o |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2013
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report________________
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For the transition period from
________________
to
________________
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Commission file number: 001-14475
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Title of each class
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Name of each exchange on which registered
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Preferred Shares, without par value
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New York Stock Exchange*
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American Depositary Shares (as evidenced by American Depositary Receipts), each representing one share of Preferred Stock
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New York Stock Exchange
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*
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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.
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Title of Class
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Number of Shares Outstanding
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Shares of Common Stock
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381,335,671
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Shares of Preferred Stock
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741,933,573
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U.S. GAAP
o
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International Financial Reporting Standards as issued by the International Accounting Standards Board
x
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Other
o
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·
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“ADRs” are to the American Depositary Receipts evidencing our ADSs;
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·
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“ADSs” are to our American Depositary Shares, each representing one share of our nonvoting preferred stock;
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·
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“ANATEL” are to
Agência Nacional de Telecomunicações
–
ANATEL
, the Brazilian telecommunication regulatory agency;
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·
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“BM&FBOVESPA” are to the
BM&FBOVESPA S.A.
–
Bolsa de Valores, Mercadorias e Futuros
, the São Paulo stock exchange;
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·
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“BNDES” are to
Banco Nacional de Desenvolvimento Econômico e Social
, the Brazilian Development Bank;
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·
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“Brazil” are to the Federative Republic of Brazil;
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·
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“Brazilian Central Bank,” “BACEN,” “Central Bank of Brazil” or “Central Bank” are to the
Banco Central do Brasil
, the Brazilian Central Bank;
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·
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“Brazilian Corporate Law” are to Law No. 6,404 of December 15, 1976, as amended;
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·
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“CADE” are to
Conselho Administrativo de Defesa Econômica
, the Brazilian competition authority;
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·
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“CDI” are to
Certificado de Depósito Interbancário
, the Certificate for Interbank Deposits;
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·
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“Ceterp” are to
Centrais Telefônicas de Ribeirão Preto
;
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·
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“Celular CRT” are to Celular CRT Participações S.A. and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
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·
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“CMN” are to the
Conselho Monetário Nacional
, the Brazilian Monetary Council;
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·
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“Commission” or “SEC” are to the U.S. Securities and Exchange Commission;
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·
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“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;
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·
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“CTBC Telecom” are to
Companhia de Telecomunicações do Brasil Central
;
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·
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“CTBC Borda” are to
Companhia Brasileira Borda do Campo – CTBC
;
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·
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“CVM” are to the
Comissão de Valores Mobiliários
, the Brazilian Securities Commission;
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·
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“D.O.U.” are to the
Diário Oficial da União
, the Official Newspaper of the Brazilian Government;
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·
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“Federal District” are to
Distrito Federal
, the federal district where Brasilia, the capital of Brazil, is located;
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·
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“General Telecommunications Law” are to
Lei Geral de Telecomunicações
, as amended, the law which regulates the telecommunications industry in Brazil;
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·
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“Global Telecom” or “GT” are to Global Telecom S.A., formerly a Vivo subsidiary before Vivo’s corporate restructuring;
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·
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“IASB” are to International Accounting Standards Board;
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·
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“IBGE” are to
Instituto Brasileiro de Geografia e Estatística
, the Brazilian Institute of Geography and Statistics;
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·
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“IFRS” are to International Financial Reporting Standards, as issued by the IASB;
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·
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“IOF” are to
Imposto sobre Operações de Crédito, Câmbio e Seguros
, or tax on credit, exchange and insurance;
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·
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“IPCA” are to
Índice Nacional de Preços ao Consumidor Amplo
, the consumer price index, published by the IBGE;
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·
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“IST” are to
Índice Setorial de Telecomunicações
, the inflation index of the telecommunications sector;
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·
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“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;
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·
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“NYSE” are to the New York Stock Exchange;
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·
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“Oi” are to Oi S.A., the mobile operator branch of Telemar;
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·
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“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;
|
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·
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“
Real
,” “
reais
” or R$ are to the Brazilian
real
, the official currency of Brazil;
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·
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“Speedy” are to broadband services provided by us through asymmetric digital subscriber lines, or ADSL;
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·
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“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;
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·
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“TCP” are to
TELESP Celular Participações S.A.
, Vivo’s predecessor company;
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·
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“TLE” are to
Tele Leste Celular Participações S.A.
and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
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·
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“TSD” are to
Tele Sudeste Celular Participações S.A.
and its consolidated subsidiaries, formerly Vivo subsidiaries before Vivo’s corporate restructuring;
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·
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“Telebrás” are to
Telecomunicações Brasileiras S.A.–Telebrás
;
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·
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“Telefonica” or “TSA” are to
Telefonica S.A.
;
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·
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“Telemar” are to
Telemar Norte Leste S.A.
(controlled by Tele Norte Leste Participações S.A.);
|
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·
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“Telemig” or “Telemig Participações” are to
Telemig Celular Participações S.A.
;
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·
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“Telemig Celular” are to
Telemig Celular S.A.
;
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·
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“Telenorte” or “Tele Norte” are to
Tele Norte Celular Participações S.A.
;
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·
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“TELESP Celular” and “TC” are to
TELESP Celular S.A.
, formerly a Vivo subsidiary before Vivo’s corporate restructuring;
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·
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“TJLP” are to
Taxa de Juros de Longo Prazo
, or long-term interest rate;
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·
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“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;
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·
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“U.S. dollar,” “U.S. dollars” or “US$” are to U.S. dollars, the official currency of the United States;
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·
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“Vivo” are to
Vivo S.A.
, a formerly wholly-owned subsidiary of Telefônica Brasil prior to the corporate restructuring that took place in 2013, that conducts cellular operations including SMP (as defined in the “Glossary of Telecommunication Terms”), in the following areas:
|
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·
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“Areas 1 and 2,” the state of São Paulo (operations previously provided by
TELESP Celular
);
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·
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“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);
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·
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“Area 4,” the state of Minas Gerais;
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·
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“Area 5,” the states of Paraná and Santa Catarina (operations previously provided by Global Telecom);
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·
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“Area 6,” the state of Rio Grande do Sul (operations previously provided by Celular CRT);
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·
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“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);
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·
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“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
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·
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“Area 10,” the states of Pernambuco, Alagoas, Paraíba, Rio Grande do Norte, Ceará and Piauí.
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·
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“Vivo Participações” are to
Vivo Participações S.A.
(formerly TCP
)
and its consolidated subsidiaries (unless the context otherwise requires); and
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·
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“Vivo brand” are to the brand used in Brazil in the operations of Telefônica Brasil;
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·
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statements concerning our operations and prospects;
|
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·
|
the size of the Brazilian telecommunications market;
|
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·
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estimated demand forecasts;
|
|
·
|
our capital expenditure plan;
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·
|
our ability to secure and maintain telecommunications infrastructure licenses, rights-of-way and other regulatory approvals;
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·
|
our strategic initiatives and plans for business growth;
|
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·
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industry conditions;
|
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·
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our funding needs and financing sources;
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·
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network completion and product development schedules;
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·
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expected characteristics of competing networks, products and services;
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·
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the outcome of certain legal proceedings;
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·
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regulatory and legal developments;
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·
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quantitative and qualitative disclosures about market risk;
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·
|
other statements of management’s expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts; and
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·
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other factors identified or discussed under “Item 3. Key Information—D. Risk Factors.”
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·
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the short history of our operations as an independent, private-sector, entity and the ongoing introduction of greater competition to the Brazilian telecommunications sector;
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·
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the cost and availability of financing;
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·
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uncertainties relating to political and economic conditions in Brazil as well as those of other emerging markets;
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·
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inflation, interest rate and exchange rate risks;
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·
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the Brazilian government’s telecommunications policy;
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·
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the Brazilian government’s tax policy;
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·
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the Brazilian government’s political instability; and
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·
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the adverse determination of disputes under litigation.
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A.
|
Selected Financial Data
|
Year ended December 31,
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||||||||||||||||||||
Income Statement Data:
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||||||
(in millions of
reais
, except for share
and per share data)
|
||||||||||||||||||||
Net operating revenue
|
34,722 | 33,919 | 29,117 | 15,788 | 15,852 | |||||||||||||||
Cost of goods and services
|
(17,542 | ) | (16,557 | ) | (15,035 | ) | (8,837 | ) | (9,236 | ) | ||||||||||
Gross profit
|
17,180 | 17,362 | 14,082 | 6,951 | 6,616 | |||||||||||||||
Operating expenses, net
|
(12,248 | ) | (10,151 | ) | (8,290 | ) | (3,408 | ) | (3,221 | ) | ||||||||||
Equity in earnings (losses) of associates
|
(55 | ) | 1 | 4 | 25 | 19 | ||||||||||||||
Operating income before financial expense, net
|
4,877 | 7,211 | 5,796 | 3,568 | 3,414 | |||||||||||||||
Financial expense, net
|
(215 | ) | (291 | ) | (141 | ) | (125 | ) | (189 | ) | ||||||||||
Income before tax and social contribution
|
4,662 | 6,920 | 5,655 | 3,443 | 3,225 | |||||||||||||||
Income tax and social contribution
|
(946 | ) | (2,468 | ) | (1,293 | ) | (1,045 | ) | (1,021 | ) | ||||||||||
Net Income
|
3,716 | 4,452 | 4,362 | 2,398 | 2,204 | |||||||||||||||
Attributable to:
|
||||||||||||||||||||
Controlling shareholders
|
3,716 | 4,453 | 4,355 | 2,398 | 2,204 | |||||||||||||||
Non-controlling shareholders
|
- | (1 | ) | 7 | — | — | ||||||||||||||
Basic and diluted earnings per share:
|
||||||||||||||||||||
Common Shares
|
3.10 | 3.72 | 4.40 | 4.45 | 4.08 | |||||||||||||||
Preferred Shares
|
3.41 | 4.09 | 4.84 | 4.89 | 4.49 | |||||||||||||||
Cash Dividends per share in
reais
, net of withholding tax:
|
||||||||||||||||||||
Common Shares
|
1.86 | 2.57 | 4.78 | 3.62 | 2.56 | |||||||||||||||
Preferred Shares
|
2.04 | 2.82 | 5.26 | 3.98 | 2.81 |
As of December 31,
|
||||||||||||||||||||
Balance Sheet Data:
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||||||
(in millions of
reais
, except number of shares)
|
||||||||||||||||||||
Property, plant and equipment, net
|
18,442 | 17,604 | 17,147 | 10,193 | 9,672 | |||||||||||||||
Total assets
|
69,541 | 70,251 | 65,489 | 19,962 | 20,643 | |||||||||||||||
Loans and financing—current portion
|
1,237 | 1,270 | 1,000 | 432 | 1,768 | |||||||||||||||
Loans and financing—noncurrent portion
|
3,215 | 3,774 | 3,969 | 1,429 | 1,752 | |||||||||||||||
Shareholders’ equity
|
42,894 | 44,681 | 43,331 | 11,667 | 11,300 | |||||||||||||||
Attributable to:
|
||||||||||||||||||||
Controlling shareholders
|
42,894 | 44,681 | 43,326 | 11,667 | — | |||||||||||||||
Noncontrolling shareholders
|
— | — | 5 | — | — | |||||||||||||||
Capital stock
|
37,798 | 37,798 | 37,798 | 6,575 | 6,575 | |||||||||||||||
Number of shares outstanding (in thousands)
|
1,123,269 | 1,123,269 | 1,123,884 | 505,841 | 505,841 |
Year ended December 31,
|
||||||||||||||||||||
Cash Flow Data:
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||||||
(in millions of
reais
)
|
||||||||||||||||||||
Operating activities:
|
||||||||||||||||||||
Net cash provided by operating activities
|
9,576 | 10,054 | 8,128 | 4,481 | 4,449 | |||||||||||||||
Investing activities:
|
||||||||||||||||||||
Net cash used in investing activities
|
(5,543 | ) | (3,721 | ) | (2,007 | ) | (1,658 | ) | (2,296 | ) | ||||||||||
Financing activities:
|
||||||||||||||||||||
Net cash used in financing activities
|
(4,622 | ) | (2,089 | ) | (4,729 | ) | (3,603 | ) | (1,618 | ) | ||||||||||
Increase (decrease) in cash and cash equivalents
|
(589 | ) | 4,244 | 1,392 | (780 | ) | 536 | |||||||||||||
Cash and cash equivalents at beginning of year
|
7,133 | 2,889 | 1,497 | 2,277 | 1,741 | |||||||||||||||
Cash and cash equivalents at end of year
|
6,544 | 7,133 | 2,889 | 1,497 | 2,277 |
Exchange Rate of R$ per US$
|
||||||||||||||||
Year ended December 31,
|
Low
|
High
|
Average(1)
|
Year-End
|
||||||||||||
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 | ||||||||||||
2013
|
1.953 | 2.446 | 2.161 | 2.343 |
(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 ended December 31,
|
Low
|
High
|
Average(2)
|
Period-End
|
||||||||||||
September 2013
|
2.203 | 2.390 | 2.270 | 2.230 | ||||||||||||
October 2013
|
2.161 | 2.212 | 2.189 | 2.203 | ||||||||||||
November 2013
|
2.243 | 2.336 | 2.295 | 2.325 | ||||||||||||
December 2013
|
2.310 | 2.382 | 2.345 | 2.343 | ||||||||||||
January 2014
|
2.334 | 2.440 | 2.382 | 2.426 | ||||||||||||
February 2014
|
2.333 | 2.424 | 2.384 | 2.333 | ||||||||||||
March 2014 (through March 18, 2014)
|
2.309
|
2.365
|
2.344
|
2.352
|
(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 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.
|
A.
|
History and Development of the Company
|
|
1)
|
Telef
ó
nica S.A. subscribed and paid up capital in TELCO, SpA through a contribution of 324 million euros, receiving shares without voting rights of TELCO, SpA. As a result of this capital increase, the share capital of Telefónica S.A. voting in Telco, SpA remaining unchanged (remaining at 46.18%), although their economic participation rose to 66%. Thus, the governance of TELCO S.p.A., as well as the obligations of Telefónica S.A. to abstain from participating in or influencing the decisions that impact the industries where they both operate, remained unchanged.
|
|
2)
|
Subject to obtaining the required previous approvals from antitrust authorities and telecommunications regulatory agencies as applicable (including Brazil and Argentina), Telefónica S.A. conducted another capital increase in TELCO S.p.A. amounting to 117 million Euros, receiving shares with no voting rights of TELCO, SpA. As a result of this capital increase, the share capital of Telefónica S.A. voting in Telco, SpA increased its total interest to 70%, with the 46.18% interest held in shares with voting rights remaining unchanged.
|
|
3)
|
Beginning as of January 1st, 2014, following approvals from antitrust authorities and telecommunications regulatory agencies as applicable (including Brazil and Argentina), Telefónica S.A. will be entitled to convert all or part of nonvoting shares into common shares with voting rights, limited however to a 64.9% interest in TELCO S.p.A. voting capital.
|
|
4)
|
Italian shareholders of TELCO S.p.A. granted Telefónica S.A. an option to purchase all of their shares in TELCO S.p.A.. Our ability to excercise this call option is subject to approvals from the applicable antitrust authorities and telecommunications regulatory agencies as applicable (including in Brazil and Argentina). The call option has been available since January 1, 2014 and will remain available as long as the Shareholders
’
Agreement remains in effect, except (i) between June 1 and June 30, 2014 and between January 15 and February 15, 2015; and (ii) during certain periods in case the Italian shareholders of TELCO S.p.A. request the entity’s spin-off.
|
|
1)
|
Approve, subject to the limitations described below, the acquisition, by Telefónica S.A., of the total interest held by Portugal Telecom, SGPS SA e PT Móveis – Serviços de Telecomunicações, SGPS, SA (PT) in Brasilcel NV, which controlled Brazilian mobile telecommunications operator Vivo Participações S.A. (Vivo Part.).
|
|
2)
|
Impose a R$15 million fine on Telefónica S.A. for violating the will and purpose of the agreement executed by and between Telefónica S.A. and CADE (as a requirement to approve the initial purchase transaction of Telecom Italia in 2007), due to the subscription and payment, by Telefónica S.A., of TELCO S.p.A. nonvoting shares in the context of its recent capital increase. This decision also requires Telefónica S.A. to dispose of its nonvoting shares held in TELCO S.p.A.
|
Year ended December 31,
|
||||||||||||
Telefônica Brasil
|
2013
|
2012
|
2011
|
|||||||||
(in millions of
reais
)
|
||||||||||||
Network
|
4,683.3 | 3,845.8 | 3,381.0 | |||||||||
Technology / Information Systems
|
569.5 | 562.3 | 612.5 | |||||||||
Others(1)
|
780.5 | 1,709.0 | 1,408.0 | |||||||||
Total capital expenditures
|
6,033.2 | 6,117.1 | 5,401.5 |
(1)
|
Consists primarily of free handset rentals, network construction, furniture and fixtures, office equipment and store layouts and an amount of
R$451 million in 2013 (R$1,050 in 2012 and R$812 in 2011) related to the acquisition and other costs of licenses
.
|
B.
|
Business Overview
|
On December 31, 2013
|
Last Available IBGE Data from 2011
|
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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 | % | 1,349,465 | 32,57 | % | 32,704 | ||||||||||||||
Paraná State
|
850, 900, 1800, 1900, 2100 and 2500
|
10,445 | 5.48 | % | 239,366 | 5.78 | % | 22,916 | ||||||||||||||
Santa Catarina State
|
850, 900, 1800, 1900, 2100 and 2500
|
6,248 | 3.28 | % | 169,050 | 4.08 | % | 27,056 | ||||||||||||||
Goiás State
|
850, 900, 1800, 1900, 2100 and 2500
|
6,004 | 3.15 | % | 111,269 | 2.69 | % | 18,532 | ||||||||||||||
Tocantins State
|
850, 900, 1800, 1900, 2100 and 2500
|
1,383 | 0.73 | % | 18,059 | 0.44 | % | 13,057 | ||||||||||||||
MatoGrosso State
|
850, 900, 1800, 1900, 2100 and 2500
|
3,035 | 1.59 | % | 71,418 | 1.72 | % | 23,531 | ||||||||||||||
Mato Grosso do Sul State
|
850, 900, 1800, 1900, 2100 and 2500
|
2,449 | 1.28 | % | 49,242 | 1.19 | % | 20,106 | ||||||||||||||
Rondônia State
|
850, 900, 1800, 1900, 2100 and 2500
|
1,562 | 0.82 | % | 27,839 | 0.67 | % | 17,822 | ||||||||||||||
Acre State
|
850, 900, 1800, 1900, 2100 and 2500
|
734 | 0.38 | % | 8,794 | 0.21 | % | 11,980 | ||||||||||||||
Amapá State
|
850, 900, 1800, 2100 and 2500
|
670 | 0.35 | % | 8,968 | 0.22 | % | 13,385 | ||||||||||||||
Amazonas State
|
850, 900, 1800, 2100 and 2500
|
3,484 | 1.83 | % | 64,555 | 1.56 | % | 18,528 | ||||||||||||||
Maranhão State
|
850, 900, 1800, 2100 and 2500
|
6,575 | 3.45 | % | 52,187 | 1.26 | % | 7,937 | ||||||||||||||
Pará State
|
850, 900, 1800, 2100 and 2500
|
7,581 | 3.97 | % | 88,371 | 2.13 | % | 11,656 | ||||||||||||||
Roraima State
|
850, 900, 1800, 2100 and 2500
|
450 | 0.24 | % | 6,951 | 0.17 | % | 15,446 | ||||||||||||||
Federal District
|
850, 900, 1800, 1900, 2100 and 2500
|
2,570 | 1.35 | % | 164,482 | 3.97 | % | 64,000 | ||||||||||||||
Bahia State
|
850, 900, 1800, 1900, 2100 and 2500
|
14,017 | 7.35 | % | 159,869 | 3.86 | % | 11,405 | ||||||||||||||
Sergipe State
|
450, 850, 900, 1800, 1900, 2100 and 2500
|
2,068 | 1.08 | % | 26,199 | 0.63 | % | 12,668 | ||||||||||||||
Rio de Janeiro State
|
850, 900, 1800, 1900, 2100 and 2500
|
15,990 | 8.38 | % | 462,376 | 11.16 | % | 28,916 | ||||||||||||||
Espírito Santo State
|
850, 900, 1800, 1900, 2100 and 2500
|
3,515 | 1.84 | % | 97,693 | 2.36 | % | 27,793 | ||||||||||||||
Rio Grande do Sul State
|
850, 900, 1800, 1900, 2100 and 2500
|
10,694 | 5.61 | % | 263,633 | 6.36 | % | 24,652 | ||||||||||||||
Alagoas State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,120 | 1.64 | % | 28,540 | 0.69 | % | 9,147 | ||||||||||||||
Ceará State
|
450, 900, 1800, 1900, 2100 and 2500
|
8,452 | 4.43 | % | 87,982 | 2.12 | % | 10,409 | ||||||||||||||
Pernambuco State
|
450, 900, 1800, 1900, 2100 and 2500
|
8,796 | 4.61 | % | 104,394 | 2.52 | % | 11,868 | ||||||||||||||
Piauí State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,118 | 1.63 | % | 24,607 | 0.59 | % | 7,891 | ||||||||||||||
Paraíba State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,767 | 1.97 | % | 35,444 | 0.86 | % | 9,409 | ||||||||||||||
Rio Grande do Norte State
|
450, 900, 1800, 1900, 2100 and 2500
|
3,168 | 1.66 | % | 36,103 | 0.87 | % | 11,396 | ||||||||||||||
Minas Gerais State
|
450, 850, 900, 1800, 2100 and 2500
|
19,597 | 10.27 | % | 386,156 | 9.32 | % | 19,704 | ||||||||||||||
Total
|
190,756 | 100.00 | % | 4,143,013 | 100.00 | % | 21,718 |
(1)
|
According to the 2010 Census published by IBGE in 2011 (latest data available).
|
(2)
|
According to the most recent IBGE data (2011). Nominal Brazilian GDP was R$4,143,013 million as of December 2011 calculated by IBGE, subject to revision.
|
|
·
|
voice services, including activation, monthly subscription, measured service and public telephones;
|
|
·
|
interconnection charges (or network usage charges), which are amounts we charge other mobile and fixed-line service providers for the use of our network;
|
|
·
|
intraregional, interregional and international long-distance voice services;
|
|
·
|
data services, (including broadband services) and mobile value added services;
|
|
·
|
Pay TV services through DTH (direct to home), a satellite technology, IPTV and cable;
|
|
·
|
the sale of wireless devices and accessories;
|
|
·
|
network services, including rental of facilities, as well as other services; and
|
|
·
|
digital services, including financial services, M2M, e-health solutions, security, video and advertising.
|
|
·
|
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%.
|
|
·
|
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.
|
|
·
|
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.”
|
|
·
|
Local Basic Plan: for clients that make mostly short-duration calls (up to three minutes), during regular hours; and
|
|
·
|
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.
|
|
·
|
Individual Special Class Access (AICE) – plan created specifically for families enrolled in the Brazilian government’s social program.
|
Characteristics of Plan
|
Basic Plan
|
Mandatory
Alternative Plan
|
||||
Monthly Basic Assignment
|
||||||
Allowance (minutes included in the Residential Assignment)
|
200 minutes
|
400 minutes
|
||||
Commercial Assignment Allowance (minutes included in the Commercial Assignment)
|
150 minutes
|
360 minutes
|
||||
Local Call Charges
|
||||||
Regular Hours
|
||||||
Completing the call (minutes deducted from the allotment)
|
– |
4 minutes
|
||||
Completing the call after the terms of the allotment Sector 31
|
– | R$0.16072 | ||||
Local Minutes–charges in excess use of the allotment Sector 31
|
R$0.10482 | R$0.04018 | ||||
Minimum time billing
|
30 seconds
|
– | ||||
Reduced Hours
|
||||||
Charge per answered call (minutes deducted from allotment)
|
2 minutes
|
4 minutes
|
||||
Charge per answered call after the allotted duration Sector 31
|
R$0.20965 | R$0.16072 |
|
·
|
Residential customers were charged a monthly subscription fee for the provision of service of R$41.62;
|
|
·
|
Commercial clients and nonresidential customers (PBX) were charged a monthly subscription fee for the provision of service of R$71.17;
|
|
·
|
Local minute tariffs were charged at R$0.10482 per minute in Sector 31; and
|
|
·
|
Activation fees of R$114.46 were charged in Sector 31.
|
|
·
|
Fee for the use of our local network—we charge local service providers a network usage charge for every minute used in connection with a call that either originates or terminates within our local network.
|
|
·
|
Fee for the use of our long-distance network—we charge long distance service providers a network usage charge on a per-minute basis only when the interconnection access to our long-distance network is in use.
|
|
·
|
Fee for the rental of certain transmission facilities used by another service provider to place a call.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
At and for the year ended December 31,
|
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Wireline access lines
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Installed access lines (millions)
|
15.1 | 14.8 | 14.7 | 14.6 | 14.5 | |||||||||||||||
Access lines in service (millions) (1)
|
10.4 | 10.5 | 11.0 | 11.3 | 11.3 | |||||||||||||||
Average access lines in service (millions)
|
10.4 | 10.7 | 11.1 | 11.3 | 11.5 | |||||||||||||||
Access lines in service per 100 inhabitants
|
23.7 | 25.1 | 26.5 | 27.5 | 27.1 | |||||||||||||||
Percentage of installed access lines connected to digital switches
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Number of public telephones (thousands)
|
199.1 | 199.2 | 215.8 | 250.7 | 250.5 | |||||||||||||||
Broadband
access lines
(millions)
|
3.9 | 3.7 | 3.6 | 3.3 | 2.6 | |||||||||||||||
Access lines in service out of São Paulo (FWT) (millions)
|
0.4 | 0.1 | - | - | - |
Year ended December 31,
|
||||||||||||||||||||
Mobile access lines
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Cellular lines in service at year-end (in millions)
|
77.2 | 76.1 | 71.5 | 60.3 | 51.7 | |||||||||||||||
Contract customers (in millions)
|
23.7 | 18.8 | 16.1 | 12.6 | 9.8 | |||||||||||||||
Prepaid customers (in millions)
|
53.6 | 57.3 | 55.4 | 47.7 | 42.0 | |||||||||||||||
Growth in cellular lines in service during year
|
1.4 | % | 6.4 | % | 18.7 | % | 16.5 | % | 15.1 | % | ||||||||||
Churn(2)
|
45.6 | % | 41.9 | % | 34.2 | % | 32.0 | % | 30.5 | % | ||||||||||
Estimated covered population (in millions)(3)
|
201.0 | 193.9 | 192.4 | 190.7 | 191.5 | |||||||||||||||
Penetration at year-end(4)
|
136.4 | % | 132.7 | % | 123.9 | % | 104.6 | % | 90.5 | % | ||||||||||
Market share(5)
|
28.5 | % | 29.1 | % | 29.5 | % | 29.7 | % | 29.7 | % |
(1)
|
Data includes public telephone lines.
|
(2)
|
Churn is the number of customers that leave us during the year, calculated as a percentage of the simple average
|
(3)
|
Number of people within our region that can access our cellular telecommunications signal.
|
(4)
|
Number of cellular lines in service in our region, including those of our competitors, divided by the population of our Region.
|
(5)
|
Percentage based on all lines in service in our region at year-end.
|
|
·
|
“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;
|
|
·
|
1800 MHz extension band of the state of São Paulo;
|
|
·
|
“D” band (1800 MHz) of the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu in the state of Rio Grande do Sul;
|
|
·
|
“E” band (1800 MHz) of the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
|
|
·
|
900 MHz extension band of the state of Rio de Janeiro;
|
|
·
|
900 MHz extension band of the state of Espírito Santo;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
900 MHz extension band of the state of Bahia;
|
|
·
|
900 MHz extension band of the state of Sergipe;
|
|
·
|
900 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
|
|
·
|
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;
|
|
·
|
1800 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
|
|
·
|
1800 MHz extension band of the city of Paranaíba, in the state of Mato Grosso do Sul;
|
|
·
|
1800 MHz extension band of the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
other 1800 MHz extension band of the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás;
|
|
·
|
1800 MHz extension band of the states of Rio de Janeiro, Espírito Santo, Bahia and Sergipe;
|
|
·
|
1800 MHz extension band of the states of Amazonas, Amapá, Maranhão, Pará and Roraima;
|
|
·
|
1800 MHz extension band of the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte;
|
|
·
|
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;
|
|
·
|
1800 MHz extension band of the cities of Londrina and Tamarana, in the state of Paraná; and
|
|
·
|
1800 MHz (extension sub bands in Region II, within the states of São Paulo and Espírito Santo, Ceará and Pernambuco) and TDD (National coverage).
|
|
·
|
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;
|
|
·
|
each operator may optionally provide domestic and international long-distance services in its licensed area;
|
|
·
|
existing mobile 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;
|
|
·
|
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:
|
|
·
|
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
|
|
·
|
a mobile operator, or its respective controlling shareholders, may not have geographical overlap between licenses.
|
|
·
|
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;
|
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·
|
by December 31, 2016: cities with over 100,000 residents;
|
|
·
|
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
|
|
·
|
a prohibition on public regime companies to provide similar services through related companies.
|
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·
|
Resolution No. 607/2013:
Amends the Fixed Telephony Numbering Regulation, enabling the efficient allocation of Provider Selection Codes (CSP).
|
|
·
|
Resolution No. 608/2013:
Amends the Account Separation and Allocation Regulation (RSAC) in order to make Accounts Document Separation and Allocation (DSAC) simpler and aligned to international standards.
|
|
·
|
Resolution No. 614/2013:
Establishes the new Regulation for Multimidia Communications Service (“
Serviço de Comunicação Multimidia – SCM
)
.
