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Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
Tim Presentation On 2007 Telecom Italia Day
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Tim Presentation On 2007 Telecom Italia Day

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  • 1. TIM BRASIL MARIO CESAR ARAUJO TIM Brasil CEO
  • 2. MARIO CESAR ARAUJO TIM BRASIL Agenda 2006 results highlights The Brazilian market context 2007-09 Plan overview Summary 1
  • 3. MARIO CESAR ARAUJO TIM BRASIL Since we met one year ago… Net service revenues (4Q06) … we achieved EBITDA margin leadership in VAS revenues (4Q06) Business segment customer base Customer satisfaction/preference Awareness (TIM Brasil regained 2006 Top of Mind among mobile … and maintained operators) our position of Coverage (TIM Brasil remains the only operator with national coverage) best-performer on ARPU Market share of net and gross additions Market share of GSM lines 2
  • 4. MARIO CESAR ARAUJO TIM BRASIL Leadership with profitability BR GAAP Net share (%, 2006 eop) Service revenues (R$bi, 4Q06) EBITDA margin (%, FY06) Market share Revenue share* ∆% 06-05 24,1% in IAS TIM 38.2% 25.4% 2.7 31.7% 24.5% 68% Brasil Vivo -5.2% 29.1% 2.6 30.7% 23.7% -14% Claro 38.1% 23.9% 1.9 22.5% 13.3% N/A * Oi and Telemig/Amazonia Celular revenues are estimated 3
  • 5. MARIO CESAR ARAUJO TIM BRASIL Commitments fulfilled 2006 target* IAS 2006 performance Subscribers (Mln, eop) Net revenues growth (%, eop) EBITDA margin** (%) 10,836 26.0% 25.4 23.4% +7.8pp 24.1% 8,784 >20% >20% ~24 20.2 16.3% 2005 2006 2005 2006 2005 2006 * Telecom Group Meeting with the Financial Community 2006 ** Organic Local currency excluding exceptional items 4
  • 6. MARIO CESAR ARAUJO TIM BRASIL Agenda 2006 results highlights The Brazilian market context 2007-09 Plan overview Summary 5
  • 7. MARIO CESAR ARAUJO TIM BRASIL Growing economy and widening consumer market Gross domestic product growth Minimum-salary increase vs. inflation 4.9% 16.7% 4.0% 15.4% 3.7% 3.4% Increasing purchasing power 2.9% Minimum- of lower income classes salary 8.3% increase 2.3% 5.7% Inflation 7.6% 3.9% 4.1% 4.2% 3.1% 2004 2005 2006 2007E 2008E 2009E 2004 2005 2006 2007E 2008E 2009E PAC* estimate 4.5% 5.0% 5.0% PAC* inflation estimate 4.1% 4.5% 4.5% Stability and increase of purchasing power * Government infrastructure investment program to accelerate economy Source: EIU, Brazilian Central Bank 6
  • 8. MARIO CESAR ARAUJO TIM BRASIL Regulatory framework 2006 2007 2008-09 F-M Fully Stability of termination Arbitration Arbitration Allocated interconnection tariff in rate Cost model the medium term M-M B&K(45/55) < Jun Positive for a fair termination Pay per use > Jul Pay per use Pay per use regulatory environment rate Number Additional opportunity to consolidate leadership in Portability - Definition Implementation high-value customer (F+M) segments 3G/Wi-Max Public Commercial Availability of wireless - consultation deployment broadband licensing +licensing Partially regulated Expected upgrade Commercially Increase of competition Unbundling Commercially not of regulation viable in the fixed-line market viable 7
  • 9. MARIO CESAR ARAUJO TIM BRASIL Telecom growth driven by mobile and BB CAGR 06-09 Lines (millions) Revenues (R$ bn) 6.5% at comparable regulatory 120 126 86 112 82 85 framework 7.9% 77 100 71 86 40.5 10.1% Mobile 35.8 38.5 Mobile 25.1 30.3 Fixed 39 37 36 36 36 Fixed -1.0% 40.6 39.6 38.4 37.3 35.6 -3.4% (voice) (voice) 6 8 9 10 4 20.5% Fixed Fixed (BB) 5.7 6.8 7.9 8.8 9.5 11.9% (BB) 2005 2006 2007E 2008E 2009E 2005 2006E 2007E 2008E 2009E Fixed-line losing ground, but still a significant market (~R$46 bn, ~60% of total) Limited competition in fixed-line vs. mobile Opportunity for challengers of fixed-line operators Source: Internal estimate 8
