2. Visit our website and IR app:
www.tim.com.br/ir
AGENDA
Macro & Industry Overview........5
Recent Results……………..………… 11
Network Evolution…………………. 19
Regulatory Update…………………. 23
Fixed Business…………………….…..27
Business Outlook…………….….…. 30
Historical Data & Others…….……34
TIM IR app
(English)
TIM RI app
(Portuguese)
3. KNOWING TIM 3
KNOWING TIM BETTER
Gross Revenues
(R$ Bln)
Customer base
EoP (Million)
15,000 km fiber optical backbone
5,500 km fiber
optical backhauling
Growth
Via
Acquisition
Brazilian Law
“Nível” 1
“Nível” 2
Legal
Requirements
Demand for transparency and disclosures
Highest level of Corporate Governance
Requirement of protection for minority shareholders
100% Tag Along
Equal dividends rights
One single class of shares
Strict disclosure policy
Statutory Audit Committee:
•Report to Board of Directors
•Oversight Financial reporting
•Analyze anonymous complaints
Unique Telco company listed on the Novo Mercado
CORPORATE GOVERNANCE
TIM: A Huge Brazilian Company
Presence in Brazil since 1998.
16th largest Private Company in Brazil (source: Exame Magazine - 2013).
Approximately R$30 billion of Market Capitalization.
74.2 million customers (27% Share)
The 2nd Player - Market and rev. share
More than 383,000 points of sales
More than 165 own stores
15 Customer Care Centers (16k attendants)
~13,100 Antennas
3,429 cities covered
95% of urban pop. covered
50,000 km of optical fiber network
~12,480 employees
23,000 indirect jobs
R$10.4 billion in taxes payments in 2013
R$3.9 billion invested in 2013
Sales
Network
Social
& Economic
GROWTH STRUCTURE
25
28
30
2011
2012
2013
4,7
5,0
5,2
2011
2012
2013
64
70
73
2011
2012
2013
EBITDA (R$ Bln)
5. MACRO & INDUSTRY OVERVIEW 5
MACRO SCENARIO OUTLOOK
•Market consensus shows a softer growth.
•Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune.
•Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data.
•Constrains of individuals budget points to an increase of mobile usage (low cost).
GDP Forecast (% YoY Growth)
Inflation Forecast (IPCA: 12 months)
Interest Rate Forecast
FX Rate Forecast (R$/U$ - year average)
(% Selic Target p.y. – year average)
Source: BaCen
5,9
6,4
6,2
6,0
2013a
2014e
2015e
2016e
8,2
11,0
11,8
10,0
2013a
2014e
2015e
2016e
2.20
2.40
2.50
2,18
2013a
2014e
2015e
2016e
2.30
1,30
1,70
2,60
2013a
2014e
2015e
2016e
6. TIM represents 30% of the industry mobile revenue* while has 27% of the market share
TIM
Source: Anatel and Players balance sheet
Vivo
Claro
Oi
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
74.203
665
121
n.d.
74.989
Market share 2Q14
26,9%
1,5%
0,5%
n.d.
---
Net Adds 2Q14 (000´s)
286
-
19
n.d.
305
Net Adds 12M (000´s)
2.008
31
61
n.d.
