SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE MONTH OF AUGUST 2002
(Commission File No. 001-14489)
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
(Exact name of registrant as specified in its charter)
TELE CENTRO OESTE CELLULAR HOLDING COMPANY
(Translation of registrant's name in English)
SCS-QUADRA 2, BLOCO C, EDIFICIO ANEXO-TELEBRASILIA CELULAR
-7° ANDAR, BRASILIA, D.F.
FEDERATIVE REPUBLIC OF BRAZIL
(Address of Principal Executive Offices)
(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 whether the registrant by
furnishing the information contained in this form
is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
----- -----
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PRESENTATION OF RESULTS
SECOND QUARTER 2002
RESULTS IN THE Brasilia, August 14, 2002 -Tele Centro Oeste Celular Participacoes S.A. ("TCO
2ND QUARTER Celular" or the "Company")-(NYSE: TRO; IBOVESPA: TCOC3/TCOC4) today discloses its
results relative to the second quarter of 2002. The Company obtained a NET
CONSOLIDATED PROFIT OF R$ 89.3 MILLION IN THE PERIOD, A MARK WHICH IS 73.6% ABOVE
THE SECOND QUARTER OF 2001. Earnings before interest, taxes, depreciation and
amortization (EBITDA) WERE R$ 154.6 MILLION AND THE EBITDA MARGIN WAS 40.3%.
HIGHLIGHTS TCO Celular has been one of the most efficient wireless telephone carriers i
Brazil, owing to strategic decisions applied in conjunction with optimum
infrastructure, supplier deals, strict cost control and increased quality and
quantity of client relationship. Part of this strategy started with the
acquisition of NBT, a Band B company operating in the Brazilian states of Amapa,
Amazonas, Maranhao, Para and Roraima. ALTHOUGH NBT HAS BEEN IN OPERATION FOR LESS
THAN THREE YEARS, it has surpassed all expectations and presented results
significantly above the average results obtained by other Band B companies. NBT
NOT ONLY IS THE FIRST AND ONLY BAND B CARRIER TO HAVE GENERATED A NET PROFIT IN
THIS FIRST QUARTER OF 2002 - R$ 4.5 MILLION - BUT IT ALSO OVERCOME THE MARK OF
500,000 SUBSCRIBERS.
AWARDS The results accomplished by TCO Celular have yielded it important awards in the
Telecommunications sector in Brazil. Early in 2002, TCO Celular was awarded the
following prizes:
|X| EXAME magazine - "Melhores e Maiores" - THE BEST COMPANY IN THE
TELECOMMUNICATIONS AREA, TOGETHER WITH ITS SUBSIDIARY COMPANY TCO CELULAR -
GOIAS;
|X| TOP SOCIAL - "Natal Sem Fome" ("Hunger-free Christmas") and "Your School at
2000 an Hour" ("Sua Escola a 2000 Por Hora");
|X| INFO EXAME - 1st prize in B2B in the Telecom sector;
|X| FORBES BRAZIL - TCO Celular - 1st prize in Telecommunications and 6th among
Best 200 Brazilian companies in 2001 on the Platinum List;
|X| ANUARIO TELECOM - "TELECOMMUNICATIONS COMPANY OF THE YEAR" and concomitantly
the "COMPANY HIGHLIGHT OF THE YEAR" in the Wireless Cellular Service
Carriers segment.
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OPERATING PERFORMANCE
The Region TCO CELULAR OPERATES IN 11 BRAZILIAN STATES AND IN THE FEDERAL DISTRICT: ACRE,
AMAZONAS, AMAPA, GOIAS, MARANHAO, MATO GROSSO, MATO GROSSO DO SUL, PARA,
RONDONIA, RORAIMA AND TOCANTINS. RECENT STATISTICS DISCLOSED BY THE BRAZILIAN
INSTITUTE OF GEOOGRAPHY and Statistics" (Instituto Brasileiro de Geografia e
Estatistica - IBGE) show that Brazilian companies continue to migrate from the
large metropolitan areas comprised between Rio and Sao Paulo, in the southeast
region of the country. The trend is towards reducing the concentration of
companies in one area of the country and transferring resources to the regions
where TCO Celular operates - the Central-West and the North. Contrary to the both
the Southeast and the Northeast, THE COMPANIES IN THE CENTRAL-WESTERN AND THE
NORTHERN REGIONS OF BRAZIL OBTAINED PRODUCTION GROWTH RATES HIGHER OR EQUAL TO THE
NATIONAL AVERAGE BETWEEN 1985 AND 2000. Whereas the Central-West concentrated the
highest industrial growth rates in the entire country, the North has been
experiencing a higher concentration of industrial activity in the states of
Amazonas and Para - respectively 1.3% and 0.6%.
Client Base TCO CELULAR REACHED THE MARK OF 2,717,173 CLIENTS IN THE FIRST QUARTER OF 2002.
OF THIS TOTAL, 27.5% WERE POST-PAID CLIENTS, WHICH WAS DUE MAINLY TO MOTHERS' DAY
AND VALENTINES' DAY CAMPAIGNS. TCO Celular's client base has maintained
continuous growth in both its areas of operation. IN AREA 7, THE CLIENT-BASE
GROWTH RATE IN THE SECOND QUARTER OF 2002, RELATIVE TO THE FIRST QUARTER OF 2002,
WAS 6.5%, WHEREAS AREA 8 PRESENTED A SPECTACULAR 10.9% GROWTH IN ITS CLIENT BASE.
WHEN COMPARED TO THE SAME PERIOD IN THE PREVIOUS YEAR, CLIENT-BASE GROWTH IN AREA
7 AND AREA 8 WAS 28.3% AND 46.5%, RESPECTIVELY.
HIGHLIGHT According to information provided by ANATEL (The Brazilian Telecommunications
Regulating Agency), the number of cell-phone users grew from 29.5 million to 30.6
million, in the second quarter of 2002. WITHIN THIS AMOUNT, TCO CELULAR INCREASED
ITS TOTAL PARTICIPATION FROM 8.5% TO 8.8%, IN THE PERIOD. Comparing TCO's
consolidated increase to the Brazilian net increase clearly shows that TCO CELULAR
REPRESENTED 18.2% OF THE NET INCREASE IN THE COUNTRY'S CELL-PHONE USER BASE IN THE
PERIOD. THIS CONFIRMS THE COMPANY'S COMPARATIVE INCREASE IN CELL-PHONE PENETRATION
IN BRAZIL.
CONSOLIDATED TCO CELULAR
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2Q02 1Q02 VAR. 2Q01 VAR.
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CLIENTS 2,717,173 2,533,272 7.3% 2,070,030 31.3%
Post-paid 748,260 700,417 6.8% 665,678 12.4%
Pre-paid 1,952,201 1,816,127 7.5% 1,387,631 40.7%
Rural 16,712 16,728 -0.1% 16,721 -0.1%
ARPU 41.32 39.74 4.0% 43.63 -5.3%
Post-paid 89.10 82.83 7.6% 84.89 5.0%
Pre-paid 22.98 22.80 0.8% 23.67 -2.9%
CHURN (%) 4.60 4.23 0.4% 3.93 0.7%
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Market Share In the second quarter of 2002, TCO Celular maintained its leading market position
in AREA 7, WITH AN ESTIMATED 75.8% MARKET SHARE, WELL ABOVE THE NATIONAL BAND A
AVERAGE, WHICH WAS 66.9%. IN AREA 8, TCO Celular showed intense growth in the
period, and raised its estimated market share to 35.5%, ALSO ABOVE THE BAND B
AVERAGE, WHICH WAS 33.1%.
