SAO PAULO, Brazil, July 18 /PRNewswire-FirstCall/ -- Net Servicos de Comunicacao S.A. (Bovespa: NETC3 and NETC4; NASDAQ: NETC; and Latibex: XNET), today announces its results for the second quarter of 2008 ("2Q08").
The Company continues to pursue its strategy of accelerated growth, generating adequate return to support this growth and ensure excellence in the services rendered.
Accordingly, the Company recently launched Net Digital HD Max, the first Pay TV service in Brazil with content in high definition, which can be viewed whenever and however desired. This product contains high definition programming ("HDTV"), combining the convenience of recording desired content through an internal 160GB hard disc, which allows for up to 100 hours of recording. In addition to the Net Digital content, this product offers premium content in high definition, as was the case with the Euro Cup and will be the case with the 2008 Beijing Olympic Games, in addition to an exclusive channel with non-stop programming in high definition.
The Company also launched the new Net Virtua broadband portfolio, which now offers speeds of 3, 6 and 12 Mbps, thus, reaffirming its leadership in Brazil's high-speed connection segment by offering 12 Mbps to all households covered by its bidirectional network. Since the launch of the "Megaflash" portfolio, Net Virtua was recognized by InfoExame Magazine for the highest average navigation speed and the best cost/benefit ratio in Brazil.
Net Fone.com, a product that combines Virtua, with fast, stable and unlimited internet connection, and Net Fone, the digital voice service and, depending on the region's technical feasibility, excellent quality signal on the free channels through its cable network, achieved the mark of 112,000 clients in the quarter. Of this total, 56% received the free channels' signals through Net's network, and 44% received only the combination of Virtua and Net Fone. Though launched recently, product sales have been brisk, showing clients' appreciation of this new product, which effectively brought a smart alternative in the Brazilian market.
Pay TV subscriber base ended the quarter with 2,709,000 clients, 18% above the same period in the previous year. The Broadband subscriber base reached 1,798,000 clients in 2Q08, a 61% increase over the 2Q07, and the number of Voice subscribers climbed 178% over the 2Q07 to a total of 982,000 clients.
Net Revenue in the quarter was R$ 891.1 million, 27% higher than the R$ 700.9 million in 2Q07. This growth was driven by the 7% increase in the Average Revenue per User (ARPU), from R$ 125.65 in 2Q07 to R$ 134.87 in 2Q08, as well as by the 50% increase in the Company's Revenue Generating Units ("RGU").
Operating Costs ended the quarter at R$ 418.9 million, 26% higher than the R$ 333.0 million in 2Q07. As a percentage of revenues, they fell slightly, from 47.5% in 2Q07 to 47.0% in 2Q08. The items that most contributed to the increase were the higher bandwidth consumption for Internet service as a result of the larger NET Virtua client base, higher expenses with call center and personnel, required to meet the growing demand for client service, maintenance and installation, while maintaining the quality of the services provided.
Selling, General and Administrative expenses (SG&A) totaled R$ 233.0 million, 7% higher than the R$ 218.4 million in 2Q07. As a percentage of net revenue, they declined from 31.2% in 2Q07 to 26.1% in 2Q08. Selling Expenses and General and Administrative Expenses rose 39% and 16%, respectively, over the 2Q07, offset by the 70% reduction in Other Revenue/Expenses due to the increase in such expenses in 2Q07, as a result of the accounting reconciliation conducted at Vivax after it was acquired by the Company.
EBITDA in the quarter totaled R$ 231.8 million, and EBITDA margin remained at 26%, 18% more than the R$ 196.5 million in 2Q07. Even considering the Company increased sales expenses due to a higher number of net additions and high sales of the new product, Net Fone.com, this result remains within the Company's positive range for its accelerated growth strategy, focused on continuous improvement in the quality of services rendered.
