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TIM Brasil
Company Presentation
May, 2019
Brazil’s largest
4G coverage.
2
This presentation contains declarations
that constitute forward looking
statements regarding the intent, belief or
curre...
3
Agenda
TIM Brasil | Meeting with Investors
Investor Relations
About Us …………………………………………………………………………………………………...……4
Marke...
4
ABOUT US
TIM Brasil | Meeting with Investors
Investor Relations
5
Solid Execution in 2018
The company in a nutshell
TIM Brasil | Meeting with Investors
Investor Relations
Live Revs
+38.4...
6
(1) Normalized Figures.
(2) Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adopti...
7
• Improved E2E Customer Experience
• Digitalization of customer care
processes
• Superior Network quality, notably on
4G...
8
Corporate Social Responsibility
TIM Brasil | Meeting with Investors
Investor Relations
PRINCIPLES AND STRATEGIES
1. Educ...
9
 Statutory Audit Committee:
• Report to Board of Directors
• Oversight Financial reporting
• Analyze anonymous complain...
10
MARKET OVERVIEW AND TIM POSITIONING
TIM Brasil | Meeting with Investors
Investor Relations
11
Evolving proposition for consistent and sustainable growth
TIM Brasil | Meeting with Investors
Investor Relations
Quali...
12
40% Social media
Others
MTR Cuts
Changing Customer Base Mix
Total base in mln customers
R$
Prepaid
Total
Postpaid
New C...
13
Brazilian Telcos: Revenues X-Ray
TIM Brasil | Meeting with Investors
Investor Relations
Total Services Net Revenues
(R$...
14
1Q19 RESULTS
TIM Brasil | Meeting with Investors
Investor Relations
Financial results are presented considering
impacts...
15Investor Relations
Quarter
Highlights:
Solid Results
Despite Tough
Headwinds
(1) Client Generated Revenues.
(2) Open Sig...
16Investor Relations
• GDP growth estimatesdown to <1.5%
• Consumer confidence deterioration
• Volatile job market recover...
17Investor Relations
TIM Agribusiness Solutions (IoT) – Planting
the seeds…
Opportunity
• Agribusiness GDP: R$ 1.6 Tln
• P...
18Investor Relations
0
1,149
182
2,100
262
2,245
2.1 GHz
1.8 GHz
1Q19
1Q18
1Q17
1Q19 Digitalization KPI’s NPS1
Infrastruct...
19Investor Relations
1Q18 1Q19 1Q18 1Q19
21.6
22.8
1Q18 1Q19
Total Net Revenues Breakdown (R$ mln | %YoY)
Mobile ARPU (R$ ...
20Investor Relations
899 906
240 249
253 247
1,011 921
180
199
116 173
1Q18 1Q19
Normalized Opex Breakdown1 (R$ mln | %YoY...
21Investor Relations
Consistent Margin Expansion and Cash Generation
(1) EBITDA normalized for the effects detailed in sli...
22Investor Relations
Strategy and Vision Remain Solid with Adjustments to Recover Momentum
Despite
challenges…
…fundamenta...
23
STRATEGIC PLAN 2019-21
TIM Brasil | Meeting with Investors
Investor Relations
Financial KPIs are presented on Pro Forma...
24
1
Mobile Post Paid Consumer (“the Controle wave”)
• Growth based on a «Mobile Challenger» approach pushing migration fr...
25
B2C Mobile: managing client base focusing on upselling and churn dynamics
Pure
post
Control
Prepaid
Daily – Multi-day p...
26
B2B (mobile + fixed): penetrate clients through added value solutions, becoming a business partner
TIM Brasil | Meeting...
27
New revenue streams: Enable
innovative services that meets
customers needs
Customer Experience: Improve
digital custome...
28
Infrastructure: capitalizing on existing infrastructure and expanding FTTH
TIM Brasil | Meeting with Investors
Investor...
29
TRANSPORT INFRASTRUCTURE
Capillarity to support Mobile and Fixed Services (B2C and B2B)
4G EVOLUTION
Spectrum Mix Usage...
30
Leverage on Efficiency Plan to maintain OPEX below inflation1 throughout the plan period
TIM Brasil | Meeting with Inve...
31
Increasing Profitability and Cash Generation
TIM Brasil | Meeting with Investors
Investor Relations
2017 2018 2019 2020...
32
TIM Brasil 2019-’21 Targets
TIM Brasil | Meeting with Investors
Investor Relations
Capex on Revenues:
Low 20’s
Capex:
~...
33
REGULATORY UPDATES
TIM Brasil | Meeting with Investors
Investor Relations
34
Spectrum Distribution - Average MHz/Pop
14 MHz 90 MHz 80 MHz 20 MHz 150 MHz 135 MHz 100 MHz 190 MHz
450 MHz 700 MHz 850...
35
Public Consultation for new frequency auctions in 2019, according to Anatel
Comments
New spectrum bands under discussio...
36
1Q19
February MarchJanuary
Public Consultation
• Grant and
Licensing
• Human exposure
to electromagnetic
field (Act
pro...
