Telefonica Brasil SA (VIV) 2003 Q1 法說會逐字稿

Good morning ladies and gentlemen at this time we would like to welcome everyone to the Telesp Celular Participacoes SA TCP Q1 2003 Conference Call. Today we have a simultaneous webcast with slide presentation on the internet that can be accessed at the site www.vivo-sp.com.br. That was 'B' as in boy and 'R' as in Robert. There will be a replay facility for this call in the website. We inform that all participants will be able to listen to the conference during the presentation. After the company's remarks are over there will be a question and answer session. At that time further instructions will be given. Should any participant need assistance during this conference please press '*0' for an operator.

Before proceeding let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of TCP's management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of TCP and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference over to Mr. Francisco Padinha, CEO of Telesp Celular Participacoes SA. Mr. Padinha you may begin sir.

Thank you. Good morning ladies and gentlemen. I would like to thank everyone for joining us to review and discuss Q1 2003 results of Telesp Celular Participacoes. I would like to remind everyone that the presentation in Power Point is now available in our site www.vivo-sp.com.br investor relations section. You can also follow the conference call through our transmission in the internet.

Here with me today we have Fernandes Veiga, our new Investor Relations Officer, [indiscernible] our IR Advisor and our Investor Relations Team.

I will begin by giving a review of the Q1 main events. After this presentation I will open the question and answer section.

The year started with many changes in the Brazilian macroeconomic scenario. In the financial side we can point out the increase in local interest rates since the inflation rate hasn't returned to a low level yet. An increase of [2M] mobile interconnection of mobile [indiscernible] fee tariffs approved by the [indiscernible] in February of this year.

We also had some changes in the company structure. As all [indiscernible] operators now under the umbrella of the same economic group, it was necessary to simplify the whole accounting package. From the first quarter of the year therefore all the information [indiscernible] to the market to reflect these unified procedures. I will discuss some of these procedures along this presentation.

Changing now to slide 3, I would like to share a quick preview of TCP's figures which is now responsible for 7.3m clients, being 6.1m in Sao Paolo region and 1.2m clients in the spaces of Parana and Santa Catarina. Our market share in Sao Paolo is now 66% and in Santa Catarina and Parana 41%. EBITDA grew 34% in a year over year basis reaching R$407m in the quarter. EBITDA margin was 44% and excluding [off set] revenues and [off set] costs EBITDA margin reached 47% in the first quarter of 2003 compared to 57% in the first quarter 2002.

On slide 4 we have our client base growth in both operators. Telesp Celular client base achieved a 16% growth compared to Q1 2002 while Global Telecom grew 33%. This quarter has a significant impact in our net additions due to the standardization of our management practices. Adopting a more rigorous criteria with our client base. Our operators have started to disconnect pre-paid clients after 90 days of non-recharging, releasing the previous period of 120 days. Therefore 90,000 subscribers were disconnected in this quarter. Nevertheless we managed to keep the client base growing in both post-paid and pre-paid segments. We can highlight that our focus on corporate segment is still producing positive results in our post-paid base growth in terms of client quality and number of net additions.

The [indiscernible] market share in Sao Paolo is detailed in slide 5. In the Sao Paolo metropolitan area, our market share stands for 67.2% and in the interior of the state at 64.8%. I would like to remind everyone that this market share has remained strong even after the entrance of a new competitor in the Sao Paolo market.

In slide 6, special attention is given to the Vivo market share in Panara and Santa Catarina, which has significantly increased since the acquisition of the company through an intensive marketing strategy. Our positioning remains strong and with a higher growth in the client base than the competition. At the Q1 2003 our market share in the region was 41% in the quarter.

We can emphasize net revenues in the slide 7, which shows a 9% increase compared to Q1 2002 totaling R$927m or US $276.5m. This positive performance came as a result of the customer portfolio growth with special emphasis on the post-paid clients as a result of our continued effort to retain the subscribers and our focus on the segment.

In this quarter we changed revenues and costs regarding the recharge of the pre-paid handsets. We previously recognized them when the client recharged the handset and with the change in our accounting standards from January 1st, we will be recognizing when the client uses the credit for instance on accrual basis. Because of these changes, net revenues in the quarter would have been R$1.1b or a 27% year over year increase.

