Entel's Q1 earnings slide despite strong Peru growth

Chilean telco Entel posted a 41% year-on-year decline in its first quarter net profits as strong growth in Peru failed to offset a weak economy and fierce competition in Chile.

Net income decreased to 14.1bn pesos (US$20.8mn) from 24bn pesos in 1Q16 as a result of lower operating income and lower tax credits related to taxable foreign investments.

Overall, Entel's Q1 revenues rose 3% to 477bn pesos, driven mainly by a 29% surge in Peru.

The company said total mobile customers rose 7% in the quarter to 14.5mn with the help of a robust expansion in the Peruvian operations.

CHILE

The number of Chilean mobile customers fell 5% to 9.3mn due to a Q1 decrease in the prepaid segment as the company faces stiffening competition in the domestic market.

Entel has faced strong price competition in the mobile broadband segment from WOM and Claro, and to a lesser extent, from Movistar and MVNOs VTR, Virgin Mobile and Móvil Falabella.

According to the March number portability figures, Entel continued to be the company losing the largest number of customers (-120,737), while Claro, WOM and Movistar added 56,365, 42,716 and 9,536, respectively.

Entel's churn rate increased to 2.87% in the quarter from 2.01% a year ago, while its mobile Arpu fell to 8,305 pesos from 8,604 pesos in the same comparison. That said, the percentage of mobile data subscribers in its postpaid base climbed to 89% from 82% in 1Q16. The postpaid segment also increased 3% to 40% of the total mobile customer base.

Entel has based its competitive strategy on expanding the LTE Advanced network to reach national coverage as well as bundling video and other consumer content packages.

The company is also pushing its Entel Hogar residential triple play offering, which helped increase fixed line service revenues 13% y-o-y.

PERU

Entel's Peruvian mobile customer base reached 5.12mn in Q1, up 39% y-o-y with gains in both postpaid and prepaid.

The company registered 35% growth in postpaid and a 41% increase in prepaid customers with the help of offers such as Yapa Prepago, which for a limited period offers unlimited minutes to all networks and free access to social networks.

The Peruvian prepaid market is also highly competitive with pressure from top players Movistar and Claro, as well as Vietnam's Bitel and new entrant Virgin Mobile.