37
APPENDIX
TIM Brasil | Meeting with Investors
Investor Relations
38
R$ Thousand
Description 2016 2017 1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
Gross Revenue...
39
R$ Million
Description 2016 2017 1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
Initial Net Fi...
40
Description 2016 2017 1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
Mobile ARPU (R$) 17,9 20,...
41
Description 2016 2017 1Q18 2018 1Q19
1Q19 vs. 1Q18
(%YoY)
Brazilian Wireless Subscriber Base (000`s) 244 236 236 229 22...
42
Brazilian Telcos: Financial X-Ray 1Q19
TIM Brasil | Meeting with Investors
Investor Relations
TIM, Vivo and Oi: IFRS 9 ...
43
Brazilian Telcos: Operational X-Ray
Source: Anatel.
TIM Brasil | Meeting with Investors
Investor Relations
1Q19 1Q18 % ...
44
228,9 MM (YoY)
VIVO 32,1% +0,3 p.p
CLARO 24,6% -0,3 p.p
TIM 24,1% -0,5 p.p
OI 16,5% +0,0 p.p
Brasil
(1Q19)
17,4 MM
VIVO...
45
Efficiency Across the Board: Tax Credits and Distributions (IoE)
TIM Brasil | Meeting with Investors
Investor Relations...
46
For further information | Investor Relations
Vicente Ferreira
E-mail: vdferreira@timbrasil.com.br
Phone: +55 21 98113-1...
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Tim - Meeting with Investors_May19

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Tim - Meeting with Investors_May19

  1. 1. TIM Brasil Company Presentation May, 2019 Brazil’s largest 4G coverage.
  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 considering impacts from IFRS 9 & IFRS 15 adoption, disconsidering impacts from IFRS 16 adoption, in “1Q19 results” section and presented on Pro Forma basis in “Strategic Plan 2019-21” section. 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 Updates ……………………………………………………………………………………....... 33 1Q19 Results ……………………………………………………………………………………………….....14 Strategic Plan 2019-21 …………………………………………………………….................................... 23 Appendix …………………………………………………………………………………………………....... 37
  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$28,5 billion of Enterprise Value Telecom Italia subsidiary (67% of shares) (1) Ex-licenses, (2) Normalized, (3) Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption. 5 Best and Wider 4G Coverage
  6. 6. 6 (1) Normalized Figures. (2) Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption. EBITDA¹ Margin (%) 28,4% 31,5% 33,5% 36,6% 38,5% 2014 2015 2016 2017 2018 Solid results with sustainable growth above market average TIM Brasil | Meeting with Investors Investor Relations -1.319 638 728 1.801 2.585 2014 2015 2016 2017 2018 EBITDA¹ - CAPEX (R$ 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 28.586 2014 2015 2016 2017 2018 1Q19 62.302 62.659 60.724 61.809 62.796 15.674 2014 2015 2016 2017 2018 1Q19 3,3% 3,1% 2,8% 2,3% 1,9% 1,9% 22,3% 21,5% 20,9% 19,7% 18,5% 17,6% 28,5% 29,1% 29,3% 29,4% 30,0% 30,0% 32,4% 33,6% 34,6% 35,6% 35,7% 36,2% 13,6% 12,7% 12,3% 13,1% 13,9% 14,0% 2014 2015 2016 2017 2018 1Q19 6,4% 6,0% 5,5% 4,4% 3,5% 3,5% 14,5% 14,1% 13,8% 13,0% 12,0% 11,6% 17,8% 18,7% 17,6% 17,8% 19,2% 19,3% 36,0% 37,7% 40,1% 41,1% 40,9% 41,4% 25,3% 23,5% 23,0% 23,8% 24,4% 24,2% 2014 2015 2016 2017 2018 1Q19 Nextel TIM Oi Claro Vivo In 2018, AMX released its numbers considering the impacts from IFRS 9 and 15. In 2019 the company used IFRS 16. TIM, Vivo and Oi released its numbers on a pro-forma basis in 2018, not considering the impacts of IFRS 9 and 15. In 2019, the companies used IFRS 9 and 15, but did not consider the impacts from IFRS 16.
  14. 14. 14 1Q19 RESULTS TIM Brasil | Meeting with Investors Investor Relations Financial results are presented considering impacts from IFRS 9 & IFRS 15 adoption, disconsidering impacts from IFRS 16 adoption. The normalized numbers reported in this presentation are adjusted by the effects listed below. Operating Costs and EBITDA normalized by adjustments to the sale-leaseback contract of towers (+R$ 1.5 million in 1Q19 and +R$ 220,000 in 1Q18). Net Income normalized by adjustments to deferred taxes (+R$ 30.3 million in 1Q19 ).
