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Results presentation 4 q13 eng
RESULTS: MAIN HIGHLIGHTS
Net Revenues

(R$ bln)

Financial
Performance

19.9

18.8

EBITDA
4.1%

+6%
2012

2013

1Q

2Q

SAC/ARPU (in months)
1.6x

1.8%

1.5x

Net Income

+4% in
2013

(Δ% YoY)

(R$ bln)

1.5

4.2% 5.2%

3Q

1.4

+4%

2012

4Q

1.6x

• EBITDA Margin at 28.9% in 4Q13
• Services EBITDA Margin at 32% in FY13

• Subs. acquisition costs: R$28 in FY13 -6% YoY

1.3x

Efficiency

2013

• Data Revenues +21.5% in FY13

• Leased line cost reduction: -6.0% YoY in FY13
• Bad debt at lowest level: -4.4% YoY in FY13

1Q13

(# of cities)
39

4Q13

Active Fiber

• 39 cities fully covered with MBB project

‘000 Km

786

47

• 3G & 4G expansion (4G RAN sharing)
• Network quality plan

2Q13

Offer
Evolution

3Q13

Small Cells
& Wi-fi

MBB

Network
Improvement

2Q13

3Q13

4Q13

1Q13 2Q13 3Q13 4Q13

Postpaid
Customer Base

Total Base
73.4 mln users

+15%
dec/13

• Deployment of LT Amazonas Backbone
• Plans ‘Controle’ and Express

12.3

10.7

dec/12

1Q13 2Q13 3Q13 4Q13

• Promotional top up
• Infinity Web + SMS
• Base mix (Prepaid 83% / Postpaid 17%)
HIGHLIGHTS 2
REVISITING PRIORITIES
1
Network Quality
& Infrastructure

• Stabilized and improved network performance
• Prepared network for data evolution

% of sites with active fiber (FTTS
phase 2) on the targeted 35 cities
95%
63%

• Optimized Capex and Opex allocation
3Q13

2
Strategy &
Offer Evolution

• Improved customer base mix

4Q13

TIMmusic and
Infinity WEB + SMS

• Managed customer base with segmented offers
• Evolved offers toward data and internet services
• TIMmusic: >250k users in 4Q and 32 mln songs downloaded

3
Institutional
Relationships

• Participating actively in industry discussions
• Recovered institutional image and dialogue

WEBSITE + APP
“Portas Abertas”

• “Open Doors” transparency initiative generated excellent
results on customer interactions (>400k collaborations/month)
• Took corporate governance to the next level (CAE)

4
People &
Organization

• Seeking “Best Company to Work For” status

TV Campaign featuring employees

• Reinforcing compliance culture
• Driving sense of belonging and employee pride
PRIORITIES 3
A YEAR OF NETWORK/QUALITY EVOLUTION: PRIORITY #1
Projects that are transforming
TIM’s infrastructure
1st Quarter

Flawless Deployment
of 4G Strategy

 RAN sharing successfully implemented
 >30% of 4G market share

TIM Fiber
Metropolitan Rings

2nd

Quarter

 >570 MSAN
 Fiber network stabilization
 Support backhauling for mobile infrastructure

Completion of
FTTS 1st Phase
“MBB”






39 cities
Improving customer experience
Improve throughput
4G ready

Before FTTS

After FTTS
Own Fiber
(300 Mbps)

Metro
Ring

Copper
(2-8Mbps)

# Cities completed

‘Quality Plan’
Implemented (war room)

100
2Q13

3Q13

Quality improvement in
critical cities

4Q13

Smallcell Pilot Project
/ Wi-fi rollout

 >150 cells implemented
 >600 hotspots with seamless authentication

New Extension of
LT Amazonas Backbone

 1,800 km of fiber
 27 cities

3rd Quarter

4th Quarter

Boa Vista

NOC Insourcing
Project

Macapá
Belém

Manaus
Jurupari

 Launching project of insourced
network operating center

NETWORK 4
QUALITY IMPROVEMENT EVIDENCES
Anatel’s Index of
Caring Performance

Anatel Complaints
over 1,000 lines

TIM
other

(in points)
98.2
93.3

TIM
other

91.9
87.2

84.4

76.2

0.51

0.55

0.38
0.34

0.36
0.35
0.34

0.24
dec/12

mar/13

jun/13

sep/13

nov/13

Source: ANATEL

TIM
other

(in thds)
16.0

92.4

91.1

Claims at Consumer’s
Protection Agency (Procon)

