Brazil’s Net Q1 profit tumbles 62 pct on expenses

* Net income tumbles to 46 mln reais in first quarter

* Net sales rises 16 pct; subscriptions slightly up

* Company to reverse surge in disconnections

SAO PAULO, April 28 (BestGrowthStock) – Net Servicos (NETC4.SA: ),
Brazil’s largest pay TV company, said on Wednesday net income
plunged 62 percent in the first quarter as a weaker currency
boosted debt-servicing costs.

Profit fell to 46 million reais ($26 million) from 120
million reais in the year-earlier period, according to a
securities filing.

Financial-related expenses outpaced revenues by 76.6
million reais, pushing down net income on a year-on-year basis.
That was more than twice the 32 million reais shortfall posted
in the first quarter of 2009.

A quarterly decline in the real (BRBY: ), Brazil’s currency,
generated foreign exchange-related losses on Net’s
dollar-denominated borrowings including loans and global bonds,
the filing said.

Net revenue rose 16 percent to 1.26 billion reais despite
lackluster new client additions of 86,000, below analysts
estimates ranging between 90,000 and 110,000.

The results underscore the difficulties that rival
satellite TV carriers pose for Net, which is struggling to
attract new subscribers as rivals offer high definition
channels at cheaper prices.

Disconnections surged in the quarter by almost a full
percentage point to 15.9 percent of the company’s customer
base. The ratio, known as churn rate, probably rose on the back
of technical glitches and complaints, analysts said.

“The company is working to identify possible causes (for
the increase in disconnections) in order to reverse the upward
trend observed in recent quarters,” the filing said.

Satellite operators grabbed almost seven in every 10 new
subscribers in the quarter ended on March 31, while additions
for Net and other cable TV companies tumbled 45 percent in the
period from a year earlier, government data showed this month.

Net Servicos’ total client base, which includes cable,
Internet and voice-service users, jumped to 10.45 million from
8.78 million a year earlier and 10.12 million in the fourth
quarter of last year.

Net shares fell for a third day on Tuesday, shedding 1.3
percent to 20.50 reais. The stock has fallen 16 percent so far
this year.

First-quarter earnings before interest, taxes, depreciation
and amortization — a measure of cash flow known as EBITDA —
jumped 30 percent to 369 million reais from 284 million reais a
year earlier.

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($1=1.759 reais)
(Reporting by Guillermo Parra-Bernal; Editing by Derek Caney)

Brazil’s Net Q1 profit tumbles 62 pct on expenses