Portugal Telecom bets on Brazil to drive growth

Portugal Telecom has grown dramatically in size over the past 12 months as it attempts to reduce dependence on its home market.

Latest financial figures show that PT’s revenues grew 64.3 percent year-on-year to €6.1 billion in 2011, thanks to the addition of the stakes it has built up in Brazil-based telcos Oi and Contax.

PT now holds a 23 percent stake in Oi, Brazil’s largest telco in terms of revenue and fourth largest in terms of customers, and a 14 percent stake in Contax, Brazil’s largest call centre company.

Without these acquisitions, revenues would have decreased by 9.7 percent the company said.

Profit for the year stood at just €339 million as operating costs ballooned by 75 percent and capex grew by 53 percent.

The Brazil acquisitions added €2.4 billion in revenue to PT’s balance sheet, more than offsetting the 7.4 percent decline from the company’s home market.

The sovereign debt crisis helped to reduce revenues in Portugal to €2.9 billion, meaning this time next year Brazil could provide a majority of the European operator’s business.

It’s not all doom and gloom in Portugal, however.

While revenues from the group’s mobile, enterprise and wholesale business units were all down, the residential segment bucked the trend with a 5.4 percent rise.

Increased pay-TV and broadband revenues, including double and triple-play offers, were the drivers behind this growth.

PT added 198,000 pay-TV customers, up 25.5 percent to 972,000, while the number of broadband customers increased by 102,000, or 12.6 percent, to 911,000.

Crucially, the amount of revenue the operator got from each residential access point increased by 9.1 percent.

Much of this success is down to PT’s innovative approach to the pay-TV space where, through its Meo brand, it is attempting to profit from a differentiated, multiscreen service.

Meo provides 150 TV channels and thousands of video on demand titles, but it is the interactive elements that look most exciting.

Last year it launched several innovative services that show what telcos can do to compete in the content space.

There was Secret Story, a channel exclusive to PT customers based around a popular reality TV show that allows customers to select the camera from which they wanted to follow contestants.

A Meo Kanal service, meanwhile, allows customers to create their own TV channels from which they can produce, edit and share multimedia content in a private or public environment for free.

Then there is Meo Go, an OTT service that allows users to access 60 live TV channels and the company’s VoD service on smartphones, tablets and PCs.

Clearly, given Portugal’s desperate economic situation, the adage that necessity is the mother of invention looks very apt.

Alongside expanding its footprint in the growing Brazilian market and innovating in content at home, PT is also planning to profit from the launch of 4G this year.

Later this month 80 percent of the Portuguese population will have access to the next generation mobile network and PT will be hoping to reverse the decline in ARPU, which fell 8.9 percent to €8.7 last year.

Alongside a range of offers to both consumers and residential customers, PT has also launched a m-payment service trial.

These are tough times for PT but it is showing other operators that a sensible acquisition strategy allied to innovation in new services can achieve results.

We will watch their progress this year with interest.

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