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TELEFONICA BRASIL S.A. 6-K 2012
vivdf1q12_6k.htm - Generated by SEC Publisher for SEC Filing

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of June, 2012

 

Commission File Number: 001-14475

 

 


 


TELEFÔNICA BRASIL S.A.

(Exact name of registrant as specified in its charter)

 

TELEFONICA BRAZIL S.A.  

(Translation of registrant’s name into English)

 

Rua Martiniano de Carvalho, 851 – 21o andar

São Paulo, S.P.

Federative Republic of Brazil

(Address of principal executive office)

 


 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

 

Form 40-F

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes

 

 

No

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes

 

 

No

 

 

 

 

 
 

 

 

Quarterly Review

 

Telefônica Brasil S.A.

 

Quarter ended March 31, 2012  
With Independent Auditors’ Review Report on Quartely Information

(A free translation of the original issued in Portuguese)

 

 

 


 
 

 

 

Telefônica Brasil S.A.

Quarterly Information

March 31, 2012

Contents

 

Independent auditors’ review report on quarterly information 1
Balance sheets 4
Statements of income 6
Statements of comprehensive income 7
Statements of changes in shareholders´ equity 8
Statements of cash flows 9
Statements of added value 10
Notes to the quarterly information 11
Management comments on consolidated performance 95

 

 

 

 


 
 

REPORT OF QUARTERLY INFORMATION REVIEW

(A free translation of the original report issued in Portuguese)

 

To the Shareholders, Board Members and Directors of

TELEFÔNICA BRASIL S.A.

São Paulo - SP

 

 

Introduction

 

 

We have reviewed the individual and consolidated interim accounting information of TELEFÔNICA BRASIL S.A. and subsidiaries, contained in the ITR (Quarterly Information Form), referring to the quarter ended on March 31, 2012, which comprises the balance sheet and related statements of income, of comprehensive income, of changes in shareholders’ equity and of cash flows for the three-month period then ended, including the notes thereto.

 

 

The management is responsible for the preparation of the individual interim accounting information according to CPC Technical Pronouncement CPC 21 – Interim Statement and interim consolidated accounting information according to CPC 21 and international standard IAS 34 – Interim Financial Reporting, issued by International Accounting Standards Board – IASB, as well as for the presentation of such information according to standards issued by CVM (Brazilian SEC), applicable to the preparation of Quarterly Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review.

 

 

Scope of review

 

 

We conducted our review in accordance with the Brazilian and international standards of review of interim information (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade e ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of inquiries, mainly to those responsible for financial and accounting matters, and the application of analytical procedures and other review procedures.

 

1

 


 
 

The scope of a review is significantly less in scope than an audit and, consequently, it did not allow us to obtain assurance that we became aware of all significant matters which could be identified in an audit. Accordingly, we did not express an audit opinion.

 

Conclusion on individual interim information

 

 

Based on our review, we are not aware of any fact which makes us believe that the individual interim accounting information included in the aforesaid quarterly information was not prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of Quarterly Information (ITR) and presented in accordance with the Brazilian SEC (CVM) regulations.

 

 

Conclusion on consolidated interim information

 

 

Based on our review, we are not aware of any fact which makes us believe that the consolidated interim accounting information included in the aforesaid quarterly information was not prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of Quarterly Information (ITR) and presented in accordance with Brazilian SEC (CVM) regulations.

 

 

Other matters

 

 

Interim statement of value added

 

 

We have also reviewed the individual and consolidated statement of value added (SVA), referring to the three-month period ended March 31, 2012, the presentation of which in the interim information is required according to standards issued by CVM (Brazilian SEC), regulations applicable to the preparation of the Quarterly Information – ITR and considered as supplementary information by IFRS’s standards, which do not require the presentation of the SVA. These statements were submitted to the same review procedures previously described and, based on our review, we are not aware of any fact which could make us believe that they were not prepared, in all material aspects, in accordance with individual and consolidated interim accounting information taken as a whole.

 

 

2

 


 
 

Audit and review of comparative amounts of previous year

 

 

The Quarterly Information – ITR, mentioned in the first paragraph, includes accounting information corresponding to income, comprehensive income, changes in shareholders’ equity, cash flows and added value of the quarter ended March 31, 2011, obtained from the Quarterly Information – ITR from that period, and those from the balance sheet of December 31, 2011, obtained from the financial statements as of December 31, 2011, presented for comparison purposes. The review of the Quarterly Information – ITR of the quarter ended March 31, 2011 and the examination of the financial statements from the period ended December 31, 2011 were conducted under the responsibility of other independent auditors, who issued review and audit reports dated May 10, 2011 and February 14, 2012, respectively, with no changes.

 

 

 

São Paulo, May 07, 2012.

 

 

CRC Nº 2SP013002/O-3

 

 

 

Clóvis Ailton Madeira

CTCRC Nº 1SP106895/O-1 "S"

3

 


 
 

Telefônica Brasil S.A.

 

Balance sheets

March 31, 2012 and December 31, 2011

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

 

Note

Company

Consolidated

Assets

 

03/31/2012

 

12/31/2011

03/31/2012

12/31/2011

Current assets

 

4,705,057

 

4,775,480

12,087,646

11,810,118

Cash and cash equivalents

4

877,302

 

826,902

3,177,346

2,940,342

Trade accounts receivable, net

5

2,267,013

 

2,286,636

4,901,347

5,105,860

Inventories

6

36,994

 

31,836

434,722

471,721

Recoverable taxes

7.1

1,021,601

 

1,130,761

2,406,472

2,495,066

Escrow deposits

8

0

 

0

118,476

116,421

Derivatives

35

2

 

674

1,314

1,840

Prepaid expenses

9

51,802

 

37,705

493,567

255,056

Other

10

450,343

 

460,966

554,402

423,812

Noncurrent assets

 

50,756,679

 

50,269,267

53,301,295

53,679,855

Long-term portion of investments pledged as collateral

 

0

 

0

102,657

99,114

Trade accounts receivable, net

5

0

 

