UPDATE: Brazil Telecom Vivo Sees 3Q Earnings More Than Double

Brazil's leading cellular operator, Vivo Participacoes (VIV VIVO4.BR), on Thursday reported that third quarter profit more than doubled amid rising revenues and effective cost controls.

The company, which is jointly controlled by Spain's Telefonica (TEF TEF.MC) and Portugal Telecom SGPS SA (PT PTC.LB), posted a third-quarter net profit of 340 million Brazilian reals ($197 million) compared with BRL133.9 million seen in the third quarter of 2008.

"The results underlined our quest for results despite a very competitive environment," said Roberto Lima, Vivo's chief executive, on a conference call.

Investors approved of the results with Vivo shares rising 3.9% to BRL48.00 in early trade on the Brazilian Stock Exchange, or Bovespa, while the benchmark Ibovespa index was 0.1% higher.

Vivo's third-quarter net revenue rose 0.2% to BRL4.09 billion from BRL4.08 billion in the year-ago period. Increased sales of data and value added products offset the decline revenues from handset sales as the company focused more on selling chips.

The company's client base expanded 2.5% from the second quarter from 48.8 million. In the same period, the company increased its market share to 31.4% from 31.2%, cementing its No. 1 position in the local market.

The company's earnings before interest, taxes, depreciation and amortization, or Ebitda, were BRL1.4 billion, up from BRL1.32 billion in the third quarter of 2008.

The Ebitda margin, a measure of profitability over net revenue, was 34.4% in the quarter, up from 32.5% a year earlier.

According to Cristiane Barretto Sales, Vivo's chief financial officer, margins improved because of an expansion in service revenues combined with efficient control of costs.

Worryingly for the company, average revenue per user fell to BRL26.40 in the last quarter from BRL29.40 in the same period one year before.

The substantial expansion of the customer base and the increased use of multiple chips were two big factors in the decline, said Lima, adding that the slowdown in the local economy also played a role.

Vivo said it invested BRL548.7 million in its operations in the third quarter, compared with BRL868.4 million in the third quarter of 2008.

The company ended the quarter with 48.8 million customers, a 15.5% increase from 42.27 million in the year-ago quarter.

-By Alastair Stewart; Dow Jones Newswires; 5511 2847-4520; alastair.stewart@dowjones.com

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