Second Quarter 2012 Results - Entel

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Second Quarter 2012 ResultsAugust 6, 2012Consolidated Revenue(in millions of Chilean Pesos)Total RevenuesMobile servicesData services (includes IT)Local telephony (includes NGN-IP)2Q12 2Q11 % Var. 1Q12 6M12 6M11 % Var351,650 301,657 17% 340,321 691,971 595,776 16%275,153 235,412 17% 271,011 546,164 464,163 18%26,112 23,156 13% 24,418 50,530 45,016 12%10,348 10,696 -3% 9,675 20,023 20,482 -2%Long distance 7,935 7,460 6% 8,241 16,175 16,146 0%InternetOther telecommunication companiesTraffic businessAmericatel PerúCall Center services and othersOthers Revenues - Non core (1)4,252 4,193 1% 4,126 8,378 8,288 1%5,976 4,910 22% 5,313 11,289 9,420 20%9,912 6,990 42% 8,079 17,991 14,352 25%5,227 4,525 16% 5,267 10,494 9,179 14%3,055 2,317 32% 2,717 5,772 4,650 24%3,680 1,998 84% 1,474 5,155 4,080 26%Consolidated revenues during the quarter reached Ch$ 351.7 billion, up 17% when comparedto 2Q11 figures. This expansion was a result of a) 17% increase in mobile services driven byservice revenues growth (+17%) derived from strong average customer base evolution (+21%)combined with a reduction in blended ARPU (-4%). Also, equipment sales revenue increased26% principally in prepaid (voice) due to higher tier handsets sold during the quarter. Customerbase grew strongly both in voice (+17%) and mobile broadband (including M2M data cards),which expanded 30% when compared to 2Q11. Revenues from monthly fixed service grew26% due to strong adoption of postpaid multimedia plans that include data usage, while VAS(+21% including MBB) also continued to grow in-line with higher data activity, chiefly in theConsumers segment. Blended ARPU placed a reduction of 4% mostly explained by lower voicerevenues in the prepaid Consumers segment. MOU was almost flat. The blended churn ratewas 3.24%, an increase compared to the 2.16% reported in 2Q11, principally attributable toprepaid due to heavy industry promotions carried out in past quarters, b) data services rose13% primarily due to outsourced datacenter IT services, followed by integrated solutions overMPLS-IP networks offered to the Corporate & SME segment, c) 42% increase in the trafficbusiness largely sustained by higher traffic in wholesale, partially offset by lower average tariffs,d) other telecommunication companies posted a 22% increase, mainly aligned with higherinfrastructure rentals to fixed line operators and new services provided to other mobileoperators, e) call center and others rose 32%, mainly supported by higher activity in both Perúand Chile, f) 16% increase in Americatel Perú, mostly attributable to an increase in the averageCH$/Peruvian Soles (+ 11%). In local currency, revenues grew 3%, fueled by integratedservices in the enterprise segment (including voice, data and Internet), partially offset by adecline in wholesale and LD revenues, g) 6% growth in LD due to an increase in ILD in partoffset by lower revenues in DLD, h) Other Revenues (Non-Core) increased mainly associatedwith site rental revenues to third parties operators. These increases were partially offset by: a)a 3% reduction in local telephony attributed to a decline in the Consumers segment impacted bya decline in lines in services.Revenues in the first half 2012 increased 16% when compared to the same period 2011.(1) Other revenues (Non-core): revenues which are not a part of the Company´s core business include gains/(losses) in sales of fixed assets andinterest accrued on past due invoices.4
Second Quarter 2012 ResultsAugust 6, 2012Consolidated Cost of Operations(in millions of Chilean Pesos)2Q12 2Q11 % Var. 1Q12 6M12 6M11 % VarCost of OperationsAccess charges & Payments to corresp.Salaries and expenses292,834 235,681 24% 272,535 565,369 462,181 22%52,229 44,535 17% 51,230 103,459 88,310 17%34,742 30,801 13% 32,006 66,748 60,852 10%Outsourced, Supplies and Equipment Services 7,764 5,486 42% 7,392 15,156 11,952 27%Bad debt provisions 10,946 8,193 34% 10,290 21,236 13,830 54%Advertising, Sales commissions & expenses 53,081 40,127 32% 48,127 101,208 76,481 32%Depreciation, amortization and ImpairmentOthers79,631 67,158 19% 72,773 152,404 132,379 15%54,441 39,381 38% 50,717 105,158 78,377 34%Consolidated cost of operations during the quarter totaled Ch$ 292.8 billion, increasing 24%compared to 2Q11. This increase was a result of: a) 32% increase in advertising, salescommissions and sales expenses, mostly related to mobile prepaid equipment sales costs inthe Consumers segment, impacted by higher valued handsets, coupled with non-recurringcharges of Ch$2.9 billion. In addition, advertising costs were up, related to the Entel Visa cardlaunched in 4Q11, while sales commissions increased across all segments, aligned with thecustomer base expansion, b) Depreciation, Amortization and Impairments grew 19%, especiallydriven by postpaid handsets in the mobile business, associated with deeper smartphonepenetration and customer base growth, and to a lesser extent, due to higher depreciation fromnetwork infrastructure and IT projects, c) 12% higher access charges and payments tocorrespondents, mainly supported by higher mobile traffic in all segments as a result of thecustomer base expansion and higher activity in the traffic business. This increase was partiallyoffset by Americatel Perú associated with a reduction in access charge rates for local telephonyservices, which took place in 1Q12, coupled with lower traffic in the LD and wholesalebusiness, d) salaries and expenses increased 13% due to inflation adjustments in salaries,headcount increases to meet demand and in call centers due to higher business activity in bothPerú and Chile, e) bad debt increased 34%, basically in mobile services driven by higherrevenues across all segments together with increased penetration in the middle and low incomesegments in Consumers, f) Outsourced, supplies and equipment services grew 42%, principallyin the Consumers segment related to higher demand and customer service, together with higherdata/IT services costs in the Corporate & SME segment to meet new contracts, g) other costsrose 38%, tied to network and site rentals, consultancy, maintenance and energy, as well as theabsence of a one-time benefit accrued in 2Q11 related to VAS services.Cost of operations in the first six months 2012 increased 22%.EBITDA and Operating IncomeDerived from the aforementioned results, EBITDA during the quarter was Ch$ 138.4 billion, a4% increase when compared to the Ch$ 133.1 billion reported in 2Q11. This increase wasbasically generated by progress in Network Rentals (including traffic business), and to a lesserextent, the Consumers segment, Americatel Perú and Call Centers.5
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Second Quarter 2012 Results - Entel

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