Consolidated TCO Celular - Operating Data
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2Q02 1Q02 VARIATION 2Q01 VARIATION
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ESTIMATED POPULATION (MILLIONS) 30.7 30.7 0% 29.2 5.1%
Estimated Penetration - TCO (%) 8.9 8.3 0.6% 7.1 1.8%
MUNICIPALITIES SERVED 386 371 4.0% 320 20.6%
Workforce 2,799 2,890 -3.1% 3,043 -8.0%
Permanent employees 1,484 1,470 1.0% 1,468 1.1%
Interns and outsourced parties 1,315 1,420 -7.4% 1,575 -16.5%
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Network Structure At the end of the second quarter of 2002, Area 7 presented a handset
digitalization rate of 96.8%. NBT has operated with 100% digital technology since
it was first established. TCO Celular currently uses TDMA technology in its
wireless telephoning services.
Consolidated TCO Celular - Network Structure
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2Q02 2Q01
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Radio Base Stations (RBS's) 812 739
Commuting Switches (CS's) 25 22
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Network Management TCO CELULAR MANAGES ITS NETWORK BY MEANS OF ITS NETWORK MANAGEMENT CENTER (CENTRO
Center DE GERENCIA DE REDES - CGR). The company chose the Netrac system, manufactured by
an Israeli company and used worldwide by major telecommunications carriers. The
Network Management Center operates 24 hours a day, 7 days a week, and allows 65%
OF NETWORK FAILURES TO BE FIXED REMOTELY. It identifies network degradation,
preventing possible failure and therefore assuring the high quality and
reliability levels registered for services rendered by means of the 25 Commuting
Switches and over 812 Radio Base Stations, in addition to all the proprietary
transmission routes.
Operating TCO Celular, which originated from the former Telebras System, DOES NOT OWN ANY
Autonomy OF ITS COMMUTING SWITCHES HARBORED INSIDE THE FACILITIES OF FIXED TELEPHONE
SERVICE CARRIERS IN BRAZIL.
Call Center TCO Celular places its stakes on client service excellency. TCO's Call Center was
conceived to centralize customer services offered to all areas covered in order
to reduce cost and standardize information, while optimizing phone-based,
client-service operations. It also operates as a business unit, providing
third-party services. The Call Center offers BackOffice and telemarketing
services to our partners, distributors, and service providers. TCO CELULAR WAS
THE FIRST TELEPHONE COMPANY IN THE COUNTRY TO BE GRANTED THE ISO 9001:2000
CERTIFICATION FOR CUSTOMER SERVICE DEVELOPMENT AND MANAGEMENT, according to a
survey conducted with the Brazilian Association for Technical Standardization
(ABNT).
Sales In its effort to meet the needs of clients and of the general public with
increasing promptness, agility and competence, TCO CELULAR HAS OPENED 54 STORES
SINCE ITS PRIVATIZATION. This enables the Company to sell its products while
offering user services in the entire region. TCO Celular's stores in Brasilia have
recently been granted the ISO 9001:2000 CERTIFICATION FOR SALES, SERVICES, AND
PERSON-TO-PERSON CUSTOMER SERVICE. TCO Celular's sales structure includes
newsstands, supermarkets, and authorized dealer chains, as well as company-owned
stores. At the end of June 2002, TCO CELULAR HAD 38 COMPANY-OWNED STORES, 1,309
accredited handset retailers, and 15.9 thousand direct and indirect phone card
retailers IN AREA 7, while IN AREA 8 TCO CELULAR HAD 16 COMPANY-OWNED STORES and
347 thousand direct and indirect phone card retailers. The workforce was reduced
by 1.4% in all Area 7 carriers, a slight drop from
Human Resources THE WORKFORCE WAS REDUCED BY 1.4% IN ALL AREA 7 CARRIERS, A SLIGHT DROP FROM 2,376
in JUNE 2001 TO 2,343 IN JUNE 2002. Of this total, 52% are permanent employees and
the remaining are interns and outsourced parties. The "Company employees per 1,000
accesses" indicator was reduced to 0.55 in June 2002. THE WORKFORCE IN THE AREA 8
CARRIER, WHICH REGISTERED 667 PERSONS IN JUNE 2001, FELL TO 456 IN JUNE 2002. Of
this total, 58% are permanent employees and the remaining are interns and
outsourced parties. The "Company employees per 1,000 accesses" indicator was
reduced in NBT to 0.53 in June 2002.
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AREA 7 -Operating Data
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2Q02 1Q02 VARIATION 2Q01 VARIATION
-------------------------------------------------------------------------------------------------
CLIENTS 2,216,507 2,081,882 6.5% 1,728,202 28.3%
Post-paid 624,894 589,366 6.0% 551,304 13.3%
Pre-paid 1,574,901 1,475,788 6.7% 1,160,177 35.7%
Rural 16,712 16,728 -0.1% 16,721 -0.1%
ARPU 42.32 39.86 6.2% 50.97 -17.0%
Churn (%) 4.45 4.01 0.44% 3.85 0.60%
-------------------------------------------------------------------------------------------------
ESTIMATED MARKET SHARE (%) 75.8 76.4 -0.6% 78 -2.2%
Estimated Population (Millions) 14.9 14.9 0.0% 14.3 4.2%
ESTIMATED PENETRATION - TCO (%) 14.8 13.9 0.9% 12.0 2.8%
Access Digitization (%) 96.8 96.1 0.7% 93.6 3.2%
MUNICIPALITIES SERVED 295 285 3.5% 259 13.9%
Workforce 2,343 2,414 -2.9% 2.76 -1.4%
Permanent employees 1,218 1,203 1.2% 1.08 0.8%
Interns and outsourced parties 1,125 1,211 -7.1% 1.68 -3.7%
-------------------------------------------------------------------------------------------------
Radio Base Stations (RBS's) 663 653 1.5% 618 7.3%
Commuting Switches (CS's) 14 14 0.0% 13 7.7%
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AREA 8 -Operating Data
-------------------------------------------------------------------------------------------------
2Q02 1Q02 VARIATION 2Q01 VARIATION
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CLIENTS 500,666 451,390 10.9% 341,828 46.5%
Post-paid 123,366 111,051 11.1% 114,374 7.9%
Pre-paid 377,300 340,339 10.9% 227,454 65.9%
ARPU 37.03 39.51 -6.3% 41.55 -10.9%
Churn (%) 5.27 5.20 0.07% 4.31 0.96%
-------------------------------------------------------------------------------------------------
ESTIMATED MARKET SHARE (%) 35.5 33.3 2.2% 29 6.5%
Estimated Population (Million) 15.8 15.8 0.0% 14.8 6.8%
ESTIMATED PENETRATION - TCO (%) 3.2 2.9 0.3% 2.3 0.9%
Access Digitization (%) 100 100 0.0% 100 0.0%
MUNICIPALITIES SERVED 91 86 5.8% 61 49.2%
Workforce 456 476 -4.2% 667 -31.6%
Permanent employees 266 267 -0.4% 260 2.3%
Interns and outsourced parties 190 209 -9.1% 407 -53.3%
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Radio Base Stations (RBS's) 149 146 2.1% 121 23.1%
Commuting Switches (CS's) 11 11 0.0% 9 22.2%
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FINANCIAL PERFORMANCE
Consolidated TCO Celular
R$ thousand
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2Q02 1Q02 VARIATION 2QT01 VARIATION
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Net Operating Income from services 323,182 294,539 9.7% 258,740 24.9%
Net Operating Income from merchandise 60,661 33,118 83.2% 45,654 32.9%
Cost of merchandise sold 79,765 42,629 87.1% 69,026 15.6%
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EBITDA with merchandise 154,587 148,444 4.1% 107,720 43.5%
% EBITDA margin 40.3% 45.3% -5.0% 35.4% 4.9%
EBITDA without merchandise 173,691 157,954 10.0% 131,092 32.5%
% EBITDA margin 53.7% 53.6% 0.1% 50.7% 3.0%
Depreciation and amortization 37,972 37,522 1.2% 32,718 16.1%
EBIT 116,615 110,922 5.1% 75,002 55.5%
% EBIT margin 30.4% 33.9% -3.5% 24.6% 5.8%
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Financial Income 55,551 44,521 24.8% 52,215 6.4%
Financial Expenses 99,429 37,312 166.5% 68,380 45.4%
-----------------------------------------------------------------------------------------------------
Investments 36,769 41,088 -10.5% 47,327 22.3%
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NET PROFIT IN THE PERIOD 89,334 71,888 24.3% 51,456 73.6%
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Net Profit TCO CELULAR'S NET PROFIT WENT UP BY 73.6% COMPARED TO THE SAME PERIOD OF LAST
YEAR, AND ITS CLIENT BASE ALSO INCREASED TO 31.3%.
