HIGHLIGHTS FOR  THE PERIOD

• Vivo’s customer base totaled 57,714 thousand accesses (18.2% annual growth);
• Vivo’s postpaid customer base recorded annual growth of 30.3%  (share of 49.8% of net additions in the postpaid segment in the quarter);
• Market share of 30.14%, annual increase of 0.74 p.p. (35.3% in the postpaid segment);
• 1.737 thousand new accesses in the quarter, (41.5% in the postpaid segment);
• Annual increase of 10.1% in the Net Service Revenue totaling R$ 4,307.6 million, (ARPU grew sequentially for the 2nd consecutive quarter);
• Annual growth of 61.4% in Data and VAS Revenue which accounts for 19.6% of the net service revenue (Internet revenue grew 92.3%);
• EBITDA Margin of 33.4% in the quarter (+2.9 p.p. vs 2Q10);
• EBITDA increased by 10.1% over 3Q09, recording R$ 1,537.8 million in the quarter;
• Net profit of R$ 601.8 million in 3Q10, with growth of 80.9% over 3Q09 (155.0% vs. 2Q10);
• 3G coverage reached 779 municipalities in September;  
• Cash flowrecorded R$ 1,372.3 million in the quarter (73.6% higher than in 3Q09);
• Net debt in 3Q10 in the amount of R$ 2,411.8 million (43.2% lower than in 3Q09). Long-term debt of 81%.

• Vivo recorded an increase of 18.2% in the total number of accesses in comparison to 3Q09 and closed the quarter with 57,714 thousand accesses.

• The market share of 30.14% represents an increase of 0.74 percentile points in relation to 3Q09. The market share of net additions recorded 35.3% in the year-to-date.

• The total net additions of 1,737 thousand accesses in 3Q10 shows a reduction in the volume of new accesses in relation to 2Q10 and 3Q09 due to seasonality and enhanced commercial focus on the postpaid segment. Out of the net additions, 41.5% were postpaid accesses, with 30.3% annual growth in the customer base in such segment, almost twice the growth recorded in the pre-paid segment, of 15.3%.

• The share of net additions of the postpaid segment was 49.8%. This result is due to the sales of the Vivo Você plan, which allows customized usage of data and voice, and to the increasing sales of access to 3G internet using smartphones and modems. The market share of postpaid accesses of Vivo recorded 35.3%.

• Such performance is explained by the strength of Vivo brand, consolidated by the unquestionable leadership in coverage and quality of the 3G network, the largest network of owned stores in Brazil and a portfolio of customized data and voice plans and promotions for each segment.

Efficiency in attracting new customers reduces acquisition cost.

• SAC of R$ 62 in 3Q10 is 20.5% lower than in 3Q09. Such decrease reflects the reduction in almost all components of this indicator, especially subsidy, mainly because of gross additions without acquisition of handsets. When compared to 2Q10, which has historically recorded higher cost due to the campaigns in the period, the reduction is of 12.7%. Such reduction is due to the segmentation work in the acquisition and increased efficiency of the distribution channels.
  

• Churnof 2.9% in the quarter is 0.4 percentile points up in the comparison with 3Q09. The variation is mainly explained by the adaptation of the disconnection policy to a higher volume of SIM Cards, especially in the pre-paid segment.

• The ARPU of R$ 25.2 in the quarter records an increase of 0.8% in relation to 2Q10 as a result of increased activity in the customer base, with increased consumption of voice and data services. The growth in the recharge volume and the increasing adoption of 3G data services is an evidence of that. When compared to 3Q09, the ARPU recorded a reduction of 7.4% arising out of the dilution effect caused mainly by the presence of multiple SIM Cards on the market.

• The Outgoing ARPU in 3Q10 recorded an increase of 1.9% in relation to 2Q10, arising out of increased consumption of minutes and usage of data. In the year-to-year comparison, the reduction of 1.9% confirms the trend of reduction of drop in the Outgoing ARPU recorded in the last two quarters, as shown.

