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Meeting with investors of november 2013

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  • 1. Meeting With Investors TIM Participações S.A. November 2013
  • 2. Knowing TIM Better TIM: A Huge Brazilian Company 15th Listing Anniversary Gross Revenues (R$ Bln) 27.8 Customer base EoP (Million) 70.3  Presence in Brazil since 1998.  13th largest Private Company in Brazil (source: Exame Magazine - 2013). Organic Growth 1998 Growth Via Acquisition 2012 1998 15,000 km fiber optical backbone 5,500 km fiber optical backhauling 2012  Approximately R$22 billion of Market Capitalization. Sales Corporate Governance Legal Requirements Requirement of protection for minority Demand for transparency and shareholders disclosures Brazilian Law “Nível” 1 Highest level of Corporate Governance Network • 72.9 million customers (27.2% Share) • The 2nd Player - Market and Rev. Share. • More than 400,000 points of sales. • More than 130 own stores. • 11 Customer Care Centers (14k attendants) • More than 12,000 Antennas. • ~3,400 cities covered. • 95% of urban pop. covered. • ~46,000 km of optical fiber network. “Nível” 2 “Lei das S.A” Unique Telco company listed on the Novo Mercado: . 100% Tag Along and equal dividend rights . One single class of shares . Strict disclosure policy • 11,800 employees. • 23,000 indirect jobs. • R$9.1 billion in taxes payments in 2012. • R$3.8 billion invested in 2012. Independent Board members . Social & Economic 2
  • 3. Macro Scenario: A Different Outlook Real GDP Forecast Inflation Forecast (%YoY Growth; Source: BaCen) (IPCA - %YoY Growth; Source: BaCen) Old Scenario New Scenario Old Scenario New Scenario 3.8 3.6 3,3 5.8 6.0 5.5 2,4 2,4 2,3 2,4 5.5 5.4 5.5 • Market consensus shows now a softer growth. 5.0 2013 2014 2015 2016 2013 2014 2015 Interest Rate Forecast • Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune. FX Rate Forecast (%Selic Target p.y. - Year average; Source: BaCen) 2016 ( R$/US$ - Year average; Source: BaCen) Market Consensus on Oct/12 Market Consensus on Oct/12 Market Consensus on Oct/13 Market Consensus on Oct/13 10.3 10.3 8.7 9.0 8.8 2014 2015 2016 8.4 10.0 2.3 2.4 2.4 2.0 2.0 2.0 2.1 2013 2014 2015 • Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data. 2016 2.2 7.3 2013 3
  • 4. Industry Overview & TIM Business Opportunity
  • 5. Brazil Telcos X-Ray Oi Vivo (2S13) (2S13) Fixed Mobile Fixed BB/TV Mobile Fixed Fixed BB TV 49,708 18,330 5,911 890 18.7% 41.1% 29.2% 5.2% Net Rev. (R$ Mln) 4,571 Fixed BB TV TOTAL 76,200 10,416 3,837 537 ND Market Share 28.7% 23.3% 18.9% 3.2% ND Net Rev. (R$ Mln) ND Fixed Customers (‘000) ND Market Share Mobile 11,177 TOTAL Customers (‘000) 9,543 Fixed / Mobile 14,114 América Móvil Brazil 17,047 TIM (2S13) 5,870 (2S13) Fixed Mobile Fixed / Mobile Fixed BB/TV Mobile Fixed Fixed BB TV TOTAL Customers (‘000) 66,472 10,516 5,945 8,985 ND Market Share 25.0% 22.7% 29.4% 53.0% ND Net Rev. (R$ Mln) 6,121 9,914 16,035 Fixed BB Mobile Fixed Fixed BB TV TOTAL Customers (‘000) 72,195 492 26 - ND Market Share 27.2% 1.1% 0.1% - ND - - - - 9,699 Net Rev. (R$ Mln)* *Organic Revenue 5
