Oi SA posts strong Q1 results, but debt pile keeps growing

1 May 2013

Brazilian owned telecoms group Oi SA, formed through the restructuring of Telemar Participacoes’ former operating divisions Brasil Telecom, Tele Norte Leste Participacoes, Coari Participacoes and Telemar Norte Leste, booked net profit of BRL262 million (USD131 million) in the first three months of this year, near doubling the average estimate of BRL134 million in a Reuters poll of analysts. However, Oi SA points out that the latest profit announcement is not comparable to the year-earlier period, due to the aforementioned corporate restructuring exercise. As such, the group reported net income of BRL44 million in 1Q12, by dint of the inclusion of two quarters of the former Brasil Telecom division prior to restructuring and one quarter of Oi’s results post-merger.

First-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) climbed 7% on an annualised basis to BRL2.151 billion in Q1 2013, it said, broadly in line with market expectations of EBITDA of BRL2.170 billion. However, Oi SA is incurring increased levels of debt, exacerbated by heavy CAPEX spending and prompting questions over the management’s ability to handle its capital expenses. The matter is further complicated by the loss of its CEO – who quit in January – leading to a sharp drop in its share price as market jitters increase over its planned turnaround strategy. Oi SA’s net debt has risen by 10% since end-2012, in a period in which capital spending increased 55% to BRL1.691 billion to improve and upgrade its mobile networks.

Oi SA closed out March 2013 with a total of 74.705 revenue generating units (RGUs), up from 70.826 million a year earlier, broken down as 18.471 million Residential subscribers (3.5%), 46.569 Personal Mobility users (5.6%), 8.949 million Business/Corporate accounts (+10.3%) and 716,000 public telephones in service (-5.4%).

Brazil, Oi