2.100
Net Revs FY13 (R$ Mln)
19.264
657
19.921
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
79.357
11.035
4.370
688
95.450
Market share 2Q14
28,8%
24,1%
18,8%
3,6%
---
Net Adds 2Q14 (000´s)
892
333
36
43
1.305
Net Adds 12M (000´s)
3.158
619
345
175
4.296
Net Revs FY13 (R$ Mln)
23.002
11.720
34.722
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
68.776
11.289
7.045
10.106
97.216
Market share 2Q14
24,9%
24,7%
30,3%
53,3%
---
Net Adds 2Q14 (000´s)
27
189
220
230
667
Net Adds 12M (000´s)
2.303
1.133
905
1.121
5.462
Net Revs FY13 (R$ Mln)
12.773
20.424
33.197
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
51.081
17.023
6.567
887
75.558
Market share 2Q14
18,5%
37,2%
28,3%
4,7%
---
Net Adds 2Q14 (000´s)
502
-240
3
58
304
Net Adds 12M (000´s)
1.373
-1.307
17
- 16
48
Net Revs FY13 (R$ Mln)
9.290
19,132
28.422
6
The mobile segment represents
75% of the industry access growth
*Mobile revenue considers only the 4 major players
Fixed / Mobile
Fixed BB
Fixed BB/TV
Fixed / Mobile
Fixed
Mobile
Fixec BB/TV
Fixed
Mobile
BRAZILIAN TELCOS X-RAY
7. MARKET STRUCTURE CHANGING TOWARDS DATA USAGE
60%
36.8 mln
40%
24.5 mln
44%
16.2 mln
24%
8.8 mln
32%
11.8 mln
(40%)
(60%)
61.3 Mln
Possess Internet connection
Does NOT Possess Internet connection
Other
Lack of coverage
Too
Expensive
53% of active connection base has currently a speed below 2Mbps
Total Households
Households which does NOT possess
Households with internet connection and breakdown for households without internet connection:
MACRO & INDUSTRY OVERVIEW 7
3%
37%
51%
91%
With Telephone
Only mobile phone
Mobile and fixed phone
Fixed phone only
Salaries up to R$1.2k
Salaries up to R$3.1k
57 mln
32 mln
2 mln
81 mln
106 mln
23 mln
53% of pop.
70% of pop.
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Re-visiting Market Structure
Market Data Revenues Growth 2016 vs. 2012:
> 13 bln Reais on Mobile (+100%)
>7 bln Reais on Fixed (+35%)
Households Profile
Purchase Power
Average Cost
83 mi
2
1
3
Access Growth (users in mln)
4
Fixed
Mobile
2009
2010
2011
2012
2013
Jun/14
118.5
23.2
+ 5X
R$41.90
R$96.00
Fixed: Voice and Broadband
Entry level plan
Mobile: Voice and Data PTIM’s entry level plan
8. Widespread use of Social Media (Social Network Users in Brazil 2011-2017)
BRAZILIAN INTERNET USAGE BOOM
Internet Penetration in South America
(Internet users per 100 inhabitants)
Strong adoption of Instant Messaging
(WhatApp mln users)
High Penetration of E-commerce
(E-commerce revenues in Bln US$)
8.4
11.0
17.0
2010
2011
2012
Amazon lauched operations in Brazil in Dec/12
83 mln Internet users – Brazil is the 5th largest nation in the world of internet users
66%
60%
59%
56%
46%
44%
41%
37%
32%
32%
30%
24%
Arg
Col
Chi
Uru
Bra
Ecu
Vem
Per
Guy
Sur
Bol
Par
56.1
66.2
78.3
88.3
97.8
104.2
110.0
2011
2012
2013
2014
2015
2016
2017
#2 in Facebook active users (76mln) only after US
#2 in Twitter users (41mln) only after US
2nd largest market outside US
40
38
32
31
25
17
13
11
3
India
Brazil
Mexico
Germany
Spain
UK
Argentina
Russia
France
28% of mobile users in Brazil use Instant Messaging apps
Source: SocialBakers, e-Marketer, Semiocast, G1.com, Folha de São Paulo
MACRO & INDUSTRY OVERVIEW 8
465 mln worldwide users
