Valuation

Report

May 27, 2009

Telemig Celular S.A.

Telemig Participações S.A.

Vivo Participações S.A.

Exhibit 99.2

Introduction

1

The

accompanying

material

has

been

prepared

by

Citigroup

Global

Markets

Inc.

(“Citi”)

and

is

subject

to

and

in

accordance

with

the

terms

of

Citi’s

engagement

letter

(the

“Engagement

Letter”)

with

Vivo

Participações

S.A.,

Telemig

Celular

Participações

S.A.

and

Telemig

Celular

S.A.

(each, a

“Company”,

and

collectively,

the

“Companies”),

including

the

section

entitled

“Use

of

Information”

therein.

The

accompanying

material

contains

information

provided

to

the

Companies

solely

for

use

by

their

respective

Board

of

Directors

and

the

Special

Committees

thereof

in

negotiating

the

terms

of

the

Transaction

(as

hereinafter

defined)

and

shall

not

be

used

for

any

other

purposes,

including,

without

limitation,

to

form

the

capital

of

any

of

the

Companies under the terms of the Corporations Law (as hereinafter defined), including, but not limited to, Article 8 thereof.  Under the terms of the

Engagement

Letter,

the

scope

of

Citi’s

engagement

is

to,

in

accordance

with

Citi’s

customary

practices,

(i)

perform

certain

valuation

analyses

of

the

Companies

as

Citi

deems

appropriate

and

(ii)

as

required

by

the

respective

by-laws

of

Vivo

Participações

S.A.

and

Telemig

Celular

Participações

S.A.,

the

Corporations

Law

(as

hereinafter

defined)

and

in

accordance

with

Parecer

de

Orientação

CVM

nº

35/08,

render

Citi’s

view

as

to

the

exchange

ratios

that could be considered equitable to the shareholders of the respective Companies, which shall be used as a basis for the negotiation of an exchange

ratio by the Companies in connection with the Transaction (as hereinafter defined), subject to the terms, conditions and limitations set forth or referred to

in the accompanying materials.  This Valuation (as hereinafter defined) is being rendered to the Board of Directors and Special Committee of each

Company and, accordingly, no other person may rely upon the accompanying material.  The accompanying material has been prepared for the purposes

described

above,

and

does

not

constitute

a

fairness

opinion

by

Citi

to

the

Companies

or

its

shareholders.

In

accordance

with

the

Brazilian

Corporations

Law

nº

6404

of

December

15,

1976,

as

amended

(the

“Corporations

Law”),

the

Companies

have

engaged

Citi

as

their

financial

advisor

to

perform

certain

valuation

analyses

(the

“Valuation”)

of

the

Companies

in

connection

with

the

corporate

restructuring

for

the merger of shares of Telemig

Celular

S.A. into Telemig

Celular

Participações

S.A. and of Telemig

Celular

Participações

S.A. into Vivo Participações

S.A.,

resulting

in

the

conversion

of

Telemig

Celular

S.A.

into

a

wholly-owned

subsidiary

of

Telemig

Celular

Participações

S.A.

and

of

Telemig

Celular

Participações

S.A.

into

a

wholly-owned

subsidiary

of

Vivo

Participações

S.A.

(the

“Transaction”).

Each

Company

has

acknowledged

and

consented

to

Citi’s

common

representation

of

each

Company

in

connection

with

the

Transaction,

and

each

Company

has

acknowledged

and

agreed

that

such

common

representation

is

without

prejudice

to

the

interests

of

any

Company

and

waived

any

potential

conflict of interests that may arise from such common representation.

In

connection

with

preparing

Citi’s

valuation

analyses,

Citi

held

group

meetings

with

certain

senior

officers,

members

of

the

Special

Committees

and

other

representatives

and

advisors

of

each

Company

concerning

the

business,

operations

and

prospects

of

each

Company.

Citi

examined

certain

publicly available business and financial information relating to each Company and certain of its subsidiaries as well as certain financial forecasts of

certain subsidiaries and investments and other information and data relating to each Company, its subsidiaries and investments which were provided to

or discussed with us by the respective managements of the Companies, including, without limitation (i) certain financial analyses and forecasts for each

of the Companies prepared and approved by the senior management of each such Company, (ii) publicly available financial statements for the years

ended

December

31,

2006,

2007

and

2008

of

each

of

the

Companies,

which

were

audited

by

Deloitte

Touche

Tohmatsu

Auditores

Independentes

regarding Vivo Participações

S.A.’s fiscal year 2006, Telemig

Celular

Participações

S.A.’s and Telemig

Celular

S.A.’s fiscal years 2006 and 2007; and by

Ernst

&

Young

Auditores

Independentes

S/S

regarding

Vivo

Participações

S.A.’s

fiscal

years

2007

and

2008,

Telemig

Celular

Participações

S.A.’s

and

Telemig

Celular

S.A.’s

fiscal

year

2008,

and

(iii)

certain

other

unaudited

financial

information

with

respect

to

each

of

the

Companies,

including

the

cash

and bank balances, loans and other debt obligations and hedging and contingencies provisions of each Company as of March 31, 2009.

