Tim 3 Q09 Webcast Eng

3Q09
TIM Participações S.A
Webcasting - 3Q09 Results

October 30th, 2009

0

TIM PARTICIPAÇÕES S.A. | Investor Relations

Agenda

Highlights of Re-launch Plan L. Luciani

3rd Quarter Results C. Zezza

Perspectives for 4Q09 L. Luciani

1


TIM Brasil Re-launch – summary of the first 9 months
Achievements

Positioning
(Brand and Quality) Subscriber’s base Self-financing

Brand: improve in Awareness and TIM reverses market share trend (net Re-launch costs +R$ 0.5 Bln 9M YoY
Top of Mind* share of 27.3% in 3Q, after 29.1% in Advertising, CRC, network quality and
2Q, vs. ~24% of market share) commissioning
Quality: confirmed #2 Anatel (with
MOU +30% higher than 1Q09) Improving pre-paid customer base Self-financing -R$ 0.7 Bln 9M YoY
(Infinity Pre-paid: >11 million clients in through Efficiency Plan
Customer Satisfaction Consumer: 6 months) Interconnection, Bad Debt and Personnel
recovery quality level in all customer
segments End of post-paid base (voice) erosion, ΔEBITDA +6.7% 9M YoY
after 15 months (Infinity Post-paid and Despite -0.9% of revenues decrease
Jul ‘08 Jan ’09 Jul ’09
TIM Único)
Overall 7.41 6.60 7.47
Post-paid 6.22 5.89 6.88

Continuous improvement on KPIs QoQ
Sources: ABA (Associação Brasileira de Anunciantes) 2


TIM’s Brand: improving in Awareness and Top of Mind TIM
Player 1
Player 2
Player 3

Share of Investments Awareness
40%

32%
31% 53%
30%
35%

29% 50%
44%
28% 42% 41%
28%
30%

26%
25%
26%
26% 34% 33%
19% 33%
24% 18% 32% 27%
34%
20%

33% 23%
29% 31% 29%
15%

17% 30% 31%
15% 16% 15%
10%
20% 22%
5%

2006 2007 2008 Jan-Aug ‘09 May/09 Jun/09 Jul/09 Aug/09 Sep/09

Share of Voice Top of Mind
TV – GRP 15”+
31%
•ABA: #1
35%

29%
30% •Folha de SP: # 2
33%
32%
31%
27%
29% 29% 29%
28%
29%

27%
27%
25% 22% 22%
21%
25%

23% 20%
23%
23% 22%
21%
21%
20%
19%
21% 20% 18% 19%
17%

Oct-Nov May-Jun Oct-Nov Jun/09
2008 Jan-Aug ‘09
07 08 08

Sources: Ibope Monitor, TIM Brasil - Pesquisa de imagem (Synovate – third-party survey institute) e tracking semanal de comunicação
* Mensuração no RJ e SP da última semana do mês 3


Network: Improvement of Service and Network Quality
Overall Service Quality – YTD’ 2009 Overall Service Quality – Sept’ 2009
% target achieved in overall service quality, TIM vs. competitors % target achieved in overall service quality, TIM vs. competitors

-0.2 +5.2 +2.1 -1.2 -5.1 -7.8 -0.9
∆pp #2
YTD 09 99.3% 99.2% 97.7%
vs. FY08 96.8% 95.5% 95.5%
93.9% 92.6%
90.9%
85.5%
90.2% 81.8%
83.0% 65.9%

Player 1 TIM Player 6 Player 5 Player 4 Player 2 Player 3 Player 1 TIM Player 6 Player 4 Player 2 Player 5 Player 3

Network Service Quality (*)
% target achieved in network quality , TIM vs. competitors % target achieved in TIM network quality

Jan/09 Set/09 Delta (p.p.)
100,00%

96.4% 97.3%
TIM 84.1% 97.3% +13.2 98,00%

96,00% 94.0%
90.7%
94,00%

Main Player 1 100.0% 99.1% -0.9
92,00%

Mobile
90,00%
87.6%
88,00%

Operators 86,00%

Player 2 95.7% 96.5% +0.8 84,00%

82,00%

Player 3 53.8% 50.0% -3.8 4Q08 1H09 jul/09 aug/09 sep/09

MOU 86 71 90
Fonte: Anatel
4
(*) SMP Anatel 3, 5, 6, 7 e 12


Improvement in Customer Satisfaction Metrics
From 0 (dissatisfied) to 10 (maximum satisfaction)

Customer satisfaction Index Customer Care Satisfaction
CRC Average satisfaction, consumer segment
Δ vs last Ranking
measure oct/08 may/09
7,9

