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Conference Call 4Q11

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  • 1. 0
  • 2. Additional Note The following financial and operational information, except where otherwise indicated, is presented g p , p , p according to the IFRS (International Financial Reporting Standards) and in Reais (R$), pursuant to Brazilian C B ili Corporate Law. t L The comparison analysis refers to TIM stand-alone basis, excluding the effects of TIM Fibers’ acquisitions in Nov/11 - except when otherwise indicate 1
  • 3. Agenda Main Achievements - Luca Luciani Operational Performance - Lorenzo Lindner Marketing Activities - Roger Solé é Financials Highlights - Cl di Zezza Fi i l Highlight Claudio Z Conclusion & Outlook Luca Luciani Outlook– 2
  • 4. Main Achievements # 2 Player in Value and Volume (26.5% of market share on # lines, +130 Bps YoY) Accelerating Customer Base +25 6% YoY ending 2011 at 64.1 million lines +25.6% YoY, 64 1 Growth Leader in Incremental Market Share (33%) for the 2nd consecutive year Fastest growing mobile operator: Top line: +18% YoY and Service Revenues: +13%YoY EBITDA: R$4.6Bln FY2011 (+10.4% YoY) Improving Cash EBITDA Margin: 27.1% and Profitability y EBIT: R$2.1 Bln FY2011 (+72.1% YoY) ( ) EBITDA-CAPEX: R$1.6Bln FY2011 Voice revenues continue to grow at double digit, both in local and long distance calls “Voice is Good” & MOU at 129 min. in 2011 (+10.8% YoY) Data Take-Up Data revenues fast accelerating: +41.3% FY2011 and +49.2% in Q4 Web/Smartphone penetration at 27% of total lines (vs. 10% Dec’10) Increased 2G Capacity by 43% in 1 Year (+157k TRX installed) Streghthening Coverage 3G at 67% urban population: 488 cities (502 at ending of January) Network N t k Roll-out Roll out of own transmission: 25k long distance back bone and 12k microwaves installed back-bone Capex at R$3.0bn – Reduced commercial investments and more allocation on network 3
  • 5. Three Years in Few:Accelerating Growth and Profitability Customer Base Expansion Revenues growthMillion lines R$ billion +18% Fastest 13.1 13 1 growing Company 9.9 3X Net Revenues +5% Net Adds 0% 4.7 Growth YoY 64.1 17.1 51.0 51 0 13.7 14.5 14 5 +25% 41.1 +56% Total Net Customer Revenues Base 2009 2010 2011 2009 2010 2011 Market share EBITDA , EBIT , EBITDA-CAPEX% of lines R$ billion Leading 2.1 34% 33% growth for the 1.2Incremental 2nd year 4.1X market 20% 0.5 26.5% share EBIT 1.36 1 36 1.64 1 64 25.1% 0.80 2X Back to #2 EBITDA-CAPEX 23.6% Market 2009 2010 2011 share 2009 2010 2011 EBITDA 3.5 4.2 4.6 4
  • 6. Two Markets, One approach: Simplicity “Voice is Good” “Internet for All” Total Voice Traffic Volume Example: Infinity Web Pushing the (Billion of minutes) (Daily Internet unique users-Pre paid (Mln)) >15mln of fixed-mobile fixed mobile substitution unique users 86.7 2.7 per month (Pre+Pos) 62.5 9X 2X 38.1 0.3 2009 2010 2011 Aug 10 Dez 11 “Ride the Voice Revenues Data Revenues simplicity” Voice Outgoing Gross Revenues Gross Data Revenues +49%YoY data (R$ Billion) growth in 4Q11 13.4 (R$ Billion) 3.2 2.2 1.9 +67% 11.3 +34% 10.0 2009 2010 2011 2009 2010 2011 Leading the Voice Market with just 2 concepts: Fast growing in VAS with just 2 concepts: • Infinity (Pre): price per call; local and LD • Infinity (Pre): unlimited browsing/messaging, per day • Liberty (Pos): unlimited call; local and LD • Liberty (Pos): unlimited browsing/messaging, per month 5
