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TIM Brasil - Meeting with Investors     TIM BrasilSeptember, 2012   - Meeting with Investors              March, 2013
Knowing TIM Better  Shareholders Structure                                                                       TIM: A Hu...
Macro-Economic Fundamentals Remain Solid                                                                            Famili...
Strategy
Leveraging on Pure Mobile Competitive Advantage  Voice FMS: Mobile is more convenient than Fixed…                         ...
Mobile Segment to Support Universalization  Customers Growth - Telecom                                            Market T...
FMS Secular Trend Remains on PlayFixed to Mobile Substitution…                                   …impacting Fixed Incumben...
2012 Results in a Few
Business Resilience Against a Strong Headwind Operational Improvement Users, Minutes, Unique Users, %YoY                  ...
Guidance: Check Point                                                                                            %        ...
The Only Company to Gain Market Share   Total Market Share Growth   (% of total lines)                                    ...
Customer Base Evolution                                                             Voice post-paid Base Analysis (ex-M2M ...
Data as Key Driver for GrowthProducts Net Revenues                                  Handset Sales Market Share            ...
EBITDA & Efficiency     EBITDA Evolution     (R$ Million)                                                                 ...
Net Income & Dividend        From EBITDA to Net Income        (R$ Million)              5,010                             ...
Cash Generation 2012 Operational Free Cash Flow                                        Net Debt (R$ Mln)                  ...
2012 Conclusion                % Households with only mobile services             Fixed price premium over mobile         ...
TIM Fiber Update
Live TIM: Up & Running                                                                                              MSANs ...
Live TIM: Speeding-Up with the New OfferMarket Demand                                                              Offers(...
Quality and Network
Keeping the Good Level of Caring Performance     IDA – Index of Caring Performance (last reported by Anatel)              ...
Capex Analysis Anatel Benchmark for 2012-2014                                            Network Targets (R$ Bln)         ...
Strengthening Network to Support Data Growth                                 Organic Capex (ex- 4G license)               ...
Business Outlook
Business Drivers of Growth                                                                                                ...
TIM Fiber Plan Update 2013/2015 Coverage (addressable) Thousands of Households                               4x           ...
2013-2015 Guidance                                              2013 -2015           R$ billion         2011   2012       ...
Appendix
Historical Data: Financials (R$ Thousand)                                            30
Historical Data: Financials (US$ Thousand)                                             31
Historical Data: OperationalROA: NOPLAT/Avg. Total Assets.Calculation considers organic Net Income and EBITDA             ...
Regulatory Update                                                                        PGMC • Access to fixed operators ...
Taxation Over Telecom in Brazil       Tax Composition                                                                     ...
Shareholders Structure and Stock performance                          Telecom Italia                                 100% ...
Safe Harbor and IR Contacts Safe Harbor Statements                                Investor Relations Team                 ...
