Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Financial Statements
TIM Celular S.A.
December 31, 2005 and 2004
with Report of Independent Auditors
TIM CELULAR S.A.
FINANCIAL STATEMENTS
December 31, 2005 and 2004
Contents
| Report of Independent Auditors | 1 | |
| Audited Financial Statements | ||
| Balance Sheets | 2 | |
| Statements of Operations | 4 | |
| Statements of Shareholders' Equity | 5 | |
| Statements of Changes in Financial Position | 6 | |
| Notes to Financial Statements | 7 | |
| A free translation from Portuguese into English of the Report of Independent Auditors on financial statements prepared in Brazilian currency in accordance with the accounting practices adopted in Brazil | ||
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
TIM Celular S.A.
| 1. | We have audited the accompanying balance sheets of TIM Celular S.A. as of December 31, 2005 and 2004, and the related statements of operations, of shareholders’ equity and of changes in financial position for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements. |
| 2. | We conducted our audits in accordance with generally accepted auditing standards in Brazil which comprised: (a) the planning of our work, taking into consideration the materiality of balances, the volume of transactions and the accounting and internal control systems of the Company and its subsidiaries, (b) the examination, on a test basis, of the documentary evidence and accounting records supporting the amounts and disclosures in the financial statements, and (c) an assessment of the accounting practices used and significant estimates made by the Company’s and subsidiaries’ management, as well as an evaluation of the overall financial statement presentation. |
| 3. | In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TIM Celular S.A. at December 31, 2005 and 2004, and the results of its operations, changes in its shareholders’ equity and changes in its financial position for the years then ended, in conformity with the accounting practices adopted in Brazil. |
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| 4. | Our audits were conducted with the objective of expressing an opinion on the financial statements referred to in the first paragraph above. The statements of cash flows and value added for the year ended December 31, 2005, prepared in accordance with the accounting practices adopted in Brazil, are presented to provide additional information on the Company, and are not a required component of the financial statements. This supplementary information was submitted to the same audit procedures described in the second paragraph above and, in our opinion is fairly presented, in all material respects, in relation to the basic financial statements taken as a whole. |
São Paulo, January 18, 2006
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP 015199/O-6
Mauro Moreira
Accountant CRC-1RJ 072056/O–0–S–SP
2
| A free translation from Portuguese into English of the financial statements prepared in accordance with the accounting practices adopted in Brazil | ||||||
TIM CELULAR S.A.
BALANCE SHEETS
December 31, 2005 and 2004
(In thousands of reais)
| 2005 | 2004 | |||
| Assets | ||||
| Current assets | ||||
| Cash and equivalents | 427,823 | 46,440 | ||
| Accounts receivable | 1,036,943 | 706,953 | ||
| Inventories | 108,270 | 110,339 | ||
| Taxes and contributions recoverable | 98,977 | 86,769 | ||
| Prepaid expenses | 29,165 | 64,026 | ||
| Other current assets | 7,916 | 7,681 | ||
| 1.709.094 | 1,022,208 | |||
| Noncurrent assets | ||||
| Taxes and contributions recoverable | 157,929 | 160,726 | ||
| Related parties | 529.985 | 5,646 | ||
| Judicial deposits | 971 | - | ||
| Other noncurrent assets | 14,105 | 5,035 | ||
| 702.990 | 171,407 | |||
| Permanent assets | ||||
| Investments | 1,051,972 | 1,188,079 | ||
| Property, plant and equipment | 6,072,325 | 5,590,580 | ||
| Deferred charges | 263,179 | 301,229 | ||
| 7,387,476 | 7,079,888 | |||
| Total assets | 9,799,560 | 8,273,503 | ||
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| 2005 | 2004 | |||
| Liabilities and shareholders´ equity | ||||
| Current liabilities | ||||
| Suppliers | 1,915.533 | 1,795,316 | ||
| Loans and financing | 54,505 | 18,059 | ||
| Salaries and related charges | 58,910 | 47,633 | ||
| Taxes, charges and contributions | 164,404 | 68,749 | ||
| Related parties | 219.791 | 697,638 | ||
| Concessions payable | 14,605 | 14,605 | ||
| Other current liabilities | 26,121 | 27,329 | ||
| 2,453,869 | 2,669,329 | |||
| Noncurrent liabilities | ||||
| Loans and financing | 1,328,543 | 8,069 | ||
| Provision for contingencies | 28,364 | 17,816 | ||
| Other noncurrent liabilities | 4,999 | 2,060 | ||
| 1,361,906 | 27,945 | |||
| Shareholders´ equity and funds for future capital | ||||
| increase | ||||
| Capital | 10,135,187 | 8,383,489 | ||
| Accumulated losses | (4,151,402) | (2,807,260) | ||
| 5,983,784 | 5,576,229 | |||
| Funds for future capital increase | 1 | - | ||
| Total shareholders´ equity and funds for future capital | 5,983,785 | 5,576,229 | ||
| increase | ||||
| 9,799,560 | 8,273,503 | |||
See accompanying notes.
4
TIM CELULAR S.A.
STATEMENTS OF OPERATIONS Years ended December 31, 2005 and 2004
(In thousands of reais, except loss per share, except in reais)
| 2005 | 2004 | |||
| Gross revenues | ||||
| Telecommunications services | 4,553,139 | 2,500,277 | ||
| Sale of goods | 1,306,629 | 925,849 | ||
| 5,859,768 | 3,426,126 | |||
| Deductions from gross revenues | (1,419,570) | (723,025) | ||
| Net revenues | 4,440,198 | 2,703,101 | ||
| Cost of services rendered | (1,751,478) | (1,021,194) | ||
| Cost of goods sold | (997,497) | (952,383) | ||
| Gross profit | 1,691,223 | 729,524 | ||
| Operating income (expenses): | ||||
| Selling | (1,808,506) | (1,245,106) | ||
| General and administrative | (525,200) | (367,190) | ||
| Equity pickup | (240,426) | (58,567) | ||
| Amortization of concession | (148,580) | (148,580) | ||
| Other operating income (expenses), net | 5,477 | (1,906) | ||
| (2,717,235) | (1,821,349) | |||
| Operating loss before financial results | (1,026,012) | (1,091,825) | ||
| Financial income (expenses): | ||||
| Financial income | 64,112 | 13,652 | ||
| Financial expenses | (206,906) | (83,969) | ||
| Foreign exchange variation, net | (172,079) | (19,380) | ||
| (314,873) | (89,697) | |||
| Operating loss | (1,340,885) | (1,181,522) | ||
| Non-operating result | (3,258) | (6,356) | ||
| Loss for the year | (1,344,143) | (1,187,878) | ||
| Loss per share | (0.04) | (0.05) | ||
See accompanying notes.
