Portugal Tel 1Q Net +16%; Domestic Operations Weak
LONDON (Dow Jones)--Portugal Telecom, Thursday reported a 16% rise in first-quarter net profit, helped mainly by a lower tax provision as its domestic operations continued to weaken.
PT, based in Lisbon, said net profit rose to EUR210.9 million in the quarter from EUR182.5 million in first quarter 2005 as sales rose 8% to EUR1.57 billion from EUR1.45 billion.
PT said earnings before interest, taxes, amortization and depreciation slipped 5% to EUR587.4 million, hurt by the impact of lower interconnection fees for its domestic fixed line and mobile units.
Mobile unit TMN's sales were EUR21 million lower because of that effect, and the fixed line unit PTC's sales were EUR9 million lower.
PT said the positive tax impact was around EUR53 million, stemming primarily from the recognition of a tax benefit in the period. Excluding that effect PT's profits would have been EUR158 million for the period, above analysts expectations of profits around EUR145 million.
PT, which faces an unsolicited EUR11.1 billion takeover bid from its much smaller rival SonaeCom, did not provide any comment on the offer along with its earnings statement. PT has said it considers the bid hostile, and its board has called on shareholders to reject it.
For its business units, PT said its total number of fixed line customers rose 0.5% to 4.5 million, powered by broadband expansion. Total mobile subscribers rose 11% to 35.5 million, driven mainly by additions at its Brazilian venture with Spain's Telefonica.
PT's pay-television business saw a 1.1% rise in customers to 1.5 million, while broadband users increased 25% to 965,000.
Domestic mobile unit TMN's average revenue per user, or ARPU, fell 9.8% in the quarter, while calling time was flat. The cash cost per user fell 13%, while data services as a percentage of total use rose to 12.8% from 11.2%.
The European telecoms industry is battling a decline in sales in the cash-generating, fixed-line activities. Meanwhile, growth in the more mature western European mobile markets has slowed.
But PT has managed to stem the decline at its domestic operations thanks to its exposure to the high-growth Brazilian wireless market through its 50% stake in country's largest mobile telephone operator Vivo Participacoes (VIV). Spain's Telefonica owns the other 50%.
Sales at PT's fixed-line unit declined 4.1% to EUR491.5 million as traffic continued to decline. Sales at its domestic wireless unit fell 2.2% to EUR337.9 million. But sales at Vivo jumped 32% to EUR523.2 million from EUR397.3 million, boosted by 12% growth in customers to 30.1 million.
"Obviously, we were very pleased with the operational performance of the group as a whole, with the only margin declines being registered at Vivo," said analyst John dos Santos at Lisbon Brokers.
He plans to fine-tune his PT model, but doesn't expect major changes to his estimates or valuation. Lisbon Brokers rates PT a buy, with EUR11.70 fair value.
At 0800 GMT PT shares were up EUR0.03, or 0.3%, at EUR9.38. The benchmark PSI-20 index was down 0.6%.
PT said its net debt remained stable at EUR3.68 billion in the quarter.
PT's separately-listed unit PT Multimedia also reported first quarter earnings Thursday, posting a drop to EUR17 million compared with EUR18.5 million in first-quarter 2005.
The fall in profit was blamed mainly on amortization stemming from capital investment in 2005, the company said.
Company Web site: http://www.telecom.pt
-By Erik T. Burns, Dow Jones Newswires; +351 21 319 1863; erik.burns@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 18th May 2006
