2. Q2 Financials Highlight
R$ mln
Guidance
2Q12 2Q11 Var. % YoY 1H12 Var. % YoY
>10%
Total Revenue (reported) 4,547 4,252 +7.0% 9,016 +12.6%
P Confirmed
Total Revenue (MTR adjusted) 4,668 +9.8% 9,180 +14.7%
>10%
EBITDA (reported) 1,214 1,145 +6.0% 2,383 +9.2%
P Confirmed
EBITDA (MTR adjusted) 1,262 +10.2% 2,453 +12.4%
~R$3 bln
CAPEX 1,057 724 +45.9% 1,600 +56.4% P Confirmed
(+R$0.5 Mln licenses)
Anticipation
focused on
Network
Leadership in Prepaid segment MTR cut (-R$121mln rev; -R$48 mln
Main Fastest data growth (+40%YoY) and Quarter EBITDA)
smartphone at 35.2% of total base Macro-economic and competitive
Achievements Impact environment
TIM Fiber started-up (Live TIM brand)
TIM Fiber start-up costs (~R$11 mln)
2
3. Effects on Q2: MTR and Macro Environment
MTR Macro Environment
Total Net Revenues
P -R$121 mln impact on net P Macro economic scenario slowdown in 1H12 vs.
(R$ billion)
revenues and -R$48 mln 1H11 (i.e.: level of indebtedness; high commitment
on EBITDA of income to debt payment; GDP lower growth)
4.7
+10%
0.1 GDP Quarterly Growth (YoY)
4.5
4.3 +7% P Still no elasticity coming
on and traffic reshape to
2Q11 2Q12 offset MTR impact
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12e 3Q12e 4Q12e 1Q13e
EBITDA
(R$ billion) Handset Sale
Net Revenues Volume
1.3 P FMS will lead to lower
+10% 83%
0.1 dependency on MTR D YoY 143%
1.2 11%
1.1 +6%
-28%
2Q11 2Q12 2Q11 2Q12 2Q11 2Q12
P Short term competition aggressiveness
Revenues Costs
Drivers to softening
Keeping the Macro scenario Intelig/ TIM Fiber EILD regulatory
these impacts Innovative approach improvement (leased lines swap) framework
2Q12 4Q12
Source: BCB, Bradesco Corretora and Company’s estimates 3
4. FMS Secular Trend Remains on Play
Fixed to Mobile Substitution… …impacting Fixed Incumbents … benefiting Mobile Segment
Fixed Tariff Premium over Mobile Lines in Service Lines
ARPM (R$/min) (D% yoy) (D% yoy)
Mobile
40% mobile
discount
-4.7% 2Q11 2Q11 +16.7%
Fixed -4.9% 3Q11 3Q11 +18.0%
-4.5% 4Q11
4Q11 +18.6%
Mobile Outgoing price (% YoY) -23% -14% -4.0% 1Q12
1Q12 +18.6%
-3.4% 2Q12
Leading Traffic to a Sharp Increase 2Q12 +17.6%
(Bln Minutes)
21.8 22.6 23.8
18.4 20.1 Fixed Revenue Mobile Revenue
17.5
(D% yoy) (D% yoy)
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
-4.1% 2Q11 2Q11 +11.3%
Leadership in LD Market Share
(% Minutes) -7.0% 3Q11 3Q11 +11.5%
-8.0% 4Q11 4Q11 +12.4%
-7.6% 1Q12 1Q12 +14.5%
jun/09 jun/10 jun/10 dec/10 jun/11 dec/11 mar/12
-11.7%** 2Q12 2Q12 +7.1%**
TIM Incumbents*
Source: Companies results, Teleco and Bloomberg estimates; 4
* Telemar, Brasil Telecom, Telesp e Embratel.
