Press Release 2 T08 En


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Press Release 2 T08 En

  1. 1. Results 2Q08 August 7th, 2008
  2. 2. TIM PARTICIPAÇÕES S.A. Investor Relations Opening remarks Innovative and Reliable brand: “Living beyond Technology” First position in Top of mind¹ First position in brand Awareness¹ Choose as the best website in sustainability among the Brazilian telcos² Best service provider IP NGN Infrastructure of the year – Cisco (2008) Most innovative application of customer care – 2008 excellence award (TM forum) Note: 1 - Synovate Institute (Jun/08); 2- Management e Excellence; Revista Razão Contábil and IBRI 2
  3. 3. Highlights Market Overview Operational Review Financial Performances 2H08 perspectives
  4. 4. TIM PARTICIPAÇÕES S.A. Investor Relations 2Q08 Highlights – An improving quarter Actions Quarterly performance 1% growth QoQ to R$29.8 despite market New pre-paid promotion (TIM 10x, focus on overall drop on-net bonus and ARPM) ARPU The highest ARPU growth among peers Focus on post-paid quality (high-end customer and better mix) Supported by MOU performance (+7%YoY and QoQ). 3G launch (May 1st); TIM web sale grew by 2x QoQ Up 21% QoQ and 49% YoY; leveraged by 3G VAS Increase content partnership (revenue share 10% of net service revenue (vs 7% 2Q07) agreement) Telesales channel total remodeled; Sharp improvement QoQ: -25%; Stricter credit policy; 6.8% of net service revenue (down from 9.6% BAD DEBT Commission based on quality of in 1Q08). acquisitions. Pre-paid offer focus on profitability 19% higher than 1Q08 to R$637 Mn; (on-net driven); EBITDA 2pp recovering in EBITDA margin QoQ, despite Reducing leased lines cost through partial spill-over of 1Q08 trend. in-source plan Strict control over discretionary costs 4
  5. 5. Highlights Market Overview Operational Review Financial Performances 2H08 perspectives
  6. 6. TIM PARTICIPAÇÕES S.A. Investor Relations Telecom Industry Overview Mobile Fixed Broadband Mn lines Mn lines 16% 69% 14% 64% 66% 74% 59% 70% 71% 71% 10% 56% 7% % Penetration per % Penetration per total population total households Market growth remains strong TIM geared to capture opportunities: (purchase power improvement from low classes) Alternative player to fixed line monopoly, after the number Market net additions fueled by: portability takes place; Handset subsidies; Benefit from strong growth in broadband and PC sales; Aggressive on-net promotions; Strengthening convergent strategy. Naked SIM-Card sales. 6 Source: Anatel and internal estimates*
  7. 7. TIM PARTICIPAÇÕES S.A. Investor Relations TIM Performance Subscriber Base (Mn) Market Share Performance 23.1% 32.5 33.8 First 29.2 31.3 27.5 Player* Third player 2Q07 3Q07 4Q07 1Q08 2Q08 Pre-paid segment grew by 26% YoY helped by “TIM Market share fairly stable in the coming quarters; 10x” promotion; Focus on customer's share of wallet. Subscriber mix remained above national peers (post-paid stood at 20.2% vs. peers 18.6%); Churn drop from 9.7% in 2Q07 to 8.4% in 2Q08 •Includes Vivo and Telemig Celular 7 •Source: ANATEL and company´s data.