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Transcript of "Meeting with investors of march 2013"

  1. 1. TIM Brasil - Meeting with Investors TIM BrasilSeptember, 2012 - Meeting with Investors March, 2013
  2. 2. Knowing TIM Better Shareholders Structure TIM: A Huge Brazilian Company  Presence in Brazil since 1998 TIM Brasil Serv. e Part. S.A. Minoritários  13th largest Private Company in Brazil (source: ExameON: 67% (1,611,969,946) ON: 33% (805,662,701) Magazine)  Unique Telco company listed on the Novo Mercado: TIM Participações S.A. .100% Tag Along and equal dividend rights Market Cap . One single class of shares (R$ Bln; CAGR) . Independent Board members +15% . A more strict disclosure policy 22.3 19.8 17.7 16.9  +11,500 direct employees 11.5  + 21,000 indirect jobs  +400,000 Points of Sales (Top-up and SIM cards) 2008 2009 2010 2011 2012  + 130 own stores Corporate Governance  > 70 million costumers. The 2nd player.  11 Customer Care Centers with 14,000 consultants Requirement of Highest level of  ~ 11,500 antennas in 3,383 cities, covering +94% urban Corporate protection for Governance population Demand for minority transparency and shareholders  Exclusive attendance of 391 municipalities and 1.64 disclosures Legal million customers Requirements  Payment of R$8.1 billion in taxes and contributions in 2012 Brazilian Law “Nível” 1 “Nível” 2  Investment: R$3.8 billion in 2012 “Lei das S.A” 2
  3. 3. Macro-Economic Fundamentals Remain Solid Families Income is increasing continually Brazilian families consumption is growing every year Average Real Salary (R$) Families consumption on Brazilian GDP demand side - %YoY growth 8 2,000 6.9 1,900 7 6.1 5.7 1,800 6 5.2 1,700 4.8 5 4.4 4.1 4.3 1,600 4 3.1 1,500 1,400 3 1,300 2 Lowest 1,200 1 Growth 1,100 - 1,000 2006a 2007a 2008a 2009a 2010a 2011a 2012a 2013e 2014e Family Indebtness will probably drop Unemployment rate is reaching a low record constantly % debt service/families income Unemployment Rate(%) 30 13.0 12.4 12.0 11.5 25 22.4 21.9 19.1 19.2 20.3 19.5 20 20.2 11.0 9.9 10.0 20 17.8 10.0 9.3 9.0 7.9 8.1 15 Peak 8.0 6.7 10 7.0 6.0 6.0 5.5 4.8 5 5.0 4.2 4.0 - 3.0Source: Credit Suisse, BaCen and IBGE 3
  4. 4. Strategy
  5. 5. Leveraging on Pure Mobile Competitive Advantage Voice FMS: Mobile is more convenient than Fixed… Data Going Mobile: Internet has a great potential… R$/minute, voice Mln Households; Fixed BB by speed % of connections 68 Mln  Possess < 2 Mbps 38% 66% Internet connection 25.7 Mln 50% mobile 27% Other discount 3.2 Mln  Does NOT 28% 25% Lack of Possess 62% 2.9 Mln Coverage Internet connection 41.9 Mln Intention 2006 2007 2008 2009 2010 2011 2012 48% Too to buy 5.6 Mln Expensive over next 12 months Total Households Households which does NOT possess Voice FMS: …TIM, with no legacies, can only gain on the trend Data Going Mobile …Mobile has greater price efficiency R$ billion, Net Revenue per Group (2012) Willingness to pay, % of households Willingness to pay (% of Households) Total 33.9 30.7 28.1 18.8 4.3 > R$ 250 1% FMS R$ 250 2% R$ 200 3% UBB Fixed + Data Focus Live TIM 12.5 R$ 150 6% + Pay TV Approach 18.5 0.9 R$ 100 13% 19.0 R$ 80 20% R$ 70 26% Mobile 21.4 17.9 R$ 50 41% 12.2 9.1 R$ 40 50% 4.3 R$ 30 62% R$ 20 68% Mobile Vivo Claro Oi TIM GVT R$ 10 73% A pure mobile approach is the most suitable strategy to capture both opportunitiesSource: Company estimates; CETIC dec’11; 5
