participate in and contribute to the sector debates, in order to collaborate with the development of regulations in Access and confidentiality – our portfolio uses systems which are exposed to various cyber Brazil and the resulting benefits for society. security risks. To minimize these risks, we have solutions to protect us against intentional or accidental contamination, malware and viruses; a structure for detecting anomalies in our internal Operational continuity – The Company’s business continuity involves a set of technologies, and external networks, cyber attacks and anomalous traffic; and tools for controlling access to systems, processes and people, in which any failures may reduce our ability to provide adequate confidential data. services for our customers or render it unfeasible. To reduce the risk of discontinued networks or services, the main internal or external disruptive factors have been identified through statistical Competition – The Brazilian telecommunications market has been consolidating. Joint ventures, analyses of incidents previously detected in networks and telecommunications systems. Network mergers and acquisitions between telecom service providers are possible in the future. To the and service availability is continuously monitored through a Network Operations Center that extent that consolidation continues, it may give rise to more competitive conditions in the mobilizes technologies, systems and people to identify and handle incidents as soon as possible, Company’s market. thus reducing downtime for our services and any impacts for our customers and the Company.

Algar Telecom - Sustainability Report 2017 Algar Telecom 34 Tax - When taxes levied on the telecommunications sector are increased, this usually leads to higher tariffs for Algar Telecom’s end-consumers. The Company is unable to provide any assurance that the Brazilian federal government, state and municipal governments will not introduce new taxes or raise current tax rates.

Accelerated debt repayment - Algar Telecom monitors its debt levels against market patterns, as well as compliance with the covenants stipulated in loan, financing and debenture agreements, as such covenants have to be kept on track for the duration of the respective agreements or contracts. In addition, the Company has its own indices, which are even more stringent than those required by our financial agreements.

TECH - BPO / IT MANAGEMENT BUSINESS

Labor – this risk is related to changes in regulations and policies, the introduction of new rules, and more rigorous inspections. In this context, for the Tech – BPO/IT Management segment, the approval of the Outsourcing Law and the Labor Reform have created legal certainty for our business, which is highly labor-intensive, and whose core activity is related to outsourcing business processes. Labor risk also covers labor practices which are out of line with the law, collective agreements or court rulings. There are fines for violations, and repeat offenses tend to significantly damage the image of a Company with the Labor Ministry, the unions and employees.

Concentration of EBIT – dependence on a small number of customers, which contributes to a substantial share in EBIT. Concentration makes the risk of default a real one, and can damage the Company in the short term.

Algar Telecom - Sustainability Report 2017 Algar Telecom 35 Our People

We are thousands of people sharing our knowledge, experiences of life and stories in order to make a difference in the market

Algar Telecom - Sustainability Report 2017 Our people 36 Algar Telecom employs 15,646 talents who have the responsibility of making our name increasingly PEOPLE stronger and respected by the market. We are thousands of people who have decided to share knowhow, experiences and life stories and to make a difference in the market, in different MANAGEMENT sectors of the Brazilian economy. Knowing this makes us aware of the huge responsibility we have to our people. And so we are careful how we manage people, and we offer our employees an environment suitable for personal and professional development, for participation (based on the Company-Network philosophy), and for recognition and wellbeing. This environment is recognized by the market, and we have been given awards such as for being one of the best companies to work for (see “Prizes and Recognition”), and also by our employees themselves, who reply to internal satisfaction surveys. The Algar group Human Talents area started a process of reviewing organizational culture in 2017. The idea is to identify cultural traits which hinder the Company’s An important instrument for finding out what staff think is the Organizational Climate Survey, development and try to eliminate them from the working environment, while at the which changed its format in 2017. One of the changes is that now there are quick questions to same time reinforcing the traits which will help us to grow sustainably. We launched be asked up to three times a year (in addition to the complete annual version), the possibility for our Falando da Gente (“Talking about Us”) campaign, which is intended to bring our managers to carry out individual surveys and monitor the results for their departments, tools for employees closer together and to make them reflect on attitudes that are desirable a comparative analysis with previous surveys and with the market average, and algorithms which for the Group, such as empathy, focusing on results, ownership of the business, agility highlight the most significant comments. Algar Telecom improved its mark in 2017 from 77% to and a critical outlook. We also held an event with the executives of the holding 83%. Another indication of the engagement of our employees is an annual survey measuring the company about evolving a more digital, simple, connected and agile mindset. degree to which the Company is in line with its strategy: in 2017, it hit 82%.

Algar Telecom - Sustainability Report 2017 Our people 37 Profile of the employees Employees by place of work (country) GRI 102-8 | 102-41

An analysis of the characteristics of our employees, separating them by age, gender and region, lets us plan our people management activities more assertively, and helps us draft policies and procedures and plan for better working conditions. We give below some more details about the profile of our employees.

Number of employees Employees by gender in 2017 55% 16,187 8,650 45% 16 ,115 6,996 15,646

Men Women 2 015 2 016 2 017

Note: in 2017, 57% (8,944) worked full-time. The remaining 43% (6,702) worked part-time

Employees by place of work Employees by age (Brazilian region) in 2017

1% 3% 4% 3% 4% 46% 50% 89% Southeastern region Brazil Less than 30 years of age 15,219 (97%) Midwestern region Between 30 and 50 years of age Northeastern region More than 50 years of age Argentina, Northern region Colombia and Mexico Southern region 427 (3%)

More details in “Supplementary GRI indicators”.

Algar Telecom - Sustainability Report 2017 Our people 38 In a highly competitive market, human talents are what can make the difference. We therefore ATTRACTION AND work on several fronts to attract, engage and develop our employees. In 2017, the key initiatives of the Algar group applicable to Algar Telecom were: Coaching and Mentoring Program; Executive Development Program; training in distribution channels; participation in Leaders ENGAGEMENT who Teach Program; promotion to more complex functions; and international benchmarking with high-performance companies in the technology sector.

Prospects – we construct a career path for all our employees, which may be linear (for management positions) or in Y-form, when there is promotion to non-management positions, for example as specialists in certain areas of expertise. We announce possibilities for promotion and we give preference to in-house recruiting. In 2017, 41. 5 % of available vacancies were filled internally, some of them by interns. We assess performance annually and instruct leaders to provide frequent feedback, not just at times when results are announced.

Algar Telecom - Sustainability Report 2017 Our people 39 In 2017, the Algar group introduced a Performance Assessment Process (PAP), which covers:

360º Assessment – on collaborative skills, by the superior, peers and subordinates and self-assessment;

Performance assessment – analysis of the technical competence, capacity for execution and ambition of the employee assessed, and annual monitoring;

Calibration Committee – a group that assesses, analyses and balances the performance of people whose jobs are of the same level of complexity;

Feedback – analysis of the calibration report with the manager and suggestions for an action plan;

Execution of Individual Development Plans.

Development of leaders – we assess the performance of executives based on the Nine Box method, which looks at the potential and performance of talents, giving a broad view of their skills and of the points that need to be worked on. Development plans and targets are set individually.

Compensation and benefits – we offer fair, merit-based compensation, including a fixed portion and a variable portion linked to attainment of targets and contribution to results, as well as a benefits package in line with what the market offers. The compensation policy is subject to collective bargaining agreements, which apply to 98% of our employees (only executives are not included in these agreements, since the rules for their compensation are subject to special regulations).

