NET Servicos Reports Mixed 4Q - Analyst Blog

NET Servicos de Comunicacao S.A. (NETC) declared mixed financial results for the fourth quarter of 2011. Quarterly net income was $65.7 million or 19 cents per share compared with a net income of $78.3 million or 23 cents per share in the year-ago comparable quarter. The decline in net income is primarily due to higher tax burden.

Net revenue (excluding connection cancellations and sales taxes), in the reported quarter, was approximately $993.4 million, up 23% year over year. The increase was mainly attributable to higher subscription revenue supported by subscriber base growth and subscribers’ preference toward high-end products.

Quarterly operating expenses were $463.1 million, up 21% over the prior-year quarter. As a percentage of revenue, operating costs decreased from 47.4% in the fourth quarter of 2010 to 46.6% in the fourth quarter of 2011. Quarterly operating margin was 53.4% compared with 52.6% in the prior-year quarter. Quarterly EBITDA was around $299.3 million, an improvement of 20.7% year over year. EBITDA margin in the reported quarter was 30.1% compared with 30.7% in the prior-year quarter.

Despite facing stiff competition from Brasil Telecom S.A. (BTM), Tele Norte Leste Participacoes S.A. (TNE), and Telefonos de Mexico (TMX), NET Servicos generated huge subscriber growth in 2011. At the end of 2011, Pay TV subscriber base was 4,730,000, up 12.3% year over year. Broadband subscriber base totaled 4,264,000, up 21% year over year. Fixed Telephone Line in Service was 3,844,000, up 21.9% year over year.

Total capital expenditure in 2011 was $922.6 million. Net debt, at the end of 2011, was $804.8 million, up 6.8% year over year. Net Debt-to- EBITDA ratio at the end of 2011 was 0.75 compared with 0.87 at the end of 2010.

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