5
TIM CELULAR S.A.
STATEMENTS OF SHAREHOLDERS’ EQUITY
Years ended December 31, 2005 and 2004
(In thousands of reais)
| Total | Funds for | |||||||||
| Retained | shareholders´ | capital | ||||||||
| Capital | earnings | equity | increase | Total | ||||||
| Balances at December 31, 2003 | 5,296,018 | (1,619,382) | 3,676,636 | 475,237 | 4,151,873 | |||||
| Capital increase | 3,087,471 | - | 3,087,471 | (475,237) | 2,612,234 | |||||
| Loss for the year | - | (1,187,878) | (1,187,878) | - | (1,187,878) | |||||
| Balances at December 31, 2004 | 8,383,489 | (2,807,260) | 5,576,229 | - | 5,576,229 | |||||
| Capital increase | 1,751,698 | - | 1,751,698 | - | 1,751,698 | |||||
| Funds for capital increase | - | - | - | 1 | 1 | |||||
| Loss for the year | - | (1,344,142) | (1,344,143) | - | (1,344,142) | |||||
| Balances at December 31, 2005 | 10,135,187 | (4,151,402) | 5,983,784 | 1 | 5,983,785 | |||||
See accompanying notes.
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TIM CELULAR S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
Years ended December 31, 2005 and 2004
(In thousands of reais)
| 2005 | 2004 | |||
| Sources of working capital | ||||
| From shareholders: | ||||
| Funds from shareholders | 1,647,379 | 1,328,744 | ||
| Acquisition of investment | 104,320 | 1,183,186 | ||
| Capitalization of net assets | - | 100,304 | ||
| 1,751,699 | 2,612,234 | |||
| From third parties: | ||||
| Loans and financing | 1,320,000 | - | ||
| Decrease in noncurrent assets | 503,365 | 117,161 | ||
| Increase in noncurrent liabilities | 2,945 | 2,733 | ||
| 1,826,310 | 119,894 | |||
| Total sources | 3,578,009 | 2,732,128 | ||
| Applications of working capital | ||||
| Loss for the year | 1,344,143 | 1,187,878 | ||
| Amounts which do not affect working capital: | ||||
| Exchange and monetary variation and interest | 39,337 | (963) | ||
| Provision for contingencies | (10,549) | (18,662) | ||
| Depreciation and amortization | (1,004,083) | (637,429) | ||
| Equity pickup | (240,426) | (58,567) | ||
| Residual value of fixed asset disposals | (3,929) | (9,621) | ||
| Total from operations | 124,493 | 462,636 | ||
| Additions to fixed assets | 1,451,706 | 1,958,711 | ||
| Additions to fixed asset with capitalization of assets | - | 36,292 | ||
| Additions to investments | 104,320 | 1,246,645 | ||
| Increase in noncurrent assets | 982,320 | 187,820 | ||
| Advance for future capital increase | 6,943 | - | ||
| Decrease in noncurrent liabilities | 5,881 | 31,876 | ||
| 2,551,170 | 3,461,344 | |||
| Total applications | 2,675,663 | 3,923,980 | ||
| Increase (decrease) in working capital | 902,346 | (1,191,852) | ||
| Changes in working capital: | ||||
| Current assets | ||||
| At end of year | 1,709,094 | 1,022,208 | ||
| At beginning of year | 1,022,208 | 605,657 | ||
| 686,886 | 416,551 | |||
| Current liabilities | ||||
| At end of year | 2,453,869 | 2,669,329 | ||
| At beginning of year | 2,669,329 | 1,060,926 | ||
| (215,460) | 1,608,403 | |||
| Increase (decrease) in working capital | 902,346 | (1,191,852) | ||
See accompanying notes.
7
TIM CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
(In thousands of reais)
1. Operations
TIM Celular S.A., located at Avenida Giovanni Gronchi, 7143 São Paulo – SP, is a privately-held corporation, wholly owned by TIM Brasil Serviços e Participações S.A. – a company from the Telecom Italy Group.
The Company´s principal business purpose is the exploitation of telecommunications services, including mobile telephone services and others, in accordance with concessions, authorizations and permissions granted.
The Company is authorized to render personal mobile services in the following States:
Region I – Rio de Janeiro, Espírito Santo, Amazonas, Amapá, Pará, Maranhão and Roraima;
Region II – Acre, Rondônia, Mato Grosso, Mato Grosso do Sul, Tocantins, Goiás, Federal District and Rio Grande do Sul;
Region III – São Paulo.
Services provided by the Company and the respective rates are regulated by ANATEL (“Agência Nacional de Telecomunicações”), regulatory authority of telecommunications in Brazil.
2. Corporate Reorganization
On October 28, 2004, with ANATEL approval, Maxitel S.A. shares held by TIM Brasil Serviços e Participações S.A., corresponding to its total capital, were transferred to TIM Celular S.A. by their book value as of September 30, 2004, at the amount of R$ 1,246,645, as per valuation report issued by independent appraisers.
On December 14, 2005, Blah! Sociedade Anônima de Serviços e Comércio shares held by TIM International N.V., corresponding to its total capital, were transferred to TIM Brasil Serviços e Participações S.A. capital by their book value as of November 30, 2005, at the amount of R$ 509, as per valuation report issued by independent appraisers.
On December 21, 2005, Blah! Sociedade Anônima de Serviços e Comércio shares held by TIM Brasil Serviços e Participações S.A., corresponding to its total capital, at the amount of R$ 509, were transferred to TIM Celular S.A..
On December 21, 2005, CRC – Centro de Relacionamento com Clientes Ltda. shares held by TIM Brasil Serviços e Participações S.A., corresponding to its total capital, at the amount of R$ 103,811 were transferred to TIM Celular S.A. by their book value as of November 30, 2005, as per valuation report issued by independent experts.
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2. Corporate Reorganization (Continued)
The Company recorded recurring losses and negative working capital. Such results are in line with management expectations, considering the operations development plans in the regions where the Company operates.
Cash projections prepared by the Company management consider the inflow of funds from new financings and capital contribution by shareholders until 2007, when, according to such projections, the Company will achieve the financial and economic break even and consequently generate positive cash flow.
3. Presentation of the Financial Statements
The Company financial statements were prepared in accordance with the accounting practices adopted in Brazil and rules applicable to the telecommunications utility concessionaires.
