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Meeting with investors (April 2019)

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Meeting with investors (April 2019)

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Meeting with investors (April 2019)

  1. 1. TIM Brasil Company Presentation March, 2019
  2. 2. 2 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. Financial results are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption. Disclaimer TIM Brasil | Meeting with Investors Investor Relations
  3. 3. 3 Agenda TIM Brasil | Meeting with Investors Investor Relations About Us …………………………………………………………………………………………………...……4 Market Overview and TIM Positioning ……………………………………………………………………10 Regulatory Update ……………………………………………………………………………………….......36 4Q18 Results ……………………………………………………………………………………………….....14 Strategic Plan 2019-21 …………………………………………………………….................................... 26 Appendix …………………………………………………………………………………………………....... 40
  4. 4. 4 ABOUT US TIM Brasil | Meeting with Investors Investor Relations
  5. 5. 5 Solid Execution in 2018 The company in a nutshell TIM Brasil | Meeting with Investors Investor Relations Live Revs +38.4% YoY All Time High EBITDA2 R$ 6.6B EBITDA2 Growth +10.3% YoY Net Serv Rev +4.7% YoY Operating FCF¹ +2.9B YoY All Time High EBITDA MARGIN2 38.5% Presence in Brazil since 1998 #2 in Mobile Net Services Revenues Strong legacy in prepaid Introduced the first plan focus on data for smartphones >90k km of fiber optical network throughout the country #2 in mobile human postpaid (ex-data only) ISE member for 11 years R$28,5 billion of Enterprise Value Telecom Italia subsidiary (67% of shares) (1) Ex-licenses, (2) Normalized. 5 Best and Wider 4G Coverage
  6. 6. 6 ¹ Normalized Figures. EBITDA¹ Margin (%) 28,4% 31,5% 33,5% 36,6% 38,5% 2014 2015 2016 2017 2018 Solid results with sustainable growth above market average TIM Brasil | Meeting with Investors Investor Relations -1.319 638 728 1.801 2.585 2014 2015 2016 2017 2018 EBITDA¹ - CAPEX (R$ MM) Net Service Revenues (Δ YoY) 2,7% 4,2% 1,7% 2,0% -0,9% 7,4% 2,4% -0,6% -0,3% 0,5% -3,9% -2,8% -4,3% -6,5% -7,1% -3,0% -5,8% -4,3% 5,1% 4,7% 2014 2015 2016 2017 2018 TIM P3 P1 P4 EBITDA¹ (R$ MM) 5.535 5.402 5.230 5.949 6.563 2014 2015 2016 2017 2018 +10,3%+13,7%
  7. 7. 7 • Improved E2E Customer Experience • Digitalization of customer care processes • Superior Network quality, notably on 4G and FTTH • Suitable portfolio solutions (mobile, residential, B2B and digital provider) • Customer centric culture • Sense of Ownership • Engaged employees focusing on customer experience • Efficiency • Internal processes digitalization • Innovative revenue streams • Risk Management Most Profitable in the Industry Most loved by customers Most Engaged Employees Consolidation of TIM Strategic framework focused on its main stakeholders TIM Brasil | Meeting with Investors Investor Relations
  8. 8. 8 Corporate Social Responsibility TIM Brasil | Meeting with Investors Investor Relations PRINCIPLES AND STRATEGIES 1. Education Every child and young person has the right to a science and mathematics education that represents the advances in knowledge gained in these areas. 2. Applications Technological innovation should serve human development 3. Work Technological innovations are the basis for a new way of working. 4. Inclusion People have the right to learn about new information and communication technologies and how they influence their everyday decisions. (Founded in July, 2013) MISSION: We are committed to creating and strengthening resources and strategies for the democratization of science and innovation that promote human development in Brazil, with mobile technology as one of the main facilitators. SUSTAINABILITY IN BUSINESS Incentive in renewable energy sources, totalizing 26% of the Company´s electricity consumption in 2018. • Self-generation: 5 hidroeletric Generating Centers • Energy purchase: Non regulated market GRI 302-1-Standard Joined UN Global Compact in 2008 Member of ISE (Sustainability Index) for 11 consecutive years ISO 14001 Enviromental Certification for Networking process (1st Brazilian telco) and ISO9001 Quality Certification for Billing and Networking processes Member of ICO2 (Carbon Efficient Index) for 7 years
  9. 9. 9  Statutory Audit Committee: • Report to Board of Directors • Oversight Financial reporting • Analyze anonymous complaints  Compensation Board and Internal Control and Risk Board operate indefinitely and act independently  Whistleblower channel website Unique Telco company listed on the Novo Mercado Committees to Reinforce and Guarantee Solid Corporate Governance 10 members (4 independents) 3 members (3 independents) 3 members (3 independents) 3 members 5 members (2 independents) 6 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 Brazilian Law “Lei das S.A” Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders Corporate Governance TIM Brasil | Meeting with Investors Investor Relations
  10. 10. 10 MARKET OVERVIEW AND TIM POSITIONING TIM Brasil | Meeting with Investors Investor Relations
  11. 11. 11 Evolving proposition for consistent and sustainable growth TIM Brasil | Meeting with Investors Investor Relations Quality Price 2017- Today 2016 Today 2016-2018 Turnaround Strategy Quality Price 2017- Today 2016 2019-21 2019-2021 2019-21 Consolidation Strategy 2008 2012 Quality Price 2008-2016 Accelerate the Digital Transformation and increase Customer Experience with better Quality and Value Proposition, leveraging on 2nd wave of Mobile Upselling, FTTH and other sources of revenues (e.g. B2B, digital services).
