`AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 2001
================================================================================
                       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, 2000
                       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 English)  (Jurisdiction of Incorporation or Organization)


                               ------------------
                         SCS, QUADRA 2, BLOCO C, 7 ANDAR
                         70302-916 BRASILIA, DF, BRAZIL
                    (Address of Principal Executive Offices)
                               ------------------
                    SECURITIES REGISTERED OR TO BE REGISTERED
                      PURSUANT TO SECTION 12(B) OF THE ACT:


              TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
              -------------------                 -----------------------------------------
      Preferred Shares, without par value*                 New York Stock Exchange
      American Depositary Shares, each                     New York Stock Exchange
      epresenting 3,000 Preferred Shares

--------------------
*Not for trading, but only in connection with the listing of American Depositary
Shares on the New York Stock Exchange.
      SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE
ACT:NONE
      SECURITIES FOR WHICH THERE IS A REPORTING  OBLIGATION  PURSUANT TO SECTION
15(D) OF THE ACT: NONE
      INDICATE THE NUMBER OF OUTSTANDING  SHARES OF EACH OF THE ISSUER'S CLASSES
OF CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD  COVERED BY THIS ANNUAL
REPORT:
                124,369,030,532 Common Shares, without par value
               240,029,997,060 Preferred Shares, without par value
      INDICATE BY CHECK MARK  WHETHER THE  REGISTRANT  (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE  ACT OF
1934  DURING  THE  PRECEDING  12 MONTHS  (OR FOR SUCH  SHORTER  PERIOD  THAT THE
REGISTRANT  WAS REQUIRED TO FILE SUCH  REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
                                  Yes X     No
                                     ---      ---
      INDICATE BY CHECK MARK WHICH  FINANCIAL  STATEMENT ITEM THE REGISTRANT HAS
ELECTED TO FOLLOW.
                            Item 17        Item 18 X
                                   ---            ---



                                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...........................................10

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.........................33

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...........................43

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................48

ITEM 8.  FINANCIAL INFORMATION................................................48

ITEM 9.  THE OFFERING AND THE LISTING.........................................52

ITEM 10. ADDITIONAL INFORMATION...............................................57

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........69

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...............70

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES......................70

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS.............................................................70

ITEM 15. DEFAULTS UPON SENIOR SECURITIES......................................70

ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
         AND USE OF PROCEEDS..................................................70

ITEM 17. FINANCIAL STATEMENTS.................................................70

ITEM 18. FINANCIAL STATEMENTS.................................................70

ITEM 19. EXHIBITS.............................................................70



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  is
separately  referred to as a "Subsidiary."  Norte Brasil  Telecom,  S.A. is also
referred to as the "Band B Subsidiary," while each of the remaining Subsidiaries
is also referred to as a "Band A Subsidiary."

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

On June 05, 2001,  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$2.390   to   US$1.00.    SEE   ITEM   3   "KEY
INFORMATION--EXCHANGE RATES."

The consolidated financial statements of the Company as of December 31, 1999 and
2000 and for the years ended December 31, 1998, 1999 and 2000 (the "Consolidated
Financial  Statements") have been prepared in accordance with generally accepted
accounting  principles in Brazil ("Brazilian GAAP"). The Consolidated  Financial
Statements and, unless  otherwise  specified,  the other financial data included
herein recognize certain effects of inflation and are restated in constant REAIS
of December  31, 2000  purchasing  power using the integral  restatement  method
(CORRECAO MONETARIA INTEGRAL).

Certain  terms are defined  the first time they are used in this Annual  Report.
The "Index of Defined  Terms" that begins on page 72 lists those terms and where
they are  defined.  The  "Technical  Glossary"  that  begins on page 74 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 2000
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, 2000,  1999 and 1998,  net income for the years ended
December 31, 2000, 1999 and 1998.

     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 1998, 1999 AND 2000

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 1998, 1999 AND 2000." 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, 1999 and 2000 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 years 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, 1999 and 2000,
have been restated into currency of December 31, 2000 purchasing power.

     ACCOUNTING CONSEQUENCES OF THE BREAKUP OF TELEBRAS

The formations of the Holding Company and the  Subsidiaries  have been accounted
for as a reorganization  of entities under common control in a manner similar to
a  pooling  of   interests.   The  assets  and   liabilities   of  the  cellular
telecommunications  businesses of the Predecessor  Companies were transferred to
the  Subsidiaries  at their indexed  historical  cost. The revenues and expenses
associated  with  such  assets  and  liabilities  were  also  allocated  to  the
Subsidiaries.  For  revenues  and  costs  of  services,  separate  records  were
maintained  historically for the cellular  telecommunications  businesses of the
Predecessor  Companies,  so actual amounts were  allocated to the  Subsidiaries.
Costs other than costs of services were allocated using methodologies  described
in Note 2 to the Consolidated Financial Statements.  The consolidated statements
of revenues  and expenses and net  interdivisional  cash receipt  (distribution)
include  the  historical   activity   related  to  the  assets  and  liabilities
transferred.   The  Consolidated   Financial   Statements  are  not  necessarily
indicative of what the  financial  condition or the revenues and expenses of the
Company  would have been if the cellular  telecommunications  businesses  of the
Predecessor  Companies had been separate legal entities  before 1998. SEE 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 5 "OPERATING  AND
FINANCIAL REVIEW AND  PROSPECTS--EFFECTS OF CHANGES IN PRESENTATION OF FINANCIAL
STATEMENTS IN 1998, 1999 AND 2000."

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 1996 and 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, 2000, minority shareholders directly and indirectly owned 11.8%, 7.8%, 2.7%,
1.8%,  3.0%,  1.7% and 5.0% of the share  capital  of  Telebrasilia,  Telegoias,
Telemat, Telems, Teleron, Teleacre and NBT, respectively.



Selected Financial Information

                                                                       YEAR ENDED DECEMBER 31,
                                                ----------------------------------------------------------------------
                                                      1996         1997          1998         1999         2000
                                                -------------- ------------ -------------- ----------- ---------------
                                                           (THOUSANDS OF REAIS, EXCEPT PER-SHARE DATA) (1)
INCOME STATEMENT DATA:
BRAZILIAN GAAP
Net operating revenue                                393,935        578,744     637,406      666,660       930,646
Cost of services rendered and cost of products       138,111        242,619     260,327      326,514       532,163
  sold                                               -------        -------     -------      -------       -------
                                                     255,824        336,125     377,079      340,146       398,483
Gross income
Operating expenses:
    Selling expenses                                  20,089         65,082      99,093      118,592       126,163
    General and administrative expenses               28,980         49,814      46,289       64,539        78,420
    Other net operating expense                        3,928          4,770         953       14,020         9,618
                                                       -----          -----      ------       ------         -----
Operating income before net financial result         210,683        225,999     230,744      142,995       184,282
Allocated interest expense.......................      4,749          4,918
Net interest expense (2).........................                                69,711       47,640        30,063
                                                                                 ------       ------        ------
Operating income before interest income and
unallocated interest expense.....................    205,934        221,081
Operating income.................................                               161,033       95,355       154,219
Net nonoperating expense.........................         --             66      20,575        6,055        19,539
Employees' participation                                 295            374       1,271        1,866         1,878
                                                         ---            ---       -----        -----         -----
Income  before   interest   income,   unallocated
  interest expense, taxes and minority interests.    205,639        220,641
Income   before   income   taxes   and   minority                               139,187       87,434       132,802
    interests (2)................................
Income and social contribution taxes.............                                40,206       29,857        40,159
                                                                                 ------       ------        ------
Income before minority interests.................    205,639        220,641      98,981       57,577        92,643
Minority interests...............................     20,973         30,779      24,076       11,531        19,980
                                                      ------         ------      ------       ------        ------
Reversal of interest on own capital..............         --             --      91,749       53,542        30,981
Income before interest income, unallocated
  interest expense and taxes (2).................    184,666        189,863
                                                     =======        =======
Net income.......................................                               166,654       99,588       103,644
                                                                                =======       ======       =======

U.S. GAAP
Income  before   interest   income,   unallocated
  interest expense and taxes (2).................    188,287        196,440
                                                     =======        =======
Net income.......................................                               164,000       32,581       104,771
                                                                                =======       ======       =======
Net profit per 1,000 shares outstanding (REAIS)..                                  0.49         0.09          0.29


                                                                           AT DECEMBER 31,
                                                     1996          1997          1998         1999         2000
                                                ------------- -------------- -------------- ----------- ------------
BALANCE SHEET DATA:                                               (THOUSANDS OF CONSTANT REAIS) (1)
BRAZILIAN GAAP
Property, plant and equipment, net                   691,265        762,994     874,262      994,531      1,083,754
Total assets                                         757,565        911,232   1,224,227    1,819,120      2,154,909
Loans and financing                                   70,475         52,700      56,256      143,828        509,149
Divisional equity                                    532,028        679,472           -            -              -
Shareholders' equity                                                            799,138    1,230,628      1,042,172

U.S. GAAP
Property, plant and equipment, net                   657,530        713,563     819,280      947,615      1,057,596
Total assets                                         734,963        878,114   1,192,699    1,426,558      2,113,001
Loans and financing                                   68,990         52,216      56,256      143,828        509,149
Divisional equity                                    511,958        651,128           -            -              -
Shareholders' equity                                                            758,374      814,623     1,001,123

------------------
(1)  Information is presented in constant REAIS of December 31, 2000.
(2)  For 1996 and 1997, prior to the effective  creation of the Subsidiaries
     on January 1, 1998, the Company did not recognize interest income or taxes,
     and recognized only the portion of interest  expense that was  specifically
     attributable to the cellular operations of the Predecessor Companies.



Exchange Rates

The Registrant will pay any cash dividends and make any other cash distributions
with respect to Preferred Shares in Brazilian  currency.  Accordingly,  exchange
rate fluctuations will affect the U.S. dollar amounts received by the holders of
ADSs on conversion by the Depositary of dividends and distributions in Brazilian
currency on the Preferred  Shares  represented by the ADSs.  Fluctuations in the
exchange rate between  Brazilian  currency and the U.S.  dollar will also affect
the U.S. dollar equivalent of the price of the Preferred Shares on the Brazilian
stock  exchanges.  SEE ITEM 5 "OPERATING  AND FINANCIAL  REVIEW AND PROSPECTS --
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 5, 2001, the Commercial
Market Rate was R$2.3629 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
----------------                                        ---------------- ------------------ -----------  --------------

1996................................................        1.0393           1.0080            1.0413        0.9733
1997................................................        1.1165           1.0805            1.1166        1.0394
1998................................................        1.2087           1.1640            1.2090        1.1160
1999................................................        1.8090           1.8191            2.200         1.2074
2000................................................        1.8270           1.7844            1.8560        1.7230
2001 (through May 31, 2001).........................        2.3590           2.1123            2.3590        1.9380
------------------
(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 2001).



RISK FACTORS

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.  SEE
ITEM 11 "QUANTITATIVE  AND QUALITATIVE  DISCLOSURE  ABOUT MARKET  RISK--EXCHANGE
RATE RISK."

INTEREST RATE INSTABILITY.

The Company may be adversely affected  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."

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."



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.  In general,  the
Company's employees do not have 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 currently uses TDMA technology in the wireless services it provides.
TDMA is a  relatively  new  technology  and it may not  provide  the  advantages
expected by the Company.  If another  technology  becomes the preferred industry
standard,  the  Company may be at a  competitive  disadvantage  and  competitive
pressures  may  require it to change its  digital  technology  at  substantially
increased costs.

The   wireless   telecommunications   industry   is   experiencing   significant
technological change, as evidenced by the increasing pace of digital upgrades in
existing  analog  wireless  systems,  the upcoming  introduction of the personal
communication  services,  or PCS, through the GSM technology,  evolving industry
standards,   ongoing  improvements  in  the  capacity  and  quality  of  digital
technology,  shorter  development  cycles for new products and  enhancements and
changes in end-user  requirements and  preferences.  If the Company is unable to
keep pace with these technological changes, the technology used on the Company's
network   may   become    obsolete.    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.

Under the Concessions,  the Company is required to render certain basic services
under its basic  service plan as well as allowed to create  additional  services
plans. The Concessions provide for a price-cap mechanism to set and adjust rates
on an annual  basis under a formula set forth in the  Concessions.  The cap is a
maximum  weighted  average  price  for a basket  of  services.  The price cap is
adjusted to reflect  the rate of  inflation  as measured by the INDICE  GERAL DE
PRECOS -- DISPONIBILIDADE  INTERNA  ("IGP-DI"),  an inflation index developed by
the FUNDACAO GETULIO VARGAS, a private Brazilian economic research organization.

The weighted average tariff for the entire basket of services may not exceed the
price cap,  but the tariffs  for  individual  services  within the basket may be
increased.  The Company may increase the tariff for any individual service by up
to 20%, subject to a downward  adjustment for inflation effects already captured
in the annual upward  adjustments  of the overall  price cap for the basket,  so
long as we adjust  other  prices  downward to ensure that the  weighted  average
tariff  does not exceed the price cap.  As a result,  the  Company's  ability to
increase  the  rates  it  charges  for  its  services  is  limited.  SEE  ITEM 4
"INFORMATION ON THE COMPANY--REGULATION OF THE TELECOMMUNICATIONS INDUSTRY--RATE
REGULATION."

COMPETITION.

Beginning in 2002, the Company will face competition  from additional  companies
that will offer PCS  services.  The Company will have the option to exchange its
existing  cellular  concession for PCS authorization  contracts.  If it does not
change its concessions,  the Company may not be able to efficiently compete with
the new entrants in its market.  The Company also competes with companies  which
provide other wireless  services,  such as mobile radio and paging  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."

Recent  emergency  measures  enacted by the  Brazilian  government  to  restrain
electric power consumption may cause an economic slowdown,  which would increase
the Company's costs and risk of service  interruption  and decrease its revenues
and customer base.

The combination of a general expansion in demand for electric power not followed
by sufficient  increase in total power  generation  capacity,  with a lower than
expected  level  of  the  hydrographic  basins  that  feed  the  most  important
hydroelectric  plants, has resulted in an unbalance between the availability and
demand of electric  power in Brazil.  In May,  2001,  the  Brazilian  government
instituted  a series of measures  aimed at  immediately  reducing  power  demand
levels in order to avoid risk of sudden blackouts in parts of the country.  Such
emergency measures include the creation of the Electric Energy Crisis Management
Board  (CAMARA DE GESTAO DA CRISE  Energetica),  with powers to,  among  others,
enact resolutions setting forth mandatory reduction in power consumption levels,
alteration in electric power tariffs,  propose  taxation changes in power supply
services and  determine  the  suspension  of power supply to selected  consumers
groups.

Pursuant to the  resolutions  enacted by the Electric  Energy Crisis  Management
Board so far, we are subject to a mandatory  reduction of our power  consumption
levels to 80% of the average  consumption  level  verified in the months of May,
June and July 2000. Compliance with such level shall be assessed per consumption
unit (i.e. each cell site; each switch),  penalty for  non-compliance  being the
increase in prices for power consumed above permitted  levels,  to be calculated
according to the prevailing  rate at the Wholesale  Energy Market - MAE (MERCADO
ATACADISTA DE ENERGIA),  and in extreme  cases of shortage,  suspension of power
supply  for that  consumption  unit for one day per each 3%  consumed  above the
permitted level.

As for new facilities and sites  established  amid the expansion of the network,
distribution channels or administrative  premises,  requests for new connections
shall only be fulfilled by power distribution utilities if the consumption level
of such new  facility is found to be equal to or below 80% of power  consumption
pattern defined for such kind of facility.

Although such measures are expected to be enough to limit power  consumption  in
Brazil to safe levels until the increase in  generation  capacity is carried out
through investments by private enterprises and state-owned companies, there is a
risk of failure to attain reduction objectives, which would ultimately result in
systematic and controlled blackouts in alternating areas.

New  emergency  regulation  as  currently  determined  may  affect  the  Company
negatively due to: (i) an increase in electric power  acquisition  costs in case
the Company fails to meet reduction levels; (ii) an interruption of operation of
all or part of the network, or all or part of the distribution  channels, due to
short-period power supply interruption, in case of non-compliance with permitted
level  or  even  in  case  a  systematic  and  controlled   blackout  policy  is
implemented;  and (iii)  difficulties for network  expansion due to restrictions
for local power suppliers to perform new power connections.

In order to  mitigate  the above  mentioned  negative  impacts,  the Company has
developed  contingency  plans that include (i) the substitution of equipment and
apparatus  for  more  power  efficient  models;  (ii) the  acquisition  of power
generators in crucial  facilities to avoid  interruption of operation and attain
some level of  self-sufficiency;  and (iii) the adoption of operating procedures
to save power. Management believes the contingency plan shall greatly reduce the
risks of the aforementioned negative impacts, with relatively low investments.

Pending  tax  reform  in Brazil  may  increase  our tax  burden  resulting  in a
reduction of profits.  The Brazilian government has proposed broad tax reform in



Brazil,  which is mainly  designed  to reduce the public  deficit  through a tax
increase.  The tax reform bill was  expected  to be  approved  by the  Brazilian
Congress in 2001.  The political  environment  during the first  semester of the
Brazilian Congress,  however,  does not favor extensive reforms of Brazilian tax
legislation  and,  thus, it is likely that tax reform will be postponed.  If tax
reform is approved,  the  Company's tax burden will 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 profits, or CSL, 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,
70302-916 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  2001,  the  Company,  including  its Band A  Subsidiaries  and Band B
Subsidiaries, had approximately 1,966,000 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. held 100% of its common shares.  On March 5,
2001, the control  changed to the Holding  Company,  through the  acquisition of
100% of the common  shares from Splice do Brasil  Telecomunicacoes  e Eletronica
S.A. and the name of the subsidiary changed to TCO IP 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 do Brasil Telecomunicacoes e Eletronica
S.A., through its subsidiary BID S.A. ("Splice"). 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.



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

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

                                                  POPULATION        % OF BRAZIL'S   % OF BRAZIL'S   PER CAPITA INCOME
SUBSIDIARY           AREA                        (MILLIONS)(1)      POPULATION (1)     GDP (2)      (NOMINAL REAIS)(2)
-----------          -------------------------- ----------------  ----------------- -------------- ---------------------
Telebrasilia.....    Federal District...........          2.01            1.21            2.75           13,053
Telegoias .......    Goias......................          4.82            2.95            1.91            3,672
Telegoias .......    Tocantins..................          1.16            0.68            0.21            1,752
Telemat .........    Mato Grosso................          2.39            1.47            1.08            4,244
Telems ..........    Mato Grosso do Sul.........          2.00            1.22            1.10            5,033
Teleron .........    Rondonia...................          1.32            0.81            0.50            3,611
Teleacre ........    Acre.......................          0.54            0.33            0.16            2,826
NBT .............    Amapa......................          0.46            0.28            0.16            3,565
NBT .............    Amazonas...................          2.62            1.68            1.65            5,990
NBT .............    Maranhao...................          5.50            3.33            0.79            1,348
NBT .............    Para.......................          6.00            3.65            1.70            2,698
NBT .............    Roraima ...................          0.30            0.19            0.08            2,862
                     REGION.....................         29.12           17.80            12.09           4,221
                     ------                              =====           =====            =====           =====

(1)   Estimates of the  Instituto  Brasileiro  de Geografia e Estatistica - IBGE
      (the "IBGE"). Demographical information pertains only to areas serviced by
      the  Concessions  and does not pertain to the cities that are not serviced
      by the Concessions.



(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 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  network
capacity,  improving  overall quality and increasing the level of digitalization
of the Company's network.

The following table sets forth the Company's capital  expenditures for each year
in the three-year period ended December 31, 2000.

                                                                           1998           1999            2000
                                                                        -----------   ------------    ------------
                                                                                  (MILLIONS OF REAIS) (1)
Automatic switching equipment........................................        31.3           49.7            29.1
Other equipment......................................................       108.4          148.2           196.0
Real estate..........................................................         1.7            0.6             0.2
Other assets (2).....................................................        19.8           19.9            30.4
                                                                             ----           ----            ----
     Total capital expenditures.....................................        161.3          218.4           255.7
                                                                            =====          =====           =====
------------------
(1)  Information is presented in constant REAIS of December 31, 2000.
(2)  "Other  Assets" does not include  expenditures  for  concessions  for Area
     8 (R$72.6 millions in 1999 and R$40.0 millions in 1998).

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),  e-web 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.

The short-message  service known as E-CELULAR allows users to send messages with
a maximum of 150 characters 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 200,000  customers are already using this service,  with
over  400,000   messages  sent  daily.  In  July  2000,  the  Company   launched
experimentally  a new  service  called  the  e-WAP,  which  is a  cellular-based
Internet-access  service that will be available in the first semester of 2001 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 the customer
will be able to access other portals and websites. One of the advantages of this
new service is that customers  have the  capability of  customizing  the portal,
which makes access and navigation  faster and more  convenient.  The Company has
already formed valuable  partnerships with, among others, FOLHA DE SAO PAULO and
the ESTADO DE SAO PAULO (major  Brazilian news agencies),  as well as with BANCO
DO BRASIL,  UNIBANCO and BANCO ITAU  (important  banking  institutions)  and SOM
BRASIL (record producers). Nearly R$20 million has already been invested in this
service  and  almost 10% of the  customers  are  expected  to be using the e-WAP
services by the end of 2001.

