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


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                    FORM 20-F
                               ------------------


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

                                      OR

[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR

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

                  For the transition period from          to

                        Commission File Number 001-14479

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

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

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

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

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

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

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

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

<TABLE>
<CAPTION>
      TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
      -------------------                    -----------------------------------------
<S>                                                    <C>
  Preferred Shares without par value                   New York Stock Exchange*
  Depositary Shares, each representing                 New York Stock Exchange
  50,000 Preferred Shares
</TABLE>
-------------------------
* Not for trading, but only in connection with the registration of American
  Depositary Shares on the New York Stock Exchange.

 SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      None

    SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION
                               15(d) OF THE ACT:

                                      None

INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL
REPORT:

          Common Shares, without par value          124,463,251,798

          Preferred Shares, without par value       210,189,114,585

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                                    YES  X  NO
                                        ---    ---
INDICATE BY CHECK MARK WHICH FINANCIAL STATEMENT ITEM THE REGISTRANT HAS ELECTED
TO FOLLOW:

                               ITEM 17     ITEM 18  X
                                       ---         ---

================================================================================


<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           ----
<S>                                                                                        <C>
PART I.......................................................................................1
     ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS...........................1
     ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.........................................1
     ITEM 3. KEY INFORMATION.................................................................1
     ITEM 4. INFORMATION ON THE COMPANY......................................................8
     ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................................24
     ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................................34
     ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............................38
     ITEM 8. FINANCIAL INFORMATION..........................................................40
     ITEM 9. THE OFFER AND LISTING..........................................................42
     ITEM 10. ADDITIONAL INFORMATION........................................................45
     ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................55
     ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITES.........................56

PART II.....................................................................................56
     ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...............................56
     ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS..56
     ITEM 15. RESERVED......................................................................56
     ITEM 16. RESERVED......................................................................56

PART III....................................................................................56
     ITEM 17. FINANCIAL STATEMENTS..........................................................56
     ITEM 18. FINANCIAL STATEMENTS.........................................................F-1
              GLOSSARY OF TELECOMMUNICATIONS TERMS.........................................G-1
     ITEM 19. EXHIBITS.....................................................................E-1


</TABLE>

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

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

        The Registrant is one of the companies formed as a result of the breakup
of Telecomunicacoes Brasileiras S.A.--Telebras, commonly referred to as
"Telebras," by the federal government of Brazil in May 1998. Each of the
subsidiaries was formed in January 1998 by spinning off the cellular
telecommunications operations of operating companies controlled by Telebras,
which we refer to in this annual report as the "predecessor companies."
References to our operations prior to January 1998 are to the cellular
operations of the predecessor companies. See "Item 4--Information on the
Company--Historical Background" for a description of the breakup of Telebras.

        References in this annual report to:

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

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

        This annual report contains forward-looking statements. Statements that
are not statements of historical fact, including statements about our beliefs
and expectations, are forward-looking statements. The words

                                       i
<PAGE>   3

"anticipates," "believes," "estimates," "expects," "forecasts," "intends,"
"plans," "predicts," "projects," and "targets" and similar words are intended
to identify these statements, which necessarily involve known and unknown risks
and uncertainties. Accordingly, our actual results of operations may be
different from our current expectations, and the reader should not place undue
reliance on these forward-looking statements. Forward-looking statements speak
only as of the date they are made, and we do not undertake any obligation to
update them in light of new information or future developments.

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

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


                                       ii
<PAGE>   4




                                    PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3.  KEY INFORMATION

A.      SELECTED FINANCIAL DATA

BACKGROUND

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

        On May 22, 1998, in preparation for the privatization, Telebras was
restructured to form twelve new holding companies, including the Registrant. The
restructuring of Telebras was accomplished by means of a procedure under
Brazilian law called cisao, or split-up. Virtually all the assets and
liabilities of Telebras were allocated to the new holding companies. In the
breakup, some assets and liabilities of Telebras, including 80.3% of the total
share capital of Amazonia Celular S.A. - Amazonas (formerly known as Telamazon
Celular), 86.9% of Amazonia Celular S.A. - Roraima (formerly known as Telaima
Celular), 90.6% of Amazonia Celular S.A. - Amapa (formerly known as Teleamapa
Celular), 69.1% of Amazonia Celular S.A. - Para (formerly known as Telepara
Celular) and 66.8% of Amazonia Celular S.A. - Maranhao (formerly known as Telma
Celular) were transferred to us.

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

        Upon its creation, the Registrant received, in addition to the shares of
its subsidiaries, assets of Telebras consisting primarily of cash. As a result,
our consolidated shareholders' equity after giving effect to the breakup of
Telebras was R$2.0 million higher than divisional equity at December 31, 1997.

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

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

                                       1
<PAGE>   5

portion of interest expense. As a result, they do not present net income and
historical earnings per share information.

        Our accounting methodology changed in 1998 to reflect the lower level of
inflation in Brazil. Through December 31, 1997, our consolidated financial
statements recognize certain effects of inflation and have been restated in
constant reais of December 31, 1997 purchasing power. The restatement was made
using the integral restatement method prescribed by the Brazilian Securities
Commission (Comissao de Valores Mobiliarios), commonly known as the "CVM," which
is an acceptable method of recognizing effects of inflation under U.S. GAAP.
Inflationary gains or losses on monetary assets and liabilities were allocated
to their corresponding income or expense caption in the consolidated statements
of operations. Inflationary gains or losses without a corresponding income or
expense caption were allocated to other net operating income (expense).

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

        In May 2000, the Registrant contributed the capital stock of its other
four subsidiaries to Amazonia Celular S.A. - Maranhao. At the same time Amazonia
Celular S.A. - Maranhao acquired the minority interests in the four subsidiaries
by means of redemptions and conversions of shares into Amazonia Celular S.A. -
Maranhao capital stock. As a result, Amazonia Celular S.A. - Maranhao became the
only direct subsidiary of the Registrant and the sole shareholder of each of
Amazonia Celular S.A. - Amazonas, Amazonia Celular S.A. - Roraima, Amazonia
Celular S.A. - Amapa and Amazonia Celular S.A. - Para.

        The Registrant intends to merge the four subsidiaries into Amazonia
Celular S.A. - Maranhao before the end of 2001, contingent on the approval of
Anatel.

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

U.S. GAAP SELECTED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                              YEARS ENDED DECEMBER 31,
                                                 -----------------------------------------------------------------------------------
                                                       1996             1997              1998              1999             2000
                                                 -------------- -------------------- -------------- ---------------- ---------------
                                                  (IN THOUSANDS OF CONSTANT REAIS AS          (IN THOUSANDS OF NOMINAL REAIS,
                                                          OF DECEMBER 31, 1997)                    EXCEPT PER SHARE DATA)
<S>                                                <C>              <C>             <C>              <C>              <C>
 STATEMENT OF OPERATIONS DATA:
  Net revenues.................................        166,453        219,316            232,555          308,846          480,622
 Operating income..............................        106,204        118,727             57,910           33,747           30,153
 Income before unallocated interest and taxes..         86,869         84,532                 --               --               --
 Net income(1).................................             --             --             31,532           19,383            7,947
 Basic and diluted income per thousand common
   shares(1)...................................             --             --               0.09             0.06             0.02
 Dividends per thousand common shares(2).......             --             --               0.01             0.02             0.01
 Number of shares (in thousands)...............             --             --        334,399,027      334,399,027      334,652,366

 OTHER FINANCIAL DATA:
 EBITDA(3).....................................        113,676        131,023             96,624           84,129           86,883
 Capital expenditures..........................        105,467         51,768             31,672          151,037          187,121
</TABLE>



                                       2


<PAGE>   6

<TABLE>
<CAPTION>
                                                                                 AS OF DECEMBER 31,
                                                 --------------------------------------------------------------------------------
                                                          1996            1997             1998             1999         2000
                                                 ---------------- ---------------  ----------------- ------------- --------------
                                                    (IN THOUSANDS OF CONSTANT              (IN THOUSANDS OF NOMINAL REAIS)
                                                 REAIS AS OF DECEMBER 31, 1997)
<S>                                                <C>              <C>               <C>              <C>           <C>
 BALANCE SHEET DATA:
 Cash and cash equivalents.....................             --            8,845           78,733           69,233       164,740
 Working capital...............................          6,580           17,161           78,654           43,213       156,995
 Total assets..................................        207,558          266,137          358,724          569,680       846,717
 Long-term debt (including current portion)....         16,842           24,057           39,203           89,128       348,900
 Divisional equity.............................        137,315          157,192               --               --            --
 Shareholders' equity..........................             --               --          189,852          252,306       261,812
</TABLE>
-------------------------------

(1)     Net income and earnings per share have not been presented for 1996 and
        1997 because interest and income taxes could not be segregated from our
        predecessor company. See Note 8 to the consolidated financial
        statements.

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

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



EXCHANGE RATES

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

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

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

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

B.      CAPITALIZATION AND INDEBTEDNESS

        Not applicable.

C.      REASONS FOR OFFER AND USE OF PROCEEDS

        Not applicable.


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<PAGE>   7


D.      RISK FACTORS

RISKS RELATING TO DOING BUSINESS IN BRAZIL

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

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

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

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

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

        The Brazilian economy may be adversely affected by changes in the
relationship between Brazilian federal and state governments. In January 1999,
the state of Minas Gerais suspended its payments to the federal government on
approximately R$18.3 billion of debt. Shortly after, the state of Rio Grande do
Sul obtained an injunction permitting it to make its debt payments into an
escrow account pending resolution of the request by seven states to renegotiate
their refinancing agreements with the government. After the federal government
announced that it could no longer guarantee state obligations to international
financial institutions, the World Bank suspended loans to the states of Minas
Gerais and Rio Grande do Sul.

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

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

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

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

        As a result of economic instability in Brazil in late 1998 and early
1999 resulting in large part from the Asian and Russian crises, the trading band
was abandoned and the real was allowed to float freely. This resulted in



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<PAGE>   8

a significant devaluation of the real against the U.S. dollar. Since January 1,
1999 the real/U.S. dollar exchange rate has ranged from a low of R$1.21 per
U.S.$1.00 on January 4, 1999 to a high of R$2.16 per U.S.$1.00 on March 3,
1999. On June 27, 2001, the rate was R$2.3320 per U.S.$1.00.

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

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

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

RISKS RELATING TO THE TELECOMMUNICATIONS INDUSTRY AND OUR BUSINESS

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

        The wireless industry is experiencing significant change. This includes
the increasing pace of digital upgrades in existing analog wireless systems,
evolving industry standards, ongoing improvements in the capacity and quality of
digital technology, shorter development cycles for new products, and
enhancements and changes in the end-user needs and preferences. There is
uncertainty as to the pace and extent of growth in customer demand, as well as
the extent to which airtime and monthly recurring charges may continue to
decline. Also, alternative technologies may develop for the provision of
services to customers that are superior to what we are able to provide. We
cannot assure you that technological developments will not materially adversely
affect us.

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

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

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

        The growth of Norte Brasil Telecom S.A., which we refer to as "NBT," the
Band "B" cellular operator which began operations in our region in October 1999,
has resulted in the gradual reduction of our market share, which was 75% at
December 31, 2000. Increasing competition from NBT and new entrants will
continue to adversely affect our market share and our margins. Our ability to
compete successfully will depend on marketing and on our ability to anticipate
and respond to competitive factors affecting the industry, including new
services that


                                       5
<PAGE>   9


may be introduced, changes in the consumer preferences, demographic trends,
economic conditions and discount pricing strategies by competitors. Though the
introduction of competition into our industry is relatively recent, it is
substantial and has already pushed us to adjust our marketing strategies. In
particular, we have had to subsidize the cost of handsets to our subscribers in
response to a similar strategy by our Band B competitor. We cannot predict which
of many possible factors will be important to maintain our competitive position
or what expenditures will be required to develop and provide such technologies,
products or services.

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

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

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

Regulatory developments could hurt our business

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

Use of hand-held phones may pose health risks

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

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

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

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

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



                                       6
<PAGE>   10

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

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

RISKS RELATED TO OUR SECURITIES

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

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

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

        Brazilian securities market is substantially smaller, less liquid and
more volatile than major securities market in the United States. This may
substantially limit the ability to sell the preferred shares underlying our ADSs
at a price and time at which a holder wishes to do so. The Sao Paulo Stock
Exchange, which is the principal Brazilian stock exchange, had a market
capitalization of approximately U.S.$225 billion as of April 30, 2001 and an
average monthly trading volume of approximately U.S.$9.0 billion for 2000. In
comparison, the New York Stock Exchange had a global market capitalization of
U.S.$17.0 trillion as of December 31, 2000 and an average monthly trading volume
of approximately U.S.$43.9 billion for 2000.

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

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

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



                                       7
<PAGE>   11

ITEM 4.INFORMATION ON THE COMPANY

A.      HISTORY AND DEVELOPMENT OF THE COMPANY

THE REGISTRANT AND ITS OPERATING SUBSIDIARIES

        We provide cellular telecommunications services in a region comprising
the Brazilian states of Para, Amazonas, Maranhao, Amapa, and Roraima under
concessions granted by the federal government of Brazil. Cellular
telecommunications services were first offered by one of our predecessor
companies in the state of Maranhao in April 1994.

        The Registrant was incorporated as a sociedad anonima with an
indefinitive term on February 28, 1998 under the laws of the Federative Republic
of Brazil under the name "Tele Norte Celular Participacoes S.A."

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

        The following table presents the contribution made by each subsidiary to
our net operating revenues and net income for the year ending December 31, 2000
and our shareholding in each subsidiary at December 31, 2000.

<TABLE>
<CAPTION>
                                          % OF NET
                                          OPERATING        % OF SHARE        % OF VOTING
                                          REVENUES           CAPITAL            STOCK
                                          ---------         ---------        ------------
<S>                                      <C>                <C>              <C>
SUBSIDIARY OF REGISTRANT
----------------------------------
Amazonia Celular S.A. - Maranhao.          22%                75.0%            89.8%

SUBSIDIARIES OF TELMA CELULAR S.A:
----------------------------------
Amazonia Celular S.A. - Para.....          40%               100.0%           100.0%
Amazonia Celular S.A. - Amazonas.          30%               100.0%           100.0%
Amazonia Celular S.A. - Amapa....           5%               100.0%           100.0%
Amazonia Celular S.A. - Roraima..           3%               100.0%           100.0%
</TABLE>

        In May 2000, we announced a plan to merge our four indirect subsidiaries
into Amazonia Celular S.A. - Maranhao. Our planned consolidation is contingent
upon the approval of Anatel and the Brazilian Securities Commission (Comissao de
Valores Mobiliarios). We believe that the consolidation of our operations into a
single integrated structure will result in cost efficiencies and an improved
quality of service.

        We estimate that the reduction in administrative costs, which will
result from the consolidation will be approximately R$1 million for the first
year following the consolidation. We also estimate that the cost savings from
the consolidation and standardization of our operations will be approximately
R$43 million at present net value.

        Substantially all of the Registrant's assets other than cash and cash
equivalents consist of shares in its subsidiaries. The Registrant relies almost
exclusively on dividends from its subsidiaries to meet its needs for cash,
including cash to pay dividends to its shareholders.

HISTORICAL BACKGROUND

        Prior to the incorporation of Telebras in 1972, there were more than 900
telecommunications companies operating throughout Brazil. Between 1972 and 1975,
Telebras and its operating subsidiaries, which we refer to collectively as the
"Telebras System," acquired almost all the other telephone companies in Brazil
and thus came to have a monopoly over the provision of public telecommunications
services in almost all areas of the country.

        Beginning in 1995, the federal government undertook a comprehensive
reform of Brazil's telecommunications regulatory system. In July 1997, Brazil's
National Congress adopted the General Telecommunications Law (Lei Geral de
Telecomunicacoes), which provided for the establishment of a new regulatory
framework, the introduction of competition and the privatization of Telebras.
The General Telecommunications Law established an independent regulatory agency
called Agencia Nacional de Telecomunicacoes - ANATEL, which we refer to as
"Anatel."



                                       8
<PAGE>   12

        In January 1998, in preparation for the restructuring and privatization
of the Telebras System, the cellular telecommunications operations of Telebras's
operating subsidiaries were spun off into separate companies. In May 1998,
Telebras was restructured to form, in addition to Telebras, twelve new holding
companies by means of a procedure under Brazilian corporate law called cisao, or
split-up. Virtually all the assets and liabilities of Telebras, including the
shares held by Telebras in the operating companies of the Telebras System, were
allocated to the new holding companies.

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

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

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

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

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

        Our capital expenditures in 1998 were approximately R$32 million. We
invested to expand and increase the capacity of our mobile telecommunications
network.

        In 1999, we spent R$151 million in capital expenditures. We invested in
the expansion and improvement of our network. In particular, we commenced the
digitalization of our network. We also directed substantial investments to
launch prepay services.

        In 2000, our capital expenditures were R$187 million. Approximately
R$169 million was invested on our network, mainly to increase traffic capacity
to absorb the large increase in customer base. Investments were also made to
expand coverage to new municipalities and roads and to launch new services such
as Internet access and SMS.

        In 2001, we plan to spend approximately R$200 million (excluding the
completion of projects began in 2001) primarily to:

                -       increase the capacity of our network through the
                        increase of the capacity of our switches;

                -       continue the digitalization of our network;

                -       expand our coverage to include 17 new towns through the
                        installation of approximately 105 new cell sites; and

                --      improve the quality of service by repositioning cell
                        sites, replacing equipment and installing amplifiers.

        Through April 2001, we have spent approximately R$46 million of our
projected capital expenditures.

B.      BUSINESS OVERVIEW

OUR REGION

        Our region covers an area of approximately 3,532,000 square kilometers,
representing approximately 41% of Brazil's area. Its population of approximately
14.8 million inhabitants represents approximately 9.0% of the population of
Brazil. Our region has 18 metropolitan areas with populations in excess of
100,000 people, including



                                       9
<PAGE>   13

the cities of Belem, Manaus, Sao Luis, Boa Vista and Macapa. During 2000, our
region generated approximately 4.4% of Brazil's gross domestic product. At
December 31, 2000, we had 755,665 subscribers.

        The map below shows the location of our region within Brazil.

                           [MAP OF BRAZIL GRAPHIC]

                                       10
<PAGE>   14

        The following table presents the population, gross domestic product and
per capita income statistics for each state in our region at the dates and for
the year indicated.

 <TABLE>
 <CAPTION>
                                           AT DECEMBER 31, 2000     YEAR ENDED DECEMBER 31, 2000
                                      ----------------------------  ----------------------------
                                      POPULATION     % OF BRAZIL'S    % OF BRAZIL'S   PER CAPITA
 STATE                                (MILLIONS)(1)  POPULATION(1)        GDP(2)       INCOME(2)
-----------------------------------  -------------- --------------  --------------- ------------
<S>                                   <C>            <C>             <C>             <C>
Maranhao.........................          5.4            3.3             0.8         R$1,348
Para.............................          6.0            3.7             1.7           2,698
Amazonas.........................          2.7            1.7             1.7           5,990
Amapa............................          0.4            0.3             0.2           3,565
Roraima..........................          0.3            0.2             0.1           2,862
                                       --------       --------        --------        --------
Region...........................         14.8            9.2             4.5           2,293
                                       ========       ========        ========        ========
</TABLE>

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

(2)     Data for 1998 as published by the Central Bank of Brazil.


        Our business, financial condition, results of operations and prospects
depend in part on the performance of the Brazilian economy and the economy of
our region, in particular. See "Item 5--Operating and Financial Review and
Prospects--Brazilian economic environment" for a description of the Brazilian
economic conditions.

OUR SERVICES

General

        We offer cellular telecommunications service to our subscribers through
a variety of rate plans. We offer analog and, commencing in late 1999, digital
cellular services. At December 31, 2000, we had a total of 755,665 subscribers.
Of this number, 46.1% were contract subscribers and 53.9% were prepay
subscribers.

        We offer internet-related services such as online banking,
short-messaging, e-mail, customized news and interconnectivity for notebooks and
palm pilots. We also offer value-added services such as voicemail, call
forwarding, call waiting, call conferencing, caller line identification and
three-way calling. In addition, we provide special services such as customized
telephone sounds and display of icons and convenience service such as weather
forecast, locksmiths, plumbers, etc., each through the mobile handset. We also
began to sell cellular telephones in 1999. We do not expect these sales to be a
significant component of our revenues.

Contract subscribers

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

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

Seasonality

        Our business is subject to seasonality to some degree. Our traffic tends
to be higher in December because of the Christmas holidays and in July, the
driest month of the year, because subscribers tend to vacation then at beaches
within our region. Subscriber additions tend to be higher in December and lower
in July because of the same reasons.

Prepay customers

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



                                       11
<PAGE>   15

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

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

Contract churn

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

        Our average monthly contract churn in 1998, 1999 and 2000 was 1.3%, 1.7%
and 2.4%, respectively. The significant increase in contract churn in 2000 as
compared to 1999 was due to the increase in competition in our region and
continuing economic problems in Brazil that have resulted in higher unemployment
and a decrease in salaries in real terms. With the anticipated growth of
competition, we may experience increased contract churn.

Quality of service

        We have experienced at times quality of service problems, including busy
circuits, lack of system availability and dropped calls. In 2000, the average
"all circuits busy rate" (as a percentage of calls attempted) was 2.2%, the
average system availability on first call attempted was 93.4% and the average
dropped call rate was 1.4%. At present, we are not experiencing any significant
quality of service problems and exceed most of the quality of service
requirements established by Anatel. See "--Regulation of the Brazilian
telecommunications industry--Obligations of telecommunications
companies--Quality of service" for a description of these obligations.

Roaming

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

Internet-related services

        In December 2000, we became the first company in Brazil, together with
our affiliate, Telemig Celular Participacoes S.A., to provide internet access
through cellular telephones using TDMA. We invested approximately R$1.2 million
in this project. We utilized a Wireless Application Protocol (WAP) platform from
Ericsson, Circuit Switched Data technology from Nortel and Nokia handsets.

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

NETWORK AND SUBSCRIBER DATA

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

<TABLE>
<CAPTION>
                                                                 1998        1999        2000
                                                               -------     -------     --------
<S>                                                            <C>         <C>         <C>
Cellular lines in service at year-end:
  Contract subscribers....................................     218,600     265,600     347,953
  Prepay subscribers......................................          --      78,000     407,712
                                                              --------    --------    --------
                                                               218,600     343,600     755,665
</TABLE>



                                       12
<PAGE>   16

<TABLE>
<CAPTION>
                                                                 1998        1999        2000
                                                               -------     -------     --------
<S>                                                            <C>         <C>         <C>
Net subscriber growth during year.........................        5.2%         57%        120%
Estimated population of our region at year-end (millions)
  (1).....................................................        14.2        14.7        14.8
Estimated covered population at year-end (millions) (2)...         7.4         8.2         8.8
Percentage of population covered at year-end (3)..........       50.3%       56.9%       61.0%
Penetration at year-end (4)...............................       1.49%        2.5%        5.2%
Average monthly incoming minutes of use per subscriber:
  Contract subscribers....................................         108         117         110
  Prepay subscribers......................................          --          73          88
Average monthly outgoing minutes of use per subscriber:
  Contract subscribers....................................         108         111         118
  Prepay subscribers......................................          --          23          18
Average monthly revenues per subscriber: (5)
  Contract subscribers....................................        R$93        R$83        R$81
  Prepay subscribers......................................          -           32          27
                                                               -------     -------     -------
    Total average.........................................        R$93        R$81        R$59
Cost of acquisition per subscriber (6)....................        R$23       R$149       R$125
</TABLE>

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

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

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

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

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

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

(6)     The significant increase in the cost of acquisition per subscriber in
        1999 as compared to 1998 reflects a reduction in activation fees from
        R$330 to R$49 for digital services and R$99 for analog services. This
        reduction was made in anticipation of competition.

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

SOURCES OF REVENUE

General

        We generate revenue from:

                -       usage charges, which include airtime charges for
                        outgoing calls and roaming and other similar charges,

                -       monthly subscription charges,

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

                -       sales of handsets, and

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


       Our rates are subject to the approval of Anatel.


                                       13
<PAGE>   17


Subscriber rates

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

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

        Our region is divided into 65 registration areas. The lowest base rate
per minute, which we refer to as a "VC1" rate, applies to calls made by a
subscriber in its registration area to persons in the same registration area.
Until May 9, 1999, calls from one registration area to another within our region
were charged at a higher rate, which we refer to as "VC2" rate. On May 9, 1999,
the VC2 and VC1 rate were made to be the same for mobile-to-mobile calls.
Beginning in February 2000, the VC2 and VC1 rates are the same for all calls
except under the Basic plan.

        Calls from our region to persons outside our region are billed at the
highest rate, which we refer to as a "VC3" rate. When a subscriber makes or
receives a call while outside our region, a per-call surcharge known as "AD" is
applicable. When a subscriber receives a call while outside his or her home
registration area, the subscriber also pays an additional rate per minute, which
we refer to as "DSL1", if the subscriber is located within our region, or a
higher rate, which we refer to as "DSL2" if the subscriber is located outside
our region.

        Airtime service charges are discounted 30% for calls made on Saturdays,
Sundays and national holidays and for calls made from 7 PM to 8 AM, Monday
through Friday. A 30% surcharge is imposed on VC1 calls made to lines of other
cellular service providers.

        In February and October 2000, we introduced several new plans and
modified existing ones in order to better address different market segments. The
following table sets forth the average rates for these plans as of February,
2001.

          RATE INFORMATION FOR OUR INDIVIDUAL CONTRACT SERVICE PLAN(1)

<TABLE>
<CAPTION>
                                                                                                                 FALE
                                                  FALE         FALE        FALE         FALE        FALE         MAIS      FALE MAIS
                                     BASIC       MAIS 1       MAIS 2      MAIS 3       MAIS 4      MAIS 5       JOVEM       ESPECIAL
                                     -----       ------       ------      ------       ------      ------       -----       --------
<S>                                 <C>         <C>          <C>        <C>         <C>         <C>            <C>         <C>
Activation fee (2)...............    100           0            0           0             0           0            0           0
Monthly subscription fee.........     33.88       26.68        43.11       67.74        101.62      136.51        17.45       33.88
Airtime charges per minute:
VC1..............................      0.43        0.40         0.37        0.34          0.34        0.34         0.68        0.34
VC2..............................      0.81        0.52         0.52        0.34          0.34        0.34         0.73        0.34
VC3..............................      0.92        0.83         0.83        0.83          0.83        0.83         1.23        0.83
DSL1.............................      0.41        0            0           0             0           0            0.34        0
DSL2.............................      0.46        0.52         0.52        0.34          0.34        0.34         1.23        0.34
AD (per call) ...................      0.77        0.41         0.41        0.34          0.34        0.34         0.41        0.34
Minutes free of time charges ....      0          26           60         130           260         400            0          33
</TABLE>
----------------
(1)     The rates presented are in reais and are the base rates charged by us,
        without giving effect to any promotional discounts offered from time to
        time, and include any applicable value-added taxes.

(2)     For digital services. Activation fee is R$49.00 reais for analog
        services.





                                       14
<PAGE>   18

             RATE INFORMATION FOR OUR CORPORATE AND PREPAY PLANS(1)

<TABLE>
<CAPTION>
                                                                     EMPRESA
                                                    EXECUTIVOPRO       PRO           PREPAY
                                                    ------------     -------         ------
<S>                                                 <C>            <C>            <C>
Activation fee ..................................        0              0              0
Monthly subscription fee ........................       33.88          10.70           0
Airtime charges per minute:
VC1..............................................        0.30           0.30           0.76
VC2..............................................        0.30           0.30           0.76
VC3..............................................        0.70           0.70           1.02
DSL1.............................................        0              0              0
DSL2.............................................        0.55           0.55           1.02
AD (per call) ...................................        0.33           0.33           1.02
Minute free of time charges .....................         --             --            0
</TABLE>
----------------

(1)     The rates presented are in reais and are the base rates charged by us,
        without giving effect to any promotional discounts offered from time to
        time, and include any applicable value-added taxes.

Fees for internet-related services

        I.WAP. Our monthly fee for i.wap, our internet access service, is R$9.00
(except for the state of Para, where it is R$9.68). In addition, there is a per
minute charge for every minute in excess of thirty minutes equal to the normal
rate of the plan of the specific subscriber.

        I.ONLINE. This is a news, short-messaging and e-mail service through the
cellular handset. The subscriber chooses the type and amount of news it wants to
receive and pays a single rate based on the package chosen. The receipt of
messages via internet or e-mail is included with the package. The following are
the applicable rates (except in the State of Para where there is a 5% increase):

<TABLE>
<CAPTION>
                 TYPE OF PACKAGE                        CONTRACT              PREPAY
       ---------------------------------------       -------------------  --------------
<S>                                                  <C>                  <C>
       Kit 1 (2 news items per day)                   R$3.90 per month     R$0.19 per day
       Kit 2 (10 news items per day)                  R$5.90 per month     R$0.29 per day
       Kit 3 (unlimited number of news items)         R$8.90 per month     R$0.39 per day
</TABLE>

        I.MENSAGEM. This is a short-messaging and e-mail service through the
cellular handset. The rate charged is R$0.19 for each message sent (except in
the state of Para, where the rate is R$0.21). There is no charge for messages
received.

        I.NET. This service permits the subscriber to connect to its notebook or
palm pilot through its mobile handset. The subscriber pays a per minute fee
equal to the normal rate of the plan of the specific subscriber.

Roaming fees

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

Network usage fees

        We earn revenues from any call, cellular or wireline, originating with
another service provider and terminating on a cellular telephone within our
region. We charge the service provider from whose network the call originates a
network usage fee for every minute our network is used in connection with the
call. The average network usage fee per minute we charged to other service
providers was R$0.21 in 1996 and R$0.19 in 1997, 1998



                                       15
<PAGE>   19

and 1999, respectively, net of value-added taxes. This fee was increased to
R$0.22 in January 2000, and R$0.27 in November 2000.

SALES AND MARKETING

General

        We divide our market into categories corresponding to the amount of
cellular telephone usage. Anatel's regulations require that cellular
telecommunications service be provided to all individual applicants, regardless
of income level, in the order in which applications are received. In order to
assist in managing the risk of payment defaults, we conduct credit checks on our
customers. We can interrupt service if a customer fails to make timely payments.
See "--Billing and collection."

Sales network

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

        COMPANY STORES. We provide telecommunications services through
company-owned stores located in metropolitan centers. Such stores are effective
in building image and brand awareness through the exclusive provision of our
telecommunications services. Company stores also provide standard levels of
service, greater accountability and consistent customer service. Although the
majority of sales at company stores consists of subscriptions for cellular
telecommunications services, the stores also sell handsets, generally for prices
at or near cost, in connection with the sale of both contract and prepay
subscriptions. At December 31, 2000, we had 9 company stores, as well as 3
mobile stores.

        INDEPENDENT DISTRIBUTORS. We select our independent distributors based
on their creditworthiness and an assessment of their premises. All of our
independent distributors receive basic training relating to the activation of
cellular telecommunications service. Independent distributors receive a
commission that varies from R$60 to R$110 for each new contract customer they
sign up for service, provided that the customer retains and pays for service for
at least three months. The amount of the commission varies depending on the plan
that is subscribed to. In addition, independent distributors receive a mark-up
margin on each sale of a handset and prepay card kit for use by prepay
subscribers.

        At December 31, 2000, we had 352 independent distributor outlets,
located primarily in metropolitan centers. Approximately 90% of the sales
generated by our independent distributors are made by distributors with whom we
have exclusivity arrangements. Our exclusive independent distributors include
well-known retailers and supermarket claims with high quality points of sale.
All exclusive marketing distributors receive marketing support and, in some
cases, financing from us to assure that they maintain desirable standards of
service. The Company's management believes that the quality and breadth of the
exclusive independent distribution network gives the Company an advantage over
its competitors.

        RETAILERS. We make prepay cards available at approximately 7,000 points
of sale. We distribute through 29 retailers, which include national and regional
franchises and chains, such as Yamada.

        In early 1999, we introduced the brand "Amazonia Celular." Amazonia
Celular is now the brand name under which the cellular telecommunications
services of all of our subsidiaries are marketed. Our internet-related services
are marketed under the "i.amazoniacelular" brand name.

Customer service

        We run a centralized call center, located in Belem, state of Para. We
provide our subscribers with 24-hour, seven-day customer service to answer
inquiries and resolve problems throughout our region. At December 31, 2000, we
had 203 service attendants.

                                       16
<PAGE>   20

        Through our customer service attendants, we are able to provide
immediate service to customers for requests such as reactivation, addition of
value-added services and number changes, among others. During 2000, our customer
service team answered, on average, in excess of 368,000 calls per month, with an
average duration of 160 seconds. Our customer service department also answered
an average 1,043 letters and e-mails per month.

BILLING AND COLLECTION

        Our billing system, which was developed by LHS Communication System
Incorporated and has been in operation since 1999, has four main functions:

                -       subscriber registration,

                -       subscriber information management,

                -       accounts payable management, and

                -       billing and collection.

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

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

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

        Our provisions for doubtful accounts were 5.6%, 16.5%, 10.2% and 6.9% of
service revenues in 1997, 1998, 1999 and 2000 respectively. The increase in the
level of doubtful accounts from 1997 to 1998 is due primarily to an increase in
the number of customers with relatively lower income, an increase in
subscription fraud and adverse economic conditions in Brazil. In the fourth
quarter of 1998, we put in place new credit and collection policies and an
anti-fraud system in order to reduce the level of bad debt. As a result of these
measures, there was a significant decrease in bad debt in 1999 and 2000.

        We experienced a problem with the software of our billing system from
October 1999 through March 2000, which resulted in the understatement of airtime
charges of a portion of our subscribers. This problem, which did not have a
material adverse effect on our financial condition, has since been resolved.

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

OUR NETWORK

        At December 31, 2000, our cellular telecommunications network covered
approximately 61% of our region's population. We continue to expand our cellular
telecommunications network to cover as broad a geographical area as is
economically feasible in order to meet consumer demand. Under our concessions,
we have obligations concerning network expansion. See "--Regulation of the
Brazilian telecommunications industry--Obligations of telecommunications
companies," for a description of these obligations.

        We increase the capacity and improve the quality of our cellular
telecommunications network by building new base stations and adding channels to
existing base stations. This development is carried out in response to projected
subscriber demand. We believe that our cellular telecommunications network will
require further development to meet increasing demand for cellular
telecommunications services in and around our region's major metropolitan areas.
To increase capacity, in 2000, we installed a new Ericsson MSC 5000 switch. See
"--Quality of service."



                                       17
<PAGE>   21

        At December 31, 2000, our cellular telecommunications network consisted
of seven cellular switches, three mini-switches, 321 cell sites and five
repeaters. Our seven switching centers are located in Belem (two), Manaus (two),
Sao Luis, Macapa and Boa Vista. Since then, we have continued to build out our
network by installing approximately 20 new cell sites. We plan to install
approximately 105 new cell sites during 2001.

        We centralized our network administration system in the City of Belem,
where we installed a network operating center (NOC). This system is capable of
monitoring the base stations, switching centers and all critical network
operational parameters in real time. We analyze the performance data generated
by this system in order to make the operating adjustments and capital
expenditures necessary to maintain and enhance network operations. In addition,
technicians operating this system have the ability to rapidly evaluate and
respond to technical difficulties in network operations.

        In 1999, we digitalized our cellular network using TDMA technology. We
also implemented our own digital transmission systems in the cities of Belem,
Manaus and Sao Luis, providing a significant increase in network quality, as
well as a reduction in leased line costs. In December 2000, approximately 85% of
our traffic was digital. This coverage increased to 90% in March 2001.

        We believe that digitalization offers advantages, including greater
network capacity, reduced operating costs and additional revenue through the
sale of value-added services. Digital cellular telecommunications service also
offers subscribers greater security. Digital cellular telephones are generally
more expensive than analog telephones. Following digitalization, we expanded our
coverage to meet the requirements established in our concessions and the
increasing demand for cellular service in the area.

        Ericsson Telecomunicacoes S.A. is our principal supplier of cellular
telecommunications equipment.

FRAUD DETECTION AND PREVENTION

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

        Subscription fraud occurs when a person, typically using a fictitious
identification and address, obtains cellular telecommunications service with no
intention of paying for the service and then incurs substantial charges before
the cellular operator is able to identify the fraud and terminate service. When
we discover that a receivable has been generated by a fraudulent call, we write
off the receivable.

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

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

                -       background checks of our employees,

                -       fraud awareness and prevention training, and

                -       credit checks of new customers through credit rating
                        agencies.

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

        We are also planning to implement an authentication center solution to
effectively detect and prevent fraud before it happens, without affecting our
legitimate subscribers. The authentication center prevents wireless fraud by




                                       18
<PAGE>   22

authenticating mobile stations upon registration, call origination and call
termination. The authentication operations make it possible to immediately
detect the presence of a clone with no noticeable impact to the legitimate
subscribers. The authentication center will be used first on international
roaming, given that the national network is not currently apt for this solution.

        The basis for these authentication operations is a 26-digit number
called the A-Key, which is known only to the authentication center and the
subscriber's handset. The A-Key, the electronic serial number and a random
number are used as inputs to the cellular authentication and voice encryption
algorithm that produces shared secret data. This data is used to calculate the
value compared between the handset and the authentication center during
authentication. Occasionally, a subscriber's shared secret data may need to be
updated because of a security violation, planned expiration, or routine
administrative procedure.

