Meeting With InvestorsTIM Participações S.A.May2013
Shareholders Structure TIM: A Huge Brazilian Company Presence in Brazil since 1998. 13th largest Private Company in Brazil (source: ExameMagazine). R$20 billion of Market Capitalization.TIM Brasil Serv. e Part. S.A. MinoritiesTIM Participações S.A.ON: 33% (805,662,701)ON: 67% (1,611,969,946)Brazilian Law“Lei das S.A”“Nível” 1 “Nível” 2LegalRequirementsDemand fortransparency anddisclosuresHighest level ofCorporateGovernanceRequirement ofprotection forminorityshareholders3Corporate GovernanceKnowing TIM BetterUnique Telco company listed on the Novo Mercado:. 100% Tag Along and equal dividend rights. One single class of shares. Independent Board members. Strict disclosure policy• >70 million costumers.• +400,000 points of sales.• +130 own stores.• 11 Customer Care Centers (14kattendants)Sales• >12,000 BTS.• 3,390 cities covered.• 94% of urban pop. covered.• 41k optical fiber network.Network• +11,500 employees.• +21,000 indirect jobs.• R$8.1 billion in taxes payments(2012).• R$3.8 billion invested (2012).Social&Economic
Source: BaCen and IBGE 4Brazilian families consumption is growing every year(Families consumption on Brazilian GDP demand side - %YoY growth)Unemployment rate is reaching a low record constantly(Unemployment Rate %)12,411,59,9 10,09,37,9 8,16,76,05,54,84,23,04,05,06,07,08,09,010,011,012,013,0Families Income is increasing continually(Average Real Salary R$)1.0001.1001.2001.3001.4001.5001.6001.7001.8001.9002.000Family Indebtness will probably drop(% debt service/families income)19,1 17,819,2 20,3 19,5 2022,4 21,920,2-510152025305,26,15,74,46,94,13,14,34,8-123456782006a 2007a 2008a 2009a 2010a 2011a 2012a 2013e 2014eMacro-Economic Fundamentals
41,925,7(38%)(62%)68 Mln HouseholdsData Going Mobile: Internet has a great potential…(Mln Households)Fixed BB by speed% of connections66%< 2 Mbps73%68%62%50%41%26%20%13%6%3%2%1%R$ 10R$ 20R$ 30R$ 40R$ 50R$ 70R$ 80R$ 100R$ 150R$ 200R$ 250> R$ 250 Ultra BroadbandMobileLeveraging on Pure Mobile Competitive AdvantageVoice FMS: Mobile is more convenient than Fixed…(R$/minute, voice)72006 2007 2008 2009 2010 2011 201250% mobilediscountWillingness to pay (% of Households)Voice FMS: …TIM, with no legacies, can only gain on the trend(R$ billion, Net Revenue per Group (2012))Data Going Mobile …Mobile has greater price efficiency(Willingness to pay, % of households)Source: Company estimates; CETIC dec’11;Mobile 21.412.2 9.117.9Fixed + Data+ Pay TV12.518.519.00.94.3Total 33.9 30.7 28.1 18.8 4.3Vivo Claro Oi TIM GVTFMSFocusA pure mobile approach is the most suitable strategy to capture both opportunitiesPossessInternetconnectionDoes NOTPossessInternetconnectionReasons for not possessing:1. Too Expensive.2. Lack of Coverage.Live TIMMarket
Strategic Priorities8Network Quality& Infrastructure1Strategy &Offer Evolution2InstitutionalRelationships3People &Organization4Solid Capex investment program.Significant coverage and capacity improvement throughextensive own fiber infrastructure.Network Quality War Room approach.Efficient 4G Investment with RAN sharing.Continuous evolution of our offer platforms(transparency, simplicity, convenience, micro-segmentation).Promoting data usage with handset strategy, new VASoffers (e.g. TIMmusic) and 4G launch.Expanding postpaid and business user base.Developing option value of Live TIM ultra-broadbandservices.External Positioning: Innovation, Quality, Transparency.“Portas Abertas” customer portal for increasedtransparency and network quality evolution.Focus on regulatory and institutional dialogue.People Focus – highly skilled, highly motivated, rightorganization.Best Place to Work initiatives.Renewing Sense of Pride and Belonging – One ofBrazil‟s Top 15 Companies.
