We downgrade our recommendation for Telesp (TSP) to Underperform based on the company’s lackluster operating results in the last quarter. Telesp remains significantly challenged by the sustained erosion in its core wireline voice business due to stiff competition, which continues to weigh on the top-line and margins.
Earnings for the last quarter missed the Zacks Consensus Estimate due to lower local voice revenue and higher losses from financial operations. Moreover, revenue growth for the Pay-TV business was more than offset by the declines in fixed voice telephony and broadband Internet.
Telesp operates in a highly matured local and long-distance phone market and faces a stringent regulatory environment. We expect operating performance in the near term to be restricted by the prevailing competitive and regulatory factors.Zacks Investment Research
