Brazilian carrier Oi has reported a drop of 80% in its 2011 fourth-quarter profit. According to its financial report, the telecom operator’s net income was $77.06 million (R$ 140.7 million), a sharp drop from the $386.04 million (R$ 704.8 million) posted during the same period of the previous year.
For 2011, Oi reported a net income of $551.02 million (R$ 1 billion), while its earnings before interest, taxes, depreciation and amortization fell 14.9%. EBITDA as a share of revenue, or EBITDA margin, fell from 34.9% in 2010 to 31.4% in 2011. In the last quarter 2011, it dropped to 26.4%; in Q4 2010 it was 31.2%.
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The profit drop happened at the same time that Oi’s restructuring plans increased expenses. “We are preparing the company to enter a new phase,” said Oi’s CFO Alex Zornig during a recent conference call. He noted that the company has opened 60 new stores and hired 700 employees. “We’ve made investments, and we aim to benefit from them this year and in 2013.”
The telecom operator is also evaluating if, and how, it will participate in the 4G spectrum auction, according to Oi’s CEO Francisco Valim. The auction is expected to take place next May.
Currently, Oi holds a distant fourth place in Brazil’s wireless market, which is led by Vivo, followed by Tim and Claro.
In 2011, Oi made an important change in its ownership structure. As a result, Oi shareholders approved a plan in February of this year to simplify the company’s complex structure. Under the terms of the plan, Oi’s original three listed companies and seven share classes were streamlined into a single company, which will be called Oi SA and float two classes of stock.
The changes are expected to help the company save $58 million (R$ 100 million) in expenses each year.
Last year, Portugal Telecom joined the company, bringing important know-how in terms of technology, operations, service quality and products.
The carrier also had important changes in leadership. In April 2011, Luiz Eduardo Falco, who worked for ten years at Oi, stepped down as CEO and left the company. In June, Francisco Tosta Valim Filho was appointed the new CEO.
Last year, Oi also obtained a revolving credit facility valued at $1.0 billion from nine banks. This operation created a significant liquidity “cushion,” strengthening the company’s capital structure and credit profile and leading to greater efficiency in cash management.
