SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

For the month of March, 2014

Commission File Number 0-28860

NET SERVIÇOS DE COMUNICAÇÃO S.A.

(Exact name of registrant as specified in its charter)

Net Communications Services Inc.

(Translation of Registrant's name into English)

Rua Verbo Divino, 1356
04719-002 - São Paulo-SP
Federative Republic of Brazil

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No ___X____

If "Yes" is marked, indicate below the file number assigned to the Registrant
in connection with Rule 12g3-2(b):82-___

~~CONSOLIDATED~~ Net ~~FORM~~Serviços de Comunicação S.A.

~~Management~~ Financial ~~and Related Persons’ Negotiation of Securities Issued by the Company~~Statements

~~Article~~ December 1131, -2013 ~~CVM~~and ~~Instruction # 358/2002~~ 2012

In With ~~February~~Reports ~~2014,~~of noIndependent ~~operations~~Registered ~~were~~Public ~~executed~~Accounting ~~in compliance with Article 11 - CVM Instruction # 358/2002~~Firm

Company Name: Net Serviços de Comunicação S.A.

Group and Related Persons

( ) Board of Directors

( X ) Management

( ) Controlling Group / Shareholders

( ) Technical and Consulting Committees

Initial Balance

Securities/ Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

Preferred

ADR

Preferred shares abroad

Operations in the Month

Securities / Derivatives

Securities Characteristics

Intermediary

Operation

Day

Quantity

Price

Volume (R$)

Common

Preferred

ADR

Preferred shares abroad

Final Balance

Securities / Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

0.0%

Preferred

0.0%

ADR

Preferred shares abroad

0.0%

NET SERVIÇOS DE COMUNICAÇÃO S.A.

~~CONSOLIDATED~~ Financial ~~FORM~~statements

~~Management~~December ~~and~~31, ~~Related~~2013 ~~Persons’~~and ~~Negotiation of Securities Issued by the Company~~2012

~~Article 11 - CVM Instruction # 358/2002~~ Contents

In Independent ~~February~~auditor’s ~~2014,~~report noon ~~operations~~financial ~~were~~statements 1 Audited ~~executed~~consolidated financial statements Income statements 3 Statements of comprehensive income 4 Balance sheets 5 Statements of changes in ~~compliance~~equity 7 Statements ~~with~~of ~~Article~~cash 11flows 8 Statements -of ~~CVM~~value ~~Instruction~~added 9 Notes #to ~~358/2002~~the financial statements 10

Company Name: Net Serviços de Comunicação S.A.

Group and Related Persons

( X ) Board of Directors

( ) Management

( ) Controlling Group / Shareholders

( ) Technical and Consulting Committees

Initial Balance

Securities/ Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

Preferred

Debenture

Operations in the Month

Securities / Derivatives

Securities Characteristics

Intermediary

Operation

Day

Quantity

Price

Volume (R$)

Common

Preferred

Debenture

Preferred shares abroad

Final Balance

Securities/ Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

Preferred

Debenture

INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS

~~CONSOLIDATED~~To ~~FORM~~Shareholders and Board Members of

~~Management~~NET ~~and~~SERVIÇOS ~~Related~~DE ~~Persons’~~COMUNICAÇÃO ~~Negotiation of Securities Issued by the Company~~S.A.

~~Article~~São 11Paulo - ~~CVM Instruction # 358/2002~~ SP

InWe ~~February~~have ~~2014~~examined the individual and consolidated financial statements of NET SERVIÇOS DE COMUNICAÇÃO S.A., norespectively ~~operations~~identified ~~were~~as ~~executed~~Parent Company and Consolidated, which comprise the balance sheet as of December 31, 2013 and the respective statements of income, of comprehensive income, of changes in ~~compliance~~net ~~with~~worth ~~Article~~and 11cash -flow ~~CVM~~for ~~Instruction~~the #year ~~358/2002~~then ended, as well as a summary of the main accounting practices and other notes.

Company Name: Net Serviços de Comunicação S.A.

Group and Related Persons

( ) Board of Directors

( ) Management

( X ) Controlling Group / Shareholders

( ) Technical and Consulting Committees

Initial Balance

Securities/ Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

113.747.095

99.4%

33.2%

Preferred

226.536.758

99.1%

66.1%

Debentures

Operations in the Month

Securities / Derivatives

Securities Characteristics

Intermediary

Operation

Day

Quantity

Price

Volume (R$)

Common

Preferred

ADR

Final Balance

Securities / Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

113.747.095

99.4%

33.2%

Preferred

226.536.758

99.1%

66.1%

Debentures

The Management’s responsibility for the financial statements

~~CONSOLIDATED~~The ~~FORM~~Company’s Management is responsible for preparation and adequate presentation of the financial statements, in accordance with the accounting practices adopted in Brazil and with the consolidated financial statements in accordance with the international financial reporting standards (IFRS), issued by the International Accounting Standards Board – IASB, and in accordance with the accounting practices adopted in Brazil, as well as by the internal controls deemed necessary for preparing financial statements that are free of material misstatement caused by either fraud or error.

~~Management~~The ~~and~~independent ~~Related Persons~~auditors’ ~~Negotiation of Securities Issued by the Company~~responsibility

~~Article~~Our 11responsibility -is ~~CVM~~to ~~Instruction~~issue #an ~~358/2002~~opinion on these financial statements based on our audit, which is conducted in accordance with the Brazilian and international auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves the performance of selected procedures for obtaining evidence of amounts and disclosures in the financial statements. The selected procedures depend on the auditor´s judgment, including assessment of risks of material misstatement of the financial statements, caused by either fraud or error. In ~~February~~assessing ~~2014~~risks, nothe ~~operations~~auditor ~~were~~considers ~~executed~~the relevant internal controls for preparation and adequate presentation of the financial statements of the Company, in ~~compliance~~order ~~with~~to ~~Article~~plan 11the -auditing ~~CVM~~procedures ~~Instruction~~appropriate #in ~~358/2002~~the circumstances, rather than express an opinion on the effectiveness of these internal controls. An audit also includes assessing the adequacy of accounting practices used, and reasonableness of estimates made by management, as well as evaluating the overall financial statement presentation.

Company Name: Embratel Participações S.A.
Group and Related Persons	( X ) Board of Directors		( ) Management		( ) Controlling Group / Shareholders			( ) Technical and Consulting Committees
Initial Balance
Securities/ Derivatives	Securities Characteristics					Quantity		%
								Same Class and Type		Total
Shares	Common					4				33.2%
Shares	Preferred					-				65.0%
Debenture
Operations in the Month
Securities / Derivatives	Securities Characteristics	Intermediary		Operation		Day	Quantity		Price		Volume (R$)
Shares	Common						-
Shares	Common						-
Shares	Common						-
Shares	Preferred						-				-
Debenture	Preferred shares abroad						-
Final Balance
Securities/ Derivatives	Securities Characteristics					Quantity		%
								Same Class and Type		Total
Shares	Common					4		0%		33.2%
Shares	Preferred					-		0%		65.0%
Debenture

We believe that the audit evidence obtained provides an adequate and appropriate basis for our opinion.

~~CONSOLIDATED~~Opinion ~~FORM~~on the individual financial statements

~~Management~~In ~~and~~our ~~Related~~opinion, ~~Persons’~~the ~~Negotiation~~individual financial statements referred to above present fairly, in all material respects, the financial position of ~~Securities~~NET ~~Issued~~SERVIÇOS byDE COMUNICAÇÃO S.A., as of December 31, 2013, the ~~Company~~performance of its operations and its cash flows for the period then ended, in accordance with accounting practices adopted in Brazil.

~~Article 11 - CVM Instruction # 358/2002~~ 1

InOpinion ~~February~~on ~~2014,~~the noconsolidated ~~operations~~financial ~~were~~statements ~~executed in compliance with Article 11 - CVM Instruction # 358/2002~~

Company Name: Embratel Participações S.A.

Group and Related Persons

( ) Board of Directors

( X ) Management

( ) Controlling Group / Shareholders

( ) Technical and Consulting Committees

Initial Balance

Securities/ Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

2,828

33.2%

Preferred

2,826

65.0%

ADR

Preferred shares abroad

Operations in the Month

Securities / Derivatives

Securities Characteristics

Intermediary

Operation

Day

Quantity

Price

Volume (R$)

Common

Preferred

ADR

Preferred shares abroad

Final Balance

Securities / Derivatives

Securities Characteristics

Quantity

Same Class and Type

Total

Common

2,828

33.2%

Preferred

2,826

65.0%

ADR

Preferred shares abroad

In our opinion, the individual financial statements referred to above present fairly, in all material respects, the financial consolidated position of NET SERVIÇOS DE COMUNICAÇÃO S.A., as of December 31, 2013, the consolidated performance of its operations and its cash flows for the period then ended, in accordance with the international financial reporting standards (IFRS, issued by IASB and accounting practices adopted in Brazil.