  12. 12. 12 40% Social media Others MTR Cuts Changing Customer Base Mix Total base in mln customers R$ Prepaid Total Postpaid New Customer Profile 0,41 0,42 0,42 0,42 0,42 0,36 0,32 0,24 0,16 0,10 0,06 0,03 0,02 07 08 09 10 11 12 13 14 15 16 17 18 19 Stabilization Expansion Consolidation 121 262 229 98 211 130 23 51 100 07 08 09 10 11 12 13 14 15 16 17 18 49% 47% Only computer Only mobile Both -2 p.p YoY +6 p.p YoY 96% 49% of Brazil's digital population uses only mobile device Internet users by device (2017 | % of internet users) Time spent per day on internet 9h 14min per day1 In Brazil, 40% of the digital time is spent on social network 3º Note: 1) Rank of internet time spent and social media users based on a list of 40 countries. Source: TIC Indivíduos (CETIC), Digital in 2018 (We are social). Brazil is ranked 6th position on social media time spent1 6º Change in Customer Profile and Mix TIM Brasil | Meeting with Investors Investor Relations
  13. 13. 13 Brazilian Telcos: Revenues X-Ray TIM Brasil | Meeting with Investors Investor Relations Total Services Net Revenues (R$ MM) Total Services Net Revenues | Share Mobile Service Net Revenue | Share Mobile Service Net Revenue (R$ MM) 120.442 120.999 119.279 118.509 116.876 2014 2015 2016 2017 2018 62.302 62.659 60.724 61.809 62.796 2014 2015 2016 2017 2018 3,3% 3,1% 2,8% 2,3% 1,9% 22,3% 21,5% 20,9% 19,7% 18,5% 28,5% 29,1% 29,3% 29,4% 30,0% 32,4% 33,6% 34,6% 35,6% 35,7% 13,6% 12,7% 12,3% 13,1% 13,9% 2014 2015 2016 2017 2018 6,4% 6,0% 5,5% 4,4% 3,5% 14,5% 14,1% 13,8% 13,0% 12,0% 17,8% 18,7% 17,6% 17,8% 19,2% 36,0% 37,7% 40,1% 41,1% 40,9% 25,3% 23,5% 23,0% 23,8% 24,4% 2014 2015 2016 2017 2018 Nextel TIM Oi Claro Vivo
  14. 14. 14 4Q18 RESULTS TIM Brasil | Meeting with Investors Investor Relations
  15. 15. 15 2018 Services Net Revenues R$ 16.2 bln (+ 4.7% YoY) TIM Live Revs R$ 392 mln (+ 38.4% YoY) 2018 Mobile ARPU R$ 22.4 (+ 11.3% YoY) 2018 TIM Live ARPU R$ 76.0 (+ 13.0% YoY) 2018 ARPU Consistent Growth MSR Dec’18 Client Base 20.2 mln (+ 13.7% YoY) 36% of the base Mobile Postpaid Fixed Broadband R$ 15.4 bln (+ 4.5 % YoY) 16.6 17.9 20.2 22.4 2015 2016 2017 2018 34.5 mln (+ 25% YoY) 62% of the base 4G Users 467 thd (+ 19% YoY) 2018 Cash Generation EBITDA¹ - Capex Net Cash Flow¹ 4Q18 at a Glance2018 EBITDA¹ R$ 6.6 bln (+ 10.3% YoY) 38.5% margin (+1.9 pp YoY) R$ 1.2 bln 0.6 0.7 1.8 2.6 2015 2016 2017 2018 Margin Evolution 83 113 4Q17 4Q18 TIM Live Net Revenues (+ 35.4% YoY) MSR (+ 3.6% YoY) 3,861 3,999 4Q17 4Q18 EBITDA¹ (+ 5.6% YoY) 1,769 1,868 4Q17 4Q18 EBITDA¹ Margin 41.7% 31.5% 33.% 36.6% 38.5% 2015 2016 2017 2018 FY18 & 4Q Highlights – Strong Results Rewarding a Challenging Year TIM Brasil | Meeting with Investors (1) EBITDA and Net Income normalized for the effects detailed in slide 2.
  16. 16. 16 2017 2018 2017 2018 2018: Increasing commitment while avoiding price war Average Recharge (R$/# of recharges) Prepaid ARPU (R$) 1Q18 2Q18 3Q18 4Q18 flat E-Recharges (Prepaid Recharge MIx) +5 p.p. TIM Pré Top Package o Unlimited Voice/SMS o Unlimited Social Media o Data package dependent on recharge size o Encourage digital recharge channel with benefits and web portal TIM Pre Top New Offer o Soft launch (Dec/18), Ad campaign (Jan/19) o Offer simplification (CEX oriented): New concept ties recharge to service packages o Proactive migration strategy to penetrate customer base TIM Pré TOP Recharges Moving Forward: Innovation, Simplification and Rationality TIM Pré Top Pricing o Minimum recharge: R$10 (7 days) o Up-selling optionality inside the prepaid with TIM Pré Top Mais TIM Pré TOP Mais RechargesR$ Days GB 15 7 1.8 20 10 2.7 30 15 4 40 20 5.4 60 30 8.1 R$ Days GB 10 7 1 15 10 1.4 20 14 2 30 21 3 40 28 4 +2.8% p.q. Maintaining Rationality Despite Aggressive Competition in Prepaid TIM Brasil | Meeting with Investors Investor Relations
  17. 17. 17 27% 56% 2017 2018 o Lock-in offers to increase loyalty and drive churn reduction; o Restructuring sales channels to rebalance acquisition; o Smart targeting prepaid base to find new pockets of growth; o Special benefits for “digital clients” (e-bill, app user, direct debt, etc.); o Innovative offers avoiding price war; o Blended ARPU showing resilience despite competition; o Recent customer base price-up (Feb/19). Executing a multi-segment migration strategy while managing acquisition quality and credit risk (1) B2C Pure Postpaid. 2017 2018 3% 18% 2017 2018 2017 2018 2.2 x Control: high single digit ARPU growth, working on more for more Pure Postpaid: CB management while evolving offer portfolio Migration + Gross adds (´000) Lock-in Offers (% over gross adds) Control to post migration¹ (‘000) Lock-in Offers¹ (% over gross adds) +12% +15 p.p. + 29 p.p. 2017 2018 +0.5% Postpaid ARPU (R$) Tweaking Postpaid Approach to Maintain Growth with Quality TIM Brasil | Meeting with Investors Investor Relations
  18. 18. 18 TIM Live: Great Year of Expansion 391 408 410 421 419 1 3 13 28 48 4Q17 1Q18 2Q18 3Q18 4Q18 72.1 82.1 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18  11 cities with FTTH, 14 active cities.  40% of new clients get ≥ 100Mbps Plans.  Bringing content to the offers with 14 streaming channels (i.e. Fox, Cartoon, NatGeo, etc.)  TIM Live represented > 50% of fixed revenues in 4Q18. Managing Portfolio to Drive ARPU Up (R$ mln; %YoY) Existing Customers New Customers Manaus – Oct-18 Salvador – Jul-18Goiânia – Aug-18 Aparecida de Goiânia – Oct-18 Rio de Janeiro – Oct-12 * Nov-17 São Gonçalo – Jun-18 Nilópolis – Aug-18 Duque de Caxias – Nov-12 (FTTC only) Nova Iguaçu – May-14 (FTTC only) São João de Meriti – Aug-15 (FTTC only) São Paulo – May-12(FTTC) Nov-17 (FTTH) Mauá – Apr-18 Poá – Aug-18 Suzano – Jul-18 3.2 mln 4.3 mln Households 2017 2018 Coverage Expansion Customer Base Expansion (000 Clients) Revenues (R$ mln) +14% +11% 83 85 90 104 113 4Q17 1Q18 2Q18 3Q18 4Q18 2018 Net Adds: ~75k FTTH Users: ~50k +14% +35% Total ARPU Price-up in August/18 FTTH FTTC 467k TIM Brasil | Meeting with Investors Investor Relations
