Meeting with TIM in Brasilia

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Meeting with TIM in Brasilia

  1. 1. ENCONTRO COM A TIM São Paulo - 04/08/2014 ENCONTRO COM A TIM São Paulo - 04/08/2014 MEETING WITH TIM Brasília - 08/19/2014
  2. 2. GLOBAL OVERVIEW Source: Merrill Lynch - Global Wireless Matrix 2Q14 (data refers to 1Q14) | Top 5 + Brazil The Brazilian market is becoming mature but there is still room for monetazing user and the main opportunity is in data. Customer Base Ranking (Mln) Service Revenues Ranking (U$ Bln) 1,254 905 339 278 268 China India EUA Brasil Indonésia 188 141 67 28 25 EUA China Japão Brasil Reino Unido 54 50 46 43 41 8 Canadá EUA Suiça Noruega Japão Brasil 68% 63% 56% 48% 47% 29% Japão Coréia Austrália Austria Argentina Brasil 179% 170% 159% 158% 156% 140% Finlândia Rússia Portugal Austria Singapura Brasil 76% 75% 74% 70% 69% 27% Finlândia Coréia Dinamarca Japão Noruega Brasil 4th 4th Data / ARPU Ranking (%) 30th Mobile Penetration Ranking (%) 13th ARPU Ranking (U$) 35th Smartphone Penetration Ranking (%) 29th 2 US Brazil Indonesia US Japan Brazil UK China Japan Korea Australia Argentina Brazil Finland Russia Brazil Singapore Canada US Switzerland Norway Japan Brazil Finland Korea Japan Norway Brazil
  3. 3. TIM Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 74,203 665 121 n.d. 74,989 Market share 2Q14 26.9% 1.5% 0.5% n.d. --- Net Adds 2Q14 (000´s) 286 - 19 n.d. 305 Net Adds 12M (000´s) 2,008 31 61 n.d. 2,100 Net Revs FY13 (R$ Mln) 19,264 657 19,921 Fixed / Mobile Fixed BB Vivo Fixed BB/TV Fixed / Mobile Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 79,357 11,035 4,370 688 95,450 Market share 2Q14 28.8% 24.1% 18.8% 3.6% --- Net Adds 2Q14 (000´s) 892 333 36 91 1,352 Net Adds 12M (000´s) 3,158 619 345 175 4,297 Net Revs FY13 (R$ Mln) 23,002 11,720 34,722 Fixed Mobile Fixed BB/TV Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 68,776 11,289 7,045 10,106 97,216 Market share 2Q14 24.9% 24.7% 30.3% 53.3% --- Net Adds 2Q14 (000´s) 27 189 220 230 666 Net Adds 12M (000´s) 2,303 1,133 905 1,121 5,462 Net Revs FY13 (R$ Mln) 12,773 20,424 33,197 Fixed Mobile Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 51,081 17,023 6,567 867 75,538 Market share 2Q14 18.5% 37.2% 28.3% 4.7% --- Net Adds 2Q14 (000´s) 502 -240 3 39 304 Net Adds 12M (000´s) 1,373 -1,307 17 - 35 48 Net Revs FY13 (R$ Mln) 9,290 19,132 28,422 Claro Oi BRAZILIAN TELCOS X-RAY Source: Companies Releases and Anatel 3
  4. 4. MARKET STRUCTURE CHANGING TOWARDS DATA USAGE 60% 36.8 mln 40% 24.5 mln 44% 16.2 mln 24% 8.8 mln 32% 11.8 mln (40%) (60%) 61.3 Mln Possess Internet connection Does NOT Possess Internet connection Other Lack of coverage Too Expensive 53% of active connection base has currently a speed below 2Mbps Total Households Households which does NOT possess Households with internet connection and breakdown for households without internet connection: 3% 37% 51% 91% With Telephone Only mobile phone Mobile and fixed phone Households profile Fixed phone only Purchase power Salaries up to R$1.2k Salaries up to R$3.1k Consumption People that access Internet (10 years or +) 57 mln 32 mln 2 mln 81 mln 106 mln 23 mln Households with internet connection (%; CETIC jun’13) 53% of pop. 70% of pop. Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates Yes No 24.3 mln of households 83 mln 49% of pop. Fixed Mobile 21% 74% 40% 60% Re-visiting Market Structure Market Data Revenues Growth 2016 vs. 2012: > 13 bln Reais on Mobile (+100%) >7 bln Reais on Fixed (+35%) 4
