AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 2000
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                              --------------------
                                    FORM 20-F
                              --------------------

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                        COMMISSION FILE NUMBER: 001-14489
                              --------------------
                            TELE CENTRO OESTE CELULAR
                               PARTICIPACOES S.A.
             (Exact Name of Registrant as Specified in Its Charter)

  TELE CENTRO OESTE CELLULAR HOLDING         THE FEDERATIVE REPUBLIC OF BRAZIL
                COMPANY                      (Jurisdiction of Incorporation or
   (Translation of Registrant's Name                   Organization)
             into English)
                              --------------------
                         SCS, QUADRA 2, BLOCO C, 7 ANDAR
                         70319-901 BRASILIA, DF, BRAZIL
                    (Address of Principal Executive Offices)
                              --------------------

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, each             New York Stock Exchange
      representing 3,000 Preferred Shares

      --------------
      *  Not for trading,  but only in  connection  with the listing of American
         Depositary Shares on the New York Stock Exchange.

       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 THIS ANNUAL REPORT:

                124,369,030,532 Common Shares, without par value

               240,029,997,060 Preferred Shares, without par value

      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.

                             Yes   X   No
                                 -----    ------

      INDICATE BY CHECK MARK WHICH  FINANCIAL  STATEMENT ITEM THE REGISTRANT HAS
ELECTED TO FOLLOW.

                         Item 17        Item 18   X
                                  -----         -----

<PAGE>

                                TABLE OF CONTENTS

                                                                          PAGE

                                     PART I

Item 1.  Description of Business.........................................    2
Item 2.  Description of Property.........................................   23
Item 3.  Legal Proceedings...............................................   23
Item 4.  Control of Registrant...........................................   25
Item 5.  Nature of Trading Market........................................   26
Item 6.  Exchange Controls and Other Limitations Affecting
         Security Holders................................................   29
Item 7.  Taxation........................................................   31
Item 8.  Selected Financial Data.........................................   36
Item 9.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.............................   41
Item 9A. Quantitative and Qualitative Disclosures about Market
         Risk............................................................   51
Item 10. Directors and Officers of Registrant............................   52
Item 11. Compensation of Directors and Officers..........................   54
Item 12. Options to Purchase Securities from Registrant or
         Subsidiaries....................................................   54
Item 13. Interest of Management in Certain Transactions..................   54

                                     PART II

Item 14. Description of Securities to be Registered......................   54

                                    PART III

Item 15. Defaults upon Senior Securities.................................   54
Item 16. Changes in Securities, Changes in Security for
         Registered Securities and Use of Proceeds.......................   54

                                     PART IV

Item 17. Financial Statements............................................   54
Item 18. Financial Statements............................................   54
Item 19. Financial Statements and Exhibits...............................   55
Index of Defined Terms...................................................   56
Technical Glossary.......................................................   58

<PAGE>

                      PRESENTATION OF FINANCIAL INFORMATION

      In this Annual  Report,  Tele Centro Oeste Celular  Participacoes  S.A., a
corporation  organized  under  the laws of the  Federative  Republic  of  Brazil
("Brazil"), is referred to as the "Holding Company," and the Holding Company and
its  Subsidiaries are  collectively  referred to as the "Company."  Telebrasilia
Celular S.A., Telegoias Celular S.A., Telemat Celular S.A., Telems Celular S.A.,
Teleron Celular S.A.,  Teleacre  Celular S.A and Norte Brasil Telecom,  S.A. are
collectively  referred to as the "Subsidiaries," and each is separately referred
to as a  "Subsidiary."  Norte Brasil  Telecom,  S.A. is also  referred to as the
"Band B Subsidiary,"  while each of the remaining  Subsidiaries is also referred
to as a "Band A Subsidiary."

      References  to (i) the  "REAL,"  "REAIS"  or "R$" are to  Brazilian  REAIS
(plural) and the Brazilian REAL (singular) and (ii) "U.S. dollars," "dollars" or
"US$" are to United States dollars.

      On June  21,  2000,  the Noon  Buying  Rate in New  York  City  for  cable
transfers as certified for customs  purposes by the Federal  Reserve Bank of New
York (the "Noon  Buying  Rate") was  R$1.8150  to US$1.00.  See below  "Selected
Financial Data--Exchange Rates."

      The  consolidated  financial  statements of the Company as of December 31,
1998 and 1999 and for the years  ended  December  31,  1997,  1998 and 1999 (the
"Consolidated  Financial  Statements")  have been  prepared in  accordance  with
generally  accepted  accounting  principles in Brazil  ("Brazilian  GAAP").  The
Consolidated  Financial  Statements and, unless otherwise  specified,  the other
financial data included  herein  recognize  certain effects of inflation and are
restated in  constant  REAIS of December  31,  1999  purchasing  power using the
integral restatement method (CORRECAO MONETARIA INTEGRAL).

      Certain  terms are  defined  the first  time they are used in this  Annual
Report. The "Index of Defined Terms" on page 56 lists those terms and where they
are  defined.   The  "Technical  Glossary"  that  begins  on  page  58  provides
definitions of certain technical terms used herein.

                           FORWARD-LOOKING INFORMATION

      This Annual Report contains  forward-looking  statements.  The Company and
its representatives may also make  forward-looking  statements in press releases
and oral  statements.  Statements  that are not  statements of historical  fact,
including  statements  about  the  beliefs  and  expectations  of the  Company's
management, are forward-looking statements. The words "anticipates," "believes,"
"estimates,"  "expects," "forecasts," "intends," "plans," "predicts," "projects"
and "targets" and similar words are intended to identify these statements, which
necessarily  involve known and unknown risks and uncertainties.  Known risks and
uncertainties,  some of which are discussed at pages 19-23 herein, include those
resulting from the short history of the Company's  operations as an independent,
private-sector  entity and the  introduction  of  competition  to the  Brazilian
telecommunications   sector,   as  well  as  those  relating  to  the  cost  and
availability of financing,  the performance of the Brazilian economy  generally,
the levels of exchange  rates between  Brazilian and foreign  currencies and the
telecommunications   policy  of  Brazil's   federal   government  (the  "Federal
Government").  Accordingly,  the actual results of operations of the Company may
be different from the Company's current expectations,  and the reader should not
place  undue  reliance  on  these  forward-looking  statements.  Forward-looking
statements  speak only as of the date they are made,  and the  Company  does not
undertake any  obligation to update them in light of new  information  or future
developments.

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

      The  Holding  Company  is one of the  companies  formed as a result of the
breakup of  Telecomunicacoes  Brasileiras  S.A. - TELEBRAS  ("TELEBRAS")  by the
Federal  Government in May 1998.  Each of the Band A Subsidiaries  was formed in
January 1998 by spinning off the cellular  telecommunications  operations  of an
operating  company  controlled  by  TELEBRAS  (collectively,   the  "Predecessor
Companies").  References to the  operations of the Company prior to January 1998
are  to  the  cellular  operations  of  the  Predecessor  Companies.  See  below
"Description of Business--Historical Background."

      The Band A Subsidiaries of the Company provide cellular telecommunications
services in Brazil's Federal District and in the Brazilian States of Goias, Mato
Grosso do Sul, Mato Grosso,  Rondonia, Acre and Tocantins  (collectively,  "Area
7") under  concessions  from the Federal  Government (the "Band A Concessions").
The Predecessor Companies began to offer cellular telecommunications services in
Area 7 in December  1991,  and the  Company is the leading  provider of cellular
telecommunications  services  in Area 7. The Band B  Subsidiary  of the  Company
provides cellular  telecommunications  service in the Brazilian States of Amapa,
Amazonas, Maranhao, Para and Roraima (collectively,  "Area 8") under concessions
from the Federal  Government (the "Band B Concessions").  The Band A Concessions
and the Band B Concessions are collectively referred to as the "Concessions." As
of May 31,  2000,  the Company,  including  its Band A  Subsidiaries  and Band B
Subsidiaries, had approximately 1,148,000 subscribers.

THE HOLDING COMPANY AND ITS OPERATING SUBSIDIARIES

      The following table sets forth the contribution made by each Subsidiary to
the Company's net operating  revenues for the year ending  December 31, 1999 and
the Holding Company's shareholding in each Subsidiary at December 31, 1999.

<TABLE>
<CAPTION>
                                          CONTRIBUTION TO
                                       CONSOLIDATED RESULTS  HOLDING COMPANY OWNERSHIP
                                       --------------------  -------------------------
                                        % OF NET OPERATING    % OF SHARE  % OF VOTING
SUBSIDIARY                                    REVENUES          CAPITAL      STOCK
----------------------                 --------------------  ------------ -----------
<S>                                        <C>                   <C>         <C>
Telebrasilia Celular S.A.
  ("Telebrasilia")..................       41.43                 86.81       88.61
Telegoias Celular S.A. ("Telegoias")       22.42                 89.00       87.25
Telemat Celular S.A. ("Telemat")....       14.00                 91.87       98.40
Telems Celular S.A. ("Telems")......       14.06                 96.01       98.90
Teleron Celular S.A. ("Teleron")....        6.52                 91.31       97.31
Teleacre Celular S.A. ("Teleacre")..        2.15                 93.00       98.70
Norte Brasil Telecom S.A. ("NBT")...        0.00                 95.00       95.00
</TABLE>

      Substantially  all the Holding  Company's  assets consist of shares in the
Subsidiaries.  The Holding  Company relies almost  exclusively on dividends from
the Subsidiaries to meet its needs for cash,  including cash to pay dividends to
its shareholders.  See below "Management's  Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

      On October 19, 1998 Tele Centro  Oeste/Inepar,  a consortium  comprised of
(i) Inepar S.A.  Industria  e  Construcoes  (50%) and (ii) the  Holding  Company
(50%), was awarded a license to provide cellular  telecommunications services in
Area 8. On May 21, 1999,  the Company  acquired 45% of the shares of Tele Centro
Oeste/Inepar from Inepar,  increasing its holding in the consortium to 95%. Upon
acquiring control,  the Company renamed Tele Centro  Oeste/Inepar  "Norte Brasil
Telecom S.A." and  registered it as a non-publicly  held company.  On October 7,
1999, NBT began providing Band B digital cellular  telecommunications service in
Area 8 in competition with Tele Norte Celular  Participacoes  S.A. Area 8 covers
approximately 41% of the territory and 8.9% of the total population of Brazil.

<PAGE>

      The Holding Company's  headquarters are located at SCS, Quadra 2, Bloco C,
7  andar,   70319-901  Brasilia,   DF,  Brazil,  and  its  telephone  numbeR  is
55-61-313-7765.

HISTORICAL BACKGROUND

      Prior to the  incorporation  of TELEBRAS in 1972, there were more than 900
telecommunications companies operating throughout Brazil. Between 1972 and 1975,
TELEBRAS and its operating  Subsidiaries  (collectively,  the "TELEBRAS System")
acquired  almost all the other  telephone  companies  in Brazil and thus came to
have a monopoly  over the  provision  of public  telecommunications  services in
almost all areas of the  country.  Beginning  in 1995,  the  Federal  Government
undertook  a  comprehensive  reform of  Brazil's  telecommunications  regulatory
system. In July 1997, Brazil's National Congress passed the Law no. 9.472, known
as the LEI GERAL DE TELECOMUNICACOES (the "General  Telecommunications Law," and
together with the regulations,  decrees,  orders and plans on telecommunications
issued by Brazil's  Executive  Branch,  the  "Telecommunications  Regulations"),
which  provided  for  the  establishment  of a  new  regulatory  framework,  the
introduction  of  competition  and the  privatization  of TELEBRAS.  The General
Telecommunications  Law  established  an  independent  regulatory  agency called
Agencia Nacional de Telecomunicacoes - ANATEL ("ANATEL").

      In January 1998, in preparation for the restructuring and privatization of
the TELEBRAS  System,  the cellular  telecommunications  operations of TELEBRAS'
operating  subsidiaries  were  spun off into  separate  companies.  In May 1998,
TELEBRAS  was  restructured  to form,  in addition to  TELEBRAS,  12 new holding
companies (the "New Holding  Companies") by means of a procedure under Brazilian
corporate  law  called  CISAO,  or  split-up.   Virtually  all  the  assets  and
liabilities of TELEBRAS,  including the shares held by TELEBRAS in the operating
companies of the TELEBRAS System,  were allocated to the New Holding  Companies.
The split-up of the TELEBRAS  System into the New Holding  Companies is referred
to herein as the "Breakup" or the "Breakup of TELEBRAS."

      The New Holding  Companies,  together with their respective  subsidiaries,
consist of (a) eight cellular service providers,  each operating in one of eight
regions (each a "Cellular Region"), (b) three fixed-line service providers, each
providing local and intraregional  long-distance service in one of three regions
(each a "Fixed-Line  Region"),  and (c) Embratel  Participacoes  S.A. - EMBRATEL
("EMBRATEL"),    which   provides   domestic   (including    intraregional   and
interregional)  long-distance  telephone  service  and  international  telephone
service throughout Brazil.

      The Holding Company is one of the New Holding  Companies.  In the Breakup,
the Holding  Company was allocated all the share capital held by TELEBRAS in the
operating   subsidiaries   of  the  TELEBRAS   System  that  provided   cellular
telecommunications  service in Area 7. In July 1998, the Federal Government sold
substantially all its shares of the New Holding Companies, including the Holding
Company,  to  private-sector  buyers.  The  Federal  Government's  shares of the
Holding Company were purchased by Splice do Brasil Telecomunicacoes e Eletronica
S.A.,  through  its  subsidiary  BID S.A.  ("Splice").  See  below  "Control  of
Registrant."

THE REGION

      The region in which the  Subsidiaries  operate (the "Region")  consists of
Area 7 and Area 8 and covers an aggregate area of approximately 5,803,501 square
kilometers,  representing  approximately 68% of the total area of Brazil and 17%
of Brazil's  population.  Area 7, which is serviced by the Band A  Subsidiaries,
includes the federal capital, Brasilia, and the surrounding Federal District, as
well as six Brazilian states.  The six states that make up the balance of Area 7
are Goias,  Tocantins,  Mato Grosso, Mato Grosso do Sul, Rondonia and Acre. Area
8, which is serviced by the Band B Subsidiary,  includes five Brazilian  states:
Amapa, Amazonas, Maranhao, Para and Roraima.

<PAGE>

      Set forth below is a map showing the location of the Region within Brazil.



                               [MAP OF BRAZIL]

<PAGE>

      The following table sets forth population,  Gross Domestic Product ("GDP")
and per capita income  statistics  for each state in Area 7 and in Area 8 at the
dates and for the years indicated.

<TABLE>
<CAPTION>

                                  POPULATION      % OF BRAZIL'S   % OF BRAZIL'S  PER CAPITA INCOME
SUBSIDIARY    AREA                (MILLIONS)<F1>  POPULATION<F1>      GDP<F2>    (NOMINAL REAIS)<F2>
------------  ------------------- --------------  --------------  -------------  -------------------
<S>           <C>                   <C>               <C>            <C>              <C>
Telebrasilia  Federal District...    1.97              1.20           2.28            10,508
Telegoias ..  Goias..............    4.72              2.88           1.84             3,428
Telegoias ..  Tocantins..........    1.14              0.69           0.20             1,580
Telemat ....  Mato Grosso........    2.38              1.45           1.05             3,972
Telems .....  Mato Grosso do Sul.    1.99              1.21           1.07             4,693
Teleron ....  Rondonia...........    1.30              0.79           0.48             3,317
Teleacre ...  Acre...............    0.53              0.32           0.15             2,605
NBT ........  Amapa..............    0.44              0.27           0.18             3,767
NBT ........  Amazonas...........    2.58              1.57           1.66             5,816
NBT ........  Maranhao...........    5.42              3.30           0.85             1,389
NBT ........  Para...............    5.89              3.59           1.69             2,584
NBT ........  Roraima ...........    0.27              0.16           0.07             2,423

              REGION.............   28.62             17.44          11.51             4,162
              ------                =====             =====          =====             =====

------------
<FN>
<F1>
      Estimates of the  Instituto  Brasileiro  de Geografia e Estatistica - IBGE
      (the "IBGE"). Demographical information pertains only to areas serviced by
      the  Concessions  and does not pertain to the cities that are not serviced
      by the Concessions.
<F2>
      SOURCE:  Instituto Brasileiro de Geografia e Estatistica - IBGE.

</FN>
</TABLE>

      The Company's  business,  financial  condition,  results of operations and
prospects  depend in part on the  performance  of the Brazilian  economy and the
economy   of  the   Region,   in   particular.   See   below   "Description   of
Business--Brazilian Economic Environment."

SERVICES

      The Company offers analog and digital cellular  telecommunications service
to its  subscribers  under its Basic  Service  Plan.  The  Company  also  offers
ancillary services,  including voicemail, call forwarding,  call waiting, caller
identification and three-way calling. In 1999 the Company began selling cellular
handsets in connection  with the  introduction of prepaid  service.  The prepaid
service is an alternative  plan designed for lower volume cellular  subscribers.
Service is paid for and credited prior to calls being made. The subscriber  must
purchase a card with  prepaid  credits  within 90 days of  activation.  Once the
credits in a card are used,  a new card must be  purchased  within 180 days,  or
else service is canceled and the  subscriber  must request a new  activation  in
order to regain  service.  Prepaid cards are sold in  denominations  of R$10.00,
R$25.00 and R$50.00.  With prepaid  cards,  subscribers  have better  control of
their expenses.

      Through  agreements  with other cellular  service  providers,  the Company
offers  automatic  roaming  services  throughout  Brazil that allow  subscribers
(other than  prepaid  subscribers)  to make and  receive  calls while out of the
Region.  The  Company  offers  international  roaming in  Argentina  and Uruguay
through agreements with local cellular service providers in those countries.  As
of January 2000,  the Company began  offering  international  roaming in over 60
countries in North America, Europe, Asia, South Africa and Australia.  Calls are
billed to the subscriber's cellular bill. No credit card or immediate payment is
required.  In order to use  international  roaming,  subscribers sign a contract
with the  Company  in the  amount of  R$100.00,  and in 48 hours the  service is
activated.  Subscribers who wish to use international  roaming in countries with
GSM technology  also receive a handset for use while in transit.  The Subscriber
is billed later for the handset usage  according to the  effective  rates of the
region  where  the  roaming   occurred.   The  Company  also  provides  cellular
telecommunications  service to subscribers of other cellular  service  providers
while they are in the Region.  The Company  charges the other service  providers
pursuant to roaming  agreements for the service  provided to their  subscribers.
See below "Description of Business--Operating Agreements--Roaming Agreements."

<PAGE>

SALES AND MARKETING

      The Company divides its subscribers into two main categories: (i) business
customers,  consisting of businesses with four or more cellular telephones,  who
accounted for 3% of the Company's revenue in 1999 and (ii) individual customers,
consisting  of  individuals   and  businesses  with  fewer  than  four  cellular
telephones,  who  accounted for 97% of the Company's  revenue  during 1999.  The
Company  varies the manner in which it markets and  promotes  its  services  and
occasionally  develops  special plans and services for particular  categories of
customers.  The Company provides additional support services,  such as dedicated
account representatives, to certain customers.

      The  Company's  customers  consist  primarily  of high- and  middle-income
individuals.  According  to the  Company's  research,  as of December  31, 1999,
approximately  67%  of the  Company's  subscribers  were  male,  and  81% of the
Company's subscribers were at least 35 years old.

      Pursuant to ANATEL's regulations,  cellular  telecommunications service is
provided to all individual applicants,  regardless of income level, in the order
in which  applications are received.  In order to assist in managing the risk of
payment defaults,  the Company conducts credit checks on its customers.  Service
can be  interrupted  if a  customer  fails to make  timely  payments.  See below
"Description of Business--Billing and Collection."

   SALES NETWORK

      The Company markets its services through a network of Company-owned stores
and  magazine  stands,  supermarkets  and  specialty  stores in the Region.  The
Company owns 45 stores located throughout the Region,  with 35 stores located in
Area 7 and 10 stores  located in Area 8. This  network  enables  the  Company to
market its service and provide aftersales services to subscribers throughout the
Region.

      The Company maintains contracts with independent distributors, who receive
a  commission  per new  subscriber.  The  level of  commission  varies  based on
exclusivity and the distributor's sales performance.

NETWORK AND SUBSCRIBER DATA

      The following  table sets forth  information  on the Company's  subscriber
base, coverage and related matters at the dates and for the years indicated.

<TABLE>
<CAPTION>
                                                      1997      1998      1999
                                                    --------  --------  --------
<S>                                                 <C>       <C>       <C>
Cellular lines in service at year-end <F1>........   373,510   538,814  851,376
Subscriber growth during year <F1>................     25.0%     44.3%    58.0%
Estimated population of Region at year-end
(millions)<F2>....................................      13.5      13.7     28.6
Percentage of population of Region covered at
year-end <F3>.....................................     75.9%     77.8%    82.0%
Penetration at year-end <F4>......................      2.8%      3.8%    5.79%
Percentage of area of Region covered at
year-end <F5>.....................................       41%       45%      49%
Average monthly incoming minutes of use per
subscriber during year............................     124.8     116.3    145.3
Average monthly outgoing minutes of use per
subscriber during year............................     117.8     109.7    100.9
Average monthly revenues per subscriber during
year <F6>.........................................  R$126.35  R$108.93  R$81.36

------------
<FN>
<F1>
      These  numbers  have  been  updated  to  account  for both  Areas 7 and 8,
      including rural service.  In 1998, there were 17,900 rural cellular lines.
      In 1999, there were 16,689 rural cellular lines.
<F2>
      IBGE estimates.
<F3>
      Management estimates of the percentage of population of the Region who can
      access the Company's cellular telephone signal. These numbers pertain only
      to Area 7.
<F4>
      Number of  cellular  lines in  service  divided by the  population  of the
      Region. These numbers pertain only to Area 7.
<F5>
      These numbers pertain only to Area 7.
<F6>
      Net operating revenue divided by the average number of subscribers divided
      by  12,  expressed  in  constant  REAIS  of  December,  31  1999,  net  of
      value-added taxes.
</FN>
</TABLE>
<PAGE>

      The Concessions  contain  certain network  coverage and quality of service
obligations.  See below  "Description of  Business--Regulation  of the Brazilian
Telecommunications  Industry--Obligations of Telecommunications  Companies." The
Company's  management  believes  that the Company  will be able to meet all such
obligations.

SOURCES OF REVENUE

      The Company generates revenue from (i) activation fees, which are one-time
charges paid to obtain cellular  telecommunications service, (ii) usage charges,
which include  measured service charges for outgoing calls and roaming and other
similar charges, (iii) monthly subscription charges, (iv) network usage charges,
which are  amounts  charged by the  Company  to other  cellular  and  fixed-line
service  providers for use of the Company's  network,  (v) prepaid handset sales
and (vi) other charges, including charges for call forwarding,  call waiting and
call  blocking.  The Company's  rates are subject to  regulation by ANATEL.  See
below "Description of Business--Regulation  of the Brazilian  Telecommunications
Industry."

   SUBSCRIBER RATES

      Since October 1994, cellular  telecommunications service in Brazil, unlike
in North America,  has been offered on a "calling party pays" basis, under which
the subscriber  pays only for calls that he or she  originates  (in addition,  a
subscriber  pays  roaming  charges  on calls  received,  as well as those  made,
outside his or her home registration area).

      The Region is divided  into 92 tariff  areas,  with 81 in Area 7 and 11 in
Area 8. The lowest base rate ("VC1")  applies to calls made by a subscriber in a
tariff area to a line in the same tariff area. Charges for calls from one tariff
area to another  within the Region are assessed at a higher rate ("VC2").  Calls
from the Region to persons  outside  the Region are billed at the  highest  rate
("VC3").  When a subscriber makes or receives a call while outside the Region, a
per-call  surcharge  known as "AD" is applicable.  When a subscriber  receives a
call outside the home registration area, the subscriber also pays a certain rate
per minute if the subscriber is located within the Region ("DSL1"),  or a higher
rate if the subscriber is located outside the Region ("DSL2").  Measured service
charges are  discounted  30% for calls made  between 9:00 p.m. and 7:00 a.m. any
day or at any time on Sundays and national holidays  ("off-peak  calls").  A 30%
surcharge  is imposed  on VC1 calls  from one  cellular  telephone  to  another,
compared to calls from a cellular telephone to a fixed-line telephone.

      The  following  table sets forth the average  rates for the Basic  Service
Plan for each year in the three-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                             ------------------------------
                                              1997        1998        1999
                                             ------      ------      ------
                                                      (REAIS) <F1>
<S>                                          <C>         <C>         <C>
Activation fee <F2>......................    330.00      151.63      151.63
Monthly subscription fee <F2>............     25.00       20.20       20.20
Per-minute charges:
  VC1 <F2><F3>...........................      0.27        0.27        0.27
  VC2 <F3>...............................      0.58        0.40        0.40
  VC3 <F3>...............................      0.66        0.66        0.66
  DSL1 <F3>..............................      0.29        0.19        0.19
  DSL2 <F3>..............................      0.33        0.33        0.33
AD (per call)<F3>........................      0.55        0.29        0.29

------------
<FN>
<F1>
      Information  for 1997 is presented in constant REAIS of December 31, 1997.
      Information for 1998 and 1999 is presented in nominal REAIS.
<F2>
      Averages of the rates charged by the  Subsidiaries,  weighted by number of
      subscribers.
<F3>
      Weighted AVERAGE peak rates, net of value-added taxes.
</FN>
</TABLE>
<PAGE>

      The following  table sets forth  certain  terms of the  Company's  service
plans, which were implemented as of February 2000.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
| AREA 7 PLANS       |           BASIC          |           240            |           500            |
|--------------------|--------------------------------------------------------------------------------|
|   STATES           | DF,GO, |   AC   |   MT   | DF,GO, |   AC   |  MT    | DF,GO, |   AC   |   MT   |
|                    | MS,RO  |        |        | MS,RO  |        |        | MS, RO |        |        |
|--------------------|--------------------------------------------------------------------------------|
| <S>                | <C>      <C>      <C>    | <C>      <C>      <C>    | <C>      <C>      <C>    |
| EXEMPT MINUTES     |             0            |           240            |            500           |
|--------------------|--------------------------------------------------------------------------------|
| RESIDENCES<F1><F2> |          162.00          |          162.00          |          162.00          |
|--------------------|--------------------------------------------------------------------------------|
| SUBSCRIPTIONS<F1>  |  31.00 |  27.91 |  33.29 |  79.00 |  79.00 |  79.00 | 139.00 | 139.00 | 139.00 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  VC1 MF<F1><F3>    | 0.4236 | 0.3809 | 0.4556 | 0.4204 | 0.3780 | 0.4521 | 0.4204 | 0.3780 | 0.4521 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  VC1 MM<F1><F4>    | 0.5507 | 0.4952 | 0.5922 | 0.5466 | 0.4914 | 0.5877 | 0.5466 | 0.4914 | 0.5877 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|    VC2 <F1>        | 0.5700 | 0.4870 | 0.6114 | 0.5700 | 0.4870 | 0.6114 | 0.5700 | 0.4870 | 0.6114 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|    VC3 <F1>        | 1.0355 | 0.8865 | 1.1136 | 1.0231 | 0.8758 | 1.1002 | 1.0231 | 0.8758 | 1.1002 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   DSL1 <F1>        | 0.3081 | 0.2651 | 0.3305 | 0.3081 | 0.2651 | 0.3305 | 0.3081 | 0.2651 | 0.3305 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   DSL2 <F1>        | 0.5121 | 0.4398 | 0.5500 | 0.5045 | 0.4319 | 0.5425 | 0.5045 | 0.4319 | 0.5425 |
|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|    AD <F1>         |   0.40 |   0.36 |   0.42 |   0.40 |   0.36 |   0.42 |   0.40 |   0.36 |   0.42 |
-------------------------------------------------------------------------------------------------------

<FN>
<F1>
    Amounts are expressed in nominal REAIS.
<F2>
    Rates not charged during promotions.
<F3>
    "MF" means "mobile fixed."
<F4>
    "MM" means "mobile mobile."

</FN>
</TABLE>

The "240" and "500"  Plans were  developed  for high volume  subscribers.  These
plans  include  a  number  of  exempt  minutes  for VC1  calls  to a  fixed-line
telephone.

<PAGE>

Aside from its Basic Service Plan,  NBT has  implemented  other service plans in
Area 8. NBT's service plan rates are set out in the following table:

<TABLE>
<CAPTION>

------------------------------------------------------------------
|    AREA 8 PLANS    | BASIC | ECONOMIC |  100  |  200  |   500  |
|--------------------|-------|----------|-------|-------|--------|
| <S>                | <C>   |  <C>     | <C>   |  <C>  | <C>    |
|   EXEMPT MINUTES   |   0   |    0     |  100  |  200  |   500  |
|--------------------|-------|----------|-------|-------|--------|
|   RESIDENCES <F1>  | 41.51 |   0.00   |  0.00 |  0.00 |   0.00 |
|--------------------|-------|----------|-------|-------|--------|
| SUBSCRIPTIONS <F1> | 30.83 |  27.00   | 54.00 | 80.00 | 150.00 |
|--------------------|-------|----------|-------|-------|--------|
|  VC1 MF <F1><F2>   |  0.36 |   0.32   |  0.31 |  0.29 |   0.22 |
|--------------------|-------|----------|-------|-------|--------|
|  VC1 MM <F1><F3>   |  0.46 |   0.42   |  0.31 |  0.29 |   0.22 |
|--------------------|-------|----------|-------|-------|--------|
|  VC1 MM (OTHER     |       |          |       |       |        |
|   OPER.) <F1><F3>  |  0.46 |   0.42   |  0.42 |  0.42 |   0.42 |
|--------------------|-------|----------|-------|-------|--------|
|     VC2 <F1>       |  0.71 |   0.71   |  0.71 |  0.71 |   0.71 |
|--------------------|-------|----------|-------|-------|--------|
|     VC3 <F1>       |  0.81 |   0.81   |  0.81 |  0.81 |   0.81 |
|--------------------|-------|----------|-------|-------|--------|
|     DSL1 <F1>      |  0.36 |   0.36   |  0.36 |  0.36 |   0.36 |
|--------------------|-------|----------|-------|-------|--------|
|     DSL2 <F1>      |  0.40 |   0.40   |  0.40 |  0.40 |   0.40 |
|--------------------|-------|----------|-------|-------|--------|
|      AD <F1>       |  0.57 |   0.57   |  0.57 |  0.57 |   0.57 |
------------------------------------------------------------------

<FN>
<F1>
      Amounts are expressed in nominal REAIS.
<F2>
      "MF" means "mobile fixed."
<F3>
      "MM" means "mobile mobile."

</FN>
</TABLE>

Prepaid  service rates are charged by the  Subsidiaries  in accordance  with the
following schedule:

<TABLE>
<CAPTION>

  TYPE OF RATE                TYPE OF CALL               SCHEDULE (1)    RATE (2)
  ------------                ------------               ------------    --------
   <S>            <C>                                       <C>          <C>
   VC1 or VC2     From Toque  Celular to any  cellular      Normal       R$ 0.97
                  or fixed-line telephone in Area 7.
   VC1 or VC2     From Toque  Celular to any cellular       Special      R$ 0.48
                  or fixed-line telephone in Area 7.
   VC1 or VC2     From Toque  Celular to any Company          24h        R$ 0.48
                  cellular telephone on any day, and
                  any  local  call on  Sundays
                  and national holidays.
      VC3         From Toque  Celular to any cellular         24h        R$ 1.90
                  or  fixed-line telephone outside
                  of Area 7.
</TABLE>


<TABLE>
<CAPTION>

          TYPE OF SERVICE                                            RATE (3)
          ---------------                                            --------

<S>                                                                   <C>
Voicemail/Answering Service                                           R$ 0.39

Confirmation of Provision of Service                                  R$ 5.00

Surcharge for obtaining balance information more than twice daily     R$ 0.20

</TABLE>

(1) The  Special  Schedule  is  available  in the  Federal  District,  Goias and
Tocantins  from 9:00 p.m. to 9:00 am; in Mato Grosso and Mato Grosso do Sul from
8:00 p.m.  to 8:00 am; in  Rondonia  from 7:00 p.m. to 7:00 am; and in Acre from
6:00 p.m. to 6:00 am.

(2) All amounts in reais,  inclusive of taxes, charged per minute for calls made
by the cellular telephone inside the caller's tariff area.

<PAGE>

   ROAMING FEES

      The Company also  receives  revenue  pursuant to roaming  agreements  with
other cellular service providers.  See below "Description of Business--Operating
Agreements--Roaming Agreements." When a call is made from within the Region by a
subscriber of another cellular service provider,  that service provider pays the
Company  for  the  call  at the  applicable  rate.  Conversely,  when a  Company
subscriber  makes a cellular  call outside the Region,  the Company must pay the
charges  associated  with that call to the  cellular  service  provider in whose
region the call originates.

   NETWORK USAGE CHARGES

      Pursuant  to  interconnection  agreements  with  other  telecommunications
providers,  the Company earns  revenues from any call  (cellular or  fixed-line)
originating with another cellular or fixed-line service provider and terminating
on  a  cellular   telephone  within  the  Region.   See  below  "Description  of
Business--Operating Agreements--Interconnection Agreements." The Company charges
the service  provider  from whose  network the call  originates a network  usage
charge for each  minute the  Company's  network is used in  connection  with the
call.  The average  network usage tariff charged by the Company to other service
providers in 1997 and 1998 was R$0.17, R$0.19 per minute,  respectively,  net of
value-added taxes. Through October of 1999, the network usage tariff was R$0.19.
As of November, 1999, Anatel granted an increase of 14.7%, increasing the tariff
to R$0.2180.

   TAXES ON TELECOMMUNICATIONS SERVICES

      The cost of  telecommunications  services  to the  subscriber  includes  a
variety of taxes.  The average rate of all such taxes,  as a percentage of gross
operating  revenues  for the  Company,  was  approximately  22.1% in  1999.  The
principal  tax is a state  value-added  tax,  the IMPOSTO  SOBRE  CIRCULACAO  DE
MERCADORIAS  E SERVICOS  (the  "ICMS"),  which the  Brazilian  states  impose at
varying  rates on certain  revenues  from the  provision  of  telecommunications
services.  The  ICMS  rate in  each  state  in the  Region  is 25% for  domestic
telecommunications  services,  except in the  State of Acre,  where the rate for
domestic  telecommunications  services is 17% for  intrastate  calls and 13% for
interstate calls, and in the State of Mato Grosso, where the ICMS rate is 30%.

      Other  taxes  on gross  operating  revenues  include  two  federal  social
contribution   taxes,  the  PROGRAMA  DE  INTEGRACAO   SOCIAL  ("PIS")  and  the
CONTRIBUICAO  PARA  FINANCIAMENTO DA SEGURIDADE  SOCIAL  ("COFINS"),  imposed on
certain  telecommunications  services  at a  combined  rate of  3.65%  of  gross
revenues.

      In June 1998, the governments of the individual  Brazilian states approved
an agreement to interpret existing Brazilian tax law to apply the ICMS effective
July 1, 1998 to certain services,  including cellular  activation,  to which the
ICMS had not previously been applied.  The agreement also provides that the ICMS
may be  applied  retroactively  to  services  rendered  during  the  five  years
preceding June 30, 1998. See below "Legal Proceedings--Litigation Related to the
Application of the ICMS."

BILLING AND COLLECTION

      The  Company's  billing  system has four main  functions:  (i)  subscriber
registration,  (ii) subscriber  information  management,  (iii) accounts payable
management  and (iv)  billing  and  collection.  To  facilitate  the billing and
collection processes,  Telebrasilia uses six staggered billing cycles per month,
Teleacre uses three billing cycles per month, and the remaining Subsidiaries use
one billing cycle per month.

      The Company  allows  subscribers at least 15 days from the due date before
suspending  service for  nonpayment.  The Company's  management  estimates  that
approximately 50% (by value) of its invoices are paid on or before the due date.
If a  subscriber's  payment  is more  than  15 days  past  due,  service  may be
suspended until full payment for all outstanding  charges is received.  After 60
days  delinquency,  the  subscriber  is referred to a  collection  agency.  If a
subscriber's payment is more than 90 days past due, service may be discontinued.
The Company's provisions for doubtful accounts were 5.5%, 6.6% and 7.4% of gross
operating revenues in 1997, 1998 and 1999, respectively. See below "Management's

<PAGE>

Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Results  of Operations for the years ended  December 31, 1997,  1998
and  1999--Operating  Expenses--Selling  Expenses."  Until  November  1999,  the
collection of accounts past due over 60 days was contracted to third parties. As
of November  1999,  the Company has effected the  collection of its own accounts
and hopes to reduce the  delinquency  rate of its  subscribers.  For subscribers
whose service is canceled due to over 90 days delinquency,  the Company offers a
20% discount for installment payments,  and a 30% discount for cash payments, of
amounts due.

      The Company receives  roaming fees from other cellular  service  providers
when their  subscribers  make cellular  calls while within the Region,  and pays
roaming fees to other  cellular  service  providers  when its  subscribers  make
cellular  calls  while  outside  of  the  Region.   See  above  "Description  of
Business--Sources of Revenue--Roaming  Fees." The Company receives network usage
fees from  other  service  providers  when  their  subscribers  make  calls that
terminate  on a cellular  telephone  within the  Region,  and the  Company  pays
network usage fees when its subscribers make calls that terminate on the network
of another service  provider.  See above  "Description of  Business--Sources  of
Revenue--Network  Usage  Charges."  After  each  collection  cycle is over,  the
Company and the other service providers  reconcile the amounts owed between them
and settle on a net basis. For  international and domestic  long-distance  calls
made by its  subscribers,  the Company  forwards the amount  collected  for such
calls  to  EMBRATEL  and  charges  EMBRATEL  a fee for  the use of its  cellular
telecommunications network.

NETWORK

      As of December 31, 1999, the Company's cellular telecommunications network
covered  approximately  49%  and  1.6%  of  the  area  of  Area  7 and  Area  8,
respectively,  and  82%  and  35% of  the  population  of  Area  7 and  Area  8,
respectively.  The Company  continues to expand its cellular  telecommunications
network to cover as broad a  geographical  area as is  economically  feasible in
order to meet consumer demand.  Under the  Concessions,  the Company has certain
obligations   concerning   network   coverage.   See   below   "Description   of
Business--Regulation of the Brazilian  Telecommunications  Industry--Obligations
of Telecommunications  Companies." At present, the Company is in compliance with
its  network   coverage   obligations   and  has  met  or  exceeded  all  ANATEL
requirements.

      As of December 31, 1999, the Company's cellular telecommunications network
in Area 7 consisted of 12 cellular switches,  537 base stations and 27,879 voice
channels  and one  national  and two regional  signaling  transfer  points.  The
Company's six Nortel  DMS-MTX and five Ericsson AXE 10 switches are  distributed
among its switching  centers,  which are located in Brasilia,  Goiania,  Palmas,
Campo Grande, Cuiaba,  Rondonopolis,  Porto Velho and Rio Branco. The network is
connected primarily by a fiber-optic  transmission system leased from fixed-line
service providers in the Region. Nortel and Ericsson are the Company's principal
suppliers of cellular telecommunications equipment.

      On October 7, 1999, NBT commenced  providing cellular telephone  services,
using the  Nortel  DMS-MTX  cellular  platform  throughout  its  network.  As of
December 31, 1999, NBT had seven cellular switches in Manaus,  Belem, Boa Vista,
Sao Luiz, Macapa, Santarem and Imperatriz and 58 base stations.

      The Company  continues to increase the capacity and improve the quality of
its cellular telecommunications network by building new base stations and adding
channels to existing base stations.  This development is carried out in response
to projected subscriber demand and international  quality standards for cellular
telecommunications  service. The Company's management believes that its cellular
telecommunications  network will require further development to continue to meet
the demand for cellular  telecommunications services in the states' capitals and
their surrounding metropolitan areas.

      Digitalization  represents one of the Company's key strategic initiatives.
Until 1997, the Company supplied only an AMPS analog cellular telecommunications
service.  During 1998, the Company began to supply digital  service based on the
TDMA standard in the Federal District,  Rondonia,  Mato Grosso do Sul, Goias and
Mato  Grosso  and, in  September  1999,  in Acre and  Tocantins.  The  Company's
management  believes that digitalization  offers certain  advantages,  including
greater  network  capacity,  reduced  operating  costs and  additional  revenues
through the sale of value-added  services.  Digital cellular  telecommunications
services also offer subscribers greater security.

<PAGE>

      Besides increasing the number of cellular  platforms,  in 1999 the Company
installed  voicemail and prepaid  platforms in the Region. As of March 13, 2000,
the Company made available a short message service  ("SMS") to its  subscribers,
named  e-celular.  SMS allows  subscribers  using digital  cellular  handsets to
receive and read messages  directly on the screen of their handset.  The Company
activated  in 2000 a platform for SMS,  based in  Brasilia,  to cover the entire
Region, including Area 8.

FRAUD DETECTION AND PREVENTION

      The  two  principal  types  of  fraud   encountered  by  the  Company  are
subscription  fraud and cloning fraud.  Subscription fraud occurs when a person,
typically  using a  fictitious  identification  and  address,  obtains  cellular
telecommunications  service with no intention of paying for the service and then
incurs  substantial  charges  before the  cellular  service  provider is able to
identify the fraud and terminate  service.  Such fraud is detected  prior to the
invoicing  of charged  services by means of analysis of the use of the  cellular
line and of  information  on the  subscriber  on file with the  Company and with
collection agencies.  However,  controlling this type of fraud is made difficult
by virtue of ANATEL's  application of Rule 05/78, which prohibits the suspension
of service prior to an account being 15 days past due. As a result, subscription
fraud constitutes one of the most significant problems for cellular companies in
Brazil.