7,7
7.5 7.5
7.4
Pre-paid 7,5

7.1
Overall -0,5 +0,5
7,3

8.43 +0.44 #3 #1 7,1
7.0

6,9

6,7

Pre 8.50 +0.36 #2 #1 3Q08 4Q08 1Q09 2Q09 3Q09*

7,1

6,9 6.6 6.7
Post 8.06 +0.72 #4 #1 Post-paid 6,7

6,5 6.3
6.1 +0,7
6,3
6.0
Post 6,1

7.96 +0.87 #4 #1
High 5,9

5,7

3Q08 4Q08 1Q09 2Q09 3Q09*

Recovery client satisfaction
in all segments
* Jul/09 e Aug/09
Sources: TIM Brasil - 12nd Customer Satisfaction Monitoring - may-jun/09; CRC Monthly Satisfaction Research
5


Customer Base: Net share stable and higher than market share

After four quarters of market … TIM confirmed
share erosion… trend reversal 2009 Monthly Net Share

Net 38% 32%
27% 29% 25%
40%

29.1%
Share (%) 26.5% 27.3% 35%

30%
24%
25.4% 25.0%
Market 24.2%
25%

Market 23.5% 20%

Share Share (%) 15%

25.9% 10%
Consistency
Evolution 23.7% 23.8% 5%

0%

17.4% 18.3% 12.1% Apr May Jun Jul Aug Sep

-10.1%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

Pre-paid Post-paid
Mln Lines 33.3 Mln Lines

6.8 -0.6 +0.1
29.8 29.9 End of post-
Infinity
Customer paid base
Pre-paid
Base 6.3 erosion, after
Growth
25.2 6.2 15 months
+3.4

Jan-08 Dec-08 Mar-09 Sep-09 Jan-08 Dec-08 Mar-09 Sep-09
6


Innovative and differentiate offers:
New concepts leveraging on TIM Community
Infinity Pré Mundo Azul

Competitive MOU
advantage of
90
TIM’s offer 70

+30%
Increasing LD
1Q09 3Q09
>11 million clients market share of traffic
(+ 10pp)
% MOU on-net

Infinity Pós TIM Único +8 pp

1Q09 3Q09

Leveraging on
TIM Community
~60% of Gross Adds are ~40 million clients
+40% Post-paid Gross Adds (Local and DDD)
(Voice) Consumer 3Q YoY new Business clients
7


Self-financing the Re-launch plan…
BRGAAP, Bln R$ -0.9% Set-09 YTD vs. YA
8.8
10

Net Service Revenues 8.9
More quality in:
9

Service
-0.9%
•Traffic Revenues -0.08
Interconnection
8

(on-net)
Bad Debt 3.8 -0.7 3.1
7
•Clients
6 G&A •Organization
Service
5
• Brand Re-shaping
Margin* +0.59 +10.0%
Commercial Expenses
3.6
4

(Fixed and Variable) 3.1 +0.5 • Recovery Customer
3
Base
Network
• Improve in Margin
2

+6.7% 2.10 despite of Revenues
1
EBITDA 1.97 EBITDA +0.13 +6.7%
decrease
0

Set-08 YTD Set-09 YTD
0

Delta EBITDA 08 vs. 09
0.05
( 0.41) ( 0.10 )
0.59

•Revenue: -0.1 2.10
1.97 •Interconnection: +0.4
•Bad debt: +0.3
+6.7%

EBITDA Gross Service Efficiency e G&A Increase Increase EBITDA
Set-08 YTD Margin* Commercial Network Set-09 YTD
Expenses Costs
* Revenue – Interconnection – bad debt 8


Improve QoQ with Quality
Service Revenues Handset Revenues
R$ Bln R$ Bln
+5% 3.08 0.37
-31%
2.94 0.25
+4% 0.19
2.82
Chip Only

1Q09 2Q09 3Q09 1Q09 2Q09 3Q09

Δ YoY -0.5% -1.2% -1.0% Δ YoY +21.5% +70.8% +13.0%

Service Contribution EBITDA and Margin
R$ Bln, 2009 R$ Mln , %, 2009
+3% 759
736
+21%

Service 1.4 +8% 1.5 609
1.2 +19% EBITDA
Contribution*

1Q 2Q 3Q
% Service 1Q 2Q 3Q
42% 48% 49%
Contribution
EBITDA 20.2% 22.3% 22.7%
~6pp higher than 2008 Margin

9
* Service Revenues – Incoming – Interconnection


Main Metrics Evolution
Customer Base MOU and ARPU
BRGAAP, Mln lines EoP, 2009 BRGAAP, Min/month, R$/month, 2009
90
33.3 70 73
31.6 QoQ trend
29.9 MOU
Pre Pré 26.5
6.3 26.0 26.6
6.2 6.2
Pós ARPU
Post