COMPETITION

General

        Our mobile telephony services market share in our region was 75% in
2000, as compared to 92% in 1999. This decrease is due to increased competition.
We expect our market share to decrease gradually as new competitors enter the
market and our existing competitor continues to build out its network in our
region.

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

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

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

        The entry of new competitors may have a material adverse effect on our
business, financial condition, results of operations or prospects. Any adverse
effects on our results and market share from competitive pressures will depend
on a variety of factors that cannot now be assessed with precision and that are
beyond our control. These factors include, among others, the identity of the
competitors, their business strategies and capabilities, prevailing market
conditions at the time, the regulations applicable to new entrants and us and
the effectiveness of our efforts to prepare for increased competition. One or
more new competitors may have technical or financial resources greater than
ours.

Band B competition

        The Band B license covers a geographic region similar to the region
covered by our concession. The license to provide mobile telephony services

        The concession to provide cellular telecommunications services in our
region on Band B was granted to Norte Brasil Telecom, which we refer to as
"NBT," a direct subsidiary of Tele Centro Oeste Celular Participacoes S.A. NBT
paid R$60.5 million for the concession and commenced to provide digital cellular
telecommunications service based on the TDMA standard in October 1999.

        The rights and obligations of NBT under its concessions are
substantially the same as ours under our concession. However, our concessions
expire in 2009 and NBT's licenses expire in 2013. Both may be renewed at the
discretion of Anatel for additional 15-year periods. NBT, a company ultimately
owned by Splice do Brasil, an industrial company, currently provides cellular
telecommunications services also in the states of Goias, Mato Grosso do Sul,
Mato Grosso, Rondonia, Acre, Tocantins and the Federal District.



                                       19
<PAGE>   23

Band C competition

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

Band D competition

        The Brazilian government held an auction in February 2001 for the Band D
frequency range for PCS covering a geographic region that included our region.
Telemar Participacoes S.A., a holding company that owns the principal wireline
service provider in our region, won the auction. Telemar is expected to commence
operations in our region in early 2002.

Band E competition

        The Brazilian federal government held an auction in March 2001 for the
Band E frequency range for PCS covering a geographic region that included our
region. Telecom Italia Mobile, which is a mobile telephony operator in other
parts of Brazil, won the auction. Telecom Italia Mobile is expected to commence
operations in our region in early 2002.

Other competition

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

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

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

        Satellite services, which provide nationwide coverage, are available in
Brazil. Although satellite services have the benefit of covering a much greater
area than cellular telecommunications services, they are considerably more
expensive than cellular telecommunications services and do not offer comparable
coverage inside buildings. Currently, we do not plan to offer mobile satellite
services, other than pursuant to a roaming arrangement with a satellite service
provider, or PCS services, although we may consider doing so in the future.

OPERATING AGREEMENTS

Interconnection agreements

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

        We have entered into interconnection agreements with NBT, our Band B
competitor, with Embratel and Intelig, two long distance carriers, with Vesper,
a wireline operator, and with our predecessor companies. The terms of these
interconnection agreements include provisions for the number of connection
points, the method by which signals must be received and transmitted and the
costs and fees of interconnection. In addition, network usage charges are
assessed based on the terms of these agreements. These agreements do not have
termination provisions; we believe that Anatel would not allow a termination
prior to the expiration and non-renewal of a concession to


                                       20
<PAGE>   24


avoid possible potential disruptions in telecommunications. See "--Regulation of
the Brazilian telecommunications industry--Obligations of telecommunications
companies--Interconnection."

Roaming agreements

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

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

REGULATION OF THE BRAZILIAN TELECOMMUNICATIONS INDUSTRY

General

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

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

Concessions and authorizations

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

        Pursuant to the Minimum Law, the Band A and Band B service providers
have been granted concessions. Each concession is a specific grant of authority
to provide cellular telecommunications services conditioned on compliance with
requirements contained in the applicable list of obligations appended to each
concession. If a cellular service provider wishes to offer any
telecommunications service other than the cellular telecommunications service
authorized by its concession, it may apply to Anatel for a license to offer such
other services.

        Each concession has been granted for an initial period of 15 years and
may be renewed at the discretion of Anatel for further periods of 15 years if
the list of obligations has been met. Our concessions to provide cellular
telecommunications services in the states of Para, Amazonas, Maranhao, Amapa and
Roraima expire in March 2009, August 2009, April 2009, May 2009 and July 2009,
respectively. These periods are shorter than 15 years because they each
represent the residual period of the original concession granted to our
predecessor companies.

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

        Beginning in January 1, 2000, Anatel has held auctions for
authorizations to use Bands C, D and E frequency ranges for PCS. These
authorizations differ from concessions in that the authorizations are for an


                                       21
<PAGE>   25

indeterminate time period and Anatel reserves the right to cancel them at
anytime. However, the frequency designation is for a period of 15 years.

Obligations of telecommunications companies

        GENERAL. As described below, we must comply with certain requirements
relating to quality of service, network expansion and interconnection. Anatel
does not currently require network operators to unbundle network elements and
services, although Anatel has stated that it plans to review the issue on a
regular basis and may require unbundling in the future. In an unbundled regime,
each network operator is required to provide a detailed list of network services
and elements which may be purchased separately by a party requesting
interconnection.

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

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

        Our quality of service obligations require:

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

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

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

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

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

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

        We must also provide cellular telecommunications service to
municipalities in our region in accordance with the following requirements:

<TABLE>
<CAPTION>
                                                         MINIMUM COVERAGE REQUIRED
                                                               BY NOVEMBER 4,
                                           --------------------------------------------------
POPULATION OF MUNICIPALITY (1)                  1999          2000         2001         2002
                                           --------------------------------------------------
<S>                                          <C>             <C>            <C>          <C>
30,000 to 50,000......................          --            --            --           70%
50,000 to 75,000......................          --            --            80%          --
75,000 to 100,000.....................          --            90%           --           --
100,000 to 200,000....................         100%           --            --           --
Maximum average installation waiting
time (in days) (2)....................         120            30            15            5
</TABLE>
-------------------

(1)     For service to be deemed to be offered in any municipality, service must
        be available to at least 30% of the population.

(2)     Time between request for service and connection in areas with cellular
        telecommunications service.

        We have met or exceeded our network expansion obligations for the period
1998-2000 and at present are in compliance with our quality of service
obligations. We expect that we will be in compliance with our obligations at all
times.

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

                                       22
<PAGE>   26

        INTERCONNECTION. All telecommunications service providers are required
to provide interconnection upon request to any party that provides public
telecommunications services, with the exception of competitors within the same
cellular region. The terms and conditions of interconnection are to be freely
negotiated between parties, subject to a price cap established by Anatel. If a
company offers any party an interconnection tariff below the price cap, it must
offer that tariff to any other requesting party on a nondiscriminatory basis. If
the parties cannot agree on the amount of the interconnection tariff, Anatel
will act as the final arbiter.

        Beginning in 2001, Anatel now requires network operators to permit
co-location of equipment. Co-location means that a network operator permits
another party to place its switching equipment in or near the local exchange of
the network operator and to connect to the network at this location. Co-location
is currently a matter for negotiation between interested parties.

Rate regulation

        Our concessions provide for a price-cap mechanism to set and adjust
rates on an annual basis. The cap is a maximum weighted average price for a
basket of services. The basket includes the services in the Basic service plan,
including monthly subscription fee, VC1, VC2, VC3, DSL1, DSL2 and AD charges, as
well as the network usage fees.

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

        The weighted average rate for the entire basket of services may not
exceed the price cap, but the rates for individual services within the basket
may be increased. We may increase the rate for any individual service by up to
20%, subject to a downward adjustment for inflation effects already captured in
the annual upward adjustments of the overall price cap for the basket, so long
as it adjusts other prices downward to ensure that the weighted average rate
does not exceed the price cap.

        Other telecommunications companies wishing to interconnect with and use
our network must pay a network usage fee. The network usage fee is a flat fee
charged per minute of use which represents an average charge for a basket of
network elements and services. The network usage fee charged by Band A service
providers is subject to a price cap set by Anatel. The price cap for the network
usage fee varies from company to company based on the underlying cost
characteristics of each company's network.

C.      ORGANIZATIONAL STRUCTURE

        The Registrant is a company incorporated on February 28, 1998 under the
laws of the Federative Republic of Brazil. The Registrant owns 75% of the share
capital and 89.8% of the voting stock of Amazonia Celular S.A. - Maranhao, a
cellular service operator in the state of Maranhao.

        Amazonia Celular S.A. - Maranhao is also the sole owner of Amazonia
Celular S.A. - Para, Amazonia Celular S.A. - Amazonas, Amazonia Celular S.A. -
Amapa and Amazonia Celular S.A. - Roraima, each a cellular service operator in
the states of Para, Amazonas, Amapa and Roraima, respectively.

D.      PROPERTY, PLANT AND EQUIPMENT

        Our principal physical properties consist of transmission equipment,
switching equipment and base stations. Our headquarters are located in Brasilia
and we lease approximately 3,200 square meters of office space in the cities of
Belem, Macapa, Sao Luiz and Boa Vista and own approximately 2,480 square meters
of office space in Manaus.

        We also lease the sites where our cellular telecommunications network
equipment is installed. At December 31, 2000, we had seven cellular switches in
Belem, Maraba, Sao Luiz, Manaus, Macapa and Boa Vista, 321 cell sites and five
repeaters, all of which were located on land leased by us. Most of these leases
are renewable every five years. In addition, we lease approximately 390 retail
stores throughout the region.



                                       23
<PAGE>   27

        Our switches have a total capacity of approximately 1.4 million
subscribers, assuming an average traffic volume higher than what the Company has
experienced to date. In terms of processors our capacity is approximately 1.9
million subscribers.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

PRESENTATION OF FINANCIAL INFORMATION

        On May 22, 1998, in preparation for the privatization, the Telebras
System was restructured to form twelve new holding companies, including the
Registrant. The restructuring of the Telebras System was accomplished by means
of a procedure under Brazilian law called cisao or split-up. Virtually all the
assets and liabilities of Telebras were allocated to the new holding companies.
In the breakup, certain assets and liabilities of Telebras, including 80.3% of
the total share capital of Amazonia Celular S.A. - Amazonas, 86.9% of Amazonia
Celular S.A. - Roraima, 90.6% of Amazonia Celular S.A. - Amapa, 69.1% of
Amazonia Celular S.A. - Para and 66.8% of Amazonia Celular S.A. - Maranhao were
transferred to us.

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

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

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

CONSOLIDATION OF OPERATIONS WITH AFFILIATE

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

PREPAY SUBSCRIBERS

        Since the inception of our prepay plan in June 1999, the number of
prepay subscribers has grown to represent approximately 53.9% of our total
subscribers at December 31, 2000. A prepay subscriber can activate a cellular
phone, purchase a prepaid card with a fixed amount of credit to be used over a
period of up to 180 days and credit the prepaid card value to the subscriber's
account either at a customer service center or by a phone call. The customer
will have access to cellular service until the credit is fully used or otherwise
until the card expires at the end of 180 days, whichever occurs first.



                                       24
<PAGE>   28

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

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

COMPOSITION OF OPERATING REVENUES AND EXPENSES

Revenues

        We generate operating revenues from:

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

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

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

                -       activation fees, which are one-time sign-up charges paid
                        to obtain cellular telecommunications service;

                -       sales of handsets; and

                -       other services and charges.

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

        We began to sell handsets in the second quarter of 1999. Because of
competitive pressures, we have had to subsidize the cost of handsets to our
subscribers. This has a negative effect on our operating margin.

Operating expenses

        Operating expenses consist of cost of services, selling, general and
administrative expenses, bad debt expense, depreciation and, in 1998, a charge
for impairment of certain analog transmission equipment. Cost of services
consists primarily of fixed costs such as leased line charges, site rental and
network maintenance, including overhead, as well as variable costs such as
certain interconnection charges. Selling, general and administrative expenses
consist primarily of salaries, wages and related benefits for administrative
personnel, advertising and promotional expenses and other overhead expenses.

TAXES ON TELECOMMUNICATIONS SERVICES

        The cost of telecommunications services to subscribers includes a
variety of taxes. The average rate of all such taxes, as a percentage of our
gross operating revenues, was approximately 20.5% in 1998, 21.5% in 1999 and
20.5% in 2000. The principal taxes are a state value-added tax, the Imposto
sobre Circulacao de Mercadorias e



                                       25
<PAGE>   29

Servicos, commonly known as the "ICMS," and a municipal tax or servicer, the
Imposto sobre Servicos, referred to as the "ISS". The ICMS is a tax that the
Brazilian states impose at varying rates on revenues from the sale of goods and
services, including telecommunications services. The ICMS rate in each state in
our region is 25% for domestic telecommunications services, except in Amapa,
where it was 17% until December 1999 and 25% after. The ISS is imposed on
services not subject to the ICMS and its average rate is 5%.

        Other taxes on gross operating revenues include two federal social
contribution taxes, the Programa de Integracao Social, referred to as "PIS," and
the Contribuicao para Financiamento da Seguridade Social, known as "COFINS,"
imposed on some telecommunications services at a combined rate of 3.65% of gross
operating revenues. Prior to February 1999, the combined rate of both taxes was
2.65%.
        In June 1998, the governments of the individual Brazilian states
approved an agreement to interpret existing Brazilian tax law to apply the ICMS
effective July 1, 1998 to some services to which the ICMS had not previously
been applied, including cellular activation and monthly subscription. The
agreement also provides that the ICMS may be applied retroactively to activation
services rendered during the five years before June 30, 1998. See "Item
8--Financial Information--Consolidated statements and other financial
information--Legal proceedings" for a fuller description of these developments.

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

                -       Contribution for the Fund of Globalization of
                        Telecommunication Services - "Fust"

        Fust was established by Law 9,998 of August 17, 2000, in order to
provide resources to cover the cost exclusively attributed to fulfilling
obligations for globalization of telecommunication services that cannot be
recovered with efficient service exploration or that is not the responsibility
of the concessionaire.

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

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

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

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

A.      RESULTS OF OPERATIONS

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

2000 COMPARED TO 1999

Net revenues

        Net revenues were R$480.6 million in 2000, compared to R$308.8 million
in 1999, representing an increase of 56%. The increase is attributable mainly to
a 30% increase in revenues derived from the provision of cellular services and
from a 270% increase in revenues derived from the sale of handsets.

        Revenues from the provision of cellular services were R$356.7 million in
2000, a 30% increase from R$275.3 million in 1999. The service revenues increase
did not follow the 96% increase in the average subscriber base because of the
introduction of prepay service in the second quarter of 1999. This service
provides access to the same service of the contract program, except that users
pay in advance for the service by way of purchase of cards. New subscribers
under the prepay plan generally generate less revenues than the contract users.
At December 31, 2000, 407,712 subscribers, or 53.9% of the total subscriber
base, were under the prepay program. We believe that a



                                       26
<PAGE>   30

significant portion of our new subscribers will adhere to the prepay program,
resulting in a lower increase in revenues as compared to the number of
subscribers.

        Revenues derived from sales of handsets increased 270% to R$123.9
million in 2000 from R$33.5 million in 1999. The substantial increase was due to
record additions in 2000.

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

        In 1999, NBT, a competing cellular service provider, began operating for
the first time in our region. Two additional competitors, Telemar and Telecom
Italia, are expected to commence PCS operations in early 2002. One more PCS
operator is also expected to enter our market sometime in 2002. We expect that
competition will contribute to declining prices and will affect our ability to
maintain growth in our subscriber base.

Cost of services

        Cost of services reached R$150.2 million in 2000, or 42% of service
revenues, compared to R$113.9 million, or 41% of service revenues, in 1999.

Selling, general and administrative expenses

        Selling, general and administrative expenses were R$144.6 million in
2000, or 41% of service revenues, compared to R$90.6 million, or 33% of service
revenues in 1999. The increase, as a percentage of service revenues, is mainly
attributable to the adoption of new marketing and sales strategies required by
an intensely competitive environment, together with a substantial increase in
commissions resulting from higher activations and an increase in marketing and
advertising costs.

        Despite the significant unmet demand in our region, as evidenced by the
low penetration rate of 5.2% at December 31, 2000, we believe that it will be
more costly in the future to attract new subscribers.

Pension plan expense

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

Bad debt expense

        Bad debt expense was R$24.8 million, or 6.9% of service revenues, in
2000, compared to R$28.1 million, or 10% of service revenues, in 1999. The
decrease in bad debt expense as a percentage of service revenues was due to the
strengthening of credit controls and the improvement of collection procedures.

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

        In the fourth quarter of 1998, we put in place new credit and collection
policies, and in 1999 we implemented an anti-fraud system to reduce our level of
bad debt. As a result of these measures, bad debt expense reduced significantly
in 1999 and in 2000.

Interest income (expense)

        Net interest expense was R$6.4 million in 2000, compared to a net
interest income of R$14.9 million in 1999. The change was due to an increase in
consolidated indebtedness in 2000 related to the funding of capital
expenditures.

                                       27
<PAGE>   31

Foreign exchange (gain) loss

        Foreign exchange loss was R$13.6 million in 2000, compared to a foreign
exchange loss of R$12.4 million in 1999.

Income taxes

        We recorded a R$1.5 million income tax credit in 2000, notwithstanding
the fact that we had income before taxes. This compares to an income tax expense
of R$4.2 million in 1999. The tax credit is attributable mainly to the recording
of tax incentives and certain non-taxable income. Income taxes include social
contribution taxes.

        The combined statutory tax rate in 2000 was 34%. The effective rate of
tax on pretax income in 1999 was 23% compared to the combined statutory rate of
37%. The difference between the effective tax rate and the combined statutory
rate in 1999 is attributable to the declaration of interest on capital. Interest
on capital consists of tax deductible dividend. See Note 9 to the consolidated
financial statements.

Net income

        As a result of the above, net income was R$7.9 million for 2000 and
R$19.4 million for 1999.

1999 COMPARED TO 1998

Net revenues

        Net revenues were R$308.8 million in 1999, compared to R$232.6 million
in 1998, representing an increase of 33%. The increase is attributable mainly to
a 32% increase in the average number of subscribers in 1999 as compared to 1998,
as well as the introduction of handset sales in the second quarter of 1999 to
assist our distribution network. The handsets revenues, which totaled R$33.5
million in 1999, did not contribute to our profit as the handsets were sold at,
or near, cost.

        Revenues from the provision of cellular services were R$275.3 million in
1999, an 18% increase from the R$232.6 million of 1998. The service revenues
increase did not follow the 32% increase in the average subscriber base because
of the introduction of prepay service in the second quarter of 1999. At December
31, 1999, 78,000 subscribers, or 23% of the total subscriber base, were under
the prepay program.

Cost of services

        Cost of services reached R$113.9 million in 1999, or 41% of service
revenues, compared to R$67.5 million, or 29% of service revenues, in 1998. The
increase, as a percentage of service revenues, is mainly attributable to an
increase in depreciation of R$30.1 million, which reflects:

                -       a R$17.6 million increase in investment in property,
                        plant and equipment, and

                -       a R$12.5 million adjustment resulting from a revised
                        estimate of useful lives of property, plant and
                        equipment in light of the advent of competition and a
                        review of industry practices.

Selling, general and administrative expenses

        Selling, general and administrative expenses were R$90.6 million in
1999, or 33% of service revenues, compared to R$51.9 million, or 22% of service
revenues in 1998. The increase is attributable to increased promotion and
advertising costs in relation to new products like prepay and digital services,
as well as higher costs for commissions related to the level of new activation.
In addition, the arrival of competition in our region in 1999 also contributed
to the increase in selling and marketing expenses.

Pension plan expense

        A pension plan expense of R$6.3 million was recorded in 1999 as a result
of changes approved by the administrator, allowing for the break-up of the plan.
The expense recorded by us represents an estimate of our share of the unfunded
pension liability.



                                       28
<PAGE>   32

Bad debt expense

        Bad debt expense was R$28.1 million, or 10% of service revenues, in
1999, compared to R$38.4 million, or 16.5% of service revenues, in 1998. During
the year, we continued to experience significant, although lower, bad debt
levels due to a variety of factors, including:

                -       overall growth in our accounts receivable;

                -       an increase in the number of customers with relatively
                        lower income, who are more prone to delay paying
                        cellular telephone bills; and

                -       subscription fraud.

        In the fourth quarter of 1998, we put in place new credit and collection
policies, and in 1999 we implemented an anti-fraud system to reduce our level of
bad debt. As a result of these measures, bad debt expense reduced significantly
in 1999 and management expects that bad debt levels will further decline in the
future.

Interest income (expense)

        Net interest income was R$14.9 million in 1999, compared to a net
interest income of R$4.5 million in 1998. The increase is due to an increase in
the average cash on hand, offset in part by an increase in consolidated
indebtedness related to capital investments.

Foreign exchange (gain) loss

        Foreign exchange loss was R$12.4 million in 1999, compared to R$2.5
million in 1998, due to the effect on our net U.S. dollar-denominated debt of
the 50% devaluation of the real relative to the U.S. dollar in 1999.

Income taxes

        Income taxes, which include social contribution taxes, were R$8.3
million in 1999 compared to R$16.9 million in 1998. The effective rate of tax on
pretax income in 1999 was 23%, compared to the combined statutory rate of 37%.
The decrease is attributable to the declaration of interest on capital in
December 1999. Interest on capital consists of tax deductible dividend. See Note
9 to the consolidated financial statements.

Net income

        As a result of the above, net income was R$19.4 million for 1999 and
R$31.5 million for 1998, or R$0.06 and R$0.09 per thousand common shares,
respectively.

B.      LIQUIDITY AND CAPITAL RESOURCES

GENERAL

        In 2000, cash provided by operating activities was R$75.3 million.
EBITDA, which we define as operating income plus depreciation and the charge for
impairment of long-lived assets, was R$86.9 million. At December 31, 2000, we
had cash and cash equivalents of R$164.7 million.

INDEBTEDNESS

        Our total debt was R$348.9 million at December 31, 2000, as compared to
R$126.1 million at December 1999. Of our total debt, R$213.3 million was
denominated in U.S. dollars bearing interest at three- or six-month LIBOR plus
an annual rate of 0.4% to 5.75%, and R$135.6 million was in reais bearing
interest at a rate of 3.8% over the long-term interest rate (which was 9.75% at
December 31, 2000) disclosed by the Central Bank. All of our indebtedness is
unsecured and arises from equipment financing. See "Item 10. Additional
Information--C. Material contracts" for a description of our principal credit
agreements.

        At December 31, 2000, 9% of our dollar-denominated debt was hedged
against exchange rate fluctuation. The hedging instrument exchanges fixed rates
(13.9% to 14.9%) over the U.S. dollar variation for an internal floating rate
(interbank deposit rate).



                                       29
<PAGE>   33

        On December 15, 2000, we obtained a R$162.6 million five-year credit
facility from the Brazilian National Economic and Social Development Bank (Banco
Nacional de Desenvolvimento Economico e Social (BNDES)) and a consortium of
three Brazilian banks: Banco Itau, Bradesco and Alfa. We have drawn down R$133
million to be invested in the expansion of our coverage and in the introduction
of new services. Of this amount, R$116 million have an annual interest of 3.8%
over the long-term interest rate disclosed by the Brazilian Central Bank (which
was 9.75% at December 31, 2000), and R$17 million have an annual interest rate
of 3.8% over the average cost of BNDES' Currency Basket, which is based on the
rates and charges, including taxes, applicable in BNDES debt obligations in
foreign currencies (which was 9.29% plus currency basket charges at December 31,
2000).

        Substantially all start-up costs and initial capital investments were
financed by cash flows from the wireline telephone operations of the predecessor
companies. Accordingly, our indebtedness does not reflect the amount of debt we
would have been required to incur to build our current network if we had
operated on a stand-alone basis from the inception of our predecessor companies'
cellular telecommunications operations.

CAPITAL EXPENDITURES

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

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

        Our capital expenditure priorities include build out of our network to
increase coverage, improvement of overall quality and increase of the level of
digitalization of our network. We spent R$187 million in capital expenditures in
2000.

        We currently expect that our capital expenditures for the year 2001 will
be approximately R$200 million. Because a substantial portion of capital
expenditures is denominated in U.S. dollars, further devaluation of the real
could require that the estimate be increased. The estimated amount and timing of
capital expenditures may also be affected by a number of other risks and
uncertainties. We are unable to project capital expenditures for 2002 and 2003
at this time because they will depend to a large degree on which technological
solution we select for the overlay of our TDMA network. We are currently
studying GSM and CDMA as options.

        We believe that our capital expenditure requirements can be met through
a combination of cash flow from operations and equipment financing from a
variety of sources.

POLITICAL AND ECONOMIC FACTORS

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

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

                -       the cost and availability of financing, and

                -       the exchange rates between Brazilian and foreign
                        currencies.

Brazilian political environment

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

                -       currency fluctuations,

                -       inflation,

                -       price instability,



                                       30
<PAGE>   34

                -       interest rates,

                -       tax policy, and

                -       telecommunications policy.

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

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

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

        In February 1999, President Fernando Henrique Cardoso issued a
provisional measure under which the Brazilian government proposed to refinance
the commercial bank and securities debt of the states and municipalities for a
period of 30 years. In February 2000, the state of Minas Gerais entered into a
debt rescheduling agreement with the federal government. Although relations
between the Brazilian federal government and the state of Minas Gerais have
improved and stabilized, renewed friction between the federal government and the
state governments may undermine investor confidence, have a negative effect on
the Brazilian economy and negatively impact states in our region. If the
Brazilian economy or the economy of states in our region were to be adversely
affected by a default, our operations and the market price of the preferred
shares and ADS may be adversely affected.

Brazilian economic environment

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

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

                -       the cost and availability of financing, and

                -       exchange rates between Brazilian and foreign currencies.

        EFFECTS OF INFLATION AND IMPACT OF REAL PLAN. Since the introduction of
the real as the new Brazilian currency in July 1994, inflation has remained
controlled although it has increased since the devaluation of the real in
January 1999. Inflation was 9.8% in 2000, 20.0% in 1999 and 1.7% in 1998, as
measured by the IGP-DI, a general price index. High inflation places pressure on
our rates and invites federal government efforts to control inflation by holding
down the rates that Brazilian public utilities are permitted to charge.

                                       31
<PAGE>   35

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

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

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

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

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

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

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

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

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

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

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

        In response to continued high capital outflows, on January 15, 1999 the
Central Bank announced that it would no longer intervene in the foreign exchange
market, except in exceptional circumstances to mitigate excessive volatility,
thereby allowing the real to U.S. dollar exchange rate to fluctuate freely.
Since January 15, 1999, the real



                                       32
<PAGE>   36

has traded in a volatile and sometimes illiquid market. The real devalued by
48.0% and 8.4% against the U.S. dollar in 1999 and 2000, respectively. At June
27, 2001, the noon buying rate was R$2.3320 to U.S.$1.00.

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

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

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

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

REGULATORY AND COMPETITIVE FACTORS

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

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

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

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

        We began to face competition in our region in the fourth quarter of 1999
and anticipate that competition will contribute to declining prices for cellular
telecommunications services and increasing pressure on operating margins. Our
future growth and results of operations will depend significantly on a variety
of factors, including:

                -       our ability to attract new subscribers,

                -       the rate of growth of our subscriber base,

                -       the usage and revenue generated from our subscribers,

                -       the level of airtime,

                -       equipment prices,

                -       the rate of churn, and

                -       our ability to control costs.

        We expect to face competition from Telemar, the Band D PCS auction
winner, and Telecom Italia, the Band E PCS auction winner, beginning in January
2002. We also expect to face competition from a Band C PCS



                                       33
<PAGE>   37

entrant sometime in 2002. The scope of increased competition and any adverse
effects on our results and market share will depend on a variety of factors that
we cannot now assess with precision and many of which are beyond our control.

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

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

D.      TREND INFORMATION

        We expect a significant increase in competition. Telemar and Telcom
Italia Mobile are expected to commence operations in our region in early 2002.
In addition, a future auction not yet scheduled could result in the addition of
one more PCS operator in our region. The increase in competition negatively
affects our market share and profit margins.

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

ITEM 6.        DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.      DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

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

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

<TABLE>
<CAPTION>
NAME                                                       POSITION           DATE ELECTED
---------------------------------------------------       ------------      ---------------
<S>                                                        <C>               <C>
Gunnar Birger Vinof Vikberg.....................           Chairman          April 30, 2001
Wellington Dantas de Amorim.....................           Director          April 30, 2001
Oscar de Paula Bernardes Neto...................           Director          April 30, 2001
Gustavo Henrique de Barroso Franco..............           Director          April 30, 2001
Elaine Aleixo Lustosa Thompson-Flores...........           Director          April 30, 2001
Antonio Britto Filho............................           Director          April 30, 2001
Veronica Valente Dantas.........................           Director          April 30, 2001
Marcos Nascimento Ferreira......................           Director          April 30, 2001
James L. Thompson...............................           Director          April 30, 2001
Valdemir Diniz..................................           Director          April 30, 2001
Isaac Selim Sutton..............................           Director          April 30, 2001

</TABLE>
        Set forth below are brief biographical descriptions of the Directors.

        GUNNAR BIRGER VINOF VIKBERG is also the President and Chief Executive
Officer of the Registrant, as well as the President and Chief Executive Officer
and Director of Telemig Celular Participacoes S.A. Mr. Vikberg is the founder
and director of Viking Consultoria Empresarial e Participacoes S/C Ltda. Mr.
Vikberg was also the Chief Executive Officer of Algar S.A. from 1997 to 1999.
Prior to that, Mr. Vikberg had been Executive Vice President. Mr. Vikberg was
the exclusive representative of Xerox Quality Services in Brazil in 1995.
Between 1992 and 1994, Mr. Vikberg was President of Millicom do Brasil S.A. and
PCN do Brasil S.A. From 1975 to 1989, Mr. Vikberg held several positions at
Grupo Xerox do Brasil S.A., including that of Executive Vice President. From
1954 to



                                       34
<PAGE>   38

1975, Mr. Vikberg was associated with L.M. Ericsson, where he was the Director
General of Ericsson do Brasil S.A. from 1968 to 1975. Mr. Vikberg has also been
a member of the Board of Directors of several Brazilian companies. Mr. Vikberg
received a degree in Electrical Engineering from the Royal Institute of
Technology in Stockholm, Sweden, as well as a degree in Business Administration
from the Institut pour l'Etude des Methodes de Direction de l'Enterprise in
Lausanne, Switzerland.

        WELLINGTON DANTAS DE AMORIM is also a Director of Telemig Celular
Participacoes S.A. Since April 1998, Mr. Amorim has served as the Investment
Guidelines Manager for PREVI - Caixa de Previdencia dos Funcionarios do Banco do
Brasil. From 1982 to 1998, Mr. Amorim served as an employee of Banco do Brasil
S.A. ("BB"). He served as Assistant to the Executive Committee of BB and Member
of the Technical Consulting of the Executive Committee of BB. He has served also
as the Coordinator of the Center of Planning and Control for the Rio de Janeiro
State Cabinet. He holds a master's degree in international relations from the
University of Brasilia and spent two years as a researcher at Tsubuka University
in Japan.

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

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

        ELAINE ALEIXO LUSTOSA THOMPSON-FLORES has been a Director of Fundacao
Petrobras de Seguridade Social-PETROS since August 1999. From July 1997 to
August 1999, Ms. Thompson-Flores was the Director of the Department of Economic
Protection and Defense and the Adjunct Secretary of the Division of Economic
Rights of the Ministry of Justice. From May 1996 to June 1997, Ms.
Thompson-Flores was a partner, director and senior economic analyst at
Intelicorp Consultoria Ltds. From April to November 1995, Ms. Thompson-Flores
was a consultant to the Executive Secretary of the Ministry of Industry,
Commerce and Tourism. From October 1993 to March 1995, she was the General
Coordinator of Industrial Affairs with the Division of Economic Policy of the
Ministry of Finance. Prior to that, Ms. Thompson-Flores was a professor and a
researcher at several Brazilian institutions. Ms. Thompson-Flores has a master's
degree in Economics from the Catholic University of Rio de Janeiro.

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

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

        MARCOS NASCIMENTO FERREIRA is also a Director of Tele Norte Celular
Participacoes S.A. Mr. Ferreira was Director of Pantanal Linhas Aereas from 1995
to 1998. For the previous seven years, Mr. Ferreira worked for OAS Group in
different roles, including two subsidiaries Vega Sopave and Ultratec Engenharia.
In recent years, Mr.



                                       35
<PAGE>   39

Ferreira has been an active Board Member of major telecom companies in Brazil,.
including Telet and Americel (1999/2000), and Pegasus (2000). Mr. Ferreira holds
a degree in civil engineering from the Federal University of Bahia as well as a
post-graduate degree in business administration from the University of
California, Berkeley

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

        VALDEMIR DINIZ is also a member of the Supervisory Board of the Tele
Norte Participacoes S.A. Mr. Diniz is the Regional Director for the Sate of
Maranhao for Banco do Brasil. Mr. Diniz was previously Regional Director for the
State of Parana and State Director for the State of Para. Mr. Diniz was also a
member of the Supervisory Board of Jari Celulose S.A., Cadan-Caulin da Amazonia
S.A. and CBPI (Ipiranga Group). He studied business administration at
FAE-Curitiba, APG Amana Exec. International, Corporate Governance at the
University of Sao Paulo - USP.

        ISAAC SELIM SUTTON has been the managing director of the Safra Group
since 1994. In addition, he has been a Director of Aracruz Celulose S.A. and
also Chairman of its Audit Committee. Mr. Sutton has also been Chief Executive
Officer of several companies, Director of Unigel Group (1992-1994),
Commercial/Marketing Director at Cosmoquimica (1986-1992) and Marketing Manager
at Dow Chemical (1980-1986). Mr. Sutton has been a member of various Boards of
Directors and has participated in the development of projects linked to banking,
telecommunications and petrochemicals, including basic and heavy industries. Mr.
Sutton holds a bachelor's degree in Economics from the University of Sao Paulo.

EXECUTIVE OFFICERS

        The following are our executive officers and their respective positions.

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

        Set forth below are brief biographical descriptions of the executive
officers whose biographies were not included above.

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

        RENE PATOINE has been Executive Vice-President of Operations of the
Company and of Telemig Celular Participacoes S.A. since September 1998. Mr.
Patoine was a member of the Board of Directors of the Company from September 1,
1998 to March 2000. Prior to that, he served as Executive Vice-President of
Operations of



                                       36


<PAGE>   40

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

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

B.      COMPENSATION

        For the year ended December 31, 2000, the aggregate amount of
compensation (including bonuses and payments in-kind) paid by us to all
directors and executive officers as a group was approximately R$1.6 million.

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

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

C.      BOARD PRACTICES

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

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

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

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

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

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



                                       37
<PAGE>   41


        The current members of the Audit Committee are Antonio Fernando Pereira
Melo, who is the chairman, Ari Matos Cardoso and Jose Carlos Soares.

        The Registrant does not have a remuneration committee.

D.      EMPLOYEES

        At December 31, 2000, we had 925 employees, as compared to 772 employees
at December 31, 1999 and 490 employees at December 31, 1998. Of our employees,
14% were employed in sales and marketing, 12% in engineering, 15% in
administration, 54% in customer service and 5% in information technology. The
significant increase in employees in 1999 and 2000 occurred primarily in the
areas of customer service and sales and marketing, (which had not been areas of
priority before the privatization), because of the increase in the subscriber
base.

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

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

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

E.      SHARE OWNERSHIP

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

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

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

        b) The second plan covers key executives (who also participate in the
first plan) and other employees. Options granted under this plan relate to
preferred stock and are exercisable at the market price at the date of grant.
The vesting period is 20% during the second year, 60% during the third year and
100% during the forth year. At December 31, 2000, 872,697 options have been
granted and none have been exercised as the vesting period had not begun.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.      MAJOR SHAREHOLDERS

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

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



                                       38
<PAGE>   42


<TABLE>
<CAPTION>
                                                           NUMBER OF COMMON             PERCENTAGE OF OUTSTANDING
NAME OF OWNER                                                SHARES OWNED                     COMMON SHARES
---------------------------------------------------      --------------------         -----------------------------
<S>                                                      <C>                          <C>
Telpart S.A. ......................................         64,499,336,719                        51.8%
Vailly.............................................         13,732,800,000                        11.0%
Caixa de Previdencia dos Funcionarios do Banco
   do Brasil.......................................         6,722,609,333                          5.4%
</TABLE>

        Telpart is a consortium comprising Newtel Participacoes S.A., which owns
51% of Telpart, and TIW do Brasil Ltda., which owns the remaining 49%. Telpart
also owns a controlling interest in Telemig Celular Participacoes S.A., the Band
A service provider in the cellular region that includes the state of Minas
Gerais.

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

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

        On December 28, 1999, our shareholders approved a legal reorganization
whereby Telpart contributed some assets to us resulting in future tax benefits.
We recorded a deferred tax asset of R$48.8 million which will be realized over a
period of up to ten years. In accordance with Brazilian corporate law, we may
issue shares (pro rata both common and preferred) to Telpart for the amount of
the tax benefits recognized by us. In addition, minority shareholders are
granted preemptive rights. If the minority shareholders do not elect to exercise
these rights, the shares will be issued to Telpart. See Note 7 to the
consolidated financial statements for a fuller description.

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

        Our common shares are not traded in the United States. Our preferred
shares trade in the United States in the form of ADSs, each representing 50,000
shares. At December 31, 2000, approximately 3,284,868 ADSs (representing
164,243,400,000 preferred shares) were held of record in the United States.