To allow better comparison with the financial statements for the current year, certain reclassifications were made in the financial statements for 2004. However, the amount of said reclassifications is not material in relation to the financial statements, as such, are not being disclosed.
4. Summary of Accounting Practices
| a) | Cash and cash equivalents |
| These represent cash and bank balances and temporary cash investments, recorded at cost, plus interest accrued up to the balance sheet date. | |
| b) | Accounts receivable |
| Accounts receivable from mobile telephone subscribers are calculated at the tariff rate on the date the services were rendered. Accounts receivable also include services provided to customers up to the balance sheet date but not yet invoiced and receivables from sales of handsets and accessories. | |
| c) | Allowance for doubtful accounts |
| The allowance for doubtful accounts is recorded based on the customer base profile, the aging of overdue accounts, the economic scenario and the risks involved in each case. The allowance amount is considered sufficient to cover possible losses on the receivables. | |
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4. Summary of Accounting Practices (Continued)
| d) | Inventories |
| Refer to cellular handsets and accessories, which are stated at average acquisition cost, which does not exceed replacement cost. A provision to adjust the slow-moving items balance to the related realization value was set up. | |
| e) | Investments |
| Investments in subsidiaries are carried under the equity method based on the subsidiaries’ equity at the balance sheet date and consistent with the accounting practices adopted by the Company. | |
| f) | Property, plant and equipment |
| Property, plant and equipment is stated at acquisition and/or construction cost, less accumulated depreciation calculated based on the straight-line method at rates that take into consideration the estimated useful lives of the assets. Repair and maintenance costs which extend the useful lives of the related assets are capitalized, while other routine costs are charged to the result of operations. | |
| Interest computed on debts that finance the construction of property, plant and equipment, is capitalized until the related assets become operational. | |
| Noncurrent assets, mainly property, plant and equipment, are periodically reviewed for possible impairment. | |
| The useful lives of all property, plant and equipment items are regularly reviewed to reflect any technological changes. | |
| g) | Deferred charges |
| Deferred charges include pre-operating expenses and financial costs of maintaining the working capital required in the pre-operating stage, amortized by the straight-line method, over ten years, as from the Company start-up date. | |
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4. Summary of Accounting Practices (Continued)
| h) | Income tax and social contribution |
| Income and social contribution taxes should be calculated based on income, adjusted to taxable income by additions and exclusions as determined by current legislation. Considering the losses incurred by the Company, it did not incur in taxable income, and no current income and social contribution taxes have been recorded. On the tax losses, no deferred credits were recorded, in view of the uncertainty of its realization. | |
| i) | Loans and financing |
| Loans and financing include accrued interest to the balance sheet date. As mentioned in Note 14, the Company is party to certain derivative instruments that convert its US dollar denominated liabilities into Reais, with the objective of hedging itself against risks associated with unexpected real/US dollar exchange rates. Gains and losses from such operations are recognized in the statements of operations under the accrual method, based on the rates established in the contracts. | |
| j) | Provision for contingencies |
| The provision for contingencies is recorded based on opinion of legal advisors and of the Company management, and is restated to the balance sheet date based on the probable losses at the end of the claims. | |
| k) | Revenue recognition |
| Service revenues are recognized as the services are provided. Billings are monthly recorded. Unbilled revenues from the last billing date to a client and the month end are recognized during the month in which the service was provided. Revenues from pre-paid telecommunication services are deferred and recorded to income in the period in which they are utilized. Revenues from the sale of handsets and accessories are recognized as the products are delivered to and accepted by end consumers or distributors. | |
| l) | Financial income (expenses) |
| It represents interest and exchange and monetary variations related to marketable securities, hedge contracts, loans and financing received and granted. | |
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| m) | Use of estimates |
| The preparation of financial statements in conformity with accounting practices adopted in Brazil requires management to make estimates and assumptions concerning the amounts of recorded assets and liabilities and the disclosure of contingent assets and liabilities at the Financial Statements date, as well as the estimation of revenues and expenses for the period. The actual results may differ from those estimates. | |
| n) | Foreign currency transactions |
| Transactions in foreign currency are recorded at the rate of exchange prevailing of the transaction date. Foreign currency denominated assets and liabilities are translated into reais using the exchange rate of the balance sheet date, which is reported by the Central Bank of Brazil. Exchange gains and losses are recognized in the statement of operations as they occur. | |
| o) | Employees’ profit sharing |
| The Company records a provision for employees’ profit sharing, based on the targets disclosed to its employees and approved by the Board of Directors. The related amounts are recorded as personnel expenses and allocated to profit and loss accounts considering each employee’s cost center.` | |
| p) | Supplemental information |
| In order to provide additional information, the following are being presented: a) statement of cash flows, prepared according to the Accounting Rules and Procedures – NPC 20 issued by IBRACON, and; b) value added statement, prepared according to Resolution – CFC #1.010. | |
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5. Cash and Cash Equivalents
| 2005 | 2004 | |||
| Cash and banks | 427,823 | 46,440 | ||
6. Accounts Receivable
| 2005 | 2004 | |||
| Services billed | 315,334 | 205,408 | ||
| Unbilled services | 173,488 | 79,561 | ||
| Network use | 206,293 | 218,924 | ||
| Sale of goods | 447,921 | 303,614 | ||
| 1,143,036 | 807,507 | |||
| Allowance for doubtful accounts | (106,244) | (100,554) | ||
| 1,036,792 | 706,953 | |||
Annually, the criteria for calculation of the allowance for doubtful accounts are reviewed to reflect the current accounts receivable risk scenario.
7. Inventories
| 2005 | 2004 | |||
| Cellular handsets | 104,430 | 109,979 | ||
| Accessories and kits for prepaid cards | 2,149 | 650 | ||
| TIM chips | 11,372 | 8,172 | ||
| 117,951 | 118,801 | |||
| Provision for adjustment to realizable value | (9,681) | (8,462) | ||
| 108,270 | 110,339 | |||
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7. Taxes and Contributions Recoverable
| 2005 | 2004 | |||
| Income tax | 10,730 | 136 | ||
| State VAT (ICMS) | 210,411 | 216,565 | ||
| Social contribution taxes on gross revenue (PIS/COFINS) | 34,606 | 30,146 | ||
| IRRF recoverable | 327 | 430 | ||
| Other | 832 | 218 | ||
| 256,906 | 247,495 | |||
| Current | (98,977) | (86,769) | ||
| Noncurrent | 157,929 | 160,726 | ||
The noncurrent portion refers to ICMS on permanent assets.
