RESULTS

4Q16Investor RelationsTelefônica Brasil S.A.

February, 2017

This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base,a breakdown of the various services tobe offered and their respective results.

The exclusive purpose of such statements is to indicate how we intend to expand our business and they should therefore notbe regarded as guarantees of future performance.

Our actual results may differ materially from those contained in such forward-looking statements, due toa variety of factors, including Brazilian political and economic factors, the developmentof competitive technologies, access to the capital required to achieve those results, and the emergence of strong competition in the markets in which we operate.

For a better understanding, we are presenting pro forma numbers combining TelefônicaBrasil and GVT results for all financial and operational indicators for every periodas of January, 2014.

DISCLAIMER

2 2

25.3%47.9%

FTTH IPTV

YoY

3.9% 3.0%6.2% 5.2%

4Q16 2016

ex-Reg. Eff.

1.8% 1.7%

4.2% 4.0%

4Q16 2016

ex-Reg. Eff.

Total Service RevenueYoY

-1.8% -1.9%

4Q16 2016

33.8% 32.1%

4Q16 2016

4.4 5.7

2015 2016

Recurring EBITDA Margin

Mobile Service Revenue YoYSuperior revenue growth in

4Q16 leveraged by mobile

resulting in consistent evolution in 2016

2016 HIGHLIGHTSAnother quarter of solid performance driving strong results

across the board in 2016

Data centric strategy focused on consolidating leadership in key markets

EBITDA3 growth and margin improvement through synergies and efficiency

Outstanding OpCF increase resulting from higher EBITDA and Capex optimization through synergies

Synergies continue to evolve solidly resulting in R$15.7Bn of NPV already secured (71% of Best Case scenario)

OpCFR$ Billion +28.2%

42%

62%

Recurring Operating CostsYoY

1- Mobile Service Revenues. 2- According to FTTH Council based on number of customers reported on September, 2016. 3- Adjusted for the sale of towers in 1Q16, in the total amount of R$513.5 million, for the provision for organizational restructuring in the total amount of R$101.2 million in 2Q16 and R$19.2 million in 3Q15, and for the provision for organizational changes and real estate reorganizations in 4Q16, in the total amount of R$52.5 million.

7.3%7.1%Rec.

EBITDA YoY

market share in

postpaid

of MSR¹ in

Data

IPTV and FTTH Accesses

FTTH operator in LatAm²

#1

3

In 2016, strict cost control, margin expansion and efficient capex

execution drove strong cash flow generation

KEY FINANCIAL HIGHLIGHTS

R$ million 4Q16 %YoY¹ 2016 %YoY¹

Net Fixed Revenue

Recurrent OpEx³

Recurrent EBITDA³

Net Mobile Service Revenue

Capex Exc. Licenses

EBITDA³ – CAPEX Exc. Licenses

Recurrent EBITDA Margin³ (%)

Net Service Revenue

Capex/Sales (%)

16,970

28,846

13,663

24,343

(0.2)

(1.9)

7.3

3.0

8,004 (3.8)

5,659

32.1% 1.9 p.p.

28.2

41,313 1.7

18.8% (0.9) p.p.

4,281

7,198

3,676

6,316

2,800

876

33.8%

10,597

25.8%

(1.2)

(1.8)

7.1

3.9

18.0

1.9 p.p.

(17.4)

1.8

3.7 p.p.

1- Considers TEF Brasil + GVT figures as of January, 2015. 2- Regulatory impact of tariff cuts (MTR/VC/TU-RL/TU-RIU). 3- Adjusted for the sale of towers in 1Q16, in the total amount of R$513.5 million, for the provision for organizational restructuring in the total amount of R$101.2 million in 2Q16 and R$19.2 million in 3Q15, and for the provision for organizational changes and real estate reorganizations in 4Q16, in the total amount of R$52.5 million.

