TIM Brasil

TIM Brasil
Company’s Presentation
November, 2014
AGENDA
 Macro & Industry Overview.......5
 Recent Results……………..…………..11
 Network Evolution…………………...18
 Regulatory Update…………………..23
 Fixed Business…………………….…...26
 Business Outlook…………….….…..29
 Historical Data & Others…….……33
Visit our website and IR app:
www.tim.com.br/ir
TIM IR app
(English)
TIM RI app
(Portuguese)
KNOWING TIM BETTER
GROWTH STRUCTURE
Gross Revenues
(R$ Bln)
25
TIM: A Huge Brazilian Company
EBITDA
(R$ Bln)
Customer base
EoP (Million)
30
28
4,7
70
5,2
5,0
 Presence in Brazil since 1998.
73
64
 16th largest Private Company in Brazil (source: Exame
Magazine - 2013).
 Approximately R$32 billion of Market Capitalization.
2011
2012
2013
2011
Growth
Via
Acquisition
2012
2013
15,000 km fiber
optical backbone
2011
2012
2013
5,500 km fiber
optical backhauling
Sales
CORPORATE GOVERNANCE
Requirement of Highest level of
Corporate
protection for
Demand for
Governance
minority
transparency and shareholders
Legal
disclosures
Requirements
Network
Brazilian
Law
“Nível” 1
“Nível” 2
Unique Telco company listed on the Novo Mercado
 100% Tag Along
 Statutory Audit Committee:
 Equal dividends rights
•
Report to Board of Directors
 One single class of shares
•
Oversight Financial reporting
 Strict disclosure policy
•
Analyze anonymous complaints
Social
&
Economic

74.7 million customers (27% Share)