One other service made available to the Company's  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. 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 3% of the Company's revenue in 2000 and (ii) individual customers,
consisting  of  individuals   and  businesses  with  fewer  than  four  cellular
telephones,  who  accounted for 97% of the Company's  revenue  during 2000.  The
Company  varies the manner in which it markets and  promotes  its  services  and
occasionally  develops  special plans and services for particular  categories of
customers.  The Company provides additional support services,  such as dedicated
account representatives, to corporate customers.

The  Company's   customers   consist   primarily  of  high-  and   middle-income
individuals.  According  to the  Company's  research,  as of December  31, 2000,
approximately 65% of the Company's  subscribers were male, and 43% were 29 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 42 stores located  throughout the Region,  with 32 stores located in Area 7
and 12 stores located in Area 8. This network  enables the Company to market its
service and provide aftersales services to subscribers throughout the Region.

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



Network and Subscriber Data

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

                                                                                1998         1999          2000
                                                                              ---------   -----------   -----------
Cellular lines in service at year-end (1).................................      538,814      851,376     1.712.184
Subscriber growth during year (1).........................................        44.3%        58.0%         101.%
Estimated population of Region at year-end (millions)(2)..................         13.7         28.6          29.1
Percentage of population of Region covered at year-end (3)................        77.8%        82.0%         84.0%
Penetration at year-end (4)...............................................         3.8%        5.79%        10.06%
Percentage of area of Region covered at year-end (5)......................          45%          49%           53%
Average monthly incoming minutes of use per subscriber during year........        116.3        145.3         103.1
Average monthly outgoing minutes of use per subscriber during year........        109.7        100.9          54.6
Average monthly revenues per subscriber during year (6)...................     R$119.77      R$89.46       R$62.20

------------------
(1)  These  numbers  have  been  updated  to  account  for  both  Areas 7 and 8,
     including rural service.  In 1999,  there were 16,689 rural cellular lines.
     In 2000, there were 16,711 rural cellular lines.
(2)  IBGE estimates.
(3)  Management  estimates of the percentage of population of the Region who can
     access the Company's cellular telephone signal.  These numbers pertain only
     to Area 7.
(4)  Number of  cellular  lines in  service  divided  by the  population  of the
     Region. These numbers pertain only to Area 7.
(5)  These numbers pertain only to Area 7.
(6)  Net operating revenue divided by the average number of subscribers  divided
     by 12, expressed in constant REAIS of December, 31 2000, net of value-added
     taxes.

The  Concessions  contain  certain  network  coverage  and  quality  of  service
obligations.    SEE    ITEM   4    "INFORMATION    ON   THE    COMPANY--BUSINESS
OVERVIEW--REGULATION OF THE BRAZILIAN  TELECOMMUNICATIONS  INDUSTRY--OBLIGATIONS
OF  TELECOMMUNICATIONS  COMPANIES." The Company's  management  believes that the
Company will be able to meet all such obligations.

Sources of Revenue

The Company  generates  revenue from (i) 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 and 300 minutes 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, 2000.



                                                       Year ended December 31,
                                               1998             1999              2000
                                            (reais)(1)
Activation fee (2)                            151.63           151.63              0
Monthly subscription fee (2)                  20.20             20.20            22.12
Per-minute charges:
VC1 (2)(3)                                     0.27             0.27             0.3023
VC2 (3)                                        0.40             0.40             0.4067
VC3 (3)                                        0.66             0.66             0.7383
DSL1 (3)                                       0.19             0.19             0.2199
DSL2 (3)                                       0.33             0.33             0.3654
AD (per call)(3)                               0.29             0.29              0.29

Information for 1998, 1999 and 2000 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,
                        MS,RO     AC       GO      MT       TO,MS,    AC       GO         MT
                                                             RO
------------------     -------  ------   ------  ------     ------  ------   ------     ------
EXEMPT MINUTES                         240                                 500
------------------                   ------                               ------
RESIDENCES (1) (2)                   162.00                               162.00
------------------                   ------                               ------
SUBSCRIPTIONS (1)       79.00    79.00     80.13   79.00    139.00   139.00   140.98    139.00
VC1 MF (1)(3)          0.4204   0.3780    0.4264  0.4521    0.4204   0.3780   0.4264    0.4521
VC1 MM (1)(4)          0.5466   0.4914    0.5544  0.5877    0.5466   0.4914   0.5544    0.5877
VC2 (1)                0.5700   0.4870    0.5781  0.6114    0.5700   0.4870   0.5781    0.6114
VC3 (1)                1.0231   0.8758    1.0377  1.1002    1.0231   0.8758   1.0377    1.1002
DSL1 (1)                0.00     0.00      0.00    0.00      0.00     0.00     0.00      0.00
DSL2 (1)               0.5045   0.4319    0.5117  0.5425    0.5045   0.4319   0.5117    0.5425
AD (1)                  0.00     0.00      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)  The "240" and "500" Plans were developed for high volume subscribers.
     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.

PLANS                   PLANO TCO - 12      ESSENCIAL 50      ESSENCIAL 100     ESSENCIAL 150      ESSENCIAL 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    59,84    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 Plans ESSENCIAL 50, 100, 150 and 300 include respectively
50,  100,  150 and 300  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 table:

AREA 8 PLANS                  BASIC     ECONOMIC      100       200        500      EASY       COLLEGE STUDENT
------------                  -----     --------      ---       ---        ---      ----       ----------------
TIME (1)                                                                                      REGULAR    REDUCED
------------                                                                                  -------    -------
EXEMPT MINUTES (5)                0          0        100        200       500         0               0
RESIDENCES (2)                41.51       0.00       0.00       0.00      0.00      0.00            0.00
SUBSCRIPTIONS (2)             30.83      27.00      54.00      80.00    150.00     12.00           15.00
VC1 MF (2)(3)                  0.36       0.32       0.31       0.29      0.22      0.59       0.67       0.21
VC1 MM (2)(4)                  0.46       0.42       0.31       0.29      0.22      0.59       0.59       0.18
VC1 MM  (OTHER  OPER.)  (2)    0.46       0.42       0.42       0.42      0.42      0.59       0.89       0.43
(4)
VC2 MF(2)                      0.71       0.71       0.71       0.71      0.71      0.59       0.77       0.27
VC2 MM(2)                      0.71       0.71       0.71       0.71      0.71      0.59       0.63       0.18
VC2 MM (OTHER OPER.) (2)       0.71       0.71       0.71       0.71      0.71      0.59       0.89       0.43
VC3 (2)                        0.81       0.81       0.81       0.81      0.81      0.99       0.99       0.56
DSL1 (2)                       0.36       0.36       0.36       0.36      0.36      0.59       0.33       0.10
DSL2 (2)                       0.40       0.40       0.40       0.40      0.40      0.59       0.99       0.56
AD (2)                         0.57       0.57       0.57       0.57      0.57      0.59            0.40
(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.

                   SERVICES             ESSENTIAL 50  ESSENTIAL 100  ESSENTIAL 150   ESSENTIAL 300
         ---------------------------    ------------  -------------  -------------   -------------
         SUBSCRIPTION                      39.00          49.00           59.00          99.00
         VC1/VC2 MM NBT E MF                0.32           0.32           0.32            0.32
         VC1/VC2 MM ANOTHER OPERATOR        0.42           0.42           0.42            0.42
         VC3                                0.81           0.81           0.81            0.81
         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 Plans  ESSENCIAL  50, 100, 150 and 300 include
         respectively  50, 100, 150 and 300 minutes of VC1 and VC2 calls for NBT
         mobile and fixed lines originated within Area 8.

TCO/NBT  offer two types of pre-paid  service  plans:  TOQUE and TOQUE  SIMPLES.
Prepaid  service rates are charged by the  Subsidiaries  in accordance  with the
following schedule:

TYPE OF RATE           TYPE OF CALL                                      SCHEDULE                   RATE (2)
------------           ------------                                      --------                   --------
                                                                               (1)            Toque         Toque
                                                                                                           Simples
VC1 or VC2             From   Toque   Celular   to  any   cellular   or
                       fixed-line telephone in Area 7.                        Normal          R$0.97         0.79
VC1 or VC2             From   Toque   Celular   to  any   cellular   or      Special          R$0.48         0.79
                       fixed-line telephone in Area 7.



VC1 or VC2             From  Toque  Celular  to  any  Company  cellular        24h            R$0.48         0.79
                       telephone  on any  day,  and any  local  call on
                       Sundays and national holidays.
VC3                    From   Toque   Celular   to  any   cellular   or        24h            R$1.90         1.90
                       fixed-line telephone outside of Area 7.
DSL1                   Received when roaming within Area 7                     24h             Free          Free
DSL2                   Received when roaming within Area 8                     24h             0.43          0.43
                       Received when roaming outside Areas 7 and 8                             1.00          1.00
AD                     Based  on  Calls  Originated  or  Received  when        24h             Free          Free
                       roaming within Areas 7 or 8
                       Based on Calls  Received  when  roaming  outside                        0.44          0.44
                       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 in reais,  inclusive of taxes, charged per minute for calls
     made by the cellular telephone inside the caller's tariff area.

The table below shows the rates practiced in Area 8:

                                                                                          Rate
                                                                                  -----------------------
    Service                     Type of Call                       Hours          Toque            Toque
                                                                                                  Simples
    -------                     ------------                       -----          -----           -------
    VC1 or    To any cellular or fixed line in Area 8             Normal           0.96            0.76
     VC2                                                         Special           0.48            0.76
              To any Area 8 cellular                              Normal           0.73            0.76
                                                                 Special           0.48            0.76
     VC3      To any cellular or fixed line outside Area 8         24 h            0.96            0.96
    DSL1      Based on Calls received when roaming in Area 8       24 h            Free            Free
    DSL2      Based on Calls received when roaming in Area 7       24 h            Free            Free
              Based on Calls  received when roaming  outside                       1.00            1.00
              Areas 7 and 8
     AD       Based on Calls  received when roaming in Areas       24 h            Free            Free
              7 and 8
              Based on Calls  received when roaming  outside                       0.44            0.44
              Areas 7 and 8

            Additional Services                  Application   Rate
----------------------------------------------   -----------   ----
Message retrieval                                Per minute    0.39
Fee for balance inquiry once per day             Per call      Free
Fee for balance inquiry more than once per day   Per call      0.10

     ROAMING FEES

The Company also  receives  revenue  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
with  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  the  Company's  network  is used in
connection  with the call.  The  average  network  usage  tariff  charged by the
Company  to other  service  providers  in 1997 and 1998 was  R$0.17,  R$0.19 per
minute,  respectively,  net of value-added  taxes.  Through October of 1999, the
network  usage  tariff was  R$0.19.  As of  November,  1999,  ANATEL  granted an
increase of 14.7%,  increasing the tariff to R$0.2180.  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 values 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 20.1% in 2000.

     o    ICMS. The principal tax is a state  value-added tax, the IMPOSTO SOBRE
          CIRCULACAO DE MERCADORIAS E SERVICOS (the "ICMS"), which the Brazilian
          states impose at varying rates on certain  revenues from the provision
          of  telecommunications  services.  The ICMS rate in each  state in the
          Region is 25% for domestic telecommunications  services, except in the
          State of Acre, where the rate for domestic telecommunications services
          is 17% for intrastate  calls and 13% for interstate  calls, and in the
          State of Mato Grosso, where the ICMS rate is 30%.

          In June 1998,  the  governments  of the  individual  Brazilian  states
          approved an agreement to interpret existing Brazilian tax law to apply
          the ICMS effective July 1, 1998 to certain  services to which the ICMS
          had not previously been applied,  including cellular  activation.  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,  through Law no. 9,718,  increased the COFINS rate from 2%
          to 3%,  allowing 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. The Provisional Measure no 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,  through Law no.
          9,998,   created  the  Fundo  de   Universalizacao   dos  Servicos  de
          Telecomunicacoes, or FUST, 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,  through Law
          no. 10,052,  created the Fundo para  Desenvolvimento  Tecnologico  das
          Telecomunicacoes,  or FUNTTEL, 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 qualification of human resources;
          o    Creating new employment opportunities; and
          o    Allowing small and medium 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,  through Law
               no. 5,070, created the Fundo de Fiscalizacao das Telecomunicacoes
               ("FISTEL"),  a tax applicable to telecommunication  services. The
               purpose  of  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 installing
          assessed on 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
          installing.

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 discontinued.
The Company's net losses on trade accounts  receivable  were 6.5%, 7.4% and 3.8%
of gross  operating  revenues in 1998, 1999 and 2000,  respectively.  SEE ITEM 5
"OPERATING AND FINANCIAL REVIEW AND  PROSPECTS--OPERATING  RESULTS FOR THE YEARS
ENDED DECEMBER 31, 1998, 1999 AND 2000--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,  2000,  the  Company's  cellular  telecommunications  network
covered  approximately  85% and  58% 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, 2000, the Company's  cellular  telecommunications  network in
Area 7 consisted of 13 cellular  switches,  601 base stations,  35 repeaters and
36.060 voice  channels and one  national  and two  regional  signaling  transfer
points. The Company's seven Nortel DMS-MTX and five Ericsson AXE 10 switches are
distributed among its switching centers, which are located in Brasilia, Goiania,
Palmas,  Campo Grande,  Cuiaba,  Rondonopolis,  Porto Velho and Rio Branco.  The
network is connected primarily by a fiber-optic  transmission system leased from
fixed-line  service  providers  in the  Region.  Nortel  and  Ericsson  are  the
Company's primary suppliers of cellular telecommunications equipment.

On October 7, 1999, NBT commenced providing cellular telephone  services,  using
the Nortel DMS-MTX cellular platform  throughout its network. As of December 31,
2000,  NBT had nine  cellular  switches  in  Manaus,  Belem,  Santarem,  Maraba,
Redencao, Sao Luis,  Imperatriz,  Boa Vista, Macapa, 112 base stations and 6.874
voice channels.

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

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

In 2000, the Company also increased its  transmission  capabilities by deploying
numerous  radio  links to connect  cell  sites to  switches.  Additionally,  for
interconnection purposes, the Company started deploying and projecting long haul
transmissions to connect its main routes,  such as Campo Grande -Dourados in the
State  of  Mato  Grosso  do Sul.  These  changes  should  reduce  the  Company's
connection costs.

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

Also, in 2000, the company  activated CSD (Circuit  Switched Data)  platforms in
Brasilia, Goiania, Campo Grande, Cuiaba, Belem, Manaus and Sao Luis and, in late
November,  the Company will  activate its WAP  (Wireless  Application  Protocol)
Gateway  provided by Ericsson to provide  customers  with data  services  and to
obtain  convergence with the Internet.  The service started with slow growth due
to the lack of handsets available in the market, but it is now gaining force due



to the  increasing  availability  of  handsets  and the new  applications  being
developed.

In 2000, the Company acquired a  telecommunications  network  management  system
from TTI, an Israeli  company,  which is expected to supervise the entire Region
network by July 2001.  This  telecommunications  system is  expected  to operate
through a 24 hours per day/7 days per week  management  center,  currently being
installed in Brasilia.

FRAUD DETECTION AND PREVENTION

The two principal  types of fraud  encountered  by the Company are  subscription
fraud and cloning  fraud.  Subscription  fraud  occurs when a person,  typically
using   a   fictitious    identification    and   address,    obtains   cellular
telecommunications  service with no intention of paying for the service and then
incurs  substantial  charges  before the  cellular  service  provider is able to
identify the fraud and terminate  service.  Such fraud is detected  prior to the
invoicing  of charged  services by means of analysis of the use of the  cellular
line and of  information  on the  subscriber  on file with the  Company and with
collection agencies.  However,  controlling this type of fraud is made difficult
by virtue of ANATEL's  application of Rule 05/78, which prohibits the suspension
of service prior to an account being 15 days past due.  However,  service may be
still  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 (user identification number) and ESN (equipment
serial number) of the subscriber are captured by the cloner through the use of a
radio  scanner.  Such calls are billed to the  subscriber  but the receivable is
written off when the Company discovers that it arose from a fraudulent call. The
Company's fraud control section can detect the clone and, as of the first cloned
call,  suspend  service  immediately.  The  subscriber  is then informed and his
invoices are scrutinized monthly. Currently,  cloning fraud is under control due
to  preventative  measures  taken by the Company such as blocking  international
calls  (service is provided only pursuant to the  subscriber's  request) and the
creation  of a 24 hour fraud  control  center,  consisting  of 17  analysts  and
utilizing the Integrated  Fraud Detection and Control System ("SAF").  SAF began
functioning on July 14, 1998 and is linked to a national network. SAF allows the
detection,  analysis and control of abnormalities of cellular service usage that
may indicate fraud throughout the national territory and almost in real time.

QUALITY OF SERVICE

In the past, the Company's  cellular  telecommunications  network was subject to
occasional  congestion in certain  areas,  primarily  the Brasilia  metropolitan
area.  Congestion  can result in the  inability to make calls and the  premature
termination  of  calls.   The  Company's   service  problems  were  worsened  by
government-imposed constraints on the Company's capital expenditure budget until
July 1998, which prevented the Company from increasing  network capacity to meet
demand for cellular  telecommunications service in parts of the Region. SEE 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,  which
allowed for increased  investment in the Company's  cellular  telecommunications
network.  Network congestion in the concession areas of Telebrasilia Celular and
Teleacre  Celular in the past limited the  Company's  ability to meet demand for
cellular  telecommunications  services  and  resulted in the creation of waiting
lists to obtain such services. However, by November 1998 the congestion problems
had been resolved and the Company had eliminated all waiting lists.

COMPETITION

The General  Telecommunications Law provides for the introduction of competition
in telecommunications services in Brazil. The Federal Government has granted ten
licenses  to private  companies  (each a "Band B Service  Provider")  to provide



cellular  telecommunications  service within  particular  regions of Brazil on a
frequency  range  referred  to as  "Band  B." The  frequency  range  used by the
cellular  service  providers  that  were  spun  off from  the  TELEBRAS  System,
including the Company (each a "Band A Service Provider") is referred to as "Band
A." Each Band B license covers a geographic  region which generally  corresponds
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  BVI-V  Ltda.  (20%),  Telesystem  International  Wireless
(Brazil),  Inc. (20%) and various Brazilian pension funds. Americel paid R$338.5
million  for  the  license.   Americel   began  to  provide   digital   cellular
telecommunications  service based exclusively on the TDMA standard in the Region
in  November  1997.  Americel  does not provide  analog  services in the Region.
Americel's rights and obligations under its license are substantially  identical
to the  Company's  rights  and  obligations  under the  Concessions.  Americel's
subscribers  use dual-mode  AMPS and TDMA standard  handsets in order to roam in
areas where digital service is not yet available.

The Company's  management  estimates that, as of December 31, 2000, Americel had
approximately 21.6% of the market,  covering  principally the state capitals and
surrounding metropolitan areas.

The Company also competes with fixed-line  telephone service providers.  Certain
of the Company's  existing and potential  subscribers  might shift to fixed-line
service  providers for a number of reasons,  including  price, if enough capital
were  invested  in the  fixed-line  telephone  industry  in  Area 7 to  increase
fixed-line density and improve service.  The fixed-line service provider in Area
7 is Tele Centro Sul Celular Participacoes S.A. ("Tele Centro Sul"). To increase
competition  and  improve the quality of  service,  the Federal  Government  has
granted concessions to other "mirror companies" to provide fixed-line  services.
On September  30, 1999,  the Federal  Government  granted a concession to Global
Village Telecom, S.A. to provide fixed-line  telecommunications  services in the
same  concession  area as Tele Centro  Sul.  Global  Village  Telecom  S.A.  has
undertaken to install 650,000  fixed-line  telephones until 2002 and to this end
will  invest   approximately  R$1  billion.  The  concession  includes  a  broad
authorization  to use fixed  wireless  solutions to attain rapid  deployment  of
fixed-lines to subscribers.

     BAND A COMPETITION IN AREA 8

In Area 8, the Band B Subsidiary  competes with the  subsidiaries  of Tele Norte
Celular  Participacoes S.A., whose commercial name is Amazonia Celular and whose
shareholders  include Telesystem  International  Wireless (Brasil),  Inc., Banco
Opportunity S.A. and Brazilian pension funds. As of December 31, 2000,  Amazonia
Celular's  subsidiaries had approximately  756,502 subscribers and a penetration
rate of 5.09 subscribers per 100 inhabitants.  It provides largely AMPS service,
with TDMA service  launched only in September 1999. By the end of 2000, it had a
74.7% market share.

     PCS COMPETITION

In November 2000, ANATEL published  regulations for the issuance of new licenses
to provide  wireless  communication  services  through a new technology known as
personal  communication  services,  or PCS. New PCS  licenses  will compete with
existing  cellular  operators 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,  besides 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  operators  and  their
          controlling  shareholders  may  only  bid  for  Band D and  Band E PCS
          licenses;

     o    A  cellular   or  PCS   operator,   or  its   respective   controlling
          shareholders,  may not hold  more  than  one  license  in any  region.
          Accordingly,  a cellular  operator 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
          operator  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 hold a second  auction  for the Band C PCS
licenses.

     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  of Brazil  region,  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 operational
targets  established by ANATEL by December 2001.  Tele Centro Sul  Participacoes
S.A.,  known as Brasil Telecom,  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 operator
in the  remaining  region,  comprising  of 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  through  GSM
technology.  Telemar  will be permitted  to commence  Band D operations  in 2002
provided  that it achieves  the  operational  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  of 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  operational  targets
established by ANATEL by December 2001.

