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Press Release 1 T08 En


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Press Release 1 T08 En

  1. 1. TIM Participações S.A. 1Q08’s Results May 6th, 2008 1
  2. 2. Highlights Market Overview Commercial Strategy Financial Performances 2
  3. 3. 1Q08 Main Highlights Indicators Results Drivers Perspectives YoY Growth: 23.7% vs Maintaining market share focused on Maintaining our competitive Client competitors 23.0%; valuable customer base (prepaid and approach; postpaid); Base Post paid mix: 20.8% vs Segmented approach: Push the competitors 18.6%. Benefits from TIM national wide right customers to the right plans. consolidated Company. Data transmission and internet Increase 29.0% YoY; ‘TIM Web Banda Larga’: wireless access: ‘TIM Web’ and ‘Nosso link’; Accounting for 8.4% of broadband solution speed up with 3G; VAS Data package offers; gross service revenue. 3G content providers partnerships. Push on media content. Selective approach in promotion; Aggressiveness on traffic promotions/disc; Migration from incoming to on-net traffic; Stable incoming revenues (lower F-M 6.6% YoY growth in net Additional revenues through cross- Revenues traffic and the cellcos on-net strategy); service revenues. selling offers: TIM Casa Flex and 3G+; Low income classes penetration. Guidance Revision: 2008 total net revenue growth as around 9% Telesales channel had its process Bad debt 9.6% of net service Aggressive campaign in remodeled; revenue. telesales distribution channel. Normalized level around 6% of net service revenue on a yearly basis. Bad Debt increase; Margin of 17.9%. 2008 EBITDA >23%. EBITDA Modest revenue increase. 3
  4. 4. Highlights Market Overview Commercial Strategy Financial Performances 4
  5. 5. 1Q08 Brazilian market at a glance Market quarterly net adds Mobile penetration by social class (2007) Mln lines 8.2 (YoY) (+103%) 83% 77% 6.1 63.5% (+48%) 4.5 53% 4.1 4.0 4.8 3.2 (-35%) (+92%) (+116%) (-8%) (+6%) 28% 2.4 2.2 (-66%) (-30%) 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 Brazil Class A Class B Class C Classes D/E Source: Anatel Source: IBGE (PNAD 2006) and internal estimates Market Overview … and TIM’s Approach Reversal trend of quarterly net adds in 2Q07; Strong hold on market maintaining solid share performance; Prepaid net adds grew by 159% YoY in 1Q08, mainly due to: Leadership in gross addition (~26% in the 1Q08) fueled by: Growth concentrated in social classes C and D/E ; Strong national brand; Naked SIM-Card sales; Large distribution network; On-net calls promotions; Push on traffic promotions; Market gross addition increased around 35% YoY; Leveraging second-hand cell-phone market by offering ‘TIM Chip only’. Second-hand cell-phones accounted for 26% of sales in 20071 Capturing low income-class growth; Note: 1) According to Latin Panel survey 5
  6. 6. Competitively marking the market Total Lines (Mn) and Penetration Rate Market Share Performance YoY -2.7 p.p. gap -1.4 p.p. gap -2.8 Mn lines -1.8 Mn lines 63.5% 65.8% +11.6 p.p. First 59.4% 56.4% player 54.2% +23.2% 28.4% 27.3% 121.0 125.8 112.8 102.2 106.7 25.8% 25.9% +23.0% 24.8% 24.1% Third +23.7% player 26.3 27.5 29.2 31.3 32.5 +1.7 p.p. gap +1.1 p.p. gap +1.7 Mn lines +1.3 Mn lines 1Q07 2Q07 3Q07 4Q07 1Q08 TIM Competitors Penetration Rate 1Q07 2Q07 3Q07 4Q07 1Q08 Mobile market growth continues strong in 2008; Successful hold on positioning with resilient market Credit expansion and purchase power improvement; share performance; Naked SIM-Card further enhance net addition; Postpaid mix at 20.8% and above competitor’s average New technology/services; of 18.6%; Source: ANATEL and company´s data. 6
  7. 7. Highlights Market Overview Commercial Strategy Financial Performances 7
