UPDATE 1-Telefonica Brasil sees stronger Q4 as economic outlook improves

Gabriela Mello

(Adds details, shares performance)

SAO PAULO, Nov 4 (Reuters) - Telefonica Brasil SA is likely to deliver stronger results in the fourth quarter, as Brazil's economic outlook improves and one-off effects that hit the two previous quarters will no longer be felt, its chief executive said on Monday.

"We expect the approved reforms and the upcoming ones to gradually improve consumption levels, boosting customer flow and sales," CEO Christian Gebara told journalists in an interview to discuss quarterly earnings.

Earlier on Monday, Brazil's largest wireless carrier posted a 69.6% fall in third-quarter net income compared with the same period a year ago, when it reported a non-recurring gain related to taxes.

The company, which operates under the brand Vivo, said its net profit hit 965 million reais ($242 million), well below analysts consensus estimate of 1.148 billion reais as compiled by Refinitiv.

Recurring earnings before interest, taxes, depreciation and amortization, a gauge of cash generation known as EBITDA, grew by 15.2% year-on-year to 4.54 billion reais.

Controlled by Spain's Telefonica, the Brazilian subsidiary reported a quarterly net revenue of 11.05 billion reais, up 2.6% compared to the third quarter of 2018. Meanwhile, operational expenses increased by 8.7% to 6.5 billion reais.

The carrier lifted investments by 1.6% in the third quarter to 2.43 billion reais, or 22% of its operating net revenue, with most of the resources allocated to its fiber-to-the-home (FTTH) network, as well as 4G and 4.5G coverage.

Telefonica Brasil is now seeking partnerships to speed up fiber expansion and reach more cities across Brazil, Gebara said.

The company recently struck a deal with American Towers Corp, which last year purchased the broadband network of state-run utilities firm Cia Energetica de Minas Gerais SA , known as Cemig.

As part of the agreement, which will add 40 cities and 800,000 potential customers to Vivo, American Towers will build part of the network and Telefonica Brasil will cover the last mile.

The carrier also put in place a franchise model under the brand Terra, targeting cities with up to 50,000 inhabitants. "With our own resources it would take a long time to expand FTTH, so we are very much open to partnerships," the CEO said.

Telefonica Brasil shares were up 1.4% up in early morning trading at 54.10 reais, lifting gains so far this year to more than 24%.

($1 = 3.9916 reais) (Reporting by Gabriela Mello and Anthony Boadle; Editing by Louise Heavens and Mark Potter)