Free Cash Flow 5,005 36.01,493 (32.0)

Net Income 4,085 22.61,215 9.0

%YoYexc. Reg. impact2

%YoYexc. Reg. impact2

1.4

6.2

4.2

2.4

5.2

4.0

4

52.1%

55.7%57.3%

59.1%

1Q16 2Q16 3Q16 4Q16

Double-digit growth in non-voice products brings total service revenues to

a positive trend

Non-voice businesses soared 15.2% yoy in 4Q16…

Mobile Data &Digital Services

UBB TV

4Q15 4Q16

Fixed Voice Mobile Voice

4Q15 4Q16

Non-Voice Services Revenue% over Service Revenue

…supported by resilient evolution in mobile and fixed data

Non-voice Servicesannual growth

Voice Servicesannual growth

-6.7%

23.7%

17.5% 4.6%

5

TOTAL SERVICE REVENUES

-15.7%• Voice revenues

affected by regulation, service maturity and macroeconomic environment

14.9% 16.6% 15.2%YoY

Growth15.7%

1.0% 1.6% 1.8%Total Serv.

Revenues

YoY Growth

2.2%

Continuous expansion of mobile revenues fueled by postpaid growth,

prepaid recovery and higher data contribution

Mobile revenue increase driven by data

1- Simplified view, does not disclose other services revenues. 2- When excluding effect of MTR cuts growth would be 6.2% YoY in 4Q16. 3- Does not

include wholesale, M2M and other services revenues.

Net Mobile Service Revenue¹

R$ Million

2,414 2,246 2,036

3,180 3,613 3,934

413 272 343

6,078 6,132 6,316

4Q15 3Q16 4Q16

3.9%²

3.0%

Data and Digital

Services

Incoming voiceOutgoing voice

Continue to sustain high postpaid growth while prepaid gradually recovers

6

-15.7%

YoY

-17.0%

23.7%

MOBILE REVENUES

Mobile Breakdown

Internet growing 40.7% YoY

30% 28%

70% 72%

4Q15 4Q16

Prepaid Postpaid

Service Revenue

YoY

-2.2 p.p.

+2.2 p.p.

-12% -12%-8%

-4%

1Q16 2Q16 3Q16 4Q16

Prepaid Revenue YoY%

Postpaid Revenue³

YoY%

6%10% 9% 8%

1Q16 2Q16 3Q16 4Q16

With a data centric strategy, Vivo continues to evolve solidly in

postpaid accesses while protecting value in prepaid, increasing market

share lead

7

Mobile AccessesThousand

MOBILE ACCESSES BASE

58% 55%

42% 45%

73,268 73,778

4Q15 4Q16

YoY

7%

1%

-4%Prepaid

Postpaid

Total

POSTPAID

MOBILE OPERATING

PREPAID

Postpaid net addsThousand

639870 891

4Q15 3Q16 4Q16

-18.2%

-4.3%

5.1%

15.3%

4Q15 4Q16

Accesses Outgoing ARPU

Reducing churn levels

(postpaid exc. M2M)

1.8%

1.6%

4Q15 4Q16

Bundled Offers

4Q15 4Q16

Increasing penetration of bundlesBundled prepaid customer base YoY%

+44%

Selective approach leading to

positive ARPU EvolutionYoY%

Positive net portability

every month

against all major

players in 2016

Total

Market

Share28.4% 30.2% +1.8 p.p.

-0.2 p.p.+39%

Execution of commercial strategy focused on value and data driving

superior ARPU

MOBILE OPERATING

higher than

competitors average¹

48% 38%

52% 62%

25.8 28.6

4Q15 4Q16

Total ARPUR$ per month

Data

Voice -12.4%

YoY

31.8%

10.8%

Innovative and value driven portfolio of offers…

…builds loyal customer base focused on data…

…and drives solid ARPU growth

100%

of customers

bundled

>70%

of customers

with data

packages

74%Total ARPU

• 5 options with larger data bundles

• Family decision driving higher loyalty

• Higher data usage through shared data plans that can be used by 1 to 6 accesses

• Weekly and monthly offers driving recurrence in top-ups

• No free add-onsdriving additional package acquisitions

• Focused on data with packages from 200Mb to 1Gb per week

PREPAID

POSTPAID

1- Based on numbers published for the 4Q16 by the main competitors and company’s estimations for one of them.