  5. 5. KNOWING TIM BETTER Gross Revenues (R$ Bln) Customer base EoP (Million) 1998 2013 1998 2Q14 15,000 km fiber optical backbone 5,500 km fiber optical backhauling Organic Growth Growth Via Acquisition Brazilian Law “Nível” 1 “Nível” 2 Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders 100% Tag Along Equal dividends rights One single class of shares Strict disclosure policy Statutory Audit Committee: •Report to Board of Directors •Oversight Financial reporting •Analyze anonymous complaints Unique Telco company listed on the Novo Mercado Corporate Governance TIM: A Huge Brazilian Company Presence in Brazil since 1998. 16th largest Private Company in Brazil (source: Exame Magazine - 2013). Approximately R$27 billion of Market Capitalization. 74.2 million customers (27% Share) The 2nd Player - Market and rev. share More than 383,000 points of sales More than 165 own stores 15 Customer Care Centers (16k attendants) ~13,100 Antennas 3,429 cities covered 95% of urban pop. covered 50,000 km of optical fiber network ~12,480 employees 23,000 indirect jobs R$10.4 billion in taxes payments in 2013 R$3.9 billion invested in 2013 Sales Network Social & Economic 74.2 29.6 Growth Structure 5
  6. 6. 26k 100k Postpaid segment grew by 7% and postpaid mix over customer base reached 16.5%, while SAC/ARPU remained below 2 months 19% 22% 27% 2Q12 2Q13 2Q14 2nd QUARTER HIGHLIGHTS 6 Operational 2Q13 2Q14 +7% YoY Data as % of revenues Net Revenues: Usage (local + long distance) + VAS Total OPEX (Δ% YoY) 11% 9% 2% -3% -7% EBITDA Margin 27% 25% 28% 2Q12 2Q13 2Q14 % of total customer base 15.8% 16.5% 2Q13 2Q14 Mix of postpaid over total base World Cup Figures (in the Stadiums) Live TIM customer base Financial Gross Data Revenue growth at solid pace: R$1.6 bln in 2Q14 Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY Strong cost control: total opex dropped 7% YoY EBITDA grew 8% YoY with margin gain 28% 32% 39% Data users reached 29 mln lines Live TIM crossed 100 thousand customers milestone +3 p.p. +5 p.p. 2Q13 3Q13 4Q13 1Q14 2Q14 Jul/14 Jun/13 2Q12 2Q13 2Q14 •Photos sent: 50 mln •Outgoing calls: 5 mln •Data traffic: 26.7 TB Maracanã Stadium
  7. 7. CORE BUSINESS ANALYSIS & PERFORMANCE MTR cut full impact in 2Q Handset sales at a healthy level although reduced growth World Cup impact on commercial activities Mobile Service Net Revenues Analysis (% YoY) EBITDA Performance (mln; %YoY) June 2013 June 2014 No Holidays 1 National holiday 3 Brazil’s games (1/2 day holiday) Up to 2 municipal holidays in main cities hosting games Net revenues from MTR -18% -28% 2.4 3.1 2.7 2Q12 2Q13 2Q14 Total units sold (mln) (Local + LD + VAS) Business Received 2Q13 2Q14 1,232 2Q13 2Q14 ReportedEBITDA Margin 1 2 3 +7% 24.9% 27.9% EBITDA 7 1Q14 2Q14 -30% Business Generated +3% -1% *MTR Impact +16% +8% 1,331 Total 6 months (YoY) +8% -26% +4% 0% (Incoming MTR + SMS) Ex-MTR Ex-MTR *MTR Impact Ex-MTR ~170 mln* ~96 mln* 1,427
