<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 20-F

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

        [ ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G)
                OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

        [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

        [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE TRANSITION PERIOD FROM         TO

                        Commission File Number 001-14483

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

                       TELEMIG CELULAR PARTICIPACOES S.A.
             (Exact name of Registrant as specified in its charter)

                        TELEMIG CELLULAR HOLDING COMPANY
                 (Translation of Registrant's name into English)

                        THE FEDERATIVE REPUBLIC OF BRAZIL
                 (Jurisdiction of incorporation or organization)

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

                     SCN QUADRA 3, BLOCO A, SOBRELOJA NORTE
                          70713-000 BRASILIA-DF, BRAZIL
                    (Address of principal executive offices)

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

        SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF
        THE ACT.

<TABLE>
<CAPTION>
        TITLE OF EACH CLASS                             NAME OF EACH EXCHANGE ON WHICH REGISTERED
        -------------------                             -----------------------------------------
<S>                                                     <C>
Preferred Shares without par value                             New York Stock Exchange*
Depositary Shares, each representing                           New York Stock Exchange
20,000 Preferred Shares
</TABLE>

------------------------------
* Not for trading, but only in connection with the registration 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 THE ANNUAL
REPORT:

<TABLE>
<S>                                                       <C>
                Common Shares, without par value          124,498,087,938
                Preferred Shares, without par value       210,247,944,620
</TABLE>

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
                                  ---              ---

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<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                             <C>

PART I............................................................................................................1
      ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS...............................................1
      ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.............................................................1
      ITEM 3. KEY INFORMATION.....................................................................................1
      ITEM 4. INFORMATION ON THE COMPANY..........................................................................7
      ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.......................................................23
      ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.........................................................33
      ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..................................................37
      ITEM 8. FINANCIAL INFORMATION..............................................................................39
      ITEM 9. THE OFFER AND LISTING..............................................................................42
      ITEM 10. ADDITIONAL INFORMATION............................................................................44
      ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................54
      ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITES.............................................55

PART II..........................................................................................................55
      ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...................................................55
      ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS......................55
      ITEM 15. RESERVED..........................................................................................55
      ITEM 16. RESERVED..........................................................................................55

PART III.........................................................................................................55
      ITEM 17. FINANCIAL STATEMENTS..............................................................................55
      ITEM 18. FINANCIAL STATEMENTS.............................................................................F-1
               GLOSSARY OF TELECOMMUNICATIONS TERMS.............................................................G-1
      ITEM 19. EXHIBITS.........................................................................................E-1


</TABLE>

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

        Telemig Celular Participacoes S.A., a corporation organized under the
laws of the Federative Republic of Brazil, is referred to in this annual report
as the "Registrant." Its subsidiary, Telemig Celular S.A., is referred to as
"Telemig Celular." All references to "we," "us" or the "Company" are to the
Registrant and depending on the context, its subsidiary Telemig Celular.

        The Registrant is one of the companies formed as a result of the breakup
of Telecomunicacoes Brasileiras S.A. - Telebras, commonly referred to as
"Telebras," by the federal government of Brazil in May 1998. Telemig Celular was
formed in January 1998 by spinning off the cellular telecommunications
operations of Telecomunicacoes de Minas Gerais S.A., its predecessor, an
operating company controlled by Telebras. References to our operations prior to
January 1998 are to the cellular operations of the predecessor company. See
"Item 4--Information on the Company--History and Development of the Company."

        References in this annual report to:

                -       the "real," "reais" and "R$" are to Brazilian reais
                        (plural) and to the Brazilian real (singular), the
                        currency of Brazil, and

                -       "U.S. dollars," "dollars" and "U.S.$" are to United
                        States dollars.



                                       i

<PAGE>   3


        This annual report contains forward-looking statements. Statements that
are not statements of historical fact, including statements about our beliefs
and expectations, 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.
Accordingly, our actual results of operations may be different from our 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 we do not undertake any obligation to update them in light of
new information or future developments.

        Unless otherwise specified, data relating to the Brazilian
telecommunications industry included in this annual report was obtained from the
Brazilian independent regulatory agency Agencia Nacional de Telecomunicacoes -
ANATEL, commonly referred to as "Anatel."

        The "Glossary of Telecommunications Terms" that begins on page G-1
provides the definition of certain technical terms used in this annual report.



                                       ii

<PAGE>   4


                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

        Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

        Not applicable.

ITEM 3. KEY INFORMATION

A.      SELECTED FINANCIAL DATA

BACKGROUND

        The selected financial information presented below should be read in
conjunction with, the consolidated financial statements and the related notes
included in this annual report, as well as in "Item 5--Operating and Financial
Review and Prospects."

        On May 22, 1998, in preparation for the privatization, Telebras was
restructured to form twelve new holding companies, including the Registrant. The
restructuring of Telebras 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. In the
breakup, some assets and liabilities of Telebras, including 82.9% of the total
share capital of Telemig Celular, were transferred to us.

        The Registrant was created effective February 28, 1998. For 1998, 1999
and 2000, our consolidated financial statements reflect the consolidated
financial condition and results of operations of the Registrant and Telemig
Celular. For earlier dates and periods, the consolidated financial statements
reflect only the financial condition and results of operations of the cellular
operations of Telecomunicacoes de Minas Gerais S. A., our predecessor company.
The formation of the Registrant and Telemig Celular has been accounted for as a
reorganization of entities under common control in a manner similar to a pooling
of interests.

        Upon its creation, the Registrant received, in addition to the shares of
Telemig Celular, assets of Telebras consisting primarily of cash and loans to
Telemig Celular. As a result, our consolidated shareholders' equity after giving
effect to the breakup of Telebras was R$73.2 million higher than divisional
equity at December 31, 1997. In consolidation, the loans to Telemig Celular and
the related liabilities of Telemig Celular were eliminated, resulting in a
reduction of R$56.8 million in indebtedness compared to December 31, 1997.

        Telemig Celular was created, effective January 1, 1998, by splitting up
the predecessor company to separate its cellular operations from its wireline
operations. The assets and liabilities of the cellular telecommunications
business of the predecessor company were transferred to Telemig Celular at their
indexed historical costs. The revenues and expenses associated with these assets
and liabilities were also allocated to Telemig Celular. For 1998, 1999 and 2000,
our consolidated financial statements reflect the operations of Telemig Celular
as a fully independent company. For prior years, our consolidated financial
statements reflect the cellular operations of the predecessor company but are
not necessarily indicative of what our financial condition and results of
operations would have been if the cellular operations of the predecessor company
had been under a separate legal entity.

        In preparing financial statements for years prior to 1998, it was not
possible to determine the amount of the predecessor company's cash and
nonspecific debt that should be allocated to the cellular operations, and there
was no shareholders' equity specifically attributable to the cellular
operations. As a result, the presentation of our consolidated financial
statements for 1996 and 1997 is different from 1998, 1999 and 2000. In
particular, the statements of operations for 1996 and 1997 do not include
interest income or taxes and includes only the allocable portion of interest
expense. As a result, they do not present net income and historical earnings per
share information.

        Our accounting methodology changed in 1998 to reflect the lower level of
inflation in Brazil. Through December 31, 1997, our consolidated financial
statements recognize certain effects of inflation and have been



                                        1
<PAGE>   5


restated in constant reais of December 31, 1997 purchasing power. The
restatement was made using the integral restatement method prescribed by the
Brazilian Securities Commission (Comissao de Valores Mobiliarios), commonly
known as the "CVM," which is an acceptable method of recognizing effects of
inflation under U.S. GAAP. Inflationary gains or losses on monetary assets and
liabilities were allocated to their corresponding income or expense caption in
the consolidated statements of operations. Inflationary gains or losses without
a corresponding income or expense caption were allocated to other net operating
income (expense).

        During 1997, the three-year cumulative inflation rate fell below 100%,
and as a result we no longer use the integral restatement method effective
January 1, 1998. The consolidated financial statements for 1998, 1999 and 2000
are presented in nominal reais and do not recognize effects of inflation.
Financial statements for prior dates and periods, which are restated in constant
reais of December 31, 1997, have not been further restated.

        The consolidated financial statements have been audited by Ernst & Young
Auditores Independentes S/C for 1998, 1999 and 2000 and by KPMG Auditores
Independentes for prior years. The consolidated financial statements are
prepared in accordance with generally accepted accounting principles in the
United States, commonly known as "U.S. GAAP."

U.S. GAAP SELECTED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                               ------------------------------------------------------------------------------
                                                      1996            1997            1998            1999            2000
                                               -----------------   ------------   ------------    -----------    ------------
                                               (IN THOUSANDS OF CONSTANT REAIS AS OF    (IN THOUSANDS OF NOMINAL REAIS,
                                                         DECEMBER 31, 1997)                    EXCEPT PER SHARE DATA)
<S>                                                   <C>             <C>         <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:
Net revenues ................................         239,163         374,162         435,305         520,824         744,261
Operating income ............................         126,038         110,868           7,498          45,487          80,649
Income before unallocated interest and
 taxes ......................................         113,081          81,464              --              --              --
Net income(1) ...............................              --              --          10,376          13,736          26,259
Basic and diluted income per thousand
 common shares(1) ...........................              --              --            0.03            0.04            0.08
Dividends per thousand common shares(2) .....              --              --              --            0.14              --
Number of shares (in thousands) .............              --              --     334,399,027     334,399,027     334,746,033

OTHER FINANCIAL DATA:
EBITDA(3) ...................................         153,351         159,192         110,427         156,104         190,518
Capital expenditures ........................         190,144         115,663         179,624         220,633         211,445
</TABLE>


<TABLE>
<CAPTION>
                                                                                  AS OF DECEMBER 31,
                                                ----------------------------------------------------------------------------
                                                      1996           1997                1998          1999          2000
                                                --------------    ----------          ---------     ----------    ----------
                                                (IN THOUSANDS OF CONSTANT REAIS AS OF       (IN THOUSANDS OF NOMINAL REAIS)
                                                         DECEMBER 31, 1997)
<S>                                                   <C>            <C>                <C>          <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents .....................            --         10,160             87,245        175,065       278,376
Working capital ...............................       (24,588)         6,614            (14,607)        18,520       211,276
Total assets ..................................       450,632        542,718            742,180      1,174,728     1,419,980
Long-term debt (including current portion) ....       134,331        115,343             52,024        195,220       467,440
Divisional equity .............................       240,088        332,332                 --             --            --
Shareholders' equity ..........................            --             --            417,912        626,777       666,614
</TABLE>
---------------------------
(1)     Net income and earnings per share have not been presented for 1996 and
        1997 because interest and income taxes could not be segregated from our
        predecessor company. See Note 8 to the consolidated financial statements

(2)     Dividends for common shares were calculated based upon the number of
        outstanding shares on the date of declaration of dividends.

(3)     EBITDA consists of operating income plus depreciation and amortization
        and, in 1998, impairment of assets. We believe that EBITDA is a standard
        measure that is commonly reported and widely used by analysts, investors
        and others in the wireless communications industry. The information has
        been disclosed in this annual report to permit a more complete
        comparative analysis of our operating performance and capitalization
        relative to other companies in the industry. These indicators should not
        be considered as a substitute or alternative for net income or cash
        flows.



                                       2
<PAGE>   6


EXCHANGE RATES

        The following table presents the period end, average, high and low, noon
buying rate reported by the Federal Reserve Bank of New York, expressed in reais
per U.S. dollar for the periods indicated. The noon buying rate at June 27, 2001
was R$2.3320 per U.S.$1.00.

<TABLE>
<CAPTION>
                                                        AVERAGE FOR
             YEAR                   PERIOD-END           PERIOD(1)              HIGH                LOW
--------------------------------   ------------        -------------        -----------         ------------
<S>                                <C>                 <C>                  <C>                 <C>
1996............................      1.0393              1.0080               1.0413              0.9733
1997............................      1.1165              1.0805               1.1166              1.0394
1998............................      1.2085              1.1640               1.2090              1.1160
1999............................      1.8090              1.8640               2.2000              1.2074
2000............................      1.9510              1.8350               1.9722              1.7420
December 2000...................                                               1.9810              1.9530
January 2001....................                                               1.9770              1.9380
February 2001...................                                               2.0470              1.9820
March 2001......................                                               2.1750              2.0220
April 2001......................                                               2.2950              2.1460
May 2001........................                                               2.3590              2.2010
</TABLE>

----------------------
(1)  Represents the average of the exchange rates on the last day of each month.

B.      CAPITALIZATION AND INDEBTEDNESS

        Not applicable.

C.      REASONS FOR OFFER AND USE OF PROCEEDS

        Not applicable.

D.      RISK FACTORS

RISKS RELATING TO DOING BUSINESS IN BRAZIL

Brazilian political and economic conditions have a direct impact on our business

        Our business, prospects, financial condition and results of operations
are dependent on general economic conditions in Brazil, and in particular on
economic growth and its impact on demand for telecommunications services, the
cost and availability of financing and exchange rates between Brazilian and
foreign currencies.

        The Brazilian economy has been characterized by frequent and
occasionally drastic intervention by the Brazilian government and volatile
economic cycles. The Brazilian government has often changed monetary, taxation,
credit, tariff and other policies to influence the course of Brazil's economy.
Our business, prospects, financial condition and results of operations may be
adversely affected by changes in policy including tariffs, exchange controls and
other matters as well as factors such as currency fluctuations, inflation, price
instability, interest rates, tax policy and other political, social and economic
developments in or affecting Brazil.

        Rapid changes in Brazilian political and economic conditions that have
already occurred and that might continue will require continued emphasis on
assessing the risks associated with our activities and adjusting our business
and operating strategy. Future developments in Brazilian government policies or
in the Brazilian economy, over which we have no control, may reduce demand for
our services in Brazil, impact the market price of the preferred shares and ADSs
and adversely affect our business, financial condition and results of
operations.

State defaults may adversely affect the market price of the preferred shares and
ADSs

        The Brazilian economy may be adversely affected by changes in the
relationship between Brazilian federal and state governments. In January 1999,
the state of Minas Gerais, which is the state where all of our operations are



                                       3
<PAGE>   7


located, suspended its payments to the federal government on approximately
R$18.3 billion of debt. Shortly after, the state of Rio Grande do Sul obtained
an injunction permitting it to make its debt payments into an escrow account
pending resolution of the request by seven states to renegotiate their
refinancing agreements with the government. After the federal government
announced that it could no longer guarantee state obligations to international
financial institutions, the World Bank suspended loans to the states of Minas
Gerais and Rio Grande do Sul.

        The Brazilian government subsequently initiated negotiations with the
states to refinance loans to them and with the World Bank to secure funding for
such loans. In late February 1999, President Cardoso issued a provisional
measure under which the Brazilian government proposed to refinance the
commercial bank and securities debt of the states and municipalities for a
period of 30 years. In February 2000, the state of Minas Gerais entered into a
debt rescheduling agreement with the federal government. Although relations
between the Brazilian federal government and the state of Minas Gerais have
improved and stabilized, renewed friction and the risk of default by state
governments may have negative effects on the economy of the state of Minas
Gerais and may undermine investor confidence. This, in turn, could have a
negative effect on our business, prospects, financial condition and results of
operations, as well as on the market price of our securities.

A significant devaluation of the real as compared to the U.S. dollar could have
a negative effect on our profit margin

        The relationship of Brazil's currency to the value of the U.S. dollar,
and the relative rates of devaluation of Brazil's currency and the prevailing
rates of inflation, have affected and may affect our business, prospects,
financial condition and results of operations.

        After its introduction on July 1, 1994, the real initially appreciated
against the U.S. dollar. In an effort to address concerns about the
overvaluation of the real relative to the U.S. dollar and to avoid a situation
similar to the economic crisis that resulted from the rapid devaluation of the
Mexican peso, the Brazilian government introduced a new exchange rate policy in
March 1995 which established a trading band for the real against the U.S. dollar
with a view to a gradual devaluation of the real relative to the U.S. dollar.

        As a result of economic instability in Brazil in late 1998 and early
1999 resulting in large part from the Asian and Russian crises, the trading band
was abandoned and the real was allowed to float freely. This resulted in a
significant devaluation of the real against the U.S. dollar. Since January 1,
1999 the real/U.S. dollar exchange rate has ranged from a low of R$1.21 per
U.S.$1.00 on January 4, 1999 to a high of R$2.16 per U.S.$1.00 on March 3,1999.
On June 27, 2001, the rate was R$2.3320 per U.S.$1.00.

        A significant devaluation of the real as compared to the U.S. dollar may
have a material negative effect on our financial condition and results of
operations because a large portion of our indebtedness (which we incur mainly to
finance our capital expenditure requirements such as the purchase of equipment
to grow our infrastructure and the purchase of handsets, which we resale to our
subscribers either at or below cost) is denominated in U.S. dollars while
substantially all of our revenues are denominated in reais. In the case of a
significant devaluation of the real in the future, it is unlikely that we will
be able to pass on the additional cost to our subscribers. If we are unable to
do this, our profit margins will decrease. There can be no assurance that the
real will maintain its current value or that the Brazilian government will not
reimplement the trading band policy or any other type of currency exchange
control mechanism.

Exchange controls and restrictions on remittances abroad may adversely affect
holders of ADSs

        Holders may be adversely affected by the imposition of restrictions on
the remittance to foreign investors of the proceeds of their investments in
Brazil and the conversion of Brazilian currency into foreign currencies. The
Brazilian government imposed remittance restrictions for approximately three
months in 1989 and early 1990. These restrictions can hinder or prevent the
conversion of dividends, distributions of the proceeds from any sale of
preferred shares, as the case may be, into U.S. dollars and the remittance of
the U.S. dollars abroad. We cannot assure you that the Brazilian government will
not take similar measures in the future.

RISKS RELATING TO THE TELECOMMUNICATIONS INDUSTRY AND OUR BUSINESS

Our future prospects remain uncertain due to significant change in the wireless
industry

        The wireless industry is experiencing significant change. This includes
the increasing pace of digital upgrades in existing analog wireless systems,
evolving industry standards, ongoing improvements in the capacity



                                       4
<PAGE>   8


and quality of digital technology, shorter development cycles for new products,
and enhancements and changes in the end-user needs and preferences. There is
uncertainty as to the pace and extent of growth in customer demand, as well as
the extent to which airtime and monthly recurring charges may continue to
decline. Also, alternative technologies may develop for the provision of
services to customers that are superior to what we are able to provide. We
cannot assure you that technological developments will not materially adversely
affect us.

We face increasing competition which may adversely affect our market share and
our margins

        Our results of operations have been affected by the opening of the
Brazilian market for cellular telecommunications services to competition in
1998. Competition from other wireless telecommunications services, such as
digital trunking and paging services, may increase with certain changes in
economic conditions, such as increases in services. Technological changes in the
telecommunications field, such as the development of personal communications
services, or PCS, and mobile satellite, have resulted and are expected to result
in the entry of additional competitors. A number of authorizations to operate
PCS auctioned by the Brazilian telecommunications regulatory agency in early
2001 have resulted in the addition of one more competitor in our region:
Telemar, the principal wireline operator in our region with a significant
presence in Brazil. Telemar is expected to commence operations in January 2002.
In addition, future auctions not yet scheduled could result in the addition of
two more PCS operators in our region.

        The entry of new competitors using PCS technology is likely to force us
to migrate our cellular mobile services to PCS to be able to provide a similar
breadth of services as our competitors. This migration will require significant
capital expenditures.

        The growth of Maxitel, the Band "B" cellular operator which began
operations in our region in December 1998, has resulted in the gradual reduction
of our market share, which was 73% at December 31, 2000. Increasing competition
from Maxitel and new entrants will continue to adversely affect our market share
and our margins. Our ability to compete successfully will depend on marketing
and on our ability to anticipate and respond to competitive factors affecting
the industry, including new services that may be introduced, changes in the
consumer preferences, demographic trends, economic conditions and discount
pricing strategies by competitors. Though the introduction of competition into
our industry is relatively recent, it is substantial and has already pushed us
to adjust our marketing strategies. In particular, we have had to subsidize the
cost of handsets to our subscribers in response to a similar strategy by our
competitor. We cannot predict which of many possible factors will be important
to maintain our competitive position or what expenditures will be required to
develop and provide such technologies, products or services.

We may experience a high rate of customer turnover which could increase our
costs of operations and reduce our revenues

        We determine average monthly contract churn for a given period by
dividing the sum of all contract subscribers disconnected during such period by
the sum of the beginning-of-month contract subscribers for each of the months in
such period, expressed as a percentage. We do not count as disconnected contract
subscribers who migrate to our prepay service voluntarily. A high rate of
contract churn could have a material adverse affect on our competitive position
and results of operations.

        During 2000, our average monthly contract churn increased in comparison
with 1999. Churn is primarily a consequence of the increase in competition and
of economic problems in Brazil that have resulted in an increase in unemployment
and a decrease in salaries in real terms. To the extent competition and/or
economic problems in Brazil increase, our contract churn will likely increase.
This would have a negative effect on our revenues.

Regulatory developments could hurt our business

        We operate under a concession that authorizes us to provide specific
services and requires us to meet minimum standards of quality and availability.
Our business, including the services we provide and the rates we charge, is
subject to comprehensive regulation under Brazilian law. Because we are subject
to extensive regulation, adverse changes in these regulations could negatively
impact our operations and our cost of doing business. In particular, new rules
are being proposed that would require operators like us to wait at least 60 days
for a bill to be past due before we can suspend service. The approval of such
rule would increase our bad credit exposure since we currently have a 19-day
policy.



                                       5
<PAGE>   9


Use of hand-held phones may pose health risks

        Media reports have suggested that radio frequency emissions from
wireless handsets may be linked to various health problems, including cancer,
and may interfere with various electronic medical devices including hearing aids
and pacemakers. Concerns over radio frequency emissions may discourage use of
wireless handsets or expose us to potential litigation, which could have a
material adverse effect on our business, prospects, financial condition and
results of operations.

We depend on key personnel; if they were to leave us, we would have insufficient
qualified employees

        Our operations are managed by a number of key management personnel, the
loss of whom could materially affect our operations. The success of our company
depends in part on our ability to hire and retain highly-skilled and qualified
management personnel. The competition for highly qualified personnel in the
telecommunications industry is intense and, accordingly, we cannot assure you
that we will be able to hire or retain management personnel necessary for our
success.

The technology we use may be made obsolete by the technology used by our
competitors

        All companies in the global telecommunications industry must adapt to
rapid and significant changes in technology. The technology that we select in
our wireless business may be challenged by competition from new or improved
digital technologies supporting wireless service or others services in the near
future. Technological changes may adversely affect our competitive position,
require substantial new capital expenditures and/or require write-downs of
obsolete technology. We are currently in the process of determining how we will
migrate from our current TDMA technology to more advanced PCS technological
solutions such as GSM or CDMA. This migration will require significant capital
expenditures.

Current disputes among our shareholders may affect the management of the Company

        Since October 2000, the shareholders composing the controlling block of
Telpart Participacoes S/A have been in litigation against one another, disputing
the right to appoint Board Members for Telpart, Telemig and Tele Norte. Each of
the parties involved has obtained injunctions at some point of the dispute. At
the present time, the members of the Board of Directors of our Company are those
appointed after an injunction was granted in favor of Telesystem International
Wireless (TIW), shareholder of Telpart. The composition of our Board of
Directors reflects the actual percentage share participation of each of the
parties involved in the dispute. There can be no assurance that the
shareholders' dispute will not affect the operations of the Company.

RISKS RELATED TO OUR SECURITIES

Developments in other markets may adversely affect the market price of preferred
shares and ADSs

        Brazilian securities markets are, to varying degrees, influenced by
economic and market conditions in other emerging market countries, as well as in
the United States. Although economic conditions are different in each country,
investors' reaction to developments in one country can affect the securities
markets and the securities of issuers in other countries, including Brazil. The
1997 Asian economic crisis and the 1998 Russian debt moratorium and devaluation
of the Russian currency caused volatility in the international financial markets
and a significant decline in a large number of market indices, including Brazil.
Currently, high interest rates and the possibility of an economic slowdown in
the United States as well as the political and financial uncertainty in
Argentina have also negatively affected the Brazilian securities markets. These
developments adversely affect our ability to raise capital when needed at
favorable rates and the market price of our securities.

The relative volatility and illiquidity of the Brazilian securities markets may
adversely affect holders of our securities

        Brazilian securities market is substantially smaller, less liquid and
more volatile than major securities market in the United States. This may
substantially limit the ability to sell the preferred shares underlying our ADSs
at a price and time at which a holder wishes to do so. The Sao Paulo Stock
Exchange, which is the principal Brazilian stock exchange, had a market
capitalization of approximately U.S.$225 billion as of April 30, 2001 and an
average monthly trading volume of approximately U.S.$9.0 billion for 2000. In
comparison, the New York Stock



                                       6
<PAGE>   10


Exchange had a global market capitalization of U.S.$17.0 trillion as of December
31, 2000 and an average monthly trading volume of approximately U.S.$43.9
billion for 2000.

Our ADSs have fewer and less well-defined shareholders' rights

        Our corporate affairs are governed by our charter and Brazilian
corporate law, which may differ from the legal principles that would apply if we
were incorporated in a jurisdiction in the United States, such as Delaware or
New York, or in other jurisdictions outside Brazil. In addition, the rights of
holders of preferred shares under Brazilian corporate law to protect their
interests relative to actions taken by our board of directors or the holders of
common shares are fewer and less well defined that under the laws of those
jurisdictions outside Brazil

        Rules and policies against self-dealing and regarding the preservation
of shareholder interests may be less well developed and enforced in Brazil than
in the United States, potentially disadvantaging holders of the preferred shares
and ADSs. Specifically, among other differences when compared to, for example,
Delaware general corporation law, Brazilian corporate law and practice has less
detailed and well-established rules and judicial precedents relating to the
review of management decisions against duty of care and duty of loyalty
standards in the context of corporate restructuring, transactions with related
parties, and sale-of-business transactions. In addition, shareholders must hold
5% of the outstanding share capital of a corporation to have standing to bring
shareholders' derivative suits, and shareholders ordinarily do not have standing
to bring a class action.

ITEM 4. INFORMATION ON THE COMPANY

A.      HISTORY AND DEVELOPMENT OF THE COMPANY

THE REGISTRANT AND ITS OPERATING SUBSIDIARY

        The Registrant's legal and commercial name is "Telemig Celular
Participacoes S.A." The Registrant is a corporation (sociedade anonima)
organized under the laws of the Federative Republic of Brazil, with an
indefinite term.

        The Registrant's headquarters are located at SCN, Quadra 3, Bloco A,
Sobreloja Norte, 70713-000 Brasilia - DF, Brazil, and its telephone number is
5561-429-5600.