      Cloning fraud consists of duplicating  the cellular  signal of a BONA FIDE
subscriber,  enabling the perpetrator of the fraud to make telephone calls using
the subscriber's signal. The MIN (user identification number) and ESN (equipment
serial number) of the subscriber are captured by the cloner through the use of a
radio  scanner.  Such calls are billed to the  subscriber  but the receivable is
written off when the Company discovers that it arose from a fraudulent call. The
Company's fraud control section can detect the clone and, as of the first cloned
call,  suspend  service  immediately.  The  subscriber  is then informed and his
invoices are scrutinized monthly. Currently,  cloning fraud is under control due
to  preventative  measures  taken by the Company such as blocking  international
calls  (service is provided only pursuant to the  subscriber's  request) and the
creation  of a 24 hour fraud  control  center,  consisting  of 17  analysts  and
utilizing the Integrated  Fraud Detection and Control System ("SAF").  SAF began
functioning on July 14, 1998 and is linked to a national network. SAF allows the
detection,  analysis and control of abnormalities of cellular service usage that
may indicate fraud throughout the national territory and almost in real time.

QUALITY OF SERVICE

      In the past, the Company's cellular telecommunications network was subject
to occasional  congestion in certain areas,  primarily the Brasilia metropolitan
area.  Congestion  can result in the  inability to make calls and the  premature
termination  of  calls.   The  Company's   service  problems  were  worsened  by
government-imposed constraints on the Company's capital expenditure budget until
July 1998, which prevented the Company from increasing  network capacity to meet
demand for cellular telecommunications service in parts of the Region. See below
"Description  of  Business--Capital  Expenditures."  Following the Breakup,  the
Company  was  no  longer  subject  to  government  imposed  capital  expenditure
constraints,  which allowed for increased  investment in the Company's  cellular
telecommunications network.

      Network  congestion in the concession  areas of  Telebrasilia  Celular and
Teleacre  Celular in the past limited the  Company's  ability to meet demand for
cellular  telecommunications  services  and  resulted in the creation of waiting
lists to obtain such services. However, by November 1998 the congestion problems
had been resolved and the Company had eliminated all waiting lists.

COMPETITION

      The  General  Telecommunications  Law  provides  for the  introduction  of
competition in telecommunications services in Brazil. The Federal Government has
granted ten licenses to private companies (each a "Band B Service  Provider") to
provide cellular  telecommunications service within particular regions of Brazil
on a frequency  range  referred to as "Band B." The frequency  range used by the
cellular  service  providers  that  were  spun  off from  the  TELEBRAS  System,
including the Company (each a "Band A Service Provider") is referred to as "Band
A." Each Band B license covers a geographic  region which generally  corresponds

<PAGE>

to a Cellular  Region.  See below  "Description of  Business--Regulation  of the
Brazilian Telecommunications Industry--Concessions and Licenses."

   OTHER TELEPHONE AND WIRELESS SERVICES

      Brazilian  telecommunications  legislation leaves room for introduction of
even more competition in the wireless  telephone market.  See below "Description
of     Business--Regulation     of     the     Brazilian      Telecommunications
Industry--Concessions and Licenses." ANATEL has already announced its intentions
to grant  licenses to mobile  telephone  service  providers to provide  Personal
Communications  Services  ("PCS") in the 1.8 GHz frequency  range,  allowing the
introduction  of a  third  competitor  to  the  incumbent  Band  A and  recently
established  Band B, operating in each of the areas of the Region.  According to
recent ANATEL  declarations,  criteria are expected to be determined  during the
month of July,  2000, and licenses will be granted by the end of 2000, but there
are no assurances that this schedule will be met.

   BAND B COMPETITION IN AREA 7

      A license to provide  cellular  telecommunications  services  in Area 7 on
Band B has been  granted to  Americel,  S.A.  ("Americel"),  whose  shareholders
include Bell Canada  International BVI-V Ltda. (20%),  Telesystem  International
Wireless (Brazil), Inc. (20%) and various Brazilian pension funds. Americel paid
R$338.5  million for the license.  Americel  began to provide  digital  cellular
telecommunications  service based exclusively on the TDMA standard in the Region
in  November  1997.  Americel  does not provide  analog  services in the Region.
Americel's rights and obligations under its license are substantially  identical
to the  Company's  rights  and  obligations  under the  Concessions.  Americel's
subscribers  use dual-mode  AMPS and TDMA standard  handsets in order to roam in
areas where digital service is not yet available.

      The Company's management estimates that, as of December 31, 1999, Americel
had approximately 20% of the market, covering principally the state capitals and
surrounding metropolitan areas.

      The Company also competes with  fixed-line  telephone  service  providers.
Certain of the  Company's  existing  and  potential  subscribers  might shift to
fixed-line service providers for a number of reasons, including price, if enough
capital were invested in the fixed-line telephone industry in Area 7 to increase
fixed-line density and improve service.  The fixed-line service provider in Area
7 is Tele Centro Sul Celular Participacoes S.A. ("Tele Centro Sul"). To increase
competition  and  improve the quality of  service,  the Federal  Government  has
granted concessions to other "mirror companies" to provide fixed-line  services.
On September  30, 1999,  the Federal  Government  granted a concession to Global
Village Telecom, S.A. to provide fixed-line  telecommunications  services in the
same  concession  area as Tele Centro  Sul.  Global  Village  Telecom  S.A.  has
undertaken to install 240,000 fixed-line  telephones in 2000 and to this end has
invested   approximately   R$100,000,000.   The  concession   includes  a  broad
authorization  to use fixed  wireless  solutions to attain rapid  deployment  of
fixed-lines to subscribers.

   BAND A COMPETITION IN AREA 8

      In Area 8, the Band B Subsidiary  competes with the  subsidiaries  of Tele
Norte Celular  Participacoes S.A., whose commercial name is Amazonia Celular and
whose shareholders  include Telesystem  International  Wireless (Brasil),  Inc.,
Banco  Opportunity  S.A. and Brazilian  pension funds.  As of December 31, 1999,
Amazonia  Celular's  subsidiaries had  approximately  344,000  subscribers and a
penetration  rate of 2.4 subscribers per 100  inhabitants.  It provides  largely
AMPS service,  with TDMA service  launched only in September 1999. By the end of
1999, it had a 89.6% market share.

   OTHER COMPETITION

      Satellite services,  which provide nationwide  coverage,  are available in
Brazil.  Although satellite services have the benefit of covering a much greater

<PAGE>

area than  cellular  telecommunications  services,  they are  considerably  more
expensive than cellular  telecommunications services and do not offer comparable
coverage inside  buildings.  The Company does not plan to offer mobile satellite
services (other than pursuant to a roaming  arrangement with a satellite service
provider), although it may consider doing so in the future.

      There can be no assurance that the entry of new competitors  will not have
a  material  adverse  effect on the  Company's  business,  financial  condition,
results of operations or prospects. Any adverse effects on the Company's results
and market share from competitive  pressures will depend on a variety of factors
that cannot now be assessed  with  precision  and that are beyond the  Company's
control. Among such factors are the identity of the competitors,  their business
strategies  and  capabilities,  prevailing  market  conditions at the time,  the
regulations  applicable to new entrants and the Company and the effectiveness of
the  Company's  efforts to prepare for  increased  competition.  One or more new
competitors may have technical or financial  resources greater than those of the
Company.

OPERATING AGREEMENTS

   INTERCONNECTION AGREEMENTS

      In order to facilitate telecommunications between cellular telephone users
and fixed-line  telephone users, as well as among cellular  telephone users, the
Subsidiaries  have  entered  into  interconnection  agreements  with  fixed-line
service providers. The fixed-line interconnection circuits ("EILD") consist of 2
MB bundles for the  interconnection  of the  cellular  network with the Switched
Fixed Telephone System ("STFC") and for interconnection  among cellular networks
(e.g. between base stations and distribution and control stations).

      The  Subsidiaries  have entered into an EILD service  contract  (the "EILD
Contract") with companies that are part of fixed-line or long distance networks.
The EILD  Contract  is  essential  to the  Subsidiaries'  capability  to provide
telecommunications between cellular and fixed-line users, since the Subsidiaries
own few interconnection circuits of their own.

      In  consideration  for  the  use of the  interconnection  circuits  of the
fixed-line  network,  pursuant to the EILD Contract,  the  Subsidiaries  paid an
aggregate amount of R$25.4 million in 1999.

   ROAMING AGREEMENTS

      Agreements  for  automatic  roaming have been entered into as of March 25,
1998 for terms of 3 years with all the other Band A Service  Providers  and with
all Band B Service  Providers  other than  Americel,  with which the  Company is
prohibited from entering into such an agreement pursuant to ANATEL  regulations.
The roaming  agreements  automatically  renew for further  one-year  terms.  The
agreements permit the Company's  subscribers to use their cellular telephones on
the networks of other cellular  service  providers  while traveling or "roaming"
outside the  Region.  Conversely,  the  Company is required to provide  cellular
telecommunications  service to subscribers of those cellular  service  providers
when those subscribers are within the Region. The agreements require the Company
and  the  other  cellular  service  providers  to  provide  service  to  roaming
subscribers on the same basis as they provide  service to their own  subscribers
and to carry out a monthly  reconciliation of roaming  subscriber usage charges.
Each  company  that  participates  in  the  Finalization  Network  for  National
Automatic  Roaming  pays a  monthly  fee equal to R$0.10  per  cellular  line in
service and  R$50.00  per 1,000 calls  (originated  or  received)  that  involve
roaming.

      The Subsidiaries have also entered into  international  roaming agreements
with  foreign  carriers  that permit  their  subscribers  to use their  cellular
telephones in Argentina  and Uruguay and  subscribers  of those  carriers to use
their  cellular  telephones  in the  Region.  The  terms of these  international
roaming   agreements   vary  from  agreement  to  agreement.   The  Company  has
international   roaming   agreements  with  Gateway   Providers  to  permit  its
subscribers  to have roaming  services in North  America,  Europe,  Asia,  South
Africa and Australia.

EMPLOYEES

      As of December 31, 1999,  the Company had a total 1,705  employees  (1,084
full-time,  238  trainees  and 383  contract),  of whom  approximately  12% were

<PAGE>

employed in technical or operational  positions,  64% in sales, customer service
and  marketing  and  24%  in  computing,  finance  and  administrative  support.
Approximately  29% of all full-time  employees are members of state labor unions
associated   with  either  the   Federacao   Nacional   dos   Trabalhadores   em
Telecomunicacoes  - Fenattel  ("Fenattel")  or the Federacao  Interestadual  dos
Trabalhadores  em   Telecomunicacoes  -  Fittel   ("Fittel").   The  process  of
negotiating the collective  bargaining  agreement for 1999/2000 was professional
and resulted in the  overwhelming  approval by the  employees  of the  Company's
proposals.

      The Company's  management  considers the relations of the Company with its
work force to be satisfactory.  Neither the Company nor any Predecessor  Company
has experienced a work stoppage that had a material effect on its operations.

      The Band A Subsidiaries  participate in a pension fund,  FUNDACAO TELEBRAS
DE SEGURIDADE SOCIAL - SISTEL ("SISTEL"),  the purpose of which is to supplement
government-provided  retirement  benefits.  SISTEL is a  multi-employer  defined
benefit plan that covers the former  employees of the TELEBRAS  System,  and the
Band A Subsidiaries are contingently liable for all of the unfunded  obligations
of the  plan.  The Band A  Subsidiaries  make  monthly  contributions  to SISTEL
currently  equal to 13.5% of the salary of each employee who is a SISTEL member.
Each employee  member also makes a monthly  contribution  to SISTEL based on age
and salary.  Members of SISTEL qualify for full pension  benefits after reaching
age 57, provided they have been members of SISTEL for at least ten uninterrupted
years and have been  affiliated  with the social security system for at least 35
years.  SISTEL  operates  independently  from the  Company,  and its  assets and
liabilities  are fully  segregated  from those of the Company.  Employees of the
Band A Subsidiaries at the time of the  privatization  had the right to maintain
their  rights and  benefits in SISTEL in  accordance  with the terms in place at
that time.  See Note 24 to the  Consolidated  Financial  Statements.  In January
2000, SISTEL's assets were segregated by its contributors,  and various benefits
plans were  developed,  including  a plan by the Company on behalf of the Band A
Subsidiaries.  A new benefits plan is currently being elaborated,  which will be
based on a contribution  concept,  as opposed to a benefits concept.  The launch
date is set for June 2000, at which time the Company's affiliates as well as new
participants will switch to the plan.

      A Duties and  Salaries  Plan is being  finalized  by the  consulting  firm
William Mercer. Its  implementation is in July 2000.  Associated with the Duties
and Salaries Plan will be a Variable Remuneration Program, with a view towards a
new approach to compensation.

      There  are no  labor-related  circumstances  on the  part  of the  Holding
Company or relevant  circumstances  on the part of the Company that would affect
the results stated herein.

      The  Subsidiaries  contract  with third  parties for cleaning and security
services, as well as for receptionist services.

RESEARCH AND DEVELOPMENT

      In connection  with the Breakup,  the Company was required to enter into a
three-year  contract  effective  as of August 1998 with the  Fundacao  Centro de
Pesquisa e Desenvolvimento em Telecomunicacoes  ("CPqD") under which the Company
is obligated to  contribute  R$1.8 million to CPqD during the three years ending
August 2001.  During the  effectiveness  of its agreement with CPqD, the Company
has access to equipment  testing and consulting and training  services,  and the
Company has  commissioned  CPqD to perform a number of research and  development
projects for the Company.  Prior to the Breakup,  a share of a contribution made
to CPqD by the  Predecessor  Companies was allocated in the Company based on the
number of its  licenses  in  service.  The Company  depends  primarily  upon the
manufacturers of telecommunications products for the development of new hardware
and does not conduct any independent research.

CAPITAL EXPENDITURES

      Prior to privatization,  the Company's  capital  expenditures were made as
part of system wide planning and allocation of capital expenditures by TELEBRAS,
which were subject to approval by the Federal  Government.  These constraints on

<PAGE>

capital expenditures  prevented the Company from making certain investments that
otherwise would have been made to improve cellular telecommunications service in
the Region.  Since the  privatization of TELEBRAS,  these  restrictions have not
applied.  The Company is now permitted to determine its own capital  expenditure
budget, subject to its obligations under the Concessions to meet certain network
coverage obligations and quality of service standards. See below "Description of
Business--Regulation of the Brazilian  Telecommunications  Industry--Obligations
of Telecommunications Companies."

      The Company's capital  expenditure  priorities  include increasing network
capacity,  improving  overall quality and increasing the level of digitalization
of the Company's network.

      The following table sets forth the Company's capital expenditures for each
year in the three-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                   1997      1998       1999
                                                  ------    ------     ------
                                                    (MILLIONS OF REAIS) <F1>
<S>                                                 <C>       <C>        <C>
Automatic switching equipment..................     11.0      28.5       41.4
Other equipment................................     71.3      98.6      123.5
Real estate....................................      6.4       1.6        0.5
Other assets <F2>..............................      8.6      18.2       16.7
                                                     ---      ----       ----
   Total capital expenditures..................     97.3     146.5      182.0
                                                    ====     =====      =====


------------
<FN>
<F1>
      Information is presented in constant REAIS of December 31, 1999.
<F2>
      "Other Assets" does not include  expenditures  for  concessions for Area 8
      (R$60.5 millions in 1999 and R$36.4 millions in 1998).
</FN>
</TABLE>

REGULATION OF THE BRAZILIAN TELECOMMUNICATIONS INDUSTRY

   GENERAL

      The Company's business,  including services provided and rates charged, is
subject to  comprehensive  regulation under the General  Telecommunications  Law
(Federal Law n(0)  9,472/97),  Federal Law n(0) 9,295/96,  also known as the LEI
MINIMA (the  "Minimum  Law"),  Federal  Decree n(0)  2,056/96  that  establisheS
general rules for cellular service (the "Cellular Service Rule") and a series of
administrative-level  regulations  enacted by the Ministry of Communications and
ANATEL,  among them ANATEL  Resolution n(0) 73, which sets the general ruleS for
telecommunications   services.   Each  of  the  Subsidiaries  operates  under  a
Concession  that  authorizes  it to  provide  cellular  services  and sets forth
certain obligations.

      ANATEL is the regulatory  agency for  telecommunications  in Brazil. It is
established by the General Telecommunications Law and operates under the October
1997 REGULAMENTO DA AGENCIA NACIONAL DE TELECOMUNICACOES  (the "ANATEL Decree").
ANATEL is a government  body governed by a separate  regulatory  scheme.  It has
administrative and financial  independence and is linked but not subordinated to
the Ministry of  Communications.  ANATEL has authority to issue legally  binding
regulations  to   telecommunications   service  providers.   Any  such  proposed
regulation is subject to a period of public  comment,  which may include  public
hearings.  Due to its independent  status,  decisions or regulations  enacted by
ANATEL are not subject to appeal to any other  government  body,  i.e.  they can
only  be  challenged  administratively  within  ANATEL  or  judicially.   ANATEL
directors have fixed tenures, which further strengthens its autonomy.

   CONCESSIONS AND LICENSES

      Concessions  and  licenses  to  provide  telecommunications  services  are
granted either under the public regime or the private  regime.  Only  fixed-line
concessionaires  are  currently  operating  under the  public  regime.  Services
provided  under the private  regime can be considered of collective  interest or
restricted  interest.  While public  services are subject to  requirements  that
arise  from the  General  Telecommunications  Law and the May 1998  Decree  that
establishes  the  GENERAL  FIXED-LINE  SERVICE   UNIVERSALIZATION  TARGET  PLAN,
collective  interest  private regime  services are only subject to  requirements

<PAGE>

imposed by ANATEL on the Concessions.  Restricted  interest private services are
subject  to  no  substantial   requirements,   other  than  in  connection  with
radio-frequency usage, when applicable.

      The  Subsidiaries  operate under the collective  interest  private regime,
being subject to a series of requirements imposed on the Concessions.  See below
"Description  of  Business--Regulation   of  the  Brazilian   Telecommunications
Industry--Obligations of Telecommunications Companies."

      Pursuant to the Minimum Law and the General  Telecommunications  Law,  the
Band A and  Band  B  Service  Providers  have  been  granted  Concessions.  Each
Concession   is   a   specific   grant   of   authority   to   supply   cellular
telecommunications  services,  subject to certain requirements  contained in the
applicable obligations provided for under each concession. If a cellular service
provider wishes to offer any telecommunications  service other than the cellular
service  authorized by its  concession,  it may apply to ANATEL for a license to
offer such other services.

      Each  Concession  has been  granted  for an  initial  period  of 15 years,
renewable for another 15 years if the obligations imposed on the Concession have
been met.

      Previously under the Concessions, Band A and Band B Service Providers were
guaranteed  that ANATEL  would not  authorize  additional  providers of cellular
telecommunications services until December 31, 1999. As this restriction has now
expired, the only limitation to the granting of licenses to new cellular service
providers  within the Region is in the  General  Telecommunications  Law,  which
provides that the number of  authorizations  issued  within a determined  region
will be limited  when (i) the entry of a new  service  provider  is  technically
impossible (e.g. lack of radio spectrum capacity) or (ii) the increase in number
of  competitors  would affect the  financial  soundness of the existing  service
providers.

   OBLIGATIONS OF TELECOMMUNICATIONS COMPANIES

      QUALITY OF SERVICE,  NETWORK  COVERAGE  AND  CUSTOMER  CARE.  All cellular
telecommunications  service  providers  are  subject to  obligations  concerning
quality of  service,  network  coverage  and  customer  care,  arising  from the
Concessions  or from  the  MEMORANDUM  OF  UNDERSTANDING  FOR  CELLULAR  SERVICE
PROVIDING  SUPERVISION  (the  "Service  Quality  Memorandum"),  entered into and
between the Subsidiaries and ANATEL in November 18, 1999.

      Under the  Concessions,  the  Company's  quality  of  service  obligations
require that:  (i) the cellular  network be fully  operational  98% of the time;
(ii) the rate of failed call  completion due to signal loss not exceed 3%; (iii)
the rate at which attempted  calls fail due to voice channel  congestion at peak
hours not exceed 5%; (iv) the drop rate for  connected  calls not exceed 3%; (v)
the cellular  network be available on first call  attempts 90% of the time;  and
(vi) the number of subscriber  complaints per month not exceed 5%. The Company's
network   coverage   obligations   require  the  Company  to  provide   cellular
telecommunications services to all municipalities in the Region with populations
greater than 100,000 by November 4, 1999 and to 70% of the municipalities in the
Region with populations  greater than 30,000 by November 4, 2002.  Customer care
obligations under the Concessions require activation to be effective,  depending
on the district or municipality,  within: (i) 180 business days of an activation
request  during  the  first  year of  operation;  (ii) 120  business  days of an
activation  request during the second year of operation;  (iii) 30 business days
of an activation  request  during the third year of operation;  (iv) 15 business
days of an  activation  request  during the forth year of  operation;  and (v) 5
business  days of an  activation  request  during  and after  the fifth  year of
operation.

      The Company is currently in compliance  with all quality and customer care
obligations  as defined by ANATEL and has met or exceeded  its network  coverage
obligations under the Concessions from 1998 to the present time. Failure to meet
these  obligations  may  result  in fines  and  penalties  of up to 0.05% of net
operating revenues per day until the Company complies with these obligations, as
well  as  potential  revocation  of  the  Concessions.  While  there  can  be no
assurances,  the Company's  management  believes that the Company will remain in
compliance with its obligations under the Concessions at all times.

      The  Service  Quality   Memorandum   provides  for  a  commitment  by  the
Subsidiaries  to employ  their best  efforts to achieve  the  following  service

<PAGE>

quality ratios by June 2001: (i) monthly rate of general  subscriber  complaints
less than  3.5%;  (ii)  monthly  rate of  subscriber  complaints  about  network
coverage plus complaints  about system's lack of capacity less than 1.5%;  (iii)
monthly  rate of completed  calls to customer  service  centers,  at peak hours,
greater  than  80%;  (iv)  monthly  rate  of  effectively  responded  subscriber
communications  greater  than 97%;  (v) monthly  rate of  subscribers  attending
customer  service  facilities  and being  assisted in 10 minutes or less greater
than 80%; (vi) number of bills with error  complaints per thousand  issued,  for
one-month  periods,  less  than  10;  (vii)  monthly  rate of  connected  calls,
originated  from Company's  subscribers at peak hours,  greater than 57%; (viii)
monthly  rate of calls  connected  in less than 15  seconds  during  peak  hours
greater that 85%; and (xiv)  monthly rate of dropped calls at peak hours smaller
than 3%. All cellular  service  providers must submit monthly reports  regarding
such rates to ANATEL. Whenever under-performance is unjustified and best efforts
to avoid the failure are not proven,  ANATEL can audit the  respective  cellular
service  provider.  If  auditing  results  point to  complete  disregard  by the
concessionaire  of its  obligations to provide  quality and continuous  cellular
service,  such service  provider may suffer  intervention by ANATEL and possible
license  revocation.  The  Subsidiaries  have met all the monthly targets so far
and, while there can be no assurances,  the Company's  management  believes that
the Company will keep achieving such targets at all times.

      INTERCONNECTION.  All telecommunications service providers are required to
provide   interconnection  upon  request  to  any  party  that  provides  public
telecommunications  services. The terms and conditions of interconnection are to
be freely  negotiated  between  parties,  subject to a price cap  established by
ANATEL. If a company offers any party an interconnection  tariff below the price
cap,   it  must  offer  that  tariff  to  any  other   requesting   party  on  a
nondiscriminatory basis.

      ANATEL  has  stated  that for the time being it does not expect to require
network service providers to permit co-location of equipment.  Co-location means
that a network operator  permits another party to place its switching  equipment
in or near the local  exchange  of the  network  operator  and to connect to the
network at this  location.  Co-location  is  currently a matter for  negotiation
between interested parties.

      ANATEL does not currently  require network  operators to unbundle  network
elements and  services,  although  ANATEL has stated that it plans to review the
issue on a  regular  basis  and may  require  unbundling  in the  future.  In an
unbundled  regime,  each network operator is required to provide a detailed list
of network  services and elements  which may be purchased  separately by a party
requesting interconnection.

   RATE REGULATION

      The Concessions  provide for a price-cap mechanism to set and adjust rates
on an annual basis.  The cap is a maximum weighted average price for a basket of
services.  The basket includes the services in the Basic Service Plan, including
monthly subscription fees, VC1 charges, VC2 charges, VC3 charges,  DSL1 charges,
DSL2 charges,  and AD charges,  as well as  interconnection  charges,  including
network  usage fees and charges to provide a physical  connection to the network
(INTERLIGACAO).

      The  initial  price cap  agreed  upon by  ANATEL  and the  Company  in the
Concessions is based on previously existing tariffs,  which were developed based
on the fully allocated  costs of the Company.  The initial price cap is adjusted
on an annual basis under a formula set forth in the  Concessions.  The price cap
is adjusted to reflect the rate of  inflation as measured by the INDICE GERAL DE
PRECOS,  DISPONIBILIDADE INTERNA ("IGP-DI"), an inflation index developed by the
FUNDACAO GETULIO VARGAS, a private Brazilian economic research organization.

      The  weighted  average  tariff for the entire  basket of services  may not
exceed the price cap, but the tariffs for individual  services within the basket
may be increased. The Company may increase the tariff for any individual service
by up to 20%,  subject to a downward  adjustment for inflation  effects  already
captured  in the annual  upward  adjustments  of the  overall  price cap for the
basket,  so long as it adjusts other prices downward to ensure that the weighted
average tariff does not exceed the price cap.

      Other  telecommunications  companies  wishing to interconnect with and use
the Company's network must pay certain fees,  primarily a network usage fee. The
network usage fee is a flat fee charged per minute of use,  which  represents an
average charge for a basket of network elements and services.  The network usage

<PAGE>

fee charged by Band A Service Providers is subject to a price cap set by ANATEL.
The price cap for the network  usage fee varies from company to company based on
the underlying cost  characteristics of each company's network.  For a breakdown
of the Company's past network usage charges,  see "--Sources of Revenue--Network
Usage Charges."

   ANCILLARY SERVICES, VALUE-ADDED SERVICES AND INTERNET REGULATION

      Under the recently  amended Norm 23/96,  cellular  service  providers  are
authorized to provide  ancillary  services to subscribers in connection with one
or more service plans. The Company currently offers its TDMA capable subscribers
the following value-added services: (i) caller identification;  (ii) voice mail;
(iii) call forwarding; (iv) call waiting; (v) three-way calling and (vi) SMS. On
June 15, 2000, ANATEL issued Resolution 226, amending Norm 23/96. Resolution 226
requires  all  cellular  service  providers  to offer  voicemail  service in all
service  plans,  defines  strict rules for billing  air-time in connection  with
voicemail  usage and authorizes the service  providers to provide and charge for
SMS in connection with one or more service plans. Before Resolution 226, SMS was
provided only under test  permission  and could not be charged.  Resolution  226
also  requires  cellular  service  providers  to  provide  detailed  billing  to
subscribers, which was formerly considered ancillary and charged for separately.
It also modifies  billing  criteria for short repetitive calls (3 to 30 seconds)
of the same origin and  destination,  provided that the delay between calls does
not exceed 120 seconds.

      Value-added services are not considered under Brazilian telecommunications
regulations  to be  telecommunications  services  per se, but rather an activity
that  adds  features  to  a  telecommunications   service  that  supports  them.
Regulations  oblige all  telecommunication  service  providers to grant  network
access  to  any  party  interested  in  providing  value-added  services,  on  a
non-discriminatory    basis,    unless    technical    impossibilities    arise.
Telecommunications  service  providers  are also  allowed to render  value-added
services  through their own network.  Internet access is considered by Brazilian
legislation as a value-added service, and its providers are not considered to be
telecommunication  companies. Current regulations allow the Company or any other
interested  party to offer Internet  connection  services  through the Company's
network.  While setting consumer pricing for its Internet  connection  services,
the Company must consider the costs charged to third  parties  offering  similar
services for the Company's  network usage.  ANATEL is expected to issue specific
regulations in the near future regarding the use of cellular networks to provide
Internet connection services.

BRAZILIAN POLITICAL ENVIRONMENT

      The  Brazilian  political   environment  was  marked  by  high  levels  of
uncertainty after the country returned to civilian rule in 1985, ending 20 years
of  military  government.  The  death  of a  President-elect  in  1985  and  the
resignation  of another  President in the midst of  impeachment  proceedings  in
1992, as well as rapid  turnover in the federal  government  at and  immediately
below the cabinet level,  adversely  affected the  implementation  of consistent
economic and monetary policies.

      Fernando  Henrique  Cardoso,  who  was  Finance  Minister  at the  time of
implementation of Brazil's latest economic stabilization plan (the "REAL Plan"),
was  elected  President  of Brazil in October  1994 and,  in October  1998,  was
reelected  for an  additional  four-year  term,  which  began in  January  1999.
President  Cardoso is the leader of a coalition  of six  political  parties that
represents a majority in the federal  Congress.  His party, the Brazilian Social
Democratic Party, holds the second largest number of seats in the coalition.

      1999 was marked by difficult  relations between the Federal Government and
certain state governments. In the 1998 elections for state governors, candidates
from parties allied with the President's coalition prevailed in 21 of 27 states,
including  the State of Sao  Paulo.  Opposition  candidates  won in six  states,
including  the States of Rio de Janeiro and Rio Grande do Sul. In January  1999,
the new  Governor of the State of Minas  Gerais  announced  that his state would
suspend payments on its debt to the Federal Government for 90 days. The Governor
of the State of Rio Grande do Sul subsequently obtained a court order permitting
his state to make its debt payments into an escrow account,  pending  resolution
of a request of seven  states to  renegotiate  refinancing  agreements  they had
reached with the Federal Government in 1997. The Federal Government responded by
seeking to withhold  constitutionally-mandated  transfers  to the State of Minas
Gerais.  The  Federal  Government  notified  certain   international   financial

<PAGE>

institutions  that it would no longer  guarantee  those states'  obligations  to
those  institutions,  leading  the World Bank to suspend  loans to the States of
Minas Gerais and Rio Grande do Sul.

      In February  1999,  state  governors  and  municipal  governments  began a
renegotiation  of their  respective  refinancing  agreements  with  the  Federal
Government in order to stabilize  state and municipal  cashflows.  By the end of
1999, all states and most municipalities had reached agreements with the Federal
Government for the refinancing of certain debt for a period of 30 years.

      Throughout  1999 and  during  the first few  months of 2000,  the  Federal
Government  succeeded in obtaining  important approvals for its long-term fiscal
reform program.  Its proposal for  comprehensive  restructuring of the Brazilian
tax system  received the approval of all  legislative  commissions of the CAMARA
DOS DEPUTADOS, the Brazilian House of Representatives, and was ready to be voted
on when the  Federal  Government  proposed  additional  amendments  to the text,
causing the process to come to a halt. On the other hand, the Federal Government
obtained a very important  victory on spending cuts in the public  sector,  with
the approval,  in May, 2000, of the Complementary Law no. 101, called the Fiscal
Responsibility  Law,  which  imposes a series  of  responsibilities  and  budget
targets on public administrators and new criteria for public budget allocation.

      On Social Security, the Federal Government has also passed a comprehensive
reform of welfare and retirement  regulations,  which aims at deficit reduction.
However,   in  October  1999,   the  Brazilian   Supreme   Federal  Court  found
unconstitutional  the levy of social security taxes on public  servants,  active
and inactive.  The Federal Government promptly adopted compensatory  measures to
balance the public accounts through the increase in collection effectiveness and
alterations on taxation policy to some segments of the population.

      The  privatization  process is still under way,  with the upcoming sale of
federal  assets in the energy and  sanitation  sector as well as the issuance of
concessions of PCS licenses to increase  competition  in the  telecommunications
market.  See  above  "Description  of   Business-Regulation   of  the  Brazilian
Telecommunications Industry-Concessions and Licenses."

BRAZILIAN ECONOMIC ENVIRONMENT

      The  Company's  business,  prospects,  financial  condition and results of
operations  are  dependent  on general  economic  conditions  in Brazil,  and in
particular   on  (i)   economic   growth   and  its   impact   on   demand   for
telecommunications  services,  (ii) the cost and  availability  of financing and
(iii) exchange rates between Brazilian and foreign currencies.

      For many years before the  introduction of the REAL Plan in late 1993, the
Brazilian economy was extremely volatile.  The Federal Government  implemented a
succession of programs intended to stabilize the economy and provide a basis for
sustainable,  noninflationary  growth.  Changes in monetary,  credit, tariff and
other policies were frequent and occasionally drastic. In particular, actions to
control  inflation,   interest  rates  or  consumption  included  freezing  bank
accounts,  imposing capital controls,  introducing high tariffs and other strong
measures. Changes in policy, social instability and other political and economic
developments, and the Brazilian government's responses to such developments, not
infrequently  had  a  material   adverse  effect  on  the  Company's   business,
operations, financial condition and results of operations.

      The Federal Government introduced the REAL Plan in December 1993. The REAL
Plan is an  economic  stabilization  program  intended  to  reduce  the  rate of
inflation by reducing certain public expenditures,  collecting  liabilities owed
to the Federal  Government,  increasing  tax  revenues,  continuing to privatize
government-owned   entities  and  introducing  a  new  currency.  The  REAL  was
introduced as Brazil's currency on July 1, 1994, initially with an exchange rate
of R$1.00 to US$1.00.  The REAL appreciated  through January 1995 and thereafter
gradually declined in value against the dollar,  reaching R$1.2087 to US$1.00 at
December  31,  1998.  Notwithstanding  the  success of the REAL Plan in lowering
inflation and stabilizing the Brazilian  economy,  the REAL Plan has also led to
economic slowdown, and a rise in unemployment in most regions and sectors of the
economy.

<PAGE>

      The Asian  financial  crisis in 1998 and the ripple effects of that crisis
presented a serious  challenge for Brazil.  After reaching a historical  high of
US$74.7 billion on April 30, 1998, Brazil's  international  reserves declined to
US$42.4 billion on October 31, 1998.

      In November  1998, in response to continuing  pressure on the REAL and the
rapid  decline in the country's  dollar  reserves,  Brazil  negotiated a US$41.5
billion  loan  package  arranged  by the  IMF.  Acceptance  of the  IMF  package
committed  Brazil to implement a combination of spending cuts and tax increases.
Brazil  received the first  installment of  approximately  US$9.4 billion in two
disbursements. Brazil's level of international reserves stabilized following the
announcement of the support  package,  reaching  US$44.6 billion at December 31,
1998. At year-end 1998, the Commercial Market Rate stood at R$1.2087 to US$1.00.

      After some initial progress in implementing a Fiscal Stabilization Program
announced  in late 1998,  the Federal  Government  encountered  difficulties  in
implementing  the program in Congress.  The Central Bank  attempted a controlled
devaluation of the REAL by widening the band within which the REAL was permitted
to trade,  but  subsequent  Central  Bank  intervention  failed to keep the rate
within the new band. On January 15, 1999,  the Central Bank  announced  that the
REAL would be permitted to float,  with Central Bank  intervention to take place
only in times of extreme  volatility.  Both the level of international  reserves
and the value of the REAL  continued to decline.  On January 31, 1999,  Brazil's
international  reserves stood at US$36.1 billion and the Commercial  Market Rate
stood at R$1.9832 to US$1.00.

      In the following weeks, the Federal Government had a series of legislative
successes  with its  efforts to  implement  the  expense  reduction  and revenue
enhancement measures under its Fiscal Stabilization  Program.  Brazil also began
negotiations  with the IMF on  adjustments  to the  previously-agreed  1999-2001
economic  program,  and  agreement  was  reached in March  1999 on new  economic
targets. Brazil received a second disbursement, of approximately US$4.9 billion,
from the IMF,  followed by an additional US$4.9 billion in bilateral loans under
the IMF-led support package.

      After  giving  effect to the  inflows  from the IMF-led  support  package,
Brazil's international reserves stood at US$44.3 billion in April, 1999, and the
Commercial  Market Rate stood at R$1.66 to US$1.00 on April 30,  1999.  By March
2000, international reserves stood at US$39.2 billion, and the Commercial Market
Rate stood at R$1.74 to US$1.00 on March 31, 2000.

      By the end of 1999, GDP grew 1.01%,  thus exceeding  expectations.  During
the first quarter of 2000, GDP grew 1.23% compared to the fourth quarter of 1999
and 3.08% compared to the first quarter of 1999. Growth in the first semester of
2000 was fueled  mainly by  industry,  which  experienced  5.69%  growth in that
period, followed by services, which grew 2.28%.  Agricultural activity decreased
by 0.84%.  Brazil's current  accounts deficit  diminished in 1999, for the first
time since  1992,  and closed the year at US$24.4  billion,  compared  to a 1998
year-end deficit of US$35 billion.  At the end of the first quarter of 2000, the
current accounts deficit stood at US$4 billion,  compared to a deficit of US$5.2
billion for the first quarter of 1999, representing a 22% reduction.

      Foreign  direct  investment net inflows stood at US$17 billion by year-end
1997,  US$25  billion by year-end  1998,  and US$30  billion by  year-end  1999,
representing  proportional  growth  of 47% in 1998  and 20% in 1999.  The  first
quarter of 2000 showed foreign direct investment net inflows of US$6.8 billion.

      Brazilian  internal  interest  rates have added  momentum to the  economic
growth.  By year end 1998,  the Selic  rate,  the  basic  interest  rate for the
economy, stood at 28.96% per year. Shortly after the January 1999 devaluation of
the REAL,  the Selic rate  peaked at 44.99% in March,  1999  while the  monetary
authorities  struggled  to hold down  inflationary  pressure  and the outflow of
investment from the country. By year-end 1999, when currency exchange volatility
had  greatly  reduced,  the  Selic  rate was down to 19.03%  and has since  kept
decreasing, reaching 18.31% on June 15, 2000.

<PAGE>

DEVELOPMENTS IN OTHER EMERGING MARKET COUNTRIES

      The  Brazilian  securities  markets are  influenced by economic and market
conditions in other emerging market countries.  Although economic conditions are
different  in each  country,  developments  in one country can have an effect on
investors' perceptions of the risks of investing in the securities of issuers in
other countries,  including  Brazil.  From 1998 through 2000, the  international
financial  markets have  experienced  significant  volatility,  with significant
adverse  effects on demand for and prices of  securities of issuers in virtually
all emerging markets, including Brazil.

      The current  volatility in the  securities  markets in Latin  American and
other emerging market  countries has been  attributed,  at least in part, to the
effects  of the Asian and the  Russian  economic  crises of  1997-98  and to the
recent  raise in interest  rates in  industrialized  countries,  especially  the
United States.

      There can be no assurance that the Brazilian  securities  markets will not
continue to be affected  negatively by events elsewhere,  especially in emerging
markets,  or that  such  events  will not  adversely  affect  the  prices of the
Company's securities.

INFLATION AND DEVALUATION

      Brazil  experienced  extremely high and generally  unpredictable  rates of
inflation  and of  devaluation  of  Brazilian  currency for many years until the
implementation  of  the  REAL  Plan.   Inflation  itself,  as  well  as  certain
governmental measures to combat inflation, and public speculation about possible
future actions have also  historically  contributed  to economic  uncertainty in
Brazil and to heightened  volatility in the Brazilian  securities  markets.  See
above "Description of Business--Brazilian Economic Environment."

      The  following  table  sets  forth  the rate of  Brazilian  inflation,  as
measured  by the INDICE  GERAL DE PRECOS - MERCADO  (the  General  Price Index -
Market or "IGP-M"),  and the devaluation of the Brazilian  currency  against the
U.S.  dollar  during  the  periods  indicated.  The  1999  inflation  index  was
significantly  impacted by the  devaluation  of the REAL in the beginning of the
year.

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                   --------------------------
                                                    1997      1998      1999
                                                   ------    ------    ------
                                                          (PERCENTAGES)
<S>                                                   <C>       <C>      <C>
Inflation (IGP-M)...............................      7.7       1.8      20.1
Devaluation (Brazilian currency vs.  US$).......      7.4       8.3      48.0
</TABLE>

      Under  the  REAL  Plan,  the rate of  Brazilian  inflation  has  decreased
considerably  since July 1994.  The exchange  rate between the REAL and the U.S.
dollar  remained  relatively  stable from mid-1994 to year-end 1998, but extreme
volatility  returned  in 1999.  See above  "Description  of  Business--Brazilian
Economic Environment." During the first quarter of 1999, inflation,  as measured
by the IGP-M,  amounted to 7.4% and the devaluation of the REAL against the U.S.
dollar was 42%. The devaluation,  which peaked at 70.8% and finished the year at
48%, drove the IGP-M to a five-year high of 20.1% for 1999. The first quarter of
2000 showed an inflationary increase of 1.75%, reflecting growth, while the REAL
recovered 2.3% of its value against the US Dollar.

      Inflation and devaluation  have potentially  adverse  consequences for the
Company's  business,  prospects,  financial condition and results of operations.
These factors introduce  distortions into the Company's financial statements and
make period-to-period comparisons difficult and unreliable.  Differences between
the relative  rate of  Brazilian  inflation as compared to the rates of Brazil's
trading partners, on the one hand, and the rate of currency devaluation,  on the
other,   can  cause  balance  sheet  losses  for  the  Company  on  its  foreign
currency-denominated  liabilities.  Inflation  places  pressure on the Company's
rates and invites  Federal  Government  efforts to control  inflation by holding
down the rates that Brazilian public utilities are permitted to charge.

<PAGE>

      There can be no assurance that  Brazilian  inflation will remain at modest
rates or, if there is an increase in  inflation,  that the  Company's  business,
prospects,  financial  condition and results of operations will not be adversely
affected.

ITEM 2.  DESCRIPTION OF PROPERTY

      The principal  physical  properties of the Company consist of transmission
equipment,  switching equipment and base stations.  The Company's properties are
located  throughout the Region.  The Company owns its  headquarters in Brasilia.
The Company  also leases  office  space in  Brasilia  (approximately  267 square
meters), Campo Grande (approximately 1,500 square meters), Cuiaba (approximately
465 square  meters),  Goiania  (approximately  810 square  meters),  Porto Velho
(approximately 650 square meters), Rio Branco (approximately 220 square meters),
Amapa  (approximately  78 square  meters),  Amazonas  (approximately  847 square
meters),  Maranhao  (approximately 885 square meters),  Para  (approximately 453
square meters) and Roraima (approximately 105 square meters).

      The  Company  also  leases  sites  where its  cellular  telecommunications
network  equipment is  installed.  As of December  31, 1999,  the Company had 19
cellular  switches and 595 base stations in the Region,  of which  approximately
8.5% were  located on land owned by the Company and the  remainder of which were
located on land leased by the Company.  Most of these leases do not expire prior
to 2003. In addition, the Company leases two retail stores in the Region.

