Tim Hellas - Seasonality Continues As Weather Moves In
With the mobile community's focus on Vodafone's multi-billion dollar acquisition of Hutch in India, which was confirmed on Sunday 11th February, it might have been easy to miss the news a few days earlier that Weather Investments - the vehicle of Orascom's owners the Sawiris family, which also owns Wind in Italy - had agreed to acquire Greek operator TIM Hellas from the private equity funds Apax Partners and Texas Pacific Group (TPG) which purchased it in June 2005 from Telecom Italia.
Weather paid a total of €3.4bn for TIM Hellas, with €2.9bn of this accounted for by net debt, making Apax and TPG a tidy €1.7bn in the process for their 20 month involvement. Of course with TIM Hellas comes its wholly owned subsidiary Q-Telecom, the smallest of the Greek operators, which TIM's private equity owners purchased in January 2006 for €350m. Together, the two operators had 3.9m customers at the end of 2006, giving them an aggregate market share of around 28% - this figure to be confirmed when market leader Cosmote releases figures on 22nd February.
At first glance, it is worrying that TIM's fourth quarter figures show a drop in ARPU of four euros in just one quarter from €31.60 per month in the three months to September to €27.60 in the three months to December. What is more, EBITDA took an even greater plunge, from €92m to €65m, implying a drop in the margin from 35.7% to 26.4% between the September and December quarters. The trend is of greater concern since the story was repeated at Q-Telecom, with ARPU off 7.5%, revenues off 6%, and EBITDA down a massive 32%, quarter on quarter.
However, looking at a longer time frame, TIM Hellas also suffered similar down-turns of approximately €4 in the final quarters of both 2004 and 2005, losing more ground in the following three months, only to recover some of these losses again between March and September. Enquiring deeper, we note that since Vodafone began publishing its ARPUs on a quarterly average basis (rather than the traditional, rather obfuscatory, rolling average basis) they too have shown a very similar pattern.
The answer is, of course, the contribution of visitor roaming traffic to overall revenues. These exibit a crescendo as the tourist season begins in Greece in the second quarter of the year, to a peak in the peak-season third quarter, before fading in the fourth quarter and crashing to almost nothing in the first quarter of each year. This seasonality in the Greek market will not unduly concern Weather, which will be used to such matters from other markets such as Egypt, Tunisia and Italy which are all subject to similar influences.
The important point to make is that the underlying dynamics are good. Quarterly revenue has been up in a year on year comparison in every quarter since Q1 2005. And, what is more, on an annual basis both sales and EBITDA were up, by 11.3% and 27.6% respectively at TIM - implying an improvement in the margin from 27.2% to 31.2% between 2005 and 2006.
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Posted to the site on 22nd February 2007