  19. 19. 19 446 601 4Q17 4Q18 0.2 0.4 0.8 1.1 1Q18 2Q18 3Q18 4Q18 59% 67% 4Q17 4Q18 0 179 244 1,138 2,116 2,221 4Q16 4Q17 4Q18 1.8GHz 2.1GHz 4G Coverage and Capacity Expansions Fiber Expansion: Transport and FTTH Refarming Evolution: LTE on 1.8 GHz and 2.1 GHz (# Cities;) 4G in 700 MHz (# Cities; % of Urban Pop.)  Refarming pushing our network capacity and quality.  4G coverage leadership w/ 3,272 cities and 93% of urban pop.  92% of the data traffic generated in 4G devices (76% through the 4G network).  coverage: 2,522 cities and 76% of urban population. 975 1,015 1,172 1,426 32.4% 40.5% 56.2% 64.8% 1Q18 2Q18 3Q18 4Q18 4G Total Elements (000 e-NodeB’s) FTTCity (Cities served by Fiber) Backhaul (% Sites w/ High Capacity) FTTH Coverage (Mln Households) 1Q18 2Q18 3Q18 4Q18 20.8 23.1 26.2 28.6 +35% +8 p.p. 5.5x 1.8: all Brazil, most cities with 10 MHz or more 2.1: N/NE of Brazil, cities with 5 or 10 MHz Solid Network Development Supporting All Business Lines TIM Brasil | Meeting with Investors Investor Relations
  20. 20. 20 4Q18 Network KPI’s VoLTE Open Signal Netflix ISP Ranking P3 Analytics¹ 79% 1st place in 4G availability >12 mln Clients Improving Voice Experience 1st place (53 times in the last 56 months) 1st place Best mobile operator Maintenance of Top Quality Indicators Customer Perception Continuously ImprovingOngoing Digital Transformation 4Q18 Digitalization KPI’s E-Billing Users E-Payment Users Meu TIM App Unique Users Non-human Interactions + 33% (YoY) 2x (YoY) + 72% (YoY) + 37% (YoY) General Satisfaction¹ (National Average) Image Improvement³ (Preference Survey; %;QoQ) +1 p.p. +1 p.p. Prepaid Preference Total Preference Total Pure Postpaid General NPS² (National Average; QoQ) +5 pts +5 pts Controle NPS Total NPS +2% +2% Solid Evolution CEX: Client Perception Rewards Continuous Efforts in Infrastructure TIM Brasil | Meeting with Investors Investor Relations jun/18 sep/18 dec/18 jun/18 sep/18 dec/18 Audit Report Benchmark Brazil, P3 Communications. Performance in the country’s biggest cities (SP, RJ and Brasilia) National Satisfaction Survey, Bridge Research. Source: Internal Caring Survey.
  21. 21. 21 4Q17 4Q18 2017 2018 2017 2018 2017 2018 Total Net Revenues Breakdown (R$ mln, %YoY) Mobile ARPU (R$,%YoY) Client Generated Revs. Growth (%YoY) +4.5% -5.4% +5.6% +39.6% 4,257 4,479 +8.4% 23.7 21.9  Top line grew 5.2% YoY and +5% in 2018.  Service Revenues up 3.7% YoY in 4Q and +4.7% in 2018.  MSR increased 3.6% YoY in 4Q and +4.5% in 2018.  Client Generated Revenues increased 4.5% YoY in 4Q and +5.1% in 2018. Client Generated Revs. Breakdown (%) Postpaid Prepaid 63% Non-TIM Clients +5.2% +21.0% -14.8% Postpaid Prepaid Resilient Revenues and ARPU Growth amid Worsening Environment TIM Brasil | Meeting with Investors Investor Relations
  22. 22. 22 2,198 2,205 77 138 4Q17 4Q18 3,494 3,518 956 994 845 900 3,826 3,661 847 884 316 530 2017 2018 Normalized Opex Breakdown (R$ mln, %YoY) 10,285 10,487 COGS Traffic (Network & Interconnection) Process (G&A + Others) Selling & Mkt Over-delivery on Efficiency Plan: 118% completion, more than compensating bad debt rise. Excluding bad debt, costs would have decreased 0.1% YoY in 2018. Traffic (-4.3% YoY): MTR cut, lower pressure from off-net traffic, and lower cost with providers, more than compensating higher costs with shared infrastructure and rent. Selling & Marketing (+0.7% YoY) : Growth explained by higher costs with Postpaid and Fixed Broadband sales and by expenses related to TIM trademark rights. Process (+6.5% YoY): Higher expenses related to collection services, including the beginning of a new contact center operation in September. Bad Debt Personnel Personnel (+4.0% YoY): Increase due to inflation and higher employee base, in addition temporary impacts. COGS (+4.4% YoY): Higher average sales price (+32.1% YoY) more than compensating decreasing volume. (R$ mln; %YoY)Quarterly Normalized OPEX (Ex-COGS) +3.0% +2.0% Bad Debt (+67.5% YoY) : Increase in the revenue base exposed to delinquency, but remained under control at 2% of gross revenues. Non-Recurring Items in Q4: Judicial decision on the payment of PIS/COFINS over ICMS tax (-R$ 159 mln) and Contingencies reassessment (non-cash effect of +R$ 157 mln). Bad Debt & COGS in Q4: Bad Debt grew 78.6% and COGS 25.8% in the 4Q YoY. Excluding these costs, OPEX would have increased 0.3% in the quarter YoY. 2,275 2,343 Bad Debt OPEX (Ex-COGS & Bad Debt) Opex X-Ray: Cost Growth Below Inflation TIM Brasil | Meeting with Investors Investor Relations
  23. 23. 23 Net Income1 Expansion (R$ mln, %YoY) 1,237 1,566 2017 2018 4.1 4.0 2017 2018 5.4 5.2 5.9 6.6 31.5% 33.5% 36.6% 38.5% 2015 2016 2017 2018 EBITDA1 & Margin1 Consistent Evolution (%; R$ bln, %YoY) Investment According to Plan (R$ bln) +26.6% Strong EBITDA1 – CAPEX (R$ mln) % Net Revenues 26% 23% EBITDA1 EBITDA1 Margin +10.3% Once again, record high EBITDA1 (R$ 1.9 bln; +5.6%) and Margin1 (41.7%) for a 4th Quarter.  Capex on track according to plan.  Strong EBITDA1 – CAPEX, up 43.5% YoY in 2018. In 4Q18, grew 4x YoY. Record high EBITDA and Margin for a year. 4 consecutive years of margin expansion. 1,801 2,585 2017 2018 11% 15% +43.5% % Net Revenues All Time High Profitability with Solid Bottom Line TIM Brasil | Meeting with Investors Investor Relations(1) EBITDA and Net Income normalized for the effects detailed in slide 2.
