Tele Norte Leste Participacoes' CEO Discusses Q2 2011 Results - Earnings Call Transcript

Tele Norte Leste Participacoes SA (TNE)

Q2 2011 Earnings Call

August 16, 2011 10:30 AM ET

Executives

Alex Waldemar Zornig – IR Officer

Francisco Valim – CEO

Analysts

Michel Morin – Morgan Stanley

Andrew Campbell – Credit Suisse

Daniel Morris – JP Morgan

Miguel Garcia – Deutsche Bank

Michelle Morin – Morgan Stanley

Chris Wright – Credit Suisse

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by and welcome to Oi’s Conference Call to discuss the Second Quarter of 2011 Results of Oi and its direct and indirect subsidiaries. This event is also being broadcast 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.

We would like to inform you that during the company’s presentation, all participants will only be able to listen to the call. We will then begin the question-and-answer 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 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 will now turn the conference over to Mr. Alex Zornig, Investor Relations Officer. Please, Mr. Alex, you may proceed.

Alex Waldemar Zornig

Thank you. Good morning, everyone. Welcome to the conference call of Oi’s consolidated first quarter 2011 results. The presentation is already available in our website, www.oi.com.br. Today with me are Mr. Francisco Valim, the current CEO, (inaudible), Paulo Matt, the Regulation Director, (inaudible) Marketing Director and Bayard Gontijo, Treasury and our IR Director

So moving to slide number 4, highlights fixed and mobile offers. On mobile we split between postpaid and prepaid. We largely compare Aparelho Grátis não Existe, means free handset doesn’t exit, I would say free handset is a bullshit to be better. Plans beginning at R$48 that includes 10,000 monthly, I mean, for local calls for any Oi or fixed line and 200 megabytes internet for smartphones offers aim to reduce churn.

On the prepaid side, we reduced the price of the ship and that increased the penetration of sales spots. We maintained the Bônus Diáriothe offer with increase in the minimal recharge to obtain bonuses, inclusion of more options for the consumption of bonuses by the clients, and depending on the region bonus can reach R$900 a month.

Oi Conta Total, we finalize the launch of Oi Conta Total over Brazil except for the state of Sao Paulo, transmitted limited long distance calls from fixed mobile phones to fixed cell phones or of any operator in Brazil. In addition to greater speed in Velox at an additional R$30 per month. Oi Conta Total repositioning aims to reduce churn in RI and increased sales in RII.

On Oi Fixed, we launch the offers of Oi Fixo Mais and Oi Fixo Ilimitado, inclusion of toll free minutes for long-distance calls and local calls to Oi mobile as well as caller ID and call waiting. The target is to add value to fixed lines in order to reduce disconnections.

On the slide 5, broadband, we maintain our position in adopted in January 2011 Internet now is for everybody plus beginning at 39.9 reais with speeds of up 20 mega. Those clients in addition to receiving the modem and the Internet provider for free have a 20hz discount in the (inaudible) fixed telephone plan. So we are trying to link the fixed voice with the broadband. We cover 4600 cities over Brazil that represents roughly 80 – 90% of the total cities in Brazil.

The strategy continues to being to increase the availability of speed offer. On the PayTV, we launched a package with 43 channels charging 39.90 reais we launched two offers with Telecine channels has been valid to the product. These measures are in line with this strategy of protecting the fixed base. After two years of the launching in the state of Rio and the offers are already in 18 states and in the federal districts and we closed the first half of 2011 with a little bit less than 350,000 customers.

Well, let’s moving to page 7. So mobile subscribers were being flat 41.5 million customers comparing to March ‘11, but an increase in 12% compared to June 1st, but it’s important to mention that different scenario for our competitors we get the approach to clean up all customers that for the last 90 days didn’t user their telephone. So it means we have a record net gross sales in the second quarter of 2011 of 6.4 million new customers, but as we clean up our base the net add was 68,000 only. But it’s important that we did this first we have lower costs in order to maintain these customers in our base and second to have more transparency to the market how many customers real use the mobile phone.

Next page, showing the ARPU we have a better ARPU comparing to the first quarter of 2011 and a lower ARPU comparing to 2010. This is basically because as we start back to growth in a mobile front, the ARPU normally have a reduction in order to for us to catch up the revenue later. In terms of market share with a cleanup we maintain our market share of 19.1%. Our capitals feel low is to be around R$26 per customer.

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