Apresentation of 2nd Quarter 2006 Results

1. Vivo Participações S.A.
2Q06 Results
July 21, 2006
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2. Executive Summary
Challenges • Stabilize Market Share • Promote Revenue Growth
Operational Highlight
Increase in the post-paid outgoing revenue of 15.3% in SP and 21.2% in RJ/ES
Increase in the post-paid outgoing ARPU of 4% in SP and 9% in RJ/ES
Decrease in the inbound traffic with migration F-M to M-M/ Decrease in interconnection revenue
Inactive clients write-off with effects in churn but without effects in revenues
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3. Introduction
Strong Commercial Activity Competitive market
Mother's Day/ Valentine's Day
Commercial Campaigns
Client Base Write-off of inactive clients
Impact in Churn
No effect on revenue
Revenues Outgoing revenues grew in relation to 2Q05
Pressure on prices with strong competition
Provision for Bad Debt(PDD) Impact of R$ 161.5 MM QoQ
Normalized PDD of R$177.2 MM or 4.7% of gross revenue
EBITDA Reduction due to non higher provisions
Normalized value: R$467.8 MM and 18.0% margin
Net Debt Manageable volume and reduction of financial costs
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4. Introduction
Advances Quality : 98% of Anatel’s goals achieved
Network completely authenticated
78% of client base centralized in a single billing system
57% of client base centralized on prepaid platforms
72% of client base centralized at the front office
Short Term Combat Fraud and Cloning
Consolidation/ Rationalization of IT/IS
National Coverage
Dedicated attention to Corporate Segment
Corporate Restructuring
Medium Term Launching of GSM’s network (overlay)
Competition and evolution in 3G
Maintenance of Leadership in 850MHz and better network
Costs Reduction
No impact of CapEx
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5. Client Base
+ 0.3% - 5.4%
28,446 28,525 30,138
30,348 total without
write-off of clients
- 8.6% 5.761
-4.4%
5.511 5.268
• Retention and loyalty programs;
• Focus on the value clients;
+1.4%
- 4.6% 24.377
22.935 23.257 • More than 78% of the clients base
integrated to the unified IT/IS
platforms.
2Q05 2Q06 1Q06
Prepaid Post-paid
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6. Leadership in Distribution & Coverage
Only Operator in 3G
Channels of distribution Coverage
8,364
6,953 2,256
327 6,116
104 1,759
91 1,660
3,231
2,795
2,118
4,806
4,054 3,907
Vivo C1 C2 Vivo C1 C2
Retail Third Party Own Stores Municipalities Covered
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7. 2Q06 Main Marketing Actions
Program based on Points Mother’s Day
Soccer World Cup 2006
Change handsets using the Buy a handset and get
program based on points. the second for free.
Talk more Vivo Prepaid Recharge in Double
When buying or changing handset, the
client speaks for how long he/she
wants for only R$0.30/min in local
calls or long distance calls from Vivo to
Vivo
Vivo offers the recharge value
Client speaks for free with any Vivo in bonus for local calls from
or fixed phone after the 3rd minute Vivo to Vivo to speak in double.
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8. Loyalty and Retention
Focus Value Clients
LOYALTY RETENTION
Changes for
Segmented
Segmented
Incentive to retain Prepaid client through discounts
Prepaid
Offer
Retention of clients through segmented offers
in the exchange for a new handset keeping the
such as “Right Planning” and “Vivo Smart”
number
Program of
Points
Points are added and can be used when handset is
Migration
Pre-Post
exchanged. Balance of points is sent by SMS in a Using base segmentation, to inform to prepaid
monthly basis. clients the advantages of being a Post-Paid.
Overlay CDMA
Incentive to change TDMA handsets for CDMA
based on the program of points.
Upgrade of
Plans and
Packages
Maxime value-for-money to client and increase
customer satisfaction
Globalmoto
Direct mail
Enables value clients to acquire the Globalmoto
handset at differentiated prices.
