What's the importance of Vivo and TIM for Telefônica and Telecom Itália?
Vivo and TIM are answering for an increasing part of the global revenue of Telefônica and Telecom Itália.
In the first semester of 2013 (1S13), Vivo was responsible for 17.2% of Telefônica's net revenue and TIM Brasil for 26.3% of Telecom Itália's revenue.
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The participation of Vivo and TIM Brasil in the Groups' global revenues increased in 1S13, despite of the fact that the positive growth in their revenues in R$ became negative when revenues are converted to Euro, due to the variation in exchange rate in the period.
Domestic operations in Europe were the main responsible for the negative growth in the global revenues registered by Telefônica (-7.8%) and Telecom Itália (-7.0%) in 1S13, in comparison with 1S12.
In this period, Telefônica's revenue in Spain had reduction of 15.1% and Telecom Itália, in Italy dropped 10.4% (1S13 in comparison with 1S12). The impact was bigger at Telecom Itália where domestic market represents 58.9% of the group's revenue.
Besides the European crisis, these operators are suffering strong competition inside their domestic markets and pressure of regulatory agencies to reduce prices for the use of their networks for other carriers. It's becoming more difficult to keep the margins they are used to have inside domestic markets, where they are getting the best performances.
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Note:Telefônica reports OIBDA margin.
There's a strong pressure of the European community for the unification of European telecom market what can drive to a rearrangement in the board of European main operators.
Telefônica has the best position inside this board in comparison with Telecom Itália. Besides the operations in Spain, the company operates in other European countries (O2) and has participaton in the groups that controls Telecom Itália. Telefônica is also trying to acquire E-plus what would drive the operator to the leadership in mobile telephony inside Germany. Even though, it's important to remember its big debt (49.8 billion Euros).
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Telecom Itália plans a "spin-off" of its fixed network in order to answer to pressures of the Italian Regulatory Agency (AgCom) that is imposing a strong reduction in the values charged by Telecom Itália for the use of its fixed network by other operators.
It's also believed that inside the Italian mobile market the best way is the consolidation, as example of what happened in the United Kingdom, because there's no room for four mobile operators holding their own infrastructure. The carrier recently analyzed a possible fusion with H3G.
Having this European scenario, the last thing that these groups would want to make would be dissolve their operations in Brazil. We can't expect, however, that the necessary investments for the growth of Brazilian market come from the headquarters. Those will have to come from Brazil.
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