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



     OTHER COMPETITION

Satellite services,  which provide 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 not have a
material adverse effect on the Company's business,  financial condition, results
of  operations or prospects.  Any adverse  effects on the Company's  results and
market share from competitive pressures will depend on a variety of factors that
cannot now be assessed with precision and that are beyond the Company's control.
Among  such  factors  are  the  identity  of  the  competitors,  their  business
strategies  and  capabilities,  prevailing  market  conditions at the time,  the
regulations  applicable to new entrants and the Company and the effectiveness of
the  Company's  efforts to prepare for  increased  competition.  One or more new
competitors may have technical or financial  resources greater than those of the
Company.

OPERATING AGREEMENTS

     INTERCONNECTION AGREEMENTS

In order to 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 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,  and many  countries in Asia,
South 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 n(0)  9,472/97),  Federal Law n(0) 9,295/96,  also known as The LEI
MINIMA (the  "Minimum  Law"),  Federal  Decree n(0)  2,056/96  that  establishes
general rules for cellular servicE (the "Cellular Service Rule") and a series of
administrative-level  regulations  enacted by the Ministry of Communications and
ANATEL,  among them ANATEL  Resolution n(0) 73, which sets the general rules foR
telecommunications   services.   Each  of  the  Subsidiaries  operates  under  a
Concession  that  authorizes  it to  provide  cellular  services  and sets forth
certain obligations.

ANATEL  is  the  regulatory  agency  for  telecommunications  in  Brazil.  It is
established by the General Telecommunications Law and operates under the October
1997 REGULAMENTO DA AGENCIA NACIONAL DE TELECOMUNICACOES  (the "ANATEL Decree").
ANATEL is a government  body governed by a separate  regulatory  scheme.  It has
administrative and financial  independence and is linked but not subordinated to
the Ministry of  Communications.  ANATEL has authority to issue legally  binding
regulations  to   telecommunications   service  providers.   Any  such  proposed
regulation is subject to a period of public  comment,  which may include  public
hearings.  Due to its independent  status,  decisions or regulations  enacted by
ANATEL are not 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.

The  Company  is  currently  analyzing  whether to make the  conversion.  If the
Company  opts  to  convert,   the  additional  band  would  require  payment  of
approximately R$85 million. Operating under an authorization would implicate the
loss of the guarantee of the terms and conditions of the license for the 15-year
term,  however,  it would 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 and
between the Subsidiaries and ANATEL in November 18, 1999.

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

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

The Service Quality Memorandum  provides for a commitment by the Subsidiaries to
employ their best efforts to achieve the  following  service  quality  ratios by
June 2001:  (i) monthly rate of general  subscriber  complaints  less than 3.5%;
(ii)  monthly  rate  of  subscriber   complaints  about  network  coverage  plus
complaints about system's lack of capacity less than 1.5%; (iii) monthly rate of
completed calls to customer  service centers,  at peak hours,  greater than 80%;
(iv) monthly rate of effectively  responded  subscriber  communications  greater
than 97%; (v) monthly rate of subscribers  attending customer service facilities
and being  assisted in 10 minutes or less greater than 80%; (vi) number of bills
with error complaints per thousand issued, for one-month periods,  less than 10;
(vii) monthly rate of connected calls,  originated from Company's subscribers at
peak hours,  greater than 57%;  (viii)  monthly rate of calls  connected in less
than 15 seconds  during peak hours  greater that 85%; and (xiv)  monthly rate of



dropped calls at peak hours smaller than 3%. All cellular service providers must
submit   monthly   reports   regarding   such   rates   to   ANATEL.    Whenever
under-performance  is unjustified  and best efforts to avoid the failure are not
proven,  ANATEL can audit the respective cellular service provider.  If auditing
results point to complete  disregard by the concessionaire of its obligations to
provide  quality and  continuous  cellular  service,  such service  provider may
suffer  intervention  by  ANATEL  and  possible  license  revocation.  With  the
exception of NBT,  which has not complied  with the target  described in section
(vii) above,  the  Subsidiaries  have met all the monthly  targets so far. While
there can be no assurances,  the Company  anticipates  that NBT will soon comply
with all the monthly  targets and that the Company  will  continue to reach such
targets at all times.

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

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

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

     RATE REGULATION

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

The initial  price cap agreed upon by ANATEL and the Company in the  Concessions
is based on previously existing tariffs, which were developed based on the fully
allocated  costs of the Company.  The initial price cap is adjusted on an annual
basis under a formula set forth in the Concessions. The price cap is adjusted to
reflect the rate of inflation as measured by the 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%, subject to a downward  adjustment for inflation effects already captured
in the annual upward  adjustments  of the overall  price cap for the basket,  so
long as it adjusts  other prices  downward to ensure that the  weighted  average
tariff does not exceed the price cap.

Other  telecommunications  companies  wishing to  interconnect  with and use the
Company's  network  must pay certain  fees,  primarily a network  usage fee. The
network usage fee is a flat fee charged per minute of use,  which  represents an
average charge for a basket of network elements and services.  The network usage
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) three-way calling; (vi) SMS; (vii)
e-web; and (viii) 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
detailed  billing to subscribers,  which was formerly  considered  ancillary and
charged for separately.  It also modifies  billing criteria for short repetitive
calls (3 to 30 seconds) of the same origin and  destination,  provided  that the
delay between calls does not exceed 120 seconds.

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

BRAZILIAN POLITICAL ENVIRONMENT

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

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

The legislative  agenda in 2000 was dominated by discussions  regarding proposed
reforms to Brazil's  corporations  law, as well as discussions  regarding fiscal
reform. While the corporations law reform was successfully approved by the House
of Representatives, the fiscal reform, although undergoing significant evolution
as far as discussions and partisan negotiations are concerned,  has not yet been
submitted to vote in the Brazilian  Congress.  It is expected to be submitted to
the Brazilian Congress in 2001.

Between  the  second  semester  of 2000 and the  first  semester  of  2001,  the
legislative  branch of the government has allegedly been involved in a series of
situations  linked to corruption and there have been reports of rivalries  among
key partisan leaders. 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,  have dominated the
political arena during the first months of 2001.

The electric power crisis and the effect that the contingency  measures may have
on Fernando  Henrique  Cardoso's  popularity  currently  are the most  prominent
issues, amid the arrangements for Presidential succession in year 2002.



The privatization  process is still under way, with the upcoming sale of federal
assets in the energy generation and sanitation sector as well as the issuance of
pending PCS licenses to increase competition in the  telecommunications  market.
SEE  ITEM 4  "INFORMATION  ON THE  COMPANY-BUSINESS  OVERVIEW-REGULATION  OF THE
BRAZILIAN TELECOMMUNICATIONS INDUSTRY-CONCESSIONS AND LICENSES."

BRAZILIAN ECONOMIC ENVIRONMENT

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

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

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

After the REAL devaluation 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.  Although  the year 2001 shows trends for a higher rate of growth
by the end of the year,  the recent energy crisis is expected to have a negative
effect on the growth of the Brazilian  economy,  causing many analysts to review
growth forecasts for 2001.

By the end of 2000, GDP grew 4.5%, thus exceeding expectations. Brazil's current
accounts  deficit  diminished  in 2000 and closed  the year at US$24.6  billion,
compared to a 1999 year-end deficit of US$25.4 billion.

Foreign  direct  investment net inflows stood at US$17 billion by year-end 1997,
US$25  billion by year-end  1998,  US$30  billion by year-end  1999,  and US$ 33
billion by year-end 2000, thus representing  proportional growth of 10% in 2000.
The first quarter of 2001 showed foreign direct investment net inflows of US$6.8
billion.

Brazilian internal interest rates have added momentum to the economic growth. By
year end 1998, the Selic rate, the basic interest rate for the economy, stood at
28.96% per year.  Shortly after the January 1999  devaluation  of the REAL,  the
Selic  rate  peaked  at 44.99% in March,  1999  while the  monetary  authorities
struggled to hold down inflationary  pressure and the outflow of investment from
the country.  By year-end 1999, the Selic rate was down to 19.03% and closed the
year 2000 at 15.75%, reaching 16.75% on June 1, 2001.

DEVELOPMENTS IN OTHER EMERGING MARKET COUNTRIES

The  Brazilian   securities  markets  are  influenced  by  economic  and  market
conditions in other emerging market countries.  Although economic conditions are
different  in each  country,  developments  in one country can have an effect on



investors' perceptions of the risks of investing in the securities of issuers in
other countries,  including  Brazil.  From 1998 through 2000, the  international
financial  markets have  experienced  significant  volatility,  with significant
adverse  effects on demand for and prices of  securities of issuers in virtually
all emerging markets, including Brazil.

The current  volatility  in the  securities  markets in Latin  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.  Recently,  the  growing  concern  in the  financial  markets of whether
Argentina will be able to keep the currency parity system with the dollar and to
avoid a default  on its  foreign  debt has  created a  significant  movement  of
investors  to hedge  against  a  possible  devaluation  in the  Argentine  local
currency and  consequently  the  Brazilian  Real,  creating some pressure at the
exchange rates of the free floating Real against the Dollar.

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.   Although  the  1999   inflation   index  was
significantly  impacted by the  devaluation  of the REAL in the beginning of the
year,  the  2000  index  showed a  return  to the one  digit  levels  of  annual
inflation,  which  indicates  that  the  impact  from the  devaluation  has been
absorbed.

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

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 exchange  rates
During the first quarter of 2000, inflation,  as measured by the IGP-M, amounted
to 1.75% and the  devaluation  of the REAL  against the U.S.  dollar was -2.33%,
showing an increase in the value of the Real. The devaluation in 2000, peaked at
9.53%  and  finished  the year at 9.3%.  The  first  quarter  of 2001  showed an
inflationary increase of 1.42%, reflecting growth, while the REAL lost 10.54% of
its value against the U.S. dollar.

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

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, 2000 and the
Holding Company's shareholding in each Subsidiary at December 31, 2000.

                                                            CONTRIBUTION TO
                                                         CONSOLIDATED RESULTS        HOLDING COMPANY OWNERSHIP
                                                         ---------------------   --------------------------------
                                                         % OF NET OPERATING          % OF SHARE       % OF VOTING
 SUBSIDIARY                                                    REVENUES                CAPITAL           STOCK
 ----------                                             ---------------------   ------------------- ------------
 Telebrasilia........................................            33.53                 88.21             90.87
 Telegoias...........................................            21.07                 92.22             91.18
 Telemat.............................................            14.63                 97.31             99.42
 Telems..............................................            12.52                 98.19             99.54
 Teleron.............................................             4.26                 96.98             97.99
 Teleacre............................................             2.13                 98.29             99.96
 NBT.................................................            12.09                 95.00             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  comprised  of (i)
Inepar S.A.  Industria e Construcoes  (50%) and (ii) the Holding  Company (50%),
was awarded a license to provide cellular telecommunications services in Area 8.
On May  21,  1999,  the  Company  acquired  45% of the  shares  of  Tele  Centro
Oeste/Inepar from Inepar,  increasing its holding in the consortium to 95%. Upon
acquiring control,  the Company renamed Tele Centro  Oeste/Inepar  "Norte Brasil
Telecom S.A." and  registered it as a non-publicly  held company.  On October 7,
1999, NBT began providing Band B digital cellular  telecommunications service in
Area 8 in competition with Tele Norte Celular  Participacoes  S.A. Area 8 covers
approximately 41% of the territory and 9% of the total population of Brazil.

PROPERTY, PLANTS AND EQUIPMENT

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

The Company  also leases  sites where its  cellular  telecommunications  network
equipment is  installed.  As of December  31, 2000,  the Company had 22 cellular
switches and 713 base stations in the Region, of which  approximately  8.5% were
located on land owned by the Company and the  remainder of which were located on
land leased by the Company. Most of these leases do not expire prior to 2003. In
addition, the Company leases two retail stores in the Region.



ITEM 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 1998,  1999 and
2000

There are three significant differences in presentation between the Consolidated
Financial  Statements  of the  Company  for 1998,  1999 and 2000.  Each of these
differences  should be taken into account in comparing  financial  condition 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 1998,  1999 and 2000, the  Consolidated
Financial  Statements  reflect  the  operations  of the  Subsidiaries  as  fully
independent  companies  Costs were  specifically  identified  where possible and
divided  accordingly  between  fixed and  cellular  operations.  Where  specific
identification  was not possible,  costs were allocated  between the Predecessor
Companies' fixed-line and cellular operations in accordance with the methodology
set forth in Note 2 to the Consolidated  Financial Statements.  It should not be
assumed that the  financial  condition and results of operations of the cellular
operations  of the  Predecessor  Companies  would have been the same if they had
been  separate  legal  entities  or if their  businesses  had been  operated  as
independent businesses prior to 1998.

CREATION OF THE HOLDING COMPANY. The Holding Company was created on May 22, 1998
in the Breakup of TELEBRAS,  and its assets were valued as of February 28, 1998.
For 1998,  1999 and 2000,  the  Consolidated  Financial  Statements  reflect the
consolidated  financial  condition  and  results of  operations  of the  Holding
Company and the Band A Subsidiaries.

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.

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, 2000, the Company had R$236.4 million
of  indebtedness  denominated in U.S.  dollars (of this amount,  R$207.9 million
were Euro  Commercial  Papers  and  R$28.5  million  represented  financing  for
equipment  imports) and R$53.1 million of  contingency  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  has  determined  that,  beginning  in January  1999,  the
TELEBRAS Loans will be treated for all purposes as REAL-denominated  liabilities
bearing  interest at a rate equal to the IGP-M 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 almost entirely in REAIS, and the Company has
no  material   dollar-denominated  assets.  The  Company  has  hedged  the  Euro
Commercial  Papers' foreign currency  exposure existing as of December 31, 2000.
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,
2000, substantially all of the Company's interest-bearing liabilities, including
the TELEBRAS  contingency,  bore interest at floating rates. The decision of the
Company's management to treat the TELEBRAS Loans as REAL-denominated obligations
does not change their character as floating-rate interest obligations,  although
the base rate of  interest  on the loans is now being  treated by the Company as
IGP-M rather than LIBOR.  The Company has not entered into derivative  contracts
or made other  arrangements  to hedge  against  this risk.  Accordingly,  should
market interest rates (principally IGP-M or, if the Company becomes obligated to
service and repay the TELEBRAS Loans as U.S.  dollar  obligations,  LIBOR) rise,
the Company's financing expenses will increase.

On January  12,  2001,  the  Holding  Company  announced  the  beginning  of the
distribution  of the second  issuance of  promissory  notes,  comprising  of 500
notes,  with unit value of R$500,000,  amounting to R$250  million.  During this
phase,  the total number of existing  promissory  notes was  subscribed  and the
amount was used at the  payment of the first  issuing.  These  promissory  notes
should  become  due  within  a  maximum  period  of 180  days  from  the date of
subscription of each promissory note.

On January 2, 2001,  the bridge  loans with Banco  Nacional  do  Desenvolvimento
Economico e Social ("BNDES") for subsidiaries Telebrasilia,  Telegoias, Telemat,
Telems,  Teleron and Teleacre were converted into long-term loans. The operation
amount  corresponded to R$43,8 million with payment  becoming due after a period
of 5 (five years).  The operation's  amortization will be recorded quarterly and
should cover the principal plus interest. The charges derived from the operation
were based on the TJLP  (Long-term  Interest Rate) published by the Central Bank
of  Brazil,  plus  2.5% per year as basic  spread  of BNDES and 1.5% per year as
risks remuneration to the financial institutions.



OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1999, AND 2000

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, 2000.

                                                     YEAR ENDED DECEMBER 31,                     %CHANGE
                                             ------------------------------------   -----------------------------
                                                1998           1999          2000        1998-1999     1999-2000
                                             ---------     ----------    --------    --------------- -------------
                                                    (MILLIONS OF REAIS) (1)
Net operating revenue.....................     637.4         666.7          930.6          4.6           39.6
Cost of services..........................     260.3         326.5          532.2         25.4           63.0
Gross profit .............................     377.1         340.1          398.5        (9.8)           17.2
Operating expenses:
Selling expenses..........................      99.1         118.6          126.2         19.7            6.4
General and administrative expenses.......      46.3          64.5           78.4         39.4           21.5
Other net operating income (expense)......     (1.0)        (14.0)          (9.6)         n.m.         (31.4)
Total                                          146.3         197.2          214.2         34.7            8.6
Operating income before interest..........     230.7         143.0          184.3       (38.0)           28.9
Net interest expense(2)...................      69.7          47.6           30.1       (31.7)         (36.9)
Operating income (3).....................      161.0          95.4          154.2       (40.8)           61.7
Net non-operating expense.................      20.6           6.1           19.5       (70.6)          222.7
Employees' profit share...................       1.3           1.9            1.9         46.8            0.6
Income    before    taxes   and   minority     139.2          87.4          132.8       (37.2)           51.9
   interests..............................
Income tax and social contribution........      40.2          29.9           40.2       (25.7)           34.5
Minority interests........................      24.1          11.5           20.0       (52.1)           73.3
Reversal of interest on own capital             91.7          53.5           31.0       (41.6)         (42.1)
Net income................................     166.7          99.6          103.6       (40.2)            4.1

------------------
n.m.:  not meaningful

(1)  Information  is presented in constant  REAIS of December 31, 2000.  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 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) resale 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."



Details of Company Revenue

                                                      YEAR ENDED DECEMBER 31,                    % CHANGE
                                              --------------------------------------  ----------------------------
                                                 1998          1999          2000        1998-1999     1999-2000
                                              ---------   ------------ -------------  -------------- -------------
                                                     (MILLIONS OF REAIS) (1)
Gross Operating Revenue:
   Usage charges...........................      380.4        369.2          349.9        (2.9)          (5.2)
   Monthly subscription charges............      193.9        211.4          194.4          9.0          (8.0)
   Network usage charges...................      187.7        197.1          334.5          5.0           69.7
   Activation fees.........................       28.6          4.1              -       (85.7)           n.m.
   Resale of handsets and prepaid cards....          -         58.6          274.8         n.m.          368.7
   Others..................................        8.5         14.9           11.2         76.0         (24.7)
                                            --------------------------------------------
   Gross operating revenue.................      799.0        855.3        1.164.9          7.0           36.2
   Value-added and other indirect taxes ...    (161.6)      (188.7)        (234.2)         16.7           24.1
Net Operating Revenue......................      637.4        666.7          930.6          4.6           39.6
                                            ============================================

------------------
(1)  Information  is presented in constant  REAIS of December 31, 2000. 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 4.6% in 1999. The growth
in revenues over this three-year  period was driven  principally by increases in
demand for cellular services.  The average number of subscribers increased 40.0%
to 621,043 subscribers in 1999 from 443,537 in 1998. In 2000, the average number
of  subscribers  increased  to  1,209,854  or by 94.8% from 1999.  The growth in
revenues in 1999 is due in part to a reduction in, and in some cases elimination
of,  activation  fees,  which in turn  facilitated  new entries,  increased  the
subscriber  base and  generated  additional  revenue.  The  introduction  of new
services,   such  as  prepaid  and  revenue  generated  by  roaming  fees,  also
contributed  to the increased  revenue.  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).

USAGE CHARGES.  Revenues from usage charges  decreased by 2.9% in 1999 from 1998
and by 5.2% in 2000 from 1999.  As of January  1999,  once  previous  accounting
discrepancies  by  TELEBRAS  were  corrected,  the  Company  ceased  recognizing
international  traffic as revenue and  expenses,  since this  traffic was due to
EMBRATEL.  To that extent,  the  variation in revenue from usage charges in 1999
from 1998,  exclusive of  international  calls, was generated mostly by an 11.3%
increase in outgoing domestic calls, from 583.1 million minutes to 649.1 million
minutes. In 2000, the reduction of revenues from usage charges was caused by the
decrease of 4.4% in the average number of contract customers.

MONTHLY  SUBSCRIPTION  CHARGES.  Revenues  from  monthly  subscription  payments
increased by 9.0% in 1999 from 1998 and decreased by 8.0% in 2000 from 1999. The
growth in  revenues  in 1999 was due mainly to a 24.3%  increase  in the average
number of contract  customers.  The decrease in 2000  principally  reflected the
4.4% reduction in the average number of these customers.

NETWORK USAGE CHARGES.  Revenues from network usage charges increased by 5.0% in
1999  from 1998 and 69.7% in 2000 from  1999.  The  increase  in 1999 was due to
growth in the volume of calls to the Company's  subscribers  originating outside
the Company's network, which grew by 73.7% from 681.3 million minutes in 1998 to
1,183 million  minutes in 1999. The 1999 result  reflects the  renegotiation  of
tariffs between the Company and the fixed-line  service providers in the Region,
which  account  for  53%  of  the  total  traffic,   thereby   diminishing   the
interconnection  fees to be  paid  (fixed-line  network  expenses).  SEE  ITEM 4
"INFORMATION  ON THE  COMPANY--BUSINESS  OVERVIEW--SOURCES  OF  REVENUE--NETWORK
USAGE  CHARGES."  From 1999 to 2000,  the  increase  in  network  usage  charges
reflected  the  increase in the total  number of  subscribers,  resulting  in an
increase in the volume of calls received by the Company's subscribers.

ACTIVATION  FEES.  Revenues from activation fees decreased by 85.7% in 1999 from
1998 and were no longer charged in 2000.  These decreases in activation  charges



were  partially  offset  by an  increase  of  27.7%  in the  average  number  of
subscribers in 1998. The decrease in revenues from  activation  fees in 1999 was
due to the strategy by the  Subsidiaries to enlarge their  subscriber  bases, by
way of promotions  reducing or waiving activation fees. In 2000, in continuation
of this strategy, activation fees were completely suspended.

