Vivendi (BIT:VIV)
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Brazil's leading cellular phone operator Vivo Participacoes (VIV) reported strong fourth-quarter earnings late Thursday, despite lower-than-expected revenue growth, on tight cost controls.

The company posted a fourth-quarter net profit of 215.5 million Brazilian reals ($167 million), up from BRL26.2 million a year earlier.

"We kept our costs under control, despite our expanding base, and grew revenues. We continued our strong 2008 showing," said Roberto Lima, Vivo's chief executive, during a conference call.

Vivo's earnings came in above expectations and emboldened investors to move into the stock Friday morning.

The stock was 4% higher at BRL36.31 in early trade on the Brazilian Stock Exchange, or Bovespa, while the benchmark Ibovespa index was 1.7% higher.

Vivo's fourth-quarter net revenue rose 14% to BRL4.27 billion from BRL3.74 billion a year earlier, with one highlight being the expansion on net service revenue as data transmission services became more popular.

The company's earnings before interest, taxes, depreciation and amortization, or Ebitda, reached BRL1.39 billion, up from BRL978.9 million a year earlier.

Fourth-quarter Ebitda significantly outstripped expectations. A Dow Jones survey of five analysts had forecast Ebitda of BRL1.20 billion. But net revenue came in slightly below the BRL4.4 billion forecast.

The Ebitda margin, a measure of profitability over net revenue, was 32.7% in the quarter, up from 26.1% a year earlier.

"Lower general and administrative costs, allied with lower GSM handset acquisition costs, were the key drivers," said Beatriz Battelli, telecom analyst at the Brascan brokerage in Rio de Janeiro.

The cost of acquiring new clients fell to BRL74 in the last quarter, down 24.5% on the BRL98 registered in the fourth quarter of 2007.

Average revenue per user, or Arpu, slipped 1% on the quarter and 5.8% on the year to BRL29.10 last quarter due to declining incoming call revenue.

But the high quality of the subscriber base will maintain outgoing Arpu in the long term, Lima said.

Falling Arpu was compensated by faster-than-expected subscriber base growth, he added.

Vivo, which is jointly controlled by Spain's Telefonica SA (TEF) and Portugal Telecom SGPS SA (PT), commanded 29.8% of the local cellphone market and accounted for 33% of industry revenue at the end of 2008.

Vivo said it invested a total BRL4.01 billion in its operations in 2008, compared with BRL2.2 billion in 2007.

As of Dec. 31, Vivo's net debt totaled BRL5.3 billion, up from BRL3.97 billion at Sept. 30 as the company sought to finance spending on new operations in the northeast, the building of its third-generation data transmission network and the purchase of third-generation licenses.

In order to ensure near-term liquidity, Vivo took a loan from the government's National Development Bank, or BNDES to finance the purchase of third-generation licenses.

-By Alastair Stewart, Dow Jones Newswires; 5511-2847-4521; alastair.stewart@dowjones.com

(Rogerio Jelmayer contributed to this report.)