  6. 6. Mobile Segment to Support Universalization Customers Growth - Telecom Market Transformation (Mln customers) Total Revenues- R$ Bln 261.8 CAGR ’12-’15 +116% 242.2 129 4% 202.9 124 174.0 116 28 22 150.6 104 (22%) 28% 14 (12%) (18%)Mobile 121.0 • Mobile 6 (6%) +12% Mobile: +7% VAS 41.2 41.5 42.0 43.0 44.0 41 46 47 46 39.4 • Mobile 0% (40%) (40%) (38%) (36%)Fixed Voice • Fixed 17 21 2007 2008 2009 2010 2011 2012 (16%) 23 25 Data* (18%) 7% (19%) (19%)Mobile 40 Fixed: -1% 35 32Penetration 64% 79% 90% 105% 124% 133% • Fixed (38%) 30 -5% (31%) (26%) (23%) Voice Customers Growth – Broadband 2009 2012 2014 2015 (Mln customers) Market split between: 52.5 +38x Mobile 47 60 69 75 (45%) (52%) (56%) (58%) 33.2 57 56 55 55 Mobile Fixed (55%) (48%) (44%) (42%) 19.1 14.6 16.3 10.0 11.4 +90% Fixed 4.1 13.8 1.4 Mobile Segment as the Growth Driver and 2008 2009 2010 2011 2012 Sector Universalization 6 *including Corporate/Wholesale
  7. 7. FMS Secular Trend Remains on PlayFixed to Mobile Substitution… …impacting Fixed Incumbents … benefiting Mobile Segment Fixed Tariff Premium over Mobile Lines in Service ARPM (R$/min) (Fixed - Residential, Mobile, D% yoy, mln lines) Fixed Mobile (Residential) -6.8% +8.1%Mobile -5.0% +19.4% 50% mobile 262 discount 22.1 242 20.6 19.6 203 2010 2011 2012 2010 2011 2012Fixed Revenues2006 2007 2008 2009 2010 2011 2012 (Fixed, Mobile, D% yoy, R$ bln) Leading Traffic to a Sharp Increase Fixed -6.3% Mobile +7.7% (Bln Minutes; Traffic Outgoing) -6.3% +10.3% 21.8 22.6 23.7 26.4 29.1 36.0 20.1 33.7 56.2 60.6 31.6 51.0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2010 2011 2012 2010 2011 2012 Organic EBITDA Leadership in LD Market Share (Integrated, Mobile as TIM, D% yoy, R$ bln) (% Minutes) Integrated Mobile88.2% -3.0% 66.5% +8.5% 53.3% 49.8% 48.5% 48.3% 49.7% -2.3% +11.1% 6.7% 45.8% 47.8% 47.7% 48.1% 28.3% 42.0% 21.3 5.1 20.6 4.7 20.2 4.2jun/09 jun/10 jun/10 dec/10 jun/11 dec/11 mar/12 TIM Incumbents* 2010 2011 2012 2010 2011 2012 * Telemar, Brasil Telecom, Telesp e Embratel. Source: Companies results and Teleco. 7
  8. 8. 2012 Results in a Few
  9. 9. Business Resilience Against a Strong Headwind Operational Improvement Users, Minutes, Unique Users, %YoY  Leader in customer base +10% +14% growth for the 10th +22% consecutive quarter 150 ~21 70.3 67.2 68.9 69.4 139 64.1 131 126 127 ~18  Leader in pre-paid  #2 in post-paid voice (ex - M2M and Dongles) 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 Customer Base – Mln Minutes of Usage Data Monthly Unique Users - Mln  Record of MoU at 150 min  Smartphone penetration Financials reached 