  8. 8. 118.5 23.2 2009 2010 2011 2012 2013 Jun/14 2Q13 2Q14 2Q13 2Q14 READY FOR DATA OPPORTUNITY 8 # Access Growth (users in mln) Brazilian Broadband: Low Average Speed (Mbps) WSJ: “Brazil - The Social Media Capital of the Universe” Fixed Data Experience is Mobile Capturing Data Opportunity Mobile 2.7 2.6 4Q13 1Q14 #2 in Facebook #2 in Twitter 2nd largest market #2 in WhatsApp 10.5 13.7 3.6 2.5 Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper ‘Folha de São Paulo’ Sources: Anatel, Akamai - State of Internet Source: IDC Tracker Source: Anatel # Total Market Equipment Sold (units in mln) Smartphone & Tablet Notebook & PC 1Q14 2Q14 SMS Web Content & Other 1,500 Data Gross Revenues Mix (R$ mln; %YoY) +22% +1% -8% +29% +33% +45% +72% BOU: Bytes of Use (Megabytes) Days of Use Data Users (# mln users) 23 29 2Q13 2Q14 +24% 2Q13 2Q14 2Q13 2Q14 +40% +30% In May, >45% connections in Brazil were < 2Mbps + 5X Δ %YoY Δ %YoY +20% 1,578
  9. 9. v v GO TO MARKET PROGRESS 9 Equipping Customer Base % of smartphone sales among players in 2Q14 % of smart + webphone on TIM’s base in 2Q14 % of smartphone over new sales in 2Q14 Postpaid oReduce churn on postpaid oAttract dual SIM card users traffic oRenewed focus on corporate customers o Leveraging on “pure mobile” distinctiveness oExpanding daily tariff scheme to new regions oSimplicity / Transparency R$ 7 weekly service package R$ 0.75 daily offer Prepaid 35% 50% 62% 2Q12 2Q13 2Q14 39% 57% 71% 2Q12 2Q13 2Q14 41% 23% 28% 9% P3 P2 P1 TIM Managing customer base… To Infinity and beyond… Penetration of smart + webphones drives data usage growth Source: GFK Group Source: Company Source: Company
  10. 10. 75.7 76.2 79.4 68.9 72.2 74.2 63.0 66.5 68.8 47.8 49.7 51.1 47% 39% 20% 30% 21% 20% 12% 10% 2Q13 2Q14 23% 24% 24% 26% 40% 35% 11% 14% 2Q13 2Q14 2Q13 2Q14 CUSTOMER BASE EVOLUTION 10 # 1 player in prepaid Strong growth in ‘Controle’ postpaid base Austere disconnection policy 2Q12 2Q13 TIM Source: ANATEL 2Q14 Vivo Claro Oi 4G Market Share (%; thd users) 3G Market Share (%; mln users) 28.9 30.2 41.5 16.2 Source: ANATEL TIM TIM 1,281 990 655 334 Customer Base (mln) Source: ANATEL +8.4% Source: Company Prepaid Recharge (R$; % YoY) 118 mln 3.3 mln
  11. 11. 2Q13 2Q14 o Brasília o Curitiba o Rio de Janeiro 4Q13 2Q14 4Q13 1Q14 2Q14 INFRASTRUCTURE FOCUSED IN DATA 11 COVERAGE  Homogeneous Access Upgrade In all relevant areas Site densification Small cell / Wi-Fi CAPACITY  Higher speed 4G roll out Mobile broadband project acceleration Backhauling infrastructure AVAILABILITY  Always available Fine tunning Fiber rings / redundance Resilience DATA CENTRIC APPROACH TIM’s Infrastructure Strategy Network in Numbers Number of 3G & 4G Sites Number of Wi-Fi & Small Cell ~11.3 ~11.0 ~13.1 Number of sites with fiber (FTTS) Cities in mobile BB project +3.5x 53 66 1Q14 2Q14 +13 cities BioSite: New approach to coverage Patent pending +47% 1 2 3 After Before o New frequency at 900 MHz in SP o Better indoor coverage o Addressing capacity requirement Completed actions Initiating in:
