Portugal Telecom Reports Light Year-End Results


Portugal Telecom reported year-end results that were a bit weaker than expected. Revenue increased 7.4% year over year, thanks to a full 12 months of consolidating the firm’s stake in Oi, versus our projection of an increase of 7.8%. Despite the recession in Portugal, PT succeeded in expanding most of its subscriber bases in the country.

While its traditional fixed-line customer base declined 1.6% to 2.6 million, the firm increased its broadband base 10.8% and its television base 17.4%, taking both to 1.2 million. PT also increased its wireless base 2.1% to 7.6 million. However, while the firm managed to also improve its average revenue per user on the fixed-line side by 2.8% to EUR 31.60 ($41.35), subscriber growth on the wireless side came at the expense of ARPU, which fell 10.8% to EUR 8.70. The firm will continue to add customers, particularly in broadband and television, but project that wireless ARPU will remain under pressure, pushing Portuguese revenue down again in 2013 and 2014.

While Oi’s performance (thanks to an extra quarter) succeeded in driving PT’s revenue higher in 2012, we don’t expect it will be so successful in 2013. Excluding the bonus quarter, Oi’s revenue increased only 0.8% from the year-ago period. While the wireless operation continues to grow strongly (up 11.1%), the fixed-line business fell 5%.

Oi will continue to expand its wireless subscriber base, but at a slower rate than in the past as the Brazilian wireless penetration rate is now more than 130%. Oi is also increasing its broadband and television bases rapidly, but these aren’t large enough to offset declines in its fixed-line customer base.

PT has been aggressively cutting costs in Portugal, but revenue has been declining even faster. The firm’s EBITDA margin for 2012 was 34.4% versus our projection of 34.6%. The recession in Portugal will continue to pressure PT’s margins in 2013, driving them even lower.


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