List of selected countries as of Feb/14
9. Mobile
23.0
12.8
9.3
19.3
4.8
Fixed+Data+Pay Tv
11.7
20.4
19.1
0.7
4.9
Total
34.7
33.2
28.4
19.9
4.8
4.9
LEVERAGING ON PURE MOBILE COMPETITIVE ADVANTAGE
Long Distance Leader
50% Market Share
2nd Overall
74.2 million customers
Prepaid Leader
29.2% Market Share
Source: Companies Releases, TIM estimates; CETIC jun’13; Akamai ; PNAD - IBGE
FMS Focus
A pure mobile approach is the most suitable strategy to capture both opportunities
Oi
Claro
Vivo
TIM
29,5%
29,6%
28,7%
28,8%
25,5%
26,9%
27,2%
26,9%
25,6%
24,6%
25,0%
24,9%
19,1%
18,7%
18,7%
18,5%
2Q11
2Q12
2Q13
2Q14
Customer Base Evolution
(Market Share)
Entering in Data World Via Mobile
(mln users)
Voice FMS: TIM, with no legacies, can only gain on the trend (R$ billion, Net Revenue per Group 2013)
2Q14 x 2Q11
-0.7 p.p
+1.4 p.p
-0.6p.p
-0.6 p.p
Source: ANATEL
Mobile
Fixed
4.1
14.6
33.1
52.5
94.8
11.4
13.8
16.3
19.1
20.9
2009
2010
2011
2012
2013
+83%
+23x
28%
26%
23%
16%
4%
4%
Vivo
Claro
Oi
TIM
GVT
Nextel
Revenue Share
MACRO & INDUSTRY OVERVIEW 9
10. -9,83%
-15,36%
1,38%
2Q12
2Q13
2Q14
9,4
9,7
12m 2Q13
12m 2Q14
0,8
1,0
12m 2Q13
12m 2Q14
Organic EBITDA
(% YoY; Not including assets sales; Mobile as TIM)
Broadband Quality
(Brazil’s Average Speed; Source: Akamai)
Fixed Incumbents
Mobile
4Q13
2.7 Mbps
ANATEL: >78% of fixed broadband connections are below 4Mbps
Fixed Incumbents
Mobile
(only TIM)
Source: Anatel
Net Revenues (% YoY)
MACRO & INDUSTRY OVERVIEW 10
Brazil Ranks 83th in Average
Speed per Country
STRATEGY PAYING OFF
VU-M
Impact
Total Access Net Addition (EoP Million)
23,4
48,0
12m 2Q13
12m 2Q14
2,4
1,8
12m 2Q13
12m 2Q14
Mobile
Fixed
Voice
Data
-8,51%
-0,30%
-3,51%
2Q12
2Q13
2Q14
5,19%
3,76%
1,42%
2Q12
2Q13
2Q14
5,62%
4,35%
5,39%
2Q12
2Q13
2Q14
Users’ Preference for Mobile
41%
50%
51%
2009
2011
2012
% HH w/ mobile phones only (Source: PNAD 2012)
12. 19
23
28
28%
32%
39%
26k
100k
Postpaid segment grew by 7% and postpaid mix over customer base reached 16.5%, while SAC/ARPU remained below 2 months
19%
22%
27%
2Q12
2Q13
2Q14
HIGHLIGHTS
Operational
2Q13
2Q14
+7% YoY
Data as % of revenues
Net Revenues: Usage (local + long distance) + VAS
Total OPEX
(Δ% YoY)
11%
9%
2%
-3%
-7%
EBITDA Margin
27%
25%
28%
2Q12
2Q13
2Q14
Data users (in mln) and
% of total customer base
15.8%
16.5%
2Q13
2Q14
Mix of postpaid over total base
World Cup Figures (in the Stadiums)
Live TIM customer base
Financial
Gross Data Revenue growth at solid pace: R$1.6 bln in 2Q14
Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY
Strong cost control: total opex dropped 7% YoY
EBITDA grew 8% YoY with margin gain
Data users reached 28 mln lines
Live TIM crossed 100 thousand customers milestone
+3 p.p.
+5 p.p.
2Q13
3Q13
4Q13
1Q14
2Q14
Jul/14
Jun/13
2Q12
2Q13
2Q14
•Photos sent: 50 mln
•Outgoing calls: 5 mln
•Data traffic: 26.7 TB
Maracanã Stadium
RECENT RESULTS 12
13. CORE BUSINESS ANALYSIS & PERFORMANCE
MTR cut full impact in 2Q
Handset sales at a healthy level although reduced growth
World Cup impact on commercial activities
Mobile Service Net Revenues Analysis
(% YoY)
EBITDA Performance
(mln; %YoY)
June
2013
June
2014
No Holidays
1 National holiday
3 Brazil’s games (1/2 day holiday)
Up to 2 municipal holidays in main cities hosting games
