20-F/A

As filed with the Securities and Exchange Commission on March 19, 2018

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-14475

TELEFÔNICA BRASIL S.A.
(Exact name of Registrant as specified in its charter)

TELEFÔNICA BRAZIL S.A.
(Translation of Registrant’s name into English)

Federative Republic of Brazil
(Jurisdiction of incorporation or organization)

Avenida Engenheiro Luis Carlos Berrini, 1376, 28º andar
04571-936 São Paulo, SP, Brazil
(Address of principal executive offices)

David Melcon Sanchez-Friera

Telephone +55 11 3430 3687

Avenida Engenheiro Luis Carlos Berrini, 1376, CEP 04571-936, São Paulo, SP, Brazil

Email: ir.br@telefonica.com
(Name, Telephone, Email and/or Facsimile and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Preferred Shares, without par value	New York Stock Exchange*
American Depositary Shares (as evidenced by American Depositary Receipts), each representing one share of Preferred Stock	New York Stock Exchange

*      Not for trading purposes, but only in connection with the registration on the New York Stock Exchange of American Depositary Shares representing those Preferred Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares of each class (excluding treasury shares) as of December 31, 2017 was:

Title of Class	Number of Shares Outstanding (excluding treasury shares)
Shares of Common Stock..................................................................................................................................	569,354,053
Shares of Preferred Stock..................................................................................................................................	1,119,339,723

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes  ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes  x No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) x Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filers,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x  Accelerated Filer ¨  Non-accelerated Filer ¨  Emerging growth company ¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board x Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17  ¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes  x No

Explanatory Note

This Amendment No. 1 to the Annual Report on Form 20-F of Telefônica Brasil S.A. (the “Company”) amends the Company’s Annual Report on Form 20-F for the year ended December 31, 2017 (the “Original 20-F”), which was filed with the Securities and Exchange Commission on February 21, 2018.  The Company is filing this Amendment No. 1 solely to furnish Exhibit 101, which was not included in the Original 20-F.  Exhibit 101 includes information about the Company in eXtensible Business Reporting Language (XBRL).

Except as described above, this Amendment No. 1 does not amend any information set forth in the Original 20-F, and the Company has not updated disclosures included therein to reflect any events that occurred subsequent to February 21, 2018.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and are otherwise not subject to liability under those sections.

PART III

ITEM 19.       EXHIBITS

Exhibit number	Description
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*      In accordance with Rule 406T(b)(2) of Regulation S-T, this eXtensible Business Reporting Language (XBRL) information is furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amendment No. 1 to the annual report on Form 20-F on its behalf.

TELEFÔNICA BRASIL S.A.
By:	/s/ Eduardo Navarro de Carvalho
	Name:	Eduardo Navarro de Carvalho
	Title:	Chief Executive Officer

By:	/s/ David Melcon Sanchez-Friera
	Name:	David Melcon Sanchez-Friera
	Title:	Chief Financial Officer

Date: March 19, 2018

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Document and Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Document Information [Line Items]
Entity Registrant Name	TELEFONICA BRASIL S.A.
Entity Central Index Key	0001066119
Document Type	20-F/A
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Common shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	569,354,053
Preferred shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	1,119,339,723

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Consolidated Balance Sheets - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Current assets	R$ 16,731,666	R$ 18,398,995
Cash and cash equivalents	4,050,338	5,105,110
Trade accounts receivable	8,588,466	8,701,688
Inventories	348,755	410,413
Taxes recoverable	2,563,990	3,027,230
Judicial deposits and garnishments	324,638	302,424
Prepaid expenses	446,439	343,092
Derivative financial instruments	87,643	68,943
Other assets	321,397	440,095
Noncurrent assets	84,651,169	83,667,264
Short-term investments pledged as collateral	81,486	78,166
Trade accounts receivable	273,888	305,411
Taxes recoverable	743,285	476,844
Deferred taxes	371,408	27,497
Judicial deposits and garnishments	6,339,167	6,049,142
Prepaid expenses	23,116	36,430
Derivative financial instruments	76,762	144,050
Other assets	88,935	55,565
Investments	98,902	85,745
Property, plant and equipment	33,222,316	31,924,918
Intangible assets	43,331,904	44,483,496
TOTAL ASSETS	101,382,835	102,066,259
LIABILITIES AND EQUITY
Current liabilities	17,862,531	20,438,575
Personnel, social charges and benefits	723,380	760,643
Trade accounts payable	7,447,100	7,611,246
Taxes, charges and contributions	1,731,315	1,770,731
Dividends and interest on equity	2,396,116	2,195,031
Provisions	1,434,911	1,183,623
Deferred revenue	372,561	429,853
Loans and financing	1,620,955	2,542,975
Debentures	1,412,486	2,120,504
Derivative financial instruments	5,239	183,212
Other liabilities	718,468	1,640,757
Noncurrent liabilities	14,058,946	12,383,265
Personnel, social charges and benefits	23,284	11,016
Trade accounts payable		71,907
Taxes, charges and contributions	49,448	49,131
Deferred taxes	709,325
Provisions	6,709,839	6,625,638
Deferred revenue	350,637	511,786
Loans and financing	2,320,147	3,126,792
Debentures	3,108,253	1,433,803
Derivative financial instruments	15,412	1,404
Other liabilities	772,601	551,788
TOTAL LIABILITIES	31,921,477	32,821,840
Equity	69,461,358	69,244,419
Capital	63,571,416	63,571,416
Capital reserves	1,213,522	1,272,581
Income reserves	2,463,228	2,474,974
Other comprehensive income accumulated	21,328	11,461
Additional proposed dividends	2,191,864	1,913,987
TOTAL LIABILITIES AND EQUITY	R$ 101,382,835	R$ 102,066,259

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Consolidated Income Statements - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Income Statements
Net operating income	R$ 43,206,832	R$ 42,508,459	R$ 40,286,815
Cost of sales	(20,272,530)	(20,823,014)	(20,345,076)
Gross profit	22,934,302	21,685,445	19,941,739
Operating income (expenses)	(16,302,065)	(15,317,426)	(14,702,141)
Selling expenses	(13,136,474)	(12,455,366)	(12,005,477)
General and administrative expenses	(2,443,105)	(2,793,386)	(2,142,459)
Other operating income	464,182	968,479	538,239
Other operating expenses	1,186,668	1,037,153	1,092,444
Operating income	6,632,237	6,368,019	5,239,598
Financial income	1,755,958	2,781,359	4,728,665
Finance expenses	(2,659,002)	(4,015,900)	(5,576,843)
Equity pickup	1,580	1,244	2,036
Income before taxes	5,730,773	5,134,722	4,393,456
Income and social contribution taxes	(1,121,983)	(1,049,480)	(973,207)
Net income for the year	R$ 4,608,790	R$ 4,085,242	R$ 3,420,249
Common shares
Consolidated Income Statements
Basic and diluted earnings per share	R$ 2.56	R$ 2.27	R$ 2.15
Preferred shares
Consolidated Income Statements
Basic and diluted earnings per share	R$ 2.82	R$ 2.50	R$ 2.37

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Consolidated Statements of Other Comprehensive Income - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Other Comprehensive Income
Net income for the year	R$ 4,608,790	R$ 4,085,242	R$ 3,420,249
Other comprehensive income (losses) that may be reclassified into income (losses) in subsequent periods	9,867	(14,007)	(206,997)
Unrealized gains (losses) on investments available for sale	338	83	(1,870)
Gains (losses) on derivative financial instruments	(2,417)	4,803	(344,610)
Taxes	707	(1,661)	117,804
Cumulative Translation Adjustments (CTA) on transactions in foreign currency	11,239	(17,232)	21,679
Other comprehensive income (losses) not to be reclassified into income (losses) in subsequent periods	(113,811)	(156,266)	264,990
Actuarial gains (losses) and limitation effect of the assets of surplus plan	(171,296)	(236,767)	401,500
Taxes	57,485	80,501	(136,510)
Other comprehensive income (losses)	(103,944)	(170,273)	57,993
Comprehensive income for the year	R$ 4,504,846	R$ 3,914,969	R$ 3,478,242

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Consolidated Statements of Changes in Equity - BRL (R$) R$ in Thousands	Capital	Special goodwill reserve	Other capital reserves	Treasury shares	Income reserves	Legal reserve	Tax incentive reserve	Expansion and modernization reserve	Retained earnings	Proposed additional dividends	Other comprehensive income accumulated	Total
Equity at beginning of period at Dec. 31, 2014	R$ 37,798,110	R$ 63,074	R$ 2,665,482	R$ (112,107)		R$ 1,532,630	R$ 1,849	R$ 0	R$ 0	R$ 2,768,592	R$ 232,465	R$ 44,950,095
Payment of additional dividend										(2,768,592)		(2,768,592)
Prescribed equity instruments, including unclaimed dividends and interest on equity									494,001			494,001
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives							5,079		(5,079)
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15			(112,107)	112,107
Capital increase - Special Shareholders' Meeting of 04/28/15	15,812,000											15,812,000
Direct costs on capital increase (net of taxes) according to the SSM of 04/28/15			(58,657)									(58,657)
Capital increase - Special Shareholders' Meeting of 04/30/15	295,285											295,285
Direct costs on capital increase (net of taxes) according to the SSM of 04/30/15			(3,776)									(3,776)
Capital increase - Merger of GVTPart shares - SSM of 05/28/15	9,666,021		(1,188,707)									8,477,314
Dissenters' right - Acquisition of GVTPart.				(87,805)								(87,805)
Equity transactions			(4,940)									(4,940)
Other comprehensive income (loss)									264,990		(206,997)	57,993
Net income for the year									3,420,249			3,420,249
Allocation of income:
Legal reserve						171,013			(171,013)
Interim interest on equity									(1,745,925)			(1,745,925)
Interim dividends									(270,000)			(270,000)
Expansion and Modernization Reserve								700,000	(700,000)
Additional proposed dividends									(1,287,223)	1,287,223
Equity at end of period at Dec. 31, 2015	63,571,416	63,074	1,297,295	(87,805)		1,703,643	6,928	700,000		1,287,223	25,468	68,567,242
Payment of additional dividend										(1,287,223)		(1,287,223)
Prescribed equity instruments, including unclaimed dividends and interest on equity									221,559			221,559
Preferred shares delivered referring to the legal process of expansion plan			2	15								17
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives							10,141		(10,141)			(10,141)
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15			(112,107)
Capital increase - Merger of GVTPart shares - SSM of 05/28/15			(1,188,707)
Other comprehensive income (loss)									(156,266)		(14,007)	(170,273)
Net income for the year									4,085,242			4,085,242
Allocation of income:
Legal reserve						204,262			(204,262)			(204,262)
Interim interest on equity									(2,172,145)			(2,172,145)
Reversal expansion and Modernization Reserve					R$ (700,000)			(700,000)	700,000			700,000
Expansion and Modernization Reserve								550,000	(550,000)			550,000
Additional proposed dividends									(1,913,987)	1,913,987		1,913,987
Equity at end of period at Dec. 31, 2016	63,571,416	63,074	1,297,297	(87,790)		1,907,905	17,069	550,000		1,913,987	11,461	69,244,419
Payment of additional dividend										(1,913,987)		(1,913,987)
Prescribed equity instruments, including unclaimed dividends and interest on equity									101,778			101,778
Repurchase of preferred shares				(32)								(32)
Preferred shares delivered referring to the legal process of expansion plan			2	2								2
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives							10,815		(10,815)			(10,815)
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15			(112,107)
Capital increase - Merger of GVTPart shares - SSM of 05/28/15			(1,188,707)
Equity transactions			(59,029)									(59,029)
Other comprehensive income (loss)									(113,811)		9,867	(103,944)
Net income for the year									4,608,790			4,608,790
Allocation of income:
Legal reserve						230,439			(230,439)			(230,439)
Interim interest on equity									(2,416,639)			(2,416,639)
Reversal expansion and Modernization Reserve					R$ (550,000)			(550,000)	550,000			550,000
Expansion and Modernization Reserve								297,000	(297,000)			297,000
Additional proposed dividends									(2,191,864)	2,191,864		2,191,864
Equity at end of period at Dec. 31, 2017	R$ 63,571,416	R$ 63,074	R$ 1,238,268	R$ (87,820)		R$ 2,138,344	R$ 27,884	R$ 297,000	R$ 0	R$ 2,191,864	R$ 21,328	R$ 69,461,358

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Consolidated Statements of Cash Flows - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Income before taxes	R$ 5,730,773	R$ 5,134,722	R$ 4,393,456
Adjustment for:
Depreciation and amortization	7,853,734	7,654,406	6,814,951
Foreign exchange on loans and derivative financial instruments	57,832	75,075	613,927
Monetary losses	543,852	620,570	299,544
Equity pickup	(1,580)	(1,244)	(2,036)
Losses (gains) on write-off/sale of assets	(74,337)	(451,215)	66,029
Provision for impairment - accounts receivable	1,481,015	1,348,221	1,230,675
Change in liability provisions	(93,479)	273,664	265,072
Write-off and reversals for impairment - inventories	(45,089)	(36,898)	(35,692)
Pension plans and other post-employment benefits	31,511	5,243	36,666
Provisions for tax, labor, civil and regulatory contingencies	999,419	985,176	1,014,080
Interest expense	926,220	1,049,553	919,908
Increase (decrease) divestiture		(32,924)	(8,448)
Increase (decrease) customer loyalty program	(5,856)	(39,683)	3,223
Other	(2,881)	(3)	(8)
Changes in assets and liabilities
Trade accounts receivable	(1,274,181)	(1,739,550)	(1,841,659)
Inventories	106,393	230,116	(81,820)
Taxes recoverable	(330,398)	(823,360)	(616,012)
Prepaid expenses	11,051	105,845	111,288
Other assets	82,109	23,202	(264,021)
Personnel, social charges and benefits	(42,830)	53,005	(169,220)
Trade accounts payable	121,577	(707,998)	178,043
Taxes, charges and contributions	180,915	601,970	106,829
Other liabilities	(2,065,631)	(1,392,510)	(1,791,114)
Total adjustments to reconcile profit (loss)	8,459,366	7,800,661	6,850,205
Cash generated from operations	14,190,139	12,935,383	11,243,661
Interest paid	(859,586)	(926,223)	(949,386)
Income and social contribution taxes paid	(689,493)	(568,335)	(397,070)
Net cash (used in) generated by operating activities	12,641,060	11,440,825	9,897,205
Cash flows from investing activities
Additions to PP&E, intangible assets and others	(8,367,660)	(7,470,869)	(6,792,895)
Cash received from sale of PP&E items	20,672	778,819	19,902
Cash paid for acquisition of companies, net of cash acquired	(206,649)		(8,528,986)
Net payment of derivative contracts on acquisition of GVT			682,695
Cash received from sale of investments	31,804
Redemption of (increase in) judicial deposits	83,500	(202,525)	(6,431)
Dividend and interest on equity received		3	8
Other	111
Net cash (used in) generated by investing activities	(8,438,222)	(6,894,572)	(14,625,707)
Cash flows from financing activities
Payment of loans, financing and debentures	(4,485,495)	(2,171,100)	(8,710,567)
Loans and financing raised	3,055,876	466,629	1,285,210
Received of derivative financial instruments	107,846	132,410	1,008,226
Payment of derivative financial instruments	(267,254)	(239,379)	(461,421)
Payment for reverse split of shares		(164)
Dividend and interest on equity paid	(3,668,551)	(2,966,384)	(3,678,665)
Capital increase			16,107,285
Direct capital increase costs			(89,605)
Payment to Dissenters' rights - shareholders			(87,805)
Treasury shares	(32)
Net cash (used in) generated by financing activities	(5,257,610)	(4,777,988)	5,372,658
Increase (decrease) in cash and cash equivalents	(1,054,772)	(231,735)	644,156
Cash and cash equivalents at beginning of the year	5,105,110	5,336,845	4,692,689
Cash and cash equivalents at end of the year	R$ 4,050,338	R$ 5,105,110	R$ 5,336,845

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OPERATIONS

12 Months Ended

Dec. 31, 2017

OPERATIONS

OPERATIONS

1)  OPERATIONS

a)  Background information

Telefônica Brasil S.A. (“Company” or “Telefônica Brasil”) is a publicly held corporation operating in telecommunication services and in the performance of activities that are necessary or useful in the rendering of such services, in conformity with the concessions and authorizations it has been granted. The Company, headquartered at Avenida Engenheiro Luiz Carlos Berrini, No. 1376, in the city and State of São Paulo, Brazil, is a member of Telefónica Group (“Group”), with headquarters in Spain and present in several countries of Europe and Latin America.

At December 31, 2017 and 2016, Telefónica S.A. (“Telefónica”), the Group holding company, held total direct and indirect interest in the Company (Note 22).

The Company is registered in the Brazilian Securities Commission ("CVM") as a publicly-held company under Category A (issuers authorized to trade any marketable securities) and has shares traded on the B3 (company resulting from the combination of activities between BM&FBovespa and CETIP – Central Custody and Settlement of Securities). The Company is also listed in the Securities and Exchange Commission ("SEC"), of the United States of America, and its American Depositary Shares ("ADSs") are classified under level II, backed only by preferred shares and traded on the New York Stock Exchange ("NYSE").

b)  Operations

The Company operates in the rendering of: (i) Fixed Switched Telephone Service Concession Arrangement ("STFC"); (ii) Multimedia Communication Service ("SCM", data communication, including broadband internet); (iii) Personal Mobile Service ("SMP"); and (iv) Conditioned Access Service ("SEAC" - Pay TV), throughout Brazil, through concessions and authorizations, as established in the General Plan of Concessions ("PGO").

Service concessions and authorizations are granted by the Brazil's Telecommunications Regulatory Agency ("ANATEL"), the agency responsible for the regulation of the Brazilian telecommunications sector under the terms of Law No. 9472 of July 16, 1997 - General Telecommunications Law ("Lei Geral das Telecomunicações" - LGT), amended by Laws No. 9986, of July 18, 2000, and No. 12485, of September 12, 2011. The operation of such concessions is subject to supplementary regulations and plans.

In accordance with the STFC service concession agreement, in every two years, during the agreement's  20-year term, the Company shall pay a fee equivalent to 2% of its prior-year STFC revenue, net of applicable taxes and social contribution taxes (Note 21). The Company's current STFC concession agreement is valid until December 31, 2025.

In accordance with the authorization terms for the usage of radio frequencies associated with SMP, in every two years after the first renewal of these agreements, the Company shall pay a fee equivalent to 2% of its prior-year SMP revenue, net of applicable taxes and social contribution taxes (Note 21), and in the 15th year the Company will pay 1% of its prior-year revenue. The calculation will consider the net revenue from the application of Basic and Alternative Services Plans. These agreements can be extended only once for a term of 15 years.

The Company's authorization terms ("TA") for the operation of SMP, according to the SMP General Authorization Plan ("PGA"), are: (i) Region I - TA n. 078/2012 / PVCP / SPV-ANATEL; (ii) Region II - TA n ° 005/2010 / PVCP / SPV-ANATEL; and (iii) Region III - TA n ° 006/2010 / PVCP / SPV-ANATEL.

The terms of authorization for the use of the radio frequency bands are granted based on the results obtained in the respective radio frequency auction conducted by ANATEL and are associated with the authorization terms for operating the service in each region. The following is a summary of the authorizations for the use of radio frequency bands, granted to the Company.

Radiofrequency	Band (MHz)		License Expiration (Year)
450 MHz	14	(1)	2027	-
700 MHz	20	—	2029	-
850 MHz	25	(2)	2020-2028	(3)
900 MHz	5	(4)	2020-2023	(5)
1800 MHz	20	(6)	2020-2023	(5)
1900 MHz	10	(7)	2022	—
2100 MHz	20-30	(10)	2023	—
2500 MHz	40	(8)	2027-2031	(9)

(1) State SP (cities with código nacional CN 13 to 19), MG and Northeast (AL, CE, PB, PE, PI, RN and SE).

(2) Except Northeast (CN 8X) and areas corresponding to sectors 03, 22, 25, 30 and 32 of the PGO / 1998.

(3) Regional Licenses: The expiration and renewal dates depend on the region. Licenses in Rio de Janeiro and Espírito Santo should expire in 2020 and 2023, respectively.

(4) Only in some regions.

(5) MG Interior expiry date 2020; the remaining licenses will expire in 2023.

(6) 20 MHz is the most common bandwidth, but is higher in some regions (up to 50 MHz).

(7) Only Northeast (CN 8X) and areas corresponding to sectors 22, 25, 30 and 32 of PGO / 1998. The licenses should be migrated to the frequency of 2100 MHz ("L-band realignment", which allows the use of 3G technology) when approved by Anatel.

(8) 40 MHz is the most common bandwidth, but is 60 MHz in some regions.

(9) The X band will expire in 2027 and the P band will expire in 2031.

(10) 30MHz in regions where the "L band" has already been migrated to the 2100 MHz frequency; 20 MHz in other regions.

C) Relevant events occurred in 2017 and 2016

c.1) Acquisition of Terra Networks by Wholly-Owned Subsidiary

On July 3, 2017, the Company informed that its wholly-owned subsidiary Telefônica Data S.A. ("TData") has acquired all the shares representing the capital stock of Terra Networks Brasil S.A. ("Terra Networks"), owned by SP Telecomunicações Participações Ltda. ("SPTE"), one of the controlling shareholders of the Company ("Transaction").

Terra Networks is a provider of digital services (own and third-party value-added services ("VAS") and carrier billing, as well as mobile channels for sales and relationships) and advertising.

TData is a company dedicated to the exploration of VAS, as well as integrated business solutions in telecommunications, technical assistance of telecommunications equipment and networks, maintenance of equipment and networks and development of projects.

The total price paid for the acquisition of shares issued by Terra Networks was  R$ 250,000, in a single installment, with no need for any financing, using only the cash available of TData. Such value was calculated based on the economic value of the Terra Networks, according to the discounted cash flow criterion, with a base date of April 30, 2017, based on an appraisal report contracted by TData Board of Directors.

The Transaction was subject to conditions usually applicable to this type of deal, and was preceded by a legal and financial audit in relation to Terra Networks and valuation by an independent company.

The Transaction was not subject to obtaining any regulatory authorizations or approvals by the Company's regulators and the way it was structured does not change the Company's shareholding structure or cause any dilution to its shareholders, generating value to them through accelerated growth of digital services and increased operational efficiency, there are no significant costs related to the Transaction.

The purpose of the Transaction was to expand and integrate the commercial offer of digital services that can add immediate value to the customer base of TData and of the Company, as well as generating TData service offers to Terra Networks' customer base and subscribers and, thanks to the national presence of Terra Networks' operation and expertise, generate leverage for TData advertising business. In addition, since the Company has the skills to create new digital media products for mobile and advertising and Terra Networks has know-how in selling, attending and operating digital services for specific customers, the acquisition by TData will also facilitate the synergy between the companies involved, in addition to maximize the unification of the commercial conditions maintained with suppliers.

Accounting Method

Considering that business combinations between entities under common control have not yet been specifically addressed by International Financial Reporting Standards (IFRS), an entity is required to apply the hierarchy in paragraphs 10-12 of IAS 8 - Accounting Policies, Change of Estimates and Error Correction  to choose the accounting policy to be adopted.

An entity may therefore choose to account for combinations of entities under common control using the Acquisition Method based on IFRS 3 (R) or the carrying amount of the net assets acquired ("Pooling of Interests" or "Predecessor Value Method"), with the guidance provided by other accounting standard-setting bodies with a Conceptual Framework similar to IFRSs.

This Transaction, which as previously described, involves companies under common control, was accounted for at the book value of the net assets acquired (“Predecessor Value Method”), as certain requirements for the use of the acquisition method set forth in IFRS 3 (R). Consequently, the difference between the consideration given in exchange for the equity interest obtained and the value of the net assets acquired was recorded in TData's equity.

Upon completion of the Transaction, as from July 3, 2017, Terra Networks became a direct subsidiary of TData and indirectly owned by the Company.

We present below the composition of the book value of identifiable net assets acquired in the amount of R$190,971.

Current assets	163,579	Current liabilities	86,892
Cash and cash equivalents	43,351	Personnel, social charges and benefits	17,327
Accounts receivable	61,276	Trade accounts payable	51,198
Derivative financial instruments	404	Taxes, charges and contributions	14,643
Taxes recoverable	22,658	Derivative financial instruments	16
Other assets	35,890	Other liabilities	3,708
Noncurrent assets	228,575	Noncurrent liabilities	114,291
Deferred taxes	117,885	Personnel, social charges and benefits	508
Judicial deposits and garnishments	102,373	Taxes, charges and contributions	229
Other assets	740	Other Provisions	112,874
Property and equipment	7,047	Other liabilities	680
Intangible assets	530
		Book value of assumed liabilities	201,183
		Book value of identifiable net assets acquired	190,971
		Total consideration	250,000
Book value of assets acquired	392,154	Adjustment to equity in TData and Company	59,029

Provision for Probable Risks and Contingent Liabilities

The agreement for the sale and purchase of this Transaction contains terms and provisions common to this type of transaction, including indemnification of certain liabilities, contingent or materialized, arising from acts or facts occurring up to the date of the Transaction, reducing the amounts already provisioned for the respective contingencies, which were considered in the purchase price.

At the date of the Transaction, Terra Networks was involved in administrative and judicial proceedings related to tax, civil and labor matters, whose unfavorable outcomes are considered probable and possible, as the case may be.

Other information

The net book value of trade accounts receivable provided by Terra Networks totals R$61,276, which does not differ from the gross amount of R$69,995, net of estimated losses for impairment of R$8,719.

From the date of acquisition until the conclusion of the financial statements for the period ended December 31, 2017, Terra Networks contributed R$155,224 of consolidated net operating revenue and R$179,615 of consolidated net income to the Company, mainly due to the recognition of R$125,191 of income tax on tax losses and negative basis of social contribution (note 7 b).

c.2) Corporate restructuring - 2016

The Shareholders’ Meeting held on April 1, 2016, approved corporate restructuring in accordance with the terms and conditions proposed on March 14, 2016.

The corporate restructuring was approved by ANATEL through Ruling No. 50,169, dated January 22, 2016, which was published in the DOU on January 28, 2016, with the conditions provided therein.

GVT Participações S.A. (“GVTPart.”) was the parent company of Global Village Telecom S.A. ("GVT"), companies controlled by the Company from May 28, 2015 to April 1, 2016. GVT was the direct controlling holder of POP Internet Ltda. (“POP”), and indirect controlling holder of Innoweb Ltda. (“Innoweb”), both with head offices in Brazil.

POP is a provider of free Internet access and content. Innoweb (subsidiary of POP) provides services using VoIP technology (voicer over IP), which allows calls using the Internet, with the facilities inherent in this environment.

The corporate restructuring occurred on the same date as the Shareholders’ Meeting mentioned above, as follows: (i) GVT was spun-off and its net assets, including assets, rights and obligations related to telecommunications activities, were absorbed by GVTPart., where as the remaining portion relating to assets, rights and obligations related to activities other than telecommunications was absorbed by POP; and (ii) the net assets of GVTPart. (after the merger of GVT’s net assets, item (i)) was merged into the Company.

The corporate restructuring intends to standardize the services provided by the companies involved in this process by (i) concentrating the rendering of telecommunication services in a single company, i.e., the Company; and (ii) migrating of activities that were provided by GVT, other than telecommunication services to POP.

As such, the simplification of the corporate structure and the centralization of the provision of telecommunication services at the Company will lead to a converging environment, facilitating consolidation and centralization in the offering of telecommunication services and simplification of service package offerings; optimizing administrative and operating costs; and standardization of the operations at the companies involved in the corporate restructuring.

Given that the merger of GVTPart. into the Company did not require a capital increase or a change in shareholders’ interest in the Company, since GVTPart. was a wholly-owned subsidiary of the Company, the replacement of shares held by the shareholders in GVTPart. with shares in the Company is not applicable. Consequently, there are no minority interests to be considered and, therefore, in accordance with the CVM’s position in similar prior cases, and under the terms of CVM Resolution No. 559/08, the provisions of article 264 of Law No. 6404/76 and its further amendments similarly do not apply.

In addition, in relation to the transaction preceding the merger of GVTPart into the Company, the replacement of shares is not applicable, given that GVT is a subsidiary of GVTPart. and of the Company itself, thus there are no minority shareholders.

Pursuant to the provisions of article 137 of Law No. 6404/76 and its further amendments, the corporate restructuring does not entitle the Company’s shareholders to the right of withdrawal. Furthermore, considering that there are no minority shareholders of GVTPart., since it is a wholly-owned subsidiary of the Company, there is no question of right to withdrawal or exercise of the right to withdraw by GVTPart. non-controlling shareholders as provided for in article 136, item iv, and article 137 of Law No. 6404/76 and its further amendments.

c.3 Acquisition of GVT Participações S.A. (“GVTPart.”)

Pursuant to, and for the purposes of, CVM Rule No. 358/02, the Company informed the market that its Special Shareholders’ Meeting (“AGE”) held on May 28, 2015 approved the ratification of the Stock Purchase Agreement and Other Covenants executed by the Company, in the capacity of “Buyer”, and Vivendi and its subsidiaries (Société d’Investissements et de Gestion 108 SAS - “FrHolding108” and Société d’Investissements et de Gestion 72 S.A.), in the capacity of “Sellers”, whereby all the shares issued by GVTPart were acquired by the Company.

Payment for acquisition of GVTPart. shares was made as follows: (i) €4.663 billion paid in cash after contractual adjustments for net debt assumed on the execution date; and (ii) Company-issued shares delivered to FRHolding108 as a result of the merger of GVTPart shares by the Company, representing 12% of the Company’s capital stock after the merger of shares.

As a result of the merger of GVTPart. shares, the Company’s capital increased by R$9,666,021, with the issuance of 68,597,306 common shares and 134,320,885 preferred shares, all registered, no-par value shares, based on the economic value of merged shares calculated using the discounted cash flow method and on the appraisal report on GVTPart’s economic value prepared by an expert firm, in accordance with article 252, paragraph 1, together with article 8, of Law No. 6404/76. The difference between the economic value of merged shares and the market value of shares issued on the transaction closing date was recognized in “Other Capital Reserves”, in the amount of R$1,188,707.

This transaction was subject to obtaining of applicable corporate and regulatory approvals, including from Brazil’s Administrative Council for Economic Defense (“CADE”) and ANATEL, further to other conditions usually applicable to this type of transaction. The transaction was approved by ANATEL under Act No. 448 of January 22, 2015, published in the Official Federal Gazette (“DOU”) on January 26, 2015, and by CADE at the 61st ordinary session of its Trial Court, held on March 25, 2015, and published in the Official Federal Gazette (“DOU”) on March 31, 2015.

Once the acquisition transaction was completed on May 28, 2015, the Company held direct interest in GVTPart and indirect interest in GVT. GVTPart. is headquartered in Brazil as its business purpose includes participation in other companies, whether national or foreign, as partner, shareholder or member. Its direct subsidiary (GVT) provides landline telephone, data, multimedia communication and pay-tv services throughout Brazilian territory.

Under IFRS 3 (R) – Business Combinations, business acquisitions are accounted for using the acquisition method.  The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the fair value of assets transferred, the liabilities assumed at the acquisition date from the former acquiree’s shareholders and equity interests issued in exchange for control over the acquiree.

The acquisition price was as follows:

Gross consideration in cash (4.663 billion euros)	15,964,853
(-) Contractual Adjustments (Net Debt)	(7,060,899)
Total consideration in cash, net	8,903,954
(+) Contingent Consideration	344,217
(+) Consideration in Shares at Fair Value	8,477,314
(-) Cash Flow Hedge Gain on Transaction, net of taxes (1)	(377,373)
(-) Refund according to sections 2.2.4 and 2.2.5 of SPA	(84,598)
Total consideration, net of Cash Flow Hedge	17,263,514

(1) Derivative transactions refer to cash flow hedges to protect the amount due in Euros to Vivendi, for the acquisition of GVTPart., against exchange rate variation of the amount.

A breakdown of the fair value of identifiable net assets acquired for R$4,426,373, as well as goodwill recorded on the acquisition date are presented below. At the date of preparation of the financial statements for the year ended December 31, 2015, the Company had already completed the revisions and adjustments of the fair value determination of the identifiable assets acquired and liabilities assumed by GVTPart..

Current assets	1,557,651	Current liabilities	5,299,662
Cash and cash equivalents	390,255	Personnel, social charges and benefits	170,989
Accounts receivable	947,378	Trade accounts payable	611,425
Inventories	4,641	Taxes, charges and contributions	346,569
Taxes recoverable	147,057	Loans and financing	3,968,615
Other assets	68,320	Provisions	17,866
		Other liabilities	184,198
Noncurrent assets	12,026,239
Short-term investment pledged as collateral	17,871	Noncurrent liabilities	3,857,855
Taxes recoverable	65,798	Trade accounts payable	67,742
Deferred taxes (4)	610,873	Taxes, charges and contributions	1,342
Judicial deposits and garnishments	551,275	Loans and financing	3,088,414
Other assets	7,052	Other Provisions (3)	679,294
Property and equipment (1)	7,970,117	Other liabilities	21,063
Intangible assets (2)	2,803,253
		Fair value of assumed liabilities	9,157,517
		Fair value of identifiable net assets acquired	4,426,373
		Goodwill (5)	12,837,141
Fair value of assets acquired	13,583,890	Total consideration, net of Cash Flow Hedge	17,263,514

(1) This includes the allocation of appreciation of property, plant and equipment items (R$409,601).

(2) This includes the allocation of fair value assigned to the brand (R$59,000), customer portfolio (R$2,523,000), appreciation and other intangibles assets (R$20,394).

(3) This includes the allocation of fair value assigned to contingent liabilities (R$512,648).

(4) This includes the allocation of deferred taxes on contingent liabilities (R$174,300).

(5)   This refers to goodwill recorded on the acquisition of GVTPart. based on expected synergies resulting from the business combination. This amount has already been used for tax purposes.

The main purpose of the Company’s acquiring of control over GVTPart was to enable the integration of landline, mobile, data and TV telecommunication services in Brazil, with a view to operating more efficiently. The acquisition of GVTPart. allows the Company to obtain significant synergies in revenues and costs, thus generating opportunities of cross sales in the individual and corporate markets, also allowing optimization of investments, improvement of service quality, reduction of cost of content, acquisition and platform in the pay-tv business, due to economies of scale, as well as reduction of general and administrative expenses, not affecting the Company’s growth potential.

The methods and assumptions used to determine the fair values were:

Customer portfolio

The customer portfolio was valued using the MEEM method (“Multi-period Excess Earnings Method”), which is based on a discounted cash flow calculation of future economic benefits attributable to the customer base, net of eliminated liabilities for contributions involving its generation.

In order to estimate the remaining useful life of the customer portfolio, an analysis of the average length of customer relationships was conducted using a churn method. 

The purpose of the useful life analysis is to estimate a survival curve that anticipates future churn rates in relation to the existing customer base. The so-called Iowa curves were used as an approximation to the customer survival curve. The fair value allocated to the customer portfolio on the acquisition date was R$2,523,000, which will be amortized over 7.77 years on average.

Brand

The fair value of “GVT” brand was determined through the "relief-from-royalty” method. This method measures the value of the asset by capitalizing the royalties saved by owning intellectual property. In other words, the owner of the brand profits from owning the intangible asset, rather than having to pay royalties for its use. The royalties saved were determined by applying a market royalty rate (expressed as a percentage of revenue) to the future expected revenues from the sale of the product or service associated with the intangible asset. The market royalty rate, normally expressed as a percentage of net revenue, is the rate a knowledgeable willing owner would charge a knowledgeable willing user for use of an asset it owns in an arm’s length transaction. The fair value allocated to the brand on the acquisition date was R$59,000, which will be amortized over 1.5 years.

Contingent Consideration

As part of the Stock Purchase Agreement and Other Covenants executed by the Company and Vivendi for the acquisition of all GVTPart-issued shares, a contingent consideration was defined for the court deposits made by GVT for the monthly installments of deferred income and social contribution taxes on the amortization of goodwill arising from the corporate restructuring process completed by GVT in 2013. In September 2014, GVT filed for a cancellation of the judicial review and the return of amounts deposited with the courts.

If GVT succeeds in receiving (being reimbursed, refunded or netting) these funds, they will be returned to Vivendi, as long as they are obtained in a final unappeasable decision. The period for returning such amount is of up to 15 years. The fair value of the contingent consideration on the acquisition date is R$344,217, recorded in the Company’s noncurrent liabilities as “Loans,  Financing and Debentures” (Note 20), which is subject to monthly monetary adjustments based on the Selic rate.

Fair value of contingent liabilities

According to IFRS 3 (R) - Business Combinations, the acquirer must recognize, on the acquisition date, contingent liabilities assumed in a business combination, even if it is not probable that cash outflows will be required to settle the obligation, as long as it is a present obligation arising from past events and its fair value can be measured reliably.

In compliance with these requirements, contingent liabilities were recognized the amount of R$512,648 of contingent liabilities at fair value, which were determined considering the expected cash outflow required to settle the obligation on the acquisition date.

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BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2017

BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

2)  BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

a)  Statement of compliance

The consolidated financial statements were prepared and are presented in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

b)  Basis of preparation and presentation

The Company’s financial statements for the years ended December 31, 2017, 2016 and 2015 are presented in thousands of reais (unless otherwise stated), which is the Company’s functional currency and were prepared under the going concern assumption.

The Board of Directors authorized the issue of these consolidated financial statements at the meeting held on February 16, 2018.

The financial statements were prepared on a historical cost basis (except where different criteria are required) and adjusted to reflect the valuation of assets and liabilities measured at fair value or considering the mark-to-market valuation when such valuations are required by IFRS.

These financial statements were prepared under various measurement bases used in accounting estimates. The accounting estimates involved in the preparation of these financial statements were based on objective and subjective factors, considering management’s judgment for determining the adequate amounts to be recorded in the financial statements. Significant items subject to these estimates and assumptions include: selection of useful lives and recoverability of property, plant and equipment in operations, measurement of the recoverability of assets with indefinite useful lives, measurement of financial assets at fair value and under present value adjustment method, as well as non-financial assets acquired in a business combination, credit risk analysis in determining estimated impairment losses of trade accounts receivable, as well as the analysis of other risks in determining other provisions, including the provision for contingencies. The carrying amounts of assets and liabilities recognized, which represent hedged items at fair value, which, alternatively, would have been recorded at amortized cost, are adjusted to state the variations in fair values attributable to the hedged risks.

Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to the uncertainties inherent in their estimate process. The Company reviews its estimates at least on an annual basis.

For comparability of the consolidated financial statements (income statement, statements of comprehensive income, statements of value added and statements of cash flows) for years ended December 31, 2017, 2016 and 2015, the effects of acquisition of Terra Networks by TData occurred on July 3, 2017 (note 1.c.1).

The accounting policies adopted in the preparation of the consolidated financial statements for the year ended December 31, 2017 are consistent with those used in the preparation of the consolidated annual financial statements for the year ended December 31, 2016. The following amendments to standards published by the International Accounting Standards Board (IASB) come into force for annual periods beginning on or after January 1, 2017:

· Improvements to IFRS 2014-2016: The annual improvements projects provide a vehicle for making non-urgent but necessary amendments to IFRS, with the aim of removing inconsistencies and clarifying wording. The amendments related to IFRS 12 Disclosure of Interests in other Entities, aimed clarifying the scope of the standard, come into force for annual periods beginning on or after January 1, 2017, whereas the rest of the improvements come into force for annual periods beginning on or after January 1, 2018. The amendments related to IFRS 12 do not have an impact on the Company’s consolidated financial statements since, as of December 31, 2017, the Company does not have participations that are classified as held for sale, as held for distribution or as discontinued operations.

· Amendments to IAS 7, Disclosure Initiative: The amendments to IAS 7 require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows, such as the issue and repayments of loans, and non-cash changes, such as unpaid acquisitions, sales and exchange differences.

· Amendments to IAS 12, Recognition of Deferred Tax Assets for Unrealised Losses: The amendments clarify the requirements on recognition of deferred taxes when the tax base of an asset exceeds its fair value.

The Company considered these amendments in the preparation of the annual consolidated financial statements; however, did not generate a significant impact on its results or financial position.

On the date of preparation of these financial statements, the following IFRS amendments had been published; however, their application was not mandatory. The Company does not adopt early any pronouncement, interpretation or amendment that has been issued, before application is mandatory.

		Mandatory application:
		annual periods
Standards and amendments		beginning on or after
IFRS 9	Financial Instruments	January 1, 2018
IFRS15	Revenue from Contracts with Customers	January 1, 2018
Clarifications to IFRS 15	Revenue from Contracts with Customers, issued on April 12,2016	January 1, 2018
Amendments to IFRS 2	Classication and Valuation of Share Based Transactions	January 1, 2018
Amendments to IFRS 4	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts	January 1, 2018
Amendments to IAS 40	Transfers of Investiment Property	January 1, 2018
IFRIC 22	Foreign Currency Transactions and Advance Consideration	January 1, 2018
Improvements to IFRS Standards	2014-2016 Cycle	January 1,2018
Improvements to IFRS Standards	2015-2017 Cycle	January 1, 2019
IFRS 16	Leases	January 1, 2019
IFRIC23	Uncertainty over Income Tax Treatments	January 1, 2019
Amendments to IFRS 9	Prepayment Features with Negative Compensation	January 1, 2019
Amendments to IAS 28	Long-term Interest in associates and Joint Ventures	January 1, 2019
IFRS 17	Insurance Contracts	January 1, 2021
Amendments to IFRS 10 and IAS 28	Sale or Contribuition of Assets between na Investidor and its Associate or Joint Venture	Deferred Indefinitely

Based on the analyses made to date, the Company estimates that the adoption of many of these standards, amendments and interpretations will not have a significant impact on the consolidated financial statements in the initial period of adoption. However, for the following issued but not yet effective standards are expected to have a significant impact on the consolidated financial statements at the time of their adoption and prospectively.

IFRS 15 Revenues from Contracts with Customers

IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The new requirements are expected to affect the following aspects, among others:

· Under IFRS 15, for bundled packages that combine multiple wireline, wireless, data, internet or television goods or services, the total revenue will be allocated to each performance obligation based on their standalone selling prices in relation to the total consideration of the package and will be recognized when (or as) the obligation is satisfied, regardless of whether there are undelivered items. This differs from current accounting where the portion of the total consideration that is contingent upon delivery of undelivered elements is not allocated to the delivered elements. Consequently, when bundles include a discount on equipment, the adoption of these new requirements will result in an increase in revenues recognized from the sale of handsets and other equipment, generally recognized upon delivery to the end customer, in detriment of ongoing service revenue over subsequent periods. To the extent that the packages are marketed at a discount, the difference between the revenue from the sale of equipment and the consideration received from the customer upfront will be recognized as a contract asset on the statement of financial position.

· Under the current accounting policy, all expenses directly related with obtaining a contract (sales commissions and other third party acquisition costs) are expensed when incurred. However, IFRS 15 requires the recognition of an asset for those costs that are incremental to obtain a contract and that are expected to be recovered and its subsequent amortisation over the same period as the revenue associated with such asset. Similarly, certain contract fulfilment costs, which are currently expensed when incurred, will be deferred under IFRS 15 to the extent that they relate to performance obligations that are satisfied over time.

· The guidance in IFRS 15 for the distinction between agent and principal is based on the concept of “control” that may differ from the currently applied notion of transfer of “risks and rewards”. As a result, with the adoption of IFRS 15, the Company will record revenue from the sale of handsets to dealers at the time of delivery and not at the time of sale to the final customer.

· Compared to the current revenue standard, IFRS 15 sets out more detailed requirements on how to account for contract modifications. Certain changes must be accounted for as a retrospective change (i.e. as a continuation of the original contract), while other modifications must be accounted for prospectively as separate contracts, like the end of the original contract and the creation of a new one.

In addition to this, IFRS 15 allows for two transition methods, namely the full retrospective method and the modified retrospective method with the cumulative effect from initial application recognized as an adjustment to the opening balance of retained earnings at the date of initial application. The Company will adopt the latter and prior-year comparatives will not be restated; instead, the Company will disclose the nature and amount of the changes in items in the statement of financial position and the income statement as a result of applying IFRS 15 for the first time.

It is also possible to elect to apply certain practical expedients to facilitate the application of the new criteria. The Company has evaluated which of them will be adopted in the implementation of the standard with the objective of reducing the complexity in its application. The main practical expedients that the Company will adopt are:

· Completed contracts: the Company will not apply the standard retrospectively to those contracts that are completed at January 1, 2018.

· Portfolio approach: the Company will apply the requirements of the standard to groups of contracts with similar characteristics, since, for the clusters identified, the effects do not differ significantly from an application on a contract by contract basis.

· Financial component: it will not be considered significant when the period between the moment when the promised good or service is transferred to a customer and the moment when the customer pays for that good or service is one year or less.

· Costs to obtain a contract: these costs will be recognized as an expense when incurred if the amortisation period of the asset that the entity would otherwise recognise is one year or less.

The process of implementing the new requirements involves the introduction of modifications to the current information systems, the implementation of new IT tools, and changes in the processes and controls of the entire revenue cycle in the Company. This process of implementation in the Company entails a high degree of complexity due to factors such as a large number of contracts, numerous data source systems, as well as the need to make complex estimates.

From the analysis performed on the transactions of the last financial year considering commercial offers as well as the volume of contracts affected, the Company estimates that the adoption of the new revenue recognition requirements on its equity is expected to result in an increase in retained earnings of 156 million reais before deferred taxes, being the most significant impacts due to the changes introduced by IFRS 15 relating to the first-time recognition of contract assets that, under IFRS 15, lead to the earlier recognition of revenue from the sale of goods, and the activation and deferral of the incremental costs related to the obtaining contracts and contract fulfilment costs that, under IFRS 15, result in the later recognition of customer acquisition costs and other selling expenses.

As the accounting effects of the transition to the new standard will be recognized directly in equity, the effects on profit or loss in 2018 will be related to changes in the point in time at which revenue and expenses are realized. The Company expects a shift from revenues from the provision of services to revenues from the sale of goods, by between 0.3 and 0.7 percentage point on the assumption that there are no significant changes to business models or products offered.

IFRS 9 Financial Instruments

IFRS 9 is applicable to financial assets and financial liabilities. As a result of the analysis of the effects of the new requirements introduced by this standard certain expected impacts have been identified in relation with the following aspects, among others:

· IFRS 9 simplifies the current measurement model for financial assets and establishes three main categories: amortised cost, fair value through profit or loss and fair value through Other Comprehensive Income (OCI), depending on the business model and the characteristics of the contractual cash flows. Regarding recognition and measurement of financial liabilities there are not significant changes from current criteria except for the recognition of changes in own credit risk in OCI for those liabilities designated at fair value through profit or loss.

· IFRS 9 introduces a new model for impairment losses on financial assets, i.e. the expected credit loss model, which replaces the current incurred loss model. The Company will apply the simplified approach and record lifetime expected losses on all trade receivables. Consequently, the application of the new requirements will probably lead to an acceleration in the recognition of impairment losses on its financial assets, mainly trade receivables.

· Under current accounting, a hedge must be highly effective both, prospective and retrospectively, while IFRS 9 introduces a new, less restrictive, accounting model for hedging, requiring an economic relationship between the hedged item and the hedging instrument and that the coverage ratio be the same as that applied by the entity for its risk management. Likewise, the new standard modifies the criteria for documentation of hedging relationships.

· In addition to this, the Company's financial statements will include more detailed disclosures with relevant information regarding financial assets and liabilities.

As a result of the analysis of the new standard, the Company expects that the key changes will relate to documentation of policies and hedging strategies, as well as the estimation and timing of recognition of expected losses on receivables from customers. The Company has decided to apply the option that allows not to restate comparative periods to be presented in the year of initial application.

Based on the analysis performed to date, the Company estimates that the new impairment requirements is expected to result upon initial adoption in a decrease of 354 million reais in retained earnings, before deferred taxes, as a result of the increase in the bad debt provision balance on receivables from customers recognized under IAS 39.

IFRS 16 Leases

IFRS 16 requires lessees to recognise assets and liabilities arising from all leases (except for short-term leases and leases of low-value assets) in the statement of financial position.

The Company acts as a lessee on a very significant number of lease agreements over different assets, such as third-party towers, circuits, office buildings and stores and land where the towers are located, mainly. A significant portion of these contracts is accounted for as operating lease under the current lease standard, with lease payments being recognized generally on a straight-line basis over the contract term.

The Company is currently in the process of estimating the impact of this new standard on such contracts. This analysis includes the estimation of the lease term, based on the non-cancellable period and the periods covered by options to extend the lease, when the exercise depends only on Telefônica and where such exercise is reasonably certain. This will depend, to a large extent, on the specific facts and circumstances by class of assets in the telecom industry (technology, regulation, competition, business model, among others).  In addition to this, the Company will make assumptions to calculate the discount rate, which will mainly be based on the incremental borrowing rate of interest for the estimated term. On the other hand, the Company is considering not to separately recognise non-lease components from lease components for those classes of assets in which non-lease components are not material with respect to the total value of the lease.

In addition to the mentioned estimations, the standard allows for two transition methods: retrospectively for all periods presented, or using a modified retrospective approach where the cumulative effect of adoption is recognized at the date of initial application. The Company has tentatively decided to adopt the latter transition method; therefore the Company would recognise the cumulative effect of initial application as an adjustment to retained earnings in the year of initial application of IFRS 16. Also, certain practical expedients are available on first-time application in connection with the right of use asset measurement, discount rates, impairment, leases that finish within the twelve months subsequent to the date of first application, initial direct costs, and term of the lease. The Company is evaluating which of these practical expedients will be adopted. In this regard, the Company is considering opting for the practical expedient that allows not reassessing whether a contract is or contains a lease on the date of initial application of IFRS 16 but to directly apply the new requirements to all those contracts which under current accounting were identified as a lease.

Due to the different alternatives available, together with the complexity of the estimations and the significant number of lease contracts, the Company has not yet completed the implementation process, so at present it is not possible to make a reasonable estimation of the impact of initial application of the new requirements. However, based on the volume of contracts affected, as well as the magnitude of the future lease commitments, as disclosed in Note 32 herein, the Company expects that the changes introduced by IFRS 16 will have a significant impact on its financial statements from the date of adoption, including the recognition on the balance sheet of right of use assets and their corresponding lease obligations in connection with the majority of contracts that are classified as operating leases under the current lease standard. Also, amortization of the right of use assets and recognition of interest costs on the lease obligation on the statements of income will replace amounts recognized as lease expense under the current lease standard. Classification of lease payments in the statement of cash flows will also be affected by the requirements of the new lease standard. On the other side, the Company's Financial Statements will include broader disclosures with relevant information regarding lease contracts.

c)  Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries at December 31, 2017, 2016 and 2015 (Note 11).

The Company held the following direct equity interests on the respective dates:

Investees	Type of investment	Equity interests		Country (Headquarters)	Core activity
Telefônica Data S.A. ("TData") (1)	Wholly-owned subsidiary	100.00	%	Brazil	Telecommunications
POP Internet Ltda ("POP") (2)	Wholly-owned subsidiary	100.00	%	Brazil	Internet
Aliança Atlântica Holding B.V. ("Aliança")	Jointly-controlled subsidiary	50.00	%	Holland	Holding of the telecommunications sector
Companhia AIX de Participações ("AIX")	Jointly-controlled subsidiary	50.00	%	Brazil	Operation of underground telecommunications networks
Companhia ACT de Participações ("ACT")	Jointly-controlled subsidiary	50.00	%	Brazil	Technical assistance in telecommunication networks

(1) TData is the wholly-owned parent of Terra Networks and Telefônica Transportes e Logística Ltda ("TGLog").

(2) POP is the wholly-owned parent of Innoweb Ltda ("Innoweb").

Interest held in subsidiaries or jointly-controlled entities is measured under the equity method in the individual financial statements. In the consolidated financial statements, investments and all asset and liability balances, revenues and expenses arising from transactions and interest held in subsidiaries are fully eliminated. Investments in jointly-controlled entities are measured under the equity method in the consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

3)  SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

a)  Cash and cash equivalents

These are maintained in order to meet short-term cash commitments and not for investment or other purposes. The Company consider cash equivalents a short-term investment readily convertible into a known amount of cash and subject to insignificant risk of change in value. Short-term investments are classified as cash-equivalent when redeemable within 90 days (Note 4).

b)  Trade accounts receivable

These are evaluated by the value of the services provided in accordance with the contracted conditions, net of estimated impairment losses. These include the services provided to customers, which were still not billed until balance sheet date, as well as other trade accounts receivable related to the sale of cellphones, SIM cards, accessories, advertising and rent of IT equipment (TData’s “Soluciona TI” product), (Note 5).

The estimated impairment losses are set up at amounts sufficient to cover any losses and mainly consider the expected default.

c)  Inventories

These are evaluated and presented at lower of average acquisition cost and net realizable value, whichever is lower. These include cellphones, SIM cards, prepaid cards, accessories, consumption materials and maintenance. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to sell (Note 6).

Estimated impairment losses are set up for materials and devices considered obsolete or whose carrying amounts are in excess of those usually sold by the Company within a reasonable period of time.

d)  Prepaid expenses

These are stated at amounts effectively disbursed referring to services contracted but not yet incurred. Prepaid expenses are allocated to the income statements to the extent that related services are rendered and economic benefits are obtained (Note 9).

e)  Investments

Control is obtained when the Company is exposed or has the right to variable returns based on its involvement with the investee and has the capacity of affecting those returns through the power exercised over an investee.

The consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company ceases to exercise said control. Assets, liabilities and results of a subsidiary acquired or sold during the year are included in the consolidated financial statements from the date on which the Company obtains control until the date on which the Company ceases to exercise control over the subsidiary.

Joint control is the contractually agreed sharing of a control, only existing when decisions about relevant activities call for unanimous agreement by the parties sharing control.

Based on the equity method, investments are recorded in balance sheets at cost plus changes after the acquisition of the equity interest. The income statement reflects the portion of the results of operations of the investees.

When changes are directly recognized in the investees' equity, the Company will recognize its portion in variations occurred, and as record these variations in the statements of changes in equity and in the statements of comprehensive income, where applicable.

The financial statements of investees are prepared for the same reporting period of the Company. Whenever necessary, adjustments are made so that the accounting policies are in accordance with those adopted by the Company.

After the equity method is applied, the Company determines whether there is any need to recognize additional impairment of its investment in investees. At each closing date, the Company determines whether there is objective evidence of impairment of investment in the affiliate. If so, the Company calculates the recoverable amount as the difference between the recoverable value of the investees and their carrying amount, and recognizes the amount in the income statements.

When there is loss of significant influence over the investees, the Company evaluates and recognizes the investment, at that moment, at fair value. Any difference between the investees’ carrying amount by the time it loses significant influence and the fair value of the remaining investment and revenue from sale is recognized in the income statements.

Foreign exchange variations in Aliança’s equity (jointly-controlled entity) are recognized in the Company’s equity in other comprehensive income (“Effects on conversion of investments abroad”, Note 22).

f)  Property, plant and equipment

Property, plant and equipment are stated at acquisition and/or construction cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the borrowing costs for long-term construction projects if the recognition criteria are met, and is stated net of ICMS (State VAT) credits, which were recorded as recoverable taxes.

Asset costs are capitalized until the asset becomes operational. Costs incurred after the asset becomes operational and that do not improve the functionality or extend the useful life of the asset are immediately recognized on the accrual basis. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation. Likewise, expenses that represent asset improvement (expanded installed capacity or useful life) are capitalized. All the other repair and maintenance costs are recognized in the income statement as incurred.

The present value of the expected cost for the decommissioning of property, plant and equipment items (towers and equipment on leased property) is capitalized at the cost of the respective asset matched against the provision for dismantling obligations (Note 18) and depreciated over the useful lives of the related assets, which do not exceed the lease term.

Depreciation is calculated by the straight-line method over the useful lives of assets at rates that take into account the estimated useful lives of assets based on technical analyses. The assets’ residual values, useful lives and methods of depreciation are reviewed on a yearly basis, adjusted prospectively, if appropriate. Useful life in terms of depreciation rates, which is reviewed annually by the Company.

Property, plant and equipment items are written off when sold or when no future economic benefit is expected from their use or sale. Any gains or losses arising from write-off of assets (measured as the difference between the net disposal proceeds and the net carrying amount of the asset) are recognized in the income statement in the year in which the asset is written off.

A brief description of the main property, plant and equipment items, Note 12 is as follows:

· Switching and transmission media equipment: Includes switching and control centers, gateway, platforms, base radio station, microcells, minicells, repeaters, antennas, radios, access networks, concentrators, cables, TV equipment and other switching and transmission media equipment.

· Terminal/modem equipment: Includes cellphones and modems (rent and free lease), CPCT, public telephones and other terminal equipment.

· Infrastructure: This includes buildings, elevators, central air conditioning equipment, towers, posts, containers, energy equipment, land piping, support and protectors, leasehold improvements, etc.

· Other fixed asset items: These include vehicles, repair and construction tools and instruments, telesupervision equipment, IT equipment, testing and measurement equipment, fixtures and other goods for general use.

g)  Intangible assets

Intangible assets acquired separately are measured at cost upon their initial recognition. The cost of an intangible asset acquired in a business combination is its fair value at the acquisition date.

After initial recognition, intangible assets are stated at acquisition and/or buildup cost, net of amortization and accumulated provision for impairment, where applicable. Intangible assets generated internally, excluding capitalized development costs, are not capitalized, and the expense is reflected in the income statement for the year in which it is incurred.

The useful lives of intangible assets are considered finite or indefinite.

· Intangible assets with finite useful lives are amortized over their economic useful lives under the straight-line method and are tested for impairment whenever there is any indication of impairment loss. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed on an annual basis.

Changes in the estimated useful life or the expected pattern of consumption of future economic benefits embodied in an asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the cost/expense category consistent with the function of the intangible assets.

· Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be justifiable. Otherwise, changes in useful life – from indefinite to finite - are carried out prospectively. Goodwill generated upon investment acquisition is treated as intangible assets with indefinite useful lives.

Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and recognized in the income statement on disposal.

A brief description of the key intangible asset items with finite useful lives, Note 13, is as follows:

· Software: This includes licenses for software used in the Company’s operating, commercial and administrative activities.

· Customer portfolio: This includes intangible assets acquired through business combination, recorded at fair value on the acquisition date.

· Trademarks:  These include intangible assets acquired through business combination, recorded at fair value on the acquisition date.

· Licenses: These include concession and authorization licenses, acquired from ANATEL for provision of telecommunication services. These also include licenses from business combinations, recorded at fair value on the acquisition date.

h)  Lease

The classification of an agreement as a lease is based on substantive issues related to the use of an asset or specific assets, or even the right to use a given asset, on the initial date of its execution.

Finance lease agreements: By means of these agreements, the Company assumes substantially all risks and rewards relating to ownership of a leased item. These are capitalized at the lease inception at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Initial direct costs incurred in the transaction are added to cost, where applicable. Payments of finance lease agreements are allocated to financial charges and reduction of finance lease liabilities in order to obtain the constant interest rate on the outstanding liability balance. Implicit interest recognized in liabilities is allocated to the income statement over the lease term using the effective interest rate method.

Leased assets are depreciated according to their estimated useful lives or the lease term, whichever is shorter.

The Company and TData are parties to the following finance lease agreements:

· As lessee: lease agreements for transmission equipment and media arising from a joint construction agreement with another telecomm operator, based on an optical network linked to the power transmission line, interconnecting the northern Brazilian cities to the Company’s national backbone and lease of towers and rooftops (arising from sale and finance leaseback, for which the net carrying amount of the assets upon disposal remained unchanged, a liability was recognized at the present value of minimum lease payments and deferred income was recorded at the difference between the selling price and the mentioned present value. (Note 19).

· As lessor: Lease agreements for IT equipment (TData’s “Soluciona TI” product) for which the Company recognizes revenue, upon inception, at the present value of lease payments matched against accounts receivable (Note 5).

The difference between the nominal amount of lease payments and recorded accounts receivable/payable are recognized as finance income/expenses using the effective interest method over the lease term.

Operating lease: These are lease agreements where lessor holds a significant portion of risks and rewards, where effects are recognized in the income statements for the year over the contractual term.

i)  Impairment of nonfinancial assets

The Company annually reviews the net carrying amount of assets in order to evaluate events or changes in economic, operating or technological circumstances that may indicate impairment losses. When such evidence is found, and net carrying amount exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net carrying amount to the recoverable amount.

The recoverable amount of an asset or a Cash Generating Unit (“CGU”) is defined as the higher of value in use and net sales value.

Upon estimation of the value in use of an asset or cash-generating unit, estimated future cash flows are discounted at present value using a discount rate based on the cost of capital rate the Capital Asset Pricing Model (CAPM) before taxes, which reflects the weighted average cost of capital and specific risks of the asset or CGU.

Whenever possible, the net sale value is determined based on a firm sale agreement executed on an arm’s length basis between knowledgeable and willing parties, adjusted by expenses attributable to the sale of assets or, when there is no firm sale agreement, based on the market price of an active market, or on the latest transaction price involving similar assets.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.

A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine an asset’s or CGU recoverable amount since the last impairment loss was recognized. Any reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement.

The following assets have specific characteristics for impairment testing:

· Goodwill: Goodwill is tested for impairment annually at the reporting date or before when circumstances indicate that the carrying amount may be impaired. Where the recoverable amount is lower than the carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

· Intangible assets: Intangible assets with indefinite useful lives are tested for impairment annually at the reporting date either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying amount may be impaired.

· Determination of value in use: The key assumptions used to estimate value in use are: (i) revenues (projected considering the growth in customer base, growth in market revenue against GDP and the Company’s share of this market); (ii) variable costs and expenses (projected in accordance with the dynamics of the customer base, and fixed costs are projected in line with the historical performance of the Company, as well as with revenue growth); and (iii) capital investments (estimated considering the technological infrastructure necessary to enable the provision of services).

Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by Company’s management.

The impairment test of the Company fixed and intangible assets, including goodwill, did not result in recognition of impairment losses for the years ended December 31, 2017 and 2016, since their estimated recoverable amount is greater than the net carrying amount as of the estimation date.

j)  Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, recorded at fair value on the acquisition date, and the fair value of any noncontrolling interest in the acquiree.

For each business combination, the Company measures noncontrolling interests in the acquiree either at its fair value or on the basis of its proportional share in the identifiable net assets of the acquiree. Costs directly attributable to an acquisition are recorded as expenses, as incurred.

Upon acquiring a business, the Company assesses financial assets acquired and liabilities assumed so as to classify and allocate them in accordance with contractual terms, economic circumstances and relevant conditions on the acquisition date, including the segregation, by the acquiree, of embedded derivatives existing in host contracts in the acquiree.

In the event a business combination is conducted in stages, the ownership interest previously held in the acquiree’s capital is reassessed at fair value on the date control is acquired, and any impacts are recognized in the income statement.

Any contingent portion to be transferred by the acquirer shall be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent portion to be considered as an asset or liability is recognized in the income statement. Contingent consideration on acquisition of a business that is not classified as equity is subsequently measured at fair value through profit or loss, whether or not included in the scope of IFRS 9 Financial Instruments.

Goodwill is initially measured as excess transferred payment amount in relation to acquired net assets (identifiable net assets acquired and liabilities assumed). If consideration is lower than fair value of acquired net assets, the difference must be recognized as gain in the income statement.

After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a CGU and part of the operation within that CGU is disposed of, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is allocated based on the relative fair values of the disposed operation and the portion of the CGU retained.

k)  Financial Instruments – Initial recognition and subsequent measurement

k.1) Financial assets

Initial recognition and measurement

Financial assets are classified at initial recognition (when it becomes part of the instrument's contractual provisions), as: (i) fair value through profit or loss; (ii) loans and receivables; (iii) investments held to maturity; (iv) financial assets available for sale or (v) derivatives classified as effective hedge instruments, as applicable.

All financial assets are initially recognized at fair value, plus, in the case of investment that is not determined at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial asset.

The Company’s consolidated financial assets include cash and cash equivalents, trade accounts receivable, short-term investments pledged as collateral and derivative financial instruments.

Subsequent measurement

Subsequent measurement of financial assets depends on their classification, as follows:

Financial assets at fair value through profit or loss: These include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss: (i) financial assets are classified as held for trading if acquired to be sold within short term. This category includes derivative financial instruments contracted by the Company which do not meet the hedge accounting criteria set out by the corresponding standard; and (ii) financial assets at fair value through profit or loss are stated in balance sheets at fair value with their corresponding gains or losses recognized in the income statements.

Loans and receivables:  these refer to non-derivative financial assets with fixed or determinable payments, however not traded in an active market.  After initial measurement, these financial assets are stated at amortized cost, using the effective interest method, less impairment, where applicable. Amortized cost is calculated taking into account any discount or “premium” on acquisition and fees or costs incurred. Amortization by the effective interest method and impairment losses are included in the financial income line in the income statement, if applicable.

Financial assets available for sale: These are non-derivative financial assets not classified as: (i) loans and receivables; (ii) investments held to maturity; or (iii) financial assets at fair value through profit or loss. These financial assets include equity and debt instruments. Debt instruments in this category are those which are intended to be held for an indefinite period and can be sold to meet liquidity needs or in response to changes in market conditions.

After initial measurement, financial assets available for sale are measured at fair value, with unrealized gains and losses being recognized directly in other comprehensive income until such time as the investment is written off, except for impairment losses, interest calculated using the effective interest method and gains or losses due to exchange variations on monetary assets, which are recognized directly in the income statement for the year.

When the investment is written-off or when a loss is determined due to impairment, the cumulative gains or losses which were previously recognized in other comprehensive income should be recognized in the statement of income.

The fair value of financial assets available for sale denominated in foreign currency is measured in the foreign currency and translated at the spot exchange rate at financial statements date. Changes in fair value attributable to translation differences that result from a change in amortized cost of the asset are recognized in the income statement, and other variations are recognized directly in equity.

Derecognition

A financial asset (or, whenever the case, a part of a financial asset, or a part of a group of similar financial assets) is derecognized when:

· The rights to receive the cash flows from the asset have expired;

· The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

k.2) Impairment of financial assets

The Company evaluate, at the balance sheet date, if there is any objective evidence indicating that the financial asset or group of financial assets is not recoverable. A loss only exists if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after initial recognition of the asset (a “loss event” occurred) and such event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reasonably estimated.

The carrying amount of an asset is reduced by a provision and the loss amount is recognized in the income statement. If, in a subsequent year, estimated impairment increases or decreases due to an event after impairment recognition, impairment loss previously recognized will be adjusted accordingly. Should a written-off asset be recovered in the future, such recovery is recognized in the income statement.

k.3) Financial liabilities

Initial recognition and measurement

Upon initial recognition, the Company’s financial liabilities are classified in the following categories:   financial liabilities measured at fair value through profit or loss and other financial liabilities.

Financial liabilities are initially recognized at fair value plus, in the case of loans and financing, transaction cost directly attributable thereto.

The Company’s consolidated financial liabilities include trade accounts payable, loans and financing, debentures, finance lease agreements, contingent payments and derivative financial instruments.

Subsequent measurement

Measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at fair value through profit or loss: These include financial liabilities designated upon initial recognition at fair value through profit or loss. This category also includes derivative financial instruments contracted which do not meet the hedge accounting criteria set out by the corresponding standard.

For the years ended December 31, 2017 and 2016, the Company did not record any financial liability at fair value through profit or loss upon initial recognition.

Loans and financing: After initial recognition, loans and financing subject to interest are subsequently measured at amortized cost, using the effective interest method. Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through the effective interest rate amortization process.

Derecognition

A financial liability is derecognized when the obligation has been revoked, cancelled or has expired.

When an existing financial liability is replaced by another of the same lender, and the terms of the instruments are substantially different, or when the terms of an existing debt instrument are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference in the corresponding carrying amounts is recognized in the income statement.

k.4) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability will take place (i) in the principal market for the asset or liability; or (ii) in the absence of a principal market, in the most advantageous market for that asset or liability.

The Company must have access to the principal (or most advantageous) market.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing an asset or liability, assuming that market participants act in their best economic interests.

Fair value measurement of a non-financial asset takes into consideration the capacity of a market participant to generate economic benefits through the best use of the asset, or selling it to another market participant that would also make the best use of the asset.

The Company use adequate valuation techniques in the circumstances and for which there is sufficient data to measure the fair value, maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs.

For assets and liabilities recurrently recognized in the financial statements, the Company determines whether there were transfers between the hierarchy levels, revaluating the classification (based on the lowest level input that is significant to the overall fair value measurement) at the end of each reporting period.

For the purposes of fair value disclosures, the Company determined classes of assets or liabilities based on the nature, characteristics and risks of those assets or liabilities and the fair value hierarchy level, as mentioned above.

k.5) Financial instruments - net

Financial assets and liabilities are presented net in the balance sheet if, and only if, there is a current enforceable legal right to offset the amounts recognized and if there is an intention to offset or realize the asset or settle the liability simultaneously.

l)  Derivative financial instruments and hedge accounting

The Company uses derivative financial instruments, such as currency and interest rate swaps or currency nondeliverable forward contracts to hedge against currency risks.

Derivative financial instruments designated in hedge transactions are initially recognized at fair value on the date on which the derivative contract is entered into, and subsequently revalued also at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive and as financial liabilities when the fair value of the instrument is negative.

Any gains or losses resulting from changes in fair value of derivatives during the year are posted directly to the income statement, except for the effective portion of cash flow hedges, which is recognized directly in equity as other comprehensive income and subsequently reclassified to P&L when the hedged item affects P&L.

