Meeting with Investors - May 2014

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Meeting with Investors - May 2014

  1. 1. Company’s Presentation TIM Brasil
  2. 2. Agenda
  3. 3. Available at: o Website: www.tim.com.br/ir o TIM IR App: English AGENDA  Macro & Industry Overview........6  Recent Results: 1Q14………………13  Network Evolution………………….21  4G Update……………………….….…. 25  Fixed Business…………………….…..28  Business Outlook…………….….…. 31  Historical Data & Others…….……35 Portuguese
  4. 4. KNOWING TIM 4 KNOWING TIM BETTER Gross Revenues (R$ Bln) Customer base EoP (Million) 1998 2013 1998 1Q14 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.  73.9 million customers (27% Share)  The 2nd Player - Market and rev. share  More than 430,000 points of sales  More than 160 own stores  15 Customer Care Centers (16k attendants)  ~14,000 Antennas  3,404 cities covered  95% of urban pop. covered  49,000 km of optical fiber network  ~12,225 employees  23,000 indirect jobs  R$10.4 billion in taxes payments in 2013  R$3.9 billion invested in 2013 Sales Network Social & Economic 73.9 29.6 GROWTH STRUCTURE
  5. 5. Macro & Industry Overview
  6. 6. MACRO & INDUSTRY OVERVIEW 6 MACRO SCENARIO OUTLOOK • Market consensus shows a much softer growth. • Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune. • Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data. Real GPD Forecast (% YoY Growth) Inflation Forecast (IPCA: % YoY Growth) Interest Rate Forecast FX Rate Forecast (R$/U$ - year average)(% Selic Target p.y. – year average) Source: BaCen 6,25 5,90 5,40 2014e 2015e 2016e 10.9 11.9 10.0 2014e 2015e 2016e 2,40 2,50 2,20 2014e 2015e 2016e 2.2 2013a 8.2% 2013a 6.3% 2013a 2.3% 2013a 1,80 2,20 3,20 2014e 2015e 2016e
  7. 7. MACRO & INDUSTRY OVERVIEW 7 BRAZILIAN TELCOS X-RAY Fixed Mobile Fixed Mobile Fixed BB/TV Fixed / Mobile Fixed BB/TV Fixed / Mobile Fixed BB Oi Vivo Claro TIM Mobile Fixed Fixed BB Pay-TV Group Customers (000´s) 73.916 662 75 n.d 74.653 Market share 27.0% 1.5% 0.3% n.d --- Net Adds 1Q14 (000´s) 486 - 15 n.d 501 Net Revs (R$ Mln) FY13 19,264 657 19,921 Net Revs (R$ Mln) 1Q14 4,561 141 Mobile Fixed Fixed BB Pay-TV Group Customers(000´s) 78.465 10.312 4.320 597 93.694 Market share 28.7% 23.0% 19.5% 3.2% --- Net Adds 1Q14 (000´s) 1.220 78 - 4 3 1.297 Net Revs (R$ Mln) FY13 23,002 11,720 34,722 Net Revs (R$ Mln) 1Q14 5,759 2,853 8,612 Mobile Fixed Fixed BB Pay-TV Group Customers (000´s) 50.580 17.775 6.329 828 75.512 Market share 18.5% 39.6% 28.6% 4.5% --- Net Adds 1Q14 (000´s) 363 - 91 - 1 453 Net Revs (R$ Mln) FY13 9,290 19,132 28,422 Net Revs (R$ Mln) 1Q14 --- --- --- Mobile Fixed Fixed BB Pay-TV Group Customers(000´s) 68.748 10.641 6.718 9.875 95.982 Market share 25.1% 23.7% 30.4% 53.6% --- Net Adds 1Q14 (000´s) 45 - 226 218 489 Net Revs (R$ Mln) FY13 12,773 20,424 33,197 Net Revs (R$ Mln) 1Q14 3,178 5,385 8,563 Source: Companies Releases
  8. 8. 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 8 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$3.1k Consumption People that access Internet (10 years or +) 57 mln 32 mln 2 mln 81 mln 106 mln 23 mln Households with internet connection (%; CETIC jun’13) 53% of pop. 70% of pop. Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates Yes No 24.3 mln of households 83 mln 49% of pop. Fixed Mobile 21% 74% 40% 60% Re-visiting Market Structure Market Data Revenues Growth 2016 vs. 2012:  > 13 bln Reais on Mobile (+100%)  >7 bln Reais on Fixed (+35%)
