Tele Norte Leste Participacoes' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Tele Norte Leste Participacoes SA (TNE)

Q1 2012 Earnings Call

May 15, 2012 11:40 AM EST


Alex Zornig – CFO, Chief Administrative Officer and Investor Relations Officer

Francisco Valim – CEO


Sean Glickenhaus – HSBC

Matt Berns – Artha Capital Management

Sumit Dutta – New Street Research

Michel Morin – Morgan Stanley

Valder Nogueira – Santander

Rizwan Ali – Deutsche Bank



Good morning, ladies and gentlemen. Thank you for standing by and welcome to Oi SA’s Conference Call to Discuss the First Quarter 2012 Results. This event is also being broadcast simultaneously on the internet via webcast, which can be accessed on the company’s IR website together with the respective presentation and the earnings release.

We would like to inform that during the company’s presentation all participants will only be able to listen to the call. 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 will now like to turn the conference call over to Mr. Alex Zornig, CFO and IR officer. Please Mr. Alex, you may proceed.

Alex Zornig

Thank you. Good morning everyone. Welcome to the conference call to discuss Oi’s results for the first quarter of 2012. The presentation is already available in our website. With me today are Francisco Valim, the CEO of Oi; Tarso Rebello, the Controller; and [Brad Borges], the new Chief Regulation Officer; Eduardo Aspesi, the Chief Marketing Officer; Biar Contege, the Treasurer and IR Officer and his team. Before starting the presentation I would like to thank you on participating in Oi Investor Day. The event was an important opportunity to strengthen the relationship between Oi’s executives and the capital market.

I would like to remind you that with the approval of the corporate restructuring in February 2012 TNL and Coari were extinguished and TMAR became a wholly owned subsidiary of Oi SA, therefore the results presented in this conference call pertains to Oi SA, the surviving company and the new name of Brasil Telecom.

At the end of March 2012, when only one month’s results of TMAR, TNL and Coari has been included. To facilitate understanding, except for the income, we have presented the consolidated pro forma results equivalent to the previous numbers of TNE as if the merger has taken place on January 1, 2012.

Note, at the end of 2011, the company started adopting segmented view by Residential, Personal Mobility and Business/Corporate line and no longer going forward. In the response to the market demand, this quarter we are presenting for operating numbers the breakdown on slides by sales in each segment.

Moving to the results of the first quarter 2012, in the first slide you see that EBITDA amounted to R$2 billion with margin of 29.6% which is almost 2% higher than the first quarter 2011 and 10% higher than in fourth quarter of 2011. In the next slide we notice that this performance basically results from the combination of three factors; growth in revenue generating units, RGUs, aggressive commercial approach and reduction of operating costs and expenses. These results are in line with the Oi’s long-term strategy announced at the Oi Investor Day.

Now, I will provide you more details about each of these factors. As you can see on slide three, with regard to RGUs, we reached stability of the Residential base, a milestone close to achieve by the company.

It’s important to highlight the slowdown of the decline in the fixed line base mainly due to the increased sales, we added 6000,000 new lines in the quarter, a 13% increase over fourth quarter of 2011. Important factors behind this performance in the Residential segment were the accelerated growth of Broadband and Pay TV, which added together 247,000 RGUs in the quarter. I also wish to point out that the growth of 13% in the Oi TV base also formed the average market growth in the quarter that was 7.3%.

In slide four, we see that our team is successfully implementing the two important points of our strategy for Personal Mobility. Focus on post-paid segment growth; increase the profitability of pre-paid segment. The numbers in the post-paid segment speaks for themselves. We evolved from net connections first quarter of 2011 to 285,000 net additions gaining the leadership in the net additions in this segment in March 2012, clearly showing the soundness of our actions.

With regard to the pre-paid segment which corresponds to 87% of our base, we maintained our structured growing profitability. We were the only operator to record growth in ARPU in the past 12 months. We already have the second highest ARPU in the market, very close to the leader which shows strength of Oi’s mobile client base. Consequently our Personal Mobility base reached 44.1 million RGUs, a 12% in 12 months. It’s important to emphasize that both our Residential and Personal Mobility segments received channel restructuring and a focus on convergence, as described in slide five, were essential to our performance.

With regards to channels we acted on most on the fronts which include increasing our presence in large retail, improving our relationships and commissioning models and continuing the growth of our owned stores. Thanks to our convergency, we have already reached particularly half of our relation base with more than one product only. In slide six, which gives the performance of Oi operational numbers, the client base is the SME and Corporate segment has been growing constantly increasing by 3.4% in the quarter and 6% in the past 12 months. In the SME segment the growth was mainly due to the increase in the sales force by around 4,000 new employees, investments in training the team and opening of nine regional offices.

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