SAO PAULO–Telefonica Brasil SA’s (VIV, VIVT4.BR) first-quarter net profit dropped 18.4% on the year, due to the rise in its debt-service and operational costs, it said Thursday.

The company, which is controlled by Spain’s Telefonica SA (TEF, TEF.MC), posted a net profit of 660.8 million Brazilian reais ($296 million), down from BRL810.2 million in the year-ago period.

Telefonica’s debt-service costs totaled BRL626 million in the first quarter, almost double compared with BRL381 million in the year-ago period. The company’s debt-service costs increased, among other reasons, because of the interest rate increase in Brazil.

Operational costs increased 4.2% to BRL6.04 billion.

In the meantime, net revenue totaled BRL8.61 billion in the first quarter, up just 0.7% from BRL8.55 billion a year ago.

Revenue from mobile-phone services increased 3.3% to BRL5.4 billion, while revenue from fixed lines fell 2.3% to BRL2.85 billion.

Earnings before interest, taxes, depreciation and amortization decreased to BRL2.56 billion from BRL2.75 billion. Ebitda margin fell to 29.8% from 32.1%.

It had 93.85 million customers at the end of the quarter, compared with 90.85 million in the year-ago period.

Telefonica Brasil is the largest mobile-phone company by market share, according to telecommunications regulator Anatel.