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Tim meeting with investors - agosto 2014

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  • 1. Company’s Presentation TIM Brasil August, 2014
  • 2. Visit our website and IR app: www.tim.com.br/ir AGENDA  Macro & Industry Overview........5  Recent Results: 1Q14………………12  Network Evolution………………….20  4G Update……………………….….…. 24  Fixed Business…………………….…..27  Business Outlook…………….….…. 30  Historical Data & Others…….……34 TIM IR app (English) TIM RI app (Portuguese)
  • 3. KNOWING TIM 3 KNOWING TIM BETTER Gross Revenues (R$ Bln) Customer base EoP (Million) 1998 2013 1998 2Q14 15,000 km fiber optical backbone 5,500 km fiber optical backhauling Organic Growth Growth Via Acquisition Brazilian Law “Nível” 1 “Nível” 2 Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders  100% Tag Along  Equal dividends rights  One single class of shares  Strict disclosure policy  Statutory Audit Committee: • Report to Board of Directors • Oversight Financial reporting • Analyze anonymous complaints Unique Telco company listed on the Novo Mercado CORPORATE GOVERNANCE TIM: A Huge Brazilian Company  Presence in Brazil since 1998.  16th largest Private Company in Brazil (source: Exame Magazine - 2013).  Approximately R$30 billion of Market Capitalization.  74.2 million customers (27% Share)  The 2nd Player - Market and rev. share  More than 383,000 points of sales  More than 165 own stores  15 Customer Care Centers (16k attendants)  ~13,100 Antennas  3,429 cities covered  95% of urban pop. covered  50,000 km of optical fiber network  ~12,480 employees  23,000 indirect jobs  R$10.4 billion in taxes payments in 2013  R$3.9 billion invested in 2013 Sales Network Social & Economic 74.2 29.6 GROWTH STRUCTURE
  • 4. Macro & Industry Overview
  • 5. MACRO & INDUSTRY OVERVIEW 5 MACRO SCENARIO OUTLOOK • Market consensus shows a softer growth. • Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune. • Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data. • Constrains of individuals budget points to an increase of mobile usage (low cost). GDP Forecast (% YoY Growth) Inflation Forecast (IPCA: 12 months) Interest Rate Forecast FX Rate Forecast (R$/U$ - year average)(% Selic Target p.y. – year average) Source: BaCen 5.9 6.4 6.2 6.0 2013a 2014e 2015e 2016e 8.2 11.0 11.8 10.0 2013a 2014e 2015e 2016e 2.20 2.40 2.50 2.18 2013a 2014e 2015e 2016e 2.30 1.30 1.70 2.60 2013a 2014e 2015e 2016e
  • 6. TIM Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 74,203 665 121 n.d. 74,989 Market share 2Q14 26.9% 1.5% 0.5% n.d. --- Net Adds 2Q14 (000´s) 286 - 19 n.d. 305 Net Adds 12M (000´s) 2,008 27 61 n.d. 2,096 Net Revs FY13 (R$ Mln) 19,264 657 19,921 Fixo / Móvel BL Fixa Vivo BL Fixa/TVFixo / Móvel Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 79,357 10,926 4,370 688 95,341 Market share 2Q14 28.8% 23.0% 18.8% 3.6% --- Net Adds 2Q14 (000´s) 892 98 36 91 1,117 Net Adds 12M (000´s) 3,158 360 345 175 4,038 Net Revs FY13 (R$ Mln) 23,002 11,720 34,722 Fixo Móvel BL Fixa/TV Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 68,776 11,100* 7,045 10,106 97,027 Market share 2Q14 24.9% 23.7% 30.3% 53.3% --- Net Adds 2Q14 (000´s) 27 - 220 230 477 Net Adds 12M (000´s) 2,303 1,248* 905 1,121 4,767 Net Revs FY13 (R$ Mln) 12,773 20,424 33,197 Fixo Móvel Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 51,081 17,263* 6,567 867 75,778 Market share 2Q14 18.5% 39.6% 28.3% 4.7% --- Net Adds 2Q14 (000´s) 502 - 3 58 563 Net Adds 12M (000´s) 1,373 -1,206* 17 - 35 1 49 Net Revs FY13 (R$ Mln) 9,290 19,132 28,422 Claro Oi BRAZILIAN TELCOS X-RAY Source: Companies Releases and Anatel MACRO & INDUSTRY OVERVIEW 6* First quarter results
