`AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 2002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       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, 2001
                        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 COMPANY     THE FEDERATIVE REPUBLIC OF BRAZIL
 (Translation of Registrant's Name into        (Jurisdiction of Incorporation
                   English)                             or Organization)
           ----------------------------------------------------------
                         SCS, QUADRA 2, BLOCO C, 7 ANDAR
                         70.319-900 BRASILIA, DF, BRAZIL
                    (Address of Principal Executive Offices)
           ----------------------------------------------------------
       SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B)
                                  OF THE ACT:

                                                  NAME OF EACH EXCHANGE
    TITLE OF EACH CLASS                            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:

                126,433,338,109 Common Shares, without par value
                252,766,698,473 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



                                TABLE OF CONTENTS


                                                                            PAGE

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS ..............2

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE.............................2

ITEM 3.    KEY INFORMATION.....................................................2

ITEM 4.    INFORMATION ON THE COMPANY.........................................15

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS.......................49

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.........................62

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..................69

ITEM 8.    FINANCIAL INFORMATION..............................................70

ITEM 9.    THE OFFERING AND THE LISTING.......................................76

ITEM 10.   ADDITIONAL INFORMATION.............................................85

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........101

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES............102

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...................102

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
           AND USE OF PROCEEDS ..............................................102

ITEM 15.   DEFAULTS UPON SENIOR SECURITIES...................................102

ITEM 16.   CHANGES IN  SECURITIES,  CHANGES IN SECURITY FOR  REGISTERED
           SECURITIES  AND USE OF PROCEEDS...................................102

ITEM 17.   FINANCIAL STATEMENTS..............................................102

ITEM 18.   FINANCIAL STATEMENTS..............................................103

ITEM 19.   EXHIBITS..........................................................103



CURRENCY AND 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.  ("Telebrasilia"),  Telegoias Celular S.A.  ("Telegoias"),  Telemat
Celular S.A. ("Telemat"),  Telems Celular S.A. ("Telems"),  Teleron Celular S.A.
("Teleron"),  Teleacre Celular S.A ("Teleacre"),  and Norte Brasil Telecom, S.A.
("NBT")  are  collectively  referred to as the  "Subsidiaries,"  and each one 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."  The Holding Company also controls
TCO IP, an  unlisted  company  created  to  deliver  general  telecommunications
services,  including multimedia  telecommunication and information services both
at the national and the international levels. TCO IP was classified as a service
provider by the Brazilian National  Telecommunications  Agency (AGENCIA NACIONAL
DE  TELECOMUNICACOES)--ANATEL.  SEE ITEM 4 "INFORMATION ON THE  COMPANY--HISTORY
AND DEVELOPMENT OF THE COMPANY."

On April 26, 2002, the Holding Company held a General Extraordinary Shareholders
Meeting in which it approved the merger of Telebrasilia into the Company and the
consequent  transfer  of the  concession  to explore  mobile  cellular  services
previously held by Telebrasilia.

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 24, 2002, 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$2.8290   to   US$1.00.   SEE   ITEM   3   "KEY
INFORMATION--EXCHANGE RATES."

The consolidated financial statements of the Company as of December 31, 2000 and
2001 and for the years ended December 31, 1999, 2000 and 2001 (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,  all other financial data included
herein recognize certain effects of inflation and are restated in constant REAIS
of December  31, 2000  purchasing  power using the integral  restatement  method
(CORRECAO MONETARIA INTEGRAL).

In 2001,  IBRACON (the  Brazilian  Institute of Independent  Auditors)  issued a
publication  stating that financial  statements would not have to be indexed for
2001 as the three-year cumulative inflation rate in Brazil fell below 100%.

Certain  terms are defined  the first time they are used in this Annual  Report.
The "Index of Defined Terms" that begins on page 109 lists those terms and where
they are  defined.  The  "Technical  Glossary"  that begins on page 112 provides
definitions of certain technical terms used herein.



SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

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   herein   in  Item  3  "Key
Information--Risk  Factors,"  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.



ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

        Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

        Not applicable.

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL INFORMATION

BACKGROUND

The selected financial information presented below should be read in conjunction
with the  Consolidated  Financial  Statements  and the notes  thereto.  The 2001
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.

    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 29 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,  2001 and 2000,  and net income for the years  ended
December 31, 2001, 2000 and 1999.

    PRESENTATION OF 1998 STATEMENT OF OPERATIONS

The  Consolidated  Statements  of  Operations  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 1999, 2000 AND 2001

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, 2000  purchasing
power,  all in accordance  with  Brazilian  GAAP using the integral  restatement
method  (CORRECAO  MONETARIA  INTEGRAL).  The Company  used the INDICE  GERAL DE
PRECOS -MERCADO (the General Price Index - Market or "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 ITEM 5



"OPERATING   AND  FINANCIAL   REVIEW  AND   PROSPECTS--EFFECTS   OF  CHANGES  IN
PRESENTATION OF FINANCIAL STATEMENTS IN 1999, 2000 AND 2001." 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 Operations  have been  allocated to
other net operating income in the Consolidated  Statements of Operations and the
"Income  Statement  Data"  presented  below.  SEE NOTE 2(B) TO THE  CONSOLIDATED
FINANCIAL STATEMENTS.

The Consolidated  Financial  Statements as of December 31, 2000 and 2001 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 years ended  December 31, 2000 and 2001,
have been restated into currency of December 31, 2001 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  certain  criteria
established by the Company's management. 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 ITEM 4  "INFORMATION  ON THE
COMPANY--HISTORICAL BACKGROUND."

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 ITEM 3  "SELECTED
FINANCIAL INFORMATION."



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$21.2  million  compared to the Company's  historical  divisional  equity.  The
amount of  distributable  retained  earnings  of the  Holding  Company  includes
retained earnings allocated to the Holding Company in the Breakup of TELEBRAS.

For 1997, the Consolidated  Financial Statements present the financial condition
and revenues and  expenses of the  cellular  telecommunications  business of the
Predecessor  Companies,  and  "minority  interests"  reflect the interest in the
Predecessor  Companies of shareholders  other than TELEBRAS.  As of December 31,
2001, minority  shareholders directly and indirectly owned 11.75%, 3.26%, 2.51%,
1.61%,  2.88%, 1.69% and 1.67% of the share capital of Telebrasilia,  Telegoias,
Telemat, Telems, Teleron, Teleacre and NBT, respectively.



SELECTED FINANCIAL INFORMATION

                                                YEAR ENDED DECEMBER 31,
                                  ----------------------------------------------
                                     1997      1998    1999     2000      2001
                                  ---------  -------  -------  ------- ---------
                                  (THOUSANDS OF REAIS, EXCEPT PER-SHARE DATA)(1)
INCOME STATEMENT DATA:
BRAZILIAN GAAP
Net operating revenue               578,744  637,406  666,660  930,646 1,248,131
Cost of services rendered and
  cost of products sold             242,619  260,327  326,514  532,163   663,158
                                    -------  -------  -------  ------- ---------
Gross income                        336,125  377,079  340,146  398,483   584,973
Operating expenses:
  Selling expenses                   65,082   99,093  118,592  126,163   195,020
  General and administrative
    expenses                         49,814   46,289   64,539   78,420   110,300
  Other net operating expense         4,770      953   14,020    9,618     4,513
                                    -------  -------  -------  ------- ---------
Operating income before net
  financial result                  225,999  230,744  142,995  184,282   275,140
Allocated interest expense........    4,918
Net interest expense (2)..........            69,711   47,640   30,063    43,471
                                             -------  -------  ------- ---------
Operating income before interest
  income and unallocated interest
  expense.........................  221,081
Operating income..................           161,033   95,355  154,219   231,669
Net nonoperating expense..........       66   20,575    6,055   19,539    25,668
Employees' participation..........      374    1,271    1,866    1,878     2,346
                                    -------  -------  -------  ------- ---------
Income before interest income,
  unallocated interest expense,
  taxes and minority interests....  220,641
Income before income taxes and
  minority interests (2)..........           139,187   87,434  132,802   203,655
Income and social contribution
  taxes...........................            40,206   29,857   40,159    56,501
                                             -------   ------  ------- ---------
Income before minority interests..  220,641   98,981   57,577   92,643   147,154
Minority interests................   30,779   24,076   11,531   19,980    13,864
                                    -------  -------   ------  ------- ---------
Reversal of interest on own
  capital.........................        -   91,749   53,542   30,981    45,297
Income before interest income,
  unallocated interest expense
  and taxes(2)....................  189,863
                                    =======
Net income........................           166,654   99,588  103,644   178,587
                                             =======   ======  =======   =======
U.S. GAAP
Income before interest income,
  unallocated interest expense
  and taxes(2).................... 196,440
                                   =======
Net income........................           164,000   32,581  104,771   194.494
                                             =======  =======  =======   =======
Net profit per 1,000 shares
  outstanding (REAIS).............              0.49     0.09     0.29      0.53



                                            AT DECEMBER 31,
                             ----------------------------------------------
                                1997      1998      1999      2000      2001
                             ---------  -------   -------   -------  ---------
                                       (THOUSANDS OF REAIS)(1)
BALANCE SHEET DATA:
BRAZILIAN GAAP
Property, plant and
  equipment, net             762,994    874,262    994,531  1,083,754  1,078,882
Total assets                 911,232  1,224,227  1,819,120  2,154,909  2,240,325
Loans and financing           52,700     56,256    143,828    509,149    516,984
Divisional equity            679,472          -         -          -          -
Shareholders' equity                    799,138  1,230,628  1,042,172  1,126,432

U.S. GAAP
Property, plant and
  equipment, net             713,563    819,280    947,615  1,057,596  1,071,186
Total assets                 878,114  1,192,699  1,426,558  2,113,001  2,389,361
Loans and financing           52,216     56,256    143,828    509,149    694,339
Divisional equity            651,128          -          -          -
Shareholders' equity                    758,374    814,623  1,000,123  1,100,291

---------------
(1)  Information is presented in constant REAIS of December 31, 2000 and nominal
     REAIS of December 31, 2001.
(2)  For 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.

EXCHANGE RATES

The Company 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 ITEM 5  "OPERATING  AND  FINANCIAL  REVIEW AND
PROSPECT--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. On June 10, 2002, the Commercial
Market Rate was R$2.6390 to US$1.00.

The following table sets forth the period-end, average, high and low Noon Buying
Rates expressed in REAIS per U.S. dollar, for the periods indicated.

                                                   AVERAGE
                                                     FOR
PERIOD                                PERIOD-END  PERIOD(1)   HIGH     LOW
------                                ----------  ---------   ----     ---

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...............................     1.8270     1.7844    1.8560  1.7230
2001 ..............................     2.3120     2.3630    2.7880  1.9380
2002 (through May 31, 2002)........     2.5220     2.4055    2.5380  2.2730

---------------
(1)  Average of the rates on the last day of each month in the  period.  SOURCE:
     Federal Reserve Bank of New York; Board of Governors of the Federal Reserve
     System (for 2002).



RISK FACTORS

Below are described  the risk factors that relate  materially to the Company and
to investments in its Preferred Shares or ADRs. The Company's business,  results
of  operations  and  financial  condition  could be harmed if any of these risks
materialize and, as a result,  the trading price of its Preferred Shares or ADRs
could  decline,  leading the holders of the Company's  ADRs to lose  substantial
portions of their investment.

The  information  included  in this  Annual  Report  concerning  Brazil has been
included herein to the extent publicly available. Such information is assumed to
be correct and has not been independently verified.

FACTORS RELATING TO BRAZIL

INFLATIONARY RISK

Brazil has historically experienced extremely high rates of inflation. Inflation
itself, as well as certain governmental  measures to combat inflation,  have had
significant  negative  effects  on the  Brazilian  economy  in  general.  At the
beginning  of 1994,  the  Brazilian  government  introduced  the REAL  Plan,  an
economic  stabilization  plan designed to reduce  inflation by reducing  certain
public expenditures,  collecting  liabilities owed to the Brazilian  government,
increasing tax revenues,  continuing the privatization program and introducing a
new currency (the "REAL Plan").  On July 1, 1994, as part of the REAL Plan,  the
Brazilian  government  introduced the REAL,  which replaced the CRUZEIRO REAL as
the  official  currency  of  Brazil.  Since the  introduction  of the REAL Plan,
Brazil's inflation rate has been  substantially  lower than in previous periods.
The  devaluation  of the REAL was the primary cause of the increase in inflation
in 1999. SEE ITEM 4 "INFORMATION ON THE COMPANY--INFLATION AND DEVALUATION."

Brazil may again experience high levels of inflation in the future.  There is no
assurance  that  recent  lower  levels  of  inflation   will  continue.   Future
governmental  actions  (including  additional actions to adjust the value of the
Brazilian currency) may trigger increases in inflation.  Accordingly, periods of
substantial  inflation  may in the future have material  adverse  effects on the
Brazilian  economy,  the  Brazilian  financial  markets  and  on  the  Company's
business, financial condition and results of operations.

Exchange rate  instability and  fluctuations  in the value of Brazil's  currency
against the value of the U.S.  dollar may result in uncertainty in the Brazilian
economy and the Brazilian  securities  market,  which may  adversely  affect the
Company's  financial condition and results of operations and the market value of
the Company's equity securities.

The Company cannot predict the effects that the Brazilian  government's exchange
rate policies may have on it. In addition,  it may be adversely  affected by any
future  devaluations  of the REAL against the U.S.  dollar because a significant
portion of its revenues and assets are denominated in REAIS, while a substantial
portion  of its debt and other  liabilities  are  denominated  in U.S.  dollars.
However, it should be noted that 87% of the Company's liabilities denominated in



U.S.  dollars are hedged in REAIS.  SEE ITEM 11  "QUANTITATIVE  AND  QUALITATIVE
DISCLOSURE ABOUT MARKET RISK--EXCHANGE RATE RISK."

INTEREST RATE INSTABILITY

The Company may be  adversely  affected by  unfavorable  changes in the interest
rates  applicable to its financial  assets and  liabilities  and cannot  predict
interest  rate   fluctuations  or  the  affects  on  its  financial  assets  and
liabilities.  SEE ITEM 11 "QUANTITATIVE AND QUALITATIVE  DISCLOSURE ABOUT MARKET
RISK--INTEREST RATE RISK."

OTHER EMERGING MARKET RISK

Brazil is generally  considered  by  international  investors to be an "emerging
market." As a result,  the market for securities  issued by Brazilian  companies
and banks is influenced by economic and market conditions in other countries, to
varying degrees.  For example,  the Brazilian  financial  markets were adversely
affected by the Mexican liquidity crisis at the end of 1994, the Asian financial
crisis  at the end of  1997,  the  Russian  financial  crisis  in  1998  and the
Argentine  crisis in 2000 and could be further  affected by future  crises.  SEE
ITEM 4  "INFORMATION  ON THE  COMPANY--DEVELOPMENTS  IN  OTHER  EMERGING  MARKET
COUNTRIES."  After  prolonged  periods  of  recession,   followed  by  political
instability,  Argentina  announced  in 2001 that it would not service its public
sector debt. In order to address the aggravated  economic and social crisis, the
Argentinean  government abandoned its decade-old fixed dollar-peso exchange rate
and created a floating,  exchange-rate regime in January,  2002. Since Argentina
is an important  trade  partner of Brazil,  a  continuation  of the  Argentinean
crisis  could  affect  both the  revenues  and the  profitability  of  Brazilian
companies having significant ties with Argentina.

The  Argentinean  crisis  may also  affect the  perception  of risk in Brazil by
foreign  investors.  If events in Argentina  continue to  deteriorate,  they may
adversely affect the Company's ability to borrow funds at an acceptable interest
rate and raise  equity  capital  when  needed.  Since  approximately  57% of the
Company's  long-term  debt at March 31, 2002 is  scheduled to mature in 2003 and
2004,  these  events  could cause the  Company to delay its capital  expenditure
plans, therefore adversely affecting the price of its securities.

SERVICE OF PROCESS

The Company is organized  under the Brazilian  legislation and all of its assets
are located  outside of the United  States.  All of its  directors and executive
officers reside outside of the United States.  As a result,  it may be difficult
to effect  service of process  upon the  Company or those  persons in the United
States or to enforce  judgments  issued by U.S.  courts  against  the Company or
those persons,  including  judgments based on the civil liability  provisions of
the federal securities laws of the United States.

TAX REFORMS

If as a result of a tax reform the Company  experiences a higher tax burden,  it
may pass on the cost of the tax  increase to its  customers.  This  increase may



have a  material  negative  impact  on  the  Company's  revenues.  SEE  ITEM  10
"ADDITIONAL INFORMATION--BRAZILIAN TAX CONSIDERATIONS."

POLITICAL RISK

Presidential  elections in Brazil are scheduled to take place in October,  2002.
The Company cannot anticipate the outcome of the elections or the policies to be
adopted  by the new  administration  or the  impact  such  policies  may have on
Brazilian economic conditions and on the Company's results of operations.  These
and other future  developments in the Brazilian economy and government  policies
may reduce the demand for the Company's services in Brazil,  adversely affecting
its financial condition and results of operations and impacting the market price
of its Preferred Shares and ADSs.

FACTORS RELATING TO THE COMPANY

THE COMPANY OPERATES IN A RAPIDLY EVOLVING INDUSTRY

The Company's prospects must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by companies in new and rapidly
evolving  industries,  such  as the  wireless  telecommunications  industry.  To
address these risks and uncertainties, it must, among other things:

o  attract consumers to its products and services;

o  expand its network and maintain network quality;

o  maintain and enhance its brand, and expand its product and service offerings;

o  attract, integrate, retain and motivate qualified personnel; and

o  adapt to meet changes in its markets and competitive developments.

The Company may not be successful in accomplishing these objectives.

THE COMPANY RELIES ON KEY PERSONNEL TO CONDUCT ITS BUSINESS AND OPERATIONS.

The  success of the  Company's  business  depends on its  ability to attract and
retain  highly  qualified  technical  and  management  personnel.  Most  of  the
Company's employees have not signed long-term employment contracts.  The loss of
key personnel could have a material effect on the Company's business.

INTERCONNECTION FLUCTUATIONS

The Company is paid a fee from other cellular service providers for every minute
that a subscriber  of other  cellular  service  providers  based  outside of the
Region uses its network.  Similarly,  the Company pays a fee to other  providers
for every minute that one of the Company's  subscribers  uses a network  outside
the Region.  The  Company's  subscribers  may spend more time in other  coverage
areas than they currently do and  subscribers  of other  cellular  providers may



spend less time in the Region or may use the  Company's  services less than they
currently do. As a result, the Company may receive less interconnection  revenue
than it presently does or it may have to pay more  interconnection fees than the
interconnection   revenue  it  collects.   SEE  ITEM  4   "INFORMATION   ON  THE
COMPANY--OPERATING AGREEMENTS."

TECHNOLOGICAL ADVANCES BY COMPETITORS

The Company presently uses TDMA technology in all wireless services it provides.
TDMA is now  considered  a mature  and  well-tested  technology,  but it may not
provide the advantages  expected by the Company for high-speed data transmission
in its wireless network. Eventual stronger demands on the part of the market for
this kind of service may leave the Company in an unfavorable position and reduce
its  competitive  advantage.  Pressure  exerted by  competitors  may require the
Company to change or update its  technology  to meet higher  industry  standards
allowing  the  deployment  of  this  type  of  service,   which  may  result  in
substantially higher costs in the network.

The  wireless  telecommunications  industry  has been  experiencing  significant
technological changes, as demonstrated by the increasing pace of recent upgrades
observed in existing digital second-generation  networks--e.g.  (2G) to 2.5G and
later to 3G.

As the pace of  development  of new  technology  increases,  network and handset
costs may decline,  creating  service  economies to end users. If the Company is
unable to keep pace with these technological changes, the technology used by the
company  may  become  obsolete  and  abandoned  in the  long  term.  SEE  ITEM 4
"INFORMATION ON THE COMPANY-COMPETITION."

UNAUTHORIZED USE OF THE COMPANY'S NETWORK

The Company will likely incur costs  associated with the unauthorized use of its
cellular  telecommunications  services  network,  including  administrative  and
capital costs  associated with detecting,  monitoring and reducing the incidence
of fraud. Fraud impacts  interconnection  costs, capacity costs,  administrative
costs,  fraud  prevention  costs and payments to other  carriers for  unbillable
fraudulent roaming.

RISKS RELATED TO THE BRAZILIAN TELECOMMUNICATIONS INDUSTRY

GOVERNMENT REGULATION

The Company's  principal  business  activities  are subject to the provisions of
applicable laws and the regulations  issued by ANATEL,  as well as the terms and
conditions  set forth in its  Concessions  and the  interconnection  and roaming
agreements  entered into by the Company.  Changes in the  interpretation of such
laws and  regulations,  the terms and conditions set forth in the Concessions or
the  interconnection  and roaming  agreements  met by the  Company  could have a
material  adverse  effect on the  Company's  financial  condition and results of
operations.  SEE ITEM 4 "INFORMATION ON THE COMPANY--REGULATION OF THE BRAZILIAN
TELECOMMUNICATIONS INDUSTRY."



ABILITY TO INCREASE TELECOMMUNICATIONS SERVICES RATES

According  to the terms of the  Concessions,  the  Company is required to render
certain  basic  services  under its basic  service  plan.  It is also allowed to
create  additional  services  plans.  The  Concessions  provide  for a price cap
mechanism  to set and adjust rates on an annual  basis,  following a formula set
forth in the  Concessions.  The cap is a  maximum  weighted-average  price for a
basket of services, 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% above the rate of inflation measured by the variation of IGP-DI,  subject
to a downward  adjustment for inflation  effects already  captured in the annual
upward adjustments of the overall price cap for the basket,  provided that other
prices are adjusted  downwards to ensure that the weighted  average  tariff does
not exceed the price cap. This results in a limitation to the Company's  ability
to increase the rates charged for its services.  SEE ITEM 4 "INFORMATION  ON THE
COMPANY--REGULATION OF THE TELECOMMUNICATIONS INDUSTRY--RATE REGULATION."

COMPETITION

Beginning in 2002, the Company may face  competition  from other  companies that
will offer PCS services similar to those existing in the United States. In 2001,
the Brazilian market began shift towards the PCS system,  called "SMP" in Brazil
(Personal Mobile System). ANATEL intends to replace SMC (Cellular Mobile System)
with PCS. The main  difference  between this and the U.S. PCS system is that the
licensing regime will change from a  concession-based  regime to a more flexible
"authorization"-based  regime. The Company will be able to choose whether or not
to convert its existing cellular concession into PCS authorization contracts. If
it does not change its  concessions,  the Company may not be able to efficiently
compete with new market entrants.

The Company also competes with companies providing other wireless services, such
as mobile  radio  and pager  services,  and with  fixed-line  telecommunications
service providers.

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 its 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 its 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 the
Company and to new entrants 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 the Company's.  If the Company is
unable to compete  successfully,  it may experience increasing rates of customer
turnover,  which would adversely  affect its financial  condition and results of
operations. SEE ITEM 4 "INFORMATION ON THE COMPANY--COMPETITION."



SATELLITE SERVICES

The entry of  providers  of  satellite  services  could 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.  SEE ITEM 4
"INFORMATION ON THE COMPANY--COMPETITION--OTHER COMPETITION."

ELECTRIC POWER SHORTAGE

Emergency  measures  enacted by the  Brazilian  government  in 2001 to  restrain
electric power  consumption  caused an economic  slowdown.  The combination of a
general  expansion in demand for  electric  power,  not  followed by  sufficient
increase in total power generation capacity,  along with low water levels in the
basins feeding the main hydroelectric  plants,  resulted in an imbalance between
the demand for electric power and the amount of energy  available in Brazil.  In
May,  2001,  the  Brazilian  government  issued a series  of  measures  aimed at
immediately  reducing  power-demand  levels in order to avoid the risk of sudden
blackouts in parts of the country.  Among those measures was the creation of the
Electric Energy Crisis Management Board (CAMARA DE GESTAO DE ENERGIA  ELETRICA),
with the  power to enact  resolutions  setting  forth  mandatory  reductions  in
power-consumption  levels, to propose taxation changes in power supply services,
to determine the suspension of power supply to select consumer groups, and other
rights.

The Brazilian energy crisis did not disrupt the Company's operations, nor did it
produce any increase in costs or decrease in revenues or customer  base.  Thanks
to a contingency plan adopted by the Company,  no interruptions of any nature as
a result of the energy  shortage  were  registered  as to the  operations of the
Company's network and its distribution channels.

Long before to the energy  crisis,  all Company  stations had been equipped with
energy systems  consisting of rectifiers and battery banks, which allow cellular
mobile equipment to operate for a minimum of eight hours in case of interruption
of electrical supply by the public concessionaires.

The actions  effectively carried out as part of the contingency plan designed by
the Company were divided in two main categories:  the first consisted of actions
to maintain network operations during blackouts--whether planned or involuntary,
whether short or long;  the second  consisted of measures  aimed at bringing the
Company's  consumption of power to levels  compliant with the targets imposed by
the government.

Maintaining network operations primarily involved (i) the review of all existing
energy systems in the network  (rectifiers,  generators and battery banks) so as
to  guarantee  their  perfect  operation  in the  event of a  blackout;  (ii) an
increase  in the  capacity  of the  battery  banks  and/or the  installation  of
generators at critical sites;  and (iii) the acquisition of portable  generators
for all regional  plants in order to supply the main  stations in the event of a
planned  blackout for a period of time longer than what the battery  banks could
provide.

The  Company  took the  following  actions in order to comply  with  consumption
targets:  (i)  activating  installed  generators  during  hours  of  high  power



consumption,  mainly in the Commutation and Control Center (CENTRAL DE COMUTACAO
E  CONTROLE  or  "CCC")  buildings  and in the  administration  buildings;  (ii)
revising the consumption targets with the energy concessionaires; (iii) revising
the lighting and  air-conditioning  systems,  including  replacing equipment and
lamps with more efficient and economical  models;  (iv) implementing  corrective
measures  associated with the use of  air-conditioning  equipment,  lighting and
elevators; (v) altering the air-conditioning systems in all radio base stations,
which  are  the  largest  energy   consumers  in  the  Company,   including  the
installation  of  devices  to allow a more  controlled  use of  outside  air for
cooling   down  the  inner  part  of  the  stations   and   therefore   allowing
air-conditioning  sets to be turned off. Together,  these measures reduced power
use by up to 30% and brought the Company's overall consumption to target levels.

There were no  restrictions to the expansion of the network thanks to the energy
efficiency  of the  Company's  new  stations.  While the limit on the  amount of
energy  supplied  to  new  installations  was  set  at  500KVA,   the  Company's
administrative and CCC buildings demand a maximum consumption of 225KVA.

The measures  described  above allowed the Company's  network to operate with no
interruptions in power supply.  Not only were there no additional costs or power
supply  interruptions  due to the shortage of energy,  but the Company faces the
possible prospect of new shortages with confidence.

PENDING TAX REFORM IN BRAZIL MAY INCREASE THE COMPANY'S TAX BURDEN, RESULTING
IN A REDUCTION OF PROFITS

The  Brazilian  government  has proposed a broad tax reform in Brazil,  which is
mainly  designed to simplify the tax system,  reduce the number of taxes and the
burden on the private sector, by reducing or eliminating cumulative taxes (which
affect the cost of production)  while not reducing the amount of revenues to the
Brazilian  Treasury.  The tax reform  bill was  expected  to be  approved by the
Brazilian congress in 2001 but was not, due to unfavorable political conditions.
In addition, because of the presidential elections, it is likely that the reform
will be postponed  again in 2002.  If tax reform is approved,  the Company's tax
burden may increase and its profits may decrease.

It is anticipated  that the reform may include the creation of a value-added tax
on goods and services  which would  replace six existing  taxes  (including  the
social contribution on net profits (CONTRIBUICAO SOCIAL SOBRE O LUCRO LIQUIDO or
"CSLL"),  the federal tax on industrial  products,  or IPI, the Turnover Tax, or
PIS, the Social Security Financing Contribution ("COFINS"), the state tax on the
circulation of goods and services, or "ICMS," and the municipal tax on services,
or ISS). In addition, the CPMF, a temporary tax on financial  transactions,  may
be replaced by a permanent  federal tax on financial  transactions.  Although we
cannot predict the outcome of the tax reform in Brazil, we may have a higher tax
burden if the tax reform bill is approved  and  implemented  as presented to the
Brazilian Congress.



ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

The exact name of the Company,  as specified in its charter is Tele Centro Oeste
Celular  Participacoes  S.A. (Tele Centro Oeste Cellular Holding  Company).  The
Company is incorporated  under the  jurisdiction  of the Federative  Republic of
Brazil.  Its  headquarters  are  located  at SCS,  Quadra  2,  Bloco C, 7 andar,
70.319-900 Brasilia, DF, Brazil, and its telephone number is 55-61-313-7765.

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  on May 22,  1998.  Each of the Band A  Subsidiaries  was  formed  on
January 5, 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 5,
1998 are to the cellular  operations of the  Predecessor  Companies.  SEE ITEM 4
"INFORMATION ON THE COMPANY--HISTORY AND DEVELOPMENT OF THE  COMPANY--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  April  2002,  the  Company,  including  its Band A  Subsidiaries  and Band B
Subsidiaries, had approximately 2,576,056 subscribers.

On November 21, 2000,  SPLICE IP S.A.  was formed as a closed  corporation.  The
Holding  Company  held  100%  of its  preferred  shares  and  Splice  do  Brasil
Telecomunicacoes e Eletronica S.A.  ("Splice") held 99.99% of its common shares.
As of March 5, 2001,  the control  changed to the Holding  Company,  through the
acquisition  of 99.99% of the  common  shares  from  Splice  and the name of the
subsidiary changed to TCO IP S.A.

On December  31, 2001,  Splice  transferred  all of its shares in BID S.A.,  the
parent company of the Holding Company, to Fixcel S.A.

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, the Brazilian  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,  through its then subsidiary BID S.A..
SEE  ITEM  7  "MAJOR   SHAREHOLDERS   AND  RELATED   PARTY   TRANSACTIONS--MAJOR
SHAREHOLDERS."

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.`

`The following  table shows  population,  Gross Domestic  Product ("GDP") and PER
CAPITA income statistics for each state in Area 7 and in Area 8.

                                 POLULATION     % OF                     % OF
                                    IN        BRAZILIAN    PER CAPITA  BRAZILIAN
SUBSIDIARY    AREA               MILLIONS(1) POPULATION(1)   GDP(2)      GDP(2)
----------    ----               ----------- ------------  ----------  ---------
Telebrasilia  Federal District     2.04         1.21%        10,935      2.28%
Telegoias     Goias                4.99         2.95%         3,603      1.84%
Telegoias     Tocantins            1.16         0.68%         1,832      0.22%
Telemat       Mato Grosso          2.50         1.47%         4,695      1.20%
Telems        Mato Grosso do Sul   2.08         1.22%         5,255      1.12%
Teleron       Rondonia             1.38         0.81%         5,255      0.52%
Teleacre      Acre                 0.56         0.33%         2,817      0.16%
NBT           Amapa                0.48         0.28%         3,392      0.16%
NBT           Amazonas             2.84         1.68%         5,577      1.60%
NBT           Maranhao             5.64         3.33%         1,402      0.81%
NBT           Para                 6.19         3.65%         2,705      1.71%
NBT           Roraima              0.32         0.19%         2,558      0.08%

---------------
(1)  Estimates of the  Instituto  Brasileiro  de Geografia e  Estatistica - IBGE
     (the  "IBGE").  Population  figures  pertain only to areas  serviced by the
     Concessions and do not pertain to cities not serviced by the Concessions.



(2)  SOURCE: Instituto Brasileiro de Geografia e Estatistica - IBGE.

The Company's business, financial condition, results of operations and prospects
depend in part on the performance of the Brazilian economy and on the economy of
the Region,  in  particular.  SEE ITEM 4 "INFORMATION  ON THE  COMPANY--BUSINESS
OVERVIEW--BRAZILIAN ECONOMIC ENVIRONMENT."

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 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 ITEM 4 "INFORMATION
ON    THE    COMPANY--BUSINESS    OVERVIEW--REGULATION    OF    THE    BRAZILIAN
TELECOMMUNICATIONS INDUSTRY--OBLIGATIONS OF TELECOMMUNICATIONS COMPANIES."

The Company's  capital  expenditure  priorities  include  increasing its network
capacity,   improving  its  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, 2001.

                                                1999        2000        2001
                                                ----        ----        ----
                                                   (MILLIONS OF REAIS) (1)
Automatic switching equipment...............    49.7        29.1         22.1
Other equipment.............................   148.2       196.0        100.7
Real estate.................................     0.6         0.2          1.3
Other assets (2)............................    19.9        30.4         66.4
                                               -----       -----         ----
    Total capital expenditures..............   218.4       255.7        190.5
                                               =====       =====        =====
---------------
(1)  Figures  in  constant  REAIS of  December  31,  2000 and  nominal  REAIS of
     December 31, 2001.
(2)  Not including  expenditures  for  concessions for Area 8 (R$72.6 million in
     1999).

BUSINESS OVERVIEW

SERVICES

The Company offers cellular  telecommunications service to its subscribers under
its Basic  Service  Plan and the  Alternative  Service  Plans with  minute-based
deductibles.  The Company also offers ancillary services,  including  voicemail,
call  forwarding,  call  waiting,  caller  identification,   three-way  calling,
short-message services (messaging,  information and news), CSD (Circuit-Switched
Data) service and wireless  application  protocol ("WAP") services.  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 service  subscribers.  Service is paid for and credited prior to
calls being made. The subscriber  must purchase  credit (using pre-paid cards or
agreements  with lottery  houses and financial  institutions)  that is valid for
outgoing  calls  within 90 days of  activation.  Once the credit is used,  a new
credit  must be  purchased  within  180 days,  or service  is  canceled  and the
subscriber  must request a new  activation in order to regain  service.  Prepaid
credits are sold in denominations of R$10.00,  R$25.00 and R$50.00. With prepaid
service, subscribers have better control of their expenses.

Messaging  services  based on the SMS platform are offered by the Company in two
different applications: content-push service and person-to-person communication.
Both SMS services are available for prepaid- and postpaid customers.

The short-message  service known as E-CELULAR allows users to send messages from
the Company's website, directly to customers' handsets. Using the same platform,
the  Company  also  releases  news on general  topics  (regional,  national  and
international) such as economy, sports, weather forecast,  horoscopes, access to
account  balances in associated  banks'  balance and agendas.  More than 550,000
customers  are already  using this service,  with over  1,000,000  messages sent
daily.

In November,  2000, the  interpersonal  messaging service known as the E-XPRESSO
was launched  experimentally,  and since August 1, 2001, subscribers have had to
pay R$0.18 for each message sent. Today, person-to-person communication accounts
for over 5 million messages sent monthly.  In January 2001, the Company launched
a new  service  called  the E-WAP,  a  cellular-based,  Internet-access  service
available to all customers who own handsets equipped with this feature. In order
to implement this service,  the Company has developed a WAP portal through which
customers can access other portals and websites.  One of the  advantages of this
new service is that  customers can customize the portal,  making both access and
navigation  faster and more convenient.  The Company has already formed valuable
partnerships  with major Brazilian news agencies FOLHA DE SAO PAULO and O ESTADO
DE SAO PAULO, as well as with BANCO DO BRASIL,  UNIBANCO and BANCO BRADESCO (two
large banking institutions) and SOM BRASIL (music producers).

