VIVO, SOUTH HEMISPHERE’S LARGEST WIRELESS GROUP ANNOUNCES FOURTH QUARTER 2003 CONSOLIDATED EARNINGS OF TELESP CELULAR PARTICIPAÇÕES S.A.

TELESP CELULAR PARTICIPAÇÕES S.A.

• As of December 27, 2002 TCP has controlled 100% of GT’s social capital. Thus, TCP recognized GT's consolidated financial results for the period from January to December 2002 period using the equity equivalence method and fully consolidated GT's balance sheet on December 31, 2002. As of January 1, 2003, the Income Statements have also been consolidated based on Brazilian Corporate Law.

• As of May 1, 2003, TCP has consolidated TCO’s data due to acquisition of its control.

• Concerning Brazilian Corporate Law, the information pertaining to 4Q02 includes TC’s consolidated figures and GT’s figures based on equity equivalence. For comparative purposes, it also includes the effects of the consolidation of GT’s 4Q02 results on concerning figures and the added on 4Q02 results of TCO.

• The Statement of Results containing accumulated data for 2003 and 2002, according to the Brazilian Corporate Law, as well as its respective information, including 12 months of results pertaining to GT and TCO, is enclosed on Table 2. In compliance with Brazilian Corporate Law, TCP’s Statement of Results for 2003 includes 12 months GT’s and TC’s operations and TCO’s operations as of May (8 months). Statements for 2002 contain only TC’s operations.

• On July 6, 2003, the operators using the Personal Mobile Service (SMP) were required to implement the Carrier Selection Code (Código de Seleção de Prestadora – “CSP”) for long distance calls. Thus, TCP operators no longer receive revenues from VC2 or VC3, and now receive interconnection revenues for the use of their networks in such calls.

• As of July 2003, the Bill & Keep rules were implemented, under which the payment for the use of the local network between the SMP companies will only occur when the traffic between them exceeds 55%. This impacts the revenue and the cost of interconnection without, however, significantly affecting EBITDA.

TCP is one of the companies which, together with Tele Centro Oeste Celular Participações S.A., Tele Leste Celular Participações S.A., Tele Sudeste Celular Participações S.A. and Celular CRT Participações S.A., forms the Joint Venture between Telefónica Móviles and Portugal Telecom. On April 13 2003, the “VIVO” brand was launched and a single image was established for the Group’s operations, emphasizing its coverage and its capillarity within the Brazilian territory and its operating strategy. Today the brand is “Top of Mind” in the Brazilian market, with a 44% recognition rate, twice as high as the second operator’s.

After acquiring 61.1% of TCO’s voting capital (20.4% of the total capital) on April 25, 2003, TCP was required by law to promote a tender offer to acquire TCO’s remaining common shares, which was launched on October 9, 2003 and finalized by an auction on November 18, 2003. TCP paid R$ 16.73 per 1,000 common shares in a total amount of R$ 538.8 million, in compliance with the process. As of this date, TCP has held 86.6% of TCO’s voting capital, which represents 28.9% of the company’s total capital, excluding treasury shares whose participations would then be 90.7% of the voting capital, which represent 29.3% of the total capital.

Although both TCP and TCO still understand that the merger of TCO into TCP, as well as its conditions, comply with the applicable legislation and that it would represent the best option for the Companies and their shareholders, TCP and TCO concluded on January 12, 2004 that, as a result of the statements made by the CVM Collegiate, the best and most timely decision considering the given situation would be to cancel the merger.

• TCP was responsible for a 53,0% share in the net additions in 4Q03, in the states in which it operates. Source: Anatel.

• TCP increased its total client base by 29.1% compared to 4Q02 (including TCO) and by 13.9% compared to 3Q03.

• The net additions in 4Q03 totaled 1,623 thousand new clients, 141.9% above the additions registered in the same period in the previous year.

• TCP has expanded its postpaid clients base by 2.5% and 6.5% against 3Q03 and 4Q02 (including TCO’s figures) respectively.

• TCP’s prepaid clients base TCP grew 17.2% against 3Q03 and 36.4% compared to 4Q02 (including TCO’s figures).

• EBITDA reached R$ 2,503.6 million in 2003, 16.4% higher than in 2002, which generated an EBITDA margin of 37.8% in 2003 (including 12 months of TCO).