RESALE OF HANDSETS AND PREPAID CARDS. As of May 31, 1999 the Band A Subsidiaries
began to link  cellular  handset  sales with the  provision of prepaid  cellular
telecommunications  services.  SEE ITEM 4 "INFORMATION ON THE  COMPANY--BUSINESS
OVERVIEW--SOURCES  OF  REVENUE--SUBSCRIBER   RATES."  Revenues  from  resale  of
handsets and prepaid  cards grew 368.7% from 1999 to 2000.  In this period,  the
number of prepaid customers increased from 286,844 to 1,115,962.

OTHERS. Revenues from other services, which principally include fees earned from
the  transfer  of  cellular  telephone  service  from  one user to  another  and
supplemental  services such as call forwarding,  call waiting and call blocking,
increased  by 76.0% in 1999 from 1998 and  decreased by 24.7% in 2000 from 1999.
The  significant  increase  from 1998 to 1999 was due mainly to the expansion of
the  roaming  network,  which  Telebrasilia  obtained  by  participating  in the
formation of a national  roaming  system.  Thus, the  Subsidiaries  paid roaming
charges when their subscribers  accessed the roaming network,  Telebrasilia also
benefited  ratably  from the revenue of the service  providers  that make up the
system. In December 1999,  revenue from roaming charges was R$7.5 million.  That
revenue was no longer  receivable in 2000,  causing a decline in total  revenues
for the year.

VALUE-ADDED AND OTHER INDIRECT  TAXES.  The principal taxes assessed on revenues
are ICMS,  PIS and  COFINS.  The ICMS rate in each  state in the  Region is 25%,
except in the  State of Acre,  where  the rate for  domestic  telecommunications
services is 17% for intrastate calls and 13% for interstate  calls, in the State
of Mato Grosso,  where,  as of January 1999 the ICMS rate was raised from 25% to
30%. The rate on sales of prepaid cellular handsets in the Region is 17%, except
in Goias where it is 7%. PIS and COFINS are imposed at a combined  rate of 3.65%
of gross operating revenues. Nonetheless, PIS and COFINS are calculated based on
the total revenue of the Company,  including  financial  revenue.  The amount of
value-added and other indirect taxes collected by the Company  represented 20.2%
in 1998,  22.1% in 1999 and 20.1% in 2000. The variations  reflect  increases in
the Company's gross operating  revenue during each period, as well as changes in
rates and the basis for calculating the  aforementioned  taxes.  Activation fees
became  subject to ICMS for the first time with effect from July 1, 1998,  which
increased the effective rate of taxation of operating revenues in 1998. SEE ITEM
8   "FINANCIAL   INFORMATION--CONSOLIDATED   STATEMENTS   AND  OTHER   FINANCIAL
INFORMATION--LEGAL  PROCEEDINGS--LITIGATION  RELATED TO THE  APPLICATION  OF THE
ICMS" AND NOTE 23 TO THE CONSOLIDATED FINANCIAL STATEMENTS.

     COST OF SERVICES

                                                   YEAR ENDED DECEMBER 31,                      % CHANGE
                                         -----------------------------------------  -------------------------------
                                             1998           1999           2000        1998-1999      1999-2000
                                         ------------ -------------- -------------  --------------- ---------------
                                                  (MILLIONS OF REAIS) (1)
Cost of services:
Depreciation...........................       80.1          120.2          142.8          50.1            18.8
Personnel..............................        8.3            9.0           11.3           8.2            25.8
Third party materials and services.....       71.6           78.9           95.8          10.2            21.5
Fixed-line network expenses............       70.3           28.0           26.9        (60.2)           (4.1)
Fistel tax.............................       18.0           30.1           51.6          67.3            71.3
Cost of products sold..................          -           50.9          194.0          n.m.           281.1
Others................................        12.1            9.4            9.8        (22.3)             4.2
                                        ----------------------------------------------
Total.................................       260.3          326.5          532.2          25.4            63.0
                                        ==============================================

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

Cost of services  increased by 63.0% in 2000 from 1999 and by 25.4% in 1999 from
1998.  The increase in 1999 and 2000  resulted  principally  from an increase in



depreciation  costs related to the growth of the Company's  network and in costs
due to the acquisition of handsets.  In 1999, this increase was partially offset
by  a  decrease  in  amounts  paid  for  the  lease  of  available  capacity  on
inter-connecting circuits.

DEPRECIATION.  Depreciation increased by 18.8% in 2000 from 1999 and by 50.1% in
1999 from 1998.  The increase in 2000  reflects the  expansion of the  Company's
network. In addition, the growth in 1999 also reflects the Company's revision of
its depreciation  policies and election to modify the  depreciation  periods for
certain   equipment  in  light  of   technological   developments  and  changing
international  business  practices.  Effective  January  1,  1999,  the  rate of
depreciation of transmission  equipment increased from 10% to 14.29% and that of
switching equipment from 7.69% to 10%.

THIRD PARTY  MATERIALS  AND SERVICES.  Materials  and services  include costs of
materials and services  received  from third  parties,  including  network usage
charges  paid  to  other  cellular   telecommunications  service  providers,  to
fixed-line  companies and to EMBRATEL for the  completion  on their  networks of
calls  originated by the Company's  customers.  Materials and services  expenses
increased  by 10.2% in 1999  from  1998 and by  21.5%  in 2000  from  1999.  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 PRODUCTS SOLD. With the  introduction of prepaid cellular service on May
1999,  the  Company  began  to  purchase  cellular  handsets  to  resell  to its
customers.  The cost of  products  sold was R$50.9  million in 1999 and  R$194.0
million in 2000.

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 4.1% in 2000  from  1999  and by  60.2% in 1999  from  1998.  Such
expenses  accounted  for 8.6% of total costs of services in 1999 compared to 27%
in 1998. The decrease in 1999 and 2000 is due mainly to reductions in fixed-line
interconnection   circuit  lease  payments   negotiated   with  the  Predecessor
Companies. SEE ITEM 4 "INFORMATION ON THE COMPANY--BUSINESS  OVERVIEW--OPERATING
AGREEMENTS--INTERCONNECTION AGREEMENTS."

FISTEL TAX. Fees payable to finance FISTEL were R$18.0  million,  R$30.1 million
and  R$51.6  million  in 1998,  1999 and  2000,  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 was due
principally  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$8.3
million in 1998 to R$9.0  million in 1999 and to R$11.3  million in 2000.  These
increases were due principally to augments in the number of employees, which has
kept pace with the growth in the  business.  The  growth  also  reflects  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$12.1
million,  R$9.4 million and R$9.8 million in 1998, 1999 and 2000,  respectively.
The decrease in 1999 reflects the  renegotiations of contracts for the expansion
of the  Company's  network.  In 2000,  these  policies  have  continued  and the
expenses remain constant.

     OPERATING EXPENSES

SELLING EXPENSES. Selling expenses increased 6.4% in 2000 from 1999 and 19.7% in
1999 from 1998.  The  increase in 1999  resulted  primarily  from an  aggressive
marketing campaign for prepaid services,  which included  advertising  campaigns
and an increase in sales commissions to independent  distributors.  In addition,
the standardization of policy among the Subsidiaries  relative to provisions for
doubtful accounts resulted in a change in calculation methodology as of December
1998.  The  methodology  comprises the recording of a provision to cover 100% of
accounts  past due over 90 days.  For accounts not yet billed,  accounts not yet



due and  accounts  past due  less  than 90 days,  the  percentages  historically
obtained  from  write-offs  are  applied  to the gross  revenues  of the last 12
months.  Prior to December 1998,  provisions were based on 100% of accounts past
due over 120 days. In the period from 1999 to 2000,  selling expenses  increased
6.4%. 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.

GENERAL  AND  ADMINISTRATIVE  EXPENSES.   General  and  administrative  expenses
increased  by 39.4% in 1999  from  1998 and by  21.5%  in 2000  from  1999.  The
increase of these  expenses in 1999 and 2000 is due primarily to the increase in
corporate personnel in the Holding Company. Due to the increase, personnel costs
accounted  for 35.9% and  34.7% of total  costs in 1999 and 2000,  respectively.
Third party  services also accounted for  significant  growth in expenses of the
Company during this period.

OTHER NET OPERATING INCOME  (EXPENSE).  The Company recorded other net operating
expense of R$1.0 million in 1998, compared with R$14.0 million in 1999 and R$9.6
million in 2000. Other net operating expenses in 1999 resulted  principally from
the amortization of the deferred charge representing  premium,  which arose from
the merger into the Company,  on December 14,  1999,  of COVERAGE  PARTICIPACOES
S.A., a subsidiary  of BID S.A.  with an  investment  in the Company as its only
asset, is being amortized over a five year period.  This amount,  R$5.9 million,
corresponds  to 1/60th of the  premium.  The  reduction  of Other Net  Operating
Expenses in 2000 resulted mainly from the practice adopted this year to register
the above mentioned  amortization as non-operating  expenses. SEE NOTES 3(G) AND
31 TO THE CONSOLIDATED FINANCIAL STATEMENTS.

     NET INTEREST EXPENSE

Net  interest  expense  of R$47.6  million  in 1999 and  R$30.1  million in 2000
resulted  primarily from the payment of dividends in the form of interest on own
capital in the amount of R$53.5  million in 1999 and R$31.0 million in 2000. SEE
ITEM 5 "OPERATING  AND  FINANCIAL  REVIEW AND  PROSPECTS--LIQUIDITY  AND CAPITAL
RESOURCES." The Company  recorded  interest income of R$42.8 million in 1999 and
R$102.8 million in 2000, which resulted  principally from interest income on the
Company's  average  balance  of  cash  and  cash  equivalents,  which  increased
significantly  as a result of increased cash  generation in 1999 and 2000.  Such
interest  income  was  partially  offset by R$37.6  million  in 1999 and  R$98.5
million in 2000 in interest expense.

     NET NON-OPERATING EXPENSE

The Company recorded net non-operating  expense of R$20.6 million in 1998, R$6.1
million in 1999 and R$19.5 million in 2000.  Non-operating  expenses in 1998 and
1999 resulted primarily from losses or write-offs on the sale of property, plant
and equipment in the amounts of R$19.6 million and R$6.1 million,  respectively,
of certain analog transmission equipment that has become obsolete as a result of
increasing  demand for digital  telecommunications  services.  The non-operating
expense in 2000 is due to the  inclusion  of the  amortization  of the  deferred
charge,  as  mentioned in the section  "Other Net  Operating  Income  (Expense)"
above. SEE NOTES 3(G) AND 31 TO THE CONSOLIDATED FINANCIAL STATEMENTS.

     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$1.3 million,
R$1.9 million and R$1.9 million in 1998, 1999 and 2000, 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  12.6%,  10.4%  and 16.2% of  income  before  minority
interests in 1998, 1999 and 2000, respectively.

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$161.3 million,  R$218.4 million and R$255.7 million in 1998, 1999 and
2000,  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 2000,  the Holding  Company  distributed a total of
R$37.9 million  (R$40.1 million in 1999) in the form of interest on own capital.
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 both national currency (mainly
R$84.0  million in December  31, 2000 from the  National  Bank for  Economic and
Social Development and R$186.9 million in promissory notes) and foreign currency
(mainly R$22.0 million from Export  Development  Corporation and R$207.9 million
in euro commercial  papers). In January 2001, the Company announced the issuance
of R$250 million in promissory notes. Also, in January, the Subsidiaries' bridge
loans with the National Bank for Economic and Social  Development 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, 2000, the Company  anticipated  R$250 million in 2001 capital
expenditures. Management expects that such expenditures will be funded primarily
with  internally  generated  cash,  supplemented  by  financings  from  external
sources.  Most of the planned  2001  capital  expenditures  will be dedicated to
expanding the capacity and coverage of the Company's network,  together with the
modernization of telecommunication services.

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

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

The Company and  Subsidiaries,  except for NBT,  make payments  towards  private
pension plans and towards medical  assistance for retired  employees,  which are
controlled by Sistel Social Security Foundation ("SISTEL"). Until December 1999,
all sponsors showed  solidarity  towards the Sistel Benefits Pan ("PBS") and the
Medical  Assistance  Plan for the Retired  ("PAMA").  On December 28, 1999,  the
sponsors of the PBS and PAMA plans  negotiated  conditions  for the  creation of
individual  pension plans per sponsor  maintaining the solidarity only for those



already  assisted by the plan and under such  conditions  at January  31,  2000,
which resulted in a restructuring proposal for the Sistel Statute and Regulation
that was approved by the Complementary  Pension  Department on January 13, 2000.
Due to the  discontinuation of the solidarity concept occurred in December 1999,
the  Company  and  subsidiaries   individually   sponsored  a  Defined  Benefits
Retirement Plan ("Plan PBS TCO"), which covers approximately 5% of the employees
working for these  companies.  SEE NOTES 24, 29(B) AND 30(A) TO THE CONSOLIDATED
FINANCIAL STATEMENTS.

U.S. GAAP Reconciliation

The Company  prepares its consolidated  financial  statements in accordance with
Brazilian  GAAP,  which  differ  in  significant  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  divisional  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 and
R$104.8 million for 2000. Until December 31, 1997, under both Brazilian and U.S.
GAAP,  revenues  from  activation  fees were  recognized  upon  activation  of a
customer's  services.  Under U.S. GAAP,  effective January 1, 1998, net revenues
from activation fees will be deferred and amortized over the estimated effective
contract life. SEE NOTE 29 TO THE CONSOLIDATED FINANCIAL STATEMENTS.

YEAR 2000 COMPLIANCE

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

RESEARCH AND DEVELOPMENT

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

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  navigation  at speeds as high as or even higher than  household  modem
connections,  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 3-G 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.

TDMA  technology has  encountered  several  pitfalls  along its  evolution.  Its
natural path towards the EDGE (Enhanced Data for GSM Evolution), as advocated by
the  TDMA  community  within  the  Universal   Wireless   Consortium  (UWC)  has
demonstrated  some  important  defections,  which may represent  delays and even
commercial unavailability.

The  Company  is  closely  tracking  all  these  alternatives  in  technological
evolution,  with a participation in the Brazilian  Commission of  Communications
"COMISSAO  BRASILEIRA  DE  COMUNICACOES,"  where it monitors  and  analyzes  the
progress of 3-G systems.

In  consonance  with these  trends of  thinking  on what the future of  wireless
telecommunications  will be like,  the Company has  maintained its position as a
leading  company  in the  market.  During  2000 and early in 2001,  the  Company
launched many services before the competition, such as the SHORT MESSAGE SERVICE
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  needs  to be  concerned  with  the  entire  chain of
products, from the content to the terminal handsets, from the network nucleus to
the aerial interface.

The Company  will  continue  to invest in the  "wireless  Internet"  convergence
segment. Moreover, new service alternatives will be made available during 2001.

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           DATE ELECTED
-------                                    ----------------   ------------------
Alexandre Beldi Netto......................   Chairman           April 26, 2001
Araldo Alexandre Marcondes de Souza........   Director           April 26, 2001
Mario Cesar Pereira de Araujo..............   Director           April 26, 2001



Ricardo de Souza Adenes....................   Director           April 26, 2001
Marco Antonio Beldi........................   Director           April 26, 2001
Antonio Fabio Beldi........................   Director           April 26, 2001
Nelson Guarnieri de Lara...................   Director           April 26, 2001



Set forth below are brief biographical descriptions of the Directors.

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

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

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

RICARDO  DE SOUZA  ADENES,  44 years  old,  has served as member of the Board of
Directors  since April 26,  2001.  He has served  Splice do Brasil S.A. as Chief
Financial  Officer since 1999. He also served as Corporate  Business  Manager in
Banco do Brasil  from 1995 to 1999 and as Chief  Financial  Officer  in Banco do
Estado de Pernambuco S.A.  ("BANDEPE"),  from 1992 to 1995. He holds a degree in
economics from Associacao de Ensino Unificado do Distrito Federal  ("AEUDF") and
a master's degree in economics from Fundacao Getulio Vargas.

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

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

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

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

BOARD OF EXECUTIVE OFFICERS

The Board of Executive  Officers consists of one President and Executive Officer
for Investor  Relations,  one Executive Officer for Network and Operations,  one
Executive  Officer for  Finance  and  Information  Technology,  one  Director of
Administration  and Human Resources and one Executive Officer for Business.  All
Executive  Officers  were elected on April 26, 2001,  by the Board of Directors,



for a term of three years.  An  Executive  Officer may be removed from office at
any time.

The following are the Executive Officers and their respective positions.

NAME                                                             POSITION                             DATE APPOINTED
---------------------------------------  ------------------------------------------------------   --------------------
Mario Cesar Pereira de Araujo..........  President and Executive Officer for Investor Relations     August 10, 1998
Sergio Assenco Tavares dos Santos......  Executive Officer for Network and Operations               January 30, 1998
Luis Andre Carpintero Blanco...........  Executive Officer for Finance                              October 1, 2000
Getulio Nery Cardoso...................  Director of Administration and Human Resources             July 28, 1999
Joao Roberto Brito.....................  Executive Officer for Business                             November 27, 2000

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

SERGIO  ASSENCO  TAVARES DOS SANTOS,  52 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,  27 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,  49 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.

JOAO  ROBERTO  BRITO,  39 years old, has served as an  Executive  Officer  since
November  27,  2000.  In 1990,  he took over the  Administration  of Finance and
Control of TELEVISAO GAUCHA S/A, which belongs to the GRUPO RBS (REDE BRASIL SUL
DE COMUNICACOES),  and was promoted to General Manager of RBS VIDEO in Sao Paulo
in 1993. In 1995,  he became  Director of Finance and  Administration  of NET, a
cable-television  corporation  based in Sao Paulo. He was Director of Operations
with NET in Porto Alegre in 1997 and in 1998 he became  General  Director of NET
in the state of Parana.  From 1999 to March 2000,  he was Director of operations
of Theme Park HOPI HARI, in Sao Paulo.  From March 2000 to November 2000, he was
Chief  Operating  Officer  of DIRECT TO  COMPANY  S.A.,  a  satellite-television
network  directed to the corporate  market.  He holds a business  administration
degree from the Federal  University of Rio Grande do Sul and he  specialized  in
direct marketing at the FUNDACAO GETULIO Vargas.  He also obtained a degree from
the  Kellogg's   Executive   Business  Program,   offered  at  the  Northwestern
University, in the United States.

AUDIT COMMITTEE

The Holding  Company is audited by an Audit  Committee  (Conselho  Fiscal).  The
Audit  Committee  comprises  three members  serving for a term of one year.  The
Audit Committee  holds a regular  meeting each month and holds special  meetings
when called by the President or by any member of the Board of Directors.

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



NAME                                    POSITION              DATE ELECTED
------------                         -----------------  -----------------------
Augusto Patarelli..................     Chairman            April 26, 2001
Aureo Monteiro de Moraes...........     Director            April 26, 2001
Francisco Jose Becker Dias.........     Director            April 26, 2001

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

AUGUSTO  PATARELLI,  53 years old, has served as Chairman of the Audit Committee
since April 26, 2001. He also has served as Chief Financial Officer of Produtiva
Cooperativa  de Trabalho e Consultoria  S.A. since 1999. He served as Manager of
Planning Department of Telecomunicacoes  Brasileiras S.A. - Telebras,  from 1993
to 1998. He holds an economics and administration degree from the Franca College
in Sao Paulo.

AUREO  MONTEIRO  DE MORAES,  50 years old,  has served as  Director of the Audit
Committee  since  April  26,  2001.  He  has  served  as  Manager  of  Corporate
Proceedings  in  Telecomunicacoes  Brasileiras  S.A.  -  Telebras.  He  holds an
administration degree from University Catolica of Brasilia.

FRANCISCO  JOSE BECKER  DIAS,  52 years old, has served as Director of the Audit
Committee  since April 26, 2001.  He has served as  Executive  Director of Banco
Fibra S.A.  since 1994.  From 1991 to 1994,  he served as Executive  Director of
Banco BMG S.A. He also served as Vice-president of Banco Norchem S.A., from 1989
to 1991.  He served as Director of Metro Banco S.A.,  from 1988 to 1989. He also
served  as  Director  of  Banco  Iochpe  S.A.  from  1985 to  1988.  He holds an
electrical  engineering degree from the Federal University of Rio Grande do Sul.
He also holds a  master's  degree in  production  engineering  from the  Federal
University  of Rio de  Janeiro  and a PhD in  Accounting  and  Finance  from the
University of Lancaster (England).

COMPENSATION

For the year ended December 31, 2000, the aggregate amount of compensation  paid
by the Holding Company to all directors,  executive  officers and members of the
Audit Committee of the Holding Company was approximately R$1.82 million.

For the year ended December 31, 2000, the aggregate  amount set aside or accrued
by the Holding Company to provide  pension,  retirement or similar  benefits for
officers,  directors and members of the Audit  Committee of the Holding  Company
was approximately R$170.2 thousand.

BOARD PRACTICES

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

EMPLOYEES

On December 31, 2000, the Company's  workforce  consisted of 2,397  persons,  of
which 1,327 were employed  personnel,  330 were interns and 740 were  outsourced
personnel.  Of this total,  66.0% were  allocated  in the  Marketing,  Sales and
Client  Attention  areas;  9.0%  in  the  Service  Development,  Implementation,
Maintenance and  Optimization  areas; and the remaining 25.0% in the Information
Technology, Finance, Administration and Human Resources areas.