Inception initial recognition of a hedge relationship, the Company formally designate and documents the hedge relationship to which it wishes to apply hedge accounting, the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk, the nature of unhedged risks, the prospective statement of hedge effectiveness and how the Company shall assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

For the purpose of hedge accounting, hedges are classified as cash flow hedges and fair value hedges.

l.1) Cash flow hedges

Cash flow hedges meeting the recording criteria are accounted for as follows: (i) the portion of gain or loss from the hedge instrument determined as effective hedge shall be recognized directly in equity (other comprehensive income), and (ii) the ineffective portion of gain or loss from the hedge instrument shall be recognized in the income statement.

When the Company’s documented risk management strategy for any given hedge relationship excludes from the hedge effectiveness evaluation any particular component of gain or loss or the corresponding cash flows from the hedge instrument, that gain or loss component is recognized in financial income (expenses).

Amounts recorded in other comprehensive income are immediately transferred to the income statement when the hedged transaction affects P&L. When a hedged item is the cost of a non-financial asset or liability, amounts recorded in equity are transferred at the initial carrying amount of the non-financial assets and liabilities.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge fails to meet the hedge accounting criteria, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs or the firm commitment is fulfilled.

The Company’s contracts are classified as cash flow hedges when they provide protection against changes in cash flows that are attributable to a particular risk associated with a recognized liability that may affect the profit or loss and fair value when they provide protection against exposure to changes in the fair value of the identified part of certain liabilities that is attributable to a particular risk (exchange variation) and may affect the profit or loss.

l.2) Fair value hedges

Fair value hedges meeting the accounting criteria are accounted for as follows: (i) gain or loss from changes in fair value of a hedge instrument shall be recognized in the income statement as finance costs; and (ii) gain or loss from a hedged item attributable to the hedged risk shall adjust the recorded amount of the hedged item to be recognized in the income statement, as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying amount is amortized through profit or loss over the remaining term of the hedge using the effective interest method. The effective interest rate amortization may begin as soon as any adjustment exists and no later than the point that the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedged item is derecognized, the unamortized fair value is recognized immediately in the income statement.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.

l.3) Classification between current and noncurrent

Derivative financial instruments are classified as current and noncurrent or segregated into short and long term portions based on an evaluation of the contractual cash flows.

When the Company maintains a derivative as economic hedge (and does not apply hedge accounting), for a period exceeding 12 months after balance sheet date, the derivative is classified as noncurrent (or segregated into current and noncurrent portions), in line with the classification of the corresponding item.

Derivative instruments that are designated as effective hedging instruments are classified consistently with the classification of the underlying hedged item.

The derivative instrument is segregated into current and noncurrent portions only when amounts can be reliably allocated.

m)  Loans and financing

Loans and financing obtained are initially recognized at fair value, net of costs incurred to obtain them and subsequently measured at amortized cost (plus charges and pro rata interest), considering the effective interest rate of each operation.

These are classified as current, unless the Company has an unconditional right to settle the liability for at least 12 months after year end.

n)  Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a period of time exceeding 18 months to prepare for its intended use or sale form part of the cost of that asset.

All other borrowing costs are recorded in the period they are incurred. Borrowing costs include interest and other costs incurred by an entity in connection with the borrowing of funds.

In 2017 and 2016, the Company did not capitalize amounts related to borrowing costs.

o)  Interest on equity and dividends

o.1) Interest on equity

Brazilian legislation allows companies to pay interest on equity, which is similar to payment of dividends; however, this is deductible for income tax calculation purposes. In order to comply with Brazilian tax legislation the Company provision, in its accounting records the amount due to match against the financial expenses account in the income statement for the year. For the presentation of these financial statements, that expense is reversed against a direct charge to equity, resulting in the same accounting treatment adopted for dividends. The distribution of interest on equity to shareholders is subject to withholding income tax at a 15% rate.

o.2) Dividends

Minimum mandatory dividends are stated in the balance sheet as legal obligations (provisions in current liabilities). Dividends in excess of such minimum amount, not yet approved in the Shareholders’ Meeting, are recorded in equity as proposed additional dividends. After approval at the Shareholders’ meeting, the dividends in excess of minimum mandatory are transferred to current liabilities, and classified as legal obligations.

p)  Provisions

p.1) General

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, when it is probable that economic benefits are required to settle the obligation and a reliable estimate of the value of the obligation can be made. Provisions are restated at the balance sheet date considering the likely amount of loss and the nature of each contingency.

Provisions for contingencies are presented at their gross amount, less the corresponding judicial deposits, and are classified as provisions for civil, labor, tax and regulatory contingencies.

Judicial deposits are classified as assets given that the conditions required for their net presentation with the provision do not exist.

p.2) Provisions for civil, labor, tax and regulatory legal claims

The Company is party to labor, tax, civil and regulatory administrative and legal proceedings and set up a provision for contingencies whose likelihood of loss was estimated as probable. The assessment of the likelihood of loss includes an analysis of available evidence, the hierarchy of laws, available case law, the latest court decisions law and their relevance in the legal system, as well as the opinion of outside legal counsel. Provisions are reviewed and adjusted considering changes in existing circumstances, such as the applicable statute of limitations, tax audit conclusions, or additional exposures identified based on new matters or court decisions.

p.3) Provision for decommissioning of assets

This refers to costs to be incurred due to returning sites to owners (locations intended for tower and equipment installation on leased property) in the same condition as these were found at the time of execution of the initial lease agreement.

These costs are provisioned at the present value of amounts expected to settle the obligation using estimated cash flows and are recognized as part of the cost of the corresponding asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to decommissioning of assets. The financial effect of the discount is recorded as incurred and recognized in the income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to, or deducted from, the cost of the asset.

p.4) Contingent liabilities recognized in a business combination

A contingent liability recognized in business combination is initially measured at fair value.

q)  Taxes

q.1) Current taxes

Current tax assets and liabilities for the current and prior years are measured at the estimated amount recoverable from, or payable to, the tax authorities. The tax rates and laws used in calculating the amounts referred to above are those in effect, or substantially in effect, at year end. In the balance sheet, current taxes are presented net of prepayments over the year.

Current income and social contribution taxes related to items directly recognized in equity are also recognized in equity. Management regularly assesses the tax position in circumstances in which tax regulation requires interpretation, and sets up provisions therefor when appropriate.

q.2) Deferred taxes

Deferred taxes arise from temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amount.

Deferred tax assets are recognized for all deductible temporary differences, unused tax credits and losses, to the extent that taxable profit is likely to be available for realization of deductible temporary differences, and unused tax credits and losses are likely to be used, except: (i) when the deferred tax asset related to the deductible temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination and does not impact, at the transaction date, the book profit, income or loss for tax purposes; and (ii) on deductible temporary differences related to investments in subsidiaries, where deferred tax assets are recognized only to the extent that it is probable that temporary differences will be reversed in the near future and taxable profit is likely be available so that temporary differences can be used.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit shall be available to allow all or part of the deferred tax asset to be used. Derecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized on all temporary tax differences, except: (i) when the deferred tax liability arises from initial recognition of goodwill, or an asset or liability in a transaction other than a business combination, and does not affect book profit or taxable profit or tax losses on the transaction date; and (ii) on temporary tax differences related to investments in subsidiaries, in which the temporary difference reversal period can be controlled and temporary differences are not likely to be reversed in the near future.

Deferred tax assets and liabilities are measured at the tax rate expected to be applicable for the year the asset will be realized or the liability will be settled, based on the rates provided in tax legislation and that were published as of year-end.

Deferred tax assets and liabilities are not discounted to present value and are classified in the balance sheet as noncurrent, irrespective of their expected realization.

The tax effects of items recorded directly in equity are also recognized in equity. Deferred tax items are recognized based on the transaction which gave rise to that deferred tax, in comprehensive income or directly in equity.

Deferred tax assets and liabilities are presented net when there is a legal or constructive right to offset a tax asset against a tax liability and deferred taxes relate to the same taxpaying entity and are subject to the same tax authority.

q.3) Sales taxes

Revenues are recognized net of value added taxes, which from services rendered is subject to State Value-Added Tax (ICMS) or Service Tax (ISS) at the rates in force in each region as well as and to Social Contribution Tax on Gross Revenue for Social Integration Program (PIS) and Social Contribution Tax on Gross Revenue for Social Security Financing (COFINS) taxation on a cumulative basis for revenue from telecommunication services.

Other revenue earned by the Company, including revenue from resale of goods, on a noncumulative basis, is taxed at for PIS, COFINS and by ICMS at the rates in force in each State.

Prepayments or recoverable amounts are stated in current or noncurrent assets, based on their estimated realization.

r)  Other assets and liabilities

Assets are recognized in the balance sheet when it is likely that their future economic benefits will flow to the Company, and their cost or value can be reliably measured.

A liability is recognized in the balance sheet when the Company have a legal or constructive obligation as a result of a past event, the settlement of which is likely to generate an outflow of economic benefits.

Assets and liabilities are presented in the balance sheet classified as current or noncurrent.

An asset is classified as current when: (i) it is expected to be realized or is intended to be sold or used in the ordinary operational cycle; (ii) it is mainly held for trading purposes; (iii) it is expected to be realized within 12 months from the reporting period; or (iv) cash and cash equivalents, unless there are restrictions upon exchange thereof, i.e., when used to settle a liability within 12 months from the reporting period. All other assets are classified as noncurrent.

A liability is classified as current when: (i) it is expected to be settled in the ordinary operational cycle; (ii) it is mainly held for trading purposes; (iii) It is expected to be settled within 12 months from the reporting period; or (iv) there is no unconditional right to defer settlement of the liability within 12 months from the reporting period. All other liabilities are classified as noncurrent.

s)  Present value adjustment of assets and liabilities

Current and noncurrent monetary assets and liabilities are adjusted to their present value when the effect on the overall financial statements is considered significant. The present value adjustment is calculated using contractual cash flows and the explicit, and sometimes implicit, interest rates of the respective assets and liabilities.

Accordingly, the interest rate embedded in revenues, expenses and related costs is discounted, so that these assets and liabilities are recognized on an accrual basis. This interest is subsequently reallocated to financial income and expenses in P&L through use of the effective interest method in relation to contractual cash flows. Implicit interest rates were determined based on assumptions, and accounting estimates are considered.

t)  Government grants and assistance

Government grants are recognized when there is reasonable certainty that the benefit will be received and that all the related conditions will be met. When the benefit refers to an expense item, it is recognized as revenue along the benefit period, on a systematic basis in relation to the costs the benefit it intends to offset.

When the Company receives non-monetary grants, the asset and the benefit are recorded at nominal amounts and reflected in the income statements over the expected useful life of the asset by equal annual installments. A loan or assistance is initially recognized or measured at fair value. A government grant is measured as the difference between the initial carrying amount of the loan and proceeds therefrom. A loan is subsequently measured in accordance with the applicable accounting policy.

When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as an additional government grant.

The financing lines with the Brazilian Development Bank (BNDES), with interest rates not exceeding those prevailing in the market, are classified under the scope of IAS 20, and are recorded at fair value based on market rates. Adjustment arising from the comparison of the amount measured based on the rate agreed upon is accounted for as deferred revenue (Note 19).

u)  Revenue recognition

Revenues substantially correspond to value of considerations received or receivable arising from the provision of telecommunications or communications services, the sale of goods, advertising and other revenue, and are stated net of taxes, discounts or returns (in case of sale of goods) thereon. Revenues and expenses are stated on the accrual basis of accounting.

Revenue is recognized when it is probable that future economic benefits will flow to the Company or its subsidiaries, when it can be reliably measured, costs incurred in the transaction can be measured, the risks and rewards have been substantially transferred to the buyer and when specific criteria have been met for each of the Company’s activities.

Consolidated revenues of the Company comprise basically telecommunication services regarding voice, data and digital services, broadband, TV and additional telecommunication services that are offered to customers through fixed-price traffic packs (paid on a monthly basis) or based on customers’ consumption, remuneration for network usage, advertising and sale of goods.

u.1) Recognition of revenues from telecommunication services

Revenues from telecommunication, data and digital services, broadband services provided are recorded on an accrual basis based on the amounts agreed upon. Local and long-distance calls are billed by the measurement process under legislation in force. The services billed on fixed monthly amounts are calculated and accounted for on a straight-line basis. Unbilled revenues from the last billing up to the balance sheet date are recognized in the month in which the service is provided.

Revenues related to sale of public phone cards and pay-as-you-go credit for cellphones as well as the respective taxes are deferred and recognized in the income statement to the extent that the services are effectively rendered.

Revenues from equipment lease contracts classified as finance lease agreement (TData’s Soluciona TI product) are recognized on installation of equipment whereupon effective transfer of risk takes place. Revenue is recognized at present value of future minimum payments provided for in the agreement.

Revenues from services are basically subject to the following indirect taxes: ICMS or ISS (as applicable), PIS and COFINS.

u.2) Recognition of revenue and cost from sales of goods

Revenues and cost of sales (mobile phones, simcards and accessories) are recorded when risks and rewards inherent in such goods are transferred to buyers.

Sales made in own stores are recognized upon sale to end consumer. Revenues and costs of sales made by accredited dealers are deferred and recognized in P&L when the device is activated, limited to 90 days from the sale date.

u.3) Customer loyalty program

The Company has a loyalty points program that enables customers to accumulate points when they pay bills regarding the usage of the services offered. The accumulated points may be exchanged for telephone sets or services, conditional upon obtaining a minimum balance of points by customer. The consideration received is allocated to the cost of sets or services at fair value. The fair value of points is determined by dividing the amount of discount granted by the number of points necessary for the redemption based on the points program. The portion of revenue related to the fair value of the accumulated balance of points generated is deferred and recognized as revenue upon redemption of points.

The number of points to be accounted for is determined through statistical techniques that consider assumptions and historical data on expected redemption rates, expiration percentages and cancellation of points, among other factors. These estimates are subject to variations and uncertainties due to changes in the behavior of customer redemptions.

u.4) Membership fee and promotional campaigns

Participation fees paid for promotional campaigns by customers of the Company are deferred and recorded in P&L throughout the duration of such campaign.

u.5) Agreements combining more than one element

Commercial packages offered by the Company that combine different elements are analyzed to determine whether it is necessary to separate the different elements identified, adopting the recognition criterion that is most adequate to each situation. Total revenue generated by the package sale is distributed among its elements, based upon their respective fair values.

The fair value determination of each element then identified implies the need for complex estimates given the nature of the business. A possible change in fair values estimates could affect the distribution of revenues between components and consequently the deferred revenue.

u.6) Advertising

Revenues from advertising are recognized in income during the advertising period.

v)  Financial income (expenses)

These include interest, and monetary and exchange variations arising from short-term investments, derivative transactions, loans, financing, debentures, present value adjustments of transactions that generate monetary assets and liabilities and other financial transactions. These are recognized on an accrual basis when earned or incurred by the Company.

For all financial instruments measured at amortized cost and interest-yielding financial assets classified as available for sale, interest income or expense is recognized using the effective interest method, which exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or liability.

w)  Post-retirement benefit plans

The Company individually sponsor pension funds of post-retirement benefits for active and retired employees, in addition to a multisponsor supplementary retirement plan and health care plan for former employees. Contributions are determined on an actuarial basis and recorded on an accrual basis. Liabilities relating to defined benefit plans are determined based on actuarial evaluations at each year end, in order to ensure that sufficient reserves have been set up for both current and future commitments.

Actuarial liabilities related to defined benefit plans were calculated using the projected unit credit method. Actuarial gains and losses are recognized immediately in equity (in other comprehensive income).

For plans with defined contribution characteristics, the obligation is limited to the contributions payable, which are recognized in the P&L in the respective accrual periods.

The asset or liability related to defined benefit plan to be recognized in financial statements corresponds to the present value of the obligation for the defined benefit (using a discount rate based on long-term National Treasury Notes “NTNs”), less fair value of plan assets that will be used to settle the obligations. Plan assets are assets held by a privately-held supplementary pension plan entity. Plan assets are not available to the Company’s creditors or those of its subsidiaries and cannot be paid directly to the Company. The fair value is based on information on market prices and, in case of securities quoted, on purchase price disclosed. The value of any defined benefit asset then recognized is limited to the present value of any economic benefits available as a reduction in future plan contribution from the Company.

Actuarial costs recognized in the income statement are limited to the service cost and cost of interest on the defined benefit plan obligation. Any changes in the measurement of plan assets and obligations are initially recognized in other comprehensive income, and immediately reclassified to retained earnings in P&L.

The Company manages and individually sponsor a health care plan for retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98 (which provides for private health care and health insurance plans). As provided for in articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees.

x)  Significant accounting judgments, estimates and assumptions

The preparation of the financial statements requires management to make judgments, estimates and adopt assumptions supported by valuation bases used in accounting estimates. The accounting estimates involved in the preparation of these financial statements were based on objective and subjective factors, considering management’s judgment for determining the adequate amounts to be recorded in the financial statements.

Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to the uncertainties inherent in their estimate process.

Significant assumptions concerning sources of uncertainty in future estimates and other significant sources of estimation uncertainty at the balance sheet date, involving a significant risk of causing a material adjustment to the carrying amount of assets and liabilities, are as follows:

x.1) Impairment of non-financial assets

An impairment loss exists when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of fair value less cost to sell and value in use. The calculation of fair value less cost to sell is based on information available on transactions for sale of similar assets or market prices less additional costs to dispose of the asset. The calculation of value in use is based on the discounted cash flow model. The recoverable amount is sensitive to the discount rate used in the discounted cash flow method, as well as expected future cash receipts and growth rate used for extrapolation purposes.

The Company regularly analyzes the performance of the defined cash generating unit in order to identify any impairment of goodwill and its other assets. Determination of the recoverable amount of the cash generating unit to which goodwill is attributed includes use of assumptions and estimates and requires use of significant accounting judgment and criterion.

x.2) Post-retirement benefit plans

The cost of pension plans with defined benefits and other post-employment health care benefits and the present value of the pension obligation are determined using actuarial valuation methods. Actuarial valuation involves use of assumptions about discount rates, future salary increases, mortality rates and future increases in pension and annuity benefits. The obligation for defined benefits is highly sensitive to changes in these assumptions. All assumptions are reviewed on an annual basis.

The mortality rate is based on publicly available mortality tables in the country. Future salary increases and pension increases are based on expected future inflation rates for the country.

x.3) Fair value of financial instruments

When the fair value of financial assets and liabilities stated in the balance sheet cannot be obtained in active markets, it will be determined using valuation techniques, including the discounted cash flow method. Data for these methods is based on those adopted in the market, whenever possible. However, when this is not feasible, a certain level of judgment is required for fair value determination. Judgment includes consideration of the inputs used, such as liquidity risk, credit risk and volatility. Changes in the assumptions about these factors could affect the reported fair value of financial instruments.

x.4) Property, plant and equipment and finite-lived intangible assets

The accounting treatment of investment in fixed and intangible assets includes estimating useful life period for depreciation purposes and the fair value at the date of acquisition, particularly for assets acquired in business combinations.

Useful life determination requires estimates regarding the expected technological developments and alternative uses of assets. The hypotheses related to the technological aspect and its future development imply a significant level of analysis, considering the difficulties in forecasting time and nature of future technological changes.

x.5) Revenue recognition – Customer Loyalty Program

The Company estimates the fair value of points attributed under the customer loyalty program by applying statistic techniques. Inputs for the model include assumptions about expected redemption rates, the mix of products that will be available for future redemption and customers’ preference in relation to points use.  Since issued points do not expire, these estimates are subject to significant uncertainties.

x.6) Agreements combining more than one element

The fair value determination of each element in a multiple element agreement requires complex estimates given the nature of the business. A possible change in fair value estimates could affect the distribution of revenues between components and consequently the deferred revenues.

x.7) Taxes

There are uncertainties regarding the interpretation of complex tax regulations and the amount and timing of future taxable profits. The Company set up provisions, based on reasonable estimates, for the possible consequences of audits by tax authorities in respective jurisdictions in which they operate. The amount of these provisions is based on various factors, such as previous tax audit experience and different interpretations of tax regulations by the taxable entity and by the relevant tax authority. Such differences in interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the Company.

The Company evaluate the recoverability of deferred tax assets based on estimates of future profits. This recoverability ultimately depends on the ability of the Company to generate taxable profits over the period in which the deferred tax asset is deductible. The analysis considers the reversal period of deferred tax liabilities, as well as estimates of taxable profits, based on updated internal projections reflecting the latest trends.

Determining the proper classification of the tax items depends on several factors, including an estimate of the period and the realization of the deferred tax asset and the expected date of payments of these taxes. The actual flow of receipt and payment of income tax could differ from estimates made by the Company, as a result of changes in tax laws or of unexpected future transactions that may impact tax balances.

x.8) Provisions for tax, labor, civil and regulatory proceedings

Provisions are recognized when the Company has a present obligation arising from a past event, settlement of which requires an outflow of resources rated as probable and when it can be reliably estimated. This obligation can be legal or constructive, derived from, among other factors, regulations, contracts, customary practices or public commitments that expose third parties to a valid expectation that the Company will assume certain responsibilities. The determination of the provision is based on the best estimate of the disbursement required to settle the corresponding obligation, considering the information available as of the closing date, including the opinion of independent experts, such as legal advisors.

x.9) Revenue recognition - revenue from unbilled services

The Company has billing systems for services with intermediate cut-off dates. Thus, at the end of each month there are revenues already received by the Company, but not effectively invoiced to its customers. These unbilled revenues are recorded based on estimates, which take into account historical consumption data, number of days elapsed since the last billing date, among others. Because historical data are used, these estimates are subject to significant uncertainties.

y)  Functional and reporting currency

The Company’s functional and reporting currency is the Brazilian real. Transactions in foreign currency were translated at the exchange rate in force as of the date the transaction. Assets and liabilities denominated in foreign currencies are translated using the exchange rate at the balance sheet date. The exchange rate variations arising from transactions in foreign currencies are recognized in P&L as financial income or expenses. Gains and losses on the translation of foreign investments are recognized in the statement of comprehensive income.

z)  Translation of transactions denominated in foreign currency

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency (real) at the exchange rate (fix rate) in force as of the transaction date and subsequently re-measured based on the fix rates effective that, at December 31, 2017, were US$1.00 = R$3.3080, €1.00 = R$3.9676, and at December 31, 2016, were US$1.00 = R$3.2591, €1.00 = R$3.4351. Gains and losses resulting from the translation of these assets and liabilities due to exchange rate variation between transaction date and period end are recognized in the income statement.

aa)  Employee profit sharing

The Company has obligations arising from employment contracts, recognizing these provisions during the year. Provisions are recorded to recognize the expense regarding employee profit sharing. These provisions are calculated based on qualitative and quantitative goals set by management and accounted for in specific accounts according to their function in groups of: Cost of services, Selling expenses and General and administrative expenses.

ab)  Share-based payments

The Company measure the cost of transactions settled with employees and officers based on shares issued by parent company (Telefónica), by reference to the fair value of the shares at the date at which they are granted, using the binomial valuation model. This fair value is charged to the income statement over the period until the vesting date.

ac)  Treasury shares

Own equity instruments that are repurchased (treasury stock) are recognized at cost and deducted from equity. No gains or losses are recognized in P&L on purchase, sale, issue or cancellation of the Company’s own equity instruments.

ad)  Segment reporting

Business segments are defined as components of a company for which separate financial information is available and regularly assessed by the operational decision making professional in decisions on how to allocate funds to an individual segment and in the assessment of segment performance.  Considering that: (i) all officers and managers' decisions are based on consolidated reports; (ii) the Company mission is to provide their customers with quality telecommunications services; and (iii) all decisions related to strategic planning, finance, purchases, short- and long-term investments are made consolidated on a consolidated basis, the Company operate in a single operating segment, namely the provision of telecommunications services.

ae)  Statement of cash flows

The statement of cash flows was prepared in accordance with IAS 7 – Statement of Cash Flows using the indirect method, and reflects the changes in cash for the years reported.

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CASH AND CASH EQUIVALENTS

12 Months Ended

Dec. 31, 2017

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS

4)  CASH AND CASH EQUIVALENTS

	12/31/17	12/31/16
Cash and banks	117,799	198,369
Short-term investments	3,932,539	4,906,741
Total	4,050,338	5,105,110

Highly liquid short-term investments basically comprise Bank Deposit Certificates (CDB) and Repurchase Agreements kept at first-tier financial institutions, pegged to the Interbank Deposit Certificate (CDI) rate, with original maturities of up to three months, and with immaterial risk of change in value. Revenues generated by these investments are recorded as financial income.

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TRADE ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2017

TRADE ACCOUNTS RECEIVABLE

TRADE ACCOUNTS RECEIVABLE

5)  TRADE ACCOUNTS RECEIVABLE

	12/31/17	12/31/16
Billed amounts	6,753,621	6,939,909
Unbilled amounts	2,481,364	1,930,708
Interconnection amounts	859,819	1,345,471
Amounts from related parties (Note 28)	201,021	190,906
Gross accounts receivable	10,295,825	10,406,994
Estimated impairment losses	(1,433,471)	(1,399,895)
Total	8,862,354	9,007,099
Current	8,588,466	8,701,688
Noncurrent	273,888	305,411

Consolidated balances of noncurrent trade accounts receivable include:

· R$122,651 at December 31, 2017 (R$143,265 at December 31, 2016), relating to the business model of resale of goods to other entities, receivable within 24 months. At December 31, 2017, the impact of the present-value adjustment was R$16,011  (R$32,920 at December 31, 2016).

· R$45,031, at December 31, 2017 (R$57,272, at December 31, 2016), net of the present value adjustment relating to the portion of accounts receivable arising from negotiations on the bankruptcy process of companies from the OI group. At December 31, 2017, the impact of the present-value adjustment was R$15,535  (R$10,268 at December 31, 2016).

· R$106,206, at December 31, 2017, (R$104,874, at December 31, 2016), relating to “Soluciona TI”, traded by TData, which consists of lease of IT equipment to small and medium companies and receipt of fixed installments over the contractual term. Considering the contractual terms, this product was classified as finance lease. At December 31, 2017, the impact of the present-value adjustment was R$33,614  (R$3,005 at December 31, 2016).

The balances of current and noncurrent trade accounts receivable, relating to finance lease of “Soluciona TI” product, comprise the following effects:

	12/31/17	12/31/16
Nominal amount receivable	434,743	611,384
Deferred financial income	(33,614)	(3,005)
Present value of accounts receivable	401,129	608,379
Estimated impairment losses	(154,666)	(344,738)
Net amount receivable	246,463	263,641
Current	140,257	158,767
Noncurrent	106,206	104,874

At December 31, 2017, the aging list of gross trade accounts receivable relating to “Soluciona TI” product is as follows:

	Nominalamount	Present value of
	receivable	accountsreceivable
Falling due within one year	229,981	229,981
Falling due between one year and five years	204,762	171,148
Total	434,743	401,129

There are no unsecured residual values resulting in benefits to the lessor nor contingent payments recognized as revenue for the year.

The aging list of trade accounts receivable, net of estimated impairment losses, is as follows:

	12/31/17	12/31/16
Falling due	6,635,125	6,841,752
Overdue – 1 to 30 days	1,132,008	1,073,568
Overdue – 31 to 60 days	375,176	322,485
Overdue – 61 to 90 days	232,648	227,010
Overdue – 91 to 120 days	105,342	105,048
Overdue – over 120 days	382,055	437,236
Total	8,862,354	9,007,099

At December 31, 2017 and 2016, no customer represented more than 10% of trade accounts receivable, net.

Changes in the estimated impairment losses for accounts receivable are as follows:

Balance at 12/31/15	(2,217,926)
Supplement to estimated losses (Note 24)	(1,843,775)
Reversal of estimated losses (Note 24)	495,554
Write-off due to use	2,166,252
Balance at 12/31/16	(1,399,895)
Supplement to estimated losses (Note 24)	(1,994,769)
Reversal of estimated losses (Note 24)	513,754
Write-off due to use	1,456,158
Business combinations (Note 1.c.1)	(8,719)
Balance at 12/31/ 2017	(1,433,471)

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INVENTORIES

12 Months Ended

Dec. 31, 2017

INVENTORIES

INVENTORIES

6)  INVENTORIES

	12/31/17	12/31/16
Materials for resale (1)	325,850	377,465
Materials for consumption	57,740	77,732
Other inventories	7,822	7,892
Gross total	391,412	463,089
Estimated losses from impairment or obsolescence (2)	(42,657)	(52,676)
Total	348,755	410,413

(1) This includes, among others, mobile phones, simcards (chip) and IT equipment in stock.

(2) Additions and reversals of estimated impairment losses and inventory obsolescence are included in cost of goods sold (Note 24).

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DEFERRED TAXES AND TAXES RECOVERABLE

12 Months Ended

Dec. 31, 2017

DEFERRED TAXES AND TAXES RECOVERABLE

DEFERRED TAXES AND TAXES RECOVERABLE

7)  DEFERRED TAXES AND TAXES RECOVERABLE

a)  Taxes recoverable

	12/31/17	12/31/16
State VAT (ICMS) (1)	2,450,856	2,329,159
Income and social contribution taxes recoverable (2)	505,535	830,549
Withholding taxes and contributions (3)	238,355	157,371
PIS and COFINS	85,098	148,759
Fistel, INSS, ISS and other taxes	27,431	38,236
Total	3,307,275	3,504,074
Current	2,563,990	3,027,230
Noncurrent	743,285	476,844

(1) This includes credits of ICMS arising from the acquisition of property and equipment (subject to offsetting in 48 months); requests for refund of ICMS, which was paid under invoices that were cancelled subsequently; for the rendering of services; tax substitution; and tax rate difference; among others. Noncurrent consolidated amounts include credits arising from the acquisition of property and equipment of R$423,588 and R$370,770 on December 31, 2017 and 2016, respectively.

(2) This refers to prepayments of income and social contribution taxes, which will be offset against federal taxes to be determined in the future.

(3) This refers to credits on withholding income tax (IRRF) on short-term investments, interest on equity and others, which are used as deduction in operations for the period and social contribution tax withheld at source on services provided to public agencies.

b)  Deferred taxes

Deferred income and social contribution tax assets are computed considering expected generation of taxable profit, which were based on a technical feasibility study, approved by the Board of Directors.

Significant components of deferred income and social contribution taxes are as follows:

	Balances at		Comprehensive		Balances at		Comprehensive	Business combination		Balances at
	12/31/15	Income statement	income	Other	12/31/16	Income statement	income	(Note 1 c.1)	Other	12/31/17
Deferred tax assets  (liabilities)
Income and social contribution taxes on tax losses (1)	26,519	(12,448)	—	—	14,071	710,411	—	69,451	—	793,933
Income and social contribution taxes on temporary differences (2)	685,071	(748,969)	78,840	(1,516)	13,426	(1,251,816)	58,192	48,434	(86)	(1,131,850)
Provisions for legal, labor, tax civil and regulatory contingencies	1,954,236	276,100	—	—	2,230,336	68,399	—	—	—	2,298,735
Trade accounts payable and other provisions	687,124	(10,001)	—	—	677,123	(25,706)	—	—	—	651,417
Estimated losses on impairment of accounts receivable	447,018	(88,213)	—	—	358,805	76,155	—	—	—	434,960
Customer portfolio and trademarks	343,107	(30,015)	—	—	313,092	(58,674)	—	—	—	254,418
Estimated losses from modems and other P&E items	294,945	(10,268)	—	—	284,677	(83,736)	—	—	—	200,941
Pension plans and other post-employment benefits	26,285	1,633	80,501	—	108,419	8,630	57,485	—	—	174,534
Profit sharing	106,198	19,058	—	—	125,256	(15,210)	—	—	—	110,046
Provision for loyalty program	32,604	(13,492)	—	—	19,112	(1,991)	—	—	—	17,121
Accelerated accounting depreciation	10,865	13,168	—	—	24,033	(15,773)	—	—	—	8,260
Estimated impairment losses on inventories	10,707	1,392	—	—	12,099	(347)	—	—	—	11,752
Derivative transactions	59,408	2,358	(1,633)	—	60,133	(35,084)	822	—	—	25,871
Licenses	(1,204,226)	(216,330)	—	—	(1,420,556)	(216,330)	—	—	—	(1,636,886)
Effects of goodwill generated in the acquisition of Vivo Part.	(809,600)	(54,720)	—	—	(864,320)	(5,461)	—	—	—	(869,781)
Goodwill from Spanish and Navytree	(337,535)	—	—	—	(337,535)	—	—	—	—	(337,535)
Goodwill from Vivo Part.	(837,918)	(167,202)	—	—	(1,005,120)	(167,203)	—	—	—	(1,172,323)
Goodwill from GVTPart.	—	(522,228)	—	—	(522,228)	(696,305)	—	—	—	(1,218,533)
Technological Innovation Law	(193,146)	52,206	—	—	(140,940)	43,407	—	—	—	(97,533)
Income and social contribution taxes on other temporary differences (3)	94,999	(2,415)	(28)	(1,516)	91,040	(126,587)	(115)	48,434	(86)	12,686
Total deferred tax assets (liabilities), noncurrent	711,590	(761,417)	78,840	(1,516)	27,497	(541,405)	58,192	117,885	(86)	(337,917)
Deferred tax assets	4,153,054				4,541,952					5,288,176
Deferred tax liabilities	(3,441,464)				(4,514,455)					(5,626,093)
Deferred tax assets  (liabilities), net	711,590				27,497					(337,917)
Represented in the balance sheet as follows:
Deferred tax assets	711,590				27,497					371,408
Deferred tax liabilities	—				—					(709,325)

(1) This refers to the amounts recorded which, in accordance with Brazilian tax legislation, may be offset to the limit of 30% of the tax bases computed for the following years, with no expiry date. In 2017, additions of R$779,862 were recorded in the Consolidated , composed of R$587,374 of the Company and R$194,488 of Terra Networks and POP.

(2) This refers to amounts that will be realized upon payment of provisions, effective impairment losses for trade accounts receivable, or realization of inventories, as well as upon reversal of other provisions.

(3) These refer to deferred taxes arising from other temporary differences, such as deferred income, renewal of licenses burden, subsidy on the sale of mobile phones, among others.

At December 31, 2017, deferred tax credits (income and social contribution tax losses) were not recognized in indirect subsidiaries' (Innoweb and TGLog) accounting records, in the amount of R$11,938 (R$2,993 at December 31, 2016), as it is not probable that future taxable profits shall be available for these subsidiaries to benefit from such tax credits.

Expected realization of deferred taxes, net, noncurrent.

The amounts are based on projections subject to change in the future.

Year
2018	1,904,953
2019	685,775
2020	374,379
2021	442,867
2022	704,303
2023 onwards	(4,450,194)
Total	(337,917)

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JUDICIAL DEPOSITS AND GARNISHMENTS

12 Months Ended

Dec. 31, 2017

JUDICIAL DEPOSITS AND GARNISHMENTS

JUDICIAL DEPOSITS AND GARNISHMENTS

8)  JUDICIAL DEPOSITS AND GARNISHMENTS

In some situations, in connection with a legal requirement or to suspension of tax liability, judicial deposits are made to secure the continuance of the claims under discussion. These judicial deposits may be required for claims where the likelihood of loss was analyzed by the Company, grounded on the opinion of its legal advisors as a probable, possible or remote loss.

	12/31/17	12/31/16
Judicial deposits
Tax	4,230,917	3,758,787
Labor	885,338	1,051,430
Civil	1,205,807	1,109,001
Regulatory	200,627	276,604
Total	6,522,689	6,195,822
Garnishments	141,116	155,744
Total	6,663,805	6,351,566
Current	324,638	302,424
Noncurrent	6,339,167	6,049,142

On December 31, 2017, the Company had a number of tax-related judicial deposits in the consolidated amount of R$4,230,917  (R$3,758,787 at December 31, 2016). In Note 18, we provide further details on issues arising from the most significant judicial deposits.

The table below presents the composition of the balances as of December 31, 2107 and 2016 of the tax judicial deposits (segregated and summarized by tribute).

	12/31/2017	12/31/2016
Contribution to Empresa Brasil de Comunicação (EBC)	1,238,068	1,053,867
Telecommunications Inspection Fund (FISTEL)	1,161,061	1,095,789
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)	518,474	449,988
Universal Telecommunication Services Fund (FUST)	484,649	456,977
Social Contribution Tax for Intervention in the Economic Order (CIDE)	270,612	176,557
State Value-Added Tax (ICMS)	273,264	212,652
Social Security, work accident insurance (SAT) and funds to third parties (INSS)	134,688	128,458
Withholding Income Tax (IRRF)	45,846	73,848
Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS)	37,965	35,570
Other taxes, charges and contributions	66,290	75,081
Total	4,230,917	3,758,787

A brief description of the main tax-related judicial deposits is as follows:

•Contribution to Empresa Brasil de Comunicação (EBC)

On behalf of its members, Sinditelebrasil (Union of Telephony, and Mobile and Personal Services) is challenging in court payment of the Contribution to Foster Public Radio Broadcasting to EBC, introduced by Law No. 11.652/2008. The Company and TData, as union members, made court deposits relating to that contribution.

•Telecommunications Inspection Fund (FISTEL)

The Company has legal proceedings involving the collection by ANATEL of the Installation Inspection Fee ("TFI") on the renewal of the validity of the license, as well as the exclusion of the calculation basis of the Installation Inspection Fee ("TFI") and Inspection and Operation Fee ("TFF") of mobile stations that do not belong to it.

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PREPAID EXPENSES

12 Months Ended

Dec. 31, 2017

PREPAID EXPENSES

PREPAID EXPENSES

9)  PREPAID EXPENSES

	12/31/17	12/31/16
Advertising and publicity	336,295	258,212
Insurance	36,941	39,558
Rental	29,713	19,276
Software and networks maintenance	12,375	12,283
Taxes, financial charges, personal and other	54,231	50,193
Total	469,555	379,522
Current	446,439	343,092
Noncurrent	23,116	36,430

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OTHER ASSETS

12 Months Ended

Dec. 31, 2017

OTHER ASSETS

OTHER ASSETS

10)  OTHER ASSETS

	12/31/17	12/31/16
Advances to employees and suppliers	58,456	83,634
Related-party receivables (Note 28)	166,733	250,679
Receivables from suppliers	114,015	99,166
Subsidy on handset sales	37,258	30,491
Surplus from post-employment benefit plans (Note 30)	9,833	9,041
Other amounts receivable	24,037	22,649
Total	410,332	495,660
Current	321,397	440,095
Noncurrent	88,935	55,565

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INVESTMENTS

12 Months Ended

Dec. 31, 2017

INVESTMENTS

INVESTMENTS

11)  INVESTMENTS

a)  Information on investees

The Company holds equity interests in wholly-owned subsidiaries (subsidiaries) and jointly-owned subsidiaries. Below, we present the main information of the Company's investees.

TData: The Company's wholly-owned subsidiary, headquartered in Brazil, has the purpose of providing and operating value-added services (VAS); integrated business solutions in telecommunications and related activities; technical assistance and maintenance of telecommunications equipment and networks and project design.

TData is the parent company of TGLog (acquired on October 28, 2015 for R$15,811) and Terra Networks (acquired on July 3, 2017 for R$250,000).

GVTPart: A wholly-owned subsidiary of the Company up to March 31, 2016.  GVTPart. was controlling shareholder of GVT and headquartered in Brazil, the business purpose of GVTPart is to hold interest in other domestic or foreign companies as a partner, shareholder or member. GVT provides landline telephone, data, multimedia communication and pay-tv services in the entire Brazilian territory. GVTPart. was merged into the Company on April 1, 2016 (Note 1 c.2).

POP: The Company's direct subsidiary on April 1, 2016 (Note 1c2), is engaged in the performance of activities related to information technology, internet and any other networks; hosting services and the commercial operation of websites and portals; handling, provision and storage of information and data; sale of software, hardware, telecommunication equipment and electronics; development, licensing and maintenance of information systems and routines; development of electronic commerce; creation and administration of own and/or third-party databases; sale of publicity and advertising and, banner vehicles; and holding interest in other companies as member or shareholder, and may also form consortia and/or other forms of association. Until March 31, 2016, POP was controlled by GVT (Note 1 c.2).

POP is the wholly-owned subsidiary of Innoweb Ltda ("Innoweb"), whose business purpose is to operate as an internet provider; performing information activities; all forms of telecommunications activities, including the transmission of voice, data and information; sale of telecommunications and electronic equipment and/or accessories; and holding interest in other companies as member or shareholder, and may also form consortia and/or other forms of association.

Aliança: Jointly-controlled subsidiary, headquartered in Amsterdam, Netherlands, with 50% interest held by the Company, this entity is engaged in the acquisition and management of subsidiaries, and holding interest in companies of the telecommunications industry.

AIX: Jointly-controlled subsidiary headquartered in Brazil, with 50% interest held by the Company, this entity is engaged in holding interest in Consórcio Refibra, and in performing activities related to the direct and indirect operation of activities associated with the construction, completion and operation of underground networks for optical fiber ducts.

ACT: Jointly-controlled subsidiary headquartered in Brazil, with 50% interest held by the Company, this entity is engaged in holding interest in Consórcio Refibra, and in performing activities related to the rendering of technical support services for the preparation of projects and completion of networks, by means of studies required to make them economically feasible, and monitor the progress of Consortium-related activities.

Below is a summary of significant financial data on the wholly-owned subsidiaries:

	At 12/31/17						At 12/31/16
	Cia ACT		Cia AIX		Aliança		Cia ACT		Cia AIX		Aliança
Equity interest	50.00	%	50.00	%	50.00	%	50.00	%	50.00	%	50.00	%
Summary of balance sheets:
Current assets	17		22,431		167,540		15		20,337		145,121
Noncurrent assets	—		13,410		—		—		12,879		—
Total assets	17		35,841		167,540		15		33,216		145,121
Current liabilities	1		4,084		58		1		4,029		101
Non-current liabilities	—		4,811		—		—		5,415		—
Equity	16		26,946		167,482		14		23,772		145,020
Total liabilities and equity	17		35,841		167,540		15		33,216		145,121
Investment Book value	8		13,473		83,741		7		11,886		72,510

	2017			2016
Summary of Income Statements:	Cia ACT	Cia AIX	Aliança	Cia ACT	Cia AIX	Aliança
Net operating income	82	45,622	—	79	42,840	—
Operating costs and expenses	(80)	(43,448)	(43)	(72)	(41,760)	(155)
Financial income (expenses), net	—	1,686	27	—	1,980	41
Income and social contribution taxes	—	(686)	—	(1)	(464)	—
Net income (loss) for the year	2	3,174	(16)	6	2,596	(114)
Equity pickup, according to interest held	1	1,587	(8)	3	1,298	(57)

b)  Changes in investments

				Other
	Aliança	AIX	ACT	investments (1)	Total investments
Balances at 12/31/15	89,799	10,099	4	1,259	101,161
Equity pick-up	(57)	1,298	3	—	1,244
Dividends and interest on equity	—	489	—	—	489
Other comprehensive  income	(17,232)	—	—	83	(17,149)
Balances at 12/31/16	72,510	11,886	7	1,342	85,745
Equity pick-up	(8)	1,587	1	—	1,580
Other comprehensive  income	11,239	—	—	338	11,577
Balances at 12/31/17	83,741	13,473	8	1,680	98,902

(1) Other investments (tax incentives and interest held in companies) are measured at fair value.

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PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2017

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

12)  PROPERTY, PLANT AND EQUIPMENT

a)  Breakdown and changes

	Switching	Terminal					Assets and
	and transmission	equipment				Estimated	facilities under
	equipment	/ modems	Infrastructure	Land	Other P&E	losses (1)	construction	Total
Annual depreciation rate(%)	2.50 to 25.00	6.67 to 66.67	2.50 to 66.67	—	10.00 to 25.00	—	—	—
Balances and changes:
Balance at 12/31/15	20,935,963	3,146,109	3,655,951	315,705	1,066,452	(494,149)	1,850,734	30,476,765
Additions	634,635	203,775	159,081	215	288,666	(19,962)	5,543,398	6,809,808
Write-offs, net (2)	(24,236)	(816)	(99,437)	(201)	3,059	28,539	(38,959)	(132,051)
Net transfers	3,473,332	677,572	523,995	—	(159,702)	(3)	(4,625,143)	(109,949)
Depreciation (Note 24)	(2,787,820)	(1,438,333)	(514,383)	—	(379,119)	—	—	(5,119,655)
Balance at 12/31/16	22,231,874	2,588,307	3,725,207	315,719	819,356	(485,575)	2,730,030	31,924,918
Additions	42,999	141,132	91,160	550	259,620	(37,374)	6,085,487	6,583,574
Write-offs, net	(88,766)	(7,602)	(6,966)	(1,916)	(2,522)	162,319	(18,897)	35,650
Net transfers	3,634,293	1,471,431	619,008	—	34,093	132,578	(5,910,612)	(19,209)
Depreciation (Note 24)	(3,011,291)	(1,468,936)	(544,454)	—	(284,983)	—	—	(5,309,664)
Business Combination (Note 1.c.1)	—	—	1,342	—	4,888	—	817	7,047
Balance at 12/31/17	22,809,109	2,724,332	3,885,297	314,353	830,452	(228,052)	2,886,825	33,222,316
At 12.31.16
Cost	70,789,534	15,294,619	15,023,890	315,719	4,308,718	(485,575)	2,730,030	107,976,935
Accumulated depreciation	(48,557,660)	(12,706,312)	(11,298,683)	—	(3,489,362)	—	—	(76,052,017)
Total	22,231,874	2,588,307	3,725,207	315,719	819,356	(485,575)	2,730,030	31,924,918
At 12.31.17
Cost	74,100,056	16,845,903	15,728,808	314,353	4,687,395	(228,052)	2,886,825	114,335,288
Accumulated depreciation	(51,290,947)	(14,121,571)	(11,843,511)	—	(3,856,943)	—	—	(81,112,972)
Total	22,809,109	2,724,332	3,885,297	314,353	830,452	(228,052)	2,886,825	33,222,316

(1) The Company recognized estimated losses for potential obsolescence of materials used in property and equipment maintenance, based on levels of historical use and expected future use.

(2) Net write-offs regarding “Infrastructure and Assets and Facilities under Construction” for the year ended December 31, 2016, include the amount of R$99,210 regarding the disposal of 1,655 towers owned by the Company to Telxius Torres Brasil Ltda, a directly controlled Telefónica subsidiary.

b)  Depreciation rates

In accordance with IAS 16, the Company performed valuations of useful lives applied to its property, plant and equipment using the direct comparative method of market data. The results of these evaluations did not indicate the need for changes in useful lives in 2017.

In relation to 2016, these evaluations indicated the need for changes in useful lives and annual depreciation rates for some items of asset classes. This change in the accounting estimate, which was applied reduced the depreciation expense for the annual period ended December 31, 2016 by R$157,053.

c)  Property and equipment items pledged in guarantee

At December 31, 2017, the Company had consolidated amounts of property and equipment items pledged in guarantee for lawsuits, amounting to R$176,591  (R$203,600 at December 31, 2016).

d)  Reversible assets

The STFC service concession arrangement establishes that all assets owned by the Company and that are indispensable to the provision of the services described in the referred to arrangement are considered “reversible” (returnable to the concession authority). At December 31, 2017, estimated residual value of reversible assets was R$8,763,355  (R$8,813,916 at December 31, 2016), which comprised switching and transmission equipment and public use terminals, external network equipment, energy, system and operational support equipment.

e)  Finance lease

At December 31, 2017, classes of switching and transmission equipment, infrastructure and other assets included the net residual amounts of R$280,103  (R$298,604 as of December 31, 2016), in which the Company is a lessee of financial leasing operations.

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

INTANGIBLE ASSETS

INTANGIBLE ASSETS

13)  INTANGIBLE ASSETS

a)  Breakdown, changes and amortization rates

	Indefinite
	useful life			Finite useful life
																	Estimated
														Other			losses	Software
					Customer									intangible			for	under
	Goodwill	Software			portfolio			Trademarks			Licenses			assets			software	development	Total
Annual amortization rate (%)	—	20.00	to	50.00	11.76	to	12.85	5.13	to	66.67	3.60	to	6.67	6.67	to	20.00
Balances and changes:
Balance at 12/31/15	23,062,421			2,385,723			3,154,501			1,274,803			15,635,082			18,190	—	76,471	45,607,191
Additions (1)	—			634,528			—			—			185,450			19,796	(4,550)	519,563	1,354,787
Write-offs, net	—			24			—			—			—			(11)	(31)	—	(18)
Net transfers	—			616,336			—			—			—			19,207	—	(532,609)	102,934
Amortization (Note 24)	—			(942,090)			(593,281)			(116,983)			(922,564)			(6,480)	—	—	(2,581,398)
Balance at 12/31/16	23,062,421			2,694,521			2,561,220			1,157,820			14,897,968			50,702	(4,581)	63,425	44,483,496
Additions	—			276,390			—			—			—			207	—	1,100,785	1,377,382
Write-offs, net	—			(7,427)			—			—			—			—	4,051	—	(3,376)
Net transfers	—			701,545			—			—			—			(24,297)	31	(658,070)	19,209
Amortization (Note 24)	—			(944,753)			(582,357)			(84,205)			(928,362)			(5,660)	—	—	(2,545,337)
Business Combination (Note 1.c.1)	—			530			—			—			—			—	—	—	530
Balance at 12/31/17	23,062,421			2,720,806			1,978,863			1,073,615			13,969,606			20,952	(499)	506,140	43,331,904
At 12/31/16
Cost	23,062,421			14,062,127			4,513,278			1,658,897			20,237,572			267,074	(4,581)	63,425	63,860,213
Accumulated amortization	—			(11,367,606)			(1,952,058)			(501,077)			(5,339,604)			(216,372)	—	—	(19,376,717)
Total	23,062,421			2,694,521			2,561,220			1,157,820			14,897,968			50,702	(4,581)	63,425	44,483,496
At 12/31/17
Cost	—			15,125,532			4,513,278			1,658,897			20,237,572			238,201	(499)	506,140	42,279,121
Accumulated amortization	23,062,421			(12,404,726)			(2,534,415)			(585,282)			(6,267,966)			(217,249)	—	—	1,052,783
Total	23,062,421			2,720,806			1,978,863			1,073,615			13,969,606			20,952	(499)	506,140	43,331,904

(1)On December 17, 2015, the Company was the winner in seven lots at a frequency of 2,500MHz, offering the amount of R$185,450. On July 21, 2016, through acts No. 2.483, No. 2.485 and No. 2.486, the Directing Council of ANATEL approved the use of these radio frequencies. The terms of authorization of these radio frequency bands were signed on July 26, 2016 and published in the DOU on August 26, 2016.

b)  Goodwill breakdown

Ajato Telecomunicação Ltda.	149
Spanish e Figueira (merged with TDBH) (1)	212,058
Santo Genovese Participações Ltda. (2)	71,892
Telefônica Televisão Participações S.A. (3)	780,693
Vivo Participações S. A. (4)	9,160,488
GVT Participações S. A. (5)	12,837,141
Total	23,062,421

(1) Goodwill from partial spin-off of “Spanish and Figueira”, which was reversed to the Company upon merger of Telefônica Data Brasil Holding S.A. (TDBH) in 2006.

(2) Goodwill generated upon acquisition of equity control of Santo Genovese Participações (parent company of Atrium Telecomunicações Ltda.), in 2004.

(3) Goodwill generated upon acquisition of Telefônica Televisão Participações (formerly Navytree) merged in 2008.

(4) Goodwill generated upon acquisition/merger of Vivo Participações in 2011.

(5) Goodwill generated upon acquisition of GVT Participações in 2015 (Note 1.c3).

c)  Goodwill impairment testing

The Company assessed recoverability of goodwill carrying amount based on the value in use and discounted cash flow method.

The process for determination of the value in use involves the use of assumptions, judgments and estimates on cash flows, such as revenue, cost and expense growth rates, estimated future investments and working capital and discount rates. The assumptions about cash flow increase projections were based on management’s estimates, market studies and macroeconomic projections. Future cash flows were discounted at the WACC (Weighted Average Cost of Capital) rate.

Consistent with the economic analysis techniques, the assessment of value in use is made for a period of five (5) years, and thereafter, considering the perpetuity of the assumptions based on the capacity of business continuity for an indefinite time. Management considered that the period of 5 years is adequate, based on its past experience in preparing cash flow projections. Such understanding is in line with paragraph 35 of IAS 36 – Impairment of Assets.

The growth rate used to extrapolate the projections beyond the 5 years period was 4.5% and 5.0% in 2017 and 2016, respectively. Estimated future cash flows were discounted at the pre tax rate of 13.58% in 2017 (14.75% in 2016), also at nominal amounts.

The inflation rate for the period analyzed in the projected cash flows was 4.0% in 2017 (4.5% in 2016).

Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by the Company’s management.

Based on annual impairment testing of the Company’s intangible assets, prepared using projections considering the financial statements at December 31, 2017 and 2016, growth projections and operating results for the year ended December 31, 2017 and 2016, no impairment losses or evidence of losses were identified, since value in use is higher than net carrying amount as of the assessment date.

c.1) Key assumptions used in the calculation of value in use:

The value in use is mainly impacted by the following assumptions:

· Revenue Growth: is based on the observation of the historical behavior of each revenue line, as well as trends based on market analysis. The projected revenue differs between product lines and services with a tendency of growth in broadband services, pay TV and IT compared to voice services (fixed).

· Growth in operating margin: takes into account the historical margin estimate of price correction, as well as ongoing projects with the aim of greater cost efficiency.

· Capex volume: we considered the projects in progress aiming at the best efficiency of use of CapEx associated with the need to increase capacity and coverage in line with the growth in revenue provided under the long-term plan. The Capex volume may also be impacted by inflation and currency fluctuations.

· Discount rate: represents the assessment of risks in the current market. The calculation of the discount rate is based on the Company’s specific circumstances and derived from the weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by Company investors. The cost of debt is based on loans with interest income that the Company is obliged to honor. The specific risk segment is incorporated by applying individual beta factors.

c.2) Sensitivity to changes in assumptions

The Company carries out a sensitivity analysis of the impairment test by considering reasonable changes in the main assumptions used in such test.

The following maximum increases or decreases, expressed in percentage points (p.p.) were assumed for the years ended December 31, 2017 and 2016:

Changes in key assumptions	In percentage points (p.p)
Financial variables
Discount rate	+/-	1.0
Perpetuity growth rates	+/-	0.5
Operating variables
OIBDA Margin	+/-	2.0
Capex/Revenues Margin	+/-	1.0

The sensitivity analysis performed at year-end 2017 and 2016 indicates that there are no significant risks arising from possible changes in the financial and operating variables, considered individually. In other words, the Company considers that within the above (reasonably wide) limits, no losses would be recognized.

XML

PERSONNEL, SOCIAL CHARGES AND BENEFITS

12 Months Ended

Dec. 31, 2017

PERSONNEL, SOCIAL CHARGES AND BENEFITS

PERSONNEL, SOCIAL CHARGES AND BENEFITS

14)  PERSONNEL, SOCIAL CHARGES AND BENEFITS

	12/31/17	12/31/16
Salaries and wages	40,171	55,476
Social charges and benefits	399,229	384,073
Profit sharing	273,384	285,887
Share-based payment plans (Note 29)	33,880	46,223
Total	746,664	771,659
Current	723,380	760,643
Noncurrent	23,284	11,016

XML

TRADE ACCOUNTS PAYABLE

12 Months Ended

Dec. 31, 2017

TRADE ACCOUNTS PAYABLE

TRADE ACCOUNTS PAYABLE

15)  TRADE ACCOUNTS PAYABLE

	12/31/17	12/31/16
Sundry suppliers (Opex, Capex, Services e Material)	6,683,503	6,617,240
Amounts payable (operators, cobilling)	187,976	314,958
Interconnection / interlink (1)	224,777	369,715
Related parties (Note 28)	350,844	381,240
Total	7,447,100	7,683,153
Current	7,447,100	7,611,246
Noncurrent	—	71,907

(1)As of December 31, 2016, the amount recorded as non-current related to the judicial proceeding filed against SMP operators claiming the reduction of the VU-M amount. On October 15, 2007, an injunction was obtained to provide a judicial deposit of the difference between VC1 calls and the amount effectively charged by SMP operators. In May 2017, the updated amount of R$71,956 was raised in favor of the operators involved, after an agreement between the parties.

XML

TAXES, CHARGES AND CONTRIBUTIONS

12 Months Ended

Dec. 31, 2017

TAXES, CHARGES AND CONTRIBUTIONS

TAXES, CHARGES AND CONTRIBUTIONS

16)  TAXES, CHARGES AND CONTRIBUTIONS

	12/31/17	12/31/16
Income and social contribution taxes payable	4,479	11,520
ICMS	1,149,137	1,226,172
PIS and COFINS	419,589	412,149
Fust and Funttel	93,869	92,828
ISS, CIDE and other taxes	113,689	77,193
Total	1,780,763	1,819,862
Current	1,731,315	1,770,731
Noncurrent	49,448	49,131

XML

DIVIDENDS AND INTEREST ON EQUITY (IOE)

12 Months Ended

Dec. 31, 2017

DIVIDENDS AND INTEREST ON EQUITY (IOE)

DIVIDENDS AND INTEREST ON EQUITY (IOE)

17)  DIVIDENDS AND INTEREST ON EQUITY (IOE)

a)  Dividends and interest on equity payable

a.1) Breakdown:

	12/31/17	12/31/16
Telefónica Latinoamérica Holding S.L.	505,750	454,583
Telefónica  S.A.	609,003	547,390
SP Telecomunicações Participações Ltda	383,933	345,090
Telefónica Chile S.A.	1,070	962
Non-controlling interest	896,360	847,006
Total	2,396,116	2,195,031

a.2) Changes:

Balance at 12/31/15	2,209,362
Supplementary dividends for 2015	1,287,223
Interim interest on equity (net of IRRF)	1,846,323
Unclaimed dividends and interest on equity	(189,471)
Payment of dividends and interest on equity	(2,966,384)
IRRF on shareholders exempt/immune from interest on equity	7,978
Balance at 12/31/16	2,195,031
Supplementary dividends for 2016	1,913,987
Interim interest on equity (net of IRRF)	2,054,143
Unclaimed dividends and interest on equity	(101,778)
Payment of dividends and interest on equity	(3,668,551)
IRRF on shareholders exempt/immune from interest on equity	3,284
Balance at 12/31/17	2,396,116

For the cash flow statement, interest on equity and dividends paid to shareholders are recognized in “Financing Activities”.

Interest on equity and dividends not claimed by shareholders expire within three years from the initial payment date. Should dividends and interest on equity expire, these amounts are recorded in retained earnings for later distribution.

XML

PROVISIONS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2017

PROVISIONS AND CONTINGENCIES

PROVISIONS AND CONTINGENCIES

18)  PROVISIONS AND CONTINGENCIES

The Company is party to administrative and judicial proceedings and labor, tax and civil claims filed in different courts. The management of the Company, based on the opinion of its legal counsel, recognized provisions for proceedings for which an unfavorable outcome is considered probable.

Breakdown of changes in provisions for cases in which an unfavorable outcome is probable, in addition to contingent liabilities and provisions for decommissioning are as follows:

	Provisions for contingencies
					Contingent	Provision for
					liabilities (PPA)	decommissioning
	Labor	Tax	Civil	Regulatory	(1)	(2)	Total
Balances at 12/31/15	1,166,151	2,736,191	1,010,356	642,695	843,882	405,421	6,804,696
Additions (income) (Note 25)	611,776	126,446	690,470	126,514	—	—	1,555,206
Write-offs due to reversal (income) (Note 25)	(153,758)	(53,616)	(343,016)	(10,552)	(9,088)	(32,924)	(602,954)
Other additions	958	100,314	7,897	—	—	162,628	271,797
Write-offs due to payment	(396,894)	(159,039)	(538,309)	(2,580)	(11,240)	—	(1,108,062)
Monetary restatement	154,724	379,385	211,959	72,857	58,191	11,462	888,578
Balances at 12/31/16	1,382,957	3,129,681	1,039,357	828,934	881,745	546,587	7,809,261
Additions (income) (Note 25)	809,754	226,125	748,620	271,124	—	—	2,055,623
Write-offs due to reversal (income) (Note 25)	(512,583)	(71,684)	(309,927)	(72,780)	(89,230)	—	(1,056,204)
Other additions (reversal)	(492)	93,596	207	—	—	20,765	114,076
Write-offs due to payment	(865,656)	(168,407)	(551,928)	(6,873)	—	—	(1,592,864)
Write-offs due to taxes (3)	—	(66,027)	—	—	—	—	(66,027)
Monetary restatement	147,334	348,393	123,487	83,387	53,281	12,129	768,011
Business combination (Note 1 c.1)	19,282	87,531	6,061	—	—	—	112,874
Balances at 12/31/17	980,596	3,579,208	1,055,877	1,103,792	845,796	579,481	8,144,750
At 12/31/16
Current	202,113	—	205,831	775,679	—	—	1,183,623
Noncurrent	1,180,844	3,129,681	833,526	53,255	881,745	546,587	6,625,638
At 12/31/17
Current	239,229	—	201,673	994,009	—	—	1,434,911
Noncurrent	741,367	3,579,208	854,204	109,783	845,796	579,481	6,709,839

(1) This refers to contingent liabilities arising from Purchase Price Allocation (PPA) generated on acquisition of the controlling interest of Vivo Participações in 2011 and GVTPart. in 2015.

(2) These refer to costs to be incurred to return the sites (locations for installation of base radio, equipment and real estate) to their respective owners in the same conditions as at the time of execution of the initial lease agreement.

(3) This refers to the amounts of tax on tax losses used to offset tax provisions arising from the Company's adherence to the Special Tax Regularization Program (PERT).

a)  Provisions and labor contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	980,596	1,382,957
Possible losses	261,876	293,146

Labor provisions and contingencies involve labor claims filed by former employees and outsourced employees (the latter alleging subsidiary or joint liability) claiming for, among other issues, overtime, salary equalization, post-retirement benefits, allowance for health hazard and risk premium, and matters relating to outsourcing.

The Company is also a defendant in labor claims filed by retired former employees who are covered by the Retired Employees Medical Assistance Plan (“PAMA”), who, among other issues, are demanding the cancellation of amendments to this plan. Most of these claims await a decision by the Regional Labor Court of São Paulo and the Superior Labor Court. Based on the opinion of its legal counsel and recent decisions of the courts, management considers the risk of loss in these cases as possible. No amount has been specified for these claims, since is not possible to estimate the cost to the Company in the event of loss.

In addition, the Company is party to Public Civil Actions filed by the Labor Public Prosecutor’s Office, mainly in relation to the determination that the Company must cease the engagement of intermediaries to carry out its core activities. No amounts were allocated to the possible degree of risk in these Public Civil Actions in the above table, since at this stage of the proceedings it is not possible to estimate the cost to the Company in the event of loss.

b)  Provisions and tax contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	3,579,208	3,129,681
Federal	502,153	343,353
State	231,998	226,571
Municipal	32,054	30,519
FUST, FISTEL and EBC	2,813,003	2,529,238
Possible losses	35,388,910	30,050,578
Federal	8,226,374	5,931,022
State	18,968,349	15,389,802
Municipal	548,014	853,244
FUST, FUNTTEL, FISTEL and EBC	7,646,173	7,876,510

b.1) Probable tax contingencies

Management and its legal counsel understand that losses are probable in the following federal, state, municipal and other tax proceedings (FUST, FISTEL and EBC) are described below:

Federal Taxes

The Company is party to administrative and legal proceedings relating to: (i) claims resulting from the non-ratification of compensation and refund requests formulated; (ii) CIDE levied on the remittance of amounts abroad related to technical and administrative assistance and similar services, as well as royalties; (iii) IRRF on interest on equity; (iv) Social Investment Fund (Finsocial) offset amounts; and (v) additional charges to the PIS and COFINS tax base, as well as additional charges to COFINS required by Law No. 9,718/98.

At December 31, 2017, consolidated provisions totaled R$502,153  (R$343,353 at December 31, 2016).

State taxes

The Company is party to administrative and judicial proceedings relating to: (i) disallowance of ICMS credits; (ii) telecommunications services not subject to ICMS; (iii) tax credit for challenges / disputes over telecommunication services not provided or wrongly charged (Agreement 39/01); (iv) rate difference of ICMS; (v) ICMS on rent of infrastructure necessary for internet (data) services; and (vi) outflows of goods with prices lower than those of acquisition.

At December 31, 2017, consolidated provisions totaled R$231,998  (R$226,571 at December 31, 2016).

Municipal taxes

The Company is party to various municipal tax proceedings, at the judicial level, relating to: (i) Property tax (IPTU); (ii) Services tax (ISS) on equipment leasing services, non-core activities and supplementary activities; and (iii) withholding of ISS on contractors' services.

At December 31, 2017, consolidated provisions totaled R$32,054  (R$30,519 at December 31, 2016).

FUST, FISTEL and EBC

The Company has administrative and judicial discussions related to: (i) the non-inclusion of interconnection expenses and industrial exploitation of a dedicated line in the calculation basis of FUST; (ii) exclusion of the calculation basis of the Installation Inspection Fee ("TFI") and Inspection and Operation Fee ("TFF") of the mobile stations that are not owned by it; and (iii) Contribution to the Promotion of Public Broadcasting (EBC).

At December 31, 2017, consolidated provisions totaled R$2,813,003  (R$2,529,238 at December 31, 2016).

b.2) Possible tax contingencies

Management and its legal counsel understand that losses are possible in the following federal, state, municipal and other tax proceedings (FUST, FUNTTEL, FISTEL and EBC) are described below:

Federal taxes

The Company is party to various administrative and judicial proceedings, at the federal level, which are awaiting decisions in different court levels.

The most important of these proceedings are: (i) statements of dissatisfaction resulting from failure to approve requests for compensation submitted by the Company; (ii) INSS (social security contribution) (a) on compensation payment for salary losses arising from the "Plano Verão" and the "Plano Bresser"; (b) SAT, social security amounts owed to third parties (INCRA and SEBRAE) and (c) supply of meals to employees, withholding of 11% (assignment of workforce); (iii) IRRF and CIDE on the funds remitted abroad related to technical services and to administrative support and similar services, etc., and royalties; (iv) IRPJ and CSLL - disallowance of costs and sundry expenses not evidenced; (v) deduction of COFINS on swap operation losses; (vi) PIS and COFINS accrual basis versus cash basis; (vii) IRPJ FINOR, FINAN or FUNRES; (viii) IRPJ and CSLL, disallowance of expenses on goodwill of the corporate restructuring of Terra Networks and Vivo S.A., and for the takeovers of Navytree, TDBH, VivoPart. and GVTPart.; (ix) ex-tariff, cancellation of the benefits under CAMEX Resolution No. 6, increase in the import duty from 4% to 28%; (x) IPI levied on shipment of fixed access units from the Company's establishment; (xi) PIS and COFINS levied on value-added services and monthly subscription services; (xii) INSS on Stock Options - requirement of social security contributions on amounts paid to employees under the stock option plan; (xiii) IOF - required on loan transactions, intercompany loans and credit transactions; and (xiv) operating expenses allegedly non-deductible and related to estimated losses on the recoverable value of accounts receivable.

At December 31, 2017, consolidated amounts involved totaled R$8,226,374  (R$5,931,022 at December 31, 2016).

State taxes

The Company is party to various administrative and judicial proceedings, at the state level, which are awaiting decisions in different court levels.

Among these lawsuits, the following are highlighted: (i) provision of facility, utility and convenience services and rental of movable property; (ii) international calls (DDI); (iii) reversal of ICMS credit related to the acquisition of items of property, plant and equipment and payment of ICMS in interstate transfers of property, plant and equipment between branches; (iv) reversal of previously unused ICMS credits; (v) service provided outside São Paulo state with ICMS paid to São Paulo State; (vi) co-billing; (vii) tax substitution with a fictitious tax base (tax guideline); (viii) use of credits related to acquisition of electric power; (ix) secondary activities, value added and supplementary services; (x) tax credits related to opposition/challenges regarding telecommunications services not provided or mistakenly charged (Agreement 39/01); (xi) deferred collection of ICMS - interconnection (DETRAF - Traffic and Service Provision Document); (xii) credits derived from tax benefits granted by other states; (xiii) disallowance of tax incentives related to cultural projects; (xiv) transfers of assets among business units owned by the Company; (xv) communications service tax credits used in provision of services of the same nature; (xvi) card donation for prepaid service activation; (xvii) reversal of credit from return and free lease in connection with assignment of networks (used by the Company itself and exemption of public bodies); (xviii) DETRAF fine; (xix) ICMS on own consumption; (xx) ICMS on exemption of public bodies; (xxi) ICMS on amounts given by way of discounts; (xxii) new tax register bookkeeping without prior authorization by tax authorities; (xxiii) ICMS on monthly subscription; (xxiv) tax on unmeasured services; and (xxv) ICMS on advertising services.

At December 31, 2017, consolidated amounts involved totaled R$18,968,349  (R$15,389,802 at December 31, 2016).

Municipal taxes

The Company is party to various administrative and judicial proceedings, at the municipal level, which are awaiting decisions in different court levels.

The most important of these proceedings are: (i) ISS on non-core activity, value-added and supplementary services; (ii) ISS withholding at source; (iii) IPTU; (iv) land use tax; (v) various municipal charges; (vi) charge for use of mobile network and lease of infrastructure; (vii) advertising services; (viii) services provided by third parties; (ix) advisory services in corporate management provided by Telefónica Latino América Holding; (x) ISS on call identification and mobile phone licensing services; (xi) ISS on full-time services, provisions, returns and cancelled tax receipts; and (xii) ISS on data processing and antivirus congeners.

At December 31, 2017, consolidated amounts involved totaled R$548,014  (R$853,244 at December 31, 2016).