ITEM 3.  LEGAL PROCEEDINGS

LITIGATION RELATED TO THE BREAKUP OF TELEBRAS

      The Breakup of TELEBRAS is subject to several lawsuits in which plaintiffs
have requested,  and in certain cases obtained,  preliminary injunctions against
the Breakup.  All of these preliminary  injunctions have been quashed by Federal
Court  decisions.  These lawsuits are all being challenged on the basis of court
competence. Recently, the Supreme Court of Justice ruled that the Federal Courts
of Minas Gerais and Brasilia were competent to hear the cases. As a result,  all
of the appeals have been sent back to the lower courts.

      The lawsuits are based on a number of legal  theories,  including that (i)
Brazil's Constitution requires that the creation of the 12 New Holding Companies
be specifically authorized by the Telecommunications Law; (ii) the shareholders'
meeting of  TELEBRAS  held on May 22,  1998 which  approved  the Breakup was not
properly  convened;  (iii)  national  sovereignty  will  be  threatened  if  the
country's  telecommunications  companies are controlled by foreign entities; and
(iv) the Telecommunications Law requires that certain matters, such as the entry
of new competitors and the  administration  of development and technology funds,
be  regulated  prior to the Breakup and  privatization,  either by an  executive
order of the President or by an act of Congress.

      If any of these lawsuits ultimately succeeds,  the Breakup will have to be
reinitiated.  This could  require,  depending  upon the  prevailing  plaintiff's
theory,  any combination of (i) amendment of the  Telecommunications  Law and/or
(ii)  reconvening  the  May  22,  1998  TELEBRAS  shareholders'  meeting.  It is
theoretically  possible  under  Brazilian  law for a court to  require  that the
Breakup be undone,  although the Company's  management  believes that this would
not be likely to occur.

LITIGATION ARISING OUT OF EVENTS PRIOR TO THE BREAKUP

      TELEBRAS  and  the  legal  predecessors  of the  Holding  Company  and the
Subsidiaries,  respectively (the "Predecessor  Companies"),  are defendants in a
number  of  legal   proceedings   and  subject  to  certain   other  claims  and
contingencies.  Liability  for any claims  arising out of acts  committed by the
Predecessor  Companies or TELEBRAS  prior to the  effective  date of the Breakup
remains with the Predecessor  Companies or TELEBRAS,  as the case may be, except
for those  liabilities  which under  specific  accounting  provisions  have been
assigned  to the  Subsidiaries  and/or  the New  Holding  Companies.  Any claims

<PAGE>

against the  Predecessor  Companies  which are not satisfied by the  Predecessor
Companies or TELEBRAS for reasons of insufficient  assets could result in claims
against the Subsidiaries or the New Holding  Companies to the extent that either
have received assets which might have been used to satisfy those claims had they
not been spun off.

      With respect to labor and tax claims, the Subsidiaries and the New Holding
Companies,  by law,  have  joint  and  several  liability  with the  Predecessor
Companies and TELEBRAS,  respectively.  However, under the terms of the Breakup,
the Predecessor Companies and TELEBRAS remain liable to the Subsidiaries and the
New Holding  Companies,  respectively,  for any such claims  arising out of acts
committed by the Predecessor Companies or TELEBRAS, as the case may be, prior to
the effective  date of the Breakup,  except for any liability for which specific
accounting  provisions  have been assigned to the Holding  Company or one of the
other New Holding Companies.  The Company's management believes that the chances
of claims of this nature  materializing  and having a material adverse financial
effect on the Company are remote.

LITIGATION RELATED TO THE APPLICATION OF THE ICMS

      In June 1998, the governments of the individual  Brazilian states approved
an  agreement  to  interpret  existing  Brazilian  tax law to apply  the ICMS in
respect of certain  revenues,  including  cellular  activation  fees and monthly
subscription  charges, that had not previously been subject to such taxes. Under
Brazilian  law, there is a risk that the state  governments  could seek to apply
this  interpretation  retroactively to activation and subscription  fees charged
during the five years preceding June 30, 1998. The Company's management believes
that the  attempt  by the state  governments  to extend the scope of the ICMS to
services that are supplementary to basic telecommunications services is unlawful
because:  (i) the state  governments  acted beyond the scope of their authority,
(ii)  their   interpretation   would  subject  to  taxation  certain   services,
particularly  cellular  activation,  that are not  considered to be payments for
telecommunications   services   and  (iii)   new   taxes  may  not  be   applied
retroactively.

   TAXATION OF CELLULAR ACTIVATION

      Each of the Band A Subsidiaries  has filed a lawsuit in the Treasury Court
of the state in which it is located seeking  injunctive  relief from retroactive
and  prospective  application  of the  ICMS to  activation  fees  and has made a
provision for the contingency  that ICMS may be payable on such fees. The Band B
Subsidiary  has not  been  involved  in any  such  lawsuit.  Each of the  Band A
Subsidiaries,  except  Telemat,  Telems  and  Teleron,  has  either  obtained  a
temporary  injunction  relieving  it from the payment of the ICMS on  activation
fees during the pendency of the lawsuits or is  depositing  with the  applicable
Treasury Court the amount of ICMS that would be payable if the  Subsidiary  does
not prevail in such lawsuit. Telemat is collecting and paying ICMS on activation
fees  as if  the  interpretation  were  valid  from  November  30,  1998  and is
accounting for such payments as expenses.  Teleron is paying similar fees but is
accounting  for such  payments as debt.  In both cases,  the judgments are being
appealed.  As for Telems, the temporary injunction relieving it from payment was
lifted,  and a  judgment  is  pending.  The  amount  that  may be  due is  being
provisioned.  The tax  authorities  of the states where the lawsuits are pending
may appeal the decisions of the Treasury Court to grant  temporary  injunctions.
There can be no assurance that the Subsidiaries  will ultimately  prevail in any
appeal  relating to the temporary  injunctions or in the  underlying  litigation
with respect to  application  of the ICMS to  activation  fees. If the ICMS were
applied  retroactively  to activation fees earned by the Company during the last
five  years,  it would  give rise to a  maximum  liability  estimated  at R$77.3
million.  In accordance with clause 2.1.5 of the Breakup  protocol signed by the
Predecessor  Companies  and the  Subsidiaries,  the  Company  believes  that the
Predecessor  Companies will be liable to the  Subsidiaries for any tax liability
arising from the retroactive  application of the ICMS to revenue recognized from
cellular  activation prior to 1998.  However,  such liability for prior debts is
not  automatically  attributable  to the  Predecessor  Companies,  since the tax
authorities by law may file suit against both the Predecessor  Companies and the
Subsidiaries  at the  same  time.  If a  Subsidiary  is  compelled  to pay a tax
liability, under the Breakup protocol it may seek restitution of its losses from
the Predecessor Company in question.

      The Company's management does not believe that the retroactive application
of the ICMS to cellular  activation is probable.  Therefore,  no provision  with
respect  to such  application  has been  made or is  expected  to be made in the
Consolidated  Financial  Statements.  The Company has made  provisions  totaling
approximately  R$3.6 million for the  application of the ICMS on activation fees
from the  effective  date of the  agreement to December 31, 1999.  The Company's

<PAGE>

management does not believe that application of the ICMS to cellular activation,
applied on a  prospective  basis,  will have a material  impact on the Company's
results of operations.

      To date no definitive position has been taken by the Courts with regard to
the levy of ICMS on activation  fees.  However,  the Brazilian  Supreme Court of
Justice has not granted an  injunction  as  requested  by other  States  through
appeals in similar lawsuits filed by taxpayers.  A definitive  judgment from the
Brazilian Supreme Court of Justice is still being awaited.

LITIGATION RELATED TO TELEBRAS LOANS

      Under the terms of the Breakup,  several loans existing  between  TELEBRAS
and its  subsidiaries  (the  "TELEBRAS  Loans")  were to have  been  distributed
through:  (i) the assignment of the debt  obligation to the relevant  subsidiary
and (ii) the assignment of the credit right to the relevant New Holding  Company
as the  new  parent  of the  subsidiary  who  assumed  the  debt.  Although  the
obligation  to pay the  TELEBRAS  Loans was duly  assigned to  Telebrasilia  and
Telegoias,  the right to receive  such  payments was not assigned to the Holding
Company  but  instead  to Tele  Centro  Sul,  one of the New  Holding  Companies
providing  fixed-line  services.  In light  of this  departure  from the  agreed
procedures for assigning the TELEBRAS  Loans,  payment of the TELEBRAS Loans was
suspended  immediately upon the change of control to the Holding Company,  and a
lawsuit was filed in June 1999 in Federal  District  Court  against  Tele Centro
Sul,  TELEBRAS and KPMG,  the auditors  for the Breakup  accounting  procedures,
requesting  liquidated  damages and a court ruling recognizing the inappropriate
procedures and  non-existence  of the debt to TELEBRAS.  KPMG was dismissed from
the lawsuit by agreeing to a declaration that the account receivable should have
been  assigned to the  Company  and not to Tele Centro Sul.  The last action was
issued in  February,  2000,  when the court  ordered the  defendants  to present
statements in response to documents submitted by the Company.

      In  response to the  lawsuit  filed  against it, Tele Centro Sul filed two
counter-lawsuits   in  October  1999   against   Telebrasilia   and   Telegoias,
respectively,  seeking  payment  of the  TELEBRAS  Loans in the amount of R$41.3
million from Telebrasilia and R$24.2 million from Telegoias. The last action for
both suits was in May 2000,  when the court  ordered each of the  defendants  to
present statements in response to documents submitted by Tele Centro Sul.

      All  three  lawsuits  have  been  joined  before  the  same  court as they
originate  from the same issue  concerning  the TELEBRAS  Loans.  The  Company's
lawyers believe that the chances of obtaining a favorable outcome of the dispute
are good.

   OTHER LITIGATION

      The Company is a party to certain legal proceedings  arising in the normal
course of business.  The Company has provided for or deposited in court  amounts
to cover its estimated losses due to adverse legal judgments.  In the opinion of
the Company's  management,  such actions,  if decided  adversely to the Company,
would not have a material  adverse effect on the Company's  business,  financial
condition or results of operations.  See Note 24 to the  Consolidated  Financial
Statements.

ITEM 4.  CONTROL OF REGISTRANT

      References in this Annual Report to "Preferred Shares" and "Common Shares"
are to the  preferred  shares and common  shares,  respectively,  of the Holding
Company.  References to "American  Depositary  Shares" or "ADSs" are to American
Depositary  Shares,  each  representing  3,000  Preferred  Shares.  The ADSs are
evidenced by American Depositary Receipts ("ADRs").

      Of the Holding  Company's two classes of capital stock  outstanding,  only
the Common  Shares have full voting  rights.  The  Preferred  Shares have voting
rights  under  limited  circumstances.  As of December  31,  1999,  BID S.A.,  a
subsidiary of Splice, owned 56.06% of the Common Shares.  Accordingly,  BID S.A.
has the  ability to control  the  election  of the  Holding  Company's  Board of
Directors and the direction and future operations of the Company.

<PAGE>

      The following  table sets forth  information  concerning  the ownership of
Common Shares by BID S.A. and by the Holding Company's officers and directors as
a group.

<TABLE>
<CAPTION>
                                                   NUMBER OF      PERCENTAGE OF
                                                    COMMON         OUTSTANDING
NAME OF OWNER                                     SHARES OWNED    COMMON SHARES
-------------------                              --------------  ---------------
<S>                                              <C>                 <C>
BID S.A.......................................   69,723,351,125      56.06%
All directors and executives officers as a
group.........................................                7          0%
</TABLE>

      Splice is a Brazilian company engaged in the development,  manufacture and
supply of digital  electronic  and  telecommunications  equipment.  Its business
activities include manufacturing, import/export of telecommunications equipment,
installation of telephone lines in rural and urban areas, financing of telephone
lines directly to the subscribers and providing  alphanumeric paging services in
ten of the largest Brazilian cities.

ITEM 5.  NATURE OF TRADING MARKET

      The  principal  trading  market for the  Preferred  Shares is the Bolsa de
Valores de Sao Paulo (the "Sao Paulo Stock Exchange").  The Preferred Shares are
also traded on the Bolsa de Valores do Rio de Janeiro (the "Rio de Janeiro Stock
Exchange") and the seven other  Brazilian  stock  exchanges.  As of December 31,
1999,  the Holding  Company had  approximately  2.5 million common and preferred
shareholders.

      The Preferred Shares commenced  trading  separately on the Brazilian stock
exchanges on September  21, 1998.  The  following  table sets forth the reported
high and low closing sale prices for Preferred  Shares of the Holding Company on
the Sao Paulo Stock Exchange for the periods indicated.

<TABLE>
<CAPTION>
                                         NOMINAL REAIS PER 1000 PREFERRED SHARES
                                         ---------------------------------------
                                                  HIGH                LOW
                                         ---------------------- ----------------
<S>                                                <C>              <C>
Third quarter 1998 (Beginning in
 September 21, 1998)                               R$0.358          R$0.269
Fourth quarter 1998                                R$1.229          R$1.130
First quarter 1999..........................       R$2.146          R$1.083
Second quarter 1999.........................       R$2.414          R$1.974
Third quarter 1999..........................       R$2.242          R$1.921
Fourth quarter 1999.........................       R$3.880          R$2.155
</TABLE>

      In the United States,  the Preferred Shares trade in the form of ADSs each
representing  3,000  Preferred  Shares,  issued  by The  Bank  of New  York,  as
depositary  (the  "Depositary")  pursuant to a Deposit  Agreement  (the "Deposit
Agreement") among the Holding Company, the Depositary and the registered holders
and  beneficial  owners from time to time of ADRs.  The ADSs  commenced  trading
separately on the NYSE on November 16, 1998 under the symbol TRO. As of December
31, 1999 there were  approximately  78 thousand  beneficial  owners of ADSs. The
following  table sets forth the reported  high and low closing  sales prices for
the ADSs on the NYSE for the period indicated.

<TABLE>
<CAPTION>
                                                    U.S. DOLLARS PER ADS
                                                   ----------------------
                                                      HIGH        LOW
                                                   ----------- ----------
<S>                                                 <C>         <C>
Fourth quarter 1998 (Beginning in
 November 16, 1998)                                 US$5.9375   US$2.000
First quarter 1999............................      US$3.6      US$2.375
Second quarter 1999...........................      US$4.4388   US$2.438
Third quarter 1999............................      US$3.7500   US$3.125
Fourth quarter 1999...........................      US$7.0633   US$3.313
</TABLE>

      The common shares and preferred  shares of Telebrasilia  Celular traded on
the Sao Paulo Stock  Exchange  from May 18, 1998 to July 30, 1999. On August 30,

<PAGE>

1999, Telebrasilia shares began trading on the Sociedade Operadora do Mercado de
Ativos (SOMA),  the  over-the-counter  market.  NBT's shares do not trade on any
stock market, as it is a closely held corporation.

RESTRUCTURING OF  THE BRAZILIAN STOCK EXCHANGES

      In January 2000, a Memorandum of Understanding was entered into by the Sao
Paulo  Stock  Exchange  and the  Rio de  Janeiro  Stock  Exchange,  beginning  a
unification program for the Brazilian stock exchanges that aims at concentrating
all stock trades and  clearances in the Sao Paulo Stock Exchange and creating an
electronic  market under the management of the Rio de Janeiro Stock Exchange for
primary  and  secondary   trading  of  government  bonds  (the  "Stock  Exchange
Unification Program").

      Under the Stock Exchange Unification Program, the clearinghouse of the Rio
de Janeiro  Stock  Exchange,  CLC - Camara de  Liquidacao e Custodia  S.A.  (the
"CLC"),  which  was  99%  owned  by  the  Rio de  Janeiro  Stock  Exchange,  was
transferred to the ownership of the Sao Paulo Stock Exchange.

      Three other memoranda of  understanding  have been entered into by the Sao
Paulo Stock Exchange and the Bolsa de Valores do Extremo Sul (the "Extreme South
Stock  Exchange"),  the Bolsa de Valores do Parana (the "Parana Stock Exchange")
and the Bolsa de Valores de  Pernambuco e Paraiba (the  "Pernambuco  and Paraiba
Stock   Exchange"),   respectively.   These   memoranda  also  provide  for  the
concentration  of all  stock  trades  and  clearances  in the  Sao  Paulo  Stock
Exchange,  leaving the other three  exchanges with duties to promote the capital
markets, by conducting  training programs and carrying out marketing  activities
to spread the stock market culture throughout the States of Santa Catarina,  Rio
Grande do Sul, Parana, Pernambuco and Paraiba.

TRADING ON THE BRAZILIAN STOCK EXCHANGES

      Of Brazil's nine stock exchanges, the Sao Paulo Stock Exchange is the most
significant and will further increase its significance  after the Stock Exchange
Unification  Program is fully  implemented.  During  1999,  the Sao Paulo  Stock
Exchange  accounted  for  approximately  95%  of the  trading  value  of  equity
securities on all Brazilian  stock  exchanges,  and the Sao Paulo Stock Exchange
and the Rio de Janeiro Stock Exchange  together  accounted for approximately 99%
of the trading value of equity securities on all Brazilian stock exchanges.

      Each  Brazilian  stock  exchange  is a non  profit  entity  owned by its
member  brokerage  firms.  Trading  on each  exchange  is  limited  to  member
brokerage  firms  and a  limited  number of  authorized  non-members.  The Sao
Paulo  Stock  Exchange  has two open outcry  trading  sessions  each day.  The
sessions  run from 10:00 a.m. to 1:00 p.m.  and from 2:00 a.m. to 4:45 p.m. on
the Sao Paulo Stock  Exchange.  Trading is also  conducted  from 10:00 a.m. to
5:00 p.m.  on an  automated  system and from 6:00 p.m.  to 10:00  p.m.  on the
After  Market,  which  trading is limited only to stocks  traded during market
hours.  There are no specialists  or market markers for the Holding  Company's
shares on the Sao Paulo Stock  Exchange.  Trading in securities  listed on the
Brazilian  stock  exchanges  may be executed  off the  organized  exchanges in
certain circumstances, although such trading is very limited.

      Settlement of transactions is effected three business days after the trade
date without adjustment of the purchase price for inflation.  Payment for shares
is made through the  facilities of separate  clearinghouses  for each  exchange,
which maintain  accounts for member  brokerage  firms.  The seller is ordinarily
required  to deliver  the shares to the  exchange  on the  second  business  day
following the trade date. The  clearinghouse for the Sao Paulo Stock Exchange is
COMPANHIA  BRASILEIRA DE LIQUIDACAO E CUSTODIA S.A. - CBLC,  which is controlled
mainly by the  member  brokerage  firms and banks  that are not  members of that
exchange. The Sao Paulo Stock Exchange will also rely on the services of the CLC
after the Stock Exchange Unification Program is fully implemented

      At December 31,  1999,  the  aggregate  market  capitalization  of the 487
companies  listed on the Sao Paulo  Stock  Exchange  was  approximately  R$408.8
billion.  Substantially  the same  securities  are listed on the Sao Paulo Stock
Exchange and on the Rio de Janeiro Stock Exchange.  Although all the outstanding
shares of an exchange-listed company may trade on a Brazilian stock exchange, in
most cases  less than half of the  listed  shares  are  actually  available  for
trading by the public,  the remainder  being held by small groups of controlling
persons that rarely trade their shares. For this reason,  data showing the total

<PAGE>

market  capitalization  of  Brazilian  stock  exchanges  tend to  overstate  the
liquidity of the Brazilian equity securities market.

      The Brazilian equity market is relatively  small and illiquid  compared to
major world  markets.  In 1999,  the combined  daily trading  volumes on the Sao
Paulo  Stock   Exchange  and  the  Rio  de  Janeiro  Stock   Exchange   averaged
approximately  R$371.1  million.  In 1999,  the stocks of the  approximately  40
companies that comprise the stock index of the Sao Paulo Stock  Exchange  (about
40 companies) accounted for approximately 80% of all trading on the spot markets
in all Brazilian stock exchanges.

      Trading on Brazilian  stock exchanges by nonresidents of Brazil is subject
to certain limitations under Brazilian foreign investment legislation.

REGULATION OF BRAZILIAN SECURITIES MARKETS

   GENERAL

      The  Brazilian  securities  market is regulated by the COMISSAO DE VALORES
MOBILIARIOS  (the  "CVM"),  which  is  the  Brazilian  equivalent  of  the  U.S.
Securities and Exchange Commission (the "SEC"), and the BANCO CENTRAL DO BRASIL,
which is the Brazilian  central bank (the "Central Bank"),  both subordinated to
the  CONSELHO  MONETARIO  NACIONAL,  the highest  regulatory  entity  within the
National Financial System (the "National Monetary  Council").  While the CVM has
authority over the organized  exchanges and over other parties  operating in the
securities   markets,   including  public  companies  which  are  bound  by  its
regulations,  the Central Bank has, among other powers, licensing authority over
financial  institutions,   including  brokerage  firms,  and  regulates  foreign
investment and foreign  exchange  transactions.  The National  Monetary  Council
enacts  general  rules  that set the  policy  for both  organs to  pursue  their
regulatory  activity.  The main legislation under which the Brazilian securities
market  is  regulated  are the Law no.  6,385/76,  as  amended  (the  "Brazilian
Securities Law"), the Law no. 6,404/76,  as amended (the "Brazilian  Corporation
Law") and the Law no. 4,595/64 as amended (the "Financial System Law").

      Under the  Brazilian  Corporation  Law,  a company  is  either  public,  a
COMPANHIA ABERTA,  and is allowed to issue publicly traded  securities,  such as
the Holding Company,  or private,  a COMPANHIA  FECHADA,  and its securities are
only traded privately.  All public companies are registered with the CVM and are
subject to reporting  requirements  to keep such status.  The shares of a public
company may also be traded  privately,  but subject to certain  limitations.  In
order to have its shares traded on Brazilian stock  exchanges,  a public company
must  be  listed  on  its  stock  exchange  of  choice,  being  subject  to  the
requirements  of such exchange,  with right of appeal to the CVM if the exchange
denies  the  listing  request.  Once  admitted  to list on one  Brazilian  stock
exchange, the public company's shares can be traded in any other Brazilian stock
exchange that matches the minimum listing requirements of the first exchange.

      Trading in securities on the Brazilian stock exchanges may be suspended at
the request of a company in anticipation of a material announcement. Trading may
also be suspended on the  initiative of a Brazilian  stock  exchange or the CVM,
among other  reasons,  based on or due to a belief  that a company has  provided
inadequate  information  regarding a material  event or has provided  inadequate
responses to inquiries by the CVM or the relevant stock exchange.

      In general, the Brazilian Securities Law provides for, among other things,
disclosure requirements, restrictions on insider trading and price manipulation,
and  protection of minority  shareholders.  However,  the  Brazilian  securities
market is not as highly regulated and supervised as the United States securities
markets or markets in certain other jurisdictions.

   DEPOSITARY SECURITIES PROGRAMS REGULATIONS

      All ADS programs must also be  registered  and approved by the CVM, as set
forth in the National Monetary Council  regulation for such programs.  See below
"Exchange  Controls and Other Limitations  Affecting  Security Holders." The CVM

<PAGE>

Instruction 317/99, as amended,  provides that, in order for level II or III ADS
programs to be approved by CVM,  there must be a cooperation  agreement  entered
into by the relevant  Brazilian stock exchange and the foreign stock exchange on
which the ADSs are listed,  such agreement being previously approved by CVM. The
Holding Company's ADS program is a level II program and has been duly registered
and approved by the CVM and a cooperation agreement has been entered into by the
Sao Paulo Stock Exchange and the New York Stock  Exchange,  bringing the Holding
Company's ADS program into full compliance with Brazilian legislation.

   MINORITY SHAREHOLDERS PROTECTION

      The Brazilian  Corporation Law provides for essential  shareholder  rights
(the "Shareholders Essential Rights"),  which are: (i) to receive dividends from
the  company;  (ii) to receive a share of the  company's  assets in the event of
liquidation; (iii) look over the company's management as provided under the Law;
(iv) right of first refusal to subscribe to new stock or convertible  securities
issued following a capital increase,  in order to maintain the same proportional
stock holding in the company;  and (v) to withdraw  from the company,  receiving
net worth  value for the equity  holding,  if any of the  following  is resolved
against the opposition of the shareholder (the "Equity Withdrawing Rights"): (A)
creation  of a new class of capital  stock or  increase  in one of the  existing
classes,  without  keeping  the  same  proportion  with the  remaining  existing
classes; (B) alterations in the conditions  attributed to one or more classes of
preferred  shares,  or the  creation  of a more  privileged  class of  preferred
shares;  (C) reduction of mandatory profit  distribution;  and (D) the company's
merger or amalgamation into another company. The Equity Withdrawing Rights "(A)"
and "(B)" above are only  available  to the holders of the  affected  classes of
shares.

      Inspection rights provided by the Law consist of the right of shareholders
representing at least 10% of the voting shares or  shareholders  representing at
least 5% of the  non-voting  shares,  to summon  the  CONSELHO  FISCAL,  a board
established to audit and inspect  management  and to assess its compliance  with
the law and  company's  By-laws  (the "Audit  Committee").  Such board will have
three to five members,  of which the non-voting  shareholders will elect one and
the minority  voting  stock  holders  representing  at least 10% of total voting
stock will elect another.  In the case of a public company,  such as the Holding
Company,  the CVM enacted a regulation in January 2000 lowering the threshold to
summon the Audit  Committee to 2% and 1% of voting stock and  non-voting  stock,
respectively,  applicable to corporations with over 150 million REAIS of capital
stock, e.g. the Holding Company.

      In an effort to  increase  the  protection  of  minority  shareholders  of
publicly traded companies in Brazil, the CVM has enacted a series of regulations
broadening the range and assurance of minority  shareholders rights, among these
CVM Instruction no. 323/00 that defines several hypotheses that constitute abuse
of power by the controlling shareholders, and CVM Instructions 299 and 319, both
enacted  in  1999,  establishing  protective  rules in the  event  of  corporate
restructuring via merger,  incorporation,  spin-off, increase of stockholding by
the  controlling  shareholder or sale of a controlling  number of shares,  among
other dispositions.

      A proposal for an amendment of the Brazilian  Corporation Law is currently
being discussed in Congress.  Although there are no assurances,  the proposal is
expected  to  pass  in  the  near  future.  The  amendment  consists  mostly  of
dispositions to increase protection for minority shareholders.

      THE SUMMARY ABOVE CONTAINS A BRIEF  DESCRIPTION  OF PRINCIPAL  PROTECTIONS
GRANTED  BY  BRAZILIAN  LEGISLATION  TO  THE  MINORITY  STOCKHOLDERS  OF  PUBLIC
COMPANIES IN GENERAL.  PROSPECTIVE  PURCHASERS OR HOLDERS OF PREFERRED SHARES OR
ADSS OF THE COMPANY  SHOULD  CONSULT THEIR OWN LEGAL ADVISORS AS TO THE SPECIFIC
AND APPLICABLE RIGHTS, TO WHICH THEY ARE ENTITLED AS HOLDERS OF PREFERRED SHARES
OR ADSS.

ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

      There are no  restrictions  on  ownership  of  Preferred  Shares or Common
Shares of the  Holding  Company by  individuals  or legal  entities  resident or
headquartered   outside  Brazil.   However,   there  are  certain   registration
requirements to assure repatriation of relevant investment principal and gains.

      The right to convert  dividend or interest on equity payments and proceeds
from the sale of shares into foreign  currency for remittance  abroad is subject
to restrictions  under foreign  investment  legislation,  which requires,  among
other things, that the relevant  investments be registered with the Central Bank
under the proper title.

<PAGE>

      The Annex V to  Resolution  1,289 of the  National  Monetary  Council,  as
amended (the "Annex V Regulations") is the main regulatory rule that governs ADS
programs;  it establishes  foreign exchange  procedures for currency flows under
such programs.  Under the Annex V Regulations,  a foreign investment certificate
of registration (a "Certificate of  Registration") is issued by the Central Bank
in favor of the Depositary and held by Banco Itau S.A., which has custody of the
Preferred  Shares  underlying the ADSs (the  "Custodian"),  on the  Depositary's
behalf.  The Certificate of Registration  applies to the entire Preferred Shares
portfolio held by the Custodian on behalf of the Depositary as agent for the ADS
Holders.  It allows the  Custodian  and the  Depositary  to  convert  dividends,
interest on equity payments or share sale proceeds,  in respect of the Preferred
Shares  represented  by the ADSs,  into foreign  currency and remit such amounts
outside Brazil.  The amount  provided in the Certificate of Registration  varies
depending  on the  number  of  ADSs  and  Preferred  Shares  in  the  Depositary
portfolio.  When new Preferred Shares are added to the Depositary portfolio, new
ADSs are issued.  Conversely,  when  Preferred  Shares are  subtracted  from the
Depositary Portfolio,  a number of ADSs are canceled.  Other Annex V Regulations
provide  for a  requirement  of prior  approval by the CVM of ADS  programs  and
favorable  tax  treatment.  See above "Nature of Trading  Market--Regulation  of
Brazilian Securities  Markets--Depositary  Securities Programs  Regulations" and
See below "Taxation--Brazilian Tax Considerations."

      A  Certificate  of  Registration  has  been  issued  in  the  name  of the
Depositary with respect to the ADSs and is maintained by the Custodian on behalf
of the  Depositary.  Accordingly,  the Custodian and the  Depositary are able to
convert into foreign  currency and remit outside Brazil all dividends,  interest
on equity  payments or share sale proceeds with respect to the Preferred  Shares
underlying the ADSs.

      Brazilian  legislation also provides for direct foreign  investment in the
Brazilian  stock market  without the need for an ADS program.  Such  investments
previously  were  regulated  by Annex  IV to  Resolution  1,289 of the  National
Monetary  Council  (the "Annex IV  Regulations"),  pursuant  to which  qualified
foreign investors (mostly financial institutions,  insurance companies,  pension
and  mutual  funds,  charitable  foundations  and other  institutions  that meet
certain  minimum  capital and other  requirements)  registered  with the CVM and
invested through custody accounts managed by authorized local agents.  Qualified
foreign investors could buy and sell shares on Brazilian stock exchanges without
obtaining  a  separate   Certificate  of  Registration  for  each   transaction.
Investments  under Annex IV are also  entitled to favorable tax  treatment.  See
below "Taxation--Brazilian Tax Considerations."

      However, in January 2000, the National Monetary Council enacted Resolution
2,689,  which provides a  comprehensive  regulatory  framework to direct foreign
investment in Brazilian capital markets.  Under Resolution 2,689, any individual
or  legal  entity,  including  mutual  funds  and  other  collective  investment
vehicles,  resident or  headquartered  abroad,  may directly invest in Brazilian
capital  markets.  With few exceptions,  this includes  virtually all investment
options  available to Brazilian  residents such as publicly  traded stocks (e.g.
the Preferred  Shares),  fixed-income  securities and  derivatives.  In order to
qualify for  registration of investments,  the foreign  investor must empower an
agent in Brazil,  which if not a financial  institution must  sub-contract  one,
submit  a  standard  form and  register  with the  CVM.  Investments  under  the
Resolution 2,689 will be electronically registered with the Central Bank through
SISBACEN (the electronic network linking the Central Bank to Brazilian financial
institutions),  and remittances outside Brazil are made through foreign exchange
contracts based on such registration.

      Although  Resolution 2,689 has not changed the rules regarding the Annex V
Regulations,  which refer to ADS programs,  it provided for a mandatory transfer
of  investment  registration  under Annex IV to  registration  under  Resolution
1,289,  setting  June 30, 2000 as the  deadline.  Other  regulations  concerning
investment vehicles with foreign  stockholders and foreign capital  fixed-income
mutual funds,  among others,  were also  affected and are being  substituted  by
Resolution  2,689.  Resolution  2,689  also  kept  open the  option  for Annex V
investors  (e.g.  the ADS  holders)  to  transfer  to  direct  ownership  of the
Preferred  Shares  instead of holding an ADS. In this case, the ADS holder would
cancel its ADS, continuing to rely on its Annex V registration for five business
days,  thereafter  having to obtain a Resolution  2,689  registration in its own
name, with minimal difference in tax treatment.  See below  "Taxation--Brazilian
Tax Considerations."

      Under current  Brazilian  legislation,  the Federal  Government may impose
temporary  restrictions on remittances of foreign capital abroad in the event of
an actual or anticipated serious imbalance of Brazil's balance of payments.  For
approximately  six months in 1989 and early 1990, the Federal  Government  froze
all dividends and capital  repatriations held by the Central Bank that were owed
to foreign equity  investors,  in order to conserve  Brazil's  foreign  currency

<PAGE>

reserves.  These amounts were  subsequently  released in accordance with Federal
Government directives. Holders of ADSs could be adversely affected by delays in,
or  refusal  to grant any,  required  government  approval  for  conversions  of
Brazilian  currency  payments and  remittances  abroad of the  Preferred  Shares
underlying the ADSs.  Although the ADS program is properly approved by competent
bodies and the relevant  Certificate of Registration has been issued in favor of
the Depositary,  there can be no assurances that the Federal Government will not
impose restrictions on foreign repatriations in the future.

ITEM 7.  TAXATION

      The following  summary  contains a description of the principal  Brazilian
and U.S.  federal  income tax  consequences  of the  acquisition,  ownership and
disposition  of  Preferred  Shares  or  ADSs,  but it does not  purport  to be a
comprehensive  description of all the tax considerations that may be relevant to
a decision to purchase  Preferred  Shares or ADSs. The summary is based upon the
tax laws of Brazil and regulations  thereunder and on the tax laws of the United
States and  regulations  thereunder  as in effect on the date hereof,  which are
subject to change.  PROSPECTIVE  PURCHASERS  OF PREFERRED  SHARES OR ADSS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX  CONSEQUENCES  OF THE  ACQUISITION,
OWNERSHIP AND DISPOSITION OF PREFERRED SHARES OR ADSS.

      Although  there is at present no income tax treaty  between Brazil and the
United States,  the tax  authorities  of the two countries have had  discussions
that may culminate in such a treaty. No assurance can be given,  however,  as to
whether or when a treaty  will  enter into force or how it will  affect the U.S.
holders of Preferred Shares or ADSs.

BRAZILIAN TAX CONSIDERATIONS

      The  following   discussion   summarizes   the  principal   Brazilian  tax
consequences of the  acquisition,  ownership and disposition of Preferred Shares
or ADSs by a holder  not deemed to be  domiciled  in Brazil  for  Brazilian  tax
purposes (a  "non-Brazilian  holder").  This discussion does not address all the
Brazilian  tax   considerations   that  may  be  applicable  to  any  particular
non-Brazilian  holder, and each  non-Brazilian  holder should consult his or her
own tax advisor about the Brazilian tax  consequences  of investing in Preferred
Shares or ADSs.

   TAXATION OF DIVIDENDS

      Dividends  paid by the Holding  Company in cash or in kind from profits of
periods  beginning on or after January 1, 1996 (i) to the  Depositary in respect
of Preferred Shares underlying ADSs or (ii) to a non-Brazilian holder in respect
of Preferred Shares will generally not be subject to Brazilian  withholding tax.
Dividends paid from profits  generated  before January 1, 1996 may be subject to
Brazilian  withholding tax at varying rates, except that stock dividends are not
subject  to  Brazilian  tax  unless the stock is  subsequently  redeemed  by the
Holding Company, or the non-Brazilian  holder sells the stock in Brazil,  within
five years after the distribution.

      The only  Brazilian  tax  treaty  now in effect  that  would  (if  certain
conditions  are met) reduce the rate of the  withholding  tax on dividends  paid
from profits  generated  before January 1, 1996 is the treaty with Japan,  which
would reduce the rate to 12.5% under the circumstances set forth in the treaty.

   TAXATION OF GAINS

      Gains realized outside Brazil by a non-Brazilian holder on the disposition
of ADSs to another  non-Brazilian  holder  are not  subject  to  Brazilian  tax.
Neither the deposit of Preferred  Shares in exchange for ADSs nor the withdrawal
of Preferred Shares upon cancellation of ADSs is subject to Brazilian tax.

      Non-Brazilian  holders are not subject to tax in Brazil on gains  realized
on  dispositions  of  Preferred  Shares  outside  Brazil to other  non-Brazilian
holders.

      Gains  realized by  non-Brazilian  holders on  dispositions  of  Preferred
Shares in Brazil or in  transactions  with  Brazilian  residents  may be free of
Brazilian  tax,  taxed at a rate of 10% or taxed at a rate of 15%,  depending on
the  circumstances.   According  to  the  Annex  V  Regulations,  gains  on  the
disposition of Preferred Shares obtained through transactions on Brazilian stock

<PAGE>

exchange  market  are  not  taxed  in  Brazil,  provided  that  disposition  and
remittance  of the proceeds  abroad are  accomplished  within five business days
after the sale.  After this period,  the aforesaid gains will be taxed at a rate
of 10%. Dividends and interest on stockholder's  equity are taxed at rates of 0%
and 15% respectively.

      Until  March,  2000,  gains on the  sale or  exchange  of  duly-registered
investments  under the Annex IV Regulations were not subject to Brazilian tax if
such sale or exchange occurred on a Brazilian stock exchange.  As of March 2000,
the Annex IV  Regulations  in question  were revoked by Resolution  2,689.  As a
result,  institutional  foreign investors must adapt their operations to the new
regulations by June 30, 2000.  The new taxation  shall be as follows:  (i) gains
realized through transactions on Brazilian stock exchanges are subject to tax at
a rate of 0%, except for payments to persons situated in jurisdictions deemed to
be tax havens  (i.e.  countries  that  either have no income tax or in which the
income tax rate is less than 20%),  which gains are taxed at a rate of 10%, (ii)
gains realized  through  off-exchange  transactions  in Brazil or with Brazilian
residents are  generally  subject to tax at a rate of 15%,  (iii)  dividends are
taxed at a rate of 0% and (iv) the  distribution  of interest  on  stockholder's
equity is subject to tax at a rate of 15%.  Brazil's  tax  treaties do not grant
relief from taxes on gains realized on sales or exchanges of preferred shares.

      Any gains  realized  by a  non-Brazilian  holder  upon the  redemption  of
Preferred Shares will be treated as gains from the disposition of such Preferred
Shares  to a  Brazilian  resident  occurring  off of a stock  exchange  and will
accordingly be subject to tax at a rate of 15%.

      Gain is  measured  by the  difference  between  the  amount  in  Brazilian
currency realized on the sale or exchange and the acquisition cost of the shares
sold,  measured in Brazilian currency without any correction for inflation;  the
acquisition cost of shares  registered as an investment with the Central Bank is
calculated  on the basis of the  foreign  currency  amount  registered  with the
Central Bank.

      There can be no  assurance  that the current  preferential  treatment  for
holders of ADSs will be maintained.

      Any exercise of preemptive rights relating to the Preferred Shares or ADSs
will not be subject to Brazilian  taxation.  Gains on the sale or  assignment of
preemptive  rights relating to the Preferred Shares will be treated  differently
for  Brazilian  tax purposes  depending on (i) whether the sale or assignment is
made by the  Depositary or the investor and (ii) whether the  transaction  takes
place on a Brazilian stock exchange.  Gains on sales or assignments  made by the
Depositary on a Brazilian  stock exchange are not taxed in Brazil,  but gains on
other sales or assignments may be subject to tax at rates up to 15%.

   DISTRIBUTIONS OF INTEREST ON CAPITAL

      Brazilian corporations may make payments to shareholders  characterized as
interest on the capital of the Holding Company as an alternative  form of making
dividend  distributions.  See below  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The rate of interest may not be higher than the Federal  Government's  long-term
interest  rate (the "TJLP") as  determined by the Central Bank from time to time
(11.00% per annum for the three month period  ending June 30,  2000).  The total
amount  distributed as interest on capital may not exceed the greater of (i) 50%
of net income  (before  taking such  distribution  and any deductions for income
taxes into account) for the year in respect of which the payment is made or (ii)
50% of retained  earnings for the year prior to the year in respect of which the
payment is made. Payments of interest on capital are decided by the shareholders
on the basis of recommendations of the company's board of directors.

      Distributions  of interest on capital paid to Brazilian and  non-Brazilian
holders of Preferred Shares,  including payments to the Depositary in respect of
Preferred  Shares  underlying  ADSs, are  deductible by the Holding  Company for
Brazilian corporate income tax purposes.  Such payments are subject to Brazilian
withholding  tax at the rate of 15%,  except for  payments  to  persons  who are
exempt  from tax in  Brazil,  which are free of  Brazilian  tax,  and except for
payments to persons  situated in  jurisdictions  deemed to be tax havens  (I.E.,
countries that either have no income tax or in which the income tax rate is less
than 20%), which will be subject to tax at a 25% rate.

<PAGE>

      No  assurance  can be given  that the Board of  Directors  of the  Holding
Company will not recommend that future  distributions  of profits should be made
by means of interest on capital instead of by means of dividends.

      Amounts paid as interest on capital (net of  applicable  withholding  tax)
may be treated as payments in respect of the  dividends  the Holding  Company is
obligated to distribute to its  shareholders  in accordance with its Charter and
the Brazilian  Corporation Law.  Distributions of interest on capital in respect
of the Preferred Shares, including distributions to the Depositary in respect of
Preferred  Shares  underlying  ADSs,  may be  converted  into U.S.  dollars  and
remitted outside of Brazil,  subject to applicable exchange controls.  See above
"Exchange Controls and Other Limitations Affecting Security Holders."

   OTHER BRAZILIAN TAXES

      There are no Brazilian inheritance, gift or succession taxes applicable to
the  ownership,  transfer  or  disposition  of  Preferred  Shares  or  ADSs by a
non-Brazilian holder except for gift and inheritance taxes levied by some states
in Brazil on gifts made or inheritances  bestowed by individuals or entities not
resident or  domiciled  in Brazil or in the  relevant  State to  individuals  or
entities that are resident or domiciled  within such State in Brazil.  There are
no Brazilian stamp, issue,  registration,  or similar taxes or duties payable by
holders of Preferred Shares or ADSs.

