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

 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the month of July, 2008
 

 
TELE NORTE CELULAR PARTICIPAÇÕES S.A.
(Exact name of Registrant as specified in its Charter)
 
TELE NORTE CELLULAR HOLDING COMPANY
(Translation of Registrant's name into English)
 



Rua Levindo Lopes, 258 - Funcionários
Cep: 30.140-170 - Belo Horizonte (MG) – Brazil

(Address of Principal Executive Offices)



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

Form 20-F:  
ý      Form 40-F:   o 

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)):

Yes:  
o      No:   ý 

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)):

Yes:   o      No:   ý 

(Indicate by check mark whether the registrant by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes:   o      No:   ý 

 


FEDERAL PUBLIC SERVICE     
CVM - BRAZILIAN SECURITIES COMMISSION     
QUARTERLY INFORMATION - ITR    Corporate Law 
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY    March 31, 2008 
Restatement required by CVM 094/08     

REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY. 
COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED. 

01.01 - IDENTIFICATION

1 - CVM CODE 
01760-4 
2 - COMPANY NAME 
TELE NORTE CELULAR PARTICIPAÇÕES S.A. 
3 - CNPJ (Corporate Taxpayer’s ID)
02.558.154/0001-29 
4 - NIRE (Corporate Registry ID)
53.300.005.761 

01.02 - HEADQUARTERS

1 – ADDRESS 
Rua Levindo Lopes, 258 - 8th floor 
2 - DISTRICT             
Funcionários 
3 - ZIP CODE 
30140-170 
4 – CITY 
Belo Horizonte 
5 - STATE 
MG 
6 - AREA CODE 
31 
7 - TELEPHONE 
9933-3077 
8 - TELEPHONE 
9 - TELEPHONE 
10 - TELEX 
11 - AREA CODE 
31 
12 - FAX 
9933-3152 
13 - FAX 
14 - FAX 
 
15 - E-MAIL 

01.03 - INVESTOR RELATIONS OFFICER (Company Mailing Address)

1- NAME 
José Luiz Magalhães Salazar 
2 - ADDRESS 
Rua Humberto de Campos, 425 
3 - DISTRICT
Leblon 
4 - ZIP CODE 
22430-190 
5 - CITY
Rio de Janeiro 
6 - STATE 
RJ 
7 - AREA CODE 
21 
8 - TELEPHONE 
3131-1123 
9 - TELEPHONE 
10 - TELEPHONE 
11 - TELEX

12 - AREA CODE 
21 
13 - FAX 
3131-1123 
14 - FAX 
15 - FAX 
 
16 - E-MAIL 
jls@oi.net.br 

01.04 - ITR REFERENCE AND AUDITOR INFORMATION

CURRENT YEAR  CURRENT QUARTER  PREVIOUS QUARTER 
1 - BEGINNING  2 - END  3 - QUARTER  4 - BEGINNING  5 - END  6 - QUARTER  7 - BEGINNING  8 - END 
 01/01/2008  12/31/2008  01/01/2008  03/31/2008  10/01/2007  12/31/2007 
09 - INDEPENDENT ACCOUNTANT  
Deloitte Touche Tohmatsu Auditores Independentes 
10 - CVM CODE 
00385-9 
11 - TECHNICIAN IN CHARGE 
Paulo Roberto Marques Garrucho 
12 - TECHNICIAN’S CPF (INDIVIDUAL TAXPAYER’S REGISTER)
373.525.127-72 

1


01.05 - CAPITAL STOCK

Number of Shares 
(in thousands)
1 - CURRENT QUARTER 
03/31/2008 
2 - PREVIOUS QUARTER
12/31/2007 
3 - SAME QUARTER, 
PREVIOUS YEAR
03/31/2007 
Paid-up Capital       
       1 – Common  2,493  2,493  124,623,842 
       2 – Preferred  4,209  4,209  210,460,313 
       3 – Total  6,702  6,702  335,084,155 
Treasury Stock 
       4 – Common 
       5 – Preferred 
       6 – Total 

01.06 - COMPANY PROFILE

1 - TYPE OF COMPANY 
Commercial, Industry and Other Types of Company 
2 - STATUS 
Operational 
3 - NATURE OF OWNERSHIP 
National Holding 
4 - ACTIVITY CODE 
1130 – Telecommunications 
5 - MAIN ACTIVITY 
Cellular Mobile Telephone 
6 - CONSOLIDATION TYPE 
Total 
7 - TYPE OF REPORT OF INDEPENDENT AUDITORS 
Unqualified 

01.07 - COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS

1 - ITEM  2 - CNPJ (Corporate Taxpayer’s ID)' 3 - COMPANY NAME 

01.08 - CASH DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER

1 - ITEM  2 - EVENT  3 - APPROVAL  4 - TYPE  5 - DATE OF PAYMENT  6 - TYPE OF SHARE  7 - AMOUNT PER SHARE 
01  AGO/E  03/28/2008  Dividend  04/14/2008  Preferred  0.7596700000 

2


01.09 - SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT YEAR

1 – ITEM 
01 
2 - DATE OF CHANGE 
29/10/2007 
3 - CAPITAL STOCK 
(in thousands of Reais)
84,851 
4 - AMOUNT OF CHANGE 
(in thousands of Reais)
5 - NATURE OF CHANGE 
Reverse Share Split 
7 - NUMBER OF SHARES ISSUED 
(Thousands)

8 -SHARE PRICE WHEN ISSUED 
(in Reais)
0,0000000000 


01.10 - INVESTOR RELATIONS OFFICER

1 – DATE 
05/21/2008 
2 – SIGNATURE 

3


02.01 - BALANCE SHEET - ASSETS (in thousands of Reais)

1 – CODE  2 – DESCRIPTION  3 – 03/31/2008  4 – 12/31/2007 
Total Assets  117,427  113,403 
1.01  Current Assets  15,139  15,527 
1.01.01  Cash and Cash Equivalents  14,199  14,979 
1.01.01.01  Cash and Cash Equivalents  35  115 
1.01.01.02  Short Term Investments  14,164  14,864 
1.01.02  Credits 
1.01.02.01  Customers 
1.01.02.02  Miscellaneous Credits 
1.01.03  Inventories 
1.01.04  Others  940  548 
1.02  Non-current assets  102,288  97,876 
1.02.01  Long Term Receivables  3,242  2,786 
1.02.01.01  Miscellaneous Credits  2,689  2,591 
1.02.01.01.01  PIS and COFINS Recoverable – Law 9718/98  1,533  1,515 
1.02.01.01.02  Income Tax and Social Contribution Recoverable  1,156  1,076 
1.02.01.01.03  Other Taxes Recoverable 
1.02.01.02  Credits with Related Parties  497  138 
1.02.01.02.01  Affiliates 
1.02.01.02.02  Subsidiaries 
1.02.01.02.03  Other Related Parties  497  138 
1.02.01.03  Others  56  57 
1.02.02  Permanent Assets  99,046  95,090 
1.02.02.01  Investments  99,046  95,090 
1.02.02.01.01  In Affiliates 
1.02.02.01.02  In Affiliates/Goodwill 
1.02.02.01.03  In Subsidiaries  99,046  95,090 
1.02.02.01.04  In Subsidiaries/Goodwill 
1.02.02.01.05  Other Investments 
1.02.02.02  Property, Plant and Equipment 
1.02.02.03  Intangible 
1.02.02.04  Deferred Charges 

4


02.02 - BALANCE SHEET - LIABILITIES (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 03/31/2008  4 – 12/31/2007 
Total Liabilities  117,427  113,403 
2.01  Current Liabilities  25,564  25,215 
2.01.01  Loans and Financing  4,917  4,980 
2.01.02  Debentures 
2.01.03  Suppliers  550  341 
2.01.04  Taxes, Charges and Contributions 
2.01.05  Dividends Payable  3,297  3,297 
2.01.06  Provisions  24 
2.01.07  Debts with Related Parties 
2.01.08  Other  16,776  16,597 
2.01.08.01  Accounts Payable and other provisions  24  25 
2.01.08.02  Accounts Payable – hedge operations  2,791  2,516 
2.01.08.03  Reverse Share Split  13,947  14,041 
2.01.08.04  Other Liabilities  14  15 
2.02  Non-current assets  25  59 
2.02.01  Long Term Liabilities  25  59 
2.02.01.01  Loans and Financing 
2.02.01.02  Debentures 
2.02.01.03  Provisions 
2.02.01.04  Debts with Related Parties  25  59 
2.02.01.05  Advance for Future Capital Increase 
2.02.01.06  Others 
2.02.01.06.01  Accounts Payable – Hedge Operations 
2.02.02  Deferred Income 
2.04  Shareholders’ Equity  91,838  88,129 
2.04.01  Paid-in Capital  84,851  84,851 
2.04.02  Capital Reserves 
2.04.03  Revaluation Reserves 
2.04.03.01  Own Assets 
2.04.03.02  Subsidiaries/Affiliates 
2.04.04  Profit Reserves  160  160 
2.04.04.01  Legal  160  160 
2.04.04.02  Statutory 
2.04.04.03  For Contingencies 
2.04.04.04  Realizable Profits 
2.04.04.05  Profit Retention 
2.04.04.06  Special for Non-Distributed Dividends 
2.04.04.07  Other Profit Reserves 
2.04.05  Retained Earnings/Accumulated Losses  6,827  3,118 
2.04.06  Advance for Future Capital Increase 

5


03.01 - STATEMENT OF INCOME (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to 
03/31/2008 
4 – 01/01/2008 to 
03/31/2008 
5 – 01/01/2007 to 
03/31/2007 
6 – 01/01/2007 to 
03/ 31/2007 
3.01  Gross Revenue from Sales and/or Services 
3.02  Gross Revenue Deductions 
3.03  Net Revenue from Sales and/or Services 
3.04  Cost of Goods and/or Services Sold 
3.05  Gross Profit 
3.06  Operating Expenses/Revenue  3,709  3,709  (5,593) (5,593)
3.06.01  Selling 
3.06.02  General and Administrative  (514) (514) (198) (198)
3.06.03  Financial  267  267  (117) (117)
3.06.03.01  Financial Income  492  492  140  140 
3.06.03.02  Financial Expenses  (225) (225) (257) (257)
3.06.04  Other Operating Revenues 
3.06.05  Other Operating Expenses 
3.06.06  Equity in Subsidiary and Affiliated Companies  3,956  3,956  (5,278) (5,278)
3.07  Operating Income  3,709  3,709  (5,593) (5,593)
3.08  Non-Operating Income 
3.08.01  Revenues 
3.08.02  Expenses 
3.09  Income Before Taxes/Profit Sharing  3,709  3,709  (5,593) (5,593)
3.10  Provision for Income Tax and Social Contribution 
3.11  Deferred Income Tax 
3.12  Profit Sharing/Statutory Contributions 
3.12.01  Employee Profit Sharing 
3.12.02  Contributions 
3.13  Reversal of Interest on Shareholders’ Equity 

6


03.01 - STATEMENT OF INCOME (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to 
03/31/2008 
4 – 01/01/2008 to 
03/31/2008 
5 – 01/01/2007 to 
03/31/2007 
6 – 01/01/2007 to 
03/ 31/2007 
3.15  Net Income/Loss for the Period  3,709  3,709  (5,593) (5,593)
  NUMBER OF SHARES, EX-TREASURY 
(in thousands)
6,702  6,702  335,084,155  335,084,155 
  EARNINGS PER SHARE  0.55342  0.55342     
  LOSS PER SHARE      (0.00002) (0.00002)

7


FEDERAL PUBLIC SERVICE     
CVM - BRAZILIAN SECURITIES COMMISSION     
QUARTERLY INFORMATION - ITR    Corporate Law 
COMMERCIAL, INDUSTRY & OTHER TYPES OF COMPANY    March 31, 2008 
Restatement required by CVM 094/08     

 
01760-4    TELE NORTE CELULAR PARTICIPAÇÕES S.A.    02.558.154/0001-29 
 
         
 
04.01 – NOTES TO THE FINANCIAL STATEMENTS 
 

1 Operations

(a) Tele Norte Celular Participações S.A. (the “Company”) is a publicly-held corporation, operating as holding of Amazonia Celular S.A. Its equity interest in the operating subsidiary on March 31, 2008 and December 31, 2007 was 89.78% of voting capital and 74.96% of the total capital.

The Company’s subsidiary holds five authorizations to provide cellular mobile services and all the activities necessary or useful to carry out these services, in conformity with the aforementioned authorizations in the States of Amapá, Amazonas, Maranhão and Roraima.

The services offered and the rates charged by the Subsidiary are regulated by the National Telecommunications Agency -ANATEL, the regulatory authority for the Brazilian telecommunications industry, according to the General Law of Telecommunications and respective regulations.

On February 19, 2004, the Subsidiary and ANATEL signed Authorization Instruments for migration to the Personal Mobile Service (SMP), which took effect as from the publication of Act 42,671 in the Federal Official Gazette on March 1, 2004.

The SMP authorizations granted to the Subsidiary are effective for an undefined term. The radio frequency authorizations have the following maturities:

   Region / Sector    Expiration 
   
 
Region 1 – radio frequencies of 800 MHz, 900 MHz and 1800 MHz     
   Sector 13 – Maranhão    April 2009 
   Sector 14 – Pará    March 2009 
   Sector 15 – Amapá    May 2009 
   Sector 16 – Amazonas    August 2009 
   Sector 17 – Roraima    July 2009 

The radio frequency authorizations may be renewed for an additional 15-year term, and the extensions are granted on a remunerated basis. On August 16, 2006, the Subsidiary filed in ANATEL a request to obtain the extension of the right to use the radio frequencies associated to the authorization instrument of the personal mobile service. The request for extension is under analysis by ANATEL.

(b) The Subsidiary has been presenting negative net working capital. In view of that, the Subsidiary’s management has implemented several actions with the purpose of improving its financial efficiency trying to enhance its services revenue and to reduce costs and expenses, as a means of ensuring the improvement in operating margin of the Subsidiary.

In February, 2007 the Call Centers of Amazônia Celular S.A. and of the related company on March 31, 2008, Telemig Celular S.A., were integrated and started to operate uniquely in Belo Horizonte (Telemig Celular’s Head Office). This measure follows a trend in the national market, where the carriers seek to concentrate their call centers in large Relationship Centers, providing standardization and scale economy. As a result of this integration, the Company’s headcount was reduced in approximately 370 employees.

8


On October 2007, the Subsidiary launched Poupo product, a telephone that may be used at home, at work or anywhere that has a power outlet, at no cost, without need of a specialized technical visit or specific telephone inlet and with competitive fares as compared to the fixed telephony carriers.

