o
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
Date of event requiring this shell company report________________
|
|
For the transition period from
________________
to
________________
|
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 one share of Preferred Stock
|
New York Stock Exchange
|
*
|
Not for trading purposes, but only in connection with the registration on the New York Stock Exchange of American Depositary Shares representing those Preferred Shares.
|
Title of Class
|
Number of Shares Outstanding
|
|
Shares of Common Stock
|
381,335,671 | |
Shares of Preferred Stock
|
741,933,573 |
U.S. GAAP
o
|
International Financial Reporting Standards as issued
by the International Accounting Standards Board
x
|
Other
o
|
|
·
|
“ADRs” are to the American Depositary Receipts evidencing our ADSs;
|
|
·
|
“ADSs” are to our American Depositary Shares, each representing one share of our nonvoting preferred stock;
|
|
·
|
“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;
|
|
·
|
“BNDES” are to
Banco Nacional de Desenvolvimento Econômico e Social
, the Brazilian Development Bank;
|
|
·
|
“Brazil” are to the Federative Republic of Brazil;
|
|
·
|
“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 15, 1976, as amended;
|
|
·
|
“CADE” are to
Conselho Administrativo de Defesa Econômica
, the Brazilian competition authority;
|
|
·
|
“CDI” are to
Certificado de Depósito Interbancário
, the Certificate for Interbank Deposits;
|
|
·
|
“Ceterp” are to
Centrais Telefônicas de Ribeirão Preto
;
|
|
·
|
“Celular CRT” are to Celular CRT Participações S.A. and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
|
|
·
|
“CMN” are to the
Conselho Monetário Nacional
, the Brazilian Monetary Council;
|
|
·
|
“Commission” or “SEC” are to the U.S. Securities and Exchange Commission;
|
|
·
|
“Corporate Law Method” are the accounting practices to be followed in the preparation of our financial statements for regulatory and statutory purposes under Brazilian Corporate Law and accounting standards issued by the CVM;
|
|
·
|
“CTBC Telecom” are to
Companhia de Telecomunicações do Brasil Central
;
|
|
·
|
“CTBC Borda” are to
Companhia Brasileira Borda do Campo – CTBC
;
|
|
·
|
“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 Brazilian Government;
|
|
·
|
“Federal District” are to
Distrito Federal
, the federal district where Brasilia, the capital of Brazil, is located;
|
|
·
|
“General Telecommunications Law” are to
Lei Geral de Telecomunicações
, as amended, the law which regulates the telecommunications industry in Brazil;
|
|
·
|
“Global Telecom” or “GT” are to Global Telecom S.A., formerly a Vivo subsidiary before Vivo’s corporate restructuring;
|
|
·
|
“IASB” are to International Accounting Standards Board;
|
|
·
|
“IBGE” are to
Instituto Brasileiro de Geografia e Estatística
, the Brazilian Institute of Geography and Statistics;
|
|
·
|
“IFRS” are to International Financial Reporting Standards, as issued by the IASB;
|
|
·
|
“IOF” are to
Imposto sobre Operações de Crédito, Câmbio e Seguros
, or tax on credit, exchange and insurance;
|
|
·
|
“IPCA” are to
Índice Nacional de Preços ao Consumidor Amplo
, the consumer price index, published by the IBGE;
|
|
·
|
“IST” are to
Índice Setorial de Telecomunicações
, the inflation index of the telecommunications sector;
|
|
·
|
“Number Portability” are to
Portabilidade Numérica
, the service mandated by ANATEL that provides customers with the option of keeping the same telephone number when switching telephone service providers;
|
|
·
|
“NYSE” are to the New York Stock Exchange;
|
|
·
|
“Oi” are to Oi S.A., the mobile operator branch of Telemar;
|
|
·
|
“PTAX” or “PTAX rate” are to the weighted average daily buy and sell exchange rates between the
real
and U.S. dollar that is calculated by the Central Bank;
|
|
·
|
“
Real
,” “
reais
” or R$ are to the Brazilian
real
, the official currency of Brazil;
|
|
·
|
“Speedy” are to broadband services provided by us through asymmetric digital subscriber lines, or ADSL;
|
|
·
|
“TCO” are to
Tele Centro Oeste Celular Participações
, which includes TCO’s “B” band subsidiary and NBT, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
|
|
·
|
“TCP” are to
TELESP Celular Participações S.A.
, Vivo’s predecessor company;
|
|
·
|
“TLE” are to
Tele Leste Celular Participações S.A.
and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
|
|
·
|
“TSD” are to
Tele Sudeste Celular Participações S.A.
and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s 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 before Vivo’s corporate restructuring;
|
|
·
|
“Telpart” are to
Telpart Participações S.A.
;
|
|
·
|
“TJLP” are to
Taxa de Juros de Longo Prazo
, or long-term interest rate;
|
|
·
|
“UMBNDES” are to a monetary unit of the BNDES, consisting of a currency basket of BNDES debt obligations in foreign currencies, which are mostly denominated in U.S. dollars;
|
|
·
|
“U.S. dollar,” “U.S. dollars” or “US$” are to U.S. dollars, the official currency of the United States;
|
|
·
|
“Vivo” are to
Vivo S.A.
, a wholly owned subsidiary of Telefônica Brasil, that conducts cellular operations including SMP (as defined in the “Glossary of Telecommunication Terms”), in the following areas:
|
|
·
|
“Areas 1 and 2,” the state of São Paulo (operations previously provided by
TELESP Celular
);
|
|
·
|
“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 4,” the state of Minas Gerais;
|
|
·
|
“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, Pará and Roraima and in the Federal District (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);
|
|
·
|
“Area 9,” the states of Bahia and Sergipe (operations previously provided by
Telebahia Celular S.A.,
or Telebahia, and
Telergipe Celular S.A.,
or Telergipe); and
|
|
·
|
“Area 10,” the states of Pernambuco, Alagoas, Paraíba, Rio Grande do Norte, Ceará and Piauí.
|
|
·
|
“Vivo Participações” are to
Vivo Participações S.A.
(formerly TCP
)
and its consolidated subsidiaries (unless the context otherwise requires); and
|
|
·
|
“Vivo brand” are to the brand used in Brazil in the operations of Telefônica Brasil;
|
|
·
|
statements concerning our operations and prospects;
|
|
·
|
the size of the Brazilian telecommunications market;
|
|
·
|
estimated demand forecasts;
|
|
·
|
our capital expenditure plan;
|
|
·
|
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;
|
|
·
|
the outcome of certain legal proceedings;
|
|
·
|
regulatory and legal developments;
|
|
·
|
quantitative and qualitative disclosures about market risk;
|
|
·
|
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. Key Information—D. Risk Factors.”
|
|
·
|
the short history of our operations as an independent, private-sector, entity and the ongoing introduction of greater competition to the Brazilian telecommunications sector;
|
|
·
|
the cost and availability of financing;
|
|
·
|
uncertainties relating to political and economic conditions in Brazil as well as those of other emerging markets;
|
|
·
|
inflation, interest rate and exchange rate risks;
|
|
·
|
the Brazilian government’s telecommunications policy;
|
|
·
|
the Brazilian government’s tax policy;
|
|
·
|
the Brazilian government’s political instability; and
|
|
·
|
the adverse determination of disputes under litigation.
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
OFFER STATISTICS AND EXPECTED TIMETABLE
|
KEY INFORMATION
|
A.
|
Selected Financial Data
|
Year ended December 31,
|
||||||||||||||||
Income Statement Data:
|
2012
|
2011
|
2010
|
2009
|
||||||||||||
IFRS
|
(in millions of
reais
, except for share
and per share data)
|
|||||||||||||||
Net operating revenue
|
33,931 | 29,129 | 15,798 | 15,852 | ||||||||||||
Cost of goods and services
|
(16,564 | ) | (15,040 | ) | (8,845 | ) | (9,236 | ) | ||||||||
Gross profit
|
17,367 | 14,089 | 6,953 | 6,616 | ||||||||||||
Operating expenses, net
|
(10,155 | ) | (8,292 | ) | (3,391 | ) | (3,221 | ) | ||||||||
Equity in earnings (losses) of associates
|
- | – | 3 | 19 | ||||||||||||
Operating income before financial expense, net
|
7,212 | 5,797 | 3,565 | 3,414 | ||||||||||||
Financial expense, net
|
(291 | ) | (140 | ) | (121 | ) | (189 | ) | ||||||||
Income before tax and social contribution
|
6,921 | 5,657 | 3,444 | 3,225 | ||||||||||||
Income tax and social contribution
|
(2,469 | ) | (1,295 | ) | (1,046 | ) | (1,021 | ) | ||||||||
Net Income
|
4,452 | 4,362 | 2,398 | 2,204 |
Year ended December 31,
|
||||||||||||||||
Income Statement Data:
|
2012
|
2011
|
2010
|
2009
|
||||||||||||
Attributable to:
|
||||||||||||||||
Controlling shareholders
|
4,453 | 4,355 | 2,398 | 2,204 | ||||||||||||
Non-controlling shareholders
|
(1 | ) | 7 | – | – | |||||||||||
Basic and diluted earnings per share:
|
||||||||||||||||
Common Shares
|
3.72 | 4.40 | 4.45 | 4.08 | ||||||||||||
Preferred Shares
|
4.09 | 4.84 | 4.89 | 4.49 | ||||||||||||
Cash Dividends per share in
reais
, net of withholding tax:
|
||||||||||||||||
Common Shares
|
2.57 | 4.78 | 3.62 | 2.56 | ||||||||||||
Preferred Shares
|
2.82 | 5.26 | 3.98 | 2.81 |
Exchange Rate of R$ per US$
|
||||||||||||||||
Year ended December 31,
|
Low
|
High
|
Average(1)
|
Year-End
|
||||||||||||
2008
|
1.559 | 2.500 | 1.833 | 2.337 | ||||||||||||
2009
|
1.741 | 2.378 | 1.990 | 1.741 | ||||||||||||
2010
|
1.655 | 1.880 | 1.759 | 1.665 | ||||||||||||
2011
|
1.535 | 1.902 | 1.671 | 1.876 | ||||||||||||
2012
|
1.702 | 2.112 | 1.959 | 2.044 |
|
Source: Central Bank of Brazil, PTAX.
|
(1)
|
Represents the average of the exchange rates (PTAX) on the last day of each month during the relevant period.
|
Exchange Rate of R$ per US$
|
||||||||||||||||
Month
|
Low
|
High
|
Average(2)
|
Month-End
|
||||||||||||
September 2012
|
2.014 | 2.039 | 2.027 | 2.031 | ||||||||||||
October 2012
|
2.022 | 2.038 | 2.030 | 2.031 | ||||||||||||
November 2012
|
2.031 | 2.107 | 2.069 | 2.107 | ||||||||||||
December 2012
|
2.044 | 2.112 | 2.078 | 2.044 | ||||||||||||
January 2013
|
1.988 | 2.047 | 2.018 | 1.988 | ||||||||||||
February 2013
|
1.957 | 1.989 | 1.973 | 1.975 | ||||||||||||
March 2013 (through March 19)
|
1.953
|
1.987
|
1.970
|
1.983
|
(2)
|
Represents the average of the exchange rates (PTAX) of the lowest and highest rates in the month.
|
B.
|
Capitalization and Indebtedness
|
C.
|
Reasons for the Offer and Use of Proceeds
|
D.
|
Risk Factors
|
|
·
|
currency fluctuations;
|
|
·
|
exchange control policies;
|
|
·
|
internal economic growth;
|
|
·
|
inflation;
|
|
·
|
energy policy;
|
|
·
|
interest rates;
|
|
·
|
liquidity of domestic capital and lending markets;
|
|
·
|
tax policies; and
|
|
·
|
other political, diplomatic, social and economic developments in or affecting Brazil.
|
|
·
|
industry policies and regulations;
|
|
·
|
licensing;
|
|
·
|
fees and tariffs;
|
|
·
|
competition, including, therefore, our ability to grow by acquiring other telecommunications businesses;
|
|
·
|
telecommunications resource allocation;
|
|
·
|
service standards;
|
|
·
|
technical standards;
|
|
·
|
quality standards;
|
|
·
|
interconnection and settlement arrangements; and
|
|
·
|
universal service obligations.
|
|
·
|
the introduction of new or stricter operational and/or service requirements;
|
|
·
|
the granting of operating licenses in our areas;
|
|
·
|
delays in the granting of, or the failure to grant, approvals for rate increases; and
|
|
·
|
antitrust limitations imposed by ANATEL and CADE.
|
|
·
|
by April 30, 2013: cities that will be host to the Confederation Cup in 2013
|
|
·
|
by December 31, 2013: host and sub-host cities to the World cup in 2014;
|
|
·
|
by May 31, 2014: state capitals, the Federal District and cities with over 500,000 residents;
|
|
·
|
by December 31, 2015: cities with over 200,000 residents;
|
|
·
|
by December 31, 2016: cities with over 100,000 residents;
|
|
·
|
by December 31, 2017: cities with between 30,000 and 100,000 residents; and
|
|
·
|
by December 31, 2019: cities with fewer than 30,000
|
INFORMATION ON THE COMPANY
|
A.
|
History and Development of the Company
|
Year ended December 31,
|
||||||||||||
Telefônica Brasil
|
2012
|
2011
|
2010
|
|||||||||
(in millions of
reais
)
|
||||||||||||
Network
|
3,845.8 | 3,381.0 | 2,039.7 | |||||||||
Technology / Information Systems
|
562.3 | 612.5 | 266.1 | |||||||||
Others(1)
|
1,709.0 | 1,408.0 | 135.6 | |||||||||
Total capital expenditures
|
6,117.1 | 5,401.5 | 2,441.4 |
(1)
|
Consists primarily of free handset rentals, network construction, furniture and fixtures, office equipment and store layouts and an amount of R$811.8 million in 2011 and R$1,050.2 million in 2012 related to the acquisition of licenses.
|
B.
|
Business Overview
|
On December 31, 2012
|
Last Available IBGE Data from 2010
|
|||||||||||||||||||||
Area
|
Frequency Range (MHz)
|
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
|
450, 850, 900, 1800, 1900, 2100 and 2500
|
41,262 | 21.63 | % | 1,247,596 | 33.09 | % | 30,243 | ||||||||||||||
Paraná State
|
850, 900, 1800, 1900, 2100 and 2500
|
10,445 | 5.48 | % | 217,290 | 5.76 | % | 20,814 | ||||||||||||||
Santa Catarina State
|
850, 900, 1800, 1900, 2100 and 2500
|
6,248 | 3.28 | % | 152,482 | 4.04 | % | 24,398 | ||||||||||||||
Goiás State
|
850, 900, 1800, 1900, 2100 and 2500
|
6,004 | 3.15 | % | 97,576 | 2.59 | % | 16,252 | ||||||||||||||
Tocantins State
|
850, 900, 1800, 1900, 2100 and 2500
|
1,383 | 0.73 | % | 17,240 | 0.46 | % | 12,462 | ||||||||||||||
MatoGrosso State
|
850, 900, 1800, 1900, 2100 and 2500
|
3,035 | 1.59 | % | 59,600 | 1.58 | % | 19,644 | ||||||||||||||
Mato Grosso do Sul State
|
850, 900, 1800, 1900, 2100 and 2500
|
2,449 | 1.28 | % | 43,514 | 1.15 | % | 17,766 | ||||||||||||||
Rondônia State
|
850, 900, 1800, 1900, 2100 and 2500
|
1,562 | 0.82 | % | 23,561 | 0.62 | % | 15,098 | ||||||||||||||
Acre State
|
850, 900, 1800, 1900, 2100 and 2500
|
734 | 0.38 | % | 8,477 | 0.22 | % | 11,567 | ||||||||||||||
Amapá State
|
850, 900, 1800, 2100 and 2500
|
670 | 0.35 | % | 8,266 | 0.22 | % | 12,361 | ||||||||||||||
Amazonas State
|
850, 900, 1800, 2100 and 2500
|
3,484 | 1.83 | % | 59,779 | 1.59 | % | 17,173 | ||||||||||||||
Maranhão State
|
850, 900, 1800, 2100 and 2500
|
6,575 | 3.45 | % | 45,256 | 1.20 | % | 6,889 | ||||||||||||||
Pará State
|
850, 900, 1800, 2100 and 2500
|
7,581 | 3.97 | % | 77,848 | 2.06 | % | 10,259 | ||||||||||||||
Roraima State
|
850, 900, 1800, 2100 and 2500
|
450 | 0.24 | % | 6,341 | 0.17 | % | 14,052 | ||||||||||||||
Federal District
|
850, 900, 1800, 1900, 2100 and 2500
|
2,570 | 1.35 | % | 149,906 | 3.98 | % | 58,489 | ||||||||||||||
Bahia State
|
850, 900, 1800, 1900, 2100 and 2500
|
14,017 | 7.35 | % | 154,340 | 4.09 | % | 11,007 | ||||||||||||||
Sergipe State
|
450, 850, 900, 1800, 1900, 2100 and 2500
|
2,068 | 1.08 | % | 23,932 | 0.63 | % | 11,572 | ||||||||||||||
Rio de Janeiro State
|
850, 900, 1800, 1900, 2100 and 2500
|
15,990 | 8.38 | % | 407,123 | 10.80 | % | 25,455 | ||||||||||||||
EspíritoSanto State
|
850, 900, 1800, 1900, 2100 and 2500
|
3,515 | 1.84 | % | 82,122 | 2.18 | % | 23,379 | ||||||||||||||
Rio Grande do Sul State
|
850, 900, 1800, 1900, 2100 and 2500
|
10,694 | 5.61 | % | 252,483 | 6.70 | % | 23,606 | ||||||||||||||
Alagoas State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,120 | 1.64 | % | 24,575 | 0.65 | % | 7,874 | ||||||||||||||
Ceará State
|
450, 900, 1800, 1900, 2100 and 2500
|
8,452 | 4.43 | % | 77,865 | 2.07 | % | 9,217 | ||||||||||||||
Pernambuco State
|
450, 900, 1800, 1900, 2100 and 2500
|
8,796 | 4.61 | % | 95,187 | 2.52 | % | 10,822 | ||||||||||||||
Piauí State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,118 | 1.63 | % | 22,060 | 0.59 | % | 7,073 | ||||||||||||||
Paraíba State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,767 | 1.97 | % | 31,947 | 0.85 | % | 8,481 | ||||||||||||||
Rio Grande do Norte State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,168 | 1.66 | % | 32,339 | 0.86 | % | 10,208 | ||||||||||||||
MinasGerais State
|
450, 850, 900, 1800, 2100 and 2500
|
19,597 | 10.27 | % | 351,381 | 9.32 | % | 17,932 | ||||||||||||||
Vivo
|
190,756 | 100.00 | % | 3,770,085 | 100.00 | % | 19,766 |
(1)
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According to Censo 2010 published by IBGE in 2011 (latest data available).
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(2)
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According to the most recent IBGE data (2010). Nominal Brazilian GDP was R$3,770,085 million as of December 2010 calculated by IBGE, subject to revision.
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voice services, including activation, monthly subscription, measured service and public telephones;
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interconnection charges (or network usage charges), which are amounts we charge other cellular and fixed-line service providers for the use of our network;
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intraregional, interregional and international long-distance voice services;
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data services, (including broadband services) and mobile value added services;
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Pay TV services through DTH (direct to home), satellite technology and land based wireless technology MMDS (multichannel multipoint distribution service) and cable;
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the sale of wireless devices and accessories;
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network services, including rental of facilities, as well as other services.
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Local services, where rates are established pursuant to a service basket of fees that includes rates for the measured traffic and subscription fees. In the case of a price adjustment, each one of the items within the local fee basket has a different weight and, as long as the total local fee price adjustment does not exceed the rate of increase in the Telecommunication General Price Index, or IST, minus a productivity factor as established in the concession agreements, each individual fee within the basket can exceed the IST variation by up to 5%.
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Installation of residential and commercial lines and public telephone services, with adjustments limited to the rate of increase in the IST minus a productivity factor as established in the concession agreements.
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Domestic long-distance services, with rate adjustments divided into intraregional and interregional long-distance services, which are calculated based on the weighted average of the traffic, and taking into account time and distance. For these categories, each fee may individually exceed the rate of increase in the IST by up to 5%; however, the total adjustments in the basket of fees cannot exceed the rate of increase in the IST minus a productivity factor as established in the concession agreements. See “—Regulation of the Brazilian Telecommunications Industry.”
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Local Basic Plan: for clients that make mostly short-duration calls (up to three minutes), during regular hours; and
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Mandatory Alternative Plan (PASOO): for clients that make mostly longer-duration calls (above three minutes), during regular hours and/or that use the line for dial-up service to the Internet.
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Individual Special Class Acess (AICE) – plan created specifically for families enrolled in the Brazilian government’s social program.
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Characteristics of Plan
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Basic Plan
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Mandatory
Alternative Plan
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Monthly Basic Assignment
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Allowance (minutes included in the Residential Assignment)
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200 minutes
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400 minutes
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Commercial Assignment Allowance (minutes included in the Commercial Assignment)
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150 minutes
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360 minutes
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Local Call Charges
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Regular Hours
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Completing the call (minutes deducted from the allotment)
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–
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4 minutes
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Completing the call after the terms of the allotment Sector 31
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–
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R$0.15980
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Local Minutes–charges in excess use of the allotment Sector 31
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R$0.10423
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R$0.03994
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Minimum time billing
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30 seconds
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–
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Reduced Hours
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Charge per answered call (minutes deducted from allotment)
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2 minutes
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4 minutes
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Charge per answered call after the allotted duration Sector 31
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R$0.20847
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R$0.15980
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Residential customers were charged a monthly subscription fee for the provision of service of R$41.38;
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Commercial clients and nonresidential customers (PBX) were charged a monthly subscription fee for the provision of service of R$70.76;
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Local minute tariffs were charged at R$0.10423 per minute in Sector 31; and
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Activation fees of R$113.81 were charged in Sector 31.
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On February 5, 2012, ANATEL published new amounts for basic fixed telephone calls and long distance calls. The rates were adjusted by the Telecommunication Services Index, resulting in a 0.568% adjustment applied linearly to all rates for national long distance and local calls.
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Fee for the use of our local network—we charge long-distance services providers a network usage charge for every minute used in connection with a call that either originates or terminates within our local network.
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Fee for the use of our long-distance network—we charge the service providers a network usage charge on a per-minute basis only when the interconnection access to our long-distance network is in use.
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Fee for the rental of certain transmission facilities used by another service provider to place a call.
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Federal Social Contributions
:
Contribuição para o Programa de Integração Social
or “PIS,” and
Contribuição para o Financiamento da Seguridade Social
or “COFINS,” are imposed on gross operating revenue at a combined rate of 3.65% for telecommunications services (consisting of the COFINS amounts of 3.0% and PIS amount of 0.65%) and 9.25% for other services (consisting of the COFINS amounts of 7.6% and PIS amount of 1.65%). PIS is a tax designed to share business profits with employees through a mandatory national savings program, and is financed by monthly deposits collected as a percentage of gross operating revenue. COFINS is a tax designed to finance special social programs created and administered by the Brazilian government. Revenue related, among other things, to investments, dividends and sales of fixed assets are not subject to PIS and COFINS.
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Contribution for the Fund for Universal Access to Telecommunications Services—”FUST.”
FUST was established in 2000 to cover the cost exclusively attributed to fulfilling obligations (including free access to telecommunications services by governmental institutions) of universal access to telecommunications services that cannot be recovered with efficient service exploration or that are not the responsibility of the concessionaire. Contribution to FUST are due at the tax rate of 1% of gross operating telecommunications services revenue (except for interconnection revenue and excluding ICMS, PIS and COFINS), and it may not be passed on to customers.
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Contribution to the Fund of Telecommunications Technological Development—”FUNTTEL.”
FUNTTEL is a federal social contribution and was established in 2000, to stimulate, among others, technological innovation and to enhance human resources development so as to increase the competitiveness of the Brazilian telecommunications industry. Contribution to FUNTTEL is due at the tax rate of 0.5% of gross operating telecommunications services revenue (except interconnection revenue and excluding canceled sales, discounts, ICMS, PIS and COFINS), and it may not be passed on to customers.
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Contribution to the Fund for Telecommunications Regulation—”FISTEL.”
FISTEL 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. The fees owed to FISTEL, known as the FISTEL Taxes, are: (i) an installation inspection fee assessed on telecommunications central offices upon the issuance of their authorization certificates and (ii) an annual operations inspection fee that is based on the number of authorized central offices in operation at the end of the previous calendar year.
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At and for the year ended December 31,
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Wireline access lines
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2012
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2011
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2010
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2009
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2008
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Installed access lines (millions)
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14.8 | 14.7 | 14.6 | 14.5 | 14.7 | |||||||||||||||
Access lines in service (millions) (1)
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10.5 | 11.0 | 11.3 | 11.3 | 11.7 | |||||||||||||||
Average access lines in service (millions)
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10.7 | 11.1 | 11.3 | 11.5 | 11.8 | |||||||||||||||
Access lines in service per 100 inhabitants
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25.1 | 26.5 | 27.5 | 27.1 | 28.7 | |||||||||||||||
Percentage of installed access lines connected to digital switches
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100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Number of public telephones (thousands)
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199.2 | 215.8 | 250.7 | 250.5 | 250.3 | |||||||||||||||
Broadband
access lines
(millions)
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3.7 | 3.6 | 3.3 | 2.6 | 2.5 |
Year ended December 31,
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Mobile access lines
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2012
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2011
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2010
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2009
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2008
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Cellular lines in service at year-end (in millions)
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76.1 | 71.5 | 60.3 | 51.7 | 44.9 | |||||||||||||||
Contract customers (in millions)
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18.8 | 16.1 | 12.6 | 9.8 | 8.6 | |||||||||||||||
Prepaid customers (in millions)
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57.3 | 55.4 | 47.7 | 42.0 | 36.4 | |||||||||||||||
Growth in cellular lines in service during year
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6.4 | % | 18.7 | % | 16.5 | % | 15.1 | % | 20.2 | % | ||||||||||
Churn(2)
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41.9 | % | 34.2 | % | 32.0 | % | 30.5 | % | 31.3 | % | ||||||||||
Estimated covered population (in millions)(3)
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193.9 | 192.4 | 190.7 | 191.5 | 189.6 | |||||||||||||||
Penetration at year-end(4)
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132.7 | % | 123.9 | % | 104.6 | % | 90.5 | % | 79.1 | % | ||||||||||
Market share(5)
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29.1 | % | 29.5 | % | 29.7 | % | 29.78 | % | 29.8 | % |
(1)
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Data includes public telephone lines.
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(2)
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Churn is the number of customers that leave us during the year, calculated as a percentage of the simple average
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(3)
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Number of people within our region that can access our cellular telecommunications signal.
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(4)
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Number of cellular lines in service in our region, including those of our competitors, divided by the population of our Region.
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(5)
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Percentage based on all lines in service in our region at year-end.
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“M” band (1800 MHz) of the Federal District and the states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia and Acre;
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1800 MHz extension band of the state of São Paulo;
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“D” band (1800 MHz) of the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu in the state of Rio Grande do Sul;
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“E” band (1800 MHz) of the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
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900 MHz extension band of the state of Rio de Janeiro;
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900 MHz extension band of the state of Espírito Santo;
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900 MHz extension band of the states of Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and the Federal District, with the exception of the cities of Paranaíba, in the state of Mato Grosso do Sul, and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
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900 MHz extension band of the state of Rio Grande do Sul, with the exception of the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu;
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900 MHz extension band of the cities of the registration area number 43 of the state of Paraná, with exception of the cities of Londrina and Tamarana;
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900 MHz extension band of the states of Paraná and Santa Catarina, with exception of the cities of the registration area number 43 of the state of Paraná and the cities of Londrina and Tamarana;
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900 MHz extension band of the state of Bahia;
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900 MHz extension band of the state of Sergipe;
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900 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
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1800 MHz extension band of the state of São Paulo, with exception of the cities of the metropolitan region of São Paulo and the cities where CTBC Telecom operates in the state of São Paulo;
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1800 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
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1800 MHz extension band of the city of Paranaíba, in the state of Mato Grosso do Sul;
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1800 MHz extension band of the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
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other 1800 MHz extension band of the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
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1800 MHz extension band of the states of Rio de Janeiro, Espírito Santo, Bahia and Sergipe;
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1800 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
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1800 MHz extension band of the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
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1800 MHz extension band of the city of Paranaíba, in the state of Mato Grosso do Sul, and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
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1800 MHz extension band of the cities of Londrina and Tamarana, in the state of Paraná; and
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800 MHz (Band A in the North), 1800 MHz (extension subbands in Region II, within the states of São Paulo and Espírito Santo, Ceará and Pernambuco) and TDD (National coverage).
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services are to be provided using the 1800 MHz frequency bands (“D” band, “E” band and “M” band), 1900 MHz frequency bands (“L” band), 1900–2100 MHz frequency bands (“F” band, “G” band, “H” band, “I” band and “J” band) and extension bands;
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each operator may optionally provide domestic and international long-distance services in its licensed area;
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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;
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according to the Invitation Document 002/2010/ANATEL, a single SMP operator in one geographic area will only be authorized to have radio frequency bands up to the total maximum limit of 80 MHz or 85 MHz, depending on the circumstances, while observing the following limits for each band:
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as a result, Nextel and other new 3G operators were given preferential status in the “H” band ((10 + 10) MHz) segment of the auction. Vivo, TIM and Claro were eligible to enter bids for the remaining SMP frequencies.
Oi acquired the band “H” lot 8 (for the cities in the states of Mato Grosso do Sul and Goiás). CTBC acquired the band “H” lot 5 (for the cities in the state of Minas Gerais) and Nextel acquired the other band “H” lots; and
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a cellular operator, or its respective controlling shareholders, may not have geographical overlap between licenses.
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by April 30, 2013: cities that will be host to the Confederation Cup in 2013
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by December 31, 2013: host and sub-host cities to the World cup in 2014;
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by May 31, 2014: state capitals, the Federal District and cities with over 500,000 residents;
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by December 31, 2015: cities with over 200,000 residents;
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by December 31, 2016: cities with over 100,000 residents;
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by December 31, 2017: cities with between 30,000 and 100,000 residents; and
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by December 31, 2019: cities with fewer than 30,000 residents.
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a prohibition on holding more than 20% of the voting shares in any other public regime company, unless previously approved by ANATEL, according to ANATEL’s Resolution No. 101/99; and
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a prohibition on public regime companies to provide similar services through related companies.
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the new General Regulation of Interconnection (“
Regulamento Geral de Interconexão
”–Resolution No. 410/2005, or “RGI”);
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the Regulation of Separation and Allocation of Costs (Resolution No. 396/2005);
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Resolution No 590/2012 – Regulates the use of industrial dedicated lines and sets forth new rules for providers with significant market power and reduces the standard circuit reference rate by approximately 30%. These reference rates are used in instances arbitration or other forms of alternative dispute resolutions. In addition, ANATEL granted service providers a four month period during which to adopt these rules. We have filed a claim against ANATEL to question the legality of retroactively applying this new regulation and to address ANATEL’s definition of significant market power as we understand there to be competition in the areas indicated by them.