B.      RELATED PARTY TRANSACTIONS

TECHNICAL SERVICES

        Since 1998, the Company had been negotiating a Technical Services
Agreement ("TSA") with Telesystem International Wireless, Inc. (TIWI), the
parent company of TIW, the 49% owner of Telpart S.A. Pursuant to the Brazilian
Corporations Law and the Company's charter, the contract requires shareholders'
approval. Considering that this approval was not obtained, the Company has not
paid for any services rendered. At December 31, 2000 and 1999, the Company has
liabilities payable to TIWI for approximately R$10.9 million and R$5.6 million,
respectively, related to expenses (principally, salaries and benefits) charged
by TIWI to the Company. Certain of those amounts are being disputed by the
Company.

ROAMING AGREEMENTS

        We are a member of a national roaming committee of cellular operators,
which includes our affiliate, Telemig Celular Participacoes S.A. The purpose of
the committee is to oversee technical and system aspects to



                                       39
<PAGE>   43


ensure the highest quality of roaming service. As required by Brazilian
regulation, Telemig and ourselves facilitate roaming to our respective
subscribers.

COST SHARING AGREEMENT

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

C.      INTERESTS OF EXPERTS AND COUNSEL

        Not applicable.

ITEM 8.FINANCIAL INFORMATION

A.      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

FINANCIAL STATEMENTS

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

LEGAL PROCEEDINGS

Litigation related to the breakup of Telebras

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

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

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

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

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

                -       the Telecommunications Law requires that some matters,
                        such as the entry of new competitors and the
                        administration of development and technology funds, be
                        regulated prior to the breakup and privatization either
                        by an executive order of the President or by an act of
                        Congress.

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

Litigation arising out of events prior to the breakup

        Telebras and our predecessor companies, the legal predecessors of the
Registrant, and our subsidiaries, respectively, are defendants in a number of
legal proceedings including tax and labor-related matters and subject to certain
other claims and contingencies. Liability for any claims arising out of acts
committed by our predecessor companies prior to the effective date of the
spin-off of the cellular assets and liabilities of the predecessor companies to
our subsidiaries remains with the predecessor companies, except for:



                                       40
<PAGE>   44


                -       labor and tax claims, for which the predecessor
                        companies and the subsidiaries are jointly and severally
                        liable, by operation of law, and

                -       liabilities with respect to which our predecessor
                        companies had made specific accounting provision prior
                        to the breakup, assigning them to our subsidiaries.

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

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

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

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

Litigation related to the application of the ICMS

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

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

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

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

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

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

        We may not prevail in our position that the new interpretation by the
state governments is unlawful. Five-year retroactive application of the ICMS to
cellular activation would have a material adverse impact on our business,
results of operations and financial condition. However, we believe that the
retroactive application of the ICMS to cellular activation is improbable. We
also believe that in such event our predecessor company would be liable to us
for any tax liability arising from the retroactive application of the ICMS to
cellular activation recognized prior to 1998. Therefore, we have not made any
provision with respect to such application in our consolidated financial
statements.

        We have made provisions totaling approximately R$3.2 million for the
application of the ICMS to cellular activation from June 1998, the effective
date of the agreement, to December 31, 2000 (see Note 14 to the



                                       41

<PAGE>   45


consolidated financial statements). The application of the ICMS to cellular
activation for the year ended December 31, 1998 would have had a maximum
negative impact estimated at R$2.7 million, R$0.3 million and R$0.2 million on
our results of operations for 1998, 1999 and 2000, respectively. The impact of
ICMS on cellular activation on our results of operations for 1999 and 2000 would
have been immaterial as we eliminated the activation fee for all but one of our
plans, and for such plan we reduced it significantly. We do not believe that
application of the ICMS on cellular activation, applied on a prospective basis,
will have a material impact on our results of operations.

        TAXATION OF MONTHLY SUBSCRIPTIONS AND OTHER SERVICES. In December 1998,
each of our subsidiaries filed an injunction with the Treasury Court of the
state in which it is located and therefore suspended the remittance of the ICMS
on monthly subscriptions and additional services and deposited such amounts in a
trust account administered by the courts. We cannot assure you that we will
prevail in this matter. Accordingly, we have recorded an aggregate provision of
R$35 million for 1998, 1999 and 2000 in our consolidated financial statements.
See Note 14 to the consolidated financial statements.

Other litigation

        We are a party to certain legal proceedings arising in the normal course
of business. We have provided for or deposited in court amounts to cover our
estimated losses due to adverse legal judgments. We believe that these actions,
if decided against us, would not have a material adverse effect on our business,
results of operations or financial condition.

DIVIDEND POLICY

        We are required to distribute to our shareholders, either as dividends
or as tax-deductible interest on capital, 25% of our adjusted net income
determined in accordance with Brazilian accounting principles as adjusted in
accordance with Brazilian corporate law. We are also required to pay a
non-cumulative preferred dividend on our preferred shares in an amount equal to
6% of the share capital attributable to the preferred shares under Brazilian
corporate law. As of December 31, 2000, the calculated preferred dividend
requirement amounted to approximately R$2.6 million. With respect to the 2000
fiscal year, the calculated preferred dividend on the preferred shares equalled
the mandatory distribution requirement.

        For purposes of the mandatory distribution requirement, we included in
adjusted net income part of the unrealized income reserve transferred upon the
breakup of Telebras, which amounted to R$59.3 million and is included in
distributable capital and other reserves in our shareholders' equity. We decided
to include the unrealized reserve in the calculation of the mandatory
distribution requirements over a ten-year period. As a result, the total
dividend for the year ended December 31, 2000 amounted to R$4.2 million. We
cannot assure you that the mandatory distribution of the unrealized income
reserve will not result in substantial additional dividend requirements.

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

        The Registrant's only significant asset other than cash are its shares
of Amazonia Celular S.A. - Maranhao. The Registrant relies almost exclusively on
dividends from its subsidiaries to meet its needs for cash, including for the
payment of dividends to its shareholders. The Registrant controls the payment of
dividends by its subsidiaries, subject to limitations under Brazilian corporate
law.

B.      SIGNIFICANT CHANGES

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

ITEM 9. THE OFFER AND LISTING

A.      OFFER AND LISTING DETAILS

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



                                       42
<PAGE>   46


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

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

<TABLE>
<CAPTION>
                                                                        NOMINAL REAIS PER 1,000
                                                                            PREFERRED SHARES
                                                                      ---------------------------
                                                                         HIGH              LOW
                                                                      ----------        ---------
<S>                                                                   <C>               <C>
1998 (beginning September 21, 1998).................................    R$1.05            R$0.12

First quarter 1999..................................................    R$1.04            R$0.48
Second quarter 1999.................................................    R$1.24            R$0.93
Third quarter 1999..................................................    R$1.24            R$0.69
Fourth quarter 1999.................................................    R$1.59            R$1.02

First quarter 2000..................................................    R$2.53            R$1.20
Second quarter 2000.................................................    R$2.19            R$1.43
Third quarter 2000..................................................    R$2.20            R$1.45
Fourth quarter 2000.................................................    R$1.53            R$1.12
</TABLE>

        In the United States, the preferred shares trade in the form of American
Depositary Shares, commonly referred to as "ADSs," each representing 50,000
preferred shares, issued by The Bank of New York as depositary pursuant to a
deposit agreement among the Registrant, the depositary and the registered
holders and beneficial owners from time to time of American Depositary Receipts,
which are commonly known as "ADRs." The ADSs commenced trading separately on the
New York Stock Exchange on November 16, 1998 under the symbol "TCN." At December
31, 2000, there were approximately 100 holders of record of ADSs. The following
table presents the reported high and low closing sales prices for ADSs on the
New York Stock Exchange for the period indicated.

<TABLE>
<CAPTION>
                                                                               U.S. DOLLARS PER ADS
                                                                        ---------------------------------
                                                                             HIGH               LOW
                                                                        ---------------  ----------------
<S>                                                                     <C>              <C>
1998 (beginning November 16, 1998)..................................      U.S.$45           U.S.$11 5/8

First quarter 1999..................................................      U.S.$29 3/4       U.S.$17
Second quarter 1999.................................................      U.S.$36 1/4       U.S.$25 1/2
Third quarter 1999..................................................      U.S.$33 3/8       U.S.$19 3/8
Fourth quarter 1999.................................................      U.S.$43 1/2       U.S.$25 1/2

First quarter 2000..................................................      U.S.$67           U.S.$34 13/16
Second quarter 2000.................................................      U.S.$57 1/8       U.S.$41
Third quarter 2000..................................................      U.S.$57 1/4       U.S.$40
Fourth quarter 2000.................................................      U.S.$40           U.S.$29 1/16
</TABLE>

B.      PLAN OF DISTRIBUTION

        Not applicable.

C.      MARKETS

TRADING ON THE NEW YORK STOCK EXCHANGE

        In the United States, the preferred shares trade in the form of ADSs,
each representing 50,000 preferred shares, issued by The Bank of New York as
depositary pursuant to a deposit agreement among the Registrant, the depositary
and the registered holders and beneficial owners from time to time of ADRs. The
ADSs commenced trading separately on the New York Stock Exchange on November 16,
1998 under the symbol "TCN."



                                       43
<PAGE>   47


TRADING ON THE BRAZILIAN STOCK EXCHANGES

General

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

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

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

        Settlement of transactions is effected three business days after the
trade date without adjustment of the purchase price for inflation. Payment for
shares is made through the facilities of separate clearinghouses for each
exchange, which maintain accounts for member brokerage firms. The seller is
ordinarily required to deliver the shares to the exchange on the second business
day following the trade date. The clearinghouse for the Sao Paulo Stock Exchange
is Companhia Brasileira de Liquidacao e Custodia S.A. - CBLC, which is
controlled mainly by the member brokerage firms and banks that are not members
of that exchange.

        At April 30, 2001, the aggregate market capitalization of the 445
companies listed on the Sao Paulo Stock Exchange was approximately R$208
billion. Although all the outstanding listed shares of an exchange-listed
company may trade on a Brazilian stock exchange, in most cases less than half of
the listed shares are actually available for trading by the public, the
remainder being held by small groups of controlling persons that rarely trade
their shares. For this reason, data showing the total market capitalization of
Brazilian stock exchanges tend to overstate the liquidity of the Brazilian
equity securities market.

        The Brazilian equity market is relatively small and illiquid compared to
major world markets. As of April 30, 2001, the five most active issuers
represented approximately 67.8% of the total trading in the Sao Paulo Stock
Exchange. In 2000, the average monthly trading volume on the Sao Paulo Stock
Exchange was approximately R$9.0 billion.

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

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

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

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



                                       44
<PAGE>   48


Regulation of Brazilian securities markets

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

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

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

        Trading in securities on the Sao Paulo Stock Exchange may be suspended
at the request of a company in anticipation of a material announcement. Trading
may also be suspended on the initiative of the Sao Paulo Stock Exchange or the
CVM, among other reasons, based on or due to a belief that a company has
provided inadequate information regarding a material event or has provided
inadequate responses to inquiries by the CVM or the Sao Paulo Stock Exchange.

        The Brazilian Securities Law provides for, among other things,
disclosure requirements, restrictions on insider trading and price manipulation,
and protection of minority shareholders. However, the Brazilian securities
markets are not as highly regulated and supervised as the United States
securities markets or markets in certain other jurisdictions.

D.      SELLING SHAREHOLDERS

        Not applicable.

E.      DILUTION

        Not applicable.

F.      EXPENSES OF THE ISSUE

        Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.      SHARE CAPITAL

        Not applicable.

B.      MEMORANDUM AND ARTICLES OF ASSOCIATION

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



                                       45
<PAGE>   49


CORPORATE PURPOSES

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

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

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

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

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

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

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

                -       to perform other mobile telephone related activities;
                        and

                -       to hold equity interests in other companies.

SHAREHOLDERS' MEETING

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

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

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

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

                -       to decrease the mandatory dividend;

                -       to amend the purposes of the company;

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

                -       to liquidate the company;

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

                -       to issue founder's shares.

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



                                       46
<PAGE>   50


MANAGEMENT

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

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

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

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

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

CAPITAL STOCK AND SHARES

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

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

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

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

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

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

        According to the charter, the general shareholders' meeting or the board
of directors may eliminate any preemptive rights in connection with the issuance
of shares, debentures or founders' shares convertible into shares and also
subscription bonuses. Nevertheless, the charter does not regulate rights
conferred to holders of preferred shares to appoint one or more members of the
administrative bodies.



                                       47
<PAGE>   51


OWNERSHIP OF SHARES

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

RESERVES

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

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

TRANSFER OF CONTROL, MERGER AND ACQUISITION

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

C.      MATERIAL CONTRACTS

MOBILE CELLULAR SERVICE CONCESSIONS

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

INTERCONNECTION AGREEMENTS

        We have entered into interconnection agreements with NBT, our Band B
competitor, with Embratel and Intelig, two long distance carriers, with Vesper,
a wireline operator, and with our predecessor companies. The terms of our
interconnection agreements are described in "Item 4. Information on the
Company--B. Business overview--Operating agreements--Interconnection agreements"
and "Item 4. Information on the Company--B. Business overview--Regulation of the
Brazilian telecommunications industry."

ROAMING AGREEMENTS

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

ERICSSON SUPPLY AGREEMENT

        On September 27, 1998, the Registrant entered into a Cellular System
Agreement with Ericsson Telecomunicacoes S.A. This agreement provides for the
supply by Ericsson to the Registrant of products, services and software for the
implementation of our cellular network. The agreement provides for different
terms of financing depending on whether the payment is related to products,
software, services or training. This agreement is for purchases of up to R$236.7
million and has a term of three years.

CREDIT AGREEMENTS

BNDES

        On December 14, 2000, Amazonia Celular S.A. - Maranhao obtained a
R$162.6 million five-year facility from the Brazilian National Economic and
Social Development Bank (Banco Nacional de Desenvolvimento Economico e Social
(BNDES)) and a consortium of three Brazilian banks: Banco Itau S.A., Banco
Bradesco S.A.



                                       48
<PAGE>   52


and Banco Alfa de Investimento S.A. The proceeds of this facility are for the
expansion of our coverage area and the introduction of new services. This
facility has an annual interest rate of 3.8% over either (i) the average cost of
BNDES' currency basket (based on rates and charges, including taxes, applicable
to BNDES' debt obligations in foreign currency) and (ii) the long-term interest
rate disclosed by the Brazilian Central Bank, depending on the tranche.
Principal is payable on January 16, 2006. At December 31, 2000, there was
R$135.6 million outstanding under this facility.

Citibank

        On October 20, 2000, our subsidiaries entered into a U.S.$50 million
credit agreement with Citibank and others to finance the purchase and
installation of goods and services related to our cellular telecommunications
plant. The Registrant guarantees the obligations of its subsidiaries under this
facility. In addition, the U.S. Overseas Private Investment Corporation provides
political risk insurance. This facility has an interest rate of six-month LIBOR
plus 2.625% per year, plus a guarantee fee of 1.3% per year. Principal and
interest are payable semi-annually, with a final maturity on October 25, 2005.
At December 31, 2000, there was R$97.8 million outstanding under this facility.

Export Development Corporation of Canada

        On December 20, 1999, our subsidiaries entered into a U.S.$25 million
credit agreement with the Export Development Corporation of Canada and others
for the purchase of cellular telecommunications equipment from Ericsson
Telecommunications. This facility has an interest rate of three-month LIBOR plus
5.75% per year. Principal is payable semi-annually while interest is payable
quarterly. The maturity date is December 22, 2004. At December 31, 2000, there
was R$48.9 million outstanding under this facility.

BBA/Santander

        On September 27, 2000, Ericsson Telecommunicacoes S.A. assigned
obligations under two loans from Banco BBA Creditanstalt S.A. and Banco
Santander Brasil S.A. to Telepara Celular S.A. (now known as Amazonia Celular
S.A. - Para) for U.S.$10.5 million each, for the payment of cellular
telecommunications equipment purchased from Ericsson Telecommunications. These
loans have an interest rate of six-month LIBOR plus 1.75% per year plus an
internal commission of 2.40% per year. Interest payments are semi-annual and
principal is payable on September 12, 2003. At December 31, 2000, there was
R$41.1 million outstanding under this facility.

ABN Amro Bank

        On March 31, 1998, Ericsson Telecomunicacoes S.A. made two loans to
Telamazon Celular S.A. (now known as Amazonia Celular S.A. - Amazonas) in an
aggregate amount of U.S.$19.4 million for the purchase of cellular
telecommunications equipment. These loans were assigned to ABN Amro Brasil
Participacoes S.A. on August 25, 2000. These loans have an interest rate of
six-month LIBOR plus 0.4% per year. Principal and interest are payable
semi-annually, with a maturity date of March 3, 2003. At December 31, 2000,
there was R$25.3 million outstanding under this facility.

D.      EXCHANGE CONTROLS

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

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



                                       49
<PAGE>   53


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

                -       has a legal representative in Brazil;

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

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

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

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

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

        The restrictions on the remittance of foreign capital abroad may hinder
or prevent Banco Itau S.A., which is acting as custodian for the preferred
shares represented by ADSs, or holders who have exchanged ADRs for preferred
shares from converting dividends, distributions or the proceeds from any sale of
such preferred shares, as the case may be, into U.S. dollars and remitting such
U.S. dollars abroad. Holders of ADSs could be adversely affected by delays in,
or refusal to grant any, required government approval for conversions of
Brazilian currency payments and remittances abroad of the proceeds from
dividends or sales of Preferred Shares underlying the ADSs.

        Under current Brazilian legislation, the federal government may impose
temporary restrictions on remittances of foreign capital abroad in the event of
a serious imbalance or an anticipated serious imbalance of Brazil's balance of
payments. For approximately six months in 1989 and early 1990, the federal
government froze all dividend and capital repatriations held by the Central Bank
that were owed to foreign equity investors, in order to conserve Brazil's
foreign currency reserves. These amounts were subsequently released in
accordance with federal government directives. The imbalance in Brazil's balance
of payments increased during 1998, and there can be no assurance that the
federal government will not impose similar restrictions on foreign repatriations
in the future.

E.      TAXATION

        The following summary contains a description of the material Brazilian
and U.S. federal income tax consequences of the acquisition, ownership and
disposition of preferred shares or ADSs. This summary does not purport to be a
comprehensive description of all the tax considerations that may be relevant to
a decision to purchase preferred shares or ADSs. The summary is based upon the
tax laws of Brazil and related regulations and on the tax laws of the United
States and related regulations as in effect on the date of this annual report.
These laws and regulations may change in the future.

        Although there is at present no income tax treaty between Brazil and the
United States, the tax authorities of the two countries have had discussions
that may culminate in such a treaty. We cannot assure you, however, as to



                                       50
<PAGE>   54


whether or when a treaty will enter into force or how it will affect the U.S.
holders of preferred shares or ADSs. Prospective holders of preferred shares or
ADSs should consult their own tax advisors as to the tax consequences of the
acquisition, ownership and disposition of preferred shares or ADSs in their
particular circumstances.

BRAZILIAN TAX CONSIDERATIONS

        The following discussion summarizes material Brazilian tax consequences
of the acquisition, ownership and disposition of preferred shares or ADSs by a
holder not deemed to be domiciled in Brazil for Brazilian tax purposes. This
discussion does not address all the Brazilian tax considerations that may be
applicable to any such particular non-Brazilian holder, and each non-Brazilian
holder should consult his or her own tax advisor about the Brazilian tax
consequences of investing in preferred shares or ADSs.

Taxation of dividends

        Dividends paid by the Registrant in cash or in kind from profits of
periods beginning on or after January 1, 1996 (i) to the depositary in respect
of preferred shares, underlying ADSs or (ii) to a non-Brazilian holder in
respect of preferred shares, will generally not be subject to Brazilian
withholding tax.

        Dividends paid from profits generated before January 1, 1996 may be
subject to Brazilian withholding tax at 15% if the profits were generated in
1994 or 1995, and at 25% if the profits were generated before 1994. Stock
dividends are not subject to Brazilian tax.

        The only Brazilian tax treaty now in effect that would, if specified
conditions are met, reduce the rate of the withholding tax on dividends paid
from profits generated before January 1, 1996 is the treaty with Japan, which
would reduce the rate to 12.5%.

Taxation of capital gains

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

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

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

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

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

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

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

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



                                       51
<PAGE>   55


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

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

        Any exercise of preemptive rights relating to the preferred shares or
ADSs will not be subject to Brazilian taxation. Gains on the sale or assignment
of preemptive rights relating to the preferred shares underlying ADSs, complying
with the rules set forth by the National Monetary Council will be treated
differently for Brazilian tax purposes depending on whether the transaction
takes place on a Brazilian stock exchange.

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

Distributions of interest on capital

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

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

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

        Payments of interest on capital are decided by the shareholders on the
basis of recommendations of a company's board of directors.

        Distributions of interest on capital paid to Brazilian and non-Brazilian
holders of preferred shares, including payments to the depositary in respect of
preferred shares underlying ADSs, are deductible by the Registrant for Brazilian
corporate income tax purposes. These payments are subject to Brazilian
withholding tax at the rate of 15%, except for payments to persons who are
constitutionally exempt from tax in Brazil. Payments to persons situated in
jurisdictions deemed to be tax havens will be subject to tax at a 25% rate. Tax
havens are defined as countries that either have no income tax or in which the
income tax rate is less than 20%.

        We cannot assure you that our board of directors will not recommend that
future distributions of profits should be made by means of interest on capital
instead of by means of dividends.

        Amounts paid as interest on capital, net of applicable withholding tax,
may be treated as payments in respect of the dividends we are obligated to
distribute to our shareholders in accordance with our charter and the Brazilian
Corporation Law. Distributions of interest on capital in respect of the
preferred shares, including distributions to the depositary in respect of
preferred shares underlying ADSs, may be converted into U.S. dollars and
remitted outside of Brazil, subject to applicable exchange controls.

Other Brazilian taxes

        There are no Brazilian taxes applicable to the ownership, transfer or
disposition of preferred shares or ADSs by a non-Brazilian holder except for
gift and inheritance taxes levied by some states in Brazil on gifts made or
inheritances bestowed by individuals or entities not resident or domiciled in
Brazil or in the relevant state to individuals or entities that are resident or
domiciled within such state in Brazil. There are no Brazilian stamp, issue,
registration, or similar taxes or duties payable by holders of preferred shares
or ADSs, except for a 0.64% tax on the secondary sale or distribution of the
preferred shares through a public offering registered with the Brazilian
Securities and Exchange Commission, limited to R$82,870 and payable by the
seller.

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



                                       52
<PAGE>   56


conversions is currently 0%, but the Minister of Finance has the legal power to
increase the rate to a maximum of 25%. Any such increase will be applicable only
prospectively.

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

U.S. FEDERAL TAX CONSIDERATIONS

        The statements regarding U.S. tax law presented below are based on U.S.
laws and regulations in force on the date of this annual report. Changes to such
laws or regulations subsequent to the date of this annual report could affect
the tax consequences described in this annual report. This summary describes the
material tax consequences of the ownership and disposition of preferred shares
or ADSs, but it does not purport to be a comprehensive description of all of the
tax consequences that may be relevant to a decision to hold or dispose of
preferred shares or ADSs.

        This summary applies only to purchasers of preferred shares or ADSs who
will hold the preferred shares or ADSs as capital assets and does not apply to
special classes of holders such as

                -       dealers in securities or currencies,

                -       holders whose functional currency is not the U.S.
                        dollar,

                -       holders of 10% or more of our shares (taking into
                        account shares held directly through depositary
                        arrangements),

                -       tax-exempt organizations,

                -       financial institutions,

                -       holders liable for the alternative minimum tax,

                -       securities traders who elect to account for their
                        investment in preferred shares or ADSs on a
                        mark-to-market basis, and

                -       persons holding preferred shares or ADSs in a hedging
                        transaction or as part of a straddle or conversion
                        transaction.

        Each holder should consult its own tax advisor concerning the overall
tax consequences to it, including the consequences under laws other than U.S.
federal income tax laws, of an investment in preferred shares or ADSs.

        In this discussion, references to "ADSs" also refer to preferred shares,
references to a "U.S. holder" are to a holder of an ADS that is

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

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

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

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

Taxation of dividends

        A U.S. holder will recognize ordinary dividend income for U.S. federal
income tax purposes in an amount equal to the amount of any cash and the value
of any property distributed by us as a dividend to the extent that such
distribution is paid out of our current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes, when such distribution is
received by the custodian or by the U.S. holder, in the case of a holder of



                                       53
<PAGE>   57


preferred shares. To the extent that such a distribution exceeds our earnings
and profits, it will be treated as a nontaxable return of capital to the extent
of the U.S. holder's tax basis in the ADS and after as capital gain.

        The amount of any distribution will include the amount of Brazilian tax
withheld on the amount distributed and the amount of a distribution paid in
reais will be measured by reference to the exchange rate for converting reais
into U.S. dollars in effect on the date the distribution is received by the
custodian, or by a U.S. holder, in the case of a holder of preferred shares. If
the custodian or U.S. holder, in the case of a holder of preferred shares, does
not convert the reais into U.S. dollars on the date it receives them, it is
possible that the U.S. holder will recognize foreign currency loss or gain,
which would be ordinary loss or gain, when the reais are converted into U.S.
dollars. Dividends paid by us will not be eligible for the dividends received
deduction allowed to corporations under the Code.

        Distributions out of earnings and profits with respect to the ADSs
generally will be treated as dividend income from sources outside of the United
States and generally will be treated separately along with other items of
"passive" (or, in the case of certain U.S. holders, "financial services") income
for purposes of determining the credit for foreign income taxes allowed under
the Code. Subject to certain limitations, Brazilian income tax withheld in
connection with any distribution with respect to the ADSs may be claimed as a
credit against the U.S. federal income tax liability of a U.S. holder if the
U.S. holder elects for that year to credit all foreign income taxes, or such
Brazilian withholding tax may be taken as a deduction. Foreign tax credits will
not be allowed for withholding taxes imposed in respect of certain short-term or
hedged positions in securities or in respect of arrangements in which a U.S.
holder's expected economic profit, after non-U.S. taxes, is insubstantial. U.S.
holders should consult their own tax advisors concerning the implications of
these rules in light of their particular circumstances.

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

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

Taxation of capital gains

        Upon the sale or other disposition of an ADS, a U.S. holder will
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realized in consideration for the
disposition of the ADS (excluding the amount of any distribution paid to the
custodian but not distributed by the custodian prior to the disposition) and the
U.S. holder's tax basis in the ADS. The gain or loss generally will be subject
to U.S. federal income tax and will be treated as capital gain or loss.
Long-term capital gains recognized by an individual holder generally are subject
to a maximum rate of 20% in respect of property held for more than one year. The
deductibility of capital losses is subject to limitations. Gain realized by a
U.S. holder on a sale or disposition of ADSs generally will be treated as U.S.
source income. Consequently, if Brazilian tax is imposed on such gain, the U.S.
holder will not be able to use the corresponding foreign tax credit, unless the
holder has other foreign source income of the appropriate type in respect of
which the credit may be used.

        A non-U.S. holder will not be subject to U.S. federal income tax or
withholding tax on gain realized on the sale or other disposition of an ADS
unless

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

                -       the holder is an individual who is present in the United
                        States of America for 183 days or more in the taxable
                        year of the sale and certain other conditions are met.

U.S. backup withholding and information reporting

        Dividend payments on the ADSs and proceeds from the sale, exchange or
other disposition of ADSs may be subject to information reporting to the IRS and
possible U.S. backup withholding at a 31% rate. Backup



                                       54
<PAGE>   58


withholding will not apply, however, to a holder who furnishes a correct
taxpayer identification number or certificate of foreign status and makes any
other required certification or who is otherwise exempt from backup withholding.
Persons required to establish their exempt status generally must provide such
certification on IRS Form W-9 (Request for Taxpayer Identification Number and
Certification) in the case of U.S. persons and on IRS Form W-8 (Certificate of
Foreign Status) in the case of non-U.S. persons. Treasury Regulations have
generally expanded the circumstances under which information reporting and
backup withholding may apply for payments made after December 31, 2000 (the "New
Withholding Regulations").

        Amounts withheld as backup withholding may be credited against a
holder's U.S. federal income tax liability, and a holder may obtain a refund of
any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS and furnishing any required
information.

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

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

U.S. state and local taxes

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

F.      DIVIDENDS AND PAYING AGENTS

        Not applicable.

G.      STATEMENT BY EXPERTS

        Not applicable.

H.      DOCUMENTS ON DISPLAY

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

I.      SUBSIDIARY INFORMATION

        Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are primarily exposed to market risk from changes in both foreign
currency exchange rates and interest rates. We are exposed to foreign exchange
rate risk because certain of our costs and debt are denominated in currencies,
primarily the U.S. dollar, other than those in which we earn revenues (primarily
the real). Similarly, we are subject to market risk deriving from changes in
interest rates which may affect the cost of our financing. We do not use
derivative instruments, such as foreign exchange forward contracts, foreign
currency options, interest rate swaps and forward rate agreements, to manage
these market risks, nor do we hold or issue derivative or other financial
instruments for trading purposes.



                                       55
<PAGE>   59


EXCHANGE RATE RISK

        We have exchange rate exposure with respect to the U.S. dollar. At
December 31, 2000, R$213.3 million of our indebtedness was denominated in U.S.
dollars. The potential additional costs to us that would result from a
hypothetical 10% change in foreign currency exchange rates would be
approximately R$21.3 million.

INTEREST RATE RISK

        At December 31, 2000, we had approximately R$348.9 million in loans and
financing outstanding bearing interest at floating rates. We invest our excess
liquidity (R$164.7 million at December 31, 2000) mainly in short-term
instruments. The potential loss in earnings to us over one year that would have
resulted from a hypothetical, instantaneous and unfavorable change of 100 basis
points in the interest rates applicable to financial assets and liabilities on
December 31, 2000 would be approximately R$5.5 million.

        The above sensitivity analysis is based on the assumption of an
unfavorable 100 basis point movement of the interest rates applicable to each
homogeneous category of financial assets and liabilities and sustained over a
period of one year. A homogeneous category is defined according to the currency
in which financial assets and liabilities are denominated and assumes the same
interest rate movement within each homogeneous category (e.g., U.S. dollars). As
a result, our interest rate risk sensitivity model may overstate the impact of
interest rate fluctuations for such financial instruments as consistently
unfavorable movements of all interest rates are unlikely. See Notes 5 and 6 to
our consolidated financial statements for a description of our short- and
long-term debt.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

        Not applicable.

                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

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

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

        Not applicable.

ITEM 15. RESERVED

        Not applicable.

ITEM 16. RESERVED

        Not applicable.

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

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



                                       56
<PAGE>   60


ITEM 18. FINANCIAL STATEMENTS

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

Tele Norte Celular Participacoes S.A.

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

Financial Statement Schedules

See Note 18 to the Consolidated Financial Statements.



                                       F-1
<PAGE>   61


                         REPORT OF INDEPENDENT AUDITORS




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



We have audited the accompanying consolidated balance sheets of Tele Norte
Celular Participacoes S.A. as of December 31, 2000 and 1999, and the related
consolidated statements of income and comprehensive income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tele Norte Celular
Participacoes S.A. at December 31, 2000 and 1999, and the consolidated statement
of income and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.


                    Ernst & Young Auditores Independentes S/C




Brasilia, Brazil
March 30, 2001



                                      F-2

<PAGE>   62


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                       -------------------
                                                                                        2000         1999
                                                                                       -------     -------
<S>                                                                                    <C>          <C>

ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                              164,740      69,233
Trade receivables, net of allowance for doubtful accounts of R$36,048 and R$27,210     120,560      87,137
Income tax receivable                                                                    5,479       9,316
Deferred income taxes                                                                    5,030      11,329
Other current assets                                                                    33,421      19,341
                                                                                       -------     -------
                                                                                       329,230     196,356
                                                                                       -------     -------

Property, plant and equipment, net                                                     438,386     307,995
Deferred income taxes                                                                   73,511      64,810
Other non current assets                                                                 5,590         519
                                                                                       -------     -------
                                                                                       846,717     569,680
                                                                                       =======     =======

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                                       108,761      58,683
Accrued liabilities                                                                     21,506      21,019
Value added and other taxes payable                                                     11,639      10,680
Interest on capital and dividends payable                                                4,597       8,405
Short-term debt                                                                              -      36,942
Current portion of long term debt                                                       23,021      11,614
Other current liabilities                                                                2,711       5,800
                                                                                       -------     -------
                                                                                       172,235     153,143
                                                                                       -------     -------

Long term debt                                                                         325,879      77,514
Pension plan obligation                                                                  7,777       6,300
Provision for contingencies and other                                                    9,311      10,042
Minority interest                                                                       69,703      70,375
                                                                                       -------     -------
                                                                                       412,670     164,231
                                                                                       -------     -------

SHAREHOLDERS' EQUITY:
Preferred shares                                                                        36,552      36,266
Common shares                                                                           21,653      21,483
Other capital and reserves                                                             156,668     151,436
Retained earnings                                                                       46,939      43,121
                                                                                       -------     -------
                                                                                       261,812     252,306
                                                                                       -------     -------
                                                                                       846,717     569,680
                                                                                       =======     =======
</TABLE>


See the accompanying notes to the consolidated financial statements.



                                      F-3
<PAGE>   63


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                 ---------------------------------------
                                                                    2000           1999           1998
                                                                 ---------      ---------      ---------
<S>                                                              <C>            <C>            <C>
Revenues:
   Services provided to third parties                              356,713        275,323        206,629
   Services provided to related parties                                  -              -         25,926
   Sales of handsets                                               123,909         33,523              -
                                                                 ---------      ---------      ---------
                                                                   480,622        308,846        232,555
                                                                 ---------      ---------      ---------

Cost of services:
   Provided by related parties                                           -              -         29,004
   Other                                                           150,204        113,872         38,540
Cost of handsets                                                   133,114         36,927              -
Selling, general and administrative expenses                       144,561         90,626         51,913
Pension plan expense                                                 1,477          6,300              -
Bad debt expense                                                    24,760         28,084         38,428
Other net operating income                                          (3,647)          (710)        (1,688)
Impairment of long-lived assets                                          -              -         18,448
                                                                 ---------      ---------      ---------
Operating income                                                    30,153         33,747         57,910

Interest income                                                    (12,330)       (20,963)        (8,591)
Interest expense                                                    18,750          6,016          4,047
Foreign exchange (gain) loss                                        13,579         12,394          2,472
                                                                 ---------      ---------      ---------
Income before minority interest and taxes                           10,154         36,300         59,982
Income taxes                                                        (1,534)         8,347         16,897
Minority interest                                                    3,741          8,570         11,553
                                                                 ---------      ---------      ---------
Net income and comprehensive income                                  7,947         19,383         31,532
                                                                 ---------      ---------      ---------



                                                                 ---------      ---------      ---------
Basic and diluted earnings, in reais per thousand shares              0.02           0.06           0.09
                                                                 =========      =========      =========
</TABLE>


See the accompanying notes to the consolidated financial statements



                                      F-4
<PAGE>   64


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<CAPTION>
                                                                             Additional
                                        Divisional   Preferred     Common     Paid-In     Capital      Retained
                                          Equity       Shares      Shares     Capital     Reserves     Earnings       Total
                                         --------     --------    --------    --------    --------     --------     --------
<S>                                     <C>          <C>          <C>         <C>         <C>          <C>          <C>
BALANCE AT DECEMBER 31, 1997              157,192            -           -           -           -            -      157,192
                                         --------     --------    --------    --------    --------     --------     --------
Contributed capital from the Spin-Off       1,975            -           -           -           -            -        1,975
Allocation of divisional equity as a
result of Spin-Off                       (159,167)      36,266      21,483           -     101,418            -            -
Contributed capital                             -            -           -           -       1,200            -        1,200
Interest on capital                             -            -           -           -           -       (2,047)      (2,047)
Net income                                      -            -           -           -           -       31,532       31,532
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 1998                    -       36,266      21,483           -     102,618       29,485      189,852
                                         --------     --------    --------    --------    --------     --------     --------
Paid in capital - non cash                      -            -           -           -      48,818            -       48,818
Net income                                      -            -           -           -           -       19,383       19,383
Dividends                                       -            -           -           -           -       (1,724)      (1,724)
Interest on capital                             -            -           -           -           -       (4,023)      (4,023)
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 1999                    -       36,266      21,483           -     151,436       43,121      252,306
                                         --------     --------    --------    --------    --------     --------     --------
Additional  paid-in capital                     -            -           -       5,688           -            -        5,688
Net income                                      -            -           -           -           -        7,947        7,947
Capital increase                                -          286         170           -        (456)           -            -
Dividends                                       -            -           -           -           -       (4,129)      (4,129)
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 2000                    -       36,552      21,653       5,688     150,980       46,939      261,812
                                         ========     ========    ========    ========    ========     ========     ========
</TABLE>



See the accompanying notes to the consolidated financial statements



                                      F-5
<PAGE>   65


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                              2000           1999           1998
                                                                           ---------      ---------      ---------
<S>                                                                        <C>            <C>            <C>
Operating activities:
Net income                                                                     7,947         19,383         31,532
Adjustments to reconcile net income to net cash provided by operating
activities:
   Depreciation                                                               56,730         50,382         20,266
   Deferred income taxes                                                      (6,311)        (6,920)       (24,428)
   Minority interest                                                           3,741          8,570         11,553
   Unrealized foreign exchange loss on long-term debt                         11,340         10,702          1,700
   Pension plan expense                                                        1,477          6,300              -
   Provision for contingencies                                                  (937)           999          9,030
   Impairment of long-lived assets                                                 -              -         18,448
   Compensation expense                                                            -              -          1,200
Changes in operating assets and liabilities:
   Trade receivables                                                         (33,423)       (43,105)         9,611
   Accounts payable and accrued liabilities                                   60,368         46,821          4,864
   Accounts payable related to property, plant and equipment                       -              -        (14,121)
   Value added and other taxes payable                                           959          1,842          6,867
   Income taxes payable                                                            -        (21,504)        12,188
   Deferred activation fees                                                   (1,735)        (3,531)         5,266
   Other                                                                     (24,889)           180         (9,185)
                                                                           ---------      ---------      ---------
Net cash provided by operating activities                                     75,267         70,119         84,791
                                                                           ---------      ---------      ---------

Investing activities:
   Proceeds from sales of property, plant and equipment                            -              -          2,348
   Additions to property, plant and equipment                               (187,121)      (151,037)       (31,672)
                                                                           ---------      ---------      ---------
Net cash used in investing activities                                       (187,121)      (151,037)       (29,324)
                                                                           ---------      ---------      ---------

Financing activities:
   Increase in short-term debt                                                     -         46,342              -
   Increase in long-term debt                                                270,485         63,372         21,971
   Repayment of short-term debt                                              (36,942)        (9,400)             -
   Repayment of long-term debt                                               (22,053)       (24,149)        (8,525)
   Dividends                                                                  (4,129)        (5,747)             -
   Contribution upon Spin-Off                                                      -              -          1,975
                                                                           ---------      ---------      ---------
Net cash provided by financing activities                                    207,361         70,418         15,421
                                                                           ---------      ---------      ---------

Increase in cash and cash equivalents for the year                            95,507        (10,500)        70,888
Cash and cash equivalents, beginning of the year                              69,233         79,733          8,845
                                                                           ---------      ---------      ---------
Cash and cash equivalents, end of the year                                   164,740         69,233         79,733
                                                                           =========      =========      =========

Supplemental cash flow information:
   Income taxes paid                                                           2,599         24,520         29,229
   Interest paid                                                              15,878          3,945          2,343
</TABLE>



See the accompanying notes to the consolidated financial statements.