8. Related Parties
Balances of related party transactions at December 31, 2005 are as follows:
| Assets | ||||||||||||||||
| Accounts receivable– Network use |
Intercompany loan |
AFAC | Accounts receivable – Sale of handsets |
CSP 41 - Cobilling | Other credits |
Total 2005 | Total 2004 | |||||||||
| TIM Nordeste | ||||||||||||||||
| Telecom. S.A. | - | - | - | 1,084 | 15,026 | - | 16,110 | - | ||||||||
| TIM Sul S.A. | 28 | - | - | 2,319 | 17,958 | - | 20,305 | 253 | ||||||||
| TIM Brasil Serv. e | ||||||||||||||||
| Participações S.A. | - | 2,909 | - | - | - | 34 | 2,943 | 275 | ||||||||
| Maxitel S.A. | - | 347,091 | - | 72 | 120,384 | 7,825 | 475,373 | 5 | ||||||||
| Blah! | - | - | - | - | - | 34 | 34 | 1,714 | ||||||||
| CRC Ltda | - | 2,148 | 6,943 | - | - | 3,912 | 13,003 | 2,529 | ||||||||
| Telecom Italia | ||||||||||||||||
| LATAM | - | - | - | - | - | 1,605 | 1,605 | 180 | ||||||||
| TI Audit | - | - | - | - | - | 74 | 73 | - | ||||||||
| Telecom Italia S.p.A. | - | - | - | - | - | 539 | 539 | 690 | ||||||||
| - | ||||||||||||||||
| Total | 28 | 352,148 | 6,943 | 3,475 | 153,368 | 14,023 | 529.985 | 5,646 | ||||||||
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8. Related Parties (Continued)
| Liabilities | ||||||||||
| Accounts | Accounts | |||||||||
| payable – | payable – | |||||||||
| Network | Purchase of | Other | Total | Total | ||||||
| use | handsets | debts | 2005 | 2004 | ||||||
| TIM Nordeste Telecom. S.A. | 7,185 | 3,023 | - | 10,208 | 210 | |||||
| TIM Sul S.A. | 6,954 | 1,368 | - | 8,322 | 177 | |||||
| TIM Brasil Serv. e Participações | ||||||||||
| S.A. | - | - | 2,068 | 2,068 | 876 | |||||
| Maxitel S.A. | 46,617 | 3,785 | 237 | 50,639 | 2,722 | |||||
| Blah! | - | - | 965 | 965 | 1,465 | |||||
| CRC Ltda | - | - | 121,028 | 121,028 | 74,804 | |||||
| Telecom Italia LATAM | - | - | 22 | 22 | 27 | |||||
| Telecom Italia S.p.A. | - | - | 26,155 | 26,155 | 612,435 | |||||
| TILAB | - | - | 153 | 153 | - | |||||
| IT Telecom Italia | - | - | 231 | 231 | 300 | |||||
| Webegg S.p.A. (antiga Teleap) | - | - | - | - | 4,622 | |||||
| Total | 60,756 | 8,176 | 150,859 | 219,791 | 697,638 | |||||
| Revenues | ||||||||||||||
| Network | Sales of | Exchange | Total | Total | ||||||||||
| use | Roaming | handsets | Financial | variation | 2005 | 2004 | ||||||||
| TIM Nordeste Telecom. S.A. | - | - | 2,130 | - | - | 2,130 | 3,168 | |||||||
| TIM Sul S.A. | 28 | - | 7,355 | - | - | 7,383 | 6,134 | |||||||
| TIM Brasil Serv. e | ||||||||||||||
| Participações S.A. | - | - | - | 604 | - | 604 | - | |||||||
| Maxitel S.A. | - | - | 426 | 44,764 | - | 45,190 | - | |||||||
| Blah! | - | - | - | - | - | - | 119 | |||||||
| CRC Ltda | - | - | - | 34 | - | 34 | 292 | |||||||
| Telecom Italia LATAM | - | - | - | - | - | - | 1,492 | |||||||
| Telecom Italia S.p.A. | - | 9,932 | - | - | 2,303 | 12,235 | - | |||||||
| IT Telecom Italia | - | - | - | - | 69 | 69 | - | |||||||
| Total | 28 | 9,932 | 9,911 | 45,402 | 2,372 | 67,645 | 11,205 | |||||||
15
8. Related Parties (Continued)
| Custo/Despesa | ||||||||||||
| Network | Exchange | Total | Total | |||||||||
| usage | Roaming | variation | Other | 2005 | 2004 | |||||||
| TIM Nordeste Telecom. S.A. | 52,220 | - | - | - | 52,220 | - | ||||||
| TIM Sul S.A. | 59,261 | - | - | - | 59,261 | - | ||||||
| TIM Brasil Serv. e Participações S.A. | - | - | - | - | - | 54,714 | ||||||
| Maxitel S.A. | 52,969 | - | - | 1,590 | 54,559 | 4,040 | ||||||
| Blah! | - | - | - | 6,495 | 6,495 | 10,491 | ||||||
| CRC Ltda | - | - | - | 46,176 | 46,176 | 38,008 | ||||||
| Telecom Italia LATAM | 2,454 | 2,454 | ||||||||||
| Telecom Italia S.p.A. | - | 4,980 | - | - | 4,980 | 29,305 | ||||||
| IT Telecom Italia | - | - | - | - | - | 2,438 | ||||||
| TILAB | 9 | 9 | ||||||||||
| Total | 164,450 | 4,980 | 2,463 | 54,261 | 226,154 | 138,996 | ||||||
Intercompany loans
Intercompany loans with TIM Brasil Serviços e Participações S.A, CRC Ltda. and Maxitel S.A. provide for charges equivalent to 100% of the Interbank Deposit Certificate (CDI) variation.
CSP 41 - Cobilling
In view of the overlapping of licenses granted to TIM Celular by Anatel with one previously-held by the Company, authorizations for other TIM Group companies related to long-distance services were terminated in 2005. Company clients now make long-distance calls by selecting one of the call operators qualified to render such service.
Since March 2005, TIM Celular S.A. is the only TIM Group company with license to render long-distance call services. As such, TIM Celular S.A. records as cobilling the amounts billed to clients of other Group call operators for the use of such service.
Network use
The Company records as Accounts Payable between related parties the expenses referring to network use tariffs (VU-M), charged for the calls made through the network of other Group call operators.