  15. 15. 15Investor Relations Quarter Highlights: Solid Results Despite Tough Headwinds (1) Client Generated Revenues. (2) Open Signal Research. EBITDA growing solidly 5.3% YoY to reach R$ 1.5 bln in Q1 Margin reached 35.7%, expanding 1.2 p.p. Strong results on cost efficiency: OPEX -0.2% YoY Excluding Bad Debt, OPEX would decrease by 2.4% YoY Mobile ARPU up 5.3% YoY, with CGR¹ growing 2.3% YoY Resilient growth amid tough macro and competition environments TIM Live Revenues at strong pace: +34.9% YoY Growth driven by ARPU (+14.4%) and user base (+18.3%) Anatel’s 2018 satisfaction survey shows TIM’s improvement Improving customer satisfaction for the 3rd consecutive year in mobile and leading the pack in ultra broadband Leadership in 4G mobile coverage and availability² FTTH coverage growing fast to reach 1.3 mln households TIM Brasil | Meeting with Investors
  16. 16. 16Investor Relations • GDP growth estimatesdown to <1.5% • Consumer confidence deterioration • Volatile job market recovery Operational Dynamics Working Despite External Challenges to Mobile Business 34 173 -43 Jan-19 Feb-19 Mar-19 Jobs creation (‘000) Source: CAGED. No support from economic recovery... ...and tough competition dynamics in prepaid • Regional attack offers from all players except TIM • Core acquisition offers with ~50% discount vs TIM • Aggressive incentives for first month and SIM card acquisition Control to Pure Migrations Postpaid Base Postpaid Gross Adds +18.4% +45.3% +11.4% Avg Recharge Ticket +11.9% Avg Spending by Recharger Demands to call center (Human Interactions) -33.4% Prepaid ARPU +1.6% (R$ 11.6/mo) TIM Pre Top offer achieving its preliminary objectives, while overall prepaid face some challenges (YoY) Postpaid acquisition and upselling still showing positive trends, amid a deceleration in net adds (YoY) Postpaid Churn Rate +0.1p.p Prepaid Churn Rate +0.2p.p +3.4% TIM Brasil | Meeting with Investors
  17. 17. 17Investor Relations TIM Agribusiness Solutions (IoT) – Planting the seeds… Opportunity • Agribusiness GDP: R$ 1.6 Tln • Primary production: R$ 400 Bln • Large farms >1.000ha • ~50k farms • ~100 Mln ha TIM Live ARPU (R$) UBB Customer Base (000) TIM Live Revenues (R$ mln) 71.1 79.6 1Q18 1Q19 +12.0% 410.7 485.7 1Q18 1Q19 +18.3% 82.9 111.8 1Q18 1Q19 +34.9% High value portfolio driving ARPU upward  >50% of sales above 100 Mbps  FTTH ARPU 17% higher than FTTC Larger coverage, more opportunity to grow  ~25% of sales come from outside RJ and SP  FTTH coverage grew 6x in a year Strong and consistent revenue growth  >30% revenue growth for 9 quarters  TIM Live represents ~50% of fixed revenues Solutions already implemented partnership to promote 700MHz 4G in countryside High Delivery on TIM Live While Developing New Revenues Opportunities TIM Brasil | Meeting with Investors
  18. 18. 18Investor Relations 0 1,149 182 2,100 262 2,245 2.1 GHz 1.8 GHz 1Q19 1Q18 1Q17 1Q19 Digitalization KPI’s NPS1 Infrastructure Development Puts TIM on the Right Track to Satisfaction (1) Internal data. 4G in 700 MHz (# Cities | % of Urban Pop.) Refarming Evolution: LTE (# Cities) 1,015 1,172 1,426 1,471 40.5% 56.2% 64.8% 65.7% 2Q18 3Q18 4Q18 1Q19 62% 66% 1Q18 1Q19 0.2 1.3 1Q18 1Q19 Backhaul (% Sites w/ High Capacity) FTTH Coverage (Mln Households) +4 pts 6.4x E-Billing Users E-Payment Users Meu TIM App Unique Users +14% (YoY) 2x (YoY) +54% (YoY) 6.7 6.8 7.1 2016 2017 2018 Prepaid 6.8 7.2 7.4 2016 2017 2018 Postpaid 7.2 6.4 TIM Market Fixed Broadband Total +6 pts Prepaid +6 pts Control +1 pts Postpaid +2 pts E-Recharges Anatel’s annual survey (General satisfaction) +7.3 p.p (YoY) Fiber Expansion: Transport and FTTH 4G Coverage and Capacity Expansions Ongoing Digital Transformation Signs of Improvements in Satisfaction TIM Brasil | Meeting with Investors