Introduction

(Cont’d)

2

In addition to the foregoing, Citi considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at

this Valuation.  The issuance of this Valuation has been authorized by Citi’s valuation committee.  Notwithstanding the foregoing to Citi’s knowledge,

none of the Companies or its managers or controlling shareholders directed, limited, hindered or took any kind of action that may have compromised

Citi’s access, use or knowledge of any information, assets, documents or work methods relevant in order for Citi to (i) obtain all information required by

Citi to produce the valuation report and reach the conclusions set forth in this Valuation, (ii) choose independently the methodologies used by Citi to

reach the conclusions set forth in this Valuation, and (iii) reach independently the conclusions set forth in this Valuation.  

For purposes of this Valuation, Citi has, with the express consent of the Companies, having analyzed, consistent with its practices for transactions of this

nature, all financial and other information received from the Companies, assumed and relied, without independent verification, upon the accuracy and

completeness of all such financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and

upon the assurances of the respective managements of the Companies that they are not aware of any relevant information that has been omitted or that

remains undisclosed to Citi.  As to the business plans and financial projections of the Companies and their respective subsidiaries and any other

information provided to or otherwise reviewed by or discussed with Citi, Citi has, consistent with its practices for transactions of this nature, and with the

express consent of the Companies, assumed that (i) they were based on the market conditions applicable to the segment in which the Companies

respectively operate, and (ii) they were reasonably prepared so as to reflect the best estimates available and the best judgment on the part of the

respective management of the Companies with regard to the expected future financial performance of each such Company during the applicable period.

Furthermore, Citi has, consistent with its practices for transactions of this nature, and with the express consent of the Companies, assumed and relied

on the consistency and reasonableness of such plans, projections and information, and has not assumed that (or verified if), as of or since the date on

which such plans, projections or other information were prepared and/or approved, (i) any changes in the business, financial condition, assets, liabilities,

business prospects or commercial transactions of any such Company, and/or (ii) any other facts have occurred that (A) could have a substantial impact

on the business plans, financial projections or other information in any relevant respects, and/or that (B) could have material effects on the outcome of

this Valuation.  Citi assumes no responsibility or liability with respect to the accuracy, truthfulness, integrity, consistency, or sufficiency of any information

provided by any of the Companies, for which the Companies are solely and exclusively responsible.

Citi has assumed, consistent with its practices for transactions of this nature, and with the Companies’ consent, that the Transaction will be

consummated in accordance with the terms described in the Form F-4 to be filed by Vivo Participações S.A. and Telemig Celular Participações S.A.,

without waiver, modification or amendment of any material term and that, in the course of obtaining the necessary regulatory or third party approvals,

consents and releases for the Transaction, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on any

Company or the contemplated benefits to each Company of the Transaction.  Citi has not made or been provided with an independent evaluation or

appraisal of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of any of the Companies nor did Citi

undertake any evaluation or appraisal of the assets or liabilities of any of the Companies, having only analyzed, consistent with its practices for

transactions of this nature, the information furnished by the respective Companies with respect to such assets and liabilities of the Companies.  Citi

made no physical inspection of the properties or assets of any of the Companies.  Citi was not requested to, and Citi did not, participate in the

negotiation or structuring of the Transaction, nor was Citi requested to, and Citi did not, solicit third party indications of interest in the possible acquisition

of all or a part of any Company.  Citi expresses no view as to, and this Valuation does not address, the underlying business decision of any Company to

effect the Transaction, the relative merits of the Transaction as compared to any alternative business strategies that might exist for any Company or the

effect of any other transaction in which any Company might engage.  Citi also expresses no view as to, and this Valuation does not address, the fairness

(financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the

Transaction, or any class of such persons relative to the exchange ratios applicable to the Transaction.

Introduction

(Cont’d)

3

The Companies have asked Citi to prepare this Valuation in connection with the requirement set forth in Article 30 of the bylaws of Vivo Participações 

with respect to the “equitable treatment” as to the exchange ratios that could be considered equitable to the shareholders of the respective Companies,

which shall be used by the Companies in connection with the Transaction.  Citi’s analysis has been prepared on the basis that if the Board of Directors of

a Company or any Special Committee thereof proposes or adopts an exchange ratio with respect to the Transaction that is within the range of exchange

ratios implied by the range of value indications derived from this Valuation with respect to the Companies in connection with the Transaction, applied on a

consistent basis, then the exchange ratio would constitute “equitable treatment.”  This Valuation has been prepared solely based on the discounted cash

flow methodology, which is the current market practice in Brazil for the assessment of a company's economic value, assuming a stable macroeconomic

scenario for Brazil.