~~SIGNATURE~~ Emphasis

~~Pursuant~~As todescribed in Note 2.1, the ~~requirements~~individual offinancial statements were prepared in accordance with the ~~Securities~~accounting ~~Exchange~~practices ~~Act~~adopted in Brazil. In the case of ~~1934~~NET SERVIÇOS DE COMUNICAÇÃO S.A., ~~the~~these ~~registrant~~practices ~~has~~differ ~~duly~~from ~~caused~~the ~~this~~IFRSs, ~~report~~applicable to beseparate ~~signed~~financial onstatements ~~its~~solely ~~behalf~~regarding the evaluation of investments in subsidiaries, related companies and jointly-controlled, by the ~~undersigned~~equity method, ~~thereunto~~as ~~duly~~for ~~authorized~~the IFRSs it would be by cost or fair value. Our opinion is not with exception due to this matter.

~~Date: March~~Other ~~10, 2014~~matters

~~NET~~Statements ~~SERVIÇOS~~of DEAdded ~~COMUNICAÇÃO S.A. By: /S/ José Antonio Guaraldi Félix José Antonio Guaraldi Félix CEO~~Value

~~FORWARD-LOOKING~~We ~~STATEMENTS~~have also examined, the statement of value added (SVA), individual and consolidated, related to the period ended on December 31, 2013, prepared under the Entity’s management responsibility, the presentation of which is required by the Brazilian corporate law for listed companies and as supplementary information by the IFRSs, which do not require the SVA’s presentation. These statements were submitted to the same review procedures previously described and, in our opinion, are adequately presented, in all material aspects, in accordance with the financial statements as a whole.

~~This~~Audit ~~press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates~~ of ~~future~~comparative ~~economic~~amounts circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of ~~dividends,~~previous the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. year

The amounts corresponding to the year ended on December 31, 2012, presented for comparative purposes, were previously examined by other independent auditors, who issued an audit report dated February 06, 2013, with no exceptions and with the same emphasis mentioned above.

São Paulo, February 04, 2014.

CRC Nº SP-013002/O-3

Ernesto Rubens Gelbcke

CTCRC Nº SP-071189/O-6

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Income statements

Years ended December 31, 2013 and 2012

(In thousands of reais, except for earnings per share)


		Controlling Company		Consolidated
	Notes	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Net revenues	4	6,147,832	4,155,890	9,708,757	7,939,196
Cost of services rendered	5/7	(4,029,972)	(2,624,088)	(6,358,433)	(5,029,267)
Gross profit		2,117,860	1,531,802	3,350,324	2,909,929

Operating expenses
Selling expenses	7	(805,264)	(565,302)	(1,096,132)	(907,322)
General and administrative expenses	7	(541,891)	(500,544)	(1,008,872)	(991,740)
Other	7	(133,994)	(22,284)	(191,519)	(77,684)
		(1,481,149)	(1,088,130)	(2,296,523)	(1,976,746)

Investments in subsidiaries
Equity pickup	13	4,046	217,020	-	-
		4,046	217,020	-	-

Operating profit		640,757	660,692	1,053,801	933,183

Finance results
Finance expenses	6	(450,041)	(213,222)	(606,028)	(402,925)
Finance income	6	76,526	78,833	91,318	101,325
		(373,515)	(134,389)	(514,710)	(301,600)

Profit before income taxes and social contribution		267,242	526,303	539,091	631,583

Income tax
Current	12	852	1,983	(65,097)	(86,240)
Deferred	12	(91,526)	(134,584)	(297,426)	(151,641)
		(90,674)	(132,601)	(362,523)	(237,881)
Profit for the year		176,568	393,702	176,568	393,702

Basic and diluted earnings per share – common	23	0.48	1.08
Basic and diluted earnings per share – preferred	23	0.53	1.18

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Statement of comprehensive income

Years ended December 31, 2013 and 2012

(In thousands of reais)

Controlling company and Consolidated	12/31/2013	12/31/2012
Profit for the year	176,568	393,702
Comprehensive income	-	-
Total comprehensive income	176,568	393,702

See accompanying notes to the financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Balance sheets

December 31, 2013 and December 31, 2012

(In thousands of reais)

		Controlling company		Consolidated
	Notes	12/31/2013	12/31/2012	12/31/2013	12/31/2012
ASSETS
Current
Cash and cash equivalents	8	258,156	17,270	282,890	38,404
Trade accounts receivable	9	1,094,425	400,103	1,098,613	757,254
Inventories	10	94,397	38,669	148,544	68,697
Related parties	19	9,326	32,576	9,326	-
Programming receivable from subsidiaries	19	-	48,529	-	-
Recoverable taxes	12	32,735	63,117	33,452	77,115
Prepaid expenses		19,141	19,929	19,227	27,818
Interest on equity	19	-	75,388	-	-
Prepaid rights for use	19	150,459	118,785	150,459	167,004
Other current assets		49,112	9,901	49,010	21,034
Total current assets		1,707,751	824,267	1,791,521	1,157,326

Non-current
Long-term receivables
Judicial deposits	11	295,444	66,490	295,444	123,396
Related parties	19	25	157,711	-	-
Deferred taxes	12	796,999	-	796,999	283,824
Recoverable taxes	12	6,078	4,060	6,430	5,682
Prepaid rights for use	19	-	107,017	-	150,459
Other non-current assets		7,812	2,192	7,812	4,434
		1,106,358	337,470	1,106,685	567,795

Investments	13	202,537	1,114,872	-	-
Property, plant and equipment	14	7,161,933	3,175,988	7,288,558	5,594,753
Intangible assets	15	2,638,658	2,397,584	2,639,728	2,439,306

Total non-current assets		11,109,486	7,025,914	11,034,971	8,601,854

Total assets		12,817,237	7,850,181	12,826,492	9,759,180

		Controlling company		Consolidated
	Notes	12/31/2013	12/31/2012	12/31/2013	12/31/2012
LIABILITIES
Current
Trade accounts payable	16	798,854	608,332	853,928	907,083
Accounts payable – programming suppliers	17	238,632	129,071	247,167	189,460
Taxes payable	12	69,255	36,528	69,800	93,994
Payroll and related charges		283,425	167,134	283,479	243,089
Debt	18	919,281	756,361	919,281	814,868
Related parties	19	1,436,109	113,982	1,371,352	127,142
Deferred revenues	19	181,870	114,939	181,870	201,283
Provisions	20	16,467	5,807	16,467	10,700
Other current liabilities		55,008	15,950	55,010	32,132
Total current liabilities		3,998,901	1,948,104	3,998,354	2,619,751



Non-current
Deferred taxes	12	-	164,422	-	164,422
Debt	18	1,738,036	792,197	1,738,036	1,117,969
Deferred revenues	19	17,386	114,221	17,386	201,099
Related parties	19	680,315	3,929	680,000	680,000
Provisions	20	627,746	227,122	637,863	375,753
Other non-current liabilities		21,721	18,645	21,721	18,645
Total non-current liabilities		3,085,204	1,320,536	3,095,006	2,557,888

Equity
Share capital	21	5,599,320	5,599,320	5,599,320	5,599,320
Capital reserves		1,084,239	152,122	1,084,239	152,122
Accumulated deficit		(950,427)	(1,169,901)	(950,427)	(1,169,901)
		5,733,132	4,581,541	5,733,132	4,581,541

Total liabilities and equity		12,817,237	7,850,181	12,826,492	9,759,180

See accompanying notes to the financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Statements of changes in equity

Years ended December 31, 2013 and 2012

(In thousands of reais)


	Notes	Number of shares (thousands)		Share capital			Capital reserves
		Common	Preferred	Subscribed	To be paid in	Paid in	Shares Premium	Special goodwill reserve	Debentures premium	Accumulated deficit	Total Equity
Balances at December 31, 2011		114,460	228,504	5,612,243	(12,923)	5,599,320	8,702	89,521	54,945	(1,564,649)	4,187,839

Transfer of special goodwill reserve for unused accumulated deficit		-	-	-	-	-	-	(1,046)	-	1,046	-

Net income		-	-	-	-	-	-	-	-	393,702	393,702

Balances at December 31, 2012		114,460	228,504	5,612,243	(12,923)	5,599,320	8,702	88,475	54,945	(1,169,901)	4,581,541

Special reserve of goodwill from the merger of GB Empreendimentos e Participações S.A.	21	-	-	-	-	-	-	975,023	-	-	975,023

Transfer of special goodwill reserve for unused accumulated deficit	21	-	-	-	-	-	-	(42,906)	-	42,906	-

Net income								-	-	176,568	176,568

Balances at December 31, 2013		114,460	228,504	5,612,243	(12,923)	5,599,320	8,702	1,020,592	54,945	(950,427)	5,733,132

See accompanying notes to the financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Cash flow statements

Years ended December 31, 2013 and 2012

(In thousands of reais)