                                      F-6
<PAGE>   66


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


1.  BACKGROUND AND DESCRIPTION OF BUSINESS

    Beginning in 1995, the federal government of Brazil (the "Federal
    Government") undertook a comprehensive reform of the Brazilian regulation of
    the telecommunications industry. In July 1997, the Federal Congress adopted
    a General Telecommunications Law providing for the privatization of
    Telecomunicacoes Brasileiras S.A. ("Telebras") which, through its 28
    operating subsidiaries, was the primary supplier of public
    telecommunications services in Brazil ("Telebras System").

    In preparation for the privatization of the Telebras system, the operating
    subsidiaries were divided into twelve separate groups, (a) three regional
    fixed line operators, (b) eight regional cellular operators and (c) one
    national long-distance operator. The cellular telecommunications businesses
    were first separated from the operating subsidiaries, and subsequently the
    fixed line businesses, the new cellular businesses and the long-distance
    operator were combined into twelve separate groups (the "New Holding
    Companies", individually, "New Holding Company"). Both the separation of the
    cellular businesses and the subsequent grouping of the former Telebras
    subsidiaries were performed using a procedure under Brazilian corporate law
    called cisao (Spin-Off). As part of this process Tele Norte Celular
    Participacoes S.A. was formed on May 22, 1998, through the Spin-Off of
    certain assets and liabilities of Telebras, including 80.3%, 86.9%, 90.6%,
    69% and 66.8% of the share capital of Telamazon Celular S.A., Telaima
    Celular S.A., Teleamapa Celular S.A., Telepara Celular S.A. and Telma
    Celular S.A. (together the "subsidiaries"), respectively.

    Telamazon Celular S.A., Telaima Celular S.A., Teleamapa Celular S.A.,
    Telepara Celular S.A. and Telma Celular S.A. were formed on January 5, 1998
    and subsequently received on January 30, 1998 from Telecomunicacoes do
    Amazonas S.A. ("Telamazon"), Telecomunicacoes de Roraima S.A. ("Telaima"),
    Telecomunicacoes do Amapa S.A. ("Teleamapa"), Telecomunicacoes do Para S.A.
    ("Telepara") and Telecomunicacoes do Maranhao S.A. ("Telma") the assets and
    liabilities comprising their respective cellular telecommunications services
    (together the "predecessor companies"). Tele Norte Celular Participacoes
    S.A. and its subsidiaries (together the "Company") are the primary suppliers
    of cellular telecommunications services in the states of Amazonas, Roraima,
    Amapa, Para and Maranhao under the terms of concessions granted by the
    Federal Government on October 23, 1997 (the "Concessions"). The Concessions
    will expire in 2009 and may be renewed at the discretion of Agencia Nacional
    de Telecomunicacoes ("Anatel"), the regulatory authority for the Brazilian
    telecommunications industry, for a further term of 15 years. Through their
    predecessors Telamazon, Telaima, Teleamapa, Telepara and Telma, the Company
    has provided cellular telecommunications services in the states of Amazonas,
    Roraima, Amapa, Para and Maranhao since April 1994.

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

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

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



                                      F-7
<PAGE>   67


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


2.  PRESENTATION OF THE FINANCIAL STATEMENTS

    These consolidated financial statements have been prepared in accordance
    with accounting principles generally accepted in the United States and rules
    and regulations adopted by the United States Securities and Exchange
    Commission. Certain of the comparative figures have been reclassified to
    conform to the presentation adopted in the current year.

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

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

    The shareholders also approved a specific structure for the shareholders'
    equity of each New Holding Company, which included an allocation of a
    portion of the retained earnings of Telebras. This value of allocated
    retained earnings does not represent the historical retained earnings of the
    New Holding Companies and therefore is presented as "Capital Reserves" on
    the consolidated statements of changes in shareholders' equity. The net
    assets which were spun-off from Telebras, in addition to its investment in
    the operating subsidiaries, resulted in a net equity increase of R$1,975 in
    relation to the Company's historical divisional equity.

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

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

3.  SUMMARY OF ACCOUNTING POLICIES

    The summary of significant accounting policies is as follows:

    (a) Consolidation

        The consolidated financial statements include the accounts of the Tele
        Norte and the subsidiaries. All significant intercompany transactions
        and balances have been eliminated.

    (b) Cash equivalents

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



                                      F-8
<PAGE>   68


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    (c) Foreign currency transactions

        Transactions in foreign currency are recorded at the prevailing exchange
        rate at the time of the related transactions. Foreign currency
        denominated assets and liabilities are translated using the exchange
        rate at the balance sheet date. Exchange differences are recognized in
        the statements of operations as they occur.

    (d) Property, plant and equipment

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

<TABLE>
<CAPTION>
                                                                          Years
                                                                        ----------
<S>                                                                       <C>
        Buildings                                                           20
        Network equipment                                                 5 to 8
        Other equipment                                                   5 to 10
</TABLE>

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

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

    (e) Revenue recognition

        Revenues for services are recognized when the service is provided or
        when the equipment is sold, respectively. Revenues from cellular
        telephone services consist of subscription charges, usage charges,
        activation fees, network usage charges and charges for maintenance and
        other customer services. Unbilled revenues from the billing date to the
        month-end are estimated and recognized as revenue during the month in
        which the service was provided. Effective January 1, 1998, the Company
        defers net activation fees. These fees are amortized over twelve months,
        the estimated effective contract life. Revenues from equipment sales
        refer to sales of handsets.

        The Company began selling prepaid cards during 1999. The revenue from
        the sales of these cards is recognized according to the minutes used for
        each card. Revenue from unused minutes is deferred until used. Because
        the amount deferred is immaterial, it has been included in other
        liabilities.

    (f) Pension and other post-retirement benefits

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



                                      F-9
<PAGE>   69


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    (g) Use of estimates

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

    (h) Advertising costs

        Advertising costs are expensed as incurred and included in selling,
        general and administrative expenses. They amounted to R$12,481, R$12,390
        and R$930 for the years ended December 31, 2000, 1999 and 1998,
        respectively.

    (i) Stock-Based Compensation

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

    (j) New accounting pronouncements

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

        In June 1998, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 133,
        "Accounting for Derivative Instruments and Hedging Activities". SFAS 133
        establishes new accounting and reporting standards for derivative
        financial instruments and for hedging activities. SFAS 133 requires
        companies to measure all derivatives at fair value and to recognize them
        in the balance sheet as an asset or liability, depending on the
        company's rights or obligations under the applicable derivative
        contract. In June 1999, the FASB issued SFAS No. 137, which deferred the
        effective date of adoption of SFAS 133 for one year. The Company will
        adopt SFAS 133 no later than the first quarter of fiscal year 2001. The
        estimated effect will be R$3,100.

    (k) Swaps

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

    (l) Reclassifications

        Certain amounts were reclassified to conform to the 2000 presentation.



                                      F-10
<PAGE>   70


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


4.  PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                    Accumulated        Carrying
                                                       Cost         Depreciation        Value
                                                     --------       ------------       ---------
<S>                                                  <C>            <C>                <C>
   DECEMBER 31, 1999
   Land and buildings                                   4,966              544            4,422
   Network equipment                                  265,504          100,022          165,482
   Other equipment                                     71,010            9,525           61,485
   Construction-in-progress                            76,606                -           76,606
                                                     --------         --------         --------
                                                      418,086          110,091          307,995
                                                     ========         ========         ========

   DECEMBER 31, 2000
   Land and buildings                                   5,984              635            5,349
   Network equipment                                  377,230          135,685          241,545
   Other equipment                                    107,820           30,501           77,319
   Construction-in-progress                           114,173                -          114,173
                                                     --------         --------         --------
                                                      605,207          166,821          438,386
                                                     ========         ========         ========
</TABLE>


    The amount of interest capitalized as part of property, plant and equipment
    is R$8,895 and R$2,623 for the years ended December 31,2000 and 1999,
    respectively.

5.  SHORT-TERM DEBT

<TABLE>
<CAPTION>
                                                                  INSTITUTION         2000             1999
                                                                  -----------      -----------      -----------
<S>                                                               <C>              <C>              <C>
   Reais facilities, due in quarterly installments until
   November 2000 with annual interest of 6.7% over the
   Long-term Interest Rate (TJLP - 12.5% at December 31,
   1999)                                                           BNDES (1)            -              36,942
                                                                                   -----------      -----------
   Total                                                                                -              36,942
                                                                                   ===========      ===========
</TABLE>

6.  LONG-TERM DEBT


<TABLE>
<CAPTION>
                                                                   INSTITUTION           2000             1998
                                                                   -----------       -----------      -----------
<S>                                                                <C>               <C>              <C>
   U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through March 2003, interest at LIBOR          ABN AMRO/
   plus 0.4%.                                                        Ericsson            25,310          32,643

   U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through December 2004, interest at LIBOR
   plus 5.75%.                                                        EDC (2)            48,885          45,450

   U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through September 2003, interest at LIBOR      BBA Bank/
   plus 4.15%.                                                       Ericsson            41,062               -

   U.S. dollar denominated, unsecured, interest at LIBOR plus
   3.925%, interest and principal due semi-annually beginning
   in April 2002 until October 2005.                                 OPIC (3)            97,790               -
</TABLE>



                                      F-11
<PAGE>   71


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<CAPTION>
                                                                  INSTITUTION         2000             1999
                                                                  -----------      -----------      -----------
<S>                                                               <C>              <C>              <C>
   Reais facilities, interest at LIBOR plus 3.8%, interest and
   principal due quarterly beginning in October 2001 until
   December 2005.                                                   BNDES (1)           135,577               -

   Other                                                                                    276          11,035
                                                                                   ------------     -----------
   Total                                                                                348,900          89,128
   Less current portion                                                                 (23,021)        (11,614)
                                                                                   ------------     -----------
   Long-term portion                                                                    325,879          77,514
                                                                                   ============     ===========
</TABLE>


    (1) BNDES - National Bank for Economic and Social Development

    (2) EDC - Export and Development Corporation

    (2) OPIC - Overseas Private Investment Corporation


        Minimum annual principal repayments of all long-term debt during the
        next five years are as follows:

<TABLE>
<S>                                                                      <C>
   2002                                                                   81,520
   2003                                                                  115,304
   2004                                                                   70,605
   2005 and after                                                         58,450
                                                                        --------
   Total                                                                 325,879
                                                                        ========
</TABLE>

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

    The contract with BNDES is secured by accounts receivable.

7.  CAPITAL STOCK

    The capital stock of the Company is comprised of preferred shares and common
    shares, all without par value. The Company has 700,000,000 thousand shares
    authorized, (including both preferred and common shares). At December 31,
    2000, there were 210,189,114 thousand outstanding preferred shares
    (210,029,997 thousand at December 31, 1999) and 124,463,251 thousand
    outstanding common shares (124,369,030 at December 31, 1999). The capital
    may be increased by a decision taken at a shareholders' meeting or by the
    Board of Directors in connection with the capitalization of profits or
    reserves, provided that the amounts were allocated for capital increases at
    a previous shareholders' meeting.

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

    Under the Brazilian Corporate Law, the number of non-voting shares or shares
    with limited voting rights, such as the preferred shares, may not exceed
    two-thirds of the total number of outstanding shares.



                                      F-12
<PAGE>   72


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    As part of the privatization of Telebras, the Brazilian Federal Government
    offered Telebras' employees the right to purchase, at a discounted price,
    the Federal Government's entire holding of Telebras preferred shares and the
    preferred shares of each of the New Holding Companies created as a result of
    the Spin-Off. The period during which employees could subscribe for the
    shares began on August 4, 1998, and expired on October 30, 1998. In 1998,
    the Company recorded compensation expense and contributed capital in the
    amount of R$1,200 related to this offer.

    At December 31, 2000 the Company has reserved 872,697 shares of preferred
    stock for issuance in connection with the stock option plans - see Note 17

    Dividends

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

    For the purposes of the Brazilian Corporate Law, and in accordance with the
    Company's by-laws, the "Adjusted Net Income" is an amount equal to the
    Company's net profits under Brazilian GAAP adjusted to reflect allocations
    to or from (i) the legal reserve, (ii) a contingency reserve for anticipated
    losses, if any, and (iii) an unrealized revenue reserve, if any. Under
    Brazilian Corporate Law, the Company is required to appropriate 5% of its
    annual earnings, calculated using Brazilian GAAP, after absorbing
    accumulated losses, to a legal reserve, which is restricted as to
    distribution. This reserve may be used to increase capital or to absorb
    losses, but may not be distributed as dividends. At December 31, 2000, the
    Company's financial statements, prepared using Brazilian GAAP, presented an
    unconsolidated total equity of R$258,324 including a legal reserve of
    R$7,311.

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

    Paid in Capital

    On December 28, 1999, the shareholders approved a legal reorganization
    whereby a major shareholder contributed certain assets to the Company
    resulting in future tax benefits. This asset will result in amortization
    expense and a related tax benefit. For US GAAP purposes, in accordance with
    EITF 94-10, tax effects caused by transactions with shareholders were not
    included in the Company's income statement but rather in equity. Therefore,
    the Company recorded a deferred tax asset of R$48,818 with an offsetting
    amount as Paid in Capital. The deferred tax asset will be realized as the
    tax benefits are recognized for local tax purposes over a period of up to 10
    years.

    In accordance with Brazilian corporate law, the Company may issue shares
    (pro rata both common and preferred) based on the different pricing criteria
    permitted by such law to the contributing shareholder for the amount of the
    tax benefits recognized by the Company. However, the minority shareholders
    will be given the



                                      F-13
<PAGE>   73


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    right to purchase their pro-rata share of this capital stock increase in
    order to prevent dilution. In case they do not accept the offer, these
    shares will be issued to the majority shareholders. Additionally, the
    Company has to ensure that shareholders will receive the minimum dividend
    required by law if the amortization expense results in accumulated losses.

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

    See also Note 10.

8.  EARNINGS PER SHARE

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

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

    Basic earnings per common share are computed by reducing net income by
    distributable and undistributable net income available to preferred
    shareholders and dividing net income available to common shareholders by the
    weighted-average number of common shares outstanding during the period. Net
    income available to preferred shareholders is the sum of the preferred
    dividends distributable net income, and the preferred shareholders' portion
    of undistributed net income.

    Undistributed net income is computed by deducting preferred dividends and
    common dividends from net income. Undistributed net income is shared
    equally, on a per share basis, by the preferred and common shareholders.

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

<TABLE>
<CAPTION>
                                                                       2000             1999              1998
                                                                  ------------      ------------      ------------
<S>                                                               <C>               <C>               <C>
   Numerator:
      Net income                                                         7,947            19,383            31,532
      Less: Distributable net income available to preferred
      stockholders                                                      (2,193)           (2,176)           (2,176)
         Undistributed net income allocated to preferred
         stockholders                                                   (2,798)           (9,998)          (17,629)
                                                                  ------------      ------------      ------------
   Numerator for basic and diluted earnings per thousand
      shares-income available to common stockholders                     2,956             7,209            11,727
                                                                  ------------      ------------      ------------
   Denominator:
   Basic and diluted weighted-average number of common shares
      (in thousands)                                               124,463,251       124,369,031       124,369,031
                                                                  ------------      ------------      ------------
   Basic and diluted earnings, in reais per thousand common
      shares                                                              0.02              0.06              0.09
                                                                  ============      ============      ============
</TABLE>



                                      F-14
<PAGE>   74


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


9.  INCOME TAXES

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

    Following is the detail of income tax expense for the years ended December
    31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                            2000         1999         1998
                                                          --------     --------    ----------
<S>                                                       <C>          <C>         <C>
   Federal income tax charge                                4,391       12,543       31,150
   Social contribution tax charge                             386        2,724       10,175
   Deferred taxes                                          (6,311)      (6,920)     (24,428)
                                                          -------      -------     --------
   Income tax expense as reported in the accompanying
   financial statements                                    (1,534)       8,347       16,897
                                                          =======      =======     ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                     2000          1999          1998
                                                                   --------      --------      --------
<S>                                                                <C>           <C>           <C>
   Tax charge at the combined statutory rate                         3,452        13,431        19,794
      Tax incentive                                                 (1,480)            -             -
      Non-deductible expenses (non taxable income) and others       (2,965)       (2,436)       (2,897)
      Interest on capital                                             (541)       (2,648)            -
                                                                   -------       -------       -------
      Income tax expense as reported in the accompanying
      financial statements                                          (1,534)        8,347        16,897
                                                                   =======       =======       =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                        2000             1999
                                                                                      --------         --------
<S>                                                                                   <C>              <C>
   Deferred tax assets:
       Income taxes losses carry forwards                                               4,739                -
       Assets related to paid in capital                                               43,824           48,818
       Impairment of equipment                                                          1,816            9,160
       Accrued expenses and provision for contingencies                                18,998           10,682
       Allowance for doubtful accounts                                                 12,256           10,164
       Capitalized interest                                                             1,810            3,427
                                                                                      -------          -------
                                                                                       83,443           82,251

   Deferred tax liabilities:
       Cumulative indexation differences                                               (4,902)          (6,112)
                                                                                      -------          -------
       Net deferred tax assets                                                         78,541           76,139
                                                                                      =======          =======
       Current portion                                                                  5,030           11,329
       Long-term deferred income taxes                                                 73,511           64,810
                                                                                      -------          -------
       Net deferred tax assets                                                         78,541           76,139
                                                                                      =======          =======
</TABLE>



                                      F-15
<PAGE>   75


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    As further explained in Note 7, the total tax of R$48,818 related to
    deferred asset was credited to paid in capital in the shareholders' equity
    section.

10. TRANSACTIONS WITH RELATED PARTIES

    (a) Empresa Brasileira de Telecomunicacoes S.A.

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

    (b) Telesystem International Wireless

        Telesystem International Wireless - TIW, the parent company of the 49%
        owner of Telpart S.A., the Company's major shareholder, provided the
        Company with technical assistance and services from August 4, 1998 until
        the end of 2000. Amounts accrued for such services were approved by the
        Company's Board of Directors and totaled R$22,844, R$9,646, and R$3,656
        in 2000, 1999 and 1998, respectively.

        The Company, after consulting with legal counsel, decided not to pay the
        amounts accrued for technical assistance and services described above.
        This was because Brazilian Corporate Law and the Company's by-laws
        require that payment for such services must be approved by the
        shareholders. However such shareholder approval did not occur.
        Accordingly, the amounts owed to TIW for technical assistance and
        services at December 31, 2000 of R$5,688 net of the related tax effect
        of R$2,930 were credited to paid-in capital.

        At December 31, 2000 and 1999, the Company has liabilities payable to
        TIW for approximately R$10,860 and R$5,581, respectively, related to
        expenses (principally, salaries and benefits) charged by TIW to the
        Company. Certain of those amounts are being disputed by the Company.

    (c) Latinvest Asset Management

        At December 31, 2000 the Company has cash equivalents of R$25,432
        deposited in Latinvest Red, an investment fund managed by Latinvest
        Asset Management, a shareholder of the Company. This cash investment
        earns interest ranging from 16% to 23% and interest income related to
        this cash equivalent amounts to R$432.

11. IMPAIRMENT OF LONG-LIVED ASSETS

    During the fourth quarter of 1998, the Company recorded a write-down of
    certain of its analog transmission network equipment amounting to R$18,448.

    In 1998, the Ministry of Communications granted to a newly formed consortium
    an additional license to provide enhanced services in the Company's
    concession area in the form of digital cellular services. The commercial
    operation of the consortium began in 1999. The introduction of competition
    with digital capacity in



                                      F-16
<PAGE>   76


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    the Company's market has resulted in an acceleration of its plan to replace
    its existing analog equipment with more modern digital equipment.

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

12. PENSION PLAN AND OTHER POST-RETIREMENT BENEFIT PLANS

    The Company, together with substantially all of the other companies in the
    former Telebras group, participates in a multi-employer defined benefit
    pension plan and other post-retirement benefit plans administered by the
    Fundacao Sistel de Seguridade Social ("Sistel"), a minority shareholder.

    Effective 2001, the plan was modified and changed into a multiple employer
    pension plan with respect to active employees. The plan assets and
    liabilities related to active employees were transferred into a new plan and
    the benefits remained unchanged. The post-retirement benefit plans remained
    as unchanged as multi-employer plans.

    Substantially all of Company's employees are covered by these plans. The
    Company contributed R$1,069 and R$786 in 1999 and 1998, respectively, with
    respect to pension fund and post-retirement plan contributions. The Company
    contributed R$68 in 2000 with respect to the multi-employer plans.

    In 1999, Sistel approved changes to the plan statutes resulting in the break
    up of plan assets and liabilities related to the active participants of each
    sponsor. Sistel did not break up plan assets and liabilities related to
    inactive participants and, thus, the Company will continue to sponsor the
    Sistel plan for such inactive participants.

    At December 31, 1999 the Company recorded its estimated portion of the
    unfunded pension liability of R$6,300.

    The pension benefit is generally defined as the difference between (i) 90%
    of the retiree's average salary during the last 36 months indexed to the
    date of retirement and (ii) the value of the retirement pension paid by the
    Brazilian social security system. For retired employees the initial pension
    payment is subsequently adjusted upwards to recognize cost of living
    increases and productivity awards granted to active employees. In addition
    to the pension supplements, post-retirement health care and life insurance
    benefits are provided to eligible pensioners and their dependents.

    Contributions to the plans are based on actuarial studies prepared by
    independent actuaries. The actuarial studies are revised periodically to
    identify whether adjustments to the contributions are necessary.

    The change in plans assets and benefit obligation, and the annual pension
    cost of the multiple employer pension plan for the active employees plan and
    the related actuarial assumptions for the year ended December 31, 2000 are
    as follows:



                                      F-17
<PAGE>   77


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<S>                                                           <C>
   Change in plan assets
   ---------------------

   Fair value of plan assets at beginning of year              8,927
   Actual return on plan assets                                1,026
   Sponsors' contributions                                       987
   Benefits and expenses paid                                  (523)
                                                             -------
   Fair value of plan assets at end of year                   10,417
                                                             =======

   Change in benefit obligations
   -----------------------------

   Benefit obligation at beginning of year                     6,300
   Net period cost                                             1,477
   Actuarial (gains) losses                                      523
   Benefits and expenses paid                                  (523)
                                                             -------
   Benefit obligation at end of year                           7,777
                                                             =======

   Components of Annual pension cost
   ---------------------------------

   Net service cost                                            1,051
   Interest cost                                               1,303
   Expected return on assets                                   (877)
                                                             -------
   Net periodic pension cost                                   1,477
                                                             =======
</TABLE>

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

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

    The above rates exclude inflation.

13. COMMITMENTS

    At December 31, 2000, the Company has capital expenditure commitments of
    R$17,200 related to the continuing expansion and modernization of the
    network.

    The Company rents equipment and premises through a number of operating lease
    agreements that expire at different dates. Total rent expense under these
    agreements was R$6,753, R$4,491 and R$4,254 for the years ended December 31,
    2000, 1999 and 1998, respectively.

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



                                      F-18
<PAGE>   78


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


<TABLE>
<S>                                                                     <C>
   Year ending December 31,
   2001                                                                   6,585
   2002                                                                   5,947
   2003                                                                   5,052
   2004                                                                   3,481
   2005 and after                                                         6,090
                                                                        -------
   Total minimum payments                                                27,155
                                                                        =======
</TABLE>

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

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

14. CONTINGENCIES

    ICMS tax on monthly fees and activation fees

    The Company believes that the ICMS (Imposto sobre Circulacao de Mercadorias
    e Servicos), a state value-added tax, relates to telecommunications
    services, and therefore the application of ICMS on monthly fees, activation
    fees and additional services lacks legal support, as these do not constitute
    telecommunications services. During the fourth quarter of 1998, the Company
    filed an injunction with the State Treasury Department of each of the five
    states in which it operates and therefore stopped remitting to the state
    governments the ICMS on monthly fees and additional services.

    On December 31, 2000, based upon their tax consultants' opinion, the
    subsidiaries decided to record a provision for contingencies. The provisions
    mentioned above are R$38,654 net of escrow deposits in the amount of
    R$30,235 consolidated (R$15,501 in 1999).

    Other litigation

    The Company is subject to legal proceedings, administrative proceedings and
    claims of various types in the ordinary course of its business for which an
    accrual of R$686 and R$2,631 for 2000 and 1999, respectively, have been
    recorded in these accompanying consolidated financial statements. In
    management's opinion, the ultimate settlements, if any, will not have any
    additional significantly adverse effect on the Company's financial condition
    or results of operations.

15. FINANCIAL INSTRUMENTS

    (a) Fair value of financial assets and liabilities

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



                                      F-19
<PAGE>   79


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


        The fair value information as of December 31, 2000 and 1999 presented
        below is based on pertinent information available to management as of
        those dates.

<TABLE>
<CAPTION>
                                               2000                           1999
                                    -------------------------       -------------------------
                                    BOOK VALUE     FAIR VALUE       BOOK VALUE     FAIR VALUE
                                    ----------     ----------       ----------     ----------
<S>                                 <C>            <C>              <C>            <C>
        Short term debt                    -                          36,942          36,942
        Long-term debt               348,900         349,432          89,128          89,128
</TABLE>

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

    (b) Concentration of risks

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

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

16. SWAPS

    At December 31, 2000 the Company had entered into swaps whereby the Company
    earns the exchange variation between the United States dollars and the
    Brazilian Real plus 13.90% to 14.90% and pays interest based on a short term
    inter bank rate. These agreements have total notional amount of R$23,900 and
    expire on various dates through 2005. The estimated fair value at December
    31, 2000 was R$1,900.

17. STOCK-BASED COMPENSATION

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

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

    (b) The second plan covers key executives (who also participate in the first
    plan) and other employees. Options granted under this plan relate to
    preferred stock and are exercisable at the market price at the date of
    grant. The vesting period is 20% during the second year, 60% during the
    third year and 100% during the fourth year. At December 31, 2000 872,697
    options have been granted and none have been exercised as the vesting period
    had not begun.

    Pro forma information regarding net income and earnings per share is
    required by Statement 123, and has been determined as if the Company had
    accounted for its employee stock options under the fair value method of that



                                      F-20
<PAGE>   80


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    Statement. The fair value for these options was estimated at the date of
    grant using a Black-Scholes option pricing model with the following
    weighted-average assumptions for 2000: risk-free interest rates of 6%
    dividend yields of 6%; volatility factors of the expected market price of
    the Company's preferred stock of 1.056; and a weighted-average expected life
    of the option of 7 years.

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

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

<TABLE>
<S>                                                                           <C>
   Pro forma net income:                                                      R$   7,919
   Pro forma basic and diluted earnings per thousand shares:                  R$    0.02
</TABLE>

18. OTHER INFORMATION

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

<TABLE>
<CAPTION>
                                               2000             1999             1998
                                           ------------     ------------     -----------
<S>                                        <C>              <C>              <C>
Balance at beginning of period                27,210           18,220            9,696
Charged to cost and expenses                  24,760           28,084           38,428
Write-off and recoveries                     (15,922)         (19,094)         (29,904)

Balance at end of period                      36,048           27,210           18,220
</TABLE>

19. SUBSEQUENT EVENTS

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

    (a) Contribution for the Fund of Globalization of Telecommunications
        Services - "Fust"

        Fust was established by Law 9,998 of August 17, 2000, in order to
        provide resources to cover the cost installment attributed to the
        accomplishment of obligations for globalization of telecommunication
        services that cannot be recovered with efficient service exploration or
        that is not responsibility of the concessionaire.

        The contribution to this Fund started on January 2, 2001, by all
        telecommunications services companies at the rate of 1% of the amount of
        gross operating telecommunications services revenue.



                                      F-21
<PAGE>   81


                      TELE NORTE CELULAR PARTICIPACOES S.A.

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


    (b) Contribution for the Fund of Telecommunications Technological
        Development - "Funttel"

        Funttel was established by Law 10,052 of November 28, 2000, in order to
        estimulate the process of technological innovation, enhance the human
        resources capacity, generate new jobs and promote access by small and
        medium companies to capital resources, in order to increase the
        competitiveness of the Brazilian Telecommunications Industry.

        The contribution of Funttel began on March 28, 2001, by all
        telecommunications services companies at the rate of 0.5% of the amount
        of gross operating telecommunications services revenue.



                                      F-22

<PAGE>   82


                      GLOSSARY OF TELECOMMUNICATIONS TERMS

access charge:                  Amount paid per minute charged by network
                                operators for the use of their network by other
                                network operators. Also known as an
                                "interconnection charge" or "network usage
                                charge."

access gates:                   The points of interface between the network
                                equipment (either dedicated or switched) and the
                                transmission media that connect network
                                equipment to the end user. The quantity of
                                service is directly related to the quantity of
                                network access gates.

AMPS (Advanced Mobile Phone     An analog cellular telecommunications services
Service):                       standard utilizing the 850 MHz band in use in
                                North America, parts of South America, Australia
                                and various other areas.

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

base station:                   A radio transmitter/receiver that maintains
                                communications with the cellular telephones
                                within a given cell. Each base station in turn
                                is interconnected with other base stations and
                                with the public switched telephone network.

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

cell:                           The geographic area covered by a single base
                                station in a cellular telecommunications system.

cell splitting:                 The process of dividing cells into smaller
                                coverage areas by reducing the power output and
                                the antenna height of the base station
                                transmitter. Cell splitting increases capacity
                                in a particular area by allowing for the further
                                reuse of frequencies by a cellular
                                telecommunications system.

cellular service:               A mobile telecommunications service provided by
                                means of a network of interconnected low-powered
                                base stations, each of which covers one small
                                geographic cell within the total cellular
                                telecommunications system service area.

channel:                        One of a number of discrete frequency ranges
                                utilized by a base station.

digital:                        A mode of representing a physical variable such
                                as speech using digits 0 and 1 only. The digits
                                are transmitted in binary form as a series of
                                pulses. Digital transmission and switching
                                technologies employ a sequence of discrete,
                                distinct pulses to represent information, as
                                opposed to continuous analog signal. Digital
                                networks allow for higher capacity and higher
                                flexibility through the use of computer-related
                                technology for the transmission and manipulation
                                of telephone calls. Digital systems offer lower
                                noise interference and can incorporate
                                encryption as a protection from external
                                interference.

exchange:                       See Switch.

internet:                       A collection of interconnected networks spanning
                                the entire world, including university,
                                corporate, government and research networks from
                                around the globe. These networks all use the IP
                                (Internet Protocol) communications protocol.



                                      G-1

<PAGE>   83


local loop:                     The system used to connect the subscriber to the
                                nearest switch. It generally consists of a pair
                                of copper wires but may also employ fiber-optic
                                circuits, microwave links or other technologies.

microcells:                     A small cell covered by a low-power base
                                station. Microcells can cover small areas such
                                as a single building.

network:                        An interconnected collection of elements. In a
                                telephone network, these consist of switches
                                connected to each other and to customer
                                equipment. The transmission equipment may be
                                based on fiber optic or metallic cable or
                                point-to-point radio connections.

network usage charge:           Amount paid per minute charged by network
                                operators for the use of their network by other
                                network operators. Also known as an "access
                                charge" or "interconnection charge."

optical fiber:                  A transmission medium which permits extremely
                                high capacities. It consists of a thin strand of
                                glass that provides a pathway along which waves
                                of light can travel for telecommunications
                                purposes.

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

penetration:                    The measurement of the take-up of services. At
                                any date, the penetration is calculated by
                                dividing the number of subscribers by the
                                population to which the service is available and
                                multiplying the quotient by 100.

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

roaming:                        A function that enables subscribers to use their
                                cellular telephones on networks of service
                                providers other than the one with which they
                                signed their initial contract.

satellite services:             Satellites are used, among other things, for
                                links with countries that cannot be reached by
                                cable or to provide an alternative to cable and
                                to form closed user networks.

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

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

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



                                      G-2

<PAGE>   84


                                   SIGNATURES

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


                             TELE NORTE CELULAR PARTICIPACOES S.A.


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


DATE: June 29, 2001



<PAGE>   85


ITEM 19. EXHIBITS

<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           ----
<S>                                                                                        <C>
1.      Charter of Tele Norte Celular Participacoes S.A. ......................................*

2(a).   Amended and Restated Deposit Agreement dated as of November 2, 1998
        among Tele Norte Celular Participacoes S.A., The Bank of New York, as
        depositary and owners and beneficial owners of American Depositary
        Receipts..............................................................................**

2(b).   Not applicable.

2(c).   Not applicable.

3.      Not applicable.

4(a).   Standard Concession Agreement for Mobile Cellular Service............................***

4(b).   Cellular System Agreement dated September 27, 1998 between Tele Norte
        Celular Participacoes S.A., and Ericsson Telecomunicacoes S.A. ......................E-2

4(c).   U.S.$15.1 million Private Instrument for Financing, Debt Assumption and
        other Agreements dated March 31, 1998 between Ericsson Telecomunicacoes
        S.A. and Telamazon Celular S.A. (now known as Amazonia Celular S.A. -
        Amazonas) (together with Private Agreement for the Assignment of Credit
        and Other Adjustments dated August 25, 2000 among Ericsson
        Telecomunicacoes S.A., ABN AMRO Brasil Participacoes S.A., Telamazon
        Celular S.A. and Telebras)..........................................................E-33

4(d).   U.S.$25 million Credit Agreement dated December 20, 1999 among Telepara
        Celular S.A., Telamazon Celular S.A., Telma Celular S.A., Teleamapa
        Celular S.A., Telaima Celular S.A., Tele Norte Celular Participacoes
        S.A., the Export Development Corporation and others.................................E-44

4(e).   U.S.$10.5 million Private Instrument for Debt Assumption, Assignment and
        Transfer dated September 27, 2000 among Telepara Celular S.A., Tele
        Norte Celular Participacoes S.A., Banco BBA Creditanstalt S.A. and
        Ericsson Telecomunicacoes S.A. ....................................................E-112

4(f)    U.S.$10.5 million Private Instrument for Debt Assumption, Assignment and
        Transfer dated September 27, 2000 among Telepara Celular S.A., Tele
        Norte Celular Participacoes S.A., Banco Santander Brasil S.A. and
        Ericsson Telecomunicacoes S.A. ....................................................E-117

4(g).   U.S.$50 million Credit Agreement dated October 20, 2000 among Telepara
        Celular S.A., Telamazon Celular S.A., Telma Celular S.A., Teleamapa
        Celular S.A., Telaima Celular S.A., Tele Norte Celular Participacoes
        S.A., Banco Citibank S.A. and others...............................................E-121

4(h).   R$162.6 million Credit Agreement dated December 14, 2000 between
        Amazonia Celular S.A. - Maranhao and BNDES.........................................E-177

5.      Not applicable.

6.      Computation of earnings per share (See Note 8 to the consolidated
        financial statements)

7.      Not applicable

8.      List of subsidiaries (See "Item 4. Information on the Company - A.
        History and development of the company - The Registrant and its
        operating subsidiaries")

9.      Not applicable.

10.     None.
</TABLE>

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

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

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



                                      E-1
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1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                    FORM 20-F
                               ------------------

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

                                      OR

[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR

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

                  For the transition period from          to

                        Commission File Number 001-14479

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

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

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

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

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

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

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

 SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT.
TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
      -------------------                    -----------------------------------------
Preferred Shares without par value                   New York Stock Exchange*
  Depositary Shares, each representing                 New York Stock Exchange
  50,000 Preferred Shares
-------------------------
* Not for trading, but only in connection with the registration of American
  Depositary Shares on the New York Stock Exchange.

 SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      None

    SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION
                               15(d) OF THE ACT:

                                      None

INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL
REPORT:

          Common Shares, without par value          124,463,251,798

          Preferred Shares, without par value       210,189,114,585

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                                    YES  X  NO
                                        ---    ---
INDICATE BY CHECK MARK WHICH FINANCIAL STATEMENT ITEM THE REGISTRANT HAS ELECTED
TO FOLLOW:

                               ITEM 17     ITEM 18  X
                                       ---         ---

================================================================================
2

                                TABLE OF CONTENTS
PAGE
                                                                                           ----
PART I.......................................................................................1
     ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS...........................1
     ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.........................................1
     ITEM 3. KEY INFORMATION.................................................................1
     ITEM 4. INFORMATION ON THE COMPANY......................................................8
     ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................................24
     ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................................34
     ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............................38
     ITEM 8. FINANCIAL INFORMATION..........................................................40
     ITEM 9. THE OFFER AND LISTING..........................................................42
     ITEM 10. ADDITIONAL INFORMATION........................................................45
     ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................55
     ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITES.........................56

PART II.....................................................................................56
     ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...............................56
     ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS..56
     ITEM 15. RESERVED......................................................................56
     ITEM 16. RESERVED......................................................................56

PART III....................................................................................56
     ITEM 17. FINANCIAL STATEMENTS..........................................................56
     ITEM 18. FINANCIAL STATEMENTS.........................................................F-1
              GLOSSARY OF TELECOMMUNICATIONS TERMS.........................................G-1
     ITEM 19. EXHIBITS.....................................................................E-1
-----------------

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

        The Registrant is one of the companies formed as a result of the breakup
of Telecomunicacoes Brasileiras S.A.--Telebras, commonly referred to as
"Telebras," by the federal government of Brazil in May 1998. Each of the
subsidiaries was formed in January 1998 by spinning off the cellular
telecommunications operations of operating companies controlled by Telebras,
which we refer to in this annual report as the "predecessor companies."
References to our operations prior to January 1998 are to the cellular
operations of the predecessor companies. See "Item 4--Information on the
Company--Historical Background" for a description of the breakup of Telebras.

        References in this annual report to:

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

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

        This annual report contains forward-looking statements. Statements that
are not statements of historical fact, including statements about our beliefs
and expectations, are forward-looking statements. The words

                                       i
3

"anticipates," "believes," "estimates," "expects," "forecasts," "intends,"
"plans," "predicts," "projects," and "targets" and similar words are intended
to identify these statements, which necessarily involve known and unknown risks
and uncertainties. Accordingly, our actual results of operations may be
different from our current expectations, and the reader should not place undue
reliance on these forward-looking statements. Forward-looking statements speak
only as of the date they are made, and we do not undertake any obligation to
update them in light of new information or future developments.

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

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

                                       ii
4

                                    PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3.  KEY INFORMATION

A.      SELECTED FINANCIAL DATA

BACKGROUND

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

        On May 22, 1998, in preparation for the privatization, Telebras was
restructured to form twelve new holding companies, including the Registrant. The
restructuring of Telebras was accomplished by means of a procedure under
Brazilian law called cisao, or split-up. Virtually all the assets and
liabilities of Telebras were allocated to the new holding companies. In the
breakup, some assets and liabilities of Telebras, including 80.3% of the total
share capital of Amazonia Celular S.A. - Amazonas (formerly known as Telamazon
Celular), 86.9% of Amazonia Celular S.A. - Roraima (formerly known as Telaima
Celular), 90.6% of Amazonia Celular S.A. - Amapa (formerly known as Teleamapa
Celular), 69.1% of Amazonia Celular S.A. - Para (formerly known as Telepara
Celular) and 66.8% of Amazonia Celular S.A. - Maranhao (formerly known as Telma
Celular) were transferred to us.

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

        Upon its creation, the Registrant received, in addition to the shares of
its subsidiaries, assets of Telebras consisting primarily of cash. As a result,
our consolidated shareholders' equity after giving effect to the breakup of
Telebras was R$2.0 million higher than divisional equity at December 31, 1997.

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

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

                                       1
5

portion of interest expense. As a result, they do not present net income and
historical earnings per share information.

        Our accounting methodology changed in 1998 to reflect the lower level of
inflation in Brazil. Through December 31, 1997, our consolidated financial
statements recognize certain effects of inflation and have been restated in
constant reais of December 31, 1997 purchasing power. The restatement was made
using the integral restatement method prescribed by the Brazilian Securities
Commission (Comissao de Valores Mobiliarios), commonly known as the "CVM," which
is an acceptable method of recognizing effects of inflation under U.S. GAAP.
Inflationary gains or losses on monetary assets and liabilities were allocated
to their corresponding income or expense caption in the consolidated statements
of operations. Inflationary gains or losses without a corresponding income or
expense caption were allocated to other net operating income (expense).

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

        In May 2000, the Registrant contributed the capital stock of its other
four subsidiaries to Amazonia Celular S.A. - Maranhao. At the same time Amazonia
Celular S.A. - Maranhao acquired the minority interests in the four subsidiaries
by means of redemptions and conversions of shares into Amazonia Celular S.A. -
Maranhao capital stock. As a result, Amazonia Celular S.A. - Maranhao became the
only direct subsidiary of the Registrant and the sole shareholder of each of
Amazonia Celular S.A. - Amazonas, Amazonia Celular S.A. - Roraima, Amazonia
Celular S.A. - Amapa and Amazonia Celular S.A. - Para.

        The Registrant intends to merge the four subsidiaries into Amazonia
Celular S.A. - Maranhao before the end of 2001, contingent on the approval of
Anatel.

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

U.S. GAAP SELECTED FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31,
                                                 -----------------------------------------------------------------------------------
                                                       1996             1997              1998              1999             2000
                                                 -------------- -------------------- -------------- ---------------- ---------------
                                                  (IN THOUSANDS OF CONSTANT REAIS AS          (IN THOUSANDS OF NOMINAL REAIS,
                                                          OF DECEMBER 31, 1997)                    EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
  Net revenues.................................        166,453        219,316            232,555          308,846          480,622
 Operating income..............................        106,204        118,727             57,910           33,747           30,153
 Income before unallocated interest and taxes..         86,869         84,532                 --               --               --
 Net income(1).................................             --             --             31,532           19,383            7,947
 Basic and diluted income per thousand common
   shares(1)...................................             --             --               0.09             0.06             0.02
 Dividends per thousand common shares(2).......             --             --               0.01             0.02             0.01
 Number of shares (in thousands)...............             --             --        334,399,027      334,399,027      334,652,366

 OTHER FINANCIAL DATA:
 EBITDA(3).....................................        113,676        131,023             96,624           84,129           86,883
 Capital expenditures..........................        105,467         51,768             31,672          151,037          187,121
2
6
AS OF DECEMBER 31,
                                                 --------------------------------------------------------------------------------
                                                          1996            1997             1998             1999         2000
                                                 ---------------- ---------------  ----------------- ------------- --------------
                                                    (IN THOUSANDS OF CONSTANT              (IN THOUSANDS OF NOMINAL REAIS)
                                                 REAIS AS OF DECEMBER 31, 1997)
BALANCE SHEET DATA:
 Cash and cash equivalents.....................             --            8,845           78,733           69,233       164,740
 Working capital...............................          6,580           17,161           78,654           43,213       156,995
 Total assets..................................        207,558          266,137          358,724          569,680       846,717
 Long-term debt (including current portion)....         16,842           24,057           39,203           89,128       348,900
 Divisional equity.............................        137,315          157,192               --               --            --
 Shareholders' equity..........................             --               --          189,852          252,306       261,812
-------------------------------

(1)     Net income and earnings per share have not been presented for 1996 and
        1997 because interest and income taxes could not be segregated from our
        predecessor company. See Note 8 to the consolidated financial
        statements.

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

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

EXCHANGE RATES

        The following table presents the period end, average, high and low, noon
buying rate reported by the Federal Reserve Bank of New York, expressed in reais
per U.S. dollar for the periods indicated. The noon buying rate at June 27, 2001
was R$2.3320 per U.S.$1.00.
AVERAGE FOR
                   YEAR                    PERIOD-END               PERIOD(1)                 HIGH                    LOW
---------------------------------------   -----------             ------------             ----------            ----------
 1996..................................      1.0393                  1.0080                  1.0413                 0.9733
 1997..................................      1.1165                  1.0805                  1.1166                 1.0394
 1998..................................      1.2085                  1.1640                  1.2090                 1.1160
 1999..................................      1.8090                  1.8640                  2.2000                 1.2074
 2000..................................      1.9510                  1.8350                  1.9722                 1.7420
 December 2000.........................                                                      1.9810                 1.9530
 January 2001..........................                                                      1.9770                 1.9380
 February 2001.........................                                                      2.0470                 1.9820
 March 2001............................                                                      2.1750                 2.0220
 April 2001............................                                                      2.2950                 2.1460
 May 2001..............................                                                      2.3590                 2.2010
--------------------------

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

B.      CAPITALIZATION AND INDEBTEDNESS

        Not applicable.

C.      REASONS FOR OFFER AND USE OF PROCEEDS

        Not applicable.

                                       3
7

D.      RISK FACTORS

RISKS RELATING TO DOING BUSINESS IN BRAZIL

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

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

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

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

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

        The Brazilian economy may be adversely affected by changes in the
relationship between Brazilian federal and state governments. In January 1999,
the state of Minas Gerais suspended its payments to the federal government on
approximately R$18.3 billion of debt. Shortly after, the state of Rio Grande do
Sul obtained an injunction permitting it to make its debt payments into an
escrow account pending resolution of the request by seven states to renegotiate
their refinancing agreements with the government. After the federal government
announced that it could no longer guarantee state obligations to international
financial institutions, the World Bank suspended loans to the states of Minas
Gerais and Rio Grande do Sul.

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

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

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

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

        As a result of economic instability in Brazil in late 1998 and early
1999 resulting in large part from the Asian and Russian crises, the trading band
was abandoned and the real was allowed to float freely. This resulted in

                                       4
8

a significant devaluation of the real against the U.S. dollar. Since January 1,
1999 the real/U.S. dollar exchange rate has ranged from a low of R$1.21 per
U.S.$1.00 on January 4, 1999 to a high of R$2.16 per U.S.$1.00 on March 3,
1999. On June 27, 2001, the rate was R$2.3320 per U.S.$1.00.

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

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

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

RISKS RELATING TO THE TELECOMMUNICATIONS INDUSTRY AND OUR BUSINESS

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

        The wireless industry is experiencing significant change. This includes
the increasing pace of digital upgrades in existing analog wireless systems,
evolving industry standards, ongoing improvements in the capacity and quality of
digital technology, shorter development cycles for new products, and
enhancements and changes in the end-user needs and preferences. There is
uncertainty as to the pace and extent of growth in customer demand, as well as
the extent to which airtime and monthly recurring charges may continue to
decline. Also, alternative technologies may develop for the provision of
services to customers that are superior to what we are able to provide. We
cannot assure you that technological developments will not materially adversely
affect us.

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

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

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

        The growth of Norte Brasil Telecom S.A., which we refer to as "NBT," the
Band "B" cellular operator which began operations in our region in October 1999,
has resulted in the gradual reduction of our market share, which was 75% at
December 31, 2000. Increasing competition from NBT and new entrants will
continue to adversely affect our market share and our margins. Our ability to
compete successfully will depend on marketing and on our ability to anticipate
and respond to competitive factors affecting the industry, including new
services that

                                       5
9

may be introduced, changes in the consumer preferences, demographic trends,
economic conditions and discount pricing strategies by competitors. Though the
introduction of competition into our industry is relatively recent, it is
substantial and has already pushed us to adjust our marketing strategies. In
particular, we have had to subsidize the cost of handsets to our subscribers in
response to a similar strategy by our Band B competitor. We cannot predict which
of many possible factors will be important to maintain our competitive position
or what expenditures will be required to develop and provide such technologies,
products or services.

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

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

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

Regulatory developments could hurt our business

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

Use of hand-held phones may pose health risks

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

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

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

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

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

                                       6
10

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

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

RISKS RELATED TO OUR SECURITIES

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

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

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

        Brazilian securities market is substantially smaller, less liquid and
more volatile than major securities market in the United States. This may
substantially limit the ability to sell the preferred shares underlying our ADSs
at a price and time at which a holder wishes to do so. The Sao Paulo Stock
Exchange, which is the principal Brazilian stock exchange, had a market
capitalization of approximately U.S.$225 billion as of April 30, 2001 and an
average monthly trading volume of approximately U.S.$9.0 billion for 2000. In
comparison, the New York Stock Exchange had a global market capitalization of
U.S.$17.0 trillion as of December 31, 2000 and an average monthly trading volume
of approximately U.S.$43.9 billion for 2000.

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

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

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

                                       7
11

ITEM 4.INFORMATION ON THE COMPANY

A.      HISTORY AND DEVELOPMENT OF THE COMPANY

THE REGISTRANT AND ITS OPERATING SUBSIDIARIES

        We provide cellular telecommunications services in a region comprising
the Brazilian states of Para, Amazonas, Maranhao, Amapa, and Roraima under
concessions granted by the federal government of Brazil. Cellular
telecommunications services were first offered by one of our predecessor
companies in the state of Maranhao in April 1994.

        The Registrant was incorporated as a sociedad anonima with an
indefinitive term on February 28, 1998 under the laws of the Federative Republic
of Brazil under the name "Tele Norte Celular Participacoes S.A."

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

        The following table presents the contribution made by each subsidiary to
our net operating revenues and net income for the year ending December 31, 2000
and our shareholding in each subsidiary at December 31, 2000.
% OF NET
                                          OPERATING        % OF SHARE        % OF VOTING
                                          REVENUES           CAPITAL            STOCK
                                          ---------         ---------        ------------
SUBSIDIARY OF REGISTRANT
----------------------------------
Amazonia Celular S.A. - Maranhao.          22%                75.0%            89.8%

SUBSIDIARIES OF TELMA CELULAR S.A:
----------------------------------
Amazonia Celular S.A. - Para.....          40%               100.0%           100.0%
Amazonia Celular S.A. - Amazonas.          30%               100.0%           100.0%
Amazonia Celular S.A. - Amapa....           5%               100.0%           100.0%
Amazonia Celular S.A. - Roraima..           3%               100.0%           100.0%
In May 2000, we announced a plan to merge our four indirect subsidiaries
into Amazonia Celular S.A. - Maranhao. Our planned consolidation is contingent
upon the approval of Anatel and the Brazilian Securities Commission (Comissao de
Valores Mobiliarios). We believe that the consolidation of our operations into a
single integrated structure will result in cost efficiencies and an improved
quality of service.

        We estimate that the reduction in administrative costs, which will
result from the consolidation will be approximately R$1 million for the first
year following the consolidation. We also estimate that the cost savings from
the consolidation and standardization of our operations will be approximately
R$43 million at present net value.

        Substantially all of the Registrant's assets other than cash and cash
equivalents consist of shares in its subsidiaries. The Registrant relies almost
exclusively on dividends from its subsidiaries to meet its needs for cash,
including cash to pay dividends to its shareholders.

HISTORICAL BACKGROUND

        Prior to the incorporation of Telebras in 1972, there were more than 900
telecommunications companies operating throughout Brazil. Between 1972 and 1975,
Telebras and its operating subsidiaries, which we refer to collectively as the
"Telebras System," acquired almost all the other telephone companies in Brazil
and thus came to have a monopoly over the provision of public telecommunications
services in almost all areas of the country.

        Beginning in 1995, the federal government undertook a comprehensive
reform of Brazil's telecommunications regulatory system. In July 1997, Brazil's
National Congress adopted the General Telecommunications Law (Lei Geral de
Telecomunicacoes), which provided for the establishment of a new regulatory
framework, the introduction of competition and the privatization of Telebras.
The General Telecommunications Law established an independent regulatory agency
called Agencia Nacional de Telecomunicacoes - ANATEL, which we refer to as
"Anatel."

                                       8
12

        In January 1998, in preparation for the restructuring and privatization
of the Telebras System, the cellular telecommunications operations of Telebras's
operating subsidiaries were spun off into separate companies. In May 1998,
Telebras was restructured to form, in addition to Telebras, twelve new holding
companies by means of a procedure under Brazilian corporate law called cisao, or
split-up. Virtually all the assets and liabilities of Telebras, including the
shares held by Telebras in the operating companies of the Telebras System, were
allocated to the new holding companies.

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

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

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

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

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

        Our capital expenditures in 1998 were approximately R$32 million. We
invested to expand and increase the capacity of our mobile telecommunications
network.

        In 1999, we spent R$151 million in capital expenditures. We invested in
the expansion and improvement of our network. In particular, we commenced the
digitalization of our network. We also directed substantial investments to
launch prepay services.

        In 2000, our capital expenditures were R$187 million. Approximately
R$169 million was invested on our network, mainly to increase traffic capacity
to absorb the large increase in customer base. Investments were also made to
expand coverage to new municipalities and roads and to launch new services such
as Internet access and SMS.

        In 2001, we plan to spend approximately R$200 million (excluding the
completion of projects began in 2001) primarily to:

                -       increase the capacity of our network through the
                        increase of the capacity of our switches;

                -       continue the digitalization of our network;

                -       expand our coverage to include 17 new towns through the
                        installation of approximately 105 new cell sites; and

                --      improve the quality of service by repositioning cell
                        sites, replacing equipment and installing amplifiers.

        Through April 2001, we have spent approximately R$46 million of our
projected capital expenditures.

B.      BUSINESS OVERVIEW

OUR REGION

        Our region covers an area of approximately 3,532,000 square kilometers,
representing approximately 41% of Brazil's area. Its population of approximately
14.8 million inhabitants represents approximately 9.0% of the population of
Brazil. Our region has 18 metropolitan areas with populations in excess of
100,000 people, including

                                       9
13

the cities of Belem, Manaus, Sao Luis, Boa Vista and Macapa. During 2000, our
region generated approximately 4.4% of Brazil's gross domestic product. At
December 31, 2000, we had 755,665 subscribers.

        The map below shows the location of our region within Brazil.

                           [MAP OF BRAZIL GRAPHIC]

                                       10
14

        The following table presents the population, gross domestic product and
per capita income statistics for each state in our region at the dates and for
the year indicated.
AT DECEMBER 31, 2000     YEAR ENDED DECEMBER 31, 2000
                                      ----------------------------  ----------------------------
                                      POPULATION     % OF BRAZIL'S    % OF BRAZIL'S   PER CAPITA
 STATE                                (MILLIONS)(1)  POPULATION(1)        GDP(2)       INCOME(2)
-----------------------------------  -------------- --------------  --------------- ------------
Maranhao.........................          5.4            3.3             0.8         R$1,348
Para.............................          6.0            3.7             1.7           2,698
Amazonas.........................          2.7            1.7             1.7           5,990
Amapa............................          0.4            0.3             0.2           3,565
Roraima..........................          0.3            0.2             0.1           2,862
                                       --------       --------        --------        --------
Region...........................         14.8            9.2             4.5           2,293
                                       ========       ========        ========        ========
-------------------
(1)     Estimates of the Brazilian Institute of Geography and Statistics
        (Instituto Brasileiro de Geografia e Estatistica - IBGE), at August,
        2000.

(2)     Data for 1998 as published by the Central Bank of Brazil.

        Our business, financial condition, results of operations and prospects
depend in part on the performance of the Brazilian economy and the economy of
our region, in particular. See "Item 5--Operating and Financial Review and
Prospects--Brazilian economic environment" for a description of the Brazilian
economic conditions.

OUR SERVICES

General

        We offer cellular telecommunications service to our subscribers through
a variety of rate plans. We offer analog and, commencing in late 1999, digital
cellular services. At December 31, 2000, we had a total of 755,665 subscribers.
Of this number, 46.1% were contract subscribers and 53.9% were prepay
subscribers.

        We offer internet-related services such as online banking,
short-messaging, e-mail, customized news and interconnectivity for notebooks and
palm pilots. We also offer value-added services such as voicemail, call
forwarding, call waiting, call conferencing, caller line identification and
three-way calling. In addition, we provide special services such as customized
telephone sounds and display of icons and convenience service such as weather
forecast, locksmiths, plumbers, etc., each through the mobile handset. We also
began to sell cellular telephones in 1999. We do not expect these sales to be a
significant component of our revenues.

Contract subscribers

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

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

Seasonality

        Our business is subject to seasonality to some degree. Our traffic tends
to be higher in December because of the Christmas holidays and in July, the
driest month of the year, because subscribers tend to vacation then at beaches
within our region. Subscriber additions tend to be higher in December and lower
in July because of the same reasons.

Prepay customers

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

                                       11
15

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

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

Contract churn

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

        Our average monthly contract churn in 1998, 1999 and 2000 was 1.3%, 1.7%
and 2.4%, respectively. The significant increase in contract churn in 2000 as
compared to 1999 was due to the increase in competition in our region and
continuing economic problems in Brazil that have resulted in higher unemployment
and a decrease in salaries in real terms. With the anticipated growth of
competition, we may experience increased contract churn.

Quality of service

        We have experienced at times quality of service problems, including busy
circuits, lack of system availability and dropped calls. In 2000, the average
"all circuits busy rate" (as a percentage of calls attempted) was 2.2%, the
average system availability on first call attempted was 93.4% and the average
dropped call rate was 1.4%. At present, we are not experiencing any significant
quality of service problems and exceed most of the quality of service
requirements established by Anatel. See "--Regulation of the Brazilian
telecommunications industry--Obligations of telecommunications
companies--Quality of service" for a description of these obligations.

Roaming

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

Internet-related services

        In December 2000, we became the first company in Brazil, together with
our affiliate, Telemig Celular Participacoes S.A., to provide internet access
through cellular telephones using TDMA. We invested approximately R$1.2 million
in this project. We utilized a Wireless Application Protocol (WAP) platform from
Ericsson, Circuit Switched Data technology from Nortel and Nokia handsets.

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

NETWORK AND SUBSCRIBER DATA

        The following table sets forth information on our subscriber base,
coverage and related matters at the dates and for the years indicated.
1998        1999        2000
                                                               -------     -------     --------
Cellular lines in service at year-end:
  Contract subscribers....................................     218,600     265,600     347,953
  Prepay subscribers......................................          --      78,000     407,712
                                                              --------    --------    --------
                                                               218,600     343,600     755,665
12
16
1998        1999        2000
                                                               -------     -------     --------
Net subscriber growth during year.........................        5.2%         57%        120%
Estimated population of our region at year-end (millions)
  (1).....................................................        14.2        14.7        14.8
Estimated covered population at year-end (millions) (2)...         7.4         8.2         8.8
Percentage of population covered at year-end (3)..........       50.3%       56.9%       61.0%
Penetration at year-end (4)...............................       1.49%        2.5%        5.2%
Average monthly incoming minutes of use per subscriber:
  Contract subscribers....................................         108         117         110
  Prepay subscribers......................................          --          73          88
Average monthly outgoing minutes of use per subscriber:
  Contract subscribers....................................         108         111         118
  Prepay subscribers......................................          --          23          18
Average monthly revenues per subscriber: (5)
  Contract subscribers....................................        R$93        R$83        R$81
  Prepay subscribers......................................          -           32          27
                                                               -------     -------     -------
    Total average.........................................        R$93        R$81        R$59
Cost of acquisition per subscriber (6)....................        R$23       R$149       R$125
-------------------

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

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

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

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

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

(6)     The significant increase in the cost of acquisition per subscriber in
        1999 as compared to 1998 reflects a reduction in activation fees from
        R$330 to R$49 for digital services and R$99 for analog services. This
        reduction was made in anticipation of competition.

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

SOURCES OF REVENUE

General

        We generate revenue from:

                -       usage charges, which include airtime charges for
                        outgoing calls and roaming and other similar charges,

                -       monthly subscription charges,

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

                -       sales of handsets, and

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

       Our rates are subject to the approval of Anatel.

                                       13
17

Subscriber rates

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

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

        Our region is divided into 65 registration areas. The lowest base rate
per minute, which we refer to as a "VC1" rate, applies to calls made by a
subscriber in its registration area to persons in the same registration area.
Until May 9, 1999, calls from one registration area to another within our region
were charged at a higher rate, which we refer to as "VC2" rate. On May 9, 1999,
the VC2 and VC1 rate were made to be the same for mobile-to-mobile calls.
Beginning in February 2000, the VC2 and VC1 rates are the same for all calls
except under the Basic plan.

        Calls from our region to persons outside our region are billed at the
highest rate, which we refer to as a "VC3" rate. When a subscriber makes or
receives a call while outside our region, a per-call surcharge known as "AD" is
applicable. When a subscriber receives a call while outside his or her home
registration area, the subscriber also pays an additional rate per minute, which
we refer to as "DSL1", if the subscriber is located within our region, or a
higher rate, which we refer to as "DSL2" if the subscriber is located outside
our region.

        Airtime service charges are discounted 30% for calls made on Saturdays,
Sundays and national holidays and for calls made from 7 PM to 8 AM, Monday
through Friday. A 30% surcharge is imposed on VC1 calls made to lines of other
cellular service providers.

        In February and October 2000, we introduced several new plans and
modified existing ones in order to better address different market segments. The
following table sets forth the average rates for these plans as of February,
2001.

          RATE INFORMATION FOR OUR INDIVIDUAL CONTRACT SERVICE PLAN(1)
FALE
                                                  FALE         FALE        FALE         FALE        FALE         MAIS      FALE MAIS
                                     BASIC       MAIS 1       MAIS 2      MAIS 3       MAIS 4      MAIS 5       JOVEM       ESPECIAL
                                     -----       ------       ------      ------       ------      ------       -----       --------
Activation fee (2)...............    100           0            0           0             0           0            0           0
Monthly subscription fee.........     33.88       26.68        43.11       67.74        101.62      136.51        17.45       33.88
Airtime charges per minute:
VC1..............................      0.43        0.40         0.37        0.34          0.34        0.34         0.68        0.34
VC2..............................      0.81        0.52         0.52        0.34          0.34        0.34         0.73        0.34
VC3..............................      0.92        0.83         0.83        0.83          0.83        0.83         1.23        0.83
DSL1.............................      0.41        0            0           0             0           0            0.34        0
DSL2.............................      0.46        0.52         0.52        0.34          0.34        0.34         1.23        0.34
AD (per call) ...................      0.77        0.41         0.41        0.34          0.34        0.34         0.41        0.34
Minutes free of time charges ....      0          26           60         130           260         400            0          33
----------------
(1)     The rates presented are in reais and are the base rates charged by us,
        without giving effect to any promotional discounts offered from time to
        time, and include any applicable value-added taxes.

(2)     For digital services. Activation fee is R$49.00 reais for analog
        services.

                                       14
18

             RATE INFORMATION FOR OUR CORPORATE AND PREPAY PLANS(1)
EMPRESA
                                                    EXECUTIVOPRO       PRO           PREPAY
                                                    ------------     -------         ------
Activation fee ..................................        0              0              0
Monthly subscription fee ........................       33.88          10.70           0
Airtime charges per minute:
VC1..............................................        0.30           0.30           0.76
VC2..............................................        0.30           0.30           0.76
VC3..............................................        0.70           0.70           1.02
DSL1.............................................        0              0              0
DSL2.............................................        0.55           0.55           1.02
AD (per call) ...................................        0.33           0.33           1.02
Minute free of time charges .....................         --             --            0
----------------

(1)     The rates presented are in reais and are the base rates charged by us,
        without giving effect to any promotional discounts offered from time to
        time, and include any applicable value-added taxes.

Fees for internet-related services

        I.WAP. Our monthly fee for i.wap, our internet access service, is R$9.00
(except for the state of Para, where it is R$9.68). In addition, there is a per
minute charge for every minute in excess of thirty minutes equal to the normal
rate of the plan of the specific subscriber.

        I.ONLINE. This is a news, short-messaging and e-mail service through the
cellular handset. The subscriber chooses the type and amount of news it wants to
receive and pays a single rate based on the package chosen. The receipt of
messages via internet or e-mail is included with the package. The following are
the applicable rates (except in the State of Para where there is a 5% increase):
TYPE OF PACKAGE                        CONTRACT              PREPAY
       ---------------------------------------       -------------------  --------------
Kit 1 (2 news items per day)                   R$3.90 per month     R$0.19 per day
       Kit 2 (10 news items per day)                  R$5.90 per month     R$0.29 per day
       Kit 3 (unlimited number of news items)         R$8.90 per month     R$0.39 per day
I.MENSAGEM. This is a short-messaging and e-mail service through the
cellular handset. The rate charged is R$0.19 for each message sent (except in
the state of Para, where the rate is R$0.21). There is no charge for messages
received.

        I.NET. This service permits the subscriber to connect to its notebook or
palm pilot through its mobile handset. The subscriber pays a per minute fee
equal to the normal rate of the plan of the specific subscriber.

Roaming fees

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

Network usage fees

        We earn revenues from any call, cellular or wireline, originating with
another service provider and terminating on a cellular telephone within our
region. We charge the service provider from whose network the call originates a
network usage fee for every minute our network is used in connection with the
call. The average network usage fee per minute we charged to other service
providers was R$0.21 in 1996 and R$0.19 in 1997, 1998

                                       15
19

and 1999, respectively, net of value-added taxes. This fee was increased to
R$0.22 in January 2000, and R$0.27 in November 2000.

SALES AND MARKETING

General

        We divide our market into categories corresponding to the amount of
cellular telephone usage. Anatel's regulations require that cellular
telecommunications service be provided to all individual applicants, regardless
of income level, in the order in which applications are received. In order to
assist in managing the risk of payment defaults, we conduct credit checks on our
customers. We can interrupt service if a customer fails to make timely payments.
See "--Billing and collection."

Sales network

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

        COMPANY STORES. We provide telecommunications services through
company-owned stores located in metropolitan centers. Such stores are effective
in building image and brand awareness through the exclusive provision of our
telecommunications services. Company stores also provide standard levels of
service, greater accountability and consistent customer service. Although the
majority of sales at company stores consists of subscriptions for cellular
telecommunications services, the stores also sell handsets, generally for prices
at or near cost, in connection with the sale of both contract and prepay
subscriptions. At December 31, 2000, we had 9 company stores, as well as 3
mobile stores.

        INDEPENDENT DISTRIBUTORS. We select our independent distributors based
on their creditworthiness and an assessment of their premises. All of our
independent distributors receive basic training relating to the activation of
cellular telecommunications service. Independent distributors receive a
commission that varies from R$60 to R$110 for each new contract customer they
sign up for service, provided that the customer retains and pays for service for
at least three months. The amount of the commission varies depending on the plan
that is subscribed to. In addition, independent distributors receive a mark-up
margin on each sale of a handset and prepay card kit for use by prepay
subscribers.

        At December 31, 2000, we had 352 independent distributor outlets,
located primarily in metropolitan centers. Approximately 90% of the sales
generated by our independent distributors are made by distributors with whom we
have exclusivity arrangements. Our exclusive independent distributors include
well-known retailers and supermarket claims with high quality points of sale.
All exclusive marketing distributors receive marketing support and, in some
cases, financing from us to assure that they maintain desirable standards of
service. The Company's management believes that the quality and breadth of the
exclusive independent distribution network gives the Company an advantage over
its competitors.

        RETAILERS. We make prepay cards available at approximately 7,000 points
of sale. We distribute through 29 retailers, which include national and regional
franchises and chains, such as Yamada.

        In early 1999, we introduced the brand "Amazonia Celular." Amazonia
Celular is now the brand name under which the cellular telecommunications
services of all of our subsidiaries are marketed. Our internet-related services
are marketed under the "i.amazoniacelular" brand name.

Customer service

        We run a centralized call center, located in Belem, state of Para. We
provide our subscribers with 24-hour, seven-day customer service to answer
inquiries and resolve problems throughout our region. At December 31, 2000, we
had 203 service attendants.

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20

        Through our customer service attendants, we are able to provide
immediate service to customers for requests such as reactivation, addition of
value-added services and number changes, among others. During 2000, our customer
service team answered, on average, in excess of 368,000 calls per month, with an
average duration of 160 seconds. Our customer service department also answered
an average 1,043 letters and e-mails per month.

BILLING AND COLLECTION

        Our billing system, which was developed by LHS Communication System
Incorporated and has been in operation since 1999, has four main functions:

                -       subscriber registration,

                -       subscriber information management,

                -       accounts payable management, and

                -       billing and collection.

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

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

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

        Our provisions for doubtful accounts were 5.6%, 16.5%, 10.2% and 6.9% of
service revenues in 1997, 1998, 1999 and 2000 respectively. The increase in the
level of doubtful accounts from 1997 to 1998 is due primarily to an increase in
the number of customers with relatively lower income, an increase in
subscription fraud and adverse economic conditions in Brazil. In the fourth
quarter of 1998, we put in place new credit and collection policies and an
anti-fraud system in order to reduce the level of bad debt. As a result of these
measures, there was a significant decrease in bad debt in 1999 and 2000.

        We experienced a problem with the software of our billing system from
October 1999 through March 2000, which resulted in the understatement of airtime
charges of a portion of our subscribers. This problem, which did not have a
material adverse effect on our financial condition, has since been resolved.

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

OUR NETWORK

        At December 31, 2000, our cellular telecommunications network covered
approximately 61% of our region's population. We continue to expand our cellular
telecommunications network to cover as broad a geographical area as is
economically feasible in order to meet consumer demand. Under our concessions,
we have obligations concerning network expansion. See "--Regulation of the
Brazilian telecommunications industry--Obligations of telecommunications
companies," for a description of these obligations.

        We increase the capacity and improve the quality of our cellular
telecommunications network by building new base stations and adding channels to
existing base stations. This development is carried out in response to projected
subscriber demand. We believe that our cellular telecommunications network will
require further development to meet increasing demand for cellular
telecommunications services in and around our region's major metropolitan areas.
To increase capacity, in 2000, we installed a new Ericsson MSC 5000 switch. See
"--Quality of service."

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21

        At December 31, 2000, our cellular telecommunications network consisted
of seven cellular switches, three mini-switches, 321 cell sites and five
repeaters. Our seven switching centers are located in Belem (two), Manaus (two),
Sao Luis, Macapa and Boa Vista. Since then, we have continued to build out our
network by installing approximately 20 new cell sites. We plan to install
approximately 105 new cell sites during 2001.

        We centralized our network administration system in the City of Belem,
where we installed a network operating center (NOC). This system is capable of
monitoring the base stations, switching centers and all critical network
operational parameters in real time. We analyze the performance data generated
by this system in order to make the operating adjustments and capital
expenditures necessary to maintain and enhance network operations. In addition,
technicians operating this system have the ability to rapidly evaluate and
respond to technical difficulties in network operations.

        In 1999, we digitalized our cellular network using TDMA technology. We
also implemented our own digital transmission systems in the cities of Belem,
Manaus and Sao Luis, providing a significant increase in network quality, as
well as a reduction in leased line costs. In December 2000, approximately 85% of
our traffic was digital. This coverage increased to 90% in March 2001.

        We believe that digitalization offers advantages, including greater
network capacity, reduced operating costs and additional revenue through the
sale of value-added services. Digital cellular telecommunications service also
offers subscribers greater security. Digital cellular telephones are generally
more expensive than analog telephones. Following digitalization, we expanded our
coverage to meet the requirements established in our concessions and the
increasing demand for cellular service in the area.

        Ericsson Telecomunicacoes S.A. is our principal supplier of cellular
telecommunications equipment.

FRAUD DETECTION AND PREVENTION

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

        Subscription fraud occurs when a person, typically using a fictitious
identification and address, obtains cellular telecommunications service with no
intention of paying for the service and then incurs substantial charges before
the cellular operator is able to identify the fraud and terminate service. When
we discover that a receivable has been generated by a fraudulent call, we write
off the receivable.

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

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

                -       background checks of our employees,

                -       fraud awareness and prevention training, and

                -       credit checks of new customers through credit rating
                        agencies.

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

        We are also planning to implement an authentication center solution to
effectively detect and prevent fraud before it happens, without affecting our
legitimate subscribers. The authentication center prevents wireless fraud by

                                       18
22

authenticating mobile stations upon registration, call origination and call
termination. The authentication operations make it possible to immediately
detect the presence of a clone with no noticeable impact to the legitimate
subscribers. The authentication center will be used first on international
roaming, given that the national network is not currently apt for this solution.

        The basis for these authentication operations is a 26-digit number
called the A-Key, which is known only to the authentication center and the
subscriber's handset. The A-Key, the electronic serial number and a random
number are used as inputs to the cellular authentication and voice encryption
algorithm that produces shared secret data. This data is used to calculate the
value compared between the handset and the authentication center during
authentication. Occasionally, a subscriber's shared secret data may need to be
updated because of a security violation, planned expiration, or routine
administrative procedure.

COMPETITION

General

        Our mobile telephony services market share in our region was 75% in
2000, as compared to 92% in 1999. This decrease is due to increased competition.
We expect our market share to decrease gradually as new competitors enter the
market and our existing competitor continues to build out its network in our
region.

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

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

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

        The entry of new competitors may have a material adverse effect on our
business, financial condition, results of operations or prospects. Any adverse
effects on our results and market share from competitive pressures will depend
on a variety of factors that cannot now be assessed with precision and that are
beyond our control. These factors include, among others, the identity of the
competitors, their business strategies and capabilities, prevailing market
conditions at the time, the regulations applicable to new entrants and us and
the effectiveness of our efforts to prepare for increased competition. One or
more new competitors may have technical or financial resources greater than
ours.