  • 7. MARKET STRUCTURE CHANGING TOWARDS DATA USAGE 60% 36.8 mln 40% 24.5 mln 44% 16.2 mln 24% 8.8 mln 32% 11.8 mln (40%) (60%) 61.3 Mln Possess Internet connection Does NOT Possess Internet connection Other Lack of coverage Too Expensive 53% of active connection base has currently a speed below 2Mbps Total Households Households which does NOT possess Households with internet connection and breakdown for households without internet connection: MACRO & INDUSTRY OVERVIEW 7 3% 37% 51% 91%With Telephone Only mobile phone Mobile and fixed phone Households profile Fixed phone only Purchase power Salaries up to R$1.2k Salaries up to R$3.1k Consumption People that access Internet (10 years or +) 57 mln 32 mln 2 mln 81 mln 106 mln 23 mln Households with internet connection (%; CETIC jun’13) 53% of pop. 70% of pop. Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates Yes No 24.3 mln of households 83 mln 49% of pop. Fixed Mobile 21% 74% 40% 60% Re-visiting Market Structure Market Data Revenues Growth 2016 vs. 2012:  > 13 bln Reais on Mobile (+100%)  >7 bln Reais on Fixed (+35%)
  • 8. Widespread use of Social Media (Social Network Users in Brazil 2011-2017) BRAZILIAN INTERNET USAGE BOOM Internet Penetration in South America (Internet users per 100 inhabitants) Strong adoption of Instant Messaging (WhatApp mln users) High Penetration of E-commerce (E-commerce revenues in Bln US$) 8.4 11.0 17.0 2010 2011 2012 Amazon lauched operations in Brazil in Dec/12 83 mln Internet users – Brazil is the 5th largest nation in the world of internet users 66% 60% 59% 56% 46% 44% 41% 37% 32% 32% 30% 24% Arg Col Chi Uru Bra Ecu Vem Per Guy Sur Bol Par 56.1 66.2 78.3 88.3 97.8 104.2 110.0 2011 2012 2013 2014 2015 2016 2017 #2 in Facebook active users (76mln) only after US #2 in Twitter users (41mln) only after US 2nd largest market outside US 40 38 32 31 25 17 13 11 3 India Brazil Mexico Germany Spain UK Argentina Russia France 28% of mobile users in Brazil use Instant Messaging apps Source: SocialBakers, e-Marketer, Semiocast, G1.com, Folha de São Paulo MACRO & INDUSTRY OVERVIEW 8 465 mln worldwide users List of selected countries as of Feb/14
  • 9. Mobile 23.0 12.8 9.3 19.3 4.8 Fixed+Data +Pay Tv 11.7 20.4 19.1 0.7 4.9 Total 34.7 33.2 28.4 19.9 4.8 4.9 LEVERAGING ON PURE MOBILE COMPETITIVE ADVANTAGE Long Distance Leader 50% Market Share 2nd Overall 74.2 million customers Prepaid Leader 29.2% Market Share Source: Companies Releases, TIM estimates; CETIC jun’13; Akamai ; PNAD - IBGE FMS Focus A pure mobile approach is the most suitable strategy to capture both opportunities Oi Claro Vivo TIM 29.5% 29.6% 28.7% 28.8% 25.5% 26.9% 27.2% 26.9% 25.6% 24.6% 25.0% 24.9% 19.1% 18.7% 18.7% 18.5% 2Q11 2Q12 2Q13 2Q14 Customer Base Evolution (Market Share) Entering in Data World Via Mobile (mln users) Voice FMS: TIM, with no legacies, can only gain on the trend (R$ billion, Net Revenue per Group 2013) 2Q14 x 2Q11 -0.7 p.p +1.4 p.p -0.6p.p -0.6 p.p Source: ANATEL Mobile Fixed 4.1 14.6 33.1 52.5 94.8 11.4 13.8 16.3 19.1 20.9 2009 2010 2011 2012 2013 +83% +23x 28% 26% 23% 16% 4% 4% Vivo Claro Oi TIM GVT Nextel Revenue Share MACRO & INDUSTRY OVERVIEW 9
  • 10. Recent Results: 2Q14