        Telemig Celular is the operating subsidiary of the Registrant. The
Registrant owns 82.9% of the share capital, and 89.2% of the voting shares of
Telemig Celular. Substantially all the Registrant's assets other than cash and
cash equivalents consist of shares of Telemig Celular. The Registrant relies
almost exclusively on dividends from Telemig Celular to meet its needs for cash,
including cash to pay dividends to its shareholders.

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, which we refer to collectively as the
"Telebras System," acquired almost all the other telephone companies in Brazil
and thus came to have a monopoly over the provision of public telecommunications
services in almost all areas of the country.

        Beginning in 1995, the federal government undertook a comprehensive
reform of Brazil's telecommunications regulatory system. In July 1997, Brazil's
National Congress adopted the General Telecommunications Law (Lei Geral de
Telecomunicacoes), 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, which we refer to as
"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, twelve 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.



                                       7
<PAGE>   11


        The new holding companies, together with their respective subsidiaries,
consist of:

        -       eight cellular service providers, each operating in one of eight
                cellular regions,

        -       three wireline service providers, each providing local and
                intraregional long-distance service in one of three wireline
                regions, and

        -       Embratel Participacoes S.A. - Embratel, which provides domestic
                and international long-distance telephone service throughout
                Brazil.

        The Registrant is one of the new cellular holding companies. In the
breakup of Telebras, the Registrant was allocated all the share capital held by
Telebras in Telemig Celular. In July 1998, the federal government sold
substantially all its shares of the new holding companies, including the
Registrant, to private-sector buyers. The federal government's shares of the
Registrant were purchased by Telpart Participacoes S.A., which we refer to as
"Telpart," a consortium comprising TIW do Brasil Ltda., Opportunity MEM S.A. and
a group of five Brazilian pension funds.

        Our capital expenditures in 1998 were approximately R$180 million. We
invested to expand, increase the capacity, improve the quality and commence the
digitalization of our mobile telecommunications network. We made digital service
available in the metropolitan area of Belo Horizonte and began implementing
digital service in 13 additional cities.

        In 1999, we spent R$221 million in capital expenditures. We continued to
invest in the expansion and digitalization of our network. We also directed
substantial investments to launch prepay services and to expand and improve our
customer service operations.

        In 2000, our capital expenditures were R$211 million. Approximately
R$182 million was invested on our network, mainly to increase traffic capacity
to absorb the large increase in customer base. Investments were also made to
expand coverage to new municipalities and roads and to launch new services such
as Internet access and SMS.

        In 2001, we plan to spend approximately R$250 million reais to:

        -       increase the capacity of our network through the installation of
                a new switch (which occurred in May 2001), the installation of
                approximately 35 new cell sites and the further expansion of our
                backbone;

        -       expand our coverage to include ten new towns through the
                installation of approximately 18 new cell cites;

        -       improve the quality of service by reposition cell sites,
                replacing equipment and purchasing and installing amplifiers;
                and

        -       introduce new services such as location-based service,
                voice-activated services (VAD), unified voice and text messaging
                and others.

        Through March 31, 2001, we had already spend approximately R$39 million.

B.      BUSINESS OVERVIEW

        We provide cellular telecommunications services under a concession from
the federal government of Brazil in a region that includes 93% of the
municipalities in the state of Minas Gerais and approximately 90% of the
population in the State. Our predecessor company began to offer cellular
telecommunications services in our region in April 1993, and we are currently
the leading provider of cellular telecommunications services in our region. At
December 31, 2000, we had 1,240,709 subscribers.

OUR REGION

        Our region covers an area of a little more than 500,000 square
kilometers, representing approximately 6% of Brazil's area. Its population of
over 16 million represents approximately 11% of the population of Brazil. In



                                       8
<PAGE>   12


1997, the per capita income in the state of Minas Gerais was approximately
U.S.$4,000 and the state of Minas Gerais generated approximately 10% of Brazil's
gross domestic product.

        At December 31, 2000, our region had 20 metropolitan areas with
populations in excess of 100,000 people, including the cities of Belo Horizonte,
Contagem, Juiz de Fora and Montes Claros. Companhia de Telecomunicacoes do
Brasil Central - CTBC Telecom offers cellular telephone services in the
westernmost part of the state of Minas Gerais. The area covered by CTBC Telecom
includes 7% of the municipalities and 10% of the population of the state of
Minas Gerais but is not part of our region.

        The map below shows the location of the state of Minas Gerais within
Brazil.

                                [MAP OF BRAZIL]

        Our 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 5--Operating and Financial Review and
Prospects--Political and economic factors--Brazilian economic environment" for a
description of the Brazilian economy.

OUR SERVICES

General

        We offer cellular telecommunications services to our subscribers through
a variety of rate plans. We offer analog and digital cellular telephone
services. At December 31, 2000, we had a total of 1,240,709 subscribers. Of this
number, 58.0% were contract subscribers and 42.0% were prepay customers.



                                       9
<PAGE>   13


        The introduction of digital technology in 1998 allowed us to increase
capacity, offer internet-related services and additional value-added services
and provide more secure communication channels. Our internet-related services
include short-messaging, e-mail, customized news and interconnectivity for
notebooks and palm pilots, all through the cellular handset. Our value-added
services include, among others, fax reception through the cellular handset,
voicemail, call forwarding, call waiting, call conferencing, caller line
identification and three-way calling. In addition, we provide special services
such as customized telephone sounds and display of icons, real time commentary
of soccer matches, information search (including bank statements, office or home
information), and a convenience service (including weather forecast, locksmiths,
plumbers, etc.), each through the mobile handset. We also sell cellular
telephones in connection with the provision of digital cellular
telecommunications service.

Contract subscribers

        Contract subscribers consist primarily of high-income individuals,
including professionals, executives and entrepreneurs, who use their handsets
for both personal and business purposes.

        A contract subscriber's handset is activated upon signing of a service
contract. The service contract provides, among other things, the terms and
conditions of the specific service plan elected by the subscriber. See
"--Sources of revenue--Subscriber rates" for a description of our contract
service plans.

Prepay customers

        In general, prepay subscribers are younger and have less income than
contract subscribers. Prepay subscribers also tend to use their handsets more to
receive than to originate calls.

        A customer becomes a prepay subscriber by acquiring a pre-activated
handset at our company stores from our independent distributors.

        A prepay customer is no longer considered a customer when a specified
period of time has elapsed since the customer purchased and activated, or added
credit to, his or her last prepay card. The customer's number is then
deactivated, and he or she is considered to have turned over.

        A prepay customer has 90 days to activate a new card after the balance
of his existing card becomes zero before losing his phone number. During such
time, a prepay customer will be able to receive local incoming calls but the
customer will not be able to make outgoing calls. Balances automatically become
zero if the customer has not activated a new card within 90 days after
activation of the previous card.

        Given the higher turnover among prepay customers, we pursue plans to
migrate our qualified prepay customers to contract plans, where customer loyalty
and retention have been historically higher.

Seasonality

        Our business is subject to seasonality to some degree. Our traffic tends
to be higher in December because of the Christmas holidays and lower in January
and February, the vacation months, because our subscribers tend to vacation
outside of our region. Subscriber additions tend to be higher in December and
lower in January and February because of the same reasons.

Contract churn

        We determine average monthly contract churn for a given period by
dividing the sum of all contract subscribers disconnected during such period by
the sum of the beginning-of-month contract subscribers for each of the months in
such period, expressed as a percentage. We do not count as disconnected contract
subscribers who migrate to our prepay service voluntarily.

        Our average monthly contract churn in 1998, 1999 and 2000 was 2.4%, 1.9%
and 2.1%, respectively. Our contract churn is mainly related to termination due
to non-payment. Our higher churn rate in 1998 was due to the effect of a
subscriber drive put in place prior to the privatization which resulted in the
acquisition of many subscribers who were later unable to pay their bills. The
increase in contract churn in 2000 as compared to 1999 was due to the increase
in competition and continuing economic problems in Brazil that have resulted in
higher



                                       10
<PAGE>   14


unemployment and a decrease in salaries in real terms. With the anticipated
growth of competition, we may experience increased contract churn.

Quality of service

        We have experienced at times quality of service problems, including busy
circuits, lack of system availability and dropped calls. In 1999, the average
"all circuits busy rate" (as a percentage of calls attempted) was 1.6%, the
average system availability on first call attempted was 96.3% and the average
dropped call rate was 2.9%. These quality measures improved in 2000, where the
average "all circuits busy rate" was 0.5%, the average system availability on
first call attempted was 98.4% and the average dropped call rate was 2.1%. At
present, we are not experiencing any significant quality of service problems and
exceed all applicable quality of service requirements established by Anatel. See
"--Regulation of the Brazilian telecommunications industry--Obligations of
telecommunications companies" for a description of these obligations.

Roaming

        Through agreements with other cellular service providers, we offer
automatic roaming services throughout Brazil that allow our subscribers to make
and receive calls while out of our region. We also offer international roaming
in various countries, including the United States, through agreements with local
cellular service providers. In addition, we provide cellular telecommunications
service to subscribers of other cellular service providers while they are in our
region. We charge the other service providers pursuant to roaming agreements for
the service provided to their subscribers. See "--Operating agreements--Roaming
agreements" for a description of our roaming arrangements.

Internet-related services

        In December 2000, we became the first company in Brazil, together with
our affiliate Tele Norte Celular Participacoes S.A., to provide internet access
through cellular telephones using TDMA. This project required an investment of
approximately R$10 million. We utilized a Wireless Application Protocol (WAP)
platform from Ericsson, Circuit Switched Data technology from Nortel and Nokia
handsets.

        We are able to provide our subscribers with customized news,
short-messaging and e-mail, as well as internet connectivity for their notebook
or palm pilot, through their cellular handset.

NETWORK AND SUBSCRIBER DATA

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

<TABLE>
<CAPTION>
                                                                    1998            1999            2000
                                                                 ----------      ----------      ----------
<S>                                                              <C>             <C>             <C>
Cellular subscribers at year-end:
   Contract subscribers ....................................        448,400         559,450         718,945
   Prepay subscribers ......................................             --         216,850         521,764
                                                                 ----------      ----------      ----------
       Total ...............................................        448,400         776,300       1,240,709
Net subscriber growth during year ..........................              5%             73%             60%
Estimated population of our region at year-end
   (millions)(1) ...........................................           15.5            16.0            16.3
Estimated covered population at year-end(millions)(2) ......           10.3            11.3            11.7
Percentage of population covered at year-end(3) ............             66%             70%             72%
Penetration at year-end(4) .................................            2.9%            6.2%            7.5%
Percentage of area of state covered at year-end ............             34%             41%             45%
Average monthly incoming minutes of use per subscriber:
   Contract subscribers ....................................             82              95              93
   Prepay subscribers ......................................             --              84              78
Average monthly outgoing minutes of use per subscriber:
   Contract subscribers ....................................             80              96              95
   Prepay subscribers ......................................             --              24              13
</TABLE>



                                       11
<PAGE>   15


<TABLE>
<S>                                                                 <C>             <C>             <C>
Average monthly revenues per subscriber(5)
   Contract subscribers ....................................           R$82            R$66            R$67
   Prepay subscribers ......................................             --            R$24            R$23
        Total Average ......................................           R$82            R$60            R$51
Cost of acquisition per subscriber(6) ......................          R$251           R$177           R$165
</TABLE>

----------------------------------------------------------------------------
(1)     Estimates of the Brazilian Institute of Geography and Statistics
        (Instituto Brasileiro de Geografia e Estatistica - IBGE) at August 2000.

(2)     Estimates by our management of the number of people within our region
        who can access our cellular telephone signal.

(3)     Estimates by our management of the percentage of the population of our
        region who can access our cellular telephone signal.

(4)     Estimates by our management of the number of cellular lines in service
        in our region.

(5)     In nominal reais, net of value-added taxes.

(6)     The significant decrease in cost of acquisition per subscriber in 1999
        as compared to 1998 is primarily due to the filling out of our
        distribution network, which was expanded in prior years.

        Our concession contains network expansion and modernization obligations.
See "--Regulation of the Brazilian telecommunications industry--Obligations of
telecommunications companies" for a description of these obligations. We believe
that we will be able to meet all these obligations.

SOURCES OF REVENUE

General

        We generate revenue from:

                -       usage charges, which include measured service charges
                        for outgoing calls and roaming and other similar
                        charges;

                -       monthly subscription charges;

                -       network usage fees, which are amounts charged by us to
                        other cellular and wireline service providers, and to
                        Embratel as the long-distance service provider, for use
                        of our network;

                -       sales of handsets; and

                -       other charges, including charges for internet access,
                        short messaging, call forwarding, call waiting and call
                        blocking.

        Our rates are subject to the approval of Anatel.

Subscriber rates

        Since October 1994, cellular telecommunications service in Brazil has
been offered on a "calling party pays" basis, under which the subscriber pays
only for calls that he or she originates, except for roaming charges on calls
received outside the subscriber's home registration area.

        Subscriber charges are computed based on the subscriber's calling plan,
the location of the party called, the place from which the call originates and
other factors described below.

        Our region is divided into seven registration areas. The lowest base
rate per minute, which we refer to as a "VC1" rate, applies to calls made by a
subscriber in its registration area to persons in the same registration area.
Until May 9, 1999, calls from one registration area to another within our region
were charged at a higher rate, which we refer to as a "VC2" rate. Since then,
the VC2 and VC1 rates are the same.

        Calls from our region to persons outside our region are billed at the
highest rate, which we refer to as "VC3" rate. When a subscriber makes or
receives a call while outside our region, a per-call surcharge known as "AD" is
applicable. When a subscriber receives a call while outside his or her home
registration area, the subscriber



                                       12
<PAGE>   16


also pays an additional rate per minute, which we refer to as a "DSL2" rate, if
the subscriber is located outside our region.

        Airtime service charges are discounted 30% for calls made on Saturdays,
Sundays and national holidays and for calls made during the period from 9PM
until 7AM (except for the Ideal Lazer plan described below, for which the period
is from 7PM until 8AM) Monday through Friday. A 30% surcharge is imposed on VC1
calls made to lines of other cellular service providers.

        We offer six contract service plans:

                -       the Basic plan with a R$100 activation fee and no
                        minimum service period, for customers who use their
                        telephones frequently during the day and night;

                -       the Ideal plan for customers who use their telephones
                        frequently during the day and night;

                -       the Ideal Lazer plan for customers who primarily use
                        their telephones at night or on weekends;

                -       the Ideal 130 and Ideal 300 plans for high usage
                        customers, under which the subscriber is entitled to 130
                        minutes and 300 minutes, respectively, of calling exempt
                        from time charges; and

                -       the Pleno Control Pro, a corporate plan for company
                        employees.

        We offer four prepay service plans:

                -       the Celular Card Noite (Night) plan for customers who
                        use their telephones mainly at night;

                -       the Celular Card Dia (Day) plan for customers who use
                        their telephones mainly during the day;

                -       the Celular Card Fim de Semana (Weekend) plan for
                        customers who use their telephones mainly during the
                        weekend; and

                -       the Control Pro, a corporate plan for company employees.

        All service plans, except the Basic plan, require the payment of a fee
if the customer terminates service within the first 12 months of initiating
service.

        The following table sets forth the principal terms of our various plans
of service at January 1, 2001.

                    RATE INFORMATION FOR OUR SERVICE PLANS(1)


<TABLE>
<CAPTION>
                                            CONTRACT SERVICE                                PREPAY SERVICE
                            ----------------------------------------------------------  ---------------------------------------
                                                                               PLENO
                                                 IDEAL     IDEAL     IDEAL    CONTROL                        FIM DE    CONTROL
                             BASIC     IDEAL     LAZER      130       300       PRO      NOITE      DIA      SEMANA      PRO
                            -------   -------   -------   -------   -------  ---------  -------    -----    --------  ---------
<S>                         <C>       <C>       <C>       <C>       <C>      <C>        <C>        <C>      <C>       <C>

Activation fee .........       100         -         -         -         -         -         -         -         -         -
Monthly subscription
fee (digital) ..........     37.99     37.99     17.99     83.28    140.93     27.95         -         -         -         -
Time charges per minute:
   VC1 .................      0.46      0.46      0.89      0.38      0.33      0.32      0.97      0.79      0.91      0.99
   VC2 .................      0.46      0.46      0.89      0.38      0.33      0.32      0.97      0.79      0.91      0.99
   VC3 .................      1.07      1.07      1.07      1.02      1.02      0.77      0.97      0.79      0.91      0.99
   DSL2 ................      0.53      0.53      0.53      0.53      0.53      0.42      0.38      0.38      0.38      0.38
Minutes free of time
charges ................       30        30        15        130       300        0         0         0         0         0
</TABLE>

----------------------
(1)     The rates presented are in reais and are the base rates without giving
        effect to any promotional discounts offered from time to time and
        include any applicable value-added taxes. Certain value-added services
        such as caller identification, call waiting, call forwarding, advanced
        voicemail and three- way conferencing are subject to a monthly fee
        depending on the plan chosen by the subscriber.


Fees for internet-related services

        I.WAP. Our monthly fee for i.wap, our internet access service, is
R$9.90. In addition, there is a per minute charge equal to 80% of the nominal
rate of the plan of the specific subscriber.



                                       13
<PAGE>   17


        I.ONLINE. This is a news, messaging and e-mail service through the
cellular handset. The subscriber chooses the type of news it wants to receive
and pays a single rate based on the package chosen. The messaging and e-mail
services are included with each package. The following are the applicable rates:

<TABLE>
<CAPTION>
                Type of Package                                Contract                      Prepay
        --------------------------------------           --------------------          ------------------
<S>                                                      <C>                           <C>
        Kit 1 (5 news items per day)                       R$3.90 per month              R$0.15 per day
        Kit 2 (10 news items per day)                      R$5.90 per month              R$0.24 per day
        Kit 3 (unlimited number of news items)             R$11.90 per month             R$0.47 per day
</TABLE>

        I.MENSAGEM. This is a messaging and e-mail service through the cellular
handset. The rate charged is R$0.19 per message sent. There is no charge for
messages received.

        I.NET. This service permits the subscriber to connect to its notebook or
palm pilot through its cellular handset. Our monthly fee is R$4.90. In addition,
there is a per minute fee equal to 80% of the normal rate of the plan of the
specific subscriber.

Roaming fees

        We also receive revenue pursuant to roaming agreements with other
cellular service providers. When a call is made from within our region by a
subscriber of another cellular service provider, that service provider pays us
for the call at the applicable rate. Conversely, when one of our subscribers
makes a cellular call outside our region, we must pay the charges associated
with that call to the cellular service provider in whose region the call
originates.

Network usage fees

        We earn revenues from any call, cellular or wireline, originating with
another service provider and terminating on a cellular telephone within our
region. We charge the service provider from whose network the call originates a
network usage fee for every minute our network is used in connection with the
call. The average network usage fee we charged to other service providers from
1996 until December 1999 was R$0.22 per minute, net of value-added taxes. This
fee was increased to R$0.24 in December 1999 and then to R$0.30 in December
2000. We have offered a 30% discount on this fee for off-peak calls.

SALES AND MARKETING

General

        We divide our market into large, medium and small volume users. The
market is further segmented according to profitability level. Our customers
consist primarily of businesses and high-income individuals.

        Anatel's regulations require that cellular telecommunications service be
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, we conduct credit checks on our customers. We can interrupt
service if a customer fails to make timely payments. See "--Billing and
collection."

Sales network

        We market our services through direct and indirect distribution
channels. We target potential large-account customers through direct contact by
a skilled sales force and provide them with ongoing support. Small and
medium-sized businesses are targeted through a combination of corporate client
focused sales force, company stores and the marketing efforts of independent
distributors. We attract prepay customers mainly through our independent
distributors and retail points-of-sale.

        COMPANY STORES. We provide telecommunications services through
company-owned stores located in metropolitan centers. Such stores are effective
in building image and brand awareness through the exclusive provision of our
telecommunications services. Company stores also provide standard levels of
service, greater accountability and consistent customer service. Although the
majority of sales at company stores consists of subscriptions for cellular
telecommunications services, the stores also sell handsets, generally for prices
at or near



                                       14
<PAGE>   18


cost, in connection with the sale of both contract and prepay subscriptions. At
December 31, 2000, we had 23 company stores.

        INDEPENDENT DISTRIBUTORS. Independent distributors sell
telecommunications services and provide us with sales coverage across our region
with minimal capital investment or operating expense from our side. In addition,
independent distributors provide customers accessibility in a broad area of
locations, convenience, diversity of products and pricing alternatives.

        We pay our independent distributors a commission that varies from R$70
to R$120 for each new contract customer they sign up for service, provided that
the customer retains and pays for service for at least three months. Independent
distributors also receive a fixed commission of R$5 for each new prepay customer
as well as a mark-up margin on each sale of a handset and prepay card kit. In
addition, independent distributors are eligible for quarterly bonuses for
meeting or exceeding certain sales targets.

        At December 31, 2000, we had more than 500 independent distributor
outlets, located primarily in metropolitan centers. Approximately 65% of the
sales generated by our independent distributors are made by distribution with
whom we have exclusivity arrangements. Our exclusive independent distributors
include well-known retailers and supermarkets with high quality points of sale.
All exclusive independent distributors receive marketing support and financing
from us to assure that they maintain desirable standards of service. The
Company's management believes that the quality and breadth of the exclusive
independent distribution network gives the Company an advantage over its
competitors.

        RETAILERS. We make prepay cards available at approximately 7,500 points
of sale. We distribute through more than 250 retailers, which include national
and regional franchises and chains, such as the Carrefour supermarket chain.

        OTHER MARKETING EFFORTS. We engage in telemarketing efforts aimed at:

                -       increasing average revenue per user through the sales of
                        value-added services,

                -       directing customers to service plans that best fit their
                        usage patterns, and

                -       soliciting potential customers.

        We also use direct mailings to solicit potential customers. In an effort
to retain high volume customers, we give out awards based on the level of
minutes of usage achieved.

Customer service

        We provide our subscribers with 24-hour customer service to answer
questions and resolve service problems. Through our customer service attendants,
we are able to provide immediate service to customers for requests such as
reactivation, addition of value-added services and number changes, among others.
At December 31, 2000, we had approximately 548 customer service attendants.

        During 2000, our customer service department answered, on average,
727,696 calls per month, with an average duration of 160 seconds. During the
same period, our customer service department also answered, on average, 1,287
letters and e-mails per month.

BILLING AND COLLECTION

        Our billing system, which was developed by LHS Communication Systems
Incorporated and has been in operation since October 1998, has four main
functions:

                -       subscriber registration,

                -       subscriber information management,

                -       accounts payable management, and

                -       billing and collection.



                                       15
<PAGE>   19


        To smooth the billing and collection cycles, we use six staggered cycles
each month.

        Brazilian law provides that subscribers must receive a bill at least
five days before the due date. Our billing policy provides that a subscriber's
payment is more than 19 days past due, we suspend service until we receive full
payment for all outstanding charges. If a subscriber's payment is more than 90
days past due, we discontinue service and the subscriber is churned.

        After each collection cycle, we reconcile the roaming and network usage
fees owed to and owing from other telecommunications service providers. For
domestic and international long distance calls made by our subscribers, we
forward the amounts due for such calls to Embratel and charge Embratel a fee for
the use of our cellular telecommunications network.

        Our provisions for doubtful accounts were 20.9%, 3.5% and 3.3% of
service revenues in 1998, 1999 and 2000, respectively. Our higher provision for
doubtful accounts in 1998 was primarily due to:

                -       the effect of a subscriber drive put in place prior to
                        the privatization, which resulted in the acquisition of
                        many subscribers who were later unable to pay their
                        bills,

                -       an increase in subscription fraud, and

                -       adverse economic conditions in Brazil.

        In the fourth quarter of 1998, we put in place new credit and collection
policies and an anti-fraud system in order to reduce the level of bad debt. As a
result of these measures, there was a significant decrease in bad debt levels in
1999 and 2000.

        We are currently in the process of replacing our billing system to
better adapt it to our new value-added services and to allow us to track
subscriber patterns and build subscriber data. We expect to complete the
replacement by early 2002.

OUR NETWORK

        At December 31, 2000, our cellular telecommunications network covered
approximately 45% of our region and 72% of its population. We continue to expand
our cellular telecommunications network to cover as broad a geographical area as
is economically feasible in order to meet consumer demand. Under our concession,
we have obligations concerning network expansion. See "--Regulation of the
Brazilian telecommunications industry--obligations of telecommunications
companies" for a description of these obligations.

        We increase the capacity and improve the quality of our cellular
telecommunications network by building new base stations and adding channels to
existing base stations. This development is carried out in response to projected
subscriber demand. We believe that our cellular telecommunications network will
require further development to meet increasing demand for cellular
telecommunications services in Belo Horizonte and other major metropolitan areas
in our region. See "--Quality of service."

        At December 31, 2000, our cellular telecommunications network consisted
of 10 cellular switches, 644 cell sites and 11 repeaters. Since then, we have
continued to build out our network by installing another cellular switch and
several new cell sites. We plan to install approximately 35 new cell sites and
retire 11 old cell sites in 2001. Our four principal switching centers, located
in Belo Horizonte, employ six Super Node NT DMS-MTX switches to provide
switching services for Belo Horizonte and the surrounding metropolitan area.
Three other switching centers, located in Divinopolis, Governador Valadares and
Montes Claros employ SNSE NT DMS-MTX switches while two other switching centers
in Juiz de Fora and Varginha employ Super Node NT DMS-MTX switches. Northern
Telecom do Brasil Ltda. is our principal supplier of cellular telecommunications
equipment.

        Until 1998, the network was connected primarily by a transmission
system, which was mainly optical fiber, rented from our predecessor company. In
1999, we installed our backbone from Juiz de Fora to Belo Horizonte and from
Divinopolis to Belo Horizonte via microwaves, and in the city of Belo Horizonte
via optical fiber. In 2000, we further expanded our backbone to connect Belo
Horizonte to each of Montes Claros, Governador Valadares and Varginha. Thus, at
present, the majority of the interconnections between our switches and the
public switched telephone network are done through our own network. We still
lease the connections between the cell sites and the



                                       16
<PAGE>   20


switches from our predecessor company. Since the commencement of operations, we
have been interconnected directly with the local public switched telephone
network and with every Band A service provider in the country, automatically
allowing our subscribers to roam throughout Brazil wherever cellular
telecommunications service exists.

        Digitalization is one of our key strategic initiatives. Prior to 1998,
we supplied only an AMPS analog cellular telecommunications service. During
1998, we made available digital service based on the TDMA standard in the
metropolitan area of Belo Horizonte and began implementing digital service in 13
other cities. At present, our digital service is available in all cities of our
region. In December 2000, approximately 78.1% of our traffic was digital. This
coverage increased to 84.5% in March 2001.

        We believe that digitalization offers advantages, including greater
network capacity, reduced operating costs and additional revenue through the
sale of value-added services. Digital cellular telecommunications service also
offers subscribers greater security. Digital cellular telephones are generally
more expensive than analog cellular telephones.

