VIVO, THE LARGEST WIRELESS GROUP IN SOUTH AMERICA, ANNOUNCES THIRD QUARTER 2003 CONSOLIDATED RESULTS OF TELE CENTRO OESTE CELULAR PARTICIPAÇÕES S.A.

• The criteria used for calculation of the main efficiency indexes of the business were unified with the other “VIVO” companies, which implied the adjustment of 3Q02 data for comparison purposes:

  • The Churn Rate is now calculated using the following formula (Churn rate = number of cancellations / average number of clients in the period). The formula formerly used considered Churn Rate = number of cancellations / (average number of clients at period start + gross number of additions in the period);

  • ARPU: adjusted based on the reclassification of the Fust/Funttel from Revenue Deduction to Operating Expense;

  • The SAC now considers 70% of the marketing expenses (previously considered 100%) and the Fistel value is no longer considered.

• As a result of the reclassification of the Fust/Funttel from deductions from Revenue Deduction to Operating Expense, the historic data concerning Net Operating Revenue, Operating Revenues and EBITDA margin were adjusted to allow comparisons. Employee Profit Sharing is now recorded as Operating Expense, which resulted in the alteration of 3Q02 values for purposes of comparison.

• As of July 06, 2003, the operators implemented the long distance Carrier Selection Code (Código de Seleção de Prestadora – “CSP”) used by clients to choose their carrier for domestic long distance services (VC2 and VC3), as well as of international cellular calls, as required by Personal Mobile Service (Serviço Móvel Pessoal – “SMP”) rules. The “VIVO” operators no longer receive revenues from VC2 or VC3 calls, and now receive interconnection revenues from the use of their networks in those calls.

• Additionally, the Bill & Keep rules was adopted for interconnection charges in July 2003. The rules establish that payments between the companies of the SMP for traffic in the same registration area only occur when the traffic exceeds 55%.

• On August 21, 2003, in compliance with an August 12, 2003 decision of CVM, TCO announced its intention of continuing the incorporation process of its shares into TCP. Following the applicable legislation, the incorporation of shares will be effective after the end of the public offering for acquisition of common shares issued by the Company.

• On September 30, 2003 the public share offer was registered with CVM under number CVM/SRE/OPA/ALI/2003/003.

• On October 09, 2003, TCO announced the beginning of the public offering of its common shares, which was part in the process of the acquisition of the Company’s control by TCP. The period for subscription to the public offering started on October 09, 2003 and will finish on November 11, 2003. It will be followed by an auction, scheduled to take place on November 18, 2003. The subsequent phases of incorporation will be disclosed later.

• On April 14, 2003, the Joint Venture between Telefónica Móviles and Portugal Telecom unified the operations of Tele Centro Oeste Celular Participações S.A. with those of Telesp Celular Participações S.A., Tele Sudeste Celular Participações S.A., Celular of CRT Participações S.A. and Tele Leste Celular Participações S.A., which now operate under the brand name “VIVO”.

• Targeting the corporate clients, the “Vivo Empresas” brand was launched, linking this key segment with the Company’s business strategy.

• “VIVO” was considered Top of Mind in most of the regions in which it operates, reflecting the successful consolidation of its brand. Additionally, the brand was awarded first place among the most admired brand mark in the wireless telecommunications sector by Carta Capital magazine.

• 26.0% growth in client base compared with 3Q02;

• 15.9% growth in post-paid client base compared with 3Q02 resulting from strong promotional, retention and client-loyalty campaigns;

• Intense commercial activity, resulting in a net addition of 263 thousand new users;

• 23.6% increase in Net Operating Revenue compared with 3Q02;

• 18.9% increase in net revenues from services compared with 3Q02, resulting from an increase in the client base;

• 56.4% increase in net revenues from goods compared with 3Q02, resulting from an increase in gross additions;

• 41.8% EBITDA margin, which is 1.4% higher than in 2Q03;

• 53.7% EBITDA Margin not including goods;

• Increase of 15.8% in operating cash flow compared with 3Q02, showing that the Company has enough generation of operating cash to maintain its investments.

• According to ANATEL’s data, TCO was responsible for a 47.6% participation in the net additions its operating states, and reached a participation rate of 55.9% in the net additions in Area 7 and 28.9% in Area 8.

• The client base increased significantly in 3Q03 compared with 3Q02: 26.0%. The period closed with 3.593 million clients.

• In 3Q03, TCO was responsible for a net addition of 214 thousand clients in Area 7 and 49 thousand clients in Area 8.

• In Area 7, TCO remained as market leader and presented an estimated market share of 68.5%, while in Area 8 NBT presented an estimated market share of 33.0%.

• At the end of 3Q03, 98.7% of the cellular handsets in Area 7 were digital. The number of analog handsets decreased by 39.1% against 3Q02. Since the beginning of its operation, NBT has operated with 100% digital technology.

• TCO currently uses TDMA technology to provide wireless telecommunication services. After the consolidation of the Joint Venture between Telefónica Móviles and Portugal Telecom in April 2003, the Company has concentrated its efforts on the selective implementation of a new overlapping network using CDMA technology (1xRTT), on the expansion of the TDMA network coverage and on the development of new services.

