VIVO, SOUTHERN HEMISPHERE'S LARGEST WIRELESS GROUP ANNOUNCES FOURTH QUARTER 2003 CONSOLIDATED EARNINGS OF TELE CENTRO OESTE CELULAR PARTICIPAÇÕES S.A.

• The criteria for calculating the main business efficiency indicators were matched with other “Vivo” companies, leading to an adjustment to 4Q02 data too for comparative purposes:
  • Churn: started to be calculated using the following formula (Churn = cancellations / average no. of clients for the period). Previously, the formula used was: (Churn = cancellations / (average no. of clients at the start of the period + gross additions for the period));
  • ARPU: adjusted due to reclassification of the Fust/Funttel deduction from revenue for operational expenses;
  • SAC: started to be included in the calculation 70% of advertising expenses (previously 100%) and no longer included the amount of the Fistel tax (previously included).
• Due to reclassification of the Fust/Funttel deduction from revenue to operational expense, past data for Net Operating Income, Operating Income and EBITDA Margin were adjusted to facilitate comparison. Employee profit sharing started to be classified as an operational expense and so amounts pertaining to 2002 were altered for comparative purposes.
• On July 6th, 2003, Personal Wireless Service (PWS) carriers had to introduce the Carrier Selection Parameter (CSP) facility for long distance calls. TCO carriers no longer received VC2 and VC3 revenues and began to receive interconnection revenues for use of their networks by these connections.
• Moreover, in compliance with Anatel regulations, Bill & Keep rules were used for interconnection charges as of July 2003. Therefore remuneration for use of networks between SMP (wireless service) carriers will only apply if traffic between them exceeds 55%, which will impact income and interconnection cost without, however, significantly affecting EBITDA .

TCO is one of the companies that together with Telesp Celular Participações S.A., Tele Leste Celular Participações S.A., Tele Sudeste Celular Participações S.A. and Celular CRT Participações S.A., comprises the assets of the Joint Venture between Telefónica Móviles and Portugal Telecom. On April 13, 2003, the “VIVO” brand was launched to create one single image for the Group's operations, thus evincing its coverage and capillarity in the country and its business strategy. The brand is now Top of Mind in the Brazilian market.

After the acquisition of shareholder control by TCP and the tender offer of TCO's remaining common shares, TCP has held 86.6% of voting capital, representing 28.9% of the Company's total capital, whose holdings excluding treasury shares was 90.7% of voting capital, representing 29.3% of total capital.

Although still taking the view that the merger of TCO into TCP shares and the conditions involved, were in accordance with legality and the best option for the companies and their shareholders, TCP and TCO, on January 12, 2004, concluded that due to statements made by the Brazilian Securities and Exchange Commission (local acronym CVM), the most appropriate and opportune decision, in view of the situation created, would be to cancel the merger.

•  4.112 million clients, an increase of 14.4% and 34.1% compared to 3Q03 and 4Q02, respectively.

•  Intensive sales activity led to 519,000 new additions in 4Q03.

•  TCO's post-paid clients base grew 10.5% in relation to 2002 and its pre-paid clients base increased 43.4%.

•  In 4Q03, 23.6% of the Company's total clients base were potential users of WAP and 1xRTT services.

•  Net operating revenue was R$ 1,958.9 million which was 24.6% up on 2002.

•  22.4% growth in net operating revenue from services in 2003 compared to 2002.

•  20.3% increase in EBITDA and 37.9% in EBITDA margin in 2003.

•  Net Revenue was R$ 463.4 million in 2003, 40.8% higher than in 2002.

•  Operating cash flow was R$ 534.8 million in 2003, which is 19.8% higher than in 2002, showing that the company has enough cash flow generation to maintain its investments.

•  In 4Q03, TCO took a 49.7% share of net additions in the states it covered. Source: ANATEL

•  TCO's clients base increased 34.1% in the year. Net additions were 141.4% higher than in 4Q02 and accounted for 49.6% of the net additions for the year.

•  In 7 area , TCO held on to its lead with a market share of 67.5%, the highest share among Brazilian wireless carriers, while in 8 area, our NBT carrier (B-band) estimated its market share at 32.7%.

