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Investor Relations - São Paulo, August 2nd, 2011   0
Agenda         Q         Q2’11: Main Achievements         Q2’11: Financial Results         Conclusions & Outlook          ...
Q2 main achievements (continuous improvement)1 Growth Acceleration        Customer Base +25%                         EBITD...
Acceleration of Growth (1/3)R$ Mln, IFRS               Customer                      +24.7%          YoY 2Q11             ...
Acceleration of growth (2/3)            Customer Base & Net Adds                    MoU & Outgoing Service Revenues       ...
Acceleration of Growth (3/3): Internet users expansiondriven by smartphone penetration                            Infinity...
2             Brand attractiveness:             #1 in preference and incremental market share                             ...
3        Strengthening the foundations (1/3)          Player 1          Player 2          Player 3                     Ove...
3       Strengthening the foundations (2/3):       Committed to a fast Network Expansion                     TIM Brasil Ca...
3    Strengthening the foundations (3/3):    Continuous Backbone expansionOne of the best backbone in the country         ...
4      Ultra-broadband in Sao Paulo and Rio de Janeiro:      Acquisition of AES Atimus on track (Fiber Network)           ...
5   Novo Mercado: the icing in the cake                            Corporate Governance Level                             ...
Agenda         Q         Q2’11: Main Achievements         Q2’11: Financial Results         Conclusions & Outlook          ...
ProfitabilityR$ Mln, %                        Subsidy capitalized                                           Ebitda margin ...
Continuous improvement of efficiency driversIFRS                                       Bad Debt                           ...
Net Debt EvolutionR$ Mln                         Ebitda - Capex                      EBITDA – CAPEX YTD:                  ...
Agenda         Q         Q2’11: Main Achievements         Q2’11: Financial Results         Conclusions & Outlook          ...
Conclusion OutlookR$ Mln, IFRS  CB Expansion                                           Consistency in Results   Mln lines ...
Challenging 3 main markets                                  Mobile                       Corporate              Residentia...
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2Q11 Presentation

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  1. 1. Investor Relations - São Paulo, August 2nd, 2011 0
  2. 2. Agenda Q Q2’11: Main Achievements Q2’11: Financial Results Conclusions & Outlook 1
  3. 3. Q2 main achievements (continuous improvement)1 Growth Acceleration Customer Base +25% EBITDA +12.7% (Normalized +23%) (2Q’11 vs. 2Q’10) Net Revenues +19.5% EBIT +122% Services Revenues +11 8% S i R +11.8% Net I N t Income +178%2 Brand attractiveness # 1 in Brand Preference MOU at 127’ (+15%) # 1 in incremental market share: at 39% 12.4 12 4 Mln internet unique users in 2Q11 (+2.7 Mln lines) Smartphone penetration at 15%3 S Strengthening the h i h R$ 14 bn CAPEX in 5 years (2009-13) 100% Anatel network quality score foundations R$ 8.5 bn CAPEX in 3 years (2011-13) +2,000 km of fiber in Amazonia AES Atimus acquisition signed in July +5,500 km of fiber in RJ/SP (AES Atimus)4 Ultra-broadband in Sao Benefits of AES Atimus: Unique fiber based infrastructure - R$ 1 bn saving in 3 years Largest capillarity in SP and RJ Paulo and Rio de Janeiro - Attack untapped market (R$ 30 billion) Integration as of 4Q115 The best corporate governance Migration to NOVO MERCADO accomplished 2
