VIVO, THE LARGEST WIRELESS GROUP IN SOUTH AMERICA, ANNOUNCES THIRD QUARTER 2003 CONSOLIDATED RESULTS OF TELE SUDESTE CELULAR PARTICIPAÇÕES S.A. (“TSD”)

In 2Q03 expenses with the PIS and COFINS taxes related to financial revenues were reclassified from Operating Expenses to Financial Expenses. For comparison purposes, this effect was also incorporated in the previous quarters results.

For comparison purposes, the financial statements figures for the quarters ended in June 30, 2003 and September 30 2002 have been reclassified when applicable.

As of July 06, 2003, the operators implemented the Long Distance Carrier Selection Code (Código de Seleção de Prestadora – “CSP”), used by clients to choose their carrier for domestic long distance services (VC2 and VC3), as well as for international cellular calls, as required by Personal Mobile Service (Serviço Móvel Pessoal – “SMP”) rules. The “VIVO” operators no longer receive revenues from VC2 or VC3, now receiving interconnection revenues from the use of their networks in those calls.

Additionally, the Bill & Keep rules was adopted for interconnection charges in 3T03. The rules establish that payments between the companies of the SMP for traffic in the same registration area only occur when the traffic exceeds 55%.

VIVO

On April 14, 2003, the Joint Venture between Telefónica Móviles and Portugal Telecom unified the operations of Tele Sudeste Celular Participações S.A. with those of Telesp Celular Participações S.A., Celular CRT Participações S.A., Tele Leste Celular Participações S.A. and Tele Centro Oeste Celular Participações S.A. under the brand name “VIVO”.

Targeting the corporate clients, the “Vivo Empresas” brand was launched, linking this key segment with the Company‘s business strategy.

“VIVO” was considered Top of Mind in most of the regions in which it operates, reflecting the successful consolidation of its brand. Additionally, the brand was awarded first place among the most admired brand mark in the wireless telecommunications sector by Carta Capital magazine.

HIGHLIGHTS

• In 3Q03, TSD‘s net income increased by 84.0% compared with 2Q03.
  
  
• A restrictive cost control policy led to a 11.3% higher EBITDA in 3Q03 compared to 2Q03. The EBITDA was 0.7% higher EBITDA when compared to 3Q02. Excluding the result generated by handset sales, EBITDA would be R$ 205.3 million and its margin would be 51.5%.
  
  
• The bad debt rate reached 1.4% of gross revenues, a 2.1 percentual points below the 3Q02‘s figure.
  
  
• Financial results in 3Q03 were positive by R$9.4 million.
  
  
• Its positive net cash position demonstrates the Company‘s financial flexibility. TSD‘s working capital was positive by R$134.7 million, registering a 47.4% increase compared to 2Q03.
  
  
• The increase in operating cash flow shows that TSD generates enough cash from its operations to make its investment program operational.
  
  
• The increase in productivity was 5.0% compared to 2Q03 and 18.0% compared to 3Q02.
  
  

HIGHLIGHTS

• TSD has maintained stable growth of its client base, reaching 3.483 million at the end of 3Q03. The Company‘s intense commercial activity was reflected in a net addition 8.9% higher than 2Q03
  
  
• The campaigns conducted by “VIVO” for promotion, client retention and client loyalty have maintained TSD as a leading company in this competitive scenario, where four carriers operate.
  
  
• In this last quarter, TSD expanded its 1XRTT coverage to the northern part of the capital and the downtown area of the city of Niterói, Icaraí and São Gonçalo.
  
  
• The metropolitan area of the city of Rio de Janeiro is already served by 1xRTT technology, from the Galeão airport to Recreio dos Bandeirantes, and so is the petrochemical region in the municipality of Macaé.
  
  

Client Base

• The Company‘s client base obtained an increase of 5.7% in 3Q03 compared with the same quarter of the previous year, while the number of post-paid clients grew by 10.9%.
  
  
• In 3Q03, net user additions were 8.9% higher than net additions in 2Q03, reaching a total of 61 thousand clients.
  
  
• At the end of 3Q03, TSD had a handset digitization rate of 97.3%. The number of analog handsets decreased by 49.2% compared with 3Q02. TSD uses CDMA and 1xRTT digital technologies in its mobile telephone services.
  
  

Average Net Revenue per User

ARPU (average net revenue per user) was greatly impacted by the implementation of Bill & Keep and CSP. TSD‘s postpaid client has remained constant when compared with 2Q03.

Minutes of Use per User

The blended average minutes of use per user increased 3.4% compared with the last quarter. MOU indicators showed improvement, especially regarding traffic within the Company‘s network, which is not reflected in the ARPU due to its lower unit value.

Mobile Penetration

The estimated rate for mobile telephone penetration reached 48.1 per 100 inhabitants in the state of Rio de Janeiro and 20.6 per 100 inhabitants in the state of Espírito Santo. The Company believes that there is room for the growth of mobile telephone services, considering their mobility advantage and the new additional services offered.

Data

In 3Q03, Tele Sudeste Celular maintained its focus on data transmission services and implemented a number of publicity campaigns, with special attention to SMS and WAP messaging services. Additionally, the Company has focused on the development of applications through the increase in the number of existing partners, offering clients a wider range of usage options. Services such as Chat Wap, Email, Cupido, Quiz and Tons Musicais have been growing within the data revenues and multiplying the functionalities of both SMS and Wap.