43% of total base R$ Bln, %YoY  Increasing investment to Total Revenues Organic EBITDA Organic Net Income R$3.4 Bln (+12% YoY) ex- 19% 27% 34% licenses 13% 16% 8% 7% 8% -2%% YoY 7% 7% 6%  Organic Net Income FY12 = R$1.5 Bln (+17.4% YoY)  EBITDA – Capex = R$1.6 0.5 Bln (ex-licenses) 5.0 0.4 4.7 0.3 4.5 1.2 1.2 1.4 0.3  Proposed dividends of 4.5 1.2 ~R$743 mln (+39% YoY) 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 1Q12 2Q12 3Q12 4Q12 % Margin 26.2 26.7 26.3 28.4 6.1 7.5 9.0 9.2 9
  10. 10. Guidance: Check Point % 2011 2012 Guidance R$ billion Achievement Total Net 17.1 18.8 18.8 100% Revenues (+10%) Organic EBITDA 4.7 5.1 5.1 100% (+10%) Organic Capex 3.0 3.4 3.0 113% Tough Year Underscored by Solid Business Foundation • Resilience of customer base growth • Macroeconomic slowdown Net Service Revenue Evolution and usage (especially data) • Regulatory scrutiny 2.7% • ARPU sequentially improving • Image damage 1.7% 1.8% 13.1% • Good cost control (ITX / network • Increased competition 6.9% costs up 9% while traffic +34%) • Intelig’s business performance Intelig’s • More investments in infrastructure below expectations 2011 YoY MTR Macro 2012 YoY Net Service Impact Business Competition Net Service Revs Impact Regulatory Revs Impact 10
  11. 11. The Only Company to Gain Market Share Total Market Share Growth (% of total lines) D 2012 vs. 2011 #1 Pre-paid 29.7% 29.5% 29.1% 28.9% +63 Bps 27.6% 28.3% Vivo -45 Bps 26.9% 26.9% 199 Vivo 26.5% bps 28.0% 27.2% -78 Bps 457 +42 Bps bps 25.4% 24.9% 24.9% 25.0% 24.1% 24.7% +67 Bps Claro Claro +0 Bps 25.1% 20.1% Oi 19.5% -53 Bps 2011 2012 19.4% 18.8% 18.8% 18.9% #2 Voice Post-paid Oi +3 Bps 38.2% 38.4% +21 Bps Vivo The only mobile 22.0% 23.2% +121 Bps operator which 2010 2011 2012 Jan/13 grew in 2012 -282 Bps Claro 23.9% 21.0% 15.3% 16.7% +143 Bps OiSource: Anatel 2Q12 4Q12 Sales Force Focus on Efficiency Bad Debt Trend (Points of sale EoP) (R$; months) (as % of Gross Revenues) 2010 67 SAC/ 1.5 Own 1.3 1.4 ARPU 2011 81 +96% Stores 2012 131 1.04% 36 0.92% 28 27 0.71% SAC 3Q12 298k +9% Mass -21% -5% Channel 4Q12 QoQ 326k 4Q10 4Q11 4Q12 4Q10 4Q11 4Q12 11
  12. 12. Customer Base Evolution Voice post-paid Base Analysis (ex-M2M and broadband) (Million lines) Customer Base Growth (% YoY) 10.5 10.7 D% YoY 10.4 10.2 10.4 10.3 +15% 9.9 10.0 9.8 9.4 9.5 9.7 10.7 9.3 +15.5% Total post- 8.3 8.4 8.7 +25% paid 10.3 base 10.0 9.7 Voice post- 4Q12: 519k Net adds Post-paid paid base 34% Net share (#2) 9.3 Dec 11 Mar 12 Jun Sep 12 Dec 12 12 Source: Anatel 4Q11 1Q12 2Q12 3Q12 4Q12 +75 Bps Voice Growth (MOU) (Minutes; %YoY; Top Up) post- 14.5% 14.4% 14.5% 14.8% 15.3%paid Mix % YoY +1.7% +0.2% +0.2% +6.7% +14.5% +8.8% 59.1 59.6 Top Up Volume 58.9 57.6 210 150Pre-paid 183 +15% 139 54.8 131 126 127 4Q11 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12Source: Anatel 12