Algar Telecom - Sustainability Report 2017 Our people 40 In 2017, we provided over 838 thousand training hours

Professional training – We count on UniAlgar, a benchmark in corporate universities (more details are given later in this chapter) that provides training courses, discussion forums, workshops and meetings, both in the classroom and online distance learning – which enables teams working outside the office to have access. In 2017 alone, more than 838 thousand hours of training were given, an average of 54 hours per employee. Additionally, we provided 502 distance learning courses, which were attended by 73 thousand people. More details in “Supplementary GRI indicators ”.

Communication and engagement – we provide channels of communication such as the Talent Integration Program (PINT), company intranet (Algarnet), a company social network on Facebook (Workplace), a weekly video program (TV Algar), news flashes on screens installed in group company premises (Toda Hora), internal murals (Fique por Dentro – “Keep in Touch”), These and other initiatives have a direct impact on the turnover ratio, an indicator of the of admissions, departures and meetings in person and remote meetings, a chat tool for employees transfers, which measures our capacity to attract and retain engaged employees. Turnover in 2017 – representing departures and and the Fale com o Presidente (“Talk to the CEO”) Program, admissions to fill vacancies – was 13.6%, virtually unchanged on 2016 and below the market average (19.9%, according to PwC which consists of a dialogue on strategy, objectives and results. data). More details on admission and turnover rates are given “Supplementary GRI indicators”.

Algar Telecom - Sustainability Report 2017 Our people 41 UniAlgar

Our Human Talents area undertakes a periodical review of training needs, which is used as a basis for investments in initiatives such as classroom and distance learning, discussion forums, workshops, meetings and the production of informative content.

Training requirements are mainly filled by UniAlgar – the Algar group’s Corporate University, which underpins the companies’ competitiveness through education. We use innovative methods, control of educational content, interactive skills platforms, distance learning, case studies and other tools to support the prosperity of our business and of our customers. We provide balanced training, with 70% practical work, 20% mentoring and 10% content, prioritizing hands-on learning to achieve results. We also have partnerships with universities such as the Dom Cabral Foundation, the Getúlio Vargas Foundation and other institutions in the cities where we operate, enabling employees to attend courses related to their work with the financial support of the Company (education allowances), provided that they are in line with the Company’s benefits policy.

In 2017, UniAlgar offered 157 classroom courses, attended by 5 thousand employees, for a total of 41 thousand hours of training. Additionally, we provided 250 distance learning courses, which were attended by 32 thousand people. Highlights are the “Academies” of Excellence (for call center staff), IT (introduced in 2016 for information technology professionals), Sales and Technical (for employees who go to customers’ homes and offices, many of them outsourced staff).

Another change during the year was that UniAlgar gave up its own premises, which released R$3.5 million of fixed costs for investing in further training. The building was deemed no longer necessary, in view of the type of training courses and the possibility of holding them elsewhere.

Algar Telecom - Sustainability Report 2017 Our people 42 HEALTH AND SAFETY

In 2017 Algar Telecom launched its Liga da Segurança (“Safety League”) project, aimed at instilling a risk management culture for personal and business safety at every level of Human rights seniority (both for employees and for suppliers); changing We also provide a Specialist Occupational Health and Safety and decent work mindsets and introducing new habits; and contributing to Engineering Service (SESMT), which has a multidisciplinary team value creation for the business by means of good safety (consisting of safety technicians and engineers, doctors, nurses, practices. The change management model covers matters social workers, nutritionists, speech and hearing specialists, We prevent and repudiate the use of child such as occupational safety, information and infrastructure psychologists and physiotherapists) and Internal Accident- labor, forced labor or labor analogous to slavery security, and across-the-board issues of sustainability. The Prevention Committees (CIPAs), whose mission is to observe which violates indigenous rights. We do not initiative is managed by the Project Management Office and report situations of risk in the workplace and to propose hire minors, except as apprentices, and we do (PMO) and affects rules, policies, procedures, the definition ways of minimizing them. Members of the CIPAs are nominated not keep workers in unhealthy environments. and communication of responsibilities, the safety management by the Company and elected by the employees, and there is one Our agreements with suppliers include specific support structure and monitoring and control activities. in every operating unit with more than 50 employees. In 2017, 97% conditions on these matters. We monitor the of the employees were represented by CIPAs. companies we engage and demand to see their In parallel, to promote the health and safety of employees, documentation (such as employment cards, the Algar group has its Algar + Health Program, which acts Other important teams for this issue are the Ergonomics health checks and receipts for payment of legal to prevent disease and improve quality of life, for example and Health Committee, which makes ergonomic studies of obligations), and we consult the list of companies with awareness campaigns, regular check-ups and medical and work stations, and the Firefighting Brigade, which meets the involved in slave labor issued by the Ministry of nutritional supervision. The Program produces statistics on the requirements of NR 23 and the technical instructions of the fire Labor and Employment, as well as making visits condition of employees’ health, which enables specific projects brigade of each region and carries out evacuation drills in line to company premises. No cases of human rights to be planned and implemented. with state law. violations were registered in 2017.

Algar Telecom - Sustainability Report 2017 Our people 43 Our network

We analyze the customer’s journey as from the sale, delivery and post-sale, and particularly the day-to-day of the relationship

Algar Telecom - Sustainability Report 2017 Our network 44 RELATIONSHIP WITH Customer experience management The customer is our reason for existing. This is a quote from the founder of the Algar group, CUSTOMERS Alexandrino Garcia, and it has become one of the Company’s values. Accordingly, each year we seek to improve our relations with customers, surprising them with new technologies, methods GRI 418-1 and approaches to improve their experience, for they rely on what we do.

We analyze every step of the way for the customer, from the moment of sale, delivery, after-sales service and, above all, the daily working of the relationship. We use methods and processes which enable us to understand what is really happening, and as a result we can take the right decisions and communicate effectively. One of the highlights in this field has been the implementation of CEM – Customer Experience Management. We use Big Data and Analytics solution which collect data and provide real-time information on customers, with insights and intuitive control panels. In this way we can personalize offers according to our customers’ profiles, provide better services, reduce the number of complaints and avoid extra costs.

Algar Telecom - Sustainability Report 2017 Our network 45 Relationship keys

In addition to these digital tools, in 2017 we defined four key factors to enhance customer service:

1) availability (fully-functioning services in a permanent state of readiness to resolve problems); 2) empathy (the ability to see things from the customer’s point of view, bringing us closer Integration of multiple channels Making life easier for the customer together); 3) simplicity (to make life easier for the customer); 4) efficiency (using resources wisely and trying to resolve In 2017, we took steps to integrate the multiple relationship We want to make things easier for our customers. Ideally, problems at the first contact). channels provided by the Company, so as to make things they should not even need to contact us. But if they do, we shall easier for the customer and improve the efficiency of the make every effort to resolve their problem quickly. To disseminate these ideas we use gamification. In an immersive call centers. This will enable us to keep a single record of our workshop with coordinators, facilitators and supervisors, relationship with each customer, including exchanges on every We provide a self-service menu for customers, we have a service we show an interactive panel with simulated situations and channel: voice, Interactive Voice Response (IVR), email, chat, area focused on digital media and we use computerized tools ask the participants to select the keys for resolving them. website, apps, chatbots, text messages and social media. The which allow technical procedures to be carried out remotely. To Afterwards the leaders of the service and support processes aim is to do away with fragmented or missing information, check whether these measures are effective, we use a metric act as multipliers, carrying the message to the more than 900 which creates dissatisfaction. With a more personalized service, known as First Call Resolution (FCR), which measures the rate operators of Algar Telecom and other partners. The process is we hope that customers will have an increasingly positive of resolution of problems at the first contact with the customer. supplemented with communications. view of what we can provide. We ended 2017 with an FCR of 62%.