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9. Net Revenue
R$ million
Service Revenue Handset Revenue
- 7.5% - 3.4%
2,360
2,184 2,262 -20.2% +31.4%
1,165
1,159 1,189
1,059 868 930
519 414 315
136 157 143
2Q05 2Q06 1Q06 2Q05 2Q06 1Q06
Other Services Network Usage Monthly Subscription Handsets
Right Planning;
Campaigns to encourage the intra network traffic;
Data transmission ;
Internet access cards, PDA’s and SMS.
Increase in the outgoing revenues;
Drop in the inbound fixed-to-mobile traffic.
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10. Data Revenue Evolution
Data Net Revenue Data Net Rev./Service Net Rev.
7.7%
2Q06
7.0%
6.1%
1Q06 +14%
2Q05
2Q05 1Q06 2Q06
2Q05 2Q06
35%
35%
17% 18%
14%
21%
65%
65%
WAP SMS ZAP + others
10 WAP SMS ZAP + others

11. ARPU Blended Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
-15.7% -5.1%
28.6
24.1
25.4
12.7
10.4
9.7
15,5 17,3
15.9 15.0
Inbound 14.4
Outgoing
2Q05 2Q06 1Q06
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12. ARPU Post-Paid Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
- 9.1% - 5.1%
78.0
74.7
70.9
25.3 21.6
20.8
52.7 50.1 53.2
Inbound
Outgoing
2Q05 2Q06 1Q06
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13. ARPU Prepaid Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
-17.4% -0.8%
15.5
12.8 12.9
9.2
6.8 7.4
6.3 Inbound
6.0 5.6
Outgoing
2Q05 2Q06 1Q06
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14. MOU Blended Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
-16.5% -2.9%
79
66
68
43
35 37
36 Inbound
31 31
Outgoing
2Q05 2Q06 1Q06
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15. MOU Post-paid Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
-4.3% +0.5%
209
200 199
82
73 76
127 127 123
Inbound
Outgoing
2Q05 2Q06 1Q06
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16. MOU Prepaid Evolution
2Q05 vs. 2Q06 2Q06 vs. 1Q06
- 26.1% -2.9%
46
34 35
32
15,5 25 26 17,3
Inbound
14
Outgoing 9 9
2Q05 2Q06 1Q06
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17. SAC*
Strategy focused on Acquisition of Value Clients
-25.1% 2.4%
171
128
125
2Q05 2Q06 1Q06
*SAC Blended
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18. Operating Costs*
Growth with Competitive Activity
R$ million
382
Cost of
434
services rendered
418
152
Personnel 156
155
830 2Q05
Cost of
handsets
433 1Q06
547 2Q06
809 PDD
Selling
711
expenses
1002
General & 127
administrative 129
expenses 146
*Depreciation is not included.
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19. PDD* Evolution
R$ million
338.7
Others
161.5
161.0 Insolvency Clients
136.6 PDD extraordinary in the 2Q06.
2Q05 1Q06 2Q06
Structure and Process Initiatives :
Authentication of the Analog network and TDMA third party network already concluded;
Interception of calls posted by Vivo clients in roaming, is fully implemented (“screening” of clients);
“Credit Scoring” (already implemented);
Strong billing actions;
“Management of Consumption”.
