Brazilian telecom carrier,
Telefonica Brasil SA
) reported first-quarter 2014 net income of R$660.8 million ($279.6
million), down 18.4% year over year. However, net operating revenue
rose 0.7% year over year to R$8,611.9 million ($3,644.5
Recurrent EBITDA dropped 9.7% year over year to R$2,562.8
million ($1,084.5 million) in the first quarter, while EBITDA
margin of 29.8% was down 340 basis points (bps).
Recurrent operating expenses in the first quarter increased 5.8%
year over year to R$6,049.1 million ($2,560.0 million).
' total revenue climbed 2.2% year over year to R$5,758.7 million
($2,437.1 million) in the reported quarter, primarily driven by
Data, Internet, VAS and other services.
Average revenue per user (ARPU) grew 0.7% to R$23.3 ($9.86),
driven by a 17.5% rise in Data ARPU. Customer churn was flat year
over year at 3.4% in the quarter.
As of Mar 31, 2014, the total subscriber base was 78.465 million
(up 3.3% year over year). Post-paid subscribers increased 27.6%
year over year to 24.912 million, while the prepaid customer count
decreased 5.2% year over year to 53.553 million.
Fixed Line Business
' total revenue fell 2.3% year over year to R$2,853.2 million
($1,207.5 million). Pay-TV revenues jumped 14.0% while fixed voice
and access revenues dropped 7.3% year over year.
At the end of the first quarter, total fixed access lines
reached 15.391 million, reflecting a 3.5% year-over-year increase.
Fixed Broadband customers were 3.918 million compared with 3.753
million a year ago. The Pay-TV subscriber base grew 14.7% year over
year to 645,000 customers, while fixed voice subscribers totaled
10.828 million, up 2.6% year over year.
Telefonica Brasil - a subsidiary of
) - exited the quarter with cash and cash equivalents of R$ 4,544.5
million ($1,923.2 million) as compared to R$6,543.9 ($3,039.6
million) at the end of 2013. Total debt was R$ 8,562.6 million
($3623.7 million) versus R$8,753.6 million ($4,066 million) at the
end of 2013 and net debt-to-EBITDA ratio was 0.35 times. The
company ended the first quarter with 1.4 million 4G customers.
Total capital expenditure during the quarter was R$1,001.0 million
($423.6 million), up 41.4% year over year.
The company declared a dividend of R$0.110683 (4.68 cents) per
common share which will be paid on May 27, 2014.
We believe Telefonica Brasil's bundled offering along with its
quality service is strengthening its competitive position, thus
allowing it to expand its market share. Focusing on higher growth
areas like data transmission and video services are expected to
deliver decent growth in the future.
Telefonica Brasil currently holds a Zacks Rank #2 (Buy). Other
stocks worth considering in this sector include
Level 3 Communications, Inc.
Nippon Telegraph and Telephone Corporation
). Level 3 carries a Zacks Rank #1 (Strong Buy) while NTT holds the
same rank as VIV.
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