One other service the Company has made  available to its customers is the E-WEB,
which  uses  CSD  technology   (Circuit-Switched   Data)  to  connect   personal
micro-computers  and palm-tops to the Internet through cellular  handsets.  This
provides users with considerable access mobility and flexibility.

Through  agreements with other cellular  service  providers,  the Company offers
automatic roaming services throughout Brazil that allow post-paid subscribers to
make and receive calls while out of the Region. These automatic roaming services
also allow  prepaid  service  subscribers  to receive  calls when out of the TCO
Region or to make  calls if  located in Area 7 or Area 8. As of October 1, 2001,
pre-paid  subscribers  have been able to originate  calls while roaming  outside
Area 7 and Area 8. 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    ITEM   4    "INFORMATION    ON   THE    COMPANY--BUSINESS
OVERVIEW--OPERATING AGREEMENTS--ROAMING AGREEMENTS."

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 8% of the Company's revenue in 2001 and (ii) individual customers,
consisting  of  individuals   and  businesses  with  fewer  than  four  cellular
telephones,  who  accounted for 92% of the Company's  revenue  during 2001.  The
manner in which the Company  markets and  promotes  its  services  varies,  with
occasional plans and services developed  specially for particular  categories of
customers.  The Company  provides  corporate  customers with additional  support
services, such as dedicated account representatives.

The  Company's   customers   consist   primarily  of  high-  and   middle-income
individuals.  According  to the  Company's  research,  as of December  31, 2001,
approximately 55% of the Company's  subscribers were male, and 60% were 40 years
old or younger.  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 ITEM
4 "INFORMATION ON THE COMPANY--BUSINESS OVERVIEW--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 52 stores and 4 kiosks located throughout the Region,  with 37 stores and 3
kiosks  located  in Area 7, and 15 stores  and 1 kiosk  located  in Area 8. This
network  enables  the  Company to market its  service  and  provide  after-sales
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.



SOURCES OF REVENUE

The Company  generates  revenue from (i) usage charges,  which include  measured
service-charges  for outgoing calls and roaming and other similar charges,  (ii)
monthly subscription  charges,  (iii) 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,  (iv) prepaid handset sales and (v) other charges,
including  charges for call  forwarding,  call  waiting and call  blocking.  The
Company's rates are subject to regulation by ANATEL.  SEE ITEM 4 "INFORMATION ON
THE COMPANY--BUSINESS  OVERVIEW--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.  As a means of incentive to
usage,  the  alternative  plan  service  called  ESSENCIAL   (Essential)  offers
deductibles  of 50, 100,  150,  300, 600 and 1,000  minutes for NBT and 50, 100,
150,  300, 650 and 1,100  minutes for the Company in calls of types VC1 and VC2,
with cheaper rates for the minutes  exceeding these limits.  The following table
sets forth the  average  rates for the Basic  Service  Plan for each year in the
three-year period ended December 31, 2001.

                                            YEAR ENDED DECEMBER 31,
                                    ----------------------------------------
                                       1999           2000          2001
                                    -----------   ------------  ------------
                                    (REAIS) (1)
Activation fee (2)                    151.63           -             -
Monthly subscription fee (2)           20.20         22.12         30.76
Per-minute charges:
VC1 (2)                                 0.27          0.3023        0.3320
VC2 (2)                                 0.40          0.4067        0.4458
VC3 (2)                                 0.66          0.7383        0.8120
DSL1 (2)                                0.19          0.2199        0.2410



DSL2 (2)                                0.33          0.3654        0.4010
AD (per call) (2)                       0.29          0.29          0.31

---------------
Information for 1999, 2000 and 2001 is presented in nominal reais.
(1)  Averages of the rates  charged by the  Subsidiaries,  weighted by number of
     subscribers.
(2)  Weighted AVERAGE peak rates, net of value-added taxes.

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

----------------------------------------------------------------------
AREA 7 PLANS                    240                       500
----------------------------------------------------------------------
STATES                DF,TO,                    DF, TO,
                      MS,RO,    GO      MT      MS,RO,    GO     MT
                      AC                        AC
----------------------------------------------------------------------
EXEMPT MINUTES                 240                       500
----------------------------------------------------------------------
RESIDENCES (1)(2)            162.00                    162.00
----------------------------------------------------------------------
SUBSCRIPTIONS (1)    79.00    80.13   79.00    139.00  140.98  139.00
----------------------------------------------------------------------
VC1 MF (1)(3)       0.4204   0.4264  0.4521    0.4204  0.4264  0.4521
----------------------------------------------------------------------
VC1 MM (1)(4)       0.5466   0.5544  0.5877    0.5466  0.5544  0.5877
----------------------------------------------------------------------
VC2 (1)             0.5700   0.5781  0.6114    0.5700  0.5781  0.6114
----------------------------------------------------------------------
VC3 (1)             1.0231   1.0377  1.1002    1.0231  1.0377  1.1002
----------------------------------------------------------------------
DSL1 (1)              0.00     0.00    0.00      0.00    0.00    0.00
----------------------------------------------------------------------
DSL2 (1)            0.5045   0.5117  0.5425    0.5045  0.5117  0.5425
----------------------------------------------------------------------
AD (1)                0.00     0.00    0.00      0.00    0.00    0.00
----------------------------------------------------------------------

---------------
(1)   Amounts are expressed in nominal REAIS.
(2)   Rates not charged during promotions.
(3)   "MF" means "mobile-fixed."
(4)   "MM" means "mobile-mobile."
(5)   These plans include a number of exempt minutes for VC1 calls to
      fixed-line and intra-network cellular telephones.

The table below shows the service plans launched in July, 2000.

--------------------------------------------------------------------------------
                  PLANO        ESSENCIAL  ESSENCIAL   ESSENCIAL     ESSENCIAL
PLANS            TCO-12           50         100         150           300
--------------------------------------------------------------------------------
STATE          GO    OTHER   GO   OTHER  GO   OTHER   GO   OTHER  GO    OTHER
--------------------------------------------------------------------------------
FREE MINUTES       0            50 MIN.    100 MIN.     150 MIN.     300 MIN.
--------------------------------------------------------------------------------
ACTIVATION        0.00          0.00        0.00         0.00         0.00
--------------------------------------------------------------------------------
BASIC
SUBSCRIPTION  10.14 10.00   39.56 39.00  9.84 59.00  69.98 69.00 110.55 109.00
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
VC-1 MF        0.70  0.69    0.60  0.59  0.47  0.46   0.44 0.43    0.34   0.33
--------------------------------------------------------------------------------
VC-1 MM TCO    0.70  0.69    0.60  0.59  0.47  0.46   0.44 0.43    0.34   0.33
--------------------------------------------------------------------------------
VC-1 MM B      0.70  0.69    0.60  0.59  0.47  0.46   0.44 0.43    0.34   0.33
--------------------------------------------------------------------------------
VC-2           0.70  0.69    0.60  0.59  0.47  0.46   0.44 0.43    0.34   0.33
--------------------------------------------------------------------------------
VC-3           1.05  1.04    1.22  1.20  1.22  1.20   1.11 1.10    1.04   1.03
--------------------------------------------------------------------------------
DSL-1          0.41  0.40    0.00  0.00  0.00  0.00   0.00 0.00    0.00   0.00
--------------------------------------------------------------------------------
DSL-2          0.51  0.51    0.51  0.51  0.51  0.51   0.51 0.51    0.51   0.51
--------------------------------------------------------------------------------
AD             0.41  0.40    0.00  0.00  0.00  0.00   0.00 0.00    0.00   0.00
--------------------------------------------------------------------------------

Note: subscriptions to ESSENCIAL 50, 100, 150 and 300 plans include respectively
50,  100,  150 and 300  minutes  of VC1 and VC2  calls  for  both  cellular  and
fixed-line numbers originated within Area 7.

The table below shows the service plans launched in June, 2001.

--------------------------------------------------------------------------------
PLANS                ESSENCIAL 650                    ESSENCIAL 1100
--------------------------------------------------------------------------------
STATE           GO         MT       OTHER        GO        MT         OTHER
--------------------------------------------------------------------------------
FREE MINUTES             650 MIN.                        1100 MIN.
--------------------------------------------------------------------------------
ACTIVATION                 0.00                             0.00
--------------------------------------------------------------------------------
BASIC
SUBSCRIPTION    181.55    192.49     179.00     303.26     321.54     299.00
--------------------------------------------------------------------------------
VC-1 MF           0.31      0.33       0.31       0.31       0.33       0.31
--------------------------------------------------------------------------------
VC-1 MM TCO       0.31      0.33       0.31       0.31       0.33       0.31
--------------------------------------------------------------------------------
VC-1 MM B         0.31      0.33       0.31       0.31       0.33       0.31
--------------------------------------------------------------------------------
VC-2              0.31      0.33       0.31       0.31       0.33       0.31
--------------------------------------------------------------------------------
VC-3              0.77      0.81       0.76       0.71       0.75       0.70
--------------------------------------------------------------------------------
DSL-1             0.00      0.00       0.00       0.00       0.00       0.00
--------------------------------------------------------------------------------
DSL-2             0.51      0.54       0.50       0.51       0.54       0.50
--------------------------------------------------------------------------------
AD                0.00      0.00       0.00       0.00       0.00        0.00
--------------------------------------------------------------------------------

Note: subscriptions to ESSENCIAL 650 and 1100 plans include respectively 650 and
1100  minutes  of VC1 and VC2 calls for both  cellular  and  fixed-line  numbers
originated within Area 7.

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 tables:

The table below  shows the rates of the service  plans for the states of AP, AM,
MA, and RR.

--------------------------------------------------------------------------------
AREA 8 PLANS       BASIC  ECONOMY  100     200     500    EASY  COLLEGE STUDENT
TIME(1)                                                         REGULAR REDUCED
--------------------------------------------------------------------------------
EXEMPT MINUTES(5)    0      0      100     200     500     0          0
--------------------------------------------------------------------------------
RESIDENCES(2)       0.00   0.00    0.00    0.00    0.00   0.00       0.00
--------------------------------------------------------------------------------
SUBSCRIPTIONS(2)   36.44  31.99   59.00   84.96  165.00  15.00      17.99
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
VC1 MF(2)(3)        0.44   0.35    0.35    0.33    0.30   0.65   0.74   0.23
--------------------------------------------------------------------------------
VC1 MM(2)(4)        0.57   0.46    0.35    0.33    0.30   0.65   0.69   0.21
--------------------------------------------------------------------------------
VC1 MM (ANOTHER     0.57   0.46    0.44    0.44    0.44   0.65   1.04   0.50
CARRIER)(2)(4)
--------------------------------------------------------------------------------
VC2 MF(2)           0.83   0.78    0.75    0.75    0.75   0.65   0.85   0.30
--------------------------------------------------------------------------------
VC2 MM(2)           0.83   0.78    0.75    0.75    0.75   0.65   0.69   0.20
--------------------------------------------------------------------------------
VC2 MM (ANOTHER     0.83   0.78    0.75    0.75    0.75   0.65   1.04   0.50
CARRIER)(2)
--------------------------------------------------------------------------------
VC3(2)              0.98   0.89    0.85    0.85    0.85   1.09   1.29   0.73
--------------------------------------------------------------------------------
DSL1(2)             0.42   0.39    0.39    0.39    0.39   0.65   0.35   0.11
--------------------------------------------------------------------------------
DSL2(2)             0.49   0.44    0.44    0.44    0.44   0.65   1.29   0.73
--------------------------------------------------------------------------------
AD(2)               0.68   0.66    0.66    0.66    0.66   0.65       0.43
--------------------------------------------------------------------------------

---------------
(1)     Regular hours from Monday through Saturday between 07:00 and 21:00 and
        Reduced Hours from Monday through Saturday between 21:00 and 07:00 and
        Sundays and national holidays.
(2)     Amounts are expressed in nominal REAIS.
(3)     "MF" means "mobile-fixed."
(4)     "MM" means "mobile-mobile."
(5)     "Deductibles" refers to VC1 MF and VC1 MM - NBT Calls.

The table below shows the rates of the service plans for the state of PA.

--------------------------------------------------------------------------------
AREA 8 PLANS         BASIC  ECONOMY   100     200    500  EASY   COLLEGE STUDENT
TIME(1)                                                          REGULAR REDUCED
--------------------------------------------------------------------------------
EXEMPT MINUTES (5)     0       0      100     200     500     0         0
--------------------------------------------------------------------------------
RESIDENCES (2)        0.00   0.00    0.00    0.00    0.00   0.00       0.00
--------------------------------------------------------------------------------
SUBSCRIPTIONS (2)    39.18  34.39   63.45   91.36  177.44  16.13      19.35
--------------------------------------------------------------------------------
VC1 MF (2)(3)       0.4764   0.38    0.38    0.36    0.32   0.69    0.80   0.24
--------------------------------------------------------------------------------
VC1 MM (2)(4)       0.6192   0.50    0.38    0.36    0.32   0.69    0.74   0.23
--------------------------------------------------------------------------------
VC1 MM (ANOTHER     0.6192   0.50    0.47    0.47    0.47   0.69    1.12   0.54
CARRIER) (2) (4)
--------------------------------------------------------------------------------
VC2 MF(2)           0.8996   0.84    0.81    0.81    0.81   0.69    0.92   0.32
--------------------------------------------------------------------------------
VC2 MM(2)           0.8996   0.84    0.81    0.81    0.81   0.69    0.74   0.21
--------------------------------------------------------------------------------
VC2 MM (ANOTHER     0.8996   0.84    0.81    0.81    0.81   0.69    1.12   0.54
CARRIER) (2)
--------------------------------------------------------------------------------
VC3 (2)             1.0628   0.96    0.92    0.92    0.92   1.18    1.39   0.78
--------------------------------------------------------------------------------
DSL1 (2)            0.4589   0.42    0.42    0.42    0.42   0.69   0.38   0.12
--------------------------------------------------------------------------------
DSL2 (2)            0.5314   0.47    0.47    0.47    0.47   0.69   1.39   0.78
--------------------------------------------------------------------------------
AD (2)               0.73    0.71    0.71    0.71    0.71   0.69       0.47
--------------------------------------------------------------------------------



---------------
(1)  Regular  hours from Monday  through  Saturday  between  07:00 and 21:00 and
     Reduced  Hours from Monday  through  Saturday  between  21:00 and 07:00 and
     Sundays and National Holidays.
(2)  Amounts are expressed in nominal REAIS.
(3)  "MF" means "mobile-fixed."
(4)  "MM" means "mobile-mobile."
(5)  "Deductibles" refers to VC1 MF and VC1 MM - NBT Calls.

The table below shows the service  plans  launched in  September,  2001,  in the
states of AP, AM, MA, and RR.

--------------------------------------------------------------------------------
       SERVICES              ESSENTIAL    ESSENTIAL    ESSENTIAL    ESSENTIAL
                                50           100          150          300
--------------------------------------------------------------------------------
SUBSCRIPTION                    39.00       55.00        69.00       118.92
--------------------------------------------------------------------------------
VC1/VC2 MM NBT AND MF            0.36        0.36         0.36         0.36
--------------------------------------------------------------------------------
VC1/VC2 MM (ANOTHER CARRIER)     0.45        0.45         0.43         0.43
--------------------------------------------------------------------------------
VC3                              0.87        0.87         0.87         0.87
--------------------------------------------------------------------------------
DSL1                             0.00        0.00         0.00         0.00
--------------------------------------------------------------------------------
DSL2                             0.40        0.40         0.40         0.40
--------------------------------------------------------------------------------
AD                               0.00        0.00         0.00         0.00
--------------------------------------------------------------------------------

Note: subscriptions to ESSENCIAL 50, 100, 150 and 300 plans include respectively
50,  100,  150  and  300  minutes  of VC1 and VC2  calls  for  NBT  mobile-  and
fixed-lines originated within Area 8.

The table below shows the service  plans  launched in  September,  2001,  in the
state of PA.

--------------------------------------------------------------------------------
       SERVICES              ESSENTIAL    ESSENTIAL    ESSENTIAL    ESSENTIAL
                                50           100          150          300
--------------------------------------------------------------------------------
SUBSCRIPTION                    41.94       59.14        74.20       127.88
--------------------------------------------------------------------------------
VC1/VC2 MM NBT AND MF            0.39        0.39         0.39         0.39
--------------------------------------------------------------------------------
VC1/VC2 MM (ANOTHER CARRIER)     0.48        0.48         0.46         0.46
--------------------------------------------------------------------------------
VC3                              0.94        0.94         0.94         0.94
--------------------------------------------------------------------------------
DSL1                             0.00        0.00         0.00         0.00
--------------------------------------------------------------------------------
DSL2                             0.43        0.43         0.43         0.43
--------------------------------------------------------------------------------



--------------------------------------------------------------------------------
AD                               0.00        0.00         0.00         0.00
--------------------------------------------------------------------------------

Note: subscriptions to ESSENCIAL 50, 100, 150 and 300 plans include respectively
50,  100,  150  and  300  minutes  of VC1 and VC2  calls  for  NBT  mobile-  and
fixed-lines originated within Area 8.

The table below shows the service plans  launched in March,  2001, in the States
of AP, AM, MA, and RR.

        --------------------------------------------------------
                  SERVICES            ESSENTIAL     ESSENTIAL
                                         600          1000
        --------------------------------------------------------
        SUBSCRIPTION                    189.00       297.15
        --------------------------------------------------------
        VC1/VC2 MM NBT AND MF            0.36         0.36
        --------------------------------------------------------
        VC1/VC2 MM (ANOTHER CARRIER)     0.43         0.43
        --------------------------------------------------------
        VC3                              0.87         0.87
        --------------------------------------------------------
        DSL1                             0.00         0.00
        --------------------------------------------------------
        DSL2                             0.40         0.40
        --------------------------------------------------------
        AD                               0.00         0.00
        --------------------------------------------------------

Note: subscriptions to ESSENCIAL 600 and 1000 plans include respectively 600 and
1000  minutes of VC1 and VC2 calls for NBT  mobile- and  fixed-lines  originated
within Area 8.

The table below shows the service plans launched in March, 2001, in the State of
PA.

        --------------------------------------------------------
                  SERVICES            ESSENTIAL     ESSENTIAL
                                         600          1000
        --------------------------------------------------------
        SUBSCRIPTION                    203.24       319.54
        --------------------------------------------------------
        VC1/VC2 MM NBT AND MF            0.39         0.39
        --------------------------------------------------------
        VC1/VC2 MM (ANOTHER CARRIER)     0.46         0.46
        --------------------------------------------------------
        VC3                              0.94         0.94
        --------------------------------------------------------
        DSL1                             0.00         0.00
        --------------------------------------------------------
        DSL2                             0.43         0.43
        --------------------------------------------------------
        AD                               0.00         0.00
        --------------------------------------------------------



Note: subscriptions to ESSENCIAL 600 and 1000 plans include respectively 600 and
1000  minutes of VC1 and VC2 calls for NBT  mobile- and  fixed-lines  originated
within Area 8.

TCO/NBT offers two types of pre-paid service plans: TOQUE and TOQUE SIMPLES.

Pre-paid service rates, in Area 7, are charged by the Subsidiaries in accordance
with the following schedule:

--------------------------------------------------------------------------------
                           TYPE OF CALL                SCHEDULE      RATE (2)
                           ------------                ---------     -----
                                                          (1)
--------------------------------------------------------------------------------
                                                                 TOQUE   TOQUE
                                                                         SIMPLES
--------------------------------------------------------------------------------
             From TOQUE  CELULAR to any cellular-
VC1 or VC2   or fixed-line handset in Area 7.           Normal   R$0.97   0.79
--------------------------------------------------------------------------------
             From TOQUE CELULAR to any cellular-
VC1 or VC2   or fixed-line handset in Area 7.          Special  R$0.48    0.79
--------------------------------------------------------------------------------
             From TOQUE CELULAR to any Company
VC1 or VC2   cellular telephone on any day, and          24h    R$0.48    0.79
             any local call on Sundays and
             national holidays.
--------------------------------------------------------------------------------
VC3          From TOQUE CELULAR to any cellular- or      24h    R$1.90    1.90
             fixed-line handset outside of Area 7.
--------------------------------------------------------------------------------
DSL1         Received when roaming within Area 7         24h     Free     Free
--------------------------------------------------------------------------------
             Received when roaming within Area 8                  0.43    0.43
DSL2         -------------------------------------       24h    -------  -------
             Received when roaming outside Areas 7                1.00    1.00
             and 8
--------------------------------------------------------------------------------
             Based on Calls Originated or Received
AD           when roaming within Areas 7 or 8                    Free     Free
             -------------------------------------       24h    -------  -------
             Based on Calls Received when roaming                 0.44    0.44
             outside Areas 7 and 8
--------------------------------------------------------------------------------


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



---------------
(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 are expressed in REAIS,  including  taxes charged per minute of
     calls made by cellular telephones inside the caller's tariff area.

The table below shows the rates practiced in State of AP, AM, MA, and RR:

--------------------------------------------------------------------------------
                                                                  RATE
SERVICE          TYPE OF CALL                  HOURS    ------------------------
                                                           TOQUE        TOQUE
                                                                        SIMPLES
--------------------------------------------------------------------------------
          To any cellular or fixed            Normal        0.96         0.76
          line in Area 8                   -------------------------------------
  VC1                                         Special       0.48         0.76
  or      ----------------------------------------------------------------------
  VC2     To any Area 8 cellular              Normal        0.73         0.76
          ----------------------------------------------------------------------
                                              Special       0.48         0.76
--------------------------------------------------------------------------------
  VC3     To any cellular or fixed             24 h         0.96         0.96
          line outside Area 8
--------------------------------------------------------------------------------
  DSL1    Based on Calls received when         24 h         Free         Free
          roaming in Area 8
--------------------------------------------------------------------------------
          Based on Calls received when                      0.43         0.43
          roaming in Area 7
  DSL2    ---------------------------------    24 h     ------------------------
          Based on Calls received when                      1.00         1.00
          roaming outside Areas 7 and 8
--------------------------------------------------------------------------------
          Based on Calls received when                      Free         Free
          roaming in Areas 7 and 8
  AD      ---------------------------------    24 h     ------------------------
          Based on Calls received when                      0.44         0.44
          roaming outside Areas 7 and 8
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
               ADDITIONAL SERVICES                 APPLICATION             RATE
--------------------------------------------------------------------------------
Message retrieval                                   per minute             0.39
--------------------------------------------------------------------------------
Fee for one daily balance inquiry                    per call              Free
--------------------------------------------------------------------------------
Fee for more than one daily balance inquiry          per call              0.10
--------------------------------------------------------------------------------



The table below shows the rates practiced in the state of PA:

--------------------------------------------------------------------------------
                                                                  RATE
SERVICE          TYPE OF CALL                  HOURS    ------------------------
                                                           TOQUE        TOQUE
                                                                        SIMPLES
--------------------------------------------------------------------------------
          To any cellular or fixed line in    Normal        1.03         0.81
          Area 8                              ----------------------------------
  VC1                                         Special       0.51         0.81
  or      ----------------------------------------------------------------------
  VC2                                         Normal        0.78         0.81
          To any Area 8 cellular              ----------------------------------
                                              Special       0.51         0.81
--------------------------------------------------------------------------------
  VC3     To any cellular or fixed line        24 h         1.03         1.03
          outside Area 8
--------------------------------------------------------------------------------
  DSL1    Based on Calls received when         24 h         Free         Free
          roaming in Area 8
--------------------------------------------------------------------------------
          Based on Calls received when                      0.47         0.47
          roaming in Area 7
  DSL2    ---------------------------------    24 h     ------------------------
          Based on Calls received whe                       1.07         1.07
          roaming outside Areas 7 and 8
--------------------------------------------------------------------------------
          Based on Calls received when                      Free         Free
          roaming in Areas 7 and 8
  AD      ---------------------------------    24 h         --------------------
          Based on Calls received when                      0.48         0.48
          roaming outside Areas 7 and 8
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
               ADDITIONAL SERVICES                 APPLICATION             RATE
--------------------------------------------------------------------------------
Message retrieval                                  per minute              0.42
--------------------------------------------------------------------------------
Fee for one daily balance inquiry                   per call               Free
--------------------------------------------------------------------------------
Fee for more than one daily balance inquiry         per call               0.11
--------------------------------------------------------------------------------

    ROAMING FEES

The Company also receives  revenues  pursuant to roaming  agreements  with other
cellular  service  providers.  SEE ITEM 4 "INFORMATION ON THE  COMPANY--BUSINESS
OVERVIEW--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
from another  cellular- or  fixed-line  service  provider and  terminating  on a
cellular   telephone  within  the  Region.   SEE  ITEM  4  "INFORMATION  ON  THE
COMPANY--BUSINESS OVERVIEW--OPERATING  AGREEMENTS--INTERCONNECTION  AGREEMENTS."
The Company charges the service provider from whose network the call originates,



a  network-usage  charge  for each  minute of use of the  Company's  network  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.  In November,  1999, ANATEL granted an increase
of 14.7%, raising the tariff to R$0.2180.  In December 2000, ANATEL authorized a
23.26%  readjustment  and  the  value  of the  TU-M  rose  to  R$0.2687,  net of
value-added taxes. In Area 8, where the NBT operates,  the value of the TU-M was
R$0.21 until October 2000. After October and the 26.38% readjustment  authorized
by ANATEL, the TU-M rose to R$0.2654, net of value-added taxes.

    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 20.7% in 2001.

o    ICMS. The main tax is a state value-added tax, the IMPOSTO SOBRE CIRCULACAO
DE MERCADORIAS E SERVICOS  (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  Acre,  where  the rate  for  domestic  telecommunications
services is 17% for intrastate  calls and 13% for  international  calls, in Mato
Grosso and Para, where the ICMS rate is 30%, and in Goias, which raised its ICMS
rate from 25% to 26%.  The rate on sales of  prepaid  cellular  handsets  in the
Region is 17%, except in Goias where it is 7%.

In June,  1998, the governments of the individual  Brazilian  states approved an
agreement to interpret  existing  Brazilian tax law to apply the ICMS to certain
services to which the ICMS had not previously been applied,  including  cellular
activation,  effective as of July 1, 1998.  The agreement also provides that the
ICMS may be applied  retroactively  to activation  services  rendered during the
five   years    preceding    June   30,    1998.    SEE   ITEM   8    "FINANCIAL
INFORMATION--CONSOLIDATED  STATEMENTS  AND  OTHER  FINANCIAL  INFORMATION--LEGAL
PROCEEDINGS--LITIGATION RELATED TO THE APPLICATION OF THE ICMS."

o    COFINS. THE CONTRIBUICAO  SOCIAL PARA O FINANCIAMENTO DA SEGURIDADE SOCIAL,
or  COFINS,  is a social  contribution  tax on  gross  revenues  (operating  and
financial).  On November 27, 1998, the Brazilian government increased the COFINS
rate from 2% to 3% by issuing Law no. 9718, which allowed a set-off of up to 1/3
of the COFINS amount with the amount owed as a result of the Contribuicao Social
Sobre Lucro  Liquido,  or CSL.  Provisional  Measure number 2158 of August 2001,
(last version of the Provisional  Measure number 1991-13 of January 13,2000) had
revoked  the  allowance  to set-off of up to 1/3 of the COFINS  amount  with the
amount owed as a result of the CSL for periods after January 1, 2000.

o    PIS.  THE  PROGRAMA  DE  INTEGRACAO  SOCIAL,  or  PIS,  is  another  social
contribution  tax  which,  together  with the  COFINS,  is  imposed  on  certain
telecommunications  services  at a  combined  rate of 3.65%  of  gross  revenues
(operating and financial).

o    FUST.  On August 17, 2000,  the Brazilian  government  created the FUNDO DE
UNIVERSALIZACAO  DOS SERVICOS DE  TELECOMUNICACOES,  or FUST, by issuing Law no.
9998.   It   consists  in  a  social   contribution   tax   applicable   to  all
telecommunication  services. The purpose of the FUST tax is to fund a portion of



the costs incurred by telecommunication  service providers to meet the universal
service  targets  required  by  ANATEL,  in case  these  costs are not  entirely
recoverable  through the provision of  telecommunication  services.  The FUST is
imposed  at a rate of 1% on  gross  operating  revenues  and its cost may not be
passed to subscribers.

o    FUNTTEL.  On November 28, 2000, the Brazilian  government created the FUNDO
PARA DESENVOLVIMENTO  TECNOLOGICO DAS  TELECOMUNICACOES,  or FUNTTEL, by issuing
Law no.  10052.  It  consists in a social  contribution  tax  applicable  to all
telecommunication  services.  The  purpose of the  FUNTTEL tax is to promote the
development   of   telecommunications   technology  in  Brazil  and  to  improve
competition in the industry by:

           o Encouraging research and development of new technologies;
           o Promoting the empowerment of human resources;
           o Creating new employment opportunities; and
           o Allowing small and medium-sized companies to access the
             lending market.

    The FUNTTEL is imposed at a rate of 0.5% on gross operating revenues and its
    cost may not be passed to subscribers.

o    FISTEL.  On July 7, 1966,  the  Brazilian  government  created the FUNDO DE
FISCALIZACAO  DAS  TELECOMUNICACOES  ("FISTEL")  by  issuing  Law no.  5070.  It
consists in a tax applicable to telecommunication  services.  The purpose of the
FISTEL  is to  provide  financial  resources  to the  Brazilian  government  for
promoting the control and inspection of the sector.

FISTEL is supported by two fees: a fee for inspection and installation  assessed
at  authorized  telecommunication  stations  at the time of the  issuance of the
authorization certificate.  There is a fixed-value for this fee according to the
kind of  equipment.  The other is a fee for  inspection  and  operation  that is
annually  assessed on the total number of stations  authorized until December 31
of the previous year. The latter fee corresponds to 50% of the estimated fee for
inspection and installation.

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, there are eight staggered billing cycles 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  suspended.
The Company's net losses on trade accounts  receivable  were 7.4%, 3.8% and 3,1%
of gross  operating  revenues in 1999, 2000 and 2001,  respectively.  SEE ITEM 5
"OPERATING AND FINANCIAL REVIEW AND  PROSPECTS--OPERATING  RESULTS FOR THE YEARS
ENDED DECEMBER 31, 1999, 2000 AND 2001--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  ITEM  4   "INFORMATION   ON  THE
COMPANY--BUSINESS  OVERVIEW--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 ITEM 4  "INFORMATION  ON THE
COMPANY--BUSINESS  OVERVIEW--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,  2001,  the  Company's  cellular  telecommunications  network
covered  approximately  86% and  55% 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  ITEM  4  "INFORMATION  ON  THE
COMPANY--BUSINESS   OVERVIEW--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, 2001, the Company's  cellular  telecommunications  network in
Area 7 consisted of 14 cellular switches,  650  base-stations,  43 repeaters and
43,310 traffic  channels and one national- and two  regional-signaling  transfer
points.  The Company's nine Nortel DMS-MTX and five Ericsson AXE 10 switches are
distributed among its switching centers,  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,  but  has  substantially  increased  its own
transmission facilities during the last year.

Since October, 1999, when NBT commenced providing cellular telephone services in
Area 8  using  the  Nortel  DMS-MTX  cellular  infrastructure,  it  has  rapidly
increased  its  penetration  into Area 8. As of December  31,  2001,  NBT had 11
cellular  switches,  located  in Manaus,  Tabatinga,  Belem,  Santarem,  Maraba,
Redencao,  Altamira,  Sao  Luis,  Imperatriz,  Boa Vista  and  Macapa,  with 139
base-stations, 10 repeaters and 8,969 traffic channels. The network is connected
primarily by Company  facilities,  including  radio  accesses and  long-distance
radio routes.

Nortel  and  Ericsson   are  the   Company's   primary   suppliers  of  cellular
infrastructure.  Also, Marconi, NERA and NEC are the Company's main suppliers of
transmission equipment.



Since 1998, the Company has been upgrading its network to supply digital service
based on the TDMA standard in the Federal District, as well as in Rondonia, Mato
Grosso do Sul,  Goias,  Mato Grosso,  Acre and Tocantins.  Digitalization  still
accounts for one of the Company's key strategic initiatives and digital accesses
now represent more than 95% of the Company's access. Company 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.

The Company  continues  to increase  its capacity and improve the quality of its
network by deploying new  base-stations  and by adding  channels to its existing
base-stations.  This  development  is  carried  out  in  response  to  projected
subscriber  demand, as well as to national and  international  quality standards
for cellular  telecommunications service. The Company's management believes that
its network will require further  development to continue to meet the demand for
cellular  services in the states'  capitals and their  surrounding  metropolitan
areas. For this reason,  work was started in 2001 to meet market demands for new
high-speed data services,  which will require technology evolution,  through the
overlay  of a new air  interface  infrastructure  (even  1X RTT or GPRS ),  with
trials scheduled by 2002 in Goiania (GSM) and Brasilia  (CDMA),  located in Area
7.

In 2001, the Company also increased its transmission capabilities by deploying
numerous radio links for interconnection purposes and to connect cell sites to
switches. Additionally, the Company began designing and deploying its long-haul
transmission network to connect its main routes, such as the Campo Grande
-Dourados, in the State of Mato Grosso do Sul, now in operation, also expanding
the Brasilia-Goiania route. A project has begun to build its connecting switches
in Brasilia, Goiania, Rondonopolis, Cuiaba and Campo Grande. In 2001, the
Company commenced building an article transmission network in Goiania, Cuiaba,
Brasilia and Campo Grande.

In  addition to  increasing  network  capacity,  in 2001 the Company has greatly
expanded its voice-mail and CSD- "Circuit Switched Data" platforms  (distributed
across  the  different  regions),  prepaid  and Short  Message  Service  ("SMS")
platforms  (centralized  in  Brasilia),  in order  to  support  demand  for this
value-added service both for TCO and NBT.

In 2001, in the SMS arena,  the Company  increased its penetration by providing,
in addition to information  services  (e-celular),  Mobile  originated  services
(M.O.)  and  also  began  developing  push-pull  services  like  CHAT,  BANKING,
INFORMATION and others, expected to be operational this year.

In 2001,  the  company  activated  CSD  (Circuit  Switched  Data)  platforms  in
Rondonopolis,  Porto Velho, Rio Branco, Palmas, Macapa and Boa Vista, completing
CSD coverage for the vast  majority of its network.  Combined with the activated
WAP (Wireless Application Protocol) Gateway provided by Ericsson, customers with
WAP-capable  phones are being provided with data services to obtain  convergence
with  the   Internet.   The  service   started  with  slow  growth  due  to  the
unavailability of WAP handsets in the market, but it is now gaining force due to
the increasing  availability of handsets and the new applications that are being
developed.



During the year 2001, TCO deployed  infrastructure to allow prepaid customers to
use roaming services, and conducted a business and a technical trial in order to
evaluate the main capabilities of a WIN platform,  provided by ERICSSON. It also
conducted  an RFP  (REQUEST  FOR  PROPOSAL)  to  evaluate  the  market  and  the
technology available for voice-portal  platforms.  The results of these projects
are now being evaluated on their technical and economic aspects.