• In line with the plans to expand and modernize its system, TCO closed 3Q03 with 911 Radio Base Stations and 25 Switches.

• On October 29, 2003, TCO starts the operation of high speed data transmission using 1xRTT technology in the Federal District and, later on, this coverage will be expanded.

The Blended ARPU obtained by TCO decreased by 4.4% compared with 3Q02, reaching R$41.0. The post-paid ARPU fell by 4.9% and the pre-paid ARPU increased by 2.1%. In 3Q03, the ARPUs were affected by the introduction of the new SMP rules, as described above, as well as by the increase of 26.0% in the client base.

The Blended MOU decreased by 9.1% compared with 3Q02, reaching 102.3 minutes per user in 3Q03. The post-paid MOU fell by 13.7% and the pre-paid MOU increased by 0.9%.

In 3Q03, TCO maintained its focus on data transmission services and implemented a number of publicity campaigns, with special attention to the messaging services, generating a growth in the number of clients who use this service.

TCO’s Net Operating Revenue grew by 3.3% as a result of the 7.9% increase in its total client base and a greater use of telecommunication services.

• The Net Operating Revenue from services increased by 1.1% compared with 2Q03, mainly resulting from the 7.9% growth in the client base.

• Compared with 2Q03, service usage revenues decreased 4.3% compared to 2Q03 and interconnection revenues increased 4.1% as a result of the growth in the client base and of the impact of the new SMP rules determining that domestic long-distance calls now generate network usage (interconnection) revenues. The negative impact of the implementation of the CSP and Bill & Keep rules for TCO was approximately 5% of the net revenue from services.

The net revenue from goods sales increased 16.9% compared with 2Q03, as a result of the Company’s intense commercial activity in the period.

The total operating cost was R$348.4 million in the 3Q03. There was a 0.8% increase in operating costs before depreciation and amortization as a result of the growth in the commercial expenses and in the cost of goods sold.

As the revenue, the cost of service rendered also suffered the impact of the Bill & Keep and CSP during 3Q03, decreasing 15.5% compared to the 2Q03.The cost of services rendered presented an increase of 3.8% compared with 3Q02, mainly by reason of increases in third-party services and in the Fistel tax.

The cost of goods sold by TCO grew by 3.9% compared to 2Q03, due to the Company’s intense commercial activity, represented by a 73.0% increase in the number of net additions in the period.

Commercial expenses increased 10.9% compared with 2Q03, mainly due to the increase in expenses with commissions paid to dealers, which are proportional to gross additions.

The bad debt rate reached 2.2% of the gross operating revenue, 2 percentual points less than in 2Q03. In 3Q02, the provision for doubtful debtors was positively affected by agreements made with other operators, which resulted in a reversion of approximately R$ 7 million and impact the bad debt rate that achieved 0.9% of the gross operating revenue. TCO has been making an effort to maintain the quality of its post-paid client base, as well as to maintain its credit control strategy for retailers and clients adopted by the “VIVO” group.

General and administrative remained stable, compared to 2Q03.

TCO’s EBITDA reached an increase of 6.8% compared to 2Q03, which shows that the Company was more efficient in generating cash using its operating assets. The EBITDA margin in the period was 41.8%, which is 1.4% higher than in 2Q03. Excluding the effect of the handsets sales, the EBITDA would be R$228.4 million and its margin would be 53.7%.

Depreciation and amortization expense were R$ 54.6 million in the quarter. Depreciation is calculated using the linear method, which considers the useful life of goods. Its variation compared with 3Q02 is mainly a result of the adjustment in the amortization of NBT’s license to its concession term, as well as the investments made.

TCO’s Net Financial Result compared with 2Q03 mainly reflected the reduction in interest revenues regarding the liquidation of debentures, whose rate, in 2Q03, was that of the CDI + 2%. The resulting income was reinvested at a profitability of 100% over the CDI. The CDI’s average rate in 3Q03 was 23.15, which represents a 3 percentual points below compared to 2Q03 and had also others effects in the net financial result in the quarter.

On September 30, 2003, TCO’s total debt was R$ 404.6 million (R$ 519.1 million on June 30, 2003), of which 54.3% was denominated in foreign currency (92.1% in U.S. dollars and 7.9% in a currency basket – BNDES index). The U.S. dollar denominated debt was 100% protected by derivative contracts at the end of the period. Considering the total amount denominated in foreign currency, including BNDES index, 99% was protected by operations with derivatives. This indebtedness was compensated by the resources available in cash (R$ 9.7 million) and financial investments (R$ 986.1 million), as well as assets and liabilities of derivatives (R$ 13.9 million payable), resulting in a net cash position of R$ 577.3 million, which distinguishes TCO by its financial flexibility.

During the nine months ended on September 30, 2003, R$ 116.9 million were invested in Property, Plant & Equipment, mainly in projects aiming to improve and expand the capacity of services rendered by the Company. The period was also marked by the investments related to the implementation of a new overlapping network of CDMA technology (1xRTT).