Slide 1: Balance sheets as of December 31, 2009 and 2008
Telecomunicagées de Sao Paulo S.A. - Telesp Balance sheets As of December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) Company Consolidated Note 7008 2009 2008 Assets Current assets 6,436,128 7,048,276 6,491,595 Cash and cash equivalents
Slide 2: Financial statements (continued)
The accompanying notes are an integral part of these Financial Statements.
Slide 3: Financial statements (continued)
The accompanying notes are an integral part of these Financial Statements.
Slide 4: Financial statements (continued)
The accompanying notes are an integral part of these Financial Statements.
Slide 5: Financial statements (continued)
The accompanying notes are an integral part of these Financial Statements.
Slide 6: 1. Operations and background
The accompanying notes are an integral part of these Financial Statements. Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements For the years ended December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 1. Operatio
Slide 7: Finance lease product and accounts receivable
Subsidiary A.Telecom offers “Posto Informático”, a product that consists in the lease of IT equipment to small- and medium-sized companies for fixed installments received over the agreed term. Considering the related contractual conditions, the Company classified this product as “Finance Lease” in i
Slide 8: Finance lease notes
There are neither unsecured residual values that produce benefits to the lessor nor contingent payments recognized as revenues during the year.
Slide 9: 7.1 Deferred income and social contribution taxes
(*) Refers to credits on the acquisition of property, plant and equipment items, available for offset against VAT obligations in 48 months. 7.1. Deferred income and social contribution taxes The Company recognized deferred income and social contribution tax assets considering the existence of taxabl
Slide 10: Deferred taxes note
(a) The balance of R$265,435 as of December 31, 2008 refers to the tax credit resulting from TTP corporate restructuring, as mentioned in Note 2.c., which was reclassified to this caption from Intangibles (Note 13). This reclassification was made to improve presentation of the financial statements,
Slide 11: Inventories allowance
The allowance for reduction to recoverable value and obsolescence takes into account timely analyses carried out by the Company.
Slide 12: Other assets
(a) Refers to receivables from Barramar S.A., registered in Companhia AIX de Participações, net of allowance for losses. (b) Comprises commercial agreements with global service providers. These agreements represented as improvement in P&L of R$77,066 for fiscal year 2009.
Slide 13: Escrow deposits
The amounts presented above refer to escrow deposits for those cases in which an unfavorable outcome is considered possible or remote. Those deposits related to provisions are presented in Note 19.
Slide 14: 11. Investments
(*) Other investments are measured at fair value, as mentioned in Note 4.i. Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) For the years ended December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese
Slide 15: Investments in affiliates under equity method
Investments in affiliates accounted for under the equity method derive from TTP, which was merged by the Company, as mentioned in Note 2.c. Significant information on these affiliate companies, are as follows:
Slide 16: Equity in earnings of subsidiaries
Aliana Atlantica A Telecom Companhia AIX de Partcipagdes Companhia ACT de Partcinagdes Telefonica Data S.A TelefGnica Televisdo Participacdes S.A Telefonica Sistemas de Televisao S.A. STR Partcinacdes e Empreendimentos S.A Lemontree Participacdes S.A. Comercial Cabo TV Sao Paulo S.A, IVA Sul Parana
Slide 17: 12. Property, plant and equipment - net
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (in thousands of reais) (A free translation of the original report issued in Portuguese) 12. Property, plant and equipment - net Property, plant and equipment ‘Switching and transmiss
Slide 18: Property, plant and equipment notes
(a) Includes IT equipment contracts classified as finance lease in the amount of R$ 41,919. Information on amounts payable is stated in Note 20.
