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TIM Brasil Subscriber Numbers Fall – For the First Time Ever
Depending upon your point of view, Q1 09 could be either the quarter in which TIM began to reverse the relative declines of recent years, or a further lurch downwards. The company lost customers in the quarter, ending with a base of 36.1m, against 36.4m at the end of Q4 08, but up on the 32.5m of one year earlier. This, for the record, is the first time the company has seen a reduction in the size of its base. TIM says in its Q1 report that the number was struck after disconnecting about one million inactive customers, implying a like for like gain of about 700k. It also tells us that it took 29% of March's new connections which in turn, implies a figure of about 380k in that month alone.
This is fine, as far as it goes, but such adjustments rarely come without a cost. ARPUs – at R$26.0 in the quarter – were already well down on the R$29.9 seen one year earlier. For a better comparison of the trend, we ought to add back the million and this gives us an even lower number – about R$24.80, or about 17% down. That coheres with the minutes of use numbers, which have fallen by 19% Q on Q to 70 per month (from 86). This is twice the decline Vivo reported (85 down to 77) and with the lower base, it implies a drop of about 20% in total network minutes. Cross-checking this against the "Network and Interconnection" line in the cost analysis, we note that this charge dropped by less than 6%, this elegantly highlighting the malign effects of a partly (largely?) fixed cost base at a time of downturn.
The answer to our initial question isn't to be found in these numbers and maybe not in the next quarter's either. TIM has been investing heavily in both the continuing roll out of GSM and its new 3G network and this ought to pay dividends in due course. However, it does appear to have lost the momentum that made it the main challenger to Vivo; that role has now passed to America Movil. The chart shows a fairly unequivocal picture as the company's growth rate slows and then stops. Telefonica took its controlling stake in TIM's parent company at the end of Q2 07 and it must be wondering whether this was a wise move.
Posted to the site on 17th May 2009
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