16
8. Related Parties (Continued) Purchase and sale of handsets
In order to optimize the excess inventories at TIM Group companies, handset purchases and sale operations were carried out during the year among Group companies. These operations were carried out at cost of acquisition of handsets from third parties.
Purchases of handsets from Group companies totaled R$10,452 in 2005.
Administrative expenses
In 2004, TIM Brasil Serviços e Participações S.A. (group holding) incurred in personnel, legal advice, human resources and advertising expenses, among others, referring to Group management, and the amounts applicable to the Company were passed on, considering a rate of 10% for purposes of interest.
17
10. Investments
| 2005 | ||||||||
| Blah! S.A. de | ||||||||
| Serviços e | CRC | |||||||
| Maxitel S.A | Comércio | Ltda. | Total | |||||
| Capital of the subsidiary | 1,200,769 | 92,383 | 98,434 | |||||
| 98,433,59 | ||||||||
| Number of shares held | 769,629,057 | 92,383,315 | 9 | |||||
| Total equity interest held | 100% | 100% | 100% | |||||
| Shareholders´ equity | 947,009 | 739 | 104,224 | |||||
| Income (loss) for the year | (241,070) | (3,351) | 2,501 | (241,920) | ||||
| Equity pickup (a) | (241,070) | 231 | 413 | (240,426) | ||||
| Investment | 947,009 | 739 | 104,224 | 1,051,972 | ||||
| (a) | Equity pickup in the subsidiaries Blah! S.A. de Serviços e Comércio and CRC Ltda. was calculated on income recorded by subsidiaries after the transfer of shares to TIM Celular S.A. on the base date November 30, 2005. |
| 2004 | ||
| Maxitel S.A. | ||
| Subsidiary´s capital | 1,200,769 | |
| Number of shares held | 769,629,057 | |
| Total equity interest held | 100,00% | |
| Shareholders´ equity | 1,188,079 | |
| Loss for the year | (274,425) | |
| Equity pickup (a) | (58,567) | |
| Investment | 1,188,079 | |
| (a) | equity pickup was calculated on income recorded by the parent company after the transfer of Maxitel shares to TIM Celular S.A. on the base date September 30, 2004. |
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11. Property, Plant and Equipment
| 2005 | 2004 | |||||||||
| Annual | ||||||||||
| depreciation | ||||||||||
| rate | Accumulated | Net | Net | |||||||
| % | Cost | depreciation | balance | balance | ||||||
| SMP exploration rights | 10 | 2,000,457 | (466,450) | 1,534,007 | 1,682,588 | |||||
| Switching/transmission | ||||||||||
| equipment | 14.29 | 2,239,552 | (460,724) | 1,778,828 | 1,350,731 | |||||
| Lease free handsets | 50 | 336,432 | (159,406) | 177,026 | 117,504 | |||||
| Infrastructure | 33.33 | 909,637 | (240,555) | 669,082 | 597,015 | |||||
| Leasehold improvements | 33.33 | 54,493 | (21,801) | 32,692 | 23,537 | |||||
| Software and hardware | 20 | 616,769 | (196,438) | 420,331 | 379,365 | |||||
| Assets for general use | 10 | 136,685 | (18,629) | 118,056 | 49,947 | |||||
| Intangible assets | 20 | 1,382,128 | (326,963) | 1,055,165 | 625,981 | |||||
| Assets and installations in | ||||||||||
| service | 7,676,153 | (1,890,966) | 5,785,187 | 4,826,668 | ||||||
| Land | 10,873 | - | 10,873 | 9,354 | ||||||
| Construction in progress | 276,265 | - | 276,265 | 754,558 | ||||||
| 7,963,291 | (1,890,966) | 6,072,325 | 5,590,580 | |||||||
The Company uses rented areas for installation of their transmission equipment, of which the rental amount is provisioned and posted monthly to income.
The work in progress balance refers basically to the construction of new transmission units (Cell sites – BTS) for network expansion.
During 2005, the amount of R$ 3,689 was recorded in property, plant and equipment relating to financial charges of loans that financed the construction.
SMP exploration rights
Authorization to render the Personal Mobile Service (SMP) by TIM Celular S.A. (regions I, II, III) was granted by means of the terms signed in 2001 with Anatel for exploration of SMP during fifteen years within the Company´s operating area.
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11. Property, Plant and Equipment (Continued)
SMP exploration rights (Continued)
In 2001 and 2003, the Company obtained authorization from Anatel to use radiofrequency blocks associated to the authorization to render SMP at the radiofrequency of 1800 MHz and 900 MHz, respectively.
Authorization amounts for exploration of SMP are shown below:
| 2005 | 2004 | |||
| SMP exploration rights - principal | ||||
| Balances at December 31, 2002 | 1,859,411 | 1,859,411 | ||
| Authorizations obtained in 2003 | 66,352 | 66,352 | ||
| 1,925,763 | 1,925,763 | |||
| Spectrum refarming | 13,664 | 13,664 | ||
| Capitalized charges | 61,030 | 61,030 | ||
| 2,000,457 | 2,000,457 | |||
| Accumulated amortization | (466,450) | (317,869) | ||
| 1,534,007 | 1,682,588 | |||
12. Deferred Charges
| 2005 | 2004 | |||
| Pre-operating expenses: | ||||
| Third-party services | 221,784 | 221,784 | ||
| Personnel expenses | 57,884 | 57,884 | ||
| Rent | 48,914 | 48,914 | ||
| Materials | 3,439 | 3,439 | ||
| Depreciation | 10,202 | 10,202 | ||
| Financial charges, net | 34,107 | 34,107 | ||
| Other expenses | 4,170 | 4,170 | ||
| 380,500 | 380,500 | |||
| Accumulated amortization | (117,321) | (79,271) | ||
| 263,179 | 301,229 | |||
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13. Suppliers
| 2005 | 2004 | |||
| Suppliers | 1,830,209 | 1,731,346 | ||
| Network use services | 82,810 | 63,970 | ||
| 1,913,019 | 1,795,316 | |||
The balance payable for network use services comprises: (i) use of the network of other fixed and mobile cell telephone operators, where calls are initiated in TIM network and end in the network of other operators (detraf); (ii) calls made when customers are outside their registration area, and are therefore considered a visitor in the other network (roaming); and (iii) calls made by customers when they choose another long-distance call operator – CSP (“cobilling”).