Operating Income TCO CELULAR'S NET OPERATING INCOME FROM SERVICES REACHED R$ 323.2 MILLION in the
second quarter of 2002, which represents an increase of 9.7% compared to the
first quarter of 2002 and 24.9% against the second quarter of 2001.
Average Net THE CONSOLIDATED ARPU WAS R$ 41.32 IN THE QUARTER, of which R$ 89.10 were to
Revenue per Post-paid and R$ 22.98 to Pre-paid. AREA 8 ARPU WAS R$ 37.03, WHILE AREA 7 ARPU
SUBSCRIBER WAS R$ 42.32.
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Cost of The net income from the sales of merchandise was R$ 60.6 million in the second
Acquisition quarter of 2002, and the cost of merchandise sold was R$ 79.8 million. The cost of
acquisition per client (SAC) in the quarter was R$133.
EBITDA EBITDA REACHED R$ 154.6 MILLION IN THE QUARTER, WHICH DEMONSTRATES THAT THE
COMPANY WAS MORE EFFICIENT IN GENERATING CASH USING ITS OPERATING ASSETS. TCO
Celular discloses its EBITDA margin in consonance with the market, which includes
the operations with sales of merchandise. THE EBITDA MARGIN OBTAINED WITH THE
SALES OF MERCHANDISE WAS 40.3% IN THE PERIOD. For a possible comparison, EBITDA
was R$ 173.7 when excluding operations with the sales of merchandise, WHICH RAISES
THE EBITDA MARGIN TO 53.7%.
Depreciation Accrued Expenses with Depreciation and Amortization totaled R$ 75.5 million, of
which R$ 38.0 million in the second quarter. Depreciation is calculated using the
linear method, considering the goods' useful life.
PDD / Losses Accrued Provision for Doubtful Debtors / Losses was R$ 21.1 million. In the
second quarter, PDD / Losses reached R$ 10.7 million, representing 3.0% of Net
Operating Income.
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Financial Expenses TCO Celular Financial Expenses in the second quarter of 2002 were impacted by the
distribution of Interest on Own Capital in the amount of R$ 40 million, relative
to the period comprised between January 2002 and June 2002.
Investments In 2002 and UP TO THE END OF THE SECOND QUARTER, R$ 77.8 MILLION HAD BEEN
INVESTED IN PROPERTY, PLANT, AND EQUIPMENT, mainly in projects for expansion of
wireless cellular telephoning network, for improvement of telecommunications
services and for the development of proprietary transmission routes. TCO Celular
is totally compliant with its Investment Plan and has anticipated its obligations
as to serving localities, therefore generating surplus cash resources.
Subsequent Events (a) As disclosed in a previous press release published by TCO Celular and in
a relevant fact published by Splice Telecomunicacoes e Eletronica S.A.
("Splice") on July 03, 2002, the Board of TCO Celular approved on July
02, 2002, the acquisition of up to R$ 470 million in private debentures
issued by Fixcel S.A., a company belonging to the Splice Group which
holds capital stock shares of BID S.A. and which directly controls TCO
Celular.
(b) In addition, the Board of TCO Celular approved on August 13, 2002 the
acquisition of up to R$ 190 million in private debentures issued by
Fixcel S.A..
TCO Celular used funds available for the acquisition of the debentures issued by
Fixcel S.A. mentioned in items (a) and (b), above.
The debentures mature in 360 (three hundred and sixty) days as of their issue and
assure profitability levels in line with general market rates; they also bear
floating guarantee on the Fixcel S.A. assets and guarantee from Splice.
Perspectives for The wireless telecommunications market has been experiencing significant changes,
2002 and TCO Celular has actively been analyzing these alterations. The second quarter
of 2002 was marked by the entry of the first SMP carrier in Brazil, which in June
25, 2002 started operations in 16 Brazilian states. The prospect of increased
competition made TCO Celular begin preparations as early as in 2001, therefore
widening its range of products and services offered, and expanding its client
relationship programs. The administration of the Company believes that its
telecommunications network will need a technological complement in order to allow
continuation of its network expansion, as well as the development of existing
client services, and preparations for facing the demand for new cellular services
such as data transmission at normal speed. This is why TCO Celular has been
conducting surveys on GSM technologies in the city of Goiania, and on CDMA in the
city of Brasilia. The Company's decision as to the choice of technology to be used
in the future will depend on a number of factors, among which the result of the
market's experiments with the services, the result of tests and the trends of
technological adopted by the market.
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**FINANCIAL SATEMENTS TO FOLLOW **
FINANCIAL STATEMENTS
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
June 30, 2002 and March 31, 2002
Jointly with the Independent Auditors' Report
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
BALANCE SHEETS
June 30, 2002 and March 31, 2002
(In thousands of Brazilian Reais)
----------------------------------------------------------
COMPANY CONSOLIDATED
----------------------------------------------------------
06/30/2002 03/31/2002 06/30/2002 03/31/2002
----------------------------------------------------------
ASSETS
---------------------------- ---------------------------
CURRENT ASSETS 290.061 118.335 1.056.049 1.143.061
---------------------------- ---------------------------
Cash and cash equivalents 1.051 70 8.583 11.008
Short-term investments 86.019 - 411.995 393.923
Marketable securities 23.373 5 231.969 385.839
Accounts receivable from services 57.190 2.847 191.472 171.726
Inventories 5.822 - 29.246 26.574
Deferred and recoverable taxes 68.803 48.824 134.690 121.066
Interest on own shareholders' equity 22.503 55.345 - -
Other assets 25.300 11.244 48.094 32.925
---------------------------- ---------------------------
NONCURRENT ASSETS 48.631 34.274 86.085 90.588
---------------------------- ---------------------------
Deferred and recoverable taxes 13.060 - 47.904 52.407
Other assets 35.571 34.274 38.181 38.181
---------------------------- ---------------------------
PERMANENT ASSETS 1.220.063 1.153.491 925.190 929.730
---------------------------- ---------------------------
Investments 966.119 1.150.867 9.240 9.601
Property, plant and equipment 253.944 2.624 881.777 884.792
Deferred charges - - 34.173 35.337
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TOTAL ASSETS 1.558.755 1.306.100 2.067.324 2.163.379
---------------------------- ---------------------------
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
BALANCE SHEETS
June 30, 2002 and March 31, 2002
(In thousands of Brazilian Reais)
-----------------------------------------------------------
COMPANY CONSOLIDATED
-----------------------------------------------------------
06/30/2002 03/31/2002 06/30/2002 03/31/2002
-----------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------
CURRENT LIABILITIES 266.499 158.835 549.393 677.989
-----------------------------------------------------------
Personnel, social charges and benefits 4.186 1.641 9.257 6.962
payable
Trade accounts payable 18.998 1.792 111.289 125.534
Indirect taxes 20.815 398 67.924 45.728
Income taxes 5.828 158 12.980 15.873
Income participation 125.084 82.848 133.023 101.867
Loans and financing 84.984 62.144 191.306 327.107
Other obligations 6.604 9.854 23.614 54.918
-----------------------------------------------------------
NONCURRENT LIABILITIES 151.896 88.890 356.009 364.659
-----------------------------------------------------------
Provision for contingencies 78.433 73.220 81.123 78.025
Trade accounts payable - - - 548
Indirect taxes - - - 1.655
Loans from related parties 9.565 44 - -
Loans and financing 63.350 15.626 272.542 284.431
Others obligations 548 - 2.344 -
-----------------------------------------------------------
PARTICIPATION OF MINORITY SHAREHOLDERS - - 21.688 62.356
-----------------------------------------------------------