The  average  age of the  Company's  employees  is 31  years,  and  50.7% of the
employees  are  male.  Furthermore,  the  level of  education  of the  Company's
employees is as follows:  Elementary:  2.0%; High School: 56.0%; Graduate:  37%;
Post-Graduate / Specialized: 5.0%.

Approximately  25% of the Company's  employed  personnel are affiliated with the
state's  labor unions,  which are  associated  with the Brazilian  Federation of
Telecommunication   Labor  ("Fenattel")  or  to  the  Interstate  Federation  of
Telecommunication  Labor  ("Fittel").  Like the previous  years,  the process of
negotiating  the  agreement  involved  in the  collective  wage  adjustment  for



2000/2001 was  conducted in a  businesslike  manner,  which made it easy for the
workers meeting in assembly to vote for its approval.

In 2000,  the Company  invested  R$1,921  thousand in training and  development,
specifically in the areas of Sales, Client Attention, Technical, Operational and
Information Technology. This resulted in significant gains in productivity.

In July 2000,  the new Career  Plan  started  to be  implemented,  for which new
descriptions   of  the  positions  in  the  Company  defined  more  clearly  the
responsibilities  and  attributions  of every  employee.  The Company expects to
implement a competency-based  performance appraisal system in the first semester
of 2001, which should ease the implementation of the new remuneration  policy to
be used in the future.

In an effort to reduce and eventually  eliminate all the uncertainty involved in
the financing of the defined  benefit plans,  as in the former PBS-TCO plan, the
Company launched a new pension plan in October 2000 called TCO PREV. This hybrid
plan  has  defined  contributions  for the  programmable  benefits  and  defined
benefits for the so-called  risk  benefits,  namely  Medical and Hospital  Care,
Disability and Death Before Retirement.

Unlike the plan formerly  used,  the new plan separates its benefits from social
security,  and  participants  may  request  to leave the plan when they reach 50
years of age (Anticipated Retirement) or 60 years of age (Normal Retirement). In
either case, the  participant is required to have been on the plan for a minimum
of 10 years with no interruption of his contributions to Sistel. The calculation
of the programmable  benefits  considers the total balance of the  participant's
contribution plus the total  contributions made by the sponsor,  plus the plan's
profitability.  Below are the  levels  of the  participants'  and the  sponsor's
contributions:

Participants' contributions:

o    Basic Contribution:  monthly and optional between the percentages that vary
     between 3.0% and 8.0% of the  participation  salary (limited to the ceiling
     of R$13,000.00), according to the age group;

o    Voluntary  contribution:  monthly and limited to 22.0% of the participation
     salary and to the participants who already contribute with 8.0%;

o    Random  Contribution:  occasional  and must be at least 10% of the  maximum
     participation salary.

Sponsor's contribution:

o    Normal  Contribution:  monthly  and in the  value  equivalent  to the Basic
     Contribution of the active participant;

o    Specific  Contribution:  monthly  and  must  observe  the  minimum  benefit
     provided by law;

o    Variable   Contribution:   occasional   and  must   observe   uniform   and
     non-discriminatory criteria for associated participants;

o    Risk  Contribution:  monthly  and  equivalent  to  3.338% of the sum of all
     participation salaries;

o    Administrative  Contribution:  monthly and equivalent to 5.0% of the sum of
     all contributions made by the participants and by the sponsor.

The new  plan  TCO  PREV  has  already  enrolled  nearly  100% of the  employees
affiliated to the former PBS-TCO plan.

As to the outsourcing of its activities, during 2000, the Company maintained all
contracts  entered into with  contractors,  mainly for  reception,  security and
cleaning  services and entered into a contract with Arthur Andersen to conduct a
study to identify further functions that can be outsourced as of 2001.



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 to 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, 2000, BID S.A., a subsidiary of
Splice, owned 53.80% 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............................................................        66,905,151,125              53.80%
All directors and executives officers as a group...................                     7                  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 providing  alphanumeric paging services in
ten of the largest Brazilian cities.

RELATED PARTY TRANSACTIONS

The Company effected transactions with Splice and subsidiaries of Splice in 1999
and 2000.  These  transactions  were  mainly  related to  marketable  securities
(R$77.7  million  in 2000 and R$7.8  million in 1999),  short  term  investments
(R$6.5  million in 2000),  acquisition of property,  plant and equipment  (R$5.1
million in 2000 and R$6.2 million in 1999),  maintenance services (R$3.5 million
in 2000) and acquisition of telephone cards (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 19% with 106% swap of
CDI  (Interbank  Deposit  Certificate).  There were no  material  related  party
transactions in 1998. See Note 26 to the Consolidated Financial Statements.

ITEM 8. FINANCIAL INFORMATION



CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Consolidated Financial Statements

     See Item 18 "Financial Statements."

Legal Proceedings

     LITIGATION RELATED TO THE BREAKUP OF TELEBRAS

The Breakup of TELEBRAS is subject to several  lawsuits in which plaintiffs have
requested,  and in certain cases obtained,  preliminary  injunctions against the
Breakup. All of these preliminary injunctions have been quashed by Federal Court
decisions.  These  lawsuits  are all  being  challenged  on the  basis  of court
competence.  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 ARISING OUT OF EVENTS PRIOR TO THE BREAKUP

TELEBRAS and the legal predecessors of the Holding Company and the Subsidiaries,
respectively (the "Predecessor Companies"),  are defendants in a number of legal
proceedings and subject to certain other claims and contingencies. Liability for
any  claims  arising  out of acts  committed  by the  Predecessor  Companies  or
TELEBRAS prior to the effective date of the Breakup remains with the Predecessor
Companies or TELEBRAS,  as the case may be, except for those  liabilities  which
under  specific  accounting  provisions  have been assigned to the  Subsidiaries
and/or the New Holding Companies.  Any claims against the Predecessor  Companies
which are not satisfied by the Predecessor  Companies or TELEBRAS for reasons of
insufficient  assets could result in claims against the  Subsidiaries or the New
Holding  Companies  to the extent that either have  received  assets which might
have been used to satisfy those claims had they not been spun off.

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



     LITIGATION RELATED TO THE APPLICATION OF THE ICMS

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

     TAXATION OF CELLULAR ACTIVATION

Each of the Band A Subsidiaries has filed a lawsuit in the Treasury Court of the
state in which it is located  seeking  injunctive  relief from  retroactive  and
prospective  application of the ICMS to activation fees and has made a provision
for the  contingency  that ICMS may be payable on such fees.  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'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 RELATED TO TELEBRAS LOANS

Under the terms of the Breakup,  several loans existing between TELEBRAS and its
subsidiaries (the "TELEBRAS Loans") were to have been distributed  through:  (i)
the  assignment of the debt  obligation to the relevant  subsidiary and (ii) the



assignment  of the credit right to the  relevant New Holding  Company as the new
parent of the  subsidiary  who assumed the debt.  Although the obligation to pay
the TELEBRAS Loans was duly assigned to Telebrasilia and Telegoias, the right to
receive such  payments  was not  assigned to the Holding  Company but instead to
Tele Centro Sul, one of the New Holding Companies providing fixed-line services.
In light of this departure from the agreed procedures for assigning the TELEBRAS
Loans,  payment of the TELEBRAS Loans was suspended  immediately upon the change
of  control  to the  Holding  Company,  and a lawsuit  was filed in June 1999 in
Federal District Court against Tele Centro Sul,  TELEBRAS and KPMG, the auditors
for the Breakup accounting procedures, requesting liquidated damages and a court
ruling recognizing the inappropriate procedures and non-existence of the debt to
TELEBRAS. 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.

All three  lawsuits  have been joined  before the same court as they involve the
same issue concerning the TELEBRAS Loans.

     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).

To create a new tax, 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
a  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$5.8 million, which has been deposited in court.

     OTHER LITIGATION

The Company is a party to certain legal proceedings arising in the normal course
of business. The Company has provided for or deposited in court amounts to cover
its  estimated  losses due to adverse  legal  judgments.  In the  opinion of the
Company's management,  such actions, if decided adversely to the Company,  would
not  have a  material  adverse  effect  on  the  Company's  business,  financial
condition or results of operations.  SEE NOTE 23 TO THE  CONSOLIDATED  FINANCIAL
STATEMENTS.

Policy on Dividend Distributions

On February 7, 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 period ending on December 31,
2000 and in accordance with Article 9 of Law 9249/95 and Provision Number 207/96
of  the  Brazilian  Securities  Exchange  Commission  (CVM),  in  the  value  of
R$0.0000528123  per share,  with 15% withheld  income tax,  which results in net
interest  of  R$0.0000448904  per share,  except to those  shareholders  who are
immune or exempt.



The  corresponding  credit was  written  in the  Company's  accounting  books on
December 31, 2000, on an individualized basis to each shareholder,  according to
their  shareholding   position  on  February  19,  2001,  rendering  the  shares
prior-to-Interest on Owned Capital as of February 20, 2001.

The value of the interest,  net of the applicable  withheld  income tax, will be
ascribed to the value of the mandatory  dividend and the  statutory  dividend on
the preferred shares, relative to the fiscal year 2000, 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,  2001,  the  general  assembly  approved  the  distribution  of the
complementary dividends relative to the fiscal year 2000, in the terms bellow:

          Values

          a) Interest on owned capital - Common and Preferred Shares
             Gross value per share                           R$0.0000528123
             Net value per share                             R$0.0000448904

          b) Dividend
             Value per share - Common and Preferred          R$0.0000511581

          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 to such tax  within  the  period
specified  by  the  Company  in  official  communication  to  the  shareholders,
published in GAZETA MERCANTIL and in the DIARIO OFICIAL on February 8, 2001. The
payment of the gross value is guaranteed to  shareholders  considered  immune by
law. The dividend is not subject to income tax.

On May 25, 2001, the Company  commenced payment of interest on owned capital and
complementary dividend relative to the fiscal year 2000, approved in the General
Ordinary Shareholders Meeting held on April 26, 2001.

SIGNIFICANT CHANGES

See  "Consolidated  Statements  of Cash Flows for the Years Ended  December  31,
1998,  1999 and 2000",  "Consolidated  Statements  of  Changes in  Shareholders'
Equity for the Years Ended December 31, 1998, 1999 and 2000",  and Notes 22, 24,
31 and 32 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 "Sao Paulo Stock Exchange"). The Preferred Shares are also traded
on the Bolsa de Valores do Rio de Janeiro (the "Rio de Janeiro Stock  Exchange")
and the seven other  Brazilian  stock  exchanges.  As of December 31, 2000,  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 1000 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


                                                                       NOMINAL REAIS PER 1000 PREFERRED SHARES
                                                                    ---------------------------------------------
                                                                            HIGH                      LOW
                                                                    --------------------- -----------------------
First quarter 1999..............................................          R$2.146                  R$1.083
Second quarter 1999.............................................          R$2.414                  R$1.974
Third quarter 1999..............................................          R$2.242                  R$1.921
Fourth quarter 1999.............................................          R$3.880                  R$2.155
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


                                                                       NOMINAL REAIS PER 1000 PREFERRED SHARES
                                                                    ---------------------------------------------
                                                                            HIGH                      LOW
                                                                    --------------------- -----------------------
November 2000...................................................          R$6.508                  R$5.288
December 2000...................................................          R$6.808                  R$5.334
January 2001....................................................          R$8.283                  R$5.834
February 2001...................................................          R$7.646                  R$5.943
March 2001......................................................          R$7.475                  R$5.034
April 2001......................................................          R$6.350                  R$4.485

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,  2000  there  were   approximately   171  registered   owners  of  ADSs  and
approximately 56.03 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


                                                                                 U.S. DOLLARS PER ADS
                                                                    -------------------------------------------
                                                                            HIGH                      LOW
                                                                    --------------------- ---------------------
First quarter 1999..............................................           US$3.600                 US$2.375
Second quarter 1999.............................................           US$4.438                 US$2.448
Third quarter 1999..............................................           US$3.750                 US$3.125
Fourth quarter 1999.............................................           US$7.063                 US$3.313
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



                                                                                 U.S. DOLLARS PER ADS
                                                                    -------------------------------------------
                                                                            HIGH                      LOW
                                                                    --------------------- ---------------------
November 2000...................................................          US$11.625                 US$8.813
December 2000...................................................          US$11.688                 US$8.813
January 2001....................................................          US$14.188                 US$9.625
February 2001...................................................          US$12.740                 US$9.500
March 2001......................................................          US$12.200                 US$7.500
April 2001......................................................           US$8.750                 US$6.600


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 May 18, 1998,  Telegoias shares
began  trading on the  Sociedade  Operadora  do Mercado  de Ativos  (SOMA),  the
over-the-counter  market.  The  other  subsidiaries'  shares,  Telemat,  Telems,
Teleron, Teleacre and NBT, do not trade on any stock market, as they are closely
held corporations.

Restructuring of the Brazilian Stock Exchanges

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

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

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

Trading on the Brazilian Stock Exchanges

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

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



Trading in securities  listed on the Brazilian  stock  exchanges may be executed
off the organized exchanges in certain  circumstances,  although such trading is
very limited.

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

At December 31, 2000, the aggregate market  capitalization  of approximately 500
companies  listed on the Sao Paulo Stock  Exchange  was  approximately  US$225.5
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$422  million.  In 2000,  the stocks of the  approximately  40 companies  that
comprise the stock index of the Sao Paulo Stock  Exchange  (about 40  companies)
accounted  for  approximately  80% of all  trading  on the spot  markets  in all
Brazilian stock exchanges.

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

Regulation of Brazilian Securities Markets

     GENERAL

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

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



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

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

     DEPOSITARY SECURITIES PROGRAMS REGULATIONS

All ADS programs must also be  registered  and approved by the CVM, as set forth
in the National  Monetary  Council  regulation  for such  programs.  SEE 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  CONSELHO  FISCAL,  a board
established to audit and inspect  management  and to assess its compliance  with
the law and  company's  By-laws  (the "Audit  Committee").  Such board will have
three to five members,  of which the non-voting  shareholders will elect one and
the minority  voting  stock  holders  representing  at least 10% of total voting
stock will elect another.  In the case of a public company,  such as the Holding
Company,  the CVM enacted a regulation in January 2000 lowering the threshold to
summon the Audit  Committee to 2% and 1% of voting stock and  non-voting  stock,
respectively,  applicable to corporations with over 150 million REAIS of capital
stock, e.g. the Holding Company.

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



A bill to amend the Brazilian  Corporation Law is currently  pending approval by
the Brazilian Senate. If passed in its current form, the Law of the Corporations
(Law 6.404/76) will be  substantially  amended.  These amendments will bring the
following changes with respect to the Company:

o    Preferred shares representing 10% of the outstanding shares not held by the
     controlling  shareholders  would be entitled to appoint a representative to
     the Company's Board of Directors;

o    Preferred  shares and common shares not held by the  Company's  controlling
     shareholders would have the collective right to appoint a representative to
     the Company's Audit Committee;

o    Disputes among  shareholders  would be subject to arbitration,  if provided
     for in the Company's bylaws;

o    Shareholders  representing 10% of the Company's outstanding shares would be
     entitled to call a shareholders'  meeting to deliberate with respect to any
     conflict of interest involving the Company's management;

o    A tender  offer at a purchase  price equal to the fair market value for all
     outstanding  shares  would be required  upon a delisting  or a  substantial
     reduction in liquidity of the Company's  shares as a result of purchases by
     the controlling shareholders;

o    Any sale of control  would  require a tender offer to purchase the minority
     shareholders'  common shares, and, if provided for in the Company's bylaws,
     for the minority  shareholders  preferred  shares, as well as at a purchase
     price at least equal to 80% of the price per share paid to the  controlling
     shareholder;

o    Shareholders  would  be  afforded  dissenters'  redemption  rights  upon  a
     spin-off only if it entailed a change in the corporate purpose, a reduction
     in mandatory dividends or participation in a conglomerate of companies;

o    The  controlling  shareholders,  the members of the Board of Directors  and
     Audit  Committee and the Executive  Officers  would be required to disclose
     any  purchase  or  sale  of  Company  shares  to the  Brazilian  Securities
     Commission and the Sao Paulo stock exchange;

o    The Company's Executive Officers and two-thirds of the members of the Board
     of Directors would have to reside in Brazil; and

o    The Company would be permitted to use the Internet as an additional  method
     of information disclosure.

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 October 10, 2000, the Company's  capital was comprised
by a total of 364,399,027,592 shares, 240,029,997,060 being preferred shares and
124,369,030,532  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,  noncumulative 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
two-thirds of the total number of shares.

The majority of the members of the Company's  Board of Directors were 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.

DISCLOSURE OF INCREASE IN PARTICIPATION

Pursuant  to  Instruction  no.  299/99 of the  COMISSAO  DE VALORES  MOBILIARIOS
("CVM"), the Brazilian securities commission, 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.

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 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.

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 to
become a member of a conglomerate of companies,  if certain liquidity  standards
of our 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 an 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$60.5 million to ANATEL for the right to explore the cellular
service and to use the associated radio frequency as follows:

     o    R$24.2 million on the date of the signature of the authorization term,
          equivalent to 40% of the total amount;
     o    R$12.1  million on November 27, 1999,  equivalent  to 20% of the total
          amount;
     o    R$12.1  million on November 27, 2000,  equivalent  to 20% of the total
          amount;
     o    R$12.1  million on 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 a fiscalization 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.  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 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 10% 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 15% 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  which do not impose income tax or
where  such tax is  imposed  at a tax  bracket  within a range  between  0% to a
maximum rate of 20% - in accordance  with Law No. 9,959, 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% (to be increased to 20% as of January 1, 2002, in
accordance  with the same Law). 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 (11.00% per annum for the three
month period ending June 30, 2000). The total amount  distributed as interest on
capital may not exceed the greater of (i) 50% of net income  (before taking such
distribution  and any  deductions for income taxes into account) for the year in
respect of which the  payment is made or (ii) 50% of retained  earnings  for the
year  prior to the year in respect of which the  payment  is made.  Payments  of
interest  on  capital  are  decided  by  the   shareholders   on  the  basis  of
recommendations of the company's board of directors.

Distributions of interest on capital paid to Brazilian and non-Brazilian holders
of  Preferred  Shares,  including  payments  to the  Depositary  in  respect  of
Preferred  Shares  underlying  ADSs, are  deductible by the Holding  Company for
Brazilian corporate income tax 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 rate will remain
0.38% until its expected  expiration in June 2002.  Although the CPMF tax is set
to expire on June 16, 2002, the Brazilian Congress is discussing the possibility
of converting this temporary tax into a permanent tax.

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

Amounts  withheld as backup  withholding may be credited against a holder's U.S.
federal  income  tax  liability,  and a holder may obtain a refund of any excess
amounts  withheld under the backup  withholding  rules by filing the appropriate
claim for refund with the IRS and  furnishing  any  required  information.  U.S.



holders of ADSs or Preferred Shares should consult their tax advisors  regarding
the application of the information reporting and backup withholding rules.

     PASSIVE FOREIGN INCOME COMPANY CONSIDERATIONS

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

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,  70302-916,  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 because certain of its costs are denominated in currencies  (primarily
the U.S.  dollar)  other than those in which it earns  revenues  (primarily  the
REAL). Similarly, the Company is subject to market risk deriving from changes in
interest rates which may affect the cost of its financing.  The Company does not
use derivative instruments,  such as foreign exchange forward contracts, foreign
currency  options,  interest rate swaps and forward rate  agreements,  to manage
these market  risks,  nor does it hold or issue  derivative  or other  financial
instruments for trading  purposes,  except for the hedge contracted for the Zero
Coupon Euro  Commercial  Paper.  SEE 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, 2000,  approximately R$236.4 million of the Company's  indebtedness
and R$53.1  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 from a hypothetical 50% change in foreign  currency  exchange rates
would be  approximately  R$14 million,  once R$207.9  related to Euro Commercial
Paper 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$53.1  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, 2000, the Company had approximately  R$509.1 million in loans
and financing outstanding,  of which approximately R$480.6 million bore interest
at fixed  rates and  approximately  R$28.5  million  bore  interest  at floating
(primarily LIBOR-based) rates. The Company invests its excess liquidity (R$450.1
million at December 31, 2000) 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, 2000 would be
approximately  R$9.2  million.  The above  sensitivity  analysis is based on the
assumption  of an  unfavorable  100 basis point  movement of the interest  rates
applicable to each homogeneous  category of financial assets and liabilities and
sustained over a period of one year. A homogeneous category is defined according
to the currency in which  financial  assets and  liabilities are denominated and
assumes the same interest rate movement within each  homogeneous  category (e.g.
U.S.  dollars).  As a result, the Company's interest rate risk sensitivity model
may  overstate  the impact of  interest  rate  fluctuations  for such  financial
instruments,  as  consistently  unfavorable  movements of all interest rates are
unlikely. SEE NOTE 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-55.

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.