**Excluding one company.
6. Operational Growth Remains Strong
Customer Base Total Market Share Growth
(million lines) (% of total lines)
+1.7 D YoY 30.1% 30.2% 30.1% 29.7%
+3.1 D% 29.5% 29.5% 29.5% 29.5% 29.8% 29.6% Vivo
+4.9 2Q
+3.7 67.2 68.9
+2.7 64.1 270
59.2 9.7 10.0 +2.0 +25% 640 bps
55.5 9.3 bps 26.9%
52.8 8.7 26.5% 26.8%
8.0 26.0%
25.4% 25.3% 25.5% 25.4% 25.4% 25.5%
Post 7.7 57.6 58.9 +11.3 +24%
50.6 54.8 Claro
Paid 45.1 47.5 25.1% 25.1% 25.5% 25.3%
24.5% 24.9% 24.6% 24.6%
23.7% 24.0%
Pre 20.4%
20.1%
Paid 19.5% 19.4% 19.7% 19.1%
18.8% 18.8% 18.5% 18.7%
Oi
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Largest
Prepaid
Net Adds Base
(000)
Post Paid 223 317 632 655 348 348
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Pre Paid 1,598 2,359 3,053 4,219 2,786 1,308
SP City Market Share Growth Customer Base Growth
(% of total lines) (%YoY)
1st in yearly growth for 8
consecutive quarters
Vivo 18% 20% 18% 17% 15% 14% 16% 19% 20% 18%
Vivo TIM 17% 17% 19% 24% 25% 25% 26% 26% 27% 24%
Claro 15% 16% 15% 16% 17% 18% 18% 17% 15% 13%
Claro
Oi 15% 10% 7% 9% 13% 12% 15% 16% 12% 15%
Oi
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Source: Anatel Source: Anatel 6
7. Growth Backed by Efficiency Approach
Customer Base Growth SAC and SAC/ARPU
(% YoY) (R$) P Continuous growth on pre-paid
-210Bps
+830Bps SAC/ 2.6 and acceleration on postpaid
ARPU
Prepaid
+860Bps 1.6
1.4
Postpaid
+360Bps P But with a rational approach:
SAC
(R$)
-44% -26% o significant subscriber
2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 acquisition cost drop
o continuous bad debt
downward trend
Handset Subsidy Bad Debt Trend
(R$ million) (as % of Gross Revenues)
1.83% Sustainable business model
Capitalized 1.08%
Subsidy o Low bad debt
0.92%
o No subsidies
o Freedom to customers
2Q10 2Q11 2Q12 2Q10 2Q11 2Q12
7
8. Update on Anatel´s Sales Ban
Current Situation: TIM is not the worst Outlook: Improvement Plan Presented
=> Network KPI => Commitment on Network Development
Anatel SMP 5 – Orig. calls compl. Anatel SMP 7 - Call drop # TRX Data Channel Elements KM of Fiber
(Points) (‘000) (‘000) (‘000 Km)
271 741 53
+75% +84%
157 4.3x 29
139
Player A TIM Player BPlayer C Player TIM Player Player
A B C
2011 2014 2011 2014 2011 2014
=> Customer KPI Apr - 11 Apr - 12
Anatel Ranking of Complaints Procon Ranking of Complaints
=> Commitment on Quality Improvement
(SMP Compl./ Lines in Service * 1000) (Compl. of Integrated System of Procon )
SMP 5 - Call Complete SMP 7 - Drop Call SMP12 - % Call Center
(% clusters) Responsiveness
90%
96% 100% 77%
92%
76%
+1,300Bps
+400Bps
Player A TIM Player B Player C Player A TIM Player B Player C +1,600Bps
Mar-11 Mar-12 Jun-11 Jun-12
TIM Call Center Index of Complaints
(Points) 1H 2012 2014E 1H 2012 2014E 1H 2012 2014E
-30%
Anatel’s sales ban is expected to be
removed in the next days
2Q11 2Q12 8
Source: Anatel, Procon and Company
10. Innovation Platform
Innovation path
Liberty
Passport
Liberty Liberty
Torpedo Controle
Liberty
Web Infinity
Torpedo
Infinity
Web
Liberty
Infinity
New Concept Unlimited Internet offer SMS Hybrid Plan International
Local=LD “All you can Unlimited Unlimited Unlimited Unlimited
eat”
Per Call Per Day or Per Day or Budget Control Per Day
Month Month
Infinity Customer Base Liberty Customer Base Infinity Web Unique Users
(million lines) (million lines) (daily users, million)
56.1 57.5 5.5 5.8 6.6 7.0 7.5
53.3 4.1 3.2 3.6
43.9 47.8 2.7
40.1 2.3
1.6
1.2
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
10
11. And Generating Value
Pre Paid – Customer Base Post Paid – Customer Base
(000 lines) (000 lines)
Combining volume and
+25% 10,001 value throughout a complete
+24% 58,873 +15%
8,019
47,506 6,956 and unlimited platform of
+27%
37,469 services (local and LD
calls, SMS and data)
2Q10 2Q11 2Q12 2Q10 2Q11 2Q12
Volume of Top Up growth MOU and Post paid Churn Pre-paid consistent growth
(Mln recharges) (Minutes, % of lines)
Post-paid taking-up with
+3%
+24%
increasing traffic and lower
MOU
+18%
disconnections…
+42%
Churn
..even with no handset
-80Bps -50Bps
subsidy policy and no loyalty
2Q10 2Q11 2Q12 2Q10 2Q11 2Q12
11
12. Internet Take-Up Supported by Best Handset and Offering
Data Revenues Smart/Web phone Penetration
(% of Gross Mobile Service Revenues) (% smartphones/total CB (lines))
+490Bps
35.2%
18.7% 31.1%
18.1% 26.6%
16.7% 19.5%
15.7% 15.4%
12.6%
14.6%
13.8%
Value Added Services Revenues
(R$ billion) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
% sold
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
1.03 48% 54% 71% 70% 77% 79%
+40%
0.73
SMS unique users growth Data users
(daily unique users) (monthly unique users)
18,907
2Q11 2Q12
+53%
~3X 12,391
2Q11 May 12
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
3G coverage
(% of urban
57% +1,100Bps 68%
pop.)
