Tim Brasil will be the key for Telecom Itália's growth in the period between 2009 and 2011
*by Eduardo Tude and José Luis de Souza
Telecom Itália's approved in the first week of December/08 its business plan for the period from 2009 to 2011.
The main objective of the plan, which sets Italy and Brazil as key markets for the operator, is improving Telecom Itália's revenues and margins in order to decrease its net debt (35.8 billion Euros in Sep/08).
The Italian market will be the cash generator for the group, presenting EBITDA margin superior than 40%. The Brazilian market will be responsible for the revenue growth, with average taxes of 8% against 0.2% in Italy.
| Plan 2009 -2011 | Telecom Italia |
Italy |
Brazil |
| Average Growth of Net Revenue (CAGR*) 2008-2011 |
>2% |
0.2% |
~8% |
EBITDA Margin (2011) |
39% |
46% |
27.5% |
| CAPEX/revenue (2011) | 13.5% |
13.5% |
13.5% |
*CAGR: Compound Annual Growth Rate is the annual average growth tax in a specified period of time.
This plan, iactually, excludes the possibility of selling TIM Brasil (more details).
In the first 9 months of 2008, Tim Brasil answered for Telecom Italia's 17.7% of revenue and 9.8% of EBITDA. The established targets for the company in period from 2009 to 2011 are:
| Tim Brasil | 2008 E |
2009 |
Plan |
| Net Revenue | >7% |
R$ ~15.3 bi |
CAGR 2008-2011 ~8% |
| EBITDA | 23-23.5% % of revenue |
R$ ~3,6 bi |
~27.5% % of revenue 2011 |
| CAPEX | R$ ~3.7 bi |
R$ ~2.8 bi |
~13.5% % of revenue 2011 |
These targets were established in R$ for results counted according to the accounting rules IAS/IFRS (European), which presents values superior to the ones gotten using the accounting rules adopted in Brazil.
The following table presents these goals considering the Brazilian accounting rules.
| Tim Brasil | 2008 E |
2009 |
Plan |
| Net Revenue | >7% |
R$ ~14.4 bi |
CAGR 2008-2011 ~8% |
| EBITDA | 22-22.5% % of revenue |
R$ ~3.3 bi |
~27% % of revenue 2011 |
| CAPEX | R$ ~3.3 bi |
R$ ~2.3 bi |
~12% % of revenue 2011 |
The following presents comments about these goals.
Revenue
The figure below presents the projection for Tim Brasil's net revenue with the targets stablished in the plan, considering the accounting standards adopted in Europe (IFRS) and in Brazil.
Tim Brasil's revenue gotten using the IFRS reached an average, in the last 7 quarters, 6.8% bigger than the one gotten by the Brazilian accounting rules.
Tim' target for revenue growth is aggressive. The average of 8% projected for the period 2008-2011 is bigger than the 7% projected for 2008, which forecasts a good result for 4Q08.
To reach this growth, Tim Brasil establishes as target for 2011 a cellular market share of about 24% with focus in high-value client, the defense of its position as second in revenue share ranking and the recovery of leadership in brand awareness.
The company also establishes the following measures:
EBITDA
Tim aspects an EBITDA margin evolution from 23% in 2008 to 27.5% in 2011 (IFRS).
Note that in this case there are also differences according to the adopted accounting standard. Tim Brasil's EBITDA gotten while using IFRS was in average, in the last 7 quarters, 13% bigger than the one gotten through the Brazilian accounting rules. Tim Brasil's EBITDA in 2007 was 24.2% through IFRS and 23.1% with the Brazilian standard accounting.
To reach these targets, Tim Brasil set objectives to improve its financial indexes, such as the default, from 6% in 2008 to 4% in 2011, and commercial, management, employees and general costs in relation to service revenue.
CAPEX
There are also differences between both accounting rules for investments (Capex), as presented in the following image.
In 2Q08 are included R$ 1,240 from 3G licenses acquisition.
In its plan, Telecom Italia estimates a Capex of R$ 3.3 billion in 2008 (R$ 2.1 billion without 3G licenses), R$ 2.3 billion in 2009 and about R$ 2.0 billion (12% of the revenue) in 2011, according to Brazilian accounting rules.
The plan sets, as a measure, an "ambitious" plan for the implementation of 3G net focusing in cities with high population concentration.
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