24 de febrero de 2015 / 23:49 / en 3 años

UPDATE 1-Telefonica Brasil eyes cost cutting as earnings stagnate

(Adds executive’s comments, details of earnings)

By Brad Haynes

SAO PAULO, Feb 24 (Reuters) - Telefonica Brasil SA is focused on controlling costs as revenue stagnates, executives told analysts on Tuesday, after posting better-than-expected profit despite slipping sales.

Net income for the Brazilian unit of Spain’s Telefonica SA edged up 2 percent from a year earlier to 1.261 billion reais ($445 million), beating an average estimate of 1.102 billion reais in a Reuters poll of analysts.

The earnings beat came despite flat revenue as accelerating disconnections by fixed-line users weighed on operations.

“We recognize that we have a weak top line and unless we work hard on the cost side, it’s very difficult to maintain the level of income that this business demands,” said Chief Financial Officer Alberto Horcajo on a conference call.

“There are plans to review a lot of contracts we have in place, because this is an economy that demands that,” he added.

Job growth has sputtered in Brazil and monthly inflation accelerated to a 12-year high, battering consumer confidence and triggering a sharp drop in household spending.

Still, cutbacks in third-party contracts helped the company keep operating cost growth below 2 percent from a year earlier, well below the more than 6 percent consumer inflation in 2014.

Provisions for delinquent consumer accounts jumped 38 percent from a year earlier, but advanced just 3 percent from the prior quarter. Executives said they expected those bad debt provisions to remain stable going forward.

Earnings before interest, taxes, depreciation and amortization slipped 4 percent to 2.749 billion reais, slightly below an average forecast of 2.771 billion reais.

$1 = 2.8325 Brazilian reais Additional reporting by Luciana Bruno in Rio de Janeiro; Editing by Chris Reese

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