We are keeping our Buy recommendation on Vivo Participações S.A. (VIV). The company has a dominant position and a strong brand in the fast growing Brazilian wireless business. Fourth quarter operating results were positive, even though net income was lower than expected as a result of higher depreciation expenses.

The short-term outlook remains encouraging due to positive industry trends coupled with the improvement in the Brazilian economic environment. Also, the acquisition of Telemig (TMB) and the new bands in all the regions where the company was not yet authorized to operate were positive news.

Presently, Vivo is trading at 45.1x our estimated 2008 earnings, and 5.5x its enterprise value to 2008 EBITDA (a more common valuation metric for the wireless industry). We believe the current valuation of VIV is attractive if compared to Tim Participações (TSU), its biggest competitor in the Brazilian market. Moreover, if we analyze the Price/sales ratio, the stock also seems to be highly undervalued.

We think that the company has a strong brand in Brazil and is posting improved results every quarter, including positive operating numbers and a declining net debt. We believe in the near future the stock will trade around 7x its enterprise value (EV)/2008 estimated EBITDA, closer to the industry mean. Our target price is US$8.