Average minutes of use shown on slide 8 amounted to $102 in Q1 2003, a 4% decrease compared to $107 in the same quarter 2002. This decrease is related to a lower pre-paid MOU of 66 a 12% drop compared to Q1 2002. The decrease in minutes of use was finally due towards macroeconomic scenario during the year, however, this drop was partially offset by 11.2% increase of post-paid minutes of use, which reached 218, mainly as a result of enhanced quality of the post-paid client base during 2002.

In Parana and Santa Catarina region, we had a similar evolution with an average minutes of use falling to 91 and post-paid minutes of use increasing 19% and reaching 157.

In slide 9 we can see that blended ARPU presented a small decrease both in Sao Paolo and in Parana and the Santa Catarina regions. In Sao Paolo blended ARPU reached R$38, US $11.3 in Q1 2003 compared to R$42 recorded in Q1 2002 and R$44 in Q4 2002. In Parana and Santa Catarina, ARPU remained fairly stable at R$33 compared to R$34 in Q1 2002.

In slide 10 we show that net revenues from wireless data rose to R$24.6m in Q1 2003, a growth of nearly 130% when compared to Q1 2002. This amount is equivalent to 3% of the total including interconnection on both operations. The share of wireless data over total revenues considering only the revenues from clients with enabled phones has already reached 5%. These figures demonstrate the high growth potential of wireless data services and keep us confident that value added service represents a great segment to be explored. For all that we maintained our focus on the launch and management of wireless data services in both regions with special attention given to messaging services and to connectivity and productivity tools targeted to corporate clients.

The 2.5G service coverage expanded and we have recently launched services in several cities in Sao Paolo and also in the state of Parana expanding 1XRTT network and services to our clients. This will provide a gain in scale for the investment and wherever it reissues our strong commitment to this new technology and the result recently obtained.

We have recently announced the roll out of the first wireless download service in Latin America. The download service provided by [indiscernible] solution allow users to download and run software in their handsets transforming them into mini computers. The company believes that new platform will be the start of an attractive and useful navigation experience using the wireless technology.

One also should notice that [indiscernible] technology is the market leader worldwide with approximately 150m users at the end of 2002.

Operating costs, excluding depreciation and amortization, totaled R$385m, US$150m, a 10% decrease compared to Q1 2002. Compared to Q4 2002 operating costs decreased 3% basically reflecting the adjustments made to handset sales, the costs associated with the reloading of pre-paid handsets which impacted the cost of services and the reversal of ETMS tax. Reversal of ETMS tax is related to a loss we felt again a direct application of ETMS to activation fees in the state of Sao Paolo. This represents an amount of R$68m recognized as other operating revenues.

In this slide we review Average Cash Cost per User in both operators. At Telesp Celular there was a 10% year over year increase and CCPU reached R$23 this quarter. At Global Telecom CCPU in Q1 2003 was R$25 resulting in the 7% drop when compared to Q1 2002.

In slide 14 we have the chart showing the subscriber acquisition contribution per operator. In the Sao Paolo region the Q1 2003 sack was R$162, US$48 which compared to R$93 in Q1 2002 and R$100 in Q4 2002. Whilst in the Parana and Santa Catarina region the Q1 2003 sack was R$191, US $57 which compares with R$86 in Q1 2002 and R$144 in Q4 2002.

Also liquidity is showing a good performance both in Sao Paolo, Parana and Santa Catarina reflecting the quality of our client data base. EBITA totaled R$407m, US $120m, a growth of 34% over the Q1 2002. Compared to Q4 2002 EBITDA decreased 9%, some of the accounting changes occurred in the quarter had a significant impact on EBITDA.

Pre-paid recharges, the negative impact on EBITDA was approximately R$57m in Q1 2003. Referring of revenues and costs of the handsets sold to dealers we used to recognize these revenues and costs when the handsets were sold from January 1st on, they will only be recognized when the client activates the handset. The positive impact on EBITDA was approximately R$20m in Q1 2003.

Other changes in accounting packages had a negative impact of EBITDA of R$13.9m. If these adjustments are disregarded, EBITDA margins would have reached 35.4% fairly stable when compared to the Q1 2002 margin.

Moving now to CAPEX in the next slide 17. We can confirm the optimization trend after heavy investments following the privatization and the beginning of the operations. We have capital expenditures of only R$80m in the quarter. CAPEX over total net revenues ratio has been decreasing dramatically, reaching 7% in Q1 2003 excluding accounting adjustments.

I will hand over now to my colleague and CFO Fernandes Veiga.

