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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___

 

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FEDERAL PUBLIC SERVICE
SECURITIES AND EXCHANGE COMMISSION (CVM)	CORPORATE LAW
QUARTERLY INFORMATION
COMMERCIAL, INDUSTRIAL COMPANY AND OTHERS	Date: June 30, 2006

REGISTRATION AT THE CVM DOES NOT REQUIRE ANY EVALUATION OF THE COMPANY, BEING ITS DIRECTORS RESPONSIBLE FOR THE VERACITY OF THIS INFORMATION.

01.01 - IDENTIFICATION

1 - CVM CODE            01768-0	2 - COMPANY NAME       BRASIL TELECOM PARTICIPAÇÕES S.A.	3 – CNPJ - TAXPAYER REGISTER        02.570.688/0001-70
4 – NIRE        5.330.000.581.8

01.02 - ADDRESS OF COMPANY HEADQUARTERS

1 - FULL ADDRESS        SIA/SUL - ASP – LOTE D - BL B - 1º ANDAR			2 - DISTRICT  SIA
3 - ZIP CODE        71215-000	4 - MUNICIPALITY  BRASILIA			5 - STATE        DF
6 - AREA CODE        61	7 - TELEPHONE NUMBER          3415-1010	8 - TELEPHONE NUMBER        3415-1256	9 - TELEPHONE NUMBER        3415-1119	10 - TELEX
11 - AREA CODE        61	12 - FAX          3415-1593	13 - FAX        3415-1315	14 - FAX        -
15 - E-MAIL  ri@brasiltelecom.com.br

01.03 - INVESTOR RELATIONS OFFICER (Address for correspondence to Company)

1 - NAME        CHARLES LAGANÁ PUTZ
2 - FULL ADDRESS        SIA/SUL - ASP - LOTE D- BL A – 2º ANDAR			3 - DISTRICT  SIA
4 - ZIP CODE        71215-000	5 – MUNICIPALITY  BRASILIA			6 - STATE  DF
7 - AREA CODE        61	8 - TELEPHONE NUMBER        3415-1010	9 - TELEPHONE NUMBER  -	10 - TELEPHONE NUMBER  -	11 - TELEX
12 - AREA CODE  61	13 – FAX          3415-1593	14 - FAX  -	15 - FAX  -
15 - E-MAIL  cputz@brasiltelecom.com.br

01.04 - REFERENCE / INDEPENDENT ACCOUNTANT

CURRENT FISCAL YEAR		CURRENT QUARTER			PRIOR QUARTER
1 - BEGINNING	2 - ENDING	3 - QUARTER	4 - BEGINNING	5 - ENDING	6 - QUARTER	7 - BEGINNING	8 - ENDING
01/01/2006	12/31/2006	2	04/01/2006	06/30/2006	1	01/01/2006	03/31/2006
9 - INDEPENDENT ACCOUNTANT      DELOITTE TOUCHE TOHMATSU AUDITORES INDEPENDENTES					10 - CVM CODE      00385-9
11 - NAME TECHNICAL RESPONSIBLE       MARCO ANTONIO BRANDÃO SIMURRO					12 - CPF – TAXPAYER REGISTER     755.400.708-44

1

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01.05 - COMPOSITION OF ISSUED CAPITAL

1 - QUANTITY OF SHARES (IN THOUSAND)	2 - CURRENT QUARTER  06/30/2006	3 - PRIOR QUARTER  03/31/2006	4 - SAME QUARTER  OF PRIOR YEAR  06/30/2005
ISSUED CAPITAL
1 - COMMON	134,031,688	134,031,688	134,031,688
2 - PREFERRED	229,937,526	229,937,526	229,937,526
3 - TOTAL	363,969,214	363,969,214	363,969,214
TREASURY SHARES
4 - COMMON	1,480,800	1,480,800	1,480,800
5 - PREFERRED	0	0	0
6 - TOTAL	1,480,800	1,480,800	1,480,800

01.06 - COMPANY’S CHARACTERISTICS

1 - TYPE OF COMPANY        INDUSTRIAL, COMMERCIAL COMPANIES AND OTHERS

2 – SITUATION        OPERATING

3 - TYPE OF CONTROLLING INTEREST        NATIONAL HOLDING

4 - ACTIVITY CODE          1130 – TELECOMMUNICATIONS

5 - MAIN ACTIVITY        PROVIDING SWITCHED FIXED TELEPHONE SERVICE (STFC)

6 - TYPE OF CONSOLIDATED        TOTAL

7 - TYPE OF ACCOUNTANTS REPORT        UNQUALIFIED

01.07 - SUBSIDIARIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENT

1 - ITEM

2 – CNPJ - TAXPAYERS REGISTER

3 - NAME

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

1 - ITEM	2 - EVENT	3 - APPROVAL	4 - DIVIDEND	5 - BEGINNING PAYMENT	6 - TYPE OF SHARE	7 - VALUE OF THE DIVIDEND PER SHARE
01	RCA	06/30/2005	Interest on Shareholders’ Equity		Common	0.0004345104
02	RCA	06/30/2005	Interest on Shareholders’ Equity		Preferred	0.0004345104

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01.09 - ISSUED CAPITAL AND CHANGES IN CURRENT YEAR

1 - ITEM

2 – DATE OF CHANGE

3 - CAPITAL STOCK (In R$ thousands)

4 - VALUE OF CHANGE (In R$ thousands)

5 - ORIGIN OF ALTERATION

6 - QUANTITY OF ISSUED SHARES (Thousands)

7 – SHARE PRICE ON ISSUANCE DATE  (In R$)

01.10 - INVESTOR RELATIONS OFFICER

1 - DATE        07/31/2006

2 - SIGNATURE

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02.01 - BALANCE SHEET – ASSETS (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2005
1	TOTAL ASSETS	5,834,477	5,700,509
1.01	CURRENT ASSETS	1,175,804	975,974
1.01.01	CASH AND CASH EQUIVALENTS	859,693	833,560
1.01.02	CREDITS	0	0
1.01.03	INVENTORIES	0	0
1.01.04	OTHER	316,111	142,414
1.01.04.01	DEFERRED AND RECOVERABLE TAXES	172,807	139,108
1.01.04.02	DIVIDENDS RECEIVABLE	140,104	0
1.01.04.03	OTHER ASSETS	3,200	3,306
1.02	LONG-TERM ASSETS	998,604	976,811
1.02.01	SUNDRY CREDITS	0	0
1.02.02	CREDITS WITH RELATED PARTIES	604,371	585,207
1.02.02.01	FROM ASSOCIATED COMPANIES	0	0
1.02.02.02	FROM SUBSIDIARIES	604,371	585,207
1.02.02.02.01	LOANS AND FINANCING	604,371	585,207
1.02.02.02.02	ADVANCES FOR FUTURE CAPITAL INCREASE	0	0
1.02.02.03	FROM OTHER RELATED PARTIES	0	0
1.02.03	OTHER	394,233	391,604
1.02.03.01	LOANS AND FINANCING	97,400	100,912
1.02.03.02	DEFERRED AND RECOVERABLE TAXES	250,435	246,984
1.02.03.03	INCOME SECURITIES	0	0
1.02.03.04	JUDICIAL DEPOSITS	46,398	43,708
1.02.03.05	INVENTORIES	0	0
1.02.03.06	OTHER ASSETS	0	0
1.03	PERMANENT ASSETS	3,660,069	3,747,724
1.03.01	INVESTMENTS	3,658,941	3,746,517
1.03.01.01	ASSOCIATED COMPANIES	0	0
1.03.01.02	SUBSIDIARIES	3,651,650	3,739,302
1.03.01.03	OTHER INVESTMENTS	7,291	7,215
1.03.02	PROPERTY, PLANT AND EQUIPMENT	1,084	1,156
1.03.03	DEFERRED CHARGES	44	51

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02.02 - BALANCE SHEET – LIABILITIES (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2006
2	TOTAL LIABILITIES	5,834,477	5,700,509
2.01	CURRENT LIABILITIES	567,357	354,056
2.01.01	LOANS AND FINANCING	135	132
2.01.02	DEBENTURES	283,083	274,939
2.01.03	SUPPLIERS	753	1,109
2.01.04	TAXES, DUTIES AND CONTRIBUTIONS	40,845	21,289
2.01.04.01	INDIRECT TAXES	18,141	2,834
2.01.04.02	TAXES ON INCOME	22,704	18,455
2.01.05	DIVIDENDS PAYABLE	213,255	56,134
2.01.06	PROVISIONS	12	12
2.01.06.01	PROVISIONS FOR CONTINGENCIES	12	12
2.01.07	DEBTS WITH RELATED PARTIES	0	0
2.01.08	OTHER	29,274	441
2.01.08.01	PAYROLL AND SOCIAL CHARGES	21	67
2.01.08.02	CONSIGNMENTS IN FAVOR OF THIRD PARTIES	27,899	113
2.01.08.03	EMPLOYEE PROFIT SHARING	0	0
2.01.08.04	OTHER LIABILITIES	1,354	261
2.02	LONG-TERM LIABILITIES	65,522	63,681
2.02.01	LOANS AND FINANCING	0	32
2.02.02	DEBENTURES	0	0
2.02.03	PROVISIONS	4,025	3,413
2.02.03.01	PROVISIONS FOR CONTINGENCIES	4,025	3,413
2.02.04	DEBTS WITH RELATED PARTIES	0	0
2.02.05	OTHER	61,497	60,236
2.02.05.01	PAYROLL AND SOCIAL CHARGES	0	0
2.02.05.02	SUPPLIERS	0	0
2.02.05.03	INDIRECT TAXES	41,153	38,943
2.02.05.04	TAXES ON INCOME	20,344	21,293
2.03	DEFERRED INCOME	0	0
2.05	SHAREHOLDERS’ EQUITY	5,201,598	5,282,772
2.05.01	CAPITAL	2,596,272	2,596,272
2.05.02	CAPITAL RESERVES	309,178	309,178
2.05.03	REVALUATION RESERVES	0	0
2.05.03.01	COMPANY ASSETS	0	0
2.05.03.02	SUBSIDIARIES/ASSOCIATED COMPANIES	0	0
2.05.04	PROFIT RESERVES	282,667	282,667
2.05.04.01	LEGAL	208,487	208,487
2.05.04.02	STATUTORY	0	0
2.05.04.03	CONTINGENCIES	0	0
2.05.04.04	REALIZABLE PROFITS RESERVES	74,180	74,180
2.05.04.05	PROFIT RETENTION	0	0

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02.02 - BALANCE SHEET - LIABILITIES (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2006
2.05.04.06	SPECIAL RESERVE FOR UNDISTRIBUTED DIVIDENDS	0	0
2.05.04.07	OTHER PROFIT RESERVES	0	0
2.05.05	RETAINED EARNINGS/ACCUMULATED DEFICIT	2,013,481	2,094,655

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03.01 - STATEMENT OF INCOME (IN THOUSANDS OF REAIS)

1 – CODE	2 – ACCOUNT DESCRIPTION	3 – 04/01/2006 TO 06/30/2006	4 - 01/01/2006 TO 06/30/2006	5 - 04/01/2005 TO 06/30/2005	6 - 01/01/2005 TO 06/30/2005
3.01	GROSS REVENUE FROM SALES AND/OR SERVICES	0	0	0	0
3.02	DEDUCTIONS FROM GROSS REVENUE	0	0	0	0
3.03	NET REVENUE FROM SALES AND/OR SERVICES	0	0	0	0
3.04	COST OF GOODS AND/OR SERVICES SOLD	0	0	0	0
3.05	GROSS PROFIT	0	0	0	0
3.06	OPERATING INCOME/EXPENSES	(78,033)	(29,443)	(150,778)	(86,341)
3.06.01	SELLING EXPENSES	0	0	0	0
3.06.02	GENERAL AND ADMINISTRATIVE EXPENSES	(3,818)	(9,029)	(6,240)	(13,283)
3.06.03	FINANCIAL	(152,427)	(100,138)	(176,560)	(105,489)
3.06.03.01	FINANCIAL INCOME	62,006	131,080	90,963	180,975
3.06.03.02	FINANCIAL EXPENSES	(214,433)	(231,218)	(267,523)	(286,464)
3.06.04	OTHER OPERATING INCOME	1,370	1,867	1,055	2,053
3.06.05	OTHER OPERATING EXPENSES	(379)	(723)	(860)	(2,007)
3.06.06	EQUITY IN THE EARNINGS OF SUBSIDIARIES AND ASSOCIATED  COMPANIES	77,221	78,580	31,827	32,385
3.07	OPERATING INCOME	(78,033)	(29,443)	(150,778)	(86,341)
3.08	NON-OPERATING INCOME	109	248	273	1,976
3.08.01	REVENUES	104	248	295	1,998
3.08.02	EXPENSES	5	0	(22)	(22)
3.09	INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST	(77,924)	(29,195)	(150,505)	(84,365)
3.10	PROVISION FOR INCOME AND SOCIAL CONTRIBUTION TAXES	(3,250)	(19,302)	6,982	(14,943)
3.11	DEFERRED INCOME TAX	0	0	0	0
3.12	STATUTORY INTEREST/ CONTRIBUTIONS	0	0	0	0
3.12.01	INTEREST	0	0	0	0

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03.01 - STATEMENT OF INCOME (IN THOUSANDS OF REAIS)

1 - CODE	2 – ACCOUNT DESCRIPTION	3 – 04/01/2006 TO 06/30/2006	4 - 01/01/2006 TO 06/30/2006	5 - 04/01/2005 TO 06/30/2005	6 - 01/01/2005 TO 06/30/2005
3.12.02	CONTRIBUTIONS	0	0	0	0
3.13	REVERSAL OF INTEREST ON SHAREHOLDERS’ EQUITY	185,300	185,300	216,600	216,600
3.15	INCOME/LOSS FOR THE PERIOD	104,126	136,803	73,077	117,292
	NUMBER OF SHARES, EX-TREASURY (THOUSAND)	362,488,414	362,488,414	362,488,414	362,488,414
	EARNINGS PER SHARE	0.00029	0.00038	0.00020	0.00032
	LOSS PER SHARE

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FEDERAL PUBLIC SERVICE
SECURITIES AND EXCHANGE COMMISSION (CVM)		CORPORATE LAW
QUARTERLY INFORMATION
COMMERCIAL, INDUSTRIAL COMPANY AND OTHERS		Date: June 30, 2006
01768-0	BRASIL TELECOM PARTICIPAÇÕES S.A.	02.570.688/0001-70
04.01-NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE QUARTERLY INFORMATION
AS OF 06/30/2006

(In thousands of Brazilian reais)

1. OPERATIONS

BRASIL TELECOM ParticipaÇões S.A. (“the Company”) is a joint-stock, listed company, incorporated pursuant to the Article 189 of Law 9,472/97 – Telecommunications General Law, as part of the TELEBRÁS spin-off process, the protocol and justification of which was approved on May 22, 1998 at shareholders’ meeting.

The Company’s purpose is to exercise the control of companies that exploit fixed telephony public services in Region II of the General Concession Plan (“PGO”) approved by Decree 2,534, dated April 02, 1998. Such control is exercised by Brasil Telecom S.A., a concessionaire responsible for Switched Fixed Telephone Service (“STFC”) in Region II of PGO. The Company additionally may have interest in other companies’ capital.

The Company is registered at the Brazilian Securities and Exchange Commission (“CVM”) and at the U.S Securities and Exchange Commission (“SEC”). Its shares are traded on the São Paulo Stock Exchange (“Bovespa”), where it also integrates level 1 of Corporate Governance, and trades its American Depositary Receipts – ADRs on the New York Stock Exchange (“NYSE”).

The Company control is exercised by SOLPART ParticipaÇões S.A. (“SOLPART”), corresponding, on the quarter closing date, to 51.00% of the voting capital and 18.78% of the total capital.

Direct Subsidiaries of the Company

a. Brasil Telecom S.A.

A Brasil Telecom S.A. is the concessionaire responsible for STFC in Region II of PGO, covering the Brazilian states of Acre, Rondônia, Mato Grosso, Mato Grosso do Sul, Tocantins, Goiás, Paraná, Santa Catarina and Rio Grande do Sul, besides the Federal District. In this area of 2,859,375 square kilometers, which corresponds to 34% of the Brazilian territory, Brasil Telecom S.A. renders since July 1998 the STFC in the modalities of local and intra-regional long distances.

With recognition of the prior fulfillment of the obligations for universalization stated in the General Plan of Universalization Goals (“PGMU”), required for December 31, 2003, Brasil Telecom S.A. obtained from the National Agency for Telecommunications (“ANATEL”), on January 19, 2004, issued authorizations for the Company to exploit STFC in the following service modalities: (i) Local and Domestic Long Distance calls in Regions I and III and Sectors 20, 22 and 25 of Region II of the General Concession Plan (“PGO”); and (ii) International Long Distance calls in Regions I, II and III of PGO. As a result of these authorizations, the Subsidiary began to exploit the Domestic and International Long Distance Services in the Regions I, II and III, starting on January 22, 2004. In the case of the Local Service in the new regions and PGO sectors, the service began to be rendered as from January 19, 2005.

New concession agreements under the modalities of local and long distance services came into force as of January 1, 2006, effective until December 31, 2025. Additional information about these agreements is mentioned in Note 5.i.

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Information related to the quality and universal service targets of the Switched Fixed Telephone Service of its Subsidiary are available to interested parties on ANATEL’s homepage, in the website www.anatel.gov.br.

b. Nova Tarrafa ParticipaÇões Ltda. and Nova Tarrafa Inc.

The company also holds the control of Nova Tarrafa ParticipaÇões Ltda. (“NTP”) and Nova Tarrafa Inc. (“NTI”). The corporate purpose of these subsidiaries is to share the capital of Internet Group (Cayman) Limited (“IG Cayman”), company dedicated to providing access to the Internet. On November 24, 2004, the company IG Cayman started to take part in the group of subsidiaries of the Company, with the acquisition of equity interests by Brasil Telecom Subsea Cable Systems (Bermuda) Ltd., a company indirectly controlled.

NTP and NTI interest in IG Cayman on the quarter closing date represented 9.25% and 0.16%, respectively and jointly with Brasil Telecom Subsea Cable Systems (Bermuda) Ltd. total interest was 98.2% .

Indirect Subsidiaries of the Company

The subsidiary Brasil Telecom S.A. holds, in its turn, the control of the following companies:

a) 14 Brasil Telecom Celular S.A.

14 Brasil Telecom Celular S.A. (“BrT Celular”) is a wholly-owned subsidiary which operates since the fourth quarter of 2004 to provide Personal Mobile Service (“SMP”), with authorization to assist the same coverage area where Brasil Telecom S.A. operates with STFC.

b) BrT ServiÇos de Internet S.A.

BrT ServiÇos de Internet S.A. (“BrTI”) is a wholly-owned subsidiary which started its operations in the beginning of 2002 and provides internet services and correlated activities.

BrTI, on the other hand, has the control of the following companies:

(i) BrT Cabos Submarinos Group

This group of companies operates through a system of submarine fiber optics cables, with connection points in the United States, Bermuda Islands, Venezuela and Brazil, allowing data traffic through packages of integrated services, offered to local and international corporate customers. It is comprised of the following companies:

•	Brasil Telecom Cabos Submarinos do Brasil (Holding) Ltda. (“BrT CSH”)
•	Brasil Telecom Cabos Submarinos do Brasil Ltda. (“BrT CS Ltda.”): BrTI exercises direct control and total control jointly with BrT CSH.

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•   Brasil Telecom Subsea Cable Systems (Bermudas) Ltd. (“BrT SCS Bermuda”): it is also an integral part of the Companies BrT Cabos Submarinos, and BrTI maintains a minority interest, however it is ensured the indirect control once the majority control belongs to Brasil Telecom S.A.. On its turn, BrT SCS Bermuda holds the total shares of Brasil Telecom of America Inc. and Brasil Telecom de Venezuela, S.A.

(ii) iBest Group

iBest Companies have their operations concentrated in providing dial up connection to the Internet, sale of advertising space for divulgation in its portal and value-added service with the availability of its Internet access accelerator. They are represented by the companies: iBest Holding Corporation, incorporated in Cayman Islands, and Freelance S.A., established in Brazil.

IG Companies

IG Companies have operations based on providing dial up access to the Internet, inclusively, its mobile internet portal related to mobile telephony in Brazil. They also render value added services related to broadband access to its portal and web page hosting and other services in the Internet market.

On November 24, 2004, BrT SCS Bermuda acquired 63.0% of the total capital, and the resulting control, of Internet Group (Cayman) Limited (“IG Cayman”), incorporated in the Cayman Islands. On July 26, 2005, BrT SCS Bermuda complemented the acquisition of additional 25.6% of IG Cayman’s total capital. On the quarter closing date, the interest held by BrT SCS Bermuda was 88.8% . IG Cayman is a holding which, in its turn, have control of Internet Group do Brasil Ltda. (“IG Brasil”) and Central de ServiÇos Internet Ltda. (“CSI”), both established in Brazil.

Agência O Jornal da Internet Ltda (“Jornal Internet” Agency).

BrTI holds thirty per cent interest in the capital stock of Jornal Internet, which aims the commercialization of goods and services through the Internet, edition of newspapers or magazines, as well as the obtainment, generation and publication of news on selected facts. Seventy per cent of the capital stock of Jornal Internet is held by Charles Laganá Putz, Company’s chief financial officer.

c) MTH Ventures do Brasil Ltda.

Brasil Telecom S.A. holds 100% of the capital of MTH Ventures do Brasil Ltda. (“MTH”), a holding company which has 100% of the capital of Brasil Telecom ComunicaÇão Multimídia Ltda. (“BrT Multimídia”).

BrT Multimídia is a service provider of private telecommunications network through optical fiber digital networks in São Paulo, Rio de Janeiro and Belo Horizonte, and long distance network connecting these metropolitan commercial centers. It also has an Internet solution center in São Paulo, which offers co-location, hosting and other value-added services.

d) Vant TelecomunicaÇões S.A. (“VANT”)

Corporation that the Company acquires the total capital stock. VANT aims the rendering of telecommunication services in general, especially multimedia communication services, execution of works, assemblies and installations in public and private environments referring to the implementation,

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operation and maintenance of networks and telecommunications systems, acquisition and onerous assignment of capabilities and means and other necessary supplementary activities, operating throughout Brazil, and is present in the main Brazilian state capitals .

e) Other Service Provider Companies

Brasil Telecom S.A. Company is the holder of 100% of the capital stock of the companies Santa Bárbara dos Pampas S.A., Santa Bárbara dos Pinhais S.A., Santa Bárbara do Cerrado S.A. and Santa Bárbara do Pantanal S.A. These companies, which were not operating on the quarter closing date, aim at rendering services in general comprising, among others, the management activities of real states or assets.

Change in the Management

On July 27, 2005, the Extraordinary Shareholders’ Meeting dismissed from office the members of the Company’s Board of Directors connected with former manager Opportunity. At Board of Directors Meeting held on August 25, 2005, a new Board of Executive Officers was elected, and the Technical Officer was maintained in his position.

At the Extraordinary Shareholders’ Meeting held on September 30, 2005, the Board of Directors’ members of Brasil Telecom S.A. were dismissed from office and new members were elected. On the same date, the Board of Directors Meeting resolved to dismiss the Chairman and to elect new members for the Board of Executive Officers, and the Network Officer was reelected. Such resolutions were ratified by the Board of Directors of Brasil Telecom S.A. in meeting held on October 5, 2005.

