2006 Annual Results

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2006 Annual Results

  1. 1. TIM Participações S.A. 4Q06 and 2006’s Results March 06, 2007 1
  2. 2. Main Messages Market Performance Commercial Strategy Financial Performance 2
  3. 3. 4Q06: Impressive Growth and Strong Financial Performance % of postpaid: +3 p.p. vs. competitors’ average GSM Clients: 36.3% of GSM market Business segment: 30 % leading market share ARPU: +21% vs. 1° player and +32% vs. 3rd player Strong EBITDA growth and margin acceleration positive net profit achieved Our results top the best performance in the industry 3
  4. 4. 2006: Value Share and Profitability Growth 26.0% YoY growth of total client base vs. 15.9% Brazilian market expansion Substantial Leader in net additions, achieving 38.2% of incremental share by the year-end value client 25.4% of market share: narrowing the gap to 1st Player to 3.7p.p. vs 11.1 p.p. in growth 2005 Leader in business segment 31.5% YoY growth in net service revenue and 51.7% VAS revenue increase Strong 8.2% reduction in subscriber acquisition cost financial 67.8% EBITDA growth, representing a 24.6% margin (+6.8 p.p. vs 2005) results Net income positive in the 4Q06 Brand TIM: “Top of Mind 2006” awareness Leader in client satisfaction & the most recommended company among clients & Improved CRM and segmentation tools enabling acquisition cost reduction True Care Segmented customer caring focused on loyalty and retention 4
  5. 5. 2006: Improving the Corporate Structure Structure at the beginning of 2006 Structure at the end of 2006 TIMTIM Brasil Participações TIM Brasil 70% 100% 20% TIM Participações TIM Celular TIM Part. 100.0% TIM Celular 100% 100% 100% 100.0% TIM Maxitel TIM Maxitel TIM Sul TIM Nordeste TIM Nordeste Transaction approved on March 16th by the Creation of a simpler organizational and operational Shareholders Meeting, with no contrary vote structure No shareholders exercised the withdrawal rights More transparency for the market Increased focus on reaching high-value customers The largest Brazilian mobile network operator in terms of market capitalization Improved tax efficiency Nota: Participation (%) in total capital. 5
  6. 6. Main Messages Market Performance Commercial Strategy Financial Performance 6
  7. 7. Continued Market Growth Lines and penetration trend Market share Growth YoY 51.2% 53.2% +5.9p.p. 48.1% 49.2% 47.3% First 99.9 34,5% 33,7% 91.8 95.9 +16% Player 31,1% 89.4 30,0% 29,1% 86.2 - 11.1 pp -3.7pp 23,4% 23,5% 24,3% 25,1% 25,4% 22,8% 23,1% 23,9% Third 21,6% 21,8% Player 16.5 17.4 17.9 18.5 19.4 +17% 4Q05 1Q06 2Q06 3Q06 4Q06 4Q05 1Q06 2Q06 3Q06 4Q06 Postpaid lines (Million) Penetration (%) Narrowing the gap to 1st player Penetration continued to grow, although Increasing market share with continued focus at a decreasing rate on value customers 51.8% of incremental share in postpaid in the quarter Increased focus on postpaid segment Leader in business segment: 30% market share Source: ANATEL. 7
  8. 8. Outperforming Market Growth and Improving Value Anticipation of year-end client base target TIM lines (Mln) Net adds market share – 2006 YoY -5.2% Vivo 25.4 +26.0% 21% + 33.4% 20.2 Others 28.9% 20% Postpaid Claro 38.1% Prepaid 80% 79% +24.1% 38.2% 2005 2006 Maintenance of Leadership in Net Additions: Market Share 23.4% 25.4% 38.2% in 2006 vs. 32.0% in 2005 Constantly outperforming market growth: + 13 p.p. vs. competitors’ average Continuous customer mix improvement: 21.3% postpaid lines vs 20.1% one year ago Leader in GSM: market share of 36.3% Source: ANATEL. 8