  9. 9. Widespread use of Social Media (Social Network Users in Brazil 2011-2017) BRAZILIAN INTERNET USAGE BOOM Internet Penetration in South America (Internet users per 100 inhabitants) Strong adoption of Instant Messaging (WhatApp mln users) High Penetration of E-commerce (E-commerce revenues in Bln US$) 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 22% 18% 18% 13% 11% 7% 6% % Growth YoY Social media users 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 9 465 mln in the world List of selected selected countries as of Fev/14
  10. 10. 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 73.9 million customers Prepaid Leader 29.1% 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% 29.7% 28.7% 25.1% 26.8% 27.0%25.4% 24.5% 25.1% 19.7% 18.7% 18.5% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 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) 1Q14 x 1Q11 -0.8 p.p +1.9 p.p -0.3 p.p -1.2 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 10
  11. 11. Users’ Preference for Mobile (%Households w/ mobile phones only) EBITDA (% YoY; Not including assets sales; Mobile as TIM) Low Fixed Broadband Quality (Brazil’s Average Speed; Source: Akamai) Fixed Incumbents Mobile 41.1% 49.7% 51.0% 2009 2011 2012 4Q13 2.7 Mbps ANATEL: >78% of fixed broadband connections are below 4Mbps -4,20% -8,93% -2,26% 1Q12 1Q13 1Q14 -2,03% 1,98% -9,68% 1Q12 1Q13 1Q14 11,82% 3,64% 2,96% 1Q12 1Q13 1Q14 13,26% 4,12% 7,64% 1Q12 1Q13 1Q14 Fixed Incumbents Mobile Source: PNAD 2012 Net Revenues (% YoY) MACRO & INDUSTRY OVERVIEW 11 Brazil Ranks 83th in Average Speed per Country PURE MOBILE STRATEGY PAYING OFF
  12. 12. Recent Results: 1Q14
  13. 13. -22.5% 1Q13 1Q14 Financial Results Mobile Net Services Revenues (Δ% YoY) Business Generated Business Received (MTR mpact) Consolidated EBITDA (Δ% YoY) Consolidated Net Income (Δ% YoY) 1Q13 1Q14 1,317 372 Incoming Outgoing (Long Distance + Usage) VAS 60.3 61.7 10.9 12.2Postpaid 1Q13 1Q14 %YoY +11.9% +2.3%Prepaid Customer Base (mln; Δ% YoY) Mobile Data Users Growth (mln; Δ% YoY) 1Q13 1Q14 Mobile Payback Ratio (SAC/ARPU in months) 1.6x 1.6x 306 1,224 Operational Results 1ST QUARTER HIGHLIGHTS +7.6% +21.6% +1.4% +8.9% 26.0% 28.0%EBITDA Margin 71.2 73.9 +3.8% 22 27 1Q13 1Q14 +20.1% 0.13 0.15EPS (R$) RECENT RESULTS: 1Q14 13
  14. 14. 0.37 0.31 0.42 0.42 1Q13 1Q14 0.05 0.03 15.0 10.3 12.1 26.8 25.5 44.4 45.5 1Q13 1Q14  320 cities under the company’s quality plan project in 1Q14  53% of 2014 target achieved in the first quarter Claims at Consumer’s Protection Agency (Procon) (in thds) TIM: Claims at Anatel over 1,000 lines Source: ANATELSource: SINDEC-Procon TIM other TIM’s Quality Plan (#cities) Note: Per economic group 25.9  The least claimed within telcos  Consistent performance in PROCON  Reducing Anatel complaints in all fronts  Network showing remarkable improvements 320 213 1Q14 Target for 1Q14 Source: Company QUALITY IMPROVEMENTS Total Complaints Network Complaints Avg. Market Complaints 2014e (Target for 2014) 599 cities 53% 4Q13 RECENT RESULTS: 1Q14 14