The process to change the management of the Company and Brasil Telecom S.A. was litigious, according to various material facts published by the Company during 2005 and various lawsuits brought by the former manager, aiming at recovering the management of the Companies, which are still under progress.

Agreements as of April 28, 2005 under the Previous Management

On April 28, 2005, still under previous management, Brasil Telecom ParticipaÇões S.A. and Brasil Telecom S.A. entered into various agreements involving the Opportunity Group and Telecom Italia (“April 28 Agreements”).

Among such agreements, Brasil Telecom S.A. and its subsidiary 14 Brasil Telecom Celular S.A. (“BTC”) executed with TIM International N.V. (“TIMI”) and TIM Brasil ServiÇos e ParticipaÇões S.A. (“TIMB”) an instrument named as “Merger Agreement” and a “Protocol” related thereto.

As mentioned in material facts published, the merger was forbidden by injunctions issued by the Brazilian and U.S. courts. It is also subject-matter of discussion under arbitration involving the controlling shareholders.

The current management of Brasil Telecom ParticipaÇões S.A. and Brasil Telecom S.A. understands that the Merger Agreement, the respective Protocol, and other April 28 agreements, which included the waiver and transaction in lawsuits involving the Companies, were entered into with conflict of interests, breaching the laws and the Bylaws of the Companies, and also, in opposition to shareholders’ agreements and without the necessary corporate approvals. In addition, the new management deems that such agreements are contrary to the best interest of the Companies, especially regarding its mobile telephony business.

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TIMI and TIMB sent to Brasil Telecom S.A. and to Brt Celular a correspondence dated as of May 2, 2006, terminating unilaterally the referred “Merger Agreement”, reserving supposed rights.

2. PRESENTATION OF FINANCIAL STATEMENTS

Preparation Criteria

The financial statements have been prepared in accordance with accounting practices adopted in Brazil, in compliance with the Brazilian corporate law, rules of CVM and rules applicable to telephony service concessionaires.

As the Company is registered with the SEC, it is subject to SEC’s standards, and it must prepare financial statements and other information by using criteria that comply with that agency’s requirements. To comply with these requirements and aiming at meeting the market’s information needs, the Company adopts, as a principle, the disclosure of information in both markets in their respective languages.

The notes to the financial statements are presented in thousands of reais, unless otherwise demonstrated. According to each situation, they present information related to the Company and the consolidated statements, being identified as “PARENT COMPANY” and “CONSOLIDATED”, respectively. When the information is common to both situations, it is indicated as “PARENT COMPANY AND CONSOLIDATED”.

In compliance with the Resolution 489/05, of CVM, as from 2006 the amounts of judicial deposits linked to the provisions for contingencies are presented in a deductive way from the liabilities established. Aiming at providing a better comparison between the data presented in the quarterly information, an identical reclassification of balances belonging to 2005 was promoted, as well as of the amounts referring to the cash flow.

The accounting estimates were based on objective and subjective factors, based on management’s judgment to determine the appropriate amount to be recorded in the financial statements. Significant elements subject to these estimates and assumptions include the residual amount of the fixed assets, allowance for doubtful accounts, inventories and deferred income tax and social contribution, provision for contingencies, valuation of derivative instruments, and assets and liabilities related to benefits to employees. The settlement of transactions involving these estimates may result in significantly different amounts due to the inaccuracy inherent to the process of determining these amounts. Management reviews its estimates and assumptions at least quarterly.

Consolidated Financial Statements

The consolidation was made in accordance with CVM Instruction 247/96 and includes the companies listed in Note 1.

Some of the main consolidation procedures are:

•	Elimination of balances of the asset and liability accounts among the consolidated companies, as well as revenue and expenses of transactions among them;
•	Elimination of the balances of the investment accounts and corresponding investor’s shareholdings, reserves and accumulated results in the consolidated companies; and

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•    Segregation of the portions of shareholders’ equity and income belonging to minority shareholders, indicated in specific items.

The reconciliation of the net income and shareholders’ equity pertaining to the Parent Company and to the Consolidated is presented below:

	NET INCOME (LOSS)		SHAREHOLDERS’  EQUITY
	06/30/06	06/30/05	06/30/06	03/31/06
PARENT COMPANY	136,803	117,292	5,201,598	5,282,772
Records made in Subsidiary’s Shareholders’ Equity
Dividends Barred by Law and Donations	(5)	(4,905)
Capitalized Interest - Subsidiary	1,746	1,746	(2,329)	(3,202)
CONSOLIDATED	138,544	114,133	5,199,269	5,279,570

Supplementary Information

The Company is presenting as supplementary information the statements of cash flows, which were prepared in accordance with Accounting Rules and Procedures - NPC 20 of the Brazilian Institute of Independent Auditors - IBRACON. The statement of cash flow is shown together with Note 17.

Report per Segment

The Company is presenting, supplementary to note 43, the report per business segment. A segment is an identifiable component of the company, intended for service rendering (business segment), or provision of products and services which are subject to risks and compensations, different from those of other segments.

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

The criteria mentioned in this note refer to the practices adopted by the Company and its subsidiaries that are included in the consolidated balance sheet.

a. Cash and Cash Equivalents: Cash equivalents are temporary high-liquid investments, with immediate maturity. They are recorded at cost, plus income registered until the closing dates of the quarters, and do not exceed market value. Investment funds quotas are appreciated considering the quota values on June 30, 2006.

b. Trade Accounts Receivable: Receivables from users of telecommunications services are recorded at the amount of the fee or the service on the date the service is rendered. Accounts receivable from services include credits for services rendered and not billed until the closing dates of the quarters. Receivables resulting from sales of cell phones and accessories are recorded by the amount of sales made, at the moment in which the goods are delivered and accepted by the customer. The criterion adopted for making the allowance for doubtful accounts takes into account the calculation of the actual percentage of losses incurred on each range of accounts receivable. The historic percentages are applied to the current ranges of accounts receivable, also including accounts coming due and the portion of services rendered yet to be billed, thus composing the amount that could become a future loss, which is recorded as a provision for accounting purposes.

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d. Investments: Investments in subsidiaries are assessed using the equity method. Goodwill is calculated based on the expectation of future results and its amortization is based on the expected realization/timing over an estimated period of not more than ten years. Other investments are recorded at acquisition cost, less allowance for losses, when applicable. The investments resulting from income tax incentives are recognized on the date of investment, and result in shares of companies with tax incentives or investment fund quotas. In the period between the investment date and receipt of shares or quotas of funds, they remain recognized in long-term assets. The Company adopts the criterion of using the maximum percentage of tax allocation. These investments are periodically valued and the result of the comparison between its original and market costs, when the latter is lower, results in the constitution of allowances for probable losses.

e. Property, Plant and Equipment: Stated at cost of acquisition and/or construction, less accumulated depreciation. Financial charges derived from obligations for financing assets and construction in progress are capitalized.

The costs incurred, when they represent improvements (increase in installed capacity or useful life) are capitalized. Maintenance and repair are charged to the profit and losses accounts, on an accrual basis.

Depreciation is calculated under the straight-line method. Depreciation rates used are based on expected useful lives of the assets and in accordance with the standards of the Public Telecommunications Service. The main rates used are set forth in Note 28.

f. Deferred Charges: Segregated between deferred charges on amortization and formation. Their breakdown is shown in Note 29. Amortization is calculated under the straight-line method, for a five-year period, in accordance with the legislation in force. When benefits are not expected from an asset, it is written off against non-operating income.

g. Income and Social Contribution Taxes: Corporate income and social contribution taxes are accounted for on an accrual basis. These taxes levied on temporary differences, tax losses and the social contribution negative basis are recorded under assets or liabilities, as applicable, according to the assumption of realization or future demand, within the parameters set forth in the CVM Instruction 371/02.

h. Loans and Financing: These are updated for monetary and/or exchange variations and interest incurred until the quarter closing date. Equal restatement is applied to the guarantee contracts to hedge the debt.

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j. Revenue Recognition: Revenues from services rendered are recognized when provided. Local and long distance calls are charged based on time measurement according to the legislation in force. Revenues from sales of payphone cards (Public Use Telephony - TUP), cell phones and accessories are recorded when delivered and accepted by the client. For prepaid services linked to mobile telephony, the revenue is recognized in accordance with the utilization of services. Revenue is not recognized if there is a significant uncertainty in its realization.

k. Recognition of Expenses: Expenses are recognized on an accrual basis, considering their relation with revenue realizations. Expenses related to future periods are deferred.

l. Financial Income (Expense), Net: Financial income is recognized on an accrual basis and comprises interest earned on overdue accounts settled after the term, gains on financial investments and hedges. Financial expenses comprise interest incurred and other charges on loans, financing and other financial transactions.

Interest on shareholders’ equity, when credited, is included in the financial expenses balance, and for financial statement presentation purposes, the amounts are reversed to profit and loss accounts and reclassified as a deduction of retained earnings, in the shareholders’ equity.

m. Benefits to Employees: Private pension plans and other retirement benefits sponsored by the Company and its Subsidiaries for their employees are managed under three Foundations. Contributions are determined on an actuarial basis, when applicable, and accounted for on an accrual basis.

As of December 31, 2001, the subsidiary Brasil Telecom S.A. recorded its actuarial deficit on the balance sheet date against shareholders’ equity, net of its tax effects. As from 2002, as new actuarial revaluations show the necessity for adjustments to the provision, they are recognized in the profit and loss accounts.

Additional information regarding the private pension plans is described in Note 6.

n. Profit Sharing: The provision for employees profit sharing is recognized on an accrual basis, being accounted as operating expense. The calculation of the amount, which is paid in the subsequent year after the provision is recognized, is based on the target program established with the labor union, by means of collective labor agreement, in accordance with Law 10,101/00 and the Company’s Bylaws.

o. Earnings or losses per thousand shares: Calculated based on the number of shares outstanding on the quarter closing date, which comprises the total number of shares issued, minus shares held in treasury.

Related parties transactions refer to the operations of the Company with the subsidiaries Brasil Telecom S.A., Nova Tarrafa ParticipaÇões Ltda. and Nova Tarrafa Inc., also including the transactions with SOLPART, its parent company.

Operations between related parties and the Company are carried out under usual market prices and conditions. The main transactions are:

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Dividends/Interest on Shareholders’ Equity: The Company destined to the Parent Company the amount of R$34,943 (R$43,168 in 2005) of the interest on shareholders’ equity up to the quarter closing date. The balance of this liability, net withholding income tax is R$29,702.

Dividends/Interest on Shareholders’ Equity: The amount of R$164,828 (R$161,344 in 2005) was destined to the Company of the interest on shareholders’ equity credited by the Parent Company up to the quarter end. The balance of this asset, net of withholding income tax, is R$140,104.

Loans with the Subsidiary: The outstanding balance arose from the spin-off of Telebrás and are indexed to exchange variation, plus interest of 1.75% per year, amounting to R$51,169 (R$51,137 as of 03/31/06). The financial loss recognized against the result up to the quarter, due to the drop of the U.S. dollar, was R$3,895 (R$7,537 of financial loss in 2005, attributed to the exchange rate reduction).

Debentures: On January 27, 2001, the Subsidiary issued 1,300 private debentures at the unit price of R$1,000 non-convertible or exchangeable for any type of share, totaling R$1,300,000, for the purpose of financing part of its investment program. All these debentures were acquired by the Company. The balance of the debentures par value will be realized in one installment, equivalent to 40% of the amount issued, with maturity term on 07/27/06. The debentures remuneration is equivalent to 100% of the CDI, paid semiannually. The balance of this asset is R$553,202 (R$534,070 on 03/31/06) and the earnings recognized in the income up to the quarter represented R$40,494 (R$79,945 in 2005).

Sureties and Guarantees: (i) The Company renders sureties as guarantee of loans and financings owed by the Subsidiary to the lending financial institutions. Up to the quarter, referring to the guarantee benefit granted, the Company earned revenues at the amount of R$1,669 (R$2,083 in 2005); and (ii) the Company renders surety for the Subsidiary related to the contracting of insurance policies, guarantee of contractual liabilities (GOC) for 2006, which amount to R$220,305 (R$217,142 in 2005). Up to the quarter closing date, in return to such surety, the Company registered an operating revenue of R$66 (R$130 in 2005).

Amounts Receivable and Expenses: arising from transactions related to share of resources. The balance receivable is R$439 (R$381 receivable on 03/31/06) and the amounts recorded in income up to the quarter comprises operating expenses of R$337 (R$1,797 in 2005).

5. MARKET VALUE OF FINANCIAL ASSETS AND LIABILITIES (FINANCIAL INSTRUMENTS) AND RISK ANALYSIS

The Company and its subsidiaries assessed the book value of its assets and liabilities as compared to market or realizable values (fair value), based on information available and evaluation methodologies applicable to each case. The interpretation of market data regarding the choice of methodologies requires considerable judgment and determination of estimates to achieve an amount considered adequate for each case. Accordingly, the estimates presented may not necessarily indicate the amounts, which can be obtained in the current market. The use of different assumptions for calculation of market value or fair value may have material effect on the obtained amounts. The selection of assets and liabilities presented in this note took place based on their materiality. Instruments whose values approximate their fair values,

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In accordance with their natures, the financial instruments may involve known or unknown risks, and the potential of such risks is important for the best judgment. Thus, there may be risks with or without guarantees, depending on circumstantial or legal aspects. Among the principal market risk factors which can affect the Company and its subsidiaries’ business are the following:

The majority of services provided by the subsidiary Brasil Telecom S.A. are related to the Concession Agreement, and a significant portion of these services is subject to the determination of fees by the regulatory agency. The credit policy, in its turn, in case of telecommunications public services, is subject to legal standards established by the concession authority. The risk exists since the Subsidiary may incur losses arising from the difficulty in receiving amounts billed to its customers. Up to the quarter, the consolidated amount of accounts receivable losses, including the allowance for doubtful accounts corresponded to 2.71% of the gross revenue (2.65% in the same period of 2005). By means of internal controls, the level of accounts receivable is constantly monitored, thus limiting the risk of past due accounts by cutting the access to the service (out phone traffic) if the bill is overdue for over 30 days. Exceptions are made for telephone services, which should be maintained for national security or defense.

The subsidiary Brasil Telecom S.A. operates in co-billing, concerning long distance calls with the use of its CSP (Operator Selection Code) originated by subscribers of other fixed and mobile telephony operators. The co-billing accounts receivable are managed by these operators, based on the operational agreements entered into with them and according to the rules set forth by ANATEL. The blocking rules set forth by the regulating agency are the same for the fixed and mobile telephony companies, which are co-billing suppliers. The Subsidiary separately monitors receivables of this nature and maintain an allowance for losses that may occur, due to the risks of not receiving such amounts.

In respect to mobile telephony, credit risk in cell phones sales and in service rendering in the postpaid category is minimized with the adoption of a credit pre-analysis. Still in relation to postpaid service, whose client base at the end of the quarter was 32.4% of the total portfolio (33.4% on 03/31/06), the receivable accounts are also monitored in order to limit default and the block is made to the service (out of phone traffic) if the bill is overdue for over fifteen days.

The Company has outstanding foreign currency-denominated loan agreements, and therefore are subject to the exchange rates fluctuation. The amounts of the assets exposed to this type of risk are the following:

	PARENT COMPANY		CONSOLIDATED

	Book Value		Book Value
	06/30/06	03/31/06	06/30/06	03/31/06
Assets
Loans with Subsidiary	51,169	51,137	-	-
Loans and Financing	97,400	100,912	97,400	100,912
Total	148,569	152,049	97,400	100,912
Long-term	148,569	152,049	97,400	100,912

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The Company and the subsidiary Brasil Telecom S.A have loans and financing contracted in foreign currency. The risk related to these liabilities arises from possible exchange rate fluctuations, which may increase these liabilities balances. Loans subject to this risk represent approximately 24.3% (23.1% on 03/31/06) of the total liabilities of consolidated loans and financings, minus the contracted hedge balances. In order to minimize this kind of risk, exchange hedge agreements are contracted with financial institutions. Of the debt installment consolidated in foreign currency, 57.7% (71.7% on 03/31/06) is covered by hedge operations and financial investments in foreign currency, resulting in an effective exposition of only 12.7% . Unrealized positive or negative effects of these operations are recorded in the profit and loss as gain or loss. Until the end of the quarter, the consolidated negative adjustments of these operations amounted to R$72,774 (R$159,027 of negative adjustments in 2005).

Net exposure as per book and market values, at the exchange rate risk, is as follows:

	PARENT COMPANY

	06/30/06		03/31/06
	Book  Value	Market  Value	Book  Value	Market  Value
Liabilities
Loans and Financing	135	135	164	164
Total	135	135	164	164
Current	135	135	132	132
Long-term	-	-	32	32

	CONSOLIDATED

	06/30/06		03/31/06
	Book Value	Market Value	Book  Value	Market Value
Liabilities
Loans and Financing	932,422	958,333	909,514	954,077
Hedge Agreements	380,746	377,130	366,110	364,009
Total	1,313,168	1,335,463	1,275,624	1,318,086
Current	192,131	193,168	176,982	177,286
Long-term	1,121,037	1,142,295	1,098,642	1,140,800

The method used for calculation of market value (fair value) of loans and financing in foreign currency and hedge instruments was future cash flows associated to each contracted instruments, minus the market rates in force in the quarter closing date.

The Company Assets arise from the full subscription of the private debentures issued by the subsidiary Brasil Telecom S.A. For the Consolidated there are loans remunerated by the rates mentioned below, as well as Certificates of Deposits (CDBs) with Banco de Brasília S.A. related to the guarantee to tax incentive granted by the Federal District Government under a program called Programa de PromoÇão do Desenvolvimento Econômico e Sustentável do Distrito Federal – PRO-DF, (Program to Promote the

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Economic and Sustained Development of the Federal District), and the remuneration of these securities is equivalent to 95% of the SELIC rate.

	PARENT COMPANY		CONSOLIDATED

	Book and Market Value		Book and Market Value
	06/30/06	03/31/06	06/30/06	03/31/06
Assets
Loans (Including Debentures)
Debentures linked to CDI	553,202	534,070	-	-
Loans subject to CDI, IGP-M	-	-	9,030	9,105
Column 27 (FGV) and IGP-DI
Securities subject to:
SELIC Rate	-	-	2,915	2,788
Total	553,202	534,070	11,945	11,893
Current	-	-	7,703	5,805
Long-term	553,202	534,070	4,242	6,088

The book values equal the market values, due to current contract conditions for these types of financial instruments are similar to those from which they are originated or do not present quotation or contracting parameters.

In 2000, the company issued private debentures convertible into preferred shares. This liability has been contracted at an interest rate linked to TJLP. The risk associated to this liability arises due to the possible increase of this rate.

The subsidiary Brasil Telecom S.A. has loans and financing contracted in local currency subject to interest rates linked to indexing units (TJLP, UMBNDES, CDI, etc). The inherent risk in these liabilities arises from possible variations in these rates. The Subsidiary contracted derivative hedge contracts to 18.7% (20.4% on 03/31/06) of the liabilities subject to the UMBNDES rate, using exchange rate swap contracts. However, the other market rates are continually monitored to evaluate the need to contract derivatives to protect against the risk of volatility of these rates. The Subsidiary also issued private and public debentures, non-convertible or exchangeable for shares. These liabilities were contracted at interest rates linked to the CDI, and the risk results from the possible increase of such rate.

The above mentioned liabilities on the quarter closing date are as follows:

	PARENT COMPANY

	06/30/06		03/31/06
	Book Value	Market  Value	Book Value	Market  Value
Liabilities
Loans linked to TJLP (including Debentures)	283,083	282,676	274,939	273,360
Total	283,083	282,676	274,939	273,360
Current	283,083	282,676	274,939	273,360

 

 

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	CONSOLIDATED

	06/30/06		03/31/06
	Book Value	Market Value	Book Value	Market Value
Liabilities
Loans subject to TJLP (including Debentures)	2,073,866	2,074,707	2,224,728	2,225,226
Loans subject to CDI	539,989	542,364	520,045	550,168
Loans subject to UMBNDES	229,405	229,653	246,107	246,932
Hedge agreements in UMBNDES	32,290	30,034	37,296	29,913
ubject to IGP-DI	22,051	22,051	21,375	21,375
Loans subject to IGPM	2,567	2,567	4,990	4,990
Other loans (fixed rate)	38,791	38,791	9,266	9,266
Total	2,938,959	2,940,167	3,063,807	3,087,870
Current	1,111,521	1,105,773	1,080,282	1,078,315
Long-term	1,827,438	1,834,394	1,983,525	2,009,555

Book value is equivalent to market values where the current contractual conditions for these types of financial instruments are similar to those in which they were originated or they did not present parameters for quotation or contraction.

d. Risk of Not Linking Monetary Restatement Indexes of Loans and Financing to Accounts Receivable

Loan and financing rates contracted by the subsidiary Brasil Telecom S.A are not linked to amounts of accounts receivable. Thus, a risk arises, since telephony fees adjustments do not necessarily follow increases in local interest rates, which affect the Subsidiary’s debts.

Contingency risks are assessed according to loss hypotheses, as probable, possible or remote. Contingencies considered probable risks are recorded as liabilities. Details of these risks are presented in Note 7.

The Company has investments, which are assessed through the equity method and the acquisition cost. Brasil Telecom S.A, Nova Tarrafa ParticipaÇões Ltda. and Nova Tarrafa Inc. are subsidiaries, whose investments are assessed by the equity method.

The investments assessed at cost are immaterial in relation to total assets. Their associated risks would not cause significant impacts to the Company’s results in case of material losses.

The amounts related to the investments are the following:

	6/30/06		3/31/06
	Book Value	Market  Value	Book  Value	Market  Value
Investments	3,658,941	6,920,058	3,746,517	5,933,595
Interest in Subsidiaries	3,651,650	6,912,767	3,739,302	5,926,380
Listed Companies	3,615,932	6,877,049	3,701,362	5,888,440
Companies Not Listed	35,718	35,718	37,940	37,940
Other Investments	7,291	7,291	7,215	7,215

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The investment in listed companies refers to the interest in Brasil Telecom S.A and its market value was assessed based on the market quotation used in the negotiation among minority shareholders.

g. Financial Investments Risks

The company has temporary high-liquid investments in exclusive financial investment funds (FIFs), whose assets comprise federal securities based on post-fixed, pre-fixed and foreign exchange rates, all subject to CDI, by means of the own backing of these securities or through futures contracts traded at the Futures and Commodities Exchange - BM&F, exclusive financial investment funds (FIFs), subject to exchange variation through futures contracts in dollar with the Futures and Commodities Exchange -BM&F, short-term investments, represented by securities issued by the Republic of Austria, remunerated at a percentage of CDI average variation, overnight financial investments, own portfolio of Deposit Certificates (CD) issued by financial institutions abroad. Overnight investments, in exchange fund and deposit certificates are subject to exchange rate fluctuation risks. The overnight and CDB investments that have spread in this type of certificate, as well as the Deposit Certificate (CD) investments, are subject to the issuing financial institution credit risk.

The Company maintains financial investments at the amount of R$859,553 (R$833,388 on 03/31/06). Income earned up to the quarter closing date is recorded as financial revenue and amounts to R$64,951 (R$74,173 in 2005). Amounts attributed to the consolidated financial statements are R$1,968,251 (R$1,659,267 on 03/31/06), for financial investments, and R$140,019 (R$207,210 in 2005), for earnings.

