Untitled Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 

For the month of May, 2010

Commission File Number 1-14493


VIVO PARTICIPAÇÕES S.A.
(Exact name of registrant as specified in its charter)
 
VIVO Holding Company
(Translation of Registrant's name into English)
 
Av. Roque Petroni Jr., no.1464, 6th floor – part, "B"building
04707-000 - São Paulo, SP
Federative Republic of Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____

 


Registration with CVM SHOULD not BE CONSTRUED AS AN appreciation on the company. company management is responsible for the information provided.

01.01 - IDENTIFICATION

1 - CVM CODE 01771-0 2 - COMPANY NAME
VIVO PARTICIPAÇÕES S.A.
3 – Brazilian IRS Registry of Legal Entities  (CNPJ)
02.558.074/0001-73
4 - Registration Number (NIRE)
35300158792

01.02 - HEAD OFFICE

1 - ADDRESS
Av. Roque Petroni Júnior, 1464
2 - DISTRICT
Morumbi
3 - ZIP CODE
04707-000
4 - MUNICIPALITY
São Paulo
5 - STATE
SP
6 - AREA CODE
11
7 - TELEPHONE NUMBER
7420-1172
8 - TELEPHONE NUMBER
7420-1182
9 - TELEPHONE NUMBER
-
10 - TELEX
-
11 - AREA CODE
11
12 - FAX
7420-2247
13 - FAX
-
14 - FAX
-
 
15 - E-MAIL

01.03 - INVESTOR RELATIONS OFFICER (Company Mail Address)

1 - NAME
Cristiane Barretto Sales
2 - ADDRESS
Av. Roque Petroni Junior, 1464
3 - DISTRICT
Morumbi
4 - ZIP CODE
04707-000
5 - MUNICIPALITY
São Paulo

6 - STATE
SP

7 - AREA CODE
11
8 - TELEPHONE NUMBER
7420-1362
9 - TELEPHONE NUMBER
-
10 - TELEPHONE NUMBER
-
11 - TELEX
-
12 - AREA CODE
11
13 - FAX
7420-2982
14 - FAX
7420-6752
15 - FAX
-
 
16 - E-MAIL
ri@vivo.com.br

01.04—GENERAL INFORMATION / INDEPENDENT ACCOUNTANT

CURRENT YEAR CURRENT QUARTER PRIOR QUARTER
1 - 
BEGINNING
2 - 
END
3 -
QUARTER 
4 - 
BEGINNING 
5 - 
END
 6 - 
QUARTER 
7 - 
BEGINNING 
8 -
END
    01/01/2010 12/31/2010 1  01/01/2010  03/31/2010  4 10/01/2009 12/31/2009 
9 - AUDITOR
Ernst & Young Auditores Independentes S/S
 10 - CVM CODE
 00471-5
11 - NAME OF RESPONSIBLE PARTNER
 Luiz Carlos Passetti
12 - INDIVIDUAL TAXPAYERS’ REGISTRATION NUMBER
 001.625.898-32

01.05 – CAPITAL COMPOSITION

NUMBER OF SHARES(IN THOUSANDS) 1
03/31/2010
2
12/31/2009
3
03/31/2009
SUBSCRIBED  CAPITAL      
1 - COMMON 137,269 137,269 136,275
2 - PREFERRED 263,445 263,445 238,064
3 - TOTAL 400,714 400,714 374,339
TREASURY STOCK      
4 - COMMON 0 0 0
5 - PREFERRED 1,123 1,123 1,123
6 - TOTAL 1,123 1,123 1,123

01.06 -  CHARACTERISTICS  OF THE COMPANY

1 - TYPE OF COMPANY
Commercial, industrial and others
2 – SITUATION
Operating
3 – SHARE CONTROL NATURE
Private holding
4 - ACTIVITY CODE
1130 - Telecommunications
5 - MAIN ACTIVITY
Cellular Telecommunications Service
6 - TYPE OF CONSOLIDATION
Total

1.07 - COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS

1 - ITEM 2 – Brazilian IRS Registry of Legal Entities (CNPJ)  3 - NAME

01.08 - DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER

1 - ITEM 2 - EVENT 3 - APPROVAL 4 - YIELD 5 - DATE OF
 PAYMENT
6 - TYPE OF
 SHARE
7 - YIELD
 PER SHARE
01 AGO 04/16/2010 Interest on Shareholders’ equity 04/19/2010 Common 0.1107577459
02 AGO 04/16/2010 Interest on Shareholders’ equity 04/19/2010 Preferred 0.1107577459
03 AGO 04/16/2010 Dividends 04/19/2010 Common 0.9138918337
04            AGO 04/16/2010 Dividends 04/19/2010 Preferred 0.9138918337
05         AGO 04/16/2010 Interest on Shareholders’ equity 10/25/2010 Common 0.1107577459
06            AGO 04/16/2010 Interest on Shareholders’ equity 10/25/2010 Preferred 0.1107577459
07         AGO 04/16/2010 Dividends 10/25/2010 Common 0.9138918337
08 AGO 04/16/2010 Dividends 10/25/2010 Preferred 0.9138918337

01.09—SUBSCRIBED CAPITAL AND CHANGES IN CURRENT YEAR

1 - ITEM 2 - DATE OF
 CHANGE
3 - CAPITAL
 (In thousands of
 reais)
4 - CHANGE
 AMOUNT
 (In thousands of
 reais)
5 - CHANGE
 NATURE
6 - NUMBER OF
 SHARES
 ISSUED
 (Thousand)
7 - SHARE
 PRICE ON
 ISSUE DATE
 (In reais)

01.10—INVESTOR RELATIONS OFFICER

1 - DATE

       04/30/2010 

 

 

2 - SIGNATURE

 

 

A free translation from Portuguese into English of quarterly information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and specific norms issued by IBRACON, CFC and CVM

FEDERAL PUBLIC SERVICE        
BRAZILIAN SECURITIES COMMISSION (CVM)
ITR – QUARTERLY INFORMATION                            Corporation Law
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY                                                 As of 03/31/2010

1 – CVM CODE
01771-0
2 - COMPANY NAME
VIVO PARTICIPAÇÕES S.A.
3 – Brazilian IRS Registry of Legal Entities (CNPJ)
02.558.074/0001-73

02.01 - BALANCE SHEET - ASSETS (IN THOUSANDS OF REAIS)

1 – CODE 2 - ACCOUNT DESCRIPTION 3 – 03/31/2010 4 - 12/31/2009
1 TOTAL ASSETS 11,783,015 11,892,840
1.01 CURRENT ASSETS 1,115,782 514,273
1.01.01 CASH AND CASH EQUIVALENTS 24,995 257,111
1.01.01.01 CASH AND CASH EQUIVALENTS 24,995 257,111
1.01.02 CREDITS - -
1.01.02.01 TRADE ACCOUNTS RECEIVABLE, NET - -
1.01.02.02 OTHER RECEIVABLES - -
1.01.03 INVENTORIES - -
1.01.04 OTHER 1,090,787 257,162
1.01.04.01 INTEREST ON SHAREHOLDERS AND DIVIDENDS 1,079,077 246,092
1.01.04.02 RECOVERABLE TAXES 9,205 8,666
1.01.04.03 DEPOSITS AND BLOCKAGES ESCROW 1,223 1,072
1.01.04.04  PREPAID EXPENSES 375 998
1.01.04.05 OTHER ASSETS 907 334
1.02 NONCURRENT ASSETS 10,667,233 11,378,567
1.02.01 LONG-TERM RECEIVABLES 1,129,579 1,173,899
1.02.01.01 OTHER RECEIVABLES - -
1.02.01.02 RECEIVABLES FROM RELATED PARTIES - -
1.02.01.02.01 FROM ASSOCIATED COMPANIES - -
1.02.01.02.02 FROM SUBSIDIARY COMPANIES - -
1.02.01.02.03 FROM OTHER RELATED PARTIES - -
1.02.01.03 OTHER 1,129,579 1,173,899
1.02.01.03.01 DEFERRED AND RECOVERABLE TAXES 1,112,404 1,157,645
1.02.01.03.02 DEPOSITS AND BLOCKAGES ESCROW 5,927 5,927
1.02.01.03.03 PREPAID EXPENSES 1,477 1,570
1.02.01.03.04 OTHER ASSETS 551 549
1.02.01.03.05 DERIVATIVE CONTRACTS 9,220 8,208
1.02.02 PERMANENT ASSETS 9,537,654 10,204,668
1.02.02.01 INVESTMENTS 8,197,823 8,864,837
1.02.02.01.01 ASSOCIATED COMPANIES - -
1.02.02.01.02 GOODWILL ON ASSOCIATED COMPANIES - -
1.02.02.01.03 SUBSIDIARY COMPANIES 8,197,719 8,864,733
1.02.02.01.04 GOODWILL ON ACQUISITION OF INVESTMENTS - -
1.02.02.01.05 OTHER INVESTMENTS 104 104
1.02.02.02 PROPERTY AND EQUIPMENT 2 2
1.02.02.03 INTANGIBLE ASSETS 1,339,829 1,339,829

02.02 - BALANCE SHEET – LIABILITIES AND SHAREHOLDERS’ EQUITY (IN THOUSANDS OF REAIS)

1 - CODE 2 - ACCOUNT DESCRIPTION 3 – 03/31/2010 3 – 12/31/2009
2 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 11,783,015 11,892,840
2.01 CURRENT LIABILITIES 974,360 819,311
2.01.01 LOANS AND FINANCING - -
2.01.02 DEBENTURES 533,051 266,256
2.01.03 SUPPLIERS 2,455 2,345
2.01.04 TAXES PAYABLE 1,481 36,609
2.01.05 DIVIDENDS PAYABLE 242,919 319,287
2.01.06 PROVISIONS 1,102 1,168
2.01.06.01 PROVISION FOR CONTINGENCIES 1,102 1,168
2.01.07 PAYABLES TO RELATED PARTIES 291 327
2.01.08 OTHER 193,061 193,319
2.01.08.01 PAYROLL AND SOCIAL CHARGES 576 393
2.01.08.02 DERIVATIVE CONTRACTS 2,060 2,302
2.01.08.03 OTHER LIABILITIES 190,425 190,624
2.02 NONCURRENT LIABILITIES 1,358,107 1,814,838
2.02.01 LONG-TERM LIABILITIES 1,358,107 1,814,838
2.02.01.01 LOANS AND FINANCING - -
2.02.01.02 DEBENTURES 1,347,868 1,803,609
2.02.01.03 PROVISIONS 485 341
2.02.01.03.01 PROVISION FOR CONTINGENCIES 485 341
2.02.01.04 PAYABLES TO RELATED PARTIES - -
2.02.01.05 ADVANCE FOR FUTURE CAPITAL INCREASE - -
2.02.01.06 OTHER 9,754 10,888
2.02.01.06.01 DERIVATIVE CONTRACTS 9,418 10,552
2.02.01.06.02 OTHER LIABILITIES 336 336
2.03 DEFERRED INCOME - -
2.05 SHAREHOLDERS’ EQUITY 9,450,548 9,258,691
2.05.01 CAPITAL STOCK 8,780,150 8,780,150
2.05.02 CAPITAL RESERVES 518,678 518,678
2.05.03 REVALUATION RESERVE - -
2.05.03.01 OWN ASSETS - -
2.05.03.02 CONTROLLED AND NON CONTROLLED SUBSIDIARIES  - -
2.05.04 PROFIT RESERVES 1,503,921 1,503,921
2.05.04.01 LEGAL 164,524 164,524
2.05.04.02 STATUTORY - -
2.05.04.03 CONTINGENCIES 11,070 11,070
2.05.04.04 REALIZABLE PROFIT RESERVES - -
2.05.04.05 RETENTION OF PROFITS - -
2.05.04.06 SPECIAL RESERVE FOR UNDISTRIBUTED DIVIDENDS 611,925 611,925
2.05.04.07 OTHER PROFIT RESERVES 716,402 716,402
2.05.04.07.01 TREASURY STOCK (11,070) (11,070)
2.05.04.07.02 RESERVE FOR EXPANSION 727,472 727,472
2.05.05 ADJUSTMENTS OF EQUITY EVALUATION (1,749,650) (1,749,650)
2.05.05.03 ADJUSTMENTS BUSINESS COMBINATION (1,749,650) (1,749,650)
2.05.06 RETAINED EARNINGS/ACCUMULATED DEFICIT 397,449 205,592

 03.01 - STATEMENT OF OPERATIONS  (IN THOUSANDS OF REAIS)

1 – CODE 2 – ACCOUNT DESCRIPTION 3 - 01/01/2010
 to 03/31/2010
4 - 01/01/2010  
to 03/31/2010
5 - 01/01/2009  
to 03/31/2009
6 - 01/01/2009  
to 03/31/2009
3.01 GROSS SALES AND/OR SERVICES - - - -
3.02 DEDUCTIONS - - - -
3.03 NET SALES AND/OR SERVICES - - - -
3.04 COST OF SALES AND/OR SERVICES - - - -
3.05 GROSS PROFIT - - - -
3.06 OPERATING EXPENSES/INCOME 211,771 211,771 131,791 131,791
3.06.01 SELLING EXPENSES        
3.06.02 GENERAL AND ADMINISTRATIVE EXPENSES (5,989) (5,989) (5,025) (5,025)
3.06.03 FINANCIAL (30,352) (30,352) (60,174) (60,174)
3.06.03.01 FINANCIAL INCOME 11,373 11,373 16,380 16,380
3.06.03.02 FINANCIAL EXPENSES (41,725) (41,725) (76,554) (76,554)
3.06.03.02.01 APPROPRIATED ON SHAREHOLDERS’ EQUITY - - - -
3.06.03.02.02 FINANCIAL OPERATIONS EXPENSES - - - -
3.06.04 OTHER OPERATING INCOME 38 38 172 172
3.06.05 OTHER OPERATING EXPENSES (264) (264) (84) (84)
3.06.06 EQUITY IN EARNINGS OF SUBSIDIARY AND
ASSOCIATED COMPANIES
248,338 248,338 196,902 196,902
3.07 OPERATING RESULT 211,771 211,771 131,791 131,791
3.08 NONOPERATING INCOME (LOSS) - - - -
3.08.01 REVENUES - - - -
3.08.02 EXPENSES - - - -
3.09 INCOME(LOSS) BEFORE TAXES AND PROFIT SHARING 211,771 211,771 131,791 131,791
3.10 PROVISION FOR INCOME AND SOCIAL
CONTRIBUTION TAXES
- - - -
3.11 DEFERRED INCOME TAX (19,914) (19,914) 1,232 1,232
3.12 STATUTORY INTEREST/CONTRIBUTIONS - - - -
3.12.01 INTEREST - - - -
3.12.02 CONTRIBUTIONS - - - -
3.13 REVERSAL OF INTEREST ON SHAREHOLDERS’ EQUITY - - - -
3.15 PROFIT /LOSS FOR THE PERIOD 191,857 191,857 133,023 133,023
  NUMBER OF SHARES, EX-TREASURY (THOUSAND) 339,591 339,591 373,216 373,216
  EARNINGS PER SHARE 0.48013 0.48013 0.35642 0.35642
  LOSS PER SHARE        

04.01 - STATEMENTS OF CASH FLOWS INDIRECT METHOD (IN THOUSANDS OF REAIS)

1 - CODE 2 - ACCOUNT DESCRIPTION 3 – 01/01/2010
to 03/31/2010
4 – 01/01/2010
to 03/31/2010
5 – 01/01/2009
to 03/31/2009
5 – 01/01/2009
to 03/31/2009
4.01 NET CASH FLOW FROM OPERATING ACTIVITIES (27,710) (27,710) (2,952) (2,952)
4.01.01 CASH FLOW FROM OPERATING ACTIVITIES (37,151) (37,151) (61,246) (61,246)
4.01.01.01 NET INCOME (LOSS) 191,857 191,857 133,023 133,023
4.01.01.02 RESULT OF INTEREST CORPORATE (248,338) (248,338) (196,902) (196,902)
4.01.01.03 LOSSES ON INVESTMENT - - 80 80
4.01.01.04 LOSSES (GAINS) IN FORWARD, SWAP AND OPTION CONTRACTS (2,682) (2,682) 3,758 3,758
4.01.01.05 LOSSES (GAINS) ON LOANS, FINANCING AND DEBENTURES 1,963 1,963 - -
4.01.01.06 PROVISION (RESERVE) FOR CONTINGENCIES 95 95 (141) (141)
4.01.01.07 PROVISION FOR SUPPLIERS 40 40 168 168
4.01.01.08 PROVISION (REVERSE) DEFERRED INCOME TAXES 19,914 19,914 (1,232) (1,232)
4.01.01.09 RESIDUAL COST OF FIXED ASSETS DISPOSALS - - - -
4.01.01.10 DEFERRED INCOME TAXES - - - -
4.01.01.11 LOSSES GENERATED FROM PURCHASE OF INVESTMENTS - - - -
4.01.02 CHANGES IN ASSETS AND LIABILITIES 9,441 9,441 58,294 58,294
4.01.02.01 DEFERRED AND RECOVERABLE TAXES 25,082 25,082 32,764 32,764
4.01.02.02 OTHER CURRENT AND NONCURRENT ASSETS (10) (10) (971) (971)
4.01.02.03 PAYROLL AND RELATED ACCRUALS 183 183 (235) (235)
4.01.02.04 TRADE ACCOUNTS PAYABLE 70 70 (139) (139)
4.01.02.05 TAXES PAYABLE (35,128) (35,128) (44,547) (44,547)
4.01.02.06 PROVISION FOR CONTINGENCIES (PAYMENTS) (17) (17) (2) (2)
4.01.02.07 CHARGES ON LOANS, FINANCING AND DEBENTURES 19,129 19,129 71,503 71,503
4.01.02.08 OTHER CURRENT AND NONCURRENT LIABILITIES 132 132 (79) (79)
4.01.03 OTHER - - - -
4.02 NET CASH FLOW FROM INVESTING ACTIVITIES 82,367 82,367 178,201 178,201
4.02.01 RECEIVED FOR SUBSCRIPTION TO MINORITY - - 8,842 8,842
4.02.02 RECEIVED OF INTEREST OS SHAREHOLDERS’ EQUITY 82,367 82,367 169,359 169,359
4.03 NET CASH FLOW FROM FINANCING ACTIVITIES (286,773) (286,773) 209,804 209,804
4.03.01 LOANS, FINANCING AND DEBENTURES FUNDING - - 210,000 210,000
4.03.02 LOANS, FINANCING AND DEBENTURES PAID (210,038) (210,038) - -
4.03.03 PAYMENT OF THE REVERSE STOCK SPLIT (83) (83) (180) (180)
4.03.04 INTEREST ON SHAREHOLDERS’ EQUITY AND DIVIDENDS PAID (76,652) (76,652) (16) (16)
4.05 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (232,116) (232,116) 385,053 385,053
4.05.01 OPENING BALANCE OF CASH AND CASH EQUIVALENTS 257,111 257,111 10,706 10,706
4.05.02 CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 24,995 24,995 395,759 395,759

05.01 - STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (IN THOUSANDS OF REAIS)

1 -
CODE
2 -
ACCOUNT DESCRIPTION
3-
CAPITAL
4-CAPITAL RESERVES 5-
REVALUATION RESERVE
6-
INCOME RESERVES
7-RETAINED
EARNINGS ACCUMULATED EARNINGS
8-
ADJUSTMENT
OF SHEET VALUTATION
9 –
TOTAL
SHAREHOLDERS’ EQUITY
5.01 OPENING BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.02 PRIOR YEAR ADJUSTMENT - - - - - - -
5.03 ADJUSTED BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.04 NET INCOME/LOSS FOR THE YEAR - - - - 191,857 - 191,857
5.05 DESTINATIONS - - - - - - -
5.05.01 DIVIDENDS - - - - - - -
5.05.02 INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.05.03 OTHER DESTINATIONS - - - - - - -
5.05.03.01 LEGAL RESERVE - - - - - - -
5.08 INCREASE/DECREASE CAPITAL - - - - - - -
5.08.01 CAPITAL INCREASE - WITH RESERVES - - - - - - -
5.08.02 CAPITAL INCREASE - SHARES MERGER - - - - - - -
5.12 OTHER - - - - - - -
5.12.01 UNCLAIMED DIVIDENDS AND INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.13 FINAL BALANCE 8,780,150 518,678 - 1,503,921 397,449 (1,749,650) 9,450,548

  05.02 - STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (IN THOUSANDS OF REAIS)

1 - CODE 2 - ACCOUNT DESCRIPTION 3-
CAPITAL
4-
CAPITAL RESERVES
5-
REVALUATION RESERVE
6-
INCOME RESERVES
7-
RETAINED EARNINGS ACCUMULATED EARNINGS
8-
ADJUSTMENT
OF SHEET VALUTATION
9 –
TOTAL
SHAREHOLDERS’ EQUITY
5.01 OPENING BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.02 PRIOR YEAR ADJUSTMENT - - - - - - -
5.03 ADJUSTED BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.04 NET INCOME/LOSS FOR THE YEAR - - - - 191,857 - 191,857
5.05 DESTINATIONS - - - - - - -
5.05.01 DIVIDENDS - - - - - - -
5.05.02 INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.05.03 OTHER DESTINATIONS - - - - - - -
5.05.03.01 LEGAL RESERVE - - - - - - -
5.08 INCREASE/DECREASE CAPITAL - - - - - - -
5.08.01 CAPITAL INCREASE - WITH RESERVES - - - - - - -
5.08.02 CAPITAL INCREASE - SHARES MERGER - - - - - - -
5.12 OTHER - - - - - - -
5.12.01 UNCLAIMED DIVIDENDS AND INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.13 FINAL BALANCE 8,780,150 518,678 - 1,503,921 397,449 (1,749,650) 9,450,548

  08.01 - BALANCE SHEET – CONSOLIDATED ASSETS (IN THOUSANDS OF REAIS)