|
|
·
|
Resolution No. 615/2013:
Amends the Fixed Telephony Service Regulation (STFC), in order to align it with the other regulations regarding fixed telephony.
|
|
·
|
Resolution No. 619/2013:
Amends the Account Separation and Allocation Regulation (RSAC) in order to standardize the allocation of historical and current costs of operators.
|
|
·
|
Resolution No. 622/2013:
Creates conditions to enable the provision of fixed telephony in rural areas, as foreseen in the
General Plan for the PGMU III.
|
|
·
|
Resolution No. 623/2013:
States that, telecommunications services providers with more than 1 million customers must create councils with society representative to discuss proposals for improving the services quality.
|
|
·
|
Resolution No. 629/2013:
Approves the Conduct Adjustment Regulation, that set the rules for the operators to swap fines for investment.
|
|
·
|
the new General Regulation of Interconnection (“
Regulamento Geral de Interconexão
”–Resolution No. 410/2005, or “RGI”);
|
|
·
|
the Regulation of Separation and Allocation of Costs (approved by Resolution No. 396/2005) and its annexes (approved by Resolutions No. 480/2007, 483/2007, 503/2008, 608/2013 and 619/2013);
|
|
·
|
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.
|
|
·
|
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;
|
|
·
|
the Regulation of Fixed and Wireless Number Portability (Resolution No. 460/2007, effective March 2009);
|
|
·
|
the new Regulation of SMP (Resolution No. 477/2007, effective February 13, 2008);
|
|
·
|
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”);
|
|
·
|
the general norms of customer interaction service by telephone, with the objective of improving the quality of services (Decree No. 6523/2008);
|
|
·
|
the Methodology of the Calculation of the WACC (Resolution No. 535/2009);
|
|
·
|
amendment of the regulation of the 3400 MHz to 3600 MHz band, allowing it to apply additionally to mobile services (Resolution No. 537/2010);
|
|
·
|
the regulation of the Broadband Power Line (BPL), allowing this service to apply to multimedia communication (SCM) (Resolution No. 527/2009);
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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);
|
|
·
|
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);
|
|
·
|
the regulation for evaluation of the efficiency of use of the radio frequency spectrum (Resolution No. 548/2010); and
|
|
·
|
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).
|
|
·
|
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 and Keep regime.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
for the first readjustment, ANATEL applied a Reduction Factor of 18% on April 2012;
|
|
·
|
for the second readjustments, ANATEL applied a Reduction Factor of 12% on April 2013; and
|
|
·
|
if the cost model has not yet produced results, the third readjustment will be subject to a Reduction Factor of 10% by April 2014.
|
|
·
|
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.”
|
|
·
|
Exclusive Dealers: The exclusive dealers channel is composed by companies, certified to provide our full portfolio through an adequate distribution network to cover the geographic dimensions of the country. Although the channel offers the whole portfolio, the channel is focused on the post-paid product.
|
|
·
|
Recharge channels:
Composed by around 70 distributors that deliver pre-paid product and services to small and medium companies in various market sectors throughout the country. This is the largest channel for prepaid recharge and access, with a huge growth of virtual recharge year by year.
|
|
·
|
Retail Channel: With strong alliance with the main retailers in Brasil, focused in prepaid recharges and data services.
|
|
·
|
Telesales: sales through active and passive telemarketing call centers, employing highly trained sales associates, focused
on fixed lines, data services and migration from pre-paid to postpaid plans.
|
|
·
|
E-commerce: As a key component of the Company’s transformation process to become a Digital Telco and
to
deliver more value to its customers, Telef
ô
nica Brasil has put strong focus on the Online Channels in 2013. In the web portal
www.vivo.com.br
, customers can obtain up-to-date information to the company´s products and services, including specific sections for corporate customers and online self-service. A total of more than 300 different services and requests can be managed online. Besides, a new mobile site tailored for smartphones was launched during the year, as well as new applications and improvements in the look and feel and functionalities of the existing online channels. The e-commerce processes are also being improved on a continued basis, to leverage on the strong e-commerce growth observed with web users in Brazil. Current e-commerce capabilities include but are not limited to the sales of mobile handsets and plans, and the portfolio of services of fixed and mobile businesses, top-ups and VAS. Some results of this strategy in 2013 were:
|
|
-
|
Increase of 27% on customer care transactions, supported mainly by a strong focus on “
Meu Vivo”
, the company´s self-care service that is available on the web and also on apps;
|
|
-
|
Partnerships with the main players of credit card and e-payments market, as well as the development of new Online channels, which increased the number of online top-ups in 500%;
|
|
-
|
44% increase on web and mobile portals visits, having the mobile portal surpassing the web portal for the first time, representing 58% of the overall online traffic;
|
|
-
|
35% increase of the online sales transactions vs. 2012, due to the good performance of innovative marketing campaigns such as the participation for the first time in the Black Friday in November, and the re-launch of the online store for mobile handsets and services;
|
|
-
|
59% increase on the penetration of the e-invoice, with significant cost reduction for the company;
|
|
-
|
Vivo´s web portal renewal in October brought strong results in user satisfaction: 86% of users consider extremely easy to use the site (Source: Bridge Research).
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
Areas 1 & 2
: 9 areas in the state of São Paulo;
|
|
·
|
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: is a type of fraud that occurs when the issuance of one or more accesses are granted without the consent of the real “holder” of identification documents with the main objective of not paying the phone bill. Fraud can occur when a customer has its identification documents stolen and signatures are forged. We had a 9.76% decrease in subscription fraud-related expenses in 2012.
|
|
·
|
Identity Fraud: also known as “social engineering,” is identity fraud, which takes place through call centers, where a caller who has access to information belonging to our existing clients reaches out to our call centers and makes unauthorized alterations and activations. We had a 91.3% decrease in this type of fraud-related expenses compared to expenses with identity fraud in 2012. The decrease in identity fraud was a result of measures implemented to detect and prevent frauds.
|
(1)
|
Telefónica Móviles España (“TME”), its Spanish directly wholly-owned subsidiary, has roaming agreements with (i) Mobile Telecommunication Company of Iran (“MTCI”), (ii) MTN Irancell (“Irancell”), and (iii) Taliya (“Taliya”).
|
(2)
|
Telefónica Germany GmbH & Co. OHG
(“TG”), Telefonica S.A.’s German 76.83% indirectly-owned subsidiary, has a roaming agreement with MTCI. TG recorded 147,319.39 euros in roaming revenues under this agreement in 2013.
|
(3)
|
Telefónica Ireland Limited
(“TIR”), Telefonica S.A.’s Irish directly wholly-owned subsidiary, has a roaming agreement with MTCI. TIR recorded 1,558.66 euros in roaming revenues under this agreement in 2013.
|
(4)
|
Telefónica UK Ltd
(“TUK”), TSA’s English directly wholly-owned subsidiary, has a roaming agreement with Irancell. TUK recorded 840.41 euros in roaming revenues under this agreement in 2013.
|
(5)
|
Pegaso Comunicaciones y Sistemas, S.A. de C.V.
(“PCS”),
Telefonica S.A.
’s Mexican directly wholly-owned subsidiary, has a roaming agreement with Irancell. PCS recorded 62.99 U.S. dollars in roaming revenues under this agreement in 2013.
|
(6)
|
Telefónica Argentina, S.A. and Telefónica Móviles Argentina, S.A.
(together TA),
Telefonica S.A.
’s Argentinean directly wholly-owned subsidiaries, have a roaming agreement with Irancell. TA recorded 65.89 U.S. dollars in roaming revenues under this agreement in 2013.
|
(7)
|
Telefónica Celular de Nicaragua. S.A.
(“TCN”),
Telefonica S.A.
’s Nicaraguan 60% indirectly-owned subsidiary, has a roaming agreement with Irancell. TCN recorded 12.65 U.S. dollars in roaming revenues under this agreement in 2013.
|
C.
|
Organizational Structure
|
D.
|
Property, Plants and Equipment
|
UNRESOLVED STAFF COMMENTS
|
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, 2013
|
5.5 | 5.9 | 4.9 | |||||||||
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 |
(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 607/2013 - Numbering on long distance calls
|
·
|
Resolution 608/2013 – Account separation and allocation (DSAC)
|
·
|
Resolution 611/2013 – Billing Areas Change
|
·
|
Resolution 614/2013 – Regulation of SCM
|
·
|
Resolution 615/2013 – Regulation of STFC
|
·
|
Resolution 617/2013 – Regulation of Private Limited Service (“
Serviços Limitado Privado – SLP”)
|
·
|
Resolution 619/2013 – Current and historical costs (DSAC)
|
·
|
Resolution 622/2013 – FATB Regulation
|
·
|
Resolution 623/2013 – Users Council
|
·
|
Resolution 624/2013 –Femtocell Regulation
|
·
|
Resolution 625/2013 – Allocation of the 700 MHz band
|
·
|
Resolution 628/2013 –Conduct Adjustment Term Regulation
|
·
|
Local Areas Regulation
|
·
|
Concession Agreement Review
|
·
|
700 MHz Auction
|
·
|
Productivity Factor Calculation
|
·
|
Public Use Telephone Regulation
|
·
|
Treatment, Collection and Offer Regulation
|
·
|
Reversible Assets
|
·
|
Consumer Rights
|
·
|
Infrastructure Share
|
·
|
Use of Spectrum Regulation
|
·
|
Sanctions and Conduct Adjustment
|
·
|
Cost Model (DSAC)
|
·
|
Systemic Disruption Regulation
|
·
|
WACC Regulation
|
·
|
Mobile Telephony (SMP) Regulation
|
|
·
|
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 TV services through satellite, cable or IPTV technology;
|
|
·
|
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
|
||||||||||||||||||
2013
|
2012
|
2011
|
2013-2012 | 2012-2011 | ||||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||
(in millions of
reais
)
|
||||||||||||||||||||
Net operating revenue
|
34,721.9 | 33,919.7 | 29,116.6 | 2.4 | % | 16.5 | % | |||||||||||||
Cost of services and goods
|
(17,542.2 | ) | (16,557.5 | ) | (15,035.2 | ) | 5.9 | % | 10.1 | % | ||||||||||
Gross profit
|
17,179.7 | 17,362.2 | 14,081.4 | (1.1 | %) | 23.3 | % | |||||||||||||
Operating expenses:
|
||||||||||||||||||||
Selling
|
(9,686.1 | ) | (8,693.7 | ) | (6,948.2 | ) | 11.4 | % | 25.1 | % | ||||||||||
General and administrative
|
(2,177.9 | ) | (2,145.3 | ) | (1,782.9 | ) | 1.5 | % | 20.3 | % | ||||||||||
Other operating revenues, net
|
(383.4 | ) | 687.7 | 441.5 | (155.8 | %) | 55.8 | % | ||||||||||||
Total operating expenses, net
|
(12,247.4 | ) | (10,151.3 | ) | (8,289.6 | ) | 20.6 | % | 22.5 | % | ||||||||||
Equity in earnings (losses) of associates
|
(55.1 | ) | 0.6 | 4.3 | - | - | ||||||||||||||
Operating income before financial expense, net
|
4,877.2 | 7,211.5 | 5,796.1 | (32.4 | %) | 24.4 | % | |||||||||||||
Net financial expenses
|
(214.8 | ) | (291.2 | ) | (141.0 | ) | (26.3 | %) | 106.6 | % | ||||||||||
Net income before income and social contribution taxes
|
4,662.4 | 6,920.3 | 5,655.1 | (32.6 | %) | 22.4 | % | |||||||||||||
Income and social contribution taxes
|
(946.5 | ) | (2,468.1 | ) | (1,292.9 | ) | (61.7 | %) | 90.9 | % | ||||||||||
Net income
|
3,715.9 | 4,452.2 | 4,362.2 | (16.5 | %) | 2.1 | % | |||||||||||||
Net income attributable to:
|
||||||||||||||||||||
Shareholders of company
|
3,715.9 | 4,453.6 | 4,355.3 | (16.6 | %) | 2.3 | % | |||||||||||||
Noncontrolling interests
|
- | (1.4 | ) | 6.9 | (100.0 | %) | (120.3 | %) | ||||||||||||
Net income
|
3,715.9 | 4,452.2 | 4,362.2 | (16.5 | %) | 2.1 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2013
|
2012
|
2013-2012 | ||||||||||
(Restated) | ||||||||||||
(in millions of
reais
)
|
||||||||||||
Telephony services
|
26,428.6 | 26,555.1 | (0.5 | %) | ||||||||
Data transmission and value added services
|
16,294.9 | 14,389.8 | 13.2 | % | ||||||||
Interconnection charges
|
3,820.0 | 4,453.4 | (14.2 | %) | ||||||||
Pay TV
|
645.0 | 805.3 | (19.9 | %) | ||||||||
Sale of goods and equipment
|
3,479.8 | 2,792.6 | 24.6 | % | ||||||||
Other services
|
1,297.3 | 1,268.4 | 2.3 | % | ||||||||
Gross operating revenue
|
51,965.6 | 50,264.6 | 3.4 | % | ||||||||
Value-added and other indirect taxes
|
(17,243.7 | ) | (16,344.9 | ) | 5.5 | % | ||||||
Net operating revenues
|
34,721.9 | 33,919.7 | 2.4 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2013
|
2012
|
2013-2012 | ||||||||||
(Restated) | ||||||||||||
(in millions of
reais
)
|
||||||||||||
Cost of goods sold
|
(2,117.9 | ) | (1,801.9 | ) | 17.5 | % | ||||||
Depreciation and amortization
|
(4,265.1 | ) | (4,131.8 | ) | 3.2 | % | ||||||
Outside services and other
|
(3,645.4 | ) | (3,373.1 | ) | 8.1 | % | ||||||
Interconnection charges
|
(3,842.3 | ) | (4,012.1 | ) | (4.2 | %) | ||||||
Rent, insurance, condominium fees, and leased lines
|
(1,428.0 | ) | (969.3 | ) | 47.3 | % | ||||||
Personnel
|
(522.1 | ) | (459.7 | ) | 13.6 | % | ||||||
Taxes, fees and contributions
|
(1,721.4 | ) | (1,809.6 | ) | (4.9 | %) | ||||||
Cost of services and goods
|
(17,542.2 | ) | (16,557.5 | ) | 5.9 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2013
|
2012
|
2013-2012 | ||||||||||
(Restated) | ||||||||||||
(in millions of
reais
)
|
||||||||||||
Selling expenses
|
(9,686.1 | ) | (8,693.7 | ) | 11.4 | % | ||||||
General and administrative expenses
|
(2,177.9 | ) | (2,145.3 | ) | 1.5 | % | ||||||
Other net operating income (expense)
|
(383.4 | ) | 687.7 | (155.8 | %) | |||||||
Total
|
(12,247.4 | ) | (10,151.3 | ) | 20.6 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(Restated) | (Restated) | |||||||||||
(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
|
1,268.4 | 1,089.5 | 16.4 | % | ||||||||
Gross operating revenue
|
50,264.6 | 43,058.6 | 16.7 | % | ||||||||
Value-added and other indirect taxes
|
(16,344.9 | ) | (13,942.0 | ) | 17.2 | % | ||||||
Net operating revenues
|
33,919.7 | 29,116.6 | 16.5 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(Restated) | (Restated) | |||||||||||
(in millions of
reais
)
|
||||||||||||
Cost of goods sold
|
(1,801.9 | ) | (1,284.3 | ) | 40.3 | % | ||||||
Depreciation and amortization
|
(4,131.8 | ) | (3,581.9 | ) | 15.3 | % | ||||||
Outside services and other
|
(3,373.1 | ) | (2,918.4 | ) | 15,6 | % | ||||||
Interconnection charges
|
(4,012.1 | ) | (4,537.1 | ) | (11.6 | %) | ||||||
Rent, insurance, condominium fees, and leased lines
|
(969.3 | ) | (913.3 | ) | 6.1 | % | ||||||
Personnel
|
(459.7 | ) | (380.1 | ) | 20.9 | % | ||||||
Taxes, fees and contribution
|
(1,809.6 | ) | (1,420.1 | ) | 27.4 | % | ||||||
Cost of services and goods
|
(16,557.5 | ) | (15,035.2 | ) | 10.1 | % |
Year ended December 31,
|
Percent change
|
|||||||||||
2012
|
2011
|
2012-2011 | ||||||||||
(Restated) | (Restated) | |||||||||||
(in millions of
reais
)
|
||||||||||||
Selling expenses
|
(8,693.7 | ) | (6,948.2 | ) | 25,1 | % | ||||||
General and administrative expenses
|
(2,145.3 | ) | (1,782.9 | ) | 20,3 | % | ||||||
Other net operating income
|
687.7 | 441.5 | 55.7 | % | ||||||||
Total
|
(10,151.3 | ) | (8,289.6 | ) | 22.5 | % |
B.
|
Liquidity and Capital Resources
|
|
·
|
the servicing of our indebtedness;
|
|
·
|
capital expenditures; and
|
|
·
|
the payment of dividends.
|
Debt
|
Currency
|
Annual interest rate payable
|
Maturity
|
Total amount outstanding (in thousands of
reais)
|
||||
BNDES loans and financing
|
R$
|
TJLP + 0 to 9%
|
2020
|
2,441.9
|
||||
BNDES loans and financing
|
R$
|
2.5 to 8.7%
|
2019
|
171.7
|
||||
BNDES loans and financing
|
UMBNDES
|
ECM + 2.38% yearly
|
2019
|
505.5
|
||||
BNB loans and financing
|
R$
|
10.0%
|
2016
|
225.0
|
||||
Mediocredito
|
US$
|
1.75%
|
2014
|
3.5
|
||||
BEI
|
US$
|
4.18% to 4.47%
|
2015
|
885.2
|
||||
Resolution 4,131
|
US$
|
2013
|
-
|
|||||
Debentures
|
R$
|
100% of the CDI + 0.68% to 106.8% of the CDI
|
2018
|
4,129.5
|
||||
Debentures
|
R$
|
IPCA + 0.5% to IPCA +7.0%
|
2021
|
172.1
|
||||
Others
|
R$
|
2014
|
219.2
|
|||||
Total debt
|
8,753.6
|
|||||||
Current
|
1,523.7
|
|||||||
Long term
|
7,229.8
|
C.
|
Research and Development, Patents and Licenses
|
R&D investments
|
2013
|
2012
|
2011
|
|||||||||
(in millions of
reais
)
|
||||||||||||
Development
|
18.2 | 22.7 | 44.6 | |||||||||
Innovation (business incubator and tests)
|
0.2 | 0.7 | 1.3 | |||||||||
Total
|
18.4 | 23.4 | 45.9 |
|
·
|
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 Fixo”, Vivo TV”, “Vivo Internet”, “Meu Vivo”, “Vivo Empresas,
Vivo Play, Vivo Fibra
” 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
|
Up to year
|
1-3 years
|
4-5 years
|
After 5 years
|
||||||||||||||||
(In thousands of
reais
, as of December 31, 2013)
|
||||||||||||||||||||
Contractual obligations
|
||||||||||||||||||||
Long-term debt (1)
|
8,753,555 | 1,523,712 | 4,946,822 | 2,136,378 | 146,642 | |||||||||||||||
Pension and other post-retirement benefits
|
370,351 | 7,417 | 14,827 | 14,732 | 333,375 | |||||||||||||||
Other long-term obligations including leases
|
10,302,962 | 2,416,820 | 2,351,217 | 2,014,468 | 3,520,457 | |||||||||||||||
Total contractual obligations
|
19,426,868 | 3,947,949 | 7,312,866 | 4,165,578 | 4,000,474 | |||||||||||||||
Commercial commitments
|
||||||||||||||||||||
Suppliers
|
6,914,009 | – | – | – | – | |||||||||||||||
Other commercial commitments
|
– | – | – | – | – | |||||||||||||||
Total commercial commitments
|
6,914,009 | – | – | – | – |
|
(1)
|
Includes interest payments.
|
Amount
|
||||
Year ending December 31,
|
(in thousands of
reais
, as of December 31, 2013)
|
|||
2015
|
1,959,575 | |||
2016
|
515,158 | |||
2017
|
2,472,089 | |||
2018
|
1,807,763 | |||
2019
|
328,615 | |||
2020 and forward
|
146,642 | |||
Total
|
7,229,842 |
A.
|
Directors and Senior Management
|
Name
|
Position
|
Date of Appointment
|
||
Antonio Carlos Valente da Silva
|
Chairman
|
April 16, 2013
|
||
Santiago Fernández Valbuena
|
Vice-Chairman
|
April 16, 2013
|
||
Antonio Gonçalves de Oliveira
|
Director
|
April 16, 2013
|
||
Eduardo Navarro de Carvalho
|
Director
|
April 16, 2013
|
||
Francisco Javier de Paz Mancho
|
Director
|
April 16, 2013
|
||
José Fernando de Almansa Moreno-Barreda
|
Director
|
April 16, 2013
|
||
Luciano Carvalho Ventura
|
Director
|
April 16, 2013
|
||
Luis Javier Bastida Ibarguen
|
Director
|
April 16, 2013
|
||
Luis Fernando Furlan
|
Director
|
April 16, 2013
|
||
Narcís Serra Serra
|
Director
|
April 16, 2013
|
||
Paulo Cesar Pereira Teixeira
|
Director
|
April 16, 2013
|
||
Roberto Oliveira de Lima
|
Director
|
April 16, 2013
|
(*)
|
The members of the Board of Directors have the mandate until the ordinary general meeting of 2016.
|
Name
|
Position
|
Date of Appointment
|
||
Antonio Carlos Valente da Silva
|
Chief Executive Officer
|
May 19, 2010
|
||
Paulo Cesar Pereira Teixeira
|
General and Executive Officer
|
September 13, 2011
|
||
Breno Rodrigo Pacheco de Oliveira
|
General Secretary and Legal Officer
|
June 14, 2011
|
||
Alberto Manuel Horcajo Aguirre
|
Chief Financial Officer, Control and Investor Relations Officer
|
August, 7, 2013
|
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 16, 2013
|
||
Cremênio Medola Neto
|
Gilmar Roberto Pereira Camurra
|
April 16, 2013
|
||
Stael Prata Silva Filho
|
Charles Edwards Allen
|
April 16, 2013
|
|
·
|
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 Javier Bastida Ibarguen
|
April 23, 2013
|
|
Antonio Gonçalves de Oliveira
|
April 23, 2013
|
|
Narcís Serra Serra
|
April 23, 2013
|
|
·
|
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
|
April 23, 2013
|
|
Antonio Carlos Valente da Silva
|
April 23, 2013
|
|
Francisco Javier de Paz Mancho
|
April 23, 2013
|
Members
|
Date Appointed
|
|
Eduardo Navarro de Carvalho
|
April 23, 2013
|
|
Luciano Carvalho Ventura
|
April 23, 2013
|
|
Roberto Oliveira de Lima
|
April 23, 2013
|
|
D.
|
Employees
|
E.
|
Share Ownership
|
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
|
1,511 | – |
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
|
1,305 | – |
B.
|
Related Party Transactions
|
C.
|
Interests of Experts and Counsel
|
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$37.2 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$469.1 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$1,383.9 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$93.5 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$281.1 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.
The parties filled an appeal and the effects of the sentence were suspended.
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$)
|
||||||||||
2013
|
Div/Int
|
3.946735 | 4.341409 | |||||||
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 |
(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$877.4 million which payment occurred on December 12, 2012.
|
B.
|
Significant Changes
|
A.
|
Offer and Listing Details
|
NYSE
|
BM&FBOVESPA
|
BM&FBOVESPA
|
||||||||||||||||||||||
HIGH
|
LOW
|
HIGH
|
LOW
|
HIGH
|
LOW
|
|||||||||||||||||||
(in US$ per ADS)
|
(in
reais
per preferred share)
|
(in
reais
per common share)
|
||||||||||||||||||||||
Year ended
|
||||||||||||||||||||||||
December 31, 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 | ||||||||||||||||||
December 31, 2013
|
27.66 | 17.94 | 54.89 | 41.66 | 48.45 | 38.24 | ||||||||||||||||||
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 | ||||||||||||||||||
Year ended December 31, 2013
|
||||||||||||||||||||||||
First quarter
|
27.66 | 24.32 | 54.12 | 48.14 | 48.24 | 43.00 | ||||||||||||||||||
Second quarter
|
26.94 | 21.74 | 54.89 | 48.29 | 48.45 | 43.55 | ||||||||||||||||||
Third quarter
|
23.50 | 19.68 | 51.50 | 45.85 | 45.50 | 41.00 | ||||||||||||||||||
Fourth quarter
|
22.94 | 17.94 | 50.12 | 41.66 | 44.15 | 38.24 | ||||||||||||||||||
Month ended
|
||||||||||||||||||||||||
September 30, 2013
|
23.50 | 19.74 | 51.50 | 46.40 | 45.50 | 41.35 | ||||||||||||||||||
October 31, 2013
|
22.94 | 21.08 | 50.12 | 46.60 | 44.15 | 40.87 | ||||||||||||||||||
November 30, 2013
|
21.35 | 19.20 | 47.60 | 43.90 | 43.85 | 39.30 | ||||||||||||||||||
December 31, 2013
|
19.22 | 17.94 | 44.83 | 41.66 | 41.00 | 38.24 | ||||||||||||||||||
January 31, 2014
|
20.22 | 18.43 | 47.75 | 44.21 | 42.00 | 38.55 | ||||||||||||||||||
February 28, 2014
|
19.21 | 17.97 | 45.95 | 42.22 | 40.60 | 37.16 | ||||||||||||||||||
March 2014 (through March 18)
|
19.24 | 18.47 | 45.10 | 43.25 | 39.24 | 37.32 |
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
|
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.
|
C.
|
Material Contracts
|
|
·
|
Telefônica - Rio Grande do Sul except Pelotas, Capão do Leão, Morro Redondo e Turuçu (“A” band) until 2022 (renewed in 2007);
|
|
·
|
Telefônica-Rio de Janeiro (“A” band) until 2020 (renewed in 2005);
|
|
·
|
Telefônica-Espírito Santo (“A” band) until 2023 (renewed in 2008);
|
|
·
|
Telefônica-Bahia (“A” band) and Vivo-Sergipe (“A” band) until 2023 (renewed in 2008);
|
|
·
|
Telefônica-São Paulo (“A” band) until 2023 (renewed in 2008); or 2024, for the cities of Ribeirão Preto and Guatapará (renewed in 2009);
|
|
·
|
Telefônica-Paraná/Santa Catarina (“B” band) until 2013;
|
|
·
|
Telefônica-Distrito Federal (“A” band) until 2021 (renewed in 2006);
|
|
·
|
Telefônica-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);
|
|
·
|
Telefônica-Goiás/Tocantins (“A” band) until 2023 (renewed in 2008);
|
|
·
|
Telefônica-Amazonas/Roraima/Amapá/Pará/Maranhão (“B” band) until 2013;
|
|
·
|
Telefônica-Minas Gerais
*
(“A” band) until 2023 (renewed in 2008);
|
|
·
|
For the cities in which CTBC Telecom operates in the state of Minas Gerais* (“E” band) until 2020;
|
*
|
On October 1, 2011, assets, rights and obligations of Vivo Participações relating to mobile operations in Minos Gerais were awarded to Vivo, a subsidiary of Vivo Participações.
|
|
·
|
Telefônica-Rio Grande do Sul (“L” band) until 2022 (renewed in 2007) including cities in the Pelotas metropolitan area;
|
|
·
|
Telefônica-Rio de Janeiro (“L” band) until 2020 (renewed in 2005);
|
|
·
|
Telefônica-Espírito Santo (“L” band) until 2023 (renewed in 2008);
|
|
·
|
Telefônica-Bahia (“L” band) and Vivo-Sergipe (“L” band) until 2023 (renewed in 2008);
|
|
·
|
Telefônica-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;
|
|
·
|
Telefônica-Paraná (excluding the cities of Londrina and Tamarana)/Santa Catarina (“L” band) until 2013;
|
|
·
|
Telefônica-Federal District (“L” band) until 2021 (renewed in 2006);
|
|
·
|
Telefônica-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;
|
|
·
|
Telefônica-Goiás/Tocantins (“L” band) until 2023 (renewed in 2008) and the cities where CTBC Telecom operates in the state of Goiás until 2022; and
|
|
·
|
Telefônica-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“L” band) until 2022;
|
|
·
|
Telefônica-Rio Grande do Sul (including cities in the Pelotas metropolitan area) (“J” band) until 2023;
|
|
·
|
Telefônica-Rio de Janeiro (“J” band) until 2023;
|
|
·
|
Telefônica-Espírito Santo (“J” band) until 2023;
|
|
·
|
Telefônica-Bahia (“J” band) and Vivo-Sergipe (“J” band) until 2023;
|
|
·
|
Telefônica-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;
|
|
·
|
Telefônica-Paraná (including the cities of Londrina and Tamarana)/Santa Catarina (“J” band) until 2023;
|
|
·
|
Telefônica-Federal District (“J” band) until 2023;
|
|
·
|
Telefônica-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;
|
|
·
|
Telefônica-Goiás (including the cities where CTBC Telecom operates in the state of Goiás)/Tocantins (“J” band) until 2023;
|
|
·
|
Telefônica-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“J” band) until 2023;
|
|
·
|
Telefônica-Amazonas/Roraima/Amapá/Pará/Maranhão (“J” band) until 2023; and
|
|
·
|
Telefônica-Minas Gerais
*
(including the cities where CTBC Telecom operates in the state of Minas Gerais) (“J” band) until 2023
|
*
|
On October 1, 2011, assets, rights and obligations of Vivo Participações relating to mobile operations in Minos Gerais were awarded to Vivo, a subsidiary of Vivo Participações.