Band B competition

        The Band B license covers a geographic region similar to the region
covered by our concession. The license to provide mobile telephony services

        The concession to provide cellular telecommunications services in our
region on Band B was granted to Norte Brasil Telecom, which we refer to as
"NBT," a direct subsidiary of Tele Centro Oeste Celular Participacoes S.A. NBT
paid R$60.5 million for the concession and commenced to provide digital cellular
telecommunications service based on the TDMA standard in October 1999.

        The rights and obligations of NBT under its concessions are
substantially the same as ours under our concession. However, our concessions
expire in 2009 and NBT's licenses expire in 2013. Both may be renewed at the
discretion of Anatel for additional 15-year periods. NBT, a company ultimately
owned by Splice do Brasil, an industrial company, currently provides cellular
telecommunications services also in the states of Goias, Mato Grosso do Sul,
Mato Grosso, Rondonia, Acre, Tocantins and the Federal District.

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23

Band C competition

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

Band D competition

        The Brazilian government held an auction in February 2001 for the Band D
frequency range for PCS covering a geographic region that included our region.
Telemar Participacoes S.A., a holding company that owns the principal wireline
service provider in our region, won the auction. Telemar is expected to commence
operations in our region in early 2002.

Band E competition

        The Brazilian federal government held an auction in March 2001 for the
Band E frequency range for PCS covering a geographic region that included our
region. Telecom Italia Mobile, which is a mobile telephony operator in other
parts of Brazil, won the auction. Telecom Italia Mobile is expected to commence
operations in our region in early 2002.

Other competition

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

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

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

        Satellite services, which provide nationwide coverage, are available in
Brazil. Although satellite services have the benefit of covering a much greater
area than cellular telecommunications services, they are considerably more
expensive than cellular telecommunications services and do not offer comparable
coverage inside buildings. Currently, we do not plan to offer mobile satellite
services, other than pursuant to a roaming arrangement with a satellite service
provider, or PCS services, although we may consider doing so in the future.

OPERATING AGREEMENTS

Interconnection agreements

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

        We have entered into interconnection agreements with NBT, our Band B
competitor, with Embratel and Intelig, two long distance carriers, with Vesper,
a wireline operator, and with our predecessor companies. The terms of these
interconnection agreements include provisions for the number of connection
points, the method by which signals must be received and transmitted and the
costs and fees of interconnection. In addition, network usage charges are
assessed based on the terms of these agreements. These agreements do not have
termination provisions; we believe that Anatel would not allow a termination
prior to the expiration and non-renewal of a concession to

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24

avoid possible potential disruptions in telecommunications. See "--Regulation of
the Brazilian telecommunications industry--Obligations of telecommunications
companies--Interconnection."

Roaming agreements

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

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

REGULATION OF THE BRAZILIAN TELECOMMUNICATIONS INDUSTRY

General

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

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

Concessions and authorizations

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

        Pursuant to the Minimum Law, the Band A and Band B service providers
have been granted concessions. Each concession is a specific grant of authority
to provide cellular telecommunications services conditioned on compliance with
requirements contained in the applicable list of obligations appended to each
concession. If a cellular service provider wishes to offer any
telecommunications service other than the cellular telecommunications service
authorized by its concession, it may apply to Anatel for a license to offer such
other services.

        Each concession has been granted for an initial period of 15 years and
may be renewed at the discretion of Anatel for further periods of 15 years if
the list of obligations has been met. Our concessions to provide cellular
telecommunications services in the states of Para, Amazonas, Maranhao, Amapa and
Roraima expire in March 2009, August 2009, April 2009, May 2009 and July 2009,
respectively. These periods are shorter than 15 years because they each
represent the residual period of the original concession granted to our
predecessor companies.

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

        Beginning in January 1, 2000, Anatel has held auctions for
authorizations to use Bands C, D and E frequency ranges for PCS. These
authorizations differ from concessions in that the authorizations are for an

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indeterminate time period and Anatel reserves the right to cancel them at
anytime. However, the frequency designation is for a period of 15 years.

Obligations of telecommunications companies

        GENERAL. As described below, we must comply with certain requirements
relating to quality of service, network expansion and interconnection. Anatel
does not currently require network operators to unbundle network elements and
services, although Anatel has stated that it plans to review the issue on a
regular basis and may require unbundling in the future. In an unbundled regime,
each network operator is required to provide a detailed list of network services
and elements which may be purchased separately by a party requesting
interconnection.

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

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

        Our quality of service obligations require:

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

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

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

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

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

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

        We must also provide cellular telecommunications service to
municipalities in our region in accordance with the following requirements:
MINIMUM COVERAGE REQUIRED
                                                               BY NOVEMBER 4,
                                           --------------------------------------------------
POPULATION OF MUNICIPALITY (1)                  1999          2000         2001         2002
                                           --------------------------------------------------
30,000 to 50,000......................          --            --            --           70%
50,000 to 75,000......................          --            --            80%          --
75,000 to 100,000.....................          --            90%           --           --
100,000 to 200,000....................         100%           --            --           --
Maximum average installation waiting
time (in days) (2)....................         120            30            15            5
-------------------

(1)     For service to be deemed to be offered in any municipality, service must
        be available to at least 30% of the population.

(2)     Time between request for service and connection in areas with cellular
        telecommunications service.

        We have met or exceeded our network expansion obligations for the period
1998-2000 and at present are in compliance with our quality of service
obligations. We expect that we will be in compliance with our obligations at all
times.

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

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        INTERCONNECTION. All telecommunications service providers are required
to provide interconnection upon request to any party that provides public
telecommunications services, with the exception of competitors within the same
cellular region. The terms and conditions of interconnection are to be freely
negotiated between parties, subject to a price cap established by Anatel. If a
company offers any party an interconnection tariff below the price cap, it must
offer that tariff to any other requesting party on a nondiscriminatory basis. If
the parties cannot agree on the amount of the interconnection tariff, Anatel
will act as the final arbiter.

        Beginning in 2001, Anatel now requires network operators to permit
co-location of equipment. Co-location means that a network operator permits
another party to place its switching equipment in or near the local exchange of
the network operator and to connect to the network at this location. Co-location
is currently a matter for negotiation between interested parties.

Rate regulation

        Our concessions provide for a price-cap mechanism to set and adjust
rates on an annual basis. The cap is a maximum weighted average price for a
basket of services. The basket includes the services in the Basic service plan,
including monthly subscription fee, VC1, VC2, VC3, DSL1, DSL2 and AD charges, as
well as the network usage fees.

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

        The weighted average rate for the entire basket of services may not
exceed the price cap, but the rates for individual services within the basket
may be increased. We may increase the rate for any individual service by up to
20%, subject to a downward adjustment for inflation effects already captured in
the annual upward adjustments of the overall price cap for the basket, so long
as it adjusts other prices downward to ensure that the weighted average rate
does not exceed the price cap.

        Other telecommunications companies wishing to interconnect with and use
our network must pay a network usage fee. The network usage fee is a flat fee
charged per minute of use which represents an average charge for a basket of
network elements and services. The network usage fee charged by Band A service
providers is subject to a price cap set by Anatel. The price cap for the network
usage fee varies from company to company based on the underlying cost
characteristics of each company's network.

C.      ORGANIZATIONAL STRUCTURE

        The Registrant is a company incorporated on February 28, 1998 under the
laws of the Federative Republic of Brazil. The Registrant owns 75% of the share
capital and 89.8% of the voting stock of Amazonia Celular S.A. - Maranhao, a
cellular service operator in the state of Maranhao.

        Amazonia Celular S.A. - Maranhao is also the sole owner of Amazonia
Celular S.A. - Para, Amazonia Celular S.A. - Amazonas, Amazonia Celular S.A. -
Amapa and Amazonia Celular S.A. - Roraima, each a cellular service operator in
the states of Para, Amazonas, Amapa and Roraima, respectively.

D.      PROPERTY, PLANT AND EQUIPMENT

        Our principal physical properties consist of transmission equipment,
switching equipment and base stations. Our headquarters are located in Brasilia
and we lease approximately 3,200 square meters of office space in the cities of
Belem, Macapa, Sao Luiz and Boa Vista and own approximately 2,480 square meters
of office space in Manaus.

        We also lease the sites where our cellular telecommunications network
equipment is installed. At December 31, 2000, we had seven cellular switches in
Belem, Maraba, Sao Luiz, Manaus, Macapa and Boa Vista, 321 cell sites and five
repeaters, all of which were located on land leased by us. Most of these leases
are renewable every five years. In addition, we lease approximately 390 retail
stores throughout the region.

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        Our switches have a total capacity of approximately 1.4 million
subscribers, assuming an average traffic volume higher than what the Company has
experienced to date. In terms of processors our capacity is approximately 1.9
million subscribers.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

PRESENTATION OF FINANCIAL INFORMATION

        On May 22, 1998, in preparation for the privatization, the Telebras
System was restructured to form twelve new holding companies, including the
Registrant. The restructuring of the Telebras System was accomplished by means
of a procedure under Brazilian law called cisao or split-up. Virtually all the
assets and liabilities of Telebras were allocated to the new holding companies.
In the breakup, certain assets and liabilities of Telebras, including 80.3% of
the total share capital of Amazonia Celular S.A. - Amazonas, 86.9% of Amazonia
Celular S.A. - Roraima, 90.6% of Amazonia Celular S.A. - Amapa, 69.1% of
Amazonia Celular S.A. - Para and 66.8% of Amazonia Celular S.A. - Maranhao were
transferred to us.

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

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

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

CONSOLIDATION OF OPERATIONS WITH AFFILIATE

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

PREPAY SUBSCRIBERS

        Since the inception of our prepay plan in June 1999, the number of
prepay subscribers has grown to represent approximately 53.9% of our total
subscribers at December 31, 2000. A prepay subscriber can activate a cellular
phone, purchase a prepaid card with a fixed amount of credit to be used over a
period of up to 180 days and credit the prepaid card value to the subscriber's
account either at a customer service center or by a phone call. The customer
will have access to cellular service until the credit is fully used or otherwise
until the card expires at the end of 180 days, whichever occurs first.

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28

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

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

COMPOSITION OF OPERATING REVENUES AND EXPENSES

Revenues

        We generate operating revenues from:

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

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

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

                -       activation fees, which are one-time sign-up charges paid
                        to obtain cellular telecommunications service;

                -       sales of handsets; and

                -       other services and charges.

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

        We began to sell handsets in the second quarter of 1999. Because of
competitive pressures, we have had to subsidize the cost of handsets to our
subscribers. This has a negative effect on our operating margin.

Operating expenses

        Operating expenses consist of cost of services, selling, general and
administrative expenses, bad debt expense, depreciation and, in 1998, a charge
for impairment of certain analog transmission equipment. Cost of services
consists primarily of fixed costs such as leased line charges, site rental and
network maintenance, including overhead, as well as variable costs such as
certain interconnection charges. Selling, general and administrative expenses
consist primarily of salaries, wages and related benefits for administrative
personnel, advertising and promotional expenses and other overhead expenses.

TAXES ON TELECOMMUNICATIONS SERVICES

        The cost of telecommunications services to subscribers includes a
variety of taxes. The average rate of all such taxes, as a percentage of our
gross operating revenues, was approximately 20.5% in 1998, 21.5% in 1999 and
20.5% in 2000. The principal taxes are a state value-added tax, the Imposto
sobre Circulacao de Mercadorias e

                                       25
29

Servicos, commonly known as the "ICMS," and a municipal tax or servicer, the
Imposto sobre Servicos, referred to as the "ISS". The ICMS is a tax that the
Brazilian states impose at varying rates on revenues from the sale of goods and
services, including telecommunications services. The ICMS rate in each state in
our region is 25% for domestic telecommunications services, except in Amapa,
where it was 17% until December 1999 and 25% after. The ISS is imposed on
services not subject to the ICMS and its average rate is 5%.

        Other taxes on gross operating revenues include two federal social
contribution taxes, the Programa de Integracao Social, referred to as "PIS," and
the Contribuicao para Financiamento da Seguridade Social, known as "COFINS,"
imposed on some telecommunications services at a combined rate of 3.65% of gross
operating revenues. Prior to February 1999, the combined rate of both taxes was
2.65%.
        In June 1998, the governments of the individual Brazilian states
approved an agreement to interpret existing Brazilian tax law to apply the ICMS
effective July 1, 1998 to some services to which the ICMS had not previously
been applied, including cellular activation and monthly subscription. The
agreement also provides that the ICMS may be applied retroactively to activation
services rendered during the five years before June 30, 1998. See "Item
8--Financial Information--Consolidated statements and other financial
information--Legal proceedings" for a fuller description of these developments.

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

                -       Contribution for the Fund of Globalization of
                        Telecommunication Services - "Fust"

        Fust was established by Law 9,998 of August 17, 2000, in order to
provide resources to cover the cost exclusively attributed to fulfilling
obligations for globalization of telecommunication services that cannot be
recovered with efficient service exploration or that is not the responsibility
of the concessionaire.

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

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

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

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

A.      RESULTS OF OPERATIONS

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

2000 COMPARED TO 1999

Net revenues

        Net revenues were R$480.6 million in 2000, compared to R$308.8 million
in 1999, representing an increase of 56%. The increase is attributable mainly to
a 30% increase in revenues derived from the provision of cellular services and
from a 270% increase in revenues derived from the sale of handsets.

        Revenues from the provision of cellular services were R$356.7 million in
2000, a 30% increase from R$275.3 million in 1999. The service revenues increase
did not follow the 96% increase in the average subscriber base because of the
introduction of prepay service in the second quarter of 1999. This service
provides access to the same service of the contract program, except that users
pay in advance for the service by way of purchase of cards. New subscribers
under the prepay plan generally generate less revenues than the contract users.
At December 31, 2000, 407,712 subscribers, or 53.9% of the total subscriber
base, were under the prepay program. We believe that a

                                       26
30

significant portion of our new subscribers will adhere to the prepay program,
resulting in a lower increase in revenues as compared to the number of
subscribers.

        Revenues derived from sales of handsets increased 270% to R$123.9
million in 2000 from R$33.5 million in 1999. The substantial increase was due to
record additions in 2000.

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

        In 1999, NBT, a competing cellular service provider, began operating for
the first time in our region. Two additional competitors, Telemar and Telecom
Italia, are expected to commence PCS operations in early 2002. One more PCS
operator is also expected to enter our market sometime in 2002. We expect that
competition will contribute to declining prices and will affect our ability to
maintain growth in our subscriber base.

Cost of services

        Cost of services reached R$150.2 million in 2000, or 42% of service
revenues, compared to R$113.9 million, or 41% of service revenues, in 1999.

Selling, general and administrative expenses

        Selling, general and administrative expenses were R$144.6 million in
2000, or 41% of service revenues, compared to R$90.6 million, or 33% of service
revenues in 1999. The increase, as a percentage of service revenues, is mainly
attributable to the adoption of new marketing and sales strategies required by
an intensely competitive environment, together with a substantial increase in
commissions resulting from higher activations and an increase in marketing and
advertising costs.

        Despite the significant unmet demand in our region, as evidenced by the
low penetration rate of 5.2% at December 31, 2000, we believe that it will be
more costly in the future to attract new subscribers.

Pension plan expense

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

Bad debt expense

        Bad debt expense was R$24.8 million, or 6.9% of service revenues, in
2000, compared to R$28.1 million, or 10% of service revenues, in 1999. The
decrease in bad debt expense as a percentage of service revenues was due to the
strengthening of credit controls and the improvement of collection procedures.

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

        In the fourth quarter of 1998, we put in place new credit and collection
policies, and in 1999 we implemented an anti-fraud system to reduce our level of
bad debt. As a result of these measures, bad debt expense reduced significantly
in 1999 and in 2000.

Interest income (expense)

        Net interest expense was R$6.4 million in 2000, compared to a net
interest income of R$14.9 million in 1999. The change was due to an increase in
consolidated indebtedness in 2000 related to the funding of capital
expenditures.

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Foreign exchange (gain) loss

        Foreign exchange loss was R$13.6 million in 2000, compared to a foreign
exchange loss of R$12.4 million in 1999.

Income taxes

        We recorded a R$1.5 million income tax credit in 2000, notwithstanding
the fact that we had income before taxes. This compares to an income tax expense
of R$4.2 million in 1999. The tax credit is attributable mainly to the recording
of tax incentives and certain non-taxable income. Income taxes include social
contribution taxes.

        The combined statutory tax rate in 2000 was 34%. The effective rate of
tax on pretax income in 1999 was 23% compared to the combined statutory rate of
37%. The difference between the effective tax rate and the combined statutory
rate in 1999 is attributable to the declaration of interest on capital. Interest
on capital consists of tax deductible dividend. See Note 9 to the consolidated
financial statements.

Net income

        As a result of the above, net income was R$7.9 million for 2000 and
R$19.4 million for 1999.

1999 COMPARED TO 1998

Net revenues

        Net revenues were R$308.8 million in 1999, compared to R$232.6 million
in 1998, representing an increase of 33%. The increase is attributable mainly to
a 32% increase in the average number of subscribers in 1999 as compared to 1998,
as well as the introduction of handset sales in the second quarter of 1999 to
assist our distribution network. The handsets revenues, which totaled R$33.5
million in 1999, did not contribute to our profit as the handsets were sold at,
or near, cost.

        Revenues from the provision of cellular services were R$275.3 million in
1999, an 18% increase from the R$232.6 million of 1998. The service revenues
increase did not follow the 32% increase in the average subscriber base because
of the introduction of prepay service in the second quarter of 1999. At December
31, 1999, 78,000 subscribers, or 23% of the total subscriber base, were under
the prepay program.

Cost of services

        Cost of services reached R$113.9 million in 1999, or 41% of service
revenues, compared to R$67.5 million, or 29% of service revenues, in 1998. The
increase, as a percentage of service revenues, is mainly attributable to an
increase in depreciation of R$30.1 million, which reflects:

                -       a R$17.6 million increase in investment in property,
                        plant and equipment, and

                -       a R$12.5 million adjustment resulting from a revised
                        estimate of useful lives of property, plant and
                        equipment in light of the advent of competition and a
                        review of industry practices.

Selling, general and administrative expenses

        Selling, general and administrative expenses were R$90.6 million in
1999, or 33% of service revenues, compared to R$51.9 million, or 22% of service
revenues in 1998. The increase is attributable to increased promotion and
advertising costs in relation to new products like prepay and digital services,
as well as higher costs for commissions related to the level of new activation.
In addition, the arrival of competition in our region in 1999 also contributed
to the increase in selling and marketing expenses.

Pension plan expense

        A pension plan expense of R$6.3 million was recorded in 1999 as a result
of changes approved by the administrator, allowing for the break-up of the plan.
The expense recorded by us represents an estimate of our share of the unfunded
pension liability.

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Bad debt expense

        Bad debt expense was R$28.1 million, or 10% of service revenues, in
1999, compared to R$38.4 million, or 16.5% of service revenues, in 1998. During
the year, we continued to experience significant, although lower, bad debt
levels due to a variety of factors, including:

                -       overall growth in our accounts receivable;

                -       an increase in the number of customers with relatively
                        lower income, who are more prone to delay paying
                        cellular telephone bills; and

                -       subscription fraud.

        In the fourth quarter of 1998, we put in place new credit and collection
policies, and in 1999 we implemented an anti-fraud system to reduce our level of
bad debt. As a result of these measures, bad debt expense reduced significantly
in 1999 and management expects that bad debt levels will further decline in the
future.

Interest income (expense)

        Net interest income was R$14.9 million in 1999, compared to a net
interest income of R$4.5 million in 1998. The increase is due to an increase in
the average cash on hand, offset in part by an increase in consolidated
indebtedness related to capital investments.

Foreign exchange (gain) loss

        Foreign exchange loss was R$12.4 million in 1999, compared to R$2.5
million in 1998, due to the effect on our net U.S. dollar-denominated debt of
the 50% devaluation of the real relative to the U.S. dollar in 1999.

Income taxes

        Income taxes, which include social contribution taxes, were R$8.3
million in 1999 compared to R$16.9 million in 1998. The effective rate of tax on
pretax income in 1999 was 23%, compared to the combined statutory rate of 37%.
The decrease is attributable to the declaration of interest on capital in
December 1999. Interest on capital consists of tax deductible dividend. See Note
9 to the consolidated financial statements.

Net income

        As a result of the above, net income was R$19.4 million for 1999 and
R$31.5 million for 1998, or R$0.06 and R$0.09 per thousand common shares,
respectively.

B.      LIQUIDITY AND CAPITAL RESOURCES

GENERAL

        In 2000, cash provided by operating activities was R$75.3 million.
EBITDA, which we define as operating income plus depreciation and the charge for
impairment of long-lived assets, was R$86.9 million. At December 31, 2000, we
had cash and cash equivalents of R$164.7 million.

INDEBTEDNESS

        Our total debt was R$348.9 million at December 31, 2000, as compared to
R$126.1 million at December 1999. Of our total debt, R$213.3 million was
denominated in U.S. dollars bearing interest at three- or six-month LIBOR plus
an annual rate of 0.4% to 5.75%, and R$135.6 million was in reais bearing
interest at a rate of 3.8% over the long-term interest rate (which was 9.75% at
December 31, 2000) disclosed by the Central Bank. All of our indebtedness is
unsecured and arises from equipment financing. See "Item 10. Additional
Information--C. Material contracts" for a description of our principal credit
agreements.

        At December 31, 2000, 9% of our dollar-denominated debt was hedged
against exchange rate fluctuation. The hedging instrument exchanges fixed rates
(13.9% to 14.9%) over the U.S. dollar variation for an internal floating rate
(interbank deposit rate).

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33

        On December 15, 2000, we obtained a R$162.6 million five-year credit
facility from the Brazilian National Economic and Social Development Bank (Banco
Nacional de Desenvolvimento Economico e Social (BNDES)) and a consortium of
three Brazilian banks: Banco Itau, Bradesco and Alfa. We have drawn down R$133
million to be invested in the expansion of our coverage and in the introduction
of new services. Of this amount, R$116 million have an annual interest of 3.8%
over the long-term interest rate disclosed by the Brazilian Central Bank (which
was 9.75% at December 31, 2000), and R$17 million have an annual interest rate
of 3.8% over the average cost of BNDES' Currency Basket, which is based on the
rates and charges, including taxes, applicable in BNDES debt obligations in
foreign currencies (which was 9.29% plus currency basket charges at December 31,
2000).

        Substantially all start-up costs and initial capital investments were
financed by cash flows from the wireline telephone operations of the predecessor
companies. Accordingly, our indebtedness does not reflect the amount of debt we
would have been required to incur to build our current network if we had
operated on a stand-alone basis from the inception of our predecessor companies'
cellular telecommunications operations.

CAPITAL EXPENDITURES

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

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

        Our capital expenditure priorities include build out of our network to
increase coverage, improvement of overall quality and increase of the level of
digitalization of our network. We spent R$187 million in capital expenditures in
2000.

        We currently expect that our capital expenditures for the year 2001 will
be approximately R$200 million. Because a substantial portion of capital
expenditures is denominated in U.S. dollars, further devaluation of the real
could require that the estimate be increased. The estimated amount and timing of
capital expenditures may also be affected by a number of other risks and
uncertainties. We are unable to project capital expenditures for 2002 and 2003
at this time because they will depend to a large degree on which technological
solution we select for the overlay of our TDMA network. We are currently
studying GSM and CDMA as options.

        We believe that our capital expenditure requirements can be met through
a combination of cash flow from operations and equipment financing from a
variety of sources.

POLITICAL AND ECONOMIC FACTORS

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

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

                -       the cost and availability of financing, and

                -       the exchange rates between Brazilian and foreign
                        currencies.

Brazilian political environment

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

                -       currency fluctuations,

                -       inflation,

                -       price instability,

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34

                -       interest rates,

                -       tax policy, and

                -       telecommunications policy.

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

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

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

        In February 1999, President Fernando Henrique Cardoso issued a
provisional measure under which the Brazilian government proposed to refinance
the commercial bank and securities debt of the states and municipalities for a
period of 30 years. In February 2000, the state of Minas Gerais entered into a
debt rescheduling agreement with the federal government. Although relations
between the Brazilian federal government and the state of Minas Gerais have
improved and stabilized, renewed friction between the federal government and the
state governments may undermine investor confidence, have a negative effect on
the Brazilian economy and negatively impact states in our region. If the
Brazilian economy or the economy of states in our region were to be adversely
affected by a default, our operations and the market price of the preferred
shares and ADS may be adversely affected.

Brazilian economic environment

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

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

                -       the cost and availability of financing, and

                -       exchange rates between Brazilian and foreign currencies.

        EFFECTS OF INFLATION AND IMPACT OF REAL PLAN. Since the introduction of
the real as the new Brazilian currency in July 1994, inflation has remained
controlled although it has increased since the devaluation of the real in
January 1999. Inflation was 9.8% in 2000, 20.0% in 1999 and 1.7% in 1998, as
measured by the IGP-DI, a general price index. High inflation places pressure on
our rates and invites federal government efforts to control inflation by holding
down the rates that Brazilian public utilities are permitted to charge.

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        The table below shows the Brazilian general price inflation (according
to the IGP-DI) and devaluation of the Brazilian currency against the U.S. dollar
for the periods shown:
YEAR ENDED DECEMBER 31,
                                                               -----------------------------
                                                                2000        1999        1998
                                                               --------  ----------  -------
Inflation (IGP-DI).......................................      9.8%       20.0%       1.7%
 Devaluation of the real vs. U.S. dollar..................      8.4%       48.0%       8.0%
EFFECTS OF EXCHANGE RATE VARIATION AND INFLATION ON OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. The devaluation of the Brazilian real and
the resulting inflation have had and will continue to have negative effects on
our results of operations, primarily as a result of the following factors:

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

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

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

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

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

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

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

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

        In response to continued high capital outflows, on January 15, 1999 the
Central Bank announced that it would no longer intervene in the foreign exchange
market, except in exceptional circumstances to mitigate excessive volatility,
thereby allowing the real to U.S. dollar exchange rate to fluctuate freely.
Since January 15, 1999, the real

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36

has traded in a volatile and sometimes illiquid market. The real devalued by
48.0% and 8.4% against the U.S. dollar in 1999 and 2000, respectively. At June
27, 2001, the noon buying rate was R$2.3320 to U.S.$1.00.

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

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

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

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

REGULATORY AND COMPETITIVE FACTORS

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

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

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

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

        We began to face competition in our region in the fourth quarter of 1999
and anticipate that competition will contribute to declining prices for cellular
telecommunications services and increasing pressure on operating margins. Our
future growth and results of operations will depend significantly on a variety
of factors, including:

                -       our ability to attract new subscribers,

                -       the rate of growth of our subscriber base,

                -       the usage and revenue generated from our subscribers,

                -       the level of airtime,

                -       equipment prices,

                -       the rate of churn, and

                -       our ability to control costs.

        We expect to face competition from Telemar, the Band D PCS auction
winner, and Telecom Italia, the Band E PCS auction winner, beginning in January
2002. We also expect to face competition from a Band C PCS

                                       33
37

entrant sometime in 2002. The scope of increased competition and any adverse
effects on our results and market share will depend on a variety of factors that
we cannot now assess with precision and many of which are beyond our control.

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

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

D.      TREND INFORMATION

        We expect a significant increase in competition. Telemar and Telcom
Italia Mobile are expected to commence operations in our region in early 2002.
In addition, a future auction not yet scheduled could result in the addition of
one more PCS operator in our region. The increase in competition negatively
affects our market share and profit margins.

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

ITEM 6.        DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.      DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

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

        The following are the current members of the Board of Directors and
their respective positions.
NAME                                                       POSITION           DATE ELECTED
---------------------------------------------------       ------------      ---------------
Gunnar Birger Vinof Vikberg.....................           Chairman          April 30, 2001
Wellington Dantas de Amorim.....................           Director          April 30, 2001
Oscar de Paula Bernardes Neto...................           Director          April 30, 2001
Gustavo Henrique de Barroso Franco..............           Director          April 30, 2001
Elaine Aleixo Lustosa Thompson-Flores...........           Director          April 30, 2001
Antonio Britto Filho............................           Director          April 30, 2001
Veronica Valente Dantas.........................           Director          April 30, 2001
Marcos Nascimento Ferreira......................           Director          April 30, 2001
James L. Thompson...............................           Director          April 30, 2001
Valdemir Diniz..................................           Director          April 30, 2001
Isaac Selim Sutton..............................           Director          April 30, 2001
Set forth below are brief biographical descriptions of the Directors.

        GUNNAR BIRGER VINOF VIKBERG is also the President and Chief Executive
Officer of the Registrant, as well as the President and Chief Executive Officer
and Director of Telemig Celular Participacoes S.A. Mr. Vikberg is the founder
and director of Viking Consultoria Empresarial e Participacoes S/C Ltda. Mr.
Vikberg was also the Chief Executive Officer of Algar S.A. from 1997 to 1999.
Prior to that, Mr. Vikberg had been Executive Vice President. Mr. Vikberg was
the exclusive representative of Xerox Quality Services in Brazil in 1995.
Between 1992 and 1994, Mr. Vikberg was President of Millicom do Brasil S.A. and
PCN do Brasil S.A. From 1975 to 1989, Mr. Vikberg held several positions at
Grupo Xerox do Brasil S.A., including that of Executive Vice President. From
1954 to

                                       34
38

1975, Mr. Vikberg was associated with L.M. Ericsson, where he was the Director
General of Ericsson do Brasil S.A. from 1968 to 1975. Mr. Vikberg has also been
a member of the Board of Directors of several Brazilian companies. Mr. Vikberg
received a degree in Electrical Engineering from the Royal Institute of
Technology in Stockholm, Sweden, as well as a degree in Business Administration
from the Institut pour l'Etude des Methodes de Direction de l'Enterprise in
Lausanne, Switzerland.

        WELLINGTON DANTAS DE AMORIM is also a Director of Telemig Celular
Participacoes S.A. Since April 1998, Mr. Amorim has served as the Investment
Guidelines Manager for PREVI - Caixa de Previdencia dos Funcionarios do Banco do
Brasil. From 1982 to 1998, Mr. Amorim served as an employee of Banco do Brasil
S.A. ("BB"). He served as Assistant to the Executive Committee of BB and Member
of the Technical Consulting of the Executive Committee of BB. He has served also
as the Coordinator of the Center of Planning and Control for the Rio de Janeiro
State Cabinet. He holds a master's degree in international relations from the
University of Brasilia and spent two years as a researcher at Tsubuka University
in Japan.

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

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

        ELAINE ALEIXO LUSTOSA THOMPSON-FLORES has been a Director of Fundacao
Petrobras de Seguridade Social-PETROS since August 1999. From July 1997 to
August 1999, Ms. Thompson-Flores was the Director of the Department of Economic
Protection and Defense and the Adjunct Secretary of the Division of Economic
Rights of the Ministry of Justice. From May 1996 to June 1997, Ms.
Thompson-Flores was a partner, director and senior economic analyst at
Intelicorp Consultoria Ltds. From April to November 1995, Ms. Thompson-Flores
was a consultant to the Executive Secretary of the Ministry of Industry,
Commerce and Tourism. From October 1993 to March 1995, she was the General
Coordinator of Industrial Affairs with the Division of Economic Policy of the
Ministry of Finance. Prior to that, Ms. Thompson-Flores was a professor and a
researcher at several Brazilian institutions. Ms. Thompson-Flores has a master's
degree in Economics from the Catholic University of Rio de Janeiro.

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

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

        MARCOS NASCIMENTO FERREIRA is also a Director of Tele Norte Celular
Participacoes S.A. Mr. Ferreira was Director of Pantanal Linhas Aereas from 1995
to 1998. For the previous seven years, Mr. Ferreira worked for OAS Group in
different roles, including two subsidiaries Vega Sopave and Ultratec Engenharia.
In recent years, Mr.

                                       35
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Ferreira has been an active Board Member of major telecom companies in Brazil,.
including Telet and Americel (1999/2000), and Pegasus (2000). Mr. Ferreira holds
a degree in civil engineering from the Federal University of Bahia as well as a
post-graduate degree in business administration from the University of
California, Berkeley

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

        VALDEMIR DINIZ is also a member of the Supervisory Board of the Tele
Norte Participacoes S.A. Mr. Diniz is the Regional Director for the Sate of
Maranhao for Banco do Brasil. Mr. Diniz was previously Regional Director for the
State of Parana and State Director for the State of Para. Mr. Diniz was also a
member of the Supervisory Board of Jari Celulose S.A., Cadan-Caulin da Amazonia
S.A. and CBPI (Ipiranga Group). He studied business administration at
FAE-Curitiba, APG Amana Exec. International, Corporate Governance at the
University of Sao Paulo - USP.

        ISAAC SELIM SUTTON has been the managing director of the Safra Group
since 1994. In addition, he has been a Director of Aracruz Celulose S.A. and
also Chairman of its Audit Committee. Mr. Sutton has also been Chief Executive
Officer of several companies, Director of Unigel Group (1992-1994),
Commercial/Marketing Director at Cosmoquimica (1986-1992) and Marketing Manager
at Dow Chemical (1980-1986). Mr. Sutton has been a member of various Boards of
Directors and has participated in the development of projects linked to banking,
telecommunications and petrochemicals, including basic and heavy industries. Mr.
Sutton holds a bachelor's degree in Economics from the University of Sao Paulo.

EXECUTIVE OFFICERS

        The following are our executive officers and their respective positions.
NAME                                         POSITION
----                                         --------
Gunnar Birger Vinof Vikberg.............     President and Chief Executive Officer
Joao Cox Neto...........................     Chief Financial Officer
Rene Patoine............................     Executive Vice-President of Operations
Joao Alberto Santos.....................     Corporate Comptroller
Set forth below are brief biographical descriptions of the executive
officers whose biographies were not included above.

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

        RENE PATOINE has been Executive Vice-President of Operations of the
Company and of Telemig Celular Participacoes S.A. since September 1998. Mr.
Patoine was a member of the Board of Directors of the Company from September 1,
1998 to March 2000. Prior to that, he served as Executive Vice-President of
Operations of

                                       36
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Telesystem International Wireless Inc. He served as Vice-President of Operations
& Strategy Planning for Telecel International Inc. from 1995 to 1997, Executive
Advisor and Engineering Director for Conecel S.A. in Ecuador from 1993 to 1995,
Project Director for Bell Canada International from 1992 to 1993, and General
Manager of Telecel S.A. in Zaire from 1989 to 1991. He holds a bachelor's degree
in electrical engineering from Sherbrooke University, Quebec, Canada.

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

B.      COMPENSATION

        For the year ended December 31, 2000, the aggregate amount of
compensation (including bonuses and payments in-kind) paid by us to all
directors and executive officers as a group was approximately R$1.6 million.

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

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

C.      BOARD PRACTICES

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

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

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

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

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

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

                                       37
41

        The current members of the Audit Committee are Antonio Fernando Pereira
Melo, who is the chairman, Ari Matos Cardoso and Jose Carlos Soares.

        The Registrant does not have a remuneration committee.

D.      EMPLOYEES

        At December 31, 2000, we had 925 employees, as compared to 772 employees
at December 31, 1999 and 490 employees at December 31, 1998. Of our employees,
14% were employed in sales and marketing, 12% in engineering, 15% in
administration, 54% in customer service and 5% in information technology. The
significant increase in employees in 1999 and 2000 occurred primarily in the
areas of customer service and sales and marketing, (which had not been areas of
priority before the privatization), because of the increase in the subscriber
base.

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

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

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

E.      SHARE OWNERSHIP

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

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

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

        b) The second plan covers key executives (who also participate in the
first plan) and other employees. Options granted under this plan relate to
preferred stock and are exercisable at the market price at the date of grant.
The vesting period is 20% during the second year, 60% during the third year and
100% during the forth year. At December 31, 2000, 872,697 options have been
granted and none have been exercised as the vesting period had not begun.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.      MAJOR SHAREHOLDERS

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

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

                                       38
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NUMBER OF COMMON             PERCENTAGE OF OUTSTANDING
NAME OF OWNER                                                SHARES OWNED                     COMMON SHARES
---------------------------------------------------      --------------------         -----------------------------
Telpart S.A. ......................................         64,499,336,719                        51.8%
Vailly.............................................         13,732,800,000                        11.0%
Caixa de Previdencia dos Funcionarios do Banco
   do Brasil.......................................         6,722,609,333                          5.4%
Telpart is a consortium comprising Newtel Participacoes S.A., which owns
51% of Telpart, and TIW do Brasil Ltda., which owns the remaining 49%. Telpart
also owns a controlling interest in Telemig Celular Participacoes S.A., the Band
A service provider in the cellular region that includes the state of Minas
Gerais.

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

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

        On December 28, 1999, our shareholders approved a legal reorganization
whereby Telpart contributed some assets to us resulting in future tax benefits.
We recorded a deferred tax asset of R$48.8 million which will be realized over a
period of up to ten years. In accordance with Brazilian corporate law, we may
issue shares (pro rata both common and preferred) to Telpart for the amount of
the tax benefits recognized by us. In addition, minority shareholders are
granted preemptive rights. If the minority shareholders do not elect to exercise
these rights, the shares will be issued to Telpart. See Note 7 to the
consolidated financial statements for a fuller description.

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

        Our common shares are not traded in the United States. Our preferred
shares trade in the United States in the form of ADSs, each representing 50,000
shares. At December 31, 2000, approximately 3,284,868 ADSs (representing
164,243,400,000 preferred shares) were held of record in the United States.