SHAREHOLDERS' EQUITY 1.140.234 1.058.249 1.140.234 1.058.249
-----------------------------------------------------------
Capital 534.046 505.000 534.046 505.000
Capital reserve 110.555 72.241 110.555 72.241
Revenue reserve 42.229 40.567 42.229 40.567
Treasury stock (9.164) (15.057) (9.164) (15.057)
Retained earnings 462.568 455.498 462.568 455.498
-----------------------------------------------------------
CAPITALIZABLE FUNDS 126 126 - 126
-----------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1.558.755 1.306.100 2.067.324 2.163.379
-----------------------------------------------------------
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
STATEMENT OF INCOME
Six months ended June 30, 2002 and 2001
(In thousands of Brazilian Reais)
---------------------------------------------------------------
COMPANY CONSOLIDATED
---------------------------------------------------------------
06/30/2002 06/30/2001 06/30/2002 06/30/2001
---------------------------------------------------------------
---------------------------------------------------------------
GROSS OPERATING REVENUE 253.627 - 896.853 731.360
---------------------------------------------------------------
Gross revenue deductions (50.369) - (185.351) (149.359)
---------------------------------------------------------------
NET OPERATING REVENUE 203.258 - 711.502 582.001
---------------------------------------------------------------
Cost of services rendered (86.771) - (318.197) (281.533)
---------------------------------------------------------------
GROSS INCOME 116.487 - 393.305 300.468
---------------------------------------------------------------
---------------------------------------------------------------
OPERATING INCOME (EXPENSES) 74.178 102.029 (165.764) (155.528)
---------------------------------------------------------------
Service provision (21.121) - (100.874) (97.871)
General and administrative expenses (33.412) (13.871) (62.778) (54.068)
Equity pickup 116.998 103.951 - -
Other operating income (expenses), net 11.713 11.949 (2.112) (3.589)
---------------------------------------------------------------
OPERATING INCOME BEFORE FINANCIAL RESULT 190.665 102.029 227.541 144.940
---------------------------------------------------------------
Financial result, net (48.854) (31.776) (36.662) (27.362)
---------------------------------------------------------------
OPERATING INCOME 141.811 70.253 190.879 117.578
---------------------------------------------------------------
Nonoperating income (expenses), net (3.331) (2) (11.037) (9.682)
---------------------------------------------------------------
INCOME BEFORE TAXES AND PARTICIPATION 138.480 70.251 179.842 107.896
---------------------------------------------------------------
Income and social contribution taxes (15.955) 1.424 (54.300) (29.672)
Employees' profit participation (1.302) (317) (2.183) (1.116)
Participation of minority shareholders - - (2.977) (8.004)
---------------------------------------------------------------
NET INCOME BEFORE REVERSAL OF INTEREST ON
OWN SHAREHOLDERS' EQUITY 121.223 71.358 120.382 69.104
---------------------------------------------------------------
Reversal of interest on own shareholders' equity 40.000 15.000 40.841 17.254
---------------------------------------------------------------
NET INCOME 161.223 86.358 161.223 86.358
---------------------------------------------------------------
OUTSTANDING SHARES ON THE BALANCE SHEET DATE (THOUSANDS) 377,948144 366.463.335
---------------------------------------------------------------
NET INCOME PER THOUSAND SHARES (R$) 0,00043 0,00024
---------------------------------------------------------------
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
CONSOLIDATED FINANCIAL STATEMENT
(In thousands of Brazilian Reais)
--------------------------------------------------------------------------------------------------------------------
CONSOLIDADO 2Q2002 2Q2001 1Q2002 1Q2001 ACC. 2002 ACC. 2001
--------------------------------------------------------------------------------------------------------------------
GROSS OPERATING REVENUE 455.178 384.821 441.674 346.539 896.853 731.360
Deductions from gross revenue (98.638) (80.427) (86.716) (68.932) (185.354) (149.359)
NET OPERATING REVENUE 356.541 304.394 354.959 277.607 711.499 582.001
Cost of services rendered and
merchandise sold * (125.411) (122.115) (132.406) (104.265) (257.817) (226.380)
GROSS PROFIT 231.130 182.279 222.553 173.342 453.683 355.621
-
OPERATING REVENUES / EXPENSES -
Services commercialized * (48.277) (48.626) (45.963) (47.677) (94.240) (96.303)
General and administrative expenses * (26.296) (22.151) (28.006) (24.772) (54.302) (46.923)
Other net revenues / expenses * (1.970) (3.783) (140) 194 (2.110) (3.589)
PROFIT BEFORE DEPRECIATION AND
FINANCIAL REVENUES / EXPENSES - EBITDA 154.587 107.719 148.444 101.087 303.030 208.806
-
Depreciation (37.972) (32.718) (37.522) (31.148) (75.494) (63.866)
-
PROFIT AFTER DEPRECIATION BEFORE
FINANCIAL REVENUE AND EXPENSES - EBIT 116.615 75.001 110.922 69.939 227.537 144.940
-
Financial revenue / expenses (43.878) (16.165) 7.210 (11.197) (36.668) (27.362)
-
OPERATING PROFIT 72.737 58.836 118.131 58.742 190.868 117.578
-
Non-operating revenue / expense (5.168) (4.378) (5.871) (5.304) (11.039) (9.682)
-
PROFIT BEFORE TAXES, MINOR 67.569 54.458 112.260 53.438 179.830 107.896
-
Income tax and social contribution (19.389) (14.992) (34.899) (14.680) (54.288) (29.672)
Employee participation (1.370) (589) (813) (527) (2.183) (1.116)
Participation of minority shareholders 1.822 (4.675) (4.799) (3.329) (2.977) (8.004)
-
PROFIT BEFORE REVERSAL OF INTEREST ON
OWNED CAPITAL 48.631 34.202 71.750 34.902 120.381 69.104
-
REVERSAL OF INTEREST ON OWNED CAPITAL 40.703 17.254 138 - 40.841 17.254
-
NET PROFIT IN THE PERIOD 89.334 51.456 71.888 34.902 161.222 86.358
--------------------------------------------------------------------------------------------------------------------
EBITDA MARGIN 40,27% 35,39% 45,30% 36,41% 42,59% 35,88%
EBIT MARGIN 30,38% 24,64% 33,85% 25,19% 31,98% 24,90%
--------------------------------------------------------------------------------------------------------------------
* without depreciation.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
1. OPERATIONS
Tele Centro Oeste Celular Participacoes S.A. is a publicly traded company directly controlled by
BID S.A. (company controlled by Splice Group), which acquired 53.80% of voting capital and 18.53%
of total capital.
The Company controls the following companies: Telegoias Celular S.A., Telemat Celular S.A., Telems
Celular S.A., Teleron Celular S.A. and Teleacre Celular S.A. The subsidiaries are responsible for
providing cellular telephone services - Band A throughout Midwestern Brazil, including the States
of Rondonia and Acre, according to the concession terms signed by the Federal Government, which
expire on August 5, 2008 but can be extended for another 15 years.
On May 24, 1999 Norte Brasil Telecom S.A. - NBT was formed as a private company, with the
objective of exploring cellular telephone services, as well as all necessary and useful activities
for delivering these services within area 8 - Band B comprising the States of Amazonas, Roraima,
Amapa, Para and Maranhao. Norte Brasil Telecom S.A. started up its activities in 1999, serving 11
of the 97 cities comprising the respective operating area. The expenses incurred to December 31,
1999 were considered as pre-operating expenses and amortized as from January 2000 when the company
became operational and the respective expenses started being amortized.
The business of Tele Centro Oeste Celular Participacoes S.A., including the services provided by
its subsidiaries and respective charges are controlled by ANATEL (National Telecommunications
Agency), the entity responsible for regulating telecommunications in Brazil in accordance with Law
No. 9472 of July 16, 1997 and respective regulations.