|
|
·
|
“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;
|
|
·
|
Telefônica Brasil (“X” Band – 2500 MHz) until 2027 (associated to SMP service);
|
|
·
|
Telefônica AL, CE, MG, PB, PE, PI, RN, SE (450 MHz) until 2027 (associated to STFC and SCM services);
|
|
·
|
Telefônica 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 individual resident of the United States;
|
|
·
|
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, 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
|
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
|
2013
|
2012
|
2011
|
||||||||||
(in thousands of
reais
)
|
||||||||||||
Audit Fees
|
6,647 | 11,589 | 7,002 | |||||||||
Audit-Related Fees
|
2,782 | 2,772 | 1,305 | |||||||||
Tax Fees
|
– | – | 58 | |||||||||
All Other Services
|
– | – | – | |||||||||
Total
|
9,429 | 14,361 | 8,365 |
Exhibit number
|
Description
|
|
1.1
|
Bylaws of Telefônica Brasil S.A., as amended (unofficial English translation).
|
|
2.1
|
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)
|
|
4.1
|
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)
|
|
4.2
|
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). (3)
|
|
4.3
|
Authorization Agreement of the Personal Mobile Service (Region II) between Agência Nacional de Telecomunicações – ANATEL and Telefonica Brasil S.A. dated January 18, 2010 (English language summary).
|
|
4.4
|
Authorization Agreement of the Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Telefonica Brasil S.A. dated January 18, 2010 (English language summary).
|
|
4.5
|
Authorization Agreement to Provide Commuted Fixed Telephone Service in Local Modality (Regions I and II) between Agência Nacional De Telecomunicações and Telefonica Brasil S.A. dated September 5, 2011 (English language summary).
|
|
4.6
|
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 Telefonica Brasil S.A. dated September 5, 2011 (English language summary).
|
|
4.7
|
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 Telefonica Brasil S.A. dated September 5, 2011 (English language summary).
|
|
4.8
|
Authorization Agreement of the Personal Mobile Service (Region I) between Agência Nacional de Telecomunicações – ANATEL and Telefonica Brasil S.A. dated February 7, 2012 (English language summary).
|
|
4.9
|
Authorization Agreement for Spectrum Blocks Associated with Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Telefonica Brasil S.A. dated October 16, 2012 (English language summary).
|
Exhibit number
|
Description
|
|
4.10
|
Authorization Agreement for Spectrum Blocks Associated with Personal Mobile Service (Region II) between Agência Nacional de Telecomunicações – ANATEL and Telef
ô
nica Brasil S.A. dated October 16, 2012 (English language summary).
|
|
4.11
|
Authorization Agreement for Spectrum Blocks Associated with Personal Mobile Service (Region III) between Agência Nacional de Telecomunicações – ANATEL and Telef
ô
nica Brasil S.A. dated October 16, 2012 (English language summary).
|
|
4.12
|
Authorization Agreement 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 Telef
ô
nica Brasil S.A. dated October 16, 2012 (English language summary).
|
|
4.13
|
Authorization Agreement 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 Telef
ô
nica Brasil S.A. dated October 16, 2012 (English language summary).
|
4.14 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
|
4.15 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
|
4.16 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
|
4.17 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
|
4.18 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
|
4.19 |
Authorization Agreement for Conditional Access Service in the Brazilian territory between Agência Nacional de Telecomunicações – ANATEL and Telefônica Brasil S.A.
|
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 March 20, 2013.
|
(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
|
By:
|
/s/ Alberto Manuel Horcajo Aguirre
|
||
Name:
|
Alberto Manuel Horcajo Aguirre
|
||
Title:
|
Chief Financial Officer
|
Consolidated
|
|||||||||||||||
ASSETS
|
Note
|
12.31.13 |
12.31.12 - Restated
|
1.1.12 -
Restated
|
|||||||||||
CURRENT ASSETS
|
15,936,633 | 16,209,181 | 11,759,744 | ||||||||||||
Cash and cash equivalents
|
5 | 6,543,936 | 7,133,485 | 2,889,543 | |||||||||||
Trade accounts receivable, net
|
6 | 5,802,859 | 5,546,938 | 5,128,142 | |||||||||||
Inventories
|
7 | 505,615 | 387,809 | 471,721 | |||||||||||
Taxes recoverable
|
8.1 | 2,191,962 | 2,052,421 | 2,495,065 | |||||||||||
Judicial deposits and garnishments
|
9 | 204,165 | 126,625 | 116,421 | |||||||||||
Derivative transactions
|
36 | 89,499 | 41,109 | 1,840 | |||||||||||
Prepaid expenses
|
10 | 257,286 | 248,337 | 255,056 | |||||||||||
Dividend and interest on equity
|
19 | 1,140 | 1,140 | 772 | |||||||||||
Other assets
|
11 | 340,171 | 671,317 | 401,184 | |||||||||||
NONCURRENT ASSETS
|
53,604,442 | 54,041,911 | 53,728,817 | ||||||||||||
Short-term investments pledged as collateral
|
5 | 106,455 | 109,708 | 124,668 | |||||||||||
Trade accounts receivable, net
|
6 | 257,086 | 93,378 | 84,855 | |||||||||||
Taxes recoverable
|
8.1 | 368,388 | 738,965 | 1,014,959 | |||||||||||
Deferred taxes
|
8.2 | 210,294 | 1,027,888 | 1,427,499 | |||||||||||
Judicial deposits and garnishments
|
9 | 4,148,355 | 3,909,268 | 3,374,490 | |||||||||||
Derivative transactions
|
36 | 329,652 | 286,278 | 225,935 | |||||||||||
Prepaid expenses
|
10 | 25,364 | 31,396 | 32,138 | |||||||||||
Other assets
|
11 | 127,793 | 92,308 | 96,049 | |||||||||||
Investments
|
12 | 86,349 | 142,881 | 152,256 | |||||||||||
Property, plant and equipment, net
|
13 | 18,441,647 | 17,604,144 | 17,146,521 | |||||||||||
Intangible assets, net
|
14 | 29,503,059 | 30,005,697 | 30,049,447 | |||||||||||
TOTAL ASSETS
|
69,541,075 | 70,251,092 | 65,488,561 |
LIABILITIES AND EQUITY
|
Note
|
12.31.13 |
12.31.12 - Restated
|
1.1.12 -
Restated
|
|||||||||||
CURRENT LIABILITIES
|
13,768,244 | 13,536,792 | 12,740,699 | ||||||||||||
Personnel, social charges and benefits
|
15 | 431,403 | 416,252 | 495,527 | |||||||||||
Trade accounts payable
|
16 | 6,914,009 | 5,889,068 | 6,038,149 | |||||||||||
Taxes, charges and contributions
|
17 | 1,315,164 | 1,781,250 | 1,691,737 | |||||||||||
Loans, financing and lease
|
18.1 | 1,236,784 | 1,270,122 | 1,000,082 | |||||||||||
Debentures
|
18.2 | 286,929 | 702,215 | 468,624 | |||||||||||
Dividend and interest on equity
|
19 | 1,187,556 | 467,831 | 972,986 | |||||||||||
Provisions
|
20 | 561,403 | 496,790 | 416,313 | |||||||||||
Derivative transactions
|
36 | 44,463 | 29,586 | 51,162 | |||||||||||
Deferred revenue
|
21 | 817,551 | 734,573 | 761,268 | |||||||||||
Payable from reverse split of fractional shares
|
389,220 | 389,510 | 389,953 | ||||||||||||
Authorization license
|
95,768 | 994,977 | - | ||||||||||||
Other liabilities
|
22 | 487,994 | 364,618 | 454,898 | |||||||||||
NONCURRENT LIABILITIES
|
12,878,389 | 12,033,180 | 9,417,077 | ||||||||||||
Personnel, social charges and benefits
|
15 | 18,698 | 13,224 | 15,160 | |||||||||||
Taxes, charges and contributions
|
17 | 75,074 | 488,749 | 433,071 | |||||||||||
Deferred taxes
|
8.2 | 722,634 | 1,216,651 | 788,954 | |||||||||||
Loans, financing and lease
|
18.1 | 3,215,156 | 3,774,461 | 3,968,513 | |||||||||||
Debentures
|
18.2 | 4,014,686 | 2,253,690 | 787,807 | |||||||||||
Provisions
|
20 | 4,062,410 | 3,453,637 | 2,838,028 | |||||||||||
Derivative transactions
|
36 | 24,807 | 26,545 | 78,369 | |||||||||||
Deferred revenue
|
21 | 253,661 | 303,362 | 156,266 | |||||||||||
Liabilities for post-retirement benefit plans
|
35 | 370,351 | 392,269 | 308,893 | |||||||||||
Other liabilities
|
22 | 120,912 | 110,592 | 42,016 | |||||||||||
TOTAL EQUITY
|
42,894,442 | 44,681,120 | 43,330,785 | ||||||||||||
EQUITY
|
42,894,442 | 44,681,120 | 43,330,785 | ||||||||||||
Capital
|
23 | 37,798,110 | 37,798,110 | 37,798,110 | |||||||||||
Capital reserves
|
23 | 2,686,897 | 2,686,897 | 2,719,665 | |||||||||||
Income reserves
|
23 | 1,287,496 | 1,100,000 | 877,322 | |||||||||||
Bonus on acquisition of interest from non-controlling shareholders
|
23 | (70,448 | ) | (70,448 | ) | (29,929 | ) | ||||||||
Other comprehensive income
|
23 | 16,849 | 17,792 | 7,520 | |||||||||||
Additional dividend proposed
|
23 | 1,175,538 | 3,148,769 | 1,953,029 | |||||||||||
Non-controlling interest
|
- | - | 5,068 | ||||||||||||
TOTAL LIABILITIES AND EQUITY
|
69,541,075 | 70,251,092 | 65,488,561 |
Note
|
2013
|
2012-
Restated
|
2011-
Restated
|
||||||||||||
Net operating revenue
|
24 | 34,721,897 | 33,919,656 | 29,116,644 | |||||||||||
Cost of sales
|
25 | (17,542,167 | ) | (16,557,444 | ) | (15,035,163 | ) | ||||||||
Gross profit
|
17,179,730 | 17,362,212 | 14,081,481 | ||||||||||||
Operating income (expenses)
|
(12,302,606 | ) | (10,150,704 | ) | (8,285,386 | ) | |||||||||
Selling expenses
|
26 | (9,686,170 | ) | (8,693,696 | ) | (6,948,211 | ) | ||||||||
General and administrative expenses
|
27 | (2,177,891 | ) | (2,145,308 | ) | (1,782,971 | ) | ||||||||
Equity pickup
|
12 | (55,150 | ) | 588 | 4,305 | ||||||||||
Other operating income (expenses), net
|
28 | (383,395 | ) | 687,712 | 441,491 | ||||||||||
Operating income before financial income (expenses)
|
4,877,124 | 7,211,508 | 5,796,095 | ||||||||||||
Financial income
|
29 | 1,748,277 | 1,281,105 | 1,102,056 | |||||||||||
Financial expense
|
29 | (1,963,037 | ) | (1,572,369 | ) | (1,243,051 | ) | ||||||||
Income before taxes
|
4,662,364 | 6,920,244 | 5,655,100 | ||||||||||||
Income and social contribution taxes
|
30 | (946,419 | ) | (2,468,063 | ) | (1,292,901 | ) | ||||||||
Net income for the year
|
3,715,945 | 4,452,181 | 4,362,199 | ||||||||||||
Attributed to:
|
|||||||||||||||
Noncontrolling interests
|
- | (1,392 | ) | 6,881 | |||||||||||
Controlling interest
|
3,715,945 | 4,453,573 | 4,355,318 | ||||||||||||
Basic and diluted earnings per common share
|
3.10 | 3.72 | 4.40 | ||||||||||||
Basic and diluted earnings per preferred share
|
3.41 | 4.09 | 4.84 |
2013
|
2012 -
Restated
|
2011 -
Restated
|
||||||||||
Net income for the year
|
3,715,945 | 4,452,181 | 4,362,199 | |||||||||
Unrealized losses on investments available for sale
|
(13,466 | ) | (5,536 | ) | (5,170 | ) | ||||||
Taxes
|
4,578
|
1,882 | 1,758 | |||||||||
(8,888 | ) | (3,654 | ) | (3,412 | ) | |||||||
Cumulative translation adjustments - operations in foreign currency
|
11,525 | 5,731 | 4,520 | |||||||||
Other comprehensive income to be reclassified to gains (losses) for subsequent periods
|
2,637 | 2,077 | 1,108 | |||||||||
Actuarial gains (losses) and limitation effect of the assets of surplus plans
|
21,612 | (69,782 | ) | (65,176 | ) | |||||||
Taxes
|
(7,348 | ) | 23,726 | 22,179 | ||||||||
14,264 | (46,056 | ) | (42,997 | ) | ||||||||
Gains (losses) - derivative transactions
|
(5,424 | ) | 12,416 | 3,022 | ||||||||
Taxes
|
1,844 | (4,221 | ) | (1,027 | ) | |||||||
(3,580 | ) | 8,195 | 1,995 | |||||||||
Other comprehensive income not to be reclassified to gains (losses) for subsequent periods
|
10,684 | (37,861 | ) | (41,002 | ) | |||||||
Comprehensive income for the year
|
3,729,266 | 4,416,397 | 4,322,305 | |||||||||
Attributable to:
|
||||||||||||
Noncontrolling interests
|
- | (1,392 | ) | 6,881 | ||||||||
Controlling interest
|
3,729,266 | 4,417,789 | 4,315,424 |
Capital | Premium on acquisition of non-controlling interest | Special Goodwill reserve | Capital reserves | Treasury stock | Legal Reserve | Tax Incentive Reserve | Retained Earnings | Additional proposed dividend | Others comprehensive income | Company’s equity | Non-controlling interest |
Total
equity
|
||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2010
|
6,575,480 | - | 63,074 | 2,688,207 | (17,719 | ) | 659,556 | - | 1,694,099 | 4,417 | 11,667,114 | - | 11,667,114 | |||||||||||||||||||||||||||||||||||||||
- | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
Proposed additional dividend for 2010
|
- | - | - | - | - | - | - | (1,694,099 | ) | - | (1,694,099 | ) | - | (1,694,099 | ) | |||||||||||||||||||||||||||||||||||||
Expired dividends and interest on equity
|
- | - | - | - | - | - | - | 107,874 | - | - | 107,874 | - | 107,874 | |||||||||||||||||||||||||||||||||||||||
Capital increase due to merger of Vivo Part. Shares
|
31,222,630 | - | - | 47,723 | - | - | - | - | - | - | 31,270,353 | - | 31,270,353 | |||||||||||||||||||||||||||||||||||||||
Withdrawal rights to shareholders due to the Vivo merger
|
- | - | - | - | (3 | ) | - | - | - | - | - | (3 | ) | - | (3 | ) | ||||||||||||||||||||||||||||||||||||
Repurchase of shares
|
- | - | - | (61,617 | ) | - | - | - | - | - | (61,617 | ) | - | (61,617 | ) | |||||||||||||||||||||||||||||||||||||
Non-controlling interest
|
- | (29,929 | ) | - | - | - | - | - | - | - | - | (29,929 | ) | (1,813 | ) | (31,742 | ) | |||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | - | (42,997 | ) | - | 3,103 | (39,894 | ) | - | (39,894 | ) | ||||||||||||||||||||||||||||||||||||
Net income for the period
|
- | - | - | - | - | - | - | 4,355,318 | - | - | 4,355,318 | 6,881 | 4,362,199 | |||||||||||||||||||||||||||||||||||||||
Profit sharing:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal reserve
|
- | - | - | - | - | 217,766 | - | (217,766 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Dividends
|
- | - | - | - | - | - | - | (382,400 | ) | - | - | (382,400 | ) | - | (382,400 | ) | ||||||||||||||||||||||||||||||||||||
Interest on equity
|
- | - | - | - | - | - | - | (1,867,000 | ) | - | - | (1,867,000 | ) | - | (1,867,000 | ) | ||||||||||||||||||||||||||||||||||||
Proposed additional dividend
|
- | - | - | - | - | - | - | (1,953,029 | ) | 1,953,029 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2011
|
37,798,110 | (29,929 | ) | 63,074 | 2,735,930 | (79,339 | ) | 877,322 | - | - | 1,953,029 | 7,520 | 43,325,717 | 5,068 | 43,330,785 | |||||||||||||||||||||||||||||||||||||
Additional dividend proposed for 2011
|
- | - | - | - | - | - | - | - | (1,953,029 | ) | - | (1,953,029 | ) | - | (1,953,029 | ) | ||||||||||||||||||||||||||||||||||||
Unclaimed dividends and interest on equity
|
- | - | - | - | - | - | 89,692 | - | - | 89,692 | - | 89,692 | ||||||||||||||||||||||||||||||||||||||||
Other changes
|
- | - | - | - | - | (3,240 | ) | - | - | (3,240 | ) | (23 | ) | (3,263 | ) | |||||||||||||||||||||||||||||||||||||
Repurchase of shares
|
- | - | - | - | (32,768 | ) | - | - | - | - | - | (32,768 | ) | - | (32,768 | ) | ||||||||||||||||||||||||||||||||||||
Noncontrolling interests
|
- | (40,519 | ) | - | - | - | - | - | - | - | (40,519 | ) | (3,653 | ) | (44,172 | ) | ||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | (46,056 | ) | - | 10,272 | (35,784 | ) | - | (35,784 | ) | ||||||||||||||||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | - | - | 4,453,573 | - | - | 4,453,573 | (1,392 | ) | 4,452,181 | ||||||||||||||||||||||||||||||||||||||
Allocation of income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal reserve
|
- | - | - | - | - | 222,678 | - | (222,678 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Interim dividend
|
- | - | - | - | - | - | - | (1,122,522 | ) | - | - | (1,122,522 | ) | - | (1,122,522 | ) | ||||||||||||||||||||||||||||||||||||
Additional dividend proposed
|
- | - | - | - | - | - | - | (3,148,769 | ) | 3,148,769 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2012
|
37,798,110 | (70,448 | ) | 63,074 | 2,735,930 | (112,107 | ) | 1,100,000 | - | - | 3,148,769 | 17,792 | 44,681,120 | - | 44,681,120 | |||||||||||||||||||||||||||||||||||||
Proposed additional dividend for 2012
|
- | - | - | - | - | - | - | - | (3,148,769 | ) | - | (3,148,769 | ) | - | (3,148,769 | ) | ||||||||||||||||||||||||||||||||||||
Unclaimed dividend and interest on equity
|
- | - | - | - | - | - | - | 116,825 | - | - | 116,825 | - | 116,825 | |||||||||||||||||||||||||||||||||||||||
DIPJ adjustment - Tax incentives
|
- | - | - | - | - | - | 1,699 | (1,699 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | - | - | 14,264 | - | (943 | ) | 13,321 | - | 13,321 | ||||||||||||||||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | - | - | 3,715,945 | - | - | 3,715,945 | 3,715,945 |
Allocation of income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal reserve
|
- | - | - | - | - | 185,797 | - | (185,797 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
Interim interest on equity
|
- | - | - | - | - | - | - | (1,738,000 | ) | - | - | (1,738,000 | ) | - | (1,738,000 | ) | ||||||||||||||||||||||||||||||||||||
Interim dividend
|
- | - | - | - | - | - | - | (746,000 | ) | - | - | (746,000 | ) | - | (746,000 | ) | ||||||||||||||||||||||||||||||||||||
Additional dividend proposed
|
- | - | - | - | - | - | - | (1,175,538 | ) | 1,175,538 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2013
|
37,798,110 | (70,448 | ) | 63,074 | 2,735,930 | (112,107 | ) | 1,285,797 | 1,699 | - | 1,175,538 | 16,849 | 42,894,442 | - | 42,894,442 | |||||||||||||||||||||||||||||||||||||
Outstanding shares (in thousands) | 1,123,269 | |||||||||||||||||||||||||||||||||||||||||||||||||||
VPA - Net book value of Company's shares | 38.19 |
2013
|
2012 -
Restated
|
2011 -
Restated
|
||||||||||
Cash generated by operating activities
|
||||||||||||
Income before taxes
|
4,662,364 | 6,920,244 | 5,655,100 | |||||||||
Items not affecting cash
|
||||||||||||
Expenses (revenues) not representing changes in cash
|
8,440,826 | 6,147,922 | 5,677,524 | |||||||||
Depreciation and amortization
|
5,643,310 | 5,491,776 | 4,584,596 | |||||||||
Foreign exchange (gains) losses on loans
|
98,105 | (1,254 | ) | 89,549 | ||||||||
Monetary (gains) losses
|
142,289 | 51,860 | (30,323 | ) | ||||||||
Equity pickup
|
55,150 | (588 | ) | (4,305 | ) | |||||||
Losses on write-off/sale of goods
|
(122,598 | ) | (1,049,014 | ) | (482,109 | ) | ||||||
Provision for impairment - accounts receivable
|
741,274 | 654,273 | 506,581 | |||||||||
Provision (reversal) of trade accounts payable
|
579,225 | (73,645 | ) | 365,415 | ||||||||
Provision (Write-offs and reversals of) for impairment – inventories
|
(5,901 | ) | 791 | (8,966 | ) | |||||||
Pension plans and other post-employment benefits
|
26,986 | (3,244 | ) | (1,163 | ) | |||||||
Provisions for tax, labor, civil and regulatory contingencies
|
660,771 | 514,840 | 255,420 | |||||||||
Interest expense
|
596,292 | 560,885 | 416,426 | |||||||||
Provision for (Reversal of) divestiture
|
19,437 | (7,854 | ) | (33,138 | ) | |||||||
Provisions for customer loyalty program
|
8,915 | 14,026 | 9,861 | |||||||||
Others
|
(2,429 | ) | (4,930 | ) | 9,680 | |||||||
(Increase) decrease in operating assets:
|
(1,673,802 | ) | (239,769 | ) | (490,360 | ) | ||||||
Trade accounts receivable
|
(1,160,903 | ) | (1,069,335 | ) | (933,551 | ) | ||||||
Inventories
|
(111,905 | ) | 83,122 | (47,355 | ) | |||||||
Taxes recoverable
|
(399,105 | ) | 589,745 | - | ||||||||
Other current assets
|
37,703 | 116,129 | 591,102 | |||||||||
Other noncurrent assets
|
(39,592 | ) | 40,570 | (100,556 | ) | |||||||
Increase (decrease) in operating liabilities:
|
(1,853,108 | ) | (2,774,400 | ) | (2,714,149 | ) | ||||||
Personnel, social charges and benefits
|
20,625 | (79,275 | ) | (56,910 | ) | |||||||
Trade accounts payable
|
(490,538 | ) | (614,237 | ) | (277,632 | ) | ||||||
Taxes, charges and contributions
|
487,854 | 134,595 | 132,569 | |||||||||
Interest paid
|
(625,624 | ) | (447,712 | ) | (496,103 | ) | ||||||
Income and social contribution taxes paid
|
(868,395 | ) | (1,480,205 | ) | (1,398,239 | ) | ||||||
Other current liabilities
|
(341,427 | ) | (219,415 | ) | (520,179 | ) | ||||||
Other noncurrent liabilities
|
(35,603 | ) | (68,151 | ) | (97,655 | ) | ||||||
Total cash generated by operating activities
|
9,576,280 | 10,053,997 | 8,128,115 |
2013
|
2012 -
Restated
|
2011 -
Restated
|
||||||||||
Cash generated by (used in) investing activities
|
||||||||||||
Future capital contribution in subsidiaries
|
- | - | - | |||||||||
Additions to PP&E and intangible assets (net of donations)
|
(5,837,172 | ) | (4,546,663 | ) | (4,653,565 | ) | ||||||
Cash received from sale of PP&E items
|
436,386 | 1,136,633 | 610,823 | |||||||||
Cash received from divestitures
|
- | 7,551 | - | |||||||||
Redemption of (investments in) investments in guarantee
|
22,485 | - | - | |||||||||
Redemption of (increase in) judicial deposits
|
(168,075 | ) | (326,577 | ) | - | |||||||
Dividend and interest on equity received
|
2,577 | 8,217 | 21,640 | |||||||||
Cash and cash equivalents from consolidation of Companies
|
- | - | 31,095 | |||||||||
Cash and cash equivalents through business combination
|
- | - | 1,982,898 | |||||||||
Total cash generated by (used in) investing activities
|
(5,543,799 | ) | (3,720,839 | ) | (2,007,109 | ) | ||||||
Cash used in (generated by) financing activities
|
||||||||||||
Payment of loans, financing and debentures
|
(2,336,023 | ) | (1,288,691 | ) | (1,426,334 | ) | ||||||
Loans and debentures raised
|
2,229,134 | 2,815,825 | 2,123,727 | |||||||||
Payment net of derivative agreements
|
20,667 | (45,413 | ) | 56,765 | ||||||||
Payment for reverse split of shares
|
(289 | ) | - | - | ||||||||
Dividend and interest on equity paid
|
(4,535,519 | ) | (3,493,997 | ) | (5,387,601 | ) | ||||||
Acquisition of noncontrolling interest
|
- | (44,172 | ) | (33,850 | ) | |||||||
Repurchase of treasury stock
|
- | (32,768 | ) | (61,620 | ) | |||||||
Total cash used in (generated by) financing activities
|
(4,622,030 | ) | (2,089,216 | ) | (4,728,913 | ) | ||||||
Increase (decrease) in cash and cash equivalents
|
(589,549 | ) | 4,243,942 | 1,392,093 | ||||||||
Cash and cash equivalents at beginning of year
|
7,133,485 | 2,889,543 | 1,497,450 | |||||||||
Cash and cash equivalents at end of year
|
6,543,936 | 7,133,485 | 2,889,543 | |||||||||
Changes in cash and cash equivalents for the year
|
(589,549 | ) | 4,243,942 | 1,392,093 |
1.
|
Operations and background
|
a)
|
Background information
|
b)
|
Corporate restructuring
|
c)
|
Operations
|
Operation Area
|
License Expiration
|
|||||||||||||
450 MHz
|
800 MHz
|
900 MHz
|
1800 MHz
|
1900 MHz (2)
|
2100 MHz (3)
|
2.5 GHz
|
||||||||
Region 1
|
||||||||||||||
Rio de Janeiro
|
-
|
Bandwidth A
– 11/29/20
|
Extension 1 -
04/30/23
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Espirito Santo
|
-
|
Bandwidth A -
11/30/23
|
Extension 1 -
04/30/23
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Amazonas, Roraima , Amapá, Pará, and Maranhão
|
-
|
Bandwidth B -
11/29/28
|
Extension 2 -
04/30/23
|
Extensions 7, 9
and 10 - 04/30/23
|
-
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Minas Gerais (except
Triángulo Mineiro
)
|
10/18/27
|
Bandwidth A -
04/29/23
|
Extension 2 -
04/30/23
|
Extensions 11 to
14 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Minas Gerais (
Triángulo Mineiro
)
|
10/18/27
|
-
|
Bandwidth E -
04/28/20
|
Bandwidth E -
04/28/20
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Bahia
|
-
|
Bandwidth A -
06/29/23
|
Extension 1 -
04/30/23
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Sergipe
|
10/18/27
|
Bandwidth A -
12/15/23
|
Extension 1 -
04/30/23
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Alagoas, Ceará, Pariba,
Pernambuco, Piaui and Rio Grande do Norte
|
10/18/27
|
-
|
-
|
Bandwidth E -
04/30/23
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
12/07/22
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Region 2
|
||||||||||||||
Paraná (except for Sector 20) and Santa Catarina
|
-
|
Bandwidth B -
04/08/28
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Paraná Sector 20 - Londrina and Tamarana (5)
|
-
|
Bandwidth B -
04/08/28
|
-
|
Bandwidth M -
04/30/23
Extensions 10 -
04/30/23
|
-
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Rio Grande do Sul (except for Sector 30)
|
-
|
Bandwidth A -
12/17/22
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Rio Grande do Sul - Sector 30 (Pelotas, Morro Redondo, Capão do Leão and Turuçu)
|
-
|
-
|
-
|
Bandwidths D and
M - 04/30/23
|
Bandwidth L -
12/07/22
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Federal District
|
-
|
Bandwidth A -
07/24/21
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Goiás and Tocantins
|
-
|
Bandwidth A -
10/29/23
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Goiás (Sector 25) (7)
|
-
|
-
|
-
|
Bandwidth M -
04/30/23
Extensions 7 to
10 - 04/30/23
|
Bandwidth L -
12/07/22
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Mato Grosso
|
-
|
Bandwidth A -
03/30/24
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Mato Grosso do Sul (except for Sector 22) (6)
|
-
|
Bandwidth A -
09/28/24
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Mato Grosso do Sul (Sector 22 - Paranaiba)
|
-
|
-
|
-
|
Bandwidth M -
04/30/23
Extensions 7, 9
and 10 - 04/30/23
|
Bandwidth L -
12/07/22
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Rondõnia
|
-
|
Bandwidth A -
07/21/24
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Acre
|
-
|
Bandwidth A -
07/15/24
|
Extension 1 -
04/30/23
|
Bandwidth M -
04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
Region 3
|
||||||||||||||
São Paulo (4)
|
10/18/27
|
Bandwidth A -
08/05/23
|
-
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
30/04/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
São Paulo (Ribeirão Preto, Guatapará and Bonfim Paulista) (4)
|
10/18/27
|
Bandwidth A -
01/20/24
|
-
|
Extensions 5, 9
and 10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
São Paulo (Franca area and region) (4)
|
10/18/27
|
Bandwidth A 08/08/23
|
-
|
Extensions 5, 9
and 10 - 04/30/23
|
Bandwidth L -
04/30/23
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
|||||||
São Paulo (Sector 33) (8)
|
-
|
-
|
-
|
Extensions 9 and
10 - 04/30/23
|
Bandwidth L -
12/07/22
|
Bandwidth J -
04/30/23
|
Bandwidth X -
10/18/27
|
(1)
|
All of the authorization terms for A and B bandwidths have been renewed for 15 years. Accordingly, no additional renewal applies (once the 30-year authorization term has been completed).
