Title of each class		Name of each exchange on which registered
Preferred Shares, without par value		New York Stock Exchange *
American Depositary Shares (as evidenced by American Depositary Receipts), each representing 1 preferred share		New York Stock Exchange

---

TABLE OF CONTENTS

				Page
ITEM 1.		IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		1
ITEM 2.		OFFER STATISTICS AND EXPECTED TIMETABLE		1
ITEM 3.		KEY INFORMATION		1
ITEM 4.		INFORMATION ON THE COMPANY		19
ITEM 4A.		UNRESOLVED STAFF COMMENTS		61
ITEM 5.		OPERATING AND FINANCIAL REVIEW AND PROSPECTS		61
ITEM 6.		DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		81
ITEM 7.		MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		89
ITEM 8.		FINANCIAL INFORMATION		90
ITEM 9.		THE OFFER AND LISTING		101
ITEM 10.		ADDITIONAL INFORMATION		105
ITEM 11.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		122
ITEM 12.		DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		122
ITEM 13.		DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		124
ITEM 14.		MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		124
ITEM 15.		CONTROLS AND PROCEDURES		124
ITEM 16.		[RESERVED]		125
ITEM 16A.		AUDIT COMMITTEE FINANCIAL EXPERT		125
ITEM 16B.		CODE OF ETHICS		125
ITEM 16C.		PRINCIPAL ACCOUNTANT FEES AND SERVICES		125
ITEM 16D.		EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		126
ITEM 16E.		PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS		126
ITEM 16F.		CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		126
ITEM 16G.		CORPORATE GOVERNANCE		126
ITEM 17.		FINANCIAL STATEMENTS		128
ITEM 18.		FINANCIAL STATEMENTS		128
ITEM 19.		EXHIBITS		128

i

---

Table of Contents

INTRODUCTION

All references in this annual report to:

• “1xRTT” are to 1x Radio Transmission Technology, the CDMA 2000 1x technology, which pursuant to the ITU (International Telecommunication Union) and in accordance with the IMT-2000 rules, is the 3G (third generation) technology;

• “ADRs” are to the American Depositary Receipts evidencing our ADSs;

• “ADSs” are to our American Depositary Shares, each representing 1 share of our non-voting preferred stock;

• “AMPS” are to Advanced Mobile Phone System, a radio interface technology for cellular networks based on spectral spreading of the radio signal and channel division in the frequency domain;

• “ANATEL” are to Agência Nacional de Telecomunicações—ANATEL, the Brazilian telecommunication regulatory agency;

• “BM&FBOVESPA” are to the BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros, the São Paulo stock exchange;

• “Brazilian Central Bank,” “BACEN,” “Central Bank of Brazil” or “Central Bank” are to the Banco Central do Brasil, the Brazilian central bank;

• “Brazilian Corporate Law” are to Law No. 6,404 of December, 1976, as amended by Law No. 9,457 of May 1997, by Law No. 10,303 of October 2001, by Law 11,638 of December 28, 2007; and to Law No. 11,941 of May 27, 2009;

• “Brazilian government” are to the federal government of the Federative Republic of Brazil;

• “CDMA” are to Code Division Multiple Access, an aerial interface technology for cellular networks based on spectral spreading of the radio signal and channel division in the code domain;

• “CDMA 2000 1xEV-DO” are to a 3G (third generation) access technology with data transmission speed of up to 2.4 megabytes per second;

• “Celular CRT” are to Celular CRT Participações S.A. and its consolidated subsidiary, formerly Vivo subsidiaries prior to our corporate restructuring;

• “Commission” are to the U.S. Securities and Exchange Commission;

• “Corporate Restructuring” are to the restructuring of our operating subsidiaries described in “Item 4.A.—Information on the Company—Our History and Development—Corporate Restructuring of Our Operating Subsidiaries”;

• “CVM” are to the Comissão de Valores Mobiliários, the Brazilian securities commission;

• “D.O.U.” are to the Diário Oficial da União, the Official Newspaper of the Government of Brazil;

• “Federal District” are to the federal district of Brasilia, the capital of Brazil;

• “General Telecommunications Law” are to Lei Geral de Telecomunicações, as amended, which regulates the telecommunications industry in Brazil;

• “Global Telecom” and “GT” are to Global Telecom S.A., formerly a Vivo subsidiary prior to our corporate restructuring;

ii

---

Table of Contents

• “GSM” are to the Global System for Mobile Communications, a service rendered by concession from ANATEL for a specific frequency range;

• “Net additions” are to the total number of new customers acquired in the period minus the reduction in the number of customers;

• “NYSE” are to the New York Stock Exchange;

• “OI” are to TNL-PCS S.A., the mobile operator branch of Telemar;

• “real,” “reais” or “R$” are to Brazilian reais, the official currency of Brazil;

• “SMC” are to Serviço Móvel Celular (Mobile Cellular Service), a service rendered pursuant to a concession granted by ANATEL to provide mobile service in a specific frequency range;

• “SMP” are to Serviço Móvel Pessoal (Personal Cellular Service), a service rendered pursuant to an authorization granted by ANATEL to provide mobile service in a specific frequency range;

• “SMS” are to text messaging services for wireless devices, which allow customers to send and receive alphanumerical messages;

• “TDMA” are to Time Division Multiple Access, a radio interface technology for cellular networks based on spectral spreading of the radio signal and channel division in the time domain;

• “TCO” are to Tele Centro Oeste Celular Participações, which includes TCO’s “B” band subsidiary and NBT, formerly Vivo subsidiaries prior to our corporate restructuring;

• “TCP” are to Telesp Celular Participações S.A., our predecessor company;

• “TLE” are to Tele Leste Celular Participações S.A. and its consolidated subsidiaries, formerly Vivo subsidiaries prior to our corporate restructuring;

• “TSD” are to Tele Sudeste Celular Participações S.A. and its consolidated subsidiaries, formerly Vivo subsidiaries prior to our corporate restructuring;

• “Telebrás” are to Telecomunicações Brasileiras S.A.—Telebrás;

• “Telemar” are to Telemar Norte Leste S.A. (controlled by Tele Norte Leste Participações S.A.);

• “Telemig” or “Telemig Participações” are to Telemig Celular Participações S.A.;

• “Telemig Celular” are to Telemig Celular S.A.;

• “Telenorte” or “Tele Norte” are to Tele Norte Celular Participações S.A.;

• “Telesp Celular” and “TC” are to Telesp Celular S.A., formerly a Vivo subsidiary prior to our corporate restructuring;

• “Telpart” are to Telpart Participações S.A.;

• “The Merger” are to the merger of the Vivo Companies as discussed in “Item 4.A.—Information on the Company—Our History and Development—Merger of the Vivo Companies”;

• “US$,” “dollars” or “U.S. dollars” are to United States dollars;

• “Vivo,” “the Company,” “we,” “our” and “us” are to Vivo Participações S.A. (formerly Telesp Celular Participações S.A.) and its consolidated subsidiaries (unless the context otherwise requires);

iii

---

Table of Contents

• “Vivo brand” are to the brand used in Brazil in the operations of the Vivo Companies, which together constitute the assets of the Brasilcel joint venture between Portugal Telecom and Telefónica;

• “Vivo Companies” are to Vivo, TCO, TLE, TSD, Celular CRT and Telemig Celular S.A., collectively;

• “Vivo S.A.” are to Vivo S.A., a wholly owned subsidiary of Vivo, that since the Restructuring has conducted all of our operations including SMP operations in the following areas:

     • “Areas 1 and 2,” the state of São Paulo (operations previously provided by Telesp Celular S.A.);

     • “Area 3,” the states of Rio de Janeiro and Espírito Santo (operations previously provided by Telerj Celular S.A., or Telerj, and Telest Celular S.A., or Telest);

     • “Area 5,” the states of Paraná and Santa Catarina (operations previously provided by Global Telecom);

     • “Area 6,” the state of Rio Grande do Sul (operations previously provided by Celular CRT);

     • “Areas 7 and 8,” the central western and northern regions, including the states of Goiás, Tocantins, Mato Grosso, Mato Grosso do Sul, Rondônia, Acre, Amapá, Amazonas, Maranhão, Para and Roraima and in the Distrito Federal (operations previously provided by Telegoias Celular S.A., or Telegoias, Telemat Celular S.A., or Telemat, Telems Celular S.A., or Telems, Teleron Celular S.A., or Teleron, Teleacre Celular S.A., or Teleacre, Norte Brasil Telecom S.A., or NBT and TCO); and

     • “Area 9,” the states Bahia and Sergipe (operations previously provided by Telebahia Celular S.A., or Telebahia, and Telergipe Celular S.A., or Telergipe);

• Vivo also operates in “Area 4”— state of Minas Gerais and “Area 10”— states of Pernambuco, Alagoas, Paraíba, Rio Grande do Norte, Ceará and Piauí.

• “WAP” are to Wireless Application Protocol, 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’ wireless devices;

• “WCDMA” are to Wide-Band Code-Division Multiple Access, a technology for wideband digital radio communications of Internet, multimedia, video and other bandwith-demanding applications; and

• “wireless devices” are to the wireless appliances that we sell, including cellular handsets, wireless handheld devices and wireless broadband cards.

     Unless otherwise specified, data relating to the Brazilian telecommunications industry included in this annual report were obtained from ANATEL.

PRESENTATION OF FINANCIAL INFORMATION

     Our consolidated financial statements as of December 31, 2009, 2008 and 2007 and for the three years in the period ended December 31, 2009, 2008 and 2007, have been prepared in accordance with the accounting practices adopted in Brazil, as prescribed by Brazilian Corporate Law, or Brazilian GAAP, which differs in certain significant respects from accounting principles generally accepted in the United States, or U.S. GAAP. Notes 33 and 34 to our financial statements appearing elsewhere in this annual report describe the principal differences between Brazilian GAAP and U.S. GAAP as they relate to us, and provide a reconciliation to U.S. GAAP of net income (loss) and shareholders’ equity. These consolidated financial statements have been audited by Ernst & Young Auditores Independentes S.S. (“EY” or “Ernst & Young”).

     In addition, GAAP convergence is a high priority on the agendas of many countries’ standards setting bodies and “convergence” is a term that suggests elimination of differences or coming together of standards. In Brazil, a number of steps have been taken towards the use of International Financial Reporting Standards (IFRS), with two distinct but related paths to IFRS adoption being taken.

iv

---

Table of Contents

     Firstly, the Brazilian securities regulator, the Comissão de Valores Mobiliários (locally CVM), has determined that IFRS should be used for consolidated financial statements of public companies from 2010 onwards, with early adoption being permitted. Secondly, a new corporate Law 11,638, which was enacted in 2007 and took effect from 2008, requires all Brazilian companies to prepare their financial statements in accordance with a new set of local standards which are currently being issued and are based on IFRS standards. This means that all Brazilian companies, both public and non-public, are currently required to use certain local standards which are similar to IFRS.

     The local standards are being issued by Comitê de Pronunciamentos Contábeis (locally CPC), a newly established Brazilian accounting standard setter. These new standards replace the existing accounting standards (Normas Profissionais de Contabilidade or NPCs issued by Instituto dos Auditores Independentes do Brasil - IBRACON) and other guidance issued by regulators.

     As of December 31, 2009, the newly issued and effective CPC standards, as listed in the notes to our financial statements, have been applied to the financial statements and others are required to be applied for calendar year 2010. Consequently, for the year to be ended December 31, 2010, Vivo Participações S.A. will present its financial statements in accordance with IFRS as issued by the International Accounting Standards Board (IASB). As permitted by the U.S. SEC rules, starting in 2010 Vivo will no longer present reconciliation to U.S. GAAP for its primary financial statements.

FORWARD LOOKING STATEMENTS

     Certain sections in this annual report, principally in “Item 3.D.—Key Information—Risk Factors,”“Item 4.—Information on the Company” and “Item 5.—Operating and Financial Review and Prospects,” contain information that is forward-looking, including but not limited to:

• statements concerning our operations and prospects;

• the size of the Brazilian telecommunications market;

• estimated demand forecasts;

• our ability to secure and maintain telecommunications infrastructure licenses, rights of way and other regulatory approvals;

• our strategic initiatives and plans for business growth;

• industry conditions;

• our funding needs and financing sources;

• network completion and product development schedules;

• expected characteristics of competing networks, products and services;

• quantitative and qualitative disclosures about market risks;

• other statements of management’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts; and

• other factors identified or discussed under “Item 3.D.—Key Information—Risk Factors.”

v

---

Table of Contents

     Forward looking statements may also be identified by words such as “believe,” “expect,” “anticipate,” “project,” “intend,” “should,” “seek,” “estimate,” “future” or similar expressions. Forward-looking information involves risks and uncertainties that could significantly affect expected results. The risks and uncertainties include, but are not limited to:

• the short history of our operations as an independent, private-sector entity and the introduction of competition to the Brazilian telecommunications sector;

• the cost and availability of financing;

• uncertainties relating to political and economic conditions in Brazil;

• inflation, interest rate and exchange rate risks;

• the Brazilian government’s telecommunications policy; and

• the adverse determination of disputes under litigation.

     We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

vi

---

Table of Contents

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

     Our consolidated financial statements are prepared in accordance with Brazilian GAAP, which differs in certain significant respects from U.S. GAAP. See Notes 33 and 34 to our financial statements for a summary of (i) the differences between Brazilian GAAP and U.S. GAAP as they relate to us, (ii) a reconciliation to U.S. GAAP of shareholders’ equity as of December 31, 2009 and 2008, and (iii) a reconciliation to U.S. GAAP of our net income or loss for each of the three years in the period ended December 31, 2009.

     Prior to 2006, the Company was under common control with TSD, TLE and Celular CRT. In February 2006, an Extraordinary Shareholders Meeting approved the merger of TSD, TLE and Celular CRT into the Company through exchange of shares and the acquisition of the non-controlling interest in TCO by exchanging shares of the Company for the shares held by non-controlling shareholders of TCO, after which TCO became a wholly-owned subsidiary of the Company (the “Merger”). See “Item 4.A.—Information on the Company—Our History and Development—Merger of the Vivo Companies.” Selected financial information combining the historical operations of TSD, TLE and Celular CRT has been presented for the year ended December 31, 2005. In the combined financial information, all inter-company transactions have been eliminated. The acquisitions of non-controlling interests in TSD, TLE, CRT and TCO were accounted for in our consolidated financial statements on the date that the respective share exchanges occurred, in February 2006. However, the financial statements have been consolidated as from January 1, 2006.

     In April 2008, we completed the acquisition of a controlling shareholding stake in Telemig Participações which is consolidated into our consolidated financial statements as from April 1, 2008. See “Item 4.A.—Information on the Company—Our History and Development—Acquisition of Telpart, Telemig and Tele Norte.”

     As a result of a change in Brazilian corporate law with respect to financial reporting (Law 11,638), certain changes in accounting criteria became effective for fiscal year 2008. Pursuant to a CVM resolution, we elected to apply these changes in accounting criteria retroactively to our financial statements with an effective date as of January 1, 2007. As a result, certain adjustments have been made to our 2007 financial statements to make them comparable to our 2008 and 2009 financial statements.

     The following tables present a summary of our selected financial data at the dates and for each of the periods indicated. You should read the following information together with our financial statements and the notes thereto included elsewhere in this annual report and with “Item 5.—Operating and Financial Review and Prospects.”

		Year ended December 31,
		Consolidated  2009 (1)		Consolidated  2008 (1)		Consolidated  2007 (1)		Consolidated  2006 (1)		Combined  2005 (2)
		(in millions of reais, except per share data)
Income Statement Data:
Brazilian GAAP
Net operating revenue		16,363.2		15,469.7		12,492.5		10,936.7		11,253.8
Cost of services and goods		(8,951.5)		(8,179.0)		(6,623.3)		(5,564.2)		(5,337.3)
Gross profit		7,411.7		7,290.7		5,869.2		5,372.5		5,916.5
Operating expenses:
Selling expenses		(4,357.4)		(4,107.0)		(3,532.8)		(3,751.1)		(3,614.9)

---

Table of Contents

		Year ended December 31,
		Consolidated  2009 (1)		Consolidated  2008 (1)		Consolidated  2007 (1)		Consolidated  2006 (1)		Combined  2005 (2)
		(in millions of reais, except per share data)
General and administrative expenses		(1,334.3)		(1,164.2)		(1,207.2)		(1,099.7)		(1,031.4)
Other net operating expenses		240.8		(469.9)		(509.4)		(319.5)		(491.6)
Operating income before net financial expenses		1,960.8		1,549.6		619.8		(202.2)		778.6
Net financial expenses		(487.2)		(637.7)		(462.8)		(748.0)		(913.1)
Operating income (loss)		1,473.6		911.9		157.0		(545.8)		(134.5)
Net non-operating income (expenses)		—		—		—		(289.0)		(96.5)
Income (loss) before income taxes and non-controlling interests		1,473.6		911.9		157.0		(834.8)		(231.0)
Income taxes		(590.5)		(469.5)		(256.8)		859.1		(363.0)
Non-controlling interests		(25,6)		(52.7)		—		(8.0)		(173.5)
Net income (loss)		857.5		389.7		(99.8)		16.3		(767.5)
Net income (loss) per share (R$)		2.1807		1.0885		(0.0694)		0.0113		(0.6919)
Dividends declared per thousand preferred shares (R$)		1.82778		0.723		—		0.018		0.037
Dividends declared per thousand common Shares (R$)		1.82778		0.723		—		—		0.047
U.S. GAAP
Operating revenue		21,355.9		20,558.3		15,922.1		14,152.3		14,407.8
Operating income (loss)		1,725.2		1,702.5		623.3		(183.2)		929.7
Net financial expenses		(488.2)		(603.6)		(437.5)		(666.3)		(914.7)
Net non-operating expenses		—		—		(0.3)		(11.6)		(14.8)
Income (loss) before income taxes and non-controlling interests		1,237.0		1,098.9		185.5		(861.1)		0.2
Income taxes		(484.4)		(547.0)		(295.1)		409.0		(319.0)
Net income (loss) (4)		752.6		551.9		(109.6)		(452.1)		(318.8)
Net income (loss) attributable to parent company(4)		726.4		500.9		(109.6)		(460.5)		(494.2)
Net income (loss) attributable to non-controlling interest(4)		26.2		51.0		-		8.4		175.4
Basic net income (loss) per share attributable to parent company —common (R$)		1.89		1.37		(0.84)		(3.97)		(4.76)
Basic net income (loss) per share attributable to parent company —preferred (R$)		1.89		1.37		—		0.08		0.20
Weighted average common shares outstanding—basic(3)		136,458,308		132,991,366		131,232,916		120,316,867		110,999,179
Weighted average preferred shares outstanding—basic(3)		248,555,838		232,353,912		228,172,795		210,335,209		159,444,173
Diluted net income (loss) per share—common (R$)		1.89		1.37		(0.84)		(3.97)		(4.76)
Diluted net income (loss) per share—preferred (R$)		1.89		1.37		—		0.08		0.20
Weighted average common shares outstanding—diluted(3)		136,458,308		133,924,147		131,232,916		120,316,867		110,999,179
Weighted average preferred shares outstanding—diluted(3)		248,555,838		232,353,912		228,172,795		210,335,209		159,444,173

(1)		The financial information presented for 2006 and 2007 represents information from Vivo’s consolidated financial statements. Vivo’s consolidated financial statements for 2008 include the results of Telemig as from April 1, 2008. The financial information presented for 2009 represents information from Vivo’s and Telemig consolidated financial statements.
(2)		The financial information presented for the 2005 fiscal year represents the combined financial data for Vivo, TSD, TLE and CRT, since these companies were under common control with Vivo for these periods.
(3)		As a result of the corporate restructuring in January 2000, the Company was obligated to issue shares to the controlling shareholder for the amount of the tax benefit on the amortization of the intangibles related to concession that was transferred in the Merger. The number of issuable shares, which are determined on the basis of estimates using the Company’s share price at the date of the balance sheet, are considered dilutive and are required to be included for the purpose of calculating diluted earnings per share for the years ended December 31, 2005, 2006, 2007, 2008 and 2009. The potentially diluted shares, consisting solely of the estimate of issuable shares mentioned above, have been excluded from the computation for the year ended December 31, 2007 as their effect would have been anti-dilutive. As described in Note 33 (j) to the Company’s financial statements for the year ended December 31, 2009, the Company applies accounting guidance for “Participating Securities and the ‘Two-Class’ Method”. Since preferred shareholders have a liquidation preference over common shareholders, net losses are not allocated to preferred shareholders. Additionally, net income (loss) per share and share amounts for all periods retroactively reflect the effect of the reverse stock split described in Note 21 to the Company’s financial statements.
(4)		Effective January 1, 2009, Vivo adopted the new accounting guidance for “Non-controlling interests in consolidated financial statements”. The prior periods have also been adjusted for the adoption of this guidance.

2

---

Table of Contents

		Year ended December 31,
		Consolidated  2009 (1)		Consolidated  2008 (1)		Consolidated  2007 (1)
Cash Flow Data:		(in millions of reais)
Brazilian GAAP
Cash flows from operating activities		4,044.4		3,722.1		3,196.7
Cash flows from investing activities		(2,264.9)		(4,694.9)		(2,011.5)
Cash flows from financing activities		(2,703.8)		964.8		(396.2)

		As of December 31,
		Consolidated  2009 (1)		Consolidated  2008 (1)		Consolidated  2007 (1)		Consolidated  2006 (1)		Combined  2005 (2)
		(in millions of reais, except per share data)
Balance Sheet Data:
Brazilian GAAP
Property, plant and equipment, net		6,445.1		7,183.9		6,316.9		6,467.2		6,683.2
Total assets		22,017.1		23,796.8		18,099.5		17,544.7		19,259.3
Loans and financing		5,124.5		8,003.2		4,385.7		4,509.9		5,652.8
Shareholders’ equity		10,190.8		8,267.5		8,296.3		8,371.7		7,047.5
Capital Stock		8,780.2		6,710.5		6,347.8		6,347.8		8,232.4
Number of shares as adjusted to reflect changes in capital		399,590		367,396		1,437,623		1,437,623		1,109,225
U.S. GAAP
Property, plant and equipment, net		6,158.2		6,973.5		6,078.9		6,333.3		6,536.4
Total assets		23,191.7		26,576.9		22,508.4		18,392.5		20,367.1
Total liabilities		12,952.9		17,225.6		13,484.0		9,210.4		11,294.7
Equity (3)		10,238.8		10,040.0		9,024.4		9,126.2		8,732.0
Equity attributable to parent company (3)		10,238.8		9,351.3		9,024.4		9,126.2		7,165.6
Equity attributable to non-controlling interest(3)		-		688.7		-		-		1,566.4
Capital stock		7,520.5		6,688.3		6,325.6		6,325.6		8,232.4
Number of shares as adjusted to reflect changes in capital		399,590		367,396		359,406		359,406		277,306

____________________________
(1)		The financial information presented for 2006 and 2007 represents information from Vivo’s consolidated financial statements. Vivo’s consolidated financial statements for 2008 include the results of Telemig as from April 1, 2008. The financial information presented for 2009 represents information from Vivo’s and Telemig consolidated financial statements.
(2)		The financial information presented for the 2005 fiscal year represents the combined financial data for Vivo, TSD, TLE and CRT, since these companies were under common control with Vivo for these periods.
(3)		Effective January 1, 2009, Vivo adopted the new accounting guidance for “Non-controlling interests in consolidated financial statements”. The prior periods have also been adjusted for the adoption of this guidance.

     As a result of the corporate restructuring in January 2000, the Company was obligated to issue shares to the controlling shareholder for the amount of the tax benefit that it received for the amortization of the intangibles related to the concession transferred in the Merger. The number of issuable shares, which are determined on the basis of estimates using the Company’s share price at the date of the balance sheet, are considered dilutive and are required to be included for the purpose of calculating diluted earnings per share for the years ended December 31, 2005, 2006, 2007, 2008 and 2009. The potentially diluted shares, consisting solely of the estimate of issuable shares mentioned above, have been excluded from the computation for the year ended December 31, 2007, as their effect would have been anti-dilutive. As described in Note 33 (j) to the Company’s financial statements for the year ended December 31, 2009, the Company applies the accounting guidance “Participating Securities and the ‘Two-Class’ Method”. Since preferred shareholders have a liquidation preference over common shareholders, net losses are not allocated to preferred shareholders. Additionally, loss per share and share amounts for all periods retroactively reflect the effect of the reverse stock split described in Note 21 to the Company’s financial statements.

Exchange Rates

     The Brazilian Central Bank allows the real/dollar exchange rate to float freely. The real/dollar exchange rate has been established mainly by the Brazilian interbank market and has fluctuated considerably. The Brazilian Central Bank has intervened occasionally to control unstable movements in the exchange rate. However, the exchange market may continue to be volatile, and the real may depreciate or appreciate substantially in relation to the U.S. dollar in the future. It is not possible to predict whether the Brazilian Central Bank or the Brazilian government will continue to let the real float freely or will intervene in the exchange rate market.

3

---

Table of Contents

     The Brazilian government has been introducing significant changes aimed at simplifying the Brazilian foreign exchange market. Prior to March 4, 2005, there were two principal legal foreign exchange markets in Brazil:

• the commercial rate exchange market; and

• the floating rate exchange market.

     Most trade and financial foreign-exchange transactions were carried out on the commercial rate exchange market. The floating market rate generally applied to transactions to which the commercial market rate did not apply. Since February 1, 1999, the Central Bank placed the commercial rate exchange market and the floating rate exchange market under identical operational limits, and financial institutions operating in the commercial market were authorized to unify their positions in the two different markets, which led to a convergence in the pricing and liquidity of both markets and a reduction in the difference between their respective rates.

     With the enactment of Resolution No. 3,265 by the National Monetary Council on March 4, 2005, both markets were consolidated into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out in this single consolidated market through institutions authorized to operate in such market.

     On August 4, 2006, Resolution No. 3,389 relaxed the exchange regime for exports, allowing Brazilian exporters to keep up to 30% of the income generated from exports of goods and/or services outside of Brazil. The remaining 70% of such income continued to be subject to compulsory repatriation to Brazil. Since March 17, 2008, Brazilian exporters are allowed to keep 100% of such income earned outside of Brazil. In addition, the foreign exchange mechanism was simplified to allow for the simultaneous purchase and sale of foreign currency through the same financial institution and using the same exchange rate.

     On September 27, 2006, Resolution No. 3,412 eliminated the existing restrictions on investments in foreign financial and derivative markets by individuals and legal entities, and on October 27, 2006, Resolution No. 3,417 increased the liquidation period permitted for currency exchange transactions from 360 to 750 days.

     Since October 2009, in accordance with Decree No. 6,983/09, the IOF tax is levied at 2% for foreign exchange transactions related to the inflow of funds to invest in the financial and capital markets. The IOF rate is zero for foreign exchange transactions for outflow for these funds.

     The following tables set forth the exchange rate (rounded to the nearest tenth of a cent), expressed in reais per U.S. dollar (R$/US$), for the periods indicated, as reported by the Brazilian Central Bank.

		Exchange Rate of R$ per US$
		Low		High		Average (1)		Year-End
Year ended December 31,
2005		2.163		2.762		2.413		2.341
2006		2.059		2.371		2.168		2.138
2007		1.732		2.156		1.929		1.771
2008		1.559		2.500		1.833		2.337
2009		1.702		2.429		1.996		1.741

______________
Source: Brazilian Central Bank, PTAX.
(1) Represents the average of the exchange rates (PTAX) on the last day of each month during the relevant period.

4

---

Table of Contents

		Exchange Rate of R$ per US$
Month Ended		Low		High
October 31, 2009		1.703		1.784
November 30, 2009		1.702		1.759
December 31, 2009		1.709		1.788
January 31, 2010		1.722		1.874
February 28, 2010		1.804		1.877
March, 2010 (through March 30, 2010)		1.764		1.823

_____________
Source: Brazilian Central Bank, PTAX.

     Although the real depreciated against the US$ in the fourth month period ended April 30, 2009 as a result of an increase in the risk aversion towards investing in the real, the real appreciated against the US$ at the end of 2009. The average exchange rate in 2009 was 1.99R$ to 1US$, which was higher than the average exchange rate of 1.84R$ to 1US$ in 2008. Nevertheless, the year end exchange rate in 2009 was 1.74R$ to 1US$, which was lower than the year end exchange rate in 2008 of 2.34R$ to 1US$, thereby reflecting an appreciation of 26% in 2009. These fluctuations in the R$/US$ exchange rate did not affect our liquidity or ability to raise funds. In 2009, we received the last installment of loans from BNB and BNDES, and we issued our fourth debentures series.

B. Capitalization and Indebtedness

     Not applicable.

C. Reasons for the Offer and Use of Proceeds

     Not applicable.

D. Risk Factors

     This section is intended to be a summary of more detailed discussions contained elsewhere in this annual report. The risks described below are not the only ones we face. Additional risks that we do not presently consider material, or of which we are not currently aware, may also affect us. Our business, results of operations or financial condition could be harmed if any of these risks materialize and, as a result, the market price of our preferred shares and our ADSs could decline.

Risks Relating to Brazil

     The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could adversely affect us and the trading price of our preferred shares and ADSs.

     In the past, the Brazilian government has intervened in the Brazilian economy and occasionally made drastic changes in policy and regulations. The Brazilian government’s actions to control inflation and affect other policies have often involved wage and price controls, currency devaluations, capital controls, and limits on imports, among other things. Our business, financial condition, results of operations and the market price of our preferred shares and ADSs may be adversely affected by changes in government policies, as well as general economic factors, including:

• currency fluctuations;

• exchange control policies;

• internal economic growth;

• inflation;

• energy policy;

• interest rates;

5

---

Table of Contents

• liquidity of domestic capital and lending markets;

• tax policies (including reforms currently under discussion in the Brazilian Congress); and

• other political, diplomatic, social and economic developments in or affecting Brazil.

     Uncertainty over the possibility of the Brazilian government implementing changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian companies. Those uncertainties are especially probable during presidential elections and campaigns are currently underway in Brazil to elect a new president on October 3, 2010. In addition, possible political crises may affect the confidence of investors and the public in general, which may result in economic deceleration and affect the trading prices of shares issued by companies listed on the stock exchange, such as us.

     Tax reforms may affect our prices and our ability to attract foreign capital

     The Brazilian government has proposed tax reforms that are currently being considered by the Brazilian Congress. If we experience a higher tax burden as a result of the tax reform, we may have to pass the cost of that tax increase to our customers. This increase may have a material negative impact on the dividends paid by our subsidiaries to us and on our revenues and operating results.

     In 2009, the Brazilian government extended the IOF (“Imposto sobre Operações Financeiras”) to tax foreign investments, more specifically fixed income and stocks investments, except for IPOs. In 2008, prior to this extension, only fixed income was taxed. The adoption of this tax aimed to reduce speculation on Brazilian markets and to reduce the volatility of appreciation of the real. Other institutional changes may be used to control the appreciation of the real. This may discourage foreign investment due to higher transaction costs. There is also the risk of reducing the potential value increase in the investment achievable solely as a result of currency rate changes.

     Political instability may have an adverse impact on the Brazilian economy and on our business.

     Political crises in Brazil in the past have affected the trust of investors and the public in general, as well as the development of the economy. Current or future political crises may have an adverse impact on the Brazilian economy, our business, financial condition and results of operations and the market price of our preferred shares and ADSs.

     Our business may be vulnerable to the current disruptions and volatility in the global financial markets.

     The global financial system has experienced difficult credit and liquidity conditions and disruptions leading to greater volatility. Since the fall of 2008, global financial markets deteriorated sharply and a number of major foreign financial institutions, including some of the largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies, were experiencing significant difficulties including runs on their deposits and inadequate liquidity.

     In an attempt to increase liquidity in the financial markets and prevent the failure of the financial system, various governments have intervened on an unprecedented scale, but there is no assurance that these measures will successfully alleviate the current financial crisis. In the long term, as a consequence, global investor confidence will likely remain low and credit will likely remain relatively lacking. Hence, additional volatility in the global financial markets may occur.

     Nevertheless, during 2009, there was an increasing perception that Brazil was one of the few countries least affected by the crisis. This perception resulted in a relatively strong investor interest in Brazil and in Brazilian companies with good credit ratings, generally enabling these companies to obtain adequate credit. Furthermore, these companies could rely on public banks, such as the National Economic and Social Development Bank (BNDES), that offered better credit terms and conditions than those offered in the international markets.

6

---

Table of Contents

     However, additional volatility in the global financial markets may occur. Continued or worsening disruption and volatility could have a material adverse effect on our ability to access capital and liquidity on acceptable financial terms, and consequently on our operations. Furthermore, an economic downturn could negatively affect the financial stability of our customers, which could result in a general reduction in business activity and a consequent loss of income for us.

     Inflation and government efforts to curb inflation may contribute to economic uncertainty in Brazil, adversely affecting our business and results of operations.

     Brazil has historically experienced high rates of inflation. Inflation and certain government’s measures taken in the attempt to curb inflation have had significant negative effects on the Brazilian economy. The Consumer Prices Index (Índice de Preços ao Consumidor), or the IPCA, published by the Instituto Brasileiro de Geografia e Estatística, rose 4.3% in 2009, remained below the target fixed by the National Monetary Council of 4.5% and within the accepted range of 2.5% to 6.5% . The inflation rate was 5.9% in 2008, 4.5% in 2007, 3.1% in 2006 and 5.7% in 2005.

     The inflation target for 2010 is 4.5% and if inflation increases beyond this target, basic interest rates may rise, causing direct effects on the cost of debt and indirect effects on the demand for telecommunication goods and services.

     Depreciation in the real/U.S. dollar exchange rate may adversely affect our ability to pay U.S. dollar-denominated or U.S. dollar-linked obligations and could lower the real market value of our preferred shares and the U.S. dollar market value of our ADSs.

     The Brazilian currency has experienced fluctuations against the U.S. dollar. The real was devalued against the U.S. dollar by 18.7% in 2001 and 52.3% in 2002. Over the next few years, in contrast, the real began appreciating against the U.S. dollar, increasing 22.3%, 8.8%, 11.8%, 8.7% and 17.2% in 2003, 2004, 2005, 2006 and 2007, respectively. However, the real depreciated against the U.S. dollar by 31.9% in 2008. In 2009, the real appreciated against the U.S. dollar, increasing 25%. See “—Selected Financial Data—Exchange Rates” for more information on exchange rates.

     Political, economic and social developments, and the perception of risk in other countries, especially emerging market countries, may adversely affect the Brazilian economy, our business, and the market price of Brazilian securities, including our preferred shares and ADSs.

     The market for securities issued by Brazilian companies may be influenced, in varying degrees, by economic and international market conditions, especially by those in Latin American and other emerging markets. The reaction of investors to developments in other countries may have an adverse impact on the market value of securities of Brazilian companies. Crises in other emerging countries or the economic policies of other countries, in particular those of the United States, may reduce investor demand for securities of Brazilian companies, including our preferred shares. Any of the foregoing developments may adversely affect the market value of our preferred shares and hinder our ability to access the capital markets and finance our operations in the future on acceptable terms and costs, or at all.

     Exchange controls and restrictions on remittances abroad may adversely affect holders of our preferred shares and ADSs.

     Brazilian law allows that, whenever there is a significant imbalance in Brazil’s balance of payments or a significant possibility that such imbalance will exist, the Brazilian government may impose temporary restrictions on capital outflows. Such restrictions could hinder or prevent the holders of our preferred shares or our Brazilian custodian, Banco Itaú S.A. (acting as the agent for the depositary) from remitting dividends abroad. The Brazilian government imposed restrictions on capital outflows for a six-month period at the end of 1989. If similar restrictions are introduced in the future, they would likely have an adverse effect on the market price of our preferred shares and ADSs.

7

---

Table of Contents

     Increases in interest rates may have a material adverse effect on our business.

     The Central Bank’s Monetary Policy Committee (Comitê de Política Monetária do Banco Central—COPOM), establishes the basic interest rate target for the Brazilian financial system by reference to the level of economic growth of the Brazilian economy, the level of inflation and other economic indicators. As of December 31, 2005, 2006, 2007, 2008 and 2009, the basic interest rate was 18.0%, 13.3%, 11.3%, 13.8% and 8.8%, respectively. For 2010, the target for inflation is 4.5%, and increases in interest rates aiming to control inflation may have a material adverse effect on us.

     Risks Relating to the Brazilian Telecommunications Industry and Us

     Extensive government regulation of the telecommunications industry may limit, in some cases, our flexibility in responding to market conditions, competition and changes in our cost structure.

     Our business is subject to extensive government regulation, including any changes that may occur during the period of our authorization to provide telecommunication services. ANATEL, which is the main telecommunications industry regulator in Brazil, regulates, among other things:

• industry policies and regulations;

• licensing;

• tariffs;

• competition, including, therefore, our ability to grow by acquiring other telecommunications businesses;

• telecommunications resource allocation;

• service standards;

• technical standards;

• interconnection and settlement arrangements; and

• universal service obligations.

     Brazil’s telecommunications regulatory framework is continuously evolving. The interpretation and enforcement of regulations, the assessment of compliance with regulations and the flexibility of regulatory authorities are all marked by uncertainty. We operate under authorization from the Brazilian government, and our ability to retain this authorization is a precondition to our success. However, in light of the regulatory framework, we cannot assure you that ANATEL will not modify the terms of our authorization adversely. Furthermore, according to the terms of our operating authorizations, we are obligated to meet certain requirements and to maintain minimum quality, coverage and service standards. Failure by us to comply with these requirements may result in the imposition of fines or other government actions, including the termination of our operating authorizations. Any partial or total revocation of any our operating authorizations would have a material adverse effect on our business, financial condition, revenues, results of operations and prospects. In recent years, ANATEL has also been reviewing and introducing changes in the applicable regulation, especially regarding the interconnection fees among telecommunications service providers in Brazil. Interconnection fees, which are fees charged by telecommunications service providers to each other to interconnect to each others’ networks, are an important part of our revenue base. To the extent that changes to the rules governing interconnection fees reduce the amount of interconnection fees we are able to collect, our businesses, financial conditions, revenues, results of operations and prospects could be materially adversely affected.

     Therefore, our businesses, results of operations, revenues and financial conditions could be negatively affected by the actions of the Brazilian authorities, including, in particular, the following:

• the introduction of new or stricter operational and/or service requirements;

8

---

Table of Contents

• the granting of operating licenses in our areas;

• delays in the granting of, or the failure to grant, approvals for rate increases; and

• anti-trust limitations imposed by ANATEL and the Administrative Council for Economic Defense (“CADE”).

     Brazilian anti-trust regulation is based on Law No. 8,884 of June 11, 1994 which prohibits any practice or transactions aimed at restricting free competition, dominating the relevant market of goods or services, arbitrarily increasing profits, or abusively exercising a dominant market position. The Economic Law Office, or SDE, and the Secretariat for Economic Monitoring, or SEAE, also act towards promoting the principle of free, ample and fair competition among all providers, as well as toward correcting the effects of imperfect competition and repressing violations against economic order. We cannot continue to expand our growth through acquisition of other service providers given the anti-trust objections of ANATEL along with the fact that we currently already render SMP service all over the country. Consolidation of the other players in the telecommunications market will increase the competitive pressure on us due to the increase in their economies of scale and reduction of operational costs, and we may be unable to respond adequately to pricing pressures resulting from consolidation, which would adversely affect our business, financial condition and results of operations.

     Our results of operations may be negatively affected by the application of the SMP rules.

     Under the SMP regime, our subsidiaries receive payment for the use of their networks in accordance with a network usage payment plan, which includes outbound long distance calls. Until June 30, 2004, SMP service providers were able to opt to establish a price cap or freely negotiate our interconnection charges. In early 2005, ANATEL began permitting free negotiations for mobile interconnection, or VU-M, fees and by July 2005, local-fixed concessionaires and mobile operators had reached a provisional agreement with respect to VU-M fees for local calls, or VC-1 (the agreement guaranteed a 4.5% increase in mobile operators’ fees). ANATEL approved that provisional agreement and, in March 2006, approved another provisional agreement of 4.5% increase for VU-M fees for long-distance calls, or VC-2, VC-3, and international calls, among the same operators that had made the VC-1 agreement in July 2005. Currently, free negotiation is the rule, subject to ANATEL regulations.

     In July 2007, ANATEL approved a provisional agreement among the fixed line operators Telefônica, Telemar, Brasil Telecom, CTBC Telecom and Sercomtel and the mobile operators for interconnection fees for VC1, VC2 and VC3 calls that provides for an annual adjustment of approximately 1.97% to interconnection fees in Region I (Telemar’s Region) and an annual adjustment of approximately 2.25% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region). There have been no changes to these annual adjustment rates for the year ended December 31, 2009.

     In January 2008, ANATEL approved a provisional agreement among the fixed line long distance operator Embratel and the mobile operators for interconnection fees for VC2 and VC3 calls, for the period since January 2004, that provides for an annual adjustment of 4.5% as of March 2006 and an annual adjustment of approximately 1.97% or approximately 2.25% as of July 2007. There have been no changes to these annual adjustment rates for the year ended December 31, 2009.

     In July 2008, ANATEL approved a provisional agreement among the fixed line operators Telefônica, Telemar, Brasil Telecom, CTBC Telecom and Sercomtel and the mobile operators for interconnection fees for VC1, VC2 and VC3 calls that provides for an annual adjustment of approximately 1.89% to interconnection fees in Region I (Telemar’s Region) and an annual adjustment of approximately 2.06% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region). There have been no changes to these annual adjustment rates for the year ended December 31, 2009.

9

---

Table of Contents

     In March 2009, ANATEL approved a provisional agreement among the fixed line long distance operator Embratel and the mobile operators for interconnection fees for VC2 and VC3 calls, for the period from 2007 to 2008, that provides for an annual adjustment of approximately 1.89% in Region I (Telemar’s Region) or approximately 2.06% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region) as of July 2008.

     In September 2009, even though it had a provisional agreement between the fixed line operators Telefônica, Telemar, Brasil Telecom and Sercomtel and the mobile operators, without CTBC Celular, ANATEL decided not to approve the readjustment of the local (VC-1) and long-distance (VC-2 and VC-3) fixed-to-mobile calls. In February 2010, this readjustment of the VC-1, VC-2 and VC-3, relative to the period from 2008 to 2009, was approved by ANATEL and the provisional agreement of VU-M readjustment (68.5% of the approved readjustment of approximately 0.97% for the VC-1) could be applied.

     The Invitation Document number 002/2007/SPV-ANATEL regarding the auction organized in December 2007 of new licenses for the 1900-2100 MHz radio frequency bands (3G licenses), states that, in the maximum allowed period of eighteen months from the publication of the Terms of Authorization (that occurred on April 30, 2008), the authorizations resulting from this auction will be combined with the existing SMP authorizations of the bid winners when pertaining to the same region of the general authorization plan of SMP (PGA-SMP). In accordance with this determination, in January 2010, ANATEL published an act determining the unification of our SMP authorizations in Regions II (states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and the Distrito Federal) and III (state of São Paulo) of the PGA-SMP, with an SMP authorization for each one of these Regions (Terms of Authorization No. 005/2010 and 006/2010, signed in January 2010, for Region II and III, respectively). Moreover, ANATEL also determined that, from November 1, 2009 (eighteen months from April 30, 2008), in each Region of the PGA-SMP, the value of the VU-M must be unified for that Region and freely negotiated. Until such date, the mobile operators charged a value of VU-M for authorization of the SMP. In February 2010, ANATEL defined the VU-M to be paid for Oi (fixed and mobile operators) and for Brasil Telecom (fixed and mobile operators) to Claro, TIM, Vivo and Telemig Celular, for region of the PGA-SMP, as a result of the unification of the SMP authorizations.

     The free negotiation process for interconnection charges has been extended and will proceed until 2010, when a “cost based” reference interconnection value is expected to be set by ANATEL according to the rules and the regulation on SMP Network Usage Fees issued in July 2006 (Resolution 438/2006). Under Resolutions 438/2006, 480/2007, 483/2007 and 503/2008, the ANATEL developed a new model from 2010 onward to determine reference costs for the use of mobile networks—RVU-M—by SMP providers who have significant market power. These values will be used in arbitration cases involving VU-M’s value by ANATEL.

     Under Resolution 438/2006, the free negotiation of the cost of use of mobile networks—VU-M—was maintained. However, in the arbitration by ANATEL, while the cost model will not be implemented until 2010, ANATEL will decide the new value of VU-M by reference to the existing ratio (as of January 1, 2006) between the value of VU-M and the value of VC-1. In addition, under the ANATEL rules, the retail rates charged to customers for local fixed to mobile calls cannot be less than the sum of the interconnection fees charged on the local fixed and mobile terminations.

     Under Resolution 438/2006, ANATEL also eliminated the partial “Bill & Keep” rule for network usage between SMP networks. The applicable rule is now “full billing,” where the SMP operator pays the entire call termination fee of the other mobile network. The rule of the partial “Bill & Keep” had been maintained by the SMP and SME (trunking) networks. Before “full billing,” an SMP operator used to pay for the use of another SMP operator’s network in the same registration area only if the traffic carried from the first operator to the second exceeded 55% of the total traffic exchanged between them. In that case, only those calls that surpassed the 55% level were subject to payment for network usage.

     ANATEL also issued Regulation No. 460/2007 regarding number portability that implemented and developed fixed and wireless number portability in Brazil effective as of March 2009, with most costs to be borne by the operators. For SMP, number portability is applied for wireless codes of access of the same registration area. Until December 2009, there were 173.9 million cell phones in Brazil. After the start of number portability in September 2008, 543,609 people changed our subsidiaries as operator as of December 31, 2009. For fixed operators, number portability is applied for fixed codes of access of the same local area. There can be no assurance that this new regulation will not have material adverse effects on the results of our operations.

10

---

Table of Contents

     We cannot predict whether the current regulatory regime will remain in place or whether any future regulatory change will have an adverse effect on our results of operations. We cannot assure you that the interconnection rates we negotiated will be upheld or that future negotiations will be as favorable as those that were previously set by ANATEL. If the readjustments that we negotiated are cancelled or if freely negotiated interconnection fees in the future are less favorable to us, our business, financial condition, revenues, results of operations and prospects will be adversely affected.

     If the inflation adjustment index now applied to our prices is changed, the new index may not adequately reflect the true effect of inflation on our prices, which could adversely affect our results of operations.

     The Brazilian government currently uses the General Price Index, or the IGP-DI (the Índice Geral de Preços Disponibilidade Interna), an inflation index developed by the Fundação Getúlio Vargas, a private Brazilian economic organization, in connection with the prices charged in the wireless telecommunications industry. Starting in 2010, the Brazilian government will begin regulating the telecommunications industry based on an economic model (FAC, or “Fully Allocated Costs”) that analyzes companies’ total costs based on a theoretical company’s costs and other factors. In connection with the introduction of this model, the Brazilian government will use a different inflation adjustment mechanism, the IST index (¥ndice de Serviços de Telecomunicações), starting in 2010. Under Resolution 438/2006, after the economic model is implemented in 2010, ANATEL will determine the reference cost of using mobile networks (RVU-M) for SMP providers who have significant market power, which will be used in the arbitration case by ANATEL to determine the value of VU-M. The inflation adjustment of the RVU-M value will use the IST index. In the auctions by SMP of new radio frequency bands, ANATEL has been using the IST index for determining the value of the installments to be paid for the licenses. If this new inflation adjustment mechanism, or any other mechanism chosen by the Brazilian government in the future, does not adequately reflect the true effect of inflation on our prices, our results of operations could be adversely affected.

     ANATEL’s new regulation regarding interconnection and network usage fees could have an adverse effect on our results.

     Since the beginning of 2005, ANATEL published the following new regulations on interconnection and network usage fees of SMP providers, some of which could have an adverse effect on our results: (1) new General Regulation of Interconnection (Regulamento Geral de Interconexão—Resolution No. 410/2005, or RGI); (2) the Regulation of Separation and Allocation of Costs (Resolution No. 396/2005); (3) the Regulation for Network Usage Fees of SMP providers (Regulamento de Remuneração pelo Uso de Redes de Prestadoras do SMP—Resolution No. 438/2006 and Resolutions No. 480/2007, 483/2007 and 503/2008); (4) the Regulation for Usage of Spectrum in the 800, 900, 1800, 1900 and 2100MHz bands (Resolution No. 454/2006); (5) the Regulation for Methodology of the Calculation of the WACC (Resolution No. 535/2009); (6) the Invitation Document numbered 002/2007/SPV-ANATEL, relating to the auction organized by ANATEL of new 3G licenses, and stating that, in the maximum allowed period of eighteen months from April 30, 2008, the authorizations resulting from this auction must be combined with the existing SMP authorizations given to the bid winners when pertaining to the same region of the general authorization plan of SMP; and (7) the general plan for updating the Brazilian telecommunications regulation (Resolution No. 516/2008, or “PGR”). The following are some of the changes in the regulation that may adversely affect our results:

• two SMP providers controlled by the same economic group can receive only one instead of two interconnection charges (VU-M) for calls originated and terminated in their networks ((3) and (6) above);

• new negotiation rules for VU-M prices by which ANATEL will have a role in determining reference prices rather than the current free-market negotiation of prices. The reference prices will apply to SMP providers that have significant market power, which may be the case of Vivo and Telemig Celular (until further decision by ANATEL, all operators are considered to have significant market power) ((3) above). In February 2010, ANATEL published the Public Consoultation No. 5/2010, with a proposal to amend Resolution No. 438/2006 regarding the identification of SMP providers that have Significant Market Power in voice call termination on individual mobile networks ((3) and (7) above);

11

---

Table of Contents

• reference prices were cost based commencing in 2008 in compliance with Resolution No. 483/2007. The prices are calculated according to the regulation on Costs Separation and Allocation (Resolution No. 396/2005) ((2) and (3) above);

• VU-M prices must follow the discounts granted to fixed telephony customers for out-of-business hours calls ((3) above);

• when receiving calls from public telephones, VU-M will adopt the same tariff rules that apply to public telephones ((3) above);

• creation of VU-M price unification among SMP providers of the same economic group having significant market power ((3), (6) and (7) above);

• the interconnection payments between SMP operators for traffic in the same registration area may occur independently of the traffic balance between the operators (this regime is referred to as “full billing”) ((1) and (3) above). Before the adoption of the above-mentioned regulation, payments between SMP operators for traffic in the same area only occurred when the traffic balance between any two companies was either less than 45% or in excess of 55% (this regime is referred to as “partial bill and keep”);

• the Invitation Document numbered 002/2007/SPV-ANATEL relates to the auction organized by ANATEL in December 2007 of new licenses (3G licenses) for the 1900-2100 MHz radio frequency bands denominated the “F”, “G”, “I” and “J” bands, and states that, in the maximum allowed period of eighteen months from the publication of the Terms of Authorization on April 30, 2008, the authorizations resulting from this auction will be combined with the existing SMP authorizations given to the bid winners when pertaining to the same region of the general authorization plan of SMP. Vivo and Telemig Celular acquired spectrum licenses for the “J” band in regions where we possess SMP licenses. In addition, the Invitation Document modifies the rule for the renewal of radio frequency licenses and includes in the calculation of operating profits the remuneration received for the use of the SMP network together with the profits earned from the service plans. In accordance with this Invitation Document, in January 2010, ANATEL published on act determining the unification of our SMP authorizations in Regions II (states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and the Distrito Federal) and III (state of São Paulo) of the PGA-SMP, with only one SMP authorization for each one of these Regions (Terms of Authorization No. 005/2010 and 006/2010, signed in January 2010, for Region II and III, respectively). Moreover, ANATEL also determined that, from November 1, 2009 (eighteen months from April 30, 2008), in each Region of the PGA-SMP, the value of the VU-M must be unified for that Region (two SMP providers controlled by the same economic group can receive only one instead of two interconnection charges (VU-M) for calls originated and terminated in their networks), and freely negotiated. Until such date, the mobile operators charged a value of VU-M for authorization of the SMP. In February 2010, ANATEL defined the VU-M to be paid for Oi (fixed and mobile operators) and for Brasil Telecom (fixed and mobile operators) to Claro, TIM, Vivo and Telemig Celular, for the region of the PGA-SMP, as a result of the unification of the SMP authorizations ((1), (3) and (6) above);

• in 2008, ANATEL published the general plan for updating the Brazilian telecommunications regulation (“Plano Geral de Atualização da Regulamentação das Telecomunicações no Brasil”—Resolution number 516/2008, or “PGR”) ((7) above).

• in December 2009, ANATEL published the Public Consultation No. 50/2009, with a proposal for the regulation of the mobile virtual network operator (MVNO) ((7) above);

• in October 2009, ANATEL published Resolution No. 535/2009 relating to the Methodology of the Calculation of the WACC ((5) above);

12

---

Table of Contents

• in December 2008, Decree 6523/2008 was effective, relating to the general norms of customer interaction service by telephone, with the objective of improving the quality of services ((7) above);

• in December 2009, ANATEL published the Public Consultation No. 51/2009, with a proposal for the invitation document related to the auction of new SMP licenses for the 1900-2100 MHz radio frequency band denominated the “H” band, for extension bands and for available frequencies at “A”, “D”, “E”, “M” and TDD bands ((4) and (7) above);

• in June 2009, ANATEL published the Public Consultation No. 24/2009, with a proposal of amending the regulation of the 450 MHz to 470 MHz band, allowing it to apply additionally to mobile services ((7) above);

• in August 2009, ANATEL published the Public Consultation No. 31/2009, with a proposal of amending the regulation of the 2500 MHz to 2690 MHz band, allowing it to apply additionally to mobile services ((7) above);

• in February 2010, ANATEL published Resolution No. 537/2010 relating to amending in the regulation of the 3400 MHz to 3600 MHz band, allowing it to apply additionally to mobile services ((7) above); and

• in April 2009, ANATEL published Resolution No. 527/2009 relating to the regulation of the Broadband Power Line (BPL), allowing this service to apply to multimedia communication (“Serviço de Comunicação Multimídia—SCM”) ((7) above).

     Such new regulations could have an adverse effect on our results of operations because: (1) our interconnection charges could drop significantly, thereby reducing our revenues; (2) ANATEL may allow more favorable prices for economic groups without significant market power; (3) the prices we charge in some regions in which we operate are higher than those in certain other regions, and consolidation of those prices, competitive pressures and other factors would reduce our average prices and thereby reduce our revenues; (4) the granting of new licenses may increase competition in our area from other operators, which could adversely affect our market share, thereby reducing our revenues; (5) the inclusion in the calculation of operating profits the remuneration received for the use of the SMP network will increase the cost of renewing licenses; (6) in ANATEL’s general plan of updating the telecommunications regulation, ANATEL targets several areas of vital importance for the mobile telecommunications business, such as regulation to improve the quality of services that can cause the rise of operational costs, regulation of the virtual mobile operation (MVNO) that can cause an increase in competitive pressure, regulation against significant market power (“Poder de Mercado Significativo—PMS”) arising from VU-M price unification among SMP providers of the same economic group having significant market power, that can reduce our revenues, and regulation of multimedia communication (“Serviço de Comunicação Multimídia—SCM”), that can cause an increase in competitive pressure.

     We face substantial competition that may reduce our market share and harm our financial performance.

     There is substantial competition in the telecommunications industry. We not only compete with companies that provide SMP service and trunking but also indirectly with companies that provide fixed-line telecommunications and Internet access services, due to the trend towards the convergence of these services.

     We expect competition to intensify as a result of the entry of new competitors and the rapid development of new technologies, products and services. Our ability to compete successfully will depend on our marketing techniques and on our ability to anticipate and respond to various competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by our competitors. If we do not keep pace with technological advances, or if we fail to respond timely to changes in competitive factors in our industry, we could continue to lose market share and could suffer a decline in our revenue. Competition from other SMP communications service providers in the regions in which we operate has also affected, and may continue to affect, our financial results by causing, among other things, a decrease in our customer growth rate, decreases in prices and increases in selling expenses. We also face indirect competition from telecommunications companies providing fixed line services and from high-speed Internet service providers.

13

---

Table of Contents

     These factors have already contributed to a negative effect on our market share and our results of operations and could have a material adverse effect on our business and results of operations in the future. As a result of competitive pressures, for example, our market share decreased from 29.84% as of December 31, 2008 to 29.75% as of December 31, 2009, and our market share of net additions to our customer base increased from 25.5% for the twelve months ended December 31, 2008 to 29.2% for the twelve months ended December 31, 2009. In addition, our net additions of customers increased by 10.1% from December 31, 2008 to December 31, 2009, including clients of Telemig.

     The ultimate impact that existing competition will have on our business is not yet clear. Our competitors may be able to offer lower prices than we do and to develop and deploy more rapidly new or improved wireless technologies, services and products. Our response to competition may require us to lower rates or extend higher subsidies to our customers for the acquisition of handsets, thereby adversely affecting our margins.

     In addition, market participants in other areas of Brazil may also seek to operate in our area, most likely through acquisitions. Recently, there has been consolidation in the Brazilian telecommunications market, and we believe this trend may continue. Consolidation may result in increased competitive pressures within our market. We may be unable to respond adequately to pricing pressures resulting from consolidation, which would adversely affect our business, financial condition and results of operations. We could be negatively affected by anti-trust limitations imposed by ANATEL and the Administrative Council for Economic Defence, or CADE. Brazilian competition regulation is based on Law No. 8,884 of June 11, 1994 which prohibits any practice aimed at restricting free competition, dominating the relevant market of goods or services, arbitrarily increasing profits, or abusively exercising dominant market position. The Economic Law Office, or SDE, and the Secretariat for Economic Monitoring, or SEAE, also act towards promoting the principle of free, ample and fair competition among all providers, as well as toward correcting the effects of imperfect competition and repressing violations against economic order. We cannot continue to expand our growth through acquisitions given the anti-trust objections of ANATEL along with the fact that we currently already render SMP service all over the country. However, consolidation of the other players will increase the competitive pressure on us due to an increase in their economies of scale and a reduction in operational costs.

     While our subsidiary Telemig was initially the only cellular operator in the State of Minas Gerais, the emergence of other wireless telecommunications operators in that area has created an intensely competitive environment for Telemig in Minas Gerais. Currently, in addition to Telemig there are four other wireless service providers operating within that same authorization area in Minas Gerais. Telemig faces competition from the following operators: (a) TIM, the “B” band frequency range operator that launched its services in December, 1998 – TIM is primarily owned by Telecom Italia (in July 2009, ANATEL published Act No. 3804/2009 determining the conditions to be followed to guarantee total separation between TIM and our subsidiaries) and operates in the entire State of Minas Gerais using TDMA and GSM technologies; (b) Oi, the “D” band operator that launched its services in June, 2002—Oi is a subsidiary of Tele Norte Leste Participações S.A. (Telemar) and operates in the entire State of Minas Gerais using GSM technology; in the auction of 3G licenses, Oi acquired spectrum licenses for the “I” band in the entire State of Minas Gerais and operates using 3G technology; (c) Claro, the “E” band operator that launched its services in the fourth quarter of 2005—Claro is controlled by América Móvil and operates in an area that comprises most of the State of Minas Gerais using GSM technology—Claro is not present in the Triângulo Mineiro region; and, (d) CTBC Celular, an “A” band operator that provides services only in the Triângulo Mineiro region—CTBC Celular is controlled by CTBC, a fixed-line operator and uses both TDMA and GSM technologies; in the auction of 3G licenses, CTBC Celular acquired spectrum licenses for the “G” band in the Triângulo Mineiro region and operates using 3G technology. In 2009, the intense competition in Telemig’s market in Minas Gerais did not hinder the increase of its total market share, which was an estimated 33% on December 31, 2009, as compared to 28.7% and 29.1% on December 31, 2008 and 2007, respectively.

     Our results of operations have been negatively affected by a decrease in our customer growth and could also be affected if our rate of customer turnover increases.

     Our rate of acquisition of new customers can be negatively affected by market penetration. In addition, if our rate of customer turnover were to increase significantly, our results of operations and or competitive position could be adversely affected. Several factors in addition to competitive pressures could influence our rate of acquisition of new customers and their rate of customer turnover, including limited network coverage, lack of sufficient reliability of their services and economic conditions in Brazil.

14

---

Table of Contents

     The industry in which we conduct our business is subject to rapid technological changes and these changes could have a material adverse effect on our ability to provide competitive services.

     The telecommunications industry is subject to rapid and significant technological changes. Our success depends, in part, on our ability to anticipate and adapt in a timely manner to technological changes. We expect that new products and technologies will emerge and that existing products and technologies will be further developed.

     The advent of new products and technologies could have a variety of consequences for us. These new products and technologies may reduce the price of our services by providing lower-cost alternatives, or they may be superior to, and render obsolete, the products and services we offer and the technologies we use, requiring investment in new technology. The cost of upgrading our products and technology in order to continue to compete effectively could be significant, and our ability to fund the upgrading may depend on our ability to obtain additional financing.

     Certain of our debt agreements contain financial covenants, and any default under such debt agreements may have a material adverse effect on our financial condition and cash flows.

     Certain of our existing debt agreements contain restrictions and covenants and require the maintenance or satisfaction of specified financial ratios and tests. Failure to meet or satisfy any of these covenants, financial ratios or financial tests could result in an event of default under these agreements.

     The cellular industry, including us, may be harmed by reports suggesting that radio frequency emissions cause health problems and interfere with medical devices.

     Media and other reports have suggested that radio frequency emissions from base stations may cause health problems. These concerns could have an adverse effect on the wireless communications industry and, possibly, expose wireless providers, including us, to litigation. According to the World Health Organization (WHO), there is no evidence in the latest medical research that shows any relationship between radio frequency emissions of base stations and health concerns. However, expansion of our network may be affected by perceived risks if we experience problems in finding new sites, which in turn may delay expansion and may affect the quality of our services. On July 2, 2002, ANATEL published Resolution No. 303 that limits emission and exposure for fields with frequencies between 9 kHz and 300 GHz. In addition, the Brazilian government developed specific legislation for the deployment of radio frequency transmission stations that supersedes the existing state and municipal laws. In May 2009, the Brazilian government published Law No. 11934/2009 that limits the exposure for fields with frequencies up to 300 GHz. The new law uses the exposition limits determined by the International Commission on Non-Ionizing Radiation Protection (ICNIRP) and recommended by the World Health Organization (WHO). The new laws may create additional transmission regulations which, in turn, could have an adverse effect on our business.

     We face risks associated with litigation.

     We and our subsidiaries are party to a number of lawsuits and other proceedings. An adverse outcome in, or any settlement of, these or other lawsuits could result in significant costs to us. In addition, our senior management may be required to devote substantial time to these lawsuits, which they could otherwise devote to our business. See “Item 8.A.—Financial Information—Consolidated Statements and Other Financial Information—Legal Matters.”

     We may be required to record impairment charges relating to goodwill and long-lived assets in the future.

     For Brazilian GAAP purposes, an impairment is recognized on goodwill if the expected net cash flows generated from the acquired net assets is not sufficient to cover their book value. As of December 31, 2009, the amount of goodwill of the Company was R$2,700.6 million.

     For U.S. GAAP purposes, we are required to test our goodwill for impairment at least annually. The difference between the book value of a company and its market value may indicate that an impairment exists. This impairment test is described in Note 33 to our audited consolidated financial statements. The Company has substantial goodwill including from the acquisition of Telemig on April 3, 2008, with a carrying value of R$948.0 million as of December 31, 2009. It is possible that we may be required to record impairment charges relating to our goodwill in future periods, and this would have an adverse effect on our results of operations. When we performed our last impairment test, our evaluation of our ability to recover the carrying value of our long-lived assets was based on projections of future operations that assumed a higher level of revenues and gross margin percentages than we have historically achieved as well as on assumptions that market place participants will make in valuing similar assets. We may not be successful in achieving these improvements in our revenues and gross margin percentages due to the competitive environment, changes in technology or other factors. If we are unable to achieve these improvements, we may be required to record impairment charges related to our long-lived assets in future periods, and this could have an adverse effect on our operations.

15

---

Table of Contents

     In addition, we are required to record impairment charges on long-lived assets, including property, plant and equipment and finite-lived intangible assets (including concessions) if the carrying value of these assets exceeds the undiscounted cash flows expected from their use for purposes of U.S. GAAP. This impairment test is also described in Note 33(m) to our audited consolidated financial statements included in this annual report.

Risks Relating to Our Shareholding Structure

     Our controlling shareholders have a great deal of influence over our business.

     As of December 31, 2009, PT Móveis SGPS, S.A. and Telefónica S.A., our principal shareholders, owned, directly and indirectly, approximately 88.9% of our common shares and 59.4% of our total capital. PT Móveis SGPS, S.A. is 100% controlled by Portugal Telecom, SGPS, S.A. See “Item 7.A.—Major Shareholders and Related Party Transactions—Major Shareholders.” Due to their share ownership, our principal shareholders have the power to control us and our subsidiary, including the power to elect our directors and officers and determine the outcome of any action requiring shareholder approval, including corporate reorganizations and the timing and payment of our dividends. The interests of PT Móveis SGPS, S.A. and Telefónica S.A. may differ from our interests or those of our other shareholders.

Risks Relating to Our Securities

     Holders of our preferred shares or ADSs may not receive any dividends.

     According to Brazilian Corporate Law and our by-laws, we must generally pay dividends to all shareholders equal to at least 25% of our annual net income, as determined and adjusted under the Brazilian Corporate Law. These adjustments to net income for purposes of calculating the basis for dividends include allocations to various reserves that effectively reduce the amount available for the payment of dividends. We were unable to pay minimum dividends for the fiscal years ended December 31, 2004, 2005 and 2007 because we had net losses. For the fiscal year ended December 2006, we were able to pay dividends because we had net income, but the amounts paid were insufficient to meet the minimum legal requirement. In addition, according to Brazilian Corporate Law, we would not pay dividends to our shareholders in any particular fiscal year if our board of directors determines that such distributions would be inadvisable in light of our financial condition. For the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved to pay dividends in the amount of R$402.6 million, which is sufficient to meet the minimum dividend required by law. According to the approval granted at the Board of Directors Meeting held on February 12, 2009 and at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and, upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated. Additionally, on February 9, 2010, the Board of Directors meeting approved the payment of dividends in the approximate amount of R$818.9 million for the fiscal year ended December 31, 2009. See “—Our preferred shares and our ADSs generally do not have voting rights.”

     Telemig Celular and Telemig Participações have paid dividends for the fiscal year ended in December 31, 2008 in an amount that is greater than that required by their respective by-laws. In November 13, 2009, Telemig Participações was merged into Vivo and consequently cease to exist. As of December 31, 2009, we had become the direct owner of 100% of the shares of Telemig Celular. Consequently, as of that date, we owned all of the shares of Telemig Celular and the Brazilian corporate provisions of the Telemig Celular by-laws requiring payment of dividends equal to at least 25% of Telemig Celular’s annual net income no longer were applicable. Nevertheless, since we are a holding company, our income consists exclusively of distributions from our subsidiaries in the form of dividends or other advances and payments. We do not generate our own operating revenues, and we are dependent on dividends and other advances and payments for our cash flow, including making any dividend payments and making payments on our indebtedness. The payment of dividends and interest on capital shall be paid in two equal installments of 50% on April 19, 2010 and 50% on October 25, 2010. Our ability to pay future dividends on our common shares, preferred shares and ADSs will depend on the financial results of our wholly-owned subsidiaries, Vivo S.A. and Telemig Celular.

16

---

Table of Contents

     Holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

     We are organized under the laws of Brazil, and most of our directors and executive officers and our independent public accountants reside or are based in Brazil. Substantially all of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in protecting their interests due to actions by us, our directors or executive officers than would shareholders of a U.S. corporation.

     The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of our ADSs.

     Investments in securities, such as the preferred shares or ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investments in securities of issuers from more developed countries.

     The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States. There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States. These features may substantially limit the ability of holders of our ADSs to exchange their ADSs for the underlying preferred shares and then to sell the preferred shares at a price and time at which holders wish to do so. The São Paulo Stock Exchange had a market capitalization of US$1.3 trillion as of December 31, 2009, and an average monthly trading volume of approximately US$53.9 billion for the first twelve months of 2009.

     In comparison, the NYSE had a domestic market capitalization of US$11.8 trillion (excluding funds and non-U.S. companies) as of December 31, 2009. A liquid and active market may never develop for our common shares, preferred shares or ADSs, and as a result, the ability of holders to sell at the desired price or time may be significantly hindered.

     Holders of our ADSs may face difficulties in protecting their interests because we are subject to different corporate rules and regulations as a Brazilian company and our shareholders may have fewer and less well-defined rights.

     Holders of ADSs are not direct shareholders of our company and are unable to enforce the rights of shareholders under our by-laws and Brazilian Corporate Law. Moreover, our corporate affairs are governed by our by-laws and the Brazilian Corporate Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, or elsewhere outside Brazil. Under Brazilian Corporate Law, the rights of a holder of our common shares or preferred shares to protect its interests with respect to actions by us, our directors or executive officers may be fewer and less well-defined than under the laws of other jurisdictions.

     Although insider trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of our common shares, preferred shares or ADSs at a potential disadvantage. In addition, the disclosure required of public companies in Brazil may be less complete or informative than that required of public companies in the United States or in certain other countries.

17

---

Table of Contents

    Our preferred shares and our ADSs generally do not have voting rights.

     In accordance with Brazilian Corporate Law and our by-laws, holders of our preferred shares, and therefore of our ADSs, are not entitled to vote at meetings of our shareholders, except in limited circumstances. In accordance with Brazilian Corporate Law and our by-laws, holders of preferred shares will have full voting rights in the event that we do not pay minimum dividends to those shareholders for three consecutive fiscal years, and those shareholders will retain those voting rights until we pay minimum dividends again.

     Because we did not pay minimum dividends for the years ended December 31, 2001, 2002, 2003, 2004, 2005, 2006 and 2007, the holders of preferred shares have been able to exercise voting rights since the General Shareholders Meeting held in March 2004. However, for the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved to pay dividends in the amount of R$402.6 million, which is sufficient to meet the minimum dividend required by Brazilian law. According to the approval granted at the Board of Directors Meeting held on February 12, 2009 and at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and, upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated. Additionally, on February 9, 2010, the Board of Directors meeting approved the payment of dividends in the approximate amount of R$818.9 million for the fiscal year ended December 31, 2009. See “—Holders of our preferred shares or ADSs may not receive any dividends” and “Item 10.B. — Additional Information— Memorandum and Articles of Association.”

     Holders of our ADSs may find it difficult to exercise even their limited voting rights at our shareholders meetings. Holders of our ADSs may exercise the limited voting rights with respect to our preferred shares represented by the ADSs only in accordance with the deposit agreement related to the ADSs. There are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional steps involved in communicating with ADS holders. For example, we are required to publish a notice of our shareholders meetings in certain newspapers in Brazil. To the extent that holders of our preferred shares are entitled to vote at a shareholders meeting, they will be able to exercise their voting rights by attending the meeting in person or voting by proxy or its equivalent under Brazilian law. By contrast, holders of the ADSs will receive notice of a shareholders meeting by mail from the depositary following our notice to the depositary requesting the depositary to do so, and so may not receive voting materials in time to instruct the depositary to vote the preferred shares underlying their ADSs. To exercise their voting rights, ADS holders must instruct the depositary on a timely basis. If voting instructions for all or part of the ADSs are not timely received by the depositary, the depositary will assume that the holders of those ADSs are instructing it to give a discretionary proxy to a person designated by us to vote their ADSs, except in limited circumstances. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of the ADSs or for the manner of carrying out those voting instructions. Accordingly, holders of the ADSs may not be able to exercise voting rights, and will have no recourse if the preferred shares underlying their ADSs are not voted as requested.

     An exchange of ADSs for preferred shares risks the loss of certain foreign currency remittance and Brazilian tax advantages.

     The ADSs benefit from the certificate of foreign capital registration, which permits The Bank of New York Mellon, as depositary, to convert dividends and other distributions with respect to preferred shares into foreign currency, and to remit the proceeds abroad. Holders of ADSs who exchange their ADSs for preferred shares will then be entitled to rely on the depositary’s certificate of foreign capital registration for five business days from the date of exchange. Thereafter, they will not be able to remit non-Brazilian currency abroad unless they obtain their own certificate of foreign capital registration, or unless they qualify under Resolution 2,689 of the Central Bank of Brazil, dated January 26, 2000 and issued by BACEN, which entitles certain investors to buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration.

18

---

Table of Contents

     If holders of ADSs do not qualify under Resolution 2,689, they will generally be subject to less favorable tax treatment on distributions with respect to our preferred shares. There can be no assurance that the depositary’s certificate of registration or any certificate of foreign capital registration obtained by holders of ADSs will not be affected by future legislative or regulatory changes, or that additional Brazilian law restrictions applicable to their investment in the ADSs may not be imposed in the future.

     Holders of our preferred shares will be subject to, and holders of our ADSs could be subject to, Brazilian income tax on capital gains from sales of preferred shares or ADSs.

     Brazilian Law No. 10,833, article 26, dated December 29, 2003, provides that gains on the disposition of assets located in Brazil by non-residents of Brazil, whether to other non-residents or to Brazilian residents, will be subject to Brazilian taxation. The common shares and preferred shares are expected to be treated as assets located in Brazil for purposes of the law, and gains on the disposition of common shares and preferred shares, even by non-residents of Brazil, are expected to be subject to Brazilian taxation. In addition, the ADSs may be treated as assets located in Brazil for purposes of the law, and therefore gains on the disposition of ADSs by non-residents of Brazil may also be subject to Brazilian taxation. Although the holders of ADSs outside Brazil may have grounds to assert that Law No. 10,833 does not apply to sales or other dispositions of ADSs, it is not possible to predict whether that understanding will ultimately prevail in the courts of Brazil, given the general and unclear scope of Law No. 10,833 and the absence of judicial court rulings in respect thereto. See “Item 10.E.—Additional Information—Taxation—Brazilian Tax Considerations.”

ITEM 4. INFORMATION ON THE COMPANY

A. Our History and Development

General

     We are incorporated under the laws of the Federative Republic of Brazil under the name Vivo Participações S.A., known as Vivo (and prior to the Merger, under the name Telesp Celular Participações S.A.). We have the legal status of a sociedade por ações, or a stock corporation, operating under Brazilian Corporate Law. Our principal executive offices are located at Avenida Doutor Chucri Zaidan, 860, 04583-110, São Paulo, SP, Brazil. Our telephone number is +55 11 7420-1172, our facsimile number is +55 11 7420-2247, and our website is www.vivo.com.br. The information on our website is not part of this Form 20-F. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, P.O. Box 885, Newark, Delaware 19715.

     According to market share data published by ANATEL, we are a leading provider of cellular telecommunications services in Brazil through our subsidiary Vivo S.A., whose operations were previously provided by our former subsidiaries TC; GT; TCO; and the subsidiaries of Celular CRT; TLE; and TSD. Additionally, we acquired the control in April 3, 2008 of Telemig Celular S.A., a wireless telecommunication provider in the state of Minas Gerais. Global Telecom (or GT, currently Vivo S.A.) is a “B” band cellular concessionaire in the states of Paraná and Santa Catarina. GT began commercial operations in December 1998. In February 2001, we acquired an 81.61% indirect economic interest in GT for R$902 million. On December 27, 2002, we acquired the remaining shares of GT for R$290.3 million.

19

---

Table of Contents

     The following chart shows our corporate structure as of December 31, 2009:

Telebrás and the Privatization

     Vivo was originally incorporated as Telesp Celular Participações as a result of a restructuring of Telebrás in 1998. Before 1972, there were more than 900 telecommunications companies operating throughout Brazil. Between 1972 and 1975, Telebrás and its operating subsidiaries, known as the “predecessor companies” and collectively as the “Telebrás System,” were created, acquiring almost all of the telecommunications companies in Brazil, and creating a near monopoly over the public telecommunications services in Brazil.

     In 1995, the federal government began a comprehensive reform of Brazil’s telecommunications regulatory system. In July 1997, Brazil’s national congress adopted the General Telecommunications Law, which provided for the establishment of a new regulatory framework, the introduction of competition and the privatization of the Telebrás System. In January 1998, in preparation for the restructuring and privatization of the Telebrás System, the cellular telecommunications operations of the Telebrás System were spun off into separate companies. In May 1998, the Telebrás System was restructured to form, in addition to Telebrás, twelve new holding companies. Virtually all of the predecessor companies’ assets and liabilities were transferred to the new holding companies, which we refer to as the new holding companies. TCP was one of the new holding companies. TCP was awarded all of the share capital held by Telebrás in TC, one of the cellular operating companies that had provided cellular telecommunications service in the state of São Paulo since 1993. The Brazilian government’s common shares of Telesp’s capital stock were purchased by the Portugal Telecom group.

20

---

Table of Contents

Brasilcel

     Vivo is controlled by Brasilcel N.V., or Brasilcel, with headquarters in the Netherlands, a joint venture between Portugal Telecom and Telefónica. Through the Vivo Companies, this joint venture controls 29.8% of the total market in Brazil, according to ANATEL, with 51.7 million customers as of December 31, 2009, according to market share data published by ANATEL. Its operations cover all of Brazil and its approximately 191 million inhabitants.

     In December 2002, Portugal Telecom and Telefónica transferred to Brasilcel all of their direct and indirect interests in the following companies (whose operations have been conducted by Vivo S.A. since our restructuring):

• TCP

TCP controlled an “A” band operator in the state of São Paulo, GT, a “B” Band operator in the states of Paraná and Santa Catarina and TCO S.A. and its subsidiaries in the states of Acre, Amazonas, Amapá, Goiás, Maranhão, Mato Grosso, Matto Grosso do Sul, Pará, Rondônia, Roraima and Tocantis and in the Federal District, Brasilia.

• TLE

TLE, which controlled “A” band operations in the states of Bahia and Sergipe, was one of the operating subsidiaries of Telebrás that was spun off as an individual company in July 1998. It received all the capital stock held by Telebrás in the subsidiaries that provided cellular telecommunication services in the states of Bahia and Sergipe, namely, Telebahia Celular and Telergipe Celular.

TLE was purchased by a consortium formed by Iberdrola Investimentos Sociedade Unipessoal Ltda., an investment company controlled by Iberdrola S.A. and Telefónica Internacional S.A., a subsidiary of Telefónica. On May 17, 1999, Iberoleste Participações S.A. purchased 3.07% of Telebahia’s capital stock and 6.54% of Telergipe’s capital stock in a tender offer. In February 2000, Telefónica and Iberdrola transferred their shares to Iberoleste, maintaining their same percentage interest in the consortium. On April 5, 2001, Telefónica purchased all the capital stock directly and indirectly held by the Iberdrola Group in TLE.

• TSD

TSD, which controlled “A” band operators in the states of Rio de Janeiro and Espírito Santo, was one of the operating subsidiaries of Telebrás that was spun off as an individual company in July 1998. TSD received all the capital stock held by Telebrás in the subsidiaries that provided cellular telecommunication services in the States of Rio de Janeiro and Espírito Santo, namely, Telerj Celular and Telest Celular, respectively.

TSD was purchased by a consortium of Telefónica Internacional S.A., Iberdrola Investimentos Sociedade Unipessoal Ltda., NTT Mobile Communications Network, Inc. and Itochu Corporation. In May 2000, Telefónica acquired 67.51% of TSD’s capital stock through an exchange offer. On April 5, 2001, Telefónica purchased from the Iberdrola group, with the authorization of ANATEL, 7% of the capital stock of Sudestecel Participações S.A., a holding company that controlled TSD.

• Celular CRT

Celular CRT controlled an “A” band operator in the state of Rio Grande do Sul. Cellular telecommunications services were first offered in the state of Rio Grande do Sul in December 1992 by a business unit of Celular CRT—Companhia Riograndense de Telecomunicações. The fixed and cellular operations of Celular CRT were split on June 25, 1998, and the cellular operations were spun off as Celular CRT. On May 4, 1999, Celular CRT obtained its registration as a publicly held company with the CVM for the trading of its shares on the over-the-counter market organized by Sociedade Operadora do Mercado de Ativos SOMA, starting on May 17, 1999. On September 8, 1999, Celular CRT registered with the Extremo Sul Stock Exchange and BM&FBOVESPA, pursuant to the applicable laws. The main shareholder of Celular CRT was the state of Rio Grande do Sul.

21

---

Table of Contents

In 1996, the state of Rio Grande do Sul sold part of its stake in Celular CRT to Telefónica. In 1998, the remaining stake of the state of Rio Grande do Sul was sold to Telefónica. In 1999, Portugal Telecom subscribed a share capital increase of Celular CRT.

Acquisition of TCO

     On April 25, 2003, TCP acquired 64.03% of the outstanding voting capital stock of TCO from Fixcel S.A. for approximately R$1,505.6 million, corresponding to R$19.49 per each lot of 1,000 shares acquired. TCO is an “A” band operator providing cellular telecommunications services in the Federal District of Brazil, as well as in the Brazilian states of Goiás, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and Tocantins. The agreement also included the acquisition of TCO’s “B” band subsidiary NBT, which provides cellular telecommunications service in the Brazilian states of Amapá, Amazonas, Maranhão, Pará and Roraima. On May 25, 2003, in compliance with Brazilian legislation, we launched a tender offer for the common shares of TCO not owned by us. The acceptance period ended on November 18, 2003. As a result of the shares tendered, we acquired 74.2% of the outstanding available common shares at the price of R$16.73 per 1,000 common shares. The total purchase price for the new shares amounted to R$538.8 million. On December 31, 2003 we held 90.73% of TCO’s ordinary shares, representing a 29.31% interest in TCO, excluding treasury stocks. We also announced the intention to launch an exchange offer for the remaining shares of TCO through which we would have become TCO’s sole shareholder. This would have been followed by a merger of TCO into TCP. After the launch of the exchange offer, the CVM raised questions on its compliance with Brazilian law. Although TCP and TCO believed, and believe, that the exchange offer complied with applicable law, TCP and TCO decided to terminate the exchange offer in January, 2004. See sections “—TCO’s Corporate Restructuring” and “—Merger of the Vivo Companies” below for more information on developments to TCO since we acquired it.

Introduction of the Vivo Brand

     In April 2003, Brasilcel launched the brand name “Vivo,” under which TCP, TCO, TLE, TSD and Celular CRT operate. The creation of the Vivo brand constituted a consolidation of the commercial models throughout the entire country into a common commercial strategy and replaced the different brands under which the different companies offered their services in their respective states. The commercial strategy of Vivo is to increase its customer base as well as revenues by retaining customers and maintaining their distribution channels. The launching of the Vivo brand was accompanied by customer loyalty programs and other measures designed to contribute to the success of the commercial strategy. Guided by a common management team, Vivo designs marketing, promotional and other initiatives common to all companies and then tailors those activities to the particular markets of those companies.

TCO’s Corporate Restructuring

     On June 30, 2004, the management of TCP and TCO approved the corporate restructuring of TCO and its subsidiaries Telegoiás, Telems, Telemat, Teleacre and Teleron. The reasons for restructuring were: (i) to improve TCO and its subsidiaries’ cash flow, which resulted in the transfer of a R$511 million tax benefit from TCP to TCO, generated by the amortization of goodwill in the amount of R$1,503 million, in connection with the acquisition of TCO and its subsidiaries by TCP in 2003 and (ii) to simplify the corporate structure of TCO’s subsidiaries, improve TCO’s capitalization and benefit the non-controlling shareholders of TCO’s subsidiaries.

VTO—Voluntary Public Tender Offer

     On October 8, 2004, Telesp Celular Participações concluded its public tender offer (“VTO”) for up to 84,252,534,000 preferred shares of TCO by TCP. The number of preferred shares tendered in the VTO exceeded the maximum number to be acquired by TCP. Due to a pro-rata allocation, TCP purchased 0.5547 preferred shares for each preferred share tendered by a TCP holder. After the VTO, on January 7, 2005, the number of TCO shares held by TCP represents 32.76% of the total preferred shares and 50.65% of the total capital stock of TCO. Also under the VTO, Avista Participações Ltda., a subsidiary of Brasilcel, purchased:

22

---

Table of Contents

• common shares of TLE representing 10.0% of TLE’s total common shares and preferred shares of TLE representing 29.51% of TLE’s total preferred shares;

• common shares of TSD representing 3.27% of TSD’s total common shares and preferred shares of TSD representing 4.89% of TSD’s total preferred shares; and

• common shares of Celular CRT representing 4.48% of Celular CRT’s total common shares and preferred shares of Celular CRT representing 23.44% of Celular CRT’s total preferred shares.

Rights Offering

     On November 8, 2004, TCP announced a capital increase of up to R$2,053,895,871.47, upon private subscription, with an issuance of 410,779,174,294 new shares, of which 143,513,066,618 are common shares and 267,266,107,676 are preferred shares, identical in every aspect to those shares currently existing, at the issuance price of five reais (R$5.00) per lot of one thousand shares, for both types of shares.

     The capital increase was carried out in three subscription stages, with due regard to preemptive rights, and ended with an auction of the remaining shares held on January 4, 2005, which was confirmed by the Board of Directors at a meeting held on January 7, 2005. The capital stock was increased to R$6,427,557,341.20, represented by 1,582,563,526,803 shares, of which 552,896,931,154 are common shares and 1,029,666,595,649 are preferred shares. Following the rights offering, Brasilcel held 94.9% of our common shares, 50.0% of our preferred shares, and 65.7% of our total capital stock.

Brasilcel’s Share Holding Increases of TLE, TSD, and Celular CRT

     In July 2005, Brasilcel and its affiliates acquired additional voting capital stock of TLE, TSD and Celular CRT in respective Share Holding increases. As a result of those transactions, Brasilcel held:

• 68.72% of TLE’s common shares, 40.95% of TLE’s preferred shares and 50.67% of TLE’s total capital stock;

• 92.01% of TSD’s common shares, 90.27% of TSD’s preferred shares and 91.03% of TSD’s total capital stock; and

• 90.57% of Celular CRT’s common shares, 51.47% of Celular CRT’s preferred shares and 68.77% of Celular CRT’s total capital stock (excluding treasury shares).

Merger of the Vivo Companies

     In February 2006, shareholders of the Vivo Companies approved their consolidation with one another through a Brazilian law procedure (the “Merger”) whereby TCO became a wholly owned subsidiary of TCP pursuant to a merger of shares (incorporação de ações) of TCO and a merger of companies (incorporação de empresas) of TLE, TSD and Celular CRT with and into TCP, with TCP as the surviving company. Holders of common shares, preferred shares or (where applicable) ADSs of TCO, TLE, TSD and Celular CRT received common shares, preferred shares or ADSs, respectively, of TCP upon approval of the Merger by the requisite percentage of the voting shareholders of TCP, and of TCO, TLE, TSD and Celular CRT, as applicable. Upon the completion of the Merger, TCP was renamed Vivo Participações S.A. and has become the holding company of TCO and GT and of the remaining subsidiaries of TLE, TSD and Celular CRT.

     The boards of directors (Conselhos de Administração) of each of the constituent companies to the Merger completed their respective approval processes for the Merger by December 4, 2005, and the respective shareholders approved the transaction as of February 22, 2006. The reasons for the Merger were to align the interests of the shareholders of TCP, TCO, and TLE, TSD and Celular CRT, which were previously under common control; to improve the liquidity of the resultant securities; to simplify the shareholding and organizational structure of the Vivo companies and expand its shareholder base; and to take advantage of important synergies among the companies, which were already operating under the common Vivo brand.

