VIVO HAS CONTINUED TO RECORD POSITIVE RESULTS THIS QUARTER, WITH INCREASED GROWTH OF REVENUES AND EBITDA. THE PROFIT, OF R$710.2 MILLION, IS 270% HIGHER THAN IN THE SAME PERIOD OF LAST YEAR.

HIGHLIGHTS FOR THE PERIOD

• Vivo’s customer base totaled 62,061 thousand accesses in March (15% annual growth), (38.7% of the net additions in the quarter were in the postpaid segment);
• Improved client mix. The postpaid customer base recorded annual growth of 26.7%;
• Postpaid market share of 35.5% (annual increase of 2 p.p) and data market share of 41.7% (+8.1 p.p.yoy);
• Market share of 29,5% in the period;
• Annual growth of 14.7% in the Net Service Revenue in 1Q11;
• Annual growth of 9% in outgoing voice service revenues, and of 8% in the incoming voice services revenue;
• Growth of 43.0% in Data and VAS Revenue in the year-over-year comparison (which accounts for 21.8% of the net service revenue). Mobile internet revenue grew 45,3%;
• EBITDA increased by 29.6% over 1Q10;
• EBITDA Margin of 34.5% in the quarter (+4.2 p.p. yoy);
• Net profit of R$ 710.2 million in 1Q11, with growth of 270% over 1Q10;
• Operating cash generation recorded R$ 826 million in the quarter (annual growth of 110.2%);
• Net debt in 1Q11 in the amount of R$ 1,599.0 million (60% lower than in 1Q10). Current rating of “brAAA” by “Standard & Poor’s”.

  HIGHLIGHTS

  CONSOLIDATED OPERATING PERFORMANCE - VIVO

• Vivo recorded an increase of 15.0% in the total number of accesses in comparison to 1Q10 and closed the quarter with 62,061 thousand accesses.

• The above mentioned performance helped keeping the stability of the market share, which decreased by mere 0.7 p.p., despite the more aggressive offers of its competitors, especially in the prepaid segment. The market share of net additions recorded 23.4% in the quarter.

• The total net additions of 1,768 thousand accesses in 1Q11 is lower than in 1Q10, due to the enhanced commercial focus on the postpaid segment. Out of the net additions, 38.7% were postpaid accesses in 1Q11 vs. 33.1% in 1Q10.

• The market share of postpaid accesses of Vivo recorded 35.5%, an increase of 2 p.p. over the same quarter of 2010. This result is due to the increased attractiveness of the services offered to the postpaid customers and to Vivo’s high performance in its sales of access in 3G internet.

• Thus, the annual growth of the postpaid customer base was 26.7%, more than twice the growth in the prepaid segment, of 12.2%

• In the segment of modems and Machine-to-Machine (M2M) accesses, Vivo’s market share, according to Anatel data, was 42%, recording an increase of 8.1 p.p. over the last year, with a share of net additions in the quarter of 77%.

• Churnof 2.7% in the quarter remained stable in the comparison with 1Q10. In the year-over-year comparison, there was a slight increase of 0.2 p.p. in the churn.
  
  

• Vivo combines service quality, market share leadership, higher 3G coverage and a strong brand, which is the brand that is mostly reminded in the industry by Brazilians for three consecutive years, according to Data Folha research. Thanks to these attributes, Vivo has been able to keep a benchmark performance in churn, profitability and revenue share for the last quarters.  

• SAC of R$ 59 in 1Q11 recorded a drop of 14.5% in the year-over-year comparison. As regards the comparison of quarter-over-quarter, the SAC recorded an increase of 5.4% over the lowest level in the Company’s history that was recorded in the last quarter of last year. The increase was due to the increased number of postpaid terminals and data services in the gross additions.
  
  
• The ARPU of R$ 24.6 in the quarter is 0.8% lower than in 1Q10 and 5.0% lower than in 4Q10. Such performance is due to the dilution effect caused by the growth of naked SIM Cards on the market.
  
  
• The dilution effect was reduced by the outgoing ARPU which recorded a growth for the second consecutive quarter in the year-over-year comparison, recording 2.7% in 1Q11. When compared to 4Q10, there was a reduction of 7.3% due to seasonality.

