Vivo has 21.6% lower profit in the second quarter with pandemic | Telecommunications

Telefônica Brasil, owner of Live, released the financial results for the 2nd quarter of 2020. The company recorded net income of R $ 1.1 billion in the period, down 21.6% in relation to the same period of the previous year. Due to the pandemic of the new coronavirus, which caused COVID-19, the operator was impacted by a drop in revenue, in fixed accesses and in investments.

These are the main financial highlights:

Indicator 2nd quarter of 2020 2nd quarter of 2019 Annual variation
Net profit R $ 1.11 billion R $ 1.42 billion -21.6%
Net operating revenue R $ 10.31 billion R $ 10.87 billion -5.1%
Operational costs R $ 6.21 billion R $ 6.6 billion -5.9%
EBITDA (earnings before interest, taxes, depreciation and amortization) R $ 4.1 billion R $ 4.25 billion -3.8%
EBITDA 39.8% 39.2% +0.6 p.p
Capex (investments) R $ 1.9 billion R $ 2.36 billion -19.1%
Customers (total accesses) 92.01 million 94.36 million -2.5%

Vivo loses accesses and mobile segment revenue

Vivo ended the quarter with 74.4 million mobile accesses, growth of 0.9% in the year. However, the quarterly variation is negative: the operator disconnected 608 thousand postpaid lines in the period, justified by the closing of stores, which limited the volume of increases.

The mobile business represented net revenue of R $ 6.6 billion, down 5.1% in the year. In the quarterly comparison, the decline was 1.5%, with a 0.7% drop in postpaid revenue and 4.9% in prepaid revenue. The biggest impact was on handset sales revenue, down 40.9% over the same period in 2019.

Compared to 2019, Vivo managed to increase its market share by 0.7 pp, adding 33% of all Brazilian mobile lines. The ARPU (average cost per user) of cellular telephony was R $ 27.9, a decrease of R $ 2.6 in relation to the previous year.

Vivo loses TV, broadband and landline customers

In the fixed segment, Vivo also declined: net revenue for the category was R $ 3.7 billion (-5.1%). The company ended the period with 17.6 million accesses, down 14.6% in the year. The biggest disconnection from the fixed telephony service, which totaled 9.7 million lines and a reduction of 17.8% in the year.

The operator also lost fixed broadband customers: 6.5 million accesses, down 9.8% year-on-year. The loss is caused by the disconnection of xDSL technology modems, which use the legacy copper network. In Vivo Fibra broadband, there was a growth of 31.9%, closing at 2.86 million accesses.

In the pay TV service, the operator lost 13% of its base, totaling 1.27 million subscribers. As in broadband, accesses from legacy technologies (satellite TV) were responsible for the retraction, since the IPTV service by optical fiber increased by 24.3%, with 805 thousand accesses.

With the addition of customers using fiber, broadband ARPU was R $ 74.5 (+ R $ 17.6) and TV ARPU was R $ 106.8 (+ R $ 2.6), while fixed voice fell by R $ 3.8, closing at R $ 34.7. Vivo lost market share in all sectors of the fixed business: there are 2.7 pp less in broadband, 0.3 pp in pay TV and 1.9 pp in fixed telephony.

Vivo needs to replace copper network

To remain relevant in the residential telecommunications sector, Vivo needs to invest in optical fiber, especially in the GVT regions. Anatel data from May 2020 indicate that, in all states, except São Paulo, about 70% of accesses are made via xDSL. There are 845 thousand connections with fiber, against 2 million in copper; in May 2019, the operator had 2.6 million broadband accesses with copper and 513 thousand accesses using fiber.

The main competitor with fiber optic expansion nationwide is Oi, which gained about 1 million accesses in the same period. Vivo says it works to overlap the copper network and has changed the investment policy, which will discourage spending on legacy networks.

Vivo’s investments do not seem concentrated to resolve the overlap in the GVT areas: in the last quarter, the operator added 30 municipalities with fiber, of which 15 are new cities and the rest belong to the state of São Paulo, where there is no competition with Hi Fiber. In the period, the company added 1.3 million households with fiber coverage, totaling 13.1 million; the expectation is to end 2020 with 14 million (+3 million compared to 2019).

Vivo also announced the construction of a neutral fiber optic network, but only in incoming medium-sized cities. The company expects to cover 1.1 million homes in 2021 and make the network feasible for partner companies to offer fixed broadband services.

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