FUST, FUNTTEL, FISTEL and EBC

Universal Telecommunications Services Fund (“FUST”)

Writs of mandamus were filed seeking the right to not include revenues with interconnection and Industrial Use of Dedicated Line (EILD) in FUST tax base, according to Abridgment No. 7 of December 15, 2005, as it does not comply with the provisions contained in sole paragraph of article 6 of Law No. 9,998/00, which are awaiting a decision from Higher Courts.

Various delinquency notices were issued by ANATEL in the administrative level to collect charges on interconnections, EILD and other revenues not earned from the provision of telecommunication services.

At December 31, 2017, consolidated amounts involved totaled R$4,316,571  (R$4,089,065 at December 31, 2016).

Fund for Technological Development of Telecommunications (“FUNTTEL”)

Proceedings filed for recognition of the right not to include interconnection revenues and any others arising from the use of resources that are part of the networks in FUNTTEL calculation basis, as determined by Law 10,052/00 and Decree No. 3,737/01, thus avoiding the improper application of Article 4, paragraph 5, of Resolution 95/13.

Several notifications of debits drawn up by the Ministry of Communications in administrative actions for constitution of the tax credit related to the interconnection, network resources and other revenues that do not originate from the provision of telecommunication services.

At December 31, 2017, consolidated amounts involved totaled R$493,867  (R$1,190,637 at December 31, 2016).

Telecommunications Inspection Fund (“FISTEL”)

Judicial actions for the collection of TFI on: (a) extensions of the term of validity of the licenses for use of telephone exchanges associated with the operation of the fixed switched telephone service; and (b) extensions of the period of validity of the right to use radiofrequency associated with the operation of the telephone service personal mobile service.

At December 31, 2017, consolidated amounts involved totaled R$2,556,443  (R$2,352,000 at December 31, 2016).

Contribution to Empresa Brasil de Comunicação (“EBC”)

The Union of Telephony and Cellular and Personal Mobile Service Companies ("Sinditelebrasil") judicially discusses, on behalf of the associates, the Contribution to the Promotion of Public Broadcasting to EBC, created by Law 11,652/08.

Several notifications of debit entry were drawn up by ANATEL at the administrative level for the constitution of the tax credit.

At December 31, 2017, consolidated amounts involved totaled R$279,292  (R$244,808 at December 31, 2016).

c)  Provisions civil contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	1,055,877	1,039,357
Possible losses	2,858,796	2,574,836

c.1) Provisions for probable civil losses

Management and its legal counsel understand that losses are probable in the following civil proceedings:

•The Company is party to proceedings involving rights to the supplementary amounts from shares calculated on network expansion plans since 1996 (supplement of share proceedings). These proceedings are at different stages: lower courts, court of justice and high court of justice. At December 31, 2017, consolidated provisions totaled R$324,232  (R$256,276 at December 31, 2016).

· The Company is party to various civil proceedings related to consumers at the administrative and judicial level, relating to the non-provision of services and/or products sold. At December 31, 2017, consolidated provisions totaled R$296,169  (R$386,699 at December 31, 2016).

· The Company is party to various civil proceedings of a non-consumer nature at administrative and judicial levels, all arising in the ordinary course of business. At December 31, 2017, consolidated provisions totaled R$435,476  (R$396,382 at December 31, 2016).

c.2) Civil contingencies assessed as possible losses

Management and its legal counsel understand that losses are possible in the following civil proceedings:

· Collective Action filed by SISTEL Participants’ Association (ASTEL) in the state of São Paulo, in which SISTEL associates in the state of São Paulo challenge the changes made in the health insurance plan for retired employees (“PAMA”) and claim for the reestablishment of the prior “status quo”. This proceeding is still in the appeal phase, and awaits a decision on the Interlocutory Appeal filed by the Company against the decision on possible admission of the appeal to higher and supreme courts filed in connection with the Court of Appeals’ decision, which changed the decision rendering the matter groundless. The amount cannot be estimated, and the claims cannot be settled due to their unenforceability because it entails the return to the prior plan conditions.

· Civil Class Actions filed by ASTEL, in the state of São Paulo, and by the Brazilian National Federation of Associations of Retirees, Pensioners and Pension Fund Members of the Telecommunications Industry (FENAPAS), both against SISTEL, the Company and other carriers, in order to annul the spin-off of the PBS private pension plan, alleging, in short, the “windup of the supplementary private pension plan of the SISTEL Foundation”, which led to various specific mirror PBS plans, and corresponding allocation of funds from technical surplus and tax contingencies existing at the time of the spin-off. The amount cannot be estimated, and the claims cannot be settled due to their unenforceability because this involves the return of the spun-off assets of SISTEL relating to telecommunication carriers of the former Telebrás System.

· The Company is party to other civil claims, at several levels, related to service rendering rights. Such claims have been filed by individual consumers, civil associations representing consumer rights or by the Bureau of Consumer Protection (PROCON), as well as by the Federal and State Public Prosecutor’s Office. The Company is also party to other claims of several types related to the ordinary course of business. At December 31, 2017, the consolidated amount totaled R$2,827,071  (R$2,559,252 at December 31, 2016).

· TGLog (company controlled by TData) is a party to the civil enforcement action process in the 3rd Civil Court of Barueri - SP for the allegation of contractual noncompliance with the transportation of goods. At December 31, 2017, the amount was R$178  (R$1,377 at December 31, 2016).

· Terra Networks (company controlled by TData) is a party to: (i) supplier action related to the transmission of events; (ii) PROCON fine (annulment action); (iii) indemnification action related to the use of content; (iv) ECAD action on copyright collection; and (v) claim actions filed by former subscribers regarding unrecognized collection, collection of undue value and contractual noncompliance. At December 31, 2017, the amount was R$17,340.

· The Company has received notices regarding noncompliance with the Customer Service (SAC) Decree. The Company is currently party to various lawsuits (administrative and legal proceedings). At December 31, 2017 and at December 31, 2016, the amount was R$14,207. 

· Intelectual Property: Lune Projetos Especiais Telecomunicação Comércio e Ind. Ltda. (Lune), a Brazilian company, filed an action on November 20, 2001 against 23 wireless carriers claiming to own the patent for caller ID and the trademark “Bina". The purpose of that lawsuit was to interrupt provision of such service by carriers and to seek indemnification equivalent to the amount paid by consumers for using the service.

An unfavorable decision was handed down determining that the Company should refrain from selling mobile phones with Caller ID service ("Bina"), subject to a daily fine of R$10,000.00 (Ten thousand reais) in case of noncompliance. Furthermore, according to that decision, the Company must pay indemnification for royalties, to be calculated in settlement. Motions for Clarification were proposed by all parties and Lune's motions for clarification were accepted since an injunctive relief in this stage of the proceedings was deemed applicable. A bill of review appeal was filed in view of the current decision which granted a stay of execution suspending that unfavorable decision until final judgment of the review. A bill of review was filed in view of the sentence handed down on June 30, 2016, by the 4th Chamber of the Court of Justice of the Federal District, in order to annul the lower court sentence and remit the proceedings back to the lower court for a new examination. At the present time, we await the judgment of the regimental grievance filed against a decision prior to the judgment, which rejected the application of the former lawyers of Lune as assistants of the author.  There is no way to determine the extent of potential liabilities with respect to this claim.

· The Company and other wireless carriers figure as defendants in several lawsuits filed by the Public Prosecutor’s Office and consumer associations to challenge imposition of a period to use prepaid minutes. The plaintiffs allege that the prepaid minutes should not expire after a specific period. Conflicting decisions were handed down by courts on the matter, even though the Company understands that its criteria for the period determination comply with ANATEL standards.

d) Provisions and regulatory contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	1,103,792	828,934
Possible losses	5,065,907	5,018,205

d.1) Provisions for regulatory contingencies assessed as probable losses

The Company is party to administrative proceedings against ANATEL, filed based on an alleged failure to meet sector regulations, and to judicial proceedings to contest sanctions applied by ANATEL at the administrative level. At December 31, 2017, consolidated provisions totaled R$1,103,792  (R$828,934 at December 31, 2016).

d.2) Regulatory contingencies assessed as possible losses

According to the Company’s management and legal counsel, the likelihood of loss of the following regulatory civil proceedings is possible:

· The Company is party to administrative proceedings filed by ANATEL alleging noncompliance with the obligations set forth in industry regulations, as well as legal claims which discuss the sanctions applied by ANATEL at the administrative level. At December 31, 2017, the consolidated amount was R$5,065,907  (R$5,018,205 at December 31, 2016).

· Administrative and judicial proceedings discussing payment of a 2% charge on interconnection services revenue arising from the extension of right of use of SMP related radio frequencies. Under clause 1.7 of the authorization term that grants right of use of SMP related radio frequencies, the extension of right of use of such frequencies entails payment every two years, during the extension period (15 years) of a 2% charge calculated on net revenues from the service provider’s Basic and Alternative Plans of the service company, determined in the year before that of payment.

However, ANATEL determined that in addition to revenues from Service Plans, the charge corresponding to 2% should also be levied on interconnection revenues and other operating revenues, which is not stipulated in clause 1.7 of referred Authorization Term.

Considering, based on the provisions of the Authorization Terms, that revenue from interconnection services should not be included in the calculation of the 2% charge for radiofrequency use right extension, the Company filed administrative and legal proceedings challenging these charges, based on ANATEL’s position.

d.3) Term of Conduct Adjustment ("TAC")

The Board of Directors of ANATEL approved, on October 27, 2016, the Company's TAC. On September 27, 2017, this instrument was judged by the Brazilian Court of Audit ("TCU"), with the instruction of recommendations and determinations to ANATEL for the continuation of the analysis of the instrument.

e)  Guarantees

The Company granted guarantees for tax, civil and labor proceedings, as follows:

	12/31/17			12/31/16
		Judicial deposits			Judicial deposits
	Property and	and	Letters of	Property and	and	Letters of
	equipment	garnishments	guarantee	equipment	garnishments	guarantee
Civil, labor and tax	176,591	6,663,805	1,669,476	203,600	6,351,566	1,948,088
Total	176,591	6,663,805	1,669,476	203,600	6,351,566	1,948,088

At December 31, 2017, in addition to the guarantees presented above, the Company had amounts under short-term investment frozen by courts (except for loan-related investments) in the consolidated amount of R$69,764  (R$67,393 at December 31, 2016).

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DEFERRED REVENUE

12 Months Ended

Dec. 31, 2017

DEFERRED REVENUE

DEFERRED REVENUE

19)  DEFERRED REVENUE

	12/31/17	12/31/16
Services and goods (1)	301,292	389,706
Disposal of PP&E (2)	165,162	227,397
Activation revenue (3)	7,959	44,914
Customer loyalty program (4)	50,354	56,210
Government grants (5)	115,379	133,300
Other (6)	83,052	90,112
Total	723,198	941,639
Current	372,561	429,853
Noncurrent	350,637	511,786

(1) This refers mainly to the balances of revenues from recharging prepaid services, which are recognized in income as services are provided to customers. It includes the amount of the agreement the Company entered into for industrial use of its mobile network by a different SMP operator in Regions I, II and III of the general authorizations plan, which is intended solely for the rendering of SMP services by the operator for its customers.

(2) Includes the net balances of the residual values from sale of non- strategic towers and rooftops, which are transferred to income as the conditions for recognition are fulfilled.

(3) This refers to the deferred activation revenue (fixed) recognized in income over the estimated period in which a customer remains in the base.

(4) This refers to points earned under the Company’s loyalty program, which enables customers to accumulate points by paying bills relating to use of services offered. The balance represents the Company’s estimate of customers exchanging points for goods and / or services in the future.

(5) This refers to: i) government subsidy arising from funds obtained from BNDES credit lines to be used in the acquisition of domestic equipment, which have been amortized over the useful life cycle of the equipment; and ii) subsidies arising from projects related to state taxes, which are being amortized over the contractual period.

(6) Includes mainly reimbursement for costs for leaving radio frequency sub-bands 2,500MHz to 2,690MHz due to cancellation of the Multichannel Multipoint Distribution Service (MMDS).

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LOANS, FINANCING AND DEBENTURES

12 Months Ended

Dec. 31, 2017

LOANS, FINANCING AND DEBENTURES

LOANS, FINANCING AND DEBENTURES

20)  LOANS, FINANCING AND DEBENTURES

a)  Breakdown

	Information as of December 31, 2017									12/31/17			12/31/16
	Currency	Annual interest rate						Maturity	Garantees	Current	Non-current	Total	Current	Non-current	Total
Local currency										1,478,656	2,237,192	3,715,848	1,480,382	2,901,521	4,381,903
Financial Institutions (a.1)										820,468	1,456,624	2,277,092	711,848	2,158,303	2,870,151
BNDES FINEM	URTJLP	TJLP+	0		to	4.08	%	7/15/2019	(1)	371,946	213,958	585,904	363,734	567,110	930,844
BNDES FINEM	URTJLP								(3)	—	—	—	29,319	—	29,319
BNDES FINEM	URTJLP	TJLP+	0		to	3.38	%	8/15/2020	(3)	184,007	303,560	487,567	182,737	480,510	663,247
BNDES FINEM	R$					5.00	%	11/15/2019	(3)	14,654	13,377	28,031	14,686	27,971	42,657
BNDES FINEM	URTJLP	TJLP+	0		to	3.12	%	1/15/2023	(3)	101,879	413,552	515,431	7,596	499,442	507,038
BNDES FINEM	R$		4.00	%	to	6.00	%	1/15/2023	(3)	37,061	132,092	169,153	12,320	163,222	175,542
BNDES FINEM	R$	Selic Acum.	D-2		+	2.32	%	1/15/2023	(3)	70,426	305,952	376,378	1,408	340,600	342,008
BNDES PSI	R$		2.5	%	to	5.5	%	1/15/2023	(2)	25,405	19,413	44,818	92,508	44,698	137,206
BNB	R$		7.06	%	to	10	%	8/18/2022	(4)	15,090	54,720	69,810	7,540	34,750	42,290
Suppliers (a.2)	R$		101.4	%	to	109.4	% of CDI	12/31/2018		607,152	—	607,152	722,591	—	722,591
Finance lease (a.3)	R$					IPCA and IGP-M		8/31/2033		51,036	334,424	385,460	45,943	328,485	374,428
Contingent Consideration (a.4)	R$					Selic				—	446,144	446,144	—	414,733	414,733
Foreign Currency										142,299	82,955	225,254	1,062,593	225,271	1,287,864
Financial Institutions (a.1)										142,299	82,955	225,254	1,062,593	225,271	1,287,864
BNDES FINEM	UMBND		ECM		+	2.38	%	7/15/2019	(1)	142,299	82,955	225,254	136,850	225,271	362,121
Resolution 4131 - Scotiabank and Bank of America	US$									—	—	—	925,743	—	925,743
Total										1,620,955	2,320,147	3,941,102	2,542,975	3,126,792	5,669,767

(1)Guarantee in receivables relating to 15% of the outstanding debt balance or four times the largest installment, whichever is higher.

(2)Pledge of financed assets.

(3)Assignment of receivables corresponding to 20% of outstanding debt balance or 1 time the last installment of sub-credit facility "A" (UMIPCA) plus 5 times the last installment of each of the other sub-credit facilities, whichever is greater.

(4)Bank guarantee provided by Banco Safra in an amount equivalent to 100% of the outstanding financing debt balance. Setting up a liquidity fund represented by financial investments in the amount equivalent to three installments of repayment referenced to the average post-grace period performance. Balances were R$11,722 and R$10,773 at December 31, 2017 and 2016, respectively. 

a.1)  Loans and financing

Some financing agreements with the BNDES described above, have lower interest rates than those prevailing on the market. These operations fall within the scope of IAS 20 and thus the subsidies granted by BNDES were adjusted to present value deferred in accordance with the useful lives of the financed assets, resulting in a balance until December 31, 2017 as of R$32,155  (R$47,346 at December 31, 2016), note 19.

a.2) Financing - Suppliers

Under bilateral agreements with suppliers, the Company obtained extension of the terms for payment of trade accounts payable at a cost based on fixed CDI rate for the corresponding periods, with the net cost equivalent to between 101.4% to 109.4% of CDI (108.4% of CDI as of December 31, 2016).

a.3) Finance lease

The Company has agreements classified as finance lease agreements in the condition of lessee relate to: (i) lease of towers and rooftops arising from sale and finance leaseback transactions; (ii) lease of Built to Suit ("BTS") sites to install antennas and other equipment and transmission facilities; (iii) lease of information technology equipment and; (iv) lease of infrastructure and transmission facilities associated with the power transmission network. The net carrying amount of the assets has remained unchanged until sale thereof, and a liability is recognized corresponding to the present value of mandatory minimum installments of the agreement.

The amounts recorded in property, plant and equipment are depreciated over the estimated useful lives of the assets or the lease term, whichever is shorter.

The balance of amounts payable relating to aforementioned transactions comprises the following effects:

	12/31/17	12/31/16
Nominal value payable	787,147	831,479
Unrealized financial expenses	(401,687)	(457,051)
Present value payable	385,460	374,428
Current	51,036	45,943
Noncurrent	334,424	328,485

Aging list of finance lease payable at December 31, 2017 is as follows:

	Nominal value	Present value
	payable	payable
Up to 1 year	57,865	51,036
From 1 to 5 years	201,057	144,963
Over five years	528,225	189,461
Total	787,147	385,460

There are no unsecured residual values resulting in benefits to the lessor or contingent payments recognized as revenue at December 31, 2017 and 2016.

a.4) Contingent consideration

As part of the Purchase and Sale Agreement and Other Covenants executed by and between the Company and Vivendi to acquire all shares in GVTPart (Note 1c.3), a contingent consideration relating to the judicial deposit made by GVT for the monthly installments of deferred income tax and social contribution on goodwill amortization was agreed, arising from the corporate restructuring process completed by GVT in 2013. If these funds are realized (being reimbursed, refunded, or via netting), they will be returned to Vivendi, as long as they are obtained in a final unappeasable decision. Reimbursement will be made within 15 years and this amount is subject to monthly restatement at the SELIC rate.

b)  Debentures

Information on the debentures at December 31, 2017 and 2016:

	Information as of "December 31,172017										12/31/17			12/31/16
			Amounts
Issue	Issue date	Maturity	Issued	Outstanding	Issue value	Remuneration p.a.					Current	Non-current	Total	Current	Non-current	Total
4th issue – Series 3	10/15/2009	10/15/2019	810,000	23,557	810,000			IPCA+	4.00	%	312	40,010	40,322	307	36,990	37,297
1st issue – Minas Comunica	12/17/2007	7/5/2021	5,550	5,550	55,500			IPCA+	0.50	%	24,088	72,264	96,352	—	97,308	97,308
3rd issue	9/10/2012	9/10/2017	200,000	200,000	2,000,000	100	%	of CDI +	0.75	%	—	—	—	2,086,763	—	2,086,763
4th issue	4/25/2013	4/25/2018	130,000	130,000	1,300,000	100	%	of CDI +	0.68	%	1,317,513	—	1,317,513	33,434	1,299,505	1,332,939
5th issue	2/8/2017	2/8/2022	200,000	200,000	2,000,000	108.25	%	of CDI			64,397	1,996,517	2,060,914	—	—	—
6th issue	11/27/2017	11/27/2020	100,000	100,000	1,000,000	100	%	of CDI +	0.24	%	6,176	999,462	1,005,638	—	—	—
Total											1,412,486	3,108,253	4,520,739	2,120,504	1,433,803	3,554,307

Transaction costs in connection with the 4th, 5th and 6th issues, totaling R$5,422 at December 31, 2017 (R$495 at December 31, 2016, 3th and 4th issues), were allocated as a reduction of liabilities as costs to be incurred and are recognized as financial expenses, according to the contractual terms of each issue.

c)  Repayment schedule

At December 31, 2017, breakdown of noncurrent loans, financing, finance lease, debentures and contingent consideration by year of maturity is as follows:

	Loans and			Contingent
Year	financing	Debentures	Finance lease	Consideration	Total
2019	737,548	64,098	43,810	—	845,456
2020	353,587	1,024,088	37,140	—	1,414,815
2021	226,244	1,024,088	32,705	—	1,283,037
2022	204,427	995,979	31,308	—	1,231,714
2023 onwards	17,773	—	189,461	446,144	653,378
Total	1,539,579	3,108,253	334,424	446,144	5,428,400

d)  Covenants

There are loans and financing with BNDES and debentures with specific covenants involving a penalty in the event of breach of contract. A breach of contract provided for in the agreements with the institutions listed above is characterized as noncompliance with covenants (analyzed on a quarterly, half-yearly or yearly basis), being a breach of a contractual clause, resulting in the early maturity of the contract.

At December 31, 2017 and 2016 all economic and financial indexes established in existing contracts have been achieved.

e)  Changes

Changes in loans and financing, debentures, finance lease agreements and contingent considerations are as follows:

	Loans and			Financing -	Contingent
	financing	Debentures	Finance lease	Suppliers	Consideration	Total
Balance at 12.31.15	4,773,489	3,544,714	296,684	1,228,682	377,721	10,221,290
Additions	466,629	—	61,866	666,085	—	1,194,580
Government grants (Note 19)	(12,040)	—	—	—	—	(12,040)
Financial charges (Note 26)	424,867	486,178	63,003	50,038	37,012	1,061,098
Issue costs	—	495	—	—	—	495
Foreign exchange variation (Note 26)	(272,795)	—	—	—	—	(272,795)
Write-offs (payments)	(1,222,135)	(477,080)	(47,125)	(1,222,214)	—	(2,968,554)
Balance at 12.31.16	4,158,015	3,554,307	374,428	722,591	414,733	9,224,074
Additions	55,876	3,000,000	13,462	571,444	—	3,640,782
Government grants (Note 19)	(1,581)	—	—	—	—	(1,581)
Financial charges (Note 26)	300,153	485,295	45,265	70,603	31,411	932,727
Issue costs	—	(4,926)	—	—	—	(4,926)
Foreign exchange variation (Note 26)	15,846	—	—	—	—	15,846
Write-offs (payments)	(2,025,963)	(2,513,937)	(47,695)	(757,486)	—	(5,345,081)
Balance at 12.31.17	2,502,346	4,520,739	385,460	607,152	446,144	8,461,841

The following is a summary of funding and payments made during the year ended December 31, 2017.

		Write-offs (payments)
	Additions	Principal	Financial charges	Total
Loans and financing	55,876	(1,781,261)	(244,702)	(2,025,963)
BNDES	15,998	(825,256)	(213,752)	(1,039,008)
BNB	39,878	(11,808)	(4,073)	(15,881)
Resolution 4131 - Scotiabank and Bank of America	—	(944,197)	(26,877)	(971,074)
Debêntures	3,000,000	(2,000,000)	(513,937)	(2,513,937)
4th issue – Series 3	—	—	(1,522)	(1,522)
3rd issue	—	(2,000,000)	(246,817)	(2,246,817)
4th issue	—	—	(151,152)	(151,152)
5th issue	2,000,000	—	(114,446)	(114,446)
6th issue	1,000,000	—	—	—
Suppliers	571,444	(668,512)	(88,974)	(757,486)
Finance lease	13,462	(35,722)	(11,973)	(47,695)
Total	3,640,782	(4,485,495)	(859,586)	(5,345,081)

Additions

Loans and Financing

Banco do Nordeste ("BNB")

On May 12, 2017, draw-downs were made related to the agreement signed on August 18, 2014 in the total amount of R$39,878. The rates of this contract are 7.06% p.a. to 10.0% p.a., total term of 8 years, with interest payments and principal repayments in 72 monthly and successive installments. These resources were destined to investment and expansion projects for the Brazil's Northeast region.

BNDES FINEM

Contract 14.2.1192.1: On December 30, 2014, a financing line of R$1,000,293 was contracted, with rates of: (i) TJLP + 0 to 3.12% p.a; (ii) 4% p.a; (iii ) Selic + 2.32% p.a, total term of 8 years, with a grace period ending on January 15, 2018. After the grace period, interest and principal repayments will be paid in 60 monthly and successive installments; and (iv) 6% a.a. total term of 7 years, with a grace period ending on January 15, 2017. After the grace period, interest and principal repayments will be paid in 60 monthly and successive installments.

During 2017, three disbursements related to this agreement were made in the amount of R$15,998.

These disbursements refer to a financial support plan linked to projects carried out in the 2014-2016 triennium, aiming at expansion in the areas of operation.

Debentures

5th Issue

At a meeting held on January 26, 2017, the Company's Board of Directors approved the 5th issue of simple debentures, non-convertible into shares of the Company, in a single series, unsecured, in the total amount of R$2,000,000, which were subject to public placement with restricted efforts, under a firm guarantee regime, in the terms of ICVM 476/09.

On February 8, 2017, the Company issued 200,000 debentures, with a par value equivalent to R$10. The debentures have a maturity of five years and the nominal unit value of each of the debentures will not be monetarily restated.

Remuneration interest corresponds to 108.25% of the accumulated variation of the average daily rates of one-day Interbank Deposits ("DI").

6th Issue

At a meeting held on November 13, 2017, the Company's Board of Directors approved the 6th issue of simple debentures, non-convertible into shares of the Company, in a single series, unsecured, in the total amount of R$1,000,000, which were subject to public placement with restricted efforts, under a firm guarantee regime, in the terms of ICVM 476/09.

On November 27, 2017, the Company issued 100,000 debentures, with a par value equivalent to R$10. The debentures have a maturity of three years and the nominal unit value of each of the debentures will not be monetarily restated.

Remuneration interest corresponds to 100.00% of the accumulated variation of the average daily rates of one-day Interbank Deposits ("DI"), plus a spread equivalent to 0.24%.

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OTHER LIABILITIES

12 Months Ended

Dec. 31, 2017

OTHER LIABILITIES

OTHER LIABILITIES

21)  OTHER LIABILITIES

	12/31/17	12/31/16
Authorization licenses (1)	258,742	1,048,523
Liabilities with related parties (Note 28)	125,987	112,358
Payment for license renewal (2)	167,536	215,154
Third-party withholdings (3)	144,593	227,685
Surplus from post-employment benefit plans (Note 30)	531,938	327,670
Amounts to be refunded to subscribers	189,380	168,708
Other liabilities	72,893	92,447
Total	1,491,069	2,192,545
Current	718,468	1,640,757
Noncurrent	772,601	551,788

(1) Includes a portion of the Company's liability arising from an agreement entered into with ANATEL, whereby the operators that won the auction of the 4G licenses organized Entidade Administradora do Processo de Redistribuição e Digitalização de Canais de TV e RTV ("EAD"), which will be responsible for equally performing all TV and RTV channel redistribution procedures and solutions to harmful interference in radio communication systems, in addition to other operations in which the winning operators have obligations, as defined in the agreement. On January 31, 2017, the Company paid R$858,991 to EAD, referring to the 2nd and 3rd installments of the auction of 700 MHz national frequency bands for the provision of SMP, performed by ANATEL on September 30, 2014.

(2) This refers to the cost of renewing STFC and SMP licenses.

(3) This refers to payroll withholdings and taxes withheld from pay-outs of interest on equity and on provision of services.

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EQUITY

12 Months Ended

Dec. 31, 2017

EQUITY

EQUITY

22)  EQUITY

a)  Capital

According to its Articles of Incorporation, the Company is authorized to increase its share capital up to 1,850,000,000 common and preferred shares. The Board of Directors is the competent body to decide on any increase and consequent issue of new shares within the authorized capital limit.

Nevertheless, Brazil’s Corporation Law (Law nº 6404/76, Article 166, item IV) - establishes that capital may be increased by means of a Special Shareholders’ Meeting resolution to decide about amendments to the Articles of Incorporation, if authorized capital increase limit has been reached.

Capital increases do not necessarily observe the proportion between the number of shares of each class to be maintained, however the number of non-voting or restricted-voting preferred shares must not exceed 2/3 of total shares issued.

Preferred shares are non-voting, except for cases set forth in Articles 9 and 10 of the Articles of Incorporation, but have priority in the event of reimbursement of capital, without premium, and are entitled to dividends 10% higher than those paid on common shares, as per article 7 of the Company’s Articles of Incorporation and item II, paragraph 1, article 17 of Law No. 6404/76.

Preferred shares are also entitled to full voting rights if the Company fails to pay the minimum dividend to which they are entitled for three consecutive financial years and this right will be kept until payment of said dividend.

Subscribed and paid-in capital at December 31, 2017 and 2016 amounted to R$63,571,416, divided into shares without par value, held as follows:

At December 31, 2017

	Common Shares			Preferred Shares			Grand Total
Shareholders	Number	%		Number	%		Number	%
Controlling Group	540,033,264	94.47	%	704,207,855	62.91	%	1,244,241,119		73.58	%
Telefónica Latinoamérica Holding, S.L.	46,746,635	8.18	%	360,532,578	32.21	%	407,279,213		24.09	%
Telefónica  S.A.	198,207,608	34.67	%	305,122,195	27.26	%	503,329,803		29.76	%
SP Telecomunicações Participações Ltda	294,158,155	51.46	%	38,537,435	3.44	%	332,695,590		19.67	%
Telefónica Chile S.A.	920,866	0.16	%	15,647	0.00	%	936,513		0.06	%
Other shareholders	29,320,789	5.13	%	415,131,868	37.09	%	444,452,657		26.28	%
Treasury Shares	2,290,164	0.40	%	983	0.00	%	2,291,147		0.14	%
Total shares	571,644,217	100.00	%	1,119,340,706	100.00	%	1,690,984,923		100.00	%
Treasury Shares	(2,290,164)			(983)			(2,291,147)
Total shares outstanding	569,354,053			1,119,339,723			1,688,693,776

At December 31, 2016

	Common Shares			Preferred Shares			Grand Total
Shareholders	Number	%		Number	%		Number	%
Controlling Group	540,033,264	94.47	%	704,207,855	62.91	%	1,244,241,119		73.58	%
Telefónica Latinoamérica Holding, S.L.	46,746,635	8.18	%	360,532,578	32.21	%	407,279,213		24.09	%
Telefónica  S.A.	198,207,608	34.67	%	305,122,195	27.26	%	503,329,803		29.76	%
SP Telecomunicações Participações Ltda	294,158,155	51.46	%	38,537,435	3.44	%	332,695,590		19.67	%
Telefónica Chile S.A.	920,866	0.16	%	15,647	0.00	%	936,513		0.06	%
Other shareholders	29,320,789	5.13	%	415,132,512	37.09	%	444,453,301		26.28	%
Treasury Shares	2,290,164	0.40	%	339	0.00	%	2,290,503		0.14	%
Total shares	571,644,217	100.00	%	1,119,340,706	100.00	%	1,690,984,923		100.00	%
Treasury Shares	(2,290,164)			(339)			(2,290,503)
Total shares outstanding	569,354,053			1,119,340,367			1,688,694,420

b) Capital reserves

b.1) Special goodwill reserve

This represents the tax benefit generated by the merger of Telefonica Data do Brasil Ltda. which will be capitalized in favor of the controlling shareholders (SPTE Participações Ltda) after the tax credits are realized under the terms of CVM Ruling No. 319/99. The balance of this account at December 31, 2017 and 2016 was R$63,074.

b.2) Other capital reserves

The breakdown as of December 31, 2017 and 2016 is as follows.

	12.31.17	12.31.16
Excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date (1)	2,735,930	2,735,930
Cancelation of treasury shares according to the Special Shareholders' Meeting  (SGM) of 3/12/15 (2)	(112,107)	(112,107)
Direct costs of capital increases (3)	(62,433)	(62,433)
Incorporation of shares of GVTPart. (4)	(1,188,707)	(1,188,707)
Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData (5)	(75,388)	(75,388)
Preferred shares delivered referring to the judicial process of expansion plan (6)	2	2
Effects of the acquisition of Terra Networks Brasil by TData (7)	(59,029)	—
Total	1,238,268	1,297,297

(1)Refers to the excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date.

(2)The cancellation of 2,332,686 shares issued by the Company, held in treasury, approved at the Special Shareholders' Meeting held on March 12, 2015.

(3)Refers to direct costs (net of taxes) of Company capital increases on April 28, 2015 and April 30, 2015, arising from the Primary Offering of Shares.

(4)Refers to the difference between the economic values of the merger of shares of GVTPart. and market value of shares, issued on the transaction closing date.

(5)Regarding the effects of the acquisition of shares of non-controlling shareholders that, with the adoption of IFRS 10, would be recorded in equity when there is no change in the shareholding control.

(6)Refers to the effects of write-offs due to the transfer of 62 preferred shares in treasury to outstanding shares, for compliance with judicial process decisions in which the Company is involved regarding rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996.

(7)Refers to the effects of TData's acquisition of Terra Networks, related to the difference between the consideration given in exchange for the equity interest obtained and the value of the net assets acquired (note 1 c.1).

b.3) Treasury shares

The Company's shares held in treasury whose balance is resulting: (i) of the exercise of the right to withdraw from the Company's common and preferred shareholders, who expressed their dissent regarding the acquisition of GVTPart (see Note 1.c3); (ii) the acquisition of preferred shares in the financial market in accordance with the share buyback program in effect at the time of the transaction (see Note 22.f); and (iii) transfers of preferred shares, related to compliance with court decisions in which the Company is involved, which deals with rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996.

The table below shows the changes in this caption for the year ended December 31, 2017 and 2016.

	Shares			In thousands of
Treasury stock	Common shares	Preferred shares	Total	reais
At 12.31.15	2,290,164	734	2,290,898	(87,805)
Transfer of lawsuits concerning judicial proceedings  (1)	—	(395)	(395)	15
At 12.31.16	2,290,164	339	2,290,503	(87,790)
Acquisition of shares in the financial market  (2)	—	706	706	(32)
Transfer of lawsuits concerning judicial proceedings  (1)	—	(62)	(62)	2
At 12.31.17	2,290,164	983	2,291,147	(87,820)

(1) Refers to the transfer of preferred shares in treasury to outstanding shares to comply with decisions of lawsuits in which the Company is involved that deals with rights to the complementary receipt of shares calculated in relation to plans to expand the network after 1996.

(2) The Company acquired preferred shares issued by the Company in the financial market: (i) on June 1, 2017, 45 shares at a unit price of R$ 47.31, totaling R$ 2; and (ii) on July 5, 2017, 661 shares at a unit price of R$45.26, totaling R$32.

c) Income reserves

The amounts of the income reserves are distributed as follows:

		Expansion and
		Modernization
	Legal reserve (1)	Reserve (2)	Tax incentives (3)	Total
At 12.31.15	1,703,643	700,000	6,928	2,410,571
Reversal of reserves	—	(700,000)	—	(700,000)
Recording of reserves	204,262	550,000	10,141	764,403
At 12.31.16	1,907,905	550,000	17,069	2,474,974
Reversal of reserves	—	(550,000)	—	(550,000)
Recording of reserves	230,439	297,000	10,815	538,254
At 12.31.17	2,138,344	297,000	27,884	2,463,228

(1) This reserve is set up by allocation of 5% of the net income for the year, up to the limit of 20% of the paid-up capital. Legal reserve will only be used to increase capital and offset accumulated losses.

(2) This reserve is constituted based on the capital budget, whose purpose is to guarantee the expansion of the network capacity to meet the Company's increasing demand and guarantee the quality of service rendering. In accordance with Article 196 of Law No. 6404/76, the capital budget will be submitted for appreciation and approval by the Shareholders' Meeting. 

(3) The Company has State VAT (ICMS) tax benefits in the states of Minas Gerais and Espírito Santo, relating to tax credits approved by the relevant bodies of said states, in connection with investments in the installation of SMP support equipment, fully operational, in accordance with the rules in force, ensuring that the localities listed in the call for bid be included in the SMP coverage area. The portion of profit subject to the incentive was excluded from dividend calculation, and may be used only in the event of capital increase or loss absorption.

d)  Dividend and interest on equity

d.1) Additional dividends proposed for 2016

On April 26, 2017, the Company's Ordinary General Meeting approved the allocation of proposed additional dividends for 2016, not yet distributed, amounting of R$1,913,987, equivalent to R$1.06295487663 and R$1.16925036430 for common and preferred shares, respectively, to the holders of common and preferred shares that were registered in the Company's records at the end of the day of the Ordinary General Meeting. The amount will be paid as of December 13, 2017.

d.2) Remuneration to shareholders

The dividends are calculated in accordance with the Company Articles of Incorporation and the Corporation Law. The table below shows the calculation of dividends and interest on equity for 2017 and 2016:

	2017	2016
Net income for the year	4,608,790	4,085,242
Allocation to legal reserve	(230,439)	(204,262)
Total	4,378,351	3,880,980
(-) Tax incentives - not distributable	(10,815)	(10,141)
Adjusted net income	4,367,536	3,870,839
IOE distributed for the year:	2,416,639	2,172,145
Interest on equity (gross)	2,416,639	2,172,145
Balance of unallocated net income	1,950,897	1,698,694
(+) Reversal special reserve for modernization and expansion	550,000	700,000
(+) Expired equity instruments	101,778	221,559
(+-) Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes	(113,811)	(156,266)
Income available to be distributed	2,488,864	2,463,987
Proposal for Distributions:
Special reserve for modernization and expansion	297,000	550,000
Additional proposed dividends	2,191,864	1,913,987
Total	2,488,864	2,463,987
Mandatory minimum dividend - 25% of adjusted net income	1,091,884	967,710

The manner proposed by management for payment of dividends was:

For 2017: The remaining unallocated balance of net income for the year ended December 31, 2017, amounting to R$1,950,897, plus equity instruments lapsed in 2017 amounting to R$101,778 and reversal special reserve for expansion and modernization of 2016 amounting to R$550,000 and less  other comprehensive income amounting to R$113,811, totaling R$2,488,864. The amount of R$297,000 was classified as "Special Reserve for Expansion and Modernization" and R$2,191,864 was classified as additional proposed dividends in accordance with the management proposal for allocation of income for the year, submitted and approved at the General Shareholders’ Meeting.

For 2016: The remaining unallocated balance of net income for the year ended December 31, 2016, amounting to R$1,698,694, plus equity instruments lapsed in 2016 amounting to R$221,559 and reversal special reserve for expansion and modernization of 2016 amounting to R$700,000 and less other comprehensive income amounting to R$156,266, totaling R$2,463,987. The amount of R$550,000 was classified as "Special Reserve for Expansion and Modernization" and R$1,913,987 was classified as additional proposed dividends in accordance with the management proposal for allocation of income for the year, submitted and approved at the General Shareholders’ Meeting at April 27, 2017.

Total proposed dividend for deliberation - per share	2017	2016
Common shares	1.217277	1.062955
Preferred shares (1)	1.339005	1.169250

(1) 10% higher than the amount allocated to each common share, under article 7 of the Company Articles of Incorporation.

In 2017 and 2016, the Company allocated interim dividends and interest on equity, which were allocated to mandatory minimum dividends, as follows:

2017

Dates			Gross Amount			Net Value			Amount per Share (1)
		Beginning of
Approval	Credit	Payment	Common	Preferred (2)	Total	Common	Preferred (2)	Total	Common	Preferred (2)
02/13/17	02/24/17	Until 12/31/18	56,916	123,084	180,000	48,379	104,621	153,000	0.084970	0.093467
03/20/17	03/31/17	Until 12/31/18	110,669	239,331	350,000	94,069	203,431	297,500	0.165220	0.181742
06/19/17	06/30/17	Until 12/31/18	30,039	64,961	95,000	25,533	55,217	80,750	0.044845	0.049330
09/18/17	09/29/17	Until 12/31/18	96,440	208,560	305,000	81,974	177,276	259,250	0.143978	0.158375
12/14/17	12/26/17	Until 12/31/18	470,072	1,016,567	1,486,639	399,561	864,082	1,263,643	0.701779	0.771957
Total			764,136	1,652,503	2,416,639	649,516	1,404,627	2,054,143

2016

Dates			Gross Amount			Net Value			Amount per Share (1)
		Beginning of
Approval	Credit	Payment	Common	Preferred (2)	Total	Common	Preferred (2)	Total	Common	Preferred (2)
02/19/16	02/29/16	08/22/17	63,239	136,761	200,000	53,753	116,247	170,000	0.094411	0.103853
03/18/16	03/31/16	08/22/17	106,559	230,441	337,000	90,575	195,875	286,450	0.159083	0.174992
04/18/16	04/29/16	08/22/17	69,563	150,437	220,000	59,129	127,871	187,000	0.103853	0.114238
06/17/16	06/30/16	08/22/17	50,908	110,092	161,000	43,272	93,578	136,850	0.076001	0.083601
09/19/16	09/30/16	08/22/17	205,528	444,472	650,000	174,699	377,801	552,500	0.306837	0.337521
12/19/16	12/30/16	12/13/17	191,029	413,116	604,145	162,374	351,149	513,523	0.285191	0.313710
Total			686,826	1,485,319	2,172,145	583,802	1,262,521	1,846,323

(1) The amounts of IOE are calculated and stated net of Withholding Income Tax (IRRF). The immune shareholders received the full  IOE amount, without withholding income tax at source.

(2) The gross and net values for the preferred shares are 10% higher than those attributed to each common share, as per article 7 of the Company's Articles of Incorporation.

d.3) Unclaimed dividends and interest on equity

Pursuant to article 287, paragraph II, item “a” of Law No. 6404, of December 15, 1976, the dividends and interest on equity unclaimed by shareholders expire in 3 (three) years, as from the initial payment date. The Company reverses the amount of unclaimed dividends and IOE to equity upon expiry.

For the years ended December 31, 2017 and 2016, the Company reversed unclaimed dividends and interest on equity amounting to R$101,778 and R$189,471, respectively, which were included in calculations for decisions on Company dividends.

e)  Other comprehensive income

Financial instruments available for sale: These refer to changes in fair value of financial assets available for sale.

Derivative financial instruments: These refer to the effective part of cash flow hedges up to the balance sheet date.

Currency translation effects for foreign investments: This refers to currency translation differences arising from the translation of financial statements of Aliança (jointly-controlled entity).

Changes in other comprehensive income are as follows:

			Currency
	Financial		translation
	instruments	Derivative	effects - foreign
	available for sale	transactions	investments	Total
Balances at 12/31/15	(8,936)	379	34,025	25,468
Exchange variation	—	—	(17,232)	(17,232)
Gains from future contracts	—	42	—	42
Reclassification of gains cash flow hedge for capex	—	3,128	—	3,128
Gains on financial assets available for sale	55	—	—	55
Balances at 12/31/16	(8,881)	3,549	16,793	11,461
Exchange variation	—	—	11,239	11,239
Losses from future contracts	—	(1,595)	—	(1,595)
Gains on financial assets available for sale	223	—	—	223
Balances at 12/31/17	(8,658)	1,954	28,032	21,328

f)  Company Share Repurchase Program

In a meeting held on June 9, 2017, the Company’s Board of Directors, in accordance with article 17, item XV, of the Articles of Incorporation, approved the repurchase of common and preferred shares issued by the Company, under CVM Ruling No. 567, of September 17, 2015, for acquisition of common and preferred shares issued by the Company for subsequent cancellation, disposal or to be held in treasury, without decreasing capital, to increase shareholder value through the efficient application of available cash resources and optimize the Company's capital allocation.

The repurchase shall be made through the use of the capital reserve balance included in the balance sheet as of March 31, 2017, excluding the reserves referred to in article 7, paragraph 1, of CVM Instruction 567, of September 17, 2015.

This program is effective until December 8, 2018, with the acquisitions made at B3, at market prices, observing the legal and regulatory limits, being the maximum amounts to be acquired of 870,781 common shares and 41,510,761 preferred shares.

On June 1, 2017 and July 5, 2017, the Company acquired 45 and 661 preferred shares issued by the Company at an average unit price of R$47.31 and R$45.26, repectively, totaling R$32.

g)  Earnings per share

Basic and diluted earnings per share were calculated by dividing profit attributed to the Company’s shareholders by the weighted average number of outstanding common and preferred shares for the year.

The table below sets out the calculation of earnings per share for the years ended December 31, 2017, 2016 and 2015:

	2017	2016	2015
Net income for the year attributable to shareholders:	4,608,790	4,085,242	3,420,249
Common shares	1,457,288	1,291,743	1,083,911
Preferred shares	3,151,502	2,793,499	2,336,338
Number of shares:	1,688,694	1,688,694	1,491,131
Weighted average number of outstanding common shares for the year	569,354	569,354	503,842
Weighted average number of outstanding preferred shares for the year	1,119,340	1,119,340	987,289
Basic and diluted earnings per share:
Common shares (in R$)	2.56	2.27	2.15
Preferred shares (in R$)	2.82	2.50	2.37

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NET OPERATING REVENUE

12 Months Ended

Dec. 31, 2017

NET OPERATING REVENUE

NET OPERATING REVENUE

23)  NET OPERATING REVENUE

	2017	2016	2015
Gross operating revenue (1)	66,243,174	65,006,728	60,997,496
Deductions from gross operating revenue	(23,036,342)	(22,498,269)	(20,710,681)
Taxes	(16,058,584)	(15,388,784)	(14,163,869)
Discounts granted and return of goods	(6,977,758)	(7,109,485)	(6,546,812)
Net operating revenue	43,206,832	42,508,459	40,286,815

(1)     These include telephone services, use of interconnection network, data and SVA services, cable TV and other services. 

No one customer contributed more than 10% of gross operating revenue for the years ended December 31, 2017, 2016 and 2015.

All amounts in net income are included in income and social contribution tax bases.

XML

OPERATING COSTS AND EXPENSES

12 Months Ended

Dec. 31, 2017

OPERATING COSTS AND EXPENSES

OPERATING COSTS AND EXPENSES

24)  OPERATING COSTS AND EXPENSES

	2017
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(845,358)	(2,387,314)	(493,095)	(3,725,767)
Third-party services	(5,591,284)	(6,423,523)	(1,232,379)	(13,247,186)
Interconnection and network use	(1,440,968)	—	—	(1,440,968)
Advertising and publicity	—	(1,015,414)	—	(1,015,414)
Rental, insurance, condominium and connection means	(2,624,405)	(151,455)	(204,701)	(2,980,561)
Taxes, charges and contributions	(1,792,764)	(39,050)	(34,779)	(1,866,593)
Estimated impairment losses on accounts receivable	—	(1,481,015)	—	(1,481,015)
Depreciation and amortization (1)	(5,963,153)	(1,433,297)	(457,284)	(7,853,734)
Cost of goods sold	(1,955,890)	—	—	(1,955,890)
Materials and other operating costs and expenses	(58,708)	(205,406)	(20,867)	(284,981)
Total	(20,272,530)	(13,136,474)	(2,443,105)	(35,852,109)

	2016
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(976,233)	(2,136,399)	(747,156)	(3,859,788)
Third-party services	(5,705,098)	(6,151,012)	(1,254,187)	(13,110,297)
Interconnection and network use	(1,924,148)	—	—	(1,924,148)
Advertising and publicity	—	(1,065,882)	—	(1,065,882)
Rental, insurance, condominium and connection means	(2,326,219)	(141,135)	(220,655)	(2,688,009)
Taxes, charges and contributions	(1,861,237)	(5,933)	(92,394)	(1,959,564)
Estimated impairment losses on accounts receivable	—	(1,348,221)	—	(1,348,221)
Depreciation and amortization (1)	(5,821,620)	(1,408,866)	(423,920)	(7,654,406)
Cost of goods sold	(2,118,940)	—	—	(2,118,940)
Materials and other operating costs and expenses	(89,519)	(197,918)	(55,074)	(342,511)
Total	(20,823,014)	(12,455,366)	(2,793,386)	(36,071,766)

	2015
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(813,612)	(1,939,493)	(468,557)	(3,221,662)
Third-party services	(5,300,820)	(6,183,609)	(1,044,272)	(12,528,701)
Interconnection and network use	(2,595,894)	—	—	(2,595,894)
Advertising and publicity	—	(1,102,458)	—	(1,102,458)
Rental, insurance, condominium and connection means	(2,051,055)	(156,663)	(186,691)	(2,394,409)
Taxes, charges and contributions	(1,616,920)	(5,264)	(65,599)	(1,687,783)
Estimated impairment losses on accounts receivable	—	(1,230,675)	—	(1,230,675)
Depreciation and amortization (1)	(5,269,588)	(1,181,216)	(364,147)	(6,814,951)
Cost of goods sold	(2,597,088)	—	—	(2,597,088)
Materials and other operating costs and expenses	(100,099)	(206,099)	(13,193)	(319,391)
Total	(20,345,076)	(12,005,477)	(2,142,459)	(34,493,012)

(1) (1)    Includes R$1,267, R$46,647 and R$37,626, related to non-cumulative PIS and COFINS tax credits in 2017, 2016 and 2015, respectively.

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OTHER OPERATING INCOME (EXPENSES)

12 Months Ended

Dec. 31, 2017

OTHER OPERATING INCOME (EXPENSES)

OTHER OPERATING INCOME (EXPENSES)

25)  OTHER OPERATING INCOME (EXPENSES)

	2017	2016	2015
Recovered expenses and fines	355,415	504,877	538,239
Provisions for labor, tax and civil contingencies	(999,419)	(985,176)	(1,014,080)
Net gain (loss) on asset disposal/loss (1)	108,767	463,602	(4,512)
Other operating income (expenses) (2)	(187,249)	(51,977)	(73,852)
Total	(722,486)	(68,674)	(554,205)
Other operating income	464,182	968,479	538,239
Other operating expenses	(1,186,668)	(1,037,153)	(1,092,444)
Total	(722,486)	(68,674)	(554,205)

(1) The amount shown for 2016 includes R$476,371 (net of residual values) from the Company’s sale of 1,655 of transmission towers to Telxius Torres Brasil Ltda. After the sale of these assets, a lease agreement for part of the towers sold was entered into, thus ensuring continued transmission of data for mobile services.

The transaction was recognized as sale and leasebackas provided under IAS 17. Management analyzed each asset leased back and classified them as operating or finance leases in accordance with IAS 17 qualitative and quantitative criteria.

Risks and benefits relating to these towers have been transferred to their purchasers, with the exception of several towers for which transfer of risks and benefits was not possible. For these items, the amount was recognized as deferred revenue (Note 19).

(2)    In the same transaction , performed in 2016 and described in item (1), the Company transferred assignment of current lease  agreements for sites and sold sharing agreements (customer portfolio) for R$40,899.

XML

FINANCIAL INCOME (EXPENSES)

12 Months Ended

Dec. 31, 2017

FINANCIAL INCOME (EXPENSES)

FINANCIAL INCOME (EXPENSES)

26)  FINANCIAL INCOME (EXPENSES)

	2017	2016	2015
Financial Income
Interest income	655,474	719,399	832,872
Interest receivable (customers, taxes and other)	124,391	104,837	87,023
Gain on derivative financial instruments	373,971	994,801	2,910,914
Foreign exchange variations on loans and financing	113,203	487,747	203,754
Other revenues from foreign exchange and monetary variation	406,013	374,169	569,698
Other financial income	82,906	100,406	124,404
Total	1,755,958	2,781,359	4,728,665
Financial Expenses
Loan, financing, debenture and finance lease charges	(932,727)	(1,061,098)	(921,019)
Foreign exchange variation on loans and financing	(129,049)	(214,952)	(1,365,133)
Loss on derivative financial instruments	(415,956)	(1,342,671)	(2,011,855)
Interest payable (financial institutions, provisions, trade accounts payable, taxes and other)	(136,425)	(278,175)	(216,729)
Other expenses with foreign exchange and monetary variation	(876,948)	(830,466)	(704,438)
IOF, Pis, Cofins and other financial expenses	(167,897)	(288,538)	(357,669)
Total	(2,659,002)	(4,015,900)	(5,576,843)
Financial Expenses, net	(903,044)	(1,234,541)	(848,178)

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INCOME AND SOCIAL CONTRIBUTION TAXES

12 Months Ended

Dec. 31, 2017

INCOME AND SOCIAL CONTRIBUTION TAXES

INCOME AND SOCIAL CONTRIBUTION TAXES

27)  INCOME AND SOCIAL CONTRIBUTION TAXES

The Company recognize income and social contribution taxes on a monthly basis, on an accrual basis, and pay the taxes based on estimates, in accordance with the trial balances for tax-reduction/tax-suspension purposes. Taxes calculated on profits until the month of the financial statements are recorded in liabilities or assets, as applicable.

Reconciliation of the reported tax expense and the amounts calculated by applying the statutory tax rate of 34% (income tax of 25% and social contribution tax of 9%) is shown in the table below for the years ended December 31, 2017, 2016 and 2015.

	2017		2016		2015
Income before taxes	5,730,773		5,134,722		4,393,456
Income and social contribution tax expenses, at the tax rate of 34%	(1,948,463)		(1,745,805)		(1,493,775)
Permanent differences
Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 11)	537		423		692
Unclaimed  interest on equity	(21,843)		(11,432)		(6,552)
Temporary differences in subsidiaries	2,007		—		—
Non-deductible expenses, gifts, incentives	(94,413)		(88,916)		(139,752)
Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years	132,080		—		—
Tax benefit related to interest on equity allocated	821,657		738,529		593,615
Other (additions) exclusions	(13,545)		57,721		72,565
Tax	(1,121,983)		(1,049,480)		(973,207)
Effective rate	19.6	%	20.4	%	22.2	%
Current income and social contribution taxes	(580,578)		(288,063)		(939,500)
Deferred income and social contribution taxes	(541,405)		(761,417)		(33,707)

Breakdown of gains and losses of deferred income and social contribution taxes on temporary differences is shown in Note 7.b).

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES

12 Months Ended

Dec. 31, 2017

BALANCES AND TRANSACTIONS WITH RELATED PARTIES

BALANCES AND TRANSACTIONS WITH RELATED PARTIES

28)  BALANCES AND TRANSACTIONS WITH RELATED PARTIES

a)  Balances and transactions with related parties

The main balances of assets and liabilities with related parties arises from transactions with companies related to the controlling group carried out at the prices and other commercial conditions agreed in contracts between the parties as follows:

a) Fixed and mobile telephony services provided by Telefónica Group companies;

b) Digital TV services provided by Media Networks Latino America;

c) Lease and maintenance of safety equipment provided by Telefônica Inteligência e Segurança Brasil;

d) Corporate services passed through at the cost effectively incurred for these services;

e) Right to use certain software licenses, including maintenance and support, provided by Telefónica Global Technology

f) International transmission infrastructure for several data circuits and roaming services provided by Telxius Cable Brasil, Telefónica International Wholesale Services Espanha, Telefónica USA; and Media Net Br;

g) Transactions with Terra Group companies based abroad, relating to the purchase of internet content, advertising and auditing services. On July 3, 2017, TData (a wholly-owned subsidiary of the Company) acquired the controlling interest in Terra Networks Brasil, note 1.c.1). Therefore, the balances presented in the result table refer to the period from January to June 2017;

h) Marketing services provided by Terra Group companies;

i) Advertising services, sale of postal solutions and development and sale of content provided by Terra Networks Brasil. On July 3, 2017, TData (a wholly-owned subsidiary of the Company) acquired the controlling interest in Terra Networks Brasil, note 1.c.1). Therefore, the balances presented in the result table refer to the period from January to June 2017;

j) Data communication services and integrated solutions provided by Telefónica International Wholesale Services Espanha and Telefónica USA;

k) Long distance call and international roaming services provided by companies of Telefónica Group;

l) Sundry expenses and costs to be reimbursed by companies of Telefónica Group;

m) Brand Fee for assignment of rights to use the brand paid to Telefónica;

n) Stock option plan for employees of the Company related to acquisition of Telefónica shares;

o) Cost Sharing Agreement(CSA) for digital-business related expenses reimbursed to Telefónica Digital;

p) Leases/rentals of Telefónica Group companies’ buildings;

q) Financial Clearing House roaming,inflows of funds for payments and receipts arising from roaming operation between group companies operated by Telfisa;

r) Integrated e-learning, online education and training solutions provided by T.Learning Services Brasil;

s) Factoring transactions, credit facilities for services provided by the Group’s suppliers;

t) Social investment in Fundação Telefônica, innovative use of technology to enhance learning and knowledge, contributing to personal and social development;

u) Contracts or agreements assigning user rights for cable ducts, optical fiber duct rental services, and right-of-way related occupancy agreements with several highway concessionaires provided by Companhia AIX;

v) Adquira Sourcing platform - online solution provided by Telefónica Compras Electrónicas to transact purchase and sale of all types of goods and services;

w) Digital media; marketing and sales, in-store and outdoor digital marketing services provided by Telefônica On The Spot Soluções Digitais Brasil;

x) Sale/transfer of the Company’s towers and customer portfolio to Telxius Torres Brasil; and

y) Logistics operator, messenger and motorcycle courier services provided by Telefônica Transportes e Logística. The amounts for the year of 2015 refer to the period from January to October 2015, the month in which this company was acquired by TData.

As described in note 30, the Company sponsor pension plans and other post-employment benefits to its employees with Visão Prev e Sistel.

The following table summarizes the consolidated balances with related parties:

		Balance Sheet - Assets
		At 12/31/17				At 12/31/16
			Cash and			Cash and
	Type of		cash	Accounts		cash	Accounts
Companies	transaction		equivalents	receivable, net	Other assets	equivalents	receivable, net	Other assets
Parent Companies
SP Telecomunicações Participações	d) / l)		—	531	46	—	94	9,618
Telefónica LatinoAmerica Holding	l)		—	—	135,486	—	—	206,619
Telefónica	l)		—	492	158	—	—	633
			—	1,023	135,690	—	94	216,870
Other Group companies
Colombia Telecomunicaciones ESP	k)		—	1,210	4,505	—	2,641	3,900
Media Networks Brasil Soluções Digitais	a) / d)		—	1,017	2,106	—	81	59
Pegaso PCS	k)		—	2,757	—	—	6,163	—
T.O2 Germany GMBH CO. OHG	k)		—	22,315	—	—	9,849	—
Telcel Telecom. Celulares C. A.	k)		—	6,067	—	—	6,180	—
Telefônica Digital España	l)		—	1,929	—	—	—	—
Telefônica Factoring do Brasil	a) / d) / l)		—	12,337	93	—	4,927	22
Telefónica Global Technology	l)		—	—	13,600	—	1,614	11,244
Telefônica Inteligência e Segurança Brasil	a) / d) / l)		—	271	1,013	—	868	945
Telefónica International Wholesale Services Espanha	j)		—	69,087	—	—	82,613	—
Telefônica Learning Services Brasil	a)		—	175	—	—	64	—
Telefónica Moviles Argentina	k)		—	7,194	—	—	6,288	—
Telefónica Moviles Del Chile	k)		—	539	387	—	10,207	337
Telefónica Moviles Del Espanha	k)		—	8,918	—	—	9,220	—
Telefônica Serviços Empresariais do Brasil	a) / d) / p)		—	2,938	2,355	—	2,518	2,410
Telefonica UK LTD.(O2 UK LTD)	k)		—	1,350	—	—	8,809	—
Telefónica USA	j)		—	6,248	—	—	3,550	—
Telfisa	q)		9,523	—	—	78,070	—	—
Telxius Cable Brasil	a) / d) / p)		—	28,981	819	—	11,513	2,678
Telxius Torres Brasil  (1)	d) / l) / p) / x)		—	14,666	5,106	—	13,842	3,709
Terra Networks Chile, Terra Networks México, Terra Networks Perú e Terra Networks Operation	g) / h)		—	8,159	—	—	—	—
Terra Networks Brasil	a) / d) / l)		—	—	—	—	5,499	7,596
Other	a) / d) / g) / h) / k) / l) / p)		—	3,840	1,059	—	4,366	909
			9,523	199,998	31,043	78,070	190,812	33,809
Total			9,523	201,021	166,733	78,070	190,906	250,679
Current assets			9,523	201,021	164,249	78,070	190,906	247,863
Noncurrent assets			—	—	2,484	—	—	2,816

		Balance Sheet - Liabilities
		At 12/31/17		At 12/31/16
		Trade		Trade
		accounts		accounts
		payable and		payable and
	Type of	other	Other	other	Other
Companies	transaction	payables	liabilities	payables	liabilities
Parent Companies
SP Telecomunicações  Participações	l)	6,656	15,000	—	533
Telefónica LatinoAmerica Holding	l)	86	—	109	—
Telefónica	l) / m) / n)	1,205	99,950	2,236	84,759
		7,947	114,950	2,345	85,292
Other Group companies
Colombia Telecomunicaciones S.A. ESP	k)	471	—	2,675	—
Companhia AIX de Participações	u)	1,915	—	1,835	—
Fundação Telefônica	t)	—	137	—	52
Media Networks Latina America SAC	b)	4,248	—	32,398	—
Media Networks Brasil Soluções Digitais	f)	33,751	318	11,821	318
Pegaso PCS	k)	388	—	2,452	—
T.O2 Germany GMBH CO. OHG	k)	5,477	—	4,409	—
Telcel Telecom. Celulares C. A.	k)	5,240	—	4,721	—
Telefónica Compras Electrónicas	v)	24,311	—	24,196	—
Telefônica Digital España	l) / o)	46,645	—	35,347	—
Telefônica Factoring do Brasil	l) / s)	—	146	—	6,154
Telefónica Global Technology	e) / l)	15,671	—	15,169	—
Telefônica Inteligência e Segurança Brasil	c) / l)	15,336	27	26,516	27
Telefónica International Wholesale Services Espanha	f)	44,240	8	50,121	8
Telefônica Learning Services Brasil	r)	37,931	—	16,328	—
Telefónica Moviles Argentina	k)	3,865	—	13,997	—
Telefónica Moviles Del Chile	k)	963	—	10,673	—
Telefónica Moviles Del Espanha	k)	3,589	—	4,671	—
Telefônica Serviços Empresariais do Brasil	d)	—	376	112	1,042
Telefonica UK LTD.(O2 UK LTD)	k)	89	—	3,868	—
Telefónica USA	f)	—	171	14,283	168
Telxius Cable Brasil	f)	44,037	2,068	52,210	2,068
Telxius Torres Brasil (1)	x) / l)	37,718	7,757	33,178	15,991
Terra Networks México, Terra Networks Perú e Terra Networks Operation	h)	7,633	—	—	—
Terra Networks Brasil	i)	—	—	3,360	1,209
Other	g) / h) / k) / l) / w)	9,379	29	14,555	29
		342,897	11,037	378,895	27,066
Total		350,844	125,987	381,240	112,358
Current liabilities		350,844	124,749	381,240	110,449
Noncurrent liabilities		—	1,238	—	1,909

		Income statement
		2017			2016			2015
			Cost, despesas			Cost, despesas			Cost, despesas and
			and other			and other			other
			expenses			expenses			expenses
		Operating	(revenues)	Financial	Operating	(revenues)	Financial	Operating	(revenues)	Financial
Companies	Type of transaction	revenues	operating	result	revenues	operating	result	revenues	operating	result
Parent Companies
SP Telecomunicações  Participações	d) / l)	—	268	—	—	67	—	—	(94)	(146)
Telefónica LatinoAmerica Holding	l)	—	36,523	11,030	—	87,526	4,348	—	134,958	(14,383)
Telefónica	l) / m) / n)	—	(331,684)	(996)	—	(319,708)	(9,727)	—	(343,453)	(28,714)
		—	(294,893)	10,034	—	(232,115)	(5,379)	—	(208,589)	(43,243)
Other Group companies
Colombia Telecomunicaciones S.A. ESP	k)	349	(10)	604	217	(2,845)	(926)	389	(1,742)	1,165
Companhia AIX de Participações	a) / u)	36	(22,738)	—	67	(21,316)	—	32	(19,216)	—
Fundação Telefônica	a) / t)	—	(11,395)	—	-	(10,530)	—	—	(10,283)	—
Media Networks Brasil Soluções Digitais	a) / d) / f)	600	(57,176)	—	572	(3,451)	—	—	-	—
Media Networks Latina America SAC	b)	—	(33,133)	(516)	-	(17,133)	(50)	—	(39,234)	—
Pegaso PCS	k)	170	536	—	86	(5,991)	—	147	(2,650)	—
T. Learning Services Brasil	a) / r)	292	(54,782)	—	2	(47,544)	1,311	140	(44,825)	—
T.O2 Germany GMBH CO. OHG	k)	75	(1,409)	—	45	(4,527)	—	917	(2,329)	—
Telefónica Compras Electrónicas	v)	—	(29,062)	—	—	(42,889)	—	—	(13,692)	—
Telefônica Digital España	l) / o)	—	(81,893)	(2,600)	—	(44,872)	(1,262)	—	(46,096)	(6,200)
Telefônica Factoring do Brasil	a) / d) / l) / s)	69	828	61	41	200	—	36	33	55
Telefónica Global Technology, S.A.U.	e) / l)	—	(36,395)	40	—	(28,933)	(756)	—	(10,262)	806
Telefônica Inteligência e Segurança Brasil	a) / c) / d) / l)	706	(40,918)	—	1,041	(39,709)	389	976	(25,636)	—
Telefónica International Wholesale Services Espanha	f) / j)	56,728	(49,960)	(2,564)	72,520	(56,293)	(15,008)	82,667	(57,952)	41,386
Telefónica Moviles Argentina	k)	3,746	6,147	—	3,072	(9,112)	—	3,053	(10,728)	—
Telefónica Moviles Del Chile	k)	1,586	(2,196)	52	1,074	(1,096)	(80)	731	(4,236)	100
Telefónica Moviles Del Espanha	k)	1,048	(1,969)	—	(836)	(2,170)	—	2,938	(3,823)	—
Telefônica Serviços Empresariais do Brasil	a) / d) / p)	286	(989)	—	118	867	(43)	934	(7,402)	—
Telefonica UK LTD.(O2 UK LTD)	k)	1,163	(1,374)	—	5	(994)	—	2,841	(1,987)	—
Telefónica USA	f) / j)	2,392	(2,322)	(2,035)	2,998	(14,970)	(349)	3,542	(18,429)	1,970
Telxius Cable Brasil	a) / d) / f) / p)	15,044	(200,536)	787	17,624	(246,595)	244	14,188	(251,717)	—
Telefônica Transportes e Logística	a) / d) / l) / q) / z)	—	—	—	—	—	—	1,710	(55,367)	—
Telxius Torres Brasil  (1)	d) / l) / p) / x)	—	(107,373)	—	31	(72,460)	1,929	—	—	—
Terra Networks Chile, Terra Networks México, Terra Networks Perú e Terra Networks Operation	g) / h)	—	(9,782)	(120)	—	—	—	—	—	—
Terra Networks Brasil	a) / d) / l) / i)	2,485	(10,719)	—	16,483	(17,884)	1,194	1,285	(21,408)	—
Other	a) / d) / g) / h) / k) / l) / p) / w) / x)	3,537	(14,608)	41	1,683	(23,677)	1,216	2,582	(11,190)	385
		90,312	(763,228)	(6,250)	116,843	(713,924)	(12,191)	119,108	(660,171)	39,667
Total		90,312	(1,058,121)	3,784	116,843	(946,039)	(17,570)	119,108	(868,760)	(3,576)

(1) In March 2016, the Company entered into a purchase and sale agreements for infrastructure and assignment of leases, pooling and other covenants ("Agreement") with Telxius Torres Brasil Ltda (a Telefónica subsidiary). The subject matter of the agreement is the purchase and sale of 1,655 tower structures, assignment of current rental agreements for their sites and shared-use/ pooling agreements. The total amount involved was R$760,000, comprising R$719,101 relating to the tower infrastructures and R$40,899 relating to the customer portfolio.

The agreement’s conditions were established taking into consideration: (i) prior transactions of the same nature performed by the Company and other companies in the industry; (ii) a valuation report for the assets subject matter of the agreement, prepared by an independent appraiser; and (iii) internal business plan showing that the operation is profitable for the Company.

The following table summarizes the aforementioned transaction:

Impacts on the Balance Sheet
Description	Balance Sheet Group	R$ thousands
Amounts receivable from Telxius Torres Brasil Ltda	Related-party receivables (1)	760,000
Amount of write-offs of residual values of towers	Property, plan and equipment (note 12)	(99,210)
Value of towers classified as finance lease	Finance lease (Note 20)	2,674
Value of towers awaiting for contractual conditions for transfer	Deferred revenues (Note 19)	140,846

(1) On April 8, 2016, Telxius Torres Brasil Ltda settled the amount of R$760,000 in favor of the Company relating to this transaction, which is classified in the statement of cash flows as cash received from sale of PP&E items.

Impacts on the Statement of Income
Description	DRE Group	R$ thousands
Value of disposal of towers (except retention and financial lease)	Other operating revenues (expenses), net (Note 25)	575,580
Value of write-off of residual amount	Other operating revenues (expenses), net (Note 25)	(99,210)
Value of customer portfolio	Other operating revenues (expenses), net (Note 25)	40,899
Amount of PIS and Cofins charged on customer portfolio	Other operating revenues (expenses), net (Note 25)	(3,783)
Effect on operating income		513,486
Amount of IR and CS levied on towers and customer portfolio	Income and social contribution taxes (Note 27)	(174,585)
Net effect on transaction income	Net effect on transaction income	338,901

b)  Management compensation

Consolidated key management personnel compensation paid by the Company to its Board of Directors and Statutory Officers for the years ended December 31, 2017 and 2016 totaled R$21,684 and R$109,314, respectively. Of this amount, R$14,439  (R$39,822 at December 31, 2016) corresponds to salaries, benefits and social charges and R$7,245  (R$69,492 at December 31, 2016) to variable compensation.

These amounts were recorded as expenses with personnel under the General and administrative expenses group of accounts (Note 24).

For the years ended December 31, 2017 and 2016, the Company’s Directors and Officers did not receive any pension, retirement pension or other similar benefits.

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SHARE-BASED PAYMENT PLANS

12 Months Ended

Dec. 31, 2017

SHARE-BASED PAYMENT PLANS

SHARE-BASED PAYMENT PLANS

29)  SHARE-BASED PAYMENT PLANS

Telefónica, as the Company’s parent company, has different share-based payment plans based on the share quotes, which were also offered to management and employees of its subsidiaries, including Telefônica Brasil.