      A  financial  transaction  tax  (the  "IOF  tax")  may be  imposed  on the
conversion of Brazilian  currency into foreign  currency (E.G.,  for purposes of
paying dividends and interest).  The rate of IOF tax rate on such conversions is
currently  0%, but the  Minister of Finance has the legal power to increase  the
rate  to  a  maximum  of  25%.  Any  such  increase  will  be  applicable   only
prospectively.

      In addition to the IOF tax, a second,  temporary  tax that  applies to the
removal of funds from accounts at banks and other  financial  institutions  (the
"CPMF tax") has been imposed on  distributions by the Holding Company in respect
of ADSs at the time such  distributions  are  converted  into U.S.  dollars  and
remitted  abroad by the  Custodian.  The CPMF tax will be in effect  until  June
2002,  unless its term is  extended,  and such tax is imposed at a rate of 0.38%
from June 1999  until June 2000 and at a rate of 0.30% from June 2000 until June
2002.

   REGISTERED CAPITAL

      Amounts  invested  in  Preferred  Shares  by a  non-Brazilian  holder  who
qualifies under the Annex IV Regulations and obtains  registration with the CVM,
or by the Depositary  representing an ADS holder,  are eligible for registration
with the Central Bank. Such  registration  (the amount so registered is referred
to as  "Registered  Capital")  allows the  remittance  outside Brazil of foreign
currency, converted at the Commercial Market Rate, acquired with the proceeds of
distributions  on, and amounts realized  through  dispositions of such Preferred
Shares.  The Registered  Capital per Preferred Share purchased in the form of an
ADS, or purchased in Brazil and deposited with the Depositary in exchange for an
ADS,  will  be  equal  to its  purchase  price  (stated  in U.S.  dollars).  The
Registered  Capital per Preferred  Share  withdrawn upon  cancellation of an ADS
will be the U.S. dollar equivalent of (i) the average price of a Preferred Share
on the Brazilian  stock exchange on which the most Preferred  Shares were traded
on the day of  withdrawal  or, (ii) if no  Preferred  Shares were traded on that
day,  the  average  price on the  Brazilian  stock  exchange  on which  the most
Preferred  Shares  were  traded  in the  fifteen  trading  sessions  immediately
preceding such withdrawal.  The U.S. dollar equivalent will be determined on the
basis of the average  Commercial Market Rates quoted by the Central Bank on such
date or dates.

      A  non-Brazilian  holder of  Preferred  Shares  may  experience  delays in
effecting Central Bank registration,  which may delay remittances abroad. Such a
delay  may  adversely  affect  the  amount  in  U.S.  dollars,  received  by the
non-Brazilian holder.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

      The  statements  regarding  U.S. tax law set forth below are based on U.S.
law as in force on the  date of this  Annual  Report,  and  changes  to such law

<PAGE>

subsequent  to the date of this  Annual  Report may affect the tax  consequences
described  herein.  This summary describes the principal tax consequences of the
ownership and  disposition of Preferred  Shares or ADSs, but it does not purport
to be a  comprehensive  description of all of the tax  consequences  that may be
relevant  to a decision  to hold or dispose of  Preferred  Shares or ADSs.  This
summary applies only to purchasers of Preferred Shares or ADSs who will hold the
Preferred Shares or ADSs as capital assets and does not apply to special classes
of holders such as dealers in securities or currencies, holders whose functional
currency  is not the U.S.  dollar,  holders  of 10% or more of the shares of the
Holding  Company  (taking into account shares held directly  through  depositary
arrangements),  tax-exempt organizations, financial institutions, holders liable
for the  alternative  minimum tax,  securities  traders who elect to account for
their  investment in Preferred  Shares or ADSs on a  mark-to-market  basis,  and
persons holding Preferred Shares or ADSs in a hedging  transaction or as part of
a straddle or conversion transaction.

      EACH HOLDER SHOULD  CONSULT SUCH HOLDER'S OWN TAX ADVISOR  CONCERNING  THE
OVERALL TAX CONSEQUENCES TO IT, INCLUDING THE CONSEQUENCES UNDER LAWS OTHER THAN
U.S. FEDERAL INCOME TAX LAWS, OF AN INVESTMENT IN PREFERRED SHARES OR ADSS.

      In this  discussion,  references to a "U.S.  holder" are to a holder of an
ADS or Preferred  Shares (i) that is a citizen or resident of the United  States
of America,  (ii) that is a corporation  organized  under the laws of the United
States of America or any state  thereof,  or (iii) that is otherwise  subject to
U.S. federal income taxation on a net basis with respect to the ADS or Preferred
Shares.

      For purposes of the U.S.  Internal  Revenue Code of 1986,  as amended (the
"Code"),  U.S. holders of ADSs will be treated as owners of the Preferred Shares
underlying such ADSs.

   TAXATION OF DIVIDENDS

      A U.S. holder will recognize  ordinary  dividend  income for U.S.  federal
income tax  purposes in an amount  equal to the amount of any cash and the value
of any property  distributed by the Holding  Company as a dividend to the extent
that  such  distribution  is  paid  out  of the  Holding  Company's  current  or
accumulated  earnings and profits ("e&p"), as determined for U.S. federal income
tax purposes,  when such distribution is received by the Custodian,  in the case
of ADSs, or by the U.S. holder,  in the case of Preferred  Shares. To the extent
that such a distribution  exceeds the Holding  Company's e&p, it will be treated
as a nontaxable return of capital,  to the extent of the U.S. holder's tax basis
in the ADS (or Preferred  Shares, as the case may be), and thereafter as capital
gain. The amount of any distribution  taken into account for U.S. federal income
tax purposes is the gross amount of the distribution  without  reduction for any
Brazilian  tax  withheld  on  the  amount  distributed,  and  the  amount  of  a
distribution  paid in REAIS will be measured by reference  to the exchange  rate
for converting REAIS into U.S. dollars in effect on the date the distribution is
received by the Custodian, in the case of ADSs, or by a U.S. holder, in the case
of Preferred  Shares.  If the Custodian or U.S. holder, as the case may be, does
not convert  such REAIS into U.S.  dollars on the date it receives  them,  it is
possible  that the U.S.  holder will  recognize  foreign  currency loss or gain,
which would be ordinary  loss or gain,  when the REAIS are  converted  into U.S.
dollars.  Dividends  paid by the Holding  Company  will not be eligible  for the
dividends   received   deduction  allowed  for  certain  dividends  received  by
corporations under the Code.

      Distributions  out of e&p with  respect  to the ADSs or  Preferred  Shares
generally will be treated as dividend  income from sources outside of the United
States and  generally  will be  treated  separately  along  with other  items of
"passive" (or, in the case of certain U.S. holders, "financial services") income
for purposes of  determining  the credit for foreign  income taxes allowed under
the Code.  Subject to certain  limitations,  Brazilian  income tax  withheld  in
connection with any  distribution  with respect to the ADSs or Preferred  Shares
may be claimed as a credit  against the U.S.  federal  income tax liability of a
U.S.  holder if such U.S.  holder  elects  for that year to credit  all  foreign
income taxes,  or such  Brazilian  withholding  tax may be taken as a deduction.
Foreign tax credits will not be allowed for withholding taxes imposed in respect
of  certain  short-term  or hedged  positions  in  securities  or in  respect of
arrangements in which a U.S. holder's  expected economic profit,  after non-U.S.
taxes,  is  insubstantial.  U.S.  holders  should consult their own tax advisors
concerning  the  implications  of these  rules  in  light  of  their  particular
circumstances.

<PAGE>

      A holder of an ADS or  Preferred  Share that is a foreign  corporation  or
nonresident alien individual (a "non-U.S. holder") generally will not be subject
to U.S. federal income tax or withholding tax on  distributions  with respect to
ADSs or Preferred  Shares that are treated as dividend  income for U.S.  federal
income tax purposes,  and generally  will not be subject to U.S.  federal income
tax or withholding tax on distributions with respect to ADSs or Preferred Shares
that are treated as capital gain for U.S.  federal  income tax  purposes  unless
such holder would be subject to U.S.  federal income tax on gain realized on the
sale or other disposition of ADSs or Preferred Shares, as discussed below.

   TAXATION OF CAPITAL GAINS

      Upon the sale or other  disposition  of an ADS or Preferred  Share, a U.S.
holder will  recognize  gain or loss for U.S.  federal income tax purposes in an
amount equal to the difference  between the amount realized in consideration for
the  disposition  of the ADS or  Preferred  Share  (excluding  the amount of any
distribution paid by the Holding Company to the Custodian but not distributed by
the Custodian prior to the disposition)  and the U.S.  holder's tax basis in the
ADS or  Preferred  Share.  Such gain or loss  generally  will be subject to U.S.
federal   income  tax  and  will  be  treated  as  capital  gain  or  loss.  The
deductibility of capital losses is subject to certain limitations. Gain realized
by a U.S. holder on a sale or disposition of ADSs or Preferred  Shares generally
will be treated as U.S. source income. Consequently, if Brazilian tax is imposed
on such gain, the U.S. holder will not be able to use the corresponding  foreign
tax credit, unless the holder has other foreign source income of the appropriate
type in respect of which the credit may be used.

      A  non-U.S.  holder  will not be  subject  to U.S.  federal  income tax or
withholding  tax on gain realized on the sale or other  disposition of an ADS or
Preferred  Share unless (i) such gain is effectively  connected with the conduct
by the holder of a trade or business in the United  States,  or (ii) such holder
is an individual  who is present in the United States of America for 183 days or
more in the taxable year of the sale and certain other conditions are met.

   U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING

      Dividend  payments  with respect to ADSs or Preferred  Shares and proceeds
from the sale, exchange or redemption of ADSs or Preferred Shares may be subject
to  information  reporting  to the U.S.  Internal  Revenue  Service  ("IRS") and
possible U.S.  backup  withholding at a 31% rate.  Backup  withholding  will not
apply,  however,  to a holder who  furnishes a correct  taxpayer  identification
number  or   certificate   of  foreign  status  and  makes  any  other  required
certification or who is otherwise exempt from backup withholding. Persons exempt
from backup  withholding  include,  for example,  all  corporations  and certain
non-U.S.  persons  who hold their ADSs or  Preferred  Shares  (and  receive  all
payments thereon or in respect  thereof) through a broker or other  intermediary
who is neither a U.S. person nor has any significant U.S.  connection.  Any U.S.
person  required to  establish  its exempt  status  generally  must provide such
certification  on IRS Form W-9 (Request for Taxpayer  Identification  Number and
Certification).  Finalized treasury regulations,  which are generally applicable
to  payments  made  after  December  31,  2000,  have  generally   expanded  the
circumstances  under which  information  reporting  and backup  withholding  may
apply.

      Amounts withheld as backup  withholding may be credited against a holder's
U.S.  federal  income  tax  liability,  and a holder  may obtain a refund of any
excess  amounts  withheld  under the  backup  withholding  rules by  filing  the
appropriate   claim  for  refund  with  the  IRS  and  furnishing  any  required
information.  U.S.  holders of ADSs or Preferred Shares should consult their tax
advisors  regarding  the  application  of the  information  reporting and backup
withholding rules.

   PASSIVE FOREIGN INCOME COMPANY CONSIDERATIONS

      The Holding Company believes that its ADSs and Preferred Shares should not
be treated as stock of a passive foreign  investment company (a "PFIC") for U.S.
federal income tax purposes, but this conclusion is a factual determination made
annually and thus is subject to change.

<PAGE>

      The Holding  Company will be a PFIC with respect to a U.S.  holder if, for
any taxable year in which the U.S. holder holds ADSs or Preferred Shares, either
(i) at least 75% of the gross income of the Holding Company for the taxable year
is passive  income or (ii) at least 50% of the average  fair market value of the
Holding  Company's  assets  consists of assets that  produce or are held for the
production  of  passive  income.  For this  purpose,  passive  income  generally
includes dividends,  interest,  royalties, rents (other than rents and royalties
derived  from the active  conduct of a trade or business  and not derived from a
related  person),  annuities and gains from assets that produce  passive income.
For the purpose of the PFIC tests, the Holding Company will be treated as owning
directly its percentage share of the assets of its subsidiaries and of receiving
directly its percentage shares of each of those subsidiaries' income, if any, so
long as the Holding Company owns, directly or indirectly, at least, 25% by value
of the particular subsidiary's stock.

      If the Holding  Company  were to become a PFIC,  a U.S.  holder of ADSs or
Preferred  Shares  generally would be subject to adverse tax  consequences  with
respect to certain  distributions  on, and gains realized from a disposition of,
ADSs or Preferred  Shares.  U.S.  holders  should consult their own tax advisors
regarding the potential application of the PFIC rules to their ownership of ADSs
or Preferred Shares.

ITEM 8.  SELECTED FINANCIAL DATA

BACKGROUND

      The  selected  financial  information  presented  below  should be read in
conjunction  with the Consolidated  Financial  Statements and the notes thereto.
The 1999  Consolidated  Financial  Statements have been audited by Ernst & Young
Auditores  Independentes  S.C., and their report on the  Consolidated  Financial
Statements appears elsewhere in this Annual Report.

      The  following   paragraphs   discuss  some  important   features  of  the
presentation  of  the  selected  financial   information  and  the  Consolidated
Financial  Statements.  These features  should be kept in mind in evaluating the
selected  financial  information  and in reading  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

   BRAZILIAN GAAP AND U.S. GAAP

      The  Consolidated  Financial  Statements  are prepared in accordance  with
Brazilian  GAAP,  which  differ in  certain  material  respects  from  generally
accepted accounting  principles in the United States ("U.S.  GAAP"). See Note 30
to the  Consolidated  Financial  Statements  for a  summary  of the  differences
between  Brazilian  GAAP and  U.S.  GAAP and a  reconciliation  to U.S.  GAAP of
shareholders'  equity as of December 31, 1999 and 1998,  divisional equity as of
December  31, 1997,  net income for the years ended  December 31, 1999 and 1998,
and income before interest  income,  unallocated  interest expense and taxes for
the year ended December 31, 1997.

   PRESENTATION OF 1998 INCOME STATEMENT

      The  consolidated  income  statement  of the  Company  for the year  ended
December 31, 1998 reflects the  operations of each of the  Subsidiaries  for the
full year 1998 and the  operations  of the  Holding  Company for the period from
February 28, 1998,  the effective  date of its  establishment  in the Breakup of
TELEBRAS, to December 31, 1998.

   CHANGES IN ACCOUNTING METHODOLOGY IN 1998 AND 1999

      The Consolidated Financial Statements and, unless otherwise specified, all
financial  information  included in this Annual Report recognize certain effects
of inflation and are restated in constant REAIS of December 31, 1999  purchasing
power,  all in accordance  with  Brazilian  GAAP using the integral  restatement
method (CORRECAO MONETARIA INTEGRAL). The Company used the IGP-M inflation index
for purposes of preparing the Consolidated Financial Statements and the selected
financial  information presented below on the basis of Brazilian GAAP. See below
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of

<PAGE>

Operations--Effects  of Changes in Presentation of Financial  Statements in 1998
and 1999."  Inflationary  gains or losses on (i) monetary assets and liabilities
and,  where  possible,  other  monetary  items  have  been  allocated  to  their
corresponding  interest  income or expense  captions  and (ii)  amounts  without
corresponding  income or expense  captions  in the  Consolidated  Statements  of
Income have been  allocated to other net  operating  income in the  Consolidated
Statements of Income and the "Income  Statement Data" presented  below. See Note
2(c) to the Consolidated Financial Statements.

      The Consolidated Financial Statements as of December 31, 1997 and 1999 and
for the years then ended have been fully indexed using the integral  restatement
method. No indexation adjustments were applied in calculating financial position
as of December 31, 1998 or results of operations for the year then ended because
the low rate of  Brazilian  inflation  in 1998 (1.8% as  measured  by the IGP-M)
would have made any restatement for 1998 inflation  insignificant.  However, the
financial  statements  as of December  31, 1998 and for the year then ended,  as
well as the fully indexed  financial  information in the Consolidated  Financial
Statements  and the  selected  financial  information  presented  below  for all
previous  periods and as of and for the year ended December 31, 1999,  have been
restated into currency of December 31, 1999 purchasing power.

   ACCOUNTING CONSEQUENCES OF THE BREAKUP OF TELEBRAS

      The  formations  of the  Holding  Company and the  Subsidiaries  have been
accounted for as a  reorganization  of entities under common control in a manner
similar to a pooling of interests.  The assets and  liabilities  of the cellular
telecommunications  businesses of the Predecessor  Companies were transferred to
the  Subsidiaries  at their indexed  historical  cost. The revenues and expenses
associated  with  such  assets  and  liabilities  were  also  allocated  to  the
Subsidiaries.  For  revenues  and  costs  of  services,  separate  records  were
maintained  historically for the cellular  telecommunications  businesses of the
Predecessor  Companies,  so actual amounts were  allocated to the  Subsidiaries.
Costs other than costs of services were allocated using methodologies  described
in Note 2 to the Consolidated Financial Statements.  The consolidated statements
of revenues  and expenses and net  interdivisional  cash receipt  (distribution)
include  the  historical   activity   related  to  the  assets  and  liabilities
transferred.   The  Consolidated   Financial   Statements  are  not  necessarily
indicative of what the  financial  condition or the revenues and expenses of the
Company  would have been if the cellular  telecommunications  businesses  of the
Predecessor  Companies had been separate legal  entities  before 1998. See above
"Description  of  Business--Historical  Background"  and  See  Note  2(b) to the
Consolidated Financial Statements.

      Cash   and   certain   nonspecific   debt   relating   to   the   cellular
telecommunications   businesses  of  the  Predecessor  Companies  could  not  be
segregated from the  Predecessor  Companies prior to December 31, 1997, and such
amounts were not  reflected in the  Company's  statement of financial  condition
prior to January 1, 1998. As a result,  interest  income,  unallocated  interest
expense  and  income  tax  expense  were  not  identified  or  reflected  in the
Consolidated  Financial  Statements  for any  period  prior to  January 1, 1998.
Because  these  revenues  and  expenses  are not  included  in the  Consolidated
Financial  Statements,  historical  income  per  share  and  dividend  per share
information  was not included in the table below for any period prior to January
1, 1998. See below "Management's  Discussion and Analysis of Financial Condition
and See Results of  Operations--Effects  of Changes in Presentation of Financial
Statements in 1998 and 1999."

      At the May 22,  1998  TELEBRAS  shareholders'  meeting,  the  shareholders
established the  shareholders'  equity of each New Holding Company and allocated
to each a portion  of the  retained  earnings  of  TELEBRAS.  TELEBRAS  retained
sufficient  earnings from which to pay certain dividends and other amounts.  The
balance of its retained  earnings was  allocated to each New Holding  Company in
proportion to the total net assets allocated to each such company.  The retained
earnings so allocated do not represent the historical  retained  earnings of the
New  Holding  Companies.  The  assets  that were spun off from  TELEBRAS  to the
Holding Company, in addition to its investment in the Subsidiaries,  resulted in
an increase of R$19.3 million  compared to the Company's  historical  divisional
equity.  See Note 26 to the  Consolidated  Financial  Statements.  The amount of
distributable  retained  earnings  of  the  Holding  Company  includes  retained
earnings allocated to the Holding Company in the Breakup of TELEBRAS.

      For 1995, 1996 and 1997, the Consolidated Financial Statements present the
financial condition and revenues and expenses of the cellular telecommunications

<PAGE>

business of the  Predecessor  Companies,  and "minority  interests"  reflect the
interest in the Predecessor Companies of shareholders other than TELEBRAS. As of
December 31, 1999,  minority  shareholders  directly and indirectly owned 13.2%,
10.5%,  8.1%,  4.0%,  8.7%, 6.0% and 5.0% of the share capital of  Telebrasilia,
Telegoias, Telemat, Telems, Teleron, Teleacre and NBT, respectively.

<PAGE>

Selected Financial Information

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                                  ------------------------------------------------
                                    1995      1996      1997      1998      1999
                                  --------  --------  --------  --------  --------
                                   (THOUSANDS OF REAIS, EXCEPT PER-SHARE DATA)<F1>
<S>                                <C>       <C>       <C>       <C>       <C>
INCOME STATEMENT DATA:
BRAZILIAN GAAP
Net operating revenue              185,461   358,280   526,361   579,714   606,320
Cost of services                    71,649   125,611   220,659   236,765   296,961
                                                                           -------
Gross profit                       113,812   232,669   305,703   342,949   309,359
Operating expenses:
   Selling expenses                 10,070    18,271    59,191    90,124   107,858
   General and administrative
   expenses                         16,143    26,357    45,305    42,099    58,698
   Other net operating income
   expense                           1,828     3,573     4,338       867    12,751
                                                                            ------
Operating income before interest    89,787   191,614   205,544   209,859   130,052
Allocated interest expense........   1,777     4,319     4,473
Net interest expense <F2>.........                                63,401    43,328
                                                                            ------
Operating income before interest
   income and Unallocated
   interest expense...............  87,649   187,295   201,071
Operating income..................                               146,458    86,724
Net nonoperating expense..........                --        60    18,713     5,507
Employees' profit share                 76       268       340     1,156     1,697
                                                 ---       ---     -----     -----
Income before interest income,
   unallocated interest
   Expense, taxes and minority
   interests......................  87,573   187,027   200,671
Income before income taxes and
   minority interests <F2>........                               126,589    79,520
Income tax and social
  contribution....................                                36,567    27,155
                                                                  ------    ------
Income before minority interests..  87,573   187,027   200,671    90,022    52,365
Minority interests................   7,731    19,075    27,993    21,897    10,487
                                              ------    ------    ------    ------
Reversal of interest on own
  capital.........................      --        --        --    83,445    48,696
Income before interest income,
   unallocated interest
   expense and taxes <F2>.........  79,842   167,951   172,679
                                    ======   =======   =======
Net income........................                               151,570    90,574
                                                                 =======    ======

U.S. GAAP
Income before interest income,
   unallocated interest
   expense and taxes <F2>.........           171,245   178,660
                                             =======   =======
Net income........................                               149,156    29,632
                                                                 =======    ======

Net income per 1,000 shares
   outstanding (REAIS)............                                  0.45      0.08
</TABLE>

<TABLE>
<CAPTION>
                                                 AT DECEMBER 31,
                                    1995      1996      1997      1998      1999
                                  --------  --------  --------  --------  --------
BALANCE SHEET DATA:                      (THOUSANDS OF CONSTANTREAIS) <F1>
<S>                                <C>       <C>       <C>      <C>        <C>
BRAZILIAN GAAP
Property, plant and equipment,
  net                              382,216   628,698   693,935    795,132    904,515
Total assets                       409,608   688,997   828,756  1,113,421  1,654,470
Loans and financing                 45,489    64,096    47,930     51,164    130,810
Divisional equity                  293,061   483,874   617,972          -         --
Shareholders' equity                                              726,807  1,119,243

U.S. GAAP
Property, plant and equipment, net           598,016   648,978    745,126    861,846
Total assets                                 668,441   798,635  1,084,747  1,297,440
Loans and financing                           62,746    47,490     51,164    130,810
                                                                             -------
Divisional equity                            465,620   592,194          -
Shareholders' equity                                              689,733    740,891
                                                                             -------

------------
<FN>
<F1>
      Information is presented in constant REAIS of December 31, 1999.
<F2>
      For  1995,  1996  and  1997,  prior  to  the  effective  creation  of  the
      Subsidiaries  on January 1, 1998,  the Company did not recognize  interest
      income or taxes,  and recognized only the portion of interest expense that
      was   specifically   attributable  to  the  cellular   operations  of  the
      Predecessor  Companies.  See  Note  2(b)  to  the  Consolidated  Financial
      Statements.

</FN>
</TABLE>
<PAGE>

EXCHANGE RATES

      The  Registrant  will pay any cash  dividends  and  make  any  other  cash
distributions   with  respect  to  Preferred   Shares  in  Brazilian   currency.
Accordingly,  exchange rate  fluctuations  will affect the U.S.  dollar  amounts
received by the holders of ADSs on conversion by the Depositary of dividends and
distributions in Brazilian  currency on the Preferred Shares  represented by the
ADSs.  Fluctuations in the exchange rate between Brazilian currency and the U.S.
dollar will also affect the U.S. dollar equivalent of the price of the Preferred
Shares on the Brazilian stock exchanges.  See below "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Foreign  Exchange and
Interest Rate Exposure.

      There  are two legal  exchange  markets  in  Brazil--the  commercial  rate
exchange market (the "Commercial  Market") and the floating rate exchange market
(the "Floating Market"). The Commercial Market is reserved primarily for foreign
trade  transactions and transactions  that generally require prior approval from
Brazilian  monetary  authorities,  such as the purchase  and sale of  registered
investments  by  foreign  persons  and  related  remittances  of  funds  abroad.
Purchases and sales of foreign exchange in the Commercial  Market may be carried
out only through a financial  institution  in Brazil  authorized to buy and sell
currency in that  market.  As used  herein,  the  "Floating  Market Rate" is the
prevailing  selling rate for Brazilian  currency into U.S. dollars which applies
to transactions to which the Commercial  Market Rate does not apply, as reported
by  the  Central  Bank.  Prior  to the  implementation  of the  REAL  Plan,  the
Commercial  Market Rate and the Floating Market Rate differed  significantly  at
times.  Since the  introduction  of the REAL,  the two rates  have not  differed
significantly,  although  there  can be no  assurance  that  there  will  not be
significant differences between the two rates in the future. Both the Commercial
Market Rate and the Floating Market Rate are freely  negotiated but are strongly
influenced by the Central Bank.  The Commercial  Market and the Floating  Market
were  unified by the Central  Bank in 1999  following  the decision to allow the
value of the REAL to  float.  However,  transactions  are  still  classified  as
"Commercial Market" and "Floating Market" transactions.

      Between  March 1995 and January 1999,  the Central Bank  maintained a band
within which the exchange rate between the REAL and the U.S. dollar  fluctuated,
and the Central  Bank  intervened  in the foreign  exchange  market from time to
time.  From  January 20, 1998 through  December  31, 1998,  the band was between
R$1.12 and R$1.22 per US$1.00. In early January 1999, the Central Bank attempted
a controlled  devaluation of the REAL by widening the band within which the REAL
was permitted to trade, but subsequent Central Bank intervention  failed to keep
the rate within the new band.  On January 15, 1999,  the Central Bank  announced
that the REAL would be permitted to float,  with  Central Bank  intervention  to
take  place  only in times of  extreme  volatility.  See above  "Description  of
Business--Brazilian  Economic  Environment."  On June 21, 2000,  the  Commercial
Market Rate was  R$1.8121  to US$1.00  and the Noon Buying Rate was  R$1.8150 to
US$1.00.

      The  following  table sets  forth the  period-end,  average,  high and low
Commercial  Market Rates (through February 21, 1995) and Noon Buying Rates (from
February  22,  1995),  expressed  in REAIS  per  U.S.  dollar,  for the  periods
indicated.

<TABLE>
<CAPTION>
                                                  AVERAGE FOR
PERIOD                                PERIOD-END  PERIOD <F1>   HIGH      LOW
----------                            ----------- ----------- --------- --------
<S>                                     <C>         <C>         <C>       <C>
1995...............................     0.9722      0.9228      0.9722    0.8450
1996...............................     1.0393      1.0080      1.0413    0.9733
1997...............................     1.1165      1.0805      1.1166    1.0394
1998...............................     1.2087      1.1640      1.2090    1.1160
1999...............................     1.8090      1.8191      2.200     1.2074
2000 (through May 31, 2000)........     1.8270      1.7844      1.8560    1.7230

------------
<FN>
<F1>
      Average of the rates on the last day of each month in the period.
      SOURCE:  Central Bank through  February 21, 1995;  Federal Reserve Bank of
      New York thereafter.
</FN>
</TABLE>
<PAGE>

ITEM 9. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORMATION OF THE REGISTRANT AND PRESENTATION OF FINANCIAL INFORMATION

      On May 22, 1998,  in  preparation  for the  privatization  of the TELEBRAS
System,  the TELEBRAS System was  restructured to form, in addition to TELEBRAS,
the Holding Company and eleven other New Holding Companies. The restructuring of
the TELEBRAS System was accomplished by means of a procedure under Brazilian law
called CISAO, or split-up.  Virtually all the assets and liabilities of TELEBRAS
were  allocated  to  the  New  Holding  Companies  which,  together  with  their
respective  subsidiaries,  comprise (a) three fixed-line service providers,  (b)
eight  cellular  service  providers  and  (c)  one  domestic  and  international
long-distance  service  provider.  The  Registrant  is one of  the  New  Holding
Companies that was formed on May 22, 1998 as part of the Breakup of TELEBRAS. In
the Breakup, certain assets and liabilities of TELEBRAS, including 83.8%, 96.0%,
91.9%,  91.3%, 94.0% and 81.4% of the total share capital of Telegoias,  Telems,
Telemat, Teleron, Teleacre and Telebrasilia,  respectively,  were transferred to
the Holding Company.

      On May 24, 1999,  NBT was  constituted as a private  corporation  with 95%
participation  by the Holding Company.  NBT's operating  objective is to explore
cellular services as well as all necessary and useful activities for delivery of
these services within Area 8. NBT commenced operations on October 7, 1999.

      The  following   discussion   should  be  read  in  conjunction  with  the
Consolidated  Financial  Statements of the Company and the notes thereto,  which
are included elsewhere in this Annual Report.  Certain important features of the
presentation  of the  Consolidated  Financial  Statements  are  described in the
introduction to "Selected Financial Data."

EFFECTS OF CHANGES IN PRESENTATION OF FINANCIAL STATEMENTS IN 1998 AND 1999

      There are three  significant  differences  in  presentation  between the
Consolidated  Financial  Statements of the Company for 1997,  and for 1998 and
1999.  Each of these  differences  should be taken into  account in  comparing
financial condition and results of operations for that period.

o  FULLY SEPARATE  OPERATIONS OF THE SUBSIDIARIES.  The Band A Subsidiaries were
   created effective January 5, 1998, by splitting up the Predecessor  Companies
   to separate their cellular operations from their fixed-line  operations.  The
   Band  B  Subsidiary  was  created  in  May  1999.  For  1998  and  1999,  the
   Consolidated  Financial Statements reflect the operations of the Subsidiaries
   as  fully  independent  companies.   For  1997,  the  Consolidated  Financial
   Statements  reflect the cellular  operations  of the  Predecessor  Companies.
   Costs were  specifically  identified  where possible and divided  accordingly
   between fixed and cellular operations.  Where specific identification was not
   possible,  costs were allocated between the Predecessor Companies' fixed-line
   and cellular  operations in accordance with the methodology set forth in Note
   2 to the Consolidated Financial Statements. It should not be assumed that the
   financial  condition and results of operations of the cellular  operations of
   the Predecessor  Companies would have been the same if they had been separate
   legal  entities  or if their  businesses  had been  operated  as  independent
   businesses prior to 1998.

   In preparing  financial  statements  for the years prior to 1998,  it was not
   possible  to  determine  the amount of the  Predecessor  Companies'  cash and
   nonspecific  debt that should be allocated to the  cellular  operations,  and
   there was no shareholders'  equity specifically  attributable to the cellular
   operations.  As a result,  the  presentation  of the  Consolidated  Financial
   Statements is different for 1997 than for 1998 and 1999. In  particular,  for
   1997 the statement of revenues and expenses does not include  interest income
   or taxes and includes only the allocable portion of interest expense,  and it
   accordingly does not present net income. See above "Selected  Financial Data"
   and See Note 2(b) to the Consolidated Financial Statements.

o  CREATION OF THE HOLDING  COMPANY.  The Holding Company was created on May 22,
   1998 in the  Breakup of  TELEBRAS,  and its assets were valued as of February
   28, 1998. For 1998 and 1999, the Consolidated  Financial  Statements  reflect
   the consolidated financial condition and results of operations of the Holding
   Company  and  the  Band A  Subsidiaries.

<PAGE>

o  INDEXATION FOR INFLATION.  The Consolidated Financial Statements are prepared
   on a  fully  indexed  basis  to  recognize  the  effects  of  changes  in the
   purchasing power of the Brazilian currency during the periods  presented.  No
   indexation  adjustments  were applied during the year ended December 31, 1998
   on account of the insignificant level of inflation during that year. However,
   the financial statements as of December 31, 1998 and for the year then ended,
   as well as the fully indexed  financial  statements for all previous  periods
   and for the year ended December 31, 1999, have been restated into currency of
   December 31, 1999 purchasing  power.  See "Selected  Financial Data" and Note
   2(c)  to the  Consolidated  Financial  Statements.  In  accordance  with  the
   constant  currency  methodology  used in the preparation of the  Consolidated
   Financial  Statements,  all of the  amounts  presented  for  the  year  ended
   December 31, 1998 have been  restated in constant  REAIS of December 31, 1999
   purchasing power as measured by the IGP-M index during 1999 (which produces a
   correction of 20.1% of all amounts in 1998).  Because the  correction  factor
   applied to 1998 amounts exceeded the rate of price inflation for many revenue
   and cost items, the accounting correction is itself a significant explanatory
   factor for the changes  recorded for such items  between 1998 and 1999 on the
   Company's  Consolidated  Statements  of Income.  As a result of this monetary
   restatement,  year-over-year  percentage calculations emphasize decreases and
   dampen increases in such revenue and cost items.

POLITICAL, ECONOMIC, REGULATORY AND COMPETITIVE FACTORS

      The  following   discussion   should  be  read  in  conjunction  with  the
"Description of Business"  section included  elsewhere in this Annual Report. As
set forth in  greater  detail  below,  the  Company's  financial  condition  and
operations   are   significantly   affected  by   Brazilian   telecommunications
regulation,   including   regulation  of  tariffs.  See  above  "Description  of
Business--Regulation   of  the  Brazilian   Telecommunications   Industry."  The
Company's  financial condition and revenues and expenses also have been, and are
expected to continue to be,  affected by the political and economic  environment
in Brazil. See above "Description of Business--Brazilian  Political Environment"
and See above  "Description of  Business--Brazilian  Economic  Environment."  In
particular, the Company's financial performance will be affected by (i) national
economic growth and its impact on demand for telecommunications  services,  (ii)
the cost and  availability  of financing  and (iii) the exchange  rates  between
Brazilian and foreign currencies.

      The Company has faced  competition  in the Region since November 1997. The
Company's  management  expects  that,  as a result of  competition,  prices  for
cellular  telecommunications  services will decline and the Company's  operating
margins  will  diminish.  The scope of  increased  competition  and any  adverse
effects on the  Company's  results and market  share will depend on a variety of
factors that cannot now be assessed with  precision and are beyond the Company's
control. See above "Description of Business--Competition."

FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE

      The  Company's  financial  condition  and  revenues  and  expenses  may be
affected  by changes in foreign  currency  exchange  rates  (primarily  the U.S.
dollar/REAL  rate) and market rates of interest  (primarily the London Interbank
Offered Rate ("LIBOR")).

      The principal  foreign  exchange risk faced by the Company arises from its
foreign  currency  liabilities.  As of December 31, 1999, the Company had R$62.7
million of indebtedness  denominated in U.S.  dollars,  which constituted all of
the  Company's  foreign  currency  indebtedness.  Of this  amount,  R$12 million
represents  financing  for equipment  imports.  The balance of this amount arose
when, under certain agreed procedures for the Breakup of TELEBRAS, certain loans
(the  "TELEBRAS  Loans")  were to have  been spun off from the  TELEBRAS  system
through (i) the  assignment of the obligation to pay the TELEBRAS Loans and (ii)
the assignment of the right to receive such payments. Although the obligation to
pay the TELEBRAS  Loans was duly assigned to  Telebrasilia  and  Telegoias,  the
right to receive such payments was not assigned to the Holding Company. In light
of this departure from the agreed  procedures for assigning the right to receive
payments  under the TELEBRAS  Loans in connection  with the Breakup of TELEBRAS,
payment  of the  TELEBRAS  Loans was  suspended  immediately  upon the change of
control of the Holding  Company.  The Company's  management has determined that,
beginning in January 1999,  the TELEBRAS  Loans will be treated for all purposes
as  real-denominated  liabilities  bearing interest at a rate equal to the IGP-M

<PAGE>

plus 6%.  Payment of the  TELEBRAS  Loans has not  resumed,  and steps are being
taken to resolve the situation. See above "Legal Proceedings--Litigation Related
to TELEBRAS Loans."

      The  Company's  revenues  are earned  almost  entirely  in REAIS,  and the
Company has no material  dollar-denominated  assets.  The Company has not hedged
its foreign currency exposure existing as of December 31, 1999. Thus, if despite
the determination of management to treat the TELEBRAS Loans as  real-denominated
liabilities,  the Company  becomes  obligated  to service and repay the TELEBRAS
Loans as U.S.  dollar  obligations,  the Company  will  continue to have foreign
exchange risk in respect of the TELEBRAS Loans. Devaluations of the REAL results
in exchange loss on foreign currency indebtedness.  Therefore,  decreases in the
value of the REAL relative to the dollar could have a material adverse effect on
the Company.

      The  Company is  exposed to  interest  rate risk as a  consequence  of its
floating rate debt and limited  floating  rate  interest-earning  assets.  As of
December  31,  1999,   substantially  all  of  the  Company's   interest-bearing
liabilities,  including the TELEBRAS Loans, bore interest at floating rates. The
decision  of  the  Company's   management   to  treat  the  TELEBRAS   Loans  as
real-denominated  obligations  does not change their character as  floating-rate
interest  obligations,  although  the base rate of  interest on the loans is now
being  treated by the Company as IGP-M  rather  than LIBOR.  The Company has not
entered into  derivative  contracts or made other  arrangements to hedge against
this risk.  Accordingly,  should market interest rates (principally IGP-M or, if
the Company  becomes  obligated to service and repay the TELEBRAS  Loans as U.S.
dollar obligations, LIBOR) rise, the Company's financing expenses will increase.

      In May 2000, the Company entered into a Zero Coupon Euro Commercial  Paper
Program of US$200 million.  The first issuance of the program amounted to US$110
million face amount,  drawn on May 23, 2000,  with a remuneration of 9.0% to the
investor and is due 360 days after the date of issuance.  In order to reduce its
foreign  currency  exposure,  the  Company  has hedged the entire  amount of the
issuance.

<PAGE>

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999

      The following table sets forth certain  components of the Company's income
for each of the years in the three-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                  YEAR ENDED DECEMBER 31,            %CHANGE
                                --------------------------    -----------------------
                                 1997      1998      1999      1997-1998   1998-1999
                                ------    ------    ------    ----------- -----------
                                 (MILLIONS OF REAIS) <F1>
<S>                              <C>      <C>       <C>          <C>      <C>
Net operating revenue........    526.4     579.7     606.3        10.1        4.6
Cost of services.............    220.6     236.7     297.0         7.3       25.4
Gross profit ................    305.8     343.0     309.4        12.2       (9.8)
Operating expenses:
Selling expenses.............     59.2      90.1     107.9        52.3       19.7
General and administrative
     expenses................     45.3      42.2      58.7        (7.1)      39.4
Other net operating income
     (expense)...............      4.3      (0.8)    (12.8)       n.m.    1,370.7
Total                            100.2     133.1     179.3        32.9       34.7
Operating income before
interest.....................    205.5     209.8     130.1         2.1      (38.0)
Allocated interest expense...      4.4        --        --          --         --
Net interest expense<F2>.....       --      63.4      43.3          --      (31.7)
Operating income <F3>........    201.0     146.4      86.7       (27.2)      (40.8)
Net non-operating expense....      0.1      18.7       5.5         n.m      (70.6)
Employees' profit share......      0.4       1.2       1.7       240.3       46.8
Income before taxes  and
  minority interests <F2>....    200.7     126.6      79.5          --      (37.2)
Income tax and social
  contribution...............       --      36.5      27.1        n.m.      (25.7)
Minority interests...........    (28.0)    (21.9)    (10.5)       21.8      (52.1)
Reversal of interest on own
  capital                           --      83.5      48.7          --      (41.6)
Income before interest
  income, unallocated
  interest expense and taxes.    172.7        --        --          --
Net income...................       --     151.6      90.6                  (40.2)

------------
<FN>
n.m.:  not meaningful
<F1>
      Information is presented in constant  REAIS of December 31, 1999.  Columns
      may not add due to rounding.
<F2>
      For 1997,  prior to the effective  creation of the Subsidiaries on January
      5, 1998,  the  Company did not  recognize  interest  income or taxes,  and
      recognized  only the portion of  interest  expense  that was  specifically
      attributable to the cellular operations of the Predecessor Companies.
<F3>
      For 1997,  information presented reflects operating income before interest
      income and unallocated interest expense. See Note 2(b) to the Consolidated
      Financial Statements.
</FN>
</TABLE>

   OPERATING REVENUES

      The Company  generates  operating  revenue from (i) activation fees, which
are  one-time  sign-up  charges  paid to obtain  cellular  service,  (ii)  usage
charges,  which include  measured service charges based on tenths of a minute of
outgoing  calls and roaming other similar  charges,  (iii) monthly  subscription
charges,  (iv)  network  usage  charges,  which are the  amounts  charged by the
Company to other cellular and fixed-line  telephone service providers for use of
the Company's  network by such service  providers'  customers (E.G., when one of
such  customers  calls one of the Company's  subscribers),  (v) prepaid  handset
sales and (vi) other services and charges,  which primarily include fees arising
from the transfer of cellular service from one user to another, and fees paid by
subscribers for supplemental services such as call forwarding,  call waiting and
call blocking.  In 1999,  the Company began to sell handsets in connection  with
the  provision  of  prepaid  cellular  telecommunications  services.  See  above
"Description of Business--Sources of Revenue--Subscriber Rates."

