Meeting with Investors - November 2014
Transcript of Meeting with Investors - November 2014
Company’s Presentation
TIM Brasil
November, 2014
Visit our website and IR app:
www.tim.com.br/ir
AGENDA Macro & Industry Overview.......5
Recent Results……………..…………..11
Network Evolution…………………...18
Regulatory Update…………………..23
Fixed Business…………………….…...26
Business Outlook…………….….…..29
Historical Data & Others…….……33
TIM IR app
(English) TIM RI app
(Portuguese)
KNOWING TIM 3
KNOWING TIM BETTER
Gross Revenues (R$ Bln)
Customer base EoP (Million)
15,000 km fiber optical backbone
5,500 km fiber optical backhauling
Growth Via
Acquisition
Brazilian Law
“Nível” 1 “Nível” 2
Legal Requirements
Demand for transparency and
disclosures
Highest level of Corporate
Governance
Requirement of protection for
minority shareholders
100% Tag Along
Equal dividends rights
One single class of shares
Strict disclosure policy
Statutory Audit Committee:
• Report to Board of Directors
• Oversight Financial reporting
• Analyze anonymous complaints
Unique Telco company listed on the Novo Mercado
CORPORATE GOVERNANCE
TIM: A Huge Brazilian Company Presence in Brazil since 1998.
16th largest Private Company in Brazil (source: Exame Magazine - 2013).
Approximately R$32 billion of Market Capitalization.
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$3.9 billion invested in 2013
Sales
Network
Social &
Economic
GROWTH STRUCTURE
25 28
30
2011 2012 2013
4,7 5,0
5,2
2011 2012 2013
64 70
73
2011 2012 2013
EBITDA (R$ Bln)
Macro & Industry Overview
MACRO SCENARIO OUTLOOK (1/2)
• Market consensus shows a softer growth in GDP.
• 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.
GDP Forecast (% YoY Growth)
Inflation Forecast (IPCA: 12 months)
Interest Rate Forecast FX Rate Forecast (R$/U$ - year average) (% Selic Target p.y. – year average)
Source: BaCen/Bloomberg
5.9 6.3 6.3
5.9
4.5
2013a 2014e 2015e 2016e
10.0 11.0
11.5 12.3
2013a 2014e 2015e 2016e
2.2
2.4 2.5
2.4
2013a 2014e 2015e 2016e
2.3
0.3
1.2
2.3
0.7
3.0
4.0
2013a 2014e 2015e 2016e
Government’s Target
Government projection Market Consensus
Government projection Market Consensus
MACRO & INDUSTRY OVERVIEW 5
MACRO SCENARIO OUTLOOK (2/2)
• Market expects the unemployment rate to increase in 2015, as jobs creation remains low.
• 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.
Unemployment (%)
Formal Jobs Creation* (In Thousand)
Indebted Households* Families on Default (% of total) (% of total)
Source: Banco Central/Bloomberg
61.6 58.9 61.4 63.2
3Q11 3Q12 3Q13 3Q14
-307
303
189 237
4Q13 1Q14 2Q14 3Q14
24.3
19.1 20.6
19.1
3Q11 3Q12 3Q13 3Q14
6.0
5.4 5.4
4.9 5.0
5.6
6.1
3Q11 3Q12 3Q13 3Q14 2014e 2015e 2016e
* Families that declared to have debts on the categories of: credit card, stores bills, personal loans, car loans and insurance and postdated check
* Families that declared to have debts overdue for more than three months
*Number of job positions with the complete registration of the employee
MACRO & INDUSTRY OVERVIEW 6
TIM represents 30% of the industry mobile revenue* while has 27% of the market share
TIM
Source: Anatel and Players balance sheet
Vivo
Claro Oi
Mobile Fixed Fixed BB Pay-TV Group
Customers 2Q14 (000´s) 74.203 665 121 n.d. 74.989
Market share 2Q14 26,9% 1,5% 0,5% n.d. ---
Net Adds 2Q14 (000´s) 286 - 19 n.d. 305
Net Adds 12M (000´s) 2.008 31 61 n.d. 2.100
Net Revs FY13 (R$ Mln) 19.264 657 19.921
Mobile Fixed Fixed BB Pay-TV Group
Customers 2Q14 (000´s) 79.357 11.035 4.370 688 95.450
