August 9, 2017 / 10:14 PM / a year ago

UPDATE 1-Hedge costs drive wide Oi loss, EBITDA lags behind

(Adds interview with Oi CEO, creditor assembly delay)

By Guillermo Parra-Bernal

SAO PAULO, Aug 9 (Reuters) - Oi SA posted a wider-than-expected second-quarter loss as the Brazilian phone carrier was forced to close currency-hedging positions because of its protracted bankruptcy protection case.

Oi lost a net 3.303 billion reais ($1 billion) last quarter, about 16 times the size of the first quarter's 200 million-real shortfall, according to a securities filing on Wednesday. The loss was much more than an average consensus estimate of 332.8 million reais compiled by Thomson Reuters.

Revenue fell slightly on a quarterly basis, reflecting declining proceeds from sales in Oi's residential, mobility and business segments. Slowing sales drove a sharp decline in costs and expenses, which in turn helped prop up operational earnings and cash flow generation last quarter, the filing said.

The numbers suggest Chief Executive Officer Marco Schroeder's turnaround plan is feeling the pinch of Brazil's slow economic recovery and the creditor protection case, which analysts said may be affecting customer views about the company. Financial expenses soared eight-fold to 5.753 billion reais from the prior quarter.

"We're working hard to reverse revenue losses, and that's why we have targeted investment as a way to do it," Schroeder told Reuters in an interview to comment the quarterly results.

Earnings before interest, tax, depreciation and amortization, a gauge of operational profit known as EBITDA, came in at 1.617 billion reais, slightly below consensus estimates of 1.649 billion reais for the quarter.

The bankruptcy process has also allowed Schroeder to undertake a much-needed revamping of Oi's infrastructure to improve service, and the launch of mobility solutions to retain subscribers. Capital spending rose to 1.2 billion reais last quarter, the filing said.

Even with investments rising, Oi generated 7.431 billion reais worth of operational cash, 62 percent more than a year earlier but slightly below the first quarter.

Oi and government officials are discussing how to better treat an 11 billion-real fine it owes to telecommunications watchdog Anatel to accelerate the bankruptcy protection case, Schroeder said.

Schroeder added that a creditor assembly to vote on Oi's restructuring plan will probably be held around October, instead of an initial target for September. ($1 = 3.1554 reais) (Reporting by Guillermo Parra-Bernal; editing by Grant McCool)

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