Apre 1 Q06

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Apre 1 Q06

  1. 1. TIM Participações S.A. 1Q06’s Results May 5th, 2006 1
  2. 2. Key Achievements Market Performance Financial Performance 2
  3. 3. Key Achievements Improving the Corporate Structure Status of Corporate Restructuring On March 16th the shareholders meeting approved the TIM Celular merger with no contrary vote. No shareholders exercise the withdrawal rights that ended on April 19th. On May 4th. the Board approved a further step of our reorganization. Current Structure Proposed Structure TIM Participações TIM Participações TIM Participações 100% 100% 100% 100% TIM Celular TIM Celular TIMNordeste TIM Sul + TIM Sul 100% 100% TIM Maxitel TIM Maxitel + TIM Nordeste This transaction, that is being submitted to the Anatel approval will: optimize even more the company’ structure allowing costs reduction related to the maintenance of two separated legal entities; and, accelerate the right to use the net operating losses accumulated in the merging companies, which amounted to R$ 5.5 billion at the end of 1Q06. We expect to close the transaction during the 3Q06. 3
  4. 4. Key Achievements TIM: Profitable growth in a highly competitive market Solid Growth Strong Financial Performance (YoY) 44% YoY growth in total customer base vs. 30% of the Brazilian market 21% growth in net service revenue The highest % of postpaid vs. peers: 45% VAS revenue increase 20.6% vs. 19.5% of the market 21% reduction in subscriber acquisition Leader in postpaid net additions in the cost quarter (30.2%) achieving 24,8% on share by the period end Stable bad debt rate over total gross revenue: 3.1% Leader in Innovative technology: 37% of GSM Market 58% growth in EBITDA achieving 24,3% margin (+6.2 p.p. compared to 1Q05) Successful client retention: churn rate stable On track to the break even: 34% net Improved CRM and segmentation tools losses reduction enabling acquisition cost reduction 4
  5. 5. Key Achievements Market Performance Financial Performance 5
  6. 6. Continuing mobile market growth in the first quarter National Market and Penetration YoY Lines growth Over the last 12 months TIM´s 48.5% 43.5% client base grew by 43.5%, TIM 60.6% 60.8% 56.4% strongly above the market Market 39.7% 39.8% 37.6% 31.4% 30.3% average (+30.3%) 48.1% 47.3% 44.0% 89,4 Slowing market growth rate, but 41.6% 86,2 continuing to outperform 38.0% 80,0 75,5 expectations: 3.7% QoQ and 30.3% YoY 68,6 More rational market with some strong subsidy focused on postpaid and low-end handsets 1Q05 2Q05 3Q05 4Q05 1Q06 Total market lines (mln) National Penetration Source: Anatel’s data base. 6
  7. 7. Market share performance Market share TIM market share gap vs. main Competitors YOY growth Vs. First Player Vs. Third Player 39.3% First 37.7% 36.1% Player 34.5% 33.7% ~ +1.2 p.p. YoY ~ - 6 pp 1.8 1Q05 2Q05 3Q05 4Q05 1Q06 0.5 22.2% 22.9% 23.4% 23.5% 21.3% 1Q05 2Q05 3Q05 4Q05 1Q06 TIM ~ + 2 pp 21.6% 21.8% Third 20.8% 21.5% 21.8% ~ + 1 pp Player -10.2 1Q05 2Q05 3Q05 4Q05 1Q06 oY -18.0 7p . p. Y . ~ -7 Sound market results achieved in São Paulo capital: 25.9% market share (+ 7.4 pp YoY), achieving 2nd position in region. Narrowing the gap vs. 1st Player and widening the distance from the 3rd Player 7
