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Company’s Presentation TIM Brasil
August, 2014
Visit our website and IR app: www.tim.com.br/ir
AGENDA Macro & Industry Overview........5
Recent Results: 1Q14……………… 12
Network Evolution…………………. 20
4G Update……………………….….…. 24
Fixed Business…………………….…..27
Business Outlook…………….….…. 30
Historical Data & Others…….……34
TIM IR app
(English) TIM RI app
(Portuguese)
KNOWING TIM 3
KNOWING TIM BETTER
Gross Revenues (R$ Bln)
Customer base EoP (Million)
1998 2013 1998 2Q14
15,000 km fiber optical backbone
5,500 km fiber optical backhauling
Organic Growth
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$3.9 billion invested in 2013
Sales
Network
Social &
Economic
74.2 29.6
GROWTH STRUCTURE
Macro & Industry Overview
MACRO & INDUSTRY OVERVIEW 5
MACRO SCENARIO OUTLOOK
• Market consensus shows a softer growth.
• Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune.
• Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data.
• Constrains of individuals budget points to an increase of mobile usage (low cost).
GDP Forecast (% YoY Growth)
Inflation Forecast (IPCA: 12 months)
Interest Rate Forecast FX Rate Forecast (R$/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
TIM
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 27 61 n.d. 2,096
Net Revs FY13 (R$ Mln) 19,264 657 19,921
Fixo / Móvel BL Fixa
Vivo
BL Fixa/TV Fixo / Móvel
Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 79,357 10,926 4,370 688 95,341
Market share 2Q14 28.8% 23.0% 18.8% 3.6% ---
Net Adds 2Q14 (000´s) 892 98 36 91 1,117
Net Adds 12M (000´s) 3,158 360 345 175 4,038
Net Revs FY13 (R$ Mln) 23,002 11,720 34,722
Fixo Móvel BL Fixa/TV
Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 68,776 11,100* 7,045 10,106 97,027
Market share 2Q14 24.9% 23.7% 30.3% 53.3% ---
Net Adds 2Q14 (000´s) 27 - 220 230 477
Net Adds 12M (000´s) 2,303 1,248* 905 1,121 4,767
Net Revs FY13 (R$ Mln) 12,773 20,424 33,197
Fixo Móvel
Mobile Fixed Fixed BB Pay-TV Group Customers 2Q14 (000´s) 51,081 17,263* 6,567 867 75,778
Market share 2Q14 18.5% 39.6% 28.3% 4.7% ---
Net Adds 2Q14 (000´s) 502 - 3 58 563
Net Adds 12M (000´s) 1,373 -1,206* 17 - 35 1 49
Net Revs FY13 (R$ Mln) 9,290 19,132 28,422
Claro Oi
BRAZILIAN TELCOS X-RAY
Source: Companies Releases and Anatel MACRO & INDUSTRY OVERVIEW 6 * First quarter results
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
Households profile
Fixed phone only
Purchase power
Salaries up to R$1.2k
Salaries up to R$3.1k
Consumption
People that access Internet (10 years or +)
57 mln
32 mln
2 mln
81 mln
106 mln
23 mln
Households with internet connection (%; CETIC jun’13)
53% of pop.
70% of pop.
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Yes
No
24.3 mln of households
83 mln 49% of pop.
Fixed
Mobile 21%
74%
40%
60%
Re-visiting Market Structure
Market Data Revenues Growth 2016 vs. 2012:
> 13 bln Reais on Mobile (+100%)
>7 bln Reais on Fixed (+35%)
Widespread use of Social Media (Social Network Users in Brazil 2011-2017)
BRAZILIAN INTERNET USAGE BOOM Internet Penetration in South America (Internet users per 100 inhabitants)
Strong adoption of Instant Messaging (WhatApp mln users)
High Penetration of E-commerce (E-commerce revenues in Bln US$)
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
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
Recent Results: 2Q14
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
2nd QUARTER HIGHLIGHTS
11
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
% 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$1.6 bln in 2Q14
Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY
Strong cost control: total opex dropped 7% YoY
EBITDA grew 8% YoY with margin gain
28% 32%
39%
Data users reached 29 mln lines
Live TIM crossed 100 thousand customers milestone
+3 p.p. +5 p.p.