1 – CODE 2 - ACCOUNT DESCRIPTION 3 – 03/31/2010 4 – 12/31/2009
1 TOTAL ASSETS 20,671,950 21,127,793
1.01 CURRENT ASSETS 5,972,269 6,002,969
1.01.01 CASH AND CASH EQUIVALENTS 805,856 1,258,574
1.01.01.01 CASH AND CASH EQUIVALENTS 805,856 1,258,574
1.01.02 CREDITS 2,554,353 2,546,806
1.01.02.01 TRADE ACCOUNTS RECEIVABLE, NET 2,554,353 2,546,806
1.01.02.02 OTHER CREDITS - -
1.01.03 INVENTORIES 302,109 423,634
1.01.04 OTHER 2,309,951 1,773,955
1.01.04.01 SHORT-TERM INVESTMENTS PLEDGED AS COLLATERAL 35,452 39,197
1.01.04.02 RECOVERABLE TAXES 1,205,180 1,186,231
1.01.04.03 DEPOSITS AND BLOCKAGES ESCROW 232,380 200,907
1.01.04.04 DERIVATIVE CONTRACTS 3,044 14,700
1.01.04.05 PREPAID EXPENSES 674,890 161,954
1.01.04.06 OTHER ASSETS 159,005 170,966
1.02 NONCURRENT ASSETS 14,699,681 15,124,824
1.02.01 LONG-TERM RECEIVABLES 4,613,108 4,493,939
1.02.01.01 OTHER CREDIT - -
1.02.01.02 RECEIVABLES FROM RELATED PARTIES - -
1.02.01.02.01 FROM ASSOCIATED COMPANIES - -
1.02.01.02.02 FROM SUBSIDIARY COMPANIES - -
1.02.01.02.03 FROM OTHER RELATED PARTIES - -
1.02.01.03 OTHER 4,613,108 4,493,939
1.02.01.03.01 SHORT-TERM INVESTMENTS PLEDGED AS COLLATERAL 52,225 51,344
1.02.01.03.02 DEFERRED AND RECOVERABLE TAXES 3,570,040 3,670,121
1.02.01.03.03 DEPOSITS AND BLOCKAGES ESCROW 815,083 608,995
1.02.01.03.04 DERIVATIVE CONTRACTS 147,436 137,060
1.02.01.03.05 PREPAID EXPENSES 25,326 23,430
1.02.01.03.06 OTHER ASSETS 2,998 2,989
1.02.02 PERMANENT ASSETS 10,086,573 10,630,885
1.02.02.01 INVESTMENTS 112 112
1.02.02.01.01 ASSOCIATED COMPANIES - -
1.02.02.01.02 SUBSIDIARY COMPANIES - -
1.02.02.01.03 OTHER INVESTMENTS 112 112
1.02.02.02 PROPERTY AND EQUIPMENT 6,010,205 6,408,504
1.02.02.03 INTANGIBLE ASSETS 4,076,256 4,222,269
1.02.02.04 DEFERRED CHARGES - -

08.02 - BALANCE SHEET – CONSOLIDATED LIABILITIES AND SHAREHOLDERS' EQUITY  (IN THOUSANDS OF REAIS)

1 – CODE 2 - ACCOUNT DESCRIPTION 3 –03/31/2010 4 –12/31/2009
2 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 20,671,950 21,127,793
2.01 CURRENT LIABILITIES 6,269,408 6,451,455
2.01.01 LOANS AND FINANCING 669,313 688,397
2.01.02 DEBENTURES 533,051 266,256
2.01.03 SUPPLIERS 2,728,014 3,053,587
2.01.04 TAXES PAYABLE 987,394 953,355
2.01.05 DIVIDENDS PAYABLE 246,065 322,433
2.01.06 PROVISIONS 129,075 134,181
2.01.06.01 PROVISION FOR CONTINGENCIES 129,075 134,181
2.01.07 PAYABLES TO RELATED PARTIES 1,407 1,180
2.01.08 OTHER 975,089 1,032,066
2.01.08.01 DERIVATIVE CONTRACTS 34,955 30,970
2.01.08.02 PAYROLL AND SOCIAL CHARGES 156,099 161,366
2.01.08.03 OTHER LIABILITIES 784,035 839,730
2.02 NONCURRENT LIABILITIES 4,951,994 5,417,647
2.02.01 LONG-TERM LIABILITIES 4,951,994 5,417,647
2.02.01.01 LOANS AND FINANCING 2,192,130 2,306,632
2.02.01.02 DEBENTURES 1,408,754 1,863,209
2.02.01.03 PROVISIONS 150,563 143,962
2.02.01.03.01 PROVISION FOR CONTINGENCIES 150,563 143,962
2.02.01.04 PAYABLES TO RELATED PARTIES - -
2.02.01.05 ADVANCE FOR FUTURE CAPITAL INCREASE - -
2.02.01.06 OTHER 1,200,547 1,103,844
2.02.01.06.01 TAXES PAYABLE 875,433 764,971
2.02.01.06.02 DERIVATIVE CONTRACTS 108,059 131,418
2.02.01.06.03 OTHER LIABILITIES 217,055 207,455
2.03 DEFERRED INCOME - -
2.04 MINORITY INTEREST - -
2.05 SHAREHOLDERS’ EQUITY 9,450,548 9,258,691
2.05.01 CAPITAL STOCK 8,780,150 8,780,150
2.05.02 CAPITAL RESERVES 518,678 518,678
2.05.03 REVALUATION RESERVE - -
2.05.03.01 OWN ASSETS - -
2.05.03.02 SUBSIDIARY/ASSOCIATED COMPANIES - -
2.05.04 INCOME RESERVES 1,503,921 1,503,921
2.05.04.01 LEGAL 164,524 164,524
2.05.04.02 STATUTORY - -
2.05.04.03 CONTINGENCIES 11,070 11,070
2.05.04.04 REALIZABLE PROFIT RESERVES - -
2.05.04.05 RETENTION OF PROFITS - -
2.05.04.06 SPECIAL RESERVE FOR UNDISTRIBUTED DIVIDENDS 611,925 611,925
2.05.04.07 OTHER PROFIT RESERVES 716,402 716,402
2.05.04.07.01 TREASURY STOCK (11,070) (11,070)
2.05.04.07.02 RESERVE FOR EXPANSION 727,472 727,472
2.05.05 ADJUSTMENTS OF EQUITY EVALUATION (1,749,650) (1,749,650)
2.05.05.03 ADJUSTMENTS BUSINESS COMBINATION (1,749,650) (1,749,650)
2.05.06 RETAINED EARNINGS/ACCUMULATED DEFICIT 397,449 205,592
2.05.07 ADVANCE FOR FUTURE CAPITAL INCREASE - -

 09.01 – CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS OF REAIS)

1 – CODE 2 – ACCOUNT DESCRIPTION 3 –01/01/2010
to 03/31/2010
4 –01/01/2010
to 03/31/2010
5 - 01/01/2009
to 03/31/2009
6 - 01/01/2009
to 03/31/2009
3.01 GROSS SALES AND/OR SERVICES 6,003,496 6,003,496 5,614,979 5,614,979
3.02 DEDUCTIONS (1,770,271) (1,770,271) (1,574,628) (1,574,628)
3.03 NET SALES AND/OR SERVICES 4,233,225 4,233,225 4,040,351 4,040,351
3.04 COST OF SALES AND/OR SERVICES (2,402,030) (2,402,030) (2,258,450) (2,258,450)
3.05 GROSS PROFIT 1,831,195 1,831,195 1,781,901 1,781,901
3.06 OPERATING EXPENSES/INCOME (1,487,103) (1,487,103) (1,515,016) (1,515,016)
3.06.01 SELLING EXPENSES (1,112,025) (1,112,025) (989,003) (989,003)
3.06.02 GENERAL AND ADMINISTRATIVE EXPENSES (315,341) (315,341) (348,155) (348,155)
3.06.03 FINANCIAL (58,273) (58,273) (164,885) (164,885)
3.06.03.01 FINANCIAL INCOME 110,027 110,027 85,520 85,520
3.06.03.02 FINANCIAL EXPENSES (168,300) (168,300) (250,405) (250,405)
3.06.03.02.01 APPROPRIATED ON SHAREHOLDERS’ EQUITY - - - -
3.06.03.02.02 FINANCIAL OPERATIONS EXPENSES - - - -
3.06.04 OTHER OPERATING INCOME 92,037 92,037 84,784 84,784
3.06.05 OTHER OPERATING EXPENSES (93,501) (93,501) (97,757) (97,757)
3.06.06 EQUITY IN EARNINGS OF SUBSIDIARY AND
ASSOCIATED COMPANIES
- - - -
3.07 OPERATING RESULT 344,092 344,092 266,885 266,885
3.08 NONOPERATING INCOME - - - -
3.08.01 REVENUES - - - -
3.08.02 EXPENSES - - - -
3.09 RESULT BEFORE TAXES AND PROFIT SHARING 344,092 344,092 266,885 266,885
3.10 PROVISION FOR INCOME AND SOCIAL
CONTRIBUTION TAXES
(108,304) (108,304) (69,360) (69,360)
3.11 DEFERRED INCOME TAX (43,931) (43,931) (50,880) (50,880)
3.12 STATUTORY INTEREST/CONTRIBUTIONS - - - -
3.12.01 INTEREST - - - -
3.12.02 CONTRIBUTIONS - - - -
3.13 REVERSAL OF INTEREST ON SHAREHOLDERS’ EQUITY - - - -
3.14 MINORITY INTEREST - - (13,622) (13,622)
3.15 PROFIT/LOSS FOR THE PERIOD 191,857 191,857 133,023 133,023
  NUMBER OF SHARES, EX-TREASURY (THOUSAND) 399,591 399,591 373,216 373,216
  EARNINGS PER SHARE 0.48013 0.48013 0.35642 0.35642
  LOSS PER SHARE - - - -

10.01 – CONSOLIDATED STATEMENTS OF CASH FLOWS  INDIRECT METHOD (IN THOUSANDS OF REAIS)

1 - CODE 2 - ACCOUNT DESCRIPTION 3 – 01/01/2010
to 03/31/2010
4 – 01/01/2010
to 03/31/2010
5 -01/01/2009 
to 03/31/2009
6-01/01/2009
to 03/31/2009
4.01 NET CASH FLOW FROM OPERATING ACTIVITIES 392,871 392,871 739,425 739,425
4.01.01 CASH FLOW FROM OPERATING ACTIVITIES 1,293,094 1,293,094 1,181,987 1,181,987
4.01.01.01 NET INCOME(LOSS) 191,857 191,857 133,023 133,023
4.01.01.02 RESULT OF INTEREST CORPORATE - - 13,622 13,622
4.01.01.03 DEPRECIATION AND AMORTIZATION 871,333 871,333 795,169 795,169
4.01.01.04 LOSS ON INVESTMENT - - 2,015 2,015
4.01.01.05 RESIDUAL COST OF FIXED ASSETS DISPOSALS 260 260 334 334
4.01.01.06 WRITE-OFF AND  REVERSALS OF PROVISIONS FOR
LOSSES ON INVENTORIES
(3,811) (3,811) 7,818 7,818
4.01.01.07 LOSS(GAIN) IN FORWARD, SWAP AND OPTION CONTRACTS (20,994) (20,994) 105,399 105,399
4.01.01.08 LOSS ON LOANS, FINANCING AND DEBENTURES 28,013 28,013 (57,915) (57,915)
4.01.01.09 MONETARY AND VARIATION (23,255) (23,255) 1,819 1,819
4.01.01.10 ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE 42,389 42,389 77,572 77,572
4.01.01.11 PLANS FOR POST-EMPLOYMENT BENEFITS (79) (79) 611 611
4.01.01.12 PROVISION FOR CONTINGENCIES 32,363 32,363 35,682 35,682
4.01.01.13 PROVISION(REVERSAL) FOR SUPPLIERS 31,319 31,319 (49,214) (49,214)
4.01.01.14 PROVISION (REVERSAL) FOR DISPOSAL OF ASSETS (2,356) (2,356) (795) (795)
4.01.01.15 PROVISION  FOR TAXES 97,415 97,415 61,389 61,389
4.01.01.16 PROVISION (RESERVAL) FIDELITY PROGRAM 4,710 4,710 (3,116) (3,116)
4.01.01.17 PROVISION DEFERRED INCOME TAXES 43,930 43,930 58,574 58,574
4.01.02 CHANGES IN ASSETS AND LIABILITIES (900,223) (900,223) (442,562) (442,562)
4.01.02.01 TRADE ACCOUNTS RECEIVABLE (49,936) (49,936) 119,303 119,303
4.01.02.02 INVENTORIES 125,336 125,336 288,151 288,151
4.01.02.03 DEFERRED AND RECOVERABLE TAXES 33,799 33,799 213,806 213,806
4.01.02.04 OTHER CURRENT AND NONCURRENT ASSETS (692,577) (692,577) (392,970) (392,970)
4.01.02.05 PAYROLL AND RELATED ACCRUALS (5,267) (5,267) (53,576) (53,576)
4.01.02.06 TRADE ACCOUNTS PAYABLE (233,128) (233,128) (548,805) (548,805)
4.01.02.07 TAXES PAYABLE 28,789 28,789 (101,635) (101,635)
4.01.02.08 PROVISIONS FOR CONTINGENCIES (PAYMENTS) (31,198) (31,198) (24,098) (24,098)
4.01.02.09 CHARGES ON LOANS, FINANCING AND DEBENTURES (24,991) (24,991) 108,404 108,404
4.01.02.10 OTHER CURRENT AND NONCURRENT LIABILITIES (51,051) (51,051) (51,142) (51,142)
4.01.03 OTHER - - - -
4.02 NET CASH FLOW FROM INVESTING ACTIVITIES (451,046) (451,046) (728,683) (728,683)
4.02.01 ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
AND INTANGIBLE
(452,612) (452,612) (738,080) (738,080)
4.02.02 RECEIVED FOR SUBSCRIPTION TO MINORITY - - 8,842 8,842
4.02.03 RESOURCES FROM THE DISPOSAL OF FIXED ASSETS 1,566 1,566 555 555
4.03 NET CASH FLOW FROM FINANCING ACTIVITIES (394,543) (394,543) (456,339) (456,339)
4.03.01 LOANS, FINANCING AND DEBENTURES FUNDING 110,000 110,000 210,000 210,000
4.03.02 LOANS, FINANCING AND DEBENTURES PAID (434,268) (434,268) (550,592) (550,592)
4.03.03 CASH RECEIVED OF FORWARD, SWAP AND
OPTION CONTRACTS
6,493 6,493 7,311 7,311
4.03.04 PAYMENT OF THE REVERSE STOCK SPLIT (116) (116) (360) (360)
4.03.05 INTEREST ON SHAREHOLDERS’ EQUITY AND DIVIDENDS PAID (76,652) (76,652) (122,698) (122,698)
4.05 INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (452,718) (452,718) (455,597) (455,597)
4.05.01 OPENING BALANCE OF CASH AND EQUIVALENTS 1,258,574 1,258,574 2,182,913 2,182,913
4.05.02 CLOSING BALANCE OF CASH AND EQUIVALENTS 805,856 805,856 1,737,316 1,737,316

11.01 – CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (IN THOUSANDS OF REAIS)

1 -
CODE
2 -
ACCOUNT DESCRIPTION
3-
CAPITAL
4-
CAPITAL RESERVES
5-
REVALUATION RESERVE
6-
INCOME RESERVES
7-
RETAINED
EARNINGS
ACCUMULATED EARNINGS
8-
ADJUSTMENT
OF SHEET VALUTATION
9 –
TOTAL SHAREHOLDERS’ EQUITY
5.01 OPENING BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.02 PRIOR YEAR ADJUSTMENT - - - - - - -
5.03 ADJUSTED BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.04 NET INCOME/LOSS FOR THE YEAR - - - - 191,857 - 191,857
5.05 DESTINATIONS - - - - - - -
5.05.01 DIVIDENDS - - - - - - -
5.05.02 INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.05.03 OTHER DESTINATIONS - - - - - - -
5.05.03.01 LEGAL RESERVE - - - - - - -
5.08 INCREASE/DECREASE CAPITAL - - - - - - -
5.08.01 CAPITAL INCREASE - WITH RESERVES - - - - - - -
5.08.02 CAPITAL INCREASE - SHARES MERGER - - - - - - -
5.12 OTHER - - - - - - -
5.12.01 UNCLAIMED DIVIDENDS AND INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.13 FINAL BALANCE 8,780,150 518,678 - 1,503,921 397,449 (1,749,650) 9,450,548

 11.02 – CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FROM 01/01/2010 TO 03/31/2010 (IN THOUSANDS OF REAIS)

1 -
CODE
2 -
ACCOUNT DESCRIPTION
3-
CAPITAL
4-
CAPITAL RESERVES
5-
REVALUATION RESERVE
6-
INCOME RESERVES
7-
RETAINED EARNINGS ACCUMULATED EARNINGS
8-
ADJUSTMENT OF SHEET VALUTATION
9 –
TOTAL SHAREHOLDERS’ EQUITY
5.01 OPENING BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.02 PRIOR YEAR ADJUSTMENT - - - - - - -
5.03 ADJUSTED BALANCE 8,780,150 518,678 - 1,503,921 205,592 (1,749,650) 9,258,691
5.04 NET INCOME/LOSS FOR THE YEAR - - - - 191,857 - 191,857
5.05 DESTINATIONS - - - - - - -
5.05.01 DIVIDENDS - - - - - - -
5.05.02 INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.05.03 OTHER DESTINATIONS - - - - - - -
5.05.03.01 LEGAL RESERVE - - - - - - -
5.08 INCREASE/DECREASE CAPITAL - - - - - - -
5.08.01 CAPITAL INCREASE - WITH RESERVES - - - - - - -
5.08.02 CAPITAL INCREASE - SHARES MERGER - - - - - - -
5.12 OTHER - - - - - - -
5.12.01 UNCLAIMED DIVIDENDS AND INTEREST ON SHAREHOLDERS’ EQUITY - - - - - - -
5.13 FINAL BALANCE 8,780,150 518,678 - 1,503,921 397,449 (1,749,650) 9,450,548

 

 A free translation from Portuguese into English of Report of Independent Auditors on Special Review of Quarterly Financial Information prepared in accordance with the accounting practices adopted in Brazil and with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), in conjunction with the National Association of State Boards of Accountancy (CFC).

 

Report of Independent Auditors on Special Review

 

The Board of Directors and Shareholders
Vivo Participações S.A.
São Paulo - SP

 

1.    We reviewed the Quarterly Financial Information - ITR, individual and consolidated, of Vivo Participações S.A. (the “Company”) and its subsidiaries, for the quarter ended March 31, 2010, comprising the balance sheet, the statements of income, of comprehensive income, of changes in shareholders’ equity and of cash flows, the notes to financial information and the performance report, prepared under the responsibility of management.

2.    Our review was conducted in accordance with the specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), in conjunction with the National Association of State Boards of Accountancy (CFC), comprising mainly: (a) inquiries of, and discussions with, the officials responsible for the accounting, financial and operational areas of the Company and its subsidiaries, relating to the main criteria adopted in the preparation of the quarterly financial information; and (b) review of information and subsequent events which have, or may have, significant effects on the financial position and results of operations of the Company and its subsidiaries.

3.    Based on our review, we are not aware of any significant changes that should be made to the Quarterly Financial Information referred to in paragraph 1 for it to be in accordance with accounting practices adopted in Brazil and rules set forth by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Quarterly Financial Information.

4.    As mentioned in Note 2, in 2009, CVM approved several Accounting Pronouncements, Interpretations and Guidelines issued by Brazilian FASB (CPC), effective in 2010, which changed accounting practices adopted in Brazil. These changes were adopted by the Company and its subsidiaries in the preparation of the Quarterly Financial Information for the quarter ended March 31, 2010 and disclosed in Note 2b. Prior period quarterly financial information, presented for comparison purposes, was adjusted in order to include the changes in accounting practices adopted in Brazil in force in 2010.
 

São Paulo, April 30, 2010.

ERNST & YOUNG
Auditores Independentes S.S.
CRC-2-SP 015199/O-6

 

        Luiz Carlos Passetti                                                Drayton Teixeira de Melo
Accountant CRC-1-SP-144.343/O-3                   Accountant CRC-1-SP-236947/O-3

 

VIVO PARTICIPAÇÕES S.A.
EXPLANATORY NOTES TO THE QUARTERLY STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2010
(in thousand Brazilian Reais, except as otherwise mentioned)


1. OPERATIONS

a. Equity Control

Vivo Participações S.A. (“Vivo Participações” or “Company”) is a publicly-held company that, at March 31, 2010 and at December 31, 2009, has as controlling shareholders Brasilcel N.V. and its subsidiaries Portelcom Participações S.A. and TBS Celular Participações Ltda., which jointly hold, treasury shares excluded, 59.6% of the Company’s total capital stock.
Brasilcel N.V. is jointly controlled by Telefónica S.A. (50% of the total capital stock), PT Móveis, Serviços de Telecomunicações, SGPS, S.A. (49.99% of the total capital stock) and Portugal Telecom, SGPS, S.A. (0.01% of the total capital).

b. Subsidiaries

At March 31, 2010 and at December 31, 2009, the Company is the 100% controlling shareholder of Vivo S.A. (“Vivo” or “subsidiary”) and of Telemig Celular S.A. (“Telemig " or “subsidiary”), which engage in personal mobile telephone services, including activities that are necessary or useful for the performance of said services, in conformity with the authorizations granted to them.

c. Authorization and Frequencies

The subsidiaries’ business and the services they may provide are regulated by the National Telecommunications Agency (“ANATEL”), the Regulatory Authority (Federal Independent Agency) for telecommunication services in accordance with Law No. 9472, dated July 16, 1997 – General Telecommunications Law (LGT). Its actions are carried out, as a rule, by enactment of regulations and supplementary plans.

The authorizations granted by ANATEL may be renewed just once, for a 15-year period, against payment every two years, after the first renewal, of rates equivalent to 2% (two percent) of the company’s revenue for the year prior to that of the payment, net of taxes and mandatory social contributions related to the application of the Basic and Alternative Plans of Service.

d. Agreement between Telefónica S.A. and Telecom Itália

In October 2007, TELCO S.p.A. (in which Telefónica S.A holds an interest of 42.3%), completed the acquisition of 23.6% of Telecom Itália. Telefónica S.A. has the shared control of Vivo Participações S.A., through its joint venture with Portugal Telecom. Telecom Italia holds an interest in TIM Participações S.A (“TIM”), which is a mobile telephone operator in Brazil. As a result of the acquisition of its interest in Telecom Itália, Telefónica S.A. does not have any direct involvement in the operations of TIM. Additionally, any transactions between the Company and its subsidiaries and TIM are transactions in the regular course of mobile telephone business, which are regulated by the ANATEL.

2. BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS

2.a) Basis of Preparation and Presentation

The individual and consolidated quarterly financial statements (ITRs) are presented in thousands of Brazilian reais (except as otherwise mentioned) and have been prepared based on the accounting practices adopted in Brazil, as well as on the rules issued by the Brazilian Securities and Exchange Commission (CVM), with due regard to the accounting standards set forth in the corporation law (Law no. 6404/76), which include the new provisions introduced, amended and revoked by Laws no. 11.638, dated December 28, 2007 and no. 11.941, dated May 27, 2009 (former Provisional Measure no. 449, dated December 03, 2008), with further regard, also, to the rules applicable to telecommunication service concessionaires.

The changes in the accounting practices arising from application of Laws No. 11,638 and No. 11,941 have been measured and registered by the Company based on the following accounting pronouncements issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Securities and Exchange Committee (CVM) and by the Federal Accounting Council (“CFC”):

In continuance with the process towards the compliance with international rules, on November 10, 2009 the CVM published CVM Resolution no. 603, which allowed publicly-held companies to present their Quarterly Financial Statements – ITRs during fiscal year 2010 according to the accounting rules in effect until December 31, 2009. The Company has elected not to adopt the procedure provided for in CVM Resolution no. 603/09 and stated that January 01, 2009 would be the “transition date” for the adoption of the new accounting practices, issued in 2009 and the mandatory adoption of which is planned to be completed by December 31, 2010. The transition date is defined as the point of departure for adopting the changes in the accounting practices adopted in Brazil, and represents the base date as of which the Company and its subsidiaries prepare their balance sheets adjusted to these new accounting practices.