Slide 19: Goodwill notes
(a) Goodwill arising from the spin-off of Figueira, which was merged into the Company as a result of the merger of Telefônica Data Brasil Holding S.A. (TDBH) in 2006. (b) Goodwill arising the acquisition of control over Santo Genovese Participações Ltda. (controlling shareholder of Atrium Telecomuni
Slide 20: Other intangibles
other Intangibles Software Dustomer Portfolio (IP Network) ther rota average annual depreciation ates * Assets fly depreciated Company ECE) 20m Annual depreciation ‘Accumulated Net book Accumulated Net book rate % Cost depreciation __value Cost _depreciation_ value 20.00 2.533258 (1,880,253) 653,005
Slide 21: 13. Intangible assets, net
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (in thousands of reais) (A free translation of the original report issued in Portuguese) 13. Intangible assets, net (Continued) Consolidated 2008 2008 Other Intangibles Annual depreci
Slide 22: BNDES credit facility
On October 10, 2007, BNDES approved a credit facility capped at R$2,034,717 to fund Company investments, of which R$1,959,464 (principal amount) has already been released and the related investments have been duly proven and accepted by BNDES. This credit facility is intended for investments in good
Slide 23: Debentures
Debentures conditions were renegotiated on September 1, 2007, date of end of the first Remuneration period and beginning of the second Remuneration period. This period ends on the debentures maturity date; namely September 1, 2010. Debentures are entitled to interest yield, payable on a quarterly ba
Slide 24: Taxes payable and other notes
(a) Income and social contribution taxes payable are presented net of payments on an estimate basis. (b) The item ‘Legal liabilities’ accounts for amounts related to lawsuits in which the Company seeks noncollection of CIDE (Social Contribution Tax for Intervention in the Economic Order) on remittan
Slide 25: Dividends and interest on equity payable
Most of the interest on shareholders’ equity and total dividends payable to minority shareholders refer to available amounts declared, but not claimed yet.
Slide 26: 19. Reserves for contingencies, net
Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 19. Reserves for contingencies,net The Company, as an entity and also as the successor to the
Slide 27: Labor contingencies and reserves
(a) In the case lawsuits of civil and labor natures referring to cases considered similar and usual (massive), management has been using, as from the second quarter of 2009, estimates calculated based on the historical average of payments made in mass lawsuits to set up provision for contingencies.
Slide 28: Other liabilities and finance lease
(a) The total amount due for the concession renewal fee was paid in April 2009 (Note 1.c) (b) Amounts resulting from the auction of share fractions after the reverse spin-off process in 2005, and TDBH acquisition process in 2006. (c) Finance Lease: The Company has lease financing contracts for use o
Slide 29: 21. Shareholders' equity - Capital
Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 21. Shareholders’ equity (Continued) a) Capital (Continued) The Company is authorized to incre
Slide 30: 21. Dividends - mandatory minimum
Telecomunicacgées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 In thousands of reais) A free translation of the original report issued in Portuguese) 21. Shareholders’ equity (Continued) f) Dividends (Continued) Minimum mandatory dividends calcu
Slide 31: Proposed dividend distribution
The balance of unallocated net income for the year at December 31, 2009, in the amount of R$1,097,973, and the dividends and interest on shareholders’ equity prescribed in 2009 in the amount of R$153,673, totaling R$1,251,646 were classified as dividends payable according to management’s proposal di
Slide 32: Interest on shareholders' equity
(i) 10% higher than the amount attributable to each common share, pursuant to article 7 of the Company’s by-laws. g) Interest on shareholders’ equity As proposed by Management, in 2009 and 2008, interest on shareholders’ equity was credited to shareholders in accordance with article 9 of Law No. 9,2
Slide 33: Payment of dividends and interest on equity
Tax-exempt shareholders received interest on shareholders’ equity in full, not subject to withholding tax. Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in
Slide 34: 22. Net operating revenue
Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 22. Net operating revenue (Continued) (i) The group of accounts “Other”, under Gross operating
Slide 35: 23. Cost of goods and services
23. Cost of goods services Company Consoli 2005 2008 2009 Depreciation and amortization (2,061,954) (2,229,050) (2,255,338) (2,390,634) Personne! (157,996) (161.947) (186,651) (198,990) Organizational Restructuring Program : (21,403) = (21,403) Materials (28,156) (30507) (179,603) (132,023) Network
Slide 36: 24-25. Selling and G&A expenses
Telecomunicacgées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 In thousands of reais) A free translation of the original report issued in Portuguese) 24. Selling expenses Company Consolidated 2005, 2008, 2009 2008 Depreciation and amortization (
Slide 37: Other operating income and expenses
(a) Comprises commercial agreements with global service providers. These agreements represents an improvement in P&L of R$77,066 for fiscal year 2009. (b) In the case lawsuits of civil and labor natures referring to cases considered similar and usual (massive), management has been using, as from the
Slide 38: 29. Income and social contribution taxes
29. Income and social contribution taxes The Company recognizes income tax and social contribution monthly on the accrual basis and pays the taxes on an estimated basis, in accordance with the trial balance for suspension or reduction. The taxes calculated on income until the month of the financial
Slide 39: Deferred tax components
The components of deferred income tax and social contribution tax assets and liabilities on temporary differences are shown in Notes 7 and 16 respectively. Total consolidated current income tax and social contribution tax payable at December 31, 2009 amounts to R$779,714 (R$1,071,609 as of December
Slide 40: 30. Transactions with related parties
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (in thousands of reais) (A free translation of the original report issued in Portuguese) 30. Transactions with related parties ‘The principal balances with related parties are as foll
Slide 41: Related party receivables
Trade accounts receivable include receivables for telecommunications services. principally Vivo S.A., Atento Brasil S.A., Terra Networks Brasil S.A., Telefonica de Argentina S.A. and Telefónica de España S.A., particularly for long-distance services and Tiws Brasil Ltda, due the contract of renderin
Slide 42: Post-retirement benefit plans
(1) DB = Defined Benefit Plan; DC = Defined Contribution Plan; Hybrid = Plan that offers both DB- and DC-type benefits. Only assets and liabilities relating to these plans’ defined benefit portions will be disclosed in the reconciliations, in compliance with CVM Rule No. 371. Telesp individually spo
Slide 43: Multiemployer plan notes
(i) Refers to the proportional share of Telesp in the assets and liabilities of the PAMA and PBS-A multiemployer plans. (ii) Surplus was not recorded by the sponsors as assets in view of limitations imposed by the private pension management council.
Slide 44: Total expenses recognized in income
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 31. Post-retirement benefit plans (Continued) b) Total expenses recoanized in income Visio PAM
Slide 45: Change in net actuarial liabilities
c) Change in net actuarial liabilities (assets) Plan's liabiles (assets) on December 21.2007 Expenses in 2008 CContrbution of the Companies in 2008, (GainyLoss generated in the period ‘Surplus not recognized in the balance sheet Plan's liabilées (assets) on December 231.2008 Expenses in 2008 Contrib
Slide 46: Change in actuarial liabilities
Telecomunicacgées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 In thousands of reais) A free translation of the original report issued in Portuguese) 21.2000 31. Post-retirement benefit plans (Continued) ) Change in actuarial liabilities Visio T
Slide 47: Actuarial assumptions
In addition to the above-mentioned assumptions, other assumptions common to all plans were adopted, as follows: • Actuarial liability discount-to-present-value rate: 9,83%; • Inflation rate: 4,60%; • Capacity factor for salaries and benefits: 98%; • Turnover: 0.15/(years of service +1), zero from ag
Slide 48: Actuarial assumptions and 32. Insurance
Note: All rates are nominal, except for medical services claim frequencies. In addition to the above-mentioned assumptions, other assumptions common to all plans were adopted, as follows: • Actuarial liability discount-to-present-value rate: 10.14%; • Inflation rate: 4,90%; • Capacity factor for sal