• Net Operating Revenue from Services were R$ 1,877.3 million in 4Q03, 8.5% higher than in 3Q03.

• Data services revenue increased by 24.9% against 3Q03 and represented 2.5% of Net Revenue from Services.

• TCO launched CDMA 1xRTT services on October 29, 2003 and on December 31, 2003 it already covered 17 municipalities.

• The Company’s WAP and ZAP (1xRTT) potential customer bases grew 53.6% in the quarter and reached 9.14 million customers, which represents 68.7% of the total number of TCP’s customers.

• In 4Q03, TC reached a 54.2% share of net additions, despite the intensification of marketing actions by the competition. Source: ANATEL.

• TC’s customer base increased 23.7% compared to 4Q02, and 12.1% compared to 3Q03.

• Net additions grew 95.2% compared to 3Q03 and 165,6% compared to 4Q02, representing 56.5% of the year’s additions.

• The churn rate in 4Q03 was 0.3 percentage points lower than in 3Q03, in spite of the increased competition and the strong growth achieved in the last quarter.

• The postpaid ARPU grew for the third consecutive quarter and kept the blended ARPU steady compared to 4Q02. Not considering the effects of the Bill & Keep rules, the blended ARPU would have grown by 2.5% year over year and decreased 1.9% quarter over quarter.

• The postpaid MOU went up by 8.6% against 3Q03 and by 10.8% compared to 4Q02, basically as a result of the traffic within our network. The prepaid MOU decreased in 4Q03 as a result of the significant increase of the postpaid customer base, strengthened by strong commercial activities associated with Christmas campaigns.

• TC’s SAC fell by 7.1% compared to 3Q03 due to the reduction of the average cost of handsets sold.

• The increase in productivity was 7.6% compared to 3Q03 and 22.8% compared to 4Q02.

• In 4Q03, GT reached a 56.0% share of net additions, in spite of the entry of a new competitor. Source: ANATEL.

• GT’s market share has been improving and in a one year period it has increased by 4.4 percentage points, of which 2.5 percentage points in the last quarter.

• GT’s customer base grew 43.7% during the year, and 21.0% compared to 3Q03. Since December 2002, the number of postpaid customers went up by 11.1%.

• Net additions were 96.0% and 167.3% above the numbers reached in 4Q02 and 3Q03, respectively, and represent 57.2% of the additions in the year.

• The postpaid ARPU went up by 4.7% against 4Q02. Compared to 3Q03, the blended ARPU registered a 6.3% reduction due to the considerable number of gross additions, of which a large number of customers will only start generating revenues in 2004.

• The postpaid and the prepaid MOU increased compared to 4Q02: 4.7% and 0.8%, respectively. The postpaid MOU increased by 11.2% compared to 3Q03.

• GT’s SAC rose 16.2% in the quarter as a result of the Christmas campaigns. However, it decreased by 19.5% against 4Q02 due to the scale gains and to the mix of handsets sold.

• The number of employees has been decreasing as a result of the synergies obtained by unifying the structures of the “VIVO” Group operators. The increase in productivity was 25.5% against 3Q03 and 79.3% against 4Q02.

• In 4Q03, TCO reached a 49.7% share in net additions. In Area 7, it reached a 60.2% share in net additions. Source: ANATEL.

• TCO’s customer base went up by 34.1% in the last one-year period. Net additions were 141.4% higher than in 4Q02 and represent 49.6% of net additions in the year.

• In Area 7, TCO maintains its leadership with an estimated market share of 67.5%, the largest market share among Brazilian wireless operators.

• The blended ARPU registered a 6.3% reduction due to the considerable number of gross additions, of which a large number of customers will only start generating revenues in 2004.

• The postpaid MOU increased by 9.5% against 3Q03.

• TCO’s SAC remained relatively steady compared to 3Q03, in spite of the Christmas campaigns. However, it went decreased 60.0% compared to 4Q02 as a result of the discounts offered by suppliers on the sale of handsets.

• The number of employees has been decreasing as a result of the synergies obtained by unifying the structures of the “VIVO” Group operators. The increase in productivity was 20.9% compared to 3Q03 and 39.9% compared to 4Q02.