  • 7. Network Evolution 2G Capacity TRX Total Brazil – installed in 2011 3G - Coverage Activations accumulative, 2011 Total TRX, ‘000 157 50.000 47,147 110 40.000 88 +43% 30.000 67% 502 in 20.000 +25% 54% 32% jan’12 10.000 % urban 0 population Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec EoP 2009 EoP 2010 EoP 2011 coverage 488 Of which TRX North and Northeast Brazil North and Activations accumulative, 2011 Northeast 25.000 20,565 210 20.000 43% 15.000 Rest of 57% # cities 57 10.000 Brazil 5.000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011 3G Overlay Node B – installed in 2011 CAPEX Activations accumulative, 2011 Total NodeB 6, 476 4,676 4 676R$ Bln 2,000 1,800 1,500 +38% 19.4 19.6 2,142 1,000 As % of +118%Net sales 17.5 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec EoP 2009 EoP 2010 EoP 2011 3.0 Long Distance Fiber Backbone Radio transmission (MW) 2.7 2.8 km Total MW Invest. 12, 090commercial 24,800 9,441 Invest. 16,000 , network 15.000 4,605 +28% +105% 2009 2010 2011 2009 2010 2011 EoP 2009 EoP 2010 EoP 2011 6
  • 8. Agenda Main Achievements - Luca Luciani Operational Performance - Lorenzo Lindner Marketing Activities - Roger Solé é Financials Highlights - Cl di Zezza Fi i l Highlight Claudio Z Conclusion & Outlook Luca Luciani Outlook– 7
  • 9. Customer Base Evolution 2011 vs. 2010 Mln lines +4.9 +13.1 +3.7 64,1 +2.7 +1.8 59,2 +4.1 55,5 9,3 +1.8 +2.5 52,8 51,0 8,7 +1.3 +2.1 +2 1 8,0 +1.8 +1.5 46,9 +1.7 44,4 7,7 42,4 7,5 39,6 41,1 37,8 7,2 36,1 7,0 6,5 6,6 6,3 6,2 6,2 , Pos P 54,8 +11.2 47,5 50,6 43,6 45,1 37,5 39,7 33,3 34,7 35,8 29,9 31,6 Pre 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11Net AddsPre-paid 87 1,687 1,687 1,354 1,103 1,716 2,242 3,838 1,598 2,359 3,053 4,219 (000)Net AddsPost-paid -393 41 86 149 150 341 280 243 223 317 632 655 (000) 8
  • 10. Market Share Improvements Total Mobile Market Post-paid Net Adds - Trailing 12 months Mkt ShareMln of lines Mln of lines Dec’11 71.6  71 6 29.5% 68.6  3.5 66.2  64.0  64.1  26.5%Vivo 61.3  62.6  2.9 60.3  58.2  60.2  2.4 52.9  53.9  55.5  58.4  60.4  24.9% 1.6 1.8Claro 51 6 51.6  56.8  56 8 53.7  55.5  1.0 52.2  51.0  43.7  45.5  18.8% 0.5 40.4  41.6  41.5  42.1  0.0 39.3  Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Oi Vivo TIM Claro Oi Dec/10 Feb/11 Apr/11 Jun/11 Aug/11 Oct/11 Dec/11 Net Market Share – Dec’11 Pre-paid Net Adds - Trailing 12 months % of net adds Mln of lines 10.5 Vivo Claro Oi 8.9 Dec 11 Dec’11 7.6 43% 26% 19% 13% 5.7 6.1 5.7 5.8 Vivo Claro Oi 3.2 FY2011 33% 29% 22% 16% Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Vivo TIM Claro Oi 9
  • 11. Postpaid growth: A sustainable business model Customer Base Post-Paid Bad Debt and SAC/ARPU Mln lines 0.6 0.7 % Gross revenues, 0.3 03 0.3 2.00% 2 00% 1.83% 0.3 0.2 0.2 1.34% 1.04% 0.2 Bad debt/ 1.08% 0.95% 0.92% Net 0.77% Addition Gross Rev 3,1 8.65 9.31 2,6 7.70 8.02 2,3 6.96 6 96 7.24 7 24 7.48 7 48 6.62 1,8 1,6 1,7 1,5 SAC/ 1,3 +24.4% ARPUCustomer YoY Base 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Anatel’s SMP 11 Indicator* Product Revenues and Capitalized Subsidy Complains/1.000 Bills p / R$ Mln $ 2011 Average: 1.45 1.91 Gross 1.85 732 712 Product 1.61 1.55 664 Revenues 424 468 433 1.69 1.63 1.17 1.11 380 1.53 1 53 1.47 1 47 286 1.10 0.76 115 85 Capitalized 64 26 8 0 0 0 Subsidy Jan11 May11 Sep11 Dec’11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11*Care relative to billing problems on 1,000 bills issued. 10
