Shares of Telefonica Brasil, S.A. VIV lost 6.6% yesterday and tumbled to a 52-week low of $15.24. Incidentally, this company’s shares have declined more than 21% over the last one year.
Ever since Telefonica Brasil announced mixed fourth-quarter 2014 earnings on Feb 24, it lost more than 18% value. Meanwhile, net operating revenue rose 1.8% year over year to R$9,047.6 million ($3,145 million). However, the figure missed the Zacks Consensus Estimate of $3,835 million. ARPU fell 0.8% to R$24.6 ($9.65), primarily owing to a 9.9% decline in Voice ARPU. On the other hand, Data ARPU improved 18.3%.
For the current year, the company has witnessed two downward revisions over the last one month with the Zacks Consensus Estimate for earnings moving down by 3.3% to $1.16. Telefonica Brasil’s fixed line voice business is facing stiff competition from alternative service offerings like wireless telephony, VoIP (voice over Internet Protocol) and cable services (voice, video and broadband).
Also, the company’s mobile segment faces competition from personal mobile and fixed line telecommunication and Internet access service offerings of other providers. Competition is expected to increase with new rivals entering the market and the rapid development of new technologies, products and services.
We believe Telefonica Brasil’s bundled offerings coupled with quality service are consistently strengthening its competitive position, in turn, allowing it to expand its market share. However, the underperformance of the company’s fixed voice and access business remains a concern. Further, competitive pressure, increased wireless penetration, a weak Brazilian currency and regulatory pressures are the major hurdles the company is presently facing.
Telefonica Brasil currently has a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in this sector include Chunghwa Telecom Co., Ltd. CHT, China Unicom (Hong Kong) Limited CHU and China Mobile Limited CHL. All these stocks sport a Zacks Rank #1 (Strong Buy).
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