Algar Telecom - Sustainability Report 2017 Our network 46 In 2017 we made purchases from approximately 5,200 suppliers through 49,500 purchase RELATIONSHIP orders. The major items were from network services providers and suppliers of technology and equipment. Most of the companies we use are located in the southeast of the country. Strategic planning is supported by a market intelligence area, and purchases are effected by the Algar WITH SUPPLIERS Corporate Solutions Center (Algar CSC), which negotiates and contracts supplies, and assesses GRI 102-9 and develops suppliers.

We have a Procurement and Service Contracting Policy, and other relevant policies such as Relationship with Public Bodies and Gifts. We have a procurement website, where current and potential partners can read our Code of Conduct for Suppliers, our policies for relations with the Company, our Guide for Registration of New Suppliers and our User Manual.

Before and after being engaged, suppliers are subjected to legal, tax, economic, financial and technical assessment. We also analyze matters related to human rights, the environment (environmental compliance), food safety, occupational health and safety and social responsibility. Our standard policy contains clauses covering all these points. We analyze the performance of suppliers on the basis of indicators, so as to identify shortcomings which might jeopardize the quality of our services.

Algar Telecom - Sustainability Report 2017 Our network 47 Social and environmental management

We give direct and indirect contributions to 27 Sustainable Development Goals

Algar Telecom - Sustainability Report 2017 Social and environmental management 48 To guide our efforts to run a sustainable business, we assume public commitments to global SUSTAINABLE social agendas. We are signatories to the Global Compact, an initiative of the United Nations Organization (UNO) to mobilize the business community around commitments in the areas of human rights, work relations, the environment and the fight against corruption. We also support COMMITMENT the Sustainable Development Goals (SDG), a UN initiative listing 17 goals and 169 targets on a GRI 102-12 wide range of issues, to serve as guidance for national policies and international cooperation up to 2030. We contribute directly or indirectly to 27 of the 169 targets.

Our work on sustainability has been recognized by the market in recent years, and this leads us to expect that we can remain among the companies with the best practices. In 2017, for the fifth consecutive year, we were elected Brazil’s most sustainable company in the telecommunications sector by the Exame magazine Sustainability Guide.

Algar Telecom - Sustainability Report 2017 Social and environmental management 49 SOCIAL PERFORMANCE

Educational programs

We believe that education is fundamental for a country’s development. We therefore channel our social investment into educational programs, in partnership with public schools and education departments in the regions where we operate. We do this through the Algar Institute, which is responsible for all the Group companies’ social investments. In 2017, we invested R$10.3 million in educational, cultural and environmental projects. R$2.8 million of this was from our own resources, and R$7.5 million from tax incentives. We select projects according to criteria that are essentially strategic, geographical (related to the areas where the Company operates) and financial. We use indicators to monitor and diagnose our initiatives, to demonstrate their social and environmental impact. We operate the following programs in 246 municipalities and eight states in Brazil:

Our figures

16,800 1,18 0 460 113 246 students volunteers teachers schools cities

Algar Telecom - Sustainability Report 2017 Social and environmental management 50 We invested R$10.3 million Media in the School – supplements teacher training on the use of the media as an educational tool. In 2017, we offered in educational, cultural and this course to 263 teachers in six cities and 79 schools. For environmental projects the first time a course was held in Balneário Camboriú (SC) through the Algar Institute for 1,200 students.

Talents of the Future – focuses on preparing high school students for the jobs market. Six courses were held in 2017. The program was also replicated by four non-profit social Volunteers organizations by means of a partnership. Our employees participate voluntarily in a range of one-off or Transforma (“Transform”) – offers workshops and classes for ongoing activities, face-to-face or remotely, contributing their children and teenagers (from 6 to 14 years of age) in Culture time, work and talents to activities arranged by the Algar Institute. and Arts, Digital Culture and Sport. We offered 800 places in In 2017 the first Volunteers’ Meeting was held, jointly with the 2017, and held 339 classes and training sessions, for a total of 663 Alair Martins Institute (Iamar), for Company professionals and hours of activities. The Wellbeing Workshop was included in the community members to share experiences. program with sponsorship from the Sabin Institute. We now have a new base for holding classes, the IFVC – Vamos Crescer (“Let’s Grow”) Learning Institute, in Uberlândia (MG). Projects with tax incentives

We set up a new partnership in 2017 with the Hortense Institute, We channel resources from tax incentives to projects in the under the School of Intelligence Program, which aims at providing areas of culture, healthcare and sport, and to help children, social and emotional teaching in schools. Based on the Multifocal teenagers and elderly people in situations of social risk. For Intelligence Theory, created by Dr. Augusto Cury, the method these sponsorships we have the support of the Corporate Tax boosts learning indices, improves interpersonal relationships and Incentive Committee, which identifies and manages funds increases family participation in the overall education of students. at municipal, state and federal level. In 2017, 56 projects were The program has now been run in 13 rural schools in Uberlândia supported, representing an investment of R$7.5 million. You can (MG), benefiting 5,000 students and 3,500 families. find more details of programs and key initiatives at Instituto Algar.

Algar Telecom - Sustainability Report 2017 Social and environmental management 51 ENVIRONMENTAL Our environmental management is based on three principles: 1. Reduction of environmental impact in line with the priorities established by the Materiality Matrix, PERFORMANCE and an analysis of the greenhouse gases emitted by the Company;

2. Incentives for pro-environment initiatives throughout our relationship network, a principle known as Sustainable Influence;

3. In our operations we always seek to comply and to obtain certification for our business. In 2017, Algar Telecom invested some R$3.9 million in environmental protection.

Algar Telecom - Sustainability Report 2017 Social and environmental management 52 Consumption of electricity We list some of these initiatives below: GRI 302-1 Energy consumption is monitored systematically, by an online tool which shows how much electricity is used in We are aware of the importance of monitoring consumption each of our buildings. of electricity, and we ensure that our operations are energy Refueling of vehicles and generators is monitored by a system efficient. Of the total invested in environmental protection, which combines location and route data (GPS), and this 79% was used for energy efficiency projects, in particular prevents fraud and permits logistics planning. equipment maintenance and cutting energy consumption, since The solar panels installed in the Algar Telecom and Algar 5% target for the year. This equipment is normally used at this is the area of the organization responsible for the majority of Tech buildings have been extended, and now account for times when electricity costs are at their peak, and its use was emissions. We have company policies on energy efficiency and the generation of between 1% and 2% of all the electricity replaced by electricity from the Free Market under agreements fleet management, and we review them every year. consumed by the companies. which offer incentives for the use of renewable energy. We have replaced fluorescent light bulbs with LED and There were increases in 2017. After taking over units in southern installed systems to control the functioning of Non-renewable fuel provided a total of 65,821 gigajoules, Brazil in 2015, Algar Telecom increased its energy consumption in air-conditioners. 9% more than in 2016, while renewable fuel provided 79,418 this region. Algar Tech required a significant fleet expansion in the gigajoules, a slight fall of 1%. We set parameters for the use of Midwest and northern regions and in the city of In 2017, 43% more electricity from solar panels was consumed fuel, and we ensure that the flex-engine vehicles in our fleet run (MG), in order to serve new customers. In spite of this expansion than in the previous year, totaling 6,914 gigajoules. Algar Tech on ethanol. As a result of the fall in gasoline prices in 2017, there in operations, energy consumption remained stable between also purchased more electricity in the Free Market, which was a rise in consumption of this fuel. In 2018, parameters will be 2016 and 2017, varying less than 1%, because we adopted more made it possible to cut the use of diesel oil in generators extended to the units in southern Brazil, where we expect to see measures to boost energy efficiency. by more than 57%, between 2016 and 2017, well above the a 3% rise in the consumption of ethanol.

