Provided By MZ Data Products
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of May, 2006

Commission File Number 001-14491
 

 

TIM PARTICIPAÇÕES S.A.
(Exact name of registrant as specified in its charter)
 

TIM PARTICIPAÇÕES S.A.
(Translation of Registrant's name into English)
 

Av. das Américas, 3434, Bloco 1, 7º andar – Parte
22640-102 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

 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.  

Yes _______ No ___X____


A free translation from Portuguese into English of Quarterly    
Financial  Information prepared in Brazilian currency and in   Corporate Legislation 
accordance with the  accounting practices adopted in Brazil.    March 31, 2006
   
FEDERAL GOVERNMENT SERVICE     
BRAZILIAN SECURITIES COMMISSION (CVM)    
QUARTERLY INFORMATION - ITR     
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES     

REGISTRATION WITH THE CVM DOES NOT IMPLY ANY ANALYSIS OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION PROVIDED. 

01.01 – IDENTIFICATION

1 - CVM CODE
01763-9 
2 - COMPANY NAME
TIM PARTICIPAÇÕES S.A.
3 - National Corporate Taxpayers' Registration Number – CNPJ 
02.558.115/0001-21 
4 - State Registration Number – NIRE
53 3 0000572 9

01.02 - HEAD OFFICE

1 - ADDRESS
Av. das Américas, 3434, Bloco 1 7º andar – parte
2 - SUBURB OR DISTRICT 
Barra da Tijuca
3 - POSTAL CODE
22640-102 
4 - MUNICIPALITY
Rio de Janeiro
5 - STATE
Rio de Janeiro
6 - AREA CODE
21
7 - TELEPHONE
4009-3742
8 - TELEPHONE
-
9 - TELEPHONE
-
10 - TELEX
-
11 - AREA CODE
21
12 - FAX
4009-3990 
13 - FAX
-
14 - FAX
-
-
15 - E-MAIL
jserafim@timbrasil.com.br

01.03 - INVESTOR RELATIONS OFFICER (Company Mail Address)

1- NAME
Paulo Roberto Cruz Cozza 
2 - ADDRESS
Av. das Américas, 3434, Bloco 1 7º andar – parte
3 - SUBURB OR DISTRICT
Barra da Tijuca
3 - ZIP CODE
22640-102 
4 - MUNICIPALITY
Rio de Janeiro 
5 - STATE
Rio de Janeiro
6 - AREA CODE
21
7 - TELEPHONE
 4009-3742 
8 - TELEPHONE
-
9 - TELEPHONE
-
10 - TELEX
-
11 - AREA CODE
21
12 - FAX
 4009-3990
13 - FAX
-
14 - FAX
-
-
15 - E-MAIL
jserafim@timbrasil.com.br 

01.04 - GENERAL INFORMATION/INDEPENDENT ACCOUNTANT

CURRENT YEAR
CURRENT QUARTER
PRIOR QUARTER
1 - BEGINNING 2. END 3 - QUARTER 4 - BEGINNING 5 - END 6 - QUARTER 7 - BEGINNING 8 - END
01.01.2006  12.31.2006 1  01.01.2006 03.31.2006  4   10.01.2005 12.31.2005
09 - INDEPENDENT ACCOUNTANT
Directa Auditores 
10 - CVM CODE
3670 
11. PARTNER RESPONSIBLE 
Ernesto Rubens Gelbcke
12 – INDIVIDUAL TAXPAYERS’ REGISTRATION NUMBER OF  THE PARTNER RESPONSIBLE 
062.825.718-04



A free translation from Portuguese into English of Quarterly    
Financial  Information prepared in Brazilian currency and in   Corporate Legislation 
accordance with the  accounting practices adopted in Brazil.    March 31, 2006
   
FEDERAL GOVERNMENT SERVICE     
BRAZILIAN SECURITIES COMMISSION (CVM)    
QUARTERLY INFORMATION - ITR     
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES     

01.01 – IDENTIFICATION

1 - CVM CODE
01763-9 
2 - COMPANY NAME
TIM PARTICIPAÇÕES S.A.
3 - Federal Corporate Taxpayers' Registration Number – CNPJ 
02.558.115/0001-21 

01.05 - CAPITAL COMPOSITION

Number of Shares
(Thousands)
Current quarter 
03.31.2006  
Prior quarter 
12.31.2005
Same quarter in prior year 
03.31.2005
Paid-up capital
1 - Common 791,117,235  299,610,631  264,793,297 
2 - Preferred 1,531,472,229  579,965,856  437,711,795 
3 - Total 2,322,589,464  879,576,487  702,505,092 
Treasury Stock
4 - Common
5 - Preferred
6 - Total

01.06 – CHARACTERISTICS OF THE COMPANY

1 - TYPE OF COMPANY
Commercial, industrial and other
2 - SITUATION
Operational
3 - NATURE OF OWNERSHIP
Local Private
4 - ACTIVITY CODE
113 – Telecommunication
5 - MAIN ACTIVITY
Cellular Telecommunication Services 
6 - TYPE OF CONSOLIDATION
Full
7 - TYPE OF REPORT OF INDEPENDENT ACCOUNTANT 
Unqualified

01.07 - COMPANIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENTS

1 - ITEM 2 - CNPJ 3 - NAME

01.08 - DIVIDENDS AND OR INTEREST ON CAPITAL APPROVED AND/OR PAID DURING AND AFTER THE QUARTER

1 - ITEM 2 - EVENT 3 - DATE APPROVED 4 - AMOUNT 5 - DATE OF PAYMENT 6 - TYPE OF SHARE 7 - AMOUNT PER SHARE
01  Statutory meeting 12/14/2005  interest on shareholders' equity  01/26/2006  ON  0,0007958376 
02  Statutory meeting 12/14/2005  interest on shareholders' equity  01/26/2006  PN  0,0007958376 



01.01 – IDENTIFICATION

1 - CVM CODE
01763-9 
2 - COMPANY NAME
TIM PARTICIPAÇÕES S.A.
3 - Federal Corporate Taxpayers' Registration Number – CNPJ 
02.558.115/0001-21 

01.09 - SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT YEAR

1 - ITEM 2 - DATE OF CHANGE 3 - CAPITAL
(IN THOUSANDS OF REAIS)
4 - TOTAL CHANGE
(IN THOUSANDS OF REAIS)
5 - NATURE OF CHANGE 7 - NUMBER OF SHARES ISSUED
(IN THOUSANDS)
8 -SHARE PRICE ON ISSUED DATE (IN REAIS)
01  03.16.2006  71,455,859  5,983,784  Merger of shares 1,443,012,977  0,0041467290 

01.10 - INVESTOR RELATIONS OFFICER

1- DATE 2 - SIGNATURE



FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

TIM Participações S.A
Notes to Quarterly Review Information
(In Thousands of Reais, except when otherwise stated)

1 Operations

TIM Participações S.A. headquartered at Avenida das Américas, 3434, bloco 1, 7th floor, Rio de Janeiro, RJ, is a publicly-held company directly controlled by TIM Brasil Serviços e Participações S.A., a Telecom Italia Group’s company, who holds interests of 81.19% of its voting capital and 69.66% of its total capital, whose operations comprise, mainly, the control of companies exploring telecommunications service in its concessions and/or authorizations areas, including cellular telephones.

The Company has the full control of TIM Sul S.A. and TIM Nordeste Telecomunicações S.A., and TIM Celular, who in turn holds control of Maxitel S.A. These subsidiary companies jointly operate cellular telephony services in all Brazilian states.

The services provided by the subsidiaries and the respective tariffs are regulated by ANATEL – Brazilian Telecommunications Agency – in charge of regulating all Brazilian telecommunications. The subsidiaries authorizations mature as follows:

Page: 1


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    Expiry Date 
TIM Sul     
     Paraná    September, 2007 
     Santa Catarina    September, 2008 
     Rio Grande do Sul (Pelotas Municipality)   April, 2009 
 
TIM Nordeste     
     Pernambuco    May, 2009 
     Ceará    November, 2008 
     Paraiba    December, 2008 
     Rio Grande do Norte    December, 2008 
     Alagoas    December, 2008 
     Piauí    March, 2009 
 
Maxitel     
     Minas Gerais    April, 2013 
     Bahia e Sergipe    August, 2012 
 
TIM Celular     
Region 1     
     Amapá    March, 2016 
     Roraima    March, 2016 
     Pará    March, 2016 
     Amazonas    March, 2016 
     Rio de Janeiro    March, 2016 
     Espírito Santo    March, 2016 

Page: 2


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    Expiry Date 
TIM Celular     
Region 2     
     Acre    March, 2016 
     Rondônia    March, 2016 
     Mato Grosso    March, 2016 
     Mato Grosso do Sul    March, 2016 
 
     Tocantins    March, 2016 
     Distrito Federal    March, 2016 
     Goiás    March, 2016 
     Rio Grande do Sul (except for Pelotas)   March, 2016 
Region 3     
     São Paulo    March, 2016 

The loss for the first quarter of 2006, already expected by the Management, arises from TIM Celular S.A. and its subsidiary Maxitel S.A, for which positive results are foreseen from 2007 on. According to the cash projections prepared by the Management of these companies, additional financing resources are expected throughout 2006.

2 Corporate Restructuring

a. Incorporation of Shares of TIM Sul S.A and TIM Nordeste Telecomunicações S.A

On April 27, 2005, TIM Participações S.A. disclosed a Relevant Event (“Fato Relevante”) that its Administrative Council authorized the signing of a Protocol and Justification for Merger proposing the incorporation of all the shares of capital stock of TIM Nordeste Telecomunicações S.A. by TIM Participações S.A.

On May 30, 2005, at the General Extraordinary Shareholders´ Meetings of TIM Sul S.A, TIM Nordeste Telecomunicações S.A and TIM Participações S.A, the incorporation of all shares of TIM Sul S.A. and TIM Nordeste Telecomunicações S.A. by TIM Participações S.A was approved, thus converting the companies into wholly-owned subsidiaries of TIM Participações S.A.

