3 Q06


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3 Q06

  1. 1. TIM Participações S.A. 3Q06’s Results November 06, 2006 1
  2. 2. Main Messages Market Performance Commercial Strategy Financial Performance 2
  3. 3. Main Messages Exceptional customer growth improving value mix Cutting edge in innovation with 1st “home zone offer” in Brazil 1st Choice for high value customers also in the corporate segment Improving customer mix combined with acquisition cost efficiency Combining strong growth with revenue and margin expansion Delivering positive cash flow 3
  4. 4. Main Messages Market Performance Commercial Strategy Financial Performance 4
  5. 5. Continuing Market Growth Lines and penetration trend Market share Growth First 36.1% 34.5% 33.7% YoY Player 31.1% 30.0% -6.1pp 51.2% +7.2p.p. 49.2% - 13.2 pp - 4.9 pp 47.3% 48.1% 44.0% 24.3% 25.1% +2.2pp 22.9% 23.4% 23.5% 95.9 +20% 89.4 91.8 22.8% 23.1% +1.3pp 86.2 21.8% 21.6% 21.8% 80.0 Third Player 3Q05 4Q05 1Q06 2Q06 3Q06 +22% Outperforming the market especially in the post 15.1 16.5 17.4 17.9 18.5 paid segment 3Q05 4Q05 1Q06 2Q06 3Q06 Postpaid market share of 26.8% Postpaid lines (Million) Penetration (%) Narrowing the gap from 1st Player on: • Total market: 4.9 p.p. vs. 13.2 p.p. • Postpaid segment: 1.6 p.p. vs 13.2 p.p. Source: ANATEL. 5
  6. 6. Exceptional Customer Growth Improving Value Anticipating the year end target TIM lines (Mln) Net adds market share – 3Q06 YoY 24.1 +31.3% Others OTHERS 23% 21% + 35.4% 18.3 42% 20% Claro Postpaid 80% 79% +30.3% 30% Vivo Prepaid 5% Leadership in Net Additions 3Q05 3Q06 42% in the 3Q06 52% in September Market Share 22.9% 25.1% 40% in August (“Father’s Day”) 56.6% of incremental share in postpaid in the quarter Continuous customer mix improvement: 21% postpaid lines vs 20% one year ago Leader in GSM: market share of 37% 89% of the lines are GSM, an increase of +10 pp YoY Source: ANATEL. 6
  7. 7. Main Messages Market Performance Commercial Strategy Financial Performance 7
  8. 8. Front-runner in Innovation First to launch a home zone: All-in-one offer for mobile at home and elsewhere TIM Casa (“TIM Home”) TIM Família (“TIM Family”) New “Family” Plan Mobile: the first option at home or for consumers on-the-go! TIM exclusive plan Enhancing TIM Plans (Fixed local call) Shared bundles of voice, VAS & LD Postpaid: 200 minutes per R$ 29.90/month for up to 5 Postpaid customers Prepaid: 100 minutes per R$ 19.90/month Up to 5 Prepaid customers can join Families: Shared bundles up to 2.000 min in for free calls with the family as well Free calls between members Savings up to 50% and 25% for prepaid Automatic monthly recharge for prepaid customers: R$25, R$50, and postpaid users in R$75 and R$100 their home zones A complete telephony solution for the whole family: free family calls anywhere big savings on local fixed calls from home 8
  9. 9. Leveraging on Corporate Market Leader in Business Segment Strong innovation drive TIM 3Q06 lines growth per segment Business segment +54% Consistent focus on high value customers Wide mobile office solution portfolio Base total +31% % Leader in business segment: 30% market share Powerful and growing large account portfolio Business market share * 27.3% 30.0% Data solution Voice Mobility July/05 July/06 * Source: Ericsson Research – July 2006 9
  10. 10. Promoting On-net Traffic Consumer: strongly pushing community and usage through promotions A single commercial strategy tuned to different levels of intensity Tarifa Zero (“Zero Tariff”) Boosting overall sales Free on net call for users on record gross adds in the 3Q06 regions with lower market share (3.5 million lines) and high potential of growth. Promoting incremental market 3 Prediletos (“3 Favorites”) Free on-net calls to TIM 3 special share in high potential Regions numbers Tarifa Zero 3 Prediletos São Paulo (state): 56.7% Rio Grande do Sul: 62.0% Strengthening the community: on-net traffic promotion has become a TIM attribute Leveraging regional opportunities: two different and simultaneous offers on Father’s Day* Reaping cost benefits in new regulatory scenario: on-net traffic does not generate mobile interconnection charges * the second annual most important retail festive date 10