  13. 13. Data as Key Driver for GrowthProducts Net Revenues Handset Sales Market Share Smart/Web phone Penetration(R$ Million) (% of handset revenues in 2012) (% over total base of lines) +56.4% 1.6x 706 Operators 43.1% 8% 39.1% 622 35.2% 563 60% 19% 31.1% 451 453 40% 33% 26.6% Open Market 40% 4Q11 1Q12 2Q12 3Q12 4Q12 P1 TIM P3 P4 Sales of web/smartphones represented 65% Source: Company estimates 4Q11 1Q12 2Q12 3Q12 4Q12VAS Gross Revenues SMS unique users growth Data users(R$ Million; % of Gross Mobile Services Revenues) (Million Montlhy unique users) (Million monthly unique users) 19.6% 20.5% 18.1% 18.7% +21.5%16.7% +24.6% >21 ~18 +29.7% 1,243 1,132 1,000 1,031 958 4Q11 1Q12 2Q12 3Q12 4Q12 3G coverage (% of urban 66% 72% 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 pop.) 13
  14. 14. EBITDA & Efficiency EBITDA Evolution (R$ Million) 16 mln of provision on advertising credit ~400 26 mln of provision on Anatel administrative procedures established between 2007/09 +69 +91 -630 +1,067 -202 5,052 -42 5,010 4,658 27.3% 26.9% 26.7% EBITDA Margin 32.4% 32.1% 32.5% Service EBITDA Margin EBITDA Δ Services Δ Handset Δ Marketing Δ Network Δ Pers./G&A Adj. EBITDA Non- Rep. EBITDA 2011 Revenues Margin and Sales and ITX and others 2012 recurring 3Q 2012 ΔYoY +6.9% -20.9% -2.3% +13.3% +11.8% +8.5% +7.6% Handset Business and Commercial Efficiency Leased Lines, Traffic and ITX Costs (%YoY) (Compound Growth Rate - Quarterly) Traffic Handset Business 6.9% Net Product COGS +26% +35% Revenues 2011 2012 2011 2012 2011 2012 Leased ITX costs Commercial Efficiency Lines costs (ex-SMS) 0.2% Gross -0.6% -3.4% Commissioning Adds Expenses -9.3% 2011 2012 2011 2012 2011 2012 2011 2012 14
  15. 15. Net Income & Dividend From EBITDA to Net Income (R$ Million) 5,010 16 + 26 = 42.1 mln – provisions 9.1 mln – monetary adjustments for the administrative procedures -2,689 2,321 -168 -705 1,449 1,500 EBITDA Depreciation/ EBIT Net Financial Taxes and Net Income Adj. Net 2012 Amortization Result Others 2012 Income 2012 ΔYoY +7.6% +3.6% +12.6% -29.7% +29.1% +13.4% +17.4%Organic Net Income Dividend Evolution(R$ Million, CAGR) (R$ Million, CAGR, Reported Payout) +22% +39% 1,500 743 1,278 533 776 497 2010 2011 2012 2010 2011 2012 Payout 22% 42% 51% Ratio 15
  16. 16. Cash Generation 2012 Operational Free Cash Flow Net Debt (R$ Mln) (R$ Mln) R$ 378.2 Mln of 4G Licenses EBITDA: -5,010 5,010 -3,765 D WC: -579 Capex: +3,765 Dividends: +523 ~ R$ 340 Mln of Income Tax: +414 License payable Others: +295 441 -1,824 +579 1,824 +1,232 -151 EBITDA CAPEX Δ WC OFCF%YoY +7.6 +24.4 +7,342 +12.4 2011 Oper. Non-Oper 2012%Net FCF 26.7 20.1 3.1 9.7 Net FCF NetRev. Debt Debt 5.1 Bln for Organic EBITDA in 2012 1.8 Bln of Oper. Free Cash Flow in 2012 3.4 Bln on Organic CapEx in 2012 16