Good evening. Speaking about operating cash flow, we are in page 18, this is more [indiscernible] when it is Q1 2002 I must say than Q1 2003 and they have said in the third column the figures correspond to Q1 2002. In this way, the operating cash flow has improved from the Q1 2002 more than 30%, it is more or less on line with the operating cash flow of Q4 2002.

Going to line 19 you can see the revolution of our bottom line. We had a net loss of R$131m compared with a net loss of R$74.5m in Q3 2002, a much better result of the Q4 2002 that has an impact of extraordinary items.

The high depreciation and amortization of other expenses influences the [indiscernible] presented.

Going to the evolution of the debt we have a consolidated debt gross of R$4.7b, corresponding to US $1.4b. We have a 5% decrease compared to R$5b at the end of March 2002 and a small increase of R$270m compared with the end of the year 2002. Principal costs of this increase is because we have already captured the [indiscernible] amount of money that we need to pay the [indiscernible] controlling the stake that we finally made this disbursement at the end of last week.

Related with the hedge, in the beginning of April 2003 we started to unwind our long position in euros in order to benefit from the declining trends in exchange rates. The net effects from this transaction will be reflected in the results of the Q2. On the net consolidated debt and cash equivalent and hedge results is shown in the three bars in page 21. You can see that at the end of March 2003 it was around R$2.9b a slight [indiscernible] increase of 4% compared to the end year of 2002 after the 30% drop compared to our net debt of March 31st 2002.

On to the summary, our customer base has grown around 90% in the last 12 months, if you remember the growth of the net service revenues was 21 and the growth of total revenues was 27 so we are increasing our revenues above the increase of our client base. [indiscernible] base is [indiscernible] subscribers, we have an increase, that means in the client base of post-paid of 1.2% since March, 2002.

We had an increase level of 1.4% number of revenue in this quarter, that is on all [indiscernible] Telecom operations in Brazil and even in other markets of Brazil. The [indiscernible] capital expenditures account only for 7% of the revenues.

Now some highlights of the TCP acquisition is basically the same ideas we have already highlighted [indiscernible]. We've shown what is happening in the conference call in the middle of January, really the operation of structures is going to be in three steps. The first step is acquisition control. The [indiscernible] was closed last Friday [indiscernible]. We are going to file the [indiscernible] to the CBN for approval in the next days and finally we have [indiscernible] in Brazil of shares. Now we have to wait until the end of the tie-along process, that we think that could be finished more or less in one month and a half if there is no CBN negotiation.

Now I pass you to Francisco Padinha.

Just to finalize, with slide 25 just giving you a snapshot of our operations in Brazil under the umbrella [indiscernible]. [indiscernible] see here are 70m clients referring to 2002 because we have not formal figures from TCL, we expect from the disposal of the results. Just reminding that we cover roughly 80% of the Brazilian territory, covering also 83% of the Brazilian [indiscernible] and 72% of the total population. So we are now in the middle of the phase of launching the new brands and the results are very encouraging.

I would like to thank you for your participation and we will be able now to answer your questions.

At this time I would like to remind everyone, in order to ask a question, please press the numbers 1 followed by 4 on your telephone keypad. If you would like to withdraw your question, you may press the pound key. Due to time constraints, we will be only taking questions until the top of the hour. Our first question is from Jose Martens (ph.) from J P Morgan. Sir, your line is live.

Thank you. Hi everyone. Just a few questions, very brief. One, can you give some details why the subscriber acquisition costs increased so much? Number two, I see your headcount went down, while your personnel costs went up. How do I reconcile that? And number three, unrelated and I guess with that consistently, I don't know if you are willing to give an estimate or, do you quantify what are going to be the synergies of the DCO acquisition, or is this way too premature? Those are my three questions. Thank you.

Just to begin with the headcount. Let me talk a little about the headcount. The headcount, in terms of the overall operations, just to give you a snapshot. That includes the current GB of roughly 8% of the top of costs. We have been drafting this figure all over the operations and we believe that now we have a very interesting ratio. If you take into account that we still have an important share of people in our sales points. We have probably today more than 3,000 customers per employee. We will continue this rationalization, which is now much more related to the rationalization of the process that possible inefficiency of the organization, because the organization is quite rational.

Just also to skip to synergies. The possible synergies of TCO. The synergies will come much more on the [inaudible] and market side rather than possibly from the operational side. Why? Because TCO is a very, very rational operation. Very well managed with a very [indiscernible] of the rations of the operations. Okay? Of course we have benefited from the purchases of the equipment and the handsets of the rationalization of the process. But as you said, it is premature and probably as we mark the very good company, we will certainly have some room for synergies in operational terms, but the most important part is synergies on the [indiscernible] market and on side of the scale of the operation.

