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Tim results presentation 2 q17
- TIM Brasil reported financial and operational results for the second quarter of 2017, highlighting improvements across key metrics. Mobile service revenues grew 5% year-over-year driven by higher postpaid subscriber additions and a shift to higher-value customers. EBITDA margins expanded significantly to 15.5% due to revenue growth and cost optimization efforts. The company's 4G network coverage also expanded rapidly, reaching over 1,850 cities during the quarter.
Tim results presentation 2 q17
- 2. 2 Results Presentation Investor Relations -33 211 445 509 1Q162Q16 1Q17 2Q17 2Q Main Highlights: Accelerated Recovering Path Postpaid Net Adds in New Rhythm (Thd lines) Mobile Net Service Revenues (%YoY) ¹ Normalized for towers sale and other items EBITDA¹ Growth (%YoY) 1H Net Adds 178K 954K 4G Coverage Leadership Enhancement (Cities covered with LTE) 579 1,850 2Q16 2Q17 3x -6.8% -3.0% -1.5% 3.7% 5.0% 2Q16 3Q16 4Q16 1Q17 2Q17 -6.5% 0.5% 5.8% 8.7% 15.5% 2Q16 3Q16 4Q16 1Q17 2Q17 5x +22 pp +12 pp 80% Coverage in June Source: Anatel
- 3. 3 Results Presentation Investor Relations PortfolioEvolution: More Focus on Postpaid and Changing Prepaid Profile Launched in June, 2017 No price change (same as 2016) Reinforce communication with postpaid users: back to top brand awareness ranking after 18 months Gathering all benefits into one plan Offering Service + Handset with lock-in Unlimited Calls Weekly plan focus : 40% of gross additions in 2Q (> 50% in July) Top-up incentives campaigns Facebook partnership: dedicated monthly package for R$ 9.90 Pure Postpaid Prepaid Partnering to produce content, shows, festivals and singers Additional features for the music platform differential Smartphone with 12m retention and no subsidy 500 minutes 2 GB of internet
- 4. 4 Results Presentation Investor Relations 28% 43% Jun/16Jun/17 Customer Base Evolution: Focus on Value vs Volume User Base and Acquisition Dynamics (Net MNP ‘000; base mln lines; EoP) Positive MNP balance against all players in every region Pre to Post migrations remain strong 2x User Base Evolution (mln lines; EoP) -10% Strict disconnection policy Avoiding one-off effects Recurring Offers Over Gross Adds (%) Prepaid Value vs Volume Postpaid Gaining Traction Recharge by Segment (%) ARPU Breakdown (%) Gross Adds + Migrations (Pre-Post) (lines; % YoY) +32% 2Q16 3Q16 4Q16 1Q17 2Q17 13.8 15.8 Base MNP Old New Portfolio Old New Portfolio Postpaid Controle Postpaid Pure +25% +11% 2Q16 2Q17 Source: user base data from Anatel ¹TIM Pre recurring +20% gross adds after TIM Black launch 25% 40% 2Q16 2Q17 + 15% YoY >50% in July TIM Pre¹+Turbo TIM Infinity Young 50.2 49.0 48.5 46.5 45.0 2Q16 3Q16 4Q16 1Q17 2Q17 Market: -10%
- 5. 5 Results Presentation Investor Relations NetworkEvolution: 4G Fastest Roll Out 4G Cities Coverage Evolution (# of cities) 4G Traffic Evolution (% of traffic generated by 4G devices) 80% of urban pop. covered >90% sites w/ proprietary backhaul 528 new cities in 2Q Enhancing Capacity and Efficiency with 1,800 MHz & 700MHz (bandwidth serving 4G) 2,600 MHz 1,800 MHz 700 MHz Larger spectrum availability for 4G Client is limited to a fraction of 4G network capacity Client is able to access full 4G network capacity Carrier Aggregation Strategy Utilizing multiple bandwidth strategy to promote capacity increase and higher speed experience 1x 2x >4x Coverage in km 48% 71% 2Q16 2Q17 # 1 coverage 1,276 1,291 1,322 1,360 1,465 1,850 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17
- 6. 6 Results Presentation Investor Relations Network:Speeding Up 4G Under 700 MHz 10 states capitals activated with 700 MHz Sites with 2.6 MHz Sites with 1.8 MHz Sites with 700 MHz Signal Propagation Effect Before x After 700 MHz Continues Refarming of 1800 MHz SpeedTest – 4G 1,800 MHz Download rate 4G traffic increased 65% in Brasilia after the full speed operation of 700 MHz Reaching Rio de Janeiro State and São Paulo interior (from 10 MHz to 15 MHz) HD Voice (VoLTE) For The Customer Launched in cities with 700 MHz availability For New Revenues and Costs Optimization 100% service transparency Improved voice quality Faster Call Setup Optimization of the battery life Improved indoor coverage IMS platform available for new services Increase the voice coverage area: WiFi + LTE 700 MHz VoLTE spectrum efficiency Simplified the network architecture Infrastructure reutilization for VoLTE, WiFi Calling and other services Download speed enhanced 60% 6/1/17 6/8/17 6/15/17 6/22/17 6/29/17 7/6/17 7/13/17 10 MHz 15 MHz (Mbps)