TCP’s Net Operating Revenue in the quarter was R$ 1,877.4 million, 8.5% higher than in 3Q03, due to 8.8% increase in the average customer base and of the increased revenues from sales of goods. Compared to 4Q02, the Net Operating Revenue went up by 101.0%; considering GT and TCO, it would have grown by 22.2%.

TCP’s net revenue from Services grew by 3.2% relative to 3Q03, reaching R$ 1,495.3 million, in spite of the increase of the average customer base. A large number of clients were added only in December and will only generate revenues in 2004. The implementation of CSP and of Bill & Keep rules generated a negative impact of approximately 3.8% of Net Revenue from Services, since TC’s main competitor complied with the SMP rules only in October 2003. Compared to 4Q02, Net Revenue from Services went up by 91.5%; considering effects of Net Revenue from Services consolidated from GT and addition of TCO’s, it would have grown by 18.6%, and not considering the impact of the Bill & Keep system it would have increased 23.2% .

The Gross Revenue from Subscription and Usage Charges totaled R$ 1,034.9 million, recording a 4.5% increase against 3Q03.

TCP’s Gross Interconnection Revenue went down by 0.2% in relation to 3Q03 and reached R$ 732.1 million due to the impact of the Bill & Keep rules. Not considering the impact of the Bill & Keep rules on 4Q03 and 3Q03, this figure would have increased by 3.3%.

Other Revenues from Services grew significantly, increasing 21.5% compared to 3Q03. Adding GT’s and TCO’s figures together in 4Q02, these revenues would have tripled. In 4Q03, data revenues represented 2.5% of net revenue from services.

Data services revenue went up by 24.9% compared to 3Q03. Data services have presented good performance as a result of the expansion of the 1xRTT service in the areas covered by TCP, including the launch by TCO of its high-speed Wireless Internet (1xRTT) on October 29, 2003, in overlay of its TDMA network, and improving popular access and handling of services such as WAP and short messages (SMS), through nation-wide promotional campaigns, as well as voice-mail, voice portal, MMS Torpedo, tones and images, messaging, cameras and customization, called “Vivo ao Vivo”.

TCP’s Net Revenue from Sales of Goods increased by 36.3% compared to 3Q03 and reached R$ 382.1 million due mainly to the increased volume of sales during the Christmas season.

The cost of personnel in 4Q03 went up by 36.4% compared to 3Q03 as a result not only of the collective agreement passed in December, which approved a 7.5% increase in line with the inflation rate, whose base-date was November 1, but also of TCO’s end-of-year bonuses and employees retention bonuses.

The cost of services rendered in 4Q03 fell by 12.0% compared to 3Q03, given that, like revenues, interconnection costs also were affected by the changes in the SMP rules, going down by 42.2%. The Fistel rate rises as a result of net additions, which went up by 106.0% in the quarter.

The cost of goods sold was R$ 461.5 million in the quarter and went up by 43.0% against 3Q03, due mainly to the Christmas campaigns, which caused a 68% increase in gross additions.

The Company’s commercial expenses in 4Q03 grew by 16.8% against 3Q03, because the increase in marketing expenses, as well as the commissions and third-party services concerning the campaigns held in the Christmas season were partially cut by the significant reduction in the provisions for doubtful accounts.

TCP has kept its bad debt rate level under control and obtained a 62.5% decrease in the expenses with the provision for doubtful accounts in 4Q03 compared to 3Q03, due mainly to the reversal of interest and fines to this provision. Not considering the reclassification of fines and interest from TC’s provision for doubtful accounts, it would reach R$ 30.0 million in 4Q03, still 15.5% lower than in 3Q03, and representing 1.2% of its gross operating revenue.

The quarterly evaluation of the contingency liabilities of the Company resulted in a net increase mainly due to the establishment of a provision for federal taxes PIS/COFINS in the amount of R$ 77.6 million. Both “TC” and “TCP” are involved in two legal suits, the first of which questions the increase in the COFINS rate and the second of which questions the change in the calculation basis of the PIS and the COFINS.

EBITDA decreased by 12.3% and reached R$ 621.9 million due to the intense commercial activity. The EBITDA margin was 33.1% in the quarter. Not considering the non-recurring items, the EBITDA would have reached R$ 669.5 million, representing a 35.7% margin.