  24. 24. 24 149 103 190 850 339 953 2017 2018 Shareholder Remuneration (Announced R$ mln; YoY) Robust Free Operating Cash Flow (R$ mln, %YoY) 2,697 1,465 NFP 2017 NFP 2018 Solid Net Financial Position (R$ mln)  FOCF¹ expanded R$ 565 mln YoY to R$ 2.9 bln  Cash and Debt optimization: debt prepayments and debentures issuance of R$ 1bln.  Debt 100% hedged. Capex and Opex covered by FX bands and derivative instrument. Net Debt/ LTM EBITDA 0.45x 0.22x 2.8 x IOC Dividends 614 170 -222 3 2,379 2,943 FOCF 2017 (ex-license) Δ EBITDA (YoY) Δ CAPEX (YoY) Δ WC (YoY) Δ Non-Recurring Items (YoY) FOCF 2018 (ex-license) +23.7% 1 11 1 Strong Cash Generation and Healthy Balance Sheet TIM Brasil | Meeting with Investors Investor Relations(1) EBITDA and Net Income normalized for the effects detailed in slide 2.
  25. 25. 25 2018 external assumptions were not met:  Macro recovery slower than expected  Worse competition in mobile reduced the ability to monetize offers 2019 Main Focus:  Control prepaid revenue decline  Maintain B2C postpaid solid performance  Expand further residential broadband  Back to growth in B2B (mobile and fixed)  Continue efficiency  Improve network capacity  Digital Transformation 2018 GUIDANCE New Strategic Plan on Feb 21st Guidance Metrics Short Term Targets (2018) 2018 Results 1) Service Revenues 5 – 7% (YoY) 4.7% 2) EBITDA Growth Double Digit (YoY) 10.3% 3) EBITDA – Capex on Revenues  13% 15.2% 4) IOC Distribution R$ 800 – 900 mln R$ 850mln 5 ) CAPEX ~ R$ 4 bln R$ 4.0 bln 2018 Targets Delivered Despite Tougher Context TIM Brasil | Meeting with Investors Investor Relations
  26. 26. 26 STRATEGIC PLAN 2019-21 TIM Brasil | Meeting with Investors Investor Relations
  27. 27. 27 1 Mobile Post Paid Consumer (“the Controle wave”) • Growth based on a «Mobile Challenger» approach pushing migration from prepaid and upselling • Leverage the benefits of 4G coverage leadership • Customer long term relationship driven by loyalty initiatives 3 B2B & Residential BB • Fiber deployment acceleration (backbone, backhaul and FTTH), with FTTH offer in selected regions • Opportunity to gain relevance in overall business Revenues leveraging on: o Revision of Value Proposition o More Convergent approach offering E2E solutions o Increase in efficiency and sales productivity 2 4 Digital Provider • New revenue streams: Enable innovative services that meet customers needs • Customer Experience: Digitalization of customer care process • Time to Market: Support current business model with digital capabilities Mobile Pre Paid • Offer simplification to improve customer experience with continued evolution of digital channels Revenues B2B & Residential BB 2 3 Mobile Post Paid 4 Digital Provider Timing Market Consolidation Illustrative Graph. 1 Mobile Pre Paid Opportunities: TIM Brasil Growth Waves TIM Brasil | Meeting with Investors Investor Relations
  28. 28. 28 B2C Mobile: managing client base focusing on upselling and churn dynamics Pure post Control Prepaid Daily – Multi-day packages Pre - Control Control - Pure Control - Control Pure - Pure New Offers: • New TIM Pre Offer1 • New VAS revenues • Family Plan • International roaming • Digital Plan Strategic Guidelines to Reduce Churn Mix Pre vs Total Postpaid Blended ARPU (R$/month) 70% <50% 30% >50% Prepaid Postpaid 20182017 2021e2020e2019e 20.2 22.4 TARGET: Double digit decrease • More selective migration from Prepaid will reduce early churn • Stimulate loyalty and digital payment methods (credit card, digital invoice, automatic debit) • Proactive lock in of customer base (churn high propensity), with Handset as a retention tool • Dedicated retention operation • Quality War Rooms² focused on eliminating dissatisfaction and key pain points 20182017 2019e 2020e 2021e Mid to High single digit growth (CAGR) Upselling 2nd Wave: Upselling between and within segments based on profiling TIM Brasil | Meeting with Investors Investor Relations 1 TIM Pré Top and TIM Pré Top Mais 2 Collection; Consumer Customer Care; Plans and Offers Information; Voice and Data Service; Billing and Allowance Complaints
  29. 29. 29 B2B (mobile + fixed): penetrate clients through added value solutions, becoming a business partner TIM Brasil | Meeting with Investors Investor Relations • Increase B2B investment to turnaround results over the next three years • Increase efficiency/productivity – Revise back office and support functions processes – Review client caring model (digital) Vision for B2B segment (Revenue Growth) Top Enterprise SMB • Complement top clients offer and portfolio • Increase sales force productivity and size • Increase penetration on Brazilian Top Companies • Explore new opportunities to sell more aggregated value solutions (e.g: IoT/Agro) • Recover growth in Fixed segment Levers Implications • Specify value proposition for Enterprise segment • Define go-to-market, addressing channel mix (direct vs indirect) optimization • Explore convergence opportunities • Optimized geographic approach to maximize productivity • Revise value proposition of SMB segment • Focus commercial effort in fixed products and uplift in sales force • Increase digital channels on sales mix 2018 2021e 25% • Market share • Share of wallet • Market share • Share of wallet • Market share • Share of wallet
  30. 30. 30 New revenue streams: Enable innovative services that meets customers needs Customer Experience: Improve digital customer service, acquiring capabilities, customer attendance and internal processes and systems Time to Market: Support current business model with digital capabilities • New revenues opportunity from being a Platform provider (analytics, BD, mobile advertising, etc.) • Content offer aggregation to support Mobile + Fixed service revenue growth • Increased role in IoT growing ecosystem (beyond connectivity) ~1 Addressable market by 2021 >30bln Reais mln lines Digital: key strategic pillars to improve customer experience and exploit new revenue streams TIM Brasil | Meeting with Investors Investor Relations PARTNERSHSIP ACCELERATION Open Innovation. API based development. DIGITAL FIRST Works across all digital devices and all channels CUSTOMER ORIENTED Continuous Customer Feedback (closed loop) AGILE DRIVEN Agile methods and practices integrated into the platform COGNITIVE Data-driven architecture providing actionable information and automation ANALYTICS DRIVEN Customers personalized experience, marketing, campaign, NBA DIGITAL CHANNELS Evolve platforms and encourage usage with offer benefits TRADITIONAL CHANNELS Improve IVR retention with evolved platform
  31. 31. 31 Infrastructure: capitalizing on existing infrastructure and expanding FTTH TIM Brasil | Meeting with Investors Investor Relations Residential Broadband Penetration - Brazil • Broadband Penetration at 45% of HH; Ultra- BB Penetration only 12% of HH • 96% of cities (~50% pop.) have very low BB penetration (~25%) • 16% of BB connections have speeds < 2Mbps Relevant opportunity to capture a strong unserved demand for Residential Broadband and Ultra-BB connectivity 0-20% 40-60% >60% 20-40% Main trends • ~3x participation on total revenue Capitalize current assets Expansion • Focus on execution excellence • Optimize go-to-market, exploiting existing infrastructure • Leverage fiber coverage from mobile network (FTTS – fiber to the site) • Shift in product mix (growth coming from FTTH) leading to a bigger ARPU Levers • Expand FTTH to several new cities in the next 3 years using cluster approach 76,0 2018 2019e 2020e 2021e FTTX Customer Base (‘000) TIM Live ARPU (R$/month) Geographic Expansion: 14 active municipalities Manaus – Oct-18 Salvador – Jul-18Goiânia – Aug-18 Aparecida de Goiânia – Oct-18 Rio de Janeiro – Oct-12 * Nov-17 São Gonçalo – Jun-18 Nilópolis – Aug-18 Duque de Caxias – Nov-12 (FTTC only) Nova Iguaçu – May-14 (FTTC only) São João de Meriti – Aug-15 (FTTC only) São Paulo – May-12(FTTC) Nov-17 (FTTH) Mauá – Apr-18 Poá – Aug-18 Suzano – Jul-18 0 400 800 1200 2018 2019 2020 2021 FTTC FTTH High-single to Low-Double digit growth (CAGR) • ~2.5x customer base growth NOTE: Ultra BB: > 34 Mbps / very low BB penetration: < 34Mbps. SOURCE: Anatel December 2018, IPC Maps 2018.