  17. 17. 2012 Conclusion % Households with only mobile services Fixed price premium over mobile TIM MoU Mobile (minutes) 55%FMS on Play 49% 129 136 116 83 Fixed 2009 2011 2006 2009 2011 2014 2009 2010 2011 2012 2015e Mobile Broadband Access per Social Class Data Monthly Users +600 bps +700 bps x2 x5 (Mln) >21Mobile ~18Data 20% 20% 2010Accelerating 18% 18% 14% 2011 11% 9% 4% 4Q11 1Q12 2Q12 3Q12 4Q12 A Class B Class C Class D/E Class Source: PNAD (national institute of statistics) MTR Path MTR (Mobile Termination Rate) (R$/minute) • Cut implemented • Clear path towards 2016 0.37 0.33MTR & EILD • Great contribution from mobile sector (ARPM -16%YoY) 0.25partially 0.17implemented EILD (Leased lines) • Resolution 590 released (cut up to 30%) • Needed framework to be followed by incumbents • Monopoly break 2012a 2013e 2014e 2015e 17
  18. 18. TIM Fiber Update
  19. 19. Live TIM: Up & Running MSANs Optical BackboneNetwork 2 networkConstruction 1 3 Buildings authorized Building’s connected MSANs installed 7.1 k 8.5 k 3.0 k 4.2 K 405 694 3Q12 4Q12 3Q12 4Q12 3Q12 4Q12 Capex per Client Quality of Service (R$) (Average Speed in Mbps) >700 35 37 500Quality of 20 21Service withLow Cost 1.8 0.4 Market Average Live TIM Live TIM 2012 Dec/15e (nominal) (delivered) Download Upload 19
  20. 20. Live TIM: Speeding-Up with the New OfferMarket Demand Offers(Units) (Units) Launch Promo Actual (jan13) Website Registration 160kCustomer Base / Sales weeks Msan Installation Takeup (average)(000 Clients) MKT share per Week per Coverage 10 Customer Base 10% 9 Sales 8 7 6 5 5% 4 3 2 1 0% 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 may/12 jun/12 jul/12 aug/12 sep/12 oct/12 nov/12 dec/12 Week 20
  21. 21. Quality and Network
  22. 22. Keeping the Good Level of Caring Performance IDA – Index of Caring Performance (last reported by Anatel) Anatel Ranking of Complains (last reported by Anatel) (Points) (Index of Complains under 1,000 access) 0.60 0.60 0.55 0.57 98.10 97.70 98.65 0.52 0.53 97.40 97.10 95.20 94.80 0.47 0.42 0.44 0.45 94.00 0.41 93.80 0.47 94.50 95.30 95.10 88.95 0.47 0.47 TIM 86.35 86.55 88.10 92.60 TIM 0.32 0.31 0.29 0.30 0.32 0.42 86.65 88.80 0.35 86.30 80.20 0.30 77.63 0.30 83.90 83.30 0.25 0.25 0.26 0.24 0.23 77.25 76.28 74.84 71.12 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Source: Anatel Source: Anatel Volume of claims at Consumer’s Protection Agency (Procon) Procon Demands throughout 2012 (# Quarterly claims) (Thousands of Demands; Demands/thousand customers) Total Demands for 21,618 19,838 1k customers 19,245 Demands 18,558 16,013 1.62 14,737 Oi 120.4 12,567 1.23 Claro/Embratel 102.7 10,687 10,510 9,344 8,882 8,913 Vivo/Telefônica 44 0.48 8,229 7,693 TIM 7,591 8,745 6,229 7,648 TIM/Intelig 32.3 0.46 7,166 6,533 4Q11 1Q12 2Q12 3Q12 4Q12 Source: SINDEC data base. Represents 45% of total Procons (12/31/12) Source: SINDEC published in Folha de São Paulo newspaper P1 TIM P3 P4 22
  23. 23. Capex Analysis Anatel Benchmark for 2012-2014 Network Targets (R$ Bln) (km of fiber;units) 2012-2014 Capex FTTS 53 TRX (000) (000 km) 271 9.9 39 +36% 2012 Extra Capex 205 +32% 0.4 over Anatel Plan +20% +39% +81% 2012a 2014e 2012a 2014e FTTS Data Channel 9.5 # sites (000) Elements (000) 8.3 3.3 7.2 741 5.5 +160% +83% 1.3 406 TIM Claro Vivo Oi 2012a 2014e 2012a 2014e Owned Network Leased Lines Opex Savings (Thousand of leased lines; % of total transport network) (% of savings each year)# Leased -35% Total Traffic +64% +39% +28%Lines Growth %YoY Inertial Opex -80% +33 p.p. -75% -55%% Owned Reported OpexNetwork 2009 2010 2011 2012 2009 2010 2011 2012 23