TCP’s EBITDA margin was negatively affected by TCO’s margin. Without TCO and excluding non-recurring items the EBITDA margin would have been 38.9%.

Expenses with depreciation and amortization tend to remain steady, since the infrastructure, whose depreciation we are now concluding, was more expensive.

TCP’s net financial expense was R$ 173.7 million higher compared to 3Q03. Financial expenses have grown, mainly as a result of non-recurring facts, such as the distribution of R$ 94.1 million in interest on shareholders’ equity in TCO, the adjustment of the PIS and COFINS provisions according to the SELIC index, the reclassification of the financial adjustment of other contingency provisions, and the reversal of interest income regarding bad debt, as well as expenses related to the incorporation of TCO. If such non-recurring items were excluded, the net result would have remained stable compared with 3Q03.

TCP’s losses amounted to R$ 177.5 million in 4Q03, which represents a reduction of 69.4% compared to 4Q02. This reduction would be of 67.8% if TCO’s net profit were added to the results for 4Q02.

The Company’s indebtedness recorded in 4Q03 was partially compensated by resources available in cash and financial investments (R$ 1,158.8 million) as well as by derivative assets and liabilities (R$ 1,002.8 in net assets), resulting in net debt of R$ 4,117.6 million, 11.0% higher than in 3Q03.

Financial leveraging (Net Debt / (Net Debt + Net equity)) increased from 51.1% in 3Q03 to 54.8% in 4Q03, as a result of the level of funding, which exceeded the payment of debts in the period and the impact of the Public Offer (R$538.8 million) concluded in November 2003. The net debt on the yearly EBITDA showed slight growth, rising from 1.48x in 3Q03 to 1.64x in 4Q03, including TCO’s figures for the January-April period in 2003 and GT’s and TCO’s figures for 4Q02. The increase in debt relative to 2002 was mainly due to the acquisition of TCO in April 2003. On December 31, 2003, the company’s short-term indebtedness represented 63.5% of the total debt, compared to 43.2% at the end of 3Q03. This increase is explained by the maturity of debt in Euro (Euro 416 million) in November 2004. The total gross debt is 79.8% denominated in foreign currency. The company acquired derivatives as a 100% hedge against currency volatility.

TCP’s consolidated gross debt and net debt are shown in detail below:

Working capital on December 31, 2003 and December 31, 2002 would be R$185.2 million and R$293.0 million, respectively. The reduction in working capital resulted largely from an increase in payments to suppliers.

The figure concerning liability – suppliers registered a balance of R$ 1,255.0 million, R$850.9 million and R$546.4 million on 12/31/2003, 09/30/2003 and 12/31/2002, respectively. The increase in balance in December 2003 was mainly due to concentrated capital investments in 4Q03, which caused a rise of R$441.2 million in accounts payable to suppliers. Moreover, there was a record of R$ 16.5 million in the Employer Participation Program in 4Q03. The consolidation of TCO raised by R$ 276.3 million the figure regarding suppliers’ payments in 4Q03, which also explains part of the increase when compared to 4Q02.

Accounts receivable registered a balance of R$ 1,212.5 million, R$ 1,042.5 million and R$ 554.3 million on 12/31/2003, 09/30/2003 and 12/31/2002, respectively. The increase, when compared to 3Q03, was a result of the increase in receivables from billed services and from goods sold to dealers. Relative to 4Q02, there was an inclusion of R$386.4 million from TCO, as well as an expansion in customer base.

During the year ended on December 31, 2003, and taking into account TCO’s figures regarding the January-April period, R$ 755.3 million were invested in fixed assets, mainly in projects for the improvement and expansion of our service capacity, the selective implementation of the 1xRTT network overlaid on TCO’s TDMA network, the upgrading of GT’s network to 1xRTT, the offer of new services, the development of its own backbone and systems integration, as well as consulting. This amount represents 11.4% of the net operating revenue.

The positive Operating Cash Flow demonstrates that TCP generates enough resources with its operation to afford its capital expenditure program. As the last quarter of the year concentrated a large part of the year’s capital expenditure, the quarter’s operating cash flow registered a reduction. However, comparing the figures for 2003 and 2002, operating cash flow grew 16.5%, including 12 months of TCO and GT. TCO’s consolidation added R$ 534.8 million to TCP’s Operating Cash Flow for 2003, which was R$ 80.5 million in the last quarter.