The following pronouncements and interpretations were considered by the Company and its subsidiaries in preparing their financial statements as from the first quarter of 2010, with retroactive application to the extent applicable. The pronouncements which impacted the financial statements are commented in 2b below:

Pronouncements

Interpretations

The authorization to complete the preparation of these Quarterly Financial Statements was given at the Executive Committee’s Meeting held on April 20, 2010.

The periods of disclosure of the subsidiaries’ information in the consolidated statements coincide with those of the controlling shareholder.

All assets and liabilities balances, revenues and expenses arising out of transactions among the consolidated companies were eliminated in the consolidated statements.

No information by segment was stated, once the Company in one sole operating segment of provision of mobile telecommunication services.

The CVM determined that the IFRS must be adopted for consolidated financial statements of publicly-held companies from 2010 on. Consequently, for the fiscal year to be ended on December 31, 2010, the Company shall present its consolidated financial statements in accordance with the IFRS, as issued by the International Accounting Standard Board – IASB.

2.b) Effect of the adjustments of the application of CPCs 15 to 40 and change to the accounting practices

The accounting practices and the calculation methods were uniformly applied in the consolidated companies and are consistent with those used in the previous year, except for the application of the CPCs and interpretations issued during fiscal year 2009 (note 2a), whose impacts on the financial statements are detailed as follows:

2.b1) Deferred income and social contribution taxes: The amounts of deferred income and social contribution taxes were posted to current assets, to the extent of their expected realization. As determined in CPC 32, the total deferred taxes are to be posted to non-current assets (note 6). Accordingly, the Company reclassified the deferred taxes of the comparative periods to non-current assets and recognized the deferred taxes ascertained in the application of the adjustments provided for in the CPCs in this same item of the ITRs (note 6).

2.b2) Inspection and Installation Rate (TFI): This rate corresponds to the amounts that are monthly paid on net additions of new customers. They were amortized during the estimated period of customer retention, equivalent to 24 months. Upon the adoption of all the CPCs already issued and with the purpose of making its accounting practices compliant with the best international practices, the Company started recognizing such amounts directly in the income statement in the “Cost of Services Rendered”, in item “Taxes, charges and contributions” (note 20). Due adjustments were made on a retrospective basis, as required in CPC 23.

2.b3) Court deposits: The amounts of court deposits granted as guarantee of civil, labor and tax proceedings were stated in the balance sheet as a reduction of the respective liabilities, complying with the provisions set forth in CVM Resolution no. 489/05. Upon the adoption of CPC 25 (and revocation of CVM Resolution no. 489/05), the Company reclassified the referred court deposits to current assets and non-current assets, according to the expected realization term (note 7).

2.b4) Post-employment benefit plans: The subsidiaries started recognizing the Net Actuarial Assets of the post-employment benefit plans, to the extent of the surplus recoverability restrictions applicable to sponsors of Brazilian pension plans. Such Net Actuarial Assts were not recognized prior to the adoption of CPC33. Actuarial gains and losses referring to the post-employment benefit plans and the amounts referring to surplus recoverability limitations due to refunds or reductions in future contributions are being immediately recognized as other comprehensive income, and do not impact any more the operating income (note 27).

2.b5) Capitalized financial charges: The financial charges provided for in certain loan and financing agreements relating to investment activities were capitalized based on the average amount of works in progress, pursuant to CVM resolution no. 193 (revoked by CVM Resolution no. 577) and Official Release CVM/SNC/SEP 01/2007. The capitalized financial charges were depreciated pursuant to the same criteria of useful life as determined for the item of property, plant & equipment to which they were attributed (note 11).

2.b6) Acquisition of non-controlling shareholders’ shares and premium: In accordance with the Brazilian accounting practices prior to CPC 15, a premium was recorded upon the acquisition of shares for prices in excess of the book value thereof. Upon the adoption of CPC 15, the transition date of which is January 01, 2009, the effects of all the transactions of acquisition of non-controlling shareholders’ shares started being recorded in the shareholders’ equity to the extent there is no change in the shareholding control. Consequently, such transactions do not generate premium or results any more and the premium previously generated in the acquisitions from non-controlling shareholders, including expenses being capitalized in the process, was eliminated towards the shareholders’ equity of the Company (note 18).

2.b7) Deferred Assets: Upon the adoption of CPC 13 on January 01, 2008, the Company and its subsidiaries elected to keep the recognized balances in the deferred asset group until the complete amortization thereof. The pre-operating expenses balance recorded as deferred assets prior to January 01, 2009 refers to pre-operating expenses of Global Telecom (Vivo’s predecessor company) and to the network formation costs in the Northeast region, which were amortized pursuant to the straight line method, within 10 years. After review by the Company, and with the purpose of making their accounting practices compliant with the best international practice, the Company and its subsidiaries elected to write-off such amounts as a counter-entry to the shareholders’ equity. The due adjustments were made on a retrospective basis, as required in CPC 23.

2.b8) Recognition of multi-element transaction revenues: In order to meet the requirements in CPC 30, the amounts of minutes included in the multi-element transactions started being segregated and shown in the income statement as a service revenue to the extent such services were used by customers. The due adjustments were made on a prospective basis (note 17).

2.b9) Donations and Subventions Reserve: The amounts of network equipment donated by suppliers were posted to a specific reserve account, in the shareholders’ equity. After review by the Company and with the purpose of making its accounting practices compliant with the best international practice and as set forth in Law no. 11.638/07, such amounts were transferred to “Deferred Revenue” (in current liabilities) and are amortized for the term the equipment is in service. The due adjustments were made on a retrospective basis, as required in CPC 23.

2.b10) Supplementary Dividends: According to previous Brazilian law, Companies could recognize dividends supplementary to the minimum mandatory dividend as of the closing date of the fiscal year based on the proposal for allocation of the net profit of the year. Upon the adoption of CPC 24, supplementary dividends must be recognized at the time they are approved by the competent managing bodies. Accordingly, the Company reversed the amounts of supplementary dividends which had been recorded at December 31, 2009 and were not yet approved at a General Shareholders Meeting. The amounts receivable from its subsidiaries have been already confirmed in the General Shareholders Meeting held on March 31, 2010. The amounts of supplementary dividends payable to the shareholders shall be confirmed at the General Shareholders Meeting to be held in April 2010 (notes 18 and 33).

2.b11) Minority interest: This refers to the effects of the minority interest in the adjustments made by the Company, arising out of the adoption of the new accounting pronouncements.

2.b12) Shareholders’ equity: This refers to the effects of the controlling shareholders’ interest in the adjustments made by the Company, arising out of the adoption of the new accounting pronouncements (note 18).

2.b13) Equity Method: This refers to the amounts calculated pursuant to the equity method, arising out of the application of the adjustments made in the subsidiaries, as provided for in the CPCs (note 10).

2.b14) Disclosure of infrastructure swap costs and revenues: the amounts of revenues and costs referring to agreements contemplating mutual provision, among different operators, of network infrastructure assets with the same technical features, prices, contractual conditions and similar nature of use, started being disclosed on a net basis in the revenues and costs. The due adjustments were made on a prospective basis, as required in CPC 30 (notes 20 and 23).

2.b15) Roaming: The amounts referring to invoicing and transfer of domestic and international roaming, which were previously posted to the current liabilities (under “Suppliers and accounts payable” – Amounts to be transferred to other operators), are now considered by the subsidiaries as revenue, at the time of the invoicing, and as costs, at the time of the transfer, pursuant to the definition of agent and principal described in CPC 30. The due adjustments were made on a prospective basis, as required in CPC 30 (notes 19 and 20).

2.b16) Reclassifications in the income statement:  As a result of the application of the CPCs and with the purpose of making the Quarterly Information/Quarterly Statements compliant with the accounting practices adopted by their controlling shareholders, the Company and its subsidiaries made some reclassifications in their income statements, as described below:

In the tables below, and for comparison purposes, the Company presents a brief description and the amounts corresponding to the impacts generated in the consolidated balance sheet as of December 31, 2009, in the shareholders’ equity for fiscal years 2009 and 2008, and in the controlling company’s and consolidated income statement for the three-month period ended on March 31, 2009. The referred adjustments and reclassifications were already applied to the accounting information presented for 2010.

Balance Sheets

Reconciliation of the Company’s balance sheet as of January 01, 2009 – Transition Date

      Company
ASSETS Note   Balance Sheet at
01.01.09 - before
adjustments
  Adjustments
CPCs  on
transition date
  Balance Sheet
at 01.01.09 -
after adjustments
               
Current              
   Cash and cash equivalents                          10,706                                   -                           10,706
   Interest on shareholders and dividends                        397,412                                   -                         397,412
   Deferred and recoverable taxes 2.b1)                        22,732                             (741)                           21,991
   Escrow deposits 2.b3)                                 -                               565                                565
   Prepaid expenses                            1,202                                   -                             1,202
   Other assets 2.b3)                             840                             (546)                                294
Total current assets                        432,892      (722)                         432,170
               
Noncurrent               
   Long-term receivables:              
      Deferred and recoverable taxes 2.b1)                      576,372                               741                         577,113
      Escrow deposits 2.b3)                                 -   5,342                             5,342
      Prepaid expenses                            1,630                                   -                             1,630
      Other assets 2.b3)                          7,442     (5,050)                             2,392
   Investments 2.b13)                   8,502,885   (187,725)                      8,315,160
   Property and equipment, net                                   4                                   -                                    4
   Intangible assets, net 2.b6)                   1,424,278   (84,449)                      1,339,829
Total noncurrent assets                   10,512,611   (271,141)                    10,241,470
                  
Total assets                   10,945,503   (271,863)                    10,673,640
               
      Company
LIABILITIES Note   Balance Sheet at
01.01.09 - before
adjustments
  Adjustments
CPCs  on
transition date
  Balance Sheet at
01.01.09 -
after adjustments
               
Current liabilities              
   Payroll and social charges                               555                                   -                                555
   Trade accounts payable                            4,463                                   -                             4,463
   Taxes payable                          46,028                                   -                           46,028
   Debentures and promissory notes                     1,112,876                                   -                      1,112,876
   Interest on shareholders and dividends 2.b10)                      407,473                      (265,685)                         141,788
   Provision for contingencies 2.b3)                          1,237                                 19                             1,256
   Derivative contracts                            1,213                                   -                             1,213
   Other liabilities                        103,644                                   -                         103,644
Total current liabilities                     1,677,489                      (265,666)                      1,411,823
               
Noncurrent                                                -
   Debentures and promissory notes                     1,000,000                                   -                      1,000,000
   Provision for contingencies 2.b3)                             167                               292                                459
   Other liabilities                               320                                   -                                320
Total noncurrent liabilities                     1,000,487                               292                      1,000,779
                                          -    
Shareholders’ equity 2.b12)                   8,267,527                          (6,489)                      8,261,038
               
Total liabilities and shareholder´s equity                   10,945,503                      (271,863)                    10,673,640

Reconciliation of the Company’s consolidated balance sheet as of January 01, 2009 – Transition Date

Consolidated
ASSETS Note Balance Sheet at
01.01.09 - before
adjustments
Adjustments CPCs
on transition date
Balance Sheet at
01.01.09 - after
adjustments
Current
Cash and cash equivalents 2,182,913 - 2,182,913
Short-term investments pledged as collateral 41,487 - 41,487
Trade accounts receivable, net 2,578,498 - 2,578,498
Inventories 778,704 - 778,704
Deferred and recoverable taxes 2.b1) 2,358,647 (1,120,523) 1,238,124
Deposits and blockages escrow 2.b3) - 164,050 164,050
Derivative contracts 347,448 - 347,448
Prepaid expenses 2.b2) 316,622 (145,391) 171,231
Other assets 2.b3) 322,934 (65,892) 257,042
Total current assets 8,927,253 (1,167,756) 7,759,497
Noncurrent
Long-term receivables:
Short-term investments pledged as collateral 47,335 - 47,335
Deferred and recoverable taxes 2.b1) 2,732,022 1,220,014 3,952,036
Deposits and blockages escrow 2.b3) - 445,283 445,283
Derivative contracts 285,303 - 285,303
Prepaid expenses 2.b2) and 2.b4) 80,206 (54,143) 26,063
Other assets 2.b3) 46,291 (34,600) 11,691
Investments 111 - 111
Property and equipment, net 7,183,908 - 7,183,908
Intangible assets, net 2.b6) 4,438,982 (84,449) 4,354,533
Deferred charges, net 2.b7) 55,393 (55,393) -
Total noncurrent assets 14,869,551 1,436,712 16,306,263
     
Total assets 23,796,804 268,956 24,065,760
Consolidated
LIABILITIES Note Balance Sheet at
01.01.09 - before
adjustments
Adjustments CPCs
on transition date
Balance Sheet at
01.01.09 -
after adjustments
Current
Payroll and social charges 185,471 - 185,471
Trade accounts payable 3,726,324 - 3,726,324
Taxes payable 2.b3) and 2.b8) 785,603 54,934 840,537
Loans and financing 2,006,972 - 2,006,972
Debentures and promissory notes 1,112,876 - 1,112,876
Interest on shareholders and dividends 2.b10) 545,864 (265,685) 280,179
Provision for contingencies 2.b3) 91,136 41,719 132,855
Derivative contracts 105,352 - 105,352
Other liabilities 2.b8) 820,233 5,734 825,967
Total current liabilities 9,379,831 (163,298) 9,216,533
Noncurrent
Taxes payable 2.b3) 275,272 372,324 647,596
Loans and financing 3,826,385 - 3,826,385
Debentures and promissory notes 1,056,923 - 1,056,923
Provision for contingencies 2.b3) 102,947 38,359 141,306
Derivative contracts 97,971 - 97,971
Other liabilities 2.b4) and 2.b9) 202,144 33,466 235,610
Total noncurrent liabilities 5,561,642 444,149 6,005,791
Result of interest corporate 2.b11) 587,804 (587,804) -
Shareholders’ equity 2.b11) and 2.b12) 8,267,527 575,909 8,843,436
     
Total liabilities and shareholder´s equity 23,796,804 268,956 24,065,760

Reconciliation of the Company’s balance sheet as of December 31, 2009 – Comparison Period

      Company
ASSETS Note   Balance sheet
disclosed
on 12.31.2009
  Adjustments
CPCs 
  Balance sheet at
12.31.09 -
resubmitted
               
Current              
   Cash and cash equivalents                          257,111                                   -                        257,111
   Interest on shareholders and dividends 2.b10)                     1,161,444                      (915,352)                        246,092
   Deferred and recoverable taxes 2.b1)                          89,551                        (80,885)                            8,666
   Escrow deposits 2.b3)                                   -                            1,072                            1,072
   Prepaid expenses                                 998                                   -                               998
   Other assets 2.b3)                            1,387                          (1,053)                               334
Total current assets                       1,510,491                      (996,218)                        514,273
               
Noncurrent               
   Long-term receivables:              
      Deferred and recoverable taxes 2.b1)                     1,076,760                          80,885                     1,157,645
      Escrow deposits 2.b3)                                   -                            5,927                            5,927
      Derivative contracts                              8,208                                   -                            8,208
      Prepaid expenses                              1,570                                   -                            1,570
      Other assets 2.b3)                            6,135                          (5,586)                               549
   Investments 2.b13)                     8,148,945                        715,892                     8,864,837
   Property and equipment, net                                     2                                   -                                   2
   Intangible assets, net 2.b6)                     2,684,427                   (1,344,598)                     1,339,829
Total noncurrent assets                     11,926,047                      (547,480)                   11,378,567
               
Total assets                     13,436,538                   (1,543,698)                   11,892,840
               
      Company
LIABILITIES Note   Balance sheet
disclosed
on 12.31.2009
  Adjustments
CPCs 
  Balance sheet at
12.31.09 -
resubmitted
               
Current              
   Payroll and social charges                                 393                                   -                               393
   Trade accounts payable                              2,345                                   -                            2,345
   Taxes payable                            36,609                                   -                          36,609
   Debentures and promissory notes                          266,256                                   -                        266,256
   Interest on shareholders and dividends 2.b10)                        931,212                      (611,925)                        319,287
   Provision for contingencies 2.b3)                            1,149                                 19                            1,168
   Derivative contracts                              2,302                                   -                            2,302
   Other liabilities                          190,951                                   -                        190,951
Total current liabilities                       1,431,217                      (611,906)                        819,311
               
Noncurrent               
   Debentures and promissory notes                       1,803,609                                   -                     1,803,609
   Derivative contracts                            10,552                                   -                          10,552
   Provision for contingencies 2.b3)                                   -                               341                               341
   Other liabilities                                 336                                   -                               336
Total noncurrent liabilities                       1,814,497                               341                     1,814,838
               
Shareholders’ equity 2.b12)                   10,190,824                      (932,133)                     9,258,691
               
Total liabilities and shareholder´s equity                     13,436,538                   (1,543,698)                   11,892,840

Reconciliation of the Company’s consolidated balance sheet as of December 31, 2009 – Comparison Period

      Consolidated
ASSETS Note   Balance sheet
disclosed on
12.31.2009
  Adjustments
CPCs 
  Balance sheet
at 12.31.09 -
resubmitted
               
Current              
   Cash and cash equivalents                  1,258,574                                  -                      1,258,574
   Short-term investments pledged as collateral                       39,197                                  -                           39,197
   Trade accounts receivable, net                  2,546,806                                  -                      2,546,806
   Inventories                     423,634                                  -                         423,634
   Deferred and recoverable taxes 2.b1)                1,982,691                    (796,460)                      1,186,231
   Deposits and blockages escrow 2.b3)                              -                      200,907                         200,907
   Derivative contracts                       14,700                                  -                           14,700
   Prepaid expenses 2.b2)                   311,328                    (149,374)                         161,954
   Other assets 2.b3)                   246,028                      (75,062)                         170,966
Total current assets                  6,822,958                    (819,989)                      6,002,969
               
Noncurrent               
   Long-term receivables:              
      Short-term investments pledged as collateral                       51,344                                  -                           51,344
      Deferred and recoverable taxes 2.b1)                2,770,909                      899,212                      3,670,121
      Deposits and blockages escrow 2.b3)                              -                      608,995                         608,995
      Derivative contracts                     137,060                                  -                         137,060
      Prepaid expenses 2.b2) e 2.b4)                     74,383                      (50,953)                           23,430
      Other assets 2.b3)                   118,523                    (115,534)                             2,989
   Investments                            112                                  -                                112
   Property and equipment, net 2.b5)                6,445,109                      (36,605)                      6,408,504
   Intangible assets, net 2.b6)                5,566,867                 (1,344,598)                      4,222,269
   Deferred charges, net 2.b7)                     29,864                      (29,864)                                     -
Total noncurrent assets                15,194,171                      (69,347)                    15,124,824
               
Total assets                22,017,129                    (889,336)                    21,127,793
               
      Consolidated
LIABILITIES Note   Balance sheet
disclosed on
12.31.2009
  Adjustments
CPCs 
  Balance sheet
at 12.31.09 -
resubmitted
               
Current              
   Payroll and social charges                     161,366                                  -                         161,366
   Trade accounts payable                  3,053,587                                  -                      3,053,587
   Taxes payable 2.b3) and 2.b8)                   892,893                        60,462                         953,355
   Loans and financing                     688,397                                  -                         688,397
   Debentures and promissory notes                     266,256                                  -                         266,256
   Interest on shareholders and dividends 2.b10)                   934,358                    (611,925)                         322,433
   Provision for contingencies 2.b3)                     70,396                        63,785                         134,181
   Derivative contracts                       30,970                                  -                           30,970
   Other liabilities 2.b8)                   834,824                          6,086                         840,910
Total current liabilities                  6,933,047                    (481,592)                      6,451,455
               
Noncurrent               
   Taxes payable 2.b3)                   317,063                      447,908                         764,971
   Loans and financing                  2,306,632                                  -                      2,306,632
   Debentures and promissory notes                  1,863,209                                  -                      1,863,209
   Provision for contingencies 2.b3)                     98,409                        45,553                         143,962
   Derivative contracts                     131,418                                  -                         131,418
   Other liabilities 2.b4) and 2.b9)                   176,527                        30,928                         207,455
Total noncurrent liabilities                  4,893,258                      524,389                      5,417,647
               
Shareholders’ equity 2.b12)              10,190,824                    (932,133)                      9,258,691
               
Total liabilities and shareholder´s equity                22,017,129                    (889,336)                    21,127,793

Shareholders’ equity

      Company   Consolidated
  Note   12.31.09   01.01.09   12.31.09   01.01.09
                   
Shareholders' equity before the effects of applications of CPCs                10,190,824         8,267,527              10,190,824        8,267,527
                   
  Effects adjustments of  that passing through by result                   
    Fistel Fee   2.b2)                                -                       -                     (4,297)                      -
    Post-employment benefit plans   2.b4)                                -                       -                     10,797                      -
    Interest on construction in progress   2.b5)                                -                       -                   (36,605)                      -
    Capitalised expenditure on acquisition of investments   2.b6)                      (4,913)                       -                     (4,913)                      -
    Deferred assets    2.b7)                                -                       -                     25,529                      -
    Prepaid services to be rendered   2.b8)                                -                       -                        (259)                      -
    Donations of network equipment   2.b9)                                -                       -                       4,768                      -
    Income tax and social contribution    2.b1)                                -                       -                            22                      -
    Equity accounting    2.b13)                           (45)                       -                               -                      -
    Result of interest corporate   2.b11)                                -                       -                     (1,787)                      -
                   
  Effects adjustments of  that not passing through by result                   
    Fistel Fee   2.b2)                                -                       -                 (191,662)         (191,662)
    Post-employment benefit plans   2.b4)                                -                       -                     (9,454)                    69
    Adjustments for non-controlling shareholdings before the merger of shares   2.b6)                        3,617                       -                               -                      -
    Premium on acquisition of interest of noncontrolling   2.b6)               (1,749,650)          (490,797)              (1,749,650)         (490,797)
    Reversal of amortization of premium on acquisition of interest in non-controlling   2.b6)                    406,348            406,348                   406,348           406,348
    Deferred assets    2.b7)                                -                       -                   (55,393)           (55,393)
    Prepaid services to be rendered   2.b8)                                -                       -                     (4,229)             (4,229)
    Donations of network equipment   2.b9)                                -                       -                   (33,218)           (33,218)
    Additional dividend   2.b10)                    611,925            265,685                   611,925           265,685
    Income tax and social contribution    2.b1)                                -                       -                     99,945             96,708
    Equity accounting    2.b13)                  (199,415)          (187,725)                               -                      -
    Result of interest corporate   2.b11)                                -                       -                               -           582,398
                   
Shareholders' equity after the effects of applications of CPCs                  9,258,691         8,261,038                9,258,691        8,843,436

Income Statements

Company
Note Income statement
released on
03.31.2009
Adjustments and
reclassifications
CPCs
Income statement
on 03.31.09 -
resubmitted
General and administrative expenses 2.b16) (5,316) 291 (5,025)
Other operating expenses, net 2.b6) and 2.b16) 2,394 (2,306) 88
Equity accounting 2.b13) 185,373 11,529 196,902
Income before financial expenses, net 182,451 9,514 191,965
Financial expenses, net (60,174) - (60,174)
Income before taxes 122,277 9,514 131,791
Income tax and social contribution 1,232 - 1,232
Net income 123,509 9,514 133,023
Consolidated
Note Income statement
released on
03.31.2009
Adjustments and
reclassifications
CPCs
Income statement
on 03.31.09 -
resubmitted
Telecommunications service 2.b8), 2.b15) and 2.b16) 4,855,614 52,080 4,907,694
Sale of goods 2.b8) 738,352 (31,067) 707,285
Gross operating revenue 5,593,966 21,013 5,614,979
Deductions 2.b8) (1,573,847) (781) (1,574,628)
Net operating revenue 4,020,119 20,232 4,040,351
Cost of services rendered 2.b2), 2.b5), 2.b9), 2.b14), 2b15) and 2.b16) (1,664,357) 17,995 (1,646,362)
Cost of goods sold 2.b16) (613,131) 1,043 (612,088)
Gross income 1,742,631 39,270 1,781,901
Selling expenses 2.b16) (989,005) 2 (989,003)
General and administrative expenses 2.b16) (348,966) 811 (348,155)
Other operating expenses, net 2.b4), 2.b6), 2.b7), 2.b14) and 2.b16) (5,624) (7,349) (12,973)
Income before Financial expenses, net 399,036 32,734 431,770
Financial expenses, net 2.b5) (149,143) (15,742) (164,885)
Income before taxes and interest 249,893 16,992 266,885
Income tax and social contribution 2.b1) (113,778) (6,462) (120,240)
Result of interest corporate 2.b11) (12,606) (1,016) (13,622)
Net income 123,509 9,514 133,023

3. CASH AND CASH EQUIVALENTS

Company Consolidated
03.31.10 12.31.09 03.31.10 12.31.09
Cash and banks 96 76 23,066 46,468
Short-term investments 24,899 257,035 782,790 1,212,106
Total 24,995 257,111 805,856 1,258,574

The financial investments refer to fixed income transactions, indexed to the variation of the Interbank Deposit Certificates (“CDI”), with immediate liquidity, held with first-category financial institutions.