Page: 3


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

This operation was intended to concentrate the liquidity of the three companies´ shares into those of one company, TIM Participações S.A. and to lower the expenses associated with controls and maintenance of the plurality of stockholders in separate entities.

The right of withdrawal of the shareholders owning common shares of the capital stock of TIM Participações S.A., as well as the minority stockholders of TIM Sul S.A. and TIM Nordeste Telecomunicações S.A., ended in July 1, 2005. The amount disbursed by the Company for payment to dissenting shareholders was R$ 0.8, represented by 153,861 common shares and 154,407 preferred shares.

b. Incorporation of Shares of TIM Celular S.A

On February 1, 2006, TIM Participações S.A. disclosed a Relevant Event that its Administrative Council authorized the signing of a Protocol and Justification for Merger proposing incorporation of all the shares of capital of TIM Celular S.A. by TIM Participações S.A.

On March 16, 2006, at the General Extraordinary Shareholders´ Meetings of TIM Participações S.A, the incorporation of all shares of TIM Celular S.A. by TIM Participações S.A was approved, thus converting TIM Celular S.A. into wholly-owned subsidiary of TIM Participações S.A.

c. Merger of the companies Centro de Relacionamento com Clientes Ltda. and Blah! Sociedade Anônima de Serviços e Comércio

On March 14, 2006, the Administrative Council of TIM Celular S.A. authorized the signing of a Protocol and Justification of Merger proposing the incorporation of net assets of its wholly-owned subsidiaries Centro de Relacionamento com Clientes Ltda. and Blah! Sociedade Anônima de Serviços e Comércio.

On March 30, 2006, the General Extraordinary Shareholders’ Meeting of TIM Celular S.A. approved the Protocol and the Justification of Merger referred to above.

Page: 4


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

3 Presentation of the Quarterly Information

a. Basis of Presentation and Disclosure

The quarterly information (company and consolidated) was prepared in accordance with the accounting practices adopted in Brazil, the rules applicable to concessionaires of public telecommunications services, and the CVM’s (Brazilian Securities Commission) accounting standards and procedures.

TIM Participações S.A. is a publicly-held company, with American Depositary Receipts being traded on the New York Stock Exchange – USA. Therefore, the Company is subject to the rules of the Securities and Exchange Commission (SEC) and, aiming at meeting market needs, it is the Company’s principle to disclose information simultaneously to both markets in Brazilian Reais, in Portuguese and in English.

b. Consolidated Quarterly Information

The consolidated quarterly information includes assets, liabilities and the result of operations of the Company and its subsidiaries, as follows:

    % Ownership 
   
    03/2006    12/2005 
     
    Direct    Indirect    Direct    Indirect 
         
 
TIM Participações S.A.                 
     TIM Nordeste Telecomunicações S.A.    100.00      100.00   
     TIM Sul S.A.    100.00      100.00   
 
TIM Celular S.A.    100.00       
     Maxitel S.A.      100.00     
     Centro de Relacionamento com Clientes Ltda.         
     Blah! S.A de Serviços e Comércio         

Page: 5


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

The main consolidation procedures are as follows:

I. Elimination of intercompany consolidated assets and liabilities accounts;

II. Elimination of participation in capital, reserves and retained earnings of the subsidiaries;

III. Elimination of intercompany revenues and expenses;

IV. Separate disclosure of the minority interest participation in the consolidated quarterly information, where applicable.

The reconciled operating income for the period can be thus shown:

    03/2006    03/2005 
     
Parent Company    (138,846)   93,616 
ADENE benefit and fiscal incentive directly recorded as shareholders’         
equity of the subsidiary TIM Nordeste Telecomunicações S.A.    (12,911)   (9,327)
     
Consolidated    (151,757)   84,289 
     

c. Comparability of the Quarterly Information

For ease of comparison of this information with the prior period’s quarterly information, the pro forma consolidated balance sheet and statement of income are shown below, as though the merger process mentioned in Note 2-b had occurred on January 1, 2005:

Page: 6


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    12/2005 
    Pro-forma 
   
ASSETS    Consolidated 
   
 
Current Assets     
     Cash and cash equivalents    1,772,600 
     Accounts receivable    2,071,631 
     Inventories    215,242 
     Taxes and contributions recoverable    242,168 
     Deferred income tax and social contribution    103,118 
     Prepaid expenses    43,730 
     Other assets    13,090 
   
    4.461,579 
   
 
Long-Term Assets     
     Taxes and contributions recoverable    297,634 
     Deferred income tax and social contribution    117,478 
     Related-party transactions    8,836 
     Judicial deposits    51,495 
     Other assets    22,766 
   
    498,209 
   
 
Permanent Assets     
     Investments    8,310 
     Property, plant and equipment    9,712,315 
     Deferred charges    274,925 
   
    9,995,550 
   
    14,955,338 
   

Page: 7


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    12/2005 
    Pro-forma 
   
LIABILITIES    Consolidated 
   
 
Current Liabilities     
     Suppliers    3,443,286 
     Loans and financing    216,147 
     Labor obligations    94,428 
     Taxes, rates and contributions    357,328 
     Authorizations payable    34,792 
     Dividends and interest on own capital payable    141,606 
     Related-party transactions    50,212 
     Other liabilities    54,442 
   
    4,392,241 
   
 
Long-Term Liabilities     
     Loans and financing    1,653,895 
     Authorizations payable    8,755 
     Taxes, rates and contributions    4,634 
     Provision for contingencies    157,501 
     Supplementary pension plan    3,584 
     Other liabilities    5,001 
   
    1,833,370 
   
 
Shareholders´ Equity     
     Capital    7,455,859 
     Capital reserves    192,081 
     Income reserves    1,081,787 
   
    8,729,727 
   
    14,955,338 
   

Page: 8


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    03/2005 
    Pro-forma 
   
    Consolidated 
   
 
Gross operating revenue     
     Telecommunications services    1,981,098 
     Sales of goods    397,356 
   
    2,378,454 
Deductions from gross revenue    (565,715)
   
Net operating revenue    1,812,739 
   
 
Cost of services rendered    (692,047)
Cost of goods sold    (329,509)
   
 
Gross income    791,183 
   
 
Operating revenues (expenses):     
           Selling    (631,828)
           General and administrative    (186,349)
           Other operating revenues, net    (84,038)
   
    (902,215)
   
 
Operating income before the net financial expenses    (111,032)
 
     Financial revenues (expenses):     
         Financial revenues    117,050 
         Financial expenses    (183,966)
   
    (66,916)
   
 
Operating loss    (177,948)
Non-operating income    (1,082)
   
 
Loss before income tax, social contribution and minority     
shareholding    (179,030)
Provision for income tax and social contribution    (33,310)
   
 
Loss before minority shareholding    (212,340)
Minority shareholding    (19,382)
   
Loss for the period    (231,722)
   

Page: 9


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

4 Summary of Accounting Practices

a. Cash and cash equivalents

These comprise cash and bank balances and short-term, readily realizable investments in the money market, stated at cost, plus the related earnings up to the balance sheet date.

b. Accounts receivable

Accounts receivable from the telecommunication service costumers are calculated at the tariff rate on the date of service rendering, including credits for services rendered but not billed to the balance sheet date, receivables from network use and receivables from sales of cell phone sets and accessories.

c. Allowance for doubtful accounts

The allowance for doubtful accounts is recorded based on the customer base profile, the aging of past due accounts, the economic scenario and the risks involved in each case. The allowance amount is considered sufficient to cover possible losses on receivables.

d. Inventories

These refer to cell phone sets and accessories, which are stated at the average acquisition cost. A provision to adjust the slow-moving and obsolete items balance to the related realization value was set up.

e. Prepaid expenses

The prepaid expenses are shown at the amount actually disbursed and not yet incurred.

f. Investments

The investments in subsidiaries are evaluated by the equity method, based on the subsidiaries´ shareholders equity, which is determined on the same date, by the same accounting principles used by the parent company.

The other investments are shown at cost, reduced to the realizable value, when applicable.

Page: 10


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

g. Property, plant and equipment

The property, plant and equipment items are shown at the acquisition and/or construction cost, net of accumulated depreciation, calculated on the straight-line method, over the useful life of assets involved. Any repair and maintenance costs incurred representing improvement, higher capacity or longer useful life are capitalized, whereas the others are recorded as income for the year.

Interest and other financial charges on financing taken for funding construction work in progress (assets and facilities under construction) are capitalized up to the startup date.

The long-term assets, especially property, plant and equipment, are periodically reviewed (impairment test) to determine the need for recording a provision for losses on any such items.

The estimated useful lives of all property, plant and equipment items are regularly reviewed considering the technological evolution.

h. Deferred charges

The deferred charges comprise pre-operating expenses and financial costs of the required working capital in the subsidiaries´ pre-operating stage, which are amortized in ten years from the date the subsidiaries become operative.

i. Income tax and social contribution

The income tax is calculated based on the income adjusted for legally stipulated additions and exclusions. The social contribution is calculated at the legally stipulated rates applied to pretax income.

Based on the Constitutive Reports nos. 0144/2003 and 0232/2003 issued by ADENE – Northeast Development Agency on March 31, 2003, the subsidiary TIM Nordeste Telecommunicações S.A. became eligible to fiscal incentive consisting of: (i) 75% reduction of income tax and non-reimbursable surtaxes for a ten-year period, from fiscal 2002 through 2011, calculated based on the exploration income arising from implementation of its installed capacity for rendering digital cellular telephone services; (ii) reduction of 37.5%, 25% and 12.5% of income tax and non-reimbursable surtaxes for fiscal 2003, 2004-2008 and 2009-2013, respectively, calculated based on the exploration income arising from implementation of its installed capacity for rendering of analogical cellular telephone services.