  19. 19. 19Investor Relations 1Q18 1Q19 1Q18 1Q19 21.6 22.8 1Q18 1Q19 Total Net Revenues Breakdown (R$ mln | %YoY) Mobile ARPU (R$ | %YoY) +2.3% -18.5% +11.6% +24.6% 4,120 4,191 +5.3% +1.7% Sustaining Revenue Growth Even with Tough Headwinds Pro-forma Client Generated Revs. Growth (%YoY) Postpaid Prepaid o Resilient Client Generated Revenues growing +2.3% YoY o Interconnection revenues down 29.9% YoY, reflecting MTR cut o Mobile Service Revenues grew 0.4% YoY o Fixed services growth driven by TIM Live (+34.9% YoY) o Service Revenues (Mobile + Fixed) up by 1.0% +9.3% -9.2% 1Q16 1Q17 1Q18 1Q19 Breakdown 65% 47% Postpaid Prepaid Non-TIM clients TIM Brasil | Meeting with Investors
  20. 20. 20Investor Relations 899 906 240 249 253 247 1,011 921 180 199 116 173 1Q18 1Q19 Normalized Opex Breakdown1 (R$ mln | %YoY) 2,698 2,694 COGS Traffic (Network & Interconnection) Process (G&A + Others) Selling & Mkt High-delivery on Efficiency Plan continues to be a key driver: 25% completion in 2019, more than compensating bad debt rise. Excluding bad debt, costs would have been -2.4% YoY in 1Q19. Bad Debt Personnel -0.2% Strong Execution on Cost Control Compensating Softer Revenues Bad Debt Action Plan Actions Status Collection Model revision with all collection agencies to improve credit recovery; Partially implemented Implementation of a Collection Portal, multi-channel with different payment methods; Implemented Improvements in billing systems to support new strategies, speed and control; Not implemented – in development Creation of a dedicated call center to treat early delinquency; Implemented New method of payment for Control plans. Implemented (1) OPEX normalized for the effects detailed in slide 2. NEW TIM Brasil | Meeting with Investors
  21. 21. 21Investor Relations Consistent Margin Expansion and Cash Generation (1) EBITDA normalized for the effects detailed in slide 2. 1.42 1.50 34.5% 35.7% 1Q18 1Q19 EBITDA1 EBITDA1 Margin +5.3% EBITDA & Margin Evolution1 (% | R$ bln | %YoY) 808 847 1Q18 1Q19 20% 20% +4.7% % Net Revenues EBITDA1 – CAPEX (R$ mln) Net Debt/ LTM EBITDA1 0.46x 0.35x 2,819 2,231 1Q18 1Q19 Net Financial Position (R$ mln) NFP Pro-forma Margin Evolution1 (%) 29.5% 30.2% 32.0% 35.5% 36.5% 1Q15 1Q16 1Q17 1Q18 1Q19 TIM Brasil | Meeting with Investors
  22. 22. 22Investor Relations Strategy and Vision Remain Solid with Adjustments to Recover Momentum Despite challenges… …fundamentals remain strong and ready for economic recovery… OPEX (YoY) - 0.2% EBITDA (YoY) + 5.3% EBITDA Margin 35.7% CGR (YoY) + 2.3% All Anatel’s Survey Metrics Improved …adjustments to our approach give confidence guidance bands are achievable. Efficient operation EBITDA at solid pace Consistent margin expansion Resilient client generated growth Evolving customer experience Reclaim offer/ communication innovation leadership Restore agile approach to accelerate decision making Refuel accountability culture to empower employees Focus on key areas of the business Reignite Growth MACRO COMPETITION TIM Brasil | Meeting with Investors
  23. 23. 23 STRATEGIC PLAN 2019-21 TIM Brasil | Meeting with Investors Investor Relations Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption.
  24. 24. 24 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
  25. 25. 25 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
  26. 26. 26 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
  27. 27. 27 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
  28. 28. 28 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.
  29. 29. 29 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
  30. 30. 30 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.
  31. 31. 31 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
