Oi Reverses Loss on Increased Broadband Internet, Mobile Phone Subscribers

Tele Norte Leste Participacoes SA, Brazil’s biggest fixed-line telephone company, posted a second- quarter profit as it boosted its rate of broadband Internet and mobile phone subscribers.

Oi, as the company is known, reported net income of 444 million reais ($252.6 million), compared with a loss of 146 million reais a year earlier, the Rio de Janeiro-based company said yesterday in a regulatory filing. Earnings fell short of the average estimate of 449.4 million reais in a Bloomberg survey of five analysts. Sales rose 1.3 percent to 7.39 billion reais.

The number of additional broadband Internet subscribers the company drew rose 11 percent compared with the same period last year. Oi also added 3.3 million more mobile phone subscribers.

Oi rose 1.3 percent, or 34 centavos, to 26.18 reais, in Sao Paulo trading at 9:35 a.m. New York time, its first gain in three days. Oi’s shares completed their biggest two-day decline in almost four years yesterday after the company announced it would sell stock to existing holders to raise 12 billion reais as part of the deal to sell a stake for about 8.4 billion reais to Portugal Telecom SGPS SA. Oi’s Telemar Norte Leste SA unit will also offer existing shareholders 12 billion reais in stock.

UBS AG cut Oi’s voting shares to “neutral” from “buy” yesterday, as the capital increases will dilute earnings, UBS analysts led by Tomas Lajous wrote in a note to clients.

Oi expects to save 600 million reais in synergies from deals, including the acquisition of Brasil Telecom SA, in the second half, and 1.2 billion reais this year, Chief Financial Officer Alex Zornig said on a conference call yesterday.

The company’s shares have fallen by 23 percent since the start of the year, while the Ibovespa index fell 2.4 percent.

Data released by Anatel, Brazil’s telecommunications regulatory agency, show Oi had 20 percent of Brazil’s mobile phone market in June, compared with 21 percent a year earlier. Oi increased its mobile phone subscriber base by 9.7 percent over the same period.

To contact the reporter on this story: Robin Stringer in New York at rstringer@bloomberg.net

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