Tele Norte Leste Partricipacoes SA Q1 2010 Earnings Call Transcript

Tele Norte Leste Partricipacoes SA Q1 2010 Earnings Call Transcript
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Tele Norte Leste Partricipacoes SA (TNE)

Q1 2010 Earnings Call

May 14, 2010 9:30 am ET

Executives

Alex Zornig – CFO and Director, IR

Flávia Bittencourt - Marketing Director

Paulo Mattos - Regulatory Affairs Director

Analysts

Michel Morin - Barclays Capital

James Rivett - Citigroup

Marcelo Gonzalez - Credit Suisse

Henry Cobbe - Nevsky

Christopher Buck - Barclays Capital

Leonardo Messer - Oceana Investimentos

Antônio Junqueira - BTG

Valder Nogueira - Santander

Presentation

Operator

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Good morning ladies and gentlemen, thank you for standing by and welcome to Oi’s Conference Call to discuss the first quarter of 2010 results of Oi and its direct and indirect subsidiaries. This event is also being rebroadcast simultaneously on the Internet via webcast, which can be accessed on the company’s IR website www.oi.com.br/ir together with the respective presentation and the earnings release.

(Operator Instructions) We will then begin the Q&A session when further instructions will be given. (Operator Instructions).

This conference call contains forward-looking statements that are subject to known and unknown risks and uncertainties that could cause the company’s actual results to differ materially from those in the forward-looking statements. Such statements speak only as of the date they are made, and the company is under no obligation to update them in light of new information or future developments.

I would now like to turn the conference over to Mr. Alex Zornig, Investor Relations Officer. Please, Mr. Alex, you may proceed.

Alex Zornig

Thank you. Good morning, everyone. Welcome to the conference call to present and analyze on the results of Oi and its subsidiaries for the first quarter of 2010. The slides present today are already available in our Investor Relations website www.oi.com.br/ir. Here with me today are Flávia Bittencourt, Marketing Director, Paulo Mattos, Regulatory Affairs Director, Tarso Rebello, Treasurer, Bayard Gontijo, Roberto Terziani and the whole team of Investor Relations.

Moving ahead with our presentation in slide 2, we can see Oi’s Revenue Generating Units RGUs, which amounted a little more than 62 million by the end of March adding 4.6 million in 12 months.

The increase in revenue generating units results from one, 4.8 million new Oi mobile customers ending the quarter with 36.6 million; two, an 8% increase in Oi Velox clients during the period, which now equals close to 4.3 million users or 20% of fixed lines in service. 222,000 increase in Pay TV users, mainly due to the successful launch of DTH service in June 2009. We ended the quarter with almost 300,000 users in this type of service.

It’s worth noting that much of the 12-month reduction in fixed lines in service occurred in Region II. As a result of the cleaning of the base in the third quarter of 2009 combined with some operational difficulties in delivering new lines in both regions which will be sold soon.

Slide 3 details the performance of the mobile and broadband segments. In the wireless segment, some 65% of the new additions came from Region III, São Paulo, whose clients rose 117% in 12 months. In that region, the company already has almost 13% market share after less than 2 years in operations. In São Paulo metropolitan region, more precisely, Oi already has more than 17% of market share.

Region I accounted for just 8% of new additions. The structure of this region where we are leaders with more than 27% market share is to increase the profitability of the current customer base. The company focus on retaining more profitability from current clients through increasing ARPU and more attractive offers for high yielding customers, both in postpaid segment and in Oi Conta Total bundle.

Region II accounted for 27% of new clients growing almost 22% year-over-year. Oi already have approximately 16% of market share from that region. Oi’s national market share at the end of March 2010 stood at 20.4%. The broadband Internet access service amounted 4.8 million users in the period, of which about 4.3 million were via fixed technology and almost 500,000 via mobile.

Following the launch of Oi VeloxPlus in the city of Hecife, which enables Internet access as fast as 100 megabytes per second, we will expand this offer to more cities. The goal is to more than double the average broadband speed in order to retain current customers and attract others who value speed. In addition, this investment allows us to redirect all the ADSL ports to switching centers based where the clients demand slower service.

Lastly, the Oi Conta Total bundle users reach close to 1.5 million mobile customers and account for more than 37% of postpaid users in Region I. Following the launch of this conversion offer in Region II, we expect Oi Conta Total to resume its fast growth. We are planning a soft launch of this service at the end of the second quarter of 2010 and into a definitive commercial launch in the third quarter. In slide 4 next we will start analyzing the financial results.

In the first quarter consolidated gross revenue amounted about 11.5 billion Reais, rising 3% for the first quarter of 2010. This performance was supported by wireless segment revenues, which grew almost 15% year-over-year. In this segment, except for handset sales every revenue item grew. The larger postpaid average base, especially Oi Conta Total, combined with bigger minute package and had a positive influence in subscription revenues.

Revenue from mobile network users benefit from higher average client base mainly in regions II and III. The larger prepaid average base combined with the introduction of the service of Oi Bonus Extra boosted on outgoing calls revenue, an offer that aims to stimulate the use of the prepaid clients on the on-net calls within Oi’s network.

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