		Controlling company		Consolidated
	Notes	2013	2012	2013	2012
Net cash flows from operating activities
Profit for the year		176,568	393,702	176,568	393,702
Adjustments to reconcile profit for the year to cash flow from operating activities
Equity pick-up		(4,046)	(217,020)	-	-
Monetary and exchange rate variations, net		173,145	78,575	167,485	103,969
Interest expense on borrowing		133,961	130,092	157,427	172,892
Depreciation and amortization	14/15	1,252,937	755,725	1,825,499	1,298,080
(Gain) losses on derivative financial instruments	24	(746)	(240)	(746)	(240)
Deferred income taxes and social contribution	12	91,526	134,584	297,426	151,641
Loss (gain) on disposal of property, plant and equipment	14/15	1,331	414	2,616	3,076
Provisions	20	101,867	(212,725)	136,675	(192,346)

Increase/decrease in operating assets and liabilities
(Increase) decrease in trade accounts receivable	9	(194,632)	(139,384)	(341,359)	(249,543)
(Increase) decrease in inventories		(25,824)	(15,234)	(71,846)	(15,562)
(Increase) decrease in recoverable taxes		187,483	66,776	98,797	91,990
(Increase) decrease in prepaid expenses		5,639	(993)	8,591	1,918
(Increase) decrease in other assets		(90,635)	20,402	(40,680)	(19,104)
Increase (decrease) in suppliers and programming		7,675	156,831	143,932	192,247
Increase (decrease) in fiscal obligations		(134,964)	2,757	(24,194)	(442)
Increase (decrease) in payroll and related charges		23,601	(225)	40,390	5,887
Increase (decrease) in deferred revenues		(131,925)	(118,826)	(204,828)	(209,553)
Increase (decrease) in provisions and other accounts payable		(22,024)	10,994	(33,815)	4,628
Dividend received		140,388	576,600	-	-
Net cash provided by operating activities		1,691,325	1,622,805	2,337,938	1,733,240

Cash flow from investing activities
Capital increase in subsidiaries	13	(69,977)	-	-	-
Acquisition of property, plant and equipment and intangible assets	14/15	(2,521,414)	(1,571,728)	(3,564,879)	(2,593,399)
Cash proceeds from sale of property, plant and equipment	14/15	357	153	413	186
Net cash used in investing activities		(2,591,034)	(1,571,575)	(3,564,466)	(2,593,213)

Cash flow from financing activities
Debt
Proceeds		1,250,231	683,383	1,336,178	687,057
Repayments of principal		(740,043)	(838,035)	(784,970)	(783,719)
Repayments of interest		(95,763)	(134,649)	(102,576)	(354,252)

Related parties
Proceeds		1,591,524	560,641	1,100,834	680,000
Payments		(865,354)	(696,938)	(78,452)	(51,887)
Net cash (used in) provided by financing activities		1,140,595	(425,598)	1,471,014	177,199

Net decrease in cash and cash equivalents		240,886	(374,368)	244,486	(682,774)

Cash and cash equivalents at the beginning of the year		17,270	391,638	38,404	721,178
Cash and cash equivalents at the end of the year		258,156	17,270	282,890	38,404
		240,886	(374,368)	244,486	(682,774)

Supplementary disclosure of cash flow information
Income taxes and social contribution paid		2,706	339	66,991	88,773

See accompanying notes to the financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Value added statements

Years ended December 31, 2013 and 2012

(In thousands of reais)

		Controlling company		Consolidated
	Notes	2013	2012	2013	2012
1. Generation of value added
Rendering of services		7,502,244	5,040,182	11,825,199	9,621,397
Other revenues		22,722	14,164	29,417	23,070
Revenue from the construction of own assets		25,135	18,088	36,906	33,405
Allowance for doubtful accounts	9	(97,248)	(58,595)	(140,334)	(104,477)
		7,452,853	5,013,839	11,751,188	9,573,395
2. ( - ) Inputs
Cost of services rendered		(1,445,996)	(1,080,376)	(2,536,315)	(2,243,386)
Materials, energy and other outsourced services		(1,513,299)	(986,116)	(2,474,248)	(2,040,724)
Other		(97,853)	(54,816)	(127,859)	(83,384)
		(3,057,148)	(2,121,308)	(5,138,422)	(4,367,494)

3. Gross value added (1-2)		4,395,705	2,892,531	6,612,766	5,205,901

4. (-) Depreciation and amortization	14/15	(1,252,937)	(755,725)	(1,825,499)	(1,298,080)

5. Net value added generated (3-4)		3,142,768	2,136,806	4,787,267	3,907,821

6. Transferred value added received
Equity pick-up	13	4,046	217,020	-	-
Finance income		181,339	119,831	196,880	169,457
		185,385	336,851	196,880	169,457

7. Net value added for distribution(5+6)		3,328,153	2,473,657	4,984,147	4,077,278

8. Distribution of value added
Personnel:
Direct Compensation		547,942	423,383	745,379	618,444
Benefits		120,795	89,698	179,862	148,810
FGTS		40,153	31,404	54,597	45,999
Other		6,687	19,733	9,526	32,027
		715,577	564,218	989,364	845,280
Government:
Federal		616,059	469,639	1,158,969	944,182
State		1,107,932	695,860	1,723,596	1,252,706
Municipal		14,112	11,616	19,707	18,389
		1,738,103	1,177,115	2,902,272	2,215,277
Third party capital:
Finance income and expenses		231,969	30,103	349,320	158,461
Rental		163,553	108,655	230,620	183,605
Monetary and foreign exchange rate variations		302,383	199,864	336,003	280,953
		697,905	338,622	915,943	623,019
Equity:
Profit for the year		176,568	393,702	176,568	393,702
Total		3,328,153	2,473,657	4,984,147	4,077,278

See accompanying notes to the financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

1. Corporate information

Net Serviços de Comunicação S.A. is a publicly held corporation incorporated under the Brazilian Law. The Company controls a group of cable subscription television companies, collectively referred to as “Net Serviços” or “the Company”. Net Serviços de Comunicação S.A.’s shares are traded on the São Paulo Stock Exchange – BM&FBOVESPA (“Bolsa de Valores, Mercadorias e Futuros”) under the code NETC.

The Company holds preferred shares traded on NASDAQ – Global Select Market as “American Depositary Shares” – ADS in the United States of America, being subject to the U.S. Securities and Exchange Act of 1934(“Exchange Act”). In January 2014, the Net Serviços American Depositary Receipts Program was canceled; and the Company has been definitively delisted from NASDAQ. However, up to the present date the Company remains registered under the Exchange Act, maintaining full compliance with its obligations until suspension and cancellation of registration for all classes of securities.

The Company also has preferred shares that are traded on the LATIBEX, the Madrid stock exchange, and is therefore subject to the regulations of the Spanish Comisión Nacional del Mercado de Valores (CNMV).

The Company is located in Brazil and its headquarters are located at Verbo Divino Street, 1356 in São Paulo, São Paulo state.

In November 2012, the National Telecommunications Agency - Anatel has granted permission to the Company to provide the Service Conditional Access (SEAC), through acts of conversion of the existing cable and MMDs licenses for the new service. The authorization of SEAC is nationwide that permits the Company operating in any location of the Brazilian territory.

The Company offers cable television services under “NET” brand name and high-speed Internet access under “NET VIRTUA” brand name through several cable networks located in the country’s largest cities. The Company and Empresa Brasileira de Telecomunicações S.A. – Embratel (“Embratel”), a subsidiary of América Móvil S.A.B. de C.V. (“América Móvil”), jointly provide voice services under “NET FONE VIA EMBRATEL (NetFone)” brand name. In September 2013, the Company launched the Combo Multi, including mobile telephony, in partnership with Claro S.A.(“Claro”), also a subsidiary of América Móvil, to its portfolio in telecommunications services.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

1. Corporate information

On October 15, 2013, the Company’s management voted in favor of acceptance of the Unified Public Offering for the acquisition of common and preferred shares issued by the Company, including the shares underlying the American Depositary Shares ("ADS") and shares traded on LATIBEX, to be launched by its controlling shareholders, Embratel Participações S.A. (“Embrapar” )and Embratel for transfer of control and discontinuity, by NET, of the differentiated corporate governance practices of Level 2 ("IPO" or "Offering" ) of BM&FBovespa.

In November 27, 2013, Embratel acquired in the auction for the unified offer to purchase shares (the "Offer"), 13,675,932 shares issued by the Company, corresponding to 83.62% of total shares outstanding, being 10,219,622 common shares, corresponding to 93.48% of these type of shares outstanding and 3,456,310 preferred shares, corresponding to 63.73% the total outstanding. It is considered as outstanding shares other than those held directly or indirectly by the controlling shareholder.

As result of the Offer, Embrapar and Embratel, together will, directly, or through their subsidiary EG Participações S.A. (“EG”), hold 329,793,729 of Company’s shares, corresponding to 96.16% of its total share capital, including 103,256,971 common shares, corresponding to 90.21% of its voting share capital; and 226,536,758 preferred shares, corresponding to 99.14% of its non-voting shares. Also as a result of the Offer the Company is no longer part of differentiated level 2 corporate governance practices relating to the BM&FBovespa.