23

---

Table of Contents

     Pursuant to the Merger, Brasilcel and its subsidiaries hold 89.0% of TCP’s common shares. Under the Protocol of Merger of Shares and Merger of Companies and Instrument of Justification, the agreements which govern the Merger, TCP underwent a capital increase in the amount of R$2,631,136,636.01 as a result of the Merger, from R$6,670,152,498.26 to R$9,301,289,134.27. The agreements also provided that Celular CRT’s preferred shares held in treasury are transferred to TCP in connection with the Merger. At the Vivo Shareholders Meeting held on February 22, 2006, TCP reduced its capital in the amount of R$3,147,782,181.54, from R$6,670,152,498.26 to R$3,522,370,316.72, as approved by management and the shareholders and in accordance with Brazilian Corporate Law, which permits reductions in capital up to the amount of accumulated losses, allowing a more accurate valuation of the company and the possibility for eventual future distributions of dividends. TCP subsequently changed its corporate name to “Vivo.” The total capital of Vivo following the merger was R$6,153,506,952.73 due to an increase in the amount of R$2,631,136,636.01 as a result of the Merger. For more information on the Merger, see the Protocol of Merger of Shares and Merger of Companies and Instrument of Justification among TCP, TSD, TLE and Celular CRT dated December 4, 2005, which is included as an exhibit to this report.

     CVM regulations permit the acquirer of a publicly held company to capitalize the tax benefits arising from the amortization of goodwill generated in the acquisition of that company, so long as preemptive rights are extended to the other shareholders of the publicly held company in connection with the capital increase. At the time of the Merger, any rights previously held by Vivo, in connection with its existing investment in TCO, or by certain controlling shareholders, in the case of TSD, TLE and Celular CRT, to capitalize credits of such companies will remain in effect. As a result, at the time of the Merger, Vivo retained its prior rights to capitalize its credits in TCO and such controlling shareholders acquired the right to use their credits in future capital increases of Vivo.

Capital Increase

     On June 08, 2006, the Board of Directors of Vivo Participações approved a capital increase and issued a total of 15,705,528 new common shares at the issue price of R$12.37 in connection with Brasilcel’s capitalization of certain tax benefits relating to the goodwill it recorded when it acquired us in December 2002 and with preemptive rights exercised by our shareholders. CVM regulations permit buyers of joint stock companies to capitalize tax benefits derived from goodwill, provided preemptive rights related to such capital increase are extended to the other shareholders of the joint stock company. The goodwill Brasilcel capitalized included approximately R$193.9 million in tax benefits for the fiscal year ending on December 31, 2005 and approximately R$0.4 million for previous fiscal years, totaling approximately R$194.3 million.

     The issue price was 100% of the weighted average of the closing prices registered by the São Paulo Stock Exchange in the 15 trading sessions held between April 07, 2006 and May 02, 2006. The preemptive rights were authorized to be exercised in the period between May 08, 2006 and June 06, 2006.

     As a result of this capital increase Brasilcel’s holdings in us consisted of 89.3% of Vivo common shares, 47.5% of Vivo preferred shares and 62.8% of Vivo’s total capital.

     The Meeting of the Board of Directors held on May 26, 2008 approved a capital increase of R$362,742, representing the tax benefit of the incorporated premium, and R$179,862 and R$182,880 for the years 2006 and 2007, respectively, with the issue of 31,959,675 new shares, comprised of 11,669,713 common shares and 20,289,962 preferred shares, ensuring the preemptive right provided for in Article 171 of Law No. 6404/76. The proceeds arising from the exercise of the preemptive right were credited to Portelcom Participações S.A. and Sudestecel Participações Ltda.

     As a result of this capital increase Brasilcel’s holdings in us consisted of 89.5% of Vivo common shares, 48.7% of Vivo preferred shares representing 63.5% of Vivo’s total capital.

Corporate Restructuring of Our Operating Subsidiaries

     On October 31, 2006, our shareholders approved the merger of Telergipe, Telebahia, Telerj, Telest, CRT, TC, TCO, Telegoiás, Telemat, Telems, Teleron, Teleacre and NBT (each an “Operating Subsidiary” and collectively, the “Operating Subsidiaries”) into Vivo S.A. (formerly known as GT) (the “Corporate Restructuring”). TCO - IP S.A. remained a separate entity, as it is not an SMP operator.

24

---

Table of Contents

     The remaining rights of the former non-controlling shareholders of TCO, Telegoiás, Telemat, Telems, Teleacre and Teleron survived the Corporate Restructuring of the Operating Subsidiaries as of November 1, 2006 and continue to exist under Vivo S.A.

     Due to this Corporate Restructuring, the SMP and SCM services that were offered by the Operating Subsidiaries in their respective areas and regions, along with their clients and users, were transferred to Vivo S.A.

     The Corporate Restructuring had no impact on Vivo’s consolidated financial statements, capital stock or shareholders’ equity.

     The benefits of this restructuring included, among others, increased organizational efficiency, a more effective management and streamlined administrative and commercial functions.

Acquisition of Telpart, Telemig and Tele Norte

     On August 2, 2007, Vivo signed a stock purchase agreement with Telpart to acquire control of Telemig Participações (then the controlling shareholder of Telemig Celular) and Tele Norte Participações (then the controlling shareholder of Amazônia Celular S.A.) and 22.73% and 19.34%, respectively, of the total capital of both Telemig Participações and Tele Norte Participações for an aggregate amount of R$1.2 billion, subject to certain price adjustments, and the completion of the transaction being subject to customary closing conditions. Telpart was at that time the parent company of Telemig and Tele Norte. In addition, pursuant to the agreement, Vivo would acquire from Telpart certain subscription rights with respect to goodwill reserves for R$87 million (R$65.8 million regarding Telemig and R$21.1 regarding Tele Norte Participações). On November 9, 2007, ANATEL approved Vivo’s acquisition of Telemig pursuant to Action (Ato) No. 68,401.

     On December 20, 2007, in accordance with the terms of Instruction CVM 358 of 01/03/02, Vivo publicly announced that it signed a stock purchase agreement with Telemar, a Brazilian telecommunications company unrelated to either Telpart or Vivo, for the sale of all of the Tele Norte shares it was acquiring from Telpart under the stock purchase agreement dated August 2, 2007, in order to facilitate its acquisition of the shares of Telemig. Subsequent to signing this stock purchase agreement, and pursuant to Action (Ato) No. 1,261 dated March 5, 2008 published in the DOU on March 7, 2008, ANATEL approved the transfer of shares of Tele Norte to Vivo and the subsequent transfer of these shares to Telemar.

     The sale to Telemar was agreed to be in the amount of R$120,009,893.00, subject to the indexation set forth in the stock purchase agreement dated December 20, 2007, which was equivalent to the price Vivo paid for these same shares under the terms of the stock purchase agreement of August 2, 2007.

     On April 3, 2008, Vivo announced that (i) all conditions precedent to the acquisition of Telemig were fulfilled, (ii) Vivo had paid the purchase price in the total amount of R$1.23 billion, comprised of R$1.163 billion in connection with the purchase of shares and R$70.511 million in connection with the acquisition of subscription rights, and (iii) Vivo had acquired, as of that date, the direct control of Telemig as a result of the acquisition of 7,258,108 common shares and 969,932 preferred shares of Telemig, representing 53.90% of the voting capital and 22.73% of the total capital of Telemig. The price per share paid by Vivo was approximately R$151.17 per common share and R$67.43 per preferred share of Telemig.

     Vivo further announced that the interests acquired in Tele Norte Participações and, indirectly, in Amazônia Celular were immediately transferred to Telemar Participações S.A., for the same price and under the same conditions set forth in the agreement with Telpart. Such interests in Tele Norte Participações consisted of 1,292,679 common shares, 3,715 preferred shares and rights to subscribe to shares to be issued by Tele Norte Participações.

     Also on April 3, Vivo announced that it would proceed with two tender offers through its subsidiary TCO IP S.A.: (i) a mandatory offer to non-controlling common shareholders in Telemig Participações and Telemig Celular, at a price per share of R$120.93 and R$2,100.03, respectively, which was subsequently launched on July 15, 2008 and (ii) a voluntary offer for up to one-third of Telemig Participações’s and Telemig Celular’s outstanding preferred shares, on a pro-rated basis, at a price per share of R$63.90 and R$654.72, respectively—which prices included a premium of approximately 25% of the weighted average price of the preferred shares of the respective company in the 30 BM&FBOVESPA trading sessions preceding and including August 1, 2007. The voluntary offer also included holders of preferred shares underlying the ADSs and was launched on April 8, 2008.

25

---

Table of Contents

     On April 4, 2008, the Company approved the transfer of the equity control of TCO IP S.A. from Vivo S.A. to Vivo Participações S.A. As a result of such transfer of control, TCO IP became a wholly-owned subsidiary of Vivo Participações.

     On August 20, 2008, Vivo announced the results of the tender offers. Upon completion of the voluntary tender offer on May 12, 2008, TCO IP had acquired 7,257,020 preferred shares of Telemig Participações and 89,492 preferred shares of Telemig Celular, for a total purchase price of R$463.7 million and R$58.59 million, respectively. On July 25, 2008, TCO IP acquired 3,929 preferred shares of Telemig Celular for an aggregate amount of R$2.57 million, and on September 9 and 10, TCO IP acquired 4,000 preferred shares of Telemig Celular for the aggregate amount of R$2.6 million. Upon completion of the mandatory tender offer on August 15, 2008, TCO IP acquired 5,803,171 common shares of Telemig Participações and 78,107 common shares of Telemig Celular, for an aggregate price of R$732.6 million and R$171.2 million, respectively.

     On August 26, 2008, Vivo Participações subscribed to a capital increase in TCO IP in the amount of R$1.149 billion, which was paid-in with the transfer and delivery, at book value, of 7,258,108 common and 969,932 preferred shares held by Vivo in Telemig Participações and Telemig Celular. As a result of this transaction, TCO IP’s share capital increased from R$905.03 million to R$2.05 billion and TCO IP became the direct controlling shareholder of Telemig.

     On December 19, 2008, Vivo and Telemig announced the shareholder approval of a corporate reorganization pursuant to which TCO IP S.A. was spun off and incorporated into Telemig Participações and Telemig Celular. As a result of the acquisition from Telpart, the tender offers and the corporate reorganization, Vivo became a holder of 96.994% common shares and 36.177% preferred shares in Telemig Participações and 8.764% common shares and 6.308% preferred shares in Telemig Celular.

Capital Increase

     In an extraordinary meeting held on February 12, 2009, our Board of Directors approved a capital increase as a result of the corporate restructuring process involving the Company and its controlled and controlling companies. The goodwill amortization resulting from this corporate restructuring resulted in an accrued tax benefit in the total amount of approximately R$189.9 million corresponding to the fiscal year ended on December 31, 2008. It also represents the credits held by the controlling shareholder, Portelcom Participações S.A. (“Portelcom”), used to increase the capital stock from approximately R$6.7 billion to R$6.9 billion, with the issuance of 5,819,678 new shares. Of such new shares being issued, 2,124,989 are common shares and 3,694,689 are preferred shares, entitled to preemptive rights as set forth by Brazilian law.

     The issue price of R$32.63 per preferred and common share, corresponded to 100% of the weighted average price of the preferred shares during the 10 trading sessions of BM&FBOVESPA, from January 28, 2009 until February 10, 2009, inclusive.

     As a result of this capital increase Brasilcel’s holdings in us consisted of 89.56% of our common shares, 48.75% of our preferred shares, representing 63.61% of our total capital.

Corporate Restructuring and Deregistration of Telemig Participações and Telemig Celular

     On March 23, 2009, in compliance with and for the purpose of Instructions CVM Nr. 319/99 and 358/02, the Board of Directors of Vivo, Telemig Participações, and Telemig Celular agreed to submit to the shareholders of all three companies a proposal for a corporate restructuring consisting of the merger of the shares of Telemig Celular into Telemig Participações and of the shares of Telemig Participações into Vivo, with the objective of making Telemig Celular into a wholly-owned subsidiary of Telemig Participações and making Telemig Participações into a wholly-owned subsidiary of Vivo (“Corporate Restructuring”).

     The purpose of the proposed Corporate Restructuring was to simplify the former organizational structure that comprised three publicly-held companies, two of them with ADRs traded outside of Brazil. The simplified structure reduces administrative costs and allows the shareholders of these three companies to participate in one company with shares traded on the Brazilian and international stock exchanges, thus increasing liquidity and facilitating the unification and standardization of the general administration of the businesses.

26

---

Table of Contents

     At a Special Shareholders’ Meeting held on July 27, 2009, the shareholders of Telemig Participações and Telemig Celular approved the Protocol of Merger of Shares and Instrument of Justification executed on May 29, 2009, which provided for the merger into Telemig Participações of all the shares of Telemig Celular, with the holders of the merged Telemig Celular shares receiving, without any further action by these holders, 17.4 common shares, no par value, of Telemig Participações for each Telemig Celular common share they held and 17.4 preferred shares, no par value, of Telemig Participações for each Telemig Celular preferred share they held, regardless of the class of Telemig Celular preferred shares held, but, as described below, the Telemig Participações shares that they received were exchanged for Vivo shares so that each holder of a Telemig Celular common share or a Telemig Celular preferred share ultimately received, without any further action by the holder, 23.838 Vivo common shares or 23.838 Vivo preferred shares, respectively, plus, in each case, cash instead of any fractional Vivo shares for which the Telemig Celular common shares and preferred shares ultimately were exchanged as a result of the Corporate Restructuring (the “Telemig Merger of Shares”).

     On the same date, at a Special Shareholders’ Meeting, the shareholders of the Company approved the Protocol of Merger of Shares and Instrument of Justification executed on May 29, 2009, which provided for the merger into Vivo Participações of the shares of Telemig Participações, including those raised in the Telemig Celular merger of shares described above, with the holders of the merged shares of Telemig Participações receiving, without any further action by these holders, 1.37 common shares, no par value, of Vivo for each Telemig Participações common share they held, and 1.37 preferred shares, no par value, of Vivo for each Telemig Participações preferred share they held plus, in each case, cash instead of any fractional shares (the “Vivo Merger of Shares”).

     The mergers of the shares of Telemig Celular and Telemig Participações did not result in any change in the number or types of outstanding shares of these companies or in the terms of any of these shares. Instead, Vivo became the owner, directly or indirectly, of all of these shares, with Telemig Participações becoming a wholly-owned subsidiary of Vivo and with Telemig Celular becoming a wholly-owned subsidiary of Telemig Participações. Ultimately, all of the non-controlling shareholders of Telemig Celular and Telemig Participações became Vivo shareholders and each shareholder received the same class of Vivo share (common or preferred) as that shareholder previously held in Telemig Celular or Telemig Participações.

     The Corporate Restructuring was submitted to ANATEL for review, but its approval was not required to merge Telemig Celular into Telemig since this part of the Corporate Restructuring plan involves companies of the same economic group. Moreover, such merger was not subject to the approval of CADE - Conselho Administrativo de Defesa Econômica.

     The charts below show the simplified organizational charts showing the corporate structure of Vivo, Telemig and Telemig Celular before and after the Corporate Restructuring.

27

---

Table of Contents

Pre-Restructuring

     The organizational chart below shows the corporate structure of Vivo, Telemig, and Telemig Celular after the implementation of the Corporate Restructuring described above. The Corporate Restructuring did not change the final composition of the control of the three companies involved.

28

---

Table of Contents

Post-Restructuring

The Corporate Restructuring resulted in the following:

• non-controlling holders of Telemig ADSs received 2.74 Vivo ADSs for each Telemig ADS they held plus cash instead of any fractional ADSs;

• Vivo became a significantly larger company and more diversified, owning 100% of the capital stock of Telemig, which in turn owned 100% of the capital stock of Telemig Celular. Telemig’s interest in the net book value and net income (loss) of Telemig Celular therefore increased to 100%, and Vivo’s interest in the net book value and net income (loss) of Telemig therefore increased to 100%;

• the preferred shares and ADSs of Telemig ceased trading on the NYSE on September 28, 2009, and were deregistered under the Exchange Act on December 15, 2009, and Telemig no longer files Annual Reports on Form 20-F or reports on Form 6-K;

• the common shares and preferred shares of Telemig and Telemig Celular were delisted from the BM&F BOVESPA and deregistered from the CVM on October 16 and 19, 2009, respectively; and

29

---

Table of Contents

• the Restructuring allowed holders of common shares and preferred shares of Telemig and Telemig Celular to receive Vivo securities having substantially the same rights as their prior securities but that instead are expected to enjoy greater liquidity than the securities previously held by them.

     The holders of common and preferred shares of Telemig and of Telemig Participações and of common shares of Vivo Participações who dissented from the merger of shares of Telemig and of Telemig Participações, were entitled, for a period of 30 days following publication of the minutes of the special shareholders’ meetings of the companies relating to the Corporate Reorganization, to withdraw themselves from the respective companies. The aggregate amount paid by Vivo or its affiliates with respect to all of the withdrawal rights exercised by holders entitled to withdraw from the companies was R$23.3 thousand for 405 shares.

     The calculations prepared for the exchange ratios of shares of Telemig for shares of Telemig Participações and of shares of Telemig Participações for shares of Vivo Participações resulted in share fractions which were replaced on the market at auctions held on September 24 and 29, 2009 at BM&FBOVESPA. These over-allotment shares represent 54,169 common shares and 42,595 preferred shares, representing a net value of approximately R$40.95 per common share, and approximately R$43.20 per preferred share, to be paid pro-rata to the fractions held by the shareholders and investors prior to the auctions.

     At a Special Shareholders’ Meeting held on November 13, 2009, the actual merger of Telemig Participações into Vivo Participações (as opposed to the merger of the shares) and the subsequent termination of Telemig Participações was approved, the appraisal and prior approval of which was submitted to ANATEL. ANATEL approved the actual merger of Telemig Participações into Vivo Participações on November 4, 2009. As a result of such merger, Telemig Celular became a direct wholly-owned subsidiary of Vivo Participações. See Note 1(d) to our 2009 financial statements.

Post-merger of Telemig Participações into Vivo

     Currently, to further simplify our corporate structure, we are seeking to also merge the operations of Telemig Celular into Vivo Participações, subsequent to which Telemig Celular will cease to exist. At a Special Shareholders’ Meeting held on November 30, 2009, the inclusion into the corporate purpose of the Bylaws of the Company of the activity of providing cellular mobile telephone service was approved in order to enable this future merger of Telemig Celular into Vivo, with a relevant notice of this future merger previously released to the market on October 8, 2009.

     On December 7, 2009, the Company communicated to its shareholders and to the market in general that, on December 3, 2009, it had filed with ANATEL a request for approval of the actual merger of Telemig Celular into Vivo Participações (as opposed to the merger of shares), in conformity with the provisions of Law no. 9.472/97 – General Telecommunications Law, on the Regulation for Verification of Share Control and Transfer of Share Control in Telecommunication Service Providers, as approved by Resolution no. 101/1999, and with the other applicable regulatory instruments. ANATEL is currently analyzing this merger.

30

---

Table of Contents

Corporate Reorganization of Our Controlling Shareholders

     A corporate reorganization was carried out in November 2009 betweenVivo’s controlling companies, resulting in the actual merger, into Portelcom Participações S.A. (“Portelcom”), of the companies Tagilo Participações Ltda., Sudestecel Participações Ltda. and Avista Participações Ltda., after which the merged companies were extinguished. Vivo Brasil Comunicações Ltda., 100% of which was previously owned by Brasilcel N.V., was also merged into Portelcom. At this same date, Brasilcel N.V. increased the capital stock of Portelcom by transferring 1,910,428 common shares of Vivo to Portelcom. Nevertheless, the ultimate shareholding control was not changed and the reorganization does not involve Vivo, but rather only the controlling group companies holding shares in Vivo.

Dividends and Interest on Shareholders’ Equity

     Year ended December 31, 2008

     In compliance with our by-laws, the general shareholders meeting on March 19, 2009 approved the payment of dividends in a total amount of approximately R$402.6 million). Such dividends, declared on the basis of the 2008 closing balance sheet, include the interest on shareholders’ equity (Juros Sobre o Capital Próprio - “JSCP”) in the approximate net amount of R$136.9 million, as approved at a meeting of the Board of Directors of the Company held on December 17, 2008, and dividends in the amount of approximately R$265.7 million.

     This amount results in an aggregate of interest on shareholders’ equity (Juros Sobre Capital Próprio or “JSCP”) plus net dividends of approximately R$1.10 per common or preferred share. The above mentioned amounts were paid on December 2, 2009.

     Year ended December 31, 2009

     In compliance with our by-laws, the Board of Directors meeting held on February 9, 2010 approved the payment of dividends in the approximate amount of R$818.9 million. Such dividends, declared on the basis of the 2009 closing balance sheet, include the interest on shareholders equity (“JSCP”) in the approximate net amount of R$88.5 million, as approved at the Board of Directors meeting held on December 14, 2009, and dividends in the amount of approximately R$730.3 million. The above mentioned dividends will be paid in two equal payments, on April 19, 2010 and October 25, 2010.

Capital Expenditures

     The primary focus of our capital expenditure program has been, and continues to be, the improvement of the capacity and quality of the services we currently offer and the provision of new services as well as the development of information systems.

     The following tables set forth our total capital expenditures for the companies and periods indicated:

		Year ended December 31,
Vivo		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		237.6		533.1		417.3
Transmission equipment		1,283.6		1,446.9		726.9
Information technology		346.0		286.5		267.2
Others(2)		500.3		1,730.9		494.3
Total capital expenditures		2,367.5		3,997.4		1,905.7

31

---

Table of Contents

		Year ended December 31,
State of São Paulo—Areas 1 and 2		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		61.5		146.8		133.4
Transmission equipment		321.9		411.7		267.1
Information Technology		281.3		243.9		238.2
Others(2)		201.3		373.1		143.8
Total capital expenditures		866.0		1,175.5		782.5
		Year ended December 31,
States of Rio de Janeiro and Espírito Santo—Area 3		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		58.4		65.3		86.4
Transmission equipment		119.6		223.7		115.3
Information technology		3.3		2.3		5.6
Others(2)		71.2		305.3		106.5
Total capital expenditures		252.5		596.6		313.8
		Year ended December 31,
States of Paraná and Santa Catarina—Area 5		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		6.3		11.8		56.2
Transmission equipment		106.1		131.2		89.8
Information Technology		0.3		1.1		2.2
Others(2)		48.1		251.1		65.6
Total capital expenditures		160.8		395.2		213.8
		Year ended December 31,
State of Rio Grande do Sul—Area 6		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		13.3		119.7		69.1
Transmission equipment		84.6		22.3		73.8
Information technology		3.0		1.1		5.9
Others(2)		62.0		231.0		62.3
Total capital expenditures		162.9		374.1		211.1
		Year ended December 31,
Central Western and Northern regions—Areas 7 and 8		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		38.7		68.7		46.4
Transmission equipment		240.0		246.6		119.3
Information Technology		3.3		2.6		8.1
Others(2)		58.6		269.8		78.7
Total capital expenditures		340.6		587.7		252.5
		Year ended December 31,
States of Bahia and Sergipe—Area 9		2009(1)		2008(1)		2007(1)
		(in millions of reais)
Switching equipment		12.0		33.2		25.8
Transmission equipment		57.9		77.3		61.6
Information technology		1.0		1.2		7.2
Others(2)		24.4		120.5		37.4
Total capital expenditures		95.3		232.2		132.0

32

---

Table of Contents

Northeast region—Area 10		Year ended  December 31,  2009		Year ended  December 31,  2008(1)
Switching equipment		12.4		19.3
Transmission equipment		200.7		212.5
Information technology		6.3		1.7
Others(2)		12.2		71.2
Total capital expenditures		231.6		304.7
State of Minas Gerais—Area 4		Year ended  December 31,  2009		Year ended  December 31,  2008
Switching equipment		35.0		68.3
Transmission equipment		152.8		121.6
Information technology		47.5		32.6
Others(2)		22.5		108.9
Total capital expenditures		257.8		331.4

_____________________
(1)		The financial information presented for 2007, 2008 and 2009 represents information from Vivo’s consolidated financial statements.
(2)		Consisting primarily of free handset rentals, network construction, furniture and fixtures, office equipment, store layouts, and an aggregate amount of R$1,201.2 million in connection the acquisition in 2008 of our 3G licenses.

     Our capital expenditure estimate for 2010 is approximately R$2.49 billion, which includes investments in network expansion, introduction of products and services that aim at maximizing the use of cellular telephony, as well as seeking ways to constantly improve the quality of services provided to our customers.

     We intend to fund these capital expenditures mostly with cash generated from operations. See “Item 5.B.—Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

B. Business Overview

     According to data regarding market share published by ANATEL, we are among the leading providers of cellular telecommunications services in Brazil, with the help of our subsidiary Vivo S.A., the leading cellular operator in Brazil. Vivo S.A. is a cellular operator in the states of Acre, Alagoas, Amapá, Amazonas, Bahia, Ceará, Espírito Santo, Goiás (also encompassing the area of Distrito Federal, or the Federal district), Maranhão, Mato Grosso, Mato Grosso do Sul, Pará, Paraíba, Paraná, Pernambuco, Piauí, Rio de Janeiro, Rio Grande do Norte, Rio Grande do Sul, Rondônia, Roraima, Santa Catarina, São Paulo, Sergipe, Tocantins and Minas Gerais through its subsidiary Telemig Celular.

     In Areas 1 and 2, Vivo S.A. uses a frequency range known as “A”, “L” and “J” band that covers 100% of the municipalities in its authorized areas in the state of São Paulo. On December 31, 2009, Vivo S.A. had 15.7 million cellular lines in service in these areas, which represented a 10.8% increase from December 31, 2008, and a market share of approximately 35.3% in São Paulo.

     In Area 3, Vivo S.A. uses the band “A”, “L” and “J” frequency range that covers 100% of the municipalities and 100% of the population in the states of Rio de Janeiro and Espírito Santo. On December 31, 2009, Vivo S.A. had 7.7 million cellular lines in service in this area, which represented a 48.8% net increase from December 31, 2008, and a market share of approximately 38.5% in those states.

     In Area 4, Vivo S.A. through its holding of Telemig Celular uses a frequency range known as “A”, “E” and “J” band that covers 71.5% of the municipalities and 92.3% of the population in the state of Minas Gerais. On December 31, 2009, Telemig Celular had 6.0 million cellular lines in service in this area, which represented a 29.4% net increase from December 31, 2008, and a market share of approximately 33.0% in Minas Gerais.

33

---

Table of Contents

     In Area 5, Vivo S.A. uses a frequency range known as “B” band that covers 66.6% of the municipalities in the states of Paraná and Santa Catarina and 93.7% of the population of Paraná and Santa Catarina. On December 31, 2009, Vivo S.A. had 3.6 million cellular lines in service in this area, which represented a 7.6% net increase from December 31, 2008, and a market share of approximately 23.0% in those states.

     In Area 6, Vivo S.A. uses the band “A”, “L” and “J” frequency range that covers 81.1% of the municipalities and 97.6% of the population in the state of Rio Grande do Sul. On December 31, 2009, Vivo S.A. had 4.6 million cellular lines in service in this area, which represented a 11.0% net increase from December 31, 2008, and a market share of approximately 42.2% in that state.

     In Areas 7 and 8, Vivo S.A. is the leading cellular operator, by number of customers, in its authorization area and uses a frequency range known as “A”, “B”, “L” and “J” band that covers 54.8% of the municipalities in the states of Acre, Distrito Federal, Goiás, Mato Grosso, Mato Grosso do Sul, Rondônia, Tocantins, Amazonas, Amapá, Maranhão, Pará and Roraima which covers 84.3% of the population in these states. On December 31, 2009, Vivo S.A. had 9.7 million cellular lines in service in these areas, which represented a 17.7% net increase from December 31, 2008, and a market share of approximately 33.1% in those states.

     In Area 9, Vivo S.A. uses the band “A”, “L” and “J” frequency range that covers 59.8% of the municipalities and 85.8% of the population in the States of Bahia and Sergipe. On December 31, 2009, Vivo S.A. had 3.6 million cellular lines in service in this area, which represented a 20.5% net increase from December 31, 2008, and a market share of approximately 29.6% in those states.

     In Area 10, Vivo S.A. uses the band “L” and “J” frequency range that covers 22.9% of the municipalities and 64.4% of the population in the States of Alagoas, Ceará, Pernambuco, Piauí, Paraíba and Rio Grande do Norte. On December 31, 2009, Vivo S.A. had 0.8 million cellular lines in service in this area, which represented a 147.6% net increase from December 31, 2008 and a market share of approximately 3.6% in those states. Vivo S.A. initiated its operations in these states in October of 2008. In February 2009 Vivo initiated its operations in Alagoas and Paraiba, in March 2009 in Rio Grande do Norte and in April 2009 in Piauí.

     On September 18, 2007, with ANATEL’s approval, Vivo acquired the band “L” lots, except for lot 16 (area of Londrina PR in region 5) and lot 20 (area of Northern Brazil in region 8). Band “L” comprises lots in frequency ranges 1895 to 1900 Mhz and 1975 to 1980 Mhz, with 5 + 5 Mhz band width. As a result, Vivo managed to complete its last coverage gap and will soon be operating in the entire Brazilian territory.

     On December 20, 2007, with ANATEL’s approval, Vivo acquired the band “J” lots with 10 + 10 Mhz band width, with the exception of the lots in the state of Minas Gerais then acquired by Telemig Celular and now by Vivo.

Our Operations

     The following tables set forth information about Vivo’s cellular telecommunications base, coverage and related matters at the dates and for the years indicated.

		Year ended December 31,
State of São Paulo—Areas 1 and 2		2009		2008		2007
Cellular lines in service at year-end (in thousands)		15,731		14,197		12,142
Contract customers		3,111		2,671		2,125
Prepaid customers		12,620		11,526		10,017
Growth in cellular lines in service during year		10.8%		16.9%		13.6%
Churn(1)		29.0%		28.8%		25.4%
Estimated population of concession areas (in millions)(2)		41.4		40.8		41.2
Estimated covered population (in millions)(3)		41.4		40.8		41.2
Percentage of population covered(4)		100%		100%		100%
Penetration at year-end(5)		108.1%		92.8%		71.0%
Percentage of municipalities covered		100%		100%		100%
Market share(6)		35,3%		37.4%		41.5%

34

---

Table of Contents

		Year ended December 31,
States of Rio de Janeiro and Espírito Santo—Area 3		2009		2008		2007
Cellular lines in service at year-end (in thousands)		7,723		7,100		5,947
Contract customers		1,760		1,608		1,391
Prepaid customers		5,963		5,492		4,556
Customer growth during the year		8.8%		19.4%		20.9%
Churn(1)		31.7%		28.3%		25.5%
Estimated population of Region at year-end (millions)(2)		19.5		19.2		19.4
Estimated covered population at year-end (millions)(3)		19.5		19.5		19.4
Percentage of population of Region covered at year-end(4)		100%		100%		100%
Penetration at year-end(5)		103.7%		95.7%		76.8%
Percentage of municipalities covered		100%		100%		100%
Market share(6)		38.5%		38.7%		39.9%
		Year ended December 31,
State of Minas Gerais—Area 4		2009		2008		2007
Cellular lines in service at year-end (in thousands)		5,985		4,627		3,901
Contract customers		1,051		975		833
Prepaid customers		4,934		3,652		3,067
Customer growth during the year		29.4%		18.6%		13.5%
Churn(1)		31.9%		45.6%		36.8%
Estimated population of region at year-end (million)(2)		20.0		19.9		19.7
Estimated covered population at year-end (million)(3)		18.5		18.3		17.1
Percentage of population covered at year-end(4)		92.3%		91.9%		84.4%
Penetration at year-end(5)		90.0%		80.8%		67.6%
Percentage of municipalities covered		71.5%		70.8%		73.6%
Estimated market share(6)		33.0%		28.7%		29.1%

35

---

Table of Contents

		Year ended December 31,
States of Paraná and Santa Catarina—Area 5		2009		2008		2007
Cellular lines in service at year-end (in thousands)		3,571		3,317		2,823
Contract customers		743		635		494
Prepaid customers		2,828		2,682		2,329
Growth in cellular lines in service during year		7.6%		17.5%		9.9%
Churn(1)		34.5%		31.3%		34.5%
Estimated population of concession areas (in millions)(2)		16.8		16.7		16.7
Estimated covered population (in millions)(3)		15.8		15.4		15.4
Percentage of population covered(4)		93.7%		92.5%		92%
Penetration at year-end(5)		91.7%		80.6%		65.7%
Percentage of municipalities covered		66.6%		60.4%		60.0%
Market share(6)		23.0%		24.6%		25.8%
		Year ended December 31,
State of Rio Grande do Sul—Area 6		2009		2008		2007
Cellular lines in service at year-end (in thousands)		4,632		4.172		3,647
Contract customers		1,245		1,119		939
Prepaid customers		3,386		3,053		2,709
Growth in cellular lines in service during year		11.0%		14.4%		9.8%
Churn(1)		22.3%		24.0%		24.1%
Estimated population of concession areas (in millions)(2)		10.9		10.9		10.7
Estimated covered population (in millions)(3)		10.6		10.6		10.4
Percentage of population covered(4)		97.6%		96.8%		96.4%
Penetration at year-end(5)		100.5		89.7%		78.7%
Percentage of municipalities covered		81.1%		75.0%		72.7%
Market share(6)		42.2%		42.8%		43.1%
		Year ended December 31,
Central Western and Northern regions—Areas 7 and 8		2009		2008		2007
Cellular lines in service at year-end (in thousands)		9,692		8,233		6,713
Contract customers		1,285		1,128		899
Prepaid customers		8,407		7,105		5,814
Growth in cellular lines in service during year		17.7%		22.6%		13.6%
Churn(1)		31.5%		34.3%		33.2%
Estimated population of concession areas (in millions)(2)		35.6		35.6		35.3
Estimated covered population (in millions)(3)		30.0		29.1		28.7
Percentage of population covered(4)		84.3%		81.7%		81.5%
Penetration at year-end(5)		81.0%		69.4%		56.0%
Percentage of municipalities covered		54.8%		47.2%		46.4%
Market share(6)		33.1%		33.3%		34.0%
		Year ended December 31,
States of Bahia and Sergipe—Area 9		2009		2008		2007
Cellular lines in service at year-end (in thousands)		3,561		2,956		2,212
Contract customers		446		420		399
Prepaid customers		3,116		2,536		1,813
Customer growth during the year		20.5%		33.6%		34.3%
Churn(1)		31.1%		30.6%		29.7%
Estimated population of region at year-end (million)(2)		16.7		16.6		16.2
Estimated covered population at year-end (million)(3)		14.3		13.8%		13.4%
Percentage of population covered at year-end(4)		85.8%		83.1%		82.5%
Penetration at year-end(5)		71.7%		62.2%		49.8%
Percentage of municipalities covered		59.8%		51.6%		50.2%
Estimated market share(6)		29.6%		28.6%		27.4%

36

---

Table of Contents

Northeast regions— Area 10		Year ended  December 31, 2009		Year ended  December 31, 2008
Cellular lines in service at year-end (in thousands)		850		343
Contract customers		143		6
Prepaid customers		707		337
Customer growth during the year		147.8%		–
Churn(1)		61.9%		0.2%
Estimated population of region at year-end (million)(2)		30.6		30.6
Estimated covered population at year-end (million)(3)		19.7		7.5
Percentage of population covered at year-end(4)		64.4%		24.4%
Penetration at year-end(5)		76.1%		65.1%
Percentage of municipalities covered		22.9%		2.2%
Estimated market share(6)		3.6%		1.7%

_________________________
(1)		Churn is the number of customers that leave us during the year, calculated as a percentage of the simple average of customers at the beginning and the end of the year.
(2)		Projections based on estimates of the Instituto Brasileiro de Geografia e Estatística (IBGE).
(3)		Number of people within our Region that can access our cellular telecommunications signal.
(4)		Percentage of the population in our Region that can access our cellular telecommunications signal.
(5)		Number of cellular lines in service in our Region, including those of our competitors, divided by the population of our Region.
(6)		Percentage based on all lines in service in our Region at year-end.

Our Services

     Before November 1998, our network used only AMPS analog technology. After the privatization of the Telebrás System, we began to use CDMA and TDMA digital technologies. In 2006, we began the implementation of a GSM network. In 2007, we began the implementation of a WCDMA network. Digitalization offers certain advantages, such as greater network capacity and additional revenue through the sale of value-added services. We continue to increase our network capacity and coverage to improve our quality of service and to meet customer demand.

     We provide voice and ancillary value-added services, including voicemail and voicemail notification, call forwarding, three-way calling, caller identification, short messaging, limitation on the number of used minutes, cellular chat room, and data service such as wireless application protocol service through which clients can access WAP sites and portals. We offer direct access to the Internet through Data cards designed to connect compatible PDAs (Personal Digital Assistant, a handheld device that combines computing, telephone/fax, Internet and networking features) and laptops or cellular phones by a cable connection that offers corporate subscribers secure access to their intranet and office resources. We also offer some new services like Multimedia Message Service and MExE (Mobile Execution Environment), which enables the wireless device to download applications and execute them on the mobile along with a user interface that contains icons on the wireless device to identify the main services (such as Voice Mail, Downloads and text messaging (SMS)) for easier access to our services.

     We offer wireless roaming services through agreements with local mobile service providers throughout Brazil and other countries, allowing our subscribers to make and receive calls while outside of our concession areas. We provide reciprocal roaming rights to the customers of the mobile service providers with which we have such agreements.

37

---

Table of Contents

     We also offer certain interactivity services with radio and television providers, allowing clients to listen to radio stations and watch TV channels at no additional cost.

     In 2005, we launched:

     “Vivo Play 3G”—a multimedia service that leverages the 3rd generation CDMA EV-DO network to provide users with downloading and streaming of video content as cartoons, news, soccer, adult content, weather forecasts and sitcoms exclusively created for mobile phones. The service also offers users the option to download full track music to mobile phones;

     “Vivo Zap 3G”—a wireless broadband Internet access for computers and handhelds using PCMCIA cards or cell phones that achieves a high data transfer rate of up to 2.4 Mbps using the 3rd generation CDMA EV-DO network and gives users an experience similar to that achieved with wired broadband connections but with the advantage of mobility;

     “Smart Mail”—a Wireless PIM solution that enables real-time access for corporate e-mail service or personal e-mail accounts through a PDA providing on-line e-mail notifications and calendar or contact synchronization;

     “World Phone”—using the same wireless device and number, the World Phone allows Vivo subscribers to automatically roam over CDMA/GSM networks in more than 170 countries;

     “Instant Messenger”—the most popular Internet instant messenger application (MSN) available for Vivo wireless device through WAP; and

     “MMS Interoperability”—interoperability agreements established with six main mobile operators in Brazil that allows Vivo subscribers to send and receive multimedia messages from other operators’ subscribers.

     In 2006 we launched:

     “Vivo Localiza Familia”—a location based service that allows children to be located and monitored by their parents via cellular phones or the internet;

     “Vivo Localiza Amigos”—a location based service that enables customers to locate their friends, as well as to be located by their friends, via the relevant address and a map of the region;

     “Vivo Co-Piloto”—a location based service that assists the user in moving from one point to another in several Brazilian cities, and that is offered in the form of a Brew application, which is an application development platform created by Qualcomm for mobile phones;

     “Vivo Bolão”—an interactive game that tests the user’s knowledge of soccer;

     “Instant Messenger”—the most popular Internet instant messenger application (MSN), which is now made available for Vivo wireless devices through SMS;

     “Vivo ao Vivo”—new interface for Vivo GSM terminals;

     “Vivo e Você na Copa”—exclusive CBF (Brazilian Soccer Confederation) content (including games, tones, wallpapers, videos and a voice portal) during the World Cup;

     “Vivo Chip” - a service menu on GSM SIM Cards;

     “Vivo Flash”—a fixed-wireless connection to the internet; and

     “Vivo Torpedo E-Mail Corporate”—a service that transforms the cellular phone number into an email address, and enables users to receive every email sent to them as SMS’.

     Further, Vivo has improved its current product offerings, as follows:

38

---

Table of Contents

     “TV no Celular” (video streaming)—now includes RTP (Radio e Televisão de Portugal) programming;

     “Vivo Play 3G”—now includes music content from Warner Music and Universal Music; and

     “Vivo Portal de Voz”—an exclusive reverse auction service with SBT (Sistema Brasileiro de Televisão).

     In 2007, we launched:

     “Vivo Pós + Speedy”—first major marketing initiative with Telefonica Brazil offering billed customers and Speedy (ADSL broadband service) customers a one year complimentary offer (free fixed-to-mobile and mobile-to-fixed calls during weekends) upon the purchase of a loyalty contract;

     “Positivo Partnership”—exclusive agreement with the largest computer manufacturer in Brazil, Positivo Informatica, regarding several marketing initiatives to be conducted together with VIVO’s Internet Services, including various commercial bundles, special data plans, customized notebooks and trademarketing initiatives;

     “Vivo em Ação 4”—the fourth edition of the first alternative multi-platform reality game released by us in 2004 where players can use SMS, voice portal, WAP and other platforms to complete a mission and earn prizes;

     “Leilão Vivo”—the first white label multi-interface reverse auction released in Brazil by a mobile operator;

     “Vivo Play Dual Delivery”—an improvement to Vivo’s music download service allowing the user to download a track on a mobile phone and a computer with a single purchase;

     Search and mobile marketing agreements signed with Yahoo;

     A new WAP Portal (presently available only for Vivo employees but soon to be available for all clients);

     A new Smartphone portal (presently available only for BlackBerry devices but soon to be available for all smartphones);

     “EU VIVO CINEMA”—a Wapsite with information and downloadable contents about movies and the cinema;

     “Music Phones”—first-ever launch in Brazil of music phones with embedded content;

     “BlackBerry”—launch of BlackBerry®, a popular email solution for individuals and businesses;

     “Vivo Avisa”—roll-out of the service “Who Called,” which can now be acquired by any Vivo customer; and

     A translation center available for tourists during the Pan American Games in Rio de Janeiro in 2007.

     In 2008, we launched:

     “TV Digital”—exclusive handsets offered by Vivo in one of Brazil’s first offerings of no-pay TV services available from any location in Brazil;

     “Rede 3G”—a high-speed and quality-signal third-generation wireless network;

     “iPhone 3G—the latest generation iPhone for which existing Vivo customers were given priority to purchase;

     “Vivo Windows Live” —access to Microsoft’s Messenger, Hotmail and Spaces applications;

     “Vivo Residencial”—a telephone terminal for home use, similar to a traditional fixed line, but portable, with no installation required, and offering economical rates for all household users;

     “Vivo 4 em 1”—combining four services in one package—pay TV, fixed-line calling packages, post-paid wireless calling plans and 3G mobile service (available only in certain areas);

39

---

Table of Contents

     “Vivo Play”—a leading digital music shop in Latin America, with more than 300,000 songs purchased monthly; and

     “Vivo Co-Piloto”—a leading navigation service available in 152 cities in Brazil and compatible with four smartphone models, that was honored by InfoExame magazine as the best mobile phone navigation service available in Brazil.

     In 2009, we launched:

     “Vivo Twittando” – a social networking and microblogging service that enables its users to send and receive tweets via the Short Message Service (SMS);

     “Open Vivo” – a platform that developers can use to create and sell software in Vivo Download Store;

     “Vivo Alerta Email” – an email notification solution with the option of setting up personal accounts on mobile phones to receive the notification by SMS or WAP Push;

      “Vivo Foto Notícia” – a combination of mobile communication and a traditional newspaper that provides users flexibility to read newspapers on their mobile phones;

     “SDP” – a platform that simplifies the implementation of new products and services; this project is part of a joint project between Telefonica and Vivo;

     “Vivo Mobile TV” – a mobile TV service allowing the client to watch TV on their mobile phone;

     “Kantoo English” – an exclusive mobile learning platform focused on a basic English course for beginners, with reading, writing and verbal communication; with this application, Vivo launched the concept of mobile learning, which will help to better prepare our customers for the workplace and for their personal activities;

     “Number portability” – a common project with other operators which allows the possibility of changing operators without changing the clients’ phone number;

     “Videocall service” – a service that allows transmission of voice and image in real time;

     “Vivo Me Liga” – a service that allows users without credit on their phones to ask others - via SMS – to call them;

     “Vivo Transferência de Crédito” – a service that enables users to transfer pre-paid credit to other Vivo customers;

     “Co-branded Credit Card – with Itaú” – a credit card issued by Banco Itaú that gives benefits to Vivo customers;

     “Insurances Partnership - with Santander” – a line of insurance policies developed by Santander and sold exclusively to Vivo customers;

     “Prepaid Internet” – a service that provides internet connectivity through three different packages – daily, weekly and monthly.

Our Region

     Vivo provides mobile telecommunications services in all of the Brazilian states in addition to the Distrito Federal, the Federal district, representing a total of approximately 8.5 million square kilometers and a population of approximately 191.5 million people. Vivo became a national operator when, on September , 2007, acquired a license of 1.9 GHz (“L” band) to operate within 6 states located in the Northwest region (Alagoas, Ceará, Pernambuco, Piauí, Paraíba and Rio Grande do Norte), combined with the acquisition of Telemig, (as mentioned in “—Acquisition of Telepart, Telemig and Tele Norte”).

40

---

Table of Contents

     On April 29, 2008, Vivo signed the Terms of Authorization for using the sub-ranges of radio frequency J, also known as Third Generation (or 3G) frequency, acquired as a result of the auction realized by ANATEL on December 18, 2007.

     The band “J” lots acquired by Vivo are summarized in the table below:

Band		width		Area		Region		Authorization  Period (year)
J		10+10		I		RJ, ES, BA e SE		15+15
J		10+10		II		PR, SC, RS, AC, DF, GO, MS, MT, RO e TO		15+15
J		10+10		III and IV		SP Capital/AM, AP, MA, PA, RR		15+15
J		10+10		V and VI		SP Interior/AL, CE, PB, PE, PI e RN		15+15
J		10+10		VII		Triângulo Mineiro		15+15
J		10+10		VIII		Paranaíba (MS) and Itumbiara Region (GO)		15+15
J		10+10		IX		Franca Region		15+15
J		10+10		X		MG without triângulo mineiro		15+15
J		10+10		XI		Municipalities of Londrina and Tamarana (PR)		15+15

     The following table sets forth population, gross domestic product (GDP), and per capita income statistics for each state in Vivo’s service regions at the dates and for the years indicated:

		On July 31, 2009						Last Available IBGE Data from 2007
Area		Frequency  Range   (Band)		Population  (in thousands)(1)		Percent of  Brazil’s   population(1)		GDP (in  millions of  reais)(2)		Percent of  Brazil’s GDP(2)		Per capita  income (in  reais)(2)
São Paulo state		A, L and J		41,384		21.61%		902,784		33.92%		22,667
Paraná state		B, L and J		10,686		5.58%		161,582		6.07%		15,711
Santa Catarina state		B, L and J		6,119		3.20%		104,623		3.93%		17,834
Goiás state		A, L and J		5,926		3.09%		65,210		2.45%		11,548
Tocantins state		A, L and J		1,292		0.67%		11,094		0.42%		8,921
Mato Grosso state		A, L and J		3,002		1.57%		42,687		1.60%		14,954
Mato Grosso do Sul state		A, L and J		2,360		1.23%		28,121		1.06%		12,411
Rondônia state		A, L and J		1,504		0.79%		15,003		0.56%		10,320
Acre state		A, L and J		691		0.36%		5,761		0.22%		8,789
Amapá state		B and J		627		0.33%		6,022		0.23%		10,254
Amazonas state		B and J		3,393		1.77%		42,023		1.58%		13,043
Maranhão state		B and J		6,367		3.33%		31,606		1.19%		5,165
Pará state		B and J		7,431		3.88%		49,507		1.86%		7,007
Roraima state		B and J		421		0.22%		4,169		0.16%		10,534
Federal District		A, L and J		2,607		1.36%		99,946		3.76%		40,696
Bahia state		A, L and J		14,637		7.64%		109,652		4.12%		7,787
Sergipe state		A, L and J		2,020		1.05%		16,896		0.63%		8,712
Rio de Janeiro state		A, L and J		16,010		8.36%		296,768		11.15%		19,245
Espírito Santo state		A, L and J		3,487		1.82%		60,340		2.27%		18,003
Rio Grande do Sul state		A, L and J		10,914		5.70%		176,615		6.64%		16,689
Alagoas state		L and J		3,156		1.65%		17,793		0.67%		5,858
Ceará state		L and J		8,548		4.46%		50,331		1.89%		6,149
Pernambuco state		L and J		8,810		4.60%		62,256		2.34%		7,337
Piauí state		L and J		3,145		1.64%		14,136		0.53%		4,662
Paraíba state		L and J		3,770		1.97%		22,202		0.83%		6,097
Rio Grande do Norte state		L and J		3,138		1.64%		22,926		0.86%		7,607
Minas Gerais state		A, E and J		20,034		10.46%		241,293		9.07%		12,519
Vivo				191,481		100.00%		2,661,345		100.00%		14,465

________________________
(1)		According to the last revision published by IBGE in 2009.
(2)		According to the most recent IBGE data (2007). Nominal Brazilian GDP was R$2,661,345 million as of December 2007 calculated by IBGE, subject to revision.

41

---

Table of Contents

Marketing and Sales

     We closely follow the developments in the markets where we operate and constantly launch new promotions and advertising campaigns. All communications efforts reinforce our commitment to maintaining a superior level of quality in the products and services offered to our customers. A strong customer acquisition objective and increased voice and data usage objective have been implemented across all of the company’s operators through mass sales promotions and segmented actions. Efforts to acquire new customers for prepaid and billed services have mostly been made through joint promotions designed to increase intranet traffic and stimulate the use of data services.

     With the premise of keeping a sustainable customer base, the acquisition promotions have also been open to current customers who wished to change their cell phones. We are actively involved in a high-value customer loyalty program by offering discounts on cell phones through direct marketing actions.

     On December 31, 2009, Vivo possessed 336 sales outlets (92 in São Paulo, 49 in the states of Rio de Janeiro and Espírito Santo, 35 in the state of Rio Grande do Sul, 37 in the states of Paraná and Santa Catarina, 21 in the states of Bahia and Sergipe, 30 in the states of Minas Gerais, 7 in the states that make up the northwest regions of Brasil and 65 in the states that make up the midwestern and northern regions of Brazil). It also has an efficient network of 11,142 authorized retail and resales dealerships. Consequently, Vivo has maintained its market leadership position, with a total of 11,478 points of sale.

     Prepaid telephone card recharging was available at 514,584 locations, including our own stores, dealers, lottery shops, physical and online card distributors, and at smaller shops, drugstores, newspaper stands, book stores, bakeries, gas stations, bars and restaurants. Online recharging is also provided by several banks’ websites.

Customer Service

     At the end of 2009, the Customers Protection Office (PROCON), an office subordinated to the Ministry of Justice, passed a regulation to improve the quality of call center services. The new rules were extremely strict, and VIVO was mentioned in the press as one of companies with the best performance in the telecommunications sector for having met the stringent requirements of this new legislation.

     In 2009, VIVO installed Genesys®, a modern platform that allows for better management of call-center calls, while also allowing the possibility to create bundles from our customers database, allowing us to provide better and faster support by analysing our customers’ behavior.

     Last year, we also created a project for inbound telemarketing sales that allowed us to make customized offers to VIVO’s customers improving VIVO’s revenue. We hired new partners for our outbound services whose payments are made in correlation with their performance, so that payment is due only if such partners carry out their expected sales.

     We continue to be the top telecommunications company in ANATEL’s ranking of mobile operators in Brazil. At the end of 2009, ANATEL’s ranking demonstrated that VIVO had the best performance among the largest companies operating in Brazil as measured by the IDA – Attendance Performance Index.

     Our challenges in 2010 are to define a model of customer interaction relationships using all contact channels (Internet, SMS, Call Center – inbound and outbound, Chat, Email, etc.) through the Genesys platform and to install a new front office for all attendants, improving quality, reducing call time and creating a better process.

    Higher quality, with lower cost

     We implemented a strategy to increase the quality of our services while lowering costs. While achieving the best signal quality, surpassing all of our competitors (according to ANATEL’s scoring system in 2009), we also took steps designed to improve the level of service of our customer care, generate greater customer satisfaction with our call centers and stores and reduce billing errors, leading to fewer claims against us. This strategy has been successful in increasing our customer satisfaction rating in 2009 and in lowering costs.

42

---

Table of Contents

Our Network

     Before November 1998, our network used only AMPS analog technology. After privatization, we began to use CDMA digital and TDMA digital technologies. In 2006, we began to implement a GSM Network. In 2007, we began to implement a WCDMA Network. Digitalization offers certain advantages, such as greater network capacity and additional revenue through the sale of value-added services. We continue to increase network capacity and coverage to improve our quality of service and to meet customer demand. By December 31, 2009, Vivo S.A.’s telecommunications network in the state of São Paulo, which provided CDMA digital, GSM digital and WCDMA digital services, covered 100% of the municipalities. Vivo S.A.’s network is connected primarily through radio transmission system and a fiber-optic of our own and leased mainly from Telecomunicações de São Paulo S.A., or Telesp. The network consists of cellular switches, base stations and other network elements such as voicemail, prepaid service, short message service, home location registers, signaling transfer point, PDSN and gateways. Vivo S.A.’s main suppliers in the state of São Paulo are NEC do Brasil S.A., Nortel Networks—Northern Telecom do Brasil, Motorola do Brasil Ltda., Lucent Technologies do Brasil, Ind. e Com. Ltda., Huawei do Brasil Telecomunicações Ltda. and Ericsson Telecomunicações S.A.

     Vivo S.A. began its activities in the states of Paraná and Santa Catarina (“Vivo PR/SC”) in December 1998 and, until 2005, offered services only through CDMA digital technology. As of December 31, 2009, the telecommunications network in PR/SC, which provided CDMA digital, GSM digital and WCDMA digital services, covered 66.6% of the municipalities, or 93.74% of the population, in its region. The PR/SC network is primarily connected by radio transmission system and a fiber-optic network of its own and leased mainly from fixed operating companies (Brasil Telecom) and Copel—Companhia Paranaense de Energia S.A.. The network consists of cellular switches, base stations and other network elements, such as home location registers, signaling transfer points and gateways. Vivo S.A.’s main suppliers in PR/SC are Motorola do Brasil Ltda. (presently Motorola Industrial Ltda. and Motorola Services Ltda.), Huawei do Brasil Telecomunicações Ltda., Alcatel Telecomunicações S/A and Ericsson Telecomunicações S.A..

     As of December 31, 2009, Vivo S.A. in the midwestern and northern regions (“CO/N”) provided WCDMA digital, CDMA Digital and GSM digital services, covering 54.77% of the municipalities, or 84.26% of the population in its region. Our network is connected primarily through radio transmission system and a fiber-optic and of our own and leased from incumbent wire line companies. The network consists of cellular switches, base-stations and other network elements such as voicemail, prepaid service, home location registers and signaling transfer points. Vivo S.A.’s principal suppliers in CO/N are Nortel Networks—Northern Telecom do Brasil, Motorola do Brasil Ltda. (presently Motorola Industrial Ltda. and Motorola Services Ltda.), Huawei do Brasil Telecomunicações Ltda. and Ericsson Telecomunicações.

     As of December 31, 2009, the telecommunications network of Vivo S.A. in Bahia and Sergipe (“BA/SE”) covered 59.76% of the municipalities, or 85.81% of the population, of its region. Its network provided WCDMA digital, CDMA digital and GSM digital services. The network is connected primarily through radio transmission system and a fiber-optic network of our own and leased mainly from Tele Norte Leste Participações S.A., or Telemar. It also includes cellular switches, base stations, and other communication devices such as prepaid service, signaling transfer point, home location registers and gateways. Vivo S.A.’s main suppliers in BA/SE are NEC do Brasil S.A., Ericsson Telecomunicações S.A., Nortel Networks—Northern Telecom do Brasil, Motorola Industrial Ltda., Motorola Services Ltda., Huawei do Brasil Telecomunicações Ltda. and Lucent Technologies do Brasil, Ind. e Com. Ltda.

     As of December 31, 2009, the telecommunications network of Vivo S.A. in the states of Rio de Janeiro and Espirito Santo covered 100% of the municipalities in its area. Its network provided WCDMA digital, CDMA digital and GSM digital services. This network is connected primarily through radio transmission and a fiber-optic system of our own and leased mainly from the incumbent wire line companies. The network consists of cellular switches, base stations and other communication devices such as voicemail, prepaid service, short message service, home location registers, signaling transfer points, PDSN and gateways. Vivo S.A.’s principal suppliers in these states are Nortel Networks—Northern Telecom do Brasil, Ericsson Telecomunicações S.A., Huawei do Brasil Telecomunicações Ltda. and Lucent Technologies do Brasil, Ind. e Com. Ltda.

43

---

Table of Contents

     As of December 31, 2009, Vivo S.A.’s network in the state of Rio Grande do Sul (“RS”) provided WCDMA digital, CDMA digital and GSM digital, covering 81.05% of the municipalities, or 97.57% of the population, of this region. The RS network is connected primarily through radio transmission and a fiber-optic system of our own and leased mainly from Brasil Telecom. The network consists of cellular switches, base stations and other communication devices such as signaling transfer point, home location registers and gateways. Vivo S.A.’s principal suppliers in RS are Nortel Networks—Northern Telecom do Brasil, Huawei do Brasil Telecomunicações Ltda., and Ericsson Telecomunicações S.A.

     As of December 31, 2009, Vivo S.A.’s network in the northeast regions (“NE”) provided WCDMA digital and GSM digital services, covering 22.95% of the municipalities, 64.37% of the population, of this region. The NE network is connected primarily through radio transmission and a fiber-optic system of our own and leased mainly from the incumbent wire line companies. The network consists of cellular switches, base stations and other communication devices such as signaling transfer point. Vivo S.A.’s principal suppliers in NE are Huawei do Brasil Telecomunicações Ltda. and Ericsson Telecomunicações S.A.

     As of December 31, 2009, Vivo S.A.’s network through its subsidiary Telemig Celular in the state of Minas Gerais (“MG”) provided WCDMA, GSM digital, TDMA digital services and AMPS analog services (of which the last two have been gradually phased out), covering 71.51% of the municipalities, 92.31% of the population, of this region. The MG network is connected primarily through radio transmission and a fiber-optic system of our own and leased mainly from the incumbent wire line companies. The network consists of cellular switches, base stations and other communication devices such as voicemail, prepaid service, short message service, home location registers and signaling transfer point. Vivo S.A.’s principal suppliers in MG are Nortel Networks—Northern Telecom do Brasil, Huawei do Brasil Telecomunicações Ltda., and Ericsson Telecomunicações S.A..

     Our advanced network management technology ensures global management and supervision of all our network processes and network performance. The network management centers are located in São Paulo, Brasilia and Minas Gerais. The network management center of São Paulo monitors the critical network operational parameters of the countrywide transmission backbone, third parties’ networks, IP networks and service platforms. The network management center in Brasília monitors the critical network operational parameters in the Midwestern Region (CO), Rio de Janeiro, Espirito Santo, Rio Grande do Sul and Paraná/Santa Catarina. The network management center in Minas Gerais monitors the critical network operational parameters in the Northeastern region (NE), the Northern region (NO), Bahia, Sergipe, São Paulo and Minas Gerais. These centers are able to identify abnormalities in both our network and in third parties’ networks, using failure and signaling monitoring systems. In addition, quality and service standards are constantly monitored. The network management centers are integrated with maintenance and operations teams that maintain and operate cellular network elements, as well as cellular infrastructure and transmission, in addition to the radio network elements and computing bases, service platforms and communications backbones.

     Our network is prepared to provide continuity of service for our customers in the event of network interruptions. We have developed contingency plans for potential catastrophes in our switching centers, power supply interruptions and security breaches.

     Pursuant to the terms of our authorization to perform our services, we are obligated to meet certain requirements for service quality. See “—Regulation of the Brazilian Telecommunications Industry—Obligations of Telecommunications Companies.”

Sources of Revenue

     We generate revenue from:

• usage charges, which include measured service charges for calls, monthly fee and other similar charges;

• interconnection charges (or network usage charges), which are amounts we charge other cellular and fixed-line service providers for the use of our network;

• the sale of wireless devices and accessories; and

44

---

Table of Contents

• other charges, including charges for call forwarding, call waiting, text messaging (SMS), call blocking and Data Services, such as WAP and ZAP, downloads and MMS services, which are charged only when the customer’s plan does not include these services.

     Our rates are subject to approval by ANATEL. See “—Regulation of the Brazilian Telecommunications Industry.”

     The table below sets forth total net operating revenues in our operating subsidiary for the last three years.

		Year ended December 31,
Vivo		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		10,477.8		10,014.0		8,000.8
Sales of wireless devices and accessories		2,932.2		3,258.1		3,105.7
Interconnection		6,301.6		6,140.3		5,109.3
Other		3,160.0		2,293.9		1,428.5
Total gross operating revenue		22,871.6		21,706.3		17,644.3
Value-added and other indirect taxes		(4,637.9)		(4,295.5)		(3,385.9)
Sales and services discount and return of goods sold		(1,870.5)		(1,941.1)		(1,765.9)
Net operating revenues (1)		16,363.2		15,469.7		12,492.5
		Year ended December 31,
State of São Paulo—Areas 1 and 2		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		3,253.9		3,241.9		2,958.4
Sales of wireless devices and accessories		1,125.7		1,259.0		1,174.9
Interconnection		2,109.2		2,118.1		1,945.1
Other		1,074.3		787.9		536.3
Total gross operating revenue		7,563.1		7,406.9		6,614.7
Value-added and other indirect taxes		(1,419.3)		(1,359.2)		(1,161.8)
Sales and services discount and return of goods sold		(618.3)		(649.8)		(683.4)
Net operating revenues		5,525.5		5,397.9		4,769.5
		Year ended December 31,
States of Rio de Janeiro and Espírito Santo—Area 3		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		1,773.1		1,826.8		1,657.3
Sales of wireless devices and accessories		501.1		565.2		654.3
Interconnection charges		1,060.8		1,097.1		1,016.9
Other		496.1		368.2		254.4
Total gross operating revenue		3,831.1		3,857.3		3,582.9
Value-added and other indirect taxes		(873.5)		(849.3)		(747.5)
Discounts granted and return of goods		(285.3)		(284.1)		(362.0)
Net operating revenues		2,672.3		2,723.9		2,473.4

45

---

Table of Contents

		Year ended December 31,
States of Paraná and Santa Catarina—Area 5		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		651.4		605.5		490.8
Sales of wireless devices and accessories		181.7		216.2		209.6
Interconnection		426.9		416.9		371.9
Other		232.8		184.2		128.4
Total gross operating revenue		1,492.8		1,422.8		1,200.7
Value-added and other indirect taxes		(294.3)		(270.9)		(217.1)
Sales and services discount and return of goods sold		(104.3)		(111.5)		(106.0)
Net operating revenues		1,094.2		1,040.4		877.6
		Year ended December 31,
State of Rio Grande do Sul—Area 6		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		1,043.8		1,013.3		861.1
Sales of wireless devices and accessories		226.9		240.8		238.5
Interconnection charges		542.2		544.1		481.0
Other		323.6		232.5		162.9
Total gross operating revenue		2,136.5		2,030.7		1,743.5
Value-added and other indirect taxes		(451.5)		(427.3)		(351.6)
Discounts granted and return of goods		(136.5)		(129.2)		(121.3)
Net operating revenues		1,548.5		1,474.2		1,270.6
		Year ended December 31,
Central Western and Northern regions—Areas 7 and 8		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		1,852.0		1,789.5		1,564.7
Sales of wireless devices and accessories		485.0		605.6		606.0
Interconnection		1,089.0		1,094.7		984.3
Other		559.1		402.4		261.0
Total gross operating revenue		3.985,1		3,892.2		3,416.0
Value-added and other indirect taxes		(874.8)		(837.8)		(701.9)
Sales and services discount and return of goods sold		(319.8)		(333.6)		(347.0)
Net operating revenues		2,790.5		2,720.8		2,367.1
		Year ended December 31,
States of Bahia and Sergipe—Area 9		2009		2008		2007
		(in millions of reais)
Usage and additional charges and monthly subscription charges		586.4		547.9		468.5
Sales of wireless devices and accessories		150.4		186.0		222.4
Interconnection charges		348.7		348.5		310.1
Other		168.9		140.9		85.5
Total gross operating revenue		1,254.4		1,223.3		1,086.5
Value-added and other indirect taxes		(262.9)		(253.3)		(206.0)
Discounts granted and return of goods		(88.7)		(96.0)		(146.2)
Net operating revenues		902.8		874.0		734.3

46

---

Table of Contents

		Year ended December 31,
Northeast region—Area 10		2009		2008
Usage and additional charges and monthly subscription charges		41.3		4.3
Sales of wireless devices and accessories		76.8		28.9
Interconnection charges		29.0		1.5
Other		51.1		0.9
Total gross operating revenue		198.2		35.6
Value-added and other indirect taxes		(41.0)		(5.2)
Discounts granted and return of goods		(37.1)		(12.4)
Net operating revenues		120.1		18.0
State of Minas Gerais—Area 4		Period from January 1, 2009 to December 31,  2009		Period from April 1,  2008 to December 31,  2008
Usage and additional charges and monthly subscription charges		1,275.9		986.3
Sales of wireless devices and accessories		184.6		156.4
Interconnection charges		695.8		519.4
Other		254.6		177.2
Total gross operating revenue		2,410.9		1,839.3
Value-added and other indirect taxes		(420.6)		(292.5)
Discounts granted and return of goods		(280.5)		(324.5)
Net operating revenues		1,709.8		1,222.3

______________
(1) Includes the following amounts that have been eliminated upon consolidation:

		Year ended December 31,
Vivo—Intercompany net operating revenues		2009		2008		2007
		(in millions of reais)
Net operating revenues		(0.5)		(1.8)		—

     Contract Customers

     Since October 1994, cellular telecommunications service in Brazil has been offered on a “calling party pays” basis, under which customers pay only for calls that they originate. In addition, customers pay roaming charges on calls made or received outside their home registration area.

     Customer charges are calculated based on the customer’s calling plan, the location of the party called, the place from which the call originates and certain other factors, as described below. Our Region is divided into areas designated for payment purposes, called registration areas, as follows:

• Areas 1 & 2—9 areas in the state of São Paulo.

• Area 3—5 areas, comprised of 1 area in the metropolitan area of Rio de Janeiro, two areas in upstate Rio de Janeiro and two areas in the state of Espírito Santo.

• Area 4—7 areas in the state of Minas Gerais.

• Area 5—9 areas, comprised of 6 areas in the state of Paraná and 3 areas in the state of Santa Catarina.

47

---

Table of Contents

• Area 6—4 areas in the state of Rio Grande do Sul.

• Areas 7 & 8—18 areas, comprised of 9 areas in Brasilia and the states of Goiás, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and Tocantins and 9 areas in the states of Amapá, Amazonas, Maranhão, Pará and Roraima

• Area 9—6 areas, comprised of 5 areas in the state of Bahia and 1 area in the state of Sergipe.

• Area 10—9 areas in the states of Pernambuco, Alagoas, Paraíba, Rio Grande do Norte, Ceará and Piauí.

     Interconnection Charges

     We earn revenue from any call that originates from another cellular or fixed-line service provider network connecting to one of our customers. We charge the service provider from whose network the call originates a network usage charge for every minute that our network is used in connection with the call. See “—Business Overview—Operating Agreements—Interconnection Agreements.” Tariff increases are subject to ANATEL’s review and approval.

     Bill and Keep

     ANATEL adopted partial “Bill & Keep” rules for interconnection charges in July 2003. The rules provided that an SMP operator paid for the use of another SMP operator’s network in the same registration area only if the traffic carried from the first operator to the second exceeded 55% of the total traffic exchanged between them. In that case, only those calls that surpassed the 55% level were subject to payment for network usage. Under Resolution 438 published in 2006, ANATEL eliminated the rule of the partial “Bill and Keep.” The current rule is “full billing,” in which the SMP operator pays the entire call termination fee of the other mobile network. The rule of the partial “Bill & Keep” was maintained between SMP and SME (trunking) networks.

     Roaming Fees

     We receive revenue pursuant to roaming agreements with other cellular service providers. When a customer of another cellular service provider makes a call within our area, that service provider pays us for the call at the applicable rate. Conversely, when one of our customers makes a cellular call outside of our Region, we must pay the charges associated with that call to the cellular service provider in whose Region the call originates. See “—Operating Agreements—Roaming Agreements.”

     Wireless Device Sales

     Through our stores and authorized dealers we sell only GSM and WCDMA devices such as handsets, smartphones, broadband USB modems and netbooks that are certified to be compatible with the Vivo network and service. We have special offers on smartphones, USB modems and other data devices for customers of bundled packages. Our current handset suppliers are Motorola, LG, Samsung, Nokia, SonyEricsson, ZTE, HTC, Palm, Apple, Semp-Toshiba, RIM (BlackBerry) and Huawei.

Operating Agreements

     We have agreements with major fixed-line and mobile operators in Brazil in order to lease physical space, real estate, air conditioning, energy, security and cleaning services. We also lease transmission capacity necessary to complete the construction of our network infrastructure.

     Interconnection Agreements

     The terms of our interconnection agreements include provisions with respect to the number of connection points and traffic signals. See “—Regulation of the Brazilian Telecommunications Industry—Obligations of Telecommunications Companies” and “—Regulation of the Brazilian Telecommunications Industry—Interconnection Regulation.”

48

---

Table of Contents

     We believe that our subsidiaries have adequate interconnection agreements with necessary fixed-line operators in order to provide services. We also believe that our subsidiaries have all the necessary interconnection agreements with long-distance carriers.

     Roaming Agreements

     We provide international GSM roaming in over 200 destinations worldwide by means of over 500 roaming agreements. Additionally, we offer international CDMA roaming in the United States, Canada, China, Mexico, Venezuela, Puerto Rico, New Zealand, Dominican Republic and South Korea. In June 2010, Vivo’s CDMA outbound roaming will be deactivated.

Taxes on Telecommunications Services and Wireless Device Sales

     In accordance with Brazilian tax laws, the principal taxes that apply to the telecommunications industry are:

• ICMS (Imposto sobre Circulação de Mercadorias e Serviços) is a state tax imposed at varying rates from 7% to 35% on certain revenues from the sale of goods and services, including telecommunications services.

• COFINS (Contribuição para Financiamento da Seguridade Social) is a federal social contribution tax imposed on the gross operating revenue less discounts and returns. In December 2003, Law No. 10,883 was enacted, making such contribution noncumulative and increasing the rate from 3.0% to 7.6%, except in connection with telecommunication services where the rate continues to be 3.0% .

• PIS (Programa de Integração Social) is a federal social contribution levied over the total revenues received by a company and its subsidiaries, with the deductions foreseen by the governing law. On December 2002, Law No. 10,637 came into force, making this contribution noncumulative and raising the rate from 0.65% to 1.65%, except for telecommunication services where the rate continues to be 0.65% .

• FUST (Fundo de Universalização dos Serviços de Telecomunicações) corresponds to 1% of the net revenue generated by the telecommunication services (except over interconnection services), and serves to provide funds designed to cover the parcel of the cost attributable exclusively to the fulfillment of universal service targets of the telecommunication services that cannot be recovered through the efficient performance of services, per the provisions of sub-item II, of Art. 81, Law No. 9472 dated July 16, 1997 (Lei Geral dos Serviços de Telecomunicações—Telecommunication Services General Law).

• FUNTTEL (Fundo para Desenvolvimento Tecnológico das Telecomunicações) is a federal social contribution which corresponds to 0.5% of the net revenues generated by the telecommunication services (except those for interconnection services) and serves to stimulate technological development, the qualification of human resources, and job generation and to promote the access of small and medium companies to capital resources, so as to broaden the competitiveness of the Brazilian telecommunications industry.

• FISTEL (Fundo de Fiscalização das Telecomunicações) is a federal tax applicable to telecommunications transmission equipment which serves to provide funds to cover the expenses incurred by the Federal Government in performing inspections of telecommunication services and in developing the means and improving the techniques necessary for carrying out these inspections. This tax is divided into two parts: Taxa de Fiscalização de Funcionamento and Taxa de Fiscalização de Instalação. Taxa de Fiscalização de Funcionamento is based on the total number of clients at the end of the previous fiscal year. Taxa de Fiscalização de Instalação is based on (i) the net monthly additions (new clients minus disconnected ones) and (ii) the installation of new equipment (base radio stations) or system changes, as for example, increases in capacity.

Billing

     Vivo uses Atlys, a billing solution that combines software and hardware resources, from the supplier company Convergys as the billing system for centralized billed invoicing in the city of São Paulo. The billing system operates via a batch processing concept using Vivo customers’ voice and data traffic. This system functions by segregating voice and data traffic on a daily basis, according to which of seven total billing preferences a customer elects. Each cycle has a specific due date for each of the consumer and corporate segments.

49

---

Table of Contents

     For prepaid services, Vivo uses the Next Generation Intelligence Network (NGIN) platform, a prepaid platform, from the supplier company PTI, which also works in a centralized way in the city of São Paulo. In order for the NGIN platform to process correctly, the same system for billed invoicing is used. This system separates the module for customer information, called Care, which is a services platform, from the Voice and Data traffic processing module used, called Core, which is a tariff platform.

     During 2006, the RJ/ES and CO/N centralization billing (billed and prepaid) were completed. The BA/SE centralization process was completed in April 1, 2007.

     Telemig Celular bills its contract customers through monthly invoices providing details about minutes of calling time and the use of additional services. Six staggered billing cycles are used each month to smooth the billing and collection process. Telemig’s billing policy stipulates that if a subscriber’s payment is past due and a customer has not responded after receiving a payment request, service is suspended until full payment for all outstanding charges is received. Currently, if a contract subscriber’s payment is more than 90 days past due, the subscriber’s service is terminated.

     In July 2009, Telemig Celular concluded its centralization process to conform its billing practices to VIVO’s prepaid platform (NGIN). The billing system for postpaid customers will be centralized during 2010 when Telemig Celular will complete its process to conform all the billing practices.

Co-billing

     ANATEL has defined the obligations surrounding co-billing service for long distance carriers in the Brazilian market, which has made possible collecting all types of calls and services in the billed in one telephone account. Similarly, it defined the basic rules for mobile companies’ prepaid services, making national and international long-distance calls possible within this segment. Mobile companies charge long-distance operators for the services given for both segments (prepaid and billed). The settlement collection, where the physical and financial data are provided, occurs monthly. Mobile companies only pass to the long-distance carriers the fees collected from the customer’s billed segment and debited from the customer’s prepaid segment. ANATEL authorizes the customer to select whichever co-billing service provider it prefers for its individual calls, whereas neither the mobile company nor the long distance carrier has discretion in this area.

Value Added Services (VAS)

     Entertainment, information and online interactivity services are available to all Vivo customers through agreements with content suppliers. These agreements are based on a revenue-sharing model through the processes of billed and prepaid categories, with all divergences between these categories being demonstrated to the content suppliers.

Collection

     We have a uniform policy dealing with accounts of defaulting billed customers in default according to its segment. If the payment is more than 15 days late, service is partially suspended, and if payment is more than 45 days late, service is fully suspended until payment is made. We offer an installment payment plan for those with past due balances. However, if accounts are not paid after 90 days, the contract is cancelled and reported to credit protection agencies. After 105 days of default, accounts are directed to independent agencies for collection and the Consumer Protection Service.

     All the amounts receivable overdue by 90 days, except for accounts receivables from interconnection fees, are considered provisions for doubtful accounts or written-off. The write-offs are in accordance with Brazilian Legislation, which permits a bad debt write-off for late payments of R$0 to R$5,000 if they are over 180 days late or R$5,001 to R$30,000 if they are over 365 days late. Write-offs of late payments of over R$30,001 that are open for more than 365 days require the commencement of a lawsuit.

50

---

Table of Contents

Fraud Detection and Prevention

     In 2009, Vivo and Telemig reinforced their efforts to achieve their goals of reducing both the number of instances of fraud and the impact of fraud on financial results. During the year ended December 31, 2009, we focused our efforts on the two main types of frauds, cloning fraud and subscription fraud. Cloning is a type of fraud that consists of duplicating the cellular signal of a bona fide customer, enabling the perpetrator of the fraud to make calls using the customer’s signal. This occurs when one line is programmed into another device and used simultaneously with a customer account, but the charges are posted to the account of the true owner. Subscription fraud occurs when a person, typically using false or stolen documents, obtains cellular telecommunications service, and then incurs substantial charges that are billed to a customer who does not exist or who did not request the service.

     Due to the improvements we made for detecting these two types of fraud, we fulfilled our goals for 2009 by reducing the occurrence of these types of fraud by an overall 45.13% from December 2008 to December 2009. This represented the largest decrease of such fraud in our history. The number of cloning fraud cases for Vivo and Telemig decreased by 90.63% from December 2008 to December 2009. Financial costs for Vivo and Telemig associated with cloning fraud were reduced by 87.74% when comparing 2008 with 2009. In addition, the number of subscription fraud cases for Vivo and Telemig decreased by 40.59% from December 2008 to December 2009. Financial costs for Vivo and Telemig associated with subscription fraud were reduced by 44.29% when comparing 2008 with 2009. In addition, financial costs for Vivo and Telemig associated with subscription and cloning frauds represented 99% and 1%, respectively, of our financial costs associated with frauds.

Competition

     We face intense competition in all the areas in which we operate, principally from other cellular service providers and also, indirectly, from fixed-line operators. Many of these competitors are part of a large, national or multinational group and therefore have access to financing, new technologies and other benefits that are derived from being a part of such a group. Fixed-line operators generally charge much lower tariffs than cellular service providers.

     In general, the principal competitors of VIVO are Claro, TIM and Oi.

     Our principal cellular competitor in the state of São Paulo is Claro. Other competitors are TIM, Oi, CTBC Celular and Aeiou. The main fixed-line operator in this area is Telecomunicações de São Paulo S.A.—Telesp, known as Telefónica.

     Our principal cellular competitor in the states of Paraná and Santa Catarina is TIM Celular or TIM. The main fixed-line operator in this area is Brasil Telecom S.A. (in 2008, the Brazilian Government published the 6654/2008 Decree of revision of the fixed-line general concession plan (“Plano Geral de Outorgas” or “PGO”), allowing fixed-line concessionaires to operate in more than one region of the country. This change allowed Telemar Norte Leste S.A. (Telemar, or Oi) to buy Brasil Telecom).

     Our principal cellular competitors in Northeast region are: Claro, in the region encompassing the states of Mato Grosso do Sul, Mato Grosso, Goiás, Tocantins, Rondônia and Acre and the Federal District, and TIM, in the region encompassing the states of Amazonas, Roraima, Pará, Amapá and Maranhão. The main fixed-line operators in this area are: Brasil Telecom S.A., in the region encompassing the states of Mato Grosso do Sul, Mato Grosso, Goiás, Tocantins, Rondônia and Acre and the Federal District, and Telemar Norte Leste S.A.—Telemar or OI, in the region encompassing the states of Amazonas, Roraima, Pará, Amapá and Maranhão. Other competitors are Oi (Telemar mobile operator) and TIM.

     In the Bahia and Sergipe service areas, our principal cellular competitor is Oi (TNL PCS S.A.). Other cellular competitors are Claro and TIM Celular or TIM, which also operates in the state of Minas Gerais. The principal fixed-line competitor in this area is Telemar Norte Leste S.A.

51

---

Table of Contents

     In the Ceará, Pernambuco, Paraíba, Alagoas, Rio Grande do Norte and Piauí service areas, our principal cellular competitor is Oi (TNL PCS S.A.). Other cellular competitors are TIM (TIM Nordeste S.A.) and Claro. The principal fixed-line competitor in this area is Telemar Norte Leste S.A.

     In the Rio de Janeiro and Espírito Santo service areas, our principal cellular competitor is Claro, which operates in the states of Rio de Janeiro and Espírito Santo. Claro is controlled by a consortium led by the Telecom Américas Ltd. (controlled by América Móvil S.A. de C.V.). Claro began providing cellular telecommunications services in this Region at the end of 1998. The principal fixed-line operator in this area is Telemar Norte Leste S.A. Oi is the third competitor and is integrated with Telemar (a fixed-line operator) and TIM is the fourth competitor.

     In Rio Grande do Sul, our principal cellular competitor is Claro, which operates in several regions in Brazil, including Vivo-Rio Grande do Sul’s region. Other cellular competitors are Brasil Telecom S.A. and TIM. The main fixed-line competitor in this area is Brasil Telecom.

     In Minas Gerais, currently, there are four other wireless service providers operating within our authorization area. We face competition from the following operators: (a) TIM, the “B” band frequency range operator that launched its services in December, 1998 (TIM is primarily owned by Telecom Italia (in July 2009, ANATEL published Act No. 3804/2009 determining the conditions to be followed to guarantee total separation between TIM and our subsidiaries) and operates in the entire State of Minas Gerais using TDMA, GSM and 3G technologies); (b) Oi, the “D” band operator that launched its services in June 2002 (Oi is a subsidiary of Tele Norte Leste Participações S.A. (Telemar) and operates in the entire State of Minas Gerais using GSM and 3G technology); (c) Claro, the “E” band operator that launched its services in the fourth quarter of 2005 (Claro is controlled by América Móvil and operates a GSM and 3G technology network); and, (d) CTBC Celular, an “A” band and 3G band operator (CTBC Celular is controlled by CTBC, a fixed-line operator and uses TDMA, GSM and 3G technologies).

     We also compete with certain other wireless telecommunications services in specific segments, such as mobile radio (including digital trunking technology, offered by Nextel), paging and beeper services, which are used by some operators in our areas as a substitute for cellular telecommunications services. These competing wireless telecommunications services are generally less expensive than mobile telecommunications services.

     Satellite-operated services, which provide nationwide coverage, are also available in Brazil. Although these services have the advantage of covering much larger areas than those covered by the cellular telecommunications services, they are considerably more expensive than the cellular telecommunications services we offer and do not provide competitive coverage inside buildings.

     There can be no assurances that the entry of new competitors will not have significant adverse effects on our business, financial condition, or the results of our operations or prospects. Any adverse effects on our market share, which results from pressures originating from competition, will depend on several factors that cannot be assessed with precision and which are therefore beyond our control. Among such factors are the identity of the competitors, their strategy and ability to conduct business, market conditions prevailing at the time, rules applicable to the new market participants and to us, as well as the effectiveness of our efforts to prepare for and face competition. There may also be competitors with higher technical capacity and more resources than we have.

Regulation of the Brazilian Telecommunications Industry

      General

     Our business, the services we provide, and the prices we charge are subject to regulation under the General Telecommunications Law and various administrative enactments, which regulate the services provided by Brazilian telecommunications operators.

     ANATEL is the agency that regulates telecommunications under the General Telecommunications Law and the July 2001 Regulamento da Agência Nacional de Telecomunicações, known as the ANATEL Decree. ANATEL is financially and administratively independent of the Brazilian government. However, ANATEL maintains a close relationship with the Ministry of Communications. Any regulation proposed by ANATEL is subject to a period of public comment, which may include a public hearing. ANATEL’s actions can be challenged in the Brazilian courts. On November 25, 1998, ANATEL enacted “Resolution 73—Regulation of Telecommunication Services,” which explains in detail the new comprehensive regulatory framework for the provision of telecommunications services in Brazil established by the General Telecommunications Law.

52

---

Table of Contents

     Concessions and Authorizations

     Before January 2000, ANATEL had only authorized two mobile service providers in each of the ten franchise areas under “A” band and “B” band. “A” band and “B” band mobile service providers were granted concessions pursuant to the Lei Mínima, or the Minimum Law. Each concession was a specific grant of authority to supply cellular telecommunications services, subject to certain requirements contained in the applicable list of obligations appended to each concession. If a mobile service provider wishes to offer any telecommunications services other than those authorized by its authorized concession, it may apply to ANATEL for an authorization to offer such other services.

     In accordance with the General Telecommunications Law, a concession relates to the provision of telecommunication services under the public regime, as determined by the public administration. A concession may only be granted upon a prior auction bidding process. As a result, regulatory provisions are included in the relevant concession agreements and the concessionaire is subject to public service principles of continuity, changeability and equal treatment of customers. In addition, ANATEL is empowered to direct and control the performance of the services, to apply penalties and to declare the expiration of the concession and the return of assets of the concessionaire to the government authority upon termination of the concession. Another distinctive feature is the right of the concessionaire to maintain certain economic and financial standards. The concession is granted for a fixed period of time and is generally renewable only once.

     An authorization is a permission granted by the public administration under the private regime, which may or may not be granted upon a prior auction bidding process, to the extent that the authorized party complies with the objective and subjective conditions deemed necessary for the rendering of the relevant type of telecommunication service in the private regime. The authorization is granted for an indeterminate period of time. Under an authorization, the government does not guarantee to the authorized company the economic-financial equilibrium, as is the case under concessions.

     SMP Licenses

     In November 2000, ANATEL adopted certain regulations for the issuance of new licenses, which are authorizations to provide wireless communication services through SMP, personal mobile service, to compete with the then existing cellular operators in the various regions of Brazil. These regulations divided Brazil into three main regions covering the same geographic area as the concessions for the fixed-line telecommunication services. ANATEL organized auctions for three new licenses for each of those regions. The new licenses provided that the new services would be operated in the 1800 MHz radio frequency bands which were denominated as the “C” band (which was later transformed into extension bands), the “D” band, “E” band and “M” band. These new licenses were auctioned by ANATEL and awarded during the first quarter of 2001, at the end of 2002, in September of 2004, in March of 2006 and in September of 2007. In September 2007, ANATEL organized auctions for fifteen new licenses in the 1900 MHz radio frequency bands which were denominated Band “L.” VIVO acquired thirteen spectrum licenses in band “L.” In December 2007, ANATEL organized auctions for thirty-six new licenses in the 1900-2100 MHz radio frequency bands (3G licenses) which were denominated bands “F,” “G,” “I” and “J.” VIVO acquired seven spectrum licenses in Band “J” and Telemig Celular acquired two spectrum licenses in Band “J”.

     Under these new licenses:

• services are to be provided using the 1800 MHz frequency bands (“D” band, “E” band and “M” band), 1900 MHz frequency bands (“L” band) and 1900-2100 MHz frequency bands (“F” band, “G” band, “I” band and “J” band);

• each operator may optionally provide domestic and international long-distance services in its licensed area;

53

---

Table of Contents

• existing cellular service providers as well as new entrants into the Brazilian telecommunications market can bid for “D” band, “E” band, “M” band, “L” band, “F” band, “G” band, “I” band and “J” band licenses.

• a cellular operator, or its respective controlling shareholders, may not have geographical overlap between licenses; and

• current “A” band and “B” band cellular service providers can apply for an extra frequency range.

     Pursuant to the SMP services regulation each of the three main regions is divided into registration areas, or tariff areas.