In its analyses, Citi made numerous assumptions with respect to the Companies, industry performance, general business, economic, market and financial

conditions and other matters, many of which are beyond the control of the Companies.  Any estimates contained in this Valuation are not necessarily

indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by these

analyses.  Estimates of values of companies do not purport to be appraisals or necessarily to reflect the prices at which companies may actually be sold. 

Because these estimates are inherently subject to uncertainty, none of the Companies, their respective Board of Directors and any Special Committees

thereof, Citi or any other person assumes responsibility if future results or actual values differ materially from the estimates.

The preparation of financial analyses and valuation reports is a complex process involving subjective judgments and is not necessarily susceptible to

partial analysis or summary description.  Citi made no attempt to assign specific weights to particular factors considered, but rather made qualitative

judgments as to the significance and relevance of all the factors considered and determined to give its valuation report.  Accordingly, Citi believes that its

analyses must be considered as a whole, and that selecting portions of the analyses and of the factors considered by Citi, without considering all of the

analyses and factors, could create a misleading or incomplete view of the processes underlying the analyses conducted by Citi and its valuation report.

In addition, this Valuation (i) treats the Companies as stand-alone operations and therefore, the analyses and results of this Valuation do not include any

operational, tax or other benefits or losses, or synergies, incremental value and/or costs for the Companies, if any, which may arise from the

consummation of the Transaction (including the amount, timing and achievability thereby) and (ii) does not address the treatment of the different classes

of shares of the Companies, and any adjustments intended to offset, or that may reflect, any specific rights associated with any specific class of shares of

the Companies, and with the consent of the Companies, Citi has not conducted any investigation with respect to the relative rights applicable to the

different classes of shares.  Therefore, Citi is not expressing, and this Valuation does not contain, any views relating to the distribution of economic value

among the various classes of shares of any of the Companies.

For purposes of the valuation analysis, Citi did not take into account tax-related effects that any shareholders of each of the Companies may experience

in connection with the exchange of Telemig Celular S.A. shares for Telemig Celular Participações S.A. shares and Telemig Celular Participações S.A.

shares for Vivo Participações S.A. shares, and any fees and expenses that may be incurred in connection with the settlement of that exchange (such as

fees that Telemig Celular Participações S.A. ADS holders may be charged for certain depositary services).

S.A.,

Article

49

of

the

bylaws

of

Telemig

Celular

Participações

S.A.

and

Parecer

de

Orientação

CVM

n

35/08

that

each

Company

obtain

a

determination

Introduction

(Cont’d)

4

/s/Citigroup

Global

Markets

Inc.

Citigroup Global Markets Inc.

Citi has acted as financial advisor to the Companies in connection with the Valuation and will receive a fixed fee upon delivery of this Valuation.  Citi and

Citi’s affiliates in the past have provided, and are currently providing, services to the Companies and Vivo S.A. unrelated to the proposed Transaction, for

which services Citi and such affiliates have received and expect to receive compensation, including, without limitation, acting as (i) financial advisor to

Citigroup Venture Capital International Brazil L.P., who was part of the controlling shareholder group of Telemig Celular Participações S.A. and Telemig

Celular S.A., in connection with the sale of its controlling stake to Vivo Participações S.A., on July 27, 2007, and (ii) counterparty on a foreign currency for

interbanking deposit certificates (CDI) swap agreement that Citi entered into with Vivo S.A. on December 6, 2007, with a maturity date of December 19,

2014.  In the ordinary course of Citi’s business, Citi and Citi’s affiliates may actively trade or hold the securities of the Companies and their respective

affiliates and subsidiaries, for Citi’s own account or for the account of Citi’s customers and, accordingly, may at any time hold a long or short position in such

securities.  In addition, Citi and Citi’s affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with the Companies and their respective

affiliates.  Subject to the foregoing, Citi has no direct or indirect interest in the Companies or the Transaction, and Citi is not aware of any circumstance that

could represent a conflict of interest with the Companies or the Transaction.

Citi’s Valuation is provided solely for the information of the Board of Directors of each Company and the Special Committees thereof in their evaluation of the

proposed Transaction, and may not be relied upon by any third party or used for any other purpose.  Citi’s Valuation is not intended to be and does not

constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the proposed Transaction.  Citi’s

Valuation may not be quoted, referred to or otherwise disclosed, in whole or in part, nor may any public reference to Citi be made, without Citi’s prior written

consent, except that, in this case of this Valuation, the Companies may reproduce this Valuation in full, and may also include references to this Valuation

and to Citi and its relationship with the Companies (in each case in form and substance as Citi shall approve), (i) in any proxy statement relating to such

Transaction that the Companies are required to file under the U.S. Securities Exchange Act of 1934 (as amended) and distribute to their shareholders and

(ii) to the extent required by (and after consultation with Citi to the extent practicable) the Brazilian corporate legislation, any specific requirements imposed

by the courts, the Comissão de Valores Mobiliários – CVM or other securities commissions which have jurisdiction over the Companies or in any disclosures

to comply with the Companies’ bylaws requirements.

