Amazônia reports widening losses in 2006; Telemig profits down

28 Mar 2007

Brazilian mobile operator Tele Norte Celular Participações (Amazônia Celular) has reported a consolidated net loss of BRL76.1 million (USD36.9 million) in 2006, up 80% year-on-year, while its sister company Telemig Celular Participações (Telemig) posted consolidated net earnings of BRL113 million, 35% lower than in the previous year. Amazônia Celular operates in the northern states of Roraima, Amazonas, Amapá and Pará, as well as in the northeastern state of Maranhão. It said net revenues climbed one percentage point to BRL436 million, but EBITDA declined 70.5% to BRL36.7 million and the EBITDA margin slumped from 32% to 9.5%. Gross revenues were also down 22% in 2006, to BRL137 million and operating losses leapt to BRL135 million from BRL14.4 million in 2005.

It was a similar tale of woe for Telemig, the leading mobile phone service provider in Brazil’s third wealthiest state of Minas Gerais. Net revenues for the unit were up marginally by 4% at BRL1.19 billion, but EBITDA dipped 19% to BRL348 million and the EBITDA margin narrowed to 32.1% from 40.6% previously. Gross profits were down 1.4% at BRL585.7 million and operating profits slumped 36% to BRL192 million.

Amazonia Celular and Telemig are believed to have signed up the services of Merrill Lynch to coordinate their search for a buyer. Mem Celular Participacoes, the company that indirectly controls the two operators, has asked Merrill Lynch to prepare ‘studies and adopt processes aiming for the evaluation of alternative strategies relative to their investments in Telemig Celular and in Amazonia Celular’. The sale is expected to be completed in 1H 2007, with Claro and Vivo seen as the companies most likely to participate.