  8. 8. A National wide consolidated company Innovative, Reliable and Appealing brand: “Living beyond Technology” ► First national consolidated operator (since 2002): Largest presence in Brazil through our network coverage (voice and data) and strong distribution channels (sales and recharge); ► Top of mind1 and consumer preference1: Brand nationally recognized as innovative company; ► Info-Exame magazine award (March-2008): The best wireless company in Brazil; ► Transparent relation with customers: Handset SIM-lock - giving customers free will. RANKING 2002 National presence 1º Brand (Top of Mind)1 1º Coverage (voice and data) 2º Market share Note: 1) Instituto Synovate - Oct-Nov/2007 8
  9. 9. Commercial strategy overview Acquisition ► Strong net addition in YoY basis (+42.7%); Promoting “On-net traffic” ► Strategy on promotions: focus on traffic incentives; ► MOU increase to 94 min (vs. 89 min. in 1Q07). Reducing our blended monthly churn rate to Retention ► Loyalty/ 2.6% (vs. 2.9% in 1Q07); Aiming valuable clients ► 20% of our prepaid base added to our loyalty promotion ‘Bonus in minutes’. Cross selling opportunities: more than 50% of Convergent ► ‘TIM Web’ are new clients in our base; Offers Catering to total ► 3G+: ‘TIM Web’ speed up; communication needs ►Offers with lower entry price barrier compared with fixed operators. ► Data Package: plans and promotions; VAS Leading innovation ► Push on contents (strategic partnerships); ► 3G+ launch: better quality and velocity. Recharge ► Large distribution network and recharge; Sales/ Optimizing channels ► Increase of virtual recharge; ► Commissioning according to customer value *more than one year in our subscriber base 9
  10. 10. TIM convergent offer roadmap 2005 2006 2007 2008 31.3 32.5 TIM Customer Base (MM) 25.4 TIM Web Banda 20.2 Larga: wireless broadband solution TIM Casa Flex: convergent voice plan which combines a fixed and mobile number on the same TIM Chip TIM Web: wireless internet access with a stand alone data bundle using a USB modem TIM Casa: special tariff bundle for fixed numbers in a ‘Home Zone concept’ Nosso Link: data plan for business customers TIM Convergent Customer Base (MM) ~1.5 ~1.2 ~0.6 ~0.2 2005 2006 2007 1Q08 Convergent customer base achieved around 1.5 million by the end of 1Q08 10
  11. 11. TIM : Aiming the future 3G+: a new experience for the most innovative VAS services Positioning / Strategy Advantages Roll-Out / Launching A step ahead on TIM convergent VELOCITY: Upgrade to 1Mbps Commercial Launching: offers through wireless broadband; and 7Mbps; 850 Mhz - April 16th 2.1 Ghz - May 1st Brand empowerment through SIMPLICITY: All ‘TIM Chip’ are 3G ready; Buy & Play concept; 3G Initial coverage in key innovation; metropolitan area; MOBILITY: Wireless internet Protect TIM customer base; 3G roll-out easyly by our actual anywhere; national consolidated coverage; Deliver content to enhance ACCESSIBILITY: Any 3G device National 3G license for usage and revenue; and computers; R$1.3bln; Encourage use of VAS: more OPPORTUNITY: Limited More spectrum capacity; quality and speed; coverage and installation by fixed Alternative to digital telcos. universalization. Push on cross selling offers; 11
  12. 12. Marketing 3G offers TIM Web Banda Larga: Wireless Broadband Solution ► TIM Web broadband : Buy & Play; Broadband ► Competitive plans: 1Mbps or 7Mbps unlimited; ► TIM Web - Automatic upgrade to 1Mbps (packages 40MB, 250MB e 1GB); ► First notebook in the market with TIM broadband access. VAS Strategic Partnership New and Improved Content Offer Handset Portfolio TIM TV GOOGLE MAPS TIM GAMES TIM VIDEO CALL TIM WAP TIM STUDIO YOUTUBE UOL MOBILE TIM MUSIC STORE 12
  13. 13. Highlights Market Overview Commercial Strategy Financial Performances 13