dec/12

mar/13

jun/13

sep/13

nov/13

11.8
11.6
10.3

9.3
7.6
6.2

4Q11

9.2

2Q12

4Q12

2Q13

4Q13

Source: SINDEC-Procon

Source: ANATEL

Network KPI’s on target (%)
 Improvement in all key Anatel
indicators compared to 2012
 Narrowing gap between IDA’s 1st place
and TIM (2nd)
 Stable Anatel’s complaints metric
 Least claimed company at Procon
 War Room helping to improve network

(For the main 195 cities)
90%
85%
80%
75%
70%
65%

mar/13

dec/13

KPIs

QUALITY 5
CUSTOMER BASE EVOLUTION

Customer Base & Net Additions
(mln)

Total Net Adds:

Total Net Adds:

39.3 mln

76.1

11.3
71.6

67.0

70.4

13.1

64.1
TIM

57.5
42.8
3Q11

4.6

49.2

1.1

73.4

3.1

68.7

6.3

3.5

65.2

6.2

9.3 mln
77.2

4.9

8.7

59.2

Total Net Adds:

19.6 mln

60.4

3.8

50.2

1.0



Growing above market



#1 player in prepaid



#2 player in voice postpaid



>3 mln net adds in 2013



Accelerating postpaid
performance

45.5


4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

Austere disconnection policy

4Q13
Source: ANATEL

%YoY
10.9

11.4

(%; thd users)

(%; mln users)

(% YoY)

Post
Paid

4G Market Share

3G Market Share

Base per Segment

11.9

12.3

36.6

41%

60.3

60.8

61.0

61.1

+2%

23.6 TIM

23%

23%

Source: ANATEL

2Q13

3Q13

4Q13

31%

25%
22.3
11.5
12%

9%
1Q13

538
41%

39%

+15%
26%

Pre
Paid

47%

4Q12

1Q13

Source: ANATEL

2Q13

3Q13

4Q13

21%
20%

17%

12%

2Q13

11%

3Q13

405
222
145

4Q13

Source: ANATEL

OPERATIONAL 6

TIM
MAINTAINING EFFICIENCY

SAC - Subscriber
Acquisition Cost

Bad Debt
(R$ mln)

(R$)

29

73

31

68
56

27

44

SAC/
Gross Adds

24

1Q13

2Q13

3Q13

4Q13

YoY

-11%

+7%

-9%

-10%

SAC/ARPU

1.6x

1.5x

1.6x

1.3x

1Q13

2Q13

3Q13

4Q13

1.0%

0.9%

0.7%

0.6%

 2013 Gross adds:

% over gross
revenues

40 millions
 Postpaid Base:
12.3 mln +15% YoY

Handset Business

Network Cost

 Total Base:

(% YoY)

(% YoY)

73.4 mln +4.3% YoY
Product Margin
(Revenue – Cost)

(megabytes)

(mln units)

10.2
2012

Total Voice Traffic
(bln minutes)

Total Data Traffic

Handset Sold

+22%

+15%

+78%

12.5

2013

0

2012

2013

YTD Nov/13

YTD Nov/12

2012

2013

-6.0%
+50%

Leased Lines
(R$ mln)

2012

2013

OPERATIONAL 7
EVOLVING MARKETING PATH IN 2013:
TRANSPARENCY, SIMPLICITY, QUALITY & INNOVATION
Quality

2013

March

VAS

Prepaid

April

VAS

August

July

LDI

October

Customer Base Highlights
MOU (Minutes of Use)

Net Adds Postpaid Mix

2013
2012

11%
1Q

78%

48%

64%

49%

24%

Outgoing ARPU

(minutes)

(% Net Adds Postpaid/ Total)

47%

+15%

21%

129

2Q

(R$)

3Q

4Q

2011

148

136

1Q13

2012

2Q13

3Q13

4Q13

2013

Handset & Revenues Highlights
Smart/webphone over new sales
(%)

70%

65%

Share of handset sales (FY13)
(%)

Operators

4Q13

~39 mln smartphone/webphones users

38%

29%

Open Market

21%

18%
+22%

26%

52%
4Q12

(% of VAS Revenues over Gross Revenues; R$ million)

8%

83%
48%

4Q11

VAS Revenue Growth

5.4

4.4
TIM
Operator 2

Operator 1
Operator 3

2012

2013

MARKETING 8
STRATEGY TOWARDS DATA & INTERNET

Re-visiting Market Structure
Households profile

TIM’s Position

With Telephone

57 mln

Only mobile phone

32 mln

Mobile and fixed phone

23 mln

Fixed phone only

2 mln

91%

3G Subscribers

51%

+82%

3%

Purchase power
81 mln

Salaries up to R$3.1k

106 mln

12

4Q11

53% of pop.