     On February 3, 2003, TCO replaced its SMC Concession Contracts for Personal Mobile Service Agreements (Termos de Autorização do Serviço Móvel Pessoal, or SMP) in Regions I (sub-range of “B” frequencies) and II (sub-range of “A” frequencies) of the General Granting Plan (Plano Geral de Outorgas, or PGO). On December 10, 2002, Telerj Celular, Telest Celular, Telebahia Celular, Telergipe Celular, Celular CRT, Global Telecom and Telesp Celular replaced its SMC Concession Contracts for Personal Mobile Service Agreements, or SMP, in Regions I (sub-range of “A” frequencies), II (sub-range of “A” and “B” frequencies) and III (sub-range of “A” frequencies) of the General Granting Plan. On July 27, 2006, ANATEL published Act 59867 authorizing the incorporation of TCO, Teleacre, Telegoiás, Teleron, Telems, Telemat, NBT, Telerj, Telest, Telebahia, Telergipe, Celular CRT and TC by GT, as well as the transfer of the respective SMP service authorization titles and of the SMP radio-frequency rights-of-use titles. Act 59867 also provides for the automatic termination of the authorizations for Multimedia Communication Services (Serviços de Comunicação Multimídia, or SCM) of TCO, Teleacre, Telegoiás, Teleron, Telems, Telemat, NBT, Telerj, Telest, Telebahia, Telergipe, Celular CRT and TC, upon each of their respective incorporations.

     In order to transfer our services to SMP, we were required to comply with several technical and operational conditions, including, among other things, the adoption of a carrier selection code for long-distance calls originating from our network.

     Our authorizations consist of two licenses—one to provide mobile telecommunications services, and another to use the frequency spectrum for a period of 15 years. The frequency license is renewable for another 15-year period upon the payment of an additional license fee.

     Our new SMP licenses include the right to provide cellular services for an unlimited period of time but restrict the right to use the spectrum according to the schedules listed in the old licenses (Vivo-Rio Grande do Sul (“A” band) until 2022 (renewed in 2006); Vivo-Rio de Janeiro (“A” band) until 2020 (renewed in 2005); Vivo-Espírito Santo (“A” band) until 2023 (renewed in 2008); Vivo-Bahia (“A” band) and Vivo-Sergipe (“A” band) until 2023 (renewed in 2008); Vivo-São Paulo (“A” band) until 2023 or 2024, for the cities of Ribeirao Preto and Guatapará (renewed in 2008); Vivo-Paraná/Santa Catarina (“B” band) until 2013; Vivo-Distrito Federal (“A” band) until 2021, (renewed in 2006); Vivo-Acre (“A” band), Vivo-Rondônia (“A” band), Vivo-Mato Grosso (“A” band) and Vivo-Mato Grosso do Sul (“A” band) until 2024 (renewed in 2008); Vivo-Goiás/Tocantins (“A” band) until 2023 (renewed in 2008); Vivo-Amazonas/Roraima/Amapá/Pará/Maranhão (“B” band) until 2013; Telemig Celular (Minas Gerais) (“A” band) until 2023 (renewed in 2007) and Telemig Celular (for the cities where CTBC Telecom operates in the state of Minas Gerais) (“E” band) until 2020). Spectrum rights may be renewed only once over a fifteen-year period.

     In September 2007, ANATEL organized auctions of new SMP licenses in the remaining radio frequency bands “D” and “E”, in the 1.8 GHz frequency band “M”, and fifteen licenses in the 1.9 GHz frequency band “L”, previously allocated to fixed operators. VIVO acquired thirteen spectrum licenses in band “L.” The following Terms of Authorization for band “L” have been signed:. Vivo-Rio Grande do Sul (“L” band) until 2022 (renewed in 2006) or 2022 for the cities of the metropolitan area of Pelotas; Vivo-Rio de Janeiro (“L” band) until 2020 (renewed in 2005); Vivo-Espírito Santo (“L” band) until 2023 (renewed in 2008); Vivo-Bahia (“L” band) and Vivo-Sergipe (“L” band) until 2023 (renewed in 2008); Vivo-São Paulo (“L” band) until 2023 or 2024, for the cities of Ribeirão Preto and Guatapará (renewed in 2008) or 2022 for the cities where CTBC Telecom operates in the state of São Paulo; Vivo-Paraná (excluding the cities of Londrina and Tamarana)/Santa Catarina (“L” band) until 2013; Vivo-Distrito Federal (“L” band) until 2021, (renewed in 2006); Vivo-Acre (“L” band), Vivo-Rondônia (“L” band), Vivo-Mato Grosso (“L” band) and Vivo-Mato Grosso do Sul (“L” band) until 2024 (renewed in 2008) or 2022 for the city of Paranaíba of Mato Grosso do Sul; Vivo-Goiás/Tocantins (“L” band) until 2023 (renewed in 2008) or 2022 for the cities where CTBC Telecom operates in the state of Goiás and Vivo-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“L” band), until 2022. Spectrum rights may be renewed only once over a fifteen-year period.

54

---

Table of Contents

     In December 2007, ANATEL organized auctions for 36 new licenses in the 1900-2100 MHz radio frequency bands (3G licenses), denominated as bands F, G, I and J. Vivo was awarded seven spectrum licenses in band “J” and Telemig Celular was awarded two licenses. The following Terms of Authorization for “J” band have been signed: Vivo-Rio Grande do Sul (including the cities of the metropolitan area of Pelotas) (“J” band) until 2023; Vivo-Rio de Janeiro (“J” band) until 2023; Vivo-Espírito Santo (“J” band) until 2023; Vivo-Bahia (“J” band) and Vivo-Sergipe (“J” band) until 2023; Vivo-São Paulo (including the cities of Ribeirão Preto and Guatapará and the cities where CTBC Telecom operates in the state of São Paulo) (“J” band) until 2023; Vivo-Paraná (including the cities of Londrina and Tamarana)/Santa Catarina (“J” band) until 2023; Vivo-Distrito Federal (“J” band) until 2023; Vivo-Acre (“J” band), Vivo-Rondônia (“J” band), Vivo-Mato Grosso (“J” band) and Vivo-Mato Grosso do Sul (including the city of Paranaíba) (“J” band) until 2023; Vivo-Goiás (including the cities where CTBC Telecom operates in the state of Goiás)/Tocantins (“J” band) until 2023; Vivo-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“J” band), until 2023; Vivo-Amazonas/Roraima/Amapá/Pará/Maranhão (“J” band) until 2023; Telemig Celular (including the cities where CTBC Telecom operates in the state of Minas Gerais) (“J” band) until 2023. Spectrum rights may be renewed only once over a fifteen-year period.

Interconnection Regulation

     Under the General Telecommunications Law, all mobile telecommunications service providers must provide interconnection upon the request of any other mobile or fixed-line telecommunications service provider. More specifically, telecommunications service providers are classified as providers of either collective or restricted services. All cellular operators, including SMP service providers, are classified by ANATEL as collective service providers. All providers of collective services are required to provide interconnection upon request to any other collective service provider. Since 2005, telecommunications service providers have been permitted to freely negotiate the terms and conditions upon which interconnection will be provided, subject to price caps and other rules established by ANATEL. For example, providers must enter into agreements regarding, among other things, tariffs, commercial conditions and technical issues with all parties on a non-discriminatory basis and starting in 2005, in order to have a more homogeneous system and to accelerate the negotiation of interconnection contracts, ANATEL has required a standard interconnection network from STFC and SMP Operators through an offer made publicly and equitably.

     If parties to an interconnection agreement cannot agree upon the terms and conditions of interconnection, ANATEL may determine those terms and conditions by arbitration. Interconnection agreements must be approved by ANATEL and may be rejected if they are contrary to the principles of free competition and the applicable regulations. Anatel has adopted, from time to time, various regulations governing interconnection rules. The following are the material regulations currently applicable to our business:

• the new General Regulation of Interconnection (“Regulamento Geral de Interconexão”—Resolution number 410/2005, or “RGI”);

• the Regulation of Separation and Allocation of Costs (Resolution number 396/2005);

• the Regulation of Industrial Exploration of Dedicated Lines (“Exploração Industrial de Linha Dedicada”—Resolution number 402/2005, or “EILD”);

• the Regulation of Remuneration of Use of SMP Providers Networks (Resolution number 438/2006);

• the Regulation of Fixed and Wireless Number Portability (Resolution number 460/2007, effective March 2009);

• the new Regulation of SMP (Resolution number 477/2007, effective February 13, 2008);

55

---

Table of Contents

• the Regulation of Terms of Separation and Allocation of Costs (Resolutions numbers 480/2007, 483/2007 and 503/2008);

• the general plan of update of the regulation of the telecommunications in Brazil (“Plano Geral de Atualização da Regulamentação das Telecomunicações no Brasil” - Resolution number 516/2008, or “PGR”);

• the general norms of customer interaction service by telephone, with the objective of improving the quality of services (Decree No. 6523/2008);

• the Methodology of the Calculation of the WACC (Resolution No. 535/2009);

• amendment of the regulation of the 3400 MHz to 3600 MHz band, allowing it to apply additionally to mobile services (Resolution No. 537/2010);

• the regulation of the Broadband Power Line (BPL), allowing this service to apply to multimedia communication (SCM) (Resolution No. 527/2009); and

• related Invitation Document number 002/2007/SPV-ANATEL regarding the auction organized in December 2007 of new licenses for the 1900-2100 MHz radio frequency bands (3G licenses), denominated bands “F,” “G,” “I” and “J,” which stated that, within a maximum allowed period of eighteen months from the publication of the Terms of Authorization (it occurred on 30 of April of 2008), the authorizations resulting from this auction would be combined with the existing SMP authorizations of the bid winners when pertaining to the same region of the general authorization plan of SMP. In accordance with this Invitation Document, in January 2010, ANATEL published an act determining the unification of our SMP authorizations in Regions II (states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and the Distrito Federal) and III (state of São Paulo) of the PGA-SMP, with only one SMP authorization for each of these Regions (Terms of Authorization No. 005/2010 and 006/2010, signed in January 2010, for Region II and III, respectively). VIVO acquired spectrum licenses in band “J” in regions where it possess SMP licenses. Moreover, the Invitation Document modified the rule for the renewal of radio frequency licenses and requires the inclusion in the calculation of the operating profits both the profits arising from remuneration for the use of the SMP network and the profits of the service plans.

Other Regulatory Issues

On November 21, 2008, the Brazil Government published the 6654/2008 Decree, dated November 20, 2008, of revision of the fixed-line general concession plan (the PGO), allowing fixed-line concessionaires to operate in more than one region of the country. This change allowed Telemar Norte Leste S.A.—Telemar or Oi - to commence the process of acquiring Brasil Telecom. This acquisition is currently being analysed by ANATEL, therefore the process of acquisition has not yet been completed.

In 2007, ANATEL published Resolution 477/2007, effective on February 13, 2008, relating to alterations in the regulation of SMP, which has contributed to an increase in our operating costs. In the new regulation, ANATEL notes areas of vital importance for mobile business, such as the necessity for retail stores in the cities within an operator’s coverage areas, increases in the validity periods of prepaid cards and places limits on the period of time during which customers may not leave service plans. These new regulations may have an adverse effect on our revenues and results of operations. In order to minimize the impacts resulting from these regulatory changes, we had already prepared ourselves during the last quarter of 2007, to meet and comply with the terms set forth by the new regulation, mainly those related to the customer service which affect procedures and required significant changes to our systems. In 2009, we continued establishing retail stores in the cities within our coverage areas, pursuant to the provisions of Resolution 477/2007. In 2009, we also established mediation centers to attend to users with hearing and speech impediments, pursuant to the provisions of Resolution 477/2007. Our plans for achieving the goals set by this new regulation will extend to August 13, 2011. Because ANATEL considers us to be affiliated with Telefónica, which already provides wire line long-distance services in the state of São Paulo and was awarded a license to provide these services nationwide, ANATEL will not award a wire line long-distance license to us. Though we and other mobile operators have requested that ANATEL revise the current SMP regime, there can be no assurance it will do so. Under the SMP regime, we will receive revenues from interconnection fees paid to us by wire line long-distance operators due to long-distance traffic originating and terminating on our network. While Vivo is not obligated to use Telefónica’s fixed line network due to the affiliation relationship, it also cannot receive its own fixed line license in the event of disagreements with Telefónica since Telefónica has the fixed nationwide licence and an affiliate cannot have the same type of licence in the same area. Since Vivo is not permitted to have a fixed license, Vivo is only able to receive interconnection fees from wire line carriers that have traffic originating or terminating on their network but not from wireless carriers using their fixed line network. Some of our wireless competitors are also unable to earn such a fixed license due to their affiliations. For example, Oi cannot have a fixed licence because it is affiliated with Telemar and Claro cannot have a fixed licence because it is affiliated with Embratel. Tim has a fixed licence because is not affiliated with any fixed operator, but in July 2009, ANATEL published Act No. 3804/2009 determining the conditions to be followed to guarantee total separation between Tim (Telecom Italia) and our subsidiaries.

56

---

Table of Contents

     Obligations of Telecommunications Companies

     As a telecommunications service provider, we are subject to regulations concerning quality of service and network expansion, as established in our authorizations and our original concession agreements.

     Any breach by the companies of telecommunications legislation or of any obligation set forth in their authorizations may result in a fine of up to R$50 million.

     The mobile service authorizations of Vivo involve obligations to meet some quality of service standards such as the system’s ability to make and receive calls, call failure rates, the network’s capacity to handle peak periods, failed interconnection of calls and customer complaints. ANATEL published the method for collecting these quality service standards data on April 23, 2003 (ANATEL Resolution No. 335/03).

     Rate Regulation

     With respect to our Basic Plan and certain roaming charges incurred in connection with alternative service plans, our authorizations continue to provide for a price cap mechanism to set and adjust rates on an annual basis. The cap is the value with the rate of inflation deducted from the productivity estimated by ANATEL. The price cap is revised annually to reflect the rate of inflation as measured by the IGP DI. However, mobile operators are able to freely set the rates for alternative service plans.

     The initial price cap agreed to by ANATEL and us in our authorizations had been based on the previously existing or bidding prices, and was adjusted annually on the basis of a formula contained in our authorizations. The price cap has been revised to reflect the rate of inflation as measured by the IGP DI.

     Other telecommunications companies that interconnect with and use our network must pay certain fees, primarily an interconnection fee. The interconnection fee is a flat fee charged per minute of use. Since 2005, ANATEL has permitted free negotiations for mobile interconnection, or VU-M, fees and by July 2005, local-fixed concessionaires and mobile operators had reached a provisional agreement with respect to VU-M fees for local calls, or VC-1 (the agreement guaranteed a 4.5% increase in fees). ANATEL approved that provisional agreement, and in March 2006, approved another provisional agreement for VU-M fees for long-distance calls, VC-2, VC-3 and international, among the same operators that made the VC-1 agreement.

     In July 2007, ANATEL approved a provisional agreement among the fixed line operators Telefônica, Telemar, Brasil Telecom, CTBC Telecom and Sercomtel and the mobile operators for interconnection fees for VC1, VC2 and VC3 calls that provides for an annual adjustment of 1.97143% to interconnection fees in Region I (Telemar’s Region) and an annual adjustment of 2.25356% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region).

     In January 2008, ANATEL approved a provisional agreement among the fixed line long distance operator Embratel and the mobile operators for interconnection fees for VC2 and VC3 calls, taking into consideration the period since January 2004, that provides for an annual adjustment of 4.5% as of March 2006 and an annual adjustment of 1.97143% or 2.25356% as of July 2007.

57

---

Table of Contents

     In July 2008, ANATEL approved a provisional agreement among the fixed line operators Telefônica, Telemar, Brasil Telecom, CTBC Telecom and Sercomtel and the mobile operators for interconnection fees for VC1, VC2 and VC3 calls that provides for an annual adjustment of 1.89409% to interconnection fees in Region I (Telemar’s Region) and an annual adjustment of 2.06308% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region).

     In March 2009, ANATEL approved a provisional agreement among the fixed line long distance operator Embratel and the mobile operators for interconnection fees for VC2 and VC3 calls, for the period from 2007 to 2008, that provides for an annual adjustment of 1.89409% in Region I (Telemar’s Region) or 2.06308% in Region II (Brasil Telecom’s Region) and Region III (Telefônica’s Region) as of July 2008.

     In September 2009, even though it had a provisional agreement between the fixed line operators Telefônica, Telemar, Brasil Telecom and Sercomtel and the mobile operators, without CTBC Celular, ANATEL decided not to approve the readjustment of the local (VC-1) and long-distance (VC-2 and VC-3) fixed-to-mobile calls. In February 2010, this readjustment of the VC-1, VC-2 and VC-3, for the period from 2008 to 2009, was approved by ANATEL and the provisional agreement of VU-M readjustment (68.5% of the approved readjustment, of approximately 0.97%, for the VC-1) could be applied.

     As indicated above, the Invitation Document number 002/2007/SPV-ANATEL regarding the auction organized in December 2007 of new licenses for the 1900-2100 MHz radio frequency bands (3G licenses), stated that, within a maximum allowed period of eighteen months from the publication of the Terms of Authorization (that occurred on April 30, 2008), the authorizations resulting from this auction would be combined with the existing SMP authorizations of the bid winners when pertaining to the same region of the general authorization plan of SMP (PGA-SMP) and accordingly our authorizations were combined in Regions I and II. ANATEL also determined that, from November 1, 2009 (eighteen months from April 30, 2008), in each Region of the PGA-SMP, the value of the VU-M must be unified for that Region and freely negotiated. Until such date, the mobile operators charged a value of VU-M for authorization of the SMP. In February 2010, ANATEL defined the VU-M to be paid for Oi (fixed and mobile operators) and for Brasil Telecom (fixed and mobile operators) to Claro, TIM, Vivo and Telemig Celular, for each region of the PGA-SMP as a result of the unification of the SMP authorizations.

     In 2007, ANATEL developed a new model which will be in use starting with 2010 to determine values of reference of remuneration for use of mobile networks—RVU-M—of SMP providers having significant market power, which will be used in the case of arbitration by ANATEL of the value of VU-M. See “—SMP Licenses” for more information on the status of this agreement.

Internet and Related Services in Brazil

     In Brazil, Internet service providers, or ISPs, are deemed to be suppliers of value-added services and not telecommunications service providers. ANATEL’s Resolution 190 requires cable operators to act as carriers of third-party Internet service providers. The Brazilian House of Representatives is considering a law that would penalize Internet service providers for knowingly providing services that allow illegal goods or services to be sold on the Internet, and would impose confidentiality requirements on Internet service providers regarding nonpublic information transmitted or stored on their networks.

C. Organizational Structure

     Following the merger of Telemig Participações into us, our subsidiaries are: Vivo S.A. and Telemig Celular S.A. See “—Our History and Development—Corporate Restructuring of Our Operating Subsidiaries and Corporate Restructuring and Deregistration of Telemig Participações and Telemig Celular”. Substantially all of our assets consist of shares in Vivo S.A. and Telemig Celular. We rely very substantially on dividends from our subsidiaries to meet our needs for cash, including cash to pay dividends to our own shareholders. See “Item 5.B.—Operating and Financial Review and Prospects—Liquidity and Capital Resources.” Currently, we are seeking to merge Telemig Celular into Vivo Participações, subsequent to which Telemig Celular will cease to exist and Vivo S.A. will remain our sole subsidiary.

58

---

Table of Contents

     For a more detailed description of our ownership structure and the joint venture between Portugal Telecom and Telefónica, see “—Our History and Development” and Exhibit 8.1.

     Acquisition of Telpart, Telemig and Tele Norte.

     On August 2, 2007, Vivo signed a stock purchase agreement with Telpart to acquire control of Telemig Participações and Tele Norte Participações and 22.72% and 19.34%, respectively, of their total capital for an aggregate amount of R$1.2 billion, subject to certain price adjustments. On December 20, 2007, Vivo signed another stock purchase agreement with Telemar for the sale of all the shares of Tele Norte that it was acquiring from Telpart under the terms of the stock purchase agreement dated August 2, 2007. This additional stock purchase agreement was signed to facilitate Vivo’s acquisition of the shares of Telemig from Telpart. On April 3, 2008, Vivo transferred to Telemar all the shares of Tele Norte that it acquired from Telpart. See “– Our history and development – Acquisition of Telpart, Telemig and Tele Norte”.

     Restructuring of Vivo, Telemig and Telemig Participações

     At a Special Shareholders’ Meeting held on July 27, 2009, the shareholders of Telemig Participações and Telemig Celular approved the Protocol of Merger of Shares and Instrument of Justification executed on May 29, 2009, which provided for the merger into Telemig Participações of all the shares of Telemig Celular, with the holders of the merged Telemig Celular shares receiving 17.4 new shares of Telemig Participações for each share of Telemig Celular that they owned.

     On the same date, at a Special Shareholders’ Meeting, the shareholders of the Company approved the Protocol of Merger of Shares and Instrument of Justification executed on May 29, 2009, which provided for the merger into Vivo Participações of the shares of Telemig Participações, including those raised in the Telemig Celular merger of shares described above, with the holders of the merged shares of Telemig Participações receiving 1.37 new shares of Vivo Participações for each Telemig Participações share that they owned.

     The mergers of the shares of Telemig Celular and Telemig Participações did not result in any change in the number or types of outstanding shares of these companies or in the terms of any of these shares. Instead, Vivo became the owner, directly or indirectly, of all of these shares, with Telemig Participações becoming a wholly-owned subsidiary of Vivo and with Telemig Celular becoming a wholly-owned subsidiary of Telemig Participações. Ultimately, all of the non-controlling shareholders of Telemig Celular and Telemig Participações became Vivo shareholders and each shareholder received the same class of Vivo share (common or preferred) as that shareholder previously held in Telemig Celular or Telemig Participações.

     At a Special Shareholders’ Meeting, held on November 13, 2009, the actual merger (as opposed to the merger of shares) into Vivo Participações and subsequent termination of Telemig Participações was approved, the appraisal and prior approval of which was submitted to ANATEL. The approval from ANATEL was obtained on November 4, 2009. As of December 31, 2009, Vivo became a holder of 100% of the total capital in Telemig Celular. See Note 1(d) to our 2009 financial statements and “.—Information on the Company—Our History and Development— Corporate Restructuring and Deregistration of Telemig Participações and Telemig Celular.”

     Currently, to further simplify our corporate structure, we are also seeking to merge the operations of Telemig Celular into Vivo Participações (as opposed to merging the shares), subsequent to which Telemig Celular will cease to exist. At a Special Shareholders’ Meeting held on November 30, 2009, the inclusion into the corporate purpose of the Bylaws of the Company of the activity of providing cellular mobile telephone service was approved in order to enable this future merger of Telemig Celular into Vivo, with a relevant notice of this future merger previously released to the market on October 8, 2009.

     On December 7, 2009, the Company communicated to its shareholders and to the market in general that, on December 3, 2009, it had filed with ANATEL a request for approval of the actual merger of Telemig Celular into Vivo Participações, in conformity with the provisions of Law no. 9.472/97 – General Telecommunications Law, on the Regulation for Verification of Share Control and Transfer of Share Control in Telecommunication Service Providers, as approved by Resolution no. 101/1999, and with the other applicable regulatory instruments. ANATEL is currently analyzing this merger.

59

---

Table of Contents

     Control by Portugal Telecom and Telefonica

     As of December 31, 2009, our voting shares were indirectly controlled by two major shareholders: Portugal Telecom and Telefónica, through Brasilcel N.V., with 88.9% of our voting stock, 44.1% of our preferred shares representing 59.4% of our total capital stock. Portugal Telecom and Telefónica share their participation in Brasilcel in equal percentages after the Merger.

D. Property, Plant and Equipment

     Our principal physical property consists of transmission equipment, switching equipment, base stations, and other communication devices, such as voicemail, prepaid service, Short Message Service, Home Location Registers, Signaling Transfer Point, Packet Data Switching Network and gateways. All switches, cell sites, administrative buildings, administrative facilities, warehouses and stores are insured against damages for operation risks.

     As of December 31, 2009, we had 64 cellular switches in São Paulo and other equipment installed in 12 owned spaces, one leased spaces and 16 shared spaces. In São Paulo, we lease most of the sites in which our cellular telecommunications network equipment is installed. The average term of these leases is five years (subject to renewal for additional five-year terms). Our 6,070 base stations and other network equipment are installed in cell sites, administrative buildings and administrative facilities. In addition, in São Paulo we own one administrative building (approximately 3,760 square meters) and we lease seven administrative areas (approximately 78,244 square meters), five kiosks and 82 retail stores.

     As of December 31, 2009, Vivo S.A., in the states of Paraná and Santa Catarina (“PR/SC”), had 19 cellular switches and other equipment installed in five owned spaces. In PR/SC, Vivo S.A. leases most of the sites in which its cellular telecommunications network equipment is installed. The average term of these leases is five years (subject to renewal for additional five-year terms). Our 2,264 base stations and other network equipment were installed in cell sites, administrative buildings, administrative facilities and warehouses. In addition, Vivo S.A. in PR/SC has one administrative building (approximately 5,272 square meters) and leases three administrative facilities (approximately 2,425 square meters), and 36 retail stores.

     As of December 31, 2009, Vivo S.A. in the Midwest region (“CO”) had 25 cellular switches and other equipment installed in six owned spaces. In CO, Vivo S.A. leases most of the sites in which its cellular telecommunications network equipment is installed. The average term of these leases is five years. Its 2,410 base stations and other network equipments were installed in cell sites, administrative buildings, administrative facilities and warehouses. Also in this region, Vivo S.A. owns seven administrative buildings (approximately 8,255 square meters), and leases one administrative facilities (approximately 1,412 square meters) and 34 retail stores.

     As of December 31, 2009, Vivo S.A. in the northern region had 18 cellular switches and other equipment installed in 15 owned spaces and one leased space. Vivo S.A. leases in this region most of the sites in which its cellular telecommunications network equipment is installed. The average term of these leases is five years. Its 1,001 base stations were installed in cell sites, administrative buildings and administrative facilities. In addition, Vivo S.A. leases seven administrative facilities (approximately 4,790 square meters), and 21 retail stores.

     As of December 31, 2009, Vivo S.A. in the states of Bahia and Sergipe had 9 cellular switches and other equipment installed in two owned spaces and three shared spaces. Vivo S.A. leases most of the sites where their cellular telecommunications network equipment is installed. The average term of these leases is five years. Their 1,275 base stations were installed in cell sites, administrative buildings, administrative facilities and warehouses. In addition, Vivo S.A. owns one administrative building (approximately 19,455 square meters ) and lease one administrative facility (approximately 610 square meters) and 19 retail stores throughout this region.

     As of December 31, 2009, Vivo S.A. in the states of Rio de Janeiro and Espirito Santo had 23 cellular switches and other equipment installed in four owned spaces, two shared spaces and one leased space. Vivo S.A. leases most of the sites where their cellular telecommunications network equipment is installed. The average term of these leases is five years. Our 3,346 base stations were installed in cell sites, administrative buildings and administrative facilities. In addition, they have their own administrative buildings (approximately 2,500 square meters) and 1 retail store, and also lease an administrative building (approximately 42,398 square meters), 8 kiosks and 46 retail stores throughout this Region.

60

---

Table of Contents

     As of December 31, 2009, Vivo S.A. in the state of Rio Grande do Sul had 13 cellular switches and other equipment installed in three owned spaces, two leased spaces and nine shared spaces. Vivo S.A. leases most of the sites where their cellular telecommunications network equipment is installed. The average term of these leases is five years. Our 2,390 base stations were installed in cell sites, administrative buildings and administrative facilities. In addition, they have their own administrative building (approximately 1,170 square meters) and also lease an administrative building (approximately 4,239 square meters), five kiosks and 28 retail stores throughout this Region.

     As of December 31, 2009, Vivo S.A. in the northeast region had two cellular switches and other equipment installed in two shared spaces. Vivo S.A. leases most of the sites where their cellular telecommunications network equipment is installed. The average term of these leases is ten years. Our 2,185 base stations were installed in cell sites, administrative buildings and administrative facilities. In addition, they lease six administrative facilities (approximately 4,200 square meters), and seven retail stores throughout this Region.

     As of December 31, 2009, Vivo S.A. in the state of Minas Gerais through its subsidiary Telemig Celular had 17 cellular switches and other equipment installed in four owned spaces and four leased spaces. Vivo S.A. leases most of the sites where their cellular telecommunications network equipment is installed. The average term of these leases is five years. Our 2,637 base stations were installed in cell sites, administrative buildings and administrative facilities. In addition, they lease two administrative building (approximately 11,687 square meters) and 26 retail stores throughout this Region.

ITEM 4A. UNRESOLVED STAFF COMMENTS

     Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     You should read the following discussion in conjunction with our consolidated financial statements and accompanying notes and other financial information included elsewhere in this annual report, and in conjunction with the financial information included under “Item 3.A.—Key Information—Selected Financial Data.”

     As a result of a change in Brazilian corporate law with respect to financial reporting (Law 11,638), certain changes in accounting criteria became effective for fiscal year 2008. Pursuant to a CVM resolution, we elected to apply these changes in accounting criteria retroactively to our financial statements with an effective date as of January 1, 2007. As a result, certain adjustments have been made to our 2007 financial statements to make them comparable to our 2008 and 2009 financial statements.

Overview

     Our results of operations are principally affected by the following key factors.

     Brazilian Political and Economic Environment

     The Brazilian economy has experienced moderate growth during the last five years. According to the IBGE (Instituto Brasileiro de Geografia e Estatística), which uses a new methodology for national accounting, Brazil’s GDP expanded 3.2% in 2005, 4.0% in 2006, 5.7% in 2007 and 5.1% in 2008. In 2009, however, Brazil’s GDP did not show growth and, in fact, declined. The decrease is a consequence of the economic downturn that commenced in the last quarter of 2008, generating a carry-over effect of 1.4% from 2008 for 2009. Even if Brazil’s GDP had sustained the same level of growth registered by the end of 2008 without further decreases, the GDP for 2009 would have decreased by 1.4% in comparison to 2008 due to the carry-over effect.

61

---

Table of Contents

     Consumer prices, as measured by the Consumer Price Index, or the IPCA, published by the IBGE, registered an increase of 4.3% in 2009. Accordingly, growth in consumer prices was below the inflation target of 4.5% established by the National Monetary Council. In 2007 and 2008, the increase had been of 4.5% and 5.9%, respectively. Inflation, as measured by the General Price Index, or the IGP-DI, calculated by the Fundação Getúlio Vargas, which includes wholesale retail and home-building prices, decreased 1.43% in 2009, compared to increases of 9.1% in 2008 and 7.9% in 2007.

     As a result of the deceleration of inflation and of the economic activity, the Central Bank decreased interest rates during 2009, and as a result, the Selic rate - the Central Bank’s overnight lending rate - decreased from 13.75% to 8.75%, which is the lowest level experienced since the creation of the inflation target system in 1999.

     Brazil ended the year of 2009 with a trade balance surplus of US$25.3 billion, compared to US$24.8 billion in 2008. Exports decreased by 22.7% to US$153.0 billion, while imports decreased by 26.3% to US$127.6 billion. Financial inflows into the country decreased significantly, with foreign direct investments of US$25.9 billion, compared to US$45.1 billion in 2008. Portfolio investments increased by US$46.7 billion in 2009 in comparison to the increase of US$6.3 billion in 2008. The good performance of external accounts allowed international reserves to increase by US$32.2 billion to a record level of US$239.1 billion.

     The economic downturn and the decrease in taxes resulted in lower tax revenues which affected the public finances and the target of 3.8% established by the Federal Government for primary surplus as part of the GDP. The target was revised to 2.5% over the year 2009. In addition, the Federal Government decided that the expenditures incurred with the Growth Acceleration Program (Programa de Aceleração do Crescimento), or PAC, and the Investment Pilot Program (Programa Piloto de Investimento), or PPI, were not included in the calculation of the primary surplus, resulting in an increase of expenses of 1.6% as part of the GDP. Considering the actual primary surplus of 2.1% of the GDP plus the expenditures with the PAC and the PPI programs, the revised target of 2.5% has been met. Net public debt, as a proportion of GDP, increased in 2009 to approximately 43.0% from 37.3% in 2008. Brazil’s capacity to absorb the world financial crisis and recover from it changed the financial markets’ perception of the country’s risk. In the past two years the Brazilian government has been upgraded by all three main rating agencies and, starting in the second half of 2009, Brazil once again started to receive huge amounts of foreign capital. The reduction in the level of economic activity and the appreciation of the real in 2009 reduced the inflationary pressures and allowed the BCB to reduce its real interest rate to an unprecedented low level in recent Brazilian history, allowing Brazil to lend money rather request capital resources.

     The improvement in domestic economic data, such as inflation, external accounts, and interest rates, along with increased liquidity in the international capital markets led to a decrease in country risk in 2009. The J.P. Morgan Emerging Markets Bond Index Plus (EMBI + Brazil), which tracks total returns for traded external debt instruments in the emerging markets, decreased to 197 basis points by the end of 2009 from 428 basis points at the end of 2008.

     As a result, the real appreciated against the U.S. dollar by 25.9% in 2009. The exchange rate on December 31, 2009 was R$1.74 to US$1.00. After the crisis in 2008, when the exchange rate reached R$2.3 to US$1.00, the appreciation trend that had been observed since 2004 was a consequence of the decrease in country risk. In the previous years, the exchange rate was R$1.77 to US$1.00 as of December 31, 2007 compared to R$2.14 to US$1.00 as of December 31, 2006 and R$2.34 to US$1.00 as of December 31, 2005. The appreciation of the real in this context is also related to the devaluation of the U.S. dollar against other currencies.

     Our business is directly affected by trends in the global economy and the Brazilian economy. If the Brazilian economy enters a period of continued recession, then demand for telecommunications services is likely to decline. Similarly, depreciation of the Brazilian real against the U.S. dollar could reduce the purchasing power of Brazilian consumers and negatively affect the ability of our customers to pay for our telecommunications services.

     Inflation

     The table below shows the Brazilian general price inflation (according to the IGP-DI and the IPCA) for the years ended December 31, 2005 through 2009:

62

---

Table of Contents

		Inflation Rate (%) as  Measured by IGP-DI (1)		Inflation Rate (%) as  Measured by IPCA (2)
December 31, 2009		(1.4)		4.3
December 31, 2008		9.1		5.9
December 31, 2007		7.9		4.5
December 31, 2006		3.8		3.1
December 31, 2005		1.2		5.7

_____________________
(1)		Source: IGP-DI, as published by the Fundação Getúlio Vargas.
(2)		Source: IPCA, as published by the Instituto Brasileiro de Geografia e Estatística.

Critical Accounting Policies

     In preparing our consolidated financial statements, we have relied on estimates and assumptions derived from historical experience and various other factors that we deemed reasonable and relevant. “Critical accounting policies” are those that are important to the portrayal of our financial condition and results and utilize management’s most difficult, subjective or complex judgments, estimates and assumptions. The significant accounting policies that we believe are critical to aid in fully understanding and evaluating our financial position and results of operations reported under Brazilian GAAP are described in Note 3 to our consolidated financial statements. A description of the differences in accounting policies between Brazilian GAAP and U.S. GAAP is included in Notes 33 and 34 to our consolidated financial statements. The application of these critical accounting policies often requires judgments made by our management regarding the effects of matters that are inherently uncertain on the carrying value of our assets and liabilities and the results of our operations. Our results of operation and financial condition may differ from those set forth in our consolidated financial statements, if our actual experience differs from management’s assumptions and estimates. The following is a discussion of our critical accounting policies, including some of the variables, assumptions and sensitivities underlying the estimates relating to:

• goodwill impairment;

• revenue recognition;

• depreciation of property, plant and equipment;

• impairment of long-lived assets;

• provisions for contingencies;

• deferred income taxes; and

• financial instruments.

     Goodwill impairment

     Under Brazilian GAAP, the amount of goodwill impairment, if any, is measured based on projections of our future operating cash flows. Under U.S. GAAP, goodwill is subject to a yearly impairment test. In performing the yearly impairment test, we identify our reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets. We then determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we would be required to perform the second step of the impairment test that involves the determination of the implicit fair value of the goodwill in the reporting unit by performing a hypothetical purchase accounting calculation. If the implicit value of the goodwill exceeds its book value, an impairment is recognized. In October 2006, we completed restructurings resulting in a change in the Company’s management structure and operating segments. As a result, the Company had one reportable segment, which represented a reporting unit as of December 31, 2009, 2008 and 2007.

63

---

Table of Contents

     A determination of the fair value and the undiscounted future operating cash flows of our cellular business requires management to make certain assumptions and estimates with respect to projected cash inflows and outflows related to future revenues, expenditures and expenses. These assumptions and estimates can be influenced by different external and internal factors, such as economic tendencies, industry trends, and interest rates, changes in our business strategies and changes in the type of services we offer to the market. The use of different assumptions and estimates could significantly change our financial statements. If assumptions and estimates about the expected future net cash flows change in the future, we may have to recognize impairment charges on goodwill, which would decrease our results of operations and shareholders’ equity.

Revenue recognition

     Under Brazilian GAAP and U.S. GAAP, we recognize revenues as the services are provided. Under Brazilian GAAP, sales of wireless devices to dealers are recognized when the respective wireless device is activated by the end user. Prepaid service revenue is initially deferred and recognized based on subscriber airtime usage. Under U.S. GAAP, revenue from sales of wireless devices along with the related cost of the wireless devices are deferred and recognized over the terms of the related customer arrangements. The excess of the cost over the amount of deferred revenue is recognized on the date of sale. Under U.S. GAAP, the subsidiaries account separately for free minutes given in connection with the sale of handsets. Therefore, we segregate free minutes given in connection with sales of wireless devices and recharges on prepaid phone plans. These minutes are recognized as used based on their respective estimated fair values.

     We consider revenue recognition to be a critical accounting policy, because of the uncertainties caused by different factors such as the complex information technology required, high volume of transactions, fraud and piracy, accounting regulations, management’s determination of collectability, uncertainties regarding our right to receive certain revenues (mainly revenues for usage of our network) and the estimation of fair value for certain transactions. Significant changes in these factors could cause us to fail to recognize revenues or to recognize revenues that we may not be able to realize in the future, despite our internal controls and procedures. In addition, we have to make estimates of the fair value of the different components of our multiple-element revenue arrangements in order to properly allocate the proceeds of each element. Actual values may differ from estimates, resulting in different allocation in the future.

Depreciation and amortization

     Depreciation on property, plant and equipment and amortization of certain intangible assets are calculated on a straight-line method over the estimated useful lives of the underlying assets, which consider historical information available to us, as well as known industry trends. Determination of estimated useful lives of property, plant and equipment involves significant judgment and includes considerations of, among other issues, our expected usage of the asset and technical improvements that might require us to replace certain assets before the end of their estimated useful lives. A change in the estimate may cause us to accelerate depreciation and amortization or may require an impairment of the asset.

Impairment of long-lived assets

     Under Brazilian GAAP, an impairment is recognized on long-lived assets such as property, plant and equipment and concession intangibles if the expected net cash flows generated by the respective asset are not sufficient to cover its book value. Under U.S. GAAP, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

     A determination of the fair value of an asset requires management to make certain assumptions and estimates with respect to projected cash inflows and outflows related to future revenues and expenses. These assumptions and estimates can be influenced by different external and internal factors, such as economic tendencies, industry trends, interest rates assumptions of marketplace participants about the best use of the asset and other changes in the marketplace. A change in the assumptions and estimates that we use could change our estimate of the expected future net cash flows and lead to the recognition of an impairment on our property, plant and equipment or concession intangibles, which would decrease our results of operations and shareholders’ equity.

64

---

Table of Contents

     Provision for contingencies

     We are subject to proceedings, lawsuits and other claims related to tax, labor and civil matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue, based on legal advice. The required reserves may change in the future due to new developments in each matter or changes in our approach in dealing with these matters, such as a change in settlement strategy. Future possible changes in the recorded reserve amounts would impact our results of operations in the period that such changes are recorded.

     Deferred income taxes

     We compute and pay income taxes based on results of operations under Brazilian GAAP. Under Brazilian GAAP and U.S. GAAP, we recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review the deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that the deferred tax assets will not be realized, based on projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies that may be available to us. When performing such reviews, we are required to make significant estimates and assumptions about future taxable income. In order to determine future taxable income, we need to estimate future taxable revenues and deductible expenses, which are subject to different external and internal factors such as economic tendencies, industry trends, interest rates, changes in our business strategies and changes in the type of services we offer to the market. The use of different assumptions and estimates could significantly change our financial statements. A change in assumptions and estimates with respect to our expected future taxable income could result in the recognition of a valuation allowance on deferred income tax assets, which would decrease our results of operations and shareholders’ equity. If we operate at a loss or are unable to generate sufficient future taxable income, if there is a material change in the actual effective tax rates, if the time period within which the underlying temporary differences become taxable or deductible, or there if is any change in our future projections, we could be required to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial increase of our effective tax rate and a material adverse impact on our operating results.

     Financial instruments

     With respect to financial instruments, we must make assumptions as to future foreign currency exchange and interest rates. For a discussion of the possible impact of fluctuations in the foreign currency exchange and interest rates on our principal financial instruments and positions, see “Item 11—Quantitative and Qualitative Disclosures About Market Risk.”

A. Operating Results

     Merger of the Vivo Companies

     In February 2006, pursuant to the Merger, TCO became our wholly owned subsidiary and each of TLE, TSD and CRT merged with and into us. Under the Merger, the Vivo Companies consolidated with one another through a Brazilian law procedure, whereby TCO became a wholly owned subsidiary of Vivo pursuant to a merger of shares (incorporação de ações) of TCO and a merger of companies (incorporação de empresas) of TLE, TSD and Celular CRT with and into Vivo, with Vivo as the surviving company. Holders of common shares, preferred shares or (where applicable) ADSs of TCO, TLE, TSD and Celular CRT received common shares, preferred shares or ADSs, respectively, of Vivo upon approval of the Merger by the requisite percentage of the voting shareholders of Vivo, and of TCO, TLE, TSD and Celular CRT, as applicable. Upon the completion of the Merger, TCP was renamed Vivo Participações S.A. and has become the holding company of TCO and of the subsidiaries TLE, TSD and Celular CRT.

65

---

Table of Contents

     Pursuant to the Merger, Brasilcel and its subsidiaries hold all of our common shares. Under the Protocol of Merger of Shares and Merger of Companies and Instrument of Justification agreements which govern the Merger, we underwent a capital increase in the amount of R$2,631,136,636 as a result of the Merger, from R$6,670,152,498 to R$9,301,289,134. The agreements also provided that Celular CRT’s preferred shares held in treasury be transferred to TCP in connection with the Merger.

     At a Vivo Shareholders Meeting held on February 22, 2006, Vivo reduced its capital in the amount of R$3,147,782,181, from R$6,670,152,498 to R$3,522,370,316, as approved by management and the shareholders and in accordance with Brazilian Corporate Law, which permits reductions in capital up to the amount of accumulated losses, allowing a more accurate valuation of the company and the possibility for eventual future distributions of dividends. The total capital of Vivo is R$6,153,506,952, owing to an increase in the amount of R$2,631,136,636 as a result of the Merger. For more information on the Merger, see the Procol of Merger of Shares and Merger of Companies and Instrument of Justification among TCP and TCO, TSD, TLE and Celular CRT dated December 4, 2005, which is included as an exhibit to this report.

     Under Brazilian GAAP, the Merger was recorded as from January 1, 2006. Since we were under common control with TSD, TLE and CRT since 2002, the financial information presented in this “Item 5—Operating and Financial Review and Prospects” combines the results of our operations with those of TSD, TLE and CRT for periods prior to January 1, 2006.

     The Extraordinary Shareholders Meeting held on October 31, 2006 approved the Merger between the fully owned subsidiary GT with Vivo’s other fully owned subsidiaries, including Telergipe, Telebahia, Telerj, Telest, Celular CRT, TC and TCO, as well as TCO’s subsidiaries, Telegoiás, Telemat, Telems, Teleron, Teleacre, and NBT.

     The objective of the corporate restructuring was to simplify the corporate and operational structure by unifying the general business administration of the operations. Operations will now be concentrated in a single operating company controlled by Vivo, to take full advantage of the synergies between the companies involved, increase Vivo shareholder value and continue the process approved in the Extraordinary Shareholders Meeting held on February 22, 2006. Upon completion of the corporate restructuring, the name GT was changed to Vivo S.A.

     Acquisition of Telpart, Telemig and Tele Norte.

     On August 2, 2007, Vivo signed a stock purchase agreement with Telpart to acquire control of Telemig Participações and Tele Norte Participações and 22.72% and 19.34%, respectively, of their total capital for an aggregate amount of R$1.2 billion, subject to certain price adjustments. On April 3, 2008, Vivo announced that (i) all conditions precedent to the acquisition of Telemig were fulfilled, (ii) Vivo had paid the purchase price in the total amount of R$1.23 billion, including R$70.51 million in connection with the acquisition of subscription rights, and (iii) Vivo had acquired, as of that date, the direct control of Telemig. Later on, Vivo launched, through a subsidiary, tender offers for common and preferred shares of Telemig Participações and Telemig Celular. After the acquisition from Telpart, the completion of the tender offers and a corporate reorganization, Vivo became, as of December 19, 2008, a holder of 96.994% of the common shares and 36.990% of the preferred shares in Telemig Participações and an indirect interest of 95.258% of the common shares and 36.054% of the preferred shares in Telemig Celular. See “Item 4.A.—Information on the Company—Our History and Development—Acquisition of Telpart, Telemig and Tele Norte”.

     On December 20, 2007, Vivo signed a stock purchase agreement with Telemar for the sale of all the shares of Tele Norte that it was acquiring from Telpart under the terms of the stock purchase agreement dated August 2, 2007. This additional stock purchase agreement was signed to facilitate Vivo’s acquisition of the shares of Telemig from Telpart. On April 3, 2008 , Vivo transferred to Telemar all the shares of Tele Norte that it acquired from Telpart. See “Item 4.A.—Information on the Company—Our History and Development—Acquisition of Telpart, Telemig and Tele Norte”.

     Corporate Restructuring and Deregistration of Telemig and Telemig Celular

     The Corporate Restructuring resulted in the following:

66

---

Table of Contents

• non-controlling holders of Telemig ADSs received 2.74 Vivo ADSs for each Telemig ADS they held plus cash instead of any fractional ADSs;

• non-controlling holders of common shares and non-controlling holders of preferred shares of Telemig (including holders of Telemig shares who received their shares as a result of the immediately preceding exchange of Telemig Celular shares for Telemig shares that is described below) received, without any further action by those holders, 1.37 common shares, no par value, of Vivo for each Telemig common share they held, and 1.37 preferred shares, no par value, of Vivo for each Telemig preferred share they held plus, in each case, cash instead of any fractional shares (the “Vivo Merger of Shares”);

• on the same day as, and prior to, the Vivo Merger of Shares, holders of common shares and holders of preferred shares of Telemig Celular received, without any further action by those holders, 17.4 common shares, no par value, of Telemig for each Telemig Celular common share they held and 17.4 preferred shares, no par value, of Telemig for each Telemig Celular preferred share they held, regardless of the class of Telemig Celular preferred shares held, but, as described above, the Telemig shares that they received were exchanged for Vivo shares so that each holder of a Telemig Celular common share or a Telemig Celular preferred share ultimately received, without any further action by the holder, 23.838 Vivo common shares or 23.838 Vivo preferred shares, respectively, plus, in each case, cash instead of any fractional Vivo shares for which the Telemig Celular common shares and preferred shares ultimately were exchanged as a result of the Corporate Restructuring (the “Telemig Merger of Shares”);

• Vivo became a significantly larger company and more diversified, owning 100% of the capital stock of Telemig, which in turn owned 100% of the capital stock of Telemig Celular. Telemig’s interest in the net book value and net income (loss) of Telemig Celular therefore increased to 100%, and Vivo’s interest in the net book value and net income (loss) of Telemig therefore increased to 100%;

• the preferred shares and ADSs of Telemig ceased trading on the NYSE on September 28, 2009, and were deregistered under the Exchange Act on December 15, 2009, and Telemig no longer files Annual Reports on Form 20-F or reports on Form 6-K;

• the common shares and preferred shares of Telemig and Telemig Celular were delisted from the BM&F BOVESPA and deregistered from the CVM on October 16 and 19, 2009, respectively; and

• the Restructuring allowed holders of common shares and preferred shares of Telemig and Telemig Celular to receive Vivo securities having substantially the same rights as their prior securities but that instead are expected to enjoy greater liquidity than the securities previously held by them.

     Currently, to further simplify our corporate structure, we are seeking to merge Telemig Celular into Vivo Participações, subsequent to which Telemig Celular will cease to exist. At a Special Shareholders’ Meeting held on November 30, 2009, the inclusion into the corporate purpose of the Bylaws of the Company of the activity of providing cellular mobile telephone service was approved in order to enable this future merger of Telemig Celular into Vivo, with a relevant notice of this future merger previously released to the market on October 8, 2009.

     On December 7, 2009, the Company communicated to its shareholders and to the market in general that, on December 3, 2009, it had filed with ANATEL a request for approval of the merger of Telemig Celular into Vivo Participações. ANATEL is currently analyzing this merger.

Results of Operations for 2009, 2008 and 2007 for Vivo

     The following table sets forth certain components of our results for the periods presented.

67

---

Table of Contents

Statement of Operations (consolidated)

		Year ended December 31,						Percent change
		2009		2008		2007		2009-2008		2008-2007
		(in millions of reais)
Net operating revenue		16,363.2		15,469.7		12,492.5		5.8		23.8
Cost of services and goods		(8,951.5)		(8,179.0)		(6,623.3)		9.4		23.5
Gross profit		7,411.7		7,290.7		5,869.2		1.7		24.2
Operating expenses:
Selling		(4,357.4)		(4,107.0)		(3,532.8)		6.1		16.3
General and administrative		(1,334.3)		(1,164.2)		(1,207.2)		14.6		(3.6)
Other operating expenses, net		240.8		(469.9)		(509.4)		n.a.		(7.8)
Total operating expenses		(5,450.9)		(5,741.1)		(5,249.4)		(5.1)		9.4
Operating income before financial expense, net		1,960.8		1,549.6		619.8		26.5		150.0
Net financial expenses		(487.2)		(637.7)		(462.8)		(23.6)		37.8
Operating income (loss)		1,473.6		911.9		157.0		61.6		480.6
Net non-operating expense		—		—		—		—		—
Net income (loss) before income and social contribution taxes and non-controlling interests		1,473.6		911.9		157.0		61.6		480.6
Income and social contribution taxes		(590.5)		(469.5)		(256.8)		25.8		82.8
Non-controlling interests		(25.6)		(52.7)		—		(51.4)		—
Net Income (loss)		857.5		389.7		(99.8)		120.0		(490.5)

     Operating Revenues

     Our operating revenues consist of the following:

• usage charges, which include charges for outgoing calls, monthly fee, roaming and similar service;

• revenues from the sale of wireless devices and accessories;

• interconnection charges (or network usage charges), which are amounts we charge other cellular and fixed-line or long-distance service providers for the use of our network; and

• other charges, including charges for the text messaging services (SMS), WAP, downloads, call forwarding, call waiting, voicemail, and call blocking.

     The composition of our operating revenues has been affected by the shift in the composition of customers to prepaid services (which generate usage charges and interconnection charges but do not generate monthly fee, and which have attracted lower income customers to our services), by our strategic focus on profitability and selective customer growth, and also by the change in the recognition of revenues related to prepaid services.

     Vivo’s net additions (number of new customers less churn) generated a 14.0% increase in the number of contract customers to 9.8 million in 2009, from 8.6 million in 2008. The 2008 figure represented a 21.1% increase from 7.1 million in 2007. Similarly, net additions generated a 15.4% increase in the number of prepaid customers to 42.0 million in 2009, from 36.4 million in 2008. The 2008 figure represented a 20.1% increase from 30.3 million in 2007.

     ANATEL authorizes cellular operators to increase tariffs based upon the prior twelve-month period’s cumulative inflation, measured by the IGP-DI variation from February to January of each year. Accordingly, changes in our revenues from year to year include the effects of tariff increases which were approximately 2.1% in 2008 and 2.0% in 2007 determined on a weighted average basis. There were no tariff increases for 2009.

68

---

Table of Contents

     As of July 6, 2003, cellular telecommunications operators in Brazil were required by the SMP rules to implement long-distance carrier selection codes (códigos de seleção de prestadora, or CSP) used by customers to choose their carrier for domestic long-distance services (VC2 and VC3) and international cellular calls. As a result, Vivo no longer receives direct revenues or incurs costs in connection with VC2 or VC3 or international calls.

     On July 14, 2006, ANATEL eliminated the rule of the partial “Bill & Keep” in the remuneration of network usage between SMP networks in favor of a full billing method. Additionally, in accordance with ANATEL’s regulations, “Bill & Keep” rules were adopted for interconnection charges in July 2003. The rules provide that companies under the SMP regime were not required to pay tariffs for the use of the local network of other SMP providers as long as customers use local service (i.e., make calls in the same registration area) and as long as there is a traffic balance between them. However, if traffic from the SMP provider that originates the call to the SMP provider that terminates the call represents more than 55% of the total local traffic between the two providers, the SMP provider who originates the higher traffic through the other provider’s network must pay to such other provider the local usage tariff for the portion of the traffic that exceeds 55%.

     The composition of operating revenues by category of service is presented in our consolidated financial statements and discussed below. We do not present operating revenues on a net basis (i.e., after deduction of taxes) by category of service.

     The following table sets forth the components of our net operating revenues for the periods presented.

		Year ended December 31,						Percent change
		2009		2008		2007		2009-2008		2008-2007
		(in millions of reais)
Usage, additional call and monthly subscription charges		10,477.8		10,014.0		8,000.8		4.6		25.2
Interconnection charges		6,301.6		6,140.3		5,109.3		2.6		20.2
Sales of wireless devices and accessories		2,932.2		3,258.1		3,105.7		(10.0)		4.9
Data and value-added services		2,971.3		2,049.8		1,330.5		45.0		54.1
Other services		188.7		244.1		98.0		(22.7)		149.1
Gross operating revenue		22,871.6		21,706.3		17,644.3		5.4		23.0
Value-added and other indirect taxes		(4,637.9)		(4,295.5)		(3,385.9)		8.0		26.9
Discounts granted and return of goods		(1,870.5)		(1,941.1)		(1,765.9)		(3.6)		9.9
Net operating revenues		16,363.2		15,469.7		12,492.5		5.8		23.8

     The following table sets forth the impact on net operating revenues of consolidating Telemig for the months of April through December 2008.

		Period from April 31 to
		December 31, 2008
		(in millions of reais)
Usage, additional call and monthly subscription charges		986.3
Interconnection charges		519.4
Sales of wireless devices and accessories		156.4
Other		177.2
Gross operating revenue		1,839.3
Value-added and other indirect taxes		(292.5)
Discounts granted and return of goods		(324.5)
Net operating revenues		1,222.3

     Net operating revenues increased by 5.8% to R$16,363.2 in 2009 from R$15,469.7 million in 2008, which in turn represented a 23.8% increase from R$12,492.5 million in 2007. The increase in 2009 reflects mainly an increase in revenues related to data and value-added services, to Internet 3G access, and to additional call charges and monthly fees. The growth in 2008 reflects mainly the consolidation of net operating revenues attributables to Telemig commencing on April 2008, as well as an increase in revenues from additional call charges and monthly fee, and sales of wireless devices and accessories.

69

---

Table of Contents

     Usage, additional call and monthly fee. Revenues from usage charges increased by 4.6% to R$10,477.8 million in 2009 from R$10,014.0 million in 2008, which in turn represented a 25.2% increase from R$8,000.8 million in 2007. The growth in usage, additional calls and monthly fees in 2009 was mainly due to an increase of 15.1% in our customer base to 51.7 million. The increase in 2008 reflects the consolidation of R$986.3 million of usage, additional call and monthly fee attributable to Telemig for the months of April through December 2008. The growth in usage charges in 2008 was mainly due to an increase of 34.2% in our customer base to 44,945 million.

     Interconnection charges. Revenues from interconnection charges increased by 2.6% to R$6,301.6 million in 2009, from R$6,140,3 million in 2008, which in turn represented a 20.2% increase from R$5,109.3 million in 2007. The increase in 2009 was principally due to an increase in mobile-to-mobile calls. The increase in interconnection charges in 2008 was principally due to the consolidation of R$579.4 million attributable to Telemig, commencing on April 2008, as well as an increase in mobile to mobile calls, concurrent with the growth in the number of terminals in use and the static number of fixed-line telephones.

     Sales of wireless devices and accessories. Revenues from sales of wireless devices and accessories decreased by 10.0% to R$2,932.2 million in 2009 from R$3,258.1 million in 2008, which in turn represented a 4.9% increase from R$3,105.7 million in 2007. The decrease in 2009 reflects an increased activity of sales of Sim Cards and wireless handsets with GSM technology which have a lower average retail price. The increase in 2008 was mainly due to the consolidation of R$156.4 million attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) sales of wireless devices and accessories decreased 0.1% to R$3,101.7 in 2008, from R$3,105.7 million in 2007 due to the disproportionately higher sales of wirelessly handsets with GSM technology which have a lower average retail price.

     Revenues from sales of wireless devices and accessories are reported before commissions and promotional discounts, and include value-added taxes. In general, the purpose of wireless device sales is to encourage growth in customers and traffic (and not necessarily to generate profits). Accordingly, we subsidize part of the costs of wireless devices. The subsidy strategy resulted in a gross loss (calculated as the difference of net operating revenues from sales minus the cost of goods sold) for Vivo of R$653.5 million, R$753.3 million (excluding Telemig) and R$693.6 million in 2009, 2008 and 2007, respectively.

     Date and value-added services and other services. Revenues from data and value-added services and other services increased by 37.8% to R$3,160.0 million in 2009 from R$2,293.9 million in 2008, which in turn represented a 60.6% increase from R$1,428.5 million in 2007. The increase was principally due to an increase in our customer base and an increase in the use of data-related services by our customers, including text message services, or SMS, wireless Internet services and other value-added services.

     Value-added and other indirect taxes. Value-added and other indirect taxes increased by 8.0% to R$4,637.9 million in 2009 from R$4,295.5 million in 2008, which in turn represented a 26.9% increase from R$3,385.9 million in 2007. The increase in 2009 was principally due to an increase in gross operating revenue, particularly in revenue from usage charges and other services. The increase in 2008 (excluding Telemig) was mainly due to an increase in gross operating revenue. The consolidation of value-added and other indirect taxes of Telemig for the months of April through December 2008 had a positive impact of R$292.5 million. The effective rate of taxes on gross operating revenues varies depending on the composition of our revenues, since the interconnection charges are not subject to ICMS. Accordingly, value-added taxes and other indirect taxes corresponded to 20.3%, 19.8% (20.1% excluding Telemig) and 19.2% of our gross operating revenues in 2009, 2008 and 2007, respectively.

     Discounts and return of goods sold. Discounts and returns decreased by 3.6% to R$1,870.0 million in 2009 from R$1,941.1 million in 2008, which in turn represented a 9.9% increase from R$1,765.9 million in 2007. Discounts and returns corresponded to 8.2%, 8.9% (8.1% excluding Telemig) and 10.0% of our gross operating revenues in 2009, 2008 and 2007, respectively. The decrease in 2009 reflects an increase of sales of wireless handsets with GSM technology, as compared to other goods, which have a lower average cost and sales of Sim Cards. The increase in 2008 reflects the consolidation of R$324.5 million attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) discounts and return of goods sold decreased 8.5% to R$1,616.6 million in 2008, from R$1,765.9 million in 2007 was mainly due to the decrease in discounts on wireless devices as a result of the increase in the base of customers who purchase wireless devices with GSM technology, which have a lower average cost.

70

---

Table of Contents

     Cost of Services and Goods

     The following table sets forth the components of our costs of services and goods sold for 2009, 2008 and 2007, as well as the percentage change from the previous year.

		Year ended December 31,						Percent change
		2009		2008		2007		2009-2008		2008-2007
		(in millions of reais)
Cost of goods sold		(2,011.0)		(2,441.9)		(2,096.8)		(17.6)		16.5
Depreciation and amortization		(2,286.1)		(1,707.0)		(1,378.9)		33.9		23.8
Supplies, outside services other		(664.2)		(551.3)		(491.6)		20.5		12.1
Interconnection charges		(2,313.2)		(2,146.7)		(1,618.2)		7.8		32.7
Rent, insurance, condominium fees, and leased lines		(672.7)		(555.8)		(436.1)		21.0		27.4
Personnel		(144.2)		(120.1)		(102.9)		20.1		16.7
Taxes		(860.1)		(656.2)		(498.8)		31.1		31.6
Cost of services and goods		(8,951.5)		(8,179.0)		(6,623.3)		9.4		23.5

     Cost of services and goods increased by 9.4% to R$8,951.5 million in 2009 from R$8,179.0 million in 2008, which in turn represented a 23.5% increase from R$6,623.3 million in 2007. The increase in 2009 was mainly due to an increase in depreciation and amortization costs, interconnection charges and taxes, partially offset by a reduction in cost of goods. The increase in 2008 reflects the consolidation of R$739.5 million of cost of services and goods attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) cost of services and goods increased 11.8% to R$7,402.0 million in 2008, from R$6,623.3 million in 2007 was mainly due to an increased in interconnection costs and depreciation and amortization costs. Gross margin (gross profit as a percent of net revenues) corresponded to 45.3%, 47.4% (47.0% excluding Telemig) and 47.0% in 2009, 2008 and 2007, respectively.

     Cost of goods sold. Cost of wireless devices and accessories decreased by 17.6% to R$2,011.0 million in 2009, from R$2,441.9 million in 2008, which in turn represented a 16.5% increase from R$2,096.8 million in 2007. The decrease in 2009 corresponds to the decrease in sales of wireless devices and accessories (discussed above) and reflects an increase in sales of wireless handsets with GSM technology (as compared to other technologies), which have a lower average cost and sales of Sim Cards. The increase in 2008 reflects the consolidation of R$192.5 million of cost of goods sold attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) cost of goods sold increased 7.3% to R$2,249.4 in 2008, from R$2,096.8 million in 2007. The increase in 2008 was mainly due to the increase of the base customers who purchase handheld devices with GSM technology, which have a lower average cost, but which have sold in generally higher volumes.

     Depreciation and amortization. Depreciation and amortization expenses increased by 33.9% to R$2,286.1 million in 2009, from R$1,707.0 million in 2008, which in turn represented an increase of 23.8% from R$1,378.9 million in 2007. The increase in 2009 was mainly due to the accelerated depreciation of CDMA technologies and to the digital ERBs investments made in this period, in addition to the amortization of licences. In 2008, the consolidation of depreciation and amortization expenses of Telemig for the months of April through December 2008 had a negative impact of R$151.6 million. The increase in 2008 (excluding Telemig) was mainly due to the accelerated depreciation of TDMA and CDMA technologies and to the digital ERBs, investments made in the period and increases in the amortization in licences, including, among others, our 3G licenses.

     Supplies, outside services and other. Cost of materials and third-party services increased by 20.5% to R$664.2 million in 2009, from R$551.3 million in 2008, which in turn represented an increase of 12.1% from R$491.6 million in 2007. The increase in 2009 reflects an increase in third-party services, mainly in plant maintenance and public services resulting from the growth of our network. The increase in 2008 reflects the consolidation of R$45.1 million attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) supplies, outside services and other increased 3.0% to R$506.2 million in 2008, from R$491.6 million in 2007. The increase in 2008 was mainly due to an increased in the third-party services, mainly in plant maintenance and public services.

71

---

Table of Contents

     Interconnection charges. Interconnection charges increased by 7.8% to R$2,313.2 million in 2009, from R$2,146.7 million in 2008, which in turn represented an increase of 32.7% from R$1,618.2 million in 2007. The increase in 2009 reflects an increase in our customer base and in outgoing off-net call traffic. The increase in 2008 reflects the consolidation of R$211.8 million of interconnection charges attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) interconnection charges increased 19.6% to R$1,934.9 in 2008, from R$1,618.2 million in 2007. The increase in 2008 is due to an increase in our customer base and in outgoing off-net call traffic.

     Rent, insurance, condominium fees, and leased lines. Rent, insurance, condominium fees, and leased lines increased by 21.0% to R$672.7 million in 2009, from R$555.8 million in 2008, which in turn represented an increase of 27.4% from R$436.1 million in 2007. The increase in 2009 is mainly due to an increase in lease payments for shared retail space and increased utilization of the circuits. The increase in 2008 (excluding Telemig) was mainly due to an increase in lease payments for shared retail space and in the utilization of the circuits.

     Personnel. Personnel expenses increased by 20.1% to R$144.2 million in 2009, from R$120.1 million in 2008, which in turn represented a 16.7% increase from R$102.9 million in 2007. The increase in 2009 was mainly due to an increase in salaries under the terms of our collective bargaining agreement, which we renegotiate annually, and an increase in training program costs. The increase in 2008 reflects the consolidation of R$12.6 million attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) personnel expenses increased 4.5% to R$107.5 million in 2008, from R$102.9 million in 2007, mainly due to an increase in salaries under the terms of our collective bargaining agreement, which we renegotiate annually.

     Taxes. Taxes increased by 31.1% to R$860.1 million in 2009, from R$656.2 million in 2008, which in turn represented a 31.6% increase from R$498.8 million in 2007. The increase in 2009 reflects an increase in FISTEL, due to the growth in the number of new subscribers. In 2008, the increase was primarily attributable to the consolidation of FISTEL and other taxes of Telemig for the months of April through December 2008 in the amount of R$53.1 million. The increase in 2008 was mainly due to an increase in FISTEL, due to an increase in the customer base.

Operating Expenses

     The following table sets forth the components of our operating expenses for each of the years ended December 31, 2009, 2008 and 2007, as well as the percentage change from the prior year.

		Year ended December 31,						Percent change
		2009		2008		2007		2009-2008		2008-2007
		(in millions of reais)
Selling expenses		(4,357.4)		(4,107.0)		(3,532.8)		6.1		16.3
General and administrative expenses		(1,334.3)		(1,164.2)		(1,207.2)		14.6		(3.6)
Other net operating expenses		240.8		(469.9)		(509.4)		(151.2)		(7.8)
Total		(5,450.9)		(5,741.1)		(5,249.4)		(5.1)		9.4

     Vivo’s operating expenses decreased by 5.1% to R$5,450.9 million in 2009, from R$5,741.6 million in 2008, which in turn represented a 9.4% increase from R$5,249.4 million in 2007. The decrease in 2009 was mainly due to a reduction in the other net operating expenses partially offset by an increase in selling expenses. The increase in 2008 reflects the consolidation of R$375.4 million of operating expenses attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) operating expenses increased 2.9% to R$5,403.2 million in 2008, from R$5,249.4 million in 2007. The increase in operating expenses in 2008 was principally due to an increase in selling expenses that were partially offset by a reduction in general and administrative expenses.

     Selling expenses. Selling expenses increased by 6.1% to R$4,357.4 million in 2009, from R$4,107.0 million in 2008, which in turn represented a 16.3% increase from R$3,532.8 million in 2007. In 2008, the consolidation of selling expenses of Telemig for the months of April through December 2008 had a negative impact of R$290.1 million. The increase in 2009 reflects an increase in third-party costs, mainly costs related to distribution and client care and depreciation and amortization. The increase was partially offset by a reduction in the provision for doubtful accounts by 29.8% to R$ 213.2 million in 2009 from R$ 303.8 million in 2008. The increase in 2008 (excluding Telemig) was principally due to an increase in third-party costs, mainly costs related to distribution and client care, and an increase in customer loyalty program costs and depreciation and amortization. Allowance for doubtful accounts were 0.9%, 1.4% and 2.1% of gross revenues for 2009, 2008 and 2007, respectively.

72

---

Table of Contents

     General and administrative expenses. General and administrative expenses increased by 14.6% to R$1,334.3 million in 2009, from R$1,164.2 million in 2008, which in turn represented a 3.6% decrease from R$1,207.2 million in 2007. The increase in 2009 reflects an increase in depreciation and amortization and in third-party costs, mainly in plant maintenance. In 2008, the consolidation of general and administrative expenses of Telemig for the months of April through December 2008 had a negative impact of R$95.2 million. The decrease in 2008 (excluding Telemig) was principally due to a decrease in third-party costs, mainly due to consulting fees.

     Other net operating expenses. The net amount of other operating expenses decreased by 151.2% to R$240.8 million of other revenues in 2009, from R$469.9 million of expenses in 2008, which in turn represents a 7.8% decrease from R$509.4 million in 2007. The decrease in 2009 reflects an increase in the revenues from recovered expenses, especially taxes and a decrease in goodwill amortization. The decrease in 2008 reflects the consolidation of R$9.9 million of other net operating revenues attributable to Telemig for the months of April through December 2008. Vivo’s (excluding Telemig) other net operating expenses decreased 5.8% to R$479.8 in 2008, from R$509.4 million in 2007. The decrease in 2008 was principally due the reversal of provisions, partially offset by the increase in goodwill amortization.

      Net Financial Expenses

     The following table sets forth certain components of our net financial expenses, as well as the percentage change of each component from the previous year, for each of the years ended December 31, 2009, 2008 and 2007.

		Year ended December 31,						Percent Change
		2009		2008		2007		2009-2008		2008-2007
		(in millions of reais)
Financial income		199.8		304.2		186.0		(34.3)		63.5
Exchange gains (losses)		520.3		(920.1)		297.5		(156.5)		(409.3)
Gains (losses) on foreign currency derivative contracts		(453.8)		519.5		(509.2)		(187.4)		(202.0)
Financial expenses		(753.5)		(541.3)		(437.1)		39.2		23.8
Total		(487.2)		(637.7)		(462.8)		(23.6)		37.8

     Net financial expenses reflect, among other things, the net effect of interest income and expense, and the net effect of exchange rate fluctuation affecting our loans, financings and derivative operations. See Note 27 to our financial statements.

     Our net financial expenses decreased by 23.6% to R$487.2 million in 2009, from R$637.7 million in 2008, which in turn represents a 37.8% increase from R$462.8 million in 2007. This decrease in 2009 is mainly due to the extraordinary facts that occurred in 2009, such as the use of some of our cash for the acquisition of 3G licenses, thus resulting in less cash balance invested and the generation of lower financial revenues as well as the effect of lower indebtedness throughout year 2009, in addition to a lower effective interest rate in 2009 (9.88% in 2009 and 12.38% in 2008). The increase in 2008 was principally due to the net debt generated in the acquisition of Telemig and recognition of financing charges in connection with our new 3G licenses. In addition, PIS/COFINS expenses on the allocation of interest on shareholders’ equity increased by R$13.9 million and the effective interest rate increased to 12.4% in 2008 from 11.8% in 2007.

     As of December 31, 2009, all of our foreign exchange indebtedness of approximately R$761.4 million was covered by long positions under hedging agreements. Under those derivative agreements, our subsidiaries’ foreign exchange-denominated obligations are swapped for real-denominated obligations bearing interest at rates linked to the Certificado de Depósito Interfinanceiro (Interbank Deposit Certificate), or CDI. This resulted in an income of R$343.9 million in 2009 in our foreign currency-denominated debt (a loss of R$688.3 million in 2008 and a gain of R$296.1 million in 2007), which was offset by losses in our currency and interest rate derivatives contracts of R$366.7 million in 2009 (a gain of R$519.5 million in 2008 and a loss of R$509.4 million in 2007).

73

---

Table of Contents

     Income and Social Contribution Taxes Income (Expense)

     We recorded expenses from income and social contribution taxes in the amount of R$590.5 million in 2009, an increase of 25.8% from an expense of R$469.5 million in 2008, which in turn represented an increase of 82.8% from an expense of R$256.8 million that we recorded in 2007. The increases in 2009 and 2008 are related to higher income before income and social contribution taxes.

     Non-controlling interest

     The non-controlling interest recorded for the year ended December 31, 2009 was in the amount of R$25.6 million and represented the non-controlling interest in Telemig for the months of January through July 2009. The non-controlling interest recorded for the year ended December 31, 2008 was in the amount of $52.7 million and represented the non-controlling interest in Telemig for the months of April through December 2008. In 2007, there was no non-controlling interest recorded for Vivo due to the completion of the corporate restructuring process which commenced in October 2006. See “—Operating Results —Merger of the Vivo Companies.”

     Vivo’s Segments

     As described in “Item 4.A.—Information of the Company—Our History and Development—Corporate Restructuring of Our Operating Subsidiaries”, during 2006, we completed corporate restructurings to simplify our corporate legal structure and create a single legal operating company. This resulted in changes to our management structure and operating segments. Since the end of the year ended December 31, 2006, we had one operating segment, cellular telecommunications services. Consequently, no separate segment information has been presented.

B. Liquidity and Capital Resources

Sources of Funds

     Vivo generated cash flow from operations of R$4,044.4 million, R$3,722.1 million and R$3,196.7 million in 2009, 2008 and 2007, respectively, primarly as a result of our net income after adjusting for non-cash expenses such as depreciation and amortization.

      Vivo used net cash for financing activities in the amount of R$3,478.7 million in 2009. Vivo repaid loans of R$5,066.2 million during 2009 and obtained new loans in the aggregate amount of R$1,952.5 million in that period, as well as cash from the net settlements on derivatives contracts of R$51.5 million.

     Vivo had R$ 4,169.8 million in long-term loans and financing as of December 31, 2009. Vivo’s R$954.7 million in short-term indebtedness as of December 31, 2009 consisted primarily of funding from financial institutions. As of December 31, 2009, Vivo had a working capital (current assets minus current liabilities) deficit of R$110.1 million compared to a working capital deficit of R$452.6 million as of December 31, 2008.

     On May 1, 2005, Vivo issued debentures in the aggregate principal amount of R$1.0 billion in two series, both maturing in May 2015. The first series, in the aggregate amount of R$200.0 million, bears interest at 103.3% of the average daily interbank deposit rate for deposits of one day (DI—Depósitos Interfinanceiros de um dia, extragrupo), payable semiannually, and is subject to renegotiation of terms (repactuação) in May 2009. The second series, in the aggregate amount of R$800.0 million, bears interest of 104.2% of the average daily interbank deposit rate, payable semiannually, and is subject to renegotiation of terms in May 2010. The proceeds of the issuance of these debentures were used for the repayment of short-term debt.

     On January 20, 2004, Telemig Celular issued U.S.$80 million of 8.75% unsecured senior notes due 2009. The notes were offered and sold in offshore transactions in accordance with Regulation S under the Securities Act to qualified institutional buyers (QIBs) in the United States under Rule 144A of the Securities Act. Interest payments on the Telemig Celular notes are made semi-annually. As of December 31, 2008, there was R$195.3 million aggregate principal amount of notes outstanding. The notes were paid in full in January 2009.

     In compliance with the terms of the personal mobile service providing agreement, resulting from public bid No. 001/2007, the State of Minas Gerais, through the State Secretary of Economic Development, has undertaken to subscribe debentures issued by Telemig Celular in the scope of the Minas Comunica Program, through the use of resources from the Fund of Universalization of the Access to Telecommunication Services, or FUNDOMIC. According to the program, Telemig Celular will provide cellular phone coverage to 134 locations within the State of Minas Gerais (those with area codes No. 34, 35 and 38). In December 2007, as consideration from the certification obtained from the State Secretary of Economic Development from serving 15 locations, Telemig Celular issued 621 non convertible debentures from the first series of the first issuance in the total amount of R$6.2 million. At December 31, 2008, for the service at 77 locations, 3,190 debentures were issued in the third series of the first issue, valued at R$31.9 million, thus completing the program for providing service to 134 locations within the State of Minas Gerais. At December 31, 2008, the updated amounts of the first, second and third series of the debentures were R$6.6 million, R$18.3 million and R$32.0 million, respectively. The outstanding balance is adjusted to inflation according to the IPCA plus 0.5% per year.

74

---

Table of Contents

     We believe that our available borrowing capacity, together with funds generated by operations, should provide sufficient liquidity and capital resources to pursue our business strategy for the foreseeable future, with respect to working capital, capital expenditures and other operating needs.

     On May 9, 2008, the Board of Directors of the Company approved the issue and offer of 22 unsecured promissory notes in the value of R$25.0 million each, totaling R$550.0 million. On October 29, 2008, the offer was registered with the CVM and issued on November 10, 2008, with maturity date on May 9, 2009, bearing interest of 115.0% of the daily CDI rate, as disclosed by the Custody and Settlement Agency – CETIP. The proceeds from this offer were used in an increase of the capital stock of TCO IP for settlement of commercial promissory notes due on November 10, 2008, in the amount of R$530.0 million.

     On June 27, 2008, the Board of Directors of the Company approved the issue and offer of 50 unsecured promissory notes in the value of R$10.0 million each, totaling R$500.0 million. On July 25, 2008, the offer was registered with the CVM and issued on July 29, 2008, with maturity date on July 24, 2009, bearing interests of 106.5% of the daily CDI rate, as disclosed by CETIP. The proceeds from this offer were used for settlement of the principal amount of the debt represented by the first issue of Company debentures.

     In October 2008, the Company signed a credit facility with the Banco do Nordeste do Brasil (BNB) in the amount of R$389.0 million, through the Northeast Constitutional Fund. This new financing shall be used for expansion of the network already existing in the states of Bahia, Sergipe and Maranhão and for implementing a new network in the states of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

     On December 17, 2008, the Board of Directors of the Company approved the second public issuance by the Company of plain and non-convertible debentures, unsecured, unregistered and in a single series. The single par value of the debenture shall be R$210,000,000.00 on the issuance date. The term of the debenture shall be of 360 days, counted from the issuance date, and maturing on January 11, 2010.

     On July 24, 2009, 20 promissory notes were issued in the value of R$25 million each, totaling R$500 million, bearing an interest rate of 115.0% of the DI (Interfinancial Deposit) rate. The funds raised from this transaction were used for the full repayment of the principal amount of the debt incurred in a prior (fourth) issuance of promissory notes for the face value of R$500 million. On October 22, 2009, the promissory notes related to this issue were settled.

     On September 4, 2009, the Board of Directors approved the fourth public issuance by the Company of simple, unsecured debentures not convertible into stock, all of them registered and of book-entry type, issued in up to three series, with a tenor of 10 years. The total amount of the issue was R$810 million, of which the basic offering corresponds to R$600 million, in addition to R$210 million from the full exercise of an option to issue additional debentures. A total of 810,000 debentures were issued in three series, with 98,000 debentures in the first series, 640,000 in the second series and 72,000 in the third series. The amount of debentures allocated to each of the series was decided in mutual agreement between the Company and the leader arranger of the offering after the conclusion of the bookbuilding procedure.

     Banco Itaú BBA S.A., in its capacity as lead arranger of the offering, carried out a bookbuilding procedure in order to determine, with interested investors, the demand for the debentures at different remuneration rates.

75

---

Table of Contents

     Rescheduling of each series is provided for as follows: first series on October 15, 2012, second series on October 15, 2013, and third series on October 15, 2014. The proceeds raised from the issuance of this offering were used for full payment of the debt related to the sixth issuance of commercial promissory notes of the Company and supplementing the working capital of the Company. The transaction costs in connection with this issuance in the amount of R$4.4 million were appropriated to a liabilities reduction account as costs to be incurred, and are recorded as financial expenses of the Company pursuant to the contractual terms of this issuance. The actual rate of this issuance, considering the transaction costs, is 112.13% of the CDI (see Note 25 of our financial statements). Tranches of the facility borrowed from Banco Nacional do Nordeste do Brasil (“BNB”) were released during fiscal year 2009 as follows: R$124.6 million in May 2009 and R$134.8 million in October 2009. With the tranche released in December 2008 in the amount of R$129.7 million, the total came to R$389.0 million.

Financing of 3G licenses

     We financed the acquisition of our 3G license through financing available from ANATEL. This allowed us to maintain our cash position during turbulent market conditions and extend our debt profile. The cost for the financing was set by reference to the IST plus monthly interest of 1.0% . The debt was set to be repaid in six equal annual installments, with maturity dates at 36, 48, 60, 72, 84 and 96 months from April 29, 2008 (the date of authorization of our license). On August 28, September 25, and October 22, 2009, Vivo settled the amounts owed to ANATEL corresponding to the full value of the 3G licenses.

Date		Value Paid – in Reais – R$
08/28/09		R$		902,205,813.06
09/25/09		R$		235,127,988.36
10/22/09		R$		163,770,561.54
		R$		1,301,104,362.96

Uses of Funds

     Our principal uses of funds are for capital expenditures, servicing our debt and payment of dividends and interest on shareholders’ equity. Our capital expenditures (including capitalized interest) amounted to R$2,367.5 million, R$3,997.4 million, and R$1,905.7 million in 2009, 2008 and 2007, respectively. Payment of debt and derivative instruments consumed cash flows of R$5,014.7 million, R$2,737.1 million and R$2,473.6 million in 2009, 2008 and 2007, respectively. Dividends and interest on shareholders’ equity payments consumed cash flows of R$419.3 million, R$54.2 million and R$17.5 million in 2009, 2008 and 2007, respectively.

     Capital Expenditures

     The following table sets forth our total capital expenditures for the periods indicated:

		Year ended December 31,
Vivo		2009		2008		2007
		(in millions of reais)
Switching equipment		237.6		533.1		417.3
Transmission equipment		1,283.6		1,446.2		729.9
Information technology		346.0		286.5		267.2
Others(1)		500.3		1,730.9		494.3
Total capital expenditures		2,367.5		3,997.4		1,905.7

(1)		Consisting primarily of wireless devices provided to customers for free in connection with signing new contracts, network construction, furniture and fixtures, office equipment and store layouts.

     Our capital expenditures over the past three years related primarily to increasing our network capacity and coverage. The Company continued its projects for improvement and expansion of the capacity of services rendered, which provided support to increase the GSM and WCDMA (3G) network, expansion of transmission routes, system centralization and integration (billing, collection and CRM, including Minas Gerais systems and a new Data Center site acquisition), development of new services and opening and renovating points of sale and terminals for the corporate segment.

76

---

Table of Contents

     In the aggregate, R$2,367.5 million were invested during the year ended December 31, 2009, which included investment in the GSM/EDGE and WCDMA (3G) network. This amount represented 14.5% of our net operating revenues.

     Our planned capital expenditures for 2010 include investments in GSM network capacity, expansion of WCDMA overlay, introduction of new products and services to maximize the use of cellular phones, expansion of our stores, the continued improvement of the quality of services provided to our customers and finalizing a new Data Center construction combined with Minas Gerais’s systems integration. The amount will be approved at the general shareholders meeting to be held April 2010. We intend to pay these expenditures with funds generated by our operations and our available borrowing capacity.

     Payments of Dividends to Shareholders

     The holders of preferred shares have been entitled to exercise voting rights since the 2004 General Shareholders Meeting as a result of our failure to pay the minimum dividends required by law. For the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved the payment of dividends in the amount of R$402.6 million, which was sufficient to meet the minimum dividend required by law. Pursuant to this Board authority and the authority granted at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated.

     In compliance with our by-laws, at a special board meeting held on February 9, 2010, our Board of Directors approved the payment of dividends in an aggregate amount of approximately R$818.9 million. These dividends were declared on the basis of the 2009 closing balance sheet to the holders of common and preferred shares. The dividends payable to holders of preferred shares and common shares are comprised of approximately (a) R$104.1 million in interest on shareholders equity, as approved at the Board of Directors meeting held on December 14, 2009 and as calculated in conformity with article 9 of Law 9249/95, which, net of withholding tax, is approximately R$88.5 million, and (b) dividends in the amount of approximately R$730.3 million, R$250.9 million for the common shares and R$479.4 million for the preferred shares. The above mentioned dividends will be paid in two equal parts, on April 19, 2010 and October 25, 2010. These dividends are sufficient to meet the minimum dividend required by law and voting rights on the preferred shares will not be regained for 2010. Even if Vivo’s holders of preferred shares were to reacquire the voting rights at some time in the future, we would not expect these voting rights to affect voting control over Vivo because our controlling shareholders currently own more than 50% of our total voting capital.

     See also “Item 8.A.—Financial Information—Consolidated Statements and Other Financial Information—Dividend Policy and Dividends—Payment of Dividends.”

     Debt

As of December 31, 2009, Vivo’s total debt position was as follows:

Debt		Amount Outstanding as of  December 31, 2009
		(in millions of reais)
Financing from financial institutions		5,124.5
Financing of ANATEL (3G)		-
Total debt		5,124.5
Long-term debt(1)		4,169.8
Short-term debt		954.7

______________
(1) Excludes the short-term portion of long-term debt.

77

---

Table of Contents

     As of December 31, 2009, Vivo’s total debt was R$5,124.5 billion, of which R$761.4 billion, or 14.9% was denominated in foreign currencies and therefore exposed to currency fluctuations.

     Of that amount, R$730.6 million was denominated in U.S. dollars (US$419.6 million), R$26.5 million was denominated in yen (¥1,408.9 million), and R$4.3 million was denominated in UMBNDES, which comprises a mix of different currencies.

     The Company and Vivo S.A. entered into swap contracts in foreign currency at several exchange rates in notional amounts as of December 31, 2009 of US$415,637 and JP¥1,338,853, as compared to US$515,606 and JP¥ 51,594,615 as of December 31, 2008. On December 31, 2009, the Company and Vivo S.A. had no interest rate swap contracts in local currency (CDI), compared to US$225,000 worth of such contracts as of December 31, 2008, and, also as of December 31, 2009, the Company and Vivo S.A. recorded the notional amount of R$110,000 of swaps indexed to the IGPM, as compared to R$110,000 as of December 31, 2009.

     On October 15, 2009, we entered into a swap contract which was indexed to the IPCA for assets and to the CDI for liabilities in the notional amount of R$72,000, in order to cover the exposure of the third series of the fourth issuance of debentures to the variation of the IPCA rate. Upon being contracted, this swap was recognized as a fair value hedge.

     Vivo S.A. has indebtedness and financing with the National Economic and Social Development Bank (BNDES), which totaled R$1,474.4 million as of December 31, 2009. Vivo S.A. also has indebtedness and financing with the Europe Bank of Investments, which totaled R$635.1 million as of December 31, 2009. In accordance with our contractual obligations, there are several economic and financial covenants and ratios that must be maintained annually. Some of the debt agreements of Vivo contain restrictive covenants. Financial ratios apply to some of our indebtedness and involve (1) current ratios, (2) capitalization ratios, (3) EBITDA margins, (4) interest coverage ratios and (5) debt-to-capital ratios. As of December 31, 2009, Vivo met all relevant economic and financial covenants and ratios.

     U.S. GAAP Reconciliation

     See Notes 33 and 34 to our audited consolidated financial statements for a description of the principal differences between the Brazilian GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S. GAAP of net income/loss and total shareholders’ equity.

New Accounting Pronouncements

     Recently Adopted Standards

     We adopted several accounting pronouncements effective December 31, 2009 and January 2008 which are reported herein and which are discussed in our financial statements.

     In June 2009, the Financial Accounting Standard Board (“FASB”) issued a standard that established the FASB Accounting Standards Codification (“ASC”) and amended the hierarchy of generally accepted accounting principles (“GAAP”) such that the ASC became the single source of authoritative U.S. GAAP. Rules and interpretive releases issued by the SEC under authority of federal securities law are also sources of the authoritative GAAP for SEC registrants. All other literature is considered non-authoritative. New Accounting Standards Updates (“ASUs”). The ASC is effective for the Company from September 1, 2009. Throughout the consolidated financial statements references that were previously made to former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.

     Effective January 1, 2009, the Company adopted new accounting guidance ASC 810, which changed the accounting for and the reporting of an entity’s non-controlling ownership. Such non-controlling ownership, previously referred to as non-controlling interest, is now referred to as non-controlling interests. The adoption of this guidance resulted in the reclassification of amounts previously attributable to non-controlling interest and classified in the mezzanine outside of shareholders’ equity, to a separate component of stockholders’ equity titled “Non-controlling Interests” in the accompanying consolidated balance sheets and statement of changes in equity. Additionally, net income and comprehensive income attributable to non-controlling interests are shown separately from consolidated net income and comprehensive income in the accompanying consolidated statements of operations and statements of changes in equity. Prior period financial statements have been reclassified to conform to the current year presentation as required by the authoritative guidance.