• The Incoming ARPU, on its turn, decreased by 15.5% in the comparison of 3Q10 with the same period of last year, mainly due to the stimulation of traffic among Vivo customers.
  

• Worthy of mention is the data ARPU growth, which increased by 36.1% in relation to 3Q09, mainly due to higher use of ‘Vivo Internet’, driven by the aggressive selling of modems and smartphones and higher penetration of SMS services.

• The Blended MOUof 115 minutesin 3Q10 increased by 29.2% in relation to 3Q09 and by 0.9% in relation to 2Q10. The increase posted in the Outgoing MOU in the annual comparison was 47.5%. The growth in relation to the same period of last year is a result of the actions for stimulating usage since the fourth quarter 2009, with campaigns such as “Recarregue e Ganhe” and the “Vivo Você” plans, which aim at increasing usage habits. 

Campaigns to stimulate usage increased outgoing traffic by 74.8%.

• In this aspect, the total traffic grew 53.1% in 3Q10 when compared to 3Q09 and 4.6% in relation to 2Q10, with increases of 74.8% and 4.2%, respectively, of the outgoing traffic, as a result of the continued of dissemination of the community concept and increase in the customer base.

Access and usage revenue grew 5.9% in relation to 3Q09 and 4.6% in relation to 2Q10 due to the high increase in the customer base in the last quarters, improvement in the customer mix and increased activity in the pre-paid segment, shown by the increase in recharges volume and, consequently, increase in voice services consumption.

Once again, due to the rationality of the campaigns, the increase in the consumption of voice services and the growth in the customer base, the profitability of the voice services revenue (voice service revenue excluding interconnection costs) recorded an increase of 5.1 percentile points in relation to the first quarter of the year.

Due to the growth of mobile-to-mobile incoming traffic, the network usage revenue (interconnection) increased by 3.1% in the quarter and recorded a slight growth of 0.4% in the year, thus reducing even more the dependence on interconnection revenues when considering the growth of the other revenues.

Data and VAS revenues grew 61.4% and 5.1% over 3Q09 and 2Q10, respectively, representing, in 3Q10, 19.6% of the Net Service Revenue. The main driver of this growth continues to be the significant increase in the number of customers of 3G plans (+112% year-to-year) as a result of Vivo’s leadership in network coverage and quality.

Mobile Internet revenues grew 92.3% over 3Q09 and 7.6% over 2Q10, accounting for 54.2% of the data revenue in 3Q10, obtained as a result of the incentives for use of such service through smartphones and modems. The revenue obtained from SMS + MMS grew 47.4%, when compared to 3Q09.

The personnel expenses in 3Q10 recorded increases of 36.8% and of 5.7% in the comparison to 3Q09 and 2Q10, respectively. Such increase arises out of the incorporation, as from September 2009, of professionals who provide assistance in our own stores, thus reducing, on their turn, costs with outsourced labor and improving several operating indicators (lower turnover and more satisfaction of employees and customers).

The cost of services rendered in 3Q10 increased by 14.0% over 3Q09, as a result of the increase in the customer base and in the mobile usage. In this context, interconnection costs grew by 11.3%, expenses with third-party services grew 22.5% and costs of Fistel Fee and other taxes increased by 10.5%. When compared to 2Q10 there was a growth of 1.6%, due to the increase in some components, especially third-party services, partially offset by the reduction in the Fistel Fee and other taxes.

The cost of goods sold recorded a reduction of 4.5% in the comparison between 3Q10 and 3Q09, due to the increase in sales of SIM Cards and to a more restrictive policy for granting subsidies that links the expense to the expected usage profile of each customer. In relation to 2Q10, a growth of 9.5% was recorded, as a result of increased sales of terminals intended for retaining customers.

The Provision for Doubtful Accounts (PDD) in 3Q10 increased 0.02 percentage point in relation to 3Q09. The amount of R$36.0 million corresponds to 0.55% of the total gross revenue, a slight increase in relation to 3Q09 (0.53%), which is impacted by extraordinary recoveries related to big corporate customers. In comparison with 2Q10, it remained stable due to the continuous improvement of the credit granting model and strict control over collection actions in all segments, with impact, mainly, over the most recent recovery level.