4Q12

40%

4Q13

4Q11

4Q12

4Q13

BOU (Bytes of Use)

(average megabytes per user)

49% of pop.

+25%

(%; CETIC jun’13)

Yes

27%

(Monthly unique users; CAGR 11-13

Households with internet connection

60%

24

Data Users

People that access
83 mln
Internet (10 years or +)

55%

43%

70% of pop.

Consumption

No

(% over total base)

37%

7

Salaries up to R$1.2k

Smart/webphone penetration

(mln users; CAGR 11-13)

Fixed
Mobile

74%
21%

18
4Q11

+75%
27

21
4Q12

4Q13

Nov/12

Nov/13

24.3 mln of households

Big opportunity for FMS on Data

Source: Anatel; Company

Source: PNAD 2012, CETIC.br TIC Domicílios 2012

MARKETING 9
TIM FIBER: RESHAPING THE FIXED BROADBAND MARKET
Building Up Size

Accelerating Growth
Penetration of new
neighborhoods

Addressable HH
(000 HH)

Customer Base

Net Adds in 2013

(000 users)

(000 users)

(sales/addressable HH)
1,069
9.1%

16
10

2.9%

522

7

4Q12 1Q13 2Q13 3Q13 4Q13

2Q12

4Q13

1Q13

Changing market dynamics
Net Adds speed mix (SP + RJ)

GVT

12 - 34 Mbps

26%

4.0

< 12 Mbps

57%

4Q12
* 12 months average of price / Mbps
Source: Anatel; Akamai 3Q13

(connections >34Mbps)

34%

4Q13

Sep/12

Dec/13

2012

Average Speed
(Mbps)

NET
2.8

5.0

2013

Live TIM

1.0

50%

15%

3Q13

UBB Market Share (SP + RJ)

(R$/Mbps)

17%

2Q13

Evolving overall market performance
Price per Mbps*

(Mbps)

> 34 Mbps

60

18

2012

2013

Other
56%

TIM
Fiber
44%

Vivo
29.8

4Q13

0.7
2012

2013

South Korea
Japan
US
SP + RJ
Australia
Italy
Brazil

38.9
22.1
13.3
9.8
5.7
5.5
4.9
2.7

1st position

43rd position

84th position

Source: Anatel; Akamai 3Q13

TIM FIBER

10
FINANCIAL RESULTS

Net Revenues

EBITDA

(R$ mln; % YoY)

+3.9%
19,921

+876

-255

+537

18,764
Service

(R$ mln)

+6.2%

5,012

+281

-95

+40

5,207

-31

Handset

16,701

+37.4%

2,344

26.7%

EBITDA Margin

26.1%

32.1%

+1.7%

16,420

Service EBITDA Margin

32.0%

3,220

Δ Mobile
Services

Δ Fixed
Services

Δ Handset

ΔYoY

+3.5%

-28.0%

EBITDA
2012

Revenue
2013

+37.4%

ΔServ.
Revs

ΔMkt
and Sales

ΔYoY

Revenue
2012

+1.7%

+2.5%

ΔNetwork
and ITX

ΔPers./G&A EBITDA
and others
2013

-0.7%

+1.4%

Fixing EBITDA Drags
Leased Lines Cost

Intelig: EBITDA-CAPEX

(% YoY)

+9.7% YoY 2012

-6% YoY 2013

2013

2012

1.04

1.04

Revenues

24%

+

+11%
+8%
-5%

2Q

(%)

(R$ bln)

+28%

1Q

MTR Exposure

FISTEL Payments

(R$ mln)