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                                           PAGE

AD.....................................15     EILD Contract...........................14
ADRs...................................48     EMBRATEL................................11
ADSs...................................48     Equity Withdrawing Rights...............11
American Depositary Shares.............48     Extreme South Stock Exchange............54
Americel...............................22     Federal Government.......................1
ANATEL.................................10     Fenattel................................46
ANATEL Decree..........................25     Financial System Law....................55
Annex IV Regulations...................61     Fistel..................................19
Annex V Regulations.....................8     Fittel..................................47
Area 7.................................10     Fixed-Line Region.......................11
Area 8.................................10     Floating Market..........................5
Audit Committee........................29     Floating Market Rate.....................5
Band A.................................23     GDP.....................................12
Band A Concessions.....................10     General Telecommunications Law..........10
Band A Service Provider................23     Holding Company..........................1
Band A Subsidiary.......................1     IBGE....................................12
Band B.................................22     ICMS....................................18
Band B Concessions.....................10     IGP-DI...................................8
Band B Service Provider................21     IGP-M...................................31
Band B Subsidiary.......................1     IOF tax.................................64
Brazil..................................1     IRS.....................................66
Brazilian Corporation Law..............56     LIBOR...................................34
Brazilian GAAP..........................1     Minimum Law.............................25
Brazilian Securities Law...............56     National Monetary Council...............55
Breakup................................11     NBT......................................1
Breakup of TELEBRAS....................11     New Holding Companies...................10
Cellular Region........................11     non-Brazilian holder....................62
Cellular Service Rule..................26     non-U.S. holder.........................62
Central Bank...........................56     Noon Buying Rate.........................1
Certificate of Registration............30     off-peak calls..........................15
CLC....................................54     Parana Stock Exchange...................54
Code...................................66     PCS......................................7
COFINS..................................9     Pernambuco and Paraiba Stock Exchange...54
Commercial Market.......................5     PETROBRAS...............................45
Common Shares..........................48     PFIC....................................67
Company.................................1     PIS................................ .....9
Concessions............................10     Predecessor Companies...................10
Consolidated Financial Statements.......1     Preferred Shares........................48
CPMF tax...............................64     R$ ......................................1
CPqD...................................42     reais....................................1
Custodian..............................60     real.....................................1
CVM....................................11     REAL Plan...............................29
Deposit Agreement......................53     Region..................................11
Depositary.............................53     Registered Capital......................64
dollars.................................1     Rio de Janeiro Stock Exchange...........52
DSL1...................................15     SAF.....................................22
DSL2...................................15     Sao Paulo Stock Exchange................52
e&p....................................65 SEC.....................................55
EILD...................................14     Service Quality Memorandum..............26


                                     PAGE                                          PAGE

Shareholders Essential Rights..........56     Telecommunications Regulations..........10
SISTEL.................................41     Telegoias...............................1
SMS....................................21     Telemat.................................1
Splice.................................11     Telems..................................1
STFC...................................24     Teleron.................................1
Stock Exchange Unification Program.....54     TJLP...................................43
Subsidiaries............................1     U.S. dollars............................1
Subsidiary..............................1     U.S. GAAP...............................2
Tele Centro Sul........................22     U.S. holder............................65
Teleacre................................1     US$.....................................1
TELEBRAS...............................10     VC1....................................15
TELEBRAS Loans.........................34     VC2....................................15
TELEBRAS System........................10     VC3....................................15
Telebrasilia............................1     WAP....................................13



TECHNICAL GLOSSARY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

EXCHANGE: See Switch.

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

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

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

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

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

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

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

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

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

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

PACKET-SWITCHED DATA COMMUNICATION SERVICES: Data services based on parceling or
breaking  the data stream into packets and  switching  the  individual  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 16, 2001



TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

CONTENTS


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

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

Consolidated Balance Sheets................................................. F-4

Consolidated Statements of Operations....................................... F-6

Consolidated Statements of Cash Flows....................................... F-7

Consolidated Statements of Changes in Shareholders' Equity.................. F-8

Notes to the Consolidated Financial Statements.............................. F-9



              REPORT OF ERNST & YOUNG AUDITORES INDEPENDENTES S.C.


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

We have  audited the  accompanying  consolidated  balance  sheets of Tele Centro
Oeste Celular  Participacoes  S.A. and  subsidiaries as of December 31, 2000 and
1999,  and  the  related  consolidated  statements  of  operations,  changes  in
shareholders'  equity and cash flows for the years then ended.  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, 2000 and 1999, and the
consolidated  results  of its  operations  and its cash flows for the years then
ended, 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

February 2, 2001 (except for note 16 as to which the date is March 28, 2001)



REPORT OF DELOITTE TOUCHE TOHMATSU


To the Board of Directors and Shareholders of
TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
Brasilia - DF, Brazil

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

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

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

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



/s/ DELOITTE TOUCHE TOHMATSU
March 26, 1999



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 2000
                 (In thousands of constant Brazilian Reais - R$)


                                                                 NOTE           1999              2000
                                                             -----------   --------------    --------------
ASSETS

CURRENT ASSETS
  Cash and cash equivalents................................                     69,432          450,131
  Marketable securities....................................       12            87,667          158,701
  Trade accounts receivable, net...........................       13           173,254          161,010
  Loans and financial investments..........................                      4,639                -
  Deferred income taxes and recoverable taxes..............       14            63,831          107,380
  Handset and accessory inventory........................                       19,137           52,082
  Other assets.............................................                     16,154           28,275
                                                                           --------------    --------------
Total current assets.......................................                    434,114          957,579

NONCURRENT ASSETS
  Deferred income taxes and recoverable taxes..............       14               617           66,282
  Loans and financial investments.........................                           -            2,673
  Other assets.............................................                      4,466            4,018
                                                                           --------------    --------------
Total noncurrent assets....................................                      5,083           72,973

PERMANENT ASSETS
  Investments..............................................                      4,458            5,445
  Property, plant and equipment, net ......................       15           994,531        1,083,754
  Deferred charges, net....................................       16           380,934           35,158
                                                                           --------------    --------------
Total permanent assets.....................................                  1,379,923        1,124,357
                                                                           --------------    --------------

                                                                           ==============    ==============
Total assets...............................................                  1,819,120        2,154,909
                                                                           ==============    ==============



See the accompanying notes to the consolidated financial statements.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 2000
                 (In thousands of constant Brazilian Reais - R$)


                                                                 NOTE           1999              2000
                                                             -----------   --------------    --------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Payroll and related accruals.............................       17             6,236            6,969
  Accounts payable and accrued expenses....................       18           106,166          227,757
  Indirect taxes...........................................       19            50,253           61,002
  Deferred taxes and income taxes payable..................       20            17,925            9,838
  Participation in results of operation....................       21            50,708           51,781
  Loans and financing......................................       22           100,629          490,239
  Payable for concession (license).........................                     18,319           19,423
  Other payables...........................................                      5,092            8,867
                                                                           --------------    --------------
Total current liabilities..................................                    355,328          875,876

NONCURRENT LIABILITIES
  Accounts payable and accrued expenses....................       18               614            1,047
  Deferred taxes and income taxes payable..................       20            59,831           71,646
  Loans and financing......................................       22            43,199           18,910
  Provision for contingencies..............................       23             7,151           62,996
  Payable for concession (license).........................                     18,319                -
                                                                           --------------    --------------
Total noncurrent liabilities...............................                    129,114          154,599

MINORITY INTERESTS.........................................                    103,911           82,136
CAPITALIZABLE FUNDS........................................                        139              126

SHAREHOLDERS' EQUITY
  Capital..................................................                    386,865          386,865
  Capital reserve..........................................                    354,867          124,610
  Legal reserve............................................                     29,882           36,349
  Revenue reserve..........................................                    112,073           97,675
  Retained earnings .......................................                    346,941          396,673
                                                                           --------------    --------------
Total shareholders' equity.................................       25         1,230,628        1,042,172
                                                                           --------------    --------------
Total liabilities and shareholders' equity.................                  1,819,120        2,154,909
                                                                           ==============    ==============


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, 1998, 1999 and 2000
 (In thousands of constant Brazilian Reais, except shares and per share amounts)

                                                                                           YEARS ENDED DECEMBER 31
                                                            ---------  ----------------------------------------------------
                                                               NOTE           1998              1999               2000
                                                            ---------  ----------------  -----------------  ---------------

Net operating revenue .....................................     4            637,406          666,660            930,646
Cost of services rendered and cost of products sold........     5          (260,327)        (326,514)          (532,163)
                                                                       ----------------  -----------------  ---------------
Gross margin...............................................                  377,079          340,146            398,483
Operating expenses
    Selling expenses ......................................     6           (99,093)        (118,592)          (126,163)
    General and administrative expenses ...................                 (46,289)         (64,539)           (78,420)
    Other net operating results............................     7              (953)         (14,020)            (9,618)
                                                                       ----------------  -----------------  ---------------
Operating income before net financial results..............                  230,744          142,995            184,282
Net financial results......................................     8           (69,711)         (47,640)           (30,063)
                                                                       ----------------  -----------------  ---------------
Operating income...........................................                  161,033           95,355            154,219
Net non-operating results..................................     9           (20,575)          (6,055)           (19,539)
Employees' participation...................................                  (1,271)          (1,866)            (1,878)
                                                                       ----------------  -----------------  ---------------
Income before income taxes and minority interest...........                  139,187           87,434            132,802
Income and social contribution taxes.......................     10          (40,206)         (29,857)           (40,159)
                                                                       ----------------  -----------------  ---------------
Income before minority interest............................                   98,981           57,577             92,643

Minority interest..........................................                 (24,076)         (11,531)           (19,980)
Reversal of interest on own capital........................                   91,749           53,542             30,981
                                                                       ----------------  -----------------  ---------------
Net income.................................................                  166,654           99,588            103,644
                                                                       ================  =================  ===============
Outstanding shares at end of year (thousands)..............              334,399,028      364,399,028        364,399,028

Profit per thousand shares (R$)............................                     0.50             0.27               0.28
                                                                       ================  =================  ===============


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, 1998, 1999 and 2000
       (In thousands of constant Brazilian Reais - R$, of December, 2000)

                                                                              1998               1999              2000
                                                                       ---------------    ---------------    ---------------
OPERATING ACTIVITIES:
   Net income..........................................................    166,654             99,588           103,644
   Adjustments  to reconcile  net income to cash
   provided by operating activities:
     Depreciation and amortization.....................................     83,221            128,762           154,345
     Provision for loss of property and equipment......................     19,606                  -                 -
     Disposal of permanent assets......................................      1,734              7,948            16,482
     Minority interests................................................     24,076             11,531            19,980
     Allowance for doubtful accounts...................................     52,653             75,162            54,873
   Decrease (increase) in assets:
       Trade accounts receivable.......................................  (107,682)          (109,365)          (42,629)
       Inventories.....................................................          -           (19,128)          (32,945)
       Deferred income taxes and recoverable taxes.....................   (25,810)           (28,779)         (109,214)
       Other assets....................................................   (10,997)           (11,822)           (9,707)
   Increase (decrease) is on liabilities:
       Personnel, social charges and benefits..........................      3,916                687               733
       Accounts payable and accrued expenses...........................     52,222             44,827           121,591
       Indirect taxes..................................................     24,983             21,416            10,749
       Other current liabilities.......................................          -              5,092             3,776
       Accrued interest................................................      8,489              2,682            34,641
       Provision for contingencies.....................................      3,642              2,068               102
       Deferred income tax ............................................    (1,660)            (4,422)          (20,229)
       Participation in results of operation...........................      1,043           (28,513)             1,073
       Payable for concession (license)................................          -             12,416          (17,215)
       Other non-current liabilities...................................          -              (151)               433
       Minority interests..............................................          -           (26,745)          (41,755)
                                                                       ---------------    ---------------    ---------------
   Net cash provided by operating activities...........................    296,090            183,254           248,728
INVESTING ACTIVITIES:
   Marketable securities...............................................          -            (87,667)          (71,034)
   Additions to investments............................................         (8)            (4,451)           (1,432)
   Additions to property, plant and equipment                             (201,269)          (291,038)         (255,678)
   Transfer from fixed assets to investments...........................          -             39,978                 -
   Capitalized interest................................................     (1,361)                 -                 -
   Addition to deferred assets.........................................        (25)           (32,042)           (7,024)
   Transfer from deferred assets to recoverable taxes..................          -                  -           118,615
                                                                       ---------------    ---------------    ---------------
   Net cash used in investing activities...............................   (202,663)          (375,220)         (216,553)
FINANCING ACTIVITIES:
   Loans repaid........................................................     (9,002)            (3,036)           (5,239)
   Proceeds from loans.................................................      4,068             87,927           391,663
   Cash generated by spin-off from Telebras............................     20,524                  -                 -
   Capitalizable funds.................................................        166                  -               (13)
   Rights spun-off from Telebras.......................................        676                  -                 -
   Issuance of preferred shares........................................          -             63,719                 -
   Premium on issue of new shares......................................          -                 82                 -
   Interest on own capital.............................................          -            (49,059)          (37,887)
                                                                       ---------------    ---------------    ---------------
   Net cash provided by financing activities...........................     16,432             99,633           348,524
Increase in cash and cash equivalents..................................    109,859            (92,333)          380,699
Cash and cash equivalents at beginning of year.........................     51,906            161,765            69,432
                                                                       ---------------    ---------------    ---------------
Cash and cash equivalents at end of year...............................    161,765             69,432           450,131
                                                                       ===============    ===============    ===============

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, 1998, 1999 AND 2000
       (In thousands of constant Brazilian Reais - R$, of December, 2000)

                                                                        SHAREHOLDERS' EQUITY
                                        -----------------------------------------------------------------------------------------
                                        DIVISIONAL                CAPITAL     LEGAL        REVENUE       RETAINED
                                          EQUITY      CAPITAL     RESERVE    RESERVE       RESERVE       EARNINGS        TOTAL
                                        -----------------------------------------------------------------------------------------
  BALANCE AT DECEMBER 31, 1997.........   679,472           -           -          -             -              -       679,472

  Spin-off from Telebras............... (679,472)     253,622           -     14,991       255,237        176,821        21,199
  Consolidation adjustments............
      Capitalized interest.............         -           -           -          -             -         11,190        11,190
      Donations and others.............         -           -           -          -             -            108           108
  Net income...........................         -           -           -          -             -        166,654       166,654
  Transfer to reserves.................         -           -           -      8,993       164,952      (173,945)             -
  Reversal of reserves.................         -           -           -          -     (255,237)       255,237              -
  Dividends/Interest on own capital....         -           -           -          -             -       (79,485)      (79,485)
                                        -----------------------------------------------------------------------------------------
  BALANCE 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 incorporated 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)
                                        -----------------------------------------------------------------------------------------
  BALANCE 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)

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





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 constant Brazilian Reais, of December, 2000,
                            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, 2000, 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:



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


1.  OPERATIONS AND BACKGROUND (Continued)

             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

    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.

    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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
          (Amounts expressed in thousands of constant Brazilian Reais,
                  of December, 2000, except per share amounts)


2.  PRESENTATION OF THE FINANCIAL STATEMENTS

    a. PRESENTATION OF THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
       1998, 1999 AND 2000

       The  consolidated  financial  statements were prepared in accordance with
       generally  accepted  accounting  principles  in  Brazil  and  regulations
       established  by  CVM  -  Comissao  de  Valores   Mobiliarios   (Brazilian
       Securities Commission).

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

       The consolidated  financial  statements include Tele Centro Oeste Celular
       Participacoes S.A. and its majority - owned subsidiaries.

       Minority interest is included in the consolidated financial statements of
       the Company.  At December 31, 2000, this interest was 11.8%,  7.8%, 2.7%,
       1.8%, 3.0%, 1.7% and 5.0% 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 generally accepted accounting  principles
       in Brazil.

       The  consolidated  financial  statements were prepared on a fully indexed
       basis to recognize the effects of changes in the purchasing  power of the
       Brazilian currency until December 31, 2000.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            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, 2000
       and for the year then ended, as published in Brazil, do not recognize the
       effects of changes in the purchasing power of the Brazilian currency that
       would  have been  required  under the  comprehensive  indexation  system,
       applied  through   December  31,  1995.  In  July  1997,  the  three-year
       cumulative  inflation  rate for Brazil  fell  below  100%.  However,  for
       accounting  purposes,  the Company  applied the constant  currency method
       through  December 31, 2000, as required by Brazilian  generally  accepted
       accounting  principles when the inflation rate is material.  During 1998,
       the  inflation  rate was 1.8%.  Therefore,  monetary  correction  was not
       applied in 1998.

       For 1999 and 2000,  the  annual  inflation  rates  were  20.1% and 9.95%,
       respectively,  which were  considered  to have a  material  effect on the
       financial  statements.  Thus the financial  statements of the Company for
       the  three-year  period ended  December 31, 2000 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, 1998, 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 currency of constant  purchasing
           power of 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 three
           year period ended December 31, 2000, as measured by the IGP-M, was as
           follows:



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


2.  PRESENTATION OF THE FINANCIAL STATEMENTS (Continued)

    b. INFLATION ACCOUNTING METHODOLOGY (Continued)

         PERIOD                                         ANNUAL INFLATION (%)
         ------                                         --------------------
         Year ended December 31, 1998................               1.80
         Year ended December 31, 1999................              20.10
         Year ended December 31, 2000................               9.95

       ii.   1998 INFLATION

             Considering  the low  level  of  inflation  in  1998,  the  Company
             considered  the  variation  of the  IGP-M  in 1998  equal to 0% for
             purposes of  applying  the  constant  currency  method.  Management
             believes that applying the variation of 1.8 % would not be material
             to the Company's financial statements.

       iii.  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  as from  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.

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

                                                   NET INCOME               SHAREHOLDERS' EQUITY
                                            ------------------------------------------------------
                                                 1999         2000             1999         2000
                                            ------------------------------------------------------
       Corporate law                          117,970      129,319        1,115,452      896,398
       Restatement of net permanent assets   (15,746)     (27,062)          199,127      239,459
       Tax effects                              9,074       12,901         (70,360)     (81,416)
       Minority interests                    (11,710)     (11,514)         (13,591)     (12,269)
                                            ------------------------------------------------------
       In constant currency                    99,588      103,644        1,230,628    1,042,172
                                            ======================================================



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

2.  PRESENTATION OF THE FINANCIAL STATEMENTS (CONTINUED)

    c. DIVISIONAL EQUITY



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


    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

       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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

3.  SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (CONTINUED)

    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.

    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
       related to  subsidiary  Norte  Brasil  Telecom  S.A.  was recorded at its
       acquisition cost and is being amortized in accordance with the concession
       terms.

       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 faced 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

3.  SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

       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 discussed in note 31. 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, 2000, 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) (iii),  the expense  related to the effects of
       deferred taxes from indexation adjustments for 1999 and 2000 are recorded
       directly against shareholders' equity.

    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  represents  interest and monetary  variations
       resulting from financial investments and loans and financing obtained and
       conceded.  Interest  charged on own capital  compose the balance of these
       accounts.  In compliance  with the tax  legislation,  the interest on own
       capital is recorded as financial  expenses and  considered as destination
       of result 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.




                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

3.  SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

    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 was 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 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 states of Goias,
       Tocantins,  Mato  Grosso  do Sul,  Mato  Grosso,  Rondonia,  Acre and the
       Federal  District.  As of 2000,  revenues were also generated through the
       states of 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.

    p. MINORITY INTERESTS

       The Company records minority interest expense, which reflects the portion
       of the earnings of  majority-owned  operations that are applicable to the
       minority interest partners. See note 2a.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


3.  SUMMARY OF THE PRINCIPAL ACCOUNTING PRACTICES (Continued)

    q. ADVERTISING COSTS

       Advertising  costs are  expensed  as  incurred  and  included  in selling
       expenses.  They  amounted to R$24,321  and  R$19,207  for the years ended
       December  31, 2000 and 1999,  respectively.  The Company did not maintain
       specific records for prior years.


4.  NET OPERATING REVENUE

                                               1998         1999         2000
                                            -----------  -----------  ----------
       Monthly subscription charges           193,859      211,364      194,424
       Activation fees                         28,606        4,080            -
       Usage charges                          380,383      369,235      349,880
       Network usage charges                  187,682      197,079      334,498
       Resale of handsets and prepaid cards         -       58,634      274,812
       Others                                   8,491       14,942       11,248
       Gross operating revenue                799,021      855,334    1,164,862
       Taxes on gross revenue                (161,615)    (188,674)    (234,216)
                                            -----------  -----------  ----------
       Net operating revenue                  637,406      666,660      930,646
                                            ===========  ===========  ==========

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


5.  COST OF SERVICES RENDERED AND COSTS OF PRODUCTS SOLD

                                               1998         1999         2000
                                            -----------  -----------  ----------
       Depreciation                            80,078      120,202     142,763
       Personnel                                8,286        8,963      11,276
       Third party materials and services      71,572       78,897      95,825
       Fixed-line network expenses             70,265       27,996      26,850
       Fistel tax                              17,994       30,111      51,581
       Cost of products sold                        -       50,918     194,045
       Others                                  12,132        9,427       9,823
                                            -----------  -----------  ----------
                                              260,327      326,514     532,163
                                            ===========  ===========  ==========



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

6.  SELLING EXPENSES

                                                    1998               1999            2000
                                               ----------------   --------------   -------------
    Personnel                                          7,047             9,815         13,827
    Third party materials and services                38,902            43,734         64,000
    Rent/leasing/insurance                               763             1,253          3,326
    Depreciation                                          84                35              -
    Net losses on trade accounts receivable           52,293            63,618         44,790
    Others                                                 4               137            220
                                               ----------------   --------------   -------------
                                                      99,093           118,592        126,163
                                               ================   ==============   =============


7.  OTHER NET OPERATING RESULTS

                                                    1998               1999             2000
                                              -----------------   --------------   -------------
    Research and development                         (2,373)             (839)          (617)
    Taxes (except income tax)                          (650)          (10,485)        (9,801)
    Contingencies                                    (3,709)           (1,318)              -
    Fines and expenses recovered                       5,189             3,167          3,354
    Amortization of the premium-Coverage
       Participacoes S.A.                                  -           (5,913)              -
    Tax incentives                                         -             4,271              -
    Other                                                590           (2,903)        (2,554)
                                              -----------------   --------------   -------------
                                                       (953)          (14,020)        (9,618)
                                              =================   ==============   =============


8.  NET FINANCIAL RESULTS

                                                    1998              1999             2000
                                              -----------------  ---------------   -------------
    Interest revenue                                  32,196            42,830        102,835
    Interest expense                                 (9,679)          (37,576)       (98,487)
    Interest on own capital (dividends)             (91,749)          (53,542)       (30,981)
    Net exchange/ monetary variations                  (479)               648        (3,430)
                                              -----------------   --------------   -------------
                                                    (69,711)          (47,640)       (30,063)
                                              ==================================================



                                 TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                                           except per share amounts)

9.  NET NON-OPERATING RESULTS

                                                     1998                1999               2000
                                                -----------------   ---------------   ---------------
    Interest on construction-in-progress              1,361                 -                 -
    Non-operating financial expenses                (1,361)                 -                 -
    Loss on the disposal of property, plant
      and equipment                                 (1,073)           (6,141)               404
    Provision for losses on the realization of
      property, plant and equipment                (19,606)                 -                 -
    Amortization of premium - Coverage
      and pre-operating expenditures                      -                 -          (21,055)
    Other non-operating income                          104                86             1,112
                                                -----------------   ---------------   ---------------
                                                   (20,575)           (6,055)          (19,539)
                                                =================   ===============   ===============


10. INCOME AND SOCIAL CONTRIBUTION TAXES

    In 1998 the income tax rate was 25% and 8% for social contribution tax. From
    May 1, 1999 the rate of social  contribution  tax changed from 8% to 12%. In
    2000,  the income tax rate was 25% and the rate of social  contribution  was
    12% in January and 9% from February to December. Deferred taxes are provided
    for based on temporary differences.

