Operating cash generation of R$ 1,213.8 million, increasing Vivo’s economic value.

Operating cash flow (EBITDA-CAPEX) of R$ 1,213.8 million in the year, representing a growth of 156.3% in relation to 2006, as a result of higher increase of revenue in relation to expenses and rationalization of investments. The year-to-date operating cash flow plus the change in working capital recorded R$ 1,616.3 million, an increase of 34.2% when compared to the same period of the previous year. This flow, which is the result of a constant search for operating and financial efficiency, increases the investment capacity and Vivo’s economic value.

GSM/EDGE Network already covers 2,318 municipalities.

In its constant search for providing its customers with satisfaction and high-quality services, VIVO has not saved efforts, concentrating most of its investments in enhancing its GSM network capacity and quality. Thus, support was ensured to the commercial action of data and voice traffic, allowing the company, also, to obtain a leadership position in the achievement of Anatel’s quality goals . The 4Q07 CapEx represented 29.0% of net revenue. The total year-to-date investment was R$ 1,919.0 million, entirely meeting the agreed goal, corresponding to 15.4% of the net revenue.

VIVO’s position as the best choice, best plans and best service quality   contributed to the growth of customer base.

Increase of use and good new customers allowed ARPU growth in the quarter.

• Continued leadership with an increase in the customer base by 15.3% in relation to 4Q06 and 6.9% in relation to 3Q07, reaching 33,484 thousand customers. The varied range of offers and service plans made available by Vivo, together with the recognized quality in the rendering of services contributed to such growth. Worthy of mention, further, is the progressive increase in sales of GSM/EDGE handsets, whose activations (additions + exchanges) have already exceeded 11.2 million handsets.
  
  
• Net additions in 4Q07 totaled 2,164 thousand new customers, with a market share of net additions of 34.2% in its coverage area, keeping its market leadership both in its operational area and in the national market. Once again the activations of GSM/EDGE technology, which represent 84.7% of total activations, contributed to the steady and consistent growth. In the year-to-date figure, activations in GSM/EDGE already represent 64.5%.
  
  
• In December 2007, in its operational area, which excludes Northeast and Minas Gerais State, the market shares of new additions was 38.8%. When compared to the whole Brazilian cellular phone market, the market share of new additions reached 29.5%, the highest among all the operators.
  
  
• In the same manner, the growth in the ARPU , which recorded R$ 31.1, evidences the quality of Vivo’s present customer base even though in a period of intense growth of the customer base, continuing to focusing on capturing and keeping high and medium value customers. This evolution was also recorded in the year-to-date figure of 2007 over 2006.

  SAC reduction of 10.4% in the quarter and of 10.2% in 2007.

• SAC of R$103 in 4Q07 represents a drop of 10.4% in relation to 3Q07 and 4Q06 due to lower expenses with capture subsidies, specially as a result of increased efficiency in the owned stores, besides a reduction in advertising and commission expenses, even though during a period of intense commercial activity in 4Q07. It is important to point out that the acquisition cost in the year-to-date figure for 2007, when compared to 2006, recorded a reduction of 10.2%, mainly due to the decrease in advertising expenses and increased sales of lower cost GSM technology handsets.

Constant Churn reduction in 2007.

• Churn of 2.1% in the quarter, with a reduction of 0.4 percentile points in relation to 4Q06 and a slight drop when compared to 3Q07. In 2007, this indicator shows a constant and gradual reduction as a result of specific actions implemented with a view to loyal and activate the customer base and Vivo’s position as best quality among cellular operators. The high-value segment, represented by “premium” customers, both postpaid and prepaid, was maintained due to the increase in the service quality. The reward program has continued to contribute to customer loyalty, renewal of customer handsets and increased satisfaction with services rendered, keeping the Churn in the lowest market level.

  ON-NET traffic increase through specific campaigns.

Sustained growth of the outgoing traffic .

Customer base quality improvement increased the ARPU .