The fair value of these options is estimated on the grant date, based on a binomial pricing model reflecting terms and conditions of instruments granted.

The Company reimburse Telefónica for the amount of the fair value of the benefits granted to management and employees on the grant date.

The main plans in effect at December 31, 2017 and 2016 are detailed below:

a)  Performance & Investment Plan (“PIP”)

Telefónica’s General Shareholders’ Meeting held on May 18, 2011 approved a long-term program for using Telefónica stock options to reward senior management’s global commitment, outstanding performance and high potential by awarding Telefónica S.A. shares.

Participants are not required to pay for their initial stock options and may increase the number of shares to be received at the end of the plan if they decide to make a joint investment in their PIP, which requires a participant to buy the equivalent of 25% of the initial shares awarded by Telefónica and hold them until the end of the cycle, when Telefónica will add another 25% in addition to the initial amount of shares in their co-investment.

Initially, the plan is expected to remain effective for 3 years. The cycles are independent of each other. The number of shares is reported at the beginning of each cycle and will be transferred to participants 3 years after the grant date assuming these professionals have met their targets.

The granting of shares is conditional on: (i) maintenance of an active employment relationship within the Telefónica Group on the cycle consolidation date; and (ii) achievement, by Telefónica, of results representing fulfillment of the objectives established for the plan.

The level of success is based on a comparison of the growth in shareholder earnings, considering stock quotations and dividends (Total Shareholder Return - TSR) with the growth in TSR for companies of the Group in an established basis of comparison.

In 2014, the Company approved the extension of this program for another 3 cycles of 3 years each, beginning October 1, 2014 until September 30, 2017. The number of shares is stated at the beginning of the cycle and three years after grant date, and shares are transferred to participants as long as TSR targets are met.

The 2013‑2016 cycle takes place in June 2016 and the TSR was not achieved, therefore Telefónica shares were not awarded to the Company's executives.

The 2014-2017 cycle takes place in September 2017 and the TSR was not achieved, therefore Telefónica shares were not awarded to the Company’s executives.

The 2015-2018 (October 1, 2015 the September 30, 2018): with 84 active Company executives (including 2 executives appointed under the Articles of Incorporation of the Company), hold the right to potentially receive 471,654 Telefónica shares (includes initial amounts and co-investment).

At December 31, 2017, the value of Telefónica’ share price was Eur 8.1950.

b)  Talent for the Future Share Plan (“TFSP”)

Telefónica’s 2014 General Shareholders’ Meeting approved a long-term program to reward the global commitment, outstanding performance and high potential of its executives by awarding Telefónica shares.

Participants are not required to pay for their initial options. Initially, the plan is expected to remain effective for 3 years. The cycle began on October 1, 2014 until September 30, 2017. The number of shares is reported at the beginning of the cycle and shares will be transferred to participants 3 years after grant date if their targets have been met.

The granting of shares is conditional upon: (i) maintenance of an active employment relationship within the Telefónica Group on the cycle consolidation date; and (ii) achievement, by Telefónica, of results representing fulfillment of the objectives established for the plan. The level of success is based on a comparison of growth in Telefónica shareholder earnings, including their quotations and dividends (Total Shareholder Return - TSR) compared with the growth in TSR for Companies of the Group in an established basis of comparison.

The 2014-2017 cycle takes place in September 2017 and the TSR was not achieved, therefore Telefónica shares were not awarded to the Company’s executives.

The 2015-2018 cycle (October 1, 2015 to September 30, 2018): with the right to potentially receive 83,500 Telefónica shares (includes initial amounts).

At December 31, 2017, the value of Telefónica’ share price was Eur 8.1950.

c)  Global Employee Share Plan (“GESP”)

At the Telefónica General Shareholders’ Meeting held on May 30, 2014, a share purchase plan under tax incentive was approved, intended for employees of Telefónica Group at the international level, including the employees of the Company. This plan offers the possibility of acquiring Telefónica shares with the commitment of the later to deliver free of charge to participants a given number of its shares, whenever certain requirements are met.

Initially, the plan was expected to remain effective for 2 years. Employees enrolled in the plan were able to acquire Telefónica shares by making monthly contributions of 25 to 150 euros (or the equivalent in local currency) totaling at most 1,800 euros over 12 months (acquisition period).

The delivery of shares occurred after the vesting period of the plan, as of July 31, 2017, and was conditional on: (i) the permanence in the Company during the 2‑year program period (vesting period), subject to certain special conditions related to terminations; and (ii) the exact number of shares to be granted at the end of the vesting period depends on the number of shares acquired and held by employees. Thus, employees enrolled with the plan, who remained in the Telefónica Group and who have held the shares acquired for an additional period of over 12 months after the end of the purchase period, will be entitled to receive one free share for each share they have acquired and held until the end of the vesting period.

The cycle was finalized on July 31, 2017, with the delivery of the net shares of withholding income tax.

The expenses of the Company with the share-based compensation plans described above, where applicable, are recorded as personnel expenses, divided into the groups Cost of Services, Selling expenses and General and Administrative Expenses (Note 24), corresponding to R$7,013 and  R$21,952 for the years ended December 31, 2017 and 2016.

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

12 Months Ended

Dec. 31, 2017

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

30)  PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

The plans sponsored by the Company and related benefit types are as follows:

Plan	Type	Entity	Sponsor
PBS-A	Defined benefit (DB)	Sistel	Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás
PAMA / PCE	Defined benefit (DB)	Sistel	Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás
Healthcare - Law No. 9656/98	Defined benefit (DB)	Telefônica Brasil	Telefônica Brasil, TData, Terra Networks and TGLog
CTB	Defined benefit (DB)	Telefônica Brasil	Telefônica Brasil
Telefônica BD	Defined benefit (DB)	VisãoPrev	Telefônica Brasil
TCOPREV	Hybrid	VisãoPrev	Telefônica Brasil
VISÃO	Defined contribution (DC) / Hybrid	VisãoPrev	Telefônica Brasil, TData, Terra Networks and TGLog

The actuarial valuation of the plans was made in December 2017 and 2016, based on the registration of the participants held on the following dates:

-  Post-Employment Health Benefits Plans

The actuarial valuation made for the PAMA health plan used the registration of the participants with a base date of October 31, 2017, projected for December 31, 2017 and the registration of the participants with a base date of July 31, 2016, projected for 31 of December 2016.

The actuarial valuation carried out for the health plan Law No. 9,656 / 98 used the register of the participants with a base date of October 31, 2017, projected for December 31, 2017 and the registration of the participants with a base date of August 31, 2016 , projected for December 31, 2016.

-  Post-employment Social Security Plans

The actuarial valuation made for the CTB pension plan used the registration of the participants with a base date of August 31, 2017, projected for December 31, 2017 and the registration of the participants with a base date of July 31, 2016, projected for 31 of December 2016.

The actuarial valuation made for all other pension plans (PBS-A, Telefônica BD, Tcoprev and Visão plans) used the register of the participants with a base date of July 31, 2017, projected for December 31, 2017 and the with a base date of July 31, 2016, projected for December 31, 2016.

The Company has participation in the decisions that directly affect the governance of the plans, with members nominated for both the Deliberative Council and the Fiscal Council of the administrators Sistel and VisãoPrev.

The defined benefit obligation is made up of different components, according to the pension characteristic of each plan, and may include the actuarial liabilities of supplementary pension liabilities, health care benefits to retirees and dependents or compensation for death or disability of members. This liability is exposed to economic and demographic risks, such as: (i) increases in medical costs that could impact the cost of health care plans; (ii) salary growth; (iii) long-term inflation rate; (iv) nominal discount rate; and (v) life expectancy of members and pensioners.

The fair value of plan assets is primarily comprised of fixed income investments (NTN’s, LFT’s, LTN’s, repurchase agreements, CDBs, debentures, letters of guarantee and FIDC shares) and equity investments (highly liquid, well regarded, large company shares and investments in market indices). Due to the concentration of fixed income and floating rate investments plan assets are mainly exposed to the risks inherent in the financial market and economic environment such as: (i) market risk in the economic sectors where variable income investments are concentrated; (ii) risk events that impact the economic environment and market indices where variable income investments are concentrated; and (iii) the long-term inflation rate that may erode the profitability of fixed-income investments at fixed rates.

The companies that administer post-employment benefits plans sponsored by the Company (VisãoPrev and Sistel) seek to meet the flows of assets and liabilities through the acquisition of fixed income securities and other long-term assets.

With the exception of the CTB deficit plans and the healthcare plan under Law No. 9656/98, generally all benefit plans that have fund constituted, present a surplus position. The economic benefit recorded in the Company's assets or that of its subsidiaries does not reflect the total surplus determined in these plans. The economic benefit stated under assets considers only the portion of the surplus which presents a real possibility of recovery. The means of plan surplus recovery is solely through reductions in future contributions and given that not all plans currently receive enough contributions for full recovery of surpluses, the economic benefit recorded under assets is limited to the total possible recovery amount in accordance with projected future contributions.

The position of plan assets is at December 31, 2017 and 2016, respectively, and plan assets were apportioned based on the company’s actuarial liabilities in relation to the total actuarial liabilities of the plan.

The actuarial gains and losses generated in each year are immediately recognized in equity (in other comprehensive income).

The following is a summary of the pension plans and other post-employment benefits:

a)  Post-retirement Health Plans

a.1) Healthcare Plan to Retirees and Special Coverage Program (PAMA and PAMA-PCE)

The Company, together with other companies of the former Telebrás System, at shared cost, sponsor health care plans (PAMA and PAMA-PCE) for retirees. These plans are managed by Fundação Sistel and are closed plans, not admitting new members.

Contributions to the plans are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution is at the fixed percentage of payroll of employees covered by the Telefônica BD plan.

a.2) Health care plan – Law No. 9656/98

The Company manages sponsor a health care plan to retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98.

As provided for in articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. Benefitted participants are classified as retirees and their dependents and dismissed employees and their dependents.

Retirees and dismissed employees, in order to keep their right to the benefits, must make contributions to the plan in accordance with the contribution tables by age bracket established by carriers and/or insurance companies.

b)  Post-Employment Pension Plans

They include the PBS Assisted Plans (“PBS-A"), CTB, Telefônica DB, Tcoprev and Visão.

On December 9, 2016, Visão Prev obtained approvals from the National Supplementary Pension Authority ("PREVIC") for the incorporation of Vivo Prev and Visão TGestiona plans to the Visão Telefônica plan. In this way, as of January 1, 2017, all participants in Vivo Prev and Visão TGestiona plans became participants in the Visão Telefônica plan. This unification preserves all vested rights, and gives participants of the incorporated plans access to the benefits of the Visão Telefônica plan.

The main purpose of the mergers is to create greater synergy of the benefits offered to the participants, as well as to reduce administrative and operational costs of the plans, as well as to improve administrative efficiency.

The following describes the key information about post-retirement pension plans.

b.1) PBS Assisted Plan (PBS-A)

The PBS-A plan is a defined benefit private pension plan managed by Sistel and sponsored by the Company jointly with the other telecommunications companies originating in the privatization of the Telebrás system. The plan is subject to funding by sponsors in case of any asset insufficiency to ensure pension supplementation of participants in the future.

The PBS-A plan comprises assisted participants of the Sistel Benefit Plan who were already retirees on January 31, 2000, from all the participating sponsors, with joint liability of all sponsors to the plan and Sistel.

Although the PBS-A plan has assets in excess of actuarial liabilities at December 31, 2017 and 2016, such surplus was not recognized due to lack of legal provision in relation to refund thereof, in addition, since it is not a contributive plan, it is not possible to make any deduction from future contributions.

b.2) CTB Plan

Contributions to the CTB plan are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution is a fixed percentage of payroll of employees covered by the plan.

The Company also individually manages and sponsors the CTB Plan, originally provided to former employees of Companhia Telefônica Brasileira (“CTB”) who were in the Company in 1977, with whom an individual retirement concession agreement was executed to encourage their resignation. This is an informal pension supplementation benefit paid to former employees directly by the Company. These plans are closed, and no other members are admitted.

b.3) Telefônica DB Plan

The Company individually sponsor defined benefit retirement plan, the Telefônica DB Plan.

In order to improve allocation of Telefôncia DB plan assets and analyze the coverage ratio of plan obligations in future years, a stochastic ALM study was prepared by Visão Prev and Willis Towers Watson. This ALM study aimed at projecting the ratio between coverage of liabilities (solvency ratio) and the risk of mismatching measured by the standard deviation of the solvency ratio. The study concluded that the plan present sustainable projection of their coverage ratio with the current investments portfolio.

At the time of the concession, a benefit is calculated, which will be paid in a lifelong form and updated by inflation. This plan is not open to new accessions.

The contributions are defined according to the costing plan, which is calculated considering financial, demographic and economic hypotheses in order to accumulate enough resources to pay the benefit to the participants who are already receiving and to the new pensions.

b.4) Tcoprev Plan

The Company sponsors, individually, the Tcoprev Plan, a hybrid plan for defined benefits and defined contribution of pension benefits, managed by Visão Prev.

The contributions to the Tcoprev plan are: (i) basic contribution, with contributions made by the participant and sponsor; and (ii) voluntary and sporadic contributions, with contribution made only by the participant. In addition to these contributions, the sponsor can make the variable contribution, of an eventual character, being apportioned proportionally to the basic contribution of the participant.

In order to improve allocation of Tcoprev plan assets and analyze the coverage ratio of plan obligations in future years, a stochastic ALM study was prepared by Visão Prev and Willis Towers Watson. This ALM study aimed at projecting the ratio between coverage of liabilities (solvency ratio) and the risk of mismatching measured by the standard deviation of the solvency ratio. The study concluded that the Tcoprev plan present sustainable projection of its coverage ratio with the current investments portfolio.

b.5) VISÃO Plans

The Visão Telefôncia and Visão Multi plans will hereinafter be shown jointly under the name VISÃO, due to their similarity.

The Company sponsor defined contribution pension plans with defined benefit components (hybrid plans), i.e. the VISÃO Plans, managed by Visão Prev. The contribution is attributed to each subsidiary in the economic and demographic proportion of its respective obligation to the plan.

The contributions made by the Company related to defined contribution plans totaled R$43,702 at December 31, 2017 (R$37,879 at December 31, 2016).

The contributions to the Visão Telefôncia and Visão Multi plans are: (i) basic and additional contribution, with contributions made by the participant and sponsor; and (ii) additional, sporadic and specific contribution, with contribution made only by the participant.

In addition, the participant has the possibility to choose one of the five investment profiles to apply their balance, they are: Super Conservative, Conservative, Moderate, Aggressive and Aggressive Fixed Income Long Term.

c)  Consolidated Information on Pension Plans and Other Post-Employment Benefits

c.1) Reconciliation of assets and liabilities:

	Net liabilities (assets) at 12.31.17			Net liabilities (assets) at 12.31.16
	Post-retirement	Post-retirement		Post-retirement	Post-retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Present value of DB plan obligations	1,861,651	1,050,576	2,912,227	1,763,866	767,642	2,531,508
Fair value of plan assets	2,585,679	726,060	3,311,739	2,703,593	667,993	3,371,586
Net liabilities (assets)	(724,028)	324,516	(399,512)	(939,727)	99,649	(840,078)
Asset limitation	791,177	130,440	921,617	993,754	164,953	1,158,707
Noncurrent assets	(9,833)	—	(9,833)	(9,041)	—	(9,041)
Current liabilities	7,914	9,021	16,935	6,826	4,162	10,988
Noncurrent liabilities	69,068	445,935	515,003	56,242	260,440	316,682

c.2) Total expenses recognized in the income statement:

	2017			2016			2015
	Post-	Post-		Post-	Post-		Post-	Post-
	retirement	retirement		retirement	retirement		retirement	retirement
	pension plans	health plans	Total	pension plans	health plans	Total	pension plans	health plans	Total
Current service cost	3,044	7,606	10,650	2,811	2,761	5,572	2,682	5,720	8,402
Net interest on net actuarial assets/liabilities	5,258	29,325	34,583	5,278	2,986	8,264	4,525	36,763	41,288
Total	8,302	36,931	45,233	8,089	5,747	13,836	7,207	42,483	49,690

c.3) Amounts recognized in other comprehensive income (loss)

	2017			2016			2015
	Post-	Post-		Post-	Post-		Post-	Post-
	retirement	retirement		retirement	retirement		retirement	retirement
	pension plans	health plans	Total	pension plans	health plans	Total	pension plans	health plans	Total
Actuarial (gains) losses	325,292	208,195	533,487	(174,496)	240,072	65,576	(87,306)	76,868	(10,438)
Asset limitation effect	(309,780)	(52,411)	(362,191)	182,088	(10,897)	171,191	(541,596)	150,541	(391,055)
Total	15,512	155,784	171,296	7,592	229,175	236,767	(628,902)	227,409	(401,493)

c.4) Changes in amount net of liability (asset) of defined benefit, net

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Net interest on net defined benefit liability (asset) at the beginning of the year	54,026	264,603	318,629	46,907	29,712	76,619
Business combinations	(12)	680	668	—	—	—
Expenses	8,302	36,931	45,233	8,089	5,747	13,836
Sponsor contributions	(10,680)	(3,041)	(13,721)	(8,562)	(31)	(8,593)
Amounts recognized in OCI	15,512	155,784	171,296	7,592	229,175	236,767
Net interest on net defined benefit liability (asset) at the end of the year	67,148	454,957	522,105	54,026	264,603	318,629
Actuarial assets per balance sheet	(9,833)	—	(9,833)	(9,041)	—	(9,041)
Actuarial liabilities per balance sheet	76,982	454,956	531,938	63,068	264,602	327,670

c.5) Changes in defined benefit liability

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Defined benefit liability at the beginning of the year	1,763,866	767,642	2,531,508	1,503,966	402,927	1,906,893
Liability assumed after acquisition of company	249	680	929	—	—	—
Current service costs	3,044	7,606	10,650	2,811	2,761	5,572
Interest on actuarial liabilities	181,208	82,488	263,696	179,496	48,420	227,916
Benefits paid	(168,856)	(30,777)	(199,633)	(156,056)	(24,229)	(180,285)
Member contributions paid	220	—	220	174	—	174
Actuarial losses (gains) adjusted by experience	(23,613)	128,469	104,856	78,373	298,403	376,776
Actuarial losses (gains) adjusted by demographic assumptions	(3,320)	(1,543)	(4,863)	—	(81,144)	(81,144)
Actuarial losses (gains) adjusted by financial assumptions	108,853	96,011	204,864	155,102	120,504	275,606
Defined benefit liability at the end of the year	1,861,651	1,050,576	2,912,227	1,763,866	767,642	2,531,508

c.6) Changes in the fair value of plan assets

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Fair value of plan assets at the beginning of the year	2,703,593	667,993	3,371,586	2,178,182	529,485	2,707,667
Asset acquired on acquisition of company	323	—	323	—	—	—
Benefits paid	(160,370)	(27,767)	(188,137)	(149,521)	(24,229)	(173,750)
Participants contributions paid	220	—	220	174	—	174
Sponsor contributions paid	2,195	31	2,226	2,027	31	2,058
Interest income on plan assets	283,090	71,061	354,151	264,761	65,015	329,776
Return on plan assets excluding interest income	(243,372)	14,742	(228,630)	407,970	97,691	505,661
Fair value of plan assets at the end of the year	2,585,679	726,060	3,311,739	2,703,593	667,993	3,371,586

c.7) Changes in assets limitation

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Asset Limitation at the beginning of the year	993,754	164,953	1,158,707	721,123	156,270	877,393
Interest on the asset limitation	107,140	17,898	125,038	90,543	19,580	110,123
Changes in the assets limitation, except interest	(309,779)	(52,411)	(362,190)	182,088	(10,897)	171,191
Effect generated by company acquisition	62	—	62	—	—	—
Asset Limitation at the  end of the year	791,177	130,440	921,617	993,754	164,953	1,158,707

c.8) Results projected for 2018

	Post‑retirement	Post‑retirement
	pension plans	health plans	Total
Current service cost	2,931	13,722	16,653
Net interest on net defined benefit liability/asset	6,074	45,892	51,966
Total	9,005	59,614	68,619

c.9) Sponsoring company contributions projected for 2018

	Post‑retirement	Post‑retirement
	pension plans	health plans	Total
Sponsor contributions	2,499	33	2,532
Benefits paid directly by the sponsor	7,914	9,026	16,940
Total	10,413	9,059	19,472

c.10) Average weighted duration of defined benefit liability

	Post‑retirement		Post‑retirement
	pension plans		health plans
In 2017	8.5	years	18.7	years
In 2016	8.9	years	12.7	years

c.11) Actuarial assumptions

	12.31.17
	Post-retirement pension plans	Post-retirement health plans
Discount rate to present value of defined benefit liability	Visão: 9.5% PBS-A and CTB: 9.8%                                                              Telefônica BD and Tcoprev: 9.9%	9.9%
Future salary growth rate	PBS-A: N/A                                                                                                  Visão, CTB, Telefônica BD and Tcoprev: 5.9%	N/A
Medical expense growth rate	N/A	7.4%
Nominal annual adjustment rate of pension benefits	4.3%	N/A
Medical service eligibility age	N/A	Eligibility on retirement 100% to 57 years
Estimated retirement age	PBS-A, CTB and Telefônica BD: 57 years                                                                                                                                                                Visão and Tcoprev: 60 years	57 years
Mortality table for nondisabled individuals	PBS-A, CTB and Telefônica BD: AT-2000 Basic segregated by gender, down-rated by 10%                                                                                Visão: AT-2000 Basic segregated by gender, down-rated by 50%	AT-2000 Basic segregated by gender, down-rated by 10%
Mortality table for disabled individuals	PBS-A, CTB and Telefônica BD: RP-2000 Disabled Female, down-rated by 40%                                                                                      Visão: N/A	RP-2000 Disabled Female, down-rated by 40%
Disability table	PBS-A, CTB, Telefônica BD and Tcoprev: Light-Forte                                            Visão: Light-Fraca, down rated by 30%	Light-Forte
Turnover	PBS-A, CTB, Telefônica BD and Tcoprev: N/A                                                          Visão: Turnover experience in VISÃO plans (2015 to 2017)	PAMA and PCE: N/A                                                                                          Law No. 9656/98: Turnover experience in VISÃO plans (2015 to 2017)

Further to the assumptions stated above, other assumptions common to all plans were adopted in 2017 as follows:

(i) Long-term inflation rate  4.3%; and

(ii) Annual increase in the use of medical services according to age: 4.0%.

	12.31.16
	Post-retirement pension plans	Post-retirement health plans
Discount rate to present value of defined benefit liability	Vivoprev and Visão: 10.9% PBS-A, CTB, Telefônica BD and Tcoprev: 10.8%	10.9%
Future salary growth rate	PBS-A: N/A                                                                                                  CTB, Telefônica BD, Prev and Visão: 6.2%	N/A
Medical expense growth rate	N/A	7.6%
Nominal annual adjustment rate of pension benefits	4.5%	N/A
Medical service eligibility age	N/A	PAMA and PCE: 5% when reaching 52 years and 10 years of contribution; 3% each subsequent year; 100% eligibility on retirement                                                                              Law No. 9656/98: 100% to 57 years
Estimated retirement age	PBS-A and CTB: N/A                                                                                   Telefônica BD: 57 years                                                                              Prev and Visão: 60 years	PAMA and PCE: 60 years                                                                             Law No. 9656/98: 57 yeras
Mortality table for nondisabled individuals	PBS-A, CTB, Telefônica BD and Tcoprev: AT-2000 Basic segregated by gender, down-rated by 10%                                                                                Vivoprev and Visão: AT-2000 Basic segregated by gender, down-rated by 50%	AT-2000 Basic segregated by gender, down-rated by 10%
Mortality table for disabled individuals	PBS-A, CTB, Telefônica BD and PBS: RP-2000 Disabled Female, down-rated by 40%                                                                                      Vivoprev and Visão: N/A	PAMA and PCE: RP-2000 Disabled Male                                                                   Law No. 9656/98: AT-2000 Basic segregated by gender, down-rated by 10%
Disability table	PBS-A, CTB and Telefônica BD: Mercer Disability                                                 Prev and Visão: Light-Fraca, down rated by 30%	Mercer Disability
Turnover	PBS-A, CTB and Telefônica BD: N/A                                                          Prev and Visão: Turnover experience in VISÃO plans (2008 to 2011)	PAMA and PCE: N/A                                                                                          Law No. 9656/98: Turnover experience in VISÃO plans (2008 to 2011)

Further to the assumptions stated above, other assumptions common to all plans were adopted in 2016 as follows: (i) Long-term inflation rate  4.5%; and (ii) Annual increase in the use of medical services according to age: 4.0%.

c.12) Changes in actuarial assumptions in relation to the prior year

In order to adjust some actuarial assumptions to the economic and demographic reality, a study was conducted for the plans administered by Visão Prev and Sistel, which adopted the definition of the assumptions in their Deliberative Councils.

The main economic and financial assumptions that have changed in relation to the previous fiscal year and that interfere with the defined benefit liability are: (i) rates for discount to present value of the defined benefit liability; (ii) long-term inflation rate; (iii) rate of future wage growth; (iv) rate of growth of medical costs; and (v) annual nominal index of adjustment of social security benefits.

The impacts on the plans’ defined benefit liabilities due to the new definition of the actuarial assumptions are as follows:

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, based on current actuarial assumptions	1,861,651	1,050,576	2,912,227
Defined benefit liability, based on prior-year actuarial assumptions	1,756,118	956,108	2,712,226
Difference from change in actuarial assumptions	105,533	94,468	200,001

c.13) Sensitivity analysis for actuarial assumptions

The Company believes that the significant actuarial assumptions with reasonable likelihood of variation due to financial and economic scenarios, which could significantly change the amount of the defined benefit obligation, are the discount rate used to adjust the defined benefit liability to present value and the rate of growth of medical costs.

Sensitivity analysis of the defined benefit liability for scenarios involving a 0.5% increase and a 0.5% decrease in the discount rate used to discount the defined benefit liability to present value is as follows:

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, discounted to present value at current rate	1,861,651	1,050,576	2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	1,784,735	977,286	2,762,021
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	1,944,833	1,132,896	3,077,729

The following is a sensitivity analysis on the defined benefit obligation for scenarios of 1% increase and 1% reduction in the rate of growth of medical costs:

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, Projected by the current medical cost growth rate	1,861,651	1,050,576	2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 1%	1,861,651	1,223,724	3,085,375
Defined benefit liability, discounted to present value considering a rate decreased by 1%	1,861,651	911,270	2,772,921

c.14) Allocation of plan assets

	12.31.17		12.31.16
	Post-retirement	Post-retirement	Post-retirement	Post-retirement
	pension plans	health plans	pension plans	health plans
Investments with market value quoted in active market:
Fixed income investments
National Treasury Note (NTN)	1,998,931	670,516	1,769,606	553,515
Treasury Financial Letter	199,135	55,544	30,588	—
Repurchase operations	142,228	—	134,863	—
Debentures	13,209	—	12,843	—
Treasury Financial Letter (LFT)	4,567	—	229,793	114,478
FIDC shares / Others	3,694	—	6,449	—
National Treasury Notes (LTN)	2,165	—	1,895	—
Bank Deposit Certificates (CDB)	1,317	—	36,744	—
Variable income investments
Investments in energy sector	57,781	—	246,400	—
Investments in food and beverage industry	32,337	—	45,054	—
Investments in aerospace sector	—	—	28,947	—
Investments in mining sector	1,197	—	2,581	—
Investments in other sectors (1)	7,124	—	9,207	—
Real estate investments	96,525	—	121,176	—
Loans to participants	18,346	—	23,562	—
Structured investments	3,753	—	224	—
Investments with market value not quoted in active market:
Loans to participants	1,590	—	1,850	—
Structured investments	1,780	—	1,811	—
Total	2,585,679	726,060	2,703,593	667,993

(1) Investments in variable income in the following industries: oil, gas and biofuel; telephony; steel and metals; construction and engineering; sales and distribution; transportation; wood and paper; education; financial services and banks; real estate, among; others.

c.15) Maturity of future benefit payments

	Post-retirement	Post-retirement
	pension plans	health plans	Total
2018	162,546	38,839	201,385
2019	166,989	42,679	209,668
2020	171,275	47,023	218,298
2021	176,423	51,987	228,410
2022	180,505	57,309	237,814
2023 onwards	5,326,440	22,761,339	28,087,779
Total	6,184,178	22,999,176	29,183,354

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT

12 Months Ended

Dec. 31, 2017

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT

31)  FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT

a) Derivative transactions

The derivative financial instruments contracted by the Company are mainly intended to hedge against foreign exchange risk arising from assets and liabilities in foreign currency, risk of inflation on its debentures and leases indexed to the IPCA and against the risk of changes in TJLP of a portion of debt with BNDES. There are no, derivative financial instruments for speculative purposes and possible currency risks are hedged.

Management understands that the Company’s internal controls for its derivatives are adequate to control risks associated with each strategy for the market. Gains/losses obtained or sustained by the Company in relation to its derivatives show that its risk management has been appropriate.

The Company calculates the effectiveness of the derivative contracts to hedge its financial liabilities and cash flows in foreign currency at the beginning of the operation and on an ongoing basis. At December 31, 2017 and 2016, the derivative instruments were effective for the hedged items.

As long as these derivatives contracts qualify for hedge accounting, the hedged item may also be adjusted to fair value, offsetting the result of the derivatives, according to the rules of hedge accounting. This hedge accounting applies both to financial liabilities and probable cash flows in foreign currency.

At December 31, 2017 and 2016, the Company held no embedded derivatives contracts.

Derivatives contracts include specific penalties for breach of contract. Breach of contract provided for in agreements made with financial institutions leads to the early maturity thereof.

a.1) Fair value of derivative financial instruments

The valuation method used to calculate the fair value of financial liabilities (if applicable) and derivative financial instruments was the discounted cash flow method, based on expected settlements or realization of liabilities and assets at market rates prevailing at the balance sheet date.

The fair values of positions in Reais are calculated by projecting future inflows from transactions using B3 yield curves discounting these flows to present value using market DI rates for swaps announced by B3.

The market values of foreign-exchange derivatives were obtained using the market exchange rates in effect at the balance sheet date and projected market rates obtained from the currency’s coupon-rate yield curves. The linear convention of 360 calendar days was used to determine coupon rates of positions indexed in foreign currencies, while the exponential convention of 252 business days was used to determine coupon rates for positions indexed to CDI rates.

Consolidated derivatives financial instruments shown below are registered with B3 and classified as swaps, usually, that do not require margin deposits.

			Accumulated effects from fair
			value
	Notional Value		Amount receivable (payable)
Description	12.31.17	12.31.16	12.31.17	12.31.16
Long position	1,166,777	2,739,524	164,405	212,993
Foreign Currency	326,149	1,522,598	102,876	158,762
US$  (1) (2)	201,445	742,137	49,110	73,833
EUR  (2)	11,000	70,064	449	—
LIBOR US$  (1)	113,704	710,397	53,317	84,929
Floating rate	643,589	898,324	28,263	31,987
CDI (1) (2)	249,239	254,883	82	3,979
TJLP (4)	394,350	643,441	28,181	28,008
Inflation rates	197,039	318,602	33,266	22,244
IPCA (3) (5)	166,775	192,318	33,266	17,998
IGPM (6)	30,264	126,284	—	4,246
Short position	(1,363,491)	(2,573,351)	(20,652)	(184,616)
Floating rate	(952,283)	(2,391,882)	(16,417)	(184,545)
CDI (1) (2) (3) (4) (5) (6)	(952,283)	(2,391,882)	(16,417)	(184,545)
Foreign Currency	(411,208)	(181,469)	(4,235)	(71)
US$  (2)	(354,356)	(88,710)	(4,235)	(71)
LIBOR US$  (1)	(56,852)	(92,759)	—	—
		Long position	164,405	212,993
		Current	87,643	68,943
		Non Current	76,762	144,050
		Short position	(20,651)	(184,616)
		Current	(5,239)	(183,212)
		Non Current	(15,412)	(1,404)
		Amounts receivable, net	143,754	28,377

(1) Foreign currency swaps (US$ and LIBOR) x CDI (R$237,384) - swap transactions for varying debt repayment dates held to hedge currency risk affecting the Company’s loans in US$ (carrying amount R$225,254).

(2) Foreign currency swaps (Euro and CDI x Euro) (R$70,946) and (US$ and CDI x US$) (R$56,071) - maturing through February 9, 2018 to hedge currency risk affecting net amounts payable (carrying amount R$70,683 in euros) and receivables (carrying amount R$56,081 in US$).

(3) IPCA x CDI rate swaps (R$39,497) - maturing through 2019 to hedge the same flow as the debentures (4th issue - 3rd series) indexed to the IPCA (carrying amount R$40,322).

(4) TJLP x CDI swaps (R$390,314) - maturing through 2019 to hedge the risk of TJLP variation on loan with BNDES (carrying amount R$441,167).

(5) IPCA x CDI swaps (R$224,820) - maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA (carrying amount R$217,178).

(6) IGPM x CDI swaps (R$42,842) - maturing 2016 through 2018 to hedge IGP-DI variation risk affecting regulatory commitments related to 4G license.

The table below shows the breakdown of swaps maturing after December 31, 2017:

	Maturing in
					Amount
					receivable
					(payable) at
Swap contract	2018	2019	2020	2021 onwards	12/31/17
Foreign currency x CDI	65,670	36,937	—	—	102,607
CDI x Foreign Currency	(4,524)	(93)	—	—	(4,617)
TJLP x CDI	20,838	7,343	—	—	28,181
IPCA x CDI	722	9,633	1,129	6,402	17,886
IGPM x CDI	(303)	—	—	—	(303)
Total	82,403	53,820	1,129	6,402	143,754

For the purposes of preparing its financial statements, the Company adopted the fair value hedge accounting methodology for its foreign currency swaps x CDI, IPCA x CDI, IGPM x CDI and TJLP x CDI for hedging or financial debt. Under this arrangement, both derivatives and hedged risk are recognized at fair value.

The ineffective portion at December 31, 2017 was R$1,289  (R$2,091 at December 31, 2016).

At December 31, 2017 and 2016, the transactions with derivatives generated consolidated negative (net) result of R$41,985 and R$347,870, respectively (Note 26).

a.2) Sensitivity analysis to the Company’s risk variables

The IFRS 7 requires by disclosing sensitivity analyses for each type of market risk that management understands to be significant when originated by financial instruments to which the entity is exposed at the end of each period, including all derivatives financial instrument transactions.

In making the above analysis, each of the transactions with derivative financial instruments was assessed and assumptions included a probable scenario and two others that could adversely impact the Company.

In the probable scenario the assumption is to use, on the maturity dates of each of the transactions, what the market had been showing through B3 yield curves (currencies and interest rates), as well as data available at IBGE, Central Bank, FGV, among others. In the probable scenario, there is no impact on the fair value of the above-mentioned derivatives. However, for scenarios II and III, risk variables were considered to deteriorate by 25% and 50% respectively.

Since the Company only holds derivatives to hedge its foreign-currency assets and liabilities, changing scenarios are tracked by the corresponding hedged items, thus showing that effects are almost non-existent. For these transactions, the Company reported the consolidated net exposure in each of the above-mentioned three scenarios at December 31, 2017.

Sensitivity analysis - net exposure

Transaction	Risk	Probable	25% depreciation	50% depreciation
Hedge (long position)	Derivatives (depreciation risk EUR)	(70,683)	(88,354)	(106,025)
Payables in EUR	Debt (appreciation risk EUR)	(42,808)	(53,510)	(64,212)
Receivables in EUR	Debt (depreciation risk EUR)	113,754	142,192	170,631
	Net Exposure	263	328	394
Hedge (short position)	Derivatives (depreciation risk US$)	(56,071)	(70,088)	(84,106)
Payables in US$	Debt (appreciation risk US$)	164,648	205,810	246,972
Receivables in US$	Debt (depreciation risk US$)	(108,567)	(135,709)	(162,851)
	Net Exposure	10	13	15
Hedge (long position)	Derivatives (risk of decrease in IPCA)	279,566	259,689	242,286
Debt in IPCA	Debt (risk of increase in IPCA)	(381,564)	(361,681)	(344,274)
	Net Exposure	(101,998)	(101,992)	(101,988)
Hedge (long position)	Derivatives (risk of decrease in IGP-DI)	42,538	42,575	42,612
Debt in IGP-DI	Debt (risk of increase in IGP-DI)	(140,859)	(140,859)	(140,859)
	Net Exposure	(98,321)	(98,284)	(98,247)
Hedge (long position)	Derivatives (risk of decrease in UMBND)	221,553	276,004	330,097
Debt in UMBND	Debt (risk of increase in UMBND)	(225,708)	(281,531)	(337,072)
	Net Exposure	(4,155)	(5,527)	(6,975)
Hedge (long position)	Derivatives (risk of decrease in TJLP)	418,496	414,263	410,144
Debt in TJLP	Debt (risk of increase in TJLP)	(1,586,846)	(1,582,396)	(1,578,066)
	Net Exposure	(1,168,350)	(1,168,133)	(1,167,922)
Hedge (CDI position)
Hedge US$ and EUR (short and long position)	Derivatives (risk of decrease in CDI)	(130,892)	(146,692)	(162,471)
Hedge IPCA (short position)	Derivatives (risk of increase in CDI)	(279,566)	(259,689)	(242,286)
Hedge IGPM (short position)	Derivatives (risk of increase in CDI)	(42,538)	(42,575)	(42,612)
Hedge UMBND (short position)	Derivatives (risk of increase in CDI)	(221,553)	(276,004)	(330,097)
Hedge TJLP (short position)	Derivatives (risk of increase in CDI)	(418,496)	(414,263)	(410,144)
	Net Exposure	(1,093,045)	(1,139,223)	(1,187,610)
Total net exposure in each scenario		(2,465,596)	(2,512,818)	(2,562,333)
Net effect on changes in current fair value		—	(47,222)	(96,737)

The assumptions used by the Company for the sensitivity analysis at December 31, 2017 were as follows:

Sensitivity analysis assumptions

Risk Variable	Probable		25% depreciation		50% depreciation
US$	3.3080		4.1350		4.9620
EUR	3.9676		4.9595		5.9514
JPY	0.0293		0.0367		0.0440
IPCA	2.79	%	3.49	%	4.19	%
IGPM	(0.52)	%	(0.65)	%	(0.78)	%
IGP-DI	(0.27)	%	(0.34)	%	(0.41)	%
UMBND	0.0646		0.0807		0.0969
URTJLP	2.0314		2.5392		3.0470
CDI	6.89	%	8.61	%	10.34	%

For calculation of the net exposure for the sensitivity analysis, all derivatives were considered at market value and hedged items designated for hedge for accounting purposes were also considered at fair value.

The fair values shown in the table above are based on the portfolio position at December 31, 2017, but do not reflect an estimate for realization due to the dynamism of the market, which is constantly monitored by the Company. The use of different assumptions could significantly affect the estimates.

b)  Fair value

The Company assessed their financial assets and liabilities in relation to market values using available information and appropriate valuation methodologies. However, both the interpretation of market data and the selection of valuation methods require considerable judgment and reasonable estimates to produce the most adequate realization value. As a result, the estimates shown do not necessarily indicate amounts that could be realized in the current market. The use of different assumptions for the market and/or methodologies may have a material effect on estimated realization values. At December 31, 2017 and 2016, neither the Company not its subsidiaries detected any significant and enduring impairment of their financial instruments.

The fair value of all assets and liabilities are classified within the fair value hierarchy described below, based on the lowest level of information that is significant to the fair value measurement as a whole:

Level 1: quoted market prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: valuation techniques for which significant lower level of information to measure the fair value directly or indirectly observable; and

Level 3: valuation techniques for which the lowest and significant level of information to measure the fair value is not available.

During years ended December 31, 2017 and 2016, there were no transfers between fair value measurements of level 3 and level 1 and 2.

The following table show the composition of financial assets and liabilities at December 31, 2017 and 2016.

		Fair value	Book value		Fair value
	Classification by category	hierarchy	12/31/17	12/31/16	12/31/17	12/31/16
Financial Assets
Current
Cash and cash equivalents (Note 4)	Amortized cost		4,050,338	5,105,110	4,050,338	5,105,110
Trade accounts receivable, net (Note 5)	Loans and receivables		8,588,466	8,701,688	8,588,466	8,701,688
Derivative transactions (Note 31)	Measured at fair value through profit or loss	Level 2	2,480	3,979	2,480	3,979
Derivative transactions (Note 31)	Hedges (economic)	Level 2	85,163	64,964	85,163	64,964
Noncurrent
Short-term investments pledged as collateral	Amortized cost		81,486	78,166	81,486	78,166
Trade accounts receivable, net (Note 5)	Loans and receivables		273,888	305,411	273,888	305,411
Derivative transactions (Note 31)	Hedges (economic)	Level 2	76,762	144,050	76,762	144,050
Total financial assets			13,158,583	14,403,368	13,158,583	14,403,368
Financial Liabilities
Current
Trade accounts payable (Note 15)	Amortized cost		7,447,100	7,611,246	7,447,100	7,611,246
Loans, financing and finance lease (Note 20)	Amortized cost		1,316,034	1,256,147	1,463,609	1,363,539
Loans, financing and finance lease (Note 20)	Measured at fair value through profit or loss	Level 2	304,921	1,286,828	317,231	1,307,310
Debentures (Note 20)	Amortized cost		1,412,174	2,120,197	1,532,427	2,242,291
Debentures (Note 20)	Measured at fair value through profit or loss	Level 2	312	307	1,490	1,412
Derivative transactions (Note 31)	Measured at fair value through profit or loss	Level 2	4,504	4,111	4,504	4,111
Derivative transactions (Note 31)	Hedges (economic)	Level 2	735	179,101	735	179,101
Noncurrent
Trade accounts payable (Note 15)	Amortized cost		—	71,907	—	71,907
Loans, financing and finance lease (Note 20)	Amortized cost		1,353,582	1,837,077	1,291,974	1,668,524
Loans, financing and finance lease (Note 20)	Measured at fair value through profit or loss	Level 2	520,421	874,982	505,422	822,818
Debentures (Note 20)	Amortized cost		3,068,243	1,396,813	2,866,372	1,260,814
Debentures (Note 20)	Measured at fair value through profit or loss	Level 2	40,010	36,990	37,717	34,124
Contingent consideration (Note 20)	Measured at fair value through profit or loss	Level 2	446,144	414,733	446,144	414,733
Derivative transactions (Note 31)	Hedges (economic)	Level 2	15,412	1,404	15,412	1,404
			15,929,592	17,091,843	15,930,137	16,983,334

c)  Capital management

The purpose of the Company’s capital management is to ensure maintenance of a high credit rating before institutions and an optimal capital ratio in order to support the Company’s business and maximize shareholder value.

The Company manages its capital structure by making adjustments and adapting to current economic conditions. For this purpose, the Company may pay dividends, raise new loans, issue debentures and contract derivatives. For the year ended December 31, 2017, there were no changes in capital structure objectives, policies or processes.

In its net debt structure, the Company includes balances referring to loans, financing, debentures, finance leasing, contingent consideration and transactions with derivatives, less cash and cash equivalents, short-term investments to secure BNB financing and guarantor of the contingent consideration liability.

The Company’s ratio of consolidated debt to shareholders’ equity consists of the following:

	12.31.17		12.31.16
Cash and cash equivalents	4,050,338		5,105,110
Loans, financing, debentures, financial lease and contingent consideration	(8,461,841)		(9,224,074)
Derivative transactions, net	143,754		28,377
Short-term investment pledged as collateral	11,722		10,773
Asset guarantor of contingent consideration	446,144		414,733
Net debt	3,809,883		3,665,081
Net equity	69,461,358		69,244,419
Net debt-to-equity ratio	5.48	%	5.29	%

d)  Risk management policy

The Company is exposed to several market risks as a result of its commercial operations, debts contracted to finance its activities and debt-related financial instruments.

d.1) Currency Risk

There is risk arising from the possibility that the Company may incur losses due to fluctuating exchange rates, which add to costs arising from loans denominated in foreign currencies.

At December 31, 2017, 2.7% of financial debt was foreign-currency denominated (14.0% at December 31, 2016). The Company enters into derivative transactions (currency hedge) with financial institutions to hedge against exchange rate variation affecting its total indebtedness in foreign currency (R$225,254 and R$1,287,864 at 31 December 2017 and 2016, respectively). Its total debt on these dates was covered by asset positions in currency-exchange hedge transactions with CDI-rate swaps.

There is also foreign exchange risk for non-financial assets and liabilities denominated in foreign currencies, which may generate a smaller amount receivable or larger amount payable depending on the exchange rate in the period.

Hedging transactions were engaged to minimize the risks associated with exchange-rate variation of non-financial assets and liabilities in foreign currencies. This balance is subject to daily changes due to the dynamics of the business. However, the Company intends to cover the net balance of these rights and obligations (US$16,953 thousand receivable and €17,535 thousand payable by December 31, 2017 and US$17,293 thousand receivable and €5,695 thousand payable by December 31, 2016) to mitigate its foreign exchange risks.

d.2) Interest and Inflation Risk

This risk arises because the Company may incur losses in the event of an unfavorable change in the domestic interest rate, which may adversely affect financial expenses resulting from the portion of debentures referenced to the CDI and liability positions in derivatives (currency hedge, IPCA and TJLP) pegged to floating interest rates (CDI).

The debt with BNDES is indexed to the Long-Term Interest Rate (TJLP) which is set on a quarterly basis by the National Monetary Council. During the year 2016 and for the quarter ended March 30, 2017, the TJLP was 7.5%. In the third quarter of 2017, the TJLP remained at 7.0%, until the end of the year.

Inflation risk arises from the Minas Comunica debentures of the 1st issue, which are tied to the IPCA and thus may adversely affect financial expenses in the event of an unfavorable change in this index.

To reduce exposure to the variable interest rate (CDI), the Company invested their cash equivalents of R$3,932,539 at December 31, 2017 (R$4,906,741 at December 31, 2016), mostly in short-term CDI-based financial investments (Bank Deposit Certificates). The carrying amounts of these instruments approach their fair values, since they may be redeemed in short term.

d.3) Liquidity Risk

Liquidity risk is the possibility of the Company not holding sufficient funds to meet their commitments due to different currencies and dates of realization of rights and settlement of obligations.

The Company structure the maturity dates of non-derivative financial contracts, as shown in Note 20, and their respective derivatives, as shown in the schedule of payments disclosed in this note, to avoid affecting their liquidity.

The Company cash flow and liquidity and those of its subsidiaries are managed on a daily basis by the departments in charge to ensure that operating cash flows and prior funding, when necessary, will be sufficient to meet their schedule of commitments in order to avoid liquidity risk.

Below, we summarize the maturity profile of our consolidated financial liabilities as set forth in loan agreements:

	Less than one
At 12.31.17	year	From 1 to 2 years	From 2 to 5 years	Over 5 years	Total
Trade accounts payable (Note 15)	7,447,100	—	—	—	7,447,100
Loans, financing and finance lease (Note 20)	1,620,955	780,904	885,411	207,688	3,494,958
Contingent consideration (Note 20)	—	—	—	446,144	446,144
Debentures (Note 20)	1,412,486	66,252	3,042,001	—	4,520,739
Derivative transactions (Note 31)	5,239	93	—	15,319	20,651
Total	10,485,780	847,249	3,927,412	669,151	15,929,592

	Less than one
At 12.31.16	year	From 1 to 2 years	From 2 to 5 years	Over 5 years	Total
Trade accounts payable (Note 15)	7,611,246	—	—	71,907	7,683,153
Loans, financing and finance lease (Note 20)	2,542,975	1,129,939	1,326,269	255,851	5,255,034
Contingent consideration (Note 20)	—	—	—	414,733	414,733
Debentures (Note 20)	2,120,504	1,355,683	78,120	—	3,554,307
Derivative transactions (Note 31)	183,212	1,185	97	122	184,616
Total	12,457,937	2,486,807	1,404,486	742,613	17,091,843

d.4) Credit Risk

The risk arises from the possibility of the Company incurring losses due to difficulty in receiving amounts billed to their customers and sales of prepaid handsets and cards that have been pre-activated for the distribution network.

The credit risk on accounts receivable is diversified and mitigated by strict control of the customer base. The Company constantly monitors the level of accounts receivable from postpaid services, and limits bad-debt risk by cutting off access to telephone lines if bills are past due. The mobile customer base predominantly uses the prepaid system, which requires purchase of credits beforehand and therefore does not pose credit risk. Exceptions are made for emergency services that must be maintained for security or national defense reasons.

Credit risk on sales of pre-activated prepaid handsets and cards is managed by a conservative policy for granting credit, using modern credit scoring methods, analyzing financial statements and consultations to commercial databases, in addition to requesting guarantees.

The Company is also subject to credit risk arising from their investments, letters of guarantee received as collateral for certain transactions and receivables from derivative transactions. The Company control the credit limits granted to each counterpart and diversify this exposure across first tier financial institutions as per current credit policies of financial counterparties.

d.5) Social and Environmental Risks

Our operations and properties are subject to various environmental laws and regulations that, among others, govern environmental licenses and records, protection of fauna and flora, air emissions, waste management and remediation of contaminated sites. If we fail to meet present and future requirements, or to identify and manage new or existing contamination, we will incur in significant costs, which include cleaning costs, damages, compensation, fines, activities suspension and other penalties, investments to improve our facilities or change our processes, or interruption of operations. The identification of environmental conditions not currently identified, more stringent inspections by regulatory agencies, the entry into force of more stringent laws and regulations or other unanticipated events may occur and, ultimately, result in significant environmental liabilities and their costs. The occurrence of any of the above factors could have a material adverse effect on our business, results of operations and financial position. According to Article 75 of Law No. 9605 of 1998, the maximum fine per breach of environmental law is R$50,000.

From the social point of view, we are exposed to contingent liabilities due to the fact that our structure foresees the hiring of outsourced service providers. These potential liabilities may involve labor claims by service providers who could eventually be treated as direct employees, which would generate requests for links and joint liability in overtime claims and occupational accidents, among others. If we obtain an unfavorable decision in relation to a significant portion of these contingencies that have not yet been provisioned, our financial and equity situation and the results of our operations may be affected.

d.6) Insurance Coverage

The policy of the Company, as well as the Telefónica Group, includes contracting insurance coverage for all assets and liabilities involving significant and high-risk amounts, based on management's judgment and following Telefónica corporate program guidelines.

At December 31, 2017, maximum limits of claims (established pursuant to the agreements of each entity consolidated by the Company) for significant assets, liabilities or interests covered by insurance and their respective amounts were R$1,501,052 for operational risks (with loss of profit) and R$75,000 for general civil liability.

d.7) Other Risks

The Company is required to comply with Brazilian anti-corruption laws and regulations, as well as laws and regulations on the same subject in jurisdictions where it has its securities traded. In particular, the Company is subject, in Brazil, to the Law nº 12.846/2013 and, in the United States, to the U.S. Foreign Corrupt Practices Act of 1977.

Although the Company has internal policies and procedures designed to ensure compliance with the aforementioned anti-corruption laws and regulations, there can be no assurance that such policies and procedures will be sufficient or that the Company’s employees, directors, officers, partners, agents and service providers will not take actions in violation of the Company’s policies and procedures (or otherwise in violation of the relevant anti-corruption laws and regulations) for which the Company or they may be ultimately held responsible. Violations of anti-corruption laws and regulations could lead to financial penalties, damage to the Company’s reputation or other legal consequences that could have a material adverse effect on the Company’s business, results of operationsand financial condition.

In connection with the above-mentioned policies, the Company is currently conducting an internal investigation - which is part of a broader investigation being conducted by the controlling shareholder of the Company (Telefónica, S.A.) - regarding possible violations of the abovementioned laws and regulations. The Company is in contact with governmental authorities about this matter and intends to cooperate with those authorities as the investigation continues. It is not possible at this time to predict the scope or duration of this matter or its likely outcome.

XML

COMMITMENTS AND GUARANTEES (RENTALS)

12 Months Ended

Dec. 31, 2017

COMMITMENTS AND GUARANTEES (RENTALS)

COMMITMENTS AND GUARANTEES (RENTALS)

32)  COMMITMENTS AND GUARANTEES (RENTALS)

The Company lease equipment, facilities, and several stores, administrative buildings, and sites (containing radio-base stations and towers), through several non-cancellable operating agreements maturing on different dates, with monthly payments.

At December 31, 2017, the total amounts corresponding to the full period of the contracts were as follows:

Up to 1 year	2,285,148
From 1 to 5 years	7,442,212
Over five years	5,017,985
Total	14,745,345

XML

ADDITIONAL INFORMATION ON CASH FLOWS

12 Months Ended

Dec. 31, 2017

ADDITIONAL INFORMATION ON CASH FLOWS

ADDITIONAL INFORMATION ON CASH FLOWS

33)  ADDITIONAL INFORMATION ON CASH FLOWS

a)  Reconciliation of cash flow financing activities

The following is a reconciliation of cash flow financing activities for the year ended December 31, 2017.

		Cash flows from		Cash flows from	Financing activities not involving cash and cash equivalents
		financing activities		operating activities
					Financial
					charges and	Additions of		Interim and
					foreign	financial lease		unclaimed
			Write-offs	Write-offs	exchange	and supplier	Business	dividends and
Consolidated	At 12/31/16	Addtions	(payments)	(payments)	variation	financing	combinations	interest on equity	At 12/31/17
Interim dividends and interest on equity	2,195,031	—	(3,668,551)	—	—	—	—	3,869,636	2,396,116
Loans and financing	4,880,606	55,876	(2,449,773)	(333,676)	385,021	571,444	—	—	3,109,498
Finance lease	374,428	—	(35,722)	(11,973)	45,265	13,462	—	—	385,460
Debentures	3,554,307	3,000,000	(2,000,000)	(513,937)	480,369	—	—	—	4,520,739
Derivative financial instruments	(28,377)	—	(159,408)	2,086	42,334	—	(389)	—	(143,754)
Contingent Consideration	414,733	—	—	—	31,411	—	—	—	446,144
Total	11,390,728	3,055,876	(8,313,454)	(857,500)	984,400	584,906	(389)	3,869,636	10,714,203

b)  Financing transactions that do not involve cash

The main financing transactions that do not involve cash of the Company refer to the acquisition of assets through finance leases. At December 31, 2017 and 2016, these transactions totaled R$13,462 and R$61,866, respectively.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Policies)

12 Months Ended

Dec. 31, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

Cash and cash equivalents

a)  Cash and cash equivalents

These are maintained in order to meet short-term cash commitments and not for investment or other purposes. The Company consider cash equivalents a short-term investment readily convertible into a known amount of cash and subject to insignificant risk of change in value. Short-term investments are classified as cash-equivalent when redeemable within 90 days (Note 4).

Trade accounts receivable

b)  Trade accounts receivable

These are evaluated by the value of the services provided in accordance with the contracted conditions, net of estimated impairment losses. These include the services provided to customers, which were still not billed until balance sheet date, as well as other trade accounts receivable related to the sale of cellphones, SIM cards, accessories, advertising and rent of IT equipment (TData’s “Soluciona TI” product), (Note 5).

The estimated impairment losses are set up at amounts sufficient to cover any losses and mainly consider the expected default.

Inventories

c)  Inventories

These are evaluated and presented at lower of average acquisition cost and net realizable value, whichever is lower. These include cellphones, SIM cards, prepaid cards, accessories, consumption materials and maintenance. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to sell (Note 6).

Estimated impairment losses are set up for materials and devices considered obsolete or whose carrying amounts are in excess of those usually sold by the Company within a reasonable period of time.

Prepaid expenses

d)  Prepaid expenses

These are stated at amounts effectively disbursed referring to services contracted but not yet incurred. Prepaid expenses are allocated to the income statements to the extent that related services are rendered and economic benefits are obtained (Note 9).

Investments

e)  Investments

Control is obtained when the Company is exposed or has the right to variable returns based on its involvement with the investee and has the capacity of affecting those returns through the power exercised over an investee.

The consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company ceases to exercise said control. Assets, liabilities and results of a subsidiary acquired or sold during the year are included in the consolidated financial statements from the date on which the Company obtains control until the date on which the Company ceases to exercise control over the subsidiary.

Joint control is the contractually agreed sharing of a control, only existing when decisions about relevant activities call for unanimous agreement by the parties sharing control.

Based on the equity method, investments are recorded in balance sheets at cost plus changes after the acquisition of the equity interest. The income statement reflects the portion of the results of operations of the investees.

When changes are directly recognized in the investees' equity, the Company will recognize its portion in variations occurred, and as record these variations in the statements of changes in equity and in the statements of comprehensive income, where applicable.

The financial statements of investees are prepared for the same reporting period of the Company. Whenever necessary, adjustments are made so that the accounting policies are in accordance with those adopted by the Company.

After the equity method is applied, the Company determines whether there is any need to recognize additional impairment of its investment in investees. At each closing date, the Company determines whether there is objective evidence of impairment of investment in the affiliate. If so, the Company calculates the recoverable amount as the difference between the recoverable value of the investees and their carrying amount, and recognizes the amount in the income statements.

When there is loss of significant influence over the investees, the Company evaluates and recognizes the investment, at that moment, at fair value. Any difference between the investees’ carrying amount by the time it loses significant influence and the fair value of the remaining investment and revenue from sale is recognized in the income statements.

Foreign exchange variations in Aliança’s equity (jointly-controlled entity) are recognized in the Company’s equity in other comprehensive income (“Effects on conversion of investments abroad”, Note 22).

Property, plant and equipment

f)  Property, plant and equipment

Property, plant and equipment are stated at acquisition and/or construction cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the borrowing costs for long-term construction projects if the recognition criteria are met, and is stated net of ICMS (State VAT) credits, which were recorded as recoverable taxes.

Asset costs are capitalized until the asset becomes operational. Costs incurred after the asset becomes operational and that do not improve the functionality or extend the useful life of the asset are immediately recognized on the accrual basis. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation. Likewise, expenses that represent asset improvement (expanded installed capacity or useful life) are capitalized. All the other repair and maintenance costs are recognized in the income statement as incurred.

The present value of the expected cost for the decommissioning of property, plant and equipment items (towers and equipment on leased property) is capitalized at the cost of the respective asset matched against the provision for dismantling obligations (Note 18) and depreciated over the useful lives of the related assets, which do not exceed the lease term.

Depreciation is calculated by the straight-line method over the useful lives of assets at rates that take into account the estimated useful lives of assets based on technical analyses. The assets’ residual values, useful lives and methods of depreciation are reviewed on a yearly basis, adjusted prospectively, if appropriate. Useful life in terms of depreciation rates, which is reviewed annually by the Company.

Property, plant and equipment items are written off when sold or when no future economic benefit is expected from their use or sale. Any gains or losses arising from write-off of assets (measured as the difference between the net disposal proceeds and the net carrying amount of the asset) are recognized in the income statement in the year in which the asset is written off.

A brief description of the main property, plant and equipment items, Note 12 is as follows:

· Switching and transmission media equipment: Includes switching and control centers, gateway, platforms, base radio station, microcells, minicells, repeaters, antennas, radios, access networks, concentrators, cables, TV equipment and other switching and transmission media equipment.

· Terminal/modem equipment: Includes cellphones and modems (rent and free lease), CPCT, public telephones and other terminal equipment.

· Infrastructure: This includes buildings, elevators, central air conditioning equipment, towers, posts, containers, energy equipment, land piping, support and protectors, leasehold improvements, etc.

· Other fixed asset items: These include vehicles, repair and construction tools and instruments, telesupervision equipment, IT equipment, testing and measurement equipment, fixtures and other goods for general use.

Intangible assets

g)  Intangible assets

Intangible assets acquired separately are measured at cost upon their initial recognition. The cost of an intangible asset acquired in a business combination is its fair value at the acquisition date.

After initial recognition, intangible assets are stated at acquisition and/or buildup cost, net of amortization and accumulated provision for impairment, where applicable. Intangible assets generated internally, excluding capitalized development costs, are not capitalized, and the expense is reflected in the income statement for the year in which it is incurred.

The useful lives of intangible assets are considered finite or indefinite.

· Intangible assets with finite useful lives are amortized over their economic useful lives under the straight-line method and are tested for impairment whenever there is any indication of impairment loss. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed on an annual basis.

Changes in the estimated useful life or the expected pattern of consumption of future economic benefits embodied in an asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the cost/expense category consistent with the function of the intangible assets.

· Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be justifiable. Otherwise, changes in useful life – from indefinite to finite - are carried out prospectively. Goodwill generated upon investment acquisition is treated as intangible assets with indefinite useful lives.

Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and recognized in the income statement on disposal.

A brief description of the key intangible asset items with finite useful lives, Note 13, is as follows:

· Software: This includes licenses for software used in the Company’s operating, commercial and administrative activities.

· Customer portfolio: This includes intangible assets acquired through business combination, recorded at fair value on the acquisition date.

· Trademarks:  These include intangible assets acquired through business combination, recorded at fair value on the acquisition date.

Licenses: These include concession and authorization licenses, acquired from ANATEL for provision of telecommunication services. These also include licenses from business combinations, recorded at fair value on the acquisition date.

Lease

h)  Lease

The classification of an agreement as a lease is based on substantive issues related to the use of an asset or specific assets, or even the right to use a given asset, on the initial date of its execution.

Finance lease agreements: By means of these agreements, the Company assumes substantially all risks and rewards relating to ownership of a leased item. These are capitalized at the lease inception at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Initial direct costs incurred in the transaction are added to cost, where applicable. Payments of finance lease agreements are allocated to financial charges and reduction of finance lease liabilities in order to obtain the constant interest rate on the outstanding liability balance. Implicit interest recognized in liabilities is allocated to the income statement over the lease term using the effective interest rate method.

Leased assets are depreciated according to their estimated useful lives or the lease term, whichever is shorter.

The Company and TData are parties to the following finance lease agreements:

· As lessee: lease agreements for transmission equipment and media arising from a joint construction agreement with another telecomm operator, based on an optical network linked to the power transmission line, interconnecting the northern Brazilian cities to the Company’s national backbone and lease of towers and rooftops (arising from sale and finance leaseback, for which the net carrying amount of the assets upon disposal remained unchanged, a liability was recognized at the present value of minimum lease payments and deferred income was recorded at the difference between the selling price and the mentioned present value. (Note 19).

· As lessor: Lease agreements for IT equipment (TData’s “Soluciona TI” product) for which the Company recognizes revenue, upon inception, at the present value of lease payments matched against accounts receivable (Note 5).

The difference between the nominal amount of lease payments and recorded accounts receivable/payable are recognized as finance income/expenses using the effective interest method over the lease term.

Operating lease: These are lease agreements where lessor holds a significant portion of risks and rewards, where effects are recognized in the income statements for the year over the contractual term.

Impairment of nonfinancial assets

i)  Impairment of nonfinancial assets

The Company annually reviews the net carrying amount of assets in order to evaluate events or changes in economic, operating or technological circumstances that may indicate impairment losses. When such evidence is found, and net carrying amount exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net carrying amount to the recoverable amount.

The recoverable amount of an asset or a Cash Generating Unit (“CGU”) is defined as the higher of value in use and net sales value.

Upon estimation of the value in use of an asset or cash-generating unit, estimated future cash flows are discounted at present value using a discount rate based on the cost of capital rate the Capital Asset Pricing Model (CAPM) before taxes, which reflects the weighted average cost of capital and specific risks of the asset or CGU.

Whenever possible, the net sale value is determined based on a firm sale agreement executed on an arm’s length basis between knowledgeable and willing parties, adjusted by expenses attributable to the sale of assets or, when there is no firm sale agreement, based on the market price of an active market, or on the latest transaction price involving similar assets.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased.

A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine an asset’s or CGU recoverable amount since the last impairment loss was recognized. Any reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement.

The following assets have specific characteristics for impairment testing:

· Goodwill: Goodwill is tested for impairment annually at the reporting date or before when circumstances indicate that the carrying amount may be impaired. Where the recoverable amount is lower than the carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

· Intangible assets: Intangible assets with indefinite useful lives are tested for impairment annually at the reporting date either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying amount may be impaired.

· Determination of value in use: The key assumptions used to estimate value in use are: (i) revenues (projected considering the growth in customer base, growth in market revenue against GDP and the Company’s share of this market); (ii) variable costs and expenses (projected in accordance with the dynamics of the customer base, and fixed costs are projected in line with the historical performance of the Company, as well as with revenue growth); and (iii) capital investments (estimated considering the technological infrastructure necessary to enable the provision of services).

Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by Company’s management.

The impairment test of the Company fixed and intangible assets, including goodwill, did not result in recognition of impairment losses for the years ended December 31, 2017 and 2016, since their estimated recoverable amount is greater than the net carrying amount as of the estimation date.

Business combinations and goodwill

j)  Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, recorded at fair value on the acquisition date, and the fair value of any noncontrolling interest in the acquiree.

For each business combination, the Company measures noncontrolling interests in the acquiree either at its fair value or on the basis of its proportional share in the identifiable net assets of the acquiree. Costs directly attributable to an acquisition are recorded as expenses, as incurred.

Upon acquiring a business, the Company assesses financial assets acquired and liabilities assumed so as to classify and allocate them in accordance with contractual terms, economic circumstances and relevant conditions on the acquisition date, including the segregation, by the acquiree, of embedded derivatives existing in host contracts in the acquiree.

In the event a business combination is conducted in stages, the ownership interest previously held in the acquiree’s capital is reassessed at fair value on the date control is acquired, and any impacts are recognized in the income statement.

Any contingent portion to be transferred by the acquirer shall be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent portion to be considered as an asset or liability is recognized in the income statement. Contingent consideration on acquisition of a business that is not classified as equity is subsequently measured at fair value through profit or loss, whether or not included in the scope of IFRS 9 Financial Instruments.

Goodwill is initially measured as excess transferred payment amount in relation to acquired net assets (identifiable net assets acquired and liabilities assumed). If consideration is lower than fair value of acquired net assets, the difference must be recognized as gain in the income statement.

After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a CGU and part of the operation within that CGU is disposed of, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is allocated based on the relative fair values of the disposed operation and the portion of the CGU retained.

Financial Instruments - Initial recognition and subsequent measurement

k)  Financial Instruments – Initial recognition and subsequent measurement

k.1) Financial assets

Initial recognition and measurement

Financial assets are classified at initial recognition (when it becomes part of the instrument's contractual provisions), as: (i) fair value through profit or loss; (ii) loans and receivables; (iii) investments held to maturity; (iv) financial assets available for sale or (v) derivatives classified as effective hedge instruments, as applicable.

All financial assets are initially recognized at fair value, plus, in the case of investment that is not determined at fair value through profit or loss, the transaction costs that are directly attributable to the acquisition of the financial asset.

The Company’s consolidated financial assets include cash and cash equivalents, trade accounts receivable, short-term investments pledged as collateral and derivative financial instruments.

Subsequent measurement

Subsequent measurement of financial assets depends on their classification, as follows:

Financial assets at fair value through profit or loss: These include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss: (i) financial assets are classified as held for trading if acquired to be sold within short term. This category includes derivative financial instruments contracted by the Company which do not meet the hedge accounting criteria set out by the corresponding standard; and (ii) financial assets at fair value through profit or loss are stated in balance sheets at fair value with their corresponding gains or losses recognized in the income statements.

Loans and receivables:  these refer to non-derivative financial assets with fixed or determinable payments, however not traded in an active market.  After initial measurement, these financial assets are stated at amortized cost, using the effective interest method, less impairment, where applicable. Amortized cost is calculated taking into account any discount or “premium” on acquisition and fees or costs incurred. Amortization by the effective interest method and impairment losses are included in the financial income line in the income statement, if applicable.

Financial assets available for sale: These are non-derivative financial assets not classified as: (i) loans and receivables; (ii) investments held to maturity; or (iii) financial assets at fair value through profit or loss. These financial assets include equity and debt instruments. Debt instruments in this category are those which are intended to be held for an indefinite period and can be sold to meet liquidity needs or in response to changes in market conditions.

After initial measurement, financial assets available for sale are measured at fair value, with unrealized gains and losses being recognized directly in other comprehensive income until such time as the investment is written off, except for impairment losses, interest calculated using the effective interest method and gains or losses due to exchange variations on monetary assets, which are recognized directly in the income statement for the year.

When the investment is written-off or when a loss is determined due to impairment, the cumulative gains or losses which were previously recognized in other comprehensive income should be recognized in the statement of income.

The fair value of financial assets available for sale denominated in foreign currency is measured in the foreign currency and translated at the spot exchange rate at financial statements date. Changes in fair value attributable to translation differences that result from a change in amortized cost of the asset are recognized in the income statement, and other variations are recognized directly in equity.

Derecognition

A financial asset (or, whenever the case, a part of a financial asset, or a part of a group of similar financial assets) is derecognized when:

· The rights to receive the cash flows from the asset have expired;

· The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

k.2) Impairment of financial assets

The Company evaluate, at the balance sheet date, if there is any objective evidence indicating that the financial asset or group of financial assets is not recoverable. A loss only exists if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after initial recognition of the asset (a “loss event” occurred) and such event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reasonably estimated.

The carrying amount of an asset is reduced by a provision and the loss amount is recognized in the income statement. If, in a subsequent year, estimated impairment increases or decreases due to an event after impairment recognition, impairment loss previously recognized will be adjusted accordingly. Should a written-off asset be recovered in the future, such recovery is recognized in the income statement.

k.3) Financial liabilities

Initial recognition and measurement

Upon initial recognition, the Company’s financial liabilities are classified in the following categories:   financial liabilities measured at fair value through profit or loss and other financial liabilities.

Financial liabilities are initially recognized at fair value plus, in the case of loans and financing, transaction cost directly attributable thereto.

The Company’s consolidated financial liabilities include trade accounts payable, loans and financing, debentures, finance lease agreements, contingent payments and derivative financial instruments.

