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  • 1. Vivo Participações S.A. 2Q06 Results July 21, 2006 1
  • 2. Executive Summary Challenges • Stabilize Market Share • Promote Revenue Growth Operational Highlight Increase in the post-paid outgoing revenue of 15.3% in SP and 21.2% in RJ/ES Increase in the post-paid outgoing ARPU of 4% in SP and 9% in RJ/ES Decrease in the inbound traffic with migration F-M to M-M/ Decrease in interconnection revenue Inactive clients write-off with effects in churn but without effects in revenues 2
  • 3. Introduction Strong Commercial Activity Competitive market Mother's Day/ Valentine's Day Commercial Campaigns Client Base Write-off of inactive clients Impact in Churn No effect on revenue Revenues Outgoing revenues grew in relation to 2Q05 Pressure on prices with strong competition Provision for Bad Debt(PDD) Impact of R$ 161.5 MM QoQ Normalized PDD of R$177.2 MM or 4.7% of gross revenue EBITDA Reduction due to non higher provisions Normalized value: R$467.8 MM and 18.0% margin Net Debt Manageable volume and reduction of financial costs 3
  • 4. Introduction Advances Quality : 98% of Anatel’s goals achieved Network completely authenticated 78% of client base centralized in a single billing system 57% of client base centralized on prepaid platforms 72% of client base centralized at the front office Short Term Combat Fraud and Cloning Consolidation/ Rationalization of IT/IS National Coverage Dedicated attention to Corporate Segment Corporate Restructuring Medium Term Launching of GSM’s network (overlay) Competition and evolution in 3G Maintenance of Leadership in 850MHz and better network Costs Reduction No impact of CapEx 4
  • 5. Client Base + 0.3% - 5.4% 28,446 28,525 30,138 30,348 total without write-off of clients - 8.6% 5.761 -4.4% 5.511 5.268 • Retention and loyalty programs; • Focus on the value clients; +1.4% - 4.6% 24.377 22.935 23.257 • More than 78% of the clients base integrated to the unified IT/IS platforms. 2Q05 2Q06 1Q06 Prepaid Post-paid 5
  • 6. Leadership in Distribution & Coverage Only Operator in 3G Channels of distribution Coverage 8,364 6,953 2,256 327 6,116 104 1,759 91 1,660 3,231 2,795 2,118 4,806 4,054 3,907 Vivo C1 C2 Vivo C1 C2 Retail Third Party Own Stores Municipalities Covered 6
  • 7. 2Q06 Main Marketing Actions Program based on Points Mother’s Day Soccer World Cup 2006 Change handsets using the Buy a handset and get program based on points. the second for free. Talk more Vivo Prepaid Recharge in Double When buying or changing handset, the client speaks for how long he/she wants for only R$0.30/min in local calls or long distance calls from Vivo to Vivo Vivo offers the recharge value Client speaks for free with any Vivo in bonus for local calls from or fixed phone after the 3rd minute Vivo to Vivo to speak in double. 7
  • 8. Loyalty and Retention Focus Value Clients LOYALTY RETENTION Changes for Segmented Segmented Incentive to retain Prepaid client through discounts Prepaid Offer Retention of clients through segmented offers in the exchange for a new handset keeping the such as “Right Planning” and “Vivo Smart” number Program of Points Points are added and can be used when handset is Migration Pre-Post exchanged. Balance of points is sent by SMS in a Using base segmentation, to inform to prepaid monthly basis. clients the advantages of being a Post-Paid. Overlay CDMA Incentive to change TDMA handsets for CDMA based on the program of points. Upgrade of Plans and Packages Maxime value-for-money to client and increase customer satisfaction Globalmoto Direct mail Enables value clients to acquire the Globalmoto handset at differentiated prices. 8
  • 9. Net Revenue R$ million Service Revenue Handset Revenue - 7.5% - 3.4% 2,360 2,184 2,262 -20.2% +31.4% 1,165 1,159 1,189 1,059 868 930 519 414 315 136 157 143 2Q05 2Q06 1Q06 2Q05 2Q06 1Q06 Other Services Network Usage Monthly Subscription Handsets Right Planning; Campaigns to encourage the intra network traffic; Data transmission ; Internet access cards, PDA’s and SMS. Increase in the outgoing revenues; Drop in the inbound fixed-to-mobile traffic. 9
  • 10. Data Revenue Evolution Data Net Revenue Data Net Rev./Service Net Rev. 7.7% 2Q06 7.0% 6.1% 1Q06 +14% 2Q05 2Q05 1Q06 2Q06 2Q05 2Q06 35% 35% 17% 18% 14% 21% 65% 65% WAP SMS ZAP + others 10 WAP SMS ZAP + others
  • 11. ARPU Blended Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 -15.7% -5.1% 28.6 24.1 25.4 12.7 10.4 9.7 15,5 17,3 15.9 15.0 Inbound 14.4 Outgoing 2Q05 2Q06 1Q06 11
  • 12. ARPU Post-Paid Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 - 9.1% - 5.1% 78.0 74.7 70.9 25.3 21.6 20.8 52.7 50.1 53.2 Inbound Outgoing 2Q05 2Q06 1Q06 12
  • 13. ARPU Prepaid Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 -17.4% -0.8% 15.5 12.8 12.9 9.2 6.8 7.4 6.3 Inbound 6.0 5.6 Outgoing 2Q05 2Q06 1Q06 13
  • 14. MOU Blended Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 -16.5% -2.9% 79 66 68 43 35 37 36 Inbound 31 31 Outgoing 2Q05 2Q06 1Q06 14
  • 15. MOU Post-paid Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 -4.3% +0.5% 209 200 199 82 73 76 127 127 123 Inbound Outgoing 2Q05 2Q06 1Q06 15