  4. 4. Acceleration of Growth (1/3)R$ Mln, IFRS Customer +24.7% YoY 2Q11 Q1 Q2 QoQ H1 YoY Base +23.0% 23.0% YoY 1Q11 Customer 52.8 55.5 +5.1% 55.5 +25% Base (Mln) +19.5% Revenues +13.8% Revenues 3,752 4,252 +13.3% 8,004 +16.8% Service +11.8% Revenues +9.0% Service Revenues 3,463 3,744 +8.1% 7,207 +10.4% +12.7%¹ +12 7%¹ Ebitda* +9.0%² Ebitda 1,033 1,138 +10.2% 2,171 +10.9% Ebit +121.8% +108.9% +108 9% Ebit 350 529 +51.4% +51 4% 879 +117% +177.8% Net Income Net Income 213 350 +64.0% 563 +212% +291.0% Ebitda - Capex 736 420 -42.9% 1,156 +55% Net Debt 1,671 1 671 1,998 1 998 +19.5% 95 1,998 1 998 -20,7% 0, * ¹ +23.2% normalized ² +22.9% normalized 3
  5. 5. Acceleration of growth (2/3) Customer Base & Net Adds MoU & Outgoing Service Revenues Data RevenuesMln users Min, R$ Bln %, R$ Mln 2.7 127 15 +30% YoY +15% Y Y YoY 2.1 +2pp YoY 110 13 1.7 MoU % Data/ 12Net Adds 55.5 73 Service 3,3 734 44.4 2,7 37.8 2,4 24 550 483Customer +25% YoY Revenues +20.5% YoY Data +33% YoYBase (Voice Out) Revenues Q209 Q210 Q211 Q2’09 Q2’10 Q2’11 Q2’09 Q2’10 Q2’11 Generating More Revenues +% YoY R$ Mln 4,252 3,512 +19.5% YoY Total 3,559 Revenues 3,744 3,144 3,350 3 350 Customer +11.8% YoY MoU Data Base Service Revenues +25% +15% +33% Community FMS Internet for Q2’09 Q2’10 Q2’11 Expansion (Voice) everybody 4
  6. 6. Acceleration of Growth (3/3): Internet users expansiondriven by smartphone penetration Infinity Web / Smartphones Unique users monthly Mln clientsInfinity Web users (Pre Paid) (Pre-Paid)Daily Unique users, Mln clients 12.4 2x 1.8 Post Paid 6x 6.1 61 Pre Paid 0.3 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Aug’10 Jun’11 2010 2011 Handsets sold - volumeSmartphone penetration% Webphone+smartphone penetration on Customer Base Webphone smartphone 000 units, handset sales >15% +83% 3,507 +64% 12% 10% 2,262 1,915 1 915 8% 1,383 54% Smartphone 48% 19% 28% 2010 September 2010 Year End 2011 March 2011 June Q1’10 Q1’11 Q2’10 Q2’11 5
  7. 7. 2 Brand attractiveness: #1 in preference and incremental market share TIM Player 2 Preference Player 1 Player 3 Net adds 39%%, Mln lines TIM #1 in 1H’11 Market Share Recovery incremental preference 32 31 market 30 4.7 47 % share 28 30.4% 29.5% 26 3.7 25.4% 25.5% 25.5% 21 21 3.9 24.9% 23.6% 25.5% 2 % 19 18 19.1% 19.0% 2.2sep/oct apr/may sep/oct apr/may sep/oct apr/may sep/oct apr/may jun ’08 dec ’08 jun ’09 dec ’09 jun ’10 dec ’10 Jun’11 ’07 07 ’08 08 ’08 08 ’09 09 ’09 09 ’10 10 ’10 10 ’11 11 With strong association to key attributes Rejection % TIM Best Positioned Competitor% Δ YoY15 13 Convenience 48 13 +13pp 2312 11 12 Best 44 11 Promotions +10pp 10 30 8 9 8 Network 40 +5pp Coverage 41 sep/oct apr/may sep/oct apr/may sep/oct apr/may sep/oct apr/may ’07 ’08 ’08 ’09 ’09 ’10 ’10 ’11 44 Innovation 23 +12pp 6