Additionally, the Subsidiary has been reassessing its investment needs with the purpose to maintain its financial balance. The results of these actions have made possible the obtaining of resources with financial institutions and the extension of maturity dates of its loans and financing. In March, 2007 the Subsidiary obtained a loan with Banco ABN AMRO Real in the amount of US$48.6 million. In the third quarter 2007, at its own discretion, the Subsidiary anticipated the settlement of a portion of the principal amount of the loan obtained with Banco ABN AMRO Real in the amount of US$5.8 million.

In the second quarter 2007, the Subsidiary, also at its own discretion, performed the early settlement of the financings obtained with Unibanco/NIB and Unibanco/Nordea.

Consequently, the Subsidiary has managed to reduce its net debt and improve its operating results.

The Subsidiary’s Management believes that the cash flow from operations, together with new loans and financing to be obtained with the financial institutions and capital markets, will allow the Subsidiary to meet its financial and operating commitments along with upcoming years.

(c) On March 7, 2007 the Management Council of the National Telecommunications Agency - ANATEL approved the numerical portability in fixed and mobile telephones.

The rule will allow the users of the Exchanged Fixed Telephone Service (STFC) and the Personal Mobile Service (SMP) to change carriers keeping their fixed or cellular phone number, as many times as they request.

The initial offer of portability, in experimental character, will start within 16 months, in capital cities to be chosen for implementation of the pilot-project and it will be totally available throughout the country within 24 months, from the publishing of the General Regulation of Portability in the Federal Official Gazette, occurred on March 21, 2007.

The Subsidiary has already contracted network and Information Technology solutions, as well as reviewed all operating processes needed to the introduction of the portability in August, 2008.

(d) On August 2, 2007 Telpart Participações S.A. (“Telpart”), the Company’s controlling entity, entered into a Stock Purchase Agreement with Vivo Participações S.A. (“Vivo”), which objective is the alienation of the total of the equity interest of Telpart in the Company’s capital stock and of Telemig Celular Participações S.A. (related company on March 31, 2008).

9


Vivo Participações S.A. is the controlling shareholder of Vivo S.A., cellular mobile service and personal mobile service operator, in the areas 7 and 8 of Regions I and II, in the area 7 of region II and of the SMP, in Region I (service areas 3 and 9), in Region II (service area 6) and Region III (service areas 1 and 2).

The execution of the Stock Purchase Agreement was approved in Telpart’s Board Meeting held on August 2, 2007 and albo by shareholders representing 99% of the total capital stock of Telpart’s controlling entity – Newtel Participações S.A. (“Newtel”) in a previous meeting held on August 2, 2007, under the provisions of the Newtel’s Shareholders Agreement.

Thereafter, the alienation of the equity interest was approved in an Extraordinary Shareholders’ Meeting of Telpart held on August 21, 2007 which, accordingly, confirmed the Stock Purchase Agreement.

The transfer of the control of Telemig Celular Participações S.A. was approved by the Management Council of ANATEL on October 23, 2007. The stock purchase agreement set forth the joint acquisition of the shares of Telemig Celular Participações S.A. and Tele Norte Celular Participações S.A.

On December 20, 2007 Vivo entered into a stock purchase agreement with Telemar Norte Leste S.A. aiming at selling the shares of Tele Norte Celular Participações S.A. which Telpart committed to sell to Vivo under the terms of the stock purchase agreement dated August 2, 2007.

The transfer of the control of Tele Norte Celular Participações S.A. was approved by the Director Council of ANATEL in a previous consent held on March 04, 2008.

On April 3, 2008, the transfer of the control of Tele Norte Celular Participações S.A. (and, indirectly, of Amazonia Celular S.A.) to Vivo ParticpaçõesS.A., as well as of the Telemig Celular Participações S.A. (and indirectly of Telemig Celular S.A.) under the terms of the Stock Purchase Agreement entered into between Vivo and Telpart, having met all conditions set forth by the contract the price has been paid.

At the same date, the transfer of the control of Tele Norte Celular Participações S.A. (and, indirectly, Amazonia Celular S.A.) to Telemar Norte Leste S.A. became effective under the terms of the Stock Purchase Agreement entered into Vivo and Telemar Norte Leste S.A..

In Extraordinary Shareholders’ Meeting held on April 03, 2008 at Tele Norte Celular Participações S.A. and Amazonia Celular S.A. the board of directors members indicated by Telemar Norte Leste S.A. were elected in both Companies and the resignations presented by the fiscal council members were accepted. At the same date, the first meetings of the new board of director were held, when the new executive boards of the Company and the Subsidiary have been assigned. In meeting held on May 05, 2008, new fiscal council members of the Company and Subsidiary have been assigned.

10


The transaction will also be submitted to the Administrative Council of the Economic Law – CADE, under the provisions of the applicable legislation.

(e) On August 13, 2007, ANATEL published in the Federal Official Gazette the New Regulation of the Personal Mobile Service (SMP). The new regulation sets forth new rules for customer service, plans migration, service suspension, validity of pre-paid credits, collection of messaging service, among others. The new regulation has become effective since February 13, 2008.

2 Significant Accounting Practices (Holding and consolidated)

(a) Presentation of the quarterly information and consolidation criteria

The quarterly information was prepared and is being presented in accordance with the accounting practices adopted in Brazil, which are based on the provisions of the Corporate Law, the rules set forth by the Brazilian Securities and Exchange Commission (CVM) and rules applicable to the telecommunications operators.

The consolidated quarterly information includes the quarterly information of the Holding, Tele Norte Celular Participações S.A., of its direct subsidiary Amazônia Celular S.A. and the special purpose entities mentioned in Note 19, proportionally to their interest in these entities. The consolidation process of the equity accounts and results related to the sum of the Companies’ balances of assets, liabilities, revenues and expenses accounts, according to the nature of each balance, plus disposal of (i) interest in capital, reserves and accrued revenues kept among the Companies; (ii) current accounts balances and other balances comprising the assets and/or liabilities, kept among the Companies; and (iii) identification of the minority shareholders.

In the preparation of quarterly information it is necessary to use estimates to account for certain assets, liabilities and other transactions. The Company’s quarterly information includes, therefore, estimates referring to the selection of useful lives of property, plant and equipment, accounts receivable of services rendered and not invoiced until balance sheet date, necessary provisions for contingent liabilities, determination of provisions for income tax, provisions for doubtful accounts and other similar items. The actual results may differ from the estimates.

The referred quarterly information is presented in thousands of reais, except as otherwise indicated.

(b) Change to the Brazilian Corporate Law, effective as of January, 2008

In December 28, 2007 Law Nr. 11638 was enacted, which modifies the provisions of the Corporations Law - Law nr. 6404/76. The referred law sets forth several changes about the preparation of financial statements, aiming at alignment with the accounting standards generally accepted in the international capital markets and allows the Brazilian Securities and Exchange Commission (CVM) to issue norms to the publicly traded corporations. The main changes introduced by the Law are applicable as of 2008 and refer to: (i) replacement of the statements of changes in financial position by the statements of cash flows; (ii) obligation of the preparation of statement of value added ; (iii) possibility to include the tax recording into the accounting booking, with segregation between the accounting and tax statements; (iv) creation of the sub-group valuation adjustments to shareholders’ equity , in the Shareholders’ Equity section; (v) establishment of the evaluation and classification criteria for the financial instruments; (vi) obligation of perform impairment evaluation of the non current assets; (vii) changes in the application of the equity method of accounting; (viii) donations and investment subventions recognition criteria; (ix) obligation of recording the new assets at fair market value, in case of mergers, acquisitions or spin-offs.and (x) introduction of the present value adjustment for the long term assets and liabilities operations and for the significant short term operations.

11


The Company already adopts the disclosure of the statements of cash flows, on its end of year financial statements and the segregation of intangibles in the fixed assets section.

On May 02, 2008, the Brazilian Securities and Exchange Commission – CVM issued the Instruction nr. 469 which provides for the application of Law nr. 11638/07. This instruction, among other aspects, confirms the position of the referred entity that it is optional the full application of Law 11638/07 to the quarterly financial information, however, the companies that elect for its not application should disclose in explanatory note, the changes that might impact the year-end financial statements. Additionally, the Instruction CVM nr. 469 required immediate application of some provisions, among which: (i) the mandatory disclosure of information about stock-based compensation; (ii) the mandatory adjustments to present value for long term assets and liabilities transactions and for relevant short term transactions, and (v) the change to the affiliate evaluating parameters to the equity method of accounting.

The Company assessed the impacts of the provisions of immediate and mandatory application of the Instruction CVM nr. 469 and, except for the disclosure of information about the stock-based compensation that is under Note 17 to these quarterly financial information, the application of the referred Instruction has not generated material impacts to the income statement of the period, to shareholders’ equity or to the Company’s disclosures.

Still in compliance to Instruction CVM nr. 469, the Company assessed the impacts of the changes provided by Law 11,638, the Company, at this moment, believes that the following items may be of certain relevance to its financial statements: (i) the preparation of statement of value added in its annual financial statements; (ii) the accounting treatment to be given to the deferred assets presented in non current assets of this quarterly information and (iii) the recognition of fair value of certain financial instruments, disclosed in comparison to the accounting values in Note 19 to this quarterly information.

With regards to the other changes not yet introduced, the Company’s management understands it depends on the regulations to be issued by the competent entities to estimate the effects resulting of the referred Law and, in its assessment, based on the currently existing local and international pronouncements, the effects would not be relevant to its financial statements.

(c) Cash and cash equivalents and Short Term Investments

12


Mainly comprised by highly liquid temporary investments which original maturity dates is no later than 90 days . The other investments are stated at cost, plus income earned up to the balance sheet date.

Short-term investments are represented by investments in an exclusive investment fund, with original maturity in excess to 90 days. The investments are shown at the value of the unit of the fund on the date of the balance sheet, and the portfolio of the exclusive fund is recorded at its realization value.

(d) Accounts receivable

Mainly represented by services and products billed to customers, by services rendered up to the balance sheet date but not yet billed, and by amounts arising from the use of the Subsidiary’s operations network by subscribers from other telecommunications carriers.

(e) Allowance for doubtful accounts

Management, based on its most recent experience, periodically evaluates the estimated loss percentages in order to record the Subsidiary’s allowance for doubtful accounts when the recovery of a receivable is considered unlikely.

(f) Inventories

Mainly comprised by mobile telephone handsets stated at average acquisition cost, net of a provision to adjust to market value for handsets and accessories out of line or whose acquisition costs are higher than the realization value.

(g) Investment in subsidiary

Evaluated at the equity method of accounting, calculated on the result of the year and other equity variations of the Subsidiary.

(h) Property, plant and equipment and Intangible

Property, plant and equipment and Intangibles are stated at acquisition and/or construction cost, less accumulated depreciation / amortization. Depreciation and Amortization is calculated on the straight-line method when assets enter into operation, at the rates mentioned in Note 11.

The Subsidiary reviews the recovery value of property, plant and equipment and intangibles by means of its future operations, when there are facts that may affect them. The purpose of this procedure is to verify if the recovery value is lower than the net book value.

When this occurs, the Subsidiary reduces the net book value to the recovery value. No provision was deemed necessary on March 31, 2008 and December 31, 2007.

13


Interests and financial charges on loans and financing obtained for investment in construction in progress (Assets and Facilities in Progress) are capitalized until such assets start to operate. Costs incurred with maintenance and repair are capitalized when they represent an increase in installed capacity or of the useful life of the asset. In the first quarter of 2008 and 2007, no interests and financial charges were capitalized.

(i) Other assets

Other current assets and non current assets are stated at cost or realizable values, including, when applicable, earnings, foreign exchange rate variations and monetary variations accrued.

(j) Foreign currency transactions

These are recorded at the rate prevailing on the date of transactions and restated based on the foreign exchange rate effective at the balance sheet date. Foreign exchange gains/losses are immediately recognized in the current year’s results.

(k) Income tax and social contribution

Income tax and social contribution on net income are calculated pursuant to prevailing laws. Deferred tax credits and liabilities are calculated based on the estimated amount of realization of the tax benefit of goodwill acquired from the Holding, through a process of restructuring, the tax losses, and the negative basis of social contribution and temporary differences arising mainly from allowance for doubtful accounts, provisions for contingencies and provision for accounts payable – hedge operations, provision for accounts payable and provision for profit sharing, as shown in Note 4.

As required by CVM Instruction 371/2002, the Company and its Subsidiary carry out technical feasibility study regarding the future realization of the deferred tax assets, considering the possible capacity of taxable income generation. These studies are performed yearly and, when necessary, the Company and the subsidiary record a loss provision for the installment of deferred social contribution and income tax realizable after the ten-year term allowed by the aforementioned Instruction. These studies are approved by the management bodies of the Companies.

(l) Provision for contingencies

Provisions for contingencies are recorded, based on the opinion of the legal advisors and of management, to cover probable losses and legal obligations of the Company and its Subsidiary resulting from tax, civil and labor claims, as required by CVM Instruction n°. 489/2005.

(m) Other liabilities

Other current and non current liabilities are stated at known or estimated amounts, plus, when applicable, corresponding charges, foreign exchange rate variations and monetary variations incurred.

14


(n) Determination of income and revenue recognition

Income is determined on the accrual basis. Revenues from telecommunications services are recorded at the rate prevailing on the date the services are rendered. Revenues from mobile telephony services comprise fees of subscription, usage, network usage, maintenance and other services rendered to subscribers. All services are billed monthly. Services rendered between the invoicing date and the end of each month are calculated and recorded as revenue in the month services are rendered. Revenues from credit recharge of prepaid cell phones are deferred and recorded in income as services are effectively provided or when the credits expire. The free minutes resulting from the reload promotions are deferred at the moment of their concession and recognized to income statements simultaneously as gross service revenues and deductions of service revenues when they are effectively used by the client. Revenues from sales of handsets and accessories are recorded when products are delivered and accepted by consumer or dealer.

(o) Pension plan

The Subsidiary participates in pension plans offering its employees pensions and other post-employment benefits. Actuarial liabilities were calculated and recorded based on the projected unit credit method, pursuant to CVM Resolution n°. 371/2000.

(p) Employees’ profit sharing

The Company and the Subsidiary record profit sharing based on the achievement of goals established for the year, subject to approval at the Shareholders’ Meeting.