  9. 9. Main Messages Market Performance Commercial Strategy Financial Performance 9
  10. 10. A Successful Commercial Strategy Segmented approach: building up a strong competitive portfolio National Tariff Plan for multi-regional companies Flexible Bundles TIM Web Móvel (Data-only Offer) INTEGRATED SOLUTIONS Business HU HU TIM Casa TIM Brasil Plans: voice+ SMS Postpaid Prepaid TIM + 25 + Data + Roaming TIM Chip Only TIM Família LU LU Pre Paid international 07 Centavos Postpaid Prepaid roaming COMMUNITY & CONVENIENCE INNOVATIVE APPROACH 10
  11. 11. Leader in Business Segment Innovation targeting market needs Complete solution on corporate portfolio Leader in business segment: 30% market share: + 3 p.p. in 2006 vs. 2005 YoY large accounts customer base growth : + ~ 130% in 2006 vs. 2005 Total postpaid net adds in TIM 2006 lines growth Business market share * 2006: 1.4 million per segment 39% 30% Business segment: +51% Consumer 61% Business Competitors Base total: +26% % * Source: Ericsson Research – 2006. 11
  12. 12. Optimized Multi-Channel Sales Network Increased focus on efficiency ~ 8,500 PoS 63% Retail Largest distribution network in Brasil ~29% Dealers Consumer ~8% •Own stores •Franchising Sales workforce strengthening and high-value customer focus ~ 1,600 Tele-sales & Postpaid acquisition incentives Personal Commissioning based on value > 255,000 points Qualified large account sales staff ( + 60% YoY growth) Recharge ~ 660 Improving channels productivity and efficiency (+75% YoY Business TBP tele-sales growth) ~ 150 KAM Note: KAM (Key Account Manager) 12 TBP (TIM Business Promoter)
  13. 13. Reducing Acquisition Cost SAC performance R$ Declining SAC level despite improved 132 customer and handset mix: 120 33.3% YoY growth in postpaid gross adds Commission increasing sales of mid-range and 65% 66% Subsidy high-end handsets Anatel’s fee on net adds Significant reduction in prepaid handsets subsidies has positive impact on direct cost Comodato 35% 34% Advertising Focus on “TIM Chip Only” strategy for Others SAC reduction 4Q05 4Q06 Acquisition cost pay-back of 3.6 months in Direct cost Indirect cost the 4Q06 vs 4.4 months in the 4Q05 13
  14. 14. Continued Focus on Customer Satisfaction Leveraging on leading brand power Average satisfaction index evolution * 8.63 8.23 8,02 3rd. Player 7,84 7.81 7,98 1st. Player 2006 Top of Mind TIM Brand is Award winner*** recognized as Jul/04 Nov/04 Apr/05 Aug/05 Nov/05 Apr/06 Oct/06 reliable and appealing, Consumer preference (%)** representative of TIM: The 1st market values 28 28 operator choice** 27 and dreams st 24 1 . Player 16 17 3rd. Player Nov/04 Apr/05 Aug/05 Apr/06 Oct/06 True care experience through all contact points! Sources: * Interscience - Oct/2006 14 ** Instituto Synovate - Oct/2006 *** Pesquisa Data Folha, Brasil - 2006
  15. 15. Consumer Market Campaigns Focus on fostering intra-network traffic ► Feliz 0,07 (“Happy 0.07”) ► Strengthening community concept: On-net local calls for just R$ 0.07 On-net traffic promotion is a TIM attribute until July/07 for postpaid and prepaid TIM’s clients ► Boosting overall sales Record gross adds in the 4Q06 (3.5 million lines) ► TIM Família (“TIM Family”) ► Complete telephony solution for Includes up to 9 dependents with a the whole family maximum of 2,500 minutes 5% of the postpaid sales in November and December ► TIM Casa (“Home Zone”) ► The first option at home or on-the-go Enhancing TIM Plans (fixed and > 250 thousands clients at year-end 2006 local calls) ► Stimulating Recharge ► Differentiated and creative ways for Motivating recharge through stimulating recharge Recarga Fácil (“Easy Recharge”) 1.5% increase in average revenue recharge, even and TIM Visa considering 24.2% YoY growth in prepaid base 15