  • 6. The Opportunity in Brazil and TIM’s Strategic Positioning A. Continue to Explore Voice FMS B. Lead the Data/Internet Wave     Market  Very large voice market, although declining.  High price umbrella in Fixed services.  Customer migration to higher plans / hybrid and postpaid. Emerging data/internet user population. Large unserved Internet demand. Old Fixed networks legacy + bundle requirement. Mobile as the natural vehicle for inclusion. Voice Revenues Voice Revenues Voice Revenues Data Revenues R$ Bln Source: TIM) (R$ bln; R$ Bln Source: TIM) (R$ bln; 41.1 42.8 39.9 41.2 33.8 45.7 46.8 46.0* -3% Mobile Mobile 39.7 40.4 38.4 36.4 34.1 32.3 Fixed -7% 13.4 2.7 Strategy/ Objectives 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FMS Customer Base Growth Customer Base Expansion 15.1 4.0 16.7 17.9 5.8 8.0 19.2 20.4 21.7 +6% +18% 10.5 13.3 Fixed 16.7 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 … Massive Mobile Internet Access Internet and Data For All C. Manage Existing Customer Base * Excluded non recurrent and non-operational revenues (e.g.: towers sell) 6
  • 7. Leveraging on Pure Mobile Competitive Advantage Prepaid Leader 28.8% Market Share Customer Base Evolution (Market Share, Source: Anatel) Vivo 3Q13 x 3Q10 30,1% 28,6% -1.6 p.p. 2nd Overall 72.9 million customers 27,2% Claro 25,5% TIM 24,5% 25,1% Oi 19,5% 18,6% 3Q10 +2.7p.p. 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Voice FMS: …TIM, with no legacies, can only gain on the trend (R$ billion, Net Revenue per Group (2012)) Total 33.9 Fixed + Data + Pay TV 12.5 30.7 18.5 Mobile 28.1 19.0 21.4 12.2 Vivo Claro 1Q13 2Q13 Long Distance Leader 50% Market Share -0.9 p.p. 3Q13 Voice FMS: Mobile is more convenient than Fixed… (R$/minute, % over households with phones.) 18.8 FMS Focus 0.9 4.3 29.5% Rev. Share 50% mobile discount 2006 2007 2008 48,9% 17.9 9.1 Oi 4Q12 -0.3 p.p. 2009 2010 2012 56,3% % of households w/ mobile phones only 4.3 TIM 2011 GVT 2009 2012 A pure mobile approach is the most suitable strategy to capture both opportunities Source: Company estimates; CETIC jun’13; Akamai ; PNAD - IBGE 7
  • 8. Brazilian Internet Opportunities Fixed Broadband Average Speed (% Customers) 1% 24% 1% 26% 1% 38% 2% 31% 3% 31% > 12Mbps 75% 72% 60% 67% 66% >2 Mbps até 12 Mbps 2Q12 3Q12 4Q12 1Q13 2Q13 3% 3% 3% 3% 3% 49% 49% 2Q12 53% 44% 3Q12 56% 41% 4Q12 59% 38% 1Q13 62% 35% 2Q13 ≤ 2 Mbps > 12Mbps >2 Mbps até 12 Mbps ≤ 2 Mbps 5% 8% 6% 10% 6% 14% 6% 16% 7% 17% > 12Mbps 88% 84% 80% 78% 76% >2 Mbps até 12 Mbps 2Q12 3Q12 4Q12 1Q13 2Q13 ≤ 2 Mbps > 12Mbps 40% 42% 44% 47% 50% 59% 57% 55% 52% 49% 1% 2Q12 1% 3Q12 1% 4Q12 1% 1Q13 1% >2 Mbps até 12 Mbps ≤ 2 Mbps 2Q13 TIM`s services portfolio is ready to capture opportunities in all broadband segments, going mobile or going through its fixed ultra broadband. 8
