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Telefonica Brasil SA Expects a Sales Growth Amidst Economic Slowdown

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February 5
11:24 PM 2016

Vivo, the trade name of Telefonica Brasil SA has prepared an arsenal to face the worsening economy ahead. It aims to increase sales on certain segment and also broaden its efficiency.

In an interview with Bloomberg,Chief Financial Officer Alberto Horcajo expressed his optimism, "We're the only mobile operator in Brazil that continues growing revenue quarter over quarter. It is our aspiration that it continues happening."

In order to keep its expansion, Telefonica Brasil has prepared a strategy to cut costs and focus on higher-paying customers. Telefonica Brasil is the biggest unit of Spanish Telefonica SA, and also the most important unit for the Madrid-based telecommunication company.

As the economy of Brazil is expected to slowdown, Telefonica Brasil faced an enormous challenge. The gross domestic product of Brazil is projected to shrink more than 3% in 2016, and it will be more difficult to find new customers for wireless service. Especially, in its 205.4 million population, there were 269 million active mobile-phone lines in the country.

Even so, Telefonica Brasil reported increase in revenue in second and third quarters of 2015. The trend is expected to continue in the fourth quarter, with an expected $2.82 billion sales in sales in the fourth quarter, an increase from last year's 9 billion reais ($2.3 billion) in the same quarter.

The tough competition in Brazil wireless market has worn out one operator, NexTel. NII Holdings, owner of the fifth largest mobile telecommunication in Brazil is reported to sell the company, according to RCR Wireless News. Some investment firms, have already been in process to review the company's financial information along with other operators.

In the midst of that competition, Telefonica Brasil with its Vivo brand kept its focus on its service quality with a premium price offer. Avoiding the suicidal price battle between other wireless providers, such as Tim Participacoes SA and Oi SA. As a result, Telefonica Brasil was able to book a profit in 2015.

In 2016, Telefonica Brasil plan to focus more on its monthly postpaid wireless customers. These customers tend to spend more on data and calling minutes, regardless of economic condition. Moreover, general outlook the telecommunication industry has not been supportive for expansion.

Analyst at Goldman Sachs Vera Rossi in Monday's note to client wrote, "Both secular and cyclical trends are working against the industry. In addition to the pressure on revenue, with voice decline offsetting the growth in data revenue, the macro backdrop is likely to have a negative impact on prepaid."

In Europe, Vivo's parent company, Telefonica SA also plan to streamlining its European operation. Recently, the company is in negotiation to divest its England's operation to Hutchison, as reported by Zacks Equity Research.

In the worsening economy, the best option is to stay focus on its base customers and streamlining operation. That is what Telefonica Brasil intend to do in 2016, as well as its parent company.

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