    Income taxes are as follows:

                                                     1998             1999            2000
                                                --------------   ---------------  ---------------
    Social contribution tax                         11,943            5,868            14,857
    Income tax                                      36,574           33,063            38,203
    Deferred taxes                                 (8,311)          (9,074)          (12,901)
                                                --------------   ---------------  ---------------
                                                    40,206           29,857            40,159
                                                ==============   ===============  ===============

    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:

                                                         1998           1999            2000
                                                    --------------  -------------  -------------
    Social contribution tax at statutory rates        (11,135)        (8,087)       (14,117)
    Social contribution tax on permanent additions        (40)        (9,039)        (6,717)
    Social contribution tax on permanent exclusions        268          8,636          7,680
    Effects on the constant currency method              (841)        (3,216)        (1,877)
    Others                                               (195)          5,838            174
                                                    --------------  -------------  -------------
    Social contribution tax                           (11,943)        (5,868)       (14,857)
                                                    ==============  =============  =============
    Income tax at statutory rates                     (34,796)       (21,858)       (33,200)
    Income tax on permanent additions                    (125)       (18,757)       (18,661)
    Income tax on permanent exclusions                   1,406         17,939         17,939
    Effects on the constant currency method            (2,631)       (10,708)        (5,739)
    Tax incentives/others                                (428)            321          1,458
                                                    --------------  -------------  -------------
    Income tax                                        (36,574)       (33,063)       (38,203)
                                                    ==============  =============  =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

10. INCOME AND SOCIAL CONTRIBUTION TAXES (Continued)

    Income taxes in Brazil include federal income tax and a social  contribution
    tax. From January 1, 1998 to April 30, 1999 the social contribution tax rate
    was 8%.  Effective May 1, 1999 to January 31, 2000, the social  contribution
    tax rate was increased to 12%. On February 1, 2000 the rate was decreased to
    9%. The federal income tax rate was 25% for all periods presented.


11. SUPPLEMENTAL CASH FLOW INFORMATION

                                                             1998             1999           2000
                                                        ---------------   ------------    -----------
    Cash paid for interest                                    2,666             535          2,927
    Cash paid against provisions for contingencies              363              92          3,639
    Income tax and social contributions paid                 41,869          21,232         54,370
    Cash paid for concessions                                15,755          19,212         19,289


12. MARKETABLE SECURITIES

    Marketable  securities  at  December  31,  2000  and 1999  consisted  of the
    following:

                                                     INTEREST          DUE DATE        1999        2000
                                                --------------   ---------------   -----------  -----------
    Notes from Central Bank of Brazil  -          100% of CDI      9/17/2001 and
    Special issue - public titles                                    6/17/2004        38,655       39,007
        issue - public titles
    Debentures - Unibanco leasing contracts       100% of CDI        5/1/2003         27,153       28,165
    Commercial Paper - Splice do Brasil S.A.      106% of CDI        1/12/2001         8,567       77,743
                                                                   3/19/2001 and
    Bank Certificate Deposit - Unibanco           100% of CDI        4/25/2001        13,292       13,786
                                                                                   -----------  -----------
                                                                                      87,667      158,701
                                                                                   ===========  ===========

    The carrying value of the assets equals the fair value.


13. TRADE ACCOUNTS RECEIVABLE, NET

                                                   1999              2000
                                               ------------      ------------
    Accrued amounts                                52,980            42,948
    Billed amounts                                149,310           143,888
    Allowance for doubtful accounts              (29,036)          (25,826)
                                               ------------      ------------
                                                  173,254           161,010
                                               ============      ============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

13. TRADE ACCOUNTS RECEIVABLE, NET (Continued)

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

                                                1998                  1999                 2000
                                           ----------------    -------------------   -----------------
    Balance at beginning of year                29,522               28,020               29,036
    Bad debt expense                            52,653               75,162               54,873
    Write-offs                                (54,155)             (74,146)             (58,083)
                                                               -------------------   -----------------
                                           ----------------    -------------------   -----------------
    Balance at end of year                      28,020               29,036               25,826
                                           ================    ===================   =================

14. DEFERRED INCOME TAXES AND RECOVERABLE TAXES

                                                                     1999                 2000
                                                              -------------------   -----------------
    Recoverable income and social contribution taxes                  39,620               47,970
    Recoverable income and social contribution taxes on
       premium (Coverage Participacoes S.A.) - (Note 16)                 -                 87,773
    Deferred income and social contribution taxes                     12,861               18,853
    Recoverable ICMS tax                                              10,506               17,764
    Other recoverable taxes                                            1,461                1,302
                                                              -------------------   -----------------
    Total                                                             64,448              173,662
                                                              ===================   =================
    Short-term                                                        63,831              107,380
                                                              ===================   =================
    Long-term                                                            617               66,282
                                                              ===================   =================

    Deferred tax assets are comprised of the following:

                                                                     1999               2000
                                                              ------------------    -------------
    Non-deductible provisions:
       Allowance for doubtful accounts                                 9,919             7,744
       Contingencies                                                   2,443             9,933
       Others                                                            499             1,176
                                                              ------------------    -------------
    Total                                                             12,861            18,853
                                                              ==================    =============

15. PROPERTY, PLANT AND EQUIPMENT, NET

    a. COMPOSITION

                                                                    1999                2000
                                                              ------------------   --------------
       Construction in progress                                      125,327           206,052
       Automatic switching equipment                                 169,166           344,140
       Transmission and other equipment                              823,668           761,476
       Land                                                            4,626             4,888
       Buildings                                                      31,994            41,339
       Computer equipment                                             11,392            17,866
       Operation license (concession)                                 85,052            82,484
       Other assets                                                   54,921            80,019
                                                              ------------------   --------------
       Total cost                                                  1,306,146         1,538,264
       Accumulated depreciation                                    (311,615)         (454,510)
                                                              ------------------   --------------
                                                                     994,531         1,083,754
                                                              ==================   ==============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


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

    b. DEPRECIATION RATES

       Depreciation  rates  applied  to  property,  plant and  equipment  are as
       follows:
                                                              %
                                            ------------------------------------
                                                   1999                 2000
                                            -----------------   ----------------
       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                3.33
       Other assets (excluding land)         5.00 to 20.00       5.00 to 20.00

    c. RENT EXPENSES

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

                                               1998         1999         2000
                                           ------------  ----------   -----------
       Rent expense                            13,505       12,510       14,614

       Future minimum rental payments under non-cancelable operating leases with
       remaining initial terms in excess of one year at December 31, 2000 are:

                         2001                         15,158
                         2002                         15,765
                         2003                         16,395
                         2004                         17,051
                         2005                         17,733
                         2006                         18,442
                                                 --------------
                        Total                        100,544
                                                 ==============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


16. DEFERRED CHARGES, NET

                                                       1999           2000
                                                 ------------------------------
    Premium - Coverage Participacoes S.A.             354,786             -
    Premium amortization                              (5,913)             -
    Pre-operating expenditures - NBT                   32,042        38,998
    Pre-operating expenses amortization                     -       (3,908)
    Other                                                  19            68
                                                 ------------------------------
    Total                                             380,934        35,158
                                                 ==============================

    Norte Telecom S.A. 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
                                                           ----------------
    Premium Coverage Participacoes S.A.                       354,786
    Write-down                                              (230,257)
                                                           ----------------
    Future tax benefits                                       124,529
    Reversal of the provision recorded in 1999 and 2000      (22,105)
    Monetary correction                                      (14,651)
                                                           ----------------
    Tax credit at December 31, 2000                            87,773
                                                           ================

    During  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 non-current assets under "deferred taxes  recoverable".
    The deferred assets  amortization  and provision  reversal are recorded as a
    non-operating  result and the  corresponding tax credit as income and social
    contribution taxes, canceling the operating result effect.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


17. PAYROLL AND RELATED ACCRUALS

                                               1999              2000
                                          ---------------   ---------------
    Salaries and wages                          1,738           1,394
    Social charges                              3,818           5,113
    Accrued benefits                              680             462
                                          ---------------   ---------------
                                                6,236           6,969
                                          ===============   ===============


18. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                            1999              2000
                                                      ----------------   -------------
    Suppliers                                                95,560           223,891
    Payments received on behalf of third parties             11,214             4,414
    Other accounts                                                6               499
                                                      ----------------   -------------
    Total                                                   106,780           228,804
                                                      ================   =============

    Short-term                                              106,166           227,757
                                                      ================   =============
    Long-term                                                   614             1,047
                                                      ================   =============


19. INDIRECT TAXES

                                                           1999               2000
                                                      ----------------   ---------------
    Value-added tax                                       30,634              25,939
    Fistel tax                                            15,668              28,355
    Other taxes on operating revenues                      3,951               6,708
                                                      ----------------   ---------------
                                                          50,253              61,002
                                                      ================   ===============


20. DEFERRED TAXES AND INCOME TAXES PAYABLE

                                                          1999               2000
                                                     ---------------    -------------
    Income tax payable                                      4,794               68
    Social contribution tax payable                         2,128                -
    Deferred taxes - liability
       Difference IPC x BTNF - Law No.  8,200/91              474                -
       Effects of full monetary correction                 70,360           81,416
                                                     ---------------    -------------
    Subtotal deferred taxes                                70,834           81,416
                                                     ---------------    -------------
                                                           77,756           81,484
                                                     ===============    =============
    Short-term                                             17,925            9,838
                                                     ===============    =============
    Long-term                                              59,831           71,646
                                                     ===============    =============



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


21. EMPLOYEES' PROFIT SHARING

                                                                        1999             2000
                                                                   ----------------------------------
    Interest on shareholders' equity for the year                       49,059           25,111
    Interest on shareholders' equity for the prior  year                 7,208            9,841
    Withholding tax on interest on shareholders' equity                (7,359)          (3,778)
    Dividends                                                                -           18,642
    Employees' profit sharing                                            1,800            1,965
                                                                   ----------------------------------
                                                                        50,708           51,781
                                                                   ==================================


22. LOANS AND FINANCING

                                             INTEREST AND INDEXATION             FINAL DUE DATE    1999        2000
                                 -------------------------------------------------------------------------------------
    NATIONAL CURRENCY
    BNDES *                    TJLP * plus 7%                                     1/2/2001       73,036     84,026

    Commercial Paper           103.5% of CDI*                                    1/12/2001            -    186,913
    Telebras                   IGP-M plus 6%                                         -           55,742          -
    Other loans                Industrial products column 20 - FGV              2000 to 2008      1,883      1,771

    FOREIGN CURRENCY
                               U.S dollar exchange variation and LIBOR *
    Banco ABC do Brasil           plus 1.125%                                    4/23/2001            -      6,086

    Euro Commercial Paper      103% of CDI *                                     5/18/2001            -    207,943
    Export Development         US dollar exchange variation and LIBOR plus
    Corporation - EDC             3.90%                                          11/22/2005       9,155     21,954
                               U.S. dollar exchange variation and LIBOR plus
    Equipment imports             2%                                             4/28/2000        4,012          -
    Others                                                                                            -        456
                                                                                              -----------------------
                                                                                                143,828    509,149
                                                                                              =======================

    Short-term                                                                                  100,629    490,239
                                                                                              =======================
    Long-term                                                                                    43,199     18,910
                                                                                              =======================

    *  BNDES   -    National Bank for Economic and Social Development
       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 constant Brazilian Reais, of December, 2000,
                            except per share amounts)

22. LOANS AND FINANCING (Continued)

    LIBOR at  December  31,  2000 was 6.65%.  TJLP,  IGP-M,  CDI and  Industrial
    Products Column 20-FGV, were 9.75%, 9.95%, 15.7% and 3.79%,  respectively in
    2000.

    Long-term payment schedule:

     DUE DATE          2000
--------------------------------
      2002             4,563
      2003             4,563
      2004             4,563
      2005             4,561
      2006             220
      2007             220
      2008             220
                ----------------
      Total           18,910
                ================

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

    Local  management  believes  there  were  errors  in the  allocation  of the
    respective  loans at the time of the spin-off and  therefore  suspended  the
    payment flow subsequent to the change of the Company's  control.  The amount
    is accrued and is being increased annually at IGP-M plus 6%.

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

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

    In  November  1999,  the  Company's  management  decided to transfer to Tele
    Centro Oeste Celular  Participacoes S.A. the liability derived from the loan
    originally due to Telecomunicacoes Brasileiras S.A. - TELEBRAS.

    In 2000, this amount was  reclassified to provision for  contingencies  (see
    note 23).



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


23. PROVISION FOR CONTINGENCIES

                                           1999               2000
                                      ---------------    ---------------
       Tax claims                           6,107              8,721
       Labor claims                           719                654
       Telebras                                 -             53,128
       Others                                 325                493
                                      ---------------    ---------------
                                            7,151             62,996
                                      ===============    ===============

    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 constant Brazilian Reais, of December, 2000,
                            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$77,300.  If the  ICMS  tax were  applied  retroactively  to
    activation  fees  earned by the  Company's  subsidiaries  since its onset on
    January 5, 1998,  it could have a material  negative  impact not only on the
    financial  condition  of  the  Company,  but  also  on  the  results  of its
    operations after January 5, 1998.

24. PENSION PLAN

    The Company and  subsidiaries,  except for Norte Brasil  Telecom S.A.,  make
    payments towards private pension plans and of medical assistance for retired
    employees  which are  controlled  by Sistel  Social  Security  Foundation  -
    SISTEL.  Until  December  1999 all sponsors  showed  solidarity  towards the
    Sistel  Benefits Plan (PBS) and the Medical  Assistance Plan for the Retired
    (PAMA).  On December 28, 1999 the sponsors of plans PBS and PAMA  negotiated
    the creation of multiple employer pension plans by sponsor,  maintaining the
    solidarity  only for those  inactive or retired  employees as of January 31,
    2000. This resulted in a restructuring proposal under the Sistel Statute and
    Regulation  which was approved by the  Complementary  Pension  Department on
    January 13, 2000.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
            NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

24. PENSION PLAN (Continued)

    The status of the  Defined  Benefits  Retirement  Plan  (PBS-A)  and Medical
    Assistance Plan for the Retired (PAMA), which still shows solidarity between
    the sponsors at December 31, 2000 and 1999, is as follows:

                                                                         2000
                                             -------------------------------------------------------------
                                                PBS-A           PAMA            Total        1999 (a)
                                             -------------- --------------- ------------------------------
    Mathematical reserves and funds           3,016,486         497,932       3,514,418      4,829,056
    Other liabilities                            57,798         431,573         489,371        649,540
                                             -------------- --------------- ------------------------------
    Total reserves and other liabilities      3,074,284         929,505       4,003,789      5,478,596
    (-) Total Sistel assets                   3,374,869         929,505       4,304,374      7,183,875
                                             -------------- --------------- --------------- --------------
    (=) Accumulated surplus                     300,585               -         300,585      1,705,279
                                             ============== =============== ==============================

    (a) refers to the status of the PBS and PAMA plans  controlled  by Sistel at
    December 31, 1999.

    Due to the discontinuation of the solidarity (i.e.  multi-employer)  concept
    in December  1999,  the Company and  subsidiaries  individually  sponsored a
    Defined Benefits Retirement Plan - Plan PBS TCO, which covers  approximately
    5%  of  the  employees   working  for  these   companies.   Apart  from  the
    supplementation  benefit,  medical  assistance  (PAMA) is offered to retired
    personnel and dependents at a shared cost. The  contributions  towards plans
    PBS TCO and PAMA are determined  based on actuarial  studies and prepared by
    independent  actuaries in  accordance  with  current  norms  established  in
    Brazil.  The contribution is 13.5% of the payroll covering the employees who
    are  included in the plan,  from which 12% is allocated to the cost for plan
    PBS TCO.

    At the end of 2000, Sistel introduced a defined  contribution plan (Benefits
    Plan TCO PREV). The defined  contribution plan is supported by contributions
    made by the participants  (employees) and by the sponsor, which are credited
    to  the  individual   accounts  of  the  participants.   The  Companies  are
    responsible for administrative  expenses. The employees participating in the
    Defined  Benefits  Plan (PBS TCO) were given the option to join the  defined
    contribution until January 31, 2001.

    Employees  not  participating  in the defined  benefit  pension plan and new
    employees can contribute up to 22% of their salary to a defined contribution
    plan. Employees may make additional  occasional  contributions.  The Company
    matches  100% of the  contributions  varying  from 3% to 8% depending on the
    employee's age. Additionally,  the Company will make variable contributions,
    of not less than the statutory minimums, based on certain criteria which are
    applied uniformly to all employees.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

24. PENSION PLAN (Continued)

    The status of the Defined  Pension and Benefit Plans PBS TCO and TCO PREV
    at December 31, 2000 is as follows:

    PBS TCO                                                     2000
    -------                                                  ------------
    Mathematical reserves and funds                              14,261
    Other liabilities                                             1,831
                                                             ------------
    Total reserves and other liabilities                         16,092
    (-) Total of plan assets                                     16,406
                                                             ------------
    (=) Accumulated surplus                                         314
                                                             ============

    TCO PREV                                                    2000
    -------                                                  ------------
    Mathematical reserves and funds                              12,753
    Other liabilities                                             1,575
                                                             ------------
    Total reserves and other liabilities                         14,328
    (-) Total plan assets                                        14,328
                                                             ------------
    (=) Accumulated surplus                                           -
                                                             ============

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


25. SHAREHOLDERS' EQUITY

    a. CAPITAL

       The  authorized  capital at  December  31,  2000 and 1999 is  700,000,000
       thousand shares.

       The capital of R$ 386,865 at December 31, 2000 and 1999,  subscribed  and
       paid-in,   consists  of   364,399,028,000   shares  with  no  par  value,
       distributed as follows (in thousands):

                                                                DECEMBER 31, 1999        DECEMBER 31, 2000
                                                              ----------------------   ---------------------
       Common shares                                                 124,369,031            124,369,031
       Preferred shares                                              240,029,997            240,029,997
                                                              ----------------------   ---------------------
       Total                                                         364,399,028            364,399,028
       Book value per thousand shares - Corporate Law (in R$)           3.061073               2.459935



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


25. SHAREHOLDERS' EQUITY (Continued)

    a. CAPITAL (Continued)

       The  capital  stock  of Tele  Centro  Oeste  Celular  Participacoes  S.A.
       consists of preferred shares and common shares, all without par value. At
       May 22,  1998,  there were  210,029,997  thousand  outstanding  preferred
       shares (inclusive of 13,718,350  thousand preferred shares resulting from
       the  settlement  in April  1998 with  Telebras  as  discussed  below) and
       124,351,903  thousand  outstanding  common shares (net of 17,128 thousand
       shares of treasury).

       The  preferred  shares are 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.

       Through  an  Extraordinary  Shareholders'  Meeting of Tele  Centro  Oeste
       Celular Participacoes S.A. held on April 30, 1999, a capital increase was
       approved through the  incorporation of retained earnings in the amount of
       R$69,525  without the  issuing of new shares,  under the terms of Article
       169, Paragraph I of Law No. 6,404/76 and Article 6 of the Social Statute.
       Therefore,  the value of the  Company's  subscribed  and paid-in  capital
       became R$323,147.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


25. SHAREHOLDERS' EQUITY (Continued)

    a. CAPITAL (Continued)

       The  Extraordinary  Shareholders'  Meeting of Tele Centro  Oeste  Celular
       Participacoes  S.A.,  which was held on May 27, 1999,  approved,  and the
       Administration Council of July 20, 1999 confirmed,  the Company's capital
       increase of  R$63,718  through the  issuance  of  30,000,000,000  (thirty
       billion)  preferred  shares,   via  a  private  offering,   resulting  in
       subscribed and paid-in capital of R$386,865.