14. Loans and Financing
| Guarantees | 2005 | 2004 | ||||
| Foreign currency – United States dollar | ||||||
| Compaq Financial Services Corporation – debit balance is updated by the foreign exchange variation, plus 6.5% interest p.a. above LIBOR. |
Telecom Italia e | |||||
| Equipamentos Comfort | ||||||
| Letter (book value of R$ | ||||||
| 5,599 in 2005 and R$ | ||||||
| 11,443 in 2004). | 2,378 | 13,483 | ||||
| Local currency | ||||||
| Banco BBA Creditanstalt S.A. – debit balance is updated | Promissory note | |||||
| by the CDI rate variation, plus 3.3% interest p.a. | 5,198 | 8,563 | ||||
| BNDES (National Bank for Economic and Social | Guarantee by the parent | |||||
| Development): bears average interest of 3.75% p.a., plus | company, and link to the | |||||
| variation of the TJLP long-term interest rate), as disclosed by | service collection | |||||
| the Central Bank of Brazil. | installment. | |||||
| 715,597 | - | |||||
| BNDES (National Bank for Economic and Social | Bank garantee | |||||
| Development): bears average interest of 3 p.a., plus | ||||||
| variation of the TJLP long-term interest rate), as disclosed by | 20,054 | |||||
| the Central Bank of Brazil. | - | |||||
| Union Debt (a) – debit balance is updated by the CDI rate | Parent company surety | |||||
| variation, plus an applicable margin of 1.25% p.a. until | ||||||
| 8/26/06; as from this date, the applicable margin will be | ||||||
| established according to the Consolidated Net Debt / | ||||||
| Consolidated EBITDA rate. | 638,361 | - | ||||
| Hedge contracts | 1,460 | 4,082 | ||||
| 1,383,048 | 26,128 | |||||
| Current | (54,505) | (18,059) | ||||
| Noncurrent | 1,328,543 | 8,069 | ||||
21
14. Loans and Financing (Continued)
(a) The following financial institutions are part of the loan agreement: HSBC Bank Brasil S.A.
– Banco Múltiplo, Banco ABN AMRO Real S.A., Banco BNP Paribas Brasil S.A., Banco Bradesco S.A., Banco do Brasil S.A., Banco Itaú BBA S.A., Banco Santander Brasil S.A., Banco Société Générale Brasil S.A., Banco Votorantim S.A., Unibanco – União de Bancos Brasileiros S.A.
The union debt is subjected to certain covenants regarding specific financial ratios. As of December 31, 2005, the company was meeting all the ratios required.
The Company entered into hedging transactions to protect itself against devaluation of the Brazilian currency (“real”) in relation to U.S. dollar, in which the term is the same as that stipulated in the financing agreement.
The noncurrent portion of loans and financing mature as follows:
| 2007 | 41,676 | |
| 2008 | 422,831 | |
| 2009 | 422,831 | |
| 2010 | 122,831 | |
| 2011 onwards | 318,374 | |
| 1,328,543 | ||
15. Salaries and Related Charges
| 2005 | 2004 | |||
| Social charges | 12,889 | 9,870 | ||
| Labor provisions | 43,320 | 35,828 | ||
| Employee retention | 2,701 | 1,935 | ||
| 58,910 | 47,633 | |||
16. Taxes, Charges and Contributions
| 2005 | 2004 | |||
| ICMS | 108,391 | 48,927 | ||
| COFINS | 14,400 | 7,861 | ||
| PIS | 3,120 | 1,767 | ||
| FISTEL | 17,513 | - | ||
| FUST | 2,115 | 1,037 | ||
| FUNTTEL | 1,057 | 519 | ||
| IRRF | 1,113 | 1,374 | ||
| ISS | 12,121 | 4,072 | ||
| Other | 4,574 | 3,192 | ||
| 164,404 | 68,749 | |||
22
17. Concessions Payable
| 2005 | 2004 | |||
| SMP exploration rights: | ||||
| Authorizations acquired | 66,352 | 66,352 | ||
| Payments | (66,352) | (66,352) | ||
| Monetary adjustment | 14,605 | 14,605 | ||
| 14,605 | 14,605 | |||
18. Provision for Contingencies
The Company is party to certain legal proceedings (labor, tax and civil) arising in the ordinary course of their business, and has recorded provisions when management believes that it can reasonably estimate probable losses, based on the opinion of their legal advisors.
The provision for contingencies is comprised as follows:
| 2005 | 2004 | |||
| Civil | 8,337 | 3,852 | ||
| Labor | 15,193 | 13,964 | ||
| Tax | 3,811 | - | ||
| Regulatory | 1,023 | - | ||
| 28,364 | 17,816 | |||
Civil contingencies
Civil contingencies refer to claims filed by former customers in connection with billing disputes, as well as claims for civil damages.
Labor contingencies
These contingencies involve several labor claims, particularly with reference to salary issues, such as salary differences and parity, overtime, among others.
Tax contingencies
The Company was served delinquency notices by the Rio de Janeiro State tax authorities, amounting to R$ 3,678, related to fine on voluntary payment delay made in a lower value in view of the inclusion of arrears interest lower than the due amount. The Company is currently discussing such notices with the tax authorities and, based on the opinion of both internal and external lawyers, management concluded that the likelihood of losses on such proceedings is probable.
23
17. Provision for Contingencies (Continued)
Regulatory contingencies
Due to noncompliance with certain provisions of the Personal Mobile Service Regulation (SMP) and quality targets, defined in the General Plan of Quality Targets for SMP (PGMQ-SMP), Anatel started a proceeding for noncompliance with obligations (PADO) against the Company.
The Company has endeavored to contest the proceeding. The defense arguments, most of which having technical and juridical nature, may contribute to a significant reduction of the penalty initially applied or definitive PADO revocation without any penalty application. The provision for regulatory contingencies was set up based on the amount of the penalties received for which the risk of loss is considered probable.
Fund for Universalization of Telecommunications Services – FUST contribution tax
Anatel issued on December 15, 2005 Abridgment of Law No. 01, aiming to collect the Fust contribution tax on interconnection revenues of telecommunications service providers, as from enactment of Law No. 9998, dated August 17, 2000. The Company believes that the referred to revenue is not subject to FUST levy, based on applicable legislation (including the provisions of sole paragraph of article 6 of Law No. 9998/00), and management intends to take applicable measures to defend Company interests. Due to the different opinion of Anatel about the matter, Company internal and external legal counsel evaluated arguments for and against Anatel’s opinion and, considering the current status of the discussion about the matter, they concluded that the likelihood of an unfavorable outcome for the Company is remote. In view of this and according to applicable accounting practices, management has not set up any corresponding provision for this matter.
