This document provides an institutional presentation by TIM Brasil for the 1st quarter of 2020. It includes the following sections:
- About TIM - Provides an overview of TIM Brasil as an operator with national presence and best 4G coverage, as well as its fiber network, residential broadband, IoT, and financial highlights for 2019.
- Market Overview - Discusses the Brazilian market context, including the economic environment, consumer demographics, and trends showing increased data usage and prominence of internet/mobile services.
- Infrastructure - Will describe TIM's network infrastructure.
- Strategy and Positioning - Will outline TIM's strategic priorities and positioning.
- Operating Evolution -
2. 2TIM Participações – Investor Relations
Disclaimer
Financial results are presented considering
impacts from IFRS 16 adoption, except otherwise
indicated.
This presentation contains declarations that
constitute forward looking statements
regarding the intent, belief or current
expectations of the customer base, estimates
regarding future financial results and other
aspects of the activities.
Analysts and investors are cautioned not to
place undue reliance on those forward looking
statements, which speak only as of the date of
this presentation. TIM Part undertakes no
obligation to release publicly the results of any
revisions to these forward looking statements.
Such forward looking statements are not
guarantees of future performance and involve
risks and uncertainties, and actual results may
differ materially from those projected as a
result of various factors.
Institutional Presentation | 1Q20
3. 3TIM Participações – Investor Relations
Agenda
ABOUT TIM
MARKET OVERVIEW
INFRASTRUCTURE
STRATEGY AND POSITIONING
OPERATING EVOLUTION
FINANCIAL EVOLUTION
OUTLOOK
04
10
22
30
37
43
49
Institutional Presentation | 1Q20
4. 4TIM Participações – Investor Relations
ABOUT TIM
Institutional Presentation | 1Q20
5. 5TIM Participações – Investor Relations
Challenger with relevant role in the telecom sector
→ Operator with National Presence
→ Best and Wider 4G Coverage
→ #1 in Prepaid, despite the transformation in the customer base
→ >100 thousand km of Fiber optical Network throughout the country
MOBILITY
→ IoT: pioneer in Agribusiness vertical solutions, connected car and value added
services
SOLUTIONS
→ >580k Residential Broadband Clients
→ 100% of the Base with High Speed (>34 Mbps)
→ Presence in 24 cities with FTTH coverage
→ 2,5 MM Homes Passed with FTTH
→ Residential Broadband offered through Mobile Network
RESIDENTIAL
~R$ 30 billion market
capitalization
Institutional Presentation | 1Q20
6. 6TIM Participações – Investor Relations
2019 financial highlights show strong execution
6
R$ 17.4
Bi
Net Revenue
(+2.3% YoY)
R$ 8.1
Bln
Highest EBITDA1
in TIM’s history
46.7%
Highest EBITDA
margin2 in the
market
R$ 491
MM
TIM Live Revenue
(Fixed Broadband)
(+30.6% YoY)
Institutional Presentation | 1Q20
(1) Normalized; (2) Normalized, Among Top 5 Players in the Telecom Market.
7. 7TIM Participações – Investor Relations 7
Institutional Presentation | 1Q20
UNIQUE TELCO COMPANY LISTED ON
THE NOVO MERCADO
82%
8%
10%
Adopted
Partially adopted
Not adopted
SHAREHOLDERS’ STRUCTURE COMMITTEES TO REINFORCE AND
GUARANTEE SOLID CORPORATE
GOVERNANCE
10 members
(4 independents) 3 members
3 members
(3 independents)
3 members
5 members
(2 independents)
7 members
→ Equal rights: vote, dividends and tag
along
→ Higher liquidity
→ Single class of share (ordinary shares)
→ Greater independence of Board of
Directors (at least 20%)
→ Strict disclosure policy
→ Member of ISE for 11 years
Shareholders’ structure and highest level of corporate governance
Corporate Governance Form1
vs 65% on
average2
Telecom Italia S.p.A.
Telecom Italia
Finance S.A.
TIM Brasil Serv. E
Part. S.A.
Minority
TIM Participações
S.A.
TIM S.A.
100%
100%
67% 33%
100%
→ 40% of independent members
→ 30% of female representation: >3x B3-
Novo Mercado average
General Assembly
Board of Directors Fiscal Council
Statutory Audit
Committee
Compensation
Board
Control and Risk
Board
Statutory Board of
Officers
34%
36%
30%
Shares (% of Free Float)
Brazil
USA
Rest of World
(1) Share position as of Mar-2020; (2) According to EY 2018 report.
8. 8TIM Participações – Investor Relations
ESG: TIM Brasil is committed to a Positive Transformation
TIM Brasil plans to improve its ESG practices based on its Materiality Matrix
Institutional Presentation | 1Q20
→ Increasing efficiency and taking advantage of green energy cost reduction
→ Developing infrastructures and Data-Center to give more to our customer with less impact
from operations
Environmental
We want to be green
→ Improving internal workforce valorization and talent management
→ Accessing Brazilian Top Employer ranking based on diversity issues
→ Promote digital capabilities and ESG Culture among the employees
→ Developing the digital education to support demand for connectivity
Social
We believe that new
capabilities are a key
factor to maintain the
leadership
→ TIM recognized as a company with highest level of commitment to sustainability and
corporate governance
→ Reinforcing and disseminating the ESG principles to the high risk suppliers
→ Adopting best practices regarding compliance, information security and privacy
protection ("LGPD“)
Governança
Efficient Mecanisms to
balance in a fair way the
interests of all
stakeholders, enhancing
transparency and control.
