1
Vivo Participações S/A 1Q07 Results
May 9, 2007
Vivo Participações 1Q07 Results
2
Vivo
Operating Performance
Financial Performance
Table of contents
Vivo Participações 1Q07 Results
público copyright©vivo20073
Executive Summary
EBITDA
5.6% increase over 1Q06
Outgoing Traffic
22% up from 1Q06
Prepaid Recharges
20.5% increase over 1Q06
Distribution Channels
National retail store share leadership with 40%
MOU
10.3% increase over 1Q06
ARPU
18.1% up from 1Q06
Net Results
89% decrease in losses over 1Q06
Operating Cash Flow + change in working capital
R$ 296.7 million
Net Debt
26% decrease over 1Q06
Data Revenue + VAS
Historical record in the quarter; 28% up from 1Q06
GSM/EDGE
16% of total additions in 1Q07 and 33% in March
Highlights
Unified Systems
100% of customer base within one common platform
* Including replacements
Vivo Participações 1Q07 Results
público copyright©vivo20074
Brand repositioning
Vivo Participações 1Q07 Results
público copyright©vivo20075
R$ 1,000 promotion
Up to R$ 1,000 in recharges paid by Vivo. The higher the recharge amount, the higher the bonus to talk to any other Vivo subscriber for 6 months in local calls.
Vivo and TelefonicaPartnership 2,500 Minutes
Bonus for free calls to any Vivo cell phone for 6 months, in local calls.
Main marketing actions
Postpaid customers using Speedy can place free local calls from their Vivo cell phones to any fixed phone, and from their fixed phones to any Vivo cell phone, during every weekend through 2007
Vivo Participações 1Q07 Results
público copyright©vivo20076
4.847 4.348 3.831
2.625
2.036
2.984
Vivo C1 C2
Retail Third Party
7,831
6,973
5,867
99
111
303
C2
C1
Vivo
Own Store
Distribution
• 40% national retail share leadership, 19% above the second placed;
• More than 338 thousand recharge points;
• New recharge partnerships with Santander and Bradesco correspondent bank services
19%4%
77%
Post-paid additions
26%38%
36%
Prepaid additions
Third PartyVivo's Own Stores Retail
• 40% of sales to individuals at the company's own stores, of which postpaid clients accounted for 77%
Sales channels share in the total additions
8,134 Points of Sale
Distribution and coverage leader in its operational area
Network Coverage
• 100% of the municipalities in Sao Paulo, Rio de Janeiro and Espirito Santo in both CDMA and GSM technologies;
• 2,295 municipalities covered against 1,782 of the second competitor in our operational area
• GSM national digital coverage
Vivo Participações 1Q07 Results
7
Vivo
Operating Performance
Financial Performance
Vivo Participações 1Q07 Results
público copyright©vivo20078
30.13829.03029.053
1Q06 1Q07 4Q06
- 0.1% - 3.7%
• Best in class solutions in GSM and CDMA.
• Vivo Escolha: 33% of the post-paid individual clients;
• GSM/EDGE Adoption: 16% of the additions in the quarter*;
• Market share leader in its operational area with 30.7% share of total additions;
• Focus on customer service and satisfaction
• Constant improvement in the services provided
* Including replacements
Customer Base
9%25%
37%
44% 38%
47%
1Q06 1Q07
High Medium Low
Additions per range
• Focus continues on the acquisition of value customers, keeping rationality;
• Additions in the high-end were 16p.p higher than 1Q06
Vivo Participações 1Q07 Results
público copyright©vivo20079
1Q06 4Q06 1Q07
recharge financial volume
- 6.1%
+ 20.5%
Actions
866922719
• In the first quarter 2007, Vivo continued its customer loyalty and retention efforts focusing on high- and medium-value customers, prepaid and postpaid.
• Use of rewards program for the replacement of handsets;
• Recharge and traffic incentive through bonuses;
• Right Planning
• Even with the maintenance of the competitive pressure in the value segment, the churn remained stable.
• 20.5% growth in the financial recharge volume in 1Q07 versus 1Q06.
• Vivo has been investing in the expansion of virtual credit resellers accounting for 40% of the total recharge;
• Vivo's prepaid customers have more than 338 thousand recharge points;
• Recharge incentive campaigns such as a "Bonus up to R$ 1,000 every month paid by Vivo".
R$ million
Recharges
Loyalty and RetentionResults
Vivo Participações 1Q07 Results
público copyright©vivo200710
125115
100
1Q06 4Q06 1Q07
*SAC Blended
- 13%
- 20% • 13% SAC reduction due to seasonality and lower expenses with GSM subsidies;
• Reduction of advertising and commissions expenses.
1Q07 vs 4Q06
• 20% SAC reduction as a result of lower expenses with subsidies, publicity and advertising;
• Launch of the GSM technology;
• Better commercial agreements with suppliers;
• Exchange rate valuation.
1Q07 vs 1Q06
SAC reduction as a result of greater commercial and operating efficiency.