15


3 Transactions with related parties

        Holding        Consolidated 
         
    03.31.08    12.31.07    03.31.08    12.31.07 
         
 
   Assets                 
   Current Assets  Accounts receivable                
       Telemig Celular S.A.        20    27 
       Brasil Telecom S.A.        2,345    2,182 
         
        2,365    2,209 
         
   Non-Current Assets - Long-term Receivables                
       Amazônia Celular S.A.    497    138     
         
 
Liabilities                 
 
   Current Liabilities – Accounts Payable                
       Telemig Celular S.A.        11   
       Brasil Telecom S.A.        1,628    2,229 
         
        1,639    2,232 
         
 
Long-term Liabilities                 
       Amazonia Celular S.A.         
       Telemig Celular S.A.    25    59    20,443    23,179 
       Telemig Celular Participações S.A.        2,953    2,897 
         
    25    59    23,396    26,076 
         
 
 
 
 
    03.31.08    03.31.07    03.31.08    03.31.07 
         
Accumulated Results                 
 
   Service revenue                 
       Telemig Celular S.A.        152    177 
       Brasil Telecom S.A.        1,826    2,312 
         
        1,978    2,489 
         
 
   Revenue (expenses) from sharing of resources                
       Amazônia Celular S.A.    726    470     
       Telemig Celular S.A.    (86)   (76)   (7,206)   (4,036)
       Telemig Celular Participações S.A.          (473)
         
    640    394    (7,206)   (4,509)
         

The Company carries out transactions with its Subsidiary and other related parties concerning certain services, described below. Related-party transactions are carried out under conditions agreed among parties, which, in Management’s understanding, are in market conditions.

16


Despite the transfer of the control mentioned in Note 1 (d), on March 31, 2008 the companies Telemig Celular Participações S.A. and its Subsidiary Telemig Celular S.A. had the same controlling shareholder, for such reason they were maintained as related parties for purposes of this quarterly information.

(a) Roaming agreements

The Subsidiary is a member of the Brazilian roaming committee of mobile operators, which includes the subsidiary of the related company on March 31, 2008, Telemig Celular Participações S.A. (Telemig Celular S.A.). The purpose of this committee is to oversee technical and system aspects to ensure the high quality of the roaming service. As required by Brazilian regulations, the Subsidiary, Telemig Celular S.A. and other mobile operators facilitate roaming to their respective subscribers.

Accounts receivable and payable, as well as service revenues with Telemig Celular S.A., refer to the pass-through of the additional call and transfer of the operators in roaming mode.

(b) Cost sharing

On March 20, 2003, Tele Norte Celular Participações S.A., its Subsidiary (Amazonia Celular S.A.) and the related companies on March 31, 2008, Telemig Celular Participações S.A. and Telemig Celular S.A., entered into a new agreement for sharing human and administrative resources, and established a jointly-owned unit. This agreement was approved at the General Shareholders’ Meetings of the respective companies, both held on March 19, 2003.

The balances recorded in long-term receivables and long-term liabilities are exclusively related to the cost sharing and jointly-owned unit creation agreement mentioned above.

The balances are adjusted by the variation of the Interbank Deposit Certificate (CDI).

(c) Brasil Telecom S.A.

The Company and Brasil Telecom S.A. are considered related parties due to, on March 31, 2008, common shareholders in their control chain.

As from August 1, 2004, the Subsidiary started to offer the Carrier Selection Code (CSP) option to its customers that elect the Brasil Telecom S.A. Carrier Selection Code (“CSP”). Consequently, the customers of the Subsidiary started to use CSP in domestic (VC2 and VC3) and international long-distance calls from their mobiles, in accordance with the Personal Mobile Service (SMP) rules.

Accounts payable to Brasil Telecom S.A. refer to the pass-through of domestic and international long-distance calls made by the Subsidiary’s subscribers using the CSP of Brasil Telecom S.A. Accounts receivable and service revenues mainly refer to the interconnection revenues for the use of the Subsidiary’s network in such long-distance calls.

17


(d) Oi

In General Shareholders’ Meeting held on April 03, 2008 the shareholder control of the Company and indirectly of its Subsidiary was transferred to Telemar Norte Leste S.A. In consequnece of this change, as of this date, the companies of OI group started to be treated as related parties.

On March 31, 2008 the accounts payable to Oi and Telemar, which were classified in current liabilities referred to the pass-through of national and international long distance calls made by the Subsidiary’s subscribers using the CSP of Oi/Telemar, totaled R$3,005. The accounts receivable and the service revenues referred mainly to the revenues from interconnection for the use of the Subsidiary’s network in these long distance calls and infrastructure sharing totaled R$10,659 and R$19,805, respectively.
These amounts were classified respectively in current assets and service revenues in the Subsidiary’s statements.

4 Income tax and social contribution

(a) Income Tax and Social Contribution Recoverable

    Holding    Consolidated 
       
    03.31.08    12.31.07    03.31.08    12.31.07 
         
 
Advances and Other Income Tax Recoverable    1,156    1,076    2,001    2,534 
Amounts                 
Advances and Other Social Contribution                 
Recoverable Amounts        122    19 
         
    1,156    1,076    2,123    2,553 
Less: Portion classified as long term    (1,156)   (1,076)   (1,156)   (1,076)
         
Portion classified as current        967    1,477 
         

(b) Deferred income tax and social contribution - assets

Deferred income tax and social contribution assets have the following nature:

    Holding    Consolidated 
       
    03.31.08    12.31.07    03.31.08    12.31.07 
         
Deferred income tax and Social Contribution – Assets                
   Deferred Income Tax                 
   Tax loss    31,889    31,013    46,205    46,178 
   Allowance for doubtful accounts        11,429    10,954 
   Provision for contingencies        37,199    35,641 
   Goodwill (CVM Instruction 349)   6,164    7,088    6,164    7,088 
   Provision for accounts payable – hedge operations    698    629    12,890    13,316 
   Provision for accounts payable    118    76    3,963    4,068 
   Provision for profit sharing        391    940 
   Other expenses        2,764    1,990 
         
    38,869    38,806    121,005    120,175 
         
Deferred social contribution                 
   Negative calculation basis    11,480    11,165    22,335    22,147 
   Allowance for doubtful accounts        4,115    3,944 
   Provision for contingencies        2,780    2,772 
   Goodwill (CVM Instruction 349)   2,219    2,552    2,219    2,552 
   Provision for accounts payable – hedge operations    251    226    4,640    4,794 
   Provision for accounts payable    42    28    1,427    1,465 
   Provision for profit sharing        141    338 
   Other expenses    24    24    1,019    741 
         
    14,016    13,995    38,676    38,753 
         
Deferred Income Tax and Social Contribution –                 
Liabilities                 
Income Tax - Foreign Exchange Variation – Cash Basis        (7,158)   (6,724)
         
Social Cont. – Foreign Exchange Variation – Cash Basis        (2,577)   (2,422)
         
Total Deferred Income Tax and Social Contribution    52,885    52,801    149,946    149,782 
         
Portion of Credits not recorded    (3,609)   (3,525)   (3,689)   (3,525)
         
Provision for loss    (49,276)   (49,276)   (64,126)   (64,126)
         
        82,131    82,131 
         

18



The Subsidiary has 75% tax benefit reduction in the income tax generated in the ADA’s inventive areas – Amazon Development Areas – in the Units of Para, Amazonas and Roraima, for a period of 10 years counted from 2004. With regards to the Units of Amapa and Maranhao, the obtaining of the tax benefit is in phase of confirmation by the Federal Revenue Service.

In the fiscal year of 2007, the Subsidiary changed the tax regime on foreign exchange gains, from the accrual basis regime to cash regime. The deferred income tax and social contribution liabilities refer to the gains from foreign exchange variation calculated by the accrual regime not yet taxes.

Pursuant to CVM Instruction n°. 371/2002, at the end of 2007, the management of the Company and it’s Subsidiary prepared technical feasibility studies on the future realization of the deferred tax assets, considering the probable capacity of future taxable income generation by the Company and by the Subsidiary, in the scope of the main variables of its businesses that may, therefore, undergo changes. These studies were approved by the Board of Directors of the Company and Subsidiary on February 25, 2008 and examined by the Fiscal Council on February 26, 2008.

Through the referred technical study, on December 31, 2007, it was identified that a portion of the deferred income tax and social contribution balance of the Company, in the amount of R$49,276, and the Subsidiary, in the amount of R$14,850 will be realized beyond the ten-year horizon allowed by CVM Instruction 371/2002. Therefore, a provision for loss in the realization of these assets, in these amounts, was booked.

The studies will be revised up to the end of fiscal year 2008 and the results of such reviews will be reflected in the corresponding financial statements.

In the first quarter 2008 and during the year of 2007, in function of the inexistence of profitability history (generation of taxable income) by the Company, a credit of deferred income tax and social contribution was recorded only on the tax loss and negative basis generated by the goodwill amortization. The credit recorded equals to the amount of tax credit on the goodwill realized in the quarter, in such a way that the total balance of deferred income tax and social contribution assets has not been changed.

19


The tax credits on tax loss and negative basis generated by other operations and on temporary additions have not been recorded. On March 31, 2008, the unrecorded tax credits totaled R$3,689 (December 31, 2007 – R$3,525).

Despite the technical study prepared by the Subsidiary indicates that the taxable income in the 10 year period will be enough for the realization of the tax credit in the amount of R$89,354, Management decided, in observance to the CVM Instruction 371/2002, not review the additional reversal of the provision in the amount of R$7,223, in function of the inexistence of profitability history (generation of taxable income) in the past years by the Subsidiary.

The credits related to the provisions temporarily non deductible, mainly tax contingencies and allowance for doubtful accounts, will be realized to the extent the corresponding matters are concluded.

As mentioned in Note 1(b), Amazonia Celular S.A. management has been implementing several actions aiming at improving the Subsidiary’s operating margin. Management believes that the actions already implemented in 2007 together with other actions that will be implemented in 2008 will generate enough taxable income in the future by the Subsidiary

According to the projections made by Subsidiary’s management, long term deferred income tax and social contribution will be realized in the following years:

Year of Use    Consolidated 
   
2010    2,500 
2011    5,548 
2012    7,616 
2013    9,871 
2014    12,967 
2015 to 2017    43,629 
   
Total (As of 03/31/2008)   82,131 
   

As the taxable base of the income tax and social contribution arises not only from the profit that may be generated but also from the existence of non-taxable revenues, non-deductible expenses, tax incentives and other variables, there is no immediate correlation between the Company’s net income and the tax income and social contribution results. Therefore, the expectation of use of the tax credits must not be taken as the only indication of the Company’s and its Subsidiary’s future results.

In the consolidated financial statements prepared in accordance with the generally accepted accounting principles of the United States of America (“US GAAP”) for the year ended on December 31, 2006, the Company’s Management at that time, having in view the losses accumulated in the last years and considering the expectation of negative results in near future, decided, pursuant SFAS 109 – Accounting for Income Taxes, to record a provision for losses for the totality of the deferred asset (including the Company’s balances), notwithstanding the fact that the components of the deferred tax asset do not expire and that the projections of future results are more favorable as from the full depreciation of the TDMA equipment network and of the actions implemented by the Management mentioned above.

20


The USGAAP adjustments mentioned above will be reviewed for the preparation of the financial statements under those principles referring to the fiscal year of 2007. This review will be completed by the end of the second quarter of 2008.

(c) Reconciliation of income tax and social contribution in the income statement

The amounts of income tax and social contribution in the quarter, shown in the results, are reconciled to their amounts at the nominal rate as below:

    Holding    Consolidated 
     
    03.31.08    03.31.07    03.31.08    03.31.07 
         
 
Income before income tax, social contribution and profit sharing    3,709    (5,593)   5,344    (7,356)
(-) Equity accounting    (3,956)   5,278     
Permanent additions (exclusions), net        (89)   1,173 
         
Calculation basis    (247)   (315)   5,255    (6,183)
         
Income tax and social contribution (34%)   84    107    (1,787)   2,102 
Income tax and social contribution on tax loss and negative basis unrecorded    (84)   (107)   (179)   (2,102)
Supplement (Reversal) of previous year – income tax and current social contribution        1,652   
         
        (314)  
         

5 Cash and Cash Equivalents and Short Term Investments

    Holding    Consolidated 
     
    03.31.08    12.31.07    03.31.08    12.31.07 
         
Cash and Cash Equivalents                 
Cash and Banks    35    115    972    4,265 
 Financial Investments – (original maturity less than 90 days)       2,945    5,619 
         
    35    115    3,917    9,884 
         
Short Term Investment                 
         
 Investment Fund    14,164    14,864    24,961    34,953 
         

On March 31, 2008 and December 31, 2007, the investment funds were mainly represented by investments in an “Investment Fund in Quotas of Investment Funds – FIC” (exclusive), which also invests in quotas of other exclusive Investment Funds, as mentioned in Note 19.

On March 31, 2008 and December 31, 2007, the portfolios of the Investment Funds were substantially comprised of highly liquid federal government securities and also by private securities of prime financial institutions, also of high liquidity, recorded at their realization amounts.

21


The Investment Funds carry out operations with financial instruments with the purpose of reducing the exposure to interest risk, which are also recorded at realization amounts.

With the consolidation of the Investment Fund, the balance of short term Investments would have the following break-down:

    Consolidated 
   
    03.31.08    12.31.07 
     
 
Fixed Income Securities – substantially Federal Public securities    24,961    34,953 

As of March 31, 2008 and December 31, 2007 there was no guarantees, mortgages, pledges or other sureties granted in favor of the exclusive funds.

6 Accounts Receivable, net

    Consolidated 
   
    03.31.08    12.31.07 
     
 
Telecommunications services    107,177    110,014 
Handsets and accessories sales    12,394    14,062 
     
    119,571    124,076 
Allowance for doubtful accounts    (44,597)   (42,780)
     
    74,974    81,296 
     

The activity of the allowance for doubtful accounts may be summarized as below:

    Consolidated 
   
    03.31.08 
   
 
Beginning Balance    42,780 
Provision complement in the quarter    4,914 
Write-off of accounts due over 180 days and recoveries in the quarter    (3,097)
   
Ending balance    44,597 
   

On March 31, 2008 and December 31, 2007, accounts receivable from telecommunications services also included amounts receivable from customers relating to the pass-through of domestic and international long-distance calls made by the subsidiary’s subscribers using the Carrier Selection Code (CSP) of the long-distance carriers, according to the Personal Mobile Service rules (SMP).

On March 31, 2008, the Subsidiary had overdue accounts receivable from telephone operators in the amount of approximately R$16,847 (December 31, 2007 – R$15,002), resulting from the use of its network. The overdue amounts are in process of collection and negotiation with the operators, which also involve amounts payable offset by the Subsidiary in the amount of R$9,318 (December 31, 2007 – R$9,176), due to the lack of collection in portion of the referred overdue amounts. The Subsidiary’s management considers that the recovery of these overdue amounts is probable.

