Brasil Telecom profits narrow 18% in Q2

Bnamericas Published: Wednesday, August 04, 2004
Fixed line operator Brasil Telecom on Tuesday (August 3) reported net profits of 82.1mn reais (US$26.9mn) for the second quarter of 2004, down 17.7% from 99.8mn reais in 2Q03. Net revenues rose 12.9% year-on-year to 2.2bn reais due to growth from long distance, data communication, and internet revenue along with a new revenue stream from its newly acquired companies MetroRed and Vant. "At the end of the quarter our carrier selection code achieved a representative market share of 38% in the inter-regional segment and 20% in the international segment, generating additional revenue from an already existing network," Brasil Telecom chief executive Carla Cico said during a teleconference on Thursday (August 4). Brasil Telecom's 34.8% quarterly increase in net debt to 1.8bn reais in 2Q04 from 1.36bn reais in 1Q04 is due to investments and dividends paid in the first quarter and the company is considering a small reduction in net debt by year-end 2004, according to company executives. "We had not incorporated the acquisitions of MetroRed and Vant [323mn reais in total], which along with somewhat higher-than-expected working capital requirements [200mn reais], explain why net debt of 1.8bn reais came in well above our 1.1bn-real forecast," reported analyst Mauricio Fernandes of investment bank Merrill Lynch. The company's Ebitda increased quarterly by 3.3% and year-on-year by 2.2% to 921mn reais in 2Q04 from 892mn reais and 901mn reais in 1Q04 and 2Q03 respectively. "Ebidta of 922mn reais was 2% below our 940mn-real forecast on higher than expected interconnection expenses and bad debt provisions," Fernandes said in a research note. Brasil Telecom is currently studying the possibility of participating in Brazilian telecom regulator Anatel's upcoming tender for six mobile licenses, particularly those in the Sao Paulo region, according to Brasil Telecom's Cico. Local press reported that participants have petitioned telecoms regulator Anatel to postpone the auction, originally planned for August 20. Brasil Telecom plans to launch GSM services, a mobile operation, by the end of this month and will invest 1bn reais into it by year-end 2004. The company aims to achieve 1 million mobile subscribers within the first 13 months of operation, with a goal to obtain 400,000 by year-end 2004. Turning to the recent furor in the Brazilian press over the hiring of US-based Kroll Associates to investigate the activities of Telecom Italia, Cico said the company has not made provisions for possible legal damages because it is confident that it will successfully defend itself. "The company didn't commit any crime. We are just defending our shareholders' interests," Cico said. Despite Brasil Telecom's potential to increase shareholder returns, it is unlikely to do so until its ongoing legal conflict with Telecom Italia is resolved, according to Merrill Lynch's Fernandes.

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