Based upon and subject to the foregoing, Citi’s experience as investment bankers, Citi’s work as described above and other factors Citi deemed relevant, if

the exchange ratio proposed or adopted by the Board of Directors of each Company or any Special Committee thereof with respect to the Transaction is

within the implied exchange ratios derived from this Valuation with respect to each of the Companies, it is Citi’s view that such exchange ratio as of the date

hereof would constitute equitable treatment to its shareholders as described above.

The accompanying material is necessarily based upon information available to Citi, and financial, stock market and other conditions and circumstances

existing and disclosed to Citi, as of the date of the accompanying material.  Citi does not have any obligation to update or otherwise revise the

accompanying material.  Nothing contained herein shall be construed as legal, tax or accounting advice.

This Valuation has been prepared in both English and Portuguese, and the Portuguese version shall prevail for all purposes.

Table

of

Contents

23

Appendix A: Glossary

19

C.

Vivo S.A. and

Vivo Participações (“Vivo Part.”)

18

B.

Telemig Celular Participações (“TCP”)

14

A.

Telemig

Celular

S.A. (“TC”)

12

Background Information

3.

8

Summary of Valuation Analyses

2.

5

Overview of the Transaction

1.

1. Overview of

the

Transaction

Overview of the Transaction

Illustrative Current Structure of Vivo Part. / TCP / TC

Illustrative Proposed Post-Transaction Structure

Vivo Part.

Vivo S.A.

TCP

Minority

Shareholders

Controlling

Shareholders

TC

Minority

Shareholders

100.0%

ON: 97.0%

PN: 37.0%

T: 58.9%

ON: 3.0%

PN: 63.0%

T: 41.1%

ON: 8.8%

PN: 6.6%

T: 7.4%

ON: 89.2%

PN: 79.7%

T: 83.3%

ON: 2.1%

PN: 13.7%

T: 9.4%

Vivo Part.

Vivo S.A.

TCP

Controlling

Shareholders

TC

Minority

Shareholders

100.0%

100.0%

ON: 89.6%

PN: 49.0%

T: 63.8%

ON: 10.4%

PN: 51.0%

T: 36.2%

100.0%

Minority

Shareholders

Source:

Companies’

filings.

Note: Does not represent the complete corporate structure. Reflects ownership net of treasury shares that may not sum to 100% due to rounding.

5

Valuation

Analyses

Methodology

6

The materials herein represent a valuation analysis (the “Valuation”) of the Companies through the discounted

cash flow methodology (“DCF”), based on information contained in the Business Plan presented and approved

by the Companies’ senior management (“Business Plan”) 

–

Each Valuation was prepared as of March 31, 2009 based on a projection period from 2009 to 2018

–

The Business Plan was prepared in nominal Brazilian Reais 

The unlevered free cash flow, based on the Business Plan prepared by the Companies’ management teams,

represents net income before net financing costs, goodwill amortization and tax-shield from net operating losses

(“NOLs”) utilization. The Valuation also assumes interest on equity, according to the Companies’ Business Plan 

The Companies’ Firm Value was determined by adding:

1.

The net present value of the unlevered free cash flows of the operating entities within the Vivo conglomerate

(Vivo S.A. and TC) for the projection period 

2.

The present value of the terminal value, calculated according to the perpetuity growth methodology applied to

a normalized unlevered free cash flow (investments in fixed assets equal to depreciation)

3.

After obtaining the sum of the above, the ownership of TCP and Vivo Part. in their respective operating

entities were applied. The resulting values were adjusted by the present value of the tax benefits from non-

operating assets and by Vivo Part.’s and TCP’s operating expenses

Non-operating assets analyzed include (i) future goodwill amortization and (ii) NOLs

The DCF Valuation was prepared based on a range of (i) discount rate / weighted average cost of capital

(“WACC”) between 14.3% and 16.7% (in nominal Reais) and (ii) perpetuity growth rate between 3.5% and 5.5%

Valuation

Analyses

Methodology

(Cont’d)

7

The indicative Equity Value calculated for each of the Companies was determined by subtracting from the Firm

Value (i) net debt, (ii) provisions for contingencies net of deposits in court, and (iii) net dividends and interest on

equity payable and receivable. These adjustments were made as set forth in the Companies’unaudited balance

sheets as of March 31, 2009

The equity value per share (“Value per Share”) for each of the Companies was determined by dividing the Equity

Value by the total number of shares outstanding as of March 31, 2009, net of treasury shares

The Valuation results in aggregate equity value indications for each of the Companies and do not allocate value

between any class or type of shares. The Valuationconsiders the Companies in their current corporate,financial

and operational structures. No adjustments were made as to potential benefits from the transaction, such as

synergies or tax gains

The illustrative range of exchange ratios calculated for the Companies was determined by the consistent

comparison of the Value per Share calculated for each Company

2. Summary

of

Valuation

Analyses

Equity

Value

(R$ mm)

Value

per Share

(R$)

Implied

Exchange

Ratio

$53.59

$73.63

$1,242.10

$29,061

$3,742

$4,128

$20,000

$2,760

$2,946

$77.87

Vivo Part.