Subsequent measurement

Measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at fair value through profit or loss: These include financial liabilities designated upon initial recognition at fair value through profit or loss. This category also includes derivative financial instruments contracted which do not meet the hedge accounting criteria set out by the corresponding standard.

For the years ended December 31, 2017 and 2016, the Company did not record any financial liability at fair value through profit or loss upon initial recognition.

Loans and financing: After initial recognition, loans and financing subject to interest are subsequently measured at amortized cost, using the effective interest method. Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through the effective interest rate amortization process.

Derecognition

A financial liability is derecognized when the obligation has been revoked, cancelled or has expired.

When an existing financial liability is replaced by another of the same lender, and the terms of the instruments are substantially different, or when the terms of an existing debt instrument are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference in the corresponding carrying amounts is recognized in the income statement.

k.4) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability will take place (i) in the principal market for the asset or liability; or (ii) in the absence of a principal market, in the most advantageous market for that asset or liability.

The Company must have access to the principal (or most advantageous) market.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing an asset or liability, assuming that market participants act in their best economic interests.

Fair value measurement of a non-financial asset takes into consideration the capacity of a market participant to generate economic benefits through the best use of the asset, or selling it to another market participant that would also make the best use of the asset.

The Company use adequate valuation techniques in the circumstances and for which there is sufficient data to measure the fair value, maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs.

For assets and liabilities recurrently recognized in the financial statements, the Company determines whether there were transfers between the hierarchy levels, revaluating the classification (based on the lowest level input that is significant to the overall fair value measurement) at the end of each reporting period.

For the purposes of fair value disclosures, the Company determined classes of assets or liabilities based on the nature, characteristics and risks of those assets or liabilities and the fair value hierarchy level, as mentioned above.

k.5) Financial instruments - net

Financial assets and liabilities are presented net in the balance sheet if, and only if, there is a current enforceable legal right to offset the amounts recognized and if there is an intention to offset or realize the asset or settle the liability simultaneously.

Derivative financial instruments and hedge accounting

l)  Derivative financial instruments and hedge accounting

The Company uses derivative financial instruments, such as currency and interest rate swaps or currency nondeliverable forward contracts to hedge against currency risks.

Derivative financial instruments designated in hedge transactions are initially recognized at fair value on the date on which the derivative contract is entered into, and subsequently revalued also at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive and as financial liabilities when the fair value of the instrument is negative.

Any gains or losses resulting from changes in fair value of derivatives during the year are posted directly to the income statement, except for the effective portion of cash flow hedges, which is recognized directly in equity as other comprehensive income and subsequently reclassified to P&L when the hedged item affects P&L.

Inception initial recognition of a hedge relationship, the Company formally designate and documents the hedge relationship to which it wishes to apply hedge accounting, the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk, the nature of unhedged risks, the prospective statement of hedge effectiveness and how the Company shall assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

For the purpose of hedge accounting, hedges are classified as cash flow hedges and fair value hedges.

l.1) Cash flow hedges

Cash flow hedges meeting the recording criteria are accounted for as follows: (i) the portion of gain or loss from the hedge instrument determined as effective hedge shall be recognized directly in equity (other comprehensive income), and (ii) the ineffective portion of gain or loss from the hedge instrument shall be recognized in the income statement.

When the Company’s documented risk management strategy for any given hedge relationship excludes from the hedge effectiveness evaluation any particular component of gain or loss or the corresponding cash flows from the hedge instrument, that gain or loss component is recognized in financial income (expenses).

Amounts recorded in other comprehensive income are immediately transferred to the income statement when the hedged transaction affects P&L. When a hedged item is the cost of a non-financial asset or liability, amounts recorded in equity are transferred at the initial carrying amount of the non-financial assets and liabilities.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge fails to meet the hedge accounting criteria, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs or the firm commitment is fulfilled.

The Company’s contracts are classified as cash flow hedges when they provide protection against changes in cash flows that are attributable to a particular risk associated with a recognized liability that may affect the profit or loss and fair value when they provide protection against exposure to changes in the fair value of the identified part of certain liabilities that is attributable to a particular risk (exchange variation) and may affect the profit or loss.

l.2) Fair value hedges

Fair value hedges meeting the accounting criteria are accounted for as follows: (i) gain or loss from changes in fair value of a hedge instrument shall be recognized in the income statement as finance costs; and (ii) gain or loss from a hedged item attributable to the hedged risk shall adjust the recorded amount of the hedged item to be recognized in the income statement, as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying amount is amortized through profit or loss over the remaining term of the hedge using the effective interest method. The effective interest rate amortization may begin as soon as any adjustment exists and no later than the point that the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

If the hedged item is derecognized, the unamortized fair value is recognized immediately in the income statement.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.

l.3) Classification between current and noncurrent

Derivative financial instruments are classified as current and noncurrent or segregated into short and long term portions based on an evaluation of the contractual cash flows.

When the Company maintains a derivative as economic hedge (and does not apply hedge accounting), for a period exceeding 12 months after balance sheet date, the derivative is classified as noncurrent (or segregated into current and noncurrent portions), in line with the classification of the corresponding item.

Derivative instruments that are designated as effective hedging instruments are classified consistently with the classification of the underlying hedged item.

The derivative instrument is segregated into current and noncurrent portions only when amounts can be reliably allocated.

Loans and financing

m)  Loans and financing

Loans and financing obtained are initially recognized at fair value, net of costs incurred to obtain them and subsequently measured at amortized cost (plus charges and pro rata interest), considering the effective interest rate of each operation.

These are classified as current, unless the Company has an unconditional right to settle the liability for at least 12 months after year end.

Borrowing costs

n)  Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a period of time exceeding 18 months to prepare for its intended use or sale form part of the cost of that asset.

All other borrowing costs are recorded in the period they are incurred. Borrowing costs include interest and other costs incurred by an entity in connection with the borrowing of funds.

In 2017 and 2016, the Company did not capitalize amounts related to borrowing costs.

Interest on equity and dividends

o)  Interest on equity and dividends

o.1) Interest on equity

Brazilian legislation allows companies to pay interest on equity, which is similar to payment of dividends; however, this is deductible for income tax calculation purposes. In order to comply with Brazilian tax legislation the Company provision, in its accounting records the amount due to match against the financial expenses account in the income statement for the year. For the presentation of these financial statements, that expense is reversed against a direct charge to equity, resulting in the same accounting treatment adopted for dividends. The distribution of interest on equity to shareholders is subject to withholding income tax at a 15% rate.

o.2) Dividends

Minimum mandatory dividends are stated in the balance sheet as legal obligations (provisions in current liabilities). Dividends in excess of such minimum amount, not yet approved in the Shareholders’ Meeting, are recorded in equity as proposed additional dividends. After approval at the Shareholders’ meeting, the dividends in excess of minimum mandatory are transferred to current liabilities, and classified as legal obligations.

Provisions

p)  Provisions

p.1) General

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, when it is probable that economic benefits are required to settle the obligation and a reliable estimate of the value of the obligation can be made. Provisions are restated at the balance sheet date considering the likely amount of loss and the nature of each contingency.

Provisions for contingencies are presented at their gross amount, less the corresponding judicial deposits, and are classified as provisions for civil, labor, tax and regulatory contingencies.

Judicial deposits are classified as assets given that the conditions required for their net presentation with the provision do not exist.

p.2) Provisions for civil, labor, tax and regulatory legal claims

The Company is party to labor, tax, civil and regulatory administrative and legal proceedings and set up a provision for contingencies whose likelihood of loss was estimated as probable. The assessment of the likelihood of loss includes an analysis of available evidence, the hierarchy of laws, available case law, the latest court decisions law and their relevance in the legal system, as well as the opinion of outside legal counsel. Provisions are reviewed and adjusted considering changes in existing circumstances, such as the applicable statute of limitations, tax audit conclusions, or additional exposures identified based on new matters or court decisions.

p.3) Provision for decommissioning of assets

This refers to costs to be incurred due to returning sites to owners (locations intended for tower and equipment installation on leased property) in the same condition as these were found at the time of execution of the initial lease agreement.

These costs are provisioned at the present value of amounts expected to settle the obligation using estimated cash flows and are recognized as part of the cost of the corresponding asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to decommissioning of assets. The financial effect of the discount is recorded as incurred and recognized in the income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to, or deducted from, the cost of the asset.

p.4) Contingent liabilities recognized in a business combination

A contingent liability recognized in business combination is initially measured at fair value.

Taxes

q)  Taxes

q.1) Current taxes

Current tax assets and liabilities for the current and prior years are measured at the estimated amount recoverable from, or payable to, the tax authorities. The tax rates and laws used in calculating the amounts referred to above are those in effect, or substantially in effect, at year end. In the balance sheet, current taxes are presented net of prepayments over the year.

Current income and social contribution taxes related to items directly recognized in equity are also recognized in equity. Management regularly assesses the tax position in circumstances in which tax regulation requires interpretation, and sets up provisions therefor when appropriate.

q.2) Deferred taxes

Deferred taxes arise from temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amount.

Deferred tax assets are recognized for all deductible temporary differences, unused tax credits and losses, to the extent that taxable profit is likely to be available for realization of deductible temporary differences, and unused tax credits and losses are likely to be used, except: (i) when the deferred tax asset related to the deductible temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination and does not impact, at the transaction date, the book profit, income or loss for tax purposes; and (ii) on deductible temporary differences related to investments in subsidiaries, where deferred tax assets are recognized only to the extent that it is probable that temporary differences will be reversed in the near future and taxable profit is likely be available so that temporary differences can be used.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit shall be available to allow all or part of the deferred tax asset to be used. Derecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized on all temporary tax differences, except: (i) when the deferred tax liability arises from initial recognition of goodwill, or an asset or liability in a transaction other than a business combination, and does not affect book profit or taxable profit or tax losses on the transaction date; and (ii) on temporary tax differences related to investments in subsidiaries, in which the temporary difference reversal period can be controlled and temporary differences are not likely to be reversed in the near future.

Deferred tax assets and liabilities are measured at the tax rate expected to be applicable for the year the asset will be realized or the liability will be settled, based on the rates provided in tax legislation and that were published as of year-end.

Deferred tax assets and liabilities are not discounted to present value and are classified in the balance sheet as noncurrent, irrespective of their expected realization.

The tax effects of items recorded directly in equity are also recognized in equity. Deferred tax items are recognized based on the transaction which gave rise to that deferred tax, in comprehensive income or directly in equity.

Deferred tax assets and liabilities are presented net when there is a legal or constructive right to offset a tax asset against a tax liability and deferred taxes relate to the same taxpaying entity and are subject to the same tax authority.

q.3) Sales taxes

Revenues are recognized net of value added taxes, which from services rendered is subject to State Value-Added Tax (ICMS) or Service Tax (ISS) at the rates in force in each region as well as and to Social Contribution Tax on Gross Revenue for Social Integration Program (PIS) and Social Contribution Tax on Gross Revenue for Social Security Financing (COFINS) taxation on a cumulative basis for revenue from telecommunication services.

Other revenue earned by the Company, including revenue from resale of goods, on a noncumulative basis, is taxed at for PIS, COFINS and by ICMS at the rates in force in each State.

Prepayments or recoverable amounts are stated in current or noncurrent assets, based on their estimated realization.

Other assets and liabilities

r)  Other assets and liabilities

Assets are recognized in the balance sheet when it is likely that their future economic benefits will flow to the Company, and their cost or value can be reliably measured.

A liability is recognized in the balance sheet when the Company have a legal or constructive obligation as a result of a past event, the settlement of which is likely to generate an outflow of economic benefits.

Assets and liabilities are presented in the balance sheet classified as current or noncurrent.

An asset is classified as current when: (i) it is expected to be realized or is intended to be sold or used in the ordinary operational cycle; (ii) it is mainly held for trading purposes; (iii) it is expected to be realized within 12 months from the reporting period; or (iv) cash and cash equivalents, unless there are restrictions upon exchange thereof, i.e., when used to settle a liability within 12 months from the reporting period. All other assets are classified as noncurrent.

A liability is classified as current when: (i) it is expected to be settled in the ordinary operational cycle; (ii) it is mainly held for trading purposes; (iii) It is expected to be settled within 12 months from the reporting period; or (iv) there is no unconditional right to defer settlement of the liability within 12 months from the reporting period. All other liabilities are classified as noncurrent.

Present value adjustment of assets and liabilities

s)  Present value adjustment of assets and liabilities

Current and noncurrent monetary assets and liabilities are adjusted to their present value when the effect on the overall financial statements is considered significant. The present value adjustment is calculated using contractual cash flows and the explicit, and sometimes implicit, interest rates of the respective assets and liabilities.

Accordingly, the interest rate embedded in revenues, expenses and related costs is discounted, so that these assets and liabilities are recognized on an accrual basis. This interest is subsequently reallocated to financial income and expenses in P&L through use of the effective interest method in relation to contractual cash flows. Implicit interest rates were determined based on assumptions, and accounting estimates are considered.

Government grants and assistance

t)  Government grants and assistance

Government grants are recognized when there is reasonable certainty that the benefit will be received and that all the related conditions will be met. When the benefit refers to an expense item, it is recognized as revenue along the benefit period, on a systematic basis in relation to the costs the benefit it intends to offset.

When the Company receives non-monetary grants, the asset and the benefit are recorded at nominal amounts and reflected in the income statements over the expected useful life of the asset by equal annual installments. A loan or assistance is initially recognized or measured at fair value. A government grant is measured as the difference between the initial carrying amount of the loan and proceeds therefrom. A loan is subsequently measured in accordance with the applicable accounting policy.

When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as an additional government grant.

The financing lines with the Brazilian Development Bank (BNDES), with interest rates not exceeding those prevailing in the market, are classified under the scope of IAS 20, and are recorded at fair value based on market rates. Adjustment arising from the comparison of the amount measured based on the rate agreed upon is accounted for as deferred revenue (Note 19).

Revenue recognition

u)  Revenue recognition

Revenues substantially correspond to value of considerations received or receivable arising from the provision of telecommunications or communications services, the sale of goods, advertising and other revenue, and are stated net of taxes, discounts or returns (in case of sale of goods) thereon. Revenues and expenses are stated on the accrual basis of accounting.

Revenue is recognized when it is probable that future economic benefits will flow to the Company or its subsidiaries, when it can be reliably measured, costs incurred in the transaction can be measured, the risks and rewards have been substantially transferred to the buyer and when specific criteria have been met for each of the Company’s activities.

Consolidated revenues of the Company comprise basically telecommunication services regarding voice, data and digital services, broadband, TV and additional telecommunication services that are offered to customers through fixed-price traffic packs (paid on a monthly basis) or based on customers’ consumption, remuneration for network usage, advertising and sale of goods.

u.1) Recognition of revenues from telecommunication services

Revenues from telecommunication, data and digital services, broadband services provided are recorded on an accrual basis based on the amounts agreed upon. Local and long-distance calls are billed by the measurement process under legislation in force. The services billed on fixed monthly amounts are calculated and accounted for on a straight-line basis. Unbilled revenues from the last billing up to the balance sheet date are recognized in the month in which the service is provided.

Revenues related to sale of public phone cards and pay-as-you-go credit for cellphones as well as the respective taxes are deferred and recognized in the income statement to the extent that the services are effectively rendered.

Revenues from equipment lease contracts classified as finance lease agreement (TData’s Soluciona TI product) are recognized on installation of equipment whereupon effective transfer of risk takes place. Revenue is recognized at present value of future minimum payments provided for in the agreement.

Revenues from services are basically subject to the following indirect taxes: ICMS or ISS (as applicable), PIS and COFINS.

u.2) Recognition of revenue and cost from sales of goods

Revenues and cost of sales (mobile phones, simcards and accessories) are recorded when risks and rewards inherent in such goods are transferred to buyers.

Sales made in own stores are recognized upon sale to end consumer. Revenues and costs of sales made by accredited dealers are deferred and recognized in P&L when the device is activated, limited to 90 days from the sale date.

u.3) Customer loyalty program

The Company has a loyalty points program that enables customers to accumulate points when they pay bills regarding the usage of the services offered. The accumulated points may be exchanged for telephone sets or services, conditional upon obtaining a minimum balance of points by customer. The consideration received is allocated to the cost of sets or services at fair value. The fair value of points is determined by dividing the amount of discount granted by the number of points necessary for the redemption based on the points program. The portion of revenue related to the fair value of the accumulated balance of points generated is deferred and recognized as revenue upon redemption of points.

The number of points to be accounted for is determined through statistical techniques that consider assumptions and historical data on expected redemption rates, expiration percentages and cancellation of points, among other factors. These estimates are subject to variations and uncertainties due to changes in the behavior of customer redemptions.

u.4) Membership fee and promotional campaigns

Participation fees paid for promotional campaigns by customers of the Company are deferred and recorded in P&L throughout the duration of such campaign.

u.5) Agreements combining more than one element

Commercial packages offered by the Company that combine different elements are analyzed to determine whether it is necessary to separate the different elements identified, adopting the recognition criterion that is most adequate to each situation. Total revenue generated by the package sale is distributed among its elements, based upon their respective fair values.

The fair value determination of each element then identified implies the need for complex estimates given the nature of the business. A possible change in fair values estimates could affect the distribution of revenues between components and consequently the deferred revenue.

u.6) Advertising

Revenues from advertising are recognized in income during the advertising period.

Financial income (expenses)

v)  Financial income (expenses)

These include interest, and monetary and exchange variations arising from short-term investments, derivative transactions, loans, financing, debentures, present value adjustments of transactions that generate monetary assets and liabilities and other financial transactions. These are recognized on an accrual basis when earned or incurred by the Company.

For all financial instruments measured at amortized cost and interest-yielding financial assets classified as available for sale, interest income or expense is recognized using the effective interest method, which exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or liability.

Post-retirement benefit plans

w)  Post-retirement benefit plans

The Company individually sponsor pension funds of post-retirement benefits for active and retired employees, in addition to a multisponsor supplementary retirement plan and health care plan for former employees. Contributions are determined on an actuarial basis and recorded on an accrual basis. Liabilities relating to defined benefit plans are determined based on actuarial evaluations at each year end, in order to ensure that sufficient reserves have been set up for both current and future commitments.

Actuarial liabilities related to defined benefit plans were calculated using the projected unit credit method. Actuarial gains and losses are recognized immediately in equity (in other comprehensive income).

For plans with defined contribution characteristics, the obligation is limited to the contributions payable, which are recognized in the P&L in the respective accrual periods.

The asset or liability related to defined benefit plan to be recognized in financial statements corresponds to the present value of the obligation for the defined benefit (using a discount rate based on long-term National Treasury Notes “NTNs”), less fair value of plan assets that will be used to settle the obligations. Plan assets are assets held by a privately-held supplementary pension plan entity. Plan assets are not available to the Company’s creditors or those of its subsidiaries and cannot be paid directly to the Company. The fair value is based on information on market prices and, in case of securities quoted, on purchase price disclosed. The value of any defined benefit asset then recognized is limited to the present value of any economic benefits available as a reduction in future plan contribution from the Company.

Actuarial costs recognized in the income statement are limited to the service cost and cost of interest on the defined benefit plan obligation. Any changes in the measurement of plan assets and obligations are initially recognized in other comprehensive income, and immediately reclassified to retained earnings in P&L.

The Company manages and individually sponsor a health care plan for retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98 (which provides for private health care and health insurance plans). As provided for in articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees.

Significant accounting judgments, estimates and assumptions

x)  Significant accounting judgments, estimates and assumptions

The preparation of the financial statements requires management to make judgments, estimates and adopt assumptions supported by valuation bases used in accounting estimates. The accounting estimates involved in the preparation of these financial statements were based on objective and subjective factors, considering management’s judgment for determining the adequate amounts to be recorded in the financial statements.

Settlement of transactions involving these estimates may result in amounts significantly different from those recorded in the financial statements due to the uncertainties inherent in their estimate process.

Significant assumptions concerning sources of uncertainty in future estimates and other significant sources of estimation uncertainty at the balance sheet date, involving a significant risk of causing a material adjustment to the carrying amount of assets and liabilities, are as follows:

x.1) Impairment of non-financial assets

An impairment loss exists when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of fair value less cost to sell and value in use. The calculation of fair value less cost to sell is based on information available on transactions for sale of similar assets or market prices less additional costs to dispose of the asset. The calculation of value in use is based on the discounted cash flow model. The recoverable amount is sensitive to the discount rate used in the discounted cash flow method, as well as expected future cash receipts and growth rate used for extrapolation purposes.

The Company regularly analyzes the performance of the defined cash generating unit in order to identify any impairment of goodwill and its other assets. Determination of the recoverable amount of the cash generating unit to which goodwill is attributed includes use of assumptions and estimates and requires use of significant accounting judgment and criterion.

x.2) Post-retirement benefit plans

The cost of pension plans with defined benefits and other post-employment health care benefits and the present value of the pension obligation are determined using actuarial valuation methods. Actuarial valuation involves use of assumptions about discount rates, future salary increases, mortality rates and future increases in pension and annuity benefits. The obligation for defined benefits is highly sensitive to changes in these assumptions. All assumptions are reviewed on an annual basis.

The mortality rate is based on publicly available mortality tables in the country. Future salary increases and pension increases are based on expected future inflation rates for the country.

x.3) Fair value of financial instruments

When the fair value of financial assets and liabilities stated in the balance sheet cannot be obtained in active markets, it will be determined using valuation techniques, including the discounted cash flow method. Data for these methods is based on those adopted in the market, whenever possible. However, when this is not feasible, a certain level of judgment is required for fair value determination. Judgment includes consideration of the inputs used, such as liquidity risk, credit risk and volatility. Changes in the assumptions about these factors could affect the reported fair value of financial instruments.

x.4) Property, plant and equipment and finite-lived intangible assets

The accounting treatment of investment in fixed and intangible assets includes estimating useful life period for depreciation purposes and the fair value at the date of acquisition, particularly for assets acquired in business combinations.

Useful life determination requires estimates regarding the expected technological developments and alternative uses of assets. The hypotheses related to the technological aspect and its future development imply a significant level of analysis, considering the difficulties in forecasting time and nature of future technological changes.

x.5) Revenue recognition – Customer Loyalty Program

The Company estimates the fair value of points attributed under the customer loyalty program by applying statistic techniques. Inputs for the model include assumptions about expected redemption rates, the mix of products that will be available for future redemption and customers’ preference in relation to points use.  Since issued points do not expire, these estimates are subject to significant uncertainties.

x.6) Agreements combining more than one element

The fair value determination of each element in a multiple element agreement requires complex estimates given the nature of the business. A possible change in fair value estimates could affect the distribution of revenues between components and consequently the deferred revenues.

x.7) Taxes

There are uncertainties regarding the interpretation of complex tax regulations and the amount and timing of future taxable profits. The Company set up provisions, based on reasonable estimates, for the possible consequences of audits by tax authorities in respective jurisdictions in which they operate. The amount of these provisions is based on various factors, such as previous tax audit experience and different interpretations of tax regulations by the taxable entity and by the relevant tax authority. Such differences in interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the Company.

The Company evaluate the recoverability of deferred tax assets based on estimates of future profits. This recoverability ultimately depends on the ability of the Company to generate taxable profits over the period in which the deferred tax asset is deductible. The analysis considers the reversal period of deferred tax liabilities, as well as estimates of taxable profits, based on updated internal projections reflecting the latest trends.

Determining the proper classification of the tax items depends on several factors, including an estimate of the period and the realization of the deferred tax asset and the expected date of payments of these taxes. The actual flow of receipt and payment of income tax could differ from estimates made by the Company, as a result of changes in tax laws or of unexpected future transactions that may impact tax balances.

x.8) Provisions for tax, labor, civil and regulatory proceedings

Provisions are recognized when the Company has a present obligation arising from a past event, settlement of which requires an outflow of resources rated as probable and when it can be reliably estimated. This obligation can be legal or constructive, derived from, among other factors, regulations, contracts, customary practices or public commitments that expose third parties to a valid expectation that the Company will assume certain responsibilities. The determination of the provision is based on the best estimate of the disbursement required to settle the corresponding obligation, considering the information available as of the closing date, including the opinion of independent experts, such as legal advisors.

x.9) Revenue recognition - revenue from unbilled services

The Company has billing systems for services with intermediate cut-off dates. Thus, at the end of each month there are revenues already received by the Company, but not effectively invoiced to its customers. These unbilled revenues are recorded based on estimates, which take into account historical consumption data, number of days elapsed since the last billing date, among others. Because historical data are used, these estimates are subject to significant uncertainties.

Functional and reporting currency

y)  Functional and reporting currency

The Company’s functional and reporting currency is the Brazilian real. Transactions in foreign currency were translated at the exchange rate in force as of the date the transaction. Assets and liabilities denominated in foreign currencies are translated using the exchange rate at the balance sheet date. The exchange rate variations arising from transactions in foreign currencies are recognized in P&L as financial income or expenses. Gains and losses on the translation of foreign investments are recognized in the statement of comprehensive income.

Translation of transactions denominated in foreign currency

z)  Translation of transactions denominated in foreign currency

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency (real) at the exchange rate (fix rate) in force as of the transaction date and subsequently re-measured based on the fix rates effective that, at December 31, 2017, were US$1.00 = R$3.3080, €1.00 = R$3.9676, and at December 31, 2016, were US$1.00 = R$3.2591, €1.00 = R$3.4351. Gains and losses resulting from the translation of these assets and liabilities due to exchange rate variation between transaction date and period end are recognized in the income statement.

Employee profit sharing

aa)  Employee profit sharing

The Company has obligations arising from employment contracts, recognizing these provisions during the year. Provisions are recorded to recognize the expense regarding employee profit sharing. These provisions are calculated based on qualitative and quantitative goals set by management and accounted for in specific accounts according to their function in groups of: Cost of services, Selling expenses and General and administrative expenses.

Share-based payments

ab)  Share-based payments

The Company measure the cost of transactions settled with employees and officers based on shares issued by parent company (Telefónica), by reference to the fair value of the shares at the date at which they are granted, using the binomial valuation model. This fair value is charged to the income statement over the period until the vesting date.

Treasury shares

ac)  Treasury shares

Own equity instruments that are repurchased (treasury stock) are recognized at cost and deducted from equity. No gains or losses are recognized in P&L on purchase, sale, issue or cancellation of the Company’s own equity instruments.

Segment reporting

ad)  Segment reporting

Business segments are defined as components of a company for which separate financial information is available and regularly assessed by the operational decision making professional in decisions on how to allocate funds to an individual segment and in the assessment of segment performance.  Considering that: (i) all officers and managers' decisions are based on consolidated reports; (ii) the Company mission is to provide their customers with quality telecommunications services; and (iii) all decisions related to strategic planning, finance, purchases, short- and long-term investments are made consolidated on a consolidated basis, the Company operate in a single operating segment, namely the provision of telecommunications services.

Statement of cash flows

ae)  Statement of cash flows

The statement of cash flows was prepared in accordance with IAS 7 – Statement of Cash Flows using the indirect method, and reflects the changes in cash for the years reported.

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OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of detailed information about business combination [line items]

Summary of authorizations for rendering SMP services

Radiofrequency	Band (MHz)		License Expiration (Year)
450 MHz	14	(1)	2027	-
700 MHz	20	—	2029	-
850 MHz	25	(2)	2020-2028	(3)
900 MHz	5	(4)	2020-2023	(5)
1800 MHz	20	(6)	2020-2023	(5)
1900 MHz	10	(7)	2022	—
2100 MHz	20-30	(10)	2023	—
2500 MHz	40	(8)	2027-2031	(9)

(1) State SP (cities with código nacional CN 13 to 19), MG and Northeast (AL, CE, PB, PE, PI, RN and SE).

(2) Except Northeast (CN 8X) and areas corresponding to sectors 03, 22, 25, 30 and 32 of the PGO / 1998.

(3) Regional Licenses: The expiration and renewal dates depend on the region. Licenses in Rio de Janeiro and Espírito Santo should expire in 2020 and 2023, respectively.

(4) Only in some regions.

(5) MG Interior expiry date 2020; the remaining licenses will expire in 2023.

(6) 20 MHz is the most common bandwidth, but is higher in some regions (up to 50 MHz).

(7) Only Northeast (CN 8X) and areas corresponding to sectors 22, 25, 30 and 32 of PGO / 1998. The licenses should be migrated to the frequency of 2100 MHz ("L-band realignment", which allows the use of 3G technology) when approved by Anatel.

(8) 40 MHz is the most common bandwidth, but is 60 MHz in some regions.

(9) The X band will expire in 2027 and the P band will expire in 2031.

(10) 30MHz in regions where the "L band" has already been migrated to the 2100 MHz frequency; 20 MHz in other regions.

Terra Networks

Disclosure of detailed information about business combination [line items]

Schedule of identifiable assets acquired and liabilities assumed

Current assets	163,579	Current liabilities	86,892
Cash and cash equivalents	43,351	Personnel, social charges and benefits	17,327
Accounts receivable	61,276	Trade accounts payable	51,198
Derivative financial instruments	404	Taxes, charges and contributions	14,643
Taxes recoverable	22,658	Derivative financial instruments	16
Other assets	35,890	Other liabilities	3,708
Noncurrent assets	228,575	Noncurrent liabilities	114,291
Deferred taxes	117,885	Personnel, social charges and benefits	508
Judicial deposits and garnishments	102,373	Taxes, charges and contributions	229
Other assets	740	Other Provisions	112,874
Property and equipment	7,047	Other liabilities	680
Intangible assets	530
		Book value of assumed liabilities	201,183
		Book value of identifiable net assets acquired	190,971
		Total consideration	250,000
Book value of assets acquired	392,154	Adjustment to equity in TData and Company	59,029

GVT Participacoes S.A. ("GVTPart")

Disclosure of detailed information about business combination [line items]

Schedule of acquisition price

Gross consideration in cash (4.663 billion euros)	15,964,853
(-) Contractual Adjustments (Net Debt)	(7,060,899)
Total consideration in cash, net	8,903,954
(+) Contingent Consideration	344,217
(+) Consideration in Shares at Fair Value	8,477,314
(-) Cash Flow Hedge Gain on Transaction, net of taxes (1)	(377,373)
(-) Refund according to sections 2.2.4 and 2.2.5 of SPA	(84,598)
Total consideration, net of Cash Flow Hedge	17,263,514

(1) Derivative transactions refer to cash flow hedges to protect the amount due in Euros to Vivendi, for the acquisition of GVTPart., against exchange rate variation of the amount.

Schedule of identifiable assets acquired and liabilities assumed

Current assets	1,557,651	Current liabilities	5,299,662
Cash and cash equivalents	390,255	Personnel, social charges and benefits	170,989
Accounts receivable	947,378	Trade accounts payable	611,425
Inventories	4,641	Taxes, charges and contributions	346,569
Taxes recoverable	147,057	Loans and financing	3,968,615
Other assets	68,320	Provisions	17,866
		Other liabilities	184,198
Noncurrent assets	12,026,239
Short-term investment pledged as collateral	17,871	Noncurrent liabilities	3,857,855
Taxes recoverable	65,798	Trade accounts payable	67,742
Deferred taxes (4)	610,873	Taxes, charges and contributions	1,342
Judicial deposits and garnishments	551,275	Loans and financing	3,088,414
Other assets	7,052	Other Provisions (3)	679,294
Property and equipment (1)	7,970,117	Other liabilities	21,063
Intangible assets (2)	2,803,253
		Fair value of assumed liabilities	9,157,517
		Fair value of identifiable net assets acquired	4,426,373
		Goodwill (5)	12,837,141
Fair value of assets acquired	13,583,890	Total consideration, net of Cash Flow Hedge	17,263,514

(1) This includes the allocation of appreciation of property, plant and equipment items (R$409,601).

(2) This includes the allocation of fair value assigned to the brand (R$59,000), customer portfolio (R$2,523,000), appreciation and other intangibles assets (R$20,394).

(3) This includes the allocation of fair value assigned to contingent liabilities (R$512,648).

(4) This includes the allocation of deferred taxes on contingent liabilities (R$174,300).

(5)   This refers to goodwill recorded on the acquisition of GVTPart. based on expected synergies resulting from the business combination. This amount has already been used for tax purposes.

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BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS (Tables)

12 Months Ended

Dec. 31, 2017

BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

Schedule of IFRS amendments

		Mandatory application:
		annual periods
Standards and amendments		beginning on or after
IFRS 9	Financial Instruments	January 1, 2018
IFRS15	Revenue from Contracts with Customers	January 1, 2018
Clarifications to IFRS 15	Revenue from Contracts with Customers, issued on April 12,2016	January 1, 2018
Amendments to IFRS 2	Classication and Valuation of Share Based Transactions	January 1, 2018
Amendments to IFRS 4	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts	January 1, 2018
Amendments to IAS 40	Transfers of Investiment Property	January 1, 2018
IFRIC 22	Foreign Currency Transactions and Advance Consideration	January 1, 2018
Improvements to IFRS Standards	2014-2016 Cycle	January 1,2018
Improvements to IFRS Standards	2015-2017 Cycle	January 1, 2019
IFRS 16	Leases	January 1, 2019
IFRIC23	Uncertainty over Income Tax Treatments	January 1, 2019
Amendments to IFRS 9	Prepayment Features with Negative Compensation	January 1, 2019
Amendments to IAS 28	Long-term Interest in associates and Joint Ventures	January 1, 2019
IFRS 17	Insurance Contracts	January 1, 2021
Amendments to IFRS 10 and IAS 28	Sale or Contribuition of Assets between na Investidor and its Associate or Joint Venture	Deferred Indefinitely

Schedule of equity interests

Investees	Type of investment	Equity interests		Country (Headquarters)	Core activity
Telefônica Data S.A. ("TData") (1)	Wholly-owned subsidiary	100.00	%	Brazil	Telecommunications
POP Internet Ltda ("POP") (2)	Wholly-owned subsidiary	100.00	%	Brazil	Internet
Aliança Atlântica Holding B.V. ("Aliança")	Jointly-controlled subsidiary	50.00	%	Holland	Holding of the telecommunications sector
Companhia AIX de Participações ("AIX")	Jointly-controlled subsidiary	50.00	%	Brazil	Operation of underground telecommunications networks
Companhia ACT de Participações ("ACT")	Jointly-controlled subsidiary	50.00	%	Brazil	Technical assistance in telecommunication networks

(1) TData is the wholly-owned parent of Terra Networks and Telefônica Transportes e Logística Ltda ("TGLog").

(2) POP is the wholly-owned parent of Innoweb Ltda ("Innoweb").

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CASH AND CASH EQUIVALENTS (Tables)

12 Months Ended

Dec. 31, 2017

CASH AND CASH EQUIVALENTS

Schedule of cash and cash equivalents

	12/31/17	12/31/16
Cash and banks	117,799	198,369
Short-term investments	3,932,539	4,906,741
Total	4,050,338	5,105,110

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TRADE ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2017

TRADE ACCOUNTS RECEIVABLE

Schedule of trade accounts receivables

	12/31/17	12/31/16
Billed amounts	6,753,621	6,939,909
Unbilled amounts	2,481,364	1,930,708
Interconnection amounts	859,819	1,345,471
Amounts from related parties (Note 28)	201,021	190,906
Gross accounts receivable	10,295,825	10,406,994
Estimated impairment losses	(1,433,471)	(1,399,895)
Total	8,862,354	9,007,099
Current	8,588,466	8,701,688
Noncurrent	273,888	305,411

Schedule of current and noncurrent trade accounts receivable, relating to finance lease

	12/31/17	12/31/16
Nominal amount receivable	434,743	611,384
Deferred financial income	(33,614)	(3,005)
Present value of accounts receivable	401,129	608,379
Estimated impairment losses	(154,666)	(344,738)
Net amount receivable	246,463	263,641
Current	140,257	158,767
Noncurrent	106,206	104,874

Schedule of aging list of gross trade accounts receivable

	Nominalamount	Present value of
	receivable	accountsreceivable
Falling due within one year	229,981	229,981
Falling due between one year and five years	204,762	171,148
Total	434,743	401,129

Schedule of aging list of trade accounts receivable, net of estimated impairment losses

	12/31/17	12/31/16
Falling due	6,635,125	6,841,752
Overdue – 1 to 30 days	1,132,008	1,073,568
Overdue – 31 to 60 days	375,176	322,485
Overdue – 61 to 90 days	232,648	227,010
Overdue – 91 to 120 days	105,342	105,048
Overdue – over 120 days	382,055	437,236
Total	8,862,354	9,007,099

Schedule of changes in the estimated impairment losses for accounts receivable

Balance at 12/31/15	(2,217,926)
Supplement to estimated losses (Note 24)	(1,843,775)
Reversal of estimated losses (Note 24)	495,554
Write-off due to use	2,166,252
Balance at 12/31/16	(1,399,895)
Supplement to estimated losses (Note 24)	(1,994,769)
Reversal of estimated losses (Note 24)	513,754
Write-off due to use	1,456,158
Business combinations (Note 1.c.1)	(8,719)
Balance at 12/31/ 2017	(1,433,471)

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2017

INVENTORIES

Schedule of inventories

	12/31/17	12/31/16
Materials for resale (1)	325,850	377,465
Materials for consumption	57,740	77,732
Other inventories	7,822	7,892
Gross total	391,412	463,089
Estimated losses from impairment or obsolescence (2)	(42,657)	(52,676)
Total	348,755	410,413

(1) This includes, among others, mobile phones, simcards (chip) and IT equipment in stock.

(2) Additions and reversals of estimated impairment losses and inventory obsolescence are included in cost of goods sold (Note 24).

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DEFERRED TAXES AND TAXES RECOVERABLE (Tables)

12 Months Ended

Dec. 31, 2017

DEFERRED TAXES AND TAXES RECOVERABLE

Schedule of taxes recoverable

	12/31/17	12/31/16
State VAT (ICMS) (1)	2,450,856	2,329,159
Income and social contribution taxes recoverable (2)	505,535	830,549
Withholding taxes and contributions (3)	238,355	157,371
PIS and COFINS	85,098	148,759
Fistel, INSS, ISS and other taxes	27,431	38,236
Total	3,307,275	3,504,074
Current	2,563,990	3,027,230
Noncurrent	743,285	476,844

(1) This includes credits of ICMS arising from the acquisition of property and equipment (subject to offsetting in 48 months); requests for refund of ICMS, which was paid under invoices that were cancelled subsequently; for the rendering of services; tax substitution; and tax rate difference; among others. Noncurrent consolidated amounts include credits arising from the acquisition of property and equipment of R$423,588 and R$370,770 on December 31, 2017 and 2016, respectively.

(2) This refers to prepayments of income and social contribution taxes, which will be offset against federal taxes to be determined in the future.

(3) This refers to credits on withholding income tax (IRRF) on short-term investments, interest on equity and others, which are used as deduction in operations for the period and social contribution tax withheld at source on services provided to public agencies.

Schedule of significant components of deferred income and social contribution taxes

	Balances at		Comprehensive		Balances at		Comprehensive	Business combination		Balances at
	12/31/15	Income statement	income	Other	12/31/16	Income statement	income	(Note 1 c.1)	Other	12/31/17
Deferred tax assets  (liabilities)
Income and social contribution taxes on tax losses (1)	26,519	(12,448)	—	—	14,071	710,411	—	69,451	—	793,933
Income and social contribution taxes on temporary differences (2)	685,071	(748,969)	78,840	(1,516)	13,426	(1,251,816)	58,192	48,434	(86)	(1,131,850)
Provisions for legal, labor, tax civil and regulatory contingencies	1,954,236	276,100	—	—	2,230,336	68,399	—	—	—	2,298,735
Trade accounts payable and other provisions	687,124	(10,001)	—	—	677,123	(25,706)	—	—	—	651,417
Estimated losses on impairment of accounts receivable	447,018	(88,213)	—	—	358,805	76,155	—	—	—	434,960
Customer portfolio and trademarks	343,107	(30,015)	—	—	313,092	(58,674)	—	—	—	254,418
Estimated losses from modems and other P&E items	294,945	(10,268)	—	—	284,677	(83,736)	—	—	—	200,941
Pension plans and other post-employment benefits	26,285	1,633	80,501	—	108,419	8,630	57,485	—	—	174,534
Profit sharing	106,198	19,058	—	—	125,256	(15,210)	—	—	—	110,046
Provision for loyalty program	32,604	(13,492)	—	—	19,112	(1,991)	—	—	—	17,121
Accelerated accounting depreciation	10,865	13,168	—	—	24,033	(15,773)	—	—	—	8,260
Estimated impairment losses on inventories	10,707	1,392	—	—	12,099	(347)	—	—	—	11,752
Derivative transactions	59,408	2,358	(1,633)	—	60,133	(35,084)	822	—	—	25,871
Licenses	(1,204,226)	(216,330)	—	—	(1,420,556)	(216,330)	—	—	—	(1,636,886)
Effects of goodwill generated in the acquisition of Vivo Part.	(809,600)	(54,720)	—	—	(864,320)	(5,461)	—	—	—	(869,781)
Goodwill from Spanish and Navytree	(337,535)	—	—	—	(337,535)	—	—	—	—	(337,535)
Goodwill from Vivo Part.	(837,918)	(167,202)	—	—	(1,005,120)	(167,203)	—	—	—	(1,172,323)
Goodwill from GVTPart.	—	(522,228)	—	—	(522,228)	(696,305)	—	—	—	(1,218,533)
Technological Innovation Law	(193,146)	52,206	—	—	(140,940)	43,407	—	—	—	(97,533)
Income and social contribution taxes on other temporary differences (3)	94,999	(2,415)	(28)	(1,516)	91,040	(126,587)	(115)	48,434	(86)	12,686
Total deferred tax assets (liabilities), noncurrent	711,590	(761,417)	78,840	(1,516)	27,497	(541,405)	58,192	117,885	(86)	(337,917)
Deferred tax assets	4,153,054				4,541,952					5,288,176
Deferred tax liabilities	(3,441,464)				(4,514,455)					(5,626,093)
Deferred tax assets  (liabilities), net	711,590				27,497					(337,917)
Represented in the balance sheet as follows:
Deferred tax assets	711,590				27,497					371,408
Deferred tax liabilities	—				—					(709,325)

(1) This refers to the amounts recorded which, in accordance with Brazilian tax legislation, may be offset to the limit of 30% of the tax bases computed for the following years, with no expiry date. In 2017, additions of R$779,862 were recorded in the Consolidated , composed of R$587,374 of the Company and R$194,488 of Terra Networks and POP.

(2) This refers to amounts that will be realized upon payment of provisions, effective impairment losses for trade accounts receivable, or realization of inventories, as well as upon reversal of other provisions.

(3) These refer to deferred taxes arising from other temporary differences, such as deferred income, renewal of licenses burden, subsidy on the sale of mobile phones, among others.

Schedule of expected realization of deferred taxes

Year
2018	1,904,953
2019	685,775
2020	374,379
2021	442,867
2022	704,303
2023 onwards	(4,450,194)
Total	(337,917)

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JUDICIAL DEPOSITS AND GARNISHMENTS (Tables)

12 Months Ended

Dec. 31, 2017

JUDICIAL DEPOSITS AND GARNISHMENTS

Schedule of judicial deposits and garnishments

	12/31/17	12/31/16
Judicial deposits
Tax	4,230,917	3,758,787
Labor	885,338	1,051,430
Civil	1,205,807	1,109,001
Regulatory	200,627	276,604
Total	6,522,689	6,195,822
Garnishments	141,116	155,744
Total	6,663,805	6,351,566
Current	324,638	302,424
Noncurrent	6,339,167	6,049,142

Schedule of composition of the balances of the tax judicial deposits

	12/31/2017	12/31/2016
Contribution to Empresa Brasil de Comunicação (EBC)	1,238,068	1,053,867
Telecommunications Inspection Fund (FISTEL)	1,161,061	1,095,789
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)	518,474	449,988
Universal Telecommunication Services Fund (FUST)	484,649	456,977
Social Contribution Tax for Intervention in the Economic Order (CIDE)	270,612	176,557
State Value-Added Tax (ICMS)	273,264	212,652
Social Security, work accident insurance (SAT) and funds to third parties (INSS)	134,688	128,458
Withholding Income Tax (IRRF)	45,846	73,848
Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS)	37,965	35,570
Other taxes, charges and contributions	66,290	75,081
Total	4,230,917	3,758,787

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PREPAID EXPENSES (Tables)

12 Months Ended

Dec. 31, 2017

PREPAID EXPENSES

Schedule of prepaid expenses

	12/31/17	12/31/16
Advertising and publicity	336,295	258,212
Insurance	36,941	39,558
Rental	29,713	19,276
Software and networks maintenance	12,375	12,283
Taxes, financial charges, personal and other	54,231	50,193
Total	469,555	379,522
Current	446,439	343,092
Noncurrent	23,116	36,430

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OTHER ASSETS (Tables)

12 Months Ended

Dec. 31, 2017

OTHER ASSETS

Schedule of other assets

	12/31/17	12/31/16
Advances to employees and suppliers	58,456	83,634
Related-party receivables (Note 28)	166,733	250,679
Receivables from suppliers	114,015	99,166
Subsidy on handset sales	37,258	30,491
Surplus from post-employment benefit plans (Note 30)	9,833	9,041
Other amounts receivable	24,037	22,649
Total	410,332	495,660
Current	321,397	440,095
Noncurrent	88,935	55,565

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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2017

INVESTMENTS

Summary of significant financial data on investees

	At 12/31/17						At 12/31/16
	Cia ACT		Cia AIX		Aliança		Cia ACT		Cia AIX		Aliança
Equity interest	50.00	%	50.00	%	50.00	%	50.00	%	50.00	%	50.00	%
Summary of balance sheets:
Current assets	17		22,431		167,540		15		20,337		145,121
Noncurrent assets	—		13,410		—		—		12,879		—
Total assets	17		35,841		167,540		15		33,216		145,121
Current liabilities	1		4,084		58		1		4,029		101
Non-current liabilities	—		4,811		—		—		5,415		—
Equity	16		26,946		167,482		14		23,772		145,020
Total liabilities and equity	17		35,841		167,540		15		33,216		145,121
Investment Book value	8		13,473		83,741		7		11,886		72,510

	2017			2016
Summary of Income Statements:	Cia ACT	Cia AIX	Aliança	Cia ACT	Cia AIX	Aliança
Net operating income	82	45,622	—	79	42,840	—
Operating costs and expenses	(80)	(43,448)	(43)	(72)	(41,760)	(155)
Financial income (expenses), net	—	1,686	27	—	1,980	41
Income and social contribution taxes	—	(686)	—	(1)	(464)	—
Net income (loss) for the year	2	3,174	(16)	6	2,596	(114)
Equity pickup, according to interest held	1	1,587	(8)	3	1,298	(57)

Schedule of changes in investments

				Other
	Aliança	AIX	ACT	investments (1)	Total investments
Balances at 12/31/15	89,799	10,099	4	1,259	101,161
Equity pick-up	(57)	1,298	3	—	1,244
Dividends and interest on equity	—	489	—	—	489
Other comprehensive  income	(17,232)	—	—	83	(17,149)
Balances at 12/31/16	72,510	11,886	7	1,342	85,745
Equity pick-up	(8)	1,587	1	—	1,580
Other comprehensive  income	11,239	—	—	338	11,577
Balances at 12/31/17	83,741	13,473	8	1,680	98,902

(1) Other investments (tax incentives and interest held in companies) are measured at fair value.

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PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2017

PROPERTY, PLANT AND EQUIPMENT

Schedule of breakdown of and changes to property, plant and equipment

	Switching	Terminal					Assets and
	and transmission	equipment				Estimated	facilities under
	equipment	/ modems	Infrastructure	Land	Other P&E	losses (1)	construction	Total
Annual depreciation rate(%)	2.50 to 25.00	6.67 to 66.67	2.50 to 66.67	—	10.00 to 25.00	—	—	—
Balances and changes:
Balance at 12/31/15	20,935,963	3,146,109	3,655,951	315,705	1,066,452	(494,149)	1,850,734	30,476,765
Additions	634,635	203,775	159,081	215	288,666	(19,962)	5,543,398	6,809,808
Write-offs, net (2)	(24,236)	(816)	(99,437)	(201)	3,059	28,539	(38,959)	(132,051)
Net transfers	3,473,332	677,572	523,995	—	(159,702)	(3)	(4,625,143)	(109,949)
Depreciation (Note 24)	(2,787,820)	(1,438,333)	(514,383)	—	(379,119)	—	—	(5,119,655)
Balance at 12/31/16	22,231,874	2,588,307	3,725,207	315,719	819,356	(485,575)	2,730,030	31,924,918
Additions	42,999	141,132	91,160	550	259,620	(37,374)	6,085,487	6,583,574
Write-offs, net	(88,766)	(7,602)	(6,966)	(1,916)	(2,522)	162,319	(18,897)	35,650
Net transfers	3,634,293	1,471,431	619,008	—	34,093	132,578	(5,910,612)	(19,209)
Depreciation (Note 24)	(3,011,291)	(1,468,936)	(544,454)	—	(284,983)	—	—	(5,309,664)
Business Combination (Note 1.c.1)	—	—	1,342	—	4,888	—	817	7,047
Balance at 12/31/17	22,809,109	2,724,332	3,885,297	314,353	830,452	(228,052)	2,886,825	33,222,316
At 12.31.16
Cost	70,789,534	15,294,619	15,023,890	315,719	4,308,718	(485,575)	2,730,030	107,976,935
Accumulated depreciation	(48,557,660)	(12,706,312)	(11,298,683)	—	(3,489,362)	—	—	(76,052,017)
Total	22,231,874	2,588,307	3,725,207	315,719	819,356	(485,575)	2,730,030	31,924,918
At 12.31.17
Cost	74,100,056	16,845,903	15,728,808	314,353	4,687,395	(228,052)	2,886,825	114,335,288
Accumulated depreciation	(51,290,947)	(14,121,571)	(11,843,511)	—	(3,856,943)	—	—	(81,112,972)
Total	22,809,109	2,724,332	3,885,297	314,353	830,452	(228,052)	2,886,825	33,222,316

(1) The Company recognized estimated losses for potential obsolescence of materials used in property and equipment maintenance, based on levels of historical use and expected future use.

(2) Net write-offs regarding “Infrastructure and Assets and Facilities under Construction” for the year ended December 31, 2016, include the amount of R$99,210 regarding the disposal of 1,655 towers owned by the Company to Telxius Torres Brasil Ltda, a directly controlled Telefónica subsidiary.

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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2017

INTANGIBLE ASSETS

Schedule of breakdown, changes and amortization rates of intangible assets

	Indefinite
	useful life			Finite useful life
																	Estimated
														Other			losses	Software
					Customer									intangible			for	under
	Goodwill	Software			portfolio			Trademarks			Licenses			assets			software	development	Total
Annual amortization rate (%)	—	20.00	to	50.00	11.76	to	12.85	5.13	to	66.67	3.60	to	6.67	6.67	to	20.00
Balances and changes:
Balance at 12/31/15	23,062,421			2,385,723			3,154,501			1,274,803			15,635,082			18,190	—	76,471	45,607,191
Additions (1)	—			634,528			—			—			185,450			19,796	(4,550)	519,563	1,354,787
Write-offs, net	—			24			—			—			—			(11)	(31)	—	(18)
Net transfers	—			616,336			—			—			—			19,207	—	(532,609)	102,934
Amortization (Note 24)	—			(942,090)			(593,281)			(116,983)			(922,564)			(6,480)	—	—	(2,581,398)
Balance at 12/31/16	23,062,421			2,694,521			2,561,220			1,157,820			14,897,968			50,702	(4,581)	63,425	44,483,496
Additions	—			276,390			—			—			—			207	—	1,100,785	1,377,382
Write-offs, net	—			(7,427)			—			—			—			—	4,051	—	(3,376)
Net transfers	—			701,545			—			—			—			(24,297)	31	(658,070)	19,209
Amortization (Note 24)	—			(944,753)			(582,357)			(84,205)			(928,362)			(5,660)	—	—	(2,545,337)
Business Combination (Note 1.c.1)	—			530			—			—			—			—	—	—	530
Balance at 12/31/17	23,062,421			2,720,806			1,978,863			1,073,615			13,969,606			20,952	(499)	506,140	43,331,904
At 12/31/16
Cost	23,062,421			14,062,127			4,513,278			1,658,897			20,237,572			267,074	(4,581)	63,425	63,860,213
Accumulated amortization	—			(11,367,606)			(1,952,058)			(501,077)			(5,339,604)			(216,372)	—	—	(19,376,717)
Total	23,062,421			2,694,521			2,561,220			1,157,820			14,897,968			50,702	(4,581)	63,425	44,483,496
At 12/31/17
Cost	—			15,125,532			4,513,278			1,658,897			20,237,572			238,201	(499)	506,140	42,279,121
Accumulated amortization	23,062,421			(12,404,726)			(2,534,415)			(585,282)			(6,267,966)			(217,249)	—	—	1,052,783
Total	23,062,421			2,720,806			1,978,863			1,073,615			13,969,606			20,952	(499)	506,140	43,331,904

(1)On December 17, 2015, the Company was the winner in seven lots at a frequency of 2,500MHz, offering the amount of R$185,450. On July 21, 2016, through acts No. 2.483, No. 2.485 and No. 2.486, the Directing Council of ANATEL approved the use of these radio frequencies. The terms of authorization of these radio frequency bands were signed on July 26, 2016 and published in the DOU on August 26, 2016.

Schedule of breakdown of goodwill

Ajato Telecomunicação Ltda.	149
Spanish e Figueira (merged with TDBH) (1)	212,058
Santo Genovese Participações Ltda. (2)	71,892
Telefônica Televisão Participações S.A. (3)	780,693
Vivo Participações S. A. (4)	9,160,488
GVT Participações S. A. (5)	12,837,141
Total	23,062,421

(1) Goodwill from partial spin-off of “Spanish and Figueira”, which was reversed to the Company upon merger of Telefônica Data Brasil Holding S.A. (TDBH) in 2006.

(2) Goodwill generated upon acquisition of equity control of Santo Genovese Participações (parent company of Atrium Telecomunicações Ltda.), in 2004.

(3) Goodwill generated upon acquisition of Telefônica Televisão Participações (formerly Navytree) merged in 2008.

(4) Goodwill generated upon acquisition/merger of Vivo Participações in 2011.

(5) Goodwill generated upon acquisition of GVT Participações in 2015 (Note 1.c3).

Schedule of sensitivity to changes in assumptions

Changes in key assumptions	In percentage points (p.p)
Financial variables
Discount rate	+/-	1.0
Perpetuity growth rates	+/-	0.5
Operating variables
OIBDA Margin	+/-	2.0
Capex/Revenues Margin	+/-	1.0

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PERSONNEL, SOCIAL CHARGES AND BENEFITS (Tables)

12 Months Ended

Dec. 31, 2017

PERSONNEL, SOCIAL CHARGES AND BENEFITS

Schedule of personnel, social charges and benefits

	12/31/17	12/31/16
Salaries and wages	40,171	55,476
Social charges and benefits	399,229	384,073
Profit sharing	273,384	285,887
Share-based payment plans (Note 29)	33,880	46,223
Total	746,664	771,659
Current	723,380	760,643
Noncurrent	23,284	11,016

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TRADE ACCOUNTS PAYABLE (Tables)

12 Months Ended

Dec. 31, 2017

TRADE ACCOUNTS PAYABLE

Schedule of trade accounts payable

	12/31/17	12/31/16
Sundry suppliers (Opex, Capex, Services e Material)	6,683,503	6,617,240
Amounts payable (operators, cobilling)	187,976	314,958
Interconnection / interlink (1)	224,777	369,715
Related parties (Note 28)	350,844	381,240
Total	7,447,100	7,683,153
Current	7,447,100	7,611,246
Noncurrent	—	71,907

(1)As of December 31, 2016, the amount recorded as non-current related to the judicial proceeding filed against SMP operators claiming the reduction of the VU-M amount. On October 15, 2007, an injunction was obtained to provide a judicial deposit of the difference between VC1 calls and the amount effectively charged by SMP operators. In May 2017, the updated amount of R$71,956 was raised in favor of the operators involved, after an agreement between the parties.

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TAXES, CHARGES AND CONTRIBUTIONS (Tables)

12 Months Ended

Dec. 31, 2017

TAXES, CHARGES AND CONTRIBUTIONS

Schedule of taxes, charges and contributions

	12/31/17	12/31/16
Income and social contribution taxes payable	4,479	11,520
ICMS	1,149,137	1,226,172
PIS and COFINS	419,589	412,149
Fust and Funttel	93,869	92,828
ISS, CIDE and other taxes	113,689	77,193
Total	1,780,763	1,819,862
Current	1,731,315	1,770,731
Noncurrent	49,448	49,131

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DIVIDENDS AND INTEREST ON EQUITY (IOE) (Tables)

12 Months Ended

Dec. 31, 2017

DIVIDENDS AND INTEREST ON EQUITY (IOE)

Schedule of breakdown of dividend and interest on equity

	12/31/17	12/31/16
Telefónica Latinoamérica Holding S.L.	505,750	454,583
Telefónica  S.A.	609,003	547,390
SP Telecomunicações Participações Ltda	383,933	345,090
Telefónica Chile S.A.	1,070	962
Non-controlling interest	896,360	847,006
Total	2,396,116	2,195,031

Schedule of changes in dividend and interest on equity

Balance at 12/31/15	2,209,362
Supplementary dividends for 2015	1,287,223
Interim interest on equity (net of IRRF)	1,846,323
Unclaimed dividends and interest on equity	(189,471)
Payment of dividends and interest on equity	(2,966,384)
IRRF on shareholders exempt/immune from interest on equity	7,978
Balance at 12/31/16	2,195,031
Supplementary dividends for 2016	1,913,987
Interim interest on equity (net of IRRF)	2,054,143
Unclaimed dividends and interest on equity	(101,778)
Payment of dividends and interest on equity	(3,668,551)
IRRF on shareholders exempt/immune from interest on equity	3,284
Balance at 12/31/17	2,396,116

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PROVISIONS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2017

PROVISIONS AND CONTINGENCIES

Schedule of breakdown of changes in provisions for cases in which an unfavorable outcome is probable, in addition to contingent liabilities and provisions for dismantling

	Provisions for contingencies
					Contingent	Provision for
					liabilities (PPA)	decommissioning
	Labor	Tax	Civil	Regulatory	(1)	(2)	Total
Balances at 12/31/15	1,166,151	2,736,191	1,010,356	642,695	843,882	405,421	6,804,696
Additions (income) (Note 25)	611,776	126,446	690,470	126,514	—	—	1,555,206
Write-offs due to reversal (income) (Note 25)	(153,758)	(53,616)	(343,016)	(10,552)	(9,088)	(32,924)	(602,954)
Other additions	958	100,314	7,897	—	—	162,628	271,797
Write-offs due to payment	(396,894)	(159,039)	(538,309)	(2,580)	(11,240)	—	(1,108,062)
Monetary restatement	154,724	379,385	211,959	72,857	58,191	11,462	888,578
Balances at 12/31/16	1,382,957	3,129,681	1,039,357	828,934	881,745	546,587	7,809,261
Additions (income) (Note 25)	809,754	226,125	748,620	271,124	—	—	2,055,623
Write-offs due to reversal (income) (Note 25)	(512,583)	(71,684)	(309,927)	(72,780)	(89,230)	—	(1,056,204)
Other additions (reversal)	(492)	93,596	207	—	—	20,765	114,076
Write-offs due to payment	(865,656)	(168,407)	(551,928)	(6,873)	—	—	(1,592,864)
Write-offs due to taxes (3)	—	(66,027)	—	—	—	—	(66,027)
Monetary restatement	147,334	348,393	123,487	83,387	53,281	12,129	768,011
Business combination (Note 1 c.1)	19,282	87,531	6,061	—	—	—	112,874
Balances at 12/31/17	980,596	3,579,208	1,055,877	1,103,792	845,796	579,481	8,144,750
At 12/31/16
Current	202,113	—	205,831	775,679	—	—	1,183,623
Noncurrent	1,180,844	3,129,681	833,526	53,255	881,745	546,587	6,625,638
At 12/31/17
Current	239,229	—	201,673	994,009	—	—	1,434,911
Noncurrent	741,367	3,579,208	854,204	109,783	845,796	579,481	6,709,839

(1) This refers to contingent liabilities arising from Purchase Price Allocation (PPA) generated on acquisition of the controlling interest of Vivo Participações in 2011 and GVTPart. in 2015.

(2) These refer to costs to be incurred to return the sites (locations for installation of base radio, equipment and real estate) to their respective owners in the same conditions as at the time of execution of the initial lease agreement.

(3) This refers to the amounts of tax on tax losses used to offset tax provisions arising from the Company's adherence to the Special Tax Regularization Program (PERT).

Schedule of guarantees granted by contingency

	12/31/17			12/31/16
		Judicial deposits			Judicial deposits
	Property and	and	Letters of	Property and	and	Letters of
	equipment	garnishments	guarantee	equipment	garnishments	guarantee
Civil, labor and tax	176,591	6,663,805	1,669,476	203,600	6,351,566	1,948,088
Total	176,591	6,663,805	1,669,476	203,600	6,351,566	1,948,088

Labor

PROVISIONS AND CONTINGENCIES

Schedule of provision contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	980,596	1,382,957
Possible losses	261,876	293,146

Tax

PROVISIONS AND CONTINGENCIES

Schedule of provision contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	3,579,208	3,129,681
Federal	502,153	343,353
State	231,998	226,571
Municipal	32,054	30,519
FUST, FISTEL and EBC	2,813,003	2,529,238
Possible losses	35,388,910	30,050,578
Federal	8,226,374	5,931,022
State	18,968,349	15,389,802
Municipal	548,014	853,244
FUST, FUNTTEL, FISTEL and EBC	7,646,173	7,876,510

Civil

PROVISIONS AND CONTINGENCIES

Schedule of provision contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	1,055,877	1,039,357
Possible losses	2,858,796	2,574,836

Regulatory

PROVISIONS AND CONTINGENCIES

Schedule of provision contingencies

	Amounts involved
Nature/Degree of Risk	12/31/17	12/31/16
Provisions - probable losses	1,103,792	828,934
Possible losses	5,065,907	5,018,205

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DEFERRED REVENUE (Tables)

12 Months Ended

Dec. 31, 2017

DEFERRED REVENUE

Schedule of deferred revenue

	12/31/17	12/31/16
Services and goods (1)	301,292	389,706
Disposal of PP&E (2)	165,162	227,397
Activation revenue (3)	7,959	44,914
Customer loyalty program (4)	50,354	56,210
Government grants (5)	115,379	133,300
Other (6)	83,052	90,112
Total	723,198	941,639
Current	372,561	429,853
Noncurrent	350,637	511,786

(1) This refers mainly to the balances of revenues from recharging prepaid services, which are recognized in income as services are provided to customers. It includes the amount of the agreement the Company entered into for industrial use of its mobile network by a different SMP operator in Regions I, II and III of the general authorizations plan, which is intended solely for the rendering of SMP services by the operator for its customers.

(2) Includes the net balances of the residual values from sale of non- strategic towers and rooftops, which are transferred to income as the conditions for recognition are fulfilled.

(3) This refers to the deferred activation revenue (fixed) recognized in income over the estimated period in which a customer remains in the base.

(4) This refers to points earned under the Company’s loyalty program, which enables customers to accumulate points by paying bills relating to use of services offered. The balance represents the Company’s estimate of customers exchanging points for goods and / or services in the future.

(5) This refers to: i) government subsidy arising from funds obtained from BNDES credit lines to be used in the acquisition of domestic equipment, which have been amortized over the useful life cycle of the equipment; and ii) subsidies arising from projects related to state taxes, which are being amortized over the contractual period.

(6) Includes mainly reimbursement for costs for leaving radio frequency sub-bands 2,500MHz to 2,690MHz due to cancellation of the Multichannel Multipoint Distribution Service (MMDS).

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LOANS, FINANCING AND DEBENTURES (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of detailed information about borrowings [line items]

Schedule of balance of amounts payable relating to finance leases

	12/31/17	12/31/16
Nominal value payable	787,147	831,479
Unrealized financial expenses	(401,687)	(457,051)
Present value payable	385,460	374,428
Current	51,036	45,943
Noncurrent	334,424	328,485

Schedule of aging list of finance lease payable

Aging list of finance lease payable at December 31, 2017 is as follows:

	Nominal value	Present value
	payable	payable
Up to 1 year	57,865	51,036
From 1 to 5 years	201,057	144,963
Over five years	528,225	189,461
Total	787,147	385,460

Schedule of repayments by year of maturity

	Loans and			Contingent
Year	financing	Debentures	Finance lease	Consideration	Total
2019	737,548	64,098	43,810	—	845,456
2020	353,587	1,024,088	37,140	—	1,414,815
2021	226,244	1,024,088	32,705	—	1,283,037
2022	204,427	995,979	31,308	—	1,231,714
2023 onwards	17,773	—	189,461	446,144	653,378
Total	1,539,579	3,108,253	334,424	446,144	5,428,400

Schedule of changes in borrowings

	Loans and			Financing -	Contingent
	financing	Debentures	Finance lease	Suppliers	Consideration	Total
Balance at 12.31.15	4,773,489	3,544,714	296,684	1,228,682	377,721	10,221,290
Additions	466,629	—	61,866	666,085	—	1,194,580
Government grants (Note 19)	(12,040)	—	—	—	—	(12,040)
Financial charges (Note 26)	424,867	486,178	63,003	50,038	37,012	1,061,098
Issue costs	—	495	—	—	—	495
Foreign exchange variation (Note 26)	(272,795)	—	—	—	—	(272,795)
Write-offs (payments)	(1,222,135)	(477,080)	(47,125)	(1,222,214)	—	(2,968,554)
Balance at 12.31.16	4,158,015	3,554,307	374,428	722,591	414,733	9,224,074
Additions	55,876	3,000,000	13,462	571,444	—	3,640,782
Government grants (Note 19)	(1,581)	—	—	—	—	(1,581)
Financial charges (Note 26)	300,153	485,295	45,265	70,603	31,411	932,727
Issue costs	—	(4,926)	—	—	—	(4,926)
Foreign exchange variation (Note 26)	15,846	—	—	—	—	15,846
Write-offs (payments)	(2,025,963)	(2,513,937)	(47,695)	(757,486)	—	(5,345,081)
Balance at 12.31.17	2,502,346	4,520,739	385,460	607,152	446,144	8,461,841

Summary of funding and payments

		Write-offs (payments)
	Additions	Principal	Financial charges	Total
Loans and financing	55,876	(1,781,261)	(244,702)	(2,025,963)
BNDES	15,998	(825,256)	(213,752)	(1,039,008)
BNB	39,878	(11,808)	(4,073)	(15,881)
Resolution 4131 - Scotiabank and Bank of America	—	(944,197)	(26,877)	(971,074)
Debêntures	3,000,000	(2,000,000)	(513,937)	(2,513,937)
4th issue – Series 3	—	—	(1,522)	(1,522)
3rd issue	—	(2,000,000)	(246,817)	(2,246,817)
4th issue	—	—	(151,152)	(151,152)
5th issue	2,000,000	—	(114,446)	(114,446)
6th issue	1,000,000	—	—	—
Suppliers	571,444	(668,512)	(88,974)	(757,486)
Finance lease	13,462	(35,722)	(11,973)	(47,695)
Total	3,640,782	(4,485,495)	(859,586)	(5,345,081)

Loans and financing

Disclosure of detailed information about borrowings [line items]

Schedule of borrowings

	Information as of December 31, 2017									12/31/17			12/31/16
	Currency	Annual interest rate						Maturity	Garantees	Current	Non-current	Total	Current	Non-current	Total
Local currency										1,478,656	2,237,192	3,715,848	1,480,382	2,901,521	4,381,903
Financial Institutions (a.1)										820,468	1,456,624	2,277,092	711,848	2,158,303	2,870,151
BNDES FINEM	URTJLP	TJLP+	0		to	4.08	%	7/15/2019	(1)	371,946	213,958	585,904	363,734	567,110	930,844
BNDES FINEM	URTJLP								(3)	—	—	—	29,319	—	29,319
BNDES FINEM	URTJLP	TJLP+	0		to	3.38	%	8/15/2020	(3)	184,007	303,560	487,567	182,737	480,510	663,247
BNDES FINEM	R$					5.00	%	11/15/2019	(3)	14,654	13,377	28,031	14,686	27,971	42,657
BNDES FINEM	URTJLP	TJLP+	0		to	3.12	%	1/15/2023	(3)	101,879	413,552	515,431	7,596	499,442	507,038
BNDES FINEM	R$		4.00	%	to	6.00	%	1/15/2023	(3)	37,061	132,092	169,153	12,320	163,222	175,542
BNDES FINEM	R$	Selic Acum.	D-2		+	2.32	%	1/15/2023	(3)	70,426	305,952	376,378	1,408	340,600	342,008
BNDES PSI	R$		2.5	%	to	5.5	%	1/15/2023	(2)	25,405	19,413	44,818	92,508	44,698	137,206
BNB	R$		7.06	%	to	10	%	8/18/2022	(4)	15,090	54,720	69,810	7,540	34,750	42,290
Suppliers (a.2)	R$		101.4	%	to	109.4	% of CDI	12/31/2018		607,152	—	607,152	722,591	—	722,591
Finance lease (a.3)	R$					IPCA and IGP-M		8/31/2033		51,036	334,424	385,460	45,943	328,485	374,428
Contingent Consideration (a.4)	R$					Selic				—	446,144	446,144	—	414,733	414,733
Foreign Currency										142,299	82,955	225,254	1,062,593	225,271	1,287,864
Financial Institutions (a.1)										142,299	82,955	225,254	1,062,593	225,271	1,287,864
BNDES FINEM	UMBND		ECM		+	2.38	%	7/15/2019	(1)	142,299	82,955	225,254	136,850	225,271	362,121
Resolution 4131 - Scotiabank and Bank of America	US$									—	—	—	925,743	—	925,743
Total										1,620,955	2,320,147	3,941,102	2,542,975	3,126,792	5,669,767

(1)Guarantee in receivables relating to 15% of the outstanding debt balance or four times the largest installment, whichever is higher.