FRAUD DETECTION AND PREVENTION

        Cloning fraud consists of duplicating the cellular signal of a
subscriber, enabling the perpetrator of the fraud to make telephone calls using
the subscriber's signal. These calls are billed to the subscriber, but we write
off the receivable when we discover that it arose from a fraudulent call. If
part of a fraudulent call is carried by the network of another service provider,
we are obligated to pay that service provider the applicable network usage fee,
regardless of whether we are able to collect the receivable associated with the
call.

        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 operator is able to identify the fraud and terminate service. When
we discover that a receivable has been generated by a fraudulent call, we write
off the receivable.

        We have implemented fraud-detection and fraud-prevention measures in an
effort to reduce fraud-related losses. Fraud-detection measures involve the
collection and review of call records to detect abnormal calling patterns. When
abnormal patterns are found, the subscriber is contacted by our fraud control
staff and, if cloning has occurred, the subscriber's number is changed.
Fraud-prevention measures include restrictions on international calls from a
given number and restrictions on three-way calling by customers with
international direct-dial access.

        We have experienced a significant increase in the incidence of
subscription fraud. In response to the increase in subscription fraud, we have
developed subscription fraud prevention measures that include:

                -       background checks of our employees,

                -       fraud awareness and prevention training, and

                -       credit checks of new customers through credit rating
                        agencies.

        We installed a nationwide fraud detection system licensed from Digital
Equipment Corporation. This system aids in fraud detection in various ways,
including identifying instances of simultaneous usage by a single subscriber,
call frequency and unusually high usage patterns. The system has been
operational within our region since July 1998 and allows us to detect cloning
within one to three days of commencement of usage.

        We are also planning to implement an authentication center solution to
effectively detect and prevent fraud before it happens, without affecting our
legitimate subscribers. The authentication center prevents wireless fraud by
authenticating mobile stations upon registration, call origination and call
termination. The authentication operations make it possible to immediately
detect the presence of a clone with no noticeable impact to the legitimate
subscribers. The authentication center will be used first on international
roaming, given that the national network is not currently apt for this solution.

        The basis for these authentication operations is a 26-digit number
called the A-Key, which is known only to the authentication center and the
subscriber's handset. The A-Key, the electronic serial number and a random
number are used as inputs to the cellular authentication and voice encryption
algorithm that produces shared secret



                                       17
<PAGE>   21


data. This data is used to calculate the value compared between the handset and
the authentication center during authentication. Occasionally, a subscriber's
shared secret data may need to be updated because of a security violation,
planned expiration, or routine administrative procedure.

COMPETITION

General

        Our mobile telephony services market share in our region was
approximately 73% in 2000, as compared to 78% in 1999. This decrease is due to
increased competition. We expect our market share to decrease gradually as new
competitors enter the market and our existing competitor continues to build out
its network in our region.

        The General Telecommunications Law provides for the introduction of
competition in telecommunications services in Brazil. To further this objective,
the Brazilian federal government has been auctioning off frequency ranges for
mobile telephony services covering different areas of Brazil, including our
region.

        As a company spun off from the Telebras System, we use a frequency range
referred to as "Band A." The Brazilian federal government has conducted, and
plans to conduct, auctions for four other frequency ranges, named bands "B,"
"C," "D" and "E."

        We believe that some of the new entrants in our region may be seeking to
develop a national footprint in Brazil. To the extent these new entrants are
able to develop a national footprint, they will be able to enjoy economies of
scale currently unavailable to us.

        The entry of new competitors may have a material adverse effect on our
business, financial condition, results of operations or prospects. Any adverse
effects on our 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 our control. These factors include, among others, the identity of the
competitors, their business strategies and capabilities, prevailing market
conditions at the time, the regulations applicable to new entrants and us and
the effectiveness of our efforts to prepare for increased competition. One or
more new competitors may have technical or financial resources greater than
ours.

Band B competition

        The Band B license covers a geographic region similar to the region
covered by our concession. The license to provide mobile telephony services in
our region on Band B was granted to Vicunha Telecomunicacoes Ltda., a holding
company that controls Maxitel S.A., the cellular telecommunications operator.
Vicunha is a consortium comprised of:

                -       Telecom Italia (96.6%),

                -       the Brazilian textiles group Vicunha (1.7%), and

                -       the media group Organizacoes Globo S.A. and Banco
                        Bradesco S.A., Brazil's largest private-sector bank
                        (1.7%).

        Maxitel paid R$520 million for its license and commenced providing
digital cellular telecommunications service based on the TDMA standard in our
region in December 1998. At present, Maxitel provides cellular
telecommunications services in approximately 278 locations in the state of Minas
Gerais, with a market share of approximately 27% at December 31, 2000.

        The rights and obligations of Maxitel under its license are
substantially the same as ours under our concession. However, our concession
expires in April 2008, while Maxitel's license expires in April 2013. Both may
be renewed at the discretion of Anatel for additional 15-year periods. Maxitel
also acquired a license for R$250 million to provide cellular telecommunications
services in the neighboring States of Bahia and Sergipe, where it began to offer
digital service in April 1997.



                                       18
<PAGE>   22


Band C competition

        The Brazilian federal government held an auction in January 2001 for the
Band C frequency range for personal communications services, commonly known as
"PCS," covering a geographic region that included our region. There were no
bidders so the Brazilian federal government plans to hold a new auction,
possibly in 2002.

Band D competition

        The Brazilian government held an auction in February 2001 for the Band D
frequency range for PCS covering a geographic region that included our region.
Telemar Participacoes S.A., a holding company that owns the principal wireline
service provider in our region, won the auction by offering R$1.1 billion.
Telemar is expected to commence operations in January 2002. We expect Telemar to
be a formidable competitor given that it already has an infrastructure in place
and enjoys brand name recognition in our region.

Band E competition

        The Brazilian federal government held an auction in March 2001 for the
Band E frequency range for PCS covering a geographic region that included our
region. Telecom Italia, which is a controlling shareholder of our Band B
competitor Maxitel, won the auction. Brazilian law requires Telecom Italia to
divest either its Band B or Band E position. Telecom Italia has indicated that
it will divest its Band E position and maintain its interest in Maxitel. No date
has been set yet for the divestment nor the auction of the divested position.

Other competition

        We also compete with wireline telephone service providers. Our existing
and potential subscribers may shift to wireline service providers to take
advantage of lower prices if service quality were to improve. Quality of service
concerns associated with the wireline service provider include installation
delays, service interruptions and service availability. However, the quality of
service of wireline providers could improve if significant investments in the
wireline telephone network are made.

        We believe that wireline service providers do not present a significant
threat or new competition for the provision of telecommunications services, as
over 90% of our current subscribers have wirelines. The primary wireline service
provider in our region is Tele Norte Leste Participacoes S.A., which is
controlled by Telemar. The second company to obtain a concession to provide
wireline telecommunications service in our region is Vesper S.A., a consortium
comprised of Bell Canada International, Wireless Local Looping, Qualcomm
Incorporated, SLI Wireless and Taquari Participacoes S.A. Vesper S.A. began
providing wireline telecommunications service in February 1999.

        We also compete with other wireless telecommunications services, such as
mobile radio, paging and beeper services, which are used in our region as a
substitute for cellular telecommunications services. These competing wireless
telecommunications services are generally less expensive than cellular
telecommunications services.

        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. Currently, we do not plan to offer mobile satellite
services other than pursuant to a roaming arrangement with a satellite service
provider or PCS services, although we may consider doing so in the future.

OPERATING AGREEMENTS

Interconnection agreements

        The provision of interconnection services to other telecommunications
service providers is obligatory upon request of another service provider.

        We have entered into interconnection agreements with Maxitel, our Band B
competitor, with Embratel and Intelig, two long distance carriers, and with
Telemar and Vesper S.A., the two wireline companies operating in our region, and
our predecessor company. The terms of these interconnection agreements include
provisions for the number of connection points, the method by which signals must
be received and transmitted and the costs and fees



                                       19
<PAGE>   23


of interconnection. In addition, network usage fees are assessed based on the
terms of these agreements. See "--Regulation of the Brazilian telecommunications
industry--Obligations of telecommunications companies--Interconnection."

Roaming agreements

        The provision of roaming services to other telecommunications service
providers is obligatory upon request of another service provider.

        We have entered into agreements for automatic roaming with all the other
Band A and B service providers outside our region. These roaming agreements
permit our subscribers to use their cellular telephones on the networks of other
cellular service providers while traveling or "roaming" outside our region.
Conversely, we are required to provide cellular telecommunications service to
subscribers of those cellular service providers from outside our region when
they are within our region. The agreements require the parties 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. The agreements have a three-year term and
automatically renew for further one-year terms.

        We have also entered into international roaming agreements with foreign
carriers that permit our subscribers to use their cellular telephones in
Argentina and Uruguay and subscribers of those carriers to use their cellular
telephones in our region. The terms of these international roaming agreements
vary from agreement to agreement.

REGULATION OF THE BRAZILIAN TELECOMMUNICATIONS INDUSTRY

General

        Our business, including the services we provide and the rates we charge,
is subject to comprehensive regulation under the Minimum Law (Lei Minima), the
General Telecommunications Law, a new comprehensive regulatory framework for the
provision of telecommunications services enacted by Anatel in November 1998 and
various related administrative enactments. We operate under a concession that
authorizes us to provide cellular services and requires compliance with some
obligations.

        Anatel is the regulatory agency for telecommunications under the October
1997 Regulation of the National Telecommunications Agency (Regulamento da
Agencia Nacional de Telecomunicacoes). Anatel, which is administratively
independent and financially autonomous, is required to report on its activities
to the Ministry of Communications. Anatel has authority to propose and issue
regulations that are legally binding on telecommunications service providers.
Any proposed regulation must undergo a period of public comment, which may
include public hearings, and may be challenged in Brazilian courts.

Concessions and authorizations

        Concessions and other types of authorizations to provide
telecommunications services are granted under the public regime or the private
regime. Our concession was granted under the private regime and we are subject
to some obligations imposed by Anatel, which we describe below under
"--Obligations of telecommunications companies."

        Pursuant to the Minimum Law, the Band A and Band B service providers
have been granted concessions. Each concession is a specific grant of authority
to provide cellular telecommunications services conditioned on compliance with
requirements contained in the applicable list of obligations appended to each
concession. If a cellular service provider wishes to offer any
telecommunications service other than the cellular telecommunications 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 and
may be renewed at the discretion of Anatel for further periods of 15 years if
the list of obligations has been met. The initial period of our concession
expires in April 2008 because it represents the residual period of the original
concession granted to our predecessor, Telecomunicacoes de Minas Gerais S.A.



                                       20
<PAGE>   24


        Until December 31, 2001, the provision of cellular telecommunications
services is limited to one Band A service provider and one Band B service
provider in any single region.

        Beginning in January 1, 2000, Anatel has held auctions for
authorizations to use Bands C, D and E frequency ranges for PCS. These
authorizations differ from concessions in that the authorizations are for an
indeterminate time period and Anatel reserves the right to cancel them at
anytime. However, the frequency designation is for a period of 15 years.

        The Company and Maxitel, as Band A and B operators, have the right to
migrate to a PCS frequency. The Company is currently studying this possibility.

Obligations of telecommunications companies

        GENERAL. As described below, we must comply with certain requirements
relating to quality of service, network expansion and interconnection. 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.

        QUALITY OF SERVICE AND NETWORK EXPANSION. We, like the Band B operator,
are subject to obligations concerning quality of service and network expansion
and modernization. If we fail to meet these obligations we may be fined.
Penalties can be of up to 0.05% of annual net operating revenues per day until
full compliance, subject to a variable maximum penalty amount.

        There is as well a potential for revocation of our concession. However,
there are no precedents for the revocation of a telecommunications concession
and there are no precise guidelines under Brazilian laws or regulations for when
such an action would arise in the event of noncompliance with the terms of a
concession.

        Our quality of service obligations require:

                -       the cellular network to be fully operational at least
                        98% of the time;

                -       the rate of failed call completion due to signal loss
                        not to exceed 3%;

                -       the rate at which the cellular network rejects attempted
                        calls because no circuits are available not to exceed
                        5%;

                -       the rate at which interconnected calls fail to complete
                        not to exceed 3%;

                -       the cellular network to be available on first call
                        attempts at least 90% of the time; and

                -       the number of subscription complaints per month not to
                        exceed five per 100 subscribers.

        We were required to meet these standards by the end of 2000. In
addition, we were also required to provide cellular telecommunications service
to all municipalities in our region with more than 100,000 inhabitants by
November 4, 1999 and to 70% of the municipalities in our region with more than
30,000 inhabitants by November 4, 2002.

        We have met or exceeded our network expansion and modernization
obligations for the period 1998-2002 and at present are in compliance with our
quality of service obligations. We expect that we will be in compliance with our
obligations at all times.

        Anatel has not yet published quality of service or network expansion
requirements for Band C, Band D or Band E operators.

        INTERCONNECTION. All telecommunications service providers are required
to provide interconnection upon request to any party that provides public
telecommunications services, with the exception of competitors within the same
cellular region. 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



                                       21
<PAGE>   25


cap, it must offer that tariff to any other requesting party on a
nondiscriminatory basis. If the parties cannot agree on the amount of the
interconnection tariff, Anatel will act as the final arbiter.

        Beginning in 2001, Anatel now requires network operators 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.

Rate regulation

        Our concession provides 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 plan,
including monthly subscription fee, VC1, VC2, VC3, DSL1, DSL2 and AD charges, as
well as network usage fees.

        The initial price cap agreed upon by Anatel and us in our concession is
based on previously existing rates, which were developed based on our fully
allocated costs. The initial price cap is adjusted on an annual basis under a
formula set forth in our concession. The price cap is adjusted to reflect
changes in the provider's cost structure and the rate of inflation as measured
by the General Price Index, Internal Availability (Indice Geral de Precos,
Disponibilidade Interna), an inflation index developed by the Fundacao Getulio
Vargas, a private Brazilian economic research organization.

        The weighted average rate for the entire basket of services may not
exceed the price cap, but the rates for individual services within the basket
may be increased. We may increase the rate 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 rate does
not exceed the price cap.

        Other telecommunications companies wishing to interconnect with and use
our network must pay 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.

C.      ORGANIZATIONAL STRUCTURE

        The Registrant has one subsidiary, Telemig Celular S.A., which is a
corporation organized under the laws of the Federative Republic of Brazil. The
Registrant owns 82.9% of the share capital, and 89.2% of the voting shares of
Telemig Celular.

        The Registrant is part of a group controlled by Telpart S.A., a
consortium comprising Opportunity Bank, a private Brazilian investment bank,
Telesystem International Wireless, Inc., a Canadian public company, and certain
Brazilian pension funds. See "Item 7--Major Shareholders and Related Party
Transactions" for a fuller description of this consortium. Telpart S.A. also
controls Tele Norte Celular Participacoes, S.A., a Brazilian cellular
telecommunications services provider under a concession from the federal
government of Brazil which covers the states of Para, Amazonas, Maranhao, Amapa
and Roraima.

D.      PROPERTY, PLANT AND EQUIPMENT

        Our principal physical properties consist of transmission equipment,
switching equipment and base stations. Our headquarters are located in Brasilia
and we lease approximately 500 square meters of office space in our region.

        We also own or lease the sites where our cellular telecommunications
network equipment is installed. At December 31, 2000, we had 10 cellular
switches in Belo Horizonte, Juiz de Fora, Varginha, Governador Valadares and
Divinopolis, 644 cell sites and 11 repeaters. Since then, we have continued to
build out our network by installing another cellular switch in Belo Horizonte
and several new cell sites. We plan to install approximately 35 new cell sites
in 2001.



                                       22
<PAGE>   26


        Our four principal switching centers, located in Belo Horizonte, employ
six Super Node NT DMS-MTX switches to provide switching services for Belo
Horizonte and the surrounding metropolitan area. Five other switching centers,
located in Juiz de Fora, Varginha, Divinopolis, Governador Valadares and Montes
Claros, employ two Super Node NT DMS-MTX and three SNSE NT DMS-MTX switches to
provide switching services for our region. Northern Telecom do Brasil Ltda. is
our principal supplier of cellular telecommunications equipment.

        Of our cell sites, 72 were located on land owned by us and the remainder
on land leased from our predecessor company or third parties. Most of these
leases will expire after December 2000 and are renewable every five years. In
addition, we lease 16 company stores throughout our region.

        Our switches have a total capacity of approximately 1.4 million
subscribers. We plan to increase capacity to approximately 1.65 million
subscribers by the end of 2001 by installing another switch and by enlarging
existing switches. Our processors have a capacity of approximately 1.9 million
subscribers.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

        This item should be read in conjunction with the consolidated financial
statements and accompanying notes included elsewhere in this annual report,
which were prepared in accordance with U.S. GAAP.

PRESENTATION OF FINANCIAL INFORMATION

        On May 22, 1998, in preparation for the privatization, the Telebras
System was restructured to form the twelve new holding companies, including the
Registrant. 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.
In the breakup, some assets and liabilities of Telebras, including 82.9% of the
total share capital of Telemig Celular, were transferred to us.

        The Registrant was created effective February 28, 1998. For 1998, 1999
and 2000, our consolidated financial statements reflect the consolidated
financial condition and results of operations of the Registrant and Telemig
Celular. For earlier dates and periods, the consolidated financial statements
reflect only the financial condition and results of operations of the cellular
operations of our predecessor company. The formation of the Registrant and
Telemig Celular has been accounted for as a reorganization of entities under
common control in a manner similar to a pooling of interests.

        Telemig Celular was created, effective January 1, 1998, by splitting up
the predecessor company to separate its cellular operations from its wireline
operations. The assets and liabilities of the cellular telecommunications
business of the predecessor company were transferred to Telemig Celular at their
indexed historical costs. The revenues and expenses associated with these assets
and liabilities were also allocated to Telemig Celular. For 1998, 1999 and 2000,
our consolidated financial statements reflect the operations of Telemig Celular
as a fully independent company. For prior years, our consolidated financial
statements reflect the cellular operations of the predecessor company but are
not necessarily indicative of what our financial condition and results of
operations would have been if the cellular operations of the predecessor company
had been under a separate legal entity prior to 1998.

        During 1997, the three-year cumulative inflation rate fell below 100%,
and as a result we no longer use the integral restatement method effective
January 1, 1998. The consolidated financial statements for 1998, 1999 and 2000
are presented in nominal reais and do not recognize effects of inflation.
Financial statements for prior dates and periods, which are restated in constant
reais of December 31, 1997, have not been further restated.

CONSOLIDATION OF OPERATIONS WITH AFFILIATE

        In order to create operating efficiencies and reduce costs, the Company
entered into a shared services arrangement in February 2001 with its affiliate,
Tele Norte Celular Participacoes S.A. Pursuant to this arrangement, the
financial, marketing, call center and human resources areas, as well as a
portion of the engineering area, of each company is managed by a single team.



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<PAGE>   27


PREPAY SUBSCRIBERS

        Since the inception of our prepay plan in March 1999, the number of
prepay subscribers has grown to represent approximately 42.0% of our total
subscribers at December 31, 2000. A prepay subscriber can activate a cellular
phone, purchase a prepaid card with a fixed amount of credit to be used over a
period of up to 180 days and credit the prepaid card value to the subscriber's
account either at a customer service center or by a phone call. The customer
will have access to cellular service until the credit is fully used or otherwise
until the card expires at the end of 180 days, whichever occurs first.

        We believe that prepay plans are attractive to a wide range of cellular
customers. In addition to helping customers control costs, a prepay program has
no monthly bill and allows customers to prepay for cellular services in cash.
The prepay market is composed of customers who typically earn a variable income
and prefer not to make a fixed financial commitment, do not have the credit
profile required to purchase a contract plan or seek cellular services for
emergency or limited use only.

        We believe the prepay service offerings provide an opportunity to
improve margins because, compared to the average contract plan, prepay plans
involve higher average per minute airtime charges, a lower cost to acquire
prepay subscribers and the absence of billing costs, credit concerns and payment
risk. Prepay customers are also potential customers for other services and
products offered by us, and we focus marketing efforts on migrating qualified
prepay customers to higher revenue contract plans. In addition, we are exploring
new methods to increase minutes of use by our prepay customers. Prepay
customers, on average, have substantially lower minutes of use than contract
customers and do not pay monthly fees and, as a result, generate substantially
lower average monthly revenues per customer.

COMPOSITION OF OPERATING REVENUES AND EXPENSES

Revenues

        We generate operating revenues from:

                -       usage charges, which include measured service charges
                        based on tenths of a minute of outgoing calls and
                        roaming and other similar charges, all of which depend
                        upon which service plan has been selected by the
                        customer;

                -       monthly subscription payments, which depend upon which
                        service plan has been selected by the customer;

                -       network usage fees, which are the amounts charged by us
                        to other cellular and wireline telephone service
                        providers for use of our network by such service
                        providers' customers;

                -       activation fees, which are one-time sign up charges paid
                        to obtain cellular service under our Basic plan;

                -       sales of handsets; and

                -       other services and charges.

        Unbilled revenues from the billing date to the month-end are estimated
and recognized as revenue during the month in which the service is provided.
Effective January 1, 1998, the Registrant defers activation fees. These fees are
amortized over twelve months, the estimated effective contract life. Revenue
from the sales of prepay cards is recognized according to the minutes used for
each card.

        We began to sell handsets in the fourth quarter of 1998. Because of
competitive pressures, we have had to subsidize the cost of handsets to our
subscribers. This has a negative impact on our operating margin.

Operating expenses

        Operating expenses consist of cost of services, selling, general and
administrative expenses, bad debt expense, depreciation and, in 1998, a charge
for impairment of certain analog transmission equipment. Cost of services
consists primarily of fixed costs such as leased line charges, site rental and
network maintenance, including



                                       24
<PAGE>   28


overhead, as well as variable costs such as certain interconnection charges.
Selling, general and administrative expenses consist primarily of salaries,
wages and related benefits for administrative personnel, advertising and
promotional expenses and other overhead expenses.

TAXES ON TELECOMMUNICATIONS SERVICES

        The cost of telecommunications services to subscribers includes a
variety of taxes. The average rate of all such taxes, as a percentage of our
gross operating revenues, was approximately 21% in 1998, 21% in 1999 and 19% in
2000. The principal taxes are a state value-added tax, the Imposto sobre
Circulacao de Mercadorias e Servicos, commonly known as the "ICMS," and a
municipal tax on services, the Imposto sobre Servico, referred to as the "ISS."
The ICMS is a tax that the Brazilian states impose at varying rates on revenues
from the sale of goods and services, including some telecommunications services.
The ICMS rate in the state of Minas Gerais is 25% for domestic
telecommunications services. The ISS is imposed on services not subject to the
ICMS and its average rate is 5%.

        Other taxes on gross operating revenues include two federal social
contribution taxes, the Programa de Integracao Social, referred to as "PIS," and
the Contribuicao para Financiamento da Seguridade Social, known as "COFINS,"
imposed on some telecommunications services at a combined rate of 3.65% of gross
operating revenues. Prior to February 1999, the combined rate of both taxes was
2.65%.

        In 2000, the federal government established the following contributions
which will affect future Company operations:

                -       Contribution for the Fund of Globalization of
                        Telecommunication 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 fulfilling
obligations for globalization of telecommunication services that cannot be
recovered with efficient service exploration or that is not the responsibility
of the concessionaire.

        Contribution to Fust, by all telecommunication services companies,
started on January 2, 2001, at the rate of 1% of the amount of gross operating
telecommunication services revenue.

                -       Contribution for the Fund of Telecommunication
                        Technological Development - "Funttel"

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

        Contribution to Funttel, by all telecommunication services companies,
started on March 28, 2001, at the rate of 0.5% of the amount of gross operating
telecommunication services revenue.

        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 some services to which the ICMS had not previously
been applied, including cellular activation and monthly subscription. 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" for a fuller description of these developments.

        Prior to the privatization, our capital expenditures were planned and
allocated on a system-wide basis and subject to approval by the federal
government. These constraints on capital expenditures prevented us from making
some investments to modernize in a timely manner our cellular telecommunications
services.

A.      RESULTS OF OPERATIONS

        The following discussion presents comparisons of results of operations
for 2000 and 1999 and for 1999 and 1998.



                                       25
<PAGE>   29


2000 COMPARED TO 1999

Net revenues

        Net revenues were R$744.3 million in 2000, compared to R$520.8 million
in 1999. The 43% increase is primarily attributable to a 46% increase in
revenues derived from the provision of cellular services, to R$650.8 million in
2000 from R$446.6 million in 1999. The increase in cellular service revenue was
substantially due to the 60% increase in our subscriber base. The percentage
increase in cellular service revenue was less than the percentage increase in
subscriber base because in 2000 we had a larger percentage of prepay subscribers
than in 1999. Prepay subscribers generally generate less revenue than contract
users.

        We launched prepay service in March 1999. This service provides access
to the same service of the contract program, except that users pay in advance
for the service by way of purchase of cards. At December 31, 2000, 521,764
subscribers, or 42% of our total subscriber base, were under the prepay program.
We believe that a significant portion of our new subscribers will adhere to the
prepay program, resulting in a lower percentage increase in revenues as compared
to the number of subscribers.

        We may have to reduce our rates further due to competition. We expect
that future reductions in rates will help stimulate growth in our subscriber
base resulting in an increase in revenues from monthly subscription payments and
an increase in revenues from usage charges as a result of an increase in call
volume. However, we are not able to determine the extent to which these effects
will offset the reduction in fees and rates.

        In December 1998, Maxitel, a competing cellular service provider, began
operating for the first time in our region. A second competitor, Telemar, is
expected to commence PCS operations in January 2002. Two more PCS operators are
expected to enter our market sometime in 2002. We expect that competition will
contribute to declining prices and will affect our ability to maintain growth in
our subscriber base.

Cost of services

        Cost of services reached R$300.0 million in 2000, or 46% of service
revenues, as opposed to R$219.2 million, or 49% of service revenues, in 1999.
The decrease in cost of services as a percentage of service revenues is mainly
attributable to lower leased line costs as a result of the expansion of our
backbone.

Selling, general and administrative expenses

        Selling, general and administrative expenses were R$244.7 million in
2000, or 38% of service revenues, compared to R$163.5 million, or 37% of service
revenues in 1999, remaining fairly stable.

Pension plan expense

        Until December 1999, we participated in a multi-employer defined benefit
pension plan administered by Fundacao Telebras de Seguridade Social-Sistel.
Effective January 1, 2000, the plan was modified and changed into a multiple
employer pension plan with respect to active employees. The expense recorded in
2000 represents the net periodic cost computed as per SFAS 87. See Note 12 to
the consolidated financial statements.