In 2001, the Company deployed its network management system,  acquired from TTI,
an Israeli company, which has supervised the network in the entire region of TCO
and NBT since  August,  2001.  Items such as  performance,  number of faults and
network  configuration are among the main ones being monitored by the management
system.  The  management  center,  located  in  Brasilia,  is a  24-hour / 7-day
operating system.

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  documents  that do not belong to him and a  fictitious  address,  obtains
cellular telecommunications service with no intention of paying for the service.
Such fraud can be 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. However,  service may still be suspended when the subscription is a suspect
one and  fraud has been  confirmed  (by means of  specific  check-ups).  In such
cases, the rules imposed by ANATEL do not prevent the discontinuance of service.
Nonetheless, 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  (mobile  identification  number)  and  ESN
(equipment  serial  number) of the  subscriber  are  captured by the "cloner" by
using a radio  scanner.  The cloned  calls are retired  from the billing  system
before issuance of the invoice, to avoid  inconveniences to the subscriber.  The
Company's  fraud-control  section  can  detect  the  clone and  suspend  service
immediately after the first cloned call. 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 upon request by the subscriber) and the creation
of a 24-hour fraud control center consisting of 14 analysts using the Integrated
Fraud Detection and Control System ("SAF").  The SAF was implemented on July 14,
1998 and it is linked to a national  network,  allowing the detection,  analysis
and control of  abnormalities  in cellular service usage that may indicate fraud
throughout the national territory, 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 ITEM
4   "INFORMATION    ON   THE    COMPANY--HISTORY    AND   DEVELOPMENT   OF   THE
CORPORATION--CAPITAL  EXPENDITURES."  Following the Breakup,  the Company was no
longer subject to government-imposed,  capital-expenditure constraints, and this
allowed for increased  investment in the Company's  cellular  telecommunications
network. In the past, network congestion in the concession areas of Telebrasilia
Celular and Teleacre  Celular  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 congestion problems
had been resolved and the Company had eliminated all its 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
to  a  Cellular  Region.  SEE  ITEM  4  "INFORMATION  ON  THE  COMPANY--BUSINESS
OVERVIEW--REGULATION OF THE BRAZILIAN  TELECOMMUNICATIONS  INDUSTRY--CONCESSIONS
AND LICENSES."

    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  (BCI)  BVI-V  Ltda.  (15.4%),   Telesystem  International
Wireless  (TIW)  (Brazil),  Inc.  (16.3) and several  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, 2001, Americel had
approximately  23,0% of the market,  covering  mainly  state  capitals and their
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 is provided in
Area 7 by Brasil-Telecom (formerly, Tele Centro Sul Celular Participacoes S.A.).



In order to  increase  competition  and  improve  service  quality,  the Federal
Government has also granted  concessions  for providing  fixed-line  services to
other "mirror  companies." On September 30, 1999, the Federal Government granted
a fixed-line  telecommunications  service  concession to Global Village Telecom,
S.A. ("GVT"),  to operate in the same concession area as Brasil-Telecom.  Global
Village  Telecom S.A. has  undertaken to install  650,000 fixed lines until 2002
and for this will invest  approximately  R$1 billion.  The concession  agreement
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 among
whose shareholders are Telesystem  International Wireless (Brasil),  Inc., Banco
Opportunity S.A., and Brazilian pension funds. As of December 31, 2001, Amazonia
Celular's  subsidiaries had approximately  908.621 subscribers and a penetration
rate of 5.9 subscribers per 100  inhabitants.  It provides largely AMPS service,
with TDMA service  launched only in September 1999. By the end of 2001, it had a
69% market share.

    PCS COMPETITION

In November 2000, ANATEL published  regulations for the issuance of new licenses
to provide wireless communication  services through new PCS technology.  New PCS
licenses will compete with existing cellular carriers in each region. PCS, which
is similar to digital cellular telecommunications  services, will operate at the
1.8 GHz  frequency  range.  The  regulations  divided  Brazil into three regions
covering  the  same  geographic  area  as  the  concession  for  the  fixed-line
telecommunication  services  and provide for three PCS licenses to be granted in
each of these regions. The three licenses in each region are referred to as Band
C, Band D and Band E, respectively. ANATEL held auctions for PCS licenses during
the first  quarter of 2001, in which some of these PCS licenses were awarded and
plans to hold  additional  auctions  in the  future  to sell the  remaining  PCS
licenses. According to the PCS regulations:

o    Each successful  bidder will receive,  in addition to an  authorization  to
provide PCS service in the relevant region, an authorization to provide domestic
and international long-distance services in that region;

o    Existing  cellular  service  providers,  as  well  as new  entrants  in the
Brazilian  telecommunications  market, may bid for Band C, Band D and Band E PCS
licenses.  However,  fixed-line carriers and their controlling  shareholders may
only bid for Band D and Band E PCS licenses;

o    A cellular or PCS carrier, or its respective controlling shareholders,  may
not hold more than one license in any region.  Accordingly,  a cellular  carrier
that is awarded a PCS license which results in a  geographical  overlap  between
its licenses,  has two  alternatives:  (i) it may sell its stake in its existing
cellular carrier within six months of executing the contract relating to the PCS
license; or (ii) it may renounce the PCS license in the geographic regions where
the overlap exists.



o    Current Band A and Band B cellular service  providers were given the option
of  exchanging  their  existing   concession  for  PCS  licenses.   SEE  ITEM  4
"INFORMATION  ON THE  COMPANY--BUSINESS  OVERVIEW--REGULATION  OF THE  BRAZILIAN
TELECOMMUNICATIONS INDUSTRY."

    BAND C COMPETITION

There were no  participants  in the auction for the Band C PCS licenses  held on
January 30, 2001.  ANATEL  plans to either hold a second  auction for the Band C
PCS  licenses  or to make a public  solicitation  to entice  companies  possibly
interested  in some parts of the Band C  frequencies.  Should only one or two in
each  region  show  interest,  ANATEL can sell  directly  to them  without a new
auction.

    BAND D COMPETITION

On  February  13,  2001,  ANATEL  held an auction  for the Band D PCS  licenses.
Telecom  Italia Mobile  ("TIM"),  bid  successfully  for the Band D PCS licenses
covering  two of the PCS  regions:  the  center-south  region of  Brazil,  which
comprises  the  concession  areas of our  Subsidiaries,  with the  exception  of
Teleacre  Celular S.A.,  Teleron  Celular S.A. and Norte Brasil Telecom S.A, and
the Sao Paulo State region. TIM paid R$543 million for the Band D PCS license in
the  center-south  region and R$997  million  for the Band D PCS  license in the
State of Sao Paulo,  representing  premiums  of 0.6% and  40.42%,  respectively,
above the minimum bid price established by ANATEL.

TIM will be permitted to commence  Band D operations  in 2002  provided that the
fixed-line  service  provider in each of these  regions  achieves the  operating
targets  established by ANATEL by December 2001.  Tele Centro Sul  Participacoes
S.A.,  now known as Brasil  Telecom  S.A.,  is the  fixed-line  provider  in the
center-south region and  Telecomunicacoes  de Sao Paulo S.A. - Telesp,  known as
Telefonica, is the fixed-line provider in the Sao Paulo State region.

Tele Norte Leste  Participacoes S.A ("Telemar"),  the primary fixed-line carrier
in the remaining  region,  comprising 16 states in the north and east of Brazil,
bid  successfully  for the PCS  license  covering  the region in which it offers
fixed-line  telecommunications services. Telemar paid R$1.1 billion for the Band
D PCS license,  which  represents a 17.23%  premium  above the minimum bid price
established  by ANATEL,  and will  provide PCS  services  using GSM  technology.
Telemar will be permitted to commence Band D operations in 2002 provided that it
achieves the operating targets established by ANATEL by December 2001.

    BAND E COMPETITION

On March 13, 2001,  ANATEL held an auction for the Band E PCS licenses.  TIM was
the only  bidder in the Band E PCS  auction,  acquiring a license to provide PCS
services in the region comprising the 16 states in the north and east of Brazil,
in which Telemar  operates as a fixed-line  provider.  There were no bidders for
the Band E PCS licenses in the two other regions. TIM paid R$990 million for the
license,   which  represents  a  5.32%  premium  above  the  minimum  bid  price
established  by  ANATEL.  TIM will  also be  permitted  to  commence  Band E PCS



operations  in  2002  provided  that  Telemar  achieves  the  operating  targets
established by ANATEL by December 2001.

ANATEL held a second auction for the Band E PCS licenses in the center-south and
the Sao Paulo State regions.

    OTHER COMPETITION

Satellite  services  providing  nationwide  coverage  are  available  in Brazil.
Although  satellite  services  have the benefit of covering a much  greater 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 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 resulting 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 make telephone calls, subscribers use the telecommunication services
available  on the  networks  provided by the  SWITCHED  FIXED  TELEPHONE  SYSTEM
("STFC")  and the  CELLULAR  MOBILE  SERVICE  ("SMC").  In order  to  facilitate
telecommunications  between  cellular  telephone users and fixed-line  telephone
users, as well as among cellular  telephone  users, it is necessary to establish
Network Interconnection Agreements.

Each network makes its Interconnection Points available,  and circuits with 2 Mb
are used to establish  the  physical  connection  between  these  points.  These
physical  connections  may be  provided by any of the parts or by both parts or,
under extraordinary  circumstances,  they may be obtained through contracts with
third parties.

In Network  Interconnection  Agreements,  the  responsibility  for providing the
physical   connection   is  shared   equally  by  the  two   companies  and  the
responsibility for physically  building each connection is normally  established
by the  Parts in  common  agreement  upon the joint  technical  planning  of the
connection.



    ROAMING AGREEMENTS

Agreements  for automatic  roaming have been  established,  through the National
Roaming  Committee  ("CGR"),  among all the Band A and Band B  cellular  service
providers,  except  Americel  S.A.  with the  Company  in Area 7 and Tele  Norte
Celular  Participacoes  S.A.  with NBT in Area 8, with which the  Company is not
obligated to enter into such an agreement pursuant to ANATEL regulations.

The agreements permit the Company's  subscribers to use their cellular phones on
networks of other  cellular  service  providers  while  traveling  or  "roaming"
outside the  Region.  Conversely,  the  Company is required to provide  cellular
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  participating  in the National  Automatic  Roaming  Network pays a
monthly fee equal to R$0.05 per  originated  or  terminated  call that  involves
roaming.  The  Brazilian  cellular  service  providers  have also,  through CGR,
entered into  international  roaming  agreements with foreign Service Providers,
which permit their  subscribers  to use their  cellular  phones in Argentina and
Uruguay and subscribers of those service  providers to use their cellular phones
in Brazil.

The terms of these  international  roaming  agreements  vary from  agreement  to
agreement.  The  Company  also  has  a  roaming  agreement  with  Gradiente,  an
international  cellular service roaming  provider,  to permit its subscribers to
have roaming services in North America, Europe, Asia, Africa and Oceania.

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 no 9,472/97), Federal Law no 9,295/96, also known as the LEI MINIMA
(the "Minimum Law"),  Federal Decree no 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  no 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 sub 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
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.

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.

ANATEL,  through its  resolutions  235 and 254,  which were enacted in September
2000 and January  2001,  respectively,  granted the cellular  service  providers
operating  under  the  Concessions  the  option  of  converting,  at  their  own
discretion,  their concession agreements into PCS authorization agreements. Upon
choosing such conversion,  the cellular service provider would receive, for each
of the  Concessions  being  converted,  an  authorization  to  provide  cellular
service,  an  authorization  to provide  domestic  long-distance  service and an
authorization to provide  international  long-distance  service,  as well as the
right to use an additional  10 MHz band at the 1.9GHz range to provide  cellular



service. This additional radio frequency band, however,  would be charged to the
service provider choosing the conversion  option.  ANATEL modified these initial
rules,  and  currently  the  1.9 GHz  range  is no  longer  licensed  and  these
frequencies are now reserved to 3G.

The  Company  is  currently  analyzing  whether to make the  conversion.  If the
Company  opts to convert,  the  additional  band now in the C Band 1.8 GHz would
require payment of approximately R$100 million,  with ANATEL allowing payment in
up to six installments. Operating under an authorization would imply the loss of
the  guarantee of the terms and  conditions of the license for the 15-year term.
It would,  however,  give the Company greater discretion in running the business
and relieve the Company of the obligation to revert its operating  assets to the
Brazilian government when the Concessions end.

    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 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  quality  ratios by



June 2001: (i) monthly rate of general  subscriber  complaints  lower than 3.5%;
(ii)  monthly  rate  of  subscriber  complaints  about  network  coverage,  plus
complaints  about the system's lack of capacity  lower 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,  lower 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
(ix) 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 monthly targets so far.

INTERCONNECTION.  All providers of  telecommunications  services 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  but  Resolution  274 of
September, 5, 2001 regulates the co-location of infra-structure among power, oil
and telecom companies.  CO-LOCATION means that a network carrier permits another
party to place its  switching  equipment  in or near the local  exchange  of the
network carrier, 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  carriers  to  "unbundle"  network
elements and services,  although  ANATEL has announced plans to review the issue
on a regular  basis and may require  unbundling  in the future.  In an unbundled
regime,  each network  carrier is required to provide a detailed list of network
services and elements  which may be purchased  separately by a party  requesting
interconnection.

Although  in general the Company  has  already  reached  and even  exceeded  the
targets  announced by ANATEL  described above, it still practices the continuous
improvement  policy applied to the Quality of Service (QoS), which is the reason
for its international standard of performance, as shown in the table below:



3.5 QUALITY INDICATORS
================================================================================
      MONTHLY QUALITY INDICATORS                                  TCO
(COLLECTED AT PEAK HOURS)                     ----------------------------------
                                                FEB/02     MAR/02   VARIATION %
--------------------------------------------------------------------------------
PVMC 1 - Rate of Subscriber Complaints (L)        0.62       0.64        3%
--------------------------------------------------------------------------------
PVMC 2 - Rate of subscriber complaints            0.15       0.18       17%
about network coverage plus system's
lack of capacity per 1,000 lines in
service (L)
--------------------------------------------------------------------------------
PVMC 3 - Rate of completed calls to              97.86      97.48        0%
customer-service centers (H)
--------------------------------------------------------------------------------
PVMC 4 - Rate of effectively-responded          100.00      99.97        0%
subscriber communications (H)
--------------------------------------------------------------------------------
PVMC 5 - Rate of subscribers attending           89.61      92.59        3%
customer-service facilities (H)
--------------------------------------------------------------------------------
PVMC 6 - Rate of bills with error                 3.43       3.08      -11%
complaints per 1,000 issued (L)
--------------------------------------------------------------------------------
PVMC 7 - Rate of originated calls,               59.32      58.86       -1%
connected (H)
--------------------------------------------------------------------------------
PVMC 8 - Rate of calls connected in less         96.18      96.02        0%
than 15 seconds (H)
--------------------------------------------------------------------------------
PVMC 9 - Rate of dropped calls (L)                1.52       1.58        4%
================================================================================
(H)  The higher, the better.
(L)  The lower, the better.

    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
(INTERCONNECTION).

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 IGP-DI.

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%, over the rate of inflation measured by the variation of IGP-DI,  subject
to a downward  adjustment for inflation  effects already  captured in the annual
upward  adjustments  of the  overall  price  cap for the  basket,  as 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
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 ITEM 4  "INFORMATION  ON THE
COMPANY--BUSINESS OVERVIEW--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) SMS; (vi) CSD; and (vii) WAP. 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  subscribers with detailed
billing, 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 and every 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 usage of the Company's network. 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 the
implementation  of the REAL Plan,  was elected  President  of Brazil in October,



1994 and in October,  1998 he 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 third largest number of
seats in the coalition.

During the first semester of 2001, the legislative  branch of the government was
involved in a series of situations  linked to corruption  and there were reports
of  rivalries  among key partisan  leaders in the Senate.  The election of a new
President of the Senate,  followed by the accusation of senators,  including the
former  President  of the Senate,  of  wrongfully  disclosing  the contents of a
secret voting list, dominated the political arena the during the first months of
2001.

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,  non-inflationary  growth. Changes in monetary,  credit, tariff and
other policies were frequent and occasionally drastic. In particular, actions to
control  inflation,  interest  rates  and  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 on 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 to a rise in  unemployment  in most  regions  and  sectors  of the
economy.

After the  devaluation  of the REAL in 1999 and a period of  adjustment to a new
regime of  free-floating  exchange rates,  the Brazilian  economy  returned to a
growth  path in the year  2000.  GDP grew  4.5% in 2000 and  4.36% by the end of
2001.  GDP was  affected  by Brazil's  electric  energy  crisis,  the decline in
international  markets  and  economic  crises in  emerging  markets,  especially
Argentina. Brazil's current accounts deficit remained at approximately 4% of GDP
in 2001.

Foreign  direct  investment net inflows stood at US$30 billion by year-end 1999,
US$33 billion by year-end 2000, and US$22 billion by year-end 2001.



Brazilian  internal  interest rates have added momentum to the economic  growth.
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,  the Selic  rate was down to 19.03%  and closed the year 2000 at
15.75%.  On June 3, 2001,  the Selic rate was 17.98% and closed the year 2001 at
19.05%.

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 2001, 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  America 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
increase in interest rates in  industrialized  countries,  especially the United
States. More recently, Argentina announced in 2001 that it would not service its
public sector debt and abandoned its decade-old fixed dollar-peso exchange rate,
creating a floating  exchange  rate  regime in  January,  2002.  In  addition to
affecting  both the revenue and  profitability  of  Brazilian  companies  having
significant  ties with  Argentina,  the  Argentinean  crisis may also affect the
perception   of  risk  in  Brazil  by  foreign   investors.   SEE  ITEM  3  "KEY
INFORMATION--RISK  FACTORS--FACTORS  RELATING TO  BRAZIL-OTHER  EMERGING  MARKET
RISK."

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 ITEM 4 "INFORMATION ON THE
COMPANY--BUSINESS OVERVIEW--BRAZILIAN ECONOMIC ENVIRONMENT."

The following table sets forth the rate of Brazilian  inflation,  as measured by
the IGP-M, and the devaluation of the Brazilian currency against the U.S. dollar
during the periods indicated.



                                                     YEAR ENDED DECEMBER 31,
                                              ----------------------------------
                                               1998    1999     2000       2001
                                              ------  ------   ------    -------
                                                         (PERCENTAGES)
Inflation (IGP-M)..........................    1.8     20.1     9.95      10.38
Devaluation (Brazilian currency vs. US$)...    8.3     48.0     9.3       18.67

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.  The exchange rate then reached a more stable pace
in 2000 and  remained  stable  until  recently,  when  the  economic  crisis  in
Argentina, as well as internal political factors,  contributed to an increase in
interest  rates.  During the year  2001,  inflation  amounted  to 10.38% and the
devaluation of the REAL against the U.S.  dollar was 18.67%,  as measured by the
IGP-M, showing an increase in value.  Inflation has peaked at 11.19% in 2002, as
measured by the IGP-M.

Inflation and devaluation have potential 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, may lead to balance-sheet  losses for the Company on its foreign-currency
denominated  liabilities  (only regarding  foreign  currency  debts,  not hedged
debts).  Inflation  puts  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.

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.

ORGANIZATIONAL STRUCTURE

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, 2001 and the
Holding Company's shareholding in each Subsidiary at December 31, 2001.

                               CONTRIBUTION TO
                                CONSOLIDATED
                                  RESULTS         HOLDING COMPANY OWNERSHIP
                               ---------------  ----------------------------
                                  % OF NET
                                 OPERATING      % OF SHARE     % OF VOTING
 SUBSIDIARY                      REVENUES         CAPITAL         STOCK
-------------                  ---------------  -----------   --------------
 Telebrasilia.........            29.75%           88.25          90.95
 Telegoias............            22.24%           96.74          98.44
 Telemat..............            13.50%           97.49          99.45
 Telems...............            11.42%           98.39          99.58



 Teleron..............             3.87%           97.12          98.13
 Teleacre.............             2.05%           98.31          99.96
 NBT..................            17.22%           98.33          95.00

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  ITEM  5   "OPERATING   AND   FINANCIAL   REVIEW   AND
PROSPECTS--LIQUIDITY AND CAPITAL RESOURCES."

On October 19, 1998 Tele Centro Oeste/Inepar, a consortium comprising (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 9% of the total population of Brazil.

On April 26, 2002,  Tele Centro Oeste Celular  Participaoes  S.A. held a General
Extraordinary   Shareholders   Meeting  in  which  it  approved  the  merger  of
Telebrasilia  into the Company and the consequent  transfer of the concession to
explore mobile cellular services previously held by Telebrasilia.

PROPERTY, PLANTS AND EQUIPMENT

The Company's  principal  physical  assets  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, 2001,  the Company had 22 cellular
switches and 787  base-stations in the Region,  of which  approximately 30% 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 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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 81.4%, 83.8%,
91.9%,  96.0%, 91.3% and 94.0% of the share capital of Telebrasilia,  Telegoias,
Telemat,  Telems,  Teleron and Teleacre,  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
Item 3A, "Selected Financial Information."

EFFECTS OF CHANGES IN PRESENTATION OF FINANCIAL STATEMENTS IN 1999, 2000 AND
2001

There are three significant differences in presentation between the Consolidated
Financial  Statements  of the Company for 1999,  2000,  and 2001.  Each of these
differences should be taken into account when comparing financial conditions and
results of operations for that period.

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 1999,  2000 and 2001, the  Consolidated
Financial  Statements  reflect  the  operations  of the  Subsidiaries  as  fully
independent companies.

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 years then ended,  as well as the
fully indexed  financial  statements for all previous  periods and for the years
ended  December 31, 1999 and 2000,  have been restated into currency of December
31,  2000  purchasing  power.  SEE ITEM 3 "KEY  INFORMATION--SELECTED  FINANCIAL



INFORMATION"  AND  NOTE  2(B)  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 years
ended  December  31,  1998 and 1999  have been  restated  in  constant  REAIS of
December  31, 2000  purchasing  power as measured by the IGP-M index during 2000
(which  produces a  correction  of 9.95% of all  amounts in 1999).  Because  the
correction  factor  applied to 1998 and 1999 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, 1999 and 2000 on the Company's Consolidated Statements of Operations. As a
result of this  monetary  restatement,  year-over-year  percentage  calculations
emphasize decreases and dampen increases in such revenue and cost items.

In 2001,  IBRACON (the  Brazilian  Institute of Independent  Auditors)  issued a
publication  stating that financial  statements would not have to be indexed for
2001 as the three-year cumulative inflation rate in Brazil fell below 100%.

POLITICAL, ECONOMIC, REGULATORY AND COMPETITIVE FACTORS

The following  discussion should be read in conjunction with the "Information on
the Company" 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  ITEM  4  "INFORMATION  ON  THE  COMPANY--BUSINESS
OVERVIEW--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 ITEM 4 "INFORMATION ON THE COMPANY--BUSINESS  OVERVIEW--BRAZILIAN
POLITICAL  ENVIRONMENT AND 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    ITEM    4    "INFORMATION    ON    THE     COMPANY--BUSINESS
OVERVIEW--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, 2001, the Company had R$307.68 million



of indebtedness  denominated in U.S. dollars.  In order to reduce this risk, the
Company has entered  into  hedge-type  contracts  (swaps to CDI) with  financial
institutions.   At  December,   31,  2001,  part  of  the  Company's   financial
indebtedness  was denominated in U.S.  Dollars,  when  approximately  87% of the
Company's  indebtedness in foreign  currency was covered by active  positions of
hedge-operations.  The hedge  transactions  were  realized in order to partially
cover future maturity dates of the debts denominated in U.S. Dollars, indexed at
fixed or variable  interest rates. The profits or losses of these operations are
registered in the Company's statement of results.

R$61.6  million  of  litigation  contingency  funds  related  to  loans  wrongly
allocated to the Company at the time of the spin-off of TELEBRAS. 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 determined that as of January 1999 the TELEBRAS Loans would
for all purposes be treated as REAL-denominated  liabilities bearing interest at
a rate  equal to the  IGP-M  plus 6%.  Payment  of the  TELEBRAS  Loans  has not
resumed,  and  steps  are  being  taken to  resolve  the  situation.  SEE ITEM 8
"FINANCIAL    INFORMATION--CONSOLIDATED    STATEMENTS   AND   OTHER    FINANCIAL
INFORMATION--LEGAL PROCEEDINGS--LITIGATION RELATED TO TELEBRAS LOANS."

The  Company's  revenues  are earned  entirely in REAIS,  and the Company has no
dollar-denominated  assets.  The  Company  has hedged 87% of its debt in foreign
currency  exposure  existing  as of  December  31,  2001.  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,  2001,  the Company had R$209.3  million in loans and  financing in
Brazilian  currency  indexed at different  floating  rates,  R$280.7  million in
financial investments,  R$362.3 million in other investments in securities based
on the CDI  variation  (Explanatory  Note 25a) plus R$61.6  million in loans and
financing denominated in foreign currency (Libor,  renegotiated  biannually) and
R$27.4 million in hedge funds for these  operations,  invested at fixed interest
rates and added monthly variations.

Substantially all of the Company's interest-bearing  liabilities,  including the
TELEBRAS  contingency,  bear  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 December, 2001, NBT signed a new contract with the National Bank for Economic
and Social Development (BANCO NACIONAL DE DESENVOLVIMENTO  ECONOMICO E SOCIAL or
"BNDES").  The transaction  amount  corresponded to R$167.6 million with payment
becoming due after a period of six years.  The  principal  amortization  will be
paid monthly after a 12-month grace period. Amortization of the interest will be
paid quarterly during the grace period of the principal and monthly  thereafter.
The charges  derived from the operation for R$16.8 million  (called "Sub Credito
B") were based on the UNIDADE  MONETARIA  DO BANCO  NACIONAL DE  DESENVOLVIMENTO
ECONOMICO E SOCIAL  (UMBNDES),  which is the weighted  averaged cost of all fees
and  expenses  incurred  by  BNDES  when  obtaining  foreign  currency  capital,
published by the Brazilian  Central Bank, plus a 2.5% annual margin of BNDES and
a 1.0% annual  risk  remuneration  to the  financial  institutions.  The charges
derived from the transaction for the R$150.8 million (called Sub Credito A) were
based on the "TJLP" (Federal  Government  Long-term  Interest Rate) published by
the Brazilian Central Bank, plus a 2.5% annual margin of BNDES and a 1.0% annual
risk  remuneration  to the  financial  institutions.  The  contract  with  BNDES
includes certain  restrictive  covenants.  As of March 31, 2002, the Company did
not have difficulty complying with these covenants.

OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

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, 2001.

                                          YEAR ENDED DECEMBER 31,    %CHANGE
                                          -----------------------    -------
                                        1999    2000     2001     1999-    2000-
                                        ----    ----     ----     2000     2001
                                                                  ----     ----
                                         (MILLIONS OF REAIS) (1)
Net operating revenue..............    666.7   930.6   1.248.1    39.6     34.1
Cost of services...................    326.5   532.2     663.2    63.0     24.6
Gross profit ......................    340.1   398.5     585.0    17.2     46.8
Operating expenses:
Cost of Sales......................    118.6   126.2     195.0     6.4     54.5
General and administrative expenses     64.5    78.4     110.3    21.6     40.7
Other net operating income              14.0     9.6       4.5   (31.4)   (53.1)
      (expense)....................
Total                                  197.2   214.2     309.8     8.6     44.6
Operating income before interest...    143.0   184.3     275.1    28.9     49.3
Net interest expense...............     47.6    30.1      43.5   (36.8)    44.5
Operating income ..................     95.4   154.2     231.7    61.6     50.3
Net non-operating expense..........      6.1    19.5      25.7   219.7     31.8
Employees' profit share............      1.9     1.9       2.3     0.0     21.1



                                          YEAR ENDED DECEMBER 31,    %CHANGE
                                          -----------------------    -------
                                        1999    2000     2001     1999-    2000-
                                        ----    ----     ----     2000     2001
                                                                  ----     ----
                                         (MILLIONS OF REAIS) (1)

Income before taxes and minority        87.4   132.8     203.7    51.9     53.4
  interests........................
Income tax and social contribution.     29.9    40.2      56.5    34.5     40.5
Minority interests.................     11.5    20.0      13.9    73.9    (30.5)
Reversal of interest on own capital    (53.5) (31.0)    (45.3)   (42.1)    46.1
Net income.........................     99.6   103.6     178.6     4.0     72.4

---------------
(1)  Information is presented in constant REAIS of December 31, 2000 and nominal
     REAIS of December 31, 2001. Columns may not add due to rounding.

    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 and 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) sales of handsets and
prepaid cards, 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  ITEM  4  "INFORMATION  ON  THE   COMPANY--BUSINESS   OVERVIEW--SOURCES   OF
REVENUE--SUBSCRIBER RATES."

Prior to  privatization,  the  Company's  capital  expenditures  were  part of a
system-wide  planning  and  allocation  of  capital  expenditures  conducted  by
TELEBRAS,  which were  subject to  approval  by the  Federal  Government.  These
constraints  on capital  expenditures  prevented the Company from making certain
investments  that  otherwise  would have been made in order to improve  cellular
telecommunications  service in the Region.  Since the privatization of TELEBRAS,
these  restrictions have been lifted. The Company can now design its own capital
expenditure  budget,  subject to its  obligations  under the Concessions to meet
certain  network  coverage  and  quality  of  service  standards.   SEE  ITEM  4
"INFORMATION  ON THE  COMPANY--BUSINESS  OVERVIEW--REGULATION  OF THE  BRAZILIAN
TELECOMMUNICATIONS INDUSTRY--OBLIGATIONS OF TELECOMMUNICATIONS COMPANIES."

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



    DETAILS OF COMPANY REVENUE

                                        YEAR ENDED DECEMBER 31,      %CHANGE
                                        -----------------------      -------
                                       1999      2000     2001     1999-   2000-
                                       ----      ----     ----     2000    2001
                                                                   ----    ----
                                         (MILLIONS OF REAIS) (1)
Gross Operating Revenue:
  Usage charges....................   369.2     349.9     530.2    (5.2)   51.5
  Monthly subscription charges.....   211.4     194.4     121.5    (8.0)   37.5)
  Network usage charges............   197.1     334.5     526.8    69.7    57.5
  Activation fees..................     4.1         -         -     n.m.      -
  Resale of handsets and prepaid       58.6     274.8     386.7    68.9    40.7
cards..............................
  Others...........................    14.9      11.2       8.3    24.8)   25.9)
                                      ---------------------------
  Gross operating revenue..........   855.3   1,164.9   1,573.4    36.2     35.1
  Value-added and other indirect     (188.7)   (234.2)   (325.3)   24.1     38.9
taxes .............................
Net Operating Revenue..............   666.7     930.6   1,248.1    39.6     34.1
                                      ===========================

---------------
(1)  Information is presented in constant REAIS of December 31, 2000 and nominal
     REAIS of December 31,  2001.  SEE NOTE 2(B) TO THE  CONSOLIDATED  FINANCIAL
     STATEMENTS. Columns may not add due to rounding.

Net operating  revenues increased by 39.6% in 2000 and 34.1% in 2001. The growth
in revenues over this three-year period was driven mainly by increases in demand
for cellular  services.  The average number of  subscribers  increased by 94.8%,
from  621,043 in 1999 to 1,209,854  subscribers  in 2000.  In 2001,  the average
number of subscribers increased to 2,053,477, or by 69.7%, compared to 2000. The
growth in revenues in 1999 was due in part to a reduction  in  activation  fees,
and in some cases to their  elimination,  which in turn not only facilitated new
entries but also increased the subscriber-base and generated additional revenue.
The introduction of new services such as prepaid service,  and revenue generated
by roaming  fees,  also  contributed  to the  increased  revenue.  In 2000,  the
significant  increase in number of customers was due to the  performance of NBT,
which reached almost 257,000 subscribers by December 31, and to the launching of
alternative post-paid plans and new services,  such as voice mail, short message
and WAP (Wireless Application Protocol). In 2001, the 34.1% increase in revenues
compared  to  2000  was  due to the  increased  traffic  caused  by the  greater
access-base.  TCO closed the year 2001 with 716,022 new subscribers  compared to
2000, totaling 2,428,206 accesses at December 31, 2001, of which 416,760 were in
Area 8 and 2,011,446 in Area 7.

USAGE  CHARGES.  Revenues from usage charges  decreased by 5.2% between 1999 and
2000 and rose by 51.5%  between 2000 and 2001.  In 2000,  the reduction of usage
revenues  was caused by a 4.4%  reduction  in the  average  number of  post-paid
subscribers.  The 2001  increase  was due to 20%  growth in the  post-paid  base
compared to the year 2000, due to the launching of the ESSENCIAL plans.



MONTHLY  SUBSCRIPTION  CHARGES.  Revenues  from  monthly  subscription  payments
decreased  by 8.0% between  1999 and 2000 and 37.5%  between 2000 and 2001.  The
decrease in revenues in 2000 was due mainly to a 4.4%  reduction  in the average
number of contract customers,  and in 2001 it resulted from the launching of the
ESSENCIAL plans, the monthly  deductible  values (minimum  consumption) of which
are accounted as usage revenue.

NETWORK USAGE  CHARGES.  Revenues from network usage charges  increased by 69.7%
between 1999 and 2000,  and 57.5%  between 2000 and 2001.  The increase in these
periods reflected the growth in the total number of subscribers, which led to an
increased  volume  of calls  to  Company  subscribers  originating  outside  the
Company's network.

ACTIVATION FEES. The fall in the revenues from activation fees was caused by the
fact that the  Subsidiary  companies  maintained  their  strategy to widen their
subscriber base by means of providing discounts and even exemptions from payment
of activation fees. The activation fees were entirely suspended in 2000.

RESALE OF  HANDSETS  AND PREPAID  CARDS.  Revenues  from resale of handsets  and
prepaid cards grew by 368.9% between 1999 and 2000 and by 40.7% between 2000 and
2001. The increase in these periods were caused by the growth in the access-base
of  Company's  pre-paid  subscribers,  which  went  up from  286,844  in 1999 to
1,115,962 in 2000 and to 1,716,398 in 2001.

OTHERS. Revenues from other services,  which mainly 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
24.8% between 1999 and 2000 and by 25.9% between 2000 and 2001. The gradual fall
was due to the  launching of  alternative  ESSENCIAL  plans,  whose  deductibles
include additional services.

TAXES ON GROSS  REVENUES.  The most  significant  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,  in the State of Mato
Grosso,  where,  in January  1999 the ICMS rate was raised from 25% to 30%.  The
state of Para also  raised its ICMS rate from 25% to 30% in January,  2001,  and
the same took place in the state of Goias,  which  raised its ICMS rate from 25%
to 26% in the same month. 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 22.1% in 1999, 20.1% in 2000 and 20.7% in 2001. In 2001, the
Federal  Government  instituted two new taxes  applicable on  telecommunications
services   revenues:   the  FUST  -  Fundo  de  Universalizacao  do  Servico  de
Telecomunicacoes and the FUNTTEL - Fundo para o Desenvolvimento  Tecnologico das
Telecomunicacoes.  Both the FUST and the FUNTTEL are  calculated by applying the
1.5% rate on the revenue generated by telecommunication services. 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.



