1) TIM's 1Q16 results showed a challenging macro environment but signs of a turnaround with operational metrics stabilizing. Service revenues fell 8% YoY due to regulatory impacts while data usage grew strongly.
2) The company launched initiatives to offset regulatory impacts and adapt its portfolio, focusing on bundling, recurrence, and improving the customer experience to increase ARPU. A workforce restructuring program achieved 40% of targeted efficiency savings.
3) Infrastructure expansion continued with 4G coverage growing, while data traffic and revenues increased sharply. The efficiency program will be further accelerated to drive over R$1 billion in savings through 2017.
Osisko Development - Investor Presentation - June 24
Results Presentation 1Q16
1.
2. 2
Results Presentation
Investor Relations
Tough 1Q16 still reflects challenging macro scenario, but points to a beginning of
turnaround in operational metrics
Operational
Results
1Q16
Net Postpaid Portability
(# of lines)
Customer Base per Technology
(% of users over total base)
1 Normalization is related to transformation costs/expenses in HR and G&A
Service Net Revenues
(YoY%) (R$ million)
Normalized¹ EBITDA
MOU – Minutes of Use
(Minutes per user per month)
1Q15 2Q15 3Q15 4Q15 1Q16
MTR Impact
-R$142 mln
Industry Reshaping
- Traditional revenues: -20% YoY
- Innovative revenues +26% YoY
- Prepaid base reduction
LTM effect of 2015 inflation
GDP decline
Lower consumer confidence
• Restructuring’s costs
• Short term impact of
new offer
• Tax impacts
-4%
-5%
-7%
-8% -8%
1Q15 2Q15 3Q15 4Q15 1Q16
Trend
stopped
1,344 1,287 1,296
1,475
1,162
1Q15 2Q15 3Q15 4Q15 1Q16
-13.5%
BOU – Bytes of Use
(MB per data user per month)
120 119
1Q15 1Q16
340
502
1Q15 1Q16
+48%
stable
31%
55%
14%
1Q15 2Q15 3Q15 4Q15 1Q16
2G & Other 3G 4G
3. 3
Results Presentation
Investor Relations
Fast reaction in multiple fronts, positioned for recovery path
Keep investment
focus
+394 new cities
with 4G vs. 1Q15
4G
leadership position
Increasing customer
base value
Off-net to all plans
& focus on
mobile bundle
Defending results
from tax impact
Actions
to offset
ICMS increase
Workforce
Restructuring program
Adapting
to market reality
Company
repositioning
New brand launch:
quality,
innovation,
customer experience
~10% of customer
base in the new
portfolio
Price
repositioning to
compensate tax
Rightsizing
workforce
On track with
Efficiency Plan
> R$ 1 bln in
efficiency
(2015-17)
~40% of program
achieved in 1Q16
New phase
launched in 2Q16
Infrastructure Offer Portfolio Efficiency Actions Positioning
4. 4
Results Presentation
Investor Relations
63
439
1,414
1,860
1Q15 1Q16
Infrastructure deployment towards data continues unabated
Coverage
Capacity
Quality
82% of urban
population with 3G
and 60% with 4G
#1 in 4G coverage
89% of total sites
within our own
infrastructure
Continuously
improving network
quality
Sites
Connected
with Fiber
Cities Sites (000)
194
Cities with MBB Project
94%
97%
95%
Feb-15 May-15 Aug-15 Nov-15 Feb-16
90%
97%
80%
Feb-15 May-15 Aug-15 Nov-15 Feb-16
Mobile
Broadband
Instant
Speed1
Mobile
Broadband
Average
Speed2
1 SMP10: Measures connection speed at any given time
above Anatel’s target. Minimum required of 95% of
measurements above target.
2 SMP11: Average connection speed registered within
the month. Required to provide at least 80% of the
contracted speed.
Anatel’s target
+32%
~3,800
~4,800
1Q15 1Q16
+26%
10.7
12.5
1Q15 1Q16
4G
3G
+17%
4G
3G
7x 4.0
8.0
2x
5. 5
Results Presentation
Investor Relations
28% market
share
Data reaccelerating, driven by 4G
Fast growing on 4G
Changing
revenue profile
Data penetration increase Traffic acceleration
(BOU: bytes of use per data customers)(million users)
4G penetration
3G penetration
Innovative Revenues
(R$ bln; YoY growth)(R$; YoY growth)
Source: Anatel
340
502
1Q15 2Q15 3Q15 4Q15 1Q16
26% 48%YoY Growth
(3G & 4G user over customer base)
Source: Anatel
Data ARPU
1.0
1.3
1Q15 1Q16
5.7
7.4
1Q15 1Q16
68%
+13pp YoY
Smartphone
penetration
+29% +26%
3.0
9.2
1Q15 2Q15 3Q15 4Q15 1Q16
~55%
~14%
1Q15 1Q16
6. 6
Results Presentation
Investor Relations
Base New OfferBase New Offer
New portfolio presenting positive results
Mobile number portability update
Improving Quality of Revenues…
ARPU improvement
in all segments 10% of total
base in the new offer
% of new offers over gross adds
Prepaid ARPU Postpaid ARPU
(postpaid users)
(R$) (R$)
17%
20%
1Q15 1Q16
Postpaid mix
63%
65%
nov/dec-15 1Q16
(postpaid and control users)
7. 7
Results Presentation
Investor Relations