It is impacted not only by the increase of ISID (ph) of the competition. If you remember you are comparing Q1 2002 with Q1 2003 and in Q1 2002 the competition was quite [indiscernible] of the areas in the majority of the areas. In the middle of 2002, the competition increased tremendously, namely in the area of Rio de Janeiro and by the end of the year also in the area of Sao Paulo with the start of the operations of [indiscernible]. But anyway, as the fact is impacted by the accounting changes, that we made, [indiscernible].

I would like to add a little on headcount too. We have made a reduction of headcount and most of these reductions have been made and there is of course involved in the reduction of the headcount. There are R$2.5m additional relating to the [indiscernible] only accounted in Q1. For the next quarter we are expecting to reduce this figure significantly. Related to the current acquisition (ph) costs there is an increase in the competition in the area of Telesp. The last offer of team has been R$99 sometimes and we are not following this kind of offers, but we are suffering with the competitiveness at the end of the last year.

Thanks a lot.

Our next question is coming from Carlos Siquera (ph) UBS Warburg.

Thank you. My question is that it seems [indiscernible] facility for its quarter compared to the first quarter last year. I guess you have probably answered that with [indiscernible]. My question is competitive [indiscernible] now in the first quarter. Also in two weeks' time we will [indiscernible] with you and what will be TCP's reaction to competitors (ph) aggressive expected promotions? What will be the focus - keeping market or keeping profitability share. And the third question relates to [indiscernible] expenses included above the [indiscernible] first quarter compared to the fourth quarter. The question is how much of sales can be attributed to the increase [indiscernible]?

As far as it concerns the choice we made about the margins or market share, we would like to emphasize that showing this weekly and our strategy is to balance both of course. Because we have the incumbents [inaudible] all over the country with the exception of (a) of Parana and Santa Catarina and [indiscernible] balance in the very efficient way, the choice between the margins and the modern market share. So that's what we have an impressing and a very good figures, high on liquidity. So our strategy is that to keep the balance on this area. We are not following offers that are in fact destroying value as Fernandez has pointed out one of the examples, which is in a country where the money costs 26.5% a year. There are offers of R$99 in ten months, okay? So we will ask what kind of customers we intend or our competitors to capture, we sell first. We do not follow. We sell first. But anyway, we need to keep our leadership position, which means that in a balanced way and measuring the performance of the company every way, we need to keep our image of leadership and also our customer base for this quality approach. That is why we increased it [indiscernible] okay? But keeping our target to keep these prices in the margins and we are tracking in the lower forties for this.

So, what are our weapons versus competition, versus to these kinds of offers? We are in the first phase of the campaign of launching the new brands, which we are very, very enthusiastic about and now [indiscernible] acting from the pulls that we are mailing every week, are very, very encouraging. So we are increasing the awareness of the brand and also the image of the large operator and the large community of the South American and in Brazil, we are marketing the quality and the [indiscernible] services and the coverage, the customer, the customer care, quality of service, the innovation, the capacity of CDMA, modern image of the terminals, the capacity of [indiscernible] ITT and also the new services based on [indiscernible]. It is a tremendous [inaudible] in terms of the marketing, but it is the only way that we have competitors [inaudible] that sometimes offer crazy offers.

So, as far as it concerns the new brand, as I said - the campaign has been running very, very well. Very impacting outputs and in fact we believe that we are launching one of the most attractive and the most solid brands in the operators in the cell network in America.

So the question was related to the? Could you explain what the question is?

Yes, sure. One [indiscernible] in Q1 2003 compared with Q1 2002 we can see that certain expenses increased by R$29m and we know that the first quarter is very usually [indiscernible] in Q1 but the question at issue is [indiscernible] amount of the new brand. And the question is how much [indiscernible] is related to the new Vivo brand.

Yes. The first quarter of 2003 has continued. Some of the offers of the end of the year 2002 and really part of these are reflected in publicity and other commercial costs. Besides some, but not very much of the difference, part of the difference is caused by some of the cost related with the Vivo launch.

Next question please?

Thank you. Our next question is coming from Guy Patty of Deutsche Bank. Sir, your line is live.

