Portugal Telecom, SGPS SA (PT)
Q4 2012 Earnings Call
February 28, 2013 11:00 am ET
Executives
Zeinal Bava – Chief Executive Officer
Luis Pacheco de Melo – Chief Financial Officer
Analysts
Georgios Ierodiaconou – Citi
Jonathan Dann – Barclays Capital
Luigi Minerva – HSBC Bank Plc
Ivon Leal – BBVA Global Markets Research
Mathieu Robilliard – Exane BNP Paribas
Presentation
Operator
Greetings and welcome to the Portugal Telecom 2012 Full Year Results. At this time, all participant are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Zeinal Bava, CEO of Portugal Telecom. Thank you. Mr. Bava, you may now begin.
Zeinal Bava
Okay, thank you very much. Good afternoon ladies and gentlemen. Thank you for being on this call (inaudible) EBITDA stood at about €2.269 million, our margin reached 34.4% and it was underpinned by the solid margin of the Portuguese telecom businesses, which stood at 45.5%.
In 2012 fully and proportionally consolidated international assets represented 58.4%, I repeat 58.4% of our international assets contribution and 50.4% of EBITDA respectively. So as part of the diversification process of our company, we continue to see the contribution of international assets increased both in terms of revenues and also in terms of EBITDA.
Net income amounted to €230 million and this is equivalent to earnings per share of about €0.27. In 2012, our CapEx amounted to €1.317 million that’s roughly 20% of revenues. Needless to say that we are investing in Brazil but with regard to Portugal, our CapEx in Portugal was down 14.1% as we begin to reach the end of the modernization process of our infrastructure and networks.
My CFO, Luís Pacheco de Melo who is here with me now will take you through the financials later on.
Let me now just focus on the business performance of our businesses not just in Portugal but internationally as well. I will keep it to much shorter than the very long presentation that my IR put on its site this morning, but I will use that as a reference. We are a geographically diversified company, we focused mainly in Portugal and Brazil. We have investments also in Africa. We have gone above the €100 million customer target that we had, and I repeat, we are not just diversified in terms of revenues and EBITDA, but also when it comes to geography, our key focus is Portuguese-speaking countries namely Portugal and Brazil.
We continue to see solid customer growth, in Portugal very much driven by the investments we have made in TV, namely in triple-play, and of course, very strong growth in our international businesses as well. Worth highlighting that in Portugal, despite a severe macroeconomic environment, our number of customers increased 3.4% in 2012.
We pretty much did not lose many fixed lines, broadband saw substantial growth 10.8%, televisions are substantial growth 17.4%, if you think in terms of triple-play, where triple-play customers were up 22.6%, if you think about our FTTH customers our FTTH customers were up almost 50% in 2012. Mobile also posted growth in Brazil, again very happy to report particularly when it comes to residential, we saw growth of 3% in terms of customers when it comes to mobile 7%, and when it comes to business and corporate 14.3%.
Other international businesses, particularly, Africa and East Timor, where we have a very solid business, our number of customers were up about 16%. In terms of financial highlights, what we have seen is the operating revenues were down about 1.2% on a like-for-like basis they were down 0.9%. EBITDA was down 3.8% and if you look at CapEx, CapEx was also down what highlighting is that when it comes to financial performance clearly, we’re seeing growth in Brazil and we are seeing stabilizing trends on that a bit later on in my presentation. Let me start now with Portugal in more detail. We continue to believe that investment in innovation will differentiate our product offering in Portugal, and will allow us to continue to grow our market share of subs and revenues without necessarily having to compete solely based on price. We wish to be always competitive on price, but we would like our customers to see in Portugal Telecom the best value offer in our market independent of the segment that we are talking about.
In terms of business priorities, if we think about B2C, residential, and if you like, personal mobility, clearly the strategic priorities for us are convergence and the cloud. Let me start with residential. We, in the fourth quarter of this year continue to see growth. Having said that, and I saw some comments from analysts that the number of net adds came in slightly lower than the previous quarters, but that has a lot to do with the fact that we, ourselves, took the deliberate decision to become a lot less, if you like, aggressive in terms of the promotions that we did, especially taking into account, if you like, the current economic environment.
We believe that this is a time when we ought to be slightly more conservative, configuring also the costs that we have in connecting customers every time we have one, and we like to see customers pay our bills at the end of the month. Notwithstanding the fact that we have seen substantial growth in pay-TV in Portugal, we continue to believe that this is one particular area where Portugal will continue to see increased penetration. Worth mentioning that this is a market where you have three free-to-air channels, and if you want any zapping experience, you would want to subscribe to a pay-TV service.
Meo is our leading brand. When it comes to triple-play, it is the number one retail brand in top of mind when you think about triple-play, but let me tell you, when it comes to retail segment in general, it’s the second-most notorious brand in the Portuguese market. Our market share is about 39.1% now.
Having said that as you know, we are not in the business of selling TV only. We like to sell triple play. And therefore for us a lot more critical is to look at the market share of Portugal Telecom as a triple play operator as opposed to a single sort of a TV operator.
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