  • 12. Agenda Main Achievements - Luca Luciani Operational Performance - Lorenzo Lindner Marketing Activities - Roger Solé é Financials Highlights - Cl di Zezza Fi i l Highlight Claudio Z Conclusion & Outlook Luca Luciani Outlook– 11
  • 13. ARPU stabilized quarterly ARPU +4.7% -3.9% +1.0% QoQ% Post paid Post-paid ARPM and ARPU ARPU Pre and Post 16.5 17.0 16.4 16.7 +2.8% +0.8% +2.7% QoQ% stable ARPMR$ cents Stabilized Pre-paid 21.6 21.2 21.9 20.8 ARPU 1Q11 2Q11 3Q11 4Q11Generated* Incoming Outgoing VASReceived* ARPU Mix & Effect 1Q11 2Q11 3Q11 4Q11 YoY% -13.5% -10.9% -9.5% -5.8% 17% CB Mix: 85% Pre ~5X 15% Post 13% ARPU stabilized on a quarterly basis 12% 12% Improving ARPU dilution limited to Post vs. Pre subscriber mix customer Post Pre 1Q11 2Q11 3Q11 4Q11 base mix FMS on voice and data growth contrast ARPU dilution Net adds Post-paid/Total net adds*Generated: Voice Out Services & VAS; Received: Incoming Services 12
  • 14. “Voice is Good”: Fixed-Mobile Substitution Accelerates “Voice is Good” ARPMBln Minutes; Minutes R$ cents/min 24.1 24 1 22.4 +8% Reshaping Portfolio… …Portfolio Reshaped 30 20.6 +9% 24.1Total traffic 19.7 +5% 22.0 25 volume 19.0 18.1 130 131 16.5 17.0 16.4 16.7 20 126 127 15 Favorable 10 MOU Out 112 113 117 119 seasonality 5 MOU In 14 14 13 13 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q11 2Q11 3Q11 4Q11 Post-paid Pre-paidMinutes; ‘000 Minutes; mln Liberty Infinity MoU +1% +3% outgoing -1% +2% MoU +5% +4.2 +3.1 +3 1outgoing +7% +655 +2.4 +632 +1.6 +317 Net +223 Net Adds Adds 1Q11 2Q11 3Q11 4Q11 1Q11 2Q11 3Q11 4Q11 13
  • 15. Data solid take-up Monthly unique users Mln clients Smartphone penetration and Infinity Web +83% 17.5 % of handsets over total CB (lines); mln Pre paid users 9.6 2.7Daily internet a y te et 0.6 Jan 11 Jan’11 Dec 11 Dec’11unique users Post paid Pre paid 27% 20% Handset sold - volume 15% 000 units, handset sales 13%Smartphone/ 10% 8% webphone +83% +49% +10% penetration Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 +64% 3,507 3,164 3 164 2,589 2,847 2,262 2,125 1,915 1,383 Web/ 52% 69% 68% Smart- 46% 28% 30% 40% phone 19% 1Q10 1Q11 2Q10 2Q11 3Q10 3Q11 4Q10 4Q11 14
  • 16. Agenda Main Achievements - Luca Luciani Operational Performance - Lorenzo Lindner Marketing Activities - Roger Solé é Financials Highlights - Cl di Zezza Fi i l Highlight Claudio Z Conclusion & Outlook Luca Luciani Outlook– 15
  • 17. 3 waves of growth Customer Base Voice Data Mln users 4Q % YoY Min, Billion minutes, Gross Revenue R$ Bln 4Q % YoY %, Gross Mobile Revenue, R$ Mln 4Q % YoY 4.9 4.1 41 +19% 129 131 +1.7% 1 7% 16.7 +310Bps 99 13.6 64.1 MoU 1.5 24.1 +28% 11.2 51.0 958 Net Adds 18.9 % Data Rev./ 41.1 Total 12.0 Service Rev. 642 Traffic 3.7 3.1 489 2.8 +26% Customer +24% Gross +18% Gross Data +49% Base +11% +31% Revenues Revenues (Voice (mobile) 4Q09 4Q10 4Q11 Out) Q409 Q410 Q411 Q409 Q410 Q411 Revenues +% 4Q YoY R$ Mln 4,688 4Q % YoY 3,926 Total Net 3,571 +19.4% +10% Revenues 4,237 3,422 3,627 Customer +16.8% Total Traffic Data +6% Base Net Service Revenues +26% +28% +49% Community Fixed-Mobile Internet for Q409 Q410 Q411Strategy Expansion substitution all 16 (Voice)