Good afternoon, gentlemen. Looking in your presentation, sorry, on your release on page 11, you show your gross and net debt schedule. I was just interested if you could explain where or why the financial institutions increase so much in Q1, [inaudible] $21m. I just wondered if you could explain what the inference of Portugal Telecom would be there? Have you paid a lot of debt to Portugal Telecom? Have you refinanced it by local institutions? If that is the case, what is the implied increase in your cost of borrowing because of that change in funding? Thank you.

Hi. This is [indiscernible], Treasurer of the company. As we stated on our last conference, we paid out to Portugal Telecom $110m back in March. This is reflected in the numbers that you see and these are, yes, this was basically funded in local markets in Reals.

Thank you.

Thank you. Our next question at this time is coming from Katy Blacklock from [indiscernible] Capital.

Hi. I just have one or two questions again on the acquisition costs, please. I just wanted to clarify - I think you mentioned in the call a fact of 162 in Q3 for Telesp Celular and 191 for Global Telecom and in the press release the numbers are 125 and 163 respectively. Could you just clarify that please.

Yes, this will depend on the accounting principles that have changed in Q1.

Okay. So under the new accounting principles which is the correct number?

125.

Okay. My other question was with CAPEX. As you say, the CAPEX in Q1 was only 8.6% of sales. Can we expect that ratio to continue through the rest of the year, or should CAPEX increase in the balance of this year?

Well our target is to keep the CAPEX in the region of 11% - 12% of total revenues, so we keep the target and if possible we will try to decrease. But as you know, we are preparing also the deployment at the end of the year of the first [indiscernible] overlay along TTO and also NCLP which is not related [indiscernible] to TCP results so I am just talking in overall terms. The 12% is a figure that we keep for an overall view of operations and we keep also for the TCP.

Okay. Thank you very much.

Thank you. Our next question at this time is coming from Tom Al (ph) of Times Square Capital (ph).

Hi. Congratulations on a good quarter. I just wanted to ask a quick question. You mention in your speech that you were in the process, if I understand correctly, of reducing your foreign currency debt to your non-Real denominate debts. I just wanted to know where your non-Real denominated debts extends, both in absolute numbers and in relation to your total debt and where you see that going over the next year.

We are thinking of alternatives related within this because of the new level of Reals compared with the dollar. Out tactics is trying to minimize the cost of that. I think that in this quarter we have go to 71% of the debt [indiscernible] as compared with 74% at the end of the year. So we are in a very similar level.

Thank you.

Thank you. Our next question at this time is coming from Gustavo Constantino of VBN Bank.

Hi everyone. [indiscernible] the [indiscernible] for the minorities of the ON shares. As you said, the process probably should be ended in four or five days. So my question is, [indiscernible] to be heard at that date would be the 80% of the 19.48 announced on Friday adjusted by the interest rates of 1.59?

We would like to pay 80% on the value that we are paying to the control in the stake and the consideration. So I think [indiscernible] of the price per share will [indiscernible] 19.48 so we would pay 80% of this with the same consideration.

Okay.

[indiscernible] timing. We are going to file. I don't know exactly if it is this week, perhaps at the end of this week or next week, we are going to file in CVN all the processes [indiscernible] and then the CVN has to answer us in 20 days and then we have to begin the offer and I think it is more or less 30 days that we have to give to the minorities to accept or not accept the offer.

So at this [indiscernible] for now so 19.48?

Yes.

Okay. Ladies and gentlemen. for a question or a comment at this time, please press 1 followed by 4 on your touchtone phone.

Our next question is coming from Andre Gaddolea (ph) of [indiscernible]

At this time please press '1' [indiscernible] on your touchtone phone. Our next question is coming from Andre Gaddolea (ph.) of Back Paul(ph.).

Hi, my question is regarding the pre-paid ARPU again on page 5. I think it's not clear. I'd like to know what would have been the pre-paid ARPU without the adjustment?

Yes the pre-paid ARPU without adjustments was 23.

23. Well [indiscernible] okay but my second question is regarding [indiscernible]. The [indiscernible] holders at the time it was announced it was not clear, you guys didn't know how to implement this because of the restriction of the Brazilian [indiscernible], you remember the [indiscernible] restriction. Do you guys already know how this issue is going to be implemented?

Yes there were two alternatives and it is issue all the [indiscernible] issue and then to convert our [indiscernible] in hours to keep this ratio.

What would be this ratio conversion [indiscernible] everybody would be allowed to convert?

Yes we have to offer the conversion for the rest of the minorities. So if anyone in the minorities want to change their PN into ON then we have to offer it to them. Yes I think that no-one is [indiscernible] is only going to result change PN's into ON's.