On November 21, 2000 TCO IP S.A. was formed as a private company, with the objective of rendering
telecommunications and Internet access services, developing solutions and others.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
1. Operations - continued
On April 26, 2002, in order to rationalize the corporate structure of the parent company and its
subsidiaries, a corporate restructuring was carried out by means of the absorption of Telebrasilia
Celular S.A. by Tele Centro Oeste Celular Participacoes S.A., taking advantages of existing
administrative and commercial synergies and concentrating the liquidity of listed companies'
shares on a single company, thereby reducing capital cost. The terms and conditions of this
restructuring were negotiated by both company managements in a Special General Meeting also held
on April 26, 2002, which approved that the substitution proportion were determined based on net
assets appraised at market value and that only preferred shares were delivered, even for ordinary
shareholders. We point out that such absorption was subject to the authorization of the National
Telecommunications Agency - ANATEL, and the restructuring was approved by Act No. 24991 of April
23, 2002. The financial statements used at the time Tele Centro Oeste Participacoes S.A. absorbed
Telebrasilia Celular S.A. were those as of December 31, 2001 pursuant to the Absorption Protocol
item III - "C" of January 15, 2002.
2. PRESENTATION OF THE FINANCIAL STATEMENTS
The financial statements of the parent company and consolidated financial statements have been
prepared in conformity with accounting practices originating in Brazil's Corporation Law and
accounting norms and procedures established by the CVM (Brazilian Securities Commission).
3. SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (COMPANY AND CONSOLIDATED)
a. SHORT-TERM INVESTMENTS
Comprise temporary high liquidity investments falling due shorter than three months, stated at
cost plus income earned through the balance sheet date.
b. MARKETABLE SECURITIES
Comprise investments to be held to the respective maturity, which should not exceed 12 months
and are recorded at cost plus interest earned through the balance sheet date.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
3. SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (COMPANY AND CONSOLIDATED)-- Continued
c. CREDITS AND OBLIGATIONS
Credits and obligations are stated at their historical value. The amounts subject to monetary
updating, foreign exchange variation and interest are adjusted through the balance sheet date.
d. ALLOWANCE FOR DOUBTFUL ACCOUNTS
THIS PROVISION WAS SET UP TO COVER ACCOUNTS OF A DOUBTFUL COLLECTION. THE METHODOLOGY COMPRISES
THE RECORDING OF A PROVISION TO COVER 100% OF ACCOUNTS OVERDUE MORE THAN 90 DAYS. ADDITIONALLY,
FOR THE ACCOUNTS NOT YET BILLED, NOT YET DUE AND OVERDUE MORE THAN 90 DAYS, THE PERCENTAGES
HISTORICALLY OBTAINED FROM WRITE-OFFS ARE APPLIED ON THE RESPECTIVE GROSS REVENUES COMPUTED
WITHIN THE LAST 12 MONTHS.
e. INVENTORIES
Stated at the lower of average acquisition cost or market value. Inventories mainly comprise
cellular equipment to be sold to operators or accredited agencies.
f. INVESTMENTS
Comprise permanent shareholding of subsidiaries recorded according to the equity pickup method.
The accounting practices adopted by subsidiaries are consistent with those adopted by the
Company. The investments are stated at cost not exceeding market value.
g. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at acquisition and/or construction cost, monetarily
updated to December 31, 1995, less accumulated depreciation.
The operation right (concession area 8) of cellular services - Band B relating to the
subsidiary Norte Brasil Telecom S.A. was stated at the respective acquisition cost and is being
amortized in accordance with concession terms.
MATERIALS RELATED TO THE PLANT EXPANSION ARE STATED AT AVERAGE ACQUISITION COST.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
3. SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (COMPANY AND CONSOLIDATED)-- Continued
g. PROPERTY, PLANT AND EQUIPMENT--Continued
The maintenance and repair expenses representing improvements (increase of installed capacity
or useful life) are capitalized, while the remaining expenses are charged to operating results
following the accrual method.
Depreciation is calculated by the straight-line method considering the useful life of the
assets at rates shown in Note 8.
h. DEFERRED CHARGES
Income and expenses computed during the pre-operating phase of subsidiaries Norte Brasil
Telecom S.A. and TCO IP S.A. are charged to deferred charges and amortized by the straight-line
method over a period of 10 years.
i. INCOME AND SOCIAL CONTRIBUTION TAXES
Income and social contribution taxes are recorded on the accrual basis, calculated in
accordance with the current tax legislation. Deferred taxes are recorded over temporary
differences, calculated based on the rates applicable at the respective realization or
liquidation.
j. PROVISION FOR CONTINGENCIES
The provision for contingencies was recorded based on an analysis of the Company's lawyers
regarding all legal actions in progress.
k. INCOME AND EXPENSES
Income and expenses are charged to the operating result for the year on the accrual basis.
Revenues derived from sales of prepaid recharging cellular telephone cards are deferred and
charged to the operating result as the cards are used.
Billings are computed monthly, and revenues not billed between the billings date and the end of
the respective period are estimated and recognized in the month in which the service was
rendered.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
3. SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (COMPANY AND CONSOLIDATED)-- Continued
l. FINANCIAL RESULT, NET
The financial result net is represented by interest and monetary updating on short-term
investments and loans obtained and granted. In compliance with the current tax legislation, the
interest on shareholders' equity was recorded as financial expenses and considered as
appropriation of result for financial statement purposes, according to Brazilian Securities
Commission (CVM) Resolution No. 207 of December 12, 1996.
m. PENSION PLAN
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A. AND SUBSIDIARIES SPONSOR A PRIVATE SOCIAL SECURITY
PLAN, WHICH IS MANAGED BY SISTEL. ACCORDING TO THE CVM RESOLUTION NO. 371 OF DECEMBER 13, 2000,
THE COMPANY CARRIED OUT STUDIES OF FUTURE BENEFITS TO EMPLOYEES. HOWEVER, THE COMPANY OPTED TO
RECORD THE ADJUSTMENT TO ACTUARIAL LIABILITIES DIRECTLY IN THE OPERATING RESULT FOR THE YEAR AS
FROM 2002 AND FOR A PERIOD OF FIVE YEARS OR, IF LOWER, FOR THE PERIOD OF THE SERVICE OR
REMAINING LIFE OF THE EMPLOYEES.
n. EMPLOYEES' PROFIT PARTICIPATION
Tele Centro Oeste Celular Participacoes S.A. and subsidiaries provide for employees' profit
participation based on Article 5 of Provisional Measure No. 980 of April 25, 1995 and
subsequent publications.
The amount provided for is equivalent to a monthly salary subject to approval in the
Shareholders Meeting.
o. EARNINGS PER SHARE
Earnings per share were calculated based on the number of outstanding shares at the balance
sheet computation date.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
4. CONSOLIDATION OF THE FINANCIAL STATEMENTS
The consolidated financial statements were prepared in accordance with consolidation basic
principles established by Brazil's Corporation Law and norms of the CVM (Brazilian Securities
Commission).
We present below the main consolidation procedures:
a) Elimination of assets and liability account balances between the consolidated companies;
b) Elimination of shareholding, reserves and retained earnings of the consolidated companies;
c) Elimination of revenues and expenses derived from business between the consolidated
companies;
d) Highlighting the minority interest amounts on the financial statements.
The consolidated companies comprise the following:
TOTAL SHAREHOLDING (%)
-----------------------------------
6/30/2002 3/31/2002
-----------------------------------
- 88.25
Telebrasilia Celular S.A.