The consolidated short-term investments - temporary investments amount to R$106,539 and income earned up to the quarter closing date, recorded as financial revenue was R$2,372.

h. Risk of Early Maturity of Loans and Financing

Liabilities resulting from financing, mentioned in the Note 35, concerning agreements of BNDES, public debentures and most of them referring to financial institutions, have clauses that estimate the early maturity of liabilities or retention of amounts pegged to debt covenants, in the cases in which certain minimum amounts for certain indicators are not reached, such as ratios of indebtedness, liquidity, cash generation and others.

Considering the provisions recognized by Brasil Telecom S.A in the financial statements of the fiscal year ended on 12/31/05 and provisions informed to the market by means of the Material Fact as of 1/4/06, the Subsidiary renegotiated, in February 2006, all the loan and hedge agreements that had financial covenants related to the Earnings before Interest, Taxes, Depreciation and Amortization – EBITDA.

For the financing agreements maintained by the Subsidiary with BNDES, the Bank is allowed to request the temporary block of amounts, given as guarantee in a linked account, in case of non-compliance with the financial ratios contractually established. In view of the non-compliance with this clause, Brasil Telecom S.A is subject to the partial and temporary block of its financial investments, in the total approximate amount of R$247,442, without prejudice of the remuneration to be received by it. Up to the quarter closing date, blocks in the consolidated investment funds of Brasil Telecom S.A in the amount of R$191,439 took place, which were reclassified for the item of contractual retentions, mentioned in note 25. The release of the blocked amounts will take place when the Brasil Telecom S.A returns to complying with the financial relations set forth in the agreements or it is successful in the negotiation of the adequacy of financial covenants negotiated. BNDES granted a renouncement in relation to the possible declaration of early maturity in view of the new non-compliance with the financial ratios.

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Taking into account the new reality of telecommunications industry, the Company and BNDES are in phase of negotiations of new financial ratios for the current agreements and for the new financing agreement related to the three-year period between 2006 and 2008.

i. Regulatory Risks

On 12/22/05, new local and domestic long distance concession agreements were entered into by Brasil Telecom S.A., which take effect between January 1, 2006 and December 31, 2025. These new concession agreements, which provide for reviews on a five-year basis, in general have a higher intervention level in the management of the businesses and several provisions defending the consumer’s interest, as noticed by the regulation body. The main highlights are:

Additionally, the regulation connected to the new concession agreement provides for changes in the local calls tariff system, which change from pulse to minute in the regular hours, in amounts of the public tariffs and in the readjustment criteria, which had the individual excursion factor reduced from 9% to 5% and will be then defined by a sector index - IST, in which composition the highest weight is IPCA.

On their turn, the interconnection tariffs, as provided for, are then defined as a percentage public tariff until the implementation of cost model by service/modality, estimated for 2008, as defined in the Regulation for Separation and Accounting Allocation (Resolution 396/05).

ANATEL, on February 23, 2006, issued the Resolution 432, postponing for a twelve-month period the dates mentioned in Rule 423, as of 12/6/05, which deals with the Amendment to the Tariff System of STFC Basic Plan in the Local Modality Rendered under Public Scheme.

It is not possible to assess, on the date this quarterly information was prepared, the future impacts to be generated by such regulation change.

Legislative Bill of Change in Telecommunications Act (“LGT”)

At the beginning of March 2006, the Executive Branch sent to the Brazilian Congress the Legislative Bill 6,677 to amend LGT 9,472, as of 7/16/97, whose content is essentially to enable the adoption of distinctive criteria based on the social-economic condition of the aspirant-user, with the purpose of reducing the social disparities and facilitate the access to telecommunications services publicly provided.

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On 7/13/2006 the Resolution 438 was published and took effect, which approves the new Remuneration Regulation for the Use of Networks of Personal Mobile Service Providers – SMP, revoking the Resolution 319/02.

It is not possible to determine on the date of preparation of this quarterly information, the future impacts to be produced in view of such regulatory change.

When Brasil Telecom S.A. received the certification for achieving the universalization targets for 2003, set forth by ANATEL, it already provided the fixed telephony service (“STFC”) in the local and domestic long distance modalities (“LDN”) intra-regional in the Region II of the General Concession Plan (“PGO”). After achieving the referred targets, ANATEL, in January 2004, issued authorizations that increase the possibility of Subsidiary’s operation: Local STFC and LDN in the Regions I and III of the PGO (and a few sectors of the Region II); International Long Distance (“LDI”) in the Regions I, II and III of the PGO; mobile telephony, by means of the subsidiary 14 Brasil Telecom Celular S.A. (“BrT Celular”), in the Region II of the Personal Mobile Service (“SMP”). The already existing concession agreements were expanded, enabling LDN calls to any part of the Brazilian territory. If Telecom Italia International N.V. (“TII”) acquired an indirect controlling interest in the Company or in Brasil Telecom S.A., these and TIM Brasil ServiÇos e ParticipaÇões S.A. (“TIM”) could be considered affiliates under the new Brazilian telecommunications legislation. That would imply the ability of providing domestic (LDN) and international (LDI) fixed and mobile telephony services throughout the same regions of TIM’s, would be subject to risk of being partially closed by ANATEL. On January 16, 2004, ANATEL issued the Act 41,780 establishing an 18-month period for TII to reacquire an indirect controlling interest in the Company, as long as TII did not participate or vote on issues related to the overlapping of services offered by Brasil Telecom S.A. and TIM, such as domestic and international long-distance and mobile services. On June 30, 2004, the Administrative Council of Economic Defense – CADE, in the records of the Write of Prevention 08700.000018/2004 -68, set forth restrictions to the exercise of the control rights on the part of Telecom Italia International N.V. and its representatives at the board of directors of Solpart ParticipaÇões S.A., Brasil Telecom ParticipaÇões S.A. and Brasil Telecom S.A.

On April 28, 2005, TII and TIM and Brasil Telecom S.A and BrT Celular entered into various corporate agreements, including an instrument called “Merger Agreement” and a “Protocol” related thereto. Among other reasons alleged, this merger operation was justified by the management of that time as possible solution to overlapping of regulatory licenses and authorizations with TIM, to remove sanctions and

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On July 7, 2005, ANATEL declared, by means of Act 51,450, that the counting of 18 month-term to solve the overlapping of licenses would start on the date of effective return of TII to the control group of Brasil Telecom S.A. On July 26, 2005, ANATEL, by means of Order 576/2005, declared that the counting of term had already started on April 28, 2005. Therefore, according to ANATEL, the interested companies shall adopt the measures necessary to eliminate the overlapping of the concessions until the end of referred term in October 2006, under the penalty of applying legal sanctions, which may affect either companies or both of them.

Depending on final decision of ANATEL, these sanctions may have an adverse and material effect on businesses and operations attributed to the Company, carried out through its subsidiary Brasil Telecom S.A. and 14 Brasil Telecom Celular S.A.

Regarding the “Merger Agreement” mentioned in this note, the subsidiary Brasil Telecom S.A. and BrT Celular started on March 15, 2006 arbitration against TII and TIM, aiming at annulling it. The Subsidiary disclosed material fact about this matter on March 16, 2006.

TII and TIM sent to the Company and to BrT Celular a correspondence dated as of May 2, 2006, unilaterally terminating the referred “Merger Agreement”, reserving supposed rights. The Company published a material fact about it on May 2, 2006.

On July 26, 2006, TII, in reply to the correspondence sent by CVM, forwarded a correspondence to the Company in which it confirmed its intention of selling its shareholding in Solpart ParticipaÇões S.A., parent company of Brasil Telecom ParticipaÇões S.A. and Brasil Telecom S.A., with the assistance of J.P. Morgan Bank. The Company released a notice about this on the same date.

The benefits described in this note are offered to the employees of the Company, its subsidiary Brasil Telecom S.A. and companies under its control. These companies are better described jointly, and can be referred to as “Brasil Telecom Companies” and for the purpose of the supplementary pension plan mentioned in this note, are also denominated “Sponsor” or “Sponsors”.

The Company sponsors supplementary pension plans related to retirement for its employees and assisted members, and, in the case of the latter, medical assistance in some cases. These plans are managed by the following foundations: (i) FundaÇão 14 de Previdência Privada (“FundaÇão 14”); (ii) FundaÇão BrTPREV (“FBrTPREV”) former CRT, a company merged by the Company on 12/28/00; and (iii) FundaÇão

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The Company’s Bylaws stipulate approval of the supplementary pension plan policy, and the joint liability attributed to the defined benefit plans is linked to the acts signed with the foundations, with the agreement of the Secretaria de Previdência Complementar - SPC, where applicable to the specific plans.

The plans sponsored are valued by independent actuaries on the fiscal year closing date. In the case of the defined benefit plans described in this explanatory note, immediate recognition of the actuarial gains and losses is adopted. Liabilities are provided for plans which show deficits. This measure has been applied since the 2001 financial year, when the regulations of CVM Resolution 371/00 were adopted. In cases that show positive actuarial situations, no assets are recorded due to the legal impossibility of reimbursing these surpluses.

The characteristics of the supplementary pension plans sponsored by the Company are described below.

FUNDAÇÃO 14

As from the split of the only pension plan managed by SISTEL, the PBS, in January 2000, already predicted the evolution trend for a new stage. Such stage would result in an own and independent management model for TCSPREV pension plan, by means of a specific entity to manage and to operate them, and this fact has become more and more evident throughout the years. This trend also occurred in other main SISTEL pension plan sponsoring companies, which created their respective supplementary pension plan foundations. In this scenario, FundaÇão 14 de Previdência Privada was created in 2004, with the purpose of taking over the management and operation of the TCSPREV pension plan, which started as from March 10, 2005, whose process was backed by the segment’s specific legislation and properly approved by the Secretaria de Previdência Complementar – SPC (the Brazilian pension’s regulatory authority).

In accordance with the Transfer Agreement entered into between FundaÇão Sistel de Seguridade Social and FundaÇão 14 de Previdência Privada, SISTEL, by means of the Management Agreement, has been rendering management and operation services of TCSPREV and PAMEC-BrT plans to FundaÇão 14, after the transferring of these plans, which took place on March 10, 2005, for a period of up to 18 months, while FundaÇão 14 organizes itself to take over the management and operation services of its plans.

Plans

TCSPREV (Defined Contribution, Settled Benefit and Defined Benefit)

This defined contribution and settled benefit plan was introduced on 2/28/00. On 12/31/01, all pension plans sponsored at that time by the Company with SISTEL were merged, being exceptionally and provisionally approved by the Secretaria de Previdência Complementar – SPC, the document sent to that Agency, due to the need for adjustments to the regulations. Thus, TCSPREV is comprised of defined contribution groups with settled and defined benefits. The plans that were merged into the TCSPREV were the PBS-TCS, PBT-BrT, BrT Management Agreement, and the Unusual Contractual Relation Instrument, and the conditions established in the original plans were maintained. In March 2003, this plan was no longer offered to the sponsors’ new contracted ones. However, this plan, concerning the defined contribution, started being offered as of March 2005. TCSPREV currently provides assistance to nearly 65.2% of the staff.

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PAMEC-BrT – Health Care Plan for Supplementary Pension Beneficiaries (Defined Benefit)

Destined for health care of retirees and pensioners subject to Grupo PBT-BrT, which was merged into TCSPREV on 12/31/01.

Contributions to this plan, by group of participants, are established based on actuarial studies prepared by independent actuaries according to regulations in force in Brazil, using the capitalization system to determine the costs. Currently, contributions are made by the participants and the sponsor only for the internal groups PBS-TCS (defined benefit) and TCSPREV (defined contribution). In the TCSPREV group, the contributions are credited in individual accounts of each participant, equally by employee and sponsor, and the basic contribution percentages vary between 3% and 8% of the participant’s salary, according to participant’s age and limited to R$19,520.40 for 2006. Participants have the option to contribute voluntarily or sporadically to the plan above the basic contribution, but without parity of the Company. In the case of the PBS-TCS group, the sponsor’s contribution corresponds to 12% of the payroll of the participants; while the employees’ contribution varies according to the age, service time and salary. An entry fee may also be payable depending on the age of entering the plan. The sponsors are responsible for the cost of all administrative expenses and risk benefits. Until the quarter, contributions by the sponsor to the TCSPREV group represented 5.19% of the payroll of the plan participants. For employees, the contributions represented 5.11% .

The contributions of the party-company up to the quarter were R$7,705 (R$7,431 in 2005).

PAMEC-BrT

The contribution for this plan was fully paid in July 1998, through a single payment. New contributions are limited to future necessity to cover expenses, if that occurs.

FUNDAÇÃO SISTEL DE SEGURIDADE SOCIAL (SISTEL)

The supplementary pension plan, which remains under SISTEL’s management, comes from the period before the Telebrás’ Spin-off and assists participants who had the status of beneficiaries in January 2000 (PBS-A). SISTEL also manages the PAMA/PAMA-PCE pension plan, formed by participants assisted by the PBS-A Plan, the PBS’s plans segregated by sponsor in January 2000 and PBS-TCS’ Internal Group, merged into the TCSPREV plan in December 2001.

PBS-A (Defined Benefit)

Maintained jointly with other sponsors subject to the provision of telecommunications services and destined for participants that had the status of beneficiaries on 1/31/00.

PAMA - Health Care Plan for Retirees / PCE – Special Coverage Plan (Defined Contribution)

Maintained jointly with other sponsors subject to the provision of telecommunications services and destined for participants that had the status of beneficiaries on 1/31/00, for the beneficiaries of the PBS-TCS Group, merged into TCSPREV (plan currently managed by FundaÇão 14) on 12/31/01 and for the participants of PBS’s defined benefit plans sponsored by other companies, together with SISTEL and other foundations). According to a legal and actuarial appraisal, the Sponsor’s responsibility is exclusively limited to future contributions. From March to July 2004 and from December 2005 to April 2006, a motivated optional migration of retirees and pensioners of PAMA took place for new coverage conditions (PCE). The participants who opted for the migration began to contribute to PAMA/PCE.

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Contributions may occur in case of accumulated deficit. On 12/31/05, the actuarial appraisal date, the plan presented a surplus.

PAMA/PCE

The Sponsor makes contributions for this plan in an amount corresponding to 1.5% on payroll of active participants subject to PBS plans, segregated and sponsored by several SISTEL sponsors. In the case of Brasil Telecom, the PBS-TCS was merged into the TCSPREV plan on 12/31/01, and began to constitute an internal group of the plan. Contributions by retirees and pensioners who migrated to PAMA/PCE are also carried out.

The contributions to PAMA, in the part attributed to the Sponsor, up to the quarter were R$59 (R$55 in 2005).

It is the manager originated from the plans sponsored by former CRT, company incorporated by Brasil Telecom S.A. at the end of 2000. The main purpose of the Company sponsoring FBrTPREV is to maintain the supplementary retirement, pension and other provisions in addition to those provided by the official social security system to participants.

BrTPREV

Defined contribution plan and settled benefits, launched in October 2002, destined for the concession of pension plan benefits supplementary to those of the official pension plan and that initially assisted only employees subject to the Subsidiary Rio Grande do Sul. This pension plan remained open to new employees of the Company and its subsidiaries from March 2003 to February 2005, when its offering was suspended. Currently, BrTPREV provides assistance to nearly 33.0% of the staff.

Fundador – Brasil Telecom and Alternativo – Brasil Telecom

Defined benefits plans destined to provide supplementary social security benefits in addition to those of the official social security, closed to the entry of new participants. Currently, these plans assist approximately 0.17% of the staff.

BrTPREV

Contributions to this plan are established based on actuarial studies prepared by independent actuaries according to the regulations in force in Brazil, using the capitalization system to determine costs. Contributions are credited in individual accounts of each participant, the employee’s and Company’s contributions being equal, the basic percentage contribution varying between 3% and 8% of the participation salary, according to the participant’s age and limited to R$20,193.00 for 2006. Participants have the option to contribute voluntarily or sporadically to the plan above the basic contribution, but without parity of the sponsor. The sponsor is responsible for the administrative expenses and risk benefits. The Company’s contributions up to the quarter represented 8.67% of the payroll of the plan participants, whilst the employee contribution was 4.98% .

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The contributions of the party-company up to the quarter were R$6,269 (R$4,454 in 2005).

Fundador – Brasil Telecom and Alternativo – Brasil Telecom

The regular contribution by the sponsor up to the quarter was of 4.32% on the payroll of plan participants, who contributed at variable rates according to age, service time and salary; the average rate in the same period was 4.32% . With the Alternativo Plan - Brasil Telecom, the participants also pay an entry fee depending on the age of joining the plan.

The normal contributions of the Sponsor up to the quarter were R$7 (R$8 in 2005).

The mathematical reserve to amortize, corresponding to the current value of the Sponsor’s supplementary contribution, as a result of the actuarial deficit of the plans managed by FBrTPREV, have the settlement within the maximum established period of twenty years, as from January 2002, according to Circular 66/SPC/GAB/COA from the Supplementary Pension Department dated 1/25/02. Of the maximum period established, 15 years and 6 months still remain for complete settlement, and up to the quarter the amount of R$64,099 (R$49,722 in 2005) was amortized.

b. Stock Option Plan for Management and Employees

The Extraordinary Shareholders’ Meeting of the subsidiary Brasil Telecom S.A., held on April 28, 2000, approved the general plan to grant stock call options to its officers and employees, including those linked to its subsidiaries. The plan authorizes a maximum limit of 10% of the shares of each class of shares. Shares derived from exercising options guarantee the beneficiaries the same rights granted to other shareholders of the respective company. The administration of this plan was entrusted to a management committee appointed by the Board of Directors, which decided only to grant preferred stock options. The plan is divided into two separate programs:

Program A

This program is granted as an extension of the performance objectives, established by the Board of Directors for a five-year period. Until June 30, 2006, no option had been granted.

Program B

The exercise price is established by the management committee based on the market price of one thousand shares on the date of the grant of option and will be monetarily restated by the IGP-M between the date of signing the contracts and the payment date.

The right to exercise the option is given in the way and terms presented as follows:

	First Grant		Second Grant		Third Grant
	As From	Deadline	From	Deadline	From	Deadline
33%	1/1/04	12/31/08	12/19/05	12/31/10	12/21/05	12/31/11
33%	1/1/05	12/31/08	12/19/06	12/31/10	12/21/06	12/31/11
34%	1/1/06	12/31/08	12/19/07	12/31/10	12/21/07	12/31/11

The acquisition periods can be anticipated as a result of the occurrence of events or special conditions established in the option contract. From December, 2004 up to June 30, 2006 options were not granted.

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Information related to the general plan to grant call options is summarized below:

	06/30/2006
	Preferred Shares Options  (Thousand)	Average Exercise Price  R$
Balance on 03/31/06	328,958	13.00
Extinguished Options	29,050	13.00
Balance on 06/30/06	299,908	13.00

There has been no granting of call options exercised until the quarter closing date and the representation of the options balance in relation to the total of outstanding shares of the subsidiary Brasil Telecom S.A. is 0.05% (0.06% on 03/31/06).

Considering the hypothesis that the options will be fully exercised, the opportunity cost of the respective premiums to the Subsidiary, calculated based on the Black&Scholes method, would be R$517 (R$780 in 2005).

c. Other Benefits to Employees

Other benefits are granted to employees, such as: health/dental care, meal allowance, group life insurance, occupational accident allowance, sickness allowance, transportation allowance, and others.

7. PROVISIONS FOR CONTINGENCIES

a. Contingent Liabilities

The Company and its subsidiaries periodically assess their contingency risks, and also review their lawsuits taking into consideration the legal, economic, tax and accounting aspects. The assessment of these risks aims to classifying them according to the chances of unfavorable outcome among the alternatives of probable, possible or remote, taking into account, as applicable, the opinion of the legal advisors.

For those contingencies, which the risks are classified as probable, provisions are recognized. Contingencies classified as possible or remote are discussed in this note. In certain situations, due to legal requirements or precautionary measures, judicial deposits are made to guarantee the continuity of the cases in litigation. These lawsuits are under discussion in administrative and judicial spheres and in several levels, from lower courts to the extraordinary ones.

It is also worth mentioning that the notice presented below shows, in some cases, identical objects with different classifications of risk level, fact that is justified by specific factual and procedural status related to each lawsuit.

Labor Claims

The provisions for labor claims include an estimate by the Company’s management, supported by the opinion of its legal advisors, of the probable losses related to lawsuits filed by employees, former employees of the Company, and of service providers related to the labor matter.

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Tax Suits

Provisions for tax contingencies mainly refer to issues related to tax collections resulting from different interpretations of the legislation on the part of the legal advisors of the Company, subsidiaries and tax authorities.

Civil Suits

The provisions for civil contingencies refers to an estimate of lawsuits related to contractual adjustments arising from Federal Government economic plans, and other cases related to community telephony programs and suit for damages and consumer lawsuits.

Classification by Risk Level

Contingencies for Probable Risk

Contingencies for probable risk of loss, for which provisions are recorded under liabilities, have the following balances:

PARENT COMPANY

CONSOLIDATED

Nature	06/30/06	03/31/06	06/30/06	03/31/06
Provisions	4,692	4,541	992,784	996,796
Labor	-	-	543,883	544,663
Tax	3,986	3,851	151,729	159,044
Civil	706	690	297,172	293,089
Linked Judicial Deposits	(655)	(1,116)	(415,030)	(379,149)
Labor	-	-	(329,147)	(318,067)
Tax	-	(426)	(2,636)	(1,802)
Civil	(655)	(690)	(83,247)	(59,280)
Total Provisions, Net of Judicial Deposits	4,037	3,425	577,754	617,647
Current	12	12	135,823	201,713
Long-term	4,025	3,413	441,931	415,934

Labor

The variations which took place in the current year, until the quarter closing date, are the following:

PARENT COMPANY

CONSOLIDATED

Balance on 12/31/05	-	567,273
Variations to the Result	-	102,493
Monetary Restatement	-	32,772
Revaluation of Contingent Risks	-	58,068
Provision of Lawsuits	-	11,653
Payments	-	(125,883)
Subtotal I (Provisions)	-	543,883
Linked Judicial Deposits on 12/31/05	-	(332,540)
Variations of Judicial Deposits	-	3,393
Subtotal II (Judicial Deposits)	-	(329,147)
Balance on 06/30/06, Net of Judicial Deposits	-	214,736

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The main objects that affect the labor contingencies provisioned are the following:

(i) Risk Premium - related to the claim of additional payment for hazardous activities, based on Law 7369/85, regulated by Decree 93,412/86, due to the supposed risk of contact by the employee with the electric power system;

(ii) Salary Differences and Consequences - related, mainly, to requests for salary increases due to supposedly unfulfilled union negotiations. They are related to the repercussion of the salary increase supposedly due on the others sums calculated based on the employees’ salaries;

(iii) Career Plan - related to the request for application of the career and salaries plan for employees of Brasil Telecom S.A., the Santa Catarina Branch (formerly Telesc), with promotions for seniority and merit, supposedly not granted by the former Telesc;

(iv) Joint/Subsidiary Responsibility - related to the request to ascribe responsibility to the subsidiary Brasil Telecom S.A., made by outsourced personnel, due to supposed nonobservance of their labor rights by their direct employers;

(v) Overtime – refers to the pleading for salary and additional payment due to labor supposedly performed beyond the contracted work time;

(vi) Reintegration – pleading due to supposed inobservance of employee’s special condition, guaranteeing the impossibility of terminating labor contract without cause;

(vii) Request for the application of regulation, which established the payment of the percentage incurring on the Company’s income, attributed to the Santa Catarina Branch; and

(viii) Supplement of FGTS fine arising from understated inflation – it refers to requests to supplement indemnification of FGTS fine, due to the recomposition of accounts of this fund by understated inflation.

