ApresentaçãO Da Tim No Jp Morgans Asia Pacific And Emerging Markets Equity Conference
1. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
TIM Participações S.A.
JP Morgan's Asia Pacific and Emerging
Markets Equity Conference 2007
September 24-25, 2007
New York
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2. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
General Context
TIM General Overview
TIM Strategic Objectives
Marketing Developments
Regulatory Framework
2Q07 Results
Conclusion
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3. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Brazilian Macroeconomic Scenario
Growing economy and widening consumer market
Gross domestic product growth Minimum-salary increase vs. inflation
5.7% 16.7%
15.4%
4.7%
4.4% 4.2% Increasing purchasing
3.7% Minimum- power of lower income
2.9% salary 8.3%
increase classes
5.7%
Inflation 7.6% 4.2%
3.9% 4.1%
3.1%
2004 2005 2006 2007E 2008E 2009E 2004 2005 2006 2007E 2008E 2009E
PAC* estimate 4.5% 5.0% 5.0% PAC* inflation estimate 4.1% 4.5% 4.5%
Stability and increase of purchasing power
•Government infrastructure investment program to accelerate economy 3
Source: EIU, Brazilian Central Bank
4. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Brazilian Telecom Market
Telecom growth driven by mobile and broadband
Client base (Mln) 6.5
Penetration Rate (Per 100 inhabitants)
Broadband 5.6 Broadband 56.4
3.9 53.2
Mobile Mobile 47.3
Fixed 2.3 Fixed 36.4
1.2 99.9 106.7
86.2 26.1
65.6 22.0 21.8 20.7 20.5
46.4
22.0
0.7 1.3 2.1 3.0 3.4
39.2 39.6 39.8 38.8 38.7
2003 2004 2005 2006 2Q07 2003 2004 2005 2006 2Q07
Main players in the telecom industry
Telefonica/PT Telmex / A. Movil Telecom Italia Citi / Pension Funds Finan. Groups
Telephony
Fixed
Fixed license
acquiried on
May 2007
Telephony
Mobile
Source: ANATEL. 4
5. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Brazilian Wireless Market
Continuous Market Growth
Client Base Performance Market Share Performance
Mln lines
-27.2 pp
29.8 29.1 30.3 1st Player 1st Player 45.1
26.5 40.5 -2.6 pp
25.4 27.5 34.5
20.9 26.3 3rd Player 29.1
20.2 28.4
23.9 3rd Player 23.4 25.4 25.8
13.7 20.5 20.8
18.7 23.9 24.6
9.5 21.6
17.9 20.7
13.6
8.3 -2.6 pp +1.2 pp
2003 2004 2005 2006 2Q07 2003 2004 2005 2006 2Q07
Source: ANATEL / Company´s data / Competitor´s press releases. 5
6. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Brazilian Wireless Market
Growing customer and revenue
Service Revenue
2Q07 Client Base (mln) Postpaid mix (%) (R$ bln) ARPU (R$)
Share
27.5 25.8% 22.0 2.8 30.3% 34.6
1st Player 30.3 28.4% 18.8 2.6 28.9% 29.9
3rd Player 26.3 27.0
24.6% 18.2 2.1 22.5%
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7. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
General Context
TIM General Overview
TIM Strategic Objectives
Marketing Developments
Regulatory Framework
2Q07 Results
Conclusion
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8. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
TIM Strategic Objectives
Market evidence * Strategic goals Initiatives
Segmented Offers
To consolidate our
leadership
TIM #1 in positioning (revenue Integrated Solutions
Mobile
service growth consistently above Community Concept
revenues* market average), Stimulating Usage
increasing profitability Prepaid Loyalty Promotion
To capture fixed-line New convergent products:
Convergence
Fixed-line = revenues (increasing share
R$ 47 billion of spending of TIM Brasil Home Zone Offer (“TIM Casa”)
customer base) Internet Access Solution (“TIM Web”)
market
Convergent package Mobile +Fixed +
To defend TIM mobile Internet (“TIM Mais Completo”)
leadership
Low-ARPU
approach
Residual
clients
To ensure profitability of Developing new business model
market in lower
low ARPU clients Oriented to low-ARPU customers
income classes
* Considering 2Q07 figures. 8
9. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Mobile Leadership: Innovative Marketing Strategy
Pushing on usage through promotions
“On-Net Traffic” focus
Stimulating
R$ 0.07 per minute for local on-net (also to fixed number)
intra-network R$0 (free calls) for 500 minutes on-net
traffic ► Facing competitors aggressiveness through continuous offer improvement
► Working on community concept in order to increase usage
Lowering SAC & Stimulating Usage