The general and administrative expenses grew by 15.1% in 3Q10 in relation to 3Q09 due to the increase in third-party services, especially collecting expenses due to a larger post-paid customer base and volume of recharge, besides the expenses with consultancy, auditing and legal services. In relation to the previous quarter, there was a variation of 6.0%, explained, mainly, by the increased expenses with third-party services.

Other Operating Revenues/Expenses, net, recorded revenues of R$ 43.6 million. The comparison with 3Q09 shows a reduction in other net revenues, especially with the increase in expenses with taxes, charges and contributions, partially offset by the revenue arising out of reversal of the net provision for retirement of property, plant & equipment. In relation to 2Q10, it recorded an increase of 46.8%.  Such variation also arises from the increase of revenue resulting from the reversal of the net provision for retirement of property, plant & equipment and other revenues.

Depreciation and amortization expenses decreased by 29.7% and 33.8% in the comparison of 3Q10 over 2Q10, respectively, due to the end, in June 2010, of the depreciation of the CDMA equipment.  

81% of the debt is on long term.

The Company closed 3Q10 with a gross debt of R$ 4,284.5 million, of which 21.9% is denominated in foreign currency. The exchange exposure of the debt is 100% covered by hedge transactions. The net debt recorded R$2,411.8 million.

Vivo Internet Brazil
plan expanded its 3G coverage and reaches 779 municipalities

CAPEX represents 14.7% of the net revenue in 3Q10. In the constant search for customer satisfaction, with high quality in service rendering, Vivo concentrates its investments in expanding the network capacity and quality as well as on information technology. In 3Q10, CAPEX totaled R$ 675.2 million. In the 2010 year-to-date, the total invested was R$ 1,493.1 million.

At October 25, 2010, the Company effected the payment to the holders of common and preferred shares of the residual balance of the dividends (corresponding to 50% of the declared dividends), based on the 2009 year-end balance sheet. The amounts corresponding to such payment were R$ 0.130303230459 referring to interest on the gross own capital for common and preferred shares (R$ 0.11075774589, net of income tax) and of R$ 0.9138918337 referring to dividends to common and preferred shares. The total amount paid now, including interest on the own capital in the amount of R$ 104,135,762.30 (R$ 88,515,397.96 net of 15% withholding income tax) and deducted from the dividends, pursuant to article 9 of Law no. 9249/95, added by the dividends in the amount of R$ 730,364,262.13, totaled dividends of R$ 2,049299159273 per share, in the total net amount of R$  818,879,660.08.

At October 15, 2010, interests were paid in the total amount of R$ 46,178,675.11 referring to the 4th issue of debentures of the Company, being: R$ 5,260,696.84 of the 1st series, R$ 35,662,540.16 of the 2nd series, and R$ 5,255,438.11 of the 3rd series.

At October 19, 2010, the loan with Banco Caixa Geral de Depósitos, in the total amount of R$ 251,231,284.33 (equivalent to principal of USD 150,000 plus interest for the period and commissions) was repaid on the maturity date. The corresponding hedge was also repaid on this date with a positive adjustment of R$ 24,598,511.64.

At November 01, 2010, interests were paid in the total amount of R$ 30,354,713.34, referring to the 2nd issue of debentures of the Company, being: R$ 12,153,970.00 of the 1st series, and R$ 18,200,743.34, of the 2nd series.

Subsequent Events:

Payment of the 2nd installment of the dividends.