    COST OF SERVICES

                                        YEAR ENDED DECEMBER 31,      %CHANGE
                                        -----------------------      -------
                                       1999      2000     2001     1999-   2000-
                                       ----      ----     ----     2000    2001
                                                                   ----    ----
                                         (MILLIONS OF REAIS) (1)
Cost of services:
Depreciation....................      120.2     142.8    160.9     18.8    12.7
Personnel.......................        9.0      11.3     11.6     25.6     2.7
Third-party materials and              78.9      95.8    126.0     21.4    31.5
services........................
Fixed-line network expenses.....       28.0      26.9     37.7     (3.9)   40.1
Fistel tax......................       30.1      51.6     53.2     71.4     3.1
Cost of sales...................       50.9     194.0    273.3    281.1    40.9
Others..........................        9.4       9.8      0.5      4.2   (94.9)
                                      ---------------------------
Total...........................      326.5     532.2    663.2     63.0    24.6
                                      ===========================

---------------
(1)  Information is presented in constant REAIS of December 31, 2000 and nominal
     reais of December 31,  2001.  SEE NOTE 2(B) TO THE  CONSOLIDATED  FINANCIAL
     STATEMENTS. Columns may not add due to rounding.

Cost of services  increased by 63.0%  between 1999 and 2000 and by 24.6% in 2001
compared to previous years.  The increase in 2000 and 2001 resulted  principally
from an increase in depreciation and  amortization  costs relative to the growth
of the  Company's  network,  and in costs  associated  with the  acquisition  of
handsets,  as well in the costs of supplies  and  third-party  services  and the
costs of interconnection with the fixed-telephoning network.

DEPRECIATION. Depreciation increased by 18.8% between 1999 and 2000 and by 12.7%
between  2000 and 2001.  The  increase in 2000  reflects  the  expansion  of the
Company's network.

THIRD-PARTY  SUPPLIES  AND  SERVICES.  Supplies 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  expenses
increased by 21.4%  between 1999 and 2000 and 31.5%  between 2000 and 2001.  The
increase in 1999 and 2000  principally  reflected the growth of subscriber base,
especially  with  prepaid  services,  causing an increase in the volume of calls
subject to network usage  charges  payable to other  telecommunications  service
providers.

COST OF SALES.  With the  introduction of prepaid  cellular service on May 1999,
the Company began to purchase cellular handsets to resell to its customers.  The
increase  in the cost of sales  also  reflected  the  impact  of the  growth  in
subsidies, which went up from R$28,721 thousand in 2000 to R$72,956 in 2001. The
cost of sales was R$194 million in 2000 and R$273.3 million in 2001.



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 3.9% between 1999 and 2000 and  increased by 40.1% between 2000 and
2001.  Such  expenses  accounted  for 5.7% of total  costs of  services in 2001,
against  5.1%  in  2000.  SEE  ITEM  4  "INFORMATION  ON  THE  COMPANY--BUSINESS
OVERVIEW--OPERATING AGREEMENTS--INTERCONNECTION AGREEMENTS."

FISTEL TAX. Fees payable to finance FISTEL were R$30.1  million,  R$51.6 million
and  R$53.2  million  in 1999,  2000 and  2001,  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 71.3% increase in 2000 and the
3.1%  rise  in  2001  were  due  mainly  to  the   expansion  of  the  Company's
subscriber-base and to the installation of new base-stations.

PERSONNEL.  Personnel  expenses  increased  during the  period,  rising from R$9
million in 1999 to R$11.3 million in 2001. These increases were due above all to
augments in the number of employees,  which has kept pace with the growth in the
business.  The growth also  reflected  salary  policies  instituted  in order to
attract  and  maintain   engineers  and  other   personnel  in  an  increasingly
competitive environment.

OTHERS.  Other costs of services include rents of 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  were R$9.4
million, R$9.8 million and R$0.5 million in 1999, 2000 and 2001, respectively.

    OPERATING EXPENSES

SELLING  EXPENSES.  Selling  expenses  increased  6.4% between 1999 and 2000 and
54.5%  between 2000 and 2001.  The increase in 2000 resulted  primarily  from an
aggressive  marketing campaign for prepaid services,  which included advertising
campaigns and an increase in sales commissions to independent distributors.  The
increase  in 2000 also  resulted  from  significant  efforts  in  marketing  and
promotional  campaigns and expenses related to sales commissions.  This increase
was  partially  offset  by a 29.6%  decrease  on net  losses  on trade  accounts
receivable.  This  reduction  was  caused  by  strong  efforts  in  billing  and
collection  processes in order to reduce  subscribers'  delinquency rates. As in
the year 2000, most variations in 2001 were observed in the marketing  expenses,
as well as in the  promotional  campaigns and sales  commissions.  Net losses on
accounts  receivable  from  subscribers  suffered a 7.8% rise against 2000,  but
comparing to the total net  revenue,  which went up by 34.1% in the same period,
it becomes  evident that the Company gained some  efficiency in the charging and
billing processes, which consequently reduced the rate of delinquency.

GENERAL  AND  ADMINISTRATIVE  EXPENSES.   General  and  administrative  expenses
increased by 21.6% and 39.4% between 1999 and 2000 and by 40.7% between 2000 and
2001. The increase of these expenses in 2000 is due primarily to the increase in
corporate personnel in the Holding Company. Due to the increase, personnel costs
accounted  for  34.7% of total  costs in  2000.  In 2001,  the most  significant
increase was in depreciation, which went up from R$5.6 million in 2000 to R$19.9



million in 2001, because of the increased  investment in fixed assets. There was
also  a 41%  increase  in  Personnel  Expenses  and a 19%  rise  in  Third-Party
services. All these increases are compatible with the Company's growth levels.

OTHER NET OPERATING INCOME  (EXPENSE).  The Company recorded other net operating
expense of R$14.0  million  in 1999 and R$9.6  million  in 2000,  against  R$4.5
million  in  2001.  Other  net  operating  income  (expense)  in  2000  resulted
principally from fines received by subscribers in connection with changes to the
prepaid  services.  In 2001,  the  reduction of the operating  income  (expense)
resulted mainly from a 285% growth in fines and recovered expenses,  from R$3.35
million in 2000 to R$12.92 million in 2001. This growth,  however, was partially
offset by a 41%  increase in the payment of taxes,  which  increased  from R$9.8
million to R$13.82 million in 2001.

    NET FINANCIAL RESULT

The Company's Net Financial  Result of R$30.1 million in 2000 and R$43.5 million
in 2001 was due mainly to the  payment of  dividends  in the form of interest on
owned capital,  in the value of R$31 million in 2000 and R$45.3 million in 2001.
SEE ITEM 5 "FINANCIAL  AND OPERATING  ANALYSES AND  PERSPECTIVES--LIQUIDITY  AND
CAPITAL  RESOURCES." The Company also registered a financial  revenue of R$102.8
million in 2000 and  R$132.4  million in 2001,  which  resulted  mainly from the
revenue  generated  by the average  balance of the  resources  available,  which
increased  substantially  as a result of increased  cash  generation in 2000 and
2001. This revenue was partially offset by financial  expenses of R$98.5 million
in 2000 and R$133.3 million in 2001. In 2001,  there was a material  increase in
the net monetary variations,  going from R$3.4 million in 2000 to R$41.5 million
in 2001 as a result of the devaluation of the real against the dollar.

    NET NON-OPERATING EXPENSE

The Company  recorded net  non-operating  expenses of R$19.5 million in 2000 and
R$25.7 million in 2001. The increase in non-operating  expenses in 2001 resulted
primarily  from an increase  in losses or  write-offs  on the sale of  property,
plant  and  equipment  in  the  amount  of  R$3.8  million,  of  certain  analog
transmission  equipment which became  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$1.9 million,
R$1.9 million and R$2.3 million in 1999, 2000 and 2001, 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  10.4%,  16.2%  and  7.2% of  income  before  minority
interests in 1999, 2000 and 2001, respectively.

DISCUSSION ON CRITICAL ACCOUNTING POLICIES

Critical  accounting policies are those that are both important to the portrayal
of our  financial  condition  and  results and  require  our  management's  most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. As the
number of variables and assumptions  affecting the possible future resolution of
the  uncertainties  increase,  those  judgments  become even more subjective and
complex. In order to provide an understanding about how the Company's management
forms its judgments about future events, including the variables and assumptions
underlying the estimates,  and the  sensitivity of those  judgments to different
circumstances,  the Company has  identified  the following  critical  accounting
policies: ? revenue recognition and accounts receivable; ? goodwill,  intangible
assets and amortization;  ? impairment of assets; ? deferred charges;  and ? tax
contingencies.

Notes 3 and 29 of the  consolidated  financial  statements  include a summary of
significant  accounting polices in Brazil and the United States and methods used
in the preparation of the consolidated financial statements.

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$218.4  million,  R$255.7 million and 190.5 million in 1999, 2000, and
2001 respectively.  These  expenditures  related primarily to increasing network
capacity,   coverage  and  digitalization.   SEE  ITEM  4  "INFORMATION  ON  THE
COMPANY--HISTORY AND DEVELOPMENT OF THE COMPANY--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 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 2001,  the Holding  Company  distributed a total of
R$80.5 million  (R$37.9  million in 2000) in the form of interest on own capital
and dividends. SEE NOTE 25(D) 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$137,8  million from BNDES) and foreign  currency  (mainly  R$50,9 million from
Export  Development   Corporation).   In  January  and  February  of  2001,  the
Subsidiaries'  bridge loans with BNDES were converted into long-term  loans. The
proceeds of the loans will be used for the  expansion and  modernization  of the
Company's  telecommunications  plant. SEE ITEM 5 "OPERATING AND FINANCIAL REVIEW
AND  PROSPECTS--FOREIGN  EXCHANGE AND INTEREST RATE EXPOSURE" AND NOTE 32 TO THE
CONSOLIDATED FINANCIAL STATEMENTS.

As of December 31, 2001, the Company anticipated  capital  expenditures of R$250
million for 2002. The Management  expects that such  expenditures will be funded
primarily  with  internally-generated   cash,  supplemented  by  financing  from
external  sources.  Most  of the  planned  2002  capital  expenditures  will  be
dedicated to expanding the capacity and coverage of the Company's  network,  the
modernization  of  telecommunication  services and the  implementation  of a new
overlay network technology to be defined by the Company.

Substantially all of the Company's start-up costs and initial investments of the
Band  A   Subsidiaries   were  financed  by  cash  flows  from  the   fixed-line
telecommunications  operations  of the  Predecessor  Companies.  In  the  Band B
Subsidiary  (NBT), such costs and investments were financed by the generation of
cash by TCO,  complemented  by financings  from  Brazilian  and foreign  banking
institutions.  Except  regarding  NBT, 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 the Brazilian law.

U.S. GAAP RECONCILIATION

The Company  prepares its consolidated  financial  statements in accordance with
Brazilian  GAAP,  which  differ  in  significant  aspects  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 shareholders' equity,  whereas under U.S. GAAP the charge would be to
income for the year.  Net income  under U.S.  GAAP was R$32.6  million for 1999,
R$104.7 million for 2000 and R$194.4 million for 2001.  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 have been  deferred  and
amortized  over  the  estimated  effective  contract  life.  SEE  NOTE 29 TO THE
CONSOLIDATED FINANCIAL STATEMENTS.

RESEARCH AND DEVELOPMENT

In 2001, the Company substantially invested in the improvement of the quality of
all  services  provided  to  customers,  with  a  focus  on  the  creation  of a
specially-designated area where the Company's Network Management Center - NMC is
located.  The system was provided by TTI, an Israeli company, and was customized
with the active participation of Company specialists.

The NMC structure is based on three areas: Configuration Management, Traffic and
Performance Management and Fault and Work-Force Management.

CONFIGURATION  MANAGEMENT  controls the resources available on the network using
tools such as databases that describe the physical and logical  resources of the
network,  the  connections  among them and how they are used. This area provides
several  internal  customers  inside the Company  with  up-to-date  information,
including the other NMC management areas, planning and engineering areas.

TRAFFIC AND PERFORMANCE MANAGEMENT controls the network's behavior by collecting
performance and traffic data from network elements.  Based on these elements the
system  creates,  calculates  and  analyzes  indexes  that track the  quality of
service  being  offered  to  the  customers,   allowing  the  identification  of
opportunities to improve such quality.

FAULT AND WORK FORCE MANAGEMENT  performs full-time  supervision of the network.
Its main goals are to drastically  reduce the impact of network  problems on the
quality of  service,  as well as to reduce the number of problems in the network
and the time required to fix them. The tools used are related to real-time alarm
monitoring, remote control of network elements and work-force coordination.

TREND INFORMATION

Third-generation  systems ("3G systems")  represent the main focus of the trends
in mobile communication. 3G systems should allow access to information at speeds
as  high  as  2,048  kbit/s,  therefore  making  available  multimedia  services
involving voice,  data,  images and sound of optimum quality.  Naturally,  these
services will not be completely  and widely  available in the  beginning,  given
that there are still several technical difficulties,  such as the required range
of frequency and, most importantly, the applications and services available. Its



growth is expected to be secondary  compared with voice in future  years,  until
users feel the need to have access to all types of  communication  at reasonable
costs.

The Company  believes  that the great  appeal of such  systems  will  consist in
Internet  browsing  at speeds  as high as or even  higher  than  household-modem
connections and marketed in package-mode,  which should be enough to disseminate
wireless  Internet on a definitive  basis.  Such systems will be  attractive  in
several other ways,  but the market needs to be prepared with  applications  and
services that justify the cost paid by users.  Therefore,  the Company  believes
that the main  application  in these  systems  will be the  Internet and not the
high-speed multimedia services, at least initially.

Consistent with these predictions, the Company believes that 2.5G systems, which
are systems that will allow data transmission at speeds significantly lower than
in 3G systems, will last longer than expected. In addition, they will be able to
meet the needs of the vast  majority of users.  The  companies  which  manage to
prepare  their  networks  to use 2.5G  systems  will  certainly  have  excellent
opportunities to remain  consonant with the trends of the market,  and when this
market  reaches a more mature stage,  they will be able to take wider and higher
steps towards 3-G systems.

The  Company  is  closely  tracking  all  these  alternatives  in  technological
evolution,  with a participation in the BRAZILIAN  COMMISSION OF  COMMUNICATIONS
(the "Comissao Brasileira de Comunicacoes"),  where it monitors and analyzes the
progress of 3-G systems.

In  consonance  with these  trends of  thought  on what the  future of  wireless
telecommunications  will be like,  the Company has  maintained its position as a
leading company in the market.  During 2001, the Company leveraged data services
throughout  existing  media,  such as the SHORT  MESSAGE  SERVICE,  the  CIRCUIT
SWITCHED DATA (CSD) and the WIRELESS APPLICATION PROTOCOL (WAP).

This fact is important in the wireless segment,  since it not only demands a new
positioning  of the  products  throughout  the  market,  but also shows that the
telecommunication segment should be concerned with the entire chain of products,
from the content to the terminal  handsets,  from the network core to the aerial
interface.

The Company  will  continue  to invest in the  "wireless  Internet"  convergence
segment.   Moreover,   the  Company   intends  to  make  available  new  service
alternatives in 2002.

It is still not possible to calculate the impact on the  Company's  revenues and
profitability of launching the new third-generation services, because no country
has yet reached the evolutionary stage of such systems.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

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.

NAME                                     POSITION           REELECTION
----                                     --------           ----------
Alexandre Beldi Netto................... Chairman         April 26, 2001
Araldo Alexandre Marcondes de Souza..... Member           April 26, 2001
Mario Cesar Pereira de Araujo........... Member           April 26, 2001
Ricardo de Souza Adenes................. Member           April 26, 2001
Marco Antonio Beldi..................... Member           April 26, 2001
Antonio Fabio Beldi..................... Member           April 26, 2001
Nelson Guarnieri de Lara................ Member           April 26, 2001

Set forth below are brief biographical descriptions of the Directors.

ALEXANDRE  BELDI  NETTO,  81 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 and Credibel  Factoring.  He holds a degree in Accounting from
the Escola de Comercio de Sorocaba  (Sorocaba School of Commerce),  in the state
of Sao Paulo.

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. Mr. Souza holds a degree in Civil Engineering
from the State University of Campinas, in the state of Sao Paulo.

MARIO CESAR PEREIRA DE ARAUJO, 54 years old, has served as a member of the Board
of  Directors  since  August  1998.  He has also served  Empresa  Brasileira  de
Telecomunicacoes S.A. - EMBRATEL as engineer and as Head of Projects Department,
Contracting and  Installation of Networks and  Telecommunications  Systems.  Mr.
Araujo  also  served as Chief of Section in  Telecomunicacoes  do Rio de Janeiro
S.A. - TELERJ.  He holds a degree in Engineering from the Federal  University of
Rio de Janeiro.

RICARDO DE SOUZA  ADENES,  44, has served as a member of the Board of  Directors
since  April 26,  2001.  He has also served as  Financial  Director of Splice do
Brasil  Telecomunicacoes  e Eletronica  S.A. since 1999.  From 1995 to 1999, Mr.
Adenes served as Corporate Business Manager of Banco do Brasil and, from 1992 to
1995, as Financial Director of Banco do Estado de Pernambuco S.A. (BANDEPE).  He
holds a degree in  Economics  from  Associacao  de Ensino  do  Distrito  Federal
(AEUDF) and an M.A. in Economics from Fundacao Getulio Vargas.

MARCO  ANTONIO  BELDI,  50 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.  Mr.  Beldi holds a degree in
Mechanical Engineering from the State University of Campinas (UNICAMP),  as well
as a degree in Law from Itu Law School, in the state of Sao Paulo.

ANTONIO  FABIO  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  Superintendent  Director,  Mr. Beldi served as Executive
Officer at Banco  Credibel and  Faculdade de  Engenharia  de Sorocaba  (Sorocaba
College of Engineering) and as Superintendent  Director of Beldi Participacoes e
Eletronica  S.A.  He holds a degree  in Civil  Engineering  from the  Pontifical
University of Campinas, in the state of Sao Paulo.

NELSON  GUARNIERI DE LARA,  74 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.
Mr. Lara holds a degree in Law from the University of Sao Paulo.

Alexandre  Beldi Netto is the father of Marcos  Antonio  Beldi and Antonio Fabio
Beldi.

BOARD OF EXECUTIVE OFFICERS

The Board of Executive  Officers consists of one President and Executive Officer
of Investor Relations, one Executive Officer of Coordination and Operations, one
Executive Officer of Businesses, one Executive Officer of Finance, one Executive
Officer of Engineering,  and one Executive Officer of  Administration  and Human
Resources. They all were elected by the Board of Directors on December 13, 2001,
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.

                                                                     DATE OF
NAME                                       POSITION                 REELECTION
----                                       --------                 ----------
Mario Cesar Pereira de Araujo   President and Head of Investor    Dec. 13, 2001
de Araujo....................    Relations
Sergio  Assenco  Tavares  dos   Executive Officer of Engineering  Dec. 13, 2001
Santos.......................
Luis Andre Carpintero           Executive Officer of Finance      Dec. 13, 2001
Blanco.......................
Getulio Nery Cardoso.........   Executive Officer of              Dec. 13, 2001
                                 Administration and
                                 Human Resources
Antonio    Carlos    Haidamus   Executive Officer of              Dec. 13, 2001
Monteiro.....................    Coordination and Operations
Roberto Iunes Brito..........    Executive Officer of Businesses  Dec. 13, 2001

Set forth below are brief biographical descriptions of the Executive Officers.

MARIO CESAR PEREIRA DE ARAUJO, 54 years old, has served as a member of the Board
of  Directors  since  August  1998.  He has also served  Empresa  Brasileira  de



Telecomunicacoes S.A. - EMBRATEL as engineer and as Head of Projects Department,
Contracting and  Installation of Networks and  Telecommunications  Systems.  Mr.
Araujo  also  served as Chief of Section in  Telecomunicacoes  do Rio de Janeiro
S.A. - TELERJ.  He holds a degree in Engineering from the Federal  University of
Rio de Janeiro.

SERGIO  ASSENCO  TAVARES DOS SANTOS,  54 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 Federal
State University of Brasilia.

LUIS ANDRE CARPINTERO  BLANCO,  28 years old, has served as an Executive Officer
since October 1, 2000. From May 1999 to September 2000, he actively took part in
several  areas of the  Company.  He  started  as  Administrative  and  Financial
Director of NBT and  Manager in the  Financial  Department  of the  Company.  He
worked in the  stock  market  with  BANCO  BOA  VISTA  INTERATLANTICO,  which is
associated with the CREDIT AGRICOLE,  and as manager in the BANCO ESPIRITO SANTO
from 1997 to 1999.  He holds a  production  engineering  degree from the Federal
University of Rio de Janeiro.

GETULIO NERY  CARDOSO,  50 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
Region  for  Splice.  He  holds a  degree  in  Electrical  Engineering  from the
Universidade  de Brasilia and has  completed  extensive  related  coursework  in
Brazil and abroad.

ANTONIO CARLOS HAIDAMUS  MONTEIRO,  48 years old, has been working for TCO since
April 1999, and has served as Executive  Officer of Coordination  and Operations
since December 2001. He has also served as Executive Vice-President of NBT since
November 1999. Mr. Monteiro started his career in the  Telecommunications  field
in 1970,  working  for the  former  TELEOESTE,  a Mato  Grosso do Sul  telephone
service carrier, before telecommunication carriers became state-owned companies.
Subsequently,  he worked for  Embratel,  TELERJ and TELEMAT,  where he served as
Director of Engineering  and President.  He holds degrees in engineering  and in
economics, and specialized in fiber optics and corporate management.

ROBERTO IUNES BRITO, 43 years old, has been Director since August 31, 2001. From
August 1998 to August  2001,  he served as Regional  Director of Telems  Celular
S.A.. Mr. Brito is responsible  for  competitive  strategy and for the operating
incomes of Telems  Celular.  From 1982 to 1998,  he was Manager of the Financial
Department,  was responsible  for the  administrative  and financial  structure,
assistant  to the  Administrative-Financial  board,  manager of the Economic and
Financial Planning Department,  and manager of the Cellular Telephone Department
in  Telecommunicacoes  do Mato  Grosso do Sul S.A.,  belonging  to the  Telebras



System.  Mr. Brito holds a degree in economics  from the Catholic  University of
Mato Grosso do Sul and an M.A. from INPE, in that state.

AUDIT COMMITTEE

The Company's  Statutory "Audit Committee"  consists of 5 (five) members elected
for a term of one year. The council meets  regularly  every 3 (three) months and
in  extraordinary  meetings  when  summoned  by the  President  or by any of its
members.

The  following  are  the  current  members  of the  Audit  Committee  and  their
respective positions.

NAME                                    POSITION         REELECTION
----                                    --------         ----------
Augusto Patarelli ..................... Adviser         April 29, 2002
Aureo Monteiro de Moraes .............. President       April 29, 2002
Francisco Jose Becker Dias ............ Adviser         April 29, 2002
Rene de Oliveira Garcia Junior......... Adviser         April 29, 2002
Joao Jose Caiafa Torres................ Adviser         April 29, 2002

Set forth below are brief biographical  descriptions of the members of the Audit
Committee.

AUGUSTO PATARELLI,  53 years old, was reelected member of the Audit Committee on
April 29, 2002.  Mr.  Patarelli  has served as  Financial  Director of Produtiva
Cooperativa de Trabalho e Consultoria  S.A. since 1999, and served as Manager of
the Planning  Department of Telecomunicacoes  Brasileiras S.A.  -Telebras,  from
1993 to 1998. He holds degrees in economics and business administration from the
University of Franca, in Sao Paulo.

AUREO  MONTEIRO  DE MORAES,  50 years  old,  was  reelected  member of the Audit
Committee,  which  elected him  President of the Council on April 29, 2002.  Mr.
Moraes  has  served as Manager of  Corporative  Procedures  in  Telecomunicacoes
Brasileiras S.A. - Telebras.  He holds a degree in Business  Administration from
the Pontifical Catholic University of Brasilia.

FRANCISCO JOSE BECKER DIAS, 52, was reelected  member of the Audit  Committee on
April 29, 2002.  He has served as Executive  Director of Banco Fibra S.A.  since
1994. Mr. Dias served as Executive Director of Banco BMG S.A. from 1991 to 1994,
and as Vice-president of Banco Norchem S.A. from 1989 to 1991. He also served as
Director of both Metro Banco S.A.,  from 1988 to 1999, and of Banco Iochpe S.A.,
from 1985 to 1988. He holds a degree in electrical  engineering from the Federal
University of Rio Grande do Sul. He specialized in production  engineering  from
the Federal  University of Rio de Janeiro and holds a Ph.D.  in  accounting  and
finance from the University of Lancaster, in England.

RENE DE OLIVEIRA  GARCIA  JUNIOR,  42 years old,  was a member of the  statutory
audit  committee of  Telebrasilia  Celular from April 2000 to March 2001. He was
elected member of the Audit  Committee on April 29, 2002. He serves as Economics
Consultant,  Corporate  Advisor,  and  Projects  Coordinator  for the  Brazilian
Institute of Economics of Fundacao  Getulio  Vargas (FGV).  He is a professor at
the Economics  Department of IBMEC;  served as Director and  substitute  for the
President  of the  COMISSAO  DE  VALORES  MOBILIARIOS,  which  is the  Brazilian
Securities and Exchange  Commission  ("CVM").  Academic  Background:  he holds a



degree in economics  from the State  University  of Rio de Janeiro;  a degree in
business  administration  from FGV; an M.A. in  economics  from FGV; a Ph.D.  in
economics from FGV;  specialized  in Capital Market and Operating  Strategies in
Derivatives at INSEAD, in Fontainebleau, in France.

JOAO  JOSE  CAIAFA   TORRES,   63  years  old,  has  served  as  member  of  the
Administration  Council of  Telebrasilia  Celular from April 2001 to March 2002,
and was elected member of TCO's  Statutory Audit Committee on April 29, 2002. He
served as Technical  Assistant,  Advisor to the  Vice-President,  and Department
Manager for Banco do Brasil.  He served as Technical  Assistant for the Treasury
Department,  Administrative  Assistant,  and  Research  Assistant  for the State
Development  Council,  in the state of Minas  Gerais  government;  Professor  of
Business  Administration in the University of Itauna, in Minas Gerais; he served
as counsel for PREVI, Ligas de Aluminio S.A., S.A. Mineracao da Trindade, Telesp
Celular S.A. and ITAUSA  Investimentos  S.A. He holds a degree in accounting and
an M.A. in Business Administration from the Federal University of Minas Gerais.

COMPENSATION

For 2001,  the amount of expenses  incurred by the Company to all the  directors
and  members  of  the  Controlling   Company's  Statutory  Audit  Committee  was
approximately R$2.5 million.

For 2001,  the amount  spent by TCO to provide  their  directors  with a private
pension plan was approximately R$174.3 thousand.

BOARD PRACTICES

     See "Board of Executive Officers" and "Audit Committee," above.

EMPLOYEES

On December 31, 2001, TCO's workforce consisted of 2,867 persons,  19.6% greater
than the amount  registered in 2000. Of this total,  1,461 were permanent staff,
278  interns and 1,128  regular  contracted  third-parties.  The  workforce  was
allocated as follows:  70.9% in Business (Marketing,  Sales and Client Service);
9.5%  in  Engineering;  9.5%  in  Finance;  4.0%  in  Administration  and  Human
Resources; 3.9% in Information Technology; and 2.2% in the president's office.

The Company's permanent staff is considered young, having an average of 31 years
of age, most of which is male (51%).

As to education level, the following  distribution was found in December,  2001:
2%  elementary   school;   58%  high  school;  36%  college  level,  and  4%  at
specialization levels.

Approximately 25% of the Company's personnel are affiliated to labor unions. The
relationships  with these  entities are  considered  good,  since the process of
negotiation of the Collective Labor Agreement  2001/2002,  as in previous years,
was conducted in a  professional  way,  which made it easier for them to have it
approved by the employees meeting in assembly.



Training  and  development  actions  implemented  by TCO along the year 2001 and
directed  mainly  to  technical  and  management  empowerment  of the  workforce
employed in the Business, Engineering and Information Technology areas, together
represent  investments  approaching  R$3.3  million.  This amount  exceeded  the
investments  made in the year 2000 by 73%. The amount of hours/year in 2001 grew
by 105% compared to 2000.

The consolidation of the  implementation  of the new Career  Development Plan is
part of the  Company's  employee-retention  program  and  managed to correct all
remaining salary discrepancies.  Also in 2001, the Company prepared new policies
for  performance  evaluation  and  variable  pay  programs.  These  programs are
expected to be implemented in the first half of 2002.

Presently, TCO sponsors two types of private pension plan programs for its
employees:

a)- Defined-Benefit Plan (PBS-TCO):

The PBS-TCO plan resulted from the  segregation of Fundacao Sistel de Seguridade
Social's  ("Sistel's")  equity in January,  2000. It is a "defined benefit" plan
and has nine  affiliated  employees  as active  participants  and  eight  former
employees  as assisted  members  (BENEFICIARIOS  ASSISTIDOS).  According  to the
plan's policy, in addition to a supplemental  benefit, the plan provides medical
care (PAMA) to retired  affiliates  and their  beneficiaries,  with shared cost,
upon  the  use of the  services.  The  PBS-TCO  plan  premiums  are  established
annually,  based on actuarial  valuations prepared by an independent actuary, in
accordance  with the  applicable  norms  effective in the  country.  The funding
system used is that of  capitalization  and the total  contribution  owed by the
sponsor  is 13.5% on the  participating  employees'  payroll,  of which 1.5 % is
directed to sponsoring the PAMA.

b)- Hybrid Plan (TCO PREV):

The  Company's  modern and  flexible  pension  plan - TCO PREV - was launched in
October,  2000,  and gained  acceptance  from nearly 100% of employees  formerly
affiliated  with the  PBS-TCO  plan,  as well as from new  employees  and  those
previously under no plan.  Designed based on the latest plan models and referred
to as a "hybrid," this plan offers two different approaches to benefits.  One of
them is the "defined  benefit" plan, for  unexpected  situations,  the so-called
Risk Benefits (Temporary Disability,  Permanent Disability and Death Annuity due
to death on the job).  The  other  approach  is the  "Programmed  Benefits"  for
anticipated  situations (Normal  Retirement and Early  Retirement).  In this new
plan,  the  Programmed  Benefits  are not  linked to the basic  official  social
security,  unlike  the old plan.  Participants  of this new plan may  request to
receive  benefits after 50 years of age (Early  Retirement) or after 60 years of
age  (Normal   Retirement).   It  is  necessary,   however,   to  terminate  the
participant's  relationship  with the sponsor and to contribute to System during
10 years with no interruptions.  The funding system used by Programmed  Benefits
operates on a parity basis between the sponsor and the  participants at the same
level as the normal  contribution,  which vary  between 3% and 8% of the monthly
salaries.  The  contributions  made by the  participants  and by the sponsor are
credited to individual  participants'  accounts. In addition, the sponsor covers
the cost provided for the risk benefits, corresponding to 3.338% of the payroll,
plus  the  plans'   administration   fees,   which   correspond  to  5%  of  the
contributions.



The  expenses  incurred by the Company  during 2001  related to private  pension
plans  sponsored for its  employees,  including the  management  staff,  totaled
R$2.856 million.

Investments  of fund  equity  for the  PBS-TCO  and TCO PREV  plans  are made in
accordance with the policies and guidelines provided by Sistel and in conformity
with the applicable legislation.  The criteria adopted are exclusively technical
and respect the PLANO  DIRETOR DE APLICACAO DO PATRIMONIO  (PDAP),  prepared and
approved annually by the Foundation's Executive Board.

SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

All Directors and Executive  Officers hold less than one percent of the class of
shares. There is no stock options plan for any director or other employee in the
Company.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

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, 2001, BID S.A. owned 53.22% 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.

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.

                                                 NUMBER OF       PERCENTAGE OF
                                                  COMMON          OUTSTANDING
NAME OF OWNER                                  SHARES OWNED      COMMON SHARES
-------------                                  ------------      -------------
BID S.A...................................   67.919.110.396          53.22%
All directors and executives
  officers as a group.....................                6              0%

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 the  provision of  alphanumeric  paging
services in ten of the largest Brazilian cities.



On December 31, 2001, Splice transferred all of its shares in BID S.A. to Fixcel
S.A., a holding company.

RELATED PARTY TRANSACTIONS

The Company  effected  transactions  with Splice and  subsidiaries  of Splice in
1999,  2000 and 2001.  These  transactions  were  mainly  related to  marketable
securities (R$362.3 million in 2001, R$77.7 million in 2000 and R$7.8 million in
1999),  short-term  investments  (R$17.3  million  in 2001 and R$6.5  million in
2000),  acquisition of property,  plant and equipment  (R$11.8  million in 2001,
R$5.1 million in 2000 and R$6.2 million in 1999),  maintenance  services  (R$1.9
million in 2001 and R$3.5 million in 2000) and  acquisition  of telephone  cards
(R$0.9 million in 2001 and R$2.1 million in 2000).

The marketable  securities are related to Commercial  Papers issued by Splice do
Brasil S/A. The interest was a pre-fixed annual rate of 24-25% with swap of 100%
of CDI (Interbank Deposit Certificate) plus 1.5% per annum.

ITEM 8. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS.

See Item 18 "Financial Statements."

LEGAL PROCEEDINGS

    LITIGATION RELATING 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.  The Supreme  Federal 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 RESULTING FROM EVENTS OCCURRED PRIOR TO 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 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 RELATING 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 ON CELLULAR TELEPHONE 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.  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 already made provisions which
amount to R$3.6 million for the collection of ICMS on the activation of cellular
telephones from the actual agreement date until December 31, 2001. The Company's
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.  It should be mentioned  that
there are few decisions from higher courts about same discussion, but a recently
one obtained by  Telefonica  Celular (the  concessionaire  of the Rio de Janeiro
region) express that the ICMS is not applicable on cellular activation fees.



    LITIGATION RELATING 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. Subsequently, KPMG was dismissed from the lawsuit. The last action was
issued in November,  2000, when the court ordered  specification  of evidence by
the  parties as the  Company  moved for an  adjudication  of the dispute and TCS
requested  expert  opinion in connection  with the TELEBRAS  Loan  documents The
parties are awaiting a decision by the judge to move  forward to court  hearings
or production of evidence.

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.  Status of this
lawsuit  is  identical  to the one  discussed  in the  preceding  paragraph.  In
November 2000, the Court summoned the parties for clarification of evidences, as
TCO had required a summary  judgment and TCS had required an  examination of the
accounts and an entry. Subsequently, the judge deemed the records sufficient.

The three lawsuits  described  above were grouped in the same Court,  given that
they deal with the same issue relating to TELEBRAS loans.  In August,  2001, the
court dismissed the Company's claims against Tele Centro Sul, TELEBRAS and KPMG,
and partially ruled in favor of Tele Centro Sul partially  against  Telebrasilia
and Telegoias.

The  Company  and Tele  Centro Sul have  appealed  in the  Supreme  Court of the
Federal District (TJDF), where the matters are now pending.

