IHS Global Insight Perspective | |
Significance | Telecom Italia has again raised its stake in the Argentine company. |
Implications | Telecom Argentina had a robust 2010 and is well-positioned to benefit from growth in mobile data in 2011 and beyond. |
Outlook | On a pro-forma basis, Argentina accounts for nearly 10% of Telecom Italia's revenues and this will grow throughout 2011. |
Telecom Italia has raised its stake in Telecom Argentina from 18.3% to 21.1%. The Italian incumbent paid its Argentine partner, Werthein, some USD145 million for an additional 10% stake in Sofora Telecomunicaciones. Telecom Italia’s fully-owned subsidiary, Telecom Italia International, now has a 68% stake in Sofora Telecomunicaciones, which controls Nortel Inversora, itself owning a 54.74% stake in Telecom Argentina. The acquisitions follows a deal last year between Telecom Italia and Werthein under which the former raised its stake in Telecom from 16.2% to 18.3% (see Argentina: 18 August 2010: Grupo Werthein and Telecom Italia Confirm Details of Agreement in Argentina).
The Italian incumbent booked EUR798 million (USD1.1 billion) of revenues and EUR245 million of earnings before interest, tax, depreciation and amortisation (EBITDA) from its investment in Telecom Argentina in 2010. On a pro-forma basis, accounting for the 18.3% stake from the start of the year, revenues and EBITDA were EUR2.82 billion and EUR924 million respectively. On the same pro-forma basis, Argentina accounted for 9.5% and 7.6% of the Italian incumbent’s revenues and EBITDA respectively.
Outlook and Implications
- Telecom Argentina's Strong Performance: Telecom Argentina reported a strong fourth quarter an full-year 2010 (see Argentina: 23 February 2011: Telecom Argentina Sees Strong Broadband and Wireless Growth in Q4). The highlight was a 24% increase in mobile service revenues, driven by a 46% increase in value-added services over the year. This growth, allied with a healthy pre-paid/post-paid split of 30:70 and growing 3G penetration, has pushed up ARPU over the year. Telecom Argentina is one of the few operators in the region to report stable fixed lines in service and revenues, and it is also seeing continuing growth in its fixed-broadband base and fixed-broadband ARPU. Broadband and data operations accounted for 37% of revenues in 2010, up from 26% in 2008.
- Opportunities and Challenges Ahead: One of Telecom Argentina’s major frustrations is that it is prevented from offering pay-TV services. It also faces the prospect of mobile number portability, the implementation of which will incur costs and, depending on how its competitors respond, could lead to higher churn rates and market share loss. In time Argentina is likely to allow telcos to enter the pay-TV market. The country is also likely to see more spectrum, particularly in the 850-MHz, 1.9-GHz and 1.7-2.1-GHz (AWS) ranges, to allow Telecom Argentina and its competitors to roll out mobile broadband further. The operator sees this as a major opportunity in the mobile segment rather than the addition of new customers and expects ARPU to reach 50 Argentine pesos (USD12.4) in 2011. It expects to raise capex from ARS2.6 billion in 2010 to ARS3.2 billion in 2011, driven among other things by IP backhaul deployment, fixed-broadband upgrades, and content delivery deployment.