Indirect Emissions -70%
Eco-efficiency +75%
Employees Engagement >MQ3
Digital Capability
Development
1k people
Employees trained on
ESG Culture
>95%
2025
2022
Carbon neutral by 2030
New Market and ISE Mantain
ISO 27001 and ISO 37001 Obtain
United Nations Agenda: 10 relevant goals for TIM Brasil
Brasil
Long Term Targets (TIM Brasil)
Renewable Energy Sources: around 50% of TIM’s energy consumption in 2019. Expanded to 60% till
the end of 2020.
• Self-generation: : 6 Hydroelectric Power Centers (5 in MG and 1 in SP)
1 Biogas Plant (landfill methane)
• Energy Buy: Free Energy Market
GRI 302-1
Standard
ISO 14001 (Network – 1st
Brazilian Telco) and ISO
9001 (Billing and Network)
Signatory of UN
Global Compact
since 2008
Member of ISE (Corporate
Sustainability Index) for
12 consecutive years
Membr of CDP (Carbon Disclosure Project) – Investor
and Supply Chain Questionnaires (since 2010)
Sustainability Report - GRI
GHG Inventory
verified by 3rd
Part -Gold Stamp
9. 9TIM Participações – Investor Relations
Institutional Presentation | 1Q20
MAIN PROJECTS
MISSION: To create and strengthen resources and strategies for the
democratization of science, technology and innovation that promote human
development in Brazil, with mobile technology as one of its main enablers.
→ + than 700,000 people involved
→ Partnership with 3 Ministries: MINC, MEC e MCTIC
→ Present in ~ 500 cities and 26 states (+DF)
→ 500,000 students, 4,000 Public Schools and 16,000 teachers
GARATEA-ISS
INSTITUTO TIM-OBMEP
SCHOLARSHIPS
PRINCIPLES AND
STRATEGIES
Education Work Application Inclusion
ACADEMIC WORKING
CAPITAL
(since 2013)
Instituto TIM’s initiatives have reached all 26 States and the
Federal District
Instituto TIM: Commitment to a Positive Transformation of Society
10. 10TIM Participações – Investor Relations
Milestones: Innovation DNA
Start-up
1998
Beginning of Long
Distance Services
2003
The end of differentiated
call tariffs (MTR) between
operators
2015
GSM launch
National Presence
2002
3G and Mobile
Broadband Launch
2008
Infinity and Liberty
Leadership in national LD
Intelig Incorporation
2009
AES Atimus Acquisition
Migration to Novo
Mercado
2011
4G License Acquisition –
2.5GHz
Launch of Live TIM in
SP
2012
Launch of InstitutoTIM
2013
4G License Acquisition –
700MHz
TIM Live reaches 100
thousand customers
2014
New Positioning
& New brand
2016
Comercial and financial
turnaround
2017
TIMLIVE / Fiber/WTTx
Digitalization
2018
5G Trials
TIM Live reaches 500 thousand
customers
2019
Institutional Presentation | 1Q20
TIM Black Família > 500k
2020
12. 12TIM Participações – Investor Relations
Despite slow recovery, structural drivers point to a better
environment
5.9 6.5 5.8 5.9 6.4
10.7
6.3
3.0
3.8 4.3
3.3
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20
IPCA
(% p.a.)
7.5
4.0
1.9
3.0
0.5
-3.5 -3.3
1.3 1.3 1.1
0.9
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20
GDP Growth
(% YoY)
(1) GDP growth at market prices: accumulated rates for the past four quarters (in relation to prior year’s same period).
Source: IBGE, BACEN, FGV.
(2) June 1st, 2020.
10.8 11.0
7.3
10.0
11.8
14.3 13.8
7.0 6.5
4.5 3.8
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20
Interest Rate
(% p.a.)
1.67 1.88 2.04 2.34 2.66
3.90
3.26 3.31
3.87 4.10
5.20
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q20
Exchange Rate
(R$ / US$, EOP)
Institutional Presentation | 1Q20
Brazilian economy was showing early signs of improvement when social distancing measures were addopted to contain the spread of the novel coronavirus in the country. The 1st
quarter of 2020 was mostly impacted in its last couple of weeks, but it was enough to cause a GDP decrease of 0.3% when compared to 1Q19. The latest projections reported by
Brazilian Central Bank’s Boletim Focus² pointed to a 6.25% YoY decrease of Brazilian GDP in 2020.
13. 13TIM Participações – Investor Relations
Brazilian population by social class
The consumers still feels the impact from past years crisis,
influencing the sector dynamics
During the past year, class B decreased, while classes D/E
increased
A
B
C
DE
5
MM
44
MM
101
MM
60
MM
2.5%
21.0%
48.1%
28.5%
Source: IPC Maps 2019 and 2019/ABEP 2019, Worlddata (2018), Exchange rate as of October 11th, 2019 (R$/US$ 4,11), IBGE, BACEN, FGV.