Net revenues
from MTR
-18%
-28%
2.4
3.1
2.7
2Q12
2Q13
2Q14
Total units sold
(mln)
(Local + LD
+ VAS)
Business
Received
2Q13
2Q14
1,232
2Q13
2Q14
ReportedEBITDA Margin
1
2
3
+7%
24.9%
27.9%
EBITDA
1Q14
2Q14
-30%
Business
Generated
+3%
-1%
*MTR Impact
+16%
+8%
1,331
Total
6 months (YoY)
+8%
-26%
+4%
0%
(Incoming
MTR + SMS)
Ex-MTR
Ex-MTR
*MTR Impact
Ex-MTR
~170 mln*
~96 mln*
1,427
RECENT RESULTS 13
14. 118.5
23.2
2009
2010
2011
2012
2013
Jun/14
2Q13
2Q14
2Q13
2Q14
READY FOR DATA OPPORTUNITY
# Access Growth (users in mln)
Brazilian Broadband: Low Average Speed (Mbps)
Fixed
Data Experience is Mobile
Capturing Data Opportunity
Mobile
2.7
2.6
4Q13
1Q14
10.5
13.7
3.6
2.5
Sources: Anatel, Akamai - State of Internet
Source: IDC Tracker
Source: Anatel
# Total Market Equipment Sold (units in mln)
Smartphone & Tablet
Notebook & PC
1Q14
2Q14
SMS
Web
Content & Other
1,500
Data Gross Revenues Mix
(R$ mln; %YoY)
+22%
+1%
-8%
+29%
+33%
+45%
+72%
BOU: Bytes of Use
(Megabytes)
Days of Use
2Q13
2Q14
2Q13
2Q14
+40%
+30%
In May, >45% connections in Brazil were < 2Mbps
+ 5X
Δ %YoY
Δ %YoY
+20%
1,578
RECENT RESULTS 14
42%
28%
17%
2%
1%
-8%
21%
20%
19%
25%
29%
33%
36%
30%
33%
45%
72%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
Content & Other
Web
SMS
Historical Change in Data Mix
(%YoY)
-1%
+13%
+7%
-1%
CAGR
CAGR
CAGR
15. 75.7
76.2
79.4
68.9
72.2
74.2
63.0
66.5
68.8
47.8
49.7
51.1
47%
39%
20%
30%
21%
20%
12%
10%
2Q13
2Q14
23%
24%
24%
26%
40%
35%
11%
14%
2Q13
2Q14
2Q13
2Q14
CUSTOMER BASE EVOLUTION
# 1 player in prepaid
Strong growth in ‘Controle’ postpaid base
Austere disconnection policy
2Q12
2Q13
TIM
Source: ANATEL
2Q14
Vivo
Claro
Oi
4G Market Share (%; thd users)
3G Market Share
(%; mln users)
28.9
30.2
41.5
16.2
Source: ANATEL
TIM
TIM
1,281
990
655
334
Customer Base
(mln)
Source: ANATEL
+8.4%
Source: Company
Prepaid Recharge
(R$; % YoY)
118 mln
3.3 mln
RECENT RESULTS 15
16. v
v
GO TO MARKET PROGRESS
Equipping Customer Base
% of smartphone sales
among players in 2Q14
% of smart + webphone on TIM’s base in 2Q14
% of smartphone over new sales in 2Q14
Postpaid
oReduce churn on postpaid
oAttract dual SIM card users traffic
oRenewed focus on corporate customers
o Leveraging on “pure mobile” distinctiveness
oExpanding daily tariff scheme to new regions
oSimplicity / Transparency
R$ 7 weekly service package
R$ 0.75 daily offer
Prepaid
35%
50%
62%
2Q12
2Q13
2Q14
39%
57%
71%
2Q12
2Q13
2Q14
41%
23%
28%
9%
P3
P2
P1
TIM
Managing customer base…
To Infinity and beyond…
Penetration of smart + webphones drives data usage growth
Source: GFK Group
Source: Company
Source: Company
RECENT RESULTS 16
20. STRATEGY: INFRASTRUCTURE EVOLUTION
2016
MASSIVE LD
BACKBONE
65,000 KM OF FIBER
2013
FIBER TO THE
AMAZON
46,000 KM OF FIBER
BY YE13
Fiber to the site / Mobile Broadband
Project Key to Data Growth
Targeting 38 cities in 2013,+100 cities till 2016.
From 2-8 to +100 Mbps.
LTE Ready.
Macro coverage fine tuning.
Focus on IP infrastructure, caching, peering.
INTELIG 15,000KM
2009
INTELIG
ACQUISITION
New backbone routes- Increasing resilience.
82% urban
population
2013 2014 2015 2016
95% urban
population
#NodeB / eNodeB
(3G + 4G)
# BTS
(2G)
2012 2013 2014e 2015e 2016e
New Sites
Including
Small Cell.
