==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
---------------
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November, 1998
---------------
Telemig Cellular Holding Company
(Translation of registrant's name into English)
SCN-Quadra CN2, Lote F, 2 Andar, Sala 205,
Brasilia-DF, Brazil
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:]
Form 20-F X Form 40-F
------- -------
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934:]
Yes No X
------- -------
[If "Yes" is marked, indicate below
the file number assigned to the registrant in
connection with Rule 12g3-2(b):] N/A
==============================================================================
TELEMIG CELLULAR HOLDING COMPANY
TABLE OF CONTENTS
Sequential Page
Item Number
- ---------- ---------------
1. Interim Financial Information, dated
November 13, 1998, announcing net operating
revenues and net income for the three-months
ended September 30, 1998................................. 3
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Tele Norte Celular Participacoes S.A.
Interim Financial Information for the
Three-Months ended September 30, 1998
Free Translation into English of Independent Auditors' Special Review Report
Originally Issued in Portuguese
The Board of Directors and Shareholders
Telemig Celular Participacoes S.A.
Brasilia - DF
1. We have carried out a special review of the accompanying quarterly
information (ITR) of Telemig Celular Participacoes S.A. as of and for the
three-months ended June 30, 1998, which comprises the balance sheet and the
statement of income of the parent company and consolidated, notes to
quarterly information and management's discussion and analysis, prepared in
accordance with accounting principles established by Brazilian Corporate
Law.
2. We conducted our review in accordance with specific standards established
by the Brazilian Accountants' Institute - IBRACON and the Federal
Accounting Council, which consisted principally of (a) inquiries and
discussion with the persons responsible for the accounting, financial and
operating areas about the criteria adopted in preparing the quarterly
information; and (b) review of the information and subsequent events that
have or could have material effects on the financial position and
operations of the Company.
3. Based on our special review, we are not aware of any material modifications
that should be made to the quarterly information referred to in the first
paragraph in order for it to be in accordance with accounting principles
established by Brazilian Corporate Law and standards issued by the
Brazilian Securities and Exchange Commission (CVM), specifically applicable
to the preparation of the required quarterly information.
4. The quarterly information for the three-months ended March 31, 1998 was
reviewed by other independent auditors, who issued a qualified special
review report dated July 24, 1998. The qualification relates to the
recording by the subsidiary company, Telemig Celular S.A., in the
three-months ended March 31, 1998 of R$ 14,097 thousand, identified in
subsequent events, related to allowance for doubtful accounts for accounts
receivable recorded in 1997 that should had been provided for in the prior
year.
5. The quarterly information for the three-months ended June 30, 1998 was
reviewed by other independent auditors, who issued a non qualified special
review report dated July 24, 1998.
Brasilia - DF, November 13, 1998
ERNST & YOUNG
Auditores Independentes S/C
CRC2SP015199/S-6 MG
Paulo Jose Machado
Contador CRC1RJ61469/T-2 MG "S" DF
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
<TABLE>
<CAPTION>
BALANCE SHEET AS OF SEPTEMBER 30, 1998
(In thousands of reais)
- --------------------------------------------------------------------------------------------------
September 30, 1998 June 30, 1998
ASSETS ------------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. 35,173 --
Accounts receivable from related parties.................. 28,063 44,266
Receivable from Telebras.................................. -- 31,417
Recoverable taxes......................................... 3,743 2,004
Other receivables......................................... 449 2,677
-------- --------
Total current assets....................................... 67,428 80,364
-------- --------
Long-term assets:
Account receivable from related parties................... 14,011 1,236
Others.................................................... 271 --
-------- --------
Total long-term assets..................................... 14,282 1,236
-------- --------
Permanent assets:
Investments............................................... 337,303 371,883
-------- --------
Total Assets............................................... 419,013 453,483
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Taxes and contributions................................... 2,348 2,729
Suppliers................................................. 1,247 --
-------- --------
Total current liabilities.................................. 3,595 2,729
-------- --------
Long-term liabilities:
Others.................................................... 67 67
-------- --------
Shareholders' equity:
Capital stock............................................. 155,553 155,553
Legal reserve............................................. 7,755 7,755
Realizable profit reserve................................. 132,048 132,048