Average
income
Benchmark
countries
6.9 6.5
12.0 11.6 12.2
Unemployment Rate
(% in the last quarter of the year)
39.6
43.8
46.3
42.4 42.7
45.9
Household Debt
(%, EOP)
2012 14 16 1813 15 17 19
106.1
86.4
73.4
93.0
80.2
Consumer Confidence
(0-200)
104.5
86.9
78.4
96.1 91.2
Business Confidence
(0-200)
> 100 = optimism > 100 = optimism
(US$ 6.262)
(US$ 4.872)
(US$ 3.203)
(US$ 2.596)
(US$ 1.681)
(US$ 1.137)
(US$ 959)
(US$ 804)
(US$ 711)
(US$ 299)
(US$ 217)
(US$ 151)
US$ 6.217
US$ 1.373
US$ 426
US$ 176
US$ 734
Institutional Presentation | 1Q20
1Q20
2012 14 16 1813 15 17 19 1Q20 2012 14 16 1813 15 17 19 1Q20
2012 14 16 1813 15 17 19 1Q20
14. 14TIM Participações – Investor Relations
0.8%
1.3%
1.4%
1.4%
1.7%
1.9%
Brazil
Morocco
South Africa
Iraq
Malaysia
Nigeria
Mobile Wallet Share1
(Mobile ARPU / per capita GDP)
Brazilian market is relevant globally with room for ARPU growth
(1) Selected countries.
Source: Merrill Lynch – Global Wireless Matrix 1Q20 (4Q19 data).
224
254
303
426
957
1,604
Brazil
Russia
Indonesia
USA
India
China
6th
Mobile Customer Base Ranking
(MM)
15.5
20.3
20.4
64.5
120.7
176.7
Brazil
India
Korea
Japan
China
USA
10th
Mobile Service Revenues Ranking
(US$ Bln / year)
107%
165%
167%
174%
180%
181%
Brazil
Morocco
Hong Kong
South Africa
Finland
Austria
30th
Mobile Penetration Ranking
(MM)
5.9
30.2
34.9
36.5
36.7
39.7
Brazil
Qatar
USA
Norway
Switzerland
Canada
38th
Mobile ARPU Ranking
(US$ / mo)
Institutional Presentation | 1Q20
19th
15. 15TIM Participações – Investor Relations
New consumer habits reinforce data service as essential,
especially over mobile network
3%
56%
40%
Internet users by device
Only computer
Only mobile
Both
+7 p.p
A/A
24%
10%
63%
3%
Internet users
Only Wi-Fi
Only mobile
Both
Don't know
73%
96%
66% 59%
37%
27%
6%
Whatsapp Facebook Youtube Instagram Twitter
Time spent per day
2º3º2º 2º
(Global ranking position)
2º Internet – 9h29m
2º Social Network – 3h34m
Social network penetration
(% population)
50%
64%
74%
2017 2018 2019
45%
26%
Movies and series Music
Paid streaming and car app users
(% of smartphone users)
+24 p.p.
Source: We are Social, Mobile Time (Opinion Box), Statista, CETIC.
Institutional Presentation | 1Q20
16. 16TIM Participações – Investor Relations
Traditional services have been losing relevance in this new
framework and internet has been gaining prominence
Source: Anatel.
(1) Number of households in 2019 estimated by TIM. (2) Source: CGI.br/NIC.br; last update as of 2018.
27% 31% 34% 36% 37%
42% 44% 45%
2012 2013 2014 2015 2016 2017 2018 2019
Fixed Broadband Penetration
(% of households)
12%
25%
23%
41%
< 2 Mbps
2 - 12
12 - 34
> 34
Fixed Broadband Connections Speed
32.6 MM
lines
31%
47%
56%
66%
71% 74%
2012 2013 2014 2015 2016 2017 2018 2019
Mobile Internet Users2
(% of >10 years population)
25% 28% 29% 28% 27% 26% 25%
22%
2012 2013 2014 2015 2016 2017 2018 2019
Pay TV Penetration
(% of households)
15.8 MM
accesses
69% 69% 67% 64% 61% 58%
53%
46%
2012 2013 2014 2015 2016 2017 2018 2019
Fixed Voice Penetration
(% of households)
33.5 MM
lines
Institutional Presentation | 1Q20
17. 17TIM Participações – Investor Relations 17
Institutional Presentation | 1Q20
Change in Market structure combined with new consumption
habits resulted in a transformation in the base profile
199 201 203 204 206 208 209 210
131% 135% 138% 126% 118% 115% 110% 97%
2012 2013 2014 2015 2016 2017 2018 2019
Mobile Penetration
Population (MM) Penetration
2.00 1.96 1.94
1.73 1.64 1.54 1.44 1.37
2012 2013 2014 2015 2016 2017 2018 2019
SIM Cards per Unique User
(Unit)
0.36 0.32
0.24
0.16
0.10 0.06 0.03 0.02
2012 2013 2014 2015 2016 2017 2018 2019
MTR Evolution
(R$ / min)
The maintenance of a high interconnection tariff
pushed the “community effect (on-net)” through the
possession of multiple SIM cards.
Mobile market has been experiencing organic growth
in total unique users.
Penetration is decreasing due to the reduction of total
SIM cards: weakening of the “community effect” due to
the decrease in ITX tariff (off-net reduction) and
dissemination of communication apps.
SIM consolidation despite the growing number of
mobile users.
211 212 213
185 165 149 130 117
44 51 58 62 67
73 80 85
2012 2013 2014 2015 2016 2017 2018 2019
Prepaid Human Postpaid
Mobile Base per Segment
(MM)
Postpaid base already represents ~50% of unique
users, besides that >60 MM Brazilians are in the credit
bureau blacklist.