4. TRADE ACCOUNTS RECEIVABLE, NET

Consolidated
03.31.10 12.31.09
Receivables from billed services   1,123,549   1,105,069 
Receivables from interconnection fees  834.801 784,524
Receivables from unbilled services  592,998 590,617
Receivables from goods sold  327,705 391,578
(-) Allowance for doubtful accounts  (324,700) (324,982)
Total 2,554,353 2,546,806

Following is the aging list for the net accounts receivable at March 31, 2010 and at December 31, 2009:

Consolidated
03.31.10 12.31.09
Unbilled 592,998 590,617
Falling due 1,506,043 1,561,644
Overdue accounts – from 1 to 30 days 237,989 208,393
Overdue accounts – from 31 to 60 days 70,873 67,059
Overdue accounts – from 61 to 90 days 54,916 51,485
Overdue accounts – from 91 to 180 days 36,685 33,969
Overdue accounts – from 181 to 360 days 50,938 28,797
Overdue accounts – more than 360 days 3,911 4,842
Total 2,554,353 2,546,806

There was not any customer representing more than 10% of the net accounts receivable at March 31, 2010 and at December 31, 2009, except for Telecomunicações de São Paulo S.A. – Telesp, which accounted for 12.2% of the net accounts receivable at March 31, 2010 (10.6% at December 31, 2009). These amounts refer, basically, to interconnection and co-billing.

At March 31, 2010, the balance of accounts receivable includes R$102,201 (R$116,747 at December 31, 2009) related to transfer of co-billing of other operators, the amounts of which were determined on the basis of statements of commitment, once the corresponding contracts have not yet been signed by the parties. Pending matters related to the definition of liability for losses resulting from fraud have not yet been resolved, and await decision by the regulatory agency as well as settlement between the parties. The Company does not expect financial losses with respect to this matter.

The changes in the allowance for doubtful debtors are as follows:

Consolidated
2010 2009
Balance at beginning of year 324,982 387,308
   Additional allowance in Q1 10 (note 21) 42,389 77,573
   Write-offs               (42,671)                (66,234)
Balance at March 31 324,700 398,647
Additional allowance in Q2, Q3 and Q4 09 135,662
   Write-offs               (209,327)
Balance at December 31 324,982

5. INVENTORIES

Consolidated
03.31.10 12.31.09
Handsets 293,395 422,337
Simcard (chip) 32,340 28,176
Accessories and other 8,991 9,033
(-) Provision for obsolescence             (32,617)           (35,912)
Total 302,109 423,634

Below are the changes in the provision for obsolescence:

Consolidated
2010 2009
Balance at beginning of year 35,912 42,580
     Additional (reversal) allowance              (3,295) 7,730
Balance at March 31 32,617 50,310
   Reversal of provision           (14,398)
Balance at December 31 35,912

The costs of goods sold, which include the amounts of the provision for obsolescence, are shown in note 20.

6. DEFERRABLE AND RECOVERABLE TAXES

6.1 Breakdown

Company Consolidated
03.31.10 12.31.09 03.31.10 12.31.09
 Resubmitted  Resubmitted
Prepaid income and social contribution taxes 684,359 709,838 821,911 814,218
Recoverable state VAT (ICMS) 199 199 647,205 648,124
Recoverable Social Contribution Taxes on
Gross Revenue for Social Integration
Program (PIS) and on Gross Revenue
for Social Security Financing (COFINS)
21,627 21,423 285,436 315,981
Withholding income tax 6,982 6,495 64,938 64,378
Other recoverable taxes 270 270 23,984 23,913
     Total recoverable taxes 713,437 738,225 1,843,474 1,866,614
Deferred income and social contribution taxes (*) 408,172 428,086 2,651,205 2,701,723
ICMS to be allocated - - 280,541 288,015
       
Total 1,121,609 1,166,311 4,775,220 4,856,352
Current 9,205 8,666 1,205,180 1,186,231
Noncurrent 1,112,404 1,157,645 3,570,040 3,670,121

(*) The controlling company’s balances refer, basically, to deferred income and social contribution taxes, relating to the portion of the tax benefit Telemig Participações (a company that was merged into Vivo Participações at November 13, 2009) received as a result of the Corporate Reorganization of TCO IP S.A., occurred in December 2008 (note 6.2). 

Telemig and Vivo are entitled to tax benefit of 75% reduction in the income tax calculated on the profit earned from activities in the tax incentive areas within the scope of the SUDENE (North of Minas Gerais and Vale do Jequitinhonha) and SUDAM (States of Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Rondônia and Roraima), respectively.

The breakdown of deferred income and social contribution taxes is as follows:

Consolidated
03.31.10 12.31.09
Resubmitted
Income and social contribution taxes loss carryforwards (a) 1,001,629 1,041,994
Tax credit acquired - restructuring (b) 551,049 591,850
Tax credits on temporary differences: (c)
  Contingencies and legal liabibility 250,210 227,842
  Useful life changes - depreciation 222,743 222,405
  Suppliers 163,530 151,324
  Doubtful accounts 110,398 110,494
  Valuation allowance  and  provision for losses- fixed assets  90,847 99,754
  Employee profit sharing 18,132 23,851
  Customer loyalty program 23,903 22,301
  Provision for obsolescence 11,090 12,210
  Derivative contracts 18,281 9,962
  Adjustments CPCs  (note 2) 102,313 102,728
  Other amounts 87,080 85,008
Total deferred taxes on non-current assets 2,651,205 2,701,723

The deferred taxes were recorded assuming their future realization, as follows:

a)   Tax loss and negative tax base: represents the amount recorded by the subsidiaries, which will be offset up to the limit of 30% of the tax base computed in the coming fiscal years and subject to no statute of limitations. The Company did not record the potential deferred income and social contribution tax credit that would arise from the use of the tax bases in the amount of R$736,502 at March 31, 2010 (R$688,023 at December 31, 2009), given the uncertainty, at this time, as to the Company’s ability to generate future taxable results to ensure realization of these deferred taxes.

b)  Tax credit incorporated: represented by the net balance of goodwill and provision for maintenance of the integrity of the shareholders’ equity (note 6.2). Realization occurs proportionally to the amortization of the goodwill in its subsidiaries, in a period from 5 to 10 years. Studies performed by independent consultants hired during the corporate reorganization process support the recovery of such amounts within the above referred time. 

c)   Tax credits on temporary differences: their realization will occur upon payment of the provisions, effective loss on bad debts or realization of inventories, as well as reversal of other provisions. The Company did not record the potential deferred income and social contribution tax credit that would arise from the use of the provisions in the amount of R$155,167 at March 31, 2010 (R$154,757 at December 31, 2009), given the uncertainty, at this time, as to the Company’s ability to generate future taxable results to ensure realization of these deferred taxes.

The Company and its subsidiaries prepared technical feasibility studies, approved by the Board of Directors, which indicated the full recovery of deferred tax amounts recognized at December 31, 2009, as defined in CVM Instruction No. 371. During the three-month period ended at March 31, 2010, no relevant fact occurred which might indicate any limitations to the full recovery of the amounts of deferred taxes recognized by the subsidiaries.

6.2  Tax credit incorporated – Corporate Reorganization

Prior to the mergers, provisions were booked for maintenance of the stockholders’ equity of the merged company and, consequently, the net assets that were merged represent, essentially, the tax benefit arising out of the possibility of deduction of the incorporated goodwill.

Included in the accounting records held for corporate and tax purposes by the Company and its subsidiaries are specific accounts related to incorporated goodwill and provision and corresponding amortization, reversal and tax credit, the balances of which are as follows:

Consolidated
03.31.10 12.31.09
Goodwill Provision Net Goodwill Provision Net
Telemig Celular Participações S.A. - Corporate Restructuring 1,193,638 (787,800) 405,838 1,251,945 (826,283) 425,662
Global Telecom S.A. - Acquisition 273,457 (180,482) 92,975 302,066 (199,364) 102,702
Telemig Celular S.A. - Corporate Restructuring 108,402 (71,546) 36,856 113,501 (74,911) 38,590
Tele Centro Oeste Celular Participações - Acquisition 26,594 (17,552) 9,042 46,540 (30,716) 15,824
Tele Leste Celular Participações S.A. - Privatization 18,645 (12,307) 6,338 26,687 (17,615) 9,072
Total 1,620,736 (1,069,687) 551,049 1,740,739 (1,148,889) 591,850

The changes in tax credits for the three-month period ended at March 31, 2010 and 2009 are as follows:

Consolidated
2010 2009
Results:
   Amortization of goodwill (120,003)                    (328,550)
   Reversal of provision                        79,202                      219,799
   Tax credit                        40,801                      108,751
   Effect on statement of operation - -

7. COURT DEPOSITS AND RESTRICTED AMOUNTS

The Company and its subsidiaries hold amounts in court deposit and subject to court restriction in relation to civil, labor and tax proceedings (notes 14 and 16), as shown below:

Consolidated
03.31.10 12.31.09
 Resubmitted
Escrow deposits
   Civil claims 69,425 67,215
   Labor 40,977 39,167
   Tax 881,037 649,541
   Total 991,439 755,923
 Escrow blockages 56,024 53,979
Total 1,047,463 809,902
Current 232,380 200,907
Noncurrent 815,083 608,995

Following is a brief description of the main court deposits in connection with tax proceedings:

The subsidiaries are parties to judicial proceedings in connection with the following matters: i) debts arising out of the offsetting of tax credits resulting from overpayments not recognized by the tax authorities; ii) tax debt due to underpayment by reason of divergences in the accessory tax returns (DCTFs); and iii) discussions referring to changes in the tax rates and increase in the tax calculation bases set forth by Law no. 9718/98. At March 31, 2010, the subsidiaries held amounts in court deposits totaling R$60,220 (R$38,569 at December 31, 2009).

The subsidiaries are parties to proceedings referring to administrative and judicial matters, aiming at discharging the assessment of the CIDE on remittances of funds abroad, in connection with agreements for transfer of technology, license of trademarks and software, etc. The subsidiaries recorded court deposits in the amount of R$88,958 at March 31, 2010 (R$63,695 at December 31, 2009).

Telemig filed a Writ of Mandamus challenging its liability for the payment of the inspection fees on mobile stations not owned by it, and started booking a provision and effecting a deposit in court for the amounts referring to the TFF – Operation Inspection Fee and to the TFI – Installation Inspection Fee. The case is awaiting decision by the TRF Court of the 1st Region. At March 31, 2010, Telemig held deposits in court totaling R$512,623 (R$416,625 at December 31, 2009).

Telemig Participações (which was merged into the Company on November 13, 2009) filed Writs of Mandamus requesting the court to declare its right not to be assessed IRRF (Withholding Income Tax) at source on its receipts of interest on own capital of its subsidiary. At March 31, 2010, Telemig held deposits in court totaling R$21,833 (R$21,445 at December 31, 2009).

Vivo is party to other judicial proceedings relating to the following matters: i) IRRF levied on income earned from rent and royalties, salaried work and fixed income financial investments; ii) debts referring to offsetting of overpayments of IRPJ and CSLL not homologated by the Brazilian Federal Revenue Service and debt for late fine due as a result of untimely payment of the IRRF tax made on a voluntary basis; and iii) obtaining the CND (Debt Clearance Certificate) for purposes of discharging the referred debt as an impairment for obtaining debt clearance certificates in order to allow the company to have its name removed from the CADIN. At March 31, 2010, Vivo held deposits in court totaling R$9,870 (R$5,797 at December 31, 2009).

The Company was party to judicial proceedings relating to the following matters: i) renewal of the debt clearance certificate requesting authorization for depositing the fully updated amount of the debts; ii) requirement of IRPJ estimates and non-payment of debts with the SIEF; and iii) voluntary disclosure. At March 31, 2010, the deposits in court totaled R$3,163 (R$2,671 at December 31, 2009).

The SINDITELEBRASIL –Telephone Operators and Cellular and Personal Mobile Service Companies Union filed a writ of mandamus in order to challenge the Contribution for Boosting Public Broadcasting payable to EBC (Empresa Brasil de Comunicação), created by Law no. 11.652/2008. Vivo and Telemig, as Union members, deposited in court the amounts relating to said contribution, which totaled R$121,276 and R$14,869, respectively, at March 31, 2010 (R$55,153 and R$6,604 at December 31, 2009).

The subsidiaries are parties to judicial proceedings relating to the following matters: i) voluntary disclosure; ii) ICMS purportedly levied on the access, adhesion, qualification, availability and use of services, as well as those relating to supplementary services and additional facilities; right to credit for acquisition of property, plant & equipment and also electric power; and iii) prepaid service activation cards. At March 31, 2010, court deposits totaled R$28,795 (R$17,106 at December 31, 2009).

At March 31, 2010, the subsidiaries recorded deposits in court in the amount of R$19,430 (R$21,876 at December 31, 2009), relating to the discussion of the following matters: i) ISS tax on revenues arising out of number substitution, handset exchange, detailed bill, specific number selection, contact transfer, message number and requested restriction of access, and assessment of ISS on cellular phone activation; ii) social contributions referring to purported absence of withholding of 11% on the amount of several invoices and receipts of service providers hired by means of labor assignment; iii) CPMF; and iv) PPNUM – Public Price for Numbering Resources Management by ANATEL.

8. PREPAID EXPENSES

Consolidated
03.31.10 12.31.09
 Resubmitted
FISTEL fee (*) 530,645 -
Advertising to be distributed 107,542 123,911
Rent 12,939 19,268
Financial charges 6,417 6,747
Insurance premium, software and other 42,673 35,458
Total 700,216 185,384
Current 674,890 161,954
Noncurrent 25,326 23,430

(*) These refer to the amounts of the Inspection and Operation Fee for fiscal year 2010, which were paid in March and shall be amortized until the end of the fiscal year.

9. OTHER ASSETS

Consolidated
12.31.09
03.31.10  Resubmitted
Related parties receivables  80,412 79,276
Credits with suppliers 35,124 62,334
Subsidies on handsets sales 13,907 10,411
Employee advances and  other assets 32,560 21,934
Total 162,003 173,955
Current 159,005 170,966
Noncurrent 2,998 2,989

10. INVESTMENTS

a) Subsidiaries information

  Subsidiaries
  Vivo   Telemig    Telemig Participações
           
Total assets at 03.31.10          15,922,230              2,246,498   n/a
Total assets at 12.31.09 (*)          16,181,420              2,165,761   n/a
           
Shareholders' equity at 03.31.10            7,193,953              1,003,766   n/a
Shareholders' equity at 12.31.09 (*)            7,920,374                 944,359   n/a
           
Net operating revenue - January to March 2010            3,774,054                 459,850   n/a
Net operating revenue - January to March 2009 (*)            3,635,538                 405,371   n/a
           
Net income - January to March 2010               188,931                   59,407   n/a
Net income - January to March 2009 (*)               178,949                   25,733                   27,201
           
(*) Resubmitted          

At December 31, 2009, the Company holds 100% of the shares of its subsidiaries – Vivo and Telemig.

  Vivo   Telemig
  03.31.10   12.31.09   03.31.10   12.31.09
Number of shares held (in thousands)              
   Common                   3,810                     3,810                     2,372                     2,372
               
 Interest in the voting capital 100.0%   100.0%   100.0%   100.0%
Total Interest 100.0%   100.0%   100.0%   100.0%

b) Breakdown

The balance of the controlling company’s investments includes the interest held in the subsidiaries' equity (investments in subsidiaries), advances for future capital increase, as well as other investments, as shown below:

Company Consolidated
03.31.10 12.31.09 03.31.10 12.31.09
Resubmitted
Investment in subsidiaries 7,830,602 8,497,616 - -
Advance for future capital - special goodwill reserve in subsidiaries 367,117 367,117 - -
Other investments 104 104 112 112
Investment balance 8,197,823 8,864,837 112 112

c) Changes

c.1) Investments in subsidiaries

The initial balances and the changes in investments relating to fiscal year 2009 are stated again in these financial statements (note 2).

Description Vivo   Telemig Participações   Telemig    Total
               
Investments at 12.31.08              6,506,881                   698,929                     79,407                7,285,217
               
  Adjustments CPCs - Equity pick-up - 01.01.09               (180,741)                     (6,061)                        (923)                 (187,725)
Investments at 01.01.09              6,326,140                   692,868                     78,484                7,097,492
   Equity pick-up on net income of subsidiaries                  178,949                     16,035                       1,918                   196,902
   Capital increase with special goodwill reserve                 289,238                     10,015                              -                   299,253
   Adjusting for dividends in 2008                            -                              -                          559                          559
   Earnings generated in the capital increase with the special goodwill reserve                            -                       1,935                              -                       1,935
Investments at 03.31.09              6,794,327                   720,853                     80,961                7,596,141
  Capital increase                 300,000                              -                              -                   300,000
  Shares merger                             -                 (112,305)                   809,551                   697,246
  Tax incentives                     6,935                              -                       2,202                       9,137
   Unclaimed dividends and interest on shareholders' equity                     3,843                              -                          928                       4,771
  Dividends and interest on shareholders’ equity               (397,923)                 (593,550)                   (19,281)              (1,010,754)
   Equity pick-up on net income of subsidiaries                  891,996                   (14,998)                     24,077                   901,075
Investments at 12.31.09              7,599,178                              -                   898,438                8,497,616
   Equity pick-up on net income of subsidiaries                  188,931                              -                     59,407                   248,338
   Additional dividend for fiscal year 2008               (915,352)                              -                              -                 (915,352)
Investments at 03.31.10              6,872,757                              -                   957,845                7,830,602

c.2) Advance for future capital increase

The initial balances and the changes in advances for future capital increase relating to fiscal year 2009 are stated again in these financial statements (note 2).

Description Vivo   Telemig Participações   Telemig    Total
Investiments at 12.31.08                 610,434                   561,209                     45,921                1,217,564
  Capital increase with special goodwill reserve               (289,238)                   (20,871)                              -                 (310,109)
Investiments at 03.31.09                 321,196                   540,338                     45,921                   907,455
   Shares merger                             -                 (540,338)                              -                 (540,338)
Investiments at 12.31.09                 321,196                              -                     45,921                   367,117
Investiments at 03.31.10                 321,196                              -                     45,921                   367,117

11. PROPERTY, PLANT AND EQUIPMENT, NET

11.a) Breakdown

Consolidated
03.31.10 12.31.09 - Resubmitted
Cost Accumulated depreciation Property, plant and equipment, net Cost Accumulated depreciation Property, plant and equipment, net
Transmission equipment 9,555,569 (7,217,349) 2,338,220 9,660,973 (7,188,371) 2,472,602
Infrastructure 3,480,606 (2,020,539) 1,460,067 3,418,058 (1,960,734) 1,457,324
Switching equipment 4,086,066 (3,259,074) 826,992 4,196,877 (3,225,490) 971,387
Terminals 2,809,100 (2,516,693) 292,407 2,721,531 (2,412,241) 309,290
Buildings 300,114 (99,896) 200,218 298,984 (97,347) 201,637
Land 101,080 - 101,080 101,264 - 101,264
Other assets 1,969,493 (1,405,517) 563,976 1,948,183 (1,372,115) 576,068
Construction in progress 227,245 - 227,245 318,932 - 318,932
Total 22,529,273 (16,519,068) 6,010,205 22,664,802 (16,256,298) 6,408,504

11.b) Changes

The initial balances and the changes in fiscal year 2009 are stated again in these financial statements (note 2).

