VIVO - Presentation 2Q10 Results

1. Results
2Q10

2. Agenda
Operating Performance
Financial Performance

3. A quarter highlighted by the accelerated
growth of revenues and EBITDA.
th f d EBITDA
Attractiveness of Vivo  Increase in Market
results in customer base Share for four
growth and improves consecutive quarters
customer mix ...
t i
...a more stable and  ARPU improvement
active customer base
base, and SAC and Ch
d d Churn
with increasing stabilization
consumption...
...driven by growth  Data Revenue
in data services... accounted for 19.4% of
the net service revenue
...resulting in  Annual growth of
accelerated growth of 10.7% in the net
service revenue and service revenue and
EBITDA. 10.6% in the EBITDA
3

4. The attractiveness of Vivo results in the customer
base growth and improves customer mix...
b th di t i
Brand Channels Offers Quality and Coverage
 Most valuable  The major own  Best cost-benefit ratio  Leader in 3G
brand in stores chain in in the market coverage
telecom sector* the market
 Complete offers with  Consistent
 H
Huge capillarity
ill it data
d t and voice
d i leadership i A t l’
l d hi in Anatel’s
of recharge points quality indicators
+19.6
+3.8
QoQ YoY
53.9 56.0
46.8 8.0% 25.5%
2.7% 18.1%
Pre paid Post paid Post paid Blended
* According to the Brand Finance Consultancy.
4

5. ...a more active customer base that uses the
mobile phone even more...
bil h
Customers
MOU VOICE TRAFFIC recharging
Minutes Million of minutes % of pre paid
customer base
+ 42.5% +70.1%
- 1.7% +1.9%
QoQ YoY QoQ YoY
18,398 18,744
116 114 + 5.9 p.p.
-4.0% -11.1% 4.4% 0.4%
25 24
80
11,022
27
-1.1% 69.8% 2.3% 114.5%
91 90
53
2Q09 1Q10 2Q10
Outgoing Incoming Outgoing Incoming
5

6. ...increasingly more stable, demanding less
efforts t attract and retain customers...
ff t to tt t d t i t
Churn of 2.6% in the quarter,
2 6% quarter
SAC Blended* with small variations for more
- 15.5% than 10 quarters
+2.9%
84
Number Portability
8 69 71 QoQ YoY
13 9 -5.1% 7.6%
9
8 9 12.6% -26.9%
20
16 19 23.9% -3.4%
16
19 21
11.6% 30.5%
27
17 13
-25.4% -52.3%
2Q09 1Q10 2Q10
Subsidy Advertising
Comissions Lending Mar/09 Jun/09 Sep/09 Dec/09 Mar/10
Fistel
* (70% of marketing expenses + costs of distribution
channels + handset subsidy + corporate lending +
Fistel)/gross additions.
6

7. ...increasing the monthly service expenditure...
ARPU – R$
- 7 4%
7.4%
+ 0.8%
27.0
24.8 25.0 Q Q
QoQ YoY
-5.1% -13.8%
4.7% -3.1%
Outgoig Incoming
7

8. ...driven by growing data service
adoption...
d ti o Mobile Internet market share
of 40%
o 4 6 million devices with access
4.6
to the 3G network
In this context Vivo has absolute
leadership o Increase of 44% in Data ARPU
Mobile Internet Market Share*
50%
40%
40%
30% Player 1
20%
Player 2
y
10% Player 3
0%
*Only consider modems and data card. Data updated
until Feb/10.
Fonte: Anatel e análises internas da Vivo. 8

9. ...resulting in growth acceleration in service
revenue and EBITDA, notwithstanding the
d EBITDA t ith t di th
consistent cash generation.
2Q10 2Q09* Δ%
Net Service Revenue 4,129.8 3,729.4 10.7%
EBITDA 1,342.7 1,213.7 10.6%
EBITDA Margin 30.5% 30.3% 0.2 p.p.
Net Result 236.0 181.7 29.9%
Cash Flow after Investments 960.9 836.0 14.9%
* The 2009 numbers were reclassified, when applicable, according to the adoption of new accounting practices in Brazil (CPCs).
9