  24. 24. Strengthening Network to Support Data Growth Organic Capex (ex- 4G license) (Capex/Sales, Mix of Investments; R$ bln) As % of Net Revs. 19.6% 18.0% 18.0% 10.7 3.4 3.6 3.0 2.8 Infra Invest. 2.7 3.1 2.3 Other Invest. 0.5 0.3 0.2 2010 2011 2012 2013e 2014e 2015e 3G Coverage 3G Capacity (incremental node-B) LTE Roll Out (# Cities, % Urban Population Covered)  Focus on main urban areas;% Urban Pop 80%Covered 72% 66%  Quality vs. Quantity. 54%  Launch of LTE service in April 2013 in six cities hosting the Confederations Cup, +62% +37%  In the course of the year, all the 12 cities of# cities 712 the FIFA World Cup 2014. 488  Sticking to Anatel’s minimum coverage 210 requirements. 2010 2011 2012 2013e 2014e 2015e 2013 2014 2015 Old Plan New Plan 24
  25. 25. Business Outlook
  26. 26. Business Drivers of Growth CAGR 12-15 4 Ways of Growth Revenue Growth (Total Revenues,R$ billion) High Single Digit growth 18.8 17.1 14.5 Customer MoU VAS HH ready Base Revenues to sell >90 Mln >200 min >26% ~2Mln Community FMS Internet for Tim Fiber 2010 2011 2012 2013e 2014e 2015e Expansion (Voice) everybody Ultra BB Mobile Customer Base FMS – Voice (MOU) Internet for All (Mobile Data) Million of lines Minutes of usage per line Data as % of Gross Mobile Serv. Revs. 250 >200 25% >26% > 90 200 19% 150 20% 70.3 129 15% 64.1 150 116 15% 13% 51.0 100 Double digit 10% Double digit growth growth 50 5% 0 0% 2010 2011 2012 2013e 2014e 2015e 2010 2011 2012 2013e 2014e 2015e 2010 2011 2012 2013e 2014e 2015e 26
  27. 27. TIM Fiber Plan Update 2013/2015 Coverage (addressable) Thousands of Households 4x ~2,000 Geographic Expansion Geographic expansion for low-middle class and targeting high ~500 income neighborhood 2012 2013 2014 2015 • 2012: priority coverage in areas with high ‘A/B classes’ concentration Efficient approach MSAN port occupancy (%), Capex (R$) • 2013: chess board strategy and entering in class C Port Occupancy (%) 80 • 2014: additional coverage in Rio de Janeiro and São 60 Paulo metropolitan regions, focusing class C 40 concentration areas 20 0 2012 2013 2014 2015Coverage Capex Installation Capex Total Capexper Home Passed per Sub per Sub ~R$2k ~R$800 ~R$5k ~R$300~R$80 ~R$700 TIM Int. Bench. TIM Int. Bench. TIM Fiber Int. Bench. Fiber Fiber 27
  28. 28. 2013-2015 Guidance 2013 -2015 R$ billion 2011 2012 CAGR Guidance Total Net High Single Digit Revenues 17.1 18.8 Growth Organic EBITDA High Single Digit 4.6 5.1 Growth Organic CapEx 3.0 3.4 10.7 28
  29. 29. Appendix
  30. 30. Historical Data: Financials (R$ Thousand) 30
  31. 31. Historical Data: Financials (US$ Thousand) 31
  32. 32. Historical Data: OperationalROA: NOPLAT/Avg. Total Assets.Calculation considers organic Net Income and EBITDA 322013e: Consensus and dividend yield from proposed 2012dividends of R$743 mln.