  8. 8. 3 Strengthening the foundations (1/3) Player 1 Player 2 Player 3 Overall Quality Drop calls Set-up Set up calls % achieved Anatel network target Drop calls rate, SMP 7 Originated calls completed, SMP 5100 TIM 1.3 84 1.2 Target: 95 <2.0 TIM 1.1 80 90 1.0 0.9 76 85 TIM #1 0.8 Target: TIM >67.0 0.7 72 80 0.6 75 0.5 68 Jun/10 Aug/10 Oct/10 Dec/10 Feb/11 Apr/11 Jun/11 Jun/10 Aug/10 Oct/10 Dec/10 Feb/11 Apr/11 Jun/11 Jun/10 Aug/10 Oct/10 Dec/10 Feb/11 Apr/11 Jun/11 TIM solid Network Reliability, achieving 100% of all Anatel target indicators (10 out of last 12 months ) 7
  9. 9. 3 Strengthening the foundations (2/3): Committed to a fast Network Expansion TIM Brasil Capex – Organic growth* Development areaR$ Bln 14Bln E D A A C 8.5Bln B Backbone Backhauling Access 09 10 11 12 13 Swaps Microwaves 2G capacity Annual Consorthia FTTS 3G coverage 2.7 2.8 2.9 Capex Fiber in Amazonia New AES Atimus New*Excludes spectrum licenses and acquisitions Backbone Backhauling (MW/FTTS) 2G Network Capacity (voice) Access 3G 000 km 28,0 % of sites connected with # ‘000 TRX installed % of urban population covered own backhauling 202 >80% >80% 20,7 20 7 +2,500bps 142 16,0 55% 115 80 7,0 2x 20% 09 10 11 ’09 ’10 ’11 ’12 ’13 ’08 ’09 ’10 ’13 ’10 ’13 > 80% of Brazilian major cities 8 connected via fiber by 2013
  10. 10. 3 Strengthening the foundations (3/3): Continuous Backbone expansionOne of the best backbone in the country Intelig/TIM Backbone: 16,000 Km 16 000 K + Macapá Boa Vista Belém Fiber SWAP in Fortaleza 2010: Manaus M ~6,500 Km M Porto Velho + Partnership TIM Aracajú A jú Salvador and T l b d Telebras Conjoint Building Cuiabá Brasília M Network 2012: ‘unlimited to all’ M Goiania Uberlândia Belo ~3,800 Km Campo p Grande Horizonte Vitória Active in capacity Rio de Janeiro + SWAP São Paulo Curitiba Partnership with M M Backbone LD Belém Telebrás for Florianópolis – Macapá - Manaus: PNBL expansion Porto Alegre ~2,000 km National Backbone (16k Km) New swap network (6.5k Km) New Conjoint Building NtWk (3.8k Km) M Metro Swap Agreements(375 Km) TIM + Intelig: ~28,000 Km New Network Manaus (~2k Km) 9
  11. 11. 4 Ultra-broadband in Sao Paulo and Rio de Janeiro: Acquisition of AES Atimus on track (Fiber Network) SP and RJ: Macroeconomics Widespread fiber network in SP and RJ ‘000 Km GDP SP/RJ metro – telecom market size RJ+SP R$1 3Tln R$1.3Tln R$Bln ~3.0 30 Argentina R$0.85 Tln ~2.5 •R$ 30 Bln Current TIM TLC Market Revenue Population •27% of Twice as RJ+SP = 57Mln Brazilian GDP 3 Mobile much fixed Italy =60Mln SP RJ incumbent i b t RJ+SP Fixed 9 backhauling Peers Infrastructure in SP and RJ 18 TLC Market Untapped MAPSP/RJ States: R$50Bln (45% of Brazil)Metro Areas: R$30Bln (26% of Brazil) SP and RJ: Addressable market 4 steps Integration Network sinergies N t k i gi Mobile PC ~30 Mln people Step 1 (link swap; FTTS) OPEX/CAPEX Mobile Data Mobile Step 2 Acceleration revenues 8 Mln households Co po ate ata Corporate Data @ Home Step St 3 Solutions Fixed @ Hot spot 4.5 Mln households revenues Step 4 Ultra-broadband class A and B • Closing: Q4’11 550,000 companies • Start-up: Q1’12 10
  12. 12. 5 Novo Mercado: the icing in the cake Corporate Governance Level Maximum level Ma im m le el of 1)One single class of Corporate share, with equal Minority Governance rights: shareholders - Vote protection - Dividend requirements Transparency and - Tag along disclosure requirements 2)Higher liquidity Legal Requirements 3)Larger number of Other Telco independent members on TIM’s Brazilian Laws Level 1 Level 2 Board “Lei das S.A” 4)Higher disclosure level Maximum level of Brazilian Corporate Governance Full Alignment: Stock option Uniqueness: TIM distinctiveness in Latam telco plan to Top l t T Management 11