8

2,327 2,097 2,144

464489 486

524585 616

407393 406

611 690 630

4,334 4,254 4,281

4Q15 3Q16 4Q16

-7.9%

YoY

4.6%

17.5%

-0.5%

3.1%

Resilient growth in high value fixed markets

Robust evolution in Ultra Broadband and TV partly compensating voice decline

Net Fixed Revenue

1- Includes voice, interconnection and other services. 2- Corporate Data and IT.

Voice and Others1 Pay TV UBB xDSL Data and IT2

R$ Million

9

FIXED REVENUES

-1.2%

0.6%

Improving mid-term prospects on B2B

1.5%18.4%

50.2%

B2C UBB IPTV

B2C Fixed Service Revenue

4Q16 YoY

• Leveraging fiber expansion

• Improving product portfolio and channels

• Simplifying processes and systems

• Capturing benefits from economic recovery

Sustained growth in B2C business, especially in key fixed services

4.2%2.8%

1.2% 1.4%

1Q16 2Q16 3Q16 4Q16

Net Fixed Revenue ex-Reg. Impact

YoY

In 2016, fixed revenue would have grown

every quarter ex-regulatory impact

47% 43%

45% 47%

8% 10%

7,117 7,296

4Q15 4Q16

FTTC

xDSL

BROADBAND

41.1 42.645.2 49.5

43.3 46.5

4Q15 4Q16

xDSL UBB

Broadband ARPU2

R$ per monthYoY

9%

4%

7%

BB Accesses1

Thousand

FTTH

Total

Customer and ARPU trends continue to be solid in higher end fixed

services

10

Fixed AccessesThousand

FIXED ACCESSES BASE

Total

FIXED OPERATING

Pay TV

Broadband

YoY

+3%

-4%

-5%

-2%

Voice

PAY TV

Pay TV AccessesThousand

IPTV

DTH

Total

82.8 90.2103.6 105.6

85.1 93.1

4Q15 4Q16

DTH IPTV

Pay TV ARPUR$ per month

1,617 1,460

171253

1,788 1,713

4Q15 4Q16

YoY

25%

6%

3%

-5%

YoY

2%

9%

9%

YoY

48%

-10%

-4%

63% 61%

30%31%

7% 7%

23,935 23,352

4Q15 4Q16

1- FTTx includes FTTH (Fiber to the Home) and FTTC (Fiber to the Cabinet) accesses.2- Considering ADSL accesses for xDSL and Fiber for UBB.

In 2016 the Company invested in key technologies to sustain superior network quality while reducing Capex level

1- Exclude amounts related to the spectrum payment in the amount of R$185.5 million in 3Q16.

CAPEX

14.3% 16.8% 18.2%25.8%

1Q16 2Q16 3Q16 4Q16

Capex/Sales¹

8.4 8.3 8.0

20.9% 19.7% 18.8%

2014 2015 2016

Capex¹R$ Billion and % over Net Revenues

Optimized Capex allocation improving

returns

• Use of big data to drive investment to the

cities/sites with strong concentration of

high-value customers

• Focus on 4G expansion (coverage and

capacity) prioritizing customer experience

• Reduction of unitary costs on FTTH

Improvement on CPE logistics provided

significant Capex avoidance

More than 30% of

Capex planned for

CPEs in 2016 saved

through

refurbishment of

used equipment

Reducing the level of Capex/Sales while

focusing on growth

2015 2016

+29%

Refurbished CPEs (units)

11

Solid execution accelerating expansion in

the 4Q16

213

28

290

1Q16 2Q16 3Q16 4Q16

Number of new 4G cities

+10.4x

1- Adjusted for the provision for organizational changes and real estate reorganizations in 4Q16, in the total amount of R$52.5 million. 2- Excludingbad debt.