2Q13 3Q13 4Q13 1Q14 2Q14
Jul/14 Jun/13
2Q12 2Q13 2Q14
• Photos sent: 50 mln
• Outgoing calls: 5 mln
• Data traffic: 26.7 TB Maracanã Stadium
CORE BUSINESS ANALYSIS & PERFORMANCE
MTR cut full impact in 2Q
Handset sales at a healthy level although reduced growth
World Cup impact on commercial activities
Mobile Service Net Revenues Analysis (% YoY)
EBITDA Performance (mln; %YoY)
June
2013 June
2014
No Holidays 1 National holiday 3 Brazil’s games (1/2 day holiday) Up to 2 municipal holidays in main cities hosting games
Net revenues from MTR -18%
-28%
2.4
3.1 2.7
2Q12 2Q13 2Q14
Total units sold (mln)
(Local + LD + VAS)
Business Received
2Q13 2Q14
1,232
2Q13 2Q14
ReportedEBITDA Margin
1
2
3
+7%
24.9% 27.9%
EBITDA
12
1Q14 2Q14
-30%
Business Generated
+3% -1%
*MTR Impact
+16% +8%
1,331
Total
6 months (YoY)
+8%
-26%
+4% 0%
(Incoming MTR + SMS)
Ex-MTR Ex-MTR
*MTR Impact
Ex-MTR
~170 mln*
~96 mln*
1,427
118.5
23.2
2009 2010 2011 2012 2013 Jun/14
2Q13 2Q142Q13 2Q14
READY FOR DATA OPPORTUNITY
13
# Access Growth (users in mln)
Brazilian Broadband: Low Average Speed (Mbps)
WSJ: “Brazil - The Social Media Capital of the Universe”
Fixed
Data Experience is Mobile Capturing Data Opportunity
Mobile
2.7 2.6
4Q13 1Q14
#2 in Facebook
#2 in Twitter
2nd largest market
#2 in WhatsApp
10.5
13.7 3.6 2.5
Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper ‘Folha de São Paulo’
Sources: Anatel, Akamai - State of Internet
Source: IDC Tracker
Source: Anatel
# Total Market Equipment Sold (units in mln)
Smartphone & Tablet
Notebook & PC
1Q14 2Q14
SMS
Web
Content & Other
1,500
Data Gross Revenues Mix (R$ mln; %YoY)
+22%
+1% -8%
+29% +33%
+45% +72%
BOU: Bytes of Use (Megabytes)
Days of Use
Data Users (# mln users)
23 29
2Q13 2Q14
+24%
2Q13 2Q14 2Q13 2Q14
+40% +30%
In May, >45% connections in Brazil were < 2Mbps
+ 5X
∆ %YoY ∆ %YoY
+20% 1,578
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 2Q142Q13 2Q14
CUSTOMER BASE EVOLUTION
14
# 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$; % YoY)
118 mln 3.3 mln
v v
GO TO MARKET PROGRESS
15
Equipping Customer Base % of smartphone sales among players in 2Q14
% of smart + webphone on TIM’s base in 2Q14
% of smartphone over new sales in 2Q14
Postpaid
o Reduce churn on postpaid o Attract dual SIM card users traffic o Renewed focus on corporate customers
o Leveraging on “pure mobile” distinctiveness o Expanding daily tariff scheme to new regions o Simplicity / Transparency
R$ 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
4,065
2Q13 2Q14
3,985
170
96
2Q13 2Q14
+2.2%
FINANCIAL RESULTS ANALYSIS (1/2) Service Net Revenues (R$ mln; % YoY)
EBITDA (R$ mln; % YoY)
Reported Revenue
2Q13
Reported Revenue
2Q14
3,985 1,232
Reported EBITDA 2Q13
Reported EBITDA 2Q14
+186 -87
Δ Opex/ Others
Traffic/Data Δ Contribution Margin
24.9%
31.1%
1,331
27.9%
34.4%
EBITDA Margin
Service EBITDA Margin
+5.8% +4.4%
Efficient Cost Control
Interconnection (Δ% YoY)
Leased Lines Cost (Δ% YoY)
% Bad Debt/Sales (% over gross revenues)
Net Services Revenues Exposure
EBITDA Exposure
MTR Impact
-2.0%
~ 25%
~ 12%
2Q10 2Q11 2Q12 2Q13 2Q14
~ 35%
~18%
2Q10 2Q11 2Q12 2Q13 2Q14
MTR Impact
+15.8%
+8.0%
-31.3%
-10%
~1% ~1%
2Q13 2Q14
MTR Exposure
1,427
‘Pro forma’ EBITDA in 2Q14
4,155
‘Pro forma’ Revenue in 2Q14
stable
+208 -253 -36
ΔYoY +6.9% -29.6% -20.5%
Δ Others Δ Business Incoming
Δ Business Generated
ΔYoY
16
-1,227
2,648
-609
-1,654*
-1,786
182
+41%
FINANCIAL RESULTS ANALYSIS (2/2) Net Income - 6 months (R$ mln; % YoY)
Net Debt (R$ mln; % YoY)
17
EBITDA
692 738
6M13 6M14
+6.7%
>94% towards infrastructure
6M13 6M14
R$1,657 mln R$1,593 mln
2G
3G
4G 2G
3G
4G
1,984
4,521
2,537
Debt Cash Net debt
Jun/13 Jun/14
1,031
6,356 5,325
1.749 1.749
4,607 3,576
Debt Cash Net debt
+110% -48%
Investments
Cash Flow - 6 months (R$ mln; R$ YoY)
YoY
Net debt/EBITDA 12M: 0.19x
New BNDES Loan
CAPEX Δ WC OFCF 6M14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF 6M13
LT Amazonas Leasing
+618 mln
Network Evolution
STRATEGY: INFRASTRUCTURE EVOLUTION
2016 MASSIVE LD BACKBONE
65,000 KM OF FIBER
2013 FIBER TO THE AMAZON
46,000 KM OF FIBER BY YE13
Fiber to the site / Mobile Broadband Project Key to Data Growth
Targeting 38 cities in 2013,+100 cities till 2016.