  • 11. 26k 100k Postpaid segment grew by 7% and postpaid mix over customer base reached 16.5%, while SAC/ARPU remained below 2 months 19% 22% 27% 2Q12 2Q13 2Q14 2nd QUARTER HIGHLIGHTS 11 Operational 2Q13 2Q14 +7% YoY Data as % of revenues Net Revenues: Usage (local + long distance) + VAS Total OPEX (Δ% YoY)11% 9% 2% -3% -7% EBITDA Margin 27% 25% 28% 2Q12 2Q13 2Q14 % of total customer base 15.8% 16.5% 2Q13 2Q14 Mix of postpaid over total base World Cup Figures (in the Stadiums) Live TIM customer base Financial Gross Data Revenue growth at solid pace: R$1.6 bln in 2Q14 Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY Strong cost control: total opex dropped 7% YoY EBITDA grew 8% YoY with margin gain 28% 32% 39% Data users reached 29 mln lines Live TIM crossed 100 thousand customers milestone +3 p.p. +5 p.p. 2Q13 3Q13 4Q13 1Q14 2Q14 Jul/14Jun/13 2Q12 2Q13 2Q14 • Photos sent: 50 mln • Outgoing calls: 5 mln • Data traffic: 26.7 TBMaracanã Stadium
  • 12. CORE BUSINESS ANALYSIS & PERFORMANCE MTR cut full impact in 2Q Handset sales at a healthy level although reduced growth World Cup impact on commercial activities Mobile Service Net Revenues Analysis (% YoY) EBITDA Performance (mln; %YoY) June 2013 June 2014 No Holidays 1 National holiday 3 Brazil’s games (1/2 day holiday) Up to 2 municipal holidays in main cities hosting games Net revenues from MTR-18% -28% 2.4 3.1 2.7 2Q12 2Q13 2Q14 Total units sold (mln) (Local + LD + VAS) Business Received 2Q13 2Q14 1,232 2Q13 2Q14 Reported EBITDA Margin 1 2 3 +7% 24.9% 27.9% EBITDA 12 1Q14 2Q14 -30% Business Generated +3% -1% *MTR Impact +16% +8% 1,331 Total 6 months (YoY) +8% -26% +4% 0% (Incoming MTR + SMS) Ex-MTR Ex-MTR *MTR Impact Ex-MTR ~170 mln* ~96 mln* 1,427
  • 13. 118.5 23.2 2009 2010 2011 2012 2013 Jun/14 2Q13 2Q142Q13 2Q14 READY FOR DATA OPPORTUNITY 13 # Access Growth (users in mln) Brazilian Broadband: Low Average Speed (Mbps) WSJ: “Brazil - The Social Media Capital of the Universe” Fixed Data Experience is Mobile Capturing Data Opportunity Mobile 2.7 2.6 4Q13 1Q14 #2 in Facebook #2 in Twitter 2nd largest market #2 in WhatsApp 10.5 13.7 3.6 2.5 Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper ‘Folha de São Paulo’ Sources: Anatel, Akamai - State of Internet Source: IDC Tracker Source: Anatel # Total Market Equipment Sold (units in mln) Smartphone & Tablet Notebook & PC 1Q14 2Q14 SMS Web Content & Other 1,500 Data Gross Revenues Mix (R$ mln; %YoY) +22% +1% -8% +29% +33% +45% +72% BOU: Bytes of Use (Megabytes) Days of Use Data Users (# mln users) 23 29 2Q13 2Q14 +24% 2Q13 2Q14 2Q13 2Q14 +40% +30% In May, >45% connections in Brazil were < 2Mbps + 5X ∆ %YoY ∆ %YoY +20% 1,578
  • 14. 75.7 76.2 79.4 68.9 72.2 74.2 63.0 66.5 68.8 47.8 49.7 51.1 47% 39% 20% 30% 21% 20% 12% 10% 2Q13 2Q14 23% 24% 24% 26% 40% 35% 11% 14% 2Q13 2Q14 2Q13 2Q14 CUSTOMER BASE EVOLUTION 14  # 1 player in prepaid  Strong growth in ‘Controle’ postpaid base  Austere disconnection policy 2Q12 2Q13 TIM Source: ANATEL 2Q14 Vivo Claro Oi 4G Market Share (%; thd users) 3G Market Share (%; mln users) 28.9 30.2 41.5 16.2 Source: ANATEL TIM TIM 1,281 990 655 334 Customer Base (mln) Source: ANATEL +8.4% Source: Company Prepaid Recharge (R$; % YoY) 118 mln 3.3 mln
  • 15. vv GO TO MARKET PROGRESS 15 Equipping Customer Base % of smartphone sales among players in 2Q14 % of smart + webphone on TIM’s base in 2Q14 % of smartphone over new sales in 2Q14 Postpaid o Reduce churn on postpaid o Attract dual SIM card users traffic o Renewed focus on corporate customers o Leveraging on “pure mobile” distinctiveness o Expanding daily tariff scheme to new regions o Simplicity / Transparency R$ 7 weekly service package R$ 0.75 daily offer Prepaid 35% 50% 62% 2Q12 2Q13 2Q14 39% 57% 71% 2Q12 2Q13 2Q14 41% 23% 28% 9% P3 P2 P1 TIM Managing customer base… To Infinity and beyond… Penetration of smart + webphones drives data usage growth Source: GFK Group Source: Company Source: Company