19. Capital
At December 31, 2005, the subscribed and paid in capital amounts to R$ 10,135,187 (R$ 8,383,489 in 2004), represented by 31,506,833,561 registered common shares (23,447,833,718 in 2004) with no par value.
24
20. Net Operating Income
| 2005 | 2004 | |||
| Revenue from telecommunications services | ||||
| Subscription charges | 158,372 | 69,504 | ||
| Use charges | 2,020,561 | 1,200,683 | ||
| Network use | 1,274,955 | 937,239 | ||
| Long distance service | 805,796 | 158,197 | ||
| Value-added services - VAS | 263,900 | 113,711 | ||
| Other | 29,555 | 20,943 | ||
| 4,553,139 | 2,500,277 | |||
| Sales of products | 1,306,629 | 925,849 | ||
| Gross operating income | 5,859,768 | 3,426,126 | ||
| Deductions | ||||
| Taxes | (1,260,626) | (658,026) | ||
| Discounts | (107,423) | (64,999) | ||
| Other | (51,521) | - | ||
| (1,419,570) | (723,025) | |||
| 4,440,198 | 2,703,101 | |||
21. Cost of Services Rendered and Goods Sold
| 2005 | 2004 | |||
| Personnel | (51,969) | (40,211) | ||
| Third-party services | (142,412) | (103,591) | ||
| Interconnection charges | (947,263) | (493,639) | ||
| Depreciation and amortization | (501,544) | (292,954) | ||
| Telecommunications supervision fund (FISTEL) | (7,182) | (6,114) | ||
| Other | (101,108) | (84,685) | ||
| Cost of services rendered | (1,751,478) | (1,021,194) | ||
| Cost of goods sold | (997,497) | (952,383) | ||
| Total cost of services rendered and goods sold | (2,748,975) | (1,973,577) | ||
25
22. Selling Expenses
| 2005 | 2004 | |||
| Personnel | (125,288) | (89,648) | ||
| Third-party services | (1,161,333) | (797,180) | ||
| Allowance for doubtful accounts | (123,665) | (83,493) | ||
| Telecommunications supervision fund (FISTEL) | (170,019) | (114,840) | ||
| Depreciation and amortization | (160,718) | (96,781) | ||
| Other | (67,483) | (63,164) | ||
| (1,808,506) | (1,245,106) | |||
23. General and Administrative Expenses
| 2005 | 2004 | |||
| Personnel | (109,740) | (71,589) | ||
| Third-party services | (178,926) | (167,283) | ||
| Depreciation and amortization | (193,241) | (99,111) | ||
| Other | (43,293) | (29,207) | ||
| (525,200) | (367,190) | |||
24. Other Operating Income (Expenses), net
| 2005 | 2004 | |||
| Income | ||||
| Fines on telecommunications services | 11,531 | 9,072 | ||
| Reversal of provision for contingency | - | 2,497 | ||
| Bonus received | 12,367 | - | ||
| Other operating income | 9 | 4,215 | ||
| 23,907 | 15,784 | |||
| Expenses | ||||
| Taxes, charges and contributions | (3,232) | (5,620) | ||
| Provision for contingencies | (10,549) | (9,732) | ||
| Other operating expenses | (4,649) | (2,338) | ||
| (18,430) | (17,690) | |||
| Other operating income (expenses), net | 5,477 | (1,906) | ||
26
25. Financial Income
| 2005 | 2004 | |||
| Discounts obtained | 1,881 | 3,941 | ||
| Bank earnings | 10,118 | 4,661 | ||
| Interest on accounts receivable | 6,164 | 4,626 | ||
| Interest on intercompany loans | 45,402 | 41 | ||
| Other income | 547 | 383 | ||
| 64,112 | 13,652 | |||
26. Financial Expenses
| 2005 | 2004 | |||
| Interest on loans and financing | (71,489) | (5,252) | ||
| PIS/COFINS on financial income | (14,189) | (2,675) | ||
| Monetary adjustment | (7,012) | (7,725) | ||
| Discounts rendered | (45,095) | (21,469) | ||
| CPMF | (26,975) | (12,870) | ||
| Interest on suppliers | (9,595) | (249) | ||
| Interest on concessions | - | (4,103) | ||
| Income tax on remittance | (21,831) | (19,910) | ||
| Other expenses | (10,720) | (9,716) | ||
| (206,906) | (83,969) | |||
27. Non-operating Result
| 2005 | 2004 | |||
| Income | ||||
| Fixed asset disposals | 3,690 | 2,586 | ||
| Expenses | ||||
| Cost of fixed assets disposed of | (6,422) | (5,760) | ||
| Non-operating donations | (526) | (3,182) | ||
| (6,948) | (8,942) | |||
| Non-operating result | (3,258) | (6,356) | ||
27
28. Tax Credits
At December 2005, the Company had income and social contribution tax losses amounting to R$ 2,780,005 (R$ 2,309,704 in 2004) each, to be offset against future taxable profit. Although such tax credits are not subject to statute of limitations, the Company may only offset the amount equivalent to 30% of the taxable profit in each year.
Income and social contribution tax credits, totaling approximately R$ 945,000, resulting from income and social contribution tax losses, will only be recorded in the financial statements when the Company management understands that there are effective and consistent perspectives for realization, by means of generation of future taxable profit.
29. Financial Instruments and Risk Management
Risk factors
The risk factors affecting the Company are the following:
(i) Exchange rate risk
The exchange rate risk relates to the possibility of the Company computing losses resulting from fluctuations in exchange rates, thus increasing debt balances of loans obtained in the market and the corresponding financial charges. In order to mitigate this kind of risk, the Company carries out hedge contracts with financial institutions.
At December 31, 2005, the financing with Compaq denominated in US dollars is fully covered by hedge contracts. Income or loss resulting from these hedge contracts is charged to result of operations.
There are no significant financial assets indexed to foreign currencies.
(ii) Iterest rate risk
Interest rate risk refers to possible unfavorable interest rate change, which would lead to an increase in financial expenses of the Company on debts and hedging operations entered into at variable interest rate. At December 31, 2005, financial resources of subsidiaries were mainly invested in Interbank Deposit Certificates (CDI), which significantly reduces this risk.
28
29. Financial Instruments (Continued) Risk factors (Continued) (iii) Credit risk related to services rendered
This risk relates to the possibility of the Company incurring losses arising from the difficulty in collecting accounts receivable billed to subscribers. In order to mitigate this risk, the Company performs credit rating analyses to support management of risk related to collection problems and also monitor accounts receivable from subscribers, disabling telephone lines of defaulting subscribers.