Telegoias Celular S.A. 97.02 96.81
Telemat Celular S.A. 97.56 97.50
Telems Celular S.A. 98.45 98.40
Teleron Celular S.A. 97.21 97.13
Teleacre Celular S.A. 98.35 98.31
Norte Brasil Telecom S.A. - NBT 98.33 31.67
TCO IP S.A. 99.99 99.99
As mentioned in Note 1, the subsidiary Telebrasilia Celular S.A. was merged by Tele Centro Oeste
Participacoes S.A. on April 26, 2002.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
5. MARKETABLE SECURITIES
CONSOLIDATED
MATURITY ---------------------
INTEREST DATE 6/30/2002 3/31/2002
-------------------------------------------------------
Commercial Paper- Prefixed annual rate 07/05/2002
Splice do of 24% to 25% with and
Brasil S.A. Swap of 100% of 09/30/2002
Interbank
Deposit Certificate -
CDI plus 1.5% p.a. 411,995 393,923
----------------------
411,995 393,923
======================
6. ACCOUNTS RECEIVABLE CONSOLIDATED
----------------------
6/30/2002 3/31/2002
----------------------
Amounts invoiced 68,771 63,669
Amounts to be invoiced 53,944 53,252
Network use rate 54,830 48,058
Sales - prepaid 28,917 20,269
Credit Cards 11,547 10,407
Allowance for doubtful accounts (40,382) (39,106)
Others 13,845 15,177
----------------------
191,472 171,726
======================
7. INVESTMENTS
COMPANY CONSOLIDATED
---------------------------------------------
6/30/2002 3/31/2002 6/30/2002 3/31/2002
---------------------------------------------
PARTICIPATION STATED BY
THE EQUITY PICKUP METHOD 957.048 1,141,451 - -
Premium - Norte Brasil
Telecom S.A. 4,882 5,033 4,882 5,033
Premium - Telegoias
Celular S.A. 4,138 4,377 4,138 4,377
Other investments 35 6 35 6
TAX INCENTIVES 16 - 185 185
---------------------------------------------
966,119 1,150,867 9,240 9,601
=============================================
THE PREMIUMS OF R$ 4,882 AND R$ 4,138 AT JUE 30, 2002 REFER, RESPECTIVELY, TO THE ACQUISITION OF
45% OF SHARES OF NORTE BRASIL TELECOM S.A. FROM INEPAR S.A. IN MAY 1999 AND THE ACQUISITION OF THE
SHARES OF TELEGOIAS CELULAR S.A. FROM THE MARKET IN 2001. THESE PREMIUMS ARE BEING AMORTIZED OVER
5 AND 10 YEARS.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
7. INVESTMENTS
The significant information on subsidiaries is as follows:
PARENT
TELEBRASILIA TELEGOIAS TELEMAT TELEMS TELERON TELEACRE NBT TCO IP COMPANY
---------------------------------------------------------------------------------------------------------
Investment balance in 332,685 319,516 194,956 166,063 46,604 25,911 54,697 1,019 1,141,451
the 1st quarter
Equity pick-up 2nd (20,300) 25,642 15,623 13,566 4,234 3,013 (2,722) (401) 38,655
quarter
Purchase of shares in - 305 10 6 1 1 - - 323
the 2nd quarter
Gain (loss) from the - (65) 4 3 - - - - (59)
purchase of shares
Reduction of the merged (25,436) - - - - - - - (25,436)
premium
Allocation of interest
on shareholders' equity - (13,865) (3,971) (6,626 (923) (1,062) - - (26,436)
- 2nd quarter
Increase (Reduction) of
investment due to the (286,949) - - - - - 115,147 - (26,447)
merger
Others - 145 107 77 23 10 - - (171,803)
---------------------------------------------------------------------------------------------------------
Investment balance in - 331,678 206,729 173,089 49,939 27,873 167,122 618 362
the 2nd quarter =========================================================================================================
Balance for share-
holders' equity in - 328,184 198,310 160,376 48,101 26,439 169,954 108 931,473
the 2nd quarter, with
no premium reserve
Percentage of
participation of the - 97,0247 97,5633 98,4528 97,2103 98,3508 98,3333 99,9900 97,0247
parent company (%)
Investment in - 318,420 193,478 157,895 46,759 26,003 167,131 618 318,420
subsidiaries
Merged premium/Advance
for future capital - 13,258 13,251 15,193 3,180 1,870 - 510 47,263
increase (TCO-IP)
---------------------------------------------------------------------------------------------------------
INVESTMENT BALANCE AT - 331,678 206,729 173,088 49,939 27,873 167,122 619 957,048
JUNE 30, 2002
=========================================================================================================
8. PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
------------------------------------------------------
6/30/2002 3/31/2002
------------------------------------------------------
ANNUAL COST
DEPRECIATION MONETARILY ACCUMULATED NET BOOK NET BOOK
RATE (%) UPDATED DEPRECIATION VALUE VALUE
---------------------------------------------------------------------
ASSETS AND SERVICE INSTALLATIONS
Switching equipment 10 231,984 (63,877) 168,107 172,372
Transmission equipment 14.29 650,847 (364,228) 286,619 306,660
Infrastructure -
- 4,825 - 4,825 4,822
Land
Buildings 4 34,679 (11,970) 22,709 22,476
Supporters and protectors 5 46,183 (9,663) 36,520 36,572
Energy equipment 10 64,279 (37,940) 26,339 27,256
Others 10 4,111 (1,606) 2.505 2,606
Computer equipment 20 31,802 (11,369) 20,433 21,672
Vehicles 20 1,776 (1,281) 495 506
5 to 20 72,418 (24,183) 48,235 43,052
Other assets
Assets for future use
Assets and construction in progress - 199,304 - 199,304 175,343
Construction material - 13,422 - 13,422 18,147
6.90 60,550 (8,286) 52,264 53,308
Exploration right (concession)
------------------------------------------------------
1,416,180 (534,403) 881,777 884,792
======================================================
9. LOANS AND FINANCING
COMPANY CONSOLIDATED
--------------------------------------------
INTEREST AND MONETARY UPDATING DUE DATE 6/30/2002 3/31/2002 6/30/2002 3/31/2002
----------------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY T.J.L.P. plus annual interest from 1/15/2008 18,513 - 226,764 192,796
BNDES 3.5% to 4%.
BNDES UMBNDES variation plus a loan charge 1/15/2008 - - - 12,954
from BNDES and annual
interest from 3.5% to 4%.
OTHER LOANS Industrial Products Column 20 - FGV 2002 to 2008 - 1,723 1,645
FOREIGN CURRENCY
Finimp Exchange variation based on the U.S. From 4/18/2002 20,219 6,497 35,004 136,588
dollar, plus Libor and 0.93% p.a. to 5/23/2002
over Libor, and 2.80% p.a.
COMPROR Exchange variation based on the U.S. From 7/07/2003 486 - 4,154 19,354
dollar plus annual interest of 9.30% to 29/11/2004
PREPAYMENT Exchange variation based on the U.S. 8/15/2002 38,916 49,987 63,941 138,045
dollar, Libor plus interest from 1.75%
to 1.90% p.a. and performance premium
ranging from 1.20% to 1.30% p.a.
EXPORT Exchange variation based on the U.S. 12/14/2006 70,200 21,286 132,262 110,156
DEVELOPMENT dollar plus semiannual Libor and
CORPORATION-EDC annual interest of 3.90%. p.a. to 5%
p.a.
--------------------------------------------
148,334 77,770 463,848 611,538
Current (84,984) (62,144) (191,306) (327,107)
--------------------------------------------
Noncurrent 63,350 15,626 275,542 284,431
============================================
THE AMOUNTS FALLING DUE ON A LONG-TERM BASIS ARE AS FOLLOWS:
CONSOLIDATED
-----------------------------------
DUE DATE 6/30/2002 3/31/2002
-----------------------------------------------------
2003 47,521 83,335
2004 90,548 79,330
2005 90,548 79,330
2006 22,883 22,161
2007 16,706 16,108
2008 4,336 4,167
-----------------------------------
272,542 284,431
===================================
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
9. LOANS AND FINANCING--Continued
On May 17, and July 11, 2001, TCO IP S.A. (a subsidiary) obtained funds in the foreign market in
amounts corresponding to US$ 90 million and US$ 20 million, respectively, through an operation
known as exports prepayment with purchase of performance. The charges on the operation were 1.75%
and 1.90% p.a. over Libor, plus 1.20% and 1.30% p.a. as purchase of performance rate.