The 2nd Player - Market and rev. share

More than 465,000 points of sales

More than 166 own stores

15 Customer Care Centers (16k attendants)

~13,500 Antennas

3,432 cities covered

95% of urban pop. covered

51,700 km of optical fiber network

~12,520 employees

23,000 indirect jobs

R$10.4 billion in taxes payments in 2013

R$3.9 billion invested in 2013
KNOWING TIM
3
Macro & Industry Overview
MACRO SCENARIO OUTLOOK (1/2)
GDP Forecast
Inflation Forecast
(% YoY Growth)
(IPCA: 12 months)
Market Consensus
Government projection
Market Consensus
Government projection
• Market consensus shows a
softer growth in GDP.
4.0
3.0
2.3
5.9
6.3
6.3
2.3
4.5
1.2
0.7
5.9
Government’s
Target
0.3
2013a
2014e
2015e
2016e
2013a
2014e
2016e
FX Rate Forecast
Interest Rate Forecast
(R$/U$ - year average)
(% Selic Target p.y. – year average)
2.4
11.0
2015e
11.5
12.3
2.2
2016e
2013a
2.5
2.4
10.0
2013a
2014e
Source: BaCen/Bloomberg
2015e
2014e
2015e
• Consensus
expects
a
deterioration in overall
macroeconomic scenario on
the medium term.
• Market expects that the
government is unlikely
pushing inflation towards
the center of the target.
• With inflation and FX Rate
going up, SELIC is expected
to grow, specially after the
recent decision to rise the
rate to 11.25% p.y.
2016e
MACRO & INDUSTRY OVERVIEW
5
MACRO SCENARIO OUTLOOK (2/2)
Unemployment
Formal Jobs Creation*
(%)
(In Thousand)
303
189
6.1
6.0
237
5.6
5.4
5.4
4.9
5.0
-307
3Q11 3Q12 3Q13 3Q14 2014e 2015e 2016e
4Q13
1Q14
2Q14
*Number of job positions with the complete registration
of the employee
Families on Default
Indebted Households*
(% of total)
(% of total)
61.6
58.9
61.4
63.2
3Q12
3Q13
3Q14
* Families that declared to have debts on the categories of:
credit card, stores bills, personal loans, car loans and insurance
and postdated check
Source: Banco Central/Bloomberg
• Even with a high number of
indebted families, families
in default figure has been
decreasing, probably guided
by the constant reduction of
unemployment and real
income gains, specially on
classes C and D.
24.3
19.1
3Q11
3Q14
• Market
expects
the
unemployment rate to
increase in 2015, as jobs
creation remains low.
3Q11
3Q12
20.6
3Q13
19.1
3Q14
* Families that declared to have debts overdue for more than three
months
MACRO & INDUSTRY OVERVIEW
6
BRAZILIAN TELCOS X-RAY
TIM
Vivo
Fixed / Mobile
Fixed BB
Customers 2Q14 (000´s)
Mobile
74.203
Fixed
665
Fixed BB
121
Pay-TV
n.d.
Market share 2Q14
26,9%
1,5%
0,5%
n.d.
---
286
-
19
n.d.
305
Net Adds 2Q14 (000´s)
Net Adds 12M (000´s)
2.008
31
61
n.d.
2.100
Net Revs FY13 (R$ Mln)
19.264
19.921
Net Adds 2Q14 (000´s)
657
Group
74.989
Claro
Fixed / Mobile
Fixed voice & BB / TV
Mobile
Customers 2Q14 (000´s)
Mobile
79.357
Fixed
11.035
Fixed BB
4.370
Pay-TV
688
Market share 2Q14
28,8%
24,1%
18,8%
3,6%
---
892
333
36
43
1.305
Net Adds 12M (000´s)
3.158
619
345
175
Net Revs FY13 (R$ Mln)
23.002
Customers 2Q14 (000´s)
Mobile
68.776
Fixed
11.289
Fixed BB
7.045
Pay-TV
10.106
Group
97.216
Market share 2Q14
24,9%
24,7%
30,3%
53,3%
---
Mobile
Customers 2Q14 (000´s)
Mobile
51.081
Fixed
17.023
Fixed BB
6.567
Pay-TV
887
Market share 2Q14
37,2%
28,3%
4,7%
---
502
-240
3
58
304
-1.307
17
- 16
48
Net Adds 2Q14 (000´s)
27
189
220
230
667
Net Adds 12M (000´s)
2.303
1.133
905
1.121
5.462
Net Adds 12M (000´s)
1.373
Net Revs FY13 (R$ Mln)
12.773
33.197
Net Revs FY13 (R$ Mln)
9.290
The mobile segment represents
75% of the industry access growth
Group
75.558
18,5%
Net Adds 2Q14 (000´s)
20.424
4.296
34.722
Oi
Fixed
Fixec BB/ TV
Source: Anatel and Players balance sheet
11.720
Group
95.450
19,132
28.422
TIM represents 30% of the industry mobile
revenue* while has 27% of the market share
*Mobile revenue considers only the 4 major players
7
MARKET STRUCTURE CHANGING TOWARDS
DATA USAGE
…with room to grow
Re-visiting Market Structure...
1
Households with internet connection (%)
Purchase Power
Salaries up to R$1.2k
81 mln
Salaries up to R$3.1k
106 mln
2
62.8 mi
53% of pop.
70% of pop.
Households Profile
With Telephone
57 mln
Only mobile phone
32 mln
Mobile and fixed phone
23 mln
Fixed phone only
Does NOT
Possess
Internet
connection
56%
35.2 mi
43% of total active connections have
speed below 2Mbs
51%
37%
3 Average Cost
Fixed: Voice and Broadband
83 mi
Entry level plan
4
43%
27.0 mi
91%
2 mln 3%
Mobile: Voice and Data
PTIM’s entry level plan
Possess
Internet
connection
38%
High cost
~R$100
~R$40
Access Growth
Reasons for not having Internet:
12%
Lack of coverage
Total
Households
122.6 Mobile
(users in mln)
Market Data Revenues Growth 2016 vs. 2012:
+ 5.2X
23.2 Fixed
2009
2010
2011
2012
2013

> 13 bln Reais on Mobile (+100%)