(iv) Credit risk related to sale of telephone sets and prepaid telephone cards
The policy adopted by the Company for the sale of telephone sets and distribution of prepaid telephone cards is directly related to the risk of credit levels accepted in the ordinary course of business. The selection of partners, the diversification of the accounts payable portfolio, the monitoring of loan conditions, the positions and limits of requests established for traders, the constitution of security interests are procedures adopted by the Company to minimize possible collection problems with its commercial partners. There are no customers accounting for more than 10% of net accounts receivable from sale of goods at December 31, 2005 and 2004 or income from sale of goods in 2005 and 2004.
(v) Financial credit risk
This risk relates to the possibility of the Company computing losses originating from the difficulty in realizing short-term investments and hedge contracts. The Company minimizes the risk associated to these financial instruments by investing in well-reputed financial institutions.
There is no concentration of available resources of work, service, concessions or rights that have not been mentioned above that could, if eliminated suddenly, severely impact the operations of the Company.
Market value of financial instruments
The estimated market value of financial instruments, mainly of cash and cash equivalents, accounts receivable and short-term financial instruments, approximates the corresponding book value considering that maturity of these instruments is within short-term. Financial instruments whose market value differs from book value at December 31, 2005 are as follows:
| 2005 | 2004 | |||||||
| Book value | Market value | Book value | Market value | |||||
| Loans and financing | 1,381.588 | 1,367,626 | 22,046 | 22,046 | ||||
29
| Hedge contracts on loans and financing | 1,460 | 1,462 | 4,082 | 3,730 | ||||
| Hedge contracts on intercompany loans | - | - | 19,693 | 23,544 |
The market value of loans and financing and of hedge contracts was determined through discounted future cash flows and use of interest rates applicable to instruments of similar nature involving the same conditions and risks, or is based on market quotations for such instruments.
Market value was estimated at a given period, based on available information and own valuation methodology. Changes in assumptions may significantly affect such estimates.
30
30. Insurance (unaudited)
As of December 31, 2005, the Company had insurance cover against fire and sundry risks for inventories and fixed assets. Management considers the amounts sufficient to cover any losses, based on the risks and amounts involved.
31. Commitments (unaudited)
On the terms of the Authorization for Mobile Personal Service (SMP) Exploitation, the Company commits itself to implement mobile personal telecommunications cover for the assigned area, on a phased basis, within the quality standards established by said authorization. Should said terms not be met, the Company will be subject to penalties.
Anatel started administrative proceedings against the Company for noncompliance with certain service quality ratios provided for in the Personal Mobile Service (SMP) authorizations in 2003 and 2004. The Company submitted answers to Anatel explaining that noncompliance with certain quality ratios was mainly due to migration from Mobile Service (SMC) to SMP, change in the long-distance system, as well as the implementation of GSM network. The Company cannot forecast the outcome of Anatel proceedings at this point. The provision for regulatory contingency recorded in the balance sheet reflects the expected losses, per management’s expectations.
31
32 Supplementary Information a. Statements of cash flows
| 2005 | ||
| Operating activities | ||
| Loss of the year | (1,344,143) | |
| Adjustments to reconcile operational results to cash: | ||
| Depreciation and amortization | 1,004,083 | |
| Equity pickup | 240,426 | |
| Provision for contingencies | 10,549 | |
| Residual value of fixed assed disposals | 3,929 | |
| Exchange and monetary variation and interest with third parties | 65,311 | |
| Exchange and monetary variation and interest with related parties - asset | ||
| (45,631) | ||
| Exchange and monetary variation and interest with related parties - | ||
| liabilities | 192,972 | |
| Allowance for doubtful accounts | 123,665 | |
| Decrease (increase) in operating assets | ||
| Trade receivables | (453,655) | |
| Taxes and contributions recoverable | (9,411) | |
| Inventories | 2,069 | |
| Other current assets | 34,626 | |
| Related parties | 174,101 | |
| Other noncurrent assets | (10,041) | |
| Increase(decrease) in operating liabilities | ||
| Labor charges | 11,277 | |
| Suppliers | 120,217 | |
| Taxes payable | 9,.655 | |
| Related Parties | 116,013 | |
| Other current liabilities | 1,729 | |
| Net cash generated by operating activities | (14,461) | |
| Investing activities | ||
| Capital increase and fund for future capital increase | 1,647,379 | |
| Purchase of fixed assets | (1,448,017) | |
| 199,362 | ||
| Financing activities | ||
| New loans with third parties | 1,320,000 | |
| New loans with related parties - assets | (329,532) | |
| New loans obtained with related parties - liabilities | 1,080,696 | |
| Amortization of loans with third parties | (32,079) | |
| Amortization of loans with related parties - assets | 24,925 | |
| Amortization of loans with related parties - liabities | (1,867,528) | |
| 196,482 | ||
| Increase in cash and cash equivalents | 381,383 | |
32
32 Supplementary Information (Continued)
b. Statements of cash flows (Continued)
| Supplemental cash flow information: | ||
| Interest paid to third parties | 13,477 | |
| Interest paid to related parties | 14,307 | |
| Capitalized interest | 3,689 |
| 2005 | ||||
| Income | ||||
| Gross operating revenue | 5,859,768 | |||
| Losses and allowance for doubtful accounts | (123,665) | |||
| Discounts | (158,945) | |||
| Net operating income (expense) | (3,258) | |||
| 5,573,900 | ||||
| Consumables from third parties | ||||
| Cost of services rendered and goods sold | (2,091,576) | |||
| Materials, energy, third-party services and others | (1,396,001) | |||
| (3,487,577) | ||||
| Retentions | ||||
| Depreciation and amortization | (1,004,083) | |||
| Net added value generated | 1,082,240 | |||
| Added value received in transfer | ||||
| Loss on investments | (240,426) | |||
| Financial income | 476,773 | |||
| 236,347 | ||||
| Total added value available for distribution | 1,318,587 | |||
| Distribution of added value | ||||
| Payroll and related charges | 241,602 | |||
| Taxes and contributions | 1,539,762 | |||
| Interest and rentals | 881,366 | |||
| Retained loss | (1,344,143) | |||
| 1,318,587 | ||||
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TIM PARTICIPAÇÕES S.A. | ||
| Date: February 1, 2006 | By: | /s/ Paulo Roberto Cruz Cozza |
| Name: Paulo Roberto Cruz Cozza | ||
| Title: Chief Financial Officer | ||