Brazil’s Vivo posts BRL179 million loss in 1Q

5 May 2006

Brazilian mobile operator Vivo Participacoes, the joint venture of Portugal Telecom and Telefónica Móviles, has reported first quarter losses of BRL179.3 million (USD86.4 million), compared with a profit of BRL42.1 million a year earlier, on the back of higher costs and a rise in bad debt provisions. Revenues for the quarter rose marginally by 0.6% to BRL2.6 billion. Sales expenses, including the costs for its customer-retention programme, rose by 29% to BRL728.1 million and bad debt provisions increased sharply year-on-year from BRL88.4 million to BRL161 million, although they were lower than the BRL260.8 million figure reported in the last quarter of 2005. EBITDA, an indicator of cash flow, fell from BRL977.7 million in 2005 to BRL717.1 million. The EBITDA margin narrowed from 37.9% to 27.6%.

Vivo’s mobile subscriber base stood at 30.138 million at the end of March 2006, up 11.8% year-on-year. Its post-paid customer base grew 8.5% over 1Q05 and outgoing revenue rose 8%, driven by the operator’s focus on developing high value market segments. Vivo has for a long time been the leading cellco in Brazil, but has struggled to turn a profit in a fiercely competitive market. In recent years it has lost market share to Telecom Italia’s TIM Brasil and to Claro, the local operation of Mexico’s América Móvil. Vivo ended the first quarter with a market share of 43.5%, down from 49.4% a year earlier, and well below its high of 56%.

In March this year Brasilcel (Vivo) completed the restructuring of its local mobile units into one entity in a bid to cut costs and improve liquidity. Under the reorganisation Tele Sudeste Celular Participacoes, Tele Leste Celular Participacoes, Tele Centro Oeste Celular Participacoes and CRT Participacoes were merged into Vivo Participacoes which now trades on the local stock exchange under the Vivo brand name.