> 7 bln Reais on Fixed (+35%)
Jul/14
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
MACRO & INDUSTRY OVERVIEW
8
BRAZILIAN INTERNET USAGE BOOM
Widespread use of Social Media
Internet Penetration in South America
(Social Network Users in Brazil 2011-2017)
(Internet users per 100 inhabitants)
66%
60%
59%
83 mln Internet users –
Brazil is the 5th largest
nation in the world of
internet users
56%
46%
Arg
Col
Chi
Uru
Bra
44%
Ecu
41%
Vem
37%
Per
110.0
104.2
88.3
32%
Guy
32%
Sur
30%
Bol
78.3
24%
Par
66.2
56.1
2011
2012
2013
2014
2015
2016
2017
Strong adoption of Instant Messaging
(E-commerce revenues in Bln US$)
(WhatApp mln users)
465 mln
worldwide users
17.0
8.4
2012
France
Russia
Argentina
Amazon lauched
operations in Brazil
in Dec/12
11.0
2011
2nd largest
market
outside US
97.8
High Penetration of E-commerce
2010
#2 in Twitter
users (41mln)
only after US
#2 in Facebook
active users
(76mln) only
after US
UK
Spain
28% of mobile
users in Brazil use
Instant Messaging
apps
Germany
Mexico
Brazil
3
List of selected
countries as of
Feb/14
11
13
17
25
31
32
38
India
40
Source: SocialBakers, e-Marketer, Semiocast, G1.com, Folha de São Paulo
MACRO & INDUSTRY OVERVIEW
9
DATA GROWTH IS THE NEW CHALLENGE
...was similar to the challenge
in data growth now
Challenge in voice growth in 2009…
High Growth
Handset Sales Share
Mobile Penetration
(% over population)
64%
53%
90%
79%
PCs, Notebooks,
Feature Phones
Smartphone
52%
Tablet
12%
11%
2006
2007
2008
4%
2009
2011
2014
Source: Anatel and IBGE
Source: IDC
“Fear” to use
Data Penetration
MOU in 2008
(% of data over total revenues in 3Q13)
(minutes)
248
212
56%
166
162
140
139
91
48%
42%
34%
27%
27%
23%
Source: Global Matrix
Low Usage
Goal: increase voice usage
• Incoming calls
only device
Challenge: deliver the best
experience in mobile internet
• Still a lot of phones
without data access
• Wi-Fi only devices
MACRO & INDUSTRY OVERVIEW
10
Recent Results
Financial Highlights
1
3rd QUARTER IN FEW: RESULTS OVERVIEW
Business generated revenues
at a good pace
3Q13
EBITDA at a solid performance
3Q13
3Q14
8.8%
Net Income
+11%
Net Income
totaled
R$348 mln
in Q3
3Q14
3Q13
3Q14
Improving fixed business (fixed business net revenues Δ% YoY)
5
Strong cost control (total opex Δ% YoY)
3
+6%
+6.4%
EBITDA
reached
R$1,332 mln
in Q3
+5%
Net Mobile
Revenues
(ex-incoming)
4
2
3Q13
4Q13
1Q14
2Q14
-2.9%
+19 p.p.
-2.9%
3Q13
3Q14
2.3%
4Q13
1Q14
-7.2%
2Q14
-8.1%
3Q14
-21.9%
-22.3%
-22.9%
-20.5%
Operational Highlights
1
3
New offers
Increasing data penetration
43%
39%
33%
3Q13
2 Bad debt under control
Bad debt as % of
gross revenues
3Q13
2Q14
3Q14
4 Strong performance in 4G market share
1.1%
0.7%
% of data users
over total base
+10 p.p.
1.1%
0.6%
4Q13
30%
0.8%
26%
1Q14
2Q14
4G
Market Share
+4 p.p.
3Q14
Jul/13
Jul/14
Source: Anatel
3Q RESULTS
12
BUSINESS FUNDAMENTALS
Core Business Evolution…
Service EBITDA (ex-handset business)
(R$ mln; %YoY)
Mobile Service Net Revenues
(% YoY)
1,378
+7.4%
1,283
Business
Generated
(Local + LD
+ VAS
+ Others)
Operating
margin
improvement
+5%
3Q13
3Q14
Service EBITDA Margin
(ex-handset business)
Business
Received
(Incoming
Voice + SMS)
-34%
3Q14
3Q13
…Overcoming Challenges
MTR cut impact on revenues
2
(YoY performance)
1Q14
2Q14
34%
30%
(% YoY)
3Q13
1
+3.6 p.p.
SMS Outgoing Revenues
3
3Q14
Macro Environment
(YoY performance)
1Q14
1.2%
3Q14
2Q14
3Q14
Brazilian GDP
Growth (%YoY)
Indebted Households
(% of total)
2.7%
Net revenues
from MTR
-8.2%
61%
-19.4%
-18%
-28%
-27%