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the Regulation of Remuneration of Use of SMP Providers Networks (Resolution No. 438/2006). In November 2010, ANATEL published Resolution No. 549/2010 modifying Resolution No. 438/2006 and providing that the groups that include SMP operators with participation rates lower than 20% in the market of mobile telephony combined in each one of the regions of the General Plan of Authorizations of SMP (PGA-SMP), are considered groups who lack significant market power in the offer of mobile interconnection, in their respective areas of authorization;
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the Regulation of Fixed and Wireless Number Portability (Resolution No. 460/2007, effective March 2009);
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the new Regulation of SMP (Resolution No. 477/2007, effective February 13, 2008);
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the Regulation of Terms of Separation and Allocation of Costs (Resolutions No. 480/2007, 483/2007 and 503/2008);
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the general plan of update of the regulation of the telecommunications in Brazil (“
Plano Geral de Atualização da Regulamentação das Telecomunicações do Brasil
” – Resolution No. 516/2008, or “PGR”);
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the general norms of customer interaction service by telephone, with the objective of improving the quality of services (Decree No. 6523/2008);
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the Methodology of the Calculation of the WACC (Resolution No. 535/2009);
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amendment of the regulation of the 3400 MHz to 3600 MHz band, allowing it to apply additionally to mobile services (Resolution No. 537/2010);
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the regulation of the Broadband Power Line (BPL), allowing this service to apply to multimedia communication (SCM) (Resolution No. 527/2009);
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related Invitation Document No. 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 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. 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 Federal District) 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 possesses 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;
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related Invitation Document No. 002/2010/ANATEL, regarding the auction organized in December 2010 of new 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, which 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;
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the regulation for the exploration of SMP by means of Virtual Network, which makes possible the creation of the “agent” and the Authorized of Mobile Virtual Network (Resolution No. 550/2010). In accordance with this regulation approved by ANATEL, Mobile Virtual Network Operators may operate either as agents or as virtual network licensees. An agent represents the personal mobile service provider through the establishment of a representation agreement, which must be ratified by ANATEL. The agent’s activity is not defined as a “telecommunications service” so this is of significant interest to companies that operate in other sectors such as large retailers, banks and football teams. However, the activity of the virtual network licensee does fall within the definition of “telecommunications service” and is thus subject to all applicable rules;
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the assignment of the bands of 451 MHz to 458 MHz and 461 MHz to 468 MHz to the Personal Mobile Service, Fixed Switched Telephone Service and to the Multimedia Communication Service, for access to the services of telephony and data in broadband, particularly in rural areas (Resolution No. 558/2010);
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the assignment of the bands of 2500 MHz to 2690 MHz to the Personal Mobile Service and Fixed Switched Telephone beyond Multimedia Communication Service and Pay Television by means of Multichannel Multipoint Distribution Service (MMDS) for which it was previously assigned (Resolution No. 544/2010);
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the regulation for evaluation of the efficiency of use of the radio frequency spectrum (Resolution No. 548/2010); and
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the addition of a ninth digit in the numbers of the mobile telephones of area 11, raising the capacity of numeration in the metropolitan region of São Paulo and eliminating definitively the problem of scarcity of numeration in this area (Resolution No. 553/2010).
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Resolution No. 588/2012 – Regulates network compensation for the STFC. This regulation revised the method of charging for TU-RL during the reduced time period for calls under two minutes of duration, and the change in Bill & Keep regime.
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Resolution No. 600/2012 –
A
pproved the competition goals plan (PGMC). The main goals of PGMC are focused on the wholesale marked and network infrastructure sharing, including: (1) passive infrastructure for transport and access networks; (2) call termination in mobile networks; (3) roaming (4) fixed network infrastructure for the transmission of date through copper cables in transmissions of 10mbps; and (5) wholesale fixed network infrastructure for local and long distance transmission of data under 35mbps.
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with an aim to restructure the process of assessing the quality of mobile service, with the inclusion of new processes and measurement of new indicators to verify the quality of mobile broadband and the quality perceived by the user, and the modernization of existing indicators, ANATEL issued on October 28, 2011 (published in the D.O.U. on October 31, 2011), Resolution No. 575/2011, which approved the Regulation for the Management of Quality of Provision of Personal Mobile Service (SMP-RGQ). The new Regulation innovates by providing assessments of the network connection and their respective data transmission rate, especially aspects of availability, stability and connection speed data network. In addition, the resolution established the formation of “GIPAQ” (Group Deployment Process Quality Measurement), which will be responsible for implementing the processes on the quality indicators for the “Guaranteed Instant Transmission Rate” and “Guaranteed Average Transmission Rate.” The methodology and procedures regarding the collection of indicator data for data connections will be defined by this group, composed of providers, ANATEL and a “Quality Measurement Authority” (EAq), which shall be responsible for implementing these processes and will be hired by the service providers until February 29, 2012. All costs associated with implementing the new procedures for measuring quality will be paid by providers of the SMP and the impacts of the Regulations are still being evaluated, mainly its financial aspect. Also, through the issuance of Resolution No. 574/2011, which approved the Rules of Quality Management (SCM-SCM RGQ) on October 28, 2011 (published in the D.O.U. on October 31, 2011), ANATEL set targets for service quality, as well as updated definitions for indicators and their calculation methods.
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the Regulation on criteria for adjustment of tariffs for calls from the STFC involving access the SMP or SME, approved by Resolution No. 576/2011, dated October 28, 2011, establishes criteria for the gradual readjustment of VCs until 2014. With respect to VU-M fees, for the period before the effectiveness of the cost model established by this Resolution, ANATEL defined transition rules if no pact is reached regarding the VU-M fees. A reduction factor (R) to be applied in the formula for readjustment of the calls involving the PSTN access the Personal Mobile Service.
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VCt ≤VCt0 x (1-R-FA) x (ISTt / ISTt0), where R corresponds to the “Reduction Factor” (
Fator de Redução
) and FA to the “Damping Factor” (
Fator de Amortecimento
), the percentage of which depends on inflation in the corresponding period.
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for the first readjustment, ANATEL will apply a Reduction Factor of 18%;
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for readjustments to follow, ANATEL will apply a Reduction Factor of 12%; and
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if the cost model has not yet produced results, the third readjustment will be subject to a Reduction Factor of 10%.
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Vivo Own Stores: focused on individual clients and located on strategic points, our own stores provide a highly trained team built up to guarantee the best sales experience for the customer. The main drive of this channel is innovation. As a result, most stores have available self assistance services for value added services and recharges. We also offer special treatment for Premium clients with scheduled appointments via the Internet to assure “no waiting in line.”
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Indirect channels: are divided in two types: resale and retail. The resale channel is composed by certified companies in the telecommunications segments providing our full portfolio and an adequately sized network for our services to attend the geographic dimensions of the market. Our presence is also established in the retail channel especially for prepaid, recharges and data services.
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Recharge channels: are represented by small companies in various market sectors throughout the country. They became the largest channel for prepaid users and provide new means of virtual recharge for customers.
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Telesales: sales through active and passive telemarketing call centers, employing highly trained sales associates, focused on fixed and data services.
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Internet: “Portal Telefônica,” with online information on our products and services specifically targeted toward our corporate clients; we also offer the option of selling services via online chat through highly trained partners and appropriate tools.
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Online Store: currently offers mobile services to clients with home delivery, payment in installments and different prices of handsets. In 2012, we launch a new online store covering all the services portfolio of fixed and mobile, and offering improvements in navigation, quality purchase, reduction in SLA, etc. supported by a communications marketing strategy.
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Door-to-door sales: aiming to approach corporate and individual clients, we dispose physical channels of assistance, such as door-to-door sales of services by outsourced small companies and own team consultants. Main focus in fixed and data services.
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Person-to-person sales: our business management team offers customized sales services, ensuring high customer loyalty and a strong customer relationship resulting from customized consulting telecommunication and IT services and technical and commercial support.
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Areas 1 & 2
: 9 areas in the state of São Paulo;
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Area 3
: 5 areas, comprising 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, comprising 6 areas in the state of Paraná and 3 areas in the state of Santa Catarina;
|
|
·
|
Area 6
: 4 areas in the state of Rio Grande do Sul;
|
|
·
|
Areas 7 & 8
: 18 areas, comprising 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; and
|
|
·
|
Area 10
: 9 areas in the states of Pernambuco, Alagoas, Paraíba, Rio Grande do Norte, Ceará and Piauí.
|
|
·
|
Subscription fraud: type of fraud that occurs when the emission of one or more qualifications without the consent of the real “owner” of documents with the main objective of not paying the phone bill. Fraud can occur through subscription data and information from individuals or companies obtained illegally.
|
|
·
|
Identity Fraud: also known as “social engineering,” the term
identity fraud
characterizes in the mobile operation the use the service provider phone channels (Call Center) with the use of real data from clients for false identification, allowing undue changes to be made in the customer’s line.
|
(1)
|
Telefónica Móviles España
(“TME”), Telefonica S.A.’s Spanish directly wholly-owned subsidiary, has respective roaming agreements with (i) Mobile Telecommunication Company of Iran (“MTCI”), (ii) MTN Irancell (“Irancell”), (iii) Telecommunication Kish Company (“TKC”) and (iv) Taliya (“Taliya”).
|
(2)
|
Telefónica Germany GmbH & Co. OHG
(“TG”), Telefonica S.A.’s German 76.83% indirectly-owned subsidiary, has a roaming agreement with MCI. TG recorded 220,714 euros in roaming revenues under this agreement in 2012.
|
(3)
|
Telefónica 02 Ireland Limited
(“TIR”), Telefonica S.A.’s Irish directly wholly-owned subsidiary, has a roaming agreement with MCI. TIR recorded 1,459 euros in roaming revenues under this agreement in 2012.
|
(4)
|
Telefónica Czech Republic, a.s.
(“TCR”), Telefonica S.A.’s Czech 69.41% indirectly-owned subsidiary, has a roaming agreement with MCI. TCR recorded 29,629 euros in roaming revenues under this agreement in 2012.
|
(5)
|
Telefónica UK Ltd
(“TUK”), Telefonica S.A.’s English directly wholly-owned subsidiary, has a roaming agreement with Irancell. TUK recorded 131 euros in roaming revenues under this agreement in 2012.
|
(6)
|
Pegaso Comunicaciones y Sistemas, S.A. de C.V.
(“TUK”), Telefonica S.A.’s Mexican directly wholly-owned subsidiary, has a roaming agreement with Irancell. TUK recorded US$46 in roaming revenues under this agreement in 2012.
|
C.
|
Organizational Structure
|
D.
|
Property, Plants and Equipment
|
UNRESOLVED STAFF COMMENTS
|
IT
EM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
A.
|
Operating Results
|
Inflation Rate
(%) as
Measured by
IGP-DI(1)
|
Inflation Rate
(%) as
Measured by
IPCA(2)
|
Inflation Rate
(%) as
Measured by
IST(3)
|
||||||||||
December 31, 2012
|
8.1 | 5.8 | 4.9 | |||||||||
December 31, 2011
|
5.0 | 6.5 | 4.9 | |||||||||
December 31, 2010
|
11.3 | 5.9 | 5.6 | |||||||||
December 31, 2009
|
(1.4 | ) | 4.3 | 2.1 | ||||||||
December 31, 2008
|
9.1 | 5.9 | 6.6 |
(1)
|
Source: IGP-DI, as published by the
Fundação Getúlio Vargas
.
|
(2)
|
Source: IPCA, as published by the
Instituto Brasileiro de Geografia e Estatística
.
|
(3)
|
Source: IST, as published by the
Agência Nacional de Telecomunicações
.
|
|
·
|
delays in the granting, or the failure to grant, approvals for rate adjustment;
|
|
·
|
the granting of licenses to new competitors in our region; and
|
|
·
|
the introduction of new or stricter requirements for our operating concession.
|
|
·
|
Resolution no 581/2012 – Regulation of SeAC
|
|
·
|
Resolution no 582/2012 – Model Authorization Form SeAC
|
|
·
|
Resolution no 586/2012 – Regulation of AICE
|
|
·
|
Resolution no 588/2012 – Network Payment Regulation STFC
|
|
·
|
Resolution no 589/2012 – Regulation of Administrative Sanctions
|
|
·
|
Resolution no 590/2012 – Regulation of EILD
|
|
·
|
Resolution no 596/2012 – Regulation of Fiscalization
|
|
·
|
Resolution no 598/2012 – Regulation of Universal Service Obligations
|
|
·
|
Resolution no 600/2012 – Regulation of PGMC
|
|
·
|
Resolution no 604/2012 – Regulation for Successive Calls
|
|
·
|
New Regulation of STFC
|
|
·
|
New Regulation of SCM
|
|
·
|
RGQ STFC
|
|
·
|
Regulation of Rural Area Service
|
|
·
|
Review of the Regulation of Infrastructure Sharing
|
|
·
|
Review of Regulation of TUPs
|
|
·
|
New Regulation of SMP
|
|
·
|
Public Consultation of the Fator X
|
|
·
|
Brazil’s economic growth and its impact on the greater demand for services;
|
|
·
|
the costs and availability of financing; and
|
|
·
|
the exchange rate between the
real
and other currencies.
|
|
·
|
Telephony services
|
|
·
|
Local: includes the sum of revenues from monthly subscription fees, installation fees, local services, public telephony and fixed-to-mobile revenues (VC1);
|
|
·
|
Domestic long-distance: includes the sum of fixed-to-mobile revenues (VC2 and VC3), public long-distance telephony and domestic long-distance;
|
|
·
|
International long-distance: includes the sum of revenues from international public telephony and international long-distance; and
|
|
·
|
Usage charges: which include measured service charges for calls, monthly fee and other similar charges;
|
|
·
|
Data Transmission and value added services
|
|
·
|
Data Transmission: includes the sum of infrastructure rental revenues and data transmission; and
|
|
·
|
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 excludes these services.
|
|
·
|
Interconnection charges
|
|
·
|
Interconnection charges (or network usage charges) are amounts we charge other cellular and fixed-line service providers for the use of our network;
|
|
·
|
Pay TV
|
|
·
|
Includes cable TV services, through satellite, cable or MMDS technology (multichannel multipoint distribution service);
|
|
·
|
Sale of goods and equipment
|
|
·
|
The sale of wireless devices and accessories; and
|
|
·
|
Other Services
|
|
·
|
Other services include integrated solution services offered to residential and corporate clients, such as Internet access, private network connectivity and leasing of computer equipment, and
|
|
·
|
Other telecommunications services such as extended service, detects, voice mail, cellular blocker, among others.
|
Year ended December 31,
|
Percent change
|
Percent change
|
||||||||||||||||||
2012
|
2011
|
2010
|
2012-2011 | 2011-2010 | ||||||||||||||||
(in millions of
reais
)
|
||||||||||||||||||||
Net operating revenue
|
33,931.4 | 29,128.7 | 15,798.3 | 16.5 | % | 84.4 | % | |||||||||||||
Cost of services and goods
|
(16,564.4 | ) | (15,039.7 | ) | (8,844.8 | ) | 10.1 | % | 70.0 | % | ||||||||||
Gross profit
|
17,367.0 | 14,089.0 | 6,953.5 | 23.3 | % | 102.6 | % | |||||||||||||
Operating expenses:
|
||||||||||||||||||||
Selling
|
(8,693.7 | ) | (6,948.2 | ) | (2,964.6 | ) | 25.1 | % | 134.4 | % | ||||||||||
General and administrative
|
(2,148.4 | ) | (1,785.6 | ) | (738.9 | ) | 20.3 | % | 141.7 | % | ||||||||||
Other operating revenues, net
|
687.4 | 442.2 | 312.4 | 55.5 | % | 41.5 | % | |||||||||||||
Total operating expenses, net
|
(10,154.7 | ) | (8,291.6 | ) | (3,391.1 | ) | 22.5 | % | 144.5 | % | ||||||||||
Equity in earnings (losses) of associates
|
- | – | 2.9 | - | (100.0 | )% | ||||||||||||||
Operating income before financial expense, net
|
7,212.3 | 5,797.4 | 3,565.3 | 24.4 | % | 62.6 | % | |||||||||||||
Net financial expenses
|
(290.8 | ) | (139.7 | ) | (120.7 | ) | 108.2 | % | 15.7 | % | ||||||||||
Net income before income and social contribution taxes
|
6,921.5 | 5,657.7 | 3,444.6 | 22.3 | % | 64.2 | % | |||||||||||||
Income and social contribution taxes
|
(2,469.3 | ) | (1,295.5 | ) | (1,045.8 | ) | 90.6 | % | 23.9 | % | ||||||||||
Net income
|
4,452.2 | 4,362.2 | 2,398.8 | 2.1 | % | 81.8 | % | |||||||||||||
Net income attributable to:
|
||||||||||||||||||||
Shareholders of company
|
4,453.6 | 4,355.3 | 2,398.8 | 2.3 | % | 81.6 | % | |||||||||||||
Noncontrolling interests
|
(1.4 | ) | 6.9 | – | (120.3 | %) | 100.0 | % | ||||||||||||
Net income for year
|
4,452.2 | 4,362.2 | 2,398.8 | 2.1 | % | 81.8 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Telephony services
|
26,555.1 | 24,254.2 | 9.5 | % | ||||||||
Data transmission and value added services
|
14,389.8 | 10,929.3 | 31.7 | % | ||||||||
Interconnection charges
|
4,453.4 | 3,785.0 | 17.7 | % | ||||||||
Pay TV
|
805.3 | 865.4 | (6.9 | %) | ||||||||
Sale of goods and equipment
|
2,792.6 | 2,135.2 | 30.8 | % | ||||||||
Other services
|
1,282.6 | 1,104.1 | 16.2 | % | ||||||||
Gross operating revenue
|
50,278.8 | 43,073.2 | 16.7 | % | ||||||||
Value-added and other indirect taxes
|
(16,347.4 | ) | (13,944.5 | ) | 17.2 | % | ||||||
Net operating revenues
|
33,931.4 | 29,128.7 | 16.5 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Cost of goods sold
|
(1,801.9 | ) | (1,284.3 | ) | 40.3 | % | ||||||
Depreciation and amortization
|
(4,132.4 | ) | (3,582.6 | ) | 15.3 | % | ||||||
Outside services and other
|
(3,379,6 | ) | (2,923.4 | ) | 15,6 | % | ||||||
Interconnection charges
|
(4,012.1 | ) | (4,537.1 | ) | (11.6 | %) | ||||||
Rent, insurance, condominium fees, and leased lines
|
(968.7 | ) | (910.5 | ) | 6.4 | % | ||||||
Personnel
|
(459.7 | ) | (380.1 | ) | 20.9 | % | ||||||
Taxes and concession renewal fees
|
(1,810.0 | ) | (1,421.7 | ) | 27.3 | % | ||||||
Cost of services and goods
|
(16,564.4 | ) | (15,039.7 | ) | 10,1 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Selling expenses
|
(8,693.7 | ) | (6,948.2 | ) | 25,1 | % | ||||||
General and administrative expenses
|
(2,148.4 | ) | (1,785.6 | ) | 20,3 | % | ||||||
Other net operating income
|
687.4 | 442.2 | 55.5 | % | ||||||||
Total
|
(10,154.7 | ) | (8,291.6 | ) | 22.5 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2011
|
2010
|
2011-2010 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Telephony services
|
24,254.2 | 15,366.0 | 57.8 | |||||||||
Data transmission and value added services
|
10,929.3 | 5,028.4 | 117.4 | |||||||||
Interconnection charges
|
3,785.0 | 523.8 | 622.6 | |||||||||
Pay TV
|
865.4 | 587.4 | 47.3 | |||||||||
Sale of goods and equipment
|
2,135.2 | 166.5 | 1,182.4 | |||||||||
Other services
|
1,104.1 | 937.0 | 17.8 | |||||||||
Gross operating revenue
|
43,073.2 | 22,609.1 | 90.5 | |||||||||
Value-added and other indirect taxes
|
(13,944.4 | ) | (6,810.8 | ) | 104.7 | |||||||
Net operating revenues
|
29,128.7 | 15,798.3 | 84.4 |
Year ended December 31,
|
Percent change
|
|||||||||||
2011
|
2010
|
2011-2010 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Cost of goods sold
|
(1,284.3 | ) | (155.7 | ) | 724.9 | % | ||||||
Depreciation and amortization
|
(3,582.6 | ) | (1,687.4 | ) | 112.3 | % | ||||||
Outside services and other
|
(2,923.4 | ) | (1,860.4 | ) | 57.1 | % | ||||||
Interconnection charges
|
(4,537.1 | ) | (4,176.7 | ) | 8.6 | % | ||||||
Rent, insurance, condominium fees, and leased lines
|
(910.5 | ) | (364.3 | ) | 149.9 | % | ||||||
Personnel
|
(380.1 | ) | (257.4 | ) | 47.7 | % | ||||||
Taxes and concession renewal fee
|
(1,421.7 | ) | (342.9 | ) | 314.6 | % | ||||||
Cost of services and goods
|
(15,039.7 | ) | (8,844.8 | ) | 70.0 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2011
|
2010
|
2011-2010 | ||||||||||
(in millions of
reais
)
|
||||||||||||
Selling expenses
|
(6,948.2 | ) | (2,964.6 | ) | 134.4 | % | ||||||
General and administrative expenses
|
(1,785.6 | ) | (738.9 | ) | 141.7 | % | ||||||
Other net operating income
|
442.2 | 312.4 | 41.5 | % | ||||||||
Total
|
(8,291.6 | ) | (3,391.1 | ) | 144.5 | % |
|
·
|
the servicing of our indebtedness;
|
|
·
|
capital expenditures; and
|
|
·
|
the payment of dividends.
|
Debt
|
Currency
|
Annual interest rate payable
|
Maturity
|
Principal amount
outstanding
(in thousands of
reais
)
|
||||
Loan and Financing BNDES
|
R$
|
TJLP + 0% to TJLP + 9.0%
|
2019
|
2,911.8
|
||||
Loan and Financing BNDES
|
R$
|
4.5% to 8.7%
|
2020
|
173.8
|
||||
Loan and Financing BNDES
|
UMBNDES
|
5.97%
|
2019
|
455.3
|
||||
Loan and Financing BNB
|
R$
|
10.0%
|
2016
|
338.6
|
||||
Mediocredito
|
US$
|
1.75%
|
2014
|
9.3
|
||||
EIB
|
US$
|
4.18% to 4.47%
|
2015
|
795.6
|
||||
Resolução 4131
|
US$
|
4.10%
|
2013
|
326.3
|
||||
Debentures
|
R$
|
100% of the CDI + 0,75% to 112% of the CDI
|
2013
|
2,787.5
|
||||
Debentures
|
R$
|
IPCA+ 0.5% to IPCA+7.0%
|
2021
|
168.4
|
||||
Others
|
R$
|
2014
|
0.6
|
|||||
Total debt
|
7,967.3
|
|||||||
Current
|
1,957.5
|
|||||||
Long term
|
6,009.7
|
C.
|
Research and Development, Patents and Licenses
|
R&D investments
|
2012
|
2011
|
2010
|
|||||||||
(in millions of
reais
)
|
||||||||||||
Development
|
22.7 | 44.6 | 12.5 | |||||||||
Innovation (business incubator and tests)
|
0.7 | 1.3 | 6.8 | |||||||||
Total
|
23.4 | 45.9 | 19.3 |
|
·
|
permission to use the trademark name “Telefônica” and all names derived from “Telefônica”;
|
|
·
|
our name “Telefônica Brasil S.A.”;
|
|
·
|
our commercial brand in Brazil “Vivo” and its sub-brands such as “Vivo Móvel”, “Vivo Fixo”, Vivo TV”, “Vivo Internet”, “Meu Vivo”, “Vivo Empresas,” among others;
|
|
·
|
our past commercial brands, “Super 15” for long-distance services and “Speedy” for broadband products, “DUO” for telephone and broadband service and “TRIO” for telephone, broadband and Digital TV service.
|
D.
|
Trend Information
|
E.
|
Off-balance-Sheet Arrangements
|
F.
|
Tabular Disclosure of Contractual Obligations
|
Total
|
Less than 1 year
|
1-3 years
|
4-5 years
|
After 5 years
|
||||||||||||||||
(In thousands of
reais
, as of December 31, 2012)
|
||||||||||||||||||||
Contractual obligations
|
||||||||||||||||||||
Long-term debt (1)
|
7,967,229 | 1,957,538 | 2,898,636 | 2,816,762 | 294,293 | |||||||||||||||
Pension and other post retirement benefits
|
392,269 | 6,119 | 12,046 | 11,684 | 362,420 | |||||||||||||||
Other long-term obligations including leases
|
9,906,827 | 1,230,640 | 2,380,900 | 2,835,176 | 3,460,111 | |||||||||||||||
Total contractual cash obligations
|
18,266,325 | 3,194,297 | 5,291,582 | 5,662,622 | 4,116,824 | |||||||||||||||
Commercial commitments
|
||||||||||||||||||||
Suppliers
|
5,889,377 | 5,889,377 | – | – | – | |||||||||||||||
Other commercial commitments
|
– | – | – | – | – | |||||||||||||||
Total commercial commitments
|
5,889,377 | 5,889,377 | – | – | – |
|
(1)
|
Includes interest payments.
|
Amount
|
||||
Year ending December 31,
|
(in thousands of
reais
,
as of December 31, 2012)
|
|||
2014
|
1,300,124 | |||
2015
|
1,159,235 | |||
2016
|
439,277 | |||
2017
|
2,389,703 | |||
2018
|
427,059 | |||
2019 and forward
|
294,293 | |||
Total
|
6,009,691 |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A.
|
Directors and Senior Management
|
Name
|
Position
|
Date of Appointment
|
||
Antonio Carlos Valente da Silva
|
Chairman
|
April 07, 2010
|
||
Santiago Fernández Valbuena
|
Vice-Chairman
|
November 7, 2011(**)
|
||
Antonio Gonçalves de Oliveira
|
Director
|
November 7, 2011(**)
|
||
Eduardo Navarro de Carvalho
|
Director
|
November 7, 2011 (**)
|
||
Fernando Abril-Martorell Hernández
|
Director
|
April 7, 2010
|
||
Fernando Xavier Ferreira
|
Director
|
April 7, 2010
|
||
Francisco Javier de Paz Mancho
|
Director
|
April 7, 2010
|
||
José Fernando de Almansa Moreno-Barreda
|
Director
|
April 7, 2010
|
||
José Manuel Fernandez Norniella
|
Director
|
May 19, 2010 (*)
|
||
Luciano Carvalho Ventura
|
Director
|
April 7, 2010
|
||
Luis Bastida Ibarguen
|
Director
|
April 7, 2010
|
||
Luis Fernando Furlan
|
Director
|
April 7, 2010
|
||
Narcís Serra Serra
|
Director
|
April 7, 2010
|
||
Paulo Cesar Pereira Teixeira
|
Director
|
November 7, 2011 (**)
|
||
Roberto Oliveira de Lima
|
Director
|
November 7, 2011 (**)
|
(*)
|
The members of the Board of Directors have the mandate until the ordinary general meeting of 2013.
|
(*)
|
The Board member José Manuel Fernandez Norniella was appointed by the Board of Directors in May 19, 2010, as provided by Article 150 of Law 6,404/76, replacing Mr. Juan Carlos Ros Brugueras. His election was ratified at the General Shareholders’ Meeting of August 12, 2010.
|
(**)
|
The Board members Santiago Fernández Valbuena, Antonio Gonçalves Oliveira, Eduardo Navarro de Carvalho, Paulo Cesar Pereira Teixeira and Roberto Oliveira de Lima were appointed by the Board of Directors at a meeting dated November 07, 2011, as provided by Article 150 of Law 6,404/76. Their elections were ratified at the General Shareholders’ Meeting of April 11, 2012.
|
Name
|
Position
|
Date of Appointment
|
||
Antonio Carlos Valente da Silva
|
Chief Executive Officer
|
May 19, 2010
|
||
Paulo Cesar Pereira Teixeira
|
General and Executive Officer and as interim Chief Financial Officer, Control and Investor Relations Officer
|
September 13, 2011
|
||
Breno Rodrigo Pacheco de Oliveira
|
General Secretary and Legal Officer
|
June 14, 2011
|
B.
|
Compensation
|
C.
|
Board Practices
|
|
·
|
establishing our general business policies;
|
|
·
|
electing and removing the members of our executive committee, and establishing their responsibilities with due regard for legal and statutory provisions;
|
|
·
|
supervising our management and examining our corporate records;
|
|
·
|
calling General Shareholders Meetings;
|
|
·
|
approving the financial statements, management reports, proposals for allocation of the company’s results and the submission of such documents to the General Shareholders Meeting;
|
|
·
|
appointing and deposing external auditors;
|
|
·
|
determining the distribution of interim dividends;
|
|
·
|
determining the payment of interest on equity “ad referendum” of the General Shareholders Meeting;
|
|
·
|
authorizing the purchase of our shares to be cancelled or kept in treasury;
|
|
·
|
appointing and removing the person responsible for internal auditing;
|
|
·
|
approving the budget and annual business plan;
|
|
·
|
deliberating on the issuance of new shares by increasing the corporate capital within the limits authorized by the bylaws;
|
|
·
|
approving the issuance of commercial paper and depositary receipts;
|
|
·
|
authorizing the sale of fixed and concession-related assets;
|
|
·
|
approving agreements, investments and obligations in an amount greater than R$250 million that have not been approved in the budget;
|
|
·
|
approving employment and compensation plans, incentive policies and professional development, regulation and staffing of the company, and the terms and conditions of collective bargaining agreements to be executed with unions representing various categories of the company’s employees and adhesion or disassociation from pension plans, all with respect to employees of the company; the Board of Directors can, at its own discretion, assign to the company’s officers limits to deliberate on these matters;
|
|
·
|
authorizing the acquisition of interest in other companies on a definitive basis and the encumbrance and creation of lien on or sale of an equity interest;
|
|
·
|
authorizing the offering of ordinary nonconvertible unsecured debentures;
|
|
·
|
approving the organizational structure of the company; the Board of Directors can assign to the officers limits to the exercise of such powers, subject to legal and bylaws provisions;
|
|
·
|
approving and modifying the internal regulations of the Board of Directors;
|
|
·
|
deliberating as to the issuance of warrants;
|
|
·
|
deliberating, by delegation of the General Shareholders Meeting, about the following aspects related to company debentures: (i) opportunity to issue, (ii) time and conditions of expiration, amortization or redemption, (iii) time and conditions of the payment of interest, of the participation in the profits and of the premium of repayment, if any, (iv) method of subscription or placement, and (v) the type of debentures;
|
|
·
|
approving the establishment of technical and advisory committees for advice on matters of interest to them, to elect members of such committees and approve the committees, internal regulations, which shall contain specific rules concerning their organization, functions, powers, and compensation of members;
|
|
·
|
authorizing the sale of property, the creation of in rem guarantees and the provision of guarantees on behalf of third parties, and setting limits on the practice of such acts by the officers;
|
|
·
|
establishing, as an internal regulation, the limits for the officers to authorize the disposition or encumbrance of permanent assets, including those related to public telecommunications services which are disabled or inoperable;
|
|
·
|
approving the company’s participation in consortia in general, and the terms of such participation; the Board of Directors may delegate such powers to the officers and establish limits, as it seeks to develop activities in line with the company’s purpose;
|
|
·
|
setting the limits for the officers to authorize the practice of reasonable gratuitous acts for the benefit of employees or the community of which the company is a part of, including the donation of unserviceable assets to the company; and
|
|
·
|
approving the creation and closure of subsidiaries of the company, in Brazil or abroad.
|
Members
|
Alternates
|
Date Appointed
|
||
Flavio Stamm
|
Gilberto Lerio
|
April 11, 2012
|
||
Cremênio Medola Neto
|
Oswaldo Vieira da Luz
|
April 11, 2012
|
||
Stael Prata Silva Filho
|
Charles Edwards Allen
|
April 11, 2012
|
|
·
|
Control and Audit Committee;
|
|
·
|
Nominations, Compensation and Corporate Governance Committee; and
|
|
·
|
Service Quality and Marketing Committee.
|
|
·
|
the appointment, termination and renewal of the independent auditors, as well as the terms and conditions of the contract with the independent auditors;
|
|
·
|
the analysis of the company’s accounts, compliance with certain legal requirements and the adoption of generally accepted accounting principles;
|
|
·
|
the results of each internal and independent audit and management’s response to the auditor’s recommendations;
|
|
·
|
the quality and integrity of the company’s internal control systems;
|
|
·
|
the performance of the independent auditors, requesting opinions on the annual reports and that the main audit reports be clear and precise; and
|
|
·
|
any communications with the internal auditors about any significant deficiencies in our control systems and identified financial conditions.
