Portugal Telecom hit by forex weakness, domestic sales decline

Portugal Telecom has reported drops in revenue and earnings for the three months ending September due to the weakness of the Brazilian real and a slump in domestic sales.

The Portuguese incumbent flagged an 11.3% fall in operating revenues, to €1.45 billion ($1.95 billion), and said net income plummeted by 66.4%, to just €21 million, between the third quarters of 2012 and 2013.

Portugal Telecom (Lisbon, Portugal) said its performance in its domestic market continued to be affected by intense competition and poor macroeconomic conditions.

Nevertheless, the operator claimed to have outperformed its rivals in the residential sector during the third quarter.

It also noted a 64.3% increase in net profit over the first nine months, to €305 million, thanks to one-off gains related to its €330 million sale of telecoms business CTM Macao.

That increase came despite an 8.8% drop in revenue, to €4.55 billion, over the nine-month period.

Meanwhile, results from Brazilian affiliate Oi (Rio de Janeiro, Brazil) were hit by the depreciation of the Brazilian real against the euro.

Oi’s revenues fell by 10.7%, to €2.1 billion, over the first nine months of the year, but they would have grown by 1.6%, to €2.3 billion, on a constant currency basis.

Last month, Portugal Telecom announced plans to merge with Oi in 2014, under the leadership of Oi chief executive Zeinal Bava.

The move is aimed at creating a more powerful global player that can generate significant economies of scale for the Portuguese and Brazilian players.

The synergies have been estimated to have a net present value of about €1.8 billion.

Recent reports from Bloomberg have indicated that Portugal Telecom currently owns about 12.1% of the investor group that controls Oi, as well as 19.4% of the Brazilian operatr’s non-voting shares, but the merger will see Portugal Telecom shareholders gain a 38.1% stake in the new entity.