Brasil Telecom S.A. filed a lawsuit against Caixa Econômica Federal, with a view to ensuring the reimbursement of all amounts paid for this purpose.

Tax

The variations which took place in the current year, until the quarter closing date, are as follows:

PARENT COMPANY

CONSOLIDATED

Balance on 12/31/05	3,780	164,848
Variations to the Result	206	53,827
Monetary Restatement	267	8,368
Revaluation of Contingent Risks	(61)	42,691
Provision of Lawsuits	-	2,768
Payments	-	(66,946)
Subtotal I (Provisions)	3,986	151,729
Linked Judicial Deposits on 12/31/05	-	(1,281)
Variations of Judicial Deposits	-	(1,355)
Subtotal II (Judicial Deposits)	-	(2,636)
Balance on 06/30/06, Net of Judicial Deposits	3,986	149,093

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The other main provisioned lawsuits refer to the following controversies:

(i) Social Security – related to the non-collection of incident social security in the payment made to cooperative companies, as well as the divergence of understanding about the allowance that comprise the contribution’s salary;

(ii) Federal Taxes – several assessments challenging supposed irregularities committed by the Company, such as undue tax losses carryforward taken place prior to the merger of the other operators of the Region II of the PGO; and

(iii) State Taxes – ICMS credits, whose validity is questioned by the State Tax Authorities.

Civil

The variations which took place in the current year, until the quarter closing date, are as follows:

PARENT COMPANY

CONSOLIDATED

Balance on 12/31/05	675	276,693
Variations to the Result	31	59,194
Monetary Restatement	29	8,818
Revaluation of Contingent Risks	-	16,666
Provision of Lawsuits	2	33,710
Payments	-	(38,715)
Subtotal I (Provisions)	706	297,172
Linked Judicial Deposits on 12/31/05	(1,234)	(22,043)
Variations of Judicial Deposits	579	(61,204)
Subtotal II (Judicial Deposits)	(655)	(83,247)
Balance on 06/30/06, Net of Judicial Deposits	51	213,925

The lawsuits provided for are the following:

(i)	Review of contractual conditions - lawsuit where a company which supplies equipment filed legal action against the subsidiary Brasil Telecom S.A., asking for a review of contractual conditions due to economic stabilization plans;
(ii)	Capital Participation Agreements - TJ/RS (court of appeals) has been firmly positioned as to the incorrect procedure previously adopted by the former CRT, currently Rio Grande do Sul Branch, owned by the subsidiary Brasil Telecom S.A., in lawsuits related to the application of a rule enacted by the Ministry of the Communications. Such lawsuits are positioned in various phases: lower courts, Court of Appeals and Superior Court of Justice;
(iii)	Customer service centers – public civil actions, comprising the closing of customer services centers;
(iv)	Free Mandatory Telephone Directories – LTOG’s - lawsuits questioning the non-delivery of printed residential telephone directories; and
(v)	Other lawsuits - related to various lawsuits in progress, comprising civil liability suits, indemnifications for contractual termination and consumer matters under procedural progress in the Special Courts, Courts of Law and Federal Courts throughout the country.

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Contingencies for Possible Risk

The composition of contingencies with risk level considered to be possible, and therefore not recorded in the accounts, is the following:

PARENT COMPANY

CONSOLIDATED

Nature	06/30/06	03/31/06	06/30/06	03/31/06
Labor	-	-	455,293	437,706
Tax	32,448	31,274	2,267,714	2,329,727
Civil	-	-	538,118	527,206
Total	32,448	31,274	3,261,125	3,294,639

Labor

The variations which took place in the current year, until the quarter closing date, are as follows:

PARENT COMPANY

CONSOLIDATED

Amount estimated on 12/31/05	-	419,169
Monetary Restatement	-	29,510
Revaluation of Contingent Risks	-	(35,591)
New Lawsuits	-	42,205
Amount estimated on 06/30/06	-	455,293

The main objects that comprise the possible losses of a labor nature are related to joint/subsidiary responsibility, supplement of FGTS indemnifying fine resulting from understated inflation, risk premium, promotions and the request for remuneration consideration for work hours supposedly exceeding the regular workload of hours agreed also contributed to the amount mentioned.

Tax

The variations which took place in the current year, until the quarter closing date, are as follows:

PARENT COMPANY

CONSOLIDATED

Amount estimated on 12/31/05	30,065	2,205,388
Monetary Restatement	2,365	156,406
Revaluation of Contingent Risks	-	(280,033)
New Lawsuits	18	185,953
Amount estimated on 06/30/06	32,448	2,267,714

The main existing lawsuits are represented by the following objects: 

(i)	INSS assessments, with defenses in administrative proceedings or in court, examining the value composition in the contribution salary supposedly owed by the company;
(ii)	Administrative defenses in lawsuits filed by the Internal Revenue Service, arising from differences of amounts between DCTF and DIPJ;
(iii)	Public class suits questioning the alleged transfer of PIS and COFINS to the end consumers;
(iv)	ICMS - On international calls;
(v)	ICMS - Differential of rate in interstate acquisitions;

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(vi)	ICMS – official notifications with the supposed levy in the activities described in the Agreement 69/98;
(vii)	Withholding Income Tax – on operations related to the protection for debt coverage;
(viii)	The Fund for Universalization of Telecommunications Service – FUST, by virtue of illegal retroactivity, according to the Company’s understanding of the change in the interpretation of its calculation basis by ANATEL; and
(ix)	ISS – supposed levy on auxiliary services to communication.

Civil

The variations which took place in the current year, until the quarter closing date, are as follows:

PARENT COMPANY

CONSOLIDATED

Amount estimated on 12/31/05	-	1,779,336
Monetary Restatement	-	18,016
Revaluation of Contingent Risks	-	(1,410,721)
New Lawsuits	-	151,487
Amount estimated on 06/30/06	-	538,118

The main lawsuits are presented as follows:

(i) Repayments resulting from Community Telephony Program lawsuits (PCT) - the plaintiffs intend to, together with Brasil Telecom S.A., repay in lawsuits related to the contracts resulting from the Community Telephony Program. Such proceedings are positioned in various phases: lower courts, Court of Appeals and Superior Court of Justice.

During the current year these proceedings were strongly reviewed as to the calculation of the amounts involved and to the risk exposure, resulting in the reduction of their amount;

(ii) Lawsuit for damages and consumer; and

(iii) Contractual - Lawsuits related to the claim for a percentage resulting from the Real Plan, to be applied to a contract for rendering of services, review of conversion of installments in URV and later in reais, related to the supply of equipment and rendering of services.

Contingencies for Remote Risk

In addition to the claims mentioned, there are still other contingencies considered of a remote risk, whose amounts are shown as follows:

PARENT COMPANY

CONSOLIDATED

Nature	06/30/06	03/31/06	06/30/06	03/31/06
Labor	-	-	143,660	182,817
Tax	24,409	23,509	530,381	477,487
Civil	37,956	37,204	331,255	323,231
Total	62,365	60,713	1,005,296	983,535

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Letters of Guarantee

The Company maintains letters of guarantee agreements executed with financial institutions, in the amount of R$13,740 (R$13,740 on 03/31/06), characterized as supplementary guarantee for judicial proceedings in temporary execution. These guarantees are contracted for an undetermined duration and the respective charge varies from 0.65% to 1.20% p.a., representing an average rate of 0.87% p.a. For consolidated effects, the letters of guarantee with such purpose represent R$638,476 (R$569,489 on 03/31/06), and the charges vary from 0.45% to 2.00% p.a., resulting in an average rate equivalent to 0.81% p.a.

Judicial deposits related to contingencies of probable and remote risk of loss are described in Note 24.

b. Contingent Assets

As follows, the tax claims promoted by the Company and Brasil Telecom S.A. are shown, through which the recovery of tax paid is claimed, calculated differently from interpretation sustained by its legal advisers.

PIS/COFINS: judicial dispute about the application of Law 9,718/98, which increased the calculation basis for PIS and COFINS. The period comprised by Law was from February 1999 to November 2002 for PIS and from February 1999 to January 2004 for COFINS. In November 2005, STF (Federal Supreme Court) concluded the judgment of certain lawsuits dealing with such issue and considered unconstitutional the increase of calculation basis introduced by said Law.

Some of the lawsuits brought by the Subsidiary were given final and unappealable decision regarding the extension of the calculation basis for COFINS, on 03/02/06, 03/10/06 and 04/07/06, respectively. On 06/30/06, the Subsidiary accounted for credits in the amount of R$97,550.

The judgments of other lawsuits are awaited, and the assessment of success in the future filing of appeals is deemed as probable, in which the recoverable estimated amount, not recognized in accounts is R$133,359 (R$130,449 on 03/31/06) for the Company and R$162,024 (R$255,661 on 03/31/06, including the portion of the credits, which already received final and unappealable decisions, mentioned in the previous paragraph) for the Consolidated.

8. SHAREHOLDERS’ EQUITY

a. Capital Stock

The Company is authorized to increase its capital stock, according to a resolution of the Board of Directors, in a total limit of seven hundred billion (700,000,000,000) common or preferred shares, observing the legal limit of two thirds (2/3) for the issue of preferred shares without voting rights.

By means of a resolution of the General Shareholders' Meeting or the Board of Directors, the Company’s capital may be increased by the capitalization of retained earnings or reserves prior to this allocated by the General Shareholders’ Meeting. Under these conditions, the capitalization may be effected without modifying the number of shares.

The capital stock is represented by common and preferred stocks, with no par value, and it is not mandatory to maintain the proportion between the shares in the case of capital increases.

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By means of a resolution of the General Shareholders’ Meeting or the Board of Directors, the preemptive right for the issue of shares, subscription bonuses or debentures convertible into shares may be excluded, in the cases stipulated in article 172 of Corporate Law.

The preferred shares do not have voting rights, except in the cases specified in sole paragraphs of article 11 and 14 of the Bylaws, but are assured priority in receiving the minimum non-cumulative dividend of 6% per annum, calculated on the amount resulting from dividing the capital stock by the total number of the Company’s shares or 3% per annum, calculated on the amount resulting from dividing the net book shareholders’ equity by the total number of the Company’s shares, whichever is greater.

Subscribed and paid-up capital as of the date of the end of the quarter is R$2,596,272 (R$2,596,272 as of 03/31/06) represented by shares without par value as follows:

In thousands of shares

Type of Shares	Total Shares		Treasury Stock		Outstanding Shares
	06/30/06	03/31/06	06/30/06	03/31/06	06/30/06	03/31/06
Common	134,031,688	134,031,688	1,480,800	1,480,800	132,550,888	132,550,888
Preferred	229,937,526	229,937,526	-	-	229,937,526	229,937,526
Total	363,969,214	363,969,214	1,480,800	1,480,800	362,488,414	362,488,414

	06/30/06	03/31/06
Book Value per thousand Outstanding Shares (R$)	14.35	14.57

In the calculation of the book value per thousand shares, the common shares held in treasury are deducted.

b. Treasury Stock

Treasury stocks are originated from Stock Repurchase Programs, carried out during the years of 2002 up to 2004. On 09/13/04, the material fact of the current proposal approved by the Company’s Board of Directors was published, for the repurchase of preferred and common stocks issued by the Company, for holding in treasury or cancellation, or subsequent sale.

The quantity of treasury stocks was the following: 

	06/30/06		03/31/06
	Common shares (thousands)	Amount	Common shares (thousands)	Amount
Opening balance in the quarter	1,480,800	20,846	1,480,800	20,846
Closing balance in the quarter	1,480,800	20,846	1,480,800	20,846

Historical cost in the acquisition of treasury stock (R$ per thousand shares)	06/30/06	03/31/06
Weighted Average	14.08	14.08
Minimum	12.40	12.40
Maximum	17.00	17.00

The unit cost in the acquisition considers the totality of stock repurchase programs.

Until the quarter closing date, there were no disposals of common shares purchased.

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Market Value of Treasury Stocks

The market value of treasury stocks on the quarter closing date was the following:

	06/30/06	03/31/06
Number of common shares held in treasury (thousands of shares)	1,480,800	1,480,800
Quotation per thousand shares on BOVESPA (R$)	28,55	23,20
Market value	42,277	34,355

The Company maintains the balance of treasury stocks in a separate account. For presentation purposes, the balance of the retained earnings account, which originated the repurchase of these shares, is presented as follows:

	06/30/06	03/31/06
Balance recorded in the Accounting Department	2,034,327	2,115,501
Treasury Stocks	(20,846)	(20,846)
Retained Earnings Balance, Net of Treasury Stocks	2,013,481	2,094,655

c. Capital Reserves

Capital reserves are recognized in accordance with the following practices:

Reserve for Premium on Subscription of Shares: results from the difference between the amount paid on subscription and the portion allocated to capital.

Other Capital Reserves: formed by the contra entry of funds invested in income tax incentives.

d. Profit Reserves

The profit reserves are recognized in accordance with the following practices:

Legal Reserve: allocation of five percent of the annual net income up to twenty percent of paid-up capital or thirty percent of capital plus capital reserves. The legal reserve is only used to increase capital stock or to absorb losses.

Unrealized Profits Reserve: recorded in the years in which the compulsory dividend amount, calculated pursuant to the Bylaws or Article 202 of Law 6,404/76, exceeded the realized portion of the net income for the year. The reserve may absorb losses in subsequent periods, or, when realized, it integrates the calculation of the adjusted net income for the purposes of dividends allocation. Pursuant to the updating promoted by Law 10,303/01, the profits recorded in the unrealized profits reserve account as from the fiscal year of 2002 shall be considered by the value of the postponed dividend. However, the unrealized profit reserve established during the effectiveness of the previous rule, when realized, it will continue to integrate the dividends calculation basis, which is the case of the unrealized profits reserve existing in the Company.

Retained Earnings: composed of remaining profits balances of net income for the year, adjusted according to the terms of article 202 of Law 6404/76, or by the recording of adjustments from prior years, if applicable.

38

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e. Dividends and Interest on Shareholders’ Equity

Dividends are calculated at the end of the fiscal year. Mandatory minimum dividends are calculated in accordance with article 202 of Law 6,404/76, and the preferred or priority dividends are calculated in accordance with the company’s Bylaws.

As a result of a resolution by the Board of Directors, the Company may pay or credit, as dividends, interest on shareholders’ equity (“JSCP”), under the terms of article 9, paragraph 7, of Law 9,249, as of 12/26/95. The interest paid or credited will be offset with the minimum mandatory annual dividend amount, in accordance with article 44 of the Company’s Bylaws.

The Interest on Shareholders’ Equity credited to the shareholders and which will be attributed to dividends, net of income tax, as part of the proposal for the allocation of results of the fiscal year to close at 2006-end to be presented for approval of the general shareholders’ meeting, was the following:

	06/30/06	06/30/05
Interest on Shareholders’ Equity (JSCP) - Credited	185,300	216,600
Common Shares	67,759	79,204
Preferred Shares	117,541	137,396
Withholding Income Tax (IRRF)	(27,795)	(32,490)
Net JSCP	157,505	184,110

9. OPERATING REVENUE FROM TELECOMMUNICATIONS

CONSOLIDATED

	06/30/06	06/30/05
Fixed Telephony Service
Local Service	3,471,331	3,527,171
Activation fees	11,648	14,867
Subscription	1,764,423	1,706,656
Measured service charges	691,582	708,948
Mobile Fixed - VC1	979,713	1,058,049
Rent	737	743
Other	23,228	37,908
Long Distance Service	1,382,325	1,533,732
Intra-Sectorial Fixed	442,429	500,990
Intra-Regional Fixed (Inter-Sectorial)	155,497	200,525
Fixed Inter Regional	133,536	148,396
VC2	348,241	384,165
Fixed Origin	138,623	148,830
Mobile Origin	209,618	235,335
VC3	279,588	267,929
Fixed Origin	112,820	106,809
Mobile Origin	166,768	161,120
International	23,034	31,727

39

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....continued 

CONSOLIDATED

	06/30/06	06/30/05
Interconnection	208,226	339,963
Fixed x Fixed	138,393	210,125
Mobile x Fixed	69,833	129,838
Lease of Means	163,015	143,626
Public Telephony Service	266,647	210,992
Supplementary Services, Intelligent Network and Advanced Telephony	172,925	166,757
Other	20,681	19,040
Total of Fixed Telephony Service	5,685,150	5,941,281
Mobile Telephony Service
Telephony	363,898	183,580
Subscription	122,855	78,871
Utilization	171,459	87,258
Roaming	5,865	602
Interconnection	53,083	15,302
Other Services	10,636	1,547
Sale of Goods	124,103	114,127
Cell Phones	119,883	106,457
Electronic Cards - Brasil Chip, Accessories and Other Goods	4,220	7,670
Total of Mobile Telephony Service	488,001	297,707
Data Transmission Services and Other
Data Transmission	929,728	686,208
Other Services of Main Activities	171,310	185,980
Total of Data Transmission Services and Other	1,101,038	872,188
Gross Operating Revenue	7,274,189	7,111,176
Deductions from Gross Revenue	(2,346,560)	(2,140,672)
Taxes on Gross Revenue	(2,092,686)	(2,018,620)
Other Deductions on Gross Revenue	(253,874)	(122,052)
Net Operating Revenue	4,927,629	4,970,504

40

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10. COST OF SERVICES RENDERED AND GOODS SOLD

The costs incurred in the rendering of services and sales of goods are as follows:

CONSOLIDATED

	06/30/06	06/30/05
Depreciation and Amortization	(1,136,365)	(1,140,859)
Interconnection	(979,093)	(1,176,812)
Third-Party Services	(451,595)	(390,540)
Rent, Leasing and Insurance	(183,647)	(202,564)
Goods Sold	(128,600)	(139,017)
Personnel	(92,565)	(68,105)
Employees Profit Sharing	(11,381)	(8,043)
Means of Connection	(48,520)	(29,783)
Material	(36,225)	(35,094)
Burden of the Concession	(33,657)	-
FISTEL	(24,110)	(36,584)
Other	(2,987)	(3,737)
Total	(3,128,745)	(3,231,138)

11. COMMERCIALIZATION OF SERVICES

The expenses related to commercialization activities are detailed according to the following nature:

CONSOLIDATED

	06/30/06	06/30/05
Third-Party Services	(366,889)	(406,971)
Losses on Accounts Receivable	(201,898)	(163,551)
Allowance/Reversal for Doubtful Accounts	4,792	(24,560)
Personnel	(122,378)	(113,460)
Employees and Management Profit Sharing	(11,268)	(9,281)
Material	(14,173)	(16,076)
Depreciation and Amortization	(8,220)	(8,100)
Rent, Leasing and Insurance	(4,768)	(3,435)
Other	(15,096)	(313)
Total	(739,898)	(745,747)

12. GENERAL AND ADMINISTRATIVE EXPENSES

The expenses related to administrative activities, which include information technology expenses, are detailed according to the following nature:

PARENT COMPANY

CONSOLIDATED

	06/30/06	06/30/05	06/30/06	06/30/05
Third-Party Services	(5,423)	(6,289)	(363,229)	(354,334)
Depreciation and Amortization	(160)	(200)	(153,42)	(138,160)
Personnel	(2,286)	(2,660)	(98,561)	(96,696)
Employees and Management Profit Sharing	-	(1,464)	(16,783)	(16,700)
Rent, Leasing and Insurance	(1,152)	(2,620)	(19,752)	(22,149)
Material	-	(40)	(10,098)	(7,612)
Other	(8)	(10)	(1,372)	(982)
Total	(9,029)	(13,283)	(663,218)	(636,633)

41

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13. OTHER OPERATING REVENUES (EXPENSES)

The remaining revenue and expenses attributed to operational activities are shown as follows:

PARENT COMPANY

CONSOLIDATED

	06/30/06	06/30/05	06/30/06	06/30/05
Recovery of Taxes and Recovered Expenses	-	787	129,835	51,121
Operating Infra-Structure Rent and Other	-	-	44,471	24,520
Technical and Administrative Services	1,817	1,266	29,081	25,650
Fines	(5)	(6)	18,513	44,353
Provision/Reversal of Other Provisions	-	-	16,975	737
Subsidies and Donations Received	-	-	5,699	-
Dividends of Investments Evaluated at Acquisition Cost	3	-	264	-
Contingencies – Provision(1)	(237)	(679)	(215,514)	(80,630)
Goodwill Amortization on the Acquisition of Investments	-	(939)	(41,311)	(50,238)
Taxes (Other than Gross Revenue, Corporate Income Tax and Social
Contribution)	(298)	(181)	(40,824)	(34,228)
Pension Funds – Provision and Administrative Costs	-	-	(19,721)	(7,796)
Court Fees	-	-	(15,044)	(3,431)
Donations and Sponsorships	-	-	(2,211)	(4,346)
Losses in the Maintenance/Resale Inventories Write-Off	-	-	(536)	(246)
Indemnifications – Telephony and Other	-	-	(68)	(6,136)
Other Revenues (Expenses)	(136)	(202)	(5,838)	(1,775)
Total	1,144	46	(96,229)	(42,445)
(1) Provisions for contingencies are described in Note 7.