Market share 2Q14 28,8% 24,1% 18,8% 3,6% ---
Net Adds 2Q14 (000´s) 892 333 36 43 1.305
Net Adds 12M (000´s) 3.158 619 345 175 4.296
Net Revs FY13 (R$ Mln) 23.002 11.720 34.722
Mobile Fixed Fixed BB Pay-TV Group
Customers 2Q14 (000´s) 68.776 11.289 7.045 10.106 97.216
Market share 2Q14 24,9% 24,7% 30,3% 53,3% ---
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 Revs FY13 (R$ Mln) 12.773 20.424 33.197
Mobile Fixed Fixed BB Pay-TV Group
Customers 2Q14 (000´s) 51.081 17.023 6.567 887 75.558
Market share 2Q14 18,5% 37,2% 28,3% 4,7% ---
Net Adds 2Q14 (000´s) 502 -240 3 58 304
Net Adds 12M (000´s) 1.373 -1.307 17 - 16 48
Net Revs FY13 (R$ Mln) 9.290 19,132 28.422
The mobile segment represents 75% of the industry access growth
*Mobile revenue considers only the 4 major players
Fixed / Mobile Fixed BB Fixed voice & BB / TV Mobile
Fixec BB/ TV Fixed Mobile
BRAZILIAN TELCOS X-RAY
Fixed / Mobile
7
122.6
23.2
56% 35.2 mi
43% 27.0 mi
62.8 mi
Possess Internet connection
Does NOT Possess Internet connection
Total Households
38% High cost
43% of total active connections have speed below 2Mbs
3%
37%
51%
91%
MARKET STRUCTURE CHANGING TOWARDS DATA USAGE
Households with internet connection (%)
With Telephone
Only mobile phone
Mobile and fixed phone
Households Profile
Fixed phone only
Purchase Power
Salaries up to R$1.2k
Salaries up to R$3.1k
Average Cost
32 mln
2 mln
81 mln
106 mln
23 mln
53% of pop.
70% of pop.
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Re-visiting Market Structure...
Market Data Revenues Growth 2016 vs. 2012:
> 13 bln Reais on Mobile (+100%)
> 7 bln Reais on Fixed (+35%)
1
2
57 mln
3
83 mi
~R$40
~R$100 Fixed: Voice and Broadband Entry level plan
Mobile: Voice and Data PTIM’s entry level plan
4 Access Growth (users in mln)
Fixed
Mobile
2009 2010 2011 2012 2013 Jul/14
+ 5.2X
Reasons for not having Internet:
12% Lack of coverage
…with room to grow
MACRO & INDUSTRY OVERVIEW 8
Widespread use of Social Media (Social Network Users in Brazil 2011-2017)
BRAZILIAN INTERNET USAGE BOOM Internet Penetration in South America (Internet users per 100 inhabitants)
Strong adoption of Instant Messaging (WhatApp mln users)
High Penetration of E-commerce (E-commerce revenues in Bln US$)
8.4
11.0
17.0
2010 2011 2012
Amazon lauched operations in Brazil
in Dec/12
83 mln Internet users – Brazil is the 5th largest nation in the world of
internet users 66%
60% 59% 56%
46% 44% 41% 37%
32% 32% 30% 24%
Arg Col Chi Uru Bra Ecu Vem Per Guy Sur Bol Par
56.1 66.2
78.3 88.3
97.8 104.2
110.0
2011 2012 2013 2014 2015 2016 2017
#2 in Facebook active users (76mln) only after US
#2 in Twitter users (41mln) only after US
2nd largest market outside US
40
38
32
31
25
17
13
11
3
India
Brazil
Mexico
Germany
Spain
UK
Argentina
Russia
France
28% of mobile users in Brazil use Instant Messaging
apps
Source: SocialBakers, e-Marketer, Semiocast, G1.com, Folha de São Paulo
MACRO & INDUSTRY OVERVIEW 9
465 mln worldwide users
List of selected countries as of
Feb/14
53% 64% 79%
90%
2006 2007 2008 2009
4% 12% 11%
52%
2011 2014
Tablet
Smartphone
56% 48% 42%
34% 27% 27% 23%
• Incoming calls only device
Mobile Penetration (% over population)
DATA GROWTH IS THE NEW CHALLENGE
Data Penetration (% of data over total revenues in 3Q13)
248 212
166 162 140 139 91
MOU in 2008 (minutes)
• Still a lot of phones without data access • Wi-Fi only devices
PCs, Notebooks, Feature Phones
MACRO & INDUSTRY OVERVIEW 10
...was similar to the challenge in data growth now
Challenge in voice growth in 2009…