  • 16. 4,065 2Q13 2Q14 3,985 170 96 2Q13 2Q14 +2.2% FINANCIAL RESULTS ANALYSIS (1/2)Service Net Revenues (R$ mln; % YoY) EBITDA (R$ mln; % YoY) Reported Revenue 2Q13 Reported Revenue 2Q14 3,985 1,232 Reported EBITDA 2Q13 Reported EBITDA 2Q14 +186 -87 Δ Opex/ Others Traffic/Data Δ Contribution Margin 24.9% 31.1% 1,331 27.9% 34.4% EBITDA Margin Service EBITDA Margin +5.8% +4.4% Efficient Cost Control Interconnection (Δ% YoY) Leased Lines Cost (Δ% YoY) % Bad Debt/Sales (% over gross revenues) Net Services Revenues Exposure EBITDA Exposure MTR Impact -2.0% ~ 25% ~ 12% 2Q10 2Q11 2Q12 2Q13 2Q14 ~ 35% ~18% 2Q10 2Q11 2Q12 2Q13 2Q14 MTR Impact +15.8% +8.0% -31.3% -10% ~1% ~1% 2Q13 2Q14 MTR Exposure 1,427 ‘Pro forma’ EBITDA in 2Q14 4,155 ‘Pro forma’ Revenue in 2Q14 stable +208 -253 -36 ΔYoY +6.9% -29.6% -20.5% Δ OthersΔ Business Incoming Δ Business Generated ΔYoY 16
  • 17. -1,227 2,648 -609 -1,654* -1,786 182 +41% FINANCIAL RESULTS ANALYSIS (2/2) Net Income - 6 months (R$ mln; % YoY) Net Debt (R$ mln; % YoY) 17 EBITDA 692 738 6M13 6M14 +6.7% >94% towards infrastructure 6M13 6M14 R$1,657 mlnR$1,593 mln 2G 3G 4G 2G 3G 4G 1,984 4,521 2,537 Debt Cash Net debt Jun/13 Jun/14 1,031 6,356 5,325 1.749 1.749 4,607 3,576 Debt Cash Net debt +110% -48% Investments Cash Flow - 6 months (R$ mln; R$ YoY) YoY Net debt/EBITDA 12M: 0.19x New BNDES Loan CAPEX Δ WC OFCF 6M14 *Considering R$3 mln of LT Amazonas leasing adjustment OFCF 6M13 LT Amazonas Leasing +618 mln
  • 18. Network Evolution
  • 19. STRATEGY: INFRASTRUCTURE EVOLUTION 2016 MASSIVE LD BACKBONE 65,000 KM OF FIBER 2013 FIBER TO THE AMAZON 46,000 KM OF FIBER BY YE13 Fiber to the site / Mobile Broadband Project Key to Data Growth  Targeting 38 cities in 2013,+100 cities till 2016.  From 2-8 to +100 Mbps.  LTE Ready.  Macro coverage fine tuning.  Focus on IP infrastructure, caching, peering. INTELIG 15,000KM 2009 INTELIG ACQUISITION  New backbone routes- Increasing resilience. 82% urban population 2013 2014 2015 2016 95% urban population #NodeB / eNodeB (3G + 4G) # BTS (2G) 2012 2013 2014e 2015e 2016e New Sites Including Small Cell. POP MW POP MW POP MW POP MW BSC-RNC Site POP MW 2013 2014 2015 2016 LTE* 3G 2G Fiber base Infrastructure Backhauling Evolution Increased Coverage and Access Capacity (# new elements) Capex Evolution Towards Data (% of total Capex) Small Cell Approach (# new elements) NETWORK EVOLUTION 19
  • 20. 2Q13 2Q14 o Brasília o Curitiba o Rio de Janeiro 4Q13 2Q14 4Q13 1Q14 2Q14 INFRASTRUCTURE FOCUSED IN DATA 20 COVERAGE  Homogeneous  Access Upgrade  In all relevant areas  Site densification  Small cell / Wi-Fi CAPACITY  Higher speed  4G roll out  Mobile broadband project acceleration  Backhauling infrastructure AVAILABILITY  Always available  Fine tunning  Fiber rings / redundance  Resilience DATA CENTRIC APPROACH TIM’s Infrastructure Strategy Network in Numbers Number of 3G & 4G Sites Number of Wi-Fi & Small Cell ~11.3 ~11.0 ~13.1 Number of sites with fiber (FTTS) Cities in mobile BB project +3.5x 53 66 1Q14 2Q14 +13 cities BioSite: New approach to coverage  Patent pending +47% 1 2 3 After Before o New frequency at 900 MHz in SP o Better indoor coverage o Addressing capacity requirement Completed actions  Initiating in:
  • 21. Capex Evolution (R$ mln) Capex per Technology (R$ mln) Fiber to the site expansion to ~100 cities Benchmark: Anatel Plan for 2012-2014 (R$ bln) 3G 2G 3G 2G 3G 4G 2011 ~R$3,800R$2,983 2014e 5.9 4.8 4.6 2.1 5.0 3.5 2.6 3.4 TIM Claro Vivo Oi 10.9 +31% +52% +98% Copper (2-8Mbps) Before FTTS After FTTS Metro Ring Own Fiber (300 Mbps) From Copper To Fiber based  Wi-Fi small cell approach Total Capex 2,836 2,983 3,386 3,871 2011 2012 2013 19% 17% 20% % over sales 2010 18% CAGR 11% Source: 5th monitoring cycle of mobile telecom improvements plan released by Anatel on Feb/14 8.3 7.2 5.5 Actual from 2012 to Oct/13 Forecasted to Nov/13 until 2014 end CAPEX ANALYSIS NETWORK EVOLUTION 21
