Spotlight: What TIM has on the radar for Brazil

Brazilian telecom operator TIM is preparing for a new phase of its operations.

It will focus more on revenue diversification principally through IoT, B2B and new advertising streams, CEO Pietro Labriola (pictured) said Wednesday in an earnings call.

The company is also readying for next year a broad digitization and automation internal project involving artificial intelligence (AI) in areas with a people-intensive workforce. 

“We think we can improve even further in this regard, so next quarter we should detail a project called megaspin to increase our digitization capacity,” said CTO Leonardo Capdeville in the call.

Implementations for customer experience in Brazil are expected for September and October, according to Capdeville.

Last year, TIM’s parent Telecom Italia announced a contract with Microsoft to use AI to improve customer experience and make internal processes more efficient. The agreement encompasses operations in Italy and Brazil. 

Finally, TIM expects to use its recently brokered infrastructure sharing with Vivo to save key investment resources and this way strengthen its cash position for an eventual consolidation movement.

TIM lost to Claro a dispute for Nextel but Oi is mulling divestment options and selling its mobile business remains an option.

“The second half could bring many surprises in this sense,” regulatory director Mario Girasole said.

TIM Brasil’s 2019-21 Industrial Plan includes savings of up to 1.2 bn reais (US$320mn).

In the national economy, TIM sees the country’s pension reform as key to unlock a positive economic agenda and the new proposal for tax reform evolving in congress as extremely important.

For consumption, the telco sees the withdrawal of 42bn reais estimated for this year from the state employee indemnity guarantee fund (FGTS) as giving a necessary short-term boost to declining GDP growth expectations. 

CONNECTED CARS

TIM also wants to accelerate investments in its fiber residential offer TIM Live in large cities, develop new verticals (IoT, M2M) and deploy fixed-wireless access (FWA) so it can provide ultra-broadband through 5G in the future.

Connected cars provide an upselling opportunity for value-added services under development.

Hence, TIM is reportedly creating car apps with a partner and supposedly is working on agreements with car manufacturers for connected sensors to monitor, protect, and maintain the car.

The company has also completed the integration of the customer base of Conecta, an MVNO that used to be managed by insurance company Porto Seguro, one of the largest car insurers in Brazil.

With that, TIM got access to an M2M customer base comprised principally of vehicle/fleet tracking and financial services (POS) machines.

5G

For 5G, TIM expects to have 37 active datacenters for edge computing by 2021.

The company also tested 5G in three different locations with three different suppliers.

5G tests in a real network in the 3.5GHz frequency saw registered download speeds greater than FTTH (>1Gbps), with more efficient capacity distribution between users.

COMPETITION

Looking to competition, aggressive price wars seem to be over and more rationality is expected in the mobile competitive environment, according to CEO Labriola.

“I see Vivo and Claro more rational on price, but Nextel and Oi need some control. Mostly Nextel is way below the line and there is a bit of irrationality on Oi's side too. I don't think this will be sustainable in the short to medium term,” he said.

LICENSE RENEWALS

According to regulatory director Girasole, operators should be demanded to invest in areas with low coverage rather than paying large sums of money as a requirement for renewal of licenses.

TIM expects that the payment for the renewal of the spectrum licenses in Brazil, many of which expire at the end of 2020, is in the form of investments in the telecommunications network.

"It should not be cash-out, but rather resources being allocated to areas with poor coverage," he said.

The PLC 79 bill that changes the telecommunications framework in Brazil and which is currently stalled in congress addresses the topic by proposing a payment-for-investment model for the renewals.

About 5G capex, TIM believes it is too early to have a perspective, adding that the 2020 tender terms need to be available before making any decision, but ideally excessive cash-outs with 5G should be avoided in the beginning.

RESULTS

TIM posted 4.2bn reais net revenues in the quarter, an increase of 2.4% year-over-year. 

Mobile ARPU grew by 5.8%, pushing mobile revenues by 1.9%, reaching 3.83bn reais.

Postpaid lines and postpaid revenues grew and represent now 40% and 66% of the total, respectively. 

Even so, Labriola believes prepaid will not disappear in Brazil. Projections are that postpaid will become the majority of lines in service in the next months.

TIM Live grew 30.6%, driving fixed service revenues up by 11.3% to 230mn reais.

FTTH coverage reached over 1,560 households in 17 cities as the company invested 945mn reais overall in the quarter, down 3.7%.

Full results can be seen here.