TIM Chip only
& Recharge ►TIM chip cost refund subject to recharge within 48 hours from
activation
incentives ► Bonus in minutes according to recharge value so as to stimulate
usage
Focusing on retaining customers
Prepaid Loyalty ► Quem tem TIM tem Mais: Loyalty promotion for prepaid clients
Promotion
►Bonus in minutes for TIM clients that have been in our base for
more than 1 year
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10. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Mobile Leadership: Continuous Value Added Services Innovation
Pushing on media content and interactivity
TIM Music Store TIM Studio
Music Download Wap Portal User Generated Content
Easy-to-download: 1 to 3 clicks maximum Videos, Images and Music upload and download from
the Web
Related contents: songs, videos, wallpapers
Revenue sharing with content producer (user)
TIM Music Club: latest news
Records: Sony&BMG, Universal, Warner and EMI Music
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11. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Convergence: Focusing on Customer's Total communication needs
Stimulating fixed to mobile substitution Mobile Internet
TIM Casa (Home Zone) TIM WEB
Internet Data Packages, also for non-TIM clients
Fixed to mobile substitution Works like a pen drive (PC or laptop internet access)
Dial-up access substitution
Very competitive local fixed calls tariffs in User-friendly device
the customers home-zone Devices
Low entry point for prepaid and attractive + or
discount for postpaid
SIM Card “Data” Modem USB PCMCIA
TIM Mais Completo
Fixed local calls Mobile local calls
(TIM Casa) + (TIM Brasil plan) + LD Full communication package combining Mobile
200 Min 200 Min 40 Min Calls + Home Fixed Calls + Internet Access
Enriching TIM convergent service offers
Internet + MMS + SMS + Modem
USB
250 MB 60 60
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12. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Developing a new business model
Mobile Penetration* by social classes
93%
New business model characterized by
59% reduced ownership cost:
Lower air-time prices (leveraging on
28% price/volume elasticity)
Use of extensive, indirect distribution
channels
Increase of electronic caring
High income** Medium income Low income
(> 3 MS***) (1-3 MS) (<1 MS)
% of
11% 31% 58%
population
Residual market in lower income social classes
* People more than 10 years old
** According to per capita household income 12
*** Minimum salary = R$350,00
Source: IBGE (PNAD, 2005)
13. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Regulatory Framework
2006 2007 2008-09
F-M Fully Stability of
termination Arbitration Arbitration Allocated interconnection tariff in
rate Cost model the medium term
M-M
B&K(45/55) < Jun Positive for a fair
termination Pay per use > Jul
Pay per use Pay per use
regulatory environment
rate
Number Additional opportunity to
consolidate leadership
Portability - Definition Implementation
in high-value customer
(F+M) segments
3G Commercial
3G/Wi-Max Availability of wireless
- 3G bid offer
Auction Wi-Max bid
broadband
Partially regulated Expected
upgrade of Increase of competition
Unbundling Commercially not -
in the fixed-line market
viable regulation
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14. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
General Context
TIM General Overview
TIM Strategic Objectives
Marketing Developments
Regulatory Framework
2Q07 Results
Conclusion
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15. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
2Q07 Results: Solid Net Service Revenues
Total Net Revenue Growth
YoY Growth
R$ Mln
Reported Organic*
3,060
+34.5% +17.3%
Continuous service revenues growth:
2,275 Total traffic + 43% YoY: focus on
91% on-net call promotion, stimulating usage
87% +40.5% +20.2%
Customer growth +23% YoY
Handset revenues drop confirms the trend
-5.8%
13% 9% of the previous quarters reflecting strong
2Q06 2Q07 push on ‘TIM Chip Only’ sales
Net Service Revenues Net Handset Revenues
MOU / ARPU Performance
MOU increase driven by on-net traffic ARPU increase QoQ
R$
Min +16%
+0.7%
81 94
34.4 34.6
2Q06 2Q07 1Q07 2Q07
Increasing usage Keeping ARPU above the market
* Proforma: Adjusted by Bill & Keep elimination starting on January 1st of 2006.