    LITIGATION RELATED TO THE ALTERATION OF THE PIS AND COFINS TAX BASIS

The CONTRIBUICAO SOCIAL PARA O FINANCIAMENTO DA SEGURIDADE SOCIAL, or COFINS, is
a social  contribution  tax on gross  revenues  (operating  and  financial).  On
November 27, 1998, the Brazilian  government,  through Law no. 9,718,  increased
the COFINS rate from 2% to 3%, and  changed  its tax basis from gross  operating
revenues  to all gross  revenues  (operating  and  financial).  The  PROGRAMA DE
INTEGRACAO  SOCIAL, or PIS, is another social  contribution tax which,  together
with the COFINS, is imposed on certain telecommunications services at a combined
rate of 3.65%.  PIS tax basis was also changed from gross operating  revenues to
all gross revenues (operating and financial).



By changing  the  original PIS and COFINS tax basis,  the  Brazilian  Government
created new taxes.  In such case, the Brazilian  Federal  Constitution  requires
that Congress pass a Complimentary Law, which requires a higher approval rate in
Congress than an Ordinary Law. However,  Law no. 9,718 is an Ordinary Law, which
is  inferior  to the  Complimentary  Law.  Accordingly,  TCO has filed a lawsuit
against those  alterations in the Brazilian tax  legislation,  on the grounds of
unconstitutionality.  The Company believes that it will prevail in such lawsuit.
Despite  this  belief,  the  lawsuit  was not  successful  in the first stage of
judgment.  The Company has filed an appeal and a judgment is pending.  The total
amount involved is R$5,805,499.56, which has been deposited in court.

     LITIGATION  RELATING  TO THE BAR OF  TRANSFER  OF COFINS AND PIS TO THE END
     CONSUMER

As imposed on telecommunications carriers, the social contribution tax described
above  results in the  transfer of costs of such  contributions  to consumers in
their  respective  telephone  bills.  The National  Association of Protection of
Credit  Consumers  (ANDEC) and the  Department  of Justice of certain  Brazilian
states have filed class action suits against the telecommunication  companies to
avoid the transfer of these costs to consumers. These suits seek to prohibit the
transfer of amounts relating to the  contributions to end consumers  residing in
the states of Minas Gerais and Maranhao (NBT), as well as the  reimbursement  of
twice the amounts already collected.  Alternatively,  money damages for pain and
suffering and pecuniary damage are requested.

The Company's  management does not believe that the suit will be successful,  as
this practice of transfer is supported by the Brazilian Legal System.

    OTHER LITIGATION

The  company is  currently  involved  in several  legal  suits  relating  to its
operations.  Therefore,  it has either  arranged to or  deposited  in escrow the
amounts  destined to cover  possible  losses  resulting  from  adverse  judicial
decisions.  The Company's  management  considers  that if such acts were decided
against  the  Company's  interests,  this  would not  significantly  impact  the
Company's businesses,  its Balance sheets or the results of its operations.  SEE
"NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS."

POLICY ON DIVIDEND DISTRIBUTIONS

On July 6, 2001 and on December 20, 2001, the Company  informed its shareholders
that the Board of  Directors  had  approved  the  payment of  interest  on owned
capital in accordance  with the statement of financial  position for the periods
January to June 2001 and July to December 2001, respectively, in accordance with
Article 9 of Law 9249/95 and  Provision  Number 207/96 of the CVM, in the values
of R$0.0000409318 and R$0.000068422056 per share,  respectively for each period,
with 15% withheld  income tax, which resulted in net interest of  R$0.0000347920
and  R$0.000058158748 per share, except to those shareholders who were immune or
exempt.



On March 14, 2002,  the Board of Directors  approved the payment of dividends at
R$0.000110843947  per share  free of income  tax for all  shareholders  who held
shares on March 25, 2002.

The  corresponding  credit on  interest  on owned  capital  was  written  in the
Company's  accounting books on December 31, 2001, on an individual basis to each
shareholder,  according to their  shareholding  position on July 16,  2001,  and
December 31, 2001, respectively for each of the above mentioned periods.

The  value of the  interest,  net of the  applicable  withheld  income  tax,  is
ascribed to the value of the mandatory  dividend and the  statutory  dividend on
the preferred shares, relative to the fiscal year 2001, adding such value to the
total amount in dividends  distributed by the Company for all purposes  provided
in the Company's bylaws.

On April 26,  2002,  the general  assembly  approved  the payment of interest on
owned capital and dividends for up to September 30, 2002, in the terms below:

     Values

        a)  Interest on owned capital - Common and Preferred Shares

        Gross value per share--Jan. to July 2001        R$0,0000409318

        Gross value per share--July to Dec. 2001        R$0,000068422056

        Net value per share--Jan. to July 2001          R$0,0000347920

        Net value per share--July to Dec. 2001          R$0,000058158748

        b)  Dividend

        Value per share - Common and Preferred         R$0,000110843947

     Income Tax

Upon approval of the accounting credit of the interest on owned capital,  income
tax was  withheld  at the rate of 15%,  except for  purposes of payment to those
shareholders  who had  proved  immune or exempt  from such tax within the period
specified by the Company in official communication to the shareholders.

SIGNIFICANT CHANGES

See  "Consolidated  Statements  of Cash Flows for the Years Ended  December  31,
1999,  2000 and 2001,"  "Consolidated  Statements  of  Changes in  Shareholders'



Equity for the Years Ended December 31, 1999,  2000 and 2001," and Notes 24, 25,
30 and 31 to the Consolidated Financial Statements.

ITEM 9. THE OFFERING AND THE LISTING

OFFER AND LISTING DETAILS

The principal trading market for the Preferred Shares is the BOLSA DE VALORES DE
SAO PAULO (the "Bolsa de Valores de Sao Paulo").  The Preferred  Shares are also
traded on the RIO DE JANEIRO  STOCK  EXCHANGE  (the  "Bolsa de Valores do Rio de
Janeiro")  and the seven other  Brazilian  stock  exchanges.  As of December 31,
2001,  the Holding  Company had  approximately  2.4 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.

                                                              NOMINAL REAIS
                                                            PER 1,000 PREFERRED
                                                                   SHARES
                                                            -------------------
                                                              HIGH        LOW
                                                            -------     -------
1998 (Beginning in September 21, 1998) ..............       R$1.229     R$0.269
1999.................................................       R$3.880     R$1.083
2000.................................................       R$8.283     R$3.017
2001.................................................       R$8.492     R$3.083



                                                              NOMINAL REAIS
                                                            PER 1,000 PREFERRED
                                                                   SHARES
                                                            -------------------
                                                              HIGH        LOW
                                                            -------     -------
First quarter 2000...................................       R$8.283     R$3.017
Second quarter 2000..................................       R$7.282     R$4.651
Third quarter 2000...................................       R$8.183     R$5.734
Fourth quarter 2000..................................       R$6.808     R$4.833
First quarter 2001...................................       R$8.492     R$5.370
Second quarter 2001..................................       R$6.899     R$4.896
Third quarter 2001...................................       R$6.517     R$3.083
Fourth quarter 2001..................................       R$5.655     R$4.181

                                                              NOMINAL REAIS
                                                            PER 1,000 PREFERRED
                                                                  SHARES
                                                            -------------------
                                                              HIGH        LOW
                                                            -------     -------
November 2001........................................       R$5.655     R$4.528
December 2001........................................       R$5.588     R$5.010
January 2002.........................................       R$5.560     R$4.420
February 2002........................................       R$4.752     R$4.254
March 2002...........................................       R$5.269     R$4.459
April 2002...........................................       R$5.070     R$4.580
May 2002                                                    R$4.690     R$4.230

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,  2001  there  were   approximately   150  registered   owners  of  ADSs  and
approximately 50.86 million outstanding ADRs. The following table sets forth the
reported  high and low  closing  sales  prices  for the ADSs on the NYSE for the
period indicated.

                                                           U.S. DOLLARS PER ADS
                                                           --------------------
                                                             HIGH        LOW
                                                           ---------   --------
1998 (Beginning in November 16, 1998) ...............      US$ 5.937   US$2.000
1999.................................................      US$ 7.063   US$2.375
2000.................................................      US$15.875   US$5.000
2001.................................................      US$13.625   US$4.280

                                                           U.S. DOLLARS PER ADS
                                                           --------------------
                                                             HIGH        LOW
                                                           ---------   --------
First quarter, 2000..................................      US$15.875   US$5.000
Second quarter, 2000.................................      US$13.000   US$8.813



Third quarter, 2000..................................      US$14.750  US$10.500
Fourth quarter, 2000.................................      US$11.688   US$8.500
First quarter, 2001..................................      US$13.625   US$8.000
Second quarter, 2001.................................       US$9.500   US$6.850
Third quarter, 2001..................................       US$8.570   US$4.280
Fourth quarter, 2001.................................       US$7.250   US$4.730

                                                           U.S. DOLLARS PER ADS
                                                           --------------------
                                                             HIGH        LOW
                                                           ---------   --------
November 2001........................................       US$7.000   US$5.300
December 2001........................................       US$7.250   US$6.450
January 2002.........................................       US$7.450   US$5.750
February 2002........................................       US$6.320   US$5.400
March 2002...........................................       US$6.900   US$5.770
April 2002...........................................       US$6.500   US$5.850
May 2002                                                    US$5.800   US$5.050

The common shares and preferred  shares of Telebrasilia  traded on the Sao Paulo
Stock  Exchange  from  May 18,  1998 to July  30,  1999.  On  August  02,  1999,
Telebrasilia  shares  began  trading on the  Sociedade  Operadora  do Mercado de
Ativos (SOMA), the over-the-counter market. On June 7, 2002, Telebrasilia shares
were  substituted  with  shares  of the  Holding  Company  due to the  merger of
Telebrasilia into the Holding Company.  On May 18, 1998,  Telegoias shares began
trading  on  the  Sociedade   Operadora  do  Mercado  de  Ativos   (SOMA),   the
over-the-counter  market.  The  other  Subsidiaries  Telemat,  Telems,  Teleron,
Teleacre,  NBT,  and (as of  December  10,  2001)  Telegoias  are  closely  held
corporations, and their shares do not trade on any stock market.

The Holding Company held a general  extraordinary  shareholders meeting on April
26,  2002,  in which it  approved  the meger of  Telebrasilia  into the  Holding
Company and the consequent transfer of the concession to explore cellular mobile
services by the Company previously held by Telebrasilia.

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

Pursuant to an agreement  reached by Brazil's nine stock exchanges,  as of April
2000, all of Brazil's stock markets have been centralized in the Sao Paulo Stock
Exchange.  Thus, in 2001, the Sao Paulo Stock Exchange accounted for 100% 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 p.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, 2001, the aggregate market  capitalization  of approximately 428
companies  listed on the Sao Paulo Stock  Exchange  was  approximately  US$185.4
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
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 2000,  the combined  daily trading  volumes on the Sao Paulo
Stock  Exchange and the Rio de Janeiro  Stock  Exchange  averaged  approximately
US$265  million.  In 2001,  the stocks of the  approximately  30 companies  that
comprise the stock index of the Sao Paulo Stock  Exchange  (about 30  companies)
accounted  for  approximately  79.5% 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 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  by Law no.
10,303/01 (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 ITEM 10
"ADDITIONAL  INFORMATION--EXCHANGE  CONTROLS." The CVM  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 Audit  Committee  (CONSELHO
FISCAL),  which is established to audit and inspect management and to assess its
compliance  with the law and  company's  By-laws.  Such  board  will  have  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,  which 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 new law (Law  No.  10.303/01)  alters  and adds  provisions  to the  Brazilian
Corporation  Law and to the Brazilian  Securities  Law. The new law was approved
and published on October 31, 2001 and became effective as of March 1, 2002.

Despite the  effectiveness  of the new law and of its  implementing  regulation,
corporations  should have adapted  their bylaws to the new rules by  shareholder
resolution no later than February 28th, 2003.

Below is a summary of the main  amendments  introduced by Law  10.303/01,  which
applies to privately-held corporations:

PREFERRED SHARES

o    New limit of 50% maximum of non-voting  preferred  stock (instead of 2/3 as
before)  shall  be  applied  as  of  March  1,  2002  to  new  corporations  and
newly-listed (publicly held) corporations (art. 15, ss.2).

o    Preferred  shareholders may no longer elect to receive dividends 10% higher
than those paid to common shares,  instead of fixed or minimum  dividends  (art.
17, I).

o    Preferred  share  benefits now  include:  (i)  preference  as to receipt of
dividends,  whether  fixed or minimum,  AND/OR (ii)  preference as to receipt of
refund of capital, with or without premium (art. 17, I, II and III). Independent
of  these  preferences,   preferred  shares  must  have  one  of  the  following
advantages,  expressed  and detailed in the bylaws,  in order to be traded:  (x)
dividends  equivalent to at least 25% of net profit, with a minimum of 3% of the
corporation's net worth and, in case of minimum  dividends,  never less than the
dividends paid to the common shares; (y) dividends per share at least 10% higher
than those paid to common shares;  or (z) right to be included in a public offer
for alienation of control,  with the same rights of the common shares  described
in art. 254-A, and dividends at least equal to the common shares.

o    Bylaws may not limit, except for fixed dividend preferred shares, the right
to  participate  in increase of capital  resulting  from the  capitalization  of
reserve funds or profits (art. 17, ss.5).

o    In case of privatization,  the privatized  corporation may create a special
class of  preferred  shares  with  exclusive  property of the  government,  with
specific  statutory  rights,  including  the right of veto over certain  matters
specified on the statute (art. 17, ss.7).

DEBENTURE BONDS

o    Clarification    of   rule   that    debenture    bonds   may   include   a
monetary-adjustment  clause based on any index not  expressly  prohibited by law
(art.54,  ss.1), with the permission to assure the holder of an option to choose
between redeeming titles in currency or in assets (art. 54, ss.2).



o    Registration  of the  term-of-issue  with the Board of Trade,  not with the
Real Estate Registry (art. 62, I e II).

o    Clarification of the rule that debenture bonds are fungible, with allowance
for deposits in custody and no requirement to issue certificates (art. 63).

ARBITRATION CLAUSE

o    Bylaws may include provision for compulsory  arbitration in case of dispute
between shareholders and the corporation,  and between controlling  shareholders
and minority shareholders (art. 109, ss.3).

SHAREHOLDERS AGREEMENT

o    Term of  shareholders  agreement may be  conditioned  upon  occurrence of a
future and uncertain event (art. 118,ss.6).

o    Shareholders  Agreement  may provide for  pooling of vote  exercisable  via
attorney-in-fact with powers granted for over 1 year (art. 118,ss.7).

o    Shareholder or director vote not conforming to the  Shareholders  Agreement
will not be taken into account (art.  118,  ss.8),  and in case of abstention or
absence of the shareholder or director, the voting rights of such shareholder or
director are transferred to any person prejudiced by such abstention or absence,
provided that such person votes in conformity  with the  Shareholders  Agreement
(art. 118, ss.9).

o    Each  Shareholder  bound  by  a  shareholders  agreement  shall  appoint  a
representative  to receive  communications  and  provide  the  corporation  with
information  (art.  118,  ss.10).  The  corporation  has  the  right  to  demand
explanation from such representative regarding the content of the clauses of the
Shareholder Agreement (art. 118, ss.11).

RIGHT TO WITHDRAW

o    A dissenter may withdraw from the  corporation  if the  corporation  merges
with another  corporation or becomes a member of a conglomerate of corporations,
provided that the class of shares owned by the dissenter does not have liquidity
and  dispersion in the market.  A class of shares has liquidity when such shares
integrate a general index  representing  a group of  securities  transacted in a
stock  market in Brazil or  abroad.  A class of shares has  dispersion  when the
controlling  shareholder  represents less than fifty percent (50%) of the shares
of such class  (art.137,  II). A dissenter  may also  withdraw in the event of a
spin-off  of the  corporation,  provided  that  (a)  there  is a  change  in the
corporate  purpose,  unless the assets are transferred to a another  corporation
whose  prevalent  activity  remains  the same as the  corporate  purpose  of the
spun-off  corporation;  (b) a reduction of the mandatory dividend occurs; or (c)
the spun-off  corporation  becomes a member of a  conglomerate  of  corporations
(art. 137, III).

BOARD OF DIRECTORS

o    Bylaws may allow employees to appoint, in assembly,  a representative to be
member of the Board of Directors (art. 140).



o    Bylaws  may  state  qualified  quorum  for  deliberations  of the  Board of
Directors regarding certain matters, which will bind all shareholders (art. 140,
IV).

o    Minority  shareholders  representing  at least 20% of the voting capital of
privately-held  corporations will no longer have the right to separately elect a
member of the Board of Directors (art. 141, ss.4). Instead,  either the minority
shareholders  representing  fifteen percent (15%) of the voting capital,  or ten
percent (10%) of the capital  represented by preferred shares with non-voting or
restricted voting rights,  will have the right to elect one member of the Board,
in a separate vote  excluding  the  controlling  shareholder,  provided that the
minority   shareholders  own  such  shares  for  at  least  a  period  of  three
uninterrupted months immediately prior to the date of the general meeting.

o    In order to be admitted to the Board of  Directors,  foreign  persons  must
maintain a Brazilian  resident  attorney-in-fact  for at least 3 years after the
end of his/her office term (art. 146, ss.2).

o    Directors  are  expressly  prohibited  (i) from  acting  simultaneously  as
directors of competing corporations;  and (ii) from having conflicting interests
with the corporation (art. 147, ss. 3).

STATUTORY AUDIT COMMITTEE

o    Increase of the type of individual  action that may be taken by the members
of the  Audit  Committee  by  authorizing  the Audit  Committee  and each of its
members,  individually,  to: (i)  supervise the acts of the  administrators  and
verify the  fulfillment of his/her legal and contractual  duties;  and (ii) keep
administration  bodies and the General  Shareholders  Assemblies informed of any
errors,  frauds or crimes that they may  discover,  also advising the company on
the proper course of action to be taken (art. 163, I and IV).

o    Clarification of the rule that requests for explanation or information made
by the Audit Committee relate to its supervisory  function (art. 163, ss.2), and
that its duties must always be exercised to the benefit of the corporation, with
no permission to a member of the Audit  Committee to use legal  prerogatives  to
the detriment to the  corporation or for personal or  third-party  benefit (art.
165, ss.1).

RETENTION AND RESERVE OF PROFITS

o    Whenever the capital  budget  related to the  retention of net profit has a
term longer  than one fiscal  year,  it should be reviewed  annually in order to
avoid inappropriate retention of profit (art. 196, ss. 2).

o    Only the amount corresponding to the total mandatory dividend exceeding the
realized  amount of net  profit of the  fiscal  year may be  transferred  to the
reserve of profits to be realized (other rules about the profits reserve are set
forth in the first and second  paragraphs  of  article  197).  According  to the
previous system,  all profit  financially not realized exceeding the amount used
to fund legal reserves (arts. 193 to 196) may be deducted from net profit of the
fiscal year for purposes of assessment of the net adjusted profit,  which is the
base of calculation of the minimum  mandatory  dividend.



o    Capital  reserves  may  only be  used  to (i)  absorb  losses  that  exceed
accumulated  profits;  (ii) redeem,  reimburse or purchase shares,  (iii) redeem
beneficiary  interests,  (iv) integrate the  corporation's  capital,  or (v) pay
dividends to preferred shares where such right is guaranteed (art. 200).

REDEMPTION OF SHARES

o    Redemption  of one or  more  classes  of  shares  should  be  submitted  to
shareholder  approval  in  General  Assembly  representing  at least half of the
shares of the class(es) in question. However, bylaws may dispose otherwise (art.
44, ss. 6).

MERGER WITH CONTROLLED COMPANY

o    Expansion of procedures already foreseen for upstream mergers to downstream
mergers (art. 264,ss.4).

STATUTE OF LIMITATION

o    Except in the cases  subject to one year statute of limitation  (art.  287,
I), all lawsuits filed by shareholders  against the  corporation,  regardless of
the  foundation  of the action,  will be subject to a statute of  limitation  of
three years (art. 287, II, g).

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 10. ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

    BUSINESS PURPOSE

The Company's  business purpose is defined in Article 2 of the Company's by-laws
as to: (i) exercise  control of the Company's  operating  cellular service under
the Concessions; (ii) promote, through its affiliate companies the expansion and
implementation  of the cellular  service  within its area of  Concession;  (iii)
promote, perform or advise the acquisition, from domestic or foreign sources, of
funds to be  invested  by the  Company or its  Subsidiaries;  (iv)  promote  and
stimulate the research and development  activities  related to mobile  telephony
sectors;  (v) perform,  through its affiliate  companies,  technical services in
connection  with the field of mobile  telephony;  (vi)  promote,  stimulate  and
coordinate, through its affiliate companies, the training of personnel necessary
for the mobile  telephony  sector;  (vii) perform or promote the import of goods
and services to its affiliate  companies;  (viii) hold equity  participation  in
other companies; and (ix) perform other activities related to Company's business
purposes.



    SHARE CAPITAL

The Company's  capital stock is comprised of preferred shares and common shares,
all without par value.  At April 26, 2002,  the  Company's  capital  comprised a
total of  379,200,036,582  shares,  252,766,698,473  being preferred  shares and
126,433,338,109  common shares.  The Company's share capital may be increased by
resolution of the Board of Directors,  up to the limit of 700,000,000,000 shares
as authorized by the by-laws.  Any increase in the authorized capital limit must
be approved by shareholders' vote.

The Company's preferred shares are non-voting except under limited circumstances
and are entitled to a preferential, non-cumulative dividend and to priority over
the common shares in the case of the Company's liquidation.

Under Brazilian  corporation law, the number of non-voting shares or shares with
limited voting rights,  such as the Company's  preferred shares,  may not exceed
fifty percent (50%) of the total number of shares, although corporations already
existing at the time of enactment of the new corporation law will have the right
to maintain  the old  parameters  of 1/3 of common  shares and 2/3 of  preferred
shares.

The majority of the members of the  Company's  Board of Directors are elected by
the controlling  shareholders of the Company's common stock. Board members, even
if appointed and/or elected by one specific  shareholder,  have fiduciary duties
towards all shareholders and the obligation to perform their duties on behalf of
the  Company's  interests.  According  to  the  new  corporation  law,  minority
shareholders  representing  at least  10% of  preferred  shares or 15% of common
shares,  in each case,  will have the right to appoint a  representative  to the
Company's  Board of  Directors  in a separate  vote  excluding  the  controlling
shareholder,  provided  that the  minority  shareholders  own such shares for at
least a period of three  uninterrupted  months  immediately prior to the date of
the general meeting.

    DISCLOSURE OF INCREASE IN PARTICIPATION

Pursuant to  Instruction  no.  299/99 of the CVM, as  amended,  any  increase in
equity  participation  in the Company,  by the  controlling  shareholder  of the
Company,  which  equals to or exceeds 5% of any class of ordinary  or  preferred
shares, must be communicated  immediately,  by such controlling shareholder,  to
the CVM and to the relevant stock exchange where the Company's shares are traded
(the Sao Paulo  Stock  Exchange).  The  concept  includes a  potential  increase
defined  as the  acquisition  of  convertible  debentures  or  warrants  by such
controlling shareholder.

Upon  receipt  of  such  communication,  the  CVM  may  order  such  controlling
shareholder to publish such  information in the newspapers  commonly used by the
Company to publish relevant notices and financial reports. In addition, pursuant
to  Instruction  no.  69/87 of the CVM any  person  or group of  persons  acting
together who achieves equity  participation  in the Company which exceeds 10% of
any class of voting shares,  shall  disclose to the CVM the identity,  number of
shares and other securities acquired and the purpose of such acquisition. Unless
CVM dismisses the need for  publication,  the acquirers must publish a notice in
the  newspapers  commonly  used by the  Company  and inform the  relevant  stock
exchange.



    VOTING RIGHTS

Each of the Company's  common shares entitles the holder to one vote at meetings
of  shareholders.  The Company's  preferred  shares do not entitle the holder to
vote except as set forth below.

One of the three members of the Company's  permanent  audit committee is elected
by majority vote of the holders of the Company's preferred shares.

Brazilian corporation law provides that non-voting shares, such as the Company's
preferred shares, acquire voting rights in the event that the Company fails, for
three consecutive fiscal years, to pay minimum dividends to such shares.

The Company's  preferred  shares are entitled to full voting rights with respect
to: (i) the  approval  of any  long-term  contract  between  the Company and its
affiliates, on one side, and any controlling shareholder of the Company or, that
shareholder's  affiliates and related  parties,  on the other;  (ii) resolutions
modifying certain provisions of the Company's by-laws;  and (iii) any resolution
submitted to the shareholders' meeting for delisting the Company.

Any  change  in  the   preference,   benefits,   conditions  of  redemption  and
amortization  of the  preferred  shares,  or the  creation  of a class of shares
having  priority or  preference  over the  preferred  shares,  would require the
approval  of the  holders of a majority  of such  preferred  shares at a special
meeting of preferred shareholders. Such a meeting would be called by publication
of notices  in  Brazilian  newspapers.  The CVM may  authorize,  even in case of
special meetings of preferred shareholders, a reduction of the quorum under this
article in the case of a publicly-held  corporation whose shares are widely held
and whose last three general meetings were attended by shareholders representing
less than one-half of the voting shares.  In any  circumstances in which holders
of preferred  shares are entitled to vote, each preferred share will entitle the
holder to one vote.

    PREEMPTIVE RIGHTS

Each  shareholder has a general  preemptive right to subscribe for shares in any
capital increase, in proportion to its shareholding. A minimum period of 30 days
following the  publication of notice of the capital  increase is allowed for the
exercise of the right. The preemptive right can be negotiated by its holder with
other  parties.  However,  a  shareholders'  meeting is  authorized to eliminate
preemptive rights or to reduce such 30-day term, with respect to the issuance of
new shares,  debentures and warrants convertible into new shares up to the limit
of the  authorized  share  capital,  provided  that  the  distribution  of these
securities  is effected:  (i) on a stock  exchange;  (ii) in a public  offering;
(iii) through an exchange of shares in a public offering the purpose of which is
to takeover  control of another  company,  or (iv) to benefit  from  certain tax
incentives.  (The new law grants the  possibility  to reduce the 30-day  term to
exercise the mentioned  right,  in cases pursuant to an exchange for shares in a
public offer for the acquisition of control.)

In the event of a  capital  increase,  which  would  maintain  or  increase  the
proportion of capital represented by preferred shares,  holders of the Company's



ADSs, or of the Company's  preferred  shares,  would have  preemptive  rights to
subscribe the newly issued preferred shares. In the event of a capital increase,
which  would  reduce the  proportion  of capital  represented  by the  Company's
preferred shares,  holders of the Company's ADSs, or of preferred shares,  would
have preemptive  rights to subscribe to preferred shares, in proportion to their
shareholdings  and to common  shares  only to the  extent  necessary  to prevent
dilution of their interest in the Company.

    RIGHT OF REDEMPTION

Subject  to the right of a  dissenting  shareholder  to seek  redemption  upon a
decision made at a shareholders'  meeting by shareholders  representing over 50%
of the voting  shares,  the Company's  common shares or the Company's  preferred
shares are not  redeemable.  The dissention of a shareholder  upon a decision on
the following  matters shall entail the right of  redemption:  (i) to change the
preference  condition of the Company's  preferred shares or to create a class of
shares having priority or preference over the Company's  preferred shares;  (ii)
to reduce the  mandatory  of  dividend  amount;  (iii) to change  the  Company's
corporate  purposes;  (iv) to swap all of the  Company's  shares  with  those of
another  company in order to make the Company a wholly-owned  subsidiary of that
company;  (v) to approve  the  takeover of another  company,  the price of which
exceeds certain limits set forth in the Brazilian corporation law; (vi) to merge
or consolidate the Company with another company,  if certain liquidity standards
of our shares, provided in the Brazilian corporation law, are not met; and (vii)
to  become a  member  of a  conglomerate  of  companies,  if  certain  liquidity
standards of Company shares,  provided in the Brazilian corporation law, are not
met. The right to redemption  lapses 30 days after publication of the minutes of
the relevant  shareholders'  meeting or,  whenever the  resolution  requires the
approval of the holders of preferred  shares by vote taken in a special  meeting
of a majority  of the holders of  preferred  shares  affected by the  resolution
within 30 days from the publication of the minutes of that special meeting.  The
Company  would be entitled to  reconsider  any action  giving rise to redemption
rights within 10 days following the expiration of those rights if the redemption
of shares of dissenting shareholders would jeopardize the financial stability of
the Company, as the case may be.

Shares are  redeemable at their book value,  determined on the basis of the last
annual balance sheet approved by the shareholders.  If the shareholders' meeting
giving rise to redemption  rights occurs more than 60 days after the date of the
last annual balance sheet, a shareholder may demand that its shares be valued on
the basis of a new  balance  sheet  that is as of a date  within 60 days of such
shareholders' meeting.

    FORM AND TRANSFER

The Company's  shares are maintained in book-entry  form with a transfer  agent,
BANCO  ABN-AMRO REAL S.A.,  and the transfer of our shares is made in accordance
with the applicable  provision of the Brazilian  corporation law, which provides
that a transfer of shares is effected by an entry made by the transfer  agent on
its books,  debiting  the share  account of the seller and  crediting  the share
account of the purchaser, against presentation of a written order of the seller,
or judicial  authorization or order, in an appropriate document which remains in
the possession of the transfer agent. The Company's  preferred shares underlying
the Company's ADS are registered on the transfer  agent's records in the name of
the Brazilian depositary.



Transfers of shares by a foreign  investor are made in the same way and executed
by such  investor's  local agent on the  investor's  behalf  except that, if the
original  investment  was  registered  with the Central Bank of Brazil under the
Brazilian  foreign  investment  in  capital  markets  regulations,  the  foreign
investor should also seek amendment,  if necessary,  through its local agent, of
the certificate of registration to reflect the new ownership.

The Sao Paulo stock exchange  operates a central  clearing  system.  A holder of
Company's shares may choose, at its discretion, to participate in these systems.
All shares  elected to be put into the system will be  deposited in custody with
the relevant stock exchange,  through a Brazilian institution duly authorized to
operate by the  Central  Bank of Brazil and having a clearing  account  with the
relevant stock  exchange.  The fact that such shares are subject to custody with
the relevant  stock  exchange  will be reflected  in the  Company's  register of
shareholders.

MATERIAL CONTRACTS

CELLULAR SERVICE AUTHORIZATION  AGREEMENT entered into and between the Brazilian
government,  through Anatel, and Tele Centro Oeste/Inepar Ltda., (currently NBT)
on November 27, 1998.

    SCOPE

The  contract  authorizes  NBT to  exclusively  use  certain  sub-band  cellular
frequencies  from 835,0 to 845,0 MHz and certain  associated  radio  frequencies
from 880,0 to 890,0 MHz and 891,5 to 894,0 Mhz for transmission in Area 8.

The  authorization  to operate the cellular  services is for na indefinite term,
subject to  certain  conditions.  However,  the  authorization  to use the radio
frequency is limited to 15 years and may be renewed once for another 15 years.

    CONSIDERATION

NBT  agreed to pay  R$60,550,000.00  to  ANATEL  for the  right to  explore  the
cellular service and to use the associated radio frequency as follow:

o  R$24,220,000.00  in the  date of the  signature  of the  authorization  term,
equivalent to 40% of the total amount;
o  R$12,110,000.00 in November 27, 1999, equivalent to 20% of the total amount;
o  R$12,110,000.00 in November 27, 2000, equivalent to 20% of the total amount;
o  R$12,110,000.00 in November 27, 2001, equivalent to 20% of the total amount.

These amounts are adjusted by 1% per month in accordance with the IGP-DI.

    MAIN CONDITIONS OF THE CONTRACT

The  operation  of the  service  is the  responsibility  and risk of NBT.  NBT's
remuneration is based on customers' payments,  and the service will be performed



in conformity to ANATEL Public Tender Proposal ("Proposal") and will observe the
conditions  of the  Methodology  of  Execution,  and the  elements  of the Price
Proposal for the right to use the service and the associated radio  frequencies,
which is established in Annexes 1, 2 and 3 of the contract. Third parties can be
contracted by the authorized,  without  prejudice of the liabilities  related to
the  services,  even if  caused  by  third  parties.  In  addition,  all  fiscal
regulations must be respected. The installation and operation of the service are
subject to ANATEL quality control guidelines.

    SERVICE RATES AND PRICES

Service prices are subject to the price cap presented in the Proposal.  There is
a differentiation between "basic" and "non-essential" services. "Basic" services
include 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.  "Non-essential"  services are optional and can vary in price according
to technical and  geographic  characteristics.  SEE ITEM 4 " INFORMATION  ON THE
COMPANY - REGULATION OF THE TELECOMMUNICATIONS INDUSTRY - RATE REGULATION."

    ANATEL RIGHTS, GUARANTEES AND OBLIGATIONS

In  general,   ANATEL  is  responsible  for:  the  general  supervision  of  the
performance of the Cellular Mobile Service; the legal and normative  application
of  penalties,   including  those  referred  in  the  authorization   term;  the
termination of the authorization,  in the manner and circumstances prescribed by
law;  the  execution  of  the  norms  defined  in  the  service,  including  the
interconnection  with the public  network;  the guarantee of quality of service;
the assurance of  competition;  and the declaration of public utility of certain
services when necessary.

    NBT RIGHTS, GUARANTEES AND OBLIGATIONS

In  general,  NBT  is  responsible  for:  the  assurance  of  an  available  and
commercially   operational  Mobile  Cellular  Service  in  accordance  with  the
authorization,  the  performance  of services at prices in  conformity  with the
agreement  and  the  "Proposal";  providing  information  about  implementation,
improvements or expansion of the service, being emphasized that ANATEL will keep
this information confidential;  the use of certified equipment, the allowance of
access to documents and places related to the authorization,  the maintenance of
the  integrity  of the  assets of the  service;  the  continuance  of an updated
inventory and register of patrimony  used in the  operation of the service;  the
maintenance of adequate  customer  care;  the annual  publication of the company
financial  demonstratives;  and the  promotion  of the  balance of the  economic
financial condition of the authorization.

    CUSTOMER RIGHTS AND OBLIGATIONS

NBT,  besides  observing  the general legal  dispositions  related to customers'
rights, has to respect customers' rights to receive adequate service,  legal and
contractual  information  (including  from  ANATEL),  and also the right to have
freedom of choice related to the use of the service.



Customers,  in order to receive the service, are asked to keep in good condition
equipment  relating  to the  security  of third  parties;  and to timely  effect
payment of charges and taxes due.

    INTERVENTION

Anatel  can  intervene  in  the  authorization  in  order  to  keep  the  proper
performance of the service in conformity with applicable  legislation,  when the
authorization  clauses or applicable regulation are not complied with. When such
intervention,  is no longer  warranted,  the  administration of the service will
revert  back  to NBT.  If the  intervention  does  not  comply  with  legal  and
regulatory requirements,  such intervention will be declared null and void, with
the immediate devolution of the service to NBT.

    TERMINATION OF THE AUTHORIZATION

The  authorization  may be terminated either by Anatel or by resignation of NBT.
Total  or  partial   non-performance   of  the  terms  and   conditions  of  the
authorization   may  result  in  regulatory,   intervention   and,   ultimately,
termination of the  authorization by Anatel.  Where termination by Anatel is due
to  non-compliance  with  regulatory  or  legal   dispositions,   administrative
procedures and due process of law shall be observed.

    PENALTIES

If in default,  NBT will be subject to penalties,  which may include fines up to
0.05% of NBT's net revenue.