  • 22. Regulatory Update
  • 23. 0.36 0.32 0.24 0.16 0.10 0.06 0.03 0.02 2012 2013 2014 2015 2016 2017 2018 2019  Auction expected for September  License period: 15 + 15 years  No additional obligation. Network and Spectrum sharing opportunities  Switch off plan starting at the beginning of 2016  Minimum prices and clean-up costs not yet defined 4G Auction RFP  Leased line (EILD) reference price reduction, in 2016, from ~20% until ~80%  Establish regulated reference prices to leased lines speed up to 34 Mbps  On preliminary ‘static’ simulation show relevant OPEX reduction MTR New Glide Path (R$) Leased Lines - EILD New parameters established New MTR and EILD Analysis Source: Anatel Source: ANATEL, Commissioners Meeting on July 17th Main measures until July, 2014  Cancelation within 48 hours, without human assistance  In case of dropped call, companies must call customer back  Minimum of 30 days for prepaid credits to expire ANATEL's new costumer care policy - RGC Source: ANATEL Resolution 632/2014, GEX Meeting on July 17th REGULATORY UPDATE TIM has been working to improve transparency and caring 23
  • 24. Expected date for the Auction  Format indicates soft competition: the spectrum will be auctioned in four blocks of 10 MHz + 10 MHz;  No additional obligations (“naked auction”), synergies with 2.5GHz auction obligations will be subject to backhaul requirements;  Authorization for spectrum sharing in cities with pop. <100k. 733MHz 4 1st Round: Cap of 10 + 10 MHz 2nd Round: Cap of 20 + 20 MHz (in case of no bidders) 5 6 2 3 1 708MHz 718MHz 728MHz 738MHz 748MHz 4 5 6 2 3 1 763MHz 773MHz 783MHz 793MHz 803MHz 9 713MHz 718MHz 723MHz 728MHz 738MHz 708MHz 743MHz 748MHz 788MHz 768MHz 773MHz 778MHz 783MHz 793MHz 763MHz 798MHz 803MHz 10 11 12 7 8 13 14 17 18 15 16 10 11 12 7 8 13 14 9 Auction details Costs & Payment method  License payment in up to six installments (36, 48, 60, 72, 84 and 96 months) preceded by a 10% down payment;  Readjustment: IGPDI +1% per month;  Reimbursement values will be defined in the BID terms and will be administrated by an independent third party;  Channel repositioning, filters, TV converter, and other mitigation techniques will be subject to reimbursement. Regional Blocks: Conclusion of the Digitalization Plan Auction Public Consultation Band allocation Res. Anatel 625/13 Nov/13 Jan Feb 2015 2018 Analog TV switch off period Mar Apr May Jun Jul Aug Sep Conclusion of the Digitalization Plan Interference tests Public consultation bid and interference Bid notice Interference Resolution Digitalization Plan 700MHZ AUCTION o Block 5 or 15 and 16 CTBC Region 106 cities or 1 mln users o Block 6 or 17 and 18 SERCOMTEL Region 2 cities or 67k users o Block 4 or 13 and 14 Represents 98% of the population, equals to national 4G UPDATE 24
  • 25. Vivo Claro Oi TIM Source: ANATEL 4G Market Share on 2500Mhz (%; thd users) 2500 MHZ auction results Spectrum Characteristics 5800 Mhz 2100 Mhz 850 Mhz 700 Mhz < 700 Mhz BTS Range (km) 0 2 4 6 8 10 Numbers of BTS 20 15 10 7 5 2 Band W Band X Band V1 Band V2 2500 MHZ rural coverage obligations X band W band V2 band V1 band Roadmap Presidential Decree Nº 5820/06 Rules to the Digital TV migration 2006 2012 ANATEL’s Resolution Creation of a study group to define the future and the atribution of the band 2013 Ordinance Nº 14/13 Premises to 700 Mhz destination on the SMP 2015 2018 Shutting down Period Feb/Apr 2013 - Subrange Atribution CP Nov/13 Res. Nº 625/2013 – Atribution of the Subrange Paid ~R$0.3 bln Paid ~R$1 bln Paid ~R$0.8 bln Paid ~R$0.3 bln 4G UPDATE 25 4G DETAILS TIM 1,281 990 655 334 3.3 mln 47% 39% 20% 30% 21% 20% 12% 10% 2Q13 3Q13 4Q13 1Q14 2Q14