From 2-8 to +100 Mbps.
LTE Ready.
Macro coverage fine tuning.
Focus on IP infrastructure, caching, peering.
INTELIG 15,000KM
2009 INTELIG ACQUISITION
New backbone routes- Increasing resilience.
82% urban population
2013 2014 2015 2016
95% urban population
#NodeB / eNodeB (3G + 4G)
# BTS (2G)
2012 2013 2014e 2015e 2016e
New Sites Including
Small Cell.
POP MW
POP MW POP MW
POP MW
BSC-RNC Site
POP MW
2013 2014 2015 2016
LTE* 3G 2G
Fiber base Infrastructure
Backhauling Evolution Increased Coverage and Access Capacity
(# new elements)
Capex Evolution Towards Data (% of total Capex)
Small Cell Approach (# new elements)
NETWORK EVOLUTION 19
2Q13 2Q14
o Brasília o Curitiba o Rio de Janeiro
4Q13 2Q14
4Q13 1Q14 2Q14
INFRASTRUCTURE FOCUSED IN DATA
20
COVERAGE Homogeneous Access Upgrade In all relevant areas Site densification Small cell / Wi-Fi
CAPACITY Higher speed 4G roll out Mobile broadband
project acceleration Backhauling
infrastructure
AVAILABILITY Always available Fine tunning Fiber rings /
redundance Resilience
DATA CENTRIC
APPROACH
TIM’s Infrastructure Strategy Network in Numbers
Number of 3G & 4G Sites
Number of Wi-Fi & Small Cell
~11.3 ~11.0
~13.1
Number of sites with fiber (FTTS)
Cities in mobile BB project
+3.5x 53 66
1Q14 2Q14
+13 cities
BioSite: New approach to coverage
Patent pending
+47%
1
2
3
After
Before
o New frequency at 900 MHz in SP o Better indoor coverage o Addressing capacity requirement
Completed actions
Initiating in:
Capex Evolution (R$ 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$3,800 R$2,983
2014e
5.9 4.8 4.6
2.1
5.0
3.5 2.6
3.4
TIM Claro Vivo Oi
10.9
+31% +52% +98%
Copper (2-8Mbps)
Before FTTS After FTTS
Metro Ring
Own Fiber (300 Mbps)
From Copper To Fiber based
Wi-Fi small cell approach
Total Capex
2,836
2,983
3,386
3,871
2011
2012
2013 19%
17%
20%
% over sales
2010
18% CAGR 11%
Source: 5th monitoring cycle of mobile telecom improvements plan released by Anatel on Feb/14
8.3 7.2
5.5
Actual from 2012 to Oct/13 Forecasted to Nov/13 until 2014 end
CAPEX ANALYSIS
NETWORK EVOLUTION 21
Regulatory Update
0.36 0.32
0.24
0.16 0.10
0.06 0.03 0.02
2012 2013 2014 2015 2016 2017 2018 2019
Auction expected for September
License period: 15 + 15 years
No additional obligation. Network and Spectrum sharing
opportunities
Switch off plan starting at the beginning of 2016
Minimum prices and clean-up costs not yet defined
4G Auction RFP
Leased line (EILD) reference price reduction, in 2016, from
~20% until ~80%
Establish regulated reference prices to leased lines speed up to
34 Mbps
On preliminary ‘static’ simulation show relevant OPEX reduction
MTR New Glide Path (R$)
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
23
Expected date for the 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
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:
Conclusion of the Digitalization Plan
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
o Block 5 or 15 and 16 CTBC Region 106 cities or 1 mln users
o Block 6 or 17 and 18 SERCOMTEL Region 2 cities or 67k users
o Block 4 or 13 and 14 Represents 98% of the population, equals to national
4G UPDATE 24
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$0.3 bln
4G UPDATE 25
4G DETAILS
TIM
1,281
990
655
334
3.3 mln
47% 39%
20%
30%
21% 20%
12%
10%
2Q13 3Q13 4Q13 1Q14 2Q14
Fixed Business
2Q13 3Q13 4Q13 1Q14 2Q14
TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2
27
Turnaround Plan on Fixed Business
2013 2012
-
2014