Page: 11


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

Deferred taxes are recognized taking into account temporary differences, tax losses and negative social contribution basis, when applicable. The amount of the previously mentioned income-tax-reduction benefit is accounted for as a reduction of income tax payable, against the Capital Reserve – Fiscal Incentive, under the Shareholders´ Equity of TIM Nordeste Telecomunicações S.A.

Deferred taxes related to temporary differences, tax losses and negative social contribution basis are shown as current and long-term assets. Their realization forecast is supported by a future taxable income projection annually reviewed and duly approved by the Company’s Management.

j. Loans and financing

Loans and financing include accrued interest to the balance sheet date. The company’s subsidiaries are party to certain derivative instruments related to their US dollar denominated liabilities with the objective of hedging them against risks associated with unexpected devaluation of the Real in relation to foreign currencies. Additionally, the Company’s subsidiaries have hedge contracts to cover changes in market interest rates. Gains and losses from such operations are recognized in the income statement under the accrual method, based on the contracted rates contracts.

k. Provision for contingencies

The provision for contingencies, recorded based on estimates which take into consideration the opinion of the Company’s management and its legal advisors, is updated based on the probable losses at the end of the litigations.

l. Revenue recognition

Service revenues are recognized as the services are provided. Billings are monthly recorded. Unbilled revenues from the billing date to the month end are measured and recognized during the month in which the service was provided. Revenues from pre-paid telecommunication services are recognized on the accrual basis in the period in which they are utilized. Revenues from the sale of cell phone sets and accessories are recognized as the products are delivered to, and accepted by, end-consumers or distributors.

Page: 12


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

m. Financial income (expenses)

These are represented by interest and exchange and monetary variations relating to short-term investments in the money market, hedge contracts, loans and financing taken and granted.

n. Pension plan

The Company and its subsidiaries record the adjustments connected with the employees’ pension plan obligations according to the rules established by NPC 26 of IBRACON, approved by CVM Deliberation 371.

o. Minority shareholding

Minority interests correspond to the interests of the minority shareholders in the subsidiaries TIM Sul S.A. and TIM Nordeste Telecomunicações S.A. In 2005 the subsidiaries were converted into wholly-owned subsidiaries of TIM Participações S.A.

p. Use of estimates

The preparation of quarterly information in conformity with the 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 balance sheet date, as well as the estimation of revenues and expenses for the year. The actual results may differ from those estimates.

q. Foreign currency transactions

Transactions in foreign currency are recorded at the exchange rate prevailing at the transaction date. Foreign currency denominated assets and liabilities are translated into Reais using the exchange rate at the balance sheet date, which is reported by the Central Bank of Brazil. Exchange gains and losses are recognized in the statement of income as they occur.

r. Employee profit sharing

The Company and its subsidiaries record a provision for employee profit sharing, based on the targets disclosed to its employees and approved by the Administrative Council. These amounts are recorded as personnel expenses and allocated to profit and loss accounts considering each employee’s cost center.

Page: 13


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

s. Interest on shareholders’ equity

Interest on shareholders’ equity paid and/or payable are recorded against financial expenses, which, for financial reporting purposes, are reclassified and disclosed as appropriation of net income for the year in the statement of shareholders’ equity. Interest on shareholders’ equity received and/or receivable are recorded against financial income, which are reclassified and disclosed as equity pick up. For presentation purposes, the income statements impacts are eliminated, being presented a decrease to investments.

t. Supplementary information

For additional information purposes, the following is presented: a) Statements of Cash Flow, prepared in accordance with the NPC no. 20 issued by the Institute of Independent Auditors of Brazil – IBRACON, ; and b) Value-Added Statements prepared in accordance with the CFC – Federal Accounting Council - Resolution no. 1010.

5 Cash and cash equivalents

        Parent Company 
     
        03/2006    12/2005 
       
 
Cash and banks        1,126    55 
Short-term investments in the money market        1,079    5,917 
       
        2,205    5,972 
       
 
 
    Consolidated 
   
            12/2005 
    03/2006    12/2005    Pro-forma 
       
 
Cash and banks    97,900    30,124    519,300 
Short-term investments in the money market    798,830    1,251,644    1,253,300 
       
    896,730    1,281,768    1,772,600 
       

The Parent Company´s readily realizable short-term investments in the money market are backed by federal government securities (LFTs and LTNs). Besides these, the short-term investments in the money market recorded by the subsidiaries also comprise Bank Deposit Certificates (CDB) issued by banks internally approved, with average return of 101.47% of Interbank Deposit Certificates – CDI.

Page: 14


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

These investments can be redeemed at any time, with no impact on recorded yield.

6 Accounts Receivable

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Billed services    632,451    225,712    652,364 
Unbilled services    373,109    123,621    358,969 
Network use    462,361    176,810    474,428 
Goods sold    594,848    258,513    794,128 
Other receivables    10,663    8,236    29,116 
       
    2,073,432    792,892    2,309,005 
Allowance for doubtful accounts    (242,068)   (69,557)   (237,374)
       
    1,831,364    723,335    2,071,631 
       

The criteria for setting up the allowance for doubtful accounts are reviewed periodically, in order to reflect the current risk surrounding receivables.

7 Inventories

        Consolidated     
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Cell phone sets    146,988    78,435    205,587 
Accessories and prepaid card kits    5,187    1,770    4,657 
TIM "chips"    16,598    9,100    24,007 
       
    168,773    89,305    234,251 
 
Provision for adjustment to realizable value    (20,265)   (7,425)   (19,009)
       
    148,508    81,880    215,242 
       

Page: 15


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

8 Recoverable Taxes and Contributions

    Parent Company 
   
    03/2006    12/2005 
     
 
Income tax    8,021    9,609 
Social contribution     
IRRF (withholding tax) on interest on own capital      15,000 
IRRF recoverable    18    422 
     
    8,048    25,040 
 
Short-term portion    (8,048)   (18,167)
     
Long-term portion      6,873 
     

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Income tax    39,885    18,761    41,542 
Social contribution    3,179    3,691    4,765 
ICMS (value-added sales tax)   382,768    111,841    397,910 
PIS / COFINS (Social Integration Program and             
Contributions to Social Security Funding)   49,405    18,080    63,717 
IRRF on interest on own capital      15,000    15,000 
IRRF recoverable    18,422    14,657    14,984 
Other    2,104    1,981    1,884 
       
    495,763    184,011    539,802 
 
Short-term portion    (213,363)   (114,065)   (242,168)
       
Long-term portion    282,400    69,946    297,634 
       

The parent company’s long-term portion refers to income tax recoverable, whereas the consolidated figure also includes ICMS on the subsidiaries´ permanent assets.

Page: 16


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

9 Deferred Income Tax and Social Contribution

The deferred income tax and social contribution can be summarized as follows:

    Parent Company 
   
    03/2006    12/2005 
     
 
Tax loss    2,404    650 
Negative social contribution basis    866    234 
Provision for contingencies    1,192    1.093 
Provision for supplementary pension fund    1,218    1.218 
Provision for the employees´ profit sharing    329    254 
     
    6,009    3.449 
 
Short-term portion    (3,599)   (1,137)
     
Long-term portion    2,410    2,312 
     

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Premium paid upon privatization    346,226    383,322    383,322 
Provision for maintaining the shareholders´ equity             
integrity    (228,509)   (252,992)   (252,992)
       
Merger-generated tax credit    117,717    130,330    130,330 
Tax loss    2,404    5,912    5,912 
Negative social contribution basis    866    2,149    2,149 
Depreciation of assets assigned on a loan-for-use basis    23,641    21,832    21,832 
Allowance for doubtful accounts    25,201    23,649    23,649 
Provision for contingencies    15,914    14,548    14,548 
Accelerated depreciation of TDMA equipment    16,518    14,682    14,682 
Provision for supplementary pension plan    1,218    1,218    1,218 
Provision for the employees´ profit sharing    3,389    3,158    3,158 
Other provisions    5,397    3,118    3,118 
       
    212,265    220,596    220,596 
 
Short-term portion    (104,225)   (103,118)   (103,118)
       
Long-term portion    108,040    117,478    117,478 
       

Page: 17


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

Based on expected taxable income generation in the future, the Company and its subsidiary TIM Sul S.A. recognize prior years’ credits on tax losses and negative social contribution basis the offsetting of which is limited to 30% of annual taxable income, with no statutes of limitation.

The deferred tax asset represented by the merger-generated tax credit refers to future tax benefit under the restructuring plan started in 2000. As a counter entry to said tax is a special reserve composed of premium on shareholders´ equity. The tax is realized ratably to estimated future income, over the duration of the authorization granted, which is due to end by 2008. The premium amortization is recorded as “Other operating expenses”.

In the first quarter of 2006 R$12,613 (R$ 12,613 in the same prior year’s period) of tax benefits was realized in connection with the above mentioned premium. Also, under the terms of the restructuring plan, the actual tax benefit for each fiscal year will be subsequently capitalized in the name of the controlling shareholder. The minority shareholders are ensured preemptive right on acquisition of an amount proportional to the new capital of the controlling shareholder. The special reserve for premium recorded by the Company’s subsidiary represents the parent company’s right to future capitalization (see Note 22-b).