  • 9. Pure Mobile Strategy Paying Off Users’ Preference for Mobile Low Fixed Broadband Quality Entering in Data World Via Mobile (%Households w/ mobile phones only) ( Brazil’s Average Speed; Source: Akamai) (Mln users; Source: Anatel) 48,9% 77,9 +18x 56,3% 2Q13 52,5 2.4 Mbps Mobile 2009 ANATEL: >50% of fixed broadband connections are below 2Mbps 2012 Fixed 33,2 11,4 4,1 2009 14,6 19 20,2 2012 16,3 Aug/13 +77% 13,8 2010 2011 Net Revenues EBITDA (% YoY) (% YoY; Not including assets sales; Mobile as TIM) Fixed Incumbents -2,6% -7,0% 3Q11 Fixed Incumbents 3Q12 6,9% 3Q12 3Q13 3Q11 3Q13 7,1% 3Q11 -4,3% -14,1% -6,1% 3Q12 3Q13 3,9% 4,2% 3Q12 3Q13 11,7% 11,6% Mobile -6,2% Mobile 3Q11 9
  • 10. TIM’s Strategic Priorities 1 Network Quality & Infrastructure Solid Capex investment program. Significant coverage and capacity improvement through extensive own fiber infrastructure. 2 Strategy & Offer Evolution Continuous evolution of our offer platforms (transparency, simplicity, convenience, microsegmentation). Network Quality War Room approach. Promoting data usage with handset strategy, new VAS offers (e.g. TIMmusic) and 4G launch. Efficient 4G Investment with RAN sharing. Expanding postpaid and business user base. Developing option value of Live TIM ultra-broadband services. 3 Institutional Relationships External Positioning: Innovation, Quality, Transparency. “Portas Abertas” customer portal for increased transparency and network quality evolution. Focus on regulatory and institutional dialogue. 4 People & Organization People Focus – highly skilled, highly motivated, right organization. Best Place to Work initiatives. Renewing Sense of Pride and Belonging – One of Brazil’s Top 15 Companies. 10
  • 11. Recent Results: 3Q13 in Few
  • 12. A Quarter in Few 3Q13 YoY 6M13 YoY Total Revenues 5,083 7.6% 9,655 7.1% − Service 4,207 2.6% 8,152 1.9% 1,362 21.5% 2,377 25.0% 876 40.9% 1,503 47.9% EBITDA 1,252 4.2% 2,456 3.0% CAPEX 1,175 52.3% 1,593 -0.4% 3Q13 YoY 6M13 YoY Postpaid (mln users) 11.9 16.4% 11.4 13.9% MOU (min) 150 8.4% 146 15.1% R$ 18.6 -1.6% R$ 18.3 -2.2% Financial R$ Million − VAS* − Handset Operational ARPU *Mobile Gross Revenue 12
  • 13. Operational Performance (1/2): Base Evolution & Quality Indicators Customer Base Evolution Mix of Post Paid (Million lines; Source: Anatel; TIM) (%; Source: Anatel) D% YoY 69.4 70.3 71.2 72.2 72.9 10.7 10.9 11.4 11.9 59.6 60.8 29% Market Share +16% 60.3 (Lines; Market Share; Source: Anatel) +5% 10.3 4G Update… Post Paid 59.1 3Q12 14.8% 61.0 29% +3% 3Q13 16.4% Pre Paid May/13 3Q12 4Q12 1Q13 2Q13 20% 23% Jun/13 26% Jul/13 Aug/13 Prudent strategy in the auction & efficient roll-out paying-off 3Q13 Customer Care Performance (Points; Complaints over 1000 lines; Average monthly claims. Source: Anatel (last reported); SINDEC) Anatel IDA - Index of Caring Performance 99.9 98.0 92.8 94.9 0.7 93.0 84.9 Claims at Consumer’s Protection Agency (SINDEC - Procon) Anatel Complaints 0.5 0.4 76.1 0.3 0.2 0.2 62.6 Jun-12 Oct-12 Feb-13 Jun-13 0.3 0.3 Jun-12 TIM Oct-12 P1 Feb-13 P3 Jun-13 7,192 7,075 4,176 6,692 4,518 2,961 3,801 2,722 3Q12 4Q12 1Q13 2Q13 3Q13 P4 13