  • 26. Fixed Business
  • 27. 2Q13 3Q13 4Q13 1Q14 2Q14 TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2 27 Turnaround Plan on Fixed Business 20132012 - 2014 New sales revenues (R$; YoY) Financial performance  Governance / Efficiency  Business development  Quality and Process Activation time (days) Operational Improvements Paying Off + Segment EBITDA-CAPEX Source: Company Net Revenues (with intercompany) 2013 2014 Business Priorities 4Q13 1Q14 2Q14Plan Phases Highlights Financial sanitization Infrastructure reinforcement Market repositioning o Positive EBITDA o Cost efficiency o Customer base management o New business unit organization o IT renewal plan o Multiservice network launch o New branding o New offers and product launch o Restructured sales force 2H14 Showing results o Sales growth o Revenue rebound Business remodeling driving stable fixed revenues QoQ +19x 2Q13 2Q14 -80%
  • 28. +34% 11.5 18.3 24.5 2Q13 0 1Q14 2Q14 28 Gaining more traction Addressable HH (000 HH) Gross Adds (000 users) Customer Base (000 users)  May/2014 o Live TIM Extreme 1Gbps for R$1,999.90 o Live TIM Blue Box release: optional TV approach  Jul/2014 New speed: 70Mbps for R$119.90 Source: Netflix July 2014 Netflix Broadband Ranking (Average streaming speed representation) 31% Positive Neutral Negative Internet buzz FIXED BROADBAND: LIVE TIM New Offers 126 neighborhoods:  43 neighborhoods in SP  83 neighborhoods in RJ Quality Experience 609 804 1,069 1,138 1,220 2Q13 3Q13 4Q13 1Q14 2Q14 8% 31% 21% 51% 72% 18% 2nd 3rd 4th 5th 6th 1st Source: Gauge 1Q14 Source: Company +113% 28 26k 100k Jul/14Jun/13 Market average
  • 29. Business Outlook
  • 30. Accelerated Network Evolution for Data KEEPING THE STRATEGIC FOCUS ON THE 2nd HALF Consolidating Recent Offers & Innovative Services Strong Institutional Position “Porta Azul” (Blue Door) Evolving the Structure for the New Challenges • Streamlining organization • Adding new talent • Stronger segment focus o Consumer o Corporate o Residential • 4G auction participation • Leadership position • Presence in dialogue with relevant institutions 4G 700MHz Small Cells BioSite Mobile Fixed VAS TIM Protect CONTENT 30 New Positioning DATA CENTRIC APPROACH Coverage 1 2 3 Capacity Availability
  • 31. 21.3 27.5 2012 2013 2016e 2012 2013 2016e +xx% OFFER EVOLUTION 136 148 >170 2012 2013 2016e 18% 21% >40% VAS Gross Revs. VAS/Revs.30% 37% >50% 43% 55% >75% 2012 2013 2016 +xx% +29% +22% Smart/Web phone Penetration (% over total base of lines) Voice MOU (minutes) Data Users (% of Data Users in CB; million users) VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln) BUSINESS OUTLOOK 31
  • 32. TIM PART: 2014-2016 GUIDANCE Total Net Revenues EBITDA CAPEX 18,764 19,921 2012 2013 2014e 2015e 2016e 5,012 5,207 2012 2013 2014e 2015e 2016e R$ million R$ million 626 3,139 3,871 3,487 384 2012 2013 2014e 2015e 2016e R$ million Infrastructure Others/Licenses 3,765 Guidance 2013-2016 CAGR: Mid Single Digit Growth 2013-2016 CAGR: Mid Single Digit Growth Total CAPEX 2014-2016: ~R$11 billion* *Does not consider 4G licenses (700Mhz). BUSINESS OUTLOOK 32
  • 33. Historical Data & Others
  • 34. RECENT TOWERS DEALS HISTORICAL DATA & OTHERS 34