Thank you. Our next question is coming from Jose Martens (ph.) from J P Morgan. Sir your line is live.

Hi, sorry for the double up in JPM. [indiscernible] released results yet? When they do should we make further adjustments [inaudible] accounts [inaudible] in Q2 or are we done for adjustments this month?

Some adjustments are coming in the second quarter because the first quarter [indiscernible] is not part [indiscernible]. So if some adjustment has to come it will come in the second quarter.

But relating to the existing companies already part of Brazil sales, we should not expect any further adjustments?

No.

Okay thanks.

Thank you. Our next question at this time comes from James MacKenzie(ph.) of Calvinor(ph.) of London.

Hi, good afternoon. I was wondering if you could talk a little bit about the cost of the [indiscernible] rebrand. Obviously a number of questions [indiscernible] any of the costs of rebranding. [inaudible] Have you got a budget for the rebranding across the BRASILCEL Group? Or for any of them singularly, Telesps? Thirdly if you could give us any guidance on what you're expecting for tax over the course of the year?

The forecast of the re-brand is divided into [indiscernible] R$20m relate with media, R$20m relate with the [indiscernible] of sales.

Okay is that just for Telesp Celular or is that for the whole?

More or less 50% of this amount corresponds to TCP. Part of this [indiscernible] because we are including 70% of [indiscernible] in the calculation [indiscernible]. The next [indiscernible]. We think that the level of [indiscernible] per hour are going to decrease a little but really I want to be higher than the year 2002.

Thank you. Our next question comes from Laura Mello(ph.) of Santandor(ph.).

Hi. Just a quick comment on the timing for [indiscernible]. I just wanted to check if you will be paying the [indiscernible] according also to the maturity of the debt that's how I would assume it on by Telesp 100% in [inaudible] half year [indiscernible]?

Really there are [indiscernible] times [inaudible] about 400% before the maturity of the first, of the first debenture, so perhaps we are going to have to repay the further debenture that matures to 26 [indiscernible].

So this means that the [indiscernible] related to this amount that will be extended, will also be paid afterwards?

No excuse me. It is not the [indiscernible] maturity [indiscernible] because we think [indiscernible] we are going to finish [indiscernible]. We think that we are not going to finish because [indiscernible] in Brazil until closer [indiscernible].

Okay I understand.

Ladies and gentlemen, again as a reminder, if you do have any further questions [indiscernible] or comments please press '1' followed by '4' on your touchtone phone. Our last question is coming from [inaudible].

[inaudible] excluding for all this [inaudible] changes about R$141b. Could you give us a sense on what will be the [inaudible] sales and how much service revenues, excluding all these adjustments? Thank you. Okay, because you're giving just the adjusted figures ...?

How much revenue, how much it's cost?

[inaudible] how much would have been the usage and handset sales if we didn't have all these adjustments during the quarter?

Yes. The [indiscernible] means around R$20m on dividend relate to the handsets implies [indiscernible] increase of R$20m relating with less recipes from [indiscernible] and with less cost agreements. But the difference between them was around R$20m. If you can see the presentation the net service revenues will be around R$904m compared with R$880m of the Q4. So if you don't figures [indiscernible]. So [indiscernible] figures of the handset revenues was around R$174m compared with the figure adjusted, compared with R$107m that goes in our official figures. So the reaction was around R$77m of revenues and [indiscernible] was around R$80m. Have I answered your questions?

Yes. Thank you.

There are no further questions at this time. Mr. Padinha please proceed with your final remarks.

Thank you very much for attending our conference call. Of course I would like to say to everybody that our operation is running despite some of the difficulties of the situation in Brazil. As well we would like to also point out this delicate operation which is to change the name of a lot of the operations and now under the umbrella of Stivevo(ph.). We have 5 open holdings [indiscernible] 5 of them are listed, 4 of them are [inaudible] companies with very strong brands but we'd like to transmit to you that we are very, very confident about the success of this very delicate operations and now assure you that we will succeed [indiscernible] in the changing of the brands of the companies [indiscernible] are starting to do and TCP is one of the main [indiscernible] important in the terms that I mentioned. [indiscernible] also [indiscernible] of the [indiscernible] brands and I would like to say that with the figures we have now coming in from the pools and with the reaction of the market the success is more or less guaranteed. Okay. Thank you very much for attending our conference call.

Ladies and gentlemen the Telesp Celular Q1 2003 Conference Call is over you may disconnect your lines at this time and have a wonderful day. Thank you.