Are ongoing with Anatel, internal studies and procedures, with respect to corporate restructuring involving the Company and related companies Claro, Embratel and Embrapar, all indirectly controlled by América Móvil. The outcome of this corporate restructuring will depend, among other things, a satisfactory completion of studies and the position to be adopted by Anatel in the face of it.

On February 4, 2014, the Company’s Board of Directors approved and authorized the issuance of the Company’s individual and consolidated financial statements. The Company's Board of Directors has power to amend the financial statements after issued.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting practices

2.1 Statement of compliance

The Company’s individual and consolidated financial statements for the years ended December 31, 2013 and 2012 were prepared and presented in compliance with accounting practices adopted in Brazil, which include the provisions of the Brazilian Corporate Law, the pronouncements issued by the Committee Accounting Pronouncements – (“CPC”) and regulations issued by the Securities and Exchange Commission – (“CVM”), which are in accordance with international financial reporting standards, issued by the International Accounting Standards Board – IASB (“IFRS”), except for the measurement of investments in subsidiaries recorded by the equity method in the controlling company’s financial statement, while for IFRS purposes it would be at cost or fair value; additionally, the Brazilian corporate law requires public companies to recognize value added – SVA (Statement of value added) in their individual and consolidated financial statements, whereas under IFRS such statements are presented as supplementary information.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its wholly-owned subsidiaries, which have the same reporting period as that of the parent company and consistent accounting policies. 2013 balances presented in the financial statements of the Company cannot be compared with the 2012 comparative balances, due to the mergers in the current year, as described in note 13.

Subsidiaries are consolidated as from their acquisition dates, which are the dates on which the Company obtained control, and continue to be consolidated until the date such control ceases.

The consolidation process entails the line by line consolidation of assets, liabilities, income and expenses, and the elimination of the following:

· Parent company’s interest in share capital, reserves and retained earnings of subsidiaries;

· Assets and liabilities resulting from transactions among the group of companies;

· Revenues and expenses arising from transactions conducted among the group of companies.

The preparation of financial statements requires the use of certain accounting estimates by Company management. The financial statements have been prepared on a historical cost basis, except for the measurement of certain assets and liabilities acquired in connection with business combinations and non-financial instruments, which have been measured at fair value.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.3 Revenue recognition

Revenues include subscribers' monthly fees, connection fees, pay-per-view, high-speed data and telephone services. Revenues are recorded when services are provided. Connection fees and direct selling expenses listed are deferred and amortized over the average estimated period that subscribers remain connected to the system.

Deferred revenue relates mainly to the prepayment of rights to use the Company’s fiber optic cable network to provide Net Fone services and rental revenue is released to the income statements over the contractual period. Revenues related to special projects and access to the network are recognized based on the average estimated period subscribers are likely to remain connected to the system.

Rental income arising from operating leases of decoders and modems is accounted for on a straight-line basis over the lease terms.

For all financial instruments measured at amortized cost and interest bearing financial assets, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statements.

2.4 Adjustment to present value of assets and liabilities

Long-term monetary assets and liabilities are adjusted to their present value as are short-term items, if the effect is considered relevant in relation to the financial statements taken as a whole. The adjustment to present value is calculated taking into account contractual cash flows and the explicit interest rate, or implicit rate in some cases, for these assets and liabilities. Based on the analyses carried out and management’s best estimate, the Company concluded that present value adjustment of current monetary assets and liabilities is not significant in relation to the overall financial statements, as such no adjustment has been recorded.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.5 Foreign currency translation

The Company and its subsidiaries are located in and have their entire operations in Brazil.

The financial statements of each subsidiary included in the consolidation of the Company are prepared using the functional currency of each entity. The functional currency of an entity is the currency of the primary economic environment in which it operates. By defining the functional currency of each of its subsidiaries, management considered that the currency significantly influences the selling price of its services, and the currency in which most of the cost of their inputs is paid or incurred. The consolidated financial statements are shown in Brazilian Reais (R$), which is the functional and reporting currency of Net Serviços de Comunicação S.A. and all subsidiaries.

Transactions in foreign currencies are initially recorded at the functional currency and recorded based on the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the rate of exchange ruling at the reporting date. Gains and losses arising from difference between translation of the balance of assets and liabilities in foreign currency at year end and the initial translation of the amount of transactions are taken to income statements.

2.6 Inventories

Inventories are stated at the lower of net realizable value (estimated selling price in the ordinary course of business less estimated selling costs) and average cost. Provisions for slow moving or obsolete inventory items are made as necessary by management.

2.7 Property, plant and equipment

Property, plant and equipment are stated at historical cost net of depreciation, and impairment losses, if applicable. The cable network includes capitalized amounts related to services costs and other expenses incurred during the construction period.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, as disclosed in note 14. Subsequent costs are included in the residual value of the fixed asset or recognized as a specific item, as applicable, only if the economic benefits associated with these items are probable and the amounts are reliably measured. The net book value of any replaced item is written-off.

Other repairs and maintenance are recognized directly in the income statement when incurred.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.7 Property, plant and equipment - continued

The residual values and estimated useful lives of assets are reviewed and adjusted prospectively, when necessary. The impacts of these revisions are recorded prospectively.

2.8 Intangible assets

Intangible assets are assessed as having finite or indefinite estimated useful lives. The cost of intangible assets acquired in a business combination is the fair value on the date of acquisition.

Intangible assets that have finite useful lives are amortized over their estimated useful lives, as disclosed in note 15.

The estimated useful lives of intangible assets with finite useful lives are reviewed at the end of each reporting period. The amortization expense of intangible assets with finite lives is recognized in the income statements, consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are not amortized; instead they are tested for impairment annually at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

The assessment of indefinite life is reviewed annually to determine whether this assessment is still justifiable. Otherwise, the change in useful life from indefinite to definite is done prospectively.

Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net amount obtained from the sale and the carrying amount of the asset and are recognized in the income statement at the moment the asset is wrote-off.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.9 Provision for impairment of long-lived assets

The Company considers the impairment of long-lived assets, including property and equipment and intangible assets. At each financial statement date, the Company assesses whether there is any indication of impairment of assets. If there is any indication of impairment, the Company estimates the recoverable amount of the asset. The recoverable amount of an asset is the higher of: (a) fair value less costs that would be incurred to sell it, and (b) its value in use. Value in use is the discounted cash flow (before taxes) arising from the continuous use of the asset to the end of its useful life.

Irrespective of the presence of indicators of impairment, goodwill and intangible assets with indefinite useful lives are tested for recovery at least once a year.

When the net book value of an asset exceeds its recoverable value, the impairment loss is recognized in the income statements.

Except for the impairment of goodwill, reversal of losses previously recorded is allowed. The reversal in these circumstances is limited to the depreciated balance of the asset as at the date of reversal, assuming that the reversal has not been registered.

2.10 Business combinations and goodwill

Business combinations are recognized using the acquisition method. The cost of the acquisition is the fair value of assets and equity instruments paid and liabilities assumed on the date of acquisition. Identifiable assets acquired and liabilities and contingencies assumed in a business combination are measured initially at fair value on the acquisition date.

Goodwill represents the excess of acquisition cost over the net fair value of assets acquired, liabilities assumed and identifiable contingent liabilities of an acquired subsidiary, at the acquisition date. If the cost of acquisition is less than the fair value of net assets acquired, the difference is recognized directly in the income statements.

2. Significant accounting policies - continued

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2.11 Income tax

Income tax and social contribution

The statutory rates applicable for federal income taxes and social contribution are 15% plus an additional 10% over R$240 for income tax and 9% for social contribution. Income taxes and social contribution are recognized on the accrual basis.

Deferred taxes are recognized using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, deferred income and social contribution taxes are not recognized when generated upon initial recording of assets and liabilities in operations not affecting the tax bases, excepting the case of business combinations. Deferred tax assets and liabilities are calculated using the tax rates applicable to taxable income in years in which these temporary differences should be realized based on tax rates that have been enacted at the reporting date.

A deferred tax asset shall be recognized for the tax loss carryforward and temporary differences to the extent that it is probable that future taxable profit will be available against which the tax loss carryforward and temporary differences can be utilized.

The Company offsets deferred tax assets and deferred tax liabilities if, and only if: (a) a legally enforceable right exists to set off current tax assets against current income tax liabilities, and (b) the deferred taxes assets and the deferred tax liabilities are related to the income tax charged by the same tax authority (i) in the same taxable entity; or (ii) in different taxable entities that intend to settle tax liabilities and tax assets on a net basis, or realize assets and settle liabilities simultaneously, in each future period in which it is expected that significant amounts of deferred tax assets or tax liabilities can be settled or recovered.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.11 Income tax – continued

Income tax and social contribution – continued

Tax on services rendered

Revenues, expenses and assets are recognized net of tax on services rendered, except:

• Where the taxes on services rendered incurred on a purchase of assets or services is not recoverable from the tax authorities, in which case the tax on services rendered is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable;

• Receivables and payables that are stated with the amount of tax on services included; and

• The net amount of tax on services rendered recoverable from, or payable to, the tax authorities is included as part of receivables or payables in the balance sheet.