  • 14. Operational Performance (2/2): Strong Efficiency Gross Additions SAC* & SAC/ARPU Bad Debt (Million lines; Source: TIM) (R$/gross adds; months) (R$ Million; % of Gross Revs.) SAC/ ARPU (months) 1.6 % of Gross Revs. 33.6 10.2 Commercial 1.8 -31% 30.5 8.7 3Q12 3Q13 3Q12 3Q13 Total Traffic (R$ million) 32.8 28.7 3Q12 *Subscriber Acquisition Cost 3Q13 Leased Lines Costs (Bln minutes) Network 56 Bad Debt SAC (R$) 3Q12 0.7% 80 -9% +17% 1.1% 0% +14% 3Q13 3Q12 3Q13 14
  • 15. Marketing: Keeping the Innovative Approach Liberty Controle Express  Pushing on Postpaid migration  Payment via credit card  TIM SIM blister for each team.  Increase Stickiness ~7x Recent Past jan/13 Young Chip Torcedor  Young segment positioning  Member get member through social network since 2010. 14 Teams alread sponsored +56% sep/13 sep/12 VOICE DATA Recarga Troco Nonstop Innovation sep/13 International LD Infinity Web + SMS TIM Music  Talk unlimited on-net for R$2 for 2 days.  Capture extra “charge”.  Leveraging on micro recharge on physical PoS.  Up selling approach, targeting only customer base.      Internet + unlimited SMS on/off-net.  Pay per day.  Combining Web and SMS offers.  Cross selling WEB and SMS .     US:R$0,20/min. + 8 countries: R$0,50/min FMS initiative. Capturing the unexplored mobile international calls market.  Market attended Today through fixed carries. Unlimited download. Pay R$0.50/day. Over the top service. Increase customer stickiness.  Network friendly.  13 million songs already downloaded. 15
  • 16. Marketing: Smartphone Supporting Data Growth Smartphone Sales Smart/Web phone Penetration (% total handset sale) (% over total base of lines) 3Q12 42% 30% 4Q12 46% 1Q13 46% 2Q13 3Q13 28% 19% 35% 24% 57% 13% Webphone 39% 30% 21% 67% Smartphone  Smartphone approach to support data usage growth. 43% 46% 50% 52%  EBITDA neutral. No subsidy Policy!  Leadership position in market of handset (3Q13) 22% 39% market share of smartphones sold 21% 3Q12 Essencial 4Q12 1Q13 2Q13 Jul 13 Launching entry-level 3G tablet Data Users VAS Revenue Growth (% of Data Users in CB; million users) (% of Mobile Services Gross Revenues; R$ Million) 34% 29% Devices Share at Sales 23% VAS/Revs. 19% 56% 46% Notebook 44% 19.9 3Q12 +23% 24.5 3Q13 1,362 VAS Gross Revs. 1,122 36% Tablets +22% 17% Desktop 3Q12 3Q13 2010 2012 2014 2016 16
  • 17. Financials: Evolution Analysis EBITDA Analysis Net Revenue Evolution (R$ Million) (R$ Million, % YoY) Thousands +7.6% Service 4,722 +151 -45 +4.2% +254 5,083 1,201 +2.6% 4,100 +107 +40.9% 622 -97 25.4% 4,207 +10 -6 25.3% EBITDA Margin 31.0% Handset +38 31.5% Service EBITDA Margin 1,252 24.6% 30.5% 876 Revenue 3Q12 Δ Mobile Services Δ Fixed Services Δ Handset ΔYoY +3.9% -22.3% EBITDA 3Q12 ΔServ. Revs ΔHandset Margin ΔMkt and Sales ΔYoY +40.9% Revenue 3Q13 +2.6% -55.2% +10.4% ΔNetwork and ITX ΔPers./G&A EBITDA and others 3Q13 -0.7% +1.2% From EBITDA to Net Income (R$ Million) 3,708 -2,045 3Q13: R$315 mln -15.6% YoY 1,663 -202 -454 1,007 EBITDA 9M13 ΔYoY Depreciation/ Amortization EBIT Net Financial Result Taxes and Others Net Income 9M13 +3.4% +2.2% +4.9% +48% -1.9% +2.1% 17
