for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

CORRECTED-UPDATE 2-Telefonica Brasil to keep capex roughly flat after 5G profit hit

(Corrects name of Telefonica Brasil’s chief executive in paragraph 2)

SAO PAULO, Feb 19 (Reuters) - Telefonica Brasil SA , the country’s largest wireless carrier, aims to keep capital spending at levels similar to last year, executives said on Wednesday, after investments to prepare for fifth-generation (5G) mobile technology weighed on earnings.

“Our ceiling is 9 billion reais ($2.06 billion) but we expect our capex to be lower than that in 2020 as we become more efficient,” Chief Executive Christian Gebara told journalists in a call to discuss quarterly earnings.

The local subsidiary of Spain’s Telefonica SA, which in Brazil operates under the brand Vivo, raised capital expenditures by 8% in 2019 to 8.844 billion reais.

Gebara said Vivo’s investments in recent years preparing the carrier for a 5G network resulted in higher depreciation costs last year that ultimately hurt net income.

Earlier on Monday, Telefonica Brasil reported a 14% drop in fourth-quarter net income from a year ago to 1.274 billion reais ($293 million), below an average estimate of 1.519 billion reais compiled by Refinitiv.

Still, tight cost controls helped the company boost earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, by 23% to 4.967 billion reais, beating an estimate of 4.463 billion reais.

In a research note, UBS analyst Vinicius Ribeiro applauded the “cost discipline” and said he could slightly raise future earnings estimates.

Shares in Telefonica Brasil rose about 1% in Sao Paulo.

Gebara said Vivo has room to improve revenues, as the transition to fiber broadband may help it lure new customers and potentially resume growth in its fixed-line business.

He said the company has also been exploring infrastructure sharing to gain efficiency. In December, it reached network-sharing agreements with rival TIM Participacoes SA .

He said Telefonica Brasil is also open to acquisition opportunities. “If an asset such as Oi becomes available we will check what the conditions and characteristics are for a potential acquisition,” Gebara said.

In September 2019, Reuters reported that Brazil’s largest fixed-line carrier, Oi SA, was in talks with Telecom Italia and Telefónica to sell some of its assets. Later that year, Oi confirmed the hiring of financial advisers to put a value on its mobile unit.

Chief Financial Officer David Melcon Sanchez-Friera said Telefonica Brasil’s debt metrics have come down and it has room to borrow more if needed in the future.

$1 = 4.3676 reais Reporting by Gabriela Mello Editing by Brad Haynes

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up