Brazil Telecom Giant Oi Records Loss of R$5.7 Billion in Q3 after Revenue Drop

RIO DE JANEIRO, BRAZIL – Oi has just released its financial report for the third quarter of 2019, and the company has recorded a loss of R$5.7 billion (US$1.42 billion).

The news came after the deferral of the release of results, initially scheduled for November 13th. In the midst of a judicial reorganization procedure, the operator has lost mobile telecommunications, fixed broadband, and pay-TV clients.

The total number of clients has decreased: 55.1 million revenue-generating-units (RGUs) in the quarter, 6.2 percent less than in the same period in 2018. Total net revenue decreased by 8.8 percent, closing at R$5 billion.

EBITDA (earnings before interest, taxes, depreciation and routine depreciation) totaled R$979 million, down 32.9 percent in relation to the same period of the previous year. Investment (capex) for the quarter was R$2.06 billion. The company closed the period with R$3.1 billion in cash (-38.2 percent); net debt grew 17 percent, reaching the R$14.7 billion mark.

Oi loses mobile telecommunications clients

The net revenue of the personal mobility business was R$1.7 billion, down 2.2 percent this year. Oi suffered a reduction of 4.8 percent in mobile telecommunications clients, but recorded a 22.8 percent increase in the postpaid segment.

The operator has been quite aggressive with its focus on the R$99 plan, which usually features 50 GB of internet (increased to 100 GB during Black Friday).

The mobile services ARPU (average revenue per user) grew 1.2 percent and reached R$16.30. There was a 1.1 percent reduction in prepaid ARPU.

Oi ended the period with 4G coverage in 939 cities, of which 42 have 4.5G technology. The 3G coverage includes 1,649 cities, while the 2G network is found in 3,453 cities.

Oi sees revenue drop in landline telecommunications and pay-TV

The net revenue of residential services totaled R$1.8 billion, a drop of 13.5 percent in the year. Oi experienced a 10.8 percent reduction in the number of clients, mainly in landline service (-12.8 percent) and fixed broadband (-9.7 percent).

After revisiting the strategy and discouraging the satellite technology (DTH), pay-TV service revenue also fell three percent, with 57,000 UGRs disconnected and a 3.6 percent drop in the customer base.

Residential services ARPU totaled R$79.20, an annual decrease of 1.2 percent. The operator does not disclose the separate numbers of each service but states that there was an increase in the average revenue from broadband and pay-TV.

Oi expands fiber optics broadband

Putting into practice its strategic plan, Oi keeps its focus on the expansion of fiber optics network, but it still has not achieved significant results: the operator states that most of the company’s current broadband base is made up of copper accesses (with ADSL and VDSL technology) and that it has a fierce competition from regional operators that work with fixed broadband in small cities.

In total, there are 408,000 fiber clients in 73 cities, while the total of fixed broadband UGRs was 4.5 million. The company’s fiber optics reached 3.6 million covered households, of which 1.1 million were reached in the quarter. The operator expects to end the quarter with 4.6 million home passed households and reach 16 million in 2021.

Oi’s strategy does not promote subscription to the copper service, even if it is present in 4,600 cities while fiber is only found in 76 municipalities. Data estimated in November show that the operator sold more fiber, with 71 percent of the membership. It reports that in cities with fiber, the growth of the FTTH base offsets most of the decline in copper.

Oi also records a decline in corporate services

In the corporate segment, Oi recorded an eight percent drop in net revenue, totaling R$1.3 billion. The number of UGRs grew 2.1 percent in the period due to a 15.2 percent increase in the mobile base, which reached 2.8 million lines.

Corporate fixed broadband fell 6.7 percent in the subscriber base, closing the quarter with 502 thousand customers. Fixed voice service fell 5.7 percent to 3.3 million lines.