  32. 32. 32 TRANSPORT INFRASTRUCTURE Capillarity to support Mobile and Fixed Services (B2C and B2B) 4G EVOLUTION Spectrum Mix Usage 68% ~82% 601 cities >1.5k cities 2018 NEW plan! (2021) High Capacity Backhaul (%) FTTH Coverage FTTH Coverage FTTX Coverage UBB COVERAGE BOOST Focus on FTTH and FTTC 11 >40cities 1.1 >4 HH (MM) 4.3 >7HH (MM) 2018 NEW plan! (2021) 90k Km ~115k Km Backbone Additional capacity : 1.8/2.1 GHz refarming and 700 MHz deployment 48% 64% 72% 80% 80% 2017 2018 2019 2020 2021 4G 3G+2G Infrastructure development focusing on mobile capacity and fiber expansion FTTCity TIM Brasil | Meeting with Investors Investor Relations
  33. 33. 33 Leverage on Efficiency Plan to maintain OPEX below inflation1 throughout the plan period TIM Brasil | Meeting with Investors Investor Relations Caring (Digital Interactions) E-Billing (% on total invoice) 2021e2018 +12MM 2018 2021e +22p.p. Digital Top Up (% on Total Top Ups) 2018 2021e +12p.p. 2018 2021e +31p.p. E-Payment (% on total payments) Accelerate Digital Transformation Initiatives • Customer facing: digital interactions, e-billing, e-payment, customer acquisition, recharges, IVR • Internal process and systems: automation of support processes, upgrade and strengthen IT Architecture • Accelerate the adoption of automatic debit in stores Sustain and Develop Traditional Initiatives Description – Plan 2019-21 Risk/PDD • Create new credit models • Implement new fraud model and collection channels Legal • Re-structure multi-functional team to mitigate entries of new lawsuits • Introduce variable incentives scheme for the external offices HR • Assess internalization vs. outsourcing Purchasing • Review purchasing practices for key categories Energy • Cleaner electricity matrix and less exposed to the regulated market movements and regulations • Put in operation the first biogas power plant of solid urban residue Efficiency Plan 2019-21: ~R$ 1.2 bln (Full plan 2017-21 R$ 2.2 bln) ¹Inflation from BACEN Focus 18th January 2019.
  34. 34. 34 Increasing Profitability and Cash Generation TIM Brasil | Meeting with Investors Investor Relations 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 4,1 4,0 2017 2018 2019 2020 2021 Net Service Revenues (% YoY) EBITDA - CAPEX (R$ bln; %) CAPEX (R$ bln) EBITDA and Margin Expansion (R$ bln; %) 1,1% 1,3% 5,1% 4,7% 17 18 19 20 21 MKT 5,9 6,6 36.6% 38.5% 2017 2018 2021e2019e EBITDA Margin EBITDA ≥ 40% 2020e2017 2018 2021e2019e 2020e % over Net Revenues EBITDA Capex Mid-single digit growth (CAGR) +2% (CAGR) ~12.5 (∑‘19-’21) 11.1% 15.2% ≥ 20% 2017 2018 2019e 2020e 2021e
  35. 35. 35 TIM Brasil 2019-’21 Targets TIM Brasil | Meeting with Investors Investor Relations Capex on Revenues: Low 20’s Capex: ~R$ 12.5 bln (∑‘19-’21) • Increase cash flow from operations • Continue with debt and tax rate optimization • Accelerate digitalization efficiencies • Maintain zero-based approach and traditional initiatives • Improve risk management models • Further improve mobile ARPU • Expand Residential BB Revenues contribution • Tap B2B opportunity GOALS DRIVERS Revenue Growth Sustainability Expand Cash Generation Improve Profitability LONG TERM TARGETS EBITDA Margin: ≥40% in 2020 EBITDA-Capex on Revenues: ≥20% in 2021 Service Revenues Growth: Mid single digit (CAGR ‘18-’21) SHORT TERM (2019) TARGETS EBITDA Growth: Mid to High single digit growth (YoY) EBITDA-Capex on Revenues: >15% Service Revenues Growth: 3% – 5% (YoY) • Additional Capex to grow fiber and improve mobile capacity Infrastructure Development
  36. 36. 36 REGULATORY UPDATES TIM Brasil | Meeting with Investors Investor Relations
  37. 37. 37 Spectrum Distribution 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 <1 GHz = Coverage [35%l----l40%] >1 GHz <3 GHz = Capacity [30%l----l40%] Total Mobile MHz 1.800 MHz (2G/4G) 40 40 20 20 29 25 22 24 20 26 29 35 43 14 5 21 18 11 14 20 20 700 MHz (4G) 800 MHz (2G/3G) 900 MHz (2G/3G) 1.900/2.100 MHz (3G/4G) 2.500/2.600 MHz (4G) 136 48 20 3 139 4 5 20 113 92 Trunking 5 Note: Does not include 450 MHz (14 MHz regional) and 2.500 MHz P Band (10 MHz local) Brazilian Spectrum - Caps and Distribution TIM Brasil | Meeting with Investors Investor Relations
  38. 38. 38 Public Consultation for new frequency auctions in 2019, according to Anatel 700 MHz 2.3 GHz 3.5 GHz 10+10 MHz (FDD) Frequency Spectrum Technology* 100 MHz (TDD) 200 MHz (TDD) 4G 5G 5G Comments Left over from 2014 auction Potential clean-up would be needed to solve coexistence w/ satellite TV *Mostly used for those technologies, however they can be used for any other technologies New spectrum bands under discussion that could be auctioned in March 2020 TIM Brasil | Meeting with Investors Investor Relations