Improving voice & data capacity.Mobile data as the center of network strategy.Q1 in Few: Main Highlights103.3%4.1%Solid VAS revenue growth.Improving LD performance.Overcoming operation start-up challenges.Growing coverage.Community strength intact.Great response to new concepts (Liberty Controle).181209CustomerConfidenceConstant NetworkEvolutionReacceleratinggrowthAccelerating LiveTIM Services1.01.24Q12 1Q13Net Mobile Serv. Rev.Growth (%YoY)1Q131Q12Gross VAS Rev.(R$ Mln)+25% +16%Voice Capacity(TRX Units 000)1Q131H12250414+66%Data Capacity(Channel Elements units 000)1Q131H12- 29%Time to install (days)Jan/13 Mar/131126095.4XAddressable Market (HH 000)2Q12 1Q136771+6%Customer Base (lines mln)1Q12 1Q13Managing competition effects.Good cost control2693061Q131Q12+14%Net Income(R$ Mln)Speeding up FTTS deployment.Strong costumer response.126145+15%MOU (minutes)1Q12 1Q13Offer attractiveness.
Engine is Running at Strong Pace and EfficientlyMarket Share Evolution(% of total lines; Source: Anatel)1327965MassChannel(SIM andrechargesales)OwnStoresFocus on Efficiency(R$; months)3632291.81.61Q121Q11 1Q131.7SAC/ARPUSAC-12% -11%1Q131Q121Q111Q121Q1319.54% 19.45%24.75% 25.02%27.20% 26.71%28.27% 28.53%4Q12+26 Bps-48 Bps+28 Bps-9 Bps#1 Prepaid: 60.3 mln users #2 Voice Postpaid: 9.0 mln usersBad Debt Resilience(as % of Gross Revenues)1Q131.1%2Q120.9%1Q120.9%+103%111Q1316.72% 17.03%21.04% 20.73%38.38% 38.36%23.22% 23.25%4Q12+3 Bps-1 Bps-31 Bps+31 Bps1Q13Showing strength in both:Pre and Post-paidSales channel as a keyfactor:EffectivenessEfficiencyResilienceQuality drivenSales Force(Points of sale EoP; Points of Sales)TIMP1 P3 P40.7%1.0%3Q12 4Q12+22%
Improving Caring Services to Recover Customer SatisfactionIDA – Index of Caring Performance (last reported)(Points - the higher the better; Source Anatel)99.996.2 95.298.298.088.0 89.493.392.873.384.091.184.972.7 73.184.4Jun-12 Aug-12 Oct-12 Dec-12Claims at Consumer’s Protection Agency (Procon)(# Claims - the lower the better; Source: SINDEC database)7,6938,882 8,91310,0476,533 7,6488,745 8,97918,55821,61819,838 19,72810,51012,56714,73715,820Anatel Ranking of Complains (last reported)(Index of Complains under 1,000 access - the lower the better;Source: Anatel)0.200.28 0.300.240.240.44 0.410.340.340.50 0.470.380.500.64 0.630.51Jun-12 Aug-12 Oct-12 Dec-124Q123Q122Q12 1Q136,006,507,007,508,00TIM PRE POS CORP12Customer Care Satisfaction Survey(Points; Source: Company)Changing caring approach to meet differentsegments needsTaking transparency and convenience to thenext levelP3P4P1TIMP3P4P1TIMP3P4P1TIM
ARPU Performance(%YoY; R$)Postpaid Growth Helping ARPU and MOU ImprovementsVoice Postpaid Customer Base(000 lines; Source: Company and Anatel)MOU Performance(minutes)1Q12 2Q12 4Q123Q12137,1687,6388,1848,7038,956+25%1Q12 2Q12 4Q123Q12 1Q131Q13126 127150139145OutgoingIncoming1Q12 2Q12 4Q123Q12 1Q1319.1 18.3 19.918.9 18.5VASVoice-8.0%-15.3%-11.0%-9.5%-3.6%Liberty Controle taking up: managingthe large pool of Infinity customerbase.Express Option (pay by credit card)might boost adoption of Liberty andLiberty Controle plans.+69%Apr/12 Mar/13+15%Controle PlansCustomerBase
31% 35% 39% 43% 46%Mobile Broadband and SMS Remain at High Speed GrowthSMS growth(Days / Million Monthly unique users)Data users(Million monthly unique users)66% 72%3G coverage(% of urbanpop.)VAS(% of Gross Mobile Services Revenues; R$ Million)6401,0001,2451Q131Q11 1Q12Web/smartphones sales alreadyrepresents 70% of total salesHandset Sales Market Share Jan-Fev/13(% of handset revenues; Source: Company)21%44%25%10%TIMP1 P3 P459%41%Open MarketOperatorsSmart/Web phone Penetration(% over total base of lines)1Q12 2Q12 3Q12 4Q121.5x13.8%18.1%21.4%~18~221Q12 2Q12 3Q12 4Q12 1Q1314Enabling customers to use it… … and they are responding.+25%1Q13Feb/12 Feb/13+19%+13%Days ofUseSMSUsersGrossRevsVAS/Revs+94%+24%
…But Mobile Internet Wave is Still in the Early Stages15Brazilian Device Market(Million Units. Source: IDC)7.5 188.8.131.52 8.9 184.108.40.206.8Desktop Notebook TabletTablet OffersNew Offer2013e2011 201256% of Brazilians listen music at leastonce a week in their mobile phoneLegal accessAll musicsUnlimited downloadPay when you useWork in offline modeSmart Pipe:Entering in theOTT world as amain actor.