|
(2)
|
Authorization terms for the L bandwidth that was linked to A or B bandwidths have been renewed together with the latter bands.
|
(3)
|
L bandwidths that have been realigned to J bandwidth have now the same renewal date as the latter band (price realignment calculation considered this point).
|
(4)
|
In São Paulo, only in cities where CN is 13 to 19, the Company holds a 450 MHz license effective until October 18, 2027.
|
(5)
|
Paraná - Sector 20 of PGO - cities of Londrina and Tamarana.
|
(6)
|
Mato Grosso do Sul - Sector 22 of PGO - city of Paranaíba.
|
(7)
|
Goiás - Sector 25 of PGO - cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão.
|
(8)
|
São Paulo - Sector 33 of PGO – cities of Altinópolis, Aramina, Batatais, Brodosqui, Buritizal, Cajuru, Cássia dos Coqueiros, Colômbia, Franca, Guaíra, Guará, Ipuã, Ituverava, Jardinópolis, Miguelópolis, Morro Agudo, Nuporanga, Orlândia, Ribeirão Corrente, Sales de Oliveira, Santa Cruz da Esperança, Santo Antônio da Alegria and São Joaquim da Barra.
|
d)
|
Share trading on stock exchanges
|
•
|
Type of shares: preferred.
|
•
|
Each ADS represents 1 (one) preferred share.
|
•
|
Shares are traded as ADS under ticker “VIV” on NYSE.
|
•
|
Foreign depositary bank: Citibank N.A.
|
•
|
Custodian bank in Brazil: Citibank N.A.
|
e)
|
Agreement between Telefónica S.A. and Telecom Italia
|
1)
|
Telefonica SA subscribed and paid up capital in Telco, SpA through a contribution of 324 million euros, receiving shares without voting rights of TELCO, SpA. As a result of this capital increase, the share capital of Telefónica S.A. voting in Telco, SpA remaining unchanged (remaining at 46.18%), although their economic participation rose to 66%. Thus, the governance of TELCO S.p.A., as well as the obligations of Telefónica S.A. to abstain from participating in or influencing the decisions that impact the industries where they both operate, remained unchanged.
|
2)
|
Subject to obtaining the required previous approvals from antitrust authorities and telecommunications regulatory agencies as applicable (including Brazil and Argentina), Telefónica S.A. will be involved in another capital increase in TELCO S.p.A. amounting to 117 million Euros, receiving shares with no voting rights of TELCO, SpA. As a result of this capital increase, the share capital of Telefónica S.A. voting in Telco, SpA increased its total interest to 70%, with the 46.18% interest held in shares with voting rights remaining unchanged.
|
3)
|
Beginning as of January 1st, 2014, following approvals from antitrust authorities and telecommunications regulatory agencies as applicable (including Brazil and Argentina), Telefónica S.A. will be entitled to convert all or part of nonvoting shares into common shares with voting rights, limited however to a 64.9% interest in TELCO S.p.A. voting capital.
|
4)
|
Italian shareholders of TELCO S.p.A. granted Telefónica S.A. an option to purchase all of their shares in TELCO S.p.A.. Exercising this call option is also subject to obtaining the required previous approvals from antitrust authorities and telecommunications regulatory agencies as applicable (including Brazil and Argentina), beginning eligible after January 1st 2014, whenever the Shareholders’ Agreement remains in full force and effect, except (i) between June 1 and June 30, 2014 and between January 15 and February 15, 2015; and (ii) during certain periods in case the Italian shareholders of TELCO S.p.A. request the entity’s spin-off.
|
1)
|
Approve, subject to the limitations described below, the acquisition, by Telefónica S.A., of the total interest held by Portugal Telecom, SGPS SA e PT Móveis – Serviços de Telecomunicações, SGPS, SA (PT) in Brasilcel NV, which controlled Brazilian mobile telecommunications operator Vivo Participações S.A. (Vivo Part.).
|
2)
|
Impose a R$15 million fine on Telefónica S.A. for violating the will and purpose of the agreement executed by and between Telefónica S.A. and CADE (as a requirement to approve the initial purchase transaction of Telecom Italia in 2007), due to the subscription and payment, by Telefónica S.A., of TELCO S.p.A. nonvoting shares in the context of its recent capital increase. This decision also requires Telefónica S.A. to dispose of its nonvoting shares held in TELCO S.p.A..
|
2.
|
Basis of preparation and presentation of the financial statements
|
ASSETS
|
Balance sheet as of 01.01.12, disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Balance sheet as of 01.01.12., disclosed as of 12.31.13
|
|||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
2,940,342 | (50,799 | ) | 2,889,543 | ||||||||
Trade accounts receivable, net (a)
|
5,105,860 | 22,282 | 5,128,142 | |||||||||
Dividend and interest on equity
|
- | 772 | 772 | |||||||||
Taxes recoverable
|
2,495,066 | (1 | ) | 2,495,065 | ||||||||
Other assets (a)
|
1,268,850 | (22,628 | ) | 1,246,222 | ||||||||
Total current assets
|
11,810,118 | (50,374 | ) | 11,759,744 | ||||||||
Noncurrent assets
|
||||||||||||
Deferred taxes
|
1,428,878 | (1,379 | ) | 1,427,499 | ||||||||
Escrow deposits
|
3,374,690 | (200 | ) | 3,374,490 | ||||||||
Other assets
|
1,630,848 | (52,244 | ) | 1,578,604 | ||||||||
Investments
|
37,835 | 114,421 | 152,256 | |||||||||
Property, plant and equipment, net
|
17,153,920 | (7,399 | ) | 17,146,521 | ||||||||
Intangible assets, net
|
30,053,684 | (4,237 | ) | 30,049,447 | ||||||||
Total noncurrent assets
|
53,679,855 | 48,962 | 53,728,817 | |||||||||
Total assets
|
65,489,973 | (1,412 | ) | 65,488,561 | ||||||||
LIABILITIES AND EQUITY
|
Balance sheet as of 01.01.12, disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Balance sheet as of 01.01.12., disclosed as of 12.31.13
|
|||||||||
Current liabilities
|
||||||||||||
Personnel, social charges and benefits
|
495,624 | (97 | ) | 495,527 | ||||||||
Trade accounts payable
|
6,037,315 | 834 | 6,038,149 | |||||||||
Taxes, charges and contributions
|
1,691,991 | (254 | ) | 1,691,737 | ||||||||
Loans, financing and lease (b)
|
988,413 | 11,669 | 1,000,082 | |||||||||
Other liabilities (b)
|
3,526,920 | (11,716 | ) | 3,515,204 | ||||||||
Total current liabilities
|
12,740,263 | 436 | 12,740,699 | |||||||||
Noncurrent liabilities
|
Personnel, social charges and benefits (d)
|
- | 15,160 | 15,160 | |||||||||
Deferred taxes
|
788,954 | - | 788,954 | |||||||||
Loans, financing and lease (b)
|
3,959,115 | 9,398 | 3,968,513 | |||||||||
Provisions (c)
|
3,147,085 | (309,057 | ) | 2,838,028 | ||||||||
Liabilities with post-retirement benefit plans (c)
|
- | 308,893 | 308,893 | |||||||||
Other liabilities (b) (d)
|
1,523,771 | (26,242 | ) | 1,497,529 | ||||||||
Total noncurrent liabilities
|
9,418,925 | (1,848 | ) | 9,417,077 | ||||||||
Equity
|
43,330,785 | - | 43,330,785 | |||||||||
Total liabilities and equity
|
65,489,973 | (1,412 | ) | 65,488,561 |
(a)
|
Amounts recorded as other accounts receivable were reclassified from “Other assets” to “Accounts receivable, net” (Notes 11 and 6).
|
(b)
|
Finance lease amounts were reclassified from “Other obligations” to “Loans, financing and finance lease” (Notes 22 and 18.1).
|
(c)
|
Actuarial liabilities of post-employment benefit plans were reclassified from “Provisions” to a specific line “Obligations with post-employment benefit plans” (Notes 20 and 35).
|
(d)
|
Liabilities relating to share-based payment plans were reclassified from “Other obligations” to “Personnel, social charges and benefits” (Notes 22 and 15
).
|
ASSETS
|
Balance sheet disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Balance sheet as of 12.31.12., disclosed as of 12.31.13
|
|||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
7,196,079 | (62,594 | ) | 7,133,485 | ||||||||
Trade accounts receivable, net (a)
|
5,513,436 | 33,502 | 5,546,938 | |||||||||
Dividend and interest on equity
|
- | 1,140 | 1,140 | |||||||||
Taxes recoverable
|
2,052,423 | (2 | ) | 2,052,421 | ||||||||
Other assets (a)
|
1,510,004 | (34,807 | ) | 1,475,197 | ||||||||
Total current assets
|
16,271,942 | (62,761 | ) | 16,209,181 | ||||||||
Noncurrent assets
|
||||||||||||
Deferred taxes
|
1,029,598 | (1,710 | ) | 1,027,888 | ||||||||
Escrow deposits
|
3,909,474 | (206 | ) | 3,909,268 | ||||||||
Other assets
|
1,399,830 | (47,797 | ) | 1,352,033 | ||||||||
Investments
|
23,683 | 119,198 | 142,881 | |||||||||
Property, plant and equipment, net
|
17,610,851 | (6,707 | ) | 17,604,144 | ||||||||
Intangible assets, net
|
30,009,289 | (3,592 | ) | 30,005,697 | ||||||||
Total noncurrent assets
|
53,982,725 | 59,186 | 54,041,911 | |||||||||
Total assets
|
70,254,667 | (3,575 | ) | 70,251,092 |
LIABILITIES AND EQUITY
|
Balance sheet disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Balance sheet as of 12.31.12., disclosed as of 12.31.13
|
|||||||||
Current liabilities
|
||||||||||||
Personnel, social charges and benefits
|
416,355 | (103 | ) | 416,252 | ||||||||
Trade accounts payable
|
5,889,377 | (309 | ) | 5,889,068 | ||||||||
Taxes, charges and contributions
|
1,781,480 | (230 | ) | 1,781,250 | ||||||||
Loans, financing and lease (b)
|
1,255,323 | 14,799 | 1,270,122 | |||||||||
Other liabilities (b)
|
4,194,936 | (14,836 | ) | 4,180,100 | ||||||||
Total current liabilities
|
13,537,471 | (679 | ) | 13,536,792 | ||||||||
Noncurrent liabilities
|
||||||||||||
Personnel, social charges and benefits
|
- | 13,224 | 13,224 | |||||||||
Loans, financing and lease (b)
|
3,756,001 | 18,460 | 3,774,461 | |||||||||
Provisions (c)
|
3,846,899 | (393,262 | ) | 3,453,637 | ||||||||
Liabilities with post-retirement benefit plans (c)
|
- | 392,269 | 392,269 | |||||||||
Other liabilities (b) (d)
|
4,433,176 | (33,587 | ) | 4,399,589 | ||||||||
Total noncurrent liabilities
|
12,036,076 | (2,896 | ) | 12,033,180 | ||||||||
Equity
|
44,681,120 | - | 44,681,120 | |||||||||
Total liabilities and equity
|
70,254,667 | (3,575 | ) | 70,251,092 |
(a)
|
Amounts recorded as other accounts receivable were reclassified from “Other assets” to “Accounts receivable, net” (Notes 11 and 6).
|
(b)
|
Finance lease amounts were reclassified from “Other obligations” to “Loans, financing and finance lease” (Notes 22 and 18.1).
|
(c)
|
Actuarial liabilities of post-employment benefit plans were reclassified from “Provisions” to a specific line “Obligations with post-employment benefit plans” (Notes 20 and 35).
|
(d)
|
Liabilities relating to share-based payment plans were reclassified from “Other obligations” to “Personnel, social charges and benefits” (Notes 22 and 15).
|
Income statement as of 12.31.12, disclosed for 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Income statement as of 12.31.12, disclosed for 12.31.13
|
||||||||||
Net operating revenue
|
33,931,422 | (11,766 | ) | 33,919,656 | ||||||||
Cost of sales
|
(16,564,464 | ) | 7,020 | (16,557,444 | ) | |||||||
Gross profit
|
17,366,958 | (4,746 | ) | 17,362,212 | ||||||||
Selling expenses
|
(8,693,696 | ) | - | (8,693,696 | ) | |||||||
General and administrative expenses
|
(2,148,476 | ) | 3,168 | (2,145,308 | ) | |||||||
Other operating income, net
|
687,503 | 209 | 687,712 | |||||||||
Equity pickup
|
- | 588 | 588 |
Income before financial income (expenses)
|
7,212,289 | (781 | ) | 7,211,508 | ||||||||
Financial income
|
1,281,554 | (449 | ) | 1,281,105 | ||||||||
Financial expenses
|
(1,572,369 | ) | - | (1,572,369 | ) | |||||||
Income before taxes
|
6,921,474 | (1,230 | ) | 6,920,244 | ||||||||
(2,469,293 | ) | 1,230 | (2,468,063 | ) | ||||||||
Net income for the period
|
4,452,181 | - | 4,452,181 |
Income statement for 12.31.11, disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Income statement for 12.31.11, disclosed as of 12.31.13
|
||||||||||
Net operating revenue
|
29,128,740 | (12,096 | ) | 29,116,644 | ||||||||
Cost of sales
|
(15,039,663 | ) | 4,500 | (15,035,163 | ) | |||||||
Gross profit
|
14,089,077 | (7,596 | ) | 14,081,481 | ||||||||
Selling expenses
|
(6,948,211 | ) | - | (6,948,211 | ) | |||||||
General and administrative expenses
|
(1,785,658 | ) | 2,687 | (1,782,971 | ) | |||||||
Other operating income, net
|
442,158 | (667 | ) | 441,491 | ||||||||
Equity pickup
|
- | 4,305 | 4,305 | |||||||||
Income before financial income (expenses)
|
5,797,366 | (1,271 | ) | 5,796,095 | ||||||||
Financial income
|
1,103,359 | (1,303 | ) | 1,102,056 | ||||||||
Financial expenses
|
(1,243,051 | ) | - | (1,243,051 | ) | |||||||
Income before taxes
|
5,657,674 | (2,574 | ) | 5,655,100 | ||||||||
(1,295,475 | ) | 2,574 | (1,292,901 | ) | ||||||||
Net income for the period
|
4,362,199 | - | 4,362,199 |
Cash flow statement for 12.31.12, disclosed as of 12.31.12
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Cash flow statement for 12.31.12, disclosed as of 12.31.13
|
||||||||||
Income before taxes
|
6,921,474 | (1,230 | ) | 6,920,244 | ||||||||
Expenses (revenues) not representing changes in cash
|
6,139,975 | 7,947 | 6.147.922 | |||||||||
(Increase) decrease in operating assets:
|
(557,118 | ) | 317,349 | (239.769 | ) | |||||||
Increase (decrease ) in operating liabilities:
|
(2,771,162 | ) | (3,238 | ) | (2,774,400 | ) | ||||||
Total cash generated by (used in) operating activities
|
9,733,169 | 320,828 | 10,053,997 |
Cash generated by (used in) investing activities
|
(3,397,253 | ) | (323,586 | ) | (3,720,839 | ) | ||||||
Cash generated by (used in) financing activities
|
(2,080,179 | ) | (9,037 | ) | (2,089,216 | ) | ||||||
Increase (decrease) in cash and cash equivalents
|
4,255,737 | (11,795 | ) | 4,243,942 | ||||||||
Cash and cash equivalents at beginning of year
|
2,940,342 | (50,799 | ) | 2,889,543 | ||||||||
Cash and cash equivalents at end of year
|
7,196,079 | (62,594 | ) | 7,133,485 | ||||||||
Changes in cash and cash equivalents for the year
|
4,255,737 | (11,795 | ) | 4,243,942 |
Cash flow statement for 01.01.12, disclosed as of 12.31.11
|
Adjustments for
adoption of IFRS 11
and Reclassifications
|
Cash flow statement for 01.01.12, disclosed as of 12.31.13
|
||||||||||
Income before taxes
|
5,657,674 | (2,574 | ) | 5,655,100 | ||||||||
Expenses (revenues) not representing changes in cash
|
5,683,221 | (5,697 | ) | 5,677,524 | ||||||||
(Increase) decrease in operating assets:
|
(479,896 | ) | (10,464 | ) | (490,360 | ) | ||||||
Increase (decrease ) in operating liabilities:
|
(2,719,624 | ) | 5,475 | (2,714,149 | ) | |||||||
Total cash generated by (used in) operating activities
|
8,141,375 | (13,260 | ) | 8,128,115 | ||||||||
Cash generated by (used in) investing activities
|
(2,028,835 | ) | 21,726 | (2,007,109 | ) | |||||||
Cash generated by (used in) financing activities
|
(4,728,913 | ) | - | (4,728,913 | ) | |||||||
Increase (decrease) in cash and cash equivalents
|
1,383,627 | 8,466 | 1,392,093 | |||||||||
Cash and cash equivalents at beginning of year
|
1,556,715 | (59,265 | ) | 1,497,450 | ||||||||
Cash and cash equivalents at end of year
|
2,940,342 | (50,799 | ) | 2,889,543 | ||||||||
Changes in cash and cash equivalents for the year
|
1,383,627 | 8,466 | 1,392,093 |
Direct ownership interest
|
||||||
Investees
|
Investor
|
Interest held
|
Total interest held
|
|||
Wholly-owned subsidiaries
|
||||||
TData
|
Telefônica Brasil
|
100.00%
|
100.00%
|
|||
Jointly controlled entities
|
||||||
Aliança
|
Telefônica Brasil
|
50.00%
|
50.00%
|
|||
AIX
|
Telefônica Brasil
|
50.00%
|
50.00%
|
|||
ACT
|
Telefônica Brasil
|
50.00%
|
50.00%
|
Direct ownership interest
|
Indirect ownership interest
|
||||||||
Investees
|
Investor
|
Interest held
|
Investor
|
Interest held
|
Total interest held
|
||||
Wholly-owned subsidiaries
|
|||||||||
Vivo
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
TData
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
ATelecom
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
TST
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
Ajato
|
-
|
-
|
TSTV
|
100.00%
|
100.00%
|
||||
GTR-T
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
Sul Paraná
|
Telefônica Brasil
|
79.29%
|
GTR-T
|
20.71%
|
100.00%
|
||||
Lemontree
|
Telefônica Brasil
|
100.00%
|
-
|
-
|
100.00%
|
||||
CaTV
|
Telefônica Brasil
|
78.48%
|
Lemontree
|
21.52%
|
100.00%
|
||||
Jointly controlled entities
|
|||||||||
Aliança
|
Telefônica Brasil
|
50.00%
|
-
|
-
|
50.00%
|
||||
AIX
|
Telefônica Brasil
|
50.00%
|
-
|
-
|
50.00%
|
||||
ACT
|
Telefônica Brasil
|
50.00%
|
-
|
-
|
50.00%
|
3.
|
Summary of significant accounting practices
|
a)
|
Cash and cash equivalents:
|
b)
|
Accounts receivable, net:
|
c)
|
Inventories:
|
d)
|
Prepaid expenses:
|
e)
|
Investments:
|
f)
|
Fixed Assets, net:
|
g)
|
Intangible Assets, net (including goodwill at the consolidated level):
|
·
|
Intangible assets with finite life are amortized over the useful economic life using the straight-line method and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed on an annual basis. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite life is recognized in the income statement in the cost/expense category consistent with the function of the intangible assets. Intangible assets include the rights to use software acquired from third parties, authorizations and licenses granted by ANATEL, customer portfolio, trademarks and other intangible items.
|
|
·
|
Intangible assets with indefinite useful life are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Goodwill arising from investment acquisition is assessed as having an indefinite useful life.
|
h)
|
Leases
:
|
i)
|
Analysis of the recoverability of non-financial assets:
|
|
·
|
Revenue:
Revenue is projected considering the growth in customer base, the evolution of market revenue in view of GDP and the Company’s share 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, as well as with revenue growth; and
|
|
·
|
Capital investments
: Investments in capital goods are estimated considering the technological infrastructure necessary to enable the provision of services.
|
j)
|
Business combination and goodwill
|
k)
|
Financial instruments – initial recognition and subsequent measurement
|
l)
|
Derivative financial instruments and hedge accounting
|
m)
|
Far value measurement
|
n)
|
Borrowing Costs
|
o)
|
Interest on shareholder’s equity and dividends
|
p)
|
Provisions
|
q)
|
Taxes, charges and contributions
|
r)
|
Other assets and liabilities
|
s)
|
Present value adjustment of assets and liabilities
|
t)
|
Government grants and assistance
|
u)
|
Revenue recognition
|
v)
|
Financial income and expenses
|
w)
|
Post-retirement benefit plans
|
x)
|
Significant accounting judgment, estimates and assumptions
|
y)
|
Functional and reporting currency
|
z)
|
Transactions denominated in foreign currency
|
aa)
|
Employee profit sharing
|
bb)
|
Share-based payments
|
cc)
|
Treasury shares
|
dd)
|
Noncontrolling interests
|
ee)
|
Information on operating segments
|
ff)
|
Statements of cash flow
|
4.
|
Acquisition of Vivo Participações S.A.
|
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
|
31,222,630 | |||
Goodwill on operation
|
9,160,488 |
(a)
|
Includes the allocation of the fair value to licenses (R$12,876,000), to the trademark (R$1,642,000) and customer portfolio (R$2,042,000). The Company does not consider the trademark and the customers portfolio as deductible for tax purposes.
|
(b)
|
Includes the recognition of deferred income taxes on (a) and (c).
|
(c)
|
Includes the allocation of fair value attributed to the contingent liabilities for R$283,000.
|
5.
|
Cash and cash equivalents
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Cash and banks
|
101,921 | 94,304 | 76,316 | |||||||||
Short-term investments
|
6,442,015 | 7,039,181 | 2,813,227 | |||||||||
Total
|
6,543,936 | 7,133,485 | 2,889,543 |
6.
|
Trade accounts receivable, net
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Billed amounts
|
4,485,539 | 4,066,835 | 3,695,379 | |||||||||
Unbilled amounts
|
1,890,485 | 1,675,091 | 1,677,708 | |||||||||
Interconnection amounts
|
859,894 | 977,644 | 896,639 | |||||||||
Gross accounts receivable
|
7,235,918 | 6,719,570 | 6,269,726 | |||||||||
Provision for impairment
|
(1,175,973 | ) | (1,079,254 | ) | (1,056,729 | ) | ||||||
Total
|
6,059,945 | 5,640,316 | 5,212,997 | |||||||||
Current
|
5,802,859 | 5,546,938 | 5,128,142 | |||||||||
Non-current
|
257,086 | 93,378 | 84,855 |
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Falling due
|
4,398,791 | 4,331,163 | 4,125,659 | |||||||||
Overdue from 1 to 30 days
|
795,389 | 718,693 | 631,923 | |||||||||
Overdue from 31 to 60 days
|
289,783 | 215,862 | 204,775 | |||||||||
Overdue from 61 to 90 days
|
166,105 | 193,291 | 115,125 | |||||||||
Overdue from 91 to 120 days
|
62,122 | 60,669 | 49,815 | |||||||||
Overdue for more than 120 days
|
347,755 | 120,638 | 85,700 | |||||||||
Total
|
6,059,945 | 5,640,316 | 5,212,997 |
Balance at January 01, 2012
|
(1,056,729 | ) | ||
Additions, net (Note 26)
|
(654,273 | ) | ||
Write-offs
|
631,748 | |||
Balance at December 31, 2012
|
(1.079.254 | ) | ||
Additions, net (Note 26)
|
(741,274 | ) | ||
Write-offs
|
644,555 | |||
Merger/split as of July 1, 2013
|
- | |||
Balance at December 31, 2013
|
(1,175,973 | ) |
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Present value of receivables
|
335,376 | 294,245 | 261,933 | |||||||||
Unrealized financial income
|
7,058 | 7,757 | 8,941 | |||||||||
Gross accounts receivable
|
342,434 | 302,002 | 270,874 | |||||||||
Provision for impairment
|
(99,791 | ) | (86,648 | ) | (69,375 | ) | ||||||
Net accounts receivable
|
242,643 | 215,354 | 201,499 | |||||||||
Current
|
146,035 | 121,976 | 116,644 | |||||||||
Noncurrent
|
96,608 | 93,378 | 84,855 |
Year
|
Trade Accounts Receivable, Gross
|
Present
Value
|
||||||
Falling due up to one year
|
238,768 | 238,768 | ||||||
Falling due up to five years
|
103,666 | 96,608 | ||||||
Total
|
342,434 | 335,376 |
7.
|
Inventories
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Consumer materials
|
58,492 | 59,417 | 94,547 | |||||||||
Materials for resale (a)
|
498,803 | 380,163 | 435,032 | |||||||||
Other inventory items
|
6,481 | 4,005 | 6,468 | |||||||||
Total gross
|
563,776 | 443,585 | 536,047 | |||||||||
Provision for impairment and obsolescence
|
(58,161 | ) | (55,776 | ) | (64,326 | ) | ||||||
Total current
|
505,615 | 387,809 | 471,721 |
(a)
|
This includes, among others, mobile telephones, simcards (chip) and IT equipment in stock.
|
Balance at January 1, 2012
|
(64,326 | ) | ||
Additions
|
(35,972 | ) | ||
Reversals
|
44,522 | |||
Balance at December 31, 2012
|
(55,776 | ) | ||
Additions
|
(29,247 | ) | ||
Reversals
|
26,862 | |||
Merger/split as of July 1, 2013
|
- | |||
Balance at December 31, 2013
|
(58,161 | ) |
8.
|
Deferred taxes and taxes recoverable
|
8.1
|
Taxes recoverable
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
ICMS (a)
|
1,556,452 | 1,631,088 | 1,665,896 | |||||||||
ICMS agreement No. 39/CAT Admin Ruling No.06 (b)
|
355,251 | 288,520 | 307,832 | |||||||||
Income and social contribution taxes (c)
|
377,704 | 528,109 | 1,143,987 |
Taxes withheld at source (d)
|
188,659 | 141,620 | 152,919 | |||||||||
PIS and COFINS
|
63,816 | 148,092 | 210,950 | |||||||||
Other
|
18,468 | 53,957 | 28,440 | |||||||||
Total
|
2,560,350 | 2,791,386 | 3,510,024 | |||||||||
Current
|
2,191,962 | 2,052,421 | 2,495,065 | |||||||||
Non-current
|
368,388 | 738,965 | 1,014,959 |
8.2
|
Deferred taxes
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Deferred Assets
|
||||||||||||
Income and social contribution tax losses (a)
|
262,915 | 21,290 | 348,576 | |||||||||
Merged tax credit (b)
|
- | 9,461 | 46,962 | |||||||||
Income and social contribution taxes on temporary differences (c)
|
||||||||||||
Provisions for labor, tax and civil contingencies
|
1,327,288 | 1,104,065 | 950,988 | |||||||||
Post-employment retirement plans
|
143,537 | 133,371 | 104,856 | |||||||||
Provision for impairment - accounts receivable
|
245,556 | 169,434 | 178,433 | |||||||||
Provision for modem and other PP&E item losses
|
166,174 | 210,107 | 137,829 | |||||||||
Profit sharing
|
71,948 | 62,218 | 82,564 | |||||||||
Accelerated accounting depreciation
|
154,181 | 421,768 | 433,512 | |||||||||
Provision for impairment – inventories
|
12,885 | 13,951 | 17,542 | |||||||||
Provision for customer loyalty program
|
31,199 | 28,168 | 23,399 | |||||||||
Derivative transactions
|
- | 42,922 | 69,387 | |||||||||
Trade accounts payable and other provisions
|
398,956 | 290,199 | 354,916 | |||||||||
Income and social contribution taxes on other temporary differences
|
157,313 | 134,460 | 109,285 | |||||||||
Total deferred tax assets
|
2,971,952 | 2,641,414 | 2,858,249 |
Deferred tax liabilities
|
||||||||||||
Merged tax credit (b)
|
(337,535 | ) | (269,514 | ) | (207,668 | ) | ||||||
Income and social contribution taxes on temporary differences (c)
|
||||||||||||
Technology Innovation Law
|
(308,490 | ) | (416,700 | ) | (333,156 | ) | ||||||
Exchange variation
|
- | (3,383 | ) | (14,742 | ) | |||||||
Customer portfolio
|
(461,870 | ) | (546,383 | ) | (630,896 | ) | ||||||
Trademarks and patents
|
(479,548 | ) | (508,178 | ) | (536,808 | ) | ||||||
Licenses
|
(719,780 | ) | (399,878 | ) | (79,976 | ) | ||||||
Effects of goodwill generated upon merger of Vivo Part.
|
(568,338 | ) | (344,927 | ) | (258,695 | ) | ||||||
Vivo Part. Goodwill
|
(480,366 | ) | (266,870 | ) | (53,374 | ) | ||||||
Income and social contribution taxes on other temporary differences
|
(128,365 | ) | (74,344 | ) | (104,389 | ) | ||||||
Total deferred tax liabilities
|
(3,484,292 | ) | (2,830,177 | ) | (2,219,704 | ) | ||||||
Total noncurrent assets (liabilities), net
|
(512,340 | ) | (188,763 | ) | 638,545 | |||||||
Deferred tax assets (liabilities), net
|
||||||||||||
Represented in the balance sheet is as follows:
|
||||||||||||
Noncurrent deferred tax assets, net
|
210,294 | 1,027,888 | 1,427,499 | |||||||||
Noncurrent deferred tax liabilities, net
|
(722,634 | ) | (1,216,651 | ) | (788,954 | ) |
|
a)
|
Income and social contribution tax losses:
this represents the amount recorded by the Company and its subsidiary which, in accordance with Brazilian tax legislation, may be offset to the limit of 30% of the tax bases computed for the following years, with no expiry date.
