RESULTS: MAIN HIGHLIGHTS
Net Revenues

(R$ bln)

Financial
Performance

19.9

18.8

EBITDA
4.1%

+6%
2012

2013

1Q

2Q

S...
REVISITING PRIORITIES
1
Network Quality
& Infrastructure

• Stabilized and improved network performance
• Prepared network...
A YEAR OF NETWORK/QUALITY EVOLUTION: PRIORITY #1
Projects that are transforming
TIM’s infrastructure
1st Quarter

Flawless...
QUALITY IMPROVEMENT EVIDENCES
Anatel’s Index of
Caring Performance

Anatel Complaints
over 1,000 lines

TIM
other

(in poi...
CUSTOMER BASE EVOLUTION

Customer Base & Net Additions
(mln)

Total Net Adds:

Total Net Adds:

39.3 mln

76.1

11.3
71.6
...
MAINTAINING EFFICIENCY

SAC - Subscriber
Acquisition Cost

Bad Debt
(R$ mln)

(R$)

29

73

31

68
56

27

44

SAC/
Gross ...
EVOLVING MARKETING PATH IN 2013:
TRANSPARENCY, SIMPLICITY, QUALITY & INNOVATION
Quality

2013

March

VAS

Prepaid

April
...
STRATEGY TOWARDS DATA & INTERNET

Re-visiting Market Structure
Households profile

TIM’s Position

With Telephone

57 mln
...
TIM FIBER: RESHAPING THE FIXED BROADBAND MARKET
Building Up Size

Accelerating Growth
Penetration of new
neighborhoods

Ad...
FINANCIAL RESULTS

Net Revenues

EBITDA

(R$ mln; % YoY)

+3.9%
19,921

+876

-255

+537

18,764
Service

(R$ mln)

+6.2%
...
FINANCIAL EVOLUTION

Profit & Yield
Net Income
(R$ mln)

1,449

+4%

Dividends

1,506

Payout

(R$ mln, payout)
2013

+13%...
PERSPECTIVES FOR 2014
Macro
Environment

Offer & Commercial
Strategy

Network Evolution

 Continuation of Quality Plan mo...
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Results presentation 4 q13 eng