In accordance with projections made by the company’ management, the long-term portion of deferred taxes will be realized as follows:

    Consolidated 
2007    78,610 
2008    29,430 
   
    108,040 
   

Below, the composition of income tax and social contribution expenses:

    Parent Company    Consolidated 
     
                    03/2005 
    03/2006    03/2005    03/2006    03/2005    Proforma 
           
Income tax for the period        (30,296)   (27,533)   (27,791)
Social contribution for the period        (10,908)   (9,924)   (10,019)
           
        (41,204)   (37,457)   (37,810)
           
 
Deferred income tax    1,882    791    3,163    3,309    3,309 
Deferred social contribution    678    284    1,118    1,191    1,191 
           
    2,560    1,075    4,281    4,500    4,500 
           
 
    2,560    1,080    (36,923)   (32,957)   (33,310)
           

Page: 18


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

Below, the reconciliation of income tax and social contribution expenses calculated based on combined tax rates, to the amount recorded in the income statement :

    Parent Company 
   
    09/30/2005    09/30/2004 
     
Income (loss) before income tax and social contribution    (141,406)   92,536 
 
Combined tax rate    34%    34% 
     
Income tax and social contribution taxes at the combined tax rate    48,078    (31,462)
(Additions)/Exclusions:         
   Result of equity accounting    (45,376)   32,671 
   Other    (142)   (129)
     
    (45,518)   32,542 
     
Income tax and social contribution credited to the income for the period    2,560    1,080 
     
Actual tax rate    -1.81%    1.17% 
     

    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
Income (loss) before income tax and social contribution    (114,834)   136,628    (179,030)
 
Combined tax rate    34%    34%    34% 
       
 
Income tax and social contribution at the combined tax             
rate    39,044    (46,454)   60,870 
 
(Additions)/Exclusions:             
   Realization of the provision for integrity of the             
   shareholders´ equity    8,325    8,325    8,325 
   Hedge    1,811     
   Exclusion of provision balances      4,801    4,801 
   Tax losses and temporary differences not recognized    (86,875)     (107,677)
   Other    772    371    371 
       
    (75,967)   13,497    (94,180)
       
 
Income tax and social contribution charged to the income             
for the period    (36,923)   (32,957)   (33,310)
       
 
Actual tax rate    -32.15%    24.1%    -18.61% 
       

Page: 19


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

The subsidiaries TIM Celular S.A. and Maxitel S.A. have tax losses and negative social contribution basis in the periods presented. The credits arising from tax losses and negative basis are not recorded until the Management of these companies find that the prospects of realization through future taxable income generation are consistent and sound.

The accumulated tax losses and negative social contribution basis as of March 31, 2006, can be thus shown:

    03/2006 
   
    Tax Losses    Negative Basis CSLL 
     
 
TIM Celular S.A.    3,408,027    3,408,027 
Maxitel S.A.    2,094,372    2,094,372 

10 Prepaid Expenses

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Fistel Annual Rate    207,907     
Rentals    4,016    271    3,960 
Advertising expenses    41,386    5,242    33,820 
Other    5,031    808    5,950 
       
    258,340    6,321    43,730 
       

11 Related Party Transactions

The related-party transactions, which are performed under regular market conditions, similarly to those with third parties, are thus composed:

Page: 20


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

Parent Company

    Expenses 
   
        Total 
    Total 03/2006    03/2005 
     
 
TIM Nordeste Telecom. S.A. (a)     246 
TIM Sul S.A. (a)     356 
     
 
Total      602 
     

(a) In January 2005 the loan agreements with subsidiaries were settled. These agreements were subject to charges in the equivalent to 104.22% of the monthly exchange variation of the Bank Deposit Certificates – CDI.

Consolidated

    Assets 
   
            Total 
    Total    Total    12/2005 
    03/2006    12/2005    Proforma 
       
 
TIM Celular S.A. (1)     18,529   
Maxitel S.A. (1)     89   
Entel Bolívia (2)   930      753 
Telecom Personal Argentina (2)   2,024      285 
Telecom Sparkle (2)   1,996      1,464 
Telecom Itália S.p.A. (3)   2,875      1,676 
Digitel (2)   177     
TIM Brasil Serv. e Participações (5)       2,943 
Brasil Telecom (1)   34,106     
Telecom Itália LATAM    150      1,605 
Other    80      110 
       
 
Total    42,338    18,618    8,836 
       

Page: 21


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    Liabilities 
   
            Total 
    Total    Total    12/2005 
    03/2006    12/2005    Proforma 
       
 
TIM Celular S.A. (1)     36,415   
Maxitel S.A. (1)     905   
Blah! S.A.      1,102   
Telecom Itália S.p.A. (3)   15,038    5,285    32,414 
IT Telecom Italia (4)   5,422    1,335    1,939 
Entel Bolívia (2)   104      58 
Telecom Personal Argentina (2)   1,910      1,193 
Telecom Sparkle (2)   8,302      3,417 
TIM Brasil Serv. e Participações (5)       10,956 
Telecom Itália Learning Services (4)   577     
Brasil Telecom (1)   425     
Digitel (2)   108     
Italtel (4)   8,040     
Outros    191      235 
       
 
Total    40.117    45.042    50.212 
       


    Revenue 
   
            Total 
    Total    Total    03/2005 
    03/2006    03/2005    Proforma 
       
 
TIM Celular S.A. (1)     10,368   
Maxitel S.A. (1)      
Telecom Italia S.p.A. (3)   2,167      5,044 
Entel Bolívia (2)   196      340 
Telecom Personal Argentina (2)   1,342     
Digitel (2)   94      84 
Telecom Sparkle (2)   791     
Brasil Telecom (1)   132,120     
Other    215      284 
       
 
Total    136,925    10,368    5,752 
       

Page: 22


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    Cost/Expense 
   
            Total 
    Total    Total    03/2005 
    03/2006    03/2005    Proforma 
       
 
TIM Celular S.A. (1)      
Maxitel S.A. (1)      
Blah! S.A.      3,524   
Telecom Italia S.p.A. (3)   1,892      4,942 
Entel Bolívia (2)   85      28 
Telecom Personal Argentina (2)   2,550     
Telecom Sparkle (2)   3,845      2,233 
Digitel (2)   102      130 
Brasil Telecom (1)   13,971     
LAN Gruppo    10      270 
Other    34      526 
       
 
Total    22,489    3,524    8,129 
       

(1) These agreements refer to telecommunications service operation covering interconnection, roaming media assignment and co-billing agreements, as well as long-distance related relationship.

(2) These refer to roaming, value-added services - – VAS and media assignment.

(3) Receivables and payables refer to international roaming and technical post-sales assistance.

(4) This refers to the development and maintenance of software pieces use in the telecommunications service billing.

(5) TIM Brasil Serviços e Participações S.A’s receivables and payables arise from loan agreements with its subsidiaries TIM Celular S.A. and Maxitel S.A., bearing interest at the equivalent to 100% of the Bank Deposit Certificates - CDI.

Page: 23


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

12 Judicial Deposits

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Civil and Labor    15,281    5,037    13,137 
ICMS – 69/98 Agreement    2,305    2,294    2,294 
ICMS 5% difference in determination in Santa Catarina    11,779    11,779    11,779 
Other - tax-related    25,114    7,168    24,285 
       
    54,479    26,278    51,495 
       

13 Investments

    Parent Company 
   
    03/2006    12/2005 
     
Investments         
   Subsidiaries    8,569,812    2,719,487 
   Other    7,893    8,288 
     
    8,577,705    2,727,775 
     

(a) participation in subsidiaries:

    03/2006 
   
    TIM Celular    TIM Nordeste         
    S.A.    Telecom. S.A    Tim Sul S.A    Total 
         
- Subsidiaries                 
Number of shares held    31,506,833,561    29,749,763,679    15,747,586,938     
Total participation in capital    100%    100%    100%     
Adjusted shareholders’ equity    5,731,681    1,321,590    1,330,547     
         
Net income (loss) for the period    (252,103)   41,494    64,239     
         
Equity pickup    (252,103)   54,405    64,239    (133,459)
         
Investment value    5,731,681    1,321,590    1,330,547    8,383,818 
Special reserve for goodwill (*)     94,303    91,691    185,994 
         
Investment value    5,731,681    1,415,893    1,422,238    8,569,812 
         
- Other (**)                
Goodwill – cost            16,918    16,918 
Goodwill–accumulated amortization            (9,025)   (9,025)
         
            7,893    7,893 
         

Page: 24


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
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Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

    12/2005 
   
    TIM Nordeste    TIM Sul     
    Telecom. S.A.    S.A.    Total 
       
- Subsidiaries             
Number of shares held    29,749,763,679    15,747,586,938     
Total participation in capital    100%    100%     
Adjusted shareholders’ equity    1,267,185    1,266,308     
       
Net income for the period    215,745    233,837     
       
Equity pickup    238,868    224,539    463,407 
       
Investment value    1,267,185    1,266,308    2,533,493 
Special reserve for goodwill (*)   94,303    91,691    185,994 
       
Investment value    1,361,488    1,357,999    2,719,487 
       
- Other (**)            
Goodwill – cost        16,918    16,918 
Goodwill – accumulated amortization        (8,630)   (8,630)
       
        8,288    8,288 
       

(*) The special reserve for goodwill recorded at TIM Nordeste Telecomunicações S.A. and TIM Sul S.A., represents the parent company’s rights in future capitalizations. These tax benefits are connected with goodwill paid upon privatization of Tele Nordeste Celular Participações S.A.., which after August 2004 was incorporated by TIM Participações S.A. and Tele Celular Sul Participações S.A. (TIM Participações S.A’s former name). This goodwill was recorded against the special reserve for goodwill, under Shareholders’ equity, being realized ratably to the estimated future income and the time of the concession, which is expected to end by 2008.

(**) Goodwill at TIM Sul S.A. was set up for amortization in ten years, based on the economic prospects of future profitability. Given the subsidiaries’ projected income, amortization in the first two years was at 4% p.a., the remainder being amortized on a straight-line basis over the remaining eight years, ending in 2008.

