Portugal Telecom beats expectations in 1Q

3 May 2005

Portugal Telecom (PT) posted net profit of EUR174.4 million on sales of EUR1.48 billion in the three months to 31 March 2005, outstripping consensus forecasts for net income of EUR160 million on quarterly sales of EUR1.45 billion. The company said that continued cost-cutting initiatives had helped offset higher charges relating to staff reductions, resulting in a lower-than-expected decline in profits. The reported net income figure was down 5.5% on the EUR184.5 million posted in Q1 2004, although EBITDA rose by 4.4% to EUR613 million, equivalent to an EBITDA margin of 41.5% (+1.3%). PT’s domestic mobile arm TMN saw mobile numbers rise 3.3% to 5.09 million, thanks to 33,000 net additions, but monthly average revenue per user (ARPU) dipped 2% to EUR22.6 and average minutes of usage (AMOU) flat-lined at 116.5 a month. Fixed line operations saw a 10% fall in retail traffic to 1.68 billion minutes while the number of fixed line accesses fell by 2.1%. On a more positive note, broadband ADSL connections doubled and the number of fixed line clients using pricing plans tripled to 1.2 million. PT’s multimedia unit reported 22,000 net additions to its cable TV service and 21,000 new cable broadband users. Elsewhere, the group’s Brazilian operation Vivo added 416,000 new subscribers to boost its total base to 27 million, although monthly ARPU fell by 17% to BRL28.8 and AMOU fell 12% to 81.9 minutes.