0

82,647

84,855

Recoverable taxes

7.1

591,949

 

787,852

810,330

1,014,959

Deferred taxes

7.2

0

 

0

1,264,446

1,428,878

Escrow deposits

8

2,932,170

 

2,815,964

3,629,222

3,400,244

Derivatives

35

29,067

 

35,142

196,443

225,935

Prepaid expenses

9

17,520

 

18,290

37,986

32,138

Other

10

100,370

 

109,221

137,110

148,293

Investments

11

21,079,182

 

20,245,883

40,764

37,835

Property, plant and equipment, net

12

9,603,319

 

9,691,517

17,098,166

17,153,920

Intangible assets, net

13

16,403,102

 

16,565,398

29,901,524

30,053,684

 

 

 

     

 

 

 

     

Total Assets

 

55,461,736

 

55,044,747

65,388,941

65,489,973

 

 

 

 

     

 

 

4

 


 
 

 

 

Note

 

Company

 

Consolidated

Liabilities and Shareholders’ Equity

   

03/31/2012

 

12/31/2011

 

03/31/2012

 

12/31/2011

                   

Current Liabilities

   

5,847,880

 

6,398,178

 

11,688,464  

 

12,740,263  

Payroll and related accruals

14

 

210,164

 

244,438

 

402,871

 

495,624

Trade accounts payable

15

 

2,154,998

 

2,396,987

 

5,398,546

 

6,081,611

Taxes payable

16

 

585,378

 

700,187

 

1,544,445

 

1,691,991

Loans and financing

17.1

 

418,743

 

510,899

 

897,064

 

988,413

Debentures

17.2

 

498,564

 

468,624

 

498,564

 

468,624

Dividends and interest on shareholders´ equity

18

 

970,319  

 

972,986

 

970,319

 

972,986

Provisions

19

 

294,028

 

287,137

 

430,054

 

416,313

Derivatives obligations

35

 

10,617

 

10,960

 

41,856

 

51,162

Deferred revenue

20

 

77,276

 

84,956

 

793,110

 

761,268

Grouping of fractional shares

   

346,278

 

346,396

 

389,834

 

389,953

Other

21

 

281,515

 

374,608

 

321,801

 

422,318

Non Current Liabilities

   

5,327,456

 

5,320,852

 

9,409,881

 

9,418,925  

Taxes payable

16

 

31,807

 

32,390

 

446,762

 

433,071

Deferred taxes

7.2

 

834,594

 

788,954

 

834,594

 

788,954

Loans and financing

17.1

 

1,172,183

 

1,277,783

 

3,738,376

 

3,959,115

Debentures

17.2

 

793,931

 

787,807

 

793,931

 

787,807

Provisions

19

 

2,399,757

 

2,336,981

 

3,312,229

 

3,147,085

Derivatives obligations

35

 

8,952

 

13,382

 

63,016

 

78,369

Deferred revenue

20

 

44,303

 

38,616

 

156,091

 

156,266

Other

21

 

41,929

 

44,939

 

64,882

 

68,258

TOTAL SHAREHOLDERS’ EQUITY

22

 

44,286,400

 

43,325,717

 

44,290,596

 

43,330,785  

Capital

   

37,798,110

 

37,798,110

 

37,798,110

 

37,798,110

Capital Reserves

   

2,718,300

 

2,719,665

 

2,718,300

 

2,719,665

Legal Reserve

   

877,322

 

877,322

 

877,322

 

877,322

Award the purchase of non-controlling interest

   

(29,929) 

 

(29,929)

 

(29,929)

 

(29,929)

Other comprehensive income

   

7,262

 

7,520

 

7,262

 

7,520

Accumulated profit

   

962,306

 

-

 

962,306

   

Additional proposed dividends

   

1,953,029

 

1,953,029

 

1,953,029

 

1,953,029

MINORITY PARTICIPATION

   

-

 

-

 

4,196

 

5,068

                   

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   

55,461,736  

 

55,044,747

 

65,388,941  

 

65,489,973

 

The accompanying notes are an integral part of these financial statements.


5

 


 
 

Telefônica Brasil S.A.

 

Statements of income

Three-months periods ended March 31, 2012 and 2011

(In thousands of reais, except earnings per share data)

(A free translation of the original issued in Portuguese)

 

 

Note

 

Company

 

Consolidated

     

Mar/2012

 

Mar/2011

 

Mar/2012

 

Mar/2011

                   

Net operating revenue

23

 

3,263,797

 

3,689,647

 

8,314,330

 

3,974,695

                   

Cost of goods and services

24

 

(2,023,786)

 

(2,128,928)

 

(4,234,140)

 

(2,404,009)

     

 

 

 

 

 

 

 

Gross profit

   

1,240,011

 

1,560,719

 

4,080,190

 

1,570,686

                   

Operation Expenses

   

(213,608)

 

(888,013)

 

(2,551,146)

 

(917,136)

Selling

25

 

(829,794)

 

(735,607)

 

(2,174,991)

 

(775,188)

General and administrative

26

 

(199,576)

 

(137,220)

 

(559,163)

 

(170,259)

Equity in earnings (losses) of associates

11

 

828,464

 

(49,611)

 

-

 

762

Other operating income (expenses), net

27

 

(12,702)

 

34,425

 

183,008

 

27,549

     

 

 

 

 

 

 

 

Operating income before financial income (expense), net

   

1,026,403  

 

672,706

 

1,529,044

 

653,550

                   

Financial income (expense), net

28

 

(35,248)

 

2,660

 

(63,069)

 

27,892

     

 

 

 

 

 

 

 

Income before income tax and social contribution

   

991,155  

 

675,366

 

1,465,975

 

681,442

                   

Income tax and social contribution

29

 

(33,705)

 

(257,029)

 

(509,397)

 

(263,105)

                   

Net income for the period

   

957,450  

 

418,337

 

956,578

 

418,337

                   
                   

Attributed to:

                 

Participation of non-controlling shareholders

   

-  

 

-

 

(872)

 

-

Equity holders of the parent company

   

957,450  

 

418,337

 

957,450

 

418,337

                   

Basic and diluted earnings per share – Common

   

0.80  

 

0.78

 

0.80

 

0.78

Basic and diluted earnings per share – Preferred

   

0.88  

 

0.85

 

0.88

 

0.85

 

The accompanying notes are an integral part of these financial statements.