Goal: increase voice usage Challenge: deliver the best
experience in mobile internet
Source: Anatel and IBGE Source: IDC
Source: Global Matrix
High Growth
“Fear” to use
Low Usage
Handset Sales Share
Recent Results
3Q13 3Q14
+6%
3rd QUARTER IN FEW: RESULTS OVERVIEW Financial Highlights
Operational Highlights
Business generated revenues at a good pace
1
Net Mobile Revenues
(ex-incoming)
3Q13 3Q14
+5%
EBITDA at a solid performance 2
EBITDA reached
R$1,332 mln in Q3
1 New offers
2 Bad debt under control
Bad debt as % of gross revenues
Increasing data penetration 3
% of data users over total base
4 Strong performance in 4G market share
4G Market Share
0.7% 0.6%
1.1% 1.1% 0.8%
3Q13 4Q13 1Q14 2Q14 3Q14
-22.3% -21.9% -22.9% -20.5%
-2.9%
3Q13 4Q13 1Q14 2Q14 3Q14
Improving fixed business (fixed business net revenues Δ% YoY) 5
+19 p.p.
Strong cost control (total opex Δ% YoY) 4
8.8% 2.3%
-2.9% -7.2% -8.1%
3Q13 4Q13 1Q14 2Q14 3Q14
33%
39% 43%
3Q13 2Q14 3Q14
Net Income 3
Net Income totaled
R$348 mln in Q3
3Q13 3Q14
+11% +6.4%
+10 p.p.
Source: Anatel
26%
30%
Jul/13 Jul/14
+4 p.p.
3Q RESULTS 12
1,283
1,378
3Q13 3Q14
Service EBITDA (ex-handset business) (R$ mln; %YoY)
BUSINESS FUNDAMENTALS Core Business Evolution…
…Overcoming Challenges
Mobile Service Net Revenues (% YoY)
Service EBITDA Margin (ex-handset business) (% YoY)
(Local + LD + VAS
+ Others)
Business Received
3Q13 3Q14
Business Generated
1 MTR cut impact on revenues (YoY performance)
(Incoming Voice + SMS)
+7.4%
30% 34%
3Q13 3Q14
+3.6 p.p.
2 SMS Outgoing Revenues (YoY performance)
-18%
-28% -27%
1Q14 2Q14 3Q14
Net revenues from MTR
3 Macro Environment
Brazilian GDP Growth (%YoY)
Source: IBGE; CNC
Indebted Households (% of total)
1S13 1S14
2.7%
0.5%
A market trend
Greater potential for data growth usage
1.2%
-8.2%
-19.4%
1Q14 2Q14 3Q14
+5%
-34%
Operating margin
improvement
61% 63%
3Q13 3Q141H14 1H13
3Q RESULTS 13
45%
39%
26% 30%
17% 20%
12% 10%
DRIVEN BY INNOVATION
Customer Base (mln users)
PREPAID MOBILE ACCOUNT/ MONEY
o Partnership: TIM, Mastercard and Caixa Econômica Federal
o Focus on unbanked population ( >50% of prepaid base)
NEW MUSIC PLATFORM
o Partnership TIM and Deezer (top global streaming platform)
o More than 35 million music available for download
o Maintaining leadership position in the mobile music industry in Brazil
Aug/12 Aug/13
TIM
Source: ANATEL
Aug/14
P1
P3
P4
Jul/13 Jul/14
3G Market Share (%; mln users)
4G Market Share (%; thd users)
30.1
31.4
42.7
16.8
123 mln
Jul/13 Jul/14
TIM
1,437
1,101
735
364
3.7 mln
TIM
Source: ANATEL Source: ANATEL
INTERNET SHARING PLANS
o Up to 4 devices
o No additional charges
WEEKLY SERVICE PACKAGE o Voice + Data + SMS o R$ 7 per week
NEW M2M PLANS o New data packages
launched for M2M services
R$ 0.75 DAILY OFFER
o Expansion to new regions: PR, SC, MA, RJ
o Covering most of the country
Adding Value Through Innovation
NEW APP FOR LANGUAGE COURSES o Games and quizzes help
students developing English skills
blah COMMUNICATION APP
o Integrated communication (VOIP, IM, SMS) App
o First ad campaign
76.5 77.1 79.7
69.4 72.9
74.7
63.2
67.1 69.3
48.0 50.0 51.3
23% 25%
25% 26%
40%
35%
11% 14%
3Q RESULTS 14
67% 77%
3Q13 3Q14
3Q13 3Q14Jul - Aug/13 Jul - Aug/14
24
32
3Q13 3Q14
MAINTAINING STRONG DATA PACE
Data Adoption
Increasing Data Penetration
Smartphone Penetration Over Customer Base (%; ∆ YoY)
Smartphones Share over New Sales (%; ∆ YoY)
Data Users (mln users; % YoY)
+32%
BOU: Bytes of Use (megabytes)
Days of Use
+40% +22%
43 mln to go!
