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Tim meeting with investors march 2019

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Tim meeting with investors march 2019

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Tim meeting with investors march 2019

  1. 1. TIM Brasil Company Presentation March, 2019
  2. 2. 2 4Q18 RESULTS
  3. 3. 3 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 FY18 & 4Q Highlights – Strong Results Rewarding a Challenging Year (1) EBITDA and Net Income normalized for the effects detailed in slide 2. 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
  4. 4. 2017 2018 2017 2018 Maintaining Rationality Despite Aggressive Competition in Prepaid 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) 4 +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.
  5. 5. 27% 56% 2017 2018 Tweaking Postpaid Approach to Maintain Growth with Quality 5 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$)
  6. 6. 391 408 410 421 419 1 3 13 28 48 4Q17 1Q18 2Q18 3Q18 4Q18 72.1 82.1 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18 TIM Live: Great Year of Expansion  11 cities with FTTH, 14 active cities.  40% of new clients get ≥ 100Mbps Plans.  Bringing content to the offers with 14 streaming channels (i.e. Fox, Cartoon, NatGeo, etc.)  TIM Live represented > 50% of fixed revenues in 4Q18. Managing Portfolio to Drive ARPU Up (R$ 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) 6 +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
  7. 7. 446 601 4Q17 4Q18 0 179 244 1,138 2,116 2,221 4Q16 4Q17 4Q18 1.8GHz 2.1GHz Solid Network Development Supporting All Business Lines 4G Coverage and Capacity Expansions Fiber Expansion: Transport and FTTH 7 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) 0.2 0.4 0.8 1.1 1Q18 2Q18 3Q18 4Q18 1Q18 2Q18 3Q18 4Q18 20.8 23.1 26.2 28.6 59% 67% 4Q17 4Q18 +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
  8. 8. 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 8 Maintenance of Top Quality Indicators CEX: Client Perception Rewards Continuous Efforts in Infrastructure 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) (1) Audit Report Benchmark Brazil, P3 Communications. Performance in the country’s biggest cities (SP, RJ and Brasilia) (2) National Satisfaction Survey, Bridge Research. (3) Source: Internal Caring Survey. 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 jun/18 set/18 dez/18jun/18 sep/18 dec/18 jun/18 set/18 dez/18jun/18 sep/18 dec/18
  9. 9. 4Q17 4Q18 2017 2018 2017 2018 2017 2018 Total Net Revenues Breakdown (R$ mln, %YoY) Mobile ARPU (R$,%YoY) Client Generated Revs. Growth (%YoY) +4.5% -5.4% +5.6% +39.6% 4,257 4,479 9 Resilient Revenues and ARPU Growth amid Worsening Environment +8.4% 23.7 21.9  Top line grew 5.2% YoY and +5% in 2018.  Service Revenues up 3.7% YoY in 4Q and +4.7% in 2018.  MSR increased 3.6% YoY in 4Q and +4.5% in 2018.  Client Generated Revenues increased 4.5% YoY in 4Q and +5.1% in 2018. Client Generated Revs. Breakdown (%) Postpaid Prepaid 63% Non-TIM Clients +5.2% +21.0% -14.8% Postpaid Prepaid
  10. 10. 2,198 2,205 77 138 4Q17 4Q18 3,494 3,518 956 994 845 900 3,826 3,661 847 884 316 530 2017 2018 Opex X-Ray: Cost Growth Below Inflation Normalized Opex Breakdown 1 (R$ 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)
  11. 11. 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 All Time High Profitability with Solid Bottom Line EBITDA1 & Margin1 Consistent Evolution (%; R$ bln, %YoY) Investment According to Plan (R$ bln) +26.6% Strong EBITDA1 – CAPEX (R$ mln) % Net Revenues 26% 23% 1 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 (1) EBITDA and Net Income normalized for the effects detailed in slide 2.
  12. 12. 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) 1 Strong Cash Generation and Healthy Balance Sheet  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 (1) EBITDA normalized for the effects detailed in slide 2. 614 [VALUE] -[VALUE] 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
  13. 13. 2018 Targets Delivered Despite Tougher Context 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 1 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
  14. 14. 1 STRATEGIC PLAN 2019-21
  15. 15. 15 TIM Brasil – Investor Relations Strategic Plan 2019-21 Evolving proposition for consistent and sustainable growth (1) Ex-licenses, (2) Normalized. Quality Price 2017- Today 2016 Today 2016-2018 Turnaround Strategy 2018 Solid Execution Live Revs +38.4% YoY in 2018 All Time High EBITDA2 R$ 6.6B in 2018 EBITDA2 Growth +10.3% YoY in 2018 Net Serv Rev +4.7% YoY in 2018 Operating FCF¹ +2.9B YoY in 2018 Best and Wider 4G Coverage 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). All Time High EBITDA MARGIN2 38.5% in 2018