22


7 Inventories

    Consolidated 
   
    03.31.08    12.31.07 
     
 
Handsets and accessories    22,272    17,573 
Provision for adjustment to market value    (11,056)   (7,852)
     
    11,216    9,721 
     

8 PIS and COFINS Recoverable – Law 9,718/98 (long-term and short-term)

In the year of 2006, the Company and the Subsidiary were successful in the Federal Supreme Court legal action that questioned the constitutionality of the increase in the calculation basis of PIS and COFINS introduced by paragraph 1, Article 3 of Law 9,718 of November 27, 1998. Accordingly, considering that the decision is final and non appealable, the Company and the Subsidiary recognized, in the last quarter of 2005, the credit of these taxes, in the amounts of R$1,343 and R$9,066, respectively.

The updated value of these credits on March 31, 2008 is R$1,533 in the Company and R$14,872 in the Subsidiary, totaling R$16,405 on a consolidated basis. The credits are recorded in the item “PIS and COFINS Recoverable – Law 9,718/98” in current assets of the Subsidiary and long term assets of the Company. The Company and the Subsidiary will perform the offset of the credits after their confirmation by the Federal Revenue Secretary.

9 ICMS recoverable – property, plant and equipment (long-term) - Consolidated

This refers to recoverable ICMS installments, to be offset as from April 2009 at the ratio of 1/48, relating to the credits arising from the acquisition of equipment for property, plant and equipment, in accordance with Complementary Law 102 of July 11, 2000. The balance on March 31, 2008 amounted to R$3,602 (December 31, 2007 – R$3,784).

10 Investment in Subsidiary

(a) The details of the equity interest in the Subsidiary Amazonia Celular S.A. are as follows:

    Holding 
   
    03.31.08     12.31.07 
     
 
Capital stock    231,431    231,431 
Shareholders’ equity    132,136    126,858 
Interest in capital stock    74.96%    74.96% 
Interest in voting capital    89.78%    89.78% 
Amount of shares held (in millions)        
   Preferred    2,374    2,374 
   Common    2,039    2,039 
 
    03.31.08    03.31.07 
     
 
Result for the period – accumulated    5,277    (7,041)
Equity Interest    74.96%    74.96% 
Accumulated equity accounting from the result of subsidiaries    3,956    (5,278)
Items that are not charged to the subsidiary’s result     
     
Total    3,956    (5,278)
     

23


(b) Investment activity in the quarter

    03.31.08 
   
 
Balance at the beginning of the period    95,090 
Equity accounting    3,956 
   
Balance at the end of the period    99,046 
   

(c) Other information

The quarterly information of the Subsidiary was reviewed by the same independent auditors of the Holding.

11 Property, Plant and Equipment and Intangible (Consolidated)

        Consolidated         
     
        03.31.08    12.31.07 
       
    Annual                 
    depreciation/        Accumulated         
    amortization    Cost    depreciation/    Net    Net 
Property, Plant and Equipment    rate - %        amortization    amount    amount 
Equipment and transmission means    12.5 to 20.0    448,053    375,519    72,534    74,413 
Switching and control centers    12.5 to 20.0    249,659    170,938    78,721    83,029 
Power supply equipment    20.0    30,094    25,897    4,197    4,641 
Buildings    5.0    8,845    6,233    2,612    2,629 
Towers and other support and protection devices    10.0    39,508    25,000    14,508    15,308 
Information technology equipment    20.0    19,618    17,335    2,283    2,494 
Terminal equipment    20.0    7,613    4,489    3,124    2,728 
Other assets    10.0 to 20.0    39,482    28,416    11,066    11,990 
           
Total assets and facilities in service        842,872    653,827    189,045    197,232 
Assets and facilities in progress (*)       27,791      27,790    39,047 
           
Total Property, Plant and Equipment        870,663    653,827    216,835    236,279 
           

Intangible                     
Software    20.0    128,683    98,998    29,685    33,195 
Authorizations – Personal Mobile Service    21.1 to 22.8    14,067    10,555    3,512    4,298 
Other    10.0 to 20.0    12,616    12,569    47    60 
           
Total Intangibles in Service        155,366    122,122    33,244    37,553 
Intangibles in progress (**)       2,002      2,002    297 
           
Total Intangibles        157,368    122,122    35,246    37,850 
           

24


(*) Refers mainly to equipment and means of transmission which installation by the vendor and/or acceptance by the Company have not been completed yet. The amounts include the civil works, towers, supports, protectors and equipment of electric energy necessary for the installation and operation of the equipment.

(**) Refers mainly to management application, billing and customer service software in development or implantation stage.

At the occasion of the technological migration process, management performed the evaluation of the recoverable amounts of TDMA network equipments through its future operations, based on the present value of future cash flows and concluded that no obsolescence reserve would be necessary. Substantially, all the assets of TDMA network will be totally depreciated up to the end of 2008.

On March 31, 2008, the Subsidiary had equipment, properties and other assets pledged or indicated as attachments in court proceedings, in the amount of R$2,571 (December 31, 2007 – R$2,807).

12 Suppliers (consolidated)

    Consolidated 
   
    03.31.08    12.31.07 
     
 
Material and service suppliers    54,406    59,609 
Interconnection and amounts to transfer – SMP    23,038    24,085 
     
    77,444    83,694 
     

(a) Material and service suppliers

On March 31, 2008 and December 31, 2007, the balance includes mainly the liabilities with suppliers for the supply of handsets, equipment, services and execution of civil construction related to the expansion of the GSM/EDGE network.

(b) Interconnection and amounts to transfer - SMP

Includes accounts payable to other mobile, fixed and long-distance telephony carriers related to network usage charge, additional call pass-through, roaming and long-distance calls.

On March 31, 2008 the Subsidiary had outstanding payable amounts with other carriers totaling R$9,318 (December 31, 2007 – R$9,176), which are being negotiated (see Note 6).

13 Loans and Financing

On March 31, 2008 and December 31, 2007, the principal amount of loans and financing was as below:

25


    Consolidated
   
    03.31.08    12.31.07 
     
ABN AMRO Real – Onlending 2770 – The outstanding balance is adjusted by the U.S. dollar exchange fluctuation, plus annual interest of 6.04%. Interest and principal are due on September, 2008.    75,004    75,956 
 
Unsecured Senior Notes – The outstanding balance is adjusted by the U.S. dollar exchange fluctuation, plus annual interest of 8.750%. Interests are payable semi-annually. Principal is repayable in January 2009.    69,964    70,852 
 
Unibanco - The outstanding balance is adjusted by the U.S. dollar exchange fluctuation, plus annual interest of 1%. Payment is in a single installment due on April 2008.    4,917    4,980 
     
    (149,885)   151,788 
Less: short term installments    (149,885)   (80,936)
     
Long-term Portion      70,852 
     

Interest on loans and financing in the amounts of R$1,278 and R$4,656 on March 31, 2008 and December 31, 2007, respectively, are shown in the account “Provisions” under current liabilities.

On March 26, 2008 the Subsidiary made the payment of interests accrued up to that date referring to the ABN AMRO Real loan. Upon this interest payment, the maturity of the principal amount was automatically extended to September, 2008 according to the provision of contractual clause.

The loan contracted with Unibanco was settled on April 07, 2008.

The Unsecured Senior Notes (“Notes”) funding program and the Loan and Financing Agreements obtained from ABN AMRO Real have restrictive covenants regarding the use of funds for the purposes specified in the agreements, certain related-party transactions, merger and takeover transactions, and achievement of certain limits substantially based on balance sheet financial ratios, among others. The Notes have further restrictive clauses as to the compliance of certain limits, based substantially on balance sheet financial indicators and EBITDA (Earning before Interests, Taxes, Depreciation and Amortization). In case of non compliance of these clauses, the Notes may have their maturities accelerated.

On March 31, 2008 by all financial covenants of the ABN AMRO REAL loan and the Notes were complied with by Amazônia Celular S.A.

14 Provision for Contingencies

    Consolidated 
   
    03.31.08    12.31.07 
     
Tax contingencies    169,577    148,794 
Civil and labor contingencies    4,942    4,691 
     
    174,519    153,485 
     
Court deposits    (144,203)   (122,971)
     
    30,316    30,514 
     

26


(a) Tax contingencies

i. Tax on Sales and Services (ICMS) on monthly subscription, value added services and activation

The management, supported by its legal advisors, understands that ICMS should be levied only on telecommunications services and, therefore, the assessment on monthly subscriptions and activation is illegal, since these are not deemed telecommunications services. The Subsidiary filed five judicial lawsuits, being one for each state where the Subsidiary operates, to discuss the legality of the ICMS assessment on services of monthly subscription, value added services and other five judicial lawsuits, also one for each state, to discuss the ICMS incidence on the amounts referred to activation.

Regarding the actions challenging the ICMS levied on activation fees, the legal actions filed in the States of Amazonas, Roraima, Amapá and Maranhão were favorable to the Subsidiary, and are final and non appealable. With regards to the State of Pará, the action is underway in the Court of Justice of this State.

With regards to the ICMS on subscription and value added services, in the State of Amapa, the processed has gone through final sentence in 2004. In the other states, the situation is as follows:

State of Pará

On February 21, 2005, the Court of Justice of the State of Pará rendered a decision in favor of the Subsidiary. On April 18, 2005, the Court of Justice of the State of Pará issued an order authorizing the release of the judicial deposits, given that the decision became final and non appealable in view of expiration of the statute of limitation. Deposits in the amount of R$6,944 were released and the corresponding provision was reversed. However, the Decision was reissued and the State Attorney General filed an appeal, which was ruled to be timely. The Office of the State Attorney General filed another appeal, however, the Court of Justice of Para, by unanimous decision, judged the theme favorably to the Subsidiary.

In the year of 2006 and from January to November, 2007 in function of the appeal filed by the State Attorney’s Office, and while there was no final decision of the decision favorable to the Subsidiary, Management made the provision for this obligation.

On December 27, 2007, the Subsidiary and the State of Para entered into an agreement to settle the legal suit. At that date, the Para’s State Attorney General filet a petition of waiver of the judicial litigation and recognized the Subsidiary’s right in not paying ICMS on subscription fees and value added services. Therefore, in December, 2007 the Subsidiary made the reversal of the amounts provisioned for. The amount reversed in 2007, net of judicial deposits written-of in the amount of R$1,803, totaled R$30,557, being that R$5,253 were recorded as sales deductions, R$21,358 as administrative expenses and R$3,946 as financial expenses.

27


On March 31, 2008, the Subsidiary and the State of Para executed a new term of agreement, where the Para’s State Government recognized the right and authorized the Subsidiary to credit the amount of R$12,811, unduly paid in the period from 1998 to 2004 as ICMS on “Subscription Fees and Value-Added Services”. This credit was recorded in the Subsidiary’s balance sheet as ICMS Recoverable (current assets), in counterparty to other operating income in the statement of income.

State of Amazonas

The Court of Justice of the State rendered a decision against the Subsidiary on June 18, 2003, against which the Subsidiary filed Special and Extraordinary appeals with the Higher Courts (Superior Court of Justice and Federal Supreme Court). The provision recorded on March 31, 2008 amounted to R$14,267 (December 31, 2007 - R$13,226), with corresponding judicial deposits in the same amount (December 31, 2007 - R$13,226).

Despite the opinion of the legal counsel of the Subsidiary that the chances of loss in this proceeding are possible, the Management understands it is a legal obligation, under the terms of Resolution CVM N° 489/2005.

State of Roraima

In Roraima, the Superior Court of Justice rendered a decision in favor of the Subsidiary on December 14, 2004. The Office of the Attorney General of the State of Roraima filed a Motion for Clarification, which was denied by the Superior Court of Justice on April 7, 2005. The State Attorney General filed a Divergence Motion, which was also denied by the Superior Court of Justice on September 29, 2005. The State Office of the Attorney General filed a Regulatory Appeal, equally denied by the Superior Court of Justice on March 22, 2006. For this reason, they filed an Extraordinary Appeal with the Federal Supreme Court, or STF, which was once again denied. Finally, on December 14, 2006 the State Office of the Attorney General filed an Interlocutory Appeal with the Federal Supreme Court, which is pending judgment. The Federal Supreme Court, on 09/21/2007 denied the continuity of the interlocutory appeal. On October 19, 2007 the State of Roraima filed a Regimental Appeal at the Federal Supreme Court against this decision.

On March 31, 2008, the provision for this obligation totaled R$13,551 (December 31, 2007 – R$13,187) with the judicial deposits corresponding to the same amount (December 31, 2007 – R$13,187).

Despite the opinion of the legal counsel of the Subsidiary that the chances of loss in this proceeding are possible, the Management keeps a provision for the amounts being discussed because it understands this is a legal obligation, under the terms of Resolution CVM N° 489/2005.

State of Maranhão

On August 6, 2002, the Court of Justice of Maranhão rendered a decision in favor of the Subsidiary. Accordingly, the judicial deposits were released in January 2003 and the provision was reversed in 2002. Despite the issuance, by the Court of Justice of the State of Maranhão, of the res judicata certificate, the Office of the Attorney General of the State Treasury filed an appeal with the Federal Supreme Court and with the Superior Court of Justice, which remanded the case to the Court of Justice of Maranhão for a new judgment. The Subsidiary filed a motion for clarification, which was denied by the Superior Court of Justice. On May 03, 2007, the process returned to new trial by the Maranhao’s Court of Justice.

28


On March 31, 2008 the provision for this obligation totaled R$23,648 (December 31, 2007 – R$24,068), without the corresponding judicial deposits.

Despite the opinion of the legal counsel of the Subsidiary that the chances of loss in this proceeding are possible, the Management keeps a provision for the amounts being discussed because it understands this is a legal obligation, under the terms of Resolution CVM N° 489/2005.

ii. Telecommunications Inspection Fee - FISTEL

The Subsidiary filed a writ of mandamus questioning the responsibility for the payment of inspection fees on mobile stations, which are not owned by the Subsidiary, and started to accrual and deposit in court the amounts related to the Operating Inspection Fee (TFF) and the Installation Inspection Fee (TFI).

In the understanding of Management of the Subsidiary and its legal advisors, the chances of loss in these processes are possible. However, for being a legal obligation under the terms of the Resolution CVM N° 489/2005, the Subsidiary recorded a provision for this obligation. The provision recorded on March 31, 2008 was R$116,245 (December 31, 2007 - R$96,418), with corresponding court deposits in the same amount.

iii. Fund for Universalization of Telecommunication Services - FUST

Based on Article 6 of Law 9998/2000, which instituted the FUST, the subsidiary does not include in the calculation base for the contribution the revenues obtained by providers of telecommunication services on account of remuneration for interconnection and for the use of its network resources.

On December 15, 2005 the ANATEL’s Management Board approved Compendium 7, which determines the inclusion of the mentioned revenues in the calculation base for FUST, with application retroactive to January 2001.