28 mln untapped market
15 mln with data handset
Data Opportunity over Customer Base
32 mln data users
1Q14 2Q14 3Q14
25% 27% 29%
% over total gross mobile service
revenues
Mix of Data Gross Revenues (R$ mln; %YoY)
SMS
Web
1,500
+29% +39%
+45% +80%
∆ %YoY growth
1,578
Content & Others
1,677
+33%
+72%
74.7 mln customer base
+23% +20% +22%
+10 p.p. New Data World
Usage Increase
Penetration Increase
25%
44%
3Q13 3Q14
+20 p.p.
3Q RESULTS 15
3Q13 3Q14
~0.7% ~0.8%
3Q13 3Q14
4,045
180
Tho
usa
nd
s
4,207 4,045 +149
Tho
usa
nd
s
+0.4%
FINANCIAL RESULTS ANALYSIS (1/2) Service Net Revenues (R$ mln; % YoY)
Reported Revenue
3Q13
Reported Revenue
3Q14
MTR Impact
-3.8%
4,225
‘Pro forma’ Revenue in 3Q14
-306 -4.5
ΔYoY +4.7% -34.5% -2.9%
Δ Others Δ Business Incoming
Δ Business Generated
Ex-MTR
1,332
109
Tho
usa
nd
s
EBITDA (R$ mln; % YoY)
1,252
Reported EBITDA 3Q13
Reported EBITDA 3Q14
+151 -71
Δ Opex/ Others
Traffic/Data Δ Contribution
Margin
24.6%
30.5%
1,332
27.4%
34.1%
EBITDA Margin
Service EBITDA Margin
+4.5% +3.4%
MTR Impact
+15.1%
+6.4%
1,441
‘Pro forma’ EBITDA in 3Q14
ΔYoY
Ex-MTR
Efficient Cost Control
Interconnection Cost (Δ% YoY)
Leased Lines Cost (Δ% YoY)
Bad Debt/Sales (% over gross revenues)
stable
3Q13 3Q14
-36.2%
3Q13 3Q14
-1.8%
Mobile First Margin Analysis (% YoY)
+6 p.p. Strong first margin
expansion showing core business improvement
Margin expansion driven by data and VAS (content & others)
3Q RESULTS 16
306 372
386 366
315 348
9M13 9M14
3,980 -2,614*
- 1,274
182 275
50%
88%
50%
12%
9M13 9M14
1,446
4,781 3,335
Tho
usa
nd
s
791
4,470 3,679
1,749 1,749
-163
+438 mln
+30%
FINANCIAL RESULTS ANALYSIS (2/2) Net Income Evolution (R$ mln; % YoY)
Net Debt (R$ mln; % YoY)
EBITDA
Debt Cash Net debt
Sep/13 Sep/14
Debt Cash Net debt
+63% -45%
Infrastructure Investment Mix (as % of capex)
Cash Flow - 9 months (R$ mln; R$ YoY)
YoY
Net debt/EBITDA 12M: 0.14x
BNDES Loan
CAPEX Δ WC OFCF 9M14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF 9M13
LT Amazonas Leasing
6,219 5,428
2G
3G + 4G +38 p.p.
