Telefonica Brasil (VIV) Risk Analysis

We are organized under the laws of Brazil, and all of our executive officers and our independent public accountants reside or are based in Brazil. Also, four of our 12 board members reside or are based in Brazil. Substantially all of our assets are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce any judgments obtained in the United States or other jurisdictions outside Brazil against us or such other persons. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in protecting their interests due to actions by us, our board members or executive officers than would shareholders of a U.S. corporation.

Our ability to consummate the transactions contemplated by the Oi Agreement is subject to certain factors outside our control, such as various closing conditions. These include customary closing conditions in addition to others that, despite being usually applicable to this type of transaction, are beyond our control, such as the requirement to obtain approvals from certain governmental regulatory authorities, including from CADE and ANATEL. Although we have obtained approval of the transactions from CADE and ANATEL as of the date of this annual report, our ability to consummate the transactions contemplated by the Oi Agreement is also subject to other factors that are beyond our control, such as the possibility of litigation that may arise relating to the regulatory approvals process or the Oi Agreement transactions generally. See "Item 4.Information on the Company-A. History and Development of the Company-Historical Background-Acquisition of UPI Mobile Assets of the Oi Group." In addition, achieving the targeted synergies of the Oi Agreement, such as operating and long-term strategic cost-savings, will depend in part upon whether we can integrate the assets and operations contemplated thereunder in an efficient and effective manner. We may not be able to accomplish this integration process smoothly or successfully. We and the Oi Group operate numerous systems, including those involving clients, spectrum, infrastructure, management information, accounting and finance, sales, billing, and regulatory compliance. Moreover, the integration of the assets and operations will require significant managerial resources, which may distract management's attention from day-to-day operations. Potential employee uncertainty and lack of focus during the integration process may also disrupt our business and result in undesired employee attrition. Our management's failure to successfully integrate the assets and operations contemplated by the Oi Agreement with our business could have a material adverse effect on our business, results of operations and financial condition. Our failure to realize the full extent, or any, of the anticipated benefits and synergies of the acquisition of assets and operations under the Oi Agreement, as well as any delays in the integration process, could have an adverse effect on our business, results of operations and financial condition.

The market for securities issued by Brazilian companies may be influenced, to varying degrees, by economic conditions in both developing and developed economies. The reaction of investors to developments in other countries may have an adverse impact on the market value of securities of Brazilian companies. The prices of shares traded on the B3, for example, have historically been sensitive to fluctuations in interest rates in the United States, as well as variations of the main U.S. stock exchanges. Additionally, crises in other emerging countries or the economic policies of other countries may reduce investor demand for securities of Brazilian companies, including our common shares and ADSs. Any of the foregoing developments may adversely affect the market value of our common shares and ADSs and hinder our ability to access the capital markets and finance our operations in the future on acceptable terms and costs, or at all. To the extent that economic problems in emerging market countries or elsewhere adversely affect Brazil, our business and the market value of our common shares and ADSs could be adversely affected. Furthermore, we cannot assure you that, in the event of adverse developments in emerging market economies, the international capital markets will remain open to Brazilian companies or that the resulting interest rates in such markets will be advantageous to us. Decreased foreign investment in Brazil may negatively affect growth and liquidity in the Brazilian economy, which in turn may have a negative impact on our business. Disruption or volatility in the global financial markets could further increase negative effects on the financial and economic environment in Brazil, which could have a material adverse effect on us.