A market trend

Greater potential for data growth usage
63%
0.5%
1H13
1S13
1H14
1S14
3Q13
3Q14
Source: IBGE; CNC
3Q RESULTS
13
DRIVEN BY INNOVATION
Adding Value Through Innovation
WEEKLY SERVICE PACKAGE
o Voice + Data + SMS
o R$ 7 per week
R$ 0.75 DAILY OFFER
INTERNET SHARING PLANS
o Expansion to new
regions: PR, SC, MA, RJ
o Up to 4 devices
NEW M2M PLANS
o New data packages
launched for M2M
services
o No additional charges
o Covering most of the
country
NEW APP FOR
LANGUAGE COURSES
o Games and quizzes help
students developing
English skills
blah COMMUNICATION APP
NEW MUSIC PLATFORM
PREPAID MOBILE ACCOUNT/ MONEY
o Integrated communication
(VOIP, IM, SMS) App
o Partnership TIM and Deezer (top global streaming
platform)
o Partnership: TIM, Mastercard and Caixa
Econômica Federal
o First ad campaign
o More than 35 million music available for download
o Focus on unbanked population ( >50% of
prepaid base)
o Maintaining leadership position in the mobile
music industry in Brazil
Customer Base
3G Market Share
(mln users)
(%; mln users)
76.5
P1
69.4
P4
25%
Aug/12
Source: ANATEL
50.0
Aug/13
51.3
Aug/14
42.7
26%
31.4
39%
11%
25%
30.1
14%
16.8
Jul/13
Source: ANATEL
Jul/14
1,437
30%
TIM
TIM
23%
48.0
35%
3.7 mln
45%
40%
69.3
63.2
(%; thd users)
123 mln
79.7
74.7
72.9
67.1
TIM
P3
77.1
4G Market Share
1,101
26%
17%
12%
Jul/13
20%
735
10%
364
Jul/14
Source: ANATEL
3Q RESULTS
14
MAINTAINING STRONG DATA PACE
Increasing Data Penetration
Data Adoption
Mix of Data Gross Revenues
(R$ mln; %YoY)
Smartphone Penetration Over
Customer Base
Smartphones Share over
New Sales
(%; ∆ YoY)
(%; ∆ YoY)
New
Data
World
+10 p.p.
+20 p.p.
44%
1,500
1,578
1,677
Content
& Others
+45%
+72%
+80%
Web
+29%
+33%
+39%
1Q14
2Q14
3Q14
+20%
+22%
+23%
25%
27%
29%
77%
67%
25%
SMS
3Q13
3Q14
3Q13
3Q14
∆ %YoY growth
+32%
Data Users
(mln users; % YoY)
% over total gross
mobile service
revenues
32
24
Data Opportunity over Customer Base
74.7 mln customer base
3Q13
BOU: Bytes of Use
43 mln to go!
32 mln data users
3Q14
Days of Use
(megabytes)
+40%
Jul - Aug/13
+22%
Jul - Aug/14
3Q13
3Q14
Usage
Increase
15 mln with
data handset
Penetration
Increase
28 mln untapped
market
3Q RESULTS
15
FINANCIAL RESULTS ANALYSIS (1/2)
Service Net Revenues
Mobile First Margin Analysis
(R$ mln; % YoY)
(% YoY)
Ex-MTR
Thousands
-306
ΔYoY +4.7%
-34.5%
-3.8%
+149
4,207
-4.5
4,225 MTR
180 Impact
4,045
 Strong
first
margin
expansion showing core
business improvement
+6 p.p.
-2.9%
 Margin expansion driven by
data and VAS (content &
others)
4,045
Reported
Revenue
3Q13
Δ Business
Generated
Δ Business
Incoming
Δ Others
Reported
Revenue
3Q14
3Q13
‘Pro forma’
Revenue in 3Q14
3Q14
EBITDA
Efficient Cost Control
(R$ mln; % YoY)
Interconnection Cost
Bad Debt/Sales
(Δ% YoY)
(% over gross revenues)
+6.4%
~0.8%
~0.7%
-36.2%
+15.1% Ex-MTR
1,252
stable
Thousands
Thousands
+0.4%
ΔYoY
3Q13
3Q14
3Q13
3Q14
24.6%
1,332
1,441
109
EBITDA Margin
27.4%
1,332
Service EBITDA Margin
34.1%
+151
-71
+4.5%
+3.4%
Leased Lines Cost
30.5%
(Δ% YoY)
-1.8%
3Q13
3Q14
Reported
EBITDA
3Q13
Traffic/Data
Δ Contribution
Margin
Δ Opex/
Others
Reported
EBITDA
3Q14
MTR
Impact
‘Pro forma’
EBITDA in 3Q14
3Q RESULTS
16
