UPDATE: Portugal Telecom Net Profit Gains On Brazil Revenue

Portugal Telecom SGPS SA (PT) said Thursday its second-quarter net profit rose 83% as higher revenue from its key Brazilian market offset weakness in the beleaguered Portuguese market.

PT, Portugal's biggest telecommunications company by market capitalization, said net profit increased to EUR164.2 million from EUR90 million a year earlier.

"The numbers are solid, despite a weak macroeconomic backdrop," ING's Georgios Ierodiaconou said. Pay television and Internet broadband adds are healthy while mobile performance isn't as bad as feared, he added.

At 0745 GMT, PT's shares traded 0.7% higher at EUR8.59.

Revenue rose 17% to EUR1.91 billion, while earnings before interest, tax, depreciation and amortization increased 11% to EUR663.6 million.

The company's biggest source of revenue is Brazilian mobile company Vivo Participacoes SA (VIV), which it controlled jointly with Spain's Telefonica SA (TEF) until July. Due to a stronger real and growth in the Brazilian market, PT's revenue in the quarter from Brazil rose 38% to EUR1.10 billion.

Last month, PT sold its stake in Vivo for EUR7.5 billion and used roughly half of the funds to buy a stake in Brazilian telecommunications company Oi (TMAR5.BR).

European telecommunication companies, including PT, are facing stagnant revenues in their home markets as customers scale back on spending during the financial crisis and migrate to low-cost operators to limit spending. Portugal, along with many of its peers in Southern Europe, has been hit especially hard by lower consumer spending that has forced companies to cut tariffs.

In Portugal, PT's revenue fell 1% to EUR798 million.

Portugal Telecom's capital expenditures declined as the company finishes investments to beef up its pay-TV business in Portugal and third-generation mobile network in Portugal and Brazil.

The Lisbon-based company said capital expenditure in the quarter fell 10% to EUR254.7 million compared with a year ago as costs from expanding its fibre optic networks declined from last year.

Besides Portugal and Brazil, Portugal Telecom has smaller operations in Angola, Cape Verde, Mozambique, Namibia and East Timor.

-By Jason Sinclair, Dow Jones Newswires; +34-91-395 8127; jason.sinclair@dowjones.com;

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