3Q

4Q

-12%

1Q

4Q10

-

0% -1%
-10%

2Q

3Q

2012
4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

2013

4Q11

4Q12

EBITDA

30%

4Q10

4Q13

4Q11

4Q12

4Q13

FINANCIALS 11
FINANCIAL EVOLUTION

Profit & Yield
Net Income
(R$ mln)

1,449

+4%

Dividends

1,506

Payout

(R$ mln, payout)
2013

+13%
1,278

2011

+13.5%

2012

2012

743

2011

2013

56%

843

533

51%

+39.3%

42%

Investments
CAPEX

CAPEX Mix

(R$ bln)

(%)

3.9

3.8

Total: R$ 3.9 bln

3.0
2011
Capex/Sales

2012

2013

18.0%

20.6%

+90% in
infrastructure

19.4%



Focus in transport
infrastructure



Zero subsidy policy on
handsets

Operating Free Cash Flow
(R$ mln)

5,207

-3,561*

EBITDA

CAPEX

Δ WC

2,216



OFCF/Net Revenues: 11%



571

Expansion of +21.4% YoY

OFCF

*OFCF does not consider R$310 mln of LT Amazonas leasing as CAPEX

FINANCIALS 12
PERSPECTIVES FOR 2014
Macro
Environment

Offer & Commercial
Strategy

Network Evolution

 Continuation of Quality Plan monitoring
and execution
 Expectation of 4G Auction for 700MHz
Spectrum
 Discussions on Sector Cost Modeling
and MTR evolution
 Keen
attention
environment trends

to

competitive

 Network coverage expansion with
increased rollout of Macro, Small Cells
and Wi-Fi HotSpots
 Acceleration of Mobile Broadband
project from current 40 cities to over
100 cities
 Focus on operational excellence and
network availability by investing on
people, systems and processes

 Voice growth with migration to postpaid
and bundling for Voice FMS
 Speed
up
data
growth
with
smartphones and tablets, innovative
VAS, 4G offers and Data FMS
 Fixed business growth coming back with
positive contribution to results
 Restructuring commercial channels
 Rational approach to pricing

Recap of 2014-16 Business Plan
Capex Evolution

(% of Capex for Access Network)

Smartphone penetration
(Over total base of lines)

LTE

Data Users

3yrs - Plan Guidance:

VAS Revenue Growth

(% Customer Base)

(% of Mobile Gross Rev.)

 Revenues:
single digit

>75%

3G

43%

55%
30%

37%

>50%

>40%
18%

2G

21%

MID

 EBITDA:
single digit

MID

 Capex: >R$11 bln
2013

2014e

2012

2013

2016e

2012

2013

2016e

2012

2013

2016e

CONCLUSION 13

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Results presentation 4 q13 eng