  15. 15. 1Q13 1Q14 74.8 76.0 78.5 67.2 71.2 73.9 61.6 66.3 68.7 46.5 49.5 50.6 CUSTOMER BASE EVOLUTION Customer Base (mln)  Leading market growth  #1 player in prepaid  #2 player in voice postpaid  Austere disconnection policy Prepaid Recharge (R$; YoY) 1Q12 1Q13 TIM +3.3% +3.8% +3.7% +2.2% Source: ANATEL Source: Company 1Q14 1Q14 x 1Q13 +10% 1Q13 1Q14 15.3% 16.5% Mix of Postpaid over total base Distribution Channel (YoY) 1Q13 1Q14 +22% Source: Company 1Q13 1Q14 +28% # Points of Sales: Mass Channel (retail) # of Own Stores Vivo Claro Oi Source: Company +121bps RECENT RESULTS: 1Q14 15
  16. 16. % of Customer Base 1Q12 1Q13 1Q14 +20.1% 1Q12 1Q13 1Q14 5.5 5.8 5.9 Mobile Data users DATA SERVICES AT A SOLID PACE Revenues (R$ bln) 18% 21% 25% % of Gross Services Revenues 26% 31% 36% Users (# mln users) +25.4% +20.4%+24.6%1.0 1.2 1.5 18 22 27Data Gross Revenues 67.2 71.2 73.9 4G Market Share (%; thd users) 3G Market Share (%; mln users) 23% 24% 23% 25% 42% 37% 10% 13% 1Q13 2Q13 3Q13 4Q13 1Q14 25.4 26.6 38.7 13.5 Source: ANATEL TIM 47% 41% 20% 33% 21% 15% 12% 11% 2Q13 3Q13 4Q13 TIM 858 676 321 223 Source: ANATEL 1Q14 Source: Company Source: Company + 39% YoY Other VAS services 105 mln 2.1 mln RECENT RESULTS: 1Q14 16
  17. 17. Access via Mobile  Notebook sales FY2014e: 8.5 mln  Tablet sales FY2014e: 11.1 mln  Smartphone sales FY2014e: 46.7 mln Device sales profile Broadband Willingness to Pay (% of Households) Source: CETIC 2012 5% of HH: Up to R$150/month 24% of HH: Up to R$70/month 59% of HH: Up to R$30/month Huge data opportunity in-house 27 mln data users Handset market share (Mar/14) TIM’s Customer Base Snapshot Source: IDC Source: GFK GroupSource: Company  The newest communication app by TIM  Provides a new user interface far all communication TIM Protect  TIM Chip for soccer fans: free content of soccer teams  Ensures safety of customer’s devices and information  Simple and reliable platform  Brazil’s largest digital music provider  >32 mln songs downloaded TIM P1 P2 P310% 25% 29% 36% 53% Open Market Operators Innovative Services Prepaid Postpaid Data Offers 73.9 million users +31 mln untapped market 46mln potential data users +15 mln with data handset36% 21% 42% LEVERAGING ON THE LARGEST COMMUNITY RECENT RESULTS: 1Q14 17
  18. 18. 1.22 1.32 1.39 1Q13 1Q141Q13 1Q14 MTR Impact MTR Cut Path -33% -25% -11% -10% Avg. MTR Price (R$) Mobile Service Net Revenues EBITDA MTR Exposure Net Services Revenues EBITDA 0.32 0.24 0.16 0.36 +5.0% 2012 2013 2014 2015e MTR IMPACT ANALYSIS ~ 27% ~ 14% 1Q10 1Q11 1Q12 1Q13 1Q14 ~ 40% ~ 20% 1Q10 1Q11 1Q12 1Q13 1Q14 Source: Company +1.4% +13.4% +7.6%  MTR cut impact should be reduced following lower exposure  Business generated (outgoing & data) should offset MTR impact Impact of ~ R$ 140 mln RECENT RESULTS: 1Q14 18
  19. 19. Net Revenues (R$ mln; % YoY) EBITDA (R$ mln; % YoY) Net Income (R$ mln; % YoY) 624 603 4,087 4,100 Thousands Revenue 1Q13 Δ HandsetΔ Fixed Services Revenue 1Q14 Δ Mobile Services -21-42+55 Service Handset 4,711 ΔYoY 4,702 +1.4% -22.9% -3.4% +0.3% 0% -3.4% 269 306 372 1Q12 1Q13 1Q14 +13.9% +21.6% FINANCIAL RESULTS ANALYSIS 1,224 EBITDA 1Q13 EBITDA 1Q14 ΔHandsets +223 -117 ΔOpex -12 Traffic/Data ΔContribution Margin 26.0% 30.7% 1,317 28.0% 33.2% EBITDA Margin Service EBITDA Margin +8% ΔYoY +7.0% +37.0% +6.1% Business Generated: +8.9% YoY Business Received: -22.5% YoY (+)Mobile: Efficiency (-)Fixed: Repositioning/new brand Cash Flow & NFP (R$ mln) -1,193 -1,374 -1,571 -265 -332 1Q12 1Q13 1Q14 OFCF Non OFCF Net Cash Flow -164 -1,458 -1,706 -1,735 NFP BoP NFP EoP -441 -1,899 -1,555 -1,314 (+) (=) +151 +421 -230 Δ Fistel RECENT RESULTS: 1Q14 19