    ASSIGNMENT

Either the authorization or NBT's rights and interests may be transferred, after
60 months from the beginning of the commercial operation of the service, subject
to ANATEL approval, and after the payment of an inspection tax.

    RENEWAL

The  authorization  for the use of the  radio  frequencies  may be  renewed  for
another 15 years, at NBT's  discretion,  provided it complies with all terms and
conditions  of the  authorization  and  requests  renewal  20  months  prior  to
expiration of the first term.  Renewal will be subject to a new payment schedule
for the use of the radio frequencies, to be set by Anatel at the time.

EXCHANGE CONTROLS

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.

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   registration   (a
"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 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 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  ITEM  9 THE  "OFFERING  AND  THE
LISTING--MARKETS--REGULATION   OF   BRAZILIAN   SECURITIES   MARKETS--DEPOSITARY
SECURITIES     PROGRAMS     REGULATIONS"     AND     ITEM     10     "ADDITIONAL
INFORMATION--TAXATION--BRAZILIAN TAX CONSIDERATIONS."

A 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
ITEM 10 "ADDITIONAL INFORMATION--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.

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 ITEM
10 "ADDITIONAL INFORMATION--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
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 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.

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,  possibly with retroactive effect, and also based on the representations
of the  Depositary  and on the  assumption  that each  obligation in the Deposit
Agreement  relating  to ADSs and any  related  documents  will be  performed  in
accordance with its terms.  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
the Company's preferred shares or ADSs. In spite of the fact that there is not a



tax treaty between Brazil and the United States,  the Brazilian income tax rules
foresee that in case of reciprocal tax treatment between countries,  individuals
are allowed to deduct from income tax owed to the  recipient  country the amount
previously collected in the other country upon remittance. With reference to the
United States, the Brazilian Federal Revenue Service issued the ATO DECLARATORIO
no 28 on April 26, 2000,  which  established  reciprocal  tax treatment  between
Brazil and United States.

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
Preferred ADSs to another non-Brazilian holder are not subject to Brazilian tax.

The withdrawal of Preferred Shares in exchange for Preferred ADSs is not subject
to Brazilian tax. The deposit of Preferred Shares in exchange for Preferred ADSs
is not  subject  to  Brazilian  tax  provided  that  the  Preferred  Shares  are
registered  by the  investor  or its agent  under the  Central  Bank's  Annex IV
Regulations  and,  as of March 31,  2000,  under  Resolution  2,689/00  (foreign
investments  registered  under Annex IV Regulations must be conformed to the new
rules set forth by Resolution 2,689/00 by June 30, 2000).

In the event that the  Preferred  Shares are not so  registered,  the deposit of
Preferred  Shares in exchange  for  Preferred  ADSs may be subject to  Brazilian
capital gains tax at the rate of 15%.



On  receipt of the  underlying  Preferred  Shares,  a  non-Brazilian  holder who
qualifies  under the Annex IV  Regulations  and,  as of March  31,  2000,  under
Resolution 2,689/00,  will be entitled to register the U.S. dollar value of such
shares with the Central Bank as described below.

Non-Brazilian  holders  are not  subject to tax in Brazil on gains  realized  on
sales of  Preferred  Shares or ADSs that occur  abroad or on the  proceeds  of a
redemption of, or a liquidating  distribution  with respect to Preferred Shares.
As a general  rule,  non-Brazilian  holders  are  subject to a  withholding  tax
imposed at a rate of 15% on gains  realized on sales or  exchanges  of Preferred
Shares  that  occur in Brazil to or with a  resident  of  Brazil,  outside  of a
Brazilian stock exchange.

Non-Brazilian holders are subject to withholding tax at a rate of 10% (increased
to 20% for  transactions  carried  out on or  after  January  1,  2002) on gains
realized on sales or  exchanges  in Brazil of  Preferred  Shares that occur on a
Brazilian Stock Exchange unless such sale is made by a non-Brazilian  holder who
is not  resident in a tax haven (as  described  below) and on a Brazilian  stock
exchange within five business days of the withdrawal of such Preferred Shares in
exchange for Preferred ADSs and the proceeds  thereof are remitted abroad within
such five-day  period or such sales are made under the Annex IV  Regulations  by
certain qualified  institutional  non-Brazilian  holders which register with the
CVM.  Gains  realized  from  transactions  on a Brazilian  stock  exchange by an
investor under Annex IV Regulations  are not subject to tax (except as described
below).

The "gain  realized" as a result of a transaction on a Brazilian  stock exchange
is the difference  between the amount in Brazilian currency realized on the sale
or exchange and the acquisition cost measured in Brazilian currency, without any
correction for inflation, of the shares sold. The "gain realized" as a result of
a transaction  that occurs other than on a Brazilian  stock exchange will be the
positive  difference between the amount realized on the sale or exchange and the
acquisition  cost of the  Preferred  Shares,  both such  values to be taken into
account in REAIS. There are grounds,  however,  to hold that the "gain realized"
should be calculated  based on the foreign  currency amount  registered with the
Central Bank. There can be no assurance that the current preferential  treatment
for holders of Preferred ADSs and for certain non-Brazilian holders of Preferred
Shares under the Annex IV  Regulations  will continue in the future or that such
treatment will not be changed in the future.

As of January 1, 2000, the  preferential  treatment  under Annex IV is no longer
applicable if the non-Brazilian holder of the Preferred ADSs or Preferred shares
is resident in a tax haven - I.E.,  countries  that do not impose  income tax or
where the income tax rate is less than 20% - in accordance with Law No. 9959, of
January 27, 2000.

In other words,  gains realized by such holder on the sale or exchange in Brazil
that occur in the spot  market of shares  traded on a Brazilian  stock  exchange
will be taxed at a rate of 10%.).  Law 9,959 also provides that such rate of 10%
on gains  realized on the sale or exchange in Brazil of preferred  shares,  that
occur on a Brazilian Stock Exchange,  will be increased to 20% for  transactions
carried out on or after January 1, 2002.

Any exercise of preemptive  rights relating to the Preferred  Shares will not be
subject to Brazilian taxation.  Any gain on the sale or assignment of preemptive



rights  relating to the Preferred  Shares by the Depositary on behalf of holders
of Preferred ADSs,  will be subject to Brazilian  income taxation at the rate of
15%,  unless  such  sale or  assignment  is  performed  within  Brazilian  stock
exchanges, in which the gains are exempt from withholding income tax.

Any gain on the sale or assignment of  preemptive  rights  relating to Preferred
Shares,  will be subject to Brazilian  income tax at the same rate applicable to
the sale or  disposition  of Preferred  Shares.  The maximum rate of such tax is
currently 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  ITEM  5  "OPERATING  AND  FINANCIAL  REVIEW  AND
PROSPECTS--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 (9.5% per annum for the three
month period ending June 30, 2001). 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 and social contribution on profits 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.

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 ITEM 10
"ADDITIONAL INFORMATION--EXCHANGE CONTROLS."

    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, the temporary contribution on financial transactions
("CPMF  tax") is  currently  levied at a rate of 0.38% on all fund  transfers in
connection with financial  transactions in Brazil.  The CPMF tax charging period
was expected to expire on June 16, 2002. However, the Brazilian Congress enacted
Constitutional  Amendment 37 on June 13,  2002,  which has extended the charging
period of the CPMF tax until December 31. 2004. Constitutional Amendment 37 also
provided that the CPMF tax will be levied at a rate of 0,38% until  December 31,
2003, and 0,08% during the rest of the period until  December 31, 2004.  Another
relevant  issue  related to CPMF tax rules is the  possibility  of  exemption to
stock exchange  transactions  performed in Brazil,  authorized by Constitutional
Amendment 37 and to be implemented by federal regulations.

    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 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.

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 rate currently  equal to 30%.  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).

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.

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.



DOCUMENTS ON DISPLAY

The documents  referred to herein may be inspected at the  Company's  registered
office at SCS, QUADRA 2, BLOCO C, 7 ANDAR, 70.319-900, BRASILIA, DF, BRAZIL.

ITEM 11. 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 (only with  regard to its  non-hedged  debt),  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.  Interest rate risk results from the possibility that
the Company may incur losses due to interest rate  fluctuations  which raise the
balance of  liabilities  associated  with loans and  financing  obtained  in the
market  and  their  financial  expenses.   The  Company  has  not  entered  into
derivatives  contracts in order to hedge against this risk. However, the Company
continuously  monitors interest rates in order to evaluate the possible need for
derivative  contracts  to  protect it against  the risk of  volatility  of these
rates.

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.   SEE  ITEM  5   "OPERATING   AND   FINANCIAL   REVIEW   AND
PROSPECTS--FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE."

EXCHANGE RATE RISK

The Company has  exchange  rate  exposure  with respect to the U.S.  dollar.  On
December 31, 2001,  approximately R$307.68 million of the Company's indebtedness
and R$61.6  million of the  Company's  contingencies  were  denominated  in U.S.
dollars.  The potential  immediate loss to the Company on such indebtedness that
would  result only in the amount of R$39,9  million,  once  R$267.78  related to
liabilities in foreign exchange are hedged against foreign currency exposure. 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$61.6 million of such  indebtedness will be treated for all
purposes as a  REAL-denominated  liability.  SEE ITEM 5 "OPERATING AND FINANCIAL
REVIEW AND PROSPECTS--FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE" AND SEE NOTES
22 AND 32 TO THE CONSOLIDATED FINANCIAL STATEMENTS.



INTEREST RATE RISK

As of December 31, 2001, the Company had approximately  R$516,9 million in loans
and financing outstanding,  of which approximately R$248,9 million bore interest
at fixed  rates and  approximately  R$268,0  million  bore  interest at floating
(primarily LIBOR and TJLP-based) rates. The Company invests its excess liquidity
(R$280,7  million at December 31, 2001) 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,
2001.  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
22 TO THE CONSOLIDATED FINANCIAL STATEMENTS.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

ITEM 14. MATERIAL  MODIFICATIONS  TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS

     None.

ITEM 15. DEFAULTS UPON SENIOR SECURITIES

     None.

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

        None.

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.

ITEM 19. 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
          1.1  By-laws of the Holding Company  previously filed with the Holding
               Company's  registration  statement  on  September  18,  1998  and
               incorporated herein by reference.
          1.2  Amendment to the Charter of the Holding Company  previously filed
               with the Holding  Company's  registration  statement on September
               18, 1998 and incorporated herein by reference.
          2.1  Deposit  Agreement  dated as of July 27, 1998 between the Holding
               Company  and The  Bank of New  York,  previously  filed  with the
               Holding  Company's  registration  statement on September 18, 1998
               and incorporated herein by reference.
          4.1  Standard   Concession   Agreement  for  Mobile  Cellular  Service
               (original  and English  translation),  previously  filed with the
               Holding  Company's  registration  statement on September 18, 1998
               and incorporated herein by reference.
          4.2  Cellular Service Authorization  Agreement (original) entered into
               and between the Brazilian  Government,  through Anatel,  and Tele
               Centro Oeste/Inepar  Ltda.,  currently Norte Brasil Telecom S.A.,
               on November 27, 1998.
          4.3  Consent of Ernst & Young Auditores Independentes S.C.

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.



                             INDEX OF DEFINED TERMS

                                                                           PAGE
                                                                           ----
3G systems...................................................................61
AD...........................................................................21
ADRs.........................................................................68
ADSs.........................................................................68
American Depositary Shares...................................................68
Americel.....................................................................35
ANATEL.......................................................................16
ANATEL Decree................................................................39
Annex IV Regulations.........................................................92
Annex V Regulations..........................................................92
Area 7.......................................................................15
Area 8.......................................................................15
Audit Committee..............................................................65
Band A.......................................................................35
Band A Concessions...........................................................15
Band A Service Provider......................................................35
Band A Subsidiary.............................................................1
Band B.......................................................................35
Band B Concessions...........................................................15
Band B Service Provider......................................................35
Band B Subsidiary,............................................................1
BNDES........................................................................52
Bolsa de Valores de Sao Paulo................................................75
Bolsa de Valores do Rio de Janeiro...........................................75
Brazil........................................................................1
Brazilian Corporation Law....................................................80
Brazilian GAAP................................................................1
Brazilian Securities Law.....................................................80
Breakup......................................................................16
Breakup of TELEBRAS..........................................................16
CCC..........................................................................14
Cellular Region..............................................................16
Cellular Service Rule........................................................39
Central Bank.................................................................80
CGR..........................................................................39
Circuit Switched Data........................................................33
CLC..........................................................................78
Code.........................................................................98


                                                                           PAGE
                                                                           ----
COFINS.......................................................................14
Comissao Brasileira de Comunicacoes..........................................61
Commercial Market.............................................................6
Common Shares................................................................68
Company.......................................................................1
Concessions..................................................................15
Consolidated Financial Statements.............................................1
CPMF tax.....................................................................97
CSLL.........................................................................14
Custodian....................................................................92
CVM..........................................................................66
Deductibles..................................................................24
Deposit Agreement............................................................77
Depositary...................................................................77
dollars.......................................................................1
DSL1.........................................................................21
DSL2.........................................................................21
e&.......................................................................98
EMBRATEL.....................................................................16
emerging market...............................................................9
Equity Withdrawing Rights....................................................81
Extreme South Stock Exchange.................................................79
Federal Government............................................................2
financial services...........................................................99
Financial System Law.........................................................80
FISTEL.......................................................................31
Fixed-Line Region............................................................16
Floating Market...............................................................6
Floating Market Rate..........................................................7
GDP..........................................................................17
General Telecommunications Law...............................................16
GVT..........................................................................36
Holding Company...............................................................1
IBGE.........................................................................17
ICMS.........................................................................14
IGP-DI.......................................................................12
IGP-M.........................................................................2
Income Statement Data.........................................................3
IOF tax......................................................................97


                                                                           PAGE
                                                                           ----
IRS.........................................................................100
LIBOR........................................................................50
Minimum Law..................................................................39
minority interests............................................................4
mirror companies.............................................................36
National Monetary Council....................................................80
NBT...........................................................................1
New Holding Companies........................................................16
non-Brazilian holder.........................................................94
non-U.S. holder..............................................................99
Noon Buying Rate..............................................................1
Norte Brasil Telecom S.A.....................................................48
off-peak calls...............................................................21
Parana Stock Exchange........................................................79
Pernambuco and Paraiba Stock Exchange........................................79
PETROBRAS....................................................................64
PFIC........................................................................100
Predecessor Companies........................................................15
Preferred Shares.............................................................68
Proposal.....................................................................90
R$............................................................................1
reais.........................................................................1
real..........................................................................1
Real Plan.....................................................................8
Region.......................................................................16
Registered Capital...........................................................97
Registration.................................................................92
SAF..........................................................................34
SEC..........................................................................80
Service Quality Memorandum...................................................41
Sistel.......................................................................68
Shareholders Essential Rights................................................81
SMC..........................................................................38
SMS..........................................................................33
SMP..........................................................................12
Splice.......................................................................15
STFC.........................................................................38
Stock Exchange Unification Program...........................................78
Sub Credito B................................................................52
Subsidiaries..................................................................1
Subsidiary....................................................................1
Teleacre......................................................................1
TELEBRAS.....................................................................15
TELEBRAS Loans...............................................................51
TELEBRAS System..............................................................15
Telebrasilia..................................................................1
Telecommunications Regulations...............................................16


                                                                           PAGE
                                                                           ----
Telegoias.....................................................................1
Telemar......................................................................37
Telemat.......................................................................1
Telems........................................................................1
Teleron.......................................................................1
TIM..........................................................................37
TJLP.........................................................................52
U.S. dollars..................................................................1
U.S. GAAP.....................................................................2
U.S. holder..................................................................98
US$...........................................................................1
VC1..........................................................................21
VC2..........................................................................21
VC3..........................................................................21
WAP..........................................................................18



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 carriers for the use of
their  network by other  network  carriers.  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.

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 carriers for the
use of their network by other network carriers. 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  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
structures  standardized  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.



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 1, 2002





                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

                       CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

                                    CONTENTS

Report of Ernst & Young Auditores Independentes S.C..................... F-1

Consolidated Balance Sheets................................................. F-2

Consolidated Statements of Operations....................................... F-4

Consolidated Statements of Cash Flows....................................... F-5

Consolidated Statements of Changes in Shareholders' Equity.................. F-6

Notes to the Consolidated Financial Statements...............................F-7



                         REPORT OF INDEPENDENT AUDITORS

Directors and Shareholders
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

We have  audited the  accompanying  consolidated  balance  sheets of Tele Centro
Oeste Celular  Participacoes  S.A. and  subsidiaries as of December 31, 2001 and
2000,  and  the  related  consolidated  statements  of  operations,  changes  in
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2001. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in Brazil and 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
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 consolidated  financial position of Tele
Centro Oeste Celular  Participacoes  S.A. at December 31, 2001 and 2000, and the
consolidated  results of its operations and its cash flows for each of the three
years in the period ended  December  31, 2001,  in  conformity  with  accounting
principles  generally accepted in Brazil,  which differ in certain respects from
those followed in the United States of America (See Note 29).

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

Brasilia, Brazil

January 31, 2002



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 2001
                     (In thousands of Brazilian Reais - R$)

                                               NOTE       2000          2001
                                              ------   ----------     ---------
ASSETS

CURRENT ASSETS
  Cash and cash equivalents................              450,131        326,637
  Marketable securities....................     12       158,701        362,310
  Trade accounts receivable, net...........     13       161,010        186,762
  Deferred income taxes and
   recoverable taxes.......................     14       107,380        120,222
  Handset and accessory inventories........               52,082         29,399
  Other assets.............................               28,275         33,124
                                                      -----------    -----------
Total current assets.......................              957,579      1,058,454

NONCURRENT ASSETS
  Deferred income taxes and
   recoverable taxes.......................     14        66,282         55,616
  Loans and financial investments..........                2,673              -
  Other assets.............................                4,018          3,922
                                                      -----------    -----------
Total noncurrent assets....................               72,973         59,538

PERMANENT ASSETS
  Investments..............................                5,445         10,470
  Property, plant and equipment, net ......     15     1,083,754      1,078,882
  Deferred charges, net....................     16        35,158         32,981
                                                      -----------    -----------
Total permanent assets.....................            1,124,357      1,122,333
                                                      -----------    -----------
Total assets...............................            2,154,909      2,240,325
                                                      ===========    ===========

See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 2001
                     (In thousands of Brazilian Reais - R$)

                                               NOTE       2000          2001
                                              ------   ----------     ---------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Payroll and related accruals...............   17         6,969           6,849
  Accounts payable and accrued expenses......   18       227,757         152,524
  Indirect taxes.............................   19        61,002          79,869
  Deferred taxes and income taxes payable....   20         9,838           7,927
  Participation in results of operation......   21        51,781         109,092
  Loans and financing........................   22       490,239         279,507
  Payable for concession (license)...........             19,423               -
  Other payables.............................              8,867          40,612
                                                      -----------    -----------
Total current liabilities....................            875,876         676,380

NONCURRENT LIABILITIES
  Accounts payable and accrued expenses......   18         1,047           1,790
  Deferred taxes and income taxes payable....   20        71,646          56,087
  Loans and financing........................   22        18,910         237,477
  Provision for contingencies................   23        62,996          76,476
                                                      -----------    -----------
Total noncurrent liabilities.................            154,599         371,830

MINORITY INTERESTS...........................             82,136          65,557
CAPITALIZABLE FUNDS..........................                126             126

SHAREHOLDERS' EQUITY
  Capital....................................            386,865         588,865
  Capital reserve............................            124,610         102,507
  Legal reserve................................           36,349          46,754
  Revenue reserve............................             97,675               -
  Retained earnings .........................            396,673         395,132
  Treasury stock.............................                  -          (6,826)
                                                      -----------    -----------
Total shareholders' equity...................   25     1,042,172       1,126,432
                                                      -----------    -----------
Total liabilities and shareholders' equity...          2,154,909       2,240,325
                                                      ===========    ===========

See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
               December 31, 1999, 2000 and 2001 (In thousands of
             Brazilian Reais, except shares and per share amounts)

                                                  YEARS ENDED DECEMBER 31
                                        ----------------------------------------
                                        NOTE    1999         2000        2001
                                        ----  ---------   ----------  ----------
Net operating revenue.................  4      666,660      930,646   1,248,131
Cost of services rendered and
cost of products sold.................  5     (326,514)    (532,163)   (663,158)
                                              ---------   ----------  ----------
Gross margin..........................         340,146      398,483     584,973
Operating expenses
    Selling expenses .................  6     (118,592)    (126,163)   (195,020)
    General and administrative
      expenses........................         (64,539)     (78,420)   (110,300)
    Other net operating results.......  7      (14,020)      (9,618)     (4,513)
                                              ---------   ----------  ----------
Operating income before net
  financial results....................        142,995      184,282     275,140
Net financial results.................. 8      (47,640)     (30,063)    (43,471)
                                              ---------   ----------  ----------

Operating income.......................         95,355      154,219     231,669
Net non-operating results.............. 9       (6,055)     (19,539)    (25,668)
Employees' participation...............         (1,866)      (1,878)     (2,346)
                                              ---------   ----------  ----------
Income before income taxes
  and minority interest                         87,434      132,802     203,655
Income and social contribution
  taxes................................ 10     (29,857)     (40,159)    (56,501)
                                              ---------   ----------  ----------

Income before minority interest.........        57,577       92,643     147,154

Minority interest.......................       (11,531)     (19,980)    (13,864)
Reversal of interest on own capital.....        53,542       30,981      45,297
                                              ---------   ----------  ----------

Net income..............................        99,588      103,644     178,587
                                              =========   ==========  ==========

Outstanding shares at
  end of year (thousands)...............   364,399,028  364,399,028  366,463,335

Profit per thousand shares (R$).........          0.27         0.28         0.49
                                              =========   ==========  ==========

See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
                        December 31, 1999, 2000 and 2001
                     (In thousands of Brazilian Reais - R$)

                                                 1999        2000        2001
                                              ---------   ----------  ----------

OPERATING ACTIVITIES:
   Net income...............................    99,588      103,644     178,587
   Adjustments to reconcile
   net income to cash provided by
   operating activities:
    Depreciation and amortization...........   128,762      154,345     186,056
    Disposal of permanent assets............     7,948       16,482      15,322
    Minority interests......................    11,531       19,980     (13,864)
    Allowance for doubtful accounts.........    75,162       54,873      60,479
   Decrease (increase) in assets:
      Trade accounts receivable.............  (109,365)     (42,629)    (86,231)
      Handset and accessory inventories.....   (19,128)     (32,945)     22,683
      Deferred income taxes and
      recoverable taxes.....................   (28,779)    (109,214)     (2,176)
      Other assets..........................   (11,822)      (9,707)     (2,080)
   Increase (decrease) in liabilities:
      Personnel, social charges
      and benefits..........................       687          733        (120)
      Accounts payable and accrued
      expenses..............................    44,827      121,591     (74,490)
      Indirect taxes........................    21,416       10,749      18,867
      Other current liabilities.............     5,092        3,776      31,745
      Accrued interest......................     2,682       34,641      82,003
      Provision for contingencies...........     2,068          102      13,480
      Deferred income tax ..................    (4,422)     (20,229)    (17,470)
      Participation in results
      of operation..........................   (28,513)       1,073      57,311
      Payable for concession (license)......    12,416      (17,215)    (19,423)
      Other non-current liabilities.........      (151)         433           -
      Minority interests....................   (26,745)     (41,755)     (2,715)
                                              ---------    ---------   ---------
   Net cash provided by operating
   activities...............................   183,254      248,728     447,964
INVESTING ACTIVITIES:
   Marketable securities....................   (87,667)     (71,034)   (203,609)
   Additions to investments.................    (4,451)      (1,432)     (7,314)
   Additions to property, plant and
   equipment................................  (291,038)    (255,678)   (190,317)
   Transfer from fixed assets
   to investments...........................    39,978            -           -
   Addition to deferred assets..............   (32,042)      (7,024)     (1,723)
   Transfer  from  deferred  assets
   to recoverable taxes.....................         -      118,615           -
                                              ---------    ---------   ---------
   Net cash used in investing activities....  (375,220)    (216,553)   (402,963)

FINANCING ACTIVITIES:
   Loans repaid..............................   (3,036)      (5,239) (1,423,210)
   Proceeds from loans.......................   87,927      391,663   1,349,042
   Capitalizable funds.......................        -          (13)          -
   Issuance of preferred shares..............   63,719            -           -
   Premium on issuance of new shares.........       82            -           -
   Treasury stock............................        -            -      (6,826)
   Dividends to minority interest
   of  subsidiaries..........................        -            -      (1,516)



   Payment  to  shareholders'   related
   to premium utilization....................        -            -      (5,485)
   Interest on own capital...................  (49,059)     (37,887)    (80,500)
                                              ---------    ---------   ---------
   Net  cash   provided   by  (used  in)
   financing activities......................   99,633      348,524    (168,495)
Increase (decrease) in cash and
cash equivalents.............................  (92,333)     380,699    (123,494)
Cash and cash equivalents at
beginning of year............................  161,765       69,432     450,131
                                              ---------    ---------   ---------
Cash and cash equivalents at end of year.....   69,432      450,131     326,637
                                              =========    =========   =========

See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                     CONSOLIDATED STATEMENTS OF CHANGES IN
                    SHAREHOLDERS' EQUITY FOR THE YEARS ENDED
                        DECEMBER 31, 1999, 2000 AND 2001
                     (In thousands of Brazilian Reais - R$)

                                 CAPITAL   LEGAL   REVENUE  RETAINED  TREASURY
                       CAPITAL   RESERVE  RESERVE  RESERVE  EARNINGS    STOCK      TOTAL
                      ------------------------------------------------------------------

BALANCES AT
DECEMBER 31, 1998..... 253,622         -   23,984  164,952   356,580        -    799,138

Capital increase
with reserves.........  69,525         -        -        -   (69,525)       -          -
Issuance of preferred
shares......            63,718         -        -        -         -        -     63,718
Reversal of
reserves..............       -         -        - (164,952)  164,952        -          -
Premium on issue of
new shares............       -        81        -        -         -        -         81
Assets incorporate
from Coverage S.A.....       -   354,786        -        -         -        -    354,786
Deferred tax on
full indexation.......       -         -        -        -   (46,551)       -    (46,551)
Net income............       -         -        -        -    99,588        -     99,588
Transfer to reserves..       -         -      5,898 112,073  (117,971)      -          -
Interest on own
capital...............       -         -        -        -   (40,132)       -    (40,132)
                      -------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1999..... 386,865   354,867   29,882  112,073   346,941        -   1,230,628

Provision  for
reduction of assets
incorporated from
Coverage..............       -  (230,257)       -        -         -        -    (230,257)
Reversal of reserves..       -         -        - (112,073)  112,073        -          -
Deferred tax on full
indexation............       -         -        -        -   (23,956)       -     (23,956)
Net income............       -         -        -        -   103,644        -     103,644
Transfer to reserves..       -         -    6,467   97,675  (104,142)       -          -
Interest on own
capital/dividends.....       -         -        -        -   (37,887)       -     (37,887)

                      --------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 2000..... 386,865   124,610   36,349   97,675   396,673        -   1,042,172

Capital increase
with reserves......... 202,000   (16,618)       -        -  (185,382)       -           -
Payment to
shareholders' related
to premium
utilization...........       -    (5,485)       -        -         -        -      (5,485)



Treasury stock........       -         -        -        -         -   (6,826)     (6,826)
Dividends to minority
interest of
subsidiaries..........       -         -        -        -    (1,516)       -      (1,516)
Reversal of reserves..       -         -        -  (97,675)   97,675        -           -
Net income............       -         -        -        -   178,587        -     178,587
Transfer to reserves..       -         -   10,405        -   (10,405)       -           -
Interest on own
capital/dividends.....       -         -        -        -   (80,500)       -     (80,500)

                      --------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 2001..... 588,865   102,507   46,754        -   395,132   (6,826)  1,126,432
                      ====================================================================

See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
            NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of Brazilian Reais, except per share amounts)

1.   OPERATIONS AND BACKGROUND

     Beginning  in  1995,  the  Federal   Government  of  Brazil  (the  "Federal
     Government")  undertook a comprehensive  reform of the Brazilian regulation
     of the  telecommunications  industry.  In July  1997 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 (the "Telebras System").

     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 first separated from the operating  subsidiaries and subsequently from
     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 (the
     "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. (the "Company") was formed on
     May 22, 1998,  through the spin-off of certain  assets and  liabilities  of
     Telebras,  including 81.4%,  83.8%,  91.9%,  96.0%,  91.3% and 94.0% of the
     share capital of Telebrasilia Celular S.A., Telegoias Celular S.A., Telemat
     Celular  S.A.,  Telems  Celular  S.A.,  Teleron  Celular  S.A. and Teleacre
     Celular  S.A.,  respectively.  Until  August 4, 1998,  the  Companies  were
     controlled by the Federal Government.

     At December 31, 2001, 53.8% of the common shares were owned by BID S.A.

     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:

        COMPANY                                                    EXPIRATION
        -------                                                    ----------
        Telebrasilia Celular S.A.......................         July 24, 2006
        Telegoias Celular S. A. .......................      October 29, 2008
        Telemat Celular S.A. ..........................        March 30, 2009
        Telems Celular S.A. ...........................    September 28, 2009
        Teleron Celular S.A. ..........................         July 21, 2009
        Teleacre Celular S.A. .........................         July 15, 2009



                                   SECTION 1.

     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 but could be extended for another 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

1.   OPERATIONS AND BACKGROUND (Continued)

        On May 24, 1999,  Norte Brasil  Telecom  S.A. - NBT, a  corporation  not
     publicly traded,  was formed with the Holding 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 up its operations at the end of October
     1999,  covering 11 of the 97 cities within their  operating  area. As their
     activities  relating to the  rendering of services  were  insignificant  at
     December 31, 1999, all expenses incurred until this date were considered as
     pre-operating and only subject to amortization from January 2000.

     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, 1999, 2000 AND 2001

        The consolidated  financial  statements were prepared in accordance with
        Brazil's  Corporation Law and regulations  established by CVM - Comissao
        de Valores Mobiliarios (Brazilian Securities Commission).

        The consolidated financial statements present the financial position and
        result of  operations of Tele Centro Oeste  Celular  Participacoes  S.A.
        (TCO) and its subsidiaries.

        Minority interest is included in the consolidated  financial  statements
        of TCO as of December 31, 2001.  This  interest was 11.8%,  3.2%,  2.5%,
        1.6%,  2.9%,  1.7%  and 1.7% of  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., 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 Brazil's Corporation Law.



        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  through  December  31,  2000.  Thus  the  financial
        statements  of the Company for each of the two years in the period ended
        December 31, 2000 were prepared using the integral  restatement  method,
        in order to express  the  balances  of the  Company in the  currency  of
        constant purchasing power at December 31, 2000.

        For 2001,  IBRACON (the  Brazilian  Institute of  Independent  Auditors)
        issued a publication stating that financial statements would not have to
        be  indexed  for 2001 as the  three-year  cumulative  inflation  rate in
        Brazil fell below 100%.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

2.   PRESENTATION OF THE FINANCIAL STATEMENTS (Continued)

     b. 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,
        2001 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%.  For
        accounting  purposes,  the Company applied the constant  currency method
        through December 31, 2000, as required by Brazilian  generally  accepted
        accounting principles when the inflation rate is material.

        For 1999 and 2000,  the annual  inflation  rates were  20.10% and 9.95%,
        respectively,  which were  considered  to have a material  effect on the
        financial statements.  Thus the financial statements of the Company 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, 2000.

        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:

        I.  INFLATION INDEX

            The  consolidated  financial  statements as of December 31, 1999 and
            2000,  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  the  currency  of  constant
            purchasing  power at December 31, 2000 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 periods  ended  December  31,  1999 and 2000,  as
            measured by the IGP-M, was as follows:

            PERIOD                                         ANNUAL INFLATION (%)
            ------                                         --------------------
            Year ended December 31, 1999..................          20.10
            Year ended December 31, 2000..................           9.95



        II. DEFERRED  INCOME TAX EFFECTS OF INDEXATION  ADJUSTMENTS  IN 1999 AND
            2000

            As a result of  legislation  mandating  the  discontinuation  of the
            indexation  system  for  Brazilian  corporate  law and  most  fiscal
            purposes  at  January  1,  1996,   the   indexation  of  assets  and
            liabilities  for financial  reporting  purposes at December 31, 1999
            and 2000 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$
            23,956 in 2000 (R$ 46,551 in 1999),  was recorded  directly  against
            shareholders'  equity.  The tax effect of depreciation and disposals
            relating  to the base  differences  (reversal  of the charge) in the
            amount of R$ 12,901 in 2000 (R$ 9,074 in 1999) was  credited  to the
            income and social  contribution taxes in the consolidated  statement
            of income.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
               (Amounts expressed in thousands of Brazilian Reais,
                           except per share amounts)

2.   PRESENTATION OF THE FINANCIAL STATEMENTS (Continued)

     b. INFLATION ACCOUNTING METHODOLOGY (Continued)

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

                                      NET INCOME          SHAREHOLDERS' EQUITY
                                 -----------------------------------------------
                                  2000        2001        2000         2001
                                 -----------------------------------------------
            Corporate law        129,319    208,104      896,398    1,010,175
            Restatement of net
            permanent assets     (27,062)   (51,270)     239,459      188,189
            Tax effects           12,901     17,403      (81,416)     (64,014)
            Minority interests   (11,514)     4,350      (12,269)      (7,918)
                                 -----------------------------------------------
            In constant currency 103,644    178,587    1,042,172    1,126,432
                                 ===============================================

     d. CONSOLIDATION PRINCIPLES

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

3.   SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES

     a. CASH AND CASH EQUIVALENTS

        Cash  equivalents  consist of highly  liquid  investments  with original
        maturity of three months or less at the time of purchase.

     b. TRADE ACCOUNTS RECEIVABLE, NET

        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 in
        the statements of operations as they occur.

     e. HANDSET AND ACCESSORY INVENTORIES

        Inventories  are stated at the lower cost or market,  whereby  costs are
        determined using the average acquisition cost method.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

3.   SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

     f. PROPERTY, PLANT AND EQUIPMENT

        Property,  plant  and  equipment  is stated at  average  acquisition  or
        construction  cost,  monetarily  corrected to December  31,  2000,  less
        accumulated depreciation.

        The  operation  right  (concession  - area  8) of the - Band B  cellular
        services relate to subsidiary  Norte Brasil Telecom S.A. was recorded at
        its  acquisition  cost and is being  amortized  in  accordance  with the
        concession  terms. In 2001, the Company changed the amortization  period
        to 15 years, with the aim of conforming the Brazilian GAAP with US GAAP.

        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 when incurred.

        Depreciation  is provided  using the  straight-line  method based on the
        estimated  useful  lives  of  the  underlying   assets.  The  respective
        depreciation rates are described in note 15.

     g. DEFERRED CHARGES

        PRE-OPERATING EXPENDITURES

        Income and  expenses  incurred  during the  pre-operating  period by the
        subsidiary  Norte Brasil  Telecom S.A. are charged to deferred  charges.
        Deferred  charges were not amortized during 1999 as the subsidiary Norte
        Brasil Telecom S.A. did not commence operations until January 2000.

