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TIM Participacoes - Rapid Growth in Brazil... But Losing Market Share
Published on: 5th March 2009
TIM Participações was the first mobile operator to achieve nationwide GSM coverage in Brazil and this helped drive its market share and its profitability for several quarters. Over the last couple of years, other operators have caught up and the effects on TIM are clear. The latest results show revenue growth of just 5% year on year (to R$18.25bn). When combined with cost growth of 6% and a 33% rise in finance charges, the result is a 51% drop in profit before tax, from R$235.1m to R$115.9m. In fact, as the Q4 profit amounted to R$167.4m, it is clear that substantial losses have been recorded in prior quarters.
TIM's presentation to investors - the most important of which is Telecom Italia, with a 69.85% stake - reflects on the loss of market share and pricing pressure the company has experienced over the recent past. TIM accounted for 25.9% of all connections in Q1 08 and 26.5% of all new connections, but successive quarters have seen this latter number drop to17.4%, 18.3% and most recently, 12.1%, such that the company's overall share now stands at just 24.2%. In absolute numbers, that equates to 36.4m, against 31.3m one year earlier. The quality of the base has also deteriorated - the prepaid base has risen by 5.35m, while the contract base has dropped by 0.2m to just 6.57m, not much more than 18% of the total, compared to nearly 22% one year earlier. Inevitably, churn has been a problem - up from 8.5% to 9.8% year on year.
This, together with competitive pressure, has hit ARPUs. TIM doesn't break out the difference in spend, but typically, contract customers in Brazil spend between four to six times as much as prepaid. The blended number has dropped from R$34.5 to R$29.9, reflecting a drop in minutes of use from 106 to 86. As this figure is R$0.2 above the Q3 figure, TIM has suggested that this is a "reversal of ARPU dilution". One quarter is a little too little evidence for our tastes, but let's hope they're right. One of the elements here which is helping offset the drop in price per minute is the growing use of data, which has helped offset a decline in voice pricing, as the chart indicates. Data, or rather, non-voice revenue now accounts for 10.8% of service revenue, up from just 9.0% one year earlier.
Tags: [arpu] [rsa] [tim] [churn] [Brazil]
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