Net Servicos de Comunicacao S.A. 3Q10 Earnings Release

SAO PAULO, Oct. 27 /PRNewswire-FirstCall/ -- Net Servicos de Comunicacao S.A. (BM&FBovespa: NETC3 and NETC4; Nasdaq: NETC; and Latibex: XNET), hereby announces its third quarter of 2010 (3Q10) results.

Executive Summary:

The third quarter of 2010 was marked by the recovery in net additions, thanks to the recovery in sales and the reduction in the churn rate. The growth in the quarter proves the effectiveness of the initiatives taken throughout the year that are bringing the desired result, namely strong growth.

Pay TV subscriber base ended 3Q10 with 4,065,000 clients, increasing by 183,000 or 12% from 3,645,000 at the end of 3Q09. Broadband base totaled 3,329,000 clients at the end of 3Q10, up 19% from 2,790,000 at the end of 3Q09. There were 2,980,000 fixed lines in service at the end of 3Q10, up 20% from 2,489,000 lines at the end of 3Q09.

Net Revenue was R$1,381.1 million in 3Q10, growing by 16% from R$1,195.3 million in 3Q09, mainly due to the expansion of the client base across all services.

Operating Costs amounted to R$669.2 million in 3Q10, 13% higher than the R$591.0 million in 3Q09, mainly driven by programming costs and the growth in Internet access bandwidth consumption, in turn as a result of the higher subscriber base. As a percentage of net revenue, operating costs decreased from 49.5% in 3Q09 to 48.5% in 3Q10.

Selling, General and Administrative (SG&A) expenses stood at R$334.5 million in the quarter, up 20% from R$278.4 million in 3Q09. Selling expenses totaled R$153.0 million, up 22%, chiefly as a result of higher commissions paid, in turn due to the growth in sales volume. General and Administrative expenses increased by 23% to R$165.3 million in the quarter, mainly due to the higher spending on IT services to improve platforms and systems, which are related to the quality of customer service.

EBITDA (earnings before interest, tax, depreciation and amortization) was R$369.0 million in 3Q10, growing by 14% from R$322.8 million in 3Q09. EBITDA margin ended the quarter at 27%.

Capex totaled R$436.7 million in 3Q10, and the variable portion, which is mainly allocated to subscriber acquisitions, represented 52% of the total invested. The balance was invested in the fixed portion and the network expansion project.

SOURCE Net Servicos de Comunicacao S.A.