2 Q06


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2 Q06

  1. 1. TIM Participações S.A. 2Q06’s Results July 24th, 2006 1
  2. 2. Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 2
  3. 3. Key Achievements Delivering continuous and profitable growth Over 1.3 million net adds Strong Subscriber growth 22.3 million clients base 24.3% of market share Promotions focused on usage and on net traffic Full pipeline of innovative First and unique to offer international roaming services continuously (VAS + Voice) for GSM prepaid customers stimulating usage First to offer BlackBerry to business and consumer Leader in the business segment Net service revenues: + 20% YoY Successful performance ARPU marked trend improvement QoQ and YoY on services top-line Growing momentum of VAS revenue: + 62% YoY (8.9% of total service revenues) EBITDA of R$500 million: 73.4% higher YoY Consistent focus on Profitability 21.5% Margin EBITDA (+7.6 p.p. YoY) 3
  4. 4. Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 4
  5. 5. Continuing outperforming market growth National Market and Penetration Market share YoY Lines growth YoY change TIM 60.8% 56.4% 48.5% 43.5% 33.3% First 30.3% 21.3% Player Market 39.8% 37.6% 31.4% 49.2% 37.7% 47.3% 48.1% 36.1% 91,8 34.5% 33.7% 44.0% 89,4 41.6% 86,2 31.1% -6.6 pp 80,0 75,5 TIM 24.3% 23.4% 23.5% + 2.1 pp 22.2% 22.9% 2Q05 3Q05 4Q05 1Q06 2Q06 2Q05 3Q05 4Q05 1Q06 2Q06 Narrowing the gap vs. 1st. Player Total market lines (mln) National Penetration 5 Source: Anatel’s data base.
  6. 6. Customer base: combining growth and quality TIM Lines (mln) Strong Quality Base Strong postpaid gross additions in the YoY quarter (21.6% share of total gross vs. 22.3 +33.3% 17.5% in 2Q05) 16.8 21% +35.1% Continuous customer mix 20% improvement: 21% postpaid lines vs 79% + 32.9% 20% one year ago 85% Postpaid 80% Prepaid Leader in GSM market 87% of our lines are GSM, an increase 2Q05 2Q06 of +12 pp YoY Market Share (%) 22.2% 24.3% GSM base grew by 54% YoY 6
  7. 7. Leveraging on Corporate Market Leader in Business Segment Acquisition Retention Main driver of TIM postpaid base growth: 70% of the total net additions YTD Leadership in Segmented mobile office management Increasing share of churn market from solutions through customer competitors profiling (evolution from retention to Powerful and growing large account portfolio Long Distance and relationship) International First to offer BlackBerry roaming aggressive offer One on one Leader in the business segment with almost Retention offers 2 million lines Volume discount for national Implementation of contracts dedicated account for top SME clients 7
  8. 8. Promotions focused on usage and on-net traffic Segmented Consumer Offer “Tarifa Zero” Bonuses for on net call Leveraging on TIM community Zero Tariff Regional approach concept on net Reduced aggressiveness in prepaid subsidy Boosting sales in regions with lower market share growth Focus on prepaid high user Quality acquisitions: new clients “TIM +25” Reward outgoing traffic show 15% higher ARPU than the & “TIM + 5” Important acquisition and average prepaid base retention tool Proactive retention : 1 of 5 prepaid current lines already “TIM Chip Only” Bonuses for recharge moved to “TIM + 25” or “TIM +5” Push on made in 48 hours recharge Low SAC strategy Push on “TIM Chip Only” pays off: users recharge 3x > average 8
  9. 9. Roaming all over the world Focus on corporate segment, but not only… Leader in International GSM/GPRS/EDGE/MMS/SMS roaming First and only to offer Voice/VAS prepaid international roaming TIM’s roaming services are based on : Convenience: one handset – and one number – worldwide Coverage: the largest international GSM network available for customers Promotional bundle offer: positive effects on outbound traffic (stimulating the usage) Roaming Alianza (one rate offer) Virtual Home Environment (intelligent network) 9
  10. 10. Bringing technology to the low and mid user Industry trend: Improved handsets mix at a more accessible cost LOW (entry price <= R$399) MED (> R$400 <= R$999) HIGH ( >R$999) 15 models 16 models 9 models • 100% colour display • 100% color display, GPRS/ • 100% with Video Play Back • 90% GPRS WAP WAP and MMS • 100% Bluetooth and • 80% with speaker phone • 93% embedded camera embedded camera • 56% infrared (data connection) • 67% with EDGE features Customers are searching for more sophisticated handsets Features of the most 2Q05 2Q06 Enabling handsets base – 2Q06 sold handsets •Monochromatic •Colour Display 55% •Monophonic •Polyphonic, MP3 37% •No Camera •Camera 26% •No GPRS and WAP •GPRS and WAP •EDGE •Infrared WAP GPRS MMS 10