227 MM
SIM Cards
124 130 137 139 138 142 144 146
74%
76%
79%
80%
79%
80% 80%
79%
2012 2013 2014 2015 2016 2017 2018 2019
Unique user >10 years (MM) Penetration
Unique User Penetration 146 MM
people
18. 18TIM Participações – Investor Relations
Three major players working in integrated manner, TIM with
relevant performance in mobile and selected approach in broadband
Integrated Pure
Regional / Niche
ISPs
MVNOs
Selected
broadband
(Mobile)
(Pay TV)
Acquired
4-play
(In JR)
Institutional Presentation | 1Q20
19. 19TIM Participações – Investor Relations
51% 52% 54%
49% 48% 46%
119.3 118.5 116.9
2016 2017 2018
Mobile Fixed
60.7
61.8
62.8
2016 2017 2018
Market revenue dynamic indicates mobile growth, and highlights
TIM’s evolution
(1) 2016-2018 comparison on pro-forma basis; (2) 2019 vs 2018 disconsidering Nextel figures and excluding impacts from IFRS 16 adoption (except for Claro in
2019).
Source: Operators’ Earnings Releases.
20.9 19.7 18.5
2.8 2.3 1.9
29.3 29.4 30.0
34.6 35.6 35.7
12.3 13.1 13.9
2016 2017 2018
13.8 13.0 12.0
5.5 4.4 3.5
17.6 17.8 19.2
40.1 41.1 40.9
23.0 23.8 24.4
2016 2017 2018
Total Services Net Revenues Share
(%)
Mobile Service Net Revenue Share
(%)
Nextel
TIM
Oi
Claro
Vivo
Nextel
TIM
Oi
Claro
Vivo
Market | Total Services Net Revenues
(R$ MM)
Market | Mobile Service Net Revenues
(R$ MM)
-1.0%
CAGR
+1.7%
CAGR
53% 55%
47% 45%
113.9 113.1
2018 2019
59.9
61.7
2018 2019
19.0 17.5
30.3 31.1
36.5 36.8
14.2 14.7
2018 2019
12.6 11.9
19.3 20.7
42.5 42.1
25.6 25.4
2018 2019
Institutional Presentation | 1Q20
20. 20TIM Participações – Investor Relations
Mobile and broadband market are competitive, but have been
showing evolution towards more rationality. Changes in market
structure may reinforce this path
0%
3%
2%
23%
8%
31%
21%
33% 24%
49%
30%
29%
26%
10%
30%
15%
16%
33%
5%
33%
1%
Others
(1) Claro considers participation of Nextel in the SMP.
Source: Anatel.
Nextel
HHI Index
0 0.25 0.5 0.75 1
0 0.25 0.5 0.75 1
0 0.25 0.5 0.75 1
0 0.25 0.5 0.75 1
Level of competitiveness
+ -
(Market Share | Mar-20)
Institutional Presentation | 1Q20
22. 22TIM Participações – Investor Relations
Regulatory updates promoting major changes in the sector
Institutional Presentation | 1Q20
Anatel and Relevant Regulators
4 MAIN REGULATORY
CHAPTERS
→ License and Spectrum
→ Competition
→ Quality and Consumer Protection
→ Universalization Policy and
Broadband
ORGANIZATION
Anatel is subject to special authority regime and bound to the
Communication Ministry, with the function to regulate the Brazilian telecom
sector (LGT, Art. 8º)
Independent Antitrust Agency (coordination with Anatel to sectoral
matters)
Important in the intersectoral regulation (infrastructure)
Tribunal de Contas da União¹: surveillance of Anatel’s operating activities;
final instance on matters “related to costs” (RF auctions, liquidation
agreements etc.)
Independent system for consumer protection on national, regional and local
levels; not integrated entities that work in parallel (and overlapping) to
Anatel
~1,500
Public
agents
~5,000
Control items
26 Regional
Offices
336
Resolutions
in force
Recent important changes
Law nº 13.879/2019 (PLC 79)
(presidential approval on 10/04/2019)
Fixed
→ Option to migrate from concession to authorization model
→ Additional broadband investment plan: balance of concession
exchange to authorization, reversible goods and public politics area
Mobile Spectrum
→ Successive renewals of the authorization (not limited to 2 periods)
→ Possibility of conversion of the renewal fee for investments
→ Radiofrequency transferal between operators (secondary market)
RQUAL (2020)
→ Approved in Dec, 2019 to introduce responsive regulation to reach better quality
of telecom services. Replaces pecuniary sanctions for alternative measures
according to the risk identified.
TAC² –Conduct Adjustment Term (Mar/19)
→ First agreement with a major operator approved by Anatel (Sep/19) and
TCU (Mar/20), with a reference value of R$ 627 million, to generate
improvements in three operating pillars: client experience, quality and
infrastructure, as well as a project to cover 300 municipalities with 4G
SPECTRUM CAP (Nov/18)
→ <1GHz frequencies: stablished the limit of up to 35% concentration
→ Between 1GHz and 3GHz bands: up to 30%
In both cases, participation can be extended up to 40%, with conditioning
(1) Government Accountability Office.
(2) Agreement for Conduct Adjustment – agreement that operators can reach with Anatel to substitute fines for investment in less favored regions.
(3) Universalization Plan.