Retained earnings......................................... 119,995 155,331
-------- --------
Total shareholders' equity................................. 415,351 450,687
-------- --------
Total liabilities and shareholders' equity................. 419,013 453,483
======== ========
</TABLE>
Free Translation into English of Quarterly Information (ITR) Originally
Issued in Portuguese
Telemig Celular Participacoes S.A.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS FOR THE THREE-MONTHS AND NINE-MONTHS ENDED SEPTEMBER 30, 1998
(In thousands of reais, except per share data)
3 months ended 9 months ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Operating expenses/income
General and administrative expenses.................... (1,673) (1,673)
Financial income ...................................... 738 9,032
Financial expenses..................................... (109) (109)
Other operating expenses............................... (99) (99)
Income from investments in subsidiaries................ (34,580) 12,190
----------- -----------
Income before income taxes............................. (35,723) 19,341
Provision for income taxes and social contribution..... 387 (2,342)
----------- -----------
Net income (loss) for the period....................... (35,336) 16,999
=========== ===========
Number of shares (in thousand)......................... 334,399,028 334,399,028
----------- -----------
Net income (loss) per share............................ (0.00011) (0.00005)
=========== ===========
</TABLE>
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Notes to Consolidated Financial Statements
Interim Financial Information for the three-months ended September 30, 1998
(Amounts expressed in thousands of Reais)
1. OPERATING CONTEXT
Telemig Celular Participacoes S. A. was constituted according to item 189
of Law # 9,472/97 - Telecommunications General Law, and based on Decree #
2,546 of April 14, 1998, as a result of a Telebras' spin off, approved by
the general stockholders' meeting held on May 22, 1998, and which Appraisal
Report as of February 28, 1998 was issued by independent auditors on April
23, 1998. The net assets spun-off are as follows:
R$
ASSETS -------------
Cash and cash equivalent............................... 16,479
Loans receivable and short term investments............ 56,557
Loans receivable and long term investments............. 271
Investments............................................ 325,112
ASSETS ----------
Net Assets Spun-Off..................................... 398,419
==========
The Company is the holding company of Telemig Celular S.A., the concessionaire
of the "A" Band cellular telephone business in approximately 93% of the
municipalities of the State of Minas Gerais.
Telpart Participacoes S.A. is the company's controlling shareholder. In the
public tender process of the Telebras Group held on July 29, 1998, Telpart
acquired 51.79% of Telemig Celular Participacoes S.A.'s common stock.
Telpart's capital is held by: TIW do Brasil Ltda.; Opportunity and by private
Brazilian pension funds.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Notes to Consolidated Financial Statements
Interim Financial Information for the three-months ended September 30, 1998
(Amounts expressed in thousands of Reais)
2. FINANCIAL STATEMENTS PREPARATION BASIS
The financial statements were prepared based upon the Brazilian Corporate Law,
applied in accordance with the regulations issued by the Brazilian Securities
Commission - CVM, and regulations applicable to concessionaires of
telecommunications public services, and in accordance with the accounting
practices described in Note 3.
The consolidated financial statements were prepared in accordance with the
standards and procedures determined by the Brazilian Securities Commission -
CVM, and includes the financial statements of the holding and of the
subsidiary, Telemig Celular Participacoes S. A. (holding company) and Telemig
Celular S. A. (operating company), respectively (see other information on the
subsidiary in Note 4).
The consolidation process of balance sheet and operations accounts corresponds
to the sum of the balances of assets, liabilities, revenues and expenses of
the consolidated Companies, according to the nature of each account,
complemented by the following eliminations: (i) capital participation,
accumulated reserves and results incurred between the Companies; and (ii)
intercompany balances.
3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
(a) Allowance for doubtful accounts
Constituted until the limit estimated by management to be sufficient to
cover possible losses with the realization of accounts receivable.
(b) Investments
The investment in subsidiary is accounted for by the equity method. The
equity pick-up adjustment includes the subsidiary's operations from
January to September, 1998, including the period prior to the spin-off.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Notes to Consolidated Financial Statements
Interim Financial Information for the three-months ended September 30, 1998
(Amounts expressed in thousands of Reais)
3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES - Continuation
(c) Property, Plan and Equipment (Consolidated)
The subsidiary's Property, Plant and Equipment are recorded at
acquisition cost and construction cost less accumulated depreciation.