  39. 39. 39 1Q2019 February MarchJanuary Public Consultation • Grant and Licensing • Human exposure to electromagnetic field (Act proposal) Act about Human exposure to electromagnetic field • Approved Public Hearing • Regulatory Monitoring (BA, SP and POA) • Tax Collection Public Consultation • Network Security and Emergency Public Services • Tax Collection Regulatory Agenda for 2019-2020 • To be approved Public Consultation • Regulatory Monitoring • Concession Agreements and PGMU IV Public Hearing • Regulatory Monitoring (AM and BSB) Grant of Subsidies • PGMU IV – 4G localities 4Q18 November DecemberOctober Public Consultation • Auction Sercomtel • Grant and Licensing Public Consultation • Regulatory Monitoring • Regulatory Agenda for 2019-2020 • Network Security and Emergency Public Services • Concession Agreements and PGMU IV • Tax Collection PGMU IV (2016-2020) • Approved Public Policy of Telecommunications Decree • Approved Radiocommunication of restricted radiation • Approved WACC • Approved Public Consultation • Radiocommunicatio n of restricted radiation • Conditions of Use of 3.5 GHz New PPDESS • Approved New Spectrum Management • Approved Anatel’s Open Data Plan • Approved PLC 79/2016 • Urgency regime Main Regulatory Topics TIM Brasil | Meeting with Investors Investor Relations
  40. 40. 40 APPENDIX TIM Brasil | Meeting with Investors Investor Relations
  41. 41. 41 R$ Thousand Description 2015 2016 2017 2018 2018 vs 2017 Gross Revenues 25.771.500 22.745.590 22.611.075 24.301.252 7,5% Service Gross Revenues 23.124.634 21.367.819 21.433.515 23.064.619 7,6% Mobile Service Gross Revenues 22.121.450 20.188.962 20.147.586 21.523.481 6,8% Gross Revenue Fixed Services 1.003.185 1.178.856 1.285.930 1.541.138 19,8% Product Gross Revenues 2.646.866 1.377.771 1.177.559 1.236.633 5,0% Taxes and Discounts (8.629.235) (7.128.176) (6.377.116) (7.251.076) 13,7% Taxes and discounts on services (7.737.407) (6.647.565) (5.959.373) (6.859.411) 15,1% Taxes and discounts on product sales (891.828) (480.611) (417.743) (391.666) -6,2% Total Net Revenues 17.142.265 15.617.413 16.233.959 17.050.176 5,0% Net Revenues Services 15.387.227 14.720.253 15.474.142 16.205.209 4,7% Mobile Service 14.726.779 13.968.489 14.687.055 15.345.671 4,5% Client generated 12.939.020 12.557.567 13.379.590 14.056.512 5,1% Voice Local (Usage and Monthly fee) 5.595.440 4.891.342 3.725.231 2.890.149 -22,4% Voice Long Distance 1.814.065 1.415.823 1.050.511 951.862 -9,4% Data and Content VAS 5.529.515 6.250.402 8.603.848 10.214.501 18,7% Interconnection 1.521.917 1.061.019 835.198 712.194 -14,7% Other Revenues 265.842 349.903 472.267 576.966 22,2% Fixed Service 660.449 751.765 787.087 859.538 9,2% of which TIM Live 113.025 192.359 283.017 391.756 38,4% Net Revenues Products 1.755.038 897.160 759.817 844.968 11,2% Operating Expenses (10.528.854) (10.408.046) (10.286.935) (10.486.638) 1,9% Personnel expenses (1.043.852) (1.005.296) (956.416) (1.031.570) 7,9% Selling & marketing expenses (3.742.720) (3.597.101) (3.494.192) (3.518.049) 0,7% Network & interconnection (3.823.481) (3.773.782) (3.825.912) (3.661.037) -4,3% General & administrative (610.974) (540.487) (548.481) (578.878) 5,5% Cost Of Goods Sold (1.856.668) (975.959) (846.839) (883.912) 4,4% Bad Debt (230.357) (266.442) (316.387) (529.903) 67,5% Other operational revenues (expenses) 779.198 (248.979) (298.709) (283.289) -5,2% Operating Expenses (Normalized) (11.739.834) (10.387.386) (10.284.883) (10.487.479) 2,0% EBITDA 6.613.411 5.209.367 5.947.023 6.563.539 10,4% EBITDA Margin 38,6% 33,4% 36,6% 38,5% 5,1% EBITDA (Normalized) 5.402.431 5.230.027 5.949.076 6.562.697 10,3% EBITDA Margin (Normalized) 31,5% 33,5% 36,6% 38,5% 5,0% Depreciation & Amortization (3.361.971) (3.785.172) (4.013.671) (4.124.567) 2,8% Depreciation (1.851.261) (2.084.041) (2.180.247) (2.250.226) 3,2% Amortization (1.510.710) (1.701.131) (1.833.424) (1.874.341) 2,2% EBIT 3.251.440 1.424.196 1.933.352 2.438.971 26,2% EBIT Margin 19,0% 9,1% 11,9% 14,3% 20,1% Net Financial Results (250.406) (410.880) (497.836) (537.333) 7,9% Financial expenses (1.115.524) (1.156.485) (1.009.653) (951.439) -5,8% Net exchange variance 2.410 (4.845) (748) 1.372 -283,4% Financial income 862.708 750.450 512.565 412.734 -19,5% Income Before Taxes 3.001.034 1.013.316 1.435.516 1.901.638 32,5% Income Tax and Social Contribution (915.591) (262.889) (201.009) 657.619 -427,2% Net Income 2.085.443 750.427 1.234.507 2.559.258 107,3% Net Financial Results (Normalized) - - - (124.119) n.a Income Tax and Social Contribution (Normalized) (543.451) (272.509) (201.026) (160.887) -20,0% Net Income (Normalized) 1.246.603 761.466 1.236.543 1.565.664 26,6% Historical Data: P&L Pro-Forma TIM Brasil | Meeting with Investors Investor Relations