$99.83

TCP

17.436x

16.870x                           

$1,740.51

TC

Summary

of

Valuation

Analyses

The results of the Valuation based on the DCF methodology considered a WACC range between 14.3% and

16.7% and a perpetuity growth range between 3.5% and 5.5%.

1.282x           1.374x

-

-

-

-

-

-

-

-

8

TC and TCP: Implied

Exchange Ratio

Range

Implied

Exchange Ratios

(Number

of

TCP shares

per TC share)

Value

per Share

(R$ per share)

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

$1,740.51 

$1,641.18 

$1,560.25 

14.3%

1,338.71 

1,286.45 

1,242.10 

16.7%

1,514.71 

1,443.64 

1,384.41 

15.5%

TCP

TC

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

$99.83 

$94.60 

$90.35 

14.3%

78.71 

75.96 

73.63 

16.7%

87.96 

84.22 

81.11 

15.5%

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

17.436x 

17.348x 

17.269x 

14.3%

17.009x 

16.936x 

16.870x 

16.7%

17.221x 

17.141x 

17.069x 

15.5%

Note: The range of implied exchange ratios was determined based on the consistent comparison of the Values per Share.

9

TCP and Vivo Part.: Implied Exchange Ratio Range

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

$99.83 

$94.60 

$90.35 

14.3%

78.71 

75.96 

73.63 

16.7%

87.96 

84.22 

81.11 

15.5%

Vivo Part.

TCP

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

$77.87 

$73.14 

$69.28 

14.3%

58.19 

55.70 

53.59 

16.7%

66.84 

63.45 

60.63 

15.5%

Perpetuity Growth Rate

5.5%

4.5%

3.5%

WACC

1.282x 

1.294x 

1.304x 

14.3%

1.353x 

1.364x 

1.374x 

16.7%

1.316x 

1.327x 

1.338x 

15.5%

Value

per Share

(R$ per share)

Implied

Exchange Ratios

(Number

of

Vivo Part. shares

per TCP share)

10

Note: The range of implied exchange ratios was determined based on the consistent comparison of the Values per Share.

TC

(R$ in millions, except Value per Share)

TCP

(R$ in millions, except Value per Share)

Vivo Part.

(R$ in millions, except Value per Share)

Summary

of

Valuation

Analyses

Indicative

Value

Range

(1)

$1,740.51 

$1,242.10 

(=)

TC

Value

per

Share

$4,128 

$2,946 

(=) TC Equity

Value

2.4 

2.4 

(÷)

Number

of

Shares

(mm)

$4,121 

$2,938 

(=)

TC

Firm

Value

$8 

$8 

(-) Adjustments

to TC Firm

Value

(2)

Indicative

Value

Range

(1)

$99.83 

$73.63 

(=)

TCP

Value

per

Share

$3,742 

$2,760 

(=) TCP Equity

Value

37.5 

37.5 

(÷) Number

of

Shares

(mm)

$3,428 

$2,446 

(=)

TCP

Firm

Value

$314 

$314 

(-) Adjustments

to

TCP

Firm

Value

(3)

Indicative

Value

Range

(1)

$77.87 

$53.59 

(=) Vivo

Part.

Value

per

Share

$29,061 

$20,000 

(=) Vivo

Part.

Equity

Value

373.2 

373.2

(÷) Number

of

Shares

(mm)

$35,588 

$26,526 

(=)

Vivo

Part.

Firm

Value

($6,527)

($6,527)

(-) Adjustments

to

Vivo

Part.

Firm

Value

(4)

11

Source: Companies’ Business Plan. Adjustments to Firm Value based on March 31, 2009 unaudited balance sheets.

(1) Based on a WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%. 

(2) Includes net debt, provisions for contingencies and dividends payable. Provisions for contingencies are net of deposits in court. 

(3) Includes cash and equivalents and dividends payable. 

(4) Includes net debt, provisions for contingencies, net value of hedging instruments, net dividends payable and receivable. Provisions for contingencies are net of deposits in court. 