Algar Telecom - Sustainability Report 2017 Social and environmental management 53 Energy consumption inside the organization12 13

2015 (GJ) 2016 (GJ) 2017 (GJ) Δ 2016/2017 Consumption of non-renewable fuel 53,489 60,311 65,821 9% Gasoline A 18,611 32,377 43,160 33% Diesel oil 33,945 26,275 20,878 (21%) Liquefied Petroleum Gas (LPG) 696 314 7 (98%) Natural gas 238 1,346 1,777 32% Consumption of renewable fuels 81,408 80,502 79,418 (1%) Anhydrous ethanol 4,683 8,283 11,045 33% Biodiesel (B100) 2,385 1,846 1,649 (11%) Hydrated ethanol 74,340 70,373 66,724 (5%) Electricity purchased 323,171 318,649 315,281 (1%) Electricity generated by solar panels 1,272 4,848 6,914 43% Total energy consumed 459,340 464,310 467,433 1%

12 The figures shown for 2015 refer to energy consumed by Algar Telecom, Algar Tech and Algar Mídia. For 2016, the figures are for Algar Telecom and Algar Tech only, as responsibility for the production of telephone directories and guides was taken over by Algar Telecom. Directories and guides stopped being produced in 2017.

13 Fuel consumption – in units of volume or mass – is the principal basis for calculating energy consumption in an ordinary unit. The conversion is based on the energy content, by mass or volume, of each type of fuel listed in the National Energy Balance Sheet (EPE/MME, 2017).

In the case of fuels consisting of mixtures – commercial gasoline and commercial diesel oil – we take into account the percentage of biofuels, as defined by Brazilian law, to estimate content of renewable or non-renewable origin in the mixtures. Conversion of electricity consumption from kWh to GJ is based on the National Energy Balance Sheet (EPE/MME, 2017).

Algar Telecom - Sustainability Report 2017 Social and environmental management 54 Greenhouse gas emissions

Since 2012 we have been preparing an annual inventory of In relation to vehicles, the increase in emissions was due to the factor in the National Grid (SIN) rose 13% between 2016 and greenhouse gases (GHG). We measure emissions from all expansion of Algar Tech’s fleet and the lower percentage of 2017. This led to an increase in scope 2 emissions. the production units we control, even if they are shared. The ethanol used by Algar Telecom’s flex vehicles – from 91% to 90% inventory is drawn up by a third party, using internationally in volume (see more details under “Electricity Consumption”). The methods used are: The Greenhouse Gas Protocol recognized methods, and we use it to map opportunities for – Corporate Accounting and Reporting Standard (WRI/ reducing GHG emissions in our processes and operations. Our efforts to boost the energy efficiency of our operations WBCSD); IPCC 2006 Guidelines for National Greenhouse Gas and diversify the sources of electricity consumed have Inventories; IPCC Fourth Assessment Report; Specifications In 2017, we emitted 13,991 tons of greenhouse gases, 5,930 contributed to a slowdown in the increase of electricity from the Brazilian GHG Protocol Program (GVces/WRI); and tons directly (scope 1) and 8,061 indirectly (scope 2). The 20% consumption in the network, to the detriment of expansion publications by the Ministry of Science, Technology, Innovation increase in direct emissions is due to the gradual replacement of our operations. Although electricity consumption in the and Communications. of the R-22 coolant gas used in our refrigeration equipment network has remained stable, the average annual emission and the increase of GHG emissions by vehicles. In spite of its potential for global warming, R-22 is regulated by the 2015 (tCO2e) 2016 (tCO2e) 2017 (tCO2e) Δ 2016/2017 Montreal Protocol on substances which destroy the ozone layer. In compliance with the guidelines for preparing corporate Stationary sources 2,122 1,191 534 (55%) inventories, unintentional emissions due to leakages of R-22 gas Vehicles 1,863 3,32014 4,380 32% are not included in the inventory, but those of its replacement, Fugitive emissions 12 9 449 1, 017 126% the R-410A gas, are included. Total emissions Direct (scope 1)15 4 ,115 4,96114 5,930 20% Biogenic 6,459 5,50914 5,430 (1%) Indirect (scope 2) 11,302 7, 214 14 8,061 12 %

14 Figures corrected during an audit after the publication of the 2016 Sustainability Report. 15 Refers to the following greenhouse gases (GHGs) regulated under the Kyoto Protocol: CO2, CH4, N2O and the family of hydrofluorocarbons (HFCs).

Algar Telecom - Sustainability Report 2017 Social and environmental management 55 ISO 14001 Other initiatives We have been awarded the ISO14001 certificate, which is related to the environmental management system, both for Online invoices for customers, avoiding the use of large Algar Telecom and for Algar Tech. The companies are submitted volumes of paper. to annual audits for renewal of the certificate. The certificates Internal Water Conservation Commission, to introduce new were renewed in 2017, and have now been held for seven years initiatives to prevent waste. in a row. This time we applied the new version of the standard Initiatives for sustainable travel, such as a car-sharing club and (published in 2015), one year in advance of the latest year substitution of gasoline by ethanol for our fleet of vehicles. permitted for updating the criteria. Planting of saplings, urban afforestation and recovery of degraded areas. Selective collection, treatment of solid waste, responsible Reverse logistics disposal, recycling and reuse. Meetings held by videoconference, to avoid travel. In line with the National Solid Waste Policy (PNRS), we apply Eco-efficient buildings, with more use of solar energy. reverse logistics for the electronic devices which we release Consumption reduced by 235 boxes of paper towels and into the market, ensuring that they are properly disposed 895 boxes of disposable cups (Algar Tech). of. We have collection points for people – whether or not System for collecting and reusing water from the air-conditioning our customers – to deposit batteries, cell phones (including plants for secondary use at the unit (Algar Tech). those of other operators) or any other electronic devices. The material is taken from the collection points each month and put through a process of separation, and parts that can be reused are returned to the manufacturers; we collected more than 2 tons of electronic equipment in 2017. Subsequently, every six months, the remaining items are sent to specialist recycling More information on companies which handle potentially hazardous products. In 2017, we also collected more than 50 tons of paper for recycling – environmental initiatives can be telephone guides and directories. found at Instituto Algar

Algar Telecom - Sustainability Report 2017 Social and environmental management 56 Performance in 2017

In 2017, we saw the expansion of our business. We focused our actions on radial expansion and on increasing the number of installed networks Algar Telecom - Sustainability Report 2017 Performance in 2017 57 OPERATING Telecom B2B The year 2017 saw an expansion of our business. For our corporate customer business we PERFORMANCE opened operations in 24 new cities, mainly in the south of the country, exploiting and expanding the fiber optic network acquired at the end of 2015. We expand radially (to places within a circle surrounding our existing areas of operation) and by intensifying the use of installed networks. In addition to the southern region, we opened for business in eight cities in the southeast, and currently we operate in 250 cities on top of the 87 where we have concessions.

The Monet submarine cable will connect the cities of Praia Grande (SP) and Fortaleza (CE) with Boca Raton (Florida, USA) and will support our expansion in the northeast region of Brazil, as well as cutting leasing costs for our international connections.

At the end of 2017, we had 95,377 B2B customers, 10 , 919 of them corporations.