10. Thus, Vivo consolidates its leadership and build
the path to sustain this position
position.
Growing and more active ...generating the expected ...resulting in an EBITDA
customer base... return for the investments Margin over 30% for the last
in 3G and... 5 quarters...
+6 p.p
...supported by a quality
coverage and high capacity in ...and sustainable cash
2G and 3G... generation.
R$417 MM in dividends
payment in April 2010.
10

11. Agenda
Operating Performance
Financial Performance

12. Net Service Revenue
R$ million
YoY Growth
%
+ 10.7%
10 7% 71.8%
71 8%
64.8%
+ 5.1% 51.8%
4,130
3,929
3 929
3,729 10.7%
3.4% 5.8%
687 802
467
4Q 09/08 1Q 10/09 2Q 10/09
Net Service Revenue Data + VAS
1,463 1,505 1,490
1 490
2Q 10/09 Growth
R$ million
1,760
1 760 1,703 1,806
+71.8%
2Q09 1Q10 2Q10
Outgoing Voice Data + VAS
+2.6% +1.9%
Interconnection
In order to simplify the analysis the chart does not include ‘Others”.
Others
12

13. Data Revenue + VAS
R$ million
Others
+ 71.8% 19%
+16.8% SMS+MMS
40%
QoQ YoY Vivo
Internet
802 41%
Others -4.8% 8.5%
687
467 Vivo Internet 16.0%
16 0% 121.4%
121 4%
Others
12%
SMS + MMS 28.1% 50.8%
SMS+MMS
35%
Vivo
Internet
53%
% Net Service Revenue
Data Revenue over Service Revenue ...with internet services being
reach stage comparable to more the largest part of thi
th l t t f this
mature markets... revenues. 13
13

14. Operating Expenses*
R$ million
+ 15% - 12% + 6%
- 1% - 9% + 13%
1,046 1,038
897 954
900 449 846
433
394
+ 26% + 24% + 26%
+ 9% + 9% + 1%
167 266 267 269
154 244
133 214 213
* Excluding Depreciation.
14

15. EBITDA Evolution
R$ million
+71.8% +1.7% +24.2% +17.4% -12.2% +6.4% +14.8%
+10.6%
2Q09 Data + Voice + H. R. Service Goods Selling Others 2Q10
VAS others Rendered Sold Expenses
Revenues Costs
15

16. EBITDA and Margin
g
R$ million
Financial discipline maintain
QoQ YoY
expenses growth under control.
5.4% 10.6%
EBITDA EBITDA Margin
16

17. EBIT and Financial Result
R$ million
EBIT FINANCIAL RESULT
+ 24.9% 2Q09
Q 1Q10
Q 2Q10
Q
503
(58)
403 402
(101)
(122)
2Q09 1Q10 2Q10
17

18. Net Result and Cash Flow
R$ million
+ 29.9%
+ 23.0%
1Q10
2Q09 2Q10
Net Margin
18

19. Gross and Net Debt
R$ million
Gross Debt Net Debt
- 29.5% - 28.5%
-14.8%
- 4.5%
6,511.1 4,692.6
,
3,937.6
4,803.2 4,588.4 3,355.3
Net Debt/EBITDA of 0.62x;
Credit Rating: ‘b AAA’
C dit R ti ‘brAAA’
19

20. CAPEX
R$ million
14.9%
11.1%
7.8%
595.1
489.2
328.7
% Capex/Net Revenue
20

21. A Successful Journey
Launching of
HSUPA network
Beggining of operations
Cloning Launching of in the Northeast region
elimination GSM network
Telemigg Focus on Customer Base
Corporate Acquisition
Restructuring
YoY accelerated
growth in Revenues
Strategic focus and EBITDA
on quality
Market Share increase
for the 4th consecutive
quarter
t
2003 2004 2005 2006 2007 2008 2009 1H10
21

22. Results
2Q10