3. Background Information

Vivo Part., TCP and TC management

Source of Projections

Cash flows projected for the operating entities Vivo S.A. and TC. Equity Value calculated based on consolidated

figures considering Vivo Part.’s

total economic ownership of approximately 100.0%, 7.4% and 58.9% in Vivo

S.A., TC and TCP, respectively, and TCP’s total ownership of 83.3% in TC

Consolidation

Terminal value calculated based on the perpetuity growth methodology, assuming a perpetuity growth rate

range between 3.5% and 5.5%

Terminal Value Calculation

March 31, 2009

Valuation Date

All projections in nominal R$

Currency

WACC range between 14.3% and 16.7%, in nominal R$

Cost of Capital

Projected

free

cash

flows

for

the

2009

–

2018

period

(10

years)

Projection Period

Summary of Main Assumptions

9.45%

9.45%

9.45%

9.45%

9.45%

9.45%

9.50%

10.00%

9.50%

9.25%

Interest Rate (SELIC –

End)

(2)

3.4%

4.20%

2010E

(1.1%)

4.23%

2009E

3.8%

4.10%

2014E

4.1%

4.10%

2013E

4.2%

4.10%

2012E

4.0%

4.15%

2011E

3.4%

4.10%

2016E

3.6%

4.10%

2015E

3.3%

4.10%

2017E

2018E

Real GDP Growth (R$)

(3)

Brazilian Inflation (IPCA)

(1)

4.10%

3.3%

Macroeconomic Assumptions

(1) Focus Report, Economist Intelligence Unit and Wall Street research reports through 2013. Assumed rate remains constant for the remainder of the projection period.

(2) Focus Report through 2013. Assumed rate remains constant for the remainder of the projection period.

(3) Focus Report, Economist Intelligence Unit and Wall Street research reports through 2013. Economist Intelligence Unit estimates for the remainder of the projection period.

12

Weighted

Average

Cost

of

Capital Calculation

(WACC)

Capital Structure

35.0%

35.0%

Target Debt  / Total Capitalization

(4)

6.3%

5.9%

Cost of Debt (Nominal US$)

9.5%

9.0%

Pre-tax Cost of Debt

(3)

Cost of Debt

34.0%

34.0%

Marginal Tax Rate

1.19%

1.19%

Beta

(2)

3.5%

2.5%

Country Risk Premium

4.0%

4.0%

U.S.

Risk

Free

Rate

(30-Year

Treasury

Bond)

(1)

8.0%

6.0%

Equity Market Risk Premium

17.0%

13.7%

Cost of Equity (Nominal US$)

13.3%

11.0%

WACC (Nominal US$)

16.7%

14.3%

WACC Range

WACC (Nominal R$)

(5)

Cost of Equity

13

(1) Assuming 30-day average yield of US Treasury bond as of May 22, 2009.

(2) Calculated using the median unlevered beta for comparable international wireless companies, relevered based on the target capital structure for the Companies.

(3) Citi estimates.

(4) Management estimates.

(5) Calculated based on the differential between inflation in U.S. and Brazil.

A. Telemig

Celular

S.A. (“TC”)

3.6%

3.8%

2.9%

2.8%

2.7%

2.6%

2.5%

2.4%

2.3%

2.3%

2.2%

3.2%

3.0%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

27.6

27.8

27.8

27.8

27.9

28.1

28.2

28.4

28.7

29.4

27.2

25.4

27.3

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Source: Company’s Business Plan.

Churn

(in % per month)

19.6

19.8

20.3

20.0

20.5

20.6

20.8

20.9

21.5

21.3

21.2

21.1

20.1

100%

96%

56%

68%

81%

90%

104%

108%

112%

116%

119%

122%

125%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Population (in mm) and Penetration (in %)

TC: Summary

Operating

Projections

Subscribers

(in

mm)

and

Market

Share

(in

%) 

Average Revenue Per User (ARPU)

(in R$ per month)

14

3.4

4.6

5.5

5.9

7.7

8.0

8.2

7.4

7.0

6.7

6.3

5.1

3.9

30.8%

30.6%

30.4%

31.6%

30.2%

29.9%

29.7%

29.4%

28.9%

28.5%

28.3%

28.7%

29.1%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

349

434

418

418

546

671

1,268

1,195

1,116

1,032

957

874

779

29.2%

31.9%

42.6%

41.6%

40.3%

39.2%

37.9%

35.9%

33.0%

28.9%

43.2%

25.5%

26.8%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

253

344

289

286

266

312

307

308

309

315

321

285

293

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

1,194

1,561

1,885

2,030

2,170

2,304

2,440

2,564

2,683

2,805

2,932

1,643

1,361

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Source: Company’s Business Plan.

(1) TC EBITDA normalized to exclude of non-recurring items.

Net Revenues

(in R$ mm)

Investments in Fixed Assets

(in R$ mm)

(1)

TC: Summary Financial Projections

EBITDA

(in

R$

mm)

and

EBITDA

Margin

(in

%)

15

Projected Fiscal Year Ending December 31,

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Unlevered Net Income (1)

$111.0

$164.0

$258.0

$339.5

$408.6

$475.1

$504.2

$551.7

$606.0

$655.5

(+) Depreciation and Amortization (2)

281.1

323.1

307.9

294.1

285.6

271.4

305.7

320.6

321.1

323.8

(+) Change in Net Working Capital

174.7

(44.2)

(25.9)

(22.4)

(1.3)

(9.7)

(5.2)

(9.8)

(5.1)

(0.8)

(-) Investments in Fixed Assets

(285.0)

(289.2)

(285.7)

(265.7)

(311.7)

(306.6)

(307.7)

(309.3)

(315.2)

(321.3)

    Unlevered Free Cash Flow

$281.8

$153.8

$254.4

$345.5

$381.2

$430.2

$497.0

$553.2

$606.9

$657.1

Adjusted Terminal Cash Flow (3)

$654.6

TC: Unlevered

Free

Cash

Flow

Calculation

(In R$ mm)

Source: Company’s Business Plan.