|
Income tax
|
Social contribution tax
|
Total
|
||||||||||
Income and social contribution tax losses at January 1, 2012
|
1,745,928 | 1,705,050 | 3,450,978 | |||||||||
Tax credit (25% + 9%)
|
436,482 | 153,455 | 589,937 | |||||||||
Tax credit recognized
|
259,011 | 89,565 | 348,576 | |||||||||
Unrecognized tax credit (*)
|
177,471 | 63,890 | 241,361 | |||||||||
Income and social contribution tax losses at December 31, 2012 (restated)
|
930,409 | 997,434 | 1,927,843 | |||||||||
Tax credit (25% + 9%)
|
232,602 | 89,769 | 322,371 | |||||||||
Tax credit recognized
|
12,066 | 9,224 | 21,290 | |||||||||
Unrecognized tax credit (*)
|
220,536 | 80,545 | 301,081 | |||||||||
Income and social contribution tax losses at December 31, 2013
|
672,523 | 1,053,155 | 1,725,678 | |||||||||
Tax credit (25% + 9%)
|
168,131 | 94,784 | 262,915 | |||||||||
Tax credit recognized
|
168,131 | 94,784 | 262,915 |
|
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 taxes on temporary differences:
amounts will be realized upon payment of provisions, effective impairment or trade receivables, or realization of inventories, as well as upon reversal of other provisions.
|
Deferred tax assets
|
Tax losses
|
Deferred tax assets
|
Total
|
|||||||||
Balance at January 01, 2012 (Restated)
|
348,576 | 2,509,673 | 2,858,249 | |||||||||
Provision
|
154,657 | 375,739 | 530,396 | |||||||||
Provision reversal
|
(481,943 | ) | (265,288 | ) | (747,231 | ) | ||||||
Balance at December 31, 2012 - Restated
|
21,290 | 2,620,124 | 2,641,414 | |||||||||
Provision
|
241,625 | 458,376 | 700,001 | |||||||||
Provision reversal
|
- | (368,537 | ) | (368,537 | ) | |||||||
Comprehensive income
|
- | (926 | ) | (926 | ) | |||||||
Merger/split as of July 1, 2013
|
- | - | - | |||||||||
Balance at December 31, 2013
|
262,915 | 2,709,037 | 2,971,952 |
Deferred tax liabilities
|
||||
Balance at January 01, 2012 (Restated)
|
(2,219,704 | ) | ||
Provision
|
(747,326 | ) | ||
Provision reversal
|
123,537 | |||
Other changes that did not flow through P&L
|
(8,071 | ) | ||
Comprehensive income
|
21,387 | |||
Balance at December 31, 2012 - Restated
|
(2,830,177 | ) | ||
Provision
|
(884,798 | ) | ||
Provision reversal
|
223,810 | |||
Other changes that did not flow through P&L
|
6,873 | |||
Merger/split as of July 1, 2013
|
- | |||
Balance at December 31, 2013
|
(3,484,292 | ) |
12.31.13 |
12.31.12 - Restated
|
|||||||
Non-realized losses on available for sale investment
|
4,578 | 1,882 | ||||||
Actuarial losses and effect of the asset ceiling on plan surplus
|
(7,348 | ) | 23,726 | |||||
Gain (losses) on derivative operations
|
1,844 | (4,221 | ) | |||||
Total
|
(926 | ) | 21,387 |
2014
|
2015
|
2016
|
2017
|
2018
|
2019 onwards
|
Total
|
||||||
(635,572)
|
(113,087)
|
(39,151)
|
(71,645)
|
(80,702)
|
427,817
|
(512,340)
|
9.
|
Escrow deposits
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Judicial deposits
|
||||||||||||
Labor
|
1,036,055 | 933,866 | 789,705 | |||||||||
Tax
|
2,364,913 | 2,182,513 | 1,938,270 | |||||||||
Civil and regulatory
|
853,980 | 866,668 | 715,285 | |||||||||
Total
|
4,254,948 | 3,983,047 | 3,443,260 | |||||||||
Garnishments
|
97,572 | 52,846 | 47,651 | |||||||||
Total
|
4,352,520 | 4,035,893 | 3,490,911 | |||||||||
Current
|
204,165 | 126,625 | 116,421 | |||||||||
Noncurrent
|
4,148,355 | 3,909,268 | 3,374,490 |
·
|
Federal contribution taxes on gross revenue for Social Integration Program (PIS) and 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
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Advertising and publicity
|
167,873 | 173,688 | 172,401 | |||||||||
Rent
|
35,168 | 51,207 | 43,744 | |||||||||
Insurance
|
29,733 | 14,250 | 11,984 | |||||||||
Financial charges
|
11,568 | 7,152 | 8,743 | |||||||||
Software maintenance, taxes and other
|
38,308 | 33,436 | 50,322 | |||||||||
Total
|
282,650 | 279,733 | 287,194 | |||||||||
Current
|
257,286 | 248,337 | 255,056 | |||||||||
Non-current
|
25,364 | 31,396 | 32,138 |
11.
|
Other assets
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Advances to employees and suppliers
|
64,991 | 97,152 | 73,646 | |||||||||
Related-party receivables
|
97,748 | 58,151 | 60,499 | |||||||||
Subsidy on handset sales
|
55,716 | 53,756 | 53,408 | |||||||||
Receivables from suppliers (a)
|
139,563 | 479,283 | 217,255 | |||||||||
Pension plan surplus
|
17,909 | 48,048 | 31,210 | |||||||||
Other realizable assets
|
92,037 | 27,235 | 61,215 | |||||||||
Total
|
467,964 | 763,625 | 497,233 | |||||||||
Current
|
340,171 | 671,317 | 401,184 | |||||||||
Noncurrent
|
127,793 | 92,308 | 96,049 |
(a)
|
At December 31, 2013, the consolidated amounts include R$362,774 referring to the disposal of nonstrategic transmission towers, received in 2013.
|
12.
|
Investments
|
a)
|
Information on investees – Jointly-controlled entities
|
At December 31, 2013
|
At December 31, 2012
|
At January 01, 2012
|
||||||||||||||||||||||||||||||||||
Cia ACT
|
Cia AIX
|
Aliança Atlântica
|
Cia ACT
|
Cia AIX
|
Aliança Atlântica
|
Cia ACT
|
Cia AIX
|
Aliança Atlântica
|
||||||||||||||||||||||||||||
Current assets
|
11 | 10,515 | 139,414 | 10 | 13,414 | 116,322 | 8 | 7,002 | 99,330 | |||||||||||||||||||||||||||
Noncurrent assets
|
- | 12,441 | - | - | 120,024 | - | - | 130,922 | 4,756 | |||||||||||||||||||||||||||
Current liabilities
|
1 | 2,950 | 2,200 | - | 3,280 | 2,302 | 2 | 4,676 | 20 | |||||||||||||||||||||||||||
Noncurrent liabilities
|
- | 6,076 | - | - | 5,792 | - | - | 3,698 | - | |||||||||||||||||||||||||||
Equity
|
10 | 13,930 | 137,214 | 10 | 124,366 | 114,020 | 6 | 129,550 | 104,066 | |||||||||||||||||||||||||||
Net income (loss)
for the year
|
- | (110,436 | ) | 136 | 4 | (550 | ) | 1,722 | (6 | ) | 6,502 | 2,114 |
b)
|
Changes in investments
|
Balances at December 31, 2012 - Restated
|
Additions
|
Equity pickup
|
Dividend and interest on equity declared and approved
|
Other comprehensive income
|
Merger / split as of July 1, 2013
|
Balances at December 31, 2013
|
||||||||||||||||||||||
Jointly controlled entities -Equity investments
|
119,198 | - | (55,150 | ) | - | 11,529 | - | 75,577 | ||||||||||||||||||||
Aliança
|
57,010 | - | 68 | - | 11,529 | - | 68,607 | |||||||||||||||||||||
AIX
|
62,183 | - | (55,218 | ) | - | - | - | 6,965 | ||||||||||||||||||||
ACT
|
5 | - | - | - | - | - | 5 | |||||||||||||||||||||
Other investments
|
23,683 | (148 | ) | - | - | (13,465 | ) | 702 | 10,772 | |||||||||||||||||||
Other investments (a)
|
23,683 | (148 | ) | - | - | (13,465 | ) | 702 | 10,772 | |||||||||||||||||||
Total investments in consolidated
|
142,881 | (148 | ) | (55,150 | ) | - | (1,936 | ) | 702 | 86,349 |
Balances at January 1, 2012
Restated
|
Additions
|
Equity pickup
|
Dividend and interest on equity declared and approved
|
Other comprehensive income
|
Residual value write-off
|
Balances at December 31, 2012 -
Restated
|
||||||||||||||||||||||
Jointly controlled entities -Equity investments
|
116,801 | - | 588 | (3,457 | ) | 5,266 | - | 119,198 | ||||||||||||||||||||
Aliança
|
52,023 | - | 861 | (1,140 | ) | 5,266 | - | 57,010 | ||||||||||||||||||||
AIX
|
64,775 | - | (275 | ) | (2,317 | ) | - | - | 62,183 | |||||||||||||||||||
ACT
|
3 | - | 2 | - | - | - | 5 | |||||||||||||||||||||
Other investments
|
34,455 | - | - | - | (5,068 | ) | (6,704 | ) | 23,683 | |||||||||||||||||||
Zon Multimédia – Direct investment (b)
|
6,737 | - | (33 | ) | (6,704 | ) | - | |||||||||||||||||||||
Other investments (a)
|
28,718 | - | - | - | (5,035 | ) | - | 23,683 | ||||||||||||||||||||
Total investments in consolidated
|
152,256 | - | 588 | (3,457 | ) | 198 | (6,704 | ) | 142,881 |
(a)
|
Other investments are stated at fair value.
|
(b)
|
On May 8, 2012, the Company sold its equity interest held in ZON (Note 2.2).
|
13.
|
Property, plant and equipment, net
|
At December 31, 2013:
|
||||||||||||
PP&E Cost
|
Accumulated depreciation
|
Net balance
|
||||||||||
Switching equipment
|
16,551,351 | (14,186,061 | ) | 2,365,290 | ||||||||
Transmission equipment and media
|
34,247,236 | (25,814,693 | ) | 8,432,543 | ||||||||
Terminal equipment/modems
|
10,763,473 | (9,295,416 | ) | 1,468,057 | ||||||||
Infrastructure
|
12,959,925 | (9,491,430 | ) | 3,468,495 | ||||||||
Land
|
314,558 | - | 314,558 | |||||||||
Other
|
3,277,142 | (2,682,185 | ) | 594,957 | ||||||||
Provision for loss
|
(169,979 | ) | - | (169,979 | ) | |||||||
Fixed assets in progress
|
1,967,726 | - | 1,967,726 | |||||||||
Total
|
79,911,432 | (61,469,785 | ) | 18,441,647 | ||||||||
At December 31, 2012 (Restated)
|
||||||||||||
PP&E Cost
|
Accumulated depreciation
|
Net balance
|
||||||||||
Switching equipment
|
15,517,041 | (13,271,794 | ) | 2,245,247 | ||||||||
Transmission equipment and media
|
31,809,734 | (24,528,539 | ) | 7,281,195 | ||||||||
Terminal equipment/modems
|
9,883,913 | (8,334,571 | ) | 1,549,342 | ||||||||
Infrastructure
|
12,756,034 | (8,911,756 | ) | 3,844,278 | ||||||||
Land
|
316,673 | - | 316,673 | |||||||||
Other
|
3,919,579 | (2,988,254 | ) | 931,325 | ||||||||
Provision for loss
|
(40,286 | ) | - | (40,286 | ) | |||||||
Fixed assets in progress
|
1,476,370 | - | 1,476,370 | |||||||||
Total
|
75,639,058 | (58,034,914 | ) | 17,604,144 |
Balance at December 31, 2012 - Restated
|
Additions
|
Write-offs, net
|
Transfers, net
|
Depreciation (d)
|
Balance at December 31 2013
|
|||||||||||||||||||
Switching equipment
|
2,245,247 | 30,948 | (101 | ) | 639,577 | (550,381 | ) | 2,365,290 | ||||||||||||||||
Transmission equipment and media
|
7,281,195 | 514,314 | (18,438 | ) | 2,100,099 | (1,444,627 | ) | 8,432,543 | ||||||||||||||||
Terminal equipment/modems
|
1,549,342 | 524,785 | (920 | ) | 346,474 | (951,624 | ) | 1,468,057 | ||||||||||||||||
Infrastructure
|
3,844,278 | 96,103 | (24,883 | ) | 261,168 | (708,171 | ) | 3,468,495 | ||||||||||||||||
Land
|
316,673 | - | (2,115 | ) | - | - | 314,558 | |||||||||||||||||
Other
|
931,325 | 70,673 | (2,531 | ) | (244,040 | ) | (160,470 | ) | 594,957 | |||||||||||||||
Provision for loss (b)
|
(40,286 | ) | (5,492 | ) | 9,560 | (133,761 | ) | - | (169,979 | ) | ||||||||||||||
Fixed assets in progress
|
1,476,370 | 3,600,201 | (10,025 | ) | (3,098,820 | ) | - | 1,967,726 | ||||||||||||||||
Total
|
17,604,144 | 4,831,532 | (49,453 | ) | (129,303 | ) | (3,815,273 | ) | 18,441,647 |
Balance at January 1, 2012-
Restated
|
Additions
|
Write-offs, net (a)
|
Transfers, net (c)
|
Depreciation (d)
|
Balance at December 31, 2012 - Restated
|
|||||||||||||||||||
Switching equipment
|
1,951,085 | 59,238 | (13,686 | ) | 706,768 | (458,158 | ) | 2,245,247 | ||||||||||||||||
Transmission equipment and media
|
6,934,793 | 518,332 | (41,124 | ) | 1,107,907 | (1,238,713 | ) | 7,281,195 | ||||||||||||||||
Terminal equipment/modems
|
1,547,030 | 1,084,718 | (5,230 | ) | (13,551 | ) | (1,063,625 | ) | 1,549,342 | |||||||||||||||
Infrastructure
|
4,232,294 | 41,601 | (103,592 | ) | 392,099 | (718,124 | ) | 3,844,278 | ||||||||||||||||
Land
|
320,302 | - | (3,629 | ) | - | - | 316,673 | |||||||||||||||||
Other
|
855,593 | 217,069 | (4,036 | ) | 59,586 | (196,887 | ) | 931,325 | ||||||||||||||||
Provision for loss (b)
|
(23,435 | ) | (2,025 | ) | 3,555 | (18,381 | ) | - | (40,286 | ) | ||||||||||||||
Fixed assets in progress
|
1,328,859 | 2,419,208 | (14,834 | ) | (2,256,863 | ) | - | 1,476,370 | ||||||||||||||||
Total
|
17,146.521 | 4,338,141 | (182,576 | ) | (22,435 | ) | (3,675,507 | ) | 17,604,144 |
(a)
|
The consolidated amounts of net write-offs in 2012 include R$138,812, regarding the sale of non-strategic towers and rooftops.
|
(b)
|
Company and subsidiary recognized a provision for potential obsolescence of materials used in PP&E maintenance, based on levels of historical use and expected future use.
|
(c)
|
The balances remaining from transfers in 2012 include R$18,773 consisting of residual values of sales of towers and rooftops pending transfer of risk and property, which will be recognized as net write-offs upon recognition of the related revenues.
|
(d)
|
Additions of depreciation costs and expenses are presented in “Depreciation and Amortization” in Notes 25, 26 and 27.
|
Switching equipment
|
10.00 to 33.33
|
|||
Transmission equipment and media
|
5.00 to 20.00
|
|||
Terminal equipment/modem
s
|
10.00 to 66.67
|
|||
Infrastructure
|
4.00 to 66.67
|
|||
Other
|
10.00 to 20.00
|
14.
|
Intangible assets, net
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Goodwill
|
10,225,280 | 10,225,280 | 10,225,280 | |||||||||
Other intangibles assets
|
19,277,779 | 19,780,417 | 19,824,167 | |||||||||
Total
|
29,503,059 | 30,005,697 | 30,049,447 |
Ajato Telecomunicações Ltda.
|
149 | |||
Goodwill Spanish and Figueira (merged in TDBH) (a)
|
212,058 | |||
Santo Genovese Participações Ltda. (b)
|
71,892 | |||
Telefônica Televisão Participações S.A. (c)
|
780,693 | |||
Vivo Participações S.A. (d)
|
9,160,488 | |||
Total
|
10,225,280 |
(a)
|
Goodwill from partial spin-off of Spanish e Figueira, which was transferred to the Company upon merger with Telefonica Data Brasil Holding S.A. (TDBH) in 2006.
|
(b)
|
Goodwill generated upon acquisition of equity control of Santo Genovese Participações (parent company of Atrium Telecomunicações Ltda.), in 2004.
|
(c)
|
Goodwill generated upon acquisition of TTP (formerly Navytree) merged in 2008, economically based on a future profitability study.
|
(d)
|
Goodwill generated upon acquisition/merge of Vivo Part. Upon merger in 2011.
|
Cost of intangible assets
|
Accumulated amortization
|
Net balance
|
||||||||||
Software
|
10,494,388 | (8,506,754 | ) | 1,987,634 | ||||||||
Customer portfolio
|
1,990,278 | (631,836 | ) | 1,358,442 | ||||||||
Trademarks and patents
|
1,601,433 | (190,980 | ) | 1,410,453 | ||||||||
Licenses
|
17,238,795 | (2,764,229 | ) | 14,474,566 | ||||||||
Other
|
152,026 | (151,690 | ) | 336 | ||||||||
Software in progress
|
46,348 | - | 46,348 | |||||||||
Total
|
31,523,268 | (12,245,489 | ) | 19,277,779 |
Cost of intangible assets
|
Accumulated amortization
|
Net balance
|
||||||||||
Software
|
10,064,993 | (8,157,989 | ) | 1,907,004 | ||||||||
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
|
159,855 | (150,978 | ) | 8,877 | ||||||||
Software in progress
|
51,042 | - | 51,042 | |||||||||
Total
|
31,021,509 | (11,241,092 | ) | 19,780,417 |
Balance at December 31, 2012 - Restated
|
Additions
|
Write-offs, net
|
Transfers, net (a)
|
Amortization (c)
|
Balance at December 31, 2013
|
|||||||||||||||||||
Software
|
1,907,004 | 377,711 | (127 | ) | 466,175 | (763,129 | ) | 1,987,634 | ||||||||||||||||
Customer portfolio
|
1,607,009 | - | - | - | (248,567 | ) | 1,358,442 | |||||||||||||||||
Trademarks and patents
|
1,494,641 | - | - | - | (84,188 | ) | 1,410,453 | |||||||||||||||||
Licenses
|
14,711,844 | 483,249 | - | - | (720,527 | ) | 14,474,566 | |||||||||||||||||
Other
|
8,877 | - | - | 3,085 | (11,626 | ) | 336 | |||||||||||||||||
Software in progress
|
51,042 | 335,263 | - | (339,957 | ) | - | 46,348 | |||||||||||||||||
Total
|
19,780,417 | 1,196,223 | (127 | ) | 129,303 | (1,828,037 | ) | 19,277,779 |
Balance at January 1, 2012- Restated
|
Additions
|
Write-offs, net
|
Transfers, net (a)
|
Amortization (b)
|
Balance at December 31, 2012 - Restated
|
|||||||||||||||||||
Software
|
1,872,472 | 498,774 | (18 | ) | 313,237 | (777,461 | ) | 1,907,004 | ||||||||||||||||
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 | |||||||||||||||||
Other
|
16,598 | 14 | - | (7,291 | ) | (444 | ) | 8,877 | ||||||||||||||||
Software in progress
|
133,439 | 227,572 | - | (309,969 | ) | - | 51,042 | |||||||||||||||||
Total
|
19,824,167 | 1,776,560 | (18 | ) | (4,023 | ) | (1,816,269 | ) | 19,780,417 |
(a)
|
Remaining consolidated balances in transfers for 2012 refers to a transfer from Goodwill to prepaid expenses in R$7,685 and R$3,662 from PP&E.
|
(b)
|
Additions of amortization costs and expenses are stated under “Depreciation and amortization” in Notes 25, 26 and 27.
|
Software
|
20.00 to 33.33
|
|||
Customer portfolio
|
9.00 to 15.00
|
|||
Trademarks and patents
|
5.00 | |||
Licenses
|
3.60 to 20.00
|
|||
Other
|
10.00 to 20.00
|
15.
|
Personnel, social charges and benefits liabilities
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Salaries and wages
|
21,124 | 38,640 | 40,651 | |||||||||
Social charges and benefits
|
228,099 | 204,675 | 223,262 | |||||||||
Profit sharing
|
182,180 | 172,937 | 214,983 | |||||||||
Share-based payment plans (a)
|
18,698 | 13,224 | 15,160 | |||||||||
Other
|
- | - | 16,631 | |||||||||
Total
|
450,101 | 429,476 | 510,687 | |||||||||
Current
|
431,403 | 416,252 | 495,527 | |||||||||
Noncurrent
|
18,698 | 13,224 | 15,160 | |||||||||
(a)
|
Noncurrent portion refers to share-based payment plans, Note 34.
|
16.
|
Trade accounts payable
|
Consolidated
|
||||||||||||
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Sundry suppliers
|
6.328,081 | 5,205,202 | 5,378,066 | |||||||||
Amounts to be passed on
|
160,552 | 151,809 | 146,437 | |||||||||
Interconnection / networking
|
425,376 | 532,057 | 513,646 | |||||||||
Total
|
6,914,009 | 5,889,068 | 6,038,149 |
17.
|
Taxes, charge and contributions
|
12.31.13 |
12.31.12 - Restated
|
01.01.12- Restated
|
||||||||||
Income taxes
|
22,893 | 243,399 | 129,452 | |||||||||
Income and social contribution taxes payable (a)
|
22,893 | 243,399 | 129,452 | |||||||||
Indirect taxes
|
1,367,345 | 2,026,600 | 1,995,356 | |||||||||
ICMS (b)
|
992,813 | 1,534,750 | 1,585,884 | |||||||||
PIS and COFINS
|
235,573 | 362,911 | 319,885 | |||||||||
Fust and Funttel
|
35,982 | 34,853 | 38,306 | |||||||||
ISS, CIDE and other
|
102,977 | 94,086 | 51,281 | |||||||||
Total
|
1,390,238 | 2,269,999 | 2,124,808 | |||||||||
Current
|
1,315,164 | 1,781,250 | 1,691,737 | |||||||||
Noncurrent
|
75,074 | 488,749 | 433,071 |
(a)
|
Income and social contribution taxes payable are stated net of payments based on estimates.
|
(b)
|
At December 31, 2012, the noncurrent portion includes R$437,295, referring to ICMS - Programa Paraná Mais Emprego, resulting from an agreement with the Paraná State Government, involving deferral of ICMS. This agreement establishes that ICMS shall be paid on the 49
th
month subsequent to that in which ICMS is computed. This amount is restated based on the Annual Restatement Factor (FCA). In December 2013, the Company settled up this liability with the Paraná State Government for amounts up to September 2013.
|
18.
|
Loans, Financing, Lease and Debentures
|
18.1
|
Loans, financing and finance lease
|
Information at December 31, 2013
|
|||||||||||||
Currency
|
Annual interest rate
|
Maturity
|
12.31.13
|
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||
Financing – BNDES
|
URTJLP (a)
|
TJLP+ 0% to 9%
|
06/15/20
|
2,441,897
|
2,911,854
|
3,063,238
|
|||||||
Financing – BNDES
|
UMBND (b)
|
ECM (c) + 2.38%
|
07/15/19
|
505,525
|
455,296
|
194,276
|
|||||||
Financing – BNDES
|
R$
|
2.5% to 8.7%
|
01/15/21
|
171,683
|
173,793
|
155,011
|
|||||||
Loan – Mediocrédito
|
US$
|
1.75%
|
02/02/14
|
3,547
|
9,310
|
14,027
|
|||||||
Loan – Resolution No. 4131
|
US$
|
-
|
326,263
|
282,205
|
|||||||||
Loans – BEI
|
US$
|
4.18% to 4.47%
|
03/02/15
|
885,176
|
795,601
|
707,975
|
|||||||
Financing – BNB
|
R$
|
10.00%
|
10/30/16
|
224,958
|
338,610
|
438,279
|
|||||||
BBVA commission
|
0.43%
|
02/28/15
|
276
|
241
|
221
|
||||||||
Financing - Leasing
|
R$
|
-
|
356
|
726
|
|||||||||
Finance lease
|
R$
|
08/31/33
|
218,878
|
33,259
|
21,067
|
||||||||
Working Capital
|
R$
|
-
|
-
|
91,570
|
|||||||||
Total
|
4,451,940
|
5,044,583
|
4,968,595
|
||||||||||
Current
|
1,236,784
|
1,270,122
|
1,000,082
|
||||||||||
Noncurrent
|
3,215,156
|
3,774,461
|
3,968,513
|
(a)
|
Long-term interest reference unit (URTJLP) used by the Brazilian Development Bank (BNDES) as the contractual currency in financing agreements.
|
(b)
|
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.
|
(c)
|
The Currency Basket Charge (ECM) is a rate quarterly disclosed by BNDES.
|
·
|
In October 2007, a credit facility was approved for the Company to finance investment in products produced domestically. All of these funds have been withdrawn and investment thereof are proven and accepted by BNDES.
|
·
|
In August 2007, Vivo (which was merged into the Company as of July 1, 2013) took out a R$1,530,459 financing facility from BNDES. Funds were released for the purpose of financing investment projects for implementation and expansion of the wireless capacity all over Brazil. Loans were released in installments 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 October 14, 2011, a R$3,031,110 credit facility was taken out from BNDES, which was adjusted to R$2,152,098 in 2013 in view of new negotiations of credit lines and products with the bank. These funds are used in investments for expansion and improvement of the current network, implementation of the infrastructure required for new technologies, from 2011 to 2013, and construction of a data center in Tamboré (São Paulo State) and social projects.
|
·
|
In January 2010, a R$319,927 financing facility to Vivo (which was merged into the Company as of July 1, 2013) was approved by BNDES through its Investment Maintenance Program (BNDES PSI). Funds borrowed are used to improve the network capacity through acquisition of domestic equipment previously registered with BNDES (subject to Finame), and released as the investments made are proved. Through December 31, 2012, the amount of R$184,489 was released and the remaining balance of R$135,438 was canceled.
|
·
|
With the merger process as of July 1, 2013, Vivo (the Company since July 1, 2013) became accountable for the financing agreements which belonged to former Vivo Part., whose balance amounted to R$23,234 as of December 31, 2013 (R$26,825 at December 31, 2012).
|
·
|
In November 2010 and in March 2011, BNDES approved credit facilities amounting to R$ 41,95 for CaTV and Sul Paraná (which were merged into TST as of July 1, 2013 and subsequently merged into the Company). On December 28, 2012, a R$9,493 financing line was approved by BNDES, repayable within 36 months, with six-month grace period for principal, fully released as the investments made are proved. Through December 31, 2013, R$ 51,443 (R$ 41,950 at December 31, 2012) had been released. These transactions also fall within the scope of IAS 20/CPC 7 because the interest rate is lower than the observable market rates (fixed interest rates varying from 2.5% to 5.5% p.a.), and government grants by BNDES, adjusted to present value, resulted – as of December 31, 2013 – in the amount of R$1,858 (R$2,404 at December 31, 2012).
|
·
|
In December 2010, BNDES, through its Investment Maintenance Program (BNDES PSI), approved a R$5,417 financing facility for the Company. At December 31, 2013, this balance amounted to R$1,720 (R$1,946 at December 31, 2012). This transaction also falls within the scope of IAS 20/CPC 7 because its interest rate is lower than the observable market rate (fixed interest rate of 5.5% p.a.), and the BNDES grant, adjusted to present value, resulted – as of December 31, 2013 – in the amount of R$287 (R$331 at December 31, 2012).
|
·
|
On December 28, 2012, R$21,783 and R$331,698 financing facilities were approved for the Company and Vivo (which was merged into the Company as of July 1, 2013), respectively, by BNDES, at the rate of 2.5% p.a., for 60 months, with
|
·
|
On August 1, 2013, financing facilities totaling R$4,030 were approved for the Company by BNDES, at annual interest rate of 3.5%, for 60 months, with a 24-month grace period for principal, and released as the investments made are proved. Through December 31, 2013, R$4,030 had been released.
|
·
|
On January 29, 2007, a credit facility amounting to R$ 247,240 was taken out with BNB. 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 to be repaid in 96 installments, after a two-year grace period.
|
·
|
On October 30, 2008, a credit facility amounting to R$ 389,000 was taken out with BNB. 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 to be repaid in 96 installments, after a two-year grace period.