  16. 16. 16 TIM Brasil – Investor Relations Strategic Plan 2019-21 116 2018 2021e 132 2018 2021e 99 2018 2021e Slow economic recovery and competitive uncertainties leading market to grow below inflation Macroeconomic scenario still tough, recovery depending heavily on structural economic reforms. High unemployment rates still holding down consumption acceleration New wave of aggressiveness, especially for Prepaid segment, expected to continue in 2019 Mobile postpaid customer base growth driving Net service revenues increase Key Market Trends CAGR: +2% CAGR: -9% CAGR: +9% Market Mobile Prepaid Base mln lines Market Net Services Revenues R$ bln Market Mobile Postpaid Base mln lines
  17. 17. 17 TIM Brasil – Investor Relations Strategic Plan 2019-21 • 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
  18. 18. 18 TIM Brasil – Investor Relations Strategic Plan 2019-21 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
  19. 19. 19 TIM Brasil – Investor Relations Strategic Plan 2019-21 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 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 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
  20. 20. 20 TIM Brasil – Investor Relations Strategic Plan 2019-21 • 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% B2B (mobile + fixed): penetrate clients through added value solutions, becoming a business partner • Market share • Share of wallet • Market share • Share of wallet • Market share • Share of wallet
  21. 21. 21 TIM Brasil – Investor Relations Strategic Plan 2019-21 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) 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 ~1 Addressable market by 2021 >30bln Reais mln lines DIGITAL CHANNELS Evolve platforms and encourage usage with offer benefits TRADITIONAL CHANNELS Improve IVR retention with evolved platform Digital: key strategic pillars to improve customer experience and exploit new revenue streams
  22. 22. 22 TIM Brasil – Investor Relations Strategic Plan 2019-21NOTE: Ultra BB: > 34 Mbps / very low BB penetration: < 34Mbps. SOURCE: Anatel December 2018, IPC Maps 2018. 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 Infrastructure: capitalizing on existing infrastructure and expanding FTTH High-single to Low-Double digit growth (CAGR) • ~2.5x customer base growth
  23. 23. 23 TIM Brasil – Investor Relations Strategic Plan 2019-21 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
  24. 24. 24 TIM Brasil – Investor Relations Strategic Plan 2019-21 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 Accelerate Digital Transformation Initiatives ¹Inflation from BACEN Focus 18th January 2019 • 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 Caring (Digital Interactions) E-Billing (% on total invoice) 2021e2018 +12MM 2018 2021e +22p.p. Efficiency Plan 2019-21: ~R$ 1.2 bln (Full plan 2017-21 R$ 2.2 bln) Digital Top Up (% on Total Top Ups) 2018 2021e +12p.p. 2018 2021e +31p.p. E-Payment (% on total payments) Leverage on Efficiency Plan to maintain OPEX below inflation1 throughout the plan period
  25. 25. 25 TIM Brasil – Investor Relations Strategic Plan 2019-21 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 Increasing Profitability and Cash Generation EBITDA Capex Mid-single digit growth (CAGR) +2% (CAGR) ~12.5 (∑‘19-’21) 11.1% 15.2% ≥ 20% 2017 2018 2019e 2020e 2021e
  26. 26. 26 TIM Brasil – Investor Relations Strategic Plan 2019-21 TIM Brasil 2019-’21 Targets • Further improve mobile ARPU • Expand Residential BB Revenues contribution • Tap B2B opportunity GOALS DRIVERS • Accelerate digitalization efficiencies • Maintain zero-based approach and traditional initiatives • Improve risk management models Revenue Growth Sustainability Expand Cash Generation Improve Profitability LONG TERM TARGETS Service Revenues Growth: Mid single digit (CAGR ‘18-’21) EBITDA Margin: ≥40% in 2020 • Increase cash flow from operations • Continue with debt and tax rate optimization EBITDA-Capex on Revenues: ≥20% in 2021 SHORT TERM (2019) TARGETS Service Revenues Growth: 3% – 5% (YoY) EBITDA Growth: Mid to High single digit growth (YoY) Capex on Revenues: Low 20’s Capex: ~R$ 12.5 bln (∑‘19-’21) EBITDA-Capex on Revenues: >15% Infrastructure Development • Additional Capex to grow fiber and improve mobile capacity

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