<PAGE>

Details of Company Revenue:

<TABLE>
<CAPTION>
                                  YEAR ENDED DECEMBER 31,            %CHANGE
                                --------------------------    -----------------------
                                 1997      1998      1999      1997-1998   1998-1999
                                ------    ------    ------    ----------- -----------
                                 (MILLIONS OF REAIS) <F1>
<S>                             <C>       <C>       <C>         <C>         <C>
Gross Operating revenue:
  Usage charges..............    312.4     346.0     335.8       10.7        (2.9)
  Monthly subscription
  charges....................    169.8     176.3     192.2        3.8         9.0
  Network usage charges......    130.7     170.7     179.2       31.6         5.0
  Activation fees............     37.7      26.1       3.7      (31.0)      (85.7)
  Prepaid handsets/cards.....      -         -        53.3         --          --
  Other......................     10.6       7.7      13.6      (27.3)       76.0
                                                    ------
  Gross operating revenue....    660.2     726.7     777.9       10.1         7.0
  Value-added and other
  indirect taxes ............   (133.8)   (147.0)   (171.6)       9.8        16.7
                                                    ------
Net Operating Revenue........    526.4     579.7     606.3       10.1         4.6
                                                    ======
------------
<FN>
<F1>
      Information  is presented in constant REAIS of December 31, 1999. See Note
      2(c) to the Consolidated Financial Statements.  Columns may not add due to
      rounding.
</FN>
</TABLE>

      Net operating  revenues  increased by 4.6% in 1999 and 10.1% in 1998.  The
growth in  revenues  over this  three-year  period  was  driven  principally  by
increases in demand for cellular  services.  The average  number of  subscribers
increased  27.7% to 443,537  subscribers  in 1998 from 347,300 in 1997. In 1999,
the average  number of  subscribers  increased to 621,043 or by 40.0% from 1998.
The growth in revenues in 1998 and 1999 is due in part to a reduction in, and in
some cases  elimination of, in activation  fees,  which in turn  facilitated new
entries,  increased the subscriber base and generated  additional  revenue.  The
introduction of new services,  such as prepaid and revenue  generated by roaming
fees,  also  contributed  to the  increased  revenue.  The increase in supply of
telecommunications  services  occasioned by the introduction of competition into
the Region in November 1997 has tended to reduce the rate of  subscriber  growth
as well as prices. As a result, management expects the rate of revenue growth to
stabilize.

      USAGE CHARGES. Revenues from usage charges increased by 10.7% in 1998 from
1997 and decreased by 2.9% in 1999 from 1998.  The increase in 1998  principally
reflected a 20.9%  increase in the total outgoing  domestic  traffic (from 482.1
million minutes in 1997 to 583.1 million  minutes in 1998),  offset in part by a
significant decrease in outgoing  international calls as the Company implemented
various  practices  restricting such calls in an effort to reduce  fraud-related
losses. Excluding revenues from international calls, revenues from usage charges
increased  16.9% to  R$343.0  million  in 1998  from  R$293.4  million  in 1997.
Revenues from usage charges on international  calls fell from approximately R$19
million in 1997 to R$2.4  million in 1998,  reflecting  reductions in fraudulent
international  long-distance  calling,  particularly  in  Telegoias.  See  above
"Description of Business--Fraud  Detection and Prevention." The increase in 1998
was also offset by a reduction in nominal  rates at the end of 1997 and again in
early 1998.  As of January  1999,  once  previous  accounting  discrepancies  by
TELEBRAS were corrected, the Company ceased recognizing international traffic as
revenue and  expenses,  since this traffic was due to EMBRATEL.  To that extent,
the  variation  in revenue  from usage  charges in 1999 from 1998,  exclusive of
international  calls,  was  generated  mostly by an 11.3%  increase  in outgoing
domestic calls, from 583.1 million minutes to 649.1 million minutes.

      MONTHLY SUBSCRIPTION CHARGES.  Revenues from monthly subscription payments
increased by 3.8% in 1998 from 1997 and by 9.0% in 1999 from 1998. The growth in
revenues  in  1998  was due to the  27.7%  increase  in the  average  number  of
subscribers,  which was almost entirely offset by a 25.6% decrease in rates. The
growth in  revenues  in 1999 was due mainly to a 24.3%  increase  in the average
number of contract customers.

      NETWORK USAGE  CHARGES.  Revenues from network usage charges  increased by
31.6% in 1998 from 1997 and by 5.0% in 1999 from 1998.  The increase in 1998 was
due to growth in the volume of calls to the  Company's  subscribers  originating
outside the Company's network, which grew by 20.9% from 520.3 million minutes in
1997 to 681.3 million minutes in 1998. From 1998 to 1999,  traffic  increased by
73.7%,  from 681.3  million  minutes to 1.183 billion  minutes.  The 1999 result
reflects the  renegotiation  of tariffs  between the Company and the  fixed-line
service  providers in the Region,  which  account for 53% of the total  traffic,

<PAGE>

thereby  diminishing the  interconnection  fees to be paid  (fixed-line  network
expenses). See above "Description of Business--Sources of Revenue--Network Usage
Charges."

      ACTIVATION FEES.  Revenues from activation fees decreased by 31.0% in 1998
from 1997 and by 85.7% in 1999 from 1998. The decrease in 1998 was the result of
a significant decrease in average activation charges, which decreased from R$327
in 1997 to R$110 in 1998 as a result of reduced-activation-fee  sales promotions
in the months of May, June, August and September, and the complete suspension of
activation fees beginning in October 1998. These decreases in activation charges
were  partially  offset  by an  increase  of  27.7%  in the  average  number  of
subscribers in 1998. The decrease in revenues from  activation  fees in 1999 was
due to the  continuation  of the strategy by the  Subsidiaries  to enlarge their
subscriber bases, by way of promotions reducing or waiving activation fees.

      MERCHANDISE  SALES.  As of May 1999 the Band A Subsidiaries  begin to link
cellular handset sales with the provision of prepaid cellular telecommunications
services.  See above "Description of  Business--Sources  of  Revenue--Subscriber
Rates."

      OTHER. Revenues from other services, which principally include fees earned
from the  transfer of cellular  telephone  service  from one user to another and
supplemental  services such as call forwarding,  call waiting and call blocking,
decreased  by 27.3% in 1998 from 1997 and  increased by 76.0% in 1999 from 1998.
The decline from 1997 to 1998 was due principally to the  significant  reduction
in charges for service  transfers,  from R$300 to R$30, the reduction of charges
for some  additional  services and the  elimination  of charges for others.  The
significant  increase  from 1998 to 1999 was due mainly to the  expansion of the
roaming network,  which Telebrasilia  obtained by participating in the formation
of a national roaming system.  Thus, the Subsidiaries  paid roaming charges when
their  subscribers  accessed the roaming  network,  Telebrasilia  also benefited
ratably from the revenue of the service  providers  that make up the system.  In
December 1999, revenue from roaming charges were R$6.8 million.

      VALUE-ADDED  AND OTHER  INDIRECT  TAXES.  The principal  taxes assessed on
revenues are ICMS, PIS and COFINS.  The ICMS rate in each state in the Region is
25%, except in the State of Acre, where the rate for domestic telecommunications
services is 17% for intrastate  calls and 13% for interstate  calls,  and in the
State of Mato  Grosso,  where,  as of January 1999 the ICMS rate was raised from
25% to 30%. The rate on sales of prepaid cellular handsets in the Region is 17%,
except in Goias where it is 7%. PIS and COFINS are imposed at a combined rate of
3.65% of gross operating  revenues.  Nonetheless,  PIS and COFINS are calculated
based on the total  revenue of the Company,  including  financial  revenue.  The
amount  of  value-added  and  other  indirect  taxes  collected  by the  Company
represented  20.3% of gross operating  revenues in 1997, 20.2% in 1998 and 22.1%
in 1999.  The  variations  reflect  increases in the Company's  gross  operating
revenue  during  each  period,  as well as  changes  in rates  and the basis for
calculating the aforementioned taxes. Activation fees became subject to ICMS for
the first time with effect from July 1, 1998, which increased the effective rate
of   taxation   of    operating    revenues   in   1998.    See   above   "Legal
Proceedings--Litigation  Related to the  Application of the ICMS" and Note 24 to
the Consolidated Financial Statements.

<PAGE>

   COST OF SERVICES

<TABLE>
<CAPTION>

                                  YEAR ENDED DECEMBER 31,            % CHANGE
                                --------------------------    -----------------------
                                 1997      1998      1999      1997-1998   1998-1999
                                ------    ------    ------    ----------- -----------
                                 (MILLIONS OF REAIS) <F1>
<S>                             <C>       <C>       <C>         <C>         <C>
Cost of services:
Depreciation and
amortization..............      53.6       72.8     109.3        36.0        50.1
Materials and services....      69.0       65.1      71.8        (5.8)       10.2
Fixed-line network
expenses..................      72.6       63.9      25.4       (12.0)      (60.2)
Fistel fees...............      11.4       16.3      27.4        43.7        67.3
Personnel.................       4.7        7.6       8.2        61.7         8.2
Cost of Goods Sold........       -          -        46.3         --          --
                                                    -----
Other.....................       9.3       11.0       8.6        18.3       (22.3)
                                                    -----       -----       -----
Total.....................     220.6      236.7     297.0         7.3        25.4
                                                    =====       =====       =====

------------
<FN>
<F1>
      Information  is  presented in constant  REAIS of December 31, 1999.  See
      Note 2(c) to the  Consolidated  Financial  Statements.  Columns  may not
      add due to rounding.
</FN>
</TABLE>

      Cost of services  increased by 25.4% in 1999 from 1998 and by 7.3% in 1998
from 1997.  The  increase  in 1999  resulted  principally  from an  increase  in
depreciation  and  amortization  costs  related to the  growth of the  Company's
network and in costs due to the  acquisition  of  handsets,  which  increase was
partially  offset by a  decrease  in  amounts  paid for the  lease of  available
capacity on inter-connecting circuits.

      DEPRECIATION AND AMORTIZATION.  Depreciation and amortization increased by
50.1% in 1999 from 1998 and by 36.0% in 1998 from 1997.  The  increase  reflects
expansion  of  the  Company's   network  and  the  Company's   revision  of  its
depreciation  policies  and  election  to modify the  depreciation  periods  for
certain   equipment  in  light  of   technological   developments  and  changing
international  business  practices.  Effective  January  1,  1999,  the  rate of
depreciation of transmission  equipment increased from 10% to 14.29% and that of
switching equipment from 7.69% to 10%.

      MATERIALS AND SERVICES.  Materials and services include costs of materials
and services  received from third parties,  including network usage charges paid
to other cellular  telecommunications service providers, to fixed-line companies
and to EMBRATEL for the completion on their networks of calls  originated by the
Company's  customers.  Materials and services expense  decreased by 5.8% in 1998
from 1997 and increased by 10.2% in 1999 from 1998. The decrease in 1998 was due
primarily to a decrease of 83%, from R$17.9  million in 1997 to R$3.1 million in
1998, in payments to EMBRATEL in  connection  with  international  long-distance
service,  principally  as a result of  reductions  in  fraudulent  international
long-distance  calling,  particularly  in Telegoias.  See above  "Description of
Business--Fraud Detection and Prevention." This decrease was partially offset by
an increase in the volume of outgoing traffic due to the growth of the Company's
subscriber  base. The increase in subscriber base in 1999 was strongly  impacted
by the launch of prepaid  services  and caused a 21.8%  increase  in third party
services  accounts,  including network usage charges,  fixed  telecommunications
costs and technical operational services.

      COST OF GOODS SOLD. With the  introduction of prepaid  cellular service on
May 31, 1999, the cost of handsets accounted for 15.6% of cost of services.

      FIXED-LINE  NETWORK EXPENSES.  Fixed-line network expenses represent lease
payments to the Predecessor Companies for use of interconnecting  circuits among
the  Company's  base  stations  and  switching  centers and for  reservation  of
available capacity on the networks of the Predecessor  Companies.  Such expenses
decreased  by 60.2% in 1999  from  1998 and by  12.0% in 1998  from  1997.  Such
expenses  accounted  for 8.6% of total costs of services in 1999 compared to 27%
in 1998. The decrease in 1998 was due to ANATEL-mandated discounts in such lease
payments,  which  initially  ranged  from 5% to 25% (in  March  1998)  and  were
subsequently  increased to a level  ranging from 15% to 48% (in May 1998),  with
the higher discounts applicable to higher-volume usage of circuits and available
capacity.  The decrease in 1999 is due not only to the  expansion of the Company
network but also to further  reductions  in fixed-line  interconnection  circuit

<PAGE>

lease payments negotiated with the Predecessor Companies. See above "Description
of Business--Operating Agreements--Interconnection Agreements."

      FISTEL  FEES.  Fees  payable  to  finance  the FUNDO DE  FISCALIZACAO  DAS
TELECOMUNICACOES  ("Fistel")  were  R$11.4  million,  R$16.3  million and R$27.4
million in 1997, 1998 and 1999,  respectively.  Fistel fees are assessed against
cellular  service  providers  for  existing  facilities  (based on the number of
active  cellular  lines),  for the  installation  of new facilities and for each
activation  of a  new  cellular  line.  The  67.3%  increase  in  1999  was  due
principally to the expansion of the Company's subscriber base, which experienced
growth of 58.0% for that period, and to the installation of new base stations.

      PERSONNEL.  Personnel  expenses  increased during the period,  rising from
R$4.7  million in 1997 to R$7.5  million  in 1998 and to R$8.2  million in 1999.
These  increases  were due  principally to increases in the number of employees,
which has kept pace with the growth in the  business and in 1998  reflected  the
need  to  create  a  business  infrastructure  (such  as  accounting,   finance,
information  technology,  sales and planning departments) in connection with the
establishment of the Holding Company and the Subsidiaries following the Breakup.
The  increase in 1998 also  reflects  salary  increases  instituted  in order to
attract  and  maintain   engineers  and  other   personnel  in  an  increasingly
competitive  environment.  This trend  continued in 1999 as  personnel  expenses
relating to services increased by 8.2% from 1998. The increase was mainly due to
an expansion in the Company's work force during this period.

      OTHER.  Other costs of services  include  rents for  properties  where the
Company's base stations,  towers and switching  equipment are located,  costs of
power supply and other  similar  infrastructure  costs.  Other costs of services
increased  by 18.3% in 1998 from 1997 and  decreased by 22.3% in 1999 from 1998.
The increase in 1998  reflected the  expansion of the Company's  network and the
growth of the business. The decrease reflects the renegotiation of contracts for
the expansion of the Company's network.

   OPERATING EXPENSES

      SELLING EXPENSES.  Selling expenses  increased 19.7% in 1999 from 1998 and
52.3% in 1998  from  1997.  The  increase  in 1999  resulted  primarily  from an
aggressive  marketing campaign for prepaid services,  which included advertising
campaigns and an increase in sales commissions to independent  distributors.  In
addition,  the  standardization  of policy  among the  Subsidiaries  relative to
provisions for doubtful accounts resulted in a change in calculation methodology
as of December 1998. The  methodology  comprises the recording of a provision to
cover 100% of  accounts  past due over 90 days.  For  accounts  not yet  billed,
accounts not yet due and accounts  past due less than 90 days,  the  percentages
historically  obtained from  write-offs are applied to the gross revenues of the
last 12  months.  Prior  to  December  1998,  provisions  were  based on 100% of
accounts  past due over 120  days.  In the  period  from  1997 to 1998,  selling
expenses  increased  52.3%.  The  increase  in 1998  resulted  primarily  from a
significant increase in marketing and promotional efforts, including advertising
campaigns,  the  establishment of a network of independent  distributors and the
opening  of new  stores.  An  increase  in the  commission  paid to  independent
distributors also contributed to the growth of selling expenses in 1998.

      GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative expenses
decreased  7.1% in 1998 from 1997 and increased by 39.4% in 1999 from 1998.  The
decrease  in 1998  resulted  primarily  from a  33.9%  decrease  in  third-party
expenses in 1998 compared with  allocated  third-party  expenses for general and
administrative  services  provided by the  Predecessor  Companies in 1997.  This
decrease  was  partially  offset  by  increases  in  personnel  expenses,  which
reflected new hirings to perform general and administrative functions (including
information  technology,  accounting,  auditing,  legal and planning) previously
performed by the  Predecessor  Companies  and  increased  depreciation  expenses
(relating   principally  to  the  depreciation  of  real  property  acquired  in
connection  with  the  Company's  new  headquarters  and  other   administrative
operations).  The 1999  increase is due  primarily  to the increase in corporate
personnel in the Holding Company. Due to the increase, personnel costs accounted
for 25.1% and 35.9% of total costs in 1998 and 1999,  respectively,  with growth
of 131.6%  arising from a 47.9%  increase in the number of employees as a result
of the establishment of NBT. Third party services also accounted for significant
growth in expenses of the Company during this period, increasing by 31.2%.

<PAGE>

      OTHER NET  OPERATING  INCOME  (EXPENSE).  The Company  recorded  other net
operating expense of R$12.8 million in 1999, compared with R$0.8 million in 1998
and other net  operating  income of R$4.3  million in 1997.  Other net operating
expenses in 1999  resulted  principally  from the  amortization  of the deferred
charge  representing  premium,  which arose from the merger into the Company, on
December 14, 1999, of Coverage Participacoes S.A., a subsidiary of BID S.A. with
an investment in the Company as its only asset,  is being  amortized over a five
year period. This amount,  R$5.4 million,  corresponds to 1/60th of the premium.
See  Notes  3(g) and 32 to the  Consolidated  Financial  Statements.  Other  net
operating  expenses in 1998 resulted  primarily from R$3.4 million in provisions
for  contingencies  (principally  ICMS litigation) and R$2.2 million in research
and development expenses,  which were partially offset by R$4.7 million in fines
collected from customers.

   NET INTEREST EXPENSE

      Net interest  expense of R$63.4 million in 1998 and R$43.3 million in 1999
resulted  primarily from the payment of dividends in the form of interest on own
capital in the amount of $R83.4  million in 1998 and R$48.7 million in 1999. See
below "Management's Discussion and Analysis of Financial Condition and See below
"Management's  Discussion  and  Analysis of Financial  Condition--Liquidity  and
Capital  Resources." The Company  recorded  interest income of R$29.3 million in
1998 and R$38.9 million in 1999, which resulted principally from interest income
on the Company's average balance of cash and cash  equivalents,  which increased
significantly  as a result of increased cash generation in 1998 and 1999 as well
as the receipt by the Company of R$18.6  million in connection  with the Breakup
of TELEBRAS.  Such interest income was partially offset by R$8.8 million in 1998
and R$34.2 million in 1999 in interest expense.

   NET NON-OPERATING EXPENSE

      Write-offs  of property,  plant and  equipment and gains and losses on the
sale of property,  plant and equipment are recorded as non-operating  income and
expense.  The Company  recorded net  non-operating  expense of R$18.7 million in
1998 and R$5.5 million in 1999.  Non-operating expense in 1998 and 1999 resulted
primarily  from  write-offs in the amounts of R$17.8  million and R$5.6 million,
respectively,  of certain analog transmission equipment that has become obsolete
as a result of increasing demand for digital telecommunications services.

   EMPLOYEES' PROFIT SHARING

      All  Brazilian  companies are required  under  Brazilian law to compensate
employees  with profit  sharing in addition to their  salary and  benefits.  The
amount of such profit sharing is determined by  negotiation  between the Company
and the labor unions  representing  the  employees.  Employees  profit share was
R$0.4  million,  R$1.2  million  and  R$1.7  million  in 1997,  1998  and  1999,
respectively.

   MINORITY INTERESTS

      Minority  interests reflect the participation of minority  shareholders in
the Subsidiaries in the net income or loss of such Subsidiaries, as the case may
be. Minority interests were 13.9% of income before interest income,  unallocated
expense,  taxes  and  minority  interests  in 1997 and 12.6% and 10.4% of income
before minority interests in 1998 and 1999, respectively. The variations in 1998
were due to  variations  in net income at the  Subsidiaries,  which have varying
levels of minority shareholder interest among them.

LIQUIDITY AND CAPITAL RESOURCES

      The Company's principal capital  requirements are for capital expenditures
and payments of dividends to shareholders. The Company made capital expenditures
totaling R$97.3  million,  R$146.5 million and R$182.0 million in 1997, 1998 and
1999,  respectively.  These expenditures related primarily to increasing network
capacity,    coverage   and   digitalization.    See   above   "Description   of
Business--Capital Expenditures."

      The Holding Company is required to distribute to its shareholders,  either
as dividends or as tax-deductible  interest on own capital,  25% of its adjusted

<PAGE>

net income  determined in accordance with Brazilian  accounting  principles,  as
adjusted in accordance with Brazilian  corporate law,  including any realization
of the net  income  reserve.  The  Holding  Company  is also  required  to pay a
non-cumulative  preferred dividend on its Preferred Shares in an amount equal to
6% of the share capital  attributable  to the Preferred  Shares under  Brazilian
corporate  law,  which  requirement  may also be satisfied by  distributions  of
interest on own capital.  In 1999,  the Holding  Company  distributed a total of
R$36.5 million  (R$72.3 million in 1998) in the form of interest on own capital.
See Note 26(c) to the Consolidated Financial Statements.

      Capital  expenditures were financed  principally with internally generated
cash throughout the period, together with financing in national currency, mainly
R$66.4  million in December  31, 1999 from the  National  Bank for  Economic and
Social  Development and financing of R$12.0 million in foreign currency.  On May
23, 2000, the Company issued US$110 million face amount under its US$200 million
Zero Coupon Euro Commercial Paper Program.  The proceeds of the issuance will be
used for the expansion  and  modernization  of the Company's  telecommunications
plant. See above  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations--Foreign Exchange and Interest Rate Exposure" and Note
33 to the Consolidated Financial Statements.

      As of December 31, 1999, the Company had total  investment  commitments of
R$300  million  in 2000  capital  expenditures.  Management  expects  that  such
expenditures   will  be  funded   primarily  with  internally   generated  cash,
supplemented  by  financings  from  external  sources.  Most of the planned 2000
capital expenditures will be dedicated to expanding the capacity and coverage of
the Company's network and digitizing the network in all areas.

      Substantially all of the Company's start-up costs and initial  investments
were financed by cash flows from the fixed-line telecommunications operations of
the Predecessor Companies.  Accordingly, the Company's debt does not reflect the
amount  of debt the  Company  would  have  been  required  to incur to build its
current  network if the Company had  operated  on a  stand-alone  basis from the
inception of the Predecessor Companies' cellular telephone operations.

      The Holding Company's principal assets are the shares of the Subsidiaries.
The Holding Company relies almost exclusively on dividends from the Subsidiaries
to meet its  needs for cash,  including  for the  payment  of  dividends  to its
shareholders.  The Holding  Company  controls  the payment of  dividends  by the
Subsidiaries, subject to limitations under Brazilian law.

      The Company  participates  in a  multi-employer  defined benefit plan that
covers  the  former  employees  of the  TELEBRAS  System,  and  the  Company  is
contingently  liable for the  unfunded  obligations  of the plan.  See Notes 25,
30(b) and 31(a) to the Consolidated Financial Statements.

U.S. GAAP RECONCILIATION

      The Company prepares its consolidated  financial  statements in accordance
with Brazilian  GAAP,  which differ in significant  respects from U.S. GAAP. The
principal  differences between Brazilian GAAP and U.S. GAAP as they affected the
Company's  revenues and expenses are during the reported  periods are: (i) until
December  31,  1998  under  Brazilian   GAAP,   interest  on  loans  to  finance
construction  in  progress  is  capitalized  at the rate of 12% per annum of the
total value of  construction  in progress,  regardless of the amount of interest
actually  incurred on such loans,  while under U.S. GAAP interest is capitalized
based on the interest rate on the debt incurred up to the lower of the amount of
construction in progress and the total loans  incurred;  (ii) until December 31,
1993  capitalized  interest  under  Brazilian  GAAP was not added to  individual
assets but was capitalized separately and amortized over a time period different
from the  estimated  useful lives of the related  assets,  while under U.S. GAAP
capitalized  interest is added to the cost of individual assets and is amortized
over their estimated  useful lives; and (iii) in accordance with Brazilian GAAP,
the deferred tax liability arising out of the indexation of permanent assets was
charged to  divisional  equity,  whereas  under U.S. GAAP the charge would be to
income for the year. Net income under U.S. GAAP was R$149.2 million for 1998 and
R$29.6million  for 1999.  Until December 31, 1997, under both Brazilian and U.S.
GAAP,  revenues  from  activation  fees were  recognized  upon  activation  of a
customer's  services.  Under U.S. GAAP,  effective January 1, 1998, net revenues
from activation fees will be deferred and amortized over the estimated effective
contract life. See Note 30(n) to the Consolidated Financial Statements.

<PAGE>

YEAR 2000 COMPLIANCE

      The Company  evaluated its most probable  worst case scenarios in relation
to the year 2000,  formulated  contingency  plans with respect to such scenarios
and  commissioned a Year 2000  contingency  plan for the Company.  The Company's
telecommunications and information systems, including those of the Subsidiaries,
experienced no  interruption or adverse effect during the transition to the Year
2000. Such transition took place uneventfully and as planned by the Company.

ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The  Company  is  exposed  to market  risk from  changes  in both  foreign
currency  exchange rates and interest  rates.  The Company is exposed to foreign
exchange rate risk because  certain of its costs are  denominated  in currencies
(primarily  the U.S.  dollar)  other  than  those  in  which  it earns  revenues
(primarily the REAL). Similarly,  the Company is subject to market risk deriving
from changes in interest rates which may affect the cost of its  financing.  The
Company does not use derivative  instruments,  such as foreign  exchange forward
contracts,  foreign  currency  options,  interest  rate swaps and  forward  rate
agreements,  to manage these market risks,  nor does it hold or issue derivative
or other  financial  instruments  for  trading  purposes,  except  for the hedge
contracted for the Zero Coupon Euro Commercial  Paper.  See above  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Foreign Exchange and Interest Rate Exposure."

EXCHANGE RATE RISK

      The Company has exchange rate exposure with respect to the U.S. dollar. At
December 31, 1999 approximately R$62.7 million of the Company's indebtedness was
denominated in U.S. dollars. The potential immediate loss to the Company on such
indebtedness  that  would  result  from a  hypothetical  50%  change in  foreign
currency  exchange rates would be approximately  R$30 million.  In addition,  if
such a change  were to be  sustained,  the  Company's  cost of  financing  would
increase in proportion  to the change.  However,  due to departures  from agreed
procedures in connection with the Breakup of TELEBRAS for assigning the right to
receive payments under such  indebtedness,  payments on such  indebtedness  were
suspended in 1998 and the Company's management has determined that, beginning in
1999,  R$50.7 million of such indebtedness will be treated for all purposes as a
REAL-denominated  liability.  See above "Management's Discussion and Analysis of
Financial  Condition  and Results of  Operations--Foreign  Exchange and Interest
Rate Exposure" and See Notes 23 and 33 to the Consolidated Financial Statements.

INTEREST RATE RISK

      As of December 31, 1999,  the Company had  approximately  R$131 million in
loans and  financing  outstanding,  of which  approximately  R$68  million  bore
interest at fixed rates and approximately R$63 million bore interest at floating
(primarily  LIBOR-based) rates. The Company invests its excess liquidity (R$63.1
million at December 31, 1999) mainly in  short-term  instruments.  The potential
loss to the Company over one year that would have resulted from a  hypothetical,
instantaneous  and unfavorable  change of 100 basis points in the interest rates
applicable  to financial  assets and  liabilities  on December 31, 1999 would be
approximately  R$1.9  million.  The above  sensitivity  analysis is based on the
assumption  of an  unfavorable  100 basis point  movement of the interest  rates
applicable to each homogeneous  category of financial assets and liabilities and
sustained over a period of one year. A homogeneous category is defined according
to the currency in which  financial  assets and  liabilities are denominated and
assumes the same interest rate movement within each  homogeneous  category (e.g.
U.S.  dollars).  As a result, the Company's interest rate risk sensitivity model
may  overstate  the impact of  interest  rate  fluctuations  for such  financial
instruments,  as  consistently  unfavorable  movements of all interest rates are
unlikely. See Note 23 to the Consolidated Financial Statements.

<PAGE>

ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT

BOARD OF DIRECTORS

      The Holding Company is  administered by a Board of Directors  (Conselho de
Administracao)  and a Board of  Executive  Officers  (Diretoria).  The  Board of
Directors  comprises seven members serving for a term of three years.  The Board
of  Directors  holds a regular  meeting  each  three  months  and holds  special
meetings  when  called  by the  Chairman  or by two  members  of  the  Board  of
Directors.

      The following are the current  members of the Board of Directors and their
respective positions.

<TABLE>
<CAPTION>

NAME                                          POSITION      DATE ELECTED
---------                                     --------      ------------------
<S>                                           <C>           <C>
Alexandre Beldi Netto.......................  Chairman      August 10, 1998
Araldo Alexandre Marcondes de Souza.........  Director      April 30, 1999
Mario Cesar Pereira de Araujo...............  Director      August 10, 1998
Jayme da Costa Ribeiro......................  Director      August 10,1998
Marco Antonio Beldi.........................  Director      September 15, 1998
Antonio Fabio Beldi.........................  Director      September 15, 1998
Nelson Guarnieri de Lara....................  Director      September 15, 1998
</TABLE>

      Set forth below are brief biographical descriptions of the Directors.

      ALEXANDRE  BELDI NETTO,  78 years old, has served as Chairman of the Board
of Directors since August 1998. He has served as Chief Executive Officer of Cia.
Rede  Telefonica  Sorocaba.  He is the  President  of the  Superior  Council  of
Cultural  Association  for  the  Technological  Renovation  of  Sorocaba  of the
University  of  Sorocaba  and  Chief  Executive  Officer  of SPL  Construtora  e
Pavimentadora  Ltda. and Banco Credibel.  He also serves as an Executive Officer
for  SELTE,  Splice  do  Brasil  and  Credibel  Factoring.  He holds a degree in
accounting  from  the  Escola  de  Comercio  de  Sorocaba  (Sorocaba  School  of
Commerce).

      ARALDO ALEXANDRE  MARCONDES DE SOUZA, 51 years old, has served as a member
of the Board of Directors since April 1999. He serves as an Executive Officer of
SPL - Construtora e Pavimentadora Ltda. He holds a civil engineering degree from
the State University of Campinas.

      MARIO CESAR PEREIRA DE ARAUJO, 51 years old, has served as a member of the
Board of Directors  since  August  1998.  He has served  Empresa  Brasileira  de
Telecomunicacoes  S.A. - EMBRATEL as an engineer  and as Head of  Department  of
Projects  and   Contracting   and   Installation  of  Networks  and  Systems  of
Telecommunications.  He also served as Chief of Section in  Telecomunicacoes  do
Rio de Janeiro S.A. - Telerj.  He holds an  engineering  degree from the Federal
University of Rio de Janeiro.

      JAYME DA COSTA RIBEIRO, 63 years old, has served as member of the Board of
Directors  since August  1998.  He served as radio  telegraphist  for the Postal
Service  (Departamento de Correios e Telegrafos) and Companhia de Urbanizacao da
Nova  Capital  do Brasil  and as advisor  of the  Commercial  Superintendent  of
COTELB.  At  Telebrasilia  he served as special  advisor of the  Coordination of
Telecommunications  Office  and  of  the  Presidency,  Head  of  Cabinet  of the
Presidency and  coordination  and human  resources  director.  He also served as
administrative  director of Fundacao  Telebras de Seguridade Social - SISTEL. He
holds a law degree from CEUB - Centro de Ensino Unificado de Brasilia.

      MARCO ANTONIO BELDI,  48 years old, has served as a member of the Board of
Directors since September 1998. Before joining Splice do Brasil Telecomunicacoes
e  Eletronica  S.A. as Chief  Financial  Officer,  he served as Chief  Financial
Officer of Banco Credibel,  CRTS - Construtora de Redes  Telefonicas  Sorocabana
and Beldi  Participacoes e Representacoes  Ltda. He holds a degree in mechanical
engineering  from the State University of Campinas  (UNICAMP),  as well as a law
degree from Itu Law School - SP.

<PAGE>

      ANTONIO FABIO BELDI,  46 years old, has served as a member of the Board of
Directors since September 1998. Before joining Splice do Brasil Telecomunicacoes
e Eletronica S.A. as Superintendent  Director, he served as an executive officer
at Banco Credibel and Faculdade de Engenharia de Sorocaba  (Sorocaba  College of
Engineering)  and  Superintendent  Director of Beldi  Participacoes e Eletronica
S.A. He holds a degree in civil  engineering  from the Pontifical  University of
Campinas - SP.

      NELSON  GUARNIERI  DE LARA,  71 years  old,  has served as a member of the
Board  of  Directors   since   September   1998.  He  joined  Splice  do  Brasil
Telecomunicacoes  e Eletronica S.A. as General Counsel in 1983 and has served as
such since then. He holds a law degree from the University of Sao Paulo.

      Alexandre  Beldi Netto is father of Marcos Antonio Beldi e Antonio Fabio
Beldi.

BOARD OF EXECUTIVE OFFICERS

      The Board of Executive  Officers  consists of one  President and Executive
Officer  for  Investor   Relations,   one  Executive  Officer  for  Network  and
Operations,  one Executive Officer for Finance and Information  Technology,  one
Director of  Administration  and Human  Resources and one Executive  Officer for
Business  elected  by the  Board  of  Directors  for a term of three  years.  An
Executive Officer may be removed from office at any time.

      The following are the Executive Officers and their respective positions.

<TABLE>
<CAPTION>

NAME                                       POSITION              DATE APPOINTED
------------                        ------------------------   ------------------
<S>                                 <C>                         <C>
Mario Cesar Pereira de Araujo...... President and Executive     August 10, 1998
                                    Officer for Investor
                                    Relations
Sergio Assenco Tavares dos Santos.. Executive Officer for       January 30, 1998
                                    Network and Operations
Paulo Narcelio Simoes Amaral....... Executive Officer for       April 30, 1999
                                    Finance and Information
                                    Technology
Getulio Nery Cardoso............... Director of                 July 28, 1999
                                    Administration and Human
                                    Resources
Jose Paulo Nascimento David........ Executive Officer for       October 6, 1999
                                    Business
</TABLE>

      SERGIO  ASSENCO  TAVARES  DOS  SANTOS,  51 years  old,  has  served  as an
Executive Officer since May 1998. He served as manager of the vice-presidency of
TELEBRAS' Department of Development and Coordination with Suppliers; coordinator
of the Technical  Office Special  Projects of  Telebrasilia;  and manager of the
Advanced   Telecommunications   Business  Unit  and   Engineering   Director  of
Telebrasilia.  He also served as the Chief Executive Officer of the company from
May to  August  1998.  He  holds a degree  in  electrical  engineering  from the
University of Brasilia.

      PAULO  NARCELIO  SIMOES  AMARAL,  37 years old, has served as an Executive
Officer since April 1999.  From 1985 to 1998 he was active in various sectors of
Banco Inter-Atlantico S.A., currently known as Banco Boavista Interatlantico. He
began  as  a  Financial  Analyst  in  1985,  subsequently  serving  as  Managing
Comptroller from 1990-1995 and as Vice-Executive Officer for Product Development
and  Corporate  Finance from  1995-1997.  In 1997 he became  Structured  Finance
Executive  Officer.  He assumed his current  position as  Executive  Officer for
Administration  and  Finance  at the  Company  in 1999.  He  holds a  degree  in
Economics from the State University of Rio de Janeiro,  post-graduate degrees in
Business  Administration  from Fundacao Getulio Vargas and  International  Trade
from  the  Federal  State  University  of Rio de  Janeiro,  as well as an MBA in
Finance from IBMEC.

      GETULIO NERY  CARDOSO,  48 years old,  has served as an Executive  Officer
since July 28,  1999.  He began his  professional  career in the Central  Bank's
Foreign Exchange Department.  Later, he joined the Production Engineering sector
of Petroleo Brasileiro,  S.A.--PETROBRAS ("PETROBRAS"). He then joined TELEBRAS'
Department  of  Industrial   Development,   specializing  in  telecommunications
industrial  development.  He then became Commercial Manager for the Central West

<PAGE>

Region  for  Splice.  He  has  a  degree  in  Electrical  Engineering  from  the
Universidade  de Brasilia and has  completed  extensive  related  coursework  in
Brazil and abroad.

      JOSE PAULO  NASCIMENTO  DAVID, 35 years old, has served  temporarily as an
Executive  Officer since October 6, 1999.  He began his  professional  career in
naval  engineering at the French company Bureau  Veritas.  He then worked in oil
and oil  derivatives  marketing for  PETROBRAS.  He became  manager of Supplies,
Natural Gas, Marketing and a chain of convenience stores for Companhia Atlantico
de Petroleo.  He also worked as Marketing  Manager for Shell  Brasil,  S.A..  He
transferred  to the  telecommunications  industry  a year ago by  joining  Algar
Telecom  Leste,  S.A.--ATL,  a Band B Service  Provider  in Rio de  Janeiro  and
Espirito   Santo,  as  Sales  Manager  and  later  as  Manager  of  the  Prepaid
Transactions  Unit. He has a degree in Naval  Engineering  from the Universidade
Federal do Rio de Janeiro- UFRJ.

ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS

      For the year ended December 31, 1999, the aggregate amount of compensation
paid by the  Holding  Company to all  directors  and  executive  officers of the
Holding Company was approximately R$1.8 million.

      For the year ended  December 31, 1999,  the aggregate  amount set aside or
accrued  by the  Holding  Company  to  provide  pension,  retirement  or similar
benefits  for officers and  directors of the Holding  Company was  approximately
R$173 thousand.

ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

      None.

ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

      None.

                                     PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED

      None.

                                    PART III

ITEM 15. DEFAULTS UPON SENIOR SECURITIES

      None.

ITEM 16. CHANGES IN SECURITIES,  CHANGES IN SECURITY  FOR REGISTERED  SECURITIES
         AND USE OF PROCEEDS

      None.

                                     PART IV

ITEM 17. FINANCIAL STATEMENTS

      The Holding Company has responded to Item 18 in lieu of responding to this
Item.

ITEM 18. FINANCIAL STATEMENTS

      Reference is made to pages F-1 through F-42.

<PAGE>

ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS

      (a)   The following  Consolidated  Financial Statements  are filed as part
            of this Form 20-F:

            Independent Auditors' Report

            Consolidated  Statement  of  Financial  Condition  and  Consolidated
            Balance Sheets

            Consolidated  Statement  of  Revenues and Expenses and Statements of
            Income

            Consolidated  Statement  of  Net  Interdivisional  Distribution  and
            Consolidated Statements of Cash Flow

            Consolidated   Statement   of  Changes   in  Divisional  Equity  and
            Consolidated Statements of Changes in Shareholders' Equity

            Notes to the Consolidated Financial Statements

      (b)   Exhibits

            1. Amendment to the Charter of the Holding Company  previously filed
            with the Holding Company's  registration  statement on September 18,
            1998.

            2a. Consent of Ernst & Young Auditores Independentes S.C.

            2b. Consent of Deloitte Touche Tohmatsu


            There are omitted from the exhibits  filed with or  incorporated  by
            reference into this Annual Report certain promissory notes and other
            instruments  and  agreements  with respect to long-term  debt of the
            Company,  none of which authorizes securities in a total amount that
            exceeds 10% of the total assets of the Company.  The Company  hereby
            agrees to furnish to the Securities and Exchange  Commission  copies
            of any  such  omitted  promissory  notes  or  other  instruments  or
            agreements as the Commission requests.

<PAGE>

<TABLE>
<CAPTION>
                             INDEX OF DEFINED TERMS

                                 PAGE                                    PAGE

<S>                           <C>       <C>                           <C>
AD.................................7    e&p...............................34
ADRs..............................25    EILD..............................14
ADSs..............................25    EILD Contract.....................14
American Depositary Shares........25    EMBRATEL...........................3
Americel..........................13    Equity Withdrawing Rights.........29
ANATEL.............................3    Extreme South Stock Exchange......27
ANATEL Decree.....................16    Federal Government.............1 ,15
Annex IV Regulations..............30    Fenattel..........................15
Annex V Regulations...............30    Financial System Law..............28
Area 7.............................2    Fistel............................48
Area 8.............................2    Fittel........................15, 53
Audit Committee...................29    Fixed-Line Region..................3
Band A........................12, 58    Floating Market...................40
Band A Concessions.................2    Floating Market Rate..............40
Band A Service Provider...........12    GDP................................5
Band A Subsidiary..................1    General Telecommunications Law.....3
Band B............................12    Holding Company................1, 15
Band B Concessions.................2    IBGE...............................5
Band B Service Provider...........12    ICMS..............................10
Band B Subsidiary..................1    IGP-DI............................18
Brazil.............................1    IGP-M.............................22
Brazilian Corporation Law.........28    IOF tax...........................33
Brazilian GAAP.....................1    IRS...............................35
Brazilian Securities Law..........28    LIBOR.............................42
Breakup............................3    Minimum Law.......................16
Breakup of TELEBRAS................3    National Monetary Council.........28
Cellular Region....................3    NBT................................2
Cellular Service Rule.............16    New Holding Companies..............3
Central Bank......................28    non-Brazilian holder..............31
Certificate of Registration.......30    non-U.S. holder...................35
CLC...............................27    Noon Buying Rate...................1
Code..............................34    off-peak calls.....................7
COFINS............................10    Parana Stock Exchange.............27
Commercial Market.................40    PCS...............................13
Common Shares.....................25    Pernambuco and Paraiba
                                          Stock Exchange..................27
Company............................1    PETROBRAS.........................53
Concessions........................2    PFIC..............................35
Consolidated Financial Statements..1    PIS...............................10
CPMF tax..........................33    Predecessor Companies.............23
CPqD..............................15    Preferred Shares..................25
Custodian.........................30    R$.................................1
CVM...............................28    REAIS..............................1
Deposit Agreement.................26    REAL...............................1
Depositary........................26    REAL Plan.........................19
dollars............................1    Region.............................3
DSL1...............................7    Registered Capital................33
DSL2...............................7    Rio de Janeiro Stock Exchange.....26

<PAGE>

SAF...............................12    TELEBRAS System....................3
Sao Paulo Stock Exchange..........26    Telebrasilia.......................2
SEC...............................28    Telecommunications Regulations.....3
Service Quality Memorandum........17    Telegoias..........................2
Shareholders Essential Rights.....29    Telemat............................2
SISTEL............................15    Telems.............................2
SMS...............................12    Teleron............................2
Splice.............................3    TJLP..............................32
STFC..............................14    U.S. dollars.......................1
Stock Exchange Unification Program27    U.S. GAAP.........................36
Subsidiaries.......................1    U.S. holder.......................34
Subsidiary.........................1    US$................................1
Tele Centro Sul...................13    VC1................................7
Teleacre...........................2    VC2................................7
TELEBRAS...........................2    VC3................................7
TELEBRAS Loans................25, 42
</TABLE>

<PAGE>

                               TECHNICAL GLOSSARY

      The following explanations are not intended as technical definitions,  but
to assist the general reader to understand  certain terms as used in this Annual
Report.