The depreciation is calculated on the straight-line method, according to
the following annual rates:
Percentage (%)
--------------------
Infrastructure.................................. 4% to 10%
Switches, Transmission and Terminals............ 7.69% to 12.50%
General Use Assets.............................. 10% to 20%
c.1) Interest on work in progress
The operating company computes monthly interest on work in progress at the
annual rate of 12% on the total capital invested in work in progress, which
is included in the cost of construction, against non-operating income, up
to the limit of the non-operating financial expenses generated by loans
obtained to finance the work. The amount exceeding non-operating financial
expenses is recorded on the capital reserve. The holding company recognizes
such interest through the equity method, being the amount charged to
operations.
(d) Income Tax and Social Contribution
Income tax and social contribution expenses are recorded on the accrual
basis. Deferred income tax and social contribution are recorded on
temporary differences.
(e) Provision for contingencies
It's computed based upon the legal counsel's opinion on loss expectations.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Notes to Consolidated Financial Statements
Interim Financial Information for the three-months ended September 30, 1998
(Amounts expressed in thousands of Reais)
4. INVESTMENTS
a) Subsidiary's Data
09/30/98
--------------
Number of subscribers............................ 432,400
Shareholders' Equity............................. 406,666
Net operating revenues........................... 328,083
Income for the nine-months....................... 12,755
Total participation ............................. 82.94%
Participation in Voting Capital.................. 89.18%
On September 30, 1998 the reconciliation between the holding company's net
income and the consolidated net income is as follows:
R$
--------------
Holding Company's net income..................... 16,999
Equity pick up adjustment on Reserve - interest
on P, P & E - work in progress................. (1,611)
----------
Consolidated Net Income.......................... 15,388
==========
5. LOANS AND FINANCING (Consolidated)
Loans and financing are denominated in foreign currency, and updated by
the exchange variation plus interest based on the London Interbank
Offered Rate -LIBOR, plus interest of 1% a year. The installments are
due every six months with final due date up to October, 2003.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Notes to Consolidated Financial Statements
Interim Financial Information for the three-months ended September 30, 1998
(Amounts expressed in thousands of Reais)
6. FINANCIAL INSTRUMENTS (Consolidated)
The book value of the Company's financial instruments and its
subsidiary, comprise short-term investments and loans and financing,
which are equivalent, approximately, to their market values. Further,
on September 30, 1998, the Company and its subsidiary, do not have
operations involving derivatives.
7. TELECOMMUNICATION SERVICES CONSOLIDATED NET OPERATING INCOME (Consolidated)
R$
----------------------------------------
07/01 - 09/30/1998 01/01 - 09/30/1998
------------------ ------------------
Subscription 36,644 118,007
Rent 10,775 29,451
Utilization 34,570 166,322
Use of the network by a third party 25,343 84,139
Activation 1,366 10,086
Additional services 2,691 5,359
Others 1,665 1,653
---------- ---------
Gross operating revenues 113,054 415,017
Taxes on gross revenues (30,341) (86,934)
---------- ---------
Net operating revenues 82,713 328,083
========== =========
8. PENSION PLAN (Consolidated)
The Company and its subsidiary sponsor a defined benefit private pension
plan, managed by Fundacao SISTEL de Seguridade Social. The contributions
for the plan are determined based on actuarial studies prepared by
independent actuaries according to the current standards in Brazil. The
actuarial studies are revised periodically in order to modify the necessity
of adjustments in the contributions. SISTEL does not show any deficit in
the most recent actuarial evaluation carried out in December, 1997. Due to
the sponsor and benefits model, the spin-off did not cause any alteration
to the pension plans.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Review of Operations
Revenues reached R$328.1 million for the first nine months of the year,
including R$82.7 million for the third quarter of 1998. During the third
quarter, the Company adjusted its interconnection revenues to correct amounts
that proved to have been overstated during the first half of the year,
totaling approximately R$20 million. Excluding that adjustment, the Company
would have reported third quarter revenues of R$100.7 million, a decline of
R$10 million, or 8.9%, compared to the average of the first two quarters of
1998. The decline in revenues was mainly related to a reduction in activation
fees as a result of a slow down in new subscriber uptake. The subscriber base
remained fairly stable in the third quarter, closing at 432,400, or a net
increase of 1,500 subscribers compared to totals for the period ended June 30,
1998.