        During the latter part of 2000,  TCO IP, an internet  service  provider,
        was formed and all the pre-operating  costs were capitalized as deferred
        charges through October 2001 when TCO IP began operations.

        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$
        354,786, which will be amortized over a 5-year period. As the merger was
        into a wholly owned subsidiary,  there was no effect on the consolidated
        financial statements.



     h. INCOME AND SOCIAL CONTRIBUTION TAXES

        Brazilian  income taxes are comprised of the federal  income tax and the
        social  contribution  tax. At December 31, 2001, the statutory rates for
        the federal income tax and for the social  contribution tax were 25% and
        9%,  respectively.   For  Brazilian  GAAP  purposes,  income  taxes  are
        accounted for using the liability method.

        As described in note 2 (b) (ii),  the expense  related to the effects of
        deferred  taxes  from  indexation  adjustments  for  1999  and  2000 are
        recorded directly against shareholders' equity.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

3.   SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

     i. PROVISION FOR CONTINGENCIES

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

     j. NET FINANCIAL RESULT

        The net  financial  result  includes  interest and  monetary  variations
        resulting from financial  investments  and loans and financing  obtained
        and provided. Interest on own capital/dividends is also included in this
        account.  In compliance  with the tax  legislation,  the interest on own
        capital/dividends  is  recorded as a  financial  expense  for  financial
        statement  purposes,  according to CVM  Deliberation No. 207 of December
        12, 1996.

     k. PENSION PLAN

        The Company and its subsidiaries,  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 the required
        contribution for the period and are recorded on the accrual basis.

     l. PROFIT PER THOUSAND-SHARES

        Profit  per  thousand-shares  were  calculated  based on the  number  of
        outstanding shares at the date of the corresponding balance sheets.

     m. REVENUE RECOGNITION

        Revenues for services and equipment are  recognized  when the service is
        provided or when the  equipment  is sold,  respectively.  Revenues  from
        cellular  telephone  services  consist of  subscription  charges,  usage
        charges,  network  usage charges and charges for  maintenance  and other
        customer  services.  Unbilled  revenues  from  the  billing  date to the
        month-end are estimated and  recognized as revenues  during the month in
        which the service is provided.  Revenues from  equipment  sales refer to
        sales of handsets.

        The Company  began selling  prepaid cards during 1999.  The revenue from
        the sales of these cards is recognized according to the minutes used for
        each card.  Revenue from unused minutes is deferred until used.  Because
        the  amount  deferred  is  immaterial,  it has  been  included  in other
        liabilities.



     n. SEGMENT INFORMATION

        The  Companies  operate  solely in one  segment  of local  and  regional
        cellular telecommunications.  Until 1999, all revenues were generated in
        relation to services  provided in or routed through the Federal District
        and the states of Goias,  Tocantins,  Mato Grosso do Sul,  Mato  Grosso,
        Rondonia, Acre, Maranhao, Para, Amapa, Roraima and 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

3.   SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

     p. MINORITY INTERESTS

        The Company records minority interest in the statements of operations to
        reflect the portion of the earnings of  majority-owned  operations  that
        are applicable to the minority interest partners. See note 2a.

     q. ADVERTISING COSTS

        Advertising  costs are  expensed  as  incurred  and  included in selling
        expenses.  They amounted to R$ 26,785,  R$ 24,321,  and R$19,207 for the
        years ended December 31, 2001, 2000, and 1999, respectively.

4.   NET OPERATING REVENUE

                                         1999       2000        2001
                                      ---------  ----------  ---------
     Monthly subscription charges      211,364     194,424     121,486
     Activation fees                     4,080           -           -
     Usage charges                     369,235     349,880     530,162
     Network usage charges             197,079     334,498     526,846
     Sale of handsets and
     prepaid cards                      58,634     274,812     386,665
     Others                             14,942      11,248       8,255
                                      ---------  ----------  ----------
     Gross operating revenue           855,334   1,164,862   1,573,414
     Taxes on gross revenue           (188,674)   (234,216)   (325,283)
                                      ---------  ----------  ----------
     Net operating revenue             666,660     930,646   1,248,131
                                      =========  ==========  ==========

5.   COST OF SERVICES RENDERED AND COSTS OF PRODUCTS SOLD

                                         1999       2000        2001
                                      ---------  ----------  ----------
     Depreciation and amortization    (120,202)   (142,763)   (160,887)
     Personnel                          (8,963)    (11,276)    (11,629)
     Third party materials
     and services                      (78,897)    (95,825)   (125,972)
     Fixed-line network expenses       (27,996)    (26,850)    (37,669)
     Fistel tax                        (30,111)    (51,581)    (53,173)
     Cost of products sold             (50,918)   (194,045)   (273,299)
     Others                             (9,427)     (9,823)       (529)
                                      ---------  ----------  ----------
                                      (326,514)   (532,163)   (663,158)
                                      =========  ==========  ==========

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



           TELE CENTRO OESTE CELULAR PARTICIPACOES S.A. NOTES TO THE
      CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts expressed in
            thousands of Brazilian Reais, except per share amounts)

6.   SELLING EXPENSES

                                         1999       2000        2001
                                      ---------  ----------  ----------
     Personnel                          (9,815)    (13,827)    (19,592)
     Third party materials and
     services                          (43,734)    (64,000)   (118,251)
     Rent/leasing/insurance             (1,253)     (3,326)     (4,074)
     Depreciation                          (35)          -      (4,448)
     Net losses on trade accounts
     receivable                        (63,618)    (44,790)    (48,301)
     Others                               (137)       (220)       (354)
                                      ---------  ----------  ----------
                                      (118,592)   (126,163)   (195,020)
                                      =========  ==========  ==========

7.   OTHER NET OPERATING RESULTS

                                         1999       2000        2001
                                      ---------  ----------  ----------
     Research and development            (839)      (617)        (436)
     Taxes (except income tax)        (10,485)    (9,801)     (13,822)
     Contingencies                     (1,318)          -           -
     Fines and expenses recovered       3,167       3,354      12,921
     Amortization of the premium -
     Coverage Participacoes S.A.       (5,913)          -           -
     Tax incentives                     4,271           -           -
     Other                             (2,903)    (2,554)      (3,176)
                                      ---------  ----------  ----------
                                      (14,020)    (9,618)      (4,513)
                                      =========  ==========  ==========

8.   NET FINANCIAL RESULTS

                                         1999       2000        2001
                                      ---------  ----------  ----------
    Interest revenue                    42,830     102,835    132,339
    Interest expense                   (37,576)    (98,487)   (89,000)
    Interest on own capital
    (dividends)                        (53,542)    (30,981)   (45,297)
    Net exchange/ monetary
    variations                             648      (3,430)   (41,513)
                                      ---------  ----------  ----------
                                       (47,640)    (30,063)   (43,471)
                                      =========  ==========  ==========

9.   NET NON-OPERATING RESULTS

                                         1999       2000        2001
                                      ---------  ----------  ----------
     Loss on the disposal of
     property, plant and equipment      (6,141)        404     (3,834)
     Amortization of premium -
     Coverage and
     pre-operating expenditures              -     (21,055)   (21,946)
     Other non-operating income             86       1,112        112
                                      ---------  ----------  ----------
                                        (6,055)    (19,539)   (25,668)
                                      =========  ==========  ==========



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

10.  INCOME AND SOCIAL CONTRIBUTION TAXES

     From January to April 1999, the social  contribution  tax rate was 8%. From
     May 1, 1999 to  January  31,  2000,  the social  contribution  tax rate was
     increased  to 12%. On February 1, 2000,  the rate was reduced to 9% and has
     not  changed  since that date.  The income tax rate was 25% for all periods
     presented.

     Income taxes are as follows:

                                         1999       2000        2001
                                      ---------  ----------  ----------
     Social contribution tax           (5,868)     (14,857)   (19,711)
     Income tax                       (33,063)     (38,203)   (54,193)
     Deferred taxes                     9,074       12,901     17,403
                                      ---------  ----------  ----------
                                      (29,857)     (40,159)   (56,501)
                                      =========  ==========  ==========

     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:

                                                 1999       2000        2001
                                              ---------  ----------  ----------
     Social contribution tax at statutory
     rates                                     (8,087)     (14,808)    (22,946)
     Social contribution tax on permanent
     additions:
        Others taxes non-deductible              (539)           -           -
        Others                                   (200)        (322)       (666)
     Social contribution tax on permanent
     exclusions:
        Premium amortization                        -        3,498       3,833
        Others                                    336            8          26
     Effects on the constant currency method   (3,216)      (3,010)          -
     COFINS (compensation)                      4,942            -           -
     Others                                       896         (223)         42
                                              ---------  ----------  ----------
     Social contribution tax                   (5,868)     (14,857)    (19,711)
                                              =========  ==========  ==========

     Income tax at statutory rates             (21,858)    (40,297)     (63,739)
     Income tax on permanent additions:
        Others taxes non-deductible             (1,236)          -            -
        Others                                    (394)       (702)      (2,035)
     Income tax on permanent exclusions:
        Premium amortization                         -       9,635       10,648
        Others                                     812          63           37
     Effects on the constant currency method   (10,708)     (8,403)           -
     Tax incentives/others                         321       1,501          896
                                              ---------  ----------  ----------
     Income tax                                (33,063)    (38,203)     (54,193)
                                              =========  ==========  ==========



11.  SUPPLEMENTAL CASH FLOW INFORMATION

                                                 1999       2000        2001
                                              ---------  ----------  ----------
     Cash paid for interest                        535       2,927       85,432
     Cash paid against provisions for               92       3,639            -
     contingencies
     Income tax and social contributions        21,232      54,370       64,446
     paid
     Cash paid for concessions                  19,212      19,289       22,385



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

12.  MARKETABLE SECURITIES

     Marketable  securities  at  December  31,  2001 and 2000  consisted  of the
following:

                                     INTEREST             DUE DATE          2000       2001
                            ----------------------------------------------------------------
     Notes from Central     Foreign           exchange
     Bank of Brazil -       variation    plus   annual
     Especial Issuing -     interest  of 6% with  Swap  9/17/2001 and
     government securities  of 100% CDI                   6/17/2004       39,007          -
     Debentures - Unibanco  Prefixed  annual  rate  of
     Leasing Contracts      15% with Swap of 100% CDI     5/1/2003        28,165          -
     Bank Deposit           Prefixed  annual  rate  of
     Certificate - Unibanco 15% with Swap of 100% CDI   3/19/2001 and
                                                          4/25/2001       13,786          -
     Commercial             Prefixed  annual  rate  of
     Paper-Splice do        24% to 25%  with  Swap  of  7/5/2002 and
     Brasil S.A.            100% CDI plus 1.5% p.a.       9/30/2002       77,743    362,310
                                                                       ---------------------
                                                                         158,701    362,310
                                                                       =====================

     The carrying value of the assets equals the fair value.

13.  TRADE ACCOUNTS RECEIVABLE, NET

                                                      2000             2001
                                                 ---------------   -------------
     Accrued amounts                                  42,948           47,193
     Billed amounts                                  143,888          180,350
     Allowance for doubtful accounts                 (25,826)         (40,781)
                                                 ---------------   -------------
                                                     161,010          186,762
                                                 ===============   =============

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

                                     1999              2000             2001
                                  ------------    --------------  --------------
     Balance at beginning of year     28,020          29,036           25,826
     Bad debt expense                 75,162          54,873           60,479
     Write-offs                      (74,146)        (58,083)         (45,524)
                                  ------------    --------------  --------------
     Balance at end of year           29,036          25,826           40,781
                                  ============    ==============  ==============



14.  DEFERRED INCOME TAXES AND RECOVERABLE TAXES

     At December 31, 2001, TCO had the following deferred and recoverable taxes:

                                                      2000             2001
                                                 ---------------   -------------
     Recoverable investment withholding tax                -           26,583
     Recoverable income and social contribution       47,970           48,507
     taxes
     Recoverable income and social contribution
     taxes on premium (Coverage Participacoes         87,773           65,830
     S.A.) - (Note 16)
     Deferred income and social contribution taxes    18,853           19,865
     Recoverable ICMS tax                             17,764           13,355
     Other recoverable taxes                           1,302            1,698
                                                 ---------------   -------------
     Total                                           173,662          175,838
                                                 ---------------   -------------
     Short-term                                      107,380          120,222
     Long-term                                        66,282           55,616
                                                 ================  =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

14.  DEFERRED INCOME TAXES AND RECOVERABLE TAXES (Continued)

     TCO and its subsidiaries have generated operating income in recent years
     and its budgets indicate similar results for future years. Therefore, the
     deferred and recoverable taxes are fully realizable.

     Deferred tax assets are comprised of the following:

                                                      2000             2001
                                                 ---------------   -------------
     Non-deductible provisions:
          Allowance for doubtful accounts              7,744            13,866
          Contingencies                                9,933             4,878
          Others                                       1,176             1,121
                                                 ---------------   -------------
     Total                                            18,853            19,865
                                                 ===============   =============

15.  PROPERTY, PLANT AND EQUIPMENT, NET

     a. COMPOSITION

                                                      2000             2001
                                                 ---------------   -------------
        Construction in progress                     206,052          168,066
        Automatic switching equipment                344,140          445,460
        Transmission and other equipment             761,476          841,249
        Land                                           4,888            6,271
        Buildings                                     41,339           43,822
        Computer equipment                            17,866           39,535
        Operation license (concession)                82,484           82,484
        Other assets                                  80,019           83,164
                                                 ---------------   -------------
        Total cost                                 1,538,264         1,710,051
        Accumulated depreciation                    (454,510)         (631,169)
                                                 ---------------   -------------
                                                1,083,754            1,078,882
                                                 ===============   =============

     b. DEPRECIATION RATES

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

                                                                %
                                                 ------------------------------
                                                      2000             2001
                                                 ---------------   -------------
        Automatic switching equipment                  10.00            10.00
        Transmission and other equipment               14.29            14.29
        Buildings                                       4.00             4.00
        Operation license (concession)                  3.33             6.67
        Other assets (excluding land)              5.00 to 20.00    5.00 to 20.00

        The exploration right balance started being amortized in 2001 at a 6.67%
        annual rate in order to adapt the  amortization-period to the concession
        term.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

15.  PROPERTY, PLANT AND EQUIPMENT, NET (Continued)

     The Company  rents  equipment  and  premises  through a number of operating
     agreements.  Total rent  expense  incurred  under  these  agreements  is as
     follows:

                                              1999      2000       2001
                                           ---------- --------   ---------
                                             12,510    14,614     15,610

     Future minimum rental payments under  non-cancelable  operating leases with
     remaining initial terms in excess of one year at December 31, 2001 are:

                            2002               15,765
                            2003               16,395
                            2004               17,051
                            2005               17,733
                            2006               18,442
                                          ----------------
                            Total              85,386
                                          ================

16.  DEFERRED CHARGES, NET

                                                      2000             2001
                                                 ---------------   -------------
     Pre-operating expenditures - NBT                 38,998           39,055
     Pre-operating expenses amortization              (3,908)          (7,808)
     Other                                                68            1,734
                                                 ---------------   -------------
     Total                                            35,158           32,981
                                                 ===============   =============

     Norte Brasil  Telecom S.A. (NBT) began its operations at the end of October
     1999,  covering 11 of the 97 cities within the Company's operating area. As
     the  Company's  activities  relating  to the  rendering  of  services  were
     insignificant  at December 31, 1999, all expenses  incurred until this date
     were  considered as  pre-operating  and only subject to  amortization  from
     January 2000.

     According to Instruction  No. 349 of the CVM  (Brazilian  Equivalent of the
     Securities  and Exchange  Commission of the U.S.) dated March 6, 2001,  the
     Company  decided on March 28, 2001 to reduce the value of the premium to an
     amount, which represents the future tax benefit,  since the amortization is
     a tax-deductible expense.

     The change in the account value is summarized as follows:



                                                      2000             2001
                                                 ---------------   -------------
     Premium Coverage Participacoes S.A.             354,786          354,786
     Write-down                                     (230,257)        (267,013)
                                                 ---------------   -------------
     Future tax benefits                             124,529           87,773
     Reversal of the provision recorded in 2000
     and 2001                                        (22,105)         (21,943)
     Monetary correction                             (14,651)               -
                                                 ---------------   -------------
     Tax credit at end of the year                    87,773           65,830
                                                 ===============   =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

16.  DEFERRED CHARGES, NET (Continued)

     In 2001 and 2000,  the net amount of the  premium and the  provision  to be
     amortized,  which  represents  future tax  benefits,  was  recorded  in the
     balance  sheet as current  and  noncurrent  assets  under  "deferred  taxes
     recoverable".  The deferred assets  amortization and provision reversal are
     recorded  as a  nonoperating  result  and the  corresponding  tax credit as
     income  and social  contribution  taxes,  canceling  the  operating  result
     effect.

17.  PAYROLL AND RELATED ACCRUALS

                                                      2000             2001
                                                 ---------------   -------------
     Salaries and wages                                1,394              651
     Social charges                                    5,113            5,729
     Accrued benefits                                    462              469
                                                 ---------------   -------------
                                                       6,969            6,849
                                                 ===============   =============

18.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                      2000             2001
                                                 ---------------   -------------
     Suppliers                                       223,891          143,797
     Payments received on behalf of third parties      4,414            9,275
     Other accounts                                      499            1,242
                                                 ---------------   -------------
Total                                                228,804          154,314
                                                 ---------------   -------------
Short-term                                           227,757          152,524
Long-term                                              1,047            1,790
                                                 ===============   =============

19.  INDIRECT TAXES

                                                      2000             2001
                                                 ---------------   -------------
     Value-added tax                                  25,939           35,205
     Fistel tax                                       28,355           37,770
     Other taxes on operating revenues                 6,708            6,894
                                                 ---------------   -------------
                                                      61,002           79,869
                                                 ===============   =============



20.  DEFERRED TAXES AND INCOME TAXES PAYABLE

                                                      2000             2001
                                                 ---------------   -------------
     Income tax payable                                   68                -
     Deferred taxes - liability
     Effects of full monetary correction              81,416           64,014
                                                 ---------------   -------------
     Subtotal deferred taxes                          81,416           64,014
                                                 ---------------   -------------
                                                      81,484           64,014
                                                 ---------------   -------------
     Short-term                                        9,838            7,927
     Long-term                                        71,646           56,087
                                                 ===============   =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

21.  EMPLOYEES' PROFIT SHARING

                                                      2000             2001
                                                 ---------------   -------------
     Interest on own capital for the year             25,111           57,288
     Interest on own capital for the prior  year       9,841           15,664
     Withholding tax on interest on own capital       (3,778)         (18,828)
     Dividends                                        18,642           52,599
     Employees' profit sharing                         1,965            2,369
                                                 ---------------   -------------
                                                      51,781          109,092
                                                 ===============   =============

22.     LOANS AND FINANCING

                               INTEREST AND MONETARY CORRECTION       DUE DATE          2000      2001
     --------------------------------------------------------------------------------------------------
     NATIONAL CURRENCY
     BNDES               T.J.L.P.  plus annual  interest from 3.5% to  1/15/2002
                         4%.                                              and          84,026  192,030
                                                                       1/15/2008
     BNDES               UMBNDES  variation  plus a loan  charge from  1/15/2002
                         BNDES and annual interest from 3.5% to 4% .      and
                                                                       1/15/2008            -   12,648
     COMMERCIAL PAPER    Annual   discount  of  19%  applied  on  the
                         subscription  date  with  Swap of  103.5% of  1/12/2001      186,913        -
                         CDI.
     BRASIL TELECOM S.A.                      -                        5/21/2002            -    2,917
     OTHER LOANS         Industrial Products Column 20 - FGV            2002 to         1,771    1,707
                                                                         2008
     FOREIGN CURRENCY
     Finimp              Exchange   variation   based   on  the  U.S.  10/3/2002
                         dollar,  plus  Libor  and  0.93%  p.a.  over      e            6,542   11,125
                         Libor, and 2.47% p.a.                        10/30/2002
     COMPROR             Exchange  variation based on the U.S. dollar
                         plus annual interest of 9.30%                 1/7/2002             -    4,447
     PREPAYMENT          Exchange   variation   based   on  the  U.S.
                         dollar,  Libor plus  interest  from 1.75% to  3/14/2002
                         1.90% p.a. and  performance  premium ranging     and
                         from 1.20% to 1.30% p.a.                      8/15/2002            -   98,174
     DEBT ASSUMPTION -   Exchange  variation based on the U.S. dollar    From
     FINIMP              plus Libor and  interest  from 0.5% to 2.45%  2/25/2002
                         p.a.                                             to                -  128,937
                                                                      10/21/2002
     LOAN FROM SUPPLIER  Exchange  variation based on the U.S. dollar
                         plus annual interest of 6.05%.               11/29/2004            -    3,291
     EURO COMMERCIAL     Annual   discount   of  9.5  with   exchange
     PAPER               variation based on the U.S. dollar.           5/18/2001      207,943        -
     EXPORT DEVELOPMENT  Exchange  variation based on the U.S. dollar
     CORPORATION - EDC   plus  semiannual  Libor and annual  interest 11/22/2005       21,954   61,708
                         of 3.90%.
                                                                                  ---------------------
                                                                                      509,149  516,984
     Short-term                                                                       490,239  279,507
                                                                                  ---------------------
     Long-term                                                                         18,910  237,477
                                                                                  =====================



     Euro Commercial Paper 103% of CDI*                                 5/18/2001   207,943         -
     Export Development    U.S.  dollar   exchange   variation  and
     Corporation - EDC     Libor plus 3.90%                            11/22/2005    21,954    61,708
     Others                                                                             456         -
                                                                                  --------------------
                                                                                    509,149   516,984
                                                                                  --------------------
     Short-term                                                                     490,239   279,507
                                                                                  --------------------
     Long-term                                                                       18,910   237,477
                                                                                  ====================

      *
      BNDES   - National Bank for Economic and Social Development.
      UMBNDES - Monetary Index of
      TJLP    - "Taxa de Juros de Longo Prazo," a long term interest rate, reset
                quarterly by the Brazilian Central Bank.
      LIBOR   - London Interbank Offered Rate.
      CDI     - "Certificado de Deposito  Interbancario," which is the Brazilian
                interbank borrowing rate.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

22.  LOANS AND FINANCING (Continued)

     LIBOR at  December  31,  2001 was 2.4%.  TJLP,  IGP-M , and CDI were 10.0%,
     9.9%, and 19.02%, respectively, at December 31, 2001.

     Long-term payment schedule:

        DUE DATE        2001
     -------------- ------------
        2003           55,320
        2004           66,735
        2005           66,735
        2006           25,402
        2007           21,176
        2008            2,109
                    ------------
     Total            237,477
                    ============

GUARANTEES:

                BANKS                               GUARANTEES
     ----------------------------   --------------------------------------------
     BNDES - TCO Operators          15% of  receivables  and CDB  (Bank  Deposit
                                    Certificate)  pledged  in the  amount of the
                                    next installment due
     BNDES - NBT                    100% of  receivables  and CDB pledged in the
                                    amount of the next  installment  due  during
                                    the first year and CDB pledged in the amount
                                    equivalent  to two  installments  due in the
                                    remaining periods
     EDC                            Guarantee from TCO and other subsidiaries
     Other loans and financing      Guarantee from TCO

     The agreements with BNDES and EDC include several covenants. At December
     31, 2001, the Company was in compliance with such covenants.

     At December 31, 2001, 87% of loans and financing in foreign currency are
     hedged against foreign exchange variation through swap contracts.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

23.  PROVISION FOR CONTINGENCIES

                                                      2000             2001
                                                 ---------------   -------------
     Tax claims                                        8,721           14,148
     Labor claims                                        654              201
     Telebras                                         53,128           61,634
     Others                                              493              493
                                                 ---------------   -------------
                                                      62,996         76,476
                                                 ===============   =============

     TELEBRAS

     This  provision  corresponds  to the original  loans from  Telecomunicacoes
     Brasileiras  S.A. -  TELEBRAS,  which  according  to  Attachment  II of the
     Spin-Off Report of February 28, 1998, approved by the General  Shareholders
     Meeting of May 1998, should be charged to the respective holding controlled
     by Telegoias Celular S.A. and Telebrasilia Celular S.A.

     Local management, based on the understanding that the respective loans were
     wrongly allocated at the time of the spin-off,  suspended the payments flow
     subsequent  to the  changes in  Company's  controls.  These loans are being
     indexed by the IGP-M (Market General Price Index) plus 6% annual interest.

     In June 1999, Tele Centro Oeste Celular Participacoes S.A. (parent company)
     filed a legal action claiming that the assets related to these  obligations
     - loans and  financing  - belong to the  Company as well as the  respective
     accessories, plus compensations for the installments paid.

     In  November  1999,  the  Company's  management  decided to transfer to the
     actual  holding  -  Tele  Centro  Oeste  Celular  Participacoes  S.A.,  the
     liability  derived  from  the  loan  originally  due  to   Telecomunicacoes
     Brasileiras S/A - TELEBRAS and absorbed during the spin-off process.

     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

     Telegoias,  Telems, Telemat, Teleron, Teleacre and Telebrasilia (the "legal
     predecessors" of the Company), and Telebras, 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.  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  legal



     predecessors  prior to the  effective  date of the  spin-off  of the  legal
     predecessors'  cellular assets and liabilities to the Companies will remain
     with the  legal  predecessors,  except  for  those  liabilities  for  which
     specific  accounting  provisions  have been assigned to the Companies.  Any
     claims against the legal  predecessors  that cannot be settled by them have
     received  assets which might have been used to settle those claims had they
     not been spun off from the legal predecessors.

     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 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

23.  PROVISION FOR CONTINGENCIES (Continued)

     ICMS ON ACTIVATION FEES

     On  June  19,  1998  the  Secretaries  of the  Treasury  of the  individual
     Brazilian  states  (the  "State  Secretaries")  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).  As a result,  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  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  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
     that the new  interpretation  of the  scope  of the  ICMS tax by the  State
     Secretaries  is  unlawful.  If the ICMS tax were applied  retroactively  to
     activation  fees earned  during the past five years,  it would  generate an
     estimated  maximum  liability  of R$ 82,000  and 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.

24.  PENSION PLAN

     Tele Centro Oeste Celular Participacoes S.A., together with other companies
     of the former Telebras System,  make payments towards private pension plans
     and of medical  assistance  for  retired  employees,  controlled  by Sistel
     Social Security  Foundation - SISTEL.  Up until December 1999, all sponsors
     of the plans  controlled by SISTEL showed  solidarity  towards the Benefits
     Plan existing at that time. On December 28, 1999, the sponsors of the plans
     controlled by SISTEL  negotiated  conditions for the creation of individual
     pension plans per sponsor  (PBS-TCO),  maintaining  the solidarity only for
     the participants  already assisted by the plan and under such conditions at
     January 31, 2000  (PBS-A),  resulting  in a  restructuring  proposal on the



     Sistel  Statute and  Regulation  which was  approved  by the  Complementary
     Pension Department on January 13, 2000.

     Due to the discontinuation of the solidarity concept occurred in 1999, Tele
     Centro Oeste Celular  Participacoes  S.A.  individually  sponsors a Defined
     Benefits  Retirement  Plan PBS-TCO,  which covers  approximately  1% of the
     employees  working  for the Company at December  31,  2001.  Apart from the
     supplementation  benefit,  the Company is participant of a  multi-sponsored
     plan of medical assistance for retired employees and dependents at a shared
     cost (PAMA). The contributions towards plan PBS-TCO are determined based on
     actuarial  studies  prepared by  independent  actuaries in accordance  with
     current norms established in Brazil. The cost determination regime is based
     on  capitalization  and the  contribution  due by the  sponsor  is 13.5% on
     payroll  covering the employees  who are  participating  in the plan,  from
     which 12% is  allocated  to the costing for plan  PBS-TCO and 1.5% for plan
     PAMA.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

24.  PENSION PLAN (Continued)

     For the other 99% of employees from Tele Centro Oeste Celular Participacoes
     S.A.,  there is an  individual  defined  contribution  plan - Benefits Plan
     TCOPREV, instituted by Sistel in August 2000. The Plan TCOPREV is supported
     by contributions made by participants  (employees) and by the sponsor which
     are credited to  individual  accounts on behalf of the  participants.  Tele
     Centro  Oeste  Celular  Participacoes  S.A.  is  responsible  for the costs
     relating  to all  administrative  and  maintenance  expenses  of the  plan,
     including  death and  invalidity  risks.  The employees  taking part of the
     Defined  Benefits  Plan  (PBS-TCO)  were  given the  option  to joint  plan
     TCOPREV,  which was also offered to the  employees  not taking part of plan
     PBS-TCO,   as  well  as  to  all  newly  hired  employees.   The  Company's
     contributions  towards  plan  TCOPREV  are  equal  to  those  made  by  the
     participants,  up to 8% of  the  participation  salary,  according  to  the
     percentage chosen by the participant.

     We present below the consolidated position of the provision for the defined
     benefits  pension  plan and medical  assistance  for retired  employees  at
     December  31,  2001,  as  well as  other  information  required  by the CVM
     Instruction No. 371, of December 13, 2000 on such plans.

     PBS - TCO

     Reconciliation of assets and liabilities at December 31, 2001

                                                              COMPANY   CONSOLIDATED
                                                             --------- --------------
     1. Present value of actuarial obligations with cover       501        3,184
     2. Present value of actuarial obligations without cover      -            -
                                                             --------- --------------
     3. Present value of actuarial obligations                  501        3,184
     4. Fair market value of the plan assets                    762        4,685
                                                             --------- --------------
     5. Present  value of  obligations  exceeding the          (261)      (1,501)
        fair market value of assets  (3 - 4)
     6. Net actuarial liabilities / (assets)                 --------- --------------
       a) Net actuarial liabilities / (assets)                 (261)      (1,501)
       b) Actuarial liabilities / (assets) already                -            -
          provided for                                       --------- --------------
       c) Additional actuarial liabilities /                   (261)      (1,501)
          (assets) (a - b)                                   ========= ==============



     TCO PREV

     Reconciliation of assets and liabilities at December 31, 2001

                                                              COMPANY   CONSOLIDATED
                                                             --------- --------------
     1. Present value of actuarial obligations with cover     5,993        33,373
     2. Present value of actuarial obligations without cover      -             -
                                                             --------- --------------
     3. Present value of actuarial obligations                5,993        33,373
     4. Fair market value of the plan assets                  5,311        29,564
                                                             --------- --------------
     5. Present  value of  obligations  exceeding the           682         3,809
        fair market value of assets  (3 - 4)
     6. Net actuarial liabilities / (assets)                 --------- --------------
       a) Net actuarial liabilities / (assets)                  682         3,809
       b) Actuarial liabilities / (assets) already                -             -
          provided for                                       --------- --------------
       c) Additional actuarial liabilities /                    682         3,809
          (assets) (a - b)                                   ========= ==============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

24.  PENSION PLAN (Continued)

     Expenses to be recorded in 2002

                                                              COMPANY   CONSOLIDATED
                                                             --------- --------------
     1. Cost of current services (with interest)              1,034         4,173
     2. Expected contributions from participants for 2002         -             -
     3. Interest on actuarial obligations                       528         2,996
     4. Expected income from assets                             591         3,345
     5. Amortization costs
       a) Actuarial (gains) or losses not recorded                -             -
       b) Cost of past services not recorded                      -             -
       c) Increase in unrecorded liabilities                      -             -
       d) Total (a+b+c)                                           -             -
                                                             --------- --------------
     6. Total expenses recorded  (1-2+3-4+5d)                   971         3,824
                                                             ========= ==============

     Actuarial assumptions adopted in the calculations:

     Discount rate for the actuarial            11.30% p.a.  ( 6.0% real e 5.0% inflation)
     obligation:
     Expected interest rates on the plan        14.45% p.a.  ( 9.0% real e 5.0% inflation)
     assets:
     Estimated salary increase index:           8.15% p.a.  ( 3.0% real e 5.0% inflation)
     Estimated benefit increase index:          5.00% p.a.  ( 0.0% real e 5.0% inflation)
     Biometrics table for general death rate:   UP84 with 1 year aggravation
     Biometrics table for disability:           Disability table
     Expected rotation rate:                    0.15 / (Service Period + 1)
     Possibility of retirement:                 100% at the first eligibility to a benefit
                                                from the Plan

     The Company has not recognized the adjustments resulting from the
     application of the CVM Resolution No. 371 in the financial statements as of
     December 31, 2001, which is the adequate procedures.

     During 2001, the Company made contributions to the Plan PBS TCO and TCO
     PREV in the amount of R$ 2,561 (R$ 2,087 in 2000).

25.  SHAREHOLDERS' EQUITY

     a. CAPITAL

        The  authorized  capital at December  31,  2001 and 2000 is  700,000,000
        thousand shares. The subscribed and paid-in capital at December 31, 2001
        corresponds  to  R$  588,865  (R$  386,865  in  2000),   represented  by



        366,463,335,000  shares  (364,399,028,000  shares  in 2000)  with no par
        value, distributed as follows (in thousands of shares):

                                                  DECEMBER 31,  DECEMBER 31,
                                                      2000          2001
                                                  ------------  ------------
        Common shares                             124,369,031   126,433,338
        Preferred shares                          240,029,997   240,029,997
                                                  ------------  ------------
        Total                                     364,399,028   366,463,335
        Book value per thousand shares - Corporate   2.459935      2.756551
        Law (in R$)



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

25.  SHAREHOLDERS' EQUITY (Continued)

     a. CAPITAL (Continued)

        The preferred  shares are entitled to a dividend 6% greater than that of
        the common shares. Earnings may be used to increase capital or otherwise
        appropriated,  consequently such earning would no longer be available as
        dividends.  Therefore, there is no assurance that preferred shareholders
        will receive the 6% premium on undistributed  earnings.  The unit of one
        thousand  shares is used  because  this is the basis for  quotation  and
        trading on the Sao Paulo Stock Exchange.

        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.

        At a  meeting  held on June 22,  2001,  the Board of  Directors  of Tele
        Centro Oeste Celular  Participacoes S.A. decided on the acquisition,  at
        market value,  of up to  28,150,000,000  shares issued by the Company as
        follows: 4,750,000,000 common shares and 23,400,000,000 preferred shares
        representing  up to 10% of  outstanding  common  shares and up to 10% of
        outstanding   preferred  shares,  for  cancellation  or  maintenance  in
        treasury and subsequent disposal, without reducing the capital.

        On August 27, 2001, the Extraordinary  Shareholders Meeting approved the
        Company's  capital increase through  capitalization of retained earnings
        in the amount of R$ 185,382, without the issuance of shares.