- 7. 7 Results Presentation Investor Relations Strongrevenue performance backed by solid user base expansion. High value customer mix is boosting ARPU levels. Investments in customer experience and network quality are perceived by the clients. +23% User Base (‘000) Net Revenues (R$ mln) User Base Mix (>=50Mb) (Volume ‘000) ARPU (R$) ANATEL Satisfaction Survey (2016, General Satisfaction in points; 0-10) Netflix ISP Speed Index (Jun/17, Mbps) Leader 23x in the last 26 months TIM Live: Another Great Quarter For the Ultra Broadband Business 284 348 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Growth Value Offer Customer Experience +11% +32% +11% P1 P3 P6 P4 3.2 3.1 2.9 2.4 2.1 #1 net adds in SP & Rio (Apr/May) 7.8 7.1 6.9 6.8 5.3 TIM P3 P1 P8 P4 7.4 6.8 6.6 6.3 5.9 TIM P7 P3 P6 P1 Rio de Janeiro São Paulo
- 8. 8 Results Presentation Investor Relations ContinuousRevenue Recovery: New Trajectory Confirmed +7.5% YoY Data on Mobile Net Service Revenues (% of VAS Revenues over MSR) Business Generated (excl. incoming rev.) (%YoY) MTR Exposure (% VU-M/Service Revenues) ARPU (R$) - 210 bps Net Service Revenues (%YoY) 3,570 +5.0% +6.6% 3,750 2Q16 Mobile Fixed 2Q17 45% 60% 2Q16 3Q16 4Q16 1Q17 2Q17 +5.0% -4.0% 7.5% 2Q16 3Q16 4Q16 1Q17 2Q17 5.8% 3.7% 2Q16 3Q16 4Q16 1Q17 2Q17 +15.5% YoY ARPU outgoing +12.6% YoY 17.22 19.38 2Q16 2Q17
- 9. 9 Results Presentation Investor Relations COGS 456444 922 952 966 924 273 232 2Q16 2Q17 Opex: Second Quarter in Details 2,616 2,552 -2% • Trend following reduction in prepaid handset sales and targeted lock-in contracts expansion. • ITX: lower cost after MTR (VU-M) cut partially offset by off-net traffic growth and negative one-off impact of TU-RL dispute*. • Rental & Power: growth driven by network expansion . • Network: positive one-off impact of 639 resolution* (already booked starting from 4Q16) and structural lower leased line costs (EILD). • Stronger postpaid sales (+32%) driving SAC increase. • Higher postpaid CB (+15%) generating increase in customer management opex (customer care, billing and collection, bad- debt), partially offset by efficiencies. • Positive impact from recharge channels revision Traffic Market Process COGS Traffic (Network + ITX) Marketing (Selling & Market + Bad Debt) Process (Personnel + G&A + Other) -15% -4% +3% -3% • Lower process driven costs mainly due to third party services contracts renegotiation, FUST/FUNTTEL reduction partially offset by higher personnel costs Efficiency Plan Recap (R$ bln) Normalized Opex Breakdown Analysis (R$ mln; %YoY) "Original" Plan 2016-18 Realized until 2016 Residual Savings Additional 2017-19 New Plan 2017-19 Efficiency Plan Completion (%) Main Actions • Digitalization of business and administrative processes • Sales channels redesign • Project zero leased lines • IT and Network vendors rationalization • Zero based budget 20192017 2018 ~60% R$1.1 blnR$0 1.7 -1.2 0.5 0.6 1.1 * The one-off events offset each other with no impact on EBITDA
- 10. 10 Results Presentation Investor Relations 74 219 2Q162Q17 26% 21% 32% 35% 2Q16 2Q17 EBITDA and Profitability: Cash Generation Normalized EBITDA¹ yearly Evolution (%YoY) Normalized EBITDA¹ (R$ mln) Normalized EBITDA¹ – CAPEX as % of Revenues (R$ mln; %) Normalized EBIT¹ Margin (R$ mln; %) Reported Net Income (R$ mln) 253 399 2Q16 2Q17 10.1% 6.6% EBITDA -CAPEX EPS 0.03 0.09 ~3 xEBIT Margin EBIT ¹ Normalized for tower sales and other items 6 p.p 14 p.p. 229 582 Margin CAPEX over Rev ~2.5x -6.5% 0.5% 5.8% 8.7% 15.5% 2Q16 3Q16 4Q16 1Q17 2Q17 1,204 1,391 2Q16 2Q17
- 11. 11 Results Presentation Investor Relations 58%70% Jun/16 Jun/17 2Q17 Main Takeaways: Business Progressing Across the Board Improved Revenue Mix Customer Experience Revenues at new frontier EBITDA Margin Improvement and High FCF Yield Network Infrastructure Advances new proposition for high value segment Speed up of digital transformation initiatives Dedicated caring for high value customers Big Data analyses driving marketing and network decisions TIM Live remains as #1 fixed ultra broadband quality of services Turnaround Progressing 2Q16 3Q16 4Q16 1Q17 2Q17 - + To mid 30sFrom High 20s “All you can eat” bundle Low Double Dig. Low Single Dig. Bundle Offers* Pay per use * Bundle offers = postpaid + weekly prepaid bundle Acceleration in 4G coverage (YTD) 2,000 cities covered by end of July Cities with 700 MHz 62 Cities o/w 10 Capitals Launch of VoLTE July 2017 EBITDA % FCF Yield Young (MSR excl. incoming)