FINANCIAL RESULTS ANALYSIS (2/2)
Net Income Evolution
(R$ mln; % YoY)
Infrastructure Investment Mix
% YoY
1,007
(as % of capex)
1,086
+7.9%
12%
3Q
315
+10.6%
2Q
386
-5.2%
348
2G
306
50%
366
88%
3G + 4G
1Q
∆ YoY
Technology
+38 p.p.
50%
372
+21.6%
2013
9M13
9M13
2014
9M14
9M14
Cash Flow - 9 months
Net Debt
(R$ mln; R$ YoY)
Thousands
(R$ mln; % YoY)
6,219
5,428
1,749
1,749
3,980
-2,614*
512
BNDES Loan
-1,786
3,335
4,781
4,470
1H14
3,679
3Q14
- 1,274
1,446
Debt
Cash
791
Net debt
Debt
Sep/13
Cash
275
182
Net debt
+438
mln
-163
Sep/14
YoY
+30%
Net debt/EBITDA 12M: 0.14x
+63%
-45%
EBITDA
CAPEX
Δ WC
LT Amazonas
Leasing
OFCF
9M14
OFCF
9M13
*Considering R$3 mln of LT Amazonas leasing adjustment
3Q RESULTS
17
Network Evolution
INFRASTRUCTURE (R)EVOLUTION (1/3)
Backhauling
Evolution
Increased Coverage and Access Capacity
(# new elements)
Fiber to the site / Mobile Broadband
Project Key to Data Growth
#NodeB / eNodeB
(3G + 4G)
 Targeting 38 cities in 2013,+100 cities till 2016.
 From 2-8 to +100 Mbps.
POP MW
POP MW
BSC-RNC Site
 LTE Ready.
95% urban
population
# BTS
(2G)
2013
POP MW
 Macro coverage fine tuning.
82% urban
population
2014
2015
2016
Capex Evolution Towards Data
POP MW POP MW
(% of total Capex)
 Focus on IP infrastructure, caching, peering.
Fiber base
Infrastructure
2013
INTELIG
2009
ACQUISITION
2013
FIBER TO THE
AMAZON
2016
MASSIVE LD
BACKBONE
2014
LTE*
2015
3G
2016
2G
Small Cell Approach
(# new elements)
INTELIG 15,000KM
46,000 KM OF FIBER
BY YE13
65,000 KM OF FIBER
New Sites
Including
Small Cell.
2012
2013
2014e
2015e
2016e
 New backbone routes- Increasing resilience.
NETWORK EVOLUTION
19
INFRASTRUCTURE (R)EVOLUTION (2/3)
Mobile Broadband Update
Investing Efficiently
Cities Covered with MBB project
3Q14
81
 Expanding # of people in
the Network team
32%
1Q14
31%
39
 From third party TO
insource Network Control
Center
36%
2Q14
2013
Network Hiring + Insource Project
30%
 Big Data analysis for capex allocation;
% of urban
population covered
 Antenna level return analyses (IRR and
payback)
 Quick incident resolution: from 56% to 76% within 8h
 Reacting faster to network problems - faults opened
within the target time: from 85% to 94%
Improving Quality and 4G Services (e.g.: SP)
Innovative Coverage Expansion
 Agreement with a tower company
 900 Mhz rollout according to plan
(above 600 sites using the new frequency)
 Project to install more than 150
small cells in gas stations in 3 cities
 Expanding backhauling
 Small cell installed inside Totem
Voice Access
# Antennas
99.0%
97.95%
 Reduction in dropped call rates and better
overall performance
 Higher average throughput rates
98.36%
97.53%
 Improvement in indoor coverage
 Increase in data and voice traffics
Source: ANATEL app
NETWORK EVOLUTION
20
INFRASTRUCTURE (R)EVOLUTION (3/3)
Fiber to the site expansion to ~100 cities
Network in Numbers
4G Sites in state capitals
To Fiber based
From Copper
3,153
3,106
3,085
3,055
 Ran Sharing
After FTTS
Before FTTS
 Smart Approach
TIM
P2
P3
P1
Metro Ring
Source: ANATEL
Copper
(2-8Mbps)
Number of 3G Sites
9,920
 9.3% growth in 9M
CAPEX Analysis
9,074
 Coverage: 79.1% of
urban population
4Q13
1Q14
2Q14
Capex Evolution
