2. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials Highlights
Outlook and Priorities
2
3. Consistent Growth: Keeping the Pace
1Q12 1Q11 ∆%
Reported Revenues 4,468 3,752 +19.1
Services 4,015 3,463 +15.9
Ebitda 1,169 1,033 +13.2
Ebit 512 350 +46.4
Revenues 4,468 3,792 +17.8
Pro-forma*
Ebitda 1,169 1,067 +9.5
* Includes Revenues and EBITDA of AES Q1 2011
Growth driven by mobile business: Speed-up of Network Roll-out:
Consistency in customer base and revenues expansion Capex +83% YoY in Q1 (2G capacity, 3G roll-out)
Data acceleration 3G upgraded to 42 Mbps starting from SP
Increased pressure on Voice services (FMS)
MTR cut started on March – impact of -R$43 mln/ TIM Fiber/TIM integration:
month revenues; -R$22 mln/month Ebitda ~1,000 antennas connected with fiber n SP/Rio (FTTS)
>1,000 Household connected (TIM Fiber)
Soft launch confirmed for Q2
3
4. Drivers of Revenue Growth: Community Expansion
and “Internet for All”
Customer Base Revenues
Mln clients, Base EoP Mln R$, Fixed+Mobile
8.5 9.9
+17% 4,015
Gross Adds 3,463
Net Service +15.9%
+72% Revenues 4,468
Net Adds 1.8 3.1 Δ% YoY
3,752
67.2 +27%
52.8 9.6 +25% Total Net
Post-paid 7.7 +19.1%
Revenues
45.1 57.6 +28%
Pre-paid
1Q11 1Q12 1Q11 1Q12
Gross Adds Net Adds Q1 2011 YoY Q1 2012 YoY
Gross Rev.
1Q Mobile only
1Q YoY
YoY
Voice Out(local) +16% +14%
Tot. +17% Tot. +72%
Long Distance +21% +16%
Pre +17% Pre +74%
Voice In -2% +8%
Post Voice -6% Post Voice +33%
VAS +32% +56%
Post Web +64% Post Web +125% TOTAL +14% +19%
4
6. Pressure on Voice (FMS) and Acceleration of
Mobile Internet (Business Transformation)
Gross Revenue Mix
Received Business Erosion Price Competition (eg. Local and LD)
MTR impact asimmetric for mobile 19% 18%
In
only operators 15% 14% 25 cents/call
–R$43 mln/month revenues LD TIM (equal to ~5cent/minute)
–R$22 mln/month margin (itx costs
52% 50%
66% regulated vs 34% not –SMS, Local
M-F, itx) 66% 68% Claro 16-21 cents/call -15/35%
VAS 14% 18%
Incoming voice MOU in fast erosion 5 cents/min
Organic (-18% YoY) as of FMS Vivo Price aligned
1Q11 1Q12
Billion Minutes Received TIM Approach to Competitive Arena
1 Forcing FMS 2 Mobile Internet
2.2 flat 2.2
monthly unique users
Volumes 21.8 22.6
Fixed- 17.5
Out 20.1
Mobile 18.4
17.5
10.3
Mobile-
Mobile Price -7% -8%
-14%
Out -23%
-32%
1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 1Q12
1Q11 1Q12
6
7. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials
Outlook and Priorities
7
11. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials
Outlook and Priorities
11
12. Infinity – The Largest Mobile Community in Brazil
Mln lines Infinity at 97%
of prepaid base 56.1 Voice out
Bln minutes
Infinity Voice 40.8 +27% 16.7 local LD M-F
13.1
56 mln users 21.7
Local
25 25 50
LD
cents cents cents
Leveraging on 0 M-F Per call
1Q11 1Q12
community
1Q 09 1Q 10 1Q 11 1Q 12
SMS
#SMS, Bln
On-net/off-net
50 cents
10x On-net
per day
Off-net
2x Revenues
1Q11 1Q12
Infinity Web Modem
Unlimited navigation for Internet for all
R$1.99/day Daily unique users, Mln
Unique users/day
― speed reduction after 80Mb 2.8 50 cents
per day
Pay when you use 1.2
Speed up to 1Mbps 1Q11 1Q12
2.5x Revenues
12
13. Liberty – Continuous Offering Innovation
1 Voice – More off-net calls bundled Post-Paid Subs
Mln lines
+25% 9.6
7.7
+39%
Data
Voice +21%
1Q 11 1Q 12
Liberty R$ 49 Liberty + 50
4
2 SMS – Unlimited messages
