Slide 1: Quarterly Review - Quarter ended March 31, 2011
Quarterly Review Telecomunicagées de Sao Paulo S.A. — Telesp Quarter ended March 31, 2011 ‘With Independent Auditors’ Review Report on Quarterly Information (A free transiation of the original issued in Portuguese)
Slide 2: Contents
Telecomunicagées de Sao Paulo S.A. - Telesp Quarterly Information March 31, 2011 Contents Independent auditors’ review report on quarterly information ... Balance sheets... Statements of income. : - Statements of comprehensive income. esses Statements of changes in shareholders” equity... Statements
Slide 3: Introduction (auditors' review report)
Introduction We have reviewed the individual and consolidated interim accounting information of Telecomunicações de São Paulo S.A. – TELESP and subsidiaries, contained in the Quarterly Information Form (ITR) for the quarter ended March 31, 2011, which comprise the balance sheet and the related state
Slide 4: Sao Paulo, May 10, 2011
Sao Paulo, May 10, 2011 ERNST & YOUNG TERCO Auditores Independentes S.S. CRC-2SP015199/0-6 Alexandre Hoeppers Accountant CRC - SC021011/0-3-T-PR-S-SP
Slide 5: Balance sheets
Telecomunicagées de Sao Paulo S.A. - Telesp Balance sheets March 31, 2011 and December 31, 2010 (In thousands of reais) (A free translation of the original issued in Portuguese) Company Consolidated Assets Note Losaizo11 _12aw010_— “oaraizo11 420172080 Current Assets 539,245 __4374.523 5.854017. _ 5
Slide 6: Balance sheets (continued)
The accompanying notes are an integral part of this Quarterly Information.
Slide 7: Statements of income
The accompanying notes are an integral part of this Quarterly Information.
Slide 8: Statements of comprehensive income
The accompanying notes are an integral part of this Quarterly Information.
Slide 9: Statements of changes in shareholders' equity
The accompanying notes are an integral part of this Quarterly Information.
Slide 10: Statements of cash flows
The accompanying notes are an integral part of this Quarterly Information.
Slide 11: Statements of added value
The accompanying notes are an integral part of this Quarterly Information.
Slide 12: Short-term investments
Short-term investments are basically CDB (Bank Deposits Certificate), indexed under CDI (Inter-bank Deposits Certificate) rate variation, which are readily liquid and maintained with reputable financial institutions.
Slide 13: 5. Trade accounts receivable, net
5. Trade accounts receivable, net Compan Consolidated Tsoi} _DecOIO “Ward0i1 _Decl2010 Billed amounts ngt03t3 1yeesst 2085440 2,042,760, ‘Accrued unbiled amounts 4.211.305 ti1e8.012 1.373.939 __1.336.444 Gross accounts receivable 3az1708 2.06343 —s.as0.s7e 3.370.201 ‘Allowance for doubtful accounts
Slide 14: A.Telecom finance lease product
Subsidiary A.Telecom offers “Posto Informático”, a product that consists of 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”. The
Slide 15: Finance lease receivables
Present value of minimum payments receivable Unrealized financial income Gross investment in finance lease receivables Allowance for doubtful accounts Financial Leases receivable, net Current Non-current Mar/2014 Deci2010 149,471 112,362 8,904 23213 68,375 135,565 (64,358) (18,102) aaa ae T4176 45,0
Slide 16: Residual values and contingent payments
There are neither unsecured residual values that produce benefits to the lessor nor contingent payments recognized as revenues during the year.
Slide 17: Allowance for inventory obsolescence
The allowance for reduction to recoverable value and obsolescence takes into account timely analyses carried out by the Company.
Slide 18: Recoverable taxes and deferred taxes
(*) Refers to credits on the acquisition of property, plant and equipment items, available for offset against VAT obligations in 48 months. 7.2 Deferred taxes The Company recognized deferred income and social contribution tax assets considering the existence of taxable income in the last five fiscal
Slide 19: Tax benefits from corporate reorganizations
(*) Relate to tax benefits arising from corporate reorganizations represented by goodwill amounts based on future expected profitability to be used in compliance with the limits established by tax legislation.
Slide 20: Receivables from Barramar S.A.
a) Refers to receivables from Barramar S.A., registered in Companhia AIX de Participações, net of allowance for losses.
Slide 21: Escrow deposits
See note 17. Provisions for further details of the matters that gave rise to these deposits.
