Portugal Telecom 1Q Net Profit Hurt By Fixed Line
LISBON -(Dow Jones)- Portugal Telecom, Thursday reported a 16.3% fall in first-quarter net profit, with poor performance in the fixed telecommunications business outweighing strength in its broadband business.
Portugal Telecom, which managed to fend off a hostile bid from smaller rival Sonaecom just two months ago, said net profit in the first quarter fell to EUR176.6 million, compared with EUR210.9 million a year earlier.
Still, the figure beats the average estimate of 3 analysts surveyed by Dow Jones Newswires, who saw net profit for first quarter down 27% at EUR152.5 million.
Portugal Telecom's sales for the quarter rose 2.5% to EUR1.46 billion, from EUR1.43 billion, while earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 5.1% to EUR570.8 million compared with EUR542.9 million.
"The company's fixed-line business continues to suffer from declining fixed-to-mobile traffic as penetration rates in mobile have soared past 100%," said John Dos Santos at Lisbon Brokers. He rates PT at buy, with a EUR11.2 price target.
However, Dos Santos added that "from an operational point of view, the strong results may lead to an improvement in our valuation."
PT said its best-performing business segment was retail broadband, or high-speed Internet connections, with its customer base growing 1.1% in the quarter to 148,000. Net additions amounted to 8,000 compared to negative net additions of 7,000.
"The sustained recovery in subscribers as from the third quarter of 2006, reflects a significant decrease in churn, essentially related with significant improvements in the quality of service provided by TV Cabo and more comprehensive triple play offer following the launch of the voice service," the company said in the statement.
However, this segment did not totally offset the negative effect of PT's domestic wireline operations, which saw total customers fall 2% in the quarter to 4.4 million.
In mobile operator TMN, PT said its domestic mobile customer base rose 7.4% in the three months to March 31 to 5.7 million, although average revenue per user, or ARPU, fell 6.7% to EUR19.1 during the same comparative period.
PT's Brazilian mobile operator, Vivo, also lost customers. Vivo, a joint venture with Spain's Telefonica SA (TEF), had 29 million customers in the first quarter, 3.7% less than the same period a year earlier.
PT is in ongoing talks with Telefonica on the future of Vivo's shareholding after the relationship between the two turned sour when Telefonica sided with Sonaecom in the failed bid.
Analysts reckon Vivo is worth around a total of EUR4 billion.
The company said that its operating costs edged 0.8% higher to EUR889.9 million in the period.
Portugal Telecom's capital expenditure amounted to EUR21 million, down 39.2%, while net debt stood at EUR178 million, EUR49 million lower than in the year ago period.
Portugal Telecom's separately-listed unit PT Multimedia also reported first quarter earnings Thursday, posting a 8.9% rise in net profit to EUR18.5 million compared with EUR17 million in first-quarter 2005.
PT Multimedia is slated for spin off by the end of the year. The decision was made as part of PT's strategy to fend off Sonaecom's bid.
At 0723 GMT, Portugal Telecom shares were up EUR0.07, or 0.7%, at EUR10.54, outperforming a slightly positive overall market.
PT shares have risen 5.6% in the last 12 months, supported by Sonaecom's bid and then prospect of a spin-off of unit PT Multimedia.
Company Web site: http://www.telecom.pt
-By Filipa Cunha, Dow Jones Newswires; +351-21-3191863; filipa.cunha@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 10th May 2007