Costs of revenues reached R$124.3 million for the first nine months of 1998
and represented 37.8% of net revenues, including R$42.3 million for the latest
quarter. Costs of revenues is expected to be positively affected during the
fourth quarter by favorable renegotiations of certain existing technical
service contracts, including leased lines.
Selling, general and administrative expenses for the nine months ended
September 30, 1998 were R$181.7 million, including R$105.1 million for the
third quarter. During the quarter, the Company implemented a new method of
estimating probable future losses on accounts receivable based on recent bad
debt experience, which resulted in bad debt expenses to R$81.0 million for the
quarter, bringing total bad debts expense for the nine-month period at R$120.2
million. Had such new method been adopted as of June 30, selling, general and
administrative expenses for the first six months would have increased by
R$54.0 million to reach R$130.6 million. The Company expects bad debt level
to remain significant for the last quarter, as it is improving its subscriber
base by churning non-performing accounts receivable. Selling expenses were
also increased as the Company was preparing the launch of new tariff plans.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating income before depreciation and amortization expenses was R$60.5
million for the first nine months of 1998, compared to R$111.9 million after
the first six months. Had the interconnection revenues and the new method for
bad debt provisions been recorded in the first half of the year, operating
income before depreciation and amortization expenses would have been R$37.9
million for the first six months and R$22.6 million for the third quarter,
respectively.
The Company experienced a net loss for the third quarter of R$36.4 million or
R$0.00011 per share, as a result of the revenue correction and the new policy
for bad debts. Net income for the nine-month period ended September 30, 1998
was R$15.4 million or R$0.00005 per share.
Outlook
The expected commencement of operations by the Band B cellular operator in
Minas Gerais during the fourth quarter of 1998 may have a negative impact on
future growth in the number of subscribers, and could potentially result in
increased marketing expenses. The Company also recently launched new tariff
plans to better address the different market segments. Although the Company
believes that such plans will stimulate usage, these new plans, which include a
reduction in activation fees, may have a negative impact on future revenues.
Additionally the Company initiated a comprehensive review of the management
structure, financials and operations, including the re-evaluation of its
analog assets.
Liquidity and Capital Resources
At September 30, 1998, the Company held cash and cash equivalents of R$61.9
million. Total assets amounted to R$677.9 million, while total indebtedness,
which is in U.S. dollars, stood at R$58.7 million.
Free Translation into English of Quarterly Information (ITR)
Originally Issued in Portuguese
Telemig Celular Participacoes S.A.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statement
Except for the historical information contained herein, this analysis may be
deemed to include forward-looking statements within the meaning of the
Securities Exchange Acts that involve risk and uncertainty, including
financial and trend projections. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance
that its expectations will be achieved. The important factors that could
cause actual results to differ materially from those in the forward-looking
statements herein include, without limitation, the risks associated with
interest rate fluctuations and currency devaluation, dependence on
availability of interconnection facilities, regulation risks and the impact of
competitive services and pricing, as well as other risks referenced from time
to time in the Company's filings with the CVM and SEC. The Company does not
undertake any obligation to release publicly any revisions to its
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
TELEMIG CELULAR PARTICIPACOES S.A.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998
(In thousands of reais)
- -------------------------------------------------------------------------------------------
September 30, June 30,
1998 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ 61,915 3,543
Trade accounts receivable................................ 29,282 78,458
Receivable from wire line company........................ 17,350 50,325
Receivable from Telebras................................. -- 30,539
Recoverable taxes........................................ 17,185 15,634
Inventories.............................................. 1,376 6
Other receivables 3,102 6,530
--------- ---------
Total current assets 130,210 185,035
--------- ---------
Long-term assets:
Recoverable taxes........................................ 28,283 9,149
Others................................................... 2,231 3,353
--------- ---------
Total long-term assets.................................... 30,514 12,502
--------- ---------
Permanent assets:
Property, plant and equipment............................ 517,164 498,731
Deferred charges......................................... 40 42
--------- ---------
Total permanent assets 517,204 498,773