  • 16. MOU Prepaid Evolution 2Q05 vs. 2Q06 2Q06 vs. 1Q06 - 26.1% -2.9% 46 34 35 32 15,5 25 26 17,3 Inbound 14 Outgoing 9 9 2Q05 2Q06 1Q06 16
  • 17. SAC* Strategy focused on Acquisition of Value Clients -25.1% 2.4% 171 128 125 2Q05 2Q06 1Q06 *SAC Blended 17
  • 18. Operating Costs* Growth with Competitive Activity R$ million 382 Cost of 434 services rendered 418 152 Personnel 156 155 830 2Q05 Cost of handsets 433 1Q06 547 2Q06 809 PDD Selling 711 expenses 1002 General & 127 administrative 129 expenses 146 *Depreciation is not included. 18
  • 19. PDD* Evolution R$ million 338.7 Others 161.5 161.0 Insolvency Clients 136.6 PDD extraordinary in the 2Q06. 2Q05 1Q06 2Q06 Structure and Process Initiatives : Authentication of the Analog network and TDMA third party network already concluded; Interception of calls posted by Vivo clients in roaming, is fully implemented (“screening” of clients); “Credit Scoring” (already implemented); Strong billing actions; “Management of Consumption”. *PDD = Provision for Bad Debt 19
  • 20. EBITDA and EBITDA Margin R$ Million EBITDA EBIT 27.8% 20.8% 18.0% 11.8% 717.1 599,3 125.5 467.8 62.5 306.3 2Q05 1Q06 2Q06 EBITDA EBITDA Normalized - 299.9 EBITDA Margin EBITDA Normalized 2Q05 1Q06 2Q06 20
  • 21. Gross Debt, Net Debt and Gearing Covered Short Term Debt Gross Debt (R$ million) Net Debt (R$ million) 4,464.4 5,482.6 4,686.4 4,333.9 60% 60% 40% 40% 1Q06 2Q06 1Q06 2Q06 Short Term Long Term Gearing 8,416 7,985 4,464 4,334 0.53 0.54 Net Debt 1Q06 2Q06 Shareholder's Equity R$ million 1Q06 2Q06 21
  • 22. Net Financial Result Reduction in Financial Expenses R$ million (246.7) (213.6) (186.3) -13.3% + 14.7% 2Q05 2Q06 1Q06 22
  • 23. Capex R$ million 419.0 954.2 116.2 335.7 Total Capex 200.1 281.3 53.7 108.6 120.3 617.0 103.3 87.6 211.9 249.1 85.9 633.8 173.5 139.5 92.1 231.6 2Q05 1Q06 2Q06 Accumulated 2005 Accumulated 2006 Network Technology Others Network Technology Others % Capex/Net Rev. 14% 13% 18% 11% 12% 2Q05 1Q06 2Q06 Accumulated 2005 Accumulated 2006 Network Quality/Capacity; Main Investments Centralized systems and platforms; Corporate segment: handsets and technology. 23
  • 24. Anatel Standards Reduction in Indicators of Non-Compliance 15.0% 14.0% 12.1% 9.3% 3.8% 4.3% 3.6% 3.3% Best Performance Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Apr-06 May-06 Jun-06 Source: ANATEL (June/2006) 24
  • 25. VIVO Social Responsibility Vivo has continued with its internal voluntary program with several actions of support to visually disabled person: Opening of Vivo Voluntary Space, located at the company’s building in Rio de Janeiro, for recording of spoken books. Three courses were provided for training Vivo volunteers – audiodescription, revisers and readers. ACTIONS Production of approximately 11,000 pages of Braile books, only in June, which work was carried out by approximately 600 volunteers of the company. 25
  • 26. GSM Overlay Project Frequency Capex Construction of a GSM/EDGE We will use the frequency of • Capex to the overlay of GSM will network capable of upgrade to W- 850MHz and CDMA with EV-DO. be approximately R$ 1,080MM; CDMA to be added to the network, • Capex already included in the which will continue in full operation. Company’s plan with no impact by the balance between investments in CDMA and GSM; Reasons Advantages Competitive Differentials • Future coverage also in GSM; • Handset prices; • Higher offer of handsets and • Digital roaming facilitated by • Short term pay-back; services to the market; present contracts; • Improvement in the competitive • Lower GSM’s handset cost; positioning; • Only Brazilian operator to offer • Gain of scale; • Experience from TEM and PT in both technologies CDMA and GSM; • Evolution to UMTS; other markets. • Its offers services that fits all • High use of the existing market segments. infrastructure; • Reduction in the price of GSM equipments; • Recurrent Economy in Capex. 26
  • 27. Final Remarks • Sustainable effort to detect and control; • Authentication of prepaid and post-paid customer base; Fraud and Cloning • System’s Prevention; • Reduction of PDD. • Unified IT and SI platforms; • 75% of clients already integrated; Systems • Simplified control; • Increased Reliability and Control. • Structure Simplification (reduction of 14 operator to 1); Corporate Restructuring • Synergies; • Cost control; • Transparency. • Search for Nationwide coverage; • 100% Digital; Coverage •1xRTT in 1,825 municipalities. • 3G’s Competitively; • Easier Roaming; GSM • Lower handsets’ costs. 27
  • 28. Safe Harbor Clause Forward Looking Statements • This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines, market share, financial results and other aspects of the activity and situation relating to the Company. The forward looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward looking statements as a result of various factors. • Analysts and investors are cautioned not to place undue reliance on those forward looking statements which speak only as of the date of this presentation. 28