  8. 8. Highlights Market Overview Operational Review Financial Performances 2H08 perspectives
  9. 9. TIM PARTICIPAÇÕES S.A. Investor Relations Roadmap to a Convergent Company ...2006 2007 2008 2008... MOBILE Strengthening our mobile business + Capturing opportunities on TIM fixed Number fixed voice services through FIXED license portability number portability TIM Casa TIM Casa Flex + TIM 3G Competing on broadband INTERNET license market with mobility concept TIM Web TIM Web Broadband + Empowered partnership in Partnership in Pay TV offers Pay TV = Convergent Company Increase customer's share of wallet through bundle offers 9
  10. 10. TIM PARTICIPAÇÕES S.A. Investor Relations Third generation launch Positioning & Roll-out / Launching Advantages partnerships Push on cross selling offers; Already in main metropolitan SPEED: Upgrade to 1Mbps and 7Mbps; Convergent offers through areas; wireless network; SIMPLICITY: All „TIM Chip‟ are Eased by our national coverage; TIM + : First notebook 3G ready; Buy & Play concept; with TIM Chip on-board; Launch of unlimited TIM Web MOBILITY: Wireless internet TIM + : TIM mobile data plans (1Mbps or 7.2Mbps); anywhere; broadband to UOL customer's base; ACCESSIBILITY: Any 3G TIM Web limited data plans: TIM + : Pay-TV + device and computers. Broadband + Mobile. Automatic upgrade to (1Mbps); 10
  11. 11. TIM PARTICIPAÇÕES S.A. Investor Relations VAS Strategy: Aiming Innovation and Profitability VAS revenue: R$397 million (21% QoQ and 49% YoY); 10% of total gross service revenue (7% - 2Q07; 8% - 1Q08) TIM web broadband sales increased by 2x QoQ (w/ incremental ARPU). VAS 3G+ New facilities Content Offer Innovative Services Mobile internet browsing Google tools TV channels TIM auction: a white label reversal auction TIM TV UOL Mobile Orkut WAP (1st in Brazil) RingBack tones TIM Music Store Sony-BMG content GPS navigation service YouTube Mobile in exclusivity at TIM TIM Video Call Music Store Yellow pages service Windows mobile for TIM smart-phone portfolio 11
  12. 12. Highlights Market Overview Operational Review Financial Performances 2H08 perspectives
  13. 13. TIM PARTICIPAÇÕES S.A. Investor Relations Net Revenue performance Total Net Revenues Outgoing voice revenues: Growth in outgoing due to new R$ Mn promotions dynamic - with MOU and ARPU rebound QoQ; 3,060 2,993 3,186 Value-added services: Strong growth of 21% QoQ and 49% YoY, as a result of our focus on data package offers and partnerships with strong content providers: Incoming revenues: Flat incoming revenues due to aggressive approach to on-net call‟s promotions for the market as a whole and also F-M pattern change. TIM maintains the focus on convergence in order to reduce the dependence on incoming traffic and to capture new sources Net Service Revenue Net Handsets Revenue of revenues; Leader In QoQ YoY QoQ Growth Handset revenues: 22% YoY drop explained by lower Total revenue +4.1% +6.5% handset price and naked SIM cards sales. Service revenue +6.8% +4.7% Handset revenue -22.4% +38.7% 13
  14. 14. TIM PARTICIPAÇÕES S.A. Investor Relations KPI’s performance (1/2) ARPU MOU R$ Minutes -14% 7% +1% ARPU performance: MOU performance: 1% growth QoQ despite market overall drop and One of the highest MOU in the market; post-paid mix decline; Subscriber mix higher quality; Best ARPU among cellcos in 2Q08; YoY drop due to increase of pre-paid segment and Elasticity effect driven by promotions. tariff promotions; Without incoming effect, ARPU would have increased by 4.1% QoQ 14
  15. 15. TIM PARTICIPAÇÕES S.A. Investor Relations KPI’s performance (2/2) SAC BAD DEBT R$ -25% R$ Mn +5% 9.6%¹ +2% 6.8%¹ 6.1%¹ ¹ Bad debt / net service revenue SAC performance: Bad debt performance: Selling expenses increase amid 3G launch; Improving from 1Q results thanks to recovery actions (e.g.: channel completely remodeled): SAC/ARPU ratio stood at 4.0x (stable QoQ); 2Q still affected by telesales distribution channel; Subsidies broadly stable, w/ focus on SIM card Expected to reach ~6% of net service revenue for sales. the FY2008 (given credit policy process revision). 15