B2B operating data 2 015 2 016 2 017 Δ 2016/2017 Number of customers (units) Total 100,015 108,686 95,377 (12.2%) Corporate 7,884 10,000 10 , 919 9.2% Small and micro company 92,131 98,686 84,458 (14.4%) segment (SME)

Note: The fall in the number of SME customers between the fourth quarter of 2016 and 2017 was due to the reclassification of 23,724 customers in January 2017, which were transferred to B2C.

Algar Telecom - Sustainability Report 2017 Performance in 2017 58 Telecom B2C Tech – BPO/IT Management

With a strategy of converging offers, combining fixed and In 2017 the Tech segment improved its operating performance, mobile broadband, fixed and mobile telephony, pay TV and although this does not show up in book EBITDA because value-added services, the number of Algar Telecom’s Revenue of customer demobilization costs and structuring expenses Generating Units (RGUs) from B2C customers rose 3.6% in 2017 (strategic projects). We gained more than 30 new customers, to about 2.3 million, year on year. mainly in Technology Environment Management services, and some major names in Customer Relationship Fixed broadband performed particularly well, with 436 thousand Management. We launched our first cognitive customer service/ accesses in 2017, 12.1% more than in 2016. We increased our ultra- debt renegotiation agent (Duda), and other applied artificial broadband base (speeds from 10 Mbps to 200 Mbps) by 34.2%. intelligence solutions. With our partners in technology, we This modality now accounts for 46% of the total of B2C fixed initiated new Digital Customer Service operations. broadband customers and is now available in 30 more cities.

Revenue-generating units

B2C operating data 2 015 2 016 2 017 Δ 2016/2017 Revenue-generating units (thousands) 2,098 2,188 2,267 3.6% Fixed broadband 356 389 436 12.1% Up to 10 MB 248 240 236 (1.7%) More than 10 MB 10 9 14 9 200 34.2% Fixed telephony 492 507 535 5.5% Mobile telephony 1,15 4 1,204 1,206 0.2% Post-paid accounts 235 285 302 6.0% Pre-paid accounts 919 919 904 (1.6%) Pay TV 96 88 90 2.3%

Algar Telecom - Sustainability Report 2017 Performance in 2017 59 See below, and on the next pages, the main performance highlights for 2017. Our financial ECONOMIC AND statements are fully available on Algar Telecom’s website. FINANCIAL PERFORMANCE Consolidated gross revenue GRI 201-1 Algar Telecom’s consolidated gross revenue amounted to R$3,557.4 million, against the R$3,314.0 million recorded in the previous year, a rise of 7.3% thanks mainly to increased income from the Telecom segment. The result reflects our growth strategy, which includes geographical expansion, a review of our portfolio of products and services, and offers aimed at boosting customer satisfaction and loyalty.

R$ millions 2015 2 016 2 017 Δ 2016/2017 Gross revenue 3,092.1 3,314.0 3,557.4 7.3% Telecom 2,229.2 2,413.1 2,606.2 8.0% B2B 1,220.4 1,354.8 1,444.8 6.6% B2C 1,074.0 1,104.8 1,193.9 8.1% Eliminations Telecom (65.2) (46.5) (32.5) - Tech – BPO/IT Management 862.9 900.9 951.2 5.6% Tech – BPO/IT Management 905.4 944.1 1,000.6 6.0% Eliminations (42.5) (43.2) (49.4) 14.4% Taxes and deductions (673.7) (769.1) (841.9) 9.5% Net revenue 2,418.4 2,544.9 2,715.5 6.7%

Algar Telecom - Sustainability Report 2017 Performance in 2017 60 Gross Telecom revenue increased by 8.0%, of which 6.6% corresponds to B2B, boosted by an 8.8% growth in corporate customers, and 8.1% in B2C

Telecom B2C – revenue from B2C customers in 2017 totaled R$1,193.9 million, against R$1,104.8 million in the previous year. The number Revenue from the Telecom segment grew 8.0% to a total B2B – revenue from B2B customers, accounting for 55% of Revenue Generating Units for B2C customers rose to 2,267 of R$2,606.2 million, accounting for 73% of the total. This of total Telecom revenue, reached R$1,444.8 million for the thousand, 3.6% more than in 2016. This increase was due to our increase is the result of good performance both in the B2B year. This performance is a consequence of our strategy for package strategy, with a combination of services of which the main segment, where revenue went up by 6.6% due to an 8.8% geographical expansion, focusing on the supply of voice, one is high-speed broadband. At the end of 2017, 46% of retail increase in numbers of corporate customers, and in B2C, which data and IT services to small, medium and large companies. broadband customers had plans for speeds of more than 10 Mbps. improved by 8.1% during the year. The change in revenue With its modern, high-quality network and close, personal from B2B and B2C between 2016 and 2017 was affected relationships (advisory service), the Company has gained new by a reclassification carried out by the Company in January customers in the regions where we operate. During the last 2017, when 23,724 customers previously served by the small year, Algar Telecom has consolidated its presence in the south Tech – BPO/IT Management companies market (SME) were transferred to B2C (retail). The of Brazil, where we started operating at the end of 2015 after aim of this change was to provide a customer service channel taking over a regional company. Since then we have opened Consolidated gross revenue from the Tech segment amounted more in line with the needs of these customers. If we ignore for business in 24 new cities, 16 of them in the southern region to R$951.2 million in 2017, a 5.6% year-on-year increase. This was this reclassification, the annual growth in revenue was 7.9% for and 8 in the south east. At the end of 2017, Algar Telecom had a due mainly to higher revenue from Telecom Service Management B2B customers and 6.5% in B2C. total of 95,377 B2B customers. and Technology Environment Management.

Algar Telecom - Sustainability Report 2017 Performance in 2017 61 Net operating revenue Operating costs and expenses

In 2017, net operating revenue of Algar Telecom’s consolidated Consolidated operating costs and expenses, excluding Tech segment, with the recognition of R$33.0 million in non- Telecom and Tech business segments stood at R$2,715.5 million amortization and depreciation, totaled R$1,935.5 million in recurring effects, namely: (I) R$12.0 million in labor provisions – an increase of 6.7% against 2016. 2017, 5.5% higher than in 2016, but growing less than revenue for for proceedings arising from the BPO operation, with the the same period. Business growth was responsible for the rise, cancellation or reduction of the scope of contracts during particularly personnel costs (+2.6%) and leases and insurance Brazil’s recent economic crisis; (II) R$11.5 million in business (+8.6%). Another factor responsible for this increase was the restructuring costs; and (III) R$9.5 million in PDD resulting from Net operating revenue organizational transformation, which led to adjustments in the one-off recognition of debts under judicial dispute. 2,715.5

Operating costs and expenses (R$ million) 2 015 2 016 2 017 2,544.9 Personnel (852.0) (946.3) (970.6) Materials (49.9) (62.8) (59.1) 2,418.4 Third party services (461.5) (464.4) (465.5) Interconnection and connection media (175.8) (129.7) (126.3) Advertising and Marketing (33.3) (38.8) (41.3) PDD (31.0) (33.7) (34.8) Leases and insurance (94.6) (164.8) (179.0) 2 015 2 016 2 017 Others* (78.6) 5.6 (58.9) Total (1,776.6) (1,834.9) (1,935.5) *Includes other operating revenue (expenses)

Algar Telecom - Sustainability Report 2017 Performance in 2017 62 EBITDA The consolidated EBITDA amounted to Consolidated EBITDA amounted to R$780.0 million, an increase EBITDA for the Telecom segment was R$716.7 million in 2017, of 9.9% compared with 2016, with a margin of 28.7%, against growth of 13.1% over 2016. The margin, in turn, went up from R$780.0 million, up by 27.9% in the previous year. This change is the result of a better 36.0% to 38.0%. The change is mainly due to the increase of the 9.9% against 2016 performance by the Telecom segment in 2017. share of B2B customers in the Company’s revenue, and to our efforts to achieve greater operating efficiency.