Capex per Technology
(R$ mln)
(R$ mln)
3Q14
CAGR
11%
Source: Company
3,871
3,386
Number of WIFI & Small Cells
1,105
2,836
R$2,983
~R$3,800
3G
4G
2,983
2G
714
4Q13
Source: Company
3G
2G
1Q14
2Q14
3Q14
2010
2011
2012
2013
19%
18%
17%
20%
2011
2014e
% over sales
NETWORK EVOLUTION
21
Regulatory Update
REGULATORY UPDATE (1/2)
700MHz Auction Results
1st Round
Block 1
Block 2
Block 3
Block 5
Block 4
Block 6
(10+10) MHz cap
(10+10) MHz
(10+10) MHz
(10+10 MHz)
(10+10) MHz
(10+10) MHz
(10+10) MHz
Total
National
In R$ Million
Regional
Minimum Price
1,928
1,928
1,928
30
1,893
5
7,712
Winning Bid
1,947
1,947
1,928
30
Unsold
(1st + 2nd rounds)
Unsold
(1st + 2nd rounds)
5,852
Premium
1.00%
0.99%
0.00%
0.02%
-
-
-
EAD
903.93
903.93
903.93
13.86
887.59
2.48
3,616
AUCTION PLAYERS
o Oi
and
Sercomtel
did
not
participate in the auction.
FINAL PRICE
TOTAL AMOUNT
o The EAD Contribution of R$890.1 million related to unsold
o Auction totaled R$5.85 billion, 24% lower then
blocks will be distributed proportionately among the sold
the R$7.7 billion expected for minimum prices
blocks and will be discounted of the Public Price.
for all blocks.
Better Coverage
Spectrum acquisition at fair price;
(Indoor and Rural)
(Price in USD/MHz/Pop. adjusted for GDP)
Average = 1.22
< 700 Mhz
700 Mhz
850 Mhz
2100 Mhz
5800 Mhz
0
2.58
BTS Range (km)
2
4
6
8
10
Number of BTS
20
15
10
7
5
0.52
0.78
0.83
1.07
1.13
1.18
DEN
NZL
Spain Brazil
GER
PORT
1.22
1.28
1.29
1.29
1.48
EUA Taiwan Italy France AUS Canada
2
REGULATORY UPDATE
23
REGULATORY UPDATE (2/2)
Estimated 700 MHz Auction Roadmap
July/14
August/14
Aug/6
• TCU’s
precautionary
measure
preventing
the auction
rules
publication
Aug/16
• ANATEL’s
auction
rules
revision
Jul/17
• Approval of
auction terms and
interference rules
• Definition of
Analog TV switchoff dates
Aug/20
• TCU
approval
September/14
November/14
Oct/7
• Auction Special 2nd week
• ANATEL’s
Commission;
Board
Classification
Award
and Award
approval
decision
published in
D.O.U.
Sep/1
• Clarifications
request
• Administrativ
e Appeal
Set/12
• Clarification
from ANATEL
• Bid bond issuing
Sep/23
• Documentation
• Bid bond; and
• First bid filing
•
Aug/21
• Auction publication
October/14
Oct/13
• Nor TV’s
appeal
(MMDS
operator)
against CEL
Sep/30
Auction
December/14
1st week
• Authorization
signature
• Public Price
payment
March/15
4th week
• EAD’s 1st 30%
payment
week
• Authorization
extracts published
in DOU
4th week
• Proof of good
standing
documentation filing
• GO/NO GO Decision:
Additional
Commitments
April/15
4th week
• EAD constitution
2nd
3rd week
• Call for
Authorization
signature
Oct/16
• Counterarguments
by TIM
…
3rd week
• Return of
the MHz
Bond
4th week
• GIRED institution
(One TIM representative)
4th week
• Performance
Bond (EAD)
issuing
REGULATORY UPDATE
24
Fixed Business
TIM SOLUÇÕES CORPORATIVAS: BUSINESS REBOUND
Turnaround on fixed business in place
1Q14
2Q14
3Q14
4Q14
Infrastructure
reinforcement
Market repositioning
Sales growth
Revenue rebound
o New business unit
o New branding
organization
o Sales multi-channel
o New offers and
o IT renewal plan
product launch
o Multiservice
o Restructured sales
network launch