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Present value of payables
|
646,159 | 51,025 | 23,920 | |||||||||
Unrealized financial expenses
|
(427,281 | ) | (17,766 | ) | (2,853 | ) | ||||||
Present value of minimum payments payable
|
218,878 | 33,259 | 21,067 | |||||||||
Current
|
19,342 | 14,799 | 11,669 | |||||||||
Noncurrent
|
199,536 | 18,460 | 9,398 |
Gross investment
|
Present value
|
|||||||
Up to one year
|
23,254 | 19,342 | ||||||
From one to five years
|
93,434 | 66,143 | ||||||
More than five years
|
529,471 | 133,393 | ||||||
Total
|
646,159 | 218,878 |
18.2
|
Debentures
|
Currency
|
Charges
|
Maturity
|
12.31.13
|
12.31.12 - Restated
|
01.01.12
Restated
|
|||||||
Debentures (4th issue) – 1st and 2nd series
|
R$
|
106.00% to 106.8% of CDI
|
10/15/15
|
748,233
|
744,678
|
346,470
|
||||||
Debentures (4th issue) – 3rd series
|
R$
|
IPCA+7.00%
|
10/15/14
|
95,351
|
96,249
|
756,617
|
||||||
Debentures (1st issue) – Telemig
|
R$
|
IPCA+0.50%
|
07/05/21
|
76,722
|
72,137
|
87,390
|
||||||
Debentures (3rd issue)
|
R$
|
100.00% of CDI + 0.75%
|
09/10/17
|
2,060,444
|
2,044,674
|
67,935
|
||||||
Debentures (4th issue)
|
R$
|
100.00% of CDI + 0.68%
|
04/25/18
|
1,322,900
|
-
|
-
|
||||||
Issue cost
|
R$
|
(2,035)
|
(1,833)
|
(1,981)
|
||||||||
Total
|
4,301,615
|
2,955,905
|
1,256,431
|
|||||||||
Current
|
286,929
|
702,215
|
468,624
|
|||||||||
Noncurrent
|
4,014,686
|
2,253,690
|
787,807
|
18.3
|
Payment Schedule
|
Year
|
||||
2015
|
1,959,575 | |||
2016
|
515,158 | |||
2017
|
2,472,089 | |||
2018
|
1,807,763 | |||
2019
|
328,615 | |||
2020 onwards
|
146,642 | |||
Total
|
7,229,842 |
18.4
|
Covenants
|
18.5
|
Guarantees
|
Loans and financing
|
Debentures
|
Finance lease
|
||||||||||
Balance at January 1, 2012
|
4,947,528 | 1,256,431 | 21,067 | |||||||||
Inflows
|
815,825 | 2,000,000 | 21,227 | |||||||||
Financial charges
|
417,246 | 134,332 | 9,305 | |||||||||
Monetary and exchange adjustments
|
105,617 | 8,313 | - | |||||||||
Write-offs (payments)
|
(1,274,892 | ) | (443,171 | ) | (18,340 | ) | ||||||
Balance at December 31, 2012
|
5,011,324 | 2,955,905 | 33,259 | |||||||||
Inflows
|
289,134 | 1,940,000 | 204,821 | |||||||||
Financial charges
|
279,734 | 318,571 | (1,770 | ) | ||||||||
Monetary and foreign exchange adjustments
|
195,311 | 9,097 | - | |||||||||
Write-offs (payments)
|
(1,542,441 | ) | (921,958 | ) | (17,432 | ) | ||||||
Merger/split as of July 1, 2013
|
- | - | - | |||||||||
Balance at December 31, 2013
|
4,233,062 | 4,301,615 | 218,878 |
19.
|
Dividends and interest on shareholders’ equity (IOE)
|
a)
|
Breakdown of receivables:
|
12.31.13 |
12.31.12 - Restated
|
01.01.12 - Restated
|
||||||||||
Vivo
|
- | - | - | |||||||||
AIX
|
- | - | 772 | |||||||||
Aliança
|
1,140 | 1,140 | - | |||||||||
TData
|
- | - | - | |||||||||
ATelecom
|
- | - | - | |||||||||
Total
|
1,140 | 1,140 | 772 |
b)
|
Changes in receivables:
|
Balance at January 01, 2012
|
- | |||
2011 supplementary dividends
|
- | |||
Dividend and IOE (net of Withholding tax over the Interest on Own Capital)
|
1,140 | |||
Dividend and IOE received
|
- | |||
Balance at December 31, 2012 - Restated
|
1,140 |
2012 supplementary dividends
|
- | |||
2013 interim dividend and IOE (net of Withholding tax over the Interest on Own Capital)
|
- | |||
Dividend and IOE received
|
- | |||
Merger/split as of July 1, 2013
|
- | |||
Balance at December 31, 2013
|
1,140 |
c)
|
Breakdown of payables:
|
|
d)
|
Changes in payables:
|
Balance at January 01, 2012
|
972,986 | |||
2011 supplementary dividends
|
1,953,029 | |||
Interim dividend
|
1,122,522 | |||
Unclaimed dividend and IOE
|
(89,692 | ) | ||
Dividend and IOE paid
|
(3,493,997 | ) | ||
Other changes
|
2,983 | |||
Balance at December 31, 2012
|
467,831 | |||
2012 supplementary dividends
|
3,148,769 | |||
Interim dividend and IOE (net of Withholding tax over the Interest on Own Capital)
|
2,223,300 | |||
Unclaimed dividend and IOE
|
(116,825 | ) | ||
Dividend and IOE paid
|
(4,535,519 | ) | ||
Balance at December 31, 2013
|
1,187,556 |
20.
|
Provisions
|
|
a)
|
Breakdown/Changes:
|
Provisions for contingencies
|
||||||||||||||||||||||||
Labor
|
Tax
|
Civil and regulatory
|
Contingent liability (PPA) (a)
|
Provision for decommissioning (b)
|
Total
|
|||||||||||||||||||
Balance at January 1, 2012
|
526,210 | 1,606,571 | 664,703 | 256,044 | 200,813 | 3,254,341 | ||||||||||||||||||
Inflows
|
238,830 | 230,984 | 244,595 | 766 | 21,484 | 736,659 | ||||||||||||||||||
Write-offs due to payment
|
(37,946 | ) | (1,665 | ) | (109,356 | ) | - | - | (148,967 | ) | ||||||||||||||
Write-offs due to reversal
|
(28,383 | ) | (7,815 | ) | (67,843 | ) | - | (7,853 | ) | (111,894 | ) | |||||||||||||
Monetary restatement
|
18,536 | 123,975 | 63,195 | 7,710 | 6,872 | 220,288 | ||||||||||||||||||
Balance at December 31, 2012 - Restated
|
717,247 | 1,952,050 | 795,294 | 264,520 | 221,316 | 3,950,427 | ||||||||||||||||||
Inflows
|
401,908 | 198,478 | 296,175 | - | 31,404 | 927,965 | ||||||||||||||||||
Write-offs due to payment
|
(77,137 | ) | (97,177 | ) | (102,948 | ) | - | - | (277,262 | ) | ||||||||||||||
Write-offs due to reversal
|
(86,959 | ) | (43,207 | ) | (99,496 | ) | (6,127 | ) | (11,967 | ) | (247,756 | ) | ||||||||||||
Monetary restatement
|
33,121 | 138,656 | 81,378 | 17,284 | - | 270,439 | ||||||||||||||||||
Balance at December 31, 2013
|
988,180 | 2,148,800 | 970,403 | 275,677 | 240,753 | 4,623,813 | ||||||||||||||||||
Current
|
92,712 | - | 468,691 | - | - | 561,403 | ||||||||||||||||||
Noncurrent
|
895,468 | 2,148,800 | 501,712 | 275,677 | 240,753 | 4,062,410 |
(a)
|
Refers to contingent liabilities arising from PPA generated in acquisition of the controlling interest of Vivo Part. in 2011.
|
(b)
|
Refer to costs to be incurred to return the sites (locations for installation of base radio, equipment and real estate) to their respective owners in the same conditions as they were at the time of execution of the initial lease agreement.
|
20.1
|
Provisions and labor contingencies
|
12.31.13 |
12.31.12
Restated
|
01.01.12 - Restated
|
||||||||||
Nature/Degree of risk
|
||||||||||||
Probable provisions
|
988,180 | 717,247 | 526,210 | |||||||||
Possible contingencies
|
313,536 | 274,156 | 404,262 |
20.2
|
Provisions and tax contingencies
|
Amounts Involved
|
||||||||||||
12.31.13 |
12.31.12 –
Restated
|
01.01.12 - Restated
|
||||||||||
Nature/Degree of risk
|
||||||||||||
Probable provisions
|
2,148,800 | 1,952,050 | 1,606,735 | |||||||||
Federal
|
2,042,098 | 1,860,803 | 1,530,789 | |||||||||
State
|
91,923 | 67,426 | 63,625 | |||||||||
Municipal
|
14,779 | 23,821 | 12,321 | |||||||||
Possible contingencies
|
16,246,407 | 13,738,155 | 11,679,158 | |||||||||
Federal
|
3,913,929 | 3,146,736 | 3,185,747 | |||||||||
State
|
7,088,859 | 5,870,365 | 4,172,479 | |||||||||
Municipal
|
580,853 | 544,323 | 471,876 | |||||||||
Anatel
|
4,662,766 | 4,176,731 | 3,849,056 |
20.3
|
Provisions, civil and regulatory contingencies
|
Amounts involved
|
||||||||||||
12.31.13 | 12.31.12 | 01.01.12 | ||||||||||
Nature/Degree of risk
|
||||||||||||
Probable provisions
|
970,403 | 795,294 | 664,703 | |||||||||
Civil
|
599,868 | 487,620 | 422,890 | |||||||||
Regulatory
|
370,535 | 307,674 | 241,813 | |||||||||
Possible contingencies
|
3,366,707 | 2,656,850 | 1,978,973 | |||||||||
Civil
|
1,681,450 | 1,491,862 | 1,118,372 | |||||||||
Regulatory
|
1,685,257 | 1,164,988 | 860,601 |
·
|
The Company is party to 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: 1
st
level, Court of Justice and Supreme Court of Justice. At December 31, 2013, considering the degree of risk involved, consolidated provision amounted to R$ 37,191 (R$ 31,260 at December 31, 2012).
|
·
|
The Company is party to proceedings of a civil nature, in the administrative and judicial spheres, the subject of which are rights relating to the provision of services. These 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 Company is defendant or plaintiff in other proceedings the subject of which relates to matters other than those under the normal course of business. At December 31, 2013, total consolidated provisions amounted to R$ 469,149 (R$ 377,649 at December 31, 2012).
|
·
|
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, 2013, total consolidated provisions amounted to R$ 93,528 (R$ 78,711 at December 31, 2012).
|
·
|
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 consolidated amount involved is R$ 281,059 (R$ 236,236 at December 31, 2012). These proceedings were assessed as a possible loss by legal counsel. The São Paulo State Court of Justice (TJSP) has reversed the
|
·
|
Class actions filed by SISTEL Members Association (ASTEL) in São Paulo State, 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 at the appeal stage, pending a decision by the court of appeals, which changed the dismissal decision. The likelihood of loss in these proceedings 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.
|
·
|
Public civil actions filed by ASTEL - SISTEL Members Association in São Paulo State and 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 likelihood of loss in these proceedings 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.
|
·
|
The Public Prosecutor’s Office of São Paulo State began a public 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.
|
·
|
The Company is 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 Prosecutor’s Office. It is also involved in other claims of several types related to the normal course of business. Total contingency amounts to R$ 1,383,932 (R$ 1,236,312 at December 31, 2012), whose likelihood of an unfavorable outcome has been assessed by their legal advisors as possible.
|
·
|
The Company has 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, amounting to at December 31, 2013 R$ 16,459 (R$ 19,314 at December 31, 2012).
|
·
|
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.
|
·
|
Validity of prepaid plan: Vivo (merged into the Company on July 1, 2013) 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.
|
·
|
The Company is party 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 likelihood of loss as possible, at December 31, 2013 amounting to R$ 1,685,257 – consolidated (R$ 1,164,988 at December 31, 2012).
|
·
|
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.
|
·
|
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), Tim Brasil Serviços e Telecomunicações S.A. (TIM), TNL SCS S.A. (Oi) and Vivo (merged into the Company on July 1, 2013) 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
|
Judicial deposits and garnishments
|
Guarantee letters
|
||||||||||
Civil, labor and tax
|
187,025 | 4,352,520 | 2,263,773 | |||||||||
Total
|
187,025 | 4,352,520 | 2,263,773 |
21.
|
Deferred revenue
|
12.31.13 |
12.31.12
Restated
|
01.01.12 - Restated
|
||||||||||
Activation revenue (a)
|
120,521 | 89,367 | 98,464 | |||||||||
Services and goods (b)
|
673,810 | 596,907 | 647,629 | |||||||||
Disposal of PP&E (c)
|
123,063 | 171,174 | - | |||||||||
Government grants (d)
|
40,840 | 44,933 | 53,202 | |||||||||
Customer loyalty program (e)
|
91,763 | 82,848 | 68,821 | |||||||||
Donation of equipment (f)
|
11,076 | 16,235 | 22,638 | |||||||||
Other
|
10,139 | 36,471 | 26,780 | |||||||||
Total
|
1,071,212 | 1,037,935 | 917,534 | |||||||||
Current
|
817,551 | 734,573 | 761,268 | |||||||||
Noncurrent
|
253,661 | 303,362 | 156,266 |
a)
|
Refers to the deferral of activation 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 to be transferred to income upon compliance with 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 life of equipment.
|
e)
|
Refers to the loyalty point program maintained by the Company, which allows customers to accumulate points when paying their bills referring to use of services offered. The balance represents the Company’s estimate of customers’ exchanging points 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 life of the referred to equipment.
|
22.
|
Other Liabilities
|
12.31.13 |
12.31.12 - Restated
|
01.01.12- Restated
|
||||||||||
Third-party withholdings
|
236,510 | 139,120 | 252,771 | |||||||||
Amounts to be refunded to subscribers
|
56,746 | 45,627 | 59,265 | |||||||||
Payables to related parties
|
105,164 | 57,348 | 71,452 | |||||||||
Payable for license renewal
|
154,211 | 194,441 | 44,296 | |||||||||
Mutual assumptions of debt and installment
|
- | - | 21,587 | |||||||||
Other payables
|
56,275 | 38,674 | 47,543 | |||||||||
Total
|
608,906 | 475,210 | 496,914 | |||||||||
Current
|
487,994 | 364,618 | 454,898 | |||||||||
Noncurrent
|
120,912 | 110,592 | 42,016 |
23.
|
Shareholders’ equity
|
|
a)
|
Capital
|
Common shares
|
Preferred shares
|
Grand total
|
||||||||||||||||||||||
Shareholders
|
Number
|
%
|
Number
|
%
|
Number
|
%
|
||||||||||||||||||
Telefónica Internacional S.A.
|
58,859,918 | 15.43 | % | 271,707,098 | 36.52 | % | 330,567,016 | 29.37 | % | |||||||||||||||
Telefónica S.A.
|
97,976,194 | 25.68 | % | 179,862,845 | 24.17 | % | 277,839,039 | 24.68 | % | |||||||||||||||
SP Telecomunicações Participações Ltda
|
192,595,149 | 50.47 | % | 29,042,853 | 3.90 | % | 221,638,002 | 19.69 | % | |||||||||||||||
Telefónica Chile S.A.
|
696,110 | 0.18 | % | 11,792 | 0.00 | % | 707,902 | 0.06 | % |
2013
|
2012
|
|||||||
Net income for the year
|
3,715,945 | 4,453,573 | ||||||
Allocation to legal reserve
|
(185,797 | ) | (222,678 | ) | ||||
Total
|
3,530,148 | 4,230,895 | ||||||
(-) Tax incentives - nondistributable
|
(1,699 | ) | - | |||||
Adjusted net income
|
3,528,449 | 4,230,895 | ||||||
Mandatory minimum dividend - 25% of adjusted net income
|
882,112 | 1,057,724 | ||||||
Dividend and IOE distributed for the year (a):
|
||||||||
Interest on equity (gross)
|
1,738,000 | - |
Interim dividends
|
746,000 | 1,122,522 | ||||||
Income available to be distributed
|
1,044,449 | 3,108,373 | ||||||
(+) Unclaimed IOE / dividends
|
116,825 | 89,692 | ||||||
(-) Actuarial (gains)/losses recognized and effect of limitation of surplus plan assets, net of taxes and other changes
|
14,264 | (49,296 | ) | |||||
Proposed additional dividend
|
1,175,538 | 3,148,769 |
Amounts per share (a)
|
Reais
|
Common
|
Preferred
|
|||||||||
Interim IOE (net of IRRF), allocated in August 2013
|
187,000 | 0.156163 | 0.171779 | |||||||||
Interim IOE (net of IRRF), allocated in September 2013
|
187,000 | 0.156163 | 0.171779 | |||||||||
Interim IOE (net of IRRF), allocated in November 2013
|
457,300 | 0.381890 | 0.420079 | |||||||||
Interim IOE (net of IRRF), allocated in December 2013
|
646,000 | 0.539474 | 0.593421 | |||||||||
Interim dividend declared in October 2013
|
746,000 | 0.622983 | 0.685282 | |||||||||
Interim dividend declared in November 2012
|
1,122,522 | 0.937417 | 1.031158 | |||||||||
Reais
|
Common
|
Preferred (1)
|
||||||||||
2013 - Total proposed for deliberation – per share
|
1,175,538 | 0.981691 | 1.079860 | |||||||||
2012 - Total proposed for deliberation – per share
|
3,148,769 | 2.629533 | 2.892487 |
2013
|
||||
Interest on equity, gross
|
1,738,000 | |||
Common shares
|
553,471 | |||
Preferred shares
|
1,184,529 | |||
Withholding income tax (IRRF)
|
(260,700 | ) | ||
Interest on equity, net
|
1,477,300 |
Financial instruments available for sale
|
Derivative transactions
|
Currency translation adjustment - foreign investments
|
Total
|
|||||||||||||
Balances at December 31, 2011
|
9,884 | 1,995 | (4,359 | ) | 7,520 | |||||||||||
Exchange variation
|
- | - | 5,731 | 5,731 | ||||||||||||
Futures
|
- | 8,195 | - | 8,195 | ||||||||||||
Loss on financial assets available for sale
|
(3,654 | ) | - | - | (3,654 | ) | ||||||||||
Balances at December 31, 2012
|
6,230 | 10,190 | 1,372 | 17,792 | ||||||||||||
Exchange variation
|
- | - | 11,525 | 11,525 | ||||||||||||
Futures
|
- | (3,580 | ) | - | (3,580 | ) | ||||||||||
Loss on financial assets available for sale
|
(8,888 | ) | - | - | (8,888 | ) | ||||||||||
Balances at December 31, 2013
|
(2,658 | ) | 6,610 | 12,897 | 16,849 |
24.
|
Net operating revenue
|
2013
|
2012 –
Restated
|
2011- Restated
|
||||||||||
Telephony service
|
26,428,677 | 26,555,103 | 24,254,154 | |||||||||
Network use
|
3,820,048 | 4,453,340 | 3,785,017 | |||||||||
Data and SVA
|
16,294,856 | 14,389,812 | 10,929,344 | |||||||||
Pay TV services
|
644,968 | 805,319 | 865,376 | |||||||||
Other services (a)
|
1,297,277 | 1,268,452 | 1,089,534 | |||||||||
Sale of goods and devices
|
3,479,786 | 2,792,611 | 2,135,165 | |||||||||
Gross operating income
|
51,965,612 | 50,264,637 | 43,058,590 | |||||||||
Taxes
|
(12,373,913 | ) | (12,146,809 | ) | (10,624,363 | ) | ||||||
Rebates and returns
|
(4,869,802 | ) | (4,198,172 | ) | (3,317,583 | ) | ||||||
Deductions from gross operating income
|
(17,243,715 | ) | (16,344,981 | ) | (13,941,946 | ) | ||||||
Net operating revenue
|
34,721,897 | 33,919,656 | 29,116,644 |
(a)
|
The amounts referring to infrastructure-related swap contracts, under the concept of agent and principal (CPC 30 and IAS 18), which were not recognized as costs and revenues for the years ended December 31, 2013 and 2012 were R$73,391 and R$44,758, respectively (Note 25).
|
25.
|
Costs of services and goods
|
2013
|
2012 - Restated
|
2011- Restated
|
||||||||||
Depreciation and amortization
|
(4,265,113 | ) | (4,131,768 | ) | (3,581,944 | ) | ||||||
Personnel
|
(522,085 | ) | (459,707 | ) | (380,067 | ) | ||||||
Interconnection and network use
|
(3,842,326 | ) | (4,012,046 | ) | (4,537,101 | ) | ||||||
Third party services
|
(3,581,735 | ) | (3,286,832 | ) | (2,816,766 | ) | ||||||
Rent, insurance, condominium fees and connection media (a) (b)
|
(1,428,040 | ) | (969,262 | ) | (913,301 | ) | ||||||
Taxes, charges and contributions
|
(1,721,434 | ) | (1,809,640 | ) | (1,420,101 | ) | ||||||
Other
|
(63,535 | ) | (86,297 | ) | (101,604 | ) | ||||||
Total cost of services rendered
|
(15,424,268 | ) | (14,755,552 | ) | (13,750,884 | ) | ||||||
Cost of goods sold
|
(2,117,899 | ) | (1,801,892 | ) | (1,284,279 | ) | ||||||
Total
|
(17,542,167 | ) | (16,557,444 | ) | (15,035,163 | ) |
(a)
|
The amounts referring to infrastructure-related
swap
contracts, under the concept of agent and principal (CPC 30 and IAS 18), which were not recognized as costs and revenues for the years ended December 31, 2013 and 2012 were R$73,391 and R$44,758, respectively (Note 24).
|
(b)
|
In 2012, the Company reversed a provision at the state road department (DER) referring to the use of right-of-ways in expressways, amounting to R$ 244,462, since it understands that the likelihood of a disbursement referring to this matter is remote.
|
26.
|
Selling expenses
|
2013
|
2012 - Restated
|
2011-
Restated
|
||||||||||
Depreciation and amortization
|
(862,146 | ) | (927,874 | ) | (684,891 | ) | ||||||
Personnel
|
(1,397,550 | ) | (1,321,397 | ) | (1,049,978 | ) | ||||||
Third party services
|
(5,559,200 | ) | (4,625,735 | ) | (3,759,779 | ) | ||||||
Provision for doubtful receivable (Note 6)
|
(741,274 | ) | (654,273 | ) | (506,581 | ) | ||||||
Rent/insurance/condominium fees
|
(130,466 | ) | (119,300 | ) | (79,239 | ) | ||||||
Publicity and advertising
|
(837,801 | ) | (867,364 | ) | (735,622 | ) | ||||||
Other
|
(157,733 | ) | (177,753 | ) | (132,121 | ) | ||||||
Total
|
(9,686,170 | ) | (8,693,696 | ) | (6,948,211 | ) |
27.
|
General and administrative expenses
|
2013
|
2012 - Restated
|
2011-Restated
|
||||||||||
Depreciation and amortization
|
(516,051 | ) | (432,134 | ) | (317,761 | ) | ||||||
Personnel
|
(612,313 | ) | (621,946 | ) | (554,874 | ) | ||||||
Third party services
|
(804,556 | ) | (831,592 | ) | (692,622 | ) | ||||||
Rent/insurance/condominium fees and other
|
(244,971 | ) | (259,636 | ) | (217,714 | ) | ||||||
Total
|
(2,177,891 | ) | (2,145,308 | ) | (1,782,971 | ) |
28.
|
Other operating income (expenses), net
|
2013
|
2012 - Restated
|
2011- Restated
|
||||||||||
Fines and expenses recovered
|
327,724 | 380,553 | 366,124 | |||||||||
Provisions for labor, tax and civil contingencies, net
|
(830,190 | ) | (769,754 | ) | (368,068 | ) | ||||||
Net income (loss) on disposals of assets (a)
|
124,142 | 1,100,256 | 513,884 | |||||||||
Other
|
(5,071 | ) | (23,343 | ) | (70,449 | ) | ||||||
Total
|
(383,395 | ) | 687,712 | 441,491 | ||||||||
Other operating income
|
575,959 | 1,870,995 | 1,229,144 | |||||||||
Other operating expenses
|
(959,354 | ) | (1,183,283 | ) | (787,653 | ) | ||||||
Total
|
(383,395 | ) | 687,712 | 441,491 |
(a)
|
In 2013 and 2012, the Company sold 93 and 4,404 non-strategic transmission towers/rooftops for R$33,816 and R$1,185,101 (net of residual values), respectively. At the same time, the parties entered into a lease agreement concerning part of the towers/rooftops disposed to continue the data transmission required for its mobile telephone services.
|
29.
|
Financial income (expenses), net
|
2013
|
2012 - Restated
|
2011-
Restated
|
||||||||||
Financial income
|
||||||||||||
Investment income
|
625,506 | 313,258 | 336,873 | |||||||||
Gains on derivative transactions
|
454,828 | 345,412 | 251,758 | |||||||||
Interest receivable
|
193,264 | 187,179 | 130,524 | |||||||||
Monetary and exchange gains
|
307,650 | 345,698 | 267,665 | |||||||||
Other
|
167,029 | 89,558 | 115,236 | |||||||||
1,748,277 | 1,281,105 | 1,102,056 | ||||||||||
Financial expense
|
||||||||||||
Interest payable
|
(825,621 | ) | (690,979 | ) | (484,663 | ) | ||||||
Losses on derivative transactions
|
(350,100 | ) | (230,216 | ) | (140,725 | ) | ||||||
Monetary and exchange losses
|
(580,386 | ) | (409,907 | ) | (308,966 | ) | ||||||
PIS/COFINS on IOE received
|
(21,461 | ) | (42,273 | ) | (18,500 | ) | ||||||
Other
|
(185,469 | ) | (198,994 | ) | (290,197 | ) | ||||||
(1,963,037 | ) | (1,572,369 | ) | (1.243,051 | ) | |||||||
Financial income (expenses), net
|
(214,760 | ) | (291,264 | ) | (140,995 | ) |
30.
|
Income and social contribution taxes
|
2013
|
2012
- Restated
|
2011-
Restated
|
||||||||||
Income before taxes
|
4,662,364 | 6,920,244 | 5,655,100 | |||||||||
Income and social contribution tax expenses at a 34% rate
|
(1,585,204 | ) | (2,352,883 | ) | (1,922,734 | ) | ||||||
Permanent and temporary differences
|
- | - | - | |||||||||
Equity pickup, net of effects of IOF received
|
(22,684 | ) | 200 | 1,464 | ||||||||
Unclaimed dividend
|
(9,241 | ) | (30,495 | ) | (5,613 | ) | ||||||
Nondeductible expenses, gifts, incentives and IOE received
|
(118,479 | ) | (68,052 | ) | (47,576 | ) | ||||||
Deferred taxes recognized in subsidiaries on income and social contribution tax losses and temporary differences from prior years
|
255,778 | - | - | |||||||||
Deferred taxes not recognized in subsidiaries on income and social contribution tax losses
|
(24,939 | ) | - | - | ||||||||
Comprehensive income
|
- | - | - | |||||||||
Reversal of IOE allocated
|
590,920 | - | 634,780 | |||||||||
Other (additions) exclusions
|
(32,570 | ) | (16,833 | ) | 46,778 | |||||||
Tax expense
|
(946,419 | ) | (2,468,063 | ) | (1,292,901 | ) | ||||||
Effective rate
|
20 | % | 36 | % | 23 | % | ||||||
Current IRPJ and CSLL
|
(616,895 | ) | (1,627,439 | ) | (925,558 | ) | ||||||
Deferred IRPJ and CSLL
|
(329,524 | ) | (840,624 | ) | (367,343 | ) |
31.
|
Earnings per share
|
2013
|
2012
|
2011
|
||||||||||
Net income for the year attributed to shareholders:
|
3,715,945 | 4,453,573 | 4,355,318 | |||||||||
Common
|
1,183,354 | 1,418,011 | 1,381,068 | |||||||||
Preferred
|
2,532,591 | 3,035,562 | 2,974,250 | |||||||||
Number of shares:
|
1,123,269 | 1,123,463 | 928,005 | |||||||||
Weighted average of outstanding common shares for the year
|
381,336 | 381,338 | 313,748 | |||||||||
Weighted average of outstanding preferred shares for the year
|
741,933 | 742,125 | 614,257 | |||||||||
Basic and diluted earnings per share:
|
||||||||||||
Common shares
|
3.10 | 3.72 | 4.40 | |||||||||
Preferred shares
|
3.41 | 4.09 | 4.84 |
32.
|
Related-party transactions and balances
|
32.a)
|
Terms and conditions of related-party transactions
|
a)
|
Fixed and mobile telephone services:
fixed and mobile telephone services provided by companies of Telefónica Group;
|
b)
|
Lease of buildings and disposal of call center assets
: lease of buildings owned by the Company where the call center structure is installed and disposal of property and equipment items used in call center activities to Atento Brasil, Telefonica Serviços Empresariais do Brasil and Telefonica Transportes e Logística;
|
c)
|
Support service by the customer support service, collection, back office and sales people:
provided by Atento Brasil; (company belongs to the Telefónica Group until 2012)
|
d)
|
Expenses incurred
: these are charged to the Company by Media Networks Latino America and Telefónica Del Peru;
|
e)
|
Digital TV services
: provided by Media Networks Latino America;
|
f)
|
Lease and maintenance of safety equipment:
provided by Telefonica Engenharia e Segurança do Brasil Ltda.;
|
g)
|
Corporate services:
these are passed through at the cost effectively incurred on those services;
|
h)
|
Systems development and maintenance services:
provided by Telefónica Global Technology;
|
i)
|
International transmission infrastructure for a number of data circuit and roaming services:
provided by Telefónica International Wholesale Brazil, Telefónica International Wholesale Services Spain and Telefónica USA;
|
j)
|
Administrative management services:
financial, equity, accounting and human resources services provided by Telefonica Serviços Empresariais do Brasil;
|
k)
|
Logistics and courier services:
provided by Telefonica Transportes e Logística;
|
l)
|
Voice portal content provider services
: provided by Terra Networks Brazil;
|
m)
|
Data communications and integrated solution services
: provided by Telefónica International Wholesale Services Spain and Telefónica USA;
|
n)
|
Long-distance calls and international roaming services
: provided by companies of Telefónica Group;
|
o)
|
Refund of expenses
: from advisory service fees, expenses with salaries and other expenses paid by the Company to be refunded by companies of the Telefónica Group;
|
p)
|
Brand Fee:
Assignment of rights to use the brand paid to Telefónica;
|
q)
|
Stock option plan
: to employees of Telefónica; and
|
r)
|
Reimbursement of expenses for the digital business to Telefónica Internacional.
