Brasil Telecom - financial results

Brasil Telecom Profit Increases 9.2% on New Customers

Brasil Telecom Participacoes SA, Brazil's third-biggest land-line telephone company, reported a 9.2 percent increase in third-quarter profit after signing more Internet and wireless customers.

Net income climbed to 164.1 million reais ($73.6 million), or 45 centavos per 1,000 shares, from 150.3 million reais, or 41 centavos, a year earlier, the Brasilia-based company said today in an e-mailed statement. Net revenue increased 3.4 percent to 2.84 billion reais.

Brasil Telecom expanded its high-speed Internet customers 16 percent to 1.76 million in the year ended in September. Mobile-phone users increased 30 percent, offsetting the land-line business, which was little changed.

``A relative stability in the fixed-line segment is made up for by the strong growth of the high-speed Internet services,'' Alex Pardellas, an analyst at Banif Investment Banking in Sao Paulo, said before the company released the report.

Brasil Telecom, which has agreed to a takeover by Telemar Participacoes SA, rose 39 centavos, or 2.4 percent, to 16.49 reais in Sao Paulo trading today. The shares lost 21 percent in the third quarter, compared with a 24 percent decline of the Bovespa index.

The carrier's net income beat the 144 million reais average of five analysts in a Bloomberg News survey.

Higher Rates

``It has been posting a satisfactory growth in mobile-phone users,'' said Beatriz Battelli, an analyst at Brascan Corretora in Rio de Janeiro. The company also has raised rates for its land lines, generating more revenue in a market that isn't growing, she said.

The country's telecommunications agency allowed Brasil Telecom to increase fixed-line calling fees by 3.1 percent in July. The number of land lines in service was 8.2 million last quarter, compared with 8.1 million a year earlier.

The number of mobile-phone users reached 5.25 million, representing 35 of the company's customer base, compared with 29 percent a year earlier.

Average revenue per user, or ARPU, declined 18 percent to 28.81 reais in the third quarter after the percentage of prepaid phone customers climbed to 83 percent of the total, from 79 percent last year. Prepaid customers typically generate less revenue.

Loss on Currency

Brasil Telecom posted an expense of 60 million reais in the quarter, caused by a 16 percent drop of the Brazilian real value against the U.S. dollar in the period. The country's currency was the second-worst performer tracked by Bloomberg in a basket of the 16 most-traded currencies.

By the end of the quarter, about 14 percent of the carrier's debt of 4.27 billion reais was linked to foreign currencies such as the dollar and the Japanese yen.

Brasil Telecom's operating expenses also rose after it brought its call centers in-house this year. The number of employees jumped to 17,700 by the end of September, compared with less than 5,900 a year earlier, helping push up costs 6.2 percent.

In April, Brasil Telecom agreed to be sold to Telemar Participacoes in a deal that may top 13 billion reais, making it the largest transaction in the Brazilian telecommunications industry since the government sold off its monopoly a decade ago.

Law Change

For the deal to go through, telecommunications regulators have to change a law that bars carriers that operate in different parts of the country from having the same controlling shareholders. The agency's board members plan to vote on the changes tomorrow.

The deal fulfills Brazilian president Luiz Inacio Lula da Silva's desire to have a national telecommunications company strong enough to compete with Spain's Telefonica SA and Mexican America Movil SAB's operations in the country.

Telemar may have to pay a 490 million reais penalty in case the transaction isn't approved by the regulatory agency, known as Anatel, by Dec. 19.

``It's very unlikely that the takeover doesn't take place,'' Battelli said. ``The government has already done too much to make it happen.''