Tower sale proceeds prop up TIM's bottom line

Brazilian telecom operator TIM said the proceeds of a tower sale enabled the company to report profit growth in the third quarter.

The carrier posted net income of 356mn reais (US$95mn) in the period, up 2.3% year-on-year.

Excluding the proceeds of the sale, net income would have been 172mn reais, down 50.5%, the company said.

TIM concluded on September 30 the second tranche of a tower sale to American Tower Corporation (ATC), with a net effect of 266mn reais. The first sales round took place in April.

Organic Ebitda – not taking into account the impact of the tower sale – was 1.30bn reais, down 2.7%. Reported Ebitda was 1.56bn reais, up 17.3% while Ebitda margin was 31.5%, up from 27.4%.

The company attributed the organic performance mainly to a tougher macroeconomic environment, the impact of the regulatory mobile termination rates (MTR) cut and a faster decline in voice services.

TIM said execution of its efficiency plan was on track, with opex (excluding towers sale) down 20% year-on-year. Net financial position remained at 0.46x and net debt was 2.5bn reais, stable from the previous quarter and down 27.5% annually.

Total net revenue was 4.12bn reais, down 15.2%, For the first nine months of the year, total net revenue was 13.1bn reais, down 5.1% year-on-year.

"Revenue performance remains impacted largely by the sharp MTR reduction and faster migration from voice to data services. On the positive side, data services kept growing solidly, in the double digits year-on-year, but not yet sufficient to offset the aforesaid pressure on traditional services," the company said in an earnings statement.

SEGMENTS

The Telecommunications Services segment's revenue was down 6.5% to 3.78bn reais, while Products revenue fell 58.7% to 334mn reais. With respect to the latter, the carrier said handset sales had been impacted by the macroeconomic environment, and by a forex appreciation that drove handset price up, in addition to "adjustments in handset strategy."

There were silver linings in the quarter: the firm's postpaid base grew 13% while smartphone penetration reached 63%, compared with 44.2% in 3Q14 (although data users still represent 43% of total base).

Innovative mobile net revenue (VAS revenues excluding SMS revenues) was 1.21bn reais, for 34.1% growth driven principally by higher data usage.