  16. 16. TIM PARTICIPAÇÕES S.A. Investor Relations EBITDA EBITDA and EBITDA margin R$ Mn 24.3% Year-over-year drop is still reflecting higher bad debt 20.0% provision (amid telesales), and selling and network 17.9% 17.9 expenses (amid 3G launch), slightly offset by VAS 744 revenues increase (+49%); 637 535 Quarterly gain is largely attributed to a better top line 2Q07 1Q08 2Q08 (fueled by VAS and usage performance) and also from the bad debt recovery and cost control. YoY QoQ EBITDA -14% +19% EBITDA margin -4pp +2pp 16
  17. 17. TIM PARTICIPAÇÕES S.A. Investor Relations R$ Mln EBITDA and EBITDA margin YoY performance Selling expenses were up 7.6% while gross adds grew by 8.7% 188.8 (62.3) (46.9) 51.6 (172.8) (34.9) (30.5) Subs base +23% Total traffic volume +33% 743.7 636.7 EBITDA Service Handsets Selling Network COGS Bad Debt Other EBITDA 2Q07 Revenue Revenue Expenses Expenses Expenses 2Q08 Change % YoY +6.8% -22.4% +7.6% +19.2% -13.7% +20.7% +12.1% EBITDA Margin 24.3% 20.0% 17
  18. 18. TIM PARTICIPAÇÕES S.A. Investor Relations From EBITDA to bottom line – 2Q08 EBITDA Depreciation Net Financial Taxes and EBIT Net Loss R$ Mn 2Q08 Amortization Expenses Others* 636.7 636.7 596.3 596.3 40.3 40.3 (59.2) (59.2) (34.1) (15.2) (34.1) Change YoY -14.4% 4.6% -76.8% -27.4% -73.9% - 18 * Other non-operating expenses/revenues
  19. 19. TIM PARTICIPAÇÕES S.A. Investor Relations Net financial position and FCF – 2Q08 Net Debt Operating Free Cash Flow R$ Mn R$ Mn Non 3G 1Q08 OpFCF OpFCF 2Q08 EBITDA WkC Capex* OpFCF* Licence OpFCF 201 3G license: (467) $1.2 Bi (2,096) Of which 637 371 $207 in dividend (868) (247) (3,210) (1,239) (868) Net cash flow totaled -R$1.115 billion in 2Q Positive OpFCF in 2Q excluding 3G license * Excluding 3G Gross Debt R$ 4.1 billion (of which 42% long term) Average annual cost 11.64% in 2Q08 versus 11.66% in 2Q07 19
  20. 20. Highlights Market Overview Operational Review Financial Performances 2H08 perspectives
  21. 21. TIM PARTICIPAÇÕES S.A. Investor Relations 2H08 perspectives Key recovery actions Voice: Refocus on postpaid high value segments, remodeling of prepaid (started in 2Q08) and innovation of promotional dynamics to enhance ARPM; VAS: Further push on innovative services leveraging on 3G mobile broadband OFFER and enriching media content; Convergence: Capture opportunities from mobile BB and NP (as of Sept‟08), by offering services as alternative player to fixed. Focus on high margin customers: Deeper segmentation of acquisition, retention and loyalty strategy; Commissioning: Increase customer value linked to compensation and develop Profitability & profitability targets per channel; Operational excellence Bad debt: Reorganization of monitoring process with stricter rules for credit analysis (implemented in 2Q08); Efficiency: Invest in transmission capacity for cost-effective management and selective reduction/revision of outsourcing model. 21
  22. 22. TIM PARTICIPAÇÕES S.A. Investor Relations 2008 guidance revision Original Update 1st Review target Review Clients Base ~ 37 Mi unchanged unchanged Market Share ~ 26% unchanged unchanged Total Revenue > 12% ~ 9% > 7% EBITDA Margin > 23% unchanged 22.0% ~ 22.5% CAPEX ~ 3.6 R$ Bi unchanged unchanged 2008 guidance revision taking into account: Revenues – On-net calls pattern increase for the market as a whole and higher handset sale through direct channels - both events ended up pressuring incoming and handset revenues Expenses – Anticipating the investments to capture mobile broadband outstanding growth and number portability opportunity; Reinforcing the call-center services, strengthening loyalty program to high-end clients and enhancing 3G network capacity. Based on the aforementioned scenario, we are taking a more conservative position on top line and EBITDA margin 22
  23. 23. TIM PARTICIPAÇÕES S.A. Investor Relations “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 Visit our Website Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ Phone: +55 21 4009-3742 / 4009-3751 / 4009-3446 Fax: +55 21 4009-3990 23