78

---

Table of Contents

     ASC 820 “Fair Value Measurement and Disclosures” defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurement. ASC 820 does not require any new fair value measurements. This statement is initially effective for financial statements issued for fiscal years beginning after November 15, 2007 (calendar year 2008), and is to be applied prospectively as of the beginning of the year in which it is initially applied. For all nonrecurring fair value measurements of nonfinancial assets and liabilities, the statement is effective for fiscal years beginning after November 15, 2008 (calendar year 2009). Since the Company has not changed its current practice, this change had no impact on its Consolidated Financial Statements. See Note 32 on Financial Instruments and Note 40(c).

     ASC 715 “Compensation-retirement Benefits” provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plans. This guidance is intended to ensure that an employer meets the objectives of the disclosures about plan assets in an employer’s defined benefit pension or other postretirement plan to provide users of financial statements with an understanding of the following: how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation techniques used to measure the fair value of plan assets; the effect of fair value measurements using significant unobservable inputs on changes in plan assets; and significant concentrations of risk within plan assets. The Company has complied with the disclosure requirements.

     ASC 350 “Intangibles-Goodwill and Other” amends the factors to be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. This guidance is effective prospectively for intangible assets acquired or renewed after January 1, 2009. The Company applied the guidance to acquisitions of intangible assets as from January 1, 2009.

     ASC 815 “Derivatives and Hedging” seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, the improvement requires (i) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (ii) the disclosure of derivative features that are credit risk-related; and (iii) cross-referencing within footnote disclosures to enable financial statement users to locate important information about derivative instruments. The Company has complied with disclosure requirements.

     ASC 805 “Business Combination” establishes principles and requirements for how an acquiring entity in a business combination recognizes and measures the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. This guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (calendar year 2009). Since the Company did not consummate any business combination in 2009, this guidance did not have any significant effect on its consolidated financial statement. However, we change the manner in which the tax benefits of prior acquisition are recognized in the current period, as a result of amendment to ASC 740. See note 33(e).

     ASC 323 “Investments-Equity Method and Joint Ventures” addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. ASC 323 was effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. ASC 323 is applied prospectively with early application prohibited. The adoption of ASC 323 did not have any impact on our consolidated financial condition or results of operations.

79

---

Table of Contents

     Recently Issued Standards

     The following accounting standards have been issued, but are not effective as of December 31, 2009 and have not been adopted by the Company.

     In June 2009, the FASB issued a statement which removes the concept of a qualifying special-purpose entity (“QSPE”) from former SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-a replacement of former FASB Statement No. 125. The QSPE concept had initially been established to facilitate off-balance sheet treatment for certain securitizations. The new statement also removes the exception from applying the requirements of consolidation accounting for variable interest entities to QSPEs. This new standard has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of this new standard will have a material impact on its financial statements.

     In June 2009, the FASB issued a new standard which amends former FIN 46(R) to among other things, require an entity to qualitatively rather than quantitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”). This determination should be based on whether the entity has (1) the power to direct matters that most significantly impact the activities of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Other key changes include: the requirement for an ongoing reconsideration of the primary beneficiary, the criteria for determining whether service provider or decision maker contracts are variable interests, the consideration of kick-out and removal rights in determining whether an entity is a VIE, the types of events that trigger the reassessment of whether an entity is a VIE and the expansion of the disclosures previously required about Transfers of Financial Assets and Interests in Variable Interest Entities. This new standard has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of this new standard will have a material impact on its financial statements.

     In October 2009, the FASB issued an update to ASC 605-25, “Revenue Recognition – Multiple-Element Arrangements”, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements to:

(i)		Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separate and how the consideration should be allocated;
(ii)		Require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence of selling price or third-party evidence of selling price;
(iii)		Eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and
(iv)		Require expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance.

     We are currently evaluating the potential impacts of this new guidance which will become mandatory on January 1, 2011.

C. Research and Development

     Vivo maintains partnerships with the Universidade Federal do Rio Grande do Sul (UFRGS) and with Pontifícia Universidade Católica do Rio Grande do Sul (PUCRS). Such partnerships permit Vivo to have laboratories at the universities, which conduct research and development of new technologies, and which support and push innovative processes. We also solidified a partnership at the end of 2004 with the Centro de Pesquisas e Desenvolvimento em Campinas—São Paulo (CPqD), to assess and study new technologies. We also rely on the research and development of our third-party suppliers.

80

---

Table of Contents

D. Trend Information

     In 2010, the rate of growth in Brazil’s cellular market is expected to exceed Brazil’s economic growth. In addition, we expect continued strong competition from other operators, greater focus on data and value-added services, targeted growth on average revenue per user, and further enhancements related to customer service. We expect that we will maintain our leadership position in the Brazilian cellular market, focusing on differentiation in the development of integrated solutions and the application of new technologies. We plan to continue to offer services and products of high quality in order to meet our clients’ expectations.

E. Off-balance sheet arrangements

     As of December 31, 2009, there were no off-balance sheet arrangements. We have no majority-owned subsidiaries that are not included in our consolidated financial statements, nor do we have any interests in, or relationships with, any special purpose entities that are not reflected in our consolidated financial statements.

F. Tabular disclosure of contractual obligations

     The following table represents our contractual obligations and commercial commitments as of December 31, 2009:

		Payments due by Period
		Total		Less than  1 year		1-3  years		4-5  years		After 5  years
		(in millions of reais)
Contractual obligations:
Long-term debt(1)		4,892.0		722.4		2,090.1		533.7		1,545.8
Operating leases		6,177.1		639.2		1,247.3		1,214.2		3,076.4
Total contractual cash obligations(2)		11,069.1		1,361.6		3,337.4		1,747.9		4,622.2

____________________
(1)		Includes short-term portion of long-term debt. Short-term debts with no long-term portion are not included
(2)		Excludes pension fund obligations.

     In addition, we have a rental commitment with Telecomunicações de São Paulo S.A., or Telesp, a related party, in an annual amount of R$163.8 million, including all costs related to the rental of certain facilities used in providing telecommunications services, such as electrical and air conditioning equipment.

     Although the pension fund obligations are not included in the table above, we expect to make contributions of approximately R$60.1 million during each of the next 5 years.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

     Our company is managed by a Board of Directors and a Board of Executive Officers. Our shareholders elect the members of the Board of Directors. The Board of Directors must have between three and twelve members, each serving a three-year term. The board currently consists of nine members. The terms of the current members of the board of directors will expire in April 2012. The Board of Directors hold regular quarterly meetings, and the chairman may call special meetings.

     The following are the current members of our Board of Directors and their respective positions.

81

---

Table of Contents

Name		Position		Date Elected
Luis Miguel Gilpérez López		Chairman		March 19, 2009
Shakhaf Wine		Vice Chairman		March 19, 2009
Luis Miguel da Fonseca Pacheco de Melo		Director		March 19, 2009
Félix Pablo Ivorra Cano		Director		March 19, 2009
Ignacio Aller Malo		Director		March 19, 2009
Rui Manuel de Medeiros D’Espiney Patrício		Director		March 19, 2009
Carlos Manuel Mendes Fidalgo Moreira Cruz		Director		March 19, 2009
José Guimaraes Monforte		Director		March 19, 2009
António Gonçalves de Oliveira		Director		March 19, 2009

     Set forth below are brief biographical descriptions of our directors.

     Luis Miguel Gilpérez López, born on December 7, 1959, is Chairman of Vivo., General Director of the Mobile division of Telefónica International and a member of the Supervisory Board of Brasilcel N.V. He was a board member of TCP, Celular CRT, TSD, TCO, Teleacre, Telegoiás, NBT, Telemat, Telems, TCO-IP S.A. and Teleron from 2004 to 2005. He began working for the Telefónica group in 1981, having assumed growing responsibilities in areas including networks, infrastructure, product and services development and marketing. He has a degree in Industrial Engineering and a master’s degree in Business Administration.

     Shakhaf Wine, born on June 13, 1969, is a Member of the board of directors of Vivo Participações S.A. since March 2004 and Vice Chairman of the board since August 2008. Member of the Board of Directors and Executive Committee of Portugal Telecom S.G.P.S. since April 2009, President and Chairman of Portugal Telecom Brasil S.A. since April 2005. Member of the board of directors of Brasilcel N.V. since March 2004 and Vice Chairman of the board since August 2008. President of the Control Committee of Brasilcel N.V. since 2006. Vice Chairman of the board of directors Telemig Participações S.A. since August 2008. Vice Chairman of the board of directors Telemig Celular S.A. since April 2008. Member of the board of directors of Mobitel S.A. since June 2006 and Chairman of the Board since August 2008. Member of the board of directors of PT Multimédia.com Brasil Ltda. since April 2005 and member of the board of directors of Universo Online S.A. since July 2005. Previously Mr. Wine was a board member at PT Investimentos Internacionais – Consultoria Internacional S.A., PT Participações, SGPS S.A., PT Móveis – Serviços de Telecomunicações SGPS S.A., PT Ventures SGPS S.A., Africatel Holdings B.V., Telesp Celular Participações, S.A., Tele Centro Oeste Celular Participações, S.A., Tele Sudeste Celular Participações, S.A., Celular CRT Participações S.A. and Banco1.Net S.A. Before joining Portugal Telecom in 2003, Mr. Wine was Director of Investment Banking and a Relationship Manager for European corporate clients in the Global Telecommunications Group of Merrill Lynch International from 1998 to 2003, based in London. Previously he was Senior Associate Director of the Latin American and Telecommunications groups of Deutsche Morgan Grenfell from 1993 until 1998, also based in London. Mr. Wine was a foreign exchange trader and dealer for the Brazilian Central Bank at Banco Icatu S.A. between 1991 and 1993. He holds a degree in Economics from the Pontifícia Universidade Católica do Rio de Janeiro.

     Luis Miguel da Fonseca Pacheco de Melo, born on April 29, 1966, is a member of the Board of Directors of Vivo Participações. He has served as CFO of Portugal Telecom, SPGS, SA since April 2006 and as Chairman of the Board of Directors of Previsão - Fund Managers Society SA since 2007. He has been a member of the Board of Directors of Africatel Holdings BV, since 2007, a member of the Board of Directors of PT-PRO - Administrative Services and Management Shared SA since 2003. He was Executive Director of PT-Multimedia - Services for Telecommunications and Multimedia SGPS from June 2002 to 2006, a member of the Board of Directors of TV Cabo Portugal S.A., from 2002 to 2006 and a member of the Board of Directors of Lusomundo Audiovisual S.A. from 2002 to 2006. He served as a member of Board of Directors of Lusomundo Cinemas S.A. from 2002 to 2006, member of the Board of Directors of PT Contents S.A. from 2002 to 2006, member of the Board of Directors of PT SGPS S.A. cable TV from 2002 to 2006 and member of the Board of Directors of Sport TV from June 2002 to November 2005. He was a manager of Lusomundo España SL, from 2003 to 2006, the Executive Director of BES Investment, a company of Banco Espirito Santo Group, and one of its largest shareholders, from 1998 to 2002 and a director of UBS Warburg from 1994 to 1998. Mr. Fonseca received a degree in Civil Engineering at the Technical Institute and an MBA from IESE in Barcelona.

82

---

Table of Contents

     Félix Pablo Ivorra Cano, born on July 1, 1946, was the President of the Board of Directors from February 1999 to September 2005. Mr. Ivorra is currently a member of the Boards of Directors of Telecomunicações de São Paulo S.A., Brasilcel N.V, Vivo Participações and Telemig Celular S.A. He was a member of the Board of Directors of TSD, TLE, TCO and Celular CRT until February 2006. He joined the Telefónica Group in July 1972 and served in the areas of Technical Specifications, Network Planning, Commercial Planning and as General Director of Advanced Communications. In 1993, he was appointed General Director of the team that founded Telefónica Servicios Móviles, where he held several positions including General Commercial Director and General Director of Business Development until January 2006. During 1997 and part of 1998, he was chairman of the board of Telefónica Móviles group companies Mensatel, S.A. and Radiored, S.A. He has a degree in Telecommunications Engineering from Escola Técnica Superior de Engenharia—ETSI in Madrid, and a post-graduate degree in Business Administration from the Instituto Católico de Administração de Empresas—ICADE also in Madrid.

     Ignacio Aller Malo, who was born on December 1, 1945, is a member of the Board of Directors of Telefónia Móviles México, S.A. de C.V., Brasilcel N.V, and Vivo Participações, S.A. He was a member of the Board of Directors of TSD, TLE and Celular CRT until February 2006. Mr. Aller has served as Chief Operating Officer of Telefónica Móviles S.A. since 2003 and has held several positions at Telefónica de España since 1967. He has a Master’s degree in Management and Control of IT Projects from Instituto de Empresa de Madrid in Madrid, and a degree in Corporate Management Control from Escuela Superior de Administración de Empresas (ESASE) in Spain.

     Rui Manuel de Medeiros D’Espiney Patrício, born on August 17, 1932, is a member of the Board of Directors of Monteiro Aranha S.A., Monteiro Aranha Participações, Vivo Participações, , Jerónimo Martins (Portugal) and Espirito Santo International Holding. He was a member of the Board of Directors of Banco Boavista S.A. from 1997 until 2000; member of the Board of Directors of Banco Inter-Atlântico S.A. from 1980 until 1997, member of the Board of Directors of Ericsson do Brasil from 1979 until 1997, Managing Director and Executive Vice-President of Monteiro Aranha S.A. from 1976 until 1992, Representative of the Monteiro Aranha Group in Europe from 1975 until 1976, and worked at Financiadora Volkswagen do Brasil from 1974 until 1975. Mr. Patrício was Minister for Foreign Affairs of Portugal from 1970 until 1974, Under-Secretary of State for Overseas Economic Development of Portugal from 1965 until 1970, Member of the Commission for Overseas Development Plan from 1963 until 1965, Economic Advisor of Sacor (Oil Company) from 1958 until 1964, and between 1958 and 1963 he was Assistant Professor at Lisbon University. Mr. Patrício has a degree in Law from the University of Lisbon—1955, a postgraduate degree in Political Economics from University of Lisbon—1956 and Business Administration from Fundação Getúlio Vargas (São Paulo)—1975.

     Carlos Manuel Mendes Fidalgo Moreira Cruz born in October 16, 1967, is a member of the Board of Directors of Vivo Participações and has served as the Director of Finance Directorate of Portugal Telecom, SGPS, since 2001. He has served as Director of Portugal Telecom International Finance BV since 2002 and Director of PT International Investments since 2006. He has served as Director of PT Ventures since 2006, Director of PT Moveis since 2006, Director of TPT – Timor’s Public Telecommunications S.A. since 2006, Director of MTC – Mobile Telecommunications Ltd. (Namíbia) since 2007, Director of MTC – Macau’s Telecommunications Company since 2007, Director of Teledata (Moçambique) since 2007 and Director of Medi Telecom. He is a Member of the Board of Auditors of Brasilcel, Member of the Board of Directors of Africatel Holdings BV and has been a Director of Directel – International Telephone Lists Ltd, Director of PT Services since 2006 and Director of Forecast since 2007. Mr. Fidalgo was a member of the Portuguese Privatizations Commission from 1999 to 2001, an Advisor of the Secretary of State for Economics and Finance from 1996 to 1998, an Assistant of Financial Strategy 1996 to 2001 in the MBA Program - IEP / EGP and served as an Assistant Corporate Finance and Macroeconomics at the University of Porto from 1987 to 1996, an Assistant Business Evaluation from 1994 to 1997 in IESF, Mr. Fidalgo was also Analyst Assistant of the Mergers & Acquisitions Department of BPI from 1990 until 1994. Mr. Cruz has a degree in Economics from the University of Porto - 1989, and a master degree in finance (MIFFT99) from London Business School (1999).

     José Guimarães Monforte, born on July 6, 1947, is currently a member of the Board of Directors and Audit Committee of Vivo since June of 2007. Mr. Guimarães Monforte is the president of Jano Comércio, Administração e Participações Ltda. and was the former President of the board of IBGC and Pini Editora S/A, and the Vice President of the board of Klicknet. He was also a member of the board of Natura Cosméticos, Caramuru Alimentos JHSF Participações S/A and the board of Agrenco of Brazil. In addition, Jose Guimarães Monforte was also the Vice President of ANBID and of the board of the Settlement Department of the Commodity Exchange. He was also the Coordinator of the Capital Opening Committee of Bovespa and a member of the Listings Commission. Furthermore, he was a member of the Advisory Panel for the OECD on the Efficiency of the Board of Directors, and a member of the Advisory Board-Americas Cabinet of the Graduate School of Business in Chicago. He also served as an executive in diverse banks and companies, such as BANESPA, Banco Merrill Lynch, Banco Citibank N.A., and was President of VBC Energia S/A. Jose Guimarães Monforte graduated with a degree in Economics from the University of Católica de Santos.

83

---

Table of Contents

     Antonio Gonçalves de Oliveira, born on May 4, 1944, is currently a member of the Board of Directors and Audit Committee of Vivo since July 2005. Mr. Gonçalves de Oliveira was a member of the Boards of Directors and Audit Committees of TSD, TLE, TCO and Celular CRT, since July 2005 and until February 2006. He is a member of the Board of Auditors of COELBA - Companhia de Eletricidade da Bahia, since April, 2006 at the appointment of Caixa de Previdência dos Funcionários do Banco do Brasil, a large Brazilian pension fund and shareholder of COELBA, President of AAMAC - Associação de Amigos do Museu de Arte Contemporânea da USP, an important participant in the contemporary cultural scene (2004/2006) and member of the council of representatives of FIESP (Federation of Industries of the state of Sao Paulo) (2003/2007). Mr. Gonçalves de Oliveira is also a member of the Social and Economic Development Council of the Brazilian Government, a board member of the Small and Medium Company Working Group sponsored by the Brazilian Government, the vice president of the Brazilian Businessmen’s Association for Market Integration (ADEBIM), a member of the orientation and steering council of Banco do Povo do Estado de São Paulo and President of the decision council of the National Employee Association of Banco do Brasil (ANABB). From 1991 to 1995, he served as director of the Latin American Sociology Association and from 1993 to 1994 he served as the executive coordinator of the Small and Medium Company National Movement (MONAMPE). He holds a degree in Social Sciences from the University of São Paulo, Brazil, and a master’s degree in Communication Sciences from the same university.

     In accordance with the shareholders agreement between Portugal Telecom SGPS, S.A., PT Movéis SGPS, S.A. and Telefónica Móviles S.A., PT Movéis is responsible for the appointment of our Chief Executive Officer and Telefónica Móviles is responsible for the appointment of our Chief Financial Officer. PT Movéis appointed three and Telefónica Móviles appointed three of the nine members of our Board of Directors.

Board of Executive Officers

     Our by-laws provide for a Board of Executive Officers with seven positions, each elected by the Board of Directors for a term of three years. Our Board of Executive Officers currently has seven members. In the absence or temporary inability to perform his duties, the Chief Executive Officer will be replaced by the Executive Vice President of Finance, Planning and Control. In the case of a vacancy in any position on the Board of Executive Officers, the respective replacement shall be appointed by the Board of Directors; in case of any inability, the Chief Executive Officer shall choose a replacement for that officer among the remaining officers. One officer may be elected for more than one position on the Board of Executive Officers, but the members of the Board of Executive Officers cannot be elected to the Board of Directors. The Board of Directors may remove executive officers from office at any time.

     The following are the current executive officers and their respective positions.

Name		Position		Date appointed
Roberto Oliveira de Lima		Chief Executive Officer		October 02, 2009
Cristiane Barretto Sales.		Executive Vice President of Finance, Planning and Control and Investor Relations Officer		August 18, 2009
Paulo Cesar Pereira Teixeira		Executive Vice President of Operations		October 02, 2009
Hugo Mattos Janeba		Executive Vice President of Marketing and Innovation		October 02, 2009
Javier Rodríguez García		Vice President of Networks		October 02, 2009
Ercio Alberto Zilli		Vice President of Regulatory Matters		October 02, 2009
João José Gallego Moura		Vice President of Resources		January 04, 2010

     Set forth below are brief biographical descriptions of our executive officers.

84

---

Table of Contents

     Roberto Oliveira de Lima, born on April 1, 1951, is Chief Executive Officer since July 1, 2005 of Vivo, Vivo S.A., Telemig Celular S.A. and formerly of TCO, Telerj, Telest, Telebahia, Telergipe, Celular CRT, TC, GT, Telegoiás, Telemat, Telems, Teleacre, Teleron and NBT. Mr. Oliveira de Lima has also been a director of TBS Celular Participações Ltda., Ptelecom Brasil S.A., Portelcom Participações S.A. and all affiliates of Brasilcel, since 2005. He was the Chief Executive Officer of TSD, TLE and Celular CRT until February 2006. Mr. Oliveira de Lima was Chairman of the Board of Directors of Grupo Credicard from 1999 to 2005 and Chief Executive Officer of Banco Credicard S.A. from 2002 to 2005. Before 1999, Mr. Oliveira de Lima held executive positions at Accor Brasil S.A., Rhodia Rhone Poulec S.A. and Saint Gobain S.A. Mr. Oliveira holds a degree in Administration and an MBA from Fundação Getulio Vargas, Brasil, and a master’s degree in finance and strategic planning from Institute Superieur des Affaires, Jouy en Josas, France. Mr. Oliveira is a Brazilian citizen.

     Cristiane Barretto Sales, born on October 15, 1968, is Executive Vice President of Finance, Planning and Control of Vivo Participações S.A., and Vivo S.A.; Chief Financial Officer of Telemig Celular S.A. and also Investor Relations Officer of Vivo Participações S.A. She was Management and Finance Director of Tele Leste Celular Participações S.A., Telebahia S. A. and Telergipe S. A. from 2000 until 2003. Since the beginning of Vivo’s Joint Venture, in 2003, she managed the Planning and Control, Accounting and Revenue Assurance Departments. Before this, she was Auditing and Consulting Manager with Arthur Andersen S/C for 10 years until 2000. Cristiane has a B.S. degree in Business Manager from Salvador College (FACS), and an Executive MBA degree from Navarra University, in Barcelona. Mrs. Sales is a Brazilian citizen.

     Paulo Cesar Pereira Teixeira, born on June 18, 1957, is the Executive Vice President of operations of Vivo since 2003, Vivo S.A. and formerly of TCO, Telerj, Telest, Telebahia, Telergipe, Celular CRT, TC, GT, Telegoiás, Telemat, Telems, Teleacre, Teleron and NBT. Mr. Teixeira is also a director of TBS Celular Participações Ltda., Ptelecom Brasil S.A. and Portelcom Participações S.A. He was the Executive Vice-President of Operations of TSD, TLE and Celular CRT until February 2006. Since 1998 Mr. Teixeira has acted as Vice-President of Telerj, Telest, Telebahia, Telergipe, Celular CRT and he was member of the Board of Directors of TSD, TLE and Celular CRT from 2001 until 2003. In 1998 he was a Director of Telepar, Telesc and CTMR Celular S.A., companies of Telecomunicações Brasileiras S.A. Telebrás, and Vice President of Tele Celular Sul S.A. Mr. Teixeira was Director of telecommunications engineering of Mato Grosso do Sul S.A. Telems, a company of Telecomunicações Brasileiras S.A. Telebrás, from 1995 through 1998. During 1995, he was a Department Manager of investment management. In 1994 he was an Assistant to the Director of Engineering. From 1990 until 1994, Mr. Teixeira served as Divisional Manager of coordination and expansion of Telebrás Holdings. Mr. Teixeira was engineer in the areas of service development and investment control of Telebrás Holding from 1988 through 1990. From 1980 until 1987, Mr. Teixeira performed several different managerial duties at Companhia Riograndense de Telecomunicações S.A.—CRT and was also a member of the board of directors from 1985 to 1986. In 1987 and 1988, he held several different positions at Telebrás affiliates. Mr. Teixeira holds an Electrical Engineering degree from the Catholic University of Pelotas, Brazil.

     Javier Rodríguez García, born on December 8, 1955, is the Vice President of Networks Vivo, Vivo S.A., since April 2005. He was the Executive Vice President of Technology and Networks of TSD, TLE and Celular CRT, until February 2006 and of Telerj, Telest, Telebahia, Telergipe, Celular CRT, TC, since May 2003, TCO, Telegoiás, Telemat, Telems, Teleacre, Teleron and NBT, until October 2006. From 1986 until 1988, Mr. García worked at INDELEC—Indústria Electrónica de Comunicaciones S.A., as the manager responsible for the implementation of an automatic mobile telecommunications project for Telefónica de España S.A. From 1988 until 1990, he worked at Rede Electrica de España S.A. as the person responsible for the installation and maintenance of radio mobile systems in Spain. From 1990 until 1992, Mr. García served as an engineering manager at Telcel S.A., where he was responsible for the implementation of automatic mobile telecommunications system for Telefónica de España S.A. in Barcelona, Madrid and Palma de Mallorca. From 1992 until 1996, he was an engineering manager responsible for the installation and maintenance of systems at Compañia Europea de Radiobusqueda S.A., and from 1996 until 1998, he worked in cellular businesses for Telefónica Group in Spain and Peru, as a network quality manager and technical area sub-manager, respectively. From 1998 until 2000, Mr. García was the technology manager in the cellular business of Telefónica Group in Brazil and from 2000 until 2003 was the network manager of Telerj and Telest He holds a degree in Technical Telecommunications Engineering from the Technical University of Madrid, Spain.

85

---

Table of Contents

     Hugo Mattos Janeba, born on December 16, 1965, has been the Vice-President Executive of Marketing and Innovation of Vivo and Vivo S.A. since June 25, 2008. He was the Image and Communications Officer of Vivo S.A. from October 2006 to June 2008 and of Telesp Celular S.A., Telerj Celular S.A., Telest Celular S.A., Telebahia Celular S.A., Telergipe Celular S.A., Celular CRT S.A. and Global Telecom S.A. from February 2003 to October 2006, having launched the Vivo brand in April 2003. From November 1999 to January 2003, he was Telesp Celular S.A.’s Marketing Officer. From November 1992 to October 1999, he held the position of Marketing Manager at PepsiCo/Elma Chips. He was Product Manager at Tambrands of Brazil from September 1991 to November 1992. Mr. Janeba also held different positions at Colgate Palmolive from July 1986 to September 1991. Mr. Janeba has a bachelors’ degree in Industrial Design from Universidade Mackenzie, São Paulo, Brazil, and also holds an MBA from the Business School of São Paulo, Brazil/Toronto University, Canada. He holds a specialization in Branding from Kellog School of Management at Northwestern University in the United States.

     Ercio Alberto Zilli, born in August 30, 1953, serves as the Vice President of Regulation of Vivo. He was Executive Chairman of Acel from August 2006, Director of Regulation of Telemar Oi from August 1998 to June 2006 and was a Special Advisor of the Minister of Communications from March 1995 to July 1998. He had different functions in Telebrás (first engineer, then manager of division, advisor to the Board of Directors, head of department and assistant to the Vice-President of engineering, supplier relations and business planning and control) from May 1977 to February 1995. He was an Engineer for NEC in Brazil from February 1975 until May 1977 and a Technical Assistant in Dentel - National Department of Telecommunications from January 1974 to January 1975. Mr. Zilli holds a degree in Electronic Engineering from the University of Brasilia, Brazil (1974) and has completed courses for extension and improvement in technical areas in UnB, Unicamp, FGV, and in Management in Canada (at the Telecommunications Executive Management Institute of Canada).

     João José Gallego Moura born on December 5, 1950, serves as Vice President of Resources of Vivo Participações S.A., of Vivo S.A, and of Telemig Celular S.A. He was General Director of Resources from 2007 to 2009, Purchase Director from 2003 to 2007, Director of Interconnection and Roaming, Director of Area Cellular Appliances and Purchase Director, Equity and Logistics, positions occupied sequentially in Telesp Celular from 2000 to 2002. He was Director of the Candidature Project for Portugal Telecom Internacional and the license of Telefonia GSM in Tunisia in 2000. He was Superintendent Director of MOBITEL Telecomunicações S.A. from 1996 to 2000. He was President of the Association of the paging service sector. He was President of paging operator CONTACTEL of Grupo Portugal Telecom in Portugal, from 1992 to 1996. He was a Member of the Board of Directors to MENSTEL, a company involved with paging and the network of mobile communications of Telefónica in Spain, from 1994 to 1996. He was CEO of Partex – main branch of Macau (China), from 1989 to 1992, an organizational consulting company involved with project management of large undertakings (Nova Ponte e Aeroporto de Macau); Director of Industrial Engineering Operations, from 1981 to 1989, of Partex – Companiha Portuguese de Serviços, in Portugal; Member of the Board of Ruling and Inspections of the Petrogal/Partex Partnership in 1988 and 1989 (in accumulation); Executive Board Member of UNIMEC – United Maintenance and Erection Contractors, ACE (director appointed pursuant to the bylaws), between 1982 and 1986 (in accumulation); Advisor to the Calouste Gulbenkian Fund, petroleum sector, in 1979 to 1980 (in accumulation); Member of the Directors of Welding and Quality (Portugal) from 1977 to 1980 and Chief of Inspection from 1974 to 1976. Mr. Moura is a licensed engineer by IST (Instituto Superior Técnico) of Lisbon, with a Masters degree from Paris (ESSA – Diplóme d` État) and a degree in Business Administration from OCU – Oklahoma City University (Hong Kong).

Fiscal Board

     Brazilian Corporate Law requires us to have a Fiscal Board (Conselho Fiscal) which is composed of three to five members elected at the General Shareholders Meeting. The Fiscal Board operates independently from our management and from our external auditors. Its main function is to examine the financial statements of each fiscal year and provide a formal report to our shareholders. Our fiscal board consists of three members and three alternates and meets quarterly. Our Fiscal Board is elected annually at the annual general shareholders meeting.

     The Fiscal Board is responsible for overseeing our management. Its main duties are:

• to review and provide an opinion on the annual report of our management;

86

---

Table of Contents

• to review the proposals of the management bodies to be submitted to the shareholders meeting regarding changes to share capital, issuance of debentures and subscription rights, capital investment plans and budgets, distributions of dividends, changes in corporate form, consolidations, mergers or split-ups; and

• to review and provide an opinion on the financial statements for the fiscal year.

     The Fiscal Board holds regular meetings every three months and special meetings when called by the Chairman of the Board of Directors or by any two members of the Fiscal Board.

     Listed below are the current members of our Fiscal Board and their respective positions:

Name		Position		Date Appointed
Ortogamis Bento (1)		Member		March 19, 2009
Paula Bragança França Mansur (2)		Chairwoman		March 19, 2009
Fabiana Faé Vicente Rodrigues (2)		Member		March 19, 2009
José Luis de Castro Neto (1)		Alternate		March 19, 2009
Ademir José Mallmann (2)		Alternate		March 19, 2009
João Renato Pierre (2)		Alternate		March 19, 2009

___________________
(1)		Appointed by our preferred shareholders.
(2)		Appointed by our controlling shareholder.

B. Compensation

     For the year ended December 31, 2009, we paid our directors and executive officers, and the directors and executive officers of our subsidiary, as compensation an aggregate amount of R$19.0 million. Furthermore, the members of our Board of Executive Officers are eligible to participate in the same complimentary retirement pension plan available to our employees.

C. Board Practices

     For more detailed information, see “—Directors and Senior Management—Board of Executive Officers,” and “—Directors and Senior Management—Fiscal Board”, above, and “Item 16G.—Corporate Governance—Committees”.

     There are no service contracts between us or our subsidiary and any of our directors providing for benefits upon termination of employment.

D. Employees

     On December 31, 2009, we had 10,598 full-time employees. From April 2008, the number of employees includes the employees of Telemig Celular (2,788 employees).

     The following table sets forth the number of our employees and a breakdown of employees by main category of activity as of the dates indicated:

		December 31,
		2009		2008		2007
Total number of employees (including trainees)		10.598		8,386		5,600
Number by category of activity:
Technical and operations area		2.333		2,350		1,755
Sales and marketing		5.214		2,773		2,061
Finance and administrative support		1.748		1,689		1,316
Customer service		1.303		1,574		468

87

---

Table of Contents

     Employees are represented by unions of workers in telecommunications companies of their states. We negotiate new collective-bargaining agreements every year with the labor unions. The collective-bargaining agreements currently in force include an average wage increase of approximately 4% and an increase of around 4% in benefits.

     Our management considers the relations between our workforce and us to be satisfactory. We have not experienced any work stoppage that materially affected our operations.

     Each of our subsidiaries negotiates a new collective-bargaining agreement every year with each local union. The collective-bargaining agreements now in force will expire on October 31, 2010. The new agreements being negotiated will be similar to those that will expire.

     At the time of the privatization, employees had the right to maintain their rights and benefits in Fundação SISTEL de Seguridade Social, or SISTEL, a multi-employer defined benefit plan that supplements government-provided retirement benefits. Under the SISTEL plan, we made monthly contributions to SISTEL equal to a percentage of the salary of each employee who was a SISTEL member. Each employee member also made a monthly contribution to SISTEL on the basis of age and salary. Pension benefits of members of SISTEL vested by the same time their retirement benefits vested under the government-provided retirement plan. SISTEL operates independently from us, and its assets and liabilities are fully segregated from us. Employees hired since January 1999 are not members of SISTEL.

     Before December 1999, the SISTEL plan covered the employees of the former Telebrás System and we were contingently liable for all of the unfunded obligations of the plan. In January 2000, we and the other companies that formerly belonged to the Telebrás system agreed to divide the existing SISTEL plan into 15 separate plans, resulting in the creation of private plans covering those employees already enrolled in the SISTEL plan. These new private pension plans are still administered by SISTEL and have retained the same terms and conditions of the SISTEL plan. The division was carried out so as to allocate liability among the companies that formerly belonged to the Telebrás system according to each company’s contributions with respect to its own employees. Joint liability among the SISTEL plan sponsors will continue with respect to retired employees, who will necessarily remain members of the SISTEL plan.

     We maintained the plans TCPPREV, TCOPREV, VISÃO CELULAR and CELPREV Telemig Celular, new private pension plans for our employees. Unlike SISTEL’s defined benefits plan, the plans TCPPREV and Visão Celular call for defined contributions by our operating subsidiaries, as sponsors, and by our employees, as participants. TCOPREV is a variable contribution plan.

     As of February 2, 2007, the board approved for the management of Vivo to transfer the following plans from Fundação SISTEL de Seguridade Social to the institution Visão Prev Sociedade de Previdência Complementar (VISÃO PREV): PBS Telesp Celular, TCPPREV, PBS Tele Centro Oeste Celular, TCOPREV, PBS Telesudeste Celular, Visão Telerj Celular, Visão Telest Celular, PBS Teleleste Celular, Visão Telebahia Celular, Visão Telergipe Celular and Visão Celular CRT. These eleven plans were transferred gradually to VISÃO PREV from May 2, 2007 until December 31st, 2007.

     The management of the previous PBS-A and PAMA plans remains under the direction of SISTEL. The PBS-A plan is a defined benefit plan dedicated to retired participants until January 31, 2000, and the PAMA plan is a multi-sponsor health care plan dedicated to the retired participants from PBS plans.

     On August 21, 2007, the board approved the new private pension plan VIVOPREV, a defined contribution plan already managed by VISÃO PREV. From March 2008, the participants of the plans PBS Telesp Celular, TCPPREV, PBS Tele Centro Oeste Celular, TCOPREV, PBS Telesudeste Celular, Visão Telerj Celular, Visão Telest Celular, PBS Teleleste Celular, Visão Telebahia Celular and Visão Telergipe Celular e Visão Celular CRT will have the possibility to migrate to the new VIVOPREV plan.

     As of December 31, 2009, 41.9% of our employees were members of these plans. We continue to have a contingent liability for the unfunded obligations of the plans with respect to all inactive employees of the former Telebrás system and all post-retirement healthcare benefits for former Telebrás employees and current employees that have not changed to the new plan.

88

---

Table of Contents

E. Share Ownership 

     As of December 31, 2009, each of the members of the Board of Directors and the Board of Executive Officers owned, directly or indirectly, less than 0.01% of any class of our shares. We do not offer stock option plans to any of our directors or employees. 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 

A. Major Shareholders 

     The following table sets forth the principal holders of common and preferred shares and their respective shares as of December 31, 2009: 

Name		Number of common  shares owned		Percentage of  outstanding  common shares		Number of preferred  shares owned		Percentage of  outstanding  preferred shares
Brasilcel		52,731,031		38.4		91,087,513		34.6
Portelcom Partic. S.A. (1)		52,116,302		38.0		24,669,191		9.4
TBS Celular Partic Ltda (1)		17,204,638		12.5		291,449		0.1
All directors and executive officers as a group		8		(2)		520		(2)

____________________
(1)		Subsidiary of Brasilcel.
(2)		Less than 1% of aggregate.

     Any significant change in the percentage ownership held by any major shareholders during the past three years is disclosed in “Item 4.A.— Information on the Company—Our History and Development” and “Item 4.C.—Information on the Company—Organizational Structure.”

     We are not aware of any other shareholder owning more than 5.0% of the common shares.

     Brasilcel does not have different voting rights, but as a result of owning more than 50.0% of our common shares, it has the ability to control the election of our Board of Directors and the direction of our future operations. See also “Item 4.A.—Information on the Company—Our History and Development—Brasilcel.”

B. Related Party Transactions

     The main transactions with unconsolidated related parties are as follows:

• Use of network and long-distance cellular communication: These transactions involve companies owned by the same controlling group: Telecomunicações de São Paulo S.A.—Telesp and subsidiaries. Some of these transactions were established based on contracts signed by Telebrás with the concessionaire operators during the period prior to privatization, when conditions were regulated by ANATEL.

• Roaming: Some international roaming services are provided by Telecomunicaçóes Móveis Nacionais. TMN and Several Companies related to the Telefonica Group in the Company’s network.

• Technical assistance: Refers to the provision of corporate management advisory and business consultancy services by Portugal Telecom, SGPS, S.A., and technical assistance provided by Telefônica S.A., and Telefônica International S.A., based on a formula proposed in the contracts that includes the variation of the LAIR (Profit Before Income tax) and the variation of the preferred and ordinary shares and that determines a coefficient to be applied upon the performance of services. In the case of the operation of the branch office in the Rio Grande Do Sul, the contract foresees only one 1% fixture on the performance of services. The above referred contracts were terminated on August 4, 2008.

• Corporate services: These are passed on to the subsidiary at the cost incurred for these services.

89

---

Table of Contents

• Call-center services: Provided by Atento Brasil S.A. and Mobitel S.A.—Dedic to users of the telecommunications services of the subsidiary, contracted for 12 months and renewable for the same period.

• Systems development and maintenance services: Provided by Portugal Telecom Inovação Brasil S.A. and Telefônica Pesquisa e Desenvolvimento do Brasil Ltda.

• Operating logistical services, accounting and financial assistance: Provided by Telefônica Serviços Empresariais do Brasil Ltda.

• Voice content portal service provider: Provided by Terra Network Brasil S.A.

     We have engaged in a number of other transactions with related parties. See Note 34 to our financial statements.

C. Interests of Experts and Counsel

     Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

     See “Item 3.A.—Key Information—Selected Financial Data” and “Item 18.—Financial Statements.”

Legal Matters

     We are party to several administrative and legal proceedings that, if decided adversely, could have a material adverse effect on our business, financial condition and results of operations. We have recorded provisions in our financial statements equivalent to the full amount of the estimated losses associated with those claims where the likelihood of an unfavorable outcome is deemed probable by our legal counsel. However, we do not record provisions in those instances where the likelihood of an unfavorable outcome is deemed possible or remote by our legal counsel. Below is a summary of our material pending administrative and legal proceedings:

Civil

     Consumer’s rights

     We are a party to several law suits brought against us by individual consumers or civil associations representing consumers’ rights that allege our failing to properly provide our products and services. None of these lawsuits are individually material. Based on the opinion of our counsel, we believe that probable losses with respect to these claims total approximately R$145.8 million, an amount for which we have made provisions, and that possible losses with respect to these claims total approximately R$492.8 million.

     We are a party to several civil claims and we have made provisions for these claims sufficient to meet probable losses. We believe that probable losses with respect to these civil claims total approximately R$100.8 million, a decrease of R$27.7 million in 2009.ANATEL

     We are also part of several administrative and legal actions brought by ANATEL that allege non-compliance with regulatory requirements related to SMP service, in the total amount of approximately R$17.5 million, including Vivo S.A and Telemig Celular. Based on the opinion of our counsel, we believe that the likelihood of unfavorable outcomes with respect to these claims is probable.

     Breakup of Telebrás

     Telebrás, our legal predecessor, was a defendant in a number of administrative and legal proceedings and was subject to various claims and contingencies. Under the terms of the Telebrás breakup, the liability for any claims arising out of acts committed by Telebrás prior to the effective date of the breakup remains with Telebrás, except for labor and tax claims (for which Telebrás and the companies incorporated as a result of the breakup are jointly and severally liable by operation of law) and any liability for which specific accounting provisions have been assigned to us or one of the other companies incorporated as a result of the breakup of Telebrás. In addition, the legality of the breakup of Telebrás had been challenged in numerous legal proceedings, some of which have not been dismissed and are still pending. We believe, based on the opinion of outside counsel, that the likelihood of an unfavorable outcome with respect to these claims is remote.

90

---

Table of Contents

     Tax Credits

     Vivo and other new holding companies incorporated in connection with the privatization of the telecommunications companies offset certain tax debts against the premiums paid by their controlling shareholders. A claim was filed on December 16, 1999 against new holding companies, including Vivo and TCO, seeking relief in the form of the annulment of the administrative acts that recognized these offsets. Although we believe that the restructuring was implemented in accordance with Brazilian law, we believe, based on the opinion of outside counsel, that an unfavorable outcome with respect to this claim is possible. In which case, we would be required to pay all the taxes that were offset against goodwill. We are unable to determine at this time the extent of any potential liabilities with respect to this claim.

     Ownership of Caller ID

     Lune Projetos Especiais Telecomunicação Comércio e Ind. Ltda., a Brazilian company, filed on November 20, 2001 lawsuits against 23 wireless telecommunications operators, including Telesp Celular Participações and its subsidiaries. The lawsuits allege that those operators violated patent number 9202624-9, related to Equipamento Controlador de Chamadas Entrantes e do Terminal do Usuário, or Caller ID, granted to Lune by the Brazilian Intellectual Property Agency—INPI, on September 30, 1997. Lune calls on the operators to cease to provide Caller ID services and seeks payment from them for the unauthorized use of the Caller ID system in an amount equivalent to the payment of fees received by such operators for use of the Caller ID system. However, Lune’s right to use patent number 9202624-9 was suspended by a federal judge in response to a lawsuit filed against Lune and INPI by Ericsson Telecomunicações S.A., TC and Telerj Celular (formerly Vivo subsidiaries prior to our corporate restructuring) filed identical lawsuits against Lune and INPI and those lawsuits are still pending before the courts. In connection with this proceeding, a third company, Sonintel, and its two partners also brought an Ação de Oposição, whereby they reinvoked their rights to a previous patent related to Caller ID, and to which the above mentioned patent (number 9202624-9) was linked. We believe, based on the opinion of outside counsel that the likelihood of an unfavorable outcome with respect to Lune’s claim against us is possible. We are unable to determine at this time the extent of any potential liabilities with respect to this claim.

     Validity of Prepaid Plan Minutes

     We and our subsidiaries, together with other Brazilian wireless telecommunications operators, are defendants in various lawsuits brought by the public prosecutor’s office and consumer protection associations challenging the imposition of a deadline for the use of purchased prepaid minutes. The plaintiffs allege that purchased prepaid minutes should not expire after any specified deadline. Conflicting decisions have been issued by the courts reviewing this matter. Although we believe that our criteria for imposing the deadline is in compliance with ANATEL’s rules, we believe, based on the opinion of outside counsel, that the likelihood of an unfavorable outcome with respect to this claim is possible, except for class actions against Telemig Celular, for which the likelihood of an unfavorable outcome with respect to this claim is considered remote, based on the opinion of outside counsel.

     Litigation Relating to the Charging of a Monthly Subscription Fee

     GT, Telegoiás Celular and Telems Celular (formerly Vivo subsidiaries prior to our corporate restructuring), together with other mobile telecommunications operators, are defendants in class action suits brought by the federal public prosecutor’s office and local agencies for consumers’ protection, which challenged the charging, by these operators, of monthly subscription tariffs, alleging that there is no legal provision authorizing such a charge. According to the plaintiff, the charging of monthly subscription tariffs also violates Brazilian Consumer Law.

91

---

Table of Contents

     In October 2007, the Superior Court of Justice (STJ) has taken a position favorable to Brazilian telecommunications operators holding that the charging of a monthly subscription fee is legal.

     Based on the opinion of our legal counsel, we believe that the possibility of an unfavorable decision in this lawsuit is remote, given that the charging of monthly subscription tariffs is expressly allowed by Brazilian telecommunications regulations.

     Difference in Shares

     More than 100,000 lawsuits were brought by fixed-subscribers against the holding companies created as a result of the breakup of the Telebrás system. Celular CRT is named in more than 4,000 of these lawsuits, rendered by the predecessor company, Companhia Rio-Grandense de Telecomunicações, currently Brasil Telecom S.A, in the state of Rio Grande do Sul.

     Prior to the privatization process, telecommunications network expansion was partially financed by plans regulated by the Ministry of Communication which entitled fixed telephone line subscribers to receive a certain number of capital stock shares of the respective fixed telephone service provider based on amounts that these subscribers have paid for their fixed phone line subscriptions.

     The plaintiffs claim to have rights regarding contracts entered into by the predecessor telecommunication company for fixed phone line subscriptions. They claim that the amount they paid for their fixed telephone subscriptions would be convertible into a certain amount of the Company’s shares after a 12-month subscription period.

     The plaintiffs allege that the procedure by which the shares were subscribed in their names was unlawful, abusive and, during a period of high inflation, did not take into consideration the monetary correction of the amount they had paid to subscribe their fixed telephone lines. Therefore, in each and every lawsuit, the plaintiffs claim that they have the right to subscribe to additional new Vivo shares as payment.

     The State Court of Appeal of Rio Grande do Sul has taken a position favorable to the plaintiffs regarding the Companhia Rio-Grandense de Telecomunicações (Brasil Telecom S.A), thus explaining the abundance of lawsuits against this company. Recently, it was reported that Companhia Rio-Grandense de Telecomunicações was ordered by the court to pay more than R$2.5 billion in connection with these lawsuits.

     As regards Celular CRT, a previous subsidiary of ours, only in approximately 45 lawsuits was Celular CRT ordered to pay the subscribers. We have proved, among other arguments, that the lawsuit against us is improper on the grounds that liability for any claims arising out of acts committed prior to the effective date of the breakup of Telebras should remain with the predecessor company (e.g. Companhia Rio-Grandense de Telecomunicações – currently Brasil Telecom S.A.). Decisions favoring this argument have been issued, including by the Supreme Court. A similar argument was adopted in the lawsuits brought against the holding companies created as a result of the breakup of the Telebrás system, as a result of which the plaintiffs dropped their actions against Vivo and TCO.

     Since 2007, Celular CRT won all the new lawsuits that were commenced against it. Presently, more than 2,800 of the lawsuits have already been finalized and there are about 1,400 lawsuits waiting for final judgment. Based on the opinion of our counsel, we believe that the likelihood of an unfavorable outcome with respect to these claims is remote.

     VU-M

     Global Village Telecom (GVT), a Brazilian telecommunications operator, filed a lawsuit against ANATEL and wireless telecommunications operators, including Vivo and Telemig Celular, claiming that the VU-Ms are fixed at an abusive rate and that these operators employ anticompetitive practices which are causing financial damages to the plaintiff. GVT requested a preliminary injunction in order to reduce the VU-Ms and a determination by a judicially-appointed expert of the proper value of the VU-Ms on a “cost-based model.” GVT also seeks compensation from the wireless operators in the amount of the difference between the value currently charged by the wireless operators and the value to be declared at the final judgment. The preliminary order was initially denied, but after a renewal requested by the plaintiff, a preliminary order was granted to GVT to allow judicial deposits of the difference between R$0.2899, which must be paid to wireless operators, and the values currently charged. ANATEL and some wireless operators, including Vivo, appealed from the preliminary order to the Federal Court and a final decision is pending. Based on the opinion of our counsel, we believe that the likelihood of an unfavorable outcome with respect to this claim is possible.

92

---

Table of Contents

     Tax-Related

     State Taxes - ICMS

     In the states of Acre, Pará, Mato Grosso do Sul, Mato Grosso, Goiás, Roraima, Rondônia, Tocantins, Amazonas and Distrito Federal, Vivo S.A. received tax assessments totaling R$ 160,233 million in December 31, 2009 (as compared to R$109.2 million as of December 31, 2008) in connection with: i) the ICMS tax applied to occasional or complementary services that do not constitute telecommunications services; ii) the ICMS tax applied to international calls made from Brazil; iii) failure to reverse proportionally an ICMS tax credit on the acquisition of fixed assets used in providing communications services and/or exempt or untaxed outgoing goods; iv) the ICMS tax applied to non-remunerated provisions of telecommunications services consisting of the donation of credits to be used in the prepaid service plan; v) failure to include in the ICMS calculation base fines and arrears interest charged to defaulting clients; vi) alleged failure to comply with supplementary obligations; vii) other taxes relating to the sale of goods, viii) delinquent fines for spontaneous infraction notices; ix) ICMS tax on the non-payment of taxes referring to tax substitution by later operations; x) ICMS tax on electric energy credits; xi) ICMS tax resulting from cancelling telecomunicationation services; xii) amounts resulting from the difference in the tax determined in DETRAF; and xiii) bundled sales with conditional discounts.

     In the state of Paraná, Vivo S.A. received tax assessments totaling R$6,852 million as of December 31, 2009, compared to R$7.3 million as of December 31, 2008, in connection with late payment of the ICMS tax.

     In the state of Bahia, Vivo S.A. received tax assessments totaling R$51.6 million in December 31, 2009, compared to R$43.0 million as of December 31, 2008, in connection with: i) failure to reverse proportionally an ICMS tax credit on the acquisition of fixed assets, electric power and switching services resulting from the provision of untaxed communications services; ii) failure to reverse ICMS credits relative to handsets provided for rental and “free leases”; iii) late payment of the ICMS tax in the period from February to March 1998; iv) application of the ICMS tax on complementary communications services; v) failure to reverse ICMS credit in relation to long distance and call centers; and vi) the ICMS tax applied to sign-up fees.

     In the state of Sergipe, Vivo S.A. received tax assessments totaling R$33.2 million in December 31, 2009, compared to R$35.4 million as of December 31, 2008, in connection with: i) failure to reverse proportionally an ICMS tax credit on the acquisition of fixed assets, electric power and switching services resulting from the provision of untaxed communications services; ii) failure to reverse ICMS credits in relation to handsets provided for rental and “free leases”; iii) application of the ICMS tax on provision of handsets on consignment; and iv) the ICMS tax applied to complementary communications services.

     In the state of Espírito Santo, Vivo S.A. received tax assessments totaling R$3.7 million in December 31, 2009, compared to R$7.0 million as of December 31, 2008, in connection with: i) incorrect ICMS credits and ii) failure to write up trade notes.

     In the state of Rio de Janeiro, Vivo S.A. received tax assessments totaling R$183.2 million in December 2009, compared to R$150.3 million as of December 31, 2008, in connection with: i) application of the ICMS tax to complementary communications services; ii) application of the ICMS tax on sign-up fees; iii) application of the ICMS tax to calls originating from administrative and test terminals; iv) application of the ICMS tax to services provided to other telecommunications operators for clients not eligible for an exemption; v) application of the ICMS tax on international calls; vi) failure to reverse proportionally an ICMS tax credit on the acquisition of fixed assets; vii) application of the ICMS tax on the provision of unpaid telecommunications services; viii) application of the ICMS tax to electric power; and ix) disallowance of ICMS tax incentives referring to cultural projects and fines.

93

---

Table of Contents

     In the state of Rio Grande do Sul, Vivo S.A. received tax assessments totaling R$22.6 million in December 2009, compared to R$28.0 million as of December 31, 2008, in connection with: (i) application of the ICMS tax to international calls; (ii) late payment of the ICMS tax; and (iii) application of the ICMS tax on electric power.

     In the state of São Paulo, Vivo S.A. received tax assessments totaling R$150.0 million in December 31, 2009, compared to R$118.7 million as of December 31, 2008, in connection with: (i) incorrect ICMS tax credits; (ii) an incorrect credit received in relation to values posted as extemporary credits; (iii) ICMS credits for values reversed due to customer complaints; and (iv) ICMS on discounts deemed as unconditioned.

     In the state of Santa Catarina, Vivo S.A. received tax assessments totaling R$685 thousand in December 31, 2009, compared to R$3.9 million as of December 31, 2008, in connection with (i) appropriation of income tax credit in excess of the limit permitted in the tax laws, relating to entries of goods the exit of which is entitled to the benefit of reduction of the tax calculation base; and (ii) fine for noncompliance with a legal obligation.

     Telemig Celular has a judicial discussion in course with regard to the ICMS levied on contractual fine, which proceedings are awaiting decision by the court of appeals. At December 31, 2009 the amount is R$12.4 million.

     Proceedings related to the above-mentioned tax assessments are currently occurring in both the administrative and judicial sphere. According to the opinion of counsel, an unfavorable outcome with respect to our claims is possible.

     Based on the opinion of our external legal counsel, in the states of Rio de Janeiro, São Paulo, Amazonas and Rondonia, Vivo S.A. recorded a provision of R$24.8 million in December 31, 2009 (R$23.6 million as of December 31, 2008), to cover potential losses from tax-related actions currently in administrative and judicial court.

     Federal Taxes

     On November 27, 1998, the method for calculating the amount of contribution required under PIS and COFINS was modified by Law No. 9,718, which increased the COFINS contribution rate from 2% to 3% and permitted the deduction of up to one-third of the amount due under COFINS from the amount due under CSLL. Since our subsidiary had a negative tax calculation basis, they could not benefit from this deduction. In addition, Law No. 9,718 effectively increased the amounts of COFINS and PIS due from our subsidiary by including financial revenues in the calculation methodology. This claim impacts TCP, TC, TCO and GT.

     We believe based on the opinion of our legal counsel, and in consideration of decisions of the Supreme Court of Brazil, that the likelihood of an unfavorable outcome with respect to the calculation methodology is remote. As of December 31, 2009, Vivo recorded provisions for the amounts of the revenues in excess of the total sales under discussion in court, in the amount of R$2.5 million (compared to R$10.4 million as of December 31, 2008). Based on IBRACON’s Technical Communication no. 05/2009, on July 31, 2009, after a judicial evaluation supported by Vivo’s legal advisors, the amount of R$7.5 million was reversed from the original amount of R$10.4 million. The remaining court deposit is of R$2.5 million, as of both December 31, 2009 and 2008.

     In the state of São Paulo, an action was brought against Vivo S.A. claiming that, in January and February of 2000, Vivo had offset COFINS against unwarranted credits received from a deduction that was in excess of the permitted one-third of the amount due under COFINS in 1999 from the amount due under CSLL. As a consequence of the ordinary program for payment of tax debts in installments (Law no. 11.941, dated May 27, 2009), the Company requested to discontinue the proceedings and to have the amounts due converted into income, with consequent release of the surplus amount. As of December 31, 2008, the amounts of provisions and judicial deposits were R$24.7 million.

     Several telecommunications carriers, including us, are defendants in a lawsuit brought by the federal public prosecutor’s office challenging our policy of passing the COFINS and PIS expenses on to our customers by incorporating them into our charges. This claim impacts Vivo S.A.. We are challenging the lawsuit on the grounds that COFINS and PIS are cost components of the services provided to our customers and, as such, should be incorporated into the price of such services, as is the practice throughout the telecommunications industry. We believe based on the opinion of our outside counsel that the likelihood of an unfavorable outcome with respect to this claim is remote.

94

---

Table of Contents

     In the state of São Paulo, Vivo S.A. received tax assessments amounting to R$514 thousand as of December 31, 2009, compared to R$8.6 million in 2008, as a result of the increase in PIS and COFINS calculation bases. The lawsuits are in administrative court awaiting the decision of the Court of Special Appeal.

     In the state of Bahia, Vivo S.A. received a COFINS assessment of R$9.9 million as of December 31, 2009, compared to R$9.7 million as of December 31, 2008, in connection with losses incurred on derivative operations performed to determine the calculation base for the contribution. The assessment is awaiting judgment in the second administrative instance.

     In the state of Rio de Janeiro, Vivo S.A. received tax assessments amounting to R$159.7 million as of December 31, 2009, compared to R$148.5 million as of December 31, 2008, in connection with: i) the use of part of the negative CSLL (federal social contribution on income) calculation base determined by the Company in 1997, which originated from a partial spin-off; ii) alleged underpayment of IRPJ (income tax) and CSLL due to the fact that the inspectors did not approve the deductibility of certain expenses; iii) alleged underpayment of IRRF (withholding tax) on overseas remittances; and iv) changes to the IRPJ and CSLL calculation bases resulting from the reduction in the Company’s declared tax loss. There are proceedings based on these assessments currently ongoing in the administrative court.

     Vivo Participações is involved in an administrative discussion related to the purported underpayment of IRRF on remittances abroad. The total amount thereof at December 31, 2009 is R$22.5 million.

     In May 2007, the Company faced tax foreclosures totaling R$32.5 million as of December 31, 2009, compared to R$29.9 million as of December 31, 2008 in connection with the tax authorities’ refusal to compensate the negative balance of IRPJ (income tax) for fiscal year 2000. The DRF - Delegacia da Receita Federal (Regional Brazilian Internal Revenue Service) - did not approve some expenditures included in the Company’s income tax return and cancelled the balance of IRPJ credits used to offset the tax, thus leading to the accumulation of debt. The decision of the first judicial instance is pending. About the same matter, Vivo Participações filed an action for annulment seeking the reversal of the tax delinquency notice, which is in course before the Federal Courts in São Paulo.

     Vivo S.A. assumed the tax assessments received by its former subsidiary “TLE” amounting to R$6.8 as of December 31, 2009 (R$6.4 million as of December 31, 2008), charged on underpayment in connection with the excess of investments in tax incentives paid to FINOR, FINAN or FUNRES (tax incentives in Brazil) as calculated during the review of the Company’s income tax return. The decision of second judicial instance is pending.

     Telemig Celular is involved in an administrative discussion due to purported underpayment of IRPJ, including application of fine and denial of the request for refund and deduction of credits ascertained by the subsidiary in consequence of the overpayments of estimated IRPJ. In all the cases, the discussion is in progress in the administrative sphere and a final decision by Taxpayers Council is awaited. At December, 31, 2009, the amount is R$30.8 million.

     Tax delinquency notices were issued against Vivo for IRPJ, CSLL, COFINS and IRRF, the main matters under controversy being: (i) undue deduction of tax losses of non-operating nature from operating profit calculated in a subsequent period; (ii) purported underpayment of taxes; (iii) non-confirmation of withholding income tax on financial statements in DIRF; (iv) separate fine on the amount bookkept/declared and the amount paid. At December 31, 2009, the total amount came to R$67.3 million (R$42.1 million on December 31, 2008).

     Vivo is involved in administrative and judicial discussions about the underpayment of IRPJ, CSLL, PIS and COFINS, having in consideration the unlawful proportional credit of the taxes and disregard about the occurrence of voluntary disclosure. Vivo is involved in discussions solely related to the occurrence of the voluntary disclosure of these taxes. In December 2009 the amount in question totals R$17.6 million (R$189 million on December 31, 2008).

95

---

Table of Contents

     Vivo is involved in an administrative discussion related to tax delinquency notices the main matters thereof being: (i) non-deductibility of the expense of interest on shareholders’ equity (“Juros Sobre Capital Próprio”), having in consideration the noncompliance with information shown in the DIRF for the amounts of income tax (IR) withheld at source for the beneficiaries of the financial income; (ii) purported underpayment of IRPJ and CSLL estimates; and (iii) adjustments to the tax calculation bases of IRPJ and CSLL. The discussions related to the above mentioned proceedings are in progress in the administrative sphere. At December 31, 2009, the amount in question was R$97.4 million (R$90.8 million on December 31, 2008).

     Vivo is involved in administrative and judicial discussions seeking to reverse the debt balance related to tax debts for IRPJ, CSLL, PIS, COFINS and IRRF. This refers to debts activated in the SIEF system by reason of statements provided by the particular (DCOMP—Statement of Tax Deduction and PER/DCOMP—Statement of Tax Deduction electronically sent), not confirmed by the Federal Revenue Service of Brazil. The discussions are awaiting the end of the administrative discussion and final judgment in the judicial sphere. At December 31, 2009 the amount in question was R$432.4 million (R$197.9 million on December 31, 2008).

     Vivo Participações is involved in administrative and judicial discussions seeking to reverse the debt balance related to tax debts for IRPJ, CSLL, PIS, COFINS and IRRF. This refers to debts activated in the SIEF system by reason of statements provided by the particular (DCOMP—Statement of Tax Deduction and PER/DCOMP—Statement of Tax Deduction electronically sent), not confirmed by the Federal Revenue Service of Brazil. The discussions are awaiting the end of the administrative discussion and final judgment in the judicial sphere. At December 31, 2009 the amount in question was R$172.1 million.

     In the state of Rio Grande do Sul, Vivo S.A. was subject to a tax assessment for alleged IRPJ and CSLL debts of R$311.1 million as of December 31, 2009, and for the allegedly unwarranted amortization of the goodwill on acquisition of the interests of Companhia Riograndense de Telecomunicações (CRT) in fiscal years 1997 and 1998. This assessment is pending judgment in the administrative court.

     Telemig Participações filed writs of mandamus requesting the court to declare its right not to be assessed IRRF (Withholding Income Tax) at source on its receipts of interest on shareholders’ equity of its subsidiary (Telemig Celular). Based on the opinion of its legal counsels, the referred lawsuits are classified as possible loss; however, once this refers to a legal obligation under the terms of CVM Resolution No. 489/2005, a provision was booked and deposits have been made in court, totaling R$21.4 million on December 31, 2009.

     We and our subsidiary filed lawsuits challenging the application of CIDE—Contribução de Intervenção no Domínio Econômico on the remittances of payments owed to suppliers headquartered outside Brazil in accordance with technology transfer and technological assistance contracts or trademark and software licenses, in accordance with the terms of Law No. 10,168/2002. We believe based on the opinion of outside counsel that the likelihood of an unfavorable outcome with respect to this claim is possible. In 2009, Vivo S.A. recorded a provision in the amount of R$80.9 million, after it made escrow deposits amounting to R$62.6 million.

     FUST

     ANATEL, through the abridgment of Law No. 7, dated December 15, 2005 established that (i) the values paid for telecommunication companies related to interconnection fees and network usage, cannot be excluded from the tax basis of FUST contributions and (ii) among others, the values received from telecommunication companies, for interconnection usage and for the use of its networks resources, can not be excluded from the tax basis of FUST contributions.

     Considering that the second part of the Abridgment of Law is not in accordance with the Law 9,998/2000, all of our former subsidiaries and Telemig Celular have filed writs of mandamus questioning the legality of this contribution and have been granted a favorable decision which has suspended our liability for the contribution.

     We believe, based on the opinion of counsel, that the likelihood of an unfavorable outcome with respect to this claim is possible.

96

---

Table of Contents

     At December 31, 2009, the amount involved for Vivo is R$331.7 million and for Telemig Celular is R$62.6 million.

     FUNTTEL

     Vivo S.A. and Telemig Celular filed a writ of mandamus directly to the Managing Chairman of the board of FUNTTEL and the Temporary Secretary of the Ministry of Communications in order to enforce its right to calculate and pay contributions to FUNTTEL, as per the provisions of Law No. 10,052 of November 28, 2000, without including in the calculation amounts received as transfers entitled to interconnection and use of the network integration resources, as expressed in article 6, paragraph 4 of Decree n. 3,737 of January 30, 2001. The Company obtained a favorable judicial decision related to this issue. As of December 31, 2009, the amount of the contributions involved is R$151.6 million for Vivo and R$20.1 million for Telemig.

     FISTEL

     TFI

     Vivo holds authorizations, which were granted by the Public Authorities by means of the Instrument of Authorization, for the exploitation of the Personal Mobile Service, for an indeterminate term; and other authorizations for using the radio frequencies on a primary character, for the remainder of the term of the first license, renewable for further fifteen years.

     At the time of the renewal of the validity term for use of the radiofrequencies in connection with the exploitation of the personal mobile service, ANATEL collects the Installation Inspection Fee—TFI referring to the issuance of new licenses assessed on the radio-base stations, mobile stations and radio-links.

     Such collection results from the understanding, by ANATEL, that art. 9, item III of Resolution No. 255 would be applicable to this case, in such manner that the extension of term would be a taxable event of the TFI. Because it considers that the collection of TFI on mobile stations is undue, Vivo has administrative discussions in course with the ANATEL, which are awaiting decision.

     At December 31, 2009, the amount in question is R$976.3 million (R$827.0 million on December 31, 2008).

     Telemig Celular, also because it considers that the collection of TFI on the mobile stations is undue, upon receiving the official letter granting the extension of the term, together with the collection form for payment of the referred fee, it filed a motion to deny, which is awaiting judgment. In the understanding of the Management and of its legal consultants, there are possible chances of success in these proceedings. At December 31, 2009, the total amount in question was R$118.4 million.

     Telecommunications Inspection Fee

     Telemig Celular filed a Writ of Mandamus challenging its liability for the payment of the inspection fees on mobile stations not owned by it, and started booking a provision and effecting a deposit in court for the amounts referring to the TFF—Operation Inspection Fee and to the TFI—Installation Inspection Fee. The case is awaiting decision by the TRF Court of the 1st Region.

     Telemig Celular’s legal counsels consider the chances of losses in these lawsuits to be possible. However, because this is a legal obligation under the terms of CVM Resolution No. 489/2005, the controlled company has booked a provision for this contingency. The provision recorded at December 31, 2009 was in the amount of R$423.4 million, with corresponding deposits in court in the same amount.

     EBC – Contribution to Public Broadcasting Investment

     On May 26, 2009, SINDITELEBRASIL, the Trade Union for Telephony and Mobile and Personal Service Companies, filed an injunction challenging the new contribution to the EBC (Empresa Brasil de Comunicação) created by Law 11652/08. No preliminary order was issued, and Vivo and Telemig, both of which are operating companies affiliated to this Trade Union, obtained legal authorization to deposit the amount in question, which as of December 31, 2009 totaled R$63.4 million. At present, the proceeding is pending decision from the Lower Level Court.

97

---

Table of Contents

     INSS

     On July 2, 2002, Telemig Celular was given an infraction notice from the National Social Security Institute (“INSS”) relating to the joint and several liability for the payment of the contribution to the INSS of service providers and the 11% withholding tax provided for in Law 9711/98. The total amount as of December 31, 2009 was R$35.3 (as compared to R$33.7 at December 31, 2008). As of December 31, 2009, Telemig had booked a provision in the amount of R$3.5 in order to cover possible losses arising out of the above-mentioned infraction notice, substantiated by the opinion of its legal advisors.

     Local Taxes - Litigation Related to ISS on use of network

     The municipalities of Salvador (in the state of Bahia) and Porto Alegre (in the state of Rio Grande do Sul) filed administrative proceedings against Telebahia Celular and Celular CRT in order to collect amounts allegedly due as a services tax (ISS). The municipalities claim that the payments received in consideration of the use of our network could be considered compensation under a lease of a movable asset, and that therefore these payments should be subject to the application of ISS. Based on the opinion of our legal counsel, we believe that Telebahia Celular and Celular CRT will be successful in its defense in these proceedings and accordingly we have not made any provisions. As of December 31, 2009, the amount involved is R$57.3 million.

     In addition, other municipalities throughout the country (in the states of Amazonas, Mato Grosso, Mato Grosso do Sul, Paraná, Rio de Janeiro, Rio Grande do Sul, Roraima, Espírito Santo and São Paulo) require the payment by VIVO of the ISS services tax for the main purposes of providing telephone complementary services, advertising, licenses and subscriptions. There is no ISS withholding over consulting services. As of December 31, 2009, the amount involved is R$37.9 million.

     Other taxes, rates and contributions

     On December 31, 2009, an amount of R$2.9 million was recorded, related to the following assessments issued by tax authorities. Based on the opinion of the legal consultants there are possible chances of success in these proceedings.

     As of December 31, 2009, a provision of R$14.7 million was recorded for various tax lawsuits related to the discussions of ISS, IRPJ, INSS, ICMS and PIS/COFINS.

     Other Litigation

     We are a party to several labor claims for which we have recorded provisions of R$40.2 million considered sufficient to meet probable losses in these cases. During the year ended December 31, 2009, no significant labor claims classified as having the potential to incur probable losses were initiated. No significant changes have occurred in the proceedings reported since the last fiscal year. With respect to proceedings in which the possibility of loss is classified as possible, the amount involved is R$205.5 million.

     We are also party to certain legal proceedings arising in the normal course of business. We believe that our provisions are sufficient to cover our estimated losses due to adverse legal decisions. We believe that adverse decisions arising from these other legal proceedings would not have a material adverse effect on our business, financial condition or results of operations. See Note 20 to our financial statements included in this report.

     Dividend Policy and Dividends

     We may pay our shareholders both dividends and interest on shareholders’ equity which is a form of distribution that is tax deductible in Brazil. The holders of preferred shares have been entitled to exercise voting rights since the 2004 General Shareholders Meeting as a result of our failure to pay the minimum dividends required by law. For the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved the payment of dividends in the amount of R$402.6 million, which was sufficient to meet the minimum dividend required by law. Pursuant to this Board authority and the authority granted at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated.

98

---

Table of Contents

     In compliance with our by-laws, at a special board meeting held on February 9, 2010, our Board of Directors approved the payment of dividends in an aggregate amount of approximately R$818.9 million. These dividends were declared on the basis of the 2009 closing balance sheet to the holders of common and preferred shares. The dividends payable to holders of preferred shares and common shares are comprised of approximately (a) R$104.1 million in interest on shareholders equity, as approved at the Board of Directors meeting held on December 14, 2009 and as calculated in conformity with article 9 of Law 9249/95, which, net of income tax, is approximately R$88.5 million, and (b) dividends in the amount of approximately R$730.3 million. The above mentioned dividends will be paid in two equal parts, on April 19, 2010 and October 25, 2010. These dividends are sufficient to meet the minimum dividend required by law and voting rights on the preferred shares will not be regained for 2010. Even if Vivo’s holders of preferred shares were to reacquire the voting rights at some time in the future, we would not expect these voting rights to affect voting control over Vivo because our controlling shareholders currently own more than 50% of our total capital.

     Each of our preferred shares is entitled to declared dividends, with priority to receive a noncumulative annual dividend, to the extent net profits or reserves are available for distribution, equal to the higher of (i) 6% of the amount obtained by dividing the amount of subscribed capital by the number of our shares and (ii) 3% of the amount obtained by dividing shareholders’ equity by the number of our outstanding shares. To the extent there are additional distributable profits, we are also required to distribute to all shareholders an amount equal to 25% of adjusted net income, or the general dividend, determined in accordance with Brazilian Corporate Law, including any realization of the unrealized net income reserve. Each of our preferred shares is also entitled to receive declared profits on par with common shares, after our common shares have been paid dividends equal to the minimum priority distribution due to our preferred shares, which is 25% of our net profits for the year.

     Under Brazilian Corporate Law, a company is permitted to suspend the payment of the mandatory dividend in respect of its common and preferred shares if:

• its board of directors and board of auditors report to the shareholders meeting that the distribution would be incompatible with the financial conditions of that company; and

• the shareholders ratify this conclusion at the shareholders meeting. In this case:

• the board of executive officers would forward to the CVM, within five days of the shareholders meeting, an explanation for the suspension of the payment of the mandatory dividends; and

• the amounts which were not distributed are to be recorded as a special reserve, and, if not absorbed by losses in subsequent fiscal years, they must be distributed as dividends as soon as the financial condition of that company permits. Dividends may be distributed by us out of our retained earnings or accumulated profits in any given fiscal year.

     Under our by-laws, we may pay dividends out of retained earnings or accumulated profits in any given fiscal year. For the purposes of Brazilian Corporate Law, accumulated profits are defined as net income after the provision of income tax and social contribution for the relevant fiscal year, net of any accumulated losses from prior fiscal years and any amounts allocated to warrants, income bonds, employees’ and management’s participation in a company’s profits. Retained earnings are defined as the amount of our net income in prior years that was not paid out as dividends in the year in which it was earned, but rather was retained in accordance with a proposal of the board of directors duly approved by a shareholders meeting.

99

---

Table of Contents

     At each annual shareholders meeting, the board of directors is required to determine how net profits for the preceding fiscal year are to be allocated. Under Brazilian Corporate Law, we are required to maintain a statutory reserve, to which we must allocate 5% of our net profits for each fiscal year until the amount of such reserve equals 20% of our paid-in capital. Losses, if any, may be charged against the statutory reserve.

     Brazilian Corporate Law also provides for two additional discretionary allocations of net profits that are subject to approval by the shareholders at the annual shareholders meeting:

• first, a percentage of net profits may be allocated to the contingency reserve for anticipated losses that may be charged to it in future years. Any amount so allocated in a prior year must be either:

• reversed in the fiscal year in which the loss was anticipated if such loss does not in fact occur; or

• written off in the event that the anticipated loss occurs;

• second, if the amount of unrealized revenue exceeds the sum of (i) the statutory reserve and (ii) retained earnings, such excess may be allocated to the unrealized profit reserve at the direction of the board of directors.

     Allocations may not hinder the payment of mandatory dividends. Unrealized revenue reserve is defined under Brazilian Corporate Law as the sum of:

• the share of equity earnings of affiliated companies, which is not paid as cash dividends; and

• profits as a result of income from operations after the end of the next succeeding fiscal year.

     The amounts available for distribution are determined on the basis of financial statements prepared in accordance with Brazilian GAAP, which differs from financial statements prepared in accordance with U.S. GAAP.

     Priority and Amount of Preferred Dividends

     Our by-laws provide for a minimum noncumulative dividend of (i) 6% of the amount obtained by dividing the amount of subscribed capital by the number of our shares and (ii) 3% of the amount obtained by dividing shareholders’ equity by the number of our outstanding shares, whichever is greater. As a result of such provision, holders of our preferred shares are entitled to receive, in any year, distributions of cash dividends prior to the holders of our common shares receiving any distribution of cash dividends in such year. In addition, distributions of cash dividends in any year are made:

• first, to the holders of preferred shares up to the amount of the dividend that must be paid to the holders of preferred shares for such year;

• then, to the holders of common shares until the amount distributed in respect of each common share is equal to the preferred dividend; and

• thereafter, distributed equally among holders of preferred and common shares.

     Payment of Dividends

     We are required by Brazilian Corporate Law and by our by-laws to hold an annual shareholders meeting by April 30 of each year, at which, among other things, an annual dividend may be declared by a decision of our shareholders on the recommendation of our board of directors. The payment of annual dividends in any given year is based on the financial statements prepared for the preceding fiscal year ending December 31. Under Brazilian Corporate Law, dividends are required to be paid within 60 days of the annual shareholders meeting, or on the date determined at a shareholders meeting, but in any case prior to the end of the fiscal year in which such dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends in respect of its shares, after which time unclaimed dividends revert back to us. Because our shares are issued in book-entry form, dividends will be credited to the depositary, which is responsible for the delivery of the dividends to their respective holders. We are not required to adjust the amount of paid-in capital for inflation. Annual dividends may be paid to shareholders pro rata according to the date when the subscription price is paid to us.

100

---

Table of Contents

     Our preferred shares underlying the ADSs are held in Brazil by a Brazilian custodian, Banco Itaú S.A., as the agent for the depositary, which is the registered owner of our shares.

     Payments of cash dividends and distributions, if any, will be made in reais to the Custodian on behalf of The Bank of New York, as depositary, which will then convert those proceeds into U.S. dollars and will cause such U.S. dollars to be delivered to the depositary for distribution to holders of ADRs. In the event that the Custodian is unable to immediately convert the reais received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by devaluations of the real that occur before such dividends are converted and remitted. Dividends in respect of our preferred shares paid to resident and non-resident shareholders, including holders of ADSs, are not currently subject to Brazilian withholding tax.

B. Significant Changes

     There were no significant changes in 2009 other than as already discussed in other sections of this annual report.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

     Brazilian private equity and debt are traded on BM&FBOVESPA, which is the trading market for our common and preferred shares. Our preferred shares began trading on the Brazilian stock exchanges on September 21, 1998. In the United States, our preferred shares trade in the form of ADSs that each represent 1 preferred share as of December 31, 2009 and that are issued by The Bank of New York, as depositary pursuant to a Deposit Agreement among Vivo, the depositary and the registered holders and beneficial owners from time to time of ADSs. The ADSs commenced trading on the New York Stock Exchange on November 16, 1998 under the symbol “TCP.” After the corporate restructuring, the symbol became “VIV.”

     The table below sets forth, for the indicated periods, the high and low closing prices of the ADSs on The New York Stock Exchange, in U.S. dollars, and the preferred shares on the São Paulo Stock Exchange, in reais:

     Stock prices per share are impacted by the reverse stock split at the ratio of 4:1, concluded on October 13, 2008.

		New York Stock  Exchange US$ per  ADS				São Paulo Stock  Exchange R$ per  1 preferred shares
		High		Low		High		Low
Year ended
December 31, 2005		30.08		12.48		77.52		28.00
December 31, 2006		16.36		9.12		46.96		19.77
December 31, 2007		23.92		13.64		42.60		28.40
December 31, 2008		29.48		8.25		48.96		18.43
December 31, 2009		33.16		13.05		56.34		29.45

101

---

Table of Contents

		New York Stock  Exchange US$ per  ADS				São Paulo Stock  Exchange R$ per  1 preferred shares
		High		Low		High		Low
Year ended December 31, 2008
First quarter		27.12		17.80		45.12		31.15
Second quarter		29.48		22.76		48.96		37.18
Third quarter		25.44		15.32		40.93		30.59
Fourth quarter		16.80		8.25		32.66		18.43
Year ended December 31, 2009
First quarter		16.87		13.05		38.70		29.45
Second quarter		21.30		13.50		41.03		30.50
Third quarter		25.25		17.85		44.70		35.85
Fourth quarter		33.16		24.25		56.34		42.88
Quarter ended
March 2010 (through March 30, 2010)		32.69		25.91		55.10		47.20
Month ended
October 31, 2009		28.94		24.25		49.87		42.88
November 30, 2009		30.50		24.40		52.53		45.10
December 31, 2009		33.16		29.31		56.34		51.31
January 31, 2010		32.69		27.99		55.10		50.00
February 28, 2010		29.78		26.84		54.50		48.90
March 2010 (through March 30, 2010)		28.87		25.91		50.90		47.20

B. Plan of Distribution

     Not applicable.

C. Markets

Trading on the São Paulo Stock Exchange (BM&FBOVESPA)

     In 2000, the Bolsa de Valores de São Paulo was reorganized through the execution of memoranda of understanding by the Brazilian stock exchanges and assumed all shares traded in Brazil. In 2007, the Bolsa de Valores de São Paulo was subject to a corporate reorganization, by which, among other things, the quotas issued by it were transferred to BOVESPA Holding S.A. and Bolsa de Valores de São Paulo S.A. – BVSP. The operations of BOVESPA Holding S.A. and Bolsa de Mercadorias e Futuros – BM&F S.A. were subsequently integrated, resulting in the creation of BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros, or BM&FBOVESPA. In late 2008, Bolsa de Valores de São Paulo – BVSP and Companhia Brasileira de Liquidação e Custódia were merged into BM&FBOVESPA, which currently concentrates all trading activities of shares and commodities in Brazil.

     When shareholders trade in common and preferred shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date without adjustment of the purchase price for inflation. The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date. Delivery of and payment for shares are made through the facilities of the clearinghouse Central Depository BM&FBOVESPA (Central Depositária BM&FBOVESPA).

     The BM&FBOVESPA is an entity owned by its member brokerage firms. Trading on the BM&FBOVESPA is limited to member brokerage firms and a limited number of authorized nonmembers. The BM&FBOVESPA has two open outcry trading sessions each day from 11:00 a.m. to 1:30 p.m. and from 2:30 p.m. to 5:45 p.m., São Paulo time, except during daylight savings time in the United States. During daylight savings time in the United States, the sessions are from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 4:45 p.m., São Paulo time, to closely mirror the NYSE trading hours. Trading is also conducted between 11:00 a.m. and 6:00 p.m., or between 10:00 a.m. and 5:00 p.m. during daylight savings time in the United States on an automated system known as the Computer Assisted Trading System (Sistema de Negociacão Assistida por Computador) on the BM&FBOVESPA and on the National Electronic Trading System (Sistema Eletrônico de Negociação Nacional). This system is a computerized system that links electronically with the seven smaller regional exchanges. The BM&FBOVESPA also permits trading from 6:45 p.m. to 7:30 p.m. on an online system connected to traditional and Internet brokers called the “after market.” Trading on the after market is subject to regulatory limits on price volatility and on the volume of shares transacted through Internet brokers.

102

---

Table of Contents

     In order to better control volatility, the BM&FBOVESPA adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of the BM&FBOVESPA falls below the limits of 10% or 15%, respectively, in relation to the index registered in the previous trading session.

     There are no specialists or market makers for our shares on BM&FBOVESPA. Trading in securities listed on the BM&FBOVESPA may be effected off the Exchange in certain circumstances, although such trading is very limited.

     Settlement of transactions is effected three business days after the trade date without adjustment of the purchase price for inflation. Payment for shares is made through the facilities of a separate clearinghouse, which maintains accounts for member brokerage firms. The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date. The clearinghouse for BM&FBOVESPA is Central Depository BM&FBOVESPA.

     The BM&FBOVESPA is significantly less liquid than the NYSE or other major exchanges in the world. As of December 31, 2009, the aggregate market capitalization of the 385 companies listed on the BM&FBOVESPA was equivalent to approximately R$2,335 billion (US$1,341 billion). By comparison, as of December 31, 2009, the aggregate market capitalization of more than 3,700 companies (including U.S. and non-U.S. companies) listed on the NYSE was approximately US$11.8 trillion. Although all of the outstanding shares of an exchange-listed company may trade on the BM&FBOVESPA, in most cases only the preferred shares or fewer than half of the listed common shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by government entities or by one principal shareholder, that rarely trade their shares. For this reason, data showing the total market capitalization of BM&FBOVESPA tends to overstate the liquidity of the Brazilian equity securities market. Overall, the Brazilian equity market is relatively small and illiquid compared to major world markets. In 2009, the combined daily trading volumes on BM&FBOVESPA averaged approximately US$2,735 million. See “Item 3.D.—Key Information—Risk Factors—Risks Relating to Our Securities—The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of our ADSs.”

Regulation of Brazilian Securities Markets

     The Brazilian securities markets are regulated by the CVM, which has authority over stock exchanges and the securities markets generally, by the Conselho Monetário Nacional, or CMN, the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities market is governed by Law No. 6,385, as amended, known as the Brazilian Securities Law, and by Law No. 6,404, as amended, known as the Brazilian Corporate Law.

     Law No. 10,303 of December 31, 2001 amended the Brazilian Corporate Law and the Brazilian Securities Law. Consequently, some major modifications resulted for the businesses of the publicly traded companies. Among the changes, Law No. 10,303, along with Executive Order No. 8 and Decree No. 3.995, all dated October 31, 2001, provided that the CVM was to have the scope of its authority and autonomy altered and expanded. The CVM, which is the agency in charge of regulating the market, now handles some functions that were reserved to the Banco Central, for example, the regulation and organization of the futures and commodities markets. Other modifications include changes in the proportion of common and preferred shares (these changes apply solely to companies incorporated after the enactment of the new law), new rules for the issuance of debentures and the exercise of the right of withdrawal, enhanced duties and powers for the members of the Board of Auditors and the Board of Directors, and the ability of publicly traded companies to make publications available over the Internet. Also provided is the pooling agreement, the so-called “block voting,” by which the shareholders agree during a prior meeting on the direction of the votes that will be cast at the general meetings. The purpose of this kind of vote is to prevent any possible individual dissidents or interests from harming corporate interests.

103

---

Table of Contents

     The period established for companies to adapt their by-laws is one year from the publication of the law on November 1, 2001. Our shareholders held a General Shareholders Meeting on March 27, 2002, and approved the necessary modifications to our by-laws.

     Under the Brazilian Corporate Law, a company is either public, a companhia aberta, such as our company, or private, a companhia fechada. All public companies are registered with the CVM and are subject to reporting requirements. A company registered with the CVM may have its securities traded either on BM&FBOVESPA or on the Brazilian over-the-counter market. The shares of a public company may also be traded privately, subject to certain limitations. In order to be listed on BM&FBOVESPA a company must apply for registration with the CVM and the stock exchange. Once the stock exchange lists a company and the CVM accepts its registration as a public company, its securities may start to be traded.

     Trading of securities on BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of BM&FBOVESPA or the CVM, among other reasons, due to a belief that the company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or BM&FBOVESPA.

     The Brazilian Securities Law, Brazilian Corporate Law and the regulations issued by the CVM, the CMN and the Central Bank provide, among other things, disclosure requirements and restrictions on insider trading, price manipulation and protection of non-controlling shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or markets in some other jurisdictions.

     The Law No. 11,941 dated May 27, 2009 (former CVM Deliberation No. 560), which deals with disclosures regarding related parties relationships in their accounting aspects, and it is applicable to financial statements for the year ended December 31, 2008. The disclosure requirements under this CVM Deliberation are disclosed in our financial statements.

     On December 3, 2008, Provisional Executive Act No. 449 (Medida Provisória n.º 449 dated December 3, 2008) was issued and, among other things, amended numerous provisions of the Brazilian corporate law, specifically in accounting aspects, such as bookkeeping, evaluation of assets criteria and the structure of financial results. Among the changes, it modified the definition of an affiliate. The Law No. 11,491/09 states that a company shall be considered affiliated when the investor has significant influence, or holds or exercises the power to participate in the decisions pertaining to financial or operating policies of the investee, without controlling it.

     On December 7, 2009, the CVM issued CVM Instruction nº480, a new instruction to replace the CVM Instruction No. 202/93. The main objectives are: i) consolidating the rules regarding registration for issuing securities so that the procedures of registration, suspension and cancellation are identical for all issuers; ii) establishing two categories of issuers of securities according to the kinds of securities admitted for trading; iii) improving the quality of information periodically provided by issuers of securities and the manner of presentation to facilitate understanding of such information by the investor; iv) ensuring a uniform standard of information is regularly provided by issuers of securities and those that are occasionally published in prospectuses for public offerings of securities distribution; and v) making it possible that certain issuers, provided they meet certain prerequisites, have their applications for registration of offers of distribution approved more quickly.

     On December 17, 2009, the CVM issued CVM Instruction No. 481, whose main objectives are i) disposing of certain information that must be disclosed to shareholders in certain events, for example in the announcement of a shareholders’ general meeting; and ii) regulating the request for a public proxy.

D. Selling Shareholders

     Not applicable.

104

---

Table of Contents

E. Dilution

     Not applicable.

F. Expenses of the Issue

     Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

     Not applicable.

B. Memorandum and Articles of Association

     The following summarizes certain material provisions of our by-laws and Brazilian Corporate Law, the main bodies of regulation governing us. Copies of our by-laws have been filed as exhibits to this annual report on Form 20-F.