In the understanding of Management and of its legal counsel, the ANATEL Compendium 7 violates the principles of Law 9998/2000, as well as certain constitutional provisions. On January 2006 the mobile carriers filed a Writ of Mandamus with the purpose of protecting their legitimate rights of continuing to pay FUST without any broadening of the calculation base not provided by law.

29


On November 16, 2006 the Subsidiary received 48 Assessment Notices related to FUST on the revenues from interconnection in 2001. On November 17, 2006, it received another 36 Assessment Notices that were duplicates of those received on November 16. The Notices total R$7,633. The pertinent Administrative Appeals were filed on December 14, 2006. On September 03, 2007 the Subsidiary received 12 additional Assessment Notices in the amount of R$1,069 related to FUST on the revenues from interconnection of 2002, being that the appeals to the assessments will be filed by the law firm retained.

Corroborating the above understanding, on March 5, 2007, The Honorable Federal Judge of the 3rd Lower Court of the Federal District judged the action in favor of the Subsidiary, permitting calculation and payment of the FUST contribution on the total amount of the gross operating revenue deriving from rendering of telecommunication services, without inclusion of the amounts for transfer of interconnection charges. ANATEL filed interlocutory appeal in Court which is still pending judgment.

On December 21, 2007, the Subsidiary received 36 more Assessment Notices in the amount of R$2,624 referring to FUST on interconnection revenues of the year 2002, being that appeals have already bee filed by the law firm retained.
Therefore, the FUST obligation on interconnection revenues has been suspended.

Additionally, In the understanding of Management and of its legal counsel, the chances of success in these proceedings are possible, both in the administrative and in the legal levels.

Therefore, no provision for this contingency has been recorded. On March 31, 2008 the total amount involved was R$11,951 (December 31, 2007 – R$11,939).

iv. Fund for Telecommunications Technological Development - FUNTTEL

Based on the provisions of Law 10,052/2000 and Decree . 3,737/2001, which instituted FUNTELL, the Subsidiary does not include in the calculation of its contribution, the revenues obtained by providers of telecommunication services on account of remuneration for interconnection and for the use of its network resources.

The Ministry of Communications took advantage of the interpretation given by ANATEL in publishing the Compendium 07/2005 to also assess and collect the FUNTELL on revenues from interconnection, however, without any regulation that authorizes this collection.

This way, on December 11, 2006 the Subsidiary received 04 Assessment Notices from the Ministry of Communications related to the FUNTTEL on interconnection revenues in 2001, amounting to R$ 2,100. The legal advisors has filed administrative appeal which is still pending judgment.

30


In the understanding of Management and its legal advisors, the interpretation of the Ministry of Communications is against the provisions of Law . 10,052/2000 and Decree 3,737/2001, in addition to several constitutional provisions.

On October 11, 2007 the Subsidiary filed, together with the other cellular carriers, an Interlocutory Injunction to question the collection of FUNTTEL on interconnection revenues.

On November 12, 2007 the preliminary decision favorable was given by the Judge of the 4th Federal Court allowing the Subsidiary to calculate and pay the contribution to the FUNTTEL on the total amount of its gross operating revenue from telecommunications services, without the inclusion of the amounts of the interconnection transfers.

Therefore, in function of the aforementioned preliminary decision, the requirement to collect FUNTTEL on interconnection revenues has been suspended.

On November 29, 2007, the Subsidiary received 01 Assessment Notice from the Ministry of Communications referring to the FUNTELL (year 2002) on interconnection revenues, the amount of R$750 thousand. The legal advisors has presented the administrative appeal which is still pending judgment.

Additionally, In the understanding of Management and of its legal advisors, the chances of success in these administrative proceedings are possible.

Thus, no provision was recorded for this contingency. On March 31, 2008, the total amount involved was R$6,963 (December 31, 2007 - R$7,013).

v. Other tax contingencies

The Subsidiary is party to other tax proceedings for which a provision of R$1,866 on March 31, 2008 (December 31, 2007 – R$1,895). The corresponding judicial deposits amounted to R$140 on March 31, 2008 and December 31, 2007. Management, based on the opinion of its legal advisors, understands that the provision recorded is sufficient to cover losses that might result from these proceedings.

(b) Civil and labor contingencies

The Subsidiary is party to certain labor and civil proceedings. Civil contingencies refer mainly to proceedings filed by customers and labor contingencies to proceedings filed by former Subsidiary’s employees. Based on the opinion of its legal advisors, management understands that the provision recorded of R$4,942 (December 31, 2007 – R$4,691) is sufficient to cover losses that might result from these proceedings.

(c) Possible and remote tax contingencies not provisioned

31


The subsidiary has tax claims involving risks of loss classified by management and its legal advisors as possible or remote amounting to R$37,651 and R$1,091 (December 31, 2007 – R$33,556 and R$5,186), respectively, for which no provision for contingencies has been recorded.

15 Shareholders’ Equity

(a) Paid-in capital stock

On March 31, 2008 and December 31, 2007, paid-in capital stock was R$84,851 and was represented by 6,702 thousand shares (December 31, 2007 – 6,702 thousand), of which 2,493 thousand are common (December 31, 2007 – 2,493 thousand) and 4,209 thousand are preferred (December 31, 2007 – 4,209 thousand), all nominative non-par shares. The Company’s authorized capital is 700,000,000 thousand shares.

On December 19, 2002, taking into account the new wording of Article 17 of Law 6,404/76, as per amendments introduced by Law 10,303/01, the Shareholders General Meeting approved amendments in the rules of payment of dividends of the Company’s preferred shares, without voting rights, and with priority in capital reimbursement, without premium, and the payment of the minimum, non-cumulative dividends, according to the criteria below, alternatively, considering that which represents the highest amount:

I – 6% (six per cent) p.y. over the amount resulting from the division of the subscribed capital by the total number of Company’s shares; or

II - right to receive the minimum mandatory dividend, according to the following criteria:

a) priority to receive minimum, non-cumulative dividends corresponding to 3% of the shareholders’ equity; and

b) right to receive profit distributions under equal conditions with common shares, after these are assured dividends equal to the minimum priority dividend established in conformity with item “a”.

Preferred shares will acquire voting right should the Company fails to pay minimum dividends for 3 (three) consecutive years.

(b) Reverse Share Split

In the Extraordinary Shareholders’ Meeting held on July 12, 2007 the reverse share split of the shares representing the Company’s capital stock was approved. The shares will be grouped in the proportion of 50,000 (fifty thousand) existing shares to 01 (one) share of the respective type.

In Extraordinary Shareholders’ Meeting held on October 29, 2007, the change of the capital stock composition of the Company’s capital stock, in function of the above mentioned reverse share split was approved. Since then, the Company’s capital stock started to be comprised by 2,492,476 common shares and 4,209,206 preferred shares.

32


On October, 2007 the Company carried out auctions for the sale of 156,221 common shares and 124,977 preferred shares related to the fractions resulting from the reverse share split mentioned in Note 15 (b). The amount of sale, net of brokerage, fees and income tax, reached R$70.3660 per common share and R$25.3733 per preferred share. The amounts mentioned were made available to the respective shareholders as of October 26, 2007.

The amounts already made available to the shareholders, but not yet claimed, in the amount of R$13,947 (holding) on March 31, 2008 (December 31, 2007 – R$14,041) are recorded in current liabilities as “Reverse Share Split”.

The Extraordinary Shareholders’ Meeting held on July 04 and October 29, 2007 approved the reverse share split and the change of the shareholders’ composition of the Subsidiary’s capital stock. On October, 2007, the process for alienation of the fractions resulting from the reverse share split was started by the Bovespa. On March 31, 2008, the process was not completed. After the completion of the auctions, the Subsidiary will make available the proceeds to the respective shareholders.

(c) Dividends

The shareholders are assured a minimum dividend of 25% on the adjusted net income for each year, in accordance with the Brazilian Corporate Law and the by-Laws, being increased up to the amount necessary for payment of the priority minimum dividend on the preferred shares.

The General Extraordinary Meeting held on March 28, 2008, approved the payment of dividends in the amount of R$3,198 related to the minimum mandatory dividend of 6% on the capital stock pursuant Art. 11, I, of the By-Laws, which payment started on April 14, 2008.

16 Insurance Coverage

On March 31, 2008 and December 31, 2007, the Subsidiary had insurance coverage against fire and sundry risks for inventories, leased assets, property, plant and equipment and loss of profits, in amounts contracted based on the evaluation of management, considering the risks and amounts involved (operating risks policy).

On March 31, 2008 and December 31, 2007, the amounts at risk insured were approximately the following:

    Consolidated 
     
    03.31.08    12.31.07 
     
Inventories    14,373    14,373 
Leased assets and property and equipment    567,192    567,192 
Loss of profit    248,482    248,482 
     
    830,047    830,047 
     

33



Additionally, the Subsidiary has insurance for general civil liability and for national transportation.

17 Stock-based compensation plan

On October 5, 2000, the Board of Directors of the Company approved two long-term incentive plans, described as below:

(a) Plan A – This plan covered the key executives who were granted preferred or common shares of the Company. The bonuses will be earned and shares would be issued only to the extent that the Company achieve its performance goals determined by the Board of Directors during a five-year performance period. On March 31, 2008, all the options granted were expired.

(b) Plan B – This plan covers some of the Company and Subsidiary’s key-executives and other employees. Options granted in such plan refer to preferred shares of Company exercised at the market price at the time they are granted. The option exercise is 20% during the second year, 60% during the third year and 100% during the fourth year, and they could be exercised up to October, 2007. The options expired in October 2007 with no exercise performed by the executives.

The Board of Directors of the Subsidiary and the Company, at meetings held on December 29 and 30, 2003, respectively, approved changes to plan B, introducing new grants.

The plan continues to cover some of the Company’s key-executives and the new stock options granted remain related to the preferred shares of the Company. However, these new options have an exercise price corresponding to the market price at the time they are granted, with a discount of 20%. The right to option exercise is 40% as from January 2004, 70% as from January 2005, and 100% as from January 2006. These options may be exercised until January 2008. The options expired on January, 2008 without being exercised by the executives.

18 Financial Instruments (consolidated)

The Company and Subsidiary participate in transactions involving financial instruments in order to reduce the exposure to interest and currency risks. Management of these risks is conducted by definition of strategies and determination of limits of exposure.

(a) Foreign exchange rate and interest rate risk

Foreign exchange rate and interest rate risks relate to the possibility of the Company and Subsidiary incurring losses arising from exchange rate and interest rate fluctuations, increasing its debt balance for loans and financing obtained in the market and corresponding interest expenses. In order to reduce such risks, the Company carries out hedge transactions, through currency and interest rate swap contracts.

34


On March 31, 2008, the restated amount of swap contracts totaled R$149,393 (December 31, 2007 – R$153,510). The contracts mature between April 2008 and January 2009.

Gains and losses in operations arise from differences in variations of contracted indicators against reference indexes (yield curve) and are accounted for on the accrual basis under interest income or expenses. In the accumulate up to March, 2008, net losses on swap operations amounted to R$5,320 (First quarter, 2007 - R$10,876). In the same period the gain with foreign exchange variation, mainly related to the foreign denominated debt, totaled R$1,955 (First quarter, 2007 – R$8,559).

On March 31, 2008, the net amount payable relating to swap contracts amounted to R$51,561, classified as current liabilities (December 31, 2007 – R$53,264 - of which R$45,815 are recorded at long-term liabilities and R$7,449 as current liabilities).

On March 31, 2008, the Company and the Subsidiary had loans and financing in the amount of R$149,885 (December 31, 2007 - R$151,788) denominated in foreign currency, of which 100% (December 31, 2007 – 100%) were covered by hedge operations.

(b) Credit risk

Credit risk associated with accounts receivable arises from telecommunications services billed and to be billed, resale of handsets and distribution of prepaid cards. The Subsidiary continuously monitors credit granted to its customers and the delinquency level.

Customer access to telecommunications services is blocked when a bill is overdue for more than 15 days, except for telephone services to be maintained for security or national defense reasons. The credit risk of accounts receivable of telecommunications mobile services is diversified. The Subsidiary maintains credit limits for handset resellers and prepaid card distributors which are defined based on potential sales, risk history, payment promptness and delinquency levels. On March 31, 2008, the Subsidiary had provision to cover eventual losses on accounts receivable amounted to R$44,597 (December 31, 2007 – R$42,780) - Note 6.

Transactions with financial institutions (financial investments and swap contracts) are distributed among prime financial institutions, minimizing the credit risk and avoiding concentration.

There is no concentration of funds available that have not been mentioned above, which could, if suddenly eliminated, severely impact the Company and the Subsidiary operations.

(c) Market value of financial instruments

35


The market values of the financial assets and liabilities are determined based on available market information and appropriate valuation methodologies. The use of different market assumptions and/or estimation methodologies could cause a different effect on the estimated market values.

The accounting balances of financial investments on March 31, 2008 and December 31, 2007 are equivalent to market values, as they are recorded at realization value. The market values of loans and financing and of swap operations were calculated according to the present value of these financial instruments, considering the interest rate practiced by the market for operations of similar nature, term and risk, as shown below:

    Consolidated 
         
    03.31.08    12.31.07 
         
    Book   Market   Book   Market
    value   value   value   value
         
 
Financial investments    2,945    2,945    5,619    5,619 
Short Term Investments    24,961    24,961    34,953    34,953 
Accounts payable – hedge operations    51,561    50,005    53,264    52,844 
Loans and financing    149,885    152,213    151,788    153,911 

The hedge operations are recognized on a monthly basis in the income statement, considering the yield curve (Note 18 (a)).

19 Special Purpose Entities (EPE)

The Company, together with its Subsidiary, Amazônia Celular S.A., and with related companies on March 31, 2008, Telemig Celular Participações S.A. and Telemig Celular S.A., invests in an Investment Fund in Quotas of Investment Funds - FIC (exclusive), managed by Banco Itaú S.A., which, in turn, invests in quotas of exclusive Financial Investment Funds.

The main information on Investment Fund in Quotas of Investment Funds – FIC (exclusive), is summarized as below:

    Holding    Consolidated 
       
    03.31.08    12.31.07    03.31.08    12.31.07 
         
Consolidated Portfolio                 
National Treasury Bonds – LTN    299,995    401,349    299,995    401,349 
Financial Treasury Bonds – LFT    179,585    235,187    179,585    235,187 
Notes of National Treasury – NTN    9,626    4,895    9,626    4,895 
Private Risk – CDB / Others    403,614    92,997    403,614    92,997 
Committed/Over/Cash Dep. Transactions    71,282    18,177    71,282    18,177 
Liabilities    (57)   (78)   (57)   (78)
         
    964,045    752,527    964,045    752,527 
         
% share at the end of the quarter    1.47%    1.98%    2.59%    4.64% 
Participation amount    14,164    14,864    24,961    34,953 
 
    Holding    Consolidated 
       
    03.31.08    12.31.07    03.31.08    03.31.07 
         
 
FIC result – in the quarter    23,693    16,240    23,693    16,240 
Share in FIC result    381    22    1,182    935 

36



For information purposes, the proportional consolidated balance of the short term investments considering the nature of the investments in exclusive funds, is presented in Note 5.