(1)

Unlevered net income represents income before interest and goodwill amortization.

(2)

Excludes goodwill amortization.

(3)

Terminal adjusted free cash flow normalizes long-term cash flows to assume depreciation equals investments in fixed assets in 2018.

16

TC: Valuation Summary

($17)

($17)

(-) Provisions

for Contingencies

(2)

$28

$28

(-) Net Debt

$4,121

$2,938

NPV of

Free

Cash

Flows

+ Terminal Value

Indicative

Value

Range

(1)

($4) 

($4) 

(-) Dividends

Payable

$1,740.51 

$1,242.10 

(=) TC Value

per Share

2.4 

2.4 

(÷) Number

of

Shares

(mm)

$4,121

$2,938 

(=) TC Firm

Value

$4,128 

$2,946 

(=) TC Equity

Value

Note: Based

on

Company’s

unaudited

balance sheet

as of

March

31, 2009.

(1)

Based on a WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%.

(2)

Value net of deposits in court.

(In R$ mm, except Value per Share)

17

B. Telemig

Celular

Participações

(“TCP”)

TCP: Valuation Summary

($8)

($8)

(-) Dividends

Payable

$4,128 

$2,946 

TC Equity Value

$3,438 

$2,453 

(x) 83.3% Equity Interest in TC

($10)

($7)

(-) NPV of TCP’s Operating Costs

(2)

Indicative

Value

Range

(1)

$323 

$323 

(+) Cash

and Equivalents

$99.83 

$73.63 

(=) TCP Value

per Share

37.5

37.5 

(÷) Number

of

Shares

(mm)

$3,428 

$2,446 

(=) TCP Firm

Value

$3,742 

$2,760 

(=) TCP Equity

Value

(In R$ mm, except Value per Share)

18

Note: Based on the Companies’ unaudited balance sheets as of March 31, 2009.

(1)

Based on a WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%.

(2)

Includes after-tax overhead costs at TCP, WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%. 

C. Vivo S.A. and Vivo Participações

(“Vivo Part.”)

2.9%

2.2%

2.2%

2.2%

2.1%

2.1%

2.0%

2.0%

2.0%

1.9%

2.5%

2.3%

2.3%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

168.5

170.8

173.7

170.5

175.2

176.6

178.0

179.3

184.0

182.9

181.8

180.6

172.1

102%

96%

53%

63%

79%

89%

106%

110%

114%

117%

120%

123%

125%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

29.1

40.3

48.2

51.8

54.9

57.7

60.3

62.7

64.8

68.2

66.6

44.3

37.4

32.6%

31.1%

29.8%

29.8%

29.8%

29.7%

29.6%

29.5%

29.4%

29.1%

28.8%

28.8%

30.0%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Vivo S.A.: Summary

Operating

Projections

Source: Company’s Business Plan.

Note: 2006 Vivo S.A. figures reflect combined results from acquired entities which today are part of Vivo S.A.

28.0

30.0

28.1

27.9

27.8

27.6

27.3

27.2

27.0

26.9

26.9

28.4

31.0

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Churn

(in % per month)

Population (in mm) and Penetration (in %)

Subscribers (in mm) and Market Share (in %)

Average Revenue Per User (ARPU)

(in R$ per month)

19

Vivo S.A.: Summary

Financial Projections

2,716

2,726

2,741

2,751

2,766

2,788

2,123

2,222

2,192

2,152

3,632

1,950

1,919

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Net Revenues

(in R$ mm)

Investments in Fixed Assets

(in R$ mm)

EBITDA

(in

R$

mm)

and

EBITDA

Margin

(in

%)

Source: Company’s Business Plan.

Note: 2006 Vivo S.A. figures reflect combined results from acquired entities which today are part of Vivo S.A.