24. 24TIM Participações – Investor Relations
Institutional Presentation | 1Q20
EVOLVE TRANSFORM
→ Move from volume to value to sustain mobile business
growth
→ Grow on broadband with financial discipline
→ New operating model to address current and future
challenges
→ Additional growth through adjacent markets
1. INFRASTRUCTURE
2. DISRUPTIVE EFFICIENCY
3. MOBILE (PREPAID, POSTPAID AND B2B)
4.UBB (B2C, B2B)
5. NEW REVENUE SOURCES
6. ESG
Strategic Pillars: Time to Move Forward
→ Evolution Plan to Further Develop Initiatives Already in Place
→ Transformation Plan to Reshape Company’s Skills Over the Next 3 Years
25. 25TIM Participações – Investor Relations
Institutional Presentation | 1Q20
Attack all
segments
→ Prepaid acceleration
(regional + smart promo,
channel mgmt.)
→ Postpaid: brand positioning,
handsets
→ SMB: consumerization
36
33
20 21
Postpaid
>45% in 2022
167 185
117
30 56
82
Playing by opportunity, meeting clients true
needs
Postpaid
Prepaid
Customer Base Mix1 (MM)
Mobile Customer Base by
Segment (MM)
(1) Total market; (2) Population > 10 years old.
Innovation positioning:
ensuring execution and
customer satisfaction to
succeed.
Low Price
Convergence
2014
2019
2022
P2
P3
P4
Innovation
Premium Price
Reduce
churn
→ Eliminate pain points:
discount management
→ Lock in high propensity
customers
→ Improve service level
3.5
%
3.8%
-0.6 p.p.
until 2022
104
139 146
Residual growth: churn management
becomes more important
Mobile Unique Users1,2 (MM) Postpaid Churn Rate (% p.m.)
ARPU
increase
→ Unlock upselling
opportunities
→ Price with “more for more”
approach
→ Boost big data, data
analytics, NBA capabilities
22.5 23.7
CAGR 19-22
low to mid
single digit
1.9 1.7
1.4
Increasing “share of wallet”
SIMs per Unique Users1 Mobile ARPU (R$ / month)
2018 2020 20222010 2015 2020 2022
Mobile: Move from volume to value to sustain mobile business
growth, leveraging customer experience
26. 26TIM Participações – Investor Relations
Institutional Presentation | 1Q20
Footprint expansion and operational improvement
Cherry picking deployment, Reduce early churn, Improve care and self-care, Reliable bill to cash processes
Differentiation: UBB + Content
OTT content friendly approach, Wi-Fi experience
2018 2019 2020 2021 2022
TIM Live >30%
CAGR 19-22
TIM Live
Others
FIXED NET REVENUES (R$) FTTx CUSTOMER BASE (mln)
2018 2019 2020 2021 2022
FTTH
FTTC
+15
cities
+42%
households
covered
FROM EVOLUTION…
Broadband: Revenues will be the Lever for Fixed Business Growth
27. 27TIM Participações – Investor Relations
Institutional Presentation | 1Q20
(1) Anatel (dec-19), internal analysis.
> 60%
20% - 40%
0% – 20%
40% – 60%
Broadband
Penetration
25 26 26 23
2 3 6 10
27 29 31 33
2016 2017 2018 2019
Others
Fiber +79%
-3%
+7%
CUSTOMER BASE BY
TECHONOLOGY (mln)
BRAZIL’S BROADBAND MARKET
BROADBAND AND FIBER PENETRATION (on HH)
Expanding TIM Live's services with the
right balance between Sales and Capex,
unlocking additional value of this asset
Create in partnership a neutral fiber
infrastructure asset in Brazil
Market sound process with an advisor to
find the right partner out of the telecom
space
…TO TRANSFORMATION
Strategic Partnership
FIBER PENETRATION TOP 5
São Paulo 24%
Santa Catarina 23%
Minas Gerais 23%
Paraná 21%
Ceará 19%
Brasil 16%
CAGR
Broadband: Smart Capex to Ensure Acceleration
29. 29TIM Participações – Investor Relations
TIM is well positioned to attend the new demand, with no legacy
to defend
41.2
39.6
37.5
33.5 32.6
2016 2017 2018 2019 1Q20
Fixed Line Base
(MM)
18.8
18.1
17.5
15.8 15.4
2016 2017 2018 2019 1Q20
Pay-TV Base
(MM)
66.6
72.7
79.8
85.2 86.4
2016 2017 2018 2019 1Q20
Human Postpaid Base (ex-M2M)
(MM)
26.9
28.9
31.2
33.0 33.0
2016 2017 2018 2019 1Q20
Broadband Base
(MM)
-6.9%
CAGR
Fixed-mobile
substitution
Traditional-OTT
substitution
+15.7%
CAGR
Market
+8.3%
CAGR
+9.4%
CAGR
Market
-6.0%
CAGR
Market
+6.5%
CAGR
+22.0%
CAGR
Market
30. 30TIM Participações – Investor Relations
Customer base transformation process, driven by pre-postpaid
migration, supported an evolution at the top of the pyramid
77%
70% 64% 61% 59%
21%
27%
32% 33% 34%
2% 3% 4% 7% 7%
2016 2017 2018 2019 1Q20
TIM Base Mix
Prepaid Human Postpaid M2M
+1.1 p.p.
YoY
-1.6 p.p.
YoY
49%
42%
34% 31% 30%
45%
52%
59% 61% 63%
6% 6% 7% 8% 7%
2016 2017 2018 2019 1Q20
Mobile Service Revenue Mix
Prepaid Postpaid Other
+1.3 p.p.
YoY
-1.0 p.p.
