Analyst Note| Michael Hodel, CFA |
TIM’s fourth-quarter results were the mirror image of rival America Movil’s in some ways. TIM’s wireless net customer additions during the period were modest: 274,000 in total, including 93,000 postpaid. Movil’s Claro added 3.1 million, with nearly 2 million of those postpaid. However, TIM continues to exercise pricing discipline. Average revenue per customer increased nearly 8% year over year to BRL 27 per month at TIM versus only about 3% (adjusted for the Nextel acquisition, by our calculation) to BRL 24 at Claro. TIM’s results are even more impressive considering its customer base slants more heavily toward the prepaid market than Claro. Still, we continue to believe TIM operates at a disadvantage to Movil and Telefonica Brasil, which both have extensive fixed-line businesses. We don’t expect to materially change our $15 per-ADR fair value estimate and we view the ADRs as modestly undervalued.