6

 


 
 

Telefônica Brasil S.A.

 

Statement of comprehensive income

Three-months periods ended March 31, 2012 and 2011

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

 

Company

Consolidated

 

03/31/2012

 

12/31/2011

 

03/31/2012

 

12/31/2011

Net income for the period

957,450

 

418,337

 

956,578

 

418,337

Gains (Losses) on investments available for sale

2,550

 

6,473

 

2,929

 

6,473

Taxes on (gains) losses on investments available for sales

(5,098)

 

(2,201)

 

(5,098)

 

(2,201)

Gains (losses) on derivative transactions

-  

 

-

 

2,680

 

-

Taxes on earnings (losses) on derivatives transactions

-  

 

-

 

(911)

 

-

Cumulative translation adjustments

142

 

2,263

 

142

 

2,263

Participation in comprehensive income of subsidiaries

2,148

 

-

 

-

 

-

Net Gains (Losses) recognized in equity

(258)

 

6,535

 

(258)

 

6,535

Comprehensive income for the period

957,192

 

424,872

 

956,320

 

424,872

               
               

Attributed to:

             

Participation of non-controlling shareholders

-

 

-

 

(872)

 

-

Equity holders of the parent company

957,192

 

424,872

 

957,192

 

424,872

               

Basic and diluted comprehensive income per share – Common

0.80

 

0.79

 

0.80

 

0.79

Basic and diluted comprehensive income per share – Preferred

0.88

 

0.87

 

0.88

 

0.87

 

 

The accompanying notes are an integral part of these financial statements.

7

 


 
 

Telefônica Brasil S.A.

 

Statements of changes in shareholders´ equity

March 31, 2012 and December 31, 2011

 (In thousands of reais)

(A free translation of the orginal issued in Portuguese)

 

   

 

Capital reserves

 

 

 

Other comprehensive income

 

 

 

Balances as of December 31, 2010

Capital

Award the purchase of non-controlling interest

Special Goodwill reserve

Capital reserves

Treasury shares

Legal Reserve

Retained Earnings

Additional proposed dividend

Unrealized gains on available for sale securities, net of tax

Derivative transactions

Cumulative translation adjusments

Equity of the Company

Participation of non-controlling shareholders

Total shareholders' equity

   

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2010

6,575,480

-

63,074

2,688,207

(17,719)

659,556

-

1,694,099

13,296

-

(8,879)

11,667,114

-

11,667,114

Unclaimed dividends and interest on shareholders’ equity, net of taxes

-

-

-

-

-

-

107,874

-

-

-

-

107,874

-

107,874

Capital increase by incorporation of the shares of Vivo Participacoes on 27/04/2011

31,222,630

-

-

47,723

-

-

-

-

-

-

-

31,270,353

-

31,270,353

Withdrawal rights to shareholders due to the incorporation of Vivo

-

-

-

-

(3)

-

-

-

-

-

-

(3)

-

(3)

Repurchase of shares

-

-

-

-

(61,617)

-

-

-

-

-

-

(61,617)

-

(61,617)

Participation of non-controlling shareholders

-

(29,929)

-

-

-

-

-

-

-

-

-

(29,929)

(1,813)

(31,742)

Legal reserve

-

-

-

-

-

217,766

(217,766)

-

-

-

-

-

-

-

Net income for the year

-

-

-

-

-

-

4,355,318

-

-

-

-

4,355,318

6,881

4,362,199

Other comprehensive income

-

-

-

-

-

-

(42,997)

-

(3,412)

1,995

4,520

(39,894)

-

(39,894)

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

-

-

-

-

-

-

(382,400)

(1,694,099)

-

-

-

(2,076,499)

-

(2,076,499)

Interest on shareholders’ equity

-

-

-

-

-

-

(1,586,950)

-

-

-

-

(1,586,950)

-

(1,586,950)

Withholding tax on interest on shareholders’ equity

-

-

-

-

-

-

(280,050)

-

-

-

-

(280,050)

-

(280,050)

Additional proposed dividend

-

-

-

-

-

-

(1,953,029)

1,953,029

-

-

-

-

-

-

   

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2011

37,798,110

(29,929)

63,074

2,735,930

(79,339)

877,322

-

1,953,029

9,884

1,995

(4,359)

43,325,717

5,068

43,330,785

   

 

 

 

 

 

 

 

 

 

 

 

 

 

Unclaimed dividends and interest on shareholders’ equity, net of taxes

-

-

-

-

-

-

4,856

-

-

-

-

4,856

-

4,856

Capital increase by incorporation of the shares of Vivo Participacoes on 27/04/2011

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Withdrawal rights to shareholders due to the incorporation of Vivo

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Repurchase of shares

-

-

-

-

(1,365)

-

-

-

-

-

-

(1,365)

-

(1,365)

Participation of non-controlling shareholders

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Legal reserve

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net income for the year

-

-

-

-

-

-

957,450

-

-

-

-

957,450

(872)

956,578

Other comprehensive income

-

-

-

-

-

-

-

-

(2,169)

1,769

142

(258)

-

(258)

Donations and investment subsidies

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Appropriations:

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Interest on shareholders’ equity

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Withholding tax on interest on shareholders’ equity

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Additional proposed dividend

-

-

-

-

-

-

-

-

-

-

-

-

-

-

   

 

                     

 

Balances as of March 31, 2012

37,798,110

(29,929)

63,074

2,735,930

(80,704)

877,322

962,306

1,953,029

7,715

3,764

(4,217)

44,286,400

4,196

44,290,596

                                                       

 

The accompanying notes are an integral part of these financial statements.