2.12 Provisions

The Company recognizes provisions, which involves management’s significant judgments related to tax, labor, and civil contingencies and respective lawyers’ fees, as a result of a past event, in which it is probable that an outflow of economic benefits will be required to settle the obligation and a reasonable estimate can be made of the amount of this obligation. The Company is subject to various legal, civil and labor proceedings during the normal course of its operations. The Company’s probability loss assessment includes the available evidences, hierarchy of the laws, available jurisprudence, as well as opinion of legal advisers. Provisions are reviewed and adjusted to consider changes in circumstances as statute of limitations, conclusions of tax audits or additional circumstances identified in base of new subjects or court decisions. The outcome can be different from the management’s estimates.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement

(i) Financial assets

Initial recognition

Financial assets are classified as: i) financial assets at fair value through profit or loss; ii) receivables; iii) held-to-maturity investments; or iv) available-for-sale financial assets. The Company determines the classification of its financial assets at initial recognition when it becomes a party to the contractual provisions of the instrument.

Financial assets are initially recognized at fair value plus, in the case of investments not designated at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. .

Sales and purchases of financial assets that require delivery of assets within a established schedule by regulation or market convention (regular purchases) are recognized on transaction date, i.e. the date that the Company commits to purchase or sell asset.

The Company’s financial assets include (a) cash and cash equivalents, (b) receivables and (c) other current assets.

a) Cash and cash equivalents

Cash and cash equivalents include cash, credit balances in bank accounts and highly liquid investments, readily convertible in a known cash amount, with insignificant risk of change in value. These investments are carried at cost plus interest to the date of the balance sheet and measured at fair value, with gain or loss recorded in the income statements.

b) Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment, when applicable. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that incurred. Interest is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting based on the effective interest rate is immaterial.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(i) Financial assets – continued

As at December 31, 2013 and December 31, 2012, financial assets classified as receivables consist of trade accounts receivable. Trade accounts receivable are recorded at estimated net realizable value and do not bear interest. The allowance for doubtful accounts is set up on the basis of the subscriber’s history of default and its amount is deemed sufficient to cover losses on the realization of accounts receivable. The average term for receipt from subscribers is approximately 30 days and any receivables outstanding for more than 180 days are written off.

The allowance for doubtful accounts substantially comprises account balances that are overdue from 90 to 180 days.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit and loss are stated in the balance sheet at fair value, and the related gains and losses are recognized in the income statement. At December 31, 2012, financial assets classified at fair value through profit or loss refer to derivative financial instruments. At December 31, 2013, the Company had no derivative financial instruments.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold them to maturity. As of December 31, 2013 and December 31, 2012, the Company did not have any held-to-maturity investments.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(i) Financial assets – continued

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are neither classified as financial assets at fair value through profit or loss, receivables or held-to-maturity investments. Available-for-sale financial assets include equity instruments and debt securities. As of December 31, 2013 and December 31, 2012, the Company did not have any available-for-sale financial assets.

Derecognition

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• The rights to receive cash flows from the asset have expired;

• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control over the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the Company’s continuing involvement with the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(ii) Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of loss impairment may include indications that the parties borrowing the loan are experiencing a time of relevant financial difficulty. The probability that they will get in bankruptcy or other financial reorganization, default or late payment of interest or principal may be indicated by a measurable decrease in the estimated future cash flows, such as changes in economic conditions or maturity related to defaults.

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(i) Impairment of financial assets – continued

Financial assets carried at amortized cost – continued

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statements. Interest income continues to be computed on the reduced carrying amount based on the and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the statements of comprehensive income.

Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the statements of comprehensive income.

(iii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified as financial liabilities at fair value through profit or loss or loans and borrowings. The Company determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The Company’s financial liabilities include: (i) trade accounts payable (ii) programming suppliers (iii) other current liabilities (iv) debt and (v) certain related party transactions.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(iii) Financial liabilities – continued

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include derivative financial instruments. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognized in the statements of comprehensive income.

As of December 31, 2013 and December 31, 2012, the Company did not have any financial liabilities at fair value through profit or loss.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statements when the liabilities are derecognized, as well as during the amortization process through the effective interest rate method. As of December 31, 2013 and December 31, 2012, the Company had its debt instruments classified and loans and borrowings.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

(iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(v) Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models. An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 24.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.14 Lease agreements

Leases in which substantially all the risks and ownership of the asset are not assumed by the Company are classified as operating leases. Operating lease payments are recorded in the income statements on a straight-line basis over the lease terms.

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

2.15 Operating segments

Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. Since all decisions are made on the basis of consolidated reports, all services are provided using the same cable network, there are no managers responsible for any specific element of the business, and all decisions relating to strategic planning, finance, purchasing, investment and liquidity application are made on a consolidated basis, the Company has concluded it has a single reportable segment.

2.16 Statement of Value Added (DVA)

The statements of value added were prepared and presented in accordance with CVM Resolution no. 557 of 12 November 2008, which approved CPC 9 – Statement of Value Added, issued by the CPC.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

2. Significant accounting policies - continued

2.13 Financial instruments – initial recognition and subsequent measurement – continued

2.17 Adoption of new and revised IFRS

The Company has adopted all standards, reviewed standards and interpretations issued by IASB that were effective for the year ended December 31, 2013.

In relation to the standards IAS 1 (R) - Presentation of Financial Statements, IAS 19 (R) - Employee Benefits, IAS 32 (R) - Compensation of Financial Assets and Financial Liabilities, IFRS 1 (R) - First Time Adoption of IFRS, IFRS 7 (R) - Financial Instruments: Disclosures, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Involvement with Other Entities, IFRS 13 Fair Value Measurement, IAS 27 Separate Financial Statements (R) and IAS 28 Investments in Associates and Joint Ventures (R) were issued (new standards) and / or revised by the IASB prior to 2012 and whose applications became effective for fiscal years beginning on January 1, 2013, did not impact the consolidated financial statements for the year ended December 31, 2013.

2.18 Issued standards not effective on December 31, 2013

The standards and interpretations issued by IASB that were not effective until the issue of the financial statements are as follows:

• IFRS 9 - Financial Instruments

• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

• IFRIC 21 – Levies

• IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39

The Company intends to adopt these pronouncements when they become applicable. Also, except for IFRS 9, whose application is required for annual periods beginning on or after January 1, 2015 and may eventually impact the classification and measurement of certain financial assets and / or liabilities of the Company, management does not expect that the adoption of the other pronouncements will impact the Company's financial statements.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

3. Accounting judgments, estimates and critical accounting practices in the preparation of financial statements

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates.

These underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a) Deferred income taxes

The amount of deferred income tax assets, as described in note 12, is reviewed at each reporting date and reduced by the amount that is no longer recoverable through estimates of future taxable income. Amounts reported involve considerable exercise of judgment by management and future taxable income may be higher or lower than the estimates considered when valuing a deferred tax asset.

b) Valuation of assets acquired and liabilities assumed in business combinations

In recent years, the Company entered into certain business combinations. Under IFRS 3 and CPC 15, the Company must allocate the cost of the acquired entity to the assets acquired and liabilities assumed based on their estimated fair values on acquisition date. Any excess of the cost of the acquired entity over the fair value of assets acquired and liabilities assumed is recorded as goodwill. The Company exercises significant judgment in identifying tangible and intangible assets and liabilities, valuing such assets and liabilities and determining their remaining useful lives. Management generally engages third party valuation consultants to assist in valuing the assets and liabilities.

The valuation assumptions include estimates of discounted cash flow and discount rates. Use of alternative assumptions would result in different estimates of the value of assets acquired and liabilities assumed.

The Company did not have any business combinations for the years ended December 2013 and 2012.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

3. Accounting judgments, estimates and critical accounting practices in the preparation of financial statements – continued

c) Estimated useful life

For the year ended December 31, 2013, Company management, based on studies conducted together with outside consultants, who considered, among other aspects, durability of assets, technological developments and market conditions in the telecommunications sector, revised estimates of useful lives of the following assets:

Description	Prevous useful life	Reviewed useful life
Installation of resedences	6 years	5 years
Terminals	5 years	3 a 4 years
Internal network	12 years	10 years
Exnternal network	12 years	8 a 10 years

This change in accounting estimate in the income for the year ended December 31, 2013 resulted in an increase in depreciation expense in the amount of R$173,433 and R$233,516 in consolidated.

d) Impairment test

The Company evaluates the existence of any impairment indicator for all long-lived assets in each closing date. Goodwill and intangible assets with indefinite useful lives are tested for impairment annually and when there are indicators of loss. Recoverable amounts are determined based on value in use calculations, using the premises of the discounted cash flows established by the management. Such calculations require the use of estimates, as detailed in note 15.

e) Provisions

Provisions, as described in note 20, are recognized when the Company has a present obligation (legal or not formalized) as a result of a past event, it is probable that an outflow of embodying economic benefits will be required to settle the obligation and a reasonable estimate can be made of the amount of this obligation.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

4. Net revenues


	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Gross revenues	7,747,813	5,217,645	12,216,151	9,937,992
Taxes on rendering of services	(1,354,412)	(884,292)	(2,116,442)	(1,682,201)
Discounts and cancellations	(245,569)	(177,463)	(390,952)	(316,595)
Net revenues	6,147,832	4,155,890	9,708,757	7,939,196

Taxes on rendering of services consist primarily of ICMS – Value Added on Sales and Services (10% on pay tv services and 25.0% to 30.0% in broadband), ISS - municipal tax on rendering of services (2.0% to 5.0%), besides the federal contributions related to PIS (0.65% or 1.65%) and COFINS (3.0% or 7.60%).