Bad debt expense

        Bad debt expense was R$21.6 million, or 3.3% of service revenues, in
1999, compared to R$15.4 million, or 3.5% of service revenues in 1999. The
decrease in bad debt expense as a percentage of service revenues is due to the
strengthening of credit controls and the improvement of collection procedures.

        We maintain an allowance for past-due accounts receivable in an amount
equal to our estimate of probable future losses on such accounts, based on
historical losses and the current level of overdue accounts receivable. We also
immediately charge off any account receivable arising from fraud. Cellular
service is cut off to customers who have accounts receivable that are more than
19 days past due. We expect that bad debt expense will remain at its current
level in the future.



                                       26
<PAGE>   30


Interest income (expense)

        Net interest expense was R$12.1 million in 2000, compared to a net
interest expense of R$0.8 million in 1999. The increase is due to an increase in
consolidated indebtedness in 2000 related to the funding of capital
expenditures.

Foreign exchange (gain) loss

        Foreign exchange loss was R$24.4 million and R$27.2 million in 2000 and
1999, respectively, due to the effect of the devaluation of the real on our U.S.
dollar denominated debt.

Income taxes

        Income taxes, which include social contribution taxes, were R$10.1
million in 2000, compared to R$2.1million in 1999.

        The effective rate of tax on pretax income in 2000 was 23%, compared to
the combined statutory rate of 34%. The effective rate of tax on pretax income
in 1999 was 12% compared to the combined statutory rate of 37%. The increase in
the effective rate in 2000 is due mainly to a lower relative amount of interest
declared in 2000 as compared to 1999. The difference between the effective tax
rate and the combined statutory rate in each year is attributable mainly to the
declaration of interest on capital. Interest on capital consists of tax
deductible dividend.

Net income

        As a result of the above, net income was R$26.3 million for 2000 and
R$13.7 million for 1999.

1999 COMPARED TO 1998

Net revenues

        Net revenues were R$520.8 million in 1999, compared to R$435.3 million
in 1998. The 20% increase is primarily attributable to the sales of handsets in
the amount of R$74.3 million. We commenced in 1999 the sale of handsets to
assists our distribution network. Handsets revenues did not contribute to our
profit as the handsets were sold at, or near, cost. Although the revenues from
the sale of handsets are expected to increase in the future, we do not believe
that they will contribute significantly to our profit. In effect, competition
may force us to offer handsets at subsidized prices.

        Revenues derived from the provision of cellular services were R$446.6
million in 1999, a 3% increase from the R$435.3 million of 1998. The service
revenues increase did not follow the 44% traffic increase as it was offset by a
25% average reduction in our rates made in November 1998 in preparation for the
entry of competition, followed by an additional reduction in the second quarter
of 1999 resulting from our elimination of intra-regional long distance rates. In
addition, we experienced a migration of calls toward the off-peak period. We
offer a 30% discount on off-peak calls. However, we plan to discontinue this
discount as the traffic increase has not offset the discount.

        In March 1999, we launched prepay service. At December 31, 1999,
approximately 216,800 subscribers, or 28% of our total subscriber base, were
under the prepay program.

Cost of services

        Cost of services reached R$219.2 million in 1999, or 49% of service
revenues, as opposed to R$156.1 million, or 36% of service revenues, in 1998.
The increase, as a percentage of service revenues, was due mainly to an increase
in depreciation of R$55 million, which reflects:

                -       a R$22 million increase in investment in property, plant
                        and equipment, and

                -       a R$33 million adjustment resulting from a revised
                        estimate of useful lives of property, plant and
                        equipment in light of the advent of competition and a
                        review of industry practices.



                                       27
<PAGE>   31


Selling, general and administrative expenses

        Selling, general and administrative expenses were R$163.5 million in
1999, or 37% of service revenues, compared to R$134.2 million, or 31% of service
revenues in 1998. The percentage increase is attributable to increased promotion
and advertising costs in relation to new products like prepay and digital
services, as well as higher costs for commissions related to the level of new
activation. In addition, the arrival of competition in our region also
contributed to the increase in selling and marketing expenses.

Pension plan expense

        A pension plan expense of R$7.1 million was recorded in 1999 as a result
of changes approved by the administrator, allowing for the break-up of the plan.
The expense recorded by us represents an estimate of our share of the unfunded
pension liability.

Bad debt expense

        Bad debt expense was R$15.4 million, or 4% of service revenues, in 1999,
compared to R$90.9 million, or 21% of service revenues in 1998. The significant
decrease resulted from a series of factors including the implementation of
credit and collection policies, an anti-fraud system and a general improvement
of our processes. The high level of bad debt in 1998 resulted in part from a
promotion at the end of 1997 that attracted lower-income subscribers.

Interest income (expense)

        Net interest expense was R$0.8 million in 1999, compared to a net
interest income of R$14.1 million in 1998. The change reflects an increase in
consolidated indebtedness in 1999 related to capital investments.

Foreign exchange (gain) loss

        Foreign exchange loss was R$27.2 million in 1999, due to the effect of
devaluation of the real on our U.S. dollar denominated debt. At December 31,
1998, debt denominated in U.S. dollars amounted to R$52.0 million and was
negatively affected by the 50% devaluation of the local currency during the
year.

Income taxes

        Income taxes, which include social contribution taxes, were R$2.1
million in 1999, compared to R$4.6 million in 1998. The effective rate of tax on
pretax income in 1999 was 12%, compared to the combined statutory rate of 33%.
The decrease is attributable to the declaration of interest on capital in
December 1999. Interest on capital consists of tax deductible dividend.
Dividends are deductible to the extent they are declared before the end of the
current fiscal year.

Net income

        As a result of the above, net income was R$13.7 million for 1999 and
R$10.4 million for 1998, or R$0.04 and R$0.03 per thousand common shares,
respectively.

B.      LIQUIDITY AND CAPITAL RESOURCES

General

        In 2000, cash provided by operating activities was R$149.9 million.
EBITDA, which we define as operating income plus depreciation and the charge for
impairment of long-lived assets, was R$190.5 million. At December 31, 2000, we
had cash and cash equivalents of R$278.4 million.

Indebtedness

        Our total debt was R$477 million at December 31, 2000. Of this debt,
R$280 million was denominated in U.S. dollars and bore interest at six-month
LIBOR plus an annual rate of 1.00% to 5.64% (expect for R$10 million, which bore
interest at 11.8% per year), and R$197 million was in reais bearing interest at
an annual rate of 3.8%



                                       28
<PAGE>   32


over the long-term interest rate disclosed by the Brazilian Central Bank (which
was 9.75% at December 31, 2000). See "Item 10. Additional Information--C.
Material contracts" for a description of our principal credit agreements.

        At December 31, 2000, 33% of our debt denominated in U.S. dollars was
hedged against exchange rate fluctuation. The hedging instrument exchanges fixed
rates (9.1% to 14.9%) over the U.S. dollar variation for an internal floating
rate (interbank deposit rate).

        On September 11, 2000, we obtained a R$260 million five-year credit
facility from the Brazilian National Economic and Social Development Bank (Banco
Nacional de Desenvolvimento Economico e Social (BNDES)) and a consortium of
three Brazilian banks: Banco Itau S.A., Banco Bradesco S.A. and Alfa de
Investimento S.A. The proceeds of this facility, which has an annual interest
rate of 3.8% over the long-term interest rate disclosed by the Brazilian Central
Bank, is being invested in the expansion of our coverage area and the
introduction of new services.

        Substantially all of our start-up costs and initial capital investments
were financed by cash flows from the wireline telephone operations of the
predecessor company. At December 31, 2000, R$46 million of our total debt is
related to credits obtained by our predecessor company to invest in plant
expansion. Accordingly, our indebtedness does not reflect the total amount of
debt we would have been required to incur to build our current network if we had
operated on a stand-alone basis from the inception of our predecessor company's
cellular telecommunications operations.

Capital expenditures

        Prior to the privatization, our capital expenditures were planned and
allocated on a system-wide basis and subject to approval by the federal
government. These constraints on capital expenditures prevented us from making
some investments to modernize in a timely manner our cellular telecommunications
services.

        Since the privatization of Telebras, these restrictions have not
applied. We are now able to determine our own capital expenditure budget
although as is the case with all telecommunications service providers, we must
comply with build-out obligations under our concession. See "Item 4--Information
on the Company--Business Overview--Regulation of the Brazilian
telecommunications industry--Obligations of telecommunications companies" for a
description of these obligations.

        We spent R$211 million in capital expenditures in 2000. We currently
expect that our capital expenditures for the years 2001 through 2003 will
aggregate approximately R$830 million, with approximately R$250 million of that
amount falling in 2001. Our capital expenditure priorities include buildout of
our network to increase coverage, improvement of overall quality and increase of
the level of digitalization of our network. In addition, we will need to install
an overlay to our TDMA network. We are currently analyzing the GSM and the CDMA
technological solutions with Ericsson and Nortel. The estimated amount and
timing of capital expenditures may be affected by a number of risks and
uncertainties, including exchange rate variations, industry developments and
changes in the Brazilian economy.

        We believe that our capital expenditure requirements can be met through
a combination of cash flow from operations, equipment financing from vendors and
credit facilities from export credit agencies and Brazilian and international
financial institutions.

POLITICAL AND ECONOMIC FACTORS

        Our business, results of operations and financial condition are
significantly affected by the political and economic environment in Brazil. In
particular, our financial performance will be affected by:

                -       economic growth in our region and its impact on demand
                        for telecommunications services,

                -       the cost and availability of financing, and

                -       the exchange rates between Brazilian and foreign
                        currencies.

Brazilian political environment

        Our business, results of operations and financial condition may be
adversely affected by changes in governmental policy affecting factors such as,
among others,



                                       29
<PAGE>   33


                -       currency fluctuations,

                -       inflation,

                -       price instability,

                -       interest rates,

                -       tax policy, and

                -       telecommunications policy.

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

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

        In January 1999, the new Governor of the state of Minas Gerais, who
belongs to an opposition party, announced that his state would suspend payments
on its debt to the federal government for 90 days. The Governor of the state of
Rio Grande do Sul subsequently obtained a court order permitting his state to
make its debt payments into an escrow account, pending resolution of a request
of seven states to renegotiate refinancing agreements they had reached with the
federal government in 1997. The federal government responded by seeking to
withhold constitutionally-mandated transfers to the state of Minas Gerais. The
federal government also notified certain international financial institutions
that it would no longer guarantee those states' obligations to those
institutions, leading the World Bank to suspend loans to the states of Minas
Gerais and Rio Grande do Sul.

        In February 1999, President Fernando Henrique Cardoso issued a
provisional measure under which the Brazilian government proposed to refinance
the commercial bank and securities debt of the states and municipalities for a
period of 30 years. In February 2000, the state of Minas Gerais entered into a
debt rescheduling agreement with the federal government.

        Our operations are concentrated in the state of Minas Gerais, one of the
defaulting states. Although relations between the Brazilian federal government
and the state of Minas Gerais have improved and stabilized, renewed friction
between the federal government and the state governments, including the
government of the state of Minas Gerais, may undermine investor confidence, have
a negative effect on the Brazilian economy and negatively impact the state of
Minas Gerais. If the Brazilian economy or the economy of the state of Minas
Gerais were to be adversely affected by a default, our operations and the market
price of the preferred shares and ADS may be adversely affected.

Brazilian economic environment

        GENERAL. Our business, results of operations and financial condition are
dependent on general economic conditions in Brazil, and in particular on:

                -       economic growth and its impact on demand for
                        telecommunications services,

                -       the cost and availability of financing, and

                -       exchange rates between Brazilian and foreign currencies.

        EFFECTS OF INFLATION AND IMPACT OF REAL PLAN. Since the introduction of
the real as the new Brazilian currency in July 1994, inflation has remained
controlled although it has increased since the devaluation of the real in
January 1999. Inflation was 9.8% in 2000, 20.0% in 1999 and 1.7% in 1998, as
measured by the IGP-DI, a general



                                       30
<PAGE>   34


price index. High inflation places pressure on our rates and invites federal
government efforts to control inflation by holding down the rates that Brazilian
public utilities are permitted to charge.

        The table below shows the Brazilian general price inflation (according
to the IGP-DI) and devaluation of the Brazilian currency against the U.S. dollar
for the periods shown:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                 -------------------------------------
                                                                   2000          1999           1998
                                                                 --------      --------       --------
<S>                                                              <C>           <C>            <C>
Inflation (IGP-DI)............................................     9.8%          20.0%          1.7%
Devaluation of the real vs. U.S. dollar.......................     8.4%          48.0%          8.0%
</TABLE>

        EFFECTS OF EXCHANGE RATE VARIATION AND INFLATION ON OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. The devaluation of the Brazilian real and
the resulting inflation have had and will continue to have negative effects on
our results of operations, primarily as a result of the following factors:

                -       Real devaluations generally result in a significant
                        decrease in the purchasing power of Brazilian consumers,
                        resulting in a decrease in the demand for cellular
                        telephony services.

                -       Due to competitive market conditions and regulatory
                        constraints, we may not always be able to increase our
                        rates in line with inflation.

                -       The significant devaluation of the real as compared to
                        the U.S. dollar in 1999 resulted in the recording of
                        exchange losses given over net U.S. dollar liability
                        position.

                -       A portion of our costs and expenses (e.g., handsets,
                        depreciation and interest expense) is denominated in
                        U.S. dollars, while all of our revenues are denominated
                        in reais. In a period of real devaluation, this
                        relationship causes a negative impact on our margins.

                -       A substantial portion of our indebtedness is denominated
                        in U.S. dollars. As a result, the real-carrying amount
                        of such debt increases to reflect the additional reais
                        required to meet such U.S. dollar liabilities.

        EFFECTS OF FOREIGN CRISES ON THE BRAZILIAN ECONOMY. In November 1997, in
a move to counteract speculation of Brazilian currency devaluation generated by
the financial crisis in the Asian markets, the Brazilian government increased
annual interest rates from approximately 20% to approximately 40%. This sudden
and dramatic increase in interest rates had the immediate effect of severely
dampening the availability of consumer credit. By April 30, 1998, these rates
had decreased to approximately 23%. Partly as a result of these events, the
Brazilian economy was driven into a recession. The market indices of the
Brazilian securities market declined significantly, and the market price of our
preferred shares was adversely affected.

        After Russia devalued its currency in August 1998, foreign investors
withdrew funds from emerging market countries. Brazil was particularly affected
due to its growing budget and current account deficits. In October 1998, the
Brazilian government announced a fiscal package designed to curb government
spending and offset higher debt service costs caused by higher interest rates.
The Brazilian government also entered into a standby accord with the IMF,
providing U.S.$41.5 billion to Brazil from contributions made by the IMF and,
among others, 20 developed country governments. Acceptance of the IMF package
committed Brazil to implementing a combination of spending cuts and tax
increases.

        Despite the fiscal package and the IMF accord, confidence in the
Brazilian market continued to erode. In an attempt to curb the increasing
capital outflows and address concerns about the commitment of certain state
governments to fiscal austerity, on January 13, 1999, the Central Bank announced
changes to its foreign exchange policy dating from 1995, including the
implementation of a wider trading band for the real/U.S. dollar exchange rate.
This resulted in the Central Bank ceasing to intervene in the market to ensure
that the real traded at between R$1.1975 and R$1.2114 per U.S.$1.00. The
commercial selling rate rose to R$1.3193 per U.S.$1.00 on the same day,
producing a devaluation of the real of approximately 8% and effectively reaching
the ceiling of the new trading band set by the Central Bank.



                                       31
<PAGE>   35


        In response to continued high capital outflows, on January 15, 1999 the
Central Bank announced that it would no longer intervene in the foreign exchange
market, except in exceptional circumstances to mitigate excessive volatility,
thereby allowing the real to U.S. dollar exchange rate to fluctuate freely.
Since January 15, 1999, the real has traded in a volatile and sometimes illiquid
market. The real devalued by 48.0% and 8.4% against the U.S. dollar in 1999 and
2000, respectively. At June 27, 2001, the noon buying rate was R$2.3320 to
U.S.$1.00.

        Shortly after the devaluation, in order to minimize excessive market
volatility and reduce the inflationary effects of the devaluation, the Central
Bank raised interest rates to more than 40% per annum. Interest rates have since
decreased, and stood at 16.75% at June 19, 2001, but are still high and have
affected consumer and business confidence.

        As a result of the devaluation, certain economic benchmarks established
in the IMF standby accord had to be revised. In March 1999, the Brazilian
government and the IMF executive board agreed to a memorandum of economic
policies for Brazil that allowed the Central Bank to intervene in the spot
foreign exchange market and stipulated how much the Central Bank could sell in
the market to improve liquidity and reduce volatility of the real. As a result,
an additional U.S.$9.8 billion was made available to Brazil in early April 1999.
Also in March 1999, the Brazilian government agreed with foreign private-sector
banks to maintain interbank lines at February 28, 1999 levels through August 30,
1999, thereby halting a significant decline in such lines since September 1998.

        Brazil has also been affected by events taking place in Ecuador and
Argentina. In late 1999, Ecuador missed a payment on the country's U.S.$5.9
billion Brady bond debt, becoming the first country ever to default on a Brady
bond debt. Argentina has been facing political and financial uncertainty since
the election in October 1999 of a new president who belongs to a political party
different from that of the prior president. More recently, a proposal made by
the Argentine Finance Minister in April 2001 to modify the existing one-to-one
exchange rate of Pesos into dollars has negatively affected the Brazilian
securities markets as well as the value of the real.

        Brazilian economic conditions may be affected negatively by events
elsewhere, especially in emerging markets. Instability in the Brazilian
financial markets caused by developments in the international financial markets
may adversely affect our financial condition and, specifically, our ability to
raise capital when needed and the market price of the preferred shares and ADSs.

REGULATORY AND COMPETITIVE FACTORS

        Our business, including the services we provide and the rates we charge,
are subject to comprehensive regulation under the General Telecommunications
Law. As a result, our business, results of operations and financial conditions
could be affected negatively by the actions of the Brazilian authorities. In
particular, we could be negatively affected by actions such as the following:

                -       delays in the granting, or the failure to grant,
                        approvals for rate increases;

                -       the granting of more concessions to new competitors in
                        our region; and

                -       the introduction of new or stricter requirements to our
                        concession.

         We began to face competition in our region in the fourth quarter of
1998 and anticipate that competition will contribute to declining prices for
cellular telecommunications services and increasing pressure on operating
margins. Our future growth and results of operations will depend significantly
on a variety of factors, including:

                -       our ability to attract new subscribers,

                -       the rate of growth of our subscriber base,

                -       the usage and revenue generated from our subscribers,

                -       the level of airtime,

                -       equipment prices,

                -       the rate of churn and



                                       32
<PAGE>   36


                -       our ability to control costs.

        We expect to face competition from Telemar, the Band D PCS auction
winner, beginning in January 2002, as well as from new PCS entrants in the Band
C and Band E frequency ranges. The scope of increased competition and any
adverse effects on our results and market share will depend on a variety of
factors that we cannot now assess with precision and many of which are beyond
our control.

C.      RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

        In connection with the breakup of Telebras, we were required to enter
into a three-year contract in May 1998 with Telebras' Center for Research and
Development (Centro de Pesquisa e Desenvolvimento da Telebras) under which we
are obligated to contribute a maximum of R$1.2 million per year to the Center
during the three years ending May 2001. We do not conduct any independent
research and primarily depend upon the manufacturers of telecommunications
products for the development of new hardware.

D.      TREND INFORMATION

        We expect a significant increase in competition. Telemar, the principal
wireline operator in our region with a significant presence in Brazil, is
expected to commence operations in January 2002. In addition, future auctions
not yet scheduled would result in the addition of two more PCS operators in our
region. The increase in competition negatively affects our market share and
profit margins. See "Item 4. Information on the Company--B. Business
overview--Competition" for a detailed description of the competitive climate in
our region.

        We also expect to continue to make significant capital expenditures to
expand the coverage and capacity, and improve the quality, of our network. See
"--B. Liquidity and capital resources--Capital expenditures."

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.      DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

        The Registrant is administered by a Board of Directors (Conselho de
Administracao) and a Board of Executive Officers (Diretoria). The Board of
Directors is comprised of eleven members serving for a term of three years. The
Board of Directors holds a regular meeting once every two months and holds
special meetings when called by the Chairman or by two members of the Board of
Directors.

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

<TABLE>
<CAPTION>
NAME                                                            POSITION              DATE ELECTED
----------------------------------------------------------    --------------       ------------------
<S>                                                           <C>                  <C>
Gunnar Birger Vinof Vikberg...............................      Chairman             April 30, 2001
Oscar de Paula Bernardes Neto.............................      Director             April 30, 2001
Gustavo Henrique de Barroso Franco........................      Director             April 30, 2001
Diogo Luiz Botelho de Vasconcellos........................      Director             April 30, 2001
Claudio Salgueiro Garcia Munhoz...........................      Director             April 30, 2001
Antonio Britto Filho......................................      Director             April 30, 2001
Antonio Fernando Pereira de Melo..........................      Director             April 30, 2001
Jose Otavio Junqueira Franco..............................      Director             April 30, 2001
Veronica Valente Dantas...................................      Director             April 30, 2001
Marcos Nascimento Ferreira................................      Director             April 30, 2001
James L. Thompson.........................................      Director             April 30, 2001
</TABLE>

        Set forth below are brief biographical descriptions of the Directors.

        GUNNAR BIRGER VINOF VIKBERG is also the President and Chief Executive
Officer of the Registrant, as well as the President and Chief Executive Officer
and Director of Tele Norte Celular Participacoes S.A. Mr. Vikberg is the founder
and director of Viking Consultoria Empresarial e Participacoes S/C Ltda. Mr.
Vikberg was also the Chief Executive Officer of Algar S.A. from 1997 to 1999.
Prior to that, Mr. Vikberg had been Executive Vice President.



                                       33
<PAGE>   37


Mr. Vikberg was the exclusive representative of Xerox Quality Services in Brazil
in 1995. Between 1992 and 1994, Mr. Vikberg was President of Millicom do Brasil
S.A. and PCN do Brasil S.A. From 1975 to 1989, Mr. Vikberg held several
positions at Grupo Xerox do Brasil S.A., including that of Executive Vice
President. From 1954 to 1975, Mr. Vikberg was associated with L.M. Ericsson,
where he was the Director General of Ericsson do Brasil S.A. from 1968 to 1975.
Mr. Vikberg has also been a member of the Board of Directors of several
Brazilian companies. Mr. Vikberg received a degree in Electrical Engineering
from the Royal Institute of Technology in Stockholm, Sweden, as well as a degree
in Business Administration from the Institut pour l'Etude des Methodes de
Direction de l'Enterprise in Lausanne, Switzerland.

        OSCAR DE PAULA BERNARDES NETO is also a Director of Tele Norte Celular
Participacoes S.A., as well as the Chairman of the Advisory Board of TIW do
Brasil, one of our controlling shareholders. Mr. Bernardes is also Senior
Partner and Chairman of the Latin American Internet Development Group and a
member of the Board of Directors of several other Brazilian companies and of
Delphi Automotive in the United States. From 1996 to 1999, Mr. Bernardes was the
Chief Executive Officer of Bunge International, an international agribusiness
company. Prior to that, Mr. Bernardes was a Senior Partner at Booz-Allen &
Hamilton. Mr. Bernardes received a degree in chemical engineering from the
Federal University of Rio de Janeiro.

        GUSTAVO HENRIQUE DE BARROSO FRANCO is also a Director of Tele Norte
Celular Participacoes S.A. Mr. Franco was the Governor of the Central Bank of
Brazil from August 1997 to January 1999. For the previous four years, Mr. Franco
served as Director of International Affairs of the Central Bank of Brazil.
Between May and September of 1993, Mr. Franco was the Deputy Secretary of
Economic Policy of the Ministry of Finance. From 1986 to 1993, Mr. Franco was an
Associate Professor in the Economics Department of the Catholic University of
Rio de Janeiro. Mr. Franco has written several books and articles on different
areas of economics. Mr. Franco holds a masters in Economics from the Catholic
University of Rio de Janeiro as well as a Ph.D. in Economics from Harvard
University.

        DIOGO LUIZ BOTELHO DE VASCONCELLOS is also a Director of COELBA, COSERN
and CELPE. Mr. Vasconcellos has been the Vice-President of COSERN and the
Securities Investment Manager of PREVI since 1998. Mr. Vasconcellos was the
Operations Manager of PREVI from 1993 to 1996 and worked at Banco do Brasil from
1984 to 1997 in many roles, including Financial Operator, Team Coordinator and
Chief of Sector. Mr. Vasconcellos received a degree in accounting, as well as a
Masters in Business Administration, from Universidade Santa Ursula in Rio de
Janeiro, Brasil.

        CLAUDIO SALGUEIRO GARCIA MUNHOZ has been an officer of Banco do Brasil
S.A. since July 1979. He is presently the Executive Manager of Banco do Brasil,
having worked in various sectors of the bank, as Assistant to the Chief
Financial Officer, Chief Analyst, Assistant to the President and Deputy
Operations Manager. Also, Mr. Munhoz had been Administrative Manager of BB
Previdencia, a pension fund related to Banco do Brasil, from January 1995
through April 1996. He was also Investor Relations Director for "521
Participacoes," and Administrative Director for the pension funds PREVI and
CASSI. In recent years, Mr. Munhoz has been an active Board Member of major
companies in Brazil, including CSN - Companhia Siderurgica Nacional (1997 to
1999) and Tele Centro Sul Participacoes S.A. (1998). Mr. Munhoz holds a degree
in Economics from the Universidade de Brasilia - UnB (1983) and is pursuing a
master's degree in Business Administration - MBA from IBEMEC.

        ANTONIO BRITTO FILHO is currently a business consultant and is a
Director of Tele Norte Participacoes S.A. Mr. Britto was a Congressman from 1986
to 1994. Mr. Britto was a Deputy Leader of the PMDB political party and one of
the first negotiators of the National Constituent Assembly. Mr. Britto was
President of the Congressional Science and Technology, Communication and
Information Commission in 1990 and 1991. In 1992, he became the Minister of
Social Security. In 1994, Mr. Britto was elected State Governor of Rio Grande do
Sul. Mr. Britto is a Social Communication Graduate from the Librarianship and
Communication Faculty of Rio Grande do Sul Federal University - UFRGS in 1970.

        ANTONIO FERNANDO PEREIRA DE MELO is the Administrative-Financial
Director of Telos-Fundacao Embratel de Seguridade Social, a pension fund related
to Embratel, the long distance telephony company. In recent years, Mr. Melo has
been an active board member of Paranapanema S.A., Caraiba Metais S.A., Paraibuna
S.A., Eluma S.A. and World Trade Center-WTC-SP, as well as the audit committee
of Tele Norte Celular Participacoes S.A. Mr. Pereira has been associated with
Embratel since 1972, having worked in many areas such as the Department of
Economy, Budget and Economical-Financial Control and the Department of Data
Processing. Mr. Melo holds a degree in Administrative and Accounting Sciences
from Moraes Junior University.