  32. 32. 32 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 Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption.
  33. 33. 33 REGULATORY UPDATES TIM Brasil | Meeting with Investors Investor Relations
  34. 34. 34 Spectrum Distribution - Average MHz/Pop 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
  35. 35. 35 Public Consultation for new frequency auctions in 2019, according to Anatel Comments New spectrum bands under discussion that could be auctioned in March 2020 TIM Brasil | Meeting with Investors Investor Relations Frequency Left over from 2014 auction700 MHz 10+10 MHz (FDD) Spectrum 2.3 GHz 100 MHz (TDD) Potential clean-up would be needed to solve coexistence w/ satellite TV 3.5 GHz 300 MHz (TDD) 26 GHz 3,2 GHz (TDD)
  36. 36. 36 1Q19 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 • Approved Public Consultation • Regulatory Monitoring • Concession Agreements and PGMU V Public Hearing • Regulatory Monitoring (AM and BSB) Grant of Subsidies • PGMU IV – 4G localities Main Regulatory Topics TIM Brasil | Meeting with Investors Investor Relations 2Q19 May JuneApril Public Consultation • Tariff freedom and Local Areas • Propose of allocation of RF iin the “S-band” • Review of destination RF in the “L-Band“ • Update of technical requirements and test procedures applicable to product conformity assessment Radio Base Station Transceiver – AAS (Active Antenna System) for 5G • Spectrum for Radio Links Public Consultation • Regulatory Monitoring (Complemmentary) Public Consultation • Femtocells
  37. 37. 37 APPENDIX TIM Brasil | Meeting with Investors Investor Relations
  38. 38. 38 R$ Thousand Description 2016 2017 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) Gross Revenues 22.745.590 22.611.075 5.843.726 24.301.252 6.121.995 4,8% 5.824.357 24.232.405 6.104.071 4,8% Service Gross Revenues 21.367.819 21.433.515 5.588.822 23.064.619 5.836.173 4,4% 5.592.108 23.065.648 5.833.801 4,3% Mobile Service Gross Revenues 20.188.962 20.147.586 5.241.980 21.523.481 5.438.516 3,7% 5.244.855 21.531.779 5.437.748 3,7% Gross Revenue Fixed Services 1.178.856 1.285.930 346.842 1.541.138 397.657 14,7% 347.253 1.533.869 396.053 14,1% Product Gross Revenues 1.377.771 1.177.559 254.904 1.236.633 285.822 12,1% 232.249 1.166.756 270.269 16,4% Taxes and Discounts (7.128.176) (6.377.116) (1.704.505) (7.251.076) (1.913.244) 12,2% (1.704.505) (7.251.076) (1.913.244) 12,2% Taxes and discounts on services (6.647.565) (5.959.373) (1.605.787) (6.859.411) (1.809.384) 12,7% (1.605.787) (6.859.411) (1.809.384) 12,7% Taxes and discounts on product sales (480.611) (417.743) (98.717) (391.665) (103.860) 5,2% (98.717) (391.665) (103.860) 5,2% Total Net Revenues 15.617.413 16.233.959 4.139.222 17.050.176 4.208.750 1,7% 4.119.853 16.981.329 4.190.826 1,7% Net Revenues Services 14.720.253 15.474.142 3.983.035 16.205.208 4.026.789 1,1% 3.986.320 16.206.238 4.024.417 1,0% Mobile Service 13.968.489 14.687.055 3.778.092 15.345.672 3.795.962 0,5% 3.780.967 15.353.970 3.795.195 0,4% Client generated 12.557.567 13.379.590 3.424.186 14.056.512 3.506.428 2,4% 3.426.292 14.043.524 3.506.024 2,3% Voice Local (Usage and Monthly fee) 4.891.342 3.725.231 751.250 2.890.149 644.955 -14,1% 751.528 2.885.978 644.869 -14,2% Voice Long Distance 1.415.823 1.050.511 223.765 951.863 210.318 -6,0% 223.765 952.034 210.310 -6,0% Data and Content VAS 6.250.402 8.603.848 2.449.171 10.214.500 2.651.155 8,2% 2.451.000 10.205.512 2.650.846 8,2% Interconnection 1.061.019 835.198 197.689 712.194 138.551 -29,9% 197.689 712.194 138.551 -29,9% Other Revenues 349.903 472.267 156.218 576.966 150.983 -3,4% 156.985 598.252 150.620 -4,1% Fixed Service 751.765 787.087 204.942 859.537 230.827 12,6% 205.354 852.268 229.222 11,6% of which TIM Live 192.359 283.017 57.543 264.925 77.409 34,5% 82.904 