14. FINANCIAL EXPENSES, NET

PARENT COMPANY

CONSOLIDATED

	06/30/06	06/30/05	06/30/06	06/30/05
Financial Revenues	131,080	180,975	309,801	531,829
Domestic Currency	129,517	180,387	308,529	320,103
On Rights in Foreign Currency	1,563	588	1,272	211,726
Financial Expenses	(231,218)	(286,464)	(684,266)	(942,383)
Domestic Currency	(44,726)	(48,631)	(332,520)	(344,387)
On Liabilities in Foreign Currency	(1,192)	(21,233)	(86,274)	(302,640)
Interest on Shareholders’ Equity	(185,300)	(216,600)	(265,472)	(295,356)
Total	(100,138)	(105,489)	(374,465)	(410,554)

15. NON-OPERATING REVENUES (EXPENSES)

PARENT COMPANY

CONSOLIDATED

	06/30/06	06/30/05	06/30/06	06/30/05
Provision for Tax Incentives Losses	-	-	(14,473)	-
Amortization of Goodwill on Merger	-	-	(3,906)	(65,911)
Result in the Write-off of Property, Plant and Equipment and Deferred
Assets	15	22	(3,040)	(11,310)
Provision/Reversal for Investment Losses	221	225	3,731	(1,061)
Provision/Reversal for Realization Amount and Losses of Property,
Plant and Equipment	-	-	901	6,169
Investment Gains (Losses)	12	1,729	12	1,729
Other Non-operating Expenses	-	-	(102)	(205)
Total	248	1,976	(16,877)	(70,589)

42

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16. INCOME TAX AND SOCIAL CONTRIBUTION ON INCOME

Income tax and social contribution on income are recorded on an accrual basis, and the tax effects on temporary differences are deferred. The provision for income tax and social contribution on earnings recognized in the income statement are as follows:

PARENT COMPANY

CONSOLIDATED

Income Before Taxes and after Employees and Management Profit Sharing	06/30/06	06/30/05	06/30/06	06/30/05
	(29,195)	(84,365)	(91,803)	(166,602)
Income of Companies Not Subject to Income Tax and Social  Contribution Calculation	-	-	32,370	32,242
Total of Taxable Income	(29,195)	(84,365)	(59,433)	(134,360)
Corporate Income Tax – IRPJ
IRPJ on Taxable Income (10%+15%=25%)	7,299	21,091	14,858	33,590
Permanent Additions	(21,563)	(33,839)	(20,997)	(46,132)
Amortization of Goodwill	-	(235)	(4,474)	(22,884)
Equity in Subsidiaries	(21,525)	(33,390)	-	-
Exchange Variation on Investments	(38)	(76)	(5,320)	(14,012)
Other Additions	-	(138)	(11,203)	(9,236)
Permanent Exclusions	60	1,717	8,039	14,786
Equity in Subsidiaries	1	1,659	-	-
Exchange Variation on Investments	-	-	-	3,146
Dividends of Investments Evaluated at Acquisition Cost /     Dividends Barred by Law	4	-	69	382
Federal Tax Recoverable	-	-	1,387	3,956
Other Exclusions	55	58	6,583	7,302
Tax Losses Carryforward	-	-	568	1,227
Other	16	11	1,518	377
IRPJ Expenses on Statement of Income	(14,188)	(11,020)	3,986	3,848
Social Contribution on Net Income – CSLL
CSLL on Taxed Income (9%)	2,628	7,593	5,349	12,092
Permanent Additions	(7,763)	(12,134)	(7,072)	(15,935)
Amortization of Goodwill	(7,749)	(85)	(1,610)	(8,238)
Equity in Subsidiaries	-	(12,020)	-	-
Exchange Variation on Investments	(14)	(27)	(1,915)	(5,044)
Other Additions	-	(2)	(3,547)	(2,653)
Permanent Exclusions	21	618	2,679	5,255
Equity in Subsidiaries	-	442	-	-
Exchange Variation on Investments	-	-	-	1,133
Dividends of Investments Evaluated at Acquisition Cost /      Dividends Barred by Law	1	-	25	138
Federal Tax Recoverable	-	-	499	1,424
Other Exclusions	20	176	2,155	2,560
Compensation of Negative Calculation Basis	-	-	201	442
Other	-	-	53	-
Effect of CSLL on Statement of Income	(5,114)	(3,923)	1,210	1,854
Effect of IRPJ and CSLL on Statement of Income	(19,302)	(14,943)	5,196	5,702

43

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17. CASH AND CASH EQUIVALENTS

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Cash	-	-	4,555	4,645
Bank Accounts	140	172	61,874	15,966
High-Liquid Investments	859,553	833,388	1,968,251	1,659,267
Total	859,693	833,560	2,034,680	1,679,878

High-liquid investments represent amounts invested in exclusive funds managed by financial institutions, guaranteed in federal bonds with average profitability equivalent to interbank deposit rates DI CETIP (CDI), in exclusive funds managed by financial Institutions and guaranteed in futures contracts of dollar traded at the Futures and Commodities Exchange (BM&F), overnight financial investments abroad that earn exchange rate variation plus interest of 5.0% p.a., deposit certificates issued by foreign financial institutions and bank deposit certificates issued by first-rate financial institutions with average profitability equivalent to CDI.

The subsidiary Brasil Telecom S.A. and the companies under its control are subject to the partial and temporary block of its financial investments, at the approximate total amount of R$247,442 and there is no loss of the remuneration to be received by it. Such retention is due to the fact that the Subsidiary did not reach certain minimum amounts for certain financial ratios, established in agreements entered into with BNDES. Further information about the block and its duration period can be checked in Note 5 h. Up to the quarter closing date, Brasil Telecom S.A. and Freelance were notified about the retentions occurred in their investment funds portfolios, at the amount of R$91,439 and R$100,000, respectively, representing R$191,439 for the Consolidated). The retained amounts were reclassified from high-liquid investments to the item contractual retentions, in current assets.

The breakdown of high-liquid investment portfolio, on the quarter closing date, is presented below:

PARENT COMPANY

	06/30/06
Financial Institution	Investments Nature			Rectifier		Total
	LTN (with swap coverage)	LFT	Over Selic	Provision for Income Tax	Liabilities
Exclusive Funds
ABN Amro	95,969	33,830	528	(1,142)	(16)	129,169
Banco do Brasil	63,511	129,496	4,918	(668)	(82)	197,175
Bradesco	47,189	27,622	17,484	(219)	(6)	92,070
Western AM (Legg Mason)	211,794	11,254	36	(949)	(199)	221,936
Itaú	86,627	21,938	1	(977)	(121)	107,468
Safra	58,773	52,925	290	-	(253)	111,735
Total Exclusive Funds	563,863	277,065	23,257	(3,955)	(677)	859,553
Total High-Liquid Investments	563,863	277,065	23,257	(3,955)	(677)	859,553

44

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CONSOLIDATED

	06/30/06
Financial Institution	Investments Nature
	LTN (with swap coverage)	LFT	Over Selic	Overnight	Open Investment Funds (Fixed Income)	NBC-E
Exclusive Funds
ABN Amro	133,335	47,002	734	-	-	-
Banco do Brasil	141,669	332,915	35,582	-	-	-
Bradesco	72,684	42,546	26,931	-	101	-
CEF	71,210	37,757	16,032	-	-	-
Western AM (Legg Mason)	211,794	11,254	36	-	-	-
Itaú	143,524	36,347	2	-	-	-
Safra	97,701	57,117	2,148	-	-	-
Santander	100,967	31,332	1,406	-	-	35,209
Unibanco	81,281	62,601	26,009	-	-	-
Votorantim	125,056	41,286	10,292	-	-	-
Total Exclusive Funds	1,179,221	700,157	119,172	-	101	35,209
Other Investments
BankBoston	-	-	-	-	8,111	-
Safra – New York	-	-	-	102,932	-	-
Smith Barney	-	-	-	-	9,185	-
Other Institutions	-	-	-	-	9,714	-
Total of Other Investments	-	-	-	102,932	27,010	-
Total High-Liquid Investments	1,179,221	700,157	119,172	102,932	27,111	35,209

CONSOLIDATED

	06/30/06
Financial Institution	Investments Nature		Rectifier		Total
	NTN-B	Bank Deposits Certificates	Provision for  Income Tax	Liabilities
Exclusive Funds
ABN Amro	-	-	(1,401)	(22)	179,648
Banco do Brasil	-	-	(1,706)	(435)	508,025
Bradesco	-	-	(476)	(10)	141,776
CEF	-	-	(641)	(115)	124,243
Western AM (Legg Mason)	-	-	(949)	(199)	221,936
Itaú	-	-	(1,311)	(201)	178,361
Safra	-	-	(210)	(253)	156,503
Santander	11,442	-	(864)	(83)	179,409
Unibanco	-	-	(627)	(87)	169,177
Votorantim	-	-	(1,155)	(12)	175,467
Total Exclusive Funds	11,442	-	(9,340)	(1,417)	2,034,545
Other Investments
BankBoston	-	-	-	-	8,111
Safra – New York	-	438	-	-	103,370
Smith Barney	-	26	-	-	9,211
Other Institutions	-	9,526	-	-	19,240
Total of Other Investments	-	9,990	-	-	139,932
Total High-Liquid Investments	11,442	9,990	(9,340)	(1,417)	2,174,477

Partial block related to Contractual Retentions	(191,439)
Partial block by judicial determination, considered in the Judicial Deposits	(14,787)
Total High-Liquid Financial Investments, Net	1,968,251

45

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Exclusive funds, which are regularly audited and for which there is no unqualified opinion, are subject to liabilities restricted to the payment of services rendered by the asset management, attributed to investment operations, such as custody, audit and other expenses rates, not existing relevant financial liabilities, as well as Company’s assets to guarantee those liabilities.

Statement of Cash Flows 

PARENT COMPANY

CONSOLIDATED

	06/30/06	06/30/05(1)	06/30/06	06/30/05(1)
Operating Activities
Net Income for the Period	136,803	117,292	138,544	114,133
Minority Interest	-	-	40,321	20,323
Income Items not Affecting Cash	(84,800)	(2,511)	2,082,186	2,040,145
Depreciation and Amortization	160	1,139	1,343,226	1,403,269
Losses on Accounts Receivables from Services	-	-	201,898	163,551
Allowance for Doubtful Accounts	-	-	(4,792)	24,560
Provision for Contingencies	237	679	215,514	80,630
Provision for Pension Funds	-	-	19,721	7,796
Deferred Taxes	(6,368)	30,032	308,681	352,032
Income in Permanent Assets Write-off	(236)	(247)	(2,049)	10,036
Equity in Subsidiaries	(78,580)	(32,385)	-	-
Other Expenses (Revenues)	(13)	(1,729)	(13)	(1,729)
Equity Changes	(11,851)	93,799	(1,125,013)	(891,034)
Trade Accounts Receivable	-	-	(150,087)	(326,761)
Inventories	-	-	17,664	100,568
Judicial Deposits	(31,102)	(15,269)	(85,517)	(112,945)
Contractual Retentions	-	-	(191,439)	-
Payroll, Social Charges and Benefits	(53)	90	12,517	20,968
Accounts Payable and Accrued Expenses	(25,022)	(44)	(46,305)	(35,096)
Taxes	26,023	(31,911)	(423,339)	(530,444)
Financial Charges	7,268	21,566	36,093	64,122
Provisions for Contingencies	579	(2)	(290,710)	(83,192)
Provisions for Pension Funds	-	-	(64,099)	(49,722)
Other Assets and Liabilities Accounts	10,456	119,369	60,209	61,468
Cash Flow from Operating Activities	40,152	208,580	1,136,038	1,283,567

Financing Activities
Dividends/Interest on Shareholders’ Equity Paid in the  Period	(295,402)	(689,150)	(398,432)	(871,588)
Loans and Financing	-	(120)	(322,302)	(264,413)
Loans Obtained	-	-	31,761	11,719
Loans Settled	-	(120)	(354,063)	(276,132)
Increases of Shareholders’ Equity	-	-	5	4,905
Acquisition of Own Shares	-	-	29	(62,272)
Cash Flow from Financing Activities	(295,402)	(689,270)	(720,700)	(1,193,368)

Investment Activities
Financial Investments	11,081	(1,007)	(106,488)	1,984
Funds Obtained in the Sale of Permanent Assets	15	34	9,698	1,340
Investments in Permanent Assets	(551)	(1,762)	(897,641)	(948,537)
Dividends/Interest on Shareholders’ Capital Received
From Subsidiaries	220,708	250,236	-	-
Cash Flow from Investment Activities	231,253	247,501	(994,431)	(945,213)

Cash Flow for the Period

(23,997)

(233,189)

(579,093)

(855,014)

Cash and Cash Equivalents
Closing Balance	859,693	595,594	2,034,680	2,371,579
Opening Balance (on December 31)	883,690	828,783	2,613,773	3,226,593
Variation of Cash and Cash Equivalents	(23,997)	(233,189)	(579,093)	(855,014)

(1) Reclassification in some lines of cash flows of 2005 took place, aiming at the adequacy to the way presented in the first quarter of the current year.

46

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18. TEMPORARY INVESTMENTS

On April 28, 2006, the subsidiary Brasil Telecom S.A. acquired securities issued by the Republic of Austria, with remuneration linked to CDI average variation percentage. The maturity of these securities will occur on 12/21/06 and the restated amount for the quarter closing date was R$106,539.

19. TRADE ACCOUNTS RECEIVABLE 

The amounts related to accounts receivable are as follows: 

CONSOLIDATED

	06/30/06	03/31/06
Billed Services	1,489,248	1,549,838
Services to be Billed	895,115	887,003
Sales of Goods	78,192	83,936
Subtotal	2,462,555	2,520,777
Allowance for Doubtful Accounts	(356,761)	(378,081)
Services Rendered	(350,375)	(371,393)
Sales of Goods	(6,386)	(6,688)
Total	2,105,794	2,142,696
Due	1,566,045	1,578,136
Past due:
01 to 30 Days	391,562	415,356
31 to 60 Days	129,318	157,036
61 to 90 Days	82,868	99,096
91 to 120 Days	71,215	71,105
More than 120 Days	221,547	200,048

47

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20. INVENTORIES

The maintenance and resale inventories, to which provisions are recorded for losses or adjustments to the forecast in which they must be realized, are composed as follows:

CONSOLIDATED

	06/30/06	03/31/06
Inventory for Resale (Cell Phones and Accessories)	97,624	111,379
Maintenance Inventory	12,406	11,688
Provision for the Adjustment to the Realization Value	(37,896)	(36,055)
Provision for Potential Losses	(6,763)	(6,756)
Total	65,371	80,256

21. LOANS AND FINANCING - ASSETS

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Loans
Loans	97,400	100,912	106,430	110,017
Loans with the Subsidiary	51,169	51,137	-	-
Financing
Debentures from the Subsidiary	553,202	534,070	-	-
Total	701,771	686,119	106,430	110,017
Current	-	-	7,703	5,805
Long-term	701,771	686,119	98,727	104,212

The “Loans and Financing” item includes the amount of R$97,400 (R$100,912 on March 31, 2006) regarding the asset transferred to Brasil Telecom ParticipaÇões S.A during TELEBRÁS spin-off process, related to liabilities of Telebrasília Celular S.A and Telegoiás Celular S.A, due to transfer of funds for the financing of their expansions. Such amounts are subject to foreign exchange variation and interest rates between approximately 11.55% p.a. and semi-annual Libor plus 1% p.a. and 1.5% p.a. These loans have been challenged in courts by the Parent Company of the Mobile Cellular Service Operators (SMC) aforementioned. For this reason, the company has not been receiving these loans. According to the opinion of the Company’s legal advisors, it is not possible to estimate the losses in relation to such receivables. The effects of the foreign exchange variation on the receivable loans are deferred to tax effects, and the corresponding deferred income and social contribution taxes are recognized.

The amount related to loans and debentures receivable from the subsidiary Brasil Telecom S.A, with maturity lower than one year, in the amount of R$559,918 (R$540.588 on 03/31/06), are recorded in the long-term assets account, pursuant to the Article 179 of the Brazilian Corporate Law.

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22. DEFERRED AND RECOVERABLE TAXES

Deferred taxes related to Corporate Income Tax and Social Contribution on Income

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Corporate Income Tax
Deferred Income Tax on:
Tax Losses	-	-	366,252	329,911
Provisions for Contingencies	1,173	1,135	241,863	243,138
Provision for Pension Plan Actuarial Insufficiency Coverage	-	-	174,950	176,269
Allowance for Doubtful Accounts	-	-	90,656	94,425
ICMS - 69/98 Agreement	-	-	56,280	73,071
Provision for COFINS/CPMF/INSS – Suspended Collection	9,763	9,767	24,204	23,910
TJLP on debits included in REFIS	-	-	8,187	7,931
Provision for Employee Profit Sharing	-	-	7,092	6,683
Provision for Suspended Collection – FUST	-	-	6,386	4,841
Unrealized Revenue	-	-	882	1,213
Other Provisions	(201)	(198)	22,431	23,178
Subtotal	10,735	10,704	999,183	984,570
Social Contribution on Income
Deferred Social Contribution on:
Negative Calculation Basis	-	-	132,076	118,947
Provisions for Contingencies	422	409	87,071	87,530
Provision for Pension Plan Actuarial Insufficiency Coverage	-	-	62,982	63,457
Allowance for Doubtful Accounts	-	-	32,636	33,993
TJLP on debits included in REFIS	-	-	2,947	2,855
Provision for Employee Profit Sharing	-	-	2,905	2,512
Provision for Suspended Collection – FUST	-	-	-	1,743
Unrealized Revenue	-	-	318	437
Other Provisions	(72)	(74)	10,302	5,098
Subtotal	350	335	331,237	316,572
Total	11,085	11,039	1,330,420	1,301,142
Current	1,322	1,271	269,760	288,124
Long-term	9,763	9,768	1,060,660	1,013,018

The following table shows the periods in which the deferred tax assets corresponding to income tax and social contribution on net income (CSLL) are expected to be realized, which are derived from temporary differences between book value on the accrual basis and the taxable income, as well as in the tax loss and in the negative basis of social contribution, when existing. The realization periods are based on a technical study that used forecast future taxable income, generated in fiscal years when the temporary differences will become deductible expenses for tax purposes. These assets are recorded in accordance with CVM Instruction 371/02 requirements, and in view of the closing of the fiscal years the technical study is submitted to the approval of the board of executive officers and the Board of Directors, as well as its examination by the Fiscal Council.

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PARENT COMPANY

CONSOLIDATED

2006	1,322	158,088
2007	1,953	227,646
2008	1,953	101,025
2009	1,953	112,194
2010	1,953	140,627
2011 to 2013	1,951	73,416
2014 to 2015	-	392,980
After 2015	-	124,444
Total	11,085	1,330,420
Current	1,322	269,760
Long-term	9,763	1,060,660

The recoverable amount expected after 2015 is a result of a provision to cover an actuarial insufficiency of pension plans that is being settled by the subsidiary Brasil Telecom S.A. according to the maximum remaining period of 15 years and 6 months, in line with the period established by the Supplementary Pension Department (“SPC”). Despite the time limit stipulated by the SPC and according to the estimated future taxable income, the Subsidiary presents conditions to fully offset the deferred taxes in a period lower than ten years, if it opts to fully anticipate the payment of the debt. Tax credits in the amount of R$131,586, attributed to the Consolidated, were not recorded due non-existence of necessary requirements for the history and/or future forecast of taxable income in VANT, BrT Multimídia, BrT CSH and BrT CS Ltda, subsidiaries indirectly controlled.

Other Taxes Recoverable

They are comprised of federal withholding taxes and payments made, calculated based on legal estimates, which will be offset against future tax obligations. The ICMS recoverable arises, for the most part, from credits recorded in the acquisition of fixed assets, whose compensation with ICMS payable may occur in up to 48 months, according to Supplementary Law 102/00.

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
ICMS	-	-	535,964	572,531
Corporate Income Tax	381,832	349,913	508,029	603,114
PIS and COFINS	567	550	195,573	97,131
Social Contribution on Net Income	29,748	24,581	118,917	94,781
FUST	-	-	720	696
Other	10	9	3,223	3,732
Total	412,157	375,053	1,362,426	1,371,985
Current	171,485	137,837	889,148	900,040
Long-term	240,672	237,216	473,278	471,945

23. INCOME SECURITIES

Represented by bank deposit certificates (CDB) of Banco de Brasília S.A. – BRB, remunerated with 95% of SELIC rate, maintained by Brasil Telecom S.A. and 14 Brasil Telecom Celular S.A., as guarantee of the financing obtained through the Program to Promote Integrated Economic and Sustainable Development of the Federal District – PRÓ-DF). These long-term income securities, which amount to R$2,915 (R$2,788 on 03/31/2006) regarding the Consolidated, will be maintained during the period of utilization and amortization of financing (liability), whose grace period establishes the first payment for year 2019, payable in 180 monthly, consecutive installments. This asset may be used to pay the final installments of that financing.

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24. JUDICIAL DEPOSITS

Balances of judicial deposits related to contingencies with level of possible and remote risk of loss:

PARENT COMPANY

CONSOLIDATED

Subject to (by Nature of Demands)	06/30/06	03/31/06	06/30/06	03/31/06
Labor	-	-	76,623	66,823
Tax	45,937	43,708	164,055	138,693
Civil	461	-	29,235	18,180
Total	46,398	43,708	269,913	223,696
Current	-	-	56,214	33,589
Long-term	46,398	43,708	213,699	190,107

25. CONTRACTUAL RETENTIONS

They refer to the retained portion of investments funds of Brasil Telecom S.A. and Freelance, in view of the financing agreements maintained with BNDES. Further information is mentioned in note 5.h. The consolidated retained amount was R$191,439.

26. OTHER ASSETS

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Advances to Suppliers	-	-	31,541	45,932
Advances to Employees	-	-	35,718	28,577
Receivables from Other Telecom Companies	-	-	8,296	7,953
Contractual Guarantees and Retentions	-	-	1,260	1,291
Prepaid Expenses	1,405	2,661	111,704	121,728
Compulsory Deposits	-	-	1,750	1,750
Assets for Sale	-	-	1,254	980
Tax Incentives	-	-	-	14,473
Other	1,795	645	11,993	11,520
Total	3,200	3,306	203,516	234,204
Current	3,200	3,306	151,390	164,887
Long-term	-	-	52,126	69,317

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27. INVESTMENTS

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Investments Carried Under The Equity Method	3,651,629	3,739,281	-	-
Brasil Telecom S.A.	3,615,932	3,701,362	-	-
Nova Tarrafa ParticipaÇões Ltda.	34,044	36,146	-	-
Nova Tarrafa Inc.	1,653	1,773	-	-
Advances for Future Capital Increase	21	21	-	-
Nova Tarrafa ParticipaÇões Ltda.	21	21	-	-
Goodwill Paid on Acquisition of Investments, Net	-	-	299,669	320,428
IG Cayman	-	-	186,993	200,962
MTH Ventures do Brasil	-	-	62,541	68,059
Companies IBEST	-	-	46,373	47,175
Companies BRT Cabos Submarinos	-	-	3,762	4,232
Interest Valued at Acquisition Cost	6,911	6,911	46,059	46,059
Tax Incentives (Net of Allowance for Losses)	380	304	20,870	20,072
Other Investments	-	-	389	389
Total	3,658,941	3,746,517	366,987	386,948

The advances for future capital increase in favor of the Subsidiary were considered in the investments appraisal, since the allocated investments are only waiting for the formalization of the corporate act in order to effect the respective capital increase.

Investments Valued Using the Equity Method: include the Company’s interest in its subsidiaries Brasil Telecom S.A., Nova Tarrafa ParticipaÇões Ltda. and Nova Tarrafa Inc., main data of which are as follows:

	BT S.A.	NTP (Ltda.)	NTI
Shareholders’ Equity	5,374,709	34,044	1,653
Capital Stock	3,470,758	32,625	2,170
Book Value per Share/Quota (R$)	0.010	1.04	1,648.05
Net income (loss) at the end of the quarter	123,095	(3,883)	(205)
Number of Shares/Quotas Held by the Company (in thousands)
Common Shares	247,276,381	-	1
Preferred Shares	120,911,021	-	-
Quotas	-	32,625	-
Ownership % in Subsidiary’s Capital (1)
In Total Capital	67.28%	99.99%	100%
In Voting Capital	99.07%	99.99%	100%

(1) Considers the outstanding capital stock. 

The equity method result is composed of the following values: 

	Operating		Non-Operating
	06/30/06	06/30/05	06/30/06	06/30/05
Brasil Telecom S.A.	82,819	35,211	13	1,729
Nova Tarrafa ParticipaÇões Ltda.	(3,883)	(2,323)	-	-
Nova Tarrafa Inc.(1)	(356)	(503)	-	-
Total	78,580	32,385	13	1,729

(1) It includes exchange variation, linked to investment abroad.

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Investments assessed using the cost of acquisition: correspond to interests obtained by converting shares or capital quotas of the tax incentive investments in the FINOR/FINAM regional programs, the Incentive Law for Information Technology Companies, and the Audiovisual Law. The amount is predominantly composed of shares of other telecommunications companies located in the regions covered by the regional incentives.

Tax incentives: arise from investments in FINOR/FINAM and audiovisual funds, originated in the portions allocated to income tax due.

Other investments: are related to collected cultural assets.

