Results PresentationTIM Participações S.A.
Q2 Financials HighlightR$ mln                                                                                             ...
Effects on Q2: MTR and Macro EnvironmentMTR                                                                              M...
FMS Secular Trend Remains on PlayFixed to Mobile Substitution…                               …impacting Fixed Incumbents  ...
Operations             5+
Operational Growth Remains Strong   Customer Base                                                                         ...
Growth Backed by Efficiency Approach  Customer Base Growth                             SAC and SAC/ARPU  (% YoY)          ...
Update on Anatel´s Sales Ban Current Situation: TIM is not the worst                                                      ...
Marketing            9+
Innovation PlatformInnovation path                                                                                        ...
And Generating Value Pre Paid – Customer Base                        Post Paid – Customer Base (000 lines)                ...
Internet Take-Up Supported by Best Handset and Offering Data Revenues                                                     ...
Financials             13+
Consistent EBITDA and Net Income Growth EBITDA Evolution                                                      From EBITDA ...
Cash Position AnalysisCapex                                                       D Working Capital(R$ Mln)               ...
TIM Fiber Update                   16+
Network and Marketing Highlights                                                                                      MSAN...
TIM Fiber Launch Plan: On Track                                                                                 Commercial...
Conclusions and 2H12 Outlook                  •   TIM managed to maintain its solid operational improvements amid         ...
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Results Presentation 2Q12

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Results Presentation 2Q12

  1. 1. Results PresentationTIM Participações S.A.
  2. 2. Q2 Financials HighlightR$ mln Guidance 2Q12 2Q11 Var. % YoY 1H12 Var. % YoY >10% Total Revenue (reported) 4,547 4,252 +7.0% 9,016 +12.6% P Confirmed Total Revenue (MTR adjusted) 4,668 +9.8% 9,180 +14.7% >10% EBITDA (reported) 1,214 1,145 +6.0% 2,383 +9.2% P Confirmed EBITDA (MTR adjusted) 1,262 +10.2% 2,453 +12.4% ~R$3 bln CAPEX 1,057 724 +45.9% 1,600 +56.4% P Confirmed (+R$0.5 Mln licenses) Anticipation focused on Network  Leadership in Prepaid segment  MTR cut (-R$121mln rev; -R$48 mln Main  Fastest data growth (+40%YoY) and Quarter EBITDA) smartphone at 35.2% of total base  Macro-economic and competitive Achievements Impact environment  TIM Fiber started-up (Live TIM brand)  TIM Fiber start-up costs (~R$11 mln) 2
  3. 3. Effects on Q2: MTR and Macro EnvironmentMTR Macro Environment Total Net Revenues P -R$121 mln impact on net P Macro economic scenario slowdown in 1H12 vs. (R$ billion) revenues and -R$48 mln 1H11 (i.e.: level of indebtedness; high commitment on EBITDA of income to debt payment; GDP lower growth) 4.7 +10% 0.1 GDP Quarterly Growth (YoY) 4.5 4.3 +7% P Still no elasticity coming on and traffic reshape to 2Q11 2Q12 offset MTR impact 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12e 3Q12e 4Q12e 1Q13e EBITDA (R$ billion) Handset Sale Net Revenues Volume 1.3 P FMS will lead to lower +10% 83% 0.1 dependency on MTR D YoY 143% 1.2 11% 1.1 +6% -28% 2Q11 2Q12 2Q11 2Q12 2Q11 2Q12 P Short term competition aggressiveness Revenues Costs Drivers to softening Keeping the Macro scenario Intelig/ TIM Fiber EILD regulatory these impacts Innovative approach improvement (leased lines swap) framework 2Q12 4Q12Source: BCB, Bradesco Corretora and Company’s estimates 3
  4. 4. FMS Secular Trend Remains on PlayFixed to Mobile Substitution… …impacting Fixed Incumbents … benefiting Mobile Segment Fixed Tariff Premium over Mobile Lines in Service Lines ARPM (R$/min) (D% yoy) (D% yoy)Mobile 40% mobile discount -4.7% 2Q11 2Q11 +16.7%Fixed -4.9% 3Q11 3Q11 +18.0% -4.5% 4Q11 4Q11 +18.6%Mobile Outgoing price (% YoY) -23% -14% -4.0% 1Q12 1Q12 +18.6% -3.4% 2Q12 Leading Traffic to a Sharp Increase 2Q12 +17.6% (Bln Minutes) 21.8 22.6 23.8 18.4 20.1 Fixed Revenue Mobile Revenue 17.5 (D% yoy) (D% yoy) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 -4.1% 2Q11 2Q11 +11.3% Leadership in LD Market Share (% Minutes) -7.0% 3Q11 3Q11 +11.5% -8.0% 4Q11 4Q11 +12.4% -7.6% 1Q12 1Q12 +14.5%jun/09 jun/10 jun/10 dec/10 jun/11 dec/11 mar/12 -11.7%** 2Q12 2Q12 +7.1%** TIM Incumbents* Source: Companies results, Teleco and Bloomberg estimates; 4 * Telemar, Brasil Telecom, Telesp e Embratel. **Excluding one company.
