Oi’s profit down on acquisition, higher marketing costs

Brazilian telecoms group Tele Norte Leste Participacoes, trading under the Oi brand, said first-quarter net profit slumped due to acquisition costs and increased spending to attract customers in nascent business markets. Oi posted net income of BRL11 million (USD5.28 million) in the three months to 31 March 2009, down from BRL569 million a year earlier, although revenues rose 3.5% to BRL7.49 billion. In a regulatory filing Brazil’s largest carrier said it had increased commercial spending by 79% to increase market share in Sao Paulo, Brazil’s richest and most densely populated state. Oi’s debt also increased eightfold to BRL19.2 billion from BRL2.54 billion a year earlier after it sold bonds to help finance last year’s purchase of Brasil Telecom Participacoes (Brasil Telecom). The BRL5.37 billion takeover gave the company control of two-thirds of the country’s fixed lines and 17% of Brazil’s wireless subscribers. ‘All our cash needs for 2009 are guaranteed,’ said Oi CFO Alex Zornig on a conference call after the report. ‘Our debt-to-earnings ratio will peak by the end of the year before dropping in 2010 and 2011.’