∆ YoY Technology
2Q
1Q
+10.6%
% YoY
3Q
1,007 1,086
+21.6%
-5.2%
+7.9%
1H14 3Q14
512
-1,786
2013 2014
3Q RESULTS 17
Network Evolution
INFRASTRUCTURE (R)EVOLUTION (1/3)
2016 MASSIVE LD BACKBONE
65,000 KM OF FIBER
2013 FIBER TO THE
AMAZON
46,000 KM OF FIBER BY YE13
Fiber to the site / Mobile Broadband Project Key to Data Growth
Targeting 38 cities in 2013,+100 cities till 2016.
From 2-8 to +100 Mbps.
LTE Ready.
Macro coverage fine tuning.
Focus on IP infrastructure, caching, peering.
INTELIG 15,000KM
2009 INTELIG
ACQUISITION
New backbone routes- Increasing resilience.
82% urban population
2013 2014 2015 2016
95% urban population
#NodeB / eNodeB (3G + 4G)
# BTS (2G)
2012 2013 2014e 2015e 2016e
New Sites Including
Small Cell.
POP MW
POP MW POP MW
POP MW
BSC-RNC Site
POP MW
2013 2014 2015 2016
LTE* 3G 2G
Fiber base Infrastructure
Backhauling Evolution Increased Coverage and Access Capacity
(# new elements)
Capex Evolution Towards Data (% of total Capex)
Small Cell Approach (# new elements)
NETWORK EVOLUTION 19
39
81
2013
1Q14
2Q14
3Q14
900 Mhz rollout according to plan (above 600 sites using the new frequency)
Expanding backhauling
INFRASTRUCTURE (R)EVOLUTION (2/3) Mobile Broadband Update
Cities Covered with MBB project
% of urban population covered
Quick incident resolution: from 56% to 76% within 8h
Reacting faster to network problems - faults opened within the target time: from 85% to 94%
Agreement with a tower company
Project to install more than 150 small cells in gas stations in 3 cities
Small cell installed inside Totem
Network Hiring + Insource Project
Innovative Coverage Expansion Improving Quality and 4G Services (e.g.: SP)
Reduction in dropped call rates and better overall performance
Higher average throughput rates
Improvement in indoor coverage
Increase in data and voice traffics
Expanding # of people in the Network team
From third party TO insource Network Control Center
30%
31%
32%
Source: ANATEL app
36%
Investing Efficiently
Big Data analysis for capex allocation;
Antenna level return analyses (IRR and payback)
99.0%
97.95%
97.53%
98.36%
Voice Access # Antennas
NETWORK EVOLUTION 20
3,153 3,106 3,085
3,055
TIM P2 P3 P1
INFRASTRUCTURE (R)EVOLUTION (3/3) Network in Numbers
4G Sites in state capitals
Ran Sharing
Smart Approach
Source: ANATEL
Number of WIFI & Small Cells
Source: Company
714
1,105
4Q13 1Q14 2Q14 3Q14
Number of 3G Sites
9.3% growth in 9M
Coverage: 79.1% of urban population
Source: Company
9,074
9,920
4Q13 1Q14 2Q14 3Q14
NETWORK EVOLUTION 21
3,871
3,386
2,983 2,836
2013201220112010
19% 17% 20%
% over sales
18%
Copper
(2-8Mbps)
Before FTTS After FTTS
Metro Ring
From Copper
To Fiber based
Fiber to the site expansion to ~100 cities
CAPEX Analysis
CAGR
11%
2G
3G
4G
R$2,983 ~R$3,800
2G
3G
Capex per Technology (R$ mln)
2011 2014e
Capex Evolution (R$ mln)
Regulatory Update
REGULATORY UPDATE (1/2)
REGULATORY UPDATE 23
700MHz Auction Results
TOTAL AMOUNT
o Auction totaled R$5.85 billion, 24% lower then
the R$7.7 billion expected for minimum prices
for all blocks.
FINAL PRICE
o The EAD Contribution of R$890.1 million related to unsold
blocks will be distributed proportionately among the sold
blocks and will be discounted of the Public Price.