|
Members
|
Date Appointed
|
|
Luis Bastida Ibarguen
|
May 19, 2010
|
|
Antonio Gonçalves de Oliveira
|
November 07, 2011
|
|
Fernando Xavier Ferreira
|
February 15, 2012
|
|
·
|
the appointment of executive officers for our company and our subsidiaries;
|
|
·
|
the parameters on compensation for our executive officers and administrators;
|
|
·
|
the terms and conditions of executive officers, employment agreements;
|
|
·
|
the review of the Board’s compensation plan and any amendments;
|
|
·
|
the incentive plans related to compensation;
|
|
·
|
the compensation policy for directors and executive officers of the company; and
|
|
·
|
the annual corporate governance report.
|
Members
|
Date Appointed
|
|
José Fernando de Almansa Moreno-Barreda
|
May 19, 2010
|
|
Antonio Carlos Valente da Silva
|
May 19, 2010
|
|
Narcis Serra Serra
|
November 05, 2012
|
|
José Manuel Fernandez Norniella
|
May 19, 2010
|
Members
|
Date Appointed
|
|
Eduardo Navarro de Carvalho
|
February 15, 2012
|
|
Luciano Carvalho Ventura
|
May 19, 2010
|
|
Roberto Oliveira de Lima
|
November 07, 2011
|
D.
|
Employees
|
E.
|
Share Ownership
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
A.
|
Major Shareholders
|
Shareholder’s Name
|
Number of common
shares owned
|
Percentage of
outstanding
common shares
|
||||||
SP Telecomunicações
|
192,595,149 | 50.47 | % | |||||
Telefónica S.A.
|
97,976,194 | 25.68 | % | |||||
Telefónica Internacional
|
58,859,918 | 15.43 | % | |||||
All directors and executive officers as a group
|
1,548 | – |
Shareholder’s Name
|
Number of preferred
shares owned
|
Percentage of
outstanding
preferred shares
|
||||||
SP Telecomunicações
|
29,042,853 | 3.90 | % | |||||
Telefónica S.A.
|
179,862,845 | 24.17 | % | |||||
Telefónica Internacional
|
271,707,098 | 36.52 | % | |||||
All directors and executive officers as a group
|
1,387 | – |
B.
|
Related Party Transactions
|
C.
|
Interests of Experts and Counsel
|
FINANCIAL INFORMATION
|
A.
|
Consolidated Statements and Other Financial Information
|
|
·
|
administrative and judicial litigation with
Instituto Nacional da Seguridade Social
, the National Institute of Social Security, or INSS;
|
|
·
|
administrative and judicial proceedings relating to tax payments;
|
|
·
|
lawsuits brought by employees, former employees and trade unions relating to alleged infringements of labor rights; and
|
|
·
|
other civil suits, including litigation arising out of the breakup of Telebrás and events preceding the breakup.
|
|
·
|
Expansion Plan–PEX
. We are defendants in proceedings related to the possible right of individuals who purchased our shares in connection with our network expansion plan after 1996, to receive additional shares from us. These claims are in various levels of the court system. The chance of loss in such proceedings is
|
|
|
classified on a case-by-case basis according to the facts presented in each proceeding. For the proceedings in which the chance of loss was classified as “probable,” we recorded a provision of R$31.3 million.
|
|
·
|
Service Complaints
. We and our subsidiaries are defendants in certain civil actions, in various court levels, regarding claims related to our services and our ordinary course of business initiated by individual customers, civil associations on behalf of customers or by the PROCON foundation, as well as by the Federal and State Public Prosecutor’s Offices. We recorded a provision of R$377.6 million for these claims. We are also defendants to civil actions in which the risk of loss is classified as “possible” in the amount of R$1,236.3 million.
|
|
·
|
Consumer Relations Claims
. We are defendants in several civil actions initiated by individual customers in which the claims are the same or very similar from to other and, when considered individually, are not material, to which we recorded a provision of R$78.7 million, calculated on the basis of on the statistical analysis of our historical losses in such proceedings.
|
|
·
|
Pension Benefit Plan Spin-Off
. Sistel Participants Association in São Paulo (ASTEL) ) and National Federation of Associations of Retirees and Pensioners and Participants in Pension Funds in Telecom (FENAPAS), they filed with two distinct - same object though - public civil action against the company, Sistel Foundation and others, claiming the annulment of the spin-off of the PBS pension benefit plan that occurred in 2000 which caused the creation of the specific TELESP–PBS pension benefit plan, and corresponding allocation of resources resulted from the technical
superavit
and fiscal contingencies existing at that time. The chance of loss in both of them is possible based on the opinion of our legal advisors. The amount involved in both cases cannot yet be determined until an expert appraisal report is conducted since it includes the spun-off portion of Sistel related to the telecommunication operators from the former “Telebrás System.”
|
|
·
|
Community Telephone Plan–PCT
. We are subject to civil public action proposals claiming the possible right for indemnity of associates and entities hired for the construction of community networks connected to the network of fixed telephony operators and have not received shares for their financial investment in the municipality of Mogi das Cruzes, involving a total amount of approximately R$236.2 million. Based on the opinion of our legal advisors, the chance of loss is possible. The appellate court has ruled in our favor and changed the lower court decision. The plaintiff filed an appeal to the Supreme Court which is awaiting resolution.
|
|
·
|
Services Quality Class Action
. The Public Prosecutor Office of the State of São Paulo commenced a class action suit claiming moral and property damages suffered by all consumers of telecommunication services from 2004 to 2009 due to the bad quality of service and failures of the communications system. The Public Prosecutors Office suggested a total award against the company of R$1 billion. A judgment was rendered on April 20, 2010 imposing the payment of damages to all consumers who proved to be eligible for the award. Alternatively, if clients do not prove themselves eligible in a number compatible with the severity of the damage after a period of one year, the judgment establishes that R$60 million should be deposited in a special fund for protection of diffuse customer interests (
Fundo Especial de Defesa de Reparação de Interesses Difusos Lesados
). It is not possible to estimate how many consumers may present themselves in this procedure nor the values to be claimed by them. The parties filled an appeal and the effects of the sentence were suspended. Despite the possible degree of risk, no value amount was attributed to this action because currently we are unable to calculate the total amount to be paid by us in the event we lose and, as a result, we have not recorded any provisions.
|
|
·
|
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 No. 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 called on the operators to cease to provide Caller ID services and sought 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. On October 5, 2011, the law suit was judged groundless against the
|
|
|
Phone Companies. Vivo will file an appeal due to this decision. This decision is not final, and will be tried before the Court and Superior Court of Justice. However, Lune’s right to use patent No. 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 before 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 (No. 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.
|
|
·
|
management and the fiscal board report to the shareholders meeting that the distribution would be incompatible with the financial circumstances of the company; and
|
|
·
|
the shareholders ratify this decision at the shareholder’s meeting. In this case:
|
|
·
|
management must forward to the CVM within five days of the shareholders meeting an explanation justifying the decision at the shareholders meeting; and
|
|
·
|
the profits that were not distributed are to be recorded as a special reserve and, if not absorbed by losses in subsequent fiscal years, are to be paid as dividends as soon as the company’s financial situation permits.
|
|
·
|
reversed in the fiscal year in which the loss was anticipated, if the loss does not in fact occur; or
|
|
·
|
written-off if the anticipated loss occurs.
|
|
·
|
the positive net result of equity adjustment; and
|
|
·
|
earnings net from transactions or the accounting of assets and liabilities at market value which must be realized after the end of the subsequent fiscal year.
|
|
·
|
50% of net income (before deducting income taxes and the interest on shareholders’ equity) for the period in respect of which the payment is made, or
|
|
·
|
50% of the sum of retained earnings and profit reserves.
|
Year
|
Description (Dividends or Interest on Shareholders’ Equity)(1)
|
Common Shares
|
Preferred Shares
|
|||
(per share/in R$)
|
||||||
2012
|
Div/Int
|
2.567510
|
2.824261
|
|||
2011
|
Div/Int
|
4.783035
|
5.261339
|
|||
2010
|
Div/Int
|
3.616248
|
3.977873
|
|||
2009
|
Div/Int
|
2.556431
|
2.812074
|
|||
2008
|
Div/Int
|
4.539838
|
4.993823
|
(1)
|
Interest on shareholders’ equity is net of withholding taxes.
|
|
·
|
an initial installment of R$800 million, with payment due June 30, 2010. The actual payment occurred on April 26, 2010; and
|
|
·
|
the remaining portion of R$451.6 million, with payment due December 21, 2010. The actual payment occurred on December 13, 2010.
|
|
·
|
an initial installment of R$1,429 million which the payment occurred on May 20, 2011; and
|
|
·
|
the remaining portion of R$264.7 million which payment occurred on November 3, 2011.
|
|
·
|
an initial installment of R$1,075.6 million which the payment occurred on May 01, 2012; and
|
|
·
|
the remaining portion of R$877.4 million which payment occurred on December 12, 2012.
|
B.
|
Significant Changes
|
THE OFFER AND LISTING
|
A.
|
Offer and Listing Details
|
NYSE
|
BM&FBOVESPA
|
BM&FBOVESPA
|
||||||||||||||||||||||
HIGH
|
LOW
|
HIGH
|
LOW
|
HIGH
|
LOW
|
|||||||||||||||||||
(in US$ per ADS)
|
(in
reais
per preferred share)
|
(in
reais
per common share)
|
||||||||||||||||||||||
Year ended
|
||||||||||||||||||||||||
December 31, 2008
|
21.72 | 18.62 | 52.12 | 44.94 | 39.95 | 33.84 | ||||||||||||||||||
December 31, 2009
|
25.53 | 23.74 | 43.54 | 42.12 | 39.29 | 36.00 | ||||||||||||||||||
December 31, 2010
|
24.53 | 22.70 | 42.03 | 38.60 | 39.30 | 36.22 | ||||||||||||||||||
December 31, 2011
|
28.33 | 25.74 | 52.97 | 47.47 | 48.00 | 43.50 | ||||||||||||||||||
December 31, 2012
|
31.22 | 21.17 | 56.92 | 43.45 | 51.69 | 37.53 | ||||||||||||||||||
Year ended December 31, 2011
|
||||||||||||||||||||||||
First quarter
|
25.34 | 23.07 | 42.60 | 37.80 | 42.30 | 36.24 | ||||||||||||||||||
Second quarter
|
30.40 | 25.00 | 46.99 | 39.48 | 43.90 | 37.02 | ||||||||||||||||||
Third quarter
|
31.77 | 25.84 | 52.50 | 43.06 | 46.88 | 37.30 | ||||||||||||||||||
Fourth quarter
|
29.34 | 25.39 | 52.97 | 46.55 | 48.00 | 40.50 | ||||||||||||||||||
Year ended December 31, 2012
|
||||||||||||||||||||||||
First quarter
|
31.02 | 27.02 | 56.59 | 47.50 | 50.98 | 42.77 | ||||||||||||||||||
Second quarter
|
31.22 | 23.31 | 56.92 | 47.30 | 51.69 | 43.20 | ||||||||||||||||||
Third quarter
|
25.66 | 21.35 | 51.60 | 43.45 | 47.88 | 39.40 | ||||||||||||||||||
Fourth quarter
|
24.08 | 21.17 | 49.28 | 43.54 | 43.65 | 37.53 |
NYSE
|
BM&FBOVESPA
|
BM&FBOVESPA
|
||||||||||||||||||||||
HIGH
|
LOW
|
HIGH
|
LOW
|
HIGH
|
LOW
|
|||||||||||||||||||
(in US$ per ADS)
|
(in
reais
per preferred share)
|
(in
reais
per common share)
|
||||||||||||||||||||||
Month ended
|
||||||||||||||||||||||||
September 30, 2012
|
23.07 | 21.37 | 46.63 | 43.45 | 41.30 | 39.40 | ||||||||||||||||||
October 31, 2012
|
22.40 | 21.45 | 45.70 | 43.54 | 40.94 | 37.53 | ||||||||||||||||||
November 30, 2012
|
23.35 | 21.80 | 48.95 | 44.79 | 42.76 | 39.33 | ||||||||||||||||||
December 31, 2012
|
24.08 | 21.17 | 49.28 | 45.20 | 43.65 | 39.35 | ||||||||||||||||||
January 31, 2013
|
25.79 | 24.32 | 52.55 | 49.62 | 47.47 | 43.00 | ||||||||||||||||||
February 29, 2013
|
26.59 | 24.43 | 52.57 | 48.14 | 46.10 | 43.00 | ||||||||||||||||||
March 2013 (through March 19)
|
27.66
|
26.41
|
54.12
|
52.04
|
48.24
|
45.41
|
B.
|
Plan of Distribution
|
C.
|
Markets
|
|
·
|
created a disclosure policy for material facts and corporate actions
(Política de Divulgação de Ato e Fato Relevante)
;
|
|
·
|
created a policy for internal controls related to financial information
(Normativa sobre Registro, Comunicação e Controle de Informação Financeiro-Contábil)
;
|
|
·
|
created Service Quality and Marketing Committee;
|
|
·
|
created Control and Audit Committee;
|
|
·
|
created Nominations, Compensation and Corporate Governance Committee;
|
|
·
|
created a policy to denounce fraud within the company (
Canal de Denúncias
);
|
|
·
|
created a policy for prior approval of contracting audit services
(Normativa sobre Aprovação Prévia de Serviços a serem Prestados pelo Auditor Externo)
;
|
|
·
|
created an internal rule of conduct relating to the securities market
(Regulamento Interno de Conduta)
;
|
|
·
|
created an Ethics Code in respect of handling financial information
(Normas de Conduta para Financeiros)
; and
|
|
·
|
created a policy regarding communication of information to the securities market
(Normativa sobre Comunicação de Informação aos Mercados)
.
|
D.
|
Selling Shareholders
|
E.
|
Dilution
|
F.
|
Expenses of the Issue
|
ADDITIONAL INFORMATION
|
A.
|
Share Capital
|
B.
|
Memorandum and Articles of Association
|
|
·
|
an officer’s power to vote on proposals in which the officer has a personal interest;
|
|
·
|
an officer’s power to vote on his own compensation, even in the absence of an independent quorum;
|
|
·
|
age limits for retirement of officers;
|
|
·
|
required shareholding to qualify as a manager (officer); or
|
|
·
|
anti-takeover mechanisms or other procedures designed to delay, defer or prevent changes in our control.
|
|
·
|
preferred shares representing 10% of our total number of outstanding shares would be entitled to appoint a representative to our Board of Directors;
|
|
·
|
disputes among our shareholders would be subject to arbitration, if provided for in our bylaws;
|
|
·
|
a tender offer at a purchase price equal to fair value for all outstanding shares would be required upon a delisting or a substantial reduction in liquidity of our shares as a result of purchases by the controlling shareholders;
|
|
·
|
any sale of control would require the shareholders to tender for the minority shareholders’ common shares and, if provided for in our charter, for the minority shareholders’ preferred shares, at a purchase price at least equal to 80% of the price per share with voting rights paid to the controlling shareholder;
|
|
·
|
shareholders would be entitled to withdraw from us upon a spin-off only if it entailed a change in the corporate purpose, a reduction in mandatory dividends or the participation in a centralized group of companies;
|
|
·
|
the controlling shareholders, the shareholders that elect members to our Board of Directors and Fiscal Board, the members of our Board of Directors and Fiscal Board and our Executive Officers would be required to disclose any purchase or sale of our shares to the CVM and BM&FBOVESPA; and
|
|
·
|
we would be permitted to satisfy our information disclosure requirements through the Internet.
|
|
·
|
the election of one member to the Board of Directors and Fiscal Board in a straight vote;
|
|
·
|
bylaw modifications that seek to limit preferred shareholders’ voting rights in respect of selecting new Board members in a straight vote;
|
|
·
|
any agreements for the rendering of management services (including technical assistance services) between us and any foreign affiliate of our controlling shareholder;
|
|
·
|
resolutions amending certain provisions of our bylaws; and
|
|
·
|
any resolution submitted to the general shareholders meeting during our liquidation process.
|
|
·
|
upon sale on a stock exchange or public subscription;
|
|
·
|
through an exchange of shares in a public offering, with the purpose of acquiring control of another company; or
|
|
·
|
for the use of certain tax incentives.
|
(i)
|
creation of a new class of preferred shares or an increase in preferred shares of an existing class, without maintaining the proportion with the remaining classes;
|
(ii)
|
change in the preferences, advantages and conditions of redemption or amortization of one or more classes of preferred shares, or the creation of a class with more favorable rights or preferences;
|
(iii)
|
reduction of the mandatory dividend;
|
(iv)
|
merger into another company or consolidation with another company;
|
(v)
|
participation in a group of companies;
|
(vi)
|
change in the purpose of the corporation; and
|
(vii)
|
split-up of the corporation.
|
C.
|
Material Contracts
|
|
·
|
Vivo-Rio Grande do Sul except Pelotas, Capão do Leão, Morro Redondo e Turuçu (“A” band) until 2022 (renewed in 2007);
|
|
·
|
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 (renewed in 2008); or 2024, for the cities of Ribeirão Preto and Guatapará (renewed in 2009);
|
|
·
|
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 2009);
|
|
·
|
Vivo-Goiás/Tocantins (“A” band) until 2023 (renewed in 2008);
|
|
·
|
Vivo-Amazonas/Roraima/Amapá/Pará/Maranhão (“B” band) until 2013;
|
|
·
|
Vivo Minas Gerais* (“A” band) until 2023 (renewed in 2008);
|
|
·
|
Vivo for the cities in which CTBC Telecom operates in the state of Minas Gerais* (“E” band) until 2020;
|
|
·
|
Vivo-Rio Grande do Sul (“L” band) until 2022 (renewed in 2007) including cities in the Pelotas metropolitan area;
|
|
·
|
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 (renewed in 2008), the cities of Ribeirão Preto, Guatapará and Bonfim Paulista (renewed in 2009) until 2024, and the cities where CTBC Telecom operates in the state of São Paulo until 2022;
|
|
·
|
Vivo-Paraná (excluding the cities of Londrina and Tamarana)/Santa Catarina (“L” band) until 2013;
|
|
·
|
Vivo-Federal District (“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) and the city of Paranaíba de Mato Grosso do Sul until 2022;
|
|
·
|
Vivo-Goiás/Tocantins (“L” band) until 2023 (renewed in 2008) and the cities where CTBC Telecom operates in the state of Goiás until 2022; and
|
|
·
|
Vivo-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“L” band) until 2022;
|
|
·
|
Vivo-Rio Grande do Sul (including cities in the Pelotas metropolitan area) (“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, Guatapará and Bonfim Paulista 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-Federal District (“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; and
|
|
·
|
Vivo-Minas Gerais* (including the cities where CTBC Telecom operates in the state of Minas Gerais) (“J” band) until 2023
|
|
·
|
"M" Band (1800 MHz) in the Federal District and the states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia and Acre;
|
|
·
|
Extension of the 1800 MHz band throughout the State of São Paulo;
|
|
·
|
“D" Band (1800 MHz) in the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu in the state of Rio Grande do Sul;
|
|
·
|
"E" Band (1800 MHz) in the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
|
|
·
|
Extension of the 900 MHz band in the State of Rio de Janeiro;
|
|
·
|
Extension of the 900 MHz band in the State of Espírito Santo;
|
|
·
|
Extension of the 900 MHz band in the States of Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia and Acre and the Federal District, with the exception of the cities of Paranaíba in the state of Mato Grosso do Sul and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
Extension of the 900 MHz band in the State of Rio Grande do Sul, with the exception of the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu;
|
|
·
|
Extension of the 900 MHz band in the cities of registry area number 43 in the state of Paraná with the exception of the cities of Londrina and Tamarana;
|
|
·
|
Extension of the 900 MHz band in the States of Paraná and Santa Catarina with the exception of the cities of registry area number 43 in the state of Paraná and the cities of Londrina and Tamarana;
|
|
·
|
Extension of the 900 MHz band in the state of Bahía;
|
|
·
|
Extension of the 900 MHz band in the state of Sergipe;
|
|
·
|
Extension of the 900 MHz band in the states of Amazonas, Amapá, Maranhão Pará and Roraima;
|
|
·
|
Extension of the 1800 MHz band in the state of São Paulo, with the exception of the cities in the metropolitan area of São Paulo and the cities where CTBC Telecom operates in the state of São Paulo;
|
|
·
|
Extension of the 1800 MHz band in the States of Amazonas, Amapá, Maranhão Pará and Roraima;
|
|
·
|
Extension of the 1800 MHz band in the city of Paranaíba in the state of Mato Grosso do Sul;
|
|
·
|
Extension of the 1800 MHz band in the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
Another extension of the 1800 MHz band in the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
Extension of the 1800 MHz band in the states of Rio do Janeiro, Espírito Santo, Bahía and Sergipe;
|
|
·
|
Extension of the 1800 MHz band in the states of Amazonas, Amapá, Maranhão Pará and Roraima;
|
|
·
|
Extension of the 1800 MHz band in the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
|
|
·
|
Extension of the 1800 MHz band in the city of Paranaíba in the state of Mato Grosso do Sul, and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
Extension of the 1800 MHz band in the cities of Londrina and Tamarana in the state of Paraná;
|
|
·
|
Vivo Brasil (“X” Band – 2500 MHz) until 2027 (associated to SMP service);
|
|
·
|
Vivo AL, CE, MG, PB, PE, PI, RN, SE (450 MHz) until 2027 (associated to STFC and SCM services);
|
|
·
|
Vivo in the areas identified by the National Codes 13, 14, 15, 16, 17, 18 e 19, in the state of São Paulo (SP), until 2027 (associated to SMP and SCM services).
|
D.
|
Exchange Controls
|
E.
|
Taxation
|
|
·
|
Gains on the disposition of preferred shares obtained upon cancellation of ADSs are not taxed in Brazil if the proceeds are remitted abroad within five business days of cancellation, unless the investor is a resident of a jurisdiction that, under Brazilian law, is deemed to be a tax haven.
|
|
·
|
Gains realized on the disposition of preferred shares through transactions with Brazilian residents or through transactions in Brazil off the Brazilian stock exchanges are generally subject to tax at a rate of 15%, or 25% in the case of a non-Brazilian holder residing in a tax haven jurisdiction.
|
|
·
|
Gains realized on preferred shares through transactions on Brazilian stock exchanges (including the organized over-the-counter market) are generally subject to tax at a rate of 15%, as of January 2005, unless the investor
|
|
|
is entitled to tax-free treatment for the transaction under Resolution No. 2,689 of the National Monetary Council Regulations, as described immediately below. Non-Brazilian holders residing in a tax haven jurisdiction may be subject to tax at a rate of up to 25%.
|
|
·
|
certain financial institutions;
|
|
·
|
dealers or traders in securities who use a mark-to-market method of tax accounting;
|
|
·
|
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;
|
|
·
|
entities classified as partnerships for U.S. federal income tax purposes;
|
|
·
|
persons liable for the alternative minimum tax or the Medicare contribution tax;
|
|
·
|
tax-exempt organizations;
|
|
·
|
persons that own or are deemed to own 10% or more of our voting stock;
|
|
·
|
persons who acquired our ADSs or preferred shares pursuant to the exercise of any employee stock option or otherwise as compensation; or
|
|
·
|
persons holding preferred shares or ADSs in connection with a trade or business conducted outside of the United States.
|
|
·
|
a citizen or 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, any state therein or the District of Columbia; or
|
|
·
|
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
|
F.
|
Dividends and Paying Agents
|
G.
|
Statement of Experts
|
H.
|
Documents on Display
|
I.
|
Subsidiary Information
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Persons depositing or withdrawing shares must pay:
|
For:
|
|
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)
|
·
Issuance of ADSs upon deposit of Shares, excluding issuances as a result of distributions
·
Delivery of Deposited Securities against surrender of ADSs
·
Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements)
·
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs
·
Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares)
·
Depositary Services
|
|
Registration or transfer fees
|
·
Registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively
|
|
Expenses of the depositary
|
·
Cable, telex and facsimile transmissions and delivery expenses as are expressly provided in the Deposit Agreement
·
Conversion of foreign currency
|
|
Taxes (including applicable interest and penalties) and other governmental charges
|
·
As necessary
|
|
Fees and expenses incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs
|
·
As necessary
|
|
Fees and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the servicing or delivery of Deposited Property
|
·
As necessary
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS PROCEDURES
|
CONTROLS AND PROCEDURES
|
[RESERVED]
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
CODE OF ETHICS
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2012
|
2011
|
2010
|
||||||||||
(in thousands of
reais
)
|
||||||||||||
Audit Fees
|
11,589 | 7,002 | 4,474 | |||||||||
Audit-Related Fees
|
2,772 | 1,305 | 755 | |||||||||
Tax Fees
|
– | 58 | 17 | |||||||||
All Other Services
|
– | – | – | |||||||||
Total
|
14,361 | 8,365 | 5,246 |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES PROCEDURES
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
CORPORATE GOVERNANCE
|
MINE SAFETY DISCLOSURE
|
FINANCIAL STATEMENTS
|
FINANCIAL STATEMENTS
|
EXHIBITS
|
Exhibit number
|
Description
|
|
1.1
|
Bylaws of Telefônica Brasil S.A., as amended (unofficial English translation).
|
|
2(a)
|
Deposit Agreement dated as of January 28, 2013, among Telefônica Brasil S.A., Citibank N.A., as Depositary, and Owners and Beneficial Owners of American Depositary Receipts issued thereunder.(1)
|
|
4(a).1
|
Contract and Justification of the Merger of Telefónica Data Brasil Holding S.A. into Telecomunicações De São Paulo S.A. – TELESP and Partial Spin-Off of Telefónica Empresas S.A. dated March 9, 2006.(2)
|
|
4(a).2
|
Credit facility with BNDES dated October 14, 2011.(3)
|
|
4(b).1
|
Certificate of Authorization to Provide Multimedia Communication Service between Agência Nacional de Telecomunicações – ANATEL and Global telecom S.A. dated March 19, 2004 (English language summary).
|
|
4(b).2
|
Authorization Term of the Personal Mobile Service (Region II) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated January 18, 2010 (English language summary). | |
4(b).3
|
Authorization Term of the Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated January 18, 2010 (English language summary). | |
4(b).4
|
Certificate of Authorization to Provide Commuted Fixed Telephone Service in Local Modality (Regions I and II) between Agência Nacional De Telecomunicações and Vivo S.A. dated September 5, 2011 (English language summary).
|
|
4(b).5
|
Certificate of Authorization to Provide Commuted Fixed Telephone Service in National Long-Distance Modality (Regions I and II) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated September 5, 2011 (English language summary).
|
|
4(b).6
|
Certificate of Authorization to Provide Commuted Fixed Telephone Service in International Long-Distance Modality (Regions I and II) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated September 5, 2011 (English language summary).
|
|
4(b).7
|
Authorization Term of the Personal Mobile Service (Region I) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated February 7, 2012 (English language summary).
|
|
4(b).8
|
Grant Authorization Term for Spectrum Blocks Associated with Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated October 16, 2012 (English language summary).
|
4(b).9
|
Grant Authorization Term for Spectrum Blocks Associated with Personal Mobile Service (Region II) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated October 16, 2012 (English language summary).
|
|
4(b).10
|
Grant Authorization Term for Spectrum Blocks Associated with Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated October 16, 2012 (English language summary).
|
|
4(b).11
|
Grant Authorization Term for Spectrum Blocks Associated with Personal Mobile Service and Multimedia Communication (Areas identified by the National Codes 13, 14, 15, 16, 17, 18 and 19, in the state of São Paulo) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated October 16, 2012 (English language summary).
|
|
4(b).12
|
Grant Authorization Term for Spectrum Blocks Associated with Personal Mobile Service and Multimedia Communication (States of Alagoas, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe) between Agência Nacional de Telecomunicações – ANATEL and Vivo S.A. dated October 16, 2012 (English language summary).
|
|
8.1
|
List of Subsidiaries
|
|
11.1
|
Code of Ethics of Telefônica Brasil S.A.(4)
|
|
12.1
|
Section 302 Certification of the Chief Executive Officer.
|
|
12.2
|
Section 302 Certification of the Chief Financial Officer.
|
|
13.1
|
Section 906 Certification of the Chief Executive Officer.
|
|
13.2
|
Section 906 Certification of the Chief Financial Officer.
|
(1)
|
Incorporated by reference to our Registration Statement of American Depositary Receipt shares on Form F-6 (No. 333-185518) filed with the Commission on December 17, 2012.
|
(2)
|
Incorporated by reference to our form CB filed with the Commission on March 14, 2006.
|
(3)
|
Incorporated by reference to our annual report on Form 20-F (No. 001-14475) filed with the Commission on April 20, 2012.
|
(4)
|
Incorporated by reference to our annual report on Form 20-F (No. 001-14475) filed with the Commission on April 16, 2007.
|
TELEFÔNICA BRASIL S.A.