B.      RELATED PARTY TRANSACTIONS

TECHNICAL SERVICES

        Since 1998, the Company had been negotiating a Technical Services
Agreement ("TSA") with Telesystem International Wireless, Inc. (TIWI), the
parent company of TIW, the 49% owner of Telpart S.A. Pursuant to the Brazilian
Corporations Law and the Company's charter, the contract requires shareholders'
approval. Considering that this approval was not obtained, the Company has not
paid for any services rendered. At December 31, 2000 and 1999, the Company has
liabilities payable to TIWI for approximately R$10.9 million and R$5.6 million,
respectively, related to expenses (principally, salaries and benefits) charged
by TIWI to the Company. Certain of those amounts are being disputed by the
Company.

ROAMING AGREEMENTS

        We are a member of a national roaming committee of cellular operators,
which includes our affiliate, Telemig Celular Participacoes S.A. The purpose of
the committee is to oversee technical and system aspects to

                                       39
43

ensure the highest quality of roaming service. As required by Brazilian
regulation, Telemig and ourselves facilitate roaming to our respective
subscribers.

COST SHARING AGREEMENT

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

C.      INTERESTS OF EXPERTS AND COUNSEL

        Not applicable.

ITEM 8.FINANCIAL INFORMATION

A.      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

FINANCIAL STATEMENTS

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

LEGAL PROCEEDINGS

Litigation related to the breakup of Telebras

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

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

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

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

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

                -       the Telecommunications Law requires that some matters,
                        such as the entry of new competitors and the
                        administration of development and technology funds, be
                        regulated prior to the breakup and privatization either
                        by an executive order of the President or by an act of
                        Congress.

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

Litigation arising out of events prior to the breakup

        Telebras and our predecessor companies, the legal predecessors of the
Registrant, and our subsidiaries, respectively, are defendants in a number of
legal proceedings including tax and labor-related matters and subject to certain
other claims and contingencies. Liability for any claims arising out of acts
committed by our predecessor companies prior to the effective date of the
spin-off of the cellular assets and liabilities of the predecessor companies to
our subsidiaries remains with the predecessor companies, except for:

                                       40
44

                -       labor and tax claims, for which the predecessor
                        companies and the subsidiaries are jointly and severally
                        liable, by operation of law, and

                -       liabilities with respect to which our predecessor
                        companies had made specific accounting provision prior
                        to the breakup, assigning them to our subsidiaries.

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

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

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

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

Litigation related to the application of the ICMS

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

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

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

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

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

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

        We may not prevail in our position that the new interpretation by the
state governments is unlawful. Five-year retroactive application of the ICMS to
cellular activation would have a material adverse impact on our business,
results of operations and financial condition. However, we believe that the
retroactive application of the ICMS to cellular activation is improbable. We
also believe that in such event our predecessor company would be liable to us
for any tax liability arising from the retroactive application of the ICMS to
cellular activation recognized prior to 1998. Therefore, we have not made any
provision with respect to such application in our consolidated financial
statements.

        We have made provisions totaling approximately R$3.2 million for the
application of the ICMS to cellular activation from June 1998, the effective
date of the agreement, to December 31, 2000 (see Note 14 to the

                                       41
45

consolidated financial statements). The application of the ICMS to cellular
activation for the year ended December 31, 1998 would have had a maximum
negative impact estimated at R$2.7 million, R$0.3 million and R$0.2 million on
our results of operations for 1998, 1999 and 2000, respectively. The impact of
ICMS on cellular activation on our results of operations for 1999 and 2000 would
have been immaterial as we eliminated the activation fee for all but one of our
plans, and for such plan we reduced it significantly. We do not believe that
application of the ICMS on cellular activation, applied on a prospective basis,
will have a material impact on our results of operations.

        TAXATION OF MONTHLY SUBSCRIPTIONS AND OTHER SERVICES. In December 1998,
each of our subsidiaries filed an injunction with the Treasury Court of the
state in which it is located and therefore suspended the remittance of the ICMS
on monthly subscriptions and additional services and deposited such amounts in a
trust account administered by the courts. We cannot assure you that we will
prevail in this matter. Accordingly, we have recorded an aggregate provision of
R$35 million for 1998, 1999 and 2000 in our consolidated financial statements.
See Note 14 to the consolidated financial statements.

Other litigation

        We are a party to certain legal proceedings arising in the normal course
of business. We have provided for or deposited in court amounts to cover our
estimated losses due to adverse legal judgments. We believe that these actions,
if decided against us, would not have a material adverse effect on our business,
results of operations or financial condition.

DIVIDEND POLICY

        We are required to distribute to our shareholders, either as dividends
or as tax-deductible interest on capital, 25% of our adjusted net income
determined in accordance with Brazilian accounting principles as adjusted in
accordance with Brazilian corporate law. We are also required to pay a
non-cumulative preferred dividend on our preferred shares in an amount equal to
6% of the share capital attributable to the preferred shares under Brazilian
corporate law. As of December 31, 2000, the calculated preferred dividend
requirement amounted to approximately R$2.6 million. With respect to the 2000
fiscal year, the calculated preferred dividend on the preferred shares equalled
the mandatory distribution requirement.

        For purposes of the mandatory distribution requirement, we included in
adjusted net income part of the unrealized income reserve transferred upon the
breakup of Telebras, which amounted to R$59.3 million and is included in
distributable capital and other reserves in our shareholders' equity. We decided
to include the unrealized reserve in the calculation of the mandatory
distribution requirements over a ten-year period. As a result, the total
dividend for the year ended December 31, 2000 amounted to R$4.2 million. We
cannot assure you that the mandatory distribution of the unrealized income
reserve will not result in substantial additional dividend requirements.

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

        The Registrant's only significant asset other than cash are its shares
of Amazonia Celular S.A. - Maranhao. The Registrant relies almost exclusively on
dividends from its subsidiaries to meet its needs for cash, including for the
payment of dividends to its shareholders. The Registrant controls the payment of
dividends by its subsidiaries, subject to limitations under Brazilian corporate
law.

B.      SIGNIFICANT CHANGES

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

ITEM 9. THE OFFER AND LISTING

A.      OFFER AND LISTING DETAILS

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

                                       42
46

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

        The following table presents the reported high and low closing sale
prices for our preferred shares as reported on the Sao Paulo Stock Exchange for
the periods indicated.
NOMINAL REAIS PER 1,000
                                                                            PREFERRED SHARES
                                                                      ---------------------------
                                                                         HIGH              LOW
                                                                      ----------        ---------
1998 (beginning September 21, 1998).................................    R$1.05            R$0.12

First quarter 1999..................................................    R$1.04            R$0.48
Second quarter 1999.................................................    R$1.24            R$0.93
Third quarter 1999..................................................    R$1.24            R$0.69
Fourth quarter 1999.................................................    R$1.59            R$1.02

First quarter 2000..................................................    R$2.53            R$1.20
Second quarter 2000.................................................    R$2.19            R$1.43
Third quarter 2000..................................................    R$2.20            R$1.45
Fourth quarter 2000.................................................    R$1.53            R$1.12
In the United States, the preferred shares trade in the form of American
Depositary Shares, commonly referred to as "ADSs," each representing 50,000
preferred shares, issued by The Bank of New York as depositary pursuant to a
deposit agreement among the Registrant, the depositary and the registered
holders and beneficial owners from time to time of American Depositary Receipts,
which are commonly known as "ADRs." The ADSs commenced trading separately on the
New York Stock Exchange on November 16, 1998 under the symbol "TCN." At December
31, 2000, there were approximately 100 holders of record of ADSs. The following
table presents the reported high and low closing sales prices for ADSs on the
New York Stock Exchange for the period indicated.
U.S. DOLLARS PER ADS
                                                                        ---------------------------------
                                                                             HIGH               LOW
                                                                        ---------------  ----------------
1998 (beginning November 16, 1998)..................................      U.S.$45           U.S.$11 5/8

First quarter 1999..................................................      U.S.$29 3/4       U.S.$17
Second quarter 1999.................................................      U.S.$36 1/4       U.S.$25 1/2
Third quarter 1999..................................................      U.S.$33 3/8       U.S.$19 3/8
Fourth quarter 1999.................................................      U.S.$43 1/2       U.S.$25 1/2

First quarter 2000..................................................      U.S.$67           U.S.$34 13/16
Second quarter 2000.................................................      U.S.$57 1/8       U.S.$41
Third quarter 2000..................................................      U.S.$57 1/4       U.S.$40
Fourth quarter 2000.................................................      U.S.$40           U.S.$29 1/16
B.      PLAN OF DISTRIBUTION

        Not applicable.

C.      MARKETS

TRADING ON THE NEW YORK STOCK EXCHANGE

        In the United States, the preferred shares trade in the form of ADSs,
each representing 50,000 preferred shares, issued by The Bank of New York as
depositary pursuant to a deposit agreement among the Registrant, the depositary
and the registered holders and beneficial owners from time to time of ADRs. The
ADSs commenced trading separately on the New York Stock Exchange on November 16,
1998 under the symbol "TCN."

                                       43
47

TRADING ON THE BRAZILIAN STOCK EXCHANGES

General

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

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

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

        Settlement of transactions is effected three business days after the
trade date without adjustment of the purchase price for inflation. Payment for
shares is made through the facilities of separate clearinghouses for each
exchange, which maintain accounts for member brokerage firms. The seller is
ordinarily required to deliver the shares to the exchange on the second business
day following the trade date. The clearinghouse for the Sao Paulo Stock Exchange
is Companhia Brasileira de Liquidacao e Custodia S.A. - CBLC, which is
controlled mainly by the member brokerage firms and banks that are not members
of that exchange.

        At April 30, 2001, the aggregate market capitalization of the 445
companies listed on the Sao Paulo Stock Exchange was approximately R$208
billion. Although all the outstanding listed shares of an exchange-listed
company may trade on a Brazilian stock exchange, in most cases less than half of
the listed shares are actually available for trading by the public, the
remainder being held by small groups of controlling persons that rarely trade
their shares. For this reason, data showing the total market capitalization of
Brazilian stock exchanges tend to overstate the liquidity of the Brazilian
equity securities market.

        The Brazilian equity market is relatively small and illiquid compared to
major world markets. As of April 30, 2001, the five most active issuers
represented approximately 67.8% of the total trading in the Sao Paulo Stock
Exchange. In 2000, the average monthly trading volume on the Sao Paulo Stock
Exchange was approximately R$9.0 billion.

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

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

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

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

                                       44
48

Regulation of Brazilian securities markets

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

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

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

        Trading in securities on the Sao Paulo Stock Exchange may be suspended
at the request of a company in anticipation of a material announcement. Trading
may also be suspended on the initiative of the Sao Paulo Stock Exchange or the
CVM, among other reasons, based on or due to a belief that a company has
provided inadequate information regarding a material event or has provided
inadequate responses to inquiries by the CVM or the Sao Paulo Stock Exchange.

        The Brazilian Securities Law provides for, among other things,
disclosure requirements, restrictions on insider trading and price manipulation,
and protection of minority shareholders. However, the Brazilian securities
markets are not as highly regulated and supervised as the United States
securities markets or markets in certain other jurisdictions.

D.      SELLING SHAREHOLDERS

        Not applicable.

E.      DILUTION

        Not applicable.

F.      EXPENSES OF THE ISSUE

        Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.      SHARE CAPITAL

        Not applicable.

B.      MEMORANDUM AND ARTICLES OF ASSOCIATION

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

                                       45
49

CORPORATE PURPOSES

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

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

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

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

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

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

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

                -       to perform other mobile telephone related activities;
                        and

                -       to hold equity interests in other companies.

SHAREHOLDERS' MEETING

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

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

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

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

                -       to decrease the mandatory dividend;

                -       to amend the purposes of the company;

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

                -       to liquidate the company;

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

                -       to issue founder's shares.

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

                                       46
50

MANAGEMENT

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

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

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

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

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

CAPITAL STOCK AND SHARES

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

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

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

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

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

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

        According to the charter, the general shareholders' meeting or the board
of directors may eliminate any preemptive rights in connection with the issuance
of shares, debentures or founders' shares convertible into shares and also
subscription bonuses. Nevertheless, the charter does not regulate rights
conferred to holders of preferred shares to appoint one or more members of the
administrative bodies.

                                       47
51

OWNERSHIP OF SHARES

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

RESERVES

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

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

TRANSFER OF CONTROL, MERGER AND ACQUISITION

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

C.      MATERIAL CONTRACTS

MOBILE CELLULAR SERVICE CONCESSIONS

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

INTERCONNECTION AGREEMENTS

        We have entered into interconnection agreements with NBT, our Band B
competitor, with Embratel and Intelig, two long distance carriers, with Vesper,
a wireline operator, and with our predecessor companies. The terms of our
interconnection agreements are described in "Item 4. Information on the
Company--B. Business overview--Operating agreements--Interconnection agreements"
and "Item 4. Information on the Company--B. Business overview--Regulation of the
Brazilian telecommunications industry."

ROAMING AGREEMENTS

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

ERICSSON SUPPLY AGREEMENT

        On September 27, 1998, the Registrant entered into a Cellular System
Agreement with Ericsson Telecomunicacoes S.A. This agreement provides for the
supply by Ericsson to the Registrant of products, services and software for the
implementation of our cellular network. The agreement provides for different
terms of financing depending on whether the payment is related to products,
software, services or training. This agreement is for purchases of up to R$236.7
million and has a term of three years.

CREDIT AGREEMENTS

BNDES

        On December 14, 2000, Amazonia Celular S.A. - Maranhao obtained a
R$162.6 million five-year facility from the Brazilian National Economic and
Social Development Bank (Banco Nacional de Desenvolvimento Economico e Social
(BNDES)) and a consortium of three Brazilian banks: Banco Itau S.A., Banco
Bradesco S.A.

                                       48
52

and Banco Alfa de Investimento S.A. The proceeds of this facility are for the
expansion of our coverage area and the introduction of new services. This
facility has an annual interest rate of 3.8% over either (i) the average cost of
BNDES' currency basket (based on rates and charges, including taxes, applicable
to BNDES' debt obligations in foreign currency) and (ii) the long-term interest
rate disclosed by the Brazilian Central Bank, depending on the tranche.
Principal is payable on January 16, 2006. At December 31, 2000, there was
R$135.6 million outstanding under this facility.

Citibank

        On October 20, 2000, our subsidiaries entered into a U.S.$50 million
credit agreement with Citibank and others to finance the purchase and
installation of goods and services related to our cellular telecommunications
plant. The Registrant guarantees the obligations of its subsidiaries under this
facility. In addition, the U.S. Overseas Private Investment Corporation provides
political risk insurance. This facility has an interest rate of six-month LIBOR
plus 2.625% per year, plus a guarantee fee of 1.3% per year. Principal and
interest are payable semi-annually, with a final maturity on October 25, 2005.
At December 31, 2000, there was R$97.8 million outstanding under this facility.

Export Development Corporation of Canada

        On December 20, 1999, our subsidiaries entered into a U.S.$25 million
credit agreement with the Export Development Corporation of Canada and others
for the purchase of cellular telecommunications equipment from Ericsson
Telecommunications. This facility has an interest rate of three-month LIBOR plus
5.75% per year. Principal is payable semi-annually while interest is payable
quarterly. The maturity date is December 22, 2004. At December 31, 2000, there
was R$48.9 million outstanding under this facility.

BBA/Santander

        On September 27, 2000, Ericsson Telecommunicacoes S.A. assigned
obligations under two loans from Banco BBA Creditanstalt S.A. and Banco
Santander Brasil S.A. to Telepara Celular S.A. (now known as Amazonia Celular
S.A. - Para) for U.S.$10.5 million each, for the payment of cellular
telecommunications equipment purchased from Ericsson Telecommunications. These
loans have an interest rate of six-month LIBOR plus 1.75% per year plus an
internal commission of 2.40% per year. Interest payments are semi-annual and
principal is payable on September 12, 2003. At December 31, 2000, there was
R$41.1 million outstanding under this facility.

ABN Amro Bank

        On March 31, 1998, Ericsson Telecomunicacoes S.A. made two loans to
Telamazon Celular S.A. (now known as Amazonia Celular S.A. - Amazonas) in an
aggregate amount of U.S.$19.4 million for the purchase of cellular
telecommunications equipment. These loans were assigned to ABN Amro Brasil
Participacoes S.A. on August 25, 2000. These loans have an interest rate of
six-month LIBOR plus 0.4% per year. Principal and interest are payable
semi-annually, with a maturity date of March 3, 2003. At December 31, 2000,
there was R$25.3 million outstanding under this facility.

D.      EXCHANGE CONTROLS

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

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

                                       49
53

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

                -       has a legal representative in Brazil;

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

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

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

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

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

        The restrictions on the remittance of foreign capital abroad may hinder
or prevent Banco Itau S.A., which is acting as custodian for the preferred
shares represented by ADSs, or holders who have exchanged ADRs for preferred
shares from converting dividends, distributions or the proceeds from any sale of
such preferred shares, as the case may be, into U.S. dollars and remitting such
U.S. dollars abroad. Holders of ADSs could be adversely affected by delays in,
or refusal to grant any, required government approval for conversions of
Brazilian currency payments and remittances abroad of the proceeds from
dividends or sales of Preferred Shares underlying the ADSs.

        Under current Brazilian legislation, the federal government may impose
temporary restrictions on remittances of foreign capital abroad in the event of
a serious imbalance or an anticipated serious imbalance of Brazil's balance of
payments. For approximately six months in 1989 and early 1990, the federal
government froze all dividend and capital repatriations held by the Central Bank
that were owed to foreign equity investors, in order to conserve Brazil's
foreign currency reserves. These amounts were subsequently released in
accordance with federal government directives. The imbalance in Brazil's balance
of payments increased during 1998, and there can be no assurance that the
federal government will not impose similar restrictions on foreign repatriations
in the future.

E.      TAXATION

        The following summary contains a description of the material Brazilian
and U.S. federal income tax consequences of the acquisition, ownership and
disposition of preferred shares or ADSs. This summary does not purport to be a
comprehensive description of all the tax considerations that may be relevant to
a decision to purchase preferred shares or ADSs. The summary is based upon the
tax laws of Brazil and related regulations and on the tax laws of the United
States and related regulations as in effect on the date of this annual report.
These laws and regulations may change in the future.

        Although there is at present no income tax treaty between Brazil and the
United States, the tax authorities of the two countries have had discussions
that may culminate in such a treaty. We cannot assure you, however, as to

                                       50
54

whether or when a treaty will enter into force or how it will affect the U.S.
holders of preferred shares or ADSs. Prospective holders of preferred shares or
ADSs should consult their own tax advisors as to the tax consequences of the
acquisition, ownership and disposition of preferred shares or ADSs in their
particular circumstances.

BRAZILIAN TAX CONSIDERATIONS

        The following discussion summarizes material Brazilian tax consequences
of the acquisition, ownership and disposition of preferred shares or ADSs by a
holder not deemed to be domiciled in Brazil for Brazilian tax purposes. This
discussion does not address all the Brazilian tax considerations that may be
applicable to any such particular non-Brazilian holder, and each non-Brazilian
holder should consult his or her own tax advisor about the Brazilian tax
consequences of investing in preferred shares or ADSs.

Taxation of dividends

        Dividends paid by the Registrant in cash or in kind from profits of
periods beginning on or after January 1, 1996 (i) to the depositary in respect
of preferred shares, underlying ADSs or (ii) to a non-Brazilian holder in
respect of preferred shares, will generally not be subject to Brazilian
withholding tax.

        Dividends paid from profits generated before January 1, 1996 may be
subject to Brazilian withholding tax at 15% if the profits were generated in
1994 or 1995, and at 25% if the profits were generated before 1994. Stock
dividends are not subject to Brazilian tax.

        The only Brazilian tax treaty now in effect that would, if specified
conditions are met, reduce the rate of the withholding tax on dividends paid
from profits generated before January 1, 1996 is the treaty with Japan, which
would reduce the rate to 12.5%.

Taxation of capital gains

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

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

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

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

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

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

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

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

                                       51
55

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

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

        Any exercise of preemptive rights relating to the preferred shares or
ADSs will not be subject to Brazilian taxation. Gains on the sale or assignment
of preemptive rights relating to the preferred shares underlying ADSs, complying
with the rules set forth by the National Monetary Council will be treated
differently for Brazilian tax purposes depending on whether the transaction
takes place on a Brazilian stock exchange.

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

Distributions of interest on capital

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

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

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

        Payments of interest on capital are decided by the shareholders on the
basis of recommendations of a company's board of directors.

        Distributions of interest on capital paid to Brazilian and non-Brazilian
holders of preferred shares, including payments to the depositary in respect of
preferred shares underlying ADSs, are deductible by the Registrant for Brazilian
corporate income tax purposes. These payments are subject to Brazilian
withholding tax at the rate of 15%, except for payments to persons who are
constitutionally exempt from tax in Brazil. Payments to persons situated in
jurisdictions deemed to be tax havens will be subject to tax at a 25% rate. Tax
havens are defined as countries that either have no income tax or in which the
income tax rate is less than 20%.

        We cannot assure you that our board of directors will not recommend that
future distributions of profits should be made by means of interest on capital
instead of by means of dividends.

        Amounts paid as interest on capital, net of applicable withholding tax,
may be treated as payments in respect of the dividends we are obligated to
distribute to our shareholders in accordance with our charter and the Brazilian
Corporation Law. Distributions of interest on capital in respect of the
preferred shares, including distributions to the depositary in respect of
preferred shares underlying ADSs, may be converted into U.S. dollars and
remitted outside of Brazil, subject to applicable exchange controls.

Other Brazilian taxes

        There are no Brazilian taxes applicable to the ownership, transfer or
disposition of preferred shares or ADSs by a non-Brazilian holder except for
gift and inheritance taxes levied by some states in Brazil on gifts made or
inheritances bestowed by individuals or entities not resident or domiciled in
Brazil or in the relevant state to individuals or entities that are resident or
domiciled within such state in Brazil. There are no Brazilian stamp, issue,
registration, or similar taxes or duties payable by holders of preferred shares
or ADSs, except for a 0.64% tax on the secondary sale or distribution of the
preferred shares through a public offering registered with the Brazilian
Securities and Exchange Commission, limited to R$82,870 and payable by the
seller.

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

                                       52
56

conversions is currently 0%, but the Minister of Finance has the legal power to
increase the rate to a maximum of 25%. Any such increase will be applicable only
prospectively.

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

U.S. FEDERAL TAX CONSIDERATIONS

        The statements regarding U.S. tax law presented below are based on U.S.
laws and regulations in force on the date of this annual report. Changes to such
laws or regulations subsequent to the date of this annual report could affect
the tax consequences described in this annual report. This summary describes the
material tax consequences of the ownership and disposition of preferred shares
or ADSs, but it does not purport to be a comprehensive description of all of the
tax consequences that may be relevant to a decision to hold or dispose of
preferred shares or ADSs.

        This summary applies only to purchasers of preferred shares or ADSs who
will hold the preferred shares or ADSs as capital assets and does not apply to
special classes of holders such as

                -       dealers in securities or currencies,

                -       holders whose functional currency is not the U.S.
                        dollar,

                -       holders of 10% or more of our shares (taking into
                        account shares held directly through depositary
                        arrangements),

                -       tax-exempt organizations,

                -       financial institutions,

                -       holders liable for the alternative minimum tax,

                -       securities traders who elect to account for their
                        investment in preferred shares or ADSs on a
                        mark-to-market basis, and

                -       persons holding preferred shares or ADSs in a hedging
                        transaction or as part of a straddle or conversion
                        transaction.

        Each holder should consult its own tax advisor concerning the overall
tax consequences to it, including the consequences under laws other than U.S.
federal income tax laws, of an investment in preferred shares or ADSs.

        In this discussion, references to "ADSs" also refer to preferred shares,
references to a "U.S. holder" are to a holder of an ADS that is

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

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

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

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

Taxation of dividends

        A U.S. holder will recognize ordinary dividend income for U.S. federal
income tax purposes in an amount equal to the amount of any cash and the value
of any property distributed by us as a dividend to the extent that such
distribution is paid out of our current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes, when such distribution is
received by the custodian or by the U.S. holder, in the case of a holder of

                                       53
57

preferred shares. To the extent that such a distribution exceeds our earnings
and profits, it will be treated as a nontaxable return of capital to the extent
of the U.S. holder's tax basis in the ADS and after as capital gain.

        The amount of any distribution will include the amount of Brazilian tax
withheld on the amount distributed and the amount of a distribution paid in
reais will be measured by reference to the exchange rate for converting reais
into U.S. dollars in effect on the date the distribution is received by the
custodian, or by a U.S. holder, in the case of a holder of preferred shares. If
the custodian or U.S. holder, in the case of a holder of preferred shares, does
not convert the reais into U.S. dollars on the date it receives them, it is
possible that the U.S. holder will recognize foreign currency loss or gain,
which would be ordinary loss or gain, when the reais are converted into U.S.
dollars. Dividends paid by us will not be eligible for the dividends received
deduction allowed to corporations under the Code.

        Distributions out of earnings and profits with respect to the ADSs
generally will be treated as dividend income from sources outside of the United
States and generally will be treated separately along with other items of
"passive" (or, in the case of certain U.S. holders, "financial services") income
for purposes of determining the credit for foreign income taxes allowed under
the Code. Subject to certain limitations, Brazilian income tax withheld in
connection with any distribution with respect to the ADSs may be claimed as a
credit against the U.S. federal income tax liability of a U.S. holder if the
U.S. holder elects for that year to credit all foreign income taxes, or such
Brazilian withholding tax may be taken as a deduction. Foreign tax credits will
not be allowed for withholding taxes imposed in respect of certain short-term or
hedged positions in securities or in respect of arrangements in which a U.S.
holder's expected economic profit, after non-U.S. taxes, is insubstantial. U.S.
holders should consult their own tax advisors concerning the implications of
these rules in light of their particular circumstances.

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

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

Taxation of capital gains

        Upon the sale or other disposition of an ADS, a U.S. holder will
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realized in consideration for the
disposition of the ADS (excluding the amount of any distribution paid to the
custodian but not distributed by the custodian prior to the disposition) and the
U.S. holder's tax basis in the ADS. The gain or loss generally will be subject
to U.S. federal income tax and will be treated as capital gain or loss.
Long-term capital gains recognized by an individual holder generally are subject
to a maximum rate of 20% in respect of property held for more than one year. The
deductibility of capital losses is subject to limitations. Gain realized by a
U.S. holder on a sale or disposition of ADSs generally will be treated as U.S.
source income. Consequently, if Brazilian tax is imposed on such gain, the U.S.
holder will not be able to use the corresponding foreign tax credit, unless the
holder has other foreign source income of the appropriate type in respect of
which the credit may be used.

        A non-U.S. holder will not be subject to U.S. federal income tax or
withholding tax on gain realized on the sale or other disposition of an ADS
unless

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

                -       the holder is an individual who is present in the United
                        States of America for 183 days or more in the taxable
                        year of the sale and certain other conditions are met.

U.S. backup withholding and information reporting

        Dividend payments on the ADSs and proceeds from the sale, exchange or
other disposition of ADSs may be subject to information reporting to the IRS and
possible U.S. backup withholding at a 31% rate. Backup

                                       54
58

withholding will not apply, however, to a holder who furnishes a correct
taxpayer identification number or certificate of foreign status and makes any
other required certification or who is otherwise exempt from backup withholding.
Persons required to establish their exempt status generally must provide such
certification on IRS Form W-9 (Request for Taxpayer Identification Number and
Certification) in the case of U.S. persons and on IRS Form W-8 (Certificate of
Foreign Status) in the case of non-U.S. persons. Treasury Regulations have
generally expanded the circumstances under which information reporting and
backup withholding may apply for payments made after December 31, 2000 (the "New
Withholding Regulations").

        Amounts withheld as backup withholding may be credited against a
holder's U.S. federal income tax liability, and a holder may obtain a refund of
any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS and furnishing any required
information.

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

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

U.S. state and local taxes

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

F.      DIVIDENDS AND PAYING AGENTS

        Not applicable.

G.      STATEMENT BY EXPERTS

        Not applicable.

H.      DOCUMENTS ON DISPLAY

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

I.      SUBSIDIARY INFORMATION

        Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are primarily exposed to market risk from changes in both foreign
currency exchange rates and interest rates. We are exposed to foreign exchange
rate risk because certain of our costs and debt are denominated in currencies,
primarily the U.S. dollar, other than those in which we earn revenues (primarily
the real). Similarly, we are subject to market risk deriving from changes in
interest rates which may affect the cost of our financing. We do not use
derivative instruments, such as foreign exchange forward contracts, foreign
currency options, interest rate swaps and forward rate agreements, to manage
these market risks, nor do we hold or issue derivative or other financial
instruments for trading purposes.

                                       55
59

EXCHANGE RATE RISK

        We have exchange rate exposure with respect to the U.S. dollar. At
December 31, 2000, R$213.3 million of our indebtedness was denominated in U.S.
dollars. The potential additional costs to us that would result from a
hypothetical 10% change in foreign currency exchange rates would be
approximately R$21.3 million.

INTEREST RATE RISK

        At December 31, 2000, we had approximately R$348.9 million in loans and
financing outstanding bearing interest at floating rates. We invest our excess
liquidity (R$164.7 million at December 31, 2000) mainly in short-term
instruments. The potential loss in earnings to us over one year that would have
resulted from a hypothetical, instantaneous and unfavorable change of 100 basis
points in the interest rates applicable to financial assets and liabilities on
December 31, 2000 would be approximately R$5.5 million.

        The above sensitivity analysis is based on the assumption of an
unfavorable 100 basis point movement of the interest rates applicable to each
homogeneous category of financial assets and liabilities and sustained over a
period of one year. A homogeneous category is defined according to the currency
in which financial assets and liabilities are denominated and assumes the same
interest rate movement within each homogeneous category (e.g., U.S. dollars). As
a result, our interest rate risk sensitivity model may overstate the impact of
interest rate fluctuations for such financial instruments as consistently
unfavorable movements of all interest rates are unlikely. See Notes 5 and 6 to
our consolidated financial statements for a description of our short- and
long-term debt.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

        Not applicable.

                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

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

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

        Not applicable.

ITEM 15. RESERVED

        Not applicable.

ITEM 16. RESERVED

        Not applicable.

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

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

                                       56
60

ITEM 18. FINANCIAL STATEMENTS
PAGE
                                                                                                   ----
Tele Norte Celular Participacoes S.A.

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

See Note 18 to the Consolidated Financial Statements.

                                       F-1
61

                         REPORT OF INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheets of Tele Norte
Celular Participacoes S.A. as of December 31, 2000 and 1999, and the related
consolidated statements of income and comprehensive income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tele Norte Celular
Participacoes S.A. at December 31, 2000 and 1999, and the consolidated statement
of income and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.

                    Ernst & Young Auditores Independentes S/C

Brasilia, Brazil
March 30, 2001

                                      F-2
62

                      TELE NORTE CELULAR PARTICIPACOES S.A.

                           CONSOLIDATED BALANCE SHEETS
                     Amounts are in thousands of reais - R$
DECEMBER 31,
                                                                                       -------------------
                                                                                        2000         1999
                                                                                       -------     -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                              164,740      69,233
Trade receivables, net of allowance for doubtful accounts of R$36,048 and R$27,210     120,560      87,137
Income tax receivable                                                                    5,479       9,316
Deferred income taxes                                                                    5,030      11,329
Other current assets                                                                    33,421      19,341
                                                                                       -------     -------
                                                                                       329,230     196,356
                                                                                       -------     -------

Property, plant and equipment, net                                                     438,386     307,995
Deferred income taxes                                                                   73,511      64,810
Other non current assets                                                                 5,590         519
                                                                                       -------     -------
                                                                                       846,717     569,680
                                                                                       =======     =======

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                                       108,761      58,683
Accrued liabilities                                                                     21,506      21,019
Value added and other taxes payable                                                     11,639      10,680
Interest on capital and dividends payable                                                4,597       8,405
Short-term debt                                                                              -      36,942
Current portion of long term debt                                                       23,021      11,614
Other current liabilities                                                                2,711       5,800
                                                                                       -------     -------
                                                                                       172,235     153,143
                                                                                       -------     -------

Long term debt                                                                         325,879      77,514
Pension plan obligation                                                                  7,777       6,300
Provision for contingencies and other                                                    9,311      10,042
Minority interest                                                                       69,703      70,375
                                                                                       -------     -------
                                                                                       412,670     164,231
                                                                                       -------     -------

SHAREHOLDERS' EQUITY:
Preferred shares                                                                        36,552      36,266
Common shares                                                                           21,653      21,483
Other capital and reserves                                                             156,668     151,436
Retained earnings                                                                       46,939      43,121
                                                                                       -------     -------
                                                                                       261,812     252,306
                                                                                       -------     -------
                                                                                       846,717     569,680
                                                                                       =======     =======
See the accompanying notes to the consolidated financial statements.

                                      F-3
63

                      TELE NORTE CELULAR PARTICIPACOES S.A.

                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME
                     Amounts are in thousands of reais - R$
YEAR ENDED DECEMBER 31,
                                                                 ---------------------------------------
                                                                    2000           1999           1998
                                                                 ---------      ---------      ---------
Revenues:
   Services provided to third parties                              356,713        275,323        206,629
   Services provided to related parties                                  -              -         25,926
   Sales of handsets                                               123,909         33,523              -
                                                                 ---------      ---------      ---------
                                                                   480,622        308,846        232,555
                                                                 ---------      ---------      ---------

Cost of services:
   Provided by related parties                                           -              -         29,004
   Other                                                           150,204        113,872         38,540
Cost of handsets                                                   133,114         36,927              -
Selling, general and administrative expenses                       144,561         90,626         51,913
Pension plan expense                                                 1,477          6,300              -
Bad debt expense                                                    24,760         28,084         38,428
Other net operating income                                          (3,647)          (710)        (1,688)
Impairment of long-lived assets                                          -              -         18,448
                                                                 ---------      ---------      ---------
Operating income                                                    30,153         33,747         57,910

Interest income                                                    (12,330)       (20,963)        (8,591)
Interest expense                                                    18,750          6,016          4,047
Foreign exchange (gain) loss                                        13,579         12,394          2,472
                                                                 ---------      ---------      ---------
Income before minority interest and taxes                           10,154         36,300         59,982
Income taxes                                                        (1,534)         8,347         16,897
Minority interest                                                    3,741          8,570         11,553
                                                                 ---------      ---------      ---------
Net income and comprehensive income                                  7,947         19,383         31,532
                                                                 ---------      ---------      ---------

                                                                 ---------      ---------      ---------
Basic and diluted earnings, in reais per thousand shares              0.02           0.06           0.09
                                                                 =========      =========      =========
See the accompanying notes to the consolidated financial statements

                                      F-4
64

                      TELE NORTE CELULAR PARTICIPACOES S.A.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Amounts are in thousands of reais - R$
Additional
                                        Divisional   Preferred     Common     Paid-In     Capital      Retained
                                          Equity       Shares      Shares     Capital     Reserves     Earnings       Total
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 1997              157,192            -           -           -           -            -      157,192
                                         --------     --------    --------    --------    --------     --------     --------
Contributed capital from the Spin-Off       1,975            -           -           -           -            -        1,975
Allocation of divisional equity as a
result of Spin-Off                       (159,167)      36,266      21,483           -     101,418            -            -
Contributed capital                             -            -           -           -       1,200            -        1,200
Interest on capital                             -            -           -           -           -       (2,047)      (2,047)
Net income                                      -            -           -           -           -       31,532       31,532
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 1998                    -       36,266      21,483           -     102,618       29,485      189,852
                                         --------     --------    --------    --------    --------     --------     --------
Paid in capital - non cash                      -            -           -           -      48,818            -       48,818
Net income                                      -            -           -           -           -       19,383       19,383
Dividends                                       -            -           -           -           -       (1,724)      (1,724)
Interest on capital                             -            -           -           -           -       (4,023)      (4,023)
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 1999                    -       36,266      21,483           -     151,436       43,121      252,306
                                         --------     --------    --------    --------    --------     --------     --------
Additional  paid-in capital                     -            -           -       5,688           -            -        5,688
Net income                                      -            -           -           -           -        7,947        7,947
Capital increase                                -          286         170           -        (456)           -            -
Dividends                                       -            -           -           -           -       (4,129)      (4,129)
                                         --------     --------    --------    --------    --------     --------     --------
BALANCE AT DECEMBER 31, 2000                    -       36,552      21,653       5,688     150,980       46,939      261,812
                                         ========     ========    ========    ========    ========     ========     ========
See the accompanying notes to the consolidated financial statements

                                      F-5
65

                      TELE NORTE CELULAR PARTICIPACOES S.A.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Amounts are in thousands of reais - R$
YEAR ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                              2000           1999           1998
                                                                           ---------      ---------      ---------
Operating activities:
Net income                                                                     7,947         19,383         31,532
Adjustments to reconcile net income to net cash provided by operating
activities:
   Depreciation                                                               56,730         50,382         20,266
   Deferred income taxes                                                      (6,311)        (6,920)       (24,428)
   Minority interest                                                           3,741          8,570         11,553
   Unrealized foreign exchange loss on long-term debt                         11,340         10,702          1,700
   Pension plan expense                                                        1,477          6,300              -
   Provision for contingencies                                                  (937)           999          9,030
   Impairment of long-lived assets                                                 -              -         18,448
   Compensation expense                                                            -              -          1,200
Changes in operating assets and liabilities:
   Trade receivables                                                         (33,423)       (43,105)         9,611
   Accounts payable and accrued liabilities                                   60,368         46,821          4,864
   Accounts payable related to property, plant and equipment                       -              -        (14,121)
   Value added and other taxes payable                                           959          1,842          6,867
   Income taxes payable                                                            -        (21,504)        12,188
   Deferred activation fees                                                   (1,735)        (3,531)         5,266
   Other                                                                     (24,889)           180         (9,185)
                                                                           ---------      ---------      ---------
Net cash provided by operating activities                                     75,267         70,119         84,791
                                                                           ---------      ---------      ---------

Investing activities:
   Proceeds from sales of property, plant and equipment                            -              -          2,348
   Additions to property, plant and equipment                               (187,121)      (151,037)       (31,672)
                                                                           ---------      ---------      ---------
Net cash used in investing activities                                       (187,121)      (151,037)       (29,324)
                                                                           ---------      ---------      ---------

Financing activities:
   Increase in short-term debt                                                     -         46,342              -
   Increase in long-term debt                                                270,485         63,372         21,971
   Repayment of short-term debt                                              (36,942)        (9,400)             -
   Repayment of long-term debt                                               (22,053)       (24,149)        (8,525)
   Dividends                                                                  (4,129)        (5,747)             -
   Contribution upon Spin-Off                                                      -              -          1,975
                                                                           ---------      ---------      ---------
Net cash provided by financing activities                                    207,361         70,418         15,421
                                                                           ---------      ---------      ---------

Increase in cash and cash equivalents for the year                            95,507        (10,500)        70,888
Cash and cash equivalents, beginning of the year                              69,233         79,733          8,845
                                                                           ---------      ---------      ---------
Cash and cash equivalents, end of the year                                   164,740         69,233         79,733
                                                                           =========      =========      =========

Supplemental cash flow information:
   Income taxes paid                                                           2,599         24,520         29,229
   Interest paid                                                              15,878          3,945          2,343
See the accompanying notes to the consolidated financial statements.