  1. 1. RESULTS: MAIN HIGHLIGHTS Net Revenues (R$ bln) Financial Performance 19.9 18.8 EBITDA 4.1% +6% 2012 2013 1Q 2Q SAC/ARPU (in months) 1.6x 1.8% 1.5x Net Income +4% in 2013 (Δ% YoY) (R$ bln) 1.5 4.2% 5.2% 3Q 1.4 +4% 2012 4Q 1.6x • EBITDA Margin at 28.9% in 4Q13 • Services EBITDA Margin at 32% in FY13 • Subs. acquisition costs: R$28 in FY13 -6% YoY 1.3x Efficiency 2013 • Data Revenues +21.5% in FY13 • Leased line cost reduction: -6.0% YoY in FY13 • Bad debt at lowest level: -4.4% YoY in FY13 1Q13 (# of cities) 39 4Q13 Active Fiber • 39 cities fully covered with MBB project ‘000 Km 786 47 • 3G & 4G expansion (4G RAN sharing) • Network quality plan 2Q13 Offer Evolution 3Q13 Small Cells & Wi-fi MBB Network Improvement 2Q13 3Q13 4Q13 1Q13 2Q13 3Q13 4Q13 Postpaid Customer Base Total Base 73.4 mln users +15% dec/13 • Deployment of LT Amazonas Backbone • Plans ‘Controle’ and Express 12.3 10.7 dec/12 1Q13 2Q13 3Q13 4Q13 • Promotional top up • Infinity Web + SMS • Base mix (Prepaid 83% / Postpaid 17%) HIGHLIGHTS 2
  2. 2. REVISITING PRIORITIES 1 Network Quality & Infrastructure • Stabilized and improved network performance • Prepared network for data evolution % of sites with active fiber (FTTS phase 2) on the targeted 35 cities 95% 63% • Optimized Capex and Opex allocation 3Q13 2 Strategy & Offer Evolution • Improved customer base mix 4Q13 TIMmusic and Infinity WEB + SMS • Managed customer base with segmented offers • Evolved offers toward data and internet services • TIMmusic: >250k users in 4Q and 32 mln songs downloaded 3 Institutional Relationships • Participating actively in industry discussions • Recovered institutional image and dialogue WEBSITE + APP “Portas Abertas” • “Open Doors” transparency initiative generated excellent results on customer interactions (>400k collaborations/month) • Took corporate governance to the next level (CAE) 4 People & Organization • Seeking “Best Company to Work For” status TV Campaign featuring employees • Reinforcing compliance culture • Driving sense of belonging and employee pride PRIORITIES 3
  3. 3. A YEAR OF NETWORK/QUALITY EVOLUTION: PRIORITY #1 Projects that are transforming TIM’s infrastructure 1st Quarter Flawless Deployment of 4G Strategy  RAN sharing successfully implemented  >30% of 4G market share TIM Fiber Metropolitan Rings 2nd Quarter  >570 MSAN  Fiber network stabilization  Support backhauling for mobile infrastructure Completion of FTTS 1st Phase “MBB”     39 cities Improving customer experience Improve throughput 4G ready Before FTTS After FTTS Own Fiber (300 Mbps) Metro Ring Copper (2-8Mbps) # Cities completed ‘Quality Plan’ Implemented (war room) 100 2Q13 3Q13 Quality improvement in critical cities 4Q13 Smallcell Pilot Project / Wi-fi rollout  >150 cells implemented  >600 hotspots with seamless authentication New Extension of LT Amazonas Backbone  1,800 km of fiber  27 cities 3rd Quarter 4th Quarter Boa Vista NOC Insourcing Project Macapá Belém Manaus Jurupari  Launching project of insourced network operating center NETWORK 4
  4. 4. QUALITY IMPROVEMENT EVIDENCES Anatel’s Index of Caring Performance Anatel Complaints over 1,000 lines TIM other (in points) 98.2 93.3 TIM other 91.9 87.2 84.4 76.2 0.51 0.55 0.38 0.34 0.36 0.35 0.34 0.24 dec/12 mar/13 jun/13 sep/13 nov/13 Source: ANATEL TIM other (in thds) 16.0 92.4 91.1 Claims at Consumer’s Protection Agency (Procon) dec/12 mar/13 jun/13 sep/13 nov/13 11.8 11.6 10.3 9.3 7.6 6.2 4Q11 9.2 2Q12 4Q12 2Q13 4Q13 Source: SINDEC-Procon Source: ANATEL Network KPI’s on target (%)  Improvement in all key Anatel indicators compared to 2012  Narrowing gap between IDA’s 1st place and TIM (2nd)  Stable Anatel’s complaints metric  Least claimed company at Procon  War Room helping to improve network (For the main 195 cities) 90% 85% 80% 75% 70% 65% mar/13 dec/13 KPIs QUALITY 5