The Tech - BPO/IT Management segment ended the year R$ in millions 2 015 2 016 2 017 Δ 2016/2017 with R$63.3 million in EBITDA, 17.2% below the figure for 2016. The margin was 7.2%, against 9.1% in the previous year. 2017 Telecom was a year of changing emphasis in the Tech segment. The EBITDA 537.2 633.5 716.7 13.1% macroeconomic crisis led to the cancellation of some contracts Margin 32.6% 36.0% 38.0% - with customers and a reduction of the scope of others. At BPO/IT the same time, we recognized a total of R$33 million in non- Management recurring costs, as explained above. To face these challenges, we EBITDA 104.6 76.5 63.3 (17.2%) have implemented a major program for operating efficiency, and Margin 13.6% 9.1% 7.2% - the results have been exceeding the targets we set. Excluding CONSOLIDATED one-off effects for the year, the EBITDA margin was 11%, 2 EBITDA 641.8 710.0 780.0 9.9% percentage points higher than in 2016. Margin 26.5% 27.9% 28.7% - Depreciation and amortization Algar Telecom - Sustainability Report 2017 Performance in 2017 63 Debt

Depreciation and amortization totaled R$327.0 million in 2017, Gross and net debt of Algar Telecom as at December 31, 2017, 3.0% higher year on year. The rise is due to a higher level of stood at R$1,613.1 million and R$1,401.1 million, respectively, limits imposed by internal and external covenants. The debt investment in the Telecom business, in projects which have against R$1,434.3 million and R$1,262.8 million in 2016. The profile is long-term, with 21% falling due in the short term already became operational for modernizing and expanding our increase of R$178.8 million in gross debt is explained by funds and 60% with maturities longer than 2 years, a comfortable networks and the quality of our services. raised to finance part of the year’s investments, which totaled level for the Company. The net debt/EBITDA ratio is 1.8x. As at R$542 million. Net debt, in turn, grew by 10.9%, and the December 31, 2017, 47% of the debt was indexed to the IPCA, Company ended 2017 with a cash balance of R$212.0 million. 45% to the CDI rate, 6% to TJLP, and 2% was at fixed rates. Net financial result Algar Telecom continues to show leverage ratios below the The net financial result for the Company was R$141.7 million in 2017, a drop of 10.2% (R$16.1 million) compared with 2016. Lower financial expenses, in spite of higher debt balances, were mainly the result of the fall in the average rates of the indexers. The average interbank deposit (CDI) rate fell from 14.00% in 2016 to 9.93% in 2017, while the IPCA inflation index was down from Schedule of repayment of gross debt (R$ million) 6.29% to 2.94%. The official long-term interest rate (TJLP), in turn, went from 7.50% in 2016 to 7.13% in 2017.

In 1 year 21 % 331.8

Net income From 1 to 2 years 19 % 302.9

Algar Telecom ended the year 2017 with net income of R$229.6 From 2 to 3 years 8% 135.7 million, against R$183.6 million in 2016. The margin on net operating revenue rose to 8.5% from 7.2%. The change in net From 3 to 4 years 16 % 264 income, even with a higher level of depreciation, is due to an increase in operating cash generated, measured by EBITDA, After 4 years 36% 578.7 and a lower volume of financial expenses.

Algar Telecom - Sustainability Report 2017 Performance in 2017 64 Investments (R$ million)

542 501 508 55 113 Growth of networks 12 4 and customers 110 40 48 BPO/IT Management 30 Operations maintenance Most investments carried out

389 Acquisition of in 2017 aimed at expanding our 336 Telecom company 306 networks, a focus on updating and growing broadband networks

2 015 2 016 2 017

Investments Value Added Statement (VAS)

Investments in 2017 amounted to R$542.0 million. The greater part of these funds (72%), R$389.3 This represents the economic value generated by our business which we share with the public. million, was channeled into network expansion – in particular the infrastructure necessary to In 2017, our operations generated net added value of R$2,342 million, against R$2,182 million in provide data services to B2B customers, the modernization and expansion of broadband networks, 2016. This means that of every R$1 of gross revenue, Algar Telecom distributed R$0.63 to the taking fiber optics to homes instead of metal cables, and expanded mobile networks. The Tech public. The greater part was directed to employees, in the shape of salaries and benefits, and segment16 accounted for 7% of the funds (R$39.5 million) and R$113.2 million (21%) was used for to the government as taxes, charges and contributions. operational maintenance and to ensure the quality of services.

16 The amount of investments in the Tech - BPO/IT Management segment was adjusted, in relation to the figure previously disclosed.

Algar Telecom - Sustainability Report 2017 Performance in 2017 65 VAS - in million of R$ 2 015 2 016 2 017

1. Revenue 3,137 3,430 3,660 Sales of goods and services 3,092 3,314 3,557 Other revenue 76 15 0 13 8 Provision for doubtful debts (31) (34) (35) 2. Inputs purchased from third parties (917) (930) (992) Cost of goods and services sold (5,780) (555) (579) Materials, energy, third party services etc. (338) (376) (413) 3. Value added (gross) 2,220 2,500 2,669 4. Retentions (288) (318) (327) Depreciation, amortization and depletion (288) (318) (327) 5. Net value added 1,931 2,182 2,342 6. Value added received in transfer 47 60 52 Financial revenue 47 60 52 7. Total value added for distribution 1,978 2,242 2,394 8. Distribution of value added 1,978 2,242 2,394 Personnel and charges 801 888 893 Tax, charges and contributions 750 867 985 Interest and leases 2 74 303 286 Dividends 50 63 77 Earnings retained for the year 10 3 121 15 3

Algar Telecom - Sustainability Report 2017 Performance in 2017 66 Outlook for 2018

Our target in 2018 will be to position the Company as a national solution by maintaining our accelerated growth

Algar Telecom - Sustainability Report 2017 Outlook for 2018 67 VISION OF THE FUTURE

Economic instability and the delicate political situation in Brazil, guarantee a working climate in which our employees will always particularly in 2016 and 2017, presented us with a challenge in feel motivated, challenged and satisfied. further developing digital platforms, offering more complete packages which contributed to customer loyalty. In the fixed network we intend to increase the number of customers with ultra-broadband; and in the mobile network, we Our goal for 2018 is to position ourselves increasingly as a shall expand our supply of 3G, 4G and 4.5G – which is already country-wide solution, maintaining our rate of growth, with the operating in Uberlândia, Uberaba and Ituiutaba (MG) – to give prospect of opening up the northeast frontier through our pair customers more access to high-speed data services. of optic fiber cables in the Monet submarine project. Algar Tech undertook a number of initiatives in 2017 to improve In 2018 we are going to invest in expanding networks and operating efficiency, increase digital interactions and reduce levels of increased usage of existing ones, and we shall pursue our default. These initiatives have prepared us to reach greater heights in technological innovation programs, which enable us to 2018, with new product offers on a digital platform and more migra- offer high quality service and maintain close relationships tion to the cloud, which will be introduced in the first half of 2018. with our customers. To provide advisory services we shall have a service structure for large corporate customers We are confident that Brazil’s economy will resume growth in 2018 which is separate from the structure for small and and that there will be higher demand for our products and solutions medium companies. as a result. We are enhancing processes, evolving in business intelligence, and reinforcing the training of our sales team. And so we We plan to maintain our rate of growth, underpinned by the are ready to take advantage of economic growth, and well placed to unique quality of the services we offer our customers, and to conquer new markets, offering superior quality and service.