Page: 25


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(b) changes in investments in subsidiaries:

        TIM         
        Nordeste         
    TIM    Telecom.    TIM Sul     
    Celular    S.A.    S.A.    Total 
         
 
Investment balance as of December 31, 2005      1,361.488    1,357,999    2,719,487 
 
Capital increase    5,983,784        5,983,784 
Equity pickup    (252,103)   54,405    64,239    (133,459)
         
 
Investment balance as of March 31, 2006                 
    5,731,681    1,415,893    1,422,238    8,569,812 
         

14 Property, plant and equipment

        Consolidated 
     
                        12/2005 
        03/2006    12/2005    Proforma 
         
    Annual                     
    average                     
    depreciation                     
    rate        Accumulated             
    %    Cost    Depreciation    Net    Net    Net 
             
 
SMP exploration rights    20    3,223,069    (1,114,270)   2,108,799    21,651    2,170,858 
Switching/transmission                         
equipment    14.29    6,159,727    (2,997,604)   3,162,123    864,591    3,250,173 
Lease free handsets    50    747,715    (478,375)   269,340    65,772    294,839 
Network infrastructure    33.33    1,402,589    (453,161)   949,428    177,794    946,255 
Leasehold improvements    33.33    86,528    (39,419)   47,109    27,302    81,059 
Software and hardware    20    900,957    (370,776)   530,181    94,086    551,610 
Assets for general use    10    258,011    (63,300)   194,711    21,690    190,487 
Intangible assets    20    2,695,232    (993,155)   1,702,077    348,221    1,677,747 
             
Assets and installations in                         
service        15,473,828    (6,510,060)   8,963,768    1,621,107    9,163,028 
 
Land        22,365      22,365    6,397    22,351 
 
Construction work in progress        371,277      371,277    198,784    526,936 
             
        15,867,470    (6,510,060)   9,357,410    1,826,288    9,712,315 
             

Page: 26


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     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
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The construction work in progress basically refers to the construction of new transmission units (Base Radio Broadcast Station - ERB) for network expansion.

In the first quarter of 2006, R$ 3,385 of property, plant and equipment was capitalized, of which R$ 1,214 at the subsidiary TIM Nordeste Telecomunicações S.A. and R$ 2,171 at the subsidiary TIM Celular, relating to financial charges on loans taken to finance the construction. No interest was capitalized in the first quarter of 2005.

SMP exploration rights

The subsidiaries’ SMP (Personal Mobile Service) authorizations are presented by the terms signed in 2002, 2003 and 2004 with Anatel, for the exploration of this service, for a fifteen-year period, in the subsidiaries’ areas of concession.

In 2003 and 2004, the subsidiaries bought authorization, granted by Anatel, for the use of radio frequency blocs connected with the provision of SMP at 900 MHz and 1800 MHz.

The amounts for the SMP exploitation are as follows:

    Consolidated 
   
            TIM         
    TIM        Nordeste         
    Celular    Maxitel    Telecom.    TIM Sul     
    S.A.    S.A.    S.A    S.A    03/2006 
           
SMP exploitation rights - principal    1,925,763    828,759    25,970    17,557    2,798,049 
Band vacancy    13,664          13,664 
Capitalized charges    61,030    350,326        411,356 
           
    2,000,457    1,179,085    25,970    17,557    3,223,069 
 
Accumulated amortization    (503,595)   (586,540)   (13,746)   (10,389)   (1.114.270)
           
    1,496,862    592,545    12,224    7,168    2,108,799 
           


    Consolidated 
   
        12/2005 
    12/2005    Proforma 
     
SMP exploitation rights - principal    43,527    2,798,049 
Band vacancy      13,664 
Capitalized charges      411,356 
     
    43,527    3,223,069 
 
Accumulated amortization    (21,876)   (1,052,211)
     
    21,651    2,170,858 
     

Page: 27


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New technology implementation

In the second half-year 2003, the subsidiaries TIM Nordeste Telecomunicações S.A., TIM Sul S.A and Maxitel S.A. started the implementation of GSM technology into their service network as a complement to current TDMA technology. In March 31, 2006, no provision for devaluation by obsolescence of property, plant and equipment was deemed necessary due to the new GSM technology implementation, as both technologies are to remain in operation at the companies until 2008, at least. The assets related to TDMA technology have been subject to accelerated depreciation and must be fully depreciated by 2008.

The subsidiary TIM Celular S.A. operates only with GSM Technology.

15 Deferred Charges

    Consolidated 
   
        12/2005 
    03/2006    Proforma 
     
Preoperating expenses:         
   Third-party services    228,665    228,665 
   Personnel expenses    79,367    79,367 
   Rentals    48,914    48,914 
   Materials    3,439    3,439 
   Depreciation    10,202    10,202 
   Financial charges – net    46,774    46,774 
   Other expenses    5,990    5,990 
     
    423,351    423,351 
Accumulated amortization    (159,010)   (148,426)
     
    264,341    274,925 
     

16 Suppliers

    Parent Company 
   
    03/2006    12/2005 
     
 
Suppliers    2,616    3,364 
     
    2,616    3,364 
     

Page: 28


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     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
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    Consolidated 
   
            12/2005 
    03/2006    12/2005    Pro-forma 
       
 
Suppliers    1,635,344    990,794    3,248,196 
Services Network Use     216,131    65,927    195,090 
       
    1,851,475    1,056,721    3,443,286 
       

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 at TIM network and end in the network of other operators; (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 (“co-billing”).

17 Loans and Financing

     Consolidated 
   
                12/2005 
    Guarantees    03/2006    12/2005    Proforma 
         
Foreign currency – US dollar                 
 
Compaq Financial Services Corporation – previously the debit balance was restated based on exchange variation plus interest at 6.5% p.a. above LIBOR.    Comfort Letter from Telecom Italia and Equipment (book value: R$4,139 at 03/2006 and R$ 5,599 at 12/2005).        2,378 
 
Local currency                 
 
Banco BBA Creditanstalt S.A. – debit balance restated based on the CDI rate plus interest at 3.3% p.a.    Nihil    3,269      5,198 
 
Banco do Nordeste - financing subject to pre- fixed interest of 14% p.a. and a 15% and 25% bonus on payment on maturity, the subject matter of a hedging operation for which the rate is 69.8% and 75.75% of the CDI monthly variation .    Banco Bradesco S.A. - bank surety    206,877    106,982    206,929 

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BNDES – National Bank for Economic and Social Development: this financing bears interest at 6% p.a. plus variation of the TJLP (long-term interest rate) as disclosed by the Central Bank of Brazil. or of the "UMBNDES" of the Basket of Currencies. The Basket of Currencies financing was the subject matter of a swap to CDI operation.    Revenue portions arising from provision of cellular mobile service.    14,142    18,989    18,989 
 
BNDES (Banco Nacional do Desenvolvimento Econômico e Social): this financing bears interest at 3.5% p.a plus variation of the TJLP (long-term interest rate) as disclosed by the Brazilian Central Bank of Brazil. or of the "UMBNDES" of the Basket of Currencies. The Basket of Currencies financing was the subject matter of a swap to some 128% of the CDI monthly variation.    Direct portion: bank surety. Indirect portion: TIM Brasil surety, with part of the blocked service collection and Promissory Notes issued by Maxitel S.A.    206,902      237,866 
 
BNDES (Banco Nacional de Desenvolvimento Econômico e social): this financing bears interest at an average rate of 3.75% p.a., plus variation of the TJLP (long-term interest rate) as disclosed by the Brazilian Central Bank.    TIM Brasil Serviços e Participações S.A. guarantee with part of the collection service blocked.    720,427      715,597 
 
BNDES (Banco Nacional de Desenvolvimento Econômico e social): this financing bears interest at an average rate of 3% p.a., plus variation of the TJLP (long-term interest rate) as disclosed by the Brazilian Central Bank.    Bank surety    50,434      20,054 
 
Syndicated Loan (a) the debit balance is restated based on the CDI rate variation plus a 1.25% p.a. margin until 08/26/06, and from then on a margin established in accordance with the Net Consolidated Debt/Consolidated EBITDA ratio    TIM Brasil Serviços e Participações S.A. guarantee    608,365      638,361 
 
Compror: Bank financing for payment of goods and services suppliers, at the average cost of the equivalent to 107.3% of the CDI.    Nihil    596,926     
 
Hedge contracts        25,062    4,812    24,670 
         
        2,432,404    130,783    1,870,042 
 
Short-term portion        (780,298)   (25,707)   (216,147)
         
Long-term portion        1,652,106    105,076    1,653,895 
         

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(a) The following Financial Institutions are part of this 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 subsidiaries entered into hedging transactions to protect against devaluation of the Brazilian currency (“Real”) in relation to foreign currencies and changes in the fair value of financing bearing prefixed interest rates with the same terms as the financing agreement.

On March 30, 2006 the long-term portion of loans and financings matures as follows:

    Consolidated 
2007    161,357 
2008    468,339 
2009    465,934 
2010    165,818 
2011 onwards    390,658 
   
    1,652,106 
   

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18 Labor obligations

    Parent Company 
   
    03/2006    12/2005 
     
 
Social Charges    244    250 
Labor provisions    1,330    1,077 
Employees retention    32    52 
     
    1,606    1,379 
     


    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Salaries and fees    1,855    1,743    1,782 
Social charges    18,279    3,901    20,233 
Labor provisions    83,602    16,120    68,301 
Employees retention    3,704    921    4,112 
       
    107,440    22,685    94,428 
       

19 Taxes, Charges and Contributions

    Parent Company 
   
    03/2006    12/2005 
     
 
IRPJ and CSL      1,121 
COFINS      7,600 
PIS      1,650 
IRRF      10,538 
Other    222   
     
    226    20,909 
     

Page: 32


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    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
IRPJ and CSL    12,017    3,444    5,149 
ICMS    185,408    99,796    225,838 
COFINS    23,489    16,569    35,924 
PIS    5,089    3,594    7,787 
FISTEL    7,176    8,292    30,790 
FUST/FUNTTEL    5,122    1,780    5,939 
IRRF    3,171    25,641    27,938 
ISS    17,608    179    15,242 
Other    7,190    3,005    7,355 
       
    266,270    162,300    361,962 
 
Short-term portion    (266,260)   (157,666)   (357,328)
       
Long-term portion    10    4,634    4,634 
       

The subsidiary TIM Sul S.A. entered into an agreement with the State of Paraná Government to defer ICMS tax payable in 48 months after the tax event date, updated by FCA/PR. This benefit, restated based on the FCA/PR, was granted by the State of Paraná under the “Programa Paraná Mais Emprego”.