      ACCESS CHARGE: Amount paid per minute charged by network operators for the
use  of  their   network  by  other   network   operators.   Also  known  as  an
"interconnection charge" or "network usage charge."

      ACCESS  GATES:  The points of  interface  between  the  network  equipment
(either  dedicated or switched) and the transmission  media that connect network
equipment to the end user.  The  quantity of service is directly  related to the
quantity of network access gates.

      AMPS   (ADVANCED    MOBILE   PHONE    SERVICE):    An   analog    cellular
telecommunications  service standard utilizing the 850 MHz band, in use in North
America, parts of South America, Australia and various other areas.

      ANALOG:  A mode of transmission  or switching which is not digital,  e.g.,
the representation of voice,  video or other modulated  electrical audio signals
which are not in digital form.

      ANALOG NETWORK:  A network using analog technology with circuit switching,
capable of connecting one user with all the users, but with limited transmission
capacity.

      ATM (ASYNCHRONOUS  TRANSFER MODE): A broadband  switching  technology that
permits the use of one network for different kinds of information (e.g.,  voice,
data and video).

      AUTOMATIC  INTERNATIONAL  ROAMING: A service which permits a subscriber to
use his or her  cellular  telephone  on a foreign  cellular  service  provider's
network.  The  subscriber  may receive  calls made to the  subscriber's  regular
cellular telephone number (such calls are "automatically"  passed to the foreign
service provider's network).

      BAND A SERVICE PROVIDER:  A former TELEBRAS operating  subsidiary that has
been granted a concession to provide cellular  telecommunications  services in a
particular area within a radio spectrum frequency range referred to by ANATEL as
"Band A."

      BAND B SERVICE PROVIDER: A cellular service provider that has been granted
a concession  to provide  cellular  telecommunications  services in a particular
area within a radio spectrum frequency range referred to by ANATEL as "Band B."

      BASE STATION: A radio  transmitter/receiver  that maintains communications
with the cellular  telephones  within a given cell. Each base station in turn is
interconnected  with other base stations and with the public switched  telephone
network.

      BROADBAND  SERVICES:  Services  characterized by a transmission speed of 2
Mbit/s or more. According to international standards, these services are divided
into     two     categories:     (i)     Interactive     services,     including
videotelephone/videoconferencing    (both    point-to-point   and   multipoint);
videomonitoring;   interconnection  of  local  networks;   file  transfer;  CAD;
high-speed  fax;  e-mail  for  moving  images  or  mixed  documents;   broadband
videotext;  video on demand;  retrieval  of sound  programs  or fixed and moving
images; and (ii) Broadcast services, such as sound programs, television programs
(including high-definition TV and pay TV) and selective document acquisition.

      CATV (CABLE TELEVISION): Cable or fiber-based distribution of TV programs.

      CDMA (CODE  DIVISION  MULTIPLE  ACCESS):  A standard  of digital  cellular
telecommunications technology.

      CELL: The  geographic  area covered by a single base station in a cellular
telecommunications system.

<PAGE>

      CELL SPLITTING:  The process of dividing cells into smaller coverage areas
by  reducing  the  power  output  and the  antenna  height  of the base  station
transmitter.  Cell splitting increases capacity in a particular area by allowing
for the further reuse of frequencies by a cellular telecommunications system.

      CELLULAR SERVICE: A mobile telecommunications service provided by means of
a network of interconnected  low-powered base stations, each of which covers one
small  geographic  cell  within  the total  cellular  telecommunications  system
service area.

      CHANNEL:  One of a number of discrete  frequency ranges utilized by a base
station.

      DIGITAL:  A mode of representing a physical  variable such as speech using
digits 0 and 1 only.  The digits are  transmitted  in binary form as a series of
pulses.  Digital  networks  allow for higher  capacity  and  higher  flexibility
through  the  use  of  computer-related  technology  for  the  transmission  and
manipulation of telephone calls.  Digital systems offer lower noise interference
and can incorporate encryption as a protection from external interference.

      DIGITAL PENETRATION: The substitution of equipment capable of transmitting
digital signals for equipment limited to analog transmission.

      EXCHANGE:  See Switch.

      FRAME RELAY: A data  transmission  service using fast  protocols  based on
direct use of transmission lines.

      INTERNET:  A collection  of  interconnected  networks  spanning the entire
world including  university,  corporate,  government and research  networks from
around  the  globe.   These   networks  all  use  the  IP  (Internet   Protocol)
communications protocol.

      ISDN  (INTEGRATED  SERVICES  DIGITAL  NETWORK):  A system in which several
services (e.g., speech and data) may be simultaneously transmitted end-to-end in
digital form.

      LEASED HIGH-SPEED DATA COMMUNICATION:  The digital exchange of information
at speeds exceeding 64 Kbps transmitted through mediums that are leased to users
for their exclusive use.

      LOCAL  LOOP:  The system  used to connect  the  subscriber  to the nearest
switch.  It generally  consists of a pair of copper  wires,  but may also employ
fiber-optic circuits, microwave links or other technologies.

      MANUAL  INTERNATIONAL  ROAMING: A service that permits a subscriber to use
his or her cellular telephone on a foreign cellular service provider's  network.
The subscriber  may only receive calls made to a temporary  number issued to the
subscriber by the foreign service provider for use while roaming.

      MICROCELLS:  A small cell covered by a low-power base station.  Microcells
can cover small areas such as a single building.

      NETWORK: An interconnected collection of elements. In a telephone network,
these consist of switches connected to each other and to customer equipment. The
transmission  equipment  may be  based  on  fiber  optic  or  metallic  cable or
point-to-point radio connections.

      NETWORK USAGE CHARGE:  Amount paid per minute charged by network operators
for the use of  their  network  by other  network  operators.  Also  known as an
"access charge" or "interconnection charge."

      OPTICAL  FIBER:  A  transmission   medium  which  permits  extremely  high
capacities.  It consists of a thin strand of glass that provides a pathway along
which waves of light can travel for telecommunications purposes.

      PACKET-SWITCHED  DATA  COMMUNICATION  SERVICES:  Data  services  based  on
parceling or breaking the data stream into packets and switching the  individual

<PAGE>

packets.  Information  transmitted  is  segmented  into cells of a  standardized
length,  which  are then  transmitted  independently  of one  another,  allowing
maximization of available  capacity and usage of a single  transmission path for
multiple  communications.  The cells are then  reassembled  upon reaching  their
destination.

      PBX (PRIVATE BRANCH EXCHANGE):  Telephone switchboard for private use, but
linked to the national telephone network.

      PENETRATION:  The measurement of the take-up of services. At any date, the
penetration  is  calculated  by  dividing  the  number  of  subscribers  by  the
population  to which the service is available  and  multiplying  the quotient by
100.

      PRIVATE LEASED CIRCUITS:  Voice, data or image transmission mediums leased
to users for their exclusive use.

      PSTN (PUBLIC SWITCHED  TELEPHONE  NETWORK):  The public telephone  network
that  delivers  basic  telephone  service  and, in certain  circumstances,  more
advanced services.

      REPEATERS:  A device that amplifies an input signal for retransmission.

      ROAMING:  A  function  that  enables  subscribers  to use  their  cellular
telephone  on networks of service  providers  other than the one with which they
signed their initial contract.

      SATELLITE  SERVICES:  Satellites are used,  among other things,  for links
with  countries  that cannot be reached by cable or to provide an alternative to
cable and to form closed user networks.

      SDH  (SYNCHRONOUS  DIGITAL  HIERARCHY):  A  hierarchical  set  of  digital
transport  structuresstandardized for the transport of suitably adapted payloads
over physical transmission networks.

      SECTORIZATION:  The  process  of  dividing  cells  into  sectors  by using
directional  antennae  at the base  station.  Sectorization  reduces  co-channel
interference which permits smaller cells and increases network capacity.

      SWITCH:  These are used to set up and route  telephone calls either to the
number  called  or to the next  switch  along  the  path.  They may also  record
information for billing and control purposes.

      TDMA (TIME  DIVISION  MULTIPLE  ACCESS):  A standard  of digital  cellular
telecommunications technology.

      UNIVERSAL  SERVICE:  The  obligation  to supply basic service to all users
throughout the national territory at reasonable prices.

      VALUE  ADDED   SERVICES:   Value   Added   Services   provide   additional
functionality to the basic transmission services offered by a telecommunications
network.

<PAGE>

                                    SIGNATURE

      Pursuant to the requirements of Section 12 of the Securities  Exchange Act
of 1934, the Holding Company certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused  this Annual  Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.


                                    By:    /S/ MARIO CESAR PEREIRA DE ARAUJO
                                       -----------------------------------------
                                    Name:  Mario Cesar Pereira de Araujo
                                    Title: President

Dated:  July 14, 2000

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

                        CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                    CONTENTS

Report of Ernst & Young Auditores Independentes S.C........................F-2

Report of Deloitte Touche Tohmatsu.........................................F-3

Report of KPMG Auditores Independentes.....................................F-4

Consolidated Balance Sheets................................................F-5

Consolidated Statement of Revenues and Expenses and Consolidated
  Statements of Income.....................................................F-7

Consolidated Statement of Net Interdivisional Cash Distribution
  and Consolidated Statements of Cash Flows................................F-8

Consolidated Statement of Changes in Divisional Equity and
  Consolidated Statements of Changes in Shareholders' Equity..............F-10

Notes to the Consolidated Financial Statements....................F-11 to F-42

<PAGE>

              REPORT OF ERNST & YOUNG AUDITORES INDEPENDENTES S.C.

Directors and Shareholders

TELE CENTRO-OESTE CELULAR PARTICIPACOES S.A.

We have audited the accompanying consolidated balance sheet of Tele Centro Oeste
Celular  Participacoes  S.A.  and  subsidiaries  as of December 31, 1999 and the
related consolidated  statements of operations,  changes in shareholders' equity
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements.

We conducted our audit in accordance with auditing standards  generally accepted
in Brazil,  which are  substantially  the same as those  followed  in the United
States of America. Those standards require that we plan and perform the audit to
obtain reasonable  assurance as to whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated financial statements referred to above, present
fairly, in all material  respects,  the consolidated  financial position of Tele
Centro  Oeste  Celular   Participacoes  S.A.  at  December  31,  1999,  and  the
consolidated  results  of its  operations  and its cash  flows for the year then
ended, in conformity with generally accepted accounting principles in Brazil and
on the basis  described in Note 2, which differ in certain  respects  from those
followed in the United States of America (See Note 30).

                   Ernst & Young Auditores Independentes S.C.
                             /s/ Luiz Carlos Nannini
                                     Partner

Brasilia, Brazil

February 4, 2000 (except for note 33 as to which the date is May 31, 2000)

<PAGE>

                       REPORT OF DELOITTE TOUCHE TOHMATSU


To the Board of Directors and Shareholders
Tele Centro Oeste Celular Participacoes S.A.
Brasilia - DF

We have audited the accompanying consolidated balance sheet of Tele Centro Oeste
Celular Participacoes S.A. as of December 31, 1998, and the related consolidated
statements of income,  changes in financial position,  cash flows and changes in
shareholders' equity for the year then ended (all expressed in Brazilian REAIS).
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  amounts and  disclosures in the  consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Tele Centro Oeste
Celular  Participacoes  S.A. as of  December  31,  1998,  and the results of its
operations,  changes in its  financial  position and its cash flows for the year
then ended in conformity with accounting principles generally accepted in Brazil
and on the basis set out in note 2.

Generally accepted accounting principles in Brazil vary in certain respects from
generally  accepted  accounting  principles  in the  United  States of  America.
Application of generally accepted accounting  principles in the United States of
America would have affected the  determination  of net income for the year ended
December 31, 1998 and the  determination of  shareholders'  equity and financial
position  at  December  31,  1998  to the  extent  summarized  in note 29 of the
consolidated financial statements.




/s/ DELOITTE TOUCHE TOHMATSU

March 26, 1999  (except for note 29.o for which the date is April 9, 1999,  note
31.d for which the date is May 24,  1999 and note 31.a for which the date is May
31, 1999)

<PAGE>

                     REPORT OF KPMG AUDITORES INDEPENDENTES

To the Board of Directors and Shareholders
Tele Centro Oeste Celular Participacoes S.A.
Brasilia - DF

   We have  audited  the  accompanying  consolidated  statements  of revenue and
expenses,  net  interdivisional  cash  distribution  / (receipt)  and changes in
divisional equity of Tele Centro Oeste Celular  Participacoes  S.A. for the year
ended  December  31,  1997.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards in Brazil, which do not differ in any material respects from generally
accepted  auditing  standards in the United States of America.  Those  standards
require that we plan and perform the audit to obtain reasonable  assurance about
whether the consolidated financial statements are free of material misstatement.
An audit includes  examining,  on a test basis,  evidence supporting amounts and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as wel1 as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our  opinion,  the  consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the revenues and expenses and net
interdivisional  cash  distribution  / (receipt)  of Tele Centro  Oeste  Celular
Participacoes  S.A. for the year ended  December 31, 1997,  in  conformity  with
accounting  principles  generally accepted in Brazil and on the basis set out in
Note 2,  including  continued  recognition  of the  effects  of  changes  in the
purchasing power of the Brazilian currency as discussed in Note 2.

   Generally accepted  accounting  principles in Brazil vary in certain respects
from generally accepted  accounting  principles in the United States of America.
Application of generally accepted accounting  principles in the United States of
America would have affected  results of operations  for the year ended  December
31,  1997,  and the  divisional  equity as of  December  31,  1997 to the extent
summarized in Note 30 of the consolidated financial statements.



July 17, 1998

Brasilia, Brazil

/s/ KPMG Auditores Independentes

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.



                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1999
      (IN THOUSANDS OF CONSTANT BRAZILIAN REAIS - R$, OF DECEMBER 31,1999)


<TABLE>
<CAPTION>
                                            NOTE        1998         1999
                                          ---------  -----------  -----------
<S>                                          <C>     <C>          <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents..............    12       147,124       63,148
  Marketable securities..................                   -       79,732
  Trade accounts receivable, net.........    13       126,466      157,573
  Loans and financial investments........               2,283        4,219
  Deferred income and recoverable taxes..    14        32,280       58,054
  Inventories............................                   8       17,405
  Other assets...........................    15         7,847       14,691
                                                     -----------  -----------
Total current assets.....................             316,008      394,822

NONCURRENT ASSETS:
  Deferred income and recoverable taxes..    14           161          561
  Loans and financial investments........                 484            -
  Other assets...........................    15         1,606        4,062
                                                     -----------  -----------
Total noncurrent assets..................               2,251        4,623

PERMANENT ASSETS:
  Investments............................                   7        4,055
  Property, plant and equipment, net ....    16       795,132      904,515
  Deferred charges, net..................    17            23      346,455
                                                     -----------  -----------
Total permanent assets...................             795,162     1,255,025
                                                     -----------  -----------
Total....................................            1,113,421    1,654,470
                                                     ===========  ===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                            NOTE        1998         1999
                                          ---------  -----------  -----------
<S>                                          <C>     <C>          <C>

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Payroll and related accruals...........    18         5,047        5,672
  Accounts payable and accrued expenses..    19        55,787       96,557
  Indirect taxes.........................    20        26,227       45,705
  Deferred income and taxes payable......    21         9,493       16,303
  Participation in results of operation..    22        72,050       46,118
  Concession Area 8......................               7,343       16,661
  Loans and financing....................    23        20,437       91,521
  Provision for contingencies............    24         4,134           -
  Other payables.........................                   -        4,630
                                                     ------------ -----------
Total current liabilities................             200,518      323,167

NONCURRENT LIABILITIES:
  Accounts payable and accrued expenses..    19           671          558
  Deferred income taxes payable..........    21        22,910       54,416
  Loans and financing....................    23        30,726       39,289
  Provision for contingencies............    24           489        6,504
  Concession Area 8......................              14,687       16,661
                                                     ------------ -----------
Total noncurrent liabilities.............              69,483      117,428

MINORITY INTERESTS.......................             116,462       94,506

CAPITALIZABLE FUNDS......................                 151          126

SHAREHOLDERS' EQUITY:
  Capital................................             230,666      351,850
  Capital reserve........................                   -      322,748
  Legal reserve..........................              21,813       27,177
  Revenue reserve........................             150,022      101,929
  Retained earnings .....................             324,306      315,539
                                                     ------------ -----------
Total shareholders' equity...............    26       726,807     1,119,243
                                                     ------------ -----------
Total....................................            1,113,421    1,654,470
                                                     ============ ===========
</TABLE>


See the accompanying notes to the consolidated financial statements.

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

             CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES FOR THE

                  YEAR ENDED DECEMBER 31, 1997 AND CONSOLIDATED

       STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
          (IN THOUSANDS OF CONSTANT BRAZILIAN REAIS, OF DECEMBER, 1999,
                            EXCEPT PER SHARE AMOUNT)


<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31
                                               ---------------------------------------
                                         NOTE      1997          1998          1999
                                        ------ -----------   -----------   -----------
<S>                                       <C>    <C>        <C>           <C>
Net  operating   revenue  from  cellular
telecommunications services.............   4      526,361       579,714       606,320
Cost of services .......................   5     (220,658)     (236,765)     (296,961)
                                               -----------   -----------   -----------
Gross profit ...........................          305,703       342,949       309,359
Operating expenses:
    Selling expenses ...................   6      (59,191)      (90,124)     (107,858)
    General and administrative expenses.          (45,306)      (42,099)      (58,698)
    Other net operating income (expense)   7        4,338          (867)      (12,751)
                                               -----------   -----------   -----------
Operating income before interest........          205,544       209,859       130,052
Allocated interest expense..............           (4,473)            -             -
Net interest expense....................   8            -       (63,401)      (43,328)
                                               -----------   -----------   -----------
Operating  income before interest income
and unallocated interest expense........          201,071             -             -
Operating income........................                -       146,458        86,724
Net non-operating income (expense)......   9          (60)      (18,713)       (5,507)
Employees' profit share.................             (340)       (1,156)       (1,697)
                                               -----------   -----------   -----------
Income before income taxes,  unallocated
interest expense and minority interest..          200,671             -             -
Income before income taxes and minority
interest................................                -       126,589        79,520
Income and social contribution taxes....  10            -       (36,567)      (27,155)
                                               -----------   -----------   -----------

Income before minority interest.........          200,671        90,022        52,365

Minority interest.......................          (27,992)      (21,897)      (10,487)
Reversal of interest on own capital.....              -          83,445        48,696
                                               -----------   -----------   -----------
Income    before    interest     income,
unallocated interest expense and taxes..          172,679             -             -
Net income..............................                        151,570        90,574

Outstanding   shares   at  end  of  year
(thousand)..............................                    334,399,028   364,399,028

Net income per thousand shares (R$).....                           0.45          0.25
                                               ===========   ===========   ===========
</TABLE>



See the accompanying notes to the consolidated financial statements.

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

  CONSOLIDATED STATEMENT OF NET INTERDIVISIONAL CASH DISTRIBUTION FOR THE YEAR
    ENDED DECEMBER 31, 1997 AND CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
                      YEAR ENDED DECEMBER 31, 1998 AND 1999

       (IN THOUSANDS OF CONSTANT BRAZILIAN REAIS - R$, OF DECEMBER, 1999)

<TABLE>
<CAPTION>
                                                    1997        1998        1999
                                                 ----------  ----------  ----------
<S>                                               <C>         <C>          <C>
OPERATING ACTIVITIES:
   Net income..................................          -     151,570      90,574
   Income before interest  income,  unallocated
   interest expense and taxes..................    172,679           -           -
   Adjustments   to  reconcile   income  before
   interest   income,    unallocated   interest
   expense  and  taxes  and net  income to cash
   provided by operating activities:
    Depreciation and amortization..............     54,421      75,689     117,108
    Provision for loss of property and
    equipment..................................          -      17,831           -
    Disposal of permanent assets...............          -       1,577       7,229
    Minority interests.........................     27,993      21,897      10,487
    Allowance for doubtful accounts............     36,412      47,887      68,359
    Decrease (increase) in assets:
     Marketable securities.....................          -           -     (79,732)
     Trade accounts receivable.................    (55,179)    (97,936)    (99,466)
     Inventories...............................          -           -     (17,397)
     Taxes receivable..........................     (6,813)    (23,474)    (26,174)
     Other current assets......................     (1,734)    (10,001)    (10,752)
    Increase (decrease) on liabilities:
     Personnel, social charges and benefits....     (1,071)      3,562         625
     Accounts payable and accrued expenses.....    (30,689)     47,495      40,770
     Indirect taxes............................     (8,832)     22,722      19,478
     Other current liabilities.................     (1,663)          -       4,630
     Accrued interest..........................      5,035       7,721       2,439
     Provision for contingencies...............      1,040       3,312       1,881
     Deferred income tax ......................          -      (1,510)     (4,022)
     Participation in results of operation.....          -         949     (25,932)
     Concession Area 8.........................          -           -      11,292
     Other non-current liabilities.............       (108)          -        (138)
     Minority interests........................          -           -     (24,324)
                                                 ----------  ----------  ----------
                                                   191,491     269,291      86,935

INVESTING ACTIVITIES:
   Additions to investments....................          -          (7)     (4,048)
   Additions to property, plant and
   equipment...................................    (97,252)   (183,052)   (264,696)
   Transfer from fixed assets to
   investments.................................          -           -      36,360
   Capitalized interest........................     (1,206)     (1,238)          -
   Addition to deferred assets.................          -         (23)    (29,142)
   Proceeds from assets disposal...............         25           -           -
                                                 ----------  ----------  ----------
                                                   (98,433)   (184,320)   (261,526)

<PAGE>

                                                    1997        1998        1999
                                                 ----------  ----------  ----------
FINANCING ACTIVITIES:
   Loans repaid................................    (21,965)     (8,187)     (2,761)
   New loans obtained..........................        764       3,700      79,969
   Cash generated by spin-off from Telebras....          -      18,666           -
   Capitalizable funds.........................          -         151           -
   Rights spun-off from Telebras...............          -         615           -
   Issuance of preferred shares................          -           -      57,952
   Premium on issue of newshares...............          -           -          74
   Interest on own capital.....................          -           -     (44,619)
                                                 ----------  ----------  ----------
                                                   (21,201)     14,945      90,615
                                                 ----------  ----------  ----------
Increase (decrease) in cash and cash
equivalents....................................     71,857      99,916     (83,976)
Net interdivisional cash distribution..........    (24,649)          -           -
Cash and cash equivalents at beginning of year.          -      47,208     147,124
                                                 ----------  ----------  ----------
Cash and cash equivalents at end of year.......     47,208     147,124      63,148
                                                 ==========  ==========  ==========
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

         CONSOLIDATED STATEMENT OF CHANGES IN DIVISIONAL EQUITY FOR THE

            YEAR ENDED DECEMBER 31, 1997 AND CONSOLIDATED STATEMENTS

                OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS
                        ENDED DECEMBER 31, 1998 AND 1999
       (IN THOUSANDS OF CONSTANT BRAZILIAN REAIS - R$, OF DECEMBER, 1999)


<TABLE>
<CAPTION>
                                                     SHAREHOLDERS' EQUITY
                                           -------------------------------------------------------
                               DIVISIONAL           CAPITAL   LEGAL   REVENUE  RETAINED
                                EQUITY     CAPITAL  RESERVE  RESERVE  RESERVE  EARNINGS    TOTAL
                               -------------------------------------------------------------------
<S>                             <C>        <C>      <C>       <C>    <C>       <C>      <C>
BALANCE AT DECEMBER 31, 1996..   483,874         -        -        -        -         -   483,874

Income     before     interest
income,  unallocated  interest
expense and taxes.............   172,679         -        -        -        -         -   172,679
Net    interdivisional    cash
distribution..................   (24,649)        -        -        -        -         -   (24,649)
Deferred  income  tax on  full
indexation....................   (20,081)        -        -        -        -         -   (20,081)
Capitalized interest..........    21,225         -        -        -        -         -    21,225
Minority    interest   effects
other than on income..........   (15,076)        -        -        -        -         -   (15,076)
                               -------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997..   617,972         -        -        -        -         -   617,972

Spin-off from Telebras........  (617,972)  230,666        -   13,634  232,135   160,817    19,280
Consolidation adjustments.....
    Capitalized interest......         -         -        -        -        -    10,177    10,177
    Donations and others......         -         -        -        -        -        99        99
Net income....................         -         -        -        -        -   151,570   151,570
Transfer to reserves..........         -         -        -    8,179  150,022  (158,201)        -
Reversal of reserves..........         -         -        -        - (232,135)  232,135         -
Dividends/Interest on own              -         -        -        -       -
capital.......................                                        (72,291)  (72,291)
                               -------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998..         -   230,666        -   21,813  150,022   324,306   726,807

Capital increase with reserves         -    63,232        -        -        -   (63,232)        -
Issuance of preferred shares..         -    57,952        -        -        -         -    57,952
Reversal of reserves..........         -         -        -        - (150,022)  150,022         -
Premium on issue of new shares         -         -       74        -        -         -        74
Assets incorporated from
Coverage S.A..................         -         -  322,674        -        -         -   322,674
Deferred tax on full
indexation....................         -         -        -        -        -   (42,338)  (42,338)
Net income....................         -         -        -        -        -    90,574    90,574
Income appropriation proposal:
   Transfer to reserves.......         -         -        -    5,364  101,929  (107,293)        -
   Interest on own capital....         -         -        -        -        -   (36,500)  (36,500)
                               -------------------------------------------------------------------
Balance at December 31, 1999..         -   351,850  322,748   27,177  101,929   315,539 1,119,243
                               ==================================================================
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    (AMOUNTS EXPRESSED IN THOUSANDS OF CONSTANT BRAZILIAN REAIS, OF DECEMBER,
                         1999, EXCEPT PER SHARE AMOUNTS)


1.  OPERATIONS AND BACKGROUND

Beginning in 1995, the Federal  Government of Brazil (the "Federal  Government")
undertook   comprehensive   reform   of   the   Brazilian   regulation   of  the
telecommunications industry. In July 1995 the Federal Congress adopted a General
Telecommunications  Law  providing  for the  privatization  of  Telecomunicacoes
Brasileiras S.A.  ("Telebras") which, through its 28 operating  subsidiaries was
the primary supplier of public telecommunications services in Brazil.


In  preparation  for the  privatization  of the Telebras  system,  the operating
subsidiaries  were  divided  into twelve  separate  groups,  (a) three  regional
fixed-line operators, (b) eight regional cellular operators and (c) one national
long-distance   operator.  The  cellular   telecommunications   businesses  were
separated  initially  from  the  operating  subsidiaries  and  subsequently  the
fixed-line  businesses,  the  new  cellular  businesses  and  the  long-distance
operator  were  combined  into the  twelve  separate  groups  (the "New  Holding
Companies").  Both the separation of the cellular  businesses and the subsequent
grouping of the former  Telebras  subsidiaries  were performed using a procedure
under  Brazilian  corporate  law called  CISAO or  spin-off.  As of part of this
process Tele Centro Oeste Celular Participacoes S.A. (the "Holding Company") was
formed.


Tele Centro  Oeste  Celular  Participacoes  S.A.  was formed on May 22,  1998,
through the spin-off of certain assets and liabilities of Telebras,  including
83.8%,  96.0%, 91.9%, 91.3%, 94.0% and 81.4% of the share capital of Telegoias
Celular S.A.,  Telems  Celular S.A.,  Telemat  Celular S.A.,  Teleron  Celular
S.A.,  Teleacre  Celular S.A. and  Telebrasilia  Celular  S.A.,  respectively.
Until August 4, 1998, the Companies were controlled by the Federal Government.


Tele  Centro  Oeste  Celular   Participacoes  S.A.  and  its  subsidiaries  (the
"Companies") are the primary suppliers of cellular  telecommunications  services
in the states of Goias,  Tocantins,  Mato Grosso do Sul, Mato Grosso,  Rondonia,
Acre and the  Federal  District  under the terms of  concessions  granted by the
Federal Government on November 4, 1997 (the "Concessions"). The Concessions will
expire as follows:

<TABLE>
<CAPTION>

        COMPANY                                                EXPIRING DATE
        -------                                                -------------
        <S>                                                  <C>
        Telegoias Celular S.A. ...........................     October 29, 2008
        Telems Celular S.A. ..............................   September 28, 2009
        Telemat Celular S.A. .............................       March 30, 2009
        Teleron Celular S.A. .............................        July 21, 2009
        Teleacre Celular S.A. ............................        July 15, 2009
        Telebrasilia Celular S.A. ........................        July 24, 2006
</TABLE>

The subsidiary companies  controlled by Tele Centro Oeste Celular  Participacoes
S.A.  were  legally  formed  on  January  5,  1998  and the  spin-off  from  the
predecessors was approved during an Extraordinary  General Shareholders Meeting,
held on January 30, 1998.

The  Concessions  may be renewed at the  discretion of Anatel (as defined below)
for a further term of 15 years. Cellular  telecommunications services were first
offered in the states serviced by the  subsidiaries of Tele Centro Oeste Celular
S.A. between July 1991 and February 1996.

<PAGE>

On May 24, 1999,  Norte Brasil  Telecom S.A. - NBT, a  corporation  not publicly
traded,  was  formed  with  the  controlling  company  participating  95% in its
capital.  NBT has the objective of operating the cellular service and activities
necessary or convenient  for the  execution of these  services,  comprising  the
coverage area 8 - Band B, which  corresponds to the geographic areas constituted
by the states of Amazonas, Roraima, Amapa, Para and Maranhao.

Norte Brasil  Telecom S.A.  started its  activities  at the beginning of October
1999.  Since its activities to December 31, 1999 were very little,  expenditures
made were considered preoperating expenses. As from January 2000, these expenses
will be amortized in proportion to the area serviced.

The Companies' businesses,  including the service they may provide and the rates
they charge are regulated by Agencia Nacional de Telecomunicacoes  (Anatel), the
regulatory authority for the Brazilian  telecommunications  industry pursuant to
Law No. 9,472 of July 16, 1997.

2.  PRESENTATION OF THE FINANCIAL STATEMENTS

A. PRESENTATION  OF THE FINANCIAL  STATEMENTS  FOR THE YEARS ENDED  DECEMBER 31,
   1998 AND 1999

The consolidated financial statements were prepared in accordance with generally
accepted accounting  principles in Brazil, the rules applicable to the companies
with  concessions  to provide  telecommunications  services  and the  accounting
principles and regulations  established by CVM - Comissao de Valores Mobiliarios
(Brazilian Securities Commission).

The  incorporation  of the net assets spun off from  Telebras was carried out on
February  28, 1998.  At this date,  the equity  accounting  of  investments  was
calculated based on the investee's shareholders' equity as of December 31, 1997.
Accordingly,   the  statement  of  operations   includes  the  parent  company's
operations  for the period  commencing  March 1 until December 31, 1998, and the
operating results of the subsidiaries for the 12 months of 1998.

The consolidated  financial statements present the financial equity situation of
Tele Centro Oeste Celular Participacoes S.A. and its subsidiaries.

Minority  interest  participation  is shown in the  consolidated  statements  of
changes in  stockholders'  equity and results of operations of Tele Centro Oeste
Celular and its  subsidiaries.  At December  31, 1999 this  interest  was 13.2%,
10.5%,  8.1%,  4.0%,  8.7%,  6.0%  and  5.0%  in  the  stockholders'  equity  of
Telebrasilia,  Telegoias, Telemat, Telems, Teleron and Teleacre and Norte Brasil
Telecom, respectively.

The presentation of the consolidated  financial statements (assets,  liabilities
and operating results) is consistent with the published financial  statements of
Tele Centro Oeste Celular  Participacoes S.A. and its subsidiaries and considers
the  elimination  of  intercompany  transactions  in accordance  with  generally
accepted accounting principles.

The consolidated  financial statements were prepared on a fully indexed basis to
recognize  the  effects  of  changes in the  purchasing  power of the  Brazilian
currency until December 31, 1999.

B. PRESENTATION OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997

The  consolidated  financial  statements  present  the  financial  position  and
revenues and expenses of Tele Centro Oeste  Participacoes  S.A. and the combined
cellular telecommunications  businesses of Telegoias,  Telems, Telemat, Teleron,
Teleacre and  Telebrasilia.  The portion of the  consolidated  equity and income
before interest  income,  unallocated  interest expense and taxes of the Company
attributable  to shareholders of the Company other than Telebras at December 31,
1997,  and for each of the years in the two year period ended  December 31, 1998
is reflected as "minority interest" in the consolidated financial statements. At
December 31, 1998,  such minority  shareholders  owned  directly and  indirectly
16.2%,  4.0%,  8.1%,  8.7%,  6.0% and 18.6% of the share  capital of  Telegoias,
Telems, Telemat, Teleron, Teleacre and Telebrasilia, respectively.

<PAGE>

The formation of the Holding Company and Telegoias  Celular S.A., Telems Celular
S.A.,  Telemat  Celular S.A.,  Teleron Celular S.A.,  Teleacre  Celular S.A. and
Telebrasilia Celular S.A. has been accounted for as a reorganization of entities
under common control in a manner  similar to a pooling of interests.  The assets
and  liabilities  of the cellular  telecommunications  businesses  of Telegoias,
Telems,  Telemat,  Teleron,  Teleacre and  Telebrasilia  were transferred to the
Companies at their indexed historical cost. The revenues and expenses associated
with such assets and  liabilities  were  allocated  to the  Companies.  Separate
records of  revenues  and cost of services  of the  cellular  telecommunications
businesses of Telegoias,  Telems,  Telemat,  Teleron,  Teleacre and Telebrasilia
were maintained historically. Accordingly, actual amounts were allocated for the
periods  included herein.  The consolidated  statements of revenues and expenses
and net  interdivisional  cash  distribution  have been  prepared to include the
historical  activity  related  to the assets and  liabilities  transferred.  The
consolidated  financial statements are not necessarily  indicative of what would
have been the financial  condition and revenues and expenses of the Companies as
of  December  31,  1997  had  the  cellular  telecommunications   businesses  of
Telegoias,  Telems,  Telemat,  Teleron,  Teleacre and Telebrasilia been separate
legal entities during such periods.

With respect to costs, the methodologies employed in transferring the assets and
liabilities included the specific  identification of costs associated with those
assets and liabilities, and the allocation of costs where identification was not
possible.  Allocations  were made using criteria  established by management that
were designed to ensure that all relevant costs were  appropriately  included in
the results of operations for the periods presented.  Those allocation  criteria
included:  square footage (in relation to land and building  related  expenses),
number of  terminals  (in  relation  to  general  management,  accounting,  data
processing,  legal  department  and other  general staff  functions),  number of
employees  (in  relation  to  the  human   resources   department),   number  of
requisitions  issued (in relation to office material costs) and miles driven (in
relation to certain transportation costs).  Management believes that the amounts
included in the  combined  financial  statements  fairly  reflect the  operating
results of the business.

The presentation of the consolidated financial statements is consistent with the
presentation  of  the  published  financial  statements  of  Telegoias,  Telems,
Telemat,   Teleron,   Teleacre  and  Telebrasilia,   from  which  the  financial
information  was  extracted,  except for  certain  reclassifications  within the
consolidated  statements of financial condition and the consolidated  statements
of revenues and expenses  which have been made to conform  previously  published
financial statements to the 1997 presentation within this annual report.

C.    INFLATION ACCOUNTING METHODOLOGY

As a result of  legislation  mandating  the  discontinuation  of the  indexation
system for Brazilian corporate law accounting and most fiscal purposes, together
with the option  granted by the  Brazilian  Securities  Commission  (Comissao de
Valores Mobiliarios - CVM), the consolidated financial statements of Tele Centro
Oeste Celular as of December 31, 1997 and for the year then ended,  as published
in Brazil,  do not recognize the effects of changes in the  purchasing  power of
the Brazilian  currency that would have been  required  under the  comprehensive
indexation  system,  applied  through  December  31,  1995.  In July  1997,  the
three-year  cumulative  inflation rate for Brazil fell below 100%. However,  for
accounting  purposes,  the Company applied the constant  currency method through
December  31,  1999,  as required by  Brazilian  generally  accepted  accounting
principles when the inflation rate is material.  During 1998, the inflation rate
was 1.8%. Therefore, monetary correction was not applied in 1998.

For 1999, the annual  inflation  rate was 20.1%,  which was considered to have a
material effect on the financial  statements.  Thus the financial  statements of
the Company for the period of three years ended  December 31, 1999 were prepared
using the integral  restatement  method, in order to express the balances of the
Company in currency of constant purchasing power of December 31, 1999.


The  principal  criteria  adopted  to  prepare  the fully  indexed  consolidated
financial  statements  are in  conformity  with the  accounting  records of Tele
Centro  Oeste  Celular  and  its  subsidiaries,  which  observe  the  accounting
practices mentioned in Note 3, as follows:

<PAGE>

I.  INFLATION INDEX

The  consolidated  financial  statements as of December 31, 1997, 1998 and 1999,
were  prepared  on a  fully  indexed  basis  to  recognize  the  effects  in the
purchasing  power of the  Brazilian  currency  during the periods  presented and
expressed in currency of constant purchasing power of December 31, 1999 by using
the monthly  average values of the INDICE GERAL DE  PRECOS-MERCADO  (the General
Prices  Index-Market or the "IGP-M") of the FUNDACAO  GETULIO VARGAS.  Inflation
for the three year period ended December 31, 1999, as measured by the IGP-M, was
as follows:

<TABLE>
<CAPTION>

PERIOD                                               ANNUAL INFLATION (%)
------                                               --------------------
<S>                                                        <C>
Year ended December 31, 1997........................         7.7
Year ended December 31, 1998........................         1.8
Year ended December 31, 1999........................        20.1
</TABLE>

II. Considering  the low level of inflation in 1998, the Company  considered the
    variation  of the IGP-M in 1998 equal to 0% for  purposes  of  applying  the
    constant currency method. Management believes that applying the variation of
    1,8 % would not be material to the Company's financial statements.

III.  CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES AT DECEMBER 31, 1997

Items in the consolidated statements of revenues and expenses are adjusted by:

o   allocating  inflationary gains or losses on interest bearing monetary assets
    and liabilities to their corresponding interest income and expense captions;

o   allocating  inflationary  gains or  losses  on  other  monetary  assets  and
    liabilities to their  corresponding  interest or expense  captions.  Amounts
    without a  corresponding  income or expense caption were allocated to "Other
    net operating income."

IV.   DEFERRED INCOME TAX EFFECTS OF INDEXATION ADJUSTMENTS IN 1997 AND 1999

As a result of  legislation  mandating  the  discontinuation  of the  indexation
system for Brazilian  corporate law and most fiscal  purposes as from January 1,
1996, the indexation of assets and liabilities for financial  reporting purposes
at December 31, 1997 and 1999 is not permitted for tax purposes.  Accordingly, a
deferred tax liability  arises from the excess of net assets shown for financial
reporting  purposes over the tax basis of these net assets.  The charge relating
to the  additional  deferred tax liability of R$ 20,081 in 1997 and R$ 42,338 in
1999, were recorded directly against divisional equity and shareholders' equity,
respectively.  The tax effect of depreciation and disposals relating to the base
differences  (reversal  of the charge) in the amount of R$ 8,253 was credited to
the income and social contribution taxes in the consolidated statement of income
in 1999 (R$ 7,559 in 1998).

V.  THE  RECONCILIATION  OF  NET  INCOME  AND  SHAREHOLDERS'  EQUITY  BALANCES
    BETWEEN CORPORATE LAW AND TOTAL RESTATEMENT IS AS FOLLOWS:


<TABLE>
<CAPTION>
                                       NET INCOME      SHAREHOLDERS' EQUITY
                                   -----------------------------------------
                                     1998      1999       1998      1999
                                   -----------------------------------------
<S>                                 <C>       <C>       <C>       <C>
CORPORATE LAW                       153,293   107,293   681,996   1,014,492
Restatement   of   net   permanent
assets                               (9,568)  (14,321)   78,174     181,104
Tax effects                           7,559      8,253  (25,797)    (63,992)

Minority interests                      286   (10,649)   (7,566)    (12,361)
                                   -----------------------------------------
IN CONSTANT CURRENCY                151,570    90,574   726,807   1,119,243
                                   =========================================
</TABLE>

<PAGE>

D.  DIVISIONAL EQUITY

As  discussed in Note 1, the  Companies  were formed as a result of the specific
identifications  and spin-off of assets,  liabilities  and revenues and expenses
comprising  the cellular  telecommunications  businesses of  Telegoias,  Telems,
Telemat,  Teleron,  Teleacre and  Telebrasilia.  Since Tele Centro Oeste Celular
Participacoes  S.A. did not exist prior to January 1, 1998 no individual capital
structure was maintained.  Consequently,  the net assets contributions have been
shown  as  "divisional  equity"  in  the  accompanying   consolidated  financial
statements.  Additionally,  a  consolidated  statement of changes in  divisional
equity has been provided,  which show the changes in the  divisional  equity for
the period presented.

E.  CONSOLIDATED STATEMENTS OF NET INTERDIVISIONAL CASH FLOWS

Because it was not  possible to  segregate  the cash  balances  for the cellular
telecommunications businesses prior to December 31, 1997 a traditional statement
of cash flows could not be prepared for 1997. In lieu of detailing the beginning
and ending  cash and cash  equivalent  balances,  and the net change in cash and
cash equivalents  between years, the net cash transferred to/from the fixed line
telephone  businesses  of  Telegoias,  Telems,  Telemat,  Teleron,  Teleacre and
Telebrasilia has been presented as "Net  interdivisional  cash  distribution" in
the consolidated statement of net interdivisional cash distribution.

At December 31, 1997 cash and cash  equivalents of R$ 47,208 were allocated from
the  fixed  line  businesses  to  form  the  working  capital  of  the  cellular
businesses.