Algar Telecom - Sustainability Report 2017 Outlook for 2018 68

Our 2017 Sustainability Report contains information about Algar Telecom and its subsidiaries, ABOUT relating to governance, strategy and performance. This document has been prepared on the basis of the guidelines issued by the Global Reporting Initiative (GRI) organization for the twelfth consecutive year. This methodology ensures the materiality, transparency and comparability of the THE REPORT report. This year we have adopted the G4 version of the guidelines for the GRI Standards, using GRI 102-3 | 102-45 | 102-50 | 102-51 | 102-52 | 102-53 | 102-54 | 102-56 the “core” option.

You will find details of our key challenges and accomplishments during the period from January 1 to December 31, 2017. The indicators are shown, when applicable, going back two years, to enable results for the different years to be compared.

The financial information included is based on the IFRS (International Financial Reporting Standards), and has been audited by E&Y. The social and environmental performance indicators For more information about this publication, please contact were calculated and confirmed internally, and have not been subject to external verification. Algar our Investor Relations department: Telecom regularly submits its indicators for greenhouse gas emissions to external verification, and [email protected] the results are made available after publication of this Report. (34) 3256-2978 Rua José Alves Garcia, 415 – Bairro Brasil The report is available on the Algar Telecom website, which also contains a section for evaluation. Uberlândia- MG (headquarters of Algar Telecom) We encourage readers to send us suggestions, criticisms and comments on the content and format of the report.

Algar Telecom - Sustainability Report 2017 69 How did we select the topics for the report?

GRI 102-46 | 103-1 | 102-48 | 102-49 | 102-40 | 102-42 | 102-43 | 102-44

The topics covered in this report were selected from community, which are the parties with the closest relationship a materiality matrix based on a survey of our strategic to the Company and which, therefore, are aware of the stakeholders in 2016. At the time, we researched the most issues that have the most impact on our business and on our important items about the Company published in the media relationship with society and with the environment. (newspapers, websites, blogs, forums and social networks) and compared the reports of other companies (in the same Within the Company, we interviewed senior management about sector, selecting those that are benchmarks in sustainability the same issues. This analysis enabled us to select the six topics reports). From this we extracted a list of 25 topics, and arranged considered to be of most significance for Algar Telecom in the discussion forums and quantitative surveys of employees, eyes of its stakeholders – and this is what the materiality matrix customers, suppliers, creditors and entities representing the illustrates in graphic form.

Algar Telecom - Sustainability Report 2017 70 + 25 13 06 MATERIALITY 14 24 11 18 19 MATRIX 17 05 09 02 GRI 102-47 22 08 10 01 23 12 Priority for Stakeholders Priority 07 21 15 20 04 03 - 16 - Priority for Senior Management +

To interpret the matrix, observe that there are three different icons, which ECONOMIC TOPICS SOCIAL TOPICS represent three categories of topic: social (blue icon), environmental (green) 1. Economic performance 11. Compliance with laws and regulations and economic (orange). On the horizontal axis you can see the rating of 2. Market presence 12. Management of labor relations topics in the assessment of senior management, while the vertical axis 3. Indirect economic impacts 13. Combating child labor shows the views of the other stakeholders we consulted. As the matrix 4. Procurement practices 14. Training and education shows, social issues predominated. 15. Complaint mechanisms related to impact on society ENVIRONMENTAL TOPICS 16. Communications and marketing The figures with icons beside them refer to the topics listed in the survey. 5. Use of materials and recycling 17. Compliance with laws and regulations on The quadrants on the right contain the six most important topics in the view 6. Energy consumption products and services of the Company and its strategic stakeholders, and so these are the ones 7. Management of and impact on biodiversity 18. Occupational health and safety given priority for inclusion in the report; they are highlighted in the table. 8. Greenhouse gas (GHG) emissions 19. Customer privacy 9. Electronic waste 20. Assessment of labor practices of suppliers 10. Environmental impact of use of products 21. Management of customer health and safety and packaging 22. Protection of children and adolescents 23. Access to telecommunication products and services 24. Non-discrimination 25. Anti-corruption

Algar Telecom - Sustainability Report 2017 71 GRI REMISSIVE INDEX

GRI 102-55

Algar Telecom - Sustainability Report 2017 72 General Disclosures Page/Response Strategy and Analysis

102-14 Statement from the most senior decision-maker of the organization about the relevance of sustainability 3

Organizational Profile 102-1 Name of the organization 10 102-2 Primary brands, products, and services 10 102-3 Location of the organization’s headquarters 69 102-4 Number of countries where the organization operates 10, 14 102-5 Nature of ownership and legal form of the organization 10, 27 102-6 Markets served by the organization 10, 14 102-7 Scale of the organization 6, 75 102-8 Total number of employees by employment contract and gender 38, 75 102-41 Percentage of total employees covered by collective bargaining agreements 38 102-9 Description of the organization’s supply chain 47 Significant changes during the reporting period regarding the organization’s size, structure, ownership, 102-10 3, 10 or supply chain 102-11 Whether and how the precautionary approach or principle is addressed by the organization 32 102-12 Social charters, principles, or other initiatives to which the organization subscribes or which it endorses 27, 33, 49 102-13 Memberships of associations 24, 27 Identified Material Aspects and Boundaries 102-45 Entities included in the consolidated financial statements 69 102-46 Defining report content and topic Boundaries 70 102-47 List of material topics 71 103-1 Explanation of the material topic and its Boundary 70 102-48 The effect of any restatements of information given in previous reports 70 102-49 Significant changes from previous reporting periods in the list of material topics and topic Boundaries. 70 Stakeholders Engagement 102-40 A list of stakeholder groups engaged by the organization. 70 102-42 The basis for identifying and selecting stakeholders with whom to engage. 70 102-43 Approach to stakeholder engagement 70 Key topics and concerns that have been raised through stakeholder engagement and actions taken by 102-44 70 the organization to address them

Algar Telecom - Sustainability Report 2017 GRI remissive index 73 Report Profile 102-50 Reporting period for the information provided. 69 102-51 Date of most recent report 69 102-52 Reporting cycle 69 102-53 The contact point for questions regarding the report or its contents 69 102-54 Reporting according to GRI standards 69 102-55 GRI Content Index 72 102-56 Policy and current practice with regard to seeking external assurance for the report 69 Governance 102-18 Governance structure 27 Ethics and Integrity 102-16 Values, principles, standards, and norms of Behavior 5, 27, 32

Topic-specific Disclosures Category: Economic Topic: Economic Performance 103-1, 103-2, 103-3 Management Approach 60 201-1 Direct economic value generated and distributed 60 Category: Environmental Topic: Energy 103-1, 103-2, 103-3 Management Approach 53 302-1 Energy consumption within the organization 53 Category: Social Topic: Anti-corruption 103-1, 103-2, 103-3 Management Approach 32 205-3 Confirmed incidents of corruption and actions taken 32 Topic: Customer Privacy 103-1, 103-2, 103-3 Management Approach 45 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data 45 Topic: Compliance 103-1, 103-2, 103-3 Management Approach 33 419-1 Monetary value of fines and total non-monetary obligations are not complied with laws and regulations 33