  • 35. QUARTERLY HISTORICAL DATA (R$ THOUSAND) HISTORICAL DATA & OTHERS 35 R$ Thousand Description 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 2Q14 vs. 2Q13 (% YoY) Gross Revenues 7,024,216 7,413,009 7,539,627 7,684,901 7,043,065 7,162,503 -3.4% Gross Revenues Telecommunications Services 6,125,517 6,136,654 6,312,149 6,490,893 6,180,443 6,014,599 -2.0% Telecommunications Services - Mobile 5,831,734 5,852,094 6,054,713 6,254,887 5,958,845 5,793,628 -1.0% Usage and Monthly fee 2,694,316 2,777,176 2,884,968 2,953,344 2,801,736 2,751,247 -0.9% Value added services - VAS 1,245,483 1,291,470 1,362,498 1,454,202 1,499,538 1,577,565 22.2% Long distance 830,331 830,045 832,558 840,030 814,990 771,408 -7.1% Interconnection 1,005,954 893,936 919,536 941,325 775,304 627,616 -29.8% Others 55,649 59,466 55,153 65,985 67,277 65,792 10.6% Telecommunications Services - Fixed 293,783 284,560 257,437 236,007 221,599 220,971 -22.3% Gross Revenues Handset sales 898,699 1,276,354 1,227,478 1,194,008 862,622 1,147,904 -10.1% Net Revenues 4,710,715 4,944,141 5,083,159 5,183,276 4,702,224 4,774,732 -3.4% Adjusted Net Revenues 4,710,715 4,988,050 5,083,159 5,183,276 4,702,224 4,774,732 -4.3% Net Revenues on Services 4,086,662 4,065,311 4,206,773 4,342,314 4,099,640 3,984,519 -2.0% Adjusted Net Revenues on Services 4,086,662 4,109,220 4,206,773 4,342,314 4,099,640 3,984,519 -3.0% Net Revenues on Products 624,053 878,830 876,386 840,963 602,584 790,214 -10.1% Operating Expenses (3,486,942) (3,711,943) (3,831,158) (3,684,504) (3,384,936) (3,443,836) -7.2% Personnel expenses (200,579) (200,623) (211,985) (218,688) (227,767) (229,822) 14.6% Selling & marketing expenses (946,656) (973,227) (1,035,454) (982,561) (980,196) (1,025,703) 5.4% Network & interconnection (1,352,476) (1,321,534) (1,344,279) (1,294,011) (1,194,478) (1,010,578) -23.5% General & administrative (159,075) (152,075) (155,809) (157,766) (149,852) (178,396) 17.3% Cost Of Goods Sold (655,634) (912,158) (906,944) (876,105) (645,844) (828,012) -9.2% Bad Debt (72,631) (67,720) (55,534) (44,167) (76,103) (77,152) 13.9% Other operational revenues (expenses) (99,891) (84,605) (121,152) (111,205) (110,695) (94,173) 11.3% EBITDA 1,223,773 1,232,198 1,252,001 1,498,773 1,317,288 1,330,896 8.0% EBITDA Margin 26.0% 24.9% 24.6% 28.9% 28.0% 27.9% 295 bps Adjusted EBITDA 1,223,773 1,262,852 1,252,001 1,498,773 1,317,288 1,330,896 5.4% Adjusted EBITDA Margin 26.0% 25.3% 24.6% 28.9% 28.0% 27.9% 256 bps Depreciation & amortization (679,439) (671,297) (694,075) (723,061) (730,313) (757,072) 12.8% Depreciation (364,335) (373,258) (376,195) (388,709) (401,829) (407,479) 9.2% Amortization (315,103) (298,039) (317,880) (334,352) (328,484) (349,594) 17.3% EBIT 544,335 560,901 557,926 775,712 586,975 573,824 2.3% EBIT Margin 11.6% 11.3% 11.0% 15.0% 12.5% 12.0% 67 bps Net Financial Results (71,085) (40,881) (90,237) (100,517) (35,834) (72,706) 77.9% Financial expenses (167,024) (152,110) (209,124) (221,442) (177,911) (256,616) 68.7% Net exchange variance (731) 2,034 (4,279) (1,435) (1,403) (560) -127.5% Financial income 96,670 109,195 123,165 122,360 143,479 184,469 68.9% Income before taxes 473,250 520,020 467,689 675,195 551,141 501,117 -3.6% Income tax and social contribution (167,183) (134,462) (152,674) (176,221) (179,008) (135,504) 0.8% Net Income 306,067 385,558 315,015 498,974 372,132 365,614 -5.2% Adjusted Net Income 306,067 405,790 315,015 498,974 372,132 365,614 -9.9%
