NET Announces its 2Q10 Earnings Release

Sao Paulo, July 20 /PRNewswire-FirstCall/ -- Net Servicos de Comunicacao S.A. (BM&FBovespa: NETC3 and NETC4; Nasdaq: NETC; and Latibex: XNET), the largest cable company in Latin America with integrated services of Pay TV ("NET"), Digital Video ("NET Digital"), bidirectional broadband internet access ("NET Vírtua") and voice ("NET Fone via Embratel"), hereby announces its second quarter of 2010 (2Q10) results.

Executive Summary:

In June 2010, the Company launched new internet connection speeds and now offers speeds of 5Mb, 10Mb, 20Mb, 50Mb and 100Mb, besides the entry level speeds. This made the combined offering of Pay TV, Broadband and Voice services even more attractive and competitive, demonstrating NET's leadership and innovation in the market.

As a result of the strategy initiated at the end of last year, NET achieved solid results in its efforts to sell Pay TV packages that include high-definition channels and high-value-added content.

The Company's organic growth resumed a positive trend, with growth in Pay TV net additions accelerating in relation to the last few quarters. Pay TV subscriber base ended 2Q10 with 3,883,000 clients, increasing by 107,000 or 12% from 3,480,000 at the end of 2Q09. Broadband base totaled 3,100,000 clients at the end of 2Q10, up 19% from 2,605,000 in 2Q09. There were 2,765,000 fixed lines in service at the end of 2Q10, up 21% from 2,286,000 lines at the end of 2Q09.

Net Revenue was R$1,310.0 million in 2Q10, growing by 19% from R$1,101.1 million in 2Q09, basically driven by the larger subscriber base for all services provided by NET.

Operating Costs amounted to R$620.1 million in the quarter, increasing by 11% from R$556.3 million in 2Q09, though declining as a percentage of net revenue to 47.3%. The increase mainly reflects the higher costs with programming, higher Internet access bandwidth consumption and call center services.

Selling, General and Administrative (SG&A) expenses totaled R$303.1 million in the quarter, up 23% from R$245.6 million in the same period of 2009. Selling expenses rose  as a result of the higher expenses with initiatives to boost sales of higher value-added products, telecom services due to the higher average duration of calls and diversification of media and sales channels to leverage opportunities related to the 2010 FIFA World Cup. General and Administrative expenses were R$170.9 million in the quarter, mainly due to the higher expenses with IT services to improve platforms and systems, which are related to the quality of customer services.

EBITDA (earnings before interest, tax, depreciation and amortization) was R$374.9 million in 2Q10, growing by 30% from R$287.4 million in 2Q09, in line with the business plan to grow organically while maintaining margins that are consistent with this growth. EBITDA margin was 29% in 2Q10.

Capex totaled R$316.2 million in 2Q10, and the majority was variable, mainly allocated to acquire equipment and subscriber installation, both of which are related to household acquisition. Additionally in the quarter, NET began to execute its network and bidirectional coverage expansion project.

SOURCE Net Servicos de Comunicacao S.A.