  13. 13. Agenda Q Q2’11: Main Achievements Q2’11: Financial Results Conclusions & Outlook 12
  14. 14. ProfitabilityR$ Mln, % Subsidy capitalized Ebitda margin +10.2% QoQ 30.2% 30.4% 1,010 1 010 1,138 , Reported on 864 85 service revenues 27.5% 105 28.4% Ebitda +12.7% YoY 24.6% 26.8% Reported on 925 total revenues 759 +23% A/A normalized normali ed Q2’09 Q2’10 Q2’11 Q2’09 Q2’10 Q2’11 Ebit margin 12.5% +51.4% QoQ 529 6.7% Ebit 239 +122% YoY 3.0% 104 Q2’09 Q2’10 Q2’11 Q2’09 Q2’10 Q2’11 Net income as % of revenues 350 +64.0% QoQ *332 8.2% Net 126 +178% YoY 3.5% Income *-11 *0% Q2’09 Q2’10 Q2’11 Q2’09 Q2’10 Q2’11 * Reported Q2’09 R$332 benefitted by R$343 Mln from FX variation on Intelig’s result; Organig R$-11 13
  15. 15. Continuous improvement of efficiency driversIFRS Bad Debt SAC* R$ Mln R$/gross add $/g 3.1 31 2.0% 2 0% 1.8% 2.6 Bad Debt % Gross Revenues -0.7pp SAC/ARPU -38% 1.1% 83 1.6 96 90 63 66 35 -27% Bad Debt SAC -45% Q209 Q210 Q211 Q209 Q210 Q211 ARPU Subsidy R$/month, mobile R$/ th bil R$ Ml Mln Zero Subsidy Strategy -11% 115 732 +3.7% QoQ 26.9 85 24.2 64 21.6 21 6 468 Gross Handset Revenues 424 433 380 26 286 8 0 Q1’10 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 Q209 Q210 Q211 *SAC = Advertising, +Subsidy + Commission 14
  16. 16. Net Debt EvolutionR$ Mln Ebitda - Capex EBITDA – CAPEX YTD: R$ 1.156 +55% YoY 14% over Revenues 2,171 1,033 EBITDA 1,015 Debt Profile 297 Gross Debt: R$ 3.30 bln (of which 80% in the long term) CAPEX ~22% of debt is denominated in foreign currency (100% hedged) Q1’11 1H’11 Average Annual Cost: 11.0% or 90.2% of CDI in the 2Q’11 vs. 10.0% or 107.5% of CDI in the 2Q’10 (~90% of debt in soft loan) Ebitda - Capex YoY +478 +408 30% 100% Net Debt 2Q 2011 996 1,300 15% Of Which: 486 mln in 35% 474 dividends 3,298 1,162 (327) 1,998 20% 1,998 666 1,671 <12M 12<36M 36<60M +60M Total C ash NF P March 2011 2Q11 NET CASH June 2011 D ebt ending FLOW ending 2Q10 NET CASH Q NFP 1Q10 FLOW NFP 2Q10 2.558 +37 2.520 15
  17. 17. Agenda Q Q2’11: Main Achievements Q2’11: Financial Results Conclusions & Outlook 16
  18. 18. Conclusion OutlookR$ Mln, IFRS CB Expansion Consistency in Results Mln lines Voice out Revenues YoY VAS Revenues YoY S 55,5 >60 44,4 Q2’11 Q2’11 +20.5% + 33.5% Q1 11 Q1’11 +17 3% 17.3% Q1 11 Q1’11 + 32 3% 32.3% Q4’10 +11.0% Q4’10 + 31.4% jun/10 Jun/11 Dec/11 MOU increase Reducing exposure to MTR Min/month Voice in Revenues YoY EBITDA exposed to MTR* >140 127 30% 115 Q2’11 + 5% -2% Q1’11 23% -6% Q4’10 Q210 Q211 jun/10 Q211 Q411 New PGMC Smartphone penetration AES Atimus draft by Smartphone, % CB Anatel >15% >18% Closing by Year End 8% 4 steps integration jun/10 Jun/11 Dec/11 17 * Net of incoming revenues less interconnection costs
  19. 19. Challenging 3 main markets Mobile Corporate Residential Attack to fixed Business Convergency: Partnerships broadband market p Expansion (SP/RJ) Community FMS 1 2 3 Data Expansion Voice Supporting heavy Supporting 1Gbps Network 100Mbps @home data approach (3G, connectivity and Evolution WiFi, LTE) Clouding solutions (digital home) Cost saving OPEX/CAPEX saving R$1Bln 18
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