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Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

 

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	Investors Relations
	(55 61) 415-1140
	ri@brasiltelecom.com.br www.brasiltelecom.com.br/ir/
	Media Relations
	(1 212) 983-1702
	ivette.almeida@annemcbride.com

FREE TRANSLATION

BRASIL TELECOM S.A.
Publicly Traded Company
Corporate Taxpayer Registration CNPJ/MF N° 76.535.764/0001-43
Board of Trade NIRE 53 3 0000622 9

NOTICE TO SHAREHOLDERS
CAPITAL INCREASE

BRASIL TELECOM S.A. (“BT” or “Company”) informs that its Board of Directors, on a meeting held on March 18, 2004, approved a capital increase, as described below.

According to the corporate restructuring approved on the Shareholders’ Meeting held on December 28, 2000, TBS Participações S.A. (“TBS”) and Companhia Riograndense de Telecomunicações (“CRT”) were incorporated by BT. The objective of this restructuring was the rationalization of the internal processes and the possibility of using the tax benefit of R$321,856,253.89 (three hundred twenty-one million, eight hundred fifty-six thousand, two hundred fifty-three reais and eighty-nine centavos), generated by the goodwill of R$946,636,040.84 (nine hundred forty-six million, six hundred thirty-six thousand, forty reais and eighty-four centavos), paid for the acquisition of the control of CRT, that will be amortized in 5 years, in compliance with the Comissão de Valores Mobiliários – CVM (Brazilian Securities and Exchange Commission) Instruction 319/99.

In 2003, BT amortized 12/60 of the goodwill corresponding to R$189,327,208.20 (one hundred eighty-nine million, three hundred twenty-seven thousand, two hundred and eight reais and twenty centavos), resulting in tax savings of R$64,371,250.79 (sixty-four million, three hundred and seventy-one thousand, two hundred and fifty reais and seventy nine centavos), that will be used to increase the capital and the share subscription goodwill reserve, in compliance with CVM rules.

The beneficiary of this credit is Brasil Telecom Participações S.A. (“BTP”), in a proportion of 74.85% and the remaining shareholders of BT as of December 28, 2000, whose names are listed on the Depositary Institution for shares issued by the Company – Banco Bradesco S.A., in a proportion of 25.15%, which will receive shares issued under this capital increase and/or cash, in the case of the BT shareholders exercise the preemptive rights, in conformity with the protocol of merger (Protocolo de Incorporação) and reasons for merger (Justificação da Incorporação) of CRT by BT.

The following table shows the capital increase booked until this moment:

FISCAL YEAR	DATE OF CAPITAL INCREASE	TOTAL AMOUNT OF SHARE SUBSCRIPTION	NUMBER OF SHARES ISSUED	CLASS	SUBSCRIPTION PRICE	AMORTIZATION
2000	03/23/2001	R$5,364,270.84	405,156,408	Preferred	R$13.24	1/60
2001	03/27/2002	R$64,371,250.11	6,398,732,615	Common	R$10.06	12/60
2002	03/17/2003	R$64,371,250.79	6,032,919,474	Common	R$10.67	12/60

Total Amount of Share Subscription:
R$64,371,250.79

Total Amount of Capital Increase:
R$28,147,220.05

Total Amount of the Share Subscription - Goodwill Reserve Increase:
R$36,224,030.74

Number and Class of Shares to be Issued:
4,549,205,003 preferred shares, without par value.

Issuance and Subscription Price:
R$14.15 per lot of one thousand shares.

Reasons for the Issuance Price:
BT. believes that its preferred shares have considerable liquidity in BOVESPA (São Paulo Stock’s Exchange) and for that reason the Company based the issuance price on average prices between March 4, 2004 and March 17, 2004.

The choice of using average prices in the stock exchange is based on article 170 of Law 6,404/76, which allows the use of that price in determining the economic value of shares. In addition, CVM Guideline (Parecer de Orientação) 01/78 indicates average prices as the preferred criteria for determining the economic value of shares, given that the shares have a sufficient standard of negotiability and that the market is well informed about the Company.

Conditions for Payment:
In cash upon subscription.

Period for Exercising the Preemptive Rights:
From March 19, 2004 to April 19, 2004.

Shares traded on or before March 18, 2004 shall be deemed to carry subscription rights. From and after March 19, 2004, shares shall be traded without subscription rights.

Number of Shares to Be Subscribed under Preemptive Rights:
In order to determine the number of shares to be subscribed under preemptive rights, the shareholder should multiply the number of shares held on March 18, 2004 by the following factors:

Class of Shares	Factor	Class of Shares to be Subscribed
Common	0.008426500176	Preferred
Preferred	0.008426500176	Preferred

Note: Holders of BT American Depositary Receipts must not subscribe to purchase additional shares or American Depositary Receipts in the preemptive rights offer.

Subscription Bulletin:
In order to obtain the Share Subscription Bulletin or trade their subscription rights, shareholders must present the following documents to the Banco Bradesco S.A., depositary institution for shares issued by the Company:
a) Natural persons: Original identity card and Individual Taxpayer Registration (CPF) card, or certified copies;
b) Legal persons: Original Federal Corporate Taxpayer Registration (CNPJ/MF) card and current consolidated articles of association (contrato social) or bylaws (estatuto social). The bylaws must have attached the minutes of the shareholders’ meeting at which the current officers (diretoria) were elected. Managing partners (sócios-gerentes) and officers (diretores) with powers to represent the company must present a certified copy of their identity card, Individual Taxpayer Registration (CPF) card and proof of address.

Where shareholders are represented under power of attorney, the public instrument of grant of power of attorney and certified copies of the attorney’s identity card and Individual Taxpayer Registration (CPF) card must be presented.

• Shareholders wishing to trade their subscription rights during the period for exercising the preemptive rights should request an instrument of assignment of rights, which will be issued by the Depositary Institution for shares issued by the Company or by the Custodian Entities;
• The Custodian Entities can only issue one assignment of rights to each subscriber;
• Once an assignment of rights has been issued, a new one must be issued in the case of a new sale;
• The Custodian Entities will be able to subscribe for themselves, as fiduciary proprietary, up to the limit of shares in custody;
• A copy of the assignment of rights will not be accepted in any circumstances.

Unexercised Subscription Rights:
Unexercised subscription rights shall automatically be extinguished, once the capital increase is related to the goodwill tax credit capitalization.

Dividends:
Shares resulting from this capital increase shall carry rights to full dividends or other capital remuneration announced from this date on and relative to the 2004 fiscal year.

Services to Shareholders:
Any branch of Banco Bradesco S.A.

Brazil, Brasília, March 19, 2004.

Carla Cico
Investor Relations Officer

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