• The Incoming ARPU, on its turn, decreased by 1.1% over 4Q10, despite the revenue growth, due to the dilution caused by the entry of naked SIM Cards on the market. In the comparison with 1Q10, it maintained the same decreasing trend, with a reduction of 6.1%, mainly because of the mentioned dilution.
  
  
• The overall traffic grew 13.4% in 1Q11 when compared to 1Q10 and remained stable in relation to 4Q10. Worthy of mention is the annual increase of 14.8% in the outgoing traffic.

  NET OPERATING REVENUES - VIVO

Annual growth of 43% in data revenues and of 45% in revenues from mobile internet services.

   OPERATING COSTS  - VIVO

The personnel expenses in 1Q11 recorded an increase of 17.3% in relation to 1Q10, due to the completion, in June 2010, of the incorporation of professionals who provide assistance in our own stores (around 5.2 thousand employees). This action resulted in reduction of outsourced labor cost, as stated in selling expenses. When compared to 4Q10, it recorded a reduction of 25.5%, and it must be considered that 4Q10 is impacted by nonrecurring expenses in the amount of R$ 66 million.

The cost of services rendered in 1Q11 increased by 5.0% over 1Q10, as a result of the increase in the customer base and in its activity. There was an annual growth of 57.7% in expenses with third-party services, especially with campaigns for stimulating usage, and increase of 9.6% with Fistel Fee and other taxes, partially offset by the reduction in interconnection expenses. When compared to 4Q10 there was a growth of 2.9% in the cost of services rendered, due to the increased expenses with third-party services.

The cost of goods sold in 1Q11 recorded increases of 2.3% and 13.5% in the comparison with 1Q10 and 4Q10, respectively, due to the increase in sales of postpaid handsets and data devices. The restrictive policy for granting subsidies that links the expense to the expected usage profile of each customer was maintained.

The Provision for Doubtful Accounts (PDD) in 1Q11 reached R$ 58.5 million, corresponding to 0.86% of the total gross revenue. This result increased 0.15 p.p. in relation to 1Q10 (0.71%). In relation to 4Q10 (0.80% of the gross revenue), the PDD recorded a slight increase of 0.06 p.p., once the 4Q10 is positively impacted by the recoveries occurred in the year end campaigns. It must be pointed out that the PDD levels remained under control and are considered to be low in relation to the industry, even considering the larger postpaid customer base of Vivo in relation to its competitors.

The general and administrative expenses grew by 14.0% in 1Q11 in relation to 1Q10 due to the increase in expenses with third-party services, especially collection expenses due to a larger post-paid customer base and volume of recharge, as well as other expenses. In relation to 4Q10, the 6.4% reduction is explained, mainly, by the reduced costs with materials, donations and other expenses.

Other Operating Revenues/Expenses, net, recorded revenues of R$ 1.4 million. The comparison with 1Q10 and with 4Q10 shows a reduction in the revenue due to the increase in operating expenses, especially taxes, fees and contributions.

Depreciation and amortization expenses in 1Q11 decreased by 37.4% in the comparison with 1Q10, due to the end, in June 2010, of the depreciation of the CDMA equipment. In relation to the previous quarter, there was an increase of 6.2%, due to the concentration of the investments in the last months of 2010, whose depreciation started being applied in early 2011.

FINANCIAL REVENUES (EXPENSES) - VIVO

Worthy of mention is the comparison between 1Q11 and 4Q10, which shows a drop of R$70.5 million in Vivo’s net financial expenses. This is mainly due to the expenses with PIS/COFINS on financial revenues, arising out of the allocation of the JSCP (Interest on the Own Capital) during 4Q10, the higher expenses with adjustments of tax contingencies and the adjustment to present value of the ICMS tax payable, accounts payable and accounts receivable in 4Q10, in addition to increased revenue for updating of court deposits in 1Q11.

The General Shareholders’ Meeting held on March 31, 2011 approved the payment of dividends of R$ 5.732990078 per share, under equal conditions for common and preferred shares, in the total net amount of R$ 2,290,846,090.02. The approved amount results in a payout of 127% of the net profit less legal reserves.