  5. 5. CUSTOMER BASE EVOLUTION Customer Base & Net Additions (mln) Total Net Adds: Total Net Adds: 39.3 mln 76.1 11.3 71.6 67.0 70.4 13.1 64.1 TIM 57.5 42.8 3Q11 4.6 49.2 1.1 73.4 3.1 68.7 6.3 3.5 65.2 6.2 9.3 mln 77.2 4.9 8.7 59.2 Total Net Adds: 19.6 mln 60.4 3.8 50.2 1.0  Growing above market  #1 player in prepaid  #2 player in voice postpaid  >3 mln net adds in 2013  Accelerating postpaid performance 45.5  4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Austere disconnection policy 4Q13 Source: ANATEL %YoY 10.9 11.4 (%; thd users) (%; mln users) (% YoY) Post Paid 4G Market Share 3G Market Share Base per Segment 11.9 12.3 36.6 41% 60.3 60.8 61.0 61.1 +2% 23.6 TIM 23% 23% Source: ANATEL 2Q13 3Q13 4Q13 31% 25% 22.3 11.5 12% 9% 1Q13 538 41% 39% +15% 26% Pre Paid 47% 4Q12 1Q13 Source: ANATEL 2Q13 3Q13 4Q13 21% 20% 17% 12% 2Q13 11% 3Q13 405 222 145 4Q13 Source: ANATEL OPERATIONAL 6 TIM
  6. 6. MAINTAINING EFFICIENCY SAC - Subscriber Acquisition Cost Bad Debt (R$ mln) (R$) 29 73 31 68 56 27 44 SAC/ Gross Adds 24 1Q13 2Q13 3Q13 4Q13 YoY -11% +7% -9% -10% SAC/ARPU 1.6x 1.5x 1.6x 1.3x 1Q13 2Q13 3Q13 4Q13 1.0% 0.9% 0.7% 0.6%  2013 Gross adds: % over gross revenues 40 millions  Postpaid Base: 12.3 mln +15% YoY Handset Business Network Cost  Total Base: (% YoY) (% YoY) 73.4 mln +4.3% YoY Product Margin (Revenue – Cost) (megabytes) (mln units) 10.2 2012 Total Voice Traffic (bln minutes) Total Data Traffic Handset Sold +22% +15% +78% 12.5 2013 0 2012 2013 YTD Nov/13 YTD Nov/12 2012 2013 -6.0% +50% Leased Lines (R$ mln) 2012 2013 OPERATIONAL 7
  7. 7. EVOLVING MARKETING PATH IN 2013: TRANSPARENCY, SIMPLICITY, QUALITY & INNOVATION Quality 2013 March VAS Prepaid April VAS August July LDI October Customer Base Highlights MOU (Minutes of Use) Net Adds Postpaid Mix 2013 2012 11% 1Q 78% 48% 64% 49% 24% Outgoing ARPU (minutes) (% Net Adds Postpaid/ Total) 47% +15% 21% 129 2Q (R$) 3Q 4Q 2011 148 136 1Q13 2012 2Q13 3Q13 4Q13 2013 Handset & Revenues Highlights Smart/webphone over new sales (%) 70% 65% Share of handset sales (FY13) (%) Operators 4Q13 ~39 mln smartphone/webphones users 38% 29% Open Market 21% 18% +22% 26% 52% 4Q12 (% of VAS Revenues over Gross Revenues; R$ million) 8% 83% 48% 4Q11 VAS Revenue Growth 5.4 4.4 TIM Operator 2 Operator 1 Operator 3 2012 2013 MARKETING 8
  8. 8. STRATEGY TOWARDS DATA & INTERNET Re-visiting Market Structure Households profile TIM’s Position With Telephone 57 mln Only mobile phone 32 mln Mobile and fixed phone 23 mln Fixed phone only 2 mln 91% 3G Subscribers 51% +82% 3% Purchase power 81 mln Salaries up to R$3.1k 106 mln 12 4Q11 53% of pop. 4Q12 40% 4Q13 4Q11 4Q12 4Q13 BOU (Bytes of Use) (average megabytes per user) 49% of pop. +25% (%; CETIC jun’13) Yes 27% (Monthly unique users; CAGR 11-13 Households with internet connection 60% 24 Data Users People that access 83 mln Internet (10 years or +) 55% 43% 70% of pop. Consumption No (% over total base) 37% 7 Salaries up to R$1.2k Smart/webphone penetration (mln users; CAGR 11-13) Fixed Mobile 74% 21% 18 4Q11 +75% 27 21 4Q12 4Q13 Nov/12 Nov/13 24.3 mln of households Big opportunity for FMS on Data Source: Anatel; Company Source: PNAD 2012, CETIC.br TIC Domicílios 2012 MARKETING 9
