Brazilian telecom company TIM SA is secretly plotting a strategic turnaround in its fibre plans and is intending to buy back a 51% of its share in its I Systems fibre business to IHS Towers at a price around 900 million of Brazilian reais (about $170 million).
This would give TIM Brasil complete control over a network that already serves 9.3 million households in 41 municipalities, which would enhance its supremacy in the Brazilian broadband market that has been on a steady growth path.
From sale to buyback
One recent example of carriers selling tower and fibre assets to create capital and redistribute infrastructure costs involved a sale of a 51% mid stake in what was at the time known as FiberCo to IHS Tower, by TIM, in 2021. The entity then rebranded as the open-access fibre arm to TIM and other operators on a long-term master services agreement.
Why does TIM want it back?
After that divestiture, the IHS Tower and other neutral fibre players in Brazil have found it hard to find enough third-party tenants to support a stand-alone fibre business on a large scale. Having TIM as an anchor tenant, I System will continue to be far too reliant on a single client, thus sabotaging the very purpose of having a separate fibre platform.
The economics of neutral fibre in Brazil has been more cumbersome than expected as noted by a Latin America telecommunications infrastructure analyst.
In the case of TIM, complete implementation of the I systems into the corporate organization enhances the level of alignment of the deployment of the networks and service delivery.
Future outlook
The negotiation itself would resemble the move Vivo made in 2020 to regain complete ownership of FiBrasil, or a larger re-shuffling in the Brazilian telecommunications market that saw operators ceasing to use the asset-light goals of their holdings and instead owning fibre infrastructure, critical infrastructure.
In the case of TIM, it implies greater control of the quality of the network and speed of rollout- but also increased capex and implementation risk.
Given the current market environment with static broadband penetration and a competitive outlook that is becoming fiercer, owning I Systems might be a decisive point to keep market share levels stable and support higher margin fibre bundles in the years to come.