Organization
restructuring

Dedicated B.U. to all
business customer

Fixed + mobile
integration
service improvement
o New offers and
product launch
o MTR reduction
force
Business Priorities:
Improvement
o Sales and customer
 Governance / Efficiency
 Business development
 Quality and Process
Financial Performance
Revenues from New Sales
Net Revenues (with intercompany)
EBITDA-CAPEX
(R$; YoY)
+5x
2013
2014
2012
2013
2014
+
-
3Q13
4Q13
1Q14
2Q14
3Q14
FIXED BUSINESS
26
LIVE TIM: SPEEDING UP GROWTH
Accelerating Operational Performance…
… with Support of Quality Experience
Addressable Households
Customer Base
(000 HH)
(000 users)
Netflix Broadband Ranking
(average streaming speed representation)
120
1,366
+55%
+2.8x
881
43
3Q13
3Q13
3Q14
Gross Adds
ARPU
(000 users)
(R$; YoY%)
31
+74%
3Q14
+32%
18
3Q13
3Q13
3Q14
3Q14
Average Speed of New Sales
(mbps)
38.2
36.7
Live TIM Net Adds Share
New Line Payback
(% of SP and RJ market additions)
(months)
31%
21
16%
Aug/13
Source: Anatel
27
3Q13
-38%
Aug/14
3Q13
13
+4.1%
3Q14
Source: Company
3Q14
Source: Company
FIXED BUSINESS
27
Business Outlook
CONCLUSION
Q3 Conclusions: A good balance between objectives
Strategic…
Operational…
32 mln
44%
32% YoY
+19 p.p. YoY
Data Users
Smartphones
(mln users)
(over total base)
Financial…
Business
Generated
MBB in 81 cities
EBITDA
+6.4% YoY
OPEX Control
Net Income
+11% YoY
Prepaid leadership
+5% YoY
R$1.3 billion
Infrastructure growth
+49% YoY
Quality
Data + VAS
(ex-SMS)
Perspectives: Moving the plan forward
Renewed Mission/
Purpose/Values
Evolving revenue profile
29
•
VOICE
•
•
DATA
SMS
•
•
MTR
DIGITAL
SERVICES
“To connect and take care
New 3-year plan
o
TIM Protagonist
o
Data and digital
services leadership
Industry leadership
o
Long term commitment
o
4G license 700MHz
o
Tower sale supporting
investment plan
of every customer, so
o
Infrastructure
everyone can do more”
o
Customer base value
o
Customer experience
o
One TIM initiative
BUSINESS OUTLOOK
29
OFFER EVOLUTION
Smart/Web phone Penetration
Voice MOU
(% over total base of lines)
(minutes)
>75%
>170
148
136
55%
43%
2012
2013
2012
2016
2013
2016e
Data Users
VAS Revenue Growth
(% of Data Users in CB; million users)
(% of Mobile Services Gross Revenues; R$ mln)
>50%
37%
30%
VAS/Revs.
18%
27.5
21.3
+29%
+xx%
VAS
Gross
Revs.
2012
2013
>40%
21%
2016e
+xx%
+22%
2012
2013
2016e
BUSINESS OUTLOOK
30
TIM PART: 2014-2016 GUIDANCE
Guidance
R$ million
18,764
19,921
2013-2016 CAGR:
Mid Single Digit Growth
Total Net Revenues
2012
2013
2014e
2015e
2016e
R$ million
5,012
EBITDA
2012
5,207
2013