Registration

     Our amended and restated by-laws were registered with the Public Registry of the state of São Paulo, or JUCESP, No. 463.439./09-9 on December 7, 2009 under company number (NIRE) 3530015879-2. Article 5 of our by-laws was amended as a result of the inclusion of a new item in the description of our purpose, approved at the general meeting of our shareholders on November 30, 2009. Our by-laws were registered with the Public Registry of the state of São Paulo, or JUCESP, Nº 463.439/09 -9, on December 7, 2009.

Objectives and Purposes

     We are a publicly traded company duly registered with the Brazilian securities commission under No. 017710. Article 2 of our by-laws provides that our corporate purpose is to:

• exercise control of operating companies which provide cellular mobile telecommunications services, personal mobile services and other services in conformity with the concessions, authorizations and permissions that have been granted to us;

• explore services and activities necessary or useful for the performance of these services, in conformity with the concessions, authorizations and permits granted thereto, including:

a) improving project performance, implementation, marketing, operation, maintenance and exploitation of cellular mobile telephone services, other telecommunication services and related services;

b) rendering of telecommunication engineering services; and

c) importing, exporting and marketing of goods, equipment, handsets and accessories related to cellular mobile telephony and to other telecommunication and related services

• promote, through our subsidiary or controlled companies, the expansion and implementation of telecommunications services within our concessions, authorizations and permissions;

• promote, carry out and direct the financing of capital from internal or external sources to be used by us or our controlled companies;

• promote, carry out and encourage study and research activities aimed at the development of the telecommunications sector;

105

---

Table of Contents

• perform, through our subsidiary and affiliated companies, specialized technical services related to the telecommunications sector;

• promote, encourage, carry out and coordinate, through our subsidiary or controlled companies, the development and training of personnel necessary to perform activities in the telecommunications sector;

• carry out and promote the import of goods and services for the operations of our subsidiary and controlled companies;

• execute other activities connected or related to our objective;

• participate in the equity capital of other companies; and

• trade equipment and materials necessary or useful for providing telecommunications services.

     At a Special Shareholders’ Meeting held on November 30, 2009, the inclusion into the corporate purpose of the Bylaws of the Company of the activity of providing cellular mobile telephone service was approved in order to enable the planned future merger of Telemig Celular into Vivo.

Directors

     Below is a description of some of the provisions of our by-laws concerning the members of our board of directors:

• the board of directors has the power to approve investments and acquisition of assets, assume any obligation and execute contracts not included in the budget for an amount exceeding R$300 million, the public issuance of promissory notes, and the acquisition of our shares for cancellation or deposit with a custodian; and

• the board of directors has the power to apportion the global remuneration set forth by the shareholders meeting between the directors and the executive officers.

     Pursuant to Brazilian Corporate Law, each member of the board of directors must have at least one share of our capital stock to be elected as a Director. There are no provisions in our by-laws with respect to:

• age limits for retirement of directors; and

• anti-takeover mechanisms or other procedures designed to delay, defer or prevent changes in our control.

     Although there are no provisions in our by-laws with respect to the following, they are regulated by Brazilian Corporate Law and CVM regulations:

• a director’s power to vote on proposals in which the Director is materially interested;

• a director’s power to vote compensation to himself or herself in the absence of an independent quorum;

• borrowing powers exercisable by the directors;

• required shareholding for director qualification; and

• disclosure of share ownership.

106

---

Table of Contents

Rights Attaching to Shares

     Dividend Rights

     See “Item 8.A.—Financial Information—Consolidated Statements and Other Financial Information—Dividend Policy and Dividends,” and “Item 8.A.—Financial Information—Consolidated Statements and Other Financial Information—Payment of Dividends.”

     Voting Rights

     Each common share entitles the holder to one vote at meetings of shareholders. Our preferred shares do not entitle the holder to vote except as discussed in our by-laws in Articles 9 and 10. Holders of our preferred shares are each entitled to attend or to address meetings of shareholders and to elect members of our board of directors according to Article 141, fourth paragraph, II, and Article 141, fifth paragraph, of Law No. 6,404/76, as amended by Article 8, fourth paragraph of Law No. 10,303/01.

     One of the members of our board of auditors and his or her alternate are elected by the majority vote of the holders of our preferred shares present at the annual meeting of shareholders at which the members of the board of auditors are elected.

     Brazilian Corporate Law provides that certain non-voting shares, such as our preferred shares, acquire voting rights in the event we fail for three consecutive fiscal years to pay the mandatory minimum dividend to which such shares are entitled, until such payment is made.

     Our preferred shares are entitled to full voting rights in the event that we fail to pay the mandatory minimum dividends to which they are entitled for three consecutive years, and with respect to:

• the execution of agreements with related parties whose terms and conditions are more burdensome for the Company than terms in the market for similar agreements in all cases subject to the provisions of article 117 of Law 6,404/76; and article 9 of our by-laws.

• changes/eliminations of certain rights and obligations as provided for in our by-laws.

     Any change in the preference, benefits, conditions of redemption and amortization of our preferred shares, or the creation of a class of shares having priority or preference over our preferred shares, would require the approval of holders of a majority of our outstanding preferred shares at a special meeting of holders of our preferred shares. Such a meeting would be called by publication of a notice in the state official gazette and one or two other Brazilian newspapers, as determined by the shareholders, at least thirty days prior to the meeting, but would not generally require any other form of notice. The execution of agreements with related parties, under terms and conditions more burdensome for the Company than market terms for agreements of the same nature shall require prior approval by the General Meeting of Shareholders, with due regard, in any case, to the provisions in Article 117 of Law 6,404/76.

     In any circumstances in which holders of our preferred shares are entitled to vote, each preferred share will entitle the holder to one vote.

     We did not pay dividends or interest on shareholders’ equity for the years ended December 31, 2005 and 2004 because we recorded a net loss for each of those years. On December 21, 2007, we paid dividends with respect to fiscal year ended December 31, 2006 in the amount of R$16.8 million which was insufficient to meet the minimum dividend required by Brazilian Corporate Law. For the fiscal year ended December 31, 2007, we were unable to pay minimum dividends because we had net losses. As a result, holders of Vivo’s preferred shares received the same voting rights as the holders of common shares until we were to pay minimum dividends again. For the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved to pay dividends in the amount of R$402.6 million, which is sufficient to meet the minimum dividend required by law. According to the approval granted at the Board of Directors Meeting held on February 12, 2009 and at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and, upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated.

107

---

Table of Contents

     Meeting of Shareholders

     According to Brazilian law, shareholders must be previously summoned in order for a general ordinary or extraordinary shareholders meeting to be convened. The summons must be published in the state official gazette and one or two other Brazilian newspapers, as determined by the shareholders, at least 15 days prior to the meeting’s scheduled date. If the meeting is not convened for some reason, a second summons must be published at least eight days before the second date specified for the meeting.

     On first call, meetings may only be convened with a minimum quorum of one-fourth of the holders of voting shares. Extraordinary meetings whose object is the amendment of the by-laws may only be convened on the first call with a minimum of two-thirds of the voting capital present. In addition, some decisions require the approval of at least one-half of the holders of voting shares (qualified quorum, article 136 of Law 6,404/76). On a second call, the meetings are convened regardless of quorum.

Preemptive Rights

     Each of our shareholders has a general preemptive right to subscribe for shares in any capital increase in proportion to its shareholding. A minimum period of 30 days following the publication of notice of the capital increase is allowed for the exercise of the right.

     In the event of a capital increase, which would maintain or increase the proportion of capital represented by our preferred shares, holders of ADSs, or of our preferred shares, would have preemptive rights to subscribe only to our newly issued preferred shares. In the event of a capital increase, which would reduce the proportion of capital represented by our preferred shares, holders of ADSs, or of our preferred shares, would have preemptive rights to subscribe to our preferred shares in proportion to their shareholdings and to our common shares only to the extent necessary to prevent dilution of their interest.

     Preemptive rights to purchase shares may not be offered to U.S. holders of our ADSs unless a registration statement under the Securities Act is effective with respect to the shares underlying those rights, or an exemption from the registration requirements of the Securities Act is available. Consequently, if you are a holder of our ADSs who is a U.S. person or is located in the United States, you may be restricted in your ability to participate in the exercise of preemptive rights.

     Right of Redemption

     Brazilian Corporate Law provides for the right of redemption to non-controlling shareholders under certain circumstances.

     The right of a dissenting shareholder to seek redemption arises in case our shareholders representing more than 50% of the voting shares, common shares or preferred shares, as applicable, decide to:

• change the preference of our preferred shares or to create a class of shares having priority or preference over our preferred shares, except if such actions are expressly permitted in the by-laws at the time of their adoption by our shareholders;

• change the preference of our preferred shares, any right they carry, their amortization or redemption rights, or to create a class of shares having priority or preference over our preferred shares;

• reduce the mandatory distribution of dividends;

• change our corporate purposes;

• transfer all of our shares to another company in order to make us a wholly owned subsidiary of that company;

• approve the acquisition of another company, the price of which exceeds certain limits set forth in Brazilian Corporate Law;

108

---

Table of Contents

• participate in a group of companies if certain liquidity standards are not met according to the Brazilian Corporate Law as amended by Law No. 10,303/01;

• merge or consolidate us with another company if certain liquidity standards are not met according to the Brazilian Corporate Law as amended by Law No. 10,303/01; and

• cisão, or split-up, Vivo Participações S.A., according to the Brazilian Corporate Law, as amended by Law No. 10,303/01, in any of the following situations: (i) reduction of minimum dividends; (ii) participation in a group of companies; or (iii) change of our corporate purposes, except in case the company receiving our assets has a corporate purpose substantially identical to ours.

     The right to redemption lapses 30 days after publication of the minutes of the relevant shareholders meeting or, whenever the resolution requires the approval of the holders of our preferred shares by vote taken in a special meeting of a majority of the holders of our preferred shares affected by the resolution, within 30 days from the publication of the minutes of that special meeting. We would be entitled to reconsider any action giving rise to redemption rights within 10 days following the expiration of those rights if the redemption of shares of dissenting shareholders would jeopardize our financial stability.

     Unless otherwise provided in our by-laws, which is not the case, shares are redeemable at their book value, determined on the basis of the last annual balance sheet approved by the shareholders. If the shareholders meeting giving rise to redemption rights occurs more than 60 days after the date of the last annual balance sheet, a shareholder may demand that its shares be valued on the basis of a new balance sheet that is as of a date within 60 days of such shareholders meeting.

     Form and Transfer

     Since March 8, 2010, our shares are maintained in book-entry form with a transfer agent, Banco Bradesco S.A., and the transfer of our shares is made in accordance with the applicable provision of Brazilian Corporate Law, which provides that a transfer of shares is effected by an entry made by the transfer agent on its books, debiting the share account of the seller and crediting the share account of the purchaser against presentation of a written order of the seller or judicial authorization or order in an appropriate document which remains in the possession of the transfer agent. Our preferred shares underlying our ADSs are registered on the records of BM&FBOVESPA in the name of the Bank of New York, as depositary of the ADSs.

     Transfers of shares by a foreign investor are made in the same way and executed by such investor’s local agent on the investor’s behalf except that, if the original investment was registered with the Central Bank of Brazil under the Brazilian foreign investment in capital markets regulations, the foreign investor should also seek amendment, if necessary, through its local agent, of the certificate of registration to reflect the new ownership.

     BM&FBOVESPA operates a central clearing system. A holder of our shares may choose, at its discretion, to participate in this system. All shares elected to be put into the system will be deposited in custody with the relevant stock exchange through a Brazilian institution duly authorized to operate by the Central Bank of Brazil and having a clearing account with the relevant stock exchange. The fact that such shares are subject to custody with the relevant stock exchange will be reflected in our register of shareholders. Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the relevant stock exchange and will be treated in the same way as registered shareholders.

     Regulation of Foreign Investment and Exchange Controls

     There are no restrictions on ownership of our preferred shares by individual or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of our shares into foreign currency and to remit such amounts abroad is subject to restrictions under foreign investment legislation which generally require, among other things, that the relevant investment be registered with the Central Bank and the CVM.

     Foreign investors may register their investment in our shares under Law 4,131 of September 3, 1962 or Resolution 2,689 of January 26, 2000. Registration under Resolution 2,689 affords favorable tax treatment to non-Brazilian investors who are not residents in a tax haven jurisdiction (i.e., countries that do not impose income tax or where the maximum income tax rate is lower than 20%), as defined by Brazilian tax laws.

109

---

Table of Contents

     Under Resolution 2,689, non-Brazilian investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. In accordance with Resolution 2,689, the definition of non-Brazilian investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

Under Resolution 2,689, a non-Brazilian investor must:

• appoint at least one representative in Brazil, with powers to perform actions relating to its investment;

• appoint an authorized custodian in Brazil for its investment;

• register as a non-Brazilian investor with the CVM; and

• register its foreign investment with the Central Bank.

     Additionally, the investor operating under the provisions of Resolution 2,689 must be registered with the Brazilian internal revenue service (“Receita Federal”) pursuant to the latter’s Regulatory Instruction 200. This registration process is undertaken by the investor’s legal representative in Brazil.

     Securities and other financial assets held by non-Brazilian investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or through organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, or occurring upon the death of an investor by operation of law or will. See “—Taxation—Brazilian Tax Considerations” for more information.

     Resolution 1,927 of the National Monetary Council provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. Accordingly, the proceeds from the sale of ADSs by holders of American Depositary Receipts outside Brazil are free of Brazilian foreign investment controls and holders of ADSs who are not resident in a tax haven jurisdiction will be entitled to favorable tax treatment.

     The right to convert dividend payments and proceeds from the sale of our shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investment be registered with the Central Bank. Restrictions on the remittance of foreign capital abroad could hinder or prevent the custodian for the preferred shares represented by ADSs, or holders who have exchanged ADSs for preferred shares, from converting dividends, distributions or the proceeds from any sale of preferred shares, as the case may be, into U.S. dollars and remitting such U.S. dollars abroad. Delays in, or refusal to, granting the required government approval for conversions of Brazilian currency payments and remittances abroad could adversely affect holders of ADSs.

     We have obtained a certificate of registration in the name of The Bank of New York, the depositary. Pursuant to this certificate, the custodian and the depositary are able to convert dividends and other distributions with respect to the preferred shares represented by ADSs into foreign currency and to remit the proceeds outside Brazil. If a holder exchanges ADSs for preferred shares, such holder may continue to rely on the depositary’s certificate of capital registration for only five business days after such exchange. After that, such holder must seek to register its investment directly with the Central Bank. Thereafter, unless the holder has registered its investment with the Central Bank, such holder may not convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such preferred shares. Such holder generally will be subject to less favorable Brazilian tax treatment than a holder of ADSs.

     Before March 14, 2005, there were two principal foreign exchange markets in Brazil, in which notes were freely negotiated but could be strongly influenced by Central Bank intervention:

110

---

Table of Contents

• the commercial rate exchange market dedicated principally to trade and financial foreign exchange transactions such as the buying and selling of registered investments by foreign entities, the purchase or sale of shares, or the payment of dividends or interest with respect to shares; and

• the floating rate exchange market that was generally used for transactions not conducted through the commercial foreign exchange market.

     On March 4, 2005, the National Monetary Council enacted Resolution No. 3,265, pursuant to which the commercial rate exchange market and the floating rate exchange market were unified in a sole exchange market, effective as of March 14, 2005. The new regulation allows, subject to certain procedures and specific regulatory provisions, the purchase and sale of foreign currency and the international transfer of reais by a person or legal entity, without limitation of the amount involved, provided, however, the legality of the transaction.

     Under Brazilian law, whenever there is a serious imbalance in Brazil’s balance of payments or reasons to foresee a serious imbalance, the Brazilian government may impose temporary restriction on the remittance of foreign currency abroad and on the conversion of Brazilian currency into foreign currencies. Such restrictions may hinder or prevent the custodian or holders who have exchanged ADSs for underlying preferred shares from converting distributions or the proceeds from any sale of such shares, as the case may be, into U.S. dollars and remitting such U.S. dollars abroad.

C. Material Contracts

     On December 11, 2002, after all of the TCP operators had switched over to the SMP system, ANATEL approved our acquisition of the remainder of the capital stock of GT and, on December 27, 2002, we acquired the remaining portion of those three holding companies. On December 31, 2002, we owned, directly and indirectly, 100% of the voting stock and economic interest of GT.

     For a description of such acquisitions, see “Item 4.A.—Information on the Company—Our History and Development.”

     On December 10, 2002, TC entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the area corresponding to the state of São Paulo, with the exception of the following municipalities: Altinópolis, Aramina, Batatais, Brodowski, Buritizal, Cajurú, Cássia dos Coqueiros, Colômbia, Franca, Guaíra, Guará, Ipuã, Ituverava, Jardinópolis, Miguelópolis, Morro Agudo, Nuporanga, Orlândia, Ribeirão Corrente, Sales de Oliveira, Santa Cruz da Esperança, Santo Antonio da Alegria and São Joaquim da Barra. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes TC to provide SMP services until August 5, 2008. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of TC’s net revenues from usage charges in the region described above in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, TC was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby.

     On December 10, 2002, TC entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the municipalities of Ribeirão Preto and Guatarapá and the district of Bonfim Paulista. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes TC to provide SMP services until January 20, 2009. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of TC’s net revenues from usage charges in the municipalities mentioned above in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, TC was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby.

     On December 10, 2002, GT entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the area corresponding to the states of Paraná and Santa Catarina. The authorization replaces the concession agreement entered into with ANATEL on April 8, 1998, and authorizes GT to provide SMP services until April 8, 2013. It may be renewed for an additional term of fifteen years upon payment of 2% of GT’s net revenues from usage charges in its region in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, GT was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby.

111

---

Table of Contents

     On December 10, 2002, Telebahia Celular entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the state of Bahia. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes Telebahia Celular to provide SMP services until June 29, 2008. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of Telebahia Celular's net revenues from usage charges in its Region in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, Telebahia Celular was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby.

     On December 10, 2002, Telergipe Celular entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the state of Sergipe. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes Telebahia Celular to provide SMP services until December 15, 2008. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of Telergipe Celular’s net revenues from usage charges in its region in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, Telergipe Celular was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby.

     On December 10, 2002, Telerj Celular entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the state of Rio de Janeiro. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes Telerj Celular to provide SMP services until November 30, 2005. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of Telerj Celular’s net revenues from usage charges in its region in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, Telerj Celular was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunications services in the region covered thereby.

     On December 10, 2002, Telest Celular entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the state of Espíritio Santo. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes Telest Celular to provide SMP services until November 30, 2008. It was renewed in 2008 for an additional term of fifteen years upon payment of 2% of Telest Celular’s net revenues from usage charges in its region in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, Telest Celular was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunications services in the region covered thereby.

     On February 3, 2003, TCO entered into an authorization agreement with ANATEL, acting as a representative of the Brazilian government, which enables it to provide personal cellular services (SMP) in the area corresponding to the Brazil’s Federal District. The authorization replaces the concession agreement entered into with ANATEL on November 4, 1997, and authorizes TCO to provide SMP services until July 24, 2006. It was renewed in 2006 for an additional term of fifteen years upon payment of 2% of TCO’s net revenues from usage charges in the region described above in the year prior to the year when payment is due, and every two years during the extension period. In consideration for the authorization, TCO was required to pay R$9.0 thousand. The authorization is a legal requirement for providing telecommunication services in the region covered thereby. TCO’s subsidiaries also entered into authorization agreements with ANATEL under similar terms.

     On April 25, 2003, TCP acquired 64.03% of the voting capital stock of TCO for approximately R$1.505 billion, corresponding to R$19.48719845 per each lot of 1,000 shares acquired. TCO is an “A” band operator providing cellular telecommunications services in the Federal District of Brazil, as well as in the Brazilian states of Goiás, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and Tocantins. The agreement also included the acquisition of TCO’s “B” band subsidiary NBT, which provides cellular telecommunications service in the Brazilian states of Amapá, Amazonas, Maranhão, Pará and Roraima.

112

---

Table of Contents

     In August 2006, we began installing a new network based on GSM/GPRS/EDGE technology, with a core dual 2G/3G and 2G access, which will be superimposed onto the current CDMA network of Vivo, with completion scheduled for December 31, 2010. Such implementation includes acquiring all the hardware, software and engineering services necessary as well as installation, configuration, integration, testing, activation and temporary operation of the respective elements. The contracts also include the SW updates and the furnishing of the new features, guarantees, support and management, as well as O&M and integration with the network system management, the interaction capability of the networks to function with other operators and integrating with the service platforms. The total cost of this new network is R$1,089 million.

     On August 2, 2007, Vivo signed a stock purchase agreement with Telpart to acquire control of Telemig Participações and Tele Norte Participações and 22.72% and 19.34%, respectively, of their total capital for an aggregate amount of R$1.2 billion, subject to certain price adjustments. On April 3, 2008, Vivo announced that (i) all conditions precedent to the acquisition of Telemig were fulfilled, (ii) Vivo had paid the purchase price in the total amount of R$1.23 billion, including R$70.51 million in connection with the acquisition of subscription rights, and (iii) Vivo had acquired, as of that date, the direct control of Telemig. See “Item 4.A.—Information on the Company—Our History and Development—Acquisition of Telpart, Telemig and Tele Norte”.

     On December 20, 2007, Vivo signed a stock purchase agreement with Telemar for the sale of all the shares of Tele Norte that it was acquiring from Telpart under the terms of the stock purchase agreement dated August 2, 2007. This additional stock purchase agreement was signed to facilitate Vivo’s acquisition of the shares of Telemig from Telpart. On April 3, 2008, Vivo transferred to Telemar all the shares of Tele Norte that it acquired from Telpart. See “Item 4.A.—Information on the Company—Our History and Development —Acquisition of Telpart, Telemig and Tele Norte”.

     In October 2008 the Company signed a credit facility with the Banco do Nordeste do Brasil (BNB) in the amount of R$389.0 million, through the Northeast Constitutional Fund. This new financing shall be used for expansion of the network already existing in the States of Bahia, Sergipe and Maranhão and for implementing a new network in the States of Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

D. Exchange Controls

     There are no restrictions on ownership of preferred shares or common shares by individuals or legal entities domiciled outside of Brazil.

     The right to convert dividend or interest on shareholders’ equity payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the investments have been registered with the Central Bank and the CVM. Such restrictions on the remittance of foreign capital abroad may hinder or prevent the custodian for our preferred shares represented by our ADSs or the holders of our preferred shares from converting dividends, distributions or the proceeds from any sale of these preferred shares into U.S. dollars and remitting the U.S. dollars abroad. Holders of our ADSs could be adversely affected by delays in, or refusal to grant any, required government approval to convert Brazilian currency payments on the preferred shares underlying our ADSs and to remit the proceeds abroad.

     Resolution No. 1,927 of the National Monetary Council provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. It restates and amends Annex V to Resolution No. 1,289 of the National Monetary Council, known as the Annex V Regulations. The ADS program was approved under the Annex V Regulations by the Central Bank and the CVM prior to the issuance of the ADSs. Accordingly, the proceeds from the sale of ADSs by ADR holders outside Brazil are free of Brazilian foreign investment controls, and holders of the ADSs are entitled to favorable tax treatment. See “—Taxation—Brazilian Tax Considerations.”

     Under Resolution 2,689, of the CMN, foreign investors registered with the CVM may buy and sell Brazilian securities, including our preferred shares, on the Brazilian stock exchange. Registration is available to qualified foreign investors, which principally include foreign financial institutions, legal entities and individuals. Resolution 2,689 also extends favorable tax treatment to registered investors. See “—Taxation—Brazilian Tax Considerations.”

113

---

Table of Contents

     Pursuant to the Resolution 2,689, foreign investors must: (i) appoint at least one representative in Brazil with the ability to perform actions regarding the foreign investment; (ii) complete the appropriate foreign investor registration form; (iii) obtain registration as a foreign investor with CVM; and (iv) register the foreign investment with the Central Bank.

     The securities and other financial assets held by a foreign investor pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or by the CVM or be registered in register, clearing and custody systems authorized by the Central Bank or by the CVM. In addition, the trading of securities is restricted to transactions carried out on the stock exchanges or over-the-counter markets licensed by the CVM.

Registered Capital

     Amounts invested in our preferred shares by a non-Brazilian holder who qualifies under Resolution 2,689 and obtains registration with the CVM, or by the depositary representing an ADS holder, are eligible for registration with the Central Bank. This registration which must be done before the first investment on Brazilian stock exchanges (the amount so registered is referred to as registered capital) allows the remittance to and outside Brazil of foreign currency, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized through, dispositions of our preferred shares. The registered capital per preferred share purchased in the form of an ADS, or purchased in Brazil and deposited with the depositary in exchange for an ADS, will be equal to its purchase price (stated in U.S. dollars). The registered capital per preferred share withdrawn upon cancellation of an ADS will be the U.S. dollar equivalent of (i) the average price of a preferred share on the Brazilian stock exchange on which the most preferred shares were traded on the day of withdrawal or (ii) if no preferred shares were traded on that day, the average price on the Brazilian stock exchange on which the most preferred shares were traded in the fifteen trading sessions immediately preceding such withdrawal. The U.S. dollar equivalent will be determined on the basis of the average market rates quoted by the Central Bank on these dates.

     A non-Brazilian holder of preferred shares may experience delays in effecting Central Bank registration, which may delay remittances abroad. This delay may adversely affect the amount in U.S. dollars, received by the non-Brazilian holder.

     A certificate of registration has been issued in the name of the depositary with respect to the ADSs and is maintained by the custodian on behalf of the depositary. Pursuant to the certificate of registration, the custodian and the depositary are able to convert dividends and other distributions with respect to the preferred shares represented by our ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges such ADSs for preferred shares, such holder will be entitled to continue to rely on the depositary’s certificate of registration for five business days after such exchange, following which such holder must seek to obtain its own certificate of registration with the Central Bank. Thereafter, any holder of preferred shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such preferred shares, unless the holder is a duly qualified investor under Resolution 2,689 or obtains its own certificate of registration. A holder that obtains a certificate of registration will be subject to less favorable Brazilian tax treatment than a holder of ADSs. See “—Taxation—Brazilian Tax Considerations.”

     If the holder does not qualify under Resolution 2,689 by registering with the CVM and the Central Bank and appointing a representative in Brazil, the holder will be subject to less favorable Brazilian tax treatment than a holder of ADSs. Regardless of qualification under Resolution 2,689, residents in tax havens are subject to less favorable tax treatment than other foreign investors. See “—Taxation—Brazilian Tax Considerations.”

     Under current Brazilian legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with federal government directives. There can be no assurance that the Brazilian government will not impose similar restrictions on foreign repatriations in the future. See “Item 3.D.—Key Information—Risk Factors—Risks Relating to Brazil.”

114

---

Table of Contents

E. Taxation

     The following is a discussion of the material Brazilian and U.S. federal income tax consequences of the acquisition, ownership and disposition of preferred shares or ADSs by certain U.S. holders. This discussion is based upon the tax laws of Brazil and the United States as in effect on the date of this annual report, which are subject to change, possibly with retroactive effect, and to differing interpretations. You should consult your own tax advisers as to the Brazilian, U.S. federal or other tax consequences of the acquisition, ownership and disposition of preferred shares or ADSs, including, in particular, the effect of any state, local or non-U.S., non-Brazilian tax laws.

     Although there is presently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of preferred shares or ADSs.

Brazilian Tax Considerations

     The following is a discussion of the material Brazilian tax consequences of the acquisition, ownership and disposition of preferred shares or ADSs by a U.S. Holder, as defined under “—U.S. Federal Income Tax Considerations,” not deemed to be domiciled in Brazil for Brazilian tax purposes. This discussion does not address all the Brazilian tax considerations that may be applicable to any particular non-Brazilian holder, and each non-Brazilian holder should consult its own tax advisor about the Brazilian tax consequences of investing in preferred shares or ADSs.

     Taxation of Dividends

     Dividends paid by us in cash or in kind from profits generated on or after January 1, 1996 (i) to the depositary in respect of preferred shares underlying ADSs or (ii) to a U.S. holder or non-Brazilian holder in respect of preferred shares will generally not be subject to Brazilian withholding tax. We do not have any undistributed profits generated before January 1, 1996.

     Distributions of Interest on Shareholders’ Equity

     Brazilian corporations may make payments to shareholders characterized as interest on shareholders’ equity as an alternative form of making distributions. The rate of interest may not be higher than the federal government’s long-term interest rate, or the TJLP, as determined by the Central Bank from time to time. The total amount distributed as interest on shareholders’ equity may not exceed the greater of (i) 50% of net income (before taking the distribution and any deductions for income taxes into account) for the year in respect of which the payment is made or (ii) 50% of retained earnings for the year prior to the year in respect of which the payment is made. Payments of interest on shareholders’ equity capital are decided by the shareholders on the basis of recommendations of the company’s board of directors.

     Distributions of interest on shareholders’ equity capital paid to Brazilian and non-Brazilian holders of preferred shares, including payments to the depositary in respect of preferred shares underlying ADSs, are deductible by us for Brazilian corporate income tax purposes. These payments to U.S. holders or non-Brazilian holders are subject to Brazilian withholding tax at the rate of 15%. If the recipient of the payment is domiciled in a tax haven jurisdiction (i.e., a country that does not impose any income tax or that imposes tax at a rate of less than 20%), the rate will be 25%.

     No assurance can be given that our board of directors will not recommend that future distributions of profits will be made by means of interest on shareholders’ equity capital instead of by means of dividends.

     Amounts paid as interest on shareholders’ equity capital (net of applicable withholding tax) may be treated as payments in respect of the dividends we are obligated to distribute to our shareholders in accordance with our bylaws (estatutos) and Brazilian Corporate Law. Distributions of interest on shareholders’ equity capital in respect of the preferred shares, including distributions to the depositary in respect of preferred shares underlying ADSs, may be converted into U.S. dollars and remitted outside of Brazil, subject to applicable exchange controls.

115

---

Table of Contents

     Taxation of Gains

      Gains realized outside Brazil by a U.S. holder or other non-Brazilian holder on the disposition of property located in Brazil, including preferred shares, to another non-Brazilian holder are subject to Brazilian tax. In this case, gains would be subject to a 15% withholding tax rate (unless there is an agreement secured between Brazil and the country of residence of the beneficiary), except if the beneficiary is located in a low-tax jurisdiction, as defined by Brazilian law, in which case the applicable rate would be 25%.

     Our understanding is that ADSs do not qualify as property located in Brazil and, therefore, are not subject to Brazilian taxes upon disposition to other non-Brazilian holders. Insofar as this understanding has not been tested through the administrative or judicial courts, we are unable to evaluate what the final ruling on the matter will be.

     Gains realized by a U.S. holder or other non-Brazilian holder on dispositions of preferred shares in Brazil or in transactions with Brazilian residents may be free of Brazilian tax, or may be taxed at a rate of 25% or 15%, depending on the circumstances.

     Gains on the disposition of preferred shares obtained upon cancellation of ADSs are not taxed in Brazil if the disposition is made and the proceeds are remitted abroad within five business days after cancellation, unless the investor is a resident of a jurisdiction that, under Brazilian law, is deemed to be a tax haven.

     Gains realized on preferred shares through transactions with Brazilian residents or through transactions in Brazil off of the Brazilian stock exchanges are generally subject to be taxed at a rate of 15%.

     Gains realized on preferred shares through transactions on Brazilian stock exchanges are generally subject to tax at a rate of 15%, unless the investor is entitled to tax-free treatment for the transaction under Resolution 2,689 of the National Monetary Council Regulations, described immediately below.

Resolution 2,689, which as of March 31, 2000 superseded the Annex IV Regulations that previously provided tax benefits to foreign investors, extends favorable tax treatment to a U.S. holder or non-Brazilian holder of preferred shares who has (i) appointed a representative in Brazil with power to take action relating to the investment in preferred shares, (ii) registered as a foreign investor with the CVM and (iii) registered its investment in preferred shares with the Central Bank. Under Resolution 2,689 securities held by foreign investors must be maintained under the custody of, or in deposit accounts with, financial institutions duly authorized by the Central Bank and the CVM. In addition, the trading of securities is restricted under Resolution 2,689 to transactions on Brazilian stock exchanges or qualified over-the-counter markets. The preferential treatment generally afforded under Resolution 2,689 and afforded to investors in ADSs is not available to residents of tax havens. All preferred shares underlying ADSs qualify under Resolution 2,689.

There can be no assurance that the current preferential treatment for U.S. holders and other non-Brazilian holders under Resolution 2,689 will be maintained.

Gain on the disposition of preferred shares is measured by the difference between the amount in Brazilian currency realized on the sale or exchange and the acquisition cost of the shares sold, measured in Brazilian currency, without any correction for inflation. Although the matter is not free from doubt, there are arguments to sustain the position that the acquisition cost of shares registered as an investment with the Central Bank is calculated on the basis of the foreign currency amount registered with the Central Bank. See “—Exchange Controls—Registered Capital.”

Gains realized by a U.S. holder and other non-Brazilian holder upon the redemption of preferred shares will be treated as gains from the disposition of such preferred shares to a Brazilian resident occurring off of a stock exchange and will accordingly be subject to be taxed at a rate of 15%. If the non-Brazilian holder is domiciled in a tax haven jurisdiction, the applicable rate would be 25%.

116

---

Table of Contents

     The purchase price of preferred shares sold on the Brazilian stock exchange is subject to withholding tax at a rate of 0.005%, except in the case of non-Brazilian holders who invest through Resolution No. 2,689. This tax may be offset against the 15% income tax due on the gains realized upon the sale of the shares.

     Any exercise of preemptive rights relating to the preferred shares or ADSs will not be subject to Brazilian taxation. Gains on the sale or assignment of preemptive rights relating to the preferred shares will be treated differently for Brazilian tax purposes depending on (i) whether the sale or assignment is made by the depositary or the investor and (ii) whether the transaction takes place on a Brazilian stock exchange. Gains on sales or assignments made by the depositary on a Brazilian stock exchange are not taxed in Brazil, but gains on other sales or assignments may be subject to tax at rates up to 15%.

     The deposit of preferred shares in exchange for the ADSs is not subject to Brazilian income tax if the preferred shares are registered under Resolution 2,689 and the respective holder is not in a tax-haven jurisdiction. If the preferred shares are not so registered or the holder is in a tax-haven jurisdiction, the deposit of preferred shares in exchange for ADSs may be subject to Brazilian capital gains tax at a rate of 15%.

     The withdrawal of preferred shares in exchange for ADSs is not subject to Brazilian tax. Upon receipt of the underlying preferred shares, a U.S. holder or other non-Brazilian holder entitled to benefits under Resolution 2,689 will be entitled to register the U.S. dollar value of such shares with the Central Bank as described above, under “Exchange Controls—Registered Capital.” If a U.S. holder or non-Brazilian holder does not qualify under Resolution 2,689, he will be subject to the less favorable tax treatment described above in respect of exchanges of preferred shares. Brazil’s tax treaties do not grant relief from taxes on gains realized on sales or exchanges of preferred shares.

     1. Beneficiaries Residing or Domiciled in Tax Havens or Low-Tax Jurisdictions

     Law No. 9,779, dated as of January 19, 1999, states that, with the exception of limited circumstances, any income derived from operations by a beneficiary that resides or is domiciled in a country considered to be a tax haven is subject to income tax to be withheld by the source at a rate of 25%. Accordingly, if the distribution of interest attributed to shareholders’ equity is made to a beneficiary residing or domiciled in a tax haven, the applicable income tax will be at a rate of 25%, instead of 15%. The increased rate also applies for capital gains paid to residents of low-tax jurisdictions as of February 2004.

     In accordance with Law No. 9,959, non-Brazilian holders of ADSs or preferred shares who are residents of tax havens have been excluded from the tax incentives granted to holders of ADSs and investors under Resolution No. 2,689 since January 1, 2000 and are subject to the same tax treatment applicable to holders who are residents of or domiciled in Brazil.

     2. Other Brazilian Taxes

     There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of preferred shares or ADSs by a non-Brazilian holder except for gift and inheritance taxes levied by some states in Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil or in the relevant state to individuals or entities who are resident or domiciled within such Brazilian state. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of preferred shares or ADSs.

     Tax on Financial Transactions

     The IOF is a tax on foreign exchange, securities, credit and insurance transactions. The IOF rate may be changed by an Executive Decree (rather than a law). In addition, the IOF rate is not subject to the ex-post-facto principle, which provides that laws increasing the rate of or creating new taxes will only come into effect as of the latter of (i) the first day of the year following their publication, or (ii) ninety days after their publication. A statute increasing the IOF rate will therefore take effect from its publication date.

     Brazilian law imposes a tax on foreign exchange transactions, or “IOF/Exchange Tax,” on the conversion of reais into foreign currency and on the conversion of foreign currency into reais. As of October 20, 2009, any inflow of funds related to investments carried out in the Brazilian financial and capital markets by a non-resident holder that has registered its investment in Brazil with the Central Bank under the rules of Resolution No. 2,689, dated January, 26, 2000 (a “2,689 Holder”) is subject to the IOF/Exchange Tax at a rate of 2.0% . However, foreign exchange transactions related to outflows of funds in connection with investments carried out in the Brazilian financial and capital markets are subject to the IOF/Exchange Tax at a rate of zero, which also applies to payments of dividends and interest on shareholders’ equity to 2,689 Holders with respect to investments in the Brazilian financial and capital markets. With the exception of these transactions, the rate applicable to most foreign exchange transactions is 0.38% . Other rates may apply to particular transactions and the Brazilian government may increase the rate at any time by up to 25.0% on the foreign exchange transaction amount. However, any increase in rates will only apply to future transactions.

117

---

Table of Contents

     Brazilian law imposes a tax on transactions involving bonds and securities, or “IOF/Bonds Tax,” due on transactions involving bonds and securities, including those carried out on a Brazilian stock exchange. The rate of the IOF/Bonds Tax applicable to the transfer of shares with the sole purpose of enabling the issuance of ADSs is currently 1.5% . This rate is applied on the product of (a) the number of shares which are transferred, multiplied by (b) the closing price for those shares on the date prior to the transfer or, if such closing price is not available on that date, the last available closing price for those shares. The Brazilian government may increase the rate of the IOF/Bonds Tax at any time by up to 1.5% per day of the transaction amount, but only in respect of future transactions.

U.S. Federal Income Tax Considerations

     The following are the material U.S. federal income tax consequences to U.S. Holders described herein of owning and disposing of preferred shares or ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to hold such securities. The discussion applies only if you hold preferred shares or ADSs as capital assets for tax purposes and it does not describe all of the tax consequences that may be relevant to holders subject to special rules, such as:

• certain financial institutions;

• insurance companies;

• dealers and traders in securities or foreign currencies;

• persons holding preferred shares or ADSs as part of a hedge, “straddle,” integrated transaction or similar transaction;

• persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

• partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

• persons liable for the alternative minimum tax;

• tax-exempt organizations;

• persons holding preferred shares or ADSs that own or are deemed to own ten percent or more of our voting stock; or

• persons who acquired our ADSs or shares pursuant to the exercise of any employee stock option or otherwise as compensation.

     If an entity that is classified as a partnership for U.S. federal income tax purposes holds preferred shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partnerships holding preferred shares or ADSs and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of the preferred shares or ADSs.

118

---

Table of Contents

     This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. It is also based in part on representations by the depositary and assumes that each obligation under the Deposit Agreement and any related agreement will be performed in accordance with its terms.

     You are a “U.S. Holder” if you are a beneficial owner of preferred shares or ADSs and if you are, for U.S. federal tax purposes:

• a citizen or individual resident of the United States;

• a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or

• an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

     THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY. U.S. HOLDERS OF PREFERRED SHARES OR ADSs ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING OR DISPOSING OF PREFERRED SHARES OR ADSs, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS.

     In general, if you own ADSs, you will be treated as the owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if you exchange ADSs for the underlying shares represented by those ADSs.

     The U.S. Treasury has expressed concern that parties to whom American depositary shares are released before shares are delivered to the depositary (“pre-release”), or intermediaries in the chain of ownership between holders and the issuer of the security underlying the American depositary shares, may be taking actions that are inconsistent with the claiming of foreign tax credits by holders of American depositary shares. These actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of Brazilian taxes, and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, each described below, could be affected by actions taken by such parties or intermediaries.

     This discussion assumes that the Company is not, and will not become, a passive foreign investment company, as described below.

     Taxation of Distributions

     Distributions paid on ADSs or preferred shares will generally be treated as dividends to the extent paid out of the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions will be reported to U.S. Holders as dividends. Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid by qualified foreign corporations to certain non-corporate U.S. Holders in taxable years beginning before January 1, 2011 are taxable at a maximum rate of 15%. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid on stock that is readily tradable on an established securities market in the United States, such as the New York Stock Exchange where our ADSs are traded. You should consult your tax advisers to determine whether the favorable rate will apply to dividends you receive and whether you are subject to any special rules that limit your ability to be taxed at this favorable rate.

     The amount of a dividend will include any amounts withheld by us in respect of Brazilian taxes on the distribution. The amount of the dividend will be treated as foreign-source dividend income to you and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations under the Code. Dividends will be included in your income on the date of your, or in the case of ADSs, the depositary’s, receipt of the dividend.

119

---

Table of Contents

     The amount of any dividend income paid in reais will be a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of such receipt regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. You may have foreign currency gain or loss if the amount of such dividend is not converted into U.S. dollars on the date of such receipt.

     Subject to applicable limitations that may vary depending upon your circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, any Brazilian income taxes withheld from dividends on preferred shares or ADSs will be creditable against your U.S. federal income tax liability. See “—Brazilian Tax Considerations—Taxation of Dividends” and “—Brazilian Tax Considerations—Distributions of Interest on Shareholders’ Equity” for a discussion of when such taxes may be withheld. The rules governing foreign tax credits are complex and, therefore, you should consult your tax adviser regarding the availability of foreign tax credits in your particular circumstances. Instead of claiming a credit, you may, at your election, deduct such Brazilian taxes in computing your taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits must apply to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States.

     Other Brazilian Taxes

     Brazilian IOF/Exchange Tax imposed on a purchase of shares and IOF/Bonds Tax imposed on a deposit of shares in exchange for ADSs (as discussed under “—Brazilian Tax Considerations”) will not be creditable foreign taxes for U.S. federal income tax purposes. U.S. Holders should consult their tax advisers as to whether those taxes would be deductible for U.S. federal income tax purposes.

     Sale and Other Disposition of Preferred Shares or ADSs

     For U.S. federal income tax purposes, gain or loss you realize on the sale or other disposition of preferred shares or ADSs will be capital gain or loss, and will be long-term capital gain or loss if you held the preferred shares or ADSs for more than one year. The amount of your gain or loss will equal the difference between your tax basis in the preferred shares or ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of preferred shares or ADSs, and you do not receive significant foreign source income from other sources, you may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax. If a Brazilian tax is withheld on the sale or disposition of preferred shares or ADSs, your amount realized will include the gross amount of the proceeds of such sale or disposition before deduction of the Brazilian tax. See “—Brazilian Tax Considerations—Taxation of Gains” for a description of when a disposition may be subject to taxation in Brazil.

     Passive Foreign Investment Company Rules

     The Company believes that it was not a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes for its 2009 taxable year. If the Company were a PFIC for any taxable year during which you held preferred shares or ADSs, gain you recognize on a sale or other disposition (including certain pledges) of the preferred shares or ADSs would be allocated ratably over your holding period for the preferred shares or ADSs. The amounts allocated to the taxable year of the sale or other disposition and to any year before the Company became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for such taxable year, and an interest charge would be imposed on the amount allocated to such taxable year. Similar rules would apply to any distribution in respect of preferred shares or ADSs in excess of 125% of the average of the annual distributions on preferred shares or ADSs that you receive during the preceding three years or your holding period, whichever is shorter. Furthermore, if the Company were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFIC for the taxable year in which it paid a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply. Certain elections may be available that would result in alternative treatments (such as a mark-to-market treatment) of the preferred shares or ADSs. You should consult your tax adviser to determine whether any such elections are available and, if so, what the consequences of the alternative treatments would be in your particular circumstances.

120

---

Table of Contents

     Information Reporting and Backup Withholding

     Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless (i) you are a corporation or other exempt recipient or (ii) in the case of backup withholding, you provide a correct taxpayer identification number and certify that you are not subject to backup withholding.

     The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

     U.S. HOLDERS OF OUR PREFERRED SHARES OR ADSs SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE BRAZILIAN, U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF OUR PREFERRED SHARES OR ADSs BASED UPON THEIR PARTICULAR CIRCUMSTANCES.

F. Dividends and Paying Agents

     We may pay our shareholders both dividends and interest on shareholders’ equity which is a form of distribution that is tax deductible in Brazil. The holders of preferred shares have been entitled to exercise voting rights since the 2004 General Shareholders Meeting as a result of our failure to pay the minimum dividends required by law. For the fiscal year ended December 31, 2008, the Board of Directors Meeting held on February 12, 2009 approved the payment of dividends in the amount of R$402.6 million, which was sufficient to meet the minimum dividend required by law. Pursuant to this Board authority and the authority granted at the General Meeting of Shareholders held on March 19, 2009, the dividends were paid on December 2, 2009 and upon this payment, the voting rights of holders of Vivo’s preferred shares that previously existed due to Vivo’s failure to pay all requested dividends were terminated..

     In compliance with our by-laws, at a special board meeting held on February 9, 2010, our Board of Directors approved the payment of dividends in an aggregate amount of approximately R$818.9 million. These dividends were declared on the basis of the 2009 closing balance sheet to the holders of common and preferred shares. The dividends payable to holders of preferred shares and common shares are comprised of approximately (a) R$104.1 million in interest on shareholders equity, as approved at the Board of Directors meeting held on December 14, 2009 and as calculated in conformity with article 9 of Law 9249/95, which, net of income tax, is approximately R$88.5 million, and (b) dividends in the amount of approximately R$730.3 million. The above mentioned dividends will be paid in two equal parts, on April 19, 2010 and October 25, 2010. These dividends are sufficient to meet the minimum dividend required by law and voting rights on the preferred shares will not be regained for 2010. Even if Vivo’s holders of preferred shares were to reacquire the voting rights at some time in the future, we would not expect these voting rights to affect voting control over Vivo because our controlling shareholders currently own more than 50% of our total capital.

G. Statement of Experts

     Not applicable.

H. Documents on Display

     We are subject to the information requirements of the Exchange Act, except that, as a foreign issuer, we are not subject to the proxy rules or the short swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the Commission. Reports and other information filed or furnished by us with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission’s Regional Offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained by mail from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may also inspect these reports and other information at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which our ADSs are listed.

121

---

Table of Contents

     In addition, the Commission maintains a website that contains information filed electronically, which can be accessed over the Internet at http://www.sec.gov.

     We also file financial statements and other periodic reports with the CVM. Copies of our annual report on Form 20-F and documents referred to in this annual report and our by-laws will be available for inspection upon request at our offices at Avenida Doutor Chucri Zaidan, 860, 04583-110, São Paulo, SP, Brazil.

I. Subsidiary Information

     Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk from changes in both foreign currency exchange rates and interest rates. We are exposed to foreign currency exchange rate risk because certain of our costs (mostly interest on debt, capital expenditures and the purchase of wireless devices) are all or partially denominated in currencies (primarily the U.S. dollar and the Yen) other than those in which we earn revenues (primarily the real). Similarly, we are subject to market risk resulting from changes in interest rates that may affect the cost of our financing. We have entered into derivative instruments, such as foreign currency swaps, to manage our exchange rate risk. We do not hold or issue derivative or other financial instruments for trading purposes. See Note 32 to our financial statements for a sensitivity analysis of our risk variables and derivative instruments.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     The depositary, The Bank of New York Mellon, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs or from intermediaries acting for them. The depositary also collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:		For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		• Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
		• Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$.02 (or less) per ADS (or portion thereof) A fee equivalent to the lesser of (1) the fee for the issuance of ADS or shares received in exercise of rights distributed, but whose securities or rights are instead sold by the depositary and the net proceeds distributed; and (2) the amount of such proceeds.		• Any cash distribution.
		• Distribution of proceeds of sales of securities or rights.
Registration or transfer fees		• Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

122

---

Table of Contents

Expenses of the depositary		• Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
		• Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes		• As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities		• As necessary

     Subject to certain terms and conditions, the Bank of New York Mellon has agreed to reimburse us for certain expenses it incurs that are related to establishment and maintenance expenses of the ADS program, including the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors.

     As of December 31, 2009, we received from the depositary of our ADSs US$3,647 thousand which was used for general corporate purposes such as the payment of costs and expenses associated with (1) the preparation and distribution of proxy materials, (2) the preparation and distribution of marketing materials and (3) consulting and other services related to investor relations.

     On October 13, 2009, the Depositary Agreement of Telemig Participações was terminated as a result of the merger of shares approved at the Extraordinary General Meeting held on July 27, 2009. No fees were paid to the depositary in connection with the termination of the Telemig Participações depositary receipt facility.

See also “Item 10.E.—Additional Information—Taxation.”

123

---

Table of Contents

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 

     None. 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 

     None. 

ITEM 15. CONTROLS AND PROCEDURES 

     (a) Disclosure Controls and Procedures 

     Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2009. Based on that evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. Our disclosure controls and procedures are effective in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and are effective in ensuring that information to be disclosed in the reports that we file or su bmit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. 

     (b) Management’s Annual Report on Internal Control over Financial Reporting 

     Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Vivo’s internal control system was designed to provide reasonable assurance as to the integrity and reliability of the published financial statements. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the control system are met. 

     Management evaluated the internal control over financial reporting under the supervision of our Chief Executive Officer, or CEO and Chief Financial Officer (our Vice-President of Finance), or CFO as of December 31, 2009. Management evaluated the effectiveness of our internal control over financial reporting based on the criteria set out in the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework. Vivo’s management concluded that as of December 31, 2009, our internal control over financial reporting was adequate and effective based on these criteria. 

     Our independent registered public accounting firm, Ernst & Young Auditores Independentes S.S., has issued an attestation report on the effectiveness of our internal controls over financial reporting as of December 31, 2009. The report on the audit of our internal control over financial reporting is included herewith. 

     (c) Attestation Report of the Registered Public Accounting Firm 

     Ernst & Young Auditores Independentes S.S. (“EY”), the independent registered public accounting firm that has audited our consolidated financial statements, has issued an attestation report on the effectiveness of our internal controls over financial reporting as of December 31, 2009. The attestation report appears on page F-3. 

124

---

Table of Contents

     (d) Changes in Internal Control over Financial Reporting

     We have made no change to our internal control over financial reporting for the year ended 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     At the Board of Directors meeting held on April 7, 2009, our Directors determined and designated that José Guimarães Monforte is an “audit committee financial expert” within the meaning of this Item 16A.

ITEM 16B. CODE OF ETHICS

     In May 2005, we implemented a Code of Ethics and Conduct for all employees. The Code’s objective is to promote the fulfillment of policies, regulations and other applicable rules with honesty, accuracy and ethics. It applies to all employees and/or persons exercising similar functions in the Company and sets forth the consequences and responsibilities for non-compliance. Vivo executives have pledged to fulfill the directions of their superiors and applicable rules, policies, directions and legislation and to cause their subordinates to do the same, and also to make the necessary clarifications and communications, so that the Code’s principles and values can be practiced by all those involved. You can obtain a copy of our Code of Ethics, free of charge, by requesting a copy from Mr. Carlos Raimar Schoeninger at +55 (11) 7420-1172.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Our consolidated financial statements have been audited by Ernst & Young Auditores Independentes S.S. (“Ernst & Young”) for the years ended December 31, 2009 and 2008. The chart below sets forth the total amount billed to us by Ernst & Young for services performed in the years 2009 and 2008, respectively, and breaks down these amounts by category of service:

		For year ended December 31,
		2009		2008
		(in thousands of reais)
Audit fees		7,659		6,535
Audit-related fees		1,767		729
Tax fees		235		-
Total		9,661		7,264

Audit Fees

     Audit fees are the aggregate fees billed by Ernst & Young for the audit of our consolidated and annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.

Audit-related Fees

     Audit-related fees are the aggregate fees billed by Ernst & Young Auditores Independentes S.S. for audit compliance reports issued in connection with regulatory requirements from ANATEL and in connection with training regarding compliance with Sarbanes-Oxley.

Tax Fees

Tax fees are fees for professional services rendered for tax compliance services.

125

---

Table of Contents

Pre-Approval Policies and Procedures

     The audit committee approves all audit, audit-related services, tax services and other services provided by Ernst & Young. Any services provided by Ernst & Young that are not specifically included within the scope of the audit must be pre-approved by the audit committee prior to any engagement. The audit committee is permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimis exception before the completion of the engagement. In 2009 and 2008, none of the fees paid to Ernst & Young were approved pursuant to the de minimis exception.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     We have an audit committee, whose members follow the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended. See “Item 16G.—Corporate Governance—Committees—Audit Committee and Audit Committee Additional Requirements.”

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS

     None.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

     Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

     The significant differences between our corporate governance practices and the NYSE corporate governance standards are as follows:

Independence of Directors and Independence Tests

     The Brazilian Corporate Law and our by-laws require that our directors be elected by our shareholders at a general shareholders meeting. Nine of our directors are appointed by our controlling shareholder, but three were appointed in accordance with Sarbanes-Oxley.

     The Brazilian Corporate Law and CVM establish rules in relation to certain qualification requirements and restrictions, investiture, compensation, duties and responsibilities of the companies’ executives and directors. Although we believe these rules provide adequate assurances that our directors are independent, we believe such rules would permit us to have directors that would not otherwise pass the independence tests established by the NYSE.

Executive Sessions

     According to the Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected into executive positions. The remaining non-management directors are not expressly empowered to serve as a check on management and there is no requirement that those directors meet regularly without management.

     Notwithstanding, none of our executive officers are members of our board of directors.

Committees

     We have an Audit Committee and a Disclosure Committee, but we are not required under applicable Brazilian Corporate Law to have, and accordingly we do not have a Nominating Committee, Corporate Governance Committee or Compensation Committee. Pursuant to our by-laws our directors are elected by our shareholders at a general shareholders meeting. Compensation for our directors and executive officers is established by our shareholders.

126

---

Table of Contents

     Audit Committee and Audit Committee Additional Requirements

     In April 2003, the SEC stated that the listing of securities of foreign private issuers may be exempt from the audit committee requirements if the issuer meets certain requirements under Rule 10A-3(c)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Notwithstanding the exemptions provided for pursuant to Rule 10A-3(c)(3), we have an Audit Committee, whose members fully comply with the independence requirements of Rule 10A-3. See “Item 6.C.—Directors, Senior Management and Employees—Board Practices” and “Item 16D.—Exemptions from the Listing Standards for Audit Committees.”

     The function of our audit committee is to oversee the:

• evaluation of accounting and financial data;

• recruitment, selection and evaluation of third party auditors;

• evaluation of internal auditing;

• evaluation of internal control procedures;

• preparation of Audit Committee Reports that are required to be included in the Company’s annual proxy statement, pursuant to SEC rules and regulations;

• observance of industry best practices with respect to laws and regulations; and

• assembly, whenever deemed necessary, for meetings of the committee.

     It is also the responsibility of the committee to take all actions necessary in connection with delegations by the Company’s board of directors pursuant to the committee’s charter and domestic and international legal and regulatory requirements.

     Disclosure Committee and Disclosure Policy

     The Policy for Disclosure of Relevant Act or Fact was set up by the Board of Directors of Vivo in compliance with Article 16 of CVM Instruction No. 358, dated July 17, 2002.

     The ultimate responsibility for the disclosure of relevant information, acts or facts is incumbent upon the CEO, the CFO and the Investor Relations Officer, the first two being responsible for authorizing information to be disclosed, while the Investor Relations Officer is responsible for the communication itself of the relevant information, under the terms of the provisions of the Relevant Act or Fact Policy and CVM Instructions 358/02 and 369/02.

     Disclosures are reviewed by the Disclosure Committee in support of the CEO and CFO. The Disclosure Committee is responsible for processing the disclosure of information and relevant Acts and Facts of the Company, and for ensuring quality disclosure of information, as well as for the implementation of the Disclosure Procedures and Controls.

     The Disclosure Committee reports directly to the CEO and the CFO and is supervised by the internal auditors. This Committee is composed by one coordinator (from Investor Relations, Mergers and Acquisitions and Financial Planning) and seven other members (representing the General Secretary and the Legal Officer, Budget and Control of Management Officer, Accounting Officer, Institutional Relations and Communication Officer, Financial, Communication and Publicity Officer, and Regulation and External Relations Officer) and has the duty of evaluating the need to outsource services (such as auditors, legal counsel and other independent consultants) in order to provide adequate support for the disclosure process.

Shareholder Approval of Equity Compensation Plans

     Our shareholders do not have the opportunity to vote on all equity compensation plans. However, any issuance of new shares that exceeds the authorized capital is subject to shareholder confirmation.

127

---

Table of Contents

Corporate Governance Guidelines

     We have not adopted any corporate governance guidelines in addition to the rules imposed upon us by applicable Brazilian Corporate Law. We believe that the corporate governance guidelines applicable to us under Brazilian Corporate Law are consistent with the guidelines established by the NYSE. We have adopted and observe (i) the Policy of Disclosure of Material Acts or Facts, which deals with the public disclosure of all relevant information as per CVM’s guidelines; and (ii) the Policy of Negotiation of Equities, which requires management to inform all transactions relating to our securities.

Code of Business Conduct and Ethics

     Although the adoption of a code of ethics is not required by Brazilian Corporate Law, Vivo implemented a Code of Ethics and Conduct for all Directors and employees in May, 2005. See “Item 16.B.—Code of Ethics.”

PART III

ITEM 17. FINANCIAL STATEMENTS

     See “Item 18.— Financial Statements.”

ITEM 18. FINANCIAL STATEMENTS

     See our consolidated financial statements beginning on Page F-1.

ITEM 19. EXHIBITS

	1.1		By-laws (Estatuto Social) of Vivo Participações S.A.—English translation.
	2.1		Deposit Agreement dated as of July 21, 1998, as amended and restated as of November 2, 1998, as further amended and restated as of July 28, 2008. (10)
	2.2		Note Purchase Agreement relating to the issuance by Telesp Celular Participações S.A. of €416,050,488.19 of floating rate notes due 2004, dated November 28, 2001, among Portugal Telecom International Finance B.V., Telesp Celular Participações S.A. and Citibank N.A. London. (2)
	2.3		Agency Agreement relating to the issuance by Telesp Celular Participações S.A. of €416,050,488.19 of floating rate notes due 2004, dated November 28, 2001, among Citibank N.A. London and Telesp Celular Participações S.A. (2)
	2.4		Shareholders Agreement dated as of February 6, 2001, among DDI Corporation, Inepar Telecomunicações S.A., ITX Corporation and Telesp Celular Participações S.A. (2)
	2.5		First Amendment to the Shareholders Agreement of Global Telecom S.A. dated August 14, 2001, among Telesp Celular Participações S.A., KDDI Corporation (formerly known as DDI Corporation), Inepar Telecomunicações S.A. and ITX Corporation—together with an English translation. (2)
	4.1		Authorization Term of the Personal Mobile Service entered by ANATEL and Telesp Celular Participações S.A.—English translation. (3)
	4.2		Authorization Term of the Personal Mobile Service entered by ANATEL and Global Telecom S.A.— English translation. (3)
	4.3		Authorization Term of the Personal Mobile Service entered by ANATEL and Tele Centro Oeste Celular Participações S.A.—English translation. (4)
	4.4		Authorization Term of the Personal Mobile Service entered by ANATEL and Telebahia Celular S.A.— English translation. (5)
	4.5		Authorization Term of the Personal Mobile Service entered by ANATEL and Telergipe Celular S.A.—English translation. (5)
	4.6		Authorization Term of the Personal Mobile Service entered by ANATEL and Telerj Celular S.A.— English translation. (6)

128

---

Table of Contents

	4.7		Authorization Term of the Personal Mobile Service entered by ANATEL and Telest Celular S.A.— English translation. (6)
	4.8		Agreement between Telesp Celular Participações S.A. and Fixcel S.A. dated as of April 25, 2003 for the acquisition of 64.03% of the voting capital stock of Tele Centro Oeste Celular Participações S.A.—English Summary. (1)
	4.9		Consulting Agreement (Instrumento Particular de Prestação de Serviços de Consultoria) dated as of January 7, 1999, between Telesp Celular S.A. and Portugal Telecom S.A., currently Portugal Telecom S.G.P.S. S.A. (2)
	4.10		Supply Agreement (Contrato de Fornecimento) dated as of August 27, 2001, between Global Telecom S.A. and Motorola do Brasil Ltda.—English summary. (2)
	4.11		Financing Agreement (Contrato de Financiamento) dated July 19, 2001, among the Brazilian Social and Economic Development Bank (Lender), Global Telecom S.A. (Borrower) and Telesp Celular S.A. (Guarantor)—English summary. (2)
	4.12		Financing Agreement (Contrato de Financiamento) dated July 19, 2001, among Banco Bradesco S.A. and Banco Alfa de Investimento S.A. (Lenders) and Global Telecom S.A. (Borrower) and Telesp Celular S.A. (Guarantor)—English summary. (2)
	4.13		Protocol of Merger of Shares and Merger of Companies and Instrument of Justification among Telesp Celular Participações S.A. and Tele Centro Oeste Celular Participações S.A., Tele Sudeste Celular Participações S.A., Tele Leste Celular Participações S.A. and Celular CRT Participações S.A. dated December 4, 2005. (7)
	4.14		Agreement dated as of August 4, 2006 among Vivo Participações S.A., Ericsson and Huawei— English summary. (1)
	4.15		Stock Purchase Agreement dated as of August 2, 2007 among Telpart Participações S.A. and Vivo Participações S.A. (8)
	4.16		Credit facility dated as of October 30, 2008 among Vivo Participações S.A. and Banco do Nordeste do Brasil S.A. (10)
	6.1		Statement regarding computation of per share earnings. (9)
	8.1		List of Subsidiaries.
	12.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	12.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	13.1		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	13.2		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

____________________
(1)		Incorporated by reference to our Form 20-F for the fiscal year ended December 31, 2006, filed with the Commission on May 3, 2007.
(2)		Incorporated by reference to Telesp Celular Participações S.A. annual report on Form 20-F for the fiscal year ended December 31, 2001, filed on June 21, 2002.
(3)		Incorporated by reference to Telesp Celular Participações S.A. annual report on Form 20-F/A for the fiscal year ended December 31, 2002, filed on June 24, 2003.
(4)		Incorporated by reference to Tele Centro Oeste Celular Participações S.A.’s annual report on Form 20-F for the fiscal year ended December 31, 2002, filed on June 30, 2003.
(5)		Incorporated by reference to Tele Leste Celular Participações S.A. annual report on Form 20-F for the fiscal year ended December 31, 2002, filed on June 24, 2003.
(6)		Incorporated by reference to Tele Sudeste Celular Participações S.A. annual report on Form 20-F for the fiscal year ended December 31, 2002, filed on June 24, 2003.
(7)		Incorporated by reference to our Form F-4 filed with the Commission on December 16, 2005.
(8)		Incorporated by reference to our Form 6-K filed with the Commission on August 13, 2007.

129

---

Table of Contents

(9)		Incorporated by reference to Note 39(j) to our audited consolidated financial statements included elsewhere in this annual report.
(10)		Incorporated by reference to our Form 20-F for the fiscal year ended December 31, 2008, filed with the Commission on April 22, 2008.

     These exhibits omit certain promissory notes and other instruments and agreements with respect to our long-term debt, none of which authorize any securities totaling more than 10% of our total assets. We hereby agree to furnish to the Securities and Exchange Commission copies of any such omitted promissory notes or other instruments or agreements upon request by the Commission.

130

---

Table of Contents

SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	VIVO PARTICIPAÇÕES S.A.
	By:	/s/ Roberto Oliveira de Lima
		Name: Roberto Oliveira de Lima
		Title: Chief Executive Officer
	By:	/s/ Cristiane Barretto Sales
		Name: Cristiane Barretto Sales
		Executive Vice President of Finance,
		Planning and Control and Investor
		Relations Officer

Date: March 31, 2010

1

---

Vivo Participações S.A. Consolidated Financial Statements for the Years Ended December 31, 2009, 2008 and 2007 and  Report of Independent Registered Public Accounting Firm  ERNST & YOUNG Auditores Independentes S.S.

---

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

		Pages
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2009 and 2008		F-5 and F-6
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007		F-5
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007		F-8 and F-9
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007		F-10 and F-11
Consolidated Statements of Value Added for the Years Ended December 31, 2009, 2008 and 2007		F-12
Notes to the Consolidated Financial Statements for the Years Ended December 31, 2009, 2008 and 2007		F-13
Definitions:
Brazilian GAAP - Accounting principles in accordance with Brazilian Corporate Law.
U.S. GAAP - Generally accepted accounting principles in the United States of America.

---

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Vivo Participações S.A. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders' equity, cash flows and value added for each of the three years in the period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vivo Participações S.A. and subsidiaries at December 31, 2009 and 2008, and the consolidated results of their operations, their cash flows and their value added for each of the three years in the period ended December 31, 2009, in conformity with accounting practices adopted in Brazil, which differ in certain respects from accounting principles generally accepted in the United States of America. Information related to the nature and effect of such differences is presented in Notes 33, 34 and 35 to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Vivo Participações S.A.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2010, except for internal control over financial reporting related to Notes 33, 34 and 35 to the consolidated financial statements, as to which the date is March 30, 2010, expressed an unqualified opinion thereon.

São Paulo, February 9, 2010,
except as to Notes 33, 34 and 35, as to which the date is March 30, 2010

ERNST & YOUNG
Auditores Independentes S.S.
CRC-2-SP-015199/O-6

/s/ Luiz Carlos Passetti
Partner

/s/ Drayton Teixeira de Melo
Partner

F-2

---

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Vivo Participações S.A.

We have audited Vivo Participações S.A.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Vivo Participações S.A.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express an opinion on Vivo Participações S.A.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

F-3

---

Table of Contents

In our opinion, Vivo Participações S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Vivo Participações S.A. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, cash flows and value added for each of the three years in the period ended December 31, 2009 and our report dated February 9, 2010, except for Notes 33, 34 and 35, as to which the date is March 30, 2010, expressed an unqualified opinion thereon.

São Paulo, February 9, 2010, except for internal control over financial reporting related to Notes 33, 34 and 35 to the consolidated financial statements, as to which the date is March 30, 2010.

ERNST & YOUNG
Auditores Independentes S.S.
CRC-2-SP-015199/O-6

/s/ Luiz Carlos Passetti
Partner

/s/ Drayton Teixeira de Melo
Partner

F-4

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008
(In thousands of Brazilian reais)

				December 31,
		Note		2009		2008
ASSETS
Current assets:
Cash and cash equivalents		4		1,258,574		2,182,913
Short-term portion of investments pledged as collateral		-		39,197		41,487
Trade accounts receivable, net		5		2,546,806		2,578,498
Inventories		6		423,634		778,704
Recoverable taxes		7		1,186,231		1,238,124
Deferred income taxes		28.c		796,460		1,120,523
Derivative contracts		10		14,700		347,448
Prepaid expenses		8		311,328		316,622
Other assets		9		246,028		322,934
Total current assets		-		6,822,958		8,927,253
Noncurrent assets:
Long-term assets:
Long-term portion of investments pledged as collateral		-		51,344		47,335
Recoverable taxes		7		968,398		905,896
Deferred income taxes		28.c		1,802,511		1,826,126
Derivative contracts		10		137,060		285,303
Prepaid expenses		8		74,383		80,206
Other assets		9		118,635		46,402
Goodwill		11		2,700,578		1,440,429
Property, plant and equipment, net		12		6,445,109		7,183,908
Intangible assets, net		13		2,866,289		2,998,553
Deferred assets, net		14		29,864		55,393
Total noncurrent assets		-		15,194,171		14,869,551
TOTAL ASSETS		-		22,017,129		23,796,804

The accompanying notes are an integral part of these consolidated financial statements.

F-5

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008
(In thousands of Brazilian reais)

				December 31,
		Note		2009		2008
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Payroll and related accruals		15		161,366		185,471
Trade accounts payable		16		3,053,587		3,726,324
Taxes payable		17		892,893		785,603
Loans and financing		18		688,397		2,006,972
Debentures and promissory note		18		266,256		1,112,876
Interest on shareholders’ equity and dividends		-		934,358		545,864
Reserve for contingencies		19		70,396		91,136
Derivative contracts		10		30,970		105,352
Other liabilities		20		834,824		820,233
Total current liabilities		-		6,933,047		9,379,831
Noncurrent liabilities:
Long-term liabilities:
Taxes payable		17		317,063		275,272
Loans and financing		18		2,306,632		3,826,385
Debentures and promissory note		18		1,863,209		1,056,923
Reserve for contingencies		19		98,409		102,947
Derivative contracts		10		131,418		97,971
Other liabilities		20		176,527		202,144
Total noncurrent liabilities		-		4,893,258		5,561,642
Non-controlling Interest				-		587,804
Shareholders’ equity:
Capital stock		21		8,780,150		6,710,526
Treasury shares		21		(11,070)		(11,070)
Capital reserves		21		518,678		708,574
Income reserves		21		903,066		859,497
Total shareholders’ equity		-		10,190,824		8,267,527
TOTAL LIABILITIES, NON-CONTROLLING
INTEREST AND SHAREHOLDERS’ EQUITY				22,017,129		23,796,804

The accompanying notes are an integral part of these consolidated financial statements.

F-6

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 , 2008 AND 2007
(In thousands of Brazilian reais, except earnings (loss) per share)

				Years Ended December 31,
		Note		2009		2008		2007
NET OPERATING REVENUE		22		16,363,186		15,469,664		12,492,494
COST OF SERVICES AND GOODS SOLD		23		(8,951,570)		(8,179,024)		(6,623,290)
GROSS PROFIT				7,411,616		7,290,640		5,869,204
Selling expenses		24		(4,357,422)		(4,107,055)		(3,532,783)
General and administrative expenses		25		(1,334,190)		(1,164,178)		(1,207,195)
Other operating income (expenses), net		26		240,812		(469,861)		(509,442)
				(5,450,800)		(5,741,094)		(5,249,420)
OPERATING INCOME BEFORE NET FINANCIAL EXPENSES				1,960,816		1,549,546		619,784
NET FINANCIAL EXPENSES		27		(487,229)		(637,699)		(462,789)
NET INCOME BEFORE INCOME AND SOCIAL CONTRIBUTION
TAXES AND NON-CONTROLLING INTEREST		-		1,473,587		911,847		156,995
Income and social contribution taxes		28		(590,453)		(469,502)		(256,825)
Non-controlling				(25,648)		(52,662)		-
interest
NET INCOME (LOSS) FOR THE YEAR		-		857,486		389,683		(99,830)
SHARES OUTSTANDING AT DECEMBER 31 (IN THOUSANDS)				399,590		367,396		1,437,623
EARNINGS (LOSS) PER SHARE OUTSTANDING AT THE BALANCE
SHEET DATE (IN BRAZILIAN REAIS)		-		2,15		1.06		(0,07)

The accompanying notes are an integral part of these consolidated financial statements.

F-7

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais)

				Capital reserves						Income reserves
						Special		Tax										Retained  earnings
		Capital		Good will		goodwill		incentive		Legal		Reserve for		Reserve for		Treasury		(accumulate
		stock		reserve		reserve		reserve		reserve		contingencies		expansion		shares		losses)		Total
BALANCES AT DECEMBER 31, 2006 – LAW
6,404/76		6,347,784		515,089		552,638		3,589		100,960		11,070		653,038		(11,070)		198,648		8,371,746
Effects of Law 11,638/07		-		-		-		-		-		-		-		-		(799)		(799)
Unclaimed dividends and interest on
shareholders’ equity		-		-		-		-		-		-		-		-		11,936		11,936
Loss for the year		-		-		-		-		-		-		-		-		(99,830)		(99,830)
Consolidation adjustments:
Grants received by subsidiary		-		-		-		-		-		-		-		-		13,286		13,286
Transfer to reserve for expansion		-		-		-		-		-		-		124,479		-		(124,479)		-
BALANCES AT DECEMBER 31, 2007 – LAW
11,638/07		6,347,784		515,089		552,638		3,589		100,960		11,070		777,517		(11,070)		(1,238)		8,296,339
Capital increase – Special Shareholders’														-		-		-		-
Meeting of May 26, 2008		362,742		-		(362,742)		-		-		-
Effects of Law 11,638/07		-		-		-		-		-		-		-		-		(5,760)		(5,760)
Unclaimed dividends and interest on														-		-		14,063		14,063
shareholders’ equity		-		-		-		-		-		-
Net income for the year		-		-		-		-		-		-		-		-		389,683		389,683
Proposed allocation of income:
Legal reserve		-		-		-		-		19,995		-		-		-		(19,995)		-
Interest on shareholders’ equity		-		-		-		-		-		-		-		-		(161,113)		(161,113)
Dividends		-		-		-		-		-		-		-		-		(218,793)		(218,793)
Additional dividends		-		-		-		-		-		-		(50,045)				3,153		(46,892)
BALANCES AT DECEMBER 31, 2008 – LAW
11,638/07		6,710,526		515,089		189,896		3,589		120,955		11,070		727,472		(11,070)		-		8,267,527

The accompanying notes are an integral part of these consolidated financial statements.

F-8

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
     STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 (Continuation)
(In thousands of Brazilian reais)

				Capital reserves						Income reserves
						Special		Tax										Retained  earnings
		Capital		Good will		goodwill		incentive		Legal		Reserve for		Reserve for		Treasury		(accumulate
		stock		reserve		reserve		reserve		reserve		contingencies		expansion		shares		losses)		Total
BALANCES AT DECEMBER 31, 2008 – LAW
11,638/07		6,710,526		515,089		189,896		3,589		120,955		11,070		727,472		(11,070)		-		8,267,527
Capital increase - with reserves -Special
Shareholders’ Meeting of Feb 12, 2009		189,896		-		(189,896)		-		-		-		-		-		-		-
Capital increase - shares merger -Special
Shareholders’ Meeting of July 27, 2009		1,879,728		-		-		-		-		-		-		-		-		1,879,728
Unclaimed dividends and interest on
shareholders’ equity		-		-		-		-		-		-		-		-		11,447		11,447
Net income for the year		-		-		-		-		-		-		-		-		857,486		857,486
Consolidation adjustments:
Tax incentive		-		-		-		-		-		-		-		-		9,137		9,137
Proposed allocation of income:
Legal reserve		-		-		-		-		43,569		-		-		-		(43,569)		-
Interest on shareholders’ equity l		-		-		-		-		-		-		-				(104,136)		(104,136)
Dividends		-		-		-		-		-		-		-				(723,689)		(723,689)
Additional dividends		-		-		-		-		-		-		-		-		(6,676)		(6,676)
BALANCES AT DECEMBER 31, 2009 – LAW
11,638/07		8,780,150		515,089		-		3,589		164,524		11,070		727,472		(11,070)		-		10,190,824

The accompanying notes are an integral part of these consolidated financial statements.

F-9

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais)

		Years ended December 31,
		2009		2008		2007
OPERATING ACTIVITIES
Net income (loss)		857,486		389,683		(99,830)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Non-controlling interest		25,648		52,662		-
Depreciation and amortization		3,257,516		2,974,185		2,492,169
Provision for loss on investments		-		60		-
Loss on fixed assets disposals		3,926		34,088		21,724
Write-off and reversals of provisions for losses on inventories		(3,592)		(9,672)		(5,285)
Loss (gain) on forward, swap and option contracts		453,791		(519,490)		509,174
Loss (gain) on loans, financing and debentures		235,074		688,304		(301,290)
Monetary and exchange variation		(12,913)		20,729		4,870
Allowance for doubtful accounts		213,235		303,846		365,740
Plans for post-retirement benefits		3,321		4,288		5,635
Provision (reversal) for contingencies		134,652		138,699		184,594
Provision (reversal) for suppliers		(12,582)		(73,950)		74,408
Provision for (reversal of) dismantling cost		(41,688)		(7,580)		8,158
Provision for taxes		51,047		21,619		(35,578)
Provision (reversal) loyalty program		(51,999)		27,798		11,333
Deferred income taxes		348,532		417,872		238,651
Changes in operating assets and liabilities, net of acquired assets and
liabilities:
Customer accounts receivable		(181,543)		(491,380)		(583,239)
Inventories		358,662		(338,250)		(89,319)
Recoverable taxes		(76,671)		(408,682)		4,554
Other assets		14,069		(217,572)		(166,869)
Payroll and related accruals		(24,105)		(7,573)		16,844
Accounts payable		(754,127)		442,152		367,887
Interest on loans, financing and debentures, net		(774,880)		197,658		(6,364)
Taxes payable		80,154		153,866		114,807
Reserve for contingencies (payments)		(160,327)		(162,573)		(133,281)
Other
liabilities		101,754		91,283		197,165
Net cash provided by operating activities		4,044,440		3,722,070		3,196,658
INVESTING ACTIVITIES
Additions to property, plant and equipment and intangible assets		(2,275,344)		(2,940,418)		(2,014,646)
Additions to deferred assets		-		(30,306)		(2,067)
Acquisition of subsidiary, net of cash acquired (a)		-		(1,736,802)		-
Additions to investments		(2,898)		-		-
Received for subscription to minority		8,842		-		-
Other investments		-		(890)		-
Cash received on sale of property, plant and equipment		4,468		13,510		5,264
Net cash used in investing activities		(2,264,932)		(4,694,906)		(2,011,449)

F-10

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 (Continuation)
(In thousands of Brazilian reais)

		Years ended December 31,
		2009		2008		2007
FINANCING ACTIVITIES
Loans, financing and debentures:
New loans and debentures proceeds from issuance of debt		1,952,511		3,289,415		2,094,966
Payment of debt, loans, financing and debentures		(4,291,367)		(1,756,625)		(1,911,418)
Net settlement on derivative contracts		51,473		(541,040)		(562,216)
Cash received for replacement shares – reverse stock split		4,063		-		-
Interest on shareholders’ equity and dividends paid		(419,304)		(54,190)		(17,547)
(Payment) cash received relating to reverse stock split		(1,223)		27,199		-
Net cash provided by (used in) financing activities		(2,703.847)		964,759		(396,215)
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS		(924,339)		(8,077)		788,994
CASH AND CASH EQUIVALENTS
At the beginning of the year		2,182,913		2,190,990		1,401,996
At the end of the year		1,258,574		2,182,913		2,190,990
SUPPLEMENTAL CASH FLOW INFORMATION
Income and social contribution taxes paid		161,128		28,834		107,841
Interest paid		774,880		439,466		311,771
(a) Details of acquisition of Telemig
Net book value acquired, net of cash		-		884,953		-
Goodwill recorded at acquisition date		-		1,723,369		-
Special goodwill reserve acquired		-		70,511		-
Cash acquired		-		(942,031)		-
Cash paid for acquisition of Telemig		-		1,736,802		-
NONCASH TRANSACTION
Grants		2,271		5,938		13,286
Unclaimed dividends and interest on shareholders' equity		11,447		14,063		11,936
Proposed dividends and interest on shareholders’ equity		834,501		555,744		-
Acquisition of non-controlling interest through an
exchange of shares		1,879,728		-		-

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-11

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
CONSOLIDATED STATEMENTS OF VALUE ADDED
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais)

		Years ended December 31,
		2009		2008		2007
INCOME		21,579,225		19,934,651		15,584,927
Service and goods sold		21,001,062		19,765,092		15,878,432
Other income		791,398		473,404		342,235
Allowance for doubtful accounts, net		(213,235)		(303,845)		(365,740)
INPUTS PURCHASED FROM THIRD PARTIES		(9,134,375)		(9,368,859)		(7,866,233)
Inputs consumed		(2,978,883)		(2,699,657)		(2,110,887)
Cost of goods sold		(2,500,132)		(3,046,332)		(2,580,574)
Materials, energy, third party services and other		(3,828,297)		(3,632,000)		(3,166,684)
(Loss) Recovery of asset values		(7,063)		9,130		(8,088)
GROSS VALUE ADDED		12,264,850		10,565,792		7,988,694
DEPRECIATION AND AMORTIZATION		(3,257,516)		(2,974,184)		(2,492,169)
NET VALUE PRODUCED		9,007,334		7,591,608		5,496,525
VALUE ADDED RECEIVED AS A TRANSFER		892,977		1,341,032		220,450
Financial income and monetary and exchange rate changes for assets		892,977		1,341,032		220,450
TOTAL VALUE ADDED TO BE DISTRIBUTED		9,900,311		8,932,640		5,716,975
DISTRIBUTION OF VALUE ADDED		9,900,311		8,932,640		5,716,975
Payroll and related accruals		830,838		671,122		598,419
Direct remuneration		539,508		336,482		295,424
Benefits		255,233		304,314		276,771
FGTS		36,097		30,326		26,224
Taxes		6,005,432		5,205,246		4,002,527
Federal		2,427,555		2,007,952		1,465,374
State		3,557,217		3,180,408		2,515,703
Municipal		20,660		16,886		21,450
Interest and rentals		2,180,907		2,613,927		1,215,859
Financial expenses and monetary exchange rate changes		1,377,480		1,937,224		660,391
Rentals		803,427		676,703		555,468
Remuneration of proper capital		883,134		442,345		(99,830)
Interest on shareholders´equity		104,136		161,113		-
Dividends		723,689		218,793		-
Retained earnings (losses)		29,661		9,777		(99,830)
Participation of non-controlling interest in retained earnings		25,648		52,662		-

The accompanying notes are an integral part of these consolidated financial statements.

F-12

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

1. OPERATIONS

a. Equity Control

Vivo Participações S.A. (“Vivo Participações” or “Company”) is a publicly-held company that, at December 31, 2009, has as its controlling shareholders Brasilcel N.V. and its subsidiaries Portelcom Participações S.A. and TBS Celular Participações Ltda., which jointly hold, treasury shares excluded, 59.6% of the Company’s total capital stock.

Brasilcel N.V. is jointly controlled by Telefónica S.A. (50% of the total capital stock), PT Móveis, Serviços de Telecomunicações, SGPS, S.A. (49.99% of the total capital stock) and Portugal Telecom, SGPS, S.A. (0.01% of the total capital).

b. Subsidiaries

As of December 31, 2009, the Company is the 100% controlling shareholder of Vivo S.A. (“Vivo” or “subsidiary”) and of Telemig Celular S.A. (“Telemig " or “subsidiary”), which provide personal mobile telephone services, including activities that are necessary or useful for the performance of said services, in conformity with the authorizations granted to them.

At December 31, 2008, the Company was the 100% controlling shareholder of Vivo and held 58.9% and 7.4% of the total capital stock of Telemig Celular Participações S.A. (“Telemig Participações”) and Telemig, respectively.

Telemig Participações was the controlling shareholder of Telemig, holding 83.25% of its total capital stock.

At November 13, 2009, Telemig Participações was merged into Vivo Participações (Note 1d).

c. Authorization and Frequencies

The subsidiaries’ business and the services they may provide are regulated by the National Telecommunications Agency (“ANATEL”), the Regulatory Authority (Federal Independent Agency) for telecommunication services in accordance with Law No. 9472, dated July 16, 1997 – General Telecommunications Law (LGT). Its actions are carried out, as a rule, by enactment of regulations and supplementary plans.

The authorizations granted by ANATEL may be renewed just once, for a 15-year period. Biannualy, after the first renewal, a payment of fees equivalent to 2% (two percent) of the company’s revenue for the preceding year, net of taxes and mandatory social contributions related to the application of the Basic and Alternative Plans of Service is required to be made to ANATEL.

The subsidiaries engage in cellular mobile telephone services (Personal Mobile Service – SMP), including activities necessary or useful for the performance of said services, in conformity with the authorization granted to them, as follows:

F-13

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Area of Service		Autorization Valid Until
Region 1
Rio de Janeiro
Radio frequencies 800/1900/2100 MHz		11/29/20 (band A), 11/30/20 (band L) and
		04/30/23 (band J)
Espírito Santo
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 11/30/23 (band A and L)
Amazonas, Roraima, Amapá, Pará and Maranhão
Radio frequencies 800/2100 MHz		11/29/13 (band B) and 04/30/23 (band J)
Minas Gerais (except Triângulo Mineiro)
Radio frequencies 800/1900/2100 MHz		04/29/23 (band A) and 04/30/23 (band J)
Minas Gerais (Triângulo Mineiro)
Radio frequencies 800/1900/2100 MHz		04/28/20 (band E) and 04/29/23 (band J)
Bahia
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 06/29/23 (band A and L)
Sergipe
Radio frequencies 800/1900/2100 MHz		12/15/23 (band A and L) and 04/30/23 (band J)
Alagoas, Ceará, Paraíba, Pernambuco, Piauí and Rio Grande do Norte
Radio frequencieas 1900/2100 MHz		12/17/22 (band L) and 04/30/23 (band J)
Region 2
Paraná and Santa Catarina
Radio frequencies 800/1900/2100 MHz		04/08/13 (band B and L) and 04/30/23 (band J)
Rio Grande do Sul
Radio frequencies 800/1900/2100 MHz		12/17/22 (band A and L) and 04/30/23 (band J)
Distrito Federal
Radio frequencies 800/1900/2100 MHz		07/24/21 (band A and L) and 04/30/23 (band J)
Goiás and Tocantins
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 10/29/23 (band A and L)
Mato Grosso
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 03/30/24 (band A and L)
Mato Grosso do Sul
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 09/28/24 (band A and L)
Rondônia
Radio frequencies 800/1900/2100 MHz		04/30/23 (band J) and 07/21/24 (band A and L)
Acre
Radiofrequências 800/1900/2100 MHz		04/30/23 (banda J) and 07/15/24 (banda A e L)
Rio Grande do Sul (Pelotas, Morro Redondo, Capão do Leão and Turuçu), Mato
Grosso do Sul (area of the CTBC) and Goiás (area of the CTBC)
Radio frequencies 1900/2100 MHz		12/07/22 (band L) and 04/30/23 (band J)
Region 3
São Paulo
Radio frequencias 800/1900/2100 MHz		04/30/23 (band J) and 08/05/23 (band A and L)
São Paulo (Ribeirão Preto, Guatapará and Bonfim Paulista)
Radio frequencia 800/1900/2100 MHz		04/30/23 (band J) and 01/20/24 (band A and L)
São Paulo (area of the Franca and region)
Radio frequencie 1900/2100 MHz		12/07/22 (band L) and 04/30/23 (band J)

F-14

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

d. Corporate Events in 2009

At a Special Shareholders’ Meeting held on July 27, 2009, the shareholders of Telemig Participações and of Telemig approved the Protocol of Non-Controlling Shares Acquisition and Instrument of Justification, executed on May 29, 2009, which permited the merger, of all the existing non-controlling shares of Telemig into Telemig Participações, with the holders of the acquired non-controlling shares of Telemig directly receiving the new shares to which they were entitled in the controlling company, Telemig Participações (the shareholders received 17.4 new shares of Telemig Participações for each share of Telemig), in accordance with the exchange ratios agreed to at the Meetings of the Boards of Directors meetings of the companies held on May 29, 2009.

At the same date, at a Special Shareholders’ Meeting, the shareholders of the Company approved the Protocol of Non-Controlling Shares Acquisiton and Instrument of Justification, executed on May 29, 2009, which provided for the merger, into Vivo Participações, of the non-controlling shares of Telemig Participações, with the holders of the acquired shares of Telemig Participações directly receiving the new shares to which they were entitled in the parent company (for each share of Telemig Participações, its shareholders received 1.37 new shares of Vivo Participações), in conformity with the exchange ratio agreed to at the Meetings of the Board of Directors of the companies, held on May 29, 2009.