  • 2. RESULTS: MAIN HIGHLIGHTS Net Revenues (R$ bln) Financial Performance 19.9 18.8 EBITDA 4.1% +6% 2012 2013 1Q 2Q SAC/ARPU (in months) 1.6x 1.8% 1.5x Net Income +4% in 2013 (Δ% YoY) (R$ bln) 1.5 4.2% 5.2% 3Q 1.4 +4% 2012 4Q 1.6x • EBITDA Margin at 28.9% in 4Q13 • Services EBITDA Margin at 32% in FY13 • Subs. acquisition costs: R$28 in FY13 -6% YoY 1.3x Efficiency 2013 • Data Revenues +21.5% in FY13 • Leased line cost reduction: -6.0% YoY in FY13 • Bad debt at lowest level: -4.4% YoY in FY13 1Q13 (# of cities) 39 4Q13 Active Fiber • 39 cities fully covered with MBB project ‘000 Km 786 47 • 3G & 4G expansion (4G RAN sharing) • Network quality plan 2Q13 Offer Evolution 3Q13 Small Cells & Wi-fi MBB Network Improvement 2Q13 3Q13 4Q13 1Q13 2Q13 3Q13 4Q13 Postpaid Customer Base Total Base 73.4 mln users +15% dec/13 • Deployment of LT Amazonas Backbone • Plans ‘Controle’ and Express 12.3 10.7 dec/12 1Q13 2Q13 3Q13 4Q13 • Promotional top up • Infinity Web + SMS • Base mix (Prepaid 83% / Postpaid 17%) HIGHLIGHTS 2
  • 3. REVISITING PRIORITIES 1 Network Quality & Infrastructure • Stabilized and improved network performance • Prepared network for data evolution % of sites with active fiber (FTTS phase 2) on the targeted 35 cities 95% 63% • Optimized Capex and Opex allocation 3Q13 2 Strategy & Offer Evolution • Improved customer base mix 4Q13 TIMmusic and Infinity WEB + SMS • Managed customer base with segmented offers • Evolved offers toward data and internet services • TIMmusic: >250k users in 4Q and 32 mln songs downloaded 3 Institutional Relationships • Participating actively in industry discussions • Recovered institutional image and dialogue WEBSITE + APP “Portas Abertas” • “Open Doors” transparency initiative generated excellent results on customer interactions (>400k collaborations/month) • Took corporate governance to the next level (CAE) 4 People & Organization • Seeking “Best Company to Work For” status TV Campaign featuring employees • Reinforcing compliance culture • Driving sense of belonging and employee pride PRIORITIES 3
  • 4. A YEAR OF NETWORK/QUALITY EVOLUTION: PRIORITY #1 Projects that are transforming TIM’s infrastructure 1st Quarter Flawless Deployment of 4G Strategy  RAN sharing successfully implemented  >30% of 4G market share TIM Fiber Metropolitan Rings 2nd Quarter  >570 MSAN  Fiber network stabilization  Support backhauling for mobile infrastructure Completion of FTTS 1st Phase “MBB”     39 cities Improving customer experience Improve throughput 4G ready Before FTTS After FTTS Own Fiber (300 Mbps) Metro Ring Copper (2-8Mbps) # Cities completed ‘Quality Plan’ Implemented (war room) 100 2Q13 3Q13 Quality improvement in critical cities 4Q13 Smallcell Pilot Project / Wi-fi rollout  >150 cells implemented  >600 hotspots with seamless authentication New Extension of LT Amazonas Backbone  1,800 km of fiber  27 cities 3rd Quarter 4th Quarter Boa Vista NOC Insourcing Project Macapá Belém Manaus Jurupari  Launching project of insourced network operating center NETWORK 4
  • 5. QUALITY IMPROVEMENT EVIDENCES Anatel’s Index of Caring Performance Anatel Complaints over 1,000 lines TIM other (in points) 98.2 93.3 TIM other 91.9 87.2 84.4 76.2 0.51 0.55 0.38 0.34 0.36 0.35 0.34 0.24 dec/12 mar/13 jun/13 sep/13 nov/13 Source: ANATEL TIM other (in thds) 16.0 92.4 91.1 Claims at Consumer’s Protection Agency (Procon) dec/12 mar/13 jun/13 sep/13 nov/13 11.8 11.6 10.3 9.3 7.6 6.2 4Q11 9.2 2Q12 4Q12 2Q13 4Q13 Source: SINDEC-Procon Source: ANATEL Network KPI’s on target (%)  Improvement in all key Anatel indicators compared to 2012  Narrowing gap between IDA’s 1st place and TIM (2nd)  Stable Anatel’s complaints metric  Least claimed company at Procon  War Room helping to improve network (For the main 195 cities) 90% 85% 80% 75% 70% 65% mar/13 dec/13 KPIs QUALITY 5