  • 10. MARIO CESAR ARAUJO TIM BRASIL Mobile residual market in lower classes and increase of churn Mobile penetration* by social class Gross Million lines, gross adds additions mix evolution Million, % 93% 59% 43 40 39 38 Fresh 14 market 11 8 5 28% Churn 29 29 31 33 market (68%) (72%) (81%) (85%) High income Medium income Low income (> 3 MS**) (1-3 MS) (<1 MS) % of population 11% 31% 58% 2006 2007E 2008E 2009E Residual market in lower income social classes Increase of churn market * People more than 10 years old ** Minimum salary = R$350,00 Source: IBGE (PNAD, 2005) 9
  • 11. MARIO CESAR ARAUJO TIM BRASIL Agenda 2006 results highlights The Brazilian market context 2007-09 Plan overview Summary 10
  • 12. MARIO CESAR ARAUJO TIM BRASIL TIM Brasil strategic objectives, guidelines... Market evidence Strategic goals Guidelines Consolidate our positioning 1 End-to-end segmentation to attract and leadership Mobile TIM #1 in service (revenue growth consistently maintain high value customers revenues above market average), 2 Operational efficiency to support increasing profitability customer base expansion Low-ARPU approach Residual market clients Ensure profitability of low 3 Develop new business model oriented to in lower income ARPU clients low-ARPU customers classes Capture fixed-line revenues 4 New convergent products Convergence Fixed-line = (increase share of spending HZ with fixed numbering R$ 46 billion on TIM Brasil customer base) Virtual PABX market Internet broadband access Defend TIM mobile leadership ... 11
  • 13. MARIO CESAR ARAUJO TIM BRASIL CAGR TIM (06-09) ... and main targets BrGaap CAGR competitors (06-09) ~1p.p. from Subscribers (mln, eop) Net revenues (R$ bln) EBITDA margin (%) Low-ARPU clients approach ~10% >33 ~4% from +>6pp >28% >10% convergence 25.4 ~7% 10.8 21.5% 2006 2009 2006 2009 2006** 2009 Market share 25.4% ~27% 29.4%* ~33%* Focus on high value customers Improving customer base mix (% post-paid) Holding voice ARPU Stimulating VAS take-up Improve efficiency * Estimated service revenue share **Net Revenues and Ebitda margin adjusted considering Bill & Keep elimination starting from 01/01/06; Ebitda Margin adjusted also for subsidy deferral impact 12
  • 14. MARIO CESAR ARAUJO TIM BRASIL Mobile leadership: key initiatives of the end-to-end approach focus on 2007 Offer Sales Caring Improvement of data Dedicated BU for LA/Top Dedicated people/ solutions SME skills Business Multi-regional/ customized bundling New sales Offer/promotion Value/revenue driven Post-paid opportunities (e.g. customization commissioning inbound VAS up-sell) Improve Subsidies in accordance Premium caring (one- Consumer segmentation: from to offer/customer value to-one) for VIP clients terminals to tariff Channel mix optimization plans (e.g. increase of VAS innovation telesales) On-net community plans Zero subsidy Alternative channel Pre-paid Chip only Channel mix optimization approach (e.g. web, (e.g. newsstands) IVR, SMS) 13
  • 15. MARIO CESAR ARAUJO TIM BRASIL Mobile leadership: operational efficiency (fixed costs) % of Fixed Costs (FY06) Key initiatives Opportunity (07-09) Improve effectiveness of call centre traffic management (Pre- Commercial fixed routing) ~3% reduction of cost costs New contract models with 3rd parties call centres per client per year 32% Continuing optimization of advertising expenditure Leverage TIM Brasil existing IP network Industrial Use of alternative technology for BTS connection ~20% reduction of cost OPEX Selective IT outsourcing (e.g. data centre, application per minute in the period 33% management) Rigorous control of non-productive activities ~1p.p. reduction of G&A G&A/ net revenues Positive impact of group restructuring percentage 11% Limited headcount growth, focused on commercial activities ~18% increase in net HR revenues/employee Progressive optimization of regional operations 19% 14
