(Recasts with executive's comments, share performance)
By Brad Haynes
SAO PAULO May 8 Telefonica Brasil SA
, Brazil's biggest phone company, reported on Thursday an
unexpectedly larger drop in quarterly profit, missing analysts'
forecasts, and warned of possible World Cup-related headwinds in
June and July.
Net income was 661 million reais ($297 million) in the first
quarter, an 18 percent drop from the year-earlier period and
below the average estimate of 746 million reais in a Reuters
survey of analysts.
A weak economy, stiff competition and sliding fixed-line
sales hurt revenue, which rose less than 1 percent.
The month-long World Cup soccer tournament, hosted by
Brazil, will bring in roaming fees and other revenue from
visiting fans, but could end up dragging on earnings, Chief
Financial Officer Paulo Cesar Teixeira said in a conference call
"In terms of revenues, we have an impact because many cities
will declare holidays during the games," Teixeira said. "With
this situation, it's possible to have a negative impact."
Brazil's phone companies also are spending heavily to avoid
the embarrassing outages that plagued last year's Confederations
Cup, a dress rehearsal for the World Cup.
Telefonica Brasil, the local unit of Spain's Telefonica
, plans to increase investments by 15 percent this year,
another senior executive, Alberto Horcajo, said at a corporate
event in Sao Paulo on Thursday.
To jump-start stagnant sales, Telefonica Brasil has launched
aggressive campaigns for new services from pay-television to
mobile data packages, which have hurt profitability in the short
Sales of more profitable post-paid mobile subscriptions rose
28 percent in the first quarter from a year earlier, but sales
expenses increased 18 percent to 1.9 billion reais, driven by
advertising campaigns and sales commissions for mobile plans.
Earnings before interest, taxes, depreciation and
amortization fell 7 percent to 2.563 billion reais, below an
average estimate of 2.594 billion reais.
Telefonica Brasil's shares fell 2 percent on the Sao Paulo
stock exchange, their biggest drop in more than five weeks.
($1 = 2.23 Brazilian reais)
(Reporting by Brad Haynes; Editing by Jeffrey Benkoe and Paul