  • 18. EBITDA and Efficiency EBITDA Commercial Activities & Others R$ Mln R$ Mln; 4Q YoY % 30.4 30.6 27.8 27 8 Reported: +8.7% EBITDA Excl. Subs. +11.0% Fistel +22.6% Taxes Impact Margin % (net adds +19%) 1,201 1,086 1,305 26 Volume and change in mix COGS +41.8% 145 (Handsets net revenue +51%) 1.176 EBITDA 940 Commissioning +18.5% Volume and change in mix (gross adds +27%) Q409 Q410 Q411 FY YoY Other Past years Tax expensesFull Year (R$ Bln) ( ) +416.1% ExpensesEBITDA 3.5 4.2 4.6 +10.4% (one time event 70 mln R$)EBIT 0.5 1.2 2.1 +72.1% Traffic Profitability Bad DebtR$ Mln R$ Mln % Mln, 4Q % YoY Total Traffic (min) 4Q % YoY +27.6% YoY % Bad Debt/ 1.08% Gross Rev. 1.04% 0.95% 0.92% Gross 3,655 +17.7% 0.77% -12 Bps Revenues 3,294 3,435 3 105 3,105 3 061 3,061 Voice Out 66 62 Bad Debt 58 61 +7.3% 1,287 +18.7% 42 1,109 1,147 1,203 Network 1,085 costs 4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2Q11 3Q11 4Q11 17
  • 19. Consistent EBITDA growth EBITDA Evolution From EBITDA to Net IncomeR$ Mln R$ Mln Net Revenue: +762 OPEX: - 658 +1,305 +1 305 +66 -176 -202 -632 +696 -280 +1,305 +1,201 , +673 -96 30.6% Ebitda Margin 27.8% -172 +405 35.5% Service Ebitda Margin 33.0% Ebitda Δ Business Δ Business Δ Δ Network Δ G&A + Ebitda EBITDA Depreciation/ EBIT Net Taxes and Net 4Q10 Generated Received Commercial Other 4Q11 4Q11 Amortization Financial Others Income + Handsets Expenses Expenses Expenses 4Q11 ΔYoY +23.6% +6.8% +19.5% +18.7% +38.0% +8.7% ΔYoY +8.7% -7.9% +30.8% +69.0% -112.0% -78.5% Dividend Net incomeR$ Mln $ R$ Mln $ 2,212 2 212 533 Tax credit 497 1,435 +66% 204 +161% Tax credit 801 +502% Intelig Fx Gain 1,285 672 6 2 776 Organic 129 2009 2010 2011 2009 2010 2011 18
  • 20. Cash Generation Operational Free Cash Flow – TIM + Nov-Dec TIM Fiber Net Debt – TIM + Nov-Dec TIM Fiber R$ Mln R$ Mln Ebitda +1,314 Δ WC +1,012 1,458 Capex - 1,150 +1,012 -1,150 Income TAX : - 94 +1,314 +1,175 Financial Result: - 101 +1,175 Others : +37 441 -158 4Q11 Δ WC CAPEX 4Q11 3Q11 Oper. FCF Non-Oper FCF 4Q11 EBITDA OFCF Net Net Debt Debt% Net 27.9% 21.5% 24.4% 25.0%Revenue 1.02 bln of Cash generation in 4Q11% YoY +9.4% - 12.1% +4.5% + 6.1% 19
  • 21. Agenda Main Achievements - Luca Luciani Operational Performance - Lorenzo Lindner Marketing Activities - Roger Solé é Financials Highlight - Cl di Z Fi i l Highlights Claudio Zezzaa Conclusion & Outlook – Luca Luciani 20
  • 22. 2011 - Delivery on Promises Waves of Growth Q4 Results +% 4Q YoY +16.8% YoY Net Serv. Rev. Customer Total Traffic Data Base +26% +28% +49% Community Expansion FMS (Voice) Internet for everybody Guidance 2011 - 13 2011CB ExpansionMln lines Market >25% 26.5% 51.0 64.1 Share Revenue Total Net Serv Rev : +13% Serv. Rev.: dec/10 dec/11 growth % High Single Digit (+7/8%) Total Net Revenues: +18%MOU increaseMin/month 129 131 Profitability (EBITDA) EBITDA 2011 > R$4.5bn > R$ 4.6bn dec/10 dec/11Smartphone Penetration CAPEX 3 Years CAPEX R$ 8.5bn ~ R$ 3.0bn in 2011 Smartphone, % CB ~27% 10% EBITDA - CAPEX OFCF: > R$ 6bn (’11-13) R$ 1.6bn in 2011 dec/10 dec/11 21
  • 23. Conclusions & Perspectives Marketing repositioning accomplished Fastest growing company 2009-2011 Building a solid infrastructure Conclusions Improving company profile: I i fil − Acquisition of Intelig and Atimus High Hi h commitment with superior C i ih i Corporate G Governance (N (Novo M Mercado) d ) Brazil: big and attractive market Mobile and Fixed: continuous reshaping of Telecom market (Voice FMS;2012-2014 Mobile Internet take-up)Perspectives Continuous growth pace (Customer Base, Revenues and Profitability) Network evolution towards FTTS and advanced data architecture Additional value creation: confirming the R$4.8bn from TIM Fiber 22