|
Balance sheet - Assets | ||||||||||||||||||||||||||||
12.31.13 | 12.31.12 | |||||||||||||||||||||||||||
Current assets
|
Noncurrent assets
|
Current assets
|
Noncurrent assets
|
|||||||||||||||||||||||||
Parent
|
Type of transaction
|
Trade accounts receivable, net
|
Other assets
|
Other assets
|
Trade accounts receivable, net
|
Other assets
|
Other assets
|
|||||||||||||||||||||
companies
|
||||||||||||||||||||||||||||
SP Telecomunicações Participações
|
o) | 28 | 183 | 6,717 | 1 | 19 | 545 | |||||||||||||||||||||
Telefónica Internacional
|
o) | - | 154 | 38,386 | - | 149 | 17,393 | |||||||||||||||||||||
Telefónica
|
o) / q) | - | 1,361 | 179 | - | 54 | 137 | |||||||||||||||||||||
28 | 1,698 | 45,282 | 1 | 222 | 18,075 | |||||||||||||||||||||||
Other group companies
|
||||||||||||||||||||||||||||
Telefónica USA
|
m) | 2,612 | - | - | 1,925 | - | - | |||||||||||||||||||||
Telefónica Chile
|
n) | - | 4,808 | - | 5,160 | - | 106 | |||||||||||||||||||||
Telefónica de España
|
n) | 230 | - | - | 2,476 | - | - | |||||||||||||||||||||
Telefónica Peru
|
d) / n) | 1,573 | - | - | 1,764 | 3,216 | 236 | |||||||||||||||||||||
Telefônica Engenharia de Segurança do Brasil
|
a) / g) / o)
|
1,320 | 1,903 | 472 | 556 | 1,915 | 293 | |||||||||||||||||||||
Telefónica International Wholesale Services Brasil
|
a) / g) / o)
|
6,966 | 139 | 344 | 641 | 218 | 22 | |||||||||||||||||||||
Telefónica International Wholesale Services Espanha
|
m) | 48,267 | - | - | 7,072 | - | - | |||||||||||||||||||||
Telefónica Moviles España
|
n) | 6,335 | - | - | 3,239 | - | - | |||||||||||||||||||||
Telefônica Serviços Empresariais do Brasil
|
a) / b) / g) / o)
|
2,579 | 15,284 | 2,837 | 1,770 | 15,605 | 1,009 | |||||||||||||||||||||
Telefônica Transportes e Logistica
|
a) / b) / g) / o)
|
530 | 146 | 64 | 206 | 102 | 7 | |||||||||||||||||||||
Terra Networks Brasil
|
a) / g) / o)
|
2,561 | 5,682 | 106 | 3,286 | 6,054 | 13 | |||||||||||||||||||||
Other
|
a) / g) / n)
|
25,352 | 5,372 | 13,611 | 12,926 | 10,701 | 357 | |||||||||||||||||||||
98,325 | 33,334 | 17,434 | 41,021 | 37,811 | 2,043 | |||||||||||||||||||||||
Total
|
98,353 | 35,032 | 62,716 | 41,022 | 38,033 | 20,118 |
Balance sheet - Liabilities | ||||||||||||||||||||||||||||
12.31.13 | 12.31.12 | |||||||||||||||||||||||||||
Current liabilities
|
Noncurrent liabilities
|
Current liabilities
|
Noncurrent liabilities
|
|||||||||||||||||||||||||
Parent
|
Type of transaction
|
Trade accounts payable
|
Other liabilities
|
Other liabilities
|
Trade accounts payable
|
Other liabilities
|
Other liabilities
|
|||||||||||||||||||||
companies
|
||||||||||||||||||||||||||||
SP Telecomunicações Participações
|
g) / o) | 50,120 | - | 6,483 | 2.685 | 4,028 | 4,689 | |||||||||||||||||||||
Telefónica Internacional
|
o) / r) | 214,523 | - | - | 601 | 1,086 | - | |||||||||||||||||||||
Telefónica
|
p) | 1,772 | 84,754 | 2,035 | 3,168 | 35,162 | - | |||||||||||||||||||||
266,415 | 84,754 | 8,518 | 6,454 | 40,276 | 4,689 | |||||||||||||||||||||||
Other group companies
|
||||||||||||||||||||||||||||
Telefónica USA
|
i) | 716 | 31 | 121 | 1,051 | 6,680 | 106 | |||||||||||||||||||||
Telefónica Chile
|
n) | - | - | - | 1,577 | - | - | |||||||||||||||||||||
Telefónica de España
|
n) | 441 | - | - | 2,158 | - | - | |||||||||||||||||||||
Telefónica Peru
|
n) | - | - | - | 49 | - | - | |||||||||||||||||||||
Telefônica Engenharia de Segurança do Brasil
|
f) | 3,550 | - | 8 | 3,828 | - | 8 | |||||||||||||||||||||
Telefónica International Wholesale Services Brasil
|
i) | 75,485 | - | 391 | 68,552 | - | 305 | |||||||||||||||||||||
Telefónica International Wholesale Services Espanha
|
i) / n) | 17,842 | 9,986 | - | 869 | 2,342 | - | |||||||||||||||||||||
Telefónica Moviles España
|
n) | 5,468 | - | - | 4,196 | - | - | |||||||||||||||||||||
Telefônica Serviços Empresariais do Brasil
|
j) / o) | 11,701 | 36 | - | 17,783 | 36 | 1,521 | |||||||||||||||||||||
Telefônica Transportes e Logistica
|
k) | 25,163 | 1 | 270 | 32,648 | 272 | 165 | |||||||||||||||||||||
Terra Networks Brasil
|
l) | 883 | - | 266 | 1,366 | 19 | 291 | |||||||||||||||||||||
Other
|
e) / h) / n)
|
49,281 | 146 | 636 | 15,096 | 522 | 116 | |||||||||||||||||||||
190,530 | 10,200 | 1,692 | 149,173 | 9,871 | 2,512 | |||||||||||||||||||||||
Total
|
456,945 | 94,954 | 10,210 | 155,627 | 50,147 | 7,201 |
Income statement - Revenues (Costs and expenses)
|
||||||||||||||||||||
2013
|
2012
|
|||||||||||||||||||
Parent
|
Type of transaction
|
Revenues
|
Costs and expenses
|
Revenues
|
Costs and expenses
|
|||||||||||||||
Companies
|
||||||||||||||||||||
SP Telecomunicações Participações
|
g) / o) | - | (41,366 | ) | - | (12,639 | ) | |||||||||||||
Telefónica Internacional
|
o) / r) | 750 | (182,481 | ) | 43,211 | - | ||||||||||||||
Telefónica
|
o) / p) | 469 | (300,843 | ) | 3,691 | (142,791 | ) | |||||||||||||
1,219 | (524,690 | ) | 46,902 | (155,430 | ) | |||||||||||||||
Other group companies
|
||||||||||||||||||||
Atento Brasil
|
a) / b) / c)
|
- | - | 50,580 | (979,672 | ) | ||||||||||||||
Telefónica USA
|
i) / m) | 1,502 | (3,920 | ) | 3,318 | (7,832 | ) | |||||||||||||
Telefónica Chile
|
n) | 1,181 | - | - | - | |||||||||||||||
Telefónica de España
|
n) | 804 | (1,857 | ) | 4,585 | (3,736 | ) | |||||||||||||
Telefónica Del Peru
|
d) / n) | 92 | (60 | ) | 3,844 | - | ||||||||||||||
Telefônica Engenharia de Segurança do Brasil
|
a) / f) / g) / o)
|
2,463 | (7,882 | ) | 2,374 | (7,077 | ) | |||||||||||||
Telefónica International Wholesale Services Brasil
|
a) / g) / i) / o)
|
9,078 | (200,988 | ) | 8,725 | (120,876 | ) | |||||||||||||
Telefónica International Wholesale Services Espanha
|
i) / m) / n)
|
49,937 | (33,532 | ) | 20,476 | (13,917 | ) | |||||||||||||
Telefónica Moviles España
|
3,244 | (4,573 | ) | - | (4,841 | ) | ||||||||||||||
Telefônica Serviços Empresariais do Brasil
|
a) / b) / g) / j) / o)
|
5,221 | (80,881 | ) | 6,125 | (97,665 | ) | |||||||||||||
Telefônica Transportes e Logistica
|
a) / b) / g) / k) / o)
|
1,121 | (88,248 | ) | 1,078 | (86,710 | ) | |||||||||||||
Terra Networks Brasil
|
a) / g) / l) / o)
|
3,875 | (579 | ) | 7,317 | (4,448 | ) | |||||||||||||
Other
|
a) / e) / g) / h) / n)
|
18,546 | (50,234 | ) | 8,590 | (5,526 | ) | |||||||||||||
97,064 | (472,754 | ) | 117,012 | (1,332,300 | ) | |||||||||||||||
Total
|
98,283 | (997,444 | ) | 163,914 | (1,487,730 | ) |
33.
|
Insurance
|
Line
|
Maximum claim limits
|
|||
Operating risks (with loss of profits)
|
1,211,400 | |||
General civil liability (RCG)
|
21,160 | |||
34.
|
Share-based compensations plans
|
a)
|
Share incentive plan of Telefónica S.A.: “Performance Share Plan” or “PSP”
|
·
|
Beneficiaries staying with the company for the three years of each cycle, subject to certain special conditions in relation to terminations.
|
·
|
The actual number of shares granted at the end of each cycle will depend on the level of success and maximum number of shares granted to each executive officer. The level of success is based on the comparison of the evolution of shareholder remuneration considering price and dividends (Total Shareholder Return - TSR) of Telefónica share, vis-à-vis the evolution of TSRs corresponding to a number of companies quoted in the telecommunications industry, which correspond to the Comparison Group. Each employee enrolled with the plan is granted, at the beginning of each cycle, a maximum number of shares, and the actual number of shares granted at the end of the cycle is calculated by multiplying this number by the maximum level of success on the date. This will be 100% if the evolution of Telefonica's TSR is equal to or greater than the third quartile of the Comparison Group, and 30% if this evolution is equal to the average. If the evolution is maintained between the two values, a linear interpolation will be made, and, if below the median, nothing will be granted.
|
Cycles
|
Number of shares
|
Par value in EUR
|
Final date
|
||||||
3rd cycle - July 1, 2008
|
186,186 | 8,39 |
June 30, 2011
|
||||||
4th cycle - July 1, 2009
|
169,323 | 8,41 |
June 30, 2012
|
||||||
5th cycle - July 1, 2010
|
173,645 | 9,08 |
June 30, 2013
|
b)
|
Performance & Investment Plan
(PIP)
|
·
|
maintenance of active employment relationship within the Telefónica Group on the cycle consolidation date;
|
·
|
achievement, by Telefónica, of results representing fulfillment of the objectives established for the plan: the level of success is based on the comparison of the evolution or shareholder compensation, obtained through (TSR) to the evolution of the TSRs of the previously defined Comparison Group companies:
|
Ø
|
100% are granted if the TSR of Telefónica S.A exceeds the TSR of companies representing 75% of capitalization on the Comparison Group stock exchange.
|
Ø
|
30% are granted if the TSR of Telefónica S.A is equivalent to the TSR of companies representing 50% of capitalization on the Comparison Group stock exchange.
|
Ø
|
determined by linear interpolation if the TSR of Telefónica S.A ranges from 50% to 75% of the capitalization of the Comparison Group stock exchange.
|
Ø
|
No shares are granted if the TSR of Telefónica S.A is below the TSR of companies representing 50% of capitalization on the Comparison Group stock exchange.
|
Cycles
|
Number of shares
|
Par value in EUR
|
Final date
|
||||||
1st cycle - July 1, 2011
|
380,663 | 8,28 |
June 30, 2014
|
||||||
2nd cycle - July 1, 2012
|
672,675 | 8,28 |
June 30, 2015
|
||||||
3rd cycle - July 1, 2013
|
477,010 | 10,39 |
June 30, 2016
|
c)
|
Global share incentive plan of Telefónica S.A.: “
Global Employee Share Plan
” or “GESP”
|
·
|
Beneficiaries staying with the company for the two years of the program (vesting period), subject to certain special conditions in relation to terminations.
|
·
|
The exact number of shares to be granted at the end of the vesting period will rely upon the number of shares acquired and held by employees. Thus, employees enrolled with the plan, continuing with the Group, and who have held the shares acquired for additional twelve months after the vesting period, are entitled to receive one free share for each share they have acquired and held through the end of the vesting period.
|
Plans
|
2013
|
2012
|
2011
|
|||||||||
PSP
|
653 | 3,994 | 10,101 | |||||||||
PIP
|
11,789 | 3,000 | 4,509 | |||||||||
GESP
|
2,285 | 3,435 | 2,298 | |||||||||
Total
|
14,727 | 10,429 | 16,908 |
35.
|
Post –Retirement Benefit Plans
|
Plan
|
Type
(1)
|
Entity
|
Sponsorship
|
|||
PBS-A
|
DB
|
Sistel
|
Telefônica Brasil, jointly with other telecoms resulting from privatization of the Telebrás System
|
|||
PAMA / PCE
|
Health care
|
Sistel
|
Telefônica Brasil, jointly with other telecoms resulting from privatization of the Telebrás System
|
|||
CTB
|
DB
|
Telefônica Brazil
|
Telefônica Brasil
|
|||
PBS
|
DB/Hybrid
|
VisãoPrev
|
Telefônica Brasil
|
|||
PREV
|
Hybrid
|
VisãoPrev
(2)
|
Telefônica Brasil
|
|||
VISÃO
|
DC/Hybrid
|
VisãoPrev
|
Telefônica Brasil and Telefonica Data
|
(1)
DB = Defined benefit plan;
|
DC = Defined Contribution Plan;
|
Hybrid = Plan that offers both DB and DC-type benefits.
(2)
Except for plan CELPREV, managed by Sistel.
|
Modality
|
%
|
|||
PBS Telesp
|
11.47 | |||
PBS Telesp Celular
|
10.68 | |||
PBS Tele Sudeste Celular
|
11.73 | |||
PBS Telemig Celular
|
6.11 | |||
PAMA
|
1.50 |
Plan
|
12.31.13 | 12.31.12 | ||||||
CTB
|
49,158 | 50,652 | ||||||
PAMA
|
321,193 | 341,617 | ||||||
Total
|
370,351 | 392,269 |
a.
|
Reconciliation of assets and liabilities
|
Net liabilities (assets) at 12.31.13
|
||||||||||||||||||||||||
Present value of DB plan obligations
|
Fair value of plan assets
|
Net liabilities (assets)
|
Asset limitation
|
Noncurrent assets
|
Noncurrent liabilities
|
|||||||||||||||||||
PBS-A (i)
|
1,208,268 | 2,125,944 | (917,676 | ) | 917,676 | - | - | |||||||||||||||||
CTB
|
49,158 | - | 49,158 | - | - | 49,158 | ||||||||||||||||||
PAMA (i)
|
387,460 | 66,267 | 321,193 | - | - | 321,193 | ||||||||||||||||||
PBS
|
205,949 | 281,127 | (75,178 | ) | 70,458 | (4,720 | ) | - | ||||||||||||||||
VISÃO
|
9,634 | 44,778 | (35,154 | ) | 28,480 | (6,674 | ) | - | ||||||||||||||||
PREV
|
28,247 | 79,844 | (51,597 | ) | 45,082 | (6,515 | ) | - | ||||||||||||||||
TOTAL
|
1,888,716 | 2,597,970 | (709,254 | ) | 1,061,696 | (17,909 | ) | 370,351 |
Net liabilities (assets) at 12.31.12
|
||||||||||||||||||||||||
Present value of DB plan obligations
|
Fair value of plan assets
|
Net liabilities (assets)
|
Asset limitation
|
Noncurrent assets
|
Noncurrent liabilities
|
|||||||||||||||||||
PBS-A (i)
|
1,376,229 | 2,136,722 | (760,493 | ) | 760,493 | - | - | |||||||||||||||||
CTB
|
50,652 | - | 50,652 | - | - | 50,652 | ||||||||||||||||||
PAMA (i)
|
437,241 | 95,624 | 341,617 | - | - | 341,617 | ||||||||||||||||||
PBS
|
229,119 | 342,323 | (113,204 | ) | 112,246 | (958 | ) | - | ||||||||||||||||
VISÃO
|
34,666 | 61,189 | (26,523 | ) | 8,685 | (17,838 | ) | - | ||||||||||||||||
PREV
|
53,559 | 106,150 | (52,591 | ) | 23,339 | (29,252 | ) | - | ||||||||||||||||
TOTAL
|
2,181,466 | 2,742,008 | (560,542 | ) | 904,763 | (48,048 | ) | 392,269 |
(i)
|
Proportional participation of the Company and its subsidiary in assets and liabilities in multi-sponsored plans PAMA and PBS-A.
|
b.
|
Total expenses recognized in P&L
|
2013
|
2012
|
2011
|
||||||||||||||||||||||||||||||||||
Current service cost
|
Net interest income (expense) on the net actuarial assets/liabilities
|
Total
|
Current service cost
|
Net interest income (expense) on the net actuarial assets/liabilities
|
Total
|
Current service cost
|
Net interest income (expense) on the net actuarial assets/liabilities
|
Total
|
||||||||||||||||||||||||||||
CTB
|
- | 4,126 | 4,126 | - | 3,164 | 3,164 | - | 1,978 | 1,978 | |||||||||||||||||||||||||||
PAMA
|
139 | 30,811 | 30,950 | 165 | 24,179 | 24,344 | 252 | 21,010 | 21,262 | |||||||||||||||||||||||||||
PBS
|
644 | (101 | ) | 543 | 853 | (13,164 | ) | (12,311 | ) | 821 | (7,816 | ) | (6,995 | ) | ||||||||||||||||||||||
VISÃO
|
4,148 | (1,722 | ) | 2,426 | 4,601 | (10,307 | ) | (5,706 | ) | 3,971 | (3,878 | ) | 93 | |||||||||||||||||||||||
PREV
|
4,270 | (2,703 | ) | 1,567 | 3,872 | (4,741 | ) | (869 | ) | 2,482 | (2,308 | ) | 174 | |||||||||||||||||||||||
TOTAL
|
9,201 | 30,411 | 39,612 | 9,491 | (869 | ) | 8,622 | 7,526 | 8,986 | 16,512 |
c.
|
Amounts recognized in other comprehensive income
|
2013
|
2012
|
|
2011
|
|
||||||||||||||||||||||||||||||||
Actuarial (gains) losses
|
Asset limitation effect
|
Total cost recognized in OCI
|
Actuarial (gains) losses
|
Asset limitation effect
|
Total cost recognized in OCI
|
Actuarial (gains) losses
|
Asset limitation effect
|
Total cost recognized in OCI
|
||||||||||||||||||||||||||||
CTB
|
(482 | ) | - | (482 | ) | 17,216 | - | 17,216 | 15,398 | - | 15,398 | |||||||||||||||||||||||||
PAMA
|
(51,336 | ) | - | (51,336 | ) | 43,940 | - | 43,940 | 36,581 | - | 36,581 | |||||||||||||||||||||||||
PBS
|
47,542 | (51,706 | ) | (4,164 | ) | (48,381 | ) | 59,051 | 10,670 | 22,643 | (12,231 | ) | 10,412 | |||||||||||||||||||||||
VISÃO
|
(6,847 | ) | 19,045 | 12,198 | 57,611 | (35,690 | ) | 21,921 | 30,628 | (28,903 | ) | 1,725 | ||||||||||||||||||||||||
PREV
|
5,336 | 19,684 | 25,020 | (20,559 | ) | (3,406 | ) | (23,965 | ) | (6,552 | ) | 7,612 | 1,060 | |||||||||||||||||||||||
TOTAL
|
(5,787 | ) | (12,977 | ) | (18,764 | ) | 49,827 | 19,955 | 69,782 | 98,698 | (33,522 | ) | 65,176 |
d.
|
Movement of net defined benefit liabilities (assets)
|
Net interest on net defined benefit liability (asset) at 12.31.12
|
Expenses for 2013
|
Sponsor contributions for 2013
|
Amounts recognized in OCI
|
Net interest on net defined benefit liability (asset) at 12.31.13
|
Actuarial assets per balance sheet
|
Actuarial liabilities per balance sheet
|
||||||||||||||||||||||
CTB
|
50,652 | 4,126 | (5,138 | ) | (482 | ) | 49,158 | - | 49,158 | |||||||||||||||||||
PAMA
|
341,617 | 30,950 | (38 | ) | (51,336 | ) | 321,193 | - | 321,193 | |||||||||||||||||||
PBS
|
(958 | ) | 543 | (141 | ) | (4,164 | ) | (4,720 | ) | (4,720 | ) | - | ||||||||||||||||
VISÃO
|
(17,838 | ) | 2,426 | (3,460 | ) | 12,198 | (6,674 | ) | (6,674 | ) | - | |||||||||||||||||
PREV
|
(29,252 | ) | 1,567 | (3,850 | ) | 25,020 | (6,515 | ) | (6,515 | ) | - | |||||||||||||||||
TOTAL
|
344,221 | 39,612 | (12,627 | ) | (18,764 | ) | 352,442 | (17,909 | ) | 370,351 |
Net interest on net defined benefit liability (asset) at 01.01.12
|
Expenses for 2012
|
Sponsor contributions for 2012
|
Amounts recognized in OCI
|
Net interest on net defined benefit liability (asset) at 12.31.12
|
Actuarial assets per balance sheet
|
Actuarial liabilities per balance sheet
|
||||||||||||||||||||||
CTB
|
34,615 | 3,164 | (4,343 | ) | 17,216 | 50,652 | - | 50,652 | ||||||||||||||||||||
PAMA
|
273,373 | 24,344 | (40 | ) | 43,940 | 341,617 | - | 341,617 | ||||||||||||||||||||
PBS
|
820 | (12,311 | ) | (136 | ) | 10,669 | (958 | ) | (958 | ) | - | |||||||||||||||||
VISÃO
|
(30,432 | ) | (5,706 | ) | (3,621 | ) | 21,921 | (17,838 | ) | (17,838 | ) | - | ||||||||||||||||
PREV
|
(693 | ) | (869 | ) | (3,725 | ) | (23,965 | ) | (29,252 | ) | (29,252 | ) | - | |||||||||||||||
TOTAL
|
277,683 | 8,622 | (11,865 | ) | 69,781 | 344,221 | (48,048 | ) | 392,269 |
e.
|
Movement of defined benefit liabilities
|
Defined benefit liability at 12. 31.12
|
Current service cost
|
Interest on actuarial liabilities
|
Benefits paid for the year
|
Allocated member contributions for the year
|
Actuarial experience (gains) losses
|
Actuarial (gains) losses based on biometric assumptions
|
Actuarial (gains) losses based on financial assumptions
|
Defined benefit liability at 12.31.13
|
||||||||||||||||||||||||||||
PBS-A
|
1,376,229 | - | 115,001 | (106,210 | ) | - | 28,268 | 32,649 | (237,669 | ) | 1,208,268 | |||||||||||||||||||||||||
CTB
|
50,652 | - | 4,127 | (5,138 | ) | - | 7,075 | 1,417 | (8,975 | ) | 49,158 | |||||||||||||||||||||||||
PAMA
|
437,241 | 139 | 38,759 | (15,664 | ) | - | (2,297 | ) | 27,808 | (98,526 | ) | 387,460 | ||||||||||||||||||||||||
PBS
|
229,119 | 644 | 19,520 | (14,181 | ) | 190 | 1,706 | 10,962 | (42,011 | ) | 205,949 | |||||||||||||||||||||||||
VISÃO
|
34,666 | 4,148 | 2,807 | (324 | ) | 341 | (8,580 | ) | (19,799 | ) | (3,625 | ) | 9,634 | |||||||||||||||||||||||
PREV
|
53,559 | 4,270 | 4,456 | (1,707 | ) | 171 | (7,038 | ) | (17,983 | ) | (7,481 | ) | 28,247 | |||||||||||||||||||||||
TOTAL
|
2,181,466 | 9,201 | 184,670 | (143,224 | ) | 702 | 19,134 | 35,054 | (398,287 | ) | 1,888,716 | |||||||||||||||||||||||||
Defined benefit liability at 01.01.12
|
Current service cost
|
Interest on actuarial liabilities
|
Benefits paid for the year
|
Allocated member contributions for the year
|
Actuarial experience (gains) losses
|
Actuarial (gains) losses based on biometric assumptions
|
Actuarial (gains) losses based on financial assumptions
|
Defined benefit liability at 12.31.12
|
||||||||||||||||||||||||||||
PBS-A
|
1,214,453 | - | 113,362 | (101,793 | ) | - | 22,791 | - | 127,416 | 1,376,229 | ||||||||||||||||||||||||||
CTB
|
34,615 | - | 3,164 | (4,343 | ) | - | 12,898 | - | 4,318 | 50,652 | ||||||||||||||||||||||||||
PAMA
|
366,660 | 165 | 35,026 | (14,821 | ) | - | 10,538 | - | 39,673 | 437,241 | ||||||||||||||||||||||||||
PBS
|
242,227 | 853 | 22,780 | (13,323 | ) | 270 | (45,066 | ) | - | 21,378 | 229,119 | |||||||||||||||||||||||||
VISÃO
|
33,986 | 4,601 | 3,085 | (1,322 | ) | 180 | (6,738 | ) | - | 874 | 34,666 | |||||||||||||||||||||||||
PREV
|
46,251 | 3,872 | 4,260 | (1,606 | ) | 113 | (2,286 | ) | - | 2,955 | 53,559 | |||||||||||||||||||||||||
TOTAL
|
1,938,192 | 9,491 | 181,677 | (137,208 | ) | 563 | (7,863 | ) | - | 196,614 | 2,181,466 |
f.
|
Movement of fair value of plan assets
|
Fair value of the plan assets at 12.31.12
|
Benefits paid for the year
|
Total contributions for the year
|
Sponsor contributions poured in the year
|
Interest income on plan assets
|
Return on the plan assets excluding interest income
|
Fair value of plan assets at 12.31.13
|
||||||||||||||||||||||
PBS-A
|
2,136,722 | (106,210 | ) | - | - | 180,936 | (85,504 | ) | 2,125,944 | |||||||||||||||||||
PAMA
|
95,624 | (15,664 | ) | 38 | 7,948 | (21,679 | ) | 66,267 | ||||||||||||||||||||
PBS
|
342,323 | (14,181 | ) | 190 | 140 | 29,538 | (76,883 | ) | 281,127 | |||||||||||||||||||
VISÃO
|
61,189 | (324 | ) | 341 | 3,462 | 5,279 | (25,159 | ) | 44,788 | |||||||||||||||||||
PREV
|
106,150 | (1,707 | ) | 171 | 3,849 | 9,218 | (37,837 | ) | 79,844 | |||||||||||||||||||
TOTAL
|
2,742,008 | (138,086 | ) | 702 | 7,489 | 232,919 | (247,062 | ) | 2,597,970 | |||||||||||||||||||
Fair value of plan assets at 01.01.12
|
Benefits paid for the year
|
Total contributions for the year
|
Sponsor contributions poured in the year
|
Interest income on plan assets
|
Return on the plan assets excluding interest income
|
Fair value of plan assets at 12.31.12
|
||||||||||||||||||||||
PBS-A
|
1,882,195 | (101,793 | ) | - | - | 243,033 | 113,287 | 2,136,722 | ||||||||||||||||||||
PAMA
|
93,287 | (14,821 | ) | 39 | 10,847 | 6,272 | 95,624 | |||||||||||||||||||||
PBS
|
294,602 | (13,323 | ) | 270 | 136 | 35,944 | 24,694 | 342,323 | ||||||||||||||||||||
VISÃO
|
108,793 | (1,322 | ) | 180 | 3,621 | 13,392 | (63,475 | ) | 61,189 | |||||||||||||||||||
PREV
|
73,689 | (1,606 | ) | 113 | 3,727 | 9,001 | 21,226 | 106,150 | ||||||||||||||||||||
TOTAL
|
2,452,566 | (132,865 | ) | 563 | 7,523 | 312,217 | 102,004 | 2,742,008 |
g.
|
Expected P&L for the year 2014
|
Current service cost
|
Net interest on net defined benefit liability/asset
|
Total
|
||||||||||
CTB
|
- | 5,012 | 5,012 | |||||||||
PAMA
|
89 | 34,590 | 34,679 | |||||||||
PBS
|
436 | (576 | ) | (140 | ) | |||||||
VISÃO
|
1,038 | (778 | ) | 260 | ||||||||
PREV
|
1,001 | (757 | ) | 244 | ||||||||
Total
|
2,564 | 37,491 | 40,055 |
h.
|
Contributions by the sponsors expected for 2014
|
Sponsor contributions
|
Benefits paid directly by the sponsor
|
Total
|
||||||||||
CTB
|
- | 5,245 | 5,245 | |||||||||
PAMA
|
41 | - | 41 | |||||||||
PBS
|
1,128 | - | 1,128 | |||||||||
VISÃO
|
1,107 | - | 1,107 | |||||||||
PREV
|
1,023 | - | 1,023 | |||||||||
Total
|
3,299 | 5,245 | 8,544 |
i.
|
Weighted average of the defined benefit obligation
|
2013
|
2012
|
||
PBS-A
|
12.75 years
|
10.45 years
|
|
CTB
|
11.32 years
|
9.27 years
|
|
PAMA
|
16.01 years
|
15.73 years
|
|
PBS
|
15.01 years
|
12.34 years
|
|
VISÃO
|
8.29 years
|
10.01 years
|
|
PREV
|
13.62 years
|
11.65 years
|
j.
