Small shareholders in Telecom Italia have called for the company to consider a merger of its Brazilian holdings with potential suitor Oi, rather than a full sale of the business, according to Reuters.

The Brazilian unit, TIM Participacoes, is widely expected to be involved in anticipated consolidation in the country, with fixed-line oriented player Oi seen as a natural suitor. But reports last week suggested that Oi may work with America Movil and Telefonica to jointly buy, and then carve up, TIM – speculation that Oi has played down.

Shareholder group Asati, which represents 6,000 small investors with a combined 1 per cent stake in Telecom Italia, also warned on the danger of undervaluing TIM.

This week TIM released third-quarter results which showed a 10.6 per cent increase in net profit to BRL348.3 million ($139.4 million), on revenue of BRL7.2 billion, down 4.1 per cent.

Mobile revenue decreased by 3.4 per cent to BRL5.8 billion.

The company noted issues such as the continued effect of mobile termination rate reductions and a decline in SMS “observed for the industry as a whole”. It said that “business generated” performance – data and outgoing voice usage – grew by 2.1 per cent year-on-year.

And it’s assessment of the Brazilian mobile market also indicates why rivals may be looking to reduce competition through consolidation. Reduced subscriber growth was attributed to “already high penetrated market, people using multiple SIM-cards and, a less dynamic economic environment”.

However, there is still growth potential from M2M and through migrating prepaid users to contracts – the market is dominated by prepaid subscribers.