8

 


 
 

Telefônica Brasil S.A.

 

Statements of cash flows

Three-months periods ended March 31, 2012 and 2011

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

   

Company

 

Consolidated

   

03/31/2012

 

03/31/2011

 

03/31/2012

 

03/31/2011

Cash flows from operations

               

Income before income tax and social contribution

 

991,155

 

675,366

 

1,465,975

 

681,442

Items that do not affect cash

               

Expenses (revenues) not affecting cash

 

(4,843)

 

597,262

 

1,508,315

 

624,740

Depreciation and amortization

 

652,628

 

475,654

 

1,318,292

 

538,508

Foreign exchange variations on loans

 

(6,023)

 

(16,551)

 

(1,705)

 

(16,551)

Monetary variations

 

(1,903)

 

(13,261)

 

134

 

(12,792)

(Gain) / Loss from equity in earnings of associates

 

(828,464)

 

49,611

 

-

 

(762)

(Gain) / Loss on permanent asset disposals

 

5,195

 

(9,047)

 

(208,107)

 

(8,620)

Allowance for doubtful accounts

 

77,944

 

73,834

 

181,860

 

84,962

Pension and other post-retirement benefits plans

 

(1,345)

 

(2,547)

 

(3,603)

 

(2,567)

Tax, Labor and civil provisions

 

27,293

 

2,320

 

74,504

 

3,115

Interest expense

 

67,720

 

40,708

 

139,784

 

40,708

Provision for dismantling costs

 

(188)

 

-

 

(508)

 

-

Provision for loyalty program

 

-

 

-

 

7,300

 

-

Others

 

2,300

 

(3,459)

 

364

 

(1,261)

(Increase) decrease in operating assets

 

218,561

 

(234,272)

 

225,441

 

(132,503)

Trade accounts receivable, net

 

(58,321)

 

(129,780)

 

24,862

 

(125,291)

Inventories

 

(5,158)

 

(4,998)

 

35,347

 

(20,730)

Other current assets

 

154,638

 

51,213

 

133,150

 

48,988

Other noncurrent assets

 

127,402

 

(150,707)

 

32,082

 

(35,470)

Increase (decrease) in operating liabilities

               
   

(278,435)

 

(152,861)

 

(1,066,189)

 

(350,149)

Payroll and related accruals

 

(34,274)

 

(59,562)

 

(92,754)

 

(61,942)

Accounts payable and accrued expenses

 

12,670

 

162,581

 

(293,014)

 

(23,869)

Taxes other than income taxes

 

(115,392)

 

(11,395)

 

(176,069)

 

(11,574)

Other current liabilities

 

(95,818)

 

10,148

 

(110,706)

 

4,123

Other noncurrent liabilities

 

(1,752)

 

(7,746)

 

(31,109)

 

(8,074)

Interest paid

 

(34,386)

 

(40,956)

 

(94,256)

 

(40,956)

Income and social contribution taxes paid

 

(9,483)

 

(205,931)

 

(268,281)

 

(207,857)

Cash provided by operations

 

926,438

 

885,495

 

2,133,542

 

823,530

                 
                 

Cash flows generated from (used in) investing activities

               

Acquisition of fixed and intangible assets, net of grants

 

(674,349)

 

(733,072)

 

(1,574,318)

 

(722,536)

Cash from sales of fixed assets

 

653

 

21,483

 

1,361

 

21,483

Cash used in investing activities

 

(673,696)

 

(711,589)

 

(1,572,957)

 

(701,053)

                 

Cash flows generated from (used in) financing activities

               

Loans paid

 

(195,561)

 

(104,464)

 

(305,608)

 

(104,464)

New loans obtained

 

-

 

698,470

 

6,966

 

698,470

Net payment on derivatives contracts

 

(5,416)

 

(3,384)

 

(23,574)

 

(3,384)

Repurchase of treasury shares

 

(1,365)

 

-

 

(1,365)

 

-

Cash generated from financing activities

 

(202,342)

 

590,622

 

(323,581)

 

590,622

                 

Increase in cash and cash equivalents

 

50,400

 

764,528

 

237,004

 

713,099

Cash and cash equivalents at beginning of year

 

826,902

 

1,089,089

 

2,940,342

 

1,556,715

Cash and cash equivalents at end of period

 

877,302

 

1,853,617

 

3,177,346

 

2,269,814

Changes in cash during the period

 

50,400

 

764,528

 

237,004

 

713,099

 

The accompanying notes are an integral part of these financial statements.

9

 


 

 

 

Telefônica Brasil S.A.

 

Statements of value added

Three-months periods ended March 31, 2012 and 2011

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

Company

 

Consolidated

 

03/31/2012

 

03/31/2011

 

03/31/2012

 

03/31/2011

               

Revenues

4.361.417

 

5.090.279

 

11.477.698

 

5.421.912

Sale of goods, products and services

4.374.387

 

5.055.008

 

11.278.762

 

5.398.587

Other income

64.974

 

109.105

 

380.796

 

108.287

Allowance for doubtful accounts

(77.944)

 

(73.834)

 

(181.860)

 

(84.962)

Input products acquired from third parties

(1.967.407)

 

(2.222.033)

 

(4.185.099)

 

(2.444.648)

Cost of goods and services

(1.327.792)

 

(1.527.628)

 

(2.241.108)

 

(1.632.077)

Materials, energy, services of third parties and others

(625.529)

 

(653.462)

 

(1.725.877)

 

(766.555)

Loss of assets

(5.848)

 

(12.435)

 

(42.510)

 

(12.863)

Others

(8.238)

 

(28.508)

 

(175.604)

 

(33.153)

Gross added value

2.394.010

 

2.868.246

 

7.292.599

 

2.977.264

Retentions

(652.628)

 

(475.654)

 

(1.318.292)

 

(538.509)

Depreciation and amortization

(652.628)

 

(475.654)

 

(1.318.292)

 

(538.509)

Net added value produced

1.741.382

 

2.392.592

 

5.974.307

 