  42. 42. 42 Description 2015 2016 2017 2018 2018 vs 2017 Brazilian Wireless Subscriber Base (000`s) 257,8 244,1 236,5 229,2 -3% Estimated Total Penetration 125,67% 118,04% 113,52% -114 p.p. Mobile Customer Base ('000) 66.234 63.418 58.634 55.923 -5% Prepaid 52.654 48.537 40.836 35.694 -13% Postpaid 13.581 14.881 17.799 20.229 14% 4G Users ('000) 7.111 16.866 27.611 34.488 25% Market Share 25,69% 25,98% 24,80% 24,40% 0 p.p. Prepaid 28,53% 29,47% 27,50% 27,55% 0 p.p. Postpaid 18,53% 18,75% 20,23% 20,30% 0 p.p. Gross Additions (000's) 34.201 31.458 27.687 24.177 -13% Net Additions (000's) -9.486 -2.816 -4.784 -2.712 -43% Monthly Churn (%) 4,9% 4,4% 4,5% 3,9% -1 p.p. Mobile ARPU (R$) 16,7 17,9 20,2 22,4 11% Prepaid 10,4 11,3 11,5 11,5 0% Postpaid 40,6 37,7 39,7 39,9 1% Total MOU 119 117 110 123 12% BOU 397 640 1.198 2.184 82% SAC/Gross Adds (R$) 30 29 40 46 17% Fixed Telephopny Customer Base ('000)* - 524 676 897 33% TIM Live Customer Base ('000) 232 306 392 462 18% TIM Live ARPU (R$) - 57,9 67,3 76,0 13% Handsets sold ('000) 4.659 1.276 1.115 -100% Smartphone Penetration (%) 67,6% 72,8% 80,9% 85,0% 4 p.p. CAPEX (R$ Mln) 4.764 4.502 4.148 3.977 -4% Organic CAPEX (R$Mln) 4.767 4.446 4.148 3.977 -4% Employees 13.062 9.863 9.519 9.661 1% *Base of Dec/2018 Historical Data: Operational TIM Brasil | Meeting with Investors Investor Relations
  43. 43. 43 R$ Million Description 2015 2016 2017 2018 2018 vs 2017 Initial Net Financial Position 1.276 1.733 2.721 2.697 -1% EBITDA Normalized 5.402 5.230 5.949 6.563 10% Capex (4.764) (4.502) (4.148) (3.977) -4% EBITDA Normalized - Capex 638 728 1.802 2.585 43% D Working Capital (628) 25 579 357 -38% Non recurring operating items - (65) (2) 1 -156% Operating Free Cash Flow Ex-licenses 10 688 2.379 2.943 24% Clean UP 700MHZ (370) - (859) (143) -83% Operating Free Cash Flow Reported (360) 688 1.520 2.800 84% Financial investments - - - - - Asset disposal 2.503 140 15 2 -86% Net impact of financial interests (487) (672) (750) (689) -8% Taxes Payments (385) (350) (297) (213) -28% Others impacts (1.368) (334) (116) (85) -27% Net Cash Flow before dividends and change in equity (97) (528) 372 1.815 388% Dividends (360) (460) (333) (588) 77% Change in Equity - - (15) 5 -133% Net Cash Flow (457) (988) 24 1.232 5033% Final Net Financial Position 1.733 2.721 2.697 1.465 -46% Historical Data: Cash Flow TIM Brasil | Meeting with Investors Investor Relations
  44. 44. 44 Brazilian Telcos: Financial X-Ray 4Q18 TIM Brasil | Meeting with Investors Investor Relations 4Q18 Financial Summary 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4.479 4.257 5,2% 11.094 11.034 0,5% 9.010 8.937 0,8% 5.317 5.782 -8,0% 539 614 -12,2% 4.224 4.075 3,7% 10.588 10.736 -1,4% 8.815 8.769 0,5% 5.255 5.722 -8,2% 532 599 -11,1% Mobile Service Revenues 3.999 3.861 3,6% 6.551 6.553 0,0% 3.069 2.860 7,3% 1.879 1.994 -5,8% 532 599 -11,1% Fixed Service Revenues 226 213 5,6% 4.038 4.184 -3,5% 5.746 5.887 -2,4% 3.376 3.727 -9,4% - - - 254 182 39,6% 506 297 70,0% 195 168 15,7% 62 60 4,3% 7 15 -54,5% 1.868 1.769 5,7% 4.104 3.946 4,0% 2.766 2.689 2,9% 1.287 1.300 129,9% 8 -54 -114,0% 41,7% 41,6% 0,2 p.p. 37,0% 35,8% 1,2 p.p. 32,2% 30,1% 2,1 p.p. 24,2% 22,5% 1,7 p.p. 1,4% -8,8% 10,2 p.p. 1.409 1.661 -15,2% 2.113 2.665 -20,7% - - - 2.085 1.835 13,6% 91 68 34,0% Capex/Net Revenues 31,5% 39,0% -7,6 p.p. 19,0% 24,2% -5,1 p.p. - - - 39,2% 31,7% 7,5 p.p. 17% 11% 5,8 p.p. 460 108 326,2% 1.997 1.281 55,9% - - - -798 -535 49,2% -84 -122 - 1.465 2.697 -45,7% 2.224 3.810 -41,6% - - - 11.826 47.621 -69,9% - - - Net Debt / EBITDA 12M 0,22 0,45 -50,8% 0,13 0,26 -52,3% - - - 21,3 16,2 31,2% - - - 23,7 21,9 8,4% 29,6 29,2 1,2% 17,0 16,0 10,3% 16,5 16,2 1,6% 53,0 57,0 -7,0% Oi Nextel Capex TIM Vivo Claro Total Net Revenues Service Revenues Products Revenues Organic EBITDA Organic EBITDA Margin EBITDA - Capex Net Debt ARPU Móvel
  45. 45. 45 Brazilian Telcos: Financial X-Ray 12M18 TIM Brasil | Meeting with Investors Investor Relations 2018 Financial Summary 2018 2017 % YoY 2018 2017 % YoY 2018 2017 % YoY 2018 2017 % YoY 2018 2017 % YoY 17.050 16.234 5,0% 43.448 43.207 0,6% 35.655 35.478 0,5% 21.860 23.557 -7,2% 2.247 2.776 -19,1% 16.205 15.474 4,7% 41.773 42.136 -0,9% 35.041 34.864 0,5% 21.665 23.327 -7,1% 2.192 2.707 -19,0% Mobile Service Revenues 15.346 14.687 4,5% 25.658 25.388 1,1% 12.062 11.017 9,5% 7.538 8.010 -5,9% 2.192 2.707 -19,0% Fixed Service Revenues 860 787 9,2% 16.115 16.749 -3,8% 22.982 23.805 -3,5% 14.127 15.317 -7,8% - - - 845 760 11,2% 1.675 1.070 56,5% 614 614 0,0% 195 230 -15,2% 54 69 -21,4% 6.563 5.949 10,3% 