2013-2016 CAGR:
Mid Single Digit Growth
2014e
2015e
2016e
R$ million
CAPEX
3,765
3,871
Infrastructure
3,139
3,487
Others/Licenses
626
384
2012
2013
Total CAPEX 2014-2016:
~R$11 billion*
2014e
2015e
2016e
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK
31
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS
33
QUARTERLY HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS
34
ANNUAL HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS
35
HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS
ROA: NOPLAT/Avg. Total Assets.
Calculation considers organic Net Income and EBITDA
HISTORICAL DATA & OTHERS
36
STRUCTURE AND STOCK PERFORMANCE
Stock Performance (base 100)*
130
120
110
100
90
80
Jan-14
Feb-14 Mar-14
TIMP3
+4.5%
Apr-14
May-14
Jun-14
TSU
-0.2%
Jul-14
Aug-14
Sep-14
Ibovespa
+5.1%
HISTORICAL DATA & OTHERS
37
TELCOS’ TAX BURDEN & HIGH INVESTMENTS
Telecom Industry Tax Payments1
Tax Burden Composition
(R$ Bln)
45.7
~5%
1.5%
46.0
~39%
28%
% Gross Revenues
2012
3%
~1%
Cofins
Cofins
PIS/PIS/
PASEP
PASEP
2013
Telecom Industry Investments2
(R$ Bln)
ICMS
ICMS
Fistel
Fistel
Fust/
Fust/
FUNTEL
FUNTEL
Total
Total
38.4
32% of
Revenues
36.8
Taxation represents almost 40% of companies gross
revenues.
2012
2013
1 Considers
2
TIM, Telefonica, Oi and AMX
Considers TIM, Telefonica, Oi, AMX and GVT
Source: players Balance Sheet
HISTORICAL DATA & OTHERS
38
SAFE HARBOR AND IR CONTACTS
Safe Harbor Statements
Statements in this presentation, as well as oral
statements made by the management of TIM
Participações S.A. (the “Company”, or “TIM”), that are
not historical fact constitute “forward looking
statements” that involve factors that could cause the
actual results of the Company to differ materially from
historical results or from any results expressed or
implied by such forward looking statements. The
Company cautions users of this presentation not to
place undue reliance on forward looking statements,
which may be based on assumptions and anticipated
events that do not materialize.
Investor Relations Team
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
E-mail: ri@timbrasil.com.br
Rogério Tostes
E-mail: rtostes@timbrasil.com.br
Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: vdferreira@timbrasil.com.br
Phone: +55 21 4109-3360
Leonardo Wanderley
E-mail: lwanderley@timbrasil.com.br
Phone: +55 21 4109-4017
Rodrigo Godoy
E-mail: rcgodoy@timbrasil.com.br
Phone: +55 21 4109-3446
Luiza Chaves
E-mail: luchaves@timbrasil.com.br
Phone: +55 21 4109-3751
Visit our Website
www.tim.com.br/ir
SAFE HARBOR & IR CONTACT
39