                                       34
<PAGE>   38


        JOSE OTAVIO JUNQUEIRA FRANCO is a Director of Telpart Participacoes S.A.
Mr. Franco is also a member of the Board of Directors of Mogiana Alimentos S.A.
Mr. Franco is also the Chief Executive Officer of MEGAAGRO S.A., an internet
company in the agricultural business. From 1996 to 1999, Mr. Franco was Vice
President for Latin America for The Quaker Oats Co and from 1982 to 1999 was
President and Director of Quaker Brasil, a subsidiary of The Quaker Oats Co.
From 1976 to 1982 held several positions within The Quaker Oats Co. Mr. Franco
received a degree of Bachelor in Economics from Mackenzie University and holds a
masters degree in Business Administration from Michigan State University.

        VERONICA VALENTE DANTAS is a partner and managing director of
Opportunity Asset Management Ltda. Ms. Dantas is also a Director of Tele Norte
Celular Participacoes S.A. Her past experience includes being a managing
director at Icatu Empreendimentos e Participacoes Ltda., an investment company
in Brazil. Ms. Dantas holds a degree in business administration from the Federal
University of Bahia.

        MARCOS NASCIMENTO FERREIRA is also a Director of Tele Norte Celular
Participacoes S.A. Mr. Ferreira was Director of Pantanal Linhas Aereas from 1995
to 1998. For the previous seven years, Mr. Ferreira worked for OAS Group in
different roles, including two subsidiaries Vega Sopave and Ultratec Engenharia.
In recent years, Mr. Ferreira has been an active Board Member of major telecom
companies in Brazil, including Telet and Americel (1999/2000), and Pegasus
(2000). Mr. Ferreira holds a degree in civil engineering from the Federal
University of Bahia as well as a post-graduate degree in business administration
from the University of California, Berkeley.

        JAMES L. THOMPSON is also a Director of Tele Norte Celular Participacoes
S.A. Based in St. Thomas, U.S. Virgin Islands, Mr. Thompson serves as Special
Counsel and Regulatory Compliance Officer with responsibility for all legal
matters affecting Globalvest Management Company, L.P. and its managed funds.
Before joining Globalvest, he maintained a law practice in Washington, D.C., and
served as Of Counsel to the law firm of Williams & Jensen, P.C., in which
capacity he represented U.S. and international commercial banks, investment
banks, mutual funds and insurance companies before Congress, federal agencies
and industry trade groups. In other aspects of his practice, Mr. Thompson has
also advised financial services companies in their initial public offerings and
in complex corporate and securities matters. He is admitted to practice law in
Washington, D.C. and New York, the U.S. Courts of Appeals for the D.C. Circuit
and the Third Circuit, and the U.S. Supreme Court. Mr. Thompson earned his
bachelor's degree in political science and literature from Duke University and
received his juris doctor from the Columbus School of Law at The Catholic
University of America.

EXECUTIVE OFFICERS

        The following are our executive officers and their respective positions.

<TABLE>
<CAPTION>
Name                                                                   Position
----------------------------------------------------     -----------------------------------------------
<S>                                                      <C>
Gunnar Birger Vinof Vikberg.........................     President and Chief Executive Officer
                                                         Chief Financial Officer and Market Relations
Joao Cox Neto.......................................        Executive Officer
Rene Patoine........................................     Executive Vice-President of Operations
Joao Alberto Santos.................................     Corporate Comptroller
</TABLE>

        Set forth below are brief biographical descriptions of the Executive
Officers not included above.

        JOAO COX NETO has been Chief Financial Officer since April 1, 1999. Mr.
Cox Neto is also Chief Financial Officer of Tele Norte Celular Participacoes
S.A. Prior to joining Telemig Celular Participacoes S.A. and Tele Norte Celular
Participacoes S.A., Mr. Cox held the position of Chief Financial Officer at
Odebrecht Servicos de Infraestrutura S.A. (OSI), the infrastructure and public
service arm of the Odebrecht Group. Previously, he held various financial
management positions at the Odebrecht Group, including Finance Director for the
holding company and CFO for OPP Petroquimica S.A. Mr. Cox holds a degree in
Economics from Universidade Federal da Bahia and has attended graduate studies
in Economics at the Universite du Quebec a Montreal and at the Oxford
University's CPS program. Since 1991 Mr. Cox has been a member of the Board of
Directors of several companies in Brazil and Argentina and he is currently a
member of the Board of ABRASCA (Brazilian Association of Public Companies) and
IBRI (Brazilian Institute for Investor Relations).

        RENE PATOINE has been Executive Vice-President of Operations of the
Company and of Tele Norte Celular Participacoes S.A. since September 1998. Mr.
Patoine was a member of the Board of Directors of the Company



                                       35
<PAGE>   39


from September 1, 1998 to March 2000. Prior to that, he served as Executive
Vice-President of Operations of Telesystem International Wireless, Inc. He
served as Vice-President of Operations & Strategy Planning for Telecel
International Inc. from 1995 to 1997, Executive Advisor and Engineering Director
for Conecel S.A. in Ecuador from 1993 to 1995, Project Director for Bell Canada
International from 1992 to 1993, and General Manager of Telecel S.A. in Zaire
from 1989 to 1991. He holds a bachelor's degree in electrical engineering from
Sherbrooke University, Quebec, Canada.

        JOAO ALBERTO SANTOS has been Comptroller of the Registrant since April
2000. Mr. Santos is also the Comptroller of Tele Norte Celular Participacoes
S.A. Prior to joining the Registrant, Mr. Santos had been the Chief Financial
Officer of the five operating companies of Tele Norte Participacoes S.A. since
their privatization in 1998. Mr. Santos's previous experience includes fifteen
years at Valvulas Schreider do Brazil S/A, where he worked at various managerial
levels in the company's financial operations. In addition, Mr. Santos worked for
several years in the cocoa and coffee export business and in the tropical fruit
juice manufacturing industry. Mr. Santos is a graduate of the State University
of Feira de Santana, in Bahia, and has completed postgraduate studies at the
Getulio Vargas Foundation in Sao Paulo.

B.      COMPENSATION

        For the year ended December 31, 2000, the aggregate amount of
compensation (including bonuses and payments in-kind) paid by us to all
directors and executive officers as a group was approximately R$1.5 million.

        For the year ended December 31, 2000, we did not set aside or accrue
monies to provide pension, retirement or similar benefits for officers and
directors.

        On October 5, our Board of Directors approved the implementation of an
executive stock incentive plan. However, no stock compensation was given to our
executives under the plan in fiscal year 2000.

C.      BOARD PRACTICES

        The Board of Directors is comprised of eleven members serving for a term
of three years. Executive officers are appointed for an indefinite period of
time. See "--Directors and Senior Management" above for information relating to
when a particular director or executive officer was appointed to his or her
current position.

        None of our directors have service contracts with the Registrant or its
subsidiary providing for benefits upon termination of employment.

        The Registrant has a permanent Audit Committee (Conselho Fiscal) that is
composed of three members elected at the ordinary general shareholders' meeting,
for a term of one year, to perform the functions defined in the Registrant's
by-laws, Brazilian Corporation Law and in the Internal Rules of the Audit
Committee (Regulamento Interno do Conselho Fiscal). Preferred shareholders have
the right to separately elect one of the members of the committee. Members do
not need to be shareholders of the Registrant.

        Only individuals who are Brazilian residents may be elected to the Audit
Committee. Moreover, Audit Committee members must have a university degree or
must have held positions of director, officer or member of audit committees for
at least three years.

        The Audit Committee has the following responsibilities, among others:
(i) supervise the members of the Board of Directors and the Board of Officers;
(ii) give legal opinions on the annual report of the Board of Directors and the
Board of Officers (Relatorio Anual da Administracao); (iii) give legal opinions
on any proposal of the executive or administrative bodies of the Registrant
regarding capital increases or reductions, issuances of securities, dividend
distributions, transformation, incorporation, merger or spin-off of the
Registrant; (iv) report to the Board of Directors, Board of Officers and general
shareholders' meeting any error, fraud or criminal acts involving the
Registrant's interests and suggest the effective measures to be taken; and (v)
give legal opinions on the financial statements of the Registrant.

        The individual remuneration of the members of the Audit Committee is
determined at the general shareholders' meeting, which remuneration for the year
of 2001 was fixed at ten percent (10%) of the average remuneration of the
officers and directors of the Registrant for that year.



                                       36
<PAGE>   40


         The current members of the Audit Committee are Jorge da Cunha
Fernandes, who is the chairman, Ari Matos Cardoso and Sergio Martinho de Matos.

        The Registrant does not have a remuneration committee.

D.      EMPLOYEES

        At December 31, 2000, we had 1,656 employees, 26% of whom were employed
in sales and marketing, 15% in engineering, 10% in administration, 45% in
customer service and 4% in information technology. We reduced our workforce by
303 employees between December 31, 2000 and December 31, 1999, mainly by
creating efficiencies in the areas of sales network and customer service.

        Approximately 8% of all employees are members of state labor unions
associated with the Interstate Federation of Telecommunications Workers
(Federacao Interestadual dos Trabalhadores em Telecomunicacoes). Telemig Celular
negotiates a new collective labor agreement every year with each local union.

        We believe that our relationship with our work force is good. We have
not experienced any work stoppages since the privatization.

        Competition has put, and we anticipate that it will continue to put,
pressure on salaries and our ability to hire and retain qualified upper and
middle managers.

        We participate in a pension fund, Fundacao Telebras de Seguridade Social
- Sistel, the purpose of which is to supplement government-provided retirement
benefits. We make monthly contributions to Sistel currently equal to 13.5% of
the salary of each employee who is a Sistel member. Each member employee also
makes a monthly contribution to Sistel based on age and salary. Members of
Sistel qualify for full pension benefits after reaching age 57, provided they
have been members of Sistel for at least ten uninterrupted years and have been
affiliated with the social security system for at least 35 years. Sistel
operates independently from us. Our employees at the time of the privatization
had the right to maintain their rights and benefits in Sistel. See Note 12 to
the consolidated financial statements. We believe that Sistel may be replaced by
one or more separate plans, but we do not know when this will occur or what the
consequences this would bring for us or our employees.

E.      SHARE OWNERSHIP

        No director or executive officer of the Registrant owns 1% or more of
the capital stock of the Registrant.

        On October 5, 2000, the Company's Board of Directors approved two
long-term incentive plans as follows:

        a) The first plan covers certain key executives who may be granted
target awards of Company shares of common or preferred stock. The awards are
earned and shares will be issued only to the extent that the Company achieves
performance goals determined by the Board of Directors during a five-year
performance period. As of December 31, 2000, no shares have been granted and no
compensation expense has been recognized.

        b) The second plan covers key executives (who also participate in the
first plan) and other employees. Options granted under this plan relate to
preferred stock and are exercisable at the market price at the date of grant.
The vesting period is 20% during the second year, 60% during the third year and
100% during the fourth year. At December 31, 2000 327,607 options have been
granted and none have been exercised as the vesting period had not begun.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.      MAJOR SHAREHOLDERS

        Of our two classes of capital stock outstanding, only the common shares
have full voting rights. The preferred shares have voting rights under limited
circumstances. Telpart S.A. owns 51.8% of the common shares. Accordingly,
Telpart has the ability to control the election of our Board of Directors and
our direction and future operations.



                                       37

<PAGE>   41

        The following table presents information concerning the ownership of
common shares by our major shareholders at March 31, 2001. We are not aware of
any other shareholder owning more than 5.0% of the common shares.

<TABLE>
<CAPTION>
                                                   NUMBER OF COMMON       PERCENTAGE OF OUTSTANDING
                  NAME OF OWNER                      SHARES OWNED                COMMON SHARES
-----------------------------------------------    ----------------       -------------------------
<S>                                                 <C>                               <C>
Telpart S.A. ..................................     64,510,587,257                    51.8%
Latinvest Holdings ............................      9,284,522,108                     7.5%
Utilitivest II, L.P. ..........................      8,220,471,888                     6.6%
Caixa de Previdencia dos Funcionarios do
  Banco do Brasil .........................          6,722,609,333                     5.4%
</TABLE>

        Telpart is a consortium comprising Newtel Participacoes S.A., which owns
51% of Telpart, and TIW do Brasil Ltda., which owns the remaining 49%. Telpart
also owns a controlling interest in Tele Norte Celular Participacoes S.A., the
Band A service provider in the cellular region that includes the States of Para,
Amazonas, Maranhao, Amapa and Roraima.

        Newtel Participacoes S.A. is a holding company. Fifty-three percent of
Newtel is owned by Opportunity MEM S.A., which is indirectly held by investment
and mutual funds managed by Opportunity Bank, a private Brazilian investment
bank. Forty-seven percent of Newtel is owned by the following Brazilian pension
funds: SISTEL - Fundacao Sistel Seguridade Social, TELOS - Fundacao Embratel de
Seguridade Social, FUNCEF - Fundacao dos Economiarios Federais; PETROS -
Fundacao Petrobras de Seguridade Social and PREVI - Caixa de Previdencia dos
Funcionarios do Banco do Brasil.

        TIW do Brasil Ltda. is an indirect wholly owned subsidiary of Telesystem
International Wireless, Inc., a Canadian public company whose shares are listed
on NASDAQ and the Toronto Stock Exchange. TIW develops, acquires, owns and
operates wireless telecommunications networks in developing and developed
markets throughout the world.

        On December 28, 1999, our shareholders approved a legal reorganization
whereby Telpart contributed some assets to us resulting in future tax benefits.
We recorded a deferred tax asset of R$212.0 million which will be realized over
a period of up to ten years. In accordance with Brazilian corporate law, we may
issue shares (pro rata both common and preferred) to Telpart for the amount of
the tax benefits recognized by us. In addition, minority shareholders are
granted preemptive rights. If the minority shareholders do not elect to exercise
these rights, the shares will be issued to Telpart. See Note 7 to the
consolidated financial statements for a fuller description.

        Since October 2000, the shareholders composing the controlling block of
Telpart Participacoes S/A have been in litigation against one another, disputing
the right to appoint Board Members for Telpart, Telemig and Tele Norte. Each of
the parties involved has obtained injunctions at some point of the dispute. At
the present time, the members of the Board of Directors of our Company are those
appointed after an injunction was granted in favor of TIW. The composition of
our Board of Directors reflects the actual percentage share participation of
each of the parties involved in the dispute. There can be no assurance that the
shareholders' dispute will not affect the operations of the Company.

        Our common shares are not traded in the United States. Our preferred
shares trade in the United States in the form of ADSs, each representing 20,000
preferred shares. At December 30, 2000, approximately 7,793,267 ADSs
(representing 155,865,340,000 preferred shares, were held of record in the
United States.

B.      RELATED PARTY TRANSACTIONS

TECHNICAL SERVICES

        Since 1998, the Company had been negotiating a Technical Services
Agreement ("TSA") with Telesystem International Wireless, Inc. (TIWI), the
parent company of TIW, the 49% owner of Telpart S.A. Pursuant to the Brazilian
Corporations Law and the Company's charter, the contract requires shareholders'
approval. Considering that this approval was not obtained, the Company has not
paid for any services rendered. At December 31, 2000 and 1999, the Company has
liabilities payable to TIWI for

                                       38
<PAGE>   42

approximately R$9.0 million and R$9.1 million, respectively, related to expenses
(principally, salaries and benefits) charged by TIWI to the Company. Certain of
those amounts are being disputed by the Company.

ROAMING AGREEMENTS

        We are a member of a national roaming committee of cellular operators
that includes our affiliate, Tele Norte Celular Participacoes S.A. The purpose
of the committee is to oversee technical and system aspects to ensure the
highest quality of roaming service. As required by Brazilian regulation, Tele
Norte Celular Participacoes S.A. and ourselves facilitate roaming to our
respective subscribers.

COST SHARING AGREEMENT

        In order to maximize efficiency in resource allocation between Telemig
Celular Participacoes S.A. and Tele Norte Celular Participacoes S.A., in
February 2001 the two companies have entered into a cost sharing agreement,
pursuant to which certain costs that are incurred for the benefit of both
companies and their subsidiaries are allocated to each company, based on
criteria designed to reflect the actual amount of use by each company (measured
by time sheets, number of customers, or estimated costs, as the case may be).
The costs that are allocated under this cost sharing agreement refer primarily
to personnel, marketing and outside consulting fees.

C.      INTERESTS OF EXPERTS AND COUNSEL

        Not applicable.

ITEM 8. FINANCIAL INFORMATION

A.      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

FINANCIAL STATEMENTS

        See Item 19(a) for a list of financial statements filed under Item 18.

LEGAL PROCEEDINGS

Litigation related to the breakup of Telebras

        The breakup of Telebras is subject to several lawsuits in which the
plaintiffs have requested, and in certain cases obtained, preliminary
injunctions against the breakup. All of these preliminary injunctions have been
quashed by decisions of the relevant Federal Court, although several of these
decisions are currently on appeal.

        These lawsuits are based on a number of legal theories, the principal
among which are that

                -       Brazil's Constitution requires that the creation of the
                        twelve new holding companies be specifically authorized
                        by the Telecommunications Law;

                -       the Telebras shareholders' meeting held on May 22, 1998
                        which approved the breakup was not properly convened;

                -       national sovereignty will be threatened if the country's
                        telecommunications companies are controlled by foreign
                        entities; and

                -       the Telecommunications Law requires that some 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 the plaintiffs in the above-described lawsuits ultimately
prevails, the breakup will have to be reinitiated. It is theoretically possible
under Brazilian law for a court to require that the breakup be unwound, although
we believe that this is very unlikely.

                                       39
<PAGE>   43

Litigation arising out of events prior to the breakup

        Telebras, our predecessor company Telecomunicacoes de Minas Gerais S.A.
and Telemig Celular are defendants in a number of legal proceedings including
tax and labor-related matters and subject to certain other claims and
contingencies. Liability for any claims arising out of acts committed by our
predecessor company prior to the effective date of the spin-off of the
predecessor company's cellular assets and liabilities to Telemig Celular remains
with the predecessor company, except for

                -       labor and tax claims, for which the Predecessor Company
                        and Telemig Celular are jointly and severally liable by
                        operation of law, and

                -       liabilities with respect to which our predecessor
                        company had made a specific accounting provision prior
                        to the breakup assigning them to Telemig Celular.

        Any claims against our predecessor company which are not satisfied by it
could result in claims against Telemig Celular to the extent that Telemig
Celular received assets at the time of the spin-off which might have been used
to settle those claims. Under the shareholders' resolution pursuant to which the
spin-off was effected, Telemig Celular has contribution rights against our
predecessor company with respect to the entire amount of any payments made by
Telemig Celular in connection with any labor or tax claims brought against
Telemig Celular which relate to events prior to the effective date of the
spin-off.

        Under the terms of the breakup, liability for any claims arising out of
acts committed by Telebras prior to the effective date of the breakup remains
with Telebras, except for

                -       labor and tax claims, for which Telebras and the new
                        holding companies are jointly and severally liable by
                        operation of law, and

                -       any liability with respect to which Telebras made a
                        specific accounting provision prior to the breakup to
                        the extent that such provision has been assigned to us
                        or one of the other new holding companies. We believe
                        that the likelihood that these claims will materialize
                        and have a material adverse effect on our business,
                        results of operations, or financial conditions are
                        remote.

Litigation related to the application of the ICMS

        GENERAL. In June 1998, the governments of the individual Brazilian
states approved an agreement to interpret existing Brazilian tax law to apply
the state value-added tax, commonly known as "ICMS," to certain services,
including cellular activation and monthly subscriptions. The agreement also
provides that the ICMS may be applied retroactively to activation services
rendered during the five years preceding June 1998.

        We believe that the attempt by the state governments to extend the scope
of the ICMS to services that are supplementary to basic telecommunications
services, such as cellular activation and monthly subscriptions, is unlawful
because

                -       the state governments acted beyond the scope of their
                        authority,

                -       the application of ICMS taxes to services not previously
                        defined as telecommunications services requires the
                        enactment of a specific law to that effect, and

                -       the Brazilian Constitution does not allow the
                        retroactive application of new taxes.

        TAXATION OF CELLULAR ACTIVATION. We have filed a lawsuit with the
Treasury Court of the state of Minas Gerais seeking injunctive relief from
retroactive and prospective application of the ICMS to cellular activation. We
have obtained a temporary injunction relieving us from the payment of the ICMS
on cellular activation during the pendency of the lawsuits. Nonetheless, the tax
authorities may appeal the decisions of the Treasury Court to grant a temporary
injunction. We cannot assure you that we will ultimately prevail in any appeal
relating to the temporary injunction or in the underlying litigation with
respect to application of the ICMS to cellular activation.

        We may not prevail in our position that the new interpretation by the
state governments is unlawful. Five-year retroactive application of the ICMS to
cellular activation would have a material adverse impact on our business,
results of operations and financial condition. However, we believe that the
retroactive application of the ICMS to

                                       40
<PAGE>   44

cellular activation is improbable. We also believe that in such event our
predecessor company would be liable to us for any tax liability arising from the
retroactive application of the ICMS to cellular activation recognized prior to
1998. Therefore, we have not made any provision with respect to such application
in our consolidated financial statements.

        We have made provisions totaling approximately R$0.9 million for the
application of the ICMS to cellular activation from June 1998, the effective
date of the agreement, to December 31, 2000 (see Note 14 to the consolidated
financial statements). The application of the ICMS to cellular activation for
the year ended December 31, 1998 would have had a maximum negative impact
estimated at R$2.6 million on our results of operations for 1998. The impact of
ICMS on cellular activation on our results of operations for 1999 and 2000 would
have been immaterial as we eliminated the activation fee for all but one of our
plans, and for such plan we reduced it significantly. We do not believe that
application of the ICMS on cellular activation, applied on a prospective basis,
will have a material impact on our results of operations.

        TAXATION OF MONTHLY SUBSCRIPTIONS AND OTHER SERVICES. In December 1998,
we filed an injunction with the Treasury Court of the state of Minas Gerais and
therefore suspended the remittance of the ICMS on monthly subscriptions and
additional services and deposited such amounts in a trust account administered
by the courts. We cannot assure you that we will prevail in this matter.
Accordingly, we have recorded an aggregate provision of R$92.6 million for 1998,
1999 and 2000 in our consolidated financial statements. See Note 14 to the
consolidated financial statements.

Litigation related to the bonus component of certain dealership agreements

        We are defendants in a legal proceeding commenced by five of our former
dealers. These former dealers filed a claim against us for the approximate
amount of R$60 million based upon a controversial interpretation of a bonus
component of their dealership agreements. So far, we have successfully prevailed
in our position, obtaining on May 9, 2001, a favorable decision of the court
upholding our interpretation of the dealership agreements. This decision has
been appealed.

Other litigation

        We are a party to legal proceedings arising in the normal course of
business. We have provided for or deposited in court amounts to cover our
estimated losses due to adverse legal judgments. We have recorded provisions of
R$5.8 million, R$3.4 million and R$1.4 million for 1998, 1999 and 2000,
respectively, in our consolidated financial statements. We believe these
actions, if decided against us, would not have a material adverse effect on our
business, results of operations or financial condition.

DIVIDEND POLICY

        We are required to distribute to our shareholders, either as dividends
or as tax-deductible interest on capital, 25% of our adjusted net income
determined in accordance with Brazilian accounting principles as adjusted in
accordance with Brazilian corporate law. We are also required to pay a
non-cumulative preferred dividend on our preferred shares in an amount equal to
6% of the share capital attributable to the preferred shares under Brazilian
corporate law. As of December 31, 2000, the calculated preferred dividend
requirement amounted to approximately R$7.9 million. With respect to the 2000
fiscal year, the calculated preferred dividend on the preferred shares equalled
the mandatory distribution requirement.

        For purposes of the mandatory distribution requirement, we included
adjusted net income part of the unrealized income reserve transferred upon the
breakup of Telebras, which amounted to R$132 million and is included in
distributable capital and other reserves in our shareholders' equity. We decided
to include the unrealized reserve in the calculation of the mandatory
distribution requirements over a ten-year period. We cannot assure you that the
mandatory distribution of the unrealized income reserve will not result in
substantial additional dividend requirements.

        Given our significant capital expenditure requirements, our present
dividend policy is to pay only the mandatory distribution.

        The Registrant's only significant asset other than cash is its shares of
Telemig Celular. The Registrant relies almost exclusively on dividends from
Telemig Celular to meet its needs for cash, including for the payment of

                                       41
<PAGE>   45

dividends to its shareholders. The Registrant controls the payment of dividends
by Telemig Celular, subject to limitations under Brazilian corporate law.

B.      SIGNIFICANT CHANGES

        No significant change to our results or financial condition has occurred
since December 31, 2000.

ITEM 9. THE OFFER AND LISTING

A.      OFFER AND LISTING DETAILS

        The principal trading market for the preferred shares of the Registrant
is the Sao Paulo Stock Exchange (Bolsa de Valores de Sao Paulo). At December 31,
2000, we had approximately 2.5 million preferred and common shareholders.

        The preferred shares commenced trading separately on the Brazilian stock
exchanges on September 21, 1998.

        The following table presents the reported high and low closing sale
prices for our preferred shares as reported on the Sao Paulo Stock Exchange for
the periods indicated.

<TABLE>
<CAPTION>
                                                                         NOMINAL REAIS PER 1,000
                                                                            PREFERRED SHARES
                                                                       --------------------------
                                                                         HIGH              LOW
                                                                       --------          --------
<S>                                                                     <C>               <C>
1998 (beginning September 21, 1998).................................    R$2.28            R$0.71

First quarter 1999..................................................    R$2.32            R$1.20
Second quarter 1999.................................................    R$3.02            R$2.10
Third quarter 1999..................................................    R$3.09            R$2.15
Fourth quarter 1999.................................................    R$4.22            R$2.60

First quarter 2000..................................................    R$9.30            R$3.61
Second quarter 2000.................................................    R$7.40            R$3.85
Third quarter 2000..................................................    R$6.57            R$4.61
Fourth quarter 2000.................................................    R$6.29            R$3.90
</TABLE>

        In the United States, the preferred shares trade in the form of American
Depositary Shares, commonly referred to as "ADSs," each representing 20,000
preferred shares, issued by The Bank of New York as depositary pursuant to a
deposit agreement among the Registrant, the depositary and the registered
holders and beneficial owners from time to time of American Depositary Receipts,
which are commonly known as "ADRs." The ADSs commenced trading separately on the
New York Stock Exchange on November 16, 1998 under the symbol "TMB." At December
31, 2000, there were approximately 133 holders of record of ADSs. The following
table presents the reported high and low closing sales prices for ADSs on the
New York Stock Exchange for the period indicated.

