TI Plans US$3.16bn 3yr Investment in TIM Unit

Europe's fourth largest telecoms operator Telecom Italia expects to invest around 2.4bn euros (US$3.16bn) in its Brazilian mobile unit TIM, from 2007 to 2009, Telecom Italia said in a statement.

TIM Brasil, the country's second largest mobile operator, is also expected to boost revenues by over 15% in 2007 compared to 2006, and by an annual average of over 10% between 2006 and 2009, the statement said.

TI is projecting an Ebitda margin of approximately 23% for TIM Brasil in 2007 and exceeding 28% in 2009, while operating cash flow is expected to reach breakeven in 2007 and grow to represent around 15% of revenues in 2009.

TIM is likely to use the investment to increase its data revenues, essentially broadband, Thomas Abreu, telecoms analyst of US consultancy Pyramid Research, told BNamericas.

"They will target high-end customers, but also SMEs, where TIM is well positioned but could face more competition in the future," Abreu said, noting that the investment is significant.

TIM is also likely to invest in licenses to deliver fixed WiMax as well as 3G, Abreu said.

The operator reported a net loss of 302mn reais (US$142mn) in 2006, down from 989mn reais in 2005, with revenues up 23.5% at 13.9bn reais against 11.2bn reais in 2005.

LATAM STRATEGY

Telecom Italia has offloaded Latin American assets in the last few years, creating the impression that it was interested in limiting its operations in the region to Brazil.

However, in this latest statement the firm expressed interest in taking control of Telecom Argentina in 2009.

"It appeared that Telecom Italia was looking to get out [of the region], but found that it could not do so right now," Abreu said, referring to "unsolicited" bids from rival operators for TIM Brasil.

"[Telecom Italia] could not find a buyer [for TIM] at the right price, but this could change," Abreu speculated.

Nevertheless, international newspapers quoted Telecom Italia executive vice chairman Carlo Buora as saying that "TIM Brasil represents a key asset in our international growth strategy."

INTERNATIONAL STRATEGY

Overall, Telecom Italia's strategy will be to develop the group's international footprint during the next three years, the statement said.

Telecom Italia plans to make global investments of around 15bn euros during 2007-09, and to achieve organic revenue growth of 1-2% for 2007 worldwide.

Telecom Italia expects its international operations to account for around 48% of the group's client base in 2009."

Posted to the site on 14th March 2007