--------- ---------
Total Assets 677,928 696,310
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans and financing...................................... 13,413 11,996
Taxes and contributions.................................. 50,902 45,660
Suppliers................................................ 71,763 56,387
Others................................................... 10,373 10,696
--------- ---------
Total current liabilities 146,451 124,739
--------- ---------
Long-term liabilities:
Loans and financing...................................... 45,268 44,142
Accruals................................................. 1,428 200
Others................................................... 67 67
--------- ---------
Total long-term liabilities 46,763 44,409
--------- ---------
Minority interest........................................ 69,364 76,475
Shareholders' equity:
Capital Stock............................................ 155,553 155,553
Legal reserve............................................ 7,755 7,755
Realizable profit reserve................................ 132,048 132,048
Retained earnings........................................ 119,994 155,331
--------- ---------
Total shareholders' equity................................ 415,350 450,687
--------- ---------
Total liabilities and shareholders' equity................ 677,928 696,310
========= =========
</TABLE>
TELEMIG CELULAR PARTICIPACOES S.A.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS AS OF SEPTEMBER 30, 1998
(In thousands of reais, except per share data)
3 months ended 9 months ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Gross revenues............................................ $113,338 $415,017
Sales taxes............................................... (30,625) (86,934)
------------ ------------
Net revenues.............................................. 82,713 328,083
Cost of sales............................................. (42,321) (124,309)
------------ ------------
Gross profit.............................................. 40,392 203,774
------------ ------------
Operating expenses/income
Selling expenses.......................................... (92,191) (153,424)
General and administrative expenses....................... (12,911) (28,301)
Financial income.......................................... 2,841 8,580
Financial expenses........................................ (2,721) (6,318)
Other operating revenues.................................. 301 2,524
(104,681) (176,939)
------------ ------------
Operating income.......................................... (64,289) 26,835
Non operating expenses ................................... (1,267) (1,245)
------------ ------------
Income before income taxes, profit sharing and
minority interests.................................. (65,556) 25,590
Provision for income taxes and social contribution........ 22,158 7,207
Profit sharing............................................ (349) (819)
Minority interests........................................ 7,332 2,176
------------ ------------
Net income (loss) for the period.......................... (36,415) 15,388
------------ ------------
Number of shares (in thousand)............................ 334,399,028 334,399,028
------------ ------------
Net income (loss) per shares.............................. (0.00011) 0.00005
============ ============
</TABLE>
TELEMIG CELULAR PARTICIPACOES S.A.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 1998
(In thousands of reais)
- --------------------------------------------------------------------------------------------------
3 months ended 9 months ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Gross revenues............................................ 113,053 415,017
Sales taxes............................................... (30,339) (86,934)
------------ ------------
Net revenues.............................................. 82,714 328,083
Cost of sales............................................. (42,321) (124,309)
------------ ------------
Gross profit.............................................. 40,393 203,774
------------ ------------
Operating expenses/income
Selling expenses.......................................... (92,191) (153,424)
General and administrative expenses....................... (11,238) (26,628)
Financial income.......................................... 3,041 5,592
Financial expenses........................................ (3,549) (12,253)
Other operating revenues.................................. 400 2,623
------------ ------------
(103,537) (184,090)
------------ ------------
Operating income.......................................... (63,144) 19,684
Non operating expenses ................................... 1,268 1,245
------------ ------------
Income before income taxes and profit sharing............. (64,412) 18,439
Provision for income tax and social contribution.......... 21,770 (4,865)
Profit sharing............................................ (349) (819)
------------ ------------
Net income (loss) for the period.......................... (42,991) 12,755
============ ============
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Telemig Cellular Holding Company
Date: November 16, 1998 By: /s/ Jose Leitao Viana
------------------------------------
Name: Jose Leitao Viana
Title: President and Chief
Executive Officer