28. PROPERTY, PLANT AND EQUIPMENT

PARENT COMPANY

Description	06/30/06				03/31/06
	Annual depreciation rates	Cost	Accumulated Amortization	Net Value	Net Value
Assets for General Use	5% - 20%	53,442	(52,428)	1,014	1,081
Other Assets	19.9%(1)	3,926	(3,856)	70	75
Total		57,368	(56,284)	1,084	1,156

CONSOLIDATED

Property, Plant and Equipment	06/30/06				03/31/06
	Annual depreciation rates	Cost	Accumulated Amortization	Net book Value	Net book Value
Work in Progress	-	385,904	-	385,904	394,676
Public Switching Equipment	20%	5,054,862	(4,663,023)	391,839	422,549
Equipment and Transmission Means	17.6%(1)	11,801,414	(8,934,387)	2,867,027	3,051,509
Termination	20%	485,673	(453,959)	31,714	34,124
Data Communication Equipment	20%	1,811,930	(985,711)	826,219	823,895
Buildings	4%	935,047	(515,303)	419,744	424,165
Infrastructure	9%(1)	3,702,662	(2,199,139)	1,503,523	1,534,299
Assets for General Use	18.5%(1)	1,093,435	(716,590)	376,845	385,244
Land	-	85,863	-	85,863	87,258
Other Assets	17.9%(1)	1,142,643	(569,982)	572,661	604,401
Total		26,499,433	(19,038,094)	7,461,339	7,762,120

(1) Annual weighted average rate. 

According to the STFC concession agreements, the assets of the subsidiary Brasil Telecom S.A. that are indispensable to providing the service and qualified as “reversible assets” will be automatically reverted to ANATEL when the concession ends, and the Subsidiary will be entitled to indemnifications established in the legislation and in the respective agreements. The amount of reversible assets on the quarter closing date was R$20,715,953 for costs, with residual value of R$4,335,800.

Rent Expenses

The company maintains properties, rights of way (posts and third-party land areas on roads), equipment, and connection means, formalized through several contracts, which mature on different dates. Some of these contracts are intrinsically related to the provision of services and are long-term agreements. Total rent expenses, means and connections related to such contracts in the quarter closing date, related to the Consolidated, amounted to R$241,197 (R$243,727 in 2005).

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Leasing

The subsidiary Brasil Telecom S.A. has financial leasing agreements for information technology equipment. Recorded leasing expenses up to the quarter amounted to R$8,144 (R$5,861 in 2005) for the Consolidated. The Company only recorded such expenditure in 2005, in the amount of R$662.

Insurance

An insurance policy programs are maintained by Brasil Telecom S.A. for covering reversible assets and loss of profits established in the Concession Contract with the government. Insurance expenses were R$1,152 (R$1,957 in 2005) for the Company and R$7,346 (R$8,342 in 2005) for the Consolidated.

The assets, responsibilities and interests covered by insurance are the following:

Type	Coverage	Amount Insured
		06/30/06	03/31/06
Operating risks	Buildings, machinery and equipment, facilities, call centers, towers, infrastructure and information technology equipment	12,087,247	12,077,311
Loss of profit	Fixed expenses and net income	9,015,211	9,015,211
Contract Guarantees	Compliance with contractual obligations	143,648	208,658
Civil Liability	Telephone service operations	12,000	12,000

The company contracted insurance coverage for the management civil liability, which also includes the subsidiary Brasil Telecom S.A., and the total amount insured is equivalent to thirty million U.S. dollars (US$ 30,000,000.00) .

There is no insurance coverage for optional civil liability related to third party claims involving Company’s vehicles.

The assumptions of adopted risks, given their nature, do not integrate the scope of a quarterly information review, consequently, they were not examined by our independent auditors.

29. DEFERRED CHARGES 

PARENT COMPANY

	06/30/06			03/31/06
	Cost	Accumulated Amortization	Net Value	Net Value
Data Processing Systems	148	(104)	44	51
Total	148	(104)	44	51

CONSOLIDATED

	06/30/06			03/31/06
	Cost	Accumulated Amortization	Net Value	Net Value
Data Processing Systems	981,287	(419,493)	561,794	584,146
Installation and Reorganization Costs	337,149	(176,515)	160,634	173,783
Goodwill derived on Merger	32,962	(32,325)	637	893
Other	68,312	(12,757)	55,555	45,880
Total	1,419,710	(641,090)	778,620	804,702

 

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30. PAYROLL AND RELATED CHARGES

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Salaries and Compensation	-	-	2,503	1,553
Payroll Charges	21	59	76,983	61,929
Benefits	-	8	5,585	5,319
Other	-	-	5,734	6,072
Total	21	67	90,805	74,873
Current	21	67	90,805	74,873

31. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Suppliers	753	1,109	1,444,857	1,400,197
Third-Party Consignments	27,899	113	177,885	116,357
Total	28,652	1,222	1,622,742	1,516,554
Current	28,652	1,222	1,600,566	1,494,473
Long-term	-	-	22,176	22,081

The amounts recorded under long-term are derived from liabilities to remunerate the third party network, the settlement of which depends on verification between the operators, such as the reconciliation of traffic.

32. INDIRECT TAXES

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
ICMS, net of Judicial Deposits of Agreement 69/98	68	68	817,705	860,699
ICMS	68	68	1,028,866	1,142,942
Judicial Deposits referring to Agreement ICMS 69/98	-	-	(211,161)	(282,243)
PIS and COFINS	59,188	41,696	195,368	186,393
Other	38	13	54,295	74,076
Total	59,294	41,777	1,067,368	1,121,168
Current	18,141	2,834	806,726	824,601
Long-term	41,153	38,943	260,642	296,567

The subsidiary Brasil Telecom S.A. paid PIS and COFINS taxes in installments, through the Special Payment in Installments (PAES), whose balance, restated by the long-term interest rate (TJLP), amounts to R$17,526 (R$24,519 on 03/31/06), to be paid in installments for the remaining 84 months.

The balance referring to ICMS comprises amounts resulting from the Agreement 69/98, which has been questioned in Court, and court deposits have been monthly made. It also includes the ICMS deferral, based on incentives by the government of the State of Paraná.

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33. TAXES ON INCOME

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Corporate Income Tax
Payables Due	-	-	6,706	6,067
Law 8,200/91 - Special Monetary Restatement	31,648	29,224	65,554	83,696
Subtotal	31,648	29,224	72,260	89,763
Social Contribution on Income
Payables Due	-	-	2,414	2,184
Law 8,200/91 - Special Monetary Restatement	11,400	10,524	24,427	26,822
Subtotal	11,400	10,524	26,841	29,006
Total	43,048	39,748	99,101	118,769
Current	22,704	18,455	59,430	92,422
Long-term	20,344	21,293	39,671	26,347

The subsidiary Brasil Telecom S.A. maintains debts registered at the Tax Recovery Program (“REFIS”), related to the denial of tax losses carried forward, derived from CRT and TBS (merged companies in 2000) at the amount of R$34,292 (R$33,858 on 03/31/06), the settlement of which awaits for ratification for tax credits offset.

34. DIVIDENDS/INTEREST ON SHAREHOLDERS’ EQUITY AND PROFIT SHARING

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Controlling Shareholders	29,702	-	29,702	-
Dividends/Interest on Shareholders’ Equity	34,943	-	34,943	-
Withholding Income Tax on Interest on Shareholders’ Equity	(5,241)	-	(5,241)	-
Minority Shareholders	183,553	56,134	312,187	117,243
Dividends/Interest on Shareholders’ Equity	150,357	-	230,529	-
Withholding Income Tax on Interest on Shareholders’ Equity	(22,554)	-	(34,579)	-
Unclaimed Dividends of Previous Years	55,750	56,134	116,237	117,243
Total Shareholders	213,255	56,134	341,889	117,243
Employees and Management Profit Sharing	-	-	37,997	27,425
Total	213,255	56,134	379,886	144,668

35. LOANS AND FINANCING (Including Debentures)

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Loans	-	-	21,535	21,615
Financing	218,255	218,284	3,887,231	3,913,208
Accrued Interest and Other Charges on Financing	64,963	56,819	343,361	404,608
Total	283,218	275,103	4,252,127	4,339,431
Current	283,218	275,071	1,303,652	1,257,264
Long-term	-	32	2,948,475	3,082,167

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Loans

CONSOLIDATED

	06/30/06	03/31/06
Loans – Other	21,535	21,615
Total	21,535	21,615

The amount recorded as Other Loans, at the amount of R$21,535 (R$21,615 on 03/31/06) refers to a VANT’s debt with the former parent company. Such liability is due on 12/31/15, restated only by the U.S. dollar exchange variation.

Financing

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
BNDES - Foreign Currency	-	-	2,052,478	2,233,192
Financial Institutions	-	-	1,351,930	1,286,416
Domestic Currency	-	-	63,409	35,631
Foreign Currency	-	-	1,288,521	1,250,785
Debentures	283,083	274,939	823,072	794,984
Suppliers – Foreign Currency	135	164	3,112	3,224
Total	283,218	275,103	4,230,592	4,317,816

Financing denominated in domestic currency: bear fixed interest rates from 2.4% p.a. and 14% p.a., resulting in a weighted average rate of 5.5% p.a. and variable interest based on TJLP (Long-term interest rates) plus 3.85% to 6.5% p.a., UMBNDES (unit of the National Social and Economic Development Bank) plus 3.85% p.a. to 6.5% p.a., CDI plus CDI + 1.0%, and General Market Price Index (IGP-M) plus 12% p.a. resulting, these variable interest, in a weighted average rate of 14.4% p.a.

Financing denominated in foreign currency: bear fixed interest rates of 0% to 9.38% p.a., resulting in a weighted average rate of 8.9% p.a. and variable interest rates of LIBOR plus 0.5% to 2.0% p.a., 1.92% p.a. over the YEN LIBOR, resulting in a weighted average rate of 2.5% p.a. The LIBOR and YEN LIBOR rates on 06/30/06, semiannual payments were 5.52% p.a. and 0.0152% p.a., respectively.

Debentures

Parent Company: In 2000, the Company issued debentures convertible into preferred shares, the raising of which aimed at financing part of the investment program of the subsidiary Brasil Telecom S.A. The restated balance of these debentures, in the amount of R$283,083, will be amortized in the installment maturing in July 2006. The debentures are remunerated at interest rate of 4% p.a. over the TJLP variation, payable half-yearly. The interest rate portion attributed to the TJLP variation that exceeds 6% p.a. will be capitalized to the balance of the debentures.

Subsidiary Brasil Telecom S.A.: third public issue of 50,000 debentures non-convertible into shares without renegotiation clause, with a unit face value of R$10, totaling R$500,000, issued on July 5, 2004. The updated balance of these debentures is R$539,989, maturing on July 5, 2009. Yield corresponds to an interest rate of 100% of the CDI plus 1% p.a., payable half-yearly.

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Repayment Schedule
The long-term debt is scheduled to be paid in the following fiscal years:

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
2007	-	32	476,770	655,801
2008	-	-	522,544	508,313
2009	-	-	924,220	910,578
2010	-	-	419,578	406,034
2011	-	-	128,110	123,031
2012	-	-	688	691
As From 2013	-	-	476,565	477,719
Total	-	32	2,948,475	3,082,167

Currency/Index Financing Composition 

PARENT COMPANY

CONSOLIDATED

Restated by	03/31/06	12/31/05	03/31/06	12/31/05
TJLP (Long-Term Interest Rate)	283,083	274,939	2,073,866	2,224,728
US Dollars	135	164	520,399	510,002
CDI	-	-	539,989	520,045
YENS	-	-	412,023	399,512
HEDGE on yen-denominated debt	-	-	378,648	364,398
UMBNDES (BNDES Basket of Currencies)	-	-	229,405	246,107
HEDGE in UMBNDES	-	-	32,290	37,296
IGP-DI			22,051	21,375
IGPM	-	-	2,567	4,990
Hedge on US dollars-denominated debt	-	-	2,098	1,712
Other (Fixed Rate)	-	-	38,791	9,266
Total	283,218	275,103	4,252,127	4,339,431

Guarantees

The financing contracted by subsidiary Brasil Telecom S.A. are guaranteed by collateral of pledge of credit rights derived from the provision of telephony services and the Parent Company’s surety.

For the consolidated loans and financing, the company maintains hedge contracts on 46% of U.S. dollar-denominated liabilities and yen loans and financing with third parties and 20.4% of the debt in UMBNDES (basket of currencies) with the BNDES, to protect against significant fluctuations in the quotations of these debts restatement factors. Gains and losses on these contracts are recognized on an accrual basis.

Debentures issued by Brasil Telecom S.A. have personal guarantee, through surety granted by the Company. By the deed of issue, the Company, in the capacity as intervening guarantor undertakes before the debenture holders as primary obligor and guarantor, to be jointly liable for all obligations assumed by the Company related to such debentures..

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36. LICENSES AND CONCESSIONS TO EXPLOIT SERVICES

CONSOLIDATED

	06/30/06	03/31/06
Personal Mobile Service	312,752	304,523
Concession of STFC	33,657	17,043
Other Authorizations	11,010	12,846
Total	357,419	334,412
Current	97,191	74,818
Long-term	260,228	259,594

The authorizations for Personal Mobile Services (SMP) are represented by the terms signed, in 2002 and 2004, by 14 Brasil Telecom Celular S.A. with ANATEL, to offer SMP Services for the next fifteen years in the same area of operation where Brasil Telecom S.A. has a concession for fixed telephony. Out of the contracted value, 10% was paid at the time of signing the contract, and the remaining balance was fully recognized in the liabilities of BrT Celular to be paid in equal, consecutive annual installments, with maturities foreseen for the years 2006 to 2010 (balance of five installments), and 2007 to 2012 (balance of six installments), depending on the fiscal year when the agreements were executed. The remaining balance is adjusted by the variation of IGP-DI, plus 1% per month.

The concession of STFC refers to the provision established by Brasil Telecom S.A. according to the accrual basis, taking as basis the application of 1% on the net revenue of taxes. According to the current concession agreement, the payment in favor of ANATEL will have a maturity every two years, defined for April of the odd years and will be equivalent to 2% of the net revenue estimated in the immediately previous year. The first payment is estimated for April 2007.

The amount of other authorizations belongs to BrT Multimídia and refers to the authorization granted to the use of radiofrequency blocks associated with the exploitation of multimedia communication services. Initially, such granting was obtained from ANATEL by VANT and on April 2006 the transfer registration to BrTMultimídia took place, which assumed the outstanding balance, with a variation of the IGP-M, plus 1% a month. The settlement of the balance of such obligation will be paid in five equal, consecutive and annual installments, counted as from May 2007.

37. PROVISIONS FOR PENSION PLANS

They refer to the recognition by Brasil Telecom S.A. of the actuarial deficit of the pension plans of defined benefit managed by FBrTPREV and FundaÇão 14 appraised by independent actuaries at the end of each fiscal year in accordance with Deliberation CVM 371/00.

To minimize the effects to be determined in the actuarial revaluation of the end of the year, the effects of the variation of INPC and pro-rata interest of 6% p.a. on the liabilities of the plans are monthly recognized, deduced from earnings of assets belonging to such plans. These charges recorded in the result up to the quarter represented R$16,087. Up to the quarter, R$9,989 was also recognized, resulting from administrative costs, regular costs of plans and non-actuarial variation which took place in the liabilities of the foundations. Additionally, aiming to follow the increase expectation of the longevity of the participants of the sponsored plans, the Subsidiary contracted with its independent actuaries a study to enable to add to the recognized provision the economic effects of this trend, resulting in the complement of R$9,732 to the provision established.

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The amount paid to FundaÇão BrTPREV up to the quarter closing date totaled R$64,099 (R$49,722 in 2005) and refers to the amortizing contributions and administrative costs.

The funds for sponsored supplementary pensions are detailed in Note 6. 

CONSOLIDATED

	06/30/06	03/31/06
FBrTPREV – BrTPREV, Alternativo and Fundador Plans	699,614	704,900
FundaÇão 14 – Plano PAMEC	184	177
Total	699,798	705,077
Current	45,136	44,756
Long-term	654,662	660,321

38. ADVANCES FROM CUSTOMERS

There are contracts entered into by Brasil Telecom S.A. and its subsidiaries related to the assignment of telecommunications means, for which its customers made advances aimed at obtaining benefits in the future, forecast for realization in the following periods:

CONSOLIDATED

	06/30/06	03/31/06
2006	4,945	5,847
2007	6,941	6,906
2008	6,941	6,906
2009	6,912	6,877
2010	6,763	6,728
2011	6,259	6,224
2012	6,259	6,224
2013 onwards	36,971	37,032
Total	81,991	82,744

39.  OTHER LIABILITIES

PARENT COMPANY

CONSOLIDATED

	06/30/06	03/31/06	06/30/06	03/31/06
Liabilities from Acquisition of Tax Credits	-	-	55,278	37,946
Advanced Receivables	-	-	30,352	34,512
CPMF - Suspended Collection	-	-	28,220	27,669
Other Taxes	-	-	24,334	111
Self-Financing Funds	-	-	24,143	24,143
Bank Credits and Receivables in Double under Processing	-	-	13,093	10,858
Liabilities with Other Telecommunications Companies	-	-	1,618	1,614
Self-Financing Installment Reimbursement – PCT	-	-	914	1,026
Other	1,354	261	10,983	8,284
Total	1,354	261	188,935	146,163
Current	1,354	261	157,972	115,915
Long-term	-	-	30,963	30,248

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Self-financing funds

They correspond to the credits of capital participation, paid by engaged subscribers, for acquisition of the right of use of switched fixed telephone service, still under the elapsed self-financing modality. It happened that, as the shareholders of the subsidiary Brasil Telecom S.A. –Rio Grande do Sul Branch (former CRT) had fully subscribed the capital increase made to repay in shares the credits for capital participation, there were no unsold shares to be delivered to the engaged subscribers. Part of these engaged subscribers, who did not accept the Subsidiary’s Public Offering for return of the referred credits in cash, as established in article 171, paragraph 2, of Law 6,404/76, are awaiting resolution of the ongoing lawsuit, filed by the Public Prosecution Service and Other, aiming at reimbursement in shares.

Self-financing Installment Reimbursement – PCT

This refers to the payment, either in cash or as offset installments in invoices for services of engaged subscribers derived from the Community Telephony Plan - PCT, in return to the obligation derived from repayment in shares. For these cases, there is settlement or judicial decision.

40. FUNDS FOR CAPITALIZATION

The expansion plans (self-financing) were the means by which the telecommunications companies financed part of the network investments. With the issue of Administrative Rule 261/97 by the Ministry of Communications, this mechanism for raising funds was eliminated, and the existing consolidated amount, of R$7,974 (R$7,974 on 03/31/06), is derived from plans sold prior to the issue of the Administrative Rule, the corresponding assets to which are already incorporated in the fixed assets through the Community Telephony Plant – PCT. For reimbursement in shares, it is necessary to await the judicial ruling on the suits brought by the interested parties.

41. EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION -EBITDA

The consolidated EBITDA, reconciled with the operating income, is as follows:

CONSOLIDATED

	06/30/06	06/30/05
Operating Loss	(74,926)	(96,013)
Financial Expenses, Net	374,465	410,554
Depreciation	1,298,009	1,287,120
Amortization of Goodwill/Negative Goodwill in Acquisition of Investments (1)	41,311	50,238
EBITDA	1,638,859	1,651,899
Net Operating Revenue	4,927,629	4,970,504
EBITDA Margin	33.3%	33.2%

(1) It does not include the amortization of special goodwill from merger recorded in the deferred charges, in permanent assets, whose amortization expense compose the non-operating income.

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42. COMMITMENTS

Services Rendered due to Acquisition of Assets

BrT SCS Bermuda acquired fixed assets from an already existing company. Together with the assets of underwater cables acquired, it assumed the obligation of providing data traffic services, initially contracted with the company that sold the assets, which was a beneficiary of the financial resources of the respective advances. The time remaining for the providing of such assumed services is approximately eighteen years.

43. INFORMATION PER BUSINESS SEGMENT – CONSOLIDATED

Information per segments is presented in relation to the Company and its subsidiaries’ business, which was identified based on their performance and management structure, as well as the internal management information.

The operations carried out among the business segments presented were based on conditions equivalent to the market.

The income by segment, as well as the equity items presented, takes into consideration the items directly attributable to the segment, also taking into account those which can be allocated on reasonable basis.

	06/30/06
	Fixed Telephony and Data Communication	Mobile  Telephony	Internet	Holding  Companies	Elimination among Segments	Consolidated
Gross Operating Revenue	6,723,148	704,184	168,912	-	(322,055)	7,274,189
Deductions from Gross Revenue	(2,095,739)	(231,051)	(20,860)	-	1,090	(2,346,560)
Net Operating Revenue	4,627,409	473,133	148,052	-	(320,965)	4,927,629
Cost of Services Rendered and Goods  Sold	(2,896,550)	(451,816)	(80,790)	-	300,411	(3,128,745)
Gross Income	1,730,859	21,317	67,262	-	(20,554)	1,798,884
Operating Expenses, Net	(1,167,225)	(266,130)	(78,032)	(11,173)	23,215	(1,499,345)
Sale of Services	(528,182)	(205,809)	(51,099)	-	45,192	(739,898)
General and Administrative Expenses	(560,865)	(68,562)	(34,345)	(9,029)	9,583	(663,218)
Other Operating Expenses, Net	(78,178)	8,241	7,412	(2,144)	(31,560)	(96,229)
Operating Income (Loss) Before  Financial Revenues (Expenses)	563,634	(244,813)	(10,770)	(11,173)	2,661	299,539
Trade Accounts Receivable	2,013,784	147,115	71,785	-	(126,890)	2,105,794
Inventories	4,812	60,559	-	-	-	65,371
Fixed Assets, Net	6,134,498	1,261,460	67,825	1,084	(3,528)	7,461,339

	09/30/04
	Fixed Telephony and Data Communication	Mobile Telephony	Internet	Holding Companies	Elimination among Segments	Consolidated
Gross Operating Revenue	6,805,423	393,506	284,226	-	(371,979)	7,111,176
Deductions from Gross Revenue	(1,996,823)	(110,684)	(33,179)	-	14	(2,140,672)
Net Operating Revenue	4,808,600	282,822	251,047	-	(371,965)	4,970,504
Cost of Services Rendered and Goods
Sold	(2,950,925)	(415,005)	(168,064)	-	302,856	(3,231,138)
Gross Income	1,857,675	(132,183)	82,983	-	(69,109)	1,739,366
Operating Expenses, Net	(1,110,314)	(285,597)	(84,134)	(16,542)	71,762	(1,424,825)
Sale of Services	(564,927)	(217,286)	(55,824)	-	92,290	(745,747)
General and Administrative Expenses	(538,393)	(58,836)	(32,272)	(13,283)	6,151	(636,633)
Other Operating Expenses, Net	(6,994)	(9,475)	3,962	(3,259)	(26,679)	(42,445)
Operating Income (Loss) Before   Financial Revenues (Expenses)	747,361	(417,780)	(1,151)	(16,542)	2,653	314,541

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	12/31/05
	Fixed Telephon and Data Communication	Mobile  Telephony	Internet	Holding  Companies	Elimination among Segments	Consolidated
Trade Accounts Receivable	2,087,915	148,330	52,161	-	(145,710)	2,142,696
Inventories	4,474	75,782	-	-	-	80,256
Fixed Assets, Net	6,422,849	1,274,820	68,146	1,156	(4,851)	7,762,120

44. SUBSEQUENT EVENTS

Fifth Issue of Brasil Telecom S.A.’s Debentures

On July 11, 2006, Brasil Telecom S.A. announced the closing of the public offering of its Fifth Issue of Debentures, being the fourth public issue. The Company issued 108,000 debentures not convertible into shares without renegotiation clause, for the unit face value of R$10, amounting to R$1,080,000. The payment term is seven years, with issue date as of June 1, 2006 and maturity on June 1, 2013. The remuneration corresponds to the interest rate of 104.1% of CDI and its payment periodicity is semiannual. Amortization, which shall indistinctly consider all debentures, will occur annually as from June 1, 2011, in three installments of 33.3%, 33.3% and 33.4% of the unit face value, respectively.