375.691 111.848 34,9% Net Revenues Products 897.160 759.817 156.187 844.968 181.961 16,5% 133.532 775.091 166.409 24,6% Operating Expenses (10.408.046) (10.286.935) (2.669.202) (10.486.638) (2.674.318) 0,2% (2.698.592) (10.609.486) (2.695.552) -0,1% Personnel expenses (1.005.296) (956.416) (239.929) (1.031.569) (249.027) 3,8% (239.929) (1.031.569) (249.027) 3,8% Selling & marketing expenses (3.597.101) (3.494.192) (869.227) (3.518.049) (882.530) 1,5% (898.616) (3.625.918) (906.097) 0,8% Network & interconnection (3.773.782) (3.825.912) (1.011.029) (3.661.037) (920.706) -8,9% (1.011.029) (3.661.037) (920.706) -8,9% General & administrative (540.487) (548.481) (144.222) (578.878) (146.084) 1,3% (144.222) (578.878) (146.084) 1,3% Cost Of Goods Sold (975.959) (846.839) (180.306) (883.912) (198.633) 10,2% (180.306) (883.912) (198.633) 10,2% Bad Debt (266.442) (316.387) (115.715) (529.902) (174.943) 51,2% (115.715) (544.881) (172.610) 49,2% Other operational revenues (expenses) (248.979) (298.709) (108.775) (283.289) (102.396) -5,9% (108.775) (283.289) (102.396) -5,9% Operating Expenses (Normalized) (10.387.386) (10.284.883) (2.668.983) (10.487.479) (2.672.846) 0,1% (2.698.372) (10.610.327) (2.694.080) -0,2% EBITDA 5.209.367 5.947.023 1.470.019 6.563.538 1.534.432 4,4% 1.421.261 6.371.843 1.495.274 5,2% EBITDA Margin 33,4% 36,6% 35,5% 38,5% 36,5% 94,4% 34,5% 37,5% 42,5% 804,4% EBITDA (Normalized) 5.230.027 5.949.076 1.470.239 6.562.697 1.535.904 4,5% 1.421.480 6.371.002 1.496.746 5,3% EBITDA Margin (Normalized) 33,5% 36,6% 35,5% 38,5% 36,5% 97,3% 34,5% 37,5% 42,6% 807,4% Depreciation & Amortization (3.785.172) (4.013.671) (943.246) (4.124.567) (1.076.406) 14,1% (901.472) (3.954.321) (1.037.082) 15,0% Depreciation (2.084.041) (2.180.247) (519.052) (2.250.226) (565.972) 9,0% (519.052) (2.250.226) (565.972) 9,0% Amortization (1.701.131) (1.833.424) (424.194) (1.874.342) (510.434) 20,3% (382.420) (1.704.095) (471.110) 23,2% EBIT 1.424.196 1.933.352 526.773 2.438.971 458.026 -13,1% 519.789 2.417.522 458.192 -11,9% EBIT Margin 9,1% 11,9% 12,7% 14,3% 10,9% n.a. 12,6% 14,2% 10,7% n.a. Net Financial Results (410.880) (497.836) (170.260) (537.333) (121.221) -28,8% (170.260) (537.333) (121.221) -28,8% Financial expenses (1.156.485) (1.009.653) (243.443) (951.439) (175.550) -27,9% (243.443) (951.439) (175.550) -27,9% Net exchange variance (4.845) (748) (237) 1.373 526 n.a. (237) 1.373 526 n.a. Financial income 750.450 512.565 73.420 412.733 53.803 -26,7% 73.420 412.733 53.803 -26,7% Income Before Taxes 1.013.316 1.435.516 356.513 1.901.638 336.806 -5,5% 349.529 1.880.190 336.971 -3,6% Income Tax and Social Contribution (262.889) (201.009) (106.773) 657.619 (117.310) 9,9% (104.399) 664.911 (117.367) 12,4% Net Income 750.427 1.234.507 249.740 2.559.258 219.495 -12,1% 245.130 2.545.101 219.605 -10,4% Net Financial Results (Normalized) - - (170.260) (603.507) (121.221) -28,8% (170.260) (603.507) (121.221) -28,8% Income Tax and Social Contribution (Normalized) (272.509) (201.026) (106.773) (268.958) (87.025) -18,5% (104.399) (261.666) (87.081) -16,6% Net Income (Normalized) 761.466 1.236.543 249.960 1.565.664 251.253 0,5% 245.350 1.551.508 251.362 2,5% Historical Data: P&L TIM Brasil | Meeting with Investors Investor Relations Pro-forma (excluding the effects of IFRS 9, 15 and 16) Excluding the effects of IFRS 16