Consolidated
Transmission
equipment
Infrastructure Switching
equipment
Terminals Buildings Land Other
assets
Construction
in progress
Total
Cost
Balances at January 01, 2009 8,979,713 3,018,294 4,243,681 2,310,275 296,670 70,352 1,767,321 857,788 21,544,094
Additions 6,492 2,620 - 95,410 - - 4,249 258,482 367,253
Write-off (432) (451) 342 (499) - - (336) - (1,376)
Transfer 218,166 74,457 72,778 7,940 1,881 - 25,180 (402,197) (1,795)
Balances at March 31, 2009 9,203,939 3,094,920 4,316,801 2,413,126 298,551 70,352 1,796,414 714,073 21,908,176
Additions (18,645) 37,156 - 309,809 - 30,696 95,184 945,925 1,400,125
Write-off (311,835) (8,613) (72,419) (13,807) (532) (334) (18,842) - (426,382)
Transfer 787,514 294,595 (47,505) 12,403 965 550 75,427 (1,341,066) (217,117)
Balances at December 31, 2009 9,660,973 3,418,058 4,196,877 2,721,531 298,984 101,264 1,948,183 318,932 22,664,802
Additions 14,269 2,964 - 87,571 1,233 - 15,185 161,934 283,156
Write-off (262,540) (2,991) (139,661) (2) - (184) (13,317) - (418,695)
Transfer 142,867 62,575 28,850 - (103) - 19,442 (253,621) 10
Balances at March 31, 2010 9,555,569 3,480,606 4,086,066 2,809,100 300,114 101,080 1,969,493 227,245 22,529,273
 
Depreciation
Balances at January 01, 2009 (6,647,993) (1,741,083) (2,680,686) (2,005,070) (87,318) - (1,198,036) - (14,360,186)
Additions (*) (334,047) (52,688) (89,711) (99,435) (2,568) - (45,413) - (623,862)
Write-off 66 282 (699) 449 - - 270 - 368
Transfer 147 30 1,658 - - - (1,318) - 517
Balances at March 31, 2009 (6,981,827) (1,793,459) (2,769,438) (2,104,056) (89,886) - (1,244,497) - (14,983,163)
Additions (539,702) (174,500) (619,925) (321,990) (7,766) - (145,147) - (1,809,030)
Write-off 329,304 7,289 51,998 13,805 301 - 16,298 - 418,995
Transfer 3,854 (64) 111,875 - 4 - 1,231 - 116,900
Balances at December 31, 2009 (7,188,371) (1,960,734) (3,225,490) (2,412,241) (97,347) - (1,372,115) - (16,256,298)
Additions (*) (299,937) (61,986) (167,095) (104,454) (2,595) - (43,569) - (679,636)
Write-off 269,784 2,437 131,645 2 - - 13,002 - 416,870
Transfer 1,175 (256) 1,866 - 46 - (2,835) - (4)
Balances at March 31, 2010 (7,217,349) (2,020,539) (3,259,074) (2,516,693) (99,896) - (1,405,517) - (16,519,068)
 
Net balance at January 01, 2009 2,331,720 1,277,211 1,562,995 305,205 209,352 70,352 569,285 857,788 7,183,908
Net balance at December 31, 2009 2,472,602 1,457,324 971,387 309,290 201,637 101,264 576,068 318,932 6,408,504
Net balance at March 31, 2010 2,338,220 1,460,067 826,992 292,407 200,218 101,080 563,976 227,245 6,010,205

(*)The sum of depreciation costs and expenses is shown in “Depreciation”, in notes 20, 21 and 22.

The remaining balances in the transfers shown in the preceding table refer to transfers made between property, plant & equipment accounts and intangible assets accounts (note 12b).

11.c) Depreciation rates

In conformity with ICPC 10, the Company and its subsidiaries effected evaluations of applied useful life in their property, plant & equipment, pursuant to the method of direct comparison to market data. The work conducted by a specialized company did not provide any material results in relation to the total net property, plant & equipment.

Property, plant & equipment are depreciated pursuant to the straight line method, at the annual rates shown below:

Yearly depreciation rates  (%)
Transmission equipment
14.29 to 20.00
Infrastructure
2.87 to 20.00
Switching equipment
14,29 to 20,00
Terminals
66.67
Buildings
2.86 to 4.00
Other assets
6.67 to 20.00

11.d) Interest on construction in progress

As informed in note 2, the Company and its subsidiaries have not capitalized financial expenses incurred in connection with loans and financing since January 01, 2009.

11.e) Pledged assets

At March 31, 2010, the subsidiaries had items of property, plant & and equipment offered as collateral in lawsuits in the amount of R$82,342 (R$83,534 at December 31, 2009).

12. INTANGIBLE ASSETS, NET

12.a) Breakdown

Consolidated
03.31.10 12.31.09 - Resubmitted
Cost Accumulated amortization Intangible net Cost Accumulated amortization Intangible net
Goodwill, negative goodwill and provision for losses on purchase of investments 2,678,299 (1,322,319) 1,355,980 2,678,299 (1,322,319) 1,355,980
Software use rights 4,916,578 (3,582,650) 1,333,928 4,851,880 (3,435,616) 1,416,264
Concession licenses 2,249,619 (941,840) 1,307,779 2,249,619 (903,450) 1,346,169
Goodwill 35,520 (27,674) 7,846 35,338 (26,906) 8,432
Other assets 52,438 (50,373) 2,065 52,438 (50,088) 2,350
Construction in progress 68,658 - 68,658 93,074 - 93,074
Total 10,001,112 (5,924,856) 4,076,256 9,960,648 (5,738,379) 4,222,269

12.b) Changes

The initial balances and the changes in fiscal year 2009 are stated again in these financial statements, as described in note 2.

Consolidated
Goodwill, negative goodwill and provision for losses on purchase of investments (*) Software
use rights
Concession
licenses
Goodwill Other
assets
Construction
in progress
Total
Cost
Balances at January 01, 2009 2,678,299 3,974,243 2,249,619 31,962 48,378 198,573 9,181,074
Additions - 46,585 - 117 606 107,678 154,986
Write-off - - - - - - -
Transfer - 133,254 - - 350 (131,809) 1,795
Balances at March 31, 2009 2,678,299 4,154,082 2,249,619 32,079 49,334 174,442 9,337,855
Additions - 172,882 - 3,259 953 230,046 407,140
Write-off - (1,464) - - - - (1,464)
Transfer - 526,380 - - 2,151 (311,414) 217,117
Balances at December 31, 2009 2,678,299 4,851,880 2,249,619 35,338 52,438 93,074 9,960,648
Additions - 14,837 - 182 - 30,672 45,691
Write-off - (5,217) - - - - (5,217)
Transfer - 55,078 - - - (55,088) (10)
Balances at March 31, 2010 2,678,299 4,916,578 2,249,619 35,520 52,438 68,658 10,001,112
Amortization              
Balances at January 01, 2009 (1,322,319) (2,684,577) (751,018) (23,569) (45,058) - (4,826,541)
Additions (*) - (132,536) (37,179) (792) (799) - (171,306)
Write-off - - - - - - -
Transfer - (517) - - - - (517)
Balances at March 31, 2009 (1,322,319) (2,817,630) (788,197) (24,361) (45,857) - (4,998,364)
Additions - (504,704) (115,253) (2,545) (2,079) - (624,581)
Write-off - 1,466 - - - - 1,466
Transfer - (114,748) - - (2,152) - (116,900)
Balances at December 31, 2009 (1,322,319) (3,435,616) (903,450) (26,906) (50,088) - (5,738,379)
Additions (*) - (152,254) (38,390) (768) (285) - (191,697)
Write-off - 5,216 - - - - 5,216
Transfer - 4 - - - - 4
Balances at March 31, 2010 (1,322,319) (3,582,650) (941,840) (27,674) (50,373) - (5,924,856)
Net balance at January 01, 2009 1,355,980 1,289,666 1,498,601 8,393 3,320 198,573 4,354,533
Net balance at December 31, 2009 1,355,980 1,416,264 1,346,169 8,432 2,350 93,074 4,222,269
Net balance at March 31, 2010 1,355,980 1,333,928 1,307,779 7,846 2,065 68,658 4,076,256

(*)The sum of amortization costs and expenses are shown in “Amortization”, in notes 20, 21 and 22.

The remaining balances in the transfers shown in the preceding table refer to the transfers made between property, plant & equipment accounts and intangible assets accounts (note 11b).

12.c) Amortization rates

Intangible assets with defined useful life are amortized pursuant to the straight line method at the annual rate show below:

Yearly amortization rates (%)
Software use  rights 20.00
Concession  licenses 6.67 to 20.00
Goodwill As contract terms
Other assets 6.67 to 20.00

13. SUPPLIERS AND TRADE ACCOUNTS PAYABLE

Consolidated
03.31.10 12.31.09
Suppliers 1,861,262 2,170,586
Amounts to be transferred LD (a) 378,445 405,619
Interconnection and  linking 350,195 324,078
Technical assistance 87,353 100,484
Other 50,759 52,820
Total 2,728,014 3,053,587

(a) The amounts refer to VC2, VC3 and roaming charges, invoiced to the subsidiaries’ customers and transferred to the long distance call operators.

14. TAXES, CHARGES AND CONTRIBUTIONS PAYABLE

Company Consolidated
12.31.09
03.31.10 12.31.09 03.31.10 Resubmitted
ICMS (a) - - 743,234 767,466
Current income and social contribution taxes (b) (c) - 15,620 145,343 117,565
Deferred Income tax and social contribution - - 30,487 28,837
PIS and COFINS 92 19,600 148,607 164,329
FISTEL (d) - - 645,278 516,375
FUST and FUNTTEL - - 11,577 11,658
CIDE (e) - - 108,912 80,933
Other taxes, fees and mandatory contributions 1,389 1,389 29,389 31,163
Total        
1,481 36,609 1,862,827 1,718,326
Current
Noncurrent 1,481 36,609 987,394 953,355
- - 875,433 764,971

(a) At March 31, 2010, the amount of R$290,825 (R$271,611 at December 31, 2009) out of the non-current liability, refers to ICMS - More Jobs for Paraná Program, resulting from an agreement with the Paraná State Government involving the deferral of ICMS tax payment. Such Agreement provides for that the ICMS becomes due always in the 49th month following that in which the ICMS tax is calculated. This amount is adjusted to the variation of the Annual Indexation Factor (FCA).

(b) The controlling company’s balance at December 31, 2009 refers to the withheld income tax on interest on own capital for which a provision was booked.

(c) Telemig Participações (which was merged into the Company on November 13, 2009 ), filed Writs of Mandamus requesting the court to declare its right not to be assessed IRRF (Withholding Income Tax) at source on its receipts of interest on own capital of its subsidiary. Based on the opinion of its legal counsels, said proceedings are classified as possible risk. Although being a case for which probable loss is possible, the Company kept a provision because it considered the same as a legal liability, having made deposits in court totaling R$21,833 at March 31, 2010 (R$21,445 at December 31, 2009), note 7.

(d) They include the amounts referring to the writ of mandamus Telemig filed, challenging the liability for the payment of the inspection fees on mobile stations which are not owned by it, and started booking a provision and effecting a deposit in court for the amounts referring to the TFF – Operation Inspection Fee and to the TFI – Installation Inspection Fee. The case is awaiting decision by the TRF Court of the 1st Region. In the opinion of its legal counsels, the chances of loss in these proceedings are possible. Although being a case for which probable loss is possible, the Company kept a provision because it considered the same as a legal liability, having made deposits in court totaling R$512,263 at March 31, 2010 (R$416,625 at December 31, 2009), note 7.

(e) They include the amounts of administrative and judicial proceedings, seeking to discharge the assessment of the CIDE on remittances of funds abroad, in connection with agreements for transfer of technology, license of trademarks and software, etc. Its subsidiaries recorded court deposits in the amount of R$108,912 at March 31, 2010 (R$80,933 at December 31, 2009), having made deposits in court totaling R$88,958 (R$63,695 at December 31, 2009), note 7.

15. LOANS, FINANCING, AND DEBENTURES

15.a) Debt breakdown

a.1) Loans and Financing

        Consolidated
Description Currency Interest Maturity 31.03.10   12.31.09
BNDES URTJLP (*) TJLP + 4.30% p.a. to 4.60% p.a. 04/15/10 to 08/15/14              1,388,049                1,470,063
Banco Europeu de Investimentos - BEI USD 4.18% p.a to  4.47% p.a. 06/19/2010 to 03/02/15                 655,299                   635,066
Banco do Nordeste do Brasil - BNB R$ 10.00%  p.a 04/29/10 to 10/30/16                 577,944                   587,627
Nota de Credito Comercial R$ 103.8% of the CDI 08/03/2010                 111,394                               -
Resolução 2770 USD 5.94% p.a 7/23/2010                   97,901                     95,327
Resolução 2770 JPY 2.60% p.a 01/18/2011                   26,910                     26,415
BNDES UMBND (**) 8.68% p.a 04/15/10 to 07/15/11                     3,754                       4,327
Comissão BBVA - 0.43% p.a. 05/28/10 to 02/28/15                        192                          188
Resolução 2770 R$                                 -                   176,016
Total                    2,861,443                2,995,029
             
Current                       669,313                   688,397
Noncurrent                    2,192,130                2,306,632

(*) URTJLP – Long term interest rate reference unit, used by the BNDES as the contract currency in loan agreements.

(**) UMBND – Monetary unit, based on a currency basket used by the BNDES as the contract currency in loan agreements.

a.2) Debentures

Company Consolidated
Description Currency Interest Maturity 03.31.10 12.31.09 03.31.10 12.31.09
Debentures (2nd Issue) R$ 104.2% to 120.0%
of the CDI
05/04/2015 1,036,662 1,014,631 1,036,662 1,014,631
Debentures (3rd Issue) R$ - 232,279 - 232,279
Debentures (4th Issue) R$ 108.0% to 112.0%
of the CDI
04/15/2010
to 10/15/2013
769,416 752,447 769,416 752,447
Debentures (4th Issue) R$ IPCA + 7.00% p.a 10/15/2010 to 10/15/2014 78,980 74,911 78,980 74,911
Debentures (1st Issue Telemig) R$ IPCA + 0.5% p.a 5/7/2021 - - 60,886 59,600
Issuance costs R$ (4,139) (4,403) (4,139) (4,403)
Total 1,880,919 2,069,865 1,941,805 2,129,465
Current 533,051 266,256 533,051 266,256
Noncurrent 1,347,868 1,803,609 1,408,754 1,863,209

15.b) Repayment schedule

At March 31, 2010, the maturity of the non-current portion of loans, financing, debentures and promissory notes were broken down by maturity year as follows:

Year Company Consolidated
2011 4,768 335,480
2012 101,956 538,248
2013 640,934 1,075,872
2014 60,130 537,233
2015 540,080 999,138
After 2015 - 114,913
Total 1,347,868                   3,600,884

15.c) Loan covenants

Vivo has loans and financing borrowed from Banco Nacional de Desenvolvimento Econômico e Social (BNDES), the balance of which at March 31, 2010 was R$1,391,803 (R$1,474,390 at December 31, 2009).  In accordance with the contracts, there are several economic and financial indexes that must be calculated on a six-month and yearly basis. At the same date, all economic and financial indexes established in the contracts were met.

The 4th issue debentures, the balance of which at March 31, 2010 was R$844,257 (R$822,955 at December 31, 2009), have economic and financial indexes which must be calculated on a quarterly basis. At that same date, all the economic and financial indexes established in the contracts were met.

The SPM service agreement entered into by Telemig with the State Department of Economic Development (note 15.e2), the balance of which at March 31, 2010 was R$60,886 (R$59,600 at December 31, 2009), sets forth covenants on petitions for judicial and extrajudicial recovery, liquidation, dissolution, insolvency, voluntary bankruptcy or decree of bankruptcy, payment default, non-compliance with non-fiduciary obligations and compliance with a certain limit substantially based on balance sheet financial indexes and EBITDA (Earnings before interest, taxes, depreciation and amortization), among others. At March 31, 2010, all covenants were fulfilled by Telemig.

15.d) Guarantees

At March 31, 2010, guarantees were granted for part of the Company’s loans and financing, according to the table below:

Banks

Loan/financing
amount

Guarantees

BNDES

R$1,388,049 (URTJLP)

R$3,754
(UMBNDES)

  • Agreement (Vivo) R$1,364,025: Accounts receivable granted as guarantee of 15% of the outstanding balance or four (4) times the amount of the highest installment, whichever is higher.
  • Agreement (Vivo) R$27,778: pledge of 15% of the accounts receivable referring to the services revenue.
  • Vivo Participações is the intervening guarantor.

Banco Europeu de Investimento – BEI

R$655,299

  • Commercial risk guaranteed by Banco BBVA Portugal.

Banco do Nordeste do Brasil S.A. - BNB

R$577,944

  • Bank security granted by Banco Bradesco S.A. in the amount equal to 100% of the outstanding loan debt.
  • Creation of a liquidity fund represented by financial investments in the amount equal to three (3) amortization installments, based on the post-grace period average installment.
  • Vivo Participações is the intervening guarantor

15.e) Debentures

e.1) Fund raising by the company

2nd Issue

Within the scope of the First Securities Distribution Program in the amount of R$2 billion, announced on August 20, 2004, the Company issued debentures related to the 2nd Issue of the Company, in the amount of R$1 billion, on May 01, 2005, with a term of ten years, counted as from the issue date, that is, May 01, 2005.

Such offering consisted of the issue in two series, being R$ 200 million in the first series, and R$800 million in the second series, with final maturity on May 4, 2015. The debentures earn interest, payable on a semiannual basis, corresponding to 120.0% (first series) and 104.2% (second series) of the accrued daily average rates for the DI (one-day Interbank, extra group deposits) (DI rates), as calculated and published by the CETIP.

Rescheduling

1st Issue

In May 2009, the debentures of the 1st Series of the 2nd Issue of the Company were rescheduled, as approved by the Board of Directors on March 30, 2009. The new effective term for interest payment is 24 months, counted from May 01, 2009, during which time the interest payment conditions defined herein shall remain unchanged. During this second term of interest payment, the debentures of the 1st Series of the 2nd Issue of the Company shall earn interest of 120.0% of the average rate of the one-day Interfinancial Deposits – the DI over extra-group rate, calculated in accordance with the formula contained in clause 4.9 of the “2nd issue Indenture”. The payments of interest on the debentures shall be made on May 01, 2010, November 01, 2010 and May 01, 2011.

Rescheduling of the interest payment on the debentures is expected to occur on May 01, 2011 (first Series).

2nd Series

At the meetings of the Board of Directors of the Company held on April 25, 2005 and on May 13, 2005 the details of the 2nd Series of the 2nd Issue of the Company were approved.

At March 29, 2010, the Board of Directors approved the following conditions for the first rescheduling of the mentioned debentures:

(i) New effective term for interest payment: the new (“second”) effective term for payment of interest on the debentures of the 2nd series of the 2nd issue of the Company shall be 24 months, counted as from May 01, 2010, during which time the interest payment conditions provided for herein shall remain unchanged;

(ii) Interest Payment: during the second effective term for interest payment (until May 01, 2012), the debentures of the 2nd Series of the 2nd issue of the Company will earn interest of 106.00% of the average rate of the one-day Interfinancial Deposits, called as extra group over DI rates, calculated in accordance with the formula contained in clause 4.9 of the “2nd issue indenture”;  

(iii) Periodicity of interest payment: during the second effective term for interest payment, the payments of interest on the debentures shall be made on a semi-annual basis as from the rescheduling date.

(iv) the debenture holders who do not agree with the new conditions provided for by the Board of Directors of the Company should state their election to exercise the right to sell their debentures to the Company until April 09, 2010, through CETIP and/or Bovespa FIX (note 33);

(v) the acquisition of the debentures held by the debenture holders who voiced their election as set forth in item 4.10.6 of the indenture shall not be added by premium of any nature whatsoever;

(vi) the other details of the issue shall remain unchanged, with due regard to the provisions in the 2nd issue indenture for nominative, book-entry, non-convertible, unsecured debentures with personal guarantee by the Company; and

(vii) we further inform that the issue rating was raised from “br AA” to “br AAA”, as published in the risk report published by Standard & Poor’s on March 19, 2010.

3rd Issue

At January 11, 2010, the Company settled the simple, non-convertible, unsecured, sole series debentures of the 3rd public issue, totaling R$210 million, earning interest of 113.55% of the Interfinancial Deposits (DI) in the amount of R$23 million.

4th Issue

At September 04, 2009, the Board of Directors approved the 4th public issue, by the Company, of simple, non-convertible, nominative and book-entry unsecured debentures, with tenor of 10 years.

The total issue value was R$810 million, and the base offering corresponded to R$600 million, added by R$210 million due to the full exercise of the option of additional debentures.

A total of eight hundred and ten thousand (810,000) debentures were issued in three (3) series, being 98,000 debentures in the 1st series, 640,000 in the 2nd series and 72,000 in the 3rd series. The amount of debentures allocated to each series was decided by mutual agreement between the Company and the lead arranger of the offering after the conclusion of the Bookbuilding procedure.

The interest payment for the 1st series will be of 108.00% of the CDI, for the 2nd series of 112.00% of the CDI and for the 3rd series, coupon of 7.00% yearly (on the nominal value adjusted to the variation of the IPCA index). These debentures earn interest with semiannual payments in the 1st and 2nd series and annual payments in the 3rd series.

Rescheduling of each series is provided for as follows: 1st series, on October 15, 2012, 2nd series, on October 15, 2013, and 3rd series, on October 15, 2014.

The proceeds raised from the issue of the offering were used for full payment of the principal of the debt represented by the 6th issue of commercial promissory notes of the Company and supplementation of the working capital of the Company.

The transaction costs in connection with this issue in the amount of R$4,139, at March 31, 2010, were appropriated to a liabilities reduction account as costs to be incurred, and are recorded as financial expenses of the Company (note 24), pursuant to the contractual terms of this issue. The actual rate of this issue, considering the transaction costs, if of 112.13% of the CDI.

e.2) Fund raising by Telemig Celular

1st Issue

In compliance with the Contract for Provision of SMP Services, in conformity with the Public Selection No 001/07, the State of Minas Gerais, acting through the State Department for Economic Development, has undertaken to subscribe debentures issued by Telemig, within the scope of the “Minas Comunica” Program, using proceeds from the Fund for Universalization of Access to Telecommunications Services (Fundo de Universalização do Acesso a Serviços de Telecomunicações) - FUNDOMIC. Under the terms of this Program, Telemig Celular would make the SMP service available to 134 locations in the areas recorded as 34, 35 and 38.

Also according to the program, 5,550 simple, unsecured, nonconvertible, registered, book-entry type debentures would be issued, without stock certificates being issued, in up to five series.

In consideration for the certification by the State Department of Economic Development of the service to be provided to 15 locations, 621 debentures were issued in the 1st Series of the 1st issue, amounting to R$ 6,210 in December 2007. In March 2008, for the service at 42 locations, 1,739 debentures were issued in the 2nd Series of the 1st issue, valued at R$ 17,390. At December 31, 2008, for the service at 77 locations, 3,190 debentures were issued in the 3rd Series of the 1st issue, valued at R$31,900, thus completing the program for providing service to 134 locations inside the state of Minas Gerais.

16. PROVISION FOR CONTINGENCIES

The Company and its subsidiaries are parties to lawsuits that generate administrative and judicial contingencies related to labor, tax and civil claims. Relevant accounting provisions have been booked with respect to such lawsuits in which the chance of loss was deemed as probable.

16.1) Breakdown

The breakdown of the balances of such provisions at March 31, 2010 and at December 31, 2009 was as follows:

Consolidated
03.31.10 12.31.09
Resubmitted
Civil 166,631 167,954
Labor 80,429 78,875
Tax 32,578 31,314
Total 279,638 278,143
Current 129,075 134,181
Noncurrent 150,563 143,962

16.2) Changes:

The initial balances and the changes to the provisions for contingencies as of December 31, 2009 are stated again in these financial statements.