Block 1 Block 2 Block 3 Block 5 Block 4 Block 6
(10+10) MHz (10+10) MHz (10+10 MHz) (10+10) MHz (10+10) MHz (10+10) MHz
In R$ Million
Minimum Price 1,928 1,928 1,928 30 1,893 5 7,712
Winning Bid 1,947 1,947 1,928 30Unsold
(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
Total
National Regional
1st Round
(10+10) MHz cap
5800 Mhz
2100 Mhz 850 Mhz
700 Mhz < 700 Mhz
0 2 4 6 8 10
Number of BTS
20 15 10 7 5 2
BTS Range (km)
0.52 0.78 0.83 1.07 1.13 1.18 1.22 1.28 1.29 1.29 1.48
2.58
DEN NZL Spain Brazil GER PORT EUA Taiwan Italy France AUS Canada
Average = 1.22
AUCTION PLAYERS
o Oi and Sercomtel did not
participate in the auction.
Spectrum acquisition at fair price; (Price in USD/MHz/Pop. adjusted for GDP)
Better Coverage (Indoor and Rural)
3rd week • Return of
the MHz Bond
Estimated 700 MHz Auction Roadmap
Aug/6 • TCU’s
precautionary measure preventing the auction rules publication
Jul/17 • Approval of
auction terms and interference rules
• Definition of Analog TV switch-off dates
Aug/21 • Auction publication
Aug/16 • ANATEL’s
auction rules revision
2nd week • Authorization
extracts published in DOU
Oct/16 • Counterarguments
by TIM
4th week • EAD constitution
4th week • GIRED institution (One TIM representative)
4th week • EAD’s 1st 30%
payment
July/14
Set/12 • Clarification
from ANATEL • Bid bond issuing
Sep/1 • Clarifications
request • Administrativ
e Appeal
Aug/20 • TCU
approval
Oct/13 • Nor TV’s
appeal (MMDS operator) against CEL
3rd week • Call for
Authorization signature
4th week • Performance
Bond (EAD) issuing
Oct/7 • Auction Special
Commission; Classification and Award decision published in D.O.U.
4th week • Proof of good
standing documentation filing
• GO/NO GO Decision: Additional Commitments
… March/15 April/15
Sep/30 • Auction
Sep/23 • Documentation • Bid bond; and • First bid filing
September/14 October/14 December/14
REGULATORY UPDATE (2/2)
August/14
REGULATORY UPDATE 24
2nd week • ANATEL’s
Board Award approval
1st week • Authorization
signature • Public Price
payment
November/14
Fixed Business
3Q13 4Q13 1Q14 2Q14 3Q14
TIM SOLUÇÕES CORPORATIVAS: BUSINESS REBOUND Turnaround on fixed business in place
2013 2012
-
2014
+
EBITDA-CAPEX Net Revenues (with intercompany)
2013 2014
1Q14 2Q14
o New business unit
organization
o IT renewal plan
o Multiservice
network launch
o New branding
o New offers and
product launch
o Restructured sales
force
4Q14
o Sales and customer
service improvement
3Q14
Financial Performance
o Sales multi-channel
Improvement
o New offers and
product launch
o MTR reduction
Revenues from New Sales (R$; YoY)
Revenue rebound Sales growth Market repositioning Infrastructure reinforcement
Governance / Efficiency Business Priorities: Business development Quality and Process
+5x
Organization restructuring
Dedicated B.U. to all
business customer Fixed + mobile
integration
FIXED BUSINESS 26
36.7
38.2
3Q13 3Q1421
13
3Q13 3Q14
Accelerating Operational Performance…
LIVE TIM: SPEEDING UP GROWTH
27
43
120
3Q13 3Q14
Customer Base (000 users)
Source: Anatel
881
1,366
3Q13 3Q14
Netflix Broadband Ranking (average streaming speed representation)
3Q13 3Q14
ARPU (R$; YoY%)
… with Support of Quality Experience
Addressable Households (000 HH)
Source: Company
+2.8x +55%
+32%
New Line Payback (months)
-38%
Gross Adds (000 users)
18
31
3Q13 3Q14
+74%
Live TIM Net Adds Share (% of SP and RJ market additions)