15.474 14.665 5,5% 10.680 10.130 5,4% 5.863 6.190 -5,3% 41 -95 - 38,5% 36,6% 1,8 p.p. 35,6% 33,9% 1,7 p.p. 30,0% 28,6% 1,4 p.p. 26,8% 26,3% 0,5 p.p. 1,8% -3,4% 5,3 p.p. 3.977 4.148 -4,1% 8.193 7.998 2,4% - - - 6.077 5.629 7,9% 243 163 48,9% Capex/Net Revenues 23,3% 25,6% -2,2 p.p. 18,9% 18,5% 0,3 p.p. - - - 27,8% 23,9% 3,9 p.p. 11% 6% 4,9 p.p. 2.585 1.801 43,5% 7.287 6.666 9,3% - - - -214 561 -138,1% -202 -259 - 1.465 2.697 -45,7% 2.224 3.810 -41,6% - - - 11.826 47.621 -75,2% - - - Net Debt / EBITDA 12M 0,22 0,45 -50,8% 0,13 0,26 -52,3% - - - 21,3 16,2 31,2% - - - 22,4 20,2 11,3% 28,6 28,5 0,4% 17,0 15,3 11,5% 16,2 16,0 1,7% 55,0 61,0 -9,8% EBITDA Margin (Adjusted) ARPU Móvel Nextel Total Net Revenues Service Revenues Products Revenues EBITDA (Adjusted) TIM Vivo Claro Oi Capex EBITDA - Capex Net Debt
  46. 46. 46 Brazilian Telcos: Operational X-Ray¹ Source: Anatel. TIM Brasil | Meeting with Investors Investor Relations 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 4Q18 4Q17 % YoY 55,9 58,6 4,8% 73,2 74,9 2,4% 56,4 59,0 4,6% 37,7 38,9 3,3% 3,3 2,8 -15,5% Market Share 24,4% 24,8% 0,4 p.p. 31,9% 31,7% -0,2 p.p. 24,6% 25,0% 0,3 p.p. 16,4% 16,5% 0,0 p.p. 1,4% 1,2% -0,3 p.p. 18,1 16,1 -10,8% 32,2 30,5 -5,4% 17,2 15,3 -11,2% 8,6 7,6 -11,2% 3,3 2,7 -16,4% Market Share 22,6% 22,2% -0,5 p.p. 40,3% 41,9% 1,6 p.p. 21,5% 21,0% -0,5 p.p. 10,8% 10,5% -0,3 p.p. 4,1% 3,7% -0,3 p.p. Mix Postpaid 32,3% 27,5% -4,8 p.p. 44,0% 40,6% -3,4 p.p. 30,5% 25,9% -4,6 p.p. 22,8% 19,6% -3,2 p.p. 98,6% 97,5% -1,0 p.p. 34,5 27,6 -19,9% 40,6 34,4 -15,3% 30,0 22,8 -24,2% 21,3 16,4 -23,3% 3,2 1,1 -64,7% Market Share 26,6% 27,0% 0,4 p.p. 31,3% 33,6% 2,3 p.p. 23,1% 22,2% -0,9 p.p. 16,4% 16,0% -0,5 p.p. 2,4% 1,1% -1,4 p.p. Mix 4G 62% 47% -14,6 p.p. 55% 46% -9,6 p.p. 53% 39% -14,6 p.p. 57% 42% -14,6 p.p. 96% 40% -56,1 p.p. Banda Larga >34 Mbps1 460.956 391.866 -15,0% 2.155.242 1.488.968 -30,9% 4.415.002 2.062.648 -53,3% 157.989 62.697 -60,3% - - - Market Share 5,7% 9,2% 3,5 p.p. 26,5% 34,7% 8,2 p.p. 54,3% 48,0% -6,3 p.p. 1,9% 1,5% -0,5 p.p. - - - 4G Customer Base (MM) Nextel Human Postpaid Customer Base ex-M2M (MM) TIM Vivo Claro Oi Mobile Customer Base (MM)
  47. 47. 47 229,2 MM (YoY) VIVO 31,9% +0,2 p.p CLARO 24,6% -0,3 p.p TIM 24,4% -0,4 p.p OI 16,4% 0,0 p.p Brasil (4Q18) 15,7 MM VIVO 34,0% +0,7 p.p OI 24,16% +0,1p.p CLARO 22,13% -0,7 p.p TIM 19,7% -0,1p.p BA/SE 17,4 MM VIVO 37,9% -1,7 p.p TIM 22,3% -2,8 p.p CLARO 20,6% +4,3 p.p OI 19,2% +0,2 p.p NO 22,9 MM CLARO 37,4% -0,2 p.p VIVO 34,4% -0,3 p.p OI 15,6% +0,8 p.p TIM 12,1% -0,4 p.p CO 12,9 MM VIVO 47,2% -0,3 p.p CLARO 30,6% +0,8 p.p OI 13,4% -0,1p.p TIM 8,7% -0,6 p.p RS 20,9 MM TIM 53,6% -0,4 p.p VIVO 19,7% -0,6 p.p CLARO 17,1% +0,2 p.p OI 9,3% +0,7 p.p PR/SC 21,8 MM VIVO 40,0% +1,8 p.p OI 21,8% -0,6 p.p TIM 21,3% -0,9 p.p CLARO 11,6% -0,5 p.p MG 23,1 MM VIVO 36,2% +0,1p.p CLARO 28,7% -2,6 p.p TIM 15,5% +1,2 p.p OI 13,5% +0,2 p.p RJ/ES 35,6 MM VIVO 37,2% +2,6 p.p TIM 26,4% -2,3 p.p CLARO 19,9% -1,1p.p OI 10,8% -0,5 p.p SP Cap 27,4 MM VIVO 35,1% -2,6 p.p CLARO 32,0% +0,1p.p TIM 20,3% +0,8 p.p OI 8,1% +0,5 p.p SPInt Posição TIM: Líder 2ª 3ª 4ª 31,5 MM TIM 33,9% +0,2 p.p OI 29,8% -0,1p.p CLARO 26,2% -0,6 p.p VIVO 10,1% +0,5 p.p NE Mobile Market Share TIM Brasil | Meeting with Investors Investor RelationsSource: Anatel.
  48. 48. 48 Efficiency Across the Board: Tax Credits and Distributions (IoE) TIM Brasil | Meeting with Investors Investor Relations Corporate Structure Simplification Project: Corporate Structure Reorganization • Designed to create a more efficient process structure to capture operational and financial synergies; • In 3Q18, TIM booked a total deferred tax asset of R$ 952.4 million¹ arising from the reorganization. Recoverable Tax over PIS/COFINS Recoverable tax: (excessive payments in the past) Judicial Dispute over the unconstitutionality of cascade taxes – PIS/Cofins charged on ICMS. • 3 Lawsuits: 1 already concluded, and 2 awaiting for final court sentence to book credits; • Assessment indicates • ~R$ 3.2 billion² in tax credits, of which R$ 353 million was booked in 4Q18 following a positive judicial decision • Remaining amount to be unlocked in the next few quarters. Distribution of Interest on Equity (“Juros sobre Capital Próprio”) • Payment via IoE generating tax efficiency to bring Effective Tax Rate down; 149 103 190 850 339 953 2017 2018 IOC Dividends Shareholder Remuneration (Announced R$ mln; YoY) ~3 x ¹ Tax credits of R$ 702.6 million plus a negative effect at Social Contribution on Profits base in the amount of R$ 249.7 million. ² More details see Note 8 in Company’s Quarterly Financial Statements (ITR).

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