|
||||
By:
|
/s/ Antonio Carlos Valente da Silva
|
|||
Name:
|
Antonio Carlos Valente da Silva
|
|||
Title:
|
Chief Executive Officer
|
By:
|
/s/ Paulo Cesar Pereira Teixeira
|
|||
Name:
|
Paulo Cesar Pereira Teixeira
|
|||
Title:
|
General and Executive Officer and as interim Chief Financial Officer, Control and Investor Relations Officer
|
Contents
|
|
Note
|
As of December 31,
|
||||||||||
Assets
|
2012
|
2011
|
|||||||||
Current assets
|
16,271,942 | 11,810,118 | |||||||||
Cash and cash equivalents
|
5 | 7,196,079 | 2,940,342 | ||||||||
Trade accounts receivable, net
|
6 | 5,513,436 | 5,105,860 | ||||||||
Inventories
|
7 | 387,809 | 471,721 | ||||||||
Recoverable taxes
|
8.1 | 2,052,423 | 2,495,066 | ||||||||
Escrow deposits
|
9 | 126,625 | 116,421 | ||||||||
Derivative transactions
|
36 | 41,109 | 1,840 | ||||||||
Prepaid expenses
|
10 | 248,337 | 255,056 | ||||||||
Other
|
11 | 706,124 | 423,812 | ||||||||
Noncurrent assets
|
53,892,725 | 53,679,855 | |||||||||
Long-term portion of investments pledged as collateral
|
109,708 | 124,668 | |||||||||
Trade accounts receivable, net
|
6 | 93,378 | 84,855 | ||||||||
Recoverable taxes
|
8.1 | 738,965 | 1,014,959 | ||||||||
Deferred taxes
|
8.2 | 1,029,598 | 1,428,878 | ||||||||
Escrow deposits
|
9 | 3,909,474 | 3,374,690 | ||||||||
Derivative transactions
|
36 | 286,278 | 225,935 | ||||||||
Prepaid expenses
|
10 | 31,396 | 32,138 | ||||||||
Other
|
11 | 140,105 | 148,293 | ||||||||
Investments
|
12 | 23,683 | 37,835 | ||||||||
Property, plant and equipment, net
|
13 | 17,610,851 | 17,153,920 | ||||||||
Intangible assets, net
|
14 | 30,009,289 | 30,053,684 | ||||||||
Total Assets
|
70,254,667 | 65,489,973 |
Note
|
As of December 31,
|
||||||||||
Liabilities and Shareholders’ Equity
|
2012
|
2011
|
|||||||||
Current Liabilities
|
13,537,471 | 12,740,263 | |||||||||
|
|||||||||||
Payroll and related accruals
|
15 | 416,355 | 495,624 | ||||||||
Trade accounts payable
|
16 | 5,889,377 | 6,037,315 | ||||||||
Taxes payable
|
17 | 1,781,480 | 1,691,991 | ||||||||
Loans and financing
|
18.1 | 1,255,323 | 988,413 | ||||||||
Debentures
|
18.2 | 702,215 | 468,624 | ||||||||
Dividends and interest on shareholders’ equity payable
|
19 | 467,831 | 972,986 | ||||||||
Provisions
|
20 | 496,790 | 416,313 | ||||||||
Derivative transactions
|
36 | 29,586 | 51,162 | ||||||||
Deferred revenue
|
21 | 734,573 | 761,268 | ||||||||
Share fractions
|
389,510 | 389,953 | |||||||||
Licenses
|
1 | 994,977 | - | ||||||||
Other
|
22 | 379,454 | 466,614 | ||||||||
Noncurrent Liabilities
|
12,036,076 | 9,418,925 | |||||||||
Taxes payable
|
17 | 488,749 | 433,071 | ||||||||
Deferred taxes
|
8.2 | 1,216,651 | 788,954 | ||||||||
Loans and financing
|
18.1 | 3,756,001 | 3,959,115 | ||||||||
Debentures
|
18.2 | 2,253,690 | 787,807 | ||||||||
Provisions
|
20 | 3,846,899 | 3,147,085 | ||||||||
Derivative transactions
|
36 | 26,545 | 78,369 | ||||||||
Deferred revenue
|
21 | 303,362 | 156,266 | ||||||||
Other
|
22 | 144,179 | 68,258 | ||||||||
Shareholders’ equity
|
23 | 44,681,120 | 43,330,785 | ||||||||
Capital
|
37,798,110 | 37,798,110 | |||||||||
Capital reserves
|
2,686,897 | 2,719,665 | |||||||||
Legal reserve
|
1,100,000 | 877,322 | |||||||||
Premium on acquisition of non-controlling interest
|
(70,448 | ) | (29,929 | ) | |||||||
Other comprehensive Income
|
17,792 | 7,520 | |||||||||
Additional proposed dividends
|
3,148,769 | 1,953,029 | |||||||||
Non-controlling shareholders
|
- | 5,068 | |||||||||
Total Liabilities
|
70,254,667 | 65,489,973 |
Note
|
2012
|
2011
|
2010
|
||||||||||||
Net operating revenue
|
24 | 33,931,422 | 29,128,740 | 15,798,251 | |||||||||||
Cost of goods and services
|
25 | (16,564,464 | ) | (15,039,663 | ) | (8,844,805 | ) | ||||||||
Gross profit
|
17,366,958 | 14,089,077 | 6,953,446 | ||||||||||||
Operating (expenses) income
|
(10,154,669 | ) | (8,291,711 | ) | (3,388,110 | ) | |||||||||
Selling
|
26 | (8,693,696 | ) | (6,948,211 | ) | (2,964,632 | ) | ||||||||
General and administrative
|
27 | (2,148,476 | ) | (1,785,658 | ) | (738,846 | ) | ||||||||
Equity in earnings (losses) of associates
|
12 | - | - | 2,889 | |||||||||||
Other operating income, net
|
28 | 687,503 | 442,158 | 312,479 | |||||||||||
Operating income before financial expenses, net
|
7,212,289 | 5,797,366 | 3,565,336 | ||||||||||||
Financial income
|
29 | 1,281,554 | 1,103,359 | 344,354 | |||||||||||
Financial expense
|
29 | (1,572,369 | ) | (1,243,051 | ) | (465,092 | ) | ||||||||
Income before income tax and social contribution
|
6,921,474 | 5,657,674 | 3,444,598 | ||||||||||||
Income tax and social contribution
|
30 | (2,469,293 | ) | (1,295,475 | ) | (1,045,762 | ) | ||||||||
Net income for the year
|
4,452,181 | 4,362,199 | 2,398,836 | ||||||||||||
Attributed to:
|
|||||||||||||||
Net income attributed to non-controlling shareholders
|
(1,392 | ) | 6,881 | - | |||||||||||
Net income attributed to controlling shareholders
|
4,453,573 | 4,355,318 | 2,398,836 | ||||||||||||
Basic and diluted earnings per share – common
|
3.72 | 4.40 | 4.45 | ||||||||||||
Basic and diluted earnings per share – preferred
|
4.09 | 4.84 | 4.89 |
2012
|
2011
|
2010
|
||||||||||
Net income for the year
|
4,452,181 | 4,362,199 | 2,398,836 | |||||||||
Unrealized losses on investments available for sale
|
(5,536 | ) | (5,170 | ) | (117,609 | ) | ||||||
Taxes on unrealized losses on investments available for sale
|
1,882 | 1,758 | 39,987 | |||||||||
Unrealized actuarial gains (losses) and effect of the limitation of surplus plan assets
|
(69,782 | ) | (65,176 | ) | (60,585 | ) | ||||||
Taxes on unrealized actuarial gains (losses) and effect of the limitation of surplus plan assets
|
23,726 | 22,179 | 18,522 | |||||||||
Gains (losses) on cash flow hedge
|
12,416 | 3,022 | - | |||||||||
Taxes on gains (losses) on cash flow hedge
|
(4,221 | ) | (1,027 | ) | - | |||||||
Cumulative translation adjustments of foreign currency transactions
|
5,731 | 4,520 | (6,778 | ) | ||||||||
Net gains (losses) recognized in equity
|
(35,784 | ) | (39,894 | ) | (126,463 | ) | ||||||
Comprehensive income for the year
|
4,416,397 | 4,322,305 | 2,272,373 | |||||||||
Attributable to:
|
||||||||||||
Net income attributed to non-controlling shareholders
|
(1,392 | ) | 6,881 | - | ||||||||
Net income attributed to controlling shareholders
|
4,417,789 | 4,315,424 | 2,272,373 |
Capital
|
Premium
paid on
acquisition
of non-
controlling
interest
|
Special
Goodwill
reserve
|
Capital
reserves
|
Treasury
shares
|
Legal
Reserve
|
Retained
Earnings
|
Additional
proposed
dividend
|
Unrealized
gains on
available
for sale
securities,
net of tax
|
Cash
flow
hedge
|
Cumulative
translation
adjustments
|
Shareholders’
equity of
company
|
Participation
of non-
controlling
shareholders
|
Total
shareholders’
equity
|
|||||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2009
|
6,575,480 | - | 63,074 | 2,688,207 | (17,719 | ) | 659,556 | (8,759 | ) | 1,251,646 | 90,918 | - | (2,101 | ) | 11,300,302 | - | 11,300,302 | |||||||||||||||||||||||||||||||||||||||
Unclaimed dividends and interest on shareholders’ equity, net of taxes
|
- | - | - | - | - | 134,440 | - | - | - | - | 134,440 | - | 134,440 | |||||||||||||||||||||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | - | 2,398,836 | - | - | - | - | 2,398,836 | - | 2,398,836 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | (42,063 | ) | - | (77,622 | ) | - | (6,778 | ) | (126,463 | ) | - | (126.463 | ) | |||||||||||||||||||||||||||||||||||||
Appropriations:
|
- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends
|
- | - | - | - | - | (196,355 | ) | (1,251,646 | ) | - | - | - | (1,448,001 | ) | - | (1,448,001 | ) | |||||||||||||||||||||||||||||||||||||||
Interest on shareholders’ equity
|
- | - | - | - | - | - | (503,200 | ) | - | - | - | - | (503,200 | ) | - | (503,200 | ) | |||||||||||||||||||||||||||||||||||||||
Withholding tax on interest on shareholders’ equity
|
- | - | - | - | - | - | (88,800 | ) | - | - | - | - | (88,800 | ) | - | (88,800 | ) | |||||||||||||||||||||||||||||||||||||||
Additional proposed dividend
|
- | (1,694,099 | ) | 1,694,099 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2010
|
6,575,480 | - | 63.074 | 2,688,207 | (17,719 | ) | 659,556 | - | 1,694,099 | 13,296 | - | (8,879 | ) | 11,667,114 | - | 11,667,114 | ||||||||||||||||||||||||||||||||||||||||
Proposed additional dividend for 2010
|
- | - | - | - | - | - | - | (1,694,099 | ) | - | - | - | (1,694,099 | ) | - | (1,694,099 | ) | |||||||||||||||||||||||||||||||||||||||
Unclaimed dividends and interest on shareholders’ equity, net of taxes
|
- | - | - | - | - | 107,874 | - | - | - | - | 107,874 | - | 107,874 | |||||||||||||||||||||||||||||||||||||||||||
Capital increase due to the acquisition of Vivo Part. on 04/27/2011
|
31,222,630 | - | - | 47,723 | - | - | - | - | - | - | - | 31,270,353 | - | 31,270,353 | ||||||||||||||||||||||||||||||||||||||||||
Withdrawal rights paid to shareholders due to the acquisition of Vivo Part.
|
- | - | - | - | (3 | ) | - | - | - | - | - | - | (3 | ) | - | (3 | ) | |||||||||||||||||||||||||||||||||||||||
Repurchase of shares
|
- | - | - | - | (61,617 | ) | - | - | - | - | - | - | (61,617 | ) | (61,617 | ) | ||||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling shareholders
|
- | (29,929 | ) | - | - | - | - | - | - | - | - | (29,929 | ) | (1,813 | ) | (31,742 | ) | |||||||||||||||||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | - | 4,355,318 | - | - | - | - | 4,355,318 | 6,881 | 4,362,199 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | (42,997 | ) | (3,412 | ) | 1,995 | 4,520 | (39,894 | ) | (39,894 | ) | ||||||||||||||||||||||||||||||||||||||||
Appropriations
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
Dividends
|
- | - | - | - | - | (382,400 | ) | - | - | - | - | (382,400 | ) | - | (382,400 | ) | ||||||||||||||||||||||||||||||||||||||||
Interest on shareholders’ equity
|
- | - | - | - | - | - | (1,867,000 | ) | - | - | - | - | (1,867,000 | ) | - | (1,867,000 | ) | |||||||||||||||||||||||||||||||||||||||
Legal Reserve
|
- | - | - | - | - | 217,766 | (217,766 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Additional proposed dividend
|
- | - | - | - | - | - | (1,953,029 | ) | 1,953,029 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2011
|
37,798,110 | (29,929 | ) | 63,074 | 2,735,930 | (79,339 | ) | 877,322 | - | 1,953,029 | 9,884 | 1,995 | (4,359 | ) | 43,325,717 | 5,068 | 43,330,785 | |||||||||||||||||||||||||||||||||||||||
Proposed additional dividend for 2011
|
- | - | - | - | - | - | - | (1,953,029 | ) | - | - | - | (1,953,029 | ) | - | (1,953,029 | ) | |||||||||||||||||||||||||||||||||||||||
Unclaimed dividends and interest on shareholders’ equity, net of taxes
|
- | - | - | - | - | - | 89,692 | - | - | - | - | 89,692 | - | 89,692 | ||||||||||||||||||||||||||||||||||||||||||
Other changes in equity
|
- | - | - | - | - | - | (3,240 | ) | - | - | - | - | (3,240 | ) | (23 | ) | (3,263 | ) | ||||||||||||||||||||||||||||||||||||||
Repurchase of shares
|
- | - | - | - | (32,768 | ) | - | - | - | - | - | - | (32,768 | ) | - | (32,768 | ) | |||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling shareholders
|
- | (40,519 | ) | - | - | - | - | - | - | - | - | - | (40,519 | ) | (3,653 | ) | (44,172 | ) | ||||||||||||||||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | - | 4,453,573 | - | - | - | - | 4,453,573 | (1,392 | ) | 4,452,181 | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | (46,056 | ) | - | (3,654 | ) | 8,195 | 5,731 | (35,784 | ) | - | (35,784 | ) | ||||||||||||||||||||||||||||||||||||||
Appropriations
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends
|
- | - | - | - | - | - | (1,122,522 | ) | - | - | - | - | (1,122,522 | ) | - | (1,122,522 | ) | |||||||||||||||||||||||||||||||||||||||
Legal Reserve
|
- | - | - | - | - | 222,678 | (222,678 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Additional proposed dividend
|
- | - | - | - | - | - | (3,148,769 | ) | 3,148,769 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2012
|
37,798,110 | (70,448 | ) | 63,074 | 2,735,930 | (112,107 | ) | 1,100,000 | - | 3,148,769 | 6,230 | 10,190 | 1,372 | 44,681,120 | - | 44,681,120 | ||||||||||||||||||||||||||||||||||||||||
Outstanding shares (thousand) | 1,123,269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Book value per share | 39.78 |
2012
|
2011
|
2010
|
||||||||||
Cash flows from operations
|
||||||||||||
Income before income tax and social contribution
|
6,921,474 | 5,657,674 | 3,444,598 | |||||||||
Items that do not affect cash
|
||||||||||||
Expenses (revenues) not affecting cash
|
6,139,975 | 5,683,221 | 2,359,272 | |||||||||
Depreciation and amortization
|
5,493,159 | 4,585,994 | 1,913,494 | |||||||||
Exchange variations from loans
|
(1,254 | ) | 89,549 | (638 | ) | |||||||
Monetary variations
|
51,860 | (30,323 | ) | 34,580 | ||||||||
(Gain)/ Loss from equity in earnings of associates
|
- | - | (2,889 | ) | ||||||||
Gain on permanent asset disposals
|
(1,049,692 | ) | (482,115 | ) | (317,486 | ) | ||||||
Allowance for doubtful accounts
|
654,273 | 506,581 | 386,340 | |||||||||
Provision for (reversal of) trade accounts payable
|
(73,645 | ) | 365,415 | 57,703 | ||||||||
Provision for (write-offs and reversal of) impairment of inventories
|
791 | (8,966 | ) | 31,091 | ||||||||
Pension and other post-retirement benefits plans
|
(3,244 | ) | (1,163 | ) | 4,504 | |||||||
Tax, civil and labor provisions
|
514,840 | 255,420 | 25,578 | |||||||||
Interest expense
|
551,580 | 416,426 | 240,367 | |||||||||
Provision for dismantling costs
|
(7,854 | ) | (33,138 | ) | 4,332 | |||||||
Provision for loyalty program
|
14,026 | 9,861 | - | |||||||||
Others
|
(4,865 | ) | 9,680 | (17,704 | ) | |||||||
(Increase) decrease in operating assets
|
(557,118 | ) | (479,896 | ) | (239,605 | ) | ||||||
Trade accounts receivable, net
|
(1,070,370 | ) | (933,558 | ) | 87,501 | |||||||
Inventories
|
83,122 | (47,355 | ) | 39,846 | ||||||||
Other current assets
|
339,327 | 601,573 | (61,161 | ) | ||||||||
Other noncurrent assets
|
90,803 | (100,556 | ) | (305,791 | ) | |||||||
Increase (decrease) in operating liabilities
|
(2,771,162 | ) | (2,719,624 | ) | (1,032,007 | ) | ||||||
Payroll and related accruals
|
(79,270 | ) | (56,908 | ) | 166,994 | |||||||
Trade accounts payable
|
(613,004 | ) | (279,721 | ) | (84,058 | ) | ||||||
Taxes other than income taxes
|
132,911 | 130,058 | (8,043 | ) | ||||||||
Other current liabilities
|
(216,292 | ) | (521,056 | ) | 43,621 | |||||||
Other noncurrent liabilities
|
(76,893 | ) | (97,655 | ) | (3,031 | ) | ||||||
Interest paid
|
(438,409 | ) | (496,103 | ) | (265,792 | ) | ||||||
Income and social contribution taxes paid
|
(1,480,205 | ) | (1,398,239 | ) | (881,698 | ) | ||||||
Cash provided by operations
|
9,733,169 | 8,141,375 | 4,532,258 |
2012
|
2011
|
2010
|
||||||||||
Cash flows generated from (used in) investing activities
|
||||||||||||
Capital increase in subsidiaries and associates
|
- | - | (3,557 | ) | ||||||||
Acquisition of fixed and intangible assets, net of grants
|
(4,549,100 | ) | (4,653,708 | ) | (2,126,465 | ) | ||||||
Cash from sales of fixed assets
|
1,136,649 | 610,880 | 292,858 | |||||||||
Cash from sales of investment
|
10,069 | - | 178,453 | |||||||||
Dividends and interest on shareholder’s equity received
|
5,129 | - | - | |||||||||
Cash and cash equivalents from consolidation of companies
|
- | 31,095 | - | |||||||||
Cash and cash equivalents from business combination
|
- | 1,982,898 | - | |||||||||
Cash used in investing activities
|
(3,397,253 | ) | (2,028,835 | ) | (1,658,711 | ) | ||||||
Cash flows generated from (used in) financing activities
|
||||||||||||
Loans paid
|
(1,279,654 | ) | (1,426,334 | ) | (1,742,818 | ) | ||||||
New loans obtained
|
2,815,825 | 2,123,727 | 74,275 | |||||||||
Net payment on derivatives contracts
|
(45,413 | ) | 56,765 | (5,399 | ) | |||||||
Dividends and interest on shareholders’ equity paid
|
(3,493,997 | ) | (5,387,601 | ) | (1,919,906 | ) | ||||||
Acquisition of non-controlling interest
|
(44,172 | ) | (33,850 | ) | - | |||||||
Repurchase of shares
|
(32,768 | ) | (61,620 | ) | - | |||||||
Cash used in financing activities
|
(2,080,179 | ) | (4,728,913 | ) | (3,593,848 | ) | ||||||
Increase (decrease) in cash and cash equivalents
|
4,255,737 | 1,383,627 | 720,301 | |||||||||
Cash and cash equivalents at beginning of year
|
2,940,342 | 1,556,715 | 2,277,016 | |||||||||
Cash and cash equivalents at end of year
|
7,196,079 | 2,940,342 | 1,556,715 | |||||||||
Changes in cash during the year
|
4,255,737 | 1,383,627 | 720,301 |
1.
|
Operations and background
|
a)
|
Shareholding controlling interest
|
b)
|
Operations
|
b.1.
|
Fixed Switch Telephone Service Concession Arrangement (STFC)
|
b.2.
|
SMP-related authorizations and frequencies
|
c)
|
Subsidiaries
|
Subsidiaries
|
12/31/12
|
12/31/11
|
||
Vivo S.A. (a)
|
100%
|
100%
|
||
Telefônica Data S.A.
|
100%
|
100%
|
||
A.Telecom S.A.
|
100%
|
100%
|
||
Telefônica Sistema de Televisão S.A.
|
100%
|
100%
|
||
Ajato Telecomunicações Ltda.
|
100%
|
100%
|
||
GTR Participações e Empreend. S.A. (b)
|
100%
|
66.67%
|
||
TVA Sul Paraná S.A. (b)
|
100%
|
91.50%
|
||
Lemontree S.A. (b)
|
100%
|
83.00%
|
||
Comercial Cabo TV São Paulo S.A. (b)
|
100%
|
93.19%
|
||
Aliança Atlântica Holding B.V.(c)
|
50%
|
50%
|
||
Companhia AIX de Participações (c)
|
50%
|
50%
|
||
Companhia ACT de Participações (c)
|
50%
|
50%
|
(a)
|
Fully consolidated as from April 2011 (Notes 1 and 4).
|
(b)
|
Fully consolidated as from January 2011 and wholly-owned subsidiaries as from June 2012.
|
(c)
|
Jointly-controlled companies.
|
d)
|
Share trading on stock exchanges
|
|
·
|
Type of share: preferred.
|
|
·
|
Each ADR represents 1 (one) preferred share.
|
|
·
|
Shares are traded as ADR through code “VIV” on the NYSE.
|
|
·
|
Foreign depositary bank: The Bank of New York.
|
|
·
|
Custodian bank in Brazil: Banco Itaú S.A.
|
e)
|
Corporate events
|
f)
|
Agreement between Telefônica S.A. and Telecom Itália (Act Nº3,804, of July 7, 2009, and Act No. 68,276, of October 31, 2007, both from ANATEL Board)
|
2.
|
Basis of presentation of the consolidated financial statements
|
a)
|
Acquisition of Vivo Part. by the Company
|
b)
|
Consolidation of TVA companies
|
c)
|
Acquisition of Lemontree and GTR shares
|
d)
|
Disposal of shares of Zon Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A.
|
e)
|
Corporate Restructuring
|
3.
|
Summary of significant accounting practices
|
a)
|
Cash and cash equivalents:
These are held to meet short-term cash commitments, and not for investment or other purposes. Cash and cash equivalents include cash, positive balances in current accounts and short-term investments redeemable within no longer than 90 days as from the date of contracts and with insignificant risk of change in market value (Note 5).
|
b)
|
Trade accounts receivable, net:
These are determined at the value of services provided according to the contracted conditions, net of the provision for impairment. It includes the services provided to customers who have not been billed up to the balance sheet date, as well as accounts receivable regarding sales of cell phones, simcards and accessories. The provision for impairment is set up in order to cover eventual losses, if any, and takes into consideration mainly the expected default (Note 6).
|
c)
|
Inventories:
These are stated at average cost of acquisition or net realizable value, whichever is lower. It includes cell phones, simcards, prepaid cards, accessories, consumables and maintenance. The net realizable value consists of the sale in the ordinary course of business, less estimated necessary costs for sale (Note 7).
|
d)
|
Prepaid expenses:
These are presented at the values actually disbursed on services engaged and not yet incurred. Prepaid expenses are allocated to profit or loss as services are provided and economic benefits are received (Note 10).
|
e)
|
Investments:
Equity interest in subsidiaries (individual or joint) is valued under the equity method in the individual financial statements. In the consolidated financial statements, investments in controlled companies are fully consolidated, and investments in jointly-controlled companies are consolidated in a proportional way.
|
f)
|
Property, plant and equipment, net:
These are stated at acquisition and/or construction cost, net of accumulated depreciation and provision for impairment, if applicable. Such cost includes the borrowing costs for long-term construction projects, whenever the recognition criteria are met, net of credits of State VAT (ICMS), which were recorded as taxes recoverable.
|
g)
|
Intangible Assets (including goodwill):
|
|
·
|
Intangible assets with definite life are amortized over the economic useful life under the straight-line method and assessed to determine impairment whenever there is evidence of loss of economic value of the asset. The amortization period and method for an intangible asset with definite life are revised once a year. Changes in the estimated useful life or in the expected consumption of future economic benefits from these assets are accounted for in light of changes in the amortization period or method, as the case may be, being treated as changes in accounting estimates.
|
|
·
|
Indefinite life intangible assets are not amortized, and a recoverability test is performed annually or when there are indications that the book value cannot be recovered. The assessment of indefinite life is annually revised to determine whether this assessment continues to be justifiable. Otherwise, the change in useful life from indefinite to definite is made on a prospective basis.
|
h)
|
Leasing
: The agreements containing clauses on use of specific assets and rights to use assets are assessed to identify the accounting treatment to be given from a leasing viewpoint.
|
i)
|
Analysis of the recoverability of assets: In compliance with
IAS 36/CPC1 (R1), the Company and its subsidiaries revise, as so required, the net book value of assets to assess events or changes in the economic, operating or technological circumstances which may indicate deterioration or impairment.
|
i.1)
|
Goodwill
: The impairment test is performed annually, at the end of the fiscal year or when circumstances indicate impairment loss of book value.
|
i.2)
|
Intangible assets
:
indefinite life intangible assets are tested for impairment once a year, whether individually or at cash generating unit level, as the case may be, or when the circumstances indicate impairment of book value.
|
i.3)
|
Determination of value in use
:
The main assumptions used to estimate the value in use are as follows:
|
|
·
|
Revenues
: Revenues are projected considering the growth of the customers base, the evolution of market revenues in view of GDP and the equity interest held by the Company and its subsidiaries in this market;
|
|
·
|
Operating costs and expenses
: Variable costs and expenses are projected in accordance with the dynamics of the customers base, and fixed costs are projected in line with the historical performance of the Company and its subsidiaries, as well as the historical growth of revenues; and
|
|
·
|
Capital investments
: Investments in capital goods are estimated in view of the technological infrastructure necessary to make feasible service offer.
|
j)
|
Business combination and goodwill
|
k)
|
Financial instruments and cash and cash equivalents
|
|
•
|
The rights to receive cash flows from asset expire;
|
|
•
|
the Company transferred its rights to receive future cash flows from asset or took on an obligation to fully pay a third party cash flows received, without any significant delay, by operation of a “transfer” agreement; and (i) the Company substantially transferred all risks and benefit attached to the asset, or (ii) the Company neither substantially transferred nor withheld all risks and benefits attached to the asset, but transferred the control over it.
|
l)
|
Derivative financial instruments and hedge accounting
|
|
•
|
Whenever the Company and its subsidiaries hold a derivative as economic hedge (and do not apply hedge accounting) for a period longer than 12 months after the balance sheet date, the derivative is classified as noncurrent (or segregated between current and noncurrent), consistently with the classification of the related item.
|
|
•
|
Derivative instruments classified as effective hedge are classified consistently with the classification of the related hedged item.
|
m)
|
Borrowing Costs
|
n)
|
Interest on shareholder’s equity and dividends
|
o)
|
Provisions
|
p)
|
Taxes, charges and contributions
|
q)
|
Other assets and liabilities
|
r)
|
Present value adjustment of assets and liabilities
|
s)
|
Government Grants
|
t)
|
Revenue recognition
|
u)
|
Financial income and expenses
|
v)
|
Post-retirement benefit plans
|
w)
|
Significant accounting judgment, estimates and assumptions
|
x)
|
Functional and reporting currency
|
y)
|
Transactions denominated in foreign currency
|
z)
|
Employee profit sharing
|
aa)
|
Transactions involving payment in shares
|
bb)
|
Treasury shares
|
cc)
|
Noncontrolling interests
|
dd)
|
Information on operating segments
|
ee)
|
Cash flow statement and statement of value added
|
4.
|
Acquisition of Vivo Participações S.A. (Vivo Part.)
|
Information (in thousands of R$)
|
Fair Value
|
|||
Current assets
|
7,244,124 | |||
Noncurrent assets
|
28,134,683 | |||
Deferred tax assets, net
(b)
|
417,883 | |||
Other noncurrent assets
|
2,385,177 | |||
Property, plant and equipment
|
6,198,358 | |||
Intangible assets
(a)
|
19,133,265 | |||
Current liabilities
|
(7,964,209 | ) | ||
Noncurrent liabilities
|
(5,352,456 | ) | ||
Other noncurrent liabilities
(c)
|
(5,352,456 | ) | ||
Net assets
|
22,062,142 | |||
Equity expenses
|
1,222,630 | |||
Goodwill on operation
|
9,160,488 |
(a)
|
Includes the fair value allocated to licenses (R$12,876,000), to brand (R$1,642,000) and customer portfolio (R$2,042,000). The Company did not consider the customer portfolio or brand as tax deductible.
|
(b)
|
Includes the recognition of deferred income taxes on (a) and (c).
|
(c)
|
Includes the allocation of fair value to contingent liabilities R$283,000.
|
5.
|
Cash and cash equivalents
|
2012
|
2011
|
|||||||
Cash and banks
|
94,454 | 77,404 | ||||||
Short-term investments
|
7,101,625 | 2,862,938 | ||||||
Total
|
7,196,079 | 2,940,342 |
6.
|
Trade accounts receivable, net
|
2012
|
2011
|
|||||||
Billed amounts
|
4,033,333 | 3,673,097 | ||||||
Unbilled amounts
|
1,675,091 | 1,677,708 | ||||||
Interconnection amounts
|
977,644 | 896,639 | ||||||
Gross accounts receivable
|
6,686,068 | 6,247,444 | ||||||
Provision for impairment
|
(1,079,254 | ) | (1,056,729 | ) | ||||
Total
|
5,606,814 | 5,190,715 | ||||||
Current
|
5,513,436 | 5,105,860 | ||||||
Non-current
|
93,378 | 84,855 |
2012
|
2011
|
|||||||
Falling due
|
4,299,125 | 4,103,377 | ||||||
Overdue from 1 to 30 days
|
718,838 | 631,923 | ||||||
Overdue from 31 to 60 days
|
218,930 | 204,775 | ||||||
Overdue from 61 to 90 days
|
188,835 | 115,125 | ||||||
Overdue from 91 to 120 days
|
60,648 | 49,815 | ||||||
Overdue for more than 120 days
|
120,438 | 85,700 | ||||||
Total
|
5,606,814 | 5,190,715 |
2012
|
2011
|
|||||||
Opening balance
|
(1,056,729 | ) | (765,633 | ) | ||||
Additions (Note 26)
|
(654,273 | ) | (506,581 | ) | ||||
Business combination
|
- | (218,171 | ) | |||||
Consolidation of TVA
|
- | (3,659 | ) | |||||
Write-offs
|
631,748 | 437,315 | ||||||
Ending balance
|
(1,079,254 | ) | (1,056,729 | ) |
2012
|
2011
|
|||||||
Present value of minimum payments receivable
|
294,245 | 261,933 | ||||||
Unrealized financial income
|
7,757 | 8,941 | ||||||
Gross investment in leases receivable
|
302,002 | 270,874 | ||||||
Provision for impairment
|
(86,648 | ) | (69,375 | ) | ||||
Total receivables, net
|
215,354 | 201,499 | ||||||
Current
|
121,976 | 116,644 | ||||||
Noncurrent
|
93,378 | 84,855 |
Year
|
Gross
Investment
|
Present
Value
|
||||||
Falling due up to one year
|
200,867 | 200,867 | ||||||
Falling due up to five years
|
101,135 | 93,378 | ||||||
Total
|
302,002 | 294,245 |
7.
|
Inventories
|
2012
|
2011
|
|||||||
Consumer materials
|
59,417 | 94,547 | ||||||
Materials for resale (*)
|
380,163 | 435,032 | ||||||
Other inventory items
|
4,005 | 6,468 | ||||||
Total gross
|
443,585 | 536,047 | ||||||
Allowance for reduction to net recoverable value and obsolescence
|
(55,776 | ) | (64,326 | ) | ||||
Total current
|
387,809 | 471,721 |
2012
|
2011
|
|||||||
Opening balance
|
(64,326 | ) | (99,696 | ) | ||||
Additions
|
(35,972 | ) | (37,462 | ) | ||||
Write-offs
|
44,522 | 95,149 | ||||||
Business combination
|
- | (18,852 | ) | |||||
Consolidation of TVA
|
- | (3,465 | ) | |||||
Ending balance
|
(55,776 | ) | (64,326 | ) |
8.
|
Deferred and recoverable taxes
|
8.1
|
Recoverable taxes
|
2012
|
2011
|
|||||||
Withholding taxes
|
141,620 | 152,919 | ||||||
Recoverable income tax and social contribution
|
528,111 | 1,143,988 | ||||||
ICMS (state VAT) (a)
|
1,631,088 | 1,665,896 | ||||||
ICMS (state VAT) Agreement No.39/CAT Administrative Ruling 06 (b)
|
288,520 | 307,832 | ||||||
PIS and COFINS
|
148,092 | 210,950 | ||||||
Other
|
53,957 | 28,440 | ||||||
Total
|
2,791,388 | 3,510,025 | ||||||
Current
|
2,052,423 | 2,495,066 | ||||||
Non-current
|
738,965 | 1,014,959 |
|
(a)
|
Refers to credits arising from additions to property, plant and equipment, subject to offsetting in 48 months.
|
|
(b)
|
Refers to the request for reimbursement of VAT paid for invoices that were later canceled.
