(Adds details of earnings, merger context, analyst comment)
SAO PAULO Aug 6 Grupo Oi SA,
Brazil's biggest fixed-line telecommunications operator, posted
a second-quarter net loss on Wednesday, as revenue stagnated and
payroll and debt-servicing costs rose amid a troubled merger
with its largest shareholder.
The company posted a quarterly loss of 221 million reais
($97 million), its first results since combining assets with
Portugal Telecom SGPS SA in April. The result was
larger than the combined shortfall of 124 million reais the
companies would have posted together a year ago, according to a
Revenue in Brazil slipped 2 percent from a year earlier to
6.94 billion reais. Revenue from Portugal fell 3.4 percent in
euros, but a currency swing boosted results in Brazilian reais
by nearly 10 percent. As a result total revenue was little
changed at 9.02 billion reais.
Earnings before interest, taxes, depreciation and
amortization, a gauge of operating profit known as EBITDA, fell
21.3 percent to 2.55 billion reais.
According to André Baggio, an analyst with JPMorgan
Securities, EBITDA was hurt by interconnection costs following a
25 percent rate cut in mid-February, higher marketing and
television content expenses and a spike in leasing expenses due
to tower sales over the past year.
The second quarter "was another weak quarter with (profit)
margin deterioration," Baggio said in a client note.
Earnings did not take into account a debt investment of 897
million euros ($1.2 billion) that Portugal Telecom made in
Luxembourg-based investment vehicle Rioforte without disclosing
it to Oi. Rioforte defaulted last month and Portugal Telecom
agreed to bear any losses, accepting a smaller share of their
Still the merger, aimed at bolstering Oi's balance sheet,
has left it with more in debt, with gross debt rising to 52.2
billion reais in June from 34.5 billion reais in March.
Subtracting cash, net debt rose 52 percent to 46.2 billion
Due to questions about how results would be announced and
potential conflicts of interest from banks involved in the
merger, few analysts had provided comparable earnings forecasts.
($1 = 2.29 Brazilian reais)
($1 = 0.7495 euros)
(Reporting by Brad Haynes and Guillermo Parra-Bernal; Editing
by Jeffrey Benkoe)