The acquisition of the non-controlling shares of Telemig and of Telemig Participações did not entail any change in the number and composition by type of their shares, which are now ultimately owned by Vivo Participações. The holders of common and preferred shares of Telemig that were merged into Telemig Participações’ equity received new shares of Telemig Participações of the same type, that is, the acquired preferred shares were replaced by new preferred shares of Telemig Participações, issued on behalf of their respective holders, and the merged common shares were replaced by new common shares of Telemig Participações, issued on behalf of their respective holders. Following, and in the same manner, the holders of non-controlling common and preferred shares of Telemig Participações acquired by Vivo Participações received new shares of Vivo Participações of the same type. Accordingly, at the end of the transaction, the non-controlling shareholders of Telemig and of Telemig Participações became shareholders of Vivo Participações.

In conformity with the provisions in Law 6404/76, article 252, paragraph 1, combined with article 8, the Appraisal Report, prepared by an independent company, based on the economic value of the shares of Telemig Participações merged into the Company for purposes of determination of the capital stock of the Company, was approved at that same date.

As a result of the above mentioned approvals, the subscribed and fully paid-up capital stock of the Company increased in value from R$6,900,422 to R$8,780,150 fully, represented by 400,713,827 book-entry shares, of which 137,269,188 are common shares and 263,444,639 are preferred shares, all of them registered and with no face value.

The above mentioned capital increase, of R$1,879,728, was generated from the fair value of the shares held by the minority shareholders of Telemig Participações, the book value of which was R$894,296. The difference between the fair value and the equity value of the acquired shares was recorded as a premium in the amount of R$985,432. Additionally, an amount of R$269,804 was recorded by Telemig Participações as premium upon the merger of the shares held by the non-controlling shareholders of its subsidiary company, Telemig. A capital increase of R$460,372 was recorded in such transaction, generated from the fair value of the acquired shares, the equity value of which totaled R$190,568. The premium amounts were posted to the intangible assets (note 11).

F-15

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The holders of common and preferred shares of Telemig and Telemig Participações and Shareholders common shares of Vivo Participações who dissented from the merger of shares of Telemig and of Telemig Participações, were entitled, as from the date of the special shareholders’ meetings of the companies to withdraw themselves from the respective companies and receive reimbursement of the shares they own at the date of communication of the Relevant Facts. Such reimbursement represented R$23, relating to 405 shares.

The calculations were quantified in consideration of the exchange ratios of shares of Telemig for shares of Telemig Participações and of shares of Telemig Participações for shares of Vivo Participações, pursuant to the previously described processes, resulted in share fractions which were re-allotted on the market at auctions held on September 24 and 29, 2009 at BM&F Bovespa. These over-allotment shares represented 54,169 common shares and 42,595 preferred shares, with a net value of R$40.95 per common share, and R$43.19 per preferred share, to be paid pro-rata to the fractions held by the shareholders and investors prior to the auctions.

Because Telemig became a wholly-owned subsidiary of Telemig Participações, and that Telemig Participações became a wholly-owned subsidiary of Vivo Participações, the registrations of Telemig and of Telemig Participações on the Brazilian Securities and Exchange Commission (“CVM”) and on BM&F Bovespa were requested to be cancelled. The cancellation of the registration of Telemig was granted on September 16, 2009. The cancellation of the registrations of Telemig Participações on CVM and on BM&F Bovespa were granted on October 16 and 19, 2009, respectively. The request for cancellation of the registration of Telemig Participações on the NYSE was filed by the NYSE itself, through Form 25, on September 28, 2009. At December 15, 2009, the Securities and Exchange Commission (“SEC”) authorized the actual filing of Form 15, cancelling the registration Telemig Participações with the SEC as of that date.

At a Special Shareholders’ Meeting held on November 13, 2009, the merger of Telemig Participações into Vivo Participações and consequent extinguishment of Telemig Participações was approved. The appraisal and approval were submitted to ANATEL, with the referred approval being obtained on November 04, 2009. As a result of such merger, Telemig became a wholly-owned subsidiary of Vivo Participações.

At a Special Shareholders’ Meeting held on November 30, 2009, the provision of cellular mobile telephone service was included and approved this provision was included in the corporate purpose of the Bylaws of the Company , in order to enable the future merger mentioned in the next paragraph.

At December 07, 2009, the Company communicated to its shareholders and to the market in general that it filed, at December 03, 2009, with the ANATEL, a request for prior approval of the merger of Telemig into Vivo Participações, in conformity with the provisions in Law no. 9.472/97 – General Telecommunications Law, in the Regulation for Verification of Share Control and Transfer of Share Control in Telecommunication Service Providers, as approved by Resolution no. 101/99, and in the other applicable regulatory instruments.

 

F-16

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

e. Agreement between Telefónica S.A. and Telecom Itália

In October 2007, TELCO S.p.A. (in which Telefónica S.A holds an interest of 42.3%), completed the acquisition of 23.6% ownership interest of Telecom Itália. Telefónica S.A. has the shared control of Vivo Participações S.A., through its joint venture with Portugal Telecom. Telecom Italia holds an interest in TIM Participações S.A (“TIM”), which is a mobile telephone operator in Brazil. As a result of the acquisition of its interest in Telecom Itália, Telefónica S.A. does not have any direct involvement in the operations of TIM. Additionally, any transactions between the Company and its subsidiaries and TIM are transactions in the regular course of business, which are regulated by the ANATEL.

2. BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS

The financial statements of the controlling company and its subsidiaries are presented in thousands of Brazilian reais (except as otherwise noted) and have been prepared based on the accounting practices adopted in Brazil, as well as on the rules issued by the Brazilian Securities and Exchange Commission (CVM), with due regard to the accounting standards set forth in the corporation law (Law no. 6404/76), which include the new provisions introduced, amended and revoked by Laws no. 11.638, dated December 28, 2007 and no. 11.941, dated May 27, 2009 (former Provisional Measure no. 449, dated December 03, 2008), with further regard, also, to the rules applicable to telecommunication service concessionaires.

The consolidated statement of operations, cash flow and statements of value added for the fiscal year ended December 31, 2008 include the consolidated income of Telemig Participações for the nine-month period (from April to December 2008). The consolidated statements for the years ended December 31, 2009 and 2008 are not comparable.

The fiscal years of the subsidiaries in the consolidated statement are consistent with those of the controlling company. The accounting policies were applied on an uniform basis in the consolidated companies and are consistent with those adopted in the previous fiscal year.

All intercompany balances arising out of transactions among the consolidated companies have been eliminated in the consolidated statements.

The changes in the accounting practices arising from application of Laws No. 11,638 and No. 11,941 have been measured and registered by the Company based on the following accounting pronouncements issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Securities and Exchange Committee (CVM) and by the Federal Accounting Council (“CFC”):

• Conceptual Structure for the Preparation and Presentation of Financial Statements, approved by CVM Resolution No. 539, dated March 14, 2008;

• CPC 01 – Reduction to the Recoverable Assets Value, approved by CVM Resolution No. 527, dated November 1, 2007;

• CPC 02 – Effects on the Changes in the Exchange Rates and Conversion of Financial Statements, approved by CVM Resolution No. 534, dated January 29, 2008;

• CPC 03 – Cash Flow Statement, approved by CVM Resolution No. 547, dated August 13, 2008;

• CPC 04 – Intangible Asset, approved by CVM Resolution No. 553, dated November 12, 2008;

• CPC 05 – Disclosure on Related Parties, approved by CVM Resolution No. 560, dated December 11, 2008;

F-17

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• CPC 06 – Commercial Leasing Transactions, approved by CVM Resolution No. 554, dated November 12, 2008;

• CPC 07 – Governmental Subsidy and Assistance, approved by CVM Resolution No. 555, dated November 12, 2008;

• CPC 08 – Transaction Costs and Premiums in the Issuance of Securities, approved by CVM Resolution No. 556, dated November 11, 2008;

• CPC 09 –Value Added Statement, approved by CVM Resolution No. 557, dated November 12, 2008;

• CPC 12 – Adjustment to Present Value, approved by CVM Resolution No. 564, dated December 17, 2008;

• CPC 13 – Initial Adoption of Law No. 11,638/07 and Provisional Measure No. 449/08, approved by CVM Resolution No. 565, dated December 17, 2008; and

• CPC 14 – Financial Instruments: Acknowledgement, Measurement and Evidencing, approved by CVM Resolution No. 566, dated December 17, 2008.

The Company shall adopt the following pronouncements and interpretations in order to prepare its financial statements as from 2010, with retroactive application to the extent applicable:

Pronouncements

• CPC 15 – Business Combination, approved by CVM Resolution No. 580, dated July 31, 2009;

• CPC 16 – Inventory, approved by CVM Resolution No. 575, dated June 5, 2009;

• CPC 18 – Investment in Affiliated Companies, approved by CVM Resolution No. 605, dated November 26, 2009;

• CPC 19 – Investment in Joint Undertaking, approved by CVM Resolution No. 606, dated November 26, 2009;

• CPC 20 – Loan Costs, approved by CVM Resolution No. 577, dated June 5, 2009;

• CPC 21 – Interim Statement, approved by CVM Resolution No. 581, dated July 31, 2009;

• CPC 22 – Segment Information, approved by CVM Resolution No. 582, dated July 31, 2009;

• CPC 23 – Accounting Policies, Change of Estimate, and Rectification of Error, approved by CVM Resolution No. 592, dated September 15, 2009;

• CPC 24 – Subsequent Events, approved by CVM Resolution No. 593, dated September 15, 2009;

• CPC 25 – Provisions, Contingent Liabilities, and Contingent Assets, approved by CVM Resolution No. 594, dated September 15, 2009;

• CPC 26 – Submission of Accounting Statements, approved by CVM Resolution No. 595, dated September 15, 2009;

• CPC 27 – Property, Plant and Equipment, approved by CVM Resolution No. 583, dated July 31, 2009;

F-18

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• CPC 30 – Revenue, approved by CVM Resolution No. 597, dated September 15, 2009;

• CPC 32 – Profit Taxes, approved by CVM Resolution No. 599, dated September 15, 2009;

• CPC 33 – Benefits to Employees, approved by CVM Resolution No. 600, dated October 7, 2009;

• CPC 35 – Separate Statements, approved by CVM Resolution No. 607, dated November 26, 2009;

• CPC 36 – Consolidated Statements, approved by CVM Resolution No. 608, dated November 26, 2009;

• CPC 37 – Initial Adoption of International Accounting Rules, approved by CVM Resolution No. 609, dated December 22, 2009;

• CPC 38 – Financial Instruments: Acknowledgment and Measurement, approved by CVM Resolution No. 604, dated November 19, 2009;

• CPC 39 – Financial Instruments: Submission, approved by CVM Resolution No. 604, dated November 19, 2009;

• CPC 40 – Financial Instruments: Evidencing, approved by CVM Resolution No. 604, dated November 19, 2009; and

• CPC 43 – Initial Adoption of Technical Procedures CPC 15 to 40, approved by CVM Resolution No. 610, dated December 22, 2009;

Interpretations

• ICPC 01 – Concession Contracts, approved by CVM Resolution No. 611, dated December 22, 2009;

• ICPC 03 – Supplementary Aspects of Commercial Leasing Transactions, approved by CVM Resolution No. 613, dated December 22, 2009;

• ICPC 06 – Hedge on Net Investment in Transactions Abroad, approved by CVM Resolution No. 616, dated December 22, 2009;

• ICPC 07 – Distribution of Profits in Natura, approved by CVM Resolution No. 617, dated December 22, 2009;

• ICPC 08 – Posting of the Dividend Payment Proposal, approved by CVM Resolution No. 601/09, dated October 7, 2009;

• ICPC 09 – Individual Accounting Statements, Separate Statements, Consolidated Statements, and Application of the Equity Accounting Method, approved by CVM Resolution No. 618, dated December 22, 2009;

F-19

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• ICPC 10 – Interpretation of the Initial Application to the Fixed Assets and the Property for Investment of Technical Pronouncements CPC 27, 28, 37 and 43, approved by CVM Resolution No. 619, dated December 22, 2009;

• ICPC 11 – Revenue from the Transfer of Customers’ Assets, approved by CVM Resolution No. 620, dated December 22, 2009; and

• ICPC 12 – Changes in Liabilities due to Discontinuance, Restructuring and Other Similar Liabilities, approved by CVM Resolution No. 621, dated December 22, 2009.

The authorization to complete the preparation of such financial statements was given at the Executive Committee’s Meeting held on February 9, 2010.

Reclassifications in the 2008 consolidated statement of operations

Some items of the consolidated statement of operations for the fiscal year ended on December 31, 2008 were reclassified to allow for comparison, as follows:

• Reclassification of the amortization of permits: overheads and administrative expenses for the costs related to services rendered; and

• Reclassification of the amortization of goodwill (own stores): overheads and administrative expenses for sales expenses.

						Financial
						Statements for
		Financial				2008 reclassified
		Statements for				for presentation
Accounts		2008 released		Reclassification		in 2009
Cost of service		(5,699,605)		(37,525)		(5,737,130)
Selling expenses		(4,104,416)		(2,639)		(4,107,055)
General and administrative expenses		(1,204,342)		40,164		(1,164,178)

The accompanying financial statements are a translation and adaptation of those originally issued in Brazil, based on Brazilian GAAP. Certain reclassifications and changes in terminology have been made and the notes have been expanded, in order to conform more closely to prevailing reporting practices pursuant to U.S. GAAP.

In order to facilitate the understanding of its financial information, and to provide more uniform information to its foreign and local shareholders, the Company has elected to prepare and present its primary financial statements in accordance with Brazilian GAAP, expressed in Brazilian Reais. Because Brazilian GAAP differs in certain significant respects from U.S. GAAP, a reconciliation of the net income and shareholders equity from Brazilian GAAP to equivalent amounts prepared under U.S. GAAP is provided herein (Note 33).

3. SUMMARY OF THE ACCOUNTING PRACTICES

a) Cash and cash equivalents

This item includes cash, positive balances in current accounts, financial investments redeemable within ninety (90) days from the transaction dates and with insignificant risk of change in market value. The financial investments included in cash equivalents are mostly classified in the category “financial assets measured at the fair value through results”.

F-20

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

b) Accounts receivable, net

The invoiced amounts are appraised at the value of the tariff on the date the service is provided. The services provided to the customers that have not yet been invoiced up to the balance sheet date are also included, and so are the accounts receivable related to the sales of handsets, simcards and accessories. An allowance for doubtful accounts was recorded in an amount deemed sufficient by Management taking into account the amounts overdue over 90 days, except for accounts receivable from interconnection fees, in addition to a portion that is being negotiated with the customers. Footnote 5 contains additional information relating to the receivables balance and bad debts reserves.

c) Inventories

Inventories comprise handsets, simcards, prepaid cards and accessories measured at the average acquisition cost, deducted by a provision for market adjustment, when applicable. A provision for the handsets considered obsolete or the quantities of which are higher than those usually marketed by the Company in a reasonable period of time has been booked.

d) Prepaid expenses

Prepaid expenses are stated at the amounts effectively disbursed and not yet incurred. The advanced expenses are appropriated to the statement of operations to the extent the related services and the economic benefits are obtained.

e) Fistel Fee

The value of the Telecommunications Inspection Fund (Fundo de Fiscalização das Telecomunicações – FISTEL) fee paid for the activation of new customers, monthly generated during the year, is deferred and amortized during the estimated period of customer retention, equivalent to 24 months.

f) Property, plant and equipment

Property, plant and equipment are stated at the cost of acquisition, formation or construction, plus interest and other financial charges incurred during the construction or development of projects. The depreciation of the properties is calculated by the straight-line method at the rates mentioned in note 12. The capitalized financial charges are depreciated according to the same criteria and useful life determined for the item of the property, plant and equipment into which they were incorporated. The property, plant and equipment are net of credits of the ICMS - Tax on Circulation of Goods and Services (state VAT) PIS - Profit Participation Program and COFINS - Social Security Financing Contribution (federal VAT), and the counterparty is recorded as recoverable taxes.

The expenses incurred related to repairs and maintenance of property, plant and equipment that represent asset improvements or increases in the capacity or useful life are capitalized, while the others are expensed as incurred. The estimated costs to be incurred in the dismantling of towers and equipment in rented real property are capitalized with a corresponding provision for reversal of fixed assets (note 20) and are depreciated over the useful life of the equipment, which does not exceed the lease term.

F-21

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Property, plant and equipment are written off after they are sold or when no future economic benefit is expected from their use or sale. Possible gains or losses (calculated as the difference between the net sale value and the residual value of the asset) are recorded in the statement of operations for the year in which the asset is written-off.

The residual value and useful life of the assets and the depreciation methods used are reviewed at the end of each year, and adjusted prospectively, as required.

g) Lease

Capital commercial leasing agreements are recognized in the property, plant and equipment and in the liabilities encompassing loans and financing, for the present value of the minimum mandatory installments of the agreement or the fair value of the assets, whichever is lower, plus, as applicable, the initial direct costs incurred with the transaction. The amounts posted in property, plant and equipment are depreciated over the economic useful life estimated for the assets or the duration established in the leasing agreement, whichever is shorter. The interest implied in the recognized liabilities of loans and financing are expensed according to the duration of the agreement, by the actual interest rate method. The operating commercial leasing agreements are recognized as expenses on a systematic basis that represents the period in which the benefit over the leased asset is obtained, even if such payments are not made on such basis.

h) Intangible Assets

Intangible assets separately acquired are measured in the initial recognition at the acquisition cost, and are subsequently amortized and/or impaired, as applicable. The premiums generated from investment acquisitions occurring until December 31, 2008, which are economically based on future profitability, were being amortized by the straight-line method for a period of 5 to 10 years, as from the dates of the original transactions. Since January 1, 2009, such premiums are no longer amortized, and will be subject to yearly tests to analyze impairments to their recoverable value (note 13). They also include the rights to use software acquired from third parties, authorization licenses obtained from ANATEL, goodwill amounts referring to own stores “fundo de comércio” (which are being amortized over the term of effectiveness of the agreements) and other intangible assets.

The useful life of the intangible assets is established as finite or indefinite.

Intangible assets with finite useful life are amortized over their economic useful life and are appraised as to the loss of recoverable value whenever there is an indication of impairment. The period and method of amortization of a finite-lived intangible asset are reviewed at the end of each fiscal year; unless impairment indicators are present requiring an interim period review. Changes in the useful life or standard of consumption of expected future benefits are recorded by means of change in the period or method of amortization, as applicable, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful life are not amortized, but are tested on a yearly basis in relation to losses of recoverable value. The classification of indefinite life is reviewed at the end of each fiscal year to determine whether such classification is still justifiable. Otherwise, the change in useful life from indefinite to finite is made in a prospectively.

Gains and losses resulting from the sale and consequently writing-off of an intangible asset are measured as the difference between the net amount obtained from the sale and the book asset value. The gains and losses are recognized in the statement of operations for the year in which the asset is written off.

F-22

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

i) Impairment

The Company evaluates the recovery of the book asset value applying the concept of value in use, through models of discounted cash flow of the cash-generating units representing all of the tangible and intangible assets of the Company.

The process of determination of the value in use involves the utilization of assumptions, judgments and estimates on cash flows, such as growth rates of revenues, costs and expenses, investment estimates, future working capital and discount rates. The assumptions on projected growth, cash flow and future cash flows are based on the Company’s business plan approved by the Management, as well as in comparable market data. They represent the best estimate of Management regarding the economic conditions that will exist during the economic life of the different cash-generating units, a set of assets that allow for the generation of cash flows. Future cash flows are discounted based on the capital cost rate - “CAPM - The Capital Asset Pricing Model”.

Consistently with the economic appraisal techniques, the value in use is appraised during a period of five years, and thereafter, considering the perpetuity of the assumptions in view of the capacity of continuity of the business for an indeterminate term. The growth rates used after the 5-year period vary from 2.5 to 4.5% .

The estimated future cash flows were discounted using a rate of 14% per year, for each cash-generating unit under review.

The main premises used to estimate the value in use are:

• Revenue: The revenues are projected from 2010 to 2014 considering the growth of the customer base pertaining to the different cash-generating units, the evolution of the market income vis-à-vis the GDP – Gross Domestic Product and the Company’s share in this market;

• Operating costs and expenses: The variable costs and expenses are projected according to the dynamics of the customer base, and the fixed costs and expenses are projected in line with the historical performance of the Company, as well as with the historical growth of the income; and

• Capex: Capital expenditures are estimated based on the technological infrastructure required to make feasible the offering of services.

The key premises rely on the historical performance of the Company and on reasonable and substantiated macroeconomic premises based on financial market projections, documented and approved by the Company’s Management.

The test of recovery of the Company’s fixed and intangible assets did not result in an impairment, since the estimated market value exceeds their net book value on the appraisal date.

j) Deferred charges

The pre-operating expenditures prior to January 1, 2009 refer to the pre-operating expenses of Global Telecom (fully amortized in 2009) and to the costs of network formation in the Northeast region, and are amortized by the straight-line method over 10 years. As permitted by Law No. 11,941, as of May 27, 2009, Vivo has chosen to keep the balance of the deferred assets that could not be allocated to other accounts, until they have been fully amortized. The deferred assets are also reviewed on a yearly basis with the purpose of appraising their recoverability.

F-23

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

k) Taxes, fees and contributions

The sales and services revenues are subject to ICMS or Tax on Services (“ISS”) at the rates prevailing in each region and to PIS and COFINS in the cumulative mode, for the revenues earned from the telecommunications services at the rates of 0.65% and 3.00%, respectively. The other revenues earned by the subsidiaries, including the revenues related to the resale of goods, in the non-cumulative mode, are levied at the rates of 1.65% and 7.60% for PIS and COFINS, respectively.

The pre-payments or other amounts likely to be offset are shown in the current or non-current assets, according to the expected date of payment.

Taxation on profits comprises income tax and social contribution, which are calculated based on the taxable results (adjusted profits), at the applicable rates, pursuant to prevailing law, where: 15%, plus 10% over the amount exceeding R$240 per year, refer to income tax, and 9% to social contribution. Therefore, additions to the accounting profit of expenses, temporarily nondeductible, or exclusions of income, temporarily nontaxable, considered for ascertainment of current taxable profits generate deferred tax assets or liabilities.

The deferred tax assets resulting from tax losses or negative base of social contribution are only recognized to the extent it is likely that there will be a positive tax base in the future. The deferred income tax and social contribution were measured based on the tax losses, social contribution negative base, and temporary differences by applying the prevailing rates of the mentioned taxes, according to the provisions of CVM Resolution No. 273, of August 20, 1998 and CVM Ruling No. 371, of June 27, 2002, and consider the expected generation of future taxable profits substantiated by a technical feasibility study approved by the Board of Directors.

The item of taxes, fees and contributions also include the legal obligations, as disclosed in note 17. The taxes classified as legal obligations are those whose legality or constitutionality are being discussed in court by the Company and its subsidiaries. Provisions are created for all such amounts, irrespective of the appraisal prepared by the legal counsels of the Company and its subsidiaries as to the chances of loss.

The following is the legend related to the taxes and contributions shown on this footnote:

- IRPJ – federal income tax;
- INSS – federal contribution to National Social Security Institute;
- CSSL – federal social contribution on income;
- COFINS – federal VAT;
- PIS – federal VAT;
- ICMS – state VAT;
- ISS – municipal tax on services provided;
- IRRF – withholding taxes;
- IOF – federal financial transaction tax;
- FUST – federal tax that serves to provide funds designed to cover the parcel of the cost attributable exclusively to the fulfillment of universal service targets of the telecommunication services that cannot be recovered through the efficient performance of services;
- FUNTTEL – federal tax that serves to stimulate technological development, the qualification of human resources, and job generation and to promote the access of small and medium companies to capital resources, so as to broaden the competitiveness of the Brazilian telecommunications industry;

F-24

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

 

- FISTEL - federal tax applicable to telecommunications transmission equipment which serves to provide funds to cover the expenses incurred by the Federal Government in performing inspections of telecommunication services and in developing the means and improving the techniques necessary for carrying out these inspections; and

- CIDE – Federal contribution of intervention on the economic dominium.

l) Provisions for contingencies

Provisions for contingencies are determined based on the opinions of the Company’s legal counsel and that of the Management as to the probable result of pending matters and are updated until the date of the balance sheet by the probable amount of loss, with consideration to the nature of each contingency.

m) Provision for the loyalty program

The subsidiaries have loyalty programs in place, in which the calls are transformed into points for future exchange of handsets and services. The accrued points, net of redemption, are provisioned considering the historical redemption data, generated points and the average point cost (note 20).

n) Interest on shareholders’ equity

Brazilian companies are allowed to pay interest on shareholders’ equity, which is similar to the payment of dividends, but is deductible for purposes of calculating of income tax. The Company has decided to pay interest to its shareholders with respect to the year ended at December 31, 2009 (note 21) and, pursuant to tax laws, it booked a reserve for the amount owed in consideration of the account of financial expenses for the year’s results. For purposes of submission of the yearly financial statements, the Company reversed such expense in consideration of a direct debit to the shareholders’ equity, abiding by the Brazilian accounting rules and CVM guidelines. The distribution of interest on shareholders’ equity to the shareholders is subject to withholding income tax at 15%.

o) Other assets and liabilities

An asset is recognized in the balance sheet when it is likely that its future economic benefit will be generated in favor of the Company or its subsidiaries, if its cost or value can be measured. The balance receivable includes commercial agreements arising from current transactions between the subsidiaries and their suppliers, the main references of which are the volume of purchases and the shared marketing campaigns.

A liability is recognized in the balance sheet when the Company or its subsidiaries have a legal obligation or an obligation created as a result of a past event, and it is probable that an economic resource will be required to settle it. The provisions are recorded based on the best estimate.

The subsidiaries sponsor pension funds of post-employment benefits and medical care, as well as other post-employment benefits to its employees (note 30). The subsidiaries’ contributions are determined on an actuarial basis and are recorded by the accrual method. The benefit plans are evaluated on an actuarial basis at the end of each fiscal year so as to verify whether the contribution fees are sufficient to form the reserves required for both current and future commitments.

The assets and liabilities are classified as current assets and current liabilities when their realization or settlement is likely to occur within the next twelve months. Otherwise, they are shown as non-current assets and non-current liabilities.

F-25

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

 

p) Adjustment to the present value of assets and liabilities

The long-term and short-term monetary assets and liabilities, when the effect is deemed to be relevant in relation to the financial statements as a whole, are adjusted to their present value. The adjustment to present value is calculated taking into account the contractual cash flows and the explicit interest rate, and in certain cases, implicit interest rate, of the respective assets and liabilities. Therefore, the interest embedded in the revenues, expenses and costs associated with such assets and liabilities are deducted with the purpose of recognizing them in accordance with the accrual method. Subsequently, such interest is reallocated to the lines of expenses and financial income for the year by using the actual interest rate method in relation to the contractual cash flows. The implicit interest rates applied were determined based on facts and circumstances and are deemed to be accounting estimates.

q) Government subvention and aid

As a result of the enactment of Provisionary Measure No. 2199-14, of August 24, 2001, subsequently amended by Law No. 11,196, of November 21, 2005, legal entities with title to projects located in areas under the jurisdictions of the Amazon Development Authority (“SUDAM”) and of the Northeast Development Authority (“SUDENE”), whose businesses fall into an economic sector that is considered a priority under an act issued by the Executive Branch, may request an income tax abatement as provided for in these regulations.

Telemig has been granted a tax benefit consisting of a 75% corporate tax reduction, based on net income earned from exploiting areas in northern Minas Gerais and the Jequitinhonha valley. This benefit has been granted up to and including 2013.

Vivo has been granted a tax benefit consisting of a 75% corporate tax reduction, based on income earned from exploiting areas in the states of Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Rondônia and Roraima. This benefit has been granted up to and including 2013.

According to article 195-A of Law No. 6404/76, a portion of net income for which a tax benefit has been granted was excluded from the calculation of mandatory dividends and may be used only for capital increase and loss amortization purposes.

r) Calculation of income

Sales revenue is presented at its net value, that is, excluding taxes, discounts and refunds (in the case of the sale of goods. The operating income is determined on an accrual basis:

r.1) Recognition of telecommunications service revenues

Service revenues are recognized as the services are rendered, and invoiced monthly. Revenues that have not been invoiced are calculated and then recognized when services are rendered. Prepaid cell phone recharge credit revenues, as well as respective taxes due there on, are deferred and recognized in the statement of operations when services are actually provided.

 

F-26

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

r.2) Recognition of revenues and costs of goods sold

Revenues and costs of goods sold (handsets, simcards and accessories) in its own stores are recognized when sold to end consumers. Revenues and costs of goods sold via dealers are recorded in the income upon activation of the handset, but, in any case, no later than 90 days after the sale date.

r.3) Financial income and expenses

Financial income and expenses represent interest, adjustment for inflation and foreign exchange rate changes derived from financial investments, derivative, loan, financing and debenture transactions; net present value adjustments of transactions that generate cash assets and liabilities; and other financial transactions.

s) Financial Instruments

Financial instruments are only recognized as of the date the Company or its subsidiaries are provided for in the contractual provisions. When recognized, they are initially recorded at fair value plus transaction costs directly imputable to their acquisition or issue, except in the case of financial assets and liabilities classified under this category at fair market value through statement of operations, where said costs are reported directly to the fiscal year’s statement of operations. Their subsequent measurement is made on each balance date according to the rules established for each type of financial assets and liabilities classification.

s.1) Financial assets: The main financial assets recognized by the Company and its subsidiaries are: cash and cash equivalents, securities, unrealized gains from derivative transactions and customer receivables. They are classified into the classes listed below, depending on the purpose for which they were purchased or issued:

(i) Financial assets measured at fair value through statement of operations include financial assets maintained for negotiation and designated assets upon initial recognition at fair value through statement of operations. They are classified as maintained for negotiation if they were intended to be sold or repurchased in the short term. Derivatives are also classified as “maintained for negotiation” with the exception of those designated as hedge instruments. They are measured at fair value on each balance sheet date. Interest, adjustment for inflation, foreign exchange rate fluctuations and other changes due to adjustment at fair value, where applicable, are recognized in statement of operations as they are incurred, in the financial incomes or expenses account.

(ii) Loans (granted) and receivables include non-derivative financial assets with fixed or determinable payments but with no quotes on the active market. After initial recognition they are carried at amortized cost, based on the effective interest rate method. Interest, adjustment for inflation, foreign exchange rate fluctuations, less losses related to recoverable values, where applicable, are recognized in statement of operations as they are incurred, in the financial incomes or expenses account.

(iii) Investments maintained to maturity include non-derivative financial assets with fixed or determinable payments with established maturities as regards which the Company has a positive intention or is able to maintain to maturity. After initial recognition, they are carried at amortized cost, based on the effective interest rate method. This method employs the discount rate which, when applied to estimated future receivables, during the expected effectiveness of the financial instrument, results in its net carrying value. Interest, adjustment for inflation, foreign exchange rate fluctuations, less losses related to recoverable value, where applicable, are reported to statement of operations as they are incurred, in the financial incomes or expenses account.

F-27

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(iv) Available for sale Financial assets which are not classified in categories (i) to (iii) above. On the date of each balance sheet they are carried at fair value. Interest, adjustment for inflation and foreign exchange rate fluctuations, where applicable, are reported to statement of operations as they are incurred, in the financial incomes or expenses account. The changes due to the difference between the updated investment value according to the contractual terms and the fair value are reported to shareholders’ equity in the equity evaluation adjustments account until such time as such assets are realized, they are then re-classified to statement of operations, net of tax effects.

s.2) Financial liabilities: The main financial liabilities recognized by the Company and its subsidiaries are: accounts payable to suppliers, unrealized losses from derivatives, loans, financing and debenture transactions. They are broken down into the categories listed below, according to the type of financial instrument contracted or issued:

(i) Financial liabilities carried at fair value through statement of operations include financial liabilities which are usually negotiated prior to maturity, liabilities designated on initial recognition at fair value through statement of operations and derivatives, excluding those designated as hedge instruments. These are measured at fair value on each balance sheet date. Interest, adjustment for inflation, foreign exchange rate fluctuations and other changes due to adjustment at fair value, where applicable, are reported to statement of operations as they are incurred, in the financial incomes or expenses account.

(ii) Financial liabilities not carried at fair value include non-derivative financial liabilities not usually negotiated prior to maturity. After initial recognition, they are carried at amortized cost, based on the effective interest rate method. Interests, adjustment for inflation, foreign exchange rate fluctuations, where applicable, are reported to statement of operations as they are incurred, in the financial incomes or expenses account.

s.3) Market value: the market value of actively traded financial instruments on the organized markets is determined based on their market price on the closing date of the balance sheet. If there is no active market, the market value is determined following evaluation techniques. These techniques include use of recent market transactions carried out between independent parties, referrals to the market value of similar financial instruments, discounted cash flow analysis and other evaluation methods.

s.4) Hedge transactions: derivative financial instruments used to protect against risk exposure or to modify the characteristics of the financial assets and liabilities, unrecognized firm commitments, highly likely transactions or net investments in overseas operations which:

(i) show a high correlation between alterations in its market value and the market value of the hedged item, both at the beginning or throughout the performance of the agreement (between 80% and 125% of effectiveness);

F-28

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(ii) have documents to identify the transaction, the risk against which hedging is sought, the risk management process and the method used to evaluate effectiveness; and

(iii) are considered effective in reducing the risk associated with the hedged exposure, are classified and posted as fair hedge value transactions, and these are derivative financial instrument designed to offset risks stemming from exposure to change in the fair value of the hedged items. The hedged items and respective related derivative financial instruments have counter entries to receipt or expense carrying accounts, in the reported statement of operations in the period;

For fiscal years ending at December 31, 2009 and 2008, the Company and its subsidiaries had no cash flow hedge or overseas investments hedge.

t) Accounting estimates

Are used to measure and recognize certain assets and liabilities in the financial statements of the Company and of its subsidiaries. The determining of these estimates factored in experiences from past and current events, assumptions regarding future events, and other objective and subjective factors. Significant items subject to estimates include: the selection of the useful lives of fixed and intangible assets; allowance for doubtful accounts; provision for inventory losses; provision for investment losses; fixed and intangible asset value recovery assessment; deferred corporate tax and social contribution assets; rates and time periods used to determine net present value of certain assets and liabilities; provision for contingencies; provision for asset divestiture; provision for the loyalty, program and actuarial liabilities; carrying fair value of financial instruments; the considerations for recognizing and measuring capitalized development costs such as intangible assets; estimates to disclose the sensitivity analysis of derivative financial instruments as established in CVM Instruction 475/08. The settlement of transactions involving these estimates may result in significantly different figures to those registered to the financial statements due to inaccuracy in determining them. The Company and its subsidiaries revise their estimates and premises at least every quarter.

u) Functional currency and presentation of the financial statements

The functional currency and that presented in the financial statements of the Company and of its subsidiaries is the Real.

v) Transactions denominated in foreign currency

Cash assets and liabilities denominated in foreign currency are converted to the functional currency (Real), using the exchange rates (Ptax) in force on the date the financial statements are prepared. On December 31, 2009, these were US$1.00 = R$1.7412; JPY1.00 = R$0.0188; €1.00 = R$2.5084, and on December 31, 2008, they were: US$1.00 = R$2.3370; JPY1.00 = R$0.0258; €1.00 = R$3.2524. Gains or losses derived from restatement of such assets and liabilities ascertained between the applicable exchange rate on the date of the transaction and that of the closing of the fiscal years are reported to statement of operations in the financial incomes and expenses account.

 

F-29

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

w) Cash flow and value added statements

The statements of cash flows were prepared and are presented as provided for in CVM Resolution No. 547, dated August 13, 2008, which approved the pronouncement on accounting practices CPC 03 – Statement of Cash Flows, issued by CPC.

The statements of cash flows show changes in cash position that occurred during the fiscal periods, via an indirect method. The terms used in the statement of cash flow are the following:

• Operating activities: are the main revenue producing activities of the Company and its subsidiaries, and any other activities excluding investment or financing activities;
• Investment activities: are activities involving the acquisition and disposal of assets over the long term and other investments not included in operating and financing activities; and
• Financing activities: are activities that result in changes in the dimension and composition of equity and loans taken out by the Company and its subsidiaries.

Value added statements were prepared and are presented as provided for in CVM Resolution No. 557, dated November 12, 2008, which approved CPC 09 – Value Added Statement, issued by CPC.

x) Employee profit sharing

Provisions are made to recognize expenses related to employee profit sharing. These provisions are determined based on management-established qualitative and quantitative goals and reported to specific accounts under the following groups: Costs of Services Rendered, Selling Expenses and General and Administrative Expenses.

y) Net earnings per thousand-share block

Net earnings per share are determined based on the number of outstanding shares on the date the balance sheet is prepared.

z) Advertising expense

Advertising costs are charged to expenses as incurred and amounted to R$427,726, R$443,616 and R$323,660 for the years ended December 31, 2009, 2008 and 2007, respectively.

4. CASH AND CASH EQUIVALENTS

		As of December, 31,
		2009		2008
Cash and banks		46,468		56,038
Short-term investments		1,212,106		2,126,875
Total		1,258,574		2,182,913

The financial investments refer to fixed income transactions, indexed to the variation of the Interbank Deposit Certificates (“CDI”), with immediate liquidity, held with first-category financial institutions.

5. TRADE ACCOUNTS RECEIVABLE, NET

		As of December,31,
		2009		2008
Receivables from billed services		1,105,069		1,125,162
Receivables from interconnection fees		784,524		796,147

F-30

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Receivables from unbilled services		590,617		539,812
Receivables from goods sold		391,578		504,685
(-) Allowance for doubtful accounts		(324,982)		(387,308)
Total		2,546,806		2,578,498

Following are the amounts for the gross accounts receivable, by age of maturity (aging list) at December 31, 2009 and 2008:

		As of December,31,
		2009		2008
Unbilled		590,617		539,812
Falling due		1,604,723		1,446,431
Overdue accounts – from 1 to 30 days		210,871		322,847
Overdue accounts – from 31 to 60 days		69,762		85,393
Overdue accounts – from 61 to 90 days		54,301		67,657
Overdue accounts – from 91 to 180 days		131,101		157,329
Overdue accounts – from 181 to 360 days		46,605		101,090
Overdue accounts – more than 360 days		163,808		245,247
Total		2,871,788		2,965,806

There was not any customer representing more than 10% of the net accounts receivable at December 31, 2009 and 2008.

At December 31, 2009, the balance of accounts receivable includes R$116,747 (R$235,867 at December 31, 2008) related to transfer of co-billing of other operators, the amounts of which were determined on the basis of statements of commitment, because the corresponding contracts have not yet been signed by the parties. Pending matters related to the definition of liability for losses resulting from fraud have not yet been resolved. The decision by the regulatory agency as well as settlement between the parties is pending. The Company does not expect material financial losses with respect to this matter.

The changes in the allowance for doubtful accounts for fiscal years ended on December 31, 2009 and 2008 are as follows:

		Years ended December 31,
		2009		2008
Balance at beginning of year		387,308		344,701
Additional allowance (Note 24)		213,235		303,845
Write-offs		(275,561)		(292,984)
Addition from Telemig Participações on 03.31.08		-		31,746
Balance at year end		324,982		387,308

6. INVENTORIES

		As of December,31,
		2009		2008
Handsets		422,337		747,186
Simcard (chip)		28,176		57,514
Accessories and other		9,033		16,584
(-) Provision for obsolescence		(35,912)		(42,580)
Total		423,634		778,704

 

F-31

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

7. RECOVERABLE TAXES

		As of December,31,
		2009		2008
Prepaid income and social contribution taxes		814,218		848,473
Recoverable state VAT (ICMS)		648,124		553,521
Recoverable federal VAT PIS and COFINS		315,981		370,813
Withholding income tax		64,378		155,204
Other recoverable taxes		23,913		23,951
Total recoverable taxes		1,866,614		1,951,962
Recoverable state VAT(ICMS) on fixed assets – noncurrent (a)		288,015		192,058
Total		2,154,629		2,144,020
Current		1,186,231		1,238,124
Noncurrent		968,398		905,896

(a) Recoverable ICMS taxes represent the amount paid in the acquisition of equipment and inventories and may be offset against ICMS on telelcommunications services. The noncurrent portion refers to taxes paid on purchase of property items, which are available for offset over a period of 48 months.

8. PREPAID EXPENSES

		As of December 31,
		2009		2008
FISTEL fee		204,148		199,851
Advertising to be distributed		123,911		136,244
Rent		19,268		19,696
Financial charges		6,747		8,747
Insurance premium and other		31,637		32,290
Total		385,711		396,828
Current		311,328		316,622
Noncurrent		74,383		80,206

9. OTHER ASSETS

		As of December 31,
		12.31.09		12.31.08
Escrow deposits, blockages and contract collateral		191,664		106,558
Subsidies on handset sales		10,411		115,593
Credits with suppliers		62,334		111,883
Credits to Amazon Celular SA and Tele Norte Celular Participações
SA (a)		-		8,522
Advances to suppliers		4,384		1,550
Related parties receivables		79,276		11,064
Employee advances and other assets		16,594		14,166
Total		364,663		369,336
Current		246,028		322,934
Noncurrent		118,635		46,402

F-32

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(a) These refer to the human and administrative resources pooling contract and organization of a condominium with Telemig and Telemig Participações, which have existed up to the date of acquisition of the share control by Vivo Participações. Interest on the account balances was accrued at the CDI rate, up to the liquidation date.

10. FOREIGN CURRENCY AND DERIVATIVE CONTRACTS

The Company’s foreign currency loans are denominated in U.S. dollars and Japanese yen and are translated at the exchange rates prevailing at December 31, 2009 and 2008, as follows:

		2009		2008
Exchange rate from R$ to US$		1.7412		2.3370
Exchange rate from R$ to Yen		0.0188		0.0258
Exchange rate from R$ to Euros		2.5084		3.2524

The forward and swap contracts described below were entered into in order to mitigate Company’s exposure to foreign exchange variations.

11. GOODWILL

a) Components and changes:

		As of December 31,
		2009		2008
Goodwill on acquisition of investments, net		2,873,902		1,613,753
Reserve for impairment		(173,324)		(173,324)
Net Balance		2,700,578		1,440,429

F-33

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

b) Changes in goodwill balances are as follows:

		As of December 31,
		2009		2008
Balance, net of impairment reserve – beginning of the year (*)		1,440,429		691,947
Goodwill on acquisition of investments (**)		1,260,149		1,166,195
Negative goodwill generated in the capital increase with reserves		-		1,802
Amortization of goodwill paid on investment acquisitions (***)		-		(419,515)
Balance, net of reserve for loss – end of the year		2,700,578		1,440,429

(*) The net profit at December 31, 2007 includes the amount of R$667,369, referring to goodwill generated from acquisitions of equity interests and their provisions for impairment booked at December 31, 2001 and 2002, in order to recognize permanent impairment on goodwill due to losses accumulated by subsidiary Global Telecom S.A., at those dates, Vivo Participações. It further includes R$24,578 referring to the premium generated from the acquisition of Ceterp Celular S.A. by Vivo. Both of them were based on future profitability, and were amortized on a straight line basis until December 31, 2008, according to the guidelines provided for in Law no. 11.638/07. Such goodwill ceased to be amortized on January 01, 2009.

(**) At December 31, 2008, the amount of R$1,166,195 refers to goodwill generated from the acquisitions of Telemig Participações and Telemig. At December 31, 2009, the amount of R$1,260,149 refers to the goodwill generated from the merger of shares (exchange of shares) of Telemig Participações and Vivo Participações of R$1,255,236, R$2,898 related to expenses from the process of exchanging the capitalized shares, and R$2,015 related to the goodwill generated from the capital increase of reserves.

(***) The sum of amortization costs and expenses are shown in “Amortization”, in note 26 (goodwill amortization).

12. PROPERTY, PLANT AND EQUIPMENT, NET

12.a) Breakdown

		As of December 31,
		2009						2008
				Accumulated		Property, plant and				Accumulated		Property, plant and
		Cost		depreciation		equipment, net		Cost		depreciation		equipment, net
Transmission equipment		9,700,786		(7,191,579)		2,509,207		8,979,713		(6,647,993)		2,331,720
Infrastructure		3,418,058		(1,960,734)		1,457,324		3,018,294		(1,741,083)		1,277,211
Switching equipment		4,196,877		(3,225,490)		971,387		4,243,681		(2,680,686)		1,562,995
Terminals		2,721,531		(2,412,241)		309,290		2,310,275		(2,005,070)		305,205
Buildings		298,984		(97,347)		201,637		296,670		(87,318)		209,352
Land		101,264		-		101,264		70,352		-		70,352
Other assets		1,948,183		(1,372,115)		576,068		1,767,321		(1,198,036)		569,285
Construction in progress		318,932		-		318,932		857,788		-		857,788
Total		22,704,615		(16,259,506)		6,445,109		21,544,094		(14,360,186)		7,183,908

In compliance with the provisions in accounting pronouncement CPC 01 – Reduction to the Recoverable Assets Value, the Company and its subsidiaries annually analyze the net book value

F-34

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

of the items of property, plant and equipment with the purpose of assessing events or changes in the economic, operating or technological circumstances which might indicate deterioration or loss on their recoverable value. Based on the analysis prepared by the Company and its subsidiaries, no provisions were required to be booked for assets recovery at December 31, 2009 and 2008. The premises adopted by the Company and its subsidiaries are described in note 3(j).

12.b) Changes

		Consolidated
		Transmission			Switching										Construction
		equipment	Infrastructure		equipment		Terminals		Buildings		Land		Other assets		in progress		Total
Cost
Balances at December 31, 2007		7,515,674	2,507,440		3,473,847		1,893,738		282,869		59,785		1,441,451		498,957		17,673,761
Additions		64,103	34,070		1,711		379,599		26		8,802		94,580		1,593,508		2,176,399
Acquisition Telemig and Telemig Participações		995,931	285,827		436,111		29,412		12,164		3,055		190,363		154,904		2,107,767
Write-off		(311,094)	(29,852)		(30,646)		(11,486)		(651)		(1,290)		(40,258)		(1)		(425,278)
Transfer		715,099	220,809		362,658		19,012		2,262		-		81,185		(1,389,580)		11,445
Balances at December 31, 2008		8,979,713	3,018,294		4,243,681		2,310,275		296,670		70,352		1,767,321		857,788		21,544,094
Additions		27,660	39,776		-		405,219		-		30,696		99,433		1,204,407		1,807,191
Write-off		(312,267)	(9,064)		(72,077)		(14,306)		(532)		(334)		(19,178)		-		(427,758)
Transfer		1,005,680	369,052		25,273		20,343		2,846		550		100,607		(1,743,263)		(218,912)
Balances at December 31, 2009		9,700,786	3,418,058		4,196,877		2,721,531		298,984		101,264		1,948,183		318,932		22,704,615
Accumulated depreciation
Balances at December 31, 2007		(5,316,853)	(1,341,281)		(2,105,727)		(1,603,340)		(72,891)		-		(916,814)		-		(11,356,906)
Additions (*)		(816,521)	(210,853)		(348,636)		(400,069)		(10,106)		-		(177,702)		-		(1,963,887)
Acquisition Telemig and Telemig Participações		(796,640)	(208,078)		(255,738)		(14,232)		(4,663)		-		(133,229)		-		(1,412,580)
Write-off		281,308	21,171		29,847		11,467		258		-		32,862		-		376,913
Transfer		713	(2,042)		(432)		1,104		84		-		(3,153)		-		(3,726)
Balances at December 31, 2008		(6,647,993)	(1,741,083)		(2,680,686)		(2,005,070)		(87,318)		-		(1,198,036)		-		(14,360,186)
Additions (*)		(876,957)	(227,188)		(709,636)		(421,425)		(10,334)		-		(190,560)		-		(2,436,100)
Write-off		329,370	7,571		51,299		14,254		301		-		16,568		-		419,363
Transfer		4,001	(34)		113,533		-		4		-		(87)		-		117,417
Balances at December 31, 2009		(7,191,579)	(1,960,734)		(3,225,490)		(2,412,241)		(97,347)		-		(1,372,115)		-		(16,259,506)
Property, plant and equipment, net
Balances at December 31, 2007		2,198,821	1,166,159		1,368,120		290,398		209,978		59,785		524,637		498,957		6,316,855
Additions		(752,418)	(176,783)		(346,925)		(20,470)		(10,080)		8,802		(83,122)		1,593,508		212,512
Acquisition Telemig and Telemig Participações		199,291	77,749		180,373		15,180		7,501		3,055		57,134		154,904		695,187
Write-off		(29,786)	(8,681)		(799)		(19)		(393)		(1,290)		(7,396)		(1)		(48,365)
Transfer		715,812	218,767		362,226		20,116		2,346		-		78,032		(1,389,580)		7,719
Balances at December 31, 2008		2,331,720	1,277,211		1,562,995		305,205		209,352		70,352		569,285		857,788		7,183,908
Additions		(849,297)	(187,412)		(709,636)		(16,206)		(10,334)		30,696		(91,127)		1,204,407		(628,909)
Write-off		17,103	(1,493)		(20,778)		(52)		(231)		(334)		(2,610)		-		(8,395)
Transfer		1,009,681	369,018		138,806		20,343		2,850		550		100,520		(1,743,263)		(101,495)
Balances at December 31, 2009		2,509,207	1,457,324		971,387		309,290		201,637		101,264		576,068		318,932		6,445,109

(*) Handsets provided to costumers free of charge.

(**) The sum of depreciation costs and expenses is shown in “Depreciation”, in notes 23, 24 and 25.

The remaining balance in the transfers shown in the preceding table refers to transfers made between property, plant and equipment accounts and intangible assets accounts (note 13b).

 

F-35

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

12.c) Depreciation rates

The annual depreciation rates are as follows:

		Useful lives
		2009		2008		2007
Transmission equipment		5 to 7		5 to 10		5 to 10
Infrastructure		5 to 35		5 to 35		5 to 35
Switching equipment		5 to 7		5 to 10		5 to 10
Terminals		1.5		1.5 to 2		1.5 to 2
Buildings		25 to 35		25 to 35		25 to 35
Other assets		5 to 15		5 to 15		5 to 15

12.d) Interest on construction in progress

At the fiscal year ended on December 31, 2009, Vivo capitalized financial expenses incurred in connection with loans for financing construction in progress in the amount of R$39,813 (R$40,460 at December 31, 2008).

12.e) Pledged Assets

At December 31, 2009, the subsidiaries had items of property, plant and and equipment offered as collateral in lawsuits in the amount of R$83,534 (R$105,866 at December 31, 2008).

		As of December 31,
		2009		2008
Tax		63,940		92,747
Labor and civil		19,594		13,119
Total		83,534		105,866

12.f) Rentals

The Company rents equipment and premises through a number of operating lease agreements that expire at different dates. Total annual rent expenses under these agreements was R$464,061, R$389,228 and R$300,891 for the years ended December 31, 2009, 2008 and 2007, respectively. Rental commitments, related primarily to facilities, including the future minimum rental payment, are as follows:

Year		Amount
Up to one year		639,220
More than one year to five years		2,461,515
More than five years		477,163
Total		3,577,898

 

F-36

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

13. INTANGIBLE ASSETS, NET

13.a) Breakdown

In compliance with the provisions in accounting pronouncement CPC 01 – Reduction to the Recoverable Assets’ Value, the Company and its subsidiaries annually analyze the net book value of the intangible assets with the purpose of assessing events or changes in the economic, operating or technological circumstances which might indicate deterioration or loss on their recoverable value. Based on the analysis prepared by the Company and its subsidiaries, no provisions were required to be booked for assets’ recovery at December 31, 2009 and 2008. The premises adopted by the Company and its subsidiaries are described in note 3j.

F-37

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

13.b) Changes

(*) The sum of amortization costs and expenses are shown in “Amortization”, in notes 23, 24 and 25.

The remaining balances in the transfers shown in the preceding table refers to the transfers made between property, plant and equipment accounts and intangible assets accounts (note 12b).

13.c) Amortization rates

		Useful lives
		2009		2008		2007
Software use rights		5		5		5
Concession licenses		5 to 15		5 to 15		5 to 15
Other assets		5 to 15		5 to 15		5 to 15

14. DEFERRED CHARGES, NET

These refer to pre-operating expenses, Global Telecom (fully amortized in 2009) and network formation costs in the Northeast region, incurred prior to January 1, 2009, which are amortized for a period of 10 years, in the net amounts of R$29,864 and R$55,393 at December 31, 2009 and 2008, respectively, as permitted in Law no. 11.941, dated May 27, 2009. The deferred assets are also revised every year with the purpose of assessing their recoverability. Based on analysis prepared by Vivo, no provisions were required to be booked for recovery of assets at December 31, 2009 and 2008.

15. PAYROLL AND RELATED ACCRUALS

F-38

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		As of December 31
		2009		2008
Wages and salaries		70,449		98,098
Accrued vacation and social security charges		78,445		76,799
Accrued benefits		12,472		10,574
Total		161,366		185,471

16. TRADE ACCOUNTS PAYABLE

		As of December 31,
		2009		2008
Suppliers		2,170,586		2,848,620
Amounts to be transferred - long distance (a)		405,619		408,807
Interconnection and linking		324,078		231,015
Technical assistance – related parties		100,484		170,178
Other		52,820		67,704
Total		3,053,587		3,726,324

(a) The amounts refer to VC2, VC3 and roaming charges, invoiced to our customers and transferred to the long distance carriers .

17. TAXES PAYABLE

		As of December 31,
		2009		2008
Taxes:
ICMS		768,501		658,306
Current income and social contribution taxes		96,120		114,867
Deferred Income tax and social contribution(*)		28,837		27,887
PIS and COFINS		161,676		144,154
FISTEL		92,973		34,195
FUST and FUNTTEL		11,658		11,386
Other taxes, fees and mandatory contributions		20,008		16,926
Total		1,179,773		1,007,721
Legal liabilities (CVM 489/05):
PIS and COFINS (a)		3,216		35,070
(-) PIS and COFINS – Escrow deposits (a)		(2,496)		(27,167)
CIDE		80,933		80,693
(-)CIDE – Escrow deposits (b)		(62,625)		(57,004)
Fistel (c)		423,402		324,764
(-) Fistel – Escrow deposits (c)		(423,402)		(324,764)
Income Tax (d)		21,445		19,828
(-)Income Tax – Escrow deposits (d)		(21,445)		(19,828)
Other taxes, fees and mandatory contributions (e)		11,155		21,562
Total		30,183		53,154
Total		1,209,956		1,060,875
Current		892,893		785,603
Noncurrent		317,063		275,272

(*) Telemig reclassified from “Deferred and recoverable taxes” (note 7.1 and 28 ), in the assets, to deferred income and social contribution taxes, in the liabilities, the amount of R$11,700 for deferred income and social contribution taxes on accelerated depreciation, for fiscal year ended December 31, 2008. Such effect is included in the consolidated balances of 2008.

F-39

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Taxes:

At December 31, 2009, the amount of R$271,611 (R$217,763 at December 31, 2008) out of the non-current liability, refers to ICMS - More Jobs for Paraná Program, resulting from an agreement with the Paraná State Government involving the deferral of ICMS tax payment. This Agreement indicates that the ICMS becomes due in the 49th month following the month in which the ICMS tax is calculated. This amount is adjusted to the variation of the Annual Indexation Factor (FCA).

Legal liabilities:

For purposes of the financial statements, the amounts of escrow deposits for said taxes are offset against taxes, fees and mandatory contributions payable, as applicable.

a) PIS and COFINS

A delinquency notice was issued by the tax authority against Vivo (proceedings no. 19515.000.700/2003 -97) for having offset the COFINS, in January and February 2000, against credits arising out of the 1/3 surplus of the COFINS itself paid in 1999, after deduction of the amount from the CSLL. The case is awaiting decision of the Special Appeal filed within the administrative sphere. By reason of for ordinary program for payment of tax debts into installments (Law no. 11.941, dated May 27, 2009), Vivo requested to discontinue the proceedings and to have the amounts due converted into income, with consequent release of the surplus amount. At December 31, 2008 the amounts of provisions and escrow deposits were R$24,671.

Law nº 9.718/98

At November 27, 1998, the calculation of PIS and COFINS was changed by Law no. 9718, which: i) increased the COFINS rate from 2% to 3%; ii) authorized the deduction of up to 1/3 of the COFINS from the amount of the CSLL; and also iii) indirectly increased the COFINS and PIS owed by Vivo, by including revenues in excess of the total sales in their tax calculation basis.

By reason of the changes introduced by laws no. 10.637/02 and 10.833/03, Vivo started including the revenues in excess of the total sales in the tax calculation basis of PIS and COFINS.

At December 31, 2009, Vivo has provisions booked for the amounts of the revenues in excess of the total sales, under discussion in court, in the amount of R$3,216 (R$10,399 at December 31, 2008). Based on IBRACON—Brazilian Board of Independent Auditors ’s Technical Communication no. 05/2009, at July 31, 2009, after a judicious evaluation supported by Vivo’s legal advisors, the amount of R$7,529 was reversed. The remaining court deposit is R$2,496, at December 31, 2009 and 2008.

b) CIDE

This refers to an administrative and judicial matter, aiming at discharging the assessment of the CIDE on remittances of funds abroad, in connection with agreements for transfer of technology, license of trademarks and software, etc. Its subsidiaries recorded the amount of R$80,933, at December 31, 2009 (R$80,693 at December 31, 2008), having deposited in court the amount of R$62,625 (R$57,004 at December 31, 2008).

F-40

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

 

c) Telecommunications Inspection Fee - FISTEL

Telemig filed a Writ of Mandamus challenging its liability for the payment of the inspection fees on mobile stations not owned by it, and started booking a provision and effecting a deposit in court for the amounts referring to the TFF – Operation Inspection Fee and to the TFI – Installation Inspection Fee. The case is awaiting decision by the TRF Court of the 1st Region.

The Company’s legal counsel considers the chances of losses in these lawsuits to be possible. Therefore, because this is considered a legal obligation, a provision was booked and escrow deposits were made in the total amount of R$423,402 at December 31, 2009 (R$324,764 at December 31, 2008).

d) IRRF on payments of Interest on shareholders’ equity – Telemig Participações

Telemig Participações (which was merged into the Company on November 13, 2009, note 1) filed Writs of Mandamus requesting the court to declare its right not to be assessed IRRF at source on its receipts of interest on shareholders’ equity of its subsidiary. Based on the opinion of the Company’s legal counsel, the referred lawsuits are classified as possible loss; therefore, because this is considered a legal obligation, at December 31, 2009 a provision was booked and deposits were made in court, totaling R$21,445 (R$19,828 at December 31, 2008).

e) Other taxes, fees and contributions

At December 31, 2009, its subsidiaries recorded the amount of R$11,155 (R$21,562 at December 31, 2008), referring to values related to tax delinquency notices issued for (i) ISS tax on personal property lease, ancillary activities and supplementary services; (ii) IRPJ on derivative transactions; (iii) INSS, (iv) ICMS tax and (v) PIS and COFINS.

Changes in the legal obligations for fiscal years ended December 31, 2009 and 2008 were as follows:

		Legal		(-)Escrow
		obligations		deposits		Total
Balance at 12.31.07		108,232		(71,419)		36,813
Additions, net of reversal		21,619		(27,345)		(5,726)
Addition of Telemig Participações at
03.31.08		338,933		(323,659)		15,274
Monetary restatement		13,133		(6,340)		6,793
Balance at 12.31.08		481,917		(428,763)		53,154
Additions, net of reversal		51,048		(95,777)		(44,729)
Monetary restatement		11,398		(9,957)		1,441
Transfer (*)		(4,212)		24,529		20,317
Balance at 12.31.09		540,151		(509,968)		30,183

(*) Amounts transferred to current taxes due to the adherence to the governmental tax program from which the company can pay certain disputed taxes up to 180 installments, as established by the Law No. 11,941, dated May 27, 2009.

 

F-41

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

18. LOANS, FINANCING, AND DEBENTURES

a) Debt breakdown

a.1) Loans and Financing

(*) URTJLP - Unit reference interest rate of long-term, used by National Economic and Social Development Bank - BNDES to finance contracts as the contract currency.

(**) UMBND - Currency, based on a basket of currencies used by BNDES to finance contracts as the contract currency.

Tranches of the facility borrowed from Northeast Economic and Social Development Bank (“BNB”) were released during fiscal year 2009, as follows: R$124,571 in May 2009, and R$134,775 in October 2009. With the tranche released in December 2008, in the amount of R$129,654, the total amount borrowed is R$389,000.

a.2) Debentures and Promissory Notes

F-42

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

b) Repayment schedule

At December 31, 2009, the maturities of the long-term portion of loans and financing are as follows:

Year
2011		478,446
2012		537,094
2013		1,074,561
2014		525,894
2015		440,218
After 2015		1,113,628
Total		4,169,841

c) Loan covenants

Vivo has loans and financing borrowed from BNDES, the balance of which at December 31, 2009 was R$1,474,390 (R$1,431,878 at December 31, 2008). In accordance with the contracts, there are several economic and financial indexes that must be calculated on a six-month and yearly basis. At the same date, all economic and financial indexes established in the contracts were met.

The SPM service agreement entered into by Telemig with the State Department of Economic Development (Minas Gerais state) (note 18.f2), the balance of which at December 31, 2009 was R$59,600 (R$56,923 at December 31, 2008), sets forth covenants on petitions for judicial and extrajudicial recovery, liquidation, dissolution, insolvency, voluntary bankruptcy or decree of bankruptcy, payment default, non-compliance with non-fiduciary obligations and compliance with a certain limit substantially based on balance sheet financial indexes and EBITDA (Earnings before interest, taxes, depreciation and amortization), among others. At December 31, 2009, all covenants were fulfilled by Telemig.

d) Guarantees

F-43

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

d) Guarantees 

At December 31, 2009, guarantees were granted for part of the Company’s loans and financing, according to the table below:

Banks	Amount of loan / financing	Guarantees
BNDES	R$1,470,063 (URTJLP) R$4,327 (UMBNDES)	• Contract VIVO R$1,441,234: Guarantee of receivables of between the debt balance or 4 (four) times the highest installment.  • Contract Vivo R$33,157: 15% of the receivables are pledged relating to service revenue  • Vivo Participações is intervening guarantor
European Bank of Investment – BEI	R$635,066	• Commercial risk guaranteed by BBVA Portugal
BNB	R$587,627	• Bank guarantee granted by Bank Bradesco S.A in an amount equivalent to 100% of the debit balance of the financing obtained  • Establishing a liquidity fund comprised of short-term investments at an amount equivalent to 3 (three) amortization installments by reference to the average post-grace period installment  • Vivo Participações is an intervening guarantor.

e) Promissory Notes

6^th Issue

At July 24, 2009, 20 promissory notes were issued, in the value of R$25 million each, totaling R$500 million, bearing interests of 115.00% of the DI - Interfinancial Deposit rate.

The funds raised from such transaction were used in the full repayment of the principal amount of the debt represented by the 4^th issue of promissory notes, in the face value of R$500 million.

At October 22, 2009, the promissory notes related to the referred issue were settled.

F-44

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

f) Debentures

f.1) Fund raising by the company

2nd Issue

Within the scope of the First Securities Distribution Program in the amount of R$2 billion, announced on August 20, 2004, the Company issued debentures related to the 2nd Issue of the Company, in the amount of R$1 billion, on May 01, 2005, with a term of ten years.

Such offering consisted of the issue in two series, R$200 million in the first series and R$800 million in the second series, with final maturity on May 1, 2015. The debentures accrue interest, payable on a semiannual basis, corresponding to 120.0% (first series) and 104.2% (second series) of the accumulated daily average rates for the DI (one-day Interbank, extra group deposits) (DI rates), as calculated and published by the Custody and Settlement Agency - CETIP. The premium over the DI is re-set every 24 months.

In May 2009, the debentures of the 1 ^st Series of the 2 ^nd Issue of the Company, as approved by the Board of Directors of the Company on March 30, 2009, were rescheduled. The new effective term of remuneration is 24 months, counted from May 01, 2009 until May 01, 2011, during which time the remuneration conditions defined herein shall remain unchanged. During this second term of remuneration, the debentures of the 1^st Series of the 2^nd Issue of the Company shall be entitled to a remuneration of 120.0% of the average rate of the one-day Interfinancial Deposits – the DI over extra-group rate, calculated in accordance with the formula contained in clause 4.9 of the “2^nd issue Indenture”. The payments of remuneration of the debentures shall be made on November 01, 2009, May 01, 2010, November 01, 2010 and May 01, 2011.

Rescheduling of the debentures remuneration is expected to occur on May 01, 2011 (first series) and May 01, 2010 (second series).

3rd Issue

On December 2008, the Board of Directors approved the 3rd public issue, by the Company, of simple, unsecured debentures not convertible into stock, of one sole series, not required to be registered with the CVM in conformity with the terms of art. 5, item II, of CVM Instruction no. 400, since said debentures referred to one sole and indivisible lot of securities. The unit face value of the debenture was R$210 million at the issue date (“Unit Face Value”), with maturity date on January 11, 2010.

4th Issue

On September 04, 2009, the Board of Directors approved the 4th public issue, by the Company, of simple, unsecured debentures not convertible into stock, all of them registered and of book-entry type, issued in up to three series, with term of 10 years.

The total amount of the issue was R$810 million, of which the basic offering corresponds to R$600 million, added by R$210 million due to the full exercise of the additional debentures option.

A total of eight 810,000 debentures were issued in three (3) series, 98,000 debentures in the 1st series, 640,000 in the 2nd series and 72,000 in the 3rd series. The amount of debentures allocated to each of the series was decided in mutual agreement between the Company and the Leader Arranger of the Offering, after the conclusion of the Bookbuilding (Market consulting mechanism made by the coordinator of the offering to pay the definition of securities / shares and the goodwill or negative goodwill on subscription price) procedure.

F-45

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The remuneration for the 1st series is 108.00% of CDI, for the 2nd series is 112.00% of CDI and to the 3rd series, a coupon of 7.00% per annum (on face value updated by the IPCA- Consumer Prices Index variation). These debentures accrue interest payable on a semiannual basis in the 1st and 2nd series and annual basis in the 3rd series.

Rescheduling of each series is provided for as follows: 1st series, on October 15, 2012, 2nd series, on October 15, 2013, and 3rd series, on October 15, 2014.

The proceeds raised as from the issue of the offering were used for full payment of the debt relating to the 6th issue of commercial promissory notes of the Company and to supplement of the working capital of the Company.

The transaction costs in connection with this issue in the amount of R$4,403 were appropriated to a liabilities reduction account as deferred cost and are recorded as financial expenses of the Company (note 25), pursuant to the contractual terms of this issue. The actual rate of this issue, considering the transaction costs is 112.13% of the CDI.

f.2) Fund raising by Telemig

1st Issue

In compliance with the Contract for Provision of SMP Services, in conformity with the Public Selection No 001/07, the State of Minas Gerais, acting through the State Department for Economic Development, has undertaken to subscribe debentures issued by Telemig, within the scope of the “Minas Comunica” Program, using proceeds from the Fund for Universalization of Access to Telecommunications Services (Fundo de Universalização do Acesso a Serviços de Telecomunicações) - FUNDOMIC. Under the terms of this Program, Telemig Celular would make the SMP service available to 134 locations in the areas recorded as 34, 35 and 38.

Also according to the program, 5,550 simple, unsecured, nonconvertible, registered, book-entry type debentures would be issued, without stock certificates being issued, in up to five series.

In consideration for the certification by the State Department of Economic Development of the service to be provided to 15 locations, 621 debentures were issued, amounting toR$6,210 in December 2007. In March 2008, for the service at 42 locations, 1,739 debentures were issued in the 2nd Series, valued atR$17,390. At December 31, 2008, for the service at 77 locations, 3,190 debentures were issued in the 3rd Series, valued at R$31,900, thus completing the program for providing service to 134 locations inside the state of Minas Gerais. At December 31, 2009, the total balance was R$59,600 (R$56,923 at December 31, 2008).

g) 3G Licenses Financing

At August 28, September 25, and October 22, 2009 Vivo settled the amounts owed to ANATEL for the 3rd generation, Band J, Width 10+10 Mhz Authorization Instruments, authorization period of 15 years, renewable only once for another 15 years, pursuant to the registration areas listed in the following table:

F-46

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Term nº		Areas of Registration (States)		Amounts paid
21/2008/SPV – ANATEL		SP (sectors except 32 and 33 of the PGO)		243,407
17/2008/SPV – ANATEL		PR and SC		235,128
9/2008/SPV – ANATEL		RJ		219,334
18/2008/SPV – ANATEL		RS (sectors except 30 of the PGO)		178,033
7/2008/SPV – ANATEL		BA		84,292
15/2008/SPV – ANATEL		GO and TO		59,175
16/2008/SPV – ANATEL		DF		54,455
20/2008/SPV – ANATEL		AL, CE, PB, PE, PI and RN		48,915
19/2008/SPV – ANATEL		AM, AP, PA, MA and RR		42,845
10/2008/SPV – ANATEL		ES		33,973
13/2008/SPV – ANATEL		MT		32,057
14/2008/SPV – ANATEL		MS (sectors except 22 of the PGO)		26,889
8/2008/SPV – ANATEL		SE		13,484
12/2008/SPV – ANATEL		RO		12,249
60/2008/SPV – ANATEL		SP (sector 33 of the PGO)		6,511
11/2008/SPV – ANATEL		AC		3,918
61/2008/SPV – ANATEL		MS, GO E RS (sectors 22, 25 and 30 of the PGO)		3,792
59/2008/SPV – ANATEL		SP (sector 32 of the PGO)		2,647
Total				1,301,104

19. PROVISION FOR CONTINGENCIES

The Company and its subsidiaries are parties to lawsuits that generate administrative and judicial contingencies related to labor, tax and civil claims. Relevant accounting provisions have been booked with respect to such lawsuits in which the chance of loss was deemed as probable.

19.1) Breakdown

The breakdown of the balances of such provisions at December 31, 2009 and 2008 was as follows:

		As of December 31,
		2009						2008
				(-) Escrow						(-) Escrow
		Provisions		deposits		Net		Provisions		deposits		Net
Civil		167,954		(67,156)		100,798		170,675		(42,187)		128,488
Labor		78,875		(38,635)		40,240		72,687		(34,344)		38,343
Tax		31,314		(3,547)		27,767		30,799		(3,547)		27,252
Total		278,143		(109,338)		168,805		274,161		(80,078)		194,083
Current						70,396						91,136
Noncurrent						98,409						102,947

19.2) Changes:

The changes to the provisions for net contingencies, for fiscal years ended December 31, 2009 and 2008, were as follows:

F-47

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Consolidated
		Civil		Labor		Tax		Total
Balance at 12. 31. 2007, net of the judicial deposits		150,743		41,909		6,752		199,404
Provisions recorded, net of reversals (note 24)		102,116		20,814		15,769		138,699
Payments		(129,854)		(15,049)		(1,821)		(146,724)
Monetary variation		1,044		-		6,552		7,596
Increase in judicial deposits		(2,253)		(13,596)		-		(15,849)
Addition of the da Telemig Participações at 03.31.08		6,692		4,265		-		10,957
Balance at 12. 31. 2008, net of the judicial deposits		128,488		38,343		27,252		194,083
Provisions recorded, net of reversals (note 24)		107,620		26,725		307		134,652
Monetary variation		(374)		-		771		397
Payments		(109,968)		(20,537)		(563)		(131,068)
Increase in judicial deposits		(24,968)		(4,291)		-		(29,259)
Balance at 12. 31. 2009, net of the judicial deposits		100,798		40,240		27,767		168,805
Current		65,580		3,673		1,143		70,396
Noncurrent		35,218		36,567		26,624		98,409

Also, the following is the legend related to the states of Brazil commented on this footnote:

DF – Distrito Federal
AC – State of Acre
AM- State of Amazonas
BA – State of Bahia
ES – State of Espírito Santos
GO – State of Goiais
MS – State of Mato Grosso do Sul
MT – State of Mato Grosso
PA – State of Paraná
RJ – State of Rio de Janeiro
RO – State of Rondônia
RR – State of Roraima
RS – State of Rio Grande do Sul
SC – State of Santa Catarina
SE – State of Sergipe
SP – State of São Paulo
TO – State of Tocantins

19.3. Tax Proceedings:

19.3.1. Probable Loss

a) ICMS

At December 31, 2009, Vivo (RJ, SP, AM and RR) was holding administrative and legal discussions on ICMS taxes that, based on the opinion of its legal advisors, are classified as probable loss and therefore are provisioned at R$24,759 (R$23,554 at December 31, 2008).

b) Federal Taxes

At December 31, 2009, Vivo was holding administrative discussions on federal taxes (IRRF/IRPJ/PIS/COFINS) that, based on the opinion of its legal advisors, are classified as probable loss and therefore are provisioned at R$2,824 (R$2,410 at December 31, 2008).

F-48

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

On July 2, 2002, an infraction notice was issued against Telemig from the INSS relating to the joint liability for the collection of the INSS contribution from service providers and the 11% withholding tax as provided for in Law 9711/98. At December 31, 2009 and 2008, Telemig had provisions amounting to R$3,547 to cover the possible losses resulting from such infraction, grounded on the opinion of its legal advisors, and has made a court deposit amounting to R$5,799. The proceedings are pending decision in the administrative sphere.

c) Other Taxes

At December 31, 2009, Vivo was holding administrative discussions on other taxes amounting to R$184 (R$1,288 at December 31, 2008), which were provisioned based on the opinion of the Company and its legal advisors.

19.3.2.Possible Loss

Based on the opinion of its legal advisors, the Company Management believes that solving the issues listed below will not produce any material adverse effects on its financial condition.

At December 31, 2009, the total amounts involved were R$3,842,217 (R$2,870,094 at December 31, 2008), as described below:

a) State Taxes

The subsidiaries have several actions subject to administrative discussion (resulting from infraction notices) and legal discussions relating to ICMS taxes in the whole Brazilian territory, as described below:

• At December 31, 2009, Vivo’s legal discussion (DF, AC, PA, MS, MT, GO, RR, RO, TO and AM) totaled R$160,233 (R$109,220 at December 31, 2008), whose main subject matters are: i) ICMS taxes on occasional or supplementary services that are not characterized as telecommunications services; ii) ICMS taxes on international calls, originating in Brazil and going to foreign countries; iii) lack of proportional reversal of ICMS tax credits referring to the acquisition of fixed assets used in the provision of communication services and/or in the outflow of exempted or non-taxed goods; iv) ICMS taxes on provision of telecommunications services not for valuable consideration, characterized by the granting of credits to be consumed in the pre-paid service plan; v) non-inclusion, in the ICMS computation base, of the fine and delinquent interest charged from defaulting customers; vi) presumed noncompliance with accessory obligations; vii) other taxes relating to the marketing of goods; viii) delinquent fine and spontaneous infraction notice; ix) ICMS on the non-payment of taxes referring to tax substitution by later operations; x) ICMS on electric energy credits; xi) ICMS resulting from the difference in the tax determined by Embratel in the DETRAF document; xii) ICMS on the canceling of telecommunications services provision; and xiii) presumed sales with conditioned discounts.
  
  
• At December 31, 2009, Vivo (PR) proceedings totaled R$6,852 (R$7,267 at December 31, 2008), whose main subject matter is the payment of ICMS tax in arrears and crediting relating to fixed assets.
  
  
• At December 31, 2009, Vivo (BA) proceedings totaled R$51,577 (R$43,040 at December 31, 2008), whose main subject matters are: i) lack of proportional reversal of ICMS tax credit referring to the acquisition of fixed assets, electric energy and switching services as a result of provision of non-taxed communication services; ii) lack of reversal of ICMS tax credits relating to outflow of equipment as rental and loan for use; iii) payment of ICMS taxes in arrears in the period from February to March 1998; iv) ICMS assessing on supplementary communication services; v) lack of reversal of ICMS tax credit relating to long-distance calls and call center; vi) ICMS taxes on services enabling; and vii) ICMS tax credits of amounts reversed by virtue of customer complaints.

F-49

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• At December 31, 2009, Vivo (SE) proceedings totaled R$33,167 (R$35,406 at December 31, 2008), whose main subject matters are: i) lack of proportional reversal of ICMS tax credit referring to the acquisition of fixed assets, electric energy and switching services provision of non-taxed communication services; ii) lack of reversal of ICMS tax credits relating to outflow of equipment as rental and loan for use; iii) ICMS taxes on the outflow of goods on a consigned basis; and iv) ICMS tax assessing on “supplementary communication services”.
  
  
• At December 31, 2009, Vivo (ES) proceedings totaled R$3,691 (R$7,019 at December 31, 2008), whose main subject matters are: i) undue ICMS tax credit; and ii) accessory obligations in relation to the bookkeeping of invoices.
  
  
• At December 31, 2009, Vivo (RJ) proceedings totaled R$183,158 (R$150,268 at December 31, 2008), whose main subject matters are: i) ICMS taxes assessing on “supplementary communication services”; ii) ICMS on services enabling; iii) ICMS on calls originating from administrative and testing terminals; iv) ICMS assessing on services provided to other telecommunications operating companies referring to certain customers that are not beneficiaries of exemption; v) ICMS on international calls; vi) lack of proportional reversal of ICMS tax credit relating to the acquisition of fixed assets; vii) ICMS on provision of telecommunications services not for valuable consideration; viii) ICMS credit relating to electric energy; ix) ICMS on the provision of telecommunications-related services; x) ICMS on the FECP additional amount, resulting from the provision of telecommunications-related services; and xi) disallowance of ICMS tax incentives referring to cultural projects and fines.
  
  
• At December 31, 2009, Vivo (RS) proceedings totaled R$22,550 (R$28,047 at December 31, 2008), whose main subject matters are: i) ICMS payment in arrears; and ii) ICMS on electric energy.
  
  
• At December 31, 2009, Vivo (SP) proceedings totaled R$149,953 (R$118,685 at December 31, 2008), whose main subject matters are: i) undue ICMS credits; ii) undue credit relating to the entry of amounts as untimely credits; iii) ICMS credits of reversed amounts by virtue of customer complaints (Cooperation Agreement 39/01); and iv) ICMS on discounts considered as unconditioned.
  
  
• At December 31, 2009, Vivo (SC) proceedings totaled R$685 (R$3,876 at December 31, 2008) whose main subject matters are: i) tax credit allocation at a higher limit than that established by the Brazilian tax law, relating to the inflow of goods whose outflow enjoys the computation base reduction benefit; and ii) fine for noncompliance with a legal obligation.
  
  
• Telemig is holding legal discussions on ICMS taxes assessing on equipment rental, contractual fines and on loan interest, whose proceedings relating to the first two discussions are pending the processing of a Special Appeal and an Extraordinary Appeal, and the latter is pending decision on a lower-level court; at December 31, 2009 the amount involved was R$12,388 (R$7,481 at December 31, 2008).

F-50

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

b) Federal Taxes

The Company and its subsidiaries are involved in several tax actions on a federal level in the whole national territory, as described below:

• Vivo is involved in an administrative discussion relating to the increase in the PIS computation base that totaled R$514 at December 31, 2009 (R$8,580 at December 31, 2008). The proceedings are pending highest-level administrative decision.
  
  
• Vivo is involved in an administrative discussion relating to a COFINS infraction notice amounting to R$9,882 at December 31, 2009 (R$9,663 at December 31, 2008), referring to deductions relating to losses incurred with derivative operations when determining the computation base for that contribution. The discussion is pending decision by the Brazilian Ministry of Finance’s Taxpayers Committee.
  
  
• Vivo was given tax infraction notices totaling R$159,666 at December 31, 2009 (R$148,467 at December 31, 2008), whose subject matters are: i) use of part of the negative computation base of the CSLL determined in fiscal 1997 by the company that gave origin to it through split-off; ii) presumed underpayment of IRPJ and CSLL because the tax inspectors did not recognize certain expenses as deductible; iii) alleged underpayment of IRRF in remittances made to foreign countries; and iv) adjustments of IRPJ and CSLL computation bases as a result of a reduction in the tax losses stated by the company. The discussions relating to the aforementioned proceedings are being held in an administrative sphere.
  
  
• Vivo was given tax infraction notices totaling R$67,311 at December 31, 2009 (R$42,129 at December 31, 2008), relating to IRPJ, CSLL, PIS, COFINS and IRRF, whose subject matters are: i) undue offsetting of non-operating tax losses with operating profits determined in a later period; ii) presumed tax underpayment; iii) non-confirmation of withholding tax on financial investments in the DIRF; and iv) isolated fine on the recorded/stated amount versus paid amount.
  
  
• Vivo is involved in administrative and legal discussions totaling R$17,569 at December 31, 2009 (R$18,937 at December 31, 2008), relating to underpayment of IRPJ, CSLL, PIS and COFINS, in view of the illegal proportional tax assessment, considering the disregard in relation to the occurrence of spontaneous infraction notice. Vivo is involved in discussions exclusively relating to the occurrence of spontaneous infraction notice of those taxes.
  
  
• Vivo is involved in administrative and legal discussions with a view to challenging debit balance of the tax debt referring to IRPJ, CSLL, PIS, COFINS and IRRF. Those are debts activated in the SIEF system because of statements rendered by the particular taxpayer (DCOMP – Compensation Statement and PER/DCOMP – Compensation Statement sent electronically), not confirmed by the Brazilian Internal Revenue Service. They are pending the completion of the administrative proceedings and final decision on a judicial level. At December 31, 2009, the amount involved was R$432,388 (R$197,864 at December 31, 2008).
  
  
• Vivo was given a tax infraction notice amounting to R$311,090 at December 31, 2009 (R$299,101 at December 31, 2008) relating to the collection of presumed IRPJ and CSLL debits, relating to the presumably undue amortization of the premium determined in the acquisition of shares in the Companhia Riograndense de Telecomunicações (“CRT”) in calendar years 1997 and 1998. Such requirement is pending decision on appeal by the Brazilian Ministry of Finance’s Taxpayers Committee.

F-51

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• Telemig was given infraction notices owing to IRPJ underpayment, including fine and denial of request for refunding and offsetting of credits determined as a result of overpayments in relation to IRPJ estimates. In one of the proceedings in October 2009, a favorable decision was rendered by the First Chamber of Tax Appeals, which caused the proceedings to be reclassified as remote. In all other cases, the discussion is being held on an administrative level pending a final decision. For those cases, the amount involved at December 31, 2009 was R$30,767 (R$36,995 at December 31, 2008).
  
  
• Vivo Participações is involved in an administrative discussion relating to the presumed underpayment of IRRF on a remittance made to a foreign country. The total amount at December 31, 2009 was R$22,536 (R$20,923 at December 31, 2008).
  
  
• In May 2007, Vivo Participações was subjected to fiscal execution amounting to R$32,452 at December 31, 2009 (R$29,905 at December 31, 2008), relating to the requirement resulting from the non-homologation of the offsetting statement with a negative IRPJ balance in calendar year 2000, fiscal 2001. This case is pending decision of the lower level court. In an addendum about the same theme, Vivo Participações proposed an annulment action with a view to challenging the infraction notice, being reviewed by the Federal Court in São Paulo.
  
  
• Vivo Participações is involved in an administrative discussion relating to the infraction notices given to its merged company Tele Leste Celular Participações S.A., amounting to R$6,793 at December 31, 2009 (R$6,385 at December 31, 2008). The tax authorities claim income tax underpayment, as a result of an excess in the allocation made to Northeast Investment Fund (“FINOR”), Amazon Investment Fund (“FINAM”) and Economic Recovery Fund of the Espírito Santo (“FUNRES”) as determined in an audit procedure of Income Tax Return Review – excess allocation to tax incentives. This case is pending decision of the second administrative level.
  
  
• Vivo Participações is involved in an administrative discussion relating to infraction notices whose subject matters are: i) non-deductibility of JSCP considering the mismatch with current information in the DIRF of withholding tax amounts for beneficiaries of financial income; ii) presumed underpayment of estimated IRPJ and CSLL; and iii) adjustments of IRPJ and CSLL computation bases. The discussions relating to the aforementioned proceedings are being held on an administrative level. At December 31, 2009, the amount involved was R$97,353 (R$90,802 at December 31, 2008).
  
  
• Vivo Participações is involved in administrative and legal discussions with a view to challenging debtor balances related to tax debits referring to IRPJ, CSLL, PIS, COFINS and IRRF. Those are debits activated in the SIEF system because of statements rendered by the particular taxpayer (DCOMP and PER/DCOMP), not confirmed by the Brazilian Internal Revenue Service. Discussions are pending the completion of the administrative discussion and final decision on a legal level. At December 31, 2009 the amount involved was R$172,077 (R$3,704 at December 31, 2008).
  
  
• The Company is involved in discussions relating to the return to its customers of amounts liquidated as contributions to COFINS) and PIS.

F-52

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• FUST: ANATEL, through Amendment 7, of December 15, 2005, stated its understanding that: (i) “The revenues, among others, to be passed on to telecommunications service providers as compensation for the interconnection and the use of the resources of their networks cannot be excluded from the computation basis of FUST contributions,” and (ii) “The revenues, among others, received from telecommunications service providers as compensation for the interconnection and the use of the resources of their networks cannot be excluded from the computation basis of FUST contributions.”
  
  Considering that the second part of the Amendment is not in accordance with the provisions of the sole paragraph of article 6 of Law 9998, of August 17, 2000, Vivo filed an injunction challenging the legality of such requirement, and a favorable decision was rendered by the Lower Court. A decision from the Court of Appeals is still pending.
  
  In January 2006, Telemig also filed an Injunction for the purposes of protecting its legitimate rights to continue paying the FUST amount without any extension of the computation basis not provided in law.
  
  At December 31, 2009 Vivo’s amounts totaled R$331,704 (R$225,549 at December 31, 2008) and Telemig amounts totaled R$62,595 (R$33,102 at December 31, 2008).
  
  The Company Management and its legal advisors understand that there is a chance of a favorable decision on such proceedings, both on the administrative and legal levels.
  
  
• FUNTTEL: Vivo and Telemig filed injunctions to the President of FUNTTEL’s Management Board and the Interim Secretary of the Brazilian Ministry of Communications to ensure their certain and liquid right to compute and pay FUNTTEL contributions, under the terms of Law 10052, of November 28, 2000, without the inclusion of the transfer amounts received as interconnection provision and use of resources integrating their networks, as provided in article 6, paragraph 4 of Decree 3737, of January 30, 2001, and a preliminary order was issued in this regard. In October 2008, the sentence rendered by the Lower Level Court was favorable to the operating companies. Therefore, in view of the sentence of the Lower Court, the enforcement of FUNTTEL on interconnection revenues is suspended.
  
  The Brazilian Ministry of Telecommunications has issued notices of assessment of FUNTTEL in relation to interconnection revenues. The legal advisers of the subsidiaries had an administrative objection that is still pending judgment.
  
  At December 31, 2009, Vivo’s amount totaled R$151,625 (R$106,101 at December 31, 2008) and Telemig’s is R$20,105 (R$19,201 at December 31, 2008).
  
  The Company Management and its legal advisors understand that there is a chance of a favorable decision on such proceedings, both on the administrative and legal levels.
  
  
• FISTEL: Vivo holds authorizations granted by the Government through an Authorization Form to explore the Personal Mobile Service for an undetermined period; and other authorizations to use frequencies on a primary basis, for the period remaining from the first license, which may be extended for another fifteen years.
  