Average Speed of New Sales (mbps)
+4.1%
16%
31%
Aug/13 Aug/14
Source: Company
FIXED BUSINESS 27
Business Outlook
CONCLUSION
29
Q3 Conclusions: A good balance between objectives
Perspectives: Moving the plan forward
Strategic… Financial… Operational…
EBITDA
Net Income
+6.4% YoY
+5% YoY
+11% YoY
MBB in 81 cities
OPEX Control
Prepaid leadership
Infrastructure growth
Evolving revenue profile Renewed Mission/ Purpose/Values
New 3-year plan
“To connect and take care
of every customer, so
everyone can do more”
o Industry leadership
o Long term commitment
o 4G license 700MHz
o Tower sale supporting investment plan
Quality
Business Generated
TIM Protagonist
• VOICE
• SMS
• MTR
• DATA
• DIGITAL SERVICES
o Data and digital services leadership
o Infrastructure
o Customer base value
o Customer experience
o One TIM initiative
Data Users (mln users)
Data + VAS (ex-SMS)
Smartphones (over total base)
32 mln 32% YoY
44% +19 p.p. YoY
R$1.3 billion +49% YoY
BUSINESS OUTLOOK 29
21.3
27.5
2012 2013 2016e 2012 2013 2016e
+xx%
OFFER EVOLUTION
136 148
>170
2012 2013 2016e
18% 21%
>40%
VAS Gross Revs.
VAS/Revs. 30% 37% >50%
43%
55%
>75%
2012 2013 2016
+xx% +29%
+22%
Smart/Web phone Penetration (% over total base of lines)
Voice MOU (minutes)
Data Users (% of Data Users in CB; million users)
VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln)
BUSINESS OUTLOOK 30
TIM PART: 2014-2016 GUIDANCE
Total Net Revenues
EBITDA
CAPEX
18,764 19,921
2012 2013 2014e 2015e 2016e
5,012 5,207
2012 2013 2014e 2015e 2016e
R$ million
R$ million
626
3,139
3,871
3,487
384
2012 2013 2014e 2015e 2016e
R$ million
Infrastructure
Others/Licenses
3,765
Guidance
2013-2016 CAGR:
Mid Single Digit Growth
2013-2016 CAGR:
Mid Single Digit Growth
Total CAPEX 2014-2016:
~R$11 billion*
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK 31
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS 33
QUARTERLY HISTORICAL DATA (R$ 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
Stock Performance (base 100)*
STRUCTURE AND STOCK PERFORMANCE
*Last price as of 02/14/2014 HISTORICAL DATA 37
HISTORICAL DATA & OTHERS 37
80
90
100
110
120
130
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14
TSU -0.2%
TIMP3 +4.5%
Ibovespa +5.1%
Cofins PIS/ PASEP ICMS Fistel Fust/
FUNTEL
TotalTotal Fust/ FUNTEL
PIS/ PASEP
ICMS Cofins Fistel
% Gross Revenues
TELCOS’ TAX BURDEN & HIGH INVESTMENTS
3% ~1%
28%
~5% 1.5% ~39%
32% of Revenues
Taxation represents almost 40% of companies gross revenues.
Tax Burden Composition Telecom Industry Tax Payments1
(R$ Bln)
Telecom Industry Investments2 (R$ Bln)
HISTORICAL DATA & OTHERS 38 Source: players Balance Sheet
1 Considers TIM, Telefonica, Oi and AMX 2 Considers TIM, Telefonica, Oi, AMX and GVT
45.7 46.0
2012 2013
36.8
38.4
2012 2013
Investor Relations Team
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
E-mail: [email protected]
Rogério Tostes
E-mail: [email protected]
Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: [email protected]
Phone: +55 21 4109-3360
Leonardo Wanderley
E-mail: [email protected]
Phone: +55 21 4109-4017
Rodrigo Godoy
E-mail: [email protected]
Phone: +55 21 4109-3446
Luiza Chaves
E-mail: [email protected]
Phone: +55 21 4109-3751
Visit our Website
www.tim.com.br/ir
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.
SAFE HARBOR AND IR CONTACTS
SAFE HARBOR & IR CONTACT 39