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
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
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