3. Brazilian TLC overview
More political interventions over regulatory agents
1 Regulatory changes to allow TLC companies merge (OI & BRT)
Political and Pressure by Government for Telecom services universalization and digital inclusion
Regulatory Taxes and interconnection tariff discussions
Widening the competition: Number Portability (already in place), Wi-Max and
Unbundling (to be discussed)
2
Mobile and broadband as main drivers for market growth
Telecom Market Modest growth in the fixed market (mainly due to low competition)
Increasing bundle offers (following the ‘one-stop-shop’ concept)
3 National consolidation of the main players
Tough competition remains in mobile with aggressiveness in promotions
Competitive
Huge opportunity in the broadband market due to strong demand
Landscape
Alternative operators and NP brought competition to the fixed market
Horizontal expansion aiming convergent offers 3
4. 1
Brazilian TLC overview: Political and Regulatory
2009-10 Scenario Impacts for TIM
Agreement among fixed and mobile VU-M rates expected broadly stable with
Interconnection operators until mid-2009 possible elasticity effect on traffic to exploit
tariff (VU-M) New regulatory rule by 2010 (Full Lower interconnection dependency due to
Allocated Cost model) better traffic mix and convergent offers
Full implementation by the end of Mobile: efforts to improve quality (call center,
Number Portability coverage) and loyalty as a competitive
1Q09
(Fixed and Mobile) advantage
Widening competition Fixed: opportunity with convergent offers
Anatel’s loan facility at a higher cost License payment: up front in 4Q08 (R$1.2bn)
Coverage obligation (service 2009 coverage roll-out balancing value and
3G license universalization and digital inclusion) regulatory obligations
“H” band to be auctioned CAPEX and OPEX impact
Complementary vehicle for Broadband More capacity / frequency for BB offer
Auction expected for 2009 (more than
Wi-Max license Delayed Wi-Max commercial launch
2 years of delay)
Widening competition Opportunity in a niche market
Updated rules to become
commercially viable Allowing a fair competition in the fixed and
Unbundling Implementation expected for 2010 broadband market for TIM
Widening competition
4
5. 2
Brazilian TLC overview: Telecom Market
TLC Subscriber Market TLC Revenue Market
Million of lines Billion of R$
10
16 5
~50%
BB Mobile 3 1 ~50% 11
~17% BB Mobile
BB Fixed 10 BB Fixed 8 ~10%
Mobile ~5%
50
194 43
~10%
Mobile 144
Fixed 43 ~2% 46
Fixed 41 ~3% 45
2008 CAGR 2011 2008 CAGR 2011
Strong growth driven by Mobile BB fueled by market PC boom and low penetration ratio
Universalization of mobile service (~100% penetration by 2011)
Fixed market growth fueled by increase of competition
Source: internal estimates 5
6. 3
Brazilian TLC overview: Competitive Landscape
TIM Telefonica/Vivo (1) Embratel /Claro Oi (2)/Brasil Telecom
Player Footprint
National fixed
Long distance
license acquired
incumbent
in may / 07
25% 30% 25% 19%
Market share (4)
Mobile
(35.2 MM) (42.3 MM) (35.7 MM) (27.1 MM)
Fixed ~0.4% ~30% / ~90%(3) ~12% ~55% / ~85%(3)
Broadband ~4% ~25% ~22% ~40%
(1) Including Telemig Celular
Mobile + Fixed Incumbent (2) Including Amazonia Celular
(3) Considering its regional presence 6
Mobile (4) 3Q08 figures
Source: company reports
8. TIM Strategy: Convergence through mobile network
Strategy Actions Key Objectives
Focus on partnership with other operators of the new TMT Market share of ~24% in
chain (content & 4-Play) 2011 with focus on value
Mobile:
Reinforce TIM cutting edge positioning on data offers
“Customer
(through Smartphones: iPhone, Blackberry and etc)
Centric" Defend revenue share
Invest in CRM capabilities improving customer life - cycle
Approach management
Recovering brand awareness
Selective approach by segment and geography
BB Users (Mn)
Flexible/simple tariff plans (“no-frills”)
30% contribution to
Push on Smartphone and 3G devices -new Wi-Fi devices growth on service
revenue ~ 2.5
Mobile BB Lower PC entry level
Growth New specialized kits for mass market distribution 0.5
Development of IM, social networking, mobile advertising '08 '11
Innovative Offerings TIM Fixo Customers (Mn)
Homezoning Best value for price (VAS included)
7% market share
Offers > 3.0
New packages for heavy users
through 0.2
TIM Fixo Packaging TIM Fixo + Mobile BB
Distribution (telesales, kiosks, and door to door approach) '08 '11
8
9. TIM Strategy: Roadmap to a Convergent Company
...2006 2007 2008 2008...