SAC*
Vivo Participações 1Q07 Results
público copyright©vivo200711
3144 39
37
3836
1Q06 4Q06 1Q07Outgoing Inbound
15,0 16,4 16,3
10,413,7
14.2
1Q06 4Q06 1Q07
Outgoing Inbound B&K Effect
7582
68
+ 10.3%- 8.5%
30.030.6
25.4
+ 18.1%- 2.0%
ARPU MOU
4.2 3.9
• ARPU maintenance in comparison with the 4Q06 and growth over 1Q06
• Adjusted 1Q07 ARPU 2.9% up from 1Q06
• Aggressive recharge campaigns
ARPU and MOU Evolution
Vivo Participações 1Q07 Results
12
Vivo
Operating Performance
Financial Performance
Vivo Participações 1Q07 Results
público copyright©vivo200713
143 158 193
1.189 1.232
9301.226 1.185
1,263
1Q06 4Q06 1Q07
Other services Monthly Subscriptions and usage
Network B&K Effect
R$ million
2,262
2,6092,647
+ 15.4%
- 1.4%
359 337
29,920 28,790 28,997∆%- 3.1
∆%+ 0.7
Average Customer
base
Net Service Revenue
• 28% growth in the Data Revenue + VAS in comparison with 1Q06;
• 20.5% increase in the financial volume of recharges in 1Q07 x 1Q06 and cost reduction.
Vivo Participações 1Q07 Results
público copyright©vivo200714
1Q06 4Q06 1Q07
+ 21.9%
• The 1Q07 showed a historical record in Vivo's data revenue;
• More than 120,000 full songs sold monthly;
• Vivo is one of the country's largest digital music stores;
• Vivo is the only operator that charges the download
contents, without charging for the traffic;
• Reverse Auction Voice Portal;
• Vivo Location base service to families: more than 10,000
customers.
% of Net Revenue
7.5% 6.6% 8.2%
* Data Income including VASs
Net Data Revenue*
Average Customer
base29,920 28,790 28,997∆%
- 3.1 ∆%
+ 0.7
+ 28.0%
Vivo Participações 1Q07 Results
público copyright©vivo200715
156
512
107
352
174
716
160
603
73
407
185
733
129
550
161
433
156
434
General andAdministrative
Expenses
SellingExpenses
Provision forBad Debt
Cost of GoodsSold
H.R.
Cost ofServicesRendered
1Q07 4Q06 1Q06
*Does not include depreciation
Bill & Keep Effect
• Cost of Services Rendered Increase in the interconnection cost with the end of the partialB&K. Adjusting for this effect, the 1Q07 amount would have shown a R$ 43 million reduction in comparison with 1Q06.
• H.R.Increase over 1Q06 as a result of restructuring expenses.
• Cost of Goods SoldBetter agreements with suppliers, impact of the exchange rate and GSM.
• Provision for Bad Debt2.7% of Gross Revenue.
• Selling ExpensesDecrease over 1Q06 due to lower third party expenses, especially commissions and marketing.
• General and Administrative Expenses21,2% increase over 1Q06 due to higher third party expenses
Operating Expenses*
R$ million
Vivo Participações 1Q07 Results
público copyright©vivo200716
717858
757
27,8%26,6%
29,2%
1Q06 4Q06 1Q07
EBITDA Margin
* EBITDA – CAPEX + Change in Working Capital
EBITDA and Margin Operating Cash Flow *
32.8%29.7%
Adjusted EBITDA for B&K
• Adjusted EBITDA for B&K would have been R$745.8 million in 1Q07and R$ 844 million in 4Q06.
297
- 114
760
1Q06 1Q074Q06
EBITDA and Free Cash Flow
R$ million
13.4
11.2
Bill&Keep Effects
Vivo Participações 1Q07 Results
público copyright©vivo200717
1Q06 1Q074Q06
• 9 times improvement year over year
• Extraordinary non recurring items in 4Q06 amounted R$876 million
• Better financial results
Net Results
R$ million
PIS and COFINS Reversal
Credit Activation
Net Income
-19
886
-179
740
136
10
+ 89%
Vivo Participações 1Q07 Results
público copyright©vivo200718
- 186
- 147
- 119
1Q06 4Q06 1Q07 1Q06 4Q06 1Q07
Short Term Long Term
4,5005,483
60%
40%
68%
32%
3,305
4,464
65%
35%
4,057
3,553
Financial Result
Net Debt Gross Debt- 26%
- 7%
- 26%
- 10%
1Q06
4Q06
1Q07 *
- 36%
- 19%• S&P confirmed Vivo’s rating and change its outlook from "negative" to "stable“
• Better financial result as a consequence of improved interest rates during the period
• Improvement in the short-term / long-term profile
* Without the effect of Fistel payment
Financial Result, Gross Debt and Net Debt
R$ million
Vivo Participações 1Q07 Results
público copyright©vivo200719
8%
36%
11%
92
805
9886
134
44
103
120
94
1Q06 4Q06 1Q07
Network Technology Others
281 235
1,059
Total Capex & % Capex / Net Revenue
• Quality improvement
• GSM/EDGE
• Systems Integration
CapexR$ million
Vivo Participações 1Q07 Results
público copyright©vivo200720
Final Remarks
"To be the biggest telecommunications operator in Braziland one of the biggest in the world is important, but to be the best in what really matters to the customer is still more important. Likewise, to be a reference in the development of high-end technology will make no difference if that technology does not provide useful services to the customer.
We wish to transform Vivo in an unforgettable customer experience for both existing and potential new fans."
Roberto Lima
Vivo Participações 1Q07 Results
público copyright©vivo200721
•Some information shows our vision of future and perspectives or objectives, such as the growth of our subscriber base, the distribution of the various services to be offered and the results to be achieved. This information is being made available for the sole purpose of elucidating how we intend to expand our business. Thus, it is not intended to provide projections for accomplishing such objectives.
•Many factors may distort our actual results in comparison with the objectives that have been presented, including Brazilian political and economic factors, the development of competitive technologies, the access to the capital required for achieving our objectives and the appearance of strong competition in our market areas.
Safe Harbor Clause Forward Looking Statements