GUARANTEES:
BANKS GUARANTEES
------------------------------------------ ---------------------------------------------------
BNDES - TCO Operators 15% of receivables and CDB pledged in the amount of
the next installment due
BNDES - NBT 100% of receivables and CDB pledged in the amount
of the next installment due during the first year
and CDB pledged in the amount equivalent to two
installments due in the remaining period
EDC Guarantee from TCO and other subsidiaries
Other loans and financing Guarantee from TCO
The contracts with BNDES and EDC include several restrictive clauses denominated covenants. At
June 30, 2002, the Company does not have problems relating to the compliance with contractual
conditions.
At June 30, 2002, the equivalent to 81% (91% at March 31, 2002) of loans and financing in foreign
currency are hedged against foreign exchange variation through swap contracts.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
10. PROVISION FOR CONTINGENCIES
Based on the lawyers' opinion, the Company recorded a provision for contingencies in amounts
considered necessary to cover possible losses derived from the outcome of ongoing processes, as
follows:
COMPANY CONSOLIDATED
-----------------------------------------------------------
6/30/2002 3/31/2002 6/30/2002 3/31/2002
-----------------------------------------------------------
Tax 12,199 9,861 14,707 14,378
Labor 54 - 236 288
Others (a) 66,180 63,359 66,180 63,359
-----------------------------------------------------------
78,433 73,220 81,123 78,025
===========================================================
(A) BASICALLY CORRESPOND TO THE ORIGINAL LOANS FROM TELECOMUNICACOES BRASILEIRAS S.A. - TELEBRAS,
WHICH, ACCORDING TO ATTACHMENT II OF THE SPIN-OFF REPORT OF FEBRUARY 28, 1998, APPROVED BY THE
GENERAL SHAREHOLDERS MEETING OF MAY 1998, SHOULD BE CHARGED TO THE RESPECTIVE HOLDING CONTROLLED
BY TELEGOIAS CELULAR S.A. AND TELEBRASILIA CELULAR S.A.
LOCAL MANAGEMENT, BASED ON THE UNDERSTANDING THAT THE RESPECTIVE LOANS WERE WRONGLY ALLOCATED AT
THE TIME OF THE SPIN-OFF, SUSPENDED PAYMENTS SUBSEQUENTLY TO THE CHANGES IN COMPANY'S CONTROLS.
THESE LOANS ARE BEING INDEXED BY THE IGP-M (GENERAL MARKET PRICE INDEX) PLUS 6% ANNUAL INTEREST.
In June 1999, Tele Centro Oeste Celular Participacoes S.A. (parent company) filed a legal action
claiming that the assets related to these obligations - loans and financing - belong to the
Company, as well as the respective accessories, plus compensations for the installments paid.
IN NOVEMBER 1999, THE COMPANY'S MANAGEMENT DECIDED TO TRANSFER TO THE ACTUAL HOLDING - TELE
CENTRO OESTE CELULAR PARTICIPACOES S.A. THE LIABILITY DERIVED FROM THE LOAN ORIGINALLY DUE TO
TELECOMUNICACOES BRASILEIRAS S/A - TELEBRAS AND ABSORBED DURING THE SPIN-OFF PROCESS.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
11. SHAREHOLDER' EQUITY
a) CAPITAL
The authorized capital at June 30, 2002 and March 31, 2002 corresponds to 700,000,000,000 shares.
The subscribed and paid-in capital at June 30, 2002 and March 31, 2002 corresponds to R$ 505,000,
represented by 366,463,335,000 shares with no par value, held as follows (in thousands of
shares):
6/30/2002 3/31/2002
--------------------------------
Common shares 126,433,338 126,433,338
PREFERRED SHARES 252,766,698 240,029,997
--------------------------------
379,200,036 366,463,335
================================
BOOK VALUE PER LOT OF THOUSAND SHARE (IN R$) 3,006946 2,887735
The preferred shares of Tele Centro Oeste Celular Participacoes S.A. are nonvoting and have
priority of reimbursement and payment of noncumulative minimum dividends.
b) SPECIAL PREMIUM RESERVE
This reserve was constituted as a result of the Company's partial spin-off and refers to the
premium paid for the acquisition of BID S.A. (subsequently recorded at Coverage Participacoes
S.A., a company merged by Tele Centro Oeste Celular Participacoes S.A.). This operation was
recorded in a specific permanent assets account against the capital reserve account recorded in
shareholders' equity. This reserve is reduced by the provision for maintaining shareholders'
equity completeness.
c) TREASURY STOCK
On March 27, 2002, the Administration Council of Tele Centro Oeste Celular Participacoes S.A.,
supporting the resolutions of June 22, 2001, September 25, 2001 and December 26, 2001,
respectively, approved the acquisition of shares at market value up to a number of 25,350,000,000
shares issued by the Company, from which 3,450,000,000 correspond to common shares and
21,900,000,000 correspond to preferred shares, representing up to 10% of the outstanding common
shares and up to 10% of the outstanding preferred shares, for cancellation or permanence in
treasury and subsequent disposal, without reduction of capital.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
11. SHAREHOLDER' EQUITY--Continued
c) TREASURY STOCK
The balance of common shares corresponds 1,251,892,000 shares at June 30, 2002 (1,157,783 at
march 31, 2002). With the merger of Telebrasilia Celular S.A. by Tele Centro Oeste Celular
Participacoes S.A., all preferred shares in treasury were cancelled.
ORDINARY SHARES AMOUNT TO 1,251,892 THOUSAND AT JUNE 30, 2002 (1,157,783 AT MARCH 31, 2002).
Market value of treasury stock at the end of the quarter was R$ 8.90 per thousand common shares
(R$ 7.90 at March 31, 2002), according to the quote on June 28, 2002 for common shares, which are
the last purchase dates.
COMMON SHARES PURCHASE AMOUNT RANGES FROM R$ 4.20 AND R$ 8.69.
12. NET OPERATING RESULT
CONSOLIDATED
-----------------------------------
6/30/2002 6/30/2001
-----------------------------------
52,638 67,421
Subscription
Use
National 289,634 226,087
Displacement/additional per calls 20,718 18,764
and others
Use of network 305,585 250,038
Additional services 6,215 3,275
Resale of cellular equipment 117,987 103,091
Resale of cards 103,346 62,573
Internet services 604 -
Others 126 111
-----------------------------------
Gross operating income 896,853 731,360
Taxes on gross income (185,351) (149,359)
------------------------------------
Net operating income 711,502 582,001
====================================
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
13. RELATED PARTY TRANSACTIONS
6/30/2002
--------------------------
COMPANY CONSOLIDATED
--------------------------
ASSETS
Cash and cash equivalents 9 9
Short-term investments 10,096 18,575
Marketable securities 86,019 411,995
Accounts receivable 2,550 -
Loans to related parties 22,503
LIABILITIES
Suppliers 258 3,060
Interest on shareholders' equity 12,336 12,336
Dividends 7,505 7,505
Intercompany 9,565 -
TRANSACTIONS
Cost of telecom services - mobile network 71 -
use tariff (TUM)
Financial expenses 9,490 19,041
General and administrative expenses - 4,166
Acquisition of telephone cards 435 2,376
Acquisition of property, plant and equipment 348 3,071
Telecom services - TUM 91 -
Other income 14,337 -
Financial income 42,881 58,498
The Company and its subsidiaries raise funds in the foreign market and pass them through to
related parties by means of Debt Assumption Operations in order to reduce the total raising cost.
In these operations, the contracted loans and financings are passed through to the related
parties at the same contracted operating rates, plus premium.