  Consolidated
  Civil   Labor   Tax   Total
Balance at 12. 31. 2008                      170,675                          72,687                          30,799                        274,161
Provisions recorded, net of reversals  (note 23)                        28,557                            8,105                             (980)                          35,682
Monetary variation                             713                                   -                               236                               949
Payments                      (23,851)                          (1,843)                             (137)                        (25,831)
Balance at 03. 31. 2009                      176,094                          78,949                          29,918                        284,961
Provisions recorded, net of reversals                          79,063                          18,620                            1,287                          98,970
Monetary variation                        (1,087)                                   -                               535                             (552)
Payments                      (86,116)                        (18,694)                             (426)                      (105,236)
Balance at 12. 31. 2009                      167,954                          78,875                          31,314                        278,143
Provisions recorded, net of reversals  (note 23)                        24,493                            7,286                               584                          32,363
Monetary variation                           (350)                                   -                               680                               330
Payments                      (25,466)                          (5,732)                                   -                        (31,198)
Balance at 03. 31. 2010                      166,631                          80,429                          32,578                        279,638
               
Current                      107,574                          19,319                            2,182                        129,075
Noncurrent                        59,057                          61,110                          30,396                        150,563

16.3) Comments/Details

16.3.1. Tax Proceedings

Probable Loss

a) State Taxes

At March 31, 2010, Vivo (RJ, SP, AM and RR) was holding administrative and legal discussions on ICMS taxes that, based on the opinion of its legal advisors, are classified as probable loss and therefore are provisioned at R$26,129 (R$24,759 at December 31, 2009).

b) Federal Taxes

At March 31, 2010, Vivo was holding administrative discussions on federal taxes (IRRF/IRPJ/PIS/COFINS) that, based on the opinion of its legal advisors, are classified as probable loss and therefore are provisioned at R$720 (R$2,824 at December 31, 2009).

c) Other Taxes

At March 31, 2010, Vivo was holding administrative discussions on other taxes amounting to R$2,182 (R$184 at December 31, 2009), which were provisioned based on the opinion of its legal advisors.

Possible Loss

Based on the opinion of its legal advisors, the Company Management believes that the settlement of the issues listed below will not produce any material adverse effects on its financial condition.

At March 31, 2010, the amounts of lawsuits of such nature, classified as possible loss, total R$4,071,818 (R$3,842,217 at December 31, 2009), which refer to administrative and judicial claims in connection with the following taxes: ICMS, PIS, COFINS, ISS, IRPJ, IRRF, CSLL, IOF, CPMF, FUST, FUNTTEL, FISTEL and Contribution for Boosting Public Broadcasting (EBC) and Social Contributions. Relevant lawsuits filed in this quarter refer to the same matters already in course at December 31, 2009.

At July 02, 2002, a delinquency notice was issued against Telemig by the National Social Security Institute (INSS) relating to the joint and several liability for the payment of the contribution to the INSS of service providers and the 11% withholding provided for in Law no. 9711/98. Although this is a case with possible chance of loss, at March 31, 2010 and December 31, 2009 Telemig held a provision in the amount of R$3,547 in order to cover eventual losses arising out of the referred delinquency notice, based on the opinion of its legal counsels. The proceedings are awaiting decision in the administrative sphere.

16.3.2. Civil Proceedings

Civil proceedings include civil claims, on several levels, and as previously shown, a provision considered sufficient to cover probable losses in those proceedings was accounted for.

a) Consumers

The Company and its subsidiaries are facing several legal proceedings filed by individual consumers or by civil associations representing the rights of consumers who claim non-fulfillment of services and/or products sold. On an individual basis, none of those proceedings is considered relevant.

At March 31, 2010, based on the opinion of its external legal advisors, R$146,658 (R$145,756 at December 31, 2009) were provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$502,822 (R$492,819 at December 31, 2009).

b) Regulatory

The subsidiaries are facing several administrative proceedings filed by ANATEL relating to noncompliance with the Regulation regarding the SMP. At December 31, 2009 R$15,195 (R$17,464 at December 31, 2009) were provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion of the proceedings of such nature and whose possible loss is expected totaled R$5,064 (R$7,570 at December 31, 2009).

c) Other Cases

They refer to proceedings of other natures, all of them relating to the regular business course. At March 31, 2010, based on the opinion of its external legal advisors, R$4,778 (R$4,734 at December 31, 2009) were provisioned, and such amount was considered sufficient to cover probable losses in those proceedings.

On the same date, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$30,294 (R$41,783 at December 31, 2009).

16.3.3 Labor Claims

They include several labor claims, and as previously shown, a provision considered sufficient to cover probable losses in those proceedings was accounted for.

At March 31, 2010, the sum of the amounts under discussion, on several levels, of the proceedings of such nature and whose possible loss is expected totaled R$203,254 (R$205,501 at December 31, 2009).

16.4) Guarantees

At March 31, 2010, the Company posted guarantees to proceedings of a tax, civil and labor nature, as follows:

Process Property and Equipment
(note 11)
Escrow
Deposits
(note 7)
Letter
Guarantee 
Total
Tax 63,940 3,547 293,629 361,116
Civil and labors 18,402 109,811 11,050 139,263
Total 82,342 113,358 304,679 500,379

In addition to the above mentioned guarantees, at March 31, 2010, the Company and its subsidiaries had amounts recorded as guarantee of lawsuits (blocked deposits in court) totaling R$56,024 (R$53,979 at December 31, 2009), note 7.

16.5) Tax Audits

According to the current Brazilian law, federal, state and municipal taxes and payroll charges are subject to review by the proper authorities for periods ranging from 5 to 30 years.

17. OTHER LIABILITIES

Company Consolidated
12.31.09
03.31.10 12.31.09 03.31.10 Resubmitted
Prepaid services to be rendered (a) - - 497,975 559,116
Reverse stock split (b) 190,290 190,489 246,698 246,930
Provision for disposal of assets (C) - - 163,753 153,739
Provision fidelity program - - 70,301 65,591
Provision for post-employment benefit plans - - 19,329 18,171
Liabilities with intercompany 291 327 1,407 1,180
Others 471 471 3,034 3,638
Total 191,052 191,287 1,002,497 1,048,365
Current 190,716 190,951 785,442 840,910
Noncurrent 336 336 217,055 207,455

a) They refer to the amounts of recharge of prepaid customers and multi-element revenue contracts, both being appropriated to the income to the extent of the consumption of the services and deferral of the amounts of donation of network equipment, according to their respective useful life (note 2).

b) They refer to credit made available to the holders of shares remaining as a result of the reverse stock split of the capital stock of the Company and of its subsidiaries.

c) They refer to the costs to be incurred in connection with the eventual need of giving back the sites (locations for installation of Radio Base Stations – RBS of the subsidiaries) to their owners in the same conditions as they were found at the time of the execution of the initial lease contracts thereof.

Following are the changes in the consolidated provisions referring to the table above:

  Provision for disposal of assets Provision
fidelity
program
Provision for
post-employment
benefit plans
Balance at beginning of year 183,387 117,590 12,620
   Provisions recorded, net of reversals 4,923 (3,916) 418
   Monetary variation 811  -   - 
Balance at 03. 31. 2009 189,121 113,674 13,038
   Provisions recorded, net of reversals (9,865) (48,083) (1,128)
   Monetary variation (25,517)  -   - 
   Actuarial gains and losses, net  -   -  15,551
   Adjustments limits on surplus plans  -   -  (9,290)
Balance at 12. 31. 2009 153,739 65,591 18,171
   Provisions recorded, net of reversals 6,706 4,710 1,158
   Monetary variation 3,308  -   - 
Balance at 03. 31. 2010 163,753 70,301 19,329

18. SHAREHOLDERS’ EQUITY

a) Capital Stock

Pursuant to the Articles of Incorporation, the Company may increase its capital stock up to the limit of seven hundred and fifty million (750,000,000) shares (authorized capital), either common or preferred, regardless of the amendment to the articles of incorporation, with the Board of Directors being the competent body to decide on the increase and the consequent issue of new shares up to the referred limit.

At March 31, 2010 and at December 31, 2009, the subscribed and paid-up capital stock of the Company was R$8,780,150, represented by shares with no face value, distributed among the shareholders as follows:

Number of shares
Capital stock
   Common 137,269,188
   Preferred 263,444,639
   Total 400,713,827
Treasury shares
   Preferred (1,123,725)
   Total (1,123,725)
Shares outstanding
   Common 137,269,188
   Preferred 262,320,914
   Total 399,590,102

b) Premium on the acquisition of minority interest

Pursuant to the Brazilian accounting practices prior to CPC 15, a premium was recorded at the time of the acquisition of shares for prices above their book value, generated by the difference between the book value of the shares purchased and the fair value of the transaction. After the adoption of CPC 15, the transition date of which is January 01, 2009, the effects of all the transactions of acquisition of shares held by minority shareholders started being recorded in the shareholders’ equity where there is no change in the shareholding control. Consequently, such transactions do not generate any premium or results now and the premium previously generated in the acquisitions from minority shareholders, including expenses capitalized in the process, were adjusted towards the shareholders’ equity of the Company, in the amount of R$1,749,650, according to the transactions described below:

• The amount of R$1,258,853, referring to the premium generated from the merger of shares (exchange of shares) of Telemig, Telemig Participações and Vivo Participações and the capitalized expenses relating to such process.

• The amount of R$490,797, referring to the premium generated in the process of acquisition of minority interest of Tele Centro Oeste Celular Participações S.A., in 2004 and 2005. As permitted in the Brazilian law, before the adoption of CPC 15 such goodwill was amortized until December 31, 2007.

c) Capital Reserves

c.1) Premium Reserve

This reserve represents the excess of value at the time of the issuance or capitalization in relation to the basic value of the share at the issuance date.

c.2) Special Premium Reserve

This reserve was booked as a result of the corporate reorganization processes described in note 6.2, as a counter-entry to the net assets transferred, and represents the future tax benefit to be earned by amortization of the premium transferred. The portion of special premium reserve corresponding to the benefit may be, at the end of each fiscal year, capitalized to the benefit of the controlling shareholder, with the issue of new shares. The capital increase is subject to the preemptive rights of the non-controlling shareholders, proportionally to their respective interests, by kind and class of share, at the time of the issue, with the amounts paid upon the exercise of such right to be directly delivered to the controlling shareholder, pursuant to the provisions in CVM Instruction no. 319/99.

With the capitalization effected in the first quarter of 2009, all the amount of tax benefit was capitalized to the benefit of the controlling shareholders; consequently, there will not be further capitalization relating to such specific tax benefits in the future.

c.3) Tax Incentives

These represent the amounts invested in tax incentives in previous fiscal years. The balance recorded by the Company was originated from the merger of Tele Centro Oeste Celular Participações S.A., occurred on February 22, 2006.

d) Profit Reserves

d.1) Legal Reserve

The legal reserve is booked by allocation of 5% of the net profit for the year, up to the limit of 20% of the paid-up capital stock or 30% of the capital stock added by the capital reserves. As from such limit, allocations to this reserve are no longer mandatory, as set forth in Art. 193 of Law no. 6404/76.

d.2) Reserve for Expansion

The reserve for expansion was booked with the purpose of holding funds for financing additional investments of fixed and current capital by allocation of up to 100% of the remaining net profit, after the legal determinations and the balance of the retained profits account. This reserve is supported by a capital budget approved at the shareholders’ meetings.

d.3) Reserve for Contingencies and Treasury Shares

The amounts recorded result from the spin-off of Companhia Riograndense de Telecomunicações – CRT and are designed to guarantee an eventual court decision rendered with respect to judicial actions concerning capitalizations for fiscal years 1996 and 1997 occurred in that company.

e) Retained Earnings

As described in note 2, the adjustments to the balances at the transition date, for compliance with the CPCs issued during fiscal year 2009, applicable as from 2010, were appropriated to this item, totaling the amount of R$344,370.

Pursuant to a change introduced by Law no. 11.638/07, the net profit for the year shall be fully allocated in conformity with the provisions set forth in articles 193 to 197 of Law no. 6.404/76.

f) Dividends and Interest on Own Capital

The preferred shares do not have voting rights, except in the cases provided for in articles 9 and 10 of the Bylaws, but are ensured priority in the reimbursement of the capital stock, without premium, the right to share the dividend to be distributed, corresponding to a minimum of 25% of net income for the fiscal year, calculated in accordance with article 202 of Brazilian Corporation law, and priority in receiving minimum non-cumulative dividends equivalent to the higher of the following amounts:

f.1) 6% (six per cent) per year on the amount resulting from the division of the subscribed capital by the total number of Company’s shares, or;

f.2) 3% (three per cent) per year on the amount resulting from the division of the shareholders’ equity by the total number of Company’s shares, and also the right to share the distributed profit under the same conditions applicable to common shares, after the common shares have been ensured of a dividend equal to the minimum priority dividend established for the preferred shares.

Because the interest on own capital added to the amounts of the per share dividends, as decided in the General Shareholders’ Meeting held on March 19, 2009, total the minimum mandatory value, as from December 02, 2009, starting date for payment of the dividends for fiscal year 2008, the holders of preferred shares are no longer entitled to full vote right.

At December 31, 2009 (before the adoption of the new pronouncements issued by the CPC, note 2), the proposed dividends were calculated as follows:

12.31.09
Net income 871,394
Appropriation to legal reserve (43,569)
Adjusted net income 827,825
Minimum dividend (25% on adjusted net income) 206,956
Interest on shareholders’ equity: (gross), approved in AGE at 12.15.09 104,136
Withholding income tax (15,620)
Interest on shareholders’ equity (net) 88,516
Proposed dividend 723,689
Proposed  additional dividend 6,676
Proposed dividend and interest on shareholders’ equity 818,881
Mandatory minimum dividends (206,956)
Additional dividend to distribuition 611,925

The amount of R$611,925, referring to supplementary dividends to be distributed, was posted to the shareholders’ equity, in the “proposed supplementary dividends” account, as determined in ICPC 08, and shall be actually allocated after approval by the General Shareholders’ Meeting to be held in the 1st semester of 2010 (note 33).

Interest on own capital and dividends not claimed by the shareholders are forfeited in 3 (three) years from the date of the beginning of payment, as set forth in article 287, subparagraph II, item a), of Law No. 6404/76.

g) Other comprehensive income

The amount of R$138,778, recorded as other comprehensive income, refers to the adjustment arising out of the post-employment benefit plans (note 27).

19. NET OPERATING REVENUE

Consolidated
12.31.09
03.31.10 Resubmitted
   Franchise and use                2,636,281                2,617,008
   Interconnection                1,562,759                1,584,124
   Data and value-added services                1,037,303                   652,417
   Other services                     57,932                     54,145
Gross revenue from service                5,294,275                4,907,694
   Value-added tax on services (ICMS)                 (926,626)                 (839,405)
   Discounts granted                 (238,764)                 (172,929)
   PIS and COFINS                 (197,526)                 (180,165)
   ISS                     (1,867)                     (2,321)
Net operating income from services                3,929,492                3,712,874
Gross income from handsets and accessories                   709,221                   707,285
   Discounts granted                 (267,228)                 (231,546)
   Value-added tax on services (ICMS)                   (70,609)                   (71,048)
   PIS and COFINS                   (38,537)                   (40,627)
   Returns of goods                   (29,114)                   (36,587)
Net operating income from sale of handsets and accessories                   303,733                   327,477
   
Total net operating income                4,233,225                4,040,351

There was not any customer who has contributed more than 10% of the gross operating revenue for the three-month periods ended March 31, 2010 and 2009.

All the amounts comprised in the Company’s consolidated net revenues make up the base for income and social contribution taxes calculation.

20. COST OF GOODS SOLD AND SERVICES RENDERED

Consolidated
03.31.09
03.31.10 Resubmitted
Interconnection                 (671,875)                 (547,499)
Depreciation                  (539,178)                 (465,266)
Taxes and contributions                 (251,761)                 (187,699)
Outside services                 (169,644)                 (134,539)
Amortization                 (116,502)                   (91,166)
Rent, insurance and condominium fees                   (96,266)                   (83,438)
Leased lines                   (84,371)                   (79,997)
Personnel                   (31,994)                   (36,834)
Other consumables                     (7,159)                   (19,924)
Cost of services rendered              (1,968,750)              (1,646,362)
Cost of goods sold                 (433,280)                 (612,088)
Total              (2,402,030)              (2,258,450)

21. SELLING EXPENSES

Consolidated
03.31.10 03.31.09
Resubmitted
Outsourced services                 (543,629)                 (444,066)
Depreciation                  (113,036)                 (108,611)
Advertising                 (106,648)                   (95,186)
Costumer loyalty and donations                 (109,368)                 (100,113)
Personnel                 (130,784)                   (94,330)
Allowance for doubtful accounts                   (42,389)                   (77,573)
Amortization                   (22,210)                   (22,619)
Rent, insurance and condominium expenses fees                   (18,423)                   (17,151)
Other supplies                   (25,538)                   (29,354)
Total              (1,112,025)                 (989,003)

22. GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated
03.31.10 03.31.09
Resubmitted
Outsourced services                 (123,038)                 (124,928)
Personnel                   (80,958)                   (79,250)
Amortization                   (52,985)                   (57,521)
Depreciation                   (27,422)                   (49,985)
Rent, insurance and condominium fees                   (21,723)                   (21,958)
Other supplies                     (9,215)                   (14,513)
Total                 (315,341)                 (348,155)

23. OTHER OPERATING REVENUE (EXPENSES), NET

Consolidated
03.31.10 03.31.09
Resubmitted
Recovered expenses                          729                       6,135
Fines                     40,187                     28,205
Shared infrastructure - EILD (*)                     40,731                     25,100
Rental properties                       4,583                       3,892
Provision for contingencies, net                   (32,363)                   (35,682)
FUST                   (21,468)                   (20,389)
PIS e COFINS                     (6,876)                   (15,508)
ICMS on other expenses                   (15,412)                   (12,598)
FUNTTEL                   (10,734)                   (10,216)
Other taxes, fees and mandatory contributions                     (6,388)                     (3,130)
Sale and provision for lost on asset                        (260)                        (234)
Other                       5,807                     21,452
Other operating expenses, net                     (1,464)                   (12,973)

(*) As described in note 2, the amounts of infrastructure swap revenues are not stated as revenues or costs. The corresponding amounts for the three-month periods ended at March 31, 2010 and 2009 were R$3,567 and R$1,234, respectively.

24. FINANCIAL EXPENSES, NET

Company Consolidated
03.31.10 03.31.09 03.31.10 03.31.09
Resubmitted Resubmitted
Financial income:
Income from financial transactions 1,012 5,472 25,401 64,118
Other income from financial operations 10,097 10,908 83,793 21,402
Total 11,109 16,380 109,194 85,520
Financial expenses:
Loans, financing and debentures (41,927) (71,503) (101,145) (144,297)
Derivative transactions 1,173 (132) (4,573) (30,966)
Discounts granted - - (4,775) (8,329)
Charges 3G licenses - - - (40,773)
Other financial transactions (262) (1,293) (51,395) (11,706)
Total (41,016) (72,928) (161,888) (236,071)
Monetary and exchange variations:
Derivative transactions 8 - 17,264 (116,861)
Loans and financing (717) - (19,369) 115,531
Suppliers and other transations - - (4,307) 730
Total (709) - (6,412) (600)
Effects of Fair Value and Adjustments
of the present value:
Loans and financing (1,245) - (8,645) (57,616)
Derivative transactions 1,509 (3,626) 8,303 42,428
Other operations - - 1,175 1,454
Total 264 (3,626) 833 (13,734)
Financial expenses, net (30,352) (60,174) (58,273) (164,885)

25. INCOME AND SOCIAL CONTRIBUTION TAXES

The Company and its subsidiaries monthly record provisions for income and social contribution taxes, on an accrual basis, paying the taxes based on the monthly estimate. The deferred taxes are recognized on the temporary differences and tax loss and negative base of the social contribution, as mentioned in Note 6. The breakdown of expenses with income and social contribution taxes is shown below:

Consolidated
03.31.10 03.31.09
Resubmitted
Income and social contribution tax on goodwill amortization                   (40,801)                 (108,751)
Income and social contribution tax                 (108,304)                   (69,360)
Deferred income and social contribution tax                     (3,130)                     57,871
Total                 (152,235)                 (120,240)

The table below presents a reconciliation of the expense with income taxes stated, eliminating the effects of the tax benefit arising out of the premium, and the amounts calculated by application of the official rates combined to a rate of 34%:

Company Consolidated
03.31.10 03.31.09 03.31.10 03.31.09
Resubmitted Resubmitted
Income before taxes                   211,771                 131,791                 344,092                 266,885
Tax credit at combined statutory rate (34%)                   (72,002)                 (44,809)               (116,991)                 (90,740)
Permanent additions (exclusions):
Grants received by subsidiarys, fines, souvenirs,
pension plans and write-off of inventory
 -   -                    (7,515)                   (8,174)
Income Tax Adjustments  -   -                      4,387                   (2,371)
Equity pick-up                     84,435                   66,947  -   - 
     Other  additions (exclusions)                     15,398                     3,606                   15,398                     5,557
Unrecognized tax loss                   (47,745)                 (24,512)                 (47,514)                 (24,512)
Tax credit (debt)                   (19,914)                     1,232               (152,235)               (120,240)

26. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONSOLIDATED)

The Company and its subsidiaries have entered into transactions involving financial instruments, the risks of which are actively managed by means of a set of initiatives, procedures and comprehensive operating policies.

The Company’s and its subsidiaries’ financial instruments are presented in compliance with CVM Resolution no. 604, dated November 19, 2009, which approved Technical Pronouncements CPCs 38, 39 and 40, and with CVM Instruction 475, dated December 17, 2008.