1Q 2Q 3Q 1Q 2Q 3Q

Gross VAS Revenue MOU ARPU
QoQ trend
BRGAAP, Mln R$
Total:
Microbrowsing
Pre-paid Outgoing:
430 483 496
Post-paid Outgoing:

1Q 2Q 3Q Incoming:
% VAS /
Service 11.2% 12.3% 12.0%
Revenues Mix CB Pre/Post
10


Agenda




11


3Q09’s Main Results

Net Service Revenues: +5.0% QoQ but still -1% YoY

Total Opex: Efficiency Plan preserving margin

• Bad Debt: -30.5% YoY

• Interconnection & Network: -10.5% YoY

• Personnel and G&A: -3.3% YoY

• Commercial: +22.1% YoY

EBITDA: +3.1% QoQ to a margin of 22.7% (vs. 22.3% in 2Q09)

Net Profit: Back to positive result of R$ 61 Mn (vs. -R$15 Mn in 2Q09)

Positive Op. FCF: Maintaining 12% of net revenues (equals to R$392 Mn), while speeding up network rollout (Capex
16% of Revenues)

Net Financial Position: R$2,544 Mn, vs. R$2,900 in 2Q09 (-R$356 Mn QoQ)

12


Revenues and EBITDA Evolution
Net Revenue EBITDA R$ Million % Margin

EBITDA & Margin
R$ Mln ΔY/Y ΔQ/Q

EBITDA 22.3% 22.7%
Margin 20.2%
Service 2,936 3,083 -1.0% +5.0%
Revenues
3,115 2,823
736 759
EBITDA 609 Less
Commercial
Efforts 2H08
1Q09 2Q09 3Q09
// 2008
3Q08 1Q09 2Q09 3Q09 EBITDA % 17,9% 20,0% 23,4%
Handset
Revenues 292 189 368 254 -13.0% -30.9%
9 Months EBITDA & Margin
Total Net
3,407 3,012 3,304 3,337 -2.0% +1.0%
Revenues 21.8%
20.5%

Gross ΔY/Y ΔQ/Q
VAS Rev. 403 430 483 496 +23.0% +2.5%
% VAS/ 1,968 2,104
Service
9.5% 11.2% 12.3% 12.0% +2.5pp -0.3pp
Rev.
9M’08 9M’09
13


Efficiency Plan to Finance Business Re-launch
Selling Expenses
R$ Mln
829 873
Strengthening 709
commercial efforts YTD: +22%
to re-launch the 715
brand… 666
598

YoY% +18.6% +24.6% +22.1%

1Q 2Q 3Q

Interconnection & Network Bad Debt Personnel and G&A Costs
R$ Mln R$ Mln R$ Mln
…with
272
consistent
1,045 1,073 1,077 203 286 277 254
savings through 4.6%*
143
Efficiency Plan YTD: -10% YTD: -7%
YTD: -45% 261 252 246
985 921 964 134 4.8%*
106 3.6%* 100 3.2%*

YoY% -5.7% -14.1% -10.5% YoY% -50.5% -47.9% -30.5% YoY% -8.7% -9.0% -3.3%

1Q 2Q 3Q 1Q 2Q 3Q 1Q 2Q 3Q
* % Net Service Revenue
2008 2009 14


EBITDA 3Q
R$ Mln Larger on-net
Community
Higher
192.5 (111.2) commercial
43.7 (158.3) push vs. 2H08

4.8
-11% YoY

+19% YoY
(11.2)
Chip-only
Service Contribution approach

798.5 R$ 80 Mln (+4% YoY) 758.8

3Q08 Business Business Handset Advertising Other 3Q09
Bad Debt
Generated Received Contribution & Sales Expenses2
(Out+VAS)1 (Incoming)
Margin % 23.4% 22.7%

1 - Outgoing + VAS + LD +Others – Interconnection & Network Costs 15
2 - Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues


Net Result: Back to Profit
R$ Mln
EBITDA Depreciation & Net Financial Taxes and Net
EBIT Result
3Q09 Amortization Expenses Others

61
(663.7)
(15)
758.8 •Tax Reversion
(144)
•Lower Interest Rates Provisioning
•3G NPV Impact •Tax Benefit (REFIS)
•Tax Benefit (REFIS) 1Q09 2Q09 3Q09

27.6
95.1 (61.9)
60.8

3Q08 798.5 (618.0) 180.5 (152.9) (39.6) (12.1)

YoY % -5.0% +7.4% -47.3% -59.5% N/A N/A

16


Operating Free Cash Flow & Net Financial Position – 3Q09

Operating Free Cash Flow Net Financial Position
R$ Million R$ Million
16%
Capex / 13%
Sales
OpFCF / 12% 12% Operating Non
2Q09 FCF Op. FCF 3Q09
2Q09 3Q09 Sales