Unlimited on/offnet R$ 9.90/
Pay when you use month
3 Handset browsing
Voice: unlimited incoming and 50 minutes outgoing to TIM
numbers and local calls
Data: unlimited data per day (speed reduction after 3Mb)
Promotional Pricing (per day, per service):
Unlimited browsing R$ 29.90/ Américas Europa/África Ásia/Oceania
month
Pay when you use R$ 19.90 R$ 19.90 R$ 69.90 13
14. Liberty Controle – Entering in a New Market
Segment
Liberty benefits Liberty Controle benefits
Convenience of unlimited R$ 27/
Convenient as Post Paid
month
usage (unlimited TIM–TIM calls, local/LD)
Fixed monthly bill Flexible as Pre Paid
(R$10 credit to use on SMS/Web/Fixed)
+
Infinity benefits
Budget Control Brazilian Demographics
Population, Mln
182 191
Pay per Day AB 26 42 Liberty
Liberty
(e.g R$0.50 SMS/Internet) C 63
103
Controle
Infinity
DE 93
45
2005 2011
14
15. Best Smartphone Portfolio Drives Internet Browsing
Unique Users Per Month Smartphone Penetration
Mln clients % of CB
17.5 31%
+70%
10.3
13%
Revenues VAS
1Q11 1Q12 R$ Bln 1Q11 1Q12
1.00
0.64
+56%
Best Device Portfolio Device Portfolio Q1 Sales
1Q11 1Q12
Units
2,368 2,354
Tablets iPad Samsung
Liberty Web Tablet (49/month) 21%
Galaxy Tab 7” 50%
Basic
Support 79%
Smart- iPhone 4S iPhone 3GS Liberty Web (29.90/month) Internet* 50%
phones Galaxy SII Galaxy Y Infinity Web (0.50 /day)
1Q11 1Q12
Modem 14 Mbps 7.2 Mbps Liberty Web Modem (69.90/month) Gross Prod. Revenues
Infinity Web Modem (1.99/day) (Mln reais) 433 +55% 673
% of Internet enabler
Performance Price
devices /gross prod. Rev 77% 94%
Best Tariff Plans *Includes modem, tablets and web/smartphones 15
16. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials
Outlook and Priorities
16
17. Network Integration
1Q12 2Q12
More than 1,000 antennas Advance in FTTS Plan: 12 a FTTS Roll-out SP/RJ
# Sites
connected with fiber (FTTS) main cities (complete 1,777
1,477
Tim Mobile 1,030
Capacity upgraded from SP/Rio and 10 capitals)
Network
8Mbps (leased copper based) Starting Leased Lines
1Q12 2Q12 YE2012
to 100Mbps (owned fiber) switch-off (Opex saving) % of
66% 95% 115%
existing
b Intelig Cust. Connected
# access
Fiber based last meter Back to commercial 3,045
Intelig/ 1,038 TIM Fiber
AES Fiber Fiber to the office for Top push for Intelig
x3 1,030 TIM
Network 688
customers (last meters) corporate business 977 Intelig
Improving network reliability 1Q11 1Q12
c First Evidences
Pre-start Activities Start-up of TIM Fiber
Tim Fiber 3,600 Building authorized First customers
Residential 1,100 Building connected connected (testers) 80Mbps
Ultra BB measured in field
IT dedicated platform Soft launch on May on pre-launch
development Commercial launch on Q3
17
18. Ultra broadband: construction and tests underway
MSANs
Network 2 Optical
Backbone
Topology network
1
Network Roll Out: Execution at full speed Technical Tests: Architecture works as designed
• Technical lab tests concluded successfully
~3,600
• Field tests underway, with first Friendly User Testers
~1,100 connected on the network:
- Download speeds reaching 80 Mbps
- Minimal signal attenuation verified on the network
1 2
As is
Status
MSANs CPEs
Speed test : 80Mbps
18
19. TIM Fiber: On track for the Q3 Commercial Launch
TIM Fiber Day
timetable confirmed
Launch Phases
Pre-Launch Test Q2
Soft Launch
Q3
Commercial Launch