The Company and its subsidiaries have proceeded to the evaluation of their financial assets and liabilities against market values, using the available information and proper evaluation methodologies. However, the interpretation of market data and the selection of evaluation methods require considerable discretion and estimates in order to calculate the most adequate realization value. In consequence, the estimates presented do not necessarily indicate the amounts realizable in the current market. The use of different market hypothesis and/or methodologies may have a material effect on the estimated realization values.

a) General considerations

At March 31, 2010 and at December 31, 2009, the main financial instruments, and their respective values by category, are as follows:

  Company
  03.31.10   12.31.09 - Resubmitted
  Fair value
through results
  Amortizated
cost
  Total   Fair value
through results
  Amortizated
cost
  Total
Assets                      
   Cash and cash equivalents                   24,995                               -                     24,995                   257,111                               -                   257,111
   Interest on shareholders' equity and dividends                             -                1,079,077                1,079,077                               -                   246,092                   246,092
   Deposits and blockages escrow                             -                       7,150                                   -                       6,999    
   Derivative contracts                     9,220                               -                       9,220                       8,208                               -                       8,208
   Other assets                         1,458                       1,458                              883                          883
Liabilities                                     -                                       -
   Payroll and related accruals                             -                          576                          576                               -                          393                          393
   Trade accounts payable                             -                       2,455                       2,455                               -                       2,345                       2,345
   Taxes payable                             -                       1,481                       1,481                               -                     36,609                     36,609
   Debentures and promissory note                             -                1,880,919                1,880,919                               -                2,069,865                2,069,865
   Interest on shareholders’ equity and dividends                             -                   242,919                   242,919                               -                   319,287                   319,287
   Derivative contracts                   11,478                               -                     11,478                     12,854                               -                     12,854
   Other liabilities                             -                   191,052                   191,052                               -                   191,287                   191,287
                       
                       
  Consolidated
  03.31.10   12.31.09 - Resubmitted
  Fair value
through results
  Amortizated
cost
  Total   Fair value
through results
  Amortizated
cost
  Total
Assets                      
  Cash and cash equivalents                 805,856                               -                   805,856                1,258,574                               -                1,258,574
  Short-term investments pledged as collateral                   87,677                               -                     87,677                     90,541                               -                     90,541
  Trade accounts receivable, net                             -                2,554,353                2,554,353                               -                2,546,806                2,546,806
  Deposits and blockages escrow                             -                1,047,463                1,047,463                               -                   809,902                   809,902
  Derivative contracts                 150,480                               -                   150,480                   151,760                               -                   151,760
  Other assets                     162,003                   162,003                               -                   173,955                   173,955
Liabilities                      
   Payroll and related accruals                             -                   156,099                   156,099                               -                   161,366                   161,366
   Trade accounts payable                             -                2,728,014                2,728,014                               -                3,053,587                3,053,587
   Taxes payable                             -                1,862,827                1,862,827                               -                1,718,326                1,718,326
   Loans and financing                 780,110                2,081,333                2,861,443                   932,824                2,062,205                2,995,029
   Debentures and promissory note                             -                1,941,805                1,941,805                               -                2,129,465                2,129,465
   Interest on shareholders’ equity and dividends                             -                   246,065                   246,065                               -                   322,433                   322,433
   Derivative contracts                 143,014                               -                   143,014                   162,388                               -                   162,388
   Other liabilities                             -                1,002,497                1,002,497                               -                1,048,365                1,048,365

b) Considerations on risk factors which may affect the Company’s and its subsidiaries’ business

The main market risks to which the Company and its subsidiaries are exposed in the conduct of their activities are:

b.1) Liquidity Risk

The liquidity risks consist of the Company and its subsidiaries eventually lacking of sufficient funds for meeting their commitments due to the different currencies and settlement terms of their rights and obligations.

The Company and its subsidiaries structure the maturity dates of the non-derivative financial agreements, as shown in note 15, and of their respective derivatives as shown in the payments schedule disclosed in the referred note, in such manner as not to affect its liquidity.

The control of the liquidity and of the cash flow of the Company and of its subsidiaries is daily monitored by the Company’s Management, in such way as to ensure that the operating cash generation and the previous fund raising, as necessary, are sufficient to meet its schedule of commitments, not generating liquidity risks to the Company and its subsidiaries.

b.2) Credit Risk

The credit risk arises out of the eventual difficulty to collect the amounts payable by its customers for the telecommunication services rendered to them and the sales of handsets to the distributors network.

The Company and its subsidiaries are also subject to the credit risk related to their financial investments and accounts receivable for swap transactions.

The credit risk involved in the rendering of telecommunications services is minimized by a strict control of the customer base and active management of customers’ default, by means of clear policies regarding the sale of post-paid handsets. The customer base of its subsidiaries has, predominantly, a prepaid system, which requires the prior charging and consequently entails no credit risk.

The credit risk in the sale of handsets and “pre-activated” prepaid cards is managed under a conservative credit policy, by means of modern management methods, including the application of “credit scoring” techniques, analysis of financial statements and information, and consultation to commercial data bases, in addition to request of guarantees.

In relation to the credit risk in connection with the financial institutions, the Company and its subsidiaries act in such a manner as to diversify this exposure among various world-class financial institutions.

b.3) Interest Rate and Inflation Risk

The interest rate risk arises out of the portion of the debt referenced to the CDI rate and of the liability positions in derivatives (exchange hedge and IPCA) contracted at floating rates, which may have a negative effect on the financial expenses in case of an unfavorable change in the interest rates. The balance of financial investments, indexed at the CDI rate, partially offsets such effect.

The debt to the BNDES is indexed to the TJLP rate. In July 2009, a reduction in the rate to 6.00% per year was announced, with a positive impact on such portion of the debt. Until March 31, 2010 the rate remained at 6.00% per year.

The inflation rate risk arises out of the debentures of Telemig Celular, indexed to the IPCA, which may negatively affect the financial expenses in case of an unfavorable change in such index.

In order to reduce the exposure to the local variable interest rate (CDI), the Company and its subsidiaries invest the cash surplus of R$782,790, mainly, in short term financial investments (Bank Deposit Certificates) indexed to the CDI rate.

b.4) Exchange Rate Risk

This risk arises out of the possibility of losses on account of exchange rate fluctuations, which may increase the liabilities and expenses arising out of loans and purchase commitments in foreign currency.

The Company and its subsidiaries have contracted financial derivative transactions (exchange hedge) so as to protect themselves against exchange rate fluctuations arising out of foreign currency loans. The instruments used were swap contracts.

The table below summarizes the net exposure of the Company and its subsidiaries to the exchange rate factor at March 31, 2010 and at December 31, 2009:

  Consolidated
  03.31.10   12.31.09
  US$   ¥   US$   ¥
Loans and financing             (423,016)             (1,411,865)               (419,584)             (1,404,398)
Loans and financing - UMBNDES  (*)                 (2,108)                           -                   (2,485)                           -
Derivative instruments              424,238              1,411,865                421,070              1,404,398
Total (insufficient coverage)                    (886)                           -                      (999)                           -

(*) UMBNDES is a monetary unit prepared by the BNDES, made-up of a foreign currencies basket, the main currency being the North-American Dollar, for which reason the Company and its subsidiaries consider it upon reviewing the risk coverage related to the exchange rate fluctuations.

In addition to the amounts informed above, Vivo records non-financial liabilities in foreign currency referring to other obligations to its suppliers. At March 31, 2010 and at December 31, 2009 the balances of other liabilities in foreign currency were US$32,925 thousand and €11,961 thousand.

c) Transactions with Derivatives

The Company and Vivo entered into swap contracts in foreign currency at several exchange rates, in notional amounts at March 31, 2010 of US$415,441 thousand, and JPY 1,338,853, (US$415,637 thousand, and JPY 1,338,853 thousand at December 31, 2009). At March 31, 2010, the Company and Vivo had no interest rate swap contracts indexed to the IGPM rate (notional amount of R$110,000 at December 31, 2009).

At October 15, 2009, a swap contract was entered into, which was indexed to the IPCA as for assets, and to the CDI, as for liabilities, in the notional amount of R$72,000, in order to cover the exposure of the flows of the 3rd series of the 4th Issue of debentures to the variation of the IPCA rate. Upon being contracted, this swap was recognized as a fair value hedge.

As required by Law no. 11,638/07, the Company and Vivo started applying CPC 14 (amended by CPCs 38, 39 and 40) since the transition date on January 01, 2007. CPC 14, as well as CPCs 38, 29 and 40, must be applied to all derivative instruments, and requires that such instruments are stated in the balance sheet at their fair value. Changes to the fair value of the derivatives are recognized in the income statement, save in case of compliance with specific criteria such as hedge accounting.

The derivative financial instruments intended for hedge and the respective items subject matter of hedge are monthly adjusted to the fair value, with due regard to the following: for those financial instruments classified as fair value hedge and evaluated as effective, the valuation or devaluation of the fair value of the item which is the hedge instrument and of the item subject matter of hedge must be recorded as a counter-entry to a proper revenue or expense account, in the income of the year.

The Company and Vivo calculate the effectiveness of these hedges on a continuous basis (at least quarterly) and, at March 31, 2010, the contracted hedges showed to be effective in relation to the debts subject matter of such coverage. As long as these derivative contracts are identified as hedge accounting according to CPC 14, the covered debt is also adjusted to the fair value in conformity with the fair value hedge rules.

The CVM, by Resolution no. 550, issued on October 17, 2008, and by Instruction no. 475, issued on December 17, 2008, provided for that publicly-held companies are required to disclose, in a specific explanatory note, qualitative and quantitative information about all their derivative financial instruments, either recognized or not as assets or liabilities in their balance sheet.

d) Risk Management Policy

All contracting of derivative financial instruments of the Company and of Vivo is intended for protection against foreign exchange risk and variations in foreign and local interest rates arising out of financial debts, pursuant to a corporate policy of risk management. Accordingly, eventual variations in the risk factors generate an inverse effect on the subject matter they are intended to protect. Therefore, there are no derivative financial instruments for speculation purposes and 99.8% of the financial exchange liabilities are hedged.

The Company and Vivo keep internal controls in relation to their derivative instruments which, in the opinion of the Management, are adequate for controlling risks associated to each strategy of market action. The results obtained by the Company and by Vivo in relation to their derivative financial instruments show that the Management has properly managed risks.

e)  Fair values of the derivative financial instruments

The valuation method used for calculating the market value of the loans, financing, debentures and derivatives was the discounted cash flow, considering expectancy of settlement or receipt of liabilities and assets at the market rates prevailing at March 31, 2010.

The fair values are calculated by projecting the future flows of the transactions, using the BM&F Bovespa curves and bringing them to present value using market DI rates for swaps disclosed by the BM&F Bovespa.

The market values of the exchange coupon swaps x CDI were obtained using the market exchange rates in effect at March 31, 2010 and the rates projected by the market which were obtained from the currency coupon curves. For calculating the coupon of the positions indexed in foreign currency the linear convention of 360 calendar days was adopted and for calculating the coupon of the positions indexed to the CDI the exponential convention of 252 business days was adopted.

The financial instruments disclosed below are recorded with the CETIP, all of them being classified as swaps, not requiring a margin deposit.

Notional Fair Value Cumulative effect
Amount receivable (payable)
Description 03.31.10 12.31.09 03.31.10 12.31.09 03.31.10 12.31.09
"Swap" of contract
Asset position
(1) Foreign currency 727,453 728,040 782,478 759,581 166,296 158,117
Abn Amro USD 78,079 78,079 97,901 95,327 3,690 3,026
Banco do Brasil JPY 22,225 22,225 26,910 26,415 - -
Citibank USD 181,230 181,230 182,578 174,296 37,879 36,070
JP Morgan USD 443,207 443,207 472,721 460,769 124,727 119,021
Votorantim USD 2,712 3,299 2,368 2,774 - -
(2) Inflation Rate 72,000 182,000 78,980 250,927 11,897 24,948
Unibanco IGPM - 110,000 - 176,016 - 14,357
Itaú IPCA 72,000 72,000 78,980 74,911 11,897 10,591
-
Liabilities position
Post Rate (CDI) (727,453) (728,040) (747,717) (750,997) 131,536 149,534
Abn Amro CDI (78,079) (78,079) (94,211) (92,301) - -
Banco do Brasil CDI (22,225) (22,225) (27,952) (27,453) 1,042 1,038
Citibank CDI (181,230) (181,230) (181,611) (177,852) 36,912 39,626
JP Morgan CDI (443,207) (443,207) (438,408) (446,791) 90,415 105,043
Votorantim CDI (2,712) (3,299) (5,535) (6,600) 3,167 3,827
Post Rate (CDI) (72,000) (182,000) (78,562) (238,833) 11,478 12,854
Unibanco CDI - (110,000) - (161,659) - -
Itaú CDI (72,000) (72,000) (78,562) (77,174) 11,478 12,854
Asset position 178,193 183,065
Provision withholding income tax (27,713) (31,305)
Liabilities position (143,014) (162,388)
Amount receivable (payable), net of withholding tax 7,466 (10,628)

(1)  Foreign currency swap x CDI (R$782,478) – swap transactions contracted with maturity dates until 2015, for protection against exchange variation risk in financing transactions in foreign currency (book value of R$784,054).

(2)   Swap IPCA x CDI percentage (R$78,980) – swap transactions contracted with maturity dates until 2014 with the purpose of protecting the flow identical to the debentures’ (4th issue – 3rd series) indexed to the IPCA (book value of R$78,980).

At March 31, 2010, the Company and Vivo recorded balances in assets (net of IRRF – withholding income tax) in the amount of R$150,480 (R$151,760 at December 31, 2009) and in liabilities in the amount of R$143,014 (R$162,388 at December 31, 2009), stated in the financial statements in order to reflect the derivatives positions.

Gains and losses in the three-month period ended on March 31, 2010, grouped by contracts executed, were recorded in the income accounts (note 24), as required in CVM Resolution 550/08.

Below is a breakdown of the maturity dates of the amounts (payable) and receivable arising out of swap contracts at March 31, 2010:

Description
"Swap" of contract Maturity Amount receivable (payable) 03.31.10
2011 2012 2013 2014 and after
Foreign currency x CDI
Abn Amro 3,690 - - - 3,690
Banco do Brasil - (1,042) - - (1,042)
Citibank (7,814) (10,329) (8,783) 27,893 967
JP Morgan (9,284) (25,101) (22,727) 91,424 34,312
Votorantim (1,904) (1,263) - - (3,167)
Total (15,312) (37,735) (31,510) 119,317 34,760
IPCA x CDI
Itaú (2,060) (3,661) (3,234) 9,374 419
Total (2,060) (3,661) (3,234) 9,374 419
Total (17,372) (41,396) (34,744) 128,691
Asset Position 39,388
Liabilities Position (4,209)
Balance before withholding income tax 35,179
Provision withholding income tax (27,713)
Balance sheet adjustments 7,466


f) Analysis of sensibility to the risk variables of the Company and its subsidiaries

CVM Instruction 475, dated December 17, 2008, provides for that publicly-held companies are required to disclose a statement of sensibility analysis for each type of market risk deemed by the management to be material, to which the entity is exposed at the closing date of each period, including all the transactions with derivative financial instruments.

In compliance with the provisions above, each of the transactions with financial derivatives was evaluated considering a probable realization scenario and two scenarios which may generate adverse results to the Company and to Vivo.

In the probable scenario, the premise of realizing what the market has been signalizing in the future market curves (currency and interest) of the BM&F Bovespa was considered. Thus, in the probable scenario, there is no impact on the fair value of the financial instruments already presented above. For the adverse scenarios, deterioration of 25% and 50%, respectively, was considered in the risk variables until the maturity date of the financial instruments.
 
As the Company and Vivo have only derivative instruments for hedging their financial debt, changes in the scenarios are accompanied by the respective hedge objects, thus showing that the effects thereof are almost null. At March 31, 2010, for these transactions, the Company and Vivo stated the balance of the subject matter (debt) and of the derivative financial instrument (hedge) in separate lines of the sensibility analysis table, in order to inform on the net exposure of the Company and of Vivo, in each of the three mentioned scenarios, as shown below:

Operation Risk   Probable   Deterioration 25%   Deterioration 50%
               
Hedge (Asset position) Derivatives (Risk reduction USD)                        755,568                        982,468                     1,227,386
Debt in USD Debt (Risk increase USD)                      (757,322)                      (984,617)                   (1,229,934)
  Net expousure                          (1,754)                          (2,149)                          (2,548)
               
Hedge (Asset position) Derivatives (Risk reduction JPY)                          26,910                          33,663                          40,428
Debt in JPY Debt (Risk increase JPY)                        (26,910)                        (33,663)                        (40,428)
  Net expousure                                   -                                   -                                   -
               
Hedge (Asset position) Derivatives (Risk reduction IPCA)                          78,980                          83,746                          88,836
Debt in IPCA Debt (Risk increase IPCA)                        (78,980)                        (83,746)                        (88,836)
  Net expousure                                   -                                   -                                   -
               
Hedge ( CDI Liability position) Derivatives (Risk increase CDI)                      (826,279)                      (898,056)                      (968,417)
  Net expousure                      (826,279)                      (898,056)                      (968,417)
               
  Net exposure in each scenario                      (828,033)                      (900,205)                      (970,965)
               
  Net effect of change in fair value                            (72,172)                      (142,932)
               

Sensibility Analysis – Net Exposure

Risk Variable Scenario I Scenario II Scenario III
USD 1.781 2.2263 2.6715
JPY 0.0191 0.0238 0.0286
IPCA 4.83% 6.04% 9.06%
CDI 8.59% 10.74% 12.89%

The net exposure in CDI shown in the sensibility analysis does not reflect all the exposure of the Company and of Vivo to the local interest rate, once, as mentioned before, the Company and Vivo have debts indexed to the CDI, which has a natural hedge, and has short term financial investments based on the variation of the CDI (R$782,790 at March 31, 2010).

For calculation of the net exposure, all the derivatives were considered at their fair value, as well as the associated debts (hedged elements).

The fair values, shown in the table above, depart from a portfolio position at March 31, 2010, however they do not reflect an estimate of realization due to the market dynamism, constantly monitored by the Company and by Vivo. The use of different premises may significantly affect the estimates.

27. POST-EMPLOYMENT BENEFIT PLANS

The table below describes the plans which the Company and its subsidiaries sponsor with the respective types of benefits.

Plan Type (1) Entity Sponsor
PBS-A DB Sistel Vivo and Telemig, jointly with other telecommunication companies originated from the privatization of the Telebrás.
PAMA DB Sistel Vivo and Telemig, jointly with other telecommunication companies originated from the privatization of the Telebrás.
PBS DB VisãoPrev Vivo, Telemig and Vivo Participações
VIVO PREV Hybrid VisãoPrev Vivo
TCOPREV Hybrid VisãoPrev Vivo
VISÃO Hybrid VisãoPrev Vivo
CELPREV Hybrid Sistel Telemig and Vivo Participações

Vivo, together with other companies belonging to the former Telebrás System, sponsor private pension plans and medical assistance plans for retired employees under the same conditions as published for the last fiscal year, as follows: i) PBS-A; ii) PAMA; iii) PBS-Telesp Celular, PBS-TCO, PBS Tele Sudeste Celular and PBS Tele Leste Celular;  iv) TCP Prev and TCO Prev Plans; and v) Visão Celular Benefit Plans - Celular CRT, Telerj Celular, Telest Celular, Telebahia Celular and Telergipe Celular.

The PBS-A and PAMA plans are managed by Fundação SISTEL de Seguridade Social – SISTEL.

Vivo sponsors the Vivo-Prev plan, which is an individual plan of defined contribution, managed by Visão Prev. Vivo’s contributions to this plan are equal to the participants’ contributions, varying from 0% to 8% of the participation wage, as a function of the percentage chosen by the participant.

Vivo, through its actuarial consultants, has prepared studies considering the impact of ordinary action no. 04/081.668-0, brought by ASTEL against Fundação Sistel de Seguridade Social, in which Telefonica and Telesp Celular (a company that was merged into Vivo) are mentioned, in addition to SISTEL, which action is related to the change in the costing system and review of other PAMA benefits. Based on the opinion of its tax consultants, the Management believes that at this time there is no payment risk, and at March 31, 2010 the chance of loss was classified as possible. At March 31, 2010 the amount in question was R$1,613 (R$1,517 at December 31, 2009).

Telemig individually sponsors a defined retirement benefits plan - Plano PBS Telemig. Besides the benefit of supplementation, medical assistance (PAMA) is provided to retired employees and to their dependents, at shared cost.

Telemig also sponsors the CelPrev, a defined contribution plan. Three types of contributions may be made by the participant, namely: (a) basic regular contribution: variable percentage from 0% to 2% of his/her participation wage; (b) additional regular contribution: variable percentage from 0% to 6% of the portion of his/her participation wage that exceeds 10 Standard Reference Units of the Plan; and (c) voluntary contribution: percentage to be freely chosen by the participant and applied on his/her participation wage. Four types of contributions may be made by the sponsor, namely: (a) basic regular contribution: contribution equal to the participant’s basic regular contribution, after deduction of the contribution for defraying the cost of the sickness allowance benefit and the contribution for defraying administrative expenses; (b) additional regular contribution: equal to the participant’s additional regular contribution, deducted by the administrative expense; (c) eventual contribution: voluntary contribution, at such frequency as may be determined by the sponsor; and (d) special contribution: contribution exclusively intended to those sponsor’s employees who are not members of the PBS plan and who were admitted in the plan within 90 days after the effective date of the CelPrev.

All revenues and expenses relating to the defined benefit plans and to the hybrid benefit plans, such as employer’s contributions, current service costs, interest cost and expected return on the assets of the plans are directly recognized in the income of the Company.

The actuarial gains and losses referring to the defined benefit plans and hybrid benefit plans, in addition to the limits on surplus recoverability due to refunds or reduction in future contributions, are being immediately recognized as other comprehensive income, not generating any impact on the operating profit of the Company.

Actuarial provisions relating to the plans mentioned above are recorded in "Other liabilities" (Note 17) or “Prepaid Expenses” (note 8), as applicable.