  11. 11. Pushing on VAS usage: Try and Buy Increasing service Evolving segmentation to Boosting SMS penetration community concept New TIM WAP site MMS Promotion New site to facilitate access to the WAP content: Promotional price on MMS for all customers during a segmented layout to low, med and high users. month to reduce the entry barrier and improve service penetration. Provide community place, strategic content, real time Brazilian and Int.l editorial, Entertainment and music. Mega TIM TV Globo World Cup Promotion SMS special bundle sold electronically (IVR) and Cross-operator innovation initiative the user can through recharge cards during short periods to pull subscribe a World Cup channel per week and win customer usage. 2006 prizes (boost revenue in June) 11
  12. 12. Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 12
  13. 13. Growing in Value Gross Revenues Gross Revenues Analysis R$ mln 2Q06 YoY YoY TOTAL GROSS REVENUE (R$ mln) 3,202 + 16% 3,202 +16% 2,753 Voice (R$ mln) 2,418 + 20% 22% 17% Traffic Volume (Bln min.) 5.3 + 25% Value Added Service (R$ mln) 237 + 62% 78% 83% Handsets Revenue (R$ mln) 547 - 8% 6.8% 8.9% 2Q05 2Q06 TOTAL NET REVENUE (R$ mln) 2,321 +12% Service Handsets sales Net Service Revenues (R$ mln) 1,958 +20% Net Handset Revenues (R$ mln) 363 -18% VAS revenue over total service revenue 13
  14. 14. ARPU Performance ARPU Analysis VAS Revenues (R$ mln) ARPU (R$) 2Q05 2Q06 30.2 30.0 41% 237 147 37% 1Q06 2Q06 marked improvements in ARPU dynamics over time Traditional Innovative Improving ARPU trends Growth YoY Growth YoY +0.7% positive Users Usage inversion -3.3% SMS P2P: + 38% MMS P2P: + 156% QoQ MMS P2P: + 148% Data: + 345% Data: + 223% 2Q05 2Q06 14
  15. 15. EBITDA Performance EBITDA Weight on EBITDA Margin 1 YoY R$ Mln A) Variable costs 2Q06 500.0 +73% Interconnection -0.1 pp 288.3 Handsets Cost -1.9 pp +7.6 p.p. - 2.0 pp 21.5% 13.9% B) Fixed & Commercial 2Q06 Headcount growth lead by: CRM’s improvements pre Commercial expenses -3.6 pp and post-sale G&A and Others -2.8 pp supporting 2Q05 2Q06 EBITDA Margin over Total Net Revenue Labor cost +0.4 pp Change in the Industrial cost -1.8 pp provision methodology in Bad debt +2.2 pp 2Q05. % on Speeding up YoY margin growth: revenues in line -5.6 pp QoQ 7.6 p.p. in the 2Q06 vs 6.2 p.p. in the 1Q06 (A) + (B) -7.6 pp 1 Calculated as YoY change of the OPEX weight on total revenues 15
  16. 16. SAC Performance SAC R$ 170 168 Declining SAC level despite: increased % postpaid on Commission gross adds 59% 58% Subsidy focus on corporate clients Anatel’s fee on progressively increases net adds weight of comodato Comodato Higher entry price handsets 41% 42% Advertising has positive impact on direct Others cost 2Q05 2Q06 Direct cost Indirect cost 16
  17. 17. From EBITDA to Bottom Line ∆ YoY (R$ mln) +211.7 -103.1 +108.6 +17.8 -39.8 +2.1 +84.4 (R$ Million) R$ Mln 25% reduction in the Net Losses 500.0 (562.9) Include 75 mln non recurring provision related to deferred tax asset* (62.9) (85.8) (249.0) (100.2) EBITDA Depreciation EBIT Net Amortization Financial Taxes and Minorities Net Losses Expenses Others * Deferred tax asset booked in the incorporated companies, TIM Sul and TIM Nordeste, before the merger occured. 17
  18. 18. Net Financial Position Net Financial Position Operating Free Cash Flow R$ Mln Non 1Q06 Operating Operating FCF FCF 2Q06 On track to break-even R$ Mln 1Q06 2Q06 (39) +1,211 (1,536) (39) (1,250) (247) (1,822) Impact of strong working capital seasonality: EBITDA +500 4Q05 CAPEX paid out in 1Q06 Of which CAPEX (351) significant handset stock paid for in 1Q06 Dividends (58) ∆ Oper. WC (188) Fistel on FY05 base paid in one installment in March 06 Gross Debt: R$2.9 billion (of which ~90% long term / average cost of 14.9% in 2Q06) Financial Assets: R$1.1 billion Net Financial Position: R$1.8 billion 18
  19. 19. Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 19
  20. 20. Key Regulatory Outcomes End of • Anatel’s resolution excluded the partial bill & keep regime, which Bill & Keep means that mobile company will now have to pay termination (Effective from July 14th 2006) charges on each local call to other mobile company Introduction of “peak” • The same resolution established to the mobile companies the obligation to apply 30% discount between “peak” and “off peak” and “off peak” time interconnection rates to Long Distance calls for LD calls FAC • Implementation date to be defined. • The cost have to be defined for each group in 3 different regions, (Full Allocated Cost) according to the PGO – “Plano Geral de Outorgas” 3G Licenses • 5 band in the frequency 1.9/2.1 GHz (Public Consultation) • Auction criteria and prices to be defined • Licenses assignment expected for 1H07 20
  21. 21. “Safe Harbor” Statements Statements in this presentation, as well as oral statements made by the management of TIM Participações S.A. (the “Company”, or “TSU”), 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. Investor Relations Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca Visit our Website: 22640-102 Rio de Janeiro, RJ http://www.timpartri.com.br Phone: +55 21 4009-3742 / 4009-3751/8113-0571 Fax: + 55 41 4009-3990 21