TIM’s Uncertain Outlook

Earlier this week, TIM Participacoes S.A. (TSU - Analyst Report), reported positive second quarter results despite the difficult global economic environment.
 
Net revenues reached R$3,304 million (US$1,581 million), an increase of 3.7% year over year. The combined customer base (including pre-paid and post-paid) increased 34.9% year over year, reaching 37.8 million subscribers. The company’s market share was 23.7%, compared to 23.5% in the year-ago quarter. Operating expenses increased just 0.8% year over year to R$2,568 million (US$1,229 million).
 
EBITDA reached R$736 million (US$352 million) in the quarter, up 15.5% year over year. EBITDA margin during the quarter was 22.3%, compared to 20.0% a year ago. Total ARPU declined 11% year over year and reached R$26.6 (US$12.73) during the quarter. Moreover, the company reported a net loss of only R$15.2 million (US$7.3 million), from a loss of R$66.3 million in the corresponding quarter a year ago.
 
The company is going to benefit from the growth in the Brazilian mobile market, which increased 19.9% year over year and reached 159.6 million lines in June. The penetration rate reached 83.5% in the second quarter, compared to 69.5% in the same period last year. Net additions in the quarter were 5.9 million (- 19.3% year over year).
 
A more relaxed monetary policy in Brazil with a continuous decrease in interest rate and the company’s merger agreement with Docas Investimentos S.A are encouraging.
 
It is too early to be sure that results of the following quarters will be positive. TIM has been having alternating good and bad quarters, thus we are uncertain about the short-term outlook on the company, considering the difficult economic climate.