Following is a breakdown of the amount recorded as net actuarial liability (asset) held by the Company for the defined benefit retirement plans and retired employees medical assistance plans at March 31, 2010 and at December 31, 2009, as well as the other information required in CPC 33  regarding such plans:

Net actuarial liability (asset) 
12.31.09
03.31.10 Resubmitted
PAMA (i)                     16,037                       15,693
PBS                     (2,166)                       (1,587)
VIVO PREV                       3,006                         2,190
TCP PREV                            (3)                               -  
TCO PREV                        (345)                               -  
VISÃO                     (2,210)                       (1,947)
CEL PREV                          (49)                               -  
Total                     14,270                     14,349

i) This refers to the proportional participation of the company in the assets and liabilities of the multi-sponsored plan – PAMA and PBS-A;

ii) Although the PBS-A plans recorded surplus balances at March 31, 2010, no asset was recognized by the sponsor, due to the absence of perspective for use of such surplus for payment of future contributions.

a) changes to the present value of the defined benefit obligations:

Plan Actuarial liabilities as of
12.31. 2009 - Resubmitted
Cost of current service Cost of Interest Actuarial liabilities
as of 03.31.10
PBS-A 21,649 - 21,649
PAMA 21,809 35 427 22,271
PBS 106,693 193 1,941 108,827
VIVO PREV 23,543 855 539 24,937
TCPPREV 289 6 6 301
TCOPREV 22,586 33 539 23,158
VISÃO 295 7 7 309
CELPREV 1,442 24 23 1,489
Total 198,306 1,153 3,482 202,941

 

Plan Actuarial liabilities
as of 12.31. 2008 -
Resubmitted
Cost of current
service
Cost of
Interest
Participants
contributions
Actuarial gains
and losses
Benefits
paid
Actuarial liabilities
as of 12.31.09 -
Resubmitted
PBS-A 31,497 - 3,084 - (11,337) (1,595) 21,649
PAMA 18,201 171 1,821 - 2,157 (541) 21,809
PBS 98,060 1,023 9,734 512 2,030 (4,666) 106,693
VIVO PREV 16,993 2,496 1,611 32 2,618 (207) 23,543
TCPPREV 519 40 49 42 (361) - 289
TCOPREV 21,905 67 2,169 15 (1,260) (310) 22,586
VISÃO 379 33 33 2 (142) (10) 295
CELPREV 1,364 170 134 36 (224) (38) 1,442
Total 188,918 4,000 18,635 639 (6,519) (7,367) 198,306

b) changes to the fair value of the assets of the plans:

Plan Fair value of assets as of 12.31.2009 - Resubmitted Expected return on assets Fair value of assets as of 03.31.2010
PBS-A (29,488) - (29,488)
PAMA (6,116) (118) (6,234)
PBS (137,862) (2,713) (140,575)
VIVO PREV (21,353) (578) (21,931)
TCPPREV (561) (15) (576)
TCOPREV (34,428) (917) (35,345)
VISÃO (10,208) (277) (10,485)
CELPREV (5,315) (96) (5,411)
Total (245,331) (4,714) (250,045)

Plan Fair value of
assets as of
12.31.2008 -
Resubmitted
Expected return
on assets
Actuarial gains
and losses
Sponsor’s
contributions
Participants
contributions
Benefits
paid
Fair value of
assets as of
12.31.2009 -
Resubmitted
PBS-A (42,870) (4,977) 16,764 - - 1,595 (29,488)
PAMA (6,348) (671) 388 (26) - 541 (6,116)
PBS (141,149) (15,634) 14,983 (216) (512) 4,666 (137,862)
VIVO PREV (26,747) (3,075) 11,118 (2,824) (32) 207 (21,353)
TCPPREV - - (448) (71) (42) - (561)
TCOPREV (29,004) (3,183) (2,390) (146) (15) 310 (34,428)
VISÃO (5,774) (644) (3,758) (40) (2) 10 (10,208)
CELPREV (4,081) (465) (735) (36) (36) 38 (5,315)
Total (255,973) (28,649) 35,922 (3,359) (639) 7,367 (245,331)

c) Conciliation between the present value of the defined benefit obligation and the fair value of the plan assets, in relation to assets and liabilities recorded in the balance sheet:

PBS-A PAMA PBS VIVO PREV TCPPREV TCOPREV VISÃO CELPREV
Present value of benefit plans covered 21,649 22,271 108,827 24,937 301 23,158 260 1,489
Present value of plans assets (29,488) (6,234) (140,575) (21,931) (576) (35,345) (10,485) (5,411)
Deficit (surplus) in benefit plans covered (7,839) 16,037 (31,748) 3,006 (275) (12,187) (10,225) (3,922)
Present value of benefit plans uncovered - - - - - - 49 -
Limitation on recovery plans in surplus 7,839 - 29,582 - 272 11,842 7,966 3,873
Net (asset) liability at 03.31.10 - 16,037 (2,166) 3,006 (3) (345) (2,210) (49)
Noncurrent asset - - 2,403 3 345 2,259 49
Noncurrent liability - 16,037 237 3,006 - - 49 -
               
PBS-A PAMA PBS VIVO PREV TCPPREV TCOPREV VISÃO CELPREV
Present value of benefit plans covered 21,649 21,809 106,693 23,543 289 22,586 248 1,442
Present value of plans assets (29,488) (6,116) (137,862) (21,353) (561) (34,428) (10,208) (5,315)
Deficit (surplus) in benefit plans covered (7,839) 15,693 (31,169) 2,190 (272) (11,842) (9,960) (3,873)
Present value of benefit plans uncovered - - - - - - 47 -
Limitation on recovery plans in surplus 7,839 - 29,582 - 272 11,842 7,966 3,873
Net (asset) liability at 12.31.09 - 15,693 (1,587) 2,190 - - (1,947) -
Noncurrent asset - - 1,828 - - - 1,994 -
Noncurrent liability - 15,693 241 2,190 - - 47 -

d) Expenses and revenues recorded in the income statement:

Plan Cost of current
service
Cost of interest Expected return
on assets
Expenses (income)
in 2010
PAMA 35 427 (118) 344
PBS 193 1,941 (2,713) (579)
VIVO PREV 855 539 (578) 816
TCPPREV 6 6 (15) (3)
TCOPREV 33 539 (917) (345)
VISÃO 7 7 (277) (263)
CELPREV 24 23 (96) (49)
Total 1,153 3,482 (4,714) (79)
           
Plan Cost of current
service
Cost of
interest
Expected return
on assets
Sponsor’s
contributions
Expenses (income)
in 2009
PAMA 171 1,821 (671) (26) 1,295
PBS 1,023 9,734 (15,634) (216) (5,093)
VIVO PREV 2,496 1,611 (3,075) (2,824) (1,792)
TCPPREV 40 49 - (71) 18
TCOPREV 67 2,169 (3,183) (146) (1,093)
VISÃO 33 33 (644) (40) (618)
CELPREV 170 134 (465) (36) (197)
Total 4,000 15,551 (23,672) (3,359) (7,480)

e) Amount recorded in other comprehensive income at March 31, 2010 and at December 31, 2009:

Plan Actuarial gains
and losses
Limitador on recovery
plans in surplus
Amount recorded in other
comprehensive income
PAMA 7,387 - 7,387
PBS 39,021 29,582 68,603
VIVO PREV 4,331 - 4,331
TCPPREV 5,539 272 5,811
TCOPREV 17,187 11,842 29,029
VISÃO 11,768 7,966 19,734
CELPREV 10 3,873 3,883
Total 85,243 53,535 138,778

f) Actual return on the assets of the plans:

Plan Actual return of plans assets in 2010 Actual return of plans assets in 2009
PBS-A                                           -                                       11,787
PAMA                                       (118)                                         (283)
PBS                                    (2,713)                                         (651)
VIVO PREV                                       (578)                                       8,043
TCP Prev                                         (15)                                         (448)
TCO Prev                                       (917)                                      (5,573)
VISÃO                                       (277)                                      (4,402)
CEL PREV                                         (96)                                      (1,200)
                                                      (4,714)                                                          7,273

g) Actuarial premises:

Plan Estimate return rate on plan assets Rate of future salary growth Medical costs growth rate Benefits growth rate Increase in use of medical services, according to age
PBS-A 9.86%   N/A   N/A   4.60%   N/A
PAMA  9.84%   N/A   7.74%   N/A   4.00%
PBS, except PBS Telemig 10.84%   6.14%   N/A   4.60%   N/A
PBS Telemig 10.51%   6.14%   N/A   4.60%   N/A
VIVO PREV 10.84%   6.79%   N/A   4.60%   N/A
TCP Prev 10.84%   6.79%   N/A   4.60%   N/A
TCO Prev 10.84%   6.79%   N/A   4.60%   N/A
VISÃO 10.84%   6.79%   N/A   4.60%   N/A
CEL PREV 10.88%   6.79%   N/A   4.60%   N/A

In addition to the foregoing premises, other premises that are common to all the plans were adopted, as follows:

h) Expected Long-Term Investments Yield

The expected investment yield rates were determined as from the expected long-term profitability and weighted for each category of assets of the benefit plans. The breakdown of the assets of the plans is positioned at September 30, 2009. The allocation goal takes into consideration the expected long term breakdown of the assets in each investment category, in accordance with the investment policy applicable to each plan.

Expected yield rates were suggested for each investment category, based on the long-term projections supplied by Tendências Consultoria and ANDIMA data, among others, as described below:

VIVO PREV   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   82.59%   82.59%   10.04%
Equity securities   16.18%   16.18%   14.94%
Loans to participants   1.23%   1.23%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.83%
             
             
PAMA   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   100.00%   100.00%   9.84%
Equity securities   0.00%   0.00%   N/A
Loans to participants   0.00%   0.00%   N/A
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   9.84%
             
             
PBS TCO   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.60%   83.60%   10.04%
Equity securities   16.38%   16.38%   14.94%
Loans to participants   0.02%   0.02%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
PBS TELE SUDESTE CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.46%   83.46%   10.04%
Equity securities   16.35%   16.35%   14.94%
Loans to participants   0.19%   0.19%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
PBS TELE LESTE CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.62%   83.62%   10.04%
Equity securities   16.38%   16.38%   14.94%
Loans to participants   0.00%   0.00%   N/A
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
PBS TELESP CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.25%   83.25%   10.04%
Equity securities   16.30%   16.30%   14.94%
Loans to participants   0.00%   0.00%   9.83%
Real estate   0.45%   0.45%   N/A
Total   100.00%   100.00%   10.84%
             
             
PBS TELEMIG CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   86.00%   86.00%   9.84%
Equity securities   13.00%   13.00%   14.94%
Loans to participants   1.00%   1.00%   10.88%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.51%
             
             
PBS-A   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   75.00%   75.00%   9.84%
Equity securities   9.00%   9.00%   14.94%
Loans to participants   1.00%   1.00%   10.88%
Real estate   4.00%   4.00%   11.69%
Structured investments   11.00%   11.00%   5.09%
Total   100.00%   100.00%   9.86%
             
             
TCPPREV   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.42%   83.42%   10.04%
Equity securities   16.34%   16.34%   14.94%
Loans to participants   0.24%   0.24%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
TCOPREV   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.23%   83.23%   10.04%
Equity securities   16.30%   16.30%   14.94%
Loans to participants   0.47%   0.47%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
VISÃO TELERJ CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.44%   83.44%   10.04%
Equity securities   16.34%   16.34%   14.94%
Loans to participants   0.22%   0.22%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
             
VISÃO TELEST CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.46%   83.46%   10.04%
Equity securities   16.35%   16.35%   14.94%
Loans to participants   0.19%   0.19%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
VISÃO TELEBAHIA CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.19%   83.19%   10.04%
Equity securities   16.30%   16.30%   14.94%
Loans to participants   0.51%   0.51%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
VISÃO TELERGIPE CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.51%   83.51%   10.04%
Equity securities   16.35%   16.35%   14.94%
Loans to participants   0.14%   0.14%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
VISÃO CELULAR CRT   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   83.30%   83.30%   10.04%
Equity securities   16.31%   16.31%   14.94%
Loans to participants   0.39%   0.39%   9.83%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.84%
             
             
CELPREV TELEMIG CELULAR   Asset Allocation   Estimate Return
  09.30.09   Target  
Debt securities   78.00%   78.00%   9.84%
Equity securities   20.00%   20.00%   14.94%
Loans to participants   2.00%   2.00%   10.88%
Real estate   0.00%   0.00%   N/A
Total   100.00%   100.00%   10.88%

i) Effect of an increase of one percentile point and effect of a decrease of one percentile point in the trend rates of the medical costs undertaken for PAMA:

Sensibility for medical premises variation

i. Variation + 1%
    Effect on the current service cost and interest cost                                              426
    Effect on the defined benefit obligation                                                            4.530
ii. Variation - 1%
    Effect on the current service cost and interest cost                                            (334)
    Effect on the defined benefit obligation                                                          (3.536)

28. TRANSACTIONS WITH RELATED PARTIES

28.a) Subsidiaries

The financial statements include financial information related to the subsidiaries (note 10), as follows:

Company Interest
03.31.10 12.31.09
Vivo S.A. 100.00% 100.00%
Telemig Celular S.A. 100.00% 100.00%

The transactions between the controlling company and its subsidiaries refer, basically, to payments of dividends and interest on the own capital.

28.b) Terms and conditions of transactions with related parties:

a) Communication via local cellular phone and to long distance and use of network: these transactions are carried out with companies of the same controlling group: Telecomunicações de São Paulo S.A. - TELESP and subsidiaries. Part of these transactions was carried out in conformity with agreements entered into between TELEBRAS and the concessionaires prior to the privatization, under conditions regulated by ANATEL. It includes roaming services to customers of Telecomunicações Móveis Nacionais – TMN and several companies related to the Telefónica Group in the Company’s network.

b) Technical Assistance: this refers to corporate management consulting services provided by PT SGPS and technical assistance services provided by Telefónica S.A., Telefónica International S.A., calculated on the basis of a formula provided for in the contracts that includes the variation in the LAIR (Profit Before the Income Tax) and the variation in PN and ON shares, which determine a rate that is applied to the service revenues. In the case of the operation of the branch office in Rio Grande do Sul, its contract provides for only a fixed percentage on the service revenue. The above referred contracts were terminated on August 04, 2008.

c) Rendering of corporate services: these were transferred to the subsidiaries at the cost actually incurred in these services.

d) Telephone assistance and sales promotion services: services provided by Atento Brasil S.A. and Mobitel S.A. – Dedic to users of telecommunication services. The service was contracted for 12 months, renewable for an equal period.

e) System development and maintenance services: rendered by Portugal Telecom Inovação Brasil S.A. and Telefonica Pesquisa e Desenvolvimento do Brasil Ltda.

f)  Logistics operator, message, motoboy and financial-accounting consultancy services: rendered by Telefonica Serviços Empresariais do Brasil Ltda.

g) Voice portal content provider services: rendered by Terra Networks Brasil S.A.

h) International roaming services: provided by companies belonging to the Telefónica Group and  Telecomunicações Móveis Nacionais – TMN.

i) Collection services: rendered by Cobros Gestão de Serviços.

j) Lease of data circuits and internet Access services: rendered by Telefonica Empresas do Brasil Ltda and Telefonica International Wholesale Brasil and ATelecom.

k) Property lease and sales of Call Center assets: lease of the owned buildings where the Call Center infrastructure is installed and sales of property, plant & equipment used in the operation of the call center to Mobitel S.A. – Dedic and Atento Brasil S.A.

l) Mobile telephone services: mobile communication services rendered to companies of the Telefónica Group and Portugal Telecom, pursuant to agreements executed between the parties.

m) Purchase of property, plant & equipment: supplied by Telefonica Empresas do Brasil S.A. and Telefonica Engenharia e Segurança do Brasil S.A.

n) Expenses with Vivo brand: amounts due to Vivo Brasil Comunicações Ltda. for maintaining Vivo brand. On November 16, 2009, Vivo Brasil Comunicações Ltda. was merged into Portelcom Participações S.A..

For the transactions above, the prices charged and other commercial conditions are agreed to in contracts between the parties.

We summarize below balances and transactions with related parties:

      Company - 03.31.10
  Nature of   Liabilities   Result
Company Transation   Current   Noncurrent   Expenses
Telecomunicações de São Paulo - Telesp c)                        168                          15                      (159)
Vivo S.A. c)                        108                            -                            -
Total                          276                          15                      (159)
               
      Company 
      12.31.09   03.31.09
  Nature of   Liabilities   Result
Company Transation   Current   Noncurrent   Expenses
Telecomunicações de São Paulo - Telesp c)                        220                          15                            -
Vivo S.A. c)                          92                            -                            -
Telefonica Serviços Empresariais do Brasil Ltda c)                            -                            -                      (675)
Total                          312                          15                      (675)


      Consolidated - 03.31.10
  Nature of   Assets   Liabilities Result
Company Transation   Current   Current   Income   Costs and Expenses
Telecomunicações de São Paulo - Telesp a) / c) / j) / l)                        381,744                        297,957                        549,396                          (103,103)
Telefonica Móviles Espana S.A. h)                            3,693                            1,727                            1,180                              (2,041)
Portugal Telecom Inovação do Brasil Ltda l) / e)                                   8                          21,508                                   8                              (5,805)
Telecomuncações Móveis Nacionais - TMN h)                            1,745                               160                               767                                 (178)
Telefonica Serviços Empresariais do Brasil Ltda f)                            1,391                          18,389                               424                            (13,735)
Telefonica International Wholesale j)                                   -                                   -                                   -                                   (53)
Telefonica International Wholesale Brasil l) / j)                                 13                            2,220                                 31                              (1,712)
Portugual Telecom, SGPS, S.A. m) / b)                            2,831                          28,713                            1,289                                        -
Telefonica Internacional S.A. b)                                   -                          13,777                                   -                                 (308)
Telefonica S.A. m) / b)                            2,234                          46,152                                   -                              (1,039)
Cobros Gestão de Serviços i)                                   1                               521                                   -                                 (337)
Atento Brasil S.A. k) / d)                            6,634                          27,792                            3,504                            (50,525)
Mobitel S.A. - Dedic k) / d)                            1,831                          46,177                               898                            (69,811)
Terra Networks S.A. l) / g)                               860                               267                               396                                   105
Atelecom S/A l) / j)                               259                            2,719                               763                              (2,797)
Telefonica Engenharia e Segurança l)                                   8                                 94                                 23                                   (43)
Telefonica Pesquisa e Desenvolvimento do Brasil Ltda e) / j)                                 31                               391                                 10                                 (312)
Telefônica Data S/A (Antes Telefônica Empresas S/A Brasil) a)                             1,918                          10,926                               198                              (2,897)
Operadoras Grupo Telefonica (Roaming internacional) h)                            4,521                            6,097                               337                              (6,197)
Telefônica Sistema de televisão S/A (Antes Light Tree S/A) l)                                 17                                     24                                        -
Total                          409,739                        525,587                        559,248                          (260,788)
                   
                   
      Consolidated
  Nature of   12.31.09   03.31.09
Company Transation   Assets   Liabilities Result
      Current   Current   Income   Costs and Expenses
Telecomunicações de São Paulo - Telesp a) / c) / j) / l)                        340,215                        299,512                        512,581                            (62,607)
Telefonica Empresas do Brasl S.A. a) / j)                            3,475                          11,825                            1,417                              (7,656)
Telefonica Móviles Espana S.A. h)                            2,608                            2,071                               349                                 (130)
Portugal Telecom Inovação do Brasil Ltda l) / e)                                   8                          44,002                                   2                              (3,411)
Telecomuncações Móveis Nacionais - TMN h)                               979                               575                               214                                   (15)
Telefonica Serviços Empresariais do Brasil Ltda f)                            1,451                          17,149                               257                            (13,545)
Telefonica International Wholesale j)                                   -                                 24                                   -                                        -
Telefonica International Wholesale Brasil l) / j)                                   9                            2,095                                   -                              (1,371)
Portugual Telecom, SGPS, S.A. m) / b)                            2,622                          33,771                            3,434                                        -
Telefonica Internacional S.A. b)                                   -                          13,470                               169                                        -
Telefonica S.A. m) / b)                            2,148                          45,113                               553                                   (43)
Cobros Gestão de Serviços i)                                   1                               561                                   -                                 (605)
Atento Brasil S.A. k) / d)                            6,922                          43,420                            3,248                            (70,716)
Mobitel S.A. - Dedic k) / d)                            1,699                          34,811                                 80                            (67,433)
Terra Networks S.A. l) / g)                               724                               592                                   -                                 (351)
Atelecom S/A l) / j)                               338                            2,829                            1,502                              (3,248)
Telefonica Sistemas do Brasil Ltda l)                                   6                                   1                                   -                                        -
Telefonica Engenharia e Segurança do Brasil S.A. l)                                   5                                 52                                 14                                        -
Telefonica Pesquisa e Desenvolvimento do Brasil Ltda e) / j)                                   -                            1,143                                   1                                 (207)
TBS Celular Participações Ltda b)                                   -                          13,152                                   -                                        -
Primesys b)                                   -                                   -                                 56                                 (122)
Operadoras Grupo Telefonica (Roaming internacional) h)                            4,606                            2,734                            2,048                                        -
T. Personales Unifon m)                                    -                               168                                   -                                        -
Total                          367,816                        569,070                        525,925                          (231,460)

28.c) Remuneration of key Management officers

During the three-month periods ended March 31, 2010 and 2009, the remuneration of the key Management officers, including fees and short term benefits, payroll charges, bonus and other benefits, totaled R$927 and R$598 in the controlling company and R$6,180 and R$4,314 in the consolidated amount, respectively, and were posted as expenses.

29. INSURANCE (CONSOLIDATED)

The Company and its subsidiaries adopted a policy of monitoring risks inherent to their transactions. For this reason, at March 31, 2010, the Company and its subsidiaries had insurance contracts in place for coverage of operating risks, civil liability, health risks, etc. The Management of the Company and of its subsidiaries considers that the amounts of such contracts are sufficient to cover potential losses. The main assets, liabilities or interests covered by insurance and their respective amounts are shown below:

Type of Insurance   Insured amounts
Operating risks   R$16,706,815
General Civil Liability– RCG   R$6,110

30. AMERICAN DEPOSITARY RECEIPTS (“ADRs”) PROGRAM

On November 16, 1998, the Company started trading ADRs on the New York Stock Exchange (NYSE) under ticker symbol "TCP" and since March 31, 2006 under ticker symbol "VIV" (in accordance with the decision made by the Special Shareholders’ Meeting of February 22, 2006), with the following main characteristics:

31. LIENS, EVENTUAL LIABILITIES AND COMMITMENTS

The subsidiaries have undertaken commitments with lessees of several stores and sites where the radio-base stations (ERB‘s) are located, already contracted at March 31, 2010, in the amount of R$3,574,036, as shown below:

Year Amount
Up to one year 654,649
More than one year to five years 2,564,878
More than five years 354,509
Total 3,574,036

32. COMPREHENSIVE INCOME

In compliance with CPC 26, the Company shows below the changes in the total consolidated comprehensive income for the periods presented in the explanatory notes.

Equity pick up on adjustments of pension plans in the subsidiaries at 01.01.09                    (102,860)
Net income for the three months ended March 31, 2009                      133,023
Consolidated total comprehensive income in March 31, 2009                        30,163
   
Equity pick up on adjustments of pension plans in the subsidiaries - merger of the shares in 06.30.09                      (26,394)
Equity pick up on adjustments of pension plans in the subsidiaries- actuarial reports in 12.31.09                        (9,524)
Net income for the nine months ended December 31, 2009                      731,626
Consolidated total comprehensive income in December 31, 2009                      725,871
   
Consolidated total comprehensive income in March 31, 2010                      191,857

33. SUBSEQUENT EVENTS

a) Rescheduling of the 2nd issue/2nd series of the Company

At April 09, 2010, the term for debenture holders who did not agree to the new conditions established by the Board of Directors of the Company for the rescheduling of the 2nd issue/2nd series debenture ended. At that date, the amount arising out of debenture holders who elected to exercise the right to sell their debentures was R$459,920. Therefore, such amount was reclassified to the current liabilities, pursuant to CPC 24.

b) Approval and partial payment of the dividends proposed in 2009

The General and Special Shareholders’ Meeting held on April 16, 2010 approved the allocation of the net profit for year 2009, in the amount of R$871,394, with R$43,569 being allocated to the Legal Reserve and R$827,825 as dividends and interest on the own capital, as follows: R$104,136 as gross interest on the own capital (R$88,516, net of withheld income tax) and R$723,689 as dividends. Additionally, R$6,676 were allocated as supplementary dividends. At April 19, 2010, the Company effected the payment of 50% of such amounts and the balance shall be paid to the shareholders at October 25, 2010.



SIGNATURE
   

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 20, 2010

 
VIVO PARTICIPAÇÕES S.A.
By:
/S/ Cristiane Barretto Sales

 
Cristiane Barretto Sales
Investor Relations Officer
 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.