  9. 9. TIM FIBER: RESHAPING THE FIXED BROADBAND MARKET Building Up Size Accelerating Growth Penetration of new neighborhoods Addressable HH (000 HH) Customer Base Net Adds in 2013 (000 users) (000 users) (sales/addressable HH) 1,069 9.1% 16 10 2.9% 522 7 4Q12 1Q13 2Q13 3Q13 4Q13 2Q12 4Q13 1Q13 Changing market dynamics Net Adds speed mix (SP + RJ) GVT 12 - 34 Mbps 26% 4.0 < 12 Mbps 57% 4Q12 * 12 months average of price / Mbps Source: Anatel; Akamai 3Q13 (connections >34Mbps) 34% 4Q13 Sep/12 Dec/13 2012 Average Speed (Mbps) NET 2.8 5.0 2013 Live TIM 1.0 50% 15% 3Q13 UBB Market Share (SP + RJ) (R$/Mbps) 17% 2Q13 Evolving overall market performance Price per Mbps* (Mbps) > 34 Mbps 60 18 2012 2013 Other 56% TIM Fiber 44% Vivo 29.8 4Q13 0.7 2012 2013 South Korea Japan US SP + RJ Australia Italy Brazil 38.9 22.1 13.3 9.8 5.7 5.5 4.9 2.7 1st position 43rd position 84th position Source: Anatel; Akamai 3Q13 TIM FIBER 10
  10. 10. FINANCIAL RESULTS Net Revenues EBITDA (R$ mln; % YoY) +3.9% 19,921 +876 -255 +537 18,764 Service (R$ mln) +6.2% 5,012 +281 -95 +40 5,207 -31 Handset 16,701 +37.4% 2,344 26.7% EBITDA Margin 26.1% 32.1% +1.7% 16,420 Service EBITDA Margin 32.0% 3,220 Δ Mobile Services Δ Fixed Services Δ Handset ΔYoY +3.5% -28.0% EBITDA 2012 Revenue 2013 +37.4% ΔServ. Revs ΔMkt and Sales ΔYoY Revenue 2012 +1.7% +2.5% ΔNetwork and ITX ΔPers./G&A EBITDA and others 2013 -0.7% +1.4% Fixing EBITDA Drags Leased Lines Cost Intelig: EBITDA-CAPEX (% YoY) +9.7% YoY 2012 -6% YoY 2013 2013 2012 1.04 1.04 Revenues 24% + +11% +8% -5% 2Q (%) (R$ bln) +28% 1Q MTR Exposure FISTEL Payments (R$ mln) 3Q 4Q -12% 1Q 4Q10 - 0% -1% -10% 2Q 3Q 2012 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2013 4Q11 4Q12 EBITDA 30% 4Q10 4Q13 4Q11 4Q12 4Q13 FINANCIALS 11
  11. 11. FINANCIAL EVOLUTION Profit & Yield Net Income (R$ mln) 1,449 +4% Dividends 1,506 Payout (R$ mln, payout) 2013 +13% 1,278 2011 +13.5% 2012 2012 743 2011 2013 56% 843 533 51% +39.3% 42% Investments CAPEX CAPEX Mix (R$ bln) (%) 3.9 3.8 Total: R$ 3.9 bln 3.0 2011 Capex/Sales 2012 2013 18.0% 20.6% +90% in infrastructure 19.4%  Focus in transport infrastructure  Zero subsidy policy on handsets Operating Free Cash Flow (R$ mln) 5,207 -3,561* EBITDA CAPEX Δ WC 2,216  OFCF/Net Revenues: 11%  571 Expansion of +21.4% YoY OFCF *OFCF does not consider R$310 mln of LT Amazonas leasing as CAPEX FINANCIALS 12
  12. 12. PERSPECTIVES FOR 2014 Macro Environment Offer & Commercial Strategy Network Evolution  Continuation of Quality Plan monitoring and execution  Expectation of 4G Auction for 700MHz Spectrum  Discussions on Sector Cost Modeling and MTR evolution  Keen attention environment trends to competitive  Network coverage expansion with increased rollout of Macro, Small Cells and Wi-Fi HotSpots  Acceleration of Mobile Broadband project from current 40 cities to over 100 cities  Focus on operational excellence and network availability by investing on people, systems and processes  Voice growth with migration to postpaid and bundling for Voice FMS  Speed up data growth with smartphones and tablets, innovative VAS, 4G offers and Data FMS  Fixed business growth coming back with positive contribution to results  Restructuring commercial channels  Rational approach to pricing Recap of 2014-16 Business Plan Capex Evolution (% of Capex for Access Network) Smartphone penetration (Over total base of lines) LTE Data Users 3yrs - Plan Guidance: VAS Revenue Growth (% Customer Base) (% of Mobile Gross Rev.)  Revenues: single digit >75% 3G 43% 55% 30% 37% >50% >40% 18% 2G 21% MID  EBITDA: single digit MID  Capex: >R$11 bln 2013 2014e 2012 2013 2016e 2012 2013 2016e 2012 2013 2016e CONCLUSION 13

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