Slide 49: 33. Financial instruments
33. Financial instruments The table below shows a breakdown of financial assets and liabilities as of December 31, 2009.
Slide 50: Financial instruments valuation
Telecomunicações de São Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A free translation of the original report issued in Portuguese) 33. Financial instruments (Continued) The Company and its subsidiaries made a valuation of the
Slide 51: Derivative swap operations
a) Swaps of foreign currency x CDI (R$23,010) – swap operations with several maturities until 2014, with the objective of hedging foreign exchange in loan operations with these characteristics (debt fair value of R$ 23,007). b) Swap CDI + 0.35% x CDI percentage swap (derivative fair value of R$1,514
Slide 52: Hedge accounting
For reporting purposes, the Company adopted the hedge accounting method for all of its foreign currency swaps x CDI. Under this methodology, both the derivative and the hedged item are measured at fair value. The derivatives associated with the debentures were not considered pursuant to this methodo
Slide 53: Sensitivity analysis - net exposure
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the financial statements (Continued) December 31, 2009 and 2008 (In thousands of reais) (A ree translation of the original report issued in Portuguese) 33. Financial instruments (Continued) ‘Sensitivity analysis — Net exposure 25% 50% Operation Ri
Slide 54: Average lines in service
Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese) 4. Operational performance (Continued) 4.3 Business performance (Continued) AVERAGE LINES IN SERVICE In thousands
Slide 55: 4.4 Perspectives
4.4 Perspectives The Company is optimistic for 2010 and expects to recover the growth rates of the years prior to the 2009 economic crisis. The telecommunications sector was less impacted by the downturn in the local market than other sectors, and presents good growth perspectives in 2010. Furthermo
Slide 56: 5.4 Indebtedness and financial income (expenses)
(*) Refer to statements of operations. Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese) 5. Financial performance (Continued) 5.4 Indebtedness and financial income (expenses)
Slide 57: Management report (Continued)
Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese)
Slide 58: 6.1 Share position
6.1 Share position In 2009, the composition of shares of the controlling group did not undergo changes. At the end of 2009, Telefónica Internacional S.A. – TISA and SP Telecomunicações Participações Ltda. hold 34.87% of the common shares and 80.53% of the preferred shares, and 50.71% of the common s
Slide 59: 6.2 Corporate restructuring and 7. Capital markets
Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese) 6. Corporate structure (Continued) 6.2 Corporate restructuring At the 30 th Special Shareholders’ Meeting held on December 30, 2009, the partial spin-off of A.Te
Slide 60: Share and ADR price performance
The TLPP3 and TLPP4 shares closed the year priced at R$37.96 and R$43.54, presenting, respectively an annual performance of 2.6% and -4.7%, compared to Bovespa Index’s performance of 82.7%. ADRs closed the year priced at US$25.16, presenting an annual performance of 29.0%, compared to the Dow Jones
Slide 61: 8. Shareholder payment policy
8. Shareholder payment policy In accordance to the Company’s Bylaws, the Company shall distribute dividends of ate least 25% of adjusted net income for the year, and preferred shareholders are entitled to dividends 10% higher than those attributed to common shares. In 2009, the Company presented a d
Slide 62: 9. Corporate governance
(*) To be Determined 9. Corporate governance With the objective of promoting good corporate governance, enhancing the quality of information disclosures and reducing investors’ uncertainties, the Company has established internal rules and policies that provide clear and objective information. The Co
Slide 63: 10.5 Employee distribution by length of service
Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese) 10. Human resources (Continued) 10.5 Profile of Employees (Continued) Distribution by length of service
Slide 64: Distribution by length of service
years 212% 168% 18% 67% 65% 78% pois Upto1 O16 4 7m 8m Mm 2 Over (02 years 00 years 10 years 1Syears 2 years 20 years 20years 30 years
Slide 65: Employee distribution by level of education
Telecomunicações de São Paulo S.A. - Telesp Management report (Continued) (A free translation of the original report issued in Portuguese) 10. Human resources (Continued) 10.5 Profile of Employees (Continued) Distribution by level of education
Slide 66: 11. Social responsibility
11. Social responsibility The Corporate Social Responsibility of the Telefônica Group is integrated with its business objectives and operations, and considers the positive and negative economic, social and environmental impacts that could result from such activities. The strategy can be summarized i
Slide 67: Corporate Responsibility Strategy of the Telefônica Group
Corporate Responsibility Strategy of the Telefônica Group Among the Corporate Social Responsibility projects carried out by Telefônica in 2009, we point out the “ Gerações Interativas” (Interactive Generations), whose objective is to promote the responsible use of Information and Communication Techn