Slide 22: 10. Investments
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the quarterty information (Continued) ‘Three months period ended March 31, 2011 (In thousands of reais) (A ree translation of the original report issued in Portuguese) 10. Investments Wholly-owned subsidiary () Alianga Atintioa Holding 8.V. A. Tel
Slide 23: Subsidiaries' financial data
Current assets Non-currant assets Current abies Non-current lability Shareholders’ Equity Revenue Expenses Netincome forthe petiodiyear Mari20t4 eo!2010 Ca Ca ‘Alianga ACT _cia aK ACT Cis AIK Atlantica e 502 0,758 7 4920 87.488 - mos = aans - raa4e 3.180 2 4.21, 364 1 B77 207 : 1.907 : - 2830 - 2 09
Slide 24: Provision for obsolescence of materials
(a) The Company and its subsidiaries recognized a provision for possible obsolescence of materials used for assets maintenance based on historical and expected future use. .
Slide 25: Property, plant and equipment notes
• Transmission equipment: acquisition of aerial cables. • Terminal equipment/modem: mainly modems and equipment for installation of external and internal lines for general public.
Slide 26: 12. Intangible assets, net
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the quarterly information (Continued) Three months period ended March 31, 2011 (in thousands of reais) (A ree translation of the original report issued in Portuguese) 12. Intangible assets, net (Continued) Company Fanaa Wat book Wet book depreciat
Slide 27: Intangible assets cost and amortization
mart Softwares ‘Customer Portfolio. (Network IP) others Total Deoi2010 Softwares ‘Customer Portfolio. (Network IP) Others Totat coer ‘Consolidated ‘Accumulated Net book ‘Accumulated Net book Cost ‘amortization value cost ‘amortization value 2,901,408 (2210033) 981.556 3.090.875 2384,112) 718.563 725
Slide 28: 13. Payroll and related accruals
13. Payroll and related accruals Company Consolidated Mara0it_ _Deci010_ “Mar011___Deci2010 Salaries and fees 27453 24,082 28,505 25,683 Payroll charges 110662 97,752 113.897 401,021 Employee profit sharing 27400 103,243 28,101 105,841 (Other indemnities 74200 74,800 74,800 74,800 Total TOs _ ORT 25
Slide 29: Taxes payable
(a) Income and social contribution taxes payable are presented net of payments on an estimated basis.
Slide 30: Loans and financing - BNDES
BNDES: In 2007 a credit facility to the Company was approved to finance investments in services and products produced domestically. All of these resources have been drawn and their investments are proven and accepted by BNDES. The TJLP is a specific referential rate not comparable with other market-
Slide 31: Consolidated maturities schedule
Consolidated maturities schedule: Year ‘Amounts 2012 308,276 2013 412,459 2014 410,015 2015 169,911 Total
Slide 32: Dividends payable and 17. Provisions
Interest on shareholders’ equity and dividends payable to minority shareholders refer to unpaid declared amounts and to amounts not claimed yet. 17. Provisions The Company, as an entity and also as the successor to the merged companies, and its subsidiaries are involved in labor, tax and civil lawsu
Slide 33: 17.1. Labor contingencies and provisions
17.1. Labor contingencies and provisions
Slide 34: Main claims
Main claims a) Suits for additional shares. These refer to suits involving the Company and addressing the right to receive additional shares calculated with regard to network expansion plans after 1996. These suits are at various stages: first stage, Supreme Court and Federal Superior Court of Appea
Slide 35: Other liabilities notes
(a) Amounts resulting from the auction of share fractions after the reverse spin-off process in 2005, and TDBH acquisition process in 2006. (b) Refer mainly to deferral of revenue from activation fee and calling cards. (c) The Company has finance lease contracts for the use of IT equipment.
