Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the Vivo Participacoes fourth quarter 2007 earnings conference call. Today with us we have Roberto Lima, CEO of Vivo Participacoes, and Mr. Ernesto Gardelliano, CFO of Vivo Participacoes.
Today we have simultaneous webcast with slide presentation on the Internet that could be accessed at the site, www.vivo.com.br/ir. There will be a replay facility for the call on the website. We inform you that all participants will be able to listen to the conference during the Company's presentation. After the Company's remarks are over, there will be a question and answer session. At that time, further instruction will be given. (OPERATOR INSTRUCTIONS).
Before proceeding, let me mention the forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Vivo's management and on information currently available to the Company. Forward-looking statements are not guarantees of performance. They involve risks and uncertainties and assumptions because they relate for future events and therefore depend on circumstances that may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Vivo and could cause results to differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. Roberto Lima, CEO of Vivo Participacoes. Mr. Lima, you may begin your conference.
ROBERTO LIMA, CEO, VIVO PARTICIPACOES S.A.: Good morning, ladies and gentlemen. On behalf of Vivo Participacoes S.A., we would like to thank you all for attending our fourth quarter 2007 earnings release presentation.
Certainly 2007 will be remembered as a year of great and important achievements for Vivo. Revenue grew up 14.2% over 2006. And we maintained control over costs, which increased at lesser rate than revenues, even with the intensification of commercial activity in the quarter. As a result, EBITDA increased by 20.7% and EBIT increased by no less than 220% when compared with 2006.
Operating cash flow climbed from BRL1.2b in 2006, to BRL1.6b in 2007. We also completed the implementation of our GSM operation, acquired Telemig and Amazonia Celular, the latest subsequently sold it to [Hoy], and acquired the 1.9 frequencies and license to operate in the [Nortes] regions and to increase our network capacity. And in December, we acquired the 3G frequencies to operate all over Brazil.
On slide five, you can see that the customer base grew 29.1m customers to 33.5m customers, making Vivo the biggest telecom communications company in the Southern Hemisphere in terms of number of customers. Net additions reached 4.4m for the year, versus a net loss of 752,000 clients in 2006, reflecting the successful implementation of GSM network, which has a portfolio of handsets tailored for each segment, reflecting as well the quality of our network and sales channels, and also the best pricing plans in the market.
The churn rate improved, thanks to the success of our main annual campaigns, Mother's Day and Christmas. And in addition, we led the commercial campaigns with the highest market share reflected in the up-turning average revenue per customers, the ARPU, which increased 11% in the year. Data ARPU grew 33% in 2007, accounting for 9.6% of service revenue in the final quarter. It's also worth emphasizing that 49% annual reduction in the credit losses.
On slide six, we show our MOU and ARPU trends, blended ARPU of BRL31.10 in the fourth quarter 2007, 1.6% up from the fourth quarter of 2006, thanks to the sale of new service package that made current customers increase their monthly commitment, plus our continued focus on the acquisition and maintenance of high and medium-value clients.
Another important factor worth mentioning here was the implementation in the prepaid segment of campaigns featuring progressive bonuses related to the recharge value and service recharge, which increased the average recharge value per client by 11.7% in the fourth quarter 2007 from fourth quarter 2006.
The year-on-year and quarter-over-quarter decline in income in ARPU was due to migration of the fixed-to-mobile traffic to mobile-to-mobile, partially due to the increased penetration of mobile telephony in Brazil. It's also worth noting that the data ARPU was BRL2.70 in the fourth quarter 2007, 42% up on the BRL1.90 recorded in the fourth quarter 2006, thanks to the launch and adoption of new data services.
Blended MOU moved up 3.9% over the third quarter 2007. The 9% increase in the outgoing traffic and the lower dependence on our incoming traffic contributed to this improvement. The usage incentive campaigns, the adoption of new service plans and segmented campaigns also helped to improve the blended MOU.
On slide seven, you can see that the subscription acquisition costs fell by 10.4% over the third quarter 2007 due to the reduced handset acquisitions costs, which allowed us to offer more competitive price and acquire more clients without jeopardizing the subsidy. In relation to the fourth quarter 2006, SAC also reduced by 10.4%. In the final quarter of 2006, we still had a substantial volume of additions using CDMA technology, whose handsets costs are higher than those of GSM.
The subscription cost reductions was also due to the dilution of advertising expense, thanks to the increased number of additions into fourth quarter 2007. It's also worth mentioning the higher number of activations in our own stores, improving commercial scale and efficiency.
On slide eight, you can see that our initiatives resulted in new additions, win-backs, restricted plans, suspended customer recoveries and, as a result, improvement in the churn rate.
As you can see in the slide nine, Vivo once again underlined its leadership in technological innovation and launched a series of new products and services. With implementation of the GSM network, we were able to offer national and international digital roaming in more than 190 countries.
Vivo and Positivo Informatica, Brazil's biggest computer manufacturer have formed an exclusive partnership. Consumers who acquire Positivo's notebooks or desktops customized for Vivo's Internet service will have access to the broadband Vivo Zap or Vivo Flash service, via 10 different plans, depending on the user's profile. These plans will help [prove] the market and reduce the entry barrier for the new mobile broadband subscribers.
We gave further proof of our pioneering nature by launching the Zap and Flash broadband solutions in the Controle Plano under which customers pay a fixed rate, but can acquire a data recharge when their allowance is used up. Vivo is the first Brazilian operator to introduce such a functionality.
We also launched four new smartphones, the LG Corona, 680, HTC Vox, and HTC Excalibur, increasing the penetration of Vivo Smart Mail service in Vivo's customer space.
We also stepped up our SMS interactivity initiatives, through products based on the reverse action model, the game Vivo [Inesell], which had 2.3m players and new partnerships with major SMS content providers.
Slide 10 deals with the customer satisfaction survey. Vivo obtained a rating that was higher than the market average, according to the total satisfaction survey carried out by GFK Institute. Needless to say, we are exceptionally pleased with this result, as it validates the success of our (inaudible) and products focused on constant improvements and the provision of increasingly high-quality service for our customers.
Our customer satisfaction rate moved up from 8.21 in 2006 to 8.41 in 2007, thanks to initiatives like the Vivo [para client], Vivo for the customer program, designed to give employees personal experience to the most critical parts of our operation, call centers, stores and corporate service.
Another example of our customer re-emphasis, was the implementation of the Cafe [Operacional], a data forum where we discuss how we can continue to improve customer satisfaction by providing an even better service. And it doesn't stop there. Vivo can now count on a new tool to develop activities that will be increasingly welcomed by customers, the Quality Guarantee Center. The idea is to subject service to continuous testing from the customer's perspective, thereby correcting problems before they are perceived. This is currently monitoring data and value-added service from the users' point of view, paying particular attention to such aspects as quality response time and stability.
For us, the satisfaction of our own employees is as important as that for our customers. On slide 11, we have made every effort to ensure that Vivo is a satisfying place to work and that our employees feel fulfilled personally, professionally and materially. Satisfied employees force [retro] cycle of continuous improvements, generating greater client satisfaction and consequently better results and improvement in stakeholders' confidence.
In December, we undertook our  employee satisfaction survey, and the results show that we were on the right track. Satisfaction with the Company reached a rate of 7.67. It's …