4G Launch16Fixed to Mobile Substitution will accelerate further with 4GRelease on April, 30th.FTTS project as the foundation for LTE.Efficient cost approach with RAN Sharing.Still a limited handset portfolio.Developing a next stage of mobile internetexperience.LTE Opportunity80%20%2G 3G2G 3G 4G LTEAverageSpeed(Mbps)CBPenetration5x10x
Development of Infrastructure20Optical Fiber Network Evolution(km of fiber)28,89138,951 40,64947,0002011 2012 Mar/13 Dec/13**According to Anatel Network PlanFTTS Project Status - 14 Brazilian Main Cities (Stage1)ManausFlorianópolisSão PauloMacapáSalvadorCuritibaMaceioRecifeFortalezaBrasíliaRio de JaneiroPortoAlegreBelémAracajuSão LuisPalmasVitoriaTeresinaBeloHorizonteCampo GrandeImperatrizGoiâniaCuiabaNatalMMMMMMMMMMMMMMMMMMMMMMJ.PessoaMMMMMMMMMMM MMMMMMMM 1st phase: Connecting sites with own fiber. Almost 85% of sites inthe 14 main Brazilian cities are connected with own fiber. 3rd phase: Expandingand fine tuning. Recifeis the first city to reachthis stage. 2nd phase: Light up the fiber and shift data traffic to own lines.2nd phase isexpected tobe completedby 4Q13M Cities of Stage 1M Cities (additional 30) of Stage 2Own Network to Support Traffic Growth(% of total transport network)52%80%48%20%2009 2012OwnedThird PartiesMain Benefits:• Increasing customer experience (throughput 50x faster thanprevious leased links on copper, 2/8Mbps)• Reduce network congestion• 4G (LTE) readyMetro RingOwn Fiber(300 Mbps)Copper(2-8Mbps)After FTTSBefore FTTS• Reducing leased lines costs
11.60712.029Jun/12 Mar/13Network Commitments21Network Elements Expansion…(units. Source: Company)…Driving Quality Improvements(% of success; % of call/data connection drop; Source: Company preview and Anatel)181209Jun/12 Mar/13250414Jun/12 Mar/13BTS TRX(Voice Capacity; 000)Channel Elements(Data Capacity; 000)94.8%97.5%95%Jul/12 Mar/132.0%1.7%2%Jul/12 Mar/1392.5%98.5% 98%Jul/12 Mar/13SMP5 - Traffic channelallocation rate (voice)SMP7 - Call Drop Rate SMP8 - Data ConnectionRate8.3%3.5%5%Jul/12 Mar/13SMP9 - Data ConnectionDrop Rate+4%+16%+66%Target agreed w/ Anatel
Capex Analysis221.33,33953406741205271Network Targets(km of fiber;units)TRX (000)Data ChannelElements (000)2014e22.9k20.3k18.4 k14.9 k9,58,37,25,50.4TIM Claro Vivo OiAnatel Benchmark for 2012-2014(R$ Bln)Owned Network Deployment….(Thousand of leased lines; % of total transport network)9.92012 Extra Capexover Anatel Plan +20% +39%2012-2014 Capex52%63%78%80%2009 2010 2011 2012% OwnedNetworkLeasedLines2012a2014e2012aFTTS(000 km)FTTS# sites (000)2014e2012a2014e2012a+160%+36%+32%+83%… Driving Leased Lines Opex Savings(% YoY)+81%23,6%6,0%-5,5%Total Traffic Customer Base Leased Lines CostsQ1 2013
232013 2014 2015Old Plan New PlanLTE Roll Out+62%3G Capacity (incremental node-B)+37%0.5 0.3 0.22.3 2.7 3.12010 2011 2012 2013e 2014e 2015e19,6% 18,0% 18,0%2104887122010 2011 2012 2013e 2014e 2015e54%66%72%80%# cities% Urban PopCovered3G Coverage(# Cities, % Urban Population Covered)Organic Capex (ex- 4G license)(Capex/Sales, Mix of Investments; R$ bln)InfraInvest.As % of Net Revs.OtherInvest.2.83.03.410.7 Focus on main urban areas; Quality vs. Quantity. Launch of LTE service in April 2013 in sixcities hosting the Confederations Cup, In the course of the year, all the 12 cities ofthe FIFA World Cup 2014. Sticking to Anatel‟s minimum coveragerequirements.3.6Strengthening Network to Support Data Growth