2.438.755

Added value received upon transfer

984.025

 

46.771

 

336.350

 

124.245

(Gain) loss from equity holding in associates

828.464

 

(49.611)

 

-

 

762

Financial income

155.561

 

96.382

 

336.350

 

123.483

Total added value to be distributed

2.725.407

 

2.439.363

 

6.310.657

 

2.563.000

Distribution of added value

(2.725.407)

 

(2.439.363)

 

(6.310.657)

 

(2.563.000)

Payroll and related charges

(234.194)

 

(185.706)

 

(537.892)

 

(191.532)

Salary

(142.651)

 

(132.205)

 

(345.546)

 

(136.695)

Benefits

(24.524)

 

(37.649)

 

(79.733)

 

(38.339)

Payroll tax - FGTS

(12.590)

 

(10.848)

 

(26.448)

 

(11.232)

Others

(54.429)

 

(5.004)

 

(86.165)

 

(5.266)

Taxes, fees and contributions

(1.195.603)

 

(1.601.591)

 

(3.905.674)

 

(1.635.415)

Federal tax

(300.828)

 

(536.294)

 

(1.534.806)

 

(563.082)

State tax

(872.609)

 

(1.054.196)

 

(2.340.181)

 

(1.054.204)

Municipal tax

(22.166)

 

(11.101)

 

(30.687)

 

(18.129)

Interest on third parties capital

(293.612)

 

(196.377)

 

(823.513)

 

(279.263)

Interest

(103.214)

 

(43.484)

 

(172.482)

 

(44.196)

Rent and leasing operations

(96.830)

 

(103.185)

 

(425.105)

 

(184.288)

Others

(93.568)

 

(49.708)

 

(225.926)

 

(50.779)

Others

(44.548)

 

(37.352)

 

(86.128)

 

(38.453)

Tax, labor and civil provisions

(44.548)

 

(37.352)

 

(86.128)

 

(38.453)

Retained Profit

957.450

 

418.337

 

956.578

 

418.337

minority participation

-

 

-

 

872

 

-

               

 

The accompanying notes are an integral part of these Financial Statements.


10

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information

Three-months period ended March 31, 2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

1.   Operations and background

 

a)    Controlling shareholders

 

Telefônica Brasil S.A., is headquartered at Rua Martiniano de Carvalho, 851, in the capital of the state of São Paulo, Brazil. The Company belongs to the Telefonica Group, the telecommunications industry leader in Spain which is also present in several European and Latin American countries. The Company is controlled by Telefónica S.A., which as of December 31, 2011 and March 31, 2012, held total direct and indirect interest of 73.81% of which 91.76% are common shares and 64.60% are preferred shares.

 

b)    Operations

 

The Company´s basic business purpose is the rendering of fixed wire telephone services in the state of São Paulo and mobile telephone services nationwide under Fixed Switch Telephone Service Concession Agreement – (STFC) and authorizations, respectively. The Company and its subsidiaries have also authorizations to provide other telecommunications services, such as data communication to the business market, broadband internet services (under the Speedy and Ajato brands), mobile telephone services ( Personal Mobile Services -SMP) and pay TV services, being: (i) by satellite all over the country (Telefonica TV Digital) and (ii) using (MMDS) Multichannel Multipoint Distribution Service technology in the cities of São Paulo, Rio de Janeiro, Curitiba and Porto Alegre.

 

The concessions and authorizations were granted by ANATEL, which is in charge of regulating the telecommunication sector in Brazil, according to the Law No 9.472, of July 16, 1997 – General Law of Telecommunication (“Lei Geral das Telecomunicações” - LGT), that was changed by Law No 9.986, of July 18, 2000 (notes 1.b.1 e 1.b.2 below).

 

The authorizations for use of 2.5GHz frequency associated with pay TV service by MMDS technology were extended in February 16, 2009 and remain in force until 2024.

 

11

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

 

b.1. Fixed Switch Telephone Service Concession Agreement (STFC)

 

The Company is the concessionaire of the STFC to render fixed telephony services in the local network and national long distance calls originated in sector 31 of region 3, which comprises the State of São Paulo (except the municipalities that form the sector 33), established in the General Concession Plan (PGO/2008).

 

The current Concession Agreement dated June 30, 2011, in place since July 1, 2011 awarded as an onerous title, will be valid until December 31, 2025. However, the agreement can be reviewed on December 31, 2015 and December 31, 2020. Such condition allows ANATEL to set up new requirements and goals for universalization and quality of telecommunication services, according to the conditions in place at that moment.

 

The Concession Agreement establishes that all assets owned by the Company which are indispensable to the provision of the services described on such agreement are considered reversible assets and are deemed to be part of the concession assets. These assets will be automatically returned to ANATEL upon expiration of the concession agreement, according to the regulation in force at that moment. On March 31, 2012, the carrying amount of reversible assets is estimated at R$6,689,939 (R$6,698,899 as of December 31, 2011), comprised of switching and transmission equipment and public use terminals, external network equipment, energy equipment and system and operation support equipment.

 

In accordance with the Concession Agreement, every two years, during the agreement’s new 20-year period, public regime companies will have to pay a fee which will correspond to 2% of its prior-year SFTC revenue, net of taxes and social contributions. In April of 2011, the Company made a payment for this concept of R$186,852, based on the 2010 STFC net revenues.

 

 

b.2. Commitments and relatives frequencies for mobile services

 

The business of Vivo S.A. ("VIVO"), including the services they can provide, are also regulated by ANATEL. Its action takes place through the issue of regulations and complementary plans.

 

The authorizations granted by ANATEL may be renewed just once, for a 15- year period. Biannually, after the first renewal, a payment of rates equivalent to 2% (two percent) of the company’s revenue for the preceding year, net of taxes and mandatory social contributions related to the application of the Basic and Alternative Plans of Service.


12

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

Vivo is engaged in cellular mobile telephone services (Personal Mobile Service – SMP), including the activities necessary or useful for the performance of said services, in conformity with the authorities granted to it.