YoY
31. 31TIM Participações – Investor Relations
21% 20% 23%
21% 21%
40%
43% 40% 39% 39%
22% 20%
22%
23% 24%
16% 12% 11% 12% 12%
2012 2013 2014 2015 2016 2017 2018 2019 1Q20
Market Share | Human Postpaid
TIM Vivo Claro Oi
28%
29% 28% 28%
27%
27%
25%
25%
27%
27%
25%
25%
25%
23% 23%
20% 20% 21% 21% 21%
2012 2013 2014 2015 2016 2017 2018 2019 1Q20
Market Share | Prepaid
TIM Vivo Claro Oi
Customer base management momentum: “from volume to value”
9.5
11.1 11.2 12.3 13.4
16.1
18.1 17.8 17.9
1.2 1.2 1.3 1.3 1.5 1.7 2.2
3.6 3.8
2012 2013 2014 2015 2016 2017 2018 2019 1Q20
TIM Base | Postpaid
(MM)
Human Postpaid M2M
Source: Anatel.
70.4 73.4 75.7
66.2 63.4 58.6 55.9 54.4 52.8
59.7 61.1 63.2
52.7 48.5
40.8 35.7 33.0 31.2
2012 2013 2014 2015 2016 2017 2018 2019 1Q20
TIM Base | Total and Prepaid
(MM)
Total Prepaid
Institutional Presentation | 1Q20
32. 32TIM Participações – Investor Relations
Approach to ensure higher value captured and sustainable
growth
16.7
40.6
10.4
17.9
37.7
11.3
20.2
39.7
11.5
22.4
39.9
11.5
23.7
38.1
12.0
Total Postpaid Prepaid
Mobile ARPU
(R$ / mo, Pro-forma1)
2015 2016 2017 2018 2019
7.1 16.9 27.6 34.5 38.6 38.6
10.7%
26.6%
47.1%
61.7%
71.0% 73.1%
2015 2016 2017 2018 2019 1Q20
Base 4G
(MM)
4G Base Penetration
397 640
1,198
2,184
3,009
3,592
2015 2016 2017 2018 2019 1Q20
BOU
(MB / mo)
(1) ARPU on Pro-forma basis, excluding IFRS 9, 15 and 16 impacts.
+10.6%
CAGR
-1.8%
CAGR
+4.2%
CAGR
Change in customer base mix, with greater postpaid relevance, was a lever
for Total ARPU growth. Upgrade to higher value plans will ensure this
continuous and robust increase.
Reduction due to
Postpaid mix, with
greater importance of
Control plans.
Institutional Presentation | 1Q20
33. 33TIM Participações – Investor Relations
“More for more”: Stepped portfolio addressing consumer wishes
through relevant partnerships
(1) Core offer for three users.
POSTPAID
ENTERTAINMENT HUB FOR
THE FAMILY
Communication
Services
TIM banca
virtual
Trial +R$ 15/mo after
unlimited calls
TIM Controle
TIM Black
TIM Black Família
from 2GB
Social
unlimited calls
from
4GB
unlimited calls
from
10GB
unlimited
calls
from 60GB1
Entertainment
international
roaming
1x
GB
shared
benefits
(monthly fee included)
TIM Pré Top
GB bonus for
portability
≥R$ 20.00/two weeks ≥R$ 49.99/mo ≥R$ 119.99/mo ≥R$ 269.99/mo
Increase CEX with better Quality and Value Proposition
Institutional Presentation | 1Q20
34. 34TIM Participações – Investor Relations
TIM Live
Exploring accelerated growth opportunities: Residential
broadband
306
392
467
566 584
2016 2017 2018 2019 1Q20
Broadband Base
(Mil)
FIBER
Internet (WTTx)
Ultra
Ultra Fibra
speed from
40 mbps
to 60 mbps
speed from
100 mbps
to 2 gbpsallowance of 30 GB
to 80 GB
Plans
Value-Added
Services Protection + Modem
+ VoD
Partnerships
+ Content (VoD, TIM
Banca, Ensina)
+ Power Wi-Fi
57.9
67.3
76.0 80.8 82.4
2016 2017 2018 2019 1Q20
TIM Live Fiber ARPU
(R$ / mo, Pro-forma1)
26 cities166 cities
+27.9%
CAGR²
+14.3%
CAGR²
(1) ARPU on Pro-forma basis, excluding IFRS 9, 15 and 16 impacts.
(2) For the 2016-2019 period.
Institutional Presentation | 1Q20
35. 35TIM Participações – Investor Relations
Not Only B2C: Evolving from Connectivity to Value-Added Service
and Solutions Provider
Porto Seguro Conecta
→ New M2M customer base: vehicle/fleet
tracking and financial services (POS);
→ New SIM card management platform:
upselling opportunity for value-added
services.
ConectarAGRO
→ New farm covered: Amaggi;
→ Partnership to promote 700MHz 4G in
countryside;
→ Implemented solutions:
Connected Car
→ Development of agreements with car
manufacturers;
→ Connected sensors to monitor, protect, and
maintain the car;
→ Management using new e-SIM platform;
→ Upselling opportunity for human lines and
VAS.
2.5
0.81.8
3.3
2Q18 2Q19
M2M Base
(MM)
+77.3%
Porto
Conecta
EM CONSTRUÇÃO
Institutional Presentation | 1Q20
36. 36TIM Participações – Investor Relations
Institutional Presentation | 1Q20
(1) Global Data Market Opportunity Forecasts to 2023: Global IoT.