4Q16 Cost Evolution% over Net Revenues

Synergies and efficiencies continue to reduce costs and increase EBITDA

margin in 4Q16

12

COSTS AND MARGINS

8.5% 8.2%

18.5% 17.9%

2.5% 3.2%

32.2% 31.4%

6.4%5.1%

-2.3%

26.5%

-1.4%

4Q16YoY

+7.1%

-1.8%Recurrent

Operating Costs¹

R$ Million

3.2%

6.3%

-20.1%

Cost of Goods Sold

Services Rendered, G&A and

Others¹

Personnel¹

Bad debt

Commercial Expenses2

Recurrent EBITDA 3,6763,432

4Q16

7,198

4Q15

7,329

IPCA

12M

+1.9 p.p.Recurrent EBITDA Margin 33.8%31.9%

343 344

3.2% 3.2%

3Q16 4Q16

Bad Debt % NOR

Commercial Expenses

• Sales force optimization

• Synergies with unified brand and channels

• Reduced call center costs due to virtualization and improved quality

R$(45)

Personnel

• Savings due to rightsizings in 2015 and 2016 despite higher costs with Insourcing of field services and call center

R$29Services Rendered, G&A and Others

• Interconnection tariff reductions

• Synergies in TV content

• Lower energy costs

R$(47)

Bad Debt

• Credit and collection actions continue to sustain bad debt at stable levels

R$72

1,295 1,348

3.1% 3.2%

2015 2016

Bad Debt % NOR

13

4Q16 Cost Evolution BreakdownR$(131) Million ΔYoY

Cost of Goods Sold

• Selective commercial approach focused on higher value customers in B2C and B2B

R$(139)

344 277

4Q15 4Q16

Subsidy YoY

-19.4%

Solid and consistent cost contention across the board during the quarterCOSTS AND MARGINS

ΔYoY

Net income expansion in 2016 driven mainly by EBITDA growth and

towers' sale

2016 Net IncomeR$ Million and % yoy

7.3%¹REPORTED ∆ YoYR$ Million %

Main variation drivers

D&A increase

Explained by the

higher volume of fixed

assets in the period

due to higher

investments in recent

years

4.6% 11.3% n.a.9.7%

Non-Recurring Items

Positively impacted by the sale of

towers in 1Q16, in the net amount of

R$338.9 million and negatively

impacted by the provision for

organizational restructuring in the net

amount of R$66.8 million in 2Q16,

R$34.6 million in 4Q16 and R$12.7

million in 3Q15

3,331 3,835 4,085

1,058 (335) (126) (94) 250

2015 EBITDA exc.Non-Recurring

Items

D&A Financial Result Taxes 2016 Non-RecurringItems

2016 after Non-Recurring Items

22.6% 11.3%

14

NET INCOME

1- Refers to Recurrent EBITDA evolution reported. For purposes of this build-up, variation excludes net effects of non-recurrent items.

Financial Result

Higher costs due to the non cash

effect from monetary indexation

of contingencies

Net debt reduction related to repayment of

debt and cash generated in the period

Sustained Free Cash Flow¹ generation with improvements

across the board

Strong cash flow generation in all lines supported robust financial

profile and strong shareholder remuneration

15

10.29.2

Dec/15 Dec/16

4.6 4.1

0.36 0.29

Dec/15 Dec/16Net debt Net debt / EBITDA

Gross DebtR$ Billion

-9.8%

YTD

-10.9%

YTD

Net DebtR$ Billion

1- FCF does not include income tax on IOC. 2- Proceeds from the sale of towers, in the net amount of R$562.1 million, expenses from the provisionfor organizational changes, in the amount of R$150.2 million and spectrum payment in the amount of R$185.5 million. 3. The income tax paymentrelated to the IOC paid in August 2016 and to the IOC paid in December 2016 took place in the subsequent month as of the deliberation of eachamount.