20 Other Information

(a) Proceeding referring to the General Law of Telecommunications

In June 2005, the Company and its Subsidiary filed a judicial action against Caixa de Previdência dos Funcionários do Banco do Brasil - PREVI and Banco do Brasil S.A., for understanding, the claimants, that the defendants are part of the controlling group (through indirect interest) both of the Company and its competitor TNL PCS S.A. ("Oi"). The action aimed to prevent the defendants from exercising their voting rights in the Company and its control chain until the matter concerning the cross shareholding is resolved.

On October 16, 2006, after the taking over of its new Board, the Company presented petition in the records of the action described above, through which it waived the rights on which the referred demand was based. On June 27, 2007, the process was extinguished upon judicial confirmation of the waiver. The abatement of the action will be concluded after final decision.

21 Subsequent Events

In relevant notice published on April 03, 2008, Telemar Norte Leste S.A. disclosed the completion of the acquisition process of 1,293 thousand common shares and 3.7 thousand preferred shares issued by Tele Norte Celular Participações S.A., holding of Amazônia Celular S.A., object of the Stock Purchase Agreement entered into Telemar Norte Leste S.A. and Vivo Participações S.A. (Vivo) on December 20, 2007, corresponding to 51.86% of the common shares and 0.09% of the preferred shares and 19.34% of the total shares issued by Tele Norte Celular Participações S.A.

The total price agreed upon in the Stock Purchase Agreement, of R$128,600 thousand, corresponds to an acquisition price per common shares issued by Tele Norte Celular Participações S.A. of R$99.38, which implies in the price per share issued by Amazônia Celular S.A. of R$152.01. These amounts have already been restated by the daily interest rate of the Interbanking Deposit Certificate – CDI since 08.02.2007 up to that date. Additionally, Telemar Norte Leste S.A. acquired subscription rights to new shares to be issued by Tele Norte Celular Participações S.A. held by Vivo as provided by the CVM Instruction . 319/99 and later amendments, for the price of R$22,611 thousand.

37


With the implementation of the transaction provided in the Stock Purchase Agreement, Telemar Norte Leste S.A. will shortly present to the Brazilian Securities and Exchange Commission (CVM), together with Credit Suisse (Brasil) S.A. Corretora de Títulos e Valores Mobiliários, in the quality of intermediate institution, requests for registration of the tender offers up to the totality of the common shares (OPA’s) of Tele Norte Celular Participações S.A. and Amazônia Celular S.A., outstanding in the market, in fulfillment to the provision of article 254-A of Law 6404/76 and CVM Instruction . 361/02.

The OPA of Tele Norte Celular Participações S.A. will be made for the cash price of R$79.51 per common share and the OPA of Amazonia Celular S.A. will be made for the cash price of R$121.61 per common share. The acquisition prices offered in the OPA’s correspond to 80% of the amount paid by Telemar Norte Leste S.A. to Vivo for the common shares that integrate the control block of Tele Norte Celular Participações S.A. and the implicit amount of Amazônia Celular S.A., under the provision of article 254-A of Law 6404/76.

In connection with the conclusion of the acquisition of Tele Norte Celular Participações S.A. by Telemar Norte Leste S.A., Telemar Norte Leste S.A. will also shortly submit to the approval of Bolsa de Valores do Estado de Sao Paulo S/A – BVSP (Bovespa), drafts of the Public Notices of acquisition volunteer tender offers (Volunteer OPA’s) of the preferred shares of Tele Norte Celular Participações S.A. and of Amazônia Celular S.A. The Volunteer OPA’s are intended to the acquisition of up to the totality of the preferred shares of Tele Norte Celular Participações S.A. and Amazônia Celular S.A. outstanding and they will be made for the cash price of R$33.00 per preferred share of Tele Norte Celular Participações S.A. and R$25.55 per preferred share of Amazônia Celular S.A., regardless of the class of share, whether preferred shares of class A, B, C, D or E. The launching of the Volunteer OPA’s is subject to the no occurrence of adverse material event that may affect the decision of Telemar Norte Leste S.A. to launch the Volunteer OPA’s and to the obtaining of the approval of the respective public notices by the Bovespa.

The management of Telemar Norte Leste S.A. confirmed that the launching of the Volunteer OPA’s is subject to the evolution of the general financial and capital market conditions and the no occurrence of events that substantially alter the profitability perspectives of Tele Norte Celular Participações S.A. and Amazônia Celular S.A., and, consequently, its decision to launch the Volunteer OPA’s.

The Volunteer OPA’s will not be intended to the delisting of the publicly traded company Tele Norte Celular Participações S.A. or Amazônia Celular S.A.

The management of Telemar Norte Leste S.A. will inform its shareholders and the market about the launching of the OPA’s and Volunteer OPA’s, as well as any other events that may affect their launching and supplemental ones if deemed necessary.

22 Restatement of the Quarterly Information

As required by Official Letter CVM/SEP/GEA-2/N°094/08, the Company restated its Quarterly Information. The following charts were included:

38


This restatement did not present changes in the individual and consolidated balance sheets, in the individual and consolidated statements of income, in the consolidated performance comments or in the Notes to the Quarterly Information submitted on May 13, 2008.

* * *

39


 
05.01 – COMMENTS ON THE COMPANY’S PERFORMANCE IN THE QUARTER 
 

See Comments on the Consolidated Performance in the Quarter.

*******************

40


06.01 – CONSOLIDATED BALANCE SHEET - ASSETS (in thousands of Reais)

1 – CODE  2 - DESCRIPTION  3 – 03/31/2008  4 – 12/31/2007 
Total Assets  509,739  529,211 
1.01  Current Assets  160,297  158,388 
1.01.01  Cash and Cash Equivalents  28,878  44,837 
1.01.01.01  Cash and Cash Equivalents  3,917  9,884 
1.01.01.02  Short Term Investments  24,961  34,953 
1.01.02  Credits  101,586  99,449 
1.01.02.01  Customers  74,974  81,296 
1.01.02.02  Miscellaneous Credits  26,612  18,153 
1.01.02.02.01  Income Tax and Social Contribution Recoverable  967  1,477 
1.01.02.02.02  PIS/COFINS Recoverable – Law 9718/98  14,872  14,437 
1.01.02.02.03  Other Taxes Recoverable  10,773  2,239 
1.01.03  Inventories  11,216  9,721 
1.01.04  Others  18,617  4,381 
1.02  Long-Term Receivables  349,442  370,823 
1.02.01  Long Term Receivables  94,971  94,175 
1.02.01.01  Miscellaneous Credits  88,422  88,506 
1.02.01.01.01  Deferred Income Tax  82,131  82,131 
1.02.01.01.02  ICMS Recoverable  3,602  3,784 
1.02.01.01.03  Income Tax and Social Contribution Recoverable  1,156  1,076 
1.02.01.01.04  PIS and COFINS Recoverable – Law 9718/98  1,533  1,515 
1.02.01.01.05  Other Taxes Recoverable 
1.02.01.02  Credits with Related Parties 
1.02.01.02.01  Affiliates 
1.02.01.02.02  Subsidiaries 
1.02.01.02.03  Other Related Parties 
1.02.01.03  Others  6,549  5,669 
1.02.02  Permanent Assets  254,471  276,648 
1.02.02.01  Investments  77  77 
1.02.02.01.01  In Affiliates 
1.02.02.01.02  In Affiliates/Goodwill 
1.02.02.01.03  In Subsidiaries 
1.02.02.01.04  In Subsidiaries/Goodwill 
1.02.02.01.05  Other Investments  77  77 
1.02.02.02  Property, Plant and Equipment  216,835  236,279 
1.02.02.03  Intangible  35,246  37,850 
1.02.02.04  Deferred Charges  2,313  2,442 

41


06.02 – CONSOLIDATED BALANCE SHEET - LIABILITIES (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 3/31/2008  4 – 12/31/2007 
Total Liabilities  509,739  529,211 
2.01  Current Liabilities  312,518  218,083 
2.01.01  Loans and Financing  149,885  80,936 
2.01.02  Debentures 
2.01.03  Suppliers  77,444  83,694 
2.01.04  Taxes, Charges and Contributions  303  8,228 
2.01.05  Dividends Payable  3,297  3,297 
2.01.06  Provisions  5,330  10,620 
2.01.07  Debts with Related Parties 
2.01.08  Other  76,259  31,308 
2.01.08.01  Accounts Payable – Hedging Operations  51,561  7,449 
2.01.08.02  Reverse Share Split  14,970  15,052 
2.01.08.03  Other Liabilities  9,728  8,807 
2.02  Long-Term Liabilities  72,293  191,231 
2.02.01  Long Term Liabilities  72,293  191,231 
2.02.01.01  Loans and Financing  70,852 
2.02.01.02  Debentures 
2.02.01.03  Provisions  30,316  30,514 
2.02.01.04  Debts with Related Parties  23,396  26,076 
2.02.01.05  Advance for Future Capital Increase 
2.02.01.06  Others  18,581  63,789 
2.02.01.06.01  Accounts Payable – Hedging Operations  45,815 
2.02.01.06.02  Pension Plan – CVM 371  2,250  2,250 
2.02.01.06.03  Licenses of Use Payable  13,117  12,612 
2.02.01.06.04  Other Liabilities  3,214  3,112 
2.02.02  Deferred Income 
2.03  Minority Interests  33,090  31,768 
2.04  Shareholders’ Equity  91,838  88,129 
2.04.01  Paid-in Capital  84,851  84,851 
2.04.02  Capital Reserves 
2.04.03  Revaluation Reserves 
2.04.03.01  Own Assets 
2.04.03.02  Subsidiaries/Affiliates 
2.04.04  Profit Reserves  160  160 
2.04.04.01  Legal  160  160 
2.04.04.02  Statutory 
2.04.04.03  For Contingencies 
2.04.04.04  Realizable Profits 
2.04.04.05  Profit Retention 
2.04.04.06  Special for Non-Distributed Dividends 
2.04.04.07  Other Profit Reserves 
2.04.05  Retained Earnings/Accumulated Losses  6,827  3,118 
2.04.06  Advance for Future Capital Increase 

42


07.01 - STATEMENT OF INCOME (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to
03/31/2008
4 - 01/01/2008 to
03/31/2008
5 – 01/01/2007 to
31/31/2007
6 – 01/01/2007 to
03/31/2007
3.01  Gross Revenue from Sales and/or Services  276,204  276,204  201,574  201,574 
3.02  Gross Revenue Deductions  (162,083) (162,083) (86,135) (83,135)
3.03  Net Revenue from Sales and/or Services  114,121  114,121  115,439  115,439 
3.04  Cost of Goods and/or Services Sold  (73,458) (73,458) (77,515) (77,515)
3.05  Gross Profit  40,663  40,663  37,924  37,924 
3.06  Operating Expenses/Revenue  (35,368) (35,368) (45,266) (45,266)
3.06.01  Selling  (22,657) (22,657) (26,500) (26,500)
3.06.02  General and Administrative  (19,293) (19,293) (11,204) (11,204)
3.06.03  Financial  (6,229) (6,229) (7,562) (7,562)
3.06.03.01  Financial Income  1,989  1,989  2,808  2,808 
3.06.03.02  Financial Expenses  (8,218) (8,218) (10,370) (10,370)
3.06.04  Other Operating Revenues  12,811  12,811 
3.06.05  Other Operating Expenses 
3.06.06  Equity in Subsidiary and Affiliated Companies 
3.07  Operating Income  5,295  5,295  (7,342) (7,342)
3.08  Non-Operating Income  49  49  (14) (14)
3.08.01  Revenues  116  116  18  18 
3.08.02  Expenses  (67) (67) (32) (32)
3.09  Income Before Taxes/Profit Sharing  5,344  5,344  (7,356) (7,356)
3.10  Provision for Income Tax and Social Contribution  (314) (314)
3.11  Deferred Income Tax 
3.12  Profit Sharing/Statutory Contributions 
3.12.01  Employee Profit Sharing 
3.12.02  Contributions 
3.13  Reversal of Interest on Shareholders’ Equity 

43


07.01CONSOLIDATED STATEMENT OF INCOME (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to
03/31/2008
4 - 01/01/2008 to
03/31/2008
5 – 01/01/2007 to
01/01/2007
6 – 01/01/2007 to
03/31/2007
3.14  Minority Interests  (1,321) (1,321) 1,763  1,763 
3.15  Net Income/Loss for the Period  3,709  3,709  (5,593) (5,593)
  NUMBER OF SHARES, EX-TREASURY (in thousands) 6,702  6,702  335,084,155  335,084,155 
  EARNINGS PER SHARE  0.55342  0.55342     
  LOSS PER SHARE      (0.00002) (0.00002)

44


 
08.01 – COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER 
 

Scope 
 

This performance report comprises the accounts of Tele Norte Celular Participações S.A., corresponding to the periods of 01/01/08 to 03/31/08, comparing them with previous quarters and with the same period of the previous year. Sums are subject to rounding differences.

Statement of income 
 

The comments on economic and financial performance are based on the model statement of income shown below: (non accounting figures not reviewed by independent accountants).

(R$ thousand)
             
Income Statement    1Q07   4Q07   1Q08
             
   Service Revenues - Gross    191,604    218,204    272,706 
   Equipment Revenues - Gross    9,970    6,035    3,498 
             
Total Revenues - GROSS    201,574    224,239    276,204 
             
   Service Revenues - Net    108,447    126,857    111,679 
   Equipment Revenues - Net    6,992    4,602    2,442 
             
Total Revenues - NET    115,439    131,459    114,121 
             
   Costs & Operating Expenses             
   Cost of Services    46,931    50,640    47,419 
   Cost of Equipment    7,758    8,015    4,549 
   Selling & Marketing Expenses    23,318    20,222    22,074 
   Bad Debt Expense    3,330    4,247    4,414 
   General & Administrative Expenses    8,718    9,029    11,918 
   Other Operating Expenses (income)   (3,012)   (21,722)   (14,209)
             
EBITDA    28,396    61,028    37,956 
             
   Margin (% total net revenues)   24.6%    46.4%    33.3% 
   Depreciation & Amortization    28,176    27,647    26,432 
   EBIT    220    33,381    11,524 
   Financial Expenses    18,929    12,196    10,440 
   Financial Revenues    (2,808)   (3,461)   (1,989)
   Foreign Exchange Loss (gain)   (8,559)   (5,839)   (2,222)
   Others    14    1,622    (49)
             
Net Income Before Taxes & Mino. Inter.   (7,356)   28,863    5,344 
             
   Taxes        314 
   Minority Interest    (1,763)   7,251    1,321 
             
Net Income (Loss)   (5,593)   21,612    3,709 
             
   Margin (% total net revenues)   -5.2%    17.0%    3.3% 
 
   Number of Shares    335,084,155,357    6,701,682    6,701,682 
   Earnings (losses) per share*    (0.017)   3.225    0.553 
   Earnings (losses) per ADR    (0.835)   3.225    0.553 
*On 1Q07 - earnings per thousand shares 

45


Operating performance 
 

Client base (not reviewed by independent accountants)
 

The Company’s client base totaled 1,405 thousand in the first quarter of 2008, in line with the 4Q07 (-0.8%) and 11.9% higher than the 1Q07. In march/08, prepaid segment reached 1,197 thousand clients, an increase of 15.5% over the 1Q07 and a slight decrease (-0.6%) over December/07, representing 85% of the total base.