  20. 20. Network Evolution
  21. 21. 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 21
  22. 22. 714 1,764 2013 2014e 1Q13 1Q14 ~11,000 ~14,000 2013 2014e 2G 3G 4G Investments Fiber Infrastructure ~19,700 Km ~37,600 Km BackboneMetro-Areas NETWORK IMPROVEMENTS  R$3.8 Billion in FY14e  R$613 mln in 1Q14  >94% in infrastructure 57,300 Km in Fiber+ = 1Q13 1Q14 2G 3G 4G R$613 mln R$470 mln Average throughput analysis where MBB is completed * From To ~ 800 Kbps ~ 2.1 Mbps Number of sites with fiber optic Cities with mobile BB project Number of 3G & 4G Sites Number of Wi-Fi & Small Cell Network Additions in the 1Q14  3G sites: + 111 in Q1 (total 9,185)  4G sites: + 208 in Q1 (total 2,133)  WiFi hotspots: +190 in Q1 (total 904)  MBB cities: + 14 in Q1 + 30% YoY 39 100 2013 2014e +16x *According to TIM independent analysis of the NetMetrics Reports provided by Speedtest.net NETWORK EVOLUTION 22
  23. 23. Capex Evolution (R$ 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 23
  24. 24. 4G Update
  25. 25. Vivo Claro Oi TIM Source: ANATEL 4G Market Share on 2500Mhz (%; thd users) 858 676 321 223 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 47% 41% 20% 33% 21% 15% 12% 11% 2Q13 3Q13 4Q13 1Q14 2.1 mln 4G DETAILS
  26. 26. 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 +0.5% 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 26
  27. 27. Fixed Business
  28. 28. FIXED BROADBAND: LIVE TIM Accelerating Deployment Addressable HH (000 HH) 609 1,138 1Q13 2Q13 3Q13 4Q13 1Q14 sep/12 mar/14 Customer Base (000 users) 75 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Customer Base ARPU (R$; CAGR %) +15% General Satisfaction Offer Billing Call Center 6.0 7.0 8.0 9.0 10.0 TIMP2P1 Market Performance Customer Satisfaction Survey* (Source: TNS Institute Research) 1.5 100 neighborhoods:  41 neighborhoods in SP  59 neighborhoods in RJ * From Dec/13 to Jan/14 8.7 9.0 8.9 9.0 8.3 7.1 8.8 7.6 7.5 5.3 7.5 7.4 8.1 8.0 7.4 TIM Fiber 39.9%Others 61.1% UBB Market Share (SP + RJ) (connections >34Mbps) Source: Anatel Gross Adds (000 users) 7.6 18.3 1Q13 1Q14 +141% Conection Quality Source: TNS Institute Research) Feb/14 FIXED BUSINESS 28
  29. 29. INTELIG, NOW POSITIONED AS “TIM SOLUÇÕES CORPORATIVAS” The Opportunity Ahead Market re-positioning 20132012 - 2014 Geographic expansion Source: IDC Brazil ICT Business Service Database TIM’s Addressable market (Net service revenues of total addressable market*; R$ bln) Better financial performance M 2014 Expansion:  2014: 7 new cities  2015: 12 new cities  Intelig now positioned as “TIM Soluções Corporativas”  Re-structuring of sales force: multi channel approach  Re-designed service portfolio CAGR 11-14 8.8 9.2 9.8 10.9 7.7 7.6 7.7 7.8 2011 2012 2013e VAS Voice 22.7 2014e 4.3 24.4 5.24.7 5.7 Data 20.8 21.5Total 5.7% 0.4% 7.4% 9.9% …with considerable room to increase revenue share (% of fixed corporate market) 1 2 3 Business Remodeling Path *Companies with more than 100 employees 2% P2 14% P3 25%P1 3% P4 21% P5 35% TIM + M M M M M M M Segment EBITDA-CAPEX Source: Company A Actual A A Net Revenues (with intercompany) 2013 2014 FIXED BUSINESS 29
