Cantv aims for 24% residential price hike

Venezuela's Cantv (NYSE: VNT) aims to negotiate residential fixed line price hikes of approximately 24% before the end of the first half, compared to average hikes of 22% for other services in 2003, chief financial officer Armando Yanez said Friday. Residential fixed to fixed prices remained frozen throughout 2003, and since this sector represents 20% of Cantv's revenues it is one of the highest priorities in talks with telecoms regulator Conatel, Yanez said during a conference call to discuss the company's 2003 results. On Wednesday, Cantv reported net income of US$19mn for 2003, down 65% compared to the US$53mn profit registered in 2002. Total revenues were US$1.99bn, down 6.3% on 2002, affected primarily by a 14% decrease in local and domestic long distance revenues. International long distance revenues were down 25% year on year at US$68mn, and fixed to mobile revenues fell 22% at US$356mn. However, revenues from data services and other wireline-related services were US$249mn, up 26% on 2002. Because of Venezuela's economic slump, wireline minutes of use were down 8.4% compared to 2002, but there was a sequential increase in 4Q03, mirroring recovery of the economy and mainly due to increased use by the corporate sector. Ebitda for 2003 was US$721mn, down 6.5%, and the Ebitda margin was flat at 36%. The company succeeded in reducing total operating expenses 6% to US$721mn, but non-operating expenses almost trebled at US$34mn, compared to US$13mn in 2002. For 2004 Cantv's financial guidance ranges from a 100bn-bolivar (US$53mn) loss to a 50bn-bolivar profit, with consolidated revenues growing to 4.35tn-4.56tn bolivares and Ebitda of 1.57tn-1.73tn bolivares. The Ebitda margin could remain flat or grow to 38%. Free cash flow for 2003 was US$597mn, up 72% compared to free cash flow in 2002, because capital expenditure fell to US$78mn last year, compared to US$406mn in 2002. The company expects 2004 free cash flow to reach 1tn-1.2tn bolivares (US$521mn-625mn), after capital expenditures of 430bn-530bn bolivares. Cantv plans to maintain its dividend policy of allocating 50% of remaining free cash to shareholders, Yanez said, adding the company will nevertheless seek investment opportunities that could yield good enough returns for extraordinary dividends. Yanez does not foresee problems with Cadivi authorizing dollar payment of this year's projected free cash flow, but said the company remains cautious. Cantv ended the year with 2.73 million fixed lines in service, up 1.1% compared to year-end 2002. The figure includes 92,011 public telephones, up 2% year on year, and 76,847 ADSL lines, up 64% on 2002. Growth of residential and corporate basic telephony lines was entirely due to uptake of prepaid services. Cantv expects access lines to grow 4-8% in 2004. The mobile client base grew 4.7% during the year to reach 2.7 million, essentially attributable to an increase in prepaid subscribers. Mobile minutes of use also recovered in the fourth quarter, growing 10.5% sequentially. Cantv expects the mobile client base to grow 3-4% in 2004, with 15-17% growth in outgoing minutes of use. Internet subscribers reached 231,938, up 19% on 2002. Cantv believes those accounts are used by a total of 1.14 million people.