Key objective Technical Trial of the Check of the Business Start of the Commercial
solution Readiness Operations
Customer base
Employees + Customers
Friendly User Testers Beta Testers
Base Build-up
Geographic Coverage
(SP/RJ) 1 neighborhood 5 neighborhoods 25+ neighborhoods
Product
UBB Naked
Communications
n/a BTL ATL
Channels
n/a Telesales D2D + Telesales
19
20. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials
Outlook and Priorities
20
21. Consistent EBITDA and Net Income Growth
EBITDA Evolution From EBITDA to Net Income
R$ Mln R$ Mln
Handsets Rev.: +164 1,169
COGS: -201 Includes R$34 mln
one off tax liability
-37 -119 -657
-192
+552 -68 512
1,169 -42
1,033
-193 276
27.5% Ebitda Margin 26.2%
31.1% Service Ebitda Margin 31.1%
EBITDA Depreciation/ EBIT Net Taxes Net
1Q12 Amortization Financial and Income
EBITDA Var. Var. Var. Var. Var. EBITDA Result Others 1Q12
1Q11 Services Handset Marketing Network Personnel 1Q12
Revenues Margin and Sales and ITX G&A and
others ΔYoY +13.2% -3.8% +46.4% +29.3% +86.5% +29.5%
expenses
EBIT Net Income
R$ Mln R$ Mln
276
512 213
350 +30%
+46%
1Q11 1Q12 1Q11 1Q12
21
22. Cash Position
CAPEX D Working Capital D WC -617 YoY
R$ Mln
-30 => Inventories
R$ Mln
1Q11 1Q12 Var -142 => Receivables
-466 => Payable
Network 60% 77% 17 p.p
+21 => Others
IT 24% 14% -10 p.p
Others 16% 8% -7 p.p
689
543
-972
297 +83% -1,285
-1,903
1Q10 1Q11 1Q12 1Q10 1Q11 1Q12
OFCF Net Income
R$ Mln
DOFCF -727 YoY R$ Mln Including TIM Fiber
-110 => EBITDA-CAPEX
net debt – R$75 Mln
-617 => D WC
2,558
1,899
1,671 +14%
-549
-714
-1,277
1Q10 1Q11 1Q12
1Q10 1Q11 1Q12 Net DEBT/
EBITDA 0.73x 0.39x 0.40x
(trailing 12m)
22
23. Agenda
Q1 in Few
Community Expansion
Keeping the Innovation Path
Infrastructure & TIM Fiber Update
Financials
Outlook and Priorities
23
24. 1Q Takeaways
Consistency of TIM´s Growth
CB Net
Revenues Continuous Innovation
Competition
Tariff plans (Passport; Controle;
“Me too” approach from 67.2 4,468 Infinity modem)
52.8 3,752
main competitors Smartphones/tablets ultimate
portfolio
Increased subsidy and +27% +19% Seamless 3G/Wi-Fi solution (ex:
commissioning Airports; Rocinha)
March March
Price-down 2011 2012
2011 Q1 2012 Q1
Accelerating Revenue Reshape TIM Network Acceleration
Regulation Crossing 1,030 antennas connected (FTTS)
1 Bln barrier with capacity increased from 8 to
Smartphone
MTR cut asymmetric penetration 100 Mbps (transmission)
impact for pure mobile >18%
31.1%
3G+ roll-out at 42Mbps (access)
vs. integrated
15%
LD 14%
EILD price-cut expected 12.6% TIM Fiber launch on scheduling
soon Data
<14%
4G auction scheduled 1,100 buildings connected
March March 2011 Q1 2012 Q1
2011 2012 3,600 building authorized
Early field test: 80 Mbps scored
24
25. Business Priorities for Q2
Competitive Arena Business Developments
- MTR (asymmetric phase) impact • Forcing FMS even more
- Long distance commoditization - Infinity‟s community expansion
- Liberty accelerating (Passport,
Controle)
Regulation
• Data enter in FMS mode
- 4G auction confirmed - Best smartphone portfolio (Apple)
- EILD new price expected - Most attractive plans (Pre; Post)
- FTTS completed in SP/RJ
- 3G+ upgraded to 42 Mbps (access)
New Business
- Ultra BB residential: confirmed • Benefitting from network sinergies
- Intelig (corporate): back to - Switch-off leased line (SP/RJ)
commercial push in Q2 - Intelig/AES/TIM network fully
integrated by Q2
25