AgendaStrategic Priorities - Rodrigo AbreuQ1 Discussions:Q1 in Few - Rodrigo AbreuNetwork and Infrastructure - Rodrigo AbreuOperations - Lorenzo LindnerMarketing - Roger SoleLive TIM - Rogério TakayanagiFinancials - Cláudio ZezzaConclusions - Rodrigo Abreu2
Strategic PrioritiesNetwork Quality& Infrastructure1Strategy &Offer Evolution2InstitutionalRelationships3People &Organization4First Impressions Key Strategic PillarsFundamentals are strong:→ Constant innovation approach.→ Unique market positioning and long termstrategy.→ Solid and expanding customer base.→ Team with strong execution track record.→ Large and efficient sales channel.→ Rapid deployment of networkinfrastructure with own fiber.And challenges being addressed:→ Renewed commitment to qualityimprovement.→ Keeping competitive edge with mobilefocus.3
Improving voice & data capacity.Mobile data as the center of network strategy.Q1 in Few: Main Highlights43.3%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.
Development of Infrastructure6Optical 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 Commitments7Network 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
Operations: Sales Force and Customer Service, the Machinery Behindthe Business
Engine is Running at Strong Pace and EfficientlyMarket Share Evolution(% of total lines; Source: Anatel)1327965MassChannel(SIM andrechargesales)OwnStoresFocus on Efficiency(R$; months)3632291.81.61Q121Q11 1Q131.7SAC/ARPUSAC-12% -11%1Q131Q121Q111Q121Q1319.54% 19.45%24.75% 25.02%27.20% 26.71%28.27% 28.53%4Q12+26 Bps-48 Bps+28 Bps-9 Bps#1 Prepaid: 60.3 mln users #2 Voice Postpaid: 9.0 mln usersBad Debt Resilience(as % of Gross Revenues)1Q131.1%2Q120.9%1Q120.9%+103%91Q1316.72% 17.03%21.04% 20.73%38.38% 38.36%23.22% 23.25%4Q12+3 Bps-1 Bps-31 Bps+31 Bps1Q13Showing strength in both:Pre and Post-paidSales channel as a keyfactor:EffectivenessEfficiencyResilienceQuality drivenSales Force(Points of sale EoP; Points of Sales)TIMP1 P3 P40.7%1.0%3Q12 4Q12+22%
Improving Caring Services to Recover Customer SatisfactionIDA – Index of Caring Performance (last reported)(Points - the higher the better; Source Anatel)99.996.2 95.298.298.088.0 89.493.392.873.384.091.184.972.7 73.184.4Jun-12 Aug-12 Oct-12 Dec-12Claims at Consumer’s Protection Agency (Procon)(# Claims - the lower the better; Source: SINDEC database)7,6938,882 8,91310,0476,533 7,6488,745 8,97918,55821,61819,838 19,72810,51012,56714,73715,820Anatel Ranking of Complains (last reported)(Index of Complains under 1,000 access - the lower the better;Source: Anatel)0.200.28 0.300.240.240.44 0.410.340.340.50 0.470.380.500.64 0.630.51Jun-12 Aug-12 Oct-12 Dec-124Q123Q122Q12 1Q136.006.507.007.508.00TIM PRE POS CORP10Customer Care Satisfaction Survey(Points; Source: Company)Changing caring approach to meet differentsegments needsTaking transparency and convenience to thenext levelP3P4P1TIMP3P4P1TIMP3P4P1TIM
Marketing: Innovation to Support Sustainable Growth
ARPU Performance(%YoY; R$)Postpaid Growth Helping ARPU and MOU ImprovementsVoice Postpaid Customer Base(000 lines; Source: Company and Anatel)MOU Performance(minutes)1Q12 2Q12 4Q123Q12127,1687,6388,1848,7038,956+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 1Q1313Enabling customers to use it… … and they are responding.+25%1Q1320.523.1Feb/12 Feb/13+19%+13%Days ofUseSMSUsersGrossRevsVAS/Revs+94%+24%
…But Mobile Internet Wave is Still in the Early Stages14Brazilian Device Market(Million Units. Source: IDC)7.5 18.104.22.168 8.9 22.214.171.124.8Desktop 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 Launch15Fixed 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
77.7%22.3%1Q12 2Q12 3Q12 4Q12 1Q13A Full Operating Business Deployed in Less Than a Year17First 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)1815xMarket Average- 29%0246810121415 20 25 35 50R$/MbpsDownload Speed (Mbps)Live TIMP1P2P3
Ready to Go: 4 Steps to Resume Growth23Solid Capex investment program.Significant coverage and capacity improvement through extensive own fiberinfrastructure.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 VAS offers (e.g. TIMmusic) and 4Glaunch.Expanding postpaid and business user base.Developing option value of Live TIM ultra-broadband services.External Positioning: Innovation, Quality, Transparency.“Portas Abertas” customer portal for increased transparency and network quality evolution.Focus on regulatory and institutional dialogue.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.Network Quality& Infrastructure1Strategy &Offer Evolution2InstitutionalRelationships3People &Organization4Solid user base and market positioning, coupled with clear strategic priorities,strong execution capability and significant investments present the right mix forTIM Brasil to move to a new growth phase.
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