12
14. Consistent EBITDA and Net Income Growth
EBITDA Evolution From EBITDA to Net Income
R$ Mln R$ Mln
1,214
Handsets Rev.: +55
COGS: -43 R$54 mln one
off event due to
mark to market
+240 +12 +27 -172 -664 hedge position
-38 1,214
1,145
550 -64
26.9% EBITDA Margin 26.7% -140 347
32.7% Service EBITDA Margin 32.2%
EBITDA Depreciation/ EBIT Net Taxes Net
EBITDA Services Handset Marketing Network Personnel EBITDA 2Q12 Amortization Financial and Income
2Q11 Revenues Margin and Sales and ITX G&A and 2Q12 Result Others 2Q12
others
expenses
ΔYoY +6.4% -14.4% -2.8% +15.1% +8.7% ΔYoY +6.0% +7.8% +3.9% +44.6% +3.2% -0.9%
15. Cash Position Analysis
Capex D Working Capital
(R$ Mln) (R$ Mln)
2Q11 2Q12 Var D WC: R$230 mln YoY
Network 61% 67% 600 Bps
IT 22% 28% 600 Bps 147
Others 17% 5% -1,200 Bps
-82
+46%
2Q10 2Q11 2Q12
2Q10 2Q11 2Q12
OFCF Net Debt
Including TIM Fiber
(R$ Mln) (R$ Mln) net debt = R$87 mln
DOFCF R$-34mln YoY
DEBITDA-CAPEX =-R$261mln
2,520
DWC R$230mln 2,278
DOther –R$3mln 1,998
2Q10 2Q11 2Q12
Net DEBT/
2Q10 2Q11 2Q12 EBITDA 0.68x 0.45x 0.47x
(trailing 12m)
15
17. Network and Marketing Highlights
MSANs
Homes
Optical Passed Ready
Backbone to Sell
Network 2
network
Construction 1
220k
3
Buildings authorized Building’s accessed MSANs installed
5,700 2,100 214
Market Demand Quality of Service
(Units) (Mbps)
Download
Website
63k Speed
Registration
Market
Demand and
Quality of
Service
Upload
Activation 1k Speed
17
18. TIM Fiber Launch Plan: On Track
Commercial Launch
Soon…
Launch Phases
Pre-Launch Test
Soft Launch Commercial Launch
Key objective Technical Trial of the Check of the Business Start of the Commercial
solution Readiness Operations
Customer base
~50 ~1 Thousand 50-70 Thousand
Employees +
Friendly User Testers Beta Testers Customers end-of-period
Geographic Coverage
(SP/RJ) 1 neighborhood 5 neighborhoods 20+ neighborhoods
Product Naked
Ultra Broadband
Communications Advertising outside of Advertising in mass
n/a
communication media (BTL) communication media (ATL)
Channels Door to door Door to door
n/a + Tele sale Outbound
+ Tele sale Outbound
+ Tele sale Inbound
18
19. Conclusions and 2H12 Outlook
• TIM managed to maintain its solid operational improvements amid
tough 1H12 (macro-economic and competitive scenario)
Conclusions
• Data services continued at a solid pace
• Leadership in market share of net addition for 8th consecutive
quarter is a clear signal how TIM’s offer is indeed the best value option
• Operational efficiency set the tone, with significant subscriber
acquisition cost (SAC) and bad debt reduction
• Focus on network development, quality improvement and
communication to defend post-paid segment and reverse the bad
perception from Anatel ban
Outlook
• Insist on FMS trend with an innovative approach
• Support data revenues growth through smartphone penetration and
network strengthening
• Launching TIM Fiber (Live TIM)
19