360
184
~750
~400
-
1.0
2.0
3.0
4.0
5.0
6.0
0% 20% 40% 60%
Connections
Share of IoT Revenues
From
(2018)
To
(2022)
From
(2018)
To
(2022)
Transport
Agriculture
IoT MARKET SIZE1
= USD Revenues (mln)
IoT IN LATIN AMERICA DEVELOP AT SCALE AND MONETIZE IOT
VERTICALS
4G TIM no Campo
Sole operator in the
initiative developing
agribusiness solutions based
on IoT.
Connected Car
First mover: agreement
with car manufacturer to
provide in-car connectivity
and automation.
~5 mln
acres with 4G
1
st
place in 4G
coverage in Brazil
>3k
cities with NB-IoT
major partners in agro
Beyond Core: Exploring B2B New Services
37. 37TIM Participações – Investor Relations
Institutional Presentation | 1Q20
TIM Ads addressable environment
(1) Latin America Digital Ad Spending 2019 eMarketer, internal analysis.
R$ 24.2 bln
digital ad market in 20221
R$ 19 bln
delivered through
mobile
>2x upside
for TIM
in 2022
Brands1
Ad agency2
Demand side
Platform3
Connection
mechanisms4
Supply side
Platform5
Publisher6
DMP
5%
50%
45%
VALUE
POOL
Beyond Core: The Mobile Advertising Opportunity
38. 38TIM Participações – Investor Relations
Institutional Presentation | 1Q20
As is To be
Opportunistic
approach
→ SMS to any 3rd
parties
→ ~R$ 190 mln
already generated
in mobile ads
products
Becoming a front
runner
→ Data monetization:
enhancing 3rd parties
campaigns
assertiveness with
customer knowledge
→ Operators
cooperation
→ Aligned with LGPD for
scoring and new
economy
TIM AS AD TECH PLAYER
Leveraging on customer data and ownership
to enhance advertisers knowledge.
TIM AS PUBLISHER
Exploring owned touch-points (digital and
physical) to advertise 3rd parties.
Close the gap
→ Exploring Captive
Portal interactions
to display 3rd
parties ads
→ New trial
contracts signed
in the past 2
months
→ Fine-tuning and
new products
development
~1902019
2020
2022
MOBILE ADS REVENUE (R$ mln)
+35%
+70%
Beyond Core: TIM’s Positioning as Publisher and Ad-Tech Player
39. 39TIM Participações – Investor Relations
Institutional Presentation | 1Q20
LOW-END
Access to banking
services.
2
→ Symbiotic partnership
(JV like)
→ Value generated by profit
sharing
HIGH-END
Convenience and
simplicity.
1
→ Full bank offer
→ Commercial partnership
→ Value generated by
commissions in fees +
equity
EXPLORING PARTNERSHIP OPPORTUNITIES
(1) Population > 15 years old (Global Findex Database 2017); (2) Population > 10 years old; (3) Population > 16 years old (Locomotiva).
First mover in telecom +
digital banking services.
Exclusive agreement
with Bank C6.
Partners short list under
analysis.
27%
59%
79%
Credit Card
Debit Card
Mobile
Unique
Users
1
2
FINANCIAL SERVICES IN BRAZIL
OWNERSHIP PENETRATION OF… (% population)
1
45
mln
Brazilians have
no bank account3
817bln
annual transactions of
unbanked population
in Brazilian economy3
R$
83
%
top 5 banks’
market share
EOP 2020
BCB expects to
launch its instant
payment system: PIX.
Beyond Core: FinTech’s Playing Field is Moving Fast and We Have
a Unique Window of Opportunity
40. 40TIM Participações – Investor Relations
Institutional Presentation | 1Q20
REDUCE CHURN
Distinguished offer through MFS
and increased engagement with
the clients have a potential to
reduce churn in the core telco
business.
DESCRIPTION TIM C6 BANK
Role Sales channel
Provider of banking licenses,
technology and infrastructure
Target clients
TIM customer base: increase attractiveness on client acquisition
within a differentiated onboarding experience
(potential ‘VIP’ experience for high-end costumers)
Offer Bank and Telecom account, making life easier for consumer
Business structure Hybrid partnership model combining fees and equity
LOWER COLLECTION COST
The bonus is only guaranteed
when the customer pays their
invoice or recharge through the
App C6, lowering the cost of
collection.