  12. 12. 2Q13 3Q13 4Q13 1Q14 2Q14 TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2 12 Turnaround Plan on Fixed Business 2013 2012 - 2014 New sales revenues (R$; YoY) Financial performance Governance / Efficiency Business development Quality and Process Activation time (days) Operational Improvements Paying Off + Segment EBITDA-CAPEX Source: Company Net Revenues (with intercompany) 2013 2014 Business Priorities 4Q13 1Q14 2Q14 Plan Phases Highlights Financial sanitization Infrastructure reinforcement Market repositioning oPositive EBITDA oCost efficiency oCustomer base management oNew business unit organization oIT renewal plan oMultiservice network launch oNew branding oNew offers and product launch oRestructured sales force 2H14 Showing results oSales growth oRevenue rebound Business remodeling driving stable fixed revenues QoQ +19x 2Q13 2Q14 -80%
  13. 13. +34% 11.5 18.3 24.5 2Q13 0 1Q14 2Q14 13 Gaining more traction Addressable HH (000 HH) Gross Adds (000 users) Customer Base (000 users) May/2014 oLive TIM Extreme 1Gbps for R$1,999.90 oLive TIM Blue Box release: optional TV approach Jul/2014 New speed: 70Mbps for R$119.90 Source: Netflix July 2014 Netflix Broadband Ranking (Average streaming speed representation) 31% Positive Neutral Negative Internet buzz FIXED BROADBAND: LIVE TIM New Offers 126 neighborhoods: 43 neighborhoods in SP 83 neighborhoods in RJ Quality Experience 609 804 1,069 1,138 1,220 2Q13 3Q13 4Q13 1Q14 2Q14 8% 31% 21% 51% 72% 18% 2nd 3rd 4th 5th 6th 1st Source: Gauge 1Q14 Source: Company +113% 13 26k 100k Jul/14 Jun/13 Market average
  14. 14. 4,065 Thousands 2Q13 2Q14 3,985 170 Thousands 96 2Q13 2Q14 +2.2% FINANCIAL RESULTS ANALYSIS (1/2) Service Net Revenues (R$ mln; % YoY) EBITDA (R$ mln; % YoY) Reported Revenue 2Q13 Reported Revenue 2Q14 3,985 1,232 Reported EBITDA 2Q13 Reported EBITDA 2Q14 +186 -87 Δ Opex/ Others Traffic/Data Δ Contribution Margin 24.9% 31.1% 1,331 27.9% 34.4% EBITDA Margin Service EBITDA Margin +5.8% +4.4% Efficient Cost Control Interconnection (Δ% YoY) Leased Lines Cost (Δ% YoY) % Bad Debt/Sales (% over gross revenues) Net Services Revenues Exposure EBITDA Exposure MTR Impact -2.0% ~ 25% ~ 12% 2Q10 2Q11 2Q12 2Q13 2Q14 ~ 35% ~18% 2Q10 2Q11 2Q12 2Q13 2Q14 MTR Impact +15.8% +8.0% -31.3% -10% ~1% ~1% 2Q13 2Q14 MTR Exposure 1,427 ‘Pro forma’ EBITDA in 2Q14 4,155 ‘Pro forma’ Revenue in 2Q14 stable +208 -253 -36 ΔYoY +6.9% -29.6% -20.5% Δ Others Δ Business Incoming Δ Business Generated ΔYoY 14
  15. 15. -1,227 2,648 -609 -1,654* -1,786 182 +41% FINANCIAL RESULTS ANALYSIS (2/2) Net Income - 6 months (R$ mln; % YoY) Net Debt (R$ mln; % YoY) 15 EBITDA 692 738 6M13 6M14 +6.7% >94% towards infrastructure 6M13 6M14 R$1,657 mln R$1,593 mln 2G 3G 4G 2G 3G 4G 1,984 4,521 2,537 Thousands Debt Cash Net debt Jun/13 Jun/14 1,031 6,356 5,325 1,749 1,749 Thousands 4,607 3,576 Debt Cash Net debt +110% -48% Investments Cash Flow - 6 months (R$ mln; R$ YoY) YoY Net debt/EBITDA 12M: 0.19x New BNDES Loan CAPEX Δ WC OFCF 6M14 *Considering R$3 mln of LT Amazonas leasing adjustment OFCF 6M13 LT Amazonas Leasing +618 mln
  16. 16. Accelerated Network Evolution for Data KEEPING THE STRATEGIC FOCUS ON THE 2nd HALF Consolidating Recent Offers & Innovative Services Strong Institutional Position “Porta Azul” (Blue Door) Evolving the Structure for the New Challenges •Streamlining organization •Adding new talent •Stronger segment focus oConsumer oCorporate oResidential •4G auction participation •Leadership position •Presence in dialogue with relevant institutions 4G 700MHz Small Cells BioSite Mobile Fixed VAS TIM Protect CONTENT 16 New Positioning DATA CENTRIC APPROACH Coverage 1 2 3 Capacity Availability

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