Market share was estimated at 18.8% in the 1Q08 compared to the 20.3% registered in the previous quarter and 22.3% in the 1Q07. Gross sales share in the 1Q08 was estimated at 21.3%, 1.4 p.p. and 4.9 p.p. lower than the 4Q07 and 1Q07, respectively.

Churn Rate (not reviewed by independent accountants)
 

Blended annualized churn rate reached 65.3% higher than the 35.2% and 35.9% recorded in the 4Q07 and 1Q07, respectively. This increase is a result of higher prepaid churn rate associated to changes in the client disconnection policy during the year 2007.

Operating Revenues 
 

Net revenues totaled R$114.1 million in the 1Q08, 1.1% and 13.2% lower than 1Q07 and 4Q07, respectively. The annual reduction is due to lower equipment revenues (-65%).

In service revenues, annual growth (+2.98%) occurred despite of lower blended ARPU, which reached R$26.0, representing a R$2.4 reduction during the period. When compared to the R$30.4 registered in the 4Q07, blended ARPU was reduced by R$4.4.

Operating costs and expenses 
 

Cost of services totaled R$47.4 million in the 1Q08, 6.4% lower than the previous quarter. This reduction is related to lower Fistel expenses (reduced client base growth). When compared to the 1Q07, cost of services increased by R$0.5 million. 

Selling and marketing expenses in the 1Q08 totaled R$22.1 million, 9.2% higher than the 4Q07, mainly due to higher personnel expenses. When compared to the 1Q07, selling and marketing expenses were reduced by 5.3% as a result of the closure of the Belém call center in the 1Q07, partially offset by the inventory adjustment to its market value. 

General and administrative expenses totaled R$11.9 million in the 1Q08, 32.0% higher than the 4Q07, as a result of higher consulting expenses and provision for contingencies. When compared to the 1Q07, general and administrative expenses increased by R$3.2 million, due to higher personnel and consulting expenses. 

46


Bad debt provisions totaled R$4.4 million in the 1Q08, slightly higher than the R$4.2 million recorded in the 4Q07 and R$1.1 million higher than the 1Q07 as a result of a slight deterioration in client credit profile.

Client acquisition cost reached R$94 in the 1Q08, 27.7% lower than R$130 recorded in the 4Q07, as a consequence of lower marketing expenses and subsidies. When compared to the first quarter of 2007, client acquisition cost decreased by R$46 due to lower promotional discounts and higher gross activation volume.

Retention costs reached R$12.2 million in the 1Q08, in line with the previous quarter and 18.1% lower than the R$14.9 million registered in the 1Q07. This reduction was a consequence of lower personnel expenses related to the closure of the Belem call center in the first quarter of 2007.

EBITDA (not reviewed by independent accountants)
 

In the 1Q08, EBITDA reached 38.0 million, 37.8% lower than 4Q07 and 33.7% higher than 1Q07. In the quarter, EBITDA margin reached 33.3% over total net revenues, an increase of 8.7 p.p. when compared to the 1Q07, but lower than the previous quarter (-13.2 p.p.). It’s worth mentioning that, in the 4Q07, EBITDA was positively impacted by the R$26.6 million ICMS reversal provision in the state of Pará. Without such impact EBITDA margin would have been 26.2% .

Depreciation and amortization 
 

In the 1Q08, depreciation and amortization expenses totaled R$26.4 million, 4.4% and 6.2% lower than 4Q07 and 1Q07, respectively, as a result of the end of depreciation on some network items in fixed assets.

Net financial expense 
 

1 – Financial Result

Net Financial Expenses

         
    R$ million
       
    1Q07   4Q07   1Q08
       
Interest Expenses (a)   (18.9)   (12.2)   (10.4)
Interest Income (b)   2.8    3.5    2.0 
Foreign Exchange Gain (Loss) (c)   8.5    5.8    2.2 
Net Financial Income (Expense)   (7.6)   (2.9)   (6.2)
       
Note: a) Interest Expenses: include financial expenses related to debt, loss in hedge operations (if any), and taxes on financial operations; b) Interest Income: include results of cash investments and gains from hedge operations (if any); and, c) Gain (Loss) from Exchange Variation: reflects almost exclusively the currency appreciation/weakening and the interest on debt denominated in foreign currency. 

Net income 
 

47


Net income in the 1Q08 totaled R$3.7 million (R$0.553 per share), reverting the loss observed on the same period of previous 2007 year and R$17.9 million lower than the 4Q07, when a non-recurrent ICMS reversal (R$26.6 million) was registered, as mentioned above.

Total debt 
 

At the end of 1Q08, total debt reached R$149.9 million, of which 100% was denominated in US dollars. The entire debt denominated in foreign currency was hedged.

The Company’s net debt in the 1Q08 reached 172.6 million, 1.1x accumulated EBITDA for the last 12 months. Although debt was partially offset by cash (cash equivalents and short-term cash investments) in the amount of R$28.9 million, it was impacted by accounts payable from hedge operations in the amount of R$51.6 million.

Investments 
 

During the first quarter of 2008, Amazônia Celular’s capital expenditures reached R$4.3 million. The breakdown of such investments follows:

             
CAPEX (R$ million)   1Q07   4Q07   1Q08
       
Network             2.5    19.6             1.0 
IT             0.1    0.5             2.0 
Others             0.7    1.8             1.3 
T O T A L             3.3    21.9             4.3 

*****************************

This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include those resulting from the short history of the Company's operations as an independent, private-sector, entity and the introduction of competition to the Brazilian telecommunications sector, as well as those relating to the cost and availability of financing, the performance of the Brazilian economy generally, the levels of exchange rates between Brazilian and foreign currencies and the Federal Government's telecommunications policy. Accordingly, the actual results of operations of the Company may be different from the Company's current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments.

48


**************

OPERATIONAL DATA
(not reviewed by independent accountants)

       
Operational Data    1Q07   4Q07   1Q08
       
Licensed Pops (in million)   17.6    17.6    18.0 
       
Clients    1,256,134    1,416,620    1,405,149 
       
   Postpaid    219,614    212,553    208,453 
   Prepaid    1,036,520    1,204,067    1,196,696 
       
Market Share    22.3%    20.3%    18.8% 
       
Annualized churn rate    35.9%    35.2%    65.3% 
       
Other Information             
       
   Universalization             
         Number of locations served    212    213    213 
         Number of cell sites    693    706    704 
         Number of switches    14    18    18 
         Headcount    374    419    400 

GLOSSARY OF KEY INDICATORS

I) Average Customers

a) Average customers – monthly

Sum of customers at the beginning and the end of the month
2

b) Average customers – quarterly and year to date

Sum of the average customers for each month of the period
Number of months in the period

II) Churn Rate (Annualized)

a) Churn % quarterly

     Sum of deactivations / Sum of average monthly opening customers for the 3 months x 12
3

b) Churn % - year to date

YTD deactivations / Sum of avg monthly opening customers since beginning of the year x 12
Number of months in the period

49


MOU – Minutes of Use (Monthly)

Number of total billable minutes for the period / Average customers for the period
Number of months in the periods

ARPU – Average Revenue per User

Net service revenues for the period (excluding roaming-in revenues)
Average customers for the period

Customer Acquisition Cost

(Sum of Marketing salaries, Selling salaries, Consulting (Sales and Marketing), Commissions, Handsets subsidies, Advertising and promotions,
FISTEL tax (activation tax), less Activation fee for the period)
Number of gross activation in the period

Free Cash Flow

Free Cash Flow = (EBITDA – CAPEX – Taxes – Net Financial Expenses* – Minority Interests – Working Capital Variation)

* Considers interest paid.

Working Capital Variation

Working Capital Variation = ( ∆ Current Assets – ∆ Cash & Cash Equivalents) – ( ∆ Current Liabilities – ∆ Short Term Loans and Financing - ∆ Loan Interest - ∆ Dividends)

Interest Coverage Ratio

Interest Coverage Ratio = EBITDA / Interest Paid

III) Current Liquidity Ratio

Current Liquidity Ratio = Current Assets / Current Liabilities

EBITDA

EBITDA = Operational Revenues - Operational Costs - Operational Expenses* - Bad Debt

* Does not include profit sharing.

50


09.01 INTEREST IN CONTROLLED AND/OR RELATED COMPANIES

1 - Item: 
01 
2 - Company name of the controlled/related company: 
AMAZÔNIA CELULAR S.A. 
3 - CNPJ: 
02.340.278/0001-33 
4 - Classification: 
CONTROLLED PUBLIC COMPANY 
5 - % interest in the capital of the invested company: 
74.96 
6 - % stockholders' equity of the investor:
107.85 
7 - Company type: 
commercial, industry and other type of company 
8 - Number of shares held in the current quarter (thousand): 
4,413 
9 - Number of shares held in the previous quarter (thousand): 
4,413 

51


11.01 PURCHASE ORDERS/EXECUTED AGREEMENTS

Company  (in thousands Reais)
1 - Balance of the purchase orders/agreements executed at the end of the current quarter  36 
2 - Balance of the purchase orders/agreements executed at the end of the same quarter of the prior fiscal year  227 

Consolidated  (in thousands Reais)
3 - Balance of the purchase orders/agreements executed at the end of the current quarter  35,343 
4 - Balance of the purchase orders/agreements executed at the end of the same quarter of the prior fiscal year  30,988 

52


15.01 INVESTMENT PROJECT

Investments

In the quarter, Amazônia Celular made investments in the amount of R$ 4.3 million. In the chart below, the company shows the opening of these investments:

 
CAPEX (R$ million)   1st quarter of 2007    4th quarter of 2007    1st quarter of 2008 
 
Network    2.5    19.6    1.0 
Information technology/systems    0.1    0.5    2.0 
Others    0.7    1.8    1.3 
Total    3.3    21.9    4.3 
 

53


 
17.01 – INDEPENDENT ACCOUNTANTS´ REVIEW REPORT 
 

(Convenience Translation into English from the Original Previously Issued in Portuguese)

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Shareholders and Board of Directors of
Tele Norte Celular Participações S.A.
Belo Horizonte - MG

1. We have performed a review of the accounting information presented in the Quarterly Information (company and consolidated) of Tele Norte Celular Participações S.A. (“Company”) for the quarter ended March 31, 2008 consisting of the balance sheet, the related statement of income, the performance report, and the notes to the Quarterly Information, all prepared under the responsibility of the Company’s management.

2. Our review was conducted in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council (CFC), and consisted principally of: (a) inquiries of and discussions with certain officials of the Company who have responsibility for accounting, financial and operating matters about the criteria adopted in the preparation of the Quarterly Information; and (b) review of the information and subsequent events that had or might have had material effects on the financial position and results of operations of the Company.

3. Based on our review, we are not aware of any material modifications that should be made to the aforementioned accounting information presented in the Quarterly Information for them to be in conformity with the standards established by the Brazilian Securities Commission (CVM), applicable to the preparation of Quarterly Information, including CVM Instruction No. 469/08.

4. As mentioned in note 2, on December 28, 2007, Law No. 11,638 was enacted and it is effective for fiscal years beginning on or after January 1, 2008. This Law altered, revoked and added new provisions to Law No. 6,404/76 (Brazilian Corporate Law) and introduced changes in Brazilian accounting practices. Although this Law has already become effective, some changes introduced by it are subject to regulation by regulatory agencies before being applied by companies. Accordingly, during this transition phase, CVM, through Instruction No. 469/08, has permitted companies not to apply all the provisions of Law No. 11,638/07 in the preparation of the Quarterly Information. Thus, the accounting information presented in the Quarterly Information for the quarter ended March 31, 2008 have been prepared in conformity with specific instructions of CVM and do not include all changes in accounting practices introduced by Law No. 11,638/07.

5. As mentioned in note 22, the Company restated its Quarterly Information to include certain additional information.

6. The accompanying Quarterly Information has been translated into English for the convenience of readers outside Brazil.

Belo Horizonte, May 13, 2008, except for Note 22, as to which the date is July 14, 2008

DELOITTE TOUCHE TOHMATSU    Paulo R. Marques Garrucho 
Auditores Independentes    Engagement Partner 

54


CONTROLLED/RELATED

COMPANY NAME 
AMAZÔNIA CELULAR S.A. 

18.01 - STATEMENT OF INCOME OF THE CONTROLLED/RELATED (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to 
03/31/2008 
4 – 01/01/2008 to 
03/31/2008 
5 – 01/01/2007 to 
03/31/2007 
6 – 01/01/2007 to 
03/ 31/2007 
3.01  Gross Revenue from Sales and/or Services  276,204  276,204  201,574  201,574 
3.02  Gross Revenue Deductions  (162,083) (162,083) (86,135) (86,135)
3.03  Net Revenue from Sales and/or Services  114,121  114,121  115,439  115,439 
3.04  Cost of Goods and/or Services Sold  (73,458) (73,458) (77,515) (77,515)
3.05  Gross Profit  40,663  40,663  37,924  37,924 
3.06  Operating Expenses/Revenue  (35,121) (35,121) (44,951) (44,951)
3.06.01  Selling  (26,488) (26,488) (26,500) (26,500)
3.06.02  General and Administrative  (14,948) (14,498) (11,006) (11,006)
3.06.03  Financial  (6,496) (6,496) (7,445) (7,445)
3.06.03.01  Financial Income  1,497  1,497  2,668  2,668 
3.06.03.02  Financial Expenses  (7,993) (7,993) (10,113) (10,113)
3.06.04  Other Operating Revenues  12,811  12,811 
3.06.05  Other Operating Expenses 
3.06.06  Equity Accounting Result 
3.07  Operating loss  5,542  5,542  (7,027) (7,027)
3.08  Non-Operating Income (loss) 49  49  (14) (14)
3.08.01  Revenues  116  116  18  18 
3.08.02  Expenses  (67) (67) (32) (32)
3.09  Income Before Taxes/Profit Sharing  5,591  5,591  (7,041) (7,041)
3.10  Provision for Income Tax and Social Contribution  (314) (314)
3.11  Deferred Income Tax 
3.12  Profit Sharing/Statutory Contributions 
3.12.01  Employee Profit Sharing 
3.12.02  Contributions 
3.13  Reversal of Interest on Shareholders’ Equity 
3.15  Loss for the Period  5,277  5,277  (7,041) (7,041)

55


18.01 - STATEMENT OF INCOME OF THE CONTROLLED/RELATED (in thousands of Reais)

1 - CODE  2 – DESCRIPTION  3 – 01/01/2008 to 
03/31/2008 
4 – 01/01/2008 to 
03/31/2008 
5 – 01/01/2007 to 
03/31/2007 
6 – 01/01/2007 to 
03/ 31/2007 
  NUMBER OF SHARES, EX-TREASURY 
(in thousands)
5,888  5,888  14,720,245  14,720,245 
  EARNINGS PER SHARE (in Reais) 0.89623  0.89623     
  LOSS PER SHARE (in Reais)     (0.00048) (0.00048)

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18.02 COMMENTS ON THE PERFORMANCE OF THE CONTROLLED/RELATED 
 
 
 
CONTROLLED/RELATED: AMAZÔNIA CELULAR S.A. 
 