  • 36. ANNUAL HISTORICAL DATA (R$ THOUSAND) HISTORICAL DATA & OTHERS 36 R$ Thousand Description 2012 2013 2014 (YTD) Gross Revenues 27,755,813 29,661,753 14,205,568 Gross Revenues Telecommunications Services 24,350,086 25,065,214 12,195,042 Telecommunications Services - Mobile 22,879,828 23,993,427 11,752,472 Usage and Monthly fee 11,086,671 11,309,804 5,552,984 Value added services - VAS 4,404,832 5,353,653 3,077,103 Long distance 3,217,921 3,332,965 1,586,398 Interconnection 3,969,138 3,760,751 1,402,920 Others 201,264 236,254 133,069 Telecommunications Services - Fixed 1,470,259 1,071,787 442,570 Gross Revenues Handset sales 3,405,726 4,596,539 2,010,526 Net Revenues 18,763,947 19,921,291 9,476,957 Adjusted Net Revenues 18,763,947 19,965,200 9,476,957 Net Revenues on Services 16,419,958 16,701,059 8,084,159 Adjusted Net Revenues on Services 16,419,958 16,744,969 8,084,159 Net Revenues on Products 2,343,989 3,220,232 1,392,798 Operating Expenses (13,751,989) (14,714,546) (6,828,772) Personnel expenses (729,032) (831,876) (457,589) Selling & marketing expenses (3,841,852) (3,937,899) (2,005,899) Network & interconnection (5,353,476) (5,312,301) (2,205,056) General & administrative (551,393) (624,725) (328,248) Cost Of Goods Sold (2,604,978) (3,350,841) (1,473,856) Bad Debt (250,972) (240,051) (153,256) Other operational revenues (expenses) (420,286) (416,853) (204,868) EBITDA 5,011,958 5,206,744 2,648,184 EBITDA Margin 26.7% 26.1% 27.9% Adjusted EBITDA 5,054,088 5,237,399 2,648,184 Adjusted EBITDA Margin 26.9% 26.2% 27.9% Depreciation & amortization (2,688,588) (2,767,871) (1,487,386) Depreciation (1,458,563) (1,502,498) (809,308) Amortization (1,230,025) (1,265,374) (678,078) EBIT 2,323,370 2,438,873 1,160,799 EBIT Margin 12.4% 12.2% 12.2% Net Financial Results (169,890) (302,720) (108,541) Financial expenses (644,754) (749,700) (434,527) Net exchange variance (4,151) (4,410) (1,962) Financial income 479,015 451,391 327,949 Income before taxes 2,153,480 2,136,153 1,052,258 Income tax and social contribution (704,592) (630,539) (314,512) Net Income 1,448,888 1,505,614 737,746 Adjusted Net Income 1,500,143 1,525,845 737,746
  • 37. HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA HISTORICAL DATA & OTHERS 37 ea Description 2012 2013 2014 Brazilian Wireless Subscriber Base (000`s) 261,808 271,100 275,707 Estimated Total Penetration 132.8% 136.45% 136.1% Municipalities Served (GSM) 3,383 3,404 3,427 Market Share 26.88% 27.09% 26.91% Total Lines (000's) 70,376 73,431 74,203 Pre-paid Lines (000's) 59,658 61,146 61,963 Post-paid Lines (000's) 10,718 12,285 12,239 Gross Additions (000's) 38,408 39,627 18,612 Net Additions (000's) 6,293 3,055 772 Churn 47.5% 50.9% 24.2% Total ARPU 19.1 18.6 17.6 Total MOU 136 148 139 SAC 29 28 29 Handsets Sold (000's) 10,227 12,511 5,400 CAPEX (R$ Mn) 3,765 3,871 1,472 Employees 11,650 12,167 12,225
  • 38. Stock Performance (base 100)* TIM Celular S.A. Intelig 100% TIM Brasil Serv. e Part. S.A. Free Float Telecom Italia International N.V. Telecom Italia 100% TIM Participações S.A. ON: 33% (805,662,701)ON: 67% (1,611,969,946) 100%100% STRUCTURE AND STOCK PERFORMANCE HISTORICAL DATA & OTHERS 38 -10% 00% 10% 20% 30% 40% 50% 60% TIMP3 Ibovespa TSU
  • 39. Cofins PIS/ PASEP ICMS Fistel Fust/ FUNTEL TotalTotalFust/ FUNTEL PIS/ PASEP ICMSCofins Fistel 2007 2012 2007 2012 % Gross Revenues TELCOS’ TAX BURDEN & HIGH INVESTMENTS 3% ~1% 28% ~5% 1,5% ~39% 16.3 27.2 6.5 10.1 20% of Revenues +70% Taxation represents almost 40% of companies gross revenues. Tax Burden Composition Mobile Industry Tax Payments (R$ Bln) Mobile Industry Investments (R$ Bln) +60% HISTORICAL DATA & OTHERS 39
  • 40. 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 Rodrigo Godoy E-mail: rcgodoy@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 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. SAFE HARBOR AND IR CONTACTS SAFE HARBOR & IR CONTACT 40

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