  39. 39. 39 R$ Million Description 2016 2017 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) Initial Net Financial Position 1.733 2.721 2.697 2.697 1.465 -45,7% 2.697 2.697 1.465 -45,7% EBITDA Normalized 5.230 5.949 1.470 6.563 1.536 4,5% 1.421 6.371 1.497 5,3% Capex (4.502) (4.148) (646) (3.901) (685) 6,0% (613) (3.831) (650) 6,0% EBITDA Normalized - Capex 728 1.802 824 2.662 851 3,2% 808 2.540 847 4,7% D Working Capital 25 579 (517) 357 (1.491) 188,4% (501) 403 (1.486) 196,6% Non recurring operating items (65) (2) - 1 (1) (0) 1 (1) 570,3% Operating Free Cash Flow Ex-licenses 688 2.379 307 3.019 (642) n.a. 307 2.944 (641) n.a. Clean UP 700MHZ - (859) (143) (143) - -100,0% (143) (143) - -100,0% Operating Free Cash Flow Reported 688 1.520 164 2.876 (642) n.a. 164 2.801 (641) n.a. Financial investments - - - - - - - - Asset disposal 140 15 - 2 - - 2 - Net impact of financial interests (672) (750) (215) (689) (145) -32,6% (215) (689) (145) -32,6% Taxes Payments (350) (297) (74) (213) (45) -39,2% (73) (213) (45) -38,4% Others impacts (334) (116) - (161) 380 (1) (86) 407 n.a. Net Cash Flow before dividends and change in equity (528) 372 (125) 1.815 (452) 261,6% (125) 1.815 (424) 239,2% Dividends (460) (333) - (588) (315) - (588) (343) Change in Equity - (15) 3 5 1 -66,7% 3 5 1 -66,7% Net Cash Flow (988) 24 (122) 1.232 (766) 527,9% (122) 1.232 (766) 527,9% Final Net Financial Position 2.721 2.697 2.819 1.465 2.231 -20,9% 2.819 1.465 2.231 -20,9% TIM Brasil | Meeting with Investors Investor Relations Historical Data: Cash-Flow Pro-forma (excluding the effects of IFRS 9, 15 and 16) Excluding the effects of IFRS 16
  40. 40. 40 Description 2016 2017 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) Mobile ARPU (R$) 17,9 20,2 21,6 22,4 22,8 5,4% 21,7 22,5 22,8 5,3% Prepaid 11,3 11,5 11,4 11,5 11,6 1,6% 11,4 11,5 11,6 1,6% Postpaid 37,7 39,7 40,0 39,9 38,2 -4,5% 40,0 39,8 38,2 -4,6% SAC/Gross Adds (R$) 29 40 48 46 56 17,8% 57 55 63 11,1% TIM Live ARPU (R$) 57,9 67,3 70,8 76,0 80,8 14,0% 71,1 74,9 79,6 12,0% CAPEX(R$ Mln) 4.502 4.148 646 3.977 685 6,0% 613 3.831 650 6,0% Organic CAPEX(R$Mln) 4.446 4.148 646 3.977 685 6,0% TIM Brasil | Meeting with Investors Investor Relations Historical Data: Financial Indicators Pro-forma (excluding the effects of IFRS 9, 15 and 16) Excluding the effects of IFRS 16
  41. 41. 41 Description 2016 2017 1Q18 2018 1Q19 1Q19 vs. 1Q18 (%YoY) Brazilian Wireless Subscriber Base (000`s) 244 236 236 229 229 -2,9% Estimated Total Penetration 118,04% 113,52% 112,98% Mobile Customer Base ('000) 63.418 58.634 57.894 55.923 55.083 -4,9% Prepaid 48.537 40.836 39.426 35.694 34.504 -12,5% Postpaid 14.881 17.799 18.468 20.229 20.579 11,4% 4G Users ('000) 16.866 27.611 29.546 34.488 35.580 20,4% Market Share 25,98% 24,80% 24,55% 24,40% 24,07% -2,0% Prepaid 29,47% 27,50% 27,16% 27,54% 27,25% 0,3% Postpaid 18,75% 20,23% 20,38% 20,31% 20,13% -1,2% Gross Additions (000's) 31.458 27.687 6.140 24.177 5.626 -8,4% Net Additions (000's) -2.816 -4.784 -740 -2.712 -1.159 56,6% Monthly Churn (%) 4,4% 4,5% 3,9% 3,9% 3,9% 0,0% Fixed Telephopny Customer Base ('000)* 524 676 739 897 946 27,9% TIM Live Customer Base ('000) 306 392 411 462 486 18,3% Handsets sold ('000) 1.276 1.115 265 1.080 246 -7,2% Smartphone Penetration (%) 72,8% 80,9% 82,1% 85,0% 85,7% 4,4% Total MOU 117 110 115 123 124 7,4% BOU 640 1.198 1.787 2.184 2.580 44,4% Employees 9.863 9.519 9.681 9.661 9.411 -2,8% *Base of Mar/2018 TIM Brasil | Meeting with Investors Investor Relations Historical Data: Operational Indicators
  42. 42. 42 Brazilian Telcos: Financial X-Ray 1Q19 TIM Brasil | Meeting with Investors Investor Relations TIM, Vivo and Oi: IFRS 9 and 15 AMX: IFRS 16 (2019) and IFRS 9 and 15 (2018) 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 4.191 4.120 1,7% 10.975 10.789 1,7% 8.940 8.848 1,0% 5.086 5.622 -9,5% 554 587 -5,7% 4.024 3.986 1,0% 10.376 10.450 -0,7% 8.595 8.734 -1,6% 5.040 5.575 -9,6% 551 570 -3,5% Mobile Service Revenues 3.795 3.781 0,4% 6.482 6.379 1,6% 3.027 2.976 1,7% 1.820 1.903 -4,4% 551 570 -3,5% Fixed Service Revenues 229 205 11,6% 3.894 4.024 -3,2% 5.632 5.758 -2,2% 3.220 3.672 -12,3% - - - 166 134 24,6% 598 386 55,1% 271 114 137,7% 46 