20 Authorizations Payable

    Consolidated 
   
            TIM         
    TIM        Nordeste         
    Celular    Maxitel    Telecom.    TIM Sul     
    S.A.    S.A.    S.A    S.A    03/2006 
           
SMP exploitation rights                     
   Authorizations acquired    66,352    58,757    23,649    15,802    164,560 
   Payments    (66,352)   (53,899)   (21,166)   (15,802)   (157,219)
   Monetary adjustment    14,605    12,577    5,543    3,777    36,502 
           
    14,605    17,435    8,026    3,777    43,843 
 
Short-term portion    (14,605)   (11,446)   (4,964)   (3,777)   (34,792)
           
Long-term portion      5,989    3,062      9,051 
           

Page: 33


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The monetary restatement of payables is based on the General Price Index – Internal Availability (IGP-DI) variation, plus interest of 1% per month.

21 Provision for Contingencies

The Company and its subsidiaries are party to certain legal proceedings (labor, tax, regulatory and civil) arising in the normal course of their business, and have recorded provisions when management understands that the risk of loss is deemed probable, based on the opinion of their legal advisors.

The provision for contingencies is thus composed:

    Parent Company 
   
    03/2006    12/2005 
     
Civil    274    200 
Labor    3,231    3,015 
     
    3,505    3,215 
     

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Proforma 
       
 
Civil    38,389    15,893    36,920 
Labor    33,694    8,360    27,098 
Tax    53,534    15,631    88,396 
Regulatory    6,383    2,903    5,087 
       
    132,000    42,787    157,501 
       

Civil contingencies

Civil contingencies refer to claims filed by former customers in connection with billing disputes and claims for civil damages.

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(In thousands of Reais, except where otherwise stated)    

 

Labor contingencies

These refer to claims filed by former employees in connection with salaries, salary differences and equalization, overtime and other matters.

Tax contingencies

In September 2003 the subsidiary TIM Nordeste Telecomunicações S.A. was assessed by the Internal Revenue Secretariat of the State of Ceará for R$ 12,721 referring to: (i) disallowance of R$ 8,402 expenses included in the IRPJ determination for the period 1999 through 2001; (ii) R$ 3,208 of differences in CSLL payments for the years from 1998 through 2001; (iii) differences of R$ 334 and R$ 777, respectively, in the payment of PIS and COFINS for the years from 1998 through 2002. The Company filed an impugnation and a voluntary appeal against this assessment. Its internal and external lawyers classify as possible the risk of loss on this action, and accordingly, no provision has been set up.

In 2003 and 2004 the subsidiary TIM Sul S.A. was assessed by the Internal Revenue Secretariat of the State of Santa Catarina for R$ 95,666, mainly relating to dispute on the levying of ICMS on certain services provided. The company is currently discussing these assessments with the tax authorities. According to its internal and external lawyers, the probable losses thereon, duly provided for, amount to R$ 15,631.

The subsidiary TIM Celular S.A. was fined by the taxing authorities of the state of Rio de Janeiro for R$ 3,678, for delaying voluntary payment that included understated arrears interest. The subsidiary is currently discussing these assessments with the tax authorities. Based on its internal and external lawyers, the Management concluded that the action will probably be lost, having, therefore, set up a provision.

In 2005, indirect subsidiary Maxitel S.A. was assessed by the Internal Revenue Secretariat of Belo Horizonte for R$ 126,933 relating to (i) taxation of monetary variations of swap operations and exchange variations of unsettled loans; (ii) a separate fine charged due to default on social contribution due on monthly-estimate-based profit for 2002 and part of 2001; (iii) default on corporate income tax based on monthly estimate for the year 2002; and (iv) interest remittance abroad (IRRF) – a voluntary declaration without payment of arrears charges. The company is currently discussing these assessments with the tax authorities. According to its internal and external lawyers, the probable losses thereon amount to R$ 32,750. As these are contingencies relating to income tax and social contribution, which, if paid upon maturity, would have been recorded as income tax and social contribution expenses, the Company found it correct to classify the provision for these contingencies as non-operating expenses.

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     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
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In 2004, the indirect subsidiary Maxitel S.A. was assessed in connection with PIS and COFINS due on exchange variation arising from revenue generated in 1999. Both notices amounted R$ 30,913. Because this is a controversial matter involving interpretation of applicable legislation, a provision was set up, in 2004, for the same amount. On March 13, 2006 the decision was issued on the action filed by the company against Law 9718 of November 27, 1998, with no right to further appeal. The company alleged that this law was unconstitutional concerning the expansion of the tax basis of calculation, preventing the collection of PIS and COFINS on non-operating revenue. In view of the final decision, the Management requested extinction of the tax assessment against the subsidiary, concerning PIS and COFINS on exchange variation and reversed, in 2006, the provision set up in 2004 (Note 27).

Regulatory Contingencies

Due to default on some SMP’s provisions and quality targets defined under the PGMQ-SMP – General SMP Quality Goals Plan – ANATEL started some procedures for determining Default on Obligations – PADO, involving the subsidiaries.

The subsidiaries have endeavored to avoid being assessed, with arguments, mostly of technical and legal nature, that may contribute to reduce significantly the initial fine charged or event definitively file the PADO, with no sanctions. The related provision was set up based on the amount of fines charged, the risk of loss involved being classified probable.

FUST – Telecommunications Service Universalization Fund

On December 15, 2005, Anatel issued its Summary no. 07 of aimed at collecting contributions to the FUST out of interconnection revenues earned by providers of telecommunications services, as from the date of enactment of Law 9998 of August 17, 2000. The Company still believes that based on applicable legislation (including the sole paragraph of article 6 of Law 9998/00), the above revenues are not subject to the FUST charges, and accordingly, the Management has taken the necessary measures to protect their interests. Given the Anatel’s views, the Company’s internal and external lawyers evaluated the favorable and the unfavorable arguments involved in its claims, and considering the status of the action, have concluded that the possibility of loss is remote. Therefore, in accordance with the applicable accounting practices, the Management has not set up a provision for this contingency. Currently Anatel’s intended collection of FUST on interconnection revenues earned by the Company is suspended, because of the temporary order issued by the Federal District Regional Court.

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     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
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Possible contingencies not provided for

Civil, Labor, Regulatory and Tax-related actions have been filed against the Company and its subsidiaries involving risk of loss that is classified as possible or remote by the management and the Company’s lawyers. No provision has been set up for these contingencies.

    Consolidated 
   
            12/2005 
    03/2006    12/2005    Pro-forma 
       
 
Civil    40,116    11,892    35,979 
Labor    26,993    13,927    20,222 
Tax    194,245    69,721    189,948 
Regulatory    20,368    9,806    26,368 
       
    281,722    105,346    272,517 
       

22 Shareholders’ Equity

a. Capital

The authorized capital comprises 2,500,000,000,000 shares.

Capital subscribed and paid-in as of March 31, 2006 comprises shares without par value, thus distributed:

    03/2006    12/2005 
     
 
Number of common shares    791,117,234,619    299,610,631,068 
Number of preferred shares    1,531,472,229,634    579,965,856,092 
     
    2,322,589,464,253    879,576,487,160 
     

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b. Capital reserves

Special reserve for goodwill

This reserve was set up during the corporate reorganization process in 2000. The portion of the special reserve corresponding to the tax benefit obtained may be capitalized at the end of each fiscal year for the benefit of the controlling shareholder, with new issuance of shares. The respective capital increase will be subject to preemptive rights of the minority shareholders, in proportion to their shareholdings, by type and class, at the time of new issuance, and the amounts payable during the year in connection with this right must be delivered directly to the controlling shareholder, in accordance with Instruction No. 319/99 of the Brazilian Securities Commission (CVM).

Reserve for future capital increase

In March 2005, capital increases were approved at the subsidiaries TIM Nordeste Telecomunicações S.A. and TIM Sul S.A. as a consequence of the capitalization of part of the special reserve for goodwill, as above mentioned. The period for the minority shareholders to exercise their preference rights expired in April 2005, when TIM Participações S.A. received R$6,401 from the shareholders that have exercised their preferential rights. When such amount was received, the exchange of shares mentioned in note 2.a, in which the subsidiaries became wholly owned companies of TIM Participações S.A., and the related capital increases of the parent company had already been established. Therefore, the amount received from minority shareholders (now shareholders of TIM Participações S.A.) was recorded against Reserve for Future Capital Increase. Management intends to propose at a shareholders’ meeting the capitalization of such amount, without issuance of shares, in benefit of all shareholders.

c. Income reserves

Legal reserve

This refers to the 5% (five percent) of net income for every year ended December 31 to be applied to the legal reserve, which should not exceed 20% (twenty percent) of capital. Also, the Company may not set up the legal reserve when it exceeds 30% (thirty percent) of capital plus capital reserves. This reserve can be used only for capital increase or compensation of accumulated losses.

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Unearned income reserve

The unearned income reserve is originated from the portion of equity pickup to be financially realized, substantially represented by the capital reserve from income tax incentive set up by the subsidiary. In conformity with Law No. 10303/01, the reserve, amounting to R$ 18,838, was set up for the amount of compulsory dividends, which exceeded the realized portion of net income for the year of 2003.

On March 7, 2006, at the Ordinary Shareholders´ Meeting, the Company’s management approved the distribution of dividends in this amount.

Reserve for expansion (other income reserves)

This reserve is composed by the remainder of net income for the year ended December 31, 2005, adjusted in accordance with article 202 of Law 6.404/76 – R$ 299,074 –, as determined by the CVM Instruction No. 59/86, to be used for investments and network expansion. This reserve is formed based on paragraph 2, article 40 of the by-laws and article 194 of Law 6.404/76. Additionally, the investments to be made thereunder are supported by the capital budget approved at the Ordinary Extraordinary Shareholders´ Meeting held on March 7, 2006.

d. Dividends

Dividends are calculated in accordance with the Bylaws and Brazilian Corporate Law (“Lei das Sociedades por Ações”).