|
8.2
|
Deferred taxes
|
2012
|
2011
|
|||||||
Deferred Assets
|
||||||||
Tax loss carry-forwards – Income tax and social contribution (a)
|
21,290 | 348,576 | ||||||
Merged tax credit (b)
|
9,461 | 46,962 | ||||||
Provisions for tax, labor and civil claims
|
1,104,065 | 950,988 | ||||||
Post-retirement benefit plans
|
133,371 | 104,856 | ||||||
Allowance for doubtful accounts
|
169,434 | 178,433 | ||||||
Provision for demobilization, losses and disposal of assets
|
210,107 | 137,829 | ||||||
Employee Profit sharing
|
62,218 | 82,564 | ||||||
Accelerated depreciation
|
421,768 | 433,512 | ||||||
Allowance for reduction of inventory to recoverable value
|
13,951 | 17,542 | ||||||
Provision for loyalty program
|
28,168 | 23,399 | ||||||
Derivatives
|
42,922 | 69,387 | ||||||
Trade accounts payable and other provisions
|
290,199 | 354,916 | ||||||
Income tax and social contribution on other temporary differences
|
136,170 | 110,664 | ||||||
2,643,124 | 2,859,628 | |||||||
Deferred liabilities | ||||||||
Merged tax credits (b) | (269,514 | ) | (207,668 | ) | ||||
Technological innovation Law
|
(416,700 | ) | (333,156 | ) | ||||
Foreign Exchange variation | (3,383 | ) | (14,742 | ) | ||||
Customer portfolio | (546,383 | ) | (630,896 | ) | ||||
Trademarks and patents | (508,178 | ) | (536,808 | ) | ||||
Licenses | (399,878 | ) | (79,976 | ) | ||||
Effect of goodwill generated upon Vivo Part. merger | (344,927 | ) | (258,695 | ) | ||||
Effect of goodwill generated on the acquisition of Vivo Part. | (266,870 | ) | (53,374 | ) | ||||
Income tax and Social contribution on other temporary differences | (74,344 | ) | (104,389 | ) | ||||
(2,830,177 | ) | (2,219,704 | ) | |||||
Total non-current asset (liability), net | (187,053 | ) | 639,924 |
a)
|
Income and social contribution tax losses:
represent the amount recorded by the Company (2012) and its subsidiaries (2011), which, according to tax legislation in Brazil can be offset by up to 30% of the tax bases computed for the following years with no expiration date. The subsidiaries, TData and TSTV, did not record the potential deferred income and social contribution tax credits which would be generated for the use of income and social contribution tax losses amounting to R$301,081 at December 31, 2012 (R$241,361 at December 31, 2011), considering uncertainties, at this moment, as to the ability of these subsidiaries to generate future taxable profits sufficient to ensure realization of these deferred taxes.
|
Income
Tax
|
Social
Contribution
|
Total
|
||||||||||
Tax-loss carry-forward and negative basis at 12/31/2012
|
930,409 | 997,434 | 1,927,843 | |||||||||
Tax credit (25% + 9%)
|
232,602 | 89,769 | 322,371 | |||||||||
Recognized tax credit
|
12,066 | 9,224 | 21,290 | |||||||||
Unrecognized tax credit
|
220,536 | 80,545 | 301,081 |
Income
Tax
|
Social
Contribution
|
Total
|
||||||||||
Tax-loss carry-forward and negative basis at 12/31/2011
|
1,745,928 | 1,705,050 | 3,450,978 | |||||||||
Tax credit (25% + 9%)
|
436,482 | 153,455 | 589,937 | |||||||||
Recognized tax credit
|
259,011 | 89,565 | 348,576 | |||||||||
Unrecognized tax credit
|
177,471 | 63,890 | 241,361 |
b)
|
Merged tax credit: Represented by tax benefits arising from corporate restructuring of goodwill for expected future profitability, whose tax use follows the limit set forth in tax legislation.
|
c)
|
Income and social contribution on temporary differences: realized upon payment of the provisions, the actual loss for reduction in recoverable value of accounts receivable or the realization of inventories, as well as the reversal of other provisions.
|
Deferred Tax Assets
|
December 31, 2011
|
Additions
|
Write-offs/
realization
|
December 31, 2012
|
||||||||||||
Tax losses
|
348,576 | 154,657 | (481,943 | ) | 21,290 | |||||||||||
Other deferred assets
|
2,511,052 | 376,070 | (265,288 | ) | (2,621,834 | ) | ||||||||||
Total
|
2,859,628 | 530,727 | (747,231 | ) | 2,643,124 |
Deferred Tax Assets
|
December 31, 2010
|
Additions
|
Write-offs/
realization
|
Business
Combination
|
December 31, 2011
|
|||||||||||||||
Tax losses
|
2,325 | - | (393,067 | ) | 739,318 | 348,576 | ||||||||||||||
Other deferred assets
|
1,011,687 | 252,826 | (108,222 | ) | 1,354,761 | 2,511,052 | ||||||||||||||
Total
|
1,014,012 | 252,826 | (501,289 | ) | 2,094,079 | 2,859,628 |
Deferred Tax Liabilities
|
December 31, 2011
|
Additions
|
Write-offs
|
Business
Combination
|
December 31, 2012
|
|||||||||||||||
Deferred liabilities
|
(2,219,704 | ) | (755,397 | ) | 144,924 | - | (2,830,177 | ) | ||||||||||||
Total
|
(2,219,704 | ) | (755,397 | ) | 144,924 | - | (2,830,177 | ) |
Deferred Tax Liabilities
|
December 31, 2010
|
Additions
|
Write-offs
|
Business
Combination
|
December 31, 2011
|
|||||||||||||||
Deferred liabilities
|
(510,333 | ) | (274,332 | ) | 176,794 | (1,611,833 | ) | (2,219,704 | ) | |||||||||||
Total
|
(510,333 | ) | (274,332 | ) | 176,794 | (1,611,833 | ) | (2,219,704 | ) |
Year
|
||||
2013
|
810,532 | |||
2014
|
264,867 | |||
2015
|
142,010 | |||
2016
|
(17,122 | ) | ||
2017
|
(19,784 | ) | ||
From 2018
|
(1,367,556 | ) | ||
Total
|
(187,053 | ) |
9.
|
Escrow deposits and Frozen assets
|
a)
|
Breakdown
|
2012
|
2011
|
|||||||
Labor
|
933,866 | 789,705 | ||||||
Tax
|
2,182,719 | 1,938,470 | ||||||
Civil
|
866,668 | 715,285 | ||||||
3,983,253 | 3,443,460 | |||||||
Frozen assets (*)
|
52,846 | 47,651 | ||||||
Total
|
4,036,099 | 3,491,111 | ||||||
Current
|
126,625 | 116,421 | ||||||
Non-current
|
3,909,474 | 3,374,690 |
|
b)
|
Changes
|
Nature
|
||||||||||||||||||||
Labor
|
Tax
|
Civil
|
Freeze of
assets by
court order
|
Total
|
||||||||||||||||
Balances at December 31, 2010
|
555,322 | 546,387 | 528,887 | 45,070 | 1,675,666 | |||||||||||||||
Inflows
|
139,123 | 92,412 | 141,146 | 83,222 | 455,903 | |||||||||||||||
Write-offs/reversals
|
(42,796 | ) | (5,605 | ) | (76,361 | ) | (99,991 | ) | (224,753 | ) | ||||||||||
Business combination
|
54,939 | 1,146,771 | 77,336 | 58,113 | 1,337,159 | |||||||||||||||
TVA consolidation
|
2,488 | 24,128 | 6,542 | 1,743 | 34,901 | |||||||||||||||
Monetary restatement
|
39,847 | 133,211 | 39,177 | - | 212,235 | |||||||||||||||
Transfers
|
40,782 | 1,166 | (1,442 | ) | (40,506 | ) | - | |||||||||||||
Balances at December 31, 2011
|
789,705 | 1,938,470 | 715,285 | 47,651 | 3,491,111 | |||||||||||||||
Inflows
|
193,650 | 131,495 | 205,779 | 55,659 | 586,583 | |||||||||||||||
Write-offs/reversals
|
(93,583 | ) | (17,681 | ) | (77,468 | ) | (71,268 | ) | (260,000 | ) | ||||||||||
Monetary restatement
|
42,714 | 134,776 | 40,915 | - | 218,405 | |||||||||||||||
Transfers
|
1,380 | (4,341 | ) | (17,843 | ) | 20,804 | - | |||||||||||||
Balances at December 31, 2012
|
933,866 | 2,182,719 | 866,668 | 52,846 | 4,036,099 | |||||||||||||||
Current
|
37,113 | 15,939 | 47,502 | 26,071 | 126,625 | |||||||||||||||
Noncurrent
|
896,753 | 2,166,780 | 819,166 | 26,775 | 3,909,474 |
·
|
Social contribution tax on gross revenue for social integration Program (PIS) and social contribution tax on gross revenue for social security financing (COFINS)
|
·
|
Social Contribution Tax for Intervention in the Economic Order (CIDE)
|
·
|
Telecommunications Inspection Fund (FISTEL)
|
·
|
Withholding income tax (IRRF)
|
·
|
Corporate income tax (IRPJ)
|
·
|
Contribution to Empresa Brasil de Comunicação (EBC)
|
·
|
Social Security, Work Accident Insurance (SAT) and Funds to Third Parties (INSS)
|
·
|
Unemployment Compensation Fund (FGTS)
|
·
|
Tax on Net Income (ILL)
|
·
|
Universal Telecommunication Services Fund (FUST)
|
·
|
Provisional Contribution Tax on Financial Transactions (CPMF)
|
·
|
State Value-Added Tax (ICMS)
|
·
|
Other taxes, charges and contributions
|
10.
|
Prepaid expenses
|
2012
|
2011
|
|||||||
Advertising and publicity
|
173,688 | 171,566 | ||||||
Rents
|
31,207 | 24,126 | ||||||
Insurance
|
10,705 | 10,289 | ||||||
Software maintenance
|
7,872 | 14,503 | ||||||
Financial charges
|
3,247 | 3,426 | ||||||
Taxes, charges and contributions
|
1,654 | 974 | ||||||
Other assets
|
19,964 | 30,172 | ||||||
Total current
|
248,337 | 255,056 | ||||||
Advertising and publicity
|
130 | 835 | ||||||
Rents
|
20,000 | 19,618 | ||||||
Insurance
|
3,545 | 1,695 | ||||||
Financial charges
|
3,905 | 5,317 | ||||||
Other assets
|
3,816 | 4,673 | ||||||
Total non-current
|
31,396 | 32,138 |
11.
|
Other assets
|
2012
|
2011
|
|||||||
Advances to employees and suppliers
|
97,152 | 73,646 | ||||||
Related parties receivables
|
38,033 | 40,285 | ||||||
Subsidy on handset sales
|
53,756 | 53,408 | ||||||
Suppliers receivables (a)
|
479,283 | 217,255 | ||||||
Other assets
|
37,900 | 39,218 | ||||||
Total current
|
706,124 | 423,812 | ||||||
Receivables from Barramar S.A. (b)
|
47,797 | 52,248 | ||||||
Amounts linked to National Treasury
|
- | 13,819 | ||||||
Pension plan surplus
|
48,048 | 31,210 | ||||||
Related party receivables
|
20,118 | 20,214 | ||||||
Other assets
|
24,142 | 30,802 | ||||||
Total non-current
|
140,105 | 148,293 |
|
(a)
|
Amounts consolidated at December 31, 2012 include R$362,774 related to the disposal of non-strategic transmission towers, property of Vivo, with guaranteed payment made by the owner.
|
|
(b)
|
Refers to receivables from Barramar S.A., recorded in Company AIX de Participações, net of allowance for losses.
|
12.
|
Investments
|
2011
|
Other
Comprehensive
Income
|
Write-off of
residual
value
|
2012
|
|||||||||||||
Other investments (*) (a)
|
37,835 | (5,568 | ) | (8,584 | ) | 23,683 | ||||||||||
Zon Multimédia – direct interest (c)
|
6,737 | (33 | ) | (6,704 | ) | - | ||||||||||
Zon Multimédia – indirect interest (c)
|
2,380 | (500 | ) | (1,880 | ) | - | ||||||||||
Other investments
|
28,718 | (5,035 | ) | - | 23,683 | |||||||||||
Total consolidated investments
|
37,835 | (5,568 | ) | (8,584 | ) | 23,683 |
|
(a)
|
Other
investments
are
measured
at fair value.
|
|
(b)
|
Consolidated
from January 1, 2011 as mentioned in Note 2.2.
|
|
(c)
|
On May 8, 2012 the Company sold its equity interest in ZON (Note 2.2)
|
2010
|
Additions
|
Result of
Equity
Method
|
Other
Comprehensive
Income
|
Consolidation
of TVA
|
2011
|
|||||||||||||||||||
Investments in subsidiaries
|
57,990 | 3,920 | 1,992 | - | (63,902 | ) | - | |||||||||||||||||
GTR Participações e Empreendimentos S.A. (b)
|
2,055 | - | 18 | - | (2,073 | ) | - | |||||||||||||||||
Lemontree Participações S.A. (b)
|
17,047 | 3,920 | (1,286 | ) | - | (19,681 | ) | - | ||||||||||||||||
Comercial Cabo TV São Paulo S.A. (b)
|
32,392 | - | 3,125 | - | (35,517 | ) | - | |||||||||||||||||
TVA Sul Paraná S.A. (b)
|
6,496 | - | 135 | - | (6,631 | ) | - | |||||||||||||||||
Other investments (*) (a)
|
42,847 | - | - | (5,012 | ) | - | 37,835 | |||||||||||||||||
Zon Multimédia – direct interest
|
9,036 | - | - | (2,299 | ) | - | 6,737 | |||||||||||||||||
Zon Multimédia – indirect interest
|
3,190 | - | - | (810 | ) | - | 2,380 | |||||||||||||||||
Other investments
|
30,621 | - | - | (1,903 | ) | - | 28,718 | |||||||||||||||||
Total consolidated investments
|
100,837 | 3,920 | 1,992 | (5,012 | ) | (63,902 | ) | 37,835 |
2012
|
2011
|
|||||||||||||||||||||||
Cia ACT
|
Cia AIX
|
Aliança Atlântica
|
Cia ACT
|
Cia AIX
|
Aliança Atlântica
|
|||||||||||||||||||
Current assets
|
5 | 6,707 | 58,161 | 4 | 3,501 | 49,655 | ||||||||||||||||||
Noncurrent assets
|
- | 60,012 | - | - | 65,461 | 2,378 | ||||||||||||||||||
Current liabilities
|
- | 1,640 | 1,151 | 1 | 2,338 | 10 | ||||||||||||||||||
Noncurrent liabilities
|
- | 2,896 | - | - | 1,849 | - | ||||||||||||||||||
Shareholders’ Equity
|
5 | 62,183 | 57,010 | 3 | 64,775 | 52,023 |
2012
|
2011
|
2010
|
||||||||||||||||||||||||||||||||||
Cia ACT
|
Cia AIX
|
Aliança
Atlântica
|
Cia ACT
|
Cia AIX
|
Aliança
Atlântica
|
Cia ACT
|
Cia AIX
|
Aliança
Atlântica
|
||||||||||||||||||||||||||||
Revenues
|
35 | 25,353 | 2,920 | 25 | 27,491 | 1,139 | 27 | 31,254 | 13,200 | |||||||||||||||||||||||||||
Expenses
|
(33 | ) | (25,628 | ) | (2,059 | ) | (28 | ) | (24,240 | ) | (82 | ) | (24 | ) | (21,985 | ) | (99 | ) | ||||||||||||||||||
Net income for the year
|
2 | (275 | ) | 861 | (3 | ) | 3,251 | 1,057 | 3 | 9,269 | 13,101 |
13.
|
Property, plant and equipment, net
|
2012
|
Cost
|
Accumulated
depreciation
|
Net book
value
|
|||||||||
Switching equipment
|
15,533,267 | (13,282,873 | ) | 2,250,394 | ||||||||
Transmission means and equipment
|
30,747,089 | (23,674,159 | ) | 7,072,930 | ||||||||
Terminal equipment and modems
|
9,887,957 | (8,319,054 | ) | 1,568,903 | ||||||||
Infrastructure
|
13,303,406 | (9,041,716 | ) | 4,261,690 | ||||||||
TV materials and equipment
|
1,054,592 | (861,018 | ) | 193,574 | ||||||||
Other
|
3,669,465 | (2,863,451 | ) | 806,014 | ||||||||
Valuation allowance
|
(19,073 | ) | - | (19,073 | ) | |||||||
Fixed assets in progress
|
1,476,419 | - | 1,476,419 | |||||||||
Total
|
75,653,122 | (58,042,271 | ) | 17,610,851 |
2011
|
Cost
|
Accumulated
depreciation
|
Net book
value
|
|||||||||
Switching equipment
|
15,084,380 | (13,133,295 | ) | 1,951,085 | ||||||||
Transmission means and equipment
|
30,051,932 | (23,289,097 | ) | 6,762,835 | ||||||||
Terminal equipment and modems
|
8,830,900 | (7,283,847 | ) | 1,547,053 | ||||||||
Infrastructure
|
13,124,946 | (8,504,974 | ) | 4,619,972 | ||||||||
TV materials and equipment
|
907,865 | (728,696 | ) | 179,169 | ||||||||
Other
|
3,546,825 | (2,758,443 | ) | 788,382 | ||||||||
Valuation allowance
|
(23,435 | ) | - | (23,435 | ) | |||||||
Fixed assets in progress
|
1,328,859 | - | 1,328,859 | |||||||||
Total
|
72,852,272 | (55,698,352 | ) | 17,153,920 |
Net book
value as of
12/31/2011
|
Additions
|
Write-offs,
net (a)
|
Transfers,
net (c)
|
Business
combination
|
Net book
value as of
12/31/2012
|
|||||||||||||||||||
Switching equipment
|
1,951,085 | 59,238 | (14,103 | ) | 706,758 | (452,584 | ) | 2,250,394 | ||||||||||||||||
Transmission equipment
|
6,762,835 | 396,498 | 27,960 | 995,829 | (1,110,192 | ) | 7,072,930 | |||||||||||||||||
Terminal equipment and modems
|
1,547,053 | 1,084,260 | (4,261 | ) | (14,488 | ) | (1,043,661 | ) | 1,568,903 | |||||||||||||||
Infrastructure (a)
|
4,619,972 | 42,599 | (180,142 | ) | 474,162 | (694,901 | ) | 4,261,690 | ||||||||||||||||
TV equipment and materials
|
179,169 | 121,817 | (8 | ) | 21,789 | (129,193 | ) | 193,574 | ||||||||||||||||
Other
|
788,382 | 216,483 | (3,177 | ) | 50,040 | (245,714 | ) | 806,014 | ||||||||||||||||
Provision for losses (b)
|
(23,435 | ) | (1,965 | ) | 6,327 | - | - | (19,073 | ) | |||||||||||||||
Property, plant and equipment in progress
|
1,328,859 | 2,419,269 | (15,184 | ) | (2,256,525 | ) | - | 1,476,419 | ||||||||||||||||
Total
|
17,153,920 | 4,338,199 | (182,588 | ) | (22,435 | ) | 3,676,245 | ) | 17,610,851 |
Net book
value as of
12/31/2010
|
Additions
|
Write-offs,
net
|
Transfers,
net
|
Depreciation (d)
|
Business
combination
|
TVA merger
|
Net book
value as of
12/31/2011
|
|||||||||||||||||||||||||
Switching equipment
|
1,234,081 | 60,166 | (5,087 | ) | 390,972 | (346,804 | ) | 617,757 | - | 1,951,085 | ||||||||||||||||||||||
Transmission equipment
|
3,709,166 | 377,411 | (49,123 | ) | 1,106,119 | (847,229 | ) | 2,441,209 | 25,282 | 6,762,835 | ||||||||||||||||||||||
Terminal equipment and modems
|
1,274,037 | 991,417 | (4,819 | ) | 1,081 | (1,002,764 | ) | 258,714 | 29,387 | 1,547,053 | ||||||||||||||||||||||
Infrastructure
|
2,811,505 | 228,124 | (61,059 | ) | 492,876 | (703,375 | ) | 1,851,056 | 845 | 4,619,972 | ||||||||||||||||||||||
TV equipment and materials
|
187,343 | 125,865 | - | (53,488 | ) | (109,607 | ) | - | 29,056 | 179,169 | ||||||||||||||||||||||
Other
|
218,469 | 160,948 | (4,879 | ) | 48,747 | (193,108 | ) | 556,973 | 1,232 | 788,382 | ||||||||||||||||||||||
Provision for losses (b)
|
(41,373 | ) | - | 8,985 | 8,953 | - | - | - | (23,435 | ) | ||||||||||||||||||||||
Property, plant and equipment in progress
|
807,469 | 2,068,327 | (12,609 | ) | (2,009,147 | ) | - | 472,649 | 2,170 | 1,328,859 | ||||||||||||||||||||||
Total
|
10,200,697 | 4,012,258 | (128,591 | ) | (13,887 | ) | (3,202,887 | ) | 6,198,358 | 87,972 | 17,153,920 |
|
(a)
|
Net write-off balances include the amount of R$138,812 for disposal of non-strategic towers and rooftops owned by Vivo.
|
|
(b)
|
The Company and its subsidiaries recognized a provision for potential obsolescence of materials used in PP&E maintenance, based on levels of historical use and expected future use.
|
|
(c)
|
Remaining balances in transfers presented in the table above of R$18,774 refer to residual values of tower and rooftops pending transfer of ownership and risk when sold, which will be recognized as net write-off upon recognition of the corresponding revenues.
|
|
(d)
|
The addition from depreciation costs and expenses are stated under “Depreciation and amortization” under Notes 25, 26 and 27, pending transfer of title.
|
Switching equipment
|
10 to 33.33
|
Transmission means and equipment
|
5 to 14.29
|
Terminal equipment and modems
|
10 to 66.67
|
Infrastructure
|
4 to 66.67
|
TV material and equipment
|
8 to 20
|
Other PP&E
|
10 to 20
|
14.
|
Intangible assets, net
|
2012
|
2011
|
|||||||
Goodwill
|
10,225,280 | 10,225,280 | ||||||
Other intangibles assets
|
19,784,009 | 19,828,404 | ||||||
Total
|
30,009,289 | 30,053,684 |
Goodwill
|
2010
|
Business
Combination
|
2011
|
2012
|
||||||||||||
Ajato Telecomunicações Ltda.
|
149 | - | 149 | 149 | ||||||||||||
Goodwill Spanish and Figueira (merged in TDBH) (a)
|
212,058 | - | 212,058 | 212,058 | ||||||||||||
Santo Genovese Participações Ltda. (b)
|
71,892 | - | 71,892 | 71,892 | ||||||||||||
Telefônica Televisão Participações S.A. (c)
|
780,693 | - | 780,693 | 780,693 | ||||||||||||
Vivo Participações S.A. (d)
|
- | 7,169,577 | 7,169,577 | 7,169,577 | ||||||||||||
Telemig Celular S.A. (e)
|
- | 133,896 | 133,896 | 133,896 | ||||||||||||
Telemig Celular Participações S.A. (e)
|
- | 1,485,172 | 1,485,172 | 1,485,172 | ||||||||||||
Global Telecom S.A. (e)
|
- | 204,762 | 204,762 | 204,762 | ||||||||||||
Tele Centro Oeste Celular Participações S. A. (e)
|
- | 150,930 | 150,930 | 150,930 | ||||||||||||
Ceterp Celular S. A. (e)
|
- | 16,151 | 16,151 | 16,151 | ||||||||||||
Total
|
1,064,792 | 9,160,488 | 10,225,280 | 10,225,280 |
(a)
|
Goodwill from partial spin-off of the company Figueira, which was reversed to the Company upon merger with Telefônica Data Brasil Holding S.A in 2006.
|
(b)
|
Goodwill generated upon acquisition of equity control over Santo Genovese Participações Ltda occurred in 2004.
|
(c)
|
Goodwill generated upon acquisition of TTP (formerly Navytree) merged in 2008. This is grounded on a future profitability study.
|
(d)
|
Goodwill generated upon acquisition of Vivo Part. in April 2011.
|
(e)
|
Goodwill arising from Vivo Part., reversed to the Company upon merger in 2011.
|
Cost
|
Accumulated
Depreciation
|
Net book
value
|
||||||||||
Software
|
9,516,578 | (7,625,745 | ) | 1,890,833 | ||||||||
Customer Portfolio
|
2,114,561 | (507,552 | ) | 1,607,009 | ||||||||
Trademarks and patents
|
1,643,511 | (148,870 | ) | 1,494,641 | ||||||||
Licenses
|
16,987,547 | (2,275,703 | ) | 14,711,844 | ||||||||
Other
|
719,431 | (690,791 | ) | 28,640 | ||||||||
Software in progress
|
51,042 | - | 51,042 | |||||||||
Total
|
31,032,670 | (11,248,661 | ) | 19,784,009 |
Cost
|
Accumulated
Depreciation
|
Net book
value
|
||||||||||
Software
|
8,744,914 | (6,883,758 | ) | 1,861,156 | ||||||||
Customer Portfolio
|
2,114,561 | (251,730 | ) | 1,862,831 | ||||||||
Trademarks and patents
|
1,643,511 | (64,665 | ) | 1,578,846 | ||||||||
Licenses
|
15,937,373 | (1,577,392 | ) | 14,359,981 | ||||||||
Goodwill
|
38,800 | (31,116 | ) | 7,684 | ||||||||
Other
|
683,021 | (658,554 | ) | 24,467 | ||||||||
Software in progress
|
133,439 | - | 133,439 | |||||||||
Total
|
29,295,619 | (9,467,215 | ) | 19,828,404 |
Net book
value as of
12/31/2011
|
Additions
|
Disposals,
net
|
Transfers,
net (a)
|
Depreciation (b)
|
Net book
value as of
12/31/2012
|
|||||||||||||||||||
Software
|
1,861,156 | 486,278 | (18 | ) | 313,630 | (770,213 | ) | 1,890,833 | ||||||||||||||||
Customer Portfolio
|
1,862,831 | - | - | - | (255,822 | ) | 1,607,009 | |||||||||||||||||
Trademarks and patents
|
1,578,846 | - | - | - | (84,205 | ) | 1,494,641 | |||||||||||||||||
Licenses
|
14,359,981 | 1,050,200 | - | - | (698,337 | ) | 14,711,844 | |||||||||||||||||
Goodwill
|
7,684 | - | - | (7,684 | ) | - | - | |||||||||||||||||
Other
|
24,467 | 12,510 | - | - | (8,337 | ) | 28,640 | |||||||||||||||||
Software in progress
|
133,439 | 227,572 | - | (309,969 | ) | - | 51,042 | |||||||||||||||||
Total
|
19,828,404 | 1,776,560 | (18 | ) | (4,023 | ) | (1,816,914 | ) | 19,784,009 | |||||||||||||||
Net book
value as of
12/31/2010
|
Additions
|
Disposals,
net
|
Transfers,
net (a)
|
Depreciation (b)
|
Business
Combination
|
Consolidation
of TVA
|
Net book
value as of
12/31/2011
|
|||||||||||||||||||||||||
Software
|
638,975 | 380,942 | (64 | ) | 161,984 | (632,725 | ) | 1,312,044 | - | 1,861,156 | ||||||||||||||||||||||
Customer Portfolio
|
14,512 | - | - | - | (193,681 | ) | 2,042,000 | - | 1,862,831 | |||||||||||||||||||||||
Trademarks and patents
|
- | - | - | - | (63,154 | ) | 1,642,000 | - | 1,578,846 | |||||||||||||||||||||||
License
|
- | 811,754 | - | - | (483,743 | ) | 14,031,970 | - | 14,359,981 | |||||||||||||||||||||||
Goodwill
|
- | 2,976 | - | - | (1,962 | ) | 6,670 | - | 7,684 | |||||||||||||||||||||||
Other
|
12,195 | 10,436 | (314 | ) | (1,263 | ) | (7,842 | ) | 1,487 | 9,768 | 24,467 | |||||||||||||||||||||
Software in progress
|
- | 183,179 | - | (146,834 | ) | - | 97,094 | - | 133,439 | |||||||||||||||||||||||
Total
|
665,682 | 1,389,287 | (378 | ) | 13,887 | (1,383,107 | ) | 19,133,265 | 9,768 | 19,828,404 |
(a)
|
Remaining balances in transfers stated in the table above R$7,684, refers to the transfer to Vivo’s prepaid expenses and R$3,662 to property, plant and equipment.
|
(b)
|
The addition of depreciation costs and expenses are stated under “Depreciation and amortization” under Notes 25, 26 and 27.
|
Software use licenses
|
20 to 33.33
|
|||
Customer portfolio
|
9 to 15
|
|||
Trademarks and patents
|
5 | |||
Licenses
|
3.6 to 20
|
|||
Other intangible assets
|
10 to 20
|
15.
|
Payroll and related accruals
|
2012
|
2011
|
|||||||
Salaries and fees
|
38,640 | 40,651 | ||||||
Payroll charges
|
204,778 | 223,359 | ||||||
Employee profit sharing
|
172,937 | 214,983 | ||||||
Other indemnities
|
- | 16,631 | ||||||
Total
|
416,355 | 495,624 |
16.
|
Trade accounts payable
|
2012
|
2011
|
|||||||
Various suppliers
|
5,205,511 | 5,348,202 | ||||||
Amounts payable to other operators
|
151,809 | 146,437 | ||||||
Interconnection/networking
|
532,057 | 513,646 | ||||||
Technical support
|
- | 29,030 | ||||||
Total
|
5,889,377 | 6,037,315 |
17.
|
Taxes payable
|
2012
|
2011
|
|||||||
Direct taxes
|
||||||||
Income tax and social contribution (a)
|
243,542 | 129,610 | ||||||
Indirect taxes
|
2,026,687 | 1,995,452 | ||||||
ICMS (state VAT) (b)
|
1,534,750 | 1,585,884 | ||||||
PIS and COFINS (taxes on revenue)
|
362,998 | 319,981 | ||||||
Fust and Funtel
|
34,853 | 38,306 | ||||||
Others
|
94,086 | 51,281 | ||||||
Total
|
2,270,229 | 2,125,062 | ||||||
Current
|
1,781,480 | 1,691,991 | ||||||
Non-current
|
488,749 | 433,071 |
(a)
|
Income and social contribution taxes payable are stated net of payments based on estimates.
|
(b)
|
The portion of non-current liabilities, including the amount of R$437,295 December 31, 2012 (R$380,271 at December 31, 2011) which refers to ICMS - Programa Paraná Mais Emprego, resulting from an agreement with the Paraná State Government, involving the deferral of ICMS payment. This agreement establishes that ICMS shall be paid on the 49th month subsequent to that in which ICMS is computed. This amount is restated based on the Annual Restatement Factor (FCA) variation.
|
18.
|
Loans, Financing and Debentures
|
18.1
|
Loans and Financing
|
Currency
|
Annual interest rate
|
Maturity
|
2012 (a)
|
2011 (a)
|
|||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+3.73%
|
5/15/15
|
938,063
|
1,327,147
|
||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+1.73%
|
5/15/15
|
50,770
|
71,821
|
||||
Financing – BNDES
|
BRL
|
5.50%
|
1/15/21
|
1,957
|
1,912
|
||||
Loan – Mediocrédito
|
US$
|
1.75%
|
2/2/14
|
9,310
|
14,027
|
||||
Loan – working capital
|
BRL
|
108.90% CDI
|
-
|
91,570
|
|||||
Loan – Resolution No. 4131
|
US$
|
4.10%
|
10/25/13
|
326,263
|
282,205
|
||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+0% to 4.30%
|
7/15/19
|
1,916,737
|
1,659,858
|
||||
Financing – BNDES
|
UMBND (c)
|
ECM(d)+2.38%p.a
|
7/15/19
|
455,296
|
194,276
|
||||
Financing – BNDES
|
R$
|
4.50% to 5.50%
|
10/15/20
|
146,365
|
135,471
|
||||
Loans – BEI
|
US$
|
4.18% to 4.47%
|
3/2/15
|
795,601
|
707,975
|
||||
Financing – BNB
|
R$
|
10.00%
|
10/30/16
|
338,610
|
438,279
|
||||
BBVA commission
|
-
|
0.43%
|
2/28/15
|
241
|
221
|
||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+5.0%
|
1/15/15
|
2,071
|
-
|
||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+5.70%
|
4/15/16
|
2,312
|
2,071
|
||||
Financing – BNDES
|
URTJLP (b)
|
TJLP+9.00%
|
4/15/16
|
1,901
|
2,341
|
||||
Financing - BNDES PSI
|
R$
|
5.50% and 8.70%
|
4/15/16
|
25,471
|
17,628
|
||||
Financing - Leasing
|
R$
|
14.70%
|
11/9/13
|
356
|
726
|
||||
Total
|
5,011,324
|
4,947,528
|
|||||||
Current
|
1,255,323
|
988,413
|
|||||||
Noncurrent
|
3,756,001
|
3,959,115
|
(a)
|
Amounts stated at fair value, where applicable.
|
(b)
|
Long-term Interest Reference Unit (URTJLP) used by the Brazilian Development Bank (BNDES) as the contractual currency in financing agreements.
|
(c)
|
Currency unit based on a currency basket (UMBND) used by BNDES as a contractual currency in financing agreements based on funds raised in foreign currency.
|
(d)
|
ECM is the rate published quarterly by BNDES and refers to charges of currency basket.
|
·
|
In October 2007, a credit facility was approved for the Company to finance investment in products and services that are produced domestically. All of these funds have been withdrawn and investment thereof has been proven and accepted by BNDES.
|
·
|
In August 2007, Vivo took out a credit facility with BNDES in the amount of R$1,530,459. Funds were released for the purpose of financing investment projects for implementation and expansion of the wireless capacity all over Brazil. Credits were released gradually and, as of December 31, 2011, no more funds were available for withdrawal. The agreement is effective for seven years. Principal will be repaid in 60 consecutive monthly installments as from September 15, 2009, after a two-year grace period.
|
·
|
On January 2010, a financing line with the BNDES in the amount up to R$319,927 through its Investment Maintenance Program (BNDES PSI). The funds borrowed are used to improve the network capacity through acquisition of domestic equipment previously registered with BNDES (subject to Finame), and released as that investment is evidenced. Until December 31, 2012, the amount of R$184,489 was released and the remaining balance of R$135,438 was canceled.
|
·
|
In November 2010 and March 2011, credit facilities for Comercial Cabo TV São Paulo were approved amounting to R$40,163. At December 31, 2012, R$41,950 (R$24,237 at December, 2011) had been released. This transaction also falls under the scope of IAS 20/CPC 7 due to the fact that interest rate is lower than the market rate (5.5% p.a prefixed), and the subvention granted by BNDES, adjusted to present value, resulted in the amount of R$2,404 at December 31, 2012 (R$2,401 at December 31, 2011).
|
·
|
In December 2010, BNDES, through its Investment Maintenance Program (BNDES PSI), approved a financing line in amount of R$5,417 for the Company. At December 31, 2012, the balance amounted to R$1,946 (R$1,912 as of December 31, 2011). This transaction also falls into the scope of IAS 20/CPC 7 because the interest rate is lower than the market rate (5.5% p.a prefixed), and the subvention granted by BNDES, adjusted to present value, resulted in the amount of R$331 at December 31, 2012 (R$376 at December 31, 2011).
|
·
|
On January 29, 2007, a credit facility from BNB was taken out amounting to R$247,240. Funds borrowed were used to expand coverage and increase mobile network capacity in the Northeastern region of Brazil. This agreement will be effective for ten years, with principal amount repaid in 96 installments, after a two-year grace period.
|
·
|
On October 30, 2008, a credit facility from BNB amounting to R$389,000 was taken out. Funds borrowed were used to expand coverage and increase mobile network capacity in the Northeastern region of Brazil. This agreement will be effective for ten years, with principal amount repaid in 96 installments, after a two-year grace period.
|
18.2
|
Debentures
|
Currency
|
Annual interest rate
|
Maturity
|
2012
|
2011
|
|||||
Debentures (2nd issuance) – Series 2
|
R$
|
106.00% of CDI
|
-
|
346,470
|
|||||
Debentures (4th issuance) – Series 1 and 2
|
R$
|
108.00% to 112.00% of CDI
|
10/15/14
|
744,678
|
756,617
|
||||
Debentures (4th issuance) – Series 3
|
R$
|
IPCA+7.00%
|
10/15/14
|
96,249
|
87,390
|
||||
Debentures (1st issuance) – Telemig
|
R$
|
IPCA+0.50%
|
07/05/21
|
72,137
|
67,935
|
||||
Debentures (3th issuance)
|
R$
|
100.00% of CDI + 0.75
|
09/10/17
|
2,044,674
|
-
|
||||
Issuance costs
|
R$
|
(1,833)
|
(1,981)
|
||||||
Total
|
2,955,905
|
1,256,431
|
|||||||
Current
|
702,215
|
468,624
|
|||||||
Non-current
|
2,253,690
|
787,807
|
18.3
|
Payment Schedule
|
Year
|
||||
2014
|
1,300,124 | |||
2015
|
1,159,235 | |||
2016
|
439,277 | |||
2017
|
2,389,703 | |||
From 2018
|
721,352 | |||
Total
|
6,009,691 |
18.4
|
Restrictive Clauses
|
18.5
|
Guarantees
|
Banks
|
Amount of loan/financing
|
Guarantees
|
||
Brazilian Development Bank (BNDES)
|
R$1,916,737 (URTJLP)
R$445,296 (UMBND)
R$146,365 (PSI - Vivo)
|
·
Contract (2007) R$514,355: Guarantee in receivables referring to 15% of the higher of debt balance or 4 (four) times the highest installment.
