UPDATE 2-Telefonica Brasil profit down on broadband push, weak sales growth

Wed Jul 24, 2013 12:12pm EDT

* Fixed-line revenue falls, mobile subscriber growth flat

* Executive says sales push to yield turnaround soon

SAO PAULO, July 24 (Reuters) - Telefonica Brasil SA posted a 16 percent drop in quarterly profit on Wednesday, as revenue stagnated while it stepped up sales efforts to stabilize its broadband and pay-TV business.

The Brazilian unit of Spain's Telefonica said second-quarter net income totaled 914 million reais ($411 million), slightly above expectations of 893 million reais in a Reuters survey of five analysts.

Competition in Brazil's fixed-line telecommunications market has stiffened as the cell phone boom of recent years evaporates. Accelerating inflation and tumbling consumer confidence has stifled growth in the Brazilian mobile market, which posted its weakest second quarter in seven years.

Telefonica, Brazil's biggest mobile carrier, expanded its cell phone base just 0.6 percent from a year earlier as the company cut off unprofitable prepaid subscribers to boost its average revenue per user 4.1 percent.

Revenue from mobile services rose 5.2 percent from a year earlier, while fixed-line revenue fell 5.2 percent.

Higher selling expenses also hurt profitability in the quarter, but Controller Cristiane Barretto told analysts on a conference call that the company would soon see a return on that spending.

"It's not possible to make a turnaround without additional commercial costs," Barretto said. "As you know, the payback is not in the first months. So it's natural to expect improvement in the near future."

Shares of Telefonica Brasil lost 2.2 percent in afternoon trading, their worst session in two weeks.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell 17 percent from a year ago to 2.576 billion reais. The average analyst estimate was for 2.665 billion reais.