The Company’s revenues are related to services rendered in the Brazilian territory.

5. Cost of services rendered


	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012

Programming costs	(1,331,564)	(833,242)	(2,245,315)	(1,795,858)
Materials and maintenance	(74,849)	(43,693)	(114,725)	(91,783)
Personnel	(441,833)	(298,003)	(641,950)	(493,468)
Pole rental	(92,152)	(60,758)	(122,496)	(93,454)
Depreciation	(1,029,586)	(517,583)	(1,543,098)	(982,590)
Amortization	(133,308)	(119,126)	(171,872)	(166,886)
Third party service	(585,605)	(338,874)	(891,419)	(668,067)
Telecommunications	(296,456)	(211,686)	(466,810)	(392,513)
Other	(44,619)	(201,123)	(160,748)	(344,648)
	(4,029,972)	(2,624,088)	(6,358,433)	(5,029,267)

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

6. Finance results


	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Finance Income:
Interest on loans to subsidiaries and associated companies	8,652	15,412	-	-
Interest on cash and cash equivalents	5,571	11,847	8,774	28,126
Interest on prepaid rights for use	42,063	36,927	54,756	51,916
Interest and fines on late monthly payments (net of finance discounts)	16,967	12,105	22,895	18,312
Other	3,273	2,542	4,893	2,971
	76,526	78,833	91,318	101,325
Finance Expenses:
Finance charges on loans and debentures	(130,975)	(101,675)	(137,928)	(119,772)
Monetary exchange rate variation on debt	(107,360)	(59,338)	(107,360)	(59,338)
Finance charges and monetary exchange (*)	(135,438)	(94,603)	(250,608)	(191,830)
Finance charges and monetary variations on contingencies, suppliers and accounts payable (**)	(56,641)	66,404	(83,290)	1,571
IOF tax on intercompany transactions	(2,963)	(3,651)	(4,632)	(7,036)
PIS and COFINS taxes on interest income	(6,519)	(7,037)	(7,934)	(8,325)
Other	(10,145)	(13,322)	(14,276)	(18,195)
	(450,041)	(213,222)	(606,028)	(402,925)
Total	(373,515)	(134,389)	(514,710)	(301,600)

(*) During the year ended December 31, 2013, finance charges and monetary exchange included, respectively (i) R$36,702 (R$30,297 at 2012) in the controlling company and R$56,296 (R$53,377 at 2012) in the consolidated, related to interest expenses referring to prepayment of the indefeasible Right to Use (IRU) with Embratel, a related party (note 19); and (ii) R$98,736 (R$64,306 at 2012), in the controlling company and R$194,312 (R$138,453 at 2012) in the consolidated, related to interest expense and US Dollar exchange variation related to amounts borrowed from Banco Inbursa S.A., a related party, and interest expense incurred to Embratel and America Móvil, regarding mutual transactions.

(**)The amounts classified under "finance charges and monetary variations on contingencies, suppliers and other liabilities" refers to net income of the updating of some liabilities related to contingencies, and disputes related to copyright and 2012, referred to tax on interest on old debts in foreign currency.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

7. Costs and expenses by nature

The Company presents its income statements by function. The table below shows details of costs and expenses by nature:


	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Programming costs	(1,331,564)	(833,242)	(2,245,315)	(1,795,858)
Other costs	(121,792)	(245,438)	(254,300)	(412,455)
Third party service	(1,161,315)	(778,675)	(1,628,176)	(1,320,093)
Depreciation and amortization	(1,252,937)	(755,725)	(1,825,499)	(1,298,080)
Employee benefits expenses	(802,443)	(623,512)	(1,093,450)	(923,889)
Telecommunication expenses	(296,456)	(211,686)	(466,810)	(392,513)
Business expenses	(306,054)	(201,369)	(439,241)	(350,980)
Other expenses	(238,560)	(62,571)	(702,165)	(512,145)
	(5,511,121)	(3,712,218)	(8,654,956)	(7,006,013)
Classified as:
Cost of services rendered	(4,029,972)	(2,624,088)	(6,358,433)	(5,029,267)
Selling expenses	(805,264)	(565,302)	(1,096,132)	(907,322)
General and administrative expenses	(541,891)	(500,544)	(1,008,872)	(991,740)
Other income (expenses) net	(133,994)	(22,284)	(191,519)	(77,684)
	(5,511,121)	(3,712,218)	(8,654,956)	(7,006,013)

8. Cash and cash equivalents

	Controlling company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Cash and banks	61,614	12,993	86,036	28,051
Banking deposit certificates	15,955	4,258	15,955	4,337
Investment funds DI	180,587	19	180,899	6,016
	258,156	17,270	282,890	38,404

Bank deposit certificates (CDBs) earn an average of 100 % of the Interbank Certificate of Deposit (CDI) rate (9.77% in 2013 and 6.90% in 2012). CDBs are highly liquid investments issued by first-line banks with floating interest rates based on the CDI rate. The Company has immediate and total access to these CDBs.

In 2012, funds from fixed income investments were represented by shares in highly liquid fixed income funds, assets of which consisted primarily of private securities (CDBs) and treasury bills. In 2013, they were represented by shares of non-exclusive DI funds, whose return seeks to monitor the variations of interest rates in the interbank deposit certificate (CDI) by the preponderant action in the domestic interest rate market.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

8. Cash and cash equivalents – continued

The increase in cash and cash equivalents for the year is primarily due to the issuance of debentures of the 7th issue by the Company on December 27, 2013. Management intends to use the balances in less than 90 days

Ouvir

Ler foneticamente

9. Trade receivables

	Controlling company			Consolidated
		12/31/2013	12/31/2012	12/31/2013	12/31/2012
Trade receivables		1,236,917	455,778	1,241,446	859,083
(-) Allowance for doubtful accounts		(142,492)	(55,675)	(142,833)	(101,829)
		1,094,425	400,103	1,098,613	757,254

Breakdown of trade receivables is as follows:

	Controlling company			Consolidated
		12/31/2013	12/31/2012	12/31/2013	12/31/2012
Due		627,524	231,026	631,685	436,601

Overdue:
Up to 30 days		405,516	137,883	405,516	264,964
31 – 60 days		40,552	22,092	40,552	39,079
61 – 90 days		35,369	15,886	35,396	27,496
91- 180 days		127,956	48,891	128,297	90,943
		1,236,917	455,778	1,241,446	859,083

The average term for receipt of subscriptions receivable is approximately 30 days. The allowance for doubtful accounts is mainly comprised by amounts overdue from 91 to 180 days. Amounts overdue by more than 180 days are written off.

The continuity schedule of the allowance for doubtful accounts is shown below:

	Controlling	Consolidated

Balances at December 31, 2011	(32,328)	(57,998)
Credits provisioned during the year	(58,595)	(104,477)
Credits written off during the year	35,248	60,646
Balances at December 31, 2012	(55,675)	(101,829)
Credits provisioned during the year	(97,248)	(140,334)
Credits written off during the year	69,371	99,330
Additions by mergers	(58,940)	-
Balances at December 31, 2013	(142,492)	(142,833)

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

10. Inventories

	Controlling company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012
Material for network maintenance	35,567	19,810	35,567	24,978
Material for technical assistance	58,830	18,859	112,977	43,719
	94,397	38,669	148,544	68,697

For the year ended December 31, 2013, there was the consumption of R$52,022 (R$43,693 in 2012) for materials related to maintenance of networks and technical assistance, which were recorded in cost of services rendered in company, and R$80,465 (R$91,783 in 2012) in consolidated.

