Brazil's TIM 1Q 2005 Net Profit BRL659 Million Vs BRL567.7 Million

SAO PAULO -(Dow Jones)- Brazilian mobile phone operator TIM Participacoes SA (TSU) Wednesday reported a net profit of 84.3 million Brazilian reals ($1=BRL2.536) for the first quarter of 2005, up nearly 17% from a year ago, due to more customers and higher usage.

The first quarter result for TIM Participacoes, one of the Brazilian units of Telecom Italia (TI), was slightly better than the market had been expecting.

Net revenues rose 16.1% to BRL659 million during the first quarter, as TIM said it signed up more customers, traffic and usage increased, and calling prices rose.

The firm, which manages two privatized operators serving nine states in southern and northeastern Brazil, ended the quarter with 5.94 million customers, up 33.4% from 4.45 million at the end of the first quarter 2004.

Brazil's fiercely competitive mobile market reached 68.6 million customers at the end of March, up nearly 40% from a year ago, according to telecoms regulator Anatel.

Higher revenues pushed earnings before interest, tax, depreciation and amortization, or Ebitda, to BRL249.2 million during the quarter, up from BRL216 million a year ago, TIM said.

However, the Ebitda margin, a useful measure of profitability, fell to 37.8% of net revenues, from 38.1% a year ago.

TIM also unveiled plans to exchange shares in its two operating units, TIM Sul and TIM Nordeste, for cash or for its own shares, to boost the liquidity of its stock and reduce administrative expenses. Once completed, TIM said it would own 100% of shares in the two subsidiaries.

Meanwhile, the firm said voice traffic increased 7.7% during the quarter, while prices rose by 4.4% on average during the period.

Average revenues per user, or ARPU, were BRL30.39 per month during the quarter, down from BRL36.14 a year ago, primarily because of the rapid growth of the customer base, and in particular prepaid users, which tend to use their phones less than contract customers.

TIM also said that its two units stopped providing domestic and international long distance services during the quarter, further impacting ARPU.

Given the rapid growth in customers, TIM unsurprisingly said cost of services rose to BRL114.9 million, up 25.2% from one year ago.

Amid intense competition in the marketplace, selling costs totaled BRL116.9 million during the first quarter, up 36.1% from the year-ago period.

Nevertheless, TIM said the cost of signing up each new customer was BRL133 during quarter, down 7.4% from a year ago, as lower cost of buying handsets from manufacturers combined with the appreciation of the Brazilian real meant the company could reduce handset subsidies.

On March 31, TIM's total debt was BRL78.5 million, of which 54% is scheduled to come due over the subsequent 12 months.

TIM invested BRL48.6 million during the quarter, down from BRL54.5 million a year ago, as it continues expanding the GSM-technology overlay for the aging TDMA network.

TIM said 43% of its customers were using the new GSM network by the end of the quarter, and that it has stepped up efforts to migrate customers from the older TDMA system.

-By Matthew Cowley, Dow Jones Newswires; 5511 3145 1479; matthew.cowley@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 27th April 2005