Since December 2019, SARS-CoV-2, a novel strain of coronavirus referred to as COVID-19, has spread throughout the world. On January 31, 2020, the WHO announced that COVID-19 was a global health emergency and on March 3, 2020, the World Health Organization categorized COVID-19 as a pandemic. The COVID-19 pandemic has resulted in numerous deaths and the imposition of local, municipal and national governmental "shelter-in-place" and other public health measures, border closures and other travel restrictions, causing unprecedented economic disruption in much of the world. In Brazil, states and municipalities, including those in which we operate, adopted directives set by the Brazilian Ministry of Health (Ministério da Saúde), and implemented measures to control the propagation of the disease, such as travel restrictions and measures to encourage social distancing, which resulted in the shutdown of restaurants, hotels, shopping centers, places of public congregation, parks and other public spaces. Uncertainty about the effectiveness of vaccines and the emergence of new strains or mutations of the virus that render vaccination ineffective or inefficient can make it difficult or impossible for the government to contain the pandemic, which could contribute to the implementation of new restrictions, thereby negatively affecting our business and operations. Since the beginning of the COVID-19 pandemic, the Brazilian government determined that the telecom sector is an essential service, which allowed us to continue our field maintenance activities without violating restrictions on movement that were generally imposed to address the pandemic. However, in accordance with recommendations from authorities, we transitioned a substantial majority of our employees to hybrid or work-from-home. In Brazil generally and in particular regions where we have a significant employee presence, facilities or critical operations, the outbreak of COVID-19 impacted our ability to manage day-to-day operations and service our customers and resulted in, among other things, loss of revenue, although we have also experienced a decrease in our costs of operations due to lower variable costs such as sales commissioning, call centers, billing and advertising. Moreover, we implemented corporate and personal travel restrictions for employees and vendors, canceled events and enabled work-from-home for many employees by equipping them to safely support customers remotely. We also implemented additional safety measures for our retail stores and field operations teams. Additionally, at certain points of the pandemic, we were required to temporarily close or reduce operations at some of our retail locations, facilities and customer call centers, although these locations have been since reopened, oftentimes with reduced hours of operation or customer capacity limitations, as stay-at-home orders began to ease in São Paulo and other Brazilian cities. Although stay-at-home orders have eased in the primary markets in which we operate, we may be required to temporarily close or reduce operations at more of or all of our retail locations, facilities or call centers again if there is a resurgence of COVID-19 or its variants in the markets in which we operate. The foregoing effects, and other effects of COVID-19, may continue for an unknown period of time. Our business has been, and may continue to be, negatively impacted by the effects of, or precautions taken to avoid exposure to, COVID-19, such as reduced travel or recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine, and by the resulting disruptions to economic conditions and financial markets. Such impacts include, but are not limited to: - Reduced sales of certain of our products and services, such as handset sales and upsells made through our retail stores and upsells through our call centers and other channels, as a result of public health measures;- Reduced availability of certain equipment in the supply chain due to increased demand;- Disruptions to our third-party providers, including those who provide many of our information technology, call center functions, certain accounting functions and other critical vendor services;- Reduced workforces caused by, among other things, the temporary inability of the workforce to work due to illness, quarantine, or government mandates, or temporary unwillingness to work due to health concerns;- Reduced customer demand or customer payment of accounts receivables as a result of adverse economic conditions resulting from the COVID-19 pandemic; and - Increases in provisions for bad debt as a result of increased unemployment and the inability of certain customers to pay bills and late fees as a result of disruptions caused by the COVID-19 pandemic. Potential future impacts include, but are not limited to: - Service disruptions or reduced bandwidth for copper-based broadband customers due to significant short-term increases in bandwidth usage due to individuals working from home and/or significantly higher expenses attributable to infrastructure investments required to meet such higher network utilization trends;- Imposition of governmental requirements preventing our termination services as a result of non-payment, thus encouraging customer defaults on invoices, resulting in a decline in our cash flows from operations and an increase in our expected losses on trade receivables;- Increased supply chain risks such as increased scrutiny or embargoing of goods produced in infected areas;- Increased health insurance and labor-related costs arising from illness, quarantine and the implementation of social distancing and work-from-home measures;- Reduced employee productivity and a negative impact on the execution of our business plans and operations as employees must balance working remotely from home with personal responsibilities, such as child care and education;- Increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us, our customers or other third parties as a result of employees or third-party vendors' employees working remotely; and - In the event of continued restrictions on certain activities, or a natural disaster, power outage, connectivity issue or other event that impacts our employees' ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue to support our customers' needs and respond to inquiries through call center operations or to perform necessary or routine repairs, maintenance and installation activities, which could adversely affect our operations and sales. The foregoing impacts, and other impacts of COVID-19 discussed elsewhere in these risk factors, are broadly consistent with those generally affecting the economic, financial, regulatory and political conditions in Brazil and elsewhere in the world, and are generally applicable to the industries and markets in which the Company and its subsidiaries operate. These impacts could materially increase our costs, negatively impact our consumer and business sales and damage the Company's financial condition, results of operations, cash flows and liquidity position, possibly to a significant degree. Federal, state and municipal governments in Brazil may announce further restrictions on the general population and we cannot predict what effect this will have on our operations and sales in the long term. We cannot predict the duration of the pandemic, the effectiveness of governmental or other measures taken to attempt to curb the pandemic, or the duration of any such measures. In addition, following the pandemic and the termination of any such governmental restrictions, the needs and preferences of our customers may have been altered. The continuation or a future resurgence of the pandemic could precipitate or aggravate the other risk factors that we face, which in turn could further materially and adversely affect our business, financial condition, liquidity, results of operations and profitability, including in ways that are not currently known to us or that we do not currently consider to present significant risks. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, clients, suppliers and shareholders. For more information about specific measures that we have adopted and potential impacts on our business operations, see "Item 4. Information on the Company-A. History and Development of the Company-Recent Developments-COVID-19 Pandemic" and "Item 5. Operating and Financial Review and Prospects- A. Operating Results-Overview-Effects of the COVID-19 Pandemic."

We are exposed to contingent liabilities resulting from our contracting structure, which includes third-party service providers. Such potential liabilities may involve labor claims by third-party providers that are treated as direct employees as well as joint liability claims relating to wage or overtime pay complaints and workplace injury claims. If a significant portion of these contingent liabilities is decided against us and for which we have not made adequate provisions, our financial condition and results of operation may be adversely affected. Furthermore, if the contracting of third party service are considered to involve the main activities of the company, it may be characterized as direct employment, which would significantly increase our costs and as a result, we may be subject to administrative proceedings by the relevant labor regulators and may be required to pay fines to the third-party service providers.

Mergers and acquisitions may change market dynamics, create competitive pressures, force small competitors to find partners and impact our financial condition; and may require us to adjust our operations, marketing strategies (including promotions), and product portfolio. The entry of a new market participant with significant financial resources or potential changes in strategy by existing telecommunications service providers can change the competitive environment in the Brazilian market. We may be unable to keep pace with these changes, which could affect our ability to compete effectively and have a material adverse effect on our business, financial condition and results of operations. Additional joint ventures, mergers and acquisitions among telecommunications service providers are possible in the future. If such consolidation occurs, it may result in increased competition within our market. We may be unable to adequately respond to pricing pressures resulting from consolidation in our market, adversely affecting our business, financial condition and results of operations. We may also consider engaging in merger or acquisition activity in response to changes in the competitive environment, which could divert resources away from other aspects of our business.