SAO PAULO -(Dow Jones)- Vivo Participacoes, Brazil's largest mobile telephone operator, Wednesday reported narrowing first quarter losses on lower client acquisition costs and rising per user revenues.
The company reported a first quarter net loss of 19.3 million Brazilian reals ($9.51 million), compared with a loss of BRL179.3 million in the same period a year ago.
The figure was below analyst forecasts. A survey of three analysts by the local Estado newswire had forecast a loss of BRL62 million.
"We have now had three quarters of results showing a turnaround in operations," said Roberto Lima, Vivo's chief executive, during a conference call.
First quarter revenues were slightly above expectations at BRL2.85 billion, up from BRL2.58 billion a year ago. The Estado survey had forecast revenues of BRL2.79 billion.
While voice services remains the main component in revenues, data service revenues grew a substantial 28% on the year before, indicating the future importance of this segment, Lima said..
Investor reaction to the results was neutral. Early afternoon, the company's shares were 0.1% higher at BRL9.01 on the Sao Paulo Stock Exchange.
The company's earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled BRL757.0 million in the first quarter, up 5.6% from BRL717.1 million in the first quarter of 2006.
The EBITDA margin, a measure of profitability over net revenue, was 26.6% in the quarter, down from 27.8% last year.
The EBITDA margin was affected by a change in the rules governing interconnection charges, which meant interconnection was now levied on all mobile-to-mobile calls. Previously, some calls had been exempt. As a result, revenues and costs rose.
Excluding the effects of the rule change, the margin would have been 29.7%, the company said.
The Vivo group is a joint venture between Spain's Telefonica and Portugal Telecom. The acquisition of Telecom Italia by a consortium led by Telefonica has raised questions over the future ownership of the company. Vivo could be merged with Telecom Italia-owned TIM Participacoes, or Telefonica could sell out to Portugal Telecom or others.
The company made bad debt provisions of BRL107.4 million for the first quarter, which were mainly related to billing problems in the northeast of the country. In the same period of 2006, provisions were 33% higher, the company noted.
Vivo registered a net loss of clients in the first quarter as the company focused on reducing churn and pulled back from offering heavy subsidies to attract customers
Vivo showed a net loss of 23,000 in the quarter, compared with additions of 333,000 in the same quarter last year.
The net decline was partly due to reduced marketing efforts in the first two months as the company concentrated on the introduction of services on its new GSM wireless system, which it is overlaying on its CDMA network.
"But net sales were above expectations last quarter," said Lima.
However, Vivo became more aggressive in March, rolling out its new GSM handsets and services and the company is now looking to regain market share, which has been leaking in recent months.
Vivo's share of the Brazilian market was 37.6% in the quarter compared with 43.5% in the same period of 2006.
"We aren't present in two key expanding regions, Minas Gerais and the Northeast, which makes it more difficult to maintain share," said Lima.
Average revenue per user rose 18% on the year to BRL30.00 per month on an increase in voice and data rates and the change in the interconnection tariffs system.
Normally, the first quarter is a weak period for telephone firms because many users go on holiday. However, analysts were impressed that the company managed to maintain Arpu levels near the BRL30.60 registered in the fourth quarter.
Meanwhile, the cost of acquiring new clients fell 13% on the year to BRL100 per client due to lower subsidies on handsets, a reduction in publicity spending and greater sales through Vivo's own outlets.
Total traffic on the Vivo network rose 6.4% on the year.
In the first quarter, the company invested BRL235.4 million, mainly on the GSM overlay process, down from BRL281.3 million in the same quarter last year.
The company said its net debt was BRL3.1 billion at the end of the quarter, down 7% from the end of the fourth quarter and down 26% from the end of the first quarter.
-By Alastair Stewart, Dow Jones Newswires; 5511 3145-1479; alastair.stewart@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 10th May 2007
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