20

10,937

14,249

16,700

17,948

18,939

19,804

20,547

21,197

21,794

22,323

22,790

12,493

15,317

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

2,597

3,140

5,489

4,222

6,154

6,877

7,363

7,842

9,327

9,004

8,678

8,299

4,867

34.3%

32.9%

23.7%

25.0%

30.0%

31.8%

36.3%

37.2%

38.2%

39.2%

39.8%

40.3%

40.9%

06

07

08

09E

10E

11E

12E

13E

14E

15E

16E

17E

18E

Vivo S.A.: Unlevered Free Cash Flow Calculation

Projected Fiscal Year Ending December 31,

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Unlevered Net Income (1)

$1,430.6

$1,881.6

$3,163.2

$3,499.7

$3,677.2

$3,842.2

$3,988.7

$4,197.7

$4,372.5

$4,559.6

(+) Depreciation and Amortization (2)

2,896.9

2,798.9

1,537.4

1,769.7

2,002.9

2,255.3

2,516.2

2,606.0

2,695.6

2,765.9

(+) Change in Net Working Capital

257.8

89.8

(79.6)

(45.0)

148.5

(25.5)

(16.8)

(37.6)

(9.1)

(7.3)

(-) Investments in Fixed Assets

(1,950.0)

(2,221.8)

(2,192.4)

(2,152.3)

(2,715.7)

(2,725.5)

(2,741.4)

(2,751.1)

(2,766.2)

(2,788.4)

    Unlevered Free Cash Flow

$2,635.3

$2,548.5

$2,428.6

$3,072.2

$3,112.9

$3,346.5

$3,746.6

$4,015.1

$4,292.8

$4,529.8

Adjusted Terminal Cash Flow (3)

$4,552.3

(In R$ mm)

Source: Company’s Business Plan.

(1)

Unlevered net income represents income before interest and goodwill amortization.

(2)

Excludes goodwill amortization.

(3)

Terminal adjusted free cash flow normalizes long-term cash flows to assume depreciation equals investments in fixed assets in 2018.

21

Vivo Part.: Valuation Summary

($411)

($411)

(-) Net Dividends

Payable

($185)

($185)

(-) Provisions

for Contingencies

(5)

($5,930)

($5,930)

(-) Net Debt

(4)

$2,206 

$1,627 

58.9% Equity

Interest

in TCP

$1,248 

$1,198 

(+) Non-Operating

Assets

(2)

$31,949 

$23,575 

NPV of

Cash

Flows

+ Terminal Value

of

Vivo S.A. (100%)

$305 

$217 

7.4% Equity

Interest

in TC

($119)

($90)

(-) NPV of

Vivo Part.’s Operating

Costs

(3)

Indicative

Value

Range

(1)

$77.87 

$53.59 

(=) Vivo Part. Value

per Share

373.2 

373.2 

(÷) Number

of

Shares

(mm)

$35,588 

$26,526

(=) Vivo Part. Firm

Value

$29,061 

$20,000 

(=) Vivo Part. Equity

Value

(In R$ mm, except Value per Share)

22

Note: Based on Companies’ unaudited balance sheets as of March 31, 2009.

(1) Based on a WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%.

(2) Includes (i) present value of tax-shield from goodwill amortization allocated in Vivo S.A., TCP and TC and (ii) tax-shield from NOL utilization at Vivo S.A.

(3) Includes after-tax overhead costs at Vivo Part., WACC range between 14.3% and 16.7% and a perpetuity growth rate range between 3.5% and 5.5%. 

(4) Includes net value of hedging instruments.

(5) Net of deposits in court.

Appendix

A: Glossary

Glossary

ARPU:

average revenue per user per month

Beta:

coefficient

that

measures

the

non-diversifiable

risk

to

which

an

asset

is

subject

to.

The

coefficient

is

determined

by

a

linear

regression

of

the

variation of the price of the asset and the variation of the price of the market portfolio

CAGR:

compounded annual growth rate

Churn:

percentage

that

measures

the

number

of

disconnected

clients

from

the

client

base

during

a

determined

period

of

time,

divided

by

the

average number of active clients in the same period

Country

Risk

Premium:

additional

return

relative

to

the

risk-free

rate

required

by

investors,

in

order

to

compensate

the

additional

risk

of

investing

in

a specific country

DCF:

discounted

cash

flow

EBITDA:

earnings

before

interest,

taxes,

depreciation

and

amortization

Equity

Market

Risk

Premium:

additional

return

relative

to

the

risk-free

rate

required

by

investors

in

order

to

compensate

for

the

higher

risk

of

investing in equities

Equity

Value:

represents

the

value

of

the

shareholder’s

claims

in

a

company’s

value

Firm

Value:

represents

the

estimated

value

of

a

company’s

assets

NPV:

net

present

value

ON:

ordinary

shares

PN:

preferred

shares

Risk-Free

Rate:

represents

the

estimated

long-term

return

of

an

investment

considered

practically

without

risk.

Frequently

approximated

by

the

long-term US Treasury Bond

Terminal

Value:

estimated

value

for

the

cash

flows

after

the

end

of

the

projection

period.

This

value

is

estimated

by

dividing

the

adjusted

cash

flow

in the year following the last year of the projection period by the WACC rate minus the perpetuity growth rate

Treasury Bond:

long-term American treasury securities (with maturities greater than 10 years)

WACC:

weighted average cost of capital

23