Portugal Telecom registered net results of 456,4 million euros (ME) between January and September of 2004, which represented an increase of 63.4% when compared to the same period in 2003. These values are in line with those that had been estimated by analysts which estimated results between 420,5 and 482,5 ME.
Portuguese retail revenue which includes the fixed network, TV by Subscription and Broadband Internet increased 1.4% to 1.372 ME, reflecting a strong growth in revenue from TV by Subscription and Broadband Internet which more than compensated the decline in revenue from fixed network traffic. Net revenue from the fixed network retail, or in other words, the revenue from the fixed network retail minus the corresponding costs of telecommunications, increased 2.7% to 857 ME as a result in the strong growth in ADSL and from the new price plans.
In the first nine months of 2004, the EBITDA (results before interest, taxes, depreciations and amortizations) was 1.769 ME which represented an increase of 4.4% which is itself equivalent to a margin of 39.7%. If we exclude the impact of the devaluation of the Brazilian Real, the EBITDA would have increased 5.6%. The growth in exploration revenue and the EBITDA of business within Portugal was 3.3% and 7.8% respectively, due to the strong development and improvement of margins in the mobile and TV by Subscription businesses.
By the end of September 2004, net debt had risen to 2.902 ME which represented a reduction of 313 ME in relation to 2003 year-end. This value included the investment of 238 ME for the acquisition of own shares according to the share buy-back program of 10% of PT’s capital which had already been announced. At the end of September, net debt, excluding VIVO was of 2.671 ME. As a result of the share buyback program and up until the 2nd November, PT had acquired 7.87% of its social capital at an average price of 7,95 Euros per share.
Growth in Clients
A sustainable increase in the client base of the PT Group was registered during the third quarter. During the period, access to the fixed network increased 28 thousand to 4.306 thousand due to a strong growth in ADSL.
In the Mobile business area, clients increased by 1,2 million to approximately 29,6 million as a result of high growth in Brazil. Since the beginning of the year, the number of mobile clients has risen by 4,04 million.
The total number of clients of TV by Subscription reached approximately 1,5 million by the end of September 2004, as a result of an extra 30 thousand new clients during the third quarter and 76 thousand in the first nine months in 2004 with an increase not only in the cable network but also in the satellite network. In Broadband, the Portugal Telecom Group held, in September 2004, 602 thousand clients, an equivalent to an access penetration rate of 11.8% (PSTN/RDIS and cable). Net additions to retail Broadband were approximately 72 thousand in the third quarter of 2004 and 211 thousand in the first nine month of 2004.
Fixed Network
In the Fixed Network business, the continuous effort in the reinforcement of performance which continued to develop through the carrying out of various initiatives, which included the retention and loyalty of clients and the strong growth in Broadband services should be emphasised. In June of 2004, the pre-paid ADSL service was launched and increased PT’s ADSL offer. Simplicity, freedom and discounts were important measures to improve the perception in the competitiveness of PT fixed network service prices in Portugal. In the third quarter of 2004, 265 thousand new price plans were added, increasing the total number of plans to 735 thousand at the end of September 2004 which represents 18.6% of PSTN/RDIS accesses.
The launching of new wireless telephones with similar functions to that of a mobile telephone, has also been an important measure to increase the use of the fixed network and to retain clients. Lastly, the joint offer of the fixed network with security solutions is another way to create value in the properties of copper lines. In the third quarter, total traffic in minutes fell 10.5% in comparison to the same period of the previous year as a result to the reduction in total retain traffic of 10.8% and wholesale traffic of 10.3%. The total ARPU (average revenue per client) grew 2.1% in the third quarter of 2004 to 35,8 Euros. The Voice ARPU fell 2.0% to 31,9 Euros and the Data ARPU increased 58.0% which contributed 10.8% to the total ARPU in the third quarter of 2004.