Based on its Bylaws, the Company shall distribute an amount equivalent to 25% of adjusted net income as minimum dividend every year ended December 31, provided there are funds available for distribution.

Preferred shares are nonvoting and take priority on (i) the payment of capital at no premium, and (ii) payment of a minimum noncumulative dividend of 6% p.a. on the total obtained from dividing the capital stock representing this type of shares by the total number of the same class of shares issued by the Company.

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In order to comply with the New Corporate Law, the Company’s bylaws were amended, including the First Paragraph of Section 10, which ensures the holders of preferred shares, every year, the right to receive stock dividends corresponding to 3% (three percent) of net earnings per share, based on the balance sheet most recently approved, whenever the dividend established according to this criterion exceeds the dividend calculated according to the criteria previously established, described in the preceding paragraph.

23 Net operating income

    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
Telecommunications service revenue             
   Subscription charges    139,641    71,795    122,077 
   Use charges    1,183,965    359,511    947,635 
   Network use    650,225    224,554    589,594 
   Long-distance charges    288,887    32,797    170,673 
   VAS – Additional services    180,964    48,599    124,429 
   Other    21,964    15,169    26,690 
       
    2,465,646    752,425    1,981,098 
 
Sales of products    423,312    130,468    397,356 
       
Gross operating revenue    2,888,958    882,893    2,378,454 
       
Deductions from gross revenue             
   Taxes    (621,699)   (188,044)   (492,903)
   Discounts    (125,030)   (34,092)   (67,817)
   Other    (10,585)   (1,737)   (4,995)
       
    (757,314)   (223,873)   (565,715)
       
    2,131,644    659,020    1,812,739 
       

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24 Cost of services rendered and goods sold

    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
Personnel    (33,105)   (6,135)   (26,845)
Third-party services    (69,474)   (19,810)   (62,501)
Interconnection charges    (347,506)   (89,495)   (311,818)
Depreciation and amortization    (320,080)   (91,217)   (253,778)
Telecommunications inspection fund    (2,301)   (636)   (3,237)
Other    (38,185)   (5,010)   (33,868)
       
Cost of services rendered    (810,651)   (212,303)   (692,047)
Cost of goods sold    (304,186)   (95,861)   (329,509)
       
Total cost of services rendered and goods sold    (1,114,837)   (308,164)   (1,021,556)
       

25 Selling expenses

    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
 
Personnel    (64,661)   (14,773)   (52,970)
Third-party services    (393,517)   (86,188)   (354,356)
Allowance for doubtful accounts    (89,381)   (25,163)   (75,551)
Telecommunications inspection fund    (91,669)   (25,938)   (72,627)
Depreciation and amortization    (72,704)   (12,236)   (53,044)
Other    (23,160)   (4,762)   (23,280)
       
    (735,092)   (169,060)   (631,828)
       

26 General and administrative expenses

    Parent Company 
   
    03/2006    03/2005 
     
 
Personnel    (1,861)   (693)
Third-party services    (5,910)   (1,079)
Other    (143)   (160)
     
    (7,914)   (1,932)
     

Page: 41


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    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
 
Personnel    (45,238)   (7,007)   (37,005)
Third-party services    (96,010)   (23,388)   (79,150)
Depreciation and amortization    (78,033)   (10,571)   (55,296)
Other    (24,187)   (3,042)   (14,898)
       
    (243,468)   (44,008)   (186,349)
       

27 Other operating revenues (expenses) - Net

    Parent Company 
   
    03/2006    03/2005 
     
 
Revenues         
   Reversal of provision for contingencies    979   
   Other receivables         
     
    979   
     
 
Expenses         
   Taxes, rates and contributions      (6)
   Amortization of goodwill    (395)   (395)
   Provision for contingencies    (775)   (692)
   Other operating expenses      (19)
     
    (1,170)   (1,112)
     
 
Other operating revenues (expenses) – Net    (191)   (1,112)
     

Page: 42


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    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
 
Revenues             
   Fines on telecommunications services    5,658    2,279    4,837 
   Reversal of provision for contingencies (a)   33,808    36    426 
   Other operating revenues    4,509    860    229 
       
    43,975    3,175    5,492 
       
 
Expenses             
   Amortization of goodwill paid on privatization    (12,613)   (12,613)   (12,613)
   Concession amortization    (62,059)   (2,324)   (62,062)
   Taxes, rates and contributions    (16,506)   (2,990)   (4,133)
   Amortization of goodwill    (395)   (395)   (395)
   Amortization of deferred charges    (1,103)     (1,135)
   Provision for contingencies    (11,627)   (1,673)   (7,181)
   Losses on legal actions    (6,657)   (835)   (1,813)
   Other operating expenses      (321)   (198)
       
    (110,960)   (21,151)   (89,530)
       
 
Other operating revenues (expenses ) - Net    (66,985)   (17,976)   (84,038)
       

(a) In 2006, this refers mainly to the reversal of provision for PIS and COFINS (Note 21).

28 Financial revenues

    Parent Company 
   
    03/2006    03/2005 
     
Interest on short-term investments    62    372 
Monetary adjustment    315    231 
Other revenues    50    28 
     
    427    631 
     

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    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
Interest on short-term investments    39,435    29,043    29,356 
Monetary adjustment    710    450    500 
Interest on accounts receivable    3,433    2,018    3,727 
Exchange variation    49,960    2,189    79,124 
Other revenues    4,673    1,027    4,343 
       
    98,211    34,727    117,050 
       

29 Financial Expenses

    Parent Company 
   
    03/2006    03/2005 
     
Interest on related-party loan agreement      (602)
CPMF    (259)   (278)
Other expenses    (2)   (256)
     
    (261)   (1,136)
     


    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
Interest on loans and financing    (54,945)   (1,885)   (17,710)
Interest on suppliers    (20,268)   (150)   (4,695)
Monetary adjustment    (6,724)   (236)   (2,648)
Interest on taxes and rates    (5,982)   (1,041)   (1,238)
CPMF    (12,140)   (4,132)   (12,599)
Discounts granted    (1,958)   (1,038)   (8,118)
Charge of installment    (23,851)   (5,650)   (6,440)
Exchange variation    (49,471)   (2,997)   (122,673)
Other expenses    (9,385)   (1,115)   (7,845)
       
    (184,724)   (18,244)   (183,966)
       

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30 Non-operating income (expense)

    Consolidated 
   
            03/2005 
    03/2006    03/2005    Proforma 
       
 
Revenues             
 Property, plant and equipment disposals    1,169    667    1,164 
       
    1,169    667    1,164 
       
 
Expenses             
 Cost of property, plant and equipment disposed of    (751)   (334)   (1,775)
 Other operating expenses    (1)     (471)
       
    (752)   (334)   (2,246)
       
 
Non-operating income (expense)   417    333    (1,082)
       

31 Financial instruments and risk management

Risk factors

The following are the main risks to which the Company and its subsidiaries are exposed:

(i) Exchange rate risks

The exchange rate risk relates to the possibility of the subsidiaries to compute 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.

In March 31, 2006, the subsidiaries’ loans and financing indexed to the “UMBNDES” exchange variance of a basket of currencies are covered by hedge contracts. Income or loss resulting from these hedge contracts is charged to operating results.

There are no significant financial assets indexed to foreign currencies.

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(ii) Interest rate risks

The interest rate risks relate to:

- possibility of changes in the fair value of financing indexed to prefixed interest rates, in the event the latter do not reflect the actual market conditions. In order to reduce this type of risk the subsidiaries sign hedge contracts with financial institutions, the income or loss on these contracts is recorded to results;

- possibility of an unfavorable change in interest rates, with a resulting increase in financial expenses incurred by the subsidiaries, due to the fact that the interest rate of part of their hedge debt and obligations is floating. In March 31, 2006, the subsidiaries’ financial resources are mostly invested in CDI, which considerably reduces this risk.

(iii) Credit risk inherent in services rendered

This risk is related to the possibility of the subsidiaries computing losses originating from the difficulty in collecting the amounts billed to customers. In order to mitigate this risk, the Company and its subsidiaries perform credit analysis that assist the management of risks related to collection problems, and monitor accounts receivable from subscribers, blocking the telephone, in case customers fail to pay their bills.

(iv) Credit risk related to the sale of telephone sets and pre-paid telephone cards

The policy adopted by the Company’s subsidiaries for the sale of telephone sets and distribution of prepaid telephone cards is directly related to credit risk levels accepted during the normal course of business. The choice of partners, the diversification of the accounts receivable portfolio, the monitoring of loan conditions, the positions and limits defined for orders placed by traders, the adoption of guarantees are procedures adopted by the subsidiaries to minimize possible collection problems with its commercial partners. There is no single client who accounts for more than 10% of net receivables from sales of goods as of March 31, 2006 and 2005, or sales revenues during the first quarter of 2006 and 2005.

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(v) Financial credit risk

This risk relates to the possibility of the Company and its subsidiaries computing losses originating from the difficulty in realizing its short-term investments and hedge contracts. The Company and its subsidiaries minimize the risk associated to these financial instruments by investing in well-reputed financial institutions.

There is no concentration of available resources in connection with work, service, concessions or rights that have not been mentioned above that could, if eliminated suddenly, severely impact the operations of the subsidiaries.

Market value of financial instruments

The estimated market value of financial instruments, especially cash and cash equivalents, accounts receivable and short-term financial instruments approximates their book value, given their short duration. Below, the financial instruments with market value different from their book value as:

    03/2006    12/2005    12/2005 Proforma 
       
    Book    Market    Book    Market    Book    Market 
    value    value    value    value    value    value 
             
 
Loans and financing    2,407,342    2,408,209    125,971    123,133    1,845,372    1,826,665 
Hedge contracts    25,062    30,701    4,812    4,206    24,670    26,251 

The market value of loans and financing and hedge contracts was determined based on future discounted cash flow and at interest rates applicable to similar instruments which involve the same risks and conditions or are based on their market quotations.