·
Contract (PSI) R$146,365: Disposal of financed asset items.
·
Contract (2011) R$1,857,678: Guarantee in receivables referring to 15% of the higher of debt balance or 4 (four) times the highest installment.
·
Telefônica Brasil is the intervening guarantor
|
||
European Bank of Investment – BEI
|
R$795,601
|
·
Commercial risk guaranteed by Banco BBVA Spain.
|
||
BNB
|
R$338,610
|
·
Bank guarantee provided by Banco Bradesco S.A. amounting to aproximately 100% of the financing obtained.
·
Establishing a liquid fund comprising short-term investments at amounts equivalent to 3 (three) repayment installments by reference to the average post-grace period installment.
Telefônica Brasil is the intervening guarantor.
|
19.
|
Dividends and interest on shareholders’ equity payable
|
a)
|
Breakdown of payables:
|
b)
|
Changes in payables:
|
2012
|
2011
|
||||||||
Opening Balance
|
972,986 | 450,897 | |||||||
Supplementary dividends
|
1,953,029 | 1,694,099 | |||||||
Business combination
|
- | 2,074,065 | |||||||
Interim dividends and interest on shareholder’s equity
|
1,122,522 | 2,249,400 | |||||||
Expiry of dividends and interest on shareholder’s equity
|
(89,692 | ) | (107,874 | ) | |||||
Payment of dividends and interest on shareholder’s equity
|
(3,493,997 | ) | (5,387,601 | ) | |||||
Other changes
|
2,983 | - | |||||||
Ending balance
|
467,831 | 972,986 |
20.
|
Provisions
|
|
a)
|
Breakdown
|
2012
|
2011
|
|||||||
Provisions for judicial and administrative proceedings
|
||||||||
Labor
|
717,247 | 526,210 | ||||||
Tax
|
1,953,043 | 1,606,735 | ||||||
Civil and regulatory
|
795,294 | 664,703 | ||||||
Subtotal
|
3,465,584 | 2,797,648 | ||||||
Provision for post-retirement benefit plans (a)
|
392,269 | 308,893 | ||||||
Contingent liabilities (b)
|
264,520 | 256,044 | ||||||
Provision for demobilization (c)
|
221,316 | 200,813 | ||||||
Total
|
4,343,689 | 3,563,398 | ||||||
Current
|
496,790 | 416,313 | ||||||
Non-current
|
3,846,899 | 3,147,085 |
(a)
|
Refers to actuarial provisions for post-retirement benefits, recorded by the Company and subsidiaries (Note 35).
|
(b)
|
Arising from PPA generated in acquisition of the controlling interest of Vivo Part. in 2011 (Note 4).
|
(c)
|
Refers to costs to be incurred to return the sites (locations for installation of base radio and administrative real estate of the Company and subsidiaries) to their respective owners in the same conditions as they were at the time of execution of the initial lease agreement.
|
|
b)
|
Changes
|
Nature
|
||||||||||||||||||||||||||||
Labor
|
Tax
|
Civil and
Regulatory
|
Provision for
post-retirement
benefit plans
|
Contingent
liabilities
|
Provision for
demobilization
|
Total
|
||||||||||||||||||||||
Balances as of 12/31/2010
|
366,391 | 310,649 | 446,159 | 219,000 | - | 16,712 | 1,358,911 | |||||||||||||||||||||
Additions
|
112,300 | 66,569 | 172,518 | 72,565 | - | 12,760 | 436,712 | |||||||||||||||||||||
Payments
|
(26,696 | ) | (11,143 | ) | (117,734 | ) | - | - | - | (155,573 | ) | |||||||||||||||||
Reversal
|
(32,088 | ) | (6,760 | ) | (57,144 | ) | (3,259 | ) | (31,084 | ) | (66,512 | ) | (196,847 | ) | ||||||||||||||
Monetary restatement
|
11,918 | 110,618 | 48,347 | - | - | 5,581 | 176,464 | |||||||||||||||||||||
Business combination
|
93,739 | 1,136,802 | 162,266 | 20,587 | 283,000 | 232,272 | 1,928,666 | |||||||||||||||||||||
TVA consolidation
|
646 | - | 10,291 | - | 4,128 | - | 15,065 | |||||||||||||||||||||
Balances as of 12/31/2011
|
526,210 | 1,606,735 | 664,703 | 308,893 | 256,044 | 200,813 | 3,563,398 | |||||||||||||||||||||
Additions
|
238,830 | 231,977 | 244,595 | 84,281 | 766 | 21,484 | 821,933 | |||||||||||||||||||||
Payments
|
(37,946 | ) | (1,665 | ) | (109,356 | ) | - | - | - | (148,967 | ) | |||||||||||||||||
Reversal
|
(28,383 | ) | (7,979 | ) | (67,843 | ) | (905 | ) | - | (7,853 | ) | (112,963 | ) | |||||||||||||||
Monetary restatement
|
18,536 | 123,975 | 63,195 | - | 7,710 | 6,872 | 220,288 | |||||||||||||||||||||
Balances as of 12/31/2012
|
717,247 | 1,953,043 | 795,294 | 392,269 | 264,520 | 221,316 | 4,343,689 | |||||||||||||||||||||
Current
|
80,091 | 20,833 | 395,866 | - | - | - | 496,790 | |||||||||||||||||||||
Non-current
|
637,156 | 1,932,210 | 399,428 | 392,269 | 264,520 | 221,316 | 3,846,899 |
20.1
|
Labor contingencies and provisions
|
20.2
|
Tax contingencies and provisions
|
20.3
|
Provisions, civil and regulatory contingencies
|
a)
|
The Company is party in proceedings that involve right to receive supplementary amounts from shares calculated in relation to the network expansion plan after 1996 (supplement of shares proceedings). These proceedings involve various phases: 1st level; Court of Justice and Supreme Court of Justice. Considering the degree of risk involved R$31,260 was provisioned (R$26,182 at December 31, 2011)
|
b)
|
The Company and its subsidiaries are parties to proceedings of a civil nature, in the administrative and judicial spheres the object of which are rights relating to the provision of services. This proceedings are filed by individual consumers, civil associations representing consumer rights, PROCON, as well as the State and Federal Public Prosecutor’s Offices. Similarly, the companies are defendants or plaintiffs in other proceedings the subject of which relate to matters other than those under the normal course of business. At December 31, 2012, provisions amounted to R$377,649 (R$315,169 at December 31, 2011) for consolidated.
|
c)
|
The Company is also involved in various lawsuits filed by individual consumers, with similar characteristics, which individually are not considered to be material, based on provision analysis, the historical average of losses in similar proceedings. At December 31, 2012, provisions amounted to R$78,711 (R$81,539 at December 31, 2011).
|
a)
|
Community Telephone Plan – PCT: Refers to a Public Civil Action to which the Company is a party and which is related to the PCT, a plan that allows purchasers of telephone line expansion plans who did not receive shares for their financial investment to claim indemnity rights, in the municipality of Mogi das Cruzes. The total amount is approximately R$236,236 (R$197,863 at December 31, 2011). This proceeding was assessed as a possible loss by legal counsel. The São Paulo State Court of Justice (TJSP) has reversed the decision and deemed the claim groundless. The carriers association of Mogi das Cruzes (plaintiff) filed a special appeal to reverse that decision, which is currently awaiting a decision.
|
b)
|
Class actions filed by SISTEL Members Association in the State of São Paulo, whereby SISTEL members in São Paulo State question the changes made in the health care plan for retired employees (PAMA), and that former conditions are restored. The claim is still in the evidentiary stage, and no decision was issued in any court level. The likelihood of loss in this proceeding was deemed as possible by legal counsel. The amount is not measurable and the claims are uncertain due to their unenforceability, since it would be necessary to restore the plan to its previous conditions.
|
c)
|
Public civil actions filed by (i) ASTEL - SISTEL Members Association in São Paulo State and (ii) FENAPAS - National Federation of Associations of Retirees, Pensioners and Pension Funds Members of the Telecommunications Industry, both against SISTEL. The Company and other carriers seek annulment of PBS pension plan spin-off, claiming “the dismantling of SISTEL Foundation supplementary pension system”, which originated several specific PBS-mirrors plans, and respective allocation of resources deriving from technical surplus and tax contingencies at the time of the spin-off. The chance of losses in this proceeding was deemed as possible by legal counsel. The amount is not measurable and the claims are uncertain due to their unenforceability, since it would be necessary to restore SISTEL’s spun-off fund related to carriers of the former Telebrás System.
|
d)
|
The Public Prosecutor’s Office of the State of São Paulo began a class action claiming moral and property damages suffered by all consumers of telecommunications services from 2004 to 2009 due to the bad quality of services and failures of the communications system. The Public Prosecutor’s Office suggested that the indemnification to be paid should be R$1 billion. The decision handed down on April 20, 2010 imposes the payment of indemnification for damages caused to all consumers who have filed a suit for such damages.
|
e)
|
The Company and its subsidiaries are involved in other civil claims, at several levels, related to service rendering. Such claims have been filed by individual consumers, civil associations representing consumer rights or by the Bureau of Consumer Protection (PROCON), as well as by the Federal and State Public Ministry. They are also involved in other claims of several types related to the normal course of business. Total contingency amounts to R$1,236,312 (consolidated) R$920,509 at December 31, 2011, whose likelihood of an unfavorable outcome has been assessed by their legal advisors as possible.
|
f)
|
The Company and its subsidiaries have received fines regarding the noncompliance with SAC Decree. We currently have various actions (administrative and judicial proceedings), whose likelihood of an unfavorable outcome has been assessed by legal advisors as possible, of R$19,314 consolidated.
|
g)
|
Intellectual Property: Lune Projetos Especiais Telecomunicação Comércio e Ind. Ltda (Lune), a Brazilian company, proposed the lawsuit on November 20, 2001 against 23 wireless carriers claiming to own the patent for caller ID and the trademark “Bina”. The purpose of that lawsuit it to interrupt provision of such service by carriers and to seek indemnification equivalent to the amount paid by consumers for using the service.
|
h)
|
Validity of prepaid plan: Vivo and other wireless carriers are defendants in several lawsuits filed by the Public Prosecutor’s Office and consumer associations to challenge imposition of a period to use prepaid minutes. The plaintiffs allege that the prepaid minutes should not expire after a specific period. Conflicting decisions were handed down by courts on the matter. Although we believe that our criteria for the period determination comply with ANATEL standards, the likelihood of an unfavorable outcome has been assessed by legal advisors as possible, except for collective actions against Telemig, for which the probability of an unfavorable outcome in relation to this claim is deemed remote, also based on the opinion of our legal advisors.
|
a)
|
The Company and its subsidiaries are parties to administrative proceedings filed by ANATEL alleging noncompliance with the obligations set forth in industry regulations, as well as legal claims which discuss the sanctions applied by ANATEL at the administrative level, rating the chance of loss as possible amounting to R$1,164,988 at December 31, 2012 and R$860,601 at December 31, 2011.
|
b)
|
Administrative proceedings discussing payment of 2% charge on revenue from interconnection services due to the extension of right of use of SMP-related radiofrequencies: Under clause 1.7 of the Authorization Terms that grant right of use of SMP-related radiofrequencies, the extension of right of use of such frequencies entails payment every two years, during the extension period (15 years), of a 2% charge calculated on net revenue from the basic and alternative service plans of the service company, determined in the year before that of payment.
|
c)
|
Administrative Proceeding No. 08012.008501/2007-91: It is a proceeding filed at the level of the Brazilian System for Competition Defense (SBDC) by Global Village Telecom Ltda (GVT), Intelig Telecomunicações Ltda (Intelig), Transit do Brasil Ltda. and Easytone Telecomunicações Ltda. on August 6, 2007 against Claro S.A. (Claro). (Claro), Tim Brasil Serviços e Telecomunicações S.A. (TIM), TNL SCS S.A. for supposed trust and price squeeze practices, with the objective of increasing VUM tariff, thus increasing the costs of competitors Due to the proceeding filed on August 21, 2008, the Department for Economic Right (SDE) started an administrative proceeding against the defendants in order to evaluate whether the practices adopted would fit into (i) items I, III and IV, article 20 and items V, article 21 and (ii) items I, III and IV, article 20 and items I and V, all of Law No. 8,884/94, to wit trust and price squeeze.
|
20.4
|
Guarantees
|
Property
and equipment
|
Escrow deposits
|
Letter bond
|
||||||||||
Civil, labor and tax
|
235,847 | 4,036,099 | 1,887,699 | |||||||||
Total
|
235,847 | 4,036,099 | 1,887,699 |
21.
|
Deferred revenues
|
a)
|
Breakdown
|
2012
|
2011
|
|||||||
Activation revenue (a)
|
57,581 | 67,672 | ||||||
Payphone cards
|
9,948 | 15,783 | ||||||
Services and goods (b)
|
558,165 | 583,751 | ||||||
Government grants (d)
|
8,294 | 8,322 | ||||||
Customer loyalty program (e)
|
82,848 | 68,821 | ||||||
Other
|
17,737 | 16,919 | ||||||
Total current
|
734,573 | 761,268 | ||||||
Activation revenue (a)
|
31,786 | 30,792 | ||||||
Services and goods (b)
|
38,742 | 48,095 | ||||||
Disposal of property, plant and equipment (c)
|
171,174 | - | ||||||
Equipment donations (f)
|
16,235 | 22,638 | ||||||
Government grants (d)
|
36,639 | 44,880 | ||||||
Other
|
8,786 | 9,861 | ||||||
Total non-current
|
303,362 | 156,266 |
|
a)
|
Refers to the deferral of fee revenue (fixed) recognized in income over the estimated period of duration of the customer plan.
|
|
b)
|
Refers to the balances of agreements of prepaid services revenue and multi-element operations, which are recognized in income to the extent that services are provided to customers.
|
|
c)
|
Refers to net balance of the residual value from disposal of non-strategic towers and rooftops owned by Vivo, to be transferred to income upon compliance of conditions for recognition in books.
|
|
d)
|
Refers to government grant deriving from funds raised with BNDES in a specific credit line (PSI Program), used in the acquisition of domestic equipment and registered at BNDES (Finame) and applied in projects to expand the network capacity, which have been amortized by the useful lives of equipment.
|
|
e)
|
Refers to the fidelity points program that Vivo maintains, which allows customers to accumulate points when paying their bills referring to use of services offered. The balance represents the Company’s estimate for exchange of points, by customers, for goods and/or services in the future.
|
|
f)
|
Refers to the balances of network equipment donations from suppliers, which are amortized by the useful lives of the referred to equipment.
|
b)
|
Changes
|
Balances as of 12/31/2010
|
141,739 | |||
Additions
|
12,139,462 | |||
Write-offs
|
(12,017,250 | ) | ||
Business combination
|
653,583 | |||
Balances as of 12/31/2011
|
917,534 | |||
Additions
|
20,763,225 | |||
Write-offs
|
(20,642,824 | ) | ||
Balances as of 12/31/2012
|
1,037,935 | |||
Current
|
734,573 | |||
Non-current
|
303,362 |
22.
|
Other Liabilities
|
a)
|
Breakdown
|
2012
|
2011
|
|||||||
Consignments on behalf of third parties
|
139,154 | 252,807 | ||||||
Amounts to be refunded to subscribers
|
45,618 | 59,265 | ||||||
Lease (a)
|
14,799 | 11,669 | ||||||
Liabilities with related parties
|
50,147 | 66,476 | ||||||
Charges payable – concession arrangement
|
106,877 | 44,296 | ||||||
Other payables
|
22,859 | 32,101 | ||||||
Total current
|
379,454 | 466,614 | ||||||
Lease (a)
|
18,460 | 9,398 | ||||||
Liabilities with related parties
|
7,201 | 4,976 | ||||||
Personnel, social charges and social benefits
|
13,224 | 15,160 | ||||||
Intercompany loan, debt assumption and installment payment
|
- | 21,587 | ||||||
Charges payable – concession arrangement
|
87,564 | - | ||||||
Other payables
|
17,730 | 17,137 | ||||||
Total noncurrent
|
144,179 | 68,258 |
|
(a)
|
The Company has finance lease agreements for use of IT equipment and transmission towers.
|
b)
|
Lease
|
2012
|
2011
|
|||||||
Lease future gross payments
|
51,025 | 23,920 | ||||||
Unrealized financial expense
|
(17,766 | ) | (2,853 | ) | ||||
Present value of minimum payments due
|
33,259 | 21,067 | ||||||
Current
|
14,799 | 11,669 | ||||||
Noncurrent
|
18,460 | 9,398 |
Year
|
Gross investment
|
Present value
|
||||||
Maturing within one year
|
16,367 | 14,799 | ||||||
Maturing more than one year but within five years
|
34,658 | 18,460 | ||||||
Total
|
51,025 | 33,259 |
c)
|
Commitments and guarantees (rentals)
|
Year
|
Value
|
|||
Up to one year
|
1,230,640 | |||
One to five years
|
5,216,076 | |||
More than five years
|
3,460,111 | |||
Total
|
9,906,827 |
23.
|
Shareholders’ equity
|
a)
|
Capital
|
b)
|
Bonus Paid on Acquisition of Interest from Non-Controlling Shareholders
|
c)
|
Capital reserves
|
d)
|
Income Reserve
|
e)
|
Interim Dividends
|
Minimum mandatory dividends calculated based on adjusted net income
|
2012
|
2011
|
||||||
Net Income for the year
|
4,453,573 | 4,355,318 | ||||||
Appropriation to legal reserve
|
(222,678 | ) | (217,766 | ) | ||||
Adjusted net income for the year
|
4,230,895 | 4,137,552 | ||||||
Minimum mandatory dividends - 25% of adjusted net income
|
1,057,724 | 1,034,388 | ||||||
Dividends and interest on shareholders’ equity distributed:
|
||||||||
Interest on Shareholders’ Equity (Gross)
|
- | 1,867,000 | ||||||
Interim Dividends
|
1,122,522 | 382,400 | ||||||
Profit available for distribution
|
3,108,373 | 1,888,152 | ||||||
(+) Interest on Shareholders’ Equity / Prescribed Dividends
|
89,692 | 107,874 | ||||||
(-) Actuarial (Gains) / losses recognized and effect of the limitation of the surplus plan assets, net of tax
|
(49,296 | ) | (42,997 | ) | ||||
Additional proposed dividend
|
3,148,769 | 1,953,029 |
2012
|
||||||||
Amounts in R$ per share (a)
|
Common
|
Preferred
|
||||||
Interim dividends declared in November 2012
|
0.937417 | 1.031158 | ||||||
0.937417 | 1.031158 |
2011
|
||||||||
Amounts in R$ per share (a)
|
Common
|
Preferred
|
||||||
Interim dividends declared in March 2011
|
3.139752 | 3.453727 | ||||||
Interim dividends declared in September 2011
|
0.319058 | 0.350964 | ||||||
Interest on shareholders’ equity - net of withholding tax
|
0.886505 | 0.975156 | ||||||
Interest on shareholders’ equity - net of withholding tax
|
0.437720 | 0.481492 | ||||||
4.783035 | 5.261339 |
2011
|
||||||||
Amounts in R$ per share (a)
|
Gross amount
|
Net amount
|
||||||
Interest on shareholder’s equity – common shares
|
1.557913 | 1.324226 | ||||||
Interest on shareholder’s equity – preferred shares
|
1.713705 | 1.456649 | ||||||
3.271.618 | 2.780.875 |
Reais
|
Common
|
Preferred (1)
|
||||||||||
2012 - Total proposed for deliberation – per share
|
3,148,769 | 2.629533 | 2.892487 | |||||||||
2011 - Total proposed for deliberation – per share
|
1,953,029 | 1.630092 | 1.793102 |
f)
|
Dividends and Interest on Shareholders’ Equity
|
2011
|
||||
Gross interest on shareholders’ equity
|
1,867,000 | |||
Common shares
|
594,113 | |||
Preferred shares
|
1,272,887 | |||
Withholding income tax
|
(280,050 | ) | ||
Interest on shareholders’ equity, net of withholding tax
|
1,586,950 |
g)
|
Prescribed Dividends
|
24.
|
Net operating revenue
|
2012
|
2011
|
2010
|
||||||||||
Telephony services
|
26,555,103 | 24,254,154 | 15,366,014 | |||||||||
Network usage
|
4,453,340 | 3,785,017 | 523,787 | |||||||||
Data Transmission and value added services
|
14,389,812 | 10,929,344 | 5,028,441 | |||||||||
Cable TV services
|
805,319 | 865,376 | 587,374 | |||||||||
Other services (a)
|
1,282,632 | 1,104,095 | 166,464 | |||||||||
Sale of goods and equipment
|
2,792,611 | 2,135,165 | 936,970 | |||||||||
Gross operating revenue
|
50,278,817 | 43,073,151 | 22,609,050 | |||||||||
ICMS
|
(10,048,616 | ) | (8,800,749 | ) | (4,702,669 | ) | ||||||
PIS and COFINS
|
(2,056,553 | ) | (1,780,503 | ) | (864,994 | ) | ||||||
ISS
|
(44,054 | ) | (45,576 | ) | (39,441 | ) | ||||||
Deductions
|
(4,198,172 | ) | (3,317,583 | ) | (1,203,695 | ) | ||||||
Net operating revenue
|
33,931,422 | 29,128,740 | 15,798,251 |
(a)
|
Vivo’s contracted amounts of swap and infrastructure, within the concept of agent and principal (CPC 30 and IAS 18), are not being disclosed as costs and revenues for the years ended December 31, 2012 and 2011 were R$44,758 and R$23,980, respectively (Note 25).
|
25.
|
Costs of goods and services
|
2012
|
2011
|
2010
|
||||||||||
Depreciation and amortization
|
(4,132,456 | ) | (3,582,633 | ) | (1,687,449 | ) | ||||||
Personnel
|
(459,707 | ) | (380,067 | ) | (257,385 | ) | ||||||
Interconnection
|
(4,012,065 | ) | (4,537,124 | ) | (4,176,714 | ) | ||||||
Third-party services
|
(3,288,842 | ) | (2,817,324 | ) | (1,841,072 | ) | ||||||
Rental / insurance / condominium and means of connection (a) (b)
|
(968,774 | ) | (910,503 | ) | (364,303 | ) | ||||||
Taxes, fees and contributions
|
(1,615,537 | ) | (1,279,426 | ) | (240,346 | ) | ||||||
Charges payable – concession arrangement (Note 1.b.1)
|
(194,442 | ) | (142,252 | ) | (102,568 | ) | ||||||
Other
|
(90,749 | ) | (106,055 | ) | (19,318 | ) | ||||||
Total of service costs
|
(14,762,572 | ) | (13,755,384 | ) | (8,689,155 | ) | ||||||
Costs of goods
|
(1,801,892 | ) | (1,284,279 | ) | (155,650 | ) | ||||||
Total
|
(16,564,464 | ) | (15,039,663 | ) | (8,844,805 | ) |
26.
|
Selling expenses
|
2012
|
2011
|
2010
|
||||||||||
Depreciation and amortization
|
(927,874 | ) | (684,891 | ) | (123,043 | ) | ||||||
Personnel
|
(1,321,397 | ) | (1,049,978 | ) | (443,386 | ) | ||||||
Third-party services
|
(4,416,402 | ) | (3,541,958 | ) | (1,730,908 | ) | ||||||
Allowance for doubtful accounts (note 6)
|
(654,273 | ) | (506,581 | ) | (386,340 | ) | ||||||
Rental / insurance / condominium
|
(119,300 | ) | (79,239 | ) | (9,434 | ) | ||||||
Publicity and advertising
|
(867,364 | ) | (735,622 | ) | (224,796 | ) | ||||||
Donation and sponsorships
|
(253,756 | ) | (251,597 | ) | - | |||||||
Others
|
(133,330 | ) | (98,345 | ) | (46,725 | ) | ||||||
Total
|
(8,693,696 | ) | (6,948,211 | ) | (2,964,632 | ) |
27.
|
General and administrative expenses
|
2012
|
2011
|
2010
|
||||||||||
Depreciation and amortization
|
(432,829 | ) | (318,470 | ) | (103,002 | ) | ||||||
Personnel
|
(623,341 | ) | (556,058 | ) | (287.866 | ) | ||||||
Third-party services
|
(832,493 | ) | (693,260 | ) | (300,101 | ) | ||||||
Rental / insurance / condominium and other expenses
|
(259,813 | ) | (217,870 | ) | (47,877 | ) | ||||||
Total
|
(2,148,476 | ) | (1,785,658 | ) | (738,846 | ) |
28.
|
Other operating income (expenses), net
|
2012
|
2011
|
2010
|
||||||||||
Fines and expenses recovered
|
380,553 | 366,124 | 195,066 | |||||||||
Donation and sponsorships
|
(6,679 | ) | (8,612 | ) | (19,117 | ) | ||||||
Provision for civil, labor and tax contingencies, net
|
(770,646 | ) | (367,554 | ) | (116,996 | ) | ||||||
Profit on disposal of assets (a)
|
1,100,934 | 513,891 | 230,335 | |||||||||
Administrative technical services
|
25,878 | 32,652 | 36,537 | |||||||||
Other expenses
|
(45,537 | ) | (94,343 | ) | (100,497 | ) | ||||||
Total
|
687,503 | 442,158 | 312,479 | |||||||||
Other operating income
|
1,871,678 | 1,229,862 | 796,285 | |||||||||
Other operating expenses
|
(1,184,175 | ) | (787,704 | ) | (483,806 | ) | ||||||
Total
|
687,503 | 442,158 | 312,479 |
|
(a)
|
During fiscal year 2012, Vivo sold a total of 4,404 transmission non-strategic towers and rooftops (1,358 towers in 2011) for different buyers for a total of R$1,462,916 (R$476,038 in 2011). After the transaction of sale of assets, Vivo leased back part of the towers and rooftops sold to continue transmitting data which is necessary for mobile services.
|
29.
|
Financial expenses, net
|
2012
|
2011
|
2010
|
||||||||||
Financial income
|
1,281,554 | 1,103,359 | 344,354 | |||||||||
Income from short-term investments
|
313,437 | 337,179 | 181,717 | |||||||||
Gains on derivative transactions
|
345,412 | 251,758 | 18,567 | |||||||||
Interest receivable
|
187,449 | 131,521 | 33,834 | |||||||||
Monetary/foreign exchange variations gains
|
345,698 | 267,665 | 86,950 | |||||||||
Other financial income
|
89,558 | 115,236 | 23,286 | |||||||||
Financial expenses
|
(1,572,369 | ) | (1.243,051 | ) | (465,092 | ) | ||||||
Interest payable
|
(690,979 | ) | (484,663 | ) | (355,971 | ) | ||||||
Losses on derivative transactions
|
(230,216 | ) | (140,725 | ) | (20,746 | ) | ||||||
Monetary/foreign exchange variation losses
|
(409,907 | ) | (308,966 | ) | (14,499 | ) | ||||||
PIS/Cofins on received interest on shareholder’s equity
|
(42,273 | ) | (18,500 | ) | - | |||||||
Others financial expenses
|
(198,994 | ) | (290,197 | ) | (73,876 | ) | ||||||
Net
|
(290,815 | ) | (139,692 | ) | (120,738 | ) |
30.