  • 6. CUSTOMER BASE EVOLUTION Customer Base & Net Additions (mln) Total Net Adds: Total Net Adds: 39.3 mln 76.1 11.3 71.6 67.0 70.4 13.1 64.1 TIM 57.5 42.8 3Q11 4.6 49.2 1.1 73.4 3.1 68.7 6.3 3.5 65.2 6.2 9.3 mln 77.2 4.9 8.7 59.2 Total Net Adds: 19.6 mln 60.4 3.8 50.2 1.0  Growing above market  #1 player in prepaid  #2 player in voice postpaid  >3 mln net adds in 2013  Accelerating postpaid performance 45.5  4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Austere disconnection policy 4Q13 Source: ANATEL %YoY 10.9 11.4 (%; thd users) (%; mln users) (% YoY) Post Paid 4G Market Share 3G Market Share Base per Segment 11.9 12.3 36.6 41% 60.3 60.8 61.0 61.1 +2% 23.6 TIM 23% 23% Source: ANATEL 2Q13 3Q13 4Q13 31% 25% 22.3 11.5 12% 9% 1Q13 538 41% 39% +15% 26% Pre Paid 47% 4Q12 1Q13 Source: ANATEL 2Q13 3Q13 4Q13 21% 20% 17% 12% 2Q13 11% 3Q13 405 222 145 4Q13 Source: ANATEL OPERATIONAL 6 TIM
  • 7. MAINTAINING EFFICIENCY SAC - Subscriber Acquisition Cost Bad Debt (R$ mln) (R$) 29 73 31 68 56 27 44 SAC/ Gross Adds 24 1Q13 2Q13 3Q13 4Q13 YoY -11% +7% -9% -10% SAC/ARPU 1.6x 1.5x 1.6x 1.3x 1Q13 2Q13 3Q13 4Q13 1.0% 0.9% 0.7% 0.6%  2013 Gross adds: % over gross revenues 40 millions  Postpaid Base: 12.3 mln +15% YoY Handset Business Network Cost  Total Base: (% YoY) (% YoY) 73.4 mln +4.3% YoY Product Margin (Revenue – Cost) (megabytes) (mln units) 10.2 2012 Total Voice Traffic (bln minutes) Total Data Traffic Handset Sold +22% +15% +78% 12.5 2013 0 2012 2013 YTD Nov/13 YTD Nov/12 2012 2013 -6.0% +50% Leased Lines (R$ mln) 2012 2013 OPERATIONAL 7
  • 8. EVOLVING MARKETING PATH IN 2013: TRANSPARENCY, SIMPLICITY, QUALITY & INNOVATION Quality 2013 March VAS Prepaid April VAS August July LDI October Customer Base Highlights MOU (Minutes of Use) Net Adds Postpaid Mix 2013 2012 11% 1Q 78% 48% 64% 49% 24% Outgoing ARPU (minutes) (% Net Adds Postpaid/ Total) 47% +15% 21% 129 2Q (R$) 3Q 4Q 2011 148 136 1Q13 2012 2Q13 3Q13 4Q13 2013 Handset & Revenues Highlights Smart/webphone over new sales (%) 70% 65% Share of handset sales (FY13) (%) Operators 4Q13 ~39 mln smartphone/webphones users 38% 29% Open Market 21% 18% +22% 26% 52% 4Q12 (% of VAS Revenues over Gross Revenues; R$ million) 8% 83% 48% 4Q11 VAS Revenue Growth 5.4 4.4 TIM Operator 2 Operator 1 Operator 3 2012 2013 MARKETING 8
  • 9. STRATEGY TOWARDS DATA & INTERNET Re-visiting Market Structure Households profile TIM’s Position With Telephone 57 mln Only mobile phone 32 mln Mobile and fixed phone 23 mln Fixed phone only 2 mln 91% 3G Subscribers 51% +82% 3% Purchase power 81 mln Salaries up to R$3.1k 106 mln 12 4Q11 53% of pop. 4Q12 40% 4Q13 4Q11 4Q12 4Q13 BOU (Bytes of Use) (average megabytes per user) 49% of pop. +25% (%; CETIC jun’13) Yes 27% (Monthly unique users; CAGR 11-13 Households with internet connection 60% 24 Data Users People that access 83 mln Internet (10 years or +) 55% 43% 70% of pop. Consumption No (% over total base) 37% 7 Salaries up to R$1.2k Smart/webphone penetration (mln users; CAGR 11-13) Fixed Mobile 74% 21% 18 4Q11 +75% 27 21 4Q12 4Q13 Nov/12 Nov/13 24.3 mln of households Big opportunity for FMS on Data Source: Anatel; Company Source: PNAD 2012, CETIC.br TIC Domicílios 2012 MARKETING 9