  8. 8. Customer base: combining growth and improved mix TIM Lines (mln) Postpaid mix YoY QoQ GSM lines 21.0 + 43% 21.1% + 0.5 pp 14.6 20.6% 20.3% 19.9% 20.1% 19.7% + 0.3 pp 19.5% 85% + 75% 18.9% 19.2% 18.9% 19.4% 19.2% + 0.3 pp 69% 18.9% 18.0% 18.6% 1Q05 1Q06 1Q05 2Q05 3Q05 4Q05 1Q06 Market Share (%) 21.3% 23.5% TIM Market Competitors Leader in postpaid net additions in the quarter Strong quality of the base: 20.6% postpaid lines vs. 19.1% 1st Player and 16.4% 3rd Player Source: Anatel’s data base. 8
  9. 9. Growing with optimized retention and acquisition cost R$ 23.8% 19.7% -21% Successful value & loyalty strategy SAC 190 150 1Q05 1Q06 Record gross additions with tight % postpaid gross adds acquisition cost control SAC/ARPU 5.3X Rational client acquisition strategy: 5.0X improved mix of gross additions 1Q05 1Q06 Reduced churn in the corporate segmented churn: -1.4 p.p., and Churn broadly stable stable overall rate. Monthly Churn + 0.1 p.p. rate 2.3% 2.4% 1Q05 1Q06 9
  10. 10. Key competitive advantages Building up a total customer caring leadership TIM Current differentials Main Growth Drivers Mobility, convenience and cutting-edge VAS Plug-in’s for high users Post-Paid Deeper segmentation of offer International Roaming Focus on “TIM Brasil” plans Community (family offer) (8 all-inclusive bundles) Subsidy focused on high- end segment Pre-Paid Deeper segmentation (new pre-paid plans “TIM +”) Launch of exclusive “TIM + 25” Low acquisition cost: SIM Card + Traffic offer and “TIM + 5” high user pre-paid plan Subsidy reduction Business Blackberry / Nokia communicator/ Treo EDGE Strong innovation drive & launch of exclusive offer Long distance and international Volume discount for nationwide contracts roaming offers VAS SMS/MMS “Carta Servizi” as Evolution of VAS from an attribute of positioning a service Re vamp the wap portal to revenue driver 10
  11. 11. Successful marketing activities Deeper segmentation of Offer: Consumer market Offers Results TIM “Chip Only” Bonuses for recharging Significant Increase in recharge made in 48 made in 48 hours Prepaid hours after the activation “TIM + 25” Double ARPU compared to the average for the segment & “TIM + 5” Rewarding outgoing traffic Strong participation in the gross addition for the segment in the period “TIM Mais 40” “TIM Conta Fixa”: 33% of postpaid & “TIM Conta Fixa” consumer gross adds Focus on convenience: Postpaid “TIM Light”: 24% of postpaid Control of expenses consumer gross adds “TIM Brasil Plans” Boosting postpaid gross Complete and differentiated additions: +70% growth from offers combining voice and launch data service 11
  12. 12. Business segment Strong innovation drive & Launch of exclusive offers National Corporate Market Share 1 Blackberry: Enlarging the portfolio of services First in Brazil to offer: > 1 year exclusive National coverage International roaming 29% Most advanced handsets portfolio New offer “Blackberry Professional” Competitors All functionalities in a easy and cheap way SME market share: 30.4% New plan combining volume and convenience (monitoring expenses) TIM 1Q06 Line growth per segment “Plan Company Control” Business Segment +70%yoy International Roaming Total Lines +43%yoy Focus on capturing heavy users Local rate promotion % 1 Source: Pesquisa - Dimensionamento do Mercado Corporativo 12 Brasileiro de Telefonia Celular - Ericsson Business Consulting; Estudo Pyramid e estimativas marketing.
