Will Telecom Italia sell Tim Brasil?
Portugal Telecom's process of leaving Vivo, and entering at Oi, increased the speculations about the possibility of Tim Brasil's sale. This is a comment which pops up repeatedly in the Brazilian and international press.
There are candidates for this acquisition. Brazil is the 5th cellular market of the world and is expanding. Vodafone was pointed out as one of the candidates.
Teleco estimates that Telecom Italia could receive about € 7 billion in this process. This money could be used in reducing Telecom Italia's net debt of € 33.9 billion, which is 3.1 times bigger than its annual EBITDA.
Telecom Italia's results |
||||
| Billion Euros |
2006 |
2007 |
2008 |
2009 |
| Net Revenue | 31.3 |
31.0 |
29.0 |
27.2 |
| EBITDA | 12.9 |
11.7 |
11.1 |
11.1 |
| EBITDA Margin | 41.1% |
37.6% |
38.2% |
40.9% |
| Net Profit | 3.0 |
2.4 |
2.2 |
1.6 |
| Net Debt | 37.3 |
35.7 |
34.5 |
33.9 |
To face debts, between 2004 and 2006, Telecom Italia sold its operations in Chile, Peru and Venezuela. In the following years the company also sold other international equities, the last of them was Hansenet (German broadband operator), sold to Telefonica in 2009. Telecom Italia kept Tim Brasil and a stake at Telecom Argentina.
The problem is that Telecom Italia in Italy (Fixed and Mobile) is dipping and Tim Brasil is the bet for operator's growth.
Tim Brasil has 44.4 million mobile accesses and presented growth of 17.4% in its base over the last 12 months. On the other hand, Telecom Italia has in its domestic market 30.5 million mobile accesses and suffered a reduction of 6.4% over the last 12 months.
In 2009, Tim Brasil realigned its strategy. The company is growing and contributing for Telecom Itália's result, reaching 15.2% of the Group's EBITDA in 2Q10.
| R$ Milions | 1Q09 |
2Q09 |
3Q09 |
4Q09 |
1Q10 |
2Q10 |
| Net Revenue | 3,174 |
3,486 |
3,440 |
3,542 |
3,269 |
3,531 |
| EBITDA | 618 |
764 |
772 |
982 |
810 |
887 |
EBITDA Margin (%) |
19.5% |
21.9% |
22.5% |
27.7% |
24.8% |
25.1% |
Net Profit (Loss) |
(165) |
313 |
195 |
349 |
30 |
101 |
| Net Debt | 3,473 |
2,900 |
2,544 |
1,684 |
2,557 |
2,520 |
| Investment | 194 |
423 |
536 |
996 |
576 |
436 |
With the integration of fixed and mobile operations promoted by Telefonica/Vivo and Claro/Embratel, Tim Brasil will face heavier competition in offering mobile broadband from 2011 on. The company is, however, in a good position in voice market. According its president, Luca Luciani, "voice service is the big deal in the sector, but in mobile telephony, and it will continue to be for the next 5 years" (Jornal Valor Econômico).
By Tim Brasil's sale, Telecom Italia would become a smaller company and its operations would be restricted to the Italian market. The process could be justified by Telecom Italia's decision to accelerate investments in fiber network (FTTH) and NGN in Italy, in order to defend its position inside this market.
Changing Telecom Italia's border may also implicate in Tim Brasil sale.
In 2007, Pirelli sold Olímpia, Telecom Italia's controller, for € 41.1 billion to a consortium (Telco) which is composed by: Telefonica (42.3%) and other Italian groups. Telco increased its stake at Telecom Italia to 24.5% in 2008.
When Telefonica took over Vivo, the company was inquired by Italian partners about its stake at Telco. The resources obtained from Tim Brasil's sale could be used to purchase Telefonica's stake at Telecom Italia.
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