On February 06, 2004, Anatel approved a 6.99% cap for readjustment of the Basic Plan basket rate in all TCP operators. The company should analyze market conditions and, if it chooses to pass on the raise, the new rates should be published in its operators’ corporate and major newsletters. Additionally, Anatel approved a VU-M (interconnection rate) readjustment of 8.316% for TC (except in the Ribeirão Preto area), of 9.244% for TC - Ribeirão Preto metropolitan area, of 9.679% for GT and, for TCO, of 6.765% in its operators in the states of Amapá, Amazonas, Maranhão, Pará and Roraima, and of 8.423% in its operators in the Federal District and in the states of Goiás, Tocantins, Mato Grosso, Mato Grosso do Sul, Rondônia and Acre. These raises were published in the Brazilian Federal Official Gazette (Diário Oficial da União) on February 09, 2004. The new VU-M values are presented on the chart below:

Financial Terms:

EBIT – Operating result before interest and taxes.
EBITDA – Operating result before interest, taxes, depreciation and amortization.
EBITDA Margin = EBITDA / Net Operating Revenue.
CAPEX – Capital Expenditure
Operating Cash Flow = Accrued EBITDA – Accrued CAPEX.
Subsidy = (net revenue from goods – cost of goods sold + discounts given by suppliers) / gross additions
PDD – Provision for doubtful debtors. A concept in accounting that measures the provision made for accounts receivable due for more than 90 days.
Net debt = Gross debt – cash – financial investments – securities – active derivative transactions + passive derivative transactions
Debt / EBITDA – Index which evaluates the Company’s ability to pay its debt with the generation of operating cash in a one-year period.
NE – Net Equity
Net debt/ (Net debt + NE) – Index which measures the Company’s financial leverage.
Current Capital (Short-term capital) = Current assets – Current liabilities
Working capital = Current Capital – Net Debt

Technology and Services

CDMA – (Code Division Multiple Access) – Aerial interface technology for cellular networks based on spectral spreading of the radio signal and channel division in the code domain.
1XRTT – (1x Radio Transmission Technology) – 2.5G technology, an evolution of CDMA technology which represents one of the steps towards 3G technology and allows data transmission at up to 144 kbps and the offer of a scope of new services.
ZAP – A service which allows quick wireless access to the Internet through a computer, notebook or palmtop, using the CDMA 1XRTT technology.
WAP –Wireless Application Protocol is an open and standardized protocol started in 1997 which allows access to Internet servers through specific equipment, a WAP Gateway at the carrier, and WAP browsers in customers’ handsets. WAP supports a specific language (WML) and specific applications ( WML script).
SMS – Short Message Service – Short text message service for cellular handsets, allowing customers to send and receive alphanumerical messages.

Operating indicators:

Customers – Number of wireless lines in service.
Gross additions – Total of new customers acquired in the period.
Net additions = Gross Additions – Reduction in number of customers
Market share = Company’s total number of customers / number of customers in its operating area
Net additions market share: participation of estimated net additions in the operating area.
Market penetration = Company’s total number of customers + estimated number of customers of competitors) / each 100 inhabitants in the Company’s operating area
Churn rate – Percentage measuring the number of inactive customers during a specific time period, relative to the average number of active customers in the same period = number of customers lost in the period / ((customers at the beginning of the period + customers at the end of the period) / 2)
ARPU (Average Revenue per User) – net revenue from services per month / monthly average of customers in the period
Blended ARPU – ARPU of the total customer base (postpaid + postpaid)
Postpaid ARPU – ARPU of postpaid service users
Prepaid ARPU – ARPU of prepaid service users
MOU (minutes of use) – monthly average, in minutes, of traffic per customer = (Total number of outgoing minutes + incoming minutes) / monthly average of customers in the period
Postpaid MOU – MOU of postpaid service users
Pretpaid MOU – MOU of prepaid service users
SAC – cost of acquisition per customer = (70% marketing expenses + costs of the distribution network + handset subsidies) / gross additions.
Productivity = number of customers / permanent employees