  Upon the extension of the right to use radiofrequency associated to the exploration of the personal mobile service, ANATEL collects the TFI relating to the issuance of new licenses assessing on Cell Sites, mobile stations, and radio-loops.
  
  Such collection is a result of ANATEL’s understanding that article 9, item III of Resolution 255 would apply to such case, so that the extension would be the taxable event of the TFI. As the Company understands that TFI collection on mobile stations is undue, Vivo is holding administrative discussions with ANATEL, which are still pending judgment.
  
  At December 31, 2009, said amount totaled R$976,316 (R$827,020 at December 31, 2008).
  
  As Telemig also understands that the TFI collection on mobile stations is undue, when the Company received the official letter on period extension, together with the collection slip of said tariff Telemig filed a refutation action, which is still pending judgment. At December 31, 2009, said amount totaled R$118,402 (R$108,789 at December 31, 2008).
  
  The Company Management and its legal advisors understand that there is a chance of a favorable decision on such proceedings.

F-53

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• EBC – Contribution to Public Broadcasting Investment:
  
  On May 26, 2009, SINDITELEBRASIL - Trade Union for Telephony and Mobile and Personal Service Companies, filed an Injunction challenging the new contribution to the EBC (Empresa Brasil de Comunicação), created by Law 11652/08. No preliminary Order was issued, and Vivo and Telemig, operating companies affiliated to said Trade Union, obtained legal authorization to deposit the amount in question, which, at December 31, 2009 totaled R$63,377. At present, the proceeding is pending decision from the Lower Level Court.
  
  
• INSS: On July 02, 2002, Telemig was given an infraction notice from the INSS, relating to the joint and several liability for the payment of the contribution to the INSS of service providers and the 11% withholding tax provided for in Law 9711/98. The total amount at December 31, 2009 was R$35,329 (R$33,726 at December 31, 2008). At December 31, 2009, Telemig had booked a provision in the amount of R$3,547 in order to cover possible losses arising out of the above mentioned infraction notice, substantiated by the opinion of its legal advisors (note 17.3b) .
  
  
• Other cases: Vivo has other cases deemed to be possible losses totaling R$2,898 at December 31, 2009 (R$3,046 at December 31, 2008).

c) Municipal Taxes

Vivo is involved in several municipal tax proceedings as described below:

• As Vivo understands that the granting to use telecommunications networks is a communication service subject to ICMS tax payment, and not a rental of personal property, the Company was given an infraction notice in the municipalities of Salvador and Porto Alegre, whose administrations demand the payment of ISS on the tariff of use of the mobile network (TUM). At December 31, 2009 said amount totaled R$57,345 (R$56,910 at December 31, 2008). The administrative discussion conducted in Salvador is pending decision from the Court of Appeals. In Porto Alegre, the decision was favorable to Vivo.
  
  
• Vivo is involved in an administrative discussion relating to the ISS in other municipalities that totaled R$37,869 at December 31, 2009 (R$32,886 at December 31, 2008), whose main subject matters are: i) ISS on supplementary telephony services, on value added to telephony, publicity/advertising, enabling, caller ID and telephony subscription services; and ii) non withholding of ISS on consulting services provided by TISA (Telefónica International) to Vivo.

F-54

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The proceedings are under discussion, some of them on the administrative level and others on the legal level.

19.4. Civil Proceedings

19.4.1. Probable and possible losses

Civil proceedings include civil claims, on several levels, and as previously shown, a provision considered sufficient to cover probable losses in those proceedings was accounted for.

a) Consumers

The Company and its subsidiaries are facing several legal proceedings filed by individual consumers or by civil associations representing the rights of consumers who claim noncompliance with services and/or products sold. On an individual basis, none of those proceedings is considered material.

At December 31, 2009, based on the opinion of its external legal advisors, R$145,756 (R$151,692 at December 31, 2008) were provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$492,819 (R$459,594 at December 31, 2008).

b) ANATEL

The subsidiaries are facing several administrative proceedings filed by ANATEL relating to noncompliance with the Regulation regarding the SMP. At December 31, 2009 R$17,464 (R$15,369 at December 31, 2008) was provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$7,570 (R$12,916 at December 31, 2008).

c) Other cases

They refer to proceedings of other natures, all of them relating to the normal business course. At December 31, 2009, based on the opinion of its external legal advisors, R$4,734 (R$3,614 at December 31, 2008) was provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$41,783 (R$21,976 at December 31, 2008).

19.5. Labor Claims

They include several labor claims, and as previously shown, a provision considered sufficient to cover probable losses in those proceedings was accounted for.

F-55

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$205,501 (R$193,462 at December 31, 2008).

19.6. Guarantees

The Company posted guarantees to proceedings of a tax, civil and labor nature, as follows:

		Property and		Escrow		Letter
Process		Equipment		deposits		Guarantee		Total
Tax		63,940		3,547		280,570		348,057
Civil and labors		19,594		105,791		9,698		135,083
Total		83,534		109,338		290,268		483,140

In addition to the above mentioned guarantees, at December 31, 2009, the Company and its subsidiaries had amounts recorded as guarantee of lawsuits (blocked deposits in court) totaling R$53,979.

19.7. Tax Audits

According to the current Brazilian law, federal, state and municipal taxes and social contributions are subject to review by the proper authorities for periods ranging from 5 to 30 years.

20. OTHER LIABILITIES

		As of December 31,
		2009		2008
Deferred revenues		518,642		451,772
Reverse stock split (a)		246,930		244,090
Provision for assets retirement obligation (b)		153,739		183,387
Provision for customer loyalty program		65,591		117,590
Provision for pension fund		15,693		12,372
Payables to related parties		1,180		3,906
Others		9,576		9,260
Total		1,011,351		1,022,377
Current		834,824		820,233
Noncurrent		176,527		202,144

a) This refers to credit made available to the holders of shares remaining as a result of the reverse stock split of the capital stock of the Company and of its subsidiaries.

b) This refers to the costs to be incurred in connection with the eventual need of giving back to their owners the sites (locations for installation of Radio Base Stations – RBS of the subsidiaries) in the same conditions as they were found at the time of the execution of the initial lease contracts thereof.

21. SHAREHOLDERS’ EQUITY

a) Capital Stock

F-56

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Pursuant to the Articles of Incorporation, the Company may increase its capital stock up to the limit of 750,000,000 shares (authorized capital), either common or preferred, regardless of the amendment to the articles of incorporation, with the Board of Directors being the competent body to resolve on the increase and the consequent issue of new shares up to the referred limit.

At a Meeting of the Board of Directors held on February 12, 2009, an increase of the capital stock in the amount of R$189,896 was approved, which corresponds to the tax benefit of the incorporated goodwill for fiscal year 2008 (note 28 (d)).

At a Special Shareholders’ Meeting held on July 27, 2009, a capital increase was approved in the amount of R$1,879,728, upon issue of 26,374,793 book-entry shares, arising out of the exchange of shares with the minority shareholders of Telemig Participações (note 1d), of which 993,854 are common shares and 25,380,793 are preferred shares, all of them registered and with no face value.

At December 31, 2009, the subscribed and paid-up capital stock of the Company was R$8,780,150 (R$6,710,526 at December 31, 2008), represented by shares with no face value, distributed among the shareholders as follows:

		Number of shares as of
		December 31,
		2009		2008
Shares outstanding
Common		137,269		134,151
Preferred		262,321		233,245
Total		399,590		367,396

b) Capital Reserves

b.1) Goodwill reserve

This reserve represents the excess of value at the time of the issuance or capitalization in relation to the basic value of the share at the issuance date.

b.2) Special Goodwill Reserve

This reserve was booked as a result of the corporate reorganization processes described in note 7.2, as a counter-entry to the net assets transferred, and represents the future tax benefit to be earned by amortization of the premium transferred. The portion of special goodwill reserve corresponding to the benefit may be, at the end of each fiscal year, capitalized to the benefit of the controlling shareholder, with the issue of new shares. The capital increase is subject to the preemptive rights of the non-controlling shareholders, proportionally to their respective interests, by kind and class of share, at the time of the issue, with the amounts paid upon the exercise of such right to be directly delivered to the controlling shareholder, pursuant to the provisions in CVM Instruction no. 319/99.

The Meeting of the Board of Directors held on February 12, 2009 approved a capital increase of R$189,896, representing the tax benefit of the incorporated goodwill reserve for fiscal year 2008, with the issue of 5,819,678 new shares, of which 2,124,989 were common shares and 3,694,689 were preferred shares, ensuring the preemptive right provided for in Article 171 of Law No. 6404/76, and the proceeds arising from the exercise of the preemptive right were credited to Portelcom

F-57

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Participações S.A.. With the capitalization effected in the first quarter of 2009, all the amount of tax benefit was capitalized to the benefit of the controlling shareholders; consequently, there will be no new capitalizations relating to these specific tax benefits in the future.

b.3) Tax Incentives

These represent the amounts invested in tax incentives in previous fiscal years. The balance recorded by the Company was originated from the merger of Tele Centro Oeste Celular Participações S.A., which occurred on February 22, 2006.

c) Profit Reserves

c.1) Legal Reserve

The legal reserve is booked by allocation of 5% of the net profit for the year, up to the limit of 20% of the paid-up capital stock or 30% of the capital stock added by the capital reserves. As from such limit, allocations to this reserve are no longer mandatory, as set forth in Art. 193 of Law no. 6404/76.

c.2) Reserve for Expansion

The reserve for expansion was booked with the purpose of holding funds for financing additional investments of fixed and current capital by allocation of up to 100% of the remaining net profit, after the legal determinations. This reserve is supported by a capital budget approved at the shareholders’ meetings.

c.3) Reserve for Contingencies and Treasury Shares

The amounts recorded result from the spin-off of Companhia Riograndense de Telecomunicações – CRT and are designed to guarantee an eventual court decision rendered with respect to judicial actions concerning capitalizations for fiscal years 1996 and 1997 which occurred in that company.

d) Retained Earnings

At a General and Special Shareholders’ Meeting, held on March 19, 2009, the allocation of the net profit for fiscal year 2008 was approved, in the amount of R$399,901, of which R$19,995 were applied to the Legal Reserve and R$379,906 as dividends and interest on capital: R$161,113 as interest on shareholders’ equity, gross value (R$136,946, net of withholding income tax) and R$218,793 as dividends (R$215,640 originally from retained earning and 3,153 from reserve for expansion). Additionally, R$46,892 transferred from reserve from expansion were allocated as supplementary dividends.

Pursuant to a change introduced by Law no. 11.638/07, the net profit for the year shall be fully allocated in conformity with the provisions set forth in articles 193 to 197 of Law no. 6.404/76.

e) Dividends and Interest on shareholders’ equity

The General and Special Shareholders’ Meeting, held on March 19, 2009, approved the payment of interest on shareholders’ equity, gross value, in the amount of R$161,113 (R$136,946, net of withholding income tax) and of dividends, in the amount of R$265,685.

The preferred shares do not have voting rights, except in the cases stipulated in articles 9 and 10 of the Bylaws, but are ensured priority in the reimbursement of the capital stock, without premium, the right to participate in the dividend to be distributed, corresponding to a minimum of 25% of net

F-58

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

income for the fiscal year, calculated in accordance with article 202 of Law no. 6.404/76, and priority in receiving minimum non-cumulative dividends equivalent to the higher of the following amounts:

e.1) 6% (six per cent) per year on the amount resulting from the division of the subscribed capital by the total number of Company’s shares; or

e.2) 3% (three per cent) per year on the amount resulting from the division of the shareholders’ equity by the total number of Company’s shares, and also the right to participate in distributed profit under the same conditions applicable to common shares, after the common shares have been ensured of a dividend equal to the minimum priority dividend established for the preferred shares.

Effective December 2, 2009, the effective date of the Commencement of payment of dividends for the year ended 2008, holders of preferred shares have lost their right to full voting because the interest on shareholders’ equity added to the value of dividends per share totaling the statutory minimum value. This was deliberated at the Annual General Meeting at March 19, 2009.

Interest on shareholders’ equity and dividends not claimed by the shareholders are forfeited in 3 (three) years, as from the date of the beginning of payment, as set forth in article 287, subparagraph II, item a), of Law No. 6404/76.

At December 31, 2009 and 2008, the proposed dividends were calculated as follows:

		As of December 31,
		2009		2008
Consolidated net income for the year		857,486		389,683
Consoldation adjustments
Unclaimed dividends and interest on		4,771		10,218
shareholders’ equity
Tax incentives in subsidiaries		9.137		-
Net income for the year of the controlling		871,394		399,901
company
Appropriation to legal reserve		(43,569)		(19,995)
Adjusted net income		827,825		379,907
Minimum dividend (25% on adjusted net income)		206,956		94,977
Proposed interest on shareholders’ equity: (gross)		104,136		161,113
Withholding income tax		(15,620)		(24,167)
Proposed interest on shareholders’ equity (net)		88,516		136,946
Proposed dividend		723,689		218,793
Proposed additional dividend		6,676		46,892
Proposed dividend and interest on
shareholders’ equity		818,881		402,631
1)     Distribuition of interest on shareholders’equity
Number of common and preferred shares (excluded
treasury shares)		399,590,102		367,395,631
Gross interest on shareholders' equity proposed per
share (R$)		R$0.2606		R$0.4385
Net interest on shareholders' equity proposed per
share (R$)		R$0.2215		R$0.3727

F-59

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

2)     Distribution of dividends
Proposed dividends for the common shares(R$)		250,898		97,012
Proposed dividends for the preferred shares(R$)		479,467		168,673
Total		730,365		265,685
Number of shares
Common shares	137,269,188			134,150,345
Preferred shares (excluded treasury shares)	262,320,914			233,245,286
Dividend per share
Common shares		R$1.8278		R$0.7232
Preferred shares		R$1.8278		R$0.7232

22. NET OPERATING REVENUE
		Years ended December 31,
		2009		2008		2007
Subscription and use		10,477,815		10,013,953		8,000,754
Interconnection		6,301,586		6,140,301		5,109,277
Data and value-added services		2,971,276		2,049,801		1,330,552
Other services		188,760		244,121		98,008
Gross revenue from service		19,939,437		18,448,176		14,538,591
Value-added tax on services (ICMS)		(3,439,788)		(3,114,869)		(2,447,298)
Discounts granted		(760,380)		(812,745)		(474,139)
PIS and COFINS		(725,839)		(669,788)		(521,963)
Service Tax ISS		(7,735)		(5,478)		(5,893)
Net operating revenue from services		15,005,695		13,845,296		11,089,298
Gross revenue from handsets and
accessories		2,932,237		3,258,070		3,105,703
Discounts granted		(966,479)		(1,009,701)		(1,144,698)
Value-added tax on services (ICMS)		(296,801)		(308,298)		(242,994)
PIS and COFINS		(167,712)		(196,994)		(167,791)
Returns of goods		(143,754)		(118,709)		(147,024)
Net operating revenue from sale of
handsets and accessories		1,357,491		1,624,368		1,403,196
Total net operating revenue		16,363,186		15,469,664		12,492,494

There was not any customer who contributed more than 10% of the gross operating revenue for the fiscal years ended December 31, 2009, 2008 and 2007.

23. COST OF GOODS SOLD AND SERVICES RENDERED

F-60

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Years ended December 31,
		2009		2008		2007
Interconnection		(2,313,193)		(2,146,713)		(1,618,216)
Depreciation		(1,856,285)		(1,424,640)		(1,088,673)
Taxes and contributions		(860,116)		(656,199)		(498,801)
Outside services		(630,142)		(539,718)		(425,753)
Amortization		(429,825)		(282,353)		(290,250)
Rent, insurance and condominium fees		(359,608)		(281,509)		(209,923)
Leased lines		(313,046)		(255,441)		(226,190)
Personnel		(144,274)		(120,108)		(102,941)
Other consumables		(34,080)		(30,449)		(65,709)
Cost of services rendered		(6,940,569)		(5,737,130)		(4,526,456)
Cost of goods sold		(2,011,001)		(2,441,894)		(2,096,834)
Total		(8,951,570)		(8,179,024)		(6,623,290)

24. SELLING EXPENSES

		Years ended December 31,
		2009		2008		2007
Outsourced services		(2,137,934)		(1,913,309)		(1,635,977)
Depreciation		(458,038)		(433,211)		(408,439)
Advertising		(427,726)		(443,616)		(323,660)
Costumer loyalty and grants		(420,722)		(429,216)		(310,856)
Personnel		(404,663)		(338,229)		(302,310)
Allowance for doubtful accounts		(213,235)		(303,845)		(365,740)
Amortization		(90,361)		(90,036)		(48,727)
Rent, insurance and condominium fees		(76,396)		(66,115)		(66,439)
Other supplies		(128,347)		(89,478)		(70,635)
Total		(4,357,422)		(4,107,055)		(3,532,783)

25. GENERAL AND ADMINISTRATIVE EXPENSES

		Years ended December 31
		2009		2008		2007
Outsourced services		(491,107)		(463,419)		(529,091)
Personnel		(326,860)		(298,815)		(266,462)
Amortization		(275,701)		(190,336)		(210,492)
Depreciation		(121,777)		(106,036)		(98,040)
Rent, insurance and condominium fees		(87,884)		(83,061)		(79,510)
Other supplies		(30,861)		(22,511)		(23,600)
Total		(1,334,190)		(1,164,178)		(1,207,195)

26. OTHER OPERATING INCOME (EXPENSES), NET

F-61

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Years endend December 31,
		2009		2008		2007
Recovered expenses		376,330		159,421		180,682
Fines		111,246		103,582		67,559
Shared infrastructure – EILD		138,796		95,017		52,764
Rental properties		16,349		13,277		-
Amortization of goodwill, net of realization
of the provision for losses on
investments		-		(411,088)		(311,676)
Provision for contingencies, net		(134,652)		(138,699)		(184,594)
FUST		(84,994)		(75,665)		(60,682)
PIS e COFINS (a)		(53,371)		(64,241)		(51,979)
ICMS on other expenses		(57,706)		(48,034)		(60,387)
FUNTTEL		(42,459)		(37,802)		(30,376)
Amortization of deferred charges		(25,529)		(36,484)		(35,871)
Other taxes, fees and mandatory
contributions		(13,133)		(13,893)		(32,970)
Sale and provision for loss on assets		(6,187)		(31,300)		(20,581)
Other income (expense),		16,122		16,048		(21,331)
Total		240,812		(469,861)		(509,442)

a) These refer to PIS and COFINS on other operating income, such as: fines, infrastructure sharing expenses, EILD and others.

F-62

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

27. FINANCIAL EXPENSES, NET

		Years ended December 31,
		2009		2008		2007
Financial income:
Income from short-term investment		169,981		271,244		138,551
Other income from financial operations		72,373		74,460		70,119
PIS and COFINS on financial income (a)		(42,539)		(41,507)		(22,848)
Total		199,815		304,197		185,822
Financial expenses:
Loans, financing and debentures		(430,646)		(433,450)		(294,232)
Derivative transactions		(86,820)		(192,580)		(222,437)
Discounts granted		(33,991)		(39,134)		(30,487)
Charges 3G licenses		(104,967)		(163,214)		-
CPMF		-		(1,769)		(62,722)
Other financial transactions		(45,480)		(51,200)		(54,818)
Total		(701,904)		(881,347)		(664,696)
Monetary and exchange variations:
Derivative transactions		(489,515)		840,913		(286,978)
Loans and financing		486,600		(841,552)		296,138
Suppliers and other transactions		33,711		(78,565)		1,375
Total		30,796		(79,204)		10,535
Effects of Fair Value and Adjustments to
present value
Loans and financing		(146,248)		154,415		5,155
Derivative transactions		122,544		(128,843)		241
Other operations		7,768		(6,917)		154
Total		(15,936)		18,655		5,550
Financial expenses, net		(487,229)		(637,699)		(462,789)

a) These refer to PIS and COFINS levied on interest on shareholders’ equity received from the subsidiaries.

28. INCOME AND SOCIAL CONTRIBUTION TAXES

The Company and its subsidiaries record provisions for income and social contribution taxes monthly on an accrual basis and pay the taxes based on the monthly estimate. Deferred taxes are recognized on temporary differences and tax loss carryforwards and negative base of social contribution calculated based on the 34% rate.

a) Components of income taxes

F-63

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The composition of expenses on income and social contribution taxes is shown below:

		Years ended December 31,
		2009		2008		2007
Income and social contribution tax credit acquired -
restructuring		(325,144)		(308,863)		(287,737)
Income and social contribution tax		(241,825)		(51,630)		(18,174)
Deferred income and social contribution tax		(23,484)		(109,009)		49,086
Total		(590,453)		(469,502)		(256,825)

b) Reconciliation of effective tax rate

The table below presents a reconciliation of the expense with income taxes stated, eliminating the effects of the tax benefit arising from the goodwill, and the amounts calculated by application of the official rates combined to a rate of 34%:

		Years ended December 31,
		2009		2008		2007
Income before taxes		1,473,587		911,847		156,995
Tax credit at combined statutory rate (34%)		(501,019)		(310,028)		(53,378)
Benefit from deductibility of interest attributed to
shareholders´equity		35,406		58,808		-
Permanent additions (exclusions):
Goodwill amortization		11,819		(135,134)		(105,970)
Grants received by subsidiaries, fines, souvenirs,
pension plans and write-off of inventory		(21,898)		(23,942)
Tax benefit over SUDENE and SUDAM		(9,137)		(3,589)		-
Other exclusions		(32,067)		(40, 222)		(94,602)
Unrecognized tax loss		(73,557)		(15,395)		(2,875)
Tax expense		(590,453)		(469,502)		(256,825)

As described in note 3.r), Telemig and Vivo are entitled to tax reduction benefit of 75% on the taxable profit calculated based on the profit earned from activities in the tax incentive areas within the scope of the Superintendency for the Development of the Northeas -t SUDENE (North of Minas Gerais and Vale do Jequitinhonha) and Superintendency for the Development of the Amazon - SUDAM (States of Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Rondônia and Roraima), respectively.

c) Composition of deferred income tax assets

The breakdown of deferred income and social contribution taxes is as follows:

		As of December 31,
		2009		2008
Income and social contribution taxes loss carryforwards (i)		1,041,994		1,131,195
Tax credit acquired - restructuring (ii)		591,850		916,994
Tax credits on temporary differences: (iii)
Contingencies and legal liability		227,842		202,983

F-64

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Useful life differences - depreciation		222,405		143,431
Provision for future payment to suppliers		151,324		155,185
Doubtful accounts		110,494		131,685
Valuation allowance and provision for losses- fixed assets		99,754		108,566
Employee profit sharing		23,851		33,163
Customer loyalty program		22,301		39,980
Obsolescence		12,210		14,478
Derivative contracts		9,962		28,974
Other amounts		84,984		40,015
Total deferred taxes		2,598,971		2,946,649
Current		796,460		1,120,523
Noncurrent		1,802,511		1,826,126

Telemig reclassified the amount of R$11,700 of deferred income and social contribution taxes levied on the accelerated depreciation, for fiscal year ended on December 31, 2008, for “Taxes, charges and contributions” liabilities (note 17). Such effect is shown in the consolidated balances of 2008.

The amount recorded in the current assets refers to the estimated reversal of temporary differences, use of tax losses and tax credit acquired - restructuring expected for the next twelve months.

The deferred taxes were recorded assuming their future realization, as follows:

(i) Tax loss and negative tax base: represents the amount recorded by the subsidiaries, which will be offset up to the limit of 30% of the tax base computed in the coming fiscal years and subject to no statute of limitations. The Company did not record the potential deferred income and social contribution tax credit that would arise from the use of the tax bases in the amount of R$688,023 (R$688,572 at December 31, 2009), given the uncertainty, at this time, as to the Company’s ability to generate future taxable results to ensure realization of these deferred taxes.

(ii) Tax credit acquired - restructuring: represented by the net balance of goodwill and provision for maintenance of the integrity of the shareholders’ equity (note 28(d)). Realization occurs proportionally to the amortization, for tax purpose, of the goodwill in its subsidiaries, in a period from 5 to 10 years. Studies performed by independent consultants hired during the corporate reorganization process support the recovery of such amounts within the above referred time.

(iii) Tax credits on temporary differences: their realization will occur upon payment of the provisions, effective loss on bad debts or realization of inventories, as well as reversal of other provisions.

The Company did not record the potential deferred income and social contribution tax credit that would arise from the use of the provisions in the amount of R$154,757 (R$155,481 at December 31, 2008), given the uncertainty, at this time, as to the Company’s ability to generate future taxable results to ensure realization of these deferred taxes.

d) Tax credit acquired - restructuring

F-65

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Prior to the mergers, provisions were booked for maintenance of the stockholders’ equity of the merged company and, consequently, the net assets that were merged represent, essentially, the tax benefit arising out of the possible deduction of the incorporated goodwill.

Included in the accounting records held for corporate and tax purposes by the Company and its subsidiaries are specific accounts related to incorporated goodwill and provision and corresponding amortization, reversal and tax credit, the balances of which were as follows:

		As of December 31,
		2009						2008
		Goodwill		Provision		Net tax benefit		Goodwill		Provision		Net tax benefit
Telemig Celular Participações S.A. - Corporate Restructuring		1,251,945		(826,283)		425,662		1,485,172		(980,214)		504,958
Global Telecom S.A. - Acquisition		302,066		(199,364)		102,702		416,503		(274,892)		141,611
Telemig Celular S.A. - Corporate Restructuring		113,501		(74,911)		38,590		133,896		(88,372)		45,524
Tele Centro Oeste Celular Participações - Acquisition		46,540		(30,716)		15,824		251,582		(166,044)		85,538
Tele Leste Celular Participações S.A. - Privatization		26,687		(17,615)		9,072		58,856		(38,846)		20,010
Telesp Celular S.A. - Privatization		-		-		-		292,668		(193,161)		99,507
Telemig Celular S.A. - Privatization		-		-		-		58,371		(38,525)		19,846
Total		1,740,739		(1,148,889)		591,850		2,697,048		(1,780,054)		916,994

The changes in tax credits for fiscal years ended on December 31, 2009 and 2008 are as follows:

		Years ended December 31,
		2009		2008
Results:
Amortization of goodwill		(956,309)		(908,423)
Reversal of provision		631,165		599,560
Tax credit		325,144		308,863
Effect on statement of operation		-		-

At a meeting of the Board of Directors held on February 12, 2009, the capitalization of a portion of the special goodwill reserve to the benefit of the controlling shareholders was approved, in the amount ofR$189,896, corresponding to the tax benefits generated in 2008 (note 21.b2). Upon the capitalization effected in the first quarter of 2009, the entire amount of the tax benefit was capitalized to the benefit of the controlling shareholders; consequently, there will be no further capitalizations relating to such specific tax benefits in the future.

29. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company and its subsidiaries are engaged in transactions involving financial instruments, the risks of which are actively managed by means of a set of initiatives, procedures and comprehensive operating policies.

The Company’s and its subsidiaries’ financial instruments are presented in compliance with CVM Resolution no. 566, dated December 17, 2008, which approved Technical Statement CPC 14, and with CVM Instruction 475, dated December 17, 2008.

The Company and its subsidiaries have evaluated their financial assets and liabilities against market values, using the available information and proper evaluation methodologies. However, the interpretation of market data and the selection of evaluation methods require considerable discretion and estimates in order to calculate the most adequate realizable value. In consequence, the estimates presented do not necessarily indicate the amounts realizable in the current market.

F-66

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The use of different market assumptions and/or methodologies may have a material effect on the estimated realization values.

a) General considerations

At December 31, 2009 and 2008, the main financial instruments, and their respective values by category, were as follows:

		Years ended December 31,
		2009						2008
		Fair value						Fair value
		through		Amortizated				through		Amortizated
		results		cost		Total		results		cost		Total
Assets
Cash and cash equivalents		1,258,574		-		1,258,574		2,182,913		-		2,182,913
Short-term investments pledged as collateral		90,541		-		90,541		88,822		-		88,822
Trade accounts receivable, net		-		2,546,806		2,546,806		-		2,578,498		2,578,498
Derivative contracts		151,760		-		151,760		632,751		-		632,751
Other assets				364,551		364,551				369,225		369,225
Liabilities
Payroll and related accruals		-		161,366		161,366		-		185,471		185,471
Trade accounts payable		-		3,053,587		3,053,587		-		3,726,324		3,726,324
Taxes payable		-		1,209,956		1,209,956		-		1,060,875		1,060,875
Loans and financing		932,824		2,062,205		2,995,029		2,393,693		3,439,664		5,833,357
Debentures and promissory note		-		2,129,465		2,129,465		-		2,169,799		2,169,799
Interest on shareholders’ equity and		-		934,358		934,358		-		545,864		545,864
Derivative contracts		162,388		-		162,388		203,323		-		203,323
Other liabilities		-		1,011,351		1,011,351		-		1,022,377		1,022,377

b) Considerations on risk factors which may affect the Company’s and its subsidiaries’ business

The main market risks to which the Company and its subsidiaries are exposed in the conduct of their activities are:

Liquidity Risk

Liquidity risk is the possibility that the Company and its subsidiaries do not have sufficient resources to meet their commitments according to the different currencies and terms of settlement of their rights and obligations.

The Company and its subsidiaries structure the maturity dates of the non-derivative financial agreements, as shown in note 18, and of their respective derivatives as shown in the payments scheduled disclosed in the referred note, in such manner as not to affect its liquidity.

The control of the Company’s and its subsidiaries’ liquidity and cash flow is daily monitored by the Company’s Management, in such way as to ensure that the operating cash generation and the previous fund raising, as necessary, are sufficient to meet its schedule of commitments, not generating liquidity risks to the Company and its subsidiaries.

Credit Risk

The credit risk arises out of the eventual difficulty to collect the amounts payable by its customers for the telecommunication services rendered to them and of sales of handsets to the distributors network.

The Company and its subsidiaries are also subject to the credit risk related to their financial investments and accounts receivable for swap transactions.

F-67

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The credit risk involved in the rendering of telecommunications services is minimized by a strict control of the customer base and active management of customers’ default, by means of clear policies regarding the sale of post-paid handsets. The customer base of the subsidiary companies has, predominantly, a prepaid system, which requires the prior charging and consequently entails no credit risk.

The credit risk in the sale of handsets and “pre-activated” prepaid cards is managed under a conservative credit policy, by means of modern management methods, including the application of “credit scoring” techniques, analysis of financial statements and information, and consultation to commercial data bases.

In relation to the credit risk in connection with the financial institutions, the Company and its subsidiaries act in such a manner as to diversify this exposure among various world-class financial institutions.

Interest Rate and Inflation Risk

The interest rate risk arises out of the portion of the debt referenced to the CDI rate and of the liability positions in derivatives (exchange hedge, General Price Index - IGPM and Consumer Prices Index - IPCA) contracted at floating rates, which may have a negative effect on the financial expenses in case of an unfavorable change in the interest rates. The balance of financial investments, indexed at the Interbank Deposit Certificate - CDI rate, partially offsets such effect.

The debt to the BNDES is indexed to the Long Term Interest Rate - TJLP rate, which remained at 6.25% per year from July 2007 until the end of June 2009. In July 2009, a reduction in the rate to 6.00% per year was announced, with a positive impact on this portion of the debt. As of December 31, 2009 the rate remained at 6.00% per year.

The inflation rate risk arises out of the debentures of the Company and of Telemig, indexed to the IPCA, which may negatively affect the financial expenses in case of an unfavorable change in such index.

In order to reduce the exposure to the local variable interest rate (CDI), the Company and its subsidiaries invest the cash surplus of R$1,212,106, mainly, in short term financial investments indexed to the CDI rate.

Exchange Rate Risk

This risk arises out of the possibility of losses on account of exchange rate fluctuations, which may increase the liabilities and expenses arising out of loans and purchase commitments in foreign currencies.

The Company and its subsidiaries have contracted financial derivative transactions (exchange hedges) so as to protect themselves against exchange rate fluctuations arising out of foreign currency loans. The instruments used are swap contracts.

The table below summarizes the net exposure of the Company and its subsidiaries to the exchange rate factor at December 31, 2009 and 2008:

F-68

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		In thousands
		12.31.09				12.31.08
		US$		¥		US$		¥
Loans and financing		(419,584)		(1,404,398)		(467,501)		(51,937,288)
Loans and financing - UMBNDES (*)		(2,485)		-		(4,061)		-
Derivative instruments		421,070		1,404,398		467,308		51,937,288
Total (insufficient coverage)		(999)		-		(4,254)		-

(*) UMBNDES is a monetary unit prepared by the BNDES, made up of a foreign currencies basket, the main currency being the US Dollar, for which reason the Company and its subsidiaries consider it upon reviewing the risk coverage related to the exchange rate fluctuations.

In addition to the amounts listed above, Vivo records liabilities in foreign currency referring to other obligations. At December 31, 2009 the balance of other liabilities in foreign currency was US$ 32,925 and €11,961 (US$33,104 and €20,044 at December 31, 2008).

c) Transactions with Derivatives

The Company entered into swap contracts in foreign currency at several exchange rates, in notional amounts at December 31, 2009 of US$ 415,637, and JPY 1,338,853, at December 31, 2009 (US$ 515,606, and JPY 51,594,615 at December 31, 2008). At December 31, 2009, the Company had no interest rate swap contracts in local currency (CDI) (R$225,000 at December 31, 2008) and, at that same date, we recorded the notional amount of R$110,000 of swaps indexed to the IGPM (R$110,000, at December 31, 2008).

At October 15, 2009, a swap contract was contracted, which was indexed to the IPCA as for assets, and to the CDI, as for liabilities, in the notional amount of R$72,000, in order to cover the exposure of the flows of the 3rd series of the 4th Issue of Debentures to the variation of the IPCA rate. Upon being contracted, this swap was recognized as a fair value hedge.

As required by Law no. 11,638/07, the Company started applying CPC 14 since the transition date on January 1, 2007. CPC 14 must be applied to all derivative instruments, and requires that such instruments are stated in the balance sheet at their fair value. Changes to the fair value of the derivatives are recognized in the statement of operations, unless the Company is able to prove compliance with specific criteria such as hedge accounting.

The derivative financial instruments intended for hedging and the respective items subject to the hedge are adjusted monthly to the fair value, with due regard to the following: for those financial instruments classified as fair value hedges and evaluated as effective, the valuation or devaluation of the fair value of the hedged instrument and of the item subject matter of hedge must be recorded as a counter-entry to the proper revenue or expense account in the statements of operations.

The Company calculates the effectiveness of these hedges on a continuous basis (at least quarterly) and, at December 31, 2009 and 2008, the contracted hedges were effective in relation to the debts being covered. As long as these derivative contracts comply with hedge accounting according to CPC 14, the covered debt is also adjusted to its fair value in conformity with the fair value hedge rules.

The CVM, by Resolution no. 550, issued on October 17, 2008, and by Instruction no. 475, issued on December 17, 2008, requires publicly-held companies to disclose, in a specific explanatory note, qualitative and quantitative information about all their derivative financial instruments, whether recognized or not as assets or liabilities in their balance sheets.

 

F-69

---

d) Risk Management Policy

All contracting of derivative financial instruments of the Company and of Vivo is intended for protection against foreign exchange risk and variations in foreign and local interest rates arising out of debts, pursuant to a corporate policy of risk management. Accordingly, eventual variations in the risk factors generate an inverse effect on the subject matter they are intended to protect. Therefore, there are no derivative financial instruments for speculation purposes and 99.8% of the financial exchange liabilities are hedged.

The Company keeps internal controls in relation to their derivative instruments which, in the opinion of the Management, are adequate for controlling risks associated with each strategy of market action. The results obtained by the Company in relation to their derivative financial instruments show that the Management has properly managed risks.

e) Fair values of the derivative financial instruments

The valuation method used for calculating the market value of the loans, financing, debentures and derivatives was the discounted cash flow which considered the expectation of settlement or receipt of liabilities and assets at the market rates prevailing at December 31, 2009 and 2008.

The fair values are calculated by projecting the future flows of the transactions, using the BM&F Bovespa curves and bringing them to present value using market DI – (one-day Interbank, extra group deposits) rates for swaps disclosed byBM&F Bovespa.

The market values of the exchange coupon swaps x CDI were obtained using the market exchange rates in effect at December 31, 2009 and 2008 and the rates projected by the market which were obtained from the currency coupon curves. For calculating the coupon of the positions indexed in foreign currency the linear convention of 360 calendar days was adopted and for calculating the coupon of the positions indexed to the CDI the exponential convention of 252 business days was adopted.

The financial instruments disclosed below are recorded with the CETIP, all of them being classified as swaps, not requiring a margin deposit.

F-70

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

						Notional				Fair Value				Cumulative effect
														Amount receivable (payable)
		Description				12.31.09		12.31.08		12.31.09		12.31.08		12.31.09		12.31.08
		"Swap" of contract
		Asset position
(1)		Foreign currency				728,040		1,768,940		759,581		2,430,082		158,117		713,641
		Abn Amro		USD		78,079		78,079		95,327		112,188		3,026		33,233
		Banco do Brasil		JPY		22,225		301,899		26,415		504,863		-		180,674
		Bradesco		USD		-		29,128		-		43,676		-		13,125
		Citibank		USD		181,230		181,230		174,296		205,044		36,070		61,394
		Itaú		USD		-		643		-		657		-		-
		JP Morgan		USD		443,207		443,207		460,769		536,433		119,021		178,381
		Pactual		USD		-		1,812		-		1,892		-		-
		Santander		JPY		-		542,296		-		835,118		-		246,834
		Unibanco		USD		3,299		92,792		-		93,478		-		-
		Votorantim		USD		-		97,854		2,774		96,733		-		-
		Post rate				-		225,000		-		226,247		-		-
		Banco do Brasil		CDI		-		175,000		-		175,970		-		-
		Bradesco		CDI		-		50,000		-		50,277		-		-
		Santander		CDI		-		-		-		-		-		-
(2)		Inflation Rate				182,000		110,000		250,927		156,703		24,948		15,623
		Unibanco		IGPM		110,000		110,000		176,016		156,703		14,357		15,623
		Itaú		IPCA		72,000		-		74,911		-		10,591		-
												-
		Liabilities position
		Post Rate (CDI)				(728,040)		(1,768,940)		(750,997)		(1,920,551)		149,534		202,109
		Abn Amro		CDI		(78,079)		(78,079)		(92,301)		(78,955)		-		-
		Banco do Brasil		CDI		(22,225)		(301,899)		(27,453)		(324,189)		1,038		-
		Bradesco		CDI		-		(29,128)		-		(30,551)		-		-
		Citibank		CDI		(181,230)		(181,230)		(177,852)		(177,882)		39,626		34,233
		Itaú		CDI		-		(643)		-		(1,172)		-		515
		JP Morgan		CDI		(443,207)		(443,207)		(446,791)		(452,853)		105,043		94,799
		Pactual		CDI		-		(1,812)		-		(3,144)		-		1,252
		Santander		CDI		-		(542,296)		-		(588,284)		-		-
		Unibanco		CDI		(3,299)		(92,792)		(6,600)		(127,030)		-		33,552
		Votorantim		CDI		-		(97,854)		-		(136,491)		3,827		37,758
		Pre Rate				-		(225,000)		-		(227,461)		-		1,214
		Banco do Brasil		PRE		-		(175,000)		-		(176,908)		-		938
		Bradesco		PRE		-		(50,000)		-		(50,553)		-		276
		Post Rate (CDI)				(182,000)		(110,000)		(238,833)		(141,080)		12,854		-
		Unibanco		CDI		(110,000)		(110,000)		(161,659)		(141,080)		-		-
		Itaú		CDI		(72,000)		-		(77,174)		-		12,854		-
								Asset position						183,065		729,264
								Provision withholding income tax						(31,305)		(96,513)
								Liabilities position						(162,388)		(203,323)
								Amount receivable (payable), net of withholding tax						(10,628)		429,428

(1) Foreign currency swap x CDI (R$759,581) – swap transactions contracted with maturity dates until 2015, for protection against exchange variation risk on financing transactions in foreign currencies (book value of R$761,323).

(2) Swap IGPM x CDI percentage (R$176,016) – swap transactions contracted with maturity date until 2010 with the purpose of protecting the cash flow identical to the debts’ indexed to the IGPM (book value of R$176,016).

(2) Swap IPCA x CDI percentage (R$74,911) – swap transactions contracted with maturity dates until 2014 with the purpose of protecting the cash flow identical to the debentures (4th issue – 3rd series) indexed to the IPCA (book value of R$74,911).

At December 31, 2009, the Company recorded balances in assets (net of IRRF – withholding income tax) in the amount of R$151,760 (R$632,751 at December 31, 2008) and in liabilities in the amount of R$162,388 (R$203,323 at December 31, 2008), stated in the financial statements in order to reflect the derivatives positions.

F-71

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Gains and losses in the fiscal year ended on December 31, 2009, grouped by contracts executed, were recorded in the income accounts (note 27), as required in CVM Resolution 550/08.

Below is a breakdown of the maturity dates of the amounts receivable (payable) arising out of swap contracts at December 31, 2009:

Description
"Swap" of contract		Maturity
										Amount receivable
		2010		2011		2012		2013 and after		(payable) 12/31/09
Foreign currency x CDI
Abn Amro		3,026		-		-		-		3,026
Banco do Brasil		-		(1,038)		-		-		(1,038)
Citibank		(8,397)		(10,859)		(9,542)		25,242		(3,556)
JP Morgan		(17,695)		(26,759)		(24,384)		82,816		13,978
Votorantim		(2,576)		(1,251)		-		-		(3,827)
Total		(25,642)		(39,907)		(33,926)		108,058		8,583
IGPM x CDI
Unibanco		14,357		-		-		-		14,357
Total		14,357		-		-		-		14,357
IPCA x CDI
Itaú		(2,302)		(4,015)		(3,646)		7,700		(2,263)
Total		(2,302)		(4,015)		(3,646)		7,700		(2,263)
Total		(13,587)		(43,922)		(37,572)		115,758
				Asset Position						183,065
				Liabilities Position						(162,388)
				Balance before withholding income tax						20,677
				Provision withholding income tax						(31,305)
				Balance sheet adjustments						(10,628)

Analysis of sensitivity to the risk variables of the Company and its subsidiaries

CVM Instruction 550/08 indicates that publicly-held companies, in addition to the provisions in item 59 of CPC 14 (Financial Instruments: Acknowledgement, Measurement and Evidencing), are required to disclose a sensitivity analysis for each type of market risk deemed the Management to be material, to which the entity is exposed at the closing date of each period, including all transactions with derivative financial instruments.

In compliance with the provisions above, each of the transactions with financial derivatives was evaluated considering a probable realization scenario and two scenarios which may generate adverse results to the Company and and its subsidiaries.

In the probable scenario, the premise of realizing what the market has been signalizing in the future market curves (currency and interest) of the BM&F Bovespa was considered. Thus, in the probable scenario, there is no impact on the fair value of the financial instruments already presented above. For the adverse scenarios, deterioration of 25% and 50%, respectively, was considered in the risk variables until the maturity date of the financial instruments.

As the Company has only derivative instruments for hedging their financial debt, changes in the scenarios are accompanied by the respective hedge objects, thus showing that the effects thereof are almost null. At December 31, 2009, for these transactions, the Company stated the balance of the subject matter (debt) and of the derivative financial instrument (hedge) in separate lines of the sensibility analysis table, in order to inform on the net exposure of the Company , in each of the three mentioned scenarios, as shown below:

F-72

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Sensitivity Analysis – Net Exposure:

Operation		Risk		Probable		Deterioration 25%		Deterioration 50%
Hedge (Asset position)		Derivatives (Risk reduction USD)		733,166		957,632		1,201,978
Debt in USD		Debt (Risk increase USD)		(735,144)		(960,067)		(1,204,872)
		Net expousure		(1,978)		(2,435)		(2,894)
Hedge (Asset position)		Derivatives (Risk reduction JPY)		26,415		33,114		39,854
Debt in JPY		Debt (Risk increase JPY)		(26,415)		(33,114)		(39,854)
		Net expousure		-		-		-
Hedge (Asset position)		Derivatives (Risk reduction IGP-M)		176,016		176,180		176,346
Debt in IGP-M		Debt (Risk increase IGP-M)		(176,016)		(176,180)		(176,346)
		Net expousure		-		-		-
Hedge (Asset position)		Derivatives (Risk reduction IPCA)		74,911		79,989		85,502
Debt in IPCA		Debt (Risk increase IPCA)		(74,911)		(79,989)		(85,502)
		Net expousure		-		-		-
Hedge ( CDI Liability position)		Derivatives (Risk increase CDI)		(989,830)		(1,058,722)		(1,126,593)
		Net expousure		(989,830)		(1,058,722)		(1,126,593)
		Net exposure in each scenario		(991,808)		(1,061,157)		(1,129,487)
		Net effect of change in fair value				(69,349)		(137,679)

Assumptions for the Sensitivity Analysis:

Risk Variable		Scenario I		Scenario II		Scenario III
USD		1.7412		2.1765		2.6118
JPY		0.018809		0.023511		0.028214
IGP-M		-1.72%		-1.29%		-0.64%
IPCA		4.31%		5.39%		8.08%
CDI		8.55%		10.69%		12.83%

The net exposure in CDI shown in the sensibility analysis does not reflect all the exposure of the Company to the local interest rate as mentioned previously, the Company has debts indexed to the CDI, which is a natural hedge, and has short-term financial investments based on the variation of the CDI (R$1,212,106 at December 31, 2009).

For calculation of the net exposure, all the derivatives were considered at their fair value, as well as the associated debts (hedged elements).

The fair values, shown in the table above, depart from a portfolio position at December 31, 2009; however they do not reflect an estimate of realization due to the market dynamism, constantly monitored by the Company. The use of different assumptions may significantly affect the estimates.

F-73

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

30. POST-EMPLOYMENT BENEFIT PLANS

The table below describes the plans which the Company and its subsidiaries sponsor with the respective types of benefits.

Plan		Type (1)		Entity		Sponsor
						Vivo and Telemig, jointly with other
PBS-A		DB		Sistel		telecommunication companies originated from the
						privatization of the Telebrás.
						Vivo and Telemig, jointly with other
PAMA		DB		Sistel		telecommunication companies originated from the
						privatization of the Telebrás.
PBS		DB		VisãoPrev		Vivo, Telemig and Vivo Participações
VIVO PREV		Hybrid		VisãoPrev		Vivo
TCOPREV		Hybrid		VisãoPrev		Vivo
VISÃO		Hybrid		VisãoPrev		Vivo
CELPREV		Hybrid		Sistel		Telemig and Vivo Participações

⁽¹⁾ DB = Defined Benefit Plan; Hybrid = Benefit plan that provides benefits structured as both defined benefit and defined contribution. Only the assets and liabilities relating to the portions of these defined benefit plans will be presented in the reconciliations in compliance with CVM Resolution No. 371.

Vivo, together with other companies belonging to the former Telebrás System, sponsor private pension plans and medical assistance plans for retired employees under the same conditions as published for the last fiscal year, as follows: (i) PBS-A; (ii) PAMA; (iii) PBS- Telesp Celular, PBS-TCO, PBS Tele Sudeste Celular and PBS Tele Leste Celular; (iv) TCP Prev and TCO Prev Plans; (v) Visão Celular Benefit Plans - Celular CRT, Telerj Celular, Telest Celular, Telebahia Celular and Telergipe Celular.

The PBS-A and PAMA plans are managed by Fundação SISTEL de Seguridade Social – SISTEL.

Vivo sponsors the Vivo-Prev plan, which is an individual plan of defined contribution, managed by Visão Prev. Vivo’s contributions to this plan are equal to the participants’ contributions, varying from 0% to 8% of the participation wage, as a function of the percentage chosen by the participant.

Vivo, through its actuarial consultants, has prepared studies considering the impact of ordinary action no. 04/081.668 -0, brought by Sistel Participants Association - ASTEL against Social Security Foundation - SISTEL in which Telefonica and Telesp Celular (a company that was merged into Vivo) are mentioned, in addition to Social Security Foundation - SISTEL, which action is related to the change in the costing system and review of the health care plan, Plano de Assistência Médica aos Aposentados – PAMA, or the PAMA. Based on the opinion of its tax consultants, Management believes that at this time there is no payment risk, and at December 31, 2009 the chance of loss was classified as possible. Therefore, there was no amount accrued in the financial statements relating to this exposure. At December 31, 2009 the amount in question was R$1,517 (R$1,475 at December 31, 2008).

F-74

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Telemig individually sponsors a defined retirement benefit plan - Plano PBS Telemig. Besides the benefit of supplementation, medical assistance (PAMA) is provided to retired employees and to their dependents, at shared cost.

Telemig also sponsors the CelPrev, a defined contribution plan. Three types of contributions may be made by the participant, namely: (a) basic regular contribution: variable percentage from 0% to 2% of his/her participation wage; (b) additional regular contribution: variable percentage from 0% to 6% of the portion of his/her participation wage that exceeds 10 Standard Reference Units of the Plan; and (c) voluntary contribution: percentage to be freely chosen by the participant and applied to his/her participation wage. Four types of contributions may be made by the sponsor, namely: (a) basic regular contribution: contribution equal to the participant’s basic regular contribution, after deduction of the contribution for defraying the cost of the sickness allowance benefit and the contribution for defraying administrative expenses; (b) additional regular contribution: equal to the participant’s additional regular contribution, deducted by the administrative expense; (c) eventual contribution: voluntary contribution, at such frequency as may be determined by the sponsor; and (d) special contribution: contribution exclusively intended to those sponsor’s employees who are not members of the PBS plan and who were admitted to the plan within 90 days after the effective date of the CelPrev.

Actuarial provisions relating to the plans mentioned above are recorded in "Other liabilities" (Note 20).

Following is a breakdown of the provision for the defined benefit retirement plans and retired employees medical assistance plan at December 31, 2009 and 2008, as well as the other information required in CVM Resolution no. 371 regarding such plans:

Plan		2009		2008
PAMA		15,693		11,853
TCP Prev		-		519
Total		15,693		12,372

a) Reconciliation of Assets and Liabilities

		2009
		Total actuarial		Fair value of		Net liabilities
		liabilities		plan assets		(assets)
Vivo Prev (ii)		23,543		(25,508)		(1,965)
PAMA (i)		21,809		(6,116)		15,693
PBS (ii)		106,695		(137,862)		(31,167)
PBS-A (i) and (ii)		21,649		(29,488)		(7,839)
TCP Prev		289		(561)		(272)
TCO Prev (ii)		22,587		(34,428)		(11,841)
Visão (ii)		297		(10,392)		(10,095)
Cel Prev (ii)		1,442		(5,315)		(3,873)
		2008
		Total actuarial		Fair value of		Net liabilities
		liabilities		plan assets		(assets)
Vivo Prev (ii)		16,993		(26,747)		(9,754)
PAMA (i)		18,201		(6,348)		11,853
PBS (ii)		98,060		(141,149)		(43,089)
PBS-A (i) and (ii)		31,497		(42,870)		(11,373)
TCP Prev		519		-		519
TCO Prev (ii)		21,905		(29,004)		(7,099)
Visão (ii)		379		(5,774)		(5,395)
Cel Prev (ii)		1,364		(4,081)		(2,717)

F-75

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(i) This refers to the proportional participation of the subsidiaries in the assets and liabilities of the multi-sponsored plan – PAMA and PBS-A;

(ii) Although the PBS, PBS-A, TCO Prev, TCP Prev, Visão, Vivo Prev and Cel Prev recorded surplus balances at December 31, 2009, no assets was recognized by the sponsor, due to the absence of perspective for use of such surplus for payment of future contributions.

b) Changes in the net actuarial liabilities (assets)

		Net (asset) liability		Expenses (income)						Net (asset) liability
		as of December		recognized in		Sponsor’s		Actuarial (gains)		as of December
		31, 08		income in 2009		contribution		losses		31, 09
Vivo Prev		(9,754)		1,032		(2,824)		9,581		(1,965)
PAMA		11,853		1,321		(26)		2,545		15,693
PBS		(43,089)		(4,875)		(216)		17,013		(31,167)
PBS-A		(11,373)		(1,893)		-		5,427		(7,839)
TCP Prev		519		89		(71)		(809)		(272)
TCO Prev		(7,099)		(946)		(146)		(3,650)		(11,841)
Visão		(5,395)		(576)		(40)		(4,084)		(10,095)
CEL Prev		(2,717)		(161)		(36)		(959)		(3,873)

c) Changes in the actuarial liabilities

		Actuarial liabilities		Cost of current		Interest on				Actuarial (gains)		Employees’		Actuarial liabilities
		as of 12.31. 2008		service		actuarial liabilities		Benefits paid		losses		contributions		as of 12.31. 2009
Vivo Prev		16,993		2,496		1,611		(207)		2,618		32		23,543
PAMA		18,201		171		1,821		(541)		2,157		-		21,809
PBS		98,060		1,024		9,735		(4,666)		2,030		512		106,695
PBS-A		31,497		-		3,084		(1,595)		(11,337)		-		21,649
TCP Prev		519		40		49		-		(361)		42		289
TCO Prev		21,905		67		2,170		(310)		(1,260)		15		22,587
Visão		379		34		34		(10)		(142)		2		297
CEL Prev		1,364		170		134		(38)		(224)		36		1,442

d) Changes in the fair value of assets of the plans

		Fair value of plan				Sponsor’s and
		assets as of				employees’		Return on plan		Gains (losses) on		Liabilities (assets)
		12.31.2008		Benefits paid		contributions		assets		assets		net 31.12.09
Vivo Prev		(26,747)		207		(2,856)		(3,075)		6,963		(25,508)
PAMA		(6,348)		541		(26)		(671)		388		(6,116)
PBS		(141,149)		4,666		(728)		(15,634)		14,983		(137,862)
PBS-A		(42,870)		1,595		-		(4,977)		16,764		(29,488)
TCP Prev		-		-		(113)		-		(448)		(561)
TCO Prev		(29,004)		310		(161)		(3,183)		(2,390)		(34,428)
Visão		(5,774)		10		(42)		(644)		(3,942)		(10,392)
CEL Prev		(4,081)		38		(72)		(465)		(735)		(5,315)

e) Expenses (revenue) in 2009

F-76

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

				Cost of interest on		Expected return		Employees’
		Cost of service		actuarial obligations		on assets		contributions		Total
Vivo Prev		2,554		1,611		(3,075)		(58)		1,032
PAMA		171		1,821		(671)		-		1,321
PBS		2,020		9,735		(15,634)		(996)		(4,875)
PBS-A		3,001		83		(4,977)		-		(1,893)
TCP Prev		66		49		-		(26)		89
TCO Prev		74		2,170		(3,183)		(7)		(946)
Visão		46		36		(644)		(14)		(576)
CEL Prev		182		134		(465)		(12)		(161)

f) Estimated expenses (revenue) for 2010

				Cost of interest on		Expected return		Employees’
		Cost of service		actuarial obligations		on assets		contributions		Total
Vivo Prev		3,454		2,156		(2,761)		(35)		2,814
PAMA		178		2,120		(582)		-		1,716
PBS		1,512		10,225		(14,356)		(366)		(2,985)
PBS-A		-		2,051		(2,830)		-		(779)
TCP Prev		35		26		(60)		(12)		(11)
TCO Prev		149		2,156		(3,669)		(16)		(1,380)
Visão		32		27		(1,126)		(6)		(1,073)
CEL Prev		169		136		(575)		(27)		(297)

g) Sponsor contributions expected for 2010

Plans		Amount
Vivo Prev		3,109
PAMA		75
PBS		238
TCP Prev		20
TCO Prev		123
Visão		28
Cel Prev		33
Total		3,626

h) Actuarial assumptions

		Estimate return rate  on plan assets		Rate of future  salary growth		Medical costs  growth rate		Benefits growth  rate		Increase in use of medical  services, according to age
Vivo Prev		10.84%		6.79%		N/A		4.60%		N/A
PAMA		9.84%		N/A		7.74%		N/A		4.00%
PBS		10.51% to 10.84%		6.14%		N/A		4.60%		N/A
PBS-A		9.86%		N/A		N/A		4.60%		N/A
TCP Prev		10.84%		6.79%		N/A		4.60%		N/A
TCO Prev		10.84%		6.79%		N/A		4.60%		N/A
Visão		10.84%		6.79%		N/A		4.60%		N/A
Cel Prev		10.88%		6.79%		N/A		4.60%		N/A

In addition to the foregoing assumptions, other assumptions that are common to all the plans were adopted, as follows:

• Rate for discount to present value of the actuarial liabilities: 9.83%;
• Inflation rate: 4.60%;

F-77

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• Turnover Rate: 0.15/years of services + 1, null after 50 years;
• Disability Effectiveness Table: Mercer Disability;
• Mortality Table: AT83, segregated by sex; and
• Disabled Mortality Table: IAPB-57.

i) Expected Long-Term Investments Yield

The expected investment yield rates were determined from the expected long-term profitability and weighted for each category of assets in the benefit plans. The breakdown of the assets of the plans is completed at September 30, 2009. The allocation goal takes into consideration the expected long-term breakdown of the assets in each of the investment categories, in accordance with the investment policy applicable to each plan.

Expected yield rates were suggested for each investment category, based on the long-term projections supplied by thrird party (Independent consult firm - Tendências Consultoria) and Brazilian Financial and Capital Markets Association - ANDIMA data, among others, as described below:

• Pre-fixed bonds: average rate, weighted by the portfolio value of the LTNs and NTN-Fs available on the market (source: ANDIMA);
• Exchange securities: SELIC rate, weighted by the exchange variation projected for the next 10 years (source: Tendências);
• Fixed income assets: variation of the average nominal internal interest rate, projected for the next 10 years (source: Tendências);
• Assets referenced to inflation: average rate, weighted by the portfolio of the NTN-Bs and NTN-Cs available on the market (source: ANDIMA);
• Variable income assets: the historic risk premium was adopted, as calculated by the consulting actuarial agent;
• Loans to participants: CDI or the plan’s actuarial goal, whichever is higher.

VIVO PREV		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		82.59%		82.59%		10.04%
Prefixed securities (eg LTN)		23.64%		23.64%		10.76%
Securities exchange (eg NTN-D)		0.00%		0.00%		N/A
Fixed income-CDI (eg CDI)		23.40%		23.40%		9.71%
Fixed income-SELIC (eg: LFT)		33.29%		33.29%		9.71%
Linked to inflation (eg NTN-B, NTN-C)		2.26%		2.26%		10.92%
Equity securities		16.18%		16.18%		14.94%
Loans to participants		1.24%		1.24%		9.83%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.83%
PAMA		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		100.00%		100.00%		9.84%
Equity securities		0.00%		0.00%		N/A
Loans to participants		0.00%		0.00%		N/A
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		9.84%

F-78

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

PBS		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		83.25 to 86.00%		83.25 to 86.00%		10.04%
Prefixed securities (eg LTN)		13.00% to 23.93%		13.00% to 23.93%		10.76% to 14.94%
Securities exchange (eg NTN-D)		0.00%		0.00%		N/A
Fixed income-CDI (eg CDI)		23.58% to 23.69%		23.58 to 23.69%		9.71%
Fixed income-SELIC (eg: LFT)		33.55% to 33.71%		33.55% to 33.71%		9.71%
Linked to inflation (eg NTN-B, NTN-C)		2.28% to 2.29%		2.28% to 2.29%		10.92%
Equity securities		16.30% to 16.38%		16.30% to 16.38%		14.94%
Loans to participants		0.00% to 1.00%		0.00% to 1.00%		0.00% to 10.88%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.68%
PBS-A		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		75.00%		75.00%		9.84%
Equity securities		9.00%		9.00%		14.94%
Loans to participants		1.00%		1.00%		10.88%
Real estate		4.00%		4.00%		11.69%
Structured investments		11.00%		11.00%		5.09%
Total		100.00%		100.00%		9.86%
TCPPREV		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		83.42%		83.42%		10.04%
Prefixed securities (eg LTN)		23.87%		23.87%		10.76%
Securities exchange (eg NTN-D)		0.00%		0.00%		N/A
Fixed income-CDI (eg CDI)		23.63%		23.63%		9.71%
Fixed income-SELIC (eg: LFT)		33.62%		33.62%		9.71%
Linked to inflation (eg NTN-B, NTN-C)		2.29%		2.29%		10.92%
Equity securities		16.34%		16.34%		14.94%
Loans to participants		0.24%		0.24%		9.83%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.84%
TCOPREV		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		83.23%		83.23%		10.04%
Prefixed securities (eg LTN)		23.82%		23.82%		10.76%
Securities exchange (eg NTN-D)		0.00%		0.00%		N/A
Fixed income-CDI (eg CDI)		23.58%		23.58%		9.71%
Fixed income-SELIC (eg: LFT)		33.55%		33.55%		9.71%
Linked to inflation (eg NTN-B, NTN-C)		2.28%		2.28%		10.92%
Equity securities		16.30%		16.30%		14.94%
Loans to participants		0.46%		0.46%		9.83%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.84%

F-79

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

VISÃO		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		83.19% to 83.51%		83.19% to 83.51%		10.04%
Prefixed securities (eg LTN)		23.81% to 23.90%		23.81% to 23.90%		10.76%
Securities exchange (eg NTN-D)		0.00%		0.00%		N/A
Fixed income-CDI (eg CDI)		23.57% to 23.66%		23.57% to 23.66%		9.71%
Fixed income-SELIC (eg: LFT)		33.53% to 33.66%		33.53% to 33.66%		9.71%
Linked to inflation (eg NTN-B, NTN-C)		2.28% to 2.29%		2.28% to 2.29%		10.92%
Equity securities		16.29% to 16.36%		16.29% to 16.36%		14.94%
Loans to participants		0.14% to 0.51%		0.14% to 0.51%		9.83%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.84%
CELPREV TELEMIG CELULAR		Asset Allocation
		09.30.09		Target		Estimate Return
Debt securities		78.00%		78.00%		9.84%
Equity securities		20.00%		20.00%		14.94%
Loans to participants		2.00%		2.00%		10.88%
Real estate		0.00%		0.00%		N/A
Total		100.00%		100.00%		10.88%

j) Effect of an increase of one percentage point and effect of a decrease of one percentage point in the trend rates of the medical costs undertaken for PAMA.

Sensitivity to the variation of medical assumptions:

i. Variation + 1%
Effect on current service cost and interest cost		426
Effect on defined benefit obligation		4,530
ii. Variation - 1%
Effect on current service cost and interest cost		(334)
Effect on defined benefit obligation		(3,536)

31. TRANSACTIONS WITH RELATED PARTIES

31.a) Subsidiaries

The financial statements include information related to the subsidiaries, as follows:

Company		Interest
		2009		2008
Vivo S.A.		100.00%		100.00%
Telemig Celular S.A.		100.00%		7.39%
Telemig Celular Participações S.A.		-		58.90%

The transactions between the controlling company and the its subsidiaries refer, basically, to payments of dividends and interest on shareholders’ equity .

31.b) Terms and conditions of transactions with related parties:

a) Communication via local cellular phone and via long distance and use of network: these transactions are carried out with companies of the same controlling group: Telecomunicações de São Paulo S.A. - TELESP and subsidiaries. Some of these transactions were carried out in

F-80

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

conformity with agreements entered into between TELEBRAS and the concessionaires prior to the privatization, under conditions regulated by ANATEL. They include roaming services to customers of Telecomunicações Móveis Nacionais – TMN and several companies related to the Telefónica Group in the subsidiaries’ network.

b) Technical Assistance: this refers to corporate management consulting services provided by PT SGPS and technical assistance services provided by Telefónica S.A., Telefónica International S.A., calculated on the basis of a formula provided for in the contracts that includes the variation in the LAIR (Profit Before Income Tax) and the variation in PN and ON shares, which determine a rate that is applied to the service revenues. In the case of the operation of the branch office in Rio Grande do Sul, its contract provides for a fixed percentage on the service revenue. The above referred contracts were terminated on August 04, 2008.

c) Rendering of corporate services: these were transferred to the subsidiaries at the cost actually incurred in these services.

d) Telephone assistance and sales promotion services: services provided to users of telecommunication services by Atento Brasil S.A. and Mobitel S.A. – Dedic. The service was contracted for 12 months, renewable for an equal period.

e) System development and maintenance services: rendered by Portugal Telecom Inovação Brasil S.A. and Telefonica Pesquisa e Desenvolvimento do Brasil Ltda.

f) Logistics operator, messageand financial-accounting consultancy services: rendered by Telefonica Serviços Empresariais do Brasil Ltda.

g) Voice portal content provider services: rendered by Terra Networks Brasil S.A.

h) International roaming services: provided by companies belonging to the Telefónica Group and Telecomunicações Móveis Nacionais – TMN.

i) Collection services: rendered by Cobros Gestão de Serviços.

j) Leased circuits and data services for internet access: provided by Telefonica Empresas do Brasil Ltda. and Telefonica International Wholesale Brasil and ATelecom.

k) Property lease and sales of call center assets: lease of the owned buildings where the call center infrastructure is installed and sales of property, plant and equipment used in the operation of the call center.

l) Mobile telephone services: mobile communication services rendered to companies of the Telefónica Group and Portugal Telecom, pursuant to agreements executed between the parties.

m) Expatriates: reimbursement of expenses with expatriated employees in activities for the companies Portugal Telecom SGPA and Telefónica S.A.

n) Purchase of property, plant and equipment: supplied by Telefonica Empresas do Brasil S.A. and Telefonica Engenharia e Segurança do Brasil S.A.

o) Expenses with Vivo brand: amounts due to Vivo Brasil Comunicações Ltda. for maintaining Vivo brand. On November 16, 2009, Vivo Brasil Comunicações Ltda. was merged into Portelcom Participações S.A.

F-81

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

For the transactions above, the prices charged and other commercial conditions are agreed to in contracts between the parties.

We summarize below balances and transactions with related parties:

		2009						2008
		Nature of		Assets		Liabilities		Nature of		Assets				Liabilities
Company		Transation		Current		Current		Transation		Current		Noncurrent		Current
Telecomunicações de São Paulo - Telesp		a) / c) / j) / l)		340,215		299,512		a) / c) / j) / l)		236,750		-		258,549
Telefonica Empresas do Brasl S.A.		a) / j)		3,475		11,825		a) / j) / l)		1,944		-		12,659
Telefonica Móviles Espana S.A.		h)		2,608		2,071		h)		464		-		286
Portugal Telecom Inovação do Brasil Ltda		l) / e)		8		44,002		l) / e)		1		-		30,624
Primesys Soluções Empresariais S.A.				-		-		h)		3		-		17
Telecomuncações Móveis Nacionais - TMN		h)		979		575		h)		460		-		152
Telefonica Serviços Empresariais do Brasil Ltda		f)		1,451		17,149		f)		397		-		16,956
Telefonica International Wholesale		j)		-		24		j)		-		-		-
Telefonica International Wholesale Brasil		l) / j)		9		2,095		j) / l)		-		-		3,075
Portugual Telecom, SGPS, S.A.		m) / b)		2,622		33,771		m) / b)		1,440		-		65,945
Telefonica Internacional S.A.		b)		-		13,470		b)		-		-		18,078
Telefonica S.A.		m) / b)		2,148		45,113		m) / b)		1,830		-		60,208
Cobros Gestão de Serviços		i)		1		561		i)		1		-		550
Atento Brasil S.A.		k) / d)		6,922		43,420		k) / d)		5,377		-		30,926
Mobitel S.A. - Dedic		k) / d)		1,699		34,811		k) / d)		2,809		-		32,110
Terra Networks S.A.		l) / g)		724		592		g) / l)		(19)		-		27
Atelecom S/A		l) / j)		338		2,829		j) / l)		795		-		3,566
Telefonica Sistemas do Brasil Ltda		l)		6		1		l)		-		-		273
Telefonica Engenharia e Segurança		l)		5		52		l)		-		-		134
Telefonica Pesquisa e Desenvolvimento do Brasil Ltda		e) / j)		-		1,143		j) / l)		-		-		1,638
TBS Celular Participações Ltda		b)		-		13,152		b)		-		-		27,622
Operadoras Grupo Telefonica (Roaming internacional)		h)		4,606		2,734		h)		1,328		-		610
T. Personales Unifon		m)		-		168		m)		-		-		168
Vivo Brasil Comunicações Ltda								o)		-		3,690		-
Total				367,816		569,070				253,580		3,690		564,173

				2009				2008				2007
		Nature of		Result				Result				Result
Company		Transation		Income		Costs and Expenses		Income		Costs and Expenses		Income		Costs and Expenses
Telecomunicações de São Paulo - Telesp		a) / c) / j) / l)		2,055,019		(294,255)		1,888,625		(208,588)		1,684,492		(183,626)
Telefonica Empresas do Brasl S.A.		a) / j) / l)		5,407		(14,193)		1,190		(4,691)		-		(4,759)
Telefonica Móviles Espana S.A.		h)		3,336		(411)		-		(406)		-		(1,558)
Portugal Telecom Inovação do Brasil Ltda		l) / e)		27		(15,461)		-		(11,295)		-		(5,913)
Primesys Soluções Empresariais S.A.				-		-		184		-		169		(298)
Telecomuncações Móveis Nacionais - TMN		h)		1,069		(75)		610		(69)		225		(79)
Telefonica Serviços Empresariais do Brasil Ltda		f)		961		(60,706)		244		(60,301)		-		(48,057)
Telefonica International Wholesale		j)		-		(137)		-		(69)		-		(501)
Telefonica International Wholesale Brasil		j) / l)		31		(5,363)		-		(4,254)		-		-
Portugual Telecom, SGPS, S.A.		m) / b)		13,826		(1,589)		-		(60,671)		1,460		(62,190)
Telefonica Internacional S.A.		b)		4,609		-		-		(4,376)		2,837		-
Telefonica S.A.		m) / b)		15,426		(388)		40,708		(22,357)		7,169		(56,779)
Cobros Gestão de Serviços		i)		-		(1,921)		-		(1,380)		-		-
Atento Brasil S.A.		k) / d)		13,465		(294,227)		1,495		(314,501)		-		(242,767)
Mobitel S.A. - Dedic		k) / d)		3,237		(300,779)		-		(243,388)		-		(221,298)
Terra Networks S.A.		g) / l)		490		(1,408)		-		(2,060)		-		(1,957)
A Telecom		j) / l)		4,228		(12,288)		8,313		-		-		-
Telefonica Sistemas do Brasil Ltda		l)		87		(1)		-		-		-		-
Telefonica Engenharia e Segurança		l)		57		-		-		-		-		-
Telefonica Pesquisa e Desenvolvimento do Brasil Ltda		j) / l)		1		(1,296)		-		(889)		-		(935)
TBS Celular Participações Ltda		b)		-		-		-		(7,865)		-		(11,644)
Operadoras Grupo Telefonica (Roaming internacional)		h)		7,184		(15)		3,061		(126)		-		-
T. Personales Unifon		m)		-		-		-		-		-		-
Vivo Brasil Comunicações Ltda				-		-		-		-		-		-
Total				2,128,460		(1,004,513)		1,944,430		(947,286)		1,696,352		(842,361)

31.c) Compensation of key Management officers

The compensation, payroll charges and benefits related to key Management officers are presented below.

F-82

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Consolidated
Description		2009		2008
Fees and benefits of short-term		9,785		10,107
Social security costs		3,488		2,783
Bonus (including charges)		7,506		10,716
Other benefits		999		442
Total		21,778		24,048

32. INSURANCE

The Company and its subsidiaries adopted a policy of monitoring risks inherent to their transactions. For this reason, at December 31, 2009, the Company and its subsidiaries had insurance contracts in place for coverage of operating risks, civil liability, health risks, etc. The Management of the Company and of its subsidiaries considers that the amounts of such contracts are sufficient to cover potential losses. The main assets, liabilities or interests covered by insurance and their respective amounts are shown below:

Type of Insurance		Insured amounts
Operating risks		R$15,870,726
General Civil Liability – RCG		R$6,110

33. SUMMARY OF THE DIFFERENCES BETWEEN BRAZILIAN GAAP AND U.S. GAAP APPLICABLE TO THE COMPANY

The Company’s accounting policies comply with accounting practices adopted in Brazil, as prescribed (“Brazilian GAAP”), which differ significantly from accounting principles generally accepted in the United States of America (“U.S. GAAP”) as described below:

a) Basis of presentation

As mentioned in Note 2, the financial statements of the Company and of the subsidiaries have been prepared based on the accounting practices adopted in Brazil, as well as on the rules issued by the Brazilian Securities and Exchange Commission (CVM), with due regard to the accounting standards set forth in the corporation law (Law No. 6,404/76), which include the new provisions introduced, amended and revoked by Law No. 11,638, dated December 28, 2007 and by Law No. 11,941, dated December 27, 2009 (former Provisional Executive Act No. 449, dated December 03, 2008), with further regard, also, to the rules applicable to telecommunication service concessionaires.

The changes in the accounting practices arising from application of Laws No. 11,638 and No. 11,941 have been measured and recorded by the Company under Brazilian GAAP based on the accounting pronouncements presented in more detail in Note 2.

b) Different criteria for capitalizing and amortizing capitalized interest

Until December 31, 1998, under Brazilian GAAP, as applied to companies in the telecommunications industry, interest attributable to construction-in-progress was capitalized at the rate of 12% per year of the balance of construction-in-progress. For the three-year period ended December 31, 2009, the subsidiary did not capitalize interest attributable to construction-in-progress at the rate of 12%; rather, the actual effective interest related to construction-in-progress was used to determine capitalized interest.

F-83

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Under U.S. GAAP, in accordance with the provisions of Accounting Standards Codification (“ASC”) 835-20 “Interest/Capitalization of Interest”, interest incurred on borrowings is capitalized to the extent that borrowings do not exceed construction-in-progress. The credit is a reduction of interest expense. Under U.S. GAAP, the amount of interest capitalized excludes monetary losses associated with local currency borrowings and the foreign exchange gains and losses on foreign currency borrowings, and other financial expenses related to borrowings.

The effects of these different criteria for capitalizing and amortizing capitalized interest are presented below:

		Consolidated
		2009		2008		2007
Capitalized interest:
U.S. GAAP capitalized interest		48,418		75,433		35,038
U.S. GAAP capitalized interest on disposals		(14,030)		(14,274)		(17,396)
Brazilian GAAP capitalized interest		(39,813)		(40,460)		(11,175)
Brazilian GAAP capitalized interest on disposals		1,600		11,032		13,828
U.S. GAAP difference on capitalization		(3,825)		31,731		20,295
Amortization of capitalized interest:
U.S. GAAP capitalized interest amortization		(83,797)		(122,322)		(111,383)
U.S. GAAP capitalized interest disposal of amortization		13,866		12,759		611
Brazilian GAAP capitalized interest amortization		14,629		4,907		56,614
Brazilian GAAP capitalized interest disposal of amortization		(1,581)		(20,806)		(485)
U.S. GAAP difference on amortization		(56,883)		(125,462)		(54,643)

c) Monetary restatement of 1996 and 1997

The amortization of the asset appreciation, which originated from the inflation accounting during 1996 and 1997, when Brazil was still considered as a high-inflationary economy for U.S. GAAP purposes, has been recognized in the reconciliation to U.S. GAAP. The loss related to monetary restatement on disposals of such assets is classified for U.S. GAAP purposes as a component of other operating expense. The resulting step-up is amortized over the remaining lives of the related assets.

d) Exchange of shares for non-controlling interest

In January 2000, the Company exchanged 21,211,875,174 of its common shares and 61,087,072,187 of its preferred shares for all of the shares held by non-controlling shareholders of Telesp Celular S.A. In 2002, TCO acquired the non-controlling interest in its subsidiary, Telebrasília Celular S.A. (“Telebrasília”) by exchanging shares of TCO for the shares held by the non-controlling shareholders of Telebrasília. The acquisition increased TCO’s interest in Telebrasília from 88.25% to 100%. In 2004, TCO acquired the remaining non-controlling interests in its other subsidiaries through an exchange offer. The exchange ratio for these share exchanges was based on the respective market value of the shares exchanged. Additionally, on November 29, 2000, TLE and TSD acquired non-controlling interests from their subsidiaries Telebahia Celular, Telergipe Celular, Telerj Celular and Telest Celular through an exchange offer transaction.

Under Brazilian GAAP, the share exchanges were recorded at book value. An increase in capital was recorded based on the market value of the Company’s shares and a capital reserve was recorded for the difference between the market price of the acquired company’s shares and the book value of the shares.

Under U.S. GAAP, the exchange of shares for non-controlling interests is accounted for using the purchase method of accounting. The purchase price of the shares is recorded based on the market price of the issuing Company’s shares at the date of the exchange offer. The purchase price is allocated to the proportional assets and liabilities of the acquired non-controlling interest based on their relative fair values. If the fair values of the net assets exceed the purchase price, the difference is recorded as a reduction to the proportional long-lived assets acquired.

F-84

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Under U.S. GAAP, the purchase price for the shares of Telesp Celular S.A. was the market price of the Company’s shares at the date of the offer. The total purchase price was R$313,643. The fair value of the net assets of Telesp Celular S.A. exceeded the purchase price by R$101,671. Under U.S. GAAP, this difference is recorded as a reduction to the acquired fixed assets of Telesp Celular S.A. The adjustment to reconcile to U.S. GAAP is therefore a reduction of capital reserve and fixed assets of R$101,671 and a reduction of depreciation expense, plus the tax effect, due to the reduction in fixed assets.

Under U.S. GAAP, shares issued to purchase the non-controlling interest in Telerj Celular S.A. and Telest Celular S.A. in 2000 were recorded at the fair value of R$351,405 and R$67,079, respectively. The step-up in the fair value of assets was allocated to fixed assets, subscriber base assets and concession intangibles in the amount of R$31,522, R$135,518 and R$216,648, respectively. The fixed assets were fully amortized over the remaining useful lives of the related fixed assets The subscriber base intangible asset was fully amortized over 48 months, representing the contractual relationship with subscribers. Concession is being amortized based on the remaining concession period of the operating companies (until November 2005 for Telerj Celular S.A. and November 2008 for Telest Celular S.A.).

Under U.S. GAAP, shares issued to purchase the non-controlling interest in Telebahia Celular and Telergipe Celular in 2000 were recorded at the fair value of R$62,082. The step-up in the fair value of assets was allocated to fixed assets, subscriber base assets and concession intangibles in the amount of R$7,215, R$2,382 and R$33,657, respectively. The fixed assets were fully amortized over the remaining useful lives of the related fixed assets. The subscriber base intangible asset was fully amortized over 48 months, representing the contractual relationship with subscribers. Concession, which is being amortized based on the remaining concession period of the operating companies (until June 2008 for Telebahia Celular and December 2008 for Telergipe Celular).

Under U.S. GAAP, shares issued to purchase the non-controlling interest in Telebrasília Celular in 2002 and the remaining non-controlling interests in 2004 were recorded at the fair value of R$64,799 and R$48,542, respectively. The step-up in the fair value of assets was allocated to fixed assets and concession intangibles in the amount of R$2,958 and R$38,336, respectively, for Telebrasília Celular in 2002 and concession intangibles in the amount of R$30,285 for the remaining minority interests acquired in 2004. The step-up in the fair value of assets is being amortized over 19 to 20 years for concession intangibles and is fully amortized for fixed assets.

Following are the components of the U.S. GAAP adjustment in shareholders’ equity related to exchanges of shares for non-controlling interest as of December 31, 2009 and 2008:

F-85

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 (In thousands of Brazilian reais, unless otherwise indicated)

		Consolidated
		2009		2008
Telesp Celular:
Reduction of property, plant and equipment		(101,671)		(101,671)
Depreciation for the property, plant and equipment		101,671		101,671
Telerj Celular and Telest Celular:
Property, plant and equipment fair-value adjustment		31,522		31,522
Depreciation of fair value of property, plant and equipment		(31,522)		(31,522)
Customer list intangible asset recorded in U.S. GAAP		135,518		135,518
Amortization of customer list		(135,518)		(135,518)
Intangible asset related to concession recorded in U.S. GAAP		216,648		216,648
Amortization of intangible asset related to concession		(216,648)		(216,648)
Telebahia Celular and Telergipe Celular:
Property, plant and equipment fair-value adjustment		7,215		7,215
Depreciation of fair value of property, plant and equipment		(7,215)		(7,215)
Customer list intangible asset recorded in U.S. GAAP		2,382		2,382
Amortization of customer list		(2,382)		(2,382)
Intangible asset related to concession recorded in U.S. GAAP		33,657		33,657
Amortization of intangible asset related to concession		(33,657)		(33,657)
Telebrasília Celular:
Property, plant and equipment fair-value adjustment		2,958		2,958
Depreciation of fair value of property, plant and equipment		(2,460)		(2,142)
Intangible asset related to concession recorded in U.S. GAAP		68,621		68,621
Amortization of intangible asset related to concession		(23,388)		(19,908)
Total of the U.S. GAAP adjustments related to the exchange of shares of non-controlling interest interest		45,731		49,529

e) Acquisitions

Until December 31, 2009, under Brazilian GAAP, purchases of an equity interest of another company are recorded at book value. The difference between the purchased company’s proportional net assets and the purchase price is recorded as goodwill. The goodwill is first attributed to any appreciation in the values of the property, plant and equipment acquired and amortized based on the useful lives of the underlying property, plant and equipment. Excess goodwill is generally amortized over ten years on a straight-line basis, based on estimated future profitability until December 31, 2008. Starting January 1, 2009 the net balance of goodwill is no longer be amortized under Brazilian GAAP and is subject to impairment analysis.

Under U.S. GAAP, the cost of an acquired entity is allocated to assets acquired, including identifiable intangible assets, and liabilities assumed based on their estimated fair values on the date of acquisition. The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed is recognized as goodwill. Under U.S. GAAP, goodwill is not subject to amortization over its estimated useful life, but, rather, it is subject to at least an annual assessment for impairment by applying a fair-value-based test.

The differences between Brazilian GAAP and U.S. GAAP relate to: (i) the acquisition of an equity interest in Daini do Brasil S.A. (“Daini”), Globaltelcom Telecomunicações S.A. (“Globaltelcom”) and GTPS S.A. Participações em Investimentos de Telecomunicações (“GTPS”) (formerly Inepar S.A. Participação em Investimentos de Telecomunicações), the holding companies which controlled Global Telecom S.A. (collectively, the “Holdings”) on February 6, 2001; (ii) the acquisition of the remaining interest in the Holdings on December 27, 2002; (iii) the acquisition of TCO on April 25, 2003 and the tender offers to purchase additional shares of TCO in November 2003 and October 2004; and (iv) merger of Tele Sudeste Celular Participações S.A. (“TSD”), Tele Leste Celular Participações S.A. (“TLE”), Celular CRT Participações S.A. (“CRT”) and Tele Centro Oeste Celular Participações S.A. (“TCO”) into the Company through exchange of shares.

F-86

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Acquisition of Global Telecom S.A. (“GT”) and Holdings

On February 6, 2001, the Company acquired 49% of the outstanding voting shares and 100% of the outstanding nonvoting preferred shares of each of the Holdings that collectively held 95% of the voting shares and 100% of the nonvoting shares of GT for a total purchase price of R$914,964. The remaining 5% of the voting shares of GT were held by another investor who subsequently sold them to the three holding companies upon authorization by ANATEL in July 2001. This purchase was funded by an additional capital contribution by the Company to the Holdings in the amount of R$17,400. The Company’s investment in the Holdings represented an 83% aggregate indirect economic interest of the total equity of GT at December 31, 2001. The balance of the economic interest was held by the Holdings.

During 2002, TCP and TC made an intercompany loan to GT amounting to R$3,161,709. On December 27, 2002, after obtaining approval from ANATEL, TCP purchased the remaining 51% of the outstanding common stock of each of the holding companies (representing an economic interest of 17%), for cash of R$290,282, and began to consolidate the Holdings. The total purchase price, considered for U.S. GAAP purposes, amounted to R$827,772, representing the cash paid plus the non-controlling interest in the intercompany loans held by Holdings immediately prior to the date of acquisition. Considering TCP’s direct and indirect interests, TCP owned 100% of the capital of GT. On December 30, 2002, R$2,310,878 of the intercompany loan was capitalized, in exchange for additional shares of GT capital stock. The acquisition of GT was completed to increase market presence in the south of Brazil and to enable TC and GT to benefit from synergies to be derived from their operations and sales of handsets.

The excess purchase price was allocated to the following fair-value adjustments: (i) property, plant and equipment which was amortized over approximately 11 years, representing the average remaining useful lives of the relating assets; (ii) customer list which is being amortized over two years, representing the average customer life; and (iii) debt which is being amortized by the effective interest method over the remaining maturities of the underlying GT debt obligations, and concession intangible which is being amortized on a straight-line basis over a 12-year period, representing the remaining term of the license.

Following are the components of the U.S. GAAP adjustment in shareholders’ equity related to GT as of December 31, 2009 and 2008:

		2009		2008
Purchase accounting on acquisition of the Holdings:
Reversal of goodwill recorded under Brazilian GAAP		(307,464)		(346,373)
Intangible related to concession recorded in U.S. GAAP		1,176,727		1,176,727
Amortization of intangible related to concession		(617,834)		(589,359)
Impairment recorded under U.S. GAAP		(89,533)		(89,533)
Reversal of valuation allowance against intangible asset related to the concession (*)		(383,939)		(383,939)
Property, plant and equipment fair-value adjustment		(121,661)		(121,661)
Depreciation of fair value of property, plant and equipment adjustment		119,013		105,776
Customer list intangible asset recorded in U.S. GAAP		140,035		140,035
Amortization of customer list		(140,035)		(140,035)
Debt fair-value adjustment		25,800		25,800
Amortization of debt fair-value adjustment		(25,800)		(25,800)
Total of the U.S. GAAP adjustments related to acquisition Holdings		(224,691)		(248,362)

F-87

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(*) Under Brazilian GAAP, if a deferred tax asset of the acquiree which was not recognized at the time of the combination is subsequently recognized, the resulting credit is recorded in income for the period.

Under U.S. GAAP, pursuant to ASC 805 “Business Combination”, until December 31, 2008, if a deferred tax asset of the acquiree which was not recognized at the time of the combination is subsequently recognized, the subsequent elimination of a valuation allowance recognized at the acquisition date for deferred tax assets would be applied first to eliminate any goodwill related to the acquisition, second to eliminate any non-current intangible assets to the acquisitions, and third to reduce income tax expense.

For U.S. GAAP purposes, the elimination of valuation allowance recorded by the Company in 2006, in the amount of R$383,939, was recorded as a reduction of the intangible asset related to concession allocated at the acquisition of GT and the remaining was recorded as a credit in income tax expense for the period.

Acquisition of TCO

On April 25, 2003, the Company acquired 64.03% of the voting capital of TCO for approximately R$1,505.6 million, and in November 2003 and October 2004, the Company completed public tender offers to acquire 26.70% of the voting capital and 32.76% of the preferred shares of TCO for R$538.8 million and R$901.5 million, respectively. After these acquisitions, TCP became the holder of 90.73% of the voting capital of TCO (51.42% of total capital). Additionally, the Company acquired a portion of the remaining balance of the special goodwill reserve of TCO, which was partially capitalized in the amount of R$63,893 on July 29, 2005 in its favor, increasing its interest in TCO to 52.47% of total capital.

