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By Gram Slattery
SAO PAULO, July 25 (Reuters) - Telefonica Brasil SA , Brazil's largest telecommunications company, beat quarterly profit estimates on Wednesday due to a gain related to a legal tax dispute, though profit met expectations when adjusted for that one-off item.
The Brazilian unit of Spain's Telefonica SA posted second-quarter net income of 3.15 billion reais ($841 million), up 261 percent from the same period a year ago and above a Reuters consensus estimate of 1.28 billion reais. Earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at 5.18 billion reais.
When adjusted for the tax issue, EBITDA came to 3.72 billion reais, up 5.8 percent year-on-year and roughly in line with the Reuters consensus estimate of 3.77 billion reais.
In a call with journalists, Chief Executive Eduardo Navarro said adjusted net income, without the tax gain, would have risen 28 percent quarter-on-quarter, resulting in net income of slightly over 1.1 billion reais, slightly off the Reuters analyst estimate.
Shares rose 1.5 percent at the open but pared gains to trade marginally in the red.
In the quarter, Telefonica Brasil continued its strategy of focusing on data and high-end broadband products, which has proven successful for Vivo, as Telefonica Brasil is branded, as well as competitors such as TIM Participacoes SA .
Revenue from fiber-to-the-home (FTTH), a type of ultra-fast broadband, rose 45 percent from a year earlier to 1.57 billion reais. Average revenue per user (ARPU) climbed 0.5 percent, reflecting a 10 percent rise for data clients that partly offset a fall of 23.5 percent in ARPU for outgoing voice clients.
The company reported a rise in expenses related to interconnection in the quarter, while investments increased 18 percent, as the company committed to 4G and FTTH expansion.
"In this quarter, we re-affirmed the strategy we laid out in March," said Navarro, referring to an investors' day in New York.
Navarro said Vivo remained focused on organic growth, but was eyeing inorganic opportunities as they appeared.
He declined to comment on the sale of telecom assets by state utility Companhia Energetica de Minas Gerais SA or by U.S.-based NII Holdings Inc, but said Vivo would take a look if debt-laden competitor Oi SA decided to divest specific assets.
The company said its results benefited from 1.83 billion reais in one-off revenue in the second quarter, mainly due to a Supreme Court ruling earlier this year, overturning a controversial accounting principle in which many firms were effectively double-taxed.
$1 = 3.74 reais Reporting by Gram Slattery; Editing by Adrian Croft and Bernadette Baum