77.7%22.3%1Q12 2Q12 3Q12 4Q12 1Q13A Full Operating Business Deployed in Less Than a Year25First CustomerAward FrostLaunch RJAES AtimusAcquisitionNov11 May12 Jul12 Sep12 Oct12 Nov12 Dec12 Mar13Alpha TestDevelopment OSS/BSSLaunch SP10,000Sales16KCustomers41% NetShareNetwork Construction(MSAN and HH Addressable)Market share (MSAN occupation)(after 5 months; Source: company estimates)MSANs(Cabinet)HouseholdsAddressable609k77011%13%1H12 2H128.2%91.8%All Speeds Above34 MbNet Share RJ/SP (Jan-Feb’13)(Source: Anatel and company estimates)240kWebsiteRegistrationLive TIMLive TIMOthersOthers
Solving Operational Start-up Difficulties to Gain Customer SatisfactionTime to Install(# days)jan/13 feb/13 mar/13Driving the Market to a New Speed Level(Average Download Speed in Mbps)1.3 1.7 1.8 2.335.52009 2010 2011 3Q12 Live TIM(delivered)43% 42%26%51% 52%38%6% 6%36%Telecom FixedBroadbandLive TIMDelighted Satisfied UnsatisfiedCustomer Satisfaction Index(Source: Study of Bridge of Research Aug/12 and TIM)Live TIM has 6xmore delightedcustomers thanmarket average.Capturing Clients Through High Speed Packages(Source: Informa Telecom & media)2615xMarket Average- 29%0246810121415 20 25 35 50R$/MbpsDownload Speed (Mbps)Live TIMP1P2P3
Efficient approachMSAN port occupancy (%), Capex (R$)Coverage (addressable)Thousands of Households~500~2,00020152014201320120204060802012 2013 2014 2015~R$2kCoverage Capexper Home Passed~R$80~R$800Installation Capexper Sub~R$300TIMFiberInt. Bench.TIMFiberInt. Bench.~R$5kTotal Capexper Sub~R$700TIMFiberInt. Bench.Port Occupancy (%)274x• 2012: priority coverage in areas with high „A/B classes‟concentration• 2013: chess board strategy and entering in class C• 2014: additional coverage in Rio de Janeiro and SãoPaulo metropolitan regions, focusing class Cconcentration areasGeographic ExpansionGeographic expansion for low-middle class and targeting highincome neighborhoodTIM Fiber Plan Update 2013/2015
3%Tax Relief - 1º Step: M2M Fistel to drop and Smartphones tax exemption (Law 12,715/2012)Total~34%Fust/FUNTELPIS/PASEP1.5%0.65%ICMSCofins~28%Tax reduction Reduction in theprice toconsumerIncrease ofPenetrationSocialImpactsEconomicImpactPossibility ofhigherinvestment innetworkBetterQualityTax Composition35In 2012, TIM paid R$9.1bln in taxes, fees andcontributions (~48% oftotal net revenues).• R$1 bln in Fistel.• R$8.1 bln in taxes,contributions andothers fees.% of GrossRevenuesTaxation Over Telecom in Brazil
Shareholders Structure and Stock performanceStock Performance (base 100)*020406080100120TIMP3 Ibovespa TSU36*Last price as of 05/03/2012TIM Celular S.A. Intelig100%TIM Brasil Serv. e Part. S.A. MinoritiesTelecom Italia International N.V.Telecom Italia100%TIM Participações S.A.ON: 33% (805,662,701)ON: 67% (1,611,969,946)100%100%
Investor Relations TeamAvenida das Américas, 3434 - Bloco 016 andar – Barra da Tijuca22640-102 Rio de Janeiro, RJE-mail: email@example.comRogério TostesE-mail: firstname.lastname@example.orgPhone: +55 21 4109-3742Vicente FerreiraE-mail: email@example.comPhone: +55 21 4109-3360Leonardo WanderleyE-mail: firstname.lastname@example.orgPhone: +55 21 4109-4017Gustavo ValenteE-mail: email@example.comPhone: +55 21 4109-3446Luiza ChavesE-mail: firstname.lastname@example.orgPhone: +55 21 4109-3751Visit our Websitewww.tim.com.br/irSafe Harbor and IR ContactsSafe Harbor StatementsStatements in this presentation, as well as oralstatements made by the management of TIMParticipações S.A. (the “Company”, or “TIM”), thatare not historical fact constitute “forward lookingstatements” that involve factors that could causethe actual results of the Company to differmaterially from historical results or from anyresults expressed or implied by such forwardlooking statements. The Company cautions usersof this presentation not to place undue reliance onforward looking statements, which may be basedon assumptions and anticipated events that donot materialize.37