 

 

c)     Share Trading in Stock Exchanges

 

c.1. Shares traded in the São Paulo Stock Exchange (BM&FBovespa)

 

On September 21, 1998, the Company started trading its shares in the São Paulo Stock Exchange (BM&FBovespa), under tickers TLPP3 and TLPP4, for common and preferred shares.

 

The Extraordinary Shareholders’ Meetings of Vivo Participações S.A. (Vivo Part.) and Telesp held on October 3, 2011, approved the merger of Vivo Part. into Telesp, which, on the same date, changed its corporate name to Telefônica Brasil S.A. On October 6, 2011, the Company changed its ticker codes to VIVT3 and VIVT4 for common and preferred shares, respectively, and the stock exchange code for Telefônica Brasil (see note 3).

 

 

c.2. Shares traded in the New York Stock Exchange (NYSE)

 

On November 16, 1998, the Company started the ADRs trading process in the New York Stock Exchange (NYSE), which currently have the following characteristics:

 

·         Type of share: preferred.

·         Each ADR represents 1 (one) preferred share.

·         The shares are traded in the form of ADRs through code “VIV” on the New York Stock Exchange.

·         Foreign depositary bank: The Bank of New York.

·         Custodian bank in Brazil: Banco Itaú S.A.

 

 

13

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

2.   Basis of presentation of quarterly information

 

The consolidated quarterly information (ITR) for the three-months period ended March  31, 2012 is presented by the Company in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB)  and the individual and consolidated financial statements  are presented in accordance with the accounting practices adopted in Brazil, which comprise the provisions of corporate legislation set forth in Law No. 6,404/76, as amended by Law no. 11,638/07 and by Law no. 11,941/09, and the accounting pronouncements issued by the Brazilian Accounting Pronouncements Board (CPC) and approved by the CVM.

 

Approval of the issuance of these quarterly information occurred in the Board of Directors meeting held on May 3, 2012.

 

These quarterly information have been prepared according to the principles, practices and accounting principles consistent with those adopted in preparing the financial statements for the fiscal year ended December 31, 2011, in addition to the new pronouncements, interpretations and amendments that entered  into force on 1st  January 2012, described as follows:

 

 

- Amendments to IAS 12, Income Taxes - Recovery of Underlying Assets

This amendment clarified the determination of deferred tax on investment property measured at fair value. Introduces a rebuttable presumption that the deferred tax on investment property measured at fair value model in IAS 40 should be set based on the fact that their carrying amount will be recovered through the sale.

The Telefónica Group has chosen not to assess the investment property at fair value method in the initial adoption of International Accounting Standards, so this change does not apply.

 

- Changes IFRS 7, Financial Instruments: Disclosures – Increase Disclosures Related to the Low –

This amendment requires additional disclosures about financial assets that were transferred but not downloaded in order to enable the user of the information understand the relationship with those assets that have not been downloaded and their associated liabilities. In addition, the amendment requires disclosures about the continuing involvement in financial assets written off to allow the user to assess the nature of the entity's continuing involvement in those assets disposed of, as well as the associated risks.

 

This amendment became effective for annual periods beginning on or after July 1, 2011 and in Brazil, only after the approval of the CPC and deliberation by the CVM for public companies. Currently this amendment is in the CPC Public Hearing.

 

14

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

It is worth mentioning that the amendment in question only affects the disclosures, but does not currently apply to the Company and has no impact on their performance or financial condition.

 

New IFRS and Interpretations of the IFRS (International Financial Reporting Interpretations Committee - IFRIC) not yet effective at March 31, 2012.

 

At the date of these quarterly information the following IFRS, amendments and interpretations of the IFRIC have been issued but their application was not mandatory:

 

Standards and Amendments to Standards

Application required: fiscal years beginning as from

Amendments to IAS 1

Presentation of items of other comprehensive income

July 1, 2012

IFRS 9

Financial instruments

January 1, 2013

IFRS 10

Consolidated Financial Statements

January 1, 2013

IFRS 11

Joint Arrangements

January 1, 2013

IFRS 12

Disclosure of Interests in Other Entities

January 1, 2013

IFRS 13

Fair Value Measurement

January 1, 2013

IAS 19 revised

Employee Benefits

January 1, 2013

IAS 27 revised

Consolidated and Separate Financial Statements

January 1, 2013

IAS 28 revised

Investments in Associates and jointly controlled companies

January 1, 2013

Amendments to IFRS 7

Disclosure – offsetting of financial assets and financial liabilities

January 1, 2013

Amendments to IAS 32

Offsetting Financial Assets and Financial Liabilities

January 1, 2014

 

The Company is currently analyzing the impact of the application of these standards, amendments and interpretations. Based on preliminary analysis made up to the present date the Company estimates that their application will not have a significant impact on the consolidated financial statements on first time adoption. Notwithstanding, changes introduced by IFRS 9 will affect the presentation of financial assets and transactions with those occurring as from January 1, 2015.

 

 

2.1  Comparative Information

 

These ITRs compares the quarters ended March 31, 2012 and 2011, except in relation to the balance sheets, which are comparing the positions on March 31, 2012 to December 31, 2011.

 

 The table below shows the relationship of the companies controlled, directly and indirectly by the Company and the percentage of stake in the company:

 

 

15

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

Subsidiaries

 

Mar/2012

 

Dec/2011

Vivo S.A (1)

 

100%

 

100%

Telefônica Data S.A.

 

100%

 

100%

A.Telecom S.A.

 

100%

 

100%

Telefônica Sistema de Televisão S.A.

 

100%

 

100%

Ajato Telecomunicações Ltda.

 

100%

 

100%

GTR Participações e Empreend. S.A. (2)

 

66,67%

 

66,67%

TVA Sul Paraná S.A. (2)

 

91,50%

 

91,50%

Lemontree S.A. (2)

 

83,00%

 

83,00%

Comercial Cabo TV São Paulo S.A. (2)

 

93,19%

 

93,19%

Aliança Atlântica Holding B.V.(3)

 

50%

 

50%

Companhia AIX de Participações (3)

 

50%

 

50%

Companhia ACT de Participações (3)

 

50%

 

50%

 

(1) fully consolidated since April, 2011 (Notes 1.”e” and 3).