(2)Pledge of financed assets.

(3)Assignment of receivables corresponding to 20% of outstanding debt balance or 1 time the last installment of sub-credit facility "A" (UMIPCA) plus 5 times the last installment of each of the other sub-credit facilities, whichever is greater.

(4)Bank guarantee provided by Banco Safra in an amount equivalent to 100% of the outstanding financing debt balance. Setting up a liquidity fund represented by financial investments in the amount equivalent to three installments of repayment referenced to the average post-grace period performance. Balances were R$11,722 and R$10,773 at December 31, 2017 and 2016, respectively.

Debentures

Disclosure of detailed information about borrowings [line items]

Schedule of borrowings

	Information as of "December 31,172017										12/31/17			12/31/16
			Amounts
Issue	Issue date	Maturity	Issued	Outstanding	Issue value	Remuneration p.a.					Current	Non-current	Total	Current	Non-current	Total
4th issue – Series 3	10/15/2009	10/15/2019	810,000	23,557	810,000			IPCA+	4.00	%	312	40,010	40,322	307	36,990	37,297
1st issue – Minas Comunica	12/17/2007	7/5/2021	5,550	5,550	55,500			IPCA+	0.50	%	24,088	72,264	96,352	—	97,308	97,308
3rd issue	9/10/2012	9/10/2017	200,000	200,000	2,000,000	100	%	of CDI +	0.75	%	—	—	—	2,086,763	—	2,086,763
4th issue	4/25/2013	4/25/2018	130,000	130,000	1,300,000	100	%	of CDI +	0.68	%	1,317,513	—	1,317,513	33,434	1,299,505	1,332,939
5th issue	2/8/2017	2/8/2022	200,000	200,000	2,000,000	108.25	%	of CDI			64,397	1,996,517	2,060,914	—	—	—
6th issue	11/27/2017	11/27/2020	100,000	100,000	1,000,000	100	%	of CDI +	0.24	%	6,176	999,462	1,005,638	—	—	—
Total											1,412,486	3,108,253	4,520,739	2,120,504	1,433,803	3,554,307

XML

OTHER LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2017

OTHER LIABILITIES

Schedule of other liabilities

	12/31/17	12/31/16
Authorization licenses (1)	258,742	1,048,523
Liabilities with related parties (Note 28)	125,987	112,358
Payment for license renewal (2)	167,536	215,154
Third-party withholdings (3)	144,593	227,685
Surplus from post-employment benefit plans (Note 30)	531,938	327,670
Amounts to be refunded to subscribers	189,380	168,708
Other liabilities	72,893	92,447
Total	1,491,069	2,192,545
Current	718,468	1,640,757
Noncurrent	772,601	551,788

(1) Includes a portion of the Company's liability arising from an agreement entered into with ANATEL, whereby the operators that won the auction of the 4G licenses organized Entidade Administradora do Processo de Redistribuição e Digitalização de Canais de TV e RTV ("EAD"), which will be responsible for equally performing all TV and RTV channel redistribution procedures and solutions to harmful interference in radio communication systems, in addition to other operations in which the winning operators have obligations, as defined in the agreement. On January 31, 2017, the Company paid R$858,991 to EAD, referring to the 2nd and 3rd installments of the auction of 700 MHz national frequency bands for the provision of SMP, performed by ANATEL on September 30, 2014.

(2) This refers to the cost of renewing STFC and SMP licenses.

(3) This refers to payroll withholdings and taxes withheld from pay-outs of interest on equity and on provision of services.

XML

EQUITY (Tables)

12 Months Ended

Dec. 31, 2017

EQUITY

Schedule of distribution of capital

At December 31, 2017

	Common Shares			Preferred Shares			Grand Total
Shareholders	Number	%		Number	%		Number	%
Controlling Group	540,033,264	94.47	%	704,207,855	62.91	%	1,244,241,119		73.58	%
Telefónica Latinoamérica Holding, S.L.	46,746,635	8.18	%	360,532,578	32.21	%	407,279,213		24.09	%
Telefónica  S.A.	198,207,608	34.67	%	305,122,195	27.26	%	503,329,803		29.76	%
SP Telecomunicações Participações Ltda	294,158,155	51.46	%	38,537,435	3.44	%	332,695,590		19.67	%
Telefónica Chile S.A.	920,866	0.16	%	15,647	0.00	%	936,513		0.06	%
Other shareholders	29,320,789	5.13	%	415,131,868	37.09	%	444,452,657		26.28	%
Treasury Shares	2,290,164	0.40	%	983	0.00	%	2,291,147		0.14	%
Total shares	571,644,217	100.00	%	1,119,340,706	100.00	%	1,690,984,923		100.00	%
Treasury Shares	(2,290,164)			(983)			(2,291,147)
Total shares outstanding	569,354,053			1,119,339,723			1,688,693,776

At December 31, 2016

	Common Shares			Preferred Shares			Grand Total
Shareholders	Number	%		Number	%		Number	%
Controlling Group	540,033,264	94.47	%	704,207,855	62.91	%	1,244,241,119		73.58	%
Telefónica Latinoamérica Holding, S.L.	46,746,635	8.18	%	360,532,578	32.21	%	407,279,213		24.09	%
Telefónica  S.A.	198,207,608	34.67	%	305,122,195	27.26	%	503,329,803		29.76	%
SP Telecomunicações Participações Ltda	294,158,155	51.46	%	38,537,435	3.44	%	332,695,590		19.67	%
Telefónica Chile S.A.	920,866	0.16	%	15,647	0.00	%	936,513		0.06	%
Other shareholders	29,320,789	5.13	%	415,132,512	37.09	%	444,453,301		26.28	%
Treasury Shares	2,290,164	0.40	%	339	0.00	%	2,290,503		0.14	%
Total shares	571,644,217	100.00	%	1,119,340,706	100.00	%	1,690,984,923		100.00	%
Treasury Shares	(2,290,164)			(339)			(2,290,503)
Total shares outstanding	569,354,053			1,119,340,367			1,688,694,420

Schedule of other capital reserves

	12.31.17	12.31.16
Excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date (1)	2,735,930	2,735,930
Cancelation of treasury shares according to the Special Shareholders' Meeting  (SGM) of 3/12/15 (2)	(112,107)	(112,107)
Direct costs of capital increases (3)	(62,433)	(62,433)
Incorporation of shares of GVTPart. (4)	(1,188,707)	(1,188,707)
Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData (5)	(75,388)	(75,388)
Preferred shares delivered referring to the judicial process of expansion plan (6)	2	2
Effects of the acquisition of Terra Networks Brasil by TData (7)	(59,029)	—
Total	1,238,268	1,297,297

(1)Refers to the excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date.

(2)The cancellation of 2,332,686 shares issued by the Company, held in treasury, approved at the Special Shareholders' Meeting held on March 12, 2015.

(3)Refers to direct costs (net of taxes) of Company capital increases on April 28, 2015 and April 30, 2015, arising from the Primary Offering of Shares.

(4)Refers to the difference between the economic values of the merger of shares of GVTPart. and market value of shares, issued on the transaction closing date.

(5)Regarding the effects of the acquisition of shares of non-controlling shareholders that, with the adoption of IFRS 10, would be recorded in equity when there is no change in the shareholding control.

(6)Refers to the effects of write-offs due to the transfer of 62 preferred shares in treasury to outstanding shares, for compliance with judicial process decisions in which the Company is involved regarding rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996.

(7)Refers to the effects of TData's acquisition of Terra Networks, related to the difference between the consideration given in exchange for the equity interest obtained and the value of the net assets acquired (note 1 c.1).

Schedule of treasury shares

	Shares			In thousands of
Treasury stock	Common shares	Preferred shares	Total	reais
At 12.31.15	2,290,164	734	2,290,898	(87,805)
Transfer of lawsuits concerning judicial proceedings  (1)	—	(395)	(395)	15
At 12.31.16	2,290,164	339	2,290,503	(87,790)
Acquisition of shares in the financial market  (2)	—	706	706	(32)
Transfer of lawsuits concerning judicial proceedings  (1)	—	(62)	(62)	2
At 12.31.17	2,290,164	983	2,291,147	(87,820)

(1) Refers to the transfer of preferred shares in treasury to outstanding shares to comply with decisions of lawsuits in which the Company is involved that deals with rights to the complementary receipt of shares calculated in relation to plans to expand the network after 1996.

(2) The Company acquired preferred shares issued by the Company in the financial market: (i) on June 1, 2017, 45 shares at a unit price of R$ 47.31, totaling R$ 2; and (ii) on July 5, 2017, 661 shares at a unit price of R$45.26, totaling R$32.

Schedule of income reserves

		Expansion and
		Modernization
	Legal reserve (1)	Reserve (2)	Tax incentives (3)	Total
At 12.31.15	1,703,643	700,000	6,928	2,410,571
Reversal of reserves	—	(700,000)	—	(700,000)
Recording of reserves	204,262	550,000	10,141	764,403
At 12.31.16	1,907,905	550,000	17,069	2,474,974
Reversal of reserves	—	(550,000)	—	(550,000)
Recording of reserves	230,439	297,000	10,815	538,254
At 12.31.17	2,138,344	297,000	27,884	2,463,228

(1) This reserve is set up by allocation of 5% of the net income for the year, up to the limit of 20% of the paid-up capital. Legal reserve will only be used to increase capital and offset accumulated losses.

(2) This reserve is constituted based on the capital budget, whose purpose is to guarantee the expansion of the network capacity to meet the Company's increasing demand and guarantee the quality of service rendering. In accordance with Article 196 of Law No. 6404/76, the capital budget will be submitted for appreciation and approval by the Shareholders' Meeting. 

(3) The Company has State VAT (ICMS) tax benefits in the states of Minas Gerais and Espírito Santo, relating to tax credits approved by the relevant bodies of said states, in connection with investments in the installation of SMP support equipment, fully operational, in accordance with the rules in force, ensuring that the localities listed in the call for bid be included in the SMP coverage area. The portion of profit subject to the incentive was excluded from dividend calculation, and may be used only in the event of capital increase or loss absorption.

Schedule of calculation of dividends and interest on equity

	2017	2016
Net income for the year	4,608,790	4,085,242
Allocation to legal reserve	(230,439)	(204,262)
Total	4,378,351	3,880,980
(-) Tax incentives - not distributable	(10,815)	(10,141)
Adjusted net income	4,367,536	3,870,839
IOE distributed for the year:	2,416,639	2,172,145
Interest on equity (gross)	2,416,639	2,172,145
Balance of unallocated net income	1,950,897	1,698,694
(+) Reversal special reserve for modernization and expansion	550,000	700,000
(+) Expired equity instruments	101,778	221,559
(+-) Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes	(113,811)	(156,266)
Income available to be distributed	2,488,864	2,463,987
Proposal for Distributions:
Special reserve for modernization and expansion	297,000	550,000
Additional proposed dividends	2,191,864	1,913,987
Total	2,488,864	2,463,987
Mandatory minimum dividend - 25% of adjusted net income	1,091,884	967,710

Schedule of proposed dividend for deliberation per share

Total proposed dividend for deliberation - per share	2017	2016
Common shares	1.217277	1.062955
Preferred shares (1)	1.339005	1.169250

(1) 10% higher than the amount allocated to each common share, under article 7 of the Company Articles of Incorporation.

Schedule of allocation of interim dividends and interest on equity

2017

Dates			Gross Amount			Net Value			Amount per Share (1)
		Beginning of
Approval	Credit	Payment	Common	Preferred (2)	Total	Common	Preferred (2)	Total	Common	Preferred (2)
02/13/17	02/24/17	Until 12/31/18	56,916	123,084	180,000	48,379	104,621	153,000	0.084970	0.093467
03/20/17	03/31/17	Until 12/31/18	110,669	239,331	350,000	94,069	203,431	297,500	0.165220	0.181742
06/19/17	06/30/17	Until 12/31/18	30,039	64,961	95,000	25,533	55,217	80,750	0.044845	0.049330
09/18/17	09/29/17	Until 12/31/18	96,440	208,560	305,000	81,974	177,276	259,250	0.143978	0.158375
12/14/17	12/26/17	Until 12/31/18	470,072	1,016,567	1,486,639	399,561	864,082	1,263,643	0.701779	0.771957
Total			764,136	1,652,503	2,416,639	649,516	1,404,627	2,054,143

2016

Dates			Gross Amount			Net Value			Amount per Share (1)
		Beginning of
Approval	Credit	Payment	Common	Preferred (2)	Total	Common	Preferred (2)	Total	Common	Preferred (2)
02/19/16	02/29/16	08/22/17	63,239	136,761	200,000	53,753	116,247	170,000	0.094411	0.103853
03/18/16	03/31/16	08/22/17	106,559	230,441	337,000	90,575	195,875	286,450	0.159083	0.174992
04/18/16	04/29/16	08/22/17	69,563	150,437	220,000	59,129	127,871	187,000	0.103853	0.114238
06/17/16	06/30/16	08/22/17	50,908	110,092	161,000	43,272	93,578	136,850	0.076001	0.083601
09/19/16	09/30/16	08/22/17	205,528	444,472	650,000	174,699	377,801	552,500	0.306837	0.337521
12/19/16	12/30/16	12/13/17	191,029	413,116	604,145	162,374	351,149	513,523	0.285191	0.313710
Total			686,826	1,485,319	2,172,145	583,802	1,262,521	1,846,323

(1) The amounts of IOE are calculated and stated net of Withholding Income Tax (IRRF). The immune shareholders received the full  IOE amount, without withholding income tax at source.

(2) The gross and net values for the preferred shares are 10% higher than those attributed to each common share, as per article 7 of the Company's Articles of Incorporation.

Schedule of changes in other comprehensive income

			Currency
	Financial		translation
	instruments	Derivative	effects - foreign
	available for sale	transactions	investments	Total
Balances at 12/31/15	(8,936)	379	34,025	25,468
Exchange variation	—	—	(17,232)	(17,232)
Gains from future contracts	—	42	—	42
Reclassification of gains cash flow hedge for capex	—	3,128	—	3,128
Gains on financial assets available for sale	55	—	—	55
Balances at 12/31/16	(8,881)	3,549	16,793	11,461
Exchange variation	—	—	11,239	11,239
Losses from future contracts	—	(1,595)	—	(1,595)
Gains on financial assets available for sale	223	—	—	223
Balances at 12/31/17	(8,658)	1,954	28,032	21,328

Schedule of calculation of earnings per share

	2017	2016	2015
Net income for the year attributable to shareholders:	4,608,790	4,085,242	3,420,249
Common shares	1,457,288	1,291,743	1,083,911
Preferred shares	3,151,502	2,793,499	2,336,338
Number of shares:	1,688,694	1,688,694	1,491,131
Weighted average number of outstanding common shares for the year	569,354	569,354	503,842
Weighted average number of outstanding preferred shares for the year	1,119,340	1,119,340	987,289
Basic and diluted earnings per share:
Common shares (in R$)	2.56	2.27	2.15
Preferred shares (in R$)	2.82	2.50	2.37

XML

NET OPERATING REVENUE (Tables)

12 Months Ended

Dec. 31, 2017

NET OPERATING REVENUE

Schedule of net operating revenue

	2017	2016	2015
Gross operating revenue (1)	66,243,174	65,006,728	60,997,496
Deductions from gross operating revenue	(23,036,342)	(22,498,269)	(20,710,681)
Taxes	(16,058,584)	(15,388,784)	(14,163,869)
Discounts granted and return of goods	(6,977,758)	(7,109,485)	(6,546,812)
Net operating revenue	43,206,832	42,508,459	40,286,815

(1)     These include telephone services, use of interconnection network, data and SVA services, cable TV and other services.

XML

OPERATING COSTS AND EXPENSES (Tables)

12 Months Ended

Dec. 31, 2017

OPERATING COSTS AND EXPENSES

Schedule of operating costs and expenses

	2017
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(845,358)	(2,387,314)	(493,095)	(3,725,767)
Third-party services	(5,591,284)	(6,423,523)	(1,232,379)	(13,247,186)
Interconnection and network use	(1,440,968)	—	—	(1,440,968)
Advertising and publicity	—	(1,015,414)	—	(1,015,414)
Rental, insurance, condominium and connection means	(2,624,405)	(151,455)	(204,701)	(2,980,561)
Taxes, charges and contributions	(1,792,764)	(39,050)	(34,779)	(1,866,593)
Estimated impairment losses on accounts receivable	—	(1,481,015)	—	(1,481,015)
Depreciation and amortization (1)	(5,963,153)	(1,433,297)	(457,284)	(7,853,734)
Cost of goods sold	(1,955,890)	—	—	(1,955,890)
Materials and other operating costs and expenses	(58,708)	(205,406)	(20,867)	(284,981)
Total	(20,272,530)	(13,136,474)	(2,443,105)	(35,852,109)

	2016
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(976,233)	(2,136,399)	(747,156)	(3,859,788)
Third-party services	(5,705,098)	(6,151,012)	(1,254,187)	(13,110,297)
Interconnection and network use	(1,924,148)	—	—	(1,924,148)
Advertising and publicity	—	(1,065,882)	—	(1,065,882)
Rental, insurance, condominium and connection means	(2,326,219)	(141,135)	(220,655)	(2,688,009)
Taxes, charges and contributions	(1,861,237)	(5,933)	(92,394)	(1,959,564)
Estimated impairment losses on accounts receivable	—	(1,348,221)	—	(1,348,221)
Depreciation and amortization (1)	(5,821,620)	(1,408,866)	(423,920)	(7,654,406)
Cost of goods sold	(2,118,940)	—	—	(2,118,940)
Materials and other operating costs and expenses	(89,519)	(197,918)	(55,074)	(342,511)
Total	(20,823,014)	(12,455,366)	(2,793,386)	(36,071,766)

	2015
			General and
			administrative
	Cost of sales	Selling expenses	expenses	Total
Personnel	(813,612)	(1,939,493)	(468,557)	(3,221,662)
Third-party services	(5,300,820)	(6,183,609)	(1,044,272)	(12,528,701)
Interconnection and network use	(2,595,894)	—	—	(2,595,894)
Advertising and publicity	—	(1,102,458)	—	(1,102,458)
Rental, insurance, condominium and connection means	(2,051,055)	(156,663)	(186,691)	(2,394,409)
Taxes, charges and contributions	(1,616,920)	(5,264)	(65,599)	(1,687,783)
Estimated impairment losses on accounts receivable	—	(1,230,675)	—	(1,230,675)
Depreciation and amortization (1)	(5,269,588)	(1,181,216)	(364,147)	(6,814,951)
Cost of goods sold	(2,597,088)	—	—	(2,597,088)
Materials and other operating costs and expenses	(100,099)	(206,099)	(13,193)	(319,391)
Total	(20,345,076)	(12,005,477)	(2,142,459)	(34,493,012)

(1)    Includes R$1,267, R$46,647 and R$37,626, related to non-cumulative PIS and COFINS tax credits in 2017, 2016 and 2015, respectively.

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OTHER OPERATING INCOME (EXPENSES) (Tables)

12 Months Ended

Dec. 31, 2017

OTHER OPERATING INCOME (EXPENSES)

Summary of other operating income (expenses)

	2017	2016	2015
Recovered expenses and fines	355,415	504,877	538,239
Provisions for labor, tax and civil contingencies	(999,419)	(985,176)	(1,014,080)
Net gain (loss) on asset disposal/loss (1)	108,767	463,602	(4,512)
Other operating income (expenses) (2)	(187,249)	(51,977)	(73,852)
Total	(722,486)	(68,674)	(554,205)
Other operating income	464,182	968,479	538,239
Other operating expenses	(1,186,668)	(1,037,153)	(1,092,444)
Total	(722,486)	(68,674)	(554,205)

(1) The amount shown for 2016 includes R$476,371 (net of residual values) from the Company’s sale of 1,655 of transmission towers to Telxius Torres Brasil Ltda. After the sale of these assets, a lease agreement for part of the towers sold was entered into, thus ensuring continued transmission of data for mobile services.

The transaction was recognized as sale and leasebackas provided under IAS 17. Management analyzed each asset leased back and classified them as operating or finance leases in accordance with IAS 17 qualitative and quantitative criteria.

Risks and benefits relating to these towers have been transferred to their purchasers, with the exception of several towers for which transfer of risks and benefits was not possible. For these items, the amount was recognized as deferred revenue (Note 19).

(2)    In the same transaction , performed in 2016 and described in item (1), the Company transferred assignment of current lease  agreements for sites and sold sharing agreements (customer portfolio) for R$40,899.

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FINANCIAL INCOME (EXPENSES) (Tables)

12 Months Ended

Dec. 31, 2017

FINANCIAL INCOME (EXPENSES)

Schedule of financial income (expenses)

	2017	2016	2015
Financial Income
Interest income	655,474	719,399	832,872
Interest receivable (customers, taxes and other)	124,391	104,837	87,023
Gain on derivative financial instruments	373,971	994,801	2,910,914
Foreign exchange variations on loans and financing	113,203	487,747	203,754
Other revenues from foreign exchange and monetary variation	406,013	374,169	569,698
Other financial income	82,906	100,406	124,404
Total	1,755,958	2,781,359	4,728,665
Financial Expenses
Loan, financing, debenture and finance lease charges	(932,727)	(1,061,098)	(921,019)
Foreign exchange variation on loans and financing	(129,049)	(214,952)	(1,365,133)
Loss on derivative financial instruments	(415,956)	(1,342,671)	(2,011,855)
Interest payable (financial institutions, provisions, trade accounts payable, taxes and other)	(136,425)	(278,175)	(216,729)
Other expenses with foreign exchange and monetary variation	(876,948)	(830,466)	(704,438)
IOF, Pis, Cofins and other financial expenses	(167,897)	(288,538)	(357,669)
Total	(2,659,002)	(4,015,900)	(5,576,843)
Financial Expenses, net	(903,044)	(1,234,541)	(848,178)

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INCOME AND SOCIAL CONTRIBUTION TAXES (Tables)

12 Months Ended

Dec. 31, 2017

INCOME AND SOCIAL CONTRIBUTION TAXES

Schedule of income and social contributions taxes

	2017		2016		2015
Income before taxes	5,730,773		5,134,722		4,393,456
Income and social contribution tax expenses, at the tax rate of 34%	(1,948,463)		(1,745,805)		(1,493,775)
Permanent differences
Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 11)	537		423		692
Unclaimed  interest on equity	(21,843)		(11,432)		(6,552)
Temporary differences in subsidiaries	2,007		—		—
Non-deductible expenses, gifts, incentives	(94,413)		(88,916)		(139,752)
Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years	132,080		—		—
Tax benefit related to interest on equity allocated	821,657		738,529		593,615
Other (additions) exclusions	(13,545)		57,721		72,565
Tax	(1,121,983)		(1,049,480)		(973,207)
Effective rate	19.6	%	20.4	%	22.2	%
Current income and social contribution taxes	(580,578)		(288,063)		(939,500)
Deferred income and social contribution taxes	(541,405)		(761,417)		(33,707)

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Tables)

12 Months Ended

Dec. 31, 2017

BALANCES AND TRANSACTIONS WITH RELATED PARTIES

Schedule of consolidated balances with the related parties

		Balance Sheet - Assets
		At 12/31/17				At 12/31/16
			Cash and			Cash and
	Type of		cash	Accounts		cash	Accounts
Companies	transaction		equivalents	receivable, net	Other assets	equivalents	receivable, net	Other assets
Parent Companies
SP Telecomunicações Participações	d) / l)		—	531	46	—	94	9,618
Telefónica LatinoAmerica Holding	l)		—	—	135,486	—	—	206,619
Telefónica	l)		—	492	158	—	—	633
			—	1,023	135,690	—	94	216,870
Other Group companies
Colombia Telecomunicaciones ESP	k)		—	1,210	4,505	—	2,641	3,900
Media Networks Brasil Soluções Digitais	a) / d)		—	1,017	2,106	—	81	59
Pegaso PCS	k)		—	2,757	—	—	6,163	—
T.O2 Germany GMBH CO. OHG	k)		—	22,315	—	—	9,849	—
Telcel Telecom. Celulares C. A.	k)		—	6,067	—	—	6,180	—
Telefônica Digital España	l)		—	1,929	—	—	—	—
Telefônica Factoring do Brasil	a) / d) / l)		—	12,337	93	—	4,927	22
Telefónica Global Technology	l)		—	—	13,600	—	1,614	11,244
Telefônica Inteligência e Segurança Brasil	a) / d) / l)		—	271	1,013	—	868	945
Telefónica International Wholesale Services Espanha	j)		—	69,087	—	—	82,613	—
Telefônica Learning Services Brasil	a)		—	175	—	—	64	—
Telefónica Moviles Argentina	k)		—	7,194	—	—	6,288	—
Telefónica Moviles Del Chile	k)		—	539	387	—	10,207	337
Telefónica Moviles Del Espanha	k)		—	8,918	—	—	9,220	—
Telefônica Serviços Empresariais do Brasil	a) / d) / p)		—	2,938	2,355	—	2,518	2,410
Telefonica UK LTD.(O2 UK LTD)	k)		—	1,350	—	—	8,809	—
Telefónica USA	j)		—	6,248	—	—	3,550	—
Telfisa	q)		9,523	—	—	78,070	—	—
Telxius Cable Brasil	a) / d) / p)		—	28,981	819	—	11,513	2,678
Telxius Torres Brasil  (1)	d) / l) / p) / x)		—	14,666	5,106	—	13,842	3,709
Terra Networks Chile, Terra Networks México, Terra Networks Perú e Terra Networks Operation	g) / h)		—	8,159	—	—	—	—
Terra Networks Brasil	a) / d) / l)		—	—	—	—	5,499	7,596
Other	a) / d) / g) / h) / k) / l) / p)		—	3,840	1,059	—	4,366	909
			9,523	199,998	31,043	78,070	190,812	33,809
Total			9,523	201,021	166,733	78,070	190,906	250,679
Current assets			9,523	201,021	164,249	78,070	190,906	247,863
Noncurrent assets			—	—	2,484	—	—	2,816

		Balance Sheet - Liabilities
		At 12/31/17		At 12/31/16
		Trade		Trade
		accounts		accounts
		payable and		payable and
	Type of	other	Other	other	Other
Companies	transaction	payables	liabilities	payables	liabilities
Parent Companies
SP Telecomunicações  Participações	l)	6,656	15,000	—	533
Telefónica LatinoAmerica Holding	l)	86	—	109	—
Telefónica	l) / m) / n)	1,205	99,950	2,236	84,759
		7,947	114,950	2,345	85,292
Other Group companies
Colombia Telecomunicaciones S.A. ESP	k)	471	—	2,675	—
Companhia AIX de Participações	u)	1,915	—	1,835	—
Fundação Telefônica	t)	—	137	—	52
Media Networks Latina America SAC	b)	4,248	—	32,398	—
Media Networks Brasil Soluções Digitais	f)	33,751	318	11,821	318
Pegaso PCS	k)	388	—	2,452	—
T.O2 Germany GMBH CO. OHG	k)	5,477	—	4,409	—
Telcel Telecom. Celulares C. A.	k)	5,240	—	4,721	—
Telefónica Compras Electrónicas	v)	24,311	—	24,196	—
Telefônica Digital España	l) / o)	46,645	—	35,347	—
Telefônica Factoring do Brasil	l) / s)	—	146	—	6,154
Telefónica Global Technology	e) / l)	15,671	—	15,169	—
Telefônica Inteligência e Segurança Brasil	c) / l)	15,336	27	26,516	27
Telefónica International Wholesale Services Espanha	f)	44,240	8	50,121	8
Telefônica Learning Services Brasil	r)	37,931	—	16,328	—
Telefónica Moviles Argentina	k)	3,865	—	13,997	—
Telefónica Moviles Del Chile	k)	963	—	10,673	—
Telefónica Moviles Del Espanha	k)	3,589	—	4,671	—
Telefônica Serviços Empresariais do Brasil	d)	—	376	112	1,042
Telefonica UK LTD.(O2 UK LTD)	k)	89	—	3,868	—
Telefónica USA	f)	—	171	14,283	168
Telxius Cable Brasil	f)	44,037	2,068	52,210	2,068
Telxius Torres Brasil (1)	x) / l)	37,718	7,757	33,178	15,991
Terra Networks México, Terra Networks Perú e Terra Networks Operation	h)	7,633	—	—	—
Terra Networks Brasil	i)	—	—	3,360	1,209
Other	g) / h) / k) / l) / w)	9,379	29	14,555	29
		342,897	11,037	378,895	27,066
Total		350,844	125,987	381,240	112,358
Current liabilities		350,844	124,749	381,240	110,449
Noncurrent liabilities		—	1,238	—	1,909

		Income statement
		2017			2016			2015
			Cost, despesas			Cost, despesas			Cost, despesas and
			and other			and other			other
			expenses			expenses			expenses
		Operating	(revenues)	Financial	Operating	(revenues)	Financial	Operating	(revenues)	Financial
Companies	Type of transaction	revenues	operating	result	revenues	operating	result	revenues	operating	result
Parent Companies
SP Telecomunicações  Participações	d) / l)	—	268	—	—	67	—	—	(94)	(146)
Telefónica LatinoAmerica Holding	l)	—	36,523	11,030	—	87,526	4,348	—	134,958	(14,383)
Telefónica	l) / m) / n)	—	(331,684)	(996)	—	(319,708)	(9,727)	—	(343,453)	(28,714)
		—	(294,893)	10,034	—	(232,115)	(5,379)	—	(208,589)	(43,243)
Other Group companies
Colombia Telecomunicaciones S.A. ESP	k)	349	(10)	604	217	(2,845)	(926)	389	(1,742)	1,165
Companhia AIX de Participações	a) / u)	36	(22,738)	—	67	(21,316)	—	32	(19,216)	—
Fundação Telefônica	a) / t)	—	(11,395)	—	-	(10,530)	—	—	(10,283)	—
Media Networks Brasil Soluções Digitais	a) / d) / f)	600	(57,176)	—	572	(3,451)	—	—	-	—
Media Networks Latina America SAC	b)	—	(33,133)	(516)	-	(17,133)	(50)	—	(39,234)	—
Pegaso PCS	k)	170	536	—	86	(5,991)	—	147	(2,650)	—
T. Learning Services Brasil	a) / r)	292	(54,782)	—	2	(47,544)	1,311	140	(44,825)	—
T.O2 Germany GMBH CO. OHG	k)	75	(1,409)	—	45	(4,527)	—	917	(2,329)	—
Telefónica Compras Electrónicas	v)	—	(29,062)	—	—	(42,889)	—	—	(13,692)	—
Telefônica Digital España	l) / o)	—	(81,893)	(2,600)	—	(44,872)	(1,262)	—	(46,096)	(6,200)
Telefônica Factoring do Brasil	a) / d) / l) / s)	69	828	61	41	200	—	36	33	55
Telefónica Global Technology, S.A.U.	e) / l)	—	(36,395)	40	—	(28,933)	(756)	—	(10,262)	806
Telefônica Inteligência e Segurança Brasil	a) / c) / d) / l)	706	(40,918)	—	1,041	(39,709)	389	976	(25,636)	—
Telefónica International Wholesale Services Espanha	f) / j)	56,728	(49,960)	(2,564)	72,520	(56,293)	(15,008)	82,667	(57,952)	41,386
Telefónica Moviles Argentina	k)	3,746	6,147	—	3,072	(9,112)	—	3,053	(10,728)	—
Telefónica Moviles Del Chile	k)	1,586	(2,196)	52	1,074	(1,096)	(80)	731	(4,236)	100
Telefónica Moviles Del Espanha	k)	1,048	(1,969)	—	(836)	(2,170)	—	2,938	(3,823)	—
Telefônica Serviços Empresariais do Brasil	a) / d) / p)	286	(989)	—	118	867	(43)	934	(7,402)	—
Telefonica UK LTD.(O2 UK LTD)	k)	1,163	(1,374)	—	5	(994)	—	2,841	(1,987)	—
Telefónica USA	f) / j)	2,392	(2,322)	(2,035)	2,998	(14,970)	(349)	3,542	(18,429)	1,970
Telxius Cable Brasil	a) / d) / f) / p)	15,044	(200,536)	787	17,624	(246,595)	244	14,188	(251,717)	—
Telefônica Transportes e Logística	a) / d) / l) / q) / z)	—	—	—	—	—	—	1,710	(55,367)	—
Telxius Torres Brasil  (1)	d) / l) / p) / x)	—	(107,373)	—	31	(72,460)	1,929	—	—	—
Terra Networks Chile, Terra Networks México, Terra Networks Perú e Terra Networks Operation	g) / h)	—	(9,782)	(120)	—	—	—	—	—	—
Terra Networks Brasil	a) / d) / l) / i)	2,485	(10,719)	—	16,483	(17,884)	1,194	1,285	(21,408)	—
Other	a) / d) / g) / h) / k) / l) / p) / w) / x)	3,537	(14,608)	41	1,683	(23,677)	1,216	2,582	(11,190)	385
		90,312	(763,228)	(6,250)	116,843	(713,924)	(12,191)	119,108	(660,171)	39,667
Total		90,312	(1,058,121)	3,784	116,843	(946,039)	(17,570)	119,108	(868,760)	(3,576)

(1) In March 2016, the Company entered into a purchase and sale agreements for infrastructure and assignment of leases, pooling and other covenants ("Agreement") with Telxius Torres Brasil Ltda (a Telefónica subsidiary). The subject matter of the agreement is the purchase and sale of 1,655 tower structures, assignment of current rental agreements for their sites and shared-use/ pooling agreements. The total amount involved was R$760,000, comprising R$719,101 relating to the tower infrastructures and R$40,899 relating to the customer portfolio.

Schedule of transactions with the related parties having impact on the balance sheet

Impacts on the Balance Sheet
Description	Balance Sheet Group	R$ thousands
Amounts receivable from Telxius Torres Brasil Ltda	Related-party receivables (1)	760,000
Amount of write-offs of residual values of towers	Property, plan and equipment (note 12)	(99,210)
Value of towers classified as finance lease	Finance lease (Note 20)	2,674
Value of towers awaiting for contractual conditions for transfer	Deferred revenues (Note 19)	140,846

(1) On April 8, 2016, Telxius Torres Brasil Ltda settled the amount of R$760,000 in favor of the Company relating to this transaction, which is classified in the statement of cash flows as cash received from sale of PP&E items.

Schedule of transactions with the related parties having impact on the statement of income

Impacts on the Statement of Income
Description	DRE Group	R$ thousands
Value of disposal of towers (except retention and financial lease)	Other operating revenues (expenses), net (Note 25)	575,580
Value of write-off of residual amount	Other operating revenues (expenses), net (Note 25)	(99,210)
Value of customer portfolio	Other operating revenues (expenses), net (Note 25)	40,899
Amount of PIS and Cofins charged on customer portfolio	Other operating revenues (expenses), net (Note 25)	(3,783)
Effect on operating income		513,486
Amount of IR and CS levied on towers and customer portfolio	Income and social contribution taxes (Note 27)	(174,585)
Net effect on transaction income	Net effect on transaction income	338,901

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS (Tables)

12 Months Ended

Dec. 31, 2017

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of plans sponsored by the Company and related benefit types

Plan	Type	Entity	Sponsor
PBS-A	Defined benefit (DB)	Sistel	Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás
PAMA / PCE	Defined benefit (DB)	Sistel	Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás
Healthcare - Law No. 9656/98	Defined benefit (DB)	Telefônica Brasil	Telefônica Brasil, TData, Terra Networks and TGLog
CTB	Defined benefit (DB)	Telefônica Brasil	Telefônica Brasil
Telefônica BD	Defined benefit (DB)	VisãoPrev	Telefônica Brasil
TCOPREV	Hybrid	VisãoPrev	Telefônica Brasil
VISÃO	Defined contribution (DC) / Hybrid	VisãoPrev	Telefônica Brasil, TData, Terra Networks and TGLog

Schedule of reconciliation of assets and liabilities

	Net liabilities (assets) at 12.31.17			Net liabilities (assets) at 12.31.16
	Post-retirement	Post-retirement		Post-retirement	Post-retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Present value of DB plan obligations	1,861,651	1,050,576	2,912,227	1,763,866	767,642	2,531,508
Fair value of plan assets	2,585,679	726,060	3,311,739	2,703,593	667,993	3,371,586
Net liabilities (assets)	(724,028)	324,516	(399,512)	(939,727)	99,649	(840,078)
Asset limitation	791,177	130,440	921,617	993,754	164,953	1,158,707
Noncurrent assets	(9,833)	—	(9,833)	(9,041)	—	(9,041)
Current liabilities	7,914	9,021	16,935	6,826	4,162	10,988
Noncurrent liabilities	69,068	445,935	515,003	56,242	260,440	316,682

Summary of total expenses recognized in the income statement

	2017			2016			2015
	Post-	Post-		Post-	Post-		Post-	Post-
	retirement	retirement		retirement	retirement		retirement	retirement
	pension plans	health plans	Total	pension plans	health plans	Total	pension plans	health plans	Total
Current service cost	3,044	7,606	10,650	2,811	2,761	5,572	2,682	5,720	8,402
Net interest on net actuarial assets/liabilities	5,258	29,325	34,583	5,278	2,986	8,264	4,525	36,763	41,288
Total	8,302	36,931	45,233	8,089	5,747	13,836	7,207	42,483	49,690

Summary of amounts recognized in other comprehensive income (loss)

	2017			2016			2015
	Post-	Post-		Post-	Post-		Post-	Post-
	retirement	retirement		retirement	retirement		retirement	retirement
	pension plans	health plans	Total	pension plans	health plans	Total	pension plans	health plans	Total
Actuarial (gains) losses	325,292	208,195	533,487	(174,496)	240,072	65,576	(87,306)	76,868	(10,438)
Asset limitation effect	(309,780)	(52,411)	(362,191)	182,088	(10,897)	171,191	(541,596)	150,541	(391,055)
Total	15,512	155,784	171,296	7,592	229,175	236,767	(628,902)	227,409	(401,493)

Schedule of changes in amount net of liability (asset) of defined benefit, net

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Net interest on net defined benefit liability (asset) at the beginning of the year	54,026	264,603	318,629	46,907	29,712	76,619
Business combinations	(12)	680	668	—	—	—
Expenses	8,302	36,931	45,233	8,089	5,747	13,836
Sponsor contributions	(10,680)	(3,041)	(13,721)	(8,562)	(31)	(8,593)
Amounts recognized in OCI	15,512	155,784	171,296	7,592	229,175	236,767
Net interest on net defined benefit liability (asset) at the end of the year	67,148	454,957	522,105	54,026	264,603	318,629
Actuarial assets per balance sheet	(9,833)	—	(9,833)	(9,041)	—	(9,041)
Actuarial liabilities per balance sheet	76,982	454,956	531,938	63,068	264,602	327,670

Schedule of results projected for 2018

	Post‑retirement	Post‑retirement
	pension plans	health plans	Total
Current service cost	2,931	13,722	16,653
Net interest on net defined benefit liability/asset	6,074	45,892	51,966
Total	9,005	59,614	68,619

Schedule of sponsoring company contributions projected for 2018

	Post‑retirement	Post‑retirement
	pension plans	health plans	Total
Sponsor contributions	2,499	33	2,532
Benefits paid directly by the sponsor	7,914	9,026	16,940
Total	10,413	9,059	19,472

Schedule of average weighted duration of defined benefit liability

	Post‑retirement		Post‑retirement
	pension plans		health plans
In 2017	8.5	years	18.7	years
In 2016	8.9	years	12.7	years

Schedule of actuarial assumptions

	12.31.17
	Post-retirement pension plans	Post-retirement health plans
Discount rate to present value of defined benefit liability	Visão: 9.5% PBS-A and CTB: 9.8%                                                              Telefônica BD and Tcoprev: 9.9%	9.9%
Future salary growth rate	PBS-A: N/A                                                                                                  Visão, CTB, Telefônica BD and Tcoprev: 5.9%	N/A
Medical expense growth rate	N/A	7.4%
Nominal annual adjustment rate of pension benefits	4.3%	N/A
Medical service eligibility age	N/A	Eligibility on retirement 100% to 57 years
Estimated retirement age	PBS-A, CTB and Telefônica BD: 57 years                                                                                                                                                                Visão and Tcoprev: 60 years	57 years
Mortality table for nondisabled individuals	PBS-A, CTB and Telefônica BD: AT-2000 Basic segregated by gender, down-rated by 10%                                                                                Visão: AT-2000 Basic segregated by gender, down-rated by 50%	AT-2000 Basic segregated by gender, down-rated by 10%
Mortality table for disabled individuals	PBS-A, CTB and Telefônica BD: RP-2000 Disabled Female, down-rated by 40%                                                                                      Visão: N/A	RP-2000 Disabled Female, down-rated by 40%
Disability table	PBS-A, CTB, Telefônica BD and Tcoprev: Light-Forte                                            Visão: Light-Fraca, down rated by 30%	Light-Forte
Turnover	PBS-A, CTB, Telefônica BD and Tcoprev: N/A                                                          Visão: Turnover experience in VISÃO plans (2015 to 2017)	PAMA and PCE: N/A                                                                                          Law No. 9656/98: Turnover experience in VISÃO plans (2015 to 2017)

Further to the assumptions stated above, other assumptions common to all plans were adopted in 2017 as follows:

(i) Long-term inflation rate  4.3%; and

(ii) Annual increase in the use of medical services according to age: 4.0%.

	12.31.16
	Post-retirement pension plans	Post-retirement health plans
Discount rate to present value of defined benefit liability	Vivoprev and Visão: 10.9% PBS-A, CTB, Telefônica BD and Tcoprev: 10.8%	10.9%
Future salary growth rate	PBS-A: N/A                                                                                                  CTB, Telefônica BD, Prev and Visão: 6.2%	N/A
Medical expense growth rate	N/A	7.6%
Nominal annual adjustment rate of pension benefits	4.5%	N/A
Medical service eligibility age	N/A	PAMA and PCE: 5% when reaching 52 years and 10 years of contribution; 3% each subsequent year; 100% eligibility on retirement                                                                              Law No. 9656/98: 100% to 57 years
Estimated retirement age	PBS-A and CTB: N/A                                                                                   Telefônica BD: 57 years                                                                              Prev and Visão: 60 years	PAMA and PCE: 60 years                                                                             Law No. 9656/98: 57 yeras
Mortality table for nondisabled individuals	PBS-A, CTB, Telefônica BD and Tcoprev: AT-2000 Basic segregated by gender, down-rated by 10%                                                                                Vivoprev and Visão: AT-2000 Basic segregated by gender, down-rated by 50%	AT-2000 Basic segregated by gender, down-rated by 10%
Mortality table for disabled individuals	PBS-A, CTB, Telefônica BD and PBS: RP-2000 Disabled Female, down-rated by 40%                                                                                      Vivoprev and Visão: N/A	PAMA and PCE: RP-2000 Disabled Male                                                                   Law No. 9656/98: AT-2000 Basic segregated by gender, down-rated by 10%
Disability table	PBS-A, CTB and Telefônica BD: Mercer Disability                                                 Prev and Visão: Light-Fraca, down rated by 30%	Mercer Disability
Turnover	PBS-A, CTB and Telefônica BD: N/A                                                          Prev and Visão: Turnover experience in VISÃO plans (2008 to 2011)	PAMA and PCE: N/A                                                                                          Law No. 9656/98: Turnover experience in VISÃO plans (2008 to 2011)

Schedule of impacts on the plans' defined benefit liabilities due to the new definition of the actuarial assumptions

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, based on current actuarial assumptions	1,861,651	1,050,576	2,912,227
Defined benefit liability, based on prior-year actuarial assumptions	1,756,118	956,108	2,712,226
Difference from change in actuarial assumptions	105,533	94,468	200,001

Summary of allocation of plan assets

	12.31.17		12.31.16
	Post-retirement	Post-retirement	Post-retirement	Post-retirement
	pension plans	health plans	pension plans	health plans
Investments with market value quoted in active market:
Fixed income investments
National Treasury Note (NTN)	1,998,931	670,516	1,769,606	553,515
Treasury Financial Letter	199,135	55,544	30,588	—
Repurchase operations	142,228	—	134,863	—
Debentures	13,209	—	12,843	—
Treasury Financial Letter (LFT)	4,567	—	229,793	114,478
FIDC shares / Others	3,694	—	6,449	—
National Treasury Notes (LTN)	2,165	—	1,895	—
Bank Deposit Certificates (CDB)	1,317	—	36,744	—
Variable income investments
Investments in energy sector	57,781	—	246,400	—
Investments in food and beverage industry	32,337	—	45,054	—
Investments in aerospace sector	—	—	28,947	—
Investments in mining sector	1,197	—	2,581	—
Investments in other sectors (1)	7,124	—	9,207	—
Real estate investments	96,525	—	121,176	—
Loans to participants	18,346	—	23,562	—
Structured investments	3,753	—	224	—
Investments with market value not quoted in active market:
Loans to participants	1,590	—	1,850	—
Structured investments	1,780	—	1,811	—
Total	2,585,679	726,060	2,703,593	667,993

(1) Investments in variable income in the following industries: oil, gas and biofuel; telephony; steel and metals; construction and engineering; sales and distribution; transportation; wood and paper; education; financial services and banks; real estate, among; others.

Schedule of maturity of future benefit payments

	Post-retirement	Post-retirement
	pension plans	health plans	Total
2018	162,546	38,839	201,385
2019	166,989	42,679	209,668
2020	171,275	47,023	218,298
2021	176,423	51,987	228,410
2022	180,505	57,309	237,814
2023 onwards	5,326,440	22,761,339	28,087,779
Total	6,184,178	22,999,176	29,183,354

Discount rate

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of sensitivity analysis for actuarial assumptions

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, discounted to present value at current rate	1,861,651	1,050,576	2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	1,784,735	977,286	2,762,021
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	1,944,833	1,132,896	3,077,729

Rate of growth of medical costs

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of sensitivity analysis for actuarial assumptions

	Post-retirement	Post-retirement
	pension plans	health plans	Total
Defined benefit liability, Projected by the current medical cost growth rate	1,861,651	1,050,576	2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 1%	1,861,651	1,223,724	3,085,375
Defined benefit liability, discounted to present value considering a rate decreased by 1%	1,861,651	911,270	2,772,921

Defined benefit liability

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of changes in amount net of liability (asset) of defined benefit, net

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Defined benefit liability at the beginning of the year	1,763,866	767,642	2,531,508	1,503,966	402,927	1,906,893
Liability assumed after acquisition of company	249	680	929	—	—	—
Current service costs	3,044	7,606	10,650	2,811	2,761	5,572
Interest on actuarial liabilities	181,208	82,488	263,696	179,496	48,420	227,916
Benefits paid	(168,856)	(30,777)	(199,633)	(156,056)	(24,229)	(180,285)
Member contributions paid	220	—	220	174	—	174
Actuarial losses (gains) adjusted by experience	(23,613)	128,469	104,856	78,373	298,403	376,776
Actuarial losses (gains) adjusted by demographic assumptions	(3,320)	(1,543)	(4,863)	—	(81,144)	(81,144)
Actuarial losses (gains) adjusted by financial assumptions	108,853	96,011	204,864	155,102	120,504	275,606
Defined benefit liability at the end of the year	1,861,651	1,050,576	2,912,227	1,763,866	767,642	2,531,508

Fair value of plan assets

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of changes in amount net of liability (asset) of defined benefit, net

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Fair value of plan assets at the beginning of the year	2,703,593	667,993	3,371,586	2,178,182	529,485	2,707,667
Asset acquired on acquisition of company	323	—	323	—	—	—
Benefits paid	(160,370)	(27,767)	(188,137)	(149,521)	(24,229)	(173,750)
Participants contributions paid	220	—	220	174	—	174
Sponsor contributions paid	2,195	31	2,226	2,027	31	2,058
Interest income on plan assets	283,090	71,061	354,151	264,761	65,015	329,776
Return on plan assets excluding interest income	(243,372)	14,742	(228,630)	407,970	97,691	505,661
Fair value of plan assets at the end of the year	2,585,679	726,060	3,311,739	2,703,593	667,993	3,371,586

Asset Limitation

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS

Schedule of changes in amount net of liability (asset) of defined benefit, net

	12.31.17			12.31.16
	Post‑retirement	Post‑retirement		Post‑retirement	Post‑retirement
	pension plans	health plans	Total	pension plans	health plans	Total
Asset Limitation at the beginning of the year	993,754	164,953	1,158,707	721,123	156,270	877,393
Interest on the asset limitation	107,140	17,898	125,038	90,543	19,580	110,123
Changes in the assets limitation, except interest	(309,779)	(52,411)	(362,190)	182,088	(10,897)	171,191
Effect generated by company acquisition	62	—	62	—	—	—
Asset Limitation at the  end of the year	791,177	130,440	921,617	993,754	164,953	1,158,707

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT (Tables)

12 Months Ended

Dec. 31, 2017

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT

Schedule of consolidated derivatives financial instruments that are registered with B3 and classified as swaps and that do not require margin deposits

			Accumulated effects from fair
			value
	Notional Value		Amount receivable (payable)
Description	12.31.17	12.31.16	12.31.17	12.31.16
Long position	1,166,777	2,739,524	164,405	212,993
Foreign Currency	326,149	1,522,598	102,876	158,762
US$  (1) (2)	201,445	742,137	49,110	73,833
EUR  (2)	11,000	70,064	449	—
LIBOR US$  (1)	113,704	710,397	53,317	84,929
Floating rate	643,589	898,324	28,263	31,987
CDI (1) (2)	249,239	254,883	82	3,979
TJLP (4)	394,350	643,441	28,181	28,008
Inflation rates	197,039	318,602	33,266	22,244
IPCA (3) (5)	166,775	192,318	33,266	17,998
IGPM (6)	30,264	126,284	—	4,246
Short position	(1,363,491)	(2,573,351)	(20,652)	(184,616)
Floating rate	(952,283)	(2,391,882)	(16,417)	(184,545)
CDI (1) (2) (3) (4) (5) (6)	(952,283)	(2,391,882)	(16,417)	(184,545)
Foreign Currency	(411,208)	(181,469)	(4,235)	(71)
US$  (2)	(354,356)	(88,710)	(4,235)	(71)
LIBOR US$  (1)	(56,852)	(92,759)	—	—
		Long position	164,405	212,993
		Current	87,643	68,943
		Non Current	76,762	144,050
		Short position	(20,651)	(184,616)
		Current	(5,239)	(183,212)
		Non Current	(15,412)	(1,404)
		Amounts receivable, net	143,754	28,377

(1) Foreign currency swaps (US$ and LIBOR) x CDI (R$237,384) - swap transactions for varying debt repayment dates held to hedge currency risk affecting the Company’s loans in US$ (carrying amount R$225,254).

(2) Foreign currency swaps (Euro and CDI x Euro) (R$70,946) and (US$ and CDI x US$) (R$56,071) - maturing through February 9, 2018 to hedge currency risk affecting net amounts payable (carrying amount R$70,683 in euros) and receivables (carrying amount R$56,081 in US$).

(3) IPCA x CDI rate swaps (R$39,497) - maturing through 2019 to hedge the same flow as the debentures (4th issue - 3rd series) indexed to the IPCA (carrying amount R$40,322).

(4) TJLP x CDI swaps (R$390,314) - maturing through 2019 to hedge the risk of TJLP variation on loan with BNDES (carrying amount R$441,167).

(5) IPCA x CDI swaps (R$224,820) - maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA (carrying amount R$217,178).

(6) IGPM x CDI swaps (R$42,842) - maturing 2016 through 2018 to hedge IGP-DI variation risk affecting regulatory commitments related to 4G license.

Schedule of breakdown of swaps maturing after December 31, 2017

	Maturing in
					Amount
					receivable
					(payable) at
Swap contract	2018	2019	2020	2021 onwards	12/31/17
Foreign currency x CDI	65,670	36,937	—	—	102,607
CDI x Foreign Currency	(4,524)	(93)	—	—	(4,617)
TJLP x CDI	20,838	7,343	—	—	28,181
IPCA x CDI	722	9,633	1,129	6,402	17,886
IGPM x CDI	(303)	—	—	—	(303)
Total	82,403	53,820	1,129	6,402	143,754

Schedule of sensitivity analysis net exposure

Transaction	Risk	Probable	25% depreciation	50% depreciation
Hedge (long position)	Derivatives (depreciation risk EUR)	(70,683)	(88,354)	(106,025)
Payables in EUR	Debt (appreciation risk EUR)	(42,808)	(53,510)	(64,212)
Receivables in EUR	Debt (depreciation risk EUR)	113,754	142,192	170,631
	Net Exposure	263	328	394
Hedge (short position)	Derivatives (depreciation risk US$)	(56,071)	(70,088)	(84,106)
Payables in US$	Debt (appreciation risk US$)	164,648	205,810	246,972
Receivables in US$	Debt (depreciation risk US$)	(108,567)	(135,709)	(162,851)
	Net Exposure	10	13	15
Hedge (long position)	Derivatives (risk of decrease in IPCA)	279,566	259,689	242,286
Debt in IPCA	Debt (risk of increase in IPCA)	(381,564)	(361,681)	(344,274)
	Net Exposure	(101,998)	(101,992)	(101,988)
Hedge (long position)	Derivatives (risk of decrease in IGP-DI)	42,538	42,575	42,612
Debt in IGP-DI	Debt (risk of increase in IGP-DI)	(140,859)	(140,859)	(140,859)
	Net Exposure	(98,321)	(98,284)	(98,247)
Hedge (long position)	Derivatives (risk of decrease in UMBND)	221,553	276,004	330,097
Debt in UMBND	Debt (risk of increase in UMBND)	(225,708)	(281,531)	(337,072)
	Net Exposure	(4,155)	(5,527)	(6,975)
Hedge (long position)	Derivatives (risk of decrease in TJLP)	418,496	414,263	410,144
Debt in TJLP	Debt (risk of increase in TJLP)	(1,586,846)	(1,582,396)	(1,578,066)
	Net Exposure	(1,168,350)	(1,168,133)	(1,167,922)
Hedge (CDI position)
Hedge US$ and EUR (short and long position)	Derivatives (risk of decrease in CDI)	(130,892)	(146,692)	(162,471)
Hedge IPCA (short position)	Derivatives (risk of increase in CDI)	(279,566)	(259,689)	(242,286)
Hedge IGPM (short position)	Derivatives (risk of increase in CDI)	(42,538)	(42,575)	(42,612)
Hedge UMBND (short position)	Derivatives (risk of increase in CDI)	(221,553)	(276,004)	(330,097)
Hedge TJLP (short position)	Derivatives (risk of increase in CDI)	(418,496)	(414,263)	(410,144)
	Net Exposure	(1,093,045)	(1,139,223)	(1,187,610)
Total net exposure in each scenario		(2,465,596)	(2,512,818)	(2,562,333)
Net effect on changes in current fair value		—	(47,222)	(96,737)

Schedule of sensitivity analysis assumptions

Risk Variable	Probable		25% depreciation		50% depreciation
US$	3.3080		4.1350		4.9620
EUR	3.9676		4.9595		5.9514
JPY	0.0293		0.0367		0.0440
IPCA	2.79	%	3.49	%	4.19	%
IGPM	(0.52)	%	(0.65)	%	(0.78)	%
IGP-DI	(0.27)	%	(0.34)	%	(0.41)	%
UMBND	0.0646		0.0807		0.0969
URTJLP	2.0314		2.5392		3.0470
CDI	6.89	%	8.61	%	10.34	%

Schedule of composition of financial assets and liabilities

		Fair value	Book value		Fair value
	Classification by category	hierarchy	12/31/17	12/31/16	12/31/17	12/31/16
Financial Assets
Current
Cash and cash equivalents (Note 4)	Amortized cost		4,050,338	5,105,110	4,050,338	5,105,110
Trade accounts receivable, net (Note 5)	Loans and receivables		8,588,466	8,701,688	8,588,466	8,701,688
Derivative transactions (Note 31)	Measured at fair value through profit or loss	Level 2	2,480	3,979	2,480	3,979
Derivative transactions (Note 31)	Hedges (economic)	Level 2	85,163	64,964	85,163	64,964
Noncurrent
Short-term investments pledged as collateral	Amortized cost		81,486	78,166	81,486	78,166
Trade accounts receivable, net (Note 5)	Loans and receivables		273,888	305,411	273,888	305,411
Derivative transactions (Note 31)	Hedges (economic)	Level 2	76,762	144,050	76,762	144,050
Total financial assets			13,158,583	14,403,368	13,158,583	14,403,368
Financial Liabilities
Current
Trade accounts payable (Note 15)	Amortized cost		7,447,100	7,611,246	7,447,100	7,611,246
Loans, financing and finance lease (Note 20)	Amortized cost		1,316,034	1,256,147	1,463,609	1,363,539
Loans, financing and finance lease (Note 20)	Measured at fair value through profit or loss	Level 2	304,921	1,286,828	317,231	1,307,310
Debentures (Note 20)	Amortized cost		1,412,174	2,120,197	1,532,427	2,242,291
Debentures (Note 20)	Measured at fair value through profit or loss	Level 2	312	307	1,490	1,412
Derivative transactions (Note 31)	Measured at fair value through profit or loss	Level 2	4,504	4,111	4,504	4,111
Derivative transactions (Note 31)	Hedges (economic)	Level 2	735	179,101	735	179,101
Noncurrent
Trade accounts payable (Note 15)	Amortized cost		—	71,907	—	71,907
Loans, financing and finance lease (Note 20)	Amortized cost		1,353,582	1,837,077	1,291,974	1,668,524
Loans, financing and finance lease (Note 20)	Measured at fair value through profit or loss	Level 2	520,421	874,982	505,422	822,818
Debentures (Note 20)	Amortized cost		3,068,243	1,396,813	2,866,372	1,260,814
Debentures (Note 20)	Measured at fair value through profit or loss	Level 2	40,010	36,990	37,717	34,124
Contingent consideration (Note 20)	Measured at fair value through profit or loss	Level 2	446,144	414,733	446,144	414,733
Derivative transactions (Note 31)	Hedges (economic)	Level 2	15,412	1,404	15,412	1,404
			15,929,592	17,091,843	15,930,137	16,983,334

Schedule of Company's ratio of consolidated debt to shareholders' equity

	12.31.17		12.31.16
Cash and cash equivalents	4,050,338		5,105,110
Loans, financing, debentures, financial lease and contingent consideration	(8,461,841)		(9,224,074)
Derivative transactions, net	143,754		28,377
Short-term investment pledged as collateral	11,722		10,773
Asset guarantor of contingent consideration	446,144		414,733
Net debt	3,809,883		3,665,081
Net equity	69,461,358		69,244,419
Net debt-to-equity ratio	5.48	%	5.29	%

Summary the maturity profile of our consolidated financial liabilities as set forth in loan agreements

	Less than one
At 12.31.17	year	From 1 to 2 years	From 2 to 5 years	Over 5 years	Total
Trade accounts payable (Note 15)	7,447,100	—	—	—	7,447,100
Loans, financing and finance lease (Note 20)	1,620,955	780,904	885,411	207,688	3,494,958
Contingent consideration (Note 20)	—	—	—	446,144	446,144
Debentures (Note 20)	1,412,486	66,252	3,042,001	—	4,520,739
Derivative transactions (Note 31)	5,239	93	—	15,319	20,651
Total	10,485,780	847,249	3,927,412	669,151	15,929,592

	Less than one
At 12.31.16	year	From 1 to 2 years	From 2 to 5 years	Over 5 years	Total
Trade accounts payable (Note 15)	7,611,246	—	—	71,907	7,683,153
Loans, financing and finance lease (Note 20)	2,542,975	1,129,939	1,326,269	255,851	5,255,034
Contingent consideration (Note 20)	—	—	—	414,733	414,733
Debentures (Note 20)	2,120,504	1,355,683	78,120	—	3,554,307
Derivative transactions (Note 31)	183,212	1,185	97	122	184,616
Total	12,457,937	2,486,807	1,404,486	742,613	17,091,843

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COMMITMENTS AND GUARANTEES (RENTALS) (Tables)

12 Months Ended

Dec. 31, 2017

COMMITMENTS AND GUARANTEES (RENTALS)

Schedule of non-cancellable operating agreements

Up to 1 year	2,285,148
From 1 to 5 years	7,442,212
Over five years	5,017,985
Total	14,745,345

XML

ADDITIONAL INFORMATION ON CASH FLOWS (Tables)

12 Months Ended

Dec. 31, 2017

ADDITIONAL INFORMATION ON CASH FLOWS

Schedule of reconciliation of cash flow financing activities

		Cash flows from		Cash flows from	Financing activities not involving cash and cash equivalents
		financing activities		operating activities
					Financial
					charges and	Additions of		Interim and
					foreign	financial lease		unclaimed
			Write-offs	Write-offs	exchange	and supplier	Business	dividends and
Consolidated	At 12/31/16	Addtions	(payments)	(payments)	variation	financing	combinations	interest on equity	At 12/31/17
Interim dividends and interest on equity	2,195,031	—	(3,668,551)	—	—	—	—	3,869,636	2,396,116
Loans and financing	4,880,606	55,876	(2,449,773)	(333,676)	385,021	571,444	—	—	3,109,498
Finance lease	374,428	—	(35,722)	(11,973)	45,265	13,462	—	—	385,460
Debentures	3,554,307	3,000,000	(2,000,000)	(513,937)	480,369	—	—	—	4,520,739
Derivative financial instruments	(28,377)	—	(159,408)	2,086	42,334	—	(389)	—	(143,754)
Contingent Consideration	414,733	—	—	—	31,411	—	—	—	446,144
Total	11,390,728	3,055,876	(8,313,454)	(857,500)	984,400	584,906	(389)	3,869,636	10,714,203

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OPERATIONS (Details)	12 Months Ended
	Dec. 31, 2017
OPERATIONS
Periodicity of payment of fee payable in an service concession agreement term	2 years
Agreement term	20 years
Percentage of service concession fees based on prior year STFC revenue	2.00%
Periodicity of payment for the usage of frequencies associated with SMP after the first renewal of these agreements	2 years
Percentage of service concession fees based on prior year SMP revenues	2.00%
Percentage of service concession fees based on prior year SMP revenues in fifteen year of agreement term	1.00%
Agreement extension term	15 years

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OPERATIONS - Acquisition of Terra Networks by Wholly-Owned Subsidiary (Details) - Terra Networks - BRL (R$) R$ in Thousands	6 Months Ended
	Dec. 31, 2017	Jul. 03, 2017
Acquisition of Terra Networks by Wholly-Owned Subsidiary
Current assets		R$ 163,579
Cash and cash equivalents		43,351
Accounts receivable		61,276
Derivative financial instruments		404
Taxes recoverable		22,658
Other assets		35,890
Noncurrent assets		228,575
Deferred taxes		117,885
Judicial deposits and garnishments		102,373
Other assets		740
Property and equipment		7,047
Intangible assets		530
Book value of assets acquired		392,154
Current liabilities		86,892
Personnel, social charges and benefits		17,327
Trade accounts payable		51,198
Taxes, charges and contributions		14,643
Derivative financial instruments		16
Other liabilities		3,708
Noncurrent liabilities		114,291
Personnel, social charges and benefits		508
Taxes, charges and contributions		229
Other provisions		112,874
Other liabilities		680
Book value of assumed liabilities		201,183
Book value of identifiable net assets acquired		190,971
Total consideration, net of Cash Flow Hedge		250,000
Adjustment to equity in TData and Company		59,029
Consolidated net operating revenue	R$ 155,224
Consolidated net income	179,615
Income tax on tax losses and negative basis of social contribution	R$ 125,191
Cost
Acquisition of Terra Networks by Wholly-Owned Subsidiary
Accounts receivable		69,995
Estimated impairment losses
Acquisition of Terra Networks by Wholly-Owned Subsidiary
Accounts receivable		R$ 8,719

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OPERATIONS - Acquisition of GVT Participacoes S.A. ("GVTPart.") (Details) - May 28, 2015 - GVT Participacoes S.A. ("GVTPart") R$ / shares in Units, R$ in Thousands, € in Millions	BRL (R$) shares	EUR (€)	BRL (R$) R$ / shares
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Payment for acquisition		€ 4,663	R$ 15,964,853
Shares issued as a percent of capital stock after the merger of shares		12.00%	12.00%
Capital increased | R$	R$ 9,666,021
Par value | R$ / shares			R$ 0
Common shares
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Shares issued (in shares)	68,597,306
Preferred shares
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Shares issued (in shares)	134,320,885

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OPERATIONS - Acquisition of GVT Participacoes S.A. ("GVTPart.") Acquisition price (Details) - GVT Participacoes S.A. ("GVTPart") R$ in Thousands, € in Millions	Dec. 31, 2015 BRL (R$)	May 28, 2015 EUR (€)	May 28, 2015 BRL (R$)
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Gross consideration in cash (4.663 billion euros)		€ 4,663	R$ 15,964,853
Contractual Adjustments (Net Debt)			(7,060,899)
Total consideration in cash, net			8,903,954
Contingent Consideration			344,217
Consideration in Shares at Fair Value			8,477,314
Cash Flow Hedge Gain on Transaction, net of taxes			(377,373)
Refund according to sections 2.2.4 and 2.2.5 of SPA			(84,598)
Total consideration, net of Cash Flow Hedge	R$ 17,263,514		R$ 17,263,514

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OPERATIONS - Acquisition of GVT Participacoes S.A. ("GVTPart.") Identifiable assets acquired and liabilities assumed (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2017	May 28, 2015
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Goodwill		R$ 23,062,421
GVT Participacoes S.A. ("GVTPart")
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Current assets	R$ 1,557,651
Cash and cash equivalents	390,255
Accounts receivable	947,378
Inventories	4,641
Taxes recoverable	147,057
Other assets	68,320
Noncurrent assets	12,026,239
Short-term investment pledged as collateral	17,871
Taxes recoverable	65,798
Deferred taxes	610,873
Judicial deposits and garnishments	551,275
Other assets	7,052
Property and equipment	7,970,117
Intangible assets	2,803,253
Fair value of assets acquired	13,583,890
Current liabilities	5,299,662
Personnel, social charges and benefits	170,989
Trade accounts payable	611,425
Taxes, charges and contributions	346,569
Loans and financing	3,968,615
Provisions	17,866
Other liabilities	184,198
Noncurrent liabilities	3,857,855
Trade accounts payable	67,742
Taxes, charges and contributions	1,342
Loans and financing	3,088,414
Other provisions	679,294
Other liabilities	21,063
Fair value of assumed liabilities	9,157,517
Fair value of identifiable net assets acquired	4,426,373
Goodwill	12,837,141	R$ 12,837,141
Total consideration, net of Cash Flow Hedge	17,263,514		R$ 17,263,514
Appreciation of property, plant and equipment	409,601
Contingent Consideration			R$ 344,217
GVT Participacoes S.A. ("GVTPart") | Contingent consideration
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Contingent liabilities	512,648
Deferred taxes on contingent liabilities	R$ 174,300
Period for returning the amounts deposited with the courts	15 years
Contingent Consideration	R$ 344,217
Trademarks | GVT Participacoes S.A. ("GVTPart")
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Intangible assets	R$ 59,000
Amortisation (in years)	1 year 6 months
Customer portfolio | GVT Participacoes S.A. ("GVTPart")
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Intangible assets	R$ 2,523,000
Amortisation (in years)	7 years 9 months 7 days
Other intangible assets | GVT Participacoes S.A. ("GVTPart")
Acquisition of GVT Participacoes S.A. ("GVTPart.")
Intangible assets	R$ 20,394

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BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS (Details) R$ in Millions	12 Months Ended
	Dec. 31, 2017 BRL (R$)
Financial effect due to application of IFRS 15
Financial effects due to application of IFRS
Increase in retained earnings before deferred taxes	R$ 156
Financial effect due to application of IFRS 15 | Minimum
Financial effects due to application of IFRS
Shift from revenues from the provision of services to revenues from the sale of goods (as a percent)	0.30%
Financial effect due to application of IFRS 15 | Maximum
Financial effects due to application of IFRS
Shift from revenues from the provision of services to revenues from the sale of goods (as a percent)	0.70%
Financial effect due to application of IFRS 9
Financial effects due to application of IFRS
Decrease in bad debts provision balance on receivables	R$ 354
Telefonica Data S.A. (TData)
Equity interests in subsidiaries
Ownership interest in wholly-owned subsidiary (as a percent)	100.00%
POP Internet Ltda ("POP")
Equity interests in subsidiaries
Ownership interest in wholly-owned subsidiary (as a percent)	100.00%
Alianca Atlantica Holding B.V. (Alianca)
Equity interests in subsidiaries
Ownership interest in jointly-controlled subsidiary (as a percent)	50.00%
Companhia AIX de Participacoes (AIX)
Equity interests in subsidiaries
Ownership interest in jointly-controlled subsidiary (as a percent)	50.00%
Companhia ACT de Participacoes (ACT)
Equity interests in subsidiaries
Ownership interest in jointly-controlled subsidiary (as a percent)	50.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Details) - R$ / $	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Withholding tax rate (as a percent)	15.00%
US Dollar
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Exchange rate	3.3080	3.2591
Euro
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Exchange rate	3.9676	3.4351

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CASH AND CASH EQUIVALENTS (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CASH AND CASH EQUIVALENTS
Cash and banks	R$ 117,799	R$ 198,369
Short-term investments	3,932,539	4,906,741
Total	R$ 4,050,338	R$ 5,105,110	R$ 5,336,845	R$ 4,692,689