<TABLE>
<CAPTION>
                                                                               U.S. DOLLARS PER ADS
                                                                          -------------------------------
                                                                              HIGH               LOW
                                                                          -------------     -------------
<S>                                                                        <C>               <C>
1998 (beginning November 16, 1998)..................................       U.S.$37 1/2       U.S.$19 3/4

First quarter 1999..................................................       U.S.$26 1/4       U.S.$14 3/4
Second quarter 1999.................................................       U.S.$35 3/4       U.S.$23 1/4
Third quarter 1999..................................................       U.S.$32 7/8       U.S.$24 7/8
Fourth quarter 1999.................................................       U.S.$46 3/4       U.S.$27

First quarter 2000..................................................       U.S.$101          U.S.$42
Second quarter 2000.................................................       U.S.$88 9/16      U.S.$42 1/4
Third quarter 2000..................................................       U.S.$71 7/16      U.S.$51 1/2
Fourth quarter 2000.................................................       U.S.$64           U.S.$43 3/4
</TABLE>

                                       42
<PAGE>   46

PLAN OF DISTRIBUTION

B.      Not applicable.

C.      MARKETS

TRADING ON THE NEW YORK STOCK EXCHANGE

        In the United States, the preferred shares trade in the form of ADSs,
each representing 20,000 preferred shares, issued by The Bank of New York as
depositary pursuant to a deposit agreement among the Registrant, the depositary
and the registered holders and beneficial owners from time to time of ADRs. The
ADSs commenced trading separately on the New York Stock Exchange on November 16,
1998 under the symbol "TMB."

TRADING ON THE BRAZILIAN STOCK EXCHANGES

General

        Until May 2000, Brazil had nine stock exchanges, with the Sao Paulo
Stock Exchange as the most significant. In May 2000, the nine stock exchanges
were unified under the management of the Sao Paulo Stock Exchange. The
unification process was ratified in June 2000, with the signing of a protocol
agreement between the Sao Paulo Stock Exchange and each of the other eight stock
exchanges. Under this agreement, all equity securities are traded on the Sao
Paulo Stock Exchange and all government securities are traded on the Rio de
Janeiro Stock Exchange. In addition, beginning in April 2001, corporate debt
securities are traded on the Sao Paulo Stock Exchange.

        The purpose of the restructuring was to increase trading in the domestic
market, reduce operating costs and strengthen the Brazilian market's
competitiveness, thus helping finance the country's development.

        The Sao Paulo Stock Exchange is a nonprofit entity owned by its member
brokerage firms. Trading on the exchange is limited to member brokerage firms
and a limited number of authorized nonmembers. The Sao Paulo Stock Exchange has
two open outcry trading sessions each day, from 10:00 a.m. to 1:00 p.m. and from
2:00 p.m. to 4:50 p.m. Trading is also conducted from 10:00 a.m. to 5:00 p.m. on
an automated system. There are no specialists or market makers for our shares on
the Sao Paulo Stock Exchange.

        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.

        At April 30, 2001, the aggregate market capitalization of the 445
companies listed on the Sao Paulo Stock Exchange was approximately R$208
billion. Although all the outstanding listed 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. As of April 30, 2001, the five most active issuers
represented approximately 67.8% of the total trading in the Sao Paulo Stock
Exchange. In 2000, the average monthly trading volume on the Sao Paulo Stock
Exchange was approximately R$9.0 billion.

        In December 2000, the Sao Paulo Stock Exchange created new listing
segments: the New Market (Novo Mercado) and the Special Corporate Governance
Levels 1 and 2.

                                       43
<PAGE>   47

        The New Market established a private contract between the listed company
and the Exchange which imposes stricter corporate governance and disclosure
practices aimed at stimulating the Brazilian capital markets by providing
greater rights and access to information to securityholders. Some of the new
required practices include a minimum float of 25% of the issued capital stock,
tag along rights, audited financial statements prepared in accordance with U.S.
GAAP or IAS GAAP and submission to arbitration.

        Like the New Market, the two Special Corporate Governance Levels
establish corporate governance practices for companies whose securities are
listed on the Sao Paulo Stock Exchange that are stricter than those established
by existing law. However, the practices are less strict than the New Market
rules.

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

Regulation of Brazilian securities markets

        The Brazilian securities market is governed by Law No. 4,728/65 as
amended, which is commonly referred to as the "Brazilian Securities Law," and
Law No. 6,404/76, as amended, which is commonly referred to as the "Brazilian
Corporation Law."

        The Brazilian securities markets are regulated by the Brazilian
Securities Commission (Comissao de Valores Mobiliarios), commonly referred to as
"CVM," which has authority over stock exchanges and the securities markets
generally, and by the Central Bank, which has, among other powers, licensing
authority over brokerage firms and regulates foreign investment and foreign
exchange transactions.

        Under the Brazilian Corporation Law, a company is either public
(companhia aberta), such as the Registrant, or private (companhia fechada). All
public companies are registered with the CVM and are subject to reporting
requirements. A company registered with the CVM may have its securities traded
either on the Sao Paulo Stock Exchange or in the Brazilian over-the-counter
market. The shares of a public company may also be traded privately, subject to
some limitations. To be listed, a company must apply for registration with the
CVM and the Sao Paulo Stock Exchange.

        Trading in securities on the Sao Paulo Stock Exchange may be suspended
at the request of a company in anticipation of a material announcement. Trading
may also be suspended on the initiative of the Sao Paulo 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 Sao Paulo Stock Exchange.

        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
markets are not as highly regulated and supervised as the United States
securities markets or markets in certain other jurisdictions.

D.      SELLING SHAREHOLDERS

        Not applicable.

E.      DILUTION

        Not applicable.

F.      EXPENSES OF THE ISSUE

        Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.      SHARE CAPITAL

        Not applicable.

                                       44
<PAGE>   48

B.      MEMORANDUM AND ARTICLES OF ASSOCIATION

        The Registrant was incorporated on February 28, 1998 as a corporation
organized under the laws of the Federative Republic of Brazil. The Registrant
was registered with the Brazilian Commercial Registry under number
53.300.005.770. Its charter provides that the Registrant's corporate existence
is indefinite.

CORPORATE PURPOSES

        The Registrant's corporate purposes are found under Article 2 of its
charter, which establishes that the purpose of the Registrant is:

                -       to control companies that perform activities related to
                        mobile telephone sector in the area of concession or
                        authorization;

                -       to promote, through its controlled or affiliated
                        companies, the extension and implementation of mobile
                        telephone services in the areas of concession or
                        authorization;

                -       to promote, to perform or to assist the capture of
                        internal or foreign investments to be invested by the
                        Registrant or its controlled or affiliated companies;

                -       to promote studies and research on the development of
                        the mobile telephone sector;

                -       to perform, directly or through its controlled or
                        affiliated companies, technical services related to the
                        mobile telephone sector;

                -       to promote, to perform and to coordinate, directly or
                        through its controlled or affiliated companies, the
                        formation and training of professionals in the mobile
                        telephone sector;

                -       to perform other mobile telephone related activities;
                        and

                -       to hold equity interests in other companies.

SHAREHOLDERS' MEETING

        The general shareholders' meeting of the Registrant must occur, on an
ordinary basis, within the four months following the closing of the corporate
fiscal year and, extraordinarily, whenever so required by corporate interests.
It is regularly called by the board of directors through a notice published at
least three times. The first call of the general meeting must be published at
least eight days in advance of the date on which the meeting will take place.

        Resolutions are generally made by the majority of the voting
shareholders present at the general meeting. Nevertheless, the Brazilian
Corporation Law sets forth that the approval of shareholders representing at
least half of the voting shares outstanding is required:

                -       to create preferred shares or to increase the existing
                        classes regardless of the proportion in relation to
                        existing classes;

                -       to modify the privileges, advantages and amortization or
                        redemption conditions of any classes of preferred shares
                        or to create a new class with greater privileges;

                -       to decrease the mandatory dividend;

                -       to amend the purposes of the company;

                -       to incorporate a company into another company or to
                        merge it or to spin it off;

                -       to liquidate the company;

                -       to become a member of a group of corporations; or

                -       to issue founder's shares.

                                       45
<PAGE>   49

        The Registrant's charter establishes that general shareholders' meetings
addressed to deliberate subjects requiring special approval must be called at
least 30 days in advance.

MANAGEMENT

        According to the Registrant's charter, the management of the Registrant
must be performed by a board of directors, which together with the shareholders
convened at a duly called meeting, is the decision-making body of Registrant,
and a board of officers, which is the representative and executive body of the
Registrant.

        The board of directors must be composed of at least three and not more
than eleven members elected for a term of three years by the shareholders at the
ordinary general meeting. It currently consists of eleven members. Only
shareholders can be elected as directors regardless of the number of shares held
by them.

        The board of officers is composed of four officers resident in Brazil:
the financial officer, the technical officer, the human resources officer and
the chief executive officer. The officers must be elected for a term of three
years by the board of directors to perform the functions defined in the
Registrant's charter.

        Both directors and officers are subject to the duties and
responsibilities set forth in the Brazilian Corporation Law and in the CVM
rules. According to these norms, officers and directors may not take part in any
corporate transaction or decision in which he/she has an interest which
conflicts with an interest of the company. Directors or officers may only
contract with the company under reasonable or equitable conditions, which are
similar to those prevailing in the marketplace or under which the company would
contract with a third person.

        The general shareholders' meeting must determine the aggregate
remuneration of the members of the board of directors and the board of officers.
The board of officers must fix the individual remuneration of each director and
officer.

CAPITAL STOCK AND SHARES

        According to the Registrant's charter, the capital stock is divided into
two different classes of shares: common shares and preferred shares. Basically,
the common shares confer to the shareholders voting rights while the preferred
shares grant to their holders priority to receive dividends and restitution of
capital, with no premium.

        With respect to the preferred shares, the Registrant's charter also
establishes the payment of a minimum amount of non-cumulative dividends
equivalent to 6% (six per cent) per year, over the value resulting from the
division of subscribed capital by the total number of shares. Although the
preferred shares have partial and limited voting rights, such limitations will
be suspended in case the Registrant does not pay the minimum amount of dividends
mentioned above for a consecutive period of three years, as indicated in the
charter.

        Moreover, the preferred shares confer the following voting rights to the
preferred shareholders:

                -       to amend or delete the article in the charter that
                        provides that the shareholders meeting will be
                        responsible for approving the execution of long-term
                        agreements between the Registrant or controlled
                        companies, on one side, and the controlling shareholder,
                        controlled companies, connected companies, those subject
                        to common control, controllers of the latter, or even
                        with parties that in any other way can be considered to
                        be related to the Registrant, on the other side,
                        exception made to those agreements which provide for
                        uniform clauses;

                -       to amend or delete the article in the charter that
                        provides that extraordinary general shareholders'
                        meetings called to decide on special quorum subjects
                        will be valid if the first call is made at least 30 days
                        in advance of the date on which the general
                        shareholders' meeting will take place, and a second call
                        is made at least 10 days in advance; and

                -       to amend or delete the article in the charter that
                        provides that the approval by the Registrant of a
                        merger, spin-off, consolidation or dissolution of
                        controlled companies, must be guided by the equal
                        treatment to all the companies involved.

        According to the charter, the general shareholders' meeting or the board
of directors may eliminate any preemptive rights in connection with the issuance
of shares, debentures or founders' shares convertible into shares

                                       46
<PAGE>   50

and also subscription bonuses. Nevertheless, the charter does not regulate
rights conferred to holders of preferred shares to appoint one or more members
of the administrative bodies.

OWNERSHIP OF SHARES

        There are no restrictions on ownership of preferred or common shares of
the Registrant by individuals or legal entities domiciled abroad or limitations
on the exercise of economic or voting rights related to the ownership of the
shares issued by the Registrant.

RESERVES

        The general shareholders' meeting may authorize the use of profits or
capital surpluses for the redemption of shares.

        Regardless of other sinking funds, the general shareholders' meeting can
allocate up to 10% (ten per cent) of the net profit to constitute a working
capital reserve. However, the working capital reserve cannot be greater than 10%
(ten per cent) of the Registrant's accounting net profit.

TRANSFER OF CONTROL, MERGER AND ACQUISITION

        There are no provisions that delay, defer or prevent changes in the
Registrant's control in the Brazilian Corporation Law or in the Registrant's
charter. Nevertheless, the Brazilian General Law of Telecommunications (Law
9.472/97) requires Anatel's prior approval for any spin off, merger,
incorporation, decrease of capital, transformation or transfer of control
involving corporations holding any telecommunications concession.

C.      MATERIAL CONTRACTS

MOBILE CELLULAR SERVICE CONCESSION

        Telemig Celular obtained a mobile cellular service concession from the
Brazilian Ministry of Communications on November 4, 1997. The terms of our
concession are described in "Item 4. Information on the Company--B. Business
overview--Regulation of the Brazilian telecommunications industry."

INTERCONNECTION AGREEMENTS

        Telemig Celular has entered into interconnection agreements with
Maxitel, our Band B competitor, with Embratel and Intelig, two long distance
carriers, and with Telemar and Vesper S.A., two wireline operators. The terms of
our interconnection agreements are described in "Item 4. Information on the
Company--B. Business overview--Operating agreements--Interconnection agreements"
and "Item 4. Information on the Company--B. Business overview--Regulation of the
Brazilian telecommunications industry."

ROAMING AGREEMENTS

        Telemig Celular has entered into roaming agreements with all other Band
A and B service providers outside our region. The terms of these agreements are
described in "Item 4. Information on the Company--B. Business
overview--Operating agreements--Roaming agreements."

NORTHERN TELECOM SUPPLY AGREEMENT

        On November 24, 1998, Telemig Celular entered into a Cellular System
Purchase and Sale Agreement with Northern Telecom Limited and two Northern
Telecom Brazilian subsidiaries. This agreement provides for the purchase by
Telemig Celular from Northern Telecom of products, services and software for the
expansion of our mobile network. The agreement provides for different terms of
financing to be provided by Northern Telecom depending on whether the financing
relates to products imported or made in Brazil, services, training or software.
This agreement is for purchases of up to U.S.$154 million and has a term of
three years.

                                       47
<PAGE>   51

CREDIT AGREEMENTS

Export Development Corporation of Canada

        On December 31, 1997, our predecessor, Telecomunicacoes de Minas Gerais
S.A., entered into a U.S.$21.3 million credit agreement with the Export
Development Corporation of Canada in respect of the purchase of cellular
telecommunications equipment from Northern Telecom companies. Interest is
payable semi-annually at an annual rate of six-month LIBOR plus 1%. Principal is
payable semi-annually with a final maturity on October 17, 2003. At December 31,
2000, there was R$20.8 million outstanding under this credit.

        On July 8, 1999, Telemig Celular also entered into a U.S.$141 million
credit agreement with the Export Development Corporation of Canada, which was
restated and amended on April 3, 2001 and April 23, 2001, in respect of the
purchase of cellular telecommunications equipment and services from Northern
Telecom companies. ABN Amro Bank NV is acting as administrative agent. The
annual interest rate under this agreement is six-month LIBOR plus 4.875%.
Principal and interest are payable semi-annually. The maturity date is April 28,
2006. At December 31, 2000, there was R$177.9 million outstanding under this
credit.

BNDES

        On September 11, 2000, Telemig Celular obtained a R$260 million
five-year facility from the Brazilian National Economic and Social Development
Bank (Banco Nacional de Desenvolvimento Economico e Social (BNDES)) and a
consortium of three Brazilian banks: Banco Itau S.A., Banco Bradesco S.A. and
Banco Alfa de Investimento S.A. The proceeds of this facility, which has an
annual interest rate of 3.8% over the long-term interest rate disclosed by the
Brazilian Central Bank, is being invested in the expansion of our coverage area
and the introduction of new services. Principal is payable on November 15, 2005.
At December 31, 2000, there was R$197.2 million outstanding under this facility.

Tele Norte Leste Participacoes S.A.

        This U.S.$38.0 million credit agreement relates to onlendings of
external financial resources contracted by Telebras and onlent to our
predecessor company. This credit was transferred by Telebras to Tele Norte Leste
Participacoes as part of the privatization process. This credit bears annual
interest at six-month LIBOR plus 1%. Principal and interest are payable
semi-annually, with the final maturity on December 15, 2002. At December 31,
2000, there was R$24.8 million outstanding under this credit.

D.      EXCHANGE CONTROLS

        The system of foreign investment in financial and capital markets in
Brazil was modified by Resolution No. 2,689 of the National Monetary Council on
January 26, 2000, which substitutes the rules of Annex IV to Resolution No.
1,289 of the National Monetary Council.

        According to Resolution No. 2,689, the entry of foreign capital through
the free-rate exchange market, as an investment in the Brazilian financial and
capital markets, will be subject to electronic registration at the Central Bank.
Qualified foreign investors registered with the CVM, acting through authorized
custody accounts managed by local agents, may buy and sell shares on Brazilian
stock exchanges without obtaining separate certificates of registration for each
transaction. However, institutions that provide custody services must submit
monthly information to the Central Bank regarding each foreign investor, as well
as submit to the Central Bank or the CVM records of transactions made by foreign
investors.

        The term "qualified foreign investors" includes any individual or a
financial or non-financial institution, resident or domiciled abroad, which:

                -       has a legal representative in Brazil;

                -       fills out a form to be kept on hand by the legal
                        representative; and

                -       obtains registration with the CVM as a foreign investor.
                        If the legal representative is an individual or
                        non-financial institution, the foreign investor should
                        also indicate a financial institution domiciled in
                        Brazil as its legal representative.

                                       48
<PAGE>   52

        The issuance of depositary receipts in foreign markets in respect of
shares of Brazilian issuers, such as our ADRs, is permitted by Resolution No.
1,927 of the National Monetary Council, which is the restated and amended Annex
V to Resolution No. 1,289 of the National Monetary Council. Our ADS program was
approved under the Annex V regime by the Central Bank and the CVM prior to the
issuance of the ADSs. Accordingly, the proceeds from the sale of ADSs by ADR
holders outside Brazil are free of Brazilian foreign investment controls and
holders of the ADSs will be entitled to the favorable tax treatment.

        A certificate of registration has been issued in the name of the
depositary with respect to the ADSs and is maintained by the custodian on behalf
of the depositary. Pursuant to the certificate of registration, the custodian
and the depositary are able to convert dividends and other distributions with
respect to the preferred shares represented by ADSs into foreign currency and
remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges
such ADSs for preferred shares, such holder will be entitled to continue to rely
on the depositary's certificate of registration for five business days after
such exchange, following which such holder must seek to obtain its own
certificate of registration with the Central Bank. A holder of preferred shares
may not convert them into foreign currency and remit funds outside Brazil unless
such holder obtains its own certificate of registration. A holder that obtains a
certificate of registration will be subject to less favorable Brazilian tax
treatment than a holder of ADSs. See "--Taxation--Brazilian tax considerations"
for a description of this tax treatment.

        The right to convert dividend payments and proceeds from the sale of
shares into foreign currency and to remit such amounts outside Brazil is subject
to restrictions under foreign investment legislation which generally requires,
among other things, that the relevant investments be registered with the Central
Bank.

        The restrictions on the remittance of foreign capital abroad may hinder
or prevent Banco Itau S.A., which is acting as custodian for the preferred
shares represented by ADSs, or holders who have exchanged ADRs for preferred
shares from converting dividends, distributions or the proceeds from any sale of
such preferred shares, as the case may be, into U.S. dollars and remitting such
U.S. dollars abroad. 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 proceeds from
dividends or sales of Preferred Shares underlying the ADSs.

        Under current Brazilian legislation, the federal government may impose
temporary restrictions on remittances of foreign capital abroad in the event of
a serious imbalance or an anticipated serious imbalance of Brazil's balance of
payments. For approximately six months in 1989 and early 1990, the federal
government froze all dividend 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. The imbalance in Brazil's balance
of payments increased during 1998, and there can be no assurance that the
federal government will not impose similar restrictions on foreign repatriations
in the future.

E.      TAXATION

        The following summary contains a description of the material Brazilian
and U.S. federal income tax consequences of the acquisition, ownership and
disposition of preferred shares or ADSs. This summary 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 related regulations and on the tax laws of the United
States and related regulations as in effect on the date of this annual report.
These laws and regulations may change in the future.

        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. We cannot assure you, however, as to
whether or when a treaty will enter into force or how it will affect the U.S.
holders of preferred shares or ADSs. Prospective holders 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 in their
particular circumstances.

BRAZILIAN TAX CONSIDERATIONS

        The following discussion summarizes material 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. This
discussion does not address all the Brazilian tax considerations that may be
applicable to any such

                                       49
<PAGE>   53

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 Registrant 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 15% if the profits were generated in
1994 or 1995, and at 25% if the profits were generated before 1994. Stock
dividends are not subject to Brazilian tax.

        The only Brazilian tax treaty now in effect that would, if specified
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%.

Taxation of capital gains

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

        Capital gains realized outside Brazil by a non-Brazilian holder on the
disposition of ADSs or preferred shares to another non-Brazilian holder are not
subject to Brazilian tax. The deposit of preferred shares in exchange for ADSs
and the withdrawal of preferred shares upon cancellation of ADSs are also not
subject to Brazilian tax.

        Capital gains realized by non-Brazilian holders on dispositions of
preferred shares in Brazil or in transactions with Brazilian residents may be
free of Brazilian tax, taxed at one of the following rates, depending on the
circumstances described below:

                -       Gains realized through off-exchange transactions in
                        Brazil or with Brazilian residents are generally subject
                        to tax at a rate of 15%.

                -       Gains realized through transactions on Brazilian stock
                        exchanges are generally subject to tax at a rate of 10%.

                -       Gains on the sale or exchange of duly-registered
                        investments made in accordance with Resolution No. 2,689
                        of the Monetary Council are not subject to Brazilian tax
                        if such sale or exchange occurs on a Brazilian stock
                        exchange, except for investments originating from
                        countries where income is not taxed or is taxed at a
                        rate lower than 20%, which are taxed in accordance with
                        the same tax rules applicable to Brazilian residents.

                -       Gains on the disposition of preferred shares obtained
                        upon cancellation of ADSs are not taxed in Brazil if
                        such disposition is made, and the proceeds are remitted
                        abroad, within five business days after cancellation.

                -       If the sales value of the preferred shares contains a
                        component of interest on capital, the amount of this
                        interest will be taxed at a rate of 15%. See
                        "--Distributions of interest on capital" below.

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

        We cannot assure you that the current preferential treatment for holders
of ADSs and non-Brazilian holders of preferred shares under the Resolution No.
2689 regime will be maintained.

        Any exercise of preemptive rights relating to the preferred shares or
ADSs will not be subject to Brazilian taxation. Gains on the sale or assignment
of preemptive rights relating to the preferred shares underlying ADSs,

                                       50
<PAGE>   54

complying with the rules set forth by the National Monetary Council will be
treated differently for Brazilian tax purposes depending on whether the
transaction takes place on a Brazilian stock exchange.

        Gains on sales or assignments made on a Brazilian stock exchange are not
taxed in Brazil, but gains on other sales or assignments may be subject to tax
at rates up to 15%.

Distributions of interest on capital

        Brazilian corporations may make payments to shareholders characterized
as interest on the capital of the company as an alternative form of making
dividend distributions. The rate of interest is calculated on the company's
equity and it may not be higher than the federal government's long-term interest
rate as determined by the Central Bank from time to time (9.25% per annum for
the three-month period starting April 1, 2001). The deduction of the total
amount distributed as interest on capital may not exceed the greater of

                -       50% of net income for the year in respect of which the
                        payment is made before taking such distribution, or

                -       50% of retained earnings for years prior to the year in
                        respect of which the payment is made, plus profit
                        reserves.

        Payments of interest on capital are decided by the shareholders on the
basis of recommendations of a 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 Registrant for Brazilian
corporate income tax purposes. These payments are subject to Brazilian
withholding tax at the rate of 15%, except for payments to persons who are
constitutionally exempt from tax in Brazil. Payments to persons situated in
jurisdictions deemed to be tax havens will be subject to tax at a 25% rate. Tax
havens are defined as countries that either have no income tax or in which the
income tax rate is less than 20%.

        We cannot assure you that our board of directors 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 we are obligated to
distribute to our shareholders in accordance with our 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.

Other Brazilian taxes

        There are no Brazilian 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, except for a 0.64% tax on the secondary sale or distribution of the
preferred shares through a public offering registered with the Brazilian
Securities and Exchange Commission, limited to R$82,870 and payable by the
seller.

        A financial transaction tax (Imposto sobre Operacoes Financeiras) may be
imposed on the conversion of Brazilian currency into foreign currency, such as
for purposes of paying dividends and interest. The 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.

        Another tax, which applies to the removal of funds from accounts at
banks and other financial institutions, will be imposed on distributions by us
in respect of ADSs at the time such distributions are converted into U.S.
dollars and remitted abroad by the custodian. This tax is in effect until June
2002, unless its term is extended, and has a rate of 0.38% from March 18, 2001
until June 17, 2002.

                                       51
<PAGE>   55

U.S. FEDERAL TAX CONSIDERATIONS

        The statements regarding U.S. tax law presented below are based on U.S.
laws and regulations in force on the date of this annual report. Changes to such
laws or regulations subsequent to the date of this annual report could affect
the tax consequences described in this annual report. This summary describes the
material 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 our shares (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 its 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 "ADSs" also refer to preferred shares,
references to a "U.S. holder" are to a holder of an ADS that is

                -       a citizen or resident of the United States of America,

                -       a corporation organized under the laws of the United
                        States of America or any state thereof, or

                -       otherwise subject to U.S. federal income taxation on a
                        net basis with respect to the ADS.

        For purposes of the U.S. Internal Revenue Code of 1986, as amended,
which we referred to as the "Code," holders of ADRs will be treated as owners of
the ADSs represented by such ADRs.

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 us as a dividend to the extent that such
distribution is paid out of our current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes, when such distribution is
received by the custodian or by the U.S. holder, in the case of a holder of
preferred shares. To the extent that such a distribution exceeds our earnings
and profits, it will be treated as a nontaxable return of capital to the extent
of the U.S. holder's tax basis in the ADS and after as capital gain.

        The amount of any distribution will include the amount of 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, or by a U.S. holder, in the case of a holder of preferred shares. If
the custodian or U.S. holder, in the case of a holder of preferred shares, does
not convert the 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.

                                       52
<PAGE>   56

Dividends paid by us will not be eligible for the dividends received deduction
allowed to corporations under the Code.

        Distributions out of earnings and profits with respect to the ADSs
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 may be claimed as a
credit against the U.S. federal income tax liability of a U.S. holder if the
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.

        Distributions of additional shares to holders with respect to their ADSs
that are made as part of a pro rata distribution to all of our shareholders
generally will not be subject to U.S. federal income tax.

