Brazilian telecom carrier
) reported first quarter 2012 net income of R$956.6 million ($541.2
million), down 15.2% year over year. Earnings per ADS came in at 48
cents, which missed the Zacks Consensus Estimate of 54 cents.
Revenue grew 3.7% year over year to R$8.31 billion ($4.7
billion). The outperformance was primarily driven by growth in
Consolidated EBITDA inched up 0.3% year over year to R$2.85
billion ($1.61 billion) with EBITDA margin decreasing 120 basis
points (bps) to 34.2%. Operating expenses grew 5.6% to R$5.47
billion ($3.09 billion) from the year-ago quarter.
revenue climbed 9.3% year over year to R$5.11 billion ($2.89
billion), driven primarily by data and VAS, and access and usage
revenues. Telefonica Brasil added 3.23 million customers to reach
74.78 million (up 20.5% year over year) subscribers at the end of
the first quarter. Post-paid and prepaid subscribers grew 24.8% and
19.3% year over year to 16.62 million and 58.16 million,
Average revenue per user (ARPU) fell 5.9% to R$22.4 ($12.7) as
lower voice ARPU outstripped the strong growth in data ARPU. Churn
deteriorated 20 bps year over year to 2.5%.
revenue fell 4.1% to R$3.21 billion ($1.81 billion) year over year.
Fixed voice and access revenue, which saw the largest decline of
14.6%, offset solid growth in interconnection (up 1.6%), Pay TV (up
45.4%), data transmission (up 10.5%) and other services revenues
Total fixed access lines reached 15.25 million at the end of the
reported quarter, reflecting a 1.3% year-over-year increase.
Telefonica Brasil registered 54,000 net additions for its fixed
broadband service, bringing the total subscriber base to roughly
3.68 million (up 9.1% year over year). The Pay TV subscriber base
shot up 34.2% year over year to 683,000 customers. Fixed voice lost
292,000 customers from the year-ago quarter, touching 10.88 million
at the end of the first quarter.
Telefonica Brasil, a subsidiary of
), exited the first quarter with cash and cash equivalents of
R$3.18 billion compared with R$4.25 billion in the year-ago
quarter. Net debt decreased to R$2.66 billion from R$3.16 billion
in 2011. Net debt-to-EBITDA ratio improved to 0.22 times compared
with 0.26 times in 2011.
Capital expenditure increased 63.4% year over year to R$1.16
billion ($0.66 billion) in the reported quarter.
Telefonica Brasil has attractive long-term opportunities in
mobile business thanks to continued expansion of the subscriber
base. We believe the fixed-line business, which is currently
lagging, will also benefit from the expansion of video, broadband
Internet and Pay TV services. However, we remain skeptical about
its ability to regain profitability this year.
Further,the synergies derived from the mobile business would be
partly offset by intense inflationary pressure, stiff competition
from its rivals such as
S.A.B. de C.V.
Telecom Italia S.P.A.
) and excessive government intervention.
We are currently maintaining our long-term Neutral
recommendation on the stock. For the short term (1-3 months),
Telefonica Brasil holds a Zacks # 3 (Hold) Rank.
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