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TRADE ACCOUNTS RECEIVABLE (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Trade accounts receivables
Billed amounts	R$ 6,753,621	R$ 6,939,909
Unbilled amounts	2,481,364	1,930,708
Interconnection amounts	859,819	1,345,471
Amounts from related parties (Note 28)	201,021	190,906
Trade accounts receivable	8,862,354	9,007,099
Current	8,588,466	8,701,688
Noncurrent	273,888	305,411
Cost
Trade accounts receivables
Trade accounts receivable	10,295,825	10,406,994
Estimated impairment losses
Trade accounts receivables
Trade accounts receivable	R$ (1,433,471)	R$ (1,399,895)

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TRADE ACCOUNTS RECEIVABLE - Noncurrent trade accounts receivable (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Non-current trade accounts receivable
Resale of good to other entities	R$ 122,651	R$ 143,265
Impact of the present-value adjustment on resale of good to other entities	16,011	32,920
Soluciona TI
Non-current trade accounts receivable
Noncurrent receivable form related parties	106,206	104,874
Impact of the present-value adjustment on resale of good to legal entities	33,614	3,005
OI group
Non-current trade accounts receivable
Accounts receivable from negotiations on the bankruptcy	45,031	57,272
Present-value adjustment on accounts receivable arising from negotiations on the bankruptcy	R$ 15,535	R$ 10,268

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TRADE ACCOUNTS RECEIVABLE, NET - Current and non current trade accounts receivable (Details) - Soluciona TI - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current and noncurrent trade accounts receivable
Deferred financial income	R$ 33,614	R$ 3,005
Noncurrent	106,206	104,874
Trade accounts receivable
Current and noncurrent trade accounts receivable
Nominal amount receivable	434,743	611,384
Deferred financial income	(33,614)	(3,005)
Present value of accounts receivable	401,129	608,379
Estimated impairment losses	(154,666)	(344,738)
Net amount receivable	246,463	263,641
Current	140,257	158,767
Noncurrent	R$ 106,206	R$ 104,874

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TRADE ACCOUNTS RECEIVABLE, NET - Aging list of gross trade accounts receivable (Details) - Soluciona TI - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Aging of gross trade accounts receivable
Unsecured residual values resulting in benefits to the lessor	R$ 0
Contingent payments recognized as revenue	0
Trade accounts receivable
Aging of gross trade accounts receivable
Nominal amount receivable	434,743	R$ 611,384
Present value of accounts receivable	401,129	R$ 608,379
Trade accounts receivable | 2018/Falling due within one year/Up to 1 year
Aging of gross trade accounts receivable
Nominal amount receivable	229,981
Present value of accounts receivable	229,981
Trade accounts receivable | Falling due between one year and five years
Aging of gross trade accounts receivable
Nominal amount receivable	204,762
Present value of accounts receivable	R$ 171,148

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TRADE ACCOUNTS RECEIVABLE, NET - Aging list of trade accounts receivable (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Aging list of trade accounts receivable
Trade accounts receivable	R$ 8,862,354	R$ 9,007,099
Falling due
Aging list of trade accounts receivable
Trade accounts receivable	6,635,125	6,841,752
Overdue - 1 to 30 days
Aging list of trade accounts receivable
Trade accounts receivable	1,132,008	1,073,568
Overdue - 31 to 60 days
Aging list of trade accounts receivable
Trade accounts receivable	375,176	322,485
Overdue - 61 to 90 days
Aging list of trade accounts receivable
Trade accounts receivable	232,648	227,010
Overdue - 91 to 120 days
Aging list of trade accounts receivable
Trade accounts receivable	105,342	105,048
Overdue - over 120 days
Aging list of trade accounts receivable
Trade accounts receivable	R$ 382,055	R$ 437,236

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TRADE ACCOUNTS RECEIVABLE, NET - Estimated impairment losses for accounts receivable (Details) - Trade accounts receivable - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Estimated impairment losses for accounts receivable rollforward
Balance at beginning	R$ (1,399,895)	R$ (2,217,926)
Supplement to estimated losses (Note 24)	(1,994,769)	(1,843,775)
Reversal of estimated losses (Note 24)	513,754	495,554
Write-off due to use	1,456,158	2,166,252
Business combination (Note 1.c.1)	(8,719)
Balance at ending	R$ (1,433,471)	R$ (1,399,895)

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INVENTORIES (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
INVENTORIES
Total	R$ 348,755	R$ 410,413
Cost
INVENTORIES
Materials for resale	325,850	377,465
Materials for consumption	57,740	77,732
Other inventories	7,822	7,892
Total	391,412	463,089
Estimated impairment losses
INVENTORIES
Total	R$ (42,657)	R$ (52,676)

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DEFERRED TAXES AND TAXES RECOVERABLE - Taxes recoverable (Details) - BRL (R$) R$ in Thousands	24 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
DEFERRED TAXES AND TAXES RECOVERABLE
State VAT (ICMS)	R$ 2,450,856	R$ 2,329,159
Income and social contribution taxes recoverable	505,535	830,549
Withholding taxes and contributions	238,355	157,371
PIS and COFINS	85,098	148,759
Fistel, INSS, ISS and other taxes	27,431	38,236
Total	3,307,275	3,504,074
Current	2,563,990	3,027,230
Noncurrent	R$ 743,285	476,844
Tax credits offsetting period	48 months
Deferred tax credits from acquisition of property and equipment	R$ 423,588	R$ 370,770

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DEFERRED TAXES AND TAXES RECOVERABLE - Deferred taxes (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	R$ 27,497	R$ 711,590
Income statement	(541,405)	(761,417)
Comprehensive income	58,192	78,840
Other	117,885	(1,516)
Business combinations (Note 1.c.1)	(86)
Balance at ending	(337,917)	27,497
Deferred tax assets	5,288,176	4,541,952	R$ 4,153,054
Deferred tax liabilities	(5,626,093)	(4,514,455)	(3,441,464)
Net deferred tax assets	371,408	R$ 27,497	R$ 711,590
Deferred tax liabilities	(709,325)
Percentage of tax bases limit used to offset tax losses		30.00%
Deferred tax credits (income and social contribution tax losses) were not recognized in indirect subsidiaries	11,938	R$ 2,993
Parent
DEFERRED TAXES AND TAXES RECOVERABLE
Income statement	587,374
Terra Networks and POP
DEFERRED TAXES AND TAXES RECOVERABLE
Income statement	194,488
Income and social contribution taxes on tax losses
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	14,071	26,519
Income statement	710,411	(12,448)
Other	69,451
Balance at ending	793,933	14,071
Income and social contribution taxes on temporary differences
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	13,426	685,071
Income statement	(1,251,816)	(748,969)
Comprehensive income	58,192	78,840
Other	48,434	(1,516)
Business combinations (Note 1.c.1)	(86)
Balance at ending	(1,131,850)	13,426
Provisions for legal, labor, tax civil and regulatory contingencies
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	2,230,336	1,954,236
Income statement	68,399	276,100
Balance at ending	2,298,735	2,230,336
Trade accounts payable and other provisions
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	677,123	687,124
Income statement	(25,706)	(10,001)
Balance at ending	651,417	677,123
Estimated losses on impairment of accounts receivable
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	358,805	447,018
Income statement	76,155	(88,213)
Balance at ending	434,960	358,805
Customer portfolio and trademarks
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	313,092	343,107
Income statement	(58,674)	(30,015)
Balance at ending	254,418	313,092
Estimated losses from modems and other P&E items
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	284,677	294,945
Income statement	(83,736)	(10,268)
Balance at ending	200,941	284,677
Pension plans and other post-employment benefits
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	108,419	26,285
Income statement	8,630	1,633
Comprehensive income	57,485	80,501
Balance at ending	174,534	108,419
Profit sharing
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	125,256	106,198
Income statement	(15,210)	19,058
Balance at ending	110,046	125,256
Provision for loyalty program
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	19,112	32,604
Income statement	(1,991)	(13,492)
Balance at ending	17,121	19,112
Accelerated accounting depreciation
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	24,033	10,865
Income statement	(15,773)	13,168
Balance at ending	8,260	24,033
Estimated impairment losses on inventories
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	12,099	10,707
Income statement	(347)	1,392
Balance at ending	11,752	12,099
Derivative transactions
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	60,133	59,408
Income statement	(35,084)	2,358
Comprehensive income	822	(1,633)
Balance at ending	25,871	60,133
Licenses
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(1,420,556)	(1,204,226)
Income statement	(216,330)	(216,330)
Balance at ending	(1,636,886)	(1,420,556)
Effects of goodwill generated in the acquisition of Vivo Part.
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(864,320)	(809,600)
Income statement	(5,461)	(54,720)
Balance at ending	(869,781)	(864,320)
Goodwill from Spanish and Navytree
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(337,535)	(337,535)
Balance at ending	(337,535)	(337,535)
Goodwill from Vivo Part.
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(1,005,120)	(837,918)
Income statement	(167,203)	(167,202)
Balance at ending	(1,172,323)	(1,005,120)
Goodwill from GVTPart.
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(522,228)
Income statement	(696,305)	(522,228)
Balance at ending	(1,218,533)	(522,228)
Technological Innovation Law
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	(140,940)	(193,146)
Income statement	43,407	52,206
Balance at ending	(97,533)	(140,940)
Income and social contribution taxes on other temporary differences
DEFERRED TAXES AND TAXES RECOVERABLE
Balance at beginning	91,040	94,999
Income statement	(126,587)	(2,415)
Comprehensive income	(115)	(28)
Other	48,434	(1,516)
Business combinations (Note 1.c.1)	(86)
Balance at ending	R$ 12,686	R$ 91,040

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DEFERRED TAXES AND TAXES RECOVERABLE - Projections (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
DEFERRED TAXES AND TAXES RECOVERABLE
Total	R$ (337,917)	R$ 27,497	R$ 711,590
2018
DEFERRED TAXES AND TAXES RECOVERABLE
Total	1,904,953
2019/From 1 to 2 years
DEFERRED TAXES AND TAXES RECOVERABLE
Total	(685,775)
2020
DEFERRED TAXES AND TAXES RECOVERABLE
Total	374,379
2021
DEFERRED TAXES AND TAXES RECOVERABLE
Total	442,867
2022
DEFERRED TAXES AND TAXES RECOVERABLE
Total	704,303
2023 onwards/Over five years
DEFERRED TAXES AND TAXES RECOVERABLE
Total	R$ (4,450,194)

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JUDICIAL DEPOSITS AND GARNISHMENTS - Judicial Deposits and garnishments (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
JUDICIAL DEPOSITS AND GARNISHMENTS
Tax	R$ 4,230,917	R$ 3,758,787
Labor	885,338	1,051,430
Civil	1,205,807	1,109,001
Regulatory	200,627	276,604
Total	6,522,689	6,195,822
Garnishments	141,116	155,744
Total	6,663,805	6,351,566
Current	324,638	302,424
Non current	R$ 6,339,167	R$ 6,049,142

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JUDICIAL DEPOSITS AND GARNISHMENTS - Tax related judicial Deposits (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	R$ 4,230,917	R$ 3,758,787
Contribution to Empresa Brasil de Comunicacao (EBC)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	1,238,068	1,053,867
Telecommunications Inspection Fund (FISTEL)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	1,161,061	1,095,789
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	518,474	449,988
Universal Telecommunication Services Fund (FUST)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	484,649	456,977
Social Contribution Tax for Intervention in the Economic Order (CIDE)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	270,612	176,557
State Value-Added Tax (ICMS)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	273,264	212,652
Social Security, work accident insurance (SAT) and funds to third parties (INSS)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	134,688	128,458
Withholding Income Tax (IRRF)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	45,846	73,848
Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS)
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	37,965	35,570
Other taxes, charges and contributions
JUDICIAL DEPOSITS AND GARNISHMENTS
Judicial tax deposits	R$ 66,290	R$ 75,081

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PREPAID EXPENSES (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
PREPAID EXPENSES
Advertising and publicity	R$ 336,295	R$ 258,212
Insurance	36,941	39,558
Rental	29,713	19,276
Software and networks maintenance	12,375	12,283
Taxes, financial charges, personal and other	54,231	50,193
Total	469,555	379,522
Current	446,439	343,092
Noncurrent	R$ 23,116	R$ 36,430

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OTHER ASSETS (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
OTHER ASSETS
Advances to employees and suppliers	R$ 58,456	R$ 83,634
Related-party receivables (Note 28)	166,733	250,679
Receivables from suppliers	114,015	99,166
Subsidy on handset sales	37,258	30,491
Surplus from post-employment benefit plans (Note 30)	9,833	9,041
Other amounts receivable	24,037	22,649
Total	410,332	495,660
Current	321,397	440,095
Noncurrent	R$ 88,935	R$ 55,565

XML

INVESTMENTS (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Jul. 03, 2017	Oct. 28, 2015	Dec. 31, 2014
INVESTMENTS
Current assets	R$ 16,731,666	R$ 18,398,995
Noncurrent assets	84,651,169	83,667,264
TOTAL ASSETS	101,382,835	102,066,259
Current liabilities	17,862,531	20,438,575
Non-current liabilities	14,058,946	12,383,265
Equity	69,461,358	69,244,419	R$ 68,567,242			R$ 44,950,095
TOTAL LIABILITIES AND EQUITY	101,382,835	102,066,259
Investment Book value	98,902	85,745	101,161
Net operating income	43,206,832	42,508,459	40,286,815
Operating costs and expenses	(35,852,109)	(36,071,766)	(34,493,012)
Financial income (expenses), net	(903,044)	(1,234,541)	(848,178)
Income and social contribution taxes	(1,121,983)	(1,049,480)	(973,207)
Net income for the year	4,608,790	4,085,242	3,420,249
Equity pickup, according to interest held	R$ 1,580	R$ 1,244	2,036
Telefonica Data S.A. (TData)
INVESTMENTS
Total consideration for acquistion of controlling interest					R$ 15,811
Proportion of ownership interest in subsidiary	100.00%
Terra Networks
INVESTMENTS
Total consideration for acquistion of controlling interest				R$ 250,000
Alianca Atlantica Holding B.V. (Alianca)
INVESTMENTS
Proportion of ownership interest in subsidiary	50.00%	50.00%
Current assets	R$ 167,540	R$ 145,121
TOTAL ASSETS	167,540	145,121
Current liabilities	58	101
Equity	167,482	145,020
TOTAL LIABILITIES AND EQUITY	167,540	145,121
Investment Book value	83,741	72,510	89,799
Operating costs and expenses	(43)	(155)
Financial income (expenses), net	27	41
Net income for the year	(16)	(114)
Equity pickup, according to interest held	R$ (8)	R$ (57)
Companhia ACT de Participacoes (ACT)
INVESTMENTS
Proportion of ownership interest in subsidiary	50.00%	50.00%
Current assets	R$ 17	R$ 15
TOTAL ASSETS	17	15
Current liabilities	1	1
Equity	16	14
TOTAL LIABILITIES AND EQUITY	17	15
Investment Book value	8	7	4
Net operating income	82	79
Operating costs and expenses	(80)	(72)
Income and social contribution taxes		(1)
Net income for the year	2	6
Equity pickup, according to interest held	R$ 1	R$ 3
Companhia AIX de Participacoes (AIX)
INVESTMENTS
Proportion of ownership interest in subsidiary	50.00%	50.00%
Current assets	R$ 22,431	R$ 20,337
Noncurrent assets	13,410	12,879
TOTAL ASSETS	35,841	33,216
Current liabilities	4,084	4,029
Non-current liabilities	4,811	5,415
Equity	26,946	23,772
TOTAL LIABILITIES AND EQUITY	35,841	33,216
Investment Book value	13,473	11,886	R$ 10,099
Net operating income	45,622	42,840
Operating costs and expenses	(43,448)	(41,760)
Financial income (expenses), net	1,686	1,980
Income and social contribution taxes	(686)	(464)
Net income for the year	3,174	2,596
Equity pickup, according to interest held	R$ 1,587	R$ 1,298

XML

INVESTMENTS - Changes in investments (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
INVESTMENTS
Balances at beginning of the period	R$ 85,745	R$ 101,161
Equity pickup	1,580	1,244	R$ 2,036
Dividends and interest on equity		489
Other comprehensive income	11,577	(17,149)
Balances at end of the period	98,902	85,745	101,161
Alianca Atlantica Holding B.V. (Alianca)
INVESTMENTS
Balances at beginning of the period	72,510	89,799
Equity pickup	(8)	(57)
Other comprehensive income	11,239	(17,232)
Balances at end of the period	83,741	72,510	89,799
Companhia AIX de Participacoes (AIX)
INVESTMENTS
Balances at beginning of the period	11,886	10,099
Equity pickup	1,587	1,298
Dividends and interest on equity		489
Balances at end of the period	13,473	11,886	10,099
Companhia ACT de Participacoes (ACT)
INVESTMENTS
Balances at beginning of the period	7	4
Equity pickup	1	3
Balances at end of the period	8	7	4
Other investments
INVESTMENTS
Balances at beginning of the period	1,342	1,259
Other comprehensive income	338	83
Balances at end of the period	R$ 1,680	R$ 1,342	R$ 1,259

XML

PROPERTY, PLANT AND EQUIPMENT (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$) item	Dec. 31, 2016 BRL (R$) item
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	R$ 31,924,918	R$ 30,476,765
Additions	6,583,574	6,809,808
Write-offs, net	35,650	(132,051)
Net transfers	(19,209)	(109,949)
Depreciation (Note 24)	(5,309,664)	(5,119,655)
Business Combination (Note 1.c.1)	7,047
Balance at end of the period	33,222,316	R$ 31,924,918
Transmission towers
PROPERTY, PLANT AND EQUIPMENT
Number of towers sold | item		1,655
Transmission towers | Telxius Torres Brasil
PROPERTY, PLANT AND EQUIPMENT
Write-offs, net	R$ (99,210)
Number of towers sold | item	1,655
Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	R$ 107,976,935
Balance at end of the period	114,335,288	R$ 107,976,935
Accumulated depreciation / amortization
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(76,052,017)
Balance at end of the period	(81,112,972)	(76,052,017)
Switching and transmission equipment
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	22,231,874	20,935,963
Additions	42,999	634,635
Write-offs, net	(88,766)	(24,236)
Net transfers	3,634,293	3,473,332
Depreciation (Note 24)	(3,011,291)	(2,787,820)
Balance at end of the period	22,809,109	22,231,874
Switching and transmission equipment | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	70,789,534
Balance at end of the period	74,100,056	70,789,534
Switching and transmission equipment | Accumulated depreciation / amortization
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(48,557,660)
Balance at end of the period	(51,290,947)	(48,557,660)
Terminal equipment / modems
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	2,588,307	3,146,109
Additions	141,132	203,775
Write-offs, net	(7,602)	(816)
Net transfers	1,471,431	677,572
Depreciation (Note 24)	(1,468,936)	(1,438,333)
Balance at end of the period	2,724,332	2,588,307
Terminal equipment / modems | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	15,294,619
Balance at end of the period	16,845,903	15,294,619
Terminal equipment / modems | Accumulated depreciation / amortization
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(12,706,312)
Balance at end of the period	(14,121,571)	(12,706,312)
Infrastructure
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	3,725,207	3,655,951
Additions	91,160	159,081
Write-offs, net	(6,966)	(99,437)
Net transfers	619,008	523,995
Depreciation (Note 24)	(544,454)	(514,383)
Business Combination (Note 1.c.1)	1,342
Balance at end of the period	3,885,297	3,725,207
Infrastructure | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	15,023,890
Balance at end of the period	15,728,808	15,023,890
Infrastructure | Accumulated depreciation / amortization
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(11,298,683)
Balance at end of the period	(11,843,511)	(11,298,683)
Land
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	315,719	315,705
Additions	550	215
Write-offs, net	(1,916)	(201)
Balance at end of the period	314,353	315,719
Land | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	315,719
Balance at end of the period	314,353	315,719
Other P&E
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	819,356	1,066,452
Additions	259,620	288,666
Write-offs, net	(2,522)	3,059
Net transfers	34,093	(159,702)
Depreciation (Note 24)	(284,983)	(379,119)
Business Combination (Note 1.c.1)	4,888
Balance at end of the period	830,452	819,356
Other P&E | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	4,308,718
Balance at end of the period	4,687,395	4,308,718
Other P&E | Accumulated depreciation / amortization
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(3,489,362)
Balance at end of the period	(3,856,943)	(3,489,362)
Estimated losses
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(485,575)	(494,149)
Additions	(37,374)	(19,962)
Write-offs, net	162,319	28,539
Net transfers	132,578	(3)
Balance at end of the period	(228,052)	(485,575)
Estimated losses | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	(485,575)
Balance at end of the period	(228,052)	(485,575)
Assets and facilities under construction
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	2,730,030	1,850,734
Additions	6,085,487	5,543,398
Write-offs, net	(18,897)	(38,959)
Net transfers	(5,910,612)	(4,625,143)
Business Combination (Note 1.c.1)	817
Balance at end of the period	2,886,825	2,730,030
Assets and facilities under construction | Cost
PROPERTY, PLANT AND EQUIPMENT
Balance at beginning of the period	2,730,030
Balance at end of the period	R$ 2,886,825	R$ 2,730,030
Minimum | Switching and transmission equipment
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	2.50%
Minimum | Terminal equipment / modems
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	6.67%
Minimum | Infrastructure
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	2.50%
Minimum | Other P&E
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	10.00%
Maximum | Switching and transmission equipment
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	25.00%
Maximum | Terminal equipment / modems
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	66.67%
Maximum | Infrastructure
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	66.67%
Maximum | Other P&E
PROPERTY, PLANT AND EQUIPMENT
Annual depreciation rate	25.00%

XML

PROPERTY, PLANT AND EQUIPMENT - Depreciation rates (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PROPERTY, PLANT AND EQUIPMENT
Property and equipment pledged in guarantee	R$ 176,591	R$ 203,600
Estimated residual value of reversible assets	R$ 8,763,355	8,813,916
Depreciation rate accounting estimates
PROPERTY, PLANT AND EQUIPMENT
Reduction to depreciation expense		R$ 157,053

XML

PROPERTY, PLANT AND EQUIPMENT - Finance lease (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	R$ 33,222,316	R$ 31,924,918	R$ 30,476,765
Finance lease
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	R$ 280,103	R$ 298,604

XML

INTANGIBLE ASSETS (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 44,483,496	R$ 45,607,191
Additions	1,377,382	1,354,787
Write-offs, net	(3,376)	(18)
Net transfers	19,209	102,934
Amortization (Note 24)	(2,545,337)	(2,581,398)
Business combination (Note 1.c.1)	(530)
Balance at end of the period	43,331,904	44,483,496
Cost
INTANGIBLE ASSETS
Balance at beginning of the period	63,860,213
Balance at end of the period	42,279,121	63,860,213
Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(19,376,717)
Balance at end of the period	1,052,783	(19,376,717)
Software
INTANGIBLE ASSETS
Balance at beginning of the period	2,694,521	2,385,723
Additions	276,390	634,528
Write-offs, net	(7,427)	24
Net transfers	701,545	616,336
Amortization (Note 24)	(944,753)	(942,090)
Business combination (Note 1.c.1)	(530)
Balance at end of the period	R$ 2,720,806	2,694,521
Software | Minimum
INTANGIBLE ASSETS
Annual amortization rate (%)	20.00%
Software | Maximum
INTANGIBLE ASSETS
Annual amortization rate (%)	50.00%
Software | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 14,062,127
Balance at end of the period	15,125,532	14,062,127
Software | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(11,367,606)
Balance at end of the period	(12,404,726)	(11,367,606)
Customer portfolio
INTANGIBLE ASSETS
Balance at beginning of the period	2,561,220	3,154,501
Amortization (Note 24)	(582,357)	(593,281)
Balance at end of the period	R$ 1,978,863	2,561,220
Customer portfolio | Minimum
INTANGIBLE ASSETS
Annual amortization rate (%)	11.76%
Customer portfolio | Maximum
INTANGIBLE ASSETS
Annual amortization rate (%)	12.85%
Customer portfolio | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 4,513,278
Balance at end of the period	4,513,278	4,513,278
Customer portfolio | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(1,952,058)
Balance at end of the period	(2,534,415)	(1,952,058)
Trademarks
INTANGIBLE ASSETS
Balance at beginning of the period	1,157,820	1,274,803
Amortization (Note 24)	(84,205)	(116,983)
Balance at end of the period	R$ 1,073,615	1,157,820
Trademarks | Minimum
INTANGIBLE ASSETS
Annual amortization rate (%)	5.13%
Trademarks | Maximum
INTANGIBLE ASSETS
Annual amortization rate (%)	66.67%
Trademarks | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 1,658,897
Balance at end of the period	1,658,897	1,658,897
Trademarks | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(501,077)
Balance at end of the period	(585,282)	(501,077)
Licenses
INTANGIBLE ASSETS
Balance at beginning of the period	14,897,968	15,635,082
Additions		185,450
Amortization (Note 24)	(928,362)	(922,564)
Balance at end of the period	R$ 13,969,606	14,897,968
Licenses | Minimum
INTANGIBLE ASSETS
Annual amortization rate (%)	3.60%
Licenses | Maximum
INTANGIBLE ASSETS
Annual amortization rate (%)	6.67%
Licenses | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 20,237,572
Balance at end of the period	20,237,572	20,237,572
Licenses | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(5,339,604)
Balance at end of the period	(6,267,966)	(5,339,604)
Other intangible assets
INTANGIBLE ASSETS
Balance at beginning of the period	50,702	18,190
Additions	207	19,796
Write-offs, net		(11)
Net transfers	(24,297)	19,207
Amortization (Note 24)	(5,660)	(6,480)
Balance at end of the period	R$ 20,952	50,702
Other intangible assets | Minimum
INTANGIBLE ASSETS
Annual amortization rate (%)	6.67%
Other intangible assets | Maximum
INTANGIBLE ASSETS
Annual amortization rate (%)	20.00%
Other intangible assets | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	R$ 267,074
Balance at end of the period	238,201	267,074
Other intangible assets | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at beginning of the period	(216,372)
Balance at end of the period	(217,249)	(216,372)
Estimated losses for software
INTANGIBLE ASSETS
Balance at beginning of the period	(4,581)
Additions		(4,550)
Write-offs, net	4,051	(31)
Net transfers	31
Balance at end of the period	(499)	(4,581)
Estimated losses for software | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	(4,581)
Balance at end of the period	(499)	(4,581)
Software under development
INTANGIBLE ASSETS
Balance at beginning of the period	63,425	76,471
Additions	1,100,785	519,563
Net transfers	(658,070)	(532,609)
Balance at end of the period	506,140	63,425
Software under development | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	63,425
Balance at end of the period	506,140	63,425
Goodwill
INTANGIBLE ASSETS
Balance at beginning of the period	23,062,421	23,062,421
Balance at end of the period	23,062,421	23,062,421
Goodwill | Cost
INTANGIBLE ASSETS
Balance at beginning of the period	23,062,421
Balance at end of the period		R$ 23,062,421
Goodwill | Accumulated depreciation / amortization
INTANGIBLE ASSETS
Balance at end of the period	R$ 23,062,421

XML

INTANGIBLE ASSETS - Goodwill breakdown (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2015
INTANGIBLE ASSETS
Goodwill	R$ 23,062,421
Ajato Telecomunicacao Ltda.
INTANGIBLE ASSETS
Goodwill	149
Spanish e Figueira (merged with TDBH)
INTANGIBLE ASSETS
Goodwill	212,058
Santo Genovese Participacoes Ltda.
INTANGIBLE ASSETS
Goodwill	71,892
Telefonica Televisao Participacoes S.A.
INTANGIBLE ASSETS
Goodwill	780,693
Vivo Participacoes S. A.
INTANGIBLE ASSETS
Goodwill	9,160,488
GVT Participacoes S.A. ("GVTPart")
INTANGIBLE ASSETS
Goodwill	R$ 12,837,141	R$ 12,837,141

XML

INTANGIBLE ASSETS - Goodwill impairment testing (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
INTANGIBLE ASSETS
Period of assessment of value of goodwill	5 years	5 years
Growth rate	4.50%	5.00%
Discount rate applied to cash flow projections	13.58%	14.75%
Inflation rate	4.00%	4.50%
Impairment loss	R$ 0	R$ 0
Minimum
INTANGIBLE ASSETS
Discount rate	(1.00%)
Perpetuity growth rates	(0.50%)
OIBDA Margin	(2.00%)
Capex/Revenues Margin	(1.00%)
Maximum
INTANGIBLE ASSETS
Discount rate	1.00%
Perpetuity growth rates	0.50%
OIBDA Margin	2.00%
Capex/Revenues Margin	1.00%

XML

PERSONNEL, SOCIAL CHARGES AND BENEFITS (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
PERSONNEL, SOCIAL CHARGES AND BENEFITS
Salaries and wages	R$ 40,171	R$ 55,476
Social charges and benefits	399,229	384,073
Profit sharing	273,384	285,887
Share-based payment plans (Note 29)	33,880	46,223
Total	746,664	771,659
Current	723,380	760,643
Noncurrent	R$ 23,284	R$ 11,016

XML

TRADE ACCOUNTS PAYABLE (Details) - BRL (R$) R$ in Thousands	1 Months Ended
	May 31, 2017	Dec. 31, 2017	Dec. 31, 2016
TRADE ACCOUNTS PAYABLE
Sundry suppliers (Opex, Capex, services e Material)		R$ 6,683,503	R$ 6,617,240
Amounts payable (operators, co-billing)		187,976	314,958
Payables for purchase of non-current assets		224,777	369,715
Related parties (Note 28)		350,844	381,240
Total		7,447,100	7,683,153
Current		R$ 7,447,100	7,611,246
Noncurrent			R$ 71,907
Judicial deposit in favor of the operators	R$ 71,956

XML

TAXES, CHARGES AND CONTRIBUTIONS (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
TAXES, CHARGES AND CONTRIBUTIONS
Income and social contribution taxes payable	R$ 4,479	R$ 11,520
ICMS	1,149,137	1,226,172
PIS and COFINS	419,589	412,149
Fust and Funttel	93,869	92,828
ISS, CIDE and other taxes	113,689	77,193
Total	1,780,763	1,819,862
Current	1,731,315	1,770,731
Noncurrent	R$ 49,448	R$ 49,131

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DIVIDENDS AND INTEREST ON EQUITY (IOE) - Breakdown (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Dividends and interest on equity payable
Dividends and interest on equity	R$ 2,396,116	R$ 2,195,031	R$ 2,209,362
Equity attributable to owners of parent [member]
Dividends and interest on equity payable
Dividends and interest on equity	2,396,116	2,195,031
Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.)
Dividends and interest on equity payable
Dividends and interest on equity	505,750	454,583
Telefonica S.A.
Dividends and interest on equity payable
Dividends and interest on equity	609,003	547,390
SP Telecomunicacoes Participacoes Ltda
Dividends and interest on equity payable
Dividends and interest on equity	383,933	345,090
Telefonica Chile S.A.
Dividends and interest on equity payable
Dividends and interest on equity	1,070	962
Non-controlling interest
Dividends and interest on equity payable
Dividends and interest on equity	R$ 896,360	R$ 847,006

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DIVIDENDS AND INTEREST ON EQUITY (IOE) - Changes (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
DIVIDENDS AND INTEREST ON EQUITY (IOE)
Beginning Balance	R$ 2,195,031	R$ 2,209,362
Supplementary dividends for previous year	1,913,987	1,287,223
Interim dividends and interest on equity (net of IRRF)	2,054,143	1,846,323
Unclaimed dividends and interest on equity	(101,778)	(189,471)
Payment of dividends and interest on equity	(3,668,551)	(2,966,384)
IRRF on shareholders exempt/immune from interest on equity	3,284	7,978
Ending Balance	R$ 2,396,116	R$ 2,195,031

XML

PROVISIONS AND CONTINGENCIES - Breakdown of changes in provisions (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PROVISIONS AND CONTINGENCIES
Balances at the beginning	R$ 7,809,261	R$ 6,804,696
Additions (income) (Note 25)	2,055,623	1,555,206
Write-offs due to reversal (income) (Note 25)	(1,056,204)	(602,954)
Other additions (reversal)	114,076	271,797
Write-offs due to payment	(1,592,864)	(1,108,062)
Write-offs due to taxes	(66,027)
Monetary restatement	768,011	888,578
Business combination (Note 1.c.1)	112,874
Balances at the closing	8,144,750	7,809,261
Current	1,434,911	1,183,623
Noncurrent	6,709,839	6,625,638
Labor
PROVISIONS AND CONTINGENCIES
Balances at the beginning	1,382,957	1,166,151
Additions (income) (Note 25)	809,754	611,776
Write-offs due to reversal (income) (Note 25)	(512,583)	(153,758)
Other additions (reversal)	(492)	958
Write-offs due to payment	(865,656)	(396,894)
Monetary restatement	147,334	154,724
Business combination (Note 1.c.1)	19,282
Balances at the closing	980,596	1,382,957
Current	239,229	202,113
Noncurrent	741,367	1,180,844
Tax
PROVISIONS AND CONTINGENCIES
Balances at the beginning	3,129,681	2,736,191
Additions (income) (Note 25)	226,125	126,446
Write-offs due to reversal (income) (Note 25)	(71,684)	(53,616)
Other additions (reversal)	93,596	100,314
Write-offs due to payment	(168,407)	(159,039)
Write-offs due to taxes	(66,027)
Monetary restatement	348,393	379,385
Business combination (Note 1.c.1)	87,531
Balances at the closing	3,579,208	3,129,681
Noncurrent	3,579,208	3,129,681
Civil
PROVISIONS AND CONTINGENCIES
Balances at the beginning	1,039,357	1,010,356
Additions (income) (Note 25)	748,620	690,470
Write-offs due to reversal (income) (Note 25)	(309,927)	(343,016)
Other additions (reversal)	207	7,897
Write-offs due to payment	(551,928)	(538,309)
Monetary restatement	123,487	211,959
Business combination (Note 1.c.1)	6,061
Balances at the closing	1,055,877	1,039,357
Current	201,673	205,831
Noncurrent	854,204	833,526
Regulatory
PROVISIONS AND CONTINGENCIES
Balances at the beginning	828,934	642,695
Additions (income) (Note 25)	271,124	126,514
Write-offs due to reversal (income) (Note 25)	(72,780)	(10,552)
Write-offs due to payment	(6,873)	(2,580)
Monetary restatement	83,387	72,857
Balances at the closing	1,103,792	828,934
Current	994,009	775,679
Noncurrent	109,783	53,255
Contingent liabilities (PPA)
PROVISIONS AND CONTINGENCIES
Balances at the beginning	881,745	843,882
Write-offs due to reversal (income) (Note 25)	(89,230)	(9,088)
Write-offs due to payment		(11,240)
Monetary restatement	53,281	58,191
Balances at the closing	845,796	881,745
Noncurrent	845,796	881,745
Provision for decommissioning
PROVISIONS AND CONTINGENCIES
Balances at the beginning	546,587	405,421
Write-offs due to reversal (income) (Note 25)		(32,924)
Other additions (reversal)	20,765	162,628
Monetary restatement	12,129	11,462
Balances at the closing	579,481	546,587
Noncurrent	R$ 579,481	R$ 546,587

XML

PROVISIONS AND CONTINGENCIES - Provisions and labor contingencies (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$)	Nov. 20, 2001 item
PROVISIONS AND CONTINGENCIES
Provision for Universal Telecommunications Services Fund	R$ 4,316,571	R$ 4,089,065
Provision under fund for Technological Development of Telecommunications	493,867	1,190,637
Provision for Telecommunications Inspection Fund	2,556,443	2,352,000
Provision for Public Price for Numbering Resource Management	R$ 279,292	244,808
Maximum
PROVISIONS AND CONTINGENCIES
Import duty (as a percent)	28.00%
Minimum
PROVISIONS AND CONTINGENCIES
Import duty (as a percent)	4.00%
Labor
PROVISIONS AND CONTINGENCIES
Provisions - probable losses	R$ 980,596	1,382,957
Provisions - possible losses	261,876	293,146
Tax
PROVISIONS AND CONTINGENCIES
Provisions - probable losses	3,579,208	3,129,681
Federal	502,153	343,353
State	231,998	226,571
Municipal	32,054	30,519
FUST, FISTEL and EBC	2,813,003	2,529,238
Possible losses	35,388,910	30,050,578
Federal	8,226,374	5,931,022
State	18,968,349	15,389,802
Municipal	548,014	853,244
FUST, FUNTTEL, FISTEL and EBC	7,646,173	7,876,510
Civil
PROVISIONS AND CONTINGENCIES
Provisions - probable losses	1,055,877	1,039,357
Possible losses	2,858,796	2,574,836
Supplement of share proceedings	324,232	256,276
Relating to failure to supply services and/or products sold	296,169	386,699
Civil proceedings of a non-consumer nature	435,476	396,382
Claims at several levels, related to service rendering rights	2,827,071	2,559,252
Civil execution proceeding	178	1,377
Unrecognized collection, collection of undue value and contractual noncompliance	17,340
Lawsuits on various administrative and legal proceedings	14,207	14,207
Number of wireless carriers under lawsuit | item			23
Daily fine in case of noncompliance	R$ 10,000
Percentage of charge on interconnection services	2.00%
Frequency of payment for use of SMP realted radio frequencies	2 years
Extension period for use of SMP related radio frequencies	15 years
Regulatory
PROVISIONS AND CONTINGENCIES
Provisions - probable losses	R$ 1,103,792	828,934
Possible losses	R$ 5,065,907	R$ 5,018,205

XML

PROVISIONS AND CONTINGENCIES - Guarantees (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
PROVISIONS AND CONTINGENCIES
Property and equipment	R$ 176,591	R$ 203,600
Judicial deposits and garnishments	6,663,805	6,351,566
Letters of guarantee	1,669,476	1,948,088
Short-term investments pledged as collateral	81,486	78,166
Contingent liability for guarantees
PROVISIONS AND CONTINGENCIES
Short-term investments pledged as collateral	R$ 69,764	R$ 67,393

XML

DEFERRED REVENUE (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
DEFERRED REVENUE
Services and goods	R$ 301,292	R$ 389,706
Disposal of PP&E	165,162	227,397
Activation revenue	7,959	44,914
Customer loyalty program	50,354	56,210
Government grants	115,379	133,300
Other	83,052	90,112
Total	723,198	941,639
Current	372,561	429,853
Noncurrent	R$ 350,637	R$ 511,786

XML

LOANS, FINANCING AND DEBENTURES - Breakdown (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$) installment	Dec. 31, 2016 BRL (R$)	Dec. 30, 2014
LOANS, FINANCING AND DEBENTURES
Current	R$ 1,620,955	R$ 2,542,975
Noncurrent	2,320,147	3,126,792
Total	3,941,102	5,669,767
Home currency
LOANS, FINANCING AND DEBENTURES
Current	1,478,656	1,480,382
Noncurrent	2,237,192	2,901,521
Total	3,715,848	4,381,903
Foreign currency
LOANS, FINANCING AND DEBENTURES
Current	142,299	1,062,593
Noncurrent	82,955	225,271
Total	225,254	1,287,864
Loans and financing | Home currency
LOANS, FINANCING AND DEBENTURES
Current	820,468	711,848
Noncurrent	1,456,624	2,158,303
Total	2,277,092	2,870,151
Loans and financing | Foreign currency
LOANS, FINANCING AND DEBENTURES
Current	142,299	1,062,593
Noncurrent	82,955	225,271
Total	225,254	1,287,864
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | Home currency
LOANS, FINANCING AND DEBENTURES
Current	371,946	363,734
Noncurrent	213,958	567,110
Total	585,904	930,844
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | Foreign currency
LOANS, FINANCING AND DEBENTURES
Current	142,299	136,850
Noncurrent	82,955	225,271
Total	R$ 225,254	362,121
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | TJLP | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	0.00%
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | TJLP | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	4.08%
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | ECM | Foreign currency
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	2.38%
Financing - BNDES FINEM - Contract 08.2.1073.1 maturing 7/15/2017 | Home currency
LOANS, FINANCING AND DEBENTURES
Current		29,319
Total		29,319
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 184,007	182,737
Noncurrent	303,560	480,510
Total	R$ 487,567	663,247
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | TJLP | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	0.00%
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | TJLP | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	3.38%
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 11/15/2019 | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 14,654	14,686
Noncurrent	13,377	27,971
Total	R$ 28,031	42,657
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 11/15/2019 | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	5.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 101,879	7,596
Noncurrent	413,552	499,442
Total	R$ 515,431	507,038
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)			0.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	0.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	3.12%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 37,061	12,320
Noncurrent	132,092	163,222
Total	R$ 169,153	175,542
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	4.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	6.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 70,426	1,408
Noncurrent	305,952	340,600
Total	R$ 376,378	342,008
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | TJLP | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)			3.12%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)			2.32%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic | Home currency
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	2.32%
Financing - BNDES PSI maturing 1/15/2023 | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 25,405	92,508
Noncurrent	19,413	44,698
Total	R$ 44,818	137,206
Financing - BNDES PSI maturing 1/15/2023 | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	2.50%
Financing - BNDES PSI maturing 1/15/2023 | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	5.50%
Financing - BNB maturing 8/18/2022 | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 15,090	7,540
Noncurrent	54,720	34,750
Total	R$ 69,810	42,290
Bank guarantee (in percent)	100.00%
Number of installments | installment	3
Remaining balances	R$ 11,722	10,773
Financing - BNB maturing 8/18/2022 | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	7.06%
Financing - BNB maturing 8/18/2022 | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)	10.00%
Financing - Suppliers | Home currency
LOANS, FINANCING AND DEBENTURES
Current	R$ 607,152	722,591
Total	R$ 607,152	722,591
Financing - Suppliers | Home currency | Minimum
LOANS, FINANCING AND DEBENTURES
CDI, as percentage	101.40%
Financing - Suppliers | Home currency | Maximum
LOANS, FINANCING AND DEBENTURES
CDI, as percentage	109.40%
Finance lease
LOANS, FINANCING AND DEBENTURES
Current	R$ 51,036	45,943
Noncurrent	334,424	328,485
Finance lease | Home currency
LOANS, FINANCING AND DEBENTURES
Current	51,036	45,943
Noncurrent	334,424	328,485
Total	385,460	374,428
Contingent consideration | Home currency
LOANS, FINANCING AND DEBENTURES
Noncurrent	446,144	414,733
Total	R$ 446,144	414,733
Resolution 4131 - Scotiabank and Bank of America | Foreign currency
LOANS, FINANCING AND DEBENTURES
Current		925,743
Total		R$ 925,743

XML

LOANS, FINANCING AND DEBENTURES - Loans and financing (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
LOANS, FINANCING AND DEBENTURES
Loans and financing	R$ 3,941,102	R$ 5,669,767
BNDES - PSI
LOANS, FINANCING AND DEBENTURES
Loans and financing	R$ 32,155	R$ 47,346
Financing - Suppliers
LOANS, FINANCING AND DEBENTURES
Net cost of CDI, as percentage		108.40%
Financing - Suppliers | Minimum
LOANS, FINANCING AND DEBENTURES
Net cost of CDI, as percentage	101.40%
Financing - Suppliers | Maximum
LOANS, FINANCING AND DEBENTURES
Net cost of CDI, as percentage	109.40%

XML

LOANS, FINANCING AND DEBENTURES - Finance lease and contingent consideration (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
LOANS, FINANCING AND DEBENTURES
Current	R$ 1,620,955	R$ 2,542,975
Noncurrent	2,320,147	3,126,792
Finance lease
LOANS, FINANCING AND DEBENTURES
Nominal value payable	787,147	831,479
Unrealized financial expenses	(401,687)	(457,051)
Present value payable	385,460	374,428
Current	51,036	45,943
Noncurrent	334,424	R$ 328,485
Unsecured residual values resulting in benefits to the lessor	R$ 0
Contingent consideration
LOANS, FINANCING AND DEBENTURES
Reimbursement period	15 years
2018/Falling due within one year/Up to 1 year | Finance lease
LOANS, FINANCING AND DEBENTURES
Nominal value payable	R$ 57,865
Present value payable	51,036
Falling due between one year and five years | Finance lease
LOANS, FINANCING AND DEBENTURES
Nominal value payable	201,057
Present value payable	144,963
2023 onwards/Over five years | Finance lease
LOANS, FINANCING AND DEBENTURES
Nominal value payable	528,225
Present value payable	R$ 189,461

XML

LOANS, FINANCING AND DEBENTURES - Debentures (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$) item	Jan. 26, 2017 BRL (R$) item	Jan. 13, 2017 BRL (R$) item	Dec. 31, 2016 BRL (R$)
LOANS, FINANCING AND DEBENTURES
Current	R$ 1,412,486			R$ 2,120,504
Non-current	3,108,253			1,433,803
Debentures
LOANS, FINANCING AND DEBENTURES
Current	1,412,486			2,120,504
Non-current	3,108,253			1,433,803
Total	R$ 4,520,739			3,554,307
4th issue - Series 3
LOANS, FINANCING AND DEBENTURES
Issued | item	810,000
Outstanding | item	23,557
Issue value	R$ 810,000
Current	312			307
Non-current	40,010			36,990
Total	R$ 40,322			37,297
1st issue - Minas Comunica
LOANS, FINANCING AND DEBENTURES
Issued | item	5,550
Outstanding | item	5,550
Issue value	R$ 55,500
Current	24,088
Non-current	72,264			97,308
Total	R$ 96,352			97,308
3rd and 4th issue
LOANS, FINANCING AND DEBENTURES
Transaction cost				495
3rd issue
LOANS, FINANCING AND DEBENTURES
Issued | item	200,000
Outstanding | item	200,000
Issue value	R$ 2,000,000
CDI, as percentage	100.00%
Current				2,086,763
Total				2,086,763
4th issue
LOANS, FINANCING AND DEBENTURES
Issued | item	130,000
Outstanding | item	130,000
Issue value	R$ 1,300,000
CDI, as percentage	100.00%
Current	R$ 1,317,513			33,434
Non-current				1,299,505
Total	1,317,513			R$ 1,332,939
4th, 5th and 6th issues
LOANS, FINANCING AND DEBENTURES
Transaction cost	R$ 5,422
5th issue
LOANS, FINANCING AND DEBENTURES
Issued | item	200,000	200,000
Outstanding | item	200,000
Issue value	R$ 2,000,000
CDI, as percentage	108.25%
Current	R$ 64,397
Non-current	1,996,517
Total	R$ 2,060,914	R$ 2,000,000
6th issue
LOANS, FINANCING AND DEBENTURES
Issued | item	100,000		100,000
Outstanding | item	100,000
Issue value	R$ 1,000,000
CDI, as percentage	100.00%
Current	R$ 6,176
Non-current	999,462
Total	R$ 1,005,638		R$ 1,000,000
IPCA | 4th issue - Series 3
LOANS, FINANCING AND DEBENTURES
Remuneration p.a.	4.00%
IPCA | 1st issue - Minas Comunica
LOANS, FINANCING AND DEBENTURES
Remuneration p.a.	0.50%
CDI | 3rd issue
LOANS, FINANCING AND DEBENTURES
Remuneration p.a.	0.75%
CDI | 4th issue
LOANS, FINANCING AND DEBENTURES
Remuneration p.a.	0.68%
CDI | 6th issue
LOANS, FINANCING AND DEBENTURES
Remuneration p.a.	0.24%

XML

LOANS, FINANCING AND DEBENTURES - Repayment schedule (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$)
Disclosure of detailed information about borrowings [line items]
Repayments	R$ 5,428,400
Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	1,539,579
Debentures
Disclosure of detailed information about borrowings [line items]
Repayments	3,108,253
Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	334,424
Contingent consideration
Disclosure of detailed information about borrowings [line items]
Repayments	446,144
2019/From 1 to 2 years
Disclosure of detailed information about borrowings [line items]
Repayments	845,456
2019/From 1 to 2 years | Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	737,548
2019/From 1 to 2 years | Debentures
Disclosure of detailed information about borrowings [line items]
Repayments	64,098
2019/From 1 to 2 years | Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	43,810
2020
Disclosure of detailed information about borrowings [line items]
Repayments	1,414,815
2020 | Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	353,587
2020 | Debentures
Disclosure of detailed information about borrowings [line items]
Repayments	1,024,088
2020 | Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	37,140
2021
Disclosure of detailed information about borrowings [line items]
Repayments	1,283,037
2021 | Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	226,244
2021 | Debentures
Disclosure of detailed information about borrowings [line items]
Repayments	1,024,088
2021 | Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	32,705
2022
Disclosure of detailed information about borrowings [line items]
Repayments	1,231,714
2022 | Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	204,427
2022 | Debentures
Disclosure of detailed information about borrowings [line items]
Repayments	995,979
2022 | Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	31,308
2023 onwards/Over five years
Disclosure of detailed information about borrowings [line items]
Repayments	653,378
2023 onwards/Over five years | Loans and financing
Disclosure of detailed information about borrowings [line items]
Repayments	17,773
2023 onwards/Over five years | Finance lease
Disclosure of detailed information about borrowings [line items]
Repayments	189,461
2023 onwards/Over five years | Contingent consideration
Disclosure of detailed information about borrowings [line items]
Repayments	R$ 446,144

XML

LOANS, FINANCING AND DEBENTURES - Changes (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	R$ 9,224,074	R$ 10,221,290
Additions	3,640,782	1,194,580
Government grants (Note 19)	(1,581)	(12,040)
Financial charges (Note 26)	932,727	1,061,098	R$ 921,019
Issue costs	(4,926)	495
Foreign exchange variation (Note 26)	15,846	(272,795)
Write-offs (payments)	(5,345,081)	(2,968,554)
Balance at end of the period	8,461,841	9,224,074	10,221,290
Loans and financing
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	4,158,015	4,773,489
Additions	55,876	466,629
Government grants (Note 19)	(1,581)	(12,040)
Financial charges (Note 26)	300,153	424,867
Foreign exchange variation (Note 26)	15,846	(272,795)
Write-offs (payments)	(2,025,963)	(1,222,135)
Balance at end of the period	2,502,346	4,158,015	4,773,489
Debentures
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	3,554,307	3,544,714
Additions	3,000,000
Financial charges (Note 26)	485,295	486,178
Issue costs	(4,926)	495
Write-offs (payments)	(2,513,937)	(477,080)
Balance at end of the period	4,520,739	3,554,307	3,544,714
Finance lease
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	374,428	296,684
Additions	13,462	61,866
Financial charges (Note 26)	45,265	63,003
Write-offs (payments)	(47,695)	(47,125)
Balance at end of the period	385,460	374,428	296,684
Financing - Suppliers
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	722,591	1,228,682
Additions	571,444	666,085
Financial charges (Note 26)	70,603	50,038
Write-offs (payments)	(757,486)	(1,222,214)
Balance at end of the period	607,152	722,591	1,228,682
Contingent consideration
LOANS, FINANCING AND DEBENTURES
Balance at beginning of the period	414,733	377,721
Financial charges (Note 26)	31,411	37,012
Balance at end of the period	R$ 446,144	R$ 414,733	R$ 377,721

XML

LOANS, FINANCING AND DEBENTURES - Summary of Funding and Payments (Details)					12 Months Ended
	Nov. 13, 2017	Jan. 26, 2017 BRL (R$) item $ / item	Jan. 13, 2017 BRL (R$) item $ / item	Dec. 30, 2014 BRL (R$) installment	Dec. 31, 2017 BRL (R$) installment item	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)
LOANS, FINANCING AND DEBENTURES
Additions					R$ 3,640,782,000	R$ 1,194,580,000
Write-offs (payments), Principal					(4,485,495,000)	(2,171,100,000)	R$ (8,710,567,000)
Write-offs (payments), Financial charges					(859,586,000)	(926,223,000)	R$ (949,386,000)
Write-offs (payments), Total					(5,345,081,000)	(2,968,554,000)
Loans and financing
LOANS, FINANCING AND DEBENTURES
Additions					55,876,000	466,629,000
Write-offs (payments), Principal					(1,781,261,000)
Write-offs (payments), Financial charges					(244,702,000)
Write-offs (payments), Total					(2,025,963,000)	(1,222,135,000)
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023
LOANS, FINANCING AND DEBENTURES
Credit facility				R$ 1,000,293,000
Annual interest rate (as a percent)				4.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | Minimum | TJLP
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)				0.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%)
LOANS, FINANCING AND DEBENTURES
Term				7 years
Consecutive monthly installments | installment				60
Adjustment to interest rate (as a percent)				6.00%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic)
LOANS, FINANCING AND DEBENTURES
Additions					15,998,000
Write-offs (payments), Principal					(825,256,000)
Write-offs (payments), Financial charges					(213,752,000)
Write-offs (payments), Total					(1,039,008,000)
Term				8 years
Consecutive monthly installments | installment				60
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)				2.32%
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Maximum | TJLP
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)				3.12%
BNB
LOANS, FINANCING AND DEBENTURES
Additions					39,878,000
Write-offs (payments), Principal					(11,808,000)
Write-offs (payments), Financial charges					(4,073,000)
Write-offs (payments), Total					R$ (15,881,000)
Term					8 years
Consecutive monthly installments | installment					72
BNB | Minimum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)					7.06%
BNB | Maximum
LOANS, FINANCING AND DEBENTURES
Annual interest rate (as a percent)					10.00%
Resolution 4131 - Scotiabank and Bank of America
LOANS, FINANCING AND DEBENTURES
Write-offs (payments), Principal					R$ (944,197,000)
Write-offs (payments), Financial charges					(26,877,000)
Write-offs (payments), Total					(971,074,000)
Debentures
LOANS, FINANCING AND DEBENTURES
Additions					3,000,000,000
Write-offs (payments), Principal					(2,000,000,000)
Write-offs (payments), Financial charges					(513,937,000)
Write-offs (payments), Total					(2,513,937,000)	(477,080,000)
Debenture					4,520,739,000	3,554,307,000
4th issue - Series 3
LOANS, FINANCING AND DEBENTURES
Write-offs (payments), Financial charges					(1,522,000)
Write-offs (payments), Total					(1,522,000)
Debenture					R$ 40,322,000	37,297,000
Number of debentures | item					810,000
4th issue - Series 3 | IPCA
LOANS, FINANCING AND DEBENTURES
Adjustment to interest rate (as a percent)					4.00%
1st issue - Minas Comunica
LOANS, FINANCING AND DEBENTURES
Debenture					R$ 96,352,000	97,308,000
Number of debentures | item					5,550
1st issue - Minas Comunica | IPCA
LOANS, FINANCING AND DEBENTURES
Adjustment to interest rate (as a percent)					0.50%
3rd issue
LOANS, FINANCING AND DEBENTURES
Write-offs (payments), Principal					R$ (2,000,000,000)
Write-offs (payments), Financial charges					(246,817,000)
Write-offs (payments), Total					R$ (2,246,817,000)
Debenture						2,086,763,000
Number of debentures | item					200,000
4th issue
LOANS, FINANCING AND DEBENTURES
Write-offs (payments), Financial charges					R$ (151,152,000)
Write-offs (payments), Total					(151,152,000)
Debenture					R$ 1,317,513,000	1,332,939,000
Number of debentures | item					130,000
5th issue
LOANS, FINANCING AND DEBENTURES
Additions					R$ 2,000,000,000
Write-offs (payments), Financial charges					(114,446,000)
Write-offs (payments), Total					(114,446,000)
Term		5 years
Debenture		R$ 2,000,000,000			R$ 2,060,914,000
Number of debentures | item		200,000			200,000
Debenture par value | $ / item		10
Accumulated variation of CDI,as a percent		R$ 108.25
6th issue
LOANS, FINANCING AND DEBENTURES
Additions					R$ 1,000,000,000
Term			3 years
Debenture			R$ 1,000,000,000		R$ 1,005,638,000
Number of debentures | item			100,000		100,000
Debenture par value | $ / item			10
Accumulated variation of CDI,as a percent			R$ 100.00
Spread	0.24%
Financing - Suppliers
LOANS, FINANCING AND DEBENTURES
Additions					R$ 571,444,000	666,085,000
Write-offs (payments), Principal					(668,512,000)
Write-offs (payments), Financial charges					(88,974,000)
Write-offs (payments), Total					(757,486,000)	(1,222,214,000)
Finance lease
LOANS, FINANCING AND DEBENTURES
Additions					13,462,000	61,866,000
Write-offs (payments), Principal					(35,722,000)
Write-offs (payments), Financial charges					(11,973,000)
Write-offs (payments), Total					R$ (47,695,000)	R$ (47,125,000)

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OTHER LIABILITIES (Details) - BRL (R$) R$ in Thousands	1 Months Ended
	Jan. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
OTHER LIABILITIES
Authorization licenses		R$ 258,742	R$ 1,048,523
Liabilities with related parties (Note 28)		125,987	112,358
Payment for license renewal		167,536	215,154
Third-party withholdings		144,593	227,685
Surplus from post-employment benefit plans (Note 30)		531,938	327,670
Amounts to be refunded to subscribers		189,380	168,708
Other liabilities		72,893	92,447
Total		1,491,069	2,192,545
Current		718,468	1,640,757
Noncurrent		R$ 772,601	R$ 551,788
Installment paid	R$ 858,991

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EQUITY - Capital (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
EQUITY
Authorized capital	1,850,000,000
Preferred shares
EQUITY
Percentage of increase in amount allocated to common share	10.00%	10.00%
Number of consecutive financial years to which minimum dividend to be paid	3 years
Maximum | Preferred shares
EQUITY
Proportion of non-vesting or restricted-voting preferred shares as percentage of total shares	0.67%

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EQUITY - Distribution of capital (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
EQUITY
Capital	R$ 63,571,416	R$ 63,571,416
Total shares outstanding	1,688,693,776	1,688,694,420
Capital
EQUITY
Number	1,690,984,923	1,690,984,923
Percentage of shares issued	100.00%	100.00%
Capital | Controlling Group
EQUITY
Number	1,244,241,119	1,244,241,119
Percentage of shares issued	73.58%	73.58%
Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.)
EQUITY
Number	407,279,213	407,279,213
Percentage of shares issued	24.09%	24.09%
Capital | Telefonica S.A.
EQUITY
Number	503,329,803	503,329,803
Percentage of shares issued	29.76%	29.76%
Capital | SP Telecomunicacoes Participacoes Ltda
EQUITY
Number	332,695,590	332,695,590
Percentage of shares issued	19.67%	19.67%
Capital | Telefonica Chile S.A.
EQUITY
Number	936,513	936,513
Percentage of shares issued	0.06%	0.06%
Capital | Other shareholders
EQUITY
Number	444,452,657	444,453,301
Percentage of shares issued	26.28%	26.28%
Treasury shares
EQUITY
Number	2,291,147	2,290,503
Percentage of shares issued	0.14%	0.14%
Common shares
EQUITY
Total shares outstanding	569,354,053	569,354,053
Common shares | Capital
EQUITY
Number	571,644,217	571,644,217
Percentage of shares issued	100.00%	100.00%
Common shares | Capital | Controlling Group
EQUITY
Number	540,033,264	540,033,264
Percentage of shares issued	94.47%	94.47%
Common shares | Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.)
EQUITY
Number	46,746,635	46,746,635
Percentage of shares issued	8.18%	8.18%
Common shares | Capital | Telefonica S.A.
EQUITY
Number	198,207,608	198,207,608
Percentage of shares issued	34.67%	34.67%
Common shares | Capital | SP Telecomunicacoes Participacoes Ltda
EQUITY
Number	294,158,155	294,158,155
Percentage of shares issued	51.46%	51.46%
Common shares | Capital | Telefonica Chile S.A.
EQUITY
Number	920,866	920,866
Percentage of shares issued	0.16%	0.16%
Common shares | Capital | Other shareholders
EQUITY
Number	29,320,789	29,320,789
Percentage of shares issued	5.13%	5.13%
Common shares | Treasury shares
EQUITY
Number	2,290,164	2,290,164
Percentage of shares issued	0.40%	0.40%
Preferred shares
EQUITY
Total shares outstanding	1,119,339,723	1,119,340,367
Preferred shares | Capital
EQUITY
Number	1,119,340,706	1,119,340,706
Percentage of shares issued	100.00%	100.00%
Preferred shares | Capital | Controlling Group
EQUITY
Number	704,207,855	704,207,855
Percentage of shares issued	62.91%	62.91%
Preferred shares | Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.)
EQUITY
Number	360,532,578	360,532,578
Percentage of shares issued	32.21%	32.21%
Preferred shares | Capital | Telefonica S.A.
EQUITY
Number	305,122,195	305,122,195
Percentage of shares issued	27.26%	27.26%
Preferred shares | Capital | SP Telecomunicacoes Participacoes Ltda
EQUITY
Number	38,537,435	38,537,435
Percentage of shares issued	3.44%	3.44%
Preferred shares | Capital | Telefonica Chile S.A.
EQUITY
Number	15,647	15,647
Percentage of shares issued	0.00%	0.00%
Preferred shares | Capital | Other shareholders
EQUITY
Number	415,131,868	415,132,512
Percentage of shares issued	37.09%	37.09%
Preferred shares | Treasury shares
EQUITY
Number	983	339
Percentage of shares issued	0.00%	0.00%

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EQUITY - Capital reserves (Details) - BRL (R$) R$ in Thousands		12 Months Ended
	Mar. 12, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
EQUITY
Incorporation of shares of GVTPart				R$ 8,477,314
Preferred shares delivered referring to the legal process of expansion plan		R$ 2	R$ 17
Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (in shares)	2,332,686
Preferred shares
EQUITY
Transfer of lawsuits concerning judicial proceedings (in shares)		62	62
Treasury shares
EQUITY
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15				112,107
Preferred shares delivered referring to the legal process of expansion plan		R$ 2	R$ 15
Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (in shares)	(45.26)
Transfer of lawsuits concerning judicial proceedings (in shares)		62	395
Treasury shares | Preferred shares
EQUITY
Transfer of lawsuits concerning judicial proceedings (in shares)		62	395
Other capital reserves
EQUITY
Excess of value in the issue or capitalization		R$ 2,735,930	R$ 2,735,930
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15		(112,107)	(112,107)	(112,107)
Direct costs on capital increase (net of taxes) according to the Special Shareholders Meeting of 04/30/15		(62,433)	(62,433)
Incorporation of shares of GVTPart		(1,188,707)	(1,188,707)	R$ (1,188,707)
Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData		(75,388)	(75,388)
Preferred shares delivered referring to the legal process of expansion plan		2	2
Effects of the acquisition of Terra Networks Brasil by TData		(59,029)
Total		1,238,268	1,297,297
Special goodwill reserve
EQUITY
Tax benefit generated by merger		R$ 63,074	R$ 63,074

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EQUITY - Capital reserves - Treasury Shares (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands			12 Months Ended
	Jul. 05, 2017	Jun. 01, 2017	Dec. 31, 2017	Dec. 31, 2016
EQUITY
Acquisition of shares in the financial market (in shares)		45
Transfer of lawsuits concerning judicial proceedings			R$ 2	R$ 17
Acquisition of shares in the financial market	R$ (32)
Preferred shares
EQUITY
Transfer of lawsuits concerning judicial proceedings (in shares)			(62)	(62)
Acquisition of shares in the financial market (in shares)	661	45
Acquisition of shares in the financial market	R$ (32)	R$ (2)
Unit issue price	R$ 45.26	R$ 47.31
Treasury shares
EQUITY
Balance (in shares)			2,290,503	2,290,898
Transfer of lawsuits concerning judicial proceedings (in shares)			(62)	(395)
Acquisition of shares in the financial market (in shares)			706
Balance (in shares)			2,291,147	2,290,503
Balance			R$ (87,790)	R$ (87,805)
Transfer of lawsuits concerning judicial proceedings			2	15
Acquisition of shares in the financial market			(32)
Balance			R$ (87,820)	R$ (87,790)
Treasury shares | Common shares
EQUITY
Balance (in shares)			2,290,164	2,290,164
Balance (in shares)			2,290,164	2,290,164
Treasury shares | Preferred shares
EQUITY
Balance (in shares)			339	734
Transfer of lawsuits concerning judicial proceedings (in shares)			(62)	(395)
Acquisition of shares in the financial market (in shares)			706
Balance (in shares)			983	339

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EQUITY - Income reserves (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
EQUITY
Balance	R$ 2,474,974
Reversal of reserves	550,000	R$ 700,000
Balance	2,463,228	2,474,974
Income reserves
EQUITY
Balance	2,474,974	2,410,571
Reversal of reserves	(550,000)	(700,000)
Recording of reserves	538,254	764,403
Balance	2,463,228	2,474,974
Legal reserve
EQUITY
Balance	1,907,905	1,703,643
Recording of reserves	230,439	204,262
Balance	2,138,344	1,907,905
Expansion and modernization reserve
EQUITY
Balance	550,000	700,000
Reversal of reserves	(550,000)	(700,000)
Recording of reserves	297,000	550,000
Balance	297,000	550,000
Tax incentive reserve
EQUITY
Balance	17,069	6,928
Recording of reserves	10,815	10,141
Balance	R$ 27,884	R$ 17,069

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EQUITY - Interim dividend and interest on equity (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands		12 Months Ended
	Apr. 28, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
EQUITY
Net income for the year		R$ 4,608,790	R$ 4,085,242	R$ 3,420,249
Legal reserve		(230,439)	(204,262)
Total		4,378,351	3,880,980
Tax incentives - not distributable		(10,815)	(10,141)
Adjusted net income		4,367,536	3,870,839
Total, Gross		2,416,639	2,172,145	1,745,925
Interest on equity (gross)		2,416,639	2,172,145
Balance of unallocated net income		1,950,897	1,698,694
Reversal expansion and Modernization Reserve		550,000	700,000
Expired equity instruments		101,778	221,559
Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes		(113,811)	(156,266)	R$ 264,990
Income available to be distributed		2,488,864	2,463,987
Expansion and Modernization Reserve		297,000	550,000
Additional proposed dividends	R$ 1,913,987	R$ 2,191,864	R$ 1,913,987
Mandatory minimum dividend - as percentage of adjusted net income		25.00%	25.00%
Mandatory minimum dividend - 25% of adjusted net income		R$ 1,091,884	R$ 967,710
Common shares
EQUITY
Proposed additional dividends per share	R$ 1.06295487663
Total, Gross		R$ 764,136	R$ 686,826
Total proposed dividend for deliberation - per share		R$ 1.217277	R$ 1.062955
Preferred shares
EQUITY
Proposed additional dividends per share	R$ 1.16925036430
Total, Gross		R$ 1,652,503	R$ 1,485,319
Total proposed dividend for deliberation - per share		R$ 1.339005	R$ 1.169250
Percentage of increase in amount allocated to common share		10.00%	10.00%

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EQUITY - Allocation of interim dividend and interest on equity (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
EQUITY
Total, Gross	R$ 2,416,639	R$ 2,172,145	R$ 1,745,925
IOE, net	R$ 2,054,143	1,846,323
Unclaimed dividend and interest on equity, expiry term	3 years
Reversal of unclaimed dividends and interest on equity	R$ 101,778	189,471
2/13/2017
EQUITY
Total, Gross	180,000
IOE, net	153,000
3/20/2017
EQUITY
Total, Gross	350,000
IOE, net	297,500
6/19/2017
EQUITY
Total, Gross	95,000
IOE, net	80,750
9/18/2017
EQUITY
Total, Gross	305,000
IOE, net	259,250
12/14/2017
EQUITY
Total, Gross	1,486,639
IOE, net	1,263,643
2/19/2016
EQUITY
Total, Gross		200,000
IOE, net		170,000
3/18/2016
EQUITY
Total, Gross		337,000
IOE, net		286,450
4/18/2016
EQUITY
Total, Gross		220,000
IOE, net		187,000
6/17/2016
EQUITY
Total, Gross		161,000
IOE, net		136,850
9/19/2016
EQUITY
Total, Gross		650,000
IOE, net		552,500
12/19/2016
EQUITY
Total, Gross		604,145
IOE, net		513,523
Common shares
EQUITY
Total, Gross	764,136	686,826
IOE, net	649,516	583,802
Common shares | 2/13/2017
EQUITY
Total, Gross	56,916
IOE, net	R$ 48,379
IOE, per share	R$ 0.084970
Common shares | 3/20/2017
EQUITY
Total, Gross	R$ 110,669
IOE, net	R$ 94,069
IOE, per share	R$ 0.165220
Common shares | 6/19/2017
EQUITY
Total, Gross	R$ 30,039
IOE, net	R$ 25,533
IOE, per share	R$ 0.044845
Common shares | 9/18/2017
EQUITY
Total, Gross	R$ 96,440
IOE, net	R$ 81,974
IOE, per share	R$ 0.143978
Common shares | 12/14/2017
EQUITY
Total, Gross	R$ 470,072
IOE, net	R$ 399,561
IOE, per share	R$ 0.701779
Common shares | 2/19/2016
EQUITY
Total, Gross		63,239
IOE, net		R$ 53,753
IOE, per share		R$ 0.094411
Common shares | 3/18/2016
EQUITY
Total, Gross		R$ 106,559
IOE, net		R$ 90,575
IOE, per share		R$ 0.159083
Common shares | 4/18/2016
EQUITY
Total, Gross		R$ 69,563
IOE, net		R$ 59,129
IOE, per share		R$ 0.103853
Common shares | 6/17/2016
EQUITY
Total, Gross		R$ 50,908
IOE, net		R$ 43,272
IOE, per share		R$ 0.076001
Common shares | 9/19/2016
EQUITY
Total, Gross		R$ 205,528
IOE, net		R$ 174,699
IOE, per share		R$ 0.306837
Common shares | 12/19/2016
EQUITY
Total, Gross		R$ 191,029
IOE, net		R$ 162,374
IOE, per share		R$ 0.285191
Preferred shares
EQUITY
Total, Gross	R$ 1,652,503	R$ 1,485,319
IOE, net	R$ 1,404,627	R$ 1,262,521
Percentage of increase in amount allocated to common share	10.00%	10.00%
Preferred shares | 2/13/2017
EQUITY
Total, Gross	R$ 123,084
IOE, net	R$ 104,621
IOE, per share	R$ 0.093467
Preferred shares | 3/20/2017
EQUITY
Total, Gross	R$ 239,331
IOE, net	R$ 203,431
IOE, per share	R$ 0.181742
Preferred shares | 6/19/2017
EQUITY
Total, Gross	R$ 64,961
IOE, net	R$ 55,217
IOE, per share	R$ 0.049330
Preferred shares | 9/18/2017
EQUITY
Total, Gross	R$ 208,560
IOE, net	R$ 177,276
IOE, per share	R$ 0.158375
Preferred shares | 12/14/2017
EQUITY
Total, Gross	R$ 1,016,567
IOE, net	R$ 864,082
IOE, per share	R$ 0.771957
Preferred shares | 2/19/2016
EQUITY
Total, Gross		R$ 136,761
IOE, net		R$ 116,247
IOE, per share		R$ 0.103853
Preferred shares | 3/18/2016
EQUITY
Total, Gross		R$ 230,441
IOE, net		R$ 195,875
IOE, per share		R$ 0.174992
Preferred shares | 4/18/2016
EQUITY
Total, Gross		R$ 150,437
IOE, net		R$ 127,871
IOE, per share		R$ 0.114238
Preferred shares | 6/17/2016
EQUITY
Total, Gross		R$ 110,092
IOE, net		R$ 93,578
IOE, per share		R$ 0.083601
Preferred shares | 9/19/2016
EQUITY
Total, Gross		R$ 444,472
IOE, net		R$ 377,801
IOE, per share		R$ 0.337521
Preferred shares | 12/19/2016
EQUITY
Total, Gross		R$ 413,116
IOE, net		R$ 351,149
IOE, per share		R$ 0.313710