        A holder of an ADS 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 that are
treated as dividend income for U.S. federal income tax purposes. The non-U.S.
holder generally will also not be subject to U.S. federal income tax or
withholding tax on distributions with respect to ADSs that are treated as
capital gain for U.S. federal income tax purposes unless the holder would be
subject to U.S. federal income tax on gain realized on the sale or other
disposition of ADSs, as discussed below.

Taxation of capital gains

        Upon the sale or other disposition of an ADS, 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 (excluding the amount of any distribution paid to the
custodian but not distributed by the custodian prior to the disposition) and the
U.S. holder's tax basis in the ADS. The gain or loss generally will be subject
to U.S. federal income tax and will be treated as capital gain or loss.
Long-term capital gains recognized by an individual holder generally are subject
to a maximum rate of 20% in respect of property held for more than one year. The
deductibility of capital losses is subject to limitations. Gain realized by a
U.S. holder on a sale or disposition of ADSs 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
unless

                -       the gain is effectively connected with the conduct by
                        the holder of a trade or business in the United States,
                        or

                -       the 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. backup withholding and information reporting

        Dividend payments on the ADSs and proceeds from the sale, exchange or
other disposition of ADSs may be subject to information reporting to the 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
required to establish their exempt status generally must provide such
certification on IRS Form W-9 (Request for Taxpayer Identification Number and
Certification) in the case of U.S. persons and on IRS Form W-8 (Certificate of
Foreign Status) in the case of non-U.S. persons. Treasury Regulations have
generally expanded the circumstances under which information reporting and
backup withholding may apply for payments made after December 31, 2000 (the "New
Withholding Regulations").

                                       53
<PAGE>   57

        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.

        The information reporting requirements of the Code generally apply to
distributions to a U.S. holder. Distributions to non-U.S. holders generally are
from information reporting and backup withholding but a non-U.S. holder may be
required to establish its non-U.S. status in order to claim such exemption.

        The New Withholding Regulations consolidate and modify the current
certification requirements and means by which a holder may claim exemptions from
U.S. federal income tax withholding and provide presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payor. All holders should consult
their tax advisors regarding the application of the New Withholding Regulations.

U.S. state and local taxes

        U.S. holders should consult their own tax advisors concerning the U.S.
state and local tax consequences of holding ADSs.

F.      DIVIDENDS AND PAYING AGENTS

        Not applicable.

G.      STATEMENT BY EXPERTS

        Not applicable.

H.      DOCUMENTS ON DISPLAY

        We file annual reports with and furnish other information to the SEC as
may be applicable from time to time. You may read and copy any documents filed
or furnished by the Registrant at the SEC's public reference rooms in
Washington, D.C., New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.

I.      SUBSIDIARY INFORMATION

        Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are primarily exposed to market risk from changes in both foreign
currency exchange rates and interest rates. We are exposed to foreign exchange
rate risk because certain of our costs and debt are denominated in currencies,
primarily the U.S. dollar, other than those in which we earn revenues (primarily
the real). Similarly, we are subject to market risk deriving from changes in
interest rates which may affect the cost of our financing. We do 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 do we hold or issue derivative or other financial
instruments for trading purposes.

EXCHANGE RATE RISK

        We have exchange rate exposure with respect to the U.S. dollar. At
December 31, 2000, R$280 million of our indebtedness was denominated in U.S.
dollars. The potential additional costs to us that would result from a
hypothetical 10% change in foreign currency exchange rates would be
approximately R$28.0 million.

INTEREST RATE RISK

        At December 31, 2000, we had approximately R$467 million in loans and
financing outstanding bearing interest at floating rates. We invest our excess
liquidity (R$278 million at December 31, 2000) mainly in short-term instruments.
The potential loss in earnings to us over one year that would have resulted from
a hypothetical,

                                       54
<PAGE>   58

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$7.5 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, our 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.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITES

        Not applicable.

                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

        The Registrant is not in default under any of its obligations nor is any
payment of dividends in arrears.

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

        Not applicable.

ITEM 15. RESERVED

        Not applicable.

ITEM 16. RESERVED

        Not applicable.

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

        We have responded to Item 18 in lieu of responding to this Item.

                                       55
<PAGE>   59

ITEM 18. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                             <C>
Telemig Celular Participacoes S.A.

Report of Independent Auditors..................................................................................F-2
Consolidated Balance Sheets-December 31, 2000 and 1999..........................................................F-3
Consolidated Statements of Income and Comprehensive Income-Years Ended December 31, 2000, 1999 and 1998.........F-4
Consolidated Statements of Changes in Shareholder's Equity-Years Ended December 31, 2000, 1999 and 1998.........F-5
Consolidated Statements of Cash Flows-Years Ended December 31, 2000, 1999 and 1998..............................F-6
Notes to the Consolidated Financial Statements..................................................................F-7

Financial Statement Schedules

See Note 18 to the Consolidated Financial Statements
</TABLE>

                                      F-1
<PAGE>   60

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Shareholders
TELEMIG CELULAR PARTICIPACOES S.A.


We have audited the accompanying consolidated balance sheets of Telemig Celular
Participacoes S.A. as of December 31, 2000 and 1999, and the related
consolidated statements of income and comprehensive income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. 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 generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Telemig Celular
Participacoes S.A. at December 31, 2000 and 1999, and the consolidated statement
of income and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.


                    Ernst & Young Auditores Independentes S/C


Brasilia, Brazil
March 30, 2001

                                      F-2
<PAGE>   61

                       TELEMIG CELULAR PARTICIPACOES S.A.

                           CONSOLIDATED BALANCE SHEETS
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                        ---------------------------------------------
                                                                                 2000                   1999
                                                                        ---------------------  ----------------------
<S>                                                                     <C>                    <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                           278,376                 175,065
Trade receivables, net of allowance for doubtful accounts of R$15,356
    and R$14,770                                                                    104,897                  67,264
Deferred income taxes                                                                21,650                  18,824
Other current assets                                                                 34,663                  23,967
                                                                        ---------------------  ----------------------
                                                                                    439,586                 285,120
                                                                        ---------------------  ----------------------

Property, plant and equipment, net                                                  758,825                 657,249
Deferred income taxes                                                               218,630                 232,359
Other non current assets                                                              2,939                       -
                                                                        ---------------------  ----------------------
                                                                                  1,419,980               1,174,728
                                                                        =====================  ======================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                                     97,509                  97,202
Accrued liabilities                                                                  31,234                  38,686
Value added and other taxes payable                                                  41,654                   8,175
Interest on capital and dividends payable                                             6,183                   9,949
Short-term debt                                                                       9,777                  90,264
Current portion of long-term debt                                                    32,591                  18,382
Other current liabilities                                                             9,362                   3,942
                                                                        ---------------------  ----------------------
                                                                                    228,310                 266,600
                                                                        ---------------------  ----------------------

Long-term debt                                                                      434,849                 176,838
Provision for contingencies                                                           7,882                  27,250
Pension plan obligation                                                               7,912                   7,061
Other long term liabilities                                                             198                       -
Minority interest                                                                    74,215                  70,202
                                                                        ---------------------  ----------------------
                                                                                    525,056                 281,351
                                                                        ---------------------  ----------------------

SHAREHOLDERS' EQUITY:
Preferred shares                                                                     98,933                  97,700
Common shares                                                                        58,583                  57,852
Other capital and reserves                                                          475,643                 464,029
Retained earnings                                                                    33,455                   7,196
                                                                        ---------------------  ----------------------

                                                                                    666,614                 626,777
                                                                        ---------------------  ----------------------
                                                                                  1,419,980               1,174,728
                                                                        =====================  ======================
</TABLE>

See the accompanying notes to the consolidated financial statements

                                      F-3
<PAGE>   62

                       TELEMIG CELULAR PARTICIPACOES S.A.

                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                  -----------------------------------------------
                                                                     2000               1999              1998
                                                                  ----------         ----------        ----------
<S>                                                               <C>                <C>               <C>
Revenues:
   Services provided to third parties                               650,835           446,573           368,093
   Services provided to related parties                                   -                 -            67,212
   Sale of handsets                                                  93,426            74,251                 -
                                                                  ----------         ----------        ----------
                                                                    744,261           520,824           435,305
                                                                  ----------         ----------        ----------

Cost of services:
   Provided by related parties                                            -                 -           102,864
   Other                                                            300,035           219,189            53,188
Cost of handsets                                                    101,919            76,236                 -
Selling, general and administrative expenses                        244,667           163,520           134,161
Pension plan expense                                                    851             7,061                 -
Bad debt expense                                                     21,556            15,364            90,927
Other net operating income                                           (5,416)           (6,033)             (443)
Impairment of long-lived assets                                           -                 -            47,110
                                                                  ----------         ----------        ----------
Operating income                                                     80,649            45,487             7,498

Interest income                                                     (31,408)          (18,940)          (18,154)
Interest expense                                                     43,514            19,783             4,075
Foreign exchange loss                                                24,443            27,175             5,786
                                                                  ----------         ----------        ----------
Income before minority interest and taxes                            44,100            17,469            15,791
Income taxes                                                         10,064             2,060             4,589
Minority interest                                                     7,777             1,673               826
                                                                  ----------         ----------        ----------
Net income and comprehensive income                                  26,259            13,736            10,376
                                                                  ----------         ----------        ----------










                                                                  ----------         ----------        ----------
Basic and diluted earnings, in reais per thousand shares                0.08               0.04              0.03
                                                                  ==========         ==========        ==========
</TABLE>

See the accompanying notes to the consolidated financial statements

                                      F-4
<PAGE>   63

                       TELEMIG CELULAR PARTICIPACOES S.A.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                                   Additional
                                            Divisional    Preferred      Common      Paid-In     Capital     Retained
                                              Equity       Shares        Shares      Capital     Reserves    Earnings       Total
                                            ----------    ---------     --------   ----------    --------    --------      --------
<S>                                         <C>           <C>           <C>        <C>           <C>         <C>           <C>
BALANCE AT DECEMBER 31, 1997                  332,332            -            -            -            -           -      332,332
                                            ----------    ---------     --------   ----------    --------    --------      --------
Contributed capital from the Spin-Off          73,240            -            -            -            -           -       73,240
Allocation of divisional equity as a
result of Spin-Off                           (405,572)      97,700       57,852            -      250,020           -            -
Contributed capital                                 -            -            -            -        1,964           -        1,964
Net income                                          -            -            -            -            -      10,376       10,376
                                            ----------    ---------     --------   ----------    --------    --------      --------
BALANCE AT DECEMBER 31, 1998                        -       97,700       57,852            -      251,984      10,376      417,912
                                            ----------    ---------     --------   ----------    --------    --------      --------
Paid in capital - non cash                          -            -            -            -      212,045           -      212,045
Net income                                          -            -            -            -            -      13,736       13,736
Interest on capital                                 -            -            -            -            -     (10,839)     (10,839)
Dividends paid                                      -            -            -            -            -      (6,077)      (6,077)
                                            ----------    ---------     --------   ----------    --------    --------      --------
BALANCE AT DECEMBER 31, 1999                        -       97,700       57,852            -      464,029       7,196      626,777
                                            ----------    ---------     --------   ----------    --------    --------      --------
ADDITIONAL PAID-IN CAPITAL                          -            -            -       13,578            -           -       13,578
CAPITAL INCREASE                                    -        1,233          731            -       (1,964)          -            -
NET INCOME                                          -            -            -            -            -      26,259       26,259
                                            ----------    ---------     --------   ----------    --------    --------      --------
BALANCE AT DECEMBER 31, 2000                        -       98,933       58,583       13,578      462,065      33,455      666,614
                                            ==========    =========     ========   ==========    ========    ========      ========
</TABLE>

See the accompanying notes to the consolidated financial statements

                                      F-5
<PAGE>   64

                       TELEMIG CELULAR PARTICIPACOES S.A.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                   --------------------------------------------------
                                                                       2000               1999                1998
                                                                   -----------        -----------         -----------
<S>                                                                <C>                <C>                 <C>
Operating activities:
Net income                                                            26,259             13,736              10,376
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation                                                      109,869            110,617              55,819
   Deferred income taxes                                               2,470             (5,940)            (33,823)
   Minority interest                                                   7,777              1,673                 826
   Unrealized foreign exchange loss on long-term debt                 24,633             14,415               5,040
   Pension plan expense                                                  851              7,061                   -
   Provision for contingencies                                       (19,368)             1,785              25,272
   Impairment of long-lived assets                                         -                  -              47,110
   Compensation expense                                                    -                  -               1,964
Changes in operating assets and liabilities:
   Trade receivables                                                 (37,633)           (17,327)              4,796
   Accounts payable and accrued liabilities                           15,064              7,298              13,337
   Accounts payable related to additions to property, plant
   and equipment                                                           -                  -              91,401
   Value added and other taxes payable                                33,479            (14,252)             22,427
   Income taxes payable                                                    -            (19,197)             19,197
   Other                                                             (13,536)             6,455             (11,914)
                                                                   -----------        -----------         -----------
Net cash provided by operating activities                            149,865            106,324             251,828
                                                                   -----------        -----------         -----------
Investing activities:
   Additions to property, plant and equipment                       (211,445)          (220,633)           (179,624)
                                                                   -----------        -----------         -----------
Net cash used in investing activities                               (211,445)          (220,633)           (179,624)
                                                                   -----------        -----------         -----------
Financing activities:
   Increases in short-term debt                                            -             98,238                   -
   Increases in long-term debt                                       267,888            148,226                   -
   Repayment of short-term debt                                      (83,534)            (9,499)                  -
   Repayment of long-term debt                                       (19,463)           (17,920)            (11,597)
   Dividends and interest on capital                                       -            (16,916)                  -
   Contribution upon Spin-Off                                              -                  -              16,478
                                                                   -----------        -----------         -----------
Net cash provided by financing activities                            164,891            202,129               4,881
                                                                   -----------        -----------         -----------
Increase in cash and cash equivalents for the year                   103,311             87,820              77,085
Cash and cash equivalents, beginning of the year                     175,065             87,245              10,160
                                                                   -----------        -----------         -----------
Cash and cash equivalents, end of the year                           278,376            175,065              87,245
                                                                   ===========        ===========         ===========
Supplemental cash flow information:
Income taxes paid                                                     16,725              4,363              22,346
Interest paid                                                         38,164             14,284               4,474
                                                                   ===========        ===========         ===========
</TABLE>

See the accompanying notes to the consolidated financial statements.

                                      F-6
<PAGE>   65

                       TELEMIG CELULAR PARTICIPACOES S.A.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                     Amounts are in thousands of reais - R$

1.      BACKGROUND AND DESCRIPTION OF BUSINESS

        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 the fixed line businesses, the new
        cellular businesses and the long-distance operator were combined into
        the twelve separate groups (the "New Holding Companies", individually,
        "New Holding Company"). 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 part of this process, Telemig Celular Participacoes
        S.A. was formed on May 22, 1998, through the Spin-Off of certain assets
        and liabilities of Telebras, including 82.9% of the share capital of
        Telemig Celular S.A. (the "subsidiary").

        Telemig Celular S.A. was formed on January 5, 1998 and subsequently
        received on January 30, 1998 from Telecomunicacoes de Minas Gerais S.A.
        ("Telemig") the assets and liabilities comprising its cellular
        telecommunications services. Telemig Celular Participacoes S.A. and its
        subsidiary, Telemig Celular S.A. (together the "Company"), are the
        primary suppliers of cellular telecommunications services in the state
        of Minas Gerais under the terms of a concession granted by the Federal
        Government on November 4, 1997 (the "Concession"). The Concession will
        expire on April 29, 2008 and may be renewed at the discretion of Agencia
        Nacional de Telecomunicacoes ("Anatel"), the regulatory authority for
        the Brazilian telecommunications industry, for a further term of 15
        years. Through its predecessor Telemig, the Company has provided
        cellular telecommunications services in the state since April 1993.

        On July 29, 1998, the Federal Government sold to twelve buyers (the "New
        Controlling Shareholders") its rights to receive shares of the twelve
        New Holding Companies upon the distribution of such shares. In
        connection with this sale, the Federal Government assigned to the New
        Controlling Shareholders, effective August 4, 1998, substantially all
        its economic and voting rights with respect to the New Holding
        Companies.

        The Company's business, including the services it may provide and the
        rates it charges, is regulated by Anatel and is fully dependent upon the
        cellular telecommunications concession granted by the Federal
        Government.

        The Company has made and will be required to make significant capital
        and operating expenditures on an ongoing basis in order to deploy its
        cellular telecommunications network which will require the Company to
        seek additional financing. Some of these investments may be financed
        through debt denominated in foreign currencies. The country's currency
        is subject to devaluation. A significant devaluation and a return to
        high levels of inflation could have an adverse effect on the Brazilian
        economy, and, as a result, it could affect the Company's financial
        position, cash flows or results of operations.

2.      PRESENTATION OF THE FINANCIAL STATEMENTS

        These consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States and
        rules and regulations adopted by the United States Securities and
        Exchange Commission.

                                      F-7
<PAGE>   66

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        The Company has also published consolidated financial statements
        prepared in accordance with accounting principles generally accepted in
        Brazil and rules and regulations adopted by the Brazilian Securities
        Commission ("CVM").

        On May 22, 1998, the shareholders of Telebras approved the Spin-Off,
        whereby existing shareholders received shares in the New Holding
        Companies in proportion to their holdings in Telebras. The New Holding
        Companies included the assets and liabilities previously recorded in the
        accounts of Telebras, with limited exceptions.

        The shareholders also approved a specific structure for the
        shareholders' equity of each New Holding Company, which included an
        allocation of a portion of the retained earnings of Telebras. This value
        of allocated retained earnings does not represent the historical
        retained earnings of the New Holding Companies and therefore is
        presented as "Capital Reserves" on the consolidated statements of
        changes in shareholders' equity. The net assets which were spun-off from
        Telebras, in addition to its investment in the operating subsidiary,
        resulted in a net equity increase of R$73,240 in relation to the
        Company's historical divisional equity.

        The capital reserves and future retained earnings computed using
        Brazilian GAAP will be the basis from which future dividends will be
        payable.

        Brazilian corporate and tax law allows state controlled companies that
        are participating in the government's privatization program a
        three-month delay between the accounting base date for a Spin-Off and
        the date on which the shareholders' meeting approves the Spin-Off,
        including the related accounting basis for the net assets spun off. As a
        result, the consolidated financial statements of the Company include the
        results of operations and changes in financial condition of the
        subsidiary from January 1, 1998 and the effects of the cash and other
        net assets (principally intercompany balances) allocated from Telebras
        as of March 1, 1998.

3.      SUMMARY OF ACCOUNTING POLICIES

        The summary of significant accounting policies is as follows:

        (a)     Consolidation

                The consolidated financial statements include the accounts of
                the Telemig and the subsidiary. All significant intercompany
                balances and transactions have been eliminated.

        (b)     Cash equivalents

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

        (c)     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.

                                      F-8
<PAGE>   67

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        (d)     Property, plant and equipment

                Property, plant and equipment are stated at indexed cost through
                December 31, 1997 and at cost thereafter. Depreciation is
                provided using the straight-line method based on the estimated
                useful lives of the underlying assets as follows:

<TABLE>
<CAPTION>
                                                                                                Years
                                                                                           --------------
<S>                                                                                        <C>
        Buildings                                                                                20
        Network equipment                                                                      5 to 8
        Other equipment                                                                        5 to10
</TABLE>

                Interest incurred on borrowings is capitalized as part of
                property, plant and equipment until the asset is placed in
                service, to the extent that borrowings do not exceed
                construction-in-progress.

                The Company reviews property, plant and equipment for impairment
                whenever events or changes in circumstances indicate that the
                carrying amount may not be recoverable. In December 1998, to
                comply with industry practice, the Company reduced the estimated
                useful lives of certain of its assets as follows: network
                equipment from 10 to 13 years to 5 to 8 years, buildings from 25
                years to 20 years and other equipment from 5 to 20 years to 5 to
                10 years.

        (e)     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 revenue 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.

        (f)     Pension and other post-retirement benefits

                In 2000, 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 employees. Prior to that, the Company participated in
                a multi-employer pension and post-retirement benefit plan for
                all of its employees. The Company accounts for such benefit
                costs in accordance with SFAS 87 (Employers Accounting for
                Pension). See note 12.

        (g)     Use of estimates

                The preparation of consolidated financial statements in
                conformity with generally accepted accounting principles
                requires management to make estimates and assumptions relating
                to the reporting of assets and liabilities and the disclosure of
                contingent assets and liabilities at the date of the financial
                statements, and the reported amounts of revenues and expenses
                during the period reported. Actual results could differ from
                those estimates.

                                      F-9
<PAGE>   68

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        (h)     Advertising costs

                Advertising costs are expensed as incurred and included in
                selling, general and administrative expenses. They amounted to
                R$24,596, R$23,047 and R$10,560 for the years ended December 31,
                2000, 1999 and 1998, respectively.

        (i)     Stock- Based Compensation

                The Company grants stock options for a fixed number of shares to
                employees with an exercise price equal to the fair value of the
                shares at the date of grant. The Company accounts for stock
                option grants in accordance with APB Opinion No. 25, Accounting
                for Stock Issued to Employees (APB 25) and related
                Interpretations because the Company believes the alternative
                fair value accounting provided for under FASB Statement No. 123,
                Accounting for Stock-Based Compensation, (FAS 123) requires the
                use of option valuation models that were not developed for use
                in valuing employee stock options. Under APB 25, because the
                exercise price of the Company's employee stock options equals
                the market price of the underlying stock on the date of grant,
                no compensation expense is recognized.

        (j)     New accounting pronouncements

                SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
                ACTIVITIES"

                In June 1998, the Financial Accounting Standards Board ("FASB")
                issued Statement of Financial Accounting Standards ("SFAS") No.
                133, "Accounting for Derivative Instruments and Hedging
                Activities". SFAS 133 establishes new accounting and reporting
                standards for derivative financial instruments and for hedging
                activities. SFAS 133 requires companies to measure all
                derivatives at fair value and to recognize them in the balance
                sheet as an asset or liability, depending on the company's
                rights or obligations under the applicable derivative contract.
                In June 1999, the FASB issued SFAS No. 137, which deferred the
                effective date of adoption of SFAS 133 for one year. The Company
                will adopt SFAS 133 no later than the first quarter of fiscal
                year 2001. The estimated effect will be approximately R$13,900.

        (k)     Swaps

                The Company entered into swap agreements as part of its program
                to manage its dollar denominated debt portfolio and related
                costs of borrowing. The differential to be paid or received is
                accrued as interest rates and exchange rates change and is
                recognized into income over the life of the agreements.

        (l)     Reclassifications

                Certain amounts were reclassified to conform to the 2000
                presentation.

4.      PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                              ACCUMULATED        CARRYING
                                                                COST         DEPRECIATION         VALUE
                                                              ---------     --------------      ----------
<S>                                                           <C>           <C>                 <C>
   DECEMBER 31, 1999
   Land and buildings                                           32,330             7,760           24,570
   Network equipment                                           702,278           257,957          444,321
   Other equipment                                             142,757            42,490          100,267
   Construction-in-progress                                     88,091                 -           88,091
                                                              ---------     --------------      ----------
                                                               965,456           308,207          657,249
                                                              =========     ==============      ==========
</TABLE>

                                      F-10
<PAGE>   69

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                              ACCUMULATED        CARRYING
                                                               COST          DEPRECIATION         VALUE
                                                            -----------     --------------      ----------
<S>                                                         <C>             <C>                 <C>
   DECEMBER 31, 2000
   Land and buildings                                           57,221            12,867           44,354
   Network equipment                                           866,045           334,299          531,746
   Other equipment                                             185,286            70,910          114,376
   Construction-in-progress                                     68,349                 -           68,349
                                                            -----------     --------------      ----------
                                                             1,176,901           418,076          758,825
                                                            ===========     ==============      ==========
</TABLE>

        The amount of interest capitalized as part of property, plant and
        equipment is R$7,000, and R$3,500 for the years ended December 31, 2000
        and 1999, respectively.

5.      SHORT-TERM DEBT

<TABLE>
<CAPTION>
                                                                      INSTITUTION          2000             1999
                                                                     -------------       --------         ---------
<S>                                                                  <C>                 <C>              <C>
   U.S. dollar denominated, quarterly interest of 11.8% to 13.9%,       Citibank
   through January 2001                                                Safra Bank           9,777           44,725

   Reais facilities, due in quarterly installments until November
   2000 with annual interest of 6.3% over the Long-term Interest
   Rate (TJLP - 12.5% at December 31, 1999)                            BNDES (1)                -           45,539
                                                                                         --------         ---------
   Total                                                                                    9,777           90,264
                                                                                         ========         =========
</TABLE>

6.      LONG TERM DEBT

<TABLE>
<CAPTION>
                                                                       INSTITUTION          2000            1999
                                                                     ---------------      --------        ---------
<S>                                                                  <C>                 <C>              <C>
   U.S. dollar denominated, unsecured, interest and principal due
   semi-annually through October 2003, interest at LIBOR plus 1%
   (LIBOR was 6.19% at December 31, 2000).                               EDC (2)           45,544           59,335

   U.S. dollar denominated, outstanding balance includes foreign
   exchange adjustments and bears annual interest at Libor plus
   5.4%. The interest payments are due semi-annually and the
   principal  due in November, 2005.                                  Dresdner Bank        19,554                -

   Reais facilities, adjusted by the long-term interest rate
   (TJLP) plus 3.8% per year. The interest payments are due
   quarterly beginning in September 2001 and the principal is due
   in November, 2005.                                                   BNDES (1)         197,235                -

   U.S. dollar denominated, unsecured, interest at LIBOR plus 5%,       EDC (2)/
   due quarterly, principal due in July 2002                             Nortel           177,941          131,248

   U.S. dollar denominated, outstanding balance includes foreign
   exchange adjustments and bears annual interest at LIBOR plus
   5.6%. The interest is due on a semi annual basis, with the           BCI (3)/
   entire principal due in September 2003.                               Alcatel           22,878
</TABLE>

                                      F-11
<PAGE>   70

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

<TABLE>
<CAPTION>
                                                                       INSTITUTION          2000            1999
                                                                     ---------------      --------        ---------
<S>                                                                  <C>                 <C>              <C>
   Other                                                                                    4,288            4,637
                                                                                          --------        ---------
   Total                                                                                  467,440          195,220
   Less current portion                                                                   (32,591)         (18,382)
                                                                                          --------        ---------
   Long-term portion                                                                      434,849          176,838
                                                                                          ========        =========
</TABLE>

        (1)     BNDES - National Bank for Economic and Social Development
        (2)     EDC - Export and Development Corporation
        (3)     BCI - Banca Commerciale Italiana

        Minimum annual principal repayments of all long-term debt during the
        next five years as at December 31, 2000 are as follows:

<TABLE>
<S>                                                                       <C>
   2002                                                                   239,013
   2003                                                                    80,792
   2004                                                                    49,760
   2005 and after                                                          65,284
                                                                          -------
   Total                                                                  434,849
                                                                          =======
</TABLE>

        The financing contracts obtained by the subsidiary from the BNDES and
        the Export and Development Corporation - EDC have covenants related to
        the destination of funds as specified in the contracts and the
        maintenance of principally balance sheet ratios. If an event default
        occurs, such long term financing may have of their due dates
        anticipated. At December 31, 2000 all covenants were met by the
        subsidiary or modified by the Financial Institution.