  • 16. MARIO CESAR ARAUJO TIM BRASIL Low-ARPU clients: increasing need for a new business model % of net additions (06E-10E) Mobile market worldwide evolution ARPU vs. EBITDA for selected operators Subscribers, bln 70% SMART - Philippines 4,0 MTS Sonatel 60% China Mobile Russia Emerging EBITDA Margin (%) 50% 2,6 markets MTS Turkcell Ukraine 1,1 40% Mobilink Pakistan 86% 30% 0,9 Developed 1,2 20% 0,3 0,6 countries 0,2 1,7 2,9 14% 10% 0,1 0,6 0% 1998 2002 2006E 2010E 0 10 20 30 40 50 Monthly ARPU (US$) New business models characterized by: Lower air-time prices (leveraging on price/volume elasticity) Lower denomination vouchers Use of extensive, indirect distribution channels Increase of electronic caring … Source: Merril Lynch Wireless Matrix (2007), Pyramid 15
  • 17. MARIO CESAR ARAUJO TIM BRASIL Our convergence approach: matching different demands with a portfolio of technologies Brazilian demand characteristics TIM technologies/offer Data Voice High speed dedicated data connection (>10Mbps) Dedicated PABX 100% guaranteed bandwidth links Hosting/ LA Large number of simultaneous users WiMax Management High customization HSPA (in IP Solutions mobility) Internet connection between 512Kbps and 8Mbps* Cost optimized QoS WiMax IP Solutions SME Medium-low interest of intra-group communication HSPA Office Limited/affordable customization Zone/ GSM Internet connection between 64Kbps and 2Mbps* WiMax Home Residential Low QoS HSPA Zone/ GSM Standard voice telephony (fixed and mobile) with no customization EDGE * Nominal speed connection 16
  • 18. MARIO CESAR ARAUJO TIM BRASIL CAPEX evolution breakdown BrGaap, R$ Bln 100%= 2.6 1.6 ~ 5.7 Administrative 5% 2% 2% Commercial 12% 20% 15% Leveling-off network CAPEX IT 21% 23% 26% (excluding licenses and convergence plan) 22% Shift of investments: 60% From roll out to quality Network 62% 52% From 2G to 3G 2005 2006 2007-2009 CAPEX/Net Revenues 30% 16% 14% 17
  • 19. MARIO CESAR ARAUJO TIM BRASIL TIM Participações Targets (BrGaap) 2006 2007 2009 Actual Targets Targets Customer Portfolio 25.4 ~ 29 > 33 (Mln SIM) Mkt Share TIM on SIM 25.4% ~ 26% ~ 27% 20.9 % ~ 10% Total Net Revenues Growth > 10% 14.2% (CAGR ’06-’09) 24.6 % EBITDA margin > 23% > 28% 21.5%* ~ 5.7** CAPEX (Bln Reais) 1.6 > 2** (Cum. ’07-09) Op. Free Cash Flow Positive from Break even > 17% on Rev. (mln €) IIIQ ‘06 (yearly base) (Year 2009) Adjusted considering Bill&Keep elimination starting from January 1st 2005 * Adjusted eliminating subsidy deferral impact ** Includes licences acquisition (3G, Wi-Max) 18
  • 20. MARIO CESAR ARAUJO TIM BRASIL Agenda 2006 results highlights The Brazilian market context 2007-09 Plan overview Summary 19
  • 21. MARIO CESAR ARAUJO TIM BRASIL Summary Achieved leadership in service revenues and profitability in 2006 Profitable growth over the next three years to be accomplished by: Consolidating our mobile leadership (focus an high-end customers) and pursuing operational efficiency Developing a new approach to guarantee profitability of low-ARPU clients Developing convergent solutions to defend our mobile leadership and capture new revenue streams 20

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