Such dividends, declared based on the 2010 closing balance sheet to the holders of common and preferred shares, include interest on the own capital, deducted from the dividends, pursuant to article 9 of Law 9249/95, in the amount of R$ 220,000,000.00, with 15% income tax withheld at source, resulting in net interest of R$ 187,000,000.00, and dividends of R$ 2,103,846,090.02.

The payment of the amounts of JCSP and Dividends that were approved shall be effected until December 21, 2011.

In relation to 1Q10, the decrease of 60% in the net debt is essentially due to the strong operating cash generation, in addition to the continuous improvement in financial efficiency.

In 1Q11, more than R$ 12.8 million of the credit facility with the BNDES referring to the Investment Support Program were drawn down. With the previous drawdown, of R$ 171.7 million, we came to a total of R$ 184.5 million of the credit facility of R$ 319.9 million. These funds are being used for the acquisition of domestic equipment intended for network capacity expansion projects.

In relation to 4Q10, Vivo’s net debt decreased by 8.3%, due to the consistent operating cash generation in the period.

CAPEX - VIVO

Vivo Internet Brazil plan expanded its 3G coverage and reaches 1,356 municipalities

CAPEX in the 1Q11, of R$ 339.7 million, is in line with the typical performance of the period. In the constant search for offering the best quality services on the market, Vivo concentrated its investments in expanding the network capacity and quality as well as on information technology.

At the General Shareholders’ Meeting, held on March 31st, 2011, a capital budget of R$ 3.5 billion was approved for 2011, which amount contemplates expenditures with frequencies acquired by Vivo S.A. at the Anatel’s Auction held in last December 2010.

Operating cash generation of R$ 826.0 million in 1Q11.

Result of the IPO carried out on 03/18 by SP Telecom Participações Ltda.

At February 11, 2011, the CVM (Brazilian Securities and Exchange Commission) granted the registration of the Public Offering of Shares (IPO), under no. CVM/SER/OPA/ALI/2011/002. The complete Bid Notice was published on February 16, 2011 in Valor Econômico newspaper, containing all the details of the referred offer. At March 18, 2011, an auction was carried out for sale of the shares held by the shareholders who accepted the offer, and the offered price for those who chose to receive the payment in cash was R$ 118.97. SP Telecomunicações Participações Ltda. was the purchaser of the 10,634,722 common shares, representing 7.75% of the common shares of Vivo and 2.65% of the total capital stock.

The managements of Vivo Participações (Vivo) and of Telecomunicações de São Paulo S.A. – Telesp, disclosed at March 25, 2011, in continuance of the corporate reorganization process concerning the merger of Vivo shares into Telesp, aiming at the unification of the shareholding structure of the companies, a relevant fact informing that the respective boards of directors approved the terms and conditions of the respective reorganization.

The managements of the companies, following the recommendations contained in CVM Guidance Opinion no. 35/08, organized special independent committees both in Vivo and in Telesp, which negotiated the share exchange ratio and voiced their opinion to the officers of the respective companies recommending the exchange ratios indicated by the financial consultants as follows: 1.55 shares of Telesp of the respective kind shall be issued for each common and preferred share of Vivo Part.

At April 27, the respective special shareholders’ meetings were held, in which the Corporate Reorganization was approved. The holders of common and preferred shares of Telesp and of common shares of Vivo Part. who dissented from the Corporate Reorganization will be able to exercise the right of withdrawal until May 30, 2011, upon reimbursement of the shares of the respective Companies held by them of record at December 27, 2010, the date of publication of the initial Relevant Fact. The holders of the preferred shares of Vivo Part. shall not be entitled to the right of withdrawal, once the referred shares are liquid and widely sold on the market, as defined in article 137, II, letters “a” and “b” of Law no. 6404. Under the terms of the provisions in article 137, IV and V of Law no. 6404, the term for exercise of the right of withdrawal is 30 days counted from the publication of the minutes of the Meetings which approved the Corporate Reorganization.

More details may be obtained from the website: www.vivo.com.br/ri.

   CONSOLIDATED BALANCE SHEET - VIVO

INDIRECT CASH FLOW STATEMENT (CONSOLIDATED)

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

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