47 -2,1% 3 16 -81,7% 1.497 1.421 5,3% 3.903 3.795 2,9% 3.307 2.645 25,0% 1.251 1.567 -20,2% 57 -5 n.a. 35,7% 34,5% 1,2 p.p. 35,6% 35,2% 0,4 p.p. 37,0% 29,9% 0,2 p.p. 24,6% 27,9% -3,3 p.p. 10,2% -0,8% 11,1 p.p. 650 613 6,1% 1.696 1.547 9,6% - - - 1.718 1.124 52,8% 26 26 1,8% Capex/Net Revenues 15,5% 14,9% 0,6 p.p. 15,5% 14,3% 1,1 p.p. - - - 33,8% 20,0% 13,8 p.p. 5% 4% 0,4 p.p. 847 808 4,7% 2.207 2.247 -1,8% - - - 520 443 17,4% 30 -31 - 2.231 2.819 -20,8% 1.279 3.084 -58,5% - - - 10.107 7.309 38,3% - - - Net Debt / EBITDA 12M 0,35 1,98 -82,5% 0,06 0,81 -92,2% - - - 1,8 2,6 -31,8% - - - 22,8 21,7 5,3% 29,5 28,6 3,1% 18,0 17,0 5,9% 16,1 16,3 -1,3% 53,0 55,1 -3,8% EBITDA - Capex Net Debt ARPU Oi Nextel Capex TIM Vivo Claro Total Net Revenues Service Revenues Products Revenues Organic EBITDA Organic EBITDA Margin
  43. 43. 43 Brazilian Telcos: Operational X-Ray Source: Anatel. TIM Brasil | Meeting with Investors Investor Relations 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY Mobile Customer Base (MM) 55,1 57,9 -4,9% 73,5 75,1 -2,1% 56,4 58,8 -4,1% 37,7 38,8 -2,9% 3,4 2,9 16,5% Market Share 24,1% 24,6% -0,5 p.p. 32,1% 31,8% 0,3 p.p. 24,6% 24,9% -0,3 p.p. 16,5% 16,4% 0,0 p.p. 1,5% 1,2% 0,2 p.p. Human Postpaid Customer Base ex-M2M (MM) 18,2 16,7 9,0% 32,3 30,8 4,9% 17,7 15,9 11,2% 9,0 7,7 17,2% 3,4 2,9 18,2% Market Share 22,5% 22,4% 0,0 p.p. 39,9% 41,4% -1,5 p.p. 21,9% 21,4% 0,5 p.p. 11,1% 10,3% 0,8 p.p. 4,2% 3,8% 0,3 p.p. Mix Postpaid 33,1% 28,9% 4,2 p.p. 44,0% 41,0% 2,9 p.p. 31,4% 27,1% 4,3 p.p. 23,8% 19,7% 4,1 p.p. 98,5% 97,0% 1,4 p.p. 4G Customer Base (MM) 35,6 29,5 20,4% 42,4 37,0 14,7% 31,9 24,7 29,5% 22,4 18,0 24,1% 3,3 1,1 188,9% Market Share 26,2% 26,7% -0,5 p.p. 31,2% 33,4% -2,2 p.p. 23,5% 22,3% 1,2 p.p. 16,5% 16,3% 0,2 p.p. 2,4% 1,0% 1,4 p.p. Mix 4G 65% 51% 13,6 p.p. 58% 49% 8,5 p.p. 57% 42% 14,7 p.p. 59% 46% 12,9 p.p. 96% 39% 57,4 p.p. NextelTIM Vivo Claro Oi
  44. 44. 44 228,9 MM (YoY) VIVO 32,1% +0,3 p.p CLARO 24,6% -0,3 p.p TIM 24,1% -0,5 p.p OI 16,5% +0,0 p.p Brasil (1Q19) 17,4 MM VIVO 37,4% -1,9 p.p TIM 21,7% +4,3 p.p CLARO 21,5% -2,7 p.p OI 19,3% +0,3 p.p NO 22,7 MM CLARO 37,7% +0,0 p.p VIVO 34,3% -0,6 p.p OI 15,7% +0,9 p.p TIM 11,9% -0,4 p.p CO 12,8 MM VIVO 47,1% -0,8 p.p CLARO 31,0% +1,2 p.p OI 13,3% 0,0 p.p TIM 8,3% -0,6 p.p RS 20,8 MM TIM 53,3% -0,5 p.p VIVO 19,8% -0,5 p.p CLARO 17,1% +0,2 p.p OI 9,5% +0,8 p.p PR/SC 21,7 MM VIVO 40,7% +2,0 p.p OI 21,7% -0,8 p.p TIM 20,9% -0,9 p.p CLARO 11,4% -0,5 p.p MG 23,1 MM VIVO 36,2% 0,0 p.p CLARO 28,5% -2,3 p.p TIM 15,5% +1,0 p.p OI 13,6% +0,4 p.p RJ/ES 35,8 MM VIVO 38,1% +3,0 p.p TIM 25,8% -2,4 p.p CLARO 19,6% -1,5 p.p OI 10,5% -0,5 p.p SP Cap 27,7 MM VIVO 34,5% -3,0 p.p CLARO 32,1% +0,6 p.p TIM 20,5% +1,0 p.p OI 8,2% +0,4 p.p SPInt Posição TIM: Líder 2ª 3ª 4ª 31,2 MM TIM 33,4% 0,0 p.p OI 30,0% +0,1p.p CLARO 26,2% -0,7 p.p VIVO 10,4% +0,7 p.p NE TIM Brasil | Meeting with Investors Investor RelationsSource: Anatel. Mobile Market Share 15,6 MM VIVO 34,6% +1,2 p.p OI 24,34% +0,2 p.p CLARO 21,59% -1,2 p.p TIM 19,4% -0,2 p.p BA/SE
  45. 45. 45 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).
  46. 46. 46 For further information | Investor Relations Vicente Ferreira E-mail: vdferreira@timbrasil.com.br Phone: +55 21 98113-1400 Bernardo Guttmann E-mail: bguttmann@timbrasil.com.br Phone: +55 21 98113-1408 Camila Assano E-mail: cacruz@timbrasil.com.br Phone: +55 21 98113-4236 Lucas Carneiro E-mail: lmcarneiro@timbrasil.com.br Phone: +55 21 98113-1141 Guilherme Kopke E-mail: gknascimento@timbrasil.com.br Phone: +55 21 98113-0583 Visit our Website www.tim.com.br/ir E-mail: ri@timbrasil.com.br 850 João Cabral de Melo Neto Avenue – South Tower - 12th floor Barra da Tijuca – 22775-057 – Rio de Janeiro, RJ

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