|
Income and social contribution taxes
|
2012
|
2011
|
2010
|
||||||||||
Income before taxes
|
6,921,474 | 5,657,674 | 3,444,598 | |||||||||
Income and social contribution taxes
|
||||||||||||
Income and social contribution taxes expenses – at 34% rate
|
(2,353,301 | ) | (1,923,609 | ) | (1,171,163 | ) | ||||||
Permanent differences
|
||||||||||||
Equity pick-up, net of effects on interest on shareholders’ equity received
|
- | - | 982 | |||||||||
Interest on shareholders’ equity expenses
|
- | 634,780 | 201,280 | |||||||||
Prescribed dividends
|
(30,495 | ) | (5,613 | ) | (7,483 | ) | ||||||
Non-deductible expenses, gifts, incentives and dividends received
|
(68,052 | ) | (47,576 | ) | (24,532 | ) | ||||||
Other additions (exclusions)
|
(17,445 | ) | 46,543 | - | ||||||||
Total general (IRPJ + CSLL)
|
(2,469,293 | ) | (1,295,475 | ) | (1,045,762 | ) | ||||||
Effective Rate
|
36 | % | 23 | % | 30 | % | ||||||
Current income and social contribution taxes
|
(1,628,669 | ) | (928,132 | ) | (926,868 | ) | ||||||
Deferred income and social contribution taxes
|
(840,824 | ) | (367,343 | ) | (118,894 | ) |
31.
|
Earnings per share
|
2012
|
2011
|
2010
|
||||||||||
Net income attributable to the shareholders:
|
4,453,573 | 4,355,318 | 2,398,836 | |||||||||
Common shares
|
1,418,011 | 1,381,068 | 749,615 | |||||||||
Preferred shares
|
3,035,562 | 2,974,250 | 1,649,221 | |||||||||
Numbers of shares:
|
1,123,463 | 928,005 | 505,841 | |||||||||
Weighted average common shares outstanding during the year
|
381,338 | 313,748 | 168,609 | |||||||||
Weighted average preferred shares outstanding during the year
|
742,125 | 614,257 | 337,232 | |||||||||
Basic and diluted earnings per share:
|
||||||||||||
Common shares
|
3.72 | 4.40 | 4.45 | |||||||||
Preferred shares
|
4.09 | 4.84 | 4.89 |
32.
|
Transactions with related parties
|
Balance Sheets - Current assets
|
|||||||||||||
2012
|
2011
|
||||||||||||
Current assets
|
Noncurrent assets
|
Current assets
|
Noncurrent assets
|
||||||||||
Company
|
Nature of transaction
|
Trade accounts receivable, net
|
Other assets
|
Other assets
|
Trade accounts
receivable, net
|
Other assets
|
Other assets
|
||||||
Controller
|
|||||||||||||
SP Telecomunicações Participações Ltda.
|
o)
|
1
|
19
|
545
|
-
|
4
|
-
|
||||||
Telefónica Internacional S.A.
|
o)
|
-
|
149
|
17,393
|
-
|
221
|
17,022
|
||||||
Telefónica S. A.
|
o)
|
-
|
54
|
137
|
-
|
482
|
1,591
|
||||||
1
|
222
|
18,075
|
-
|
707
|
18,613
|
||||||||
Other companies of the group
|
|||||||||||||
Atento Brasil S. A.
|
a) / b)
|
-
|
-
|
-
|
13,350
|
1,370
|
-
|
||||||
T.Usa
|
m)
|
1,925
|
-
|
-
|
913
|
-
|
-
|
||||||
Telefonica da Argentina S. A.
|
n)
|
2,462
|
-
|
-
|
2,452
|
-
|
-
|
||||||
Telefónica de España S. A.
|
n)
|
2,476
|
-
|
-
|
5,320
|
-
|
-
|
||||||
Telefónica Del Peru
|
d) / n)
|
1,764
|
3,216
|
236
|
1,750
|
8,913
|
-
|
||||||
Telefonica Engenharia de Segurança do Brasil Ltda.
|
a) / g) / o)
|
556
|
1,915
|
293
|
484
|
1,552
|
287
|
||||||
Telefônica International Wholesale Services Brasil Ltda.
|
a) / g) / o)
|
641
|
218
|
22
|
1,683
|
448
|
22
|
||||||
Telefónica International Wholesale Services Espanha
|
m)
|
7,072
|
-
|
-
|
6,057
|
-
|
-
|
||||||
Telefónica Moviles España S.A.
|
n)
|
3,239
|
-
|
-
|
5,424
|
-
|
-
|
||||||
Telefônica Serviços Empresariais do Brasil Ltda.
|
a) / b) / g) / o)
|
1,770
|
15,605
|
1,009
|
1,068
|
15,622
|
932
|
||||||
Telefônica Transportes e Logistica Ltda.
|
a) / b) / g) / o)
|
206
|
102
|
7
|
16
|
147
|
-
|
||||||
Terra Networks Brasil S. A.
|
a) / g) / o)
|
3,286
|
6,054
|
13
|
3,729
|
5,776
|
16
|
||||||
Others
|
a) / d) / g) / n)
|
15,624
|
10,701
|
463
|
15,654
|
5,750
|
344
|
||||||
41,021
|
37,811
|
2,043
|
57,900
|
39,478
|
1,601
|
||||||||
Total
|
41,022
|
38,033
|
20,118
|
57,900
|
40,285
|
20,214
|
Balance Sheets - Current Liabilities
|
|||||||||||||
2012
|
2011
|
||||||||||||
Liabilities
|
Noncurrent liabilities
|
Liabilities
|
Noncurrent liabilities
|
||||||||||
Company
|
Nature of transaction
|
Trade accounts payable
|
Other liabilities
|
Other liabilities
|
Trade accounts payable
|
Other liabilities
|
Other liabilities
|
||||||
Controller
|
|||||||||||||
SP Telecomunicações Participações Ltda.
|
o)
|
2,685
|
4,028
|
4,689
|
-
|
-
|
-
|
||||||
Telefónica Internacional S.A.
|
o)
|
601
|
1,086
|
-
|
24,878
|
20,389
|
-
|
||||||
Telefónica S. A.
|
p)
|
3,168
|
35,162
|
-
|
4,394
|
38,346
|
-
|
||||||
6,454
|
40,276
|
4,689
|
29,272
|
58,735
|
-
|
||||||||
Other companies of the group
|
|||||||||||||
Atento Brasil S. A.
|
c)
|
-
|
-
|
-
|
182,654
|
4,038
|
338
|
||||||
T.Usa
|
i)
|
1,051
|
6,680
|
106
|
-
|
42
|
97
|
||||||
Telefonica da Argentina S. A.
|
n)
|
1,577
|
-
|
-
|
1,260
|
-
|
-
|
||||||
Telefónica de España S. A.
|
n)
|
2,158
|
-
|
-
|
3,997
|
-
|
-
|
||||||
Telefónica Del Peru
|
n)
|
49
|
-
|
-
|
61
|
-
|
700
|
||||||
Telefonica Engenharia de Segurança do Brasil Ltda.
|
f)
|
3,828
|
-
|
8
|
5,704
|
43
|
210
|
||||||
Telefônica International Wholesale Services Brasil Ltda.
|
i)
|
68,552
|
-
|
305
|
29,080
|
-
|
505
|
||||||
Telefónica International Wholesale Services Espanha
|
i)
|
869
|
2,342
|
-
|
716
|
2,686
|
-
|
||||||
Telefónica Moviles España S.A.
|
n)
|
4,196
|
-
|
-
|
5,984
|
-
|
-
|
||||||
Telefônica Serviços Empresariais do Brasil Ltda.
|
j) / o)
|
17,783
|
36
|
1,521
|
10,553
|
162
|
2,976
|
||||||
Telefônica Transportes e Logistica Ltda.
|
k)
|
32,648
|
272
|
165
|
36,341
|
269
|
144
|
||||||
Terra Networks Brasil S. A.
|
l)
|
1,366
|
19
|
291
|
1,081
|
19
|
-
|
||||||
Others
|
e) / h) / n)
|
15,096
|
522
|
116
|
24,365
|
482
|
6
|
||||||
149,173
|
9,871
|
2,512
|
301,796
|
7,741
|
4,976
|
||||||||
Total
|
155,627
|
50,147
|
7,201
|
331,068
|
66,476
|
4,976
|
Income Statements - Revenues and Incomes
|
|||||||||
2012
|
2011
|
||||||||
Company
|
Nature of transaction
|
Revenues
|
Expenses
|
Revenues
|
Expenses
|
||||
Controller
|
|||||||||
SP Telecomunicações Participações Ltda.
|
o)
|
-
|
(12,639)
|
4
|
(357,805)
|
||||
Telefónica Internacional S.A.
|
o)
|
43,211
|
-
|
1
|
(603,066)
|
||||
Telefónica S. A.
|
o) / p)
|
3,691
|
(142,791)
|
-
|
(578,363)
|
||||
46,902
|
(155,430)
|
5
|
(1,539,234)
|
||||||
Other companies of the group
|
|||||||||
Atento Brasil S. A.
|
a) / b) / c)
|
50,580
|
(979,672)
|
51,148
|
(1,041,829)
|
||||
T.Usa
|
m) / i)
|
3,318
|
(7,832)
|
2,431
|
(105)
|
||||
Telefonica da Argentina S. A.
|
n)
|
3,563
|
(2,354)
|
3,254
|
(2,140)
|
||||
Telefónica de España S. A.
|
n)
|
4,585
|
(3,736)
|
6,266
|
(5,643)
|
||||
Telefónica Del Peru
|
d) / n)
|
3,844
|
-
|
3,788
|
-
|
||||
Telefonica Engenharia de Segurança do Brasil Ltda.
|
a) / f) / g) / o)
|
2,374
|
(7,077)
|
1,133
|
(5,454)
|
||||
Telefônica International Wholesale Services Brasil Ltda.
|
a) / g) / i) / o)
|
8,725
|
(120,876)
|
5,741
|
(88,642)
|
||||
Telefónica International Wholesale Services Espanha
|
i) / m)
|
20,476
|
(13,917)
|
11,918
|
(14,625)
|
||||
Telefónica Moviles España S.A.
|
n)
|
-
|
(4,841)
|
9,190
|
(7,985)
|
||||
Telefônica Serviços Empresariais do Brasil Ltda.
|
a) / b) / g) / j) / o)
|
6,125
|
(97,665)
|
6,553
|
(94,644)
|
||||
Telefônica Transportes e Logistica Ltda.
|
a) / b) / g) / k) / o)
|
1,078
|
(86,710)
|
67
|
(80,887)
|
||||
Terra Networks Brasil S. A.
|
a) / g) / l) / o)
|
7,317
|
(4,448)
|
8,461
|
(5,604)
|
||||
Others
|
a) / d) / e) / g) / h) / n)
|
5,027
|
(3,172)
|
8,445
|
(30,678)
|
||||
117,012
|
(1,332,300)
|
118,395
|
(1,378,236)
|
||||||
Total
|
163,914
|
(1,487,730)
|
118,400
|
(2,917,470)
|
a)
|
Fixed and mobile telephony services
: Fixed and mobile telecommunication services provided to Telefônica group.
|
b)
|
Rental of buildings and sale of call center assets
. Rental of Company buildings where the call center infrastructure is installed and sale of fixed assets used in call center operations to Atento Brasil, Telefonica Serviços Empresariais do Brasil and Telefônica Transportes e Logística;
|
c)
|
Supporting services to teleservice, collection, back-office and sales promoters centers
: Provided by Atento Brasil;
|
d)
|
Expenses incurred
: These are transferred to the Company by Media Networks Latin and Telefónica Del Peru;
|
e)
|
Digital TV services
: provided by Media Networks Latin;
|
f)
|
Rental and maintenance of safety equipment
: provided by Telefônica Engenharia e Segurança do Brasil;
|
|
g)
|
Corporate services
: these are transferred by the cost effectively incurred for these services;
|
|
h)
|
System development and maintenance services
: provided by Telefônica Global Technology;
|
|
i)
|
Infrastructure for international transmission to various data circuits and connection services
: provided by Telefônica International Wholesale Brasil; Telefônica International Wholesale Services; and Telefônica USA;
|
|
j)
|
Administrative management services
: financial, equity, accounting and human resources services provided by Telefonica Serviços Empresariais do Brasil;
|
|
k)
|
Logistic operation services, messenger and carrier
: these are provided by Telefônica Transportes e Logística;
|
|
l)
|
Provider of voice portal content
: these services are provided by Terra Networks Brasil;
|
|
m)
|
Data communication and integrated solutions
: provided for Telefônica International Wholesale Services and Telefónica Usa;
|
|
n)
|
Long distance call and international roaming services
: provided by companies from Telefônica group;
|
|
o)
|
Reimbursement of expenses
: come from consulting fees, expenses for salaries and other expenses paid by the Company to be reimbursed by the companies of Telefónica Group, and
|
|
p)
|
Brand Fee:
assignment of use rights paid to Telefônica brand.
|
33.
|
Insurance
|
Type
|
Insurance Coverage
|
|||
Operational risks (with loss of profits)
|
R$ | 1,095,420 | ||
Optional civil responsibility - general
|
R$ | 40,293 | ||
ANATEL guarantee insurance
|
R$ | 24,644 |
34.
|
Stock options
|
a)
|
Plan of rights on Telefônica S.A. shares: Performance Share Plan (PSP)
|
-
|
The permanence in the company for each cycle three-year term, subject to certain special conditions in relation to write-offs.
|
-
|
The concrete number of shares to be delivered at the end of each cycle will depend on the success level and maximum number of shares attributed to each executive. The level of success is based on the comparison of the shareholder compensation evolution, considering quotation and dividends (Total
|
Cycle
|
Nº of Shares
|
Unit Value in Euros
|
Date of Completion
|
|||
3
rd
cycle July 1, 2008
|
186,186
|
8.39
|
June 30, 2011
|
|||
4
rd
cycle July 1, 2009
|
169,323
|
8.41
|
June 30, 2012
|
Cycle
|
Nº of Shares
|
Unit Value in Euros
|
Date of Completion
|
|||
5
th
cycle July, 1, 2010
|
170,219
|
9.08
|
June 30, 2013
|
|
b)
|
“Performance & Investment Plan” or “PIP”
|
|
-
|
Maintenance of an active employment relationship with Telefônica Group at the cycle consolidation date;
|
|
-
|
Achievement, by Telefônica, of results representing the compliance of the objectives determined for the plan: The success level is based on the comparison of the shareholders’ compensation, obtained through TSR, in relation to the performance of the TSR of Comparison Group companies predefined.
|
|
-
|
All shares will be delivered if the TSR of Telefônica S.A. exceeds the TSR of companies representing 75% of the stock market capitalization of the Comparison Group.
|
|
-
|
30% of shares will be delivered if the TSR of Telefônica S.A. is at the same level or above the TSR of companies representing 50% of the stock market capitalization of the Comparison Group.
|
|
-
|
Determined by linear interpolation if the TSR of Telefônica S.A. is between 50% and 75% of the stock market capitalization of amounts of the Comparison Group.
|
|
-
|
No shares will be delivered if the TSR of Telefônica S.A. is below the TSR of companies representing 50% of the stock market capitalization of the Comparison Group.
|
Cycle
|
Nº of Shares
|
Unit Value in Euros
|
Date of Completion
|
|||
1st cycle July 1 2011
|
208,269
|
8.28
|
June 30, 2014
|
|||
2st cycle July 1 2012
|
345,026
|
8.28
|
June 30, 2015
|
c)
|
Global Telefônica S.A. share-based plan: Global Employee Share Plan” or “GESP”.
|
-
|
The beneficiary must continue to work for the Company throughout the two years of effectiveness of the plan (vesting period), subject to certain special conditions relating to departures from the Company.
|
-
|
The actual number of shares to be granted at the end of the vesting period will depend on the number of shares purchased and maintained by the employees. As such, the employees participating in the Plan who remain in the Group and, who maintained the purchased shares for an additional period of other twelve months after the purchase period, will be entitled to receive one share free-of-charge for each share which they acquired and maintained at the end of the vesting period.
|
Plans
|
2012
|
2011
|
2010
|
|||||||||
PSP
|
3,994 | 10,101 | 9,516 | |||||||||
PIP
|
3,000 | 4,509 | - | |||||||||
GESP
|
3,435 | 2,298 | 840 | |||||||||
Total
|
10,429 | 16,908 | 10,356 |
35.
|
Post-retirement benefit plans
|
Plan
|
Type
(1)
|
Entity
|
Sponsor
|
|||
PBS-A
|
BD
|
Sistel
|
Telefônica Brasil and Vivo in conjunction with the other telecommunication companies resulting from the breakup of Telebras.
|
|||
PAMA/PCE
|
Health care plan
|
Sistel
|
Telefônica Brasil and Vivo in conjunction with the other telecommunication companies resulting from the breakup of Telebras.
|
|||
CTB
|
BD
|
Telefónica Brasil
|
Telefônica Brasil
|
|||
PBS
|
BD/Hybrid
|
VisãoPrev
|
Telefônica Brasil and Vivo
|
|||
PREV
|
Hybrid
|
VisãoPrev
(2)
|
Vivo S.A.
|
|||
VISÃO
|
CD/Hybrid
|
VisãoPrev
|
A. Telecom, Telefônica Data, Telefônica Brasil, Vivo and VisãoPrev Companhia de Previdência Complementar
|
(1)
|
BD = Defined Benefit Plan;
|
(2)
|
Except CELPREV plan, managed by Sistel.
|
Plan
|
%
|
|
PBS Telesp
|
6.82
|
|
PBS Telesp Celular
|
7.16
|
|
PBS Tele Sudeste Celular
|
6.64
|
|
PBS Telemig Celular
|
6.11
|
|
PAMA
|
1.5
|
Plan
|
2012
|
2011
|
||||||
CTB
|
50,652 | 34,615 | ||||||
PAMA
|
341,617 | 273,373 | ||||||
PBS
|
- | 905 | ||||||
Total
|
392,269 | 308,893 |
2012
|
|||||||||||||||||||||||||||||
PBS-A (i)
|
CTB
|
PAMA (i)
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||||||
Total actuarial liabilities
|
1,376,229 | 50,652 | 437,241 | 229,119 | 34,666 | 53,559 | 2,181,466 | ||||||||||||||||||||||
Fair value of assets
|
2,136,722 | - | 95,624 | 342,323 | 61,189 | 106,150 | 2,742,008 | ||||||||||||||||||||||
Liabilities (assets), net
|
(760,493 | ) | 50,652 | 341,617 | (113,204 | ) | (26,523 | ) | (52,591 | ) | (560,542 | ) | |||||||||||||||||
Assets limitation
|
760,493 | - | - | 112,246 | 8,685 | 23,339 | 904,763 | ||||||||||||||||||||||
Noncurrent assets
|
- | - | - | (958 | ) | (17,838 | ) | (29,252 | ) | (48,048 | ) | ||||||||||||||||||
Noncurrent liabilities
|
- | 50,652 | 341,617 | - | - | - | 392,269 |
2011
|
||||||||||||||||||||||||||||
PBS-A (i)
|
CTB
|
PAMA (i)
|
PBS
|
Visão
|
PREV
|
Total
|
||||||||||||||||||||||
Total actuarial liabilities
|
1,214,453 | 34,615 | 366,660 | 242,227 | 33,986 | 46,251 | 1,938,192 | |||||||||||||||||||||
Fair value of assets
|
1,882,195 | - | 93,287 | 294,602 | 108,793 | 73,689 | 2,452,566 | |||||||||||||||||||||
Liabilities (assets), net
|
(667,742 | ) | 34,615 | 273,373 | (52,375 | ) | (74,807 | ) | (27,438 | ) | (514,374 | ) | ||||||||||||||||
Assets limitation
|
667,742 | - | - | 53,195 | 44,375 | 26,745 | 792,057 | |||||||||||||||||||||
Noncurrent assets
|
- | - | - | (85 | ) | (30,432 | ) | (693 | ) | (31,210 | ) | |||||||||||||||||
Noncurrent liabilities
|
- | 34,615 | 273,373 | 905 | - | - | 308,893 |
i)
|
Refers to the company’s and its subsidiaries’ proportional interest in PAMA and PBS-A multi-sponsored plan assets and liabilities.
|
2012
|
||||||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||
Current service cost
|
- | 165 | 853 | 4,601 | 3,872 | 9,491 | ||||||||||||||||||
Interest cost
|
3,164 | 35,026 | 22,780 | 3,085 | 4,260 | 68,315 | ||||||||||||||||||
Expected return on plan assets
|
- | (10,847 | ) | (35,944 | ) | (13,392 | ) | (9,001 | ) | (69,184 | ) | |||||||||||||
3,164 | 24,344 | (12,311 | ) | (5,706 | ) | (869 | ) | 8,622 |
2011 | ||||||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||
Current service cost
|
- | 252 | 821 | 3,971 | 2,482 | 7,526 | ||||||||||||||||||
Interest cost
|
1,978 | 29,173 | 17,838 | 3,062 | 3,487 | 55,538 | ||||||||||||||||||
Expected return on plan assets
|
- | (8,163 | ) | (25,654 | ) | (6,940 | ) | (5,795 | ) | (46,552 | ) | |||||||||||||
1,978 | 21,262 | (6,995 | ) | 93 | 174 | 16,512 |
2010
|
||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
Total
|
||||||||||||||||
Current service cost
|
- | 159 | 78 | 3,663 | 3,900 | |||||||||||||||
Interest cost
|
2,148 | 23,038 | 8,803 | 2,865 | 36,854 | |||||||||||||||
Expected return on plan assets
|
- | (6,489 | ) | (11,334 | ) | (11,970 | ) | (29,793 | ) | |||||||||||
2,148 | 16,708 | (2,453 | ) | (5,442 | ) | 10,961 |
2012 | ||||||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||
Actuarial (gains) losses
|
17,216 | 43,940 | (48,381 | ) | 57,611 | (20,559 | ) | 49,827 | ||||||||||||||||
Limitation effect
|
- | - | 59,051 | (35,690 | ) | (3,406 | ) | 19,955 | ||||||||||||||||
Total cost recognized in other comprehensive income | 17,216 | 43,940 | 10,670 | 21,921 | (23,965 | ) | 69,782 |
2011 | ||||||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||
Actuarial (gains) losses | 15,398 | 36,581 | 22,643 | 30,628 | (6,552 | ) | 98,698 | |||||||||||||||||
Limitation effect
|
- | - | (12,231 | ) | (28,903 | ) | 7,612 | (33,522 | ) | |||||||||||||||
Total cost recognized in other comprehensive income | 15,398 | 36,581 | 10,412 | 1,725 | 1,060 | 65,176 |
2010
|
||||||||||||||||||||
CTB
|
PAMA
|
PBS
|
Visão
|
Total
|
||||||||||||||||
Actuarial (gains) losses | (1,809 | ) | 13,069 | (7 | ) | (1,138 | ) | 10,115 | ||||||||||||
Limitation effect
|
- | - | 2,472 | 47,998 | 50,470 | |||||||||||||||
Total cost recognized in other comprehensive income | (1,809 | ) | 13,069 | 2,465 | 46,860 | 60,585 |
PBS-A
|
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
||||||||||||||||||||||
Plan liabilities (Assets) as of 01/01/2011
|
- | 20,818 | 198,182 | - | (27,171 | ) | - | 191,829 | ||||||||||||||||||||
Business Combination
|
(17,809 | ) | - | 17,431 | (50,294 | ) | (11,048 | ) | (19,961 | ) | (81,681 | ) | ||||||||||||||||
Expenses in 2011
|
(92,030 | ) | 1,978 | 21,262 | (6,995 | ) | 93 | 174 | (75,518 | ) | ||||||||||||||||||
Contributions of the companies to plans in 2011
|
- | (3,579 | ) | (83 | ) | (294 | ) | (5,016 | ) | (1,100 | ) | (10,072 | ) | |||||||||||||||
Amounts recognized in other comprehensive income
|
109,839 | 15,398 | 36,581 | 58.403 | 12,710 | 20,194 | 253,125 | |||||||||||||||||||||
Liabilities (Assets) as of 12/31/2011
|
- | 34,615 | 273,373 | 820 | (30,432 | ) | (693 | ) | 277,683 | |||||||||||||||||||
Expenses in 2012
|
(129,671 | ) | 3,164 | 24,344 | (12,311 | ) | (5,706 | ) | (869 | ) | (121,049 | ) | ||||||||||||||||
Contributions of the companies to plans in 2012
|
- | (4,343 | ) | (40 | ) | (136 | ) | (3,621 | ) | (3,725 | ) | (11,865 | ) | |||||||||||||||
Amounts recognized in other comprehensive income
|
129,671 | 17,216 | 43,940 | 10,669 | 21,921 | (23,965 | ) | 199,452 | ||||||||||||||||||||
Liabilities (Assets) as of 12/31/2012
|
- | 50,652 | 341,617 | (958 | ) | (17,838 | ) | (29,252 | ) | 344,221 | ||||||||||||||||||
Actuarial asset recognized in the balance sheet
|
- | - | - | (958 | ) | (17,838 | ) | (29,252 | ) | (48,048 | ) | |||||||||||||||||
Actuarial liability recognized in the balance sheet
|
- | 50,652 | 341,617 | - | - | - | 392,269 |
PBS-A
|
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
||||||||||||||||||||||
Actuarial liabilities as of January 1, 2011
|
1,138,330 | 20,818 | 272,140 | 94,177 | 31,915 | - | 1,557,380 | |||||||||||||||||||||
Business Combination
|
35,091 | - | 23,936 | 117,481 | 161 | 49,656 | 226,325 | |||||||||||||||||||||
Cost of current service
|
- | - | 251 | 821 | 3,970 | 2,482 | 7,524 | |||||||||||||||||||||
Interest on actuarial liabilities
|
114,725 | 1,978 | 29,173 | 17,838 | 3,062 | 3,487 | 170,263 | |||||||||||||||||||||
Benefits paid in the year
|
(97,917 | ) | (3,579 | ) | (13,390 | ) | (13,385 | ) | (5,900 | ) | (1,113 | ) | (135,284 | ) | ||||||||||||||
Contributions of participants in the year
|
- | - | 345 | - | - | 345 | ||||||||||||||||||||||
Actuarial (gains) losses in the year
|
24,224 | 15,398 | 54,550 | 24,950 | 778 | (8,261 | ) | 111,639 | ||||||||||||||||||||
Actuarial liabilities as of December 31, 2011
|
1,214,453 | 34,615 | 366,660 | 242,227 | 33,986 | 46,251 | 1,938,192 | |||||||||||||||||||||
Cost of current service
|
- | - | 165 | 853 | 4,601 | 3,872 | 9,491 | |||||||||||||||||||||
Interest on actuarial liabilities
|
113,362 | 3,164 | 35,026 | 22,780 | 3,085 | 4,260 | 181,677 | |||||||||||||||||||||
Benefits paid in the year
|
(101,793 | ) | (4,343 | ) | (14,821 | ) | (13,323 | ) | (1,322 | ) | (1,606 | ) | (137,208 | ) | ||||||||||||||
Contributions of participants in the year
|
- | - | 270 | 180 | 113 | 563 | ||||||||||||||||||||||
Actuarial (gains) losses in the year
|
150,207 | 17,216 | 50,211 | (23,688 | ) | (5,864 | ) | 669 | 188,751 | |||||||||||||||||||
Actuarial liabilities as of December 31, 2012
|
1,376,229 | 50,652 | 437,241 | 229,119 | 34,666 | 53,559 | 2,181,466 |
PBS-A
|
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
||||||||||||||||||||||
Fair value of plan assets as of January 1, 2011
|
1,717,746 | - | 73,959 | 111,612 | 121,378 | - | 2,024,695 | |||||||||||||||||||||
Business Combination
|
52,900 | - | 6,505 | 167,775 | 11,209 | 69,617 | 308,006 | |||||||||||||||||||||
Benefits paid in the year
|
(97,917 | ) | (3,579 | ) | (13,390 | ) | (13,385 | ) | (5,900 | ) | (1,113 | ) | (135,284 | ) | ||||||||||||||
Total contributions in the year
|
- | 3,579 | 81 | 640 | 5,017 | 1,099 | 10,416 | |||||||||||||||||||||
Expected return on plan assets in the year
|
206,757 | - | 8,163 | 25,654 | 6,940 | 5,795 | 253,309 | |||||||||||||||||||||
Gains / (losses) on assets
|
2,709 | - | 17,969 | 2,306 | (29,851 | ) | (1,709 | ) | (8,576 | ) | ||||||||||||||||||
Fair value of plan assets as of December 31, 2011
|
1,882,195 | - | 93,287 | 294,602 | 108,793 | 73,689 | 2,452,566 | |||||||||||||||||||||
Benefits paid in the year
|
(101,793 | ) | - | (14,821 | ) | (13,323 | ) | (1,322 | ) | (1,606 | ) | (132,865 | ) | |||||||||||||||
Total contributions in the year
|
- | - | 39 | 406 | 3,801 | 3,840 | 8,086 | |||||||||||||||||||||
Expected return on plan assets in the year
|
243,033 | - | 10,847 | 35,944 | 13,392 | 9,001 | 312,217 | |||||||||||||||||||||
Gains / (losses) on assets
|
113,287 | - | 6,272 | 24,694 | (63,475 | ) | 21,226 | 102,004 | ||||||||||||||||||||
Fair value of plan assets as of December 31, 2012
|
2,136,722 | - | 95,624 | 342,323 | 61,189 | 106,150 | 2,742,008 |
CTB
|
PAMA
|
PBS
|
Visão
|
PREV
|
Total
|
|||||||||||||||||||
Cost of current service
|
- | 139 | 643 | 4,147 | 4,270 | 9,199 | ||||||||||||||||||
Net interest on net actuarial assets/liabilities
|
4,127 | 30,811 | (101 | ) | (1,721 | ) | (2,703 | ) | 30,413 | |||||||||||||||
Total expenses (reversions) for 2013
|
4,127 | 30,950 | 542 | 2,426 | 1,567 | 39,612 |
2012
|
Expected
return rate
on plan assets
|
Future salary growth rate
|
Medical care
cost growth rate
|
Annual nominal
index of private
pension benefit restatement
|
Medical service eligibility age
|
Retirement age
|
Rate used to
present value
discount of the
actuarial liabilities
|
|||||||
PBS
|
8.7% to 8.91%
|
6.18%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
8.7% to 8.91%
|
|||||||
Visão
|
8.32% to 8.84%
|
6.18%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
8.32% to 8.84%
|
|||||||
PREV
|
8.5% to 9.05%
|
6.18%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
8.5% to 9.05%
|
|||||||
CTB
|
8.57%
|
6.18%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
8.57%
|
|||||||
PAMA
|
9.02%
|
N/A
|
7.64%
|
N/A
|
5% upon reaching 52 years old and 10 years participating; 3% for each subsequent year; 100% in eligibility for regular retirement
|
N/A
|
9.02%
|
|||||||
PBS-A
|
8.67%
|
N/A
|
N/A
|
4.5%
|
N/A
|
N/A
|
8.67%
|
|
·
|
Inflation rate: 4.5%;
|
|
·
|
Capacity factor for salaries and benefits: 98%;
|
|
·
|
Turnover: 0.15 (years of service +1), zero from age 50;
|
|
·
|
Disability entry table: Mercer Disability;
|
|
·
|
Actuarial Table: AT2000 segregated by sex; and
|
|
·
|
Disability mortality table: IAPB-57.
