Telefonica Brasil Misses Overall - Analyst Blog
July 26 2012 - 1:45PM
Zacks
Brazilian telecom carrier
Telefonica Brasil SA (VIV)
reported second quarter 2012 net income of R$1,085.5 million
($554.7 million), down 5.6% year over year. Earnings per ADS came
in at 49 cents, considerably lagging the Zacks Consensus Estimate
of 56 cents.
Revenue dipped 0.2% year over year
to R$8.24 billion ($4.2 billion), and also missed the Zacks
Consensus Estimate of $4.37 billion, mainly due to the slowdown in
fixed-line customer base.
Consolidated EBITDA inched up 1%
year over year to R$3.1 billion ($1.6 billion) with EBITDA margin
increasing 40 basis points (bps) to 37.5%. Operating expenses
dropped 0.9% year over year to R$5.15 billion ($2.63 billion).
Revenue
Segments
Mobile
revenue climbed 8.4% year over year to R$5.12 billion ($2.62
billion), driven primarily by data and VAS, and access and usage
revenues. Telefonica Brasil added 0.93 million customers in the
quarter, thus taking its total subscriber base to 75.72 million (up
18.2% year over year). Post-paid and prepaid subscribers grew 20.6%
and 17.5% year over year to 17.17 million and 58.54 million,
respectively.
Average revenue per user (ARPU)
fell 7% to R$21.9 ($11.2) as lower voice ARPU fully mitigated the
growth in data ARPU. As a result of higher termination of 1.6
million inactive prepaid subscribers, customer churn upped 1% year
over year to 3.8%.
Fixed
revenue fell 11.7% year over year to R$3.11 billion ($1.6 billion).
Pay TV performed the worst with revenue decline of 20.2% followed
by declines of 17%, 13.5% and 3.2% in fixed voice and access, other
services and interconnection revenues, respectively. However, data
transmission revenue increased 2.2%.
Total fixed access lines reached
15.13 million at the end of the reported quarter, reflecting a 0.9%
year-over-year decrease. Telefonica Brasil added 32,000 fixed
broadband service customers, bringing the total subscriber base to
roughly 3.72 million (up 7.1% year over year) during the quarter.
The Pay TV subscriber base dropped 4.6% year over year to 650,000
customers. Fixed voice lost 113,000 customers and the subscriber
base stood at 10.77 million at the end of the second quarter.
Liquidity
Telefonica Brasil, a subsidiary of
Telefonica SA (TEF), exited the second quarter
with cash and cash equivalents of R$2.11 billion compared with
R$2.67 billion in the year-ago quarter. Net debt decreased to
R$3.17 billion from R$3.21 billion in the year-ago quarter. Net
debt-to-EBITDA ratio improved to 0.26 times from 0.27 times in the
year-ago quarter.
Capital expenditures decreased
38.2% year over year to R$1.14 billion ($0.58 billion) in the
reported quarter.
Our Take
Despite the expansion of video,
broadband Internet and Pay TV services, we remain skeptical about
the company’s ability to regain lost profitability in the
fixed-line segment. Tariff cuts, intense inflationary pressure,
stiff competition from rivals like America Movil
S.A.B. de C.V. (AMX) and Telecom Italia
S.P.A. (TI), and excessive government intervention would
put added pressure. All these factors might restrict potential
synergies derived from the mobile business and restrain top and
bottom-line growth.
We are currently maintaining our
long-term Underperform recommendation on the stock. For the short
term (1-3 months), Telefonica Brasil holds a Zacks # 5 (Strong
Sell) Rank.
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis Report
TELECOM ITA-ADR (TI): Free Stock Analysis Report
TELEF BRASIL SA (VIV): Free Stock Analysis Report
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