MOBILE Strengthening our mobile
business
+
Capturing opportunities on fixed
TIM fixed Number voice services through number
FIXED license portability portability
TIM Casa TIM Casa Flex TIM Fixo
+
Competing on broadband market
TIM 3G with mobility concept
INTERNET license
TIM Web Widening portfolio
TIM Web Broadband
+
Strengthening partnership in
Partnership in Pay TV offers
Pay TV
=
Convergent Company
Increase customer's share of
wallet through bundle offers
9
10. TIM Strategy: Efficiency
Actions Financial objective
Commercial Efficiency Commercial cash cost as % of
service revenues
New commissioning model increasingly oriented on
>2pp reduction
acquisition quality and value, leading to higher efficiency of
in 2011 from 2008 level
customer investments
Subsidy strategy increasingly focused on high user segment Bad debt as % of service revenues
Bad debt reduction to industry benchmark leveraging on new
From ~6% in 2008
control rules/ stricter credit analysis
to ~4% in 2011
Structural Efficiency Industrial (Network and IT) costs per
customer per year
Optimize transport network infrastructure (partnerships vs.
make or buy) Slightly decrease
Maximum exploitation of IT platforms synergies with Telecom
G&A & labour cost as % of serv. revs.
Italia
Tight G&A cost control ~1pp reduction
Harvest Human Resources efficiency in 2011 from 2008 level
10
11. TIM Strategy: paving a sustainable growth
TIM became part of Bovespa’ s Corporate Sustainability Index (ISE)
On December 1st of 2008, TIM became part of the new portfolio of
Bovespa’s Corporate Sustainability Index (ISE);
ISE is composed by 30 companies out of 394 traded at Bovespa,
comprising only the companies with a strong
commitment to sustainability and social responsibility;
ISE is based on the international concept of the Triple Bottom Line (TBL), which makes an integrated assessment
of companies’ social, environmental and financial elements;
Underlining TIM’s commitment on a constant relationship improvement among all its stakeholders and
strengthening its environmental indicators performance;
Recognized as one of the national companies more committed to management transparency and which contributes
to the development of a fair social system, environmentally balanced and economically prosperous.