Mobile Portugal (TMN)
69 thousand new clients were registered in the third quarter of 2004. At the end of September 2004, TMN held 4.941 thousand active clients, which represents an increase of 5.3% according to the same period in the previous year. The MOM (minutes of usage) in the third quarter of 2004 totalled 125 minutes which represented a decrease of 1.8% when compared to the same period in the previous year which essentially reflects a reduction in fixed-mobile and mobile-fixed traffic. In the first nine months of 2004, the MOM fell 1.1% as compared to the same period in the previous year. The ARPU registered a reduction of 5.2% to 25,5 Euros as a result of the reduction in the interconnection tariffs, a reduction in the MOU, an increase in the weight of traffic in its own network and traffic promotions whose aims were to increase utilization. In the first nine months of 2004, the ARPU fell 4.1% to 24,4 Euros. Revenue from data services represented 9.9% of the services revenue in the third quarter of 2004 representing an improvement of 2,0pp when compared to the same period in the previous year. The number of messages (SMS) in the third quarter of 2004 increased 13.6% to 391 million and represented approximately 55 messages per months per active SMS user.
The I9 (mobile multimedia portal) has been well accepted, reaching more than 161 thousand users by the end of September 2004. Games, ring tones, sport, highlights and video make up the contents and services that are mostly used on a daily basis. The number of active MMS terminals reached 249 thousand by the end of September 2004. The number of GPRS terminals reached 1.237 thousand.
In April 2004, TMN became the first mobile operator to launch a UMTS telephone in Portugal with a service which allowed video calls. The coverage of the UMTS network already reaches 13 of the largest cities throughout the country and is expanding so as to cover the entire national territory.
Mobile Brazil (Vivo)
An extra 1.131 thousand clients were added in the third quarter of 2004 which was also a period with intense commercial activity and an increase in the competition which came from operators like TIM and CLARO. Vivo held 24,6 million active clients at the end of September 2004 which corresponds to an average market share of 53.3% in the regions in which it operates and solidifies its position as market leader. The Vivo’s MOU fell 14.5% in the third quarter of 2004 to 87 minutes due to a negative evolution in entry traffic. In the first nine months of 2004, the MOU fell 10% to 90 minutes. In the third quarter of 2004, the ARPU was of 32,1 Brazilian Real which represents a reduction of 18.7% when compared to the same period in the previous year.
Multimedia (PT Multimedia).
Net results of PT Multimedia reached 17,8 ME in the third quarter representing a significant improvement when compared to the 5,7 ME in the same time band of 2003. In the first nine months of 2003, net results totalled 48,4 ME as compared to 8,9 ME in the first nine months of 2003.
Exploration revenue of PTM in the third quarter of 2004 increased 9.5% when compared to the same period in 2003 to 179 ME which is largely due to an increase of 15.1% in revenue from TV by Subscription and Cable Internet. The EBITDA in the third quarter of 2004 increased 41.0% to 48 ME with an EBITDA margin registering an improvement of 6,0pp to 26.9% as a result of the strong growth in TV by Subscription clients and Broadband Internet, from the increase in the ARPU and a decrease in operational costs.
Between July and September, net additions in clients of TV by Subscription were of 30 thousand, with a total number of TV by Subscription clients increasing 8.2% to approximately 1,5 million. The total ARPU of TV by Subscription in the third quarter of 2004 increase 7.4% to 25,6 Euros as a result of greater penetration in premium services, including Broadband Internet. The number of Broadband clients reached 290 thousand at the end of September, an increase of 43.0% when compared to the same period in the previous year causing net additions to reach 21 thousand in the third quarter of 2004 and 59 thousand in the first nine months of 2004.
Audiovisual Business
Exploration revenue in the audiovisual business reached 23 ME in the third quarter of 2004 registering a decrease of 13.3% when compared to the same period in the previous year. The behaviour of this business unit reflects the lack of revenue from the sale of consoles and video games in the sequence of the termination of the contract for the distribution of Sony products. In the meantime, revenue from the distribution of video increase 20.4% in the third quarter of 2004 as compared to the same period of 2003 benefiting from a wider and more valuable range of films. The EBITDA was of 5 ME which corresponds to an increase of 45.1% when compared to the same period of 2003.
Media Business
Lusomundo Media presented revenues of 35 ME in the third quarter of 2004 which represented an increase of 6.6% when compared to the same period in the previous year, as a result of an increase in revenue from publicity (+3.5%), newspaper circulation (+12.2%) and from the sale of promotional products (+17.8%). Lusomundo Media’s EBITDA, as a result of the increased growth in revenue, went from a negative result of 3 ME in the third quarter of 2003 to a positive result of 1 ME in the third quarter of 2004 where the EBITDA margin improved to 2.4%.