• The blended MOU was 3.9% higher than in the previous quarter. The increase in the outgoing traffic contributed to such growth, which was due to the campaigns for stimulating use for the prepaid segment, adoption of new service plans, segmented campaigns and seasonality.
  
  
• The total traffic recorded a 7.0% growth in 4Q07 in relation to 3Q07, emphasizing the 9.0% growth in the outgoing traffic. In the comparison between 4Q07 and 4Q06, the total traffic increased by 8.0% and considering only the outgoing traffic the increase is 10.6%. The inbound traffic stability arises mainly from the increase in the mobile-mobile and long-distance traffic, showing each time more the increase in mobile access as a means of personal communication, offsetting the trend of decrease in the fixed-mobile traffic.
  
  
• The blended ARPU recorded the amount of R$ 31.1 in 4Q07, an increase of 1.0% in relation to 3Q07 and of 1.6% when compared to the same period of the previous year. The outgoing ARPU increased by 6.1% over 4Q06. In the comparison of the year-to-date figure for 2007 over 2006 the ARPU growth was 11.8%, also as a result of the outgoing ARPU growth. It is important to consider that an arithmetic dilution of the ARPU results from the number of additions in the last quarter.

Consistent growth in the revenue from the outgoing traffic.

Growth of data revenue and VAS.

Service revenue grew 12.8% and total net revenue grew 14.8% in relation to 4Q06. In relation to 3Q07, the total net revenue grew by 3.8%, especially due to the increase in the revenue from subscription and usage.

The increase of 15.1% in “ subscription and usage revenue ”, when compared to 4Q06, is mainly due to the increase in the total outgoing revenue, which was due to the growth in the total outgoing traffic, by the incentive to usage and promotions and, especially, to the increase in the average recharge value per customer of 11.7%. When compared to 3Q07, there was 4.9% increase in the subscription and usage revenue, as result of customer base increase and incentive to usage with segmented campaigns.

Data revenue plus VAS accounted for 9.6% of the service revenue in 4Q07, a  63.1% nominal increase over 4Q06. In the comparison between 4Q07 and 3Q07, it recorded an increase of 21.7%. This self-supported growth is a result of the increase and diversification of WAP portfolio, contents and games through new partnerships, Vivo Zap (Mobile Internet), Flash/Desk Modem (Fixed Internet), Balck Berry and Smart Mail, launching of innovative products and services and actions designed to stimulate the use of the services currently offered (SMS, VIVO AVISA, Message Service and Voice Mail). The use of the Vivo Chip Menu (GSM exclusive) has shown to be an excellent means for offering data services. The easy access and intuitive navigation have played a decisive role for such success and there is a large growth potential because it made use easier to the customer.

Increase of 1.2% in the cost of services rendered, lower than the increase recorded in the customer base.

The increase of 7.7% in the cost of services rendered in 4Q07, when compared to 4Q06, is due to the 17.5% increase in interconnection costs, the increase in expenses with third-party services, in addition to an increase referring to rental of leased lines, offset by a reduction in the provision for losses from interconnection adjusts. When compared to 3Q07, it recorded an increase of 1.2% also due to the increase in interconnection costs, partially offset by a reduction in the provision for losses from interconnection adjusts, expenses with rental, insurance and condominium rates resulting from renegotiation and renewal of contracts.
The increase in interconnection costs and in the network usage revenue in the period, are due to the growth in the customer base and consequently in total traffic.

  Better commercial and operational efficiency.

The cost of goods sold increased by 50.3% in 4Q07 over 4Q06, especially in part due to an increased number of gross activations which accounted for 66.5% growth. In relation to 3Q07, the cost of goods sold recorded 4.6% increase arising out of more commercial activity, however being lower than the increase recorded in the additions, which was 33.3%, thus showing a substantial increase in the commercial efficiency of the company.

In 4Q07, selling expenses increased by 15.3% in relation to 4Q06, as a result of the increase in expenses with loyalty, agency and commissions. Therefore there was an increase of 7.3%, recording a reduction in the provision for bad debt between the compared periods. The year-to-date figure recorded a reduction of 8.7% mainly due to the reduction of 49.2% in expenses with the provision for bad debt.