The Group “Vivo” has brought to Brazil the “Vivo ao Vivo” service in which technology all services are visually represented by icons on the handset screen and the user can access any one of the services with only a click.

Human Resources

The number of effective employees has decreased due to the synergies obtained with the unification of the structures of “Vivo” operators. The increase in productivity, shown in the number of clients per effective employees, was 5.0% compared to 2Q03 and 18.0% compared to 3Q02.

Net Operating Revenue

TSD‘s Net Operating Revenue decreased by 0.5% in 3Q03 compared with the same period of the previous year and 4.5% compared to 2Q03, due mainly to a retraction in the net revenue from services, which represents approximately 90% of the total net revenue.

Net Revenue from Services

Net revenues from services fell by 1.2% compared to 3Q02 and by 5.0% compared to 2Q03. Gross interconnection revenues were affected by the new Bill & Keep rules, a 5.3% decrease when compared with 2Q03. The negative impact of the implementation of the CSP and the Bill & Keep rules was approximately 6% of the net revenue from services.

Other net revenues from services presented significant growth, increasing by 147.0% compared with 2Q03 and by 226.0% compared with 3Q02, including revenues from data. Revenues from data grew by 98.7% compared to 2Q03.

Personnel Costs

As a result of the synergies obtained within the organizational structure and in the workforce, and of the Company‘s increase in productivity, TSD reduced its personnel costs in 3Q03 by 3.2% compared with 2Q03, and increased the same costs by 3.4% compared with 3Q02 due to the average 4% increase in salaries granted in the December 2002 collective agreement.

Cost of Services

As revenues, costs were also influenced by the adoption of the CSP and Bill & Keep rules. Rendered The cost of services rendered decreased by 14.6% compared to 3Q02 and by 25.0% compared to 2Q03, and was largely impacted by the 29.3% reduction in interconnection costs compared with 3Q02 and by the 45.8% reduction compared with 2Q03. The cost of connection means also fell in relation to 2Q03 due to the implementation of the Company‘s own backbone.

Cost of Goods

Sold There was a 2.0% increase in the Cost of Goods Sold by TSD in 3Q03, compared with 2Q03.

Commercial Expense

Compared with the previous quarter, commercial expenses increased due to an increase in third party services resulted from the change in the account of outsourced logistics services that used to be recorded as general and administrative expenses and began to be registered as commercial services and was offset by the launch of the “VIVO” brand in 2Q03.

Bad Debt

The bad debt rate reached 1.4% of the gross operating revenue, a 2.1 p.p. reduction compared to 3Q02. Bad debt has remained low due to the constant efforts to maintain the quality of the post-paid client base, and due to the credit control strategy for retailers and corporate clients.

EBITDA

In 3Q03, the Company‘s cost-reduction policy resulted in an 11.3% increase in EBITDA compared to 2Q03. The EBITDA for TSD reached R$ 172.3 million and its EBITDA margin in the period was 37.9%. However, the effect of revenues from handsets sold, EBITDA would be R$ 205.3 million and its margin would be 51.5%.

Depreciation

Total expenses with depreciation and amortization were R$ 107.5 million at the end of 3Q03. Depreciation is calculated using the linear method, which considers the useful life of goods.

Financial Results

The financial result in 3Q03 was positive by R$9.4 million, against financial expenses of R$12.6 million registered in 2Q03, due to the reduction in derivative losses.

Net Profit

TSD‘s Net Income in the quarter was R$ 44.7 million, representing a 5.1% increase compared to 3Q02. Net Income in 3Q03 represented a 84.0% improvement compared with the results obtained in 2Q03.

Net Debt

TSD‘s financial structure shown a continuous improvement, with a constant reduction of its net debt. The Company‘s R$ 335.5 million at the end of 3Q03, caused by cash generation and by a decrease in capital investments, resulted in a positive net cash position, which constituted evidence of TSD‘s financial flexibility.

On September 30, 2003, TSD‘s total debt was R$ 301.5 million (R$301.9 million in June 30, 2003) of which 100% was denominated in U.S. dollars and was entirely protected by derivative transactions at the end of 3Q03. This indebtedness was compensated by the resources available in cash and by financial investments (R$ 335.5 million), as well as by derivatives assets and liabilities (R$ 5.6 million in liabilities), resulting in net cash position of R$ 28.4 million.

The company‘s working capital was positive by R$134.7 million, representing a 47.4% increase compared to 2Q03.

The details of TSD‘s consolidated gross debt and of its net debt are presented below:

Investment

During the nine months ended on September 30, 2003, R$ 149.0 million were invested mostly to offer new services and to develop our own backbone.

Corporate Campaigns and Events

• Vivo sponsored the third edition of Fashion Rio, a fashion event that takes place in Rio de Janeiro, and launched the Samsung Twist handset during the event.
  
  
• The Company‘s collaborators donated winter clothes and other pieces of clothing to charity organizations.
  
  
• The Company supported the McDia Feliz event for children with cancer and maintained stands for advance sales of Big Mac sandwiches, as well as other Ronald Mc Donald House products.
  
  
• The Company conducted a book donation campaign among its collaborators.
  
  
• The carrier operating in the state of Espírito Santo was first place in the Brand Recall Survey by the Futura Research Institute for the A Gazeta newspaper, and received a prize from Target Magazine because its billboard and newspaper ads achieved first place in public preference, in a survey conducted by Flexconsult.