11. Judicial deposits

The Company has judicial deposits related to labor, civil and tax claims, as follows:

	Controlling company			Consolidated
		12/31/2013	12/31/2012	12/31/2013	12/31/2012
Labor		40,791	11,685	40,791	20,165
Civil		11,805	3,051	11,805	9,042
Lease of poles and ducts and copyright payable		207,223	32,867	207,223	65,973
Tax		35,625	18,887	35,625	28,216
		295,444	66,490	295,444	123,396

12. Income tax

a. Income tax and social contribution



	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012

Current income tax and social contribution expenses	852	1,983	(65,097)	(86,240)

Deferred income tax and social contribution on:
Tax losses and social contribution	-	-	(214,967)	(41,649)
Temporary differences:
-Fiscal credits on Goodwill	(137,720)	(137,050)	(137,720)	(137,050)
- Amortization of intangible and property, plant and equipment	2,008	16,502	2,008	16,502
- Provisions	44,186	(14,036)	53,253	10,556
Total deferred income tax	(91,526)	(134,584)	(297,426)	(151,641)
Tax expenses	(90,674)	(132,601)	(362,523)	(237,881)

The statutory rates applicable for federal income tax and social contribution are 25% and 9%, respectively, which represent an aggregate rate of 34% in 2013 and 2012.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

12. Income tax – continued

a. Income tax and social contribution – continued

Amounts reported as income tax expense in the income statements are reconciled to the statutory rates as follows:

	Controlling Company		Consolidated
	12/31/2013	12/31/2012	12/31/2013	12/31/2012

Profit before income taxes and social contribution	267,242	526,303	539,091	631,583

Income taxes and social contribution at the nominal rate of 34%	(90,862)	(178,943)	(183,291)	(214,738)

(Additions) / exclusions:
Income tax and social contribution on equity	1,376	73,787	-	-
Income tax and social contribution on non-deductible expenses	(7,947)	(1,625)	(10,105)	(2,355)
Income tax and social contribution on interest on capital	(13,781)	(20,084)	-	-
Imposto de renda e contribuição social sobre provisões temporárias de exercícios	81,691	-	81,691	-
Other reconciling items:
Tax losses from the year, not accounted for	(71,694)	(13,379)	(71,699)	(20,004)
Tax losses from previous years recognized in 2013 due to mergers	-	-	(185,397)	-
Other	10,543	7,643	6,278	(784)
Income tax and social contribution for the year	(90,674)	(132,601)	(362,523)	(237,881)
Effective tax rate	(33,93%)	(25,19%)	(67,25%)	(37,66%)

Brazilian tax law allows tax losses to be carried forward indefinitely to be utilized to off-set future taxable income. Tax legislation enacted in 1995 limits the utilization of tax loss carry forwards in a given year to 30% of taxable income.

Deferred tax assets are recognized on tax losses and negative calculation bases for the social contribution taxes are supported by projections of taxable income based on technical feasibility studies. These studies consider the history of profitability of the Company and its subsidiaries and the prospect of maintaining current profitability in the future as the basis for estimated recovery of credits within a period of not more than 10 years. The remaining deferred tax assets, which are based on temporary differences, mainly amortizations of fiscal credits arisen from mergers, tax contingencies and among other provisions, were recognized based on expectations for their realization.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

12. Income tax – continued

b. Deferred and recoverable tax

	Controlling company		Consolidated
	12/31/2013	12/31/2012	12/31/2013		12/31/2012
Recoverable tax:
Withhold income tax	12,328	18,306	12,441		19,639
Recoverable Federal tax	10,516	12,466	11,108		18,939
Recoverable State tax	6,078	34,576	6,430		36,245
Other	9,891	1,829	9,903		7,974
	38,813	67,177	39,882		82,797
Current	32,735	63,117	33,452		77,115
Non-current	6,078	4,060	6,430		5,682

Tax obligations
Federal tax	55,903	31,838	55,990		63,908
State tax	9,185	2,460	9,635		26,555
Municipal taxes	4,606	2,772	4,614		4,073
	69,694	37,070	70,239		94,536
	69,255	36,528	69,800		93,994
Deferred taxes:	439	542	439		542

Income taxes and Social contribution assets:
Crédito fiscal oriundo da incorporação da GB Empreendimentos e Participações S.A.	910,022	-	910,022	-	-

Net operating losses carry forward	-	-	-		214,967

Temporary differences
Provisions	225,824	57,999	225,824		79,952
Allowance for doubtful accounts	54,014	19,971	54,014		36,174
Provision for profit sharing	57,326	37,157	57,326		50,296
Foreign exchange and derivative losses	-	22,235	-		28,004
Property, equipment, inventories and trade accounts payables	53,460	65,889	53,460		77,668
Estimated average tax rate and other	-	25	-		39
	390,624	203,276	390,624		487,100

Income taxes and Social contribution liabilities:
Tax credit on goodwill	(371,299)	(233,578)	(371,299)		(233,578)
Intangible	(131,068)	(133,880)	(131,068)		(133,880)
Other	(1,280)	(240)	(1,280)		(240)
	(503,647)	(367,698)	(503,647)		(367,698)

Non-current assets	796,999	-	796,999		283,824
Non-current liabilities	-	(164,422)	-		(164,422)

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

12. Income tax – continued

b. Deferred and recoverable tax – continued

	Controlling company	Consolidated
Changes in deferred income tax and social contribution deferred assets	Temporary differences	Net operating losses carry forward	Temporary differences	Total
Balances at December 31, 2011	(29,890)	256,616	14,376	270,992
Addition	8,518	-	53,643	53,643
Write-offs	(143,050)	(41,649)	(163,584)	(205,233)
Balances at December 31, 2012	(164,422)	214,967	(95,565)	119,402
Addition	168,231	-	209,743	209,743
Write-offs	(259,757)	(214,967)	(292,202)	(507,169)
Incorporation of GB	975,023	-	975,023	975,023
Addition for incorporation	77,924	-	-	-
Balances at December 31, 2013	796,999	-	796,999	796,999

Fiscal credits arose by the merger of GB Empreendimentos e Participações S.A.

On August 30, 2013, the Company merged GB Empreendimentos e Participações S.A. ("GB"), a company formerly controlled by Embrapar and until then, the parent company of the Company, in order to simplify the organizational structure of its investments, leverage synergies, reduce operating costs and other benefits. Consequently, equity interests that Embrapar and its subsidiary Embratel held indirectly in the Company through GB are now directly held.

Considering that the equity of GB consisted exclusively of investment in the Company, the merger of GB by the Company did not result in a capital increase. Consequently the participation that Embrapar and its subsidiary Embratel held indirectly in the Company through the GB, now is directly held, simplifying the structure of the corporate group.

Through this merger, the Company succeeded in the GB right of amortization for tax purposes, of a benefit in the amount of R$975,023. According to CVM Instruction 319 and related explanatory note issued by CVM, as well as technical interpretation ICPC09 (R1) issued by the CPC, the referred deferred tax asset was recorded as a heading called "special reserve of goodwill arose from the merger of GB" in equity.

In September 2013, the Company initiated the use of tax credits resulting from this reverse merger, adopting the linear amortization within 60 months. Though, during the year ended December 31, 2013, the Company amortized tax credits in the amount of R$65,001.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

12. Income tax – continued

b. Deferred and recoverable tax – continued

Estimated realization of deferred tax assets is determined based on the projection of future taxable income, as follows:

	Controlling company and Consolidated
2014	390,852
2015	248,187
2016	209,768
2017	293,799
2018	150,018
2019 a 2021	7,526
2022 a 2023	496
	1,300,646

The estimates for recovery of deferred tax assets are reviewed at least once a year and are based on projections of taxable income considering several financial and business assumptions prevailing at the closing period at December 31, 2013. Consequently, these estimates may not realize in the future as expected due to the uncertainties inherent in these forecasts.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

12. Income tax – continued

b. Deferred and recoverable tax – continued

The Company has net operating losses to offset 30% of the annual taxable income, without expiration, for the following amounts:

	Controlling company						Consolidated
	12/31/2013			12/31/2012			12/31/2013			12/31/2012
	Income Taxes	Social contribution	Total	Income taxes	Social contribution	Total	Income taxes	Social contribution	Total	Income taxes	Social contribution	Total
Gross amounts	1,846,040	2,078,024	-	1,616,071	1,917,235	-	2,105,034	2,337,610	-	2,510,402	2,833,622	-
Tax credit (25%/9%)	461,510	187,022	648,532	404,018	172,551	576,569	526,258	210,385	736,643	627,601	255,026	882,627
Recognized tax credit	-	-	-	-	-	-	-	-	-	(156,070)	(58,897)	(214,967)

At December 31, 2013, Company management reviewed the carrying amounts of deferred tax assets in light of ongoing studies on corporate restructuring and has not recognized deferred tax on income and social contribution tax losses. The merger of subsidiaries Net Rio Ltda., Net Brasilia Ltda. and Net São Paulo Ltda. in 2013 caused the loss of the right to offset in the annual taxable income tax loss carry forwards of these entities amounting to R$185,397.