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EQUITY - Changes in other comprehensive income (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Changes in other comprehensive income
Balance	R$ 11,461	R$ 25,468
Exchange variation	11,239	(17,232)	R$ 21,679
Losses from future contracts	(1,595)
Gains from future contracts		42
Reclassification of gains cash flow hedge for goodwill/capex		3,128
Gains (losses) on financial assets available for sale	223	55
Balance	21,328	11,461	25,468
Financial instruments available for sale
Changes in other comprehensive income
Balance	(8,881)	(8,936)
Gains (losses) on financial assets available for sale	223	55
Balance	(8,658)	(8,881)	(8,936)
Derivative transactions
Changes in other comprehensive income
Balance	3,549	379
Losses from future contracts	(1,595)
Gains from future contracts		42
Reclassification of gains cash flow hedge for goodwill/capex		3,128
Balance	1,954	3,549	379
Currency translation effects - foreign investments
Changes in other comprehensive income
Balance	16,793	34,025
Exchange variation	11,239	(17,232)
Balance	R$ 28,032	R$ 16,793	R$ 34,025

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EQUITY - Company Share Repurchase Program (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands				12 Months Ended
	Jul. 05, 2017	Jun. 09, 2017	Jun. 01, 2017	Dec. 31, 2017
EQUITY
Acquisition of shares in the financial market (in shares)			45
Acquisition of shares in the financial market	R$ 32
Common shares
EQUITY
Shares to be acquired under repurchase program		870,781
Preferred shares
EQUITY
Shares to be acquired under repurchase program		41,510,761
Acquisition of shares in the financial market (in shares)	661		45
Unit issue price	R$ 45.26		R$ 47.31
Acquisition of shares in the financial market	R$ 32		R$ 2
Treasury shares
EQUITY
Acquisition of shares in the financial market (in shares)				706
Acquisition of shares in the financial market				R$ 32
Treasury shares | Preferred shares
EQUITY
Acquisition of shares in the financial market (in shares)				706

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EQUITY - Earnings per share (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
EQUITY
Net income for the year attributable to shareholders:	R$ 4,608,790	R$ 4,085,242	R$ 3,420,249
Weighted average number of outstanding shares for the year	1,688,694	1,688,694,000	1,491,131,000
Common shares
EQUITY
Net income for the year attributable to shareholders:	R$ 1,457,288	R$ 1,291,743	R$ 1,083,911
Weighted average number of outstanding shares for the year	569,354,000	569,354,000	503,842,000
Basic and diluted earnings per share	R$ 2.56	R$ 2.27	R$ 2.15
Preferred shares
EQUITY
Net income for the year attributable to shareholders:	R$ 3,151,502	R$ 2,793,499	R$ 2,336,338
Weighted average number of outstanding shares for the year	1,119,340,000	1,119,340,000	987,289,000
Basic and diluted earnings per share	R$ 2.82	R$ 2.50	R$ 2.37

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NET OPERATING REVENUE (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
NET OPERATING REVENUE
Gross operating revenue	R$ 66,243,174	R$ 65,006,728	R$ 60,997,496
Deductions from gross operating revenue	(23,036,342)	(22,498,269)	(20,710,681)
Taxes	(16,058,584)	(15,388,784)	(14,163,869)
Discounts granted and return of goods	(6,977,758)	(7,109,485)	(6,546,812)
Net operating revenue	R$ 43,206,832	R$ 42,508,459	R$ 40,286,815

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OPERATING COSTS AND EXPENSES (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
OPERATING COSTS AND EXPENSES
Personnel	R$ (3,725,767)	R$ (3,859,788)	R$ (3,221,662)
Third-party services	(13,247,186)	(13,110,297)	(12,528,701)
Interconnection and network use	(1,440,968)	(1,924,148)	(2,595,894)
Advertising and publicity	(1,015,414)	(1,065,882)	(1,102,458)
Rental, insurance, condominium and connection means	(2,980,561)	(2,688,009)	(2,394,409)
Taxes, charges and contributions	(1,866,593)	(1,959,564)	(1,687,783)
Estimated impairment losses on accounts receivable	(1,481,015)	(1,348,221)	(1,230,675)
Depreciation and amortization	(7,853,734)	(7,654,406)	(6,814,951)
Cost of goods sold	(1,955,890)	(2,118,940)	(2,597,088)
Material and other operating costs and expenses	(284,981)	(342,511)	(319,391)
Total	(35,852,109)	(36,071,766)	(34,493,012)
Non-cumulative PIS and COFINS	1,267	46,647	37,626
Cost of sales
OPERATING COSTS AND EXPENSES
Personnel	(845,358)	(976,233)	(813,612)
Third-party services	(5,591,284)	(5,705,098)	(5,300,820)
Interconnection and network use	(1,440,968)	(1,924,148)	(2,595,894)
Rental, insurance, condominium and connection means	(2,624,405)	(2,326,219)	(2,051,055)
Taxes, charges and contributions	(1,792,764)	(1,861,237)	(1,616,920)
Depreciation and amortization	(5,963,153)	(5,821,620)	(5,269,588)
Cost of goods sold	(1,955,890)	(2,118,940)	(2,597,088)
Material and other operating costs and expenses	(58,708)	(89,519)	(100,099)
Total	(20,272,530)	(20,823,014)	(20,345,076)
Selling expenses
OPERATING COSTS AND EXPENSES
Personnel	(2,387,314)	(2,136,399)	(1,939,493)
Third-party services	(6,423,523)	(6,151,012)	(6,183,609)
Advertising and publicity	(1,015,414)	(1,065,882)	(1,102,458)
Rental, insurance, condominium and connection means	(151,455)	(141,135)	(156,663)
Taxes, charges and contributions	(39,050)	(5,933)	(5,264)
Estimated impairment losses on accounts receivable	(1,481,015)	(1,348,221)	(1,230,675)
Depreciation and amortization	(1,433,297)	(1,408,866)	(1,181,216)
Material and other operating costs and expenses	(205,406)	(197,918)	(206,099)
Total	(13,136,474)	(12,455,366)	(12,005,477)
General and administrative expenses
OPERATING COSTS AND EXPENSES
Personnel	(493,095)	(747,156)	(468,557)
Third-party services	(1,232,379)	(1,254,187)	(1,044,272)
Rental, insurance, condominium and connection means	(204,701)	(220,655)	(186,691)
Taxes, charges and contributions	(34,779)	(92,394)	(65,599)
Depreciation and amortization	(457,284)	(423,920)	(364,147)
Material and other operating costs and expenses	(20,867)	(55,074)	(13,193)
Total	R$ (2,443,105)	R$ (2,793,386)	R$ (2,142,459)

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OTHER OPERATING INCOME (EXPENSES) - Summary of other operating income (expenses) (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
OTHER OPERATING INCOME (EXPENSES), NET
Recovered expenses and fines	R$ 355,415	R$ 504,877	R$ 538,239
Provisions for labor, tax and civil contingencies	(999,419)	(985,176)	(1,014,080)
Net gain (loss) on asset disposal/loss	108,767	463,602	(4,512)
Other operating income (expenses)	(187,249)	(51,977)	(73,852)
Total	(722,486)	(68,674)	(554,205)
Other operating income	464,182	968,479	538,239
Other operating expenses	R$ (1,186,668)	R$ (1,037,153)	R$ (1,092,444)

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OTHER OPERATING INCOME (EXPENSES) - Sale of assets (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$) item	Dec. 31, 2015 BRL (R$)
Sale of assets
Net gain (loss) on asset disposal/loss	R$ 108,767	R$ 463,602	R$ (4,512)
Transmission towers
Sale of assets
Net gain (loss) on asset disposal/loss		R$ 476,371
Number of towers sold | item		1,655
Transmission towers | Customer portfolio
Sale of assets
Disposal of sharing agreement		R$ 40,899

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FINANCIAL INCOME (EXPENSES) - Finance expenses, net (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
FINANCIAL INCOME (EXPENSES)
Interest income	R$ 655,474	R$ 719,399	R$ 832,872
Interest receivable (customers, taxes and other)	124,391	104,837	87,023
Gain on derivative financial instruments	373,971	994,801	2,910,914
Foreign exchange variations on loans and financing	113,203	487,747	203,754
Other revenues from foreign exchange and monetary variation	406,013	374,169	569,698
Other financial income	82,906	100,406	124,404
Total	1,755,958	2,781,359	4,728,665
Loan, financing, debenture and finance lease charges	(932,727)	(1,061,098)	(921,019)
Foreign exchange variation on loans and financing	(129,049)	(214,952)	(1,365,133)
Loss on derivative financial instruments	(415,956)	(1,342,671)	(2,011,855)
Interest payable (financial institutions, provisions, trade accounts payable, taxes and other)	(136,425)	(278,175)	(216,729)
Other expenses with foreign exchange and monetary variation	(876,948)	(830,466)	(704,438)
IOF, PIS, Cofins and other financial expenses	(167,897)	(288,538)	(357,669)
Total	(2,659,002)	(4,015,900)	(5,576,843)
Financial Expenses, net	R$ (903,044)	R$ (1,234,541)	R$ (848,178)

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INCOME AND SOCIAL CONTRIBUTION TAXES (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)
DEFERRED TAXES AND TAXES RECOVERABLE
Statutory tax rate	34	34
Income tax rate	25.00%	25.00%
Social contribution tax rate	9.00%	9.00%
Income before taxes	R$ 5,730,773	R$ 5,134,722	R$ 4,393,456
Income and social contribution tax expenses, at the tax rate of 34%	(1,948,463)	(1,745,805)	(1,493,775)
Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 11)	537	423	692
Unclaimed interest on equity	(21,843)	(11,432)	(6,552)
Temporary differences in subsidiaries	2,007
Non-deductible expenses, gifts, incentives	(94,413)	(88,916)	(139,752)
Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years	132,080
Tax benefit related to interest on equity allocated	821,657	738,529	593,615
Other (additions) exclusions	(13,545)	57,721	72,565
Tax	R$ (1,121,983)	R$ (1,049,480)	R$ (973,207)
Effective rate	19.6	20.4	22.2
Current income and social contribution taxes	R$ (580,578)	R$ (288,063)	R$ (939,500)
Deferred income and social contribution taxes	R$ (541,405)	R$ (761,417)	R$ (33,707)

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Balance Sheet (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cash and cash equivalents	R$ 9,523	R$ 78,070
Accounts receivable, net	201,021	190,906
Other assets	166,733	250,679
Other current assets	164,249	247,863
Other noncurrent assets	2,484	2,816
Trade accounts payable and other payables	350,844	381,240
Other liabilities	125,987	112,358
Other liabilities, current	124,749	110,449
Other liabilities, non-current	1,238	1,909
Parent
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	1,023	94
Other assets	135,690	216,870
Trade accounts payable and other payables	7,947	2,345
Other liabilities	114,950	85,292
SP Telecomunicacoes Participacoes
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	531	94
Other assets	46	9,618
Trade accounts payable and other payables	6,656
Other liabilities	15,000	533
Telefonica LatinoAmerica Holding
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Other assets	135,486	206,619
Trade accounts payable and other payables	86	109
Telefonica
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	492
Other assets	158	633
Trade accounts payable and other payables	1,205	2,236
Other liabilities	99,950	84,759
Other Group companies
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cash and cash equivalents	9,523	78,070
Accounts receivable, net	199,998	190,812
Other assets	31,043	33,809
Trade accounts payable and other payables	342,897	378,895
Other liabilities	11,037	27,066
Colombia Telecomunicaciones ESP
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	1,210	2,641
Other assets	4,505	3,900
Colombia Telecomunicaciones S.A. ESP
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Trade accounts payable and other payables	471	2,675
Companhia AIX de Participacoes (AIX)
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Trade accounts payable and other payables	1,915	1,835
Media Networks Latina America SAC
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Trade accounts payable and other payables	4,248	32,398
Media Networks Brasil Solucoes Digitals
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	1,017	81
Other assets	2,106	59
Trade accounts payable and other payables	33,751	11,821
Other liabilities	318	318
Fundacao Telefonica
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Other liabilities	137	52
Pegaso PCS
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	2,757	6,163
Trade accounts payable and other payables	388	2,452
T.O2 Germany GMBH CO. OHG
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	22,315	9,849
Trade accounts payable and other payables	5,477	4,409
Telcel Telecom. Celulares C. A.
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	6,067	6,180
Trade accounts payable and other payables	5,240	4,721
Telefonica Compras Electronicas
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Trade accounts payable and other payables	24,311	24,196
Telefonica Digital Espana
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	1,929
Trade accounts payable and other payables	46,645	35,347
Telefonica Factoring do Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	12,337	4,927
Other assets	93	22
Other liabilities	146	6,154
Telefonica Global Technology
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net		1,614
Other assets	13,600	11,244
Trade accounts payable and other payables	15,671	15,169
Telefonica Inteligencia e Seguranca Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	271	868
Other assets	1,013	945
Trade accounts payable and other payables	15,336	26,516
Other liabilities	27	27
Telefonica International Wholesale Services Espanha
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	69,087	82,613
Trade accounts payable and other payables	44,240	50,121
Other liabilities	8	8
Telefonica Learning Services Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	175	64
Trade accounts payable and other payables	37,931	16,328
Telefonica Moviles Argentina
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	7,194	6,288
Trade accounts payable and other payables	3,865	13,997
Telefonica Moviles Del Chile
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	539	10,207
Other assets	387	337
Trade accounts payable and other payables	963	10,673
Telefonica Moviles Del Espanha
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	8,918	9,220
Trade accounts payable and other payables	3,589	4,671
Telefonica Servicos Empresariais do Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	2,938	2,518
Other assets	2,355	2,410
Trade accounts payable and other payables		112
Other liabilities	376	1,042
Telefonica UK LTD.
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	1,350	8,809
Trade accounts payable and other payables	89	3,868
Telefonica USA
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	6,248	3,550
Trade accounts payable and other payables		14,283
Other liabilities	171	168
Telfisa
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cash and cash equivalents	9,523	78,070
Telxius Cable Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	28,981	11,513
Other assets	819	2,678
Trade accounts payable and other payables	44,037	52,210
Other liabilities	2,068	2,068
Telxius Torres Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	14,666	13,842
Other assets	5,106	3,709
Trade accounts payable and other payables	37,718	33,178
Other liabilities	7,757	15,991
Terra Networks Chile, Terra Networks Mexico, Terra Networks Peru e Terra Networks Operation
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	8,159
Trade accounts payable and other payables	7,633
Terra Networks
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net		5,499
Other assets		7,596
Trade accounts payable and other payables		3,360
Other liabilities		1,209
Other
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Accounts receivable, net	3,840	4,366
Other assets	1,059	909
Trade accounts payable and other payables	9,379	14,555
Other liabilities	R$ 29	R$ 29

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Income Statement (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$) item	Dec. 31, 2016 BRL (R$) item	Dec. 31, 2015 BRL (R$)
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	R$ 90,312	R$ 116,843	R$ 119,108
Cost, despesas and other expenses (revenues) operating	(1,058,121)	(946,039)	(868,760)
Financial result	3,784	(17,570)	(3,576)
Parent
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(294,893)	(232,115)	(208,589)
Financial result	10,034	(5,379)	(43,243)
SP Telecomunicacoes Participacoes
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	268	67	(94)
Financial result			(146)
Telefonica LatinoAmerica Holding
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	36,523	87,526	134,958
Financial result	11,030	4,348	(14,383)
Telefonica
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(331,684)	(319,708)	(343,453)
Financial result	(996)	(9,727)	(28,714)
Other Group companies
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	90,312	116,843	119,108
Cost, despesas and other expenses (revenues) operating	(763,228)	(713,924)	(660,171)
Financial result	(6,250)	(12,191)	39,667
Colombia Telecomunicaciones S.A. ESP
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	349	217	389
Cost, despesas and other expenses (revenues) operating	(10)	(2,845)	(1,742)
Financial result	604	(926)	1,165
Companhia AIX de Participacoes (AIX)
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	36	67	32
Cost, despesas and other expenses (revenues) operating	(22,738)	(21,316)	(19,216)
Fundacao Telefonica
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(11,395)	(10,530)	(10,283)
Media Networks Brasil Solucoes Digitals
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	600	572
Cost, despesas and other expenses (revenues) operating	(57,176)	(3,451)
Media Networks Latina America SAC
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(33,133)	(17,133)	(39,234)
Financial result	(516)	(50)
Pegaso PCS
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	170	86	147
Cost, despesas and other expenses (revenues) operating	536	(5,991)	(2,650)
Telefonica Learning Services Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	292	2	140
Cost, despesas and other expenses (revenues) operating	(54,782)	(47,544)	(44,825)
Financial result		1,311
T.O2 Germany GMBH CO. OHG
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	75	45	917
Cost, despesas and other expenses (revenues) operating	(1,409)	(4,527)	(2,329)
Telefonica Compras Electronicas
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(29,062)	(42,889)	(13,692)
Telefonica Digital Espana
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(81,893)	(44,872)	(46,096)
Financial result	(2,600)	(1,262)	(6,200)
Telefonica Factoring do Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	69	41	36
Cost, despesas and other expenses (revenues) operating	828	200	33
Financial result	61		55
Telefonica Global Technology
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(36,395)	(28,933)	(10,262)
Financial result	40	(756)	806
Telefonica Inteligencia e Seguranca Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	706	1,041	976
Cost, despesas and other expenses (revenues) operating	(40,918)	(39,709)	(25,636)
Financial result		389
Telefonica International Wholesale Services Espanha
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	56,728	72,520	82,667
Cost, despesas and other expenses (revenues) operating	(49,960)	(56,293)	(57,952)
Financial result	(2,564)	(15,008)	41,386
Telefonica Moviles Argentina
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	3,746	3,072	3,053
Cost, despesas and other expenses (revenues) operating	6,147	(9,112)	(10,728)
Telefonica Moviles Del Chile
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	1,586	1,074	731
Cost, despesas and other expenses (revenues) operating	(2,196)	(1,096)	(4,236)
Financial result	52	(80)	100
Telefonica Moviles Del Espanha
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	1,048	(836)	2,938
Cost, despesas and other expenses (revenues) operating	(1,969)	(2,170)	(3,823)
Telefonica Servicos Empresariais do Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	286	118	934
Cost, despesas and other expenses (revenues) operating	(989)	867	(7,402)
Financial result		(43)
Telefonica UK LTD.
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	1,163	5	2,841
Cost, despesas and other expenses (revenues) operating	(1,374)	(994)	(1,987)
Telefonica USA
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	2,392	2,998	3,542
Cost, despesas and other expenses (revenues) operating	(2,322)	(14,970)	(18,429)
Financial result	(2,035)	(349)	1,970
Telxius Cable Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	15,044	17,624	14,188
Cost, despesas and other expenses (revenues) operating	(200,536)	(246,595)	(251,717)
Financial result	787	244
Telxius Torres Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues		31
Cost, despesas and other expenses (revenues) operating	(107,373)	(72,460)
Financial result		1,929
Terra Networks Chile, Terra Networks Mexico, Terra Networks Peru e Terra Networks Operation
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Cost, despesas and other expenses (revenues) operating	(9,782)
Financial result	(120)
Terra Networks
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	2,485	16,483	1,285
Cost, despesas and other expenses (revenues) operating	(10,719)	(17,884)	(21,408)
Financial result		1,194
Other
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Operating revenues	3,537	1,683	2,582
Cost, despesas and other expenses (revenues) operating	(14,608)	(23,677)	(11,190)
Financial result	R$ 41	R$ 1,216	R$ 385
Transmission towers
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Number of towers sold | item		1,655
Transmission towers | Telxius Torres Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Number of towers sold | item	1,655
Total amount involved	R$ 760,000
Disposal of tower infrastructures	719,101
Disposal of sharing agreement	R$ 40,899

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Summary of transaction (Details) - BRL (R$) R$ in Thousands		12 Months Ended
	Apr. 08, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Amounts from related parties (Note 28)		R$ 201,021	R$ 190,906
Value of write-off of residual amount		35,650	(132,051)
Deferred revenues		165,162	227,397
Cash received from sale of PP&E items		20,672	778,819	R$ 19,902
Telxius Torres Brasil
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Amounts from related parties (Note 28)		14,666	R$ 13,842
Telxius Torres Brasil | Transmission towers
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Amounts from related parties (Note 28)		760,000
Value of write-off of residual amount		(99,210)
Finance lease		2,674
Deferred revenues		140,846
Cash received from sale of PP&E items	R$ 760,000
Value of disposal of towers (except retention and financial lease)		575,580
Value of customer portfolio		40,899
Amount of PIS and Cofins charged on customer portfolio		(3,783)
Effect on operating income		513,486
Amount of IR and CS levied on towers and customer portfolio		(174,585)
Net effect on transaction income		R$ 338,901

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BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Management compensation (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Key management personnel compensation	R$ 21,684	R$ 109,314
Salaries, benefits and social charges	14,439	39,822
Variable compensation	R$ 7,245	R$ 69,492

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SHARE-BASED PAYMENT PLANS (Details)		12 Months Ended
	May 18, 2011	Dec. 31, 2017 item € / shares shares	Dec. 31, 2014 item
Performance & Investment Plan
SHARE-BASED PAYMENT PLANS
Initial percentage of shares purchased	25.00%
Percentage of shares awarded	25.00%
Initial life of the plan	3 years
Number of cycles extended			3
Extended life of plan			3 years
Share price | € / shares		€ 8.1950
PIP 2015-2018 cycle
SHARE-BASED PAYMENT PLANS
Number of active executives		84
Number of executives appointed under articles		2
Number of potential shares to be received | shares		471,654
Talent future share plan
SHARE-BASED PAYMENT PLANS
Initial life of the plan			3 years
Share price | € / shares		€ 8.1950
TFSP 2015-2018 cycle
SHARE-BASED PAYMENT PLANS
Number of potential shares to be received | shares		83,500

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SHARE-BASED PAYMENT PLANS - Global Employee Share Plan (Details) - Global Employee Share Plan	May 30, 2014 EUR (€) shares
SHARE-BASED PAYMENT PLANS
Initial life of the plan	2 years
Period for employee contribution	12 months
Vesting period	2 years
Number of free share for each share acquired | shares	1
Minimum
SHARE-BASED PAYMENT PLANS
Employees monthly contribution	€ 25
Shares holding period after purchase period for getting free shares	12 months
Maximum
SHARE-BASED PAYMENT PLANS
Employees monthly contribution	€ 150
Employees annual contribution	€ 1,800

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SHARE-BASED PAYMENT PLANS - Changes (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
SHARE-BASED PAYMENT PLANS
Expense from share-based payment transactions with employees	R$ 7,013	R$ 21,952

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sponsored Plans by Type (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
VISAO Plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Contributions made by the Company	R$ 43,702	R$ 37,879

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Reconciliation of assets and liabilities (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of assets and liabilities:
Present value of DB plan obligations	R$ 2,912,227	R$ 2,531,508
Fair value of plan assets	3,311,739	3,371,586
Net liabilities (assets)	(399,512)	(840,078)
Net liabilities (assets)	522,105	318,629	R$ 76,619
Noncurrent assets	(9,833)	(9,041)
Current liabilities	16,935	10,988
Noncurrent liabilities	515,003	316,682
Post-retirement pension plans
Reconciliation of assets and liabilities:
Present value of DB plan obligations	1,861,651	1,763,866
Fair value of plan assets	2,585,679	2,703,593
Net liabilities (assets)	(724,028)	(939,727)
Net liabilities (assets)	67,148	54,026	46,907
Noncurrent assets	(9,833)	(9,041)
Current liabilities	7,914	6,826
Noncurrent liabilities	69,068	56,242
Post-retirement health plans
Reconciliation of assets and liabilities:
Present value of DB plan obligations	1,050,576	767,642
Fair value of plan assets	726,060	667,993
Net liabilities (assets)	324,516	99,649
Net liabilities (assets)	454,957	264,603	29,712
Current liabilities	9,021	4,162
Noncurrent liabilities	445,935	260,440
Asset Limitation
Reconciliation of assets and liabilities:
Net liabilities (assets)	921,617	1,158,707	877,393
Asset Limitation | Post-retirement pension plans
Reconciliation of assets and liabilities:
Net liabilities (assets)	791,177	993,754	721,123
Asset Limitation | Post-retirement health plans
Reconciliation of assets and liabilities:
Net liabilities (assets)	R$ 130,440	R$ 164,953	R$ 156,270

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Total expenses recognized in the income statement (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	R$ 10,650	R$ 5,572	R$ 8,402
Net interest on net actuarial assets/liabilities	34,583	8,264	41,288
Total	45,233	13,836	49,690
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	3,044	2,811	2,682
Net interest on net actuarial assets/liabilities	5,258	5,278	4,525
Total	8,302	8,089	7,207
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	7,606	2,761	5,720
Net interest on net actuarial assets/liabilities	29,325	2,986	36,763
Total	R$ 36,931	R$ 5,747	R$ 42,483

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Amounts recognized in other comprehensive income (loss) (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Actuarial (gains) losses	R$ 533,487	R$ 65,576	R$ (10,438)
Asset limitation effect	(362,191)	171,191	(391,055)
Total	171,296	236,767	(401,493)
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Actuarial (gains) losses	325,292	(174,496)	(87,306)
Asset limitation effect	(309,780)	182,088	(541,596)
Total	15,512	7,592	(628,902)
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Actuarial (gains) losses	208,195	240,072	76,868
Asset limitation effect	(52,411)	(10,897)	150,541
Total	R$ 155,784	R$ 229,175	R$ 227,409

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in amount net of liability (asset) of defined benefit, net (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	R$ 318,629	R$ 76,619
Business combinations	668
Expenses	45,233	13,836
Sponsor contributions	(13,721)	(8,593)
Amounts recognized in OCI	171,296	236,767
Balance at the end of the year	522,105	318,629
Actuarial assets per balance sheet	(9,833)	(9,041)
Actuarial liabilities per balance sheet	531,938	327,670
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	54,026	46,907
Business combinations	(12)
Expenses	8,302	8,089
Sponsor contributions	(10,680)	(8,562)
Amounts recognized in OCI	15,512	7,592
Balance at the end of the year	67,148	54,026
Actuarial assets per balance sheet	(9,833)	(9,041)
Actuarial liabilities per balance sheet	76,982	63,068
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	264,603	29,712
Business combinations	680
Expenses	36,931	5,747
Sponsor contributions	(3,041)	(31)
Amounts recognized in OCI	155,784	229,175
Balance at the end of the year	454,957	264,603
Actuarial liabilities per balance sheet	R$ 454,956	R$ 264,602

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in defined benefit liability (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	R$ 318,629	R$ 76,619
Liability assumed after acquisition of company	668
Balance at the end of the year	522,105	318,629
Defined benefit liability
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	2,531,508	1,906,893
Liability assumed after acquisition of company	929
Current service costs	10,650	5,572
Interest on actuarial liabilities	263,696	227,916
Benefits paid	(199,633)	(180,285)
Member contributions paid	220	174
Actuarial losses (gains) adjusted by experience	104,856	376,776
Actuarial losses (gains) adjusted by demographic assumptions	(4,863)	(81,144)
Actuarial losses (gains) adjusted by financial assumptions	204,864	275,606
Balance at the end of the year	2,912,227	2,531,508
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	54,026	46,907
Liability assumed after acquisition of company	(12)
Balance at the end of the year	67,148	54,026
Post-retirement pension plans | Defined benefit liability
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	1,763,866	1,503,966
Liability assumed after acquisition of company	249
Current service costs	3,044	2,811
Interest on actuarial liabilities	181,208	179,496
Benefits paid	(168,856)	(156,056)
Member contributions paid	220	174
Actuarial losses (gains) adjusted by experience	(23,613)	78,373
Actuarial losses (gains) adjusted by demographic assumptions	(3,320)
Actuarial losses (gains) adjusted by financial assumptions	108,853	155,102
Balance at the end of the year	1,861,651	1,763,866
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	264,603	29,712
Liability assumed after acquisition of company	680
Balance at the end of the year	454,957	264,603
Post-retirement health plans | Defined benefit liability
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	767,642	402,927
Liability assumed after acquisition of company	680
Current service costs	7,606	2,761
Interest on actuarial liabilities	82,488	48,420
Benefits paid	(30,777)	(24,229)
Actuarial losses (gains) adjusted by experience	128,469	298,403
Actuarial losses (gains) adjusted by demographic assumptions	(1,543)	(81,144)
Actuarial losses (gains) adjusted by financial assumptions	96,011	120,504
Balance at the end of the year	R$ 1,050,576	R$ 767,642

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in the fair value of plan assets (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	R$ (318,629)	R$ (76,619)
Asset acquired on acquisition of company	(668)
Balance at the end of the year	(522,105)	(318,629)
Fair value of plan assets
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	3,371,586	2,707,667
Asset acquired on acquisition of company	323
Benefits paid	(188,137)	(173,750)
Participants contributions paid	220	174
Sponsor contributions paid	2,226	2,058
Interest income on plan assets	354,151	329,776
Return on plan assets excluding interest income	(228,630)	505,661
Balance at the end of the year	3,311,739	3,371,586
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	(54,026)	(46,907)
Asset acquired on acquisition of company	12
Balance at the end of the year	(67,148)	(54,026)
Post-retirement pension plans | Fair value of plan assets
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	2,703,593	2,178,182
Asset acquired on acquisition of company	323
Benefits paid	(160,370)	(149,521)
Participants contributions paid	220	174
Sponsor contributions paid	2,195	2,027
Interest income on plan assets	283,090	264,761
Return on plan assets excluding interest income	(243,372)	407,970
Balance at the end of the year	2,585,679	2,703,593
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	(264,603)	(29,712)
Asset acquired on acquisition of company	(680)
Balance at the end of the year	(454,957)	(264,603)
Post-retirement health plans | Fair value of plan assets
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	667,993	529,485
Benefits paid	(27,767)	(24,229)
Sponsor contributions paid	31	31
Interest income on plan assets	71,061	65,015
Return on plan assets excluding interest income	14,742	97,691
Balance at the end of the year	R$ 726,060	R$ 667,993

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in assets limitation (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	R$ 318,629	R$ 76,619
Effect generated by company acquisition	668
Balance at the end of the year	522,105	318,629
Asset Limitation
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	1,158,707	877,393
Interest on the asset limitation	125,038	110,123
Changes in the assets limitation, except interest	(362,190)	171,191
Effect generated by company acquisition	62
Balance at the end of the year	921,617	1,158,707
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	54,026	46,907
Effect generated by company acquisition	(12)
Balance at the end of the year	67,148	54,026
Post-retirement pension plans | Asset Limitation
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	993,754	721,123
Interest on the asset limitation	107,140	90,543
Changes in the assets limitation, except interest	(309,779)	182,088
Effect generated by company acquisition	62
Balance at the end of the year	791,177	993,754
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	264,603	29,712
Effect generated by company acquisition	680
Balance at the end of the year	454,957	264,603
Post-retirement health plans | Asset Limitation
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Balance at the beginning of the year	164,953	156,270
Interest on the asset limitation	17,898	19,580
Changes in the assets limitation, except interest	(52,411)	(10,897)
Balance at the end of the year	R$ 130,440	R$ 164,953

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Results projected (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$)
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	R$ 16,653
Net interest on net defined benefit liability/asset	51,966
Total	68,619
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	2,931
Net interest on net defined benefit liability/asset	6,074
Total	9,005
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Current service cost	13,722
Net interest on net defined benefit liability/asset	45,892
Total	R$ 59,614

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sponsoring company contributions projected (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$)
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Sponsor contributions	R$ 2,532
Benefits paid directly by the sponsor	16,940
Total	19,472
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Sponsor contributions	2,499
Benefits paid directly by the sponsor	7,914
Total	10,413
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Sponsor contributions	33
Benefits paid directly by the sponsor	9,026
Total	R$ 9,059

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Average weighted duration of defined benefit liability (Details) - Y	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Average weighted duration of defined benefit liability	8.5	8.9
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Average weighted duration of defined benefit liability	18.7	12.7

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Actuarial Assumptions (Details) - Y	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Long term inflation rate	4.30%	4.50%
Medical expense growth rate	7.40%
Annual increase in use of healthcare services according to age	4.00%	4.00%
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Nominal annual adjustment rate of pension benefits	4.30%	4.50%
Visao
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Discount rate to present value of defined benefit liability	9.50%
Mortality table for nondisabled individuals (as a percent)	50.00%
Disability table ( as a percent)	30.00%
Visao and Tcoprev
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Estimated retirement age	60
PBS-A and CTB
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Long term inflation rate	9.80%
Telefnica BD and Tcoprev
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Discount rate to present value of defined benefit liability	9.90%
Visao, CTB, Telefonica BD and Tcoprev
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Future salary growth rate	5.90%
PBS-A, CTB and Telefonica BD
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Estimated retirement age	57
Mortality table for nondisabled individuals (as a percent)	10.00%
Mortality table for disabled individuals (as a percent)	40.00%
Vivoprev and Visao
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Discount rate to present value of defined benefit liability		10.90%
Mortality table for nondisabled individuals (as a percent)		50.00%
PBS-A, CTB, Telefnica BD and Tcoprev
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Discount rate to present value of defined benefit liability		10.80%
Mortality table for nondisabled individuals (as a percent)		10.00%
CTB, Telefnica BD, Prev and Visao
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Future salary growth rate		6.20%
Telefonica BD Plan
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Estimated retirement age		57
Prev and Visao
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Estimated retirement age		60
Disability table ( as a percent)		30.00%
PBS-A, CTB, Telefnica BD and PBS
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Mortality table for disabled individuals (as a percent)		40.00%
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Discount rate to present value of defined benefit liability	9.90%	10.90%
Medical expense growth rate		7.60%
Medical service eligibility age	57 years
Contribution eligibility on retirement (as a percent)	100.00%	100.00%
Estimated retirement age	57	57
Mortality table for nondisabled individuals (as a percent)	10.00%	10.00%
Mortality table for disabled individuals (as a percent)	40.00%	10.00%
Post-retirement health plans | Minimum
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Estimated retirement age		57
PAMA and PCE
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Annual increase in use of healthcare services according to age		5.00%
Subsequent year contribution (as a percent)		3.00%
Contribution eligibility on retirement (as a percent)		100.00%
Estimated retirement age		60
PAMA and PCE | Minimum
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Medical service eligibility age		10 years
PAMA and PCE | Maximum
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Medical service eligibility age		52 years

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in Actuarial Assumptions in Relation to Prior Year (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	R$ 522,105	R$ 318,629	R$ 76,619
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	67,148	54,026	46,907
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	454,957	264,603	29,712
Defined benefit liability
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	2,912,227	2,531,508	1,906,893
Difference from change in actuarial assumptions	200,001
Defined benefit liability | Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	1,861,651	1,763,866	1,503,966
Difference from change in actuarial assumptions	105,533
Defined benefit liability | Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	1,050,576	R$ 767,642	R$ 402,927
Difference from change in actuarial assumptions	94,468
Based on prior-year actuarial assumptions | Defined benefit liability
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	(2,712,226)
Based on prior-year actuarial assumptions | Defined benefit liability | Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	(1,756,118)
Based on prior-year actuarial assumptions | Defined benefit liability | Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability	R$ (956,108)

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PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sensitivity analysis for actuarial assumptions (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	R$ 2,912,227	R$ 2,531,508
Discount rate
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Increase in actuarial assumption (as a percent)	0.50%
Decrease in actuarial assumption (as a percent)	0.50%
Defined benefit liability, discounted to present value at current rate	R$ 2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	2,762,021
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	R$ 3,077,729
Rate of growth of medical costs
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Increase in actuarial assumption (as a percent)	1.00%
Decrease in actuarial assumption (as a percent)	1.00%
Defined benefit liability, discounted to present value at current rate	R$ 2,912,227
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	3,085,375
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	2,772,921
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,861,651	1,763,866
Post-retirement pension plans | Discount rate
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,861,651
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	1,784,735
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	1,944,833
Post-retirement pension plans | Rate of growth of medical costs
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,861,651
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	1,861,651
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	1,861,651
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,050,576	R$ 767,642
Post-retirement health plans | Discount rate
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,050,576
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	977,286
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	1,132,896
Post-retirement health plans | Rate of growth of medical costs
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit liability, discounted to present value at current rate	1,050,576
Defined benefit liability, discounted to present value considering a rate increased by 0.5%	1,223,724
Defined benefit liability, discounted to present value considering a rate decreased by 0.5%	R$ 911,270

XML

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Allocation of plan assets (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Allocation of plan assets
Total	R$ 3,311,739	R$ 3,371,586
Post-retirement pension plans
Allocation of plan assets
Total	2,585,679	2,703,593
Post-retirement pension plans | Market value quoted in active market
Allocation of plan assets
Real estate investments	96,525	121,176
Structured investments	3,753	224
Post-retirement pension plans | Market value not quoted in active market
Allocation of plan assets
Structured investments	1,780	1,811
Post-retirement pension plans | National Treasury Note (NTN) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	1,998,931	1,769,606
Post-retirement pension plans | Treasury Financial Letter (LFT) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	199,135	30,588
Post-retirement pension plans | Repurchase operations | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	142,228	134,863
Post-retirement pension plans | Bank Deposit Certificates (CDB) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	13,209	12,843
Post-retirement pension plans | Financial bills | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	4,567	229,793
Post-retirement pension plans | Debentures | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	3,694	6,449
Post-retirement pension plans | National Treasury Notes (LTN) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	2,165	1,895
Post-retirement pension plans | FIDC shares / Others | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	1,317	36,744
Post-retirement pension plans | Investments in energy sector | Market value quoted in active market
Allocation of plan assets
Variable income investments	57,781	246,400
Post-retirement pension plans | Investments in food and beverage industry | Market value quoted in active market
Allocation of plan assets
Variable income investments	32,337	45,054
Post-retirement pension plans | Investments in aerospace sector | Market value quoted in active market
Allocation of plan assets
Variable income investments		28,947
Post-retirement pension plans | Investments in mining sector | Market value quoted in active market
Allocation of plan assets
Variable income investments	1,197	2,581
Post-retirement pension plans | Investments in other sectors | Market value quoted in active market
Allocation of plan assets
Variable income investments	7,124	9,207
Post-retirement pension plans | Loans to participants | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	18,346	23,562
Post-retirement pension plans | Loans to participants | Market value not quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	1,590	1,850
Post-retirement health plans
Allocation of plan assets
Total	726,060	667,993
Post-retirement health plans | National Treasury Note (NTN) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	670,516	553,515
Post-retirement health plans | Treasury Financial Letter (LFT) | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants	R$ 55,544
Post-retirement health plans | Financial bills | Market value quoted in active market
Allocation of plan assets
Fixed income investments and Loans to participants		R$ 114,478

XML

PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Maturity of future benefit payments (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$)
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	R$ 29,183,354
2018/Falling due within one year/Up to 1 year
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	201,385
2019/From 1 to 2 years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	209,668
2020
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	218,298
2021
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	228,410
2022
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	237,814
2023 onwards/Over five years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	28,087,779
Post-retirement pension plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	6,184,178
Post-retirement pension plans | 2018/Falling due within one year/Up to 1 year
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	162,546
Post-retirement pension plans | 2019/From 1 to 2 years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	166,989
Post-retirement pension plans | 2020
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	171,275
Post-retirement pension plans | 2021
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	176,423
Post-retirement pension plans | 2022
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	180,505
Post-retirement pension plans | 2023 onwards/Over five years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	5,326,440
Post-retirement health plans
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	22,999,176
Post-retirement health plans | 2018/Falling due within one year/Up to 1 year
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	38,839
Post-retirement health plans | 2019/From 1 to 2 years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	42,679
Post-retirement health plans | 2020
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	47,023
Post-retirement health plans | 2021
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	51,987
Post-retirement health plans | 2022
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	57,309
Post-retirement health plans | 2023 onwards/Over five years
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
Total	R$ 22,761,339

XML

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Derivative financial instruments (Details) - instrument	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Embedded derivative financial instruments held	0	0
Threshold business days for linear convention	360 days
Threshold business days for exponential convention	252 days

XML

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Derivatives financial instruments classified as swaps (Details) € in Thousands, R$ in Thousands, $ in Thousands	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)
Derivatives financial instruments
Current			R$ 87,643	R$ 68,943
Non Current			76,762	144,050
Current			(5,239)	(183,212)
Non Current			(15,412)	(1,404)
Total			143,754	28,377
Carrying amount			8,461,841	9,224,074	R$ 10,221,290
Foreign currency swaps US $
Derivatives financial instruments
Notional Value			237,384
Carrying amount			225,254
Foreign currency swaps Euro
Derivatives financial instruments
Notional Value			70,946
Foreign currency swaps maturing through February 9, 2018
Derivatives financial instruments
Notional Value			56,071
Currency risk affecting net amount payable | €		€ 70,683
Currency risk affecting net amount receivable | $	$ 56,081
Foreign currency swaps maturing through 2019 to hedge the risk of IPCA
Derivatives financial instruments
Notional Value			39,497
Carrying amount			40,322
Foreign currency swaps maturing through 2019 to hedge the risk of TJLP
Derivatives financial instruments
Notional Value			390,314
Carrying amount			441,167
Foreign currency swaps maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA
Derivatives financial instruments
Notional Value			224,820
Carrying amount			217,178
Foreign currency swaps maturing 2016 through 2018 to hedge IGP-DI
Derivatives financial instruments
Notional Value			42,842
Long position
Derivatives financial instruments
Notional Value			1,166,777	2,739,524
Accumulated effects from fair value Amount receivable or payable			164,405	212,993
Current			87,643	68,943
Non Current			76,762	144,050
Long position | Floating interest rate
Derivatives financial instruments
Notional Value			643,589	898,324
Accumulated effects from fair value Amount receivable or payable			28,263	31,987
Long position | CDI
Derivatives financial instruments
Notional Value			249,239	254,883
Accumulated effects from fair value Amount receivable or payable			82	3,979
Long position | TJLP
Derivatives financial instruments
Notional Value			394,350	643,441
Accumulated effects from fair value Amount receivable or payable			28,181	28,008
Long position | Inflation rates
Derivatives financial instruments
Notional Value			197,039	318,602
Accumulated effects from fair value Amount receivable or payable			33,266	22,244
Long position | IPCA
Derivatives financial instruments
Notional Value			166,775	192,318
Accumulated effects from fair value Amount receivable or payable			33,266	17,998
Long position | IGPM
Derivatives financial instruments
Notional Value			30,264	126,284
Accumulated effects from fair value Amount receivable or payable				4,246
Long position | Foreign currency
Derivatives financial instruments
Notional Value			326,149	1,522,598
Accumulated effects from fair value Amount receivable or payable			102,876	158,762
Long position | US Dollar
Derivatives financial instruments
Notional Value			201,445	742,137
Accumulated effects from fair value Amount receivable or payable			49,110	73,833
Long position | Euro
Derivatives financial instruments
Notional Value			11,000	70,064
Accumulated effects from fair value Amount receivable or payable			449
Long position | LIBOR US$
Derivatives financial instruments
Notional Value			113,704	710,397
Accumulated effects from fair value Amount receivable or payable			53,317	84,929
Short position
Derivatives financial instruments
Notional Value			(1,363,491)	(2,573,351)
Accumulated effects from fair value Amount receivable or payable			(20,652)	(184,616)
Short position			(20,651)	(184,616)
Current			(5,239)	(183,212)
Non Current			(15,412)	(1,404)
Short position | Foreign currency
Derivatives financial instruments
Notional Value			(411,208)	(181,469)
Short position			(4,235)	(71)
Short position | US Dollar
Derivatives financial instruments
Notional Value			(354,356)	(88,710)
Short position			(4,235)	(71)
Short position | US Dollar | Floating interest rate
Derivatives financial instruments
Notional value for short position			(952,283)	(2,391,882)
Short position			(16,417)	(184,545)
Short position | Euro | CDI
Derivatives financial instruments
Notional value for short position			(952,283)	(2,391,882)
Short position			(16,417)	(184,545)
Short position | LIBOR US$
Derivatives financial instruments
Notional Value			R$ (56,852)	R$ (92,759)

XML

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Breakdown of swaps (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Derivative financial instruments break down of swaps
Total	R$ 143,754	R$ 28,377
Ineffective portion of hedge	1,289	2,091
(Net) result of transactions with derivatives	(41,985)	R$ 347,870
Foreign currency x CDI
Derivative financial instruments break down of swaps
Total	102,607
CDI x Foreign Currency
Derivative financial instruments break down of swaps
Total	(4,617)
TJLP x CDI
Derivative financial instruments break down of swaps
Total	28,181
IPCA x CDI
Derivative financial instruments break down of swaps
Total	17,886
IGPM x CDI
Derivative financial instruments break down of swaps
Total	(303)
2018/Falling due within one year/Up to 1 year
Derivative financial instruments break down of swaps
Total	82,403
2018/Falling due within one year/Up to 1 year | Foreign currency x CDI
Derivative financial instruments break down of swaps
Total	65,670
2018/Falling due within one year/Up to 1 year | CDI x Foreign Currency
Derivative financial instruments break down of swaps
Total	(4,524)
2018/Falling due within one year/Up to 1 year | TJLP x CDI
Derivative financial instruments break down of swaps
Total	20,838
2018/Falling due within one year/Up to 1 year | IPCA x CDI
Derivative financial instruments break down of swaps
Total	722
2018/Falling due within one year/Up to 1 year | IGPM x CDI
Derivative financial instruments break down of swaps
Total	(303)
2019/From 1 to 2 years
Derivative financial instruments break down of swaps
Total	53,820
2019/From 1 to 2 years | Foreign currency x CDI
Derivative financial instruments break down of swaps
Total	36,937
2019/From 1 to 2 years | CDI x Foreign Currency
Derivative financial instruments break down of swaps
Total	(93)
2019/From 1 to 2 years | TJLP x CDI
Derivative financial instruments break down of swaps
Total	7,343
2019/From 1 to 2 years | IPCA x CDI
Derivative financial instruments break down of swaps
Total	9,633
2020
Derivative financial instruments break down of swaps
Total	1,129
2020 | IPCA x CDI
Derivative financial instruments break down of swaps
Total	1,129
2021 onwards
Derivative financial instruments break down of swaps
Total	6,402
2021 onwards | IPCA x CDI
Derivative financial instruments break down of swaps
Total	R$ 6,402

XML

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Sensitivity analysis net exposure (Details) R$ in Thousands	12 Months Ended
	Dec. 31, 2017 BRL (R$) item
Net exposure
Percentage of risk deterioration for scenario one	25.00%
Percentage of risk deterioration for scenario two	50.00%
Number of scenarios | item	3
Probable
Net exposure
Net exposure in euro	R$ 263
Net exposure in us dollars hedge short position	10
Net exposure in IPCA	(101,998)
Net exposure in IGP-DI	(98,321)
Net exposure in UMBND	(4,155)
Net exposure in TJLP	(1,168,350)
Net exposure in hedge CDI position	(1,093,045)
Total net exposure in each scenario	(2,465,596)
Probable | Hedge (long position) derivatives depreciation risk in Euro [member]
Net exposure
Net exposure in euro	(70,683)
Probable | Debt appreciation risk for payables in Euro
Net exposure
Net exposure in euro	(42,808)
Probable | Debt depreciation risk for receivables in Euro
Net exposure
Net exposure in euro	113,754
Probable | Hedge (short position) derivatives depreciation risk in US dollars
Net exposure
Net exposure in us dollars hedge short position	(56,071)
Probable | Debt appreciation risk for payables in US dollars
Net exposure
Net exposure in us dollars hedge short position	164,648
Probable | Debt depreciation risk for receivables in US dollars
Net exposure
Net exposure in us dollars hedge short position	(108,567)
Probable | Hedge (long position) derivatives risk of decrease risk in IPCA
Net exposure
Net exposure in IPCA	279,566
Probable | Debt risk of increase in IPCA
Net exposure
Net exposure in IPCA	(381,564)
Probable | Hedge (long position) derivatives risk of decrease in IGP-DI
Net exposure
Net exposure in IGP-DI	42,538
Probable | Debt risk of increase in IGP-DI
Net exposure
Net exposure in IGP-DI	(140,859)
Probable | Hedge (long position) derivatives risk of decrease risk in UMBND
Net exposure
Net exposure in UMBND	221,553
Probable | Debt risk of increase in UMBND
Net exposure
Net exposure in UMBND	(225,708)
Probable | Hedge (long position) derivatives risk of decrease risk in TJLP
Net exposure
Net exposure in TJLP	418,496
Probable | Debt risk of increase in TJLP
Net exposure
Net exposure in TJLP	(1,586,846)
Probable | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI
Net exposure
Net exposure in hedge CDI position	(130,892)
Probable | Hedge IPCA short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(279,566)
Probable | Hedge IGPM short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(42,538)
Probable | Hedge UMBND short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(221,553)
Probable | Hedge TJLP short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(418,496)
25% depreciation
Net exposure
Net exposure in euro	328
Net exposure in us dollars hedge short position	13
Net exposure in IPCA	(101,992)
Net exposure in IGP-DI	(98,284)
Net exposure in UMBND	(5,527)
Net exposure in TJLP	(1,168,133)
Net exposure in hedge CDI position	(1,139,223)
Total net exposure in each scenario	(2,512,818)
Net effect on changes in current fair value	(47,222)
25% depreciation | Hedge (long position) derivatives depreciation risk in Euro [member]
Net exposure
Net exposure in euro	(88,354)
25% depreciation | Debt appreciation risk for payables in Euro
Net exposure
Net exposure in euro	(53,510)
25% depreciation | Debt depreciation risk for receivables in Euro
Net exposure
Net exposure in euro	142,192
25% depreciation | Hedge (short position) derivatives depreciation risk in US dollars
Net exposure
Net exposure in us dollars hedge short position	(70,088)
25% depreciation | Debt appreciation risk for payables in US dollars
Net exposure
Net exposure in us dollars hedge short position	205,810
25% depreciation | Debt depreciation risk for receivables in US dollars
Net exposure
Net exposure in us dollars hedge short position	(135,709)
25% depreciation | Hedge (long position) derivatives risk of decrease risk in IPCA
Net exposure
Net exposure in IPCA	259,689
25% depreciation | Debt risk of increase in IPCA
Net exposure
Net exposure in IPCA	(361,681)
25% depreciation | Hedge (long position) derivatives risk of decrease in IGP-DI
Net exposure
Net exposure in IGP-DI	42,575
25% depreciation | Debt risk of increase in IGP-DI
Net exposure
Net exposure in IGP-DI	(140,859)
25% depreciation | Hedge (long position) derivatives risk of decrease risk in UMBND
Net exposure
Net exposure in UMBND	276,004
25% depreciation | Debt risk of increase in UMBND
Net exposure
Net exposure in UMBND	(281,531)
25% depreciation | Hedge (long position) derivatives risk of decrease risk in TJLP
Net exposure
Net exposure in TJLP	414,263
25% depreciation | Debt risk of increase in TJLP
Net exposure
Net exposure in TJLP	(1,582,396)
25% depreciation | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI
Net exposure
Net exposure in hedge CDI position	(146,692)
25% depreciation | Hedge IPCA short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(259,689)
25% depreciation | Hedge IGPM short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(42,575)
25% depreciation | Hedge UMBND short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(276,004)
25% depreciation | Hedge TJLP short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(414,263)
50% depreciation
Net exposure
Net exposure in euro	394
Net exposure in us dollars hedge short position	15
Net exposure in IPCA	(101,988)
Net exposure in IGP-DI	(98,247)
Net exposure in UMBND	(6,975)
Net exposure in TJLP	(1,167,922)
Net exposure in hedge CDI position	(1,187,610)
Total net exposure in each scenario	(2,562,333)
Net effect on changes in current fair value	(96,737)
50% depreciation | Hedge (long position) derivatives depreciation risk in Euro [member]
Net exposure
Net exposure in euro	(106,025)
50% depreciation | Debt appreciation risk for payables in Euro
Net exposure
Net exposure in euro	(64,212)
50% depreciation | Debt depreciation risk for receivables in Euro
Net exposure
Net exposure in euro	170,631
50% depreciation | Hedge (short position) derivatives depreciation risk in US dollars
Net exposure
Net exposure in us dollars hedge short position	(84,106)
50% depreciation | Debt appreciation risk for payables in US dollars
Net exposure
Net exposure in us dollars hedge short position	246,972
50% depreciation | Debt depreciation risk for receivables in US dollars
Net exposure
Net exposure in us dollars hedge short position	(162,851)
50% depreciation | Hedge (long position) derivatives risk of decrease risk in IPCA
Net exposure
Net exposure in IPCA	242,286
50% depreciation | Debt risk of increase in IPCA
Net exposure
Net exposure in IPCA	(344,274)
50% depreciation | Hedge (long position) derivatives risk of decrease in IGP-DI
Net exposure
Net exposure in IGP-DI	42,612
50% depreciation | Debt risk of increase in IGP-DI
Net exposure
Net exposure in IGP-DI	(140,859)
50% depreciation | Hedge (long position) derivatives risk of decrease risk in UMBND
Net exposure
Net exposure in UMBND	330,097
50% depreciation | Debt risk of increase in UMBND
Net exposure
Net exposure in UMBND	(337,072)
50% depreciation | Hedge (long position) derivatives risk of decrease risk in TJLP
Net exposure
Net exposure in TJLP	410,144
50% depreciation | Debt risk of increase in TJLP
Net exposure
Net exposure in TJLP	(1,578,066)
50% depreciation | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI
Net exposure
Net exposure in hedge CDI position	(162,471)
50% depreciation | Hedge IPCA short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(242,286)
50% depreciation | Hedge IGPM short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(42,612)
50% depreciation | Hedge UMBND short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	(330,097)
50% depreciation | Hedge TJLP short position derivatives risk of increase in CDI
Net exposure
Net exposure in hedge CDI position	R$ (410,144)

XML

FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Sensitivity analysis assumptions (Details)	12 Months Ended
	Dec. 31, 2017
Probable | IPCA
Sensitivity analysis assumptions
Risk Variable (as a percent)	2.79%
Probable | IGPM
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.52%)
Probable | IGP-DI
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.27%)
Probable | UMBND
Sensitivity analysis assumptions
Risk Variable Ratio	0.0646
Probable | URTJLP
Sensitivity analysis assumptions
Risk Variable Ratio	2.0314
Probable | CDI
Sensitivity analysis assumptions
Risk Variable (as a percent)	6.89%
Probable | US Dollar
Sensitivity analysis assumptions
Risk Variable Ratio	3.3080
Probable | Euro
Sensitivity analysis assumptions
Risk Variable Ratio	3.9676
Probable | JPY
Sensitivity analysis assumptions
Risk Variable Ratio	0.0293
25% depreciation | IPCA
Sensitivity analysis assumptions
Risk Variable (as a percent)	3.49%
25% depreciation | IGPM
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.65%)
25% depreciation | IGP-DI
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.34%)
25% depreciation | UMBND
Sensitivity analysis assumptions
Risk Variable Ratio	0.0807
25% depreciation | URTJLP
Sensitivity analysis assumptions
Risk Variable Ratio	2.5392
25% depreciation | CDI
Sensitivity analysis assumptions
Risk Variable (as a percent)	8.61%
25% depreciation | US Dollar
Sensitivity analysis assumptions
Risk Variable Ratio	4.1350
25% depreciation | Euro
Sensitivity analysis assumptions
Risk Variable Ratio	4.9595
25% depreciation | JPY
Sensitivity analysis assumptions
Risk Variable Ratio	0.0367
50% depreciation | IPCA
Sensitivity analysis assumptions
Risk Variable (as a percent)	4.19%
50% depreciation | IGPM
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.78%)
50% depreciation | IGP-DI
Sensitivity analysis assumptions
Risk Variable (as a percent)	(0.41%)
50% depreciation | UMBND
Sensitivity analysis assumptions
Risk Variable Ratio	0.0969
50% depreciation | URTJLP
Sensitivity analysis assumptions
Risk Variable Ratio	3.0470
50% depreciation | CDI
Sensitivity analysis assumptions
Risk Variable (as a percent)	10.34%
50% depreciation | US Dollar
Sensitivity analysis assumptions
Risk Variable Ratio	4.9620
50% depreciation | Euro
Sensitivity analysis assumptions
Risk Variable Ratio	5.9514
50% depreciation | JPY
Sensitivity analysis assumptions
Risk Variable Ratio	0.0440

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Fair value (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Transfers from level 1 to 2 assets	R$ 0	R$ 0
Transfers from level 2 to 1 assets	0	0
Transfers from level 1 to 2 liabilities	0	0
Transfers from level 2 to 1 liabilities	0	0
Transfers in to level 3	0	0
Transfers out of level 3	R$ 0	R$ 0

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Composition of consolidated financial assets and liabilities (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Financial assets Book value	R$ 13,158,583	R$ 14,403,368
Financial assets Fair value	13,158,583	14,403,368
Financial liabilities Book value	15,929,592	17,091,843
Fair value of financial liabilities	15,930,137	16,983,334
Cash and cash equivalents | Amortized cost
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial assets Book value	4,050,338	5,105,110
Current financial assets Fair value	4,050,338	5,105,110
Short-term investments pledged as collateral | Amortized cost
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Noncurrent financial assets Book value	81,486	78,166
Noncurrent financial assets Fair value	81,486	78,166
Trade accounts receivable | Loans and receivables
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial assets Book value	8,588,466	8,701,688
Noncurrent financial assets Book value	273,888	305,411
Current financial assets Fair value	8,588,466	8,701,688
Noncurrent financial assets Fair value	273,888	305,411
Derivative financial instruments | Measured at fair value through profit or loss | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial assets Book value	2,480	3,979
Current financial assets Fair value	2,480	3,979
Derivative financial instruments | Hedges (economic) | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial assets Book value	85,163	64,964
Noncurrent financial assets Book value	76,762	144,050
Current financial assets Fair value	85,163	64,964
Noncurrent financial assets Fair value	76,762	144,050
Trade accounts payable | Amortized cost
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	7,447,100	7,611,246
Noncurrent financial liabilities Book value		71,907
Current financial liabilities Fair value	7,447,100	7,611,246
Noncurrent financial liabilities Fair value		71,907
Loans and financing | Measured at fair value through profit or loss | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	304,921	1,286,828
Noncurrent financial liabilities Book value	520,421	874,982
Current financial liabilities Fair value	317,231	1,307,310
Noncurrent financial liabilities Fair value	505,422	822,818
Loans and financing | Amortized cost
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	1,316,034	1,256,147
Noncurrent financial liabilities Book value	1,353,582	1,837,077
Current financial liabilities Fair value	1,463,609	1,363,539
Noncurrent financial liabilities Fair value	1,291,974	1,668,524
Debentures | Measured at fair value through profit or loss | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	312	307
Noncurrent financial liabilities Book value	40,010	36,990
Current financial liabilities Fair value	1,490	1,412
Noncurrent financial liabilities Fair value	37,717	34,124
Debentures | Amortized cost
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	1,412,174	2,120,197
Noncurrent financial liabilities Book value	3,068,243	1,396,813
Current financial liabilities Fair value	1,532,427	2,242,291
Noncurrent financial liabilities Fair value	2,866,372	1,260,814
Derivative financial instruments | Measured at fair value through profit or loss | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	4,504	4,111
Current financial liabilities Fair value	4,504	4,111
Derivative financial instruments | Hedges (economic) | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Current financial liabilities Book value	735	179,101
Noncurrent financial liabilities Book value	15,412	1,404
Current financial liabilities Fair value	735	179,101
Noncurrent financial liabilities Fair value	15,412	1,404
Contingent consideration | Measured at fair value through profit or loss | Level 2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Noncurrent financial liabilities Book value	446,144	414,733
Noncurrent financial liabilities Fair value	R$ 446,144	R$ 414,733

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Capital Management (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Cash and cash equivalents	R$ 4,050,338	R$ 5,105,110	R$ 5,336,845	R$ 4,692,689
Loans, financing, debentures, financial lease and contingent consideration	(8,461,841)	(9,224,074)	(10,221,290)
Derivative financial instruments, net	143,754	28,377
Short-term investments pledged as collateral	81,486	78,166
EQUITY	69,461,358	69,244,419	R$ 68,567,242	R$ 44,950,095
Capital management
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Cash and cash equivalents	4,050,338	5,105,110
Loans, financing, debentures, financial lease and contingent consideration	(8,461,841)	(9,224,074)
Derivative financial instruments, net	143,754	28,377
Asset guarantor of contingent consideration	446,144	414,733
Net debt	3,809,883	3,665,081
EQUITY	R$ 69,461,358	R$ 69,244,419
Net debt-to-equity ratio	5.48%	5.29%
Financing - BNB maturing 8/18/2022 | Capital management
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Short-term investments pledged as collateral	R$ 11,722	R$ 10,773

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Currency and Interest Risk (Details) € in Thousands, R$ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2017 EUR (€)	Dec. 31, 2017 BRL (R$)	Sep. 30, 2017	Mar. 31, 2017	Dec. 31, 2016 EUR (€)	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)	Dec. 31, 2014 BRL (R$)
Disclosure of risk management strategy related to hedge accounting [line items]
Cash and cash equivalents				R$ 4,050,338				R$ 5,105,110	R$ 5,336,845	R$ 4,692,689
Currency Risk
Disclosure of risk management strategy related to hedge accounting [line items]
Foreign currency denominated financial debt (as a percent)	2.70%	14.00%
Total indebtedness in foreign currency				R$ 225,254				1,287,864
Net balance of these rights and obligations receivable | $	$ 16,953	$ 17,293
Net balance of these rights and obligations payable | €			€ 17,535				€ 5,695
Interest Risk
Disclosure of risk management strategy related to hedge accounting [line items]
Borrowings, interest rate	7.00%		7.00%	7.00%	7.00%	7.50%
CDI | Interest Risk
Disclosure of risk management strategy related to hedge accounting [line items]
Cash and cash equivalents				R$ 3,932,539				R$ 4,906,741

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Liquidity Risk (Details) - BRL (R$) R$ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Risk management policy
Financial liabilities	R$ 15,929,592	R$ 17,091,843
Liquidity Risk
Risk management policy
Financial liabilities	15,929,592	17,091,843
Liquidity Risk | Trade accounts payable
Risk management policy
Financial liabilities	7,447,100	7,683,153
Liquidity Risk | Loans, financing and finance lease
Risk management policy
Financial liabilities	3,494,958	5,255,034
Liquidity Risk | Contingent consideration
Risk management policy
Financial liabilities	446,144	414,733
Liquidity Risk | Debentures
Risk management policy
Financial liabilities	4,520,739	3,554,307
Liquidity Risk | Derivative financial instruments
Risk management policy
Financial liabilities	20,651	184,616
2018/Falling due within one year/Up to 1 year | Liquidity Risk
Risk management policy
Financial liabilities	10,485,780	12,457,937
2018/Falling due within one year/Up to 1 year | Liquidity Risk | Trade accounts payable
Risk management policy
Financial liabilities	7,447,100	7,611,246
2018/Falling due within one year/Up to 1 year | Liquidity Risk | Loans, financing and finance lease
Risk management policy
Financial liabilities	1,620,955	2,542,975
2018/Falling due within one year/Up to 1 year | Liquidity Risk | Debentures
Risk management policy
Financial liabilities	1,412,486	2,120,504
2018/Falling due within one year/Up to 1 year | Liquidity Risk | Derivative financial instruments
Risk management policy
Financial liabilities	5,239	183,212
2019/From 1 to 2 years | Liquidity Risk
Risk management policy
Financial liabilities	847,249	2,486,807
2019/From 1 to 2 years | Liquidity Risk | Loans, financing and finance lease
Risk management policy
Financial liabilities	780,904	1,129,939
2019/From 1 to 2 years | Liquidity Risk | Debentures
Risk management policy
Financial liabilities	66,252	1,355,683
2019/From 1 to 2 years | Liquidity Risk | Derivative financial instruments
Risk management policy
Financial liabilities	93	1,185
From 2 to 5 years | Liquidity Risk
Risk management policy
Financial liabilities	3,927,412	1,404,486
From 2 to 5 years | Liquidity Risk | Loans, financing and finance lease
Risk management policy
Financial liabilities	885,411	1,326,269
From 2 to 5 years | Liquidity Risk | Debentures
Risk management policy
Financial liabilities	3,042,001	78,120
From 2 to 5 years | Liquidity Risk | Derivative financial instruments
Risk management policy
Financial liabilities		97
2023 onwards/Over five years | Liquidity Risk
Risk management policy
Financial liabilities	669,151	742,613
2023 onwards/Over five years | Liquidity Risk | Trade accounts payable
Risk management policy
Financial liabilities		71,907
2023 onwards/Over five years | Liquidity Risk | Loans, financing and finance lease
Risk management policy
Financial liabilities	207,688	255,851
2023 onwards/Over five years | Liquidity Risk | Contingent consideration
Risk management policy
Financial liabilities	446,144	414,733
2023 onwards/Over five years | Liquidity Risk | Derivative financial instruments
Risk management policy
Financial liabilities	R$ 15,319	R$ 122

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Social and Environmental Risks (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$)
Environmental risks
Exposure to contingent liabilities
Maximum fine per breach of environmental law	R$ 50,000

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FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Insurance Coverage (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$)
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT
Maximum limits of claims for operational risks	R$ 1,501,052
Maximum limits of claims for general civil liability risks	R$ 75,000

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COMMITMENTS AND GUARANTEES (RENTALS) - Non-cancellable operating agreements (Details) R$ in Thousands	Dec. 31, 2017 BRL (R$)
Non-cancellable operating agreements
Amount corresponding to contracts	R$ 14,745,345
2018/Falling due within one year/Up to 1 year
Non-cancellable operating agreements
Amount corresponding to contracts	2,285,148
Falling due between one year and five years
Non-cancellable operating agreements
Amount corresponding to contracts	7,442,212
2023 onwards/Over five years
Non-cancellable operating agreements
Amount corresponding to contracts	R$ 5,017,985

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ADDITIONAL INFORMATION ON CASH FLOWS (Details) - BRL (R$) R$ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	R$ 11,390,728
Cash flows from financing activities, Additions	3,055,876
Cash flows from financing activities, Write-offs (payments)	(8,313,454)
Cash flows from operating activities, Write-offs (payments)	(857,500)
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	984,400
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing	584,906
Financing activities not involving cash and cash equivalents, Business combinations	(389)
Financing activities not involving cash and cash equivalents, Interim and unclaimed dividends and interest on equity	3,869,636
Balance at end of the year	10,714,203	R$ 11,390,728
Acquisition of assets through financial leases	13,462	61,866
Interim dividends and interest on equity
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	2,195,031
Cash flows from financing activities, Write-offs (payments)	(3,668,551)
Financing activities not involving cash and cash equivalents, Interim and unclaimed dividends and interest on equity	3,869,636
Balance at end of the year	2,396,116	2,195,031
Loans and financing
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	4,880,606
Cash flows from financing activities, Additions	55,876
Cash flows from financing activities, Write-offs (payments)	(2,449,773)
Cash flows from operating activities, Write-offs (payments)	(333,676)
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	385,021
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing	571,444
Balance at end of the year	3,109,498	4,880,606
Finance lease
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	374,428
Cash flows from financing activities, Write-offs (payments)	(35,722)
Cash flows from operating activities, Write-offs (payments)	(11,973)
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	45,265
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing	13,462
Balance at end of the year	385,460	374,428
Debentures
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	3,554,307
Cash flows from financing activities, Additions	3,000,000
Cash flows from financing activities, Write-offs (payments)	(2,000,000)
Cash flows from operating activities, Write-offs (payments)	(513,937)
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	480,369
Balance at end of the year	4,520,739	3,554,307
Derivative financial instruments
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	(28,377)
Cash flows from financing activities, Write-offs (payments)	(159,408)
Cash flows from operating activities, Write-offs (payments)	2,086
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	42,334
Financing activities not involving cash and cash equivalents, Business combinations	(389)
Balance at end of the year	(143,754)	(28,377)
Contingent consideration
ADDITIONAL INFORMATION ON CASH FLOWS
Balance at beginning of the year	414,733
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation	31,411
Balance at end of the year	R$ 446,144	R$ 414,733