These debentures have personal guarantee, by means of surety granted by the Company. According to the deed of issue, the Company, in the capacity as intervening guarantor undertakes before the debenture holders as primary obligor and guarantor, to be jointly liable for all obligations assumed by Brasil Telecom S.A..

The proceeds obtained from such issue will be destined by the Subsidiary to the refinancing and rescheduling of the debts including the full settlement of outstanding balance of the private debenture and partial amortizations of principal amounts related to outstanding agreements with BNDES.

Settlement of Debentures

On July 27, 2006, Brasil Telecom S.A. settled its debt with the Company, related to private debentures. The amount related to the payment of the final installment totaled R$556,911, remuneration included.

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Public Debentures Issued by the Company

On July 27,2006, the Company settled the balance of its public debentures. The amount related to the payment of final installment totaled R$285,419, remuneration included.

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

See Comments on the Consolidated Performance in the Quarter.

 

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06.01 - CONSOLIDATED BALANCE SHEET - ASSETS (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2006
1	TOTAL ASSETS	16,386,389	16,291,871
1.01	CURRENT ASSETS	5,878,038	5,486,714
1.01.01	CASH AND CASH EQUIVALENTS	2,034,680	1,679,878
1.01.02	CREDITS	2,105,794	2,142,696
1.01.02.01	ACCOUNTS RECEIVABLE FROM SERVICES	2,105,794	2,142,696
1.01.03	INVENTORIES	65,371	80,256
1.01.04	OTHER	1,672,193	1,583,884
1.01.04.01	LOANS AND FINANCING	7,703	5,805
1.01.04.02	DEFERRED AND RECOVERABLE TAXES	1,158,908	1,188,164
1.01.04.03	JUDICIAL DEPOSITS	56,214	33,589
1.01.04.04	DIVIDENDS RECEIVABLE	0	0
1.01.04.05	CONTRACTUAL RETENTIONS	191,439	191,439
1.01.04.06	TEMPORARY INVESTMENTS	106,539	0
1.01.04.07	OTHER ASSETS	151,390	164,887
1.02	LONG-TERM ASSETS	1,901,405	1,851,387
1.02.01	OTHER CREDITS	0	0
1.02.02	CREDITS WITH RELATED PARTIES	0	0
1.02.02.01	FROM ASSOCIATED COMPANIES	0	0
1.02.02.02	FROM SUBSIDIARIES	0	0
1.02.02.03	FROM OTHER RELATED PARTIES	0	0
1.02.03	OTHER	1,901,405	1,851,387
1.02.03.01	LOANS AND FINANCING	98,727	104,212
1.02.03.02	DEFERRED AND RECOVERABLE TAXES	1,533,938	1,484,963
1.02.03.03	INCOME SECURITIES	2,915	2,788
1.02.03.04	JUDICIAL DEPOSITS	213,699	190,107
1.02.03.05	INVENTORIES	0	0
1.02.03.06	OTHER ASSETS	52,126	69,317
1.03	PERMANENT ASSETS	8,606,946	8,953,770
1.03.01	INVESTMENTS	366,987	386,948
1.03.01.01	ASSOCIATED COMPANIES	4	4
1.03.01.02	SUBSIDIARIES	0	0
1.03.01.03	OTHER INVESTMENTS	366,983	386,944
1.03.02	PROPERTY, PLANT AND EQUIPMENT	7,461,339	7,762,120
1.03.03	DEFERRED CHARGES	778,620	804,702

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06.02 - CONSOLIDATED BALANCE SHEET - LIABILITIES (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2006
2	TOTAL LIABILITIES	16,386,389	16,291,871
2.01	CURRENT LIABILITIES	4,677,187	4,325,503
2.01.01	LOANS AND FINANCING	980,580	962,280
2.01.02	DEBENTURES	323,072	294,984
2.01.03	SUPPLIERS	1,422,681	1,378,116
2.01.04	TAXES, DUTIES AND CONTRIBUTIONS	866,156	917,023
2.01.04.01	INDIRECT TAXES	806,726	824,601
2.01.04.02	TAXES ON INCOME	59,430	92,422
2.01.05	DIVIDENDS PAYABLE	341,889	117,243
2.01.06	PROVISIONS	180,959	246,469
2.01.06.01	PROVISION FOR CONTINGENCIES	135,823	201,713
2.01.06.02	PROVISION FOR PENSION PLAN	45,136	44,756
2.01.07	DEBTS WITH RELATED PARTIES	0	0
2.01.08	OTHER	561,850	409,388
2.01.08.01	PAYROLL AND SOCIAL CHARGES	90,805	74,873
2.01.08.02	CONSIGNMENTS IN FAVOR OF THIRD PARTIES	177,885	116,357
2.01.08.03	EMPLOYEE PROFIT SHARING	37,997	27,425
2.01.08.04	LICENSE FOR OPERATING TELECOMS SERVICES	97,191	74,818
2.01.08.05	OTHER LIABILITIES	157,972	115,915
2.02	LONG-TERM LIABILITIES	4,748,713	4,883,977
2.02.01	LOANS AND FINANCING	2,448,475	2,582,167
2.02.02	DEBENTURES	500,000	500,000
2.02.03	PROVISIONS	1,096,593	1,076,255
2.02.03.01	PROVISION FOR CONTINGENCIES	441,931	415,934
2.02.03.02	PROVISION FOR PENSION PLAN	654,662	660,321
2.02.04	DEBTS WITH RELATED PARTIES	0	0
2.02.05	OTHER	703,645	725,555
2.02.05.01	PAYROLL AND SOCIAL CHARGES	0	0
2.02.05.02	SUPPLIERS OF MATERIALS AND SERVICES	22,176	22,081
2.02.05.03	INDIRECT TAXES	260,642	296,567
2.02.05.04	TAXES ON INCOME	39,671	26,347
2.02.05.05	LICENSE FOR OPERATING TELECOMS SERVICES	260,228	259,594
2.02.05.06	ADVANCES FROM CUSTOMERS	81,991	82,744
2.02.05.07	OTHER LIABILITIES	30,963	30,248
2.02.05.08	FUNDS FOR CAPITALIZATION	7,974	7,974
2.03	DEFERRED INCOME	0	0
2.04	MINORITY INTEREST	1,761,220	1,802,821
2.05	SHAREHOLDERS’ EQUITY	5,199,269	5,279,570
2.05.01	CAPITAL	2,596,272	2,596,272
2.05.02	CAPITAL RESERVES	309,178	309,178
2.05.03	REVALUATION RESERVES	0	0

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06.02 - CONSOLIDATED BALANCE SHEET - LIABILITIES (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 06/30/2006	4 –03/31/2006
2.05.03.01	COMPANY ASSETS	0	0
2.05.03.02	SUBSIDIARIES/ASSOCIATED COMPANIES	0	0
2.05.04	PROFIT RESERVES	282,667	282,667
2.05.04.01	LEGAL	208,487	208,487
2.05.04.02	STATUTORY	0	0
2.05.04.03	CONTINGENCIES	0	0
2.05.04.04	REALIZABLE PROFITS RESERVES	74,180	74,180
2.05.04.05	PROFIT RETENTION	0	0
2.05.04.06	SPECIAL RESERVE FOR UNDISTRIBUTED DIVIDENDS	0	0
2.05.04.07	OTHER PROFIT RESERVES	0	0
2.05.05	RETAINED EARNINGS/ACCUMULATED DEFICIT	2,011,152	2,091,453

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07.01 - CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS OF REAIS)

1 - CODE	2 - ACCOUNT DESCRIPTION	3 – 04/01/2006 TO 06/30/2006	4 - 01/01/2006 TO 06/30/2006	5 - 04/01/2005 TO 06/30/2005	6 - 01/01/2005 TO 06/30/2005
3.01	GROSS REVENUE FROM SALES AND/OR SERVICES	3,619,302	7,274,189	3,642,445	7,111,176
3.02	DEDUCTIONS FROM GROSS REVENUE	(1,168,570)	(2,346,560)	(1,119,517)	(2,140,672)
3.03	NET REVENUE FROM SALES AND/OR SERVICES	2,450,732	4,927,629	2,522,928	4,970,504
3.04	COST OF GOODS AND/OR SERVICES SOLD	(1,560,807)	(3,128,745)	(1,645,432)	(3,231,138)
3.05	GROSS PROFIT	889,925	1,798,884	877,496	1,739,366
3.06	OPERATING INCOME/EXPENSES	(1,044,825)	(1,873,810)	(1,074,132)	(1,835,379)
3.06.01	SELLING EXPENSES	(365,482)	(739,898)	(374,998)	(745,747)
3.06.02	GENERAL AND ADMINISTRATIVE EXPENSES	(340,371)	(663,218)	(327,058)	(636,633)
3.06.03	FINANCIAL	(299,201)	(374,465)	(358,368)	(410,554)
3.06.03.01	FINANCIAL INCOME	193,704	309,801	336,707	531,829
3.06.03.02	FINANCIAL EXPENSES	(492,905)	(684,266)	(695,075)	(942,383)
3.06.04	OTHER OPERATING INCOME	206,003	287,749	85,696	168,123
3.06.05	OTHER OPERATING EXPENSES	(245,774)	(383,978)	(99,404)	(210,568)
	EQUITY IN THE EARNINGS OF SUBSIDIARIES OR ASSOCIATED
3.06.06	COMPANIES	0	0	0	0
3.07	OPERATING INCOME	(154,900)	(74,926)	(196,636)	(96,013)
3.08	NON-OPERATING INCOME	(14,347)	(16,877)	(36,734)	(70,589)
3.08.01	REVENUES	17,103	24,033	8,661	25,022
3.08.02	EXPENSES	(31,450)	(40,910)	(45,395)	(95,611)
3.09	INCOME (LOSS) BEFORE TAXES AND INTEREST	(169,247)	(91,803)	(233,370)	(166,602)
3.10	PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION	47,308	5,196	25,773	5,702
3.11	DEFERRED INCOME TAX	0	0	0	0
3.12	INTEREST/STATUTORY CONTRIBUTIONS	0	0	0	0
3.12.01	INTEREST	0	0	0	0

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07.01 - CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS OF REAIS)

1 - CODE	2 – ACCOUNT DESCRIPTION				3 – 04/01/2006 TO 06/30/2006		4 - 01/01/2006 TO 06/30/2006		5 - 04/01/2005 TO 06/30/2005		6 - 01/01/2005 TO 06/30/2005
3.12.02	CONTRIBUTIONS				0		0		0		0
3.13	REVERSAL OF INTEREST ON SHAREHOLDERS’ EQUITY				265,472		265,472		295,356		295,356
3.14	MINORITY INTEREST				(38,535)		(40,321)		(18,714)		(20,323)
3.15	INCOME/LOSS FOR THE PERIOD				104,998		138,544		69,045		114,133
	NUMBER OF SHARES, EX-TREASURY (THOUSAND)				362,488,414		362,488,414		362,488,414		362,488,414
	EARNINGS PER SHARE				0.00029		0.00038		0.00019		0.00031
	LOSS PER SHARE

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08.01 - COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER

PERFORMANCE REPORT – 2^nd QUARTER 2006

The performance report presents the consolidated figures of Brasil Telecom ParticipaÇões S.A.
and its subsidiaries, described in Note 1 of this Quarterly Information.

OPERATING PERFORMANCE (not reviewed by independent auditors)

Fixed Telephony 

Plant

Operating Data		2Q06		1Q06		2Q06/1Q06
						(%)
Lines Installed (thousand)		10,795		10,814		(0.2)
Additional Lines Installed (thousand)		(20)		(2)		891.5
Lines in Service – LES (thousand)		9,407		9,543		(1.4)
- Residential (thousand)		5,940		6,043		(1.7)
- Non-residential (thousand)		1,401		1,432		(2.2)
- Public Telephones – TUP (thousand)		291		295		(1.5)
- Prepaid (thousand)		316		317		(0.2)
- Hybrid (thousand)		819		826		(0.8)
- Other (includes PABX) (thousand)		640		630		1.5
Additional Lines in Service (thousand)		(133)		(17)		681.2
Average Lines in Service – LMES (thousand)		9,484		9,552		(0.7)
LES/100 Inhabitants		22		22		(1.7)
TUP/1,000 Inhabitants		7		7		(1.9)
TUP/100 Lines Installed		1		3		(63.4)
Utilization Rate (in Service/Installed)		87.1%		88.2%		(1.1)p.p.
Digitalization Rate		100.0%		100.0%		-

Fixed Plant	The utilization rate showed a reduction of 1.1p.p. during 2Q06 and reached 87.1% in June. BrT has a technical reserve of nearly 1.4 million lines installed in order to immediately meet a demand increase, without the need of additional investments. At the end of 2Q06, Brasil Telecom’s plant was comprised of 10.8 million lines installed, 9.4 million of which were in service.
	The participation of the hybrid terminal – LigMix – in the plant in service remained steady at 8.7% by the end of June, the same percentage of March. The hybrid terminal is available in the centers with idle capacity upon verification of customer’s default, or in marketing campaigns targeted at low income customers. As from September on, the prepaid terminals will be replaced by the hybrid terminals and by AICE (Special Class Individual Access).

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Traffic 

Operating Data		2Q06		1Q06		2Q06/1Q06
						(%)
Exceeding Pulses (million)		2,142		2,291		(6.5)
VC-1 (million minutes)		700		745		(6.0)
Domestic Long Distance – LDN (million minutes)		1,395		1,427		(4.0)
VC-2 (million minutes)		160		153		4.4
VC-3 (million minutes)		100		105		(5.2)

Exceeding Local Pulses	In 2Q06, Brasil Telecom reached 2.1 billion exceeding pulses, representing a 6.5% reduction compared to 1Q06. Several factors have contributed to this performance, such as: less business days during the quarter, the FIFA World Cup, the increase in the plant of ADSL accesses and the expansion of the mobile plant.
Long-Distance Traffic	Long-distance traffic in 2Q06 decreased 4.0% compared to 1T06 and totaled 1.4 billion minutes. The factors that explain this reduction are less business days during the quarter, the increase of the share of LDN (Domestic Long Distance) plans with franchise and higher competition.
LD Market Share	Brasil Telecom closed 2Q06 with a 61.8% market share in the inter-regional segment and a 35.6% share in the international segment (quarterly average).
	In 2Q06, Brasil Telecom posted an average market share of 84.8% in the intra- regional segment, 0.7 p.p. higher than the 84.1% recorded in 2Q05. In the inter- regional and international segments, Brasil Telecom increased its share by 7.0 p.p. and 4.4 p.p., respectively of the market share within 12 months.

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Mobile Telephony

Operating Data		2Q06		1Q06		2Q06/1Q06
						(%)
Customers (thousand)		2,772		2,460		12.6
Postpaid		900		820		9.6
Prepaid		1,872		1,640		14.1
Net Additions (thousand)		311		248		25.3
Postpaid		79		128		(38.3)
Prepaid		232		120		93.3
Gross Additions (thousand)		515		399		29.2
Postpaid		107		152		(29.7)
Prepaid		409		247		65.2
Cancellations (thousand)		204		152		35.5
Postpaid		28		24		17.5
Prepaid		177		128		38.8
Annual Churn		31.3%		26.0%		0.2p.p.
Postpaid		12.8%		12.9%		-
Prepaid		40.3%		32.3%		0.2p.p.
Customer Acquisition Cost (SAC)		152		137		11.3
Market Share		10.7%		9.4%		0.1p.p.
Assisted Locations		796		782		1.8
% Coverage		87.0%		86.0%		-
Base Stations (ERBs)		2,147		2,123		1.1
Commutation and Control Centers (CCCs)		9		8		12.5
Employees		632		735		(14.0)

Mobile Accesses	BrT Móvel reached 2,772.0 thousand mobile accesses in service, representing a net addition of 310.9 thousand accesses in the quarter, against a reduction of 272 thousand accesses in the market of Region II. This figure represents 51.4% of the target of 1,087 thousand accesses estimated for 2006. At the end of 2Q06, BrT Móvel’s customer portfolio was 12.6% higher than that of 1Q06 and, compared to the same quarter of 2005, there was a 106.1% increase.
Customer Base Mix	By the end of June, the mobile plant was composed of 900.2 thousand postpaid plan subscribers (32.5% of the BrT Móvel’s customer base) which showed the highest share in postpaid among the mobile telephony operators present in Brazil.
Coverage	During 2Q06, BrT Móvel increased to 3,396 the number of points of sale and increased its coverage area in 796 locations, reaching 87% of the population in the Region II.
Market Share	By the end of 2Q06, BrT Móvel reached a 10.7% market share in its operating area, compared to 9.4% in 1Q06 and 5.9% in 1Q05. In the Midwest and North Regions, the company reached 13.7%, maintaining the third position in the rank. BrT Móvel has already exceeded the third entrant in terms of market share, in the Federal District and in the States of Acre, Rondônia, Tocantins, Mato Grosso and Goiás.

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DATA

Broadband 

ADSL Accesses	During 2Q06, Brasil Telecom added 70.8 thousand accesses to its plant, amounting to 1,154.9 thousand broadband accesses in service by the end of June 2006, a 6.5% and 54.5% increase compared to 1Q06 and 2Q05, respectively.
	The ADSL (ADSL/LES) penetration in 2Q06 reached 12.3%, compared to 11.3% in 1Q06 and 7.8% in 2Q005. This percentage is the most representative among the concessionaries.

Internet Providers

BrTurbo, iG and	Brasil Telecom Internet (“BrTI”), company leader in providing dial up access to the Internet access in the Brazilian market, has approximately 3.5 million of dial up Internet active users, who, together, were responsible for a traffic of 10.4 billion minutes in 2Q06, a growth of 15.5% compared to the traffic generated in 1Q06, when it reached 9.0 billion minutes, due to the seasonality. Together, the three component providers of BrTI also have approximately 1.1 million customers of paid services, including the provision of broadband access and value-added services, compared to 976 thousand clients in 1Q06.
iBest
	iBest, the largest dial up access provider in the Region II, with a market share estimated at 53.7% in 2Q06, 1.7 p.p. higher compared to 1Q06, is present in more than 1,700 cities, with approximately 11.5 million registered users, of which 1.4 million are active users.
	iG generated, in 2Q06, a traffic of 5.1 billion minutes, against 4.6 billion minutes in the previous quarter, being the leader in volume of generated traffic in the Regions I and III of PGO (General Concession Plan). It is present in more than 2,100 cities, it has 16.4 registered users and 1.8 million active users. The customer base of broadband access of iG grew 72% compared to the same period of 2005 (2Q05), reaching 239 thousand customers at the end of 2Q06. When compared to 1Q06, the broadband access customer base grew approximately 15%, considering that at that time IG had 208 thousand users.
	BrTurbo reached 635 thousand customers in the Region II at the end of 2Q06, a 61.6% growth compared to the same period of 2005 and a 10% growth in relation to the previous quarter. Approximately 55.5% of broadband access customers were subscribers of BrTurbo in Region II, representing a 1.5 p.p. growth compared to 1Q06, positioning the provider as the market leader in its region.
	At the end of 2Q06, Brasil Telecom Internet relied on 879 thousand broadband customers in Brazil, representing an 11% increase when compared to the 793 thousand broadband customers in 1Q06.

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ECONOMIC-FINANCIAL PERFORMANCE

Revenues

Local Service	The local service gross revenue reached R$1,702.2 million in 2Q06, 3.8% lower than   that recorded in 1Q06. Out of the total of the local service revenue, 70.9% came from   subscription and service measured revenue, and 28.0% represented revenues with VC-1   calls.
	Gross revenue with VC-1 calls reached R$476.2 million in 2Q06, 5.4% lower than   the one in 1Q06, reflecting the traffic drop. The fall trend of VC-1 traffic has been   proved since the second half of 2005, as a reflection of the aggressive promotional   campaigns of mobile operators focused on mobile-mobile traffic. Compared to 2Q05,   the gross revenue with VC-1 calls was 12.1% lower, mainly due to a 17.6% reduction   in traffic, offset by the 7.99% readjustment in the VC-1 fee in June 2005.
	In the second quarter, subscription gross revenue reached R$871.1 million, a 2.5%   reduction compared to the R$893.3 million recorded in 1Q06, due to the reduction of   133 thousand lines in the service plant and the reduction of 6.3 thousand hybrid lines.
	The gross revenue with service measured totaled R$336.0 million in 2Q06, 5.5%   lower than the one in 1Q06, reflecting the growth of the mobile telephony customer   base and the commercialization of ADSL accesses, which caused a 6.5% drop in the   volume of exceeding pulses. Compared to 2Q05, the gross revenue with service   measured was 8.8% lower, mainly due to the reduction of traffic, of approximately   14.1%, partially offset by a 7.27% fee readjustment in the local pulse fee in July 2005.
Public Telephony	Public telephony gross revenue reached R$138.8 million in 2Q06, 8.5% higher than the revenue reached in 1Q06 and 11.9% higher than the revenue of 2Q05. The variation compared to 1Q06 is mainly explained by the 6.2% increase in credits sales. The increase against 2Q05 was influenced by the fee readjustment of 7.37% in the credit rate of payphone card, in July 2006.
Long Distance	Gross revenue from LD services amounted to R$678.5 million in 2Q06, representing a 3.6% reduction compared to 1Q06. This performance basically reflects the 4.0% drop in traffic. Compared to 2Q05, LD revenue was 12.9% lower due to the 15.4% reduction in traffic, offset by the 2.94% fee readjustment applied as from July 2005. Another factor that has influenced the drop in LD revenue was the Company decision to discourage LD calls originated outside Region II, in order to prevent fraud.
Interconnection	Interconnection revenue in 2Q06 was R$99.7 million, an 8.1% and 43.1%   reduction compared to 1Q06 and to 2Q05. Such drop has been influenced by some   aggressive promotional campaigns promoted by the mobile telephony operators,   which stimulated the mobile-mobile traffic and, additionally, in relation to 2Q05,   there were reductions in interconnection fees, of about 13.3% in July 2005 and 19.1%   in January 2006.
Data  Communication	In 2Q06, gross revenue from data communication and other services of the main activity added up to R$562.6 million, a 4.5% increase compared to the previous quarter and a 24.6% increase compared to 2Q05. The ADSL revenue amounted to R$245.1, representing 43.6% of the total data communication. We stress the growth of network formation services (Interlan, IP Turbo, ServiÇo Plus, IP Dedicado) and the raise in ADSL accesses in service of 6.5% and 54.5% in 1Q06 and 2Q06, respectively.

