March 26, 2020 / 5:03 PM / 2 months ago

UPDATE 2-Brazil's Oi sees coronavirus boosting broadband demand after weak Q4 results

(Recasts adding CEO’s remarks from conference call, analyst comments and share performance)

By Gabriela Mello

SAO PAULO, March 26 (Reuters) - Brazil’s biggest fixed-line carrier Oi SA sees an increasing demand for broadband services compensating for lower mobile sales during the coronavirus outbreak, its Chief Executive said on Thursday, after it reported a higher-than-expected loss.

All company-owned stores are now closed and Oi is currently monitoring traffic to activate new circuits if needed to guarantee stability in all its services.

“A gigantic number of customers have a slow broadband speed, so with restrictions of movement we have an increase in demand that pretty much compensates for the negative impact on mobile sales,” CEO Rodrigo Abreu said in an analysts call.

Oi, which filed for bankruptcy protection in June 2016, reported a fourth-quarter loss of 2.3 billion reais ($457 million) compared with an average estimate of 1.1 billion-real loss compiled by Refinitiv, as revenue decline overshadowed cost-cutting efforts.

Earnings before interest, taxes, depreciation and amortization (EBITDA) came in line with expectations at 1.3 billion reais.

Preferred shares in Oi were up 6% on Thursday afternoon, while common stocks were rising 3.8%.

“With all revenue lines still in decline mode year-on-year, we weren’t surprised,” analysts at investment bank BTG Pactual wrote on Thursday.

On March 11, rivals TIM Participações SA and Telefonica Brasil SA informed Oi’s advisor Bank of America of their interest in kicking off talks for a potential acquisition of all or part of Oi’s mobile division.

BTG Pactual calculates that Oi’s Ebitda would grow to approximately 3 billion reais immediately after selling its mobile unit.

It is not immediately clear how the two plan to divide up the business, but market participants argue that TIM would most likely get a larger share of Oi’s mobile business.

“We are now doing our own analysis with advisors about the next steps in the sale of our mobile unit,” Abreu said, adding the transaction depends on creditors approval.

He noted it is difficult to assess the full impact of the coronavirus crisis, but so far the company is on target with its strategic plan, including asset sales.

Oi expects to raise up to 1.5 billion reais by the end of the second-quarter with the divestment of mobile towers, data centers and real estate assets, according to Chief Financial Officer Camille Loyo Faria.

$1 = 5.0345 reais Reporting by Gabriela Mello; Editing by Nick Zieminski and David Gregorio

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