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UPDATE 1-Portugal's Zon Optimus expects far higher savings from merger
February 28, 2014 / 11:46 AM / 4 years ago

UPDATE 1-Portugal's Zon Optimus expects far higher savings from merger

* Expects annual savings of 80-90 mln euros

* Net profit 63.4 million euros after merger costs of 61 mln

* EBITDA stable at 537 mln euros, in line with forecast

* Shares rise 7 percent

LISBON, Feb 28 (Reuters) - Portuguese telecoms firm Zon Optimus said savings from the merger that created it could be almost double its initial forecast and offset restructuring costs this year, sending its shares sharply higher.

In its first annual results since Zon Multimedia and Sonaecom’s mobile phone unit Optimus merged early last year, the company said 2013 profit was hit by the costs from the tie-up as well as fierce competition.

Speaking to analysts, Chief Financial Officer Jose Pedro Pereira da Costa put annual savings from the deal at 80-90 million euros ($109-123 million) from this year, up from the firm’s previous forecast of 45-50 million euros. The savings would be made mainly in infrastructure and network convergence.

He also told Reuters there would still be restructuring costs linked to the merger this year and next, but the benefits of the joint operation should be slightly higher in net terms this year.

Zon Optimus shares were up 7 percent at 5.56 euros at 1118 GMT, outperforming a 0.4 rise in the broader Lisbon market .

Net profit for 2013 was 63.4 million euros, about half the level of the combined pro-forma earnings of 2012 for the two firms that merged.

Earnings were weighed down by restructuring costs of 61 million euros, without which the company said the profit would have been “similar to the previous year”.

At the operating level, earnings before interest, taxes, depreciation and amortisation (EBITDA) were almost flat at 537 million euros, while revenues dropped 3.2 percent to 1.474 billion euros - both in line with analysts’ expectations.

“The pressure of the macroeconomic situation continues to impact the communications business of Zon Optimus,” it said, referring to Portugal’s recession, but adding cost discipline and efficiency gains allowed it to keep EBITDA stable.

Although the country started to emerge from its worst recession since the 1970s last year, the economy still contracted 1.4 percent in 2013. The government expects the economy to grow at least 0.8 percent this year when the country is to move on from its 2011 international bailout.

Zon Optimus competes against former monopoly Portugal Telecom and the local unit of Britain’s Vodafone in a depressed market where the companies have been waging a price war to win customers.

Portugal Telecom this month reported a 35 percent fall in net profit for the last quarter of 2013, hit by the tough competition.

Despite the fledgling economic recovery in Portugal, the corporate segment of the market was affected by cost cuts at companies and state institutions and results suffered from intense price competition, Portugal Telecom said.

$1 = 0.7309 euros Reporting By Daniel Alvarenga; Writing by Andrei Khalip; Editing by Pravin Char

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