Payment of interest on debentures

Repayment of loan

Information available in our website:  http://www.vivo.com.br/ir 

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

CAPEX – Capital Expenditure.
Working capital = Operational Current assets – Operational Current liabilities.
Net debt = Gross debt – cash – financial investments – securities – asset from derivative transactions + liability from derivative transactions.
Net Debt / EBITDA – Index which evaluates the Company’s ability to pay its debt with the generation of operating cash within a one-year period.
EBIT – Earnings before interest and taxes.
EBITDA – Earnings result before interest. taxes. depreciation and amortization.
Indebtedness = Net Debt / (Net Debt + NE) – Index which measures the Company’s financial leverage.
Operating Cash Flow = EBITDA – CAPEX.
IST = Telecommunications Services Index.
EBITDA Margin = EBITDA / Net Operating Revenue.
Allowance for doubtful accounts  = A concept in accounting that measures the provision made for accounts receivable overdue for more than 90 days, includes part of clients under negotiation.
SE – Shareholders’ Equity.
Subsidy = (net revenue from goods – cost of goods sold + discounts given by suppliers) / gross additions.

Technology and Services

1xRTT – (1x Radio Transmission Technology) – It is the CDMA 2000 1x technology which, pursuant to the ITU (International Telecommunication Union). and in accordance with the IMT-2000 rules is considered 3G (third generation) Technology.
CDMA – (Code Division Multiple Access) – Wireless interface technology for cellular networks based on spectral spreading of the radio signal and channel division by code domain.
CDMA 2000 1xEV-DO – 3rd Generation access technology with data transmission speed of up to 2.4 Megabits per second.
CSP – Carrier Selection Code.
SMP – Personal Mobile Services.
SMS – Short Message Service – Short text message service for cellular handsets. allowing customers to send and receive alphanumerical messages.
WAP – Wireless Application Protocol is an open and standardized protocol started in 1997 which allows access to Internet servers through specific equipment. a WAP Gateway at the carrier. and WAP browsers in customers’ handsets. WAP supports a specific language (WML) and specific applications (WML script).
ZAP – A service which allows quick wireless access to the Internet through a computer, notebook or palmtop.
GSM – (Global System for Mobile) – an open digital cellular technology used for transmitting mobile voice and data services. It is a circuit witched system that divides each channel into time-slots.

Operating indicators:

Gross additions – Total of customers acquired in the period.
Net additions = Gross Additions – number of customers disconnected.
ARPU (Average Revenue per User) – net revenue from services per month / monthly average of customers in the period.
Postpaid ARPU – ARPU of postpaid service users.
Prepaid ARPU – ARPU of prepaid service users.
Blended ARPU – ARPU of the total customer base (post paid + prepaid).
Entry Barrier – Value of the least expensive phone offered.
Customers – Number of wireless lines in service.
Churn rate = percentage of the disconnections from customer base during the period or the number of customers disconnected in the period / ((customers at the beginning of the period + customers at the end of the period) / 2).
Market share = Company’s total number of customers / number of customers in its operating area.
Market share of net additions: participation of estimated net additions in the operating area.
MOU (minutes of use) – monthly average. in minutes. of traffic per customer = (Total number of outbound minutes + incoming minutes) / monthly average of customers in the period.
Postpaid MOU – MOU of postpaid service users.
Prepaid MOU – MOU of prepaid service users.
Market penetration = Company’s total number of customers + estimated number of customers of competitors) / each 100 inhabitants in the Company’s operating area.
Productivity = number of customers / permanent employees.
Right planning programs – Customer profile adequacy plans
SAC – cost of acquisition per customer = (70% marketing expenses + costs of the distribution network + handset subsidies + free lease to corporate customers (PJ) + Fistel) / gross additions.
VC – amount owed by the User, per time unit, for the communication.
VC1 – amount owed by the User, per time unit, for a call made to a STFC Access Code in the internal geographic area of the Registration Area of the call originated.
VC2 – amount owed by the User, per time unit, for a domestic long distance call to a location outside the registration area where the user is located but inside his/her primary area code.
VC3 – amount owed by the User, per time unit, for a domestic long distance call to a location outside the registration area where the user is located and outside his/her primary area code.
VU-M – amount payable to a SMP Operator, per time unit, for the use of its network (interconnection fee).
Partial Bill & Keep – system of collection for use of local network between SMP operators which occurs only when traffic between them exceeds 55%, which impacts revenue and interconnection cost. Application of Partial Bill &Keep ceased as from July 2006.