        On the same date,  2,064,307,557  common shares,  amounting to R$16,618,
        were issued to BID S.A. in return for the tax benefit  derived  from the
        amortization of the premium reserve.



     b. LEGAL RESERVE

        Under Brazilian  Corporation Law, the Company is required to appropriate
        5% of its  annual  earnings,  calculated  using  Brazilian  GAAP,  after
        absorbing accumulated losses, to a legal reserve, which is restricted as
        to  distribution.  This  reserve may be used to  increase  capital or to
        absorb losses, but may not be distributed as dividends.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

25.  SHAREHOLDERS' EQUITY (Continued)

     c. LONG TERM REVENUE RESERVE

        The long-term revenue reserve represents earned but unrealized  revenues
        resulting  from the  investments  accounted for using the equity method.
        The  reserve is realized  when  dividends  or interest on  shareholders'
        equity are received, and other events,  according to CVM policies.  Upon
        realization,  the reserves are reversed to retained earnings. Changes in
        reserve are outlined as follows:

                                                      2000             2001
                                                 ---------------   -------------
     Income reserve                                  112,073           97,675
     Reversal                                       (112,073)         (97,675)
     Annual reserve                                   97,675                -
                                                 ---------------   -------------
     Balance at December 31                           97,675                -
                                                 ===============   =============

        At December 31, 2001, the Company did not record income  reserves as the
        compulsory dividends portion did not exceed the realized income.

     d. DIVIDENDS/INTEREST ON OWN CAPITAL

        Pursuant to its by-laws, Tele Centro Oeste Celular Participacoes S.A. is
        required to distribute as dividends, to the extent amounts are available
        for distribution,  an aggregate amount equal to at least 25% of Adjusted
        Net Income (as defined below) for each fiscal year. 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.

        Below is the calculation of the minimum amount of dividends that must be
        distributed:

                                                      2000             2001
                                                 ---------------   -------------
        Year's net income                            103,644          208,104
        (+) Reversal of long term revenue reserve    112,073           97,675
        (-) Long term revenue reserve                (97,675)               -



        (-) Legal reserve                             (6,467)         (10,405)
        (+)Adjustment to determine the Corporate Law  18,750                -
           calculation basis
                                                 ---------------   -------------
        (=)Adjusted net profit                       130,325          295,374
        Mandatory dividends (25%)                     32,581           73,844
        Common shares                                 11,122           25,477
        Preferred shares                              21,459           48,367
                                                 ---------------   -------------
        Dividends value per lot of thousand            0.089            0.202
        shares - R$                              ===============   =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

25.  SHAREHOLDERS' EQUITY (Continued)

     d. DIVIDENDS/INTEREST ON OWN CAPITAL (Continued)

     In 2001, interest on shareholders'  equity of R$40,000 (R$ 0.109353 per lot
     of thousand  shares) was paid to shareholders as a dividend.  This dividend
     was paid net of a 15%  withholding  tax.  As  approved  at a  shareholders'
     meeting, this dividend was distributed as follows:

                                                      2001             2000
                                                 -------------------------------
     Common shares                                    13,775            6,569
     Preferred shares                                 26,225           12,676
     Withholding tax                                  (6,000)          (2,887)
                                                 -------------------------------
                                                      34,000           16,358
                                                 ===============================

     Additionally, dividends of R$ 40,500 were accrued at December 31, 2001 (R$
     18,642 in 2000), to be distributed as follows:

                                                      2001             2000
                                                 -------------------------------
     Common shares                                    13,932            6,363
     Preferred shares                                 26,568           12,279
                                                 -------------------------------
                                                      40,500           18,642
                                                 ===============================

     e. TREASURY STOCK

        At December 31, 2001,  treasury stock represents  336,900,000  preferred
        shares and 747,178,000 common shares.

        Preferred shares were acquired at a cost ranging from R$ 4.38 to R$ 5.86
        per thousand shares.

        Common  shares were  acquired at a cost  ranging from R$ 4.24 to R$ 8.50
        per thousand shares.

     f. RETAINED EARNINGS

        The remaining balance of retained earnings,  adjusted in accordance with
        Article 202 of Law No. 6,404/76, in the amount of R$ 395,133 at December
        31,  2001 (R$  396,673  in 2000),  will be used for  future  investments
        according  to  the  capital  budget  to  be  presented  at  the  General
        Shareholders Meeting.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

26.  TRANSACTIONS WITH RELATED PARTIES

                                                   2001                           2000    1999
                            -------------------------------------------------------------------
                            SPLICE                   SPL          CSM
                              DO       BANCO     CONSTRUTORA    CARTOES
                            BRASIL   CREDIBEL         E           S.A.    TOTAL   TOTAL   TOTAL
                             S.A.               PAVIMENTADORA
                            -------------------------------------------------------------------
     ASSETS
     Cash      and     cash      -          -               -         -       -     713     337
     equivalents
     Short-term investments      -     17,353               -         -  17,353   6,527     369
     Commercial paper       362,310         -               -         - 362,310  77,743   7,792
     Loan agreement              -          -               -         -       -   2,673       -
     LIABILITIES
     Suppliers                 556          -              22       663   1,241   1,452     200
     Interest     on    own  6,671          -               -         -   6,671       -       -
     capital
     Dividends               7,505          -               -         -   7,505       -       -
     TRANSACTIONS
     Income from            39,788      1,250               -         -  41,038   11,078   2,081
     short-term
     investments
     Financial expenses      7,850          -               -         -   7,850       -       -
     Maintenance services    1,968          -               -         -   1,968   3,508     276
     Other materials             -          -               -        10      10       -       -
     Acquisition of              -          -               -       920     920   2,121     282
     telephone cards
     Acquisition of
     property, plant and     9,338          -           2,457         -  11,795   5,112    6,231
     equipment

     The majority shareholder of the Company is BID S.A., which is controlled by
     Splice  do  Brasil,  which  in turn is  under  common  control  with  Banco
     Credibel, SPL Construtora e Pavimentadora and CSM Cartoes S.A.

     The Company  and  subsidiaries  obtain  loans in the  financial  market and
     transfer the proceeds to related parties through Debt Assumption Agreements
     with the aim of reducing loan costs.  The loans obtained are transferred to
     related parties at the same rates  originally  charged plus a premium.

     According to a contract  entered into between Splice do Brasil S.A. and the
     subsidiaries  of Tele Centro Oeste Celular  Participacoes  S.A.,  technical



     assistance  services are payable to Splice do Brasil S.A.  corresponding at
     1% of the net operating  income.  For the year ended  December 31, 2001 the
     amount of R$ 1,932 was charged to general and administrative expenses.

     All  transactions  with related parties were carried out in accordance with
     the Company's Articles of Incorporation and under normal market conditions.

27.  INSURANCE

     At December 31, 2001, in the opinion of management, all significant or high
     risk assets and obligations were insured.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

28.  FINANCIAL INSTRUMENTS

     a. FAIR VALUE 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 use of different  market  assumptions  and/or  estimation
        methodologies  may have a material  effect on the estimated fair values.
        The amount  relating to foreign  currency  loans  indexed at  originally
        contracted  rates  corresponds  to R$ 307.682 which has been  monetarily
        adjusted by rates derived from swap  contracts.  The difference  between
        the loan amounts and the swap  contracts was recorded as other  payables
        at December 31, 2001. The fair value information as of December 31, 2001
        and 2000 presented below is based on pertinent  information available to
        management as of those dates.

                                         2000                   2001
                                -----------------------------------------------
                                   BOOK        FAIR       BOOK        FAIR
                                   VALUE       VALUE      VALUE       VALUE
                                -----------------------------------------------
Loans and financing                509,149    509,149    327,432     326,584
Marketable securities              158,701    158,701    362,310     362,310

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

        Cash,  cash  equivalents,  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.

        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.

     b. RISK FACTORS

        The risk factors affecting the Company's  financial  instruments are the
        following:

        (i) EXCHANGE RATE RISK

            Exchange  rate  risk  relates  to the  possibility  of  the  Company
            computing  losses derived from foreign  exchange rate  fluctuations,
            increasing  the debt balance of foreign  currency  loans obtained in



            the market and the  corresponding  financial  expenses.  In order to
            reduce this type of risk,  the Company  enters into hedge  contracts
            (swaps of CDI) with financial institutions.

            At December 31, 2001, part of the Company's loans and financing were
            denominated  in U.S.  dollars  and 87% of such loans and  financings
            were covered by hedge contracts.  The gains or losses resulting from
            these hedge contracts are recorded in the statement of operations.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

28.  FINANCIAL INSTRUMENTS (Continued)

        (ii) INTEREST RATES RISK

            Interest  rate  risk  relates  to the  possibility  of  the  Company
            computing   losses   resulting  from  interest  rate   fluctuations,
            increasing the debt balances of loans obtained in the market and the
            financial expenses. The Company has not entered into hedge contracts
            against  this risk.  However,  the Company  constantly  monitors the
            market  interest  rates in order to assess the need for  contracting
            derivatives and obtain protection  against the risk of interest rate
            volatility.

        (iii) OPERATING CREDIT RISK

            The risk relates to the possibility of the Company  computing losses
            derived  from  difficulties  in  collecting  the  amounts  billed to
            customers,   represented   by   cellular   equipment   dealers   and
            distributors  of prepaid  telephone  cards.  In order to reduce this
            type of risk, the Company  performs credit  analyses  supporting the
            risk management  over collection  problems and monitors the accounts
            receivable from  subscribers,  blocking the calling capacity in case
            customers  fail to pay  their  debts.  With  respect  to  shops  and
            distributors,  the Company maintains  individual credit limits based
            on the  analysis of sales  potential,  risk  history and  collection
            problem risks.

            CREDIT RISK LINKED TO RENDERING OF SERVICES

            The credit risk in relation to  accounts  receivable  from  cellular
            telephone services is diversified.

            CREDIT RISK LINKED TO THE SALE OF EQUIPMENT

            The Company's policy for selling equipment and distributing  prepaid
            telephone  cards  is  closely  related  to the  credit  risk  levels
            accepted  during the normal  course of  business.  The  selection of
            partners,   the  diversification  of  receivables   portfolio,   the
            monitoring of loan terms,  position and request  limits  established
            for  dealers,  constitution  of  actual  guarantees  are  procedures
            adopted by the  Company  in order to  minimize  possible  collection
            problems with its trading partners.

        (iv) FINANCIAL CREDIT RISK

            The risk relates to the possibility of the Company  computing losses
            derived  from   difficulties   in  the   realization  of  short-term
            investments  and  hedge  contracts.  The  Company  and  subsidiaries
            minimize the risks  associated with these  financial  instruments by
            investing with reputable financial institutions.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.  SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP

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

     a. DIFFERENT CRITERIA FOR CAPITALIZING AND AMORTIZING CAPITALIZED INTEREST

        Through  December 31, 1993,  interest was not capitalized as part of 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. Additionally, until December 31, 1998, Brazilian
        GAAP   for   telecommunications   companies   required   that   interest
        attributable to  construction-in-progress  was computed at a rate of 12%
        per annum of the  balance of  construction-in-progress  and the  portion
        which relates to interest on third party loans was credited to financial
        expenses based on actual interest costs. The portion relating to its own
        capital was credited to capital  reserves.  Since January 1, 1999,  this
        practice was not required anymore and CVM Instruction No. 193/96 came to
        be used. In 2001, 2000 and 1999, the Company did not capitalize interest
        attributable to construction-in-progress for Brazilian GAAP.

        Under US GAAP,  according to Statement of Financial  Accounting Standard
        ("SFAS") No. 34 "Capitalization of Interest Cost", 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.
        Furthermore,  the amount of interest  capitalized  excludes the monetary
        gains  associated with the borrowing and the foreign  exchange gains and
        losses on foreign currency borrowings.



     b. DIFFERENT CRITERIA FOR CAPITALIZING AND AMORTIZING  CAPITALIZED INTEREST
        (Continued)

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

                                                               1999       2000       2001
                                                           ---------- ----------- ---------
        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).                  3,709     14,118     16,209
        US GAAP difference                                 ---------- ----------- ---------
                                                              3,709     14,118     16,209
                                                           ========== =========== =========

        AMORTIZATION OF CAPITALIZED INTEREST DIFFERENCE
        Amortization under Brazilian GAAP                     6,363     10,926     11,323
        Less amortization under US GAAP                     (2,005)    (4,287)    (6,325)
                                                           ---------- ----------- ---------
        US GAAP difference                                    4,358      6,639      4,998
                                                           ========== =========== =========



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

     c. PENSION AND OTHER POST-RETIREMENT BENEFITS

        The Company  participates in a multi-employer  pension plan with respect
        to its retired  employees  and a multiple  employer  with respect to its
        active  employees.  The  Company  also  participates  in  multi-employer
        post-retirement benefit plan for all of its retired employees and active
        employees electing the defined  contribution plan. Under Brazilian GAAP,
        annual  pension  contributions  are expensed as the annual pension cost,
        and no liability for future  obligations  is recorded.  US GAAP requires
        accounting for such benefit costs in accordance with SFAS 87 "Employers'
        Accounting for Pensions." At December 31, 1999 and 2000, accrued pension
        costs of R$ 29,534 and R$ 1,358,  respectively were recorded for US GAAP
        purposes.  See note 30a.  During 2000, the Company  introduced a defined
        contribution plan in which active employees could elect participation in
        lieu of participation in the defined benefit pension plan. Employees who
        elected  participation in the defined  contribution  plan  automatically
        lose their right to participate in the post-retirement health care plan.

     d. 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.

     e. 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.  Additionally,  under  Brazilian  GAAP,
        interest  expense  may be imputed on capital and  included in  operating
        income.  This  imputed  interest  is then  reversed  from  non-operating
        income. Under US GAAP, interest is not imputed on capital.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

     f. EMPLOYEES' PROFIT SHARING

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

     g. 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.

     h. 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.
        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.

     i. INCOME TAXES

        For Brazilian  GAAP,  the deferred tax charges  relating to the deferred
        income tax effects of  indexation  adjustments  for 2000 and 1999,  were
        recorded  directly against  shareholders'  equity.  Under U.S. GAAP, for
        purposes  of  financial  statements,   the  effects  of  the  indexation
        adjustments  made in 2000 and 1999 on the deferred  income tax, would be
        charged to the income and social  contribution taxes in the consolidated
        statements of operations.

     j. EARNINGS PER SHARE

        In 2001,  2000, 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
        Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  per
        Share",  the  computation  is  based  on  the  weighted  average  shares
        outstanding during the year, excluding treasury stock.



     k. DEFERRED TAXES

        The deferred  income tax  liability  resulting  from the  indexation  of
        permanent  assets of R$ 23,956 in 2000 and R$ 46,551 in 1999 was charged
        directly to  shareholders'  equity in accordance  with  Brazilian  GAAP,
        whereas for U.S.  GAAP the charge  would be to income for the year.  The
        deferred  tax  effect  related  to  previously  recorded  indexation  of
        permanent assets amount to R$ 17,403,  R$ 12,901 and 9,074 in 2001, 2000
        and  1999,  respectively,   and  was  charged  directly  to  the  income
        statement.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

     l. VALUATION OF LONG-LIVED ASSETS

        For US GAAP,  effective  January 1, 1996, the Companies  applied 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 review.
        The carrying value of long-lived assets is considered  impaired when the
        anticipated   undiscounted   cash   flow  from   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  application  of this
        standard  has not had a  material  effect on the  Companies'  results or
        financial condition.

     m. 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 certain subsidiaries.

        In April 1998, the AICPA issued  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 expensed as incurred.

        Thus,  the adjustment to  shareholders'  equity in 2001 of R$ 32,981 (R$
        35,158 in 2000) was recorded for US GAAP purposes.

     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.  Beginning in 2000,  there were no differences
        regarding the revenue recognition criteria between Brazilian GAAP and US
        GAAP because the Companies ceased charging activation fees.

     o. RETAINED EARNINGS

        For Brazilian  GAAP, a company formed as a result of a spin-off may have
        retained   earnings  on  its  balance  sheet  if  the  parent  company's
        shareholders'  resolution for 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$ 447,049.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

     p. PREMIUM - COVERAGE PARTICIPACOES S.A.

        As  discussed  in note 16, in 1999 the Company  recognized  an asset for
        Brazilian GAAP purposes of R$ 354,786,  and the related  amortization of
        R$  5,913,  as a result of an  intangible  asset  created  when BID S.A.
        purchased  the  controlling   interest  of  the  Holding  Company,   and
        subsequently  pushed the asset down to the Holding Company.  For US GAAP
        purposes,  these amounts were excluded from net equity and net income in
        1999. In 2000 and 2001, as a result of a change in Brazilian  accounting
        principle,  only the future tax  benefits  of the  transaction  could be
        considered as an asset.  Under  Brazilian GAAP the  amortization  of the
        premium is recorded as an expense in the net  nonoperating  results with
        an equal offsetting  reduction of the tax provision.  Under US GAAP only
        the current and deferred  provision is  affected.  Also since 2000,  the
        future amortization  deductions of this amount became utilizable for tax
        purposes.  Therefore,  for US GAAP  purposes,  in  accordance  with EITF
        94-10,  the  future  tax  benefits   resulting  from  transactions  with
        shareholders  were  recognized  as an asset but are not  included in the
        Company's income statement, but rather in equity.

     q. AMORTIZATION OF CONCESSION

        For Brazilian GAAP purposes,  the amortization  period of the concession
        (license) for the Band B Company,  Norte Brasil Telecom S.A. is 30 years
        in 2000,  which  included an  additional  15 years  assuming  renewal by
        Anatel.  For US GAAP  purposes,  the  amortization  period  of 15  years
        includes only the initial term of the concession.

        In 2001, the Company  changed the  amortization  period to 15 years with
        the aim of conforming  the  Brazilian  GAAP  treatment  with the US GAAP
        treatment.

     r. INTEREST ON OWN CAPITAL

        For  Brazilian  GAAP  purposes,  the  interest  on one's own  capital is
        considered   a  financial   expense  in  operating   income,   and  then
        reclassified to equity as a dividend. For US GAAP purposes,  interest on
        one's own capital directly reduces equity as a dividend.



     s. INVESTMENTS IN MARKETABLE SECURITIES

        Under  Brazilian  GAAP,   marketable  securities  are  valued  based  on
        historical cost plus accrued  interest.  US GAAP requires  securities be
        valued in accordance with SFAS 115,  "Accounting for Certain Investments
        in Debt and Equity Securities".  All the marketable  securities would be
        considered  available-for-sale  under SFAS 115,  however  since the fair
        value equals the carrying value there is no adjustment to equity.

     t. DERIVATIVES AND HEDGING ACTIVITIES

        As of  January  1,  2001,  for US GAAP  purposes,  the  Company  adopted
        Financial  Accounting  Standards Board Statement No.133,  ACCOUNTING FOR
        DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES (Statement 133) which was
        issued in June, 1998 and its amendments  Statements 137,  ACCOUNTING FOR
        DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE
        DATE OF FASB  STATEMENT  NO.  133 AND  138,  ACCOUNTING  FOR  DERIVATIVE
        INSTRUMENTS AND CERTAIN HEDGING  ACTIVITIES issued in June 1999 and June
        2000, respectively (collectively referred to as Statement 133).



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

     u. DERIVATIVES AND HEDGING ACTIVITIES--continued

        As a result of  adoption  of  Statement  133 for US GAAP  purposes,  the
        Company  calculated  the  fair  value  of  its  foreign  currency  swaps
        agreements.  The  difference  between  fair  value and book value is not
        significant, so no adjustment was made in the financial statements.

     v. DEBT ASSUMPTION AGREEMENTS

        The Company and  subsidiaries  obtain loans in the financial  market and
        transfer  the  proceeds  to  related  parties  through  Debt  Assumption
        Agreements.  In accordance  with Brazilian  GAAP, the resulting  balance
        sheet  amounts were  set-off,  but for US GAAP  purposes  they have been
        restated in the balance  sheet.

     RECONCILIATION OF THE INCOME DIFFERENCES BETWEEN US AND BRAZILIAN GAAP

                                                              1999        2000      2001
                                                           ---------- ----------- ---------
     Net income as reported..........................        99,588     103,644    178,587
      Different criteria for determining:
        Capitalized interest.........................         3,709      14,118     16,209
        Amortization of capitalized interest.........         4,358       6,639      4,998
        Activation income deferral...................       (4,048)           -          -
        Amortization of the activation income deferral       18,986       1,024          -
        Costs of start-up activities and others......      (32,042)     (3,116)      2,177
        Premium amortization.........................         5,913           -          -
        Pension benefits - SFAS 87 adjustments ......      (29,534)      28,186      1,990
        Amortization of Concession...................             -     (2,746)          -
      Items posted directly to equity
        Deferred tax on full indexation..............      (46,551)    (23,956)          -
      Effects  of the above  adjustments  on  deferred       11,815    (14,926)    (8,627)
        taxes........................................
      Effects  of the above  adjustments  on  minority          387     (4,096)      (840)
        shares.......................................      ---------- ----------- ---------
     US GAAP net income..............................        32,581     104,771    194,494
                                                           ========== =========== =========
     EARNINGS PER THOUSAND SHARES ACCORDING TO US
     GAAP
     Net income applicable to preferred shares               21,367      70,375    130,449
     Net income applicable to common shares                  11,214      34,396     64,045
     Net income                                            ---------- ----------- ---------
                                                             32,581     104,771    194,494



     Basic and fully diluted earnings per thousand shares
     in R$:
         Preferred                                             0.10        0.29       0.54
         Common                                           ========== =========== =========
                                                               0.09        0.28       0.51
                                                          ========== =========== =========
     Weighted average number of shares outstanding
     (thousands)                                         223,591,641 240,029,997 239,964,678
         Preferred                                       124,369,031 124,369,031 124,882,040
         Common



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

29.     SUMMARY OF DIFFERENCES BETWEEN BRAZILIAN AND US GAAP (Continued)

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

                                                                      2000           2001
                                                                  ------------   -----------
     Shareholders' equity as reported ...............               1,042,172     1,126,432
       Different criteria for:
         Capitalized interest .......................                (48,358)      (32,148)
         Amortization of capitalized interest .......                  22,199        27,197
         Activation income deferral .................                (32,655)      (32,655)
         Amortization of the activation income deferral.......         32,655        32,655
         Donations received .........................                   (130)         (130)
         Costs of start-up activities and others.....                (35,158)      (32,981)
         Pension benefits - SFAS 87 adjustments......                 (1,348)           642
         Amortization of concession                                   (2,746)       (2,746)
         Effects of the above adjustments on deferred taxes...         20,343        11,716
         Minority interests .........................                   3,149         2,309
                                                                  ------------   -----------
     Shareholders' equity according to US GAAP ......               1,000,123     1,100,291
     Additional information:                                      ============   ===========
       Total assets under US GAAP....................               2,113,001     2,389,361
                                                                  ------------   -----------
       Property, plant and equipment.................               1,489,906     1,677,904
       Accumulated depreciation......................               (432,310)     (606,718)
                                                                  ------------   -----------
       Net property, plant and equipment.............               1,057,596     1,071,186
                                                                  ============   ===========

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

     Balances at December 31, 1999...................                 814,623
     Recoverable taxes on premium - Coverage
       Participacoes S.A.............................                 118,616
     Net income......................................                 104,771
     Interest on own capital/dividends...............                (37,887)
                                                                  ------------
     Balances at December 31, 2000...................               1,000,123
     Payment to shareholders' related to premium                      (5,485)
       utilization Treasury stock....................                 (6,826)
     Dividends to minority interest of subsidiaries..                 (1,516)



     Net income......................................                 194,494
     Interest on own capital/dividends...............                (80,500)
                                                                  ------------
        Balances at December 31, 2001................               1,100,291
                                                                  ============

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

     a. PENSION PLAN

        The Company and its subsidiaries,  except for Norte Brasil Telecom S.A.,
        together  with  substantially  all of the other  companies in the former
        Telebras group,  participate in a multi-employer defined benefit pension
        plan  and  other  post-retirement  benefit  plans  administered  by  the
        FUNDACAO SISTEL DE SEGURIDADE SOCIAL ("Sistel"), a minority shareholder.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

     a. PENSION PLAN (Continued)

        Effective  2001,  the plan was  modified  and  changed  into a  multiple
        employer pension plan with respect to active employees.  The plan assets
        and liabilities  related to active employees were transferred into a new
        plan. The benefits remained unchanged. The post retirement benefit plans
        remained as unchanged multi-employer plans. Also during 2001, the active
        employees  were able to elect between  participation  in this plan, or a
        defined contribution plan.

        Substantially all of Company's employees are covered by these plans. The
        Company   contributed   R$  2,136   and  R$  1,519  in  1999  and  1998,
        respectively,  in respect to pension  fund  contributions.  The  Company
        contributed  R$ 2,561 in 2001 (R$ 2,087 in 2000)  with  respect  to post
        retirement plans.

        In 1999,  Sistel approved changes to the plan statutes  resulting in the
        break  up  of  plan  assets  and  liabilities   related  to  the  active
        participants  of each  sponsor.  Sistel did not break up plan assets and
        liabilities related to inactive participants and, thus, the Company will
        continue to sponsor the Sistel plan for such inactive participants.

        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 pension payment is  subsequently  adjusted  upwards to recognize
        cost of living  increases  and  productivity  awards  granted  to active
        employees.  In  addition  to the  pension  supplements,  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. The actuarial studies are revised periodically to
        identify whether adjustments to the contributions are necessary.

        The change in plans assets and benefit  obligation  plan and the related
        actuarial assumptions are as follows:

        CHANGE IN PLAN ASSETS
                                                       DEFINED BENEFIT PENSION
                                                    ----------------------------
                                                        2000            2001
                                                    -------------  -------------
        Fair value of plan assets at beginning        17,518           2,964
          of year
        Actual return on plan assets                   8,267             339
        Sponsors' contributions                        2,862             164



        Expenses and distributions                     (201)           (122)
        Effect of settlement                               -            (39)
        Assets transferred to defined               (25,482)         (1,322)
          contribution plan                         -------------  -------------
        Fair value of plan assets at end of year       2,964           1,984
                                                    =============  =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

     a. PENSION PLAN -- Continued

        CHANGE IN BENEFIT OBLIGATIONS
                                                       DEFINED BENEFIT PENSION
                                                    ----------------------------
                                                        2000            2001
                                                    -------------  -------------
        Benefit obligation at beginning of year       35,056           2,333
        Service cost                                   2,643             111
        Interest cost                                  3,950             263
        Actuarial gains                              (8,195)              72
        Benefits and expenses paid                     (201)           (122)
        Curtailment                                 (10,629)         (1,796)
        Settlement                                  (20,291)            (38)
                                                    -------------  -------------
        Benefit obligation at end of year              2,333             823
                                                    =============  =============

        COMPONENTS OF ANNUAL PENSION COST

                                                        2000            2001
                                                    -------------  -------------
        Net service cost                               1,558              80
        Interest cost                                  3,950             263
        Expected return on assets                    (2,645)           (435)
        Amortization of unrecognized gain              (703)           (102)
        Amortization of initial transition               813              16
          obligation                                -------------  -------------
        Net periodic pension cost                      2,973           (178)
                                                    =============  =============

        The weighted-average actuarial assumptions,  as determined by actuaries,
        were as follows:

                                                        2000            2001
                                                    -------------  -------------
        Discount rate for determining projected       11.30%          11.30%
          benefit obligations
        Rate of increase in compensation levels        8.15%           8.15%
        Expected long-term rate of return on          14.45%          14.45%
          plan assets

        In 2001,  for  employees  who  elected  to  participate  in the  defined
        contribution  plan,  pension plan assets of R$ 1,322 (R$ 25,482 in 2000)
        were transferred to the employee's  account in the defined  contribution
        plan. Under the provisions of Statement of Financial Accounting Standard
        No. 88,  "Employers'  Accounting for  Settlements  and  Curtailments  of
        Defined Benefit Pension Plans and for Termination Benefits," the effects
        of employees electing to withdraw from the defined benefit plan in order
        to  participate  in  the  defined   contribution   plan   constitutes  a



        curtailment  which resulted in the recognition of a gain of R$ 1,683 (R$
        3,512 in 2000) to the Company.  Additionally,  the  transference of plan
        assets to the defined contribution plan constitutes a settlement,  which
        also resulted in the  recognition of a gain of R$ 25 (R$ 23,198 in 2000)
        to the Company.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

     a. PENSION PLAN -- Continued

                                                 2001
        --------------------------------------------------------------------------------------
                                                                                      After
                                                 Before                            Curtailment
                                               Curtailment   Effect of   Effect of     and
                                                   And      Curtailment Settlement  Settlement
                                               Settlement
                                               ------------------------------------------------
        Actuarial present value of benefit
        obligations:
           Vested benefit obligation               (524)           -           -      (524)
           Accumulated benefit obligation          (723)           -           -      (723)

           Projected benefit obligation          (2,657)       1,796          38      (823)
           Plan assets at fair value              2,022            -        (38)      1,984
                                               ------------------------------------------------

           Funded status                           (635)       1,796           -      1,161

           Unrecognized net gain                   (560)           -          25      (535)
           Unrecognized transition                  129         (113)          -         16
        obligation
                                               ------------------------------------------------

        Accrued pension cost recognized for
        US GAAP                                  (1,066)       1,683          25        642
                                               ------------------------------------------------

                                                         2000
        --------------------------------------------------------------------------------------
                                                                                      After
                                                 Before                            Curtailment
                                               Curtailment   Effect of   Effect of     and
                                                   And      Curtailment Settlement  Settlement
                                               Settlement
                                              ------------ ------------ ---------- -----------
        Actuarial present value of benefit
        obligations:
           Vested benefit obligation             (2,938)           -       1,771    (1,166)
           Accumulated benefit obligation       (22,111)           -      20,291    (1,820)

           Projected benefit obligation         (33,252)      10,629      20,291    (2,333)
           Plan assets at fair value             28,445            -    (25,482)      2,964
                                               ------------------------------------------------



           Funded status                         (4,807)      10,629     (5,191)        631

           Unrecognized net gain                (30,512)           -      28,389    (2,124)
           Unrecognized transition                7,262       (7,117)          -        145
        obligation
                                               ------------------------------------------------

        Accrued pension cost recognized for
        US GAAP                                 (28,057)       3,512       23,198    (1,348)
                                               ------------------------------------------------



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

     b. CONCENTRATION OF RISK

        Credit risk with respect to trade accounts receivable from third parties
        is  diversified.  Although  collateral  is not  required,  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 25% 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
        unions. The collective  agreements currently in force expire in November
        2002.

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

     c. SWAPS

        At December  31, 2001 and 2000 the  Company had foreign  currency  swaps
        agreements in order to reduce this type of risk.  The fair values of the
        Company's foreign currency swap contracts were estimated based on quoted
        market prices of comparable contracts, and at December 31, 2001 and 2000
        were substantially the same as book value.

     d. RECENT ACCOUNTING PRONOUNCEMENTS

        In December 1999, the  Securities and Exchange  Commission  issued Staff
        Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
        Statements." SAB 101 provides  guidance on applying  generally  accepted
        accounting   principles  to  revenue  recognition  issues  in  financial
        statements.  The  adoption of SAB 101 did not have a material  effect on
        the Company's results of operations and financial position.

        In July 2001,  the Financial  Accounting  Standards  Board (FASB) issued
        SFAS No. 141,  "Business  Combinations" and SFAS No. 142,  "Goodwill and
        Other   Intangible   Assets."   SFAS  141  requires  that  all  business
        combinations  be accounted for by the purchase  method of accounting and
        changes the criteria for recognition of intangible  assets acquired in a
        business  combination.  The provisions of SFAS 141 apply to all business
        combinations  initiated  after June 30,  2001.  SFAS 142  requires  that



        goodwill and intangible assets with indefinite useful lives no longer be
        amortized;  however, these assets must be reviewed at least annually for
        impairment.  Intangible assets with finite useful lives will continue to
        be amortized  over their  respective  useful  lives.  The standard  also
        establishes specific guidance for testing for impairment of goodwill and
        intangible  assets with indefinite  useful lives. The provisions of SFAS
        142 will be  effective  for the  Company's  fiscal  year 2002.  However,
        goodwill and intangible  assets acquired after June 30, 2001 are subject
        immediately to the non-amortization  provisions of SFAS 142. The Company
        does not  expect  that  the  adoption  of SFAS  141 and 142 will  have a
        material effect on its financial position or results of operations.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (Amounts expressed in thousands of Brazilian Reais, except per share amounts)

30.     ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

     d. RECENT ACCOUNTING PRONOUNCEMENTS--continued

        In June of 2001,  the FASB issued SFAS No.  143,  "Accounting  for Asset
        Retirement  Obligations,"  on the accounting for obligations  associated
        with the retirement of long-lived assets.  SFAS 143 requires a liability
        to be recognized in the financial statements for retirement  obligations
        meeting  specific  criteria.  SFAS 143 is  effective  for  fiscal  years
        beginning  after June 15, 2002.  The Company  believes  that adoption of
        this  statement  will not have a  significant  impact  on its  financial
        position or results of operation.

        In August  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for the
        Impairment or Disposal of Long-Lived  Assets." SFAS 144 amends  existing
        accounting guidance on asset impairment and provides a single accounting
        model for long-lived  assets to be disposed of. Among other  provisions,
        the  new  rules  change  the  criteria  for   classifying  an  asset  as
        held-for-sale.  The standard also broadens the scope of businesses to be
        disposed of that qualify for reporting as discontinued  operations,  and
        changes  the  timing  of  recognizing  losses  on such  operations.  The
        provisions of SFAS 144 will be effective  for the Company's  fiscal year
        2002  and will be  applied  prospectively.  The  Company  believes  that
        adoption of this  statement  will not have a  significant  impact on its
        financial position or results of operation.

31.     SUBSEQUENT EVENTS (UNAUDITED)

        In order to rationalize  the corporate  structure of the Company and its
        subsidiaries, a reorganization was carried out by means of the merger of
        Telebrasilia Celular S.A. on April 26, 2002 by Tele Centro Oeste Celular
        Participacoes   S.A.,  taking  advantage  of  the   administrative   and
        commercial  synergies in place and concentrating the liquidity of listed
        companies' shares in a sole company,  thereby reducing capital cost. The
        terms and  conditions  of this  restructuring  were  negotiated  by both
        companies'  management in a Special  General  Meeting also held on April
        26, 2002, which approved that the  substitutions  were made based on the
        shareholders' equity at book value with the delivery of preferred shares
        only,  even to common  shareholders.  This  merger  was  subject  to the
        authorization by the National  Telecommunications  Agency - ANATEL,  and
        restructuring was approved by Act NO 24991, of April 23, 2002.



                                  EXHIBIT INDEX

        1.1    By-laws of the Holding Company  previously filed with the Holding
               Company's  registration  statement  on  September  18,  1998  and
               incorporated herein by reference.
        1.2    Amendment to the Charter of the Holding Company  previously filed
               with the Holding  Company's  registration  statement on September
               18, 1998 and incorporated herein by reference.
        2.1    Deposit  Agreement  dated as of July 27, 1998 between the Holding
               Company  and The  Bank of New  York,  previously  filed  with the
               Holding  Company's  registration  statement on September 18, 1998
               and incorporated herein by reference.
        4.1    Standard   Concession   Agreement  for  Mobile  Cellular  Service
               (original  and English  translation),  previously  filed with the
               Holding  Company's  registration  statement on September 18, 1998
               and incorporated herein by reference.
        4.2    Cellular Service Authorization Agreement entered into and between
               the  Brazilian  Government,   through  Anatel,  and  Tele  Centro
               Oeste/Inepar  Ltda.,  currently  Norte Brasil  Telecom  S.A.,  on
               November 27, 1998,  previously  filed with the Holding  Company's
               annual  report  on July  16,  2001  and  incorporated  herein  by
               reference.
        4.3    Consent of Ernst & Young Auditores Independentes S.C.`