Telefonica Brasil (VIV) Q1 Earnings Lag, Revenues Grow Y/Y

Brazilian telecom carrier Telefonica (MC:TEF) Brasil SA (NYSE:VIV) recently reported mixed financial results in the first quarter of 2017.

First-quarter net income was approximately $316.9 million, down 18.2% year over year. Earnings per ADR (American Depository Receipt) were 19 cents, a penny shy of the Zacks Consensus Estimate.

Net operating revenues were around $3,369.1 million, up 1.5% year over year.

Total operating costs in the reported quarter were approximately $2,250.9 million, up 6.5% year over year. Quarterly EBITDA (earnings before interest, tax, depreciation and amortization) was about $1,117.8 million, reflecting a decrease of 7.2% year over year. EBITDA margin was 33.2% compared with 36.6% in the prior-year quarter.

Telefonica Brasil is a subsidiary of Spanish telecom giant Telefonica SA (NYSE:T) . The company shares a fiercely competitive space with the likes of America Movil SAB (NYSE:AMX) in Brazil. U.S. telecom giant AT&T Inc. (NYSE:T) may also enter in the Brazilian market in future further intensifying the competition. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Segment-wise Results

Mobile Business’ total revenue increased 5% year over year to approximately $1,974.8 million in the reported quarter. As of Mar 31, 2017, the company’s total mobile subscriber base touched 73.997 million (up 1% year over year). Post-paid subscriber count increased 8.2% year over year to 33.825 million, while the prepaid customer count fell 4.4% year over year to 40.171 million. In the reported quarter, the company added a net 435,000 postpaid mobile subscribers.

Fixed Line Business’ total revenue dropped 2.2% year over year to approximately $1,312.5 million. Handset revenues were $81.4 million, down 15.2% year over year.

As of Mar 31, 2017, total fixed access lines were 23.239 million, reflecting a decrease of 3% year-over-year. Fixed Broadband customers were 7.336 million, up 1.7% year over year. Fixed voice lines were 14.242 million, down 4.7% year over year. The Pay-TV subscriber base declined 7% year over year to 1.661 million.

ARPU & Churn Rate

Quarterly data ARPU (average revenue per user) was up a substantial 35.8% to about $6.11 while quarterly voice revenue per user dropped 31.1% to around $2.80. Mobile postpaid ARPU was around $16.54, up 3.8% year over year. Mobile postpaid monthly churn rate was 1.7%, compared with 1.8% in the year-ago quarter. Mobile prepaid ARPU was around $4.33, down 2.1% year over year. Prepaid monthly churn rate was 4.7% compared with 4.5% in the year-ago quarter.

Liquidity

Telefonica Brasil exited the first quarter of 2017 with a net debt of around $3,436.8 million, down 2.9% year over year.

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