*PDD = Provision for Bad Debt
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20. EBITDA and EBITDA Margin
R$ Million
EBITDA EBIT
27.8%
20.8%
18.0%
11.8%
717.1
599,3
125.5
467.8 62.5
306.3
2Q05 1Q06 2Q06
EBITDA EBITDA Normalized - 299.9
EBITDA Margin EBITDA Normalized
2Q05 1Q06 2Q06
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21. Gross Debt, Net Debt and Gearing
Covered Short Term Debt
Gross Debt (R$ million) Net Debt (R$ million)
4,464.4
5,482.6
4,686.4 4,333.9
60% 60%
40% 40%
1Q06 2Q06
1Q06 2Q06
Short Term Long Term
Gearing
8,416
7,985
4,464 4,334
0.53 0.54
Net Debt 1Q06 2Q06
Shareholder's Equity
R$ million 1Q06 2Q06
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22. Net Financial Result
Reduction in Financial Expenses
R$ million
(246.7)
(213.6)
(186.3)
-13.3% + 14.7%
2Q05 2Q06 1Q06
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23. Capex
R$ million
419.0
954.2
116.2 335.7
Total Capex 200.1
281.3
53.7 108.6
120.3 617.0
103.3
87.6 211.9
249.1 85.9
633.8 173.5
139.5
92.1 231.6
2Q05 1Q06 2Q06 Accumulated 2005 Accumulated 2006
Network Technology Others Network Technology Others
% Capex/Net Rev. 14% 13% 18%
11%
12%
2Q05 1Q06 2Q06 Accumulated 2005 Accumulated 2006
Network Quality/Capacity;
Main Investments Centralized systems and platforms;
Corporate segment: handsets and technology.
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24. Anatel Standards
Reduction in Indicators of Non-Compliance
15.0%
14.0%
12.1%
9.3%
3.8% 4.3%
3.6%
3.3%
Best
Performance
Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Apr-06 May-06 Jun-06
Source: ANATEL (June/2006)
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25. VIVO Social Responsibility
Vivo has continued with its internal voluntary program with several
actions of support to visually disabled person:
Opening of Vivo Voluntary Space, located at the company’s
building in Rio de Janeiro, for recording of spoken books.
Three courses were provided for training Vivo volunteers –
audiodescription, revisers and readers.
ACTIONS Production of approximately 11,000 pages of Braile books, only
in June, which work was carried out by approximately 600
volunteers of the company.
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26. GSM Overlay
Project Frequency Capex
Construction of a GSM/EDGE We will use the frequency of • Capex to the overlay of GSM will
network capable of upgrade to W- 850MHz and CDMA with EV-DO. be approximately R$ 1,080MM;
CDMA to be added to the network, • Capex already included in the
which will continue in full operation. Company’s plan with no impact by
the balance between investments in
CDMA and GSM;
Reasons Advantages Competitive Differentials
• Future coverage also in GSM; • Handset prices; • Higher offer of handsets and
• Digital roaming facilitated by • Short term pay-back; services to the market;
present contracts; • Improvement in the competitive
• Lower GSM’s handset cost; positioning; • Only Brazilian operator to offer
• Gain of scale; • Experience from TEM and PT in both technologies CDMA and GSM;
• Evolution to UMTS; other markets. • Its offers services that fits all
• High use of the existing market segments.
infrastructure;
• Reduction in the price of GSM
equipments;
• Recurrent Economy in Capex.
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27. Final Remarks
• Sustainable effort to detect and control;
• Authentication of prepaid and post-paid customer base;
Fraud and Cloning
• System’s Prevention;
• Reduction of PDD.
• Unified IT and SI platforms;
• 75% of clients already integrated;
Systems • Simplified control;
• Increased Reliability and Control.
• Structure Simplification (reduction of 14 operator to 1);
Corporate Restructuring • Synergies;
• Cost control;
• Transparency.
• Search for Nationwide coverage;
• 100% Digital;
Coverage •1xRTT in 1,825 municipalities.
• 3G’s Competitively;
• Easier Roaming;
GSM
• Lower handsets’ costs.
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28. Safe Harbor Clause
Forward Looking Statements
• This presentation contains statements that constitute forward looking statements in its
general meaning and within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this document and include
statements regarding the intent, belief or current expectations of the customer base,
estimates regarding future growth in the different business lines, market share, financial
results and other aspects of the activity and situation relating to the Company. The
forward looking statements in this document can be identified, in some instances, by
the use of words such as "expects", "anticipates", "intends", "believes", and similar
language or the negative thereof or by forward-looking nature of discussions of
strategy, plans or intentions. Such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties and actual results may differ
materially from those in the forward looking statements as a result of various factors.
• Analysts and investors are cautioned not to place undue reliance on those forward
looking statements which speak only as of the date of this presentation.
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