The excess purchase price was allocated to the following fair-value adjustments: (i) property plant and equipment which is being amortized over remaining useful lives of the related assets; (ii) subscriber base intangible asset which is being amortized over two years, representing the average customer life; (iii) long-term debt being amortized by the effective interest method over the remaining maturities of the underlying TCO debt obligations; (iv) the intangible asset related to the concession being amortized on a straight-line basis over approximately a period of 18 years, representing the remaining term of the license of Area 8 and the remaining term of the license of Area 7 which expire in 2008, plus one extension of 15 years; (v) the goodwill recorded for U.S. GAAP purposes which represents the amount paid in excess of the fair value of TCO. Under Brazilian GAAP, TCP recorded goodwill amounting to R$2,134,824.

Following are the components of the U.S. GAAP adjustment in shareholders’ equity related to such acquisitions as of December 31, 2009 and 2008:

F-88

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		2009		2008
Purchase accounting on acquisition of TCO:
Reversal of goodwill recorded under Brazilian GAAP		(163,073)		(232,787)
Intangible related to concession recorded in U.S. GAAP		1,407,876		1,407,876
Amortization of intangible related to concession		(578,473)		(501,858)
Property, plant and equipment fair-value adjustment		69,895		69,895
Depreciation of fair value of property, plant and equipment adjustment		(62,801)		(58,831)
Customer list intangible asset recorded in U.S. GAAP		321,995		321,995
Amortization of customer list		(321,995)		(321,995)
Debt fair-value adjustment		5,125		5,125
Amortization of debt fair-value adjustment		(5,125)		(5,125)
Goodwill recorded under U.S. GAAP		481,193		510,032
Deferred income tax		(390,527)		(346,769)
Total of the U.S. GAAP adjustments related to acquisition of TCO		764,090		847,558

Acquisition of Telemig Celular Participações S.A. and Telemig Celular S.A.

On April 3, 2008, the equity control of Telemig Participações (and, indirectly, of Telemig Celular) was transferred to the Company. The price paid on April 3, 2008 for the 7,258,108 common shares and 969,932 preferred shares of Telemig Participações, already added by the remuneration provided for in the Purchase and Sale Agreement entered into with Telpart, was R$1,162,594. On this date, 53.90% of the voting capital and 22.73% of the total capital of Telemig Participações were transferred to the Company.

On April 8, 2008, the Company, through its subsidiary TCO IP (“Issuer”), launched a Voluntary Public Offering (“Voluntary VPO”) for the purchase of up to 1/3 of the outstanding preferred shares of Telemig Celular and of Telemig Participações. With the completion of the VPO on May 12, 2008, TCO IP acquired 7,257,020 preferred shares of Telemig Participações, representing 20.04% of the total capital and 89,492 preferred shares of Telemig Celular, representing 3.77% of the total capital, having paid the prices of R$463,724 and R$58,592, respectively. On July 25, 2008, TCO IP acquired 3,929 preferred shares of Telemig Celular, representing 0.16% of the total capital, for the amount of R$2,572 and on September 9 and 10, TCO IP acquired 4,000 preferred shares of Telemig Celular, representing 0.17% of the total capital, for the amount of R$2,619.

On July 15, 2008, the Company launched the Mandatory Public Offering for Disposal of Share Control for the acquisition of the outstanding common shares, through its subsidiary TCO IP, in continuance with the process for acquisition of Telemig Participações and of Telemig Celular. Upon the completion of the Mandatory Public Offering on August 15, 2008, TCO IP had acquired 5,803,171 common shares of Telemig Participações, representing 16.03% of the total capital and 78,107 common shares of Telemig Celular, representing 3.29% of the total capital, having paid the prices of R$732,650 and R$171,239, respectively.

On November 12, 2008, at a Special Meeting of the Board of Directors of Telemig Participações, a capital increase was approved, to be made out of the special goodwill reserve, in the amount of R$22,964, upon issue of 670,300 new registered, preferred shares, without par value, corresponding to the tax benefit of fiscal year 2007. After such capital increase, the Company own 58.90% of the total capital of Telemig Participações. During the acquisition period several expenses were incurred on the amount of R$14,332, which were capitalized as transaction costs.

For U.S. GAAP purposes, the purchase price of such acquisitions was allocated as follows:

F-89

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Acquisition
		2008
Amounts representing 58.90% and 7.40% (total capital) of the historical net assets of Telemig Celular Participações S.A. and Telemig Celular S.A., respectively, under U.S. GAAP		903,686
Fair-value adjustments:
Inventory (a)		2,729
Value added tax credit (ICMS) (b)		(1,493)
Property, plant and equipment (c)		176,401
Intangible assets – software (d)		3,073
Intangible assets – concession (e)		1,693,203
Debt obligations (f)		1,668
Goodwill		466,753
Deferred income tax		(637,698)
Purchase price		2,608,322

(a) Difference being amortized over 2 months, representing the average inventory turn over.

(b) Difference being amortized over 2 years, representing the realization of the tax benefit of state VAT (ICMS) added value tax.

(c) Difference being amortized over 5 years, representing the weighted-average remaining useful lives of the related assets.

(d) Difference being amortized over 3 years, representing the weighted-average remaining useful lives of the related intangible asset. assets.

(e) The intangible asset related to the concession is being amortized on a straight-line basis over a period of approximately 30 years, representing the remaining term of the 3G license which expires in 2023, plus one extension of 15 years.

(f) Difference being amortized by the effective interest method over the remaining maturities of the underlying Telemig Celular.

The following table includes the components of the U.S. GAAP adjustment in shareholders’ equity related to such acquisitions as of December 31, 2009 and 2008:

		2009		2008
Purchase accounting on acquisition of Telemig Celular Participações and Telemig Celular S.A.:
Reversal of goodwill recorded under Brazilian GAAP (*)		(1,532,839)		(1,619,069)
Intangible asset related to concession recorded in U.S. GAAP		1,693,203		1,693,203
Amortization of intangible related to concession		(91,842)		(35,157)
Property, plant and equipment fair-value adjustment		176,401		176,401
Depreciation of fair value of property, plant and equipment adjustment		(58,605)		(22,360)
Software fair-value adjustment		3,073		3,073
Amortization of software adjustment		(1,732)		(659)
Value added tax credit fair-value adjustment		(1,493)		(1,493)
Amortization of added value tax credit fair-value adjustment		624		238
Inventory fair-value adjustment		2,729		2,729
Amortization of inventory fair-value adjustment		(2,729)		(2,729)
Debt fair-value adjustment		1,668		1,668
Amortization of debt fair-value adjustment		(1,440)		-
Goodwill recorded under U.S. GAAP		403,143		466,752
Deferred income tax		(601,871)		(632,497)
Total of the U.S. GAAP adjustments related to acquisition of Telemig Celular Participações S.A. and Telemig Celular S.A.		(11,710)		30,100

(*) As commented previously, for tax purpose only, the goodwill recoded under BRGAAP still being amortized during 2009.

F-90

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Under Brazilian GAAP the goodwill paid on Telemig’s acquisition was restructured in accordance with CVM Instruction 319/99, turning the deductible portion of the goodwill (34%) in tax benefit (Tax credit acquired – restructuring) as mentioned in the footnote 28. Therefore, the tax benefits of R$504,958 and R$45,524 were recorded at Telemig Participações and Telemig Celular level, respectively, since the credit of same amount was recorded as Special goodwill reserve at Telemig Participações and Telemig’s equity, respectively. The portion of the tax benefit utilized each year can be capitalized to the benefit of the controlling shareholder (the Company) in the subsequent year as mentioned in footnote 23.c.2.

Under U.S. GAAP the tax benefit recorded at Telemig level was reversed at the consolidated level being recorded when realized on the tax return in accordance with the provisions of ASC 805-740 “Business Combination/Income Taxes”. For the year ended December 31, 2009, the amount of R$63,609 reduced goodwill per tax benefit realization pursuant to ASC 805-740. No tax benefit was realized in 2008.

The Company paid a premium (i.e., goodwill) over the fair value of the net tangible assets and identified intangible assets acquired for a number of reasons, including but not limited to the following:

- Telemig fills in the Company’s licensed spectrum and network footprints by covering areas where it did not have licenses or network infrastructure;

- Telemig’s subscriber base has a strong business subscriber component in the state of Minas Gerais, which allowed it to be very competitive in this state;

- The acquisition will reduce the Company’s uncollectible roaming costs in the state of Minas Gerais;

f) Merger of Tele Sudeste Celular Participações S.A. (“TSD”), Tele Leste Celular Participações S.A. (“TLE”), Celular CRT Participações S.A. (“CRT”) and Tele Centro Oeste Celular Participações S.A. (“TCO”) into Vivo Participações S.A. (former Telesp Celular Participações S.A.) through exchange of shares.

As described above, in February 2006, the Company was merged with TSD, TLE and CRT, and acquired the remaining minority interest in TCO through share exchange transactions.

Under U.S. GAAP, the exchange of shares for non-controlling interests is accounted for using the purchase method of accounting. The purchase price of the shares is recorded based on the market price of the issuing Company’s shares at the date of the exchange offer. The purchase price is allocated to the proportional assets and liabilities of the acquired non-controlling interest based on their relative fair values. If the fair values of the net assets exceed the purchase price, the difference is recorded as a reduction to the proportional long-lived assets acquired. For U.S. purposes, the purchase price of such exchanges of shares was allocated as follows:

		Date of
		exchange
		of shares
Amounts representing 8.97%, 49.33%, 31.23% and 47.53% of the historical net assets of TSD, TLE, CRT and TCO, respectively, under U.S. GAAP		1,708,795
Fair-value adjustments:
Property, plant and equipment (a)		215,217
Intangible assets - customer list (b)		607,606
Intangible asset related to concession (c)		11,867
Goodwill		283,795

F-91

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Deferred income tax		(283,795)
Purchase price (d)		2,543,485

(a) Difference being amortized over approximately 2.33 years, representing the weighted-average remaining useful lives of the relating assets.

(b) Difference being amortized over two years, representing the average customer life.

(c) The intangible asset related to the concession is being amortized on a straight-line basis over a period of approximately 17 years.

(d) The purchase was determined using the average market prices of the acquired companies’ shares two days before and two days after the terms of the acquisition are agreed to and announced.

Following are the components of the U.S. GAAP adjustment in shareholders’ equity related to such acquisitions as of December 31, 2009 and 2008:

Purchase accounting on merger of TSD, TLE and CRT and the acquisition of non-controlling interest in TCO:

		2009		2008
Property, plant and equipment fair-value adjustment		215,217		215,217
Depreciation of fair value of property, plant and equipment adjustment		(215,217)		(215,217)
Customer list intangible asset recorded		607,606		607,606
Amortization of customer list		(607,606)		(607,606)
Intangible related to concession recorded		11,867		11,867
Amortization of intangible related to concession		(2,749)		(2,047)
Goodwill		283,795		283,795
Deferred income tax		(3,100)		(3,339)
Total of the U.S. GAAP adjustments related to merger of TSD, TLL,CRT and the acquisition of non-controlling interest in TCO		289,813		290,276

g) Pension and other post-retirement benefits

The Company and its subsidiaries participate in two multiemployer benefit plans (PBS-A and PAMA) for its retired employees that are operated and administered by SISTEL and provide for the costs of pension and other post-retirement benefits based on a fixed percentage of remuneration, as recommended annually by independent actuaries. For purposes of U.S. GAAP, the Company is only required to disclose its annual contributions to multiemployer plans. The Company and its subsidiaries also sponsor a single-employer defined pension benefit plan (PBS) and single-employer defined contribution pension plans (Prev and Visão). Under Prev and Visão Plans, besides the contributions to the plans, the Company is responsible for funding the risks of death and disability of the participants, and for some participants of the TCO Prev who have migrated from PBS-TCO are also granted some defined pension benefits. The provisions of ASC 715 “Compensation-Retirement Benefit” were promptly applied for the multiemployer plan and only applied for the single employer plans with effect from January 1, 1992, because it was not feasible to apply them from the effective date specified in the standard.

Under Brazilian GAAP, if there is sufficient information available, multiemployer defined benefit pension plans and other postretirement benefits should be accounted as if they were single employer plans. As such, under Brazilian GAAP the Company recognized actuarial liabilities corresponding to its share in multiemployer plans, while under U.S. GAAP, the Company recognizes contributions due to the plan each year. See additional disclosures in Note 30.

F-92

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

A summary of the difference between Brazilian GAAP and U.S. GAAP in accrued pension and other post-retirement plan liabilities is as follows:

		As of December 31, 2009						As of December 31, 2008
		U.S.		Brazilian		Accumulated		U.S.		Brazilian		Accumulated
		GAAP		GAAP		difference		GAAP		GAAP		difference
Visão		(9,912)		-		(9,912)		(5,394)		-		(5,394)
PBS		(31,168)		-		(31,168)		(43,091)		-		(43,091)
Prev		(13,796)		-		(13,796)		(19,051)		519		(19,570)
PAMA		-		15,693		(15,693)		-		11,853		(11,853)
Accrued pension
post-retirement
benefit		(54,876)		15,693		(70,569)		(67,536)		12,372		(79,908)

On December 31, 2006, the Company and its subsidiaries adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans” (subsequently codified within ASC 715 “Compensation-Retirement Benefits”). Under ASC 715, provisions related to recognition and disclosures, which requires an employer to recognize the over or unfunded status of a defined-benefit post-retirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through other comprehensive income. The impact of the adoption of ASC 715 was as a gain of R$29,645, net of income taxes, which was recorded directly in accumulated other comprehensive income at year end.

Reconciliation of pension and other post-retirement benefit plans adjustment:

		Year ended December 31,
		2009		2008		2007
U.S. GAAP:
Net periodic pension cost under U.S. GAAP		4,711		8,818		6,311
Settlements		-		4,391		-
Pension cost under Brazilian GAAP		(6,653)		(7,153)		(3,596)
Net reconciliation effect		11,364		20,362		9,880

The incremental effect of applying ASC 715 on individual line items in the statement of financial position as of December 31, 2006 (inception date), is as follows:

		Before				After the
		application of				application of
		ASC 715		Adjustments		ASC 715
Prepaid assets for pension benefits		-		44,917		44,917
Deferred income taxes		2,493,421		(15,272)		2,478,149
Accumulated other comprehensive income		-		29,645		29,645
Total shareholders' equity		9,096,550		29,645		9,126,195

h) Escrow deposits

Under Brazilian GAAP, the amounts of the escrow deposits linked to the reserve for contingencies are presented as deductions from the recorded liabilities. As shown in notes 17 and 19, escrow deposits were R$619,306 and R$509,946 as of December 31, 2009 and 2008, respectively. Under

F-93

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

U.S. GAAP they should be presented as separated in current or non-current assets instead of contra provision.

i) Income taxes

The Company and its subsidiaries fully accrue for deferred income taxes on temporary differences between tax and accounting records. The existing policies for providing for deferred taxes are consistent with ASC 740 “Income Taxes”, except that under Brazilian GAAP deferred tax assets are recorded as the amounts expected to be realized, whereas ASC 740 requires deferred tax assets to be recognized in full, but reduced by a valuation allowance to an amount that is more likely than not to be realized.

Under Brazilian GAAP, Vivo Participações S.A. did not recognize deferred income tax and social contribution assets of R$842,780 and R$845,053 as of December 31, 2009 and 2008, respectively, due to the uncertainties involving their realization. For U.S. GAAP purposes, the amounts not recognized represent the valuation allowances that were recorded under U.S. GAAP.

Effective January 1, 2007, the Company and its subsidiaries adopted former FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes”, codified in ASC 740-10 “Income Taxes/Overall”, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740 “Income Taxes”. The Interpretation prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. For each tax position, the enterprise must determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to recognize within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. The benefit to be recognized is the largest amount that is more likely than not to be realized upon ultimate settlement.

The Company has no uncertain tax positions for which it has recorded unrecognized income tax benefits; accordingly, there was no impact on the Company’s results of operations from the adoption of this interpretation. In addition, as of the date of the adoption of ASC 740-10, the Company did not have any accrued interest and penalties related to unrecognized tax benefits. The Company and its subsidiaries recognize interest and penalties related to unrecognized tax benefits in financial expense and other operating expense, respectively.

The Company and its subsidiaries file, separately, income tax returns in the Brazilian federal jurisdiction and are generally no longer subject to federal income tax examinations by tax authorities for years before 2003. The Brazilian Internal Revenue Service (“Brazilian IRS”) is currently examining our subsidiary Vivo S.A.’s (former Global Telecom) income tax returns for years 2003 to 2006. As a large tax payer, the Company is under continuous examination by the Brazilian federal tax authorities.

Management does not believe there will be any material changes related to uncertain tax positions over the next 12 months.

j) Earnings per share

Under Brazilian GAAP, earnings per share are calculated based on the number of shares outstanding at the balance sheet date.

F-94

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Under U.S. GAAP the Company applies the ASC 260 “Earnings per Share”.

Since the preferred and common shareholders have different dividends, voting and liquidation rights, basic and diluted earnings per share have been calculated using the “two-class” method. The “two-class” method is an earnings allocation formula that determines earnings per share for preferred and common stock according to the dividends to be paid as required by the Company’s by laws and participation rights in undistributed earnings.

Basic earnings per common share is computed by reducing net income by distributable and undistributable net income available to preferred shareholders and dividing net income available to common shareholders by the weighted-average number of common shares outstanding. Since preferred shareholders have a liquidation preference over common shareholders, losses are not allocated to preferred shareholders. Net income available to preferred shareholders is the sum of the preferred stock dividends and the preferred shareholders’ portion of undistributed net income.

Total undistributed net income is computed by deducting total dividends (the sum of preferred and common stock dividends) from net income. Total undistributed net income is shared equally by the preferred and common shareholders on a “pro rata” basis.

As of December 31, 2009, 2008 and 2007, the Company was obligated to issue shares to the controlling shareholder for the amount of the tax benefit realized relating to the corporate restructuring that occurred in February, 2006. The number of shares issuable was computed considering the balance of the special goodwill reserve (null in 2009, R$189,896 in 2008 and R$552,638 in 2007). However, the potentially dilutive shares, consisting solely of the estimate of common shares issuable mentioned above, have been excluded from the computation for the year 2007 as their effect would have been anti-dilutive.

For the periods presented below, the computation of basic and diluted earnings per share is as follows:

		Consolidated
		For the year ended				For the year ended				For the year ended
		December 31, 2009				December 31, 2008				December 31, 2007
		(in thousands, except per share data and percentages)
		Common		Preferred		Common		Preferred		Common		Preferred
Basic numerator:
Actual dividends paid		173,051		315,210		58,829		102,284		-		-
Allocated undistributed
earnings (loss)		83,985		152,978		123,690		216,102		(109,625)		-
Allocated net income available
for common and preferred
shareholders		257,036		468,188		182,519		318,386		(109,625)		-
Basic denominator:
Weighted-average shares		136,458,308		248,555,838		132,991,366		232,353,912		131,232,916		228,172,795
Earnings (loss) per share – basic		1.88		1.88		1.37		1.37		(0.84)		-
Diluted numerator:
Actual dividends paid		173,051		315,210		58,829		102,284		-		-

F-95

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Allocated undistributed
earnings (loss)		83,992		152,971		124,240		215,552		(109,625)		-
Allocated net income (loss)
available for common and
preferred shareholders		257,043		468,181		183,069		317,836		(109,625)		-
Diluted denominator:
Weighted-average shares		136,458,308		248,555,838		133,924,147		232,353,912		131,232,916		228,172,795
Earnings (loss) per share - diluted		1.88		1.88		1.37		1.37		(0.84)		-

The Company’s preferred shares are nonvoting, except under certain limited circumstances, and are entitled to a preferential and noncumulative dividend and to priority over the common shares in the event of liquidation of the Company.

k) Presentation in statements of operations

Interest income (expense)

Brazilian GAAP requires that interest be shown as part of operating income. Under U.S. GAAP interest expense would be shown after operating income, and accrued interest would be included in accounts payable and accrued expenses.

Cash Rebates

Under Brazilian GAAP, cash considerations are classified as selling expenses. Under U.S. GAAP cash rebates are recorded in the cost of services and goods sold or as cost incurred such as the cooperative advertising.

Loyalty Program expense

Under Brazilian GAAP, the provision for loyalty program is classified as selling and the reversal of unrealized portion of this provision in subsequent periods as other operating income. Under U.S. GAAP, loyalty program expense is recorded in the cost of services and goods sold.

Extemporaneous credit

Under Brazilian GAAP, extemporaneous credit resulting from claim of taxes payment incidental on revenues from ordinary activities is classified as other operating income. Under U.S. GAAP, this credit is recorded as revenues from ordinary activities.

l) Leases

The Company and its subsidiaries have leased certain computer hardware and software under non-cancelable leases. Under Brazilian GAAP, all leases were considered to be operating leases, with lease expense recorded when paid until January 1, 2008. As from this date, with the first adoption of Law No. 11,638, in conformity with CPC 06 – Commercial Leasing Transactions Leases, approved by CVM Resolution No. 554, dated November 12, 2008, these leases are considered capital leases. Under CPC 06, the Company and its subsidiaries were required to record the asset

F-96

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

at the present value of the minimum lease payments with a corresponding debt obligation for the years 2008 and 2007. Depreciation was recorded over the shorter of the estimated useful life of the asset or the lease term. Interest expense was recognized over the term of the lease and payments under the lease were amortized to principal and interest under the effective interest method. Under U.S. GAAP, leases are classified as operating lease or capital lease according to ASC 840. The depreciation of capital leases was recorded on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. All capital leases are fully depreciated and paid as of December 31, 2009.

m) Valuation of long-lived assets and goodwill

Under accounting practices adopted in Brazil, an impairment is recognized on long-lived assets, such as property, plant and equipment and concession intangibles, if the expected net cash flows generated the respective asset are not sufficient to cover its carrying amount. As from January 1, 2008, with the first adoption of Law No. 11,638, under CPC 01 Reduction of the Recoverable Value of the Assets, approved by CVM Resolution No. 527, dated November 01, 2007, the Company and its subsidiaries periodically evaluate the carrying value of long-lived assets to be held and used, when events and circumstances warrant such a review. An impairment is recognized on long-lived assets, such as property, plant and equipment, intangible assets and deferred assets, if the expected discounted cash flows generated by the respective asset are not sufficient to recover its carrying amount. Under U.S. GAAP, the Company and its subsidiaries evaluate long-lived assets for impairment using the criteria set forth in ASC 360 “Property, Plant and Equipment”. In accordance with this provision Standard, the Company and its subsidiaries periodically evaluate the carrying value of long-lived assets to be held and used, when events and circumstances warrant such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from such assets is separately identifiable and is less than their carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the assets.

The Company and its subsidiaries have performed a review of its long-lived assets including property, plant and equipment, finite-lived intangible asset, including concession, and concluded that the recognition of an impairment charge was not required. The Company’s evaluation of its ability to recover the carrying value of its long-lived assets was based upon projections of future operations that assumed a higher level of revenues and gross margin percentages that the Company has historically achieved. The assumptions adopted by the Company are presented in more detail in note 3(j).There can be no assurance that the Company will be successful in achieving these improvements in its revenues and gross margin percentages, mainly due to technological and competition environment. Should the Company be unable to achieve such improvements, future impairment provisions may be recorded related to its investments in property, plant and equipment and the licenses acquired to operate its cellular networks.

Under Brazilian GAAP, the amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows until January 1, 2008, the date of the first adoption of Law No. 11,638/07. As from this date, under CPC 01 - Reduction of the Recoverable Value of the Assets, approved by CVM Resolution No. 527, dated November 1, 2007, the Company identifies its reporting units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets. The Company then determines the fair value of each reporting unit. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized first to goodwill until it is reduced to zero and then proportionally to other long-lived assets.

Under U.S. GAAP, goodwill is not amortized and is subject to a impairment test. In performing the impairment test, the Company identifies its reporting units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and

F-97

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

intangible assets. The Company then determines the fair value of each reporting unit and compares it to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, a second step of the impairment test is performed which involves the determination of the implicit fair value of the reporting unit by performing a hypothetical purchase price allocation. If the implicit value of the goodwill exceeds the book value, an impairment is recognized. The Company performed an impairment test for goodwill under U.S. GAAP and determined that the recognition of an impairment loss was not required. The Company performed its impairment testing as of December 31, 2009.

The changes in the carrying amount of U.S. GAAP goodwill as of December 31, 2009 and 2008 are as follows:

		Vivo Participações S.A.
		(*)
		2009		2008
Balance at January 1		976,785		579,246
Addition – acquisition of Telemig		-		466,753
Reduction of goodwill for tax benefits recognized		(92,449)		(69,214)
Balance at December 31		884,336		976,785

(*) During 2006 the Company completed restructurings resulting in a change in the Company’s management structure and operating segments. As a result, the Company had one reportable segment, which represented a reporting unit as of December 31, 2009.

n) FISTEL fees

Under Brazilian GAAP, the FISTEL fees assessed on each activation of a new cellular line are deferred beginning on January 1, 2001 for amortization over the customers’ estimated subscription period. For U.S. GAAP purposes, this fee would be charged directly to the statement of operations. Therefore, the deferred FISTEL fees on activation fees as of December 31, 2009, 2008 and 2007 are being adjusted in the reconciliation of the income differences between Brazilian GAAP and U.S. GAAP.

o) Revenue recognition

Under U.S. GAAP, the Company and its subsidiaries recognize service revenue as the services are provided. Prepaid service revenue is deferred and recognized based on subscriber airtime usage. Additional differences in the Company and its subsidiaries’ revenue recognition policies are discussed below:

(i) Roaming

The Company and its subsidiaries have roaming agreements with other cellular service providers. When a call is made from within one coverage area by a subscriber of another cellular service provider, that service provider pays the subsidiary for the service at the applicable rates. Conversely, when one of the subsidiary’s customers roams outside the coverage area, the subsidiary pays the charges associated with that call to the cellular service provider in whose region the call was originated and charges the same amount to its subscriber. Under Brazilian GAAP, revenues for roaming charges are recorded net of the related costs when the services are provided. Under U.S. GAAP, revenues and costs for roaming charges should be recorded gross. Accordingly, this difference in accounting policy has no impact on net income (loss) or in the reconciliation of shareholders’ equity. The impact of this difference under U.S. GAAP was to increase both revenues

F-98

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

and cost of goods and services by R$80,802, R$52,601 and R$46,796 for 2009, 2008 and 2007, respectively.

(ii) Value-added and other sales taxes

Under Brazilian GAAP, revenue is recognized net or related value-added and other sales taxes. Under U.S. GAAP, revenue is recognized gross and these taxes are recorded separately and related cost of services and goods. Accordingly, this difference in accounting has no impact in net income (loss) nor in shareholders’ equity. The impact of this difference under U.S. GAAP was to increase both revenues and cost of goods and services by R$4,630,140, R$4,289,949 and R$3,380,046 for 2009, 2008 and 2007, respectively, as compared to amounts reported under Brazilian GAAP.

(iii) Deferred revenue sales of handsets

Under Brazilian GAAP, revenues and costs related to handset sales, including applicable value added and other sales taxes are recognized when sold. Under U.S. GAAP, prior to 2008, revenue on sales of handsets with no value to the customer on a stand-alone basis, along with the related cost of the handset, including applicable value added and other sales taxes, are amortized over their term of arrangement with the customer. Any excess of the cost over the amount of deferred revenue related to handset sales is recognized on the date of sale. As substantially all of the subsidiary’s handsets are sold below cost, this difference in accounting policy had no impact on net income (loss) or in shareholders’ equity. The unamortized balance of deferred handset revenue and the related balance of unamortized deferred handset costs was R$381,413, R$518,774 and R$1,267,138 as of December 31, 2009, 2008 and 2007, respectively. The impact of this difference under U.S. GAAP was to decrease both net revenues and cost of services and goods by R$90,837 for 2007 and to increase both net revenues and cost of services and goods by R$137,362 and R$748,364 for 2009 and 2008, respectively. We had previously considered whether these handsets represent a separate unit of accounting under ASC 605 “Revenue Recognition” and believe the criterion has not been met because the handsets do not have value to the customer on a stand-alone basis, since our TDMA and CDMA technology handsets are not compatible with the GSM technology used by all other competitors. In the beginning of 2007 the subsidiaries started the transition of CDMA technology to GSM. However, we concluded there was no impact in our revenue recognition policy under U.S. GAAP, since the frequency utilized by our competitors during 2007 was not compatible with the frequency used by our GSM technology and therefore, the GSM handsets also do not have stand-alone value. Consequently, the revenue recognition policy under U.S. GAAP for the sale of GSM handsets was consistent with policy used for the sale of CDMA for the year ended on December 31, 2007.

During 2008, the subsidiaries began to commercialize types of GSM handsets, which are compatible with the GSM technology used by all other competitors. Since this has occurred, GSM handsets of the Company have an observable market value and therefore, stand-alone value. Consequently, the revenue recognition policy under U.S. GAAP for the sale of GSM handsets is similar to Brazilian GAAP and the revenues and costs related to these handsets sales, including applicable value added and other sales taxes are recognized when sold.

(iv) Free minutes given in connection with sales of handsets

Under U.S. GAAP, the subsidiaries began to separately account for free minutes given in connection with the sales of handsets. Consequently, a portion of the revenue generated from the sale of handsets is allocated to the free minutes given and deferred based on the fair value of the minutes. The revenues associated with the free minutes are then recognized based on subscriber airtime usage. Under Brazilian GAAP, the subsidiary does not separately account for free minutes

F-99

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

given in connection with sales of handsets. For the year ended December 31, 2009, the effects in net income (loss) of this accounting difference were R$(246), in 2008 R$(925) and in 2007 R$93,608.

(v) Deferred revenue of free minutes given in connection with prepaid cards

The Company commercializes prepaid cards with credit minutes to its clients and gives free minutes in connection with its sales. Under U.S. GAAP the subsidiaries separately account for free minutes given in connection with the prepaid cards. Consequently, a portion of the revenue generated from the sale of prepaid cards is allocated to the free minutes given and deferred based on the fair value of the minutes. The revenues associated with the free minutes are then recognized based on subscriber airtime usage. Under Brazilian GAAP, the subsidiaries do not separately account for free minutes given in connection with sales of prepaid cards. For the year ended December 31, 2009 and 2008, the effects in net income of this accounting difference were (R$1,748) and (R$10,526) respectively. The effect in 2007 was immaterial.

p) Derivative financial instruments

As mentioned in Note 29 the Company and its subsidiaries have entered into foreign-currency swap contracts at various exchange rates, in the notional amounts of US$415.6 million and JPY1,338.9million (US$515.6 million and JPY 51,594.7 million as of December 31, 2008). Also, the Company had contracted an inflation index swap (General Price Index - IGPM) in the notional amount of R$110.0 million as of December 31, 2009 and 2008 and an inflation index swap (Costumer Price Index - IPCA) in the notional amount of R$72.0 million. As of December 31, 2009, the Company did not have swaps for local interest rates (CDI) (R$225.0 million as of December 31, 2008).

Under Brazilian GAAP, CPC 14 must be applied to all derivative instruments, and requires that such instruments are stated in the balance sheet at their fair value. Changes to the fair value of the derivatives are recognized in the statement of operations, unless specific accounting criteria are met.

Under U.S. GAAP, the Company and its subsidiaries apply ASC 815 “Derivatives and Hedging”. ASC 815 must be applied to all derivative instruments and certain derivative instruments embedded in hybrid instruments and require that such instruments be recorded in the balance sheet either as an asset or liability measured at its fair value. Changes in the derivative’s fair value are recognized currently in earnings unless specific hedge accounting criteria are met.

If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives that are considered to be effective, as defined, will either offset the change in fair value of the hedged assets and liabilities or firm commitments through earnings or will be recorded in other comprehensive income until the hedged item is recorded in earnings. Any portion of a change in a derivative’s fair value that is considered to be ineffective, as defined, must be immediately recorded in earnings. Any portion of a change in a derivative’s fair value that the Company and its subsidiaries have elected to exclude from its measurement of effectiveness, such as the change in time value of option contracts, will also be recorded in earnings.

For the years ended on December 31, 2009 and 2008 the Company and its subsidiaries have designated certain swap contracts as fair value hedges. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable, to the hedged risk are recognized in current earnings. The Company and its subsidiaries are exposed to certain risks relating to its ongoing

F-100

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

business operations. The primary risks managed by using derivative instruments are detailed in note 29(d).

The Company and its subsidiaries had R$928.9 million (US$415.6 million, JPY1,338.9 million and R$110.0 million) as of December 31, 2009 and R$2,453.1 million (US$433.0 million, JPY51.594.6 million and R$110.0 million) as of December 31, 2008, of notional value swap contracts with a fair value of R$1.007,7 million as of December 31, 2009 (R$2,394.0 million as of December 31, 2008) designated as fair value hedges on a portion of the Company’s foreign-currency denominated debt.

The Company and its subsidiaries are hedging the related foreign currency (U.S. dollar and Japanese yen) and interest rate risk associated with such indebtedness. The Company and its subsidiaries calculate the effectiveness of these hedges both at inception and on an ongoing basis (i.e., quarterly). Since theses derivative contracts qualify for hedge accounting under Brazilian GAAP and U.S. GAAP, the hedged debt is also adjusted to fair value under the fair value hedge rules. These derivative instruments have been highly effective in achieving offsetting changes in fair values due to changes in the risks being hedged.

For the years 2009 and 2008, the reconciliation of shareholders’ equity does not reflect any difference between Brazilian GAAP and U.S. GAAP. For the year 2007, it reflects the debt marked-to-market adjustment for this debt assigned as fair value hedge under Brazilian GAAP that did not meet the criteria under U.S. GAAP. During the year 2008, such debt was settled and the difference between Brazilian GAAP and U.S. GAAP was eliminated.

The Company includes the gain or loss on the hedged items related to fair value hedges in the same line item – interest expense –as the offsetting loss or gain on the related interest and foreign currency rate swaps as follows:

In millions of R$		2009
				Gain/(loss) on
Income statement classification		Gain/(loss) on swaps		borrowings
Interest expense		(445.828)		278.308

Tabular disclosure of fair values of derivative instruments in a statement of financial position as of December 31, 2009 is as follows:

In thousands of R$		Asset Derivatives				Liability Derivatives
As of December 31,		2009				2009
		Balance Sheet				Balance Sheet
		Location		Fair Value		Location		Fair Value
Derivatives designated as hedging
instruments under ASC 815
Foreign currency contracts		Other assets		756.807		Other liabilities		(744.397)
Other contracts		Other assets		250.927		Other liabilities		(238.833)
Total derivatives designated as hedging
instruments under ASC 815				1.007.734				(983.230)
Derivatives not designated as hedging
instruments under ASC 815 (a)
Foreign currency contracts		Other assets		2.774		Other liabilities		(6.600)
Total derivatives not designated as
hedging instruments under ASC 815				2.774				(6.600)

F-101

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(a) Although these derivatives are not designated as hedging instruments, these derivative instruments were not contracted for speculative purposes.

As mentioned in note 29(d), all contracting of derivative financial instruments of the Company and of Vivo is intended for protection against foreign exchange risk and variations in foreign and local interest rates arising out of debts, pursuant to a corporate policy of risk management. Accordingly, eventual variations in the risk factors generate an inverse effect on the subject matter they are intended to protect. Therefore, there are no derivative financial instruments for speculation purposes and 99.8% of the financial exchange liabilities are hedged.

The Company keeps internal controls in relation to their derivative instruments which, in the opinion of the Management, are adequate for controlling risks associated with each strategy of market action. The results obtained by the Company in relation to their derivative financial instruments show that the Management has properly managed risks.

F-102

---

The effect of derivative instruments on the income statement for the year ended on December 31, 2009 is as follows:

In millions of R$
				Amount of gain or (loss)
		Location of Gain or (Loss)		recognized in income on
Derivatives in ASC 815 Fair Value Hedging		recognized in income on		Derivative
Relationships		derivatives		2009
Foreign currency contracts		Foreign currency gain/(loss)		(442.299)
Other contracts		Other income/(expense)		(3.529)
Total				(445.828)

In millions of R$
				Amount of gain or (loss)
				recognized in income on
		Location of Gain or (Loss)		Derivative
Derivatives not designated as hedging instruments		recognized in income on
under ASC 815 (a)		derivatives		2009
Interest rate contracts		Interest income/(expense)		(5.752)
Foreign currency contracts		Foreign currency gain/(loss)		(2.210)
Total				(7.962)

(a) Although these derivatives are not designated as hedging instruments, these derivative instruments were not contracted for speculative purposes.

Counterparty credit risk

There is a credit risk from the possibility that the Company may incur losses associated with its receivables from adjustments of swap transactions with financial institutions. To minimize this risk, the Company operates in order to diversify this exposure between counterparties of first line, according to its Credit Policy.

q) License acquisition costs

The incurred interest between the date of the documentation and proposal submission to obtain the license acquisition to operate Band B mobile telephone services and the date of the initial operations of GT was recorded as deferred assets according to Brazilian GAAP. Under U.S. GAAP, the interest was capitalized as license acquisition cost. The amount of reversal relates to differences on interest accrued in 1998. This difference is being amortized over the license period. The effects of license acquisition costs on net income (loss) for the years ended 2009, 2008 and 2007 are R$(7,470), R$(5,677) and R$(6,001), respectively.

r) Deferred assets

F-103

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The Company has recorded pre-operational costs incurred prior to January 1, 2009 as deferred assets, to be amortized on a straight-line basis over 10 years, as allowed by Brazilian GAAP. Under U.S. GAAP, these costs are recorded as expenses when incurred. The effects of deferred assets amortization on net income (loss) for the years ended 2009, 2008 and 2007 are R$25,529, R$3,440 and R$35,871, respectively.

s) Grants

Under Brazilian GAAP, equipment received free of charge (grants) were recorded at fair value, with a corresponding credit to capital reserve, which is amortized into the result of operations based on realization of the corresponding asset until January 1, 2008, the date of the first adoption of Law No.11,638. As from this date, grants were recorded at fair value, with a corresponding credit to deferred revenue, which is amortized into results of operations based on realization of the corresponding asset. The remaining balance existing on December 31, 2007 was kept in capital reserve, until its complete realization. For U.S. GAAP purposes, the credit to capital reserves would be classified as a reduction of the related asset and amortized to reduce depreciation expense.

t) Items posted directly to shareholders’ equity.

Under Brazilian GAAP, various items are posted directly to shareholders’ equity, which under U.S. GAAP would be posted to the statements of operations. The posting of such items to shareholders’ equity gives rise to adjustments in the consolidated statement of changes in shareholders’ equity. Since the original postings to the equity accounts would, under U.S. GAAP be made directly to the statements of operations, the adjustment is included in the reconciliation of net income (loss) differences between U.S. and Brazilian GAAP. The accumulated amount of grants of R$35,597 across several years are adjusted in the Company’s financial statements for U.S. GAAP purposes

u) Present value of noncurrent recoverable value added tax credit (ICMS)

Under Brazilian GAAP, noncurrent governmental accounts receivable were not discounted to present value until January 1, 2008, the date of the first adoption of Law No. 11,638/07. As from this date, under CPC 12 – Adjustment to Present Value, approved by CVM Resolution No. 564 of December 17, 2008, noncurrent tax assets have been discounted to present value. As the Law No. 11,638/07 was applied retrospectively to the Company, the noncurrent governmental taxes receivable were discounted to present value for the year 2007, 2008 and 2009.

Under U.S. GAAP, noncurrent governmental taxes receivable are not discounted to present value.

v) Merger of noncontrolling interest of TCP and TC into Vivo Participações S.A.

As mentioned in Note 1.d., a Special Shareholders’ Meeting held on July 27, 2009, the shareholders of Telemig Participações and of Telemig approved the Protocol of Merger of Shares and Instrument of Justification, executed on May 29, 2009, which provided for the merger, into Telemig Participações, of all the shares of Telemig, with the holders of the merged shares of Telemig directly receiving the new shares to which they were entitled in the merged company, Telemig Participações (the shareholders received 17.4 new shares of Telemig Participações for each share of Telemig), in accordance with the exchange ratios agreed to at the Meetings of the Boards of Directors of the companies held on May 29, 2009.

At the same date, at a Special Shareholders’ Meeting, the shareholders of the Company approved the Protocol of Merger of Shares and Instrument of Justification, executed on May 29, 2009, which provided for the merger, into Vivo Participações, of the shares of Telemig Participações, with the holders of the merged shares of Telemig Participações directly receiving the new shares (for each share of Telemig Participações, its shareholders received 1.37 new shares of Vivo Participações), in conformity with the exchange ratio agreed to at the Meetings of the Board of Directors of the companies, held on May 29, 2009.

F-104

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The merger of the shares of Telemig and of Telemig Participações did not entail any change in the number and composition by type of their shares, which finally became owned, all of them, by Vivo Participações. The holders of common and preferred shares of Telemig that were merged into Telemig Participações’ equity received new shares of Telemig Participações of the same type, that is, the merged preferred shares were replaced by new preferred shares of Telemig Participações, issued on behalf of their respective holders, and merged common shares were replaced by new common shares of Telemig Participações, issued on behalf of their respective holders. Following, and in the same manner, the holders of common and preferred shares of Telemig Participações merged into Vivo Participações’ equity received new shares of Vivo Participações of the same type. Accordingly, at the end of the transaction, the non-controlling shareholders of Telemig and of Telemig Participações became shareholders of Vivo Participações.

As a result of the above described approvals, the subscribed and fully paid-up capital stock of the Company increased from R$6,900,422 to R$8,780,150, represented by 400,713,827 book-entry shares, of which 137,269,188 are common shares and 263,444,639 are preferred shares, all of them registered and with no face value.

The above mentioned capital increase, of R$1,879,728, was generated from the economic value of the shares held by the minority shareholders of Telemig Participações, the equity value of which totaling an amount of R$894,296.

Under Brazilian GAAP, the difference between the economic value and the equity value of the acquired shares was recorded as a goodwill in the amount of R$985,432. Additionally, an amount of R$269,804 was recorded by Telemig Participações as goodwill upon the merger of the shares held by the minority shareholders of its subsidiary company, Telemig. A capital increase of R$460,372 was recorded in such transaction, generated from the economic value of acquired shares, the equity value of which totaled R$190,567. The goodwill amounts were posted to the intangible assets.

Under U.S. GAAP changes in a parent’s ownership while the parent retains its controlling financial interest in its subsidiary shall be accounted for as equity transactions. The carrying amount of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted shall be recognized in equity attributable to the parent. Therefore, the goodwill generated under Brazilian GAAP in the merger of the noncontrolling interest of TC and TCP of R$1,255,236 was reclassified to equity attributable to the parent under U.S. GAAP.

x) Costs directly attributable to the merger of TC and TCP into Vivo Participações S.A.

Under Brazilian GAAP, during the year 2009 the Company incurred certain costs directly related to the exchange of shares with noncontrolling interest of TC and TCP, which were capitalized as part of the transaction costs.

Under U.S. GAAP, the direct costs including “out-of-pocket” or incremental costs directly related to an acquisition of noncontrolling interest, such as fees paid to outside consultants for accounting and legal issues and for appraisals, are expensed when incurred.

F-105

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

w) Reversal of proposed dividends

Under Brazilian GAAP, proposed dividends are accrued in the financial statements in anticipation of their approval at the shareholders’ meeting. Under U.S. GAAP, dividends are not accrued until they are formally approved by the shareholders.

The interest on shareholders’ equity is a legal liability from the date it is declared, therefore, these amounts are included as dividends in the year they are formally approved by a shareholders’ meeting for U.S. GAAP purposes.

y) Comprehensive income

ASC 220 “Comprehensive Income”, establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The objective of the U.S. GAAP rules is to report all changes in shareholders’ equity that result from transactions and other economic events of the period other than transactions with owners (“comprehensive income”). Comprehensive income is the total net income and other non-owner equity transactions that result in changes in net equity.

For the years ended December 31, 2009 and 2008, the component of comprehensive income includes only the accumulated effect of initial adoption of ASC 715 “Compensation-Retirement Benefits”. For the year ended December 31, 2007 there was no component in the comprehensive income.

z) Inventories owned by the subsidiaries and provided free of charge to corporate customers

The subsidiaries have agreements with its corporate customers, through which handsets owned by the subsidiaries are provided free of charge to the customer from periods varying from 12 to 24 months, through a right-of-use agreement. Under Brazilian GAAP these handsets are recorded as property, plant and equipment and depreciated over a period of 18 months. The period of 18 months represents the estimated contractual relationship with our subscribers and also the estimated useful life.

Under U.S. GAAP the subsidiaries have deferred the inventoriable cost of the handsets provided to customers under this revenue arrangement. Under ASC 330 “Inventory”, Therefore, the cost of handsets under this type of agreement is reclassified from property, plant and equipment to costs of inventory subject to a deferred revenue arrangement, non-current, and amortized over the period of 18 months. The subsidiaries expect to recover the cost through the non-cancellable service arrangement.

The amounts of inventoriable costs incurred by the Company and reclassified to non-current assets, net of amortization were R$309,289 and R$313,145 as of December 31, 2009 and 2008 respectively.

aa) Cash and cash equivalents

Under Brazilian GAAP the Company has defined cash and cash equivalents as being cash, positive balances of bank accounts and financial investments redeemable within 90 days from the transaction date.

F-106

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Under U.S. GAAP, cash equivalents are considered all highly liquid investments with maturities of three months or less when purchased. No difference was noted between Brazilian GAAP and U.S. GAAP for cash and cash equivalents.

ab) Presentation of non-controlling interest

Under Brazilian GAAP non-controlling interest is reported in the consolidated balance sheet in the mezzanine section between liabilities and equity. Also, net income attributable to non-controlling interest is reported as an expense in arriving at consolidated net income.

ASC 810 “Consolidation” clarifies that a non-controlling interest in an operating subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated statement of operations of the amounts attributed to the parent and to the non-controlling interest. This statement was effective prospectively for fiscal years beginning after December 15, 2008 (calendar year 2009), with presentation and disclosure requirements applied retrospectively to comparative financial statements. Effective January 1, 2009, the Company adopted the provision of this statement and applied its presentation requirements retrospectively.

ac) Debt issuance cost

Under Brazilian GAAP debt issuance cost is recognized as a contra-liability account and amortized in connection with the related debt using the effective interest rate. Under U.S. GAAP, the debt issuance cost is reclassified to assets. No difference on the amortization calculation exists between both GAAPs.

Reconciliation of the net income (loss) differences between Brazilian GAAP and U.S. GAAP

		Consolidated
		2009		2008		2007
Brazilian GAAP net income (loss) for the year		857,486		389,683		(99,830)
ab) Reclassification of noncontrolling interest under Brazilian GAAP		25,648		52,662		-
Add (deduct)-
Different criteria for:
b) Capitalized interest		(3,825)		31,731		20,295
b) Amortization of capitalized interest		(56,883)		(125,462)		(54,643)
c) Amortization of monetary restatement of 1996 and 1997		(474)		(474)		(3,524)
d) Exchange of shares for non-controlling interests:
Depreciation effect from reduction of fixed assets		(318)		3,022		9,727
Amortization of concession		(3,480)		(10,335)		(12,989)
e) Acquisitions:
Reversal of goodwill amortization according to Brazilian GAAP		-		581,307		480,609
Reversal of tax benefit on amortization of goodwill according to Brazilian GAAP		175,818		(45,681)		(45,681)
Depreciation of fixed assets		(26,978)		(13,085)		7,269
Amortization of software		(1,073)		(659)		-
Amortization of fair-value adjustment to inventory		-		(2,729)		-

F-107

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Amortization of fair value related to tax credits		386		238
Amortization of intangible related to concession		(161,775)		(140,247)		(105,090)
Additional interest expense on purchase price allocation of debt		(1,441)		(37)		(1,046)
Deferred tax effect		(86,545)		(112,646)		(117,269)
f) Merger of TSD, TLE, CRT and TCO		(463)		(43,767)		(257,055)
g) Pension and other post-retirement benefits		11,364		20,362		9,880
l) Difference in criteria for capital leases		-		(1,454)		1,459
n) FISTEL fees		(4,297)		(77,655)		(63,027)
o) Free minutes given in connection with sales of handsets		(246)		(925)		93,608
o) Free minutes given in connection with sales of prepaid cards		(1,748)		(10,526)		-
p) Derivative financial instruments		-		(5,330)		2,655
q) Amortization of license acquisition costs		(7,470)		(5,677)		(6,001)
r) Amortization of deferred assets		25,529		3,440		35,871
s) Grants		8,292		3,613		3,132
u) Reversal of present value of ICMS tax credit		(8,522)		4,181		(154)
x) Costs directly attributable to the merger of noncontrolling interest of TCP and TC		(2,898)		-		-
i) Deferred tax effect on the above adjustments		15,292		58,307		(7,595)
Net income (loss) – U.S. GAAP		751,379		551,857		(109,625)
Net income (loss) attributable to parent company		725,224		500,905		(109,625)
Net income attributable to non-controlling interest		26,155		50,952		-

		Consolidated
		2009		2008		2007
Common earnings (loss) per shares attributable to parent company- basic		1.88		1.37		(0.84)
Weighted-average common shares - basic		136,458,308		132,991,366		131,232,916
Preferred earnings per shares attributable to parent company– basic		1.88		1.37		-
Weighted-average preferred shares – basic		248,555,838		232,353,912		228,172,795
Common earnings (loss) per shares attributable to parent company- diluted		1.88		1.37		(0.84)
Weighted-average common shares - diluted		136,458,308		133,924,147		131,232,916
Preferred earnings per shares attributable to parent company- diluted		1.88		1.37		-
Weighted-average preferred shares - diluted		248,555,838		232,353,912		228,172,795

Earnings (loss) per share in accordance with U.S. GAAP

As described in item (j), net losses have not been allocated to preferred shares in the loss per share calculation since preferred shareholders have a liquidation preference over common shareholders.

Reconciliation of the shareholders’ equity differences between Brazilian GAAP and U.S. GAAP

F-108

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Consolidated
		2009		2008
Brazilian GAAP shareholders’ equity – Law 11,638		10,190,824		8,267,527
ab) Reclassification of noncontrolling interest under Brazilian GAAP -		-		587,804
Add (deduct)-
Different criteria for:
b) Capitalized interest		213,097		216,922
b) Amortization of capitalized interest		(276,422)		(219,539)
c) Monetary restatement of 1996 and 1997, net		4,075		4,549
d) Exchange of shares for non-controlling interests:
Adjustment to fixed assets		(59,976)		(59,976)
Accumulated depreciation		60,474		60,792
Adjustment to concession		318,926		318,926
Amortization of concession		(273,693)		(270,213)
Adjustment to client list		137,900		137,900
Amortization of client list		(137,900)		(137,900)
e) Acquisitions - purchase accounting allocations:
GT and Holdings		(224,691)		(248,362)
TCO		764,090		847,558
Telemig		(11,710)		30,101
f) Merger of TSD, TLE, CRT and TCO		289,813		290,276
g) Pension and other post-retirement benefits		70,569		79,908
n) FISTEL fees		(204,148)		(199,851)
o) Free minutes given in connection with sales of handsets		(4,301)		(4,055)
o) Free minutes given in connection with sales of prepaid cards		(12,274)		(10,526)
q) Interest capitalized on license acquisition costs		42,006		42,006
q) Accumulated amortization of license acquisition costs		(25,336)		(17,866)
r) Deferred assets, net of accumulated amortization		(29,864)		(55,393)
s) Grants		(35,597)		(43,889)
u) Reversal of present value of ICMS tax credit		22,261		30,783
v) Difference between the fair value of consideration paid and adjusted noncontrolling interest of TCP and TC		(1,255,236)		-
x) Costs directly attributable to the merger of noncontrolling interest of TCP and TC		(2,898)		-
i) Deferred taxes on the above adjustments		65,655		43,325
w) Reversal of proposed dividends in excess of minimum mandatory attributable to parent company		611,925		265,685
w) Reversal of proposed dividends in excess of minimum mandatory attributable to non-controlling interest		-		83,590
Shareholders’ equity – U.S. GAAP		10,237,569		10,040,082
Shareholders’ equity attributable to parent company		10,237,569		9,351,340
Shareholders’ equity attributable to non-controlling interest		-		688,742

F-109

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Changes in the consolidated equity under U. S. GAAP

		Consolidated
		Equity Attributable		Noncontrolling		Total Equity
		to Parent Company		interest
Equity under U.S. GAAP as of December 31, 2006		9,126,195		-		9,126,195
Unclaimed dividends and interest on shareholders’ equity		11,936		-		11,936
Net income (loss)		(109,625)		-		(109,625)
Accumulated other comprehensive income, net of tax		(4,119)		-		(4,119)
Equity under U.S. GAAP as of December 31, 2007		9,024,387		-		9,024,387
Unclaimed dividends and interest on shareholders’ equity		14,063		2,221		16,284
Purchase of Telemig		-		684,488		684,488
Net income		500,905		50,952		551,857
Declared dividends and Interest on shareholders’ equity		(161,113)		(45,356)		(206,469)
Accumulated other comprehensive income, net of tax		(26,902)		(3,563)		(30,465)
Equity under U.S. GAAP as of December 31, 2008		9,351,340		688,742		10,040,082
Unclaimed dividends and interest on shareholders’ equity		11,447		-		11,447
Tax incentive		9,137		-		9,137
Subscription of non-controlling interest in the capital increase with goodwill reserve		-		8,842		8,842
Gains in the subscription of non-controlling interest in the capital increase with goodwill
reserve		-		80		80
Merger of non-controlling interest of TCP and TC – June 2009		642,338		(642,338)		-
Net income		725,224		26,155		751,379
Declared dividends and Interest on shareholders’ equity		(488,261)		(81,472)		(569,733)
Accumulated other comprehensive income, net of tax		(13,656)		(9)		(13,665)
Equity under U.S. GAAP as of December 31, 2009		10,237,569		-		10,237,569

Disclosure of accumulated other comprehensive income balance

						Accumulated
						other
		Controlling		Noncontrolling		comprehensive
Pension plan - adjustment, net of tax		shareholder		interest		income
Balance at December 31, 2006 of AOCI		29,645		-		29,645
Current period change, net of tax (R$2,122)		(4,119)		-		(4,119)
Balance at December 31, 2007, net of tax (R$13,150) of AOCI		25,526				25,526
Current period change, net of tax (R$15,694 )		(26,902)		(3,563)		(30,465)
Balance at December 31, 2008, net of tax (R$2,546) of AOCI		(1,376)		(3,563)		(4,939)
Current period change of January to June 2009, net of tax (R$11)		(12)		(9)		(21)

F-110

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Reclassification of non-controlling interest of TC and TCP in June 2009		(3,572)		3,572		-
Current period change of July to December 2009, net of tax (R$7,027)		(13,644)		-		(13,644)
Balance at December 31, 2009, net of tax (R$9,584) of AOCI		(18,604)		-		(18,604)

U.S. GAAP supplementary information

Reconciliation of operating income under Brazilian GAAP to operating income under U.S. GAAP

		Consolidated
		2009		2008		2007
Brazilian GAAP operating income as reported		1,473,587		911,847		156,995
Reversal of financial expense, net		487,229		637,699		462,789
U.S. GAAP adjustments:
Amortization of monetary restatement of 1996 and 1997		(474)		(474)		(3,524)
Amortization on capitalized interest		(56,883)		(125,462)		(54,643)
Amortization of license acquisition costs		(7,470)		(5,677)		(6,001)
Difference in criteria for capital leases		-		(1,454)		1,459
FISTEL fees		(4,297)		(77,655)		(63,027)
Exchange of shares of non-controlling interest:
Depreciation effect from reduction of fixed assets		(318)		3,022		9,727
Amortization of concession		(3,480)		(10,335)		(12,989)
Amortization of deferred assets		25,529		3,440		35,871
Amortization of grants		8,292		3,613		3,132
Pension and other post-retirement benefits		11,364		20,362		9,880
Free minutes given in connection with sales of handsets		(246)		(925)		93,608
Free minutes given in connection with sales of prepaid cards		(1,748)		(10,526)		-
Acquisitions:
Reversal of goodwill amortization according to Brazilian GAAP		-		581,307		480,609
Amortization of intangible related to concession		(161,775)		(140,247)		(105,090)
Amortization of intangible related to software		(1,073)		(659)		-
Realization of fair-value adjustment to inventory		-		(2,729)		-
Depreciation of fixed assets		(26,978)		(13,085)		7,269
Merger of TSD, TLE, CRT and TCO		(702)		(66,314)		(389,477)
Disposal of capitalized interest		(12,430)		(3,242)		(24,096)
Costs directly attributable to the merger of non-controlling interest of TCP and TC		(2,898)		-		-
Other operating expenses		-		-		282
U.S. GAAP operating income		1,725,229		1,702,506		623,302

F-111

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Reconciliation of net operating revenue and costs of services and goods sold under Brazilian GAAP to U.S. GAAP

		Consolidated
		2009		2008		2007
Brazilian GAAP net revenue		16,363,186		15,469,664		12,492,494
Reclassification to cost of services and goods value-added and other sales taxes		4,630,140		4,289,949		3,380,046
Roaming charges		80,802		61,800		46,796
Deferred revenues on sales of handsets, net of amortization		137,362		748,364		(90,837)
U.S. GAAP adjustments:
Free minutes given in connection with sales of handsets		(246)		(925)		93,608
Free minutes given in connection with sales of prepaid cards		(1,748)		(10,526)		-
Extemporaneous credit from claim of taxes payment		146,381		-		-
U.S. GAAP net revenue		21,355,877		20,558,326		15,922,107
Brazilian GAAP cost of services and goods sold		(8,951,570)		(8,179,024)		(6,623,290)
Reclassification to cost of services and goods sold:
Value-added and other sales taxes		(4,630,140)		(4,289,949)		(3,380,046)
Roaming charges		(80,802)		(61,800)		(46,796)
Deferred cost on handset sales, including taxes on sales, net of amortization during the year		(137,362)		(748,364)		90,837
Reclassification from selling expense-
Rewards program expense		(7,795)		(57,153)		(11,336)
Cash rebates		46,421		47,779		10,243
Reclassification from other operating income-
Rewards program expense		59,792
U.S. GAAP adjustments:
Amortization of monetary restatement of 1996 and 1997		(474)		(474)		(3,524)
Amortization on capitalized interest		(69,168)		(117,415)		(54,769)
Amortization of license acquisition costs		(7,470)		(5,677)		(6,001)
Difference in criteria for capital leases		-		-		(4,756)
FISTEL fees		(4,297)		(77,655)		(63,027)
Exchange of shares of minority interest:
Depreciation effect from reduction of fixed assets		(318)		3,022		9,727
Amortization of concession		(3,480)		(10,335)		(12,989)
Amortization of grants		8,292		3,613		3,132
Pension and other post-retirement benefits		11,364		21,933		9,880
Acquisitions:
Amortization of intangible related to concession		(161,775)		(140,247)		(105,090)
Depreciation of fixed assets		(26,978)		(13,085)		7,269
Amortization of intangible related to software		(1,073)		(659)		-
Realization of fair-value adjustment related to inventory		-		(2,729)		-
Merger of TSD, TLE, CRT and TCO		(702)		(66,314)		(389,477)
U.S. GAAP cost of services and goods		(13,957,535)		(13,696,104)		(10,570,013)
U.S. GAAP gross profit		7,398,342		6,862,222		5,352,094
Supplementary balance sheet information U.S. GAAP:
Total assets		23,207,671		26,576,896		22,508,441
Current liabilities		6,474,960		9,167,303		9,480,393
Non-current liabilities		6,495,142		8,058,253		4,003,661
Net property, plant and equipment		6,158,207		6,973,528		6,078,929

F-112

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

34. ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP

a) Pension and other post-retirement benefits

As described in footnotes 30, the Company and its subsidiaries’s employees receive pension and post-retirement pension benefits under funded and unfunded defined benefit plans, defined contribution plans and multiemployer plans. The Company uses a December 31 measurement date for its plans assets. Disclosures on the Company’s contributions to defined contribution and multiemployer plans are included in Note 30.

Although TCP Prev and TCO Prev are defined contribution plans, there is a risk of death and disability of participants, which is borne by the sponsor, requiring an actuarial calculation. The following table has the obligation and funded status information on the Company’s single-employer benefit plans under U.S. GAAP:

Change in benefit obligation

		Consolidated
		2009		2008
Benefit obligation at the beginning of the year		139,225		75,392
Service cost		3,827		3,543
Interest cost		13,735		12,594
Plan participants contributions		640		(3,435)
Actuarial gain		2,661		16,345
Benefits paid		(5,231)		(4,118)
Settlement		-		(22,116)
Telemig’s plans		-		61,020
Benefit obligation at the end of the year		154,857		139,225
Change in plan assets
		Consolidated
		2009		2008
Fair value of plan assets at the beginning of the year		206,761		125,197
Actual return on plan assets		4,230		(10,912)
Actual contributions		3,973		2,672
Benefits paid		(5,231)		(4,118)
Telemig’s plans		-		109,767
Settlement		-		(15,845)
Fair value of plan assets at the end of the year		209,733		206,761
Reconciliation of funded status
		Consolidated
		2009		2008
Funded status		54,876		67,536

 

F-113

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Amounts recognized in the statement of financial position

		Consolidated
		2009		2008
Non-current assets		57,354		68,302

Current liability		-		(74)
Non-current liability		(2,478)		(692)
Net amount recognized		54,876		67,536

F-114

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Components of net periodic pension cost and other benefit cost

				Consolidated
		2009		2008		2007
Service cost (net of employee contributions)		3,827		2,779		2,170
Interest cost on PBO		13,735		12,594		7,473
Expected return on assets		(23,000)		(22,739)		(14,451)
Amortization of initial transition obligation		606		609		609
Amortization of (gains) loss		55		(2,127)		(2,141)
Amortization of prior service cost		66		66		29
Net periodic pension cost and other benefit cost		(4,711)		(8,818)		(6,311)

Accumulated other comprehensive income

		Consolidated
		2009		2008
Actuarial gain		24,290		2,915
Transition obligation		2,986		3,592
Prior service cost		912		978
Total		28,188		7,485

Changes in items not yet recognized in net periodic pension cost

		Consolidated
		2009						2008
						Prior						Prior
		Actuarial		Transition		service		Actuarial		Transition		service
		(gain) loss		obligation		cost		(gain) loss		obligation		cost
Balance at the beginning of the year		2,915		3,592		978		(43,918)		4,200		1,044
Amount generated in the period		21,430		-		-		44,706		-		-
Amount recycled to statement of operations		(55)		(606)		(66)		2,127		(608)		(66)
Balance at ending of year		24,290		2,986		912		2,915		3,592		978

Assumptions

				Consolidated
		2009		2008		2007
Discount rate for determining projected benefit obligations		9.83%		10.14%		10.77%
		6.14% for		6.44% for
		PBS plans		PBS plans
		and 6.79%		and 7.10%
		for Prev and		for Prev and
Rate of increase in compensation levels		Vis o plans		Vis o plans		6.59%
Benefit adjustments		4.60%		4.90%		4.50%
Expected long-term rate of return on plan assets		10.68%		11.18%		11.00%
Inflation		4.60%		4.90%		4.50%

Plan assets

The Company’s weighted-average pension plan asset allocations by asset category at the end of 2009 and 2008, and the target allocation for 2010, are as follows:

F-115

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Target		Percentage of plan  assets at year end
		allocation for
		2010		2009		2008
Asset category:
Equity securities		14.79%		11.51%		17.9%
Loans		0.80%		0.18%		-
Fixed income		84.41%		87.83%		81.0%
Other		0.00%		0.48%		1.1%
Total		100.0%		100.0%		100.0%

Our portfolio strategy emphasizes a long-term equity orientation, significant diversification, the use of both public and private investments and financial and operational risk controls. Our diversification and risk control processes serve to minimize the concentration of risk. Assets are allocated according to long-term risk and return estimates. Both active and passive management approaches are used depending on perceived market efficiencies and various other factors.

In order to project the long-term target investment return for the total portfolio, estimates are prepared for the total return of each major asset class over a reasonable period. Those estimates are based on a combination of factors including the current market interest rates and valuation levels, consensus earnings expectations, historical long-term risk premiums and value-added.

The expected return on plan assets is average after-tax return of each asset category weighted by target allocations. Asset categories return as based on long-term macroeconomic scenarios.

The Company determines the fair value of plan assets using observable market data obtained from independent sources when available. The Company classifies its plan assets according to the fair value hierarchy:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets;quoted prices for identical or similar instruments in markets that are not active;and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following summarizes the fair value of plan assets by asset category and level within the fair value hierarchy as of December 31, 2009:

F-116

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Description		December 31,  2009		Quoted prices  in active  markets for  identical assets  (Level 1)		Significant other  observable  inputs (Level 2)		Significant  unobservable  inputs  (Level 3)
Assets
Equity securities:
Brazilian equities		6,372		6,372		-		-
Total equity securities		6,372		6,372		-		-
Fixed income securities:
Other fixed income (a)		1,074		-		1,074		-
Total fixed income securities		1,074		-		1,074		-
Other types of investments
Investment funds (b)		197,312		165,967		31,345		-
Other investments (c)		4,975		-		4,975
Total other types of investments		202,287		165,967		36,320
Cash:		-		-		-		-
Total:		209,733		172,339		37,394		-

(a) This category is comprised of financing and loans to the plan’s participants.

(b) This category includes investments of approximately 87.99% in fixed income securities,11.53% in equity securities and 0.48% in other investments.

(c) This category is comprised of assets used for administrative purposes.

Brazilian equities, which fall within Level 1, are valued by marking the assets to the market price per the São Paulo Stock Exchange (BOVESPA. The equities are valued at the last quoted price disclosed by BOVESPA for a given day. If there is no trading, the last quoted price of the prior day is used.

Brazilian government bonds, which fall within Level 1, are priced daily by using a market interest rate from the National Association of the Institutions of the Capital Market (ANDIMA). Pre-fixed corporate bonds, which fall within Level 2, are priced daily by using a market interest rate and the credit spread between the market interest rate and the interest rate at date of issuance. The market interest rate for the corporate bonds is established by using the future interest yield of the Brazilian Mercantile & Futures Exchange (BM&F). Variable interest rate bonds, which fall within Level 2, are priced daily by using the market interest rate from ANDIMA.

The investment funds portfolio within the Visão Prev plans have a concentration of assets with approximately 47% of the total assets of the plans as of December 31, 2009 invested in Brazilian Federal Government Bonds. These bonds are classified as investment grade by the major credit risk agencies.

Estimated future benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

		Single-employer
		amount
2010		10,083
2011		10,934

2012		12,071
2013		13,129
2014		13,856
Years 2015-2019		83,291

F-117

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

A summary of the SISTEL multiemployer defined-benefit pension plan (inactive employees pension plan

- PBS-A) as of December 31, 2009 and 2008,in which the Company and its subsidiaries participate is as follows:

Inactive employees pension plan - PBS-A

		Consolidated
		2009		2008
Funded status:
Projected benefit obligation		4,860,382		4,977,285
Fair value of plan assets		(6,657,856)		(6,828,191)
Funded status *		(1,797,474)		(1,850,906)

A summary of the SISTEL multiemployer post-retirement benefits plan (health care plan - PAMA), in which the Company and its subsidiaries participate, is as follows:

Health care plan - PAMA

		Consolidated
		2009		2008
Funded status:
Accumulated post-retirement benefit obligation:
Active participants		38,704		37,110
Fully eligible active plan participants		11,048		9,098
Inactive participants		1,888,133		1,506,410
		1,937,885		1,552,618
Fair value of plan assets		(572,758)		(554,595)
Obligations in excess of plan assets *		1,365,127		998,023
* These balances have not been recognized in the Company’s Consolidated Balance Sheets in accordance with U.S. GAAP

b) Intangible assets

Following is a summary of the Company’s intangible assets subject to amortization under U.S. GAAP:

F-118

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		Consolidated
		2009
				Software		Customer
		Concession		use rights		list		Other
Gross		6,906,067		4,949,313		1,207,536		88,350
Accumulated amortization		(2,972,692)		(3,439,207)		(1,207,536)		(76,994)
Net		3,933,375		1,510,106		-		11,356
Amortization expense		325,859		638,311		-		6,215
Amortization period		(*)		5 years		2 years		1.5 year
		Consolidated
		2008
				Software		Customer
		Concession		use rights		list		Other
Gross		6,906,067		4,023,438		1,207,536		65,924
Accumulated amortization		(2,646,833)		(2,533,114)		(1,207,536)		(53,882)
Net		4,259,234		1,490,324		-		12,042
Amortization expense		262,022		453,778		25,317		6,540
Amortization period		(*)		5 years		2 years		4.4 years

(*) Amortized using a straight-line method over the major term for the 3G License until 2038.

The estimated aggregate amortization expense for the next five years is as follows:

		Amount
2010		942,933
2011		940,513
2012		606,803
2013		244,985
2014		208,137

Following is a detailed summary of the Company’s concession intangible assets under U.S. GAAP for the years ended on December 31, 2009 and 2008:

F-119

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

		As of December 31, 2009
										Original		Remaining
				Accumulated		Write-off				useful life		useful life
		Cost		amortization		concession		Intangible net		(years)		(years)
		(in thousands of reais)
PPA allocated to intangible assets of
Telemig per the acquisition of the
majority ownership (a)		1,693,203		(91,842)		-		1,601,361		30.0		28.3
PPA allocated to intangible assets of
TCO per acquisition of stake control
in 2003 (a)		882,824		(415,524)		-		467,300		20.3		14.6
PPA allocated to intangible assets of
TCO per acquisition of non-
controlling interest in 2004 (a)		525,052		(162,949)		-		362,103		16.9		12.7
PPA allocated to intangible assets of
GT per acquisition of stake control
in 2001 (a)		1,176,727		(617,834)		(473,472)		85,421		12.0		3.0
Sub total – Identified intangible assets
(PPA) related to acquisitions		4,277,806		(1,288,149)		(473,472)		2,516,185
3G Spectrum License acquired in 2008
to operate in Band J, except for
areas VII and X (b)		1,147,693		(104,932)		-		1,042,761		15.0		13.6
License acquired in 1998 to operate in
the states of Paraná and Santa Catarina
(b)		915,916		(716,794)		-		199,122		15.0		3.2
Sub total – Spectrum Licenses		2,063,609		(821,726)		-		1,241,883
										From 5.0 to
Other intangibles		564,652		(389,345)		-		175,307		15.0		10.3
Total of intangible assets		6,906,067		(2,499,220)		(473,472)		3,933,375

F-120

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 (In thousands of Brazilian reais, unless otherwise indicated)

		As of December 31, 2008
										Original		Remaining
				Accumulated		Write-off				useful life		useful life
		Cost		amortization		concession		Intangible net		(years)		(years)
		(in thousands of reais)
PPA allocated to intangible assets of
Telemig per the acquisition of the
majority ownership (a)		1,693,203		(35,157)		-		1,658,046		30.0		29.3
PPA allocated to intangible assets of
TCO per acquisition of stake control
in 2003 (a)		882,824		(369,947)		-		512,877		20.3		15.6
PPA allocated to intangible assets of
TCO per acquisition of non-
controlling interest in 2004 (a)		525,052		(131,911)		-		393,141		16.9		13.7
PPA allocated to intangible assets of
GT per acquisition of stake control
in 2001 (a)		1,176,727		(589,359)		(473,472)		113,896		12.0		4.0
Sub total – Identified intangible assets
(PPA) related to acquisitions		4,277,806		(1,126,374)		(473,472)		2,677,960
3G Spectrum License acquired in 2008
to operate in Band J, except for
areas VII and X (b)		1,147,693		(26,233)		-		1,121,460		15.0		14.6
License acquired in 1998 to operate in
the states of Paraná and Santa Catarina
(b)		915,916		(657,040)		-		258,876		15.0		4.2
Sub total – Spectrum Licenses		2,063,609		(683,273)		-		1,380,336
										From 4.0 to
Other intangibles		564,652		(363,714)		-		200,938		20.0		10.4
Total of intangible assets		6,906,067		(2,173,361)		(473,472)		4,259,234

(a) The intangible asset related to the PPA has been amortized on a straight-line basis, attributed to the identified assets, based on the estimated benefit the intangibles will provide to the Company during the period of the concession.

(b) Useful life estimated based on the license term. The amount paid for these licenses relates to the first 15 years of the concession.

c) Fair Value Measurements and disclosures (ASC 820)

We adopted ASC 820 on January 1, 2008, which provides a definition of fair value, establishes a framework for measuring fair value, and requires expanded disclosures about fair value measurements. The standard applies when GAAP requires or allows assets or liabilities to be measured at fair value; therefore, it does not expand the use of fair value in any new circumstance.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking

F-121

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

transparency (i.e., unobservable inputs). Additionally, ASC 820 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring the fair value of a liability.

ASC 820 establishes a three-level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Following is a description of the three hierarchy levels:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date. Additionally, the entity must have the ability to access the active market, and the quoted prices cannot be adjusted by the entity.

Level 2 - Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

Items Measured at Fair Value on a Recurring Basis

In accordance with ASC 820, we measure our cash equivalents, foreign currency and interest rate derivative swap contracts at fair value. Our cash equivalents are classified within Level 1, because they are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Our foreign currency, interest rate derivative swap contracts and financing and loans assigned as fair value hedge are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table summarizes our financial assets and liabilities recorded at fair value as of December 31, 2009 and 2008:

F-122

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Description		December 31,  2009		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash Equivalents
Short-term investments		1,302,647		1,302,647		-		-
Derivative contracts
Foreign currency derivative contracts		759,581		-		759,581		-
		176,016				176,016
Interest rate derivative contracts (Swap IGP-M x CDI)
		74,911				74,911
Interest rate derivative contracts (Swap IPCA x CDI)
Total Assets		2,313,155		1,302,647		1,010,508		-
Liabilities
Loans and financing under fair value hedge		1,007,734		-		1,007,734		-
Derivative contracts
Foreign currency derivative contracts		750,997		-		750,997		-
Interest rate derivative contracts (Swap IGP-M x CDI)		161,659				161,659
Interest rate derivative contracts (Swap IPCA x CDI)		77,174				77,174
Total Liabilities		1,997,564		-		1,997,564		-

F-123

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Description		December 31, 2008		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash Equivalents
Short-term investments		2,126,875		2,126,875		-		-
Derivative contracts
Foreign currency derivative contracts		2,432,082		-		2,432,082		-
		226,248				226,248
Interest rate derivative contracts (Swap CDI x Prefixed)
Interest rate derivative contracts (Swap IGP-M x CDI)		156,703				156,703
Total Assets		4,941,908		2,126,875		2,815,033		-
Liabilities
Loans and financing under fair value hedge		2,393,694		-		2,393,694		-
Derivative contracts
Foreign currency derivative contracts		1,920,551		-		1,920,551		-
Interest rate derivative contracts ( Swap CDI x Prefixed)		227,461				227,461
Interest rate derivative contracts(Swap IGP-M x CDI)		141,080				141,080
Total Liabilities		4,682,786		-		4,682,786		-

The valuation method used for the calculation of fair value of loans, financing and derivative instruments (foreign currency and interest rate derivative swap contracts) was the discounted cash flow considering the expected settlements and realization of such financial assets and liabilities at effective market rate as of reporting date. For derivative instruments the method used for the calculation of fair value is presented in more details in Note 29.

For the year ended on December 31, 2009, short-term investments generated a gain of R$170 million (R$271.2 million as of December 31, 2008), which was included as net financial expense in the statement of operations. The short-term investments refer to fixed income transactions, indexed to the variation of the Interbank Deposit Certificates (“CDI”), with immediate liquidity.

Also, during the year ended on December 31, 2009, our derivative contracts generated a net loss of R$453.8 million (net gain of R$519.5 as of December 31, 2008). The net results of operations have been included as net financial expense.

Assets Measured at Fair Value on a Nonrecurring Basis

Goodwill and other long-lived assets held and used are reviewed for impairment on an annual basis or earlier if there is an event or change in circumstances that would indicate that the carrying value of these assets could not be fully recovered. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset to its fair value. Long-lived assets held and used are recognized at fair value when they are deemed to be other-than-temporarily impaired. We estimate fair value based on the best information available making whatever estimates, judgments and projections are considered necessary as discussed in note 3.j. The estimation of fair value measured by discounting expected future cash flows at discount rates commensurate with the risk involved are considered level 3 inputs. We do not believe that we have any impairment to our goodwill or other long-lived assets held and used as of December 31, 2009. We believe our estimates and judgments with respect to our goodwill and other long-lived assets held and used are reasonable. Nonetheless, if there was a material change in assumptions used in the determination of such fair values or if there is a material change in the conditions or circumstances that influence such assets, we could be required to record an impairment charge.

F-124

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

As required by ASC 20, effective in 2009, we applied the provisions of the Standard in assessing the fair values of the non-monetary assets, including our annual Goodwill impairment test.

d) Concentration of risks

Credit risk with respect to trade accounts receivable is diversified. The Company and its subsidiaries continually monitor the level of trade accounts receivable and limit the exposure to bad debts by cutting access to the telephone network if any invoice is 15 days past due. Exceptions comprise telephone services that must be maintained for reasons of safety or national security.

In conducting their business, Vivo S.A. and Telemig Celular S.A are fully dependent upon the cellular telecommunications authorizations, granted by the Federal Government.

There is no concentration of available sources of labor, services, concessions or rights, other than those mentioned above, that could, if suddenly eliminated, severely impact the Company and its subsidiaries operations.

e) Commitments

Budgeted capital expenditure commitments for 2010 are approximately R$2.5 billion, of which R$2.3 billion refer to Vivo S.A. operational budget and R$0.2 billion refer to Telemig Celular S.A. For 2009, the budgeted capital expenditure commitments were approximately R$2.6 billion, of which R$2.2 billion refer to Vivo's consolidated operational budget and R$0.4 billion refer to Telemig Celular Participações S.A. consolidated operational budget.

As established in our authorizations and original concession agreements, the Company and its subsidiaries are subject to obligations concerning quality of services, network expansion and modernization, as established in their authorizations and their original concession agreements. The Company believes that it is currently in compliance with its quality of service and expansion obligations.

f) Segment information

By the end of the year ended December 31, 2009, the Company had one operating segment, cellular telecommunications services. Consequently, no separate segment information has been presented for U.S. GAAP purposes. See footnote 22 for the analysis of the net operating revenue for each product and service provided by the Company and its subsidiaries.

g) Asset Retirement Obligation

ASC 410 “Asset Retirement and Environmental Obligations” requires the subsidiary to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and capitalize that amount as part of the book value of the long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the subsidiary either settles the obligation for its recorded amount or incurs a gain or loss.

F-125

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

The subsidiaries have certain legal obligations related to network infrastructure, principally tower assets, which fall within the scope of ASC 410. These legal obligations include obligations to remediate leased land on which the subsidiary’s network infrastructure assets are located. The significant assumptions used in estimating the subsidiary’s asset retirement obligations include the following: a probability that each of the subsidiary’s network infrastructure assets will be remediated at the lessor’s directive, expected settlement dates that coincide with lease expiration dates plus estimates of lease extensions, remediation costs that are indicative of what third party vendors would charge the subsidiary to remediate the sites, expected inflation rates that are consistent with historical inflation rates, and credit-adjusted risk-free rates that approximate the subsidiary’s incremental borrowing rates.

The changes in asset retirement obligation were as follows:

Balance at December 31, 2007		145,947
Acquisition of Telemig		15,536
Additions in 2008, net		15,490
Accretion expense		6,414
Balance at December 31, 2008		183,387
Reductions in 2009, net		(23,373)
Reduction expense		(6,275)
Balance at December 31, 2009		153,739

The asset retirement obligation is also recorded under Brazilian GAAP. See footnote 20.

h) Deferred Income taxes

Under Brazilian GAAP, deferred taxes are classified as current or non-current based upon the expected period of reversal. Under U.S. GAAP, deferred taxes are classified as current or non-current based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, are classified according to the expected reversal date of the temporary difference. The classification of our deferred tax assets and liabilities under USGAAP is as follows as of December 31, 2009 and 2008. Current deferred tax asset of R$801,888 and R$1,098,429, respectively, current deferred tax liability of R$25,177 and R$36,036, respectively, non-current deferred tax asset of R$1,426,350 and R$1,249,659, respectively and non-current deferred tax liability of R$1,114,450 and R$1,091,753, respectively.

Additionally, under Brazilian GAAP, the Company (Vivo Participações S.A.) did not recognize deferred income tax and social contribution assets of R$842,780 and R$845,053 as of December 31, 2009 and 2008, respectively, due to the uncertainties involving their realization. Under U.S. GAAP Vivo Participações S.A. recorded those amounts, and as a result of the uncertainty involving their realization, a full valuation allowance in the same amount was also recorded in 2009 and 2008.

i) Leases

The composition of net rent expense for all operating leases, including leases of property and equipment, was as follows in 2009, 2008 and 2007 periods:

		2009	2008		2007

F-126

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

Minimum rentals		464,061		389,228		300,891
Contingent rentals		-		-		‘-
Total rent expense		464,061		389,228		300,891
Less: sublease income		-		-		-
Net rent expense		464,061		389,228		300,891

The future minimum lease payments under our operating leases by fiscal year (not including contingent rentals), were as follows:

		Operating
Fiscal Year		Leases
2010		639,220
2011		626,324
2012		621,002
2013		613,790
2014		600,399
Thereafter		477,163
Total		3,577,898

j) New accounting pronouncements

Recently Adopted Standards

• In June 2009, the Financial Accounting Standard Board (“FASB”) issued a standard that established the FASB Accounting Standards Codification (“ASC”) and amended the hierarchy of generally accepted accounting principles (“GAAP”) such that the ASC became the single source of authoritative U.S. GAAP. Rules and interpretive releases issued by the SEC under authority of federal securities law are also sources of the authoritative GAAP for SEX registrants. All other literature is considered non-authoritative. New Accounting Standards Updates (“ASUs”). The ASC is effective for the Company from September 1, 2009. Throughout the consolidated financial statements references that were previously made to former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.

• Effective January 1, 2009, the Company adopted new accounting guidance ASC 810, which changed the accounting for and the reporting of an entity’s non-controlling interest. Such non-controlling interest, previously referred to as minority interest, is now referred to as noncontrolling interests. The adoption of this guidance resulted in the reclassification of amounts previously attributable to minority interest and classified in the mezzanine outside of shareholders’ equity, to a separate component of stockholders’ equity titled “Noncontrolling Interests” in the accompanying consolidated balance sheets and statement of changes in equity. Additionally, net income and comprehensive income attributable to noncontrolling interests are shown separately from consolidated net income and comprehensive income in the accompanying consolidated statements of operations and statements of changes in equity. Prior period financial statements have been reclassified to conform to the current year presentation as required by the authoritative guidance.

F-127

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• ASC 820 “Fair Value Measurement and Disclosures” defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurement. ASC 820 does not require any new fair value measurements. This statement is initially effective for financial statements issued for fiscal years beginning after November 15, 2007 (calendar year 2008), and is to be applied prospectively as of the beginning of the year in which it is initially applied. For all nonrecurring fair value measurements of nonfinancial assets and liabilities, the statement is effective for fiscal years beginning after November 15, 2008 (calendar year 2009). Since the Company has not changed its current practice, this change had no impact on its Consolidated Financial Statements. See Note 32 on Financial Instruments and Note 40.c.

• ASC 715 “Compensation-retirement Benefits” provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plans. This guidance is intended to ensure that an employer meets the objectives of the disclosures about plan assets in an employer’s defined benefit pension or other postretirement plan to provide users of financial statements with an understanding of the following: how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation techniques used to measure the fair value of plan assets; the effect of fair value measurements using significant unobservable inputs on changes in plan assets; and significant concentrations of risk within plan assets. The Company has complied with the disclosure requirements.

• ASC 350 “Intangibles-Goodwill and Other” amends the factors to be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. This guidance is effective prospectively for intangible assets acquired or renewed after January 1, 2009. The Company applied the guidance to acquisitions of intangible assets as from January 1, 2009.

• ASC 815 “Derivatives and Hedging” seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, the improvement requires (i) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (ii) the disclosure of derivative features that are credit risk-related; and (iii) cross-referencing within footnote disclosures to enable financial statement users to locate important information about derivative instruments. The Company has complied with disclosure requirements.

• ASC 805 “Business Combination” establishes principles and requirements for how an acquiring entity in a business combination recognizes and measures the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. This guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (calendar year 2009). Since the Company did not consummate any business combination in 2009, this guidance did not have any significant effect on its consolidated financial statement. However, we change the manner in which the tax benefits of prior acquisition are recognized in the current period, as a result of amendment to ASC 740. See note 33(e).

F-128

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

• ASC 323 “Investments-Equity Method and Joint Ventures” addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. ASC 323 was effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. ASC 323 is applied prospectively with early application prohibited. The adoption of ASC 323 did not have any impact on our consolidated financial condition or results of operations.

Recently Issued Standards

The following accounting standards have been issued, but as of December 31, 2009 are not yet effective and have not been adopted by the Company.

• In June 2009, the FASB issued a statement which removes the concept of a qualifying special-purpose entity (“QSPE”) from former SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-a replacement of former FASB Statement No. 125. The QSPE concept had initially been established to facilitate off-balance sheet treatment for certain securitizations. The new statement also removes the exception from applying the requirements of consolidation accounting for variable interest entities to QSPEs. This new standard has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of this new standard will have a material impact on its financial statements.

• In June 2009, the FASB issued a new standard which amends former FIN 46(R) to among other things, require an entity to qualitatively rather than quantitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”). This determination should be based on whether the entity has 1) the power to direct matters that most significantly impact the activities of the VIE and 2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Other key changes include: the requirement for an ongoing reconsideration of the primary beneficiary, the criteria for determining whether service provider or decision maker contracts are variable interests, the consideration of kick-out and removal rights in determining whether an entity is a VIE, the types of events that trigger the reassessment of whether an entity is a VIE and the expansion of the disclosures previously required about Transfers of Financial Assets and Interests in Variable Interest Entities. This new standard has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of this new standard will have a material impact on its financial statements.

• In October 2009, the FASB issued an update to ASC 605-25, “Revenue Recognition – Multiple-Element Arrangements”, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements to:
(i) Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arramgement should be separate and how the consideration should be allocated;
(ii) Require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor dows not have vendor-specific objective evidence of selling price or third-party evidence of selling price;

F-129

---

Table of Contents

VIVO PARTICIPAÇÕES S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands of Brazilian reais, unless otherwise indicated)

(iii) Eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and
(iv) Require expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable recenue arrangement guidance.

The Company is evaluating the potencial impact of this new guidance which is mandatory starting January 1, 2011.

35. SUBSEQUENT EVENTS

Payment of Debentures

The third public issue of the Company’s simple debentures, non-convertible into stock, in the total amount of R$213 million, at the interest rate of 113.55% of the Interfinancial Deposit (DI) was settled on January 11, 2010.

Capital budget proposal

On February 9, 2010, at the Special Meeting of the Board of Directors the Directors have unanimously approved, without restrictions, under the terms of paragraph 2 of Article 196 of Law 6,404/76, the Capital Budget of Vivo Participações S.A. and of its subsidiaries for fiscal year 2010, in the amount of R$2,490,000, pursuant to the following funding sources.

This budget does not contemplate expenses with licenses and/or frequencies.

Capital Budget Proposal of Vivo S.A.		R$ 2,256,089
Capital Budget Proposal of Telemig Celular S.A.		R$ 233,911
Total		R$ 2,490,000
Funding Sources:
• Own/third parties’ funds		R$ 2,490,000

Dividends and interest on own capital

On the same date, at the Special Meeting of the Board of Directors the Directors have unanimously approved, without restrictions, in compliance with the legal provisions governing the matter, the Company’s Management proposed the allocation of the Net Profit for Fiscal Year 2009, in the amount of R$ 871,394, to be posted to the Profit Earnings account.

F-130

---