F.  CONSOLIDATION PRINCIPLES

The  consolidated  financial  statements  include the  financial  records of the
Holding Company and its  subsidiaries.  All material  intercompany  accounts and
transactions have been eliminated.

3.  SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES

A.  CASH AND CASH EQUIVALENTS

Cash  equivalents  are  considered  to  be  all  highly  liquid  temporary  cash
investments with original maturity dates of three months or less.

B.  TRADE ACCOUNTS RECEIVABLE

Accounts receivable from telephone subscribers are calculated at the tariff rate
on the date the services were rendered.  Trade accounts  receivable also include
services  provided  to  customers  up to the  balance  sheet  date  but  not yet
invoiced.

C.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

An allowance was made for trade accounts receivable for which  recoverability is
considered improbable.

D.  FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currency are recorded at the prevailing exchange rate at
the time of the related  transactions.  Foreign currency  denominated assets and
liabilities  are  translated  using the exchange rate at the balance sheet date.
Exchange   differences  are  recognized  as  translation   gains/losses  in  the
consolidated statement of income.

E.  INVENTORIES

Inventories are stated at average  acquisition  cost, not exceeding  replacement
cost.

<PAGE>

Inventories are segregated in plant  expansion,  maintenance and prepaid resale.
Inventories  for  expansion  are  classified  in  construction  in progress  and
maintenance and resale inventories are classified in current assets.

F.  PROPERTY, PLANT AND EQUIPMENT

Property,  plant and equipment is stated at average  acquisition or construction
cost, monetarily corrected to December 31, 1999, less accumulated depreciation.

The operation right (concession - area 8) of the Band B cellular service related
to subsidiary Norte Brasil Telecom S.A. was recorded at its acquisition cost.

Up  to  December  31,  1998,  in  conformity   with  the  norms   applicable  to
concessionaires of telecommunication public services, annual interest of 12% was
applied  monthly on total capital  invested in  construction  in progress to the
date of placement in service.  The interest was charged to capital  reserve.  As
from January 1, 1999, this practice is not required  anymore and CVM Instruction
No. 193/96 became to be used (interest capitalization). In 1999, the Company did
not capitalize interest attributable to construction-in-progress

The materials for plant expansion are stated at average acquisition cost.

Maintenance and repair expenses representing improvements (increase of installed
capacity or useful life) are  capitalized,  while the  remaining  are charged to
operating results following the accrual method.

Depreciation is provided using the  straight-line  method based on the estimated
useful  lives of the  underlying  assets.  In 1999,  the  depreciation  rates of
transmission  equipment were changed from 10% to 14.29% and commuting  equipment
from 7.69% to 10%, to better  reflect the term of their  economic  benefit.  The
principal depreciation rates are shown in note 16 (b).

G.  DEFERRED CHARGES

PREOPERATING EXPENDITURES

Income and expenses incurred during the preoperating  period of subsidiary Norte
Brasil Telecom S.A. are charged to deferred charges.

Deferred  charges were not amortized  during 1999,  since the  subsidiary  Norte
Brasil Telecom S.A. is in its preoperating phase, as commented in Note 1.

PREMIUM IN THE MERGER OF COVERAGE PARTICIPACOES S.A.

On December 14, 1999, the Company's parent company Coverage  Participacoes  S.A.
was merged into the Company  with the  purpose of  obtaining  the tax benefit of
premium amortization in the amount of R$ 322,674, which will be amortized over a
5-year period as commented in Note 32.

H.  VACATION PAY ACCRUAL

Cumulative vacation pay due to employees is accrued as earned.

I.  INCOME AND SOCIAL CONTRIBUTION TAXES

Income and social  contribution  taxes are  recorded  on the  accrual  basis and
calculated in accordance  with the  legislation in force.  Deferred income taxes
are  recognized on timing  differences  and  calculated at the foreseen rates of
their realization or liquidation.

<PAGE>

As described in Note 2 (c) (iv), the expense  related to the effects of deferred
taxes  from  indexation  adjustments  for 1997 and  1999 are  recorded  directly
against divisional equity and shareholders' equity, respectively.

J.  PROVISION FOR CONTINGENCIES

The provision for  contingencies was made based on the estimate of Company legal
advisors on judicial proceedings in process.

K.  NET FINANCIAL RESULT

The net financial result represents interest and monetary  variations  resulting
from  financial  investments  and loans and  financing  obtained  and  conceded.
Interest  charged on own  capital  compose  the  balance of these  accounts.  In
compliance  with the tax  legislation,  the  interest is  recorded as  financial
expenses and for financial  statement purposes is considered as appropriation of
income in accordance with CVM Deliberation No. 207 of December 12, 1996.

L.  PENSION PLAN

The Company and its subsidiaries,  except Norte Brasil Telecom S.A., participate
in a  multi-employer  plan  that  provides  pension  and  other  post-retirement
benefits  for its  employees.  Current  costs are  determined  as the  amount of
required contribution for the period and are recorded on the accrual basis.

M.  EARNINGS PER THOUSAND-SHARE LOT

The information  relating to earnings per  thousand-share lot was only presented
in  1998  and  1999  as the  capital  structure  of Tele  Centro  Oeste  Celular
Participacoes  S.A. was not yet in place at December 31, 1997. In 1998 and 1999,
earnings  per  thousand-share  lot  were  calculated  based  on  the  number  of
outstanding shares at the date of the corresponding balance sheet.

N.  SEGMENT INFORMATION

The  Companies  operate  solely in one  segment of local and  regional  cellular
telecommunications.  All revenues are generated in relation to services provided
in or routed  through the states of Goias,  Tocantins,  Mato Grosso do Sul, Mato
Grosso,  Rondonia, Acre and the Federal District. As of 2000, revenues will also
be generated through the states of Maranhao, Para, Amapa, Roraima e Amazonas.

O.  USE OF ESTIMATES

The  preparation  of  consolidated   financial  statements  in  conformity  with
Brazilian GAAP and US GAAP requires management to make estimates and assumptions
related to assets,  liabilities,  revenues  and  expenses  for the period  being
reported. Actual results could differ from those estimates.

P.  MINORITY INTERESTS

Minority interests refers to shareholders, other than Telebras, in the Companies
in 1997 and shareholders of the Companies,  except for the Holding Company,  for
the years ended December 31, 1998 and 1999.

<PAGE>

4.  NET OPERATING REVENUE FROM CELLULAR TELECOMMUNICATIONS SERVICES

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                       <C>         <C>         <C>
Monthly subscription charges               169,790     176,313     192,233
Activation fees                             37,719      26,017       3,711
Usage charges                              312,401     345,954     335,815
Network usage charges                      129,668     170,695     179,241
Sale of cellular equipment/cards                 -           -      53,327
Other                                       10,623       7,722      13,590
                                          ----------  ----------  ----------
Total gross operating revenue              660,201     726,701     777,917
Taxes on gross revenue                    (133,840)   (146,987)   (171,597)
                                          ----------  ----------  ----------
Net operating revenue from cellular
telecommunication services                 526,361     579,714     606,320
                                          ==========  ==========  ==========
</TABLE>

There are no customers who contribute more than 10% of gross operating revenues.

5.  COST OF SERVICES

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                        <C>         <C>         <C>
Depreciation and amortization               53,560      72,830     109,322
Personnel                                    4,661       7,536       8,152
Third party materials and services          69,090      65,094      71,756
Fixed-line network expenses                 72,632      63,905      25,462
Fistel fees                                 11,389      16,365      27,386
Cost of products sold                            -           -      46,309
Other                                        9,326      11,035       8,574
                                          ----------  ----------  ----------
                                           220,658     236,765     296,961
                                          ==========  ==========  ==========
</TABLE>

6.  SELLING EXPENSES

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                         <C>         <C>        <C>
Personnel                                    5,287       6,409       8,927
Material                                       210         438         778
Third party services                        16,521      34,943      38,998
Rent/leasing/insurance                         640         694       1,140
Depreciation and amortization                  108          76          32
Taxes, rates and contributions                   -           4          86
Allowance for doubtful accounts             25,853      (1,366)      5,224
Net losses on trade accounts receivable     10,559      48,926      52,636
Other materials                                 13           -          37
                                          ----------  ----------  ----------
                                            59,191      90,124     107,858
                                          ==========  ==========  ==========
</TABLE>

<PAGE>

7.  OTHER NET OPERATING INCOME (EXPENSE)

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                         <C>         <C>        <C>
Research and development                    (2,691)     (2,158)       (763)
Taxes (except income tax)                     (205)       (591)     (9,536)
Contingencies                                 (731)     (3,373)     (1,199)
Fines and expenses recovered                 5,310       4,719       2,880
Inflationary gains (losses)                  2,587           -           -
Amortization of the premium - Coverage           -           -      (5,378)
Participacoes S.A.
Tax incentives                                   -           -       3,884
Other                                           68         536      (2,639)
                                          ----------  ----------  ----------
                                              4,338       (867)    (12,751)
                                          ==========  ==========  ==========
</TABLE>

8.  NET INTEREST EXPENSE

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                     <C>         <C>
Interest revenue                                         29,282      38,953
Interest expense                                         (8,803)    (34,175)
Interest on own capital                                 (83,445)    (48,696)
Net exchange/ monetary variations                          (435)        590
                                                       ----------  ---------
                                                        (63,401)    (43,328)
                                                       ==========  ==========
</TABLE>

9.  NET NON-OPERATING INCOME (EXPENSES)

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                         <C>        <C>          <C>
Interest on construction-in-progress         1,206       1,238           -
Non-operating financial expenses            (1,206)     (1,238)          -
Loss on the realization of property,             -        (976)     (5,585)
plant and equipment
Provision for losses on the realization
of property, plant and equipment                 -     (17,831)          -
Other non-operating income (expenses)          (60)         94          78
                                          ----------  ----------  ----------
                                               (60)    (18,713)     (5,507)
                                          ==========  ==========  ==========
</TABLE>

10.   INCOME AND SOCIAL CONTRIBUTION TAXES

In 1997 and 1998 the income tax rate was 25% and 8% for social contribution tax.
From May 1, 1999 the rate of social  contribution  tax on income changed from 8%
to 12%. Deferred taxes are provided for based on temporary differences.

At December 31, 1997, income tax and social contribution  expenses have not been
included  in the  consolidated  demonstrations  of  operations  because  certain
financial and other  revenues/(expenses)  of the cellular  business were neither
identified nor segregated from Telegoias,  Telems,  Telemat,  Teleron Teleacre e
Telebrasilia, which resulted in an incomplete presentation of income before tax.

INCOME TAXES ARE AS FOLLOWS:

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                     <C>         <C>
Social contribution tax on income                       10,862       5,338
Income tax                                              33,264      30,070
Deferred taxes                                          (7,559)     (8,253)
                                                      ----------  ----------
                                                        36,567      27,155
                                                      ==========  ==========
</TABLE>

<PAGE>

The  table  below  is  a  reconciliation  of  tax  expense   recognized  in  the
consolidated  income statement and the amount  calculated in accordance with the
legislation in force:

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------------------
<S>                                                    <C>          <C>
Consolidated income before minority interest,
income taxes and reversal of interest on own
capital                                                126,589      87,773
Social contribution tax                                 10,127       9,304
Income tax                                              31,647      21,943
                                                      ----------------------
Total income taxes                                      41,774      31,247
Effect of permanent differences                         (5,207)     (4,092)
                                                      ----------------------
Total income taxes on income statement                  36,567      27,155

</TABLE>
                                                      ======================

11. CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                          <C>        <C>         <C>
Interest paid                                5,764       2,425         487
Cash paid against provisions for                13         330          84
contingencies
Income tax and social contribution paid          -      38,079      19,310
Paid concession                                  -      14,329      17,473

</TABLE>

12. CASH AND CASH EQUIVALENTS

At December 31, 1998 and 1999,  cash  equivalents  mainly  comprise fixed income
short-term investments.

13. TRADE ACCOUNTS RECEIVABLE, NET

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                    <C>         <C>
Accrued amounts                                         36,357      48,185
Billed amounts                                         115,593     135,796
Allowance for doubtful accounts                        (25,484)    (26,408)
                                                      ----------  ----------
                                                       126,466     157,573
                                                      ==========  =========
</TABLE>

The changes in the allowance for doubtful accounts are as follows:

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                        <C>         <C>         <C>
Initial balance                              1,475      26,850      25,484
Provision charged to selling                36,412      47,887      68,359
expense
Write-offs                                 (11,037)    (49,253)    (67,435)
                                          ----------  ----------  ----------
Ending balance                              26,850      25,484      26,408
                                          ==========  ==========  ==========
</TABLE>

<PAGE>

14. DEFERRED INCOME AND RECOVERABLE TAXES

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                     <C>         <C>
Recoverable income tax                                  14,012      26,301
Recoverable social contribution tax                      1,851       9,733
Deferred income and social contribution taxes           16,539      11,697
Recoverable ICMS tax                                         -       9,555
Other recoverable taxes                                     39       1,329
                                                      ----------  ----------
Total                                                   32,441      58,615
                                                      ==========  ==========

Short-term                                              32,280      58,054
Long-term                                                  161         561

</TABLE>

15. OTHER ASSETS

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                      <C>        <C>
Amounts in litigation                                    3,798       4,296
Balance from transactions with fixed-line                3,574           -
companies
Tax incentives                                               -       3,912
Other                                                    2,081      10,545
                                                      ----------  ----------
                                                         9,453      18,753
                                                      ==========  ==========

Short-term                                               7,847      14,691
Long-term                                                1,606       4,062
</TABLE>

16. PROPERTY, PLANT AND EQUIPMENT, NET

A)  COMPOSITION

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                   <C>         <C>
Construction in progress                                160,179     113,984
Automatic switching equipment                            96,375     153,855
Transmission and other equipment                        616,306     749,117
Land                                                      3,852       4,207
Buildings                                                28,748      29,098
Computer equipment                                        3,719      10,361
Exploration right (concession)                           36,360      77,354
Other assets                                             61,516      49,950
                                                      ----------  ----------
Total cost                                            1,007,055   1,187,926
Accumulated depreciation                               (211,923)   (283,411)
                                                      ----------  ----------
                                                        795,132     904,515
                                                      ==========  ==========
</TABLE>

B)  DEPRECIATION RATES

Depreciation rates applied to property, plant and equipment are as follows:

<TABLE>
<CAPTION>
                                                                %
                                                  ------------------------------
                                                        1998            1999
                                                  -------------    -------------
  <S>                                             <C>              <C>
  Automatic switching equipment                       7.69            10.00
  Transmission and other equipment                   10.00            14.29
  Buildings                                           4.00             4.00
  Other assets (excluding land)                   5.00 to 20.00    5.00 to 20.00
</TABLE>

<PAGE>

C)  RENTAL

The  Companies  rent  equipment  and  premises  through  a number  of  operating
agreements that expire at different dates. Total annual rent expense under these
agreements are as follows:

<TABLE>
<CAPTION>
                                             1997        1998        1999
                                          ----------  ----------  ----------
<S>                                         <C>         <C>         <C>
Rental expenses                             10,212      12,283      11,378
</TABLE>


Rental  commitments  relate  primarily to  facilities  where the future  minimum
rental  payments under leases with remaining  non-cancelable  terms in excess of
one year are:

<TABLE>
<CAPTION>
                                                       1999
                                                     --------
                                      <S>             <C>
                                      2000            12,737
                                      2001            13,110
                                      2002            13,905
                                      2003            14,748
                                      2004            14,748
                                      2005            14,748
                                                     --------
                                      Total           83,996
                                                     ========
</TABLE>

17. DEFERRED CHARGES, NET

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------------------
<S>                                                         <C>    <C>
Premium - Coverage Participacoes S.A.                        -     322,674
Premium amortization                                         -      (5,378)
Preoperating expenses - NBT                                  -      29,142
Other                                                       23          17
                                                      ----------------------
Total                                                       23     346,455
                                                      ======================
</TABLE>

18. PAYROLL AND RELATED ACCRUALS

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                      <C>         <C>
Salaries and wages                                         942       1,581
Social charges                                           2,939       3,472
Accrued benefits                                         1,166         619
                                                      ----------  ----------
                                                         5,047       5,672
                                                      ==========  ==========

</TABLE>

19. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                     <C>         <C>
Suppliers                                               37,674      86,911
Consignment on behalf of third parties                  16,155      10,199
Other accounts                                           2,629           5
                                                      ----------  ----------
Total                                                   56,458      97,115
                                                      ==========  ==========

Short-term                                              55,787      96,557
Long-term                                                  671         558
</TABLE>

<PAGE>

20.   INDIRECT TAXES

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                     <C>        <C>
Value - added taxes                                     20,052     27,861
Fistel fees                                                170      14,250
Other taxes on operating revenues                        6,005       3,594
                                                      ----------  ----------
                                                        26,227     45,705
                                                      ==========  ==========
</TABLE>

21.   DEFERRED INCOME AND TAXES PAYABLE

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                   <C>         <C>
Income tax payable                                       1,262      4,360
Social contribution tax payable                          4,781      1,935
Deferred taxes - liability
     Difference IPC x BTNF - Law No. 8,200/91              545        432
     Effects of full monetary correction                25,798     63,992
     Other temporary differences                            17          -
                                                      ----------  ----------
                                                        26,360     64,424
                                                      ----------  ----------
                                                        32,403     70,719
                                                      ==========  ==========

Short-term                                               9,493     16,303
 Long-term                                              22,910     54,416
</TABLE>

22.   PARTICIPATION IN RESULTS OF OPERATION

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                    <C>         <C>
Interest on shareholders' equity of the year            83,405     44,619
Interest on shareholders' equity of the prior  year          -      6,556
Withholding tax on interest on shareholders' equity    (12,512)    (6,693)
Employees' profit sharing                                1,157      1,636
                                                      ----------  ----------
                                                        72,050     46,118
                                                      ==========  ==========
</TABLE>

23.   LOANS AND FINANCING

<TABLE>
<CAPTION>

                        Interest and indexation            Due date     1998     1999
                    ------------------------------------------------------------------
<S>                 <C>                                  <C>           <C>     <C>
NATIONAL CURRENCY
BNDES               TJLP plus 7% annual interest           10/8/2000        -   66,425
TELEBRAS            IGP-M plus  6% annual interest            -        47,619   50,697
OTHER LOANS         Industrial products column 20 - FGV  2000 to 2008   3,545    1,713

Foreign currency
Equipment imports   U.S. dollar  exchange  variation
                    plus   Libor   and   2%   annual
                    interest                               4/28/2000        -    3,649
EXPORT  DEVELOPMENT U.S. dollar  exchange  variation
CORPORATION - EDC   plus  semester  Libor  and 3.90%
                    annual interest                       11/22/2005        -    8,326
                                                                    ------------------
                                                                       51,164  130,810
                                                                    ==================

Short-term                                                             20,437   91,521
Long-term                                                              30,726   39,289

</TABLE>

Libor at December 31, 1999 was 6.5%. TJLP, IGP-M and Industrial  Products Column
20-FGV, presented a variation of 12.5%, 20.1% and 7%, respectively in 1999.

<PAGE>

Long-term payment schedule:

<TABLE>
<CAPTION>
Due date            1999
------------------------
<S>               <C>
2001              26,010
2002               7,206
2003               1,875
2004               1,875
2005               1,873
2006                 209
2007                 209
2008                  32
               ---------
Total             39,289
               =========
</TABLE>

The original  loans from  Telecomunicacoes  Brasileiras  S.A. - TELEBRAS  which,
according to Attachment II of the Spin-off Report of February 28, 1998, approved
by the  Shareholders  Meeting of May 1998,  should be charged to the  respective
Holding parent company of Telegoias Celular S.A. and Telebrasilia Celular S.A..

Based on the understanding  that there have been errors in the allocation of the
respective loans at the time of the spin-off, local Company management suspended
the payment flow subsequent to the change of Company's control,  subjecting from
January  1999  the  total  debts  owed  by  subsidiary  companies  to the  IGP-M
indexation plus 6% annual interest.

In June 1999, Tele Centro Oeste Celular Participacoes S.A (parent company) filed
a legal action claiming the ownership of all assets related to these liabilities
(loans and financing)  plus  accessories as well as compensation of installments
paid.

The Company's  lawyers believe that the chances of obtaining a favorable outcome
are good in this case.

In November 1999,  local Company  management  decided to transfer to the holding
company - Tele Centro Oeste Celular  Participacoes  S.A. - the liability derived
from the loan originally due to  Telecomunicacoes  Brasileiras  S.A. - TELEBRAS,
absorbed by the spin-off process.

24.   PROVISION FOR CONTINGENCIES

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                      <C>         <C>
Tax claims                                               3,420       5,554
Labor claims                                               878         654
Civil claims                                               325         296
                                                      ----------  ----------
                                                         4,623       6,504
                                                      ==========  ==========

Short-term                                               4,134           -
Long-term                                                  489       6,504
</TABLE>

CIVIL AND LABOR CLAIMS

The provision for labor and civil claims are management's  estimates of the most
probable  losses in  relation  to  various  suits  filed by  current  and former
employees, suppliers, fiscal lawsuits and others.

POTENTIAL LITIGATION

Telebras,  Telegoias,  Telems, Telemat, Teleron, Teleacre and Telebrasilia,  the
legal  predecessors of the Holding Company,  and Telegoias  Celular S.A., Telems
Celular S.A., Telemat Celular S.A., Teleron Celular S.A.,  Teleacre Celular S.A.
and Telebrasilia Celular S.A., respectively, are defendants in a number of legal

<PAGE>

proceedings and subject to certain other claims and contingencies. Liability for
any claims arising out of acts committed by Telegoias, Telems, Telemat, Teleron,
Teleacre  and  Telebrasilia  prior  to the  effective  date of the  spin-off  of
Telegoias',   Telems',  Telemat's,   Teleron's,  Teleacre's  and  Telebrasilia's
cellular  assets and  liabilities to the Companies,  will remain with Telegoias,
Telems,  Telemat,   Teleron,   Teleacre  and  Telebrasilia,   except  for  those
liabilities for which specific  accounting  provisions have been assigned to the
Companies. Any claims against Telegoias,  Telems, Telemat, Teleron, Teleacre and
Telebrasilia that cannot be dealt with by Telegoias,  Telems, Telemat,  Teleron,
Teleacre or  Telebrasilia,  have  received  assets which might have been used to
settle those claims had they not been spun off from Telegoias,  Telems, Telemat,
Teleron, Teleacre and Telebrasilia.

Under the terms of the breakup of Telebras,  liability for any claims  resulting
from  actions  taken by  Telebras  prior to the  effective  date of the  breakup
remains with  Telebras,  except for labor and tax claims (in which case Telebras
and the new Holding Company are jointly and severally  liable) and any liability
for which  specific  accounting  provisions  have been  assigned  to the Holding
Company.  Creditors of Telebras  may  question  this  allocation  of  liability.
Management  believes that the chances of any claims  materializing  and having a
significantly  adverse  financial  effect on the  Companies  and/or the  Holding
Company are remote, and therefore no provision has been made.

ICMS ON ACTIVATION FEES

On June 19, 1998 the  Secretaries  of the Treasury of the  individual  Brazilian
states approved an agreement to interpret existing Brazilian tax law in order to
expand the application of the Imposto sobre Circulacao de Mercadorias e Servicos
(Value-Added  Tax on Sales and  Services - ICMS).  This tax then covers not only
telecommunications services, but also other services including the activation of
cellular telephones,  which were not previously subject to such tax and the ICMS
tax may be applied retroactively for such services rendered during the last five
years.

The Company  believes  that the  attempt by the state  Treasury  Secretaries  to
extend  the  scope of ICMS tax to  services  which  are  supplementary  to basic
telecommunications services is unlawful because: (i) the state Secretaries acted
beyond the scope of their authority;  (ii) their interpretation would subject to
taxation  certain   services  which  cannot  be  considered   telecommunications
services; and (iii) new taxes may not be applied retroactively. In addition, the
Company  believes  that  Telegoias,   Telems,  Telemat,  Teleron,  Teleacre  and
Telebrasilia,  the legal  predecessors  of the Company,  would be liable for any
payments  made in  connection  with any  claim  resulting  from the  retroactive
application  of the ICMS tax on  activation  fees for periods  prior to 1998. No
provision  for  such  taxes  has  been  made  in the  accompanying  consolidated
financial  statements,  since the Company  does not believe it is probable  that
such taxes will be payable for services rendered during the last five years.

There can be no  assurance  that the  Company  will  prevail in its  position to
regard the new interpretation by the state treasury secretaries as unlawful.  If
the ICMS tax were applied  retroactively  to  activation  fees earned during the
past five years, it would generate a maximum liability estimated at R$77,300. If
the ICMS  tax were  applied  retroactively  to  activation  fees  earned  by the
Company's  subsidiaries  since its onset on  January  5,  1998,  it could have a
material negative impact not only on the financial condition of the Company, but
also on the results of its operations after January 5, 1998.

25.   PENSION PLAN

The  Company  and its  subsidiaries,  except  for  Norte  Brasil  Telecom  S.A.,
participate  in a  multi-employer  defined  benefit  pension  plan  and in other
post-retirement  benefit  plans  managed by the FUNDACAO  TELEBRAS DE SEGURIDADE
SOCIAL ("Sistel").

Approximately  90% of the Companies'  employees are covered by these plans.  The
Companies  contributed  with and  charged  to their  expense  accounts  R$1,207,
R$1,826  and R$ 2,136  for  their  pension  funds  during  1997,  1998 and 1999,
respectively.  The Companies notified Sistel of their intention to withdraw from
the  portion  of  the  pension   plan   covering  its  active   employees.   The
post-retirement  health care plan and the pension  plan for  inactive  employees
will remain as a multi-employer plan.

<PAGE>

The pension  benefit is generally  defined as the difference  between (i) 90% of
the retiree's  average  salary during the last 36 months  indexed to the date of
retirement  and (ii) the value of the  retirement  pension paid by the Brazilian
social security system.  For retired  employees,  the initial annuity payment is
subsequently  adjusted  upwards  to  recognize  cost  of  living  increases  and
productivity   awards   granted  to  active   employees.   In  addition  to  the
supplementary  annuity,  post-retirement health care and life insurance benefits
are provided to eligible pensioners and their dependents.

Contributions  to  the  plans  are  based  on  actuarial   studies  prepared  by
independent  actuaries  under Brazilian  regulations.  These studies are revised
periodically, in order to identify whether adjustments made to contributions are
necessary.  An overall  summary of the Sistel plan,  compliant  with  accounting
principles generally accepted in Brazil, is presented below:

<TABLE>
<CAPTION>
                                                         1998        1999
                                                      ----------  ----------
<S>                                                    <C>         <C>

Accumulated pension and other post-retirement          4,341,826   4,311,895
benefit obligations
Other obligations                                        375,710   2,052,236
                                                      ----------  ----------
Total obligations                                      4,717,536   6,364,131
                                                      ==========  ==========
Combined plan assets:
Financial market                                       2,958,960   3,685,233
Stocks and shares                                      2,013,000   2,911,487
Investment properties                                    473,858     423,899
Loans to beneficiaries                                   139,141      89,413
Other investments                                         57,077      44,104
                                                      ----------  ----------
Total plan assets                                      5,642,036   7,154,136
                                                      ----------  ----------
Excess of total plan assets over total obligations       924,500     790,005
                                                      ==========  ==========
</TABLE>

26.   SHAREHOLDERS' EQUITY

INCORPORATION OF TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

On May 22, 1998 the shareholders of Telebras  approved  Telebras'  division into
the New Holding Companies using a procedure under Brazilian corporate law called
a CISAO,  whereby  existing  shareholders  received  shares,  in the New Holding
Companies in proportion to their holdings in Telebras. The New Holding Companies
contain  the assets and  liabilities  previously  recorded  in the  accounts  of
Telebras,  except for the  following  items  which  will  remain in the books of
Telebras and not be allocated to the New Holding Companies:

o  approximately  R$117,698 of net assets which have been  attributed to a newly
   constituted research foundation that will take over the activities previously
   performed by the Telebras Campinas Research and Development Center; and,


o  approximately R$444,370 of net assets that will provide the funds required to
   liquidate  Telebras,   including   approximately   R$158,532  of  retroactive
   dividends to be paid to the holders of new shares  issued in April 1998, as a
   result of the  resolution  of the dispute over the capital  increase of 1990,
   approximately  R$60,050 of indemnity  payments to employees and approximately
   R$104,487 of expenses arising out of the privatization process.


In addition to approving  the  allocation of assets and  liabilities  to the New
Holding Companies at the May 22, 1998 meeting,  the shareholders also approved a
specific  structure for the  shareholders'  equity of each New Holding  Company,
which  included  the   allocation  of  a  portion  of  the  retained   earnings.
Consequently,  the amounts of the  balances of capital,  reserves  and  retained
earnings,  together  with  the  corresponding  assets  and  liabilities  for the
formation of Tele Centro Oeste  Celular  Participacoes  S.A.  were  established.
After Telebras retained within its own shareholders'  equity sufficient retained
earnings  from which to pay  dividends on its 1997 earnings and in settlement of

<PAGE>

dividends  as a result  of  settlement  of the  1990  disputed  share  increase,
Telebras  allocated  to each New Holding  Company  the  balance of its  retained
earnings  in  proportion  to the  allocated  total  net  assets.  This  value of
allocated retained earnings does not represent the historical  retained earnings
of the holding  companies.  The assets which were  spun-off  from  Telebras,  in
addition  to  its  investment  in the  operating  subsidiaries,  resulted  in an
increase of R$19,281 in relation to the Company's historical  divisional equity.
These values are shown in the "Spin-off from  Telebras"  column in the following
table. The first column summarizes the December 31, 1997 consolidated historical
balances of the  Companies,  and the "Holding  Company  Consolidated  Statement"
column  summarizes the  consolidated  balance sheet of Tele Centro Oeste Celular
Participacoes S.A. after the spin-off.

As a  result  of the  legal  structure  of the  spin-off  and as  allowed  under
Brazilian  GAAP, a company formed as a result of a cisao will have such retained
earnings in its balance  sheet as the parent  company  shareholders'  resolution
adopting  the  cisao  allocates  from the  parent  company  to the new  company.
Accordingly,  upon  formation,  Tele Centro Oeste Celular  Participacoes  S.A.'s
legal capital structure was defined by the resolutions  approved by the Telebras
shareholders'  meeting  of May 22,  1998 so that  its  shareholders'  equity  of
R$637,253  includes  retained  earnings of  R$406,584.  The  allocated  retained
earnings and future gains will be the basis from which future  dividends will be
payable.

The "Adjustments and  Eliminations"  columns includes (i) the elimination of the
Telebras  investment in the Companies and (ii) the  elimination of  intercompany
loans, payable and receivables.

<TABLE>
<CAPTION>

                                                               Adjustments
                           December 31, 1997   Spin-off from       and       Consolidated
                          Historical balances    Telebras      eliminations    Holding
                          -------------------  -------------   ------------  ------------
<S>                              <C>              <C>             <C>            <C>
Assets:
Cash and cash equivalents         47,208           18,666               -         65,874
Intercompany receivables               -              396            (396)             -
Other current assets              85,939                -               -         85,939
Total current assets             133,147           19,062            (396)       151,813
Intercompany receivables               -              219            (219)             -
                          -------------------  -------------   ------------  ------------
Other noncurrent assets            1,674                -               -          1,674
Investments in
 subsidiaries                          -          617,972        (617,972)             -
Property, plant and
 equipment, net                  693,935                -               -        693,935
                          -------------------  -------------   ------------  ------------
Total permanent assets           693,935          617,972        (617,972)       693,935
Total assets                     828,756          637,253        (618,587)       847,422
                          ===================  =============   ============  ============

Liabilities:
Total current liabilities         37,831                -            (396)        37,435
                          -------------------  -------------   ------------  ------------
Loans and financing               36,438                             (219)        36,219
Other                             32,419                -               -         32,419
                          -------------------  -------------   ------------  ------------
Total noncurrent                  68,857                -            (219)        68,638
 liabilities

Minority interests               104,095                -               -        104,095
                          -------------------  -------------   ------------  ------------
Divisional equity                617,972                -        (617,972)             -
Capital                                -          182,640               -        182,640
Capital reserves                       -           48,029               -         48,029
Retained earnings                      -          406,584               -        406,584
Total shareholders'
 equity                          617,972          637,253        (617,972)       637,253
                          -------------------  -------------   ------------  ------------
Total liabilities and
 shareholders' equity            828,756          637,253        (618,587)       847,422
                          ===================  =============   ============  ============
</TABLE>

The  formation of the Holding  Company and of  Telegoias  Celular  S.A.,  Telems
Celular S.A., Telemat Celular S.A., Teleron Celular S.A.,  Teleacre Celular S.A.
and  Telebrasilia  Celular S.A. has been  accounted for as a  reorganization  of
entities  under common  control in a manner  similar to a pooling of  interests.
Brazilian  corporate  and tax law allows  state  controlled  companies  that are
participating  in the  government's  privatization  program a three  month delay
between  the  accounting  base  date for a  spin-off  and the date on which  the
shareholders'  meeting approves the spin-off,  including the related  accounting

<PAGE>

basis  for the net  assets  spun  off.  Furthermore,  as  allowed  by  Brazilian
corporate  law,  the  amount  shown in the  "Spin off from  Telebras"  column as
"Investment in subsidiaries" was determined based on the balance sheets of those
subsidiaries as of December 31, 1997. As a result,  the  consolidated  financial
statements  of the Holding  Company will include the results of  operations  and
changes in financial  condition of the subsidiaries from January 1, 1998 and the
effects of the cash allocated from Telebras as of March 1, 1998.

Besides  approving the  allocation of assets and  liabilities to the New Holding
Companies,  the  shareholders  also  approved a specific  structure  for the net
equity of each new holding  company in the same  Assembly  held on May 22, 1998.
Therefore, not only the value of the opening balance of capital was established,
but also the reserves and the accrued profits,  as well as the respective assets
and  liabilities  for  the   constitution  of  the  Tele  Centro  Oeste  Celular
Participacoes S.A..

Consequent to the legal  structuring  of the spin-off  process,  the Tele Centro
Oeste  Celular   Participacoes   S.A.   incorporated,   at  the  moment  of  its
constitution, a net equity value of R$ 590,719. This included accrued profits of
R$ 114,280  and the  results of the months of January  and  February,  1998:  R$
1,619.

However,  the  Company's  Administration  understands  that due to an error made
during the deliberations  carried out during the above mentioned  Assembly,  the
loans cited under Note 23 with their controlled  companies  Telebrasilia Celular
and Telegoias  Celular,  were not allocated as the Company's assets.  Such loans
total R$ 48,351  according to the criteria  established  for the  segregation of
assets and liabilities provided by Attachment II of the Spin-Off Report,  issued
on  February  28,  1998 by a  specialized  company  and  approved  by the May 22
Assembly as Attachment III.

Administration also understands that the above mentioned error resulted from the
fact that the  records  used by that  specialized  company  do not  reflect  the
segregation  of the loans of this  fixed-line  system  company with the cellular
telephone Companies, as evident in applicable support documentation.

The company submitted the question to a Commercial and Corporate Law specialist,
who acknowledged  that the spin-off of the  Telecomunicacoes  Brasileiras S.A. -
TELEBRAS,  did not follow the justified  means,  thus harming the company it had
just created.

Below  are the  effects  of the Net  Equity  of the Tele  Centro  Oeste  Celular
Participacoes S.A., in case the above mentioned loans are added to the assets of
this Holding Company.

<TABLE>
<CAPTION>

                                           1998       1999
                                        -----------------------
<S>                                      <C>        <C>
Net Shareholder's Equity                 726,807    1,119,243
(+) Controlled Companies' loans           48,351       48,351
(+) Appropriation  of  net  financial
     charges and taxes                     4,310        7,292
(=) Net Shareholders' equity             779,468    1,174,886
</TABLE>

a)  Capital

The  authorized  capital at December 31, 1999 and 1998 is  700,000,000  thousand
shares.

The capital of R$ 351,850 at December 31, 1999 (R$ 230,666 in 1998),  subscribed
and paid-in,  consists of 364,399,028,000 shares with no par value,  distributed
as follows (in thousands):

<TABLE>
<CAPTION>

                                                   31/12/98        31/12/99
                                                --------------  --------------
<S>                                               <C>             <C>
Common shares                                     124,369,031     124,369,031
Preferred shares                                  210,029,997     240,029,997
   Total                                          334,399,028     364,399,028
Book value per thousand shares - Corporate          2.0394685        2.784472
 law (in R$)
</TABLE>

The capital stock of Tele Centro Oeste Celular  Participacoes  S.A. is comprised
of preferred  shares and common shares,  all without par value. At May 22, 1998,
there were  210,029,997  thousand  outstanding  preferred  shares  (inclusive of

<PAGE>

13,718,350 thousand preferred shares resulting from the settlement in April 1998
with Telebras as discussed below) and 124,351,903  thousand  outstanding  common
shares (net of 17,128 thousand shares of treasury).

The preferred shares are non-voting  except under limited  circumstances and are
entitled  to a  preferential,  non-cumulative  dividend  of 6% per  year  and to
priority over the common shares in the case of  liquidation of Tele Centro Oeste
Celular Participacoes S.A..

Under the Brazilian  Corporation Law, the number of non-voting  shares or shares
with  limited  voting  rights,  such as the  preferred  shares,  may not  exceed
two-thirds of the total number of shares.

On June 7, 1990,  the Board of Directors of Telebras  authorized  an increase in
Telebras  share  capital  by  public  offer.  During  the offer  period  the CVM
initiated  an  investigation  as  to  whether   Brazilian   securities  law  and
regulations  regarding  the  correct  pricing of the new shares  issued had been
violated,  because  the shares  were  issued at a discount  to equity  value per
share. After its investigation the CVM notified the Federal  Prosecutor's Office
that it believed no violation  occurred since the price was  established in line
with market prices for Telebras' shares traded on the Brazilian stock exchanges.
Nevertheless,  the  Federal  Prosecutor  decided  to pursue  the  issue  through
judicial  channels.  In April  1998,  resolution  was  reached  on the  disputed
Telebras  capital  increase of 1990. In connection with the resolution  Telebras
issued 13,718,350 thousand shares of preferred stock.

Through an  Extraordinary  Shareholders  Meeting at Tele  Centro  Oeste  Celular
Participacoes  S.A.  held on April 30, 1999,  the capital  increase was approved
through  the  incorporation  of  retained  earnings  in the  amount of R$ 63,232
without the issuing of new shares,  under the terms of Article 169,  Paragraph I
of Law No. 6,404/76 and Article 6 of the Social Statute. Therefore, the value of
the Company's subscribed and paid-in capital became R$ 293,898.

The   Extraordinary   Shareholders   Meeting  of  Tele  Centro   Oeste   Celular
Participacoes S.A. held on May 27, 1999 approved, and the Administration Council
of July 20, 1999 confirmed,  the Company's capital increase of R$ 57,952 through
the issuing of 30,000,000,000 (thirty billion) preferred shares, through private
subscription and cash payment on the subscription date,  resulting in subscribed
and paid-in capital of R$ 351,850.

b)  Income reserves

Legal reserve

Tele Centro Oeste  Celular  Participacoes  S.A. is obliged by  Corporate  Law to
direct  5% of its  annual  profit  to  the  Legal  Reserve  until  this  reserve
corresponds to 20% of the Company's  realized  Capital,  or 30% of the Company's
Capital added to the capital  reserves.  After these limits,  the  allocation to
these  reserves is no longer  mandatory.  The legal  reserve can only be used to
increase the Company's Capital and to absorb losses.

LONG TERM REVENUE RESERVE

Represents  earned but  unrealized  revenues  resulting  from the balance of the
adjustments of the investments valued using the equity method of accounting. The
reserve is realized  when  dividends  or interest  on  shareholders'  equity are
received,  and other  events,  according to CVM  policies.  The  realization  of
reserves is reversed to retained earnings.

Movement of unearned income reserve:

<TABLE>
<CAPTION>

                                                    1998         1999
                                                -------------------------
<S>                                               <C>         <C>
Income reserve                                     232,135     150,022
Reversal                                          (232,135)   (150,022)
Constitution                                       150,022     101,929
                                                -------------------------
            BALANCE AT DECEMBER 31                 150,022     101,929
                                                =========================
</TABLE>


<PAGE>

c)  Dividends/interest on own capital

Pursuant  to its  by-laws,  Tele  Centro  Oeste  Celular  Participacoes  S.A. is
required  to  distribute  as  dividends  in respect of each  fiscal  year ending
December 31, to the extent amounts are available for distribution,  an aggregate
amount equal to at least 25% of Adjusted Net Income (as  defined  below) on such
date.  The annual  dividend  distributed  to holders of  preferred  shares  (the
"Preferred  Dividend")  has priority in the  allocation  of Adjusted Net Income.
Remaining  amounts to be  distributed  are  allocated  first to the payment of a
dividend  to  holders  of  common  shares in an  amount  equal to the  Preferred
Dividend and the  remainder is  distributed  equally  among holders of preferred
shares and common shares.

For the purposes of the Brazilian  Corporation  Law, and in accordance with Tele
Centro Oeste Celular  Participacoes S.A.'s by-laws, the "Adjusted Net Income" is
an amount equal to Tele Centro Oeste  Celular  Participacoes  S.A.'s net profits
adjusted to reflect  allocations  to or from (i) the statutory  reserve,  (ii) a
contingency  reserve for  anticipated  losses,  if any, and (iii) an  unrealized
revenue reserve, if any.

In  1999  the   Administration   Council  decided  to  distribute   interest  on
shareholders'  equity to its shareholders in the amount of R$36,500,  from which
R$31,229  was  calculated  to the  priority  value for  preferred  shares and to
mandatory dividends.

