Net Servicos de Comunicacao S.A. 2008 Earnings Release
11 February 2009 - 10:56PM
PR Newswire (US)
SAO PAULO, Brazil, Feb. 11 /PRNewswire-FirstCall/ -- Net Servicos
de Comunicacao S.A. (Bovespa: NETC3 and NETC4; Nasdaq: NETC; and
Latibex: XNET), today announces its results for the fourth quarter
of 2008 ("4Q08") and fiscal year 2008. The year 2008 will be marked
in the Company's history as the year of the record growth in the
subscriber base, combined with the maintenance performance levels
considered satisfactory by Management and the Board of Directors.
It was a year of several launches such as Net Digital HD Max, which
combines the best of high-definition programming with the
convenience of a recorder; Net Fone.com, a triple-play offering
that marked the Company's entry in a new and important segment of
the population, taking digital inclusion to thousands of Brazilian
households; the new Net Virtua broadband portfolio, featuring
speeds of 3, 6 and 12 Mbps; NET Virtua 5G, the fifth generation
broadband service providing ultra-high access speeds through the
new network frequency management system, Docsis 3.0; and the new
pay TV portfolio, providing segmented programming assortments
capable of meeting the most diverse individual and family needs.
The Pay TV base closed the year with 3,071,000 subscribers, 24%
more than in 2007. The Broadband base reached 2,217,000 subscribers
in 4Q08, 56% more than in 2007. The number of fixed-line
subscribers jumped 190% over 2007 to 1,802,000 subscribers. The
Company's financial result continued to show that it is possible to
combine subscriber base growth with a satisfactory performance for
its shareholders. Net Revenue was R$ 1,021.8 million in 4Q08, up
28% from R$ 798.7 million in 4Q07, and R$ 3,690.4 million in 2008,
27% up over R$ 2,901.8 million in 2007. Base growth and the higher
ARPU (average revenue per user) fueled revenue growth. In 4Q08,
ARPU came to R$ 136.24, 3.7% up on the R$ 131.34 recorded in 4Q07.
The slowdown in ARPU growth is due to the Company's strategy of
seeking expansion opportunities in a new market segment. Note that
the reduction in ARPU is not, as yet, related to the migration to
lower value-added packages or any reduction in the prices of
packages. Operating Costs rose by 24% year-on-year, from R$ 383.7
million in 4Q07 to R$ 475.7 million in 4Q08 and by 27% in the full
year, from R$ 1,379.7 million in 2007 to R$ 1,749.9 million. As a
percentage of net revenue, these costs remained flat at 47% between
2007 and 2008 and edged down from 48% in 4Q07 to 47% in 4Q08. The
higher bandwidth consumption resulting from the growth of the
broadband subscriber base and the change in the consumption profile
was the main reason behind this cost increase. In addition, the
increase in call center costs due to the growth of the Net Combo
base, which generates more complex customer care, and higher
programming costs due to the expansion of the pay-TV base, pushed
up operating costs in the fourth quarter and in the full year.
Selling, General and Administrative Expenses totaled R$ 258.8
million in 4Q08, 36% up on the R$ 190.8 million recorded in 4Q07,
and R$ 920.7 million in 2008, 25% up on the R$ 735.6 million in
2007. As a percentage of net revenue, these expenses edged up from
24% to 25% between 4Q07 and 4Q08 and remained virtually stable at
25% between 2007 and 2008. Selling expenses climbed by 51% in the
quarter and 50% in the year, chiefly due to the increase in
commissions and personnel expenses, as well as the intensification
of marketing campaigns. General and administrative expenses rose
41% in the quarter and 23% in the year as a result of increased
consultancy costs and infrastructure adjustments to meet the
Company's current needs. EBITDA before Selling Expenses was R$
383.6 million in 4Q08, 34% up on the R$ 285.6 million in 4Q07, and
R$ 1,371.2 million, up 29% over 2007. EBITDA Margin before Selling
Expenses came to 37% in 4Q08 and in 2008, slightly higher than the
36% in 4Q07 and remaining stable in comparison with 2007. This
margin level shows that the Company's EBITDA margin may rise if
there is a slowdown in growth. EBITDA totaled R$ 278.2 million in
4Q08, an increase of 29% compared to R$ 215.6 million In 4Q07, and
R$ 981.7 million in 2008, 22% up on the R$ 804.3 million recorded
in 2007, with the EBITDA margin remaining at 27%. The Company's
Investments (Capex) has been mainly targeted at acquiring a client
that has a fast payback and a positive net present value and hence
the Company is comfortable about continuing its investment plans
and moving forward with its accelerated growth strategy, since
return on investment is fully in line with the policy on
shareholder value creation. In 2008, Capex totaled R$ 992.9
million, 29% up on 2007. This increase was due to the higher number
of installations last year, which used up R$ 720.3 million, or 73%,
of total Capex. This variable Capex was spent mainly in materials
related to subscriber acquisition and adjustments to
infrastructure, such as data center expansion and node breakings.
Discretionary projects accounted for 27% of the total and were
mainly allocated to improving network quality. The Company
continued with its foreign-exchange hedge policy in order to
protect its cash flow in regard to the payment of its financial
commitments and the purchase of imported equipment. It should be
emphasized that NET did not undertake any speculative operations in
the FX market. The new call center regulations have been in effect
since December 1, 2008, with new service requirements and targets.
Call centers must now provide clients with the option to contact an
operator as in the first electronic menu, be available 24/7, and
respond to clients' complaints within five days. Compliance with
the new regulations required investments in infrastructure, IT
systems and hiring and training of call center operators, thus
pushing up Capex and operating costs. Upcoming Events Conference
Call - 4th Quarter 2008 Earnings Release Date: February 11, 2009 BR
GAAP (in Portuguese) 07:00 a.m. (NY Time) Telephone: +55 (11)
2188-0188 Replay till February 19, 2009: + 55 (11) 2188-0188
Conference ID: NET Servicos Live webcast at:
http://ir.netservicos.com.br/ BR GAAP (In English): 09:00 a.m. (NY
Time) Telephone: (1 412) 858-4600 Conference ID: NET Servicos
Replay till February 19, 2009: (1 412) 317-0088 Conference ID for
replay: 427410# Live webcast at: http://ir.netservicos.com.br/
Public Meetings Sao Paulo - APIMEC Venue: Gran Hyatt Sao Paulo Av.
Nacoes Unidas, 13.301 Date: February 17, 2009 Time: 8:30 a.m.
(Brasilia) Rio de Janeiro - APIMEC Venue: Casa Julieta de Serpa Av.
Praia do Flamengo, no. 340 Date: February 18, 2009 Time: 8:30 a.m.
(Brasilia) Expected Dates for Upcoming Results (1st quarter 2009)
-- April 28, 2009 (2nd quarter 2009) -- July 21, 2009 (3rd quarter
2009) -- October 20, 2009 IR Contact: Adriana Godinho / IR Manager
Sandra Firmino Santos / IR Analyst http://ir.netservicos.com.br/
Phone: (55 11) 2111-2721 DATASOURCE: Net Servicos de Comunicacao
S.A. CONTACT: Investors: Adriana Godinho, IR Manager, or Sandra
Firmino Santos, IR Analyst, both of Net Servicos de Comunicacao
S.A, (55 11) 2111-2721, Web site: http://ir.netservicos.com.br/
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