•  The substantial number of gross additions, many of whom will only start to generate revenue in 2004, impacted blended ARPU (Average revenue per user), which fell by 6.3% in relation to 3Q03.

•  TCO's SAC fell 59.8% in relation to 4Q02 mainly due to supplier discounts.

•  As a result of the company's managerial efficiency, productivity gains in 4Q03 were 20.8% and 39.9% in relation to 3Q03 and 4Q02 respectively.

Operating Highlights for 7 Area

•  In 4Q03, TCO's 7 Area accounted for a 60.2 % share of net additions in the states in which it operates. Three wireless operators operate in the same states as TCO. Source: ANATEL

•  Growth in the clients base in the area in 4Q03, was 14.1% in relation to 3Q03 and 34.1% compared to 4Q02, ending the year with 3.311 million clients.

•  7 Area's post-paid clients base grew 12.4% compared with 2002 due to a focus on the corporate market and post-paid clients.

•  TCO's 7 Area acquired 408,000 net additions in 4Q03.

•  TCO's 7 Area maintained its leadership with a market share of 67.5%.

•  The substantial number of gross additions, many of whom will only start to generate revenue in 2004, impacted 7 Area's blended ARPU, which fell by 5.5% in relation to 3Q03.

•  7 Area's SAC was practically unchanged in relation to 3Q03 and despite intensive sales activity in the period fell 62.4% in relation to 4Q02 mainly due to supplier discounts.

•  Due to the company's managerial efficiency, productivity gains in 4Q03 were 22.2% and 51.9% in relation to 3Q03 and 4Q02 respectively.

Operating Highlights for 8 Area

•  In 4Q03, TCO's 8 Area accounted for a 30.3 % share of net additions in the states in which it operates. Four wireless operators operate in the same states as TCO. Source: ANATEL

•  In 4Q03 8 Area's clients base grew 16.1% compared with 3Q03 and 34.1% compared with 4Q02, to end the year with 802,000 clients.

•  8 Area's post-paid clients base grew 2.8% compared with 3Q03 due to a focus on the corporate market and post-paid clients.

•  TCO's 8 Area reported 111,000 net additions in 4Q03;

•  TCO's 8 Area obtained a market share of 32.7% with four competitors in its market.

•  The substantial number of gross additions, many of whom will only start to generate revenue in 2004, impacted 8 Area's blended ARPU, which fell by 9.6% in relation to 3Q03.

•  The 8 Area's SAC was reduced by 20.0% in relation to 3Q03 due to supplier discounts.

•  Due to the company's managerial efficiency, productivity gains of 17.0% and 3.4% in relation to 3Q03 and 4Q02 respectively.

•  TCO is currently using TDMA and CDMA 1xRTT digital technologies superimposed on the current TDMA network.

•  As of October 29th, 2003, TCO started high-speed Wireless Internet over its CDMA 1xRTT network and by the end of 2003 was already covering the cities of Brasília, Goiânia and 15 other municipalities in the state of Goiás.

•  There has been more usage of WAP and 1xRTT to advertise new services and applications such as chats, and broadcast in the use of applications and news. In 4Q03, 23.6% of the total clients base were potential users of WAP and 1xRTT services.

Net Operating Revenue from Goods

TCO's net operating revenue from goods in 2003 amounted to R$ 301.5 million, which is 38.2% up on 2002. In 4Q03, the company's net operating revenue from goods grew 48.7% in relation to 3Q03, due to intensive sales activity in the period.

Subscriber and Usage Revenue

TCO's subscriber and usage revenue in 2003 was R$ 1,286.7 million, which is 23.7% higher in relation to 2002. In 4Q03, subscriber and usage revenue grew 8.0% compared with 3Q03 mainly due to greater usage of services.

Interconnection Revenue

TCO's interconnection revenue in 2003 increased 19.6% in relation to 2002, in spite of the impact of the Bill & Keep rules, beginning in 3Q03, which represented 1.9% of the net operating revenue from services.

Other Revenues and Revenue from Data Services

Other service revenue showed substantial growth in 2003 with a total R$ 40.3 million. In 4Q03 revenue from data services represented 42.2% of the revenue from other services, mainly due to the nationwide campaigns related to users of SMS ( Short Message Service ), WAP and 1xRTT.