  5. 5. Operations 5+
  6. 6. Operational Growth Remains Strong Customer Base Total Market Share Growth (million lines) (% of total lines) +1.7 D YoY 30.1% 30.2% 30.1% 29.7% +3.1 D% 29.5% 29.5% 29.5% 29.5% 29.8% 29.6% Vivo +4.9 2Q +3.7 67.2 68.9 +2.7 64.1 270 59.2 9.7 10.0 +2.0 +25% 640 bps 55.5 9.3 bps 26.9% 52.8 8.7 26.5% 26.8% 8.0 26.0% 25.4% 25.3% 25.5% 25.4% 25.4% 25.5% Post 7.7 57.6 58.9 +11.3 +24% 50.6 54.8 Claro Paid 45.1 47.5 25.1% 25.1% 25.5% 25.3% 24.5% 24.9% 24.6% 24.6% 23.7% 24.0% Pre 20.4% 20.1% Paid 19.5% 19.4% 19.7% 19.1% 18.8% 18.8% 18.5% 18.7% Oi 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Largest PrepaidNet Adds Base (000) Post Paid 223 317 632 655 348 348 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Pre Paid 1,598 2,359 3,053 4,219 2,786 1,308 SP City Market Share Growth Customer Base Growth (% of total lines) (%YoY) 1st in yearly growth for 8 consecutive quarters Vivo 18% 20% 18% 17% 15% 14% 16% 19% 20% 18% Vivo TIM 17% 17% 19% 24% 25% 25% 26% 26% 27% 24% Claro 15% 16% 15% 16% 17% 18% 18% 17% 15% 13% Claro Oi 15% 10% 7% 9% 13% 12% 15% 16% 12% 15% Oi 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12Source: Anatel Source: Anatel 6
  7. 7. Growth Backed by Efficiency Approach Customer Base Growth SAC and SAC/ARPU (% YoY) (R$) P Continuous growth on pre-paid -210Bps +830Bps SAC/ 2.6 and acceleration on postpaid ARPUPrepaid +860Bps 1.6 1.4Postpaid +360Bps P But with a rational approach: SAC (R$) -44% -26% o significant subscriber 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 acquisition cost drop o continuous bad debt downward trend Handset Subsidy Bad Debt Trend (R$ million) (as % of Gross Revenues) 1.83%  Sustainable business modelCapitalized 1.08% Subsidy o Low bad debt 0.92% o No subsidies o Freedom to customers 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 7
  8. 8. Update on Anatel´s Sales Ban Current Situation: TIM is not the worst Outlook: Improvement Plan Presented=> Network KPI => Commitment on Network Development Anatel SMP 5 – Orig. calls compl. Anatel SMP 7 - Call drop # TRX Data Channel Elements KM of Fiber (Points) (‘000) (‘000) (‘000 Km) 271 741 53 +75% +84% 157 4.3x 29 139 Player A TIM Player BPlayer C Player TIM Player Player A B C 2011 2014 2011 2014 2011 2014=> Customer KPI Apr - 11 Apr - 12 Anatel Ranking of Complaints Procon Ranking of Complaints => Commitment on Quality Improvement (SMP Compl./ Lines in Service * 1000) (Compl. of Integrated System of Procon ) SMP 5 - Call Complete SMP 7 - Drop Call SMP12 - % Call Center (% clusters) Responsiveness 90% 96% 100% 77% 92% 76% +1,300Bps +400Bps Player A TIM Player B Player C Player A TIM Player B Player C +1,600Bps Mar-11 Mar-12 Jun-11 Jun-12 TIM Call Center Index of Complaints (Points) 1H 2012 2014E 1H 2012 2014E 1H 2012 2014E -30% Anatel’s sales ban is expected to be removed in the next days 2Q11 2Q12 8Source: Anatel, Procon and Company
  9. 9. Marketing 9+
  10. 10. Innovation PlatformInnovation path Liberty Passport Liberty Liberty Torpedo Controle Liberty Web Infinity Torpedo Infinity Web Liberty Infinity New Concept Unlimited Internet offer SMS Hybrid Plan International  Local=LD  “All you can  Unlimited  Unlimited  Unlimited  Unlimited eat”  Per Call  Per Day or  Per Day or  Budget Control  Per Day Month Month Infinity Customer Base Liberty Customer Base Infinity Web Unique Users (million lines) (million lines) (daily users, million) 56.1 57.5 5.5 5.8 6.6 7.0 7.5 53.3 4.1 3.2 3.6 43.9 47.8 2.7 40.1 2.3 1.6 1.2 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 10
  11. 11. And Generating Value Pre Paid – Customer Base Post Paid – Customer Base (000 lines) (000 lines)  Combining volume and +25% 10,001 value throughout a complete +24% 58,873 +15% 8,019 47,506 6,956 and unlimited platform of +27% 37,469 services (local and LD calls, SMS and data) 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 Volume of Top Up growth MOU and Post paid Churn  Pre-paid consistent growth (Mln recharges) (Minutes, % of lines)  Post-paid taking-up with +3% +24% increasing traffic and lower MOU +18% disconnections… +42% Churn ..even with no handset -80Bps -50Bps subsidy policy and no loyalty 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 11
