Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

INDEPENDENT AUDITOR’S REPORT ON INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS

The Shareholders, Board of Directors and Officers

Telefônica Brasil S.A.

São Paulo, SP

Opinion

We have audited the individual and consolidated financial statements of Telefônica Brasil S.A. (“Company”), identified as Company and consolidated, respectively, which comprise the statement of financial position as at December 31, 2016 and the statements of income, of comprehensive income, of changes in equity, and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting practices.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the individual and consolidated financial position of Telefônica Brasil S.A. as at December 31, 2016, its individual and consolidated financial performance and its individual and consolidated cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities, under those standards, are further described in the “Auditor’s responsibilities for the audit of individual and consolidated financial statements" section of our report. We are independent of the Company and its subsidiaries and comply with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants, the professional standards issued by the Brazil’s National Association of State Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to support our opinion.

Key audit matters

Key audit matters are those which, in our professional view, were the most significant ones in our current year audit. These matters were addressed in the context of our audit of the overall individual and consolidated financial statements and in forming our opinion on the individual and consolidated financial statements. Therefore, we did not express a separate opinion on these matters.

Goodwill impairment

In accordance with the accounting practices adopted in Brazil, the Company is required to test goodwill for impairment on an annual basis to determine whether impairment loss exist, if any. At December 31, 2016 the consolidated balance of this account is R$ 23,062,421 thousand, disclosed in Notes 3i and 14 to financial statements.

The monitoring of this matter was considered to be significant to our audit, since the evaluation of impairment of these intangible assets is complex and involves a high degree of subjectivity, and is based on various assumptions such as: revenue growth, evolution of the operating margin, volume of investments in capital goods, and the Company’s discount rate and growth rate for future years. Such assumptions may be significantly affected by market conditions or future economic scenarios in Brazil, which cannot yet be estimated accurately.

Our audit procedures included, among others, the involvement of specialized professionals to assist us with evaluating the assumptions and methodologies used by the Company and its subsidiaries, especially those relating to the most significant assumptions of the model, and with analyzing the sensitivity and evaluating whether a reasonable variation in the most significant assumptions might determine an impairment loss. Furthermore, the procedures included a test of the Company’s internal controls when preparing and reviewing the impairment test. We also focused on the Company disclosures of the assumptions used in the calculations of impairment of such intangible assets, which are included in the aforesaid notes to financial statements.

Revenue recognition

Due to the nature of its operations, the Company’s revenue recognition is highly dependent on the fair operation of the information technology systems and the respective internal controls to ensure that all services provided were duly recorded in the appropriate accounting period, including unbilled revenues from services provided. Revenue earned by the Company and its subsidiaries and their criteria for recognition in P&L are disclosed in Notes 3b, 3u and 24 to financial statements.

The monitoring of this matter was deemed to be significant to our audit, since the assurance of the integrity of the reports obtained from the billing systems and used as key elements in the calculations of estimated unbilled revenue, which include prorated estimate of the remaining period between billed and unbilled revenue until the end of the corresponding month, besides the high dependence on the operation of the internal control environment, as described above.  

Our audit procedures relating to revenue recognition included, among others:

·         Test of internal controls regarding the information technology general controls designed by the Company, including the controls over the management of access and changes to the systems and their data, accuracy of calculations made, besides the controls implemented to ensure the integrity of the reports obtained, used for calculation of unbilled revenue;

·         Recalculation of the estimated cycles of unbilled services and test of integrity of the report involving the comparison of manual entries regarding the estimate of unbilled services with the respective documental evidence;

·         Documental tests for a sample of accounting entries to the revenue account, taking into consideration aspects of significance and unpredictability in our sampling.

Other matters

Statements of value added

The individual and consolidated statements of value added (SVA) for the year December 31, 2016, prepared under the responsibility of Company management and disclosed as supplementary information for IFRS purposes, were submitted to audit procedures performed in conjunction with the audit of the Company financial statements. To form our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, where applicable, and whether their form and contents are in accordance with the criteria set out in Technical Pronouncement CPC 09 – Statement of Value Added. In our opinion, these statements of value added were fairly prepared, in all significant respects, according to the criteria set in that Technical Pronouncement and are consistent in relation to the overall individual and consolidated financial statements.

Other information accompanying the individual and consolidated financial statements and the auditor’s report

Company management is responsible for such other information comprising the Management Report.

Our opinion on the individual and consolidated financial statements does not cover the Management Report and did not express any type of audit conclusion on this report.

In connection with the audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, when doing so, consider whether such report is significantly inconsistent with the individual and consolidated financial statements or with our understanding gained during the audit or otherwise appears to be significantly misstated. Should we conclude, based on the work carried out, that there is a significant misstatement in the Management Report, we are required to report such fact. We have nothing to report thereon.

Responsibilities of management and those charged with governance for the individual and consolidated financial statements

Management is responsible for the preparation and fair presentation of these individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal controls as management determines is necessary to enable the preparation of individual and consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the individual and consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable,  matters related to going concern and using the going concern basis of accounting when preparing the individual and consolidated financial statements, unless management either intends to liquidate the Company and its subsidiaries or to cease operations, or has no other realistic alternative to avoid closedown.  

Those charged with the Company’s and its subsidiaries’ governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of individual and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International standards on auditing will always detects material misstatements when it exists. Misstatements can arise from fraud or error and are considered material if individually or jointly they could reasonably be expected to influence the economic decisions of users made on the basis of these individual and consolidated financial statements.

As part of the audit conducted in accordance with Brazilian and International standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

·       Identify and assess risks of material misstatements of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve override of internal controls, collusion, forgery, intentional omissions or misrepresentations.

·       Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and its subsidiaries’ internal controls.

·       Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

·       Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast substantial doubt on about the Companies’ and its subsidiaries’ ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern.

·       Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the corresponding transactions and events in a manner that achieves fair presentation.

·       Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the individual and consolidated financial statements. We are responsible for the management, supervision and performance of the Company’s and its subsidiaries’ audit and, as a consequence, for the audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provided those responsible for governance with a declaration that we have complied with the significant ethical requirements, including the applicable Independence requirements, and reported all relationships or matters which might considerably affect our independence, including the respective safeguards, where applicable.

Of the matters subject to disclosure to those responsible for governance, we determined those we considered to be most significant in the audit of the individual and consolidated financial statements for the current year and accordingly consist of key audit matters. We described our matters in our audit report, unless a law or regulation prevents public disclosure of the matter or when, in extremely rare circumstances, we determine that the matter should not be disclosed in our report, as the adverse consequences of such disclosure may, in a reasonable perspective, exceed the benefits of disclosure to the public interest.

São Paulo, February 17, 2017

ERNST & YOUNG Auditores Independentes S.S.

CRC-2SP015199/O-6

Luiz Carlos Passetti

Accountant CRC-1SP144343/O-3