  • 10. TIM FIBER: RESHAPING THE FIXED BROADBAND MARKET Building Up Size Accelerating Growth Penetration of new neighborhoods Addressable HH (000 HH) Customer Base Net Adds in 2013 (000 users) (000 users) (sales/addressable HH) 1,069 9.1% 16 10 2.9% 522 7 4Q12 1Q13 2Q13 3Q13 4Q13 2Q12 4Q13 1Q13 Changing market dynamics Net Adds speed mix (SP + RJ) GVT 12 - 34 Mbps 26% 4.0 < 12 Mbps 57% 4Q12 * 12 months average of price / Mbps Source: Anatel; Akamai 3Q13 (connections >34Mbps) 34% 4Q13 Sep/12 Dec/13 2012 Average Speed (Mbps) NET 2.8 5.0 2013 Live TIM 1.0 50% 15% 3Q13 UBB Market Share (SP + RJ) (R$/Mbps) 17% 2Q13 Evolving overall market performance Price per Mbps* (Mbps) > 34 Mbps 60 18 2012 2013 Other 56% TIM Fiber 44% Vivo 29.8 4Q13 0.7 2012 2013 South Korea Japan US SP + RJ Australia Italy Brazil 38.9 22.1 13.3 9.8 5.7 5.5 4.9 2.7 1st position 43rd position 84th position Source: Anatel; Akamai 3Q13 TIM FIBER 10
  • 11. FINANCIAL RESULTS Net Revenues EBITDA (R$ mln; % YoY) +3.9% 19,921 +876 -255 +537 18,764 Service (R$ mln) +6.2% 5,012 +281 -95 +40 5,207 -31 Handset 16,701 +37.4% 2,344 26.7% EBITDA Margin 26.1% 32.1% +1.7% 16,420 Service EBITDA Margin 32.0% 3,220 Δ Mobile Services Δ Fixed Services Δ Handset ΔYoY +3.5% -28.0% EBITDA 2012 Revenue 2013 +37.4% ΔServ. Revs ΔMkt and Sales ΔYoY Revenue 2012 +1.7% +2.5% ΔNetwork and ITX ΔPers./G&A EBITDA and others 2013 -0.7% +1.4% Fixing EBITDA Drags Leased Lines Cost Intelig: EBITDA-CAPEX (% YoY) +9.7% YoY 2012 -6% YoY 2013 2013 2012 1.04 1.04 Revenues 24% + +11% +8% -5% 2Q (%) (R$ bln) +28% 1Q MTR Exposure FISTEL Payments (R$ mln) 3Q 4Q -12% 1Q 4Q10 - 0% -1% -10% 2Q 3Q 2012 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2013 4Q11 4Q12 EBITDA 30% 4Q10 4Q13 4Q11 4Q12 4Q13 FINANCIALS 11
  • 12. FINANCIAL EVOLUTION Profit & Yield Net Income (R$ mln) 1,449 +4% Dividends 1,506 Payout (R$ mln, payout) 2013 +13% 1,278 2011 +13.5% 2012 2012 743 2011 2013 56% 843 533 51% +39.3% 42% Investments CAPEX CAPEX Mix (R$ bln) (%) 3.9 3.8 Total: R$ 3.9 bln 3.0 2011 Capex/Sales 2012 2013 18.0% 20.6% +90% in infrastructure 19.4%  Focus in transport infrastructure  Zero subsidy policy on handsets Operating Free Cash Flow (R$ mln) 5,207 -3,561* EBITDA CAPEX Δ WC 2,216  OFCF/Net Revenues: 11%  571 Expansion of +21.4% YoY OFCF *OFCF does not consider R$310 mln of LT Amazonas leasing as CAPEX FINANCIALS 12
  • 13. PERSPECTIVES FOR 2014 Macro Environment Offer & Commercial Strategy Network Evolution  Continuation of Quality Plan monitoring and execution  Expectation of 4G Auction for 700MHz Spectrum  Discussions on Sector Cost Modeling and MTR evolution  Keen attention environment trends to competitive  Network coverage expansion with increased rollout of Macro, Small Cells and Wi-Fi HotSpots  Acceleration of Mobile Broadband project from current 40 cities to over 100 cities  Focus on operational excellence and network availability by investing on people, systems and processes  Voice growth with migration to postpaid and bundling for Voice FMS  Speed up data growth with smartphones and tablets, innovative VAS, 4G offers and Data FMS  Fixed business growth coming back with positive contribution to results  Restructuring commercial channels  Rational approach to pricing Recap of 2014-16 Business Plan Capex Evolution (% of Capex for Access Network) Smartphone penetration (Over total base of lines) LTE Data Users 3yrs - Plan Guidance: VAS Revenue Growth (% Customer Base) (% of Mobile Gross Rev.)  Revenues: single digit >75% 3G 43% 55% 30% 37% >50% >40% 18% 2G 21% MID  EBITDA: single digit MID  Capex: >R$11 bln 2013 2014e 2012 2013 2016e 2012 2013 2016e 2012 2013 2016e CONCLUSION 13