On November 11, 2013, the Federal Government issued Provisional Executive Order No. 627 ("MP No. 627"), which proposes to amend the federal tax law for the purpose of adjusting the tax rules to the accounting rules. The Company has evaluated the provisions contained in MP No. 627, which can still be changed by the Federal Government, and based on currently available information it did not identify significant impacts on the financial statements for the year ended December 31, 2014.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

13. Investments

Detailed information about the composition, changes as well others relevant information of investments are as follows:

a) Continuity schedule of investments

Companies	Balances on 12/31/2011	Additons	Capital increase	Dividends	Interest on equity	Equity	Balances on 12/31/2012
Investments in subsidiaries:
Net São Paulo Ltda.	801,062	-	-	(382,000)	(31,936)	187,888	575,014
Net Rio Ltda.	417,176	-	-	(190,000)	(17,067)	27,718	237,827
Net Brasília Ltda.	111,303	-	97,900	-	(10,068)	8,367	207,502
Reyc Comércio e Participações Ltda.	40,038	-	50,161	-	-	(9,848)	80,351
Jacareí Cabo Ltda. (*)	6,418	-	-	-	-	4,679	11,097
Net Brasil Serviços de Televisão por Assinatura S.A.	-	2	-	-	-	1,114	1,116
Other (*)	9,463	-	-	(4,600)	-	(2,898)	1,965
	1,385,460	2	148,061	(576,600)	(59,071)	217,020	1,114,872

On May 14, 2012, the subsidiaries Net São Paulo Ltda. and Net Rio Ltda., paid dividends to the parent company Net Services in the amount of R$382,000 and R$190,000, respectively. The subsidiaries Net Brasilia Ltda. and Reyc Comércio e Participação Ltda. increased its capital using debts they have with the Company as described in note 19.

Companies	% Interest	Balances on 12/31/2012	Capital increase	Write-offs for incorporation	Interest on equity	Dividends	Equity	Balances on 12/31/2013
Investments in subsidiaries:
Net São Paulo Ltda.(*)	-	575,014	-	(544,876)	(21,706)	(65,000)	56,568	-
Net Rio Ltda. (*)	-	237,827	63,649	(264,666)	(10,511)	-	(26,299)	-
Net Brasília Ltda. (*)	-	207,502	22,076	(191,618)	(8,316)	-	(29,644)	-
Reyc Comércio e Participações Ltda.	100%	80,351	120,538	-	-	-	(715)	200,174
Jacareí Cabo Ltda. (*)	-	11,097	-	(14,060)	-	-	2,963	-
Net Brasil Serviços de Televisão por Assinatura S.A.	100%	1,116	-	-	-	-	1,247	2,363
Other	-	1,965	-	(1,891)	-	-	(74)	-
		1,114,872	206,263	(1,017,111)	(40,533)	(65,000)	4,046	202,537

On March 26, 2013, the subsidiaries Net São Paulo Ltda., paid dividends to the controlling company Net Serviços (related to the year ended on December 31, 2012) in the amount of R$ 65,000. In the same date, the Company increased capital on its subsidiaries Net Rio, Net Brasilia Ltda. and Reyc Comércio e Participação Ltda., using intercompanies loans in the amount of R$136,286 and cash and cash equivalents in the amount of R$69,977.

In continuity with the corporate restructuring process, during the year ended December, 31, 2013, the Company incorporated the following subsidiaries:

Entity	Date	Net assets
Net Rio Ltda.	09/30/2013	264,666
Net Brasília Ltda.	09/30/2013	191,618
Jacareí Cabo Ltda.	09/30/2013	14,060
Net São Paulo Ltda.	10/31/2013	544,876
614 Serviços de Internet Maceió Ltda.	10/31/2013	491
614 Serviços de Internet João Pessoa Ltda.	10/31/2013	1.399
614 TVH Vale Ltda.	10/31/2013	1

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

13. Investments – continued

b) Information related to subsidiaries


			12/31/2013				Effect on the Controlling Company’s income
Subsidiaries:	Quotas (thousands)	Assets	Liabilities	Equity	Net sales	Net income/(loss) for the year	2013	2012
Net São Paulo Ltda. (*)	100%	-	-	-	2,357,658	56,568	56,568	187,888
Net Rio Ltda. (*)	100%	-	-	-	1,023,415	(26,298)	(26,298)	27,718
Net Brasília Ltda, (*)	100%	-	-	-	261,833	(29,644)	(29,644)	8,367
Reyc Comércio e Participações Ltda.	100%	266,766	66,591	200,175	538,328	(715)	(715)	(9,848)
Jacareí Cabo Ltda. (*)	100%	-	-	-	13,727	2,963	2,963	4,679
Net Brasil Serviços de Televisão por Assinatura S.A.	100%	11,711	9,348	2,363	2,449	1,246	1,246	1,114
Other(*)	100%	-	-	-	-	(74)	(74)	(2,898)
							4,046	217,020

(*) Companies merged by the controlling company Net Serviços in 2013.

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

14. Property, plant and equipment
	Controlling company
	Distribution plant	Software and computer equipment	Machinery and equipment	Furniture and fixtures	Installations, improvements and properties	Vehicles	Tools	Other	Total
Cost
Balances at December 31, 2011	4,257,254	122,063	28,108	23,651	59,514	2,980	28,445	7,795	4,529,810
Additions	1,396,813	59,070	99	1,774	4,756	57	5,446	1,414	1,469,429
Transfers	(3,097)	661	-	5	3,694	-	-	-	1,263
Write-offs	(20,353)	(3,420)	(28)	(37)	(2)	(853)	-	-	(24,693)
Balances at December 31, 2012	5,630,617	178,374	28,179	25,393	67,962	2,184	33,891	9,209	5,975,809
Additions	2,195,630	25,933	194	2,534	10,404	46	17,384	5,539	2,257,664
Additions for incorporation	5,682,746	30,472	17,436	10,776	51,008	1,404	36,942	2,162	5,832,946
Transfers	(7,637)	-	199	64	5,060	-	-	-	(2,314)
Write-offs	(40,525)	(1,781)	(341)	(68)	-	(542)	(4)	-	(43,261)
Balances at December 31, 2013	13,460,831	232,998	45,667	38,699	134,434	3,092	88,213	16,910	14,020,844

Accumulated depreciation
Depreciation rate per annum	8,33 a 20%	20 a 33,33%	10%	10%	4 a 25%	20%	20%	-	-
Balances at December 31, 2011	(2,096,964)	(99,930)	(22,344)	(16,411)	(31,338)	(2,674)	(17,410)	121	(2,286,950)
Additions	(511,467)	(14,737)	(1,386)	(1,299)	(3,554)	(88)	(4,466)	-	(536,997)
Write-offs	20,051	3,217	23	37	2	796	-	-	24,126
Balances at December 31, 2012	(2,588,380)	(111,450)	(23,707)	(17,673)	(34,890)	(1,966)	(21,876)	121	(2,799,821)
Additions	(1,023,424)	(28,817)	(1,314)	(1,584)	(5,096)	(93)	(6,474)	-	(1,066,802)
Transfers	(2,933,558)	(28,289)	(15,227)	(6,546)	(26,450)	(1,190)	(24,641)	-	(3,035,901)
Additions for incorporation	1,885	-	-	-	-	-	-	-	1,885
Write-offs	39,003	1,779	341	68	-	533	4	-	41,728
Balances at December 31, 2013	(6,504,474)	(166,777)	(39,907)	(25,735)	(66,436)	(2,716)	(52,987)	121	(6,858,911)

Net balances at December 31, 2011	2,160,290	22,133	5,764	7,240	28,176	306	11,035	7,916	2,242,860
Net balances at December 31, 2012	3,042,237	66,924	4,472	7,720	33,072	218	12,015	9,330	3,175,988
Net balances at December 31, 2013	6,956,357	66,221	5,760	12,964	67,998	376	35,226	17,031	7,161,933

NET SERVIÇOS DE COMUNICAÇÃO S.A.

Notes to the financial statements

December 31, 2013 and 2012

(In thousands of reais)

14. Property, plant and equipment

	Consolidated
	Distribution plant	Software and computer equipment	Machinery and equipment	Furniture and fixtures	Installations, improvements and properties	Vehicles	Tools	Other	Total
Cost
Balances at December 31, 2011	8,182,538	150,057	45,550	32,771	98,138	3,903	54,356	8,144	8,575,457
Additions	2,401,365	60,690	216	2,176	5,621	74	10,228	1,414	2,481,784
Transfers	(9,113)	939	11	228	10,279	-	-	-	2,344
Write-offs	(41,548)	(4,611)	(137)	(76)	(2)	(1,048)	(13)	-	(47,435)
Balances at December 31, 2012	10,533,242	207,075	45,640	35,099	114,036	2,929	64,571	9,558	11,012,150
Additions	3,217,803	26,229	421	3,123	13,879	46	23,127	6,971	3,291,599
Transfers	(19,254)	-	248	80	7,432	-	-	-	(11,494)
Write-offs	(82,923)	(1,847)	(382)	(69)	-	(542)	(4)	-	(85,767)
Balances at December 31, 2013	13,648,868	231,457	45,927	38,233	135,347	2,433	87,694	16,529	14,206,488

Accumulated depreciation
Depreciation rate per annum	8,33 a 20%	20 a 33,33%	10%	10%	4 a 25%	20%	20%	-	-
Balances at December 31, 2011	(4,178,441)	(124,822)	(36,970)	(21,547)	(53,282)	(3,070)	(35,061)	502	(4,452,691)
Additions	(973,404)	(17,053)	(1,934)	(1,907)	(6,338)	(283)	(7,960)	-	(1,008,879)
Transfers	-	-	-	(74)	74	-	-	-	-
Write-offs	38,581

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Gross amounts

Tax credit (25%/9%)

Recognized tax credit

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