  12. 12. Internet Take-Up Supported by Best Handset and Offering Data Revenues Smart/Web phone Penetration (% of Gross Mobile Service Revenues) (% smartphones/total CB (lines)) +490Bps 35.2% 18.7% 31.1% 18.1% 26.6% 16.7% 19.5% 15.7% 15.4% 12.6% 14.6% 13.8% Value Added Services Revenues (R$ billion) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 % sold 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1.03 48% 54% 71% 70% 77% 79% +40% 0.73 SMS unique users growth Data users (daily unique users) (monthly unique users) 18,907 2Q11 2Q12 +53% ~3X 12,391 2Q11 May 121Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3G coverage (% of urban 57% +1,100Bps 68% pop.) 12
  13. 13. Financials 13+
  14. 14. Consistent EBITDA and Net Income Growth EBITDA Evolution From EBITDA to Net Income R$ Mln R$ Mln 1,214 Handsets Rev.: +55 COGS: -43 R$54 mln one off event due to mark to market +240 +12 +27 -172 -664 hedge position -38 1,2141,145 550 -6426.9% EBITDA Margin 26.7% -140 34732.7% Service EBITDA Margin 32.2% EBITDA Depreciation/ EBIT Net Taxes NetEBITDA Services Handset Marketing Network Personnel EBITDA 2Q12 Amortization Financial and Income 2Q11 Revenues Margin and Sales and ITX G&A and 2Q12 Result Others 2Q12 others expenses ΔYoY +6.4% -14.4% -2.8% +15.1% +8.7% ΔYoY +6.0% +7.8% +3.9% +44.6% +3.2% -0.9%
  15. 15. Cash Position AnalysisCapex D Working Capital(R$ Mln) (R$ Mln) 2Q11 2Q12 Var D WC: R$230 mln YoY Network 61% 67% 600 Bps IT 22% 28% 600 Bps 147 Others 17% 5% -1,200 Bps -82 +46% 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12OFCF Net Debt Including TIM Fiber(R$ Mln) (R$ Mln) net debt = R$87 mln DOFCF R$-34mln YoY DEBITDA-CAPEX =-R$261mln 2,520 DWC R$230mln 2,278 DOther –R$3mln 1,998 2Q10 2Q11 2Q12 Net DEBT/ 2Q10 2Q11 2Q12 EBITDA 0.68x 0.45x 0.47x (trailing 12m) 15
  16. 16. TIM Fiber Update 16+
  17. 17. Network and Marketing Highlights MSANs Homes Optical Passed Ready Backbone to SellNetwork 2 networkConstruction 1 220k 3 Buildings authorized Building’s accessed MSANs installed 5,700 2,100 214 Market Demand Quality of Service (Units) (Mbps) Download Website 63k Speed RegistrationMarketDemand andQuality ofService Upload Activation 1k Speed 17
  18. 18. TIM Fiber Launch Plan: On Track Commercial Launch Soon…Launch Phases  Pre-Launch Test  Soft Launch Commercial LaunchKey objective Technical Trial of the Check of the Business Start of the Commercial solution Readiness OperationsCustomer base ~50 ~1 Thousand 50-70 Thousand Employees + Friendly User Testers Beta Testers Customers end-of-periodGeographic Coverage(SP/RJ) 1 neighborhood 5 neighborhoods 20+ neighborhoodsProduct Naked Ultra BroadbandCommunications Advertising outside of Advertising in mass n/a communication media (BTL) communication media (ATL)Channels Door to door Door to door n/a + Tele sale Outbound + Tele sale Outbound + Tele sale Inbound 18
  19. 19. Conclusions and 2H12 Outlook • TIM managed to maintain its solid operational improvements amid tough 1H12 (macro-economic and competitive scenario) Conclusions • Data services continued at a solid pace • Leadership in market share of net addition for 8th consecutive quarter is a clear signal how TIM’s offer is indeed the best value option • Operational efficiency set the tone, with significant subscriber acquisition cost (SAC) and bad debt reduction • Focus on network development, quality improvement and communication to defend post-paid segment and reverse the bad perception from Anatel ban Outlook • Insist on FMS trend with an innovative approach • Support data revenues growth through smartphone penetration and network strengthening • Launching TIM Fiber (Live TIM) 19
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