  • 18. Financial Position Capex ~94% in infrastructure (R$ Mln) D Working Capital (R$ Mln) 987 1,175 +52% 853 -10% 252 LT Amazonas 772 +139% 413 923 3Q11 3Q12 OFCF 320 3Q13 D OFCF YoY: +R$471 3Q11 +29% 3Q12 3Q13 Net Debt (R$ Mln) (R$ Mln) 1,458 1,314 1,550 1,446 252 +56% LT Amazonas 843 624 +35% 1,194 3Q11 3Q11 3Q12 3Q13 Net DEBT / EBITDA (trailing 12m) 0.32 3Q12 0.29 3Q13 0.28 18
  • 19. Network and Infrastructure
  • 20. Network Check Point: Mobile BB Plan & Backhauling Backhauling Evolution Key Steps for Improvement: MBB/FTTS Project POP MW  Own fiber reaching ~85% of antennas at major cities. POP MW BSC-RNC Site  Targeting 38 main cities till year end.  FTTS: From 2-8 Mbps link to +100 Mbps. POP MW POP MW  Caching, Peering, Web Acceleration. POP MW  Macro coverage fine tuning for mobile broadband. Results for Recife Our 1st out of 38 cities Downlink throughput (Kbps) 4x MBB Coverage Q2 Q3 2,394 1,660 TIM 979 Market Average 574 Apr/13 Source: TIM Sep/13 3G (HSPA) MBB (HSPA+ DC) 20
  • 21. Network Check Point: Backbone Evolution HLR Resiliency Amazon Fiber Backbone Project Details: Boa Vista Macapá Manaus Belém Jurupari Tucuruí Maceió Porto Velho Increasing number of HLR Centrals. From 3 to 8. Fortaleza Salvador Cuiabá Rondonópolis Brasília Goiânia Belo Horizonte Vitória Campo Grande Preto Rib. Rio de Janeiro Umuarama São Paulo Curitiba Santa Maria Florianópolis Porto Alegre  ~R$200 million  27 cities  1,757 km  Capacity: 75 x 100 Gbps Existing network Network in construction LT Amazonas network 98-08 PURE MOBILE INFRASTRUCTURE 2009 INTELIG ACQUISITION 2011 ATIMUS ACQUISITION FIBER TO THE 2013 RJ & SP AMAZON 2016 MASSIVE LD BACKBONE Fiber Timeline 0 KM of FIBER + 15,000 KM of FIBER 20,500 KM of FIBER 46,000 KM of FIBER By YE13 65,000 KM of FIBER 21
  • 22. Network Commitments Network Elements Expansion… (units. Source: Company) BTS Channel Elements (Data Capacity; 000) 12.120 11.607 464 +86% 250 +4% TRX (Voice Capacity; 000) 215 +19% 181 Jun/12 Jun/13 Jun/12 Jun/12 Jun/13 Jun/13 …Driving Quality Improvements (% of success; % of call/data connection drop; Source: Anatel) Voice Network Access Rate Voice Network Drop Rate Data Network Access Rate 97,1% Data Network Disconnection Rate 98% 95,7% 95% 1,3% 1,1% 2% 95,9% 96,0% 1,5% Aug/12 Apr/13 Aug/12 Apr/13 Aug/12 Apr/13 1,7% Aug/12 5% Apr/13 Target agreed w/ Anatel 22
  • 23. Capex Analysis Benchmark: Anatel Plan for 2012-2014 Organic Capex (ex-4G licenses) (R$ Bln) (Capex/Sales; Mix of Investments; R$ bln) 2012-2014 Capex As % of Net Revs. 9.9 2012 Extra Capex over Anatel Plan 19,6% 0.4 +20% +39% 18,0% +81% 8,3 Infra Invest. 7,2 5,5 TIM Claro Vivo 3.4 3.0 2.8 9,5 18,0% Other Invest. 3.1 2.7 2.3 0.5 0.3 0.2 2010 Oi 3.6 2011 2012 Owned Network Deployment…. … Driving Network Opex Savings (% of total transport network) 2013e (% YoY) Q3 2013 20% 48% Voice Postpaid +23% YoY 14,0% 52% 80% 2009 2012 Owned Rented 5.0% Total Traffic Customer Base 0,0% Leased Lines Costs 23