POP MW
POP MW POP MW
POP MW
BSC-RNC Site
POP MW
2013 2014 2015 2016
LTE* 3G 2G
Fiber base
Infrastructure
Backhauling
Evolution Increased Coverage and Access Capacity
(# new elements)
Capex Evolution Towards Data
(% of total Capex)
Small Cell Approach
(# new elements)
NETWORK EVOLUTION 20
21. 2Q13
2Q14
o Brasília
o Curitiba
o Rio de Janeiro
4Q13
2Q14
4Q13
1Q14
2Q14
INFRASTRUCTURE FOCUSED IN DATA
COVERAGE
Homogeneous
Access Upgrade
In all relevant areas
Site densification
Small cell / Wi-Fi
CAPACITY
Higher speed
4G roll out
Mobile broadband project acceleration
Backhauling infrastructure
AVAILABILITY
Always available
Fine tunning
Fiber rings / redundance
Resilience
DATA CENTRIC APPROACH
TIM’s Infrastructure Strategy
Network in Numbers
Number of 3G & 4G Sites
Number of Wi-Fi & Small Cell
~11.3
~11.0
~13.1
Number of sites with fiber (FTTS)
Cities in mobile BB project
+3.5x
53
66
1Q14
2Q14
+13 cities
BioSite: New approach to coverage
Patent pending
+47%
1
2
3
After
Before
o New frequency at 900 MHz in SP
o Better indoor coverage
o Addressing capacity requirement
Completed actions
Initiating in:
NETWORK EVOLUTION 21
22. Capex Evolution
(R$ mln)
Capex per Technology
(R$ mln)
Fiber to the site expansion to ~100 cities Benchmark: Anatel Plan for 2012-2014
(R$ bln)
3G
2G
3G
2G
3G
4G
2011
R$2,983 ~R$3,800
2014e
5.9
4.8 4.6
2.1
5.0
3.5
2.6
3.4
TIM Claro Vivo Oi
10.9
+31% +52% +98%
Copper
(2-8Mbps)
Before FTTS After FTTS
Metro Ring
Own Fiber
(300 Mbps)
From Copper
To Fiber based
Wi-Fi small cell approach
Total
Capex
2,836
2,983
3,386
3,871
2011
2012
2013 19%
17%
20%
% over sales
2010
18%
CAGR
11%
Source: 5th monitoring cycle of mobile telecom improvements plan released by Anatel on Feb/14
8.3
7.2
5.5
Actual from 2012 to Oct/13 Forecasted to Nov/13 until 2014 end
CAPEX ANALYSIS
NETWORK EVOLUTION 22
24. 0.36
0.32
0.24
0.16
0.10
0.06
0.03
0.02
2012
2013
2014
2015
2016
2017
2018
2019
Auction expected for September
License period: 15 + 15 years
No additional obligation. Network and Spectrum sharing opportunities
Switch off plan starting at the beginning of 2016
Minimum prices and clean-up costs not yet defined
4G Auction RFP
Leased line (EILD) reference price reduction, in 2016, from ~20% until ~80%
Establish regulated reference prices to leased lines speed up to 34 Mbps
On preliminary ‘static’ simulation show relevant OPEX reduction
MTR New Glide Path (R$)
Leased Lines - EILD New parameters established
New MTR and EILD Analysis
Source: Anatel
Source: ANATEL, Commissioners Meeting on July 17th
Main measures until July, 2014
Cancelation within 48 hours, without human assistance
In case of dropped call, companies must call customer back
Minimum of 30 days for prepaid credits to expire
ANATEL's new costumer care policy - RGC
Source: ANATEL Resolution 632/2014, GEX Meeting on July 17th
REGULATORY UPDATE
TIM has been working to improve transparency and caring
REGULATORY UPDATE 24
25. 30/Sep Auction
Format indicates soft competition: the spectrum will be auctioned in four blocks of 10 MHz + 10 MHz;
No additional obligations (“naked auction”), synergies with 2.5GHz auction obligations will be subject to backhaul requirements;
Authorization for spectrum sharing in cities with pop. <100k.