  16. 16. Main Messages Market Performance Commercial Strategy Financial Performance 16
  17. 17. Becoming market leader on Net Service Revenues Best trend in net service revenue Net Service Revenue Performance* 2.7 Continuous growth in service revenue R$ Bln 2.5 2.3 2.2 2.6 Vivo 2.4 Combination of top quality ARPU & customer growth Claro 2.0 1.9 1.8 1.7 Effective high user churn ratio away from 1st. player 1.3 1.5 1Q06 2Q06 3Q06 4Q06 Total net revenue growth YoY Growth YoY Growth R$ Bln Reported Organic** R$ Bln Reported Organic** 10.8 +21% +14% 2.9 +21% +7% 9.5 2.7 89% +31% +22% 94% +43% +22% 83% 82% • focus on “TIM Chip Only” • lower weight of handset sales, in 17% 11% -25% -25% 18% -63% -63% view of subsidies 6% reduction 2005* 2006* 4Q05* 4Q06 Net service revenue Net handsets revenue Net service revenue Net handsets revenue * Source: based on companies reports ** Proforma: Bill & Keep elimination starting on January 1st 2005 (not audited). 17
  18. 18. ARPU Performance ARPU improvement Focus on VAS usage stimulation R$ +8% 51.7% YoY growth in VAS revenues 34.4 37.0 Integrated service packages (voice, LD, VAS and data) 2.2 2.5 Increased content offers and new partnerships MMS and SMS promotions New subscription plans New TIM WAP site VAS ARPU 3Q06 4Q06 High quality clients acquired in the quarter combined with a positive seasonality in the period Keeping ARPU gap vs. market in the 4Q06 2006 VAS breakdown 37 Growth YoY R$ 31 Usage 28 63% MMS P2P: + 22% 37% Data: + 307% Users SMS P2P: + 20% Innovative Traditional* MMS P2P: + 275% Vivo Claro Data: + 104% *VAS Traditional= SMS P2P and Voice Mail 18
  19. 19. Delivering Strong EBITDA and Margin Solid base growth with high quality clients and profitability EBITDA Continuous R$ Mln R$ Mln EBITDA and +45% +68% margin improvement 797.5 1,485.9 2,492.5 550.3 Higher efficiency and cost 4Q05 4Q06 2005 2006 expansion control EBITDA Margin (%) Improved 24.6% 27.3% competitive 23.0% environment: no 17.8% 22.9% 21.5% 15.7% (excluding negative impact 20.1% deferral of handsets subsidies) from Christmas’ 4Q05 4Q06 2005 2006 campaigns EBITDA Margin Reported EBITDA Margin Adjusted (Excluding the effect of B&K elimination starting on Jan 1st, 2005) 19
  20. 20. From EBITDA to Bottom Line ∆ YoY (R$ mln) + 247.2 - 68.4 + 178.8 + 16.8 - 0.8 +194.8 (R$ Million) R$ Mln 797.6 (597.2) Break-even! (90.8) (30.9) 200.3 78.7 EBITDA Depreciation EBIT Net Taxes and Net Income 4Q06 Amortization Financial Others Expenses Net loss reduction ∆ 2006 vs. 2005 (R$ Mln) +1,006.6 (370.0) +636.6 +29.7 +21.6 +687.9 20
  21. 21. Financial Discipline well Preserved Improved net financial position Increasing dividends distribution R$ Mln Non R$ Mln Operating Operating 450.8 3Q06 FCF FCF 4Q06 ~ 4x 122.0 2005 2006 (1,787) 873 (113) (1,027) R$ per 1,000 0.1387 0.1933 shares EBITDA +798 CAPEX (693) 1.3870 1.9330 ∆ Oper. WC +769 R$ per ADR Seasonal increase in purchase related to CAPEX and Partial realization of the expansion reserve and handsets distribution to shareholders as dividends Gross Debt: R$2.2 billion (of which 85% long term / average annual cost of 13% in 4Q06) Cash and equivalents: R$1.2 billion Net Debt: (R$1.0) billion 21
  22. 22. “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 Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca Visit our Website: 22640-102 Rio de Janeiro, RJ http://www.timpartri.com.br Phone: +55 21 4009-3742 / 4009-3751/8113-0571 Fax: + 55 41 4009-3314 22
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