Bloomberg News

Tim CEO Says Voting Rights Plan to Make Acquisitions Easier (1)

May 06, 2011

Tim Participacoes SA, Brazil’s third- biggest wireless carrier, will find it easier to acquire companies after extending voting rights to all shareholders, Chief Executive Officer Luca Luciani said.

The plan to exchange 0.8406 voting shares for each nonvoting share makes Tim’s stock more liquid in Brazil and the U.S., Luciani said today in a phone interview. That gives the Rio de Janeiro-based company, controlled by Telecom Italia SpA (TIT), more flexibility to use shares in transactions, he said.

Tim is on the lookout for network infrastructure such as the nationwide fiber-optic network it acquired in 2009 by buying Intelig Telecomunicacoes Ltda., said Luciani, 43. Tim issued new stock and assumed debt as part of that takeover.

“The same potential deal could be much more efficient now with shares of higher liquidity that have been re-rated,” Luciani said. “In Brazil, there are many opportunities in the infrastructure area.”

Tim’s nonvoting shares rose 54 centavos, or 7.8 percent, to 7.48 reais in Sao Paulo trading at 4:10 p.m. New York time, the biggest increase since December 2008. The voting shares rose 59 centavos, or 7.2 percent, to 8.78 reais.

The change in shareholder rights is part of Tim’s move to join the Sao Paulo stock exchange’s Novo Mercado, which requires all shares to have voting rights as part of its stricter disclosure requirements.

Transparency Increased

“We see this development as very positive,” Andre Baggio, a Sao Paulo-based analyst at JPMorgan Chase & Co., wrote in a note to clients yesterday. The plan will increase liquidity and transparency, he said.

The company, which trails Vivo Participacoes SA and America Movil SAB (AMXL) in Brazilian wireless subscribers, has gained market share in the past year by offering plans with unlimited calling to other Tim subscribers and to fixed lines. Tim held 25.1 percent of the market at the end of March, up from 23.7 percent a year earlier, according to Anatel, Brazil’s telecommunications regulator. Vivo had 29.5 percent and America Movil had 25.4 percent.

Brazil’s wireless market growth has accelerated in each of the seven months ending in March, when it was up 17.5 percent to 210.5 million total subscribers, according to Anatel. The pace of growth will probably continue to speed up this year as competition makes service more affordable and more customers sign up for Internet plans, Luciani said.

‘Room for Growth’

“Competition is quite high, that will mean SIM penetration can accelerate,” Luciani said, referring to the removable SIM cards used to connect phone handsets to networks. “There’s a lot of room for growth in Brazil, not only in voice but in data.”

Data services such as Internet access will make up about 20 percent of Tim’s revenue by the end of this year, up from 14 percent last quarter, Luciani said. Voice service will continue to grow as customers use their mobile phones instead of land lines, he said.

While Vivo, controlled by Telefonica SA (TEF), and America Movil are both combining their fixed-line and wireless businesses, Tim prefers to remain a wireless-only competitor, Luciani said.

“It is a big advantage,” he said. “We can focus all our investments in mobile technologies that are much more efficient so that we can offer a higher return on invested capital to the shareholders. Mobile infrastructure in Brazil is an advantage.”

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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