733 MHz
4
1st Round: Cap of 10 + 10 MHz
2nd Round: Cap of 20 + 20 MHz (in case of no bidders)
5
6
2
3
1
708 MHz
718 MHz
728 MHz
738 MHz
748 MHz
4
5
6
2
3
1
763 MHz
773 MHz
783 MHz
793 MHz
803 MHz
9
713 MHz
718 MHz
723 MHz
728 MHz
738 MHz
708 MHz
743 MHz
748 MHz
788 MHz
768 MHz
773 MHz
778 MHz
783 MHz
793 MHz
763 MHz
798 MHz
803 MHz
10
11
12
7
8
13
14
17
18
15
16
10
11
12
7
8
13
14
9
Auction details
Costs & Payment method
Minimum prices: R$1.9bi + R$0.9 (EAD*) per block;
License payment in up to six installments (36, 48, 60, 72, 84 and 96 months) preceded by a 10% down payment;
Readjustment: IGPDI +1% per month;
Reimbursement values will be defined in the BID terms and will be administrated by an independent third party;
Channel repositioning, filters, TV converter, and other mitigation techniques will be subject to reimbursement.
Regional Blocks:
Auction Public Consultation
Band allocation Res. Anatel 625/13
Nov/13
Jan
Feb
2015
2018
Analog TV switch off period
Mar
Apr
May
Jun
Jul
Aug
Sep
Conclusion of the Digitalization Plan
Interference tests
Public consultation bid and interference
Bid notice
Interference Resolution Digitalization Plan
700MHZ AUCTION
oBlock 5 or 15 and 16 CTBC Region 106 cities or 1 mln users
oBlock 6 or 17 and 18 SERCOMTEL Region 2 cities or 67k users
oBlock 4 or 13 and 14 Represents 98% of the population, equals to national
REGULATORY UPDATE 25
*Entity for Administration of TV and RTV Channel Relocation and Digitalization Process
26. Vivo
Claro
Oi
TIM
Source: ANATEL
4G Market Share on 2500Mhz (%; thd users)
2500 MHZ auction results
Spectrum Characteristics
5800 Mhz
2100 Mhz
850 Mhz
700 Mhz
< 700 Mhz
BTS Range (km)
0
2
4
6
8
10
Numbers of BTS
20
15
10
7
5
2
Band W
Band X
Band V1
Band V2
2500 MHZ rural coverage obligations
X band
W band
V2 band
V1 band
Roadmap
Presidential Decree Nº 5820/06 Rules to the Digital TV migration
2006
2012
ANATEL’s Resolution
Creation of a study group to define the future and the atribution of the band
2013
Ordinance Nº 14/13 Premises to 700 Mhz destination on the SMP
2015
2018
Shutting down Period
Feb/Apr 2013 - Subrange Atribution CP
Nov/13 Res. Nº 625/2013 – Atribution of the Subrange
Paid ~R$0.3 bln
Paid ~R$1 bln
Paid ~R$0.8 bln
Paid ~R$0.3 bln
4G DETAILS
TIM
1,281
990
655
334
3.3 mln
47%
39%
20%
30%
21%
20%
12%
10%
2Q13
3Q13
4Q13
1Q14
2Q14
REGULATORY UPDATE 26
28. 2Q13
3Q13
4Q13
1Q14
2Q14
TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2
Turnaround Plan on Fixed Business
2013
2012
-
2014
New sales revenues (R$; YoY)
Financial performance
Governance / Efficiency
Business development
Quality and Process
Activation time (days)
Operational Improvements Paying Off
+
Segment EBITDA-CAPEX
Source: Company
Net Revenues (with intercompany)
2013
2014
Business Priorities
4Q13
1Q14
2Q14
Plan
Phases
Highlights
Financial sanitization
Infrastructure reinforcement
Market repositioning
oPositive EBITDA
oCost efficiency
oCustomer base management
oNew business unit organization
oIT renewal plan
oMultiservice network launch
oNew branding
oNew offers and product launch
oRestructured sales force
2H14
Showing results
oSales growth
oRevenue rebound
Business remodeling driving stable fixed revenues QoQ
+19x
2Q13
2Q14
-80%
FIXED BUSINESS 28
29. +34%
11.5
18.3
24.5
2Q13
0
1Q14
2Q14
Gaining more traction
Addressable HH
(000 HH)
Gross Adds (000 users)
Customer Base (000 users)
May/2014
oLive TIM Extreme 1Gbps for R$1,999.90
oLive TIM Blue Box release: optional TV approach
Jul/2014 New speed: 70Mbps for R$119.90
Source: Netflix July 2014
Netflix Broadband Ranking (Average streaming speed representation)
31%
Positive
Neutral
Negative
Internet buzz
FIXED BROADBAND: LIVE TIM
New Offers
126 neighborhoods:
43 neighborhoods in SP
83 neighborhoods in RJ
Quality Experience
609
804
1,069
1,138
1,220
2Q13
3Q13
4Q13
1Q14