FREE CASH FLOW

5,005

227

213

(1,094)

(8,004)

13,663

3,680

(206)

906

(1,434)

(8,319)

12,733

2015 2016R$ Million

EBITDA

(CAPEX)

(Working Capital)

Free Cash Flow

(Interest and Income Taxes)

YoYR$ Million

+929

+315

-693

+433

+340

+1,324

Non-Recurring Items²

R$3.3Bn shareholder remuneration paid during 2016³.

Issuance of debentures in the amount of

R$2Billion on February 8th to improve

debt profile

16

SYNERGIES

NPV

R$ Billion

Strong execution led Vivo to fully secure base case NPV and guarantee 71% of best case scenario

Base Case

167%

113%

114%

41%

107%

% of captured value over:

Best Case

97%

71%

85%

20%

78%

4.45.9 5.0 5.0

3.0

4.14.6

3.2

3.9

6.79.8

6.52.7

5.5

5.5

1.114

22

25

16

Base Case Due Diligence

Best CaseIntegration

Plan

Trending NPV Already Captured

Revenues

Financial

and Tax

Opex

Capex

55%64% 71%

2Q16 3Q16 4Q16

Main drivers for evolution in

4Q16

• Savings generated by additional

restructuring during 2016

• Early migration of leased

circuits through negotiation of

fines with operators

• Gains with renegotiation of

large TV content contracts

already being captured in the

4Q16

Already executed synergy actions to secure 71% of the NPV of Best

Case Scenario

Impact from Operational Synergies in free cash flow amounts to R$1.4Bn

in 2016

1- Net of impact from upfront integration costs. 2- Normalized for the impact of the provision for organizational restructuring in 2Q16, in the totalamount of R$101.2 million. 3- Opex avoidance is not considered for Fiber HP’s.

Direct Cash Flow Synergies1

Capex and Opex

Avoidance Synergies

Indirect Cash Flow Synergies

Impact of Synergies on Opex

Impact of Synergies on EBITDA

Impact of Synergies on Revenues

Impact of Synergies on Capex (net of enabling investments)

Impact on Direct OpCF

Economic gains related to companies’ leveraging on each

other assets, thus avoiding investments and expenses

R$465Impact on

Indirect OpCF

+ Revenues

- Opex

- Capex

+ EBITDA

+ OpCF

17

Million

SYNERGIES

Backbone

(Capex)R$129Million

Backhaul

(Capex)

R$75Million

Fiber HP's

(Capex)R$122Million

Opex

Avoidance3R$139Million

1960

FY15 FY16

-99

12

FY15 FY16

28

366

FY15 FY16

73582

FY15 FY16

100

948

FY15 FY16

2

2

2

Vivo aims to accelerate value creation and sustain absolute leadership

in the Brazilian telecom space

18

STRATEGY

Vision Be the best alternative for connectivity in Brazil

Strategy Totalize customers with a complete, profitable and quality offer

Best internet in and out of home

Digitalization EfficiencyBest customer experience across channels

• Expansion of FTTH network

• Best mobile data coverage (3G,4G…5G)

• Hub for most relevant digital services

• Digital processes end to end

• Leveraging on Big Data

• Lean company model

• Synergies

• Best-in-class stores

• Highly trained field and customer service teams

• Complete self-care

Foundation Continue being the most valuable and aspirational brand

R$4.1 Billion in shareholders remuneration² (+ 24% y-o-y) to be paid in August and December 2017 (based on 2016 results)

Optimized Capex of R$24 Billion from 2017 to 2019

Continuous EBITDA margin improvement through efficiency and synergies

Data Centric strategy driving double-digit growth in Mobile Data & Digital and Fixed UBB revenues¹

19

Main Financial Perspectives 2017

1- Double digit growth refers to the combined revenue growth of mobile data and digital services and ultra broadband.2- Shareholders remunerations of R$4.1 Billion, being R$1.9 Billion in dividends and R$2.2 Billion in interest on capital (Gross amount). Tobe ratified in the Telefonica Brasil’s General Shareholders Meeting of 2017, to be held on April 26, 2017.

For further information:Investor Relations+55 11 3430.3687

ir.br@telefonica.com www.telefonica.com.br/ir