SAO PAULO Feb 26 Telefonica Brasil SA
on Wednesday posted a 17 percent drop in
fourth-quarter net income as the Brazilian phone company spent
heavily on marketing to boost stagnant sales in a crowded
Profit at the Brazilian unit of Spain's Telefonica
fell to 1.231 billion reais ($527 million) versus 1.474 billion
reais a year ago. The latest result topped the average analyst
estimate of 1.11 billion reais, according to a Reuters survey.
Revenue edged up less than 2 percent from a year ago, but
operating costs jumped 22 percent as Telefonica stepped up
aggressive advertising and commissions to bolster its pay-TV and
The competition in Brazil's rapidly cooling
telecommunications market, worsened by tighter credit and
eroding consumer confidence, has reinforced expectations among
analysts that the country could soon lose a mobile carrier.
Since late last year, there have been persistent reports
suggesting the possible breakup and sale of No. 2 wireless
operator TIM Participações. If that happens, it could
ease antitrust issues facing Telefonica in Brazil as it
moves to take control of TIM's parent, Telecom Italia.
The companies mentioned in the reports have denied any
Telefonica's fourth-quarter earnings before interest, taxes,
depreciation and amortization, a gauge of operating profit known
as cash flow, fell 26 percent to 2.871 billion reais, but topped
the average analyst estimate of 2.63 billion reais.