(2) fully consolidated since January 2011.

(3) Jointly controlled.

 

 

The main events and changes in the consolidation environment that, due to their significance, should be considered for analysis of the consolidated  three months period ended March 31, 2012, are presented as follows:

 

a)    Acquisition of Vivo Participações S.A. by the Company

 

In the Company's Extraordinary General Meeting held on April 27, 2011, was approved by unanimous vote, the Protocol of Merger of Shares and Justification signed between the Company and Vivo Part..  Each share of Vivo Part. has been exchanged by 1.55 shares of the Company. Due to this merger of shares, the Company's capital was increased by R$ 31,222,630.

 

b)    Grouping of SMP authorizations and incorporations of Vivo Participações S.A.

 

In a meeting of the Board of Directors of the subsidiary Vivo Part. held on June 14, 2011, was approved the proposal for merger of licenses to provide SMP service (previously held by Vivo Part. in the state of Minas Gerais and by Vivo in other states of Brazil), thus unifying the operations and of Authorization terms of SMP operation in Vivo.

 

The means proposed in making this corporate restructuring viable were the transfer, on October 1, 2011 of assets, rights and obligations related to the operation of SMP services in Minas Gerais by Vivo Part. to Vivo (mobile operator in the group that had SMP authorizations in other states of Brazil). When this grouping was completed, Vivo Part became a holding.

 

16

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

In accordance with the provisions of Law No. 6,404/76, a specialized company was engaged to prepare a valuation study for the part of Vivo Part.’s net assets corresponding to SMP operations in the state of Minas Gerais that was transfered to Vivo S.A.’s equity, as well as for the net equity of Vivo Part. that was incorporated into the Company.

 

Due to the fact that Vivo Part. was a whole owned subsidiary of the Company, since April 27, 2011, which net equity already included the investment of the shares in Vivo S.A., the merger: i) did not result in a capital increase for the Company; ii) there was no exchange of shares held by Vivo Part. non-controlling shareholders for Company’s shares; and iii) there was no need to prepare a net equity valuation report to market price for the calculation of the exchange share ratio, as there didn’t exist non-controlling shareholders to be protected.

 

Accordingly, under the terms of article 226, paragraphs I and II of Law No. 6,404/76, shares held by the Company in the net equity value of Vivo Part. were cancelled. On conclusion of the corporate restructuring, Vivo Part. was incorporated by the Company on October 3, 2011 and Vivo S.A. became its full subsidiary, simplifying and rationalizing the  cost structure of the companies envolved.

 

The ITRs include the Company's consolidated results of Vivo Part. (Incorporated by the Company on October 3, 2011) and Vivo results from April 1st, 2011. Vivo Participações S.A. and Vivo S.A. were included in the Company’s consolidated financial statements through the full consolidation method.

 

c)    Consolidation of TVA companies

 

 

As from June 1, 2011, the Company started to include the companies GTR Participações e Empreendimentos S.A., TVA Sul Paraná S.A., Lemontree Participações S.A. and Comercial Cabo TV São Paulo S.A. in its consolidated financial statements by applying the full consolidation method. Previously,  these companies were included in the Company’s consolidated financial statements through the equity method.

 

d)    Acquisition of Lemontree Participações S.A. shares

 

On September 29, 2011, the Company purchased 68,533,233 common shares representing 49% of the referred class of shares of Lemontree Participações S.A., which is the holder of 80.1% of the common shares of Comercial Cabo TV São Paulo S.A., a company engaged in cable TV services in the State of São Paulo. As a consequence, the Company currently has an interest of 83% in Lemontree Partipações S.A. and 93.19% in Comercial Cabo TV São Paulo S.A. This transaction was considered as a non-controlling shareholders’ acquistion for the purpose of disclosure and measurement in these quarterly information.

 

17

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

 

3.   Buniness Combination - Acquisition of Vivo Participações S.A. (Vivo Part.)

 

Fiscal year 2011

 

As described in Note 2.a) on April 27, 2011, the shareholders' meetings of the Company and Vivo Part. approved the acquisition of 100% of the shares of the latter by the Company, each share of Vivo Part. has been replaced by 1.55 shares of the Company. This operation was recorded using the acquisition method.

 

The provisional fair values, goodwill and cost of the identifiable assets acquired and liabilities assumed in this transaction at acquisition dates were the following:

 

In R$ thousands
(provisional data)

Vivo Part.
Fair value

Current assets

7,244,124

Non-current assets

28,134,683

Deferred tax asset, net(2)

417,883

Other non-current assets

2,385,177

Property, plant and equipment

6,198,358

Intangible assets (1)

19,133,265

 

 

Current liabilities

(7,964,209)

Non-current liabilities

(5,352,456)

Other non-current liabilities (3)

(5,352,456)

Net asset amount

22,062,142

Cost of shareholdings

31,222,630

Goodwill of the transaction

9,160,488

 

(1) Includes the allocation of fair value attributed to licenses (R$12,876,000), trademark (R$1,642,000) and customer base (R$2,042,000). The Company does not consider trademark and customer base as deductible items for tax purposes.
(2)

Includes the recognition of deferred income tax over (1) and (3).

(3) Includes allocation of fair value attributed to contingent liabilities of R$283,000.

     

The fair value of accounts receivables for products sold and services rendered totals R$2,809,561. The gross amount is R$3,027,732. Over the gross amount of accounts receivables for products sold and services rendered, an allowance for doubtful accounts of R$218,171 was recorded, for which settlement is expected in the net value of this provision.

 

 

18

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

According to /IFRS 3 (R) - Business Combination, the acquirer must recognize, on the date of acquisition, contingent liabilities assumed on a business combination even if it is not likely that the outflow of resources to settle the liability are necessary, as long as a present obligation arising from past events exists and its fair value can be reliably measured.  In compliance with the criteria above, in this acquisition, a contingent liability at fair value of R$283,000 was recognized, based on the possible cash outflow estimated for its settlement on the acquisition date (see note 19).