Scope 
 

The present performance report includes the accounts of Amazônia Celular S.A. for the period of 01/01/08 to 03/31/08 comparative to the preceding quarters and the same period of previous year. Sums are subject to rounding differences.

Statement of income 
 

The comments on economic and financial performance are based on the model statement of income shown below: (non accounting figures not reviewed by independent accountants).

    (R$ thousand)
 
Income Statement    1Q07    4Q07    1Q08 
 
   Service Revenues - Gross    191,604    218,204    272,706 
   Equipment Revenues - Gross    9,970    6,035    3,498 
 
Total Revenues - GROSS    201,574    224,239    276,204 
 
   Service Revenues - Net    108,447    126,857    111,679 
   Equipment Revenues - Net    6,992    4,602    2,442 
 
Total Revenues - NET    115,439    131,459    114,121 
 
   Costs & Operating Expenses             
   Cost of Services    46,931    50,640    47,419 
   Cost of Equipment    7,758    8,015    4,549 
   Selling & Marketing Expenses    23,318    20,222    22,074 
   Bad Debt Expense    3,330    4,247    4,414 
   General & Administrative Expenses    8,519    8,832    11,404 
   Other Operating Expenses (income)   (3,012)   (21,722)   (14,209)
 
EBITDA    28,595    61,225    38,470 
 
   Margin (% total net revenues)   24.8%    46.6%    33.7% 
   Depreciation & Amortization    28,177    27,647    26,432 
 
EBIT    418    33,578    12,038 
 
   Financial Expenses    18,425    11,727    10,153 
   Financial Revenues    (2,668)   (3,080)   (1,497)
   Foreign Exchange Loss (gain)   (8,312)   (5,649)   (2,160)
   Others    14    1,622    (49)
 
Net Income Before Taxes & Mino. Inter.    (7,041)   28,958    5,591 
 
   Taxes        314 
 
Net Income (Loss)   (7,041)   28,958    5,277 
 
   Number of Shares    335,084,155    335,084,155    335,084,155 
   Earnings (losses) per share *    (0.021)   0.086    0.016 
   Earnings (losses) per ADR    (1.051)   4.321    0.787 
* On 1Q07 - earnings per thousand shares             

57


Operating performance 
 

 
Client base (not reviewed by independent accountants)
 

The Company’s client base totaled 1,405 thousand in the first quarter of 2008, in line with the 4Q07 (-0.8%) and 11.9% higher than the 1Q07. In march/08, prepaid segment reached 1,197 thousand clients, an increase of 15.5% over the 1Q07 and a slight decrease (-0.6%) over December/07, representing 85% of the total base.

Market share was estimated at 18.8% in the 1Q08 compared to the 20.3% registered in the previous quarter and 22.3% in the 1Q07. Gross sales share in the 1Q08 was estimated at 21.3%, 1.4 p.p. and 4.9 p.p. lower than the 4Q07 and 1Q07, respectively.

Churn Rate (not reviewed by independent accountants)
 

Blended annualized churn rate reached 65.3% higher than the 35.2% and 35.9% recorded in the 4Q07 and 1Q07, respectively. This increase is a result of higher prepaid churn rate associated to changes in the client disconnection policy during the year 2007.

Operating Revenues 
 

Net revenues totaled R$114.1 million in the 1Q08, 1.1% and 13.2% lower than 1Q07 and 4Q07, respectively. The annual reduction is due to lower equipment revenues (-65%).

In service revenues, annual growth (+2.98%) occurred despite of lower blended ARPU, which reached R$26.0, representing a R$2.4 reduction during the period. When compared to the R$30.4 registered in the 4Q07, blended ARPU was reduced by R$4.4.

Operating costs and expenses 
 

Cost of services totaled R$47.4 million in the 1Q08, 6.4% lower than the previous quarter. This reduction is related to lower Fistel expenses (reduced client base growth). When compared to the 1Q07, cost of services increased by R$0.5 million.

Selling and marketing expenses in the 1Q08 totaled R$22.1 million, 9.2% higher than the 4Q07, mainly due to higher personnel expenses. When compared to the 1Q07, selling and marketing expenses were reduced by 5.3% as a result of the closure of the Belém call center in the 1Q07, partially offset by the inventory adjustment to its market value.

General and administrative expenses totaled R$11.4 million in the 1Q08, 30.0% higher than the 4Q07, as a result of higher consulting expenses and provision for contingencies. When compared to the 1Q07, general and administrative expenses increased by R$2.9 million, due to higher personnel and consulting expenses.

Bad debt provisions totaled R$4.4 million in the 1Q08, slightly higher than the R$4.2 million recorded in the 4Q07 and R$1.1 million higher than the 1Q07 as a result of a slight deterioration in client credit profile.

58


Client acquisition cost reached R$94 in the 1Q08, 27.7% lower than R$130 recorded in the 4Q07, as a consequence of lower marketing expenses and subsidies. When compared to the first quarter of 2007, client acquisition cost decreased by R$46 due to lower promotional discounts and higher gross activation volume.

Retention costs reached R$12.2 million in the 1Q08, in line with the previous quarter and 18.1% lower than the R$14.9 million registered in the 1Q07. This reduction was a consequence of lower personnel expenses related to the closure of the Belem call center in the first quarter of 2007.

EBITDA (not reviewed by independent accountants)
 

In the 1Q08, EBITDA reached 38.5 million, 37.1% lower than 4Q07 and 34.6% higher than 1Q07. In the quarter, EBITDA margin reached 33.7% over total net revenues, an increase of 8.9 p.p. when compared to the 1Q07, but lower than the previous quarter (-12.9 p.p.). It’s worth mentioning that, in the 4Q07, EBITDA was positively impacted by the R$26.6 million ICMS reversal provision in the state of Pará. Without such impact EBITDA margin would have been 26.2% .

Depreciation and amortization 
 

In the 1Q08, depreciation and amortization expenses totaled R$26.4 million, 4.4% and 6.2% lower than 4Q07 and 1Q07, respectively, as a result of the end of depreciation on some network items in fixed assets.

Net financial expense 
 

Net Financial Expenses

1 – Financial Result

 
    R$ million 
   
    1Q07    4Q07    1Q08 
       
 Interest Expenses (a)   (18.9)   (12.2)   (10.4)
 Interest Income (b)   2.8    3.5    2.0 
 Foreign Exchange Gain (Loss) (c)   8.5    5.8    2.2 
 Net Financial Income (Expense)   (7.6)   (2.9)   (6.2)
 

Note: a) Interest Expenses: include financial expenses related to debt, loss in hedge operations (if any), and taxes on financial operations; b) Interest Income: include results of cash investments and gains from hedge operations (if any); and, c) Gain (Loss) from Exchange Variation: reflects almost exclusively the currency appreciation/weakening and the interest on debt denominated in foreign currency. 

59


Net income 
 

Net income in the 1Q08 totaled R$5.3 million (R$0.787 per share), reverting the loss observed on the same period of previous year 2007 and R$23.7 million lower than the 4Q07, when a non-recurrent ICMS reversal (26.6 million) was registered, as mentioned above.

Total debt 
 

At the end of 1Q08, total debt reached R$144.9 million, of which 100% was denominated in US dollars. The entire debt denominated in foreign currency was hedged.

The Company’s net debt in the 1Q08 reached 179 million, 1.1x accumulated EBITDA for the last 12 months. Although debt was partially offset by cash (cash equivalents and short-term cash investments) in the amount of R$14.7 million, it was impacted by accounts payable from hedge operations in the amount of R$48.8 million.

Investments 
 

During the first quarter of 2008, Amazônia Celular’s capital expenditures reached R$4.3 million. The breakdown of such investments follows:

 
CAPEX (R$ million)   1Q07    4Q07    1Q08 
Network    2.5    19.6    1.0 
IT    0.1    0.5    2.0 
Others    0.7    1.8    1.3 
T O T A L    3.3    21.9    4.3 
 

This press release contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Known risks and uncertainties include those resulting from the short history of the Company's operations as an independent, private-sector, entity and the introduction of competition to the Brazilian telecommunications sector, as well as those relating to the cost and availability of financing, the performance of the Brazilian economy generally, the levels of exchange rates between Brazilian and foreign currencies and the Federal Government's telecommunications policy. Accordingly, the actual results of operations of the Company may be different from the Company's current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments.

**************

OPERATIONAL DATA

60


(not reviewed by independent accountants)

 
Operational Data    1Q07    4Q07    1Q08 
 
Licensed Pops (in million)   17.6    17.6    18.0 
 
Clients    1,256,134    1,416,620    1,405,149 
 
   Postpaid    219,614    212,553    208,453 
   Prepaid    1,036,520    1,204,067    1,196,696 
 
Market Share    22.3%    20.3%    18.8% 
 
Annualized churn rate    35.9%    35.2%    65.3% 
 
Other Information             
 
   Universalization             
         Number of locations served    212    213    213 
         Number of cell sites    693    706    704 
         Number of switches    14    18    18 
         Headcount    374    419    400 

GLOSSARY OF KEY INDICATORS 

I) Average Customers 

c) Average customers – monthly 

Sum of customers at the beginning and the end of the month
2

d) Average customers – quarterly and year to date 

Sum of the average customers for each month of the period
Number of months in the period

II) Churn Rate (Annualized)

a) Churn % quarterly 

Sum of deactivations / Sum of average monthly opening customers for the 3 months x 12 

b) Churn % - year to date 

YTD desactivations / Sum of avg monthly opening customers since beginning of the year x 12 
Number of months in the period

61


MOU – Minutes of Use (Monthly)

Number of total billable minutes for the period / Average customers for the period
Number of months in the periods

ARPU – Average Revenue per User

Net service revenues for the period (excluding roaming-in revenues)
Average customers for the period

Customer Acquisition Cost

(Sum of Marketing salaries, Selling salaries, Consulting (Sales and Marketing),
Commissions, Handsets subsidies, Advertising and promotions,
FISTEL tax (activation tax), less Activation fee for the period)

Number of gross activation in the period

Free Cash Flow

Free Cash Flow = (EBITDA – CAPEX – Taxes – Net Financial Expenses*
– Minority Interests – Working Capital Variation) –

* Considers interest paid.

Working Capital Variation

Working Capital Variation = ( ∆ Current Assets – ∆ Cash & Cash Equivalents ) –
( ∆ Current Liabilities – ∆ Short Term Loans and Financing - ∆ Loan Interest -
∆ Dividends)

Interest Coverage Ratio

Interest Coverage Ratio = EBITDA / Interest Paid

III) Current Liquidity Ratio

Current Liquidity Ratio = Current Assets / Current Liabilities

62


EBITDA

EBITDA = Operational Revenues - Operational Costs - Operational Expenses* - Bad Debt

* Does not include profit sharing.

63


 
19.01 – DESCRIPTION OF THE CHANGED INFORMATION 
 

In compliance with Official Letter CVM/SEP/GEA-2/No. 094/08, the following charts were amended:

01.09 Subscribed capital and changes; in relation to this chart, we inform that there was no change in the company's capital in the first quarter of 2008. We only added data of the last change, which happened in October/07, related to the reverse share split. However, this change did not cause changes in the amount of the Company capital.
09.01 Interest in controlled/related companies.
11.01 Purchase orders and executed agreements.
15.01 Investment projects.
18.00 Data of controlled/related companies.

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TABLE OF CONTENTS

GROUP   TABLE  DESCRIPTION  PAGE 
01  01  IDENTIFICATION 
01  02  HEADQUARTERS 
01  03  INVESTOR RELATIONS OFFICER (Company Mailing Address)
01  04  ITR REFERENCE 
01  05  CAPITAL STOCK 
01  06  COMPANY PROFILE 
01  07  COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS 
01  08  CASH DIVIDENDS 
01  09  SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT YEAR 
01  10  INVESTOR RELATIONS OFFICER 
02  01  BALANCE SHEET – ASSETS 
02  02  BALANCE SHEET - LIABILITIES 
03  01  STATEMENT OF INCOME 
04  01  EXPLANATORY NOTES 
05  01  COMMENTS ON THE COMPANY’S PERFORMANCE IN THE QUARTER  40 
06  01  CONSOLIDATED BALANCE SHEET - ASSETS  41 
06  02  CONSOLIDATED BALANCE SHEET - LIABILITIES  42 
07  01  CONSOLIDATED STATEMENT OF INCOME  43 
08  01  COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER  45 
09  01  INTEREST IN RELATED AND/OR CONTROLLED COMPANIES  51 
11  01  PURCHASE ORDERS/EXECUTED AGREEMENTS  52 
15  01  INVESTMENT PROJECT  53 
17  01  INDEPENDENT ACCOUNTANTS’ REVIEW REPORT  54 
    AMAZÔNIA CELULAR S.A.   
18  01  STATEMENT OF INCOME OF THE CONTROLLED/RELATED COMPANY  55 
18  02  COMMENT ON THE PERFORMANCE OF THE CONTROLLED/RELATED COMPANY  57 
19  01  DESCRIPTION OF THE CHANGED INFORMATION  64 

65


 
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.

Date: July 16, 2008

 
  TELE NORTE CELULAR PARTICIPAÇÕES S.A.
       
       
    By: /s/       José Luiz Magalhães Salazar
       
    Name: José Luiz Magalhães Salazar
    Title: Investor Relations Officer
 

 

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.