        The contract with BNDES is secured by accounts receivable.

7.      CAPITAL STOCK

        The capital stock of the Company is comprised of preferred shares and
        common shares, all without par value. The Company has 700,000,000
        thousand shares authorized (including both preferred and common shares).
        At December 31, 2000, there were 210,247,945 thousand outstanding
        preferred shares (210,029,997 thousand at December 31, 1999) and
        124,498,088 thousand outstanding common shares (124,369,031 thousand at
        December 31, 1999). The capital may be increased by a decision taken at
        a shareholders' meeting or by the Board of Directors in connection with
        the capitalization of profits or reserves, provided that the amounts
        were allocated for capital increases at a previous shareholders'
        meeting.

        The preferred shares are non-voting except under limited circumstances
        and are entitled to a preferential, 6% non-cumulative dividend. The
        preferred shares are also entitled to priority over the common shares in
        the case of liquidation of the Company.

        Under the Brazilian Corporate 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 outstanding shares.

        As part of the privatization of Telebras, the Brazilian Federal
        Government offered Telebras' employees the right to purchase, at a
        discounted price, the Federal Government's entire holding of Telebras
        preferred shares and the preferred shares of each of the New Holding
        Companies created as a result of the Spin-Off. The period during which
        employees

                                      F-12
<PAGE>   71

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        could subscribe for the shares began on August 4, 1998, and expired on
        October 30, 1998. In 1998, the Company recorded compensation expense and
        contributed capital in the amount R$1,964 related to this offer.

        At December 31, 2000 the Company has reserved 327,607 shares of
        preferred stock for issuance in connection with the stock option plans -
        see Note 17.

        Dividends

        Under Brazilian Corporate Law, dividends can only be paid out of the
        distributable capital arising from the Spin-Off and from future retained
        earnings. Pursuant to its by-laws, the Company is required to distribute
        as dividends in respect of each fiscal year ending on December 31, to
        the extent amounts are available for distribution, an aggregate amount
        equal to at least 25% of Adjusted Net Income, as defined below, on such
        date. The annual dividend distributed to holders of preferred shares
        (the "Preferred Dividend") has priority in the allocation of Adjusted
        Net Income. Remaining amounts to be distributed are allocated first to
        the payment of a dividend to holders of common shares in an amount per
        share equal to the Preferred Dividend, and the remainder is distributed
        equally, on a per share basis, among holders of preferred shares and
        common shares.

        For the purposes of the Brazilian Corporate Law, and in accordance with
        the Company's by-laws, the "Adjusted Net Income" is an amount equal to
        the Company's net profits under Brazilian GAAP adjusted to reflect
        allocations to or from (i) the legal reserve, (ii) a contingency reserve
        for anticipated losses, if any, and (iii) an unrealized revenue reserve,
        if any. Under Brazilian Corporate 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. At
        December 31, 2000, the Company's financial statements, prepared using
        Brazilian GAAP, presented an unconsolidated total equity of R$649,277
        (R$1,043,490 at December 31, 1999) including a legal reserve of R$11,051
        (R$9,092 at December 31, 1999).

        Additionally, Brazilian corporations are permitted to attribute
        tax-deductible interest expense on shareholders' equity, which may
        either be paid in cash, in the form of a dividend, or used to increase
        capital stock value for statutory purposes. For financial reporting
        purposes, such interest on capital is recorded as a reduction from
        retained earnings.

        Paid in Capital

        On December 28, 1999, the shareholders approved a legal reorganization
        whereby a major shareholder contributed certain assets to the Company
        resulting in future tax benefits. This asset will result in amortization
        expense and a related tax benefit. In accordance with EITF 94-10, tax
        effects caused by transactions with shareholders were not included in
        the Company's income statement but rather in equity. Therefore, the
        Company recorded a deferred tax asset of R$212,045 with an offsetting
        amount as Paid in Capital. The deferred tax asset will be realized as
        the tax benefits are recognized for local tax purposes over a period of
        10 years.

        In accordance with Brazilian Corporate Law, the Company may issue shares
        (pro rata both common and preferred) based on the different pricing
        criteria permitted by such law to the contributing shareholder for the
        amount of the tax benefits recognized by the Company. However, the
        minority shareholders will be given the right to purchase their pro-rata
        share of this capital stock increase in order to prevent dilution. In
        case they do not accept the offer, these shares will be issued to the
        majority shareholders. Additionally, the Company has to ensure that
        shareholders will receive the minimum dividend required by law if the
        amortization expense results in accumulated losses.

                                      F-13
<PAGE>   72

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        These potential shares are considered contingent shares and since it is
        not possible to determine what pricing criteria the Company will use,
        these shares are not included in either basic or diluted earnings per
        share calculation, in accordance with SFAS 128.

        See also Note 10.

8.      EARNINGS PER SHARE

        In these consolidated financial statements, information is disclosed per
        lot of one thousand shares, because this is the minimum number of shares
        that can be traded on the Brazilian stock exchanges.

        Since the preferred and common shareholders have different dividend,
        voting and liquidation rights, basic earnings per share has been
        calculated using the "two-class" method. The "two-class" method is an
        earnings allocation formula that determines earnings per share for
        preferred and common shares according to the dividends to be paid as
        required by the Company's by-laws and participation rights in
        undistributed earnings.

        Basic earnings per common share is computed by reducing net income by
        distributable and undistributable net income available to preferred
        shareholders and dividing net income available to common shareholders by
        the weighted-average number of common shares outstanding during the
        period. Net income available to preferred shareholders is the sum of the
        preferred dividends (distributable net income) and the preferred
        shareholders' portion of undistributed net income. Undistributed net
        income is computed by deducting preferred dividends and common dividends
        from net income. Undistributed net income is shared equally on a per
        share basis by the preferred and common shareholders.

        The following table sets forth the computation of basic and diluted
        earnings per thousand of common shares:

<TABLE>
<CAPTION>
                                                                                    2000            1999           1998
                                                                                ------------    ------------   ------------
<S>                                                                             <C>             <C>            <C>
   Numerator:
      Net income                                                                     26,259          13,736         10,376
      Less: Distributable net income available to preferred stockholders             (5,936)         (5,862)        (5,862)
         Undistributed net income allocated to preferred stockholders               (10,577)         (2,765)          (655)
                                                                                ------------    ------------   ------------
   Numerator for basic and diluted earnings per thousand shares-income
      available to common stockholders                                                9,746           5,109          3,859
                                                                                ------------    ------------   ------------
   Denominator:
   Basic and diluted weighted-average number of common shares (in thousands)    124,498,088     124,369,031    124,369,031
                                                                                ------------    ------------   ------------
   Basic and diluted earnings, in reais per thousand common shares                     0.08            0.04           0.03
                                                                                ============    ============   ============
</TABLE>

9.      INCOME TAXES

        Brazilian income taxes comprise federal income tax and the social
        contribution tax. The statutory rates for federal income tax and for the
        social contribution tax are 25% and 9%, 25% and 12%, and 25% and 8% at
        December 31, 2000, 1999 and 1998, respectively.

                                      F-14
<PAGE>   73

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        Following is the detail of income tax expense for the year ended
        December 31, 2000:

<TABLE>
<CAPTION>
                                                                                      2000           1999           1998
                                                                                    --------       ---------     ----------
<S>                                                                                 <C>            <C>           <C>
   Federal income tax                                                                 7,545          7,619         28,988
   Social contribution tax                                                               49            381          9,424
   Deferred taxes                                                                     2,470         (5,940)       (33,823)
                                                                                    --------       ---------     ----------
   Income tax expense as reported in the accompanying financial statements           10,064          2,060          4,589
                                                                                    ========       =========     ==========
</TABLE>

        Following is a reconciliation of the reported income tax expense and the
        amount calculated by applying the combined statutory tax rate of 34%,
        37% and 33% for the years ended December 31, 2000, 1999 and 1998,
        respectively:

<TABLE>
<CAPTION>
                                                                                      2000           1999           1998
                                                                                    --------       ---------     ----------
<S>                                                                                 <C>            <C>           <C>
    Tax charge at the combined statutory rate                                        14,994          6,464          5,211
       Tax incentive                                                                   (895)             -              -
       Non-taxable income (net of non-deductible expenses)                           (1,936)          (131)          (622)
       Interest on capital                                                           (2,099)        (4,274)             -
                                                                                    --------       ---------     ----------
       Income tax expense as reported in the accompanying financial statements       10,064          2,060          4,589
                                                                                    ========       =========     ==========
</TABLE>

        Following is an analysis of deferred income tax assets and liabilities:

<TABLE>
<CAPTION>
                                                                                                      2000           1999
                                                                                                   -------        -------
<S>                                                                                                <C>            <C>
   Deferred tax assets:
       Income taxes losses carry forwards                                                           13,993              -
       Asset related to paid in capital                                                            188,644        210,241
       Impairment of equipment                                                                       1,753         10,393
       Accrued expenses and provision for contingencies                                             37,394         31,259
       Allowance for doubtful accounts                                                               5,221          5,021
       Capitalized interest                                                                          3,914          8,567
                                                                                                   -------        -------
                                                                                                   250,919        265,481

   Deferred tax liabilities:
       Cumulative indexation differences                                                           (10,639)       (14,298)
                                                                                                   -------        -------
       Net deferred tax assets                                                                     240,280        251,183
                                                                                                   =======        =======

       Current portion                                                                              21,650         18,824
       Long-term deferred income taxes                                                             218,630        232,359
                                                                                                   -------        -------
       Net deferred tax assets                                                                     240,280        251,183
                                                                                                   =======        =======
</TABLE>

        As further explained in Note 7, the total tax of R$212,045 related to
        deferred asset was credited to paid in capital in the shareholders'
        equity section.

                                      F-15
<PAGE>   74

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

10.     TRANSACTIONS WITH RELATED PARTIES

        (a)     Empresa Brasileira de Telecomunicacoes S.A.

                Up until the change of control of the Company on August 4, 1998,
                Empresa Brasileira de Telecomunicacoes S.A., a long-distance
                cellular telecommunications company, the predecessor companies
                and the other parties to the Telebras group were related to the
                Company. The Company has operating agreements with these
                companies for inter or intrastate long-distance, international
                telephone calls, automatic roaming and interconnection. The
                Company executed several service contracts with the predecessor
                companies to perform certain administrative tasks on the
                Company's behalf.

        (b)     Telesystem International Wireless

                Telesystem International Wireless - TIW, the parent company of
                the 49% owner of Telpart S.A., the Company's major shareholder,
                provided the Company with technical assistance and services from
                August 4, 1998 until the end of 2000. Amounts accrued for such
                services were approved by the Company's Board of Directors and
                totaled R$42,686, R$19,903 and R$3,489 in 2000, 1999 and 1998,
                respectively.

                The Company, after consulting with legal counsel, decided not
                pay the amounts accrued for technical assistance and services
                described above. This was because Brazilian Corporate Law and
                the Company's by-laws require that payment for such services
                must be approved by the shareholders. However such shareholder
                approval did not occur. Accordingly, the amounts owed to TIW for
                technical assistance and services at December 31, 2000 of
                R$13,578 net of the related tax effect of R$6,994 were credited
                to paid-in capital.

                At December 31, 2000 and 1999, the Company has liabilities
                payable to TIW for approximately R$9,012 and R$9,061,
                respectively, related to expenses (principally, salaries and
                benefits) charged by TIW to the Company. Certain of those
                expenses are being disputed by the Company.

11.     IMPAIRMENT OF LONG-LIVED ASSETS

        During the fourth quarter of 1998, the Company recorded a write-down of
        certain of its analog transmission network equipment amounting to
        R$47,110.

        In early 1998, the Ministry of Communications granted to a newly formed
        consortium an additional license to provide enhanced services in the
        Company's concession area in the form of digital cellular services. The
        commercial operation of the consortium began at the end of 1998. The
        introduction of competition with digital capacity in the Company's
        market resulted in an acceleration of its plan to replace its existing
        analog equipment with more modern digital equipment.

        The amount of the write-down was established by comparing the fair value
        of the analog transmission equipment, established based on the expected
        future cash flows from the use of this equipment, discounted at a
        risk-adjusted rate, to the carrying amount of the impaired equipment.

12.     PENSION PLAN AND OTHER POST-RETIREMENT BENEFIT PLANS

        The Company, together with substantially all of the other companies in
        the former Telebras group, participates 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.

                                      F-16
<PAGE>   75

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        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 and the benefits remained unchanged. The post-retirement benefit
        plans remained unchanged as multi-employer plans.

        Substantially all of the Company's employees are covered by these plans.
        The Company contributed R$1,841, and R$1,479 in 1999 and 1998
        respectively, in respect to pension and post-retirement fund
        contributions. The Company contributed R$110 in 2000 with respect to the
        multiemployer plans.

        In 1999, Sistel approved changes to the plan statutes resulting in the
        break up of plan assets and liabilities related to the 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.

        At December 31, 1999 the Company recorded its estimated portion of the
        unfunded pension liability of R$7,061.

        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 obligations, and the annual
        pension cost of the multiple employer pension plan, for the active
        employees and the related actuarial assumptions, for the year ended
        December 31, 2000 are as follows:

        Change in plan assets

<TABLE>
<S>                                                          <C>
    Fair value of plan assets at beginning of year           24,596
    Actual return on plan assets                              4,105
    Sponsors' contributions                                   1,726
    Benefits paid and expenses                                 (589)
                                                             ------
    Fair value of plan assets at end of year                 29,838
                                                             ======
</TABLE>

        Change in benefit obligations

<TABLE>
<S>                                                           <C>
    Benefit obligation at beginning of year                   7,061
    Net period cost                                             851
    Actuarial gains                                             589
    Benefits paid and expenses                                 (589)
                                                              -----
    Benefit obligation at end of year                         7,912
                                                              =====
</TABLE>

        Components of Annual pension cost

<TABLE>
<S>                                                          <C>
    Net service cost                                          1,329
    Interest cost                                             1,749
    Expected return on assets                                (2,227)
                                                             ------
    Net periodic pension cost                                   851
                                                             ======
</TABLE>

                                      F-17
<PAGE>   76

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

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

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

        The above rates exclude inflation.

13.     COMMITMENTS

        At December 31, 2000, the Company had capital expenditure commitments of
        R$17,000 related to the continuing expansion and modernization of the
        network.

        The Company rents certain equipment and premises through a number of
        operating lease agreements that expire at different dates. Total rent
        expense under these agreements was R$12,823, R$14,371 and R$8,089 for
        the years ended December 31, 2000, 1999 and 1998, respectively.

        Future minimum lease payments under non-cancelable operating leases with
        an initial term of one year or more are as follows at December 31, 2000.

<TABLE>
<CAPTION>
   Year ending December 31,
<S>                                                                                                   <C>
   2001                                                                                                6,092
   2002                                                                                                5,454
   2003                                                                                                4,559
   2004                                                                                                2,988
   2005 and after                                                                                      4,118
                                                                                                      ------
   Total minimum payments                                                                             23,211
                                                                                                      ======
</TABLE>

        The Company's concession requires that certain network coverage
        requirements and service quality milestones be met to continue to be
        valid and permit the Company to operate.

        The Company guarantees certain debt amounting to R$2,400 of an
        association which owns and operates certain operating assets.

14.     CONTINGENCIES

        ICMS tax on monthly fees and additional services

        The Company believes that the ICMS [Imposto sobre Circulacao de
        Mercadorias e Servicos], a state value-added tax, relates to
        telecommunications services and therefore that the application of ICMS
        on monthly fees or rentals lacks legal support, as these do not
        constitute telecommunications services. In December 1998, the Company
        filed an injunction with the State Treasury Department and therefore
        stopped remitting to the state government the ICMS on monthly fees and
        additional services.

        On December 31, 2000, based upon its tax consultants opinion, the
        Company re-evaluated the amount of its provisions for contingencies
        related to the charges of ICMS before the agreement 69/89, and reversed
        R$16,784.

                                      F-18
<PAGE>   77

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

        The balance of the provision for monthly fees, activation fees and
        rentals above mentioned is R$93,496, net of escrow deposits in the
        amount of R$86,979 in 2000 (R$38,116 in 1999).

        Other litigation

        The Company is subject to legal proceedings, administrative proceedings
        and claims of various types in the ordinary course of its business for
        which a provision of R$1,365 and R$3,370, for 2000 and 1999
        respectively, has been recorded in these accompanying consolidated
        financial statements. In management's opinion, the ultimate settlements,
        if any, will not have any additional significantly adverse effect on the
        Company's financial condition or results of operations.

15.     FINANCIAL INSTRUMENTS

        (a)     Fair value of financial assets and liabilities

                Estimated fair values of the Company's financial assets and
                liabilities have been determined using available market
                information and appropriate valuation methodologies. However,
                considerable judgment is required in interpreting market data to
                develop the estimated fair values. Accordingly, the amounts
                presented below are not necessarily indicative of the amounts
                that could be realized in a current market exchange. The use of
                different market assumptions and/or estimation methodologies may
                have a material effect on the estimated fair values.

                The fair value information as of December 31, 2000 and 1999
                presented below is based on pertinent information available to
                management as of those dates. Financial assets or liabilities
                are not shown when no significant difference in values is
                believed to exist.

<TABLE>
<CAPTION>
                                                       2000                                   1999
                                          -----------------------------          -----------------------------
                                          BOOK VALUE         FAIR VALUE          BOOK VALUE         FAIR VALUE
                                          ----------         ----------          ----------         ----------
<S>                                       <C>                <C>                 <C>                <C>
        Short term debt                        9,777              9,705              90,264             90,264
        Long-term debt                       467,440            465,865             195,220            195,220
</TABLE>

                The carrying value of cash, cash equivalents, trade accounts
                receivable, other current assets, accounts payable and accrued
                liabilities are a reasonable estimate of their fair value
                because of the short maturities of such instruments. Interest
                rates that are currently available to the Company for issuance
                of debt with similar terms and maturities were used to estimate
                the fair value of loans and financing.

        (b)     Concentration of risks

                Credit risk with respect to trade accounts receivable is
                diversified. The Company continually monitors the level of trade
                accounts receivable and limits the exposure to bad debts by
                cutting access to the telephone network if any invoice is twenty
                days past due. Exceptions comprise telephone services that must
                be maintained for reasons of safety or national security.

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

                                      F-19
<PAGE>   78

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

16.     SWAPS

        At December 31, 2000 the Company had entered into swaps whereby the
        Company earns the exchange variation between the United States dollars
        and the Brazilian Real plus 9.10% to 14.90% and pays interest based on a
        short term inter bank rate. These agreements have total notional amount
        of R$90,284 and expire on various dates through 2005. The estimated fair
        value at December 31, 2000 was approximately R$7,200.

17.     STOCK-BASED COMPENSATION

        On October 5, 2000, the Company's Board of Directors approved two
        long-term incentive plans as follows:

        (a) The first plan covers certain key executives who may be granted
        target awards of Company shares of common or preferred stock. The awards
        are earned and shares will be issued only to the extent that the Company
        achieves performance goals determined by the Board of Directors during a
        five-year performance period. As of December 31, 2000, no shares have
        been granted and no compensation expense has been recognized.

        (b) The second plan covers key executives (who also participate in the
        first plan) and other employees. Options granted under this plan relate
        to preferred stock and are exercisable at the market price at the date
        of grant. The vesting period is 20% during the second year, 60% during
        the third year and 100% during the fourth year. At December 31, 2000
        327,607 options have been granted and none have been exercised as the
        vesting period had not begun.

        Pro forma information regarding net income and earnings per share is
        required by Statement 123, and has been determined as if the Company had
        accounted for its employee stock options under the fair value method of
        that Statement. The fair value for these options was estimated at the
        date of grant using a Black-Scholes option pricing model with the
        following weighted-average assumptions for 2000: risk-free interest
        rates of 6% dividend yields of 6%; volatility factors of the expected
        market price of the Company's preferred stock of 0.82; and a
        weighted-average expected life of the option of 7 years.

        The Black-Scholes option valuation model was developed for use in
        estimating the fair value of traded options, which have no vesting
        restrictions and are fully transferable. In addition, option valuation
        models require the input of highly subjective assumptions including the
        expected stock price volatility. Because the Company's employee stock
        options have characteristics significantly different from those of
        traded options, and because changes in the subjective input assumptions
        can materially affect the fair value estimate, in management's opinion,
        the existing models do not necessarily provide a reliable single measure
        of the fair value of its employee stock options.

        For purposes of pro forma disclosures, the estimated fair value of the
        options is amortized to expense over the options' vesting period. The
        Company's pro forma information for the year ended December 31, 2000
        follows:

<TABLE>
<S>                                                                           <C>
   Pro forma net income:                                                      R$26,228
   Pro forma basic and diluted earnings per thousand shares:                  R$0.08
</TABLE>

                                      F-20
<PAGE>   79

                       TELEMIG CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$

18.     OTHER INFORMATION

        The changes in the allowance for doubtful accounts during the three
        years ended December 31, 2000 was as follows:

<TABLE>
<CAPTION>
                                                            2000              1999                 1998
                                                         ---------          ---------           ----------
<S>                                                      <C>                <C>                 <C>
   Balance at beginning of period                          14,770             26,078              25,007
   Charged to cost and expenses                            21,556             15,364              90,927
   Write-off and recoveries                               (20,970)           (26,672)            (89,856)

   Balance at end of period                                15,356             14,770              26,078
</TABLE>

19.     SUBSEQUENT EVENTS

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

        (a)     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 or 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.

        (b)     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 jobs
                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 began on March 28, 2001, by all
                telecommunications services companies at the rate of 0.5% of the
                amount of gross operating telecommunications services revenue.

                                      F-21
<PAGE>   80

                      GLOSSARY OF TELECOMMUNICATIONS TERMS

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
                                        services standard utilizing the 850 MHz
                                        band in use in North America, parts of
                                        South America, Australia and various
                                        other areas.

analog:                                 A transmission method employing a
                                        continuous electrical signal that varies
                                        in amplitude or frequency in response to
                                        changes in sound, light, position, etc.,
                                        impressed on a transducer in the sending
                                        device.

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).

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.

CDMA (Code Division Multiple Access):   A standard of digital cellular
                                        telecommunications technology that
                                        provides more call carrying capacity
                                        than analog or TDMA

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 transmission and switching
                                        technologies employ a sequence of
                                        discrete, distinct pulses to represent
                                        information, as opposed to continuous
                                        analog signal. 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.

exchange:                               See Switch.

                                      G-1
<PAGE>   81

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.

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.

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.

PCS (Personal Communication Services):  PCS has come to represent two things:
                                        first, a digital wireless communications
                                        service operating over the 1.9 GHz band;
                                        and second, more generically, a wireless
                                        communications service utilizing a
                                        digital network that offers typical
                                        features such as voice, video and data
                                        applications, short messaging,
                                        voicemail, caller identification, call
                                        conferencing and call forwarding.
                                        Generic PCS suppliers promote this
                                        service in the ability of its features
                                        to be customized, or "bundled," to the
                                        needs of the individual customers.

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.

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

roaming:                                A function that enables subscribers to
                                        use their cellular telephones 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.

switch:                                 A device that opens or closes circuits
                                        or selects the paths or circuits to be
                                        used for transmission of information.
                                        Switching is the process of
                                        interconnecting circuits to form a
                                        transmission path between users.
                                        Switches may also record information for
                                        billing and control purposes.

TDMA (Time Division Multiple Access):   A standard of digital cellular
                                        telecommunications technology, which
                                        provides more call carrying capacity
                                        than analog, but less than CDMA.

value added services:                   Value added services provide additional
                                        functionality to the basic transmission
                                        services offered by a telecommunications
                                        network.

                                      G-2
<PAGE>   82

                                   SIGNATURES

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


                                    TELEMIG CELULAR PARTICIPACOES S.A.


                                       By:    /s/ JOAO COX NETO
                                              ----------------------------------
                                              Joao Cox Neto
                                              Chief Financial Officer and
                                              Market Relations Executive Officer


DATE: June 29, 2001
<PAGE>   83

ITEM 19 EXHIBITS

<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                    ----
<S>     <C>                                                                        <C>
1.      Charter of Telemig Celular Participacoes S.A. .................................*
2(a).   Amended and Restated Deposit Agreement dated as of November 2,
        1998 among Telemig Celular Participacoes S.A., The Bank of New
        York, as depositary and owners and beneficial owners of
        American Depositary Receipts .................................................**
2(b).   Not applicable.
2(c).   Not applicable.
3.      Not applicable.
4(a).   Cellular System Purchase and Sale Agreement dated November 24,
        1998 by and between Telemig Celular Participacoes S.A.,
        Northern Telecom do Brasil Industria e Comercio Ltda.,
        Northern Telecom do Brasil Comercio e Servicos Ltda., and
        Northern Telecom Limited ....................................................***
4(b).   Standard Concession Agreement for Mobile Cellular Service ..................****
4(c).   U.S.$21.3 million Credit Agreement dated December 31, 1997
        between Telecomunicacoes de Minas Gerais S.A. and the Export
        Development Corporation of Canada ...........................................E-2
4(d).   U.S.$141 million Amended and Restated Credit
        Agreement dated April 3, 2001 between Telemig
        Celular, the Export Development Corporation of Canada
        and others (including amendment dated
        April 23, 2001) ............................................................E-42
4(e).   R$260.3 million Credit Agreement dated November 9, 2000 among
        Telemig Celular, BNDES and others .........................................E-120
4(f).   U.S.$38.0 million Credit Agreement dated December 12, 1996
        between Telebras and Telecomunicacoes de Minas Gerais S.A .................E-149
5.      Not applicable.
6.      Computation of earnings per share (See Note 8 to the
        consolidated financial statements)
7.      Not applicable.
8.      List of subsidiaries (See "Item 4-Information on the
        Company-A.  History and development of the company-The
        Registrant and its operating subsidiary")
9.      Not applicable.
10.     None.
</TABLE>

------------------------------
*       Previously filed in Registration Statement on Form 20-F on September 18,
        1998 and in Form 6-K filed on April 23, 1999.

**      Previously filed in Registration Statement on Form F-6 on October 29,
        1998 (No. 333-9560)

***     Previously filed in Annual Report on Form 20-F on June 30, 1999.

****    Previously filed in Registration Statement on Form 20-F on September 18,
        1998.

                                      E-1