 

Analysis of cash flow on acquisition

 

R$thousand 

Transaction costs (included in cash flows from operating activities)

 

 

(9,066)

Cash and cash equivalents of the company acquired (included in cash flows from investing activities)

 

 

1,982,898

Net cash of outflow and cash equivalents from the acquisition

 

 

1,973,832

 

The transaction costs incurred to date in an amount of R$9,066 were recorded in the statement of income as other operating expenses.

 

For information purposes only, we presented below an unaudited and/or not reviewed pro forma combined statement of income between the Company and the acquired company, Vivo Part., should the acquisition have taken place on January 1, 2011, without considering retroactively as of this date the accounting effects of the purchase price allocations (PPA). This statement does not intend to represent the real results of the operations of the Company should the restructuring have taken place on the specified date, nor should it be used to project results of the Company’s operations on any date or future period.

 

For the three-months period ended March 31, 2011 (unaudited/not reviewed)

 

 

Telefônica Brasil
Consolidated for
the fiscal year ended
March 31, 2011

Vivo
Consolidated
for the three
months period
ended
March 31, 2011

Elimination
(b)

Telefônica Brasil
Combined

Net operating revenue

3,974,696

4,852,749

(809,940)

8,017,505

Costs of goods and services (a)

(2,404,009)

(2,276,981)

773,395

(3,907,595)

Gross profit

1,570,687

2,575,768

(36,545)

4,109,910

Operating (expenses) income

(917,136)

(1,470,292)

36,545

(2,350,883)

Selling (a)

(775,188)

(1,120,930)

36,545

(1,859,573)

General and administrative (a)

(170,259)

(310,416)

-

(480,675)

Other operating income (expenses), net

28,311

(38,946)

-

(10,635)

Operating income before financial expense, net

653,551

1,105,476

-

1,759,027

Financial expense, net

27,892

(39,794)

-

(11,902)

Income before income tax and social contribution

681,443

1,065,682

-

1,747,125

Income tax and social contribution

(263,105)

(355,476)

-

(618,581)

Net income for the period (c)

418,338

710,206

-

1,128,544

 

(a) Includes depreciation and amortization expenses amounting to R$1,084,368.
(b) Includes mainly revenues and interconnection costs.
(c)   Combined net income would be R$997,077 in march, 2011, should the effects of the amortization of intangible assets of the first 3 months of 2011 (R$199,193), net of deferred income taxes amounting to R$67,726, have been included.

 

19

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

4.   Cash and cash equivalents

 

 

Company

Consolidated

 

Mar/2012

 

Dec/2011

Mar/2012

 

Dec/2011

Bank accounts

1,361

 

17,969

30,020

 

77,404

Short-term investments

875,941

 

808,933

3,147,326

 

2,862,938

Total

877,302

 

826,902

3,177,346

 

2,940,342

 

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.

 

 

5.   Trade accounts receivable, net

 

 

Company

Consolidated

 

Mar/2012

 

Dec/2011

Mar/2012

 

Dec/2011

Billed amounts

1,776,296

 

1,742,090

3,440,041

 

3,461,465

Interconnection receivable

206,620

 

210,668

869,284

 

930,178

Accrued unbilled amounts

891,722

 

941,614

1,778,647

 

1,855,801

Gross accounts receivable

2,874,638

 

2,894,372

6,087,972

 

6,247,444

             

Allowance for reduction of the recoverable value

(607,625)

 

(607,736)

(1,103,978)

 

(1,056,729)

             

Total

2,267,013

 

2,286,636

4,983,994

 

5,190,715

             

Current

1,597,582

 

1,653,269

3,806,059

 

4,103,377

Past-due – 1 to 30 days

378,833

 

371,256

657,887

 

631,923

Past-due – 31 to 60 days

108,642

 

97,504

225,954

 

204,775

Past-due – 61 to 90 days

51,053

 

46,932

130,978

 

115,125

Past-due – 91 to 120 days

22,354

 

24,188

53,546

 

49,815

Past-due – more than 120 days

108,549

 

93,487

109,570

 

85,700

Total

2,267,013

 

2,286,636

4,983,994

 

5,190,715

             

Current

2,267,013

 

2,286,636

4,901,347

 

5,105,860

Non-current

-

 

-

82,647

 

84,855

 

20

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the original issued in Portuguese)

 

 

 

Changes in Allowance for reduction of the recoverable value

 

 

Company

Consolidated

 

Mar/2012

 

Mar/2012

Opening balance

(607,736)

 

(1,056,729)

Provision charged to selling expenses (Note 25)

(77,944)

 

(181,860)

Write-offs

78,055

 

134,611

Ending balance

(607,625)

 

(1,103,978)

       

 

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, this product was  classified as “Finance Lease” in the financial statements as of March 31, 2012 and December 31, 2011.

 

The consolidated accounts receivable as of March 31, 2012 and December 31, 2011 reflect the following effects:

 

 

Mar/2012

Dec/2011

Present value of minimum payments receivable

261,261

261,933

Unrealized financial income

7,895

8,941

Gross investment in finance lease receivables

269,156

270,874

Allowance for reduction of the recoverable value

(76,240)

(69,375)

Financial Leases receivable, net

192,916

201,499

Current

110,269

116,644

Non-current

82,647

84,855

 

 

Aging list of financial leases receivable on March 31, 2012:

 

Year

Gross
Investment

Present
Value

Falling due within one year

178,614

178,614

Falling due within five years

90,542

82,647

Total

269,156

261,261

 

There are neither unsecured residual values that produce benefits to the lessor nor contingent payments recognized as revenues during the year.

 

 

21

 


 
 

Telefônica Brasil S.A.

 

Notes to the quarterly information (Continued)

Three-months period ended March 31,2012

(In thousands of reais)

(A free translation of the origina