FILE PHOTO: The Telefonica logo is seen at its headquarters in Barcelona, Spain, May 12, 2022. REUTERS/Nacho Doce
By Peter Frontini
SÃO PAULO, Jul 26 (Reuters) – Telefonica Brazil said on Tuesday that its second-quarter net profit fell 44.6% as higher financial and operating costs offset strong results from its mobile phone business.
The company, a subsidiary of the Spanish Telefónica that operates in Brazil under the Vivo brand, obtained a net profit of 746 million reais (139.4 million dollars).
Telefónica Brazil’s results were mainly affected by a 282% increase in financial expenses, as the company took on more debt to pay for the acquisition of 5G licenses and the mobile phone business of the company Oi, at a time of increasing of bank loan costs.
Recurring EBITDA or gross operating profit was 4,580 million reais, 8.3% more than the previous year.
Net operating income for the period increased 11.1% to 11.83 billion reais. Net revenue from the company’s mobile phone services, its main business, grew 16% to 8.1 billion reais, boosted by new customers from Oi, which Telefónica agreed to buy in 2020.
Oi customer migration is expected to be completed by the end of the first quarter of 2023.
In a context of galloping inflation in Brazil, Telefónica’s operating costs increased by 27.3% in the period, reaching 5,060 million reais.
Despite the good numbers, Citi analysts say the results will negatively surprise the market.
“The combined impact of higher cost inflation and higher financial expenses pressured profitability beyond our expectations,” Citi said in a note to clients.
(1 dollar = 5.3511 reais)
(Reporting by Peter Frontini; editing by Leslie Adler, Richard Pullin and Sam Holmes; translation by Dario Fernandez)