2Q09 3Q09
169
R$ 356 Mln of
(536) debt reduction (2,544)
(2,900)
759

392
392 (35)
EBITDA ΔWork. CAPEX Operating
Cap. FCF
R$ 3.50 billion (of which 60% long term)
Gross Debt
~33% of total debt is denominated in foreign currency (fully hedged)

Average annual cost 9.74% in 3Q09 vs.12.54% in 3Q08 (and 10.95% in 2Q09)
17


Agenda




18


Client-oriented for a value increase

•Post: ‘Liberty’, ‘Infinity’ and •Network: 2G voice service (MOU
‘Único’ Plans and quality)

n
ion
•Organization: Customer

Qu
attio

Qu
•Chip only and SIM-unlocked

ovva

alil
Satisfaction Management

a ti
handsets approach

nn o

ty
y
IInn
•Operation: simplification and
•VAS / Handset Portfolio automation of basic-processes
based (eg: Business)
KPIs KPIs
• Incremental Market Share Network Development
Network Development • Customer Satisfaction
• Post-paid base • Churn
• % of VAS revenues • Preference
•Improve 2G Capacity
•Backhauling and Backboning (Intelig)
•3G Roll-out KPIs
• Network capacity: # TRX
• Trade-off CAPEX-OPEX (leased lines)
Source: Bridge Research, Customer Satisfaction Monitoring , May-June 2009 • 3G: # Node-B 19


TIM is Innovation
Plans Business Model Handsets and VAS

“Liberty: the biggest club in Brazil” Chip only (for all post-paid plans) Unique and distinctive

• Win-Win-Win:
- TIM: SAC/Bad Debt reduction,
• Unlimited calls • Exclusivity in devices (e.g.: Windows
competitive differentiation in
- local and DDD Phone)
service vs. handset
- TIM to TIM • Outsourcing of VAS platforms
- Sales: one more option for sales
multiplatform applications store:
• Community with more than 40 - Client: flexibility music, games, adult (ex: Qualcomm)
million clients . Handset Benefit or • Presence of TIM in applications
• Free National Roaming . Service Benefit store of main suppliers (e.g.:
“Brasileirão 2009” in Apple Store)

Community concept (on-net) Handset Revenue
Microbrowsing
Infinity Pre Infinity Post Liberty SAC / ARPU
20


The Path of 2009
1Q09 2Q09 3Q09 4Q09
Brand: new format and Launch of Infinity Plans Encourage Usage: Focusing on Post-paid:
increasing in Share of (Pre and Post-paid) - Infinity (Pre and Post) - Liberty
Investments Loyalty (Handset and and launched of “Blue” - Infinity e Único
Monthly Fee Discounts) Concept (Local and LD) Go-2-Market Model: Chip
Network Quality:
capacity, access, Push on Sales: - Quick-win of pre-paid Only, or traditional model
transportation (LD) - Focused on Post-paid clients Acceleration and Network
and MNP Push on Sales and CRM Development:
Costumers Satisfaction action
- Network - 2G Capacity
Recovery in all
Rationalization Clients migration to new - 3G Coverage
Consumer Segments
- New ways to plans (Pre) Intelig
encourage Usage

Awareness Costumer Base and Δ Post-paid Clients and
KPIs and Quality MOU
Market Share SAC/ARPU

R$ Mln , %, 2009 +
3.08 +
2.94
2.82 +
Service
+
Revenues 22.3% 22.7%

20.2%
EBITDA
Margin
21


Conclusions: summary of 9 months of the Re-launch Plan

1 Brand re-shaping, with visibility (#1 Top of Mind), quality (#2 Anatel) e Customer Satisfaction
(#1 Consumer)

2 Strengthening pre-paid customer base: (Infinity Pre-paid: >11 million clients in 6 months) and
end of post-paid base erosion, after 15 months (Infinity Post-paid and TIM Único)

3 Re-launch Plan funded: Efficiency Plan neutralizes higher commercial costs

4 QoQ growth of main KPIs: Customer Base, MOU, ARPU, EBITDA and Margin

5 Positive result in bottom line, improvement of Operating Free Cash Flow and Net Debt

22


Conclusions: Priorities for the 4th quarter
1 Client-oriented for a value increase:

Innovation: Launch of Liberty and Chip-only (to all post-paid offers – sales and retention)

Quality: focusing on 2G Network and Customer Satisfaction Management

Network Development: Voice capacity, Backhauling/Backboning and 3G development

2 In Q4 we will continue our repositioning process:

Improve MOU and ARPU defending

Brand re-shaping, customer base growth with a stable market share

Efficiency to preserve margin ...

3 ... Confirming improvements in all metrics QoQ, as showed in 3Q (Pre-paid and Post-base base, Revenue,
EBITDA and Margin

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.tim.com.br/ir
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

24

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