(Adds CEO comments, market reaction)
By Gram Slattery
SAO PAULO, Feb 21 (Reuters) - Telefonica Brasil SA , the country’s largest telecommunications company, on Wednesday reported that fourth-quarter profit rose 25 percent from a year ago as it increased its reliance on higher-end offerings.
In a securities filing, the Brazilian unit of Spain’s Telefonica SA reported net income of 1.517 billion reais ($466 million).
While the result was slightly below a Reuters consensus estimate of 1.61 billion reais, recurring net income, which took into account one-off expenses like regulatory provisions, totaled 1.63 billion reais.
In recent quarters, Vivo, the carrier’s local brand, has emphasized high-end products that bring relatively high revenues per user, while phasing out often cheaper pay-as-you-go prepaid plans.
Post-paid connections climbed 10.1 percent from a year ago, while prepaid plans fell 5.5 percent. Average revenue per user in the company’s data segment, which Vivo and its main competitors are expanding, climbed 23 percent in annual terms.
In a presentation to investors, the company said it will continue to focus on segments like fiber to the home (FTTH), or ultra-fast broadband, in 2018. Brazil is relatively underdeveloped in that segment despite high penetration of basic mobile service.
“We’re going to grow our B2B business, expand our FTTH network more quickly, and maintain our leadership in mobile operations, accelerating 4G,” the company said.
Talking to reporters, Chief Operating Officer Christian Gebara flagged some potential regulatory upsides. He said an agreement with regulator Anatel to swap billions of reais in fines for significant investments in broadband and other technologies could be concluded by the end of April.
Chief Executive Officer Eduardo Navarro also expressed cautious optimism that Brazil’s Senate that would allow Vivo to divest hundreds of millions of dollars of dated assets to focus on modern technology, saying the current regulations were “absurd.”
Executives said Vivo continued to keep a rein on costs, which were essentially steady from a year before, helping to prop up margins, even as overall revenue decreased slightly.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) came to 3.767 billion reais. While the figure missed the Reuters consensus estimate of 3.90 billion reais, Vivo posted non-recurring EBITDA, stripped of various one-off costs, of 3.94 billion.
Preferred shares in Vivo were volatile, opening up 0.65 percent on the results, and later rising almost 0.8 percent, before eventually falling 1.1 percent to 51.84 reais in mid-day trade. ($1 = 3.25 reais) (Reporting by Gram Slattery; Editing by Marguerita Choy and Jeffrey Benkoe)