The market values were estimated at a specific time, using available information and the Company’s own evaluation methods. Any change in the underlying assumptions may significantly affect the estimates.

Page: 47


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

32 Pension Plan and other post-employment benefits

TIM Participações S.A. and its subsidiaries TIM Nordeste Telecomunicações S.A and TIM Sul S.A, have been sponsoring a private defined benefits pension plan for a group of employees of the former TELEBRÁS system, which is managed by Fundação Sistel de Seguridade Social – SISTEL, as a consequence of the legal provisions applicable to the privatization process of these companies in July 1998.

Considering that, in 1999 and 2000, the sponsors of the pension plans managed by SISTEL had already negotiated conditions for the creation of individual pension plans per sponsoring company and maintenance of joint liability only in relation to the participants already assisted on January 31, 2000, the Companies and their subsidiaries in 2002, like other companies resulting from the former TELEBRÁS system, started the creation of a pension plan for defined contributions meeting the most modern social security standards adopted by private companies and allowing the possibility of migration to this plan of the group of employees linked to SISTEL.

On November 13, 2002, the Brazilian Secretariat for Supplemental Pension Plans, through official ruling No. 1917 CGAJ/SPC, approved the statutes of the new pension plan, denominated Statutes of the TIMPREV Benefits Plan, defined contributions, which provide for new conditions for benefits granting and maintenance, as well as the rights and obligations of the Plan Managing Entity, the sponsoring companies, participants and the beneficiaries thereof.

Under the new plan, the contribution on the part of the sponsoring company shall be of 100% of the amount of the basic contribution on the part of participants, and the managing entity of TIMPREV shall ensure, on the terms and conditions of the approved plan statutes, the benefits listed below, not being held liable for granting any other, even if the government official social security adventitiously starts granting them to beneficiaries:

Page: 48


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

However, as not all employees of the Company and its subsidiaries have migrated to TIMPREV plan, the pension and health care plans deriving from the TELEBRÁS system continue existing and are briefly set out below:

PBS: benefits plan of SISTEL for defined benefits, which includes the employees paying contributions to the plan (active) who participated in the plans sponsored by the companies of the former TELEBRÁS system;

“PBS Assistidos”: private pension plan for employees receiving benefits (inactive), for multi-sponsored benefits;

“Convênio de Administração”: for managing pension payment to retirees and pensioners of the predecessors of the subsidiary companies;

PAMEC: health care plan granted to pensioners of the predecessors of the subsidiary companies;

PBT: plan for defined benefits for pensioners of the predecessors of the company and its subsidiaries;

PAMA: health care plan for retired employees and their dependents, on a shared cost basis.

In accordance with the rules established by NPC-26 issued by the Institute of Independent Auditors of Brazil – IBRACON, as approved by CVM Deliberation No. 371, the actuarial position of these plans represents a surplus not recorded by the Company in view of the impossibility to recover such amounts and also considering that the amount of contributions will not be reduced for the future sponsor.

TIM Sul S.A. is the succeeding sponsoring company arising from the partial spin-off of Telecomunicações do Paraná S.A – TELEPAR, of the private pension supplementation plans introduced in 1970 under a Collective Agreement, approved by the Atypical Contractual Agreement entered into by said company and the Unions representing the professional categories then existing.

In the first quarter of 2006, the contributions to TIMPREV totaled R$65, being R$27 by Tim Nordeste Telecomunicações S.A. and R$38 by Tim Sul S.A. (R$30 by Tim Nordeste Telecomunicações S.A. and R$42 by Tim Sul S.A. in the same period in 2005).

Page: 49


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

33 Insurance (unaudited)

As of march 31, 2006, the Company and its subsidiaries have insurance coverage against fire and sundry risks for inventories and property, plant and equipment. Management considers the amounts sufficient to cover any losses, based on the risks and amounts involved.

34 Commitments

On the terms of the Authorization for Mobile Personal Service (SMP) Exploitation, the subsidiaries have committed to implement mobile personal telecommunications cover for the assigned area, on a phased basis, within the quality standards established by such authorization. Should said terms fail to be met, the subsidiaries are subject to penalties.

Anatel has brought administrative proceedings against the subsidiaries for noncompliance with certain quality service indicators in 2003 and 2004 as established by the licenses for Personal Mobile Service (SMP). The subsidiaries have claimed that noncompliance with certain quality indicators were mainly due to the migration from the Cellular Mobile Service (SMC) to the Personal Mobile Service (SMP), the change in the long-distance system, and the implementation of the GSM network. It is not possible to estimate the outcome of these claims at this point in time. A provision for regulatory contingencies reflected in the balance sheet shows the amount of losses expected by the Management.

Page: 50


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

Supplementary information

a. Cash Flow Statements

    Parent Company    Consolidated 
     
    03/2006    03/2005    03/2006    03/2005 
         
Operating Activities                 
   Net Income (Loss) for the period    (138,846)   93,616    (151,757)   (231,722)
   Adjustments for reconciliation of income to cash and cash                 
equivalents:                 
       Depreciation and amortization    395    395    546,987    438,323 
       Results of equity accounting    133,459    (96,090)    
       Residual value of permanent assets written off        750    (702)
       Interest on own capital received    64,750    60,446     
       Deferred income tax and social contribution    (2,560)   (1,073)   (4,282)   (4,501)
       Minority shareholding          21,464 
       Interest, monetary and exchange variation on loans        72,475    20,220 
       Interest, monetary and exchange variation on related-party loans              46,432 
       Allowance for doubtful accounts        89,381    75,551 
 
   Decrease (increase) in operating assets                 
       Trade receivables        117,570    (34,896)
       Taxes and contributions recoverable    16,992    4,673    44,039    (7,616)
       Inventories        66,734    25,692 
       Related-party transactions      108    (186)   (19,467)
       Other current assets    (105)   (30)   (220,390)   (156,377)
       Other long-term assets    (551)   (293)   (4,867)   (4,443)
 
   Increase (decrease) in operating liabilities                 
       Labor obligations    228      13,012    15,439 
       Suppliers    (748)   356    (1,591,811)   (957,748)
       Taxes, rates and contributions    (20,683)   (15,791)   (82,781)   (11,166)
       Provision for contingencies    290    692    (25,501)   (1,324)
       Related-party transactions      (34,948)   (10,095)   (1,304)
       Other short-term liabilities    (194)     200    4,889 
         
   Net cash and cash equivalents generated by operating activities    52,427    12,062    (1,140,522)   (783,256)
         
 
Investment activities:                 
   Additions to property, plant and equipment        (165,854)   (270,966)
         
        (165,854)   (270,966)
         
Financial activities                 
   New loans        616,474   
   Related-party loans          924,404 
   Loan amortization        (129,678)   (78,507)
   Capital increase          14,383 
   Dividends and interest on own capital paid    (56,195)   (65)   (56,290)   (11,798)
         
    (56,195)   (65)   430,506    848,482 
         
 
Increase (decrease) in cash and cash equivalents    (3,768)   11,997    (875,870)   (205,740)
         
 
Supplementary cash flow information:                 
   Income tax and social contribution paid            12,572    19,275 
   Interest paid        86,600    14,118 
   Capitalized interest        3,385   

Page: 51


FEDERAL PUBLIC SERVICE     
CVM – BRAZILIAN SECURITIES COMMISSION     
ITR – Quarterly Information    Corporate Law 
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY    Base Date – 03/31/2006 
 
 
 
     01763-9 TIM PARTICIPAÇÕES S.A.    02.558.115/0001-21 
 
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese 
 
04.01 - NOTES TO QUARTERLY INFORMATION     
 
(In thousands of Reais, except where otherwise stated)    

 

b. Value-Added Statements

    Parent Company    Consolidated 
     
    03/2006    03/2005    03/2006    03/2005 
         
Revenues                 
     Gross operating revenue        2,888,958    2,378,454 
     Allowance for doubtful accounts and losses        (89,381)   (75,551)
     Discounts granted        (135,615)   (72,811)
     Non-operating revenues (expenses) – Net      (6)   417    (1,082)
         
      (6)   2,664,379    2,229,010 
 
Input bought from third parties                 
     Costs of services rendered and goods sold        (723,339)   (706,128)
     Materials, energy, third-party services and other    (5,738)   (1,844)   (506,829)   (458,043)
         
    (5,738)   (1,844)   (1,230,168)   (1,164,171)
 
Retained items                 
     Depreciation and amortization    (395)   (395)   (546,987)   (438,323)
 
Net added value produced    (6,133)   (2,245)   887,224    626,516 
 
Added value received through transfer                 
     Gain on investments    (133,459)   96,091     
     Financial revenues    428    631    98,211    117,050 
         
    (133,031)   96,722    98,211    117,050 
 
Total undistributed value-added    (139,164)   94,477    985,435    743,566 
         
 
Value-added distribution                 
     Personnel and related charges    1,593    606    123,257    100,558 
     Taxes, rates and contributions    (1,945)   (605)   791,951    639,812 
     Interest and rentals    34    860    221,984    215,536 
     Minority shareholding          19,382 
     Retained earnings    (138,846)   93,616    (151,757)   (231,722)
         
 
    (139,164)   94,477    985,435    743,566 
         

36 Subsequent events

On April 19, the right to withdrawals of minority shareholders owning common shares of TIM Participações S.A. under the merger with TIM Celular S.A.(Note 2-c) elapsed. There was no dissention on the part of these minority shareholders.

Page: 52


 

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: May 05, 2006 By: /s/ Paulo Roberto Cruz Cozza
    Name: Paulo Roberto Cruz Cozza
    Title: Chief Financial Officer