Moderating Wireless Competition Continues to Benefit Vivo

We believe Telefonica Brasil (Vivo) is one of the strongest telecom carriers in Brazil, vying with America Movil to offer converged wireless and broadband services across much of the country. Consolidation has made the wireless industry much more attractive, but the market still faces several challenges, including a fragmented fixed-line industry, coupled with economic and political instability. We expect Vivo’s solid balance sheet will enable it to ride out any bumps along the way, but shareholder returns could suffer if competition or regulation turns more aggressive than we expect.