Net Servicos Continues to Grow

Net Servicos de Comunicacao S.A. (NETC - Analyst Report), the largest cable MSO of Brazil, declared better-than-expected results for the third quarter. Quarterly gross revenues were $839.8 million, an improvement of 10.8% year over year. This is primarily due to impressive growth of the subscriber base in all of its services. Net revenues (excluding connection cancellations and sales taxes), in the reported quarter, was $639.3 million, up 12.3% year over year. 

Net income on GAAP basis, in the third quarter, was $115.8 million or 34 cents per share compared to a net income of $2.3 million or 1 cent per share in the year-ago quarter. EPS of 33 cents was well above the Zacks Consensus Estimate of 18 cents.
 
Subscription revenues stood at $732.4 million, up 9.5% year over year. Accession revenues were $16.2%, down 4.4% year-over-year. Pay-per-view (PPV) revenues were $10.9 million, up 3.9% year-over-year, and revenues from Other services were $91.1 million, up 26.9% year over year. At the end of the reported quarter, Pay TV subscriber base was 3,645,000, up 25% compared to the prior-year quarter. Broadband subscriber base totaled 2,790,000, up 35% over year-ago quarter. Fixed Telephone Line in Service was 2,489,000, up 63% year over year.
 
Quarterly operating expenses were $316.5 million, up 14.7% over the prior-year quarter. Selling, General & Administrative expenses were $148 million, up 4.9% over year-ago quarter. EBITDA came in at $173.1 million, an improvement of 18.4% year over year. Non-operating income in the same quarter was $22 million compared to a non-operating loss of $25.4 million in the prior-year quarter. In the same quarter, corporate income tax was $32.3 million compared to $2.7 million in the year-ago quarter. Net debt (total debt –cash & marketable securities), at the end of the third quarter was $562 million compared to $268.2 million at the end of the prior-year quarter.

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