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16. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
2Q07 Results: Reducing Acquisition Cost
SAC Performance
R$
168 -33% Lowering SAC despite better level of customer
and handset mix:
113 24.6% YoY growth in postpaid gross adds
increasing % of mid-range and high-end handsets
58% Commission sold
Subsidy
70% Anatel’s fee on Reduced subsidy strategy with focus on “TIM
net adds Chip Only” offer:
More than 70% of overall gross adds in 2Q07 vs.
42% Comodato ~40% in 2Q06
30% Advertising
Others Postpaid SAC oriented to maintain
2Q06 2Q07 competitiveness
Direct cost Indirect cost
Improved pay-back period:
3.3 months in 2Q07 vs 4.7* months in 2Q06
* Proforma: Bill & Keep elimination starting on January 1st of 2006. 16
17. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
2Q07 Results: Net Financial Position
Net Debt QoQ Trend Net Cash Flow (OpFCF + Non OpFCF)
R$ Mln Non R$ Mln Seasonal Impact (R$781 Mln)
OpFCF OpFCF
1Q07 2Q07
341 390
Annual
Fistel Net Cash
440 Flow
Pro-forma
(391)
(1,582) 165
Reported Paid
(556) (1,973) 2Q07 Dividends
EBITDA +744
CAPEX (324)
Δ Oper. WC (255) Of which
Dividends (440)
Positive Net Cash Flow (+R$390 Mln) excluding
Positive Operating FCF due to increased profitability seasonal disbursement
Gross Debt: R$2.3 billion (of which 89% long term / average annual cost of 11.66% p.y. in 2Q07)
Cash and equivalents: R$0.3 billion
Net Debt: R$2.0 billion
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18. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
2Q07 Results: Profitability and Bottom Line Growth
EBITDA and EBITDA Margin
743.7
515.7 44.2%
24.3%
+ 4.5 p.p. YoY organic margin growth
22.7% * 743.7
515.7
Strong service revenue growth offsetting
2Q06 2Q07 the seasonality of the period related to
Organic EBITDA Margin ** commercial expenses
19.8%** 24.3%
+R$ 228 million
+4.5 p.p.
EBITDA (R$ million) EBITDA Margin
Net Income
R$ Mln Positive Bottom Line
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2Q06 Improved operating result
2Q07 reversal of R$ 273 million in relation
+R$273 to the losses reported in the 2Q06
(239)
* Reported EBITDA Margin
* * Adjusted by Bill & Keep elimination starting on January 1st of 2006
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19. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
General Context
TIM General Overview
TIM Strategic Objectives
Marketing Developments
Regulatory Framework
2Q07 Results
Conclusion
19
20. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
TIM Strong Market Position
Nationwide Innovation
Coverage Leadership in innovative services
Only Company with full national presence convergent solution
Largest GSM operator in number of clients (mobile + fixed + internet)
The largest mobile data coverage Continuous VAS innovation
Recognized TIM Brand Strong operational &
The first mobile operator choice financial results
Continuous value client growth
Leader in average client satisfaction
Leader in service revenue
Committed to constant improvement of
brand perception through creation of new Solid YoY Revenue growth
customer operations unit Leader in ARPU
Quality Sustainable Growth
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21. JP Morgan’s Asia Pacific and Emerging Markets Equity Conference 2007
New York - September 24-25, 2007 - Mr. Francesco Locati, COO
Presentation Disclaimer
These presentations have been written and presented by TIM Participações S.A. TIM
Participações S.A. is solely responsible for the accuracy and completeness of the
contents of such presentations and/or other documents. JPMorgan does not have any
responsibility for or control over the contents of such presentations and/or other
documents. No endorsement is intended or implied notwithstanding the distribution of the
presentations and/or other documents at the JPMorgan Asia Pacific Conference /
Corporate Access Day. The materials and information in the presentations and other
documents are for informational purposes only, and are not an offer or solicitation for the
purchase or sale of any securities or financial instruments or to provide any investment
service or investment advice.
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