                                      F-6
66

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

1.  BACKGROUND AND DESCRIPTION OF BUSINESS

    Beginning in 1995, the federal government of Brazil (the "Federal
    Government") undertook a comprehensive reform of the Brazilian regulation of
    the telecommunications industry. In July 1997, the Federal Congress adopted
    a General Telecommunications Law providing for the privatization of
    Telecomunicacoes Brasileiras S.A. ("Telebras") which, through its 28
    operating subsidiaries, was the primary supplier of public
    telecommunications services in Brazil ("Telebras System").

    In preparation for the privatization of the Telebras system, the operating
    subsidiaries were divided into twelve separate groups, (a) three regional
    fixed line operators, (b) eight regional cellular operators and (c) one
    national long-distance operator. The cellular telecommunications businesses
    were first separated from the operating subsidiaries, and subsequently the
    fixed line businesses, the new cellular businesses and the long-distance
    operator were combined into twelve separate groups (the "New Holding
    Companies", individually, "New Holding Company"). Both the separation of the
    cellular businesses and the subsequent grouping of the former Telebras
    subsidiaries were performed using a procedure under Brazilian corporate law
    called cisao (Spin-Off). As part of this process Tele Norte Celular
    Participacoes S.A. was formed on May 22, 1998, through the Spin-Off of
    certain assets and liabilities of Telebras, including 80.3%, 86.9%, 90.6%,
    69% and 66.8% of the share capital of Telamazon Celular S.A., Telaima
    Celular S.A., Teleamapa Celular S.A., Telepara Celular S.A. and Telma
    Celular S.A. (together the "subsidiaries"), respectively.

    Telamazon Celular S.A., Telaima Celular S.A., Teleamapa Celular S.A.,
    Telepara Celular S.A. and Telma Celular S.A. were formed on January 5, 1998
    and subsequently received on January 30, 1998 from Telecomunicacoes do
    Amazonas S.A. ("Telamazon"), Telecomunicacoes de Roraima S.A. ("Telaima"),
    Telecomunicacoes do Amapa S.A. ("Teleamapa"), Telecomunicacoes do Para S.A.
    ("Telepara") and Telecomunicacoes do Maranhao S.A. ("Telma") the assets and
    liabilities comprising their respective cellular telecommunications services
    (together the "predecessor companies"). Tele Norte Celular Participacoes
    S.A. and its subsidiaries (together the "Company") are the primary suppliers
    of cellular telecommunications services in the states of Amazonas, Roraima,
    Amapa, Para and Maranhao under the terms of concessions granted by the
    Federal Government on October 23, 1997 (the "Concessions"). The Concessions
    will expire in 2009 and may be renewed at the discretion of Agencia Nacional
    de Telecomunicacoes ("Anatel"), the regulatory authority for the Brazilian
    telecommunications industry, for a further term of 15 years. Through their
    predecessors Telamazon, Telaima, Teleamapa, Telepara and Telma, the Company
    has provided cellular telecommunications services in the states of Amazonas,
    Roraima, Amapa, Para and Maranhao since April 1994.

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

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

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

                                      F-7
67

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

2.  PRESENTATION OF THE FINANCIAL STATEMENTS

    These consolidated financial statements have been prepared in accordance
    with accounting principles generally accepted in the United States and rules
    and regulations adopted by the United States Securities and Exchange
    Commission. Certain of the comparative figures have been reclassified to
    conform to the presentation adopted in the current year.

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

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

    The shareholders also approved a specific structure for the shareholders'
    equity of each New Holding Company, which included an allocation of a
    portion of the retained earnings of Telebras. This value of allocated
    retained earnings does not represent the historical retained earnings of the
    New Holding Companies and therefore is presented as "Capital Reserves" on
    the consolidated statements of changes in shareholders' equity. The net
    assets which were spun-off from Telebras, in addition to its investment in
    the operating subsidiaries, resulted in a net equity increase of R$1,975 in
    relation to the Company's historical divisional equity.

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

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

3.  SUMMARY OF ACCOUNTING POLICIES

    The summary of significant accounting policies is as follows:

    (a) Consolidation

        The consolidated financial statements include the accounts of the Tele
        Norte and the subsidiaries. All significant intercompany transactions
        and balances have been eliminated.

    (b) Cash equivalents

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

                                      F-8
68

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    (c) Foreign currency transactions

        Transactions in foreign currency are recorded at the prevailing exchange
        rate at the time of the related transactions. Foreign currency
        denominated assets and liabilities are translated using the exchange
        rate at the balance sheet date. Exchange differences are recognized in
        the statements of operations as they occur.

    (d) Property, plant and equipment

        Property, plant and equipment are stated at indexed cost through
        December 31, 1997 and at cost thereafter. Depreciation is provided using
        the straight-line method based on the estimated useful lives of the
        underlying assets as follows:
Years
                                                                        ----------
Buildings                                                           20
        Network equipment                                                 5 to 8
        Other equipment                                                   5 to 10
Interest incurred on borrowings is capitalized as part of property,
        plant and equipment until the asset is placed in service, to the extent
        that borrowings do not exceed construction-in-progress.

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

    (e) Revenue recognition

        Revenues for services are recognized when the service is provided or
        when the equipment is sold, respectively. Revenues from cellular
        telephone services consist of subscription charges, usage charges,
        activation fees, network usage charges and charges for maintenance and
        other customer services. Unbilled revenues from the billing date to the
        month-end are estimated and recognized as revenue during the month in
        which the service was provided. Effective January 1, 1998, the Company
        defers net activation fees. These fees are amortized over twelve months,
        the estimated effective contract life. Revenues from equipment sales
        refer to sales of handsets.

        The Company began selling prepaid cards during 1999. The revenue from
        the sales of these cards is recognized according to the minutes used for
        each card. Revenue from unused minutes is deferred until used. Because
        the amount deferred is immaterial, it has been included in other
        liabilities.

    (f) Pension and other post-retirement benefits

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

                                      F-9
69

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    (g) Use of estimates

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

    (h) Advertising costs

        Advertising costs are expensed as incurred and included in selling,
        general and administrative expenses. They amounted to R$12,481, R$12,390
        and R$930 for the years ended December 31, 2000, 1999 and 1998,
        respectively.

    (i) Stock-Based Compensation

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

    (j) New accounting pronouncements

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

        In June 1998, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 133,
        "Accounting for Derivative Instruments and Hedging Activities". SFAS 133
        establishes new accounting and reporting standards for derivative
        financial instruments and for hedging activities. SFAS 133 requires
        companies to measure all derivatives at fair value and to recognize them
        in the balance sheet as an asset or liability, depending on the
        company's rights or obligations under the applicable derivative
        contract. In June 1999, the FASB issued SFAS No. 137, which deferred the
        effective date of adoption of SFAS 133 for one year. The Company will
        adopt SFAS 133 no later than the first quarter of fiscal year 2001. The
        estimated effect will be R$3,100.

    (k) Swaps

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

    (l) Reclassifications

        Certain amounts were reclassified to conform to the 2000 presentation.

                                      F-10
70

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

4.  PROPERTY, PLANT AND EQUIPMENT
Accumulated        Carrying
                                                       Cost         Depreciation        Value
                                                     --------       ------------       ---------
DECEMBER 31, 1999
   Land and buildings                                   4,966              544            4,422
   Network equipment                                  265,504          100,022          165,482
   Other equipment                                     71,010            9,525           61,485
   Construction-in-progress                            76,606                -           76,606
                                                     --------         --------         --------
                                                      418,086          110,091          307,995
                                                     ========         ========         ========

   DECEMBER 31, 2000
   Land and buildings                                   5,984              635            5,349
   Network equipment                                  377,230          135,685          241,545
   Other equipment                                    107,820           30,501           77,319
   Construction-in-progress                           114,173                -          114,173
                                                     --------         --------         --------
                                                      605,207          166,821          438,386
                                                     ========         ========         ========
The amount of interest capitalized as part of property, plant and equipment
    is R$8,895 and R$2,623 for the years ended December 31,2000 and 1999,
    respectively.

5.  SHORT-TERM DEBT
INSTITUTION         2000             1999
                                                                  -----------      -----------      -----------
Reais facilities, due in quarterly installments until
   November 2000 with annual interest of 6.7% over the
   Long-term Interest Rate (TJLP - 12.5% at December 31,
   1999)                                                           BNDES (1)            -              36,942
                                                                                   -----------      -----------
   Total                                                                                -              36,942
                                                                                   ===========      ===========
6.  LONG-TERM DEBT
INSTITUTION           2000             1998
                                                                   -----------       -----------      -----------
U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through March 2003, interest at LIBOR          ABN AMRO/
   plus 0.4%.                                                        Ericsson            25,310          32,643

   U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through December 2004, interest at LIBOR
   plus 5.75%.                                                        EDC (2)            48,885          45,450

   U.S. dollar denominated, unsecured, interest and principal
   due semi-annually through September 2003, interest at LIBOR      BBA Bank/
   plus 4.15%.                                                       Ericsson            41,062               -

   U.S. dollar denominated, unsecured, interest at LIBOR plus
   3.925%, interest and principal due semi-annually beginning
   in April 2002 until October 2005.                                 OPIC (3)            97,790               -
F-11
71

                      TELE NORTE CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$
INSTITUTION         2000             1999
                                                                  -----------      -----------      -----------
Reais facilities, interest at LIBOR plus 3.8%, interest and
   principal due quarterly beginning in October 2001 until
   December 2005.                                                   BNDES (1)           135,577               -

   Other                                                                                    276          11,035
                                                                                   ------------     -----------
   Total                                                                                348,900          89,128
   Less current portion                                                                 (23,021)        (11,614)
                                                                                   ------------     -----------
   Long-term portion                                                                    325,879          77,514
                                                                                   ============     ===========
(1) BNDES - National Bank for Economic and Social Development

    (2) EDC - Export and Development Corporation

    (2) OPIC - Overseas Private Investment Corporation

        Minimum annual principal repayments of all long-term debt during the
        next five years are as follows:
2002                                                                   81,520
   2003                                                                  115,304
   2004                                                                   70,605
   2005 and after                                                         58,450
                                                                        --------
   Total                                                                 325,879
                                                                        ========
The financing contracts obtained by the subsidiaries with BNDES, Overseas
    Private Investment Corporation - OPIC - and the Export and Development
    Corporation - EDC have covenants related to the destination of funds as
    specified in the contracts, and the maintenance of principally balance sheet
    ratios. If an event default occurs, such financing may have their due dates
    anticipated. At December 31, 2000 all covenants were met by the subsidiaries
    or waived by the Financial Institution.

    The contract with BNDES is secured by accounts receivable.

7.  CAPITAL STOCK

    The capital stock of the Company is comprised of preferred shares and common
    shares, all without par value. The Company has 700,000,000 thousand shares
    authorized, (including both preferred and common shares). At December 31,
    2000, there were 210,189,114 thousand outstanding preferred shares
    (210,029,997 thousand at December 31, 1999) and 124,463,251 thousand
    outstanding common shares (124,369,030 at December 31, 1999). The capital
    may be increased by a decision taken at a shareholders' meeting or by the
    Board of Directors in connection with the capitalization of profits or
    reserves, provided that the amounts were allocated for capital increases at
    a previous shareholders' meeting.

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

    Under the Brazilian Corporate Law, the number of non-voting shares or shares
    with limited voting rights, such as the preferred shares, may not exceed
    two-thirds of the total number of outstanding shares.

                                      F-12
72

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    As part of the privatization of Telebras, the Brazilian Federal Government
    offered Telebras' employees the right to purchase, at a discounted price,
    the Federal Government's entire holding of Telebras preferred shares and the
    preferred shares of each of the New Holding Companies created as a result of
    the Spin-Off. The period during which employees could subscribe for the
    shares began on August 4, 1998, and expired on October 30, 1998. In 1998,
    the Company recorded compensation expense and contributed capital in the
    amount of R$1,200 related to this offer.

    At December 31, 2000 the Company has reserved 872,697 shares of preferred
    stock for issuance in connection with the stock option plans - see Note 17

    Dividends

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

    For the purposes of the Brazilian Corporate Law, and in accordance with the
    Company's by-laws, the "Adjusted Net Income" is an amount equal to the
    Company's net profits under Brazilian GAAP adjusted to reflect allocations
    to or from (i) the legal reserve, (ii) a contingency reserve for anticipated
    losses, if any, and (iii) an unrealized revenue reserve, if any. Under
    Brazilian Corporate Law, the Company is required to appropriate 5% of its
    annual earnings, calculated using Brazilian GAAP, after absorbing
    accumulated losses, to a legal reserve, which is restricted as to
    distribution. This reserve may be used to increase capital or to absorb
    losses, but may not be distributed as dividends. At December 31, 2000, the
    Company's financial statements, prepared using Brazilian GAAP, presented an
    unconsolidated total equity of R$258,324 including a legal reserve of
    R$7,311.

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

    Paid in Capital

    On December 28, 1999, the shareholders approved a legal reorganization
    whereby a major shareholder contributed certain assets to the Company
    resulting in future tax benefits. This asset will result in amortization
    expense and a related tax benefit. For US GAAP purposes, in accordance with
    EITF 94-10, tax effects caused by transactions with shareholders were not
    included in the Company's income statement but rather in equity. Therefore,
    the Company recorded a deferred tax asset of R$48,818 with an offsetting
    amount as Paid in Capital. The deferred tax asset will be realized as the
    tax benefits are recognized for local tax purposes over a period of up to 10
    years.

    In accordance with Brazilian corporate law, the Company may issue shares
    (pro rata both common and preferred) based on the different pricing criteria
    permitted by such law to the contributing shareholder for the amount of the
    tax benefits recognized by the Company. However, the minority shareholders
    will be given the

                                      F-13
73

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    right to purchase their pro-rata share of this capital stock increase in
    order to prevent dilution. In case they do not accept the offer, these
    shares will be issued to the majority shareholders. Additionally, the
    Company has to ensure that shareholders will receive the minimum dividend
    required by law if the amortization expense results in accumulated losses.

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

    See also Note 10.

8.  EARNINGS PER SHARE

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

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

    Basic earnings per common share are computed by reducing net income by
    distributable and undistributable net income available to preferred
    shareholders and dividing net income available to common shareholders by the
    weighted-average number of common shares outstanding during the period. Net
    income available to preferred shareholders is the sum of the preferred
    dividends distributable net income, and the preferred shareholders' portion
    of undistributed net income.

    Undistributed net income is computed by deducting preferred dividends and
    common dividends from net income. Undistributed net income is shared
    equally, on a per share basis, by the preferred and common shareholders.

    The following table sets forth the computation of basic and diluted earnings
    per thousand of common shares:
2000             1999              1998
                                                                  ------------      ------------      ------------
Numerator:
      Net income                                                         7,947            19,383            31,532
      Less: Distributable net income available to preferred
      stockholders                                                      (2,193)           (2,176)           (2,176)
         Undistributed net income allocated to preferred
         stockholders                                                   (2,798)           (9,998)          (17,629)
                                                                  ------------      ------------      ------------
   Numerator for basic and diluted earnings per thousand
      shares-income available to common stockholders                     2,956             7,209            11,727
                                                                  ------------      ------------      ------------
   Denominator:
   Basic and diluted weighted-average number of common shares
      (in thousands)                                               124,463,251       124,369,031       124,369,031
                                                                  ------------      ------------      ------------
   Basic and diluted earnings, in reais per thousand common
      shares                                                              0.02              0.06              0.09
                                                                  ============      ============      ============
F-14
74

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

9.  INCOME TAXES

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

    Following is the detail of income tax expense for the years ended December
    31, 2000, 1999 and 1998:
2000         1999         1998
                                                          --------     --------    ----------
Federal income tax charge                                4,391       12,543       31,150
   Social contribution tax charge                             386        2,724       10,175
   Deferred taxes                                          (6,311)      (6,920)     (24,428)
                                                          -------      -------     --------
   Income tax expense as reported in the accompanying
   financial statements                                    (1,534)       8,347       16,897
                                                          =======      =======     ========
Following is a reconciliation of the reported income tax expense and the
    amount calculated by applying the combined statutory tax rate of 34%, 37%
    and 33% for the years ended December 31, 2000, 1999 and 1998, respectively:
2000          1999          1998
                                                                   --------      --------      --------
Tax charge at the combined statutory rate                         3,452        13,431        19,794
      Tax incentive                                                 (1,480)            -             -
      Non-deductible expenses (non taxable income) and others       (2,965)       (2,436)       (2,897)
      Interest on capital                                             (541)       (2,648)            -
                                                                   -------       -------       -------
      Income tax expense as reported in the accompanying
      financial statements                                          (1,534)        8,347        16,897
                                                                   =======       =======       =======
Following is an analysis of deferred income tax assets and liabilities:
2000             1999
                                                                                      --------         --------
Deferred tax assets:
       Income taxes losses carry forwards                                               4,739                -
       Assets related to paid in capital                                               43,824           48,818
       Impairment of equipment                                                          1,816            9,160
       Accrued expenses and provision for contingencies                                18,998           10,682
       Allowance for doubtful accounts                                                 12,256           10,164
       Capitalized interest                                                             1,810            3,427
                                                                                      -------          -------
                                                                                       83,443           82,251

   Deferred tax liabilities:
       Cumulative indexation differences                                               (4,902)          (6,112)
                                                                                      -------          -------
       Net deferred tax assets                                                         78,541           76,139
                                                                                      =======          =======
       Current portion                                                                  5,030           11,329
       Long-term deferred income taxes                                                 73,511           64,810
                                                                                      -------          -------
       Net deferred tax assets                                                         78,541           76,139
                                                                                      =======          =======
F-15
75

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    As further explained in Note 7, the total tax of R$48,818 related to
    deferred asset was credited to paid in capital in the shareholders' equity
    section.

10. TRANSACTIONS WITH RELATED PARTIES

    (a) Empresa Brasileira de Telecomunicacoes S.A.

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

    (b) Telesystem International Wireless

        Telesystem International Wireless - TIW, the parent company of the 49%
        owner of Telpart S.A., the Company's major shareholder, provided the
        Company with technical assistance and services from August 4, 1998 until
        the end of 2000. Amounts accrued for such services were approved by the
        Company's Board of Directors and totaled R$22,844, R$9,646, and R$3,656
        in 2000, 1999 and 1998, respectively.

        The Company, after consulting with legal counsel, decided not to pay the
        amounts accrued for technical assistance and services described above.
        This was because Brazilian Corporate Law and the Company's by-laws
        require that payment for such services must be approved by the
        shareholders. However such shareholder approval did not occur.
        Accordingly, the amounts owed to TIW for technical assistance and
        services at December 31, 2000 of R$5,688 net of the related tax effect
        of R$2,930 were credited to paid-in capital.

        At December 31, 2000 and 1999, the Company has liabilities payable to
        TIW for approximately R$10,860 and R$5,581, respectively, related to
        expenses (principally, salaries and benefits) charged by TIW to the
        Company. Certain of those amounts are being disputed by the Company.

    (c) Latinvest Asset Management

        At December 31, 2000 the Company has cash equivalents of R$25,432
        deposited in Latinvest Red, an investment fund managed by Latinvest
        Asset Management, a shareholder of the Company. This cash investment
        earns interest ranging from 16% to 23% and interest income related to
        this cash equivalent amounts to R$432.

11. IMPAIRMENT OF LONG-LIVED ASSETS

    During the fourth quarter of 1998, the Company recorded a write-down of
    certain of its analog transmission network equipment amounting to R$18,448.

    In 1998, the Ministry of Communications granted to a newly formed consortium
    an additional license to provide enhanced services in the Company's
    concession area in the form of digital cellular services. The commercial
    operation of the consortium began in 1999. The introduction of competition
    with digital capacity in

                                      F-16
76

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    the Company's market has resulted in an acceleration of its plan to replace
    its existing analog equipment with more modern digital equipment.

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

12. PENSION PLAN AND OTHER POST-RETIREMENT BENEFIT PLANS

    The Company, together with substantially all of the other companies in the
    former Telebras group, participates in a multi-employer defined benefit
    pension plan and other post-retirement benefit plans administered by the
    Fundacao Sistel de Seguridade Social ("Sistel"), a minority shareholder.

    Effective 2001, the plan was modified and changed into a multiple employer
    pension plan with respect to active employees. The plan assets and
    liabilities related to active employees were transferred into a new plan and
    the benefits remained unchanged. The post-retirement benefit plans remained
    as unchanged as multi-employer plans.

    Substantially all of Company's employees are covered by these plans. The
    Company contributed R$1,069 and R$786 in 1999 and 1998, respectively, with
    respect to pension fund and post-retirement plan contributions. The Company
    contributed R$68 in 2000 with respect to the multi-employer plans.

    In 1999, Sistel approved changes to the plan statutes resulting in the break
    up of plan assets and liabilities related to the active participants of each
    sponsor. Sistel did not break up plan assets and liabilities related to
    inactive participants and, thus, the Company will continue to sponsor the
    Sistel plan for such inactive participants.

    At December 31, 1999 the Company recorded its estimated portion of the
    unfunded pension liability of R$6,300.

    The pension benefit is generally defined as the difference between (i) 90%
    of the retiree's average salary during the last 36 months indexed to the
    date of retirement and (ii) the value of the retirement pension paid by the
    Brazilian social security system. For retired employees the initial pension
    payment is subsequently adjusted upwards to recognize cost of living
    increases and productivity awards granted to active employees. In addition
    to the pension supplements, post-retirement health care and life insurance
    benefits are provided to eligible pensioners and their dependents.

    Contributions to the plans are based on actuarial studies prepared by
    independent actuaries. The actuarial studies are revised periodically to
    identify whether adjustments to the contributions are necessary.

    The change in plans assets and benefit obligation, and the annual pension
    cost of the multiple employer pension plan for the active employees plan and
    the related actuarial assumptions for the year ended December 31, 2000 are
    as follows:

                                      F-17
77

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

   Fair value of plan assets at beginning of year              8,927
   Actual return on plan assets                                1,026
   Sponsors' contributions                                       987
   Benefits and expenses paid                                  (523)
                                                             -------
   Fair value of plan assets at end of year                   10,417
                                                             =======

   Change in benefit obligations
   -----------------------------

   Benefit obligation at beginning of year                     6,300
   Net period cost                                             1,477
   Actuarial (gains) losses                                      523
   Benefits and expenses paid                                  (523)
                                                             -------
   Benefit obligation at end of year                           7,777
                                                             =======

   Components of Annual pension cost
   ---------------------------------

   Net service cost                                            1,051
   Interest cost                                               1,303
   Expected return on assets                                   (877)
                                                             -------
   Net periodic pension cost                                   1,477
                                                             =======
The weighted-average actuarial assumptions, as determined by actuaries, were
    as follows:
Discount rate for determining projected benefit obligations                  6.00%
   Rate of increase in compensation levels                                      3.00%
   Expected long-term rate of return on plan assets                             9.00%
The above rates exclude inflation.

13. COMMITMENTS

    At December 31, 2000, the Company has capital expenditure commitments of
    R$17,200 related to the continuing expansion and modernization of the
    network.

    The Company rents equipment and premises through a number of operating lease
    agreements that expire at different dates. Total rent expense under these
    agreements was R$6,753, R$4,491 and R$4,254 for the years ended December 31,
    2000, 1999 and 1998, respectively.

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

                                      F-18
78

                      TELE NORTE CELULAR PARTICIPACOES S.A.

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                     Amounts are in thousands of reais - R$
Year ending December 31,
   2001                                                                   6,585
   2002                                                                   5,947
   2003                                                                   5,052
   2004                                                                   3,481
   2005 and after                                                         6,090
                                                                        -------
   Total minimum payments                                                27,155
                                                                        =======
The Company guarantees certain debt amounting to R$2,400 of an association
    which owns and operates certain operating assets.

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

14. CONTINGENCIES

    ICMS tax on monthly fees and activation fees

    The Company believes that the ICMS (Imposto sobre Circulacao de Mercadorias
    e Servicos), a state value-added tax, relates to telecommunications
    services, and therefore the application of ICMS on monthly fees, activation
    fees and additional services lacks legal support, as these do not constitute
    telecommunications services. During the fourth quarter of 1998, the Company
    filed an injunction with the State Treasury Department of each of the five
    states in which it operates and therefore stopped remitting to the state
    governments the ICMS on monthly fees and additional services.

    On December 31, 2000, based upon their tax consultants' opinion, the
    subsidiaries decided to record a provision for contingencies. The provisions
    mentioned above are R$38,654 net of escrow deposits in the amount of
    R$30,235 consolidated (R$15,501 in 1999).

    Other litigation

    The Company is subject to legal proceedings, administrative proceedings and
    claims of various types in the ordinary course of its business for which an
    accrual of R$686 and R$2,631 for 2000 and 1999, respectively, have been
    recorded in these accompanying consolidated financial statements. In
    management's opinion, the ultimate settlements, if any, will not have any
    additional significantly adverse effect on the Company's financial condition
    or results of operations.

15. FINANCIAL INSTRUMENTS

    (a) Fair value of financial assets and liabilities

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

                                      F-19
79

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

        The fair value information as of December 31, 2000 and 1999 presented
        below is based on pertinent information available to management as of
        those dates.
2000                           1999
                                    -------------------------       -------------------------
                                    BOOK VALUE     FAIR VALUE       BOOK VALUE     FAIR VALUE
                                    ----------     ----------       ----------     ----------
Short term debt                    -                          36,942          36,942
        Long-term debt               348,900         349,432          89,128          89,128
The carrying value of cash, cash equivalents, trade receivables, other
        current assets, accounts payable and accrued liabilities are a
        reasonable estimate of their fair value because of the short maturities
        of such instruments. Interest rates that are currently available to the
        Company for issuance of debt with similar terms and maturities were used
        to estimate the fair value of long-term debt.

    (b) Concentration of risks

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

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

16. SWAPS

    At December 31, 2000 the Company had entered into swaps whereby the Company
    earns the exchange variation between the United States dollars and the
    Brazilian Real plus 13.90% to 14.90% and pays interest based on a short term
    inter bank rate. These agreements have total notional amount of R$23,900 and
    expire on various dates through 2005. The estimated fair value at December
    31, 2000 was R$1,900.

17. STOCK-BASED COMPENSATION

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

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

    (b) The second plan covers key executives (who also participate in the first
    plan) and other employees. Options granted under this plan relate to
    preferred stock and are exercisable at the market price at the date of
    grant. The vesting period is 20% during the second year, 60% during the
    third year and 100% during the fourth year. At December 31, 2000 872,697
    options have been granted and none have been exercised as the vesting period
    had not begun.

    Pro forma information regarding net income and earnings per share is
    required by Statement 123, and has been determined as if the Company had
    accounted for its employee stock options under the fair value method of that

                                      F-20
80

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    Statement. The fair value for these options was estimated at the date of
    grant using a Black-Scholes option pricing model with the following
    weighted-average assumptions for 2000: risk-free interest rates of 6%
    dividend yields of 6%; volatility factors of the expected market price of
    the Company's preferred stock of 1.056; and a weighted-average expected life
    of the option of 7 years.

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

    For purposes of pro forma disclosures, the estimated fair value of the
    options is amortized to expense over the options' vesting period. The
    Company's pro forma information for the year ended December 31, 2000
    follows:
Pro forma net income:                                                      R$   7,919
   Pro forma basic and diluted earnings per thousand shares:                  R$    0.02
18. OTHER INFORMATION

    The changes in the allowance for doubtful accounts during the three years
    ended December 31, 2000 was as follows:
2000             1999             1998
                                           ------------     ------------     -----------
Balance at beginning of period                27,210           18,220            9,696
Charged to cost and expenses                  24,760           28,084           38,428
Write-off and recoveries                     (15,922)         (19,094)         (29,904)

Balance at end of period                      36,048           27,210           18,220
19. SUBSEQUENT EVENTS

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

    (a) Contribution for the Fund of Globalization of Telecommunications
        Services - "Fust"

        Fust was established by Law 9,998 of August 17, 2000, in order to
        provide resources to cover the cost installment attributed to the
        accomplishment of obligations for globalization of telecommunication
        services that cannot be recovered with efficient service exploration or
        that is not responsibility of the concessionaire.

        The contribution to this Fund started on January 2, 2001, by all
        telecommunications services companies at the rate of 1% of the amount of
        gross operating telecommunications services revenue.

                                      F-21
81

                      TELE NORTE CELULAR PARTICIPACOES S.A.

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

    (b) Contribution for the Fund of Telecommunications Technological
        Development - "Funttel"

        Funttel was established by Law 10,052 of November 28, 2000, in order to
        estimulate the process of technological innovation, enhance the human
        resources capacity, generate new jobs and promote access by small and
        medium companies to capital resources, in order to increase the
        competitiveness of the Brazilian Telecommunications Industry.

        The contribution of Funttel began on March 28, 2001, by all
        telecommunications services companies at the rate of 0.5% of the amount
        of gross operating telecommunications services revenue.

                                      F-22
82

                      GLOSSARY OF TELECOMMUNICATIONS TERMS

access charge:                  Amount paid per minute charged by network
                                operators for the use of their network by other
                                network operators. Also known as an
                                "interconnection charge" or "network usage
                                charge."

access gates:                   The points of interface between the network
                                equipment (either dedicated or switched) and the
                                transmission media that connect network
                                equipment to the end user. The quantity of
                                service is directly related to the quantity of
                                network access gates.

AMPS (Advanced Mobile Phone     An analog cellular telecommunications services
Service):                       standard utilizing the 850 MHz band in use in
                                North America, parts of South America, Australia
                                and various other areas.

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

base station:                   A radio transmitter/receiver that maintains
                                communications with the cellular telephones
                                within a given cell. Each base station in turn
                                is interconnected with other base stations and
                                with the public switched telephone network.

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

cell:                           The geographic area covered by a single base
                                station in a cellular telecommunications system.

cell splitting:                 The process of dividing cells into smaller
                                coverage areas by reducing the power output and
                                the antenna height of the base station
                                transmitter. Cell splitting increases capacity
                                in a particular area by allowing for the further
                                reuse of frequencies by a cellular
                                telecommunications system.

cellular service:               A mobile telecommunications service provided by
                                means of a network of interconnected low-powered
                                base stations, each of which covers one small
                                geographic cell within the total cellular
                                telecommunications system service area.

channel:                        One of a number of discrete frequency ranges
                                utilized by a base station.

digital:                        A mode of representing a physical variable such
                                as speech using digits 0 and 1 only. The digits
                                are transmitted in binary form as a series of
                                pulses. Digital transmission and switching
                                technologies employ a sequence of discrete,
                                distinct pulses to represent information, as
                                opposed to continuous analog signal. Digital
                                networks allow for higher capacity and higher
                                flexibility through the use of computer-related
                                technology for the transmission and manipulation
                                of telephone calls. Digital systems offer lower
                                noise interference and can incorporate
                                encryption as a protection from external
                                interference.

exchange:                       See Switch.

internet:                       A collection of interconnected networks spanning
                                the entire world, including university,
                                corporate, government and research networks from
                                around the globe. These networks all use the IP
                                (Internet Protocol) communications protocol.

                                      G-1
83

local loop:                     The system used to connect the subscriber to the
                                nearest switch. It generally consists of a pair
                                of copper wires but may also employ fiber-optic
                                circuits, microwave links or other technologies.

microcells:                     A small cell covered by a low-power base
                                station. Microcells can cover small areas such
                                as a single building.

network:                        An interconnected collection of elements. In a
                                telephone network, these consist of switches
                                connected to each other and to customer
                                equipment. The transmission equipment may be
                                based on fiber optic or metallic cable or
                                point-to-point radio connections.

network usage charge:           Amount paid per minute charged by network
                                operators for the use of their network by other
                                network operators. Also known as an "access
                                charge" or "interconnection charge."

optical fiber:                  A transmission medium which permits extremely
                                high capacities. It consists of a thin strand of
                                glass that provides a pathway along which waves
                                of light can travel for telecommunications
                                purposes.

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

penetration:                    The measurement of the take-up of services. At
                                any date, the penetration is calculated by
                                dividing the number of subscribers by the
                                population to which the service is available and
                                multiplying the quotient by 100.

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

roaming:                        A function that enables subscribers to use their
                                cellular telephones on networks of service
                                providers other than the one with which they
                                signed their initial contract.

satellite services:             Satellites are used, among other things, for
                                links with countries that cannot be reached by
                                cable or to provide an alternative to cable and
                                to form closed user networks.

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

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

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

                                      G-2
84

                                   SIGNATURES

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

                             TELE NORTE CELULAR PARTICIPACOES S.A.

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

DATE: June 29, 2001
85

ITEM 19. EXHIBITS
PAGE
                                                                                           ----
1.      Charter of Tele Norte Celular Participacoes S.A. ......................................*

2(a).   Amended and Restated Deposit Agreement dated as of November 2, 1998
        among Tele Norte Celular Participacoes S.A., The Bank of New York, as
        depositary and owners and beneficial owners of American Depositary
        Receipts..............................................................................**

2(b).   Not applicable.

2(c).   Not applicable.

3.      Not applicable.

4(a).   Standard Concession Agreement for Mobile Cellular Service............................***

4(b).   Cellular System Agreement dated September 27, 1998 between Tele Norte
        Celular Participacoes S.A., and Ericsson Telecomunicacoes S.A. ......................E-2

4(c).   U.S.$15.1 million Private Instrument for Financing, Debt Assumption and
        other Agreements dated March 31, 1998 between Ericsson Telecomunicacoes
        S.A. and Telamazon Celular S.A. (now known as Amazonia Celular S.A. -
        Amazonas) (together with Private Agreement for the Assignment of Credit
        and Other Adjustments dated August 25, 2000 among Ericsson
        Telecomunicacoes S.A., ABN AMRO Brasil Participacoes S.A., Telamazon
        Celular S.A. and Telebras)..........................................................E-33

4(d).   U.S.$25 million Credit Agreement dated December 20, 1999 among Telepara
        Celular S.A., Telamazon Celular S.A., Telma Celular S.A., Teleamapa
        Celular S.A., Telaima Celular S.A., Tele Norte Celular Participacoes
        S.A., the Export Development Corporation and others.................................E-44

4(e).   U.S.$10.5 million Private Instrument for Debt Assumption, Assignment and
        Transfer dated September 27, 2000 among Telepara Celular S.A., Tele
        Norte Celular Participacoes S.A., Banco BBA Creditanstalt S.A. and
        Ericsson Telecomunicacoes S.A. ....................................................E-112

4(f)    U.S.$10.5 million Private Instrument for Debt Assumption, Assignment and
        Transfer dated September 27, 2000 among Telepara Celular S.A., Tele
        Norte Celular Participacoes S.A., Banco Santander Brasil S.A. and
        Ericsson Telecomunicacoes S.A. ....................................................E-117

4(g).   U.S.$50 million Credit Agreement dated October 20, 2000 among Telepara
        Celular S.A., Telamazon Celular S.A., Telma Celular S.A., Teleamapa
        Celular S.A., Telaima Celular S.A., Tele Norte Celular Participacoes
        S.A., Banco Citibank S.A. and others...............................................E-121

4(h).   R$162.6 million Credit Agreement dated December 14, 2000 between
        Amazonia Celular S.A. - Maranhao and BNDES.........................................E-177

5.      Not applicable.

6.      Computation of earnings per share (See Note 8 to the consolidated
        financial statements)

7.      Not applicable

8.      List of subsidiaries (See "Item 4. Information on the Company - A.
        History and development of the company - The Registrant and its
        operating subsidiaries")

9.      Not applicable.

10.     None.
---------
*       Previously filed in Registration Statement on Form 20-F on September 18,
        1998 and in Form 6-K filed on April 23, 1999.

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

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

                                      E-1