Slide 36: Future payments of finance lease
Future payments of the gross finance lease Unrealized financial expense Present value of minimum, payments due Current Noncurrent Mari2011__Deci2010 37870 42,194 (6,094) 7344 3776 34,853
Slide 37: Commitments and guarantees - rentals
There are neither unsecured residual values that produce benefits to the lessor nor contingent payments recognized as revenues during the year. Commitments And Guarantees Rentals The Company rents equipment and facilities through several operating agreements maturing on different dates. The monthly
Slide 38: Shareholders' equity - capital in shares
Mar/2014. Deci2010 ‘Total Capital in shares ‘Common shares 168,819,870 168,819,870 Preferred shares 337,417,402 337,417,402 Total 506,237,272 506,237,272 ‘Treasury shares ‘Common shares (210,573) (210,579) Preferred shares (185,213) (185,213) Total (395,792) (35,792) Outstanding shares ‘Common share
Slide 39: Net operating revenue and operating expenses
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the quarterty information (Continued) Three months period ended March 31, 2011 (In thousands of reais) (A tree translation of the original report issued in Portuguese) 20. Net operating revenue Company Consolidated Mari201t Mari2010__ “Mari2011_—_
Slide 40: Other operating income and financial income
22. Other operating income (expenses), Company Fines on telecommuncaion services 574-2507. Renal ofinfastucture eet 10.278 Donaion and sponsorships (e086) (10.783) Provision forcivi contingencies, net 21.718) (28.028) Net profit on disposal of assets eos crtaaty Other incomefexpenses aoe 107794) oe
Slide 41: Deferred income tax components
The components of deferred income and social contribution tax assets and liabilities on temporary differences are shown in note 7.2.
Slide 42: Earnings per share
The table below shows, the calculation of earnings per share: Net income attributable to the shareholders: ‘Common shares Preferred shares Numbers of shares: Weighted average common shares outstanding during the year Weighted average preferred shares outstanding during the year Basic and diluted ear
Slide 43: 26. Transactions with related parties
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the quarterly information (Continued) Three months period ended March 31, 2011 (In thousands of reais) (A tree translation of the original report issued in Portuguese) 26. Transactions with related parties The principal balances with related parti
Slide 44: Financial assets and liabilities
Financial assets Curent assets (Cash and cash equivalents irate 4) Dervatves ‘Noncurrent assess Interests mother companies ‘mounts inked ote Natonal “Treasury Secuties (ote 8) Total financial assets Financial abilities Curren liabites {are and inancrg (note 15) Derivatives ‘Noneurren abies tans and
Slide 45: Market risks
The Company is exposed to several market risks as a result of its commercial operations, debts obtained to finance its activities and debt-related financial instruments. The principal market risk factors that affect the Company’s business are detailed below: a) Exchange rate risk This risk arises fr
Slide 46: Derivative swap contracts
Accumulated effect in Notional Value Fi value zou acai Description Index, Masti _Deo010, _maritt_ _peooto, receivable, _pavable Swap Contacts Assets Ersion ‘Sine Times? __19008 _eassoa __17.300 - - Bes uso ~ 2.85 ~ 2854 : Vetorantim Uso 10452 tos tage : : sradesco uso 148 ~ tees . 2 = sradesco cur t
Slide 47: Swap operations
a) Swaps of foreign currency (EUR and dollar) x CDI (R$695,304) – swap operations with several maturities until 2014, with the objective of hedging foreign exchange variation for loans (debt fair value of R$ 693,422). b) Swap CDI percentage x foreign currency (Euro and Dollar) (R$22,400) - swap cont
Slide 48: Swap contracts maturity
‘Swap contracts Maturity Amount payable! receivable at 2014 2012 _2019__2014 thereafter ‘120% Foreign Currency x CDI 810) _ e269 __ (7.60 527 sar ‘VOTORANTIM (4.505) (888) (7.688) (3527) (24,086) BRADESCO @) - - - ey SAFRA @2m) - - - eam HSBC (11.928) - : - (11,928) BNP PARIBAS, e781) - : - 6701) BA
Slide 49: Sensitivity analysis - net exposure
Telecomunicagées de Sao Paulo S.A. - Telesp Notes to the quarterly information (Continued) Three months period ended March 31, 2011 (In thousands of reais) (A free translation of the original report issued in Portuguese) 29. Financial instruments (Continued) ‘Sensitivity analysis — Net exposure _— s
Slide 50: Depreciation and interconnection notes
(a) It includes depreciation and amortization expenses for R$1,084,368. (b) It includes mainly interconnection revenues and costs. .
Slide 51: Accountant signature
Telecomunicacgées de Sao Paulo S.A. - Telesp Notes to the quarterly information (Continued) Three months period ended March 31, 2011 In thousands of reais) A free translation of the original report issued in Portuguese) Milton Shigueo Takarada Accountant CRC - 18P138816/0-8
Slide 52: Management comments on consolidated performance
1. Accumulated Net Operating Revenue until March 31, 2011 amounted to R$3,966.0 million, which, when compared to R$3,893.7 million recorded in the same prior-year period, represented an increase of R$72,3 million or 1.9%. Main increases occurred in data transmission revenues; revenue from national l