2Q14
8%
31%
21%
51%
72%
18%
2nd
3rd
4th
5th
6th
1st
Source: Gauge 1Q14
Source: Company
+113%
26k
100k
Jul/14
Jun/13
Market average
FIXED BUSINESS 29
31. Accelerated Network Evolution for Data
KEEPING THE STRATEGIC FOCUS ON THE 2nd HALF
Consolidating Recent Offers & Innovative Services
Strong Institutional Position
“Porta Azul” (Blue Door)
Evolving the Structure for the New Challenges
•Streamlining organization
•Adding new talent
•Stronger segment focus
oConsumer
oCorporate
oResidential
•4G auction participation
•Leadership position
•Presence in dialogue with relevant institutions
4G 700MHz
Small Cells
BioSite
Mobile
Fixed
VAS
TIM Protect
CONTENT
New Positioning
DATA CENTRIC APPROACH
Coverage
1
2
3
Capacity
Availability
BUSINESS OUTLOOK 31
32. 21.3
27.5
2012
2013
2016e
2012
2013
2016e
+xx%
OFFER EVOLUTION
136
148
>170
2012
2013
2016e
18%
21%
>40%
VAS Gross Revs.
VAS/Revs.
30%
37%
>50%
43%
55%
>75%
2012
2013
2016
+xx%
+29%
+22%
Smart/Web phone Penetration (% over total base of lines)
Voice MOU
(minutes)
Data Users (% of Data Users in CB; million users)
VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln)
BUSINESS OUTLOOK 32
33. TIM PART: 2014-2016 GUIDANCE
Total Net Revenues
EBITDA
CAPEX
18,764
19,921
2012
2013
2014e
2015e
2016e
5,012
5,207
2012
2013
2014e
2015e
2016e
R$ million
R$ million
626
3,139
3,871
3,487
384
2012
2013
2014e
2015e
2016e
R$ million
Infrastructure
Others/Licenses
3,765
Guidance
2013-2016 CAGR: Mid Single Digit Growth
2013-2016 CAGR: Mid Single Digit Growth
Total CAPEX 2014-2016: ~R$11 billion*
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK 33
37. ANNUAL HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS 37 YearR$ ThousandDescription201220132014 (YTD) Gross Revenues27,755,813 29,661,753 14,205,568 Gross Revenues Telecommunications Services24,350,086 25,065,214 12,195,042 Telecommunications Services - Mobile22,879,828 23,993,427 11,752,472 Usage and Monthly fee11,086,671 11,309,804 5,552,984 Value added services - VAS4,404,832 5,353,653 3,077,103 Long distance3,217,921 3,332,965 1,586,398 Interconnection3,969,138 3,760,751 1,402,920 Others201,264 236,254 133,069 Telecommunications Services - Fixed1,470,259 1,071,787 442,570 Gross Revenues Handset sales 3,405,726 4,596,539 2,010,526 Net Revenues18,763,947 19,921,291 9,476,957 Adjusted Net Revenues18,763,947 19,965,200 9,476,957 Net Revenues on Services16,419,958 16,701,059 8,084,159 Adjusted Net Revenues on Services16,419,958 16,744,969 8,084,159 Net Revenues on Products2,343,989 3,220,232 1,392,798 Operating Expenses(13,751,989) (14,714,546) (6,828,772) Personnel expenses(729,032) (831,876) (457,589) Selling & marketing expenses(3,841,852) (3,937,899) (2,005,899) Network & interconnection(5,353,476) (5,312,301) (2,205,056) General & administrative(551,393) (624,725) (328,248) Cost Of Goods Sold(2,604,978) (3,350,841) (1,473,856) Bad Debt(250,972) (240,051) (153,256) Other operational revenues (expenses)(420,286) (416,853) (204,868) EBITDA5,011,958 5,206,744 2,648,184 EBITDA Margin26.7%26.1%27.9% Adjusted EBITDA5,054,088 5,237,399 2,648,184 Adjusted EBITDA Margin26.9%26.2%27.9% Depreciation & amortization(2,688,588) (2,767,871) (1,487,386) Depreciation(1,458,563) (1,502,498) (809,308) Amortization(1,230,025) (1,265,374) (678,078) EBIT2,323,370 2,438,873 1,160,799 EBIT Margin12.4%12.2%12.2% Net Financial Results(169,890) (302,720) (108,541) Financial expenses(644,754) (749,700) (434,527) Net exchange variance(4,151) (4,410) (1,962) Financial income479,015 451,391 327,949 Income before taxes2,153,480 2,136,153 1,052,258 Income tax and social contribution(704,592) (630,539) (314,512) Net Income1,448,888 1,505,614 737,746 Adjusted Net Income1,500,143 1,525,845 737,746
38. HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS
ROA: NOPLAT/Avg. Total Assets.