Algar Telecom - Sustainability Report 2017 GRI remissive index 74 SUPPLEMENT TO GRI INDICATORS Number of 2 015 2 016 2 017 ∆% employees by region Men Women Men Women Men Women Men Women PROFILE OF EMPLOYEES GRI 102-7 | 102-8 Southern region 270 41 240 39 322 177 34% 332%

Southeastern region 7,266 7,660 7,249 7, 313 6,999 6,605 (3%) (14%)

Midwestern Region 373 63 485 78 501 82 3% 30% Number of employees 2 015 2 016 2 017 ∆% Northeastern Region 229 13 348 11 443 14 27% 8% by functional level Men Women Men Women Men Women Men Women Executive 10 3 32 10 0 29 93 30 (7%) (6%) Northern Region 56 3 78 1 74 2 (5%) (33%) Non executive 8,268 7,784 8,516 7, 470 8,557 6,966 3% (11%) Argentina 10 6 16 97 13 12 2 15 25% 15%

Total per gender 8,371 7, 816 8,616 7,499 8,650 6,996 3% (10%) Chile 6 2 5 2 0 0 (100%) (100%)

Total 16,187 16 ,115 15,646 (3%) Colombia 65 18 99 34 10 4 39 5% 15 %

Mexico - - 15 8 85 62 467% 675%

Number of employees 2 015 2 016 2 017 ∆% Total by gender 8,371 7, 816 8,616 7,499 8,650 6,996 3% (10%) by type of contract Men Women Men Women Men Women Men Women Total 16,187 16 ,115 15,646 (3%) Determined period 39 25 4 1 19 11 375% 1,000%

Undetermined period 8,332 7, 791 8,612 7,498 8,631 6,985 0.2% (7%) Total employees 2 015 2 016 2 017 ∆%

Total by gender 8,371 7, 816 8,616 7,499 8,650 6,996 0.4% (7%) by age bracket Men Women Men Women Men Women Men Women

Total 16,187 16 ,115 15,646 (3%) Less than 30 years of age 3,948 4,527 3,889 4,305 3,805 4,075 (2%) (10%)

Between 30 and 50 4,073 3,043 4,398 2,989 4,437 2,718 1% (11%) Number of employees 2 015 2 016 2 017 ∆% years of age by type of job Men Women Men Women Men Women Men Women More than 50 years 350 246 329 205 408 203 24% (17%) Full-time 6,724 2,664 7,000 2,625 6,613 2,331 (6%) (13%) of age Part-time 1,647 5,152 1, 616 4,874 2,037 4,665 26% (9%) Total by gender 8,371 7, 816 8,616 7,499 8,650 6,996 0% (10%) Total by gender 8,371 7, 816 8,616 7,499 8,650 6,996 0% (10%) Total 16,187 16 ,115 15,646 (3%) Total 16,187 16 ,115 15,646 (3%)

Algar Telecom - Sustainability Report 2017 Supplement to GRI indicators 75 TURNOVER

2 015 2 016 2 017 Turnover by gender Engagement Engagement Engagement Admissions Departures % Turnover Admissions Departures % Turnover Admissions Departures % Turnover Rate % Rate % Rate %

Men 3,169 3,327 20% 20% 3,458 3 , 216 21 % 21 % 3,120 3,005 20% 20% Women 3,245 4,473 20% 24% 2,976 3,290 19 % 19 % 3,088 3,232 20% 20% Total 6,414 7,800 40% 44% 6,434 6,506 40% 40% 6,208 6,237 40% 40%

2 015 2 016 2 017 Turnover by age bracket Engagement Engagement Engagement Admissions Departures % Turnover Admissions Departures % Turnover Admissions Departures % Turnover Rate % Rate % Rate % Less than 30 years of age 4,360 5,029 27% 29% 4,201 3,813 26% 25% 4,360 3,951 28% 26% Between 30 and 50 years of age 1,939 2,559 12 % 14 % 2,074 2,479 13 % 14 % 1,767 2,154 11 % 12 % More than 50 years of age 115 212 1% 1% 15 9 214 1% 1% 81 13 2 1% 1% Total 6,414 7,800 40% 44% 6,434 6,506 40% 40% 6,208 6,237 40% 40%

2 015 2 016 2 017 Turnover by region Engagement Engagement Engagement Admissions Departures % Turnover Admissions Departures % Turnover Admissions Departures % Turnover Rate % Rate % Rate % Southern region 218 90 1% 1% 75 10 7 0% 1% 332 115 2% 1% Southeastern region 5,892 7,499 37% 41% 5,533 5,897 34% 35% 5,164 5,584 33% 34% Midwestern Region 177 12 3 1% 1% 327 200 2% 2% 258 244 2% 2% Northeastern Region 10 4 62 1% 1% 277 16 0 2% 2% 185 81 1% 2% Northern Region 23 26 0% 0% 76 56 0% 0% 34 33 1% 0% Argentina 0 0 0% 0% 42 54 0% 0% 50 40 0% 0% Chile 0 0 0% 0% 0 1 0% 0% - 4 0% 0% Colombia 0 0 0% 0% 81 31 1% 0% 54 69 0% 0% Mexico 0 0 0% 0% 23 0 0% 0% 131 67 1% 1% Total 6,414 7,800 40% 44% 6,411 6,506 40% 40% 6,208 6,237 40% 40%

Algar Telecom - Sustainability Report 2017 Supplement to GRI indicators 76 Training programs

Distance Learning

Distance learning Courses Participants Participations training programs

Algar Telecom (by UniAlgar) 250 2,844 25,357

Algar Tech (by UniAlgar) 250 720 6,451

Algar Tech (operational) 252 8,628 41,191

Total 502 12,192 72,999

2 015 2 016 2 017 Functional Category Men Women Total Men Women Total Men Women Total Working hours 6,329 2,255 8,584 4,833 1, 612 6,445 2,087 980 3,066 Total employees in the category - Executive 10 3 32 13 5 10 0 29 12 9 93 30 12 3 number of employees Hours/employee 61 70 64 48 56 50 22 33 25 Working hours 295,103 558,031 853,134 306,195 732,833 1,039,028 366,451 468,819 835,270 Total employees in the category - Non-Executive 8,268 7,784 16,052 8,516 7, 470 15,986 8,557 6,966 15,523 number of employees Hours/employee 36 72 53 36 98 65 43 67 54 Working hours 301,432 560,286 865,221 311,028 734,445 1,045,473 368,537 469,799 838,336 Total Total – number of employees 8,371 7, 816 16,187 8,616 7,499 16 ,115 8,650 6,996 15,646 Hours/employee 36 72 53 36 98 65 43 67 54

Algar Telecom - Sustainability Report 2017 Supplement to GRI indicators 77 Algar Telecom S/A CORPORATE CNPJ: 71.208.516/0001-74 Phone No.: (55 34) 3256-2978 INFORMATION Email: [email protected] Website: ri.algartelecom.com.br Address: Rua José Alves Garcia 415, Bairro Brasil Uberlândia, Minas Gerais – Brazil, CEP 38400-668

Algar Telecom www.algartelecom.com.br

Algar Tech www.algartech.com

CREDITS Coordination Algar Telecom – Investor Relations Office

Text, editing, GRI consulting and English version MZ GROUP’’

Graphic Design Project and layout MZ GROUP’’

Images Algar’s internal image bank, Deposit photos and Shutterstock

Algar Telecom - Sustainability Report 2017 78