  • 24. Live TIM
  • 25. Live TIM: Maintaining the High Speed Mode Net Adds  Accelerating improving ARPU; sales and Customer Base (000 Clients; Source: TIM) (000 Clients; Source: Anatel) 42.6 9.7 1.6 4Q12 1Q13 2Q13 3Q13 3Q12 Clients highly satisfied Clients highly satisfied Network Evolution (000 Addressable Households ; Source: TIM) 804 881 609 General Satisfaction 38 neighborhoods in SP 34 neighborhoods in Rio 1Q13 2Q13 8,3 GVT 7.1% 7,5 OTHER 5.6% 9,0 7,2 8,0 8,0 Conection Quality 3Q13 7,5 Phone Attending 6,9 6.0 6,6 7.0 3Q13 2Q13 TIM 7,3 Bill 257 1Q13 (UBB >34MB ; Source: Anatel) P2 6,9 Offer 522 4Q12 Market Share SP+RJ (August) Source: TNS Market Research P1 4Q12 16.3 6.6 1.2 3Q12 3Q12 26.4 10.1 8.1  Reference as UBB service provider ( >50% net share). 16.2 13.3x  Taking the lead as #1 challenger in Rio and São Paulo; 7,9 9,1 8,7 NET 8.9% 7,7 8.0 LIVE TIM 48.5% VIVO 22.0% 9.0 10.0 OI 7.8% 25
  • 26. Business Outlook
  • 27. Where We Are: TIM 2013 Year-to-Date Results Financial 9M13 YoY R$ Million Total Revenues 14,738 7.3% − Service 12,359 2.1% − VAS* 3,899 23.7% − Handset 2,379 45.2% EBITDA 3,708 3.4% CAPEX 2,769 +16.8% Operational 9M13 YoY • Consistent financial and operational results even amidst a different macro scenario • Continuous growth/acceleration on postpaid, improving customer base mix, ARPU evolution. • Maintaining data services at double digit growth, underscored by smartphone sales and innovative offers. • Solid improvement on Network and Quality indicators. • Executing Fiber-to-the-Site (FTTS) project and 3G/4G roll-out, guaranteeing mobile broadband acceleration. Postpaid (mln users) 11.9 16.4% MOU (min) 147 12.7% • Strong efficiency: Industry benchmark for SAC and bad debt. R$ 18.4 -2.0% • Strong savings on leased lines costs, even with traffic double digit growth. ARPU Reported figures for TIM Part. *Gross Mobile Revenues 27
  • 28. Strategy: Infrastructure Evolution Backhauling Evolution Increased Coverage and Access Capacity Fiber to the site / Mobile Broadband Project Key to Data Growth POP MW POP MW BSC-RNC Site  LTE Ready. 82% urban population #NodeB / eNodeB (3G + 4G)  Targeting 38 cities in 2013,+100 cities till 2016.  From 2-8 to +100 Mbps. # new elements 95% urban population # BTS (2G) 2013 2014 2015 2016 POP MW Capex Evolution Towards Data  Macro coverage fine tuning. POP MW POP MW % of total Capex  Focus on IP infrastructure, caching, peering. Fiber base Infrastructure 2013 INTELIG 2009 ACQUISITION FIBER TO THE 2013 AMAZON 2016 MASSIVE LD BACKBONE 2014 LTE* 2015 3G 2016 2G Small Cell Approach # new elements INTELIG 15,000KM 46,000 KM OF FIBER BY YE13 65,000 KM OF FIBER New Sites. Including Small Cell. 2012 2013e 2014e 2015e 2016e  New backbone routes- Increasing resilience. *Includes 2.5GHz RAN Sharing. 28
  • 29. Offer Evolution Smart/Web phone Penetration Voice MOU (% over total base of lines) Innovative Offers Driving Growth and Differentiation (Minutes) >170 >75% 150 136 52% 43% 2012 Jul 13 2012 2016e 3Q13 2016e Data Users VAS Revenue Growth (% of Data Users in CB; million users) (% of Mobile Services Gross Revenues; R$ Million) >50% 34% 29% VAS/Revs. >40% 23% 21% XX% +15% 21.3 2012 3Q13 +XX% +XX% 24.5 VAS Gross Revs. 2016e 2012 2013e 2016e 29