  30. 30. Business Outlook
  31. 31. PERSPECTIVES Offer Innovation  Slower macroeconomic growth requires evolution of industry approach  Competitive landscape remains intense  Regulatory environment: o Upcoming 4G Auction o New consumer regulation framework  World Cup games: airports and stadiums coverage o Wi-fi off loading at Maracanã: in recent test 25% of data traffic were off-loaded  Financial Services: o Initial commercial launch of a “prepaid mobile account” / “mobile money” o A partnership between TIM, “Caixa Econômica Federal” (federal bank) and Mastercard o Focus on “unbanked” population (50% of prepaid base.)  New data offers: more options of data cap for prepaid (10 & 30Mb)  Infinity Turbo 7 launch: services package of R$7 per 7 days all in: o Voice + Web + SMS  4G included in all data package  TIMmusic included in postpaid packages  Live TIM Extreme: new 1Gbps offer  “TIM Soluções Corporativas” / “TIM Empresas” as renewed positioning of fixed and mobile corporate solutions  Business Generated: +8.9% YoY  EBITDA: +7.6% YoY  EBITDA Margin: +200 bps YoY  Net income: +21.6% YoY Solid results in 1Q14 Macro environment highlights Continued infrastructure focus  Coverage densification: macro and micro coverage enlargement  Resilience and network availability  Network control (NOC) internalization completed: o Monitored elements - more than: 12,000 sites, 70,000 km of fiber, 900 IP network elements, 6,700 transmission equipment and 1,300 MSANs  Towers: analyzing opportunities to unlock hidden value BUSINESS OUTLOOK 31
  32. 32. OFFER EVOLUTION 136 148 >170 2012 2013 2016e 2012 2013 2016e 18% 21% >40% VAS Gross Revs. VAS/Revs. 21.3 27.5 2012 2013 2016e 30% 37% >50% 43% 55% >75% 2012 2013 2016 +xx% +29% +22% +xx% Smart/Web phone Penetration (% over total base of lines) Voice MOU (minutes) Data Users (% of Data Users in CB; million users) VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln) BUSINESS OUTLOOK 32
  33. 33. 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$11 billion* *Does not consider 4G licenses (700Mhz). BUSINESS OUTLOOK 33
  34. 34. Historical Data & Others
  35. 35. RECENT TOWERS DEALS HISTORICAL DATA & OTHERS 35
  36. 36. HISTORICAL DATA: FINANCIALS (R$ THOUSAND) HISTORICAL DATA & OTHERS 36
  37. 37. HISTORICAL DATA: FINANCIALS (US$ THOUSAND) HISTORICAL DATA & OTHERS 37
  38. 38. HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA HISTORICAL DATA & OTHERS 38
  39. 39. Stock Performance (base 100)* TIM Celular S.A. Intelig 100% TIM Brasil Serv. e Part. S.A. Minorities 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% 0 20 40 60 80 100 120 140 160 180 TIMP3 Ibovespa STRUCTURE AND STOCK PERFORMANCE HISTORICAL DATA & OTHERS 39
  40. 40. 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 40
  41. 41. 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 Leonardo Wanderley E-mail: lwanderley@timbrasil.com.br Phone: +55 21 4109-4017 Luiza Chaves E-mail: luchaves@timbrasil.com.br Phone: +55 21 4109-3751 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 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 41

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