In 4Q03, the cost of the services provided by TCO increased 2.0% due mainly to the 52.3% rise in Fistel tax, which was levied on net additions and was raised by 97.3% in 4Q03 in relation to 3Q03.

In 4Q03, the company's cost of goods sold increased 69.7% in relation to 3Q03 due mainly to the 97.3% growth in net additions in the period.

Tables below:
Table 1: TCO - Consolidated Income Statement.
Table 2 and 3: TCO - Consolidated Balance Sheet

This press release contains forecasts of future events. Such statements are not statements of historical fact, and merely reflect the expectations of the company's management. The terms "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects", "aims" and similar terms are intended to identify these statements, which obviously involve risks or uncertainties which may or may not be foreseen by the company. Accordingly, the future results of operations of the Company may differ from its current expectations, and the reader should not rely exclusively on the positions taken herein. These forecasts speak only of the date they are made, and the company does not undertake any obligation to update them in light of new information or future developments.

Financial Terms:

EBIT – Operating result before interest and taxes.
EBITDA – Operating result before interest, taxes, depreciation and amortization.
EBITDA Margin = EBITDA / Net Operating Income.
CAPEX – Capital Expenditure
Operating Cash Flow = Accrued EBITDA – Accrued CAPEX.
Subsidy = (net income from goods – cost of goods sold + discounts given by suppliers) / gross additions
PDD – Provision for doubtful debtors. A concept in accounting that measures the provision made for accounts receivable due for more than 90 days.
Net debt = Gross debt – cash – financial investments – securities – active derivative transactions + passive derivative transactions
Debt / EBITDA – Index which evaluates the Company's ability to pay its debt with the generation of operating cash in a one-year period.
NE – Net Equity
Net debt/ (Net debt + NE) – Index which measures the Company's financial leverage.
Current Capital (Short-term capital) = Current assets – Current liabilities
Working capital = Current Capital – Net Debt

Technology and Services

CDMA – (C ode Division Multiple Access ) – Aerial interface technology for cellular networks based on spectral spreading of the radio signal and channel division in the code domain.
1XRTT – ( 1x Radio Transmission Technology) – 2.5G technology, an evolution of CDMA technology which represents one of the steps towards 3G technology and allows data transmission at up to 144 kbps and the offer of a scope of new services.
ZAP – A service which allows quick wireless access to the Internet through a computer, notebook or palmtop, using the CDMA 1XRTT technology.
WAP – Wireless Application Protocol is an open and standardized protocol started in 1997 which allows access to Internet servers through specific equipment, a WAP Gateway at the carrier, and WAP browsers in customers' handsets. WAP supports a specific language (WML) and specific applications ( WML script ).
SMS – Short Message Service – Short text message service for cellular handsets, allowing customers to send and receive alphanumerical messages.

Operating indicators:

Customers – Number of wireless lines in service.
Gross additions – Total of new customers acquired in the period.
Net additions = Gross Additions – Reduction in number of customers
Market share = Company's total number of customers / number of customers in its operating area
Net additions market share : participation of estimated net additions in the operating area.
Market penetration = Company's total number of customers + estimated number of customers of competitors) / each 100 inhabitants in the Company's operating area
Churn rate – Percentage measuring the number of inactive customers during a specific time period, relative to the average number of active customers in the same period = number of customers lost in the period / ((customers at the beginning of the period + customers at the end of the period) / 2)
ARPU (Average Revenue per User) – net income from services per month / monthly average of customers in the period
Blended ARPU – ARPU of the total customer base (contract + postpaid)
Contract ARPU – ARPU of postpaid service users
Prepaid ARPU – ARPU of prepaid service users
MOU (minutes of use) – monthly average, in minutes, of traffic per customer = (Total number of outgoing minutes + incoming minutes) / monthly average of customers in the period
Contract MOU – MOU of postpaid service users
Pretpaid MOU – MOU of prepaid service users
SAC – cost of acquisition per customer = (70% marketing expenses + costs of the distribution network + handset subsidies) / gross additions.
Productivity = number of customers / permanent employees