Brazil's second largest mobile phone company TIM Participações posted a net profit of 20.3mn reais (US$9.5mn) in the third quarter of 2006 compared to a loss of 304mn reais in 3Q05, TIM said in a statement.
The Brazilian mobile phone unit of Telecom Italia (NYSE: TI) recorded a 30% increase in net revenues to 2.75bn reais from 2.1bn reais in the 3Q05 primarily due to the reduction in average financial costs and exchange rate variation.
TIM results were solid and in line with expectations, according to a note by analyst Carlos Constantini at Deutsche Bank Equity Research.
The company's third quarter numbers were affected by the adoption of a new accounting policy regarding handset subsidies for postpaid clients and produced a 136mn-real extraordinary Ebitda gain.
TIM's Ebitda reached 677mn reais, up 92.7% compared to 3Q05, with an Ebitda margin of 24.6%, which grew 7.9 percentage points compared to a year ago.
"In our view, TIM's results were strong and confirm it is the best performing cellular operation in Brazil at this point in time," Constantini said.
TIM ended the third quarter with 24.1 million clients, up 31.3% year-on-year and with a market share of 25.1% versus 22.9% in 3Q05.
"Net additions were 601,000 higher than we expected as higher gross additions were offset by higher-than-expected churn of 2.5%, analyst Walter Piecyk at Pali Research said in a research note.
The postpaid base grew by 35.4% in the last twelve months, outperforming the national average, Mario Cesar de Araujo, CEO of TIM Brasil told analysts during a conference call.
TIM was also confident about the challenge from rivals such as the third largest mobile operator Claro which is offering promotions in the postpaid handset market.
"We continue to react to subsidies in the postpaid consumer market with our aggressive promotions such as TIM Familia," de Araujo said.
"In the postpaid corporate market we also have aggressively built up sales channels and benefited from the quality of our services and solutions such as Blackberry and roaming," de Araujo added.
In the next quarter, TIM expects stable costs, despite some increases in call center expenses and handset recharge commissions, he said.
TIM Participações is the holding company of TIM Celular and TIM Nordeste.
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