<TABLE>
<CAPTION>

                                                      1998        1999
                                                   ----------  ----------
<S>                                                 <C>         <C>
Year's Net Profit                                    151,570      90,574
(+) Reversal of long term revenue reserve            232,135     150,022
(-) Long term revenue reserve                       (150,022)   (101,929)
(-) Legal reserve                                     (8,179)     (5,364)
(+) Adjustment to determine the Corporate
     Legislation calculation basis                    11,999       8,389
                                                   ----------  ----------
(=) Adjusted Net Profit                              237,503     124,914
     Mandatory Dividends (25%)                        59,376      31,229
                                                   ==========  ==========
</TABLE>

As proposal by management, interest on capital was recognized as of December 31,
1998 and 1999, and was treated as dividends,  pursuant to art. 9 of Law 9249/95,
net of  withholding  income  tax,  after  approval at the  shareholders'  annual
meeting.

d)  Retained earnings

The remaining balance of retained  earnings,  pursuant to Article 202 of Law No.
6,404/76, in the amount of R$ 315,539 at December 31, 1999 (R$ 324,306 in 1998),
will be used for  future  investments  according  to the  capital  budget  to be
presented at the Shareholders Meeting.

27.   TRANSACTIONS WITH RELATED PARTIES

Before  August 4, 1997,  the Company was  controlled  by the  Brazilian  Federal
Government  through  Telebras.  This  originated the  transactions  with related
parties described below and disclosed in the profit and loss account.

Before August 4, 1997, the main  transactions with related parties were effected
with the Empresa Brasileira de Telecomunicacoes S.A. ("Embratel"),  a subsidiary
of  Telebras,   regarding  long-distance  cellular  telecommunication,   besides
Telegoias,  Telems,  Telemat,  Teleron,  Teleacre and  Telebrasilia in using the
respective telecommunications network. The Companies are responsible for billing
cellular  subscribers for  long-distance  calls and collecting  payments owed to
other cellular and fixed-line carriers. The collection for outgoing calls is the
responsibility  of the Companies and the  collection  for incoming  calls is the
responsibility of the originating telephone company.  After the collection cycle
is complete,  the Companies and the regional  fixed-line and cellular  companies
jointly reconcile the amounts collected against the amounts, if any, transferred
to each party, and pay the net amounts  outstanding to the appropriate  parties,
including the long-distance portion of the charges to Embratel.


<PAGE>

Until the breakup of Telebras, Telegoias, Telems, Telemat, Teleron, Teleacre and
Telebrasilia and the other companies of the Telebras System, each contributed to
the Research and Development  Center operated by Telebras  (CENTRO DE PESQUISA E
DESENVOLVIMENTO DA TELEBRAS).

Following the breakup of Telebras,  the Research and Development Center became a
private,  independently  administered  foundation financed by contributions from
the New Holding Companies  resulting from the breakup.  Pursuant to a three year
contract  signed in May 1998  between  the  foundation  and the  Companies,  the
Companies are obligated to contribute  with a maximum of R$2,133 to the research
and  development  center  during the three  years  ending May 2001.  The current
amount  spent in a given  year may be  adjusted  downward  at the  option of the
foundation.

The  Companies  believe  that  except for  interest  income and the  unallocated
interest expense and taxes, all the costs of doing business are reflected in the
consolidated financial statements and that no additional amounts should be added
to the  consolidated  financial  statements  as a result of the cessation of the
activities previously performed by Telebras.

Other  related  parties  included  until August 4, 1998 are  Federal,  State and
Municipal  Governments.  Revenues from telephone calls made by government bodies
and related  organizations  have not been included below because telephone users
details are not recorded by the Companies.

A summary of the  balances and  transactions  with these  related  parties is as
follows:

<TABLE>
<CAPTION>

                                                                 1997
                                                             -------------
<S>                                                             <C>
Current assets:
    Accounts receivable from third parties, net                   3,257
Current liabilities:
    Loans and financing                                          11,491
    Other liabilities                                             2,616
Long term obligations:
    Loans and financing                                          36,438

Net operating income resulting from cellular services           132,605
Cost of services rendered                                       146,162
Operating expenses                                               53,255
Financial expenses                                                4,473
</TABLE>

28.   INSURANCE

At December 31, 1999, in the opinion of  management,  all  significant  and high
risk assets and obligations were insured.

29.   FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

Estimated fair values of the Companies'  financial  assets and liabilities  have
been determined  using available  market  information and appropriate  valuation
methodologies.  However,  considerable  judgment  was  required in  interpreting
market data to produce the  estimated  fair values.  Accordingly,  the estimates
presented  below are not  necessarily  indicative  of the amounts  that could be
realized in a current market exchange.

The fair value  information as of December 31, 1998 and 1999 presented  below is
based on pertinent information available to management as of those dates.

Where there is no  comparison  between the equity value of a financial  asset or
liability  item at market  value,  presumably  there  should  be no  significant
differences between these amounts.

<PAGE>

<TABLE>
<CAPTION>

                                          1998                1999
                                    ---------------------------------------
                                       BOOK     FAIR      BOOK      FAIR
                                       Value    value     Value     value
                                    ---------------------------------------
<S>                                   <C>       <C>      <C>       <C>
Deferred tax liabilities              25,797    16,084    18,623    12,811
Loans                                 51,164    52,272   130,810   130,810

</TABLE>

CASH,  CASH  EQUIVALENTS,  CLIENT  ACCOUNTS  RECEIVABLE,  OTHER CURRENT  ASSETS,
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The Cash, Cash equivalents,  client accounts  receivable,  other current assets,
accounts payable and accrued expenses  represent a reasonable  estimate of their
fair market value.  The cash  equivalents are  represented  mainly by short term
financial  investments.  The fair market  values of such  investments  and other
short  term  investments,  as well as the  bank  deposits  that do not  meet the
definition of short term  investments  were estimated  using the rates currently
offered for deposits with similar due dates.

DEFERRED TAX LIABILITIES

The fair market value of these  instruments  were calculated  discounting  their
future cash flows using the Long Term Interest Rate,  disclosed by the Brazilian
Central Bank.

LOANS AND FINANCING

Interest  rates  currently  available for the Companies  when issuing debts with
similar conditions were used in order to estimate the fair market value.

30. SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP

The  Companies'   accounting   policies  comply  with  the  "generally  accepted
accounting   principles"  in  Brazil,   the  Brazilian  "GAAP".  The  accounting
principles  and policies  practiced in the United States of America ("US GAAP"),
which differ significantly from the former, are described below.

A.  DIFFERENT CRITERIA FOR CAPITALIZING AND AMORTIZING CAPITALIZED INTEREST

Until  December 31, 1993,  capitalized  interest was not added to the individual
assets in property, plant and equipment;  instead, it was capitalized separately
and amortized over a time period  different from the useful lives of the related
assets.  Under US GAAP,  capitalized  interest is added to the individual assets
and is amortized over their estimated useful lives.  Also, under Brazilian GAAP,
as applied to  companies in the  telecommunications  industry up to December 31,
1998, interest attributable to construction-in-progress is computed at a rate of
12% per annum of the  balance  of  construction-in-progress  and that part which
relates to interest on third party loans is credited to financial expenses based
on actual interest costs;  the balance relating to own capital being credited to
capital reserves. As from January 1, 1999, this practice is not required anymore
and CVM  Instruction  No. 193/96 became to be used. In 1999, the Company did not
capitalize interest attributable to construction-in-progress.

Under US GAAP, in accordance  with the  provisions of the Statement of Financial
Accounting  Standard ("SFAS") No. 34  "Capitalization  of Financial Costs",  the
interest  incurred on borrowings is capitalized to the extent that borrowings do
not exceed  construction-in-progress.  The  credit is a  reduction  of  interest
expense. Under US GAAP, the amount of interest capitalized excludes the monetary
gains associated with the borrowing and the foreign exchange gains and losses on
foreign currency borrowings.

<PAGE>

The  effects  of  these  different  criteria  for  capitalizing  and  amortizing
capitalized interest are presented below:

<TABLE>
<CAPTION>

                                                     1997      1998     1999
                                                   -----------------------------
<S>                                                  <C>       <C>      <C>

CAPITALIZED INTEREST DIFFERENCE
US GAAP  CAPITALIZED  INTEREST
   Interest which would have been capitalized
   and  credited  to  income  under  US  GAAP
   (where interest incurred on loans from the
   parent Company and from third-parties, net
   of  gains  and  losses  due  to   monetary
   variations,  except in years  where  total
   loans   exceeded    total    construction-
   in-progress,  when capitalized interest is
   reduced proportionally).                          6,151      3,419   3,373
INTEREST  CAPITALIZED  AND  CREDITED TO INCOME
MINUS  INTEREST  CAPITALIZED  UNDER  BRAZILIAN           -        214       -
GAAP:
                                                  ------------------------------
 Total                                               6,151      3,633   3,373
   Interest   capitalized   and   credited  to
   income   (up  to  the  limit  of   interest
   incurred on loans  obtained  for  financing
   capital  investments,   net  of  gains  and
   losses  resulting  from   currency/monetary
   variations)                                      (1,206)    (1,237)      -
   Interest capitalized and credited to
   reserves                                        (21,225)   (12,005)      -
                                                 -------------------------------
Total                                              (22,431)   (13,242)      -
 US GAAP difference                                (16,280)    (9,609)  3,373
                                                 ===============================

 AMORTIZATION    OF    CAPITALIZED    INTEREST
 DIFFERENCE
   Amortization under Brazilian GAAP                 3,119      6,405   5,787
   Minus the amortization under US GAAP
   Difference   -   accumulated   amortization      (1,115)   (1,765)  (1,823)
   credited to asset under US GAAP                    -       (80)       -
                                                 -------------------------------
US GAAP difference                                   2,004     4,560    3,964
                                                 ===============================
</TABLE>

B.  PENSION AND OTHER POST-RETIREMENT BENEFITS

The Companies  participate in multi-employer  benefit plans (Sistel) and provide
for the costs of pension  and other  post-retirement  benefits  based on a fixed
percentage of remuneration,  as recommended  annually by independent  actuaries.
The provisions of the SFAS 87 - Employers'  Accounting for Pensions were applied
to calculate the funded status as of January 1, 1992 because applying them as of
the date  specified in the  standard was not  feasible.  In December  1999,  are
agreement to withdraw from multi-employer pension plan was reached. See note 31.

C.  DISCLOSURE REQUIREMENTS

US GAAP  disclosure  requirements  differ from the Brazilian ones.  However,  in
these  consolidated  financial  statements,  the  level of  disclosure  has been
expanded to comply with US GAAP.

D.  INTEREST EXPENSE

Brazilian GAAP requires that interest be shown as part of the operating  profit.
Under US GAAP,  interest  expense would be shown after the operating  profit and
accrued interest would be included in accounts payable and accrued expenses.

E.  EMPLOYEES' PROFIT SHARE

Brazilian   GAAP  requires  that   employees'   profit  share  be  shown  as  an
appropriation  of the net income for the year. Under the US GAAP, the employees'
profit share would be included as an operating expense.


<PAGE>

F.  PERMANENT ASSETS

Brazilian GAAP includes a class of assets called `permanent assets'. This is the
collective name for all assets subject to indexation  adjustments,  according to
Brazil's  corporation law and the tax legislation.  Under US GAAP, the assets in
this  classification  would  be  noncurrent  assets  and  property,   plant  and
equipment.

Losses in reversals and provisions for losses in the  recuperation  of permanent
assets in 1998  totaled R$ 976 and  R$17,831,  respectively.  Such  losses  were
included in non-operating expenses for Brazilian GAAP purposes.  According to US
GAAP, such profits and losses would alter the operating income.

G.  PRICE-LEVEL ADJUSTMENTS AND US GAAP PRESENTATION

The  effects  of  price-level  adjustments  have  not been  eliminated  from the
reconciliation  with US GAAP,  nor are the monetary  gains or losses  associated
with  the  various  US  GAAP  adjustments  identified  separately,  because  the
application  of  inflation  restatement  as  measured  by the UFIR and the IGP-M
represents a comprehensive  measure of the effects of price level changes in the
Brazilian  economy and, as such,  is considered a more  meaningful  presentation
than the  historical  cost-based  financial  reporting for both Brazilian and US
accounting purposes.

H.  ITEMS POSTED DIRECTLY TO STOCKHOLDERS' EQUITY

Under  Brazilian GAAP,  various items are posted directly to divisional  equity,
which under US GAAP would be posted to the  consolidated  statements of revenues
and expenses.  One example is capitalized interest. The posting of such items to
divisional equity implies  adjustments in the consolidated  statement of changes
in stockholders' equity. Since that the original postings to the equity accounts
would,  under  US GAAP,  be made  directly  to the  consolidated  statements  of
revenues and expenses,  the adjustment is also included in the reconciliation of
the net profit for US GAAP purposes.

I.  INCOME TAXES

The Company did not present its income tax up to December  31,  1997,  since the
consolidated  financial statements do not include certain expenses and revenues,
because  non-specific cash and debts were not allocated from Telegoias,  Telems,
Telemat,  Teleron,  Teleacre and Telebrasilia.  However, for Brazilian GAAP, the
deferred tax charges  relating to the deferred  income tax effects of indexation
adjustments for 1997 and 1999, are recorded  directly against  divisional equity
and  shareholders' equity,  respectively.  Under  U.S.  GAAP,  for  purposes  of
financial statements, the effects of the indexation adjustments made in 1997 and
1999 on the  deferred  income  tax,  would be  charged  to the income and social
contribution taxes in the consolidated statement of income.

J.  EARNINGS PER SHARE

Earnings per share has not been  presented for  Brazilian  GAAP for 1997, as the
capital  structure of the Holding Company was not in place at December 31, 1997.
Earnings  per  share  has not  been  presented  for  U.S.  GAAP  for 1997 as the
statements  of  revenues  and  expenses  exclude  interest  income,  unallocated
interest  expense  and income  taxes as a result of  specific  cash and debt not
being  allocated  from  Telegoias,   Telems,   Telemat,   Teleron,   Teleacre  e
Telebrasilia.

In 1998 and 1999, the Brazilian GAAP  computation of earnings per share is based
on shares  outstanding at year end, and does not distinguish  between common and
preferred shares.  Under U.S. GAAP Statements of Financial  Accounting Standards
No. 128,  "Earnings per Share",  the  computation is based on the average shares
outstanding during the year.

K.  DEFERRED TAXES

The deferred  income tax liability  resulting  from the  indexation of permanent
assets  of  R$20,081  in 1997 and R$  42,338  in 1999 was  charged  directly  to
divisional  equity and  shareholders' equity,  respectively  in accordance  with

<PAGE>

Brazilian  GAAP,  whereas  for U.S.  GAAP the charge  would be to income for the
year.  For  1998 and  1999,  the  deferred  tax  effect  on  realization  of the
indexation  effects  amounting  R$7,559 and R$ 8,253 was charged directly to the
income  statement.  Until 1997,  the deferred tax effects of the above U.S. GAAP
adjustment of R$ 4,794 in 1997 is not included in the  reconciliation  of income
differences  between  U.S.  and  Brazilian  GAAP  and for  1998 and 1999 the tax
effects amounting to R$6,496 and R$ 10,746 are included in the income statement.

L.  VALUATION OF LONG-LIVED ASSETS

For US GAAP,  effective  January 1, 1996, the Companies should adopt SFAS No 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." According to this standard, the Companies periodically evaluate
the carrying  value of  long-lived  assets to be held and used,  when events and
circumstances warrant such revision.  The carrying value of long-lived assets is
considered impaired when the anticipated undiscounted cash flow from such assets
is separately identifiable and is less than their carrying value. In that event,
a loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the assets.  The  adoption of this  standard did not have a
material effect on the Companies' results or financial condition.

M.  RETAINED EARNINGS

For Brazilian GAAP, a company formed as a result of a spin-off may have retained
earnings in its  balance-sheet  if the parent company  shareholders'  resolution
adopting the spin-off allocates retained earnings from the parent company to the
new company.  Under US GAAP, "retained earnings" allocated in the spin-off would
not  be  considered  historical  retained  earnings,  since  such  amount  would
represent  capital  allocated  from the parent company and would be described as
"distributed capital." As a result of the May 22, 1998 spin-off, the Company was
allocated distributed capital of R$ 406,586.

N.  REVENUE RECOGNITION

Until  December  31,  1997,  under both  Brazilian  and US GAAP,  revenues  from
activation fees were  recognized  upon  activation of each customer's  services.
Under US GAAP,  effective as of January 1, 1998,  net revenues  from  activation
fees will be deferred and amortized over the estimated effective contract life.

O.  STOCK COMPENSATION

As part of the  privatization  of the Telebras  System,  the Federal  Government
offered Telebras System employees the right to purchase the Federal Government's
entire holding of Telebras common and preferred shares of each of the twelve new
holding  companies  formed as a result of the split of  Telebras  ("New  Holding
Companies") (representing 2.18% of the outstanding capital stock of Telebras and
of each New  Holding  Company)  at a price of R$83,09  per lot of 13,000  shares
(each "lot" comprised of 1,000 preferred shares of each, Telebras and the twelve
New Holding  Companies).  This price  represents a 50% discount  from the market
price of 1,000  Telebras  preferred  shares at the time the  Federal  Government
authorized  the plan.  Each employee had the right to purchase up to 144 lots of
13,000  preferred  shares,   to  be  allocated   pro-rata  if  the  shares  were
oversubscribed.

The Federal  Government  made 7.2 million lots available for sale, or 60% of the
12.1 million lots that would be taken up if each employee  purchased the maximum
allowed 144 lots.  The period to sign up to purchase the shares ended on October
30, 1998. On August 4, 1998, date on which the offer to employees  commenced and
the measurement  date for 60% of the shares,  the market price of 1,000 Telebras
shares was  R$152,77.  Under U.S.  GAAP,  the charge for the third quarter would
have  been  approximately   R$62,400,   which  represents  share  of  the  offer
price/market  price  differential  on 60% of the  shares  offered  for which the
measurement  date was  August 4, 1998.  As of October  30,  1998,  the  original
expiration of the program the Company's employees had subscribed to 92,692 lots.
Pursuant to an extension,  employees  could rescind their  subscriptions  at any
time prior to April 9, 1999 and shares relating to rescinded  subscriptions were
assigned  to the  remaining  subscribers  on a pro rata  basis.  The  difference
between the 60% of the shares  recorded at December 1998 and the ultimate number
of shares subscribed by the Company's employees was R$6,443.


<PAGE>

Although the Federal  Government,  rather than the Company or Telebras,  offered
the shares to  employees,  under U.S.  GAAP the  deemed  compensation  amount is
"pushed down" to each of the New Holding Companies in accordance with the number
of shares purchased by each New Holding Company in accordance with the number of
shares purchased by each New Holding Company and its subsidiaries employees.

P.  COSTS OF START-UP ACTIVITIES

According to the Brazilian GAAP, the deferment of start-up costs is possible and
was  recorded in relation to the  start-up  of the  operations  of Norte  Brasil
Telecom S.A.

In April 1998,  the AICPA issue  Statement of Position  98-5,  "Reporting on the
Costs of Start-up  Activities".  This  statement  became  effective  in 1999 and
requires costs of start-up  activities and organization  cost to be expressed as
incurred.

Thus, the adjustment of R$ 29,142 was recorded for US GAAP purposes.

Q.  PREMIUM - COVERAGE PARTICIPACOES S.A.

Adjustments  made for US GAAP purposes as the premium  computed at the merger of
Coverage Participacoes S.A. On December 14, 1999 has not been realized yet.

The  adjustments  of R$ 322,674 and R$ 5,378 were recorded in the  shareholders'
equity and operating result respectively.

RECONCILIATION OF THE INCOME DIFFERENCES BETWEEN US AND BRAZILIAN GAAP

<TABLE>
<CAPTION>
                                                   1997      1998      1999
                                               -------------------------------
<S>                                               <C>       <C>       <C>
Net income as reported....................        172,679    151,570   90,574
  Different criteria for determining:
    Capitalized interest..................        (16,280)    (9,609)   3,373
    Amortization of capitalized interest..          2,004      4,560    3,964
    Activation income deferral............              -    (26,017)  (3,682)
    Amortization of the activation income               -     11,500   17,268
     deferral.............................
    Stock compensation expense............              -     (1,627)       -
    Costs of start-up activities..........              -          -  (29,142)
    Premium amortization..................              -          -    5,378
    Pension benefits - SFAS 87
     Adjustments..........................              -          -  (26,861)
  Items posted directly to equity
Capitalized interest on construction in
  Progress................................         21,226     10,176        -
        Deferred Tax on full indexation...              -          -  (42,338)
  Effects of the above adjustments on
deferred taxes............................              -      6,496   10,746
  Effects of the above adjustments on
    minority shares.......................           (969)     2,107      352
                                               -------------------------------
US GAAP net income........................        178,660    149,156   29,632
                                               ===============================

RESULTS PER THOUSAND SHARES ACCORDING TO US
  GAAP
Common shares - basic and diluted                -           1.20          0.24
  Weighted average of outstanding common
    shares (thousands)                           -    124,369,031   124,369,031
Preferred shares - basic and diluted             -           0.71          0.12
Weighted average of current preferred shares
  (thousands)                                    -    210,029,997   240,029,997

</TABLE>

<PAGE>


RECONCILIATION  OF  THE  SHAREHOLDERS'   EQUITY  DIFFERENCES  BETWEEN  US  AND
BRAZILIAN GAAP

<TABLE>
<CAPTION>
                                                           1998       1999
                                                        ----------------------
<S>                                                       <C>      <C>
Shareholders' equity as reported ..................       726,807  1,119,243
   Different criteria for:
     Capitalized interest .........................       (60,194)   (56,821)
     Amortization of capitalized interest .........        10,188     14,152
     Activation income deferral ...................       (26,017)   (29,699)
     Amortization of the activation income
       deferral....................................        11,500     28,768
     Donations received ...........................          (118)      (118)
     Costs of start-up activities..................             -    (29,142)
     Premium - Coverage Participacoes
      S.A..........................................             -   (322,674)
     Premium amortization..........................             -      5,378
     Pension benefits - SFAS 87 adjustments........             -    (26,861)
     Effects of the above adjustments on deferred
       taxes.......................................         21,331     32,077
     Minority interests ...........................          6,588      6,236
                                                        ----------------------
Shareholders' equity according to US GAAP .........        689,733    740,891
                                                        ======================
Additional information:
   Total assets under US GAAP......................      1,084,747  1,297,440
                                                        ----------------------
   Property, plant and equipment...................        946,862  1,131,105
   Accumulated depreciation........................       (201,736)  (269,259)
                                                        ----------------------
   Net property, plant and equipment...............        745,126    861,846
                                                        ======================
</TABLE>


STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP

<TABLE>
<CAPTION>

<S>                                                            <C>
Balance at December 31, 1997.......................            592,194
Telebras Spin-off..................................             19,281
Reversal of stock option plan accrual..............              1,627
Minority interest on reversal of stock option plan
 accrual...........................................               (234)
Net income.........................................            149,156
Dividends proposed.................................            (72,291)
                                                             -----------
Balance at December 31, 1998.......................            689,733
Capital increase with own resources................             57,952
Premium on issues of new shares....................                 74
Net income.........................................             29,632
Interest on own capital............................            (36,500)
                                                             -----------
Balance at December 31, 1999.......................            740,891
                                                             ===========
</TABLE>


31.   ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

A.  PENSION PLAN

The  Company  and its  subsidiaries,  except  for  Norte  Brasil  Telecom  S.A.,
participate in multi-employer  defined benefit pension and other post-retirement
benefit plans, which are operated and administered by SISTEL.

In December of 1999, the Company and the other  companies  which  participate in
the Sistel plan,  reached an agreement to withdraw the active  participants from
the pension plan and establish a new plan for each of the companies. The parties
have agreed to  allocate  the plan assets  based on the  proportional  amount of
liability as calculated under Brazilian accounting principles. The allocation of
the initial transition  obligation and unamortized gains and losses was based on
the projected benefit obligation (PBO) of each individual sponsor divided by the
total PBO of Sistel at December 31, 1999. The inactive  employees of all the New
Holding Companies which  participated in the Sistel defined benefit pension plan
will  remain as part of the multi-employer  plan in Sistel.  The post-retirement

<PAGE>

benefit plans will also remain as a multi-employer plan, however, Sistel will no
longer subsidize life insurance premiums for inactive (retired) employees.


Since  withdrawal  of the active  participants  from the plan was probable as of
December  31,  1999,  and the  liability  could be  estimated,  the  Company has
recorded  under  US  GAAP a  charge  to net  income  in 1999  for the  estimated
liability for the active employees,  which totaled  R$26,861.  Since the Company
remains jointly and severally liable for the multi-employer portion of the plan,
no amounts were recorded under those plans.


A summary of  the liability  as  of December 31, 1999 for  the Company's  active
employees defined benefit pension plan is as follows:

<TABLE>
<CAPTION>

                                                                      1999
                                                                  -----------
    <S>                                                            <C>
    FUNDED STATUS:
       Accumulated benefit obligation:
          Vested........................................ .           1,121
          Non vested.....................................           21,854
                                                                  -----------
          Total..........................................           22,975
                                                                  ===========
       Projected benefit obligation......................           35,056
       Fair value of plan assets to be allocated to the
         Company.........................................          (17,518)
                                                                  -----------
         Projected obligation in excess of assets .......           17,538
         Unrecognized (gains) losses ....................           17,398
         Unrecognized net transition obligation .........           (8,075)
                                                                  -----------
       Accrued pension cost..............................           26,861
                                                                  ===========
</TABLE>


A  summary  of  the  Sistel  pension  plan  as of  December  31,  1999  for  the
multi-employer portion (inactive employees pension plan) is as follows:

<TABLE>
<CAPTION>
                                                                      1999
                                                                  -----------
    <S>                                                           <C>
    FUNDED STATUS:
       Accumulated benefit obligation:
          Vested.........................................          2,649,103
                                                                  -----------
       Projected benefit obligation......................          2,649,103
       Fair value of plan assets.........................         (2,479,020)
                                                                  -----------
         Projected obligation in excess of assets........            170,083
                                                                  ===========
</TABLE>


The funded status of the Sistel  pension plans as of December 31, 1998,  were as
follows:

   PENSION BENEFIT PLAN

<TABLE>
<CAPTION>
                                                                      1999
                                                                  -----------
    <S>                                                           <C>
    FUNDED STATUS:
       Accumulated benefit obligation:
          Vested...................................                2,908,211
          Non vested...............................                4,825,691
          Total....................................                7,733,902
       Projected benefit obligation................                9,945,794
       Fair value of plan assets...................               (4,577,580)
                                                                  -----------
       Projected obligation in excess of assets....                5,368,214
                                                                  ===========
</TABLE>

<PAGE>

The actuarial assumptions used in 1998 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                         1998         1999
                                                      -----------  -----------
       <S>                                              <C>           <C>
       Discount rate for determining projected
         benefit obligations.......................     6.00%         6.00%
       Rate of increase in compensation levels.....     3.25%         3.00%
       Benefit adjustments.........................     1.50%         0.00%
       Expected long-term rate of return on plan
         assets....................................     6.00%         9.00%
</TABLE>


The above are real rates and exclude inflation.
A  summary  of  the   post-retirement   benefits   plan  (which   remains  as  a
multi-employer plan) is as follows:

<TABLE>
<CAPTION>
                                                         1998         1999
                                                      -----------  -----------
    <S>                                                <C>         <C>
    FUNDED STATUS:
       Accumulated post-retirement benefit
         obligations:
           Active participants......................   1,220,056       584,080
           Inactive participants....................     531,731       598,377
                                                      -----------  -----------
                                                       1,751,787     1,182,457
                                                      ===========  ===========
       Fair value of plan assets...................     (119,177)     (156,075)
                                                      -----------  -----------
       Obligations in excess of plan assets........    1,632,610     1,026,382
                                                      ===========  ===========
</TABLE>


In December 1999,  Sistel agreed with the New Holding Companies that it would no
longer subsidize life insurance  premiums for retirees.  Therefore,  there was a
curtailment  of the  plan  which  resulted  in a  reduction  in the  accumulated
post-retirement benefit obligation of R$227,980 as of December 31, 1999.


Actuarial assumptions used were as follows:

<TABLE>
<CAPTION>

                                                         1998         1999
                                                      -----------  -----------
       <S>                                              <C>           <C>
       Discount rate for determining projected
         benefit obligations.......................      6.00%        6.00%
       Rate of increase in compensation levels.....      3.25%        3.00%
       Expected long-term rate of return on plan
         assets....................................      6.00%        9.00%
</TABLE>

Health  care cost  trend  rates of  increase  were  projected  at  annual  rates
excluding  inflation ranging from 6.48% in 1998 decreasing to 2.00% in 2047. The
effect of a one percent annual  increase  (reduction) in the assumed health care
cost  trend  rates  would  increase  (reduce)  the  accumulated  post-retirement
benefits obligation at December 31, 1999 by R$226,930 (R$ 173,301).  Measurement
of the  accumulated  post-retirement  benefit  obligation  was based on the same
assumptions as were used in the pension fund liability calculations.


   CHANGE IN BENEFIT OBLIGATION

<TABLE>
<CAPTION>
                                                         1998         1999
                                                      -----------  -----------
    <S>                                                <C>         <C>
    Benefit obligation at the beginning of year ....   1,696,833   1,751,787
    Service cost....................................      59,749      58,897
    Interest cost ..................................      90,808      97,681
    Benefits paid...................................     (17,062)    (23,414)
    Administrative expenses.........................      (2,339)     (1,843)
    Actuarial (gain) loss...........................     (76,202)   (472,671)
    Curtailment of the plan.........................           -    (227,980)
                                                      -----------  -----------
    Benefit obligation at end of year...............   1,751,787   1,182,457
                                                      ===========  ===========
</TABLE>
<PAGE>

   CHANGE IN PLAN ASSETS

<TABLE>
<CAPTION>
                                                         1998         1999
                                                      -----------  -----------
    <S>                                                 <C>         <C>
    Fair value of plan assets at beginning
      of year......................................     115,458     119,177
    Employer contributions.........................      30,668      26,130
    Plan participants' contribution ...............           -           -
    Benefits paid..................................     (14,409)    (23,414)
    Administrative expenses........................      (2,339)     (1,843)
    Actual return on plan assets...................     (10,201)     36,025
                                                      ----------  -----------
    Fair value of plan assets at end of year.......     119,177     156,075
                                                      ==========  ===========
</TABLE>

The funded status of the pension and post  retirement  plans under Brazilian and
US GAAP differ. Benefit obligations differ because they have been prepared using
different actuarial assumptions permitted under Brazilian and US GAAP.


The net assets of the plans differ under  Brazilian and US GAAP  principally due
to the  accrual  of income tax  contingencies  of the  pension  fund for US GAAP
purposes  in  the  amount  of  R$765,530   and   R$650,446  in  1998  and  1999,
respectively.  The  contingency  arises out of  uncertainty as to the income tax
status of Brazilian  pension funds in general  because the tax law is unclear as
to whether  these funds are exempt  from tax on their  investment  gains.  Under
Brazilian  GAAP, the liability is recorded but not deducted from plan assets for
disclosure purposes.

B.  CONCENTRATION OF RISK

Credit risk with  respect to trade  accounts  receivable  from third  parties is
diversified.  The  Companies  continually  monitor  the level of trade  accounts
receivable  and  limit  the  exposure  to bad  debts by  cutting  access  to the
telephone  network if any invoice is fifteen days past-due.  Exceptions  include
telephone  services  that must be  maintained  for reasons of safety or national
security.

In conducting  their  businesses,  the Companies  are fully  dependent  upon the
cellular telecommunications concession as granted by the Federal Government.

Approximately  29% of all full-time  employees are members of state labor unions
associated   with  either  the   Federacao   NACIONAL   DOS   TRABALHADORES   EM
TELECOMUNICACOES   ("Fenattel"),   or  with  the  FEDERACAO   INTERESTADUAL  DOS
TRABALHADORES  EM  TELECOMUNICACOES  ("Fittel").  The  Companies  negotiate  new
collective  labor  agreements  every year with the local union.  The  collective
agreements currently in force expire in November 2000.

There is no concentration of available sources of labor,  services,  concessions
or rights, other than those mentioned above, that could, if suddenly eliminated,
severely impact the Companies' operations.

C. NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
130,  "Reporting  Comprehensive  Income",  which  establishes  the standards for
reporting and  displaying  comprehensive  income and its  components  (revenues,
expenses, gains and losses) as part of a full set of financial statements.  This
statement  requires that all elements of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
consolidated  financial  statements.   The  Company  does  not  have  any  other
comprehensive  income  items  during 1998 and 1999.  As  discussed  in Note 30d.
certain  adjustments  were posted directly to  shareholder's  equity for 1997 as
Telebras was unable to allocate  certain items such as taxes and interest to the
Company. Therefore, the presentation of such statement is not included herein.

In March 1998,  the  American  Institute of Certified  Public  Accountants  (the
"AICPA")  issued  Statement  of  Position  98-1,  "Accounting  for the  Costs of
Computer Software Developed or Obtained for Internal Use". This statement became
effective in 1999 and establishes accounting standards for costs incurred in the
acquisition or development and  implementation  of computer  software.  This new
standard requires the  capitalization of certain software  implementation  costs

<PAGE>

relating to software  acquired or developed  and  implemented  for the Company's
use. This  statement has not presented any  significant  effect on the Company's
financial position and results of operations.

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133,  "Accounting  for Derivative  Instruments  and Hedging  Activities"  ("SFAS
133"),  which  establishes  accounting  and reporting  standards for  derivative
instruments  and for hedging  activities by requiring  that all  derivatives  be
recognized  in the  balance  sheet  and  measured  at fair  value.  SFAS  133 is
effective  for fiscal  years  beginning  after  June 15,  2000.  The  Company is
currently  evaluating  the  potential  impact of this  standard on its financial
position and results of operations.

In December 1999, the staff of the  Securities  and Exchange  Commission  issued
Staff  Accounting  Bulletin  No.  101,  "Views on Selected  Revenue  Recognition
Issues"  ("SAB  101"),  which  sets  forth  the  staff's  views in  applying
generally accepted accounting principles to selected revenue recognition issues.
SAB 101 is effective for the second quarter of 2000. The Company will assess the
effect of this new  standard  during 2000  fiscal  year.  The  Company  does not
believe there will be any significant effect on its financial statements.


In  March  2000,   the  Financial   Accounting   Standards   Board  issued  FASB
Interpretation  No. 44 ("FIN 44").  FIN 44 is effective  July 1, 2000 and should
also be applied to certain  events after  December 15, 1998 but prior to July 1,
2000. FIN 44 clarifies the  application of APB Opinion 25 "Accounting  for Stock
Issued to Employees" for certain issues. The Company understands that FIN 44 has
no impact on its financial statements.


32. CORPORATE RESTRUCTURING

On  December  3,  1999,  the   administrators   of  Tele  Centro  Oeste  Celular
Participacoes  S.A. (TCO),  Telebrasilia  Celular S.A.,  Telegoias Celular S.A.,
Telemat  Celular S.A.,  Telems  Celular  S.A.,  Teleacre  Celular S.A.,  Teleron
Celular S.A.  (Operadoras),  BID S.A. and Coverage  Participacoes S.A., indirect
controller of TCO,  published  relevant  information  regarding the intention of
submitting to the respective  Administration  Councils and Shareholders Meetings
the terms,  conditions  and  justifications  for a corporate  restructuring  and
merger of  operating  companies  at TCO,  and  simultaneously  a  company  fully
controlled by BID S.A. (Coverage  Participacoes S.A.), with an investment in TCO
as its only asset, without any obligation or debt.

On December 13,  1999,  TCO,  together  with the other  companies,  BID S.A. and
Coverage  Participacoes S.A.,  published a new relevant fact bearing in mind the
publication  of CVM  Instruction  No. 319 and  320/99  and due to the  Ordinance
CVM/PTE/  No.  308/99 of the CVM  presidency,  deciding  to  suspend  the merger
process of the  companies,  TCO  proposed  the  capital  closure of one of these
operating  Companies,  submitting  this proposal to the C.V.M.,  public offer of
shares acquisition for subsequent registration cancellation.

On December 14, 1999 Coverage Participacoes S.A. was merged into the Company. As
published  through  appropriate  means,  the  management  of  TCO  and  Coverage
understand  that the  restructuring  would result in to the improvement of TCO's
cash  flow,  as  well as  assuring  the  integrity  and  nonmodification  of the
dividends flow to the shareholders of TCO due to the premium amortization.

The premium that could be amortized by TCO corresponds to R$322,674,  estimating
its full  utilization over a period of 5 year from the merger date. This premium
was  recorded  in a specific  permanent  assets  account  (deferred  charges) in
counterpart to a special capital  reserve account for future capital  increases,
included in shareholders' equity.

In 1999,  the amount of R$5,378  was  amortized  corresponding  to 1/60 pro rata
amount of the premium. The respective tax benefit should be subscribed according
to CVM Instruction No. 319/99.


<PAGE>

33.   SUBSEQUENT EVENTS

a)  Issuing of Commercial Papers and Zero Coupon Euro Commercial Papers

On January 20, 2000 Tele Centro Oeste  Celular  Participacoes  S.A published the
announcement  regarding  the  beginning  of  distribution  of the 1st issuing of
Promissory Notes,  comprising 400 notes, with unit value of R$ 500 (five hundred
thousand reais),  amounting to R$200,000,000 (two hundred million reais).  Until
May 31, 2000 a number of 376 Promissory  Notes were issued.  The amount was used
in the acquisition of shares from the regional operators which should operate as
private  corporations  (see note "b" below).  The remaining of the funds will be
used in the network expanding activities and offer of new services.

The  Promissory  Notes  could  be  subscribed  at any  time  within  the  public
distribution  period  per  unit  value  with a  discount  to be  granted  at the
subscription  and payment  date in order to adjust the notes to the market value
applicable at the respective issuing date.

These  Promissory  Notes  are due  within a period  of 360 days from the date of
subscription of each Promissory Note.

In May 2000,  the  Company  entered  into a Zero Coupon  Euro  Commercial  Paper
Program of US$ 200 million.  The first  issuance of the program  amounted to US$
110 million face amount,  drawn on May 23, 2000,  with a remuneration of 9.0% to
the investor and is due 360 days after the date of issuance.  In order to reduce
its foreign currency  exposure,  the Company has hedged the entire amount of the
issuance.

The funds  will be used in the  network  expanding  activities  and after of new
services.

b)  Acquisition of shares

On April 24, 2000, through a public auction held by the SOMA (Negotiation System
of the Assets Market Operator), Tele Centro Oeste Celular Participacoes S.A.-TCO
acquired shares from minority  shareholders  who agreed with the cancellation of
the publicly traded company registration for the following companies:

                 -------------------------------------------------------------
                 |                NUMBER OF SHARES - IN UNITS                 |
------------------------------------------------------------------------------|
|    COMPANIES   | MANIFESTING   |   AGREEING   |  DISAGREEING |  ACQUIRED BY |
|                |  PARTIES      |   PARTIES    |  PARTIES     |    TCO       |
|-----------------------------------------------------------------------------|
|       TELEMS   |    8,297,594  |   8,291,933  |      5,661   |   8,291,933  |
|-----------------------------------------------------------------------------|
|       TELEMAT  |   18,566,018  |  17,132,090  |  1,433,928   |   17,132,090 |
|-----------------------------------------------------------------------------|
|      TELEACRE  |   37,044,030  |  36,848,030  |    196,000   |   36,848,030 |
-------------------------------------------------------------------------------

The closing of the capital of  Telebrasilia  Celular S.A.,  Telegoias  Celular
S.A. and Teleron Celular S.A. was postponed to a date not yet known.

c)  Social contribution tax on income

Based on  Provisional  Measure No. 1,858 of October 26, 1999, the rate of social
contribution  tax on income  changed from 12% to 9% for the period from February
1, 2000 to December 31, 2002.

<PAGE>






                                  EXHIBIT INDEX


Exhibit 1.  Amendment to the Charter of the Holding Company
            previously filed with the Holding Company's
            registration  statement on September 18, 1998..................X-2

Exhibit 2a. Consent of Ernst & Young Auditores Independentes S.C...........X-3

Exhibit 2b. Consent of Deloitte Touche Tohmatsu............................X-4




<PAGE>


                                                                       EXHIBIT 1

The  following  amendment to the Holding  Company's  Charter was approved by the
shareholders  at an  extraordinary  shareholders  meeting on July 28, 1999.  The
Charter was previously filed with the Holding Company's  Registration  Statement
on September 18, 1998. An amended Charter,  which contained  amendments approved
by the shareholders on April 30, 1999 and May 27, 1999, was again filed with the
Company's annual report on July 1, 1999.

Article 22 of the Charter is amended to now read:

"The Board of Executive Officers shall consist of 1 (one) President and 4 (four)
Executive  Officers  designated  Executive  Officer for Network and  Operations,
Executive  Officer for Business,  Executive  Officer for Finance and Information
Technology,  and  Executive  Officer  for  Administration  and Human  Resources,
elected and dismissable at any time by the Board of Directors."



<PAGE>


                                                                      EXHIBIT 2A

                         CONSENT OF INDEPENDENT AUDITORS




Tele Centro Oeste Celular Participacoes S.A.
SCN Q.02 Bloco C, 226 -- 6 andar
Brasilia- DF

INDEPEDENT AUDITORS' CONSENT

We consent  to the use in this  Annual  Report on Form 20-F of our report  dated
February  4, 2000  (except  for note 33 as to which  the date is May 31,  2000),
relating to the consolidated  financial  statements of Tele Centro Oeste Celular
Participacoes S.A., prepared in conformity with accounting  principals generally
accepted in Brazil for the year ended  December 31, 1999,  which appears in such
Annual Report.


Ernst & Young Auditores Independentes S.C.
/s/  Luiz Carlos Nannini
Partner

Brasilia - Brazil  July 13, 2000


<PAGE>

                                                                      EXHIBIT 2B

                         CONSENT OF INDEPENDENT AUDITORS



Tele Centro Oeste Celular Participacoes S.A.
SCN Q.02 Bloco C, 226 --6 andar
Brasilia- DF


We consent  to the use in this  Annual  Report on Form 20-F of our report  dated
February 19, 1999 (except for note 30.p for which the date is April 9, 1999, and
note  29.a,  for  which the date is May 31,  1999),  relating  to the  financial
statements  of  Tele  Centro  Oeste  Celular  Participacoes  S.A.,  prepared  in
conformity with accounting  principals generally accepted in Brazil for the year
ended December 31, 1998, which appears in such Annual Report.

/s/ Deloitte Tohmatsu

Rio de Janeiro, July 7, 2000