  33. 33. Regulatory Update PGMC • Access to fixed operators networks: • MTR (VU-M) billing system: Unbundling of copper networks (Backbone, Backhaul and Last Mile at Full billing between PMS* players (i.e. TIM, Claro, Oi and Vivo). regulated prices (wholesale vs. retail prices cross check). Partial bill and keep between non-PMS players (Nextel, CTBC and No unbundling of fiber networks: exclusive use of fiber networks Sercomtel) and PMS players was defined as follows: (including dark fiber) for 9 consecutive years (Regulatory Grace Period). 2013/2014: 80/20 2015: 60/40 • Infrastructure sharing: 2016: Full Billing Sharing of the passive infrastructure (duct, conduits and towers). • MTR cut path: • National Roaming: 2013: 9.5% (~R$ 0.33/min.) - effective in April, 2013. Charged at the lowest tariff in the market for non-PMS players (Nextel, 2014: 25% (~R$ 0.25/min.) CTBC and Sercomtel). 2015: 33% (~R$ 0.17/min.) 2016: Cost Model 4G QUALITY • 2.5 GHz: • Improvement Plan: Contract is signed, 10% paid in 4Q12, 90% to be paid in 2Q13 Focus on the improvement of customer care and network. (License value: R$ 382 mln). Suppliers are defined: Huawei, Nokia-Siemens and Ericsson. • Anatel quarterly assessment: Based on follow-up monthly meetings • Future of 700 MHz Auction : Ongoing discussion among Anatel, mobile carriers and • Indication of the integrality of the new quality rules broadcasters on digital dividend. New broadband indicators start to be informed of November/ 2012.*PMS as Significant Market Power. A player which has the power to influence a specific market. 33
  34. 34. Taxation Over Telecom in Brazil Tax Composition ~34% ~28% 1.5% In 2012, TIM paid R$9.1 % of Gross bln in taxes, fees and Revenues contributions (~48% of total net revenues). • R$1 bln in Fistel. 0.65% • R$8.1 bln in taxes, contributions and others fees. 3% Cofins PIS/ ICMS Fust/ Total PASEP FUNTEL Tax Relief - 1º Step: M2M Fistel and Smartphones (MP 563/2012) Tax reduction Reduction in the Increase of price to Penetration consumer Social Impacts Possibility of Better higher Quality investment in network Economic Impact 34
  35. 35. Shareholders Structure and Stock performance Telecom Italia 100% Stock Performance (base 100)* Telecom Italia International N.V. 140 100% 120 TIM Brasil Serv. e Part. S.A. Minorities 100ON: 67% (1,611,969,946) ON: 33% (805,662,701) 80 60 40 TIM Participações S.A. 20 0 100% 100% TIM Celular S.A. Intelig TIMP3 Ibovespa TSU *Last price as of 03/01/2012 35
  36. 36. Safe Harbor and IR Contacts Safe Harbor Statements Investor Relations Team Avenida das Américas, 3434 - Bloco 01 Statements in this presentation, as well as oral 6 andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ statements made by the management of TIM E-mail: ri@timbrasil.com.br Participações S.A. (the “Company”, or “TIM”), that Rogério Tostes are not historical fact constitute “forward looking E-mail: rtostes@timbrasil.com.br statements” that involve factors that could cause Phone: +55 21 4109-3742 the actual results of the Company to differ Vicente Ferreira E-mail: vdferreira@timbrasil.com.br materially from historical results or from any Phone: +55 21 4109-3360 results expressed or implied by such forward Leonardo Wanderley looking statements. The Company cautions users E-mail: lwanderley@timbrasil.com.br of this presentation not to place undue reliance on Phone: +55 21 4109-4017 forward looking statements, which may be based Gustavo Valente E-mail: gvalente@timbrasil.com.br on assumptions and anticipated events that do Phone: +55 21 4109-3446 not materialize. Luiza Chaves E-mail: luchaves@timbrasil.com.br Phone: +55 21 4109-3751 Visit our Website www.tim.com.br/ir 36
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