    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.

    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:

                                                1999              2000
                                         -------------------------------------
       Income reserve                          164,952            112,073
       Reversal                              (164,952)          (112,073)
       Annual reserve                          112,073             97,675
                                         -------------------------------------
       Balance at December 31                  112,073             97,675
                                         =====================================

    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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

25. SHAREHOLDERS' EQUITY (Continued)

    d. DIVIDENDS/INTEREST ON OWN CAPITAL (Continued)

       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:

                                                                             1999              2000
                                                                        ----------------  ----------------
       Year's net income                                                      99,588             103,644
       (+) Reversal of long term revenue reserve                             164,952             112,073
       (-) Long term revenue reserve                                       (112,073)            (97,675)
       (-) Legal reserve                                                     (5,898)             (6,467)
       (+) Adjustment to determine the Corporate Law calculation basis       (9,224)              18,750
                                                                        ----------------  ----------------
       (=) Adjusted net profit                                               137,345             130,325
       Mandatory dividends (25%)                                              34,337              32,581
       Common shares                                                          11,721              11,122
       Preferred shares                                                       22,616              21,459
                                                                        ----------------  ----------------
       Dividends value per lot of thousand shares - R$
                                                                               0.094               0.089
                                                                        ================  ================

       The Administration Council agreed to distribute interest on shareholders'
       equity to its shareholders in the amount of R$37,887 and R$40,132 in 2000
       and 1999,  respectively,  from which  R$32,581  and  R$34,337 in 2000 and
       1999,  respectively,  was  calculated to the priority value for preferred
       shares and to mandatory dividends.

       Subsequent to approval at the annual shareholders'  meeting,  interest on
       capital was  recognized as of December 31, 2000 and 1999, and was treated
       as  dividends,  pursuant  to art. 9 of Law  9249/95,  net of  withholding
       income tax.

    e. RETAINED EARNINGS

       The remaining  balance of retained  earnings of R$396,673 at December 31,
       2000 (R$346,941 in 1999), will be used for future  investments  according
       to the capital budget as presented at the  Shareholders  Meeting,  and in
       accordance with Article 202 of Law No. 6,404/76.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


26. TRANSACTIONS WITH RELATED PARTIES

                                                                            2000                                1999
                                             ----------------------------------------------------------------------------
                                                                            SPL         CSM
                                                SPLICE DO   BANCO      CONSTRUTORA E  CARTOES
                                                  BRASIL   CREDIBEL    PAVIMENTADORA    S.A.       TOTAL        TOTAL
                                             ----------------------------------------------------------------------------
    ASSETS
    Cash and cash equivalents                        -       713             -            -          713         337
    Short-term investments                           -     6,527             -            -        6,527         369
    Commercial paper                            77,743         -             -            -       77,743       7,792
    Loan agreement                               2,673         -             -            -        2,673           -
    LIABILITIES
    Suppliers                                    1,410         -             -           42        1,452         200
    TRANSACTIONS
    Income from short-term investments          10,588       490             -            -       11,078       2,081
    Maintenance services                         3,508         -             -            -        3,508         276
    Acquisition of telephone cards                   -         -             -        2,121        2,121         282
    Acquisition of property, plant and
    equipment                                    3,760         -         1,352            -                    6,231
                                                                                                   5,112

    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.


27. INSURANCE

    At December 31, 2000, in the opinion of management,  all significant or high
    risk assets and obligations were insured.


28. FINANCIAL INSTRUMENTS

    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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


28. FINANCIAL INSTRUMENTS (Continued)

    The fair value  information as of December 31, 2000 and 1999 presented below
    is based on pertinent information available to management as of those dates.

                                                1999                         2000
                                     ---------------------------------------------------------
                                         BOOK          FAIR          BOOK          FAIR
                                         VALUE         VALUE         VALUE         VALUE
                                     ---------------------------------------------------------
    Loans and financing                 143,828       143,828       509,149       509,149
    Marketable securities                87,667        87,667       158,701       158,701

    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.


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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


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

    a. DIFFERENT CRITERIA FOR CAPITALIZING AND AMORTIZING CAPITALIZED INTEREST

       Until  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  be  computed  at 12% per annum and that the
       part that  related  to  interest  on third  party  loans be  credited  to
       financial  expenses based on actual interest costs;  the balance relating
       to own capital was  credited to capital  reserves.  Beginning  January 1,
       1999, this practice was no longer required. In 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


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

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

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

                                                              1998         1999          2000
                                                          -----------------------------------------
       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).                 3,995        3,709        14,118

       INTEREST  CAPITALIZED  AND CREDITED TO INCOME
       MINUS INTEREST  CAPITALIZED  UNDER  BRAZILIAN
       GAAP:

       Interest  capitalized  and credited to income
       (up to the  limit  of  interest  incurred  on
       loans   obtained   for   financing    capital
       investments,   net  of   gains   and   losses
       resulting  from  currency/monetary variations)        (1,360)           -             -
       Interest capitalized and credited  to reserves       (13,200)           -             -
                                                           -----------------------------------------
       Total                                                (14,560)           -             -

       US GAAP difference                                   (10,565)       3,709        14,118
                                                           =========================================

       AMORTIZATION OF CAPITALIZED INTEREST DIFFERENCE
       Amortization under Brazilian GAAP                      7,042        6,363        10,926
       Less amortization under US GAAP                       (2,028)      (2,005)       (4,287)

                                                           -----------------------------------------
       US GAAP difference                                     5,014        4,358         6,639
                                                           =========================================



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

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

    b. 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.

    c. DISCLOSURE REQUIREMENTS

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

    d. INTEREST EXPENSE

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

    e. 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


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

    f. PERMANENT ASSETS

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

       Losses and provisions for losses in the  recuperation of permanent assets
       in 1998 and 1999  totaled  R$ 1,073  and R$  19,606,  respectively.  Such
       losses  were  included  in  non-operating  expenses  for  Brazilian  GAAP
       purposes. According to US GAAP, such profits and losses would be included
       in operating income.

       In 1999 and 2000, there were no changes to the amount previously accrued.

    g. PRICE-LEVEL ADJUSTMENTS AND US GAAP PRESENTATION

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

    h. ITEMS RECORDED DIRECTLY TO STOCKHOLDERS' EQUITY

       Under  Brazilian  GAAP,  various  items are recorded  directly to equity,
       which under US GAAP would be recorded in the  consolidated  statements of
       revenues and expenses.  One example is  capitalized  interest until 1998.
       The recording of such items to divisional  equity implies  adjustments in
       the consolidated  statement of changes in stockholders' equity. Since the
       original amounts recorded to the equity accounts would, under US GAAP, be
       made  directly to the  consolidated  statements of revenues and expenses,
       the adjustment is also included in the  reconciliation  of net income for
       US GAAP purposes.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

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

    i. INCOME TAXES

       For  Brazilian  GAAP,  the deferred tax charges  relating to the deferred
       income  tax  effects of  indexation  adjustments  for 2000 and 1999,  are
       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 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.

    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.  For
       2000 and 1999,  the deferred tax effect on  realization of the indexation
       effects  amounting  R$ 12,901 and R$ 9,074 was  charged  directly  to the
       income statement.

    l. VALUATION OF LONG-LIVED ASSETS

       For US GAAP, effective January 1, 1996, the Companies adopted 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 adoption of this standard did not have a material effect
       on the Companies' results or financial condition.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

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

    m. 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.

    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. For the year ended December 31, 2000, there were
       no  differences   regarding  the  revenue  recognition  criteria  between
       Brazilian  GAAP  and  US  GAAP  because  the  Companies  ceased  charging
       activation fees.

    o. STOCK COMPENSATION

       As  part  of  the  privatization  of the  Telebras  System,  the  Federal
       Government  offered  Telebras System  employees the right to purchase the
       Federal  Government's  entire  holding of Telebras  common and  preferred
       shares of each of the twelve new holding  companies formed as a result of
       the split of Telebras ("New Holding  Companies")  (representing  2.18% of
       the  outstanding  capital  stock  of  Telebras  and of each  New  Holding
       Company)  at a price of R$ 91.36 per lot of  13,000  shares  (each  "lot"
       comprised of 1,000 preferred shares of each,  Telebras and the twelve New
       Holding Companies). This price represented a 50% discount from the market
       price  of  1,000  Telebras  preferred  shares  at the  time  the  Federal
       Government  authorized the plan.  Each employee had the right to purchase
       up to 144 lots of 13,000 preferred  shares,  to be allocated  pro-rata if
       the shares were oversubscribed.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

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

    o. STOCK COMPENSATION (Continued)

       The Federal  Government  made 7.2 million lots available for sale, or 60%
       of the 12.1  million  lots that  would have been made  available  if each
       employee purchased the maximum allowed 144 lots. The period to sign up to
       purchase  the shares ended on October 30,  1998.  On August 4, 1998,  the
       date on which the offer to employees  commenced and the measurement  date
       for 60% of the shares,  the market price of 1,000 Telebras  shares was R$
       167,97. Under U.S. GAAP, the charge in 1998 would have been approximately
       R$ 68,600,  which represents the offer price/market price differential on
       60% of the shares offered.  Under Brazilian GAAP, no compensation expense
       was  recognized.  As of October 30, 1998, the original  expiration of the
       programs, the Company's employees had subscribed to 92,692 lots. Pursuant
       to an extension,  employees could rescind their subscriptions at any time
       prior to April 9, 1999 and shares  relating  to  rescinded  subscriptions
       were  assigned to the  remaining  subscribers  on a pro rata  basis.  The
       difference  between the 60% of the shares  recorded at December  1998 and
       the ultimate number of shares  subscribed by the Company's  employees was
       R$ 7,084.

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

    p. COSTS OF START-UP ACTIVITIES

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

       In April 1998, the AICPA 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  in 2000 of R$  35,158  (R$  32,042  in 1999)  was
       recorded for US GAAP purposes.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

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

    q. 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, 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 during 2000, as a result of the transaction  described in
       note  31,  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.

    r. 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,
       which includes 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.

    s. 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.

    t. 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


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

    RECONCILIATION OF THE INCOME DIFFERENCES BETWEEN US AND BRAZILIAN GAAP

                                                                            1998            1999           2000
                                                                     ---------------------------------------------
    Net income as reported.........................................       166,654          99,588        103,644
          Different criteria for determining:
            Capitalized interest...................................      (10,565)           3,709         14,118
            Amortization of capitalized interest...................         5,014           4,358          6,639
            Activation income deferral.............................      (28,606)         (4,048)              -
            Amortization of the activation income deferral.........        12,644          18,986          1,024
            Stock compensation expense.............................       (1,789)               -              -
            Costs of start-up activities and others................      (32,042)         (3,116)
            Premium amortization...................................             -           5,913              -
              Pension benefits - SFAS 87 adjustments...............             -        (29,534)         28,186
            Amortization of Concession.............................             -               -        (2,746)
         Items posted directly to equity
            Capitalized interest on construction in progress.......        11,190               -              -
            Deferred tax on full indexation.                                    -        (46,551)       (23,956)
            ......................................
          Effects of the above adjustments on deferred taxes.......         7,142          11,815       (14,926)
          Effects of the above adjustments on minority shares......         2,317             387        (4,096)
                                                                     ---------------------------------------------
      US GAAP net income...........................................       164,001          32,581        104,771
                                                                     =============================================

      EARNINGS PER THOUSAND SHARES ACCORDING TO US GAAP
      Net income applicable to preferred shares                           105,223          21,367         70,375
      Net income applicable to common shares                               58,778          11,214         34,396
                                                                     ---------------------------------------------
      Net income                                                          164,001          32,581        104,771
      Basic earnings per thousand shares in R$:
          Preferred                                                          0.50            0.10           0.29
                                                                     =============================================
          Common                                                             0.47            0.09           0.28
                                                                     =============================================

      Weighted average number of shares outstanding (thousands)
          Preferred                                                   210,029,997     223,591,641    240,029,997
          Common                                                      124,369,031     124,369,031    124,369,031



                                    TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                                           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

                                                                                 1999               2000
                                                                           -------------------------------------
    Shareholders' equity as reported ..............................              1,230,628         1,042,172
          Different criteria for:
             Capitalized interest .................................               (62,476)          (48,358)
             Amortization of capitalized interest .................                 15,560            22,199
             Activation income deferral ...........................               (32,655)          (32,655)
             Amortization of the activation
                income deferral....................................                 31,631            32,655
             Donations received ...................................                  (130)             (130)
             Costs of start-up activities and others...............               (32,042)          (35,158)
             Premium - Coverage Participacoes S.A. ................              (354,786)                 -
             Premium amortization..................................                  5,913                 -
             Pension benefits - SFAS 87 adjustments................               (29,534)           (1,348)
             Amortization of concession                                                  -           (2,746)
             Effects of the above adjustments on deferred taxes....
                                                                                    35,269            20,343
             Minority interests ...................................                  7,245             3,149
                                                                           -------------------------------------
    Shareholders' equity according to US GAAP ...................                  814,623         1,000,123
                                                                           =====================================
    Additional information:
          Total assets under US GAAP...............................              1,426,558         2,113,001
                                                                           -------------------------------------
          Property, plant and equipment............................              1,243,670         1,489,906
          Accumulated depreciation.................................              (296,055)         (432,310)
                                                                           -------------------------------------
          Net property, plant and equipment........................                947,615         1,057,596
                                                                           =====================================



                                    TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
                          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                                           except per share amounts)


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

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

    Balance at December 31, 1998............................................         758,375
    Capital increase with own resources.....................................          63,718
    Premium on issues of new shares.........................................              81
    Net                                                                               32,581
    income..................................................................
    Interest on own capital.................................................        (40,132)
                                                                                 --------------
    Balance 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)
                                                                                 --------------
    Balance at December 31, 2000............................................       1,000,123
                                                                                 ==============


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.

       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$
       2,087 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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

30. ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

    a. PENSION PLAN (Continued)

       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
                                                               ------------------------------

       Fair value of plan assets at beginning of year                       17,518
       Actual return on plan assets                                          8,267
       Sponsors' contributions                                               2,862
       Expenses and distributions                                            (201)
       Assets transferred to defined contribution plan                    (25,482)
                                                               ------------------------------
       Fair value of plan assets at end of year                              2,964
                                                               ==============================

       CHANGE IN BENEFIT OBLIGATIONS

                                                                 DEFINED BENEFIT PENSION
                                                               ------------------------------
                                                                            2000
                                                               ------------------------------

       Benefit obligation at beginning of year                              35,056
       Service cost                                                          2,643
       Interest cost                                                         3,950
       Actuarial gains                                                     (8,195)
       Benefits and expenses paid                                            (201)
       Curtailment                                                        (10,629)
       Settlement                                                         (20,291)
                                                               ------------------------------
       Benefit obligation at end of year                                     2,333
                                                               ==============================



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


30. ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

    a. PENSION PLAN -- Continued

       COMPONENTS OF ANNUAL PENSION COST

                                                                            2000
                                                                ---------------------------

       Net service cost                                                    1,558
       Interest cost                                                       3,950
       Expected return on assets                                         (2,645)
       Amortization of unrecognized gain                                   (703)
       Amortization of initial transition obligation                         813
                                                                ---------------------------
       Net periodic pension cost                                           2,973
                                                                ===========================

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

                                                                              2000              1999
                                                                       ------------------------------------
       Discount rate for determining projected benefit obligations            11.30%            11.30%
       Rate of increase in compensation levels                                 8.15%             8.15%
       Expected long-term rate of return on plan assets                       14.45%            14.45%

       In  2000,  for  employees  who  elected  to  participate  in the  defined
       contribution  plan,  pension plan assets of R$25,482 were  transferred to
       the employee's account in the defined contribution plan. The Company made
       no  additional   contributions  during  2000.  Under  the  provisions  of
       Statement of Financial Accounting Standard No. 88, "Employers' Accounting
       for Settlements and Curtailments of Defined Benefit Pension Plans and for
       Termination Benefits," the effects of employees electing to withdraw from
       the  defined  benefit  plan  in  order  to  participate  in  the  defined
       contribution  plan  constitutes  a  curtailment  which  resulted  in  the
       recognition  of a gain of R$  3,512  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$
       23,198 to the Company.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


30. ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

    a. PENSION PLAN (Continued)

                                                             Before                                      After
                                                          Curtailment      Effect of     Effect of    Curtailment
                                                         AND SETTLEMENT   CURTAILMENT    SETTLEMENT  AND SETTLEMENT
                                                        ---------------  -------------  -----------  -------------
       Actuarial present value of benefit obligations:
         Vested benefit obligation                           (2,938)             0         1,771       (1,166)
         Accumulated benefit obligation                     (22,111)             0        20,291       (1,820)

         Projected benefit obligation                       (33,252)        10,629        20,291       (2,333)
         Plan assets at fair value                            28,445             0      (25,482)         2,964
                                                        ---------------  -------------  -----------  -------------

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

         Unrecognized net gain                              (30,512)             0        28,389       (2,124)
         Unrecognized transition obligation                    7,262       (7,117)             0           145
                                                        ---------------  -------------  -----------  -------------
       Accrued pension cost recognized for US GAAP          (28,057)         3,512        23,198       (1,348)
                                                        ---------------  -------------  -----------  -------------


    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 2001.

       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.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


30. ADDITIONAL DISCLOSURES REQUIRED BY US GAAP (Continued)

    c. NEW ACCOUNTING PRONOUNCEMENTS

       In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
       No. 133 "Accounting for Derivative  Instruments and Hedging  Activities",
       which  establishes  accounting  and reporting  standards  for  derivative
       instruments,  including certain derivative  instruments embedded in other
       contracts,  and for hedging  activities.  The statements require entities
       that use  derivative  instruments  to measure these  instruments  at fair
       value and record them as assets or liabilities  on the balance sheet.  It
       also  requires  entities to reflect the gains or losses  associated  with
       changes in the fair value of these derivatives,  either in earnings or as
       a separate component of comprehensive income,  depending on the nature of
       the underlying contract or transaction.  Because of the Company's limited
       use of  derivatives,  management does not anticipate that the adoption of
       SFAS No. 133 will have a  material  effect on the  financial  statements.
       Tele  Centro  Oeste  Celular  Participacoes  S.A.  will  adopt  SFAS  133
       effective January 1, 2001.

       In December 1999, the  Securities  and Exchange  Commission  issued Staff
       Accounting  Bulletin  (SAB) No. 101,  "Revenue  Recognition  in Financial
       Statements".   SAB  No.  101  provides  additional  guidance  on  revenue
       recognition  as well as criteria for when  revenue is generally  realized
       and earned and also requires the deferral of  incremental  direct selling
       costs.  The  Company's  adoption of SAB No. 101 in 2000 had no effects on
       the earnings or financial position of the Company.


31. CORPORATE RESTRUCTURING

    In order  to  fully  utilize  the tax  benefits  that  will  arise  from the
    amortization of the premium discussed in note 16, a corporate  restructuring
    was approved in an Extraordinary Shareholders' Meeting.

    This corporate  restructuring  has essentially  pushed down from Tele Centro
    Oeste  Participacoes  S.A.  to the  operating  companies,  a portion  of the
    premium, which will be amortized at the operating company level.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)

32. SUBSEQUENT EVENTS

    a. On January  12,  2001 the  Holding  Company  issued R$ 250,000 of 180-day
       commercial  paper,  consisting  of 500 notes  with a face value of R$ 500
       each. A portion of the  proceeds was used to pay the existing  commercial
       paper.

    b. On  January  2,  2001,   the  bridge   loans  with  Banco   Nacional   do
       Desenvolvimento  Economico e Social - BNDES for subsidiaries 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.  were
       converted into long-term  loans. The principal amount of R$ 43,835 is due
       after a period of 5 (five years). The interest rate is the TJLP plus 4%.

    c. In 2000, the Federal Government established the following  contributions,
       which will affect the future operations of the Company:

       CONTRIBUTION FOR THE FUND OF GLOBALIZATION OF TELECOMMUNICATIONS SERVICES
       - "FUST"

       Fust was established by Law 9,998 of August 17, 2000, in order to provide
       resources to cover the cost exclusively  attributed to the accomplishment
       of  obligations  for  globalization  of  telecommunication  services that
       cannot be recovered  with  efficient  service  exploration of that is not
       responsibility of the concessionaire.

       The  contribution  to this  Fund  started  on  January  2,  2001,  by all
       telecommunications  services companies at the rate of 1% of the amount of
       gross operating telecommunications services revenue.



                  TELE CENTRO OESTE CELULAR PARTICIPACOES S.A.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Amounts expressed in thousands of constant Brazilian Reais, of December, 2000,
                            except per share amounts)


32. SUBSEQUENT EVENTS (Continued)

    CONTRIBUTION FOR THE FUND OF TELECOMMUNICATIONS  TECHNOLOGICAL DEVELOPMENT -
    "FUNTTEL"

    Funttel was  established  by Law 10,052 of November  28,  2000,  in order to
    stimulate  the  process  of  technological  innovation,  enhance  the  human
    resources  capacity,  generate new job positions and promote access by small
    and  medium  companies  to  capital  resources,  in  order  to  amplify  the
    competitiveness of the Brazilian Telecommunications Industry.

    The   contribution  of  Funttel  will  begin  on  March  28,  2001,  by  all
    telecommunications  services  companies at the rate of 0.5% of the amount of
    gross operating telecommunications services revenue.



                                 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  (summary)  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.`