Telemar Q4 profits up on lower debt, expenses

9 Mar 2007

Brazilian telecoms operator Tele Norte Leste Participacoes (Telemar) has reported a 47% year-on-year rise in fourth quarter profits to BRL613 million (USD291 million) for the three months to 31 December 2006, largely thanks to a reduction in debt and lower interest rate expenses. Revenues in the period were BRL4.44 billion, up from BRL4.39 billion a year earlier. The company said that low interest rates in Brazil helped trim debt costs, offsetting higher operating expenses related to providing telephony services. Interconnection costs leapt 33% to BRL781.6 million in Q4 after the regulator, Anatel, altered its methodology for calculating how telcos charge each other to connect mobile users to their network. Other expenses related to telephony and internet access services were up 17% at BRL802.2 million. Earnings before interest, tax, amortisation and depreciation (EBITDA) dipped from BRL1.68 billion to BRL1.50 billion in the fourth quarter; the EBITDA margin was 33.8% from 38.4% a year ago.

Telemar markets its mobile services under the Oi brand and only last week announced it was bringing its fixed, mobile, internet and entertainment services together under the Oi name. The fixed line unit will become Oi Fixo, while the company’s Velox internet operation will be renamed Oi Velox. The move is designed to strengthen the company’s position as an integrated communications provider in Brazil. The integration process will take place during August 2007.

Telemar ended 2006 with 17.1 million fixed line customers, up 0.6% year-on-year, while the number of mobile phone users rose 26% to 13.08 million. Broadband subscribers increased 40% to 1.13 million at end-December. In 2007 Telemar is investing BRL2.4 billion in its networks and services in a bid to raise its mobile use base to 15 million by the end of the year, and increase broadband subscriptions to 1.4 million. Elsewhere, it is rumoured to be studying a bid to acquire Telemig Celular Particpacoes and may bid for government licences to operate next-generation wireless networks.

Brazil, Oi