Beyond Core: Confirming Innovation Leadership in Telecom
Through a Hybrid High-end Partnership with C6 Bank
42. 42TIM Participações – Investor Relations
Institutional Presentation | 1Q20
IT to the next level in 18-24 months
Network 5 key pillars
Benefits:
Big data
evolution
NBA
roll-out
Application and
architecture review
Catalogue
creation
Cognitive
systems
Data
Growth
5G
ready
New
initiatives
IoT
Fixed
Broadband
New
capabilities
Customers’
Integrated view
Time-to-
market
Automation of
processes and
efficiency increase
Densification and
innovative solutions
Fixed
Wireless
Access
Convergent
architecture
New IoT
businesses
opportunities
Decommissioning
Savings
Evolution Transformation
Infrastructure: Act Today to Be Ready for the Future
43. 43TIM Participações – Investor Relations
Institutional Presentation | 1Q20
Data Growth 5G ready IoT
New
initiatives
Fixed
Broadband
New services
requirements:
increasing efficiency
to cope with data
demand
Innovate with 5G,
evaluating spectrum
limitation vs new
services to technology
development
Support fixed BB
growth with agnostic
approach and
consistent convergent
architecture
New opportunities
becoming reality:
"Network slices“ for
service optimization
Decommissioning and
convergence of
network to boost
savings
→ Deep infra sharing
→ 80% of new sites will
be Biosites
→ Indoor sites
densification
→ Massive MIMO
→ IP/Optical
convergence
→ 5G spectrum Auction
→ Launch of main cities
→ Cluster approach
(MAN) at 5G cities
→ Core evolution
→ Content distribution
→ Resilience
improvement
→ FTTH vs FWA
→ Virtualization
through SD-WAN
→ Multi access edge
computing
→ New IoT services
→ NB-IoT expansion
→ E2E legacy
decommissioning
→ Sky coverage
→ Partnerships (MOU
Vivo)
→ 2G/3G consolidation
Network: Transformation Initiatives to Thrive Efficiency and New
Business Opportunities
44. 44TIM Participações – Investor Relations
Institutional Presentation | 1Q20
17
19
~22
2018 2019 2020 2021 2022
ACCESS NETWORK (‘000 SITES)
3,272 3,520
>4k
1,426
2,455
2018 2019 2020 2021 2022
Total
700 / 850
MHz
4G COVERAGE (# cities)
76%
75%
92%
2018 2019 2020 2021 2022
TRAFFIC MIX EVOLUTION
4G
2G / 3G
Better indoor
experience.
Network: Mobile Shift to 4G Network Still in Progress as a Way to
Improve Quality and Reduce Cost to Serve
45. 45TIM Participações – Investor Relations
Institutional Presentation | 1Q20
FTTH (# cities)
11
23
~70
2018 2019 2020 2021 2022
HOME PASSED (mln)
1.1
2.3
~5.5
2018 2019 2020 2021 2022
BACKBONE + BACKHAUL (‘000 km)
90
101
>130
2018 2019 2020 2021 2022
FTTCity (# cities)
601
821
~1.5
2018 2019 2020 2021 2022
Transport
Network
UBB
Network: Fiber Expansion to Support Business Continuity and
Ultrabroadband Acceleration
46. 46TIM Participações – Investor Relations
Institutional Presentation | 1Q20
→ Bad Debt (e.g. new
credit models, collections
systems improvement)
→ Legal processes (e.g.
predictive models to
reduce JEC expenses -
special court for small
cases)
→ Self-Provisioning (e.g.,
Naked SIM)
→ Self-caring: Cognitive
IVR and WhatsApp
services (e.g., second
invoice, balance check
and etc.)
→ Self-healing (e.g.,
technical resolution for
broadband services)
→ Administrative
processes (e.g. ground
leasing)
→ Pay-roll management
IT Planning &
Development
→ Industrial
agreements (e.g. VIVO
MoU)
→ Innovative
Technologies (Massive
MIMO)
→ TIM Live’s
Transformation with
partnership
→ Cloudification (storage
as commodity)
Process efficiency Digital & Automation Make vs buy Smart CAPEX
Being competitive: increase
return on investment by
focusing it where we can
apply differentiation.
Productivity: focus on the
core.
Brazilians are already
digital: unique environment
opportunity.
Gaps as opportunities:
Close gaps and surpass the
benchmark.
Holistic Efficiency Approach: Disruptive Efficiency to Address
Industry Challenges
47. 47TIM Participações – Investor Relations
3 5 5 1
20 20 20
11
21 185
3 4
5
35 26 29
43
1322 29
25
24
20
21
44
43
20
117
148
177
93
Spectrum Distribution
(Average of MHz / population)
Spectrum distribution reflects available capacity, though user
experience will also depend on network management
14 MHz 90 MHz 80 MHz 20 MHz 150 MHz 135 MHz 100 MHz 190 MHz
450 MHz 700 MHz 850 MHz 900 MHz 1,800 MHz 2,100 MHz 2,300 MHz 2,500 MHz
450 MHz
700 MHz
850 MHz
900 MHz
1,800 MHz
2,100 MHz
2,500 MHz
<1 GHz = Coverage [35%l----l40%] >1 GHz <3 GHz = Capacity [30%l----l40%]
Mobile
Total
Spectrum Cap
48. 48TIM Participações – Investor Relations
Coverage expansion supported by a robust infrastructure
411
1,255
3,003 3,272 3,477 3,506
0 2
916
1,426
2,313 2,436
2015 2016 2017 2018 2019 1Q20
4G Coverage
(# cities)
Total 700 MHz
93% with
VoLTE
70.3 75.8
85.2 90.1
100.8 102.2
2015 2016 2017 2018 2019 1Q20
Backbone + Backhaul Evolution
(‘000 km)
Start of robust infrastructure via acquisition
strategy: Intelig (2009), AES (2012).
15.0
17.3 18.2 18.8 19.6
21.7
2015 2016 2017 2018 2019 1Q20
Total Sites
(‘000)
(1) Full coverage is not equal to the sum of technologies, as there is an overlapping area (brownfield).
5 5 5 5 5 5
2
11
23 24
2015 2016 2017 2018 2019 1Q20
TIM Live Coverage1
(# cities)
FTTC FTTH
2.1 2.1
3.2 3.5 3.6 3.6
1.1
2.3 2.5
2015 2016 2017 2018 2019 1Q20
Covered Households1
(MM)
FTTC FTTH
4.3
14
25
Institutional Presentation | 1Q20
5.526 5.6
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