  13. 13. VAS True Care: Easy & Useful Innovation Increase of services Segmentation evolution: SMS Boost penetration community concept • Data transmission on EDGE • Re launch of the WAP portal • Launch of the ”carta servizi” • Push e-mail: Blackberry • Strategic contents SMS+MMS • VAS enable handset portfolio partnership • Stimulate premium SMS Blackberry Professional: competitive & innovative solution SMS promotional for weekends 7,6% Regional approach (contents and offers) Easy configurations for SMS, MMS and Data New site WAP and enhanced contents 13
  14. 14. Leveraging on customer care Size: more than 30 million contacts in the quarter -9% Efficiency: reduction in average attending time 1Q05 1Q06 +6% Effectiveness: increase % of answered call 1Q05 1Q06 Complains per 1,000 clients Result: best positioned in complains rate among major Players 3rd 1st 4th TIM player player player Source: Anatel CRC – April 06 Other Players 14
  15. 15. Key Achievements Market Performance Financial Performance 15
  16. 16. Strong Growth Revenue and Share in the Market Gross Revenue Gross Revenues Analysis 1Q06 YoY R$ mln YoY Voice (R$ mln) 2,285 + 23% 2,378.4 2,889.0 +21% Traffic Volume (Bln min.) 5.1 + 33% 17% 15% Value Added Service (R$ mln) 181 + 45% Strong push on Handsets Revenue (R$ mln) 423 + 7% chip sales (“Chip 83% 85% Only”), as a low Handset Sold (thousands) 1,110 -7% acquisition cost 6.3% 7.3% strategy Average handset prices (R$) 359.7 + 15% % of mid-high handset sold 40% + 17pp 1Q05 1Q06 Total Net Revenues 2,132 +18% Service Handsets sales VAS revenue over Service Net Service Revenues 1,847 +21% Net Services Revenue share top 3 players Sustainable Growth TIM 31% 34% ~ +3 pp Confirming outperformance for net 3rd player 22% service revenues growth: 24% ~ +2 pp 1st player 47% 42% ~ -5 pp +21% YoY vs. -1% 1st player and 19% 3rd player 1Q05 1Q06 16
  17. 17. ARPU Performance ARPU Analysis Speeding-up VAS ARPU (R$) TIM Peer avg.* VAS Revenue YoY +23% +24% +23% 181.0 +45% 33.6 32.8 30.0 124.4 26.7 27.0 24.5 7.3% 6.3% 3Q 05 4Q 05 1Q 06 1Q05 1Q06 VAS Revenues (R$ Mln) Keeping strong gap in ARPU vs. market % over Gross Services Revenues Trend impacted by constant market build-up and strong seasonality: Data & Growth YoY Interactive Seasonal ARPU trend in the Market Users service SMS P2P + 58% 36% MMS P2P + 83% -10% Data + 239% -8% -9%/10% 64% Usage SMS P2P + 54% 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 SMS/MMS MMS P2P + 52% P2P Data + 336% *Weighted average 1st and 3rd player ** Estimated 17
  18. 18. EBITDA Performance EBITDA Weight on EBITDA Margin 1 High entry prices R$ Mln A) Variable costs 1Q06 handsets with YoY positive impact Interconnection -0.7 pp on subsidies level Handsets Cost -3.9 pp 518.2 +58% - 4.6 pp 327.3 +6.2 p.p. B) Fixed & Commercial 1Q06 Headcount growth lead by: CRM’s Commercial expenses -1.0 pp improvements, and 24.3% G&A and Others -0.4 pp pre and post-sale 18.1% supporting Labor cost +0.3 pp Industrial cost -0.5 pp 1Q05 1Q06 EBITDA Margin over Total Net Revenue -1.6 pp (A) + (B) -6.2 pp 1 Calculated as YoY change of the OPEX weight on total revenues 18
  19. 19. From EBITDA to Bottom Line ∆ YoY % +58% +25% -74% +29% 6% -100% +35% (R$ mln) 191.0 -108.7 82.3 -19.6 -2.1 19.4 80.0 (R$ Million) R$ Mln R$ Mln On track to the break-even point 518.2 (547.0) (28.7) (86.5) (151.8) (36.5) EBITDA Depreciation EBIT Net Taxes and Minorities Net Losses Amortization Financial Others Income 19
  20. 20. Net Financial Position +349 R$ Mln Net Financial Position (QoQ Analysis) 1Q05 4Q05 1Q06 CAPEX 4Q05: (1,089) (97) FISTEL fee on FY05: (302) (97) Handsets acquired 4Q05: (516) EBITDA: +518 Other changes: +309 CAPEX: (169) Net Financial Results: (87) Others: (9) (1,386) (1,536) (1,598) Operating (96) (37) Historically significant cash Free Cash Flow: 1,250 (56) (1,536) generation in the forthcoming Net Financial EBITDA Operating Other non Income Dividends Net Financial quarters Position -CAPEX Working operating Taxes Position Dec05 Capital 1Q06 Impact of strong working capital seasonality: 43% of 2005 capex was accounted in the 4Q05, and disbursements made in the 1Q06 30.3% of the 2005 handsets were acquired in the 4Q05 and disbursements made in the 1Q06 Fistel fee on FY05 customer base paid in one installment on March 06 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

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