11
13. 3Q08 Results: Subs and Market Share
Subscribers base (Mn) Revenue vs. Market share
20.7% Market Revenue
share Share*
33.8 35.2
31.3 32.5
29.2
25% 28%
24.5 25.8 27.0 28.4
22.6
6.6 6.8 6.8 6.8 6.8
3Q07 4Q07 1Q08 2Q08 3Q08 TIM Competitors
Source: Anatel and internal estimates
Post-paid Pre-paid * net service revenues
Pre-paid growth supported by on-net promotions and naked A selective approach on subscriber base growth, with focus on
SIM-Card sales (>50% of total gross adds) profitability and a strict disconnection policy;
Post-paid
Capturing additional value from subscriber base through cross-
. Selective approach on acquisition with focus on value and quality
selling offer
. Commercial focus on retention
. Launch of new premium customer care channel
13
14. 3Q08 Results: Commercial activities
Commercial activities roadmap in 3Q08 VOICE: Remodeling tariffs and promotions dynamics
Post-paid focus with
smartphone ► Change in promotions conditions aiming profitability
‘Nova Tarifa Zero’
Stimulating VAS traffic ► Shortening promotion validity
‘Mega TIM Torpedo’
► Handset subsidy value oriented (on retention and acquisition)
Post-paid focus Pre-paid
► Stimulating customer’s recharges through promotional bonus
‘Tarifa Zero’ reinforce offer
‘Use e Ganhe’
VAS: Push on innovative services
► Segregate VAS promotion from voice
JUL/08 AUG/08 SEP/08 OCT/08 ► Stimulating usage through data package offer
► VAS empowered by 3G roll-out
► Further enhance partnerships
TIM + ASUS
Enhance partnership
CONVERGENCE: Strengthening our portfolio
‘TIM Web’ Broadband
Convergent offer
‘TIM FIXO’ launch ► Widening our TIM Web plan to address different needs
Convergent offer
► Focus on number portability opportunity
► Cross-selling convergent offers via TIM Web, TIM Fixo and
‘TIM TV 3G’
Innovative service Mobile
14
15. 3Q08 Results: KPI’s performance
ARPU MOU
R$ Minutes
-13% +7%
34.0 100 101
29.5 29.8 29.7 94 94
3Q07 1Q08 2Q08 3Q08 3Q07 1Q08 2Q08 3Q08
SAC BAD DEBT
R$ R$ Mn 275 as % of net service revenue
-14% 272
-7%
~119* ~95** 203
~60**
129 117 119 110
177
156 143 143
3Q07 1Q08 2Q08 3Q08 3Q07 1Q08 2Q08 3Q08
9.6% 9.6% 6.8% 4.7%
15
* Impact from write-off of receivables in 3Q07 **Impact from telesales channel in Q1 and Q2
16. 3Q08 Results: Net Revenue and EBITDA performances
Total Net Revenues EBITDA and EBITDA margin
R$ Mn R$ Mn Additional bad debt impact
3,358 12%
3,163 2,993 3,186
800
715 697
630 ~60
~173*
~95
2,971 3,066
2,878 2,838
535 637
542
285 155 215 292
3Q07 1Q08 2Q08 3Q08 3Q07 1Q08 2Q08 3Q08
Net Service Revenue Net Handsets Revenue
YoY 1Q 2Q 3Q Reported Margin
17.1% 17.9% 20.0% 23.8%
Total net revenue +5.3% +4.1% +6.1%
Adjusted Margin
Service revenue +6.6% +6.8% +6.5%
22.2% 21.1% 21.9% 23.8%
Handset revenue -14.5% -22.4% +2.3%*
*Impact from write-off of receivables in 3Q07: R$119 Mn in bad
16
* -14% adjusting for write-off of receivables in 3Q07 debt and R$55 Mn in handset revenue
17. R$ Mln
3Q08 Results: EBITDA YoY performance
132.1 9.5 799.8
715.1 (173) 187.8 6.6 (40.3)
(80.6)
42.6
542.1 (48.4) If adjusted by write- 13.0 If adjusted by write-off
off of receivables in 3Q07 of receivables in 3Q07
Adjusted Receivables Reported Service Handsets Selling Network COGS Bad Debt Other EBITDA
EBITDA Write-off EBITDA Revenue Revenue Expenses Expenses Expenses 3Q08
3Q07 3Q07
Change
+6.5% +2.3% +6.0% +8.1% -10.1% -48.0% -3.8%
% YoY
22.2% 17.1% 23.8%
Adjusted Reported
EBITDA Margin EBITDA Margin 17
23. “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 http://www.timpartri.com.br
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
Phone: +55 21 4009-3742 / 4009-3446 / 4009-4017
Fax: +55 21 4009-3990
23