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Mobile Telephony	In 2Q06, mobile telephony consolidated gross revenue totaled R$260.4 million, of which R$187.5 million referred to services and R$69.5 million to handsets and accessories sales. This performance accounts for a 14.4% increase compared to 1Q06 and a 72.8% increase compared to 2Q05.
	Compared to 1Q06 and 2Q05, the mobile telephony services gross revenue of 2Q06 surpassed by 9.2% and 131.8%, respectively, due to the increase in the customer portfolio. The gross revenue with handsets and accessories sales was 27.1% higher than the one recorded in 1Q06, due to the promotions of Valentine’s Day and Mothers’ Day.
Mobile Telephony ARPU	Total mobile telephony ARPU recorded in 2Q06 was R$26.0. ARPU referring to postpaid accesses was R$34.6 and ARPU related to prepaid was R$21.8. Compared to 1Q06, prepaid ARPU increased by 8.3% due to a significant increase of data communication, mainly stimulated by a promotion during FIFA World Cup.
Consolidated Net	The consolidated net revenue of Brasil Telecom reached R$2,450.7 million in 2Q06, 1.1% and 2.9% lower than in 1Q06 and 2Q05, respectively.
Revenue

Costs and Expenses

Operating Costs and Expenses	In 2Q06, operating costs and expenses totaled R$2,306.4 million, against R$2,321.7 million in 1Q06 and R$2,361.2 million in 2Q05. The items that considerably influenced the variation of 2Q06 compared to 1Q06 were: personnel (-14.5%), other (-63.2%), material (25.5%), provisions (19.5%) and advertising and marketing (107.1%).
Number of Employees	At the end of 2Q06, 5,384 employees worked in the fixed telephony segment of Brasil Telecom, compared to 5,420 in the previous quarter. BrT Móvel ended 2Q06 with 632 employees, against 735 in 1Q06. By the end of March, 6,016 people worked in the Group, a 2.3% reduction compared to March.
Personnel	In 2Q06, personnel costs and expenses reached R$162.7 million, a 14.5% decrease compared to the previous quarter. This variation results from a reduction in the staff occurred in 1Q06.
Third-party Services	Costs and expenses with third-party services, excluding interconnection and advertising & marketing, totaled R$575.2 million in 2Q06, 5.7% higher than the amounts recorded in the previous quarter, partially justified by the call center costs and expenses increase, due to the increase in BrT Móvel customer base.
Interconnection	Interconnection costs totaled R$480.6 million in 2Q06, a 3.6% and 20.0% reduction compared to 1Q06 and 2Q05, respectively. This better performance reflects the scale gain of BrT Móvel and the change in the profile of VC traffic, in which VC-1 calls, responsible for the larger portion of the interconnection cost (VU-M), reduced their share compared to the total traffic. In 2Q05, there was a 13.33% negative readjustment of TU-RL, offset by the readjustments of VU-M (4.5%) and TU-RIU (2.9%).

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Advertising and Marketing	Advertising & marketing expenses totaled R$42.2 million in 2Q06, a 107.1% increase compared to 1Q06 mainly resulting from advertising campaigns promoted in the Mothers´ Day and in the Valentine’s Day. The expenses of BrT Móvel related to advertising and marketing amounted to R$20.2 million, representing 47.9% of the Group total expenses with advertising and marketing.
Accounts  Receivable Losses  (PCCR)/Operating  Gross Revenue  (ROB)	The Accounts Receivable Losses (PCCR) and the gross revenue ratio in 2Q06 was 2.3%, against 3.1% in 1Q06 and totaled R$84.3 million in 2Q06, 25.2% lower than in 1Q06.
Provisions for Contingencies	In 2Q06, provisions for contingencies totaled R$140.3 million, a R$65.1 million increase compared to 1Q06, justified by provisions for tax and labor contingencies.
Materials	Material costs and expenses totaled R$105.2 million in 2Q06, a 25.5% increase compared to 1Q06. Material costs and expenses of BrT Móvel totaled R$81.8 million, representing 77.7% of the total material costs and expenses recorded by the Group. Excluding the costs and expenses of BrT Móvel with material, the material costs and expenses of Brasil Telecom reached R$23.5 million in 2Q06, against R$23 million in 1Q06 and R$24.7 million in 2Q05.
Other Operating  Costs and  Expenses/Revenues	Other operating costs and expenses amounted to R$46.7 million in 2Q06, a   63.2% reduction compared to 1Q06, with fines resulting from the termination of   operating agreements with maintenance services providers in the amount of R$31.3   million, offset, among other factors, by the recovery of State and Federal taxes.

EBITDA 

R$813.6 million EBITDA	Brasil Telecom’s consolidated EBITDA was R$813.6 million in 2Q06. The consolidated EBITDA margin reached 33.2% in 2Q06. In 1Q06, the EBITDA reached R$825.3 million, representing an EBITDA margin of 33.3%, against an R$827.6 million EBITDA in 2Q05, with a 32.8% margin.
	EBITDA of BrT Móvel stood negative at R$47.9 million in 2Q06, representing a negative EBITDA margin of 19.1%. The performance of BrT Móvel in 2Q06 is linked to the scale gain obtained due to the increase in the subscriber base and to the customer acquisition cost (SAC), both in compliance with the goals established by Brasil Telecom.

Indebtedness 

Total Debt	By the end of June 2006, Brasil Telecom’s consolidated gross debt totaled R$4,252.2 million, 2.0% lower than that registered by the end of March.
Net Debt	Brasil Telecom closed 2Q06 with a cash of R$2,034.7 million, against R$1,865.0 million at the end of March. Additionally, in 2Q06, the Company had R$191.4 million referring to contractual retentions related to debt covenants and R$106.5 million, related to short-term temporary investments. In 1Q06, the amount of contractual retentions was R$191.4 million and there were no temporary investments. The consolidated net debt totaled R$1,919.5 million, 15.9% lower than that recorded in March 2006.

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Long-term debt	In June, 69.3% of the total debt was allocated in the long term.
Accumulated Cost	The Company’s consolidated debt had in 2Q06 an accumulated cost of 11.5% p.a., equivalent to 72.2% of the CDI.
of Debt
Financial Leverage	At the end of June 2006, Brasil Telecom’s financial leverage, represented by the ratio of its net debt to shareholders’ equity, was equal to 36.9%, against 43.2% in the previous quarter.

Investments 

R$ Million

Investments in Permanent Assets				2Q06		1Q06		2Q06/1Q06
								(%)
Network Expansion				153.2		99.5		54,0
- Conventional Telephony				15.8		0.3		N.A.
- Transmission Backbone				9.8		2.4		305.7
- Data Network				79.0		33.9		132.8
- Intelligent Network				0.1		0.7		(87.8)
- Network Management Systems				0.5		0.4		27.0
- Other Investments in Network Expansion				48.1		61.7		(22.1)
Network Operation				53.1		50.9		4.4
Public Telephony				1.9		1.4		33.5
Information Technology				14.8		8.5		74.8
Expansion Personnel				19.5		26.9		(27.4)
Other				32.1		22.3		43.9
Fixed Telephony Total				274.6		209.4		31.1
BrT Celular				60.3		5.2		1.066.0
Mobile Telephony Total				60.3		5.2		1.066.0
Total Investment				334.9		214.6		56.0

Investments in permanent assets	In 2Q06, Brasil Telecom investments totaled R$334.9 million, of which R$274.6 million were invested in fixed telephony, and R$60.3 million in mobile telephony. Compared to 1Q06, investments had a 56.0% increase, and they are according to the investment schedule estimated for 2006.

-.-.-.-.-.-.-.-.-.-.-.-.-

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09.01 - INVESTMENTS IN SUBSIDIARIES AND/OR ASSOCIATED COMPANIES

1 - ITEM	2 - NAME OF SUBSIDIARY/ASSOCIATED COMPANY	3 - CNPJ - TAXPAYER REGISTER	4 - CLASSIFICATION	5 - OWNERSHIP % IN SUBSIDIARY'S	6 - SHAREHOLDER'S EQUITY % IN PARENT COMPANY
7 - TYPE OF COMPANY		8 - NUMBER OF SHARES IN CURRENT QUARTER (THOUSAND)		9 - NUMBER OF SHARES IN PRIOR QUARTER (THOUSAND)

01	14 BRASIL TELECOM S.A.	76.535.764/0001-43	SUBSIDIARY PUBLICLY HELD COMPANY	67.28	69.52
COMMERCIAL, INDUSTRIAL COMPANY AND OTHERS		368,187,402		363,961,565

02	NOVA TARRAFA PARTICIPAÇÕES LTDA.	03.001.341/0001-70	SUBSIDIARY NON-PUBLICLY HELD  COMPANY	99.99	0.65
COMMERCIAL, INDUSTRIAL COMPANY AND OTHERS		32,625		32,625

03	NOVA TARRAFA INC.	. . / -	SUBSIDIARY NON-PUBLICLY HELD  COMPANY	100.00	0.03
COMMERCIAL, INDUSTRIAL COMPANY AND OTHERS		1		1

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16.01 - OTHER INFORMATION WHICH THE COMPANY UNDERSTANDS RELEVANT

In compliance with the Corporate Governance Differentiated Practices Rules, the Company discloses the additional information below, related to its shareholders’ compositions:

1. OUTSTANDING 

As of 06/30/2006				In units of shares

Shareholder	Common Shares	%	Preferred Shares	%	Total	%
Direct and Indirect – Parent	81,848,936,875	61.07	12,979,222,374	5.65	94,828,159,249	26.05
Management
Board of Directors	37,397	0.00	26,928	0.00	64,325	0.00
Directors	461	0.00	2,025,989	0.00	2,026,450	0.00
Fiscal Board	5,648	0.00	5,644	0.00	11,292	0.00
Treasury Shares	1,480,800,000	1.10	-	-	1,480,800,000	0.41
Other Shareholders	50,701,907,822	37.83	216,956,244,749	94.35	267,658,152,571	73.54
Total	134,031,688,203	100.00	229,937,525,684	100.00	363,969,213,887	100.00
Outstanding Shares in the Market	50,701,913,470	37.83	216,956,250,393	94.35	267,658,163,863	73.54

As of 06/30/2005				In units of shares

Shareholder	Common Shares	%	Preferred Shares	%	Total	%
Direct and Indirect – Parent	81,145,572,182	60.54	16,932,383,489	7.36	98,077,955,671	26.95
Management
Board of Directors	35,265	0.00	52,577	0.00	87,842	0.00
Directors	5,513	0.00	2,030,663	0.00	2,036,176	0.00
Fiscal Board	13,694	0.00	13,696	0.00	27,390	0.00
Treasury Shares	1,480,800,000	1.11	-	-	1,480,800,000	0.41
Other Shareholders	51,405,261,549	38.35	213,003,045,259	92.64	264,408,306,808	72.64
Total	134,031,688,203	100.00	229,937,525,684	100.00	363,969,213,887	100.00
Outstanding Shares in the Market	51,405,275,243	38.35	213,003,058,955	92.64	264,408,334,198	72.65

2. SHAREHOLDERS HOLDING OVER 5% OF THE VOTING CAPITAL (As of 06/30/2006)

The shareholders, who directly or indirectly, hold more than 5% of the Company’s common and preferred shares, are as follows:

Brasil Telecom ParticipaÇões S.A.

In thousands of shares

Name	General  Taxpayers’  Register	Citizenship	Common    Shares	%	Preferred    shares	%	Total  shares	%
Solpart ParticipaÇões S.A.	02.607.736-0001/58	Brazilian	68,356,161	51.00	0	0.00	68,356,161	18.78
Previ	33.754.482-0001/24	Brazilian	6,895,682	5.14	7,840,963	3.41	14,736,645	4.05
BNDES ParticipaÇões S.A.	00.383.281/0001-09	Brazilian	1,271,491	0.95	11,498,992	5.00	12,770,483	3.51
Treasury Shares	-	-	1,480,800	1.10	-	-	1,480,800	0.41
Other	-	-	56,027,554	41.81	210,597,571	91.59	266,625,125	73.25
Total	-	-	134,031,688	100.00	229,937,526	100.00	363,969,214	100.00

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Distribution of the Capital from Controlling Shareholders up to Individuals 

Solpart ParticipaÇões S.A.

In units of shares

Name	General Taxpayers’ Register	Citizenship	Common Shares	%	Preferred shares	%	Total shares	%
Timepart ParticipaÇões Ltda.	02.338.536-0001/47	Brazilian	509,991	0.02	-	-	- 509,991	0.02
Techold ParticipaÇões S.A.	02.605.028-0001/88	Brazilian	1,318,229,979	61.98	-	-	- 1,318,229,979	61.98
Telecom Italia International N.V.	-	Italian	808,259,996	38.00	-	-	- 808,259,996	38.00
Other	-	-	35	0.00	-	-	- 35	0.00
Total	-	-	2,127,000,001	100.00	-	-	- 2,127,000,001	100.00

Timepart ParticipaÇões Ltda.

In units of quotas

Name	General Taxpayers’  Register	Citizenship	Quotas	%
Privtel Investimentos S.A.	02.620.949.0001/10	Brazilian	208,830	33.10
Teleunion S.A.	02.605.026-0001/99	Brazilian	213,340	33.80
Telecom Holding S.A.	02.621.133-0001/00	Brazilian	208,830	33.10
Total	-	-	631,000	100.00

Privtel Investimentos S.A.

In units of shares

Name	General  Taxpayers’ Register	Citizenship	Common  Shares	%	Preferred shares	%	Total  shares	%
Eduardo Cintra Santos	064.858.395-34	Brazilian	19,998	99.99	-	-	19,998	99.99
Other	-	-	2	0.01	-	-	2	0.01
Total	-	-	20,000	100.00	-	-	20,000	100.00

Teleunion S.A.

In units of shares

Name	General  Taxpayers’ Register	Citizenship	Common  Shares	%	Preferred shares	%	Total  shares	%
Luiz Raymundo Tourinho Dantas  (estate)	000.479.025-15	Brazilian	19,998	99.99	-	-	19,998	99.99
Other	-	-	2	0.01	-	-	2	0.01
Total	-	-	20,000	100.00	-	-	20,000	100.00

Telecom Holding S.A.

In units of shares

Name	General  Taxpayers’ Register	Citizenship	Common  Shares	%	Preferred shares	%	Total  shares	%
Woog Family Limited  Partnership	-	American	19,997	99.98	-	-	19,997	99.98
Other	-	-	3	0.02	-	-	3	0.02
Total	-	-	20,000	100.00	-	-	20,000	100.00

Techold ParticipaÇões S.A.

In units of shares

Name	General  Taxpayers’ Register	Citizenship	Common  Shares	%	Preferred shares	%	Total  shares	%
Invitel S.A.	02.465.782-0001/60	Brazilian	1,061,443,255	100.00	341,898,149	100.00	1,403,341,404	100.00
Fábio de Oliveira Moser	777.109.677-87	Brazilian	1	0.00	-	-	1	0.00
Verônica Valente Dantas	262.853.205-00	Brazilian	1	0.00	-	-	1	0.00
Maria Amália Delfim de Melo Coutrim	654.298.507-72	Brazilian	1	0.00	-	-	1	0.00
Total	-	-	1,061,443,258	100.00	341,898,149	100.00	1,403,341,407	100.00

 

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Invitel S.A.

In units of shares

Name	General Taxpayers’  Register	Citizenship	Common Shares	%	Preferred shares	%	Total shares	%
FundaÇão 14 de Previdência Privada	00.493.916-0001/20	Brazilian	92,713,711	6.269	-	-	92,713,711	6.269
Telos – Fund. Embratel de Segurid.	42.465.310-0001/21	Brazilian	33,106,348	2.239	-	-	33,106,348	2.239
Funcef – Fund. dos Economiários	00.436.923-0001/90	Brazilian	571,411	0.039	-	-	571,411	0.039
Petros – Fund. Petrobrás Segurid.	34.053.942-0001/50	Brazilian	55,903,360	3.78	-	-	55,903,360	3.78
Previ – Caixa Prev. Func. B. Brasil	33.754.482-0001/24	Brazilian	285,901,442	19.333	-	-	285,901,442	19.333
Zain ParticipaÇões S.A.	02.363.918-0001/20	Brazilian	1,009,796,295	68.282	-	-	1,009,796,295	68.282
Citigroup Venture Capital International Brazil LP	-	Cayman Islands	302,945	0.02	-	-	302,945	0.02
Investidores Institucionais FIA	01.909.558-0001/57	Brazilian	419,917	0.028	-	-	419,917	0.028
Opportunity Fund	-	Virgin Islands	69,587	0.005	-	-	69,587	0.005
CVC Opportunity Invest. Ltda.	03.605.085-0001/20	Brazilian	14	0	-	-	14	0
Priv FIA	02.559.662-0001/21	Brazilian	37,778	0.003	-	-	37,778	0.003
Tele FIA	02.597.072-0001/93	Brazilian	35,417	0.002	-	-	35,417	0.002
Verônica Valente Dantas	262.853.205-00	Brazilian	1	0	-		1	0
Maria Amália Delfim de Melo Coutrim	654.298.507-72	Brazilian	1	0	-	-	1	0
Lênin Florentino de Faria	203.561.374-49	Brazilian	2	0	-	-	2	0
Ricardo Knoepfelmacher	351.080.021-49	Brazilian	1	0	-	-	1	0
Sérgio Spinelli Silva Júnior	111.888.088-93	Brazilian	1	0	-	-	1	0
Kevin Michael Altit	842.326.847-00	Brazilian	1	0	-	-	1	0
Fábio de Oliveira Moser	777.109.677-87	Brazilian	2	0	-	-	2	0
Sérgio Ros Brasil Pinto	010.833.047-80	Brazilian	1	0	-	-	1	0
Total	-	-	1,478,858,235	100.00	-	-	1,478,858,235	100.00

Zain ParticipaÇões S.A.

In units of shares

Name	General Taxpayers’  Register	Citizenship	Common Shares	%	Preferred shares	%	Total shares	%
Investidores Institucionais FIA	01.909.558-0001/57	Brazilian	552,668,015	45.850	-	-	552,668,015	45.850
Citigroup Venture Capital International Brazil LP	-	Cayman Islands	511,953,674	42.473	-	-	511,953,674	42.473
Opportunity Fund	-	Virgin Islands	108,497,504	9.001	-	-	108,497,504	9.001
Priv FIA	02.559.662-0001/21	Brazilian	28,765,247	2.386	-	-	28,765,247	2.386
Opportunity Lógica Rio Consultoria e	01.909.405-0001/00
ParticipaÇões Ltda		Brazilian	3,475,631	0.288	-	-	3,475,631	0.288
Tele FIA	02.597.072-0001/93	Brazilian	9,065	0.002	-	-	9,065	0.002
Opportunity Equity Partners	01.909.405-0001/00
Administradora de Recursos Ltda.		Brazilian	2	0.000	-	-	2	0.000
Opportunity Investimentos Ltda.	03.605.085-0001/20	Brazilian	15	0.000	-	-	15	0.000
Verônica Valente Dantas	262.853.205-00	Brazilian	603	0.000	-	-	603	0.000
Maria Amália Delfim de Melo Coutrim	654.298.507-72	Brazilian	90	0.000	-	-	90	0.000
Danielle Silbergleid Ninio	016.744.087-06	Brazilian	2	0.000	-	-	2	0.000
Daniel Valente Dantas	063.917.105-20	Brazilian	2	0.000	-	-	2	0.000
Eduardo Penido Monteiro	094.323.965-68	Brazilian	431	0.000	-	-	431	0.000
Ricardo Wiering de Barros	806.663.027-15	Brazilian	2	0.000	-	-	2	0.000
Pedro Paulo Elejalde de Campos	264.776.450-68	Brazilian	3	0.000	-	-	3	0.000
Renato Carvalho do Nascimento	633.578.366-53	Brazilian	3	0.000	-	-	3	0.000
Sérgio Spinelli Silva Júnior	111.888.088-93	Brazilian	1	0.000	-	-	1	0.000
André Rizzi de Oliveira	135.529.508-42	Brazilian	1	0.000	-	-	1	0.000
Alberto Ribeiro Guth	759.014.807-59	Brazilian	1	0.000	-	-	1	0.000
Hiram Bandeira Pagano Filho	085.074.717-14	Brazilian	1	0.000	-	-	1	0.000
Mariana Sarmento Meneghetti	069.991.807-33	Brazilian	1	0.000	-	-	1	0.000
Ricardo Knoepfelmacher	351.080.021-49	Brazilian	1	0.000	-	-	1	0.000
Sérgio Ros Brasil Pinto	010.833.047-80	Brazilian	1	0.000	-	-	1	0.000
Kevin Michael Altit	842.326.847-00	Brazilian	1	0.000	-	-	1	0.000
Total	-	-	1,205,370,297	100.00	-	-	1,205,370,297	100.00

 

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17.01 – SPECIAL REVIEW REPORT – UNQUALIFIED

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

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Management and Shareholders of
Brasil Telecom ParticipaÇões S.A.
Brasília – DF

1.	We have performed a special review of the accompanying interim financial statements of Brasil Telecom ParticipaÇões S.A. and subsidiaries (Company and consolidated), consisting of the balance sheets as of June 30, 2006, and the related statements of income for the quarter and six-month period then ended and the performance report, all expressed in Brazilian reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company’s management.
2.	We conducted our review in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council, which consisted principally of: (a) inquiries of and discussions with persons responsible for the accounting, financial and operating areas as to the criteria adopted in preparing the interim financial statements, and (b) review of the information and subsequent events that had or might have had material effects on the financial position and results of operations of the Company and its subsidiaries.
3.	Based on our special review, we are not aware of any material modifications that should be made to the interim financial statements referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements.
4.	We conducted our special review for the purpose of issuing a review report on the mandatory interim financial statements. Supplemental disclosure of cash flow information is presented for purposes of additional analysis.
	Such supplemental information for the six-month period ended June 30, 2006 has been subjected to the same review procedures applied to the interim financial statements and, based on our special review, we are not aware of any material modifications that should be made to the statement of cash flows for it to be presented fairly, in all material respects, in relation to the interim financial statements taken as a whole.
5.	The balance sheets as of March 31, 2006, presented for comparative purposes, were reviewed by us and our review report thereon, dated May 12, 2006, was unqualified. In addition, the statements of income for the quarter and six-month period ended June 30, 2005 and the statement of cash flows for the six-month period ended June 30, 2005, presented for comparative purposes, were reviewed by other independent auditors, whose review report thereon, dated July 29, 2005, was unqualified and contained an emphasis of matter paragraph regarding the agreement entered into on April 28, 2005, establishing the merger of the indirect subsidiary 14 Brasil Telecom Celular S.A. into Tim Brasil ServiÇos e ParticipaÇões S.A.
6.	The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil.

São Paulo, July 31, 2006 

DELOITTE TOUCHE TOHMATSU	Marco Antônio Brandão Simurro
Auditores Independentes	Engagement Partner

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ANNEX	FRAME	DESCRIPTION	PAGE
01	01	IDENTIFICATION	1
01	02	ADDRESS OF COMPANY HEADQUARTERS	1
01	03	INVESTOR RELATIONS OFFICER - (Address for correspondence to Company)	1
01	04	REFERENCE/INDEPENDENT ACCOUNTANT	1
01	05	COMPOSITION OF ISSUED CAPITAL	2
01	06	COMPANY’S CHARACTERISTICS	2
01	07	SUBSIDIARIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENT	2
01	08	DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER	2
01	09	ISSUED CAPITAL AND CHANGES IN CURRENT YEAR	3
01	10	INVESTOR RELATIONS OFFICER	3
02	01	BALANCE SHEET - ASSETS	4
02	02	BALANCE SHEET - LIABILITIES	5
03	01	STATEMENT OF INCOME	7
04	01	NOTES TO THE FINANCIAL STATEMENTS	9
05	01	COMMENTS ON THE COMPANY’S PERFORMANCE IN THE QUARTER	65
06	01	CONSOLIDATED BALANCE SHEET - ASSETS	66
06	02	CONSOLIDATED BALANCE SHEET - LIABILITIES	67
07	01	CONSOLIDATED STATEMENT OF INCOME	69
08	01	COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER	71
09	01	INVESTMENTS IN SUBSIDIARIES AND/OR ASSOCIATED COMPANIES	79
16	01	OTHER INFORMATION WHICH THE COMPANY UNDERSTANDS RELEVANT	80
17	01	REPORT OF INDEPENDENT ACCOUNTANTS ON SPECIAL REVIEW	83
		BRASIL TELECOM S.A.
		NOVA TARRAFA PARTICIPAÇÕES LTDA.
		NOVA TARRAFA INC.

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