|
2011
|
Expected return rate on plan assets
|
Future salary growth rate
|
Medical care cost growth rate
|
Annual nominal index of private pension benefit restatement
|
Medical service eligibility age
|
Retirement age
|
Rate used to present value discount of the actuarial liabilities
|
|||||||
PBS
|
11.60%
|
PBS: 6.54%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
9.73%
|
|||||||
Visão
|
11.60%
|
Visão: 7.20%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
9.73%
|
|||||||
PBS Telemig
|
12.08%
|
N/A
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
9.73%
|
|||||||
Celprev
/PREV
|
Celprev: 11.10%
PREV: 11.60%
|
Celprev: 7.19%
PREV: 7.20%
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
9.73%
|
|||||||
CTB
|
N/A
|
N/A
|
N/A
|
4.5%
|
N/A
|
Eligibility for regular retirement
|
9.73%
|
|||||||
PAMA
|
11.07%
|
N/A
|
7.64%
|
N/A
|
5% upon reaching 52 years old and 10 years participating; 3% for each subsequent year; 100% in eligibility for regular retirement
|
N/A
|
9.73%
|
|||||||
PBS-A
|
12.08%
|
N/A
|
N/A
|
4.5%
|
N/A
|
N/A
|
9.73%
|
|
·
|
Inflation rate: 4.5%;
|
|
·
|
Capacity factor for salaries and benefits: 98%;
|
|
·
|
Turnover: 0.15 (years of service +1), zero from age 50;
|
|
·
|
Disability entry table: Mercer Disability;
|
|
·
|
Actuarial Table: AT2000 segregated by sex; and
|
|
·
|
Disability mortality table: IAPB-57.
|
2012
|
2011
|
||||
Percentage of allocation of plan assets
|
|||||
Capital instruments
|
11.52% | 5.87% | |||
Debt instruments
|
88.30% | 92.87% | |||
Other
|
0.18% | 1.26% | |||
Total
|
100.00% | 100.00% | |||
Expected return from plan assets
|
|||||
Capital instruments
|
8.5% to 11.4%
|
16.36% | |||
Debt instruments
|
8.5% to 9.06%
|
12.46% | |||
Other
|
8.5% to 10.57%
|
11.67% |
|
·
|
Variable income assets: historic risk premium estimated by the actuarial advisor;
|
|
·
|
Prefixed securities: weighted average rate based on National Treasury Bills (LTN) available and National Treasury Notes – F Series (NTN-F) market portfolio;
|
|
·
|
Assets linked to inflation: weighted average rate based on NTN-B and NTN-C portfolio available in the market;
|
|
·
|
Foreign exchange securities: average SELIC rate weighted by the foreign exchange variation rate projected for the following 10 years;
|
|
·
|
Fixed income assets: average internal nominal interest rate variation, projected for the following 10 years;
|
|
·
|
Loans to participants: the higher rate between CDI and the plan actuarial goal is considered;
|
|
·
|
Properties: the plan actuarial goal used was that of its administrator.
|
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
Present value of liabilities
|
805,236 | 723,739 | 419,050 | 386,722 | 337,480 | |||||||||||||||
Fair value of assets
|
605,286 | 570,371 | 309,949 | 289,239 | 253,695 | |||||||||||||||
Deficit (surplus) of plans
|
199,950 | 153,368 | 112,101 | 97,483 | 83,785 | |||||||||||||||
Experience adjustment on liabilities
|
38,543 | 87,413 | 5,397 | 30,043 | 39,929 | |||||||||||||||
Experience adjustment on assets
|
(11,283 | ) | (11,284 | ) | (1,352 | ) | (19,826 | ) | (8,598 | ) |
2013
|
2014
|
2015
|
2016
|
2017
|
2018 thereof
|
|||||||||||||||||||
Defined pension plan
|
143,430 | 149,216 | 155,112 | 161,678 | 168,029 | 7,577,033 | ||||||||||||||||||
2012
|
2011
|
|||||||
Effect on projected medical expense trend rates
|
||||||||
For an increase of 1% in projected medical expense trend rates
|
||||||||
(i) Total effect on costs of current services and interest on liabilities
|
6,431 | 5,639 | ||||||
(i) Total effect on the present value of liabilities
|
70,393 | 57,677 | ||||||
For a decrease of 1% in projected medical expense trend rates
|
||||||||
(i) Total effect on costs of current services and interest on liabilities
|
(5,278 | ) | (4,653 | ) | ||||
(i) Total effect on the present value of liabilities
|
(57,867 | ) | (47,581 | ) |
36.
|
Financial instruments
|
Fair value | Amortized cost | |||||||||||||||||||||||||||
Hedge
|
Available
for sale
|
Loans and
receivables
|
Level 1
Market price
|
Level 2
Estimated based
on other
market data
|
Total Book
Value
|
Total
Fair Value
|
||||||||||||||||||||||
Financial assets
|
||||||||||||||||||||||||||||
Current assets
|
||||||||||||||||||||||||||||
Cash and cash equivalents (Note 5)
|
- | - | 7,196,079 | - | - | 7,196,079 | 7,196,079 | |||||||||||||||||||||
Derivative transactions (Note 36)
|
41,109 | - | - | - | 41,109 | 41,109 | 41,109 | |||||||||||||||||||||
Noncurrent assets
|
||||||||||||||||||||||||||||
Interests in other companies (Note 36)
|
- | 23,683 | - | 23,683 | - | 23,683 | 23,683 | |||||||||||||||||||||
Derivative transactions (Note 36)
|
286,278 | - | - | - | 286,278 | 286,278 | 286,278 | |||||||||||||||||||||
Total financial assets
|
327,387 | 23,683 | 7,196,079 | 23,683 | 327,387 | 7,547,149 | 7,547,149 |
Measured at
fair value
through
profit or loss
|
Amortized
cost
|
Hedge
|
Level 2
Estimated based
on other
market data
|
Total Book
Value
|
Total
Fair Value
|
|||||||||||||||||||
Financial liabilities
|
||||||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||||||
Loans and financing (note 18)
|
365,192 | 890,131 | - | 365,192 | 1,255,323 | 1,456,466 | ||||||||||||||||||
Debentures (Note 18)
|
6,013 | 696,202 | - | 6,013 | 702,215 | 811,919 | ||||||||||||||||||
Derivative transactions (Note 36)
|
470 | - | 29,116 | 29,586 | 29,586 | 29,586 | ||||||||||||||||||
Noncurrent liabilities
|
||||||||||||||||||||||||
Loans and financing (note 18)
|
1,009,673 | 2,746,328 | - | 1,009,673 | 3,756,001 | 3,581,630 | ||||||||||||||||||
Debentures (Note 18)
|
90,235 | 2,163,455 | - | 90,235 | 2,253,690 | 2,158,008 | ||||||||||||||||||
Derivative transactions (Note 36)
|
- | - | 26,545 | 26,545 | 26,545 | 26,545 | ||||||||||||||||||
Total financial liabilities
|
1,471,583 | 6,496,116 | 55,661 | 1,527,244 | 8,023,360 | 8,064,154 |
Fair value
|
Amortized cost
|
|||||||||||||||||||||||||||||||||||
Measured at
fair value
through
profit or loss
|
Hedge
|
Available
for sale
|
Loans and
receivables
|
Investments
held to
maturity
|
Level 1
Market price
|
Level 2
Estimated
based on
other market
data
|
Total Book
Value
|
Total
Fair Value
|
||||||||||||||||||||||||||||
Financial assets
|
||||||||||||||||||||||||||||||||||||
Current assets
|
||||||||||||||||||||||||||||||||||||
Cash and cash equivalents (note 5)
|
- | - | 2,940,342 | - | - | - | 2,940,342 | 2,940,342 | ||||||||||||||||||||||||||||
Derivative transactions (Note 36)
|
730 | 1,110 | - | - | - | - | 1,840 | 1,840 | 1,840 | |||||||||||||||||||||||||||
Noncurrent assets
|
||||||||||||||||||||||||||||||||||||
Interests in other companies (Note 36)
|
- | - | 37,696 | - | - | 37,696 | - | 37,696 | 37,696 | |||||||||||||||||||||||||||
Derivative transactions (Note 36)
|
- | 225,935 | - | - | - | - | 225,935 | 225,935 | 225,935 | |||||||||||||||||||||||||||
Amounts linked to the National Treasury Securities (note 10)
|
- | - | - | - | 13,819 | - | - | 13,819 | 13,819 | |||||||||||||||||||||||||||
Total financial assets
|
730 | 227,045 | 37,696 | 2,940,342 | 13,819 | 37,696 | 227,775 | 3,219,632 | 3,219,632 |
Measured at
fair value
through
profit or loss
|
Amortized
cost
|
Hedge
|
Level 2
Estimated
based on
other market
data
|
Total Book
Value
|
Total
Fair Value
|
|||||||||||||||||||
Financial liabilities
|
||||||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||||||
Loans and financing (note 18)
|
34,802 | 953,611 | - | 34,802 | 988,413 | 1,220,811 | ||||||||||||||||||
Debentures (Note 18)
|
5,537 | 463,087 | - | 5,537 | 468,624 | 521,057 | ||||||||||||||||||
Derivative transactions (Note 36)
|
1,327 | - | 49,835 | 51,162 | 51,162 | 51,162 | ||||||||||||||||||
Noncurrent liabilities
|
||||||||||||||||||||||||
Loans and financing (note 18)
|
969,977 | 2,989,138 | - | 969,977 | 3,959,115 | 3,586,462 | ||||||||||||||||||
Debentures (Note 18)
|
81,853 | 705,954 | - | 81,853 | 787,807 | 722,453 | ||||||||||||||||||
Derivative transactions (Note 36)
|
- | - | 78,369 | 78,369 | 78,369 | 78,369 | ||||||||||||||||||
Total financial liabilities
|
1,093,496 | 5,111,790 | 128,204 | 1,221,700 | 6,333,490 | 6,180,314 |
2012
|
2011
|
|||||||
Zon Multimédia (a)
|
- | 9,117 | ||||||
Other investments
|
23,683 | 28,718 | ||||||
Total
|
23,683 | 37,835 |
(a)
|
On May 8, 2012, the Company disposed of 1,618,652 common shares, representing 0.52% of capital (voting shares) of Multimédia - Serviços de Telecomunicações e Multimédia, SGPS, S.A.
|
|
a)
|
Exchange rate risk
|
|
b)
|
Interest rate and inflation risk
|
|
c)
|
Liquidity risk
|
|
d)
|
Credit risk
|
Accumulated balance
|
|||||||||||||||||||||||||
Amount receivable (payable)
|
Notional Value
|
Fair value
|
|||||||||||||||||||||||
Description
|
Index
|
2012
|
2011
|
2012
|
2011
|
2012
|
2011
|
||||||||||||||||||
Swap Contracts
|
|||||||||||||||||||||||||
Receivable
|
|||||||||||||||||||||||||
Foreign currency (a)
|
1,329,065 | 1,106,438 | 1,672,895 | 1,248,514 | 253,189 | 212,262 | |||||||||||||||||||
Citibank
|
USD
|
181,230 | 187,845 | 216,270 | 199,872 | 39,617 | 32,219 | ||||||||||||||||||
Votorantim
|
USD
|
7,744 | 13,434 | 9,311 | 14,028 | - | - | ||||||||||||||||||
Banco do Brasil
|
USD
|
258,900 | 258,900 | 326,263 | 282,205 | 32,931 | 19,629 | ||||||||||||||||||
Bradesco
|
USD
|
415,464 | 196,728 | 519,481 | 231,391 | 85,043 | 43,137 | ||||||||||||||||||
Itaú
|
USD
|
22,520 | 6,324 | 22,239 | 6,371 | - | 57 | ||||||||||||||||||
JP Morgan
|
USD
|
443,207 | 443,207 | 579,331 | 514,647 | 142,065 | 117,220 | ||||||||||||||||||
Foreign currency (b)
|
11,773 | 44,098 | 11,772 | 43,059 | - | - | |||||||||||||||||||
Bradesco
|
EUR
|
2,613 | 13,828 | 2,613 | 13,773 | - | - | ||||||||||||||||||
Itaú
|
EUR
|
9,160 | 30,270 | 9,159 | 29,286 | - | - | ||||||||||||||||||
Foreign currency (c)
|
LIBOR US$
|
179,533 | 179,533 | 238,422 | 213,062 | 52,112 | - | ||||||||||||||||||
179,533 | 179,533 | 238,422 | 213,062 | 52,112 | - | ||||||||||||||||||||
Inflation rates
|
72,000 | 72,000 | 96,249 | 87,390 | 22,086 | 15,513 | |||||||||||||||||||
Itaú
|
IPCA
|
72,000 | 72,000 | 96,249 | 87,390 | 22,086 | 15,513 | ||||||||||||||||||
Floating rate (c)
|
- | 4,644 | - | 4,638 | - | - | |||||||||||||||||||
Bradesco
|
CDI
|
- | 896 | - | 899 | - | - | ||||||||||||||||||
Itaú
|
CDI
|
- | 3,748 | - | 3,739 | - | - |
Accumulated balance
|
|||||||||||||||||||||||||
Notional Value
|
Fair value
|
Amount receivable (payable)
|
|||||||||||||||||||||||
Description
|
Index
|
2012
|
2011
|
2012
|
2011
|
2012
|
2011
|
||||||||||||||||||
Liabilities | |||||||||||||||||||||||||
Floating rate (a)
|
(1,412,838 | ) | (1,222,536 | ) | (1,059,243 | ) | (1.280,672 | ) | (55,545 | ) | (125,435 | ) | |||||||||||||
Citibank
|
CDI
|
(181,230 | ) | (187,845 | ) | (180,418 | ) | (186,324 | ) | (3,765 | ) | (18,672 | ) | ||||||||||||
Votorantim
|
CDI
|
(7,744 | ) | (13,434 | ) | (21,336 | ) | (34,139 | ) | (12,025 | ) | (20,111 | ) | ||||||||||||
Banco do Brasil
|
CDI
|
(258,900 | ) | (258,900 | ) | (287,686 | ) | (262,576 | ) | - | - | ||||||||||||||
Bradesco
|
CDI
|
(418,077 | ) | (210,556 | ) | (463,910 | ) | (230,901 | ) | (26,273 | ) | (28,874 | ) | ||||||||||||
Itaú
|
CDI
|
(103,680 | ) | (108,594 | ) | (105,893 | ) | (112,680 | ) | (333 | ) | (1,153 | ) | ||||||||||||
JP Morgan
|
CDI
|
(443,207 | ) | (443,207 | ) | - | (454,052 | ) | (13,149 | ) | (56,625 | ) | |||||||||||||
Foreign currency (b)
|
LIBOR US$
|
(179,533 | ) | (179,533 | ) | (238,422 | ) | (213,062 | ) | (586 | ) | - | |||||||||||||
Bradesco
|
(179,533 | ) | (179,533 | ) | (238,422 | ) | (213,062 | ) | (586 | ) | - | ||||||||||||||
Floating rate (b)
|
(72,000 | ) | (72,000 | ) | - | (75,926 | ) | - | (4,049 | ) | |||||||||||||||
Itaú
|
IPCA
|
(72,000 | ) | (72,000 | ) | - | (75,926 | ) | - | (4,049 | ) | ||||||||||||||
Foreign currency (c)
|
- | (4,644 | ) | - | (4,685 | ) | - | (47 | ) | ||||||||||||||||
Bradesco
|
USD
|
- | (896 | ) | - | (937 | ) | - | (38 | ) | |||||||||||||||
Itau
|
USD
|
- | (3,748 | ) | - | (3,748 | ) | - | (9 | ) | |||||||||||||||
Receivable
|
327,387
|
227,775
|
|||||||||||||||||||||||
Payable
|
(56,131
|
) |
(129,531
|
) | |||||||||||||||||||||
Amount receivable
|
271,256
|
98,244
|
a)
|
Foreign currency Swaps (Dollar) x CDI (R$1,643,413) swap transactions were contracted with varied maturities until 2019, in order to hedge against exchange variation risk of the loan operation in US dollars (book value of the financial debt of R$1,586,470).
|
b)
|
Foreign currency swaps (Euro and Dollar) and (CDI x EUR) (R$41,254 - swap transactions contracted with maturities until March 1, 2013, in order to hedge against exchange variation risks of net payables in Euro and in Dollar (book value of R$32,962 in Dollar and R$11,163 in Euro).
|
c)
|
Swap IPCA x CDI percentage (R$96,249) - swap transactions contracted with annual maturities until 2014, in order to hedge the flow identical to that of debentures (4th issue - 3rd series) indexed at IPCA (market balance of R$96,249).
|
Swap contracts
|
Maturity
|
|||||||||||||||||||
2013
|
2014
|
2015
|
2016
thereafter
|
Amount
payable/
receivable at
12/31/2012
|
||||||||||||||||
Foreign Currency x CDI
|
10,902 | 19,395 | 147,851 | 71,022 | 249,170 | |||||||||||||||
VOTORANTIM
|
(8,292 | ) | (3,733 | ) | - | - | (12,025 | ) | ||||||||||||
BRADESCO
|
(10,300 | ) | (8,325 | ) | 5,787 | 71,022 | 58,184 | |||||||||||||
JP MORGAN
|
(6,234 | ) | (6,914 | ) | 142,064 | - | 128,916 | |||||||||||||
BANCO DO BRASIL
|
38,576 | - | - | - | 38,576 | |||||||||||||||
CITIBANK
|
(2,515 | ) | 38,367 | - | - | 35,852 | ||||||||||||||
ITAÚ
|
(333 | ) | - | - | - | (333 | ) | |||||||||||||
IPCA x CDI
|
621 | 21,465 | - | - | 22,086 | |||||||||||||||
ITAÚ
|
621 | 21,465 | - | - | 22,086 | |||||||||||||||
Total
|
11,523 | 40,860 | 147,851 | 71,022 | 271,256 |
Transaction
|
Risk
|
Probable
|
25% Decrease
|
50% Decrease
|
||||
Hedge (receivable)
|
Derivatives (Risk of USD devaluation)
|
1,131,174
|
1,422,210
|
1,716,672
|
||||
Debt in USD
|
Debts (Risk of USD appreciation)
|
(1,131,414)
|
(1,422,510)
|
(1,717,033)
|
||||
Net exposure
|
(240)
|
(300)
|
(361)
|
|||||
Hedge (receivable)
|
Derivatives (Risk of EUR devaluation)
|
11,772
|
13,927
|
16,717
|
||||
Accounts payable in EUR
|
Accounts payable in EUR (Risk of EUR appreciation)
|
(12,317)
|
(15,396)
|
(18,475)
|
||||
Net exposure
|
(545)
|
(1,469)
|
(1,758)
|
|||||
Hedge (receivable)
|
Derivatives (Risk of USD devaluation)
|
29,482
|
38,251
|
45,921
|
||||
Accounts payable in USD
|
Debts (Risk of USD appreciation)
|
(34,904)
|
(43,630)
|
(52,356)
|
||||
Net exposure
|
(5,422)
|
(5,379)
|
(6,435)
|
|||||
Hedge (receivable)
|
Derivatives (Risk of IPCA devaluation)
|
96,249
|
91,755
|
92,200
|
||||
Debt in IPCA
|
Debts (Risk of IPCA appreciation)
|
(96,249)
|
(91,755)
|
(92,200)
|
||||
Net exposure
|
-
|
-
|
-
|
|||||
Hedge (receivable)
|
Derivatives (Risk of USD devaluation)
|
480,151
|
653,045
|
799,457
|
||||
Debt in UMBNDES
|
Debts (Risk of UMBNDES appreciation)
|
(477,105)
|
(647,908)
|
(793,157)
|
||||
Net exposure
|
3,046
|
5,137
|
6,300
|
|||||
Hedge (CDI - receivable)
|
Derivatives (Risk of CDI appreciation)
|
(1,553,915)
|
(1,552,622)
|
(1,606,484)
|
||||
Net exposure
|
(1,553,915)
|
(1,552,622)
|
(1,606,484)
|
|||||
Total net exposure in each scenario
|
(1,557,076)
|
(1,554,633)
|
(1,608,738)
|
|||||
Net effect on the variation of current fair value
|
-
|
2,443
|
(51,662)
|
Risk variable
|
Probable
|
25% Decrease
|
50% Decrease
|
|||||||||
USD
|
2.0435 | 2.5544 | 3.0653 | |||||||||
EUR
|
2.6962 | 3.3702 | 4.0443 | |||||||||
IPCA
|
5.84 | % | 7.30 | % | 8.76 | % | ||||||
CDI
|
6.90 | % | 8.63 | % | 10.35 | % |
37.
|
Subsequent events
|
Parties:
|
Global Telecom S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 19, 2004
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide the Multimedia Communication Services in accordance with regulations set forth by ANATEL. This authorization was granted to Global Telecom, a company incorporated by Vivo in 2006.
|
Area:
|
Throughout the Brazilian territory.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
January 18, 2010
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Personal Mobile Service in accordance with regulations set forth by ANATEL. This Authorization Agreement consolidates the following prior authorization agreements: No. 012/2002/PVCP/SPV-ANATEL dated 12/10/2002; No. 017/2002/PVCP/SPV-ANATEL, dated 12/10/2002; No. 006/2003/PVCP/SPV-ANATEL, dated 2/3/2003; No. 007/2003/ PVCP/SPV-ANATEL, dated 2/3/2003; No. 08/2003/PVCP/SPVANATEL, dated 2/3/2003; No. 009/2003/PVCP/SPV-ANATEL, dated 2/3/2003; No. 010/2003/PVCP/SPV-ANATEL, dated 2/3/2003; No. 011/2003/PVCP/SPV-ANATEL, dated 2/3/2003; and No. 019/2007/PVCP/SPV-ANATEL, dated 12/7/2007.
|
Area:
|
Region II of the General Plan of Personal Mobile Service Authorization, which includes the states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and Federal District.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
January 18, 2010
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Personal Mobile Service in accordance with regulations set forth by ANATEL. This Authorization Agreement consolidates the following prior authorization agreements: No. 018/2002/PVCP/SPV-ANATEL, dated 12/10/2002; No. 019/2002/PVCP/SPV-ANATEL, dated 12/10/2002; and No. 020/2007/PVCP/SPV-ANATEL, dated 12/7/2007.
|
Area:
|
Region III of the General Plan of Personal Mobile Service Authorization, which includes the state of São Paulo.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
September 5, 2011
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide local Commuted Fixed Telephone Service in accordance with regulations set forth by ANATEL, for the general public. This authorization was transferred from Telefônica Brasil S.A. to Vivo S.A. pursuant to ANATEL Act No. 6,128/2011
|
Area:
|
Regions I and II of the General Authorization Plan, which includes the state of Rio de Janeiro, Minas Gerais, Espírito Santo, Bahia, Sergipe, Alagoas, Pernambuco, Paraíba, Rio Grande do Norte, Ceará, Piauí, Maranhão, Pará, Amapá, Amazonas, Roraima, Rio Grande do Sul, Santa Catarina,Paraná, Mato Grosso do Sul, Mato Grosso, Goiás, Tocantins, Rondônia, Acre and Federal District.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
September 5, 2011
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide long-distance Commuted Fixed Telephone Service in accordance with regulations set forth by ANATEL, for the general public. This authorization was transferred from Telefônica Brasil S.A. to Vivo S.A. pursuant to ANATEL Act No. 6,128/2011
|
Area:
|
Regions I and II of the General Authorization Plan, which includes the state of Rio de Janeiro, Minas Gerais, Espírito Santo, Bahia, Sergipe, Alagoas, Pernambuco, Paraíba, Rio Grande do Norte, Ceará, Piauí, Maranhão, Pará, Amapá, Amazonas, Roraima, Rio Grande do Sul, Santa Catarina,Paraná, Mato Grosso do Sul, Mato Grosso, Goiás, Tocantins, Rondônia, Acre and Federal District.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
September 5, 2011
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide long-distance Commuted Fixed Telephone Service in accordance with regulations set forth by ANATEL, for the general public. This authorization was transferred from Telefônica Brasil S.A. to Vivo S.A. pursuant to ANATEL Act No. 6,128/2011
|
Area:
|
Regions I and II of the General Authorization Plan, which includes the state of Rio de Janeiro, Minas Gerais, Espírito Santo, Bahia, Sergipe, Alagoas, Pernambuco, Paraíba, Rio Grande do Norte, Ceará, Piauí, Maranhão, Pará, Amapá, Amazonas, Roraima, Rio Grande do Sul, Santa Catarina,Paraná, Mato Grosso do Sul, Mato Grosso, Goiás, Tocantins, Rondônia, Acre and Federal District.
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
February 7, 2012
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Personal Mobile Service in accordance with regulations set forth by ANATEL. This Authorization Agreement consolidates the following prior authorization agreements: No. 013/2002/PVCP/SPV-ANATEL, dated 12/10/2002; No. 014/2002/PVCP/SPV-ANATEL, dated 12/10/2002; No. 015/2002/PVCP/SPV-ANATEL, dated 12/10/2002; No. 016/2002/ PVCP/SPVANATEL, dated 12/10/2002; No. 012/2003/PVCP/SPV-ANATEL, dated 2/3/2003; No. 018/2007/PVCP/SPVANATEL, dated 12/7/2007; and No. 046/2011/PVCP/ SPV-ANATEL, dated 10/17/2011.
|
Area:
|
Region II of the General Plan of Personal Mobile Service Authorization, which includes the states of Rio de Janeiro, Espírito Santo, Minas Gerais, Amazonas, Roraima, Amapá, Pará, Maranhão, Bahia, Sergipe , Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas
|
Amount:
|
The amount owed under the grant is R$9,000.00, which was paid at the time of execution of the Authorization Agreement.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
October 16, 2012
|
Expiration:
|
October 18, 2027
|
Purpose:
|
Authorization to use blocks of radiofrequency associated with Personal Mobile Service, without exclusivity, primarily in sub-bands 2,550 to2,570 MHz and 2,670 to 2,690 MHz.
|
Area:
|
Region III of the General Plan of Personal Mobile Service Authorization, which includes the state of São Paulo.
|
Amount:
|
R$574,558,358.62 (five hundred seventy-four million, five hundred and fifty-eight thousand, three hundred fifty-eight
reais
and sixty-two cents). 10% of the total value was paid upon signing, the remainder will be paid in 2013.
|
Renewal:
|
This license may be renewed only once, for 15 years. The amount due for the renewal will be payable every two years during the extension period for an amount corresponding to 2% (two percent) of the revenues of the Personal Mobile Service provider for the year preceding payment, net of taxes and social contributions. On the 15th year the provider must pay 1% of its revenue for the previous year.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
October 16, 2012
|
Expiration:
|
October 18, 2027
|
Purpose:
|
Authorization to use blocks of radiofrequency associated with Personal Mobile Service, without exclusivity, primarily in sub-bands 2,550 to2,570 MHz and 2,670 to 2,690 MHz.
|
Area:
|
Region II of the General Plan of Personal Mobile Service Authorization, which includes the states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia, Acre and Federal District.
|
Amount:
|
R$248,344,927.69 (two hundred forty-eight million, three hundred forty and four thousand, nine hundred twenty-seven reais and sixty-nine cents). 10% of the total value was paid upon signing, the remainder will be paid in 2013.
|
Renewal:
|
This license may be renewed only once, for 15 years. The amount due for the renewal will be payable every two years during the extension period for an amount corresponding to 2% (two percent) of the revenues of the Personal Mobile Service provider for the year preceding payment, net of taxes and social contributions. On the 15th year the provider must pay 1% of its revenue for the previous year.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
October 16, 2012
|
Expiration:
|
October 18, 2027
|
Purpose:
|
Authorization to use blocks of radiofrequency associated with Personal Mobile Service, without exclusivity, primarily in sub-bands 2,550 to2,570 MHz and 2,670 to 2,690 MHz.
|
Area:
|
Region III of the General Plan of Personal Mobile Service Authorization, which includes the state of São Paulo.
|
Amount:
|
R$ 227,096,713.69 (two hundred twenty-seven million, ninety-six thousand, seven hundred and thirteen reais and sixty-nine cents). 10% of the total value was paid upon signing, the remainder will be paid in 2013.
|
Renewal:
|
This license may be renewed only once, for 15 years. The amount due for the renewal will be payable every two years during the extension period for an amount corresponding to 2% (two percent) of the revenues of the Personal Mobile Service provider for the year preceding payment, net of taxes and social contributions. On the 15th year the provider must pay 1% of its revenue for the previous year.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
October 16, 2012
|
Expiration:
|
October 18, 2027
|
Purpose:
|
Authorization to use blocks of radiofrequency associated with Personal Mobile Service and Multimedia Communications, without exclusivity, primarily in sub-bands 451MHz to 458 MHz and 461 MHz to 468 MHz. This grant was pursuant to the award of Lot 3 of under the bid No. 004/2012/PVCP/SPV-ANATEL.
|
Area:
|
Areas identified by the Area Codes 13, 14, 15, 16, 17, 18 and 19, in the state of São Paulo.
|
Amount:
|
The grant amount for this authorization is established determined by the offer price for Lot 3 of the bid No. 004/2012/PVCP/SPV-ANATEL
|
Renewal:
|
This license may be renewed only once, for 15 years. The amount due for the renewal will be payable every two years during the extension period for an amount corresponding to 2% (two percent) of the revenues of the Personal Mobile Service provider for the year preceding payment, net of taxes and social contributions. On the 15th year the provider must pay 1% of its revenue for the previous year.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Parties:
|
Vivo S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
October 16, 2012
|
Expiration:
|
October 18, 2027
|
Purpose:
|
Authorization to use blocks of radiofrequency associated with Personal Mobile Service and Multimedia Communications, without exclusivity, primarily in sub-bands 451MHz to 458 MHz and 461 MHz to 468 MHz. This grant was pursuant to the award of Lot 3 of under the bid No. 004/2012/PVCP/SPV-ANATEL.
|
Area:
|
States of Alagoas, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe.
|
Amount:
|
The grant amount for this authorization is established determined by the offer price for Lot 3 of the bid No. 004/2012/PVCP/SPV-ANATEL
|
Renewal:
|
This license may be renewed only once, for 15 years. The amount due for the renewal will be payable every two years during the extension period for an amount corresponding to 2% (two percent) of the revenues of the Personal Mobile Service provider for the year preceding payment, net of taxes and social contributions. On the 15th year the provider must pay 1% of its revenue for the previous year.
|
Penalties:
|
Breach of the Authorization Agreement and applicable regulations to Multimedia Communication Services may result in administrative proceedings by ANATEL, the application of warning sanctions, fines, temporary suspension or revocation of licenses.
|
Subsidiaries
|
2012
|
||
Vivo S.A (1)
|
100%
|
||
Telefônica Data S.A.
|
100%
|
||
A.Telecom S.A.
|
100%
|
||
Telefônica Sistema de Televisão S.A.
|
100%
|
||
Ajato Telecomunicações Ltda.
|
100%
|
||
GTR Participações e Empreend. S.A. (2)
|
100%
|
||
TVA Sul Paraná S.A. (2)
|
100%
|
||
Lemontree Participações S.A. (2)
|
100%
|
||
Comercial Cabo TV São Paulo S.A. (2)
|
100%
|
||
Aliança Atlântica Holding B.V.(3)
|
50%
|
||
Companhia AIX de Participações (3)
|
50%
|
||
Companhia ACT de Participações (3)
|
50%
|
||
(1) fully consolidated as of April 2011.
(2) fully consolidated as of January 2011.
(3) jointly controlled
|
Date: March 20, 2013
|
||||
By:
|
/s/ Antonio Carlos Valente da Silva
|
|||
Name:
|
Antonio Carlos Valente da Silva
|
|||
Title:
|
Chief Executive Officer
|
Date: March 20, 2013
|
||||
By:
|
/s/ Paulo Cesar Pereira Teixeira
|
|||
Name:
|
Paulo Cesar Pereira Teixeira
|
|||
Title:
|
General and Executive Officer and as interim Chief Financial Officer, Control and Investor Relations Officer
|
|
(i)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
|
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: March 20, 2013
|
||||
By:
|
/s/ Antonio Carlos Valente da Silva
|
|||
Name: |
Antonio Carlos Valente da Silva
|
|||
Title: |
Chief Executive Officer
|
Date: March 20, 2013
|
||||
By:
|
/s/ Paulo Cesar Pereira Teixeira
|
|||
Name: |
Paulo Cesar Pereira Teixeira
|
|||
Title: |
General and Executive Officer and as interim Chief Financial Officer, Control and Investor Relations Officer
|