Calculation considers organic Net Income and EBITDA HISTORICAL DATA & OTHERS 38
Year
Description 2012 2013 2014
Brazilian Wireless Subscriber Base (000`s) 261,808 271,100 275,707
Estimated Total Penetration 132.8% 136.45% 136.1%
Municipalities Served (GSM) 3,383 3,404 3,427
Market Share 26.88% 27.09% 26.91%
Total Lines (000's) 70,376 73,431 74,203
Pre-paid Lines (000's) 59,658 61,146 61,963
Post-paid Lines (000's) 10,718 12,285 12,239
Gross Additions (000's) 38,408 39,627 18,612
Net Additions (000's) 6,293 3,055 772
Churn 47.5% 50.9% 24.2%
Total ARPU 19.1 18.6 17.6
Total MOU 136 148 139
SAC 29 28 29
Handsets Sold (000's) 10,227 12,511 5,400
CAPEX (R$ Mn) 3,765 3,871 1,472
Employees 11,650 12,167 12,225
39. Stock Performance (base 100)*
TIM Celular S.A.
Intelig
100%
TIM Brasil Serv. e Part. S.A.
Free Float
Telecom Italia International N.V.
Telecom Italia
100%
TIM Participações S.A.
ON: 33% (805,662,701)
ON: 67% (1,611,969,946)
100%
100%
STRUCTURE AND STOCK PERFORMANCE
HISTORICAL DATA & OTHERS 39
-10%
00%
10%
20%
30%
40%
50%
60%
TIMP3
Ibovespa
TSU
40. Cofins
PIS/ PASEP
ICMS
Fistel
Fust/
FUNTEL
Total
Total
Fust/ FUNTEL
PIS/ PASEP
ICMS
Cofins
Fistel
% Gross Revenues
TELCOS’ TAX BURDEN & HIGH INVESTMENTS
3%
~1%
28%
~5%
1.5%
~39%
32% of Revenues
Taxation represents almost 40% of companies gross revenues.
Tax Burden Composition
Telecom Industry Tax Payments1
(R$ Bln)
Telecom Industry Investments2
(R$ Bln)
HISTORICAL DATA & OTHERS 40
Source: players Balance Sheet
1 Considers TIM, Telefonica, Oi and AMX
2 Considers TIM, Telefonica, Oi, AMX and GVT
45.7
46.0
2012
2013
36.8
38.4
2012
2013
41. Investor Relations Team
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
E-mail: ri@timbrasil.com.br
Rogério Tostes
E-mail: rtostes@timbrasil.com.br
Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: vdferreira@timbrasil.com.br
Phone: +55 21 4109-3360
Leonardo Wanderley
E-mail: lwanderley@timbrasil.com.br
Phone: +55 21 4109-4017
Rodrigo Godoy
E-mail: rcgodoy@timbrasil.com.br
Phone: +55 21 4109-3446
Luiza Chaves
E-mail: luchaves@timbrasil.com.br
Phone: +55 21 4109-3751
Visit our Website
www.tim.com.br/ir
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.
SAFE HARBOR AND IR CONTACTS
SAFE HARBOR & IR CONTACT 41