POSTPAIDPREPAID
Portfolio evolution: a better experience leading to higher ARPU
TIM PRÉ 150
R$7/week recurring
150MB + 100min off-
net + SMS
TIM PRÉ 500
R$10/week
recurring
500MB + 100min off
+ Deezer
TIM PRÉ Classic
R$8/week
recurring
250MB + unlimited
on-net + SMS
TIM PRÉ 1GB
R$35/month
recurring
1GB + 400 min off-
net + SMS
CONTROLE
TIM CONTROLE
R$50/month
1.5GB + 500min off-
net + WhatsApp
TIM PÓS
R$139/month
5GB + 1,000min off-
net + WhatsApp
Recurrence as base of all
propositions
VALUE BASE
Offer segmentation to
improve convenience
Better customer experience
for higher ARPU
New
Portfolio
Evolution
TIM PRÉ 300
R$10/week recurring
300MB + 100min off-
net + SMS
TIM PRÉ 150
R$7/week
recurring
150MB + 100min off-
net + SMS
TIM CONTROLE
R$50/month
1GB + 500min off-
net + WhatsApp
TIM PÓS
R$99/month
2GB + 1,000min off-
net + WhatsApp
New
Portfolio
at
launch
Upselling to improve
profitability
8. 8
Results Presentation
Investor Relations
1Q15 1Q16
Revenue transformation continues
Business Generated Revs MixData Revenues MixData Growth Reacceleration
MTR Cut - Last year of material impact
Total Net Revenues (R$ bln; % YoY)
4.55
3.85
+26.3 %
-20.3% -34.8% +14.3%
-61.2%
1Q15 Innovative
Services
Traditional
Services
Incoming Fixed
Business
Handsets 1Q16
21% 21%
17%
9%
14%
1Q15 2Q15 3Q15 4Q15 1Q16
(% YoY)
SMS
Innovative
Services +26 %
-37 %
Mobile Net Service Revenues (R$ bln; % YoY)
-5.4%
ex-MTR
Revenue
Exposure
39%
47%
61%
53%
1Q15 2Q15 3Q15 4Q15 1Q16
Data
MTR
Impact
Voice
3.79
3.58
3.44
(% of business generated net revenues)
1Q15 1Q16
-9.2%
(VAS net revenues mix; % YoY)
~7%~10%
9. 9
Results Presentation
Investor Relations
26.2%
20.1%
1.6%
-2.8%
-9.0%
-22.1%
-61.3%
7.1%
-4.3%Personnel
Efficiency plan on track and to be further accelerated
Normalized1 Opex Performance Ex-COGS (R$ mln)
2,550
2,438
41
1Q15 Growth Inflation ITX Efficiency Plan 1Q16
Efficiency Plan Status (2015-2017)
Jan/15 Dec/17
> R$1 bln
Mar/16
~ 40%
Recurring
% YoY
-4.4%
Reported
%YoY
1 Normalization is related to transformation costs/expenses in HR and G&A
-2.8%
Transformation
Impact
Normalized for
HR additional
costs (R$33 mln)
Opex in
details
(% YoY)
Selling & MarketingITX & Network
G&A
COGS
Bad Debt
Commissions –9.6%
Fistel (Condecine
and Net Adds) +8%
Leased Lines -16%
Mobile ITX -21%
Power & Rental: +27%
Normalized for
Headquarters
relocation costs
(R$8 mln)
Products
Margin +63%
Bad debt / Gross
Revenues 1.2%
Normalized1
-
> R$90 mln
Annual
Run rate savings
~R$7 mln
Leased Lines and
other net. exp.
> R$200 mln
+
Others Costs
10. 10
Results Presentation
Investor Relations
Process
Improvement
Digging deeper into cost reduction – Efficiency Program 2.0
Optimization /
Control
Strategic
Sourcing
Organization/
Rightsizing
and Efficiency
Process
Improvement
Business
Model
Changes
> R$1 bln in savings
Jan/15 Dec/17
Business
Model
Changes
• 3 years program
• Between R$ 300-350 mln per year
Mar/16
Corporate Efficiency Plan
Additional Efficiency & Cost Restructuring
• Enhancement of corporate efficiency program;
• Additional efforts in Sales & Marketing (commissioning
model and advertising);
• Full cash cost approach;
+Sales & MKT
New
Approach
Optimization /
Control
+
Strategic
Sourcing
+
Organization/
Rightsizing
and Efficiency
+
~ 40%
11. 11
Results Presentation
Investor Relations
1.34
1.12 1.16
-8% -1% +63%
+41 mln
1Q15 ∆ Other
OPEX
Products
Margin
1Q16 Reported Transformation
Costs / Expenses
1Q16 Normalized
1Q15 1Q16
317
128
1Q15 1Q16
Defending margin despite tough environment
Net DebtNet Profit
MTR Cut - Last year of material impact
EBITDA Evolution (R$ bln; % YoY)
EBITDA
Margin
29.1%29.5%
Normalized1 EBITDA (R$ bln; % YoY)
Normalized¹ EBITDA Exposure
-9.1%
ex-MTR
-60%
7.9
3.5
4.4
Debt Cash Net Debt
(R$ bln)
Net Debt / 12M EBITDA: 0.54x
MTR
Impact
1.34 1.16
1.22
1 Normalization is related to transformation costs/expenses in HR and G&A
(R$ mln)
Voice & Data
Contribution Margin
Impact of off-net offers, investment
for repositioning & future growth
-13.5%
30.2%
-16.6%
-13.5%
1
~14% ~8%
12. 12
Results Presentation
Investor Relations
Conclusion & Outlook
Less impact from
MTR
-8.7% -9.2%
4Q15 1Q16 2Q16 3Q16 4Q16
-5.3%
-13.5%
4Q15 1Q16 2Q16 3Q16 4Q16
Mobile Service Net Revenues
(%YoY)
Normalized¹ EBITDA
(%YoY)
1 Normalization is related to transformation costs/expenses in HR and G&A
Headwinds should gradually reduce…
Traditional business
stabilization
Data services
resuming growth
Better customer
base mix
Continuous cost
efficiency program
intensified
Keeping focus on
Infrastructure