|
Actuarial assumptions
|
2013 | ||||||||||||||||||||||||||||
Plan |
Future salary
growth rate
|
Medical
expense growth
|
Nominal annual
adjustment rate
of pension
|
Medical service
eligibility age
|
Retirement age
|
Mortality table
for nondisabled
|
Mortality
table for
|
Disability
table
|
Turnover
|
|||||||||||||||||||
PBS
|
6.18 | % | N/A | 4.5 | % | N/A |
57 years old
|
AT-2000 Basic
segregated by
|
RP-2000
Disabled
|
Mercer
Disability
|
N/A | |||||||||||||||||
AT-2000 Basic
|
Turnover
|
|||||||||||||||||||||||||||
segregated by
|
Light-Fraca,
|
experience in
|
||||||||||||||||||||||||||
gender, down-
|
down-rated by
|
VISÃO plans
|
||||||||||||||||||||||||||
VISÃO
|
6.18 | % | N/A | 4.5 | % | N/A |
60 years old
|
rated by 50%
|
N/A | 30 | % |
(2008 to 2011)
|
||||||||||||||||
N/A, except
|
||||||||||||||||||||||||||||
AT-2000 Basic
|
for TCOPrev,
|
Turnover
|
||||||||||||||||||||||||||
segregated by
|
which uses
|
Light-Fraca,
|
experience in
|
|||||||||||||||||||||||||
gender, down-
|
RP-2000
|
down-rated by
|
VISÃO plans
|
|||||||||||||||||||||||||
PREV
|
6.18 | % | N/A | 4.5 | % | N/A |
60 years old
|
rated by 50%
|
Disabled Male
|
30 | % |
(2008 to 2011)
|
||||||||||||||||
AT-2000 Basic
|
||||||||||||||||||||||||||||
segregated by
|
||||||||||||||||||||||||||||
gender, down-
|
||||||||||||||||||||||||||||
CTB
|
6.18 | % | N/A | 4.5 | % | N/A | N/A |
rated by 10%
|
N/A | N/A | N/A | |||||||||||||||||
5% upon
|
||||||||||||||||||||||||||||
reaching 52 years
|
||||||||||||||||||||||||||||
and 10 years of
|
||||||||||||||||||||||||||||
participation; 3%
|
||||||||||||||||||||||||||||
each subsequent
|
AT-2000 Basic
|
|||||||||||||||||||||||||||
year; 100% in
|
segregated by
|
|||||||||||||||||||||||||||
normal retirment
|
gender, down-
|
|||||||||||||||||||||||||||
PAMA
|
N/A | 7.64 | % | N/A |
eligibility
|
N/A |
rated by 10%
|
N/A | N/A | N/A | ||||||||||||||||||
AT-2000 Basic
|
||||||||||||||||||||||||||||
segregated by
|
||||||||||||||||||||||||||||
gender, down-
|
||||||||||||||||||||||||||||
PBS-A
|
N/A | N/A | 4.5 | % | N/A | N/A |
rated by 10%
|
N/A | N/A | N/A |
·
|
Long-term inflation rate: 4.5%;
|
·
|
Discount rate at present value of the defined benefit liability: 10.77%;
|
·
|
Capacity factor for salaries and benefits: 98%;
|
·
|
Growth of medical costs by age (aging factor): 4%; and
|
·
|
Actuarial method: PUC
|
2012
|
||||||||||||||||||
Plano
|
Future salary
growth rate
|
Medical
expense growth
rate
|
Nominal annual
adjustment rate
benefits
|
Medical service
eligibility age
|
Retirement age
|
|||||||||||||
PBS
|
6.18 | % | N/A | 4.5 | % | N/A |
57 years old
|
|||||||||||
VISÃO
|
6.18 | % | N/A | 4.5 | % | N/A |
60 years old
|
|||||||||||
PREV
|
6.18 | % | N/A | 4.5 | % | N/A |
60 years old
|
|||||||||||
CTB
|
6.18 | % | N/A | 4.5 | % | N/A | N/A | |||||||||||
PAMA
|
N/A | 7.64 | % | N/A |
5% upon
reaching 52 years
normal retirment
|
N/A | ||||||||||||
PBS-A
|
N/A | N/A | 4.5 | % | N/A | N/A |
·
|
Long-term inflation rate: 4.5%;
|
·
|
Capacity factor for salaries and benefits: 98%;
|
·
|
Rotation: 0.15 (length of service +1), null as from 50 years;
|
·
|
Table of disability benefit request: Mercer Disability;
|
·
|
Mortality table for non-disabled people: AT2000 segregated by gender;
|
·
|
Mortality table for disabled people: IAPB-57
|
·
|
Growth of medical costs by age (aging factor): 4%; and
|
·
|
Actuarial method: PUC
|
k.
|
Changes in actuarial assumptions in relation to the prior year
|
·
|
Mortality table for non-disabled people
|
·
|
Mortality table for disabled people
|
·
|
Table of disability benefit request
|
·
|
Rotation index
|
·
|
Discount rate at present value of the defined benefit liability
|
Defined benefit liability, based on current actuarial assumptions
|
Defined benefit liability, based on prior-year actuarial assumptions
|
Difference from change in actuarial assumptions
|
||||||||||
PBS-A
|
1,208,268 | 1,413,289 | (205,021 | ) | ||||||||
CTB
|
49,158 | 56,715 | (7,557 | ) | ||||||||
PAMA
|
387,460 | 458,178 | (70,718 | ) | ||||||||
PBS
|
205,949 | 236,998 | (31,049 | ) | ||||||||
VISÃO
|
9,634 | 33,059 | (23,425 | ) | ||||||||
PREV
|
28,247 | 53,710 | (25,463 | ) | ||||||||
Total
|
1,888,716 | 2,251,949 | (363,233 | ) |
l.
|
Sensitivity analysis of actuarial assumptions
|
Defined benefit liability, discounted to present value at a 10.77% rate
|
Defined benefit liability, discounted to present value at a 11.27% rate (up by 0.5%)
|
Defined benefit liability, discounted to present value at a 10.27% rate (down by 0.5%)
|
||||||||||
PBS-A
|
1,208,268 | 1,157,255 | 1,263,512 | |||||||||
CTB
|
49,158 | 47,323 | 51,134 | |||||||||
PAMA
|
387,460 | 365,071 | 412,143 | |||||||||
PBS
|
205,949 | 195,860 | 216,989 | |||||||||
VISÃO
|
9,634 | 9,433 | 9,845 | |||||||||
PREV
|
28,247 | 27,007 | 29,607 | |||||||||
Total
|
1,888,716 | 1,801,949 | 1,983,230 |
m.
|
Allocation of assets of plans
|
PBS-A
|
PAMA
|
PBS
|
VISÃO
|
PREV
|
||||||||||||||||
Investments with market value quoted in active market:
|
||||||||||||||||||||
Fixed income investments
|
||||||||||||||||||||
Nacional Treasury Note (NTN)
|
1,302,601 | 53,876 | 266,580 | 32,353 | 55,710 | |||||||||||||||
Treasury Financial Letter (LFT)
|
126,428 | 204 | - | 396 | 682 | |||||||||||||||
Nacional Treasury Letter (LTN)
|
15,205 | 164 | 8,066 | 1,664 | 2,865 | |||||||||||||||
Certificate of Interbank Deposit (CDB)
|
75,815 | 12,023 | - | 759 | 1,307 | |||||||||||||||
Debentures
|
- | - | - | 2,969 | 5,112 | |||||||||||||||
Financial letter
|
- | - | - | 1,877 | 3,231 | |||||||||||||||
FIDC quotes / Others
|
- | - | 5,420 | 1,209 | 2,081 | |||||||||||||||
Variable income investments
|
||||||||||||||||||||
Investments in food and beverage industry
|
88,886 | - | - | 367 | 902 | |||||||||||||||
Investments in aerospace sector
|
44,836 | - | - | - | - | |||||||||||||||
Investments in energy sector
|
206,876 | - | - | 241 | 592 | |||||||||||||||
Investments in mining sector
|
7,866 | - | - | 300 | 738 | |||||||||||||||
Investments in oil, gas and biofuels
|
- | - | - | 151 | 371 | |||||||||||||||
Investments in telephone industry
|
- | - | - | 85 | 209 | |||||||||||||||
Investments in steel and metallurgy sector
|
- | - | - | 153 | 376 | |||||||||||||||
Investments in water and sanitation sector
|
- | - | - | 13 | 32 | |||||||||||||||
Investments in construction and engineering
|
- | - | - | 143 | 352 | |||||||||||||||
Investments in the trading and distribution industry
|
- | - | - | 66 | 163 | |||||||||||||||
Investments in transport sector
|
- | - | - | 159 | 390 | |||||||||||||||
Investments in wood and paper industry
|
- | - | - | 76 | 188 | |||||||||||||||
Investments in education sector
|
- | - | - | 67 | 166 | |||||||||||||||
Investments in financial services industry / banking institutions
|
- | - | - | 797 | 1,960 | |||||||||||||||
Investments in real estate
|
- | - | - | 52 | 127 | |||||||||||||||
Investments in tacacco sector
|
- | - | - | 33 | 81 | |||||||||||||||
Investments in sector holdings
|
- | - | - | 138 | 340 | |||||||||||||||
Investments in other sectors
|
- | - | - | 127 | 311 | |||||||||||||||
Investments in market index (IBrX50)
|
44,857 | - | - | - | - | |||||||||||||||
Structured investments
|
10,630 | - | - | - | - | |||||||||||||||
Real estate investments
|
170,076 | - | - | - | - | |||||||||||||||
Loans to participants
|
31,868 | - | 1,061 | - | - | |||||||||||||||
Investments with market value non-quoted in active market:
|
||||||||||||||||||||
Loans to participants
|
- | - | - | 593 | 1,558 | |||||||||||||||
Total
|
2,125,944 | 66,267 | 281,127 | 44,788 | 79,844 |
n.
|
Calendar of due dates of payments of future benefits
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019 onwards
|
|||||||||||||||||||
PBS-A
|
103,336 | 107,010 | 110,704 | 114,411 | 117,960 | 4,183,610 | ||||||||||||||||||
CTB
|
5,245 | 5,248 | 5,238 | 5,220 | 5,198 | 139,280 | ||||||||||||||||||
PAMA
|
16,643 | 18,337 | 20,182 | 22,189 | 24,344 | 2,842,005 | ||||||||||||||||||
PBS
|
14,861 | 15,545 | 16,542 | 17,218 | 17,885 | 1,032,487 | ||||||||||||||||||
VISÃO
|
1,681 | 1,693 | 1,700 | 1,709 | 1,713 | 25,344 | ||||||||||||||||||
PREV
|
2,818 | 2,879 | 2,943 | 3,072 | 3,151 | 156,791 |
36.
|
Financial instruments
|
Fair value
|
Amortized cost
|
|||||||||||||||||||||||||||||||
Financial assets
|
Measured at fair value through profit or loss
|
Coverage
|
Available for sale
|
Loans and receivables
|
Level 1 Market price
|
Level 2 Estimates based on other market inputs
|
Total book value
|
Total fair value
|
||||||||||||||||||||||||
Current
|
||||||||||||||||||||||||||||||||
Cash and cash equivalent (Note5)
|
- | - | - | 6,543,936 | - | - | 6,543,936 | 6,543,936 | ||||||||||||||||||||||||
Derivative transactions (Note36)
|
893 | 88,606 | - | - | - | 89,499 | 89,499 | 89,499 | ||||||||||||||||||||||||
Noncurrent
|
||||||||||||||||||||||||||||||||
Equity investments (Note12)
|
- | - | 86,349 | - | 86,349 | - | 86,349 | 86,349 | ||||||||||||||||||||||||
Derivative transactions (Note36)
|
- | 329,652 | - | - | - | 329,652 | 329,652 | 329,652 | ||||||||||||||||||||||||
Total financial assets
|
893 | 418,258 | 86,349 | 6,543,936 | 86,349 | 419,151 | 7,049,436 | 7,049,436 |
Financial liabilities
|
Measured at fair value through profit or loss
|
Amortized cost
|
Coverage
|
Level 2 Estimates based on other market inputs
|
Total book value
|
Total fair value
|
||||||||||||||||||
Current
|
||||||||||||||||||||||||
Loans, financing and lease (Note 18.1)
|
- | 1,236,784 | - | - | 1,236,784 | 1,417,911 | ||||||||||||||||||
Debentures (Note 18.2)
|
- | 286,929 | - | - | 286,929 | 588,116 | ||||||||||||||||||
Derivative transactions (Note36)
|
871 | - | 43,592 | 44,463 | 44,463 | 44,463 | ||||||||||||||||||
Noncurrent
|
||||||||||||||||||||||||
Loans, financing and lease (Note18.1)
|
- | 3,215,156 | - | - | 3,215,156 | 2,923,290 | ||||||||||||||||||
Debentures (Note 18.2)
|
- | 4,014,686 | - | - | 4,014,686 | 3,698,203 | ||||||||||||||||||
Derivative transactions (Note36)
|
- | - | 24,807 | 24,807 | 24,807 | 24,807 | ||||||||||||||||||
Total financial assets
|
871 | 8,753,555 | 68,399 | 69,270 | 8,822,825 | 8,696,790 |
Fair value
|
Amortized cost
|
|||||||||||||||||||||||||||
Financial assets |
Coverage
|
Available for sale
|
Loans and receivables
|
Level 1 Market price
|
Level 2 Estimates based on other market inputs
|
Total book value
|
Total fair value
|
|||||||||||||||||||||
Current
|
||||||||||||||||||||||||||||
Cash and cash equivalent (Note5)
|
- | - | 7,133,485 | - | - | 7,133,485 | 7,133,485 | |||||||||||||||||||||
Derivative transactions (Note36)
|
41,109 | - | - | - | 41,109 | 41,109 | 41,109 | |||||||||||||||||||||
Noncurrent
|
||||||||||||||||||||||||||||
Equity investments (Note12)
|
- | 142,881 | - | 142,881 | - | 142,881 | 142,881 | |||||||||||||||||||||
Derivative transactions (Note36)
|
286,278 | - | - | - | 286,278 | 286,278 | 286,278 | |||||||||||||||||||||
Total financial assets
|
327,387 | 142,881 | 7,133,485 | 142,881 | 327,387 | 7,603,753 | 7,603,753 |
Financial liabilities
|
Measured at fair value through profit or loss
|
Amortized cost
|
Coverage
|
Level 2 Estimates based on other market inputs
|
Total book value
|
Total fair value
|
||||||||||||||||||
Current
|
||||||||||||||||||||||||
Loans, financing and lease (Note 18.1)
|
- | 1,270,122 | - | - | 1,270,122 | 1,471,265 | ||||||||||||||||||
Debentures (Note 18.2)
|
- | 702,215 | - | - | 702,215 | 811,919 | ||||||||||||||||||
Derivative transactions (Note 36)
|
470 | - | 29,116 | 29,586 | 29,586 | 29,586 | ||||||||||||||||||
Noncurrent
|
||||||||||||||||||||||||
Loans, financing and lease (Note 18.1)
|
- | 3,774,461 | - | - | 3,774,461 | 3,600,090 | ||||||||||||||||||
Debentures (Note 18.2)
|
- | 2,253,690 | - | - | 2,253,690 | 2,158,008 | ||||||||||||||||||
Derivative transactions (Note 36)
|
- | - | 26,545 | 26,545 | 26,545 | 26,545 | ||||||||||||||||||
Total financial liabilities
|
470 | 8,000,488 | 55,661 | 56,131 | 8,056,619 | 8,097,413 |
12.31.13 | 12.31.12 | |||||||
Cash and cash equivalents
|
6,543,936 | 7,133,485 | ||||||
Loans, financing, debentures, lease and derivative transactions (net of short-term investments pledged as a guarantee for debt repayment)
|
(8,343,761 | ) | (7,669,252 | ) | ||||
Net debt
|
1,799,825 | 535,767 | ||||||
Net equity
|
42,894,442 | 44,681,120 | ||||||
Net debt-to-equity ratio
|
4.20 | % | 1.20 | % |
a.
|
Currency risk
|
b.
|
Interest rate and inflation risk
|
c.
|
Liquidity risk
|
d.
|
Credit risk
|
Accumulated effect
|
||||||||||||||||||||||||||
Notional value
|
Fair value
|
Receivables (payables)
|
||||||||||||||||||||||||
Description
|
Index
|
12.31.13 | 12.31.12 | 12.31.13 | 12.31.12 | 12.31.13 | 12.31.12 | |||||||||||||||||||
Swap contracts
|
||||||||||||||||||||||||||
Receivable
|
||||||||||||||||||||||||||
Foreign currency
|
1,339,265 | 1,520,371 | 1,843,347 | 1,923,089 | 393,232 | 305.301 | ||||||||||||||||||||
Citibank
|
US$
|
181,230 | 181,230 | 240,175 | 216,270 | 62,099 | 39,617 | |||||||||||||||||||
Votorantim
|
US$
|
2,464 | 7,744 | 3,547 | 9,311 | - | - | |||||||||||||||||||
Banco do Brasil
|
US$
|
- | 258,900 | - | 326,263 | - | 38,576 | |||||||||||||||||||
Bradesco
|
US$
|
474,281 | 415,464 | 626,463 | 519,481 | 50,883 | 32,931 | |||||||||||||||||||
Itaú
|
US$
|
36,656 | 22,520 | 37,182 | 22,239 | 394 | - | |||||||||||||||||||
JP Morgan
|
US$
|
443,207 | 443,207 | 645,001 | 579,331 | 204,720 | 142,065 | |||||||||||||||||||
Bradesco
|
EUR
|
12,888 | 2,613 | 12,913 | 2,613 | - | - | |||||||||||||||||||
Itaú
|
EUR
|
5,506 | 9,160 | 5,481 | 9,159 | - | - | |||||||||||||||||||
Bradesco
|
LIBOR US$
|
179,533 | 179,533 | 264,615 | 238,422 | 75,136 | 52,112 | |||||||||||||||||||
Itaú
|
JPY
|
3,500 | - | 7,970 | - | - | - | |||||||||||||||||||
Floating rate
|
736,169 | - | 713,292 | - | 4,438 | - | ||||||||||||||||||||
Bradesco
|
CDI
|
15,530 | - | 15,518 | - | 89 | - | |||||||||||||||||||
Itaú
|
CDI
|
20,639 | - | 20,769 | - | - | - | |||||||||||||||||||
HSBC
|
TJLP
|
100,000 | - | 96,715 | - | 552 | - | |||||||||||||||||||
Citibank
|
TJLP
|
200,000 | - | 193,430 | - | 1,233 | - | |||||||||||||||||||
Santander
|
TJLP
|
300,000 | - | 290,145 | - | 2,012 | - | |||||||||||||||||||
Itaú
|
TJLP
|
100,000 | - | 96,715 | - | 552 | - | |||||||||||||||||||
Inflation rates
|
232,714 | 72,000 | 251,282 | 96,249 | 21,481 | 22,086 |
Itaú
|
IPCA
|
72,000 | 72,000 | 95,351 | 96,249 | 21,159 | 22,086 | |||||||||||||||||||
Santander
|
IPCA
|
160,714 | - | 155,931 | - | 322 | - | |||||||||||||||||||
Payable
|
||||||||||||||||||||||||||
Floating rate
|
(2,083,238 | ) | (1,412,838 | ) | (2,148,818 | ) | (1,509,659 | ) | (66,145 | ) | (55,545 | ) | ||||||||||||||
Citibank
|
CDI
|
(381,230 | ) | (181,230 | ) | (377,847 | ) | (180,418 | ) | (7,574 | ) | (3,765 | ) | |||||||||||||
Votorantim
|
CDI
|
(2,464 | ) | (7,744 | ) | (7,335 | ) | (21,336 | ) | (3,788 | ) | (12,025 | ) | |||||||||||||
Banco do Brasil
|
CDI
|
- | (258,900 | ) | - | (287,686 | ) | - | - | |||||||||||||||||
HSBC
|
CDI
|
(100,000 | ) | - | (98,891 | ) | - | (2.727 | ) | - | ||||||||||||||||
Bradesco
|
CDI
|
(487,169 | ) | (418,077 | ) | (537,975 | ) | (463,910 | ) | (21.932 | ) | (26,273 | ) | |||||||||||||
Itaú
|
CDI
|
(208,454 | ) | (103,680 | ) | (215,479 | ) | (105,893 | ) | (2,855 | ) | (333 | ) | |||||||||||||
Santander
|
CDI
|
(460,714 | ) | - | (456,982 | ) | - | (13.240 | ) | - | ||||||||||||||||
JP Morgan
|
CDI
|
(443,207 | ) | (443,207 | ) | (454,309 | ) | (450,416 | ) | (14.029 | ) | (13,149 | ) | |||||||||||||
Foreign exchange
|
(224,911 | ) | (179,533 | ) | (309,221 | ) | (238,422 | ) | (3,125 | ) | (586 | ) | ||||||||||||||
Bradesco
|
LIBOR US$
|
(179,533 | ) | (179,533 | ) | (264,615 | ) | (238,422 | ) | (2.687 | ) | (586 | ) | |||||||||||||
Bradesco
|
US$
|
(15,530 | ) | - | (15,429 | ) | - | - | - | |||||||||||||||||
Itaú
|
EUR
|
(5,709 | ) | - | (5,811 | ) | - | (65 | ) | - | ||||||||||||||||
Itaú
|
US$
|
(24,139 | ) | - | (23,366 | ) | - | (373 | ) | - | ||||||||||||||||
Receivables
|
419,151 | 327,387 | ||||||||||||||||||||||||
Payables
|
(69,270 | ) | (56,131 | ) | ||||||||||||||||||||||
Receivables, net
|
349,881 | 271,256 |
Swap contract
|
Maturity
|
|||||||||||||||||||
2014
|
2015
|
2016
|
2017 onwards
|
Receivables (payables) at 12.31.13
|
||||||||||||||||
Foreign currency
vs.
CDI
|
26,886 | 212,029 | 18,986 | 89,945 | 347,846 | |||||||||||||||
Votorantim
|
(3,788 | ) | - | - | - | (3,788 | ) | |||||||||||||
Bradesco
|
(14,839 | ) | 7,308 | 18,986 | 89,945 | 101,400 | ||||||||||||||
JP Morgan
|
(14,029 | ) | 204,721 | - | - | 190,692 | ||||||||||||||
Citibank
|
59,276 | - | - | - | 59,276 | |||||||||||||||
Itaú
|
266 | - | - | - | 266 | |||||||||||||||
CDI
vs.
Foreign currency
|
(152 | ) | - | - | - | (152 | ) | |||||||||||||
Itaú
|
(241 | ) | - | - | - | (241 | ) | |||||||||||||
Bradesco
|
89 | - | - | - | 89 | |||||||||||||||
FORWARD
|
(197 | ) | - | - | - | (197 | ) | |||||||||||||
Itaú
|
(197 | ) | - | - | - | (197 | ) | |||||||||||||
TJLP
vs.
CDI
|
(2,703 | ) | (6,172 | ) | (5,247 | ) | 1,958 | (12,164 | ) | |||||||||||
Citibank
|
(792 | ) | (1,774 | ) | (1,506 | ) | 553 | (3,519 | ) | |||||||||||
HSBC
|
(566 | ) | (994 | ) | (825 | ) | 210 | (2,175 | ) | |||||||||||
Santander
|
(779 | ) | (2,410 | ) | (2,091 | ) | 985 | (4,295 | ) | |||||||||||
Itaú
|
(566 | ) | (994 | ) | (825 | ) | 210 | (2,175 | ) | |||||||||||
IPCA
vs.
CDI
|
21,201 | 35 | (11 | ) | (6,677 | ) | 14,548 | |||||||||||||
Itaú
|
21,159 | - | - | - | 21,159 | |||||||||||||||
Santander
|
42 | 35 | (11 | ) | (6,677 | ) | (6,611 | ) | ||||||||||||
Total
|
45,035 | 205,892 | 13,728 | 85,226 | 349,881 |
Consolidated
|
||||||||
Transaction
|
Risk
|
Probable
|
Deterioration 25%
|
Deterioration 50%
|
||||
Hedge (receivable)
|
Derivatives (Risk of USD devaluation)
|
888,723
|
1,117,006
|
1,347,808
|
||||
Debt in USD
|
Debts (Risk of USD devaluation)
|
(888,723)
|
(1,117,006)
|
(1,347,808)
|
||||
Net exposure
|
-
|
-
|
-
|
|||||
Hedge (payable)
|
Derivatives (Risk of EUR devaluation)
|
12,583
|
15,807
|
18,974
|
||||
Accounts payable in EUR
|
Accounts payable in EUR (Risk of EUR devaluation)
|
(19,875)
|
(24,844)
|
(29,813)
|
||||
Accounts receivable in EUR
|
Accounts payable in EUR (Risk of EUR devaluation
|
11,833
|
14,791
|
17,749
|
||||
Net exposure
|
4,541
|
5,754
|
6,910
|
|||||
Hedge (receivable)
|
Derivatives (Risk of USD devaluation)
|
73,192
|
91,219
|
109,513
|
||||
Accounts payable in USD
|
Debt (Risk of USD devaluation)
|
(122,891)
|
(153,613)
|
(184,336)
|
||||
Accounts receivable in USD
|
Debt (Risk of USD devaluation)
|
42,070
|
52,587
|
63,105
|
||||
Net exposure
|
(7,629)
|
(9,807)
|
(11,718)
|
|||||
Hedge (receivable)
|
Derivatives (Risk of IPCA decrease)
|
95,351
|
95,593
|
96,349
|
||||
Debt in IPCA
|
Debts (Risk of IPCA increase)
|
(95,351)
|
(95,593)
|
(96,349)
|
||||
Net exposure
|
-
|
-
|
-
|
|||||
Hedge (receivable)
|
Derivatives (Risk of UMBND decrease)
|
559,628
|
713,146
|
872,705
|
||||
Debt in UMBND
|
Debts (Risk of UMBND increase)
|
(554,739)
|
(706,896)
|
(865,032)
|
||||
Net exposure
|
4,889
|
6,250
|
7,673
|
|||||
Hedge (receivable)
|
Derivatives (Risk of TJLP decrease)
|
677,004
|
729,556
|
782,191
|
||||
Debt in TJLP
|
Debts (Risk of TJLP increase)
|
(677,004)
|
(729,556)
|
(782,191)
|
Net exposure
|
-
|
-
|
-
|
|||||
Hedge (CDI payable)
|
||||||||
Hedge USD (payable)
|
Derivatives (Risk of CDI increase)
|
(642,543)
|
(641,909)
|
(641,298)
|
||||
Hedge USD and EUR (payable and receivable) |
(85,556)
|
(85,534)
|
(85,512)
|
|||||
Hedge UMBND (payable)
|
Derivatives (Risk of CDI increase)
|
(458,528)
|
(465,691)
|
(472,064)
|
||||
Hedge TJLP (payable)
|
Derivatives (Risk of CDI increase)
|
(689,170)
|
(690,082)
|
(690,912)
|
||||
Hedge IPCA (payable)
|
Derivatives (Risk of CDI increase)
|
(74,192)
|
(74,346)
|
(74,496)
|
||||
Net exposure
|
(1,949,989)
|
(1,957,562)
|
(1,964,282)
|
|||||
Total net exposure in each scenario
|
(1,948,188)
|
(1,955,365)
|
(1,961,417)
|
|||||
Net effect on variation of current fair value |
-
|
(7,177)
|
(13,229)
|
Risk variable
|
Probable
|
Deterioration 25%
|
Deterioration 50%
|
|||||||||
USD
|
2.3426 | 2.9283 | 3.5139 | |||||||||
EUR
|
3.2307 | 4.0384 | 4.846 | |||||||||
IPCA
|
0.057 | 0.0713 | 0.0855 | |||||||||
JPY
|
2.23 | % | 2.79 | % | 3.35 | % | ||||||
CDI
|
9.77 | % | 12.21 | % | 14.66 | % | ||||||
UMBND
|
0.0458 | 0.0572 | 0.0686 | |||||||||
URTJLP
|
197.41 | % | 246.76 | % | 296.11 | % |
37.
|
Commitments and guarantees (Rentals)
|
Up to one year
|
2,416,820 | |||
From one to five years
|
4,365,685 | |||
More than five years
|
3,520,457 | |||
Total
|
10,302,962 |
38.
|
Subsequent Events
|
Parties:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
January 18, 2010.
|
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. and later transferred back to Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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. and later transferred back to Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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. and later transferred back to Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
Februay 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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:
|
Telefônica Brasil S.A., as authorizee, and Agência Nacional de Telecomunicações (ANATEL), as grantor.
|
Date:
|
March 18, 2013.
|
Term:
|
Indefinite
|
Purpose:
|
Authorization to provide Conditional Access Service in private regime.
|
Area:
|
Entire 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.
|
Penalty:
|
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
|
2013
|
||
Telefônica Data S.A.
|
100%
|
||
Aliança Atlântica Holding B.V.(1)
|
50%
|
||
Companhia AIX de Participações (1)
|
50%
|
||
Companhia ACT de Participações (1)
|
50%
|
Date: March19, 2014
|
|||
By:
|
/s/ Antonio Carlos Valente da Silva
|
||
Name:
|
Antonio Carlos Valente da Silva
|
||
Title:
|
Chief Executive Officer
|
Date: March 19, 2014
|
|||
By:
|
/s/ Alberto Manuel Horcajo Aguirre
|
||
Name:
|
Alberto Manuel Horcajo Aguirre
|
||
Title:
|
Chief Financial 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 19, 2014
|
|||
By:
|
/s/ Antonio Carlos Valente da Silva
|
||
Name:
|
Antonio Carlos Valente da Silva
|
||
Title:
|
Chief Executive Officer
|
Date: March 19, 2014
|
|||
By:
|
/s/ Alberto Manuel Horcajo Aguirre
|
||
Name:
|
Alberto Manuel Horcajo Aguirre
|
||
Title:
|
Chief Financial Officer
|