Telefónica Brasil, the parent company of Vivo (BOV:VIVT3), announced its fourth-quarter results for 2024, showcasing both growth and challenges within its financial metrics. The company reported a net profit of R$ 1.76 billion, which reflects a 10.1% increase compared to the same period last year, aligning closely with market expectations. Analysts anticipated slightly lower earnings of R$ 1.7 billion, according to data from LSEG.
For the quarter ending December 31, 2024, Telefônica's EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, rose by 7.8% year-over-year to R$ 6.2 billion, maintaining a steady EBITDA margin of 42.5%. The operational revenue for the company reached R$ 14.58 billion, indicating annual growth of 7.7%. This increase was driven largely by both the mobile and fixed service segments, which saw respective revenue growths of 7.6% and 8.0%. Mobile services generated R$ 10.37 billion, whereas fixed services amounted to R$ 4.2 billion.
Interestingly, the total operation costs also increased by 7.7% to R$ 8.38 billion, mirroring the revenue growth. A unique highlight of this quarter is the notable increase under 'other revenues', which surged by 52.3% to R$ 531 million, attributed to the impact of regulatory contingency reversals from transitioning the fixed telecommunications concession to an authorization model.
This strategic shift is anticipated to streamline costs and investments over the coming years, with expected benefits from project execution estimated at R$ 4.5 billion over the next decade. Additional positive impacts include removing costs associated with concessions, with the potential for disassembling 120,000 tons of copper from legacy infrastructure.
Despite the promising increase in net profit, market reactions to the quarterly results have been mixed. On the day following the financial report, shares of Telefónica Brasil plummeted by 6.71% to R$ 49.90 as of 11:15 AM BRT. Analysts from BTG Pactual noted the results showed weak profitability, and stated their concerns about the overall quality of the results, particularly pointing out static growth in mobile services quarter-over-quarter.
BTG’s analysts recommended Telefónica shares as part of a safe investment strategy, especially within the current volatile market conditions. They praised the strength of the company's business model and its competitive positioning, highlighting the solid cash flow generation and significant shareholder returns. The bank maintains its 'buy' recommendation with a target price projected at R$ 62.00 over the next year.
Looking at the year as a whole, Telefónica Brasil reported total earnings of R$ 5.5 billion for 2024, which is up 10.3% compared to 2023. The annual EBITDA was reported at R$ 22.88 billion, representing growth of 7.3%. Total annual revenue climbed to R$ 55.8 billion, reflecting a 7.2% rise.
Investments over Q4 2024 amounted to R$ 2.46 billion, primarily directed toward 5G network expansion, accounting for 16.5% of the company’s revenue. This investment level was slightly lower than the previous year. By the close of the quarter, the company's net debt stood at R$ 13.8 billion, down by 2.6% year-over-year.
Overall, Telefónica Brasil’s Q4 2024 results showcase resilience and growth segments offset by some profitability pressures, driven by continued investment and regulatory enhancements. While the market's initial reaction was negative, strategic adjustments and growth prospects appear promising as the company positions itself for future challenges.