49.2% reduction in the PDD in the year-to-date for 2007.

The Provision for Bad Debt – PDD in 4Q07 was of R$ 76.7 million, representing 1.6% of the total gross revenue, a 5.1% increase in relation to the same period of the previous year, which was R$ 73.0 million, representing 1.8% of the gross revenue. When compared to 3Q07, which recorded R$ 80.4 million, the reduction was of 4.6%. In the year-to-date figure, the PDD recorded R$ 365.7 million, representing 2.1% of the total gross revenue, a reduction of 49.2% in relation to year-to-date for 2006 which represented 4.7% of the gross revenue. This result evidences the strict control exercised over new customers, improvement of the credit policy and on debt collection.

General and administrative expenses increased by 3.6% in 4Q07 in relation to 4Q06, due, mainly, to the increase in expenses with third-party services, especially technical assistance, partially offset by a reduction in expenses with rental, insurances and condominium fees. When compared to 3Q07, it represents a growth of 3.9% arising out of the increase in third-party services, especially data processing and plant maintenance, offset by the reduction in expenses with technical assistance.

Personnel expenses climbed by 20.1% over the 3Q07, thanks to the collective wage agreement in November and payments related to the achievement of performance targets.

Other Operating Revenue / Expenses recorded revenue of R$ 40.6 million. The variation in relation to 4Q06 arises from the increase in the provision for contingencies, in addition to a reduction in the revenue from recovered expenses, due to the reversion of PIS and COFINS process (Law 9718, of 1998) that recorded R$126 million in 2006 and R$47 million in 2007, offset by the reduction in the expenses with taxes, duties and contributions. When compared to 3Q07, the variation is due to reduction in expenses with taxes, duties and contributions and an increase in revenues from recovered expenses.

Reduction in financial expenses by 24.0% in 4Q07 over 4Q06.

VIVO Participações’ net financial expense in 4Q07 was reduced by R$ 2.4 million in relation to 3Q07. If we disregard the extraordinary effect of the assessment of PIS/COFINS on the allocation of Interest on Own Capital, which occurred in 4Q07, in the amount of R$ 22.8 million, the reduction in the net final expenses would be R$ 25.2 million. Such lower net financial expense was due, mainly, to the drop in the net debt, occasioned by the generation from improved cash flow, besides a reduction in actual interest rates in the period (2.78% in 3Q07 and 2.58% in 4Q07).

In the comparison with 4Q06, there was also a reduction of R$ 35.2 million in the net financial expense, due to the drop in the net debt, besides a more significant reduction in the interest rate in the period (3.12% in 4Q06 and 2.58% in 4Q07).

In the comparison between the year-to-date figure for 2007 over 2006, the net financial expense of VIVO Participações was reduced by R$ 279.7 million, due, mainly, to the dropt in the net debt, stimulated by the strong operating cash generation, the loan facilities obtained through long-term structured transactions from incentive banks (with lower financial cost), as well as the reduction in the actual interest rate for the period (15.03% in 2006 and 11.77% in 2007).

In 2007, VIVO obtained long-term loans from incentive banks, i) BNB – Banco do Nordeste do Brasil R$ 247.3 million, of which R$ 164.8 million have been already drawn-down; ii) BNDES – Banco Nacional de Desenvolvimento Econômico e Social R$ 1.5 billion, of which R$ 605.0 million have been already drawn-down, and iii) BEI – Banco Europeu de Investimentos EUR 250.0 million, of which R$ 181.2 million have been already drawn-down.

Net Debt reduction.

The reduction in Net Debt, in the comparison between 4Q07 over 4Q06, is due to a better generation of operating cash, arising mainly from the growth in operating margins, growth in operating revenue and better working capital management.

Net Profit of R$ 28.3 million in the quarter, six times higher than in 3Q07. In the year-to-date, a loss of R$ 99.4 million. The operating profit (EBIT) in the year-to-date for 2007 was R$ 646.8 million, an increase of 219.7% in relation to 2006.