  • 30. BUSINESS STABILIZATION AND RECOVERY INTELIG Fixed Business Evolution • Focus on value, selecting high margin customers. Top Line: Recovery Path • Selective approach focused on high potential verticals: Finance, ISP (data), Call Center (voice). • Network ready to retake sales. 2012 2013e 2014e 2015e 2016e 2014e 2015e 2016e EBITDA: Inflection Point • Increasing addressable market with mobile synergy approach. • Optimize investment leveraging on multi service networks. 2012 2013e Addressable Households Sustainable Growth Mode TIM FIBER ´000 • Leading the market share for speed above 34Mbps (ultra BB offers). 522 2012 • Leveraging fiber assets in SP and RJ with reduced investment and efficient approach. 881 3Q13 2016 UBB Market Share RJ/SP (Aug13) >34 Mbps download speed • Good potential at SME segment. GVT 7.1% • Strong support to mobile business w/ small cell backhauling. OTHER5.6% LIVE TIM VIVO 22.0% 48.5% NET 8.9% OI 7.8% 30
  • 31. TIM Part: 2014-2016 Guidance Guidance R$ billion 18,8 2013-2016 CAGR: Mid Single Digit Growth Total Net Revenues 2012 2013e 2014e 2015e 2016e R$ billion 5 EBITDA 2013-2016 CAGR: Mid Single Digit Growth 2012 2013e 2014e 2015e 2016e R$ billion 3.8 CAPEX Infrastructure Total CAPEX 2014-2016: ~R$11 billion* 3,2 Others/Licenses 0,5 2012 *Does not consider 4G licenses (700Mhz). 2013e 2014e 2015e 2016e 31
  • 32. Appendix
  • 33. Market Share Evolution Total Customer Base (% Market Share) 2012 Mobile Net Revenue Share Size: 268,270 thousand (% 2012Total Net Revenue) Penetration rate: 135.3% 29,7% 28,6% 26,8% 27,2% 24,5% 25,1% 18,7% 18,6% P4 P1 P3 15,0% TIM 20,2% P3 35,3% P4 29,5% P1 Total Prepaid Customer Base Total Voice Postpaid Customer Base (% Market Share) TIM (% Market Share) 39,8% 38,4% 28,0% 28,1% 28,8% 25,8% 25,3% 24,1% 19,5% 19,7% P1 TIM P1 P3 P4 16,1% 24,1% TIM 20,0% 22,0% 22,8% P3 16,0% P4 33
  • 34. Mobile Internet and Its Great Business Opportunity FMS on Data Internet Users Penetration: large room for growth... (% over households with internet connection) (% population who has used internet within the last 3 months) 89 86 81 80 74 Fixed* 34 39 41 46 49 Social Class Split 1 3 2008 2009 10 2010 17 21 A: 94% Mobile B: 80% 2011 2008 2012 2009 2010 2011 2012 C: 47% DE: 14% 68 mln people never used internet *Includes dial-up connection Mobile Devices are also increasing its presence… …and usage is 4 years behind (% Presence over households) (% internet users within the last 3 months) 67 Notebooks 41 35 23 10 30 7 30 2009 2010 2011 2012 10 4 23 7 60 14 2 2008 53 58 69 24 50 9 9 Euro Area data in 2008: Everyday: 70% Once a Week: 20% Once a Month: 7% Tablets 2008 2009 2010 2011 2012 Everyday/Almost Everyday At least once a week At least once a month Source: CETIC jun’13; Data Market 34