  11. 11. Driving the VAS Usage Stimulation Increasing service Community concept Boosting chat penetration & GPRS Mega TIM Wap TIM Spot Promotion that offered unlimited Provides free SMS subscriber access for TIM WAP channels, sponsored by an FAST, during at 30 days with a advertisement. Users receive a R$9.90 per month. message with news and spots. Podcast Blah! Chat It´s a new concept to download The users that sent more messages news by videos and audio files. to blah! chat, during the promotion, Users have journalistic and sports got a cell phone (Nokia 7250i with files that change regularly. camera). TIM point of sales: a VAS sales channels 11
  12. 12. Main Messages Market Performance Commercial Strategy Financial Performance 12
  13. 13. Continued Growth of Service Revenue Total net revenues performance R$ Mln Growth YoY Focus on Service Revenues 3Q06 Reported Organic* R$ Mln 2.394 Total Net Revenues 2,746 +30% +16% +38% B&K 306 impact Net Services Revenues 2,394 +38% +21% Net Handset Revenues 351 -6% -6% 1.729 +21% 2.088 • Focus on services revenues through push on “TIM Chip Only” • Lowering weight of handset revenues with decreased prepaid subsidies * Excluding Bill & Keep elimination impact 3Q05 3Q06 Service revenue share vs. first player Net Service Revenue Share st Narrowing the gap vs. 1 Player YoY Revenue 41.8% 49.2% +7.4 p.p. gap of R$ Combination of top quality ARPU & customer growth 73 Mln vs. 1st Continuous service revenue growth 1st Player 58.2% 50.8% -7.4 p.p. player in the 3Q06 3Q05 3Q06 13
  14. 14. ARPU Performance ARPU analysis VAS revenues (R$ Mln) (R$) 34.4 Gross VAS Revenues YoY B&K 217.0 +58.5% 136.9 30.0 30.2 30.0 4.8 5.9 1Q06 2Q06 3Q06 Stable ARPU QoQ (excluding the impact of the 3Q05 3Q06 B&K elimination) % of gross revenues Keeping ARPU gap vs. Market 3Q06 Growth YoY (R$) Superior ARPU – 3Q06 Usage 34.4 MMS P2P: + 408% 28.7 Data: + 482% 27.0 61% 39% Users SMS P2P: + 34% MMS P2P: + 287% Data: + 173% 1st player 3rd player Traditional Innovative 14
  15. 15. EBITDA and Margin Performance Combining strong top-line growth with healthy margin expansion EBITDA (R$ Mln) EBITDA Margin (%) 135.9 676.7 11.2 552.0 +57% 24.6% 351.1 22.6% 19.7% 16.7% 3Q05 3Q06 Deferral of B&K 3Q06 3Q05 3Q06 Adjusted Subsidy Impact Reported EBITDA Margin Reported EBITDA Margin Adjusted (Excluding deferral of handset subsidies and effect of B&K elimination) EBITDA margin excluding the deferral of subsidies EBITDA continues to demonstrate a profitable growth, Speeding up QoQ margin growth: even excluding the non-recurring effect 3.3 pp in the 3Q06 vs 2.8 pp in the 3Q05 15
  16. 16. Reducing Acquisition Cost SAC performance R$ Declining SAC level despite improved customer mix: 154 146 increased % of postpaid on gross adds focus on corporate clients Commission progressively increases weight of 63% 58% Subsidy comodato Anatel’s fee on net adds Significant reduction in prepaid handsets subsidies has positive impact on direct cost Comodato 37% 42% Advertising Leveraging “TIM Chip Only” strategy for Others SAC reduction 3Q05 3Q06 Acquisition cost pay-back of 4.9 months in Direct cost Indirect cost the 3Q06 vs 5.1 months in the 3Q05 16
  17. 17. From EBITDA to Bottom Line Δ YoY (R$ mln) + 325.6 - 89.8 + 235.8 + 45.8 + 47.1 + 328.8 (R$ Million) R$ Mln 135.9 Deferral of handsets subsidies 577.8 540.8 Positive Bottom Line! 98.9 79.9 1.3 20.3 EBITDA Depreciation EBIT Net Taxes and Net Income Amortization Financial Others Expenses 17
  18. 18. Net Financial Position Net financial position Operating free cash flow R$ Mln Non Operating Operating 2Q06 FCF FCF 3Q06 R$ Mln 147 +186 2Q06 3Q06 (39) (1,822) 147 (112) (1,787) EBITDA +677 Positive cash generation CAPEX (374) Δ Oper. WC (155) Gross Debt: R$2.9 billion (of which ~68% long term / average annual cost of 13.9% in 3Q06) Financial Assets: R$1.1 billion Net Financial Position: R$1.8 billion 18
  19. 19. “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. 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 4009-3314 19