  14. 14. Net Revenue Performance Total Net Revenues Outgoing voice revenues: R$ Mn . Good showing in outgoing traffic, fueled by large YoY incentives to on-net and M-F calls; MOU (blended) stood at 94 minutes 2,993 +5.3% per user (5.2% up YoY) and maintaining the market highest users in 2,843 our customer base; +6.6% Incoming revenues: 95% 94% . Performance linked to cellcos aggressive approach to on-net call promotion, and F-M continue pattern change; . Strategy oriented to convergent service (i.e..: TIM- 5% -14.5% Casa), reducing our dependence of income revenues; 6% 1Q07 1Q08 Value-added services (VAS): Net Service Revenue Net Handsets Revenue . VAS stood at 8.4% of gross service revenues (29% YoY growth). Innovative services (MMS, downloads etc) accounted for 54% of these revenues. Handset revenues: . Net handset sales drop 14.5% YoY, as a result of lower handset price. 2008 Total Net Revenues Guidance Revision Company has fined tuned total revenues guidance for 2008 mainly due to a decrease on handset revenue growth. Our new target for total net revenue growth is around 9% instead of higher than 12% from the previous announcement. We are maintaining the other targets unchanged. 14
  15. 15. ARPU Performance R$ Main reasons to ARPU performance: -14% Increase penetration in low income class and strong prepaid 34.4 29.5 growth (25% YoY); Aggressiveness in traffic promotions/discount; VAS promotions put into place as to safeguard positioning and for education in light of recent launch of 3G+ service; 1Q07 1Q08 Migration of incoming calls to on-net calls; SAC Performance R$ -5% Subsidy strategy oriented to maintain competitiveness in 124 110 117 Indirect cost valuable customers; - Comodatun - Advertising 38% 38% Focus on traffic promotion instead of high subsidy; 42% - Others Acquisition cost was largely affected by lower commission and Direct cost advertising expenses; - Commission - Subsidy 62% 62% 58% Gross adds were up 22.0% YoY and selling expenses were up - FISTEL 4.6% YoY. 1Q07 4Q07 1Q08 SAC/ARPU: 3.8x 3.2x 4.1x 15
  16. 16. Bad Debt Major source of bad debt increase: R$ Mn % of net service Aggressive campaign in telesales channel; revenues Strong gross addition (since 2H07), specially in postpaid. 271.7 9.6% Actions implemented: 95.0* 3.4% Telesales channel had its process completely remodeled; Implement new rules; 6.5% 173.0 176.7 6.2% Strict credit analysis; Bad debt expected to come back to its historical levels: 1Q07 1Q08 Around 6% of net service revenues in a yearly basis. *additional bad-debt provision from Telesales channel 16
  17. 17. EBITDA and EBITDA margin performance R$ Mln Strong outgoing traffic volume, (off-net and M-F calls) and 3G deployment Selling expenses were 4.6% up from the 1Q07, while gross addition grew 22.0%. (135.8) (26.3) 176.1 (26.4) 630.4 Additional (98.7) 95.0 bad-debt 0.4 (17.9) 664.1 535.4 535.4 EBITDA Handsets Service Network Selling Bad Debt COGS Other EBITDA Normalized 1Q07 Revenue Revenue Expenses Expenses Expenses* 1Q08 EBITDA Change -14.5% +6.6% +14.9% +4.6% +57.1% -0.1% +6.8% % YoY EBITDA 21.1% 23.4% 17.9% Margin * Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues 17
  18. 18. From EBITDA to bottom line R$ Mln 535.4 (572.0) (36.7) (56.1) (107.9) (15.2) EBITDA 1Q08 Depreciation EBIT Net Financial Taxes and Net Loss Amortization Expenses Others* Change YoY R$ Mn (129) (10) (118) 7 23 (88) * Other non-operating expenses/revenues 18
  19. 19. Net financial position Net Debt Net cash flow R$ Mln R$ Mln Non OpFCF OpFCF 4Q07 1Q08 (1,122) (694) (556) (973) -138 428 (1,086) (36) (2,095) Reported Annual 1Q08 Reported EBITDA +535.4 CAPEX (272.6) 1Q08 Fistel Pro-forma 1Q07 Δ Oper. WC (1,349.1) Negative WC due to cash-out of 4Q07’s CAPEX and FISTEL Seasonal Impact of FISTEL: R$428 Mn. Gross Debt: R$2.8 billion (of which 48% long term ) Average annual cost: 10.96% in 1Q08 versus 11.92% in 1Q07 19
  20. 20. “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 Visit our Website: Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ Phone: +55 21 4009-3742 / 4009-3751 / 4009-3446 Fax: + 55 21 4009-3990 20