According to the contract entered into by and among Splice do Brasil S.A. and the subsidiaries of
Tele Centro Oeste Celular Participacoes S.A., Telems Celular S.A., Telemat Celular S.A., Teleron
Celular S.A., Telegoias Celular S.A and Teleacre Celular S.A., a technical assistance shall be
provided to Splice do Brasil S.A., corresponding to 1% of net operating revenues. For the period
ended June 30, 2002, R$ 2,279 (1,887 at March 31, 2002) was appropriated to general and
administrative expenses.
All the related party transactions were carried out in accordance with the Company's articles of
incorporation and at normal market conditions.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
14. FINANCIAL INSTRUMENTS
Pursuant to Normative Instruction of CVM No. 235/95, Tele Centro Oeste Celular Participacoes S.A.
and subsidiaries performed an evaluation of book value of their assets and liabilities in
relation to market value based on available information and appropriate evaluation methodologies.
However, the interpretation of market information, as well as of the selection of evaluation
methods, require considerable judgment and reasonable estimates in order to conclude on the most
adequate realization value. Consequently, the estimates presented do not necessarily indicate the
amounts that could be realized in the current market. The application of different market
hypothesis and/or estimate could have a material effect on the estimated realization values.
The Company's investments are recorded by the equity pickup method. These investments comprise
subsidiaries of strategic interest to the Company. Therefore, market value considerations are not
applicable. The accounts receivable and accounts payable recorded in current assets and
liabilities approximate market value due to their short-term maturity.
The main market risk factors affecting the Company's business comprise the following:
a) EXCHANGE RATE RISK
This risk relates to the possibility of the Company computing losses derived from foreign
exchange rate fluctuations, increasing the debt balance of foreign currency loans obtained in the
market and the financial expenses balance. In order to reduce this type of risk, the Company
enters into hedge contracts (swaps of CDI) with financial institutions.
At June 30, 2002, part of the Company's financial debts were denominated in U.S. dollar and 81%
(91 % at March 31, 2002) of the foreign currency debts were covered by hedge operations carried
out for purposes of partially covering the future maturity of debts in U.S. dollars, indexed by
fixed or variable interest rates. The gains or losses from these operations are recorded in the
statement of income.
The Company's net exposure to the foreign exchange rate risk, at book and market value, at June
30, 2002 corresponds to the following:
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
14. FINANCIAL INSTRUMENTS --Continued
JUNE 30, 2002 MARCH 31, 2002
------------------------- --------------------------
Book Market Book Market
VALUE VALUE VALUE VALUE
------------------------------------------------------
Loans in U.S. dollars 235,361 237,161 404,143 409,591
Hedge 189,897 181,719 364,847 365,773
------------------------- --------------------------
Net exposure 45,464 55,442 39,296 43,818
========================= ======++++================
The valuation method used for calculating the market value of loans, financing and swap contracts
was based on discounted cash flow, considering the expectations of liquidation or realization of
liabilities and assets at market rates in effect at the balance sheet date.
b) INTEREST RATES RISK
The risk relates to the possibility of the Company computing losses resulting from interest rate
fluctuations, increasing the debt balances of loans obtained in the market and the financial
expenses. The Company has not entered into hedge contracts against this risk. However, the
Company constantly monitors the market interest rates in order to assess the need for contracting
derivatives and to hedge against the risk of interest rates volatility.
At June 30, 2002, the Company presents the amount of R$ 228,487 (R$ 207,935 at March 31, 2002) in
loans and financing in local currency obtained at various fluctuating rates (as explained in Note
9), as well as short-term investments in the amount of R$ 231,969 (R$ 385,389 at March 31, 2002)
and investments in marketable securities of R$ 411,995 (R$ 393,923 at March 31, 2002) based on
the CDI variation.
At June 30, 2002, the Company presents R$ 132,262 (R$ 110,156 at March 31, 2002) in loans and
financing in foreign currency at variable interest rates (Libor renegotiated on a semiannual
basis) and hedge contracts for these operations amounting to R$ 87,285 (R$ 75,254 at March 31,
2002) at fixed interest rates plus the exchange variation.
Another risk to which Tele Centro Oeste Celular Participacoes S.A. and subsidiaries are exposed
is the non-connection between the monetary updating indexes on their debts and those on accounts
receivable. The telephone charge readjustments do not necessarily correspond to the local
interest rates rise affecting the Company's debts.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
14. FINANCIAL INSTRUMENTS --Continued
c) OPERATING CREDIT RISK
The risk relates to the possibility of the Company computing losses derived from difficulties in
collecting the amounts billed to customers, represented by cellular equipment dealers and
distributors of prepaid telephone cards. In order to reduce this type of risk, the Company
performs credit analyses supporting the risk management over collection problems and monitors the
accounts receivable from subscribers, locking the calling capacity in case customers fail to pay
their debts. With respect to shops and distributors, the Company maintains individual credit
limits based on the analysis of sales potential, risk history and collection problem risks.
CREDIT RISK LINKED TO RENDERING OF SERVICES
The credit risk in relation to accounts receivable from cellular telephone services is
diversified.
CREDIT RISK LINKED TO THE SALE OF EQUIPMENT
The Company's policy for selling equipment and distributing prepaid telephone cards is closely
related to the credit risk levels accepted during the normal course of business. The selection of
partners, the diversification of receivables portfolio, the monitoring of loan terms, position
and request limits established for dealers, obtaining guarantees are procedures adopted by the
Company in order to minimize possible collection problems with its trading partners.
d) FINANCIAL CREDIT RISK
The risk relates to the possibility of the Company computing losses derived from difficulties in
the realization of short-term investments and hedge contracts. The Company and subsidiaries
minimize the risks associated with these financial instruments by investing with good rating
financial institutions.
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
EXPLICATIVE NOTES
For the period ended June 30, 2002
(In thousands of Brazilian Reais)
15. SUBSEQUENT EVENT
(a) As disclosed in a previous press release published by Tele Centro Oeste Celular
Participacoes S.A. and in a relevant fact published by Splice Telecomunicacoes e Eletronica
S.A. ("Splice") on July 03, 2002, the Board of Tele Centro Oeste Celular Participacoes S.A.
approved on July 02, 2002, the acquisition of up to R$ 470 million in private debentures
issued by Fixcel S.A., a company belonging to the Splice Group which holds capital stock
shares of BID S.A., direct controller of Tele Centro Oeste Celular Participacoes S.A..
(b) In addition, the Board of Tele Centro Oeste Celular Participacoes Celular S.A. approved on
August 13, 2002 the acquisition of up to R$ 190 million in private debentures issued by
Fixcel S.A..
Tele Centro Oeste Celular Participacoes S.A used funds available for the acquisition of the debentures
issued by Fixcel S.A. mentioned in items (a) and (b), above.
The debentures mature in 360 (three hundred and sixty) days as of their issue and assure profitability
levels in line with general market rates; they also bear floating guarantee on the Fixcel S.A. assets
and guarantee from Splice.
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS. STATEMENTS THAT ARE NOT STATEMENTS OF HISTORICAL
FACT, INCLUDING STATEMENTS ABOUT THE BELIEFS AND EXPECTATIONS OF THE COMPANY'S MANAGEMENT, ARE
FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS," "FORECASTS,"
"INTENDS," "PLANS," "PREDICTS," "PROJECTS" AND "TARGETS" AND SIMILAR WORDS ARE INTENDED TO IDENTIFY
THESE STATEMENTS, WHICH NECESSARILY INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. ACCORDINGLY, THE
ACTUAL RESULTS OF OPERATIONS OF THE COMPANY MAY BE DIFFERENT FROM THE COMPANY'S CURRENT EXPECTATIONS,
AND THE READER SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE, AND THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION
TO UPDATE THEM IN LIGHT OF NEW INFORMATION OR FUTURE DEVELOPMENTS.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tele Centro Oeste Cellular Holding Company
Date: August 15, 2002 By: /S/ MARIO CESAR PEREIRA DE ARAUJO
-----------------------------------------
Name: Mario Cesar Pereira de Araujo
Title: President