  • 35. Still Increasing Internet Penetration and Data Market 61.3 Mln (40%) 1% R$ 250 1% R$ 200 2% R$ 150 5% R$ 100 32% 11.8 mln Other Does NOT Possess Internet connection 60% 36.8 mln R$ 80 R$ 70 Lack of (60%) coverage 24% 8.8 mln R$ 50 R$ 40 R$ 30 Too Expensive Total Households 44% 16.2 mln CABLE FTTH > R$ 250 R$ 20 R$ 10 12% ADSL VDSL 53% of active connection base has currently a speed below 2Mbps 18% 24% 39% 48% 59% 65% MBB 40% 24.5 mln Possess Internet connection Willingness to pay (% of Households) 71% Households which does NOT possess Source: CETIC´13 Market Data Revenues Growth 2016 vs. 2012:  >13 bln Reais on Mobile (+100%)  >7 bln Reais on Fixed (+35%) 35
  • 36. Understanding Internet Usage Trends Going deeper into wireless penetration in Brazil (%) # SIM Cards 124 133 Wireless Penetration 2008 2009 2010 2011 Real 80 Penetration 2 3+ A 3% 67% 24% 6% 7% 63% 24% 5% 17% 62% 17% 3% 41% 47% 10% 1% Total 63 76 1 DE 56 67 0 C 79 Social Class B 105 91 20% 59% 17% 3% 2012 Our current portfolio reflects consumer’s behavior (Activities over mobile phone; % users who have used mobile within the last 3 months) 64 57 49 47 Send SMS Listen Music 31 24 22 Internet 18 5 2010 2011 Source: CETIC jun’13; Data Market; Anatel 2012 36
  • 37. Historical Data: Financials (R$ Thousand) 37
  • 38. Historical Data: Financials (US$ Thousand) 38
  • 39. Historical Data: Operational & Financial Ratios ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA 2013e: Consensus and dividend yield from approved 2012 dividends of R$743 mln. 2013e Multiples related to 2014YE estimates.. 39
  • 40. Taxation Over Telecom in Brazil Tax Composition ~34% ~28% 1.5% In 2012, TIM paid R$9.1 bln in taxes, fees and contributions (~48% of total net revenues). • R$1 bln in Fistel. • R$8.1 bln in taxes, contributions and others fees. % of Gross Revenues 0.65% 3% Cofins PIS/ PASEP ICMS Fust/ FUNTEL Total Tax Relief - 1º Step: M2M Fistel to drop and Smartphones tax exemption (Law 12,715/2012) Tax reduction Reduction in the price to consumer Increase of Penetration Social Impacts Possibility of higher investment in network Better Quality Economic Impact 40
  • 41. Shareholders Structure and Stock performance Telecom Italia Stock Performance (base 100)* 100% Telecom Italia International N.V. 180 100% TIM Brasil Serv. e Part. S.A. Minorities ON: 33% (805,662,701) ON: 67% (1,611,969,946) 160 140 120 100 80 60 40 TIM Participações S.A. 100% TIM Celular S.A. *Last price as of 11/01/2013 20 100% Intelig 0 TIMP3 Ibovespa TSU 41
  • 42. Safe Harbor and IR Contacts 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 Team Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ E-mail: ri@timbrasil.com.br Rogério Tostes E-mail: rtostes@timbrasil.com.br Phone: +55 21 4109-3742 Vicente Ferreira E-mail: vdferreira@timbrasil.com.br Phone: +55 21 4109-3360 Leonardo Wanderley E-mail: lwanderley@timbrasil.com.br Phone: +55 21 4109-4017 Gustavo Valente E-mail: gvalente@timbrasil.com.br Phone: +55 21 4109-3446 Luiza Chaves E-mail: luchaves@timbrasil.com.br Phone: +55 21 4109-3751 Visit our Website www.tim.com.br/ir 42