New sales revenues (R$; 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
o Positive EBITDA
o Cost efficiency
o Customer base
management
o New business unit
organization
o IT renewal plan
o Multiservice network
launch
o New branding
o New offers and
product launch
o Restructured sales
force
2H14
Showing results
o Sales growth
o Revenue
rebound
Business remodeling driving stable fixed revenues QoQ
+19x
2Q13 2Q14
-80%
+34%
11.5
18.3
24.5
2Q13 0 1Q14 2Q14
28
Gaining more traction
Addressable HH (000 HH)
Gross Adds (000 users)
Customer Base (000 users)
May/2014
o Live TIM Extreme 1Gbps for R$1,999.90
o Live TIM Blue Box release: optional TV approach
Jul/2014
New speed: 70Mbps for R$119.90
Source: Netflix July 2014
Netflix Broadband Ranking (Average streaming speed representation)
31%
Positive Neutral Negative
Internet buzz
FIXED BROADBAND: LIVE TIM
New Offers
126 neighborhoods:
43 neighborhoods in SP
83 neighborhoods in RJ
Quality Experience
609
804
1,069 1,138
1,220
2Q13 3Q13 4Q13 1Q14 2Q14
8%
31%
21%
51%
72%
18% 2nd
3rd
4th
5th
6th
1st
Source: Gauge 1Q14
Source: Company
+113%
28
26k
100k
Jul/14 Jun/13
Market average
Business Outlook
Accelerated Network Evolution for Data
KEEPING THE STRATEGIC FOCUS ON THE 2nd HALF Consolidating Recent Offers & Innovative Services
Strong Institutional Position
“Porta Azul” (Blue Door)
Evolving the Structure for the New Challenges
• Streamlining organization
• Adding new talent
• Stronger segment focus
o Consumer
o Corporate
o Residential
• 4G auction participation
• Leadership position
• Presence in dialogue with relevant institutions
4G 700MHz
Small Cells
BioSite Mobile
Fixed
VAS
TIM Protect
CONTENT
30
New Positioning
DATA CENTRIC APPROACH
Coverage
1
2
3
Capacity
Availability
21.3 27.5
2012 2013 2016e 2012 2013 2016e
+xx%
OFFER EVOLUTION
136 148
>170
2012 2013 2016e
18% 21% >40%
VAS Gross Revs.
VAS/Revs. 30% 37% >50%
43%
55%
>75%
2012 2013 2016
+xx% +29%
+22%
Smart/Web phone Penetration (% over total base of lines)
Voice MOU (minutes)
Data Users (% of Data Users in CB; million users)
VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln)
BUSINESS OUTLOOK 31
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$11 billion*
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK 32
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS 34
QUARTERLY HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS 35
R$ Thousand
Description 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 2Q14 vs. 2Q13 (% YoY)
Gross Revenues 7,024,216 7,413,009 7,539,627 7,684,901 7,043,065 7,162,503 -3.4% Gross Revenues Telecommunications Services 6,125,517 6,136,654 6,312,149 6,490,893 6,180,443 6,014,599 -2.0% Telecommunications Services - Mobile 5,831,734 5,852,094 6,054,713 6,254,887 5,958,845 5,793,628 -1.0% Usage and Monthly fee 2,694,316 2,777,176 2,884,968 2,953,344 2,801,736 2,751,247 -0.9% Value added services - VAS 1,245,483 1,291,470 1,362,498 1,454,202 1,499,538 1,577,565 22.2% Long distance 830,331 830,045 832,558 840,030 814,990 771,408 -7.1% Interconnection 1,005,954 893,936 919,536 941,325 775,304 627,616 -29.8% Others 55,649 59,466 55,153 65,985 67,277 65,792 10.6% Telecommunications Services - Fixed 293,783 284,560 257,437 236,007 221,599 220,971 -22.3% Gross Revenues Handset sales 898,699 1,276,354 1,227,478 1,194,008 862,622 1,147,904 -10.1%Net Revenues 4,710,715 4,944,141 5,083,159 5,183,276 4,702,224 4,774,732 -3.4%Adjusted Net Revenues 4,710,715 4,988,050 5,083,159 5,183,276 4,702,224 4,774,732 -4.3% Net Revenues on Services 4,086,662 4,065,311 4,206,773 4,342,314 4,099,640 3,984,519 -2.0% Adjusted Net Revenues on Services 4,086,662 4,109,220 4,206,773 4,342,314 4,099,640 3,984,519 -3.0% Net Revenues on Products 624,053 878,830 876,386 840,963 602,584 790,214 -10.1%Operating Expenses (3,486,942) (3,711,943) (3,831,158) (3,684,504) (3,384,936) (3,443,836) -7.2% Personnel expenses (200,579) (200,623) (211,985) (218,688) (227,767) (229,822) 14.6% Selling & marketing expenses (946,656) (973,227) (1,035,454) (982,561) (980,196) (1,025,703) 5.4% Network & interconnection (1,352,476) (1,321,534) (1,344,279) (1,294,011) (1,194,478) (1,010,578) -23.5% General & administrative (159,075) (152,075) (155,809) (157,766) (149,852) (178,396) 17.3% Cost Of Goods Sold (655,634) (912,158) (906,944) (876,105) (645,844) (828,012) -9.2% Bad Debt (72,631) (67,720) (55,534) (44,167) (76,103) (77,152) 13.9% Other operational revenues (expenses) (99,891) (84,605) (121,152) (111,205) (110,695) (94,173) 11.3%EBITDA 1,223,773 1,232,198 1,252,001 1,498,773 1,317,288 1,330,896 8.0% EBITDA Margin 26.0% 24.9% 24.6% 28.9% 28.0% 27.9% 295 bpsAdjusted EBITDA 1,223,773 1,262,852 1,252,001 1,498,773 1,317,288 1,330,896 5.4% Adjusted EBITDA Margin 26.0% 25.3% 24.6% 28.9% 28.0% 27.9% 256 bpsDepreciation & amortization (679,439) (671,297) (694,075) (723,061) (730,313) (757,072) 12.8% Depreciation (364,335) (373,258) (376,195) (388,709) (401,829) (407,479) 9.2% Amortization (315,103) (298,039) (317,880) (334,352) (328,484) (349,594) 17.3%EBIT 544,335 560,901 557,926 775,712 586,975 573,824 2.3% EBIT Margin 11.6% 11.3% 11.0% 15.0% 12.5% 12.0% 67 bpsNet Financial Results (71,085) (40,881) (90,237) (100,517) (35,834) (72,706) 77.9% Financial expenses (167,024) (152,110) (209,124) (221,442) (177,911) (256,616) 68.7% Net exchange variance (731) 2,034 (4,279) (1,435) (1,403) (560) -127.5% Financial income 96,670 109,195 123,165 122,360 143,479 184,469 68.9%Income before taxes 473,250 520,020 467,689 675,195 551,141 501,117 -3.6% Income tax and social contribution (167,183) (134,462) (152,674) (176,221) (179,008) (135,504) 0.8%Net Income 306,067 385,558 315,015 498,974 372,132 365,614 -5.2%Adjusted Net Income 306,067 405,790 315,015 498,974 372,132 365,614 -9.9%
ANNUAL HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS 36
R$ ThousandDescription 2012 2013 2014 (YTD)
Gross Revenues 27,755,813 29,661,753 14,205,568 Gross Revenues Telecommunications Services 24,350,086 25,065,214 12,195,042 Telecommunications Services - Mobile 22,879,828 23,993,427 11,752,472 Usage and Monthly fee 11,086,671 11,309,804 5,552,984 Value added services - VAS 4,404,832 5,353,653 3,077,103 Long distance 3,217,921 3,332,965 1,586,398 Interconnection 3,969,138 3,760,751 1,402,920 Others 201,264 236,254 133,069 Telecommunications Services - Fixed 1,470,259 1,071,787 442,570 Gross Revenues Handset sales 3,405,726 4,596,539 2,010,526 Net Revenues 18,763,947 19,921,291 9,476,957 Adjusted Net Revenues 18,763,947 19,965,200 9,476,957 Net Revenues on Services 16,419,958 16,701,059 8,084,159 Adjusted Net Revenues on Services 16,419,958 16,744,969 8,084,159 Net Revenues on Products 2,343,989 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) EBITDA 5,011,958 5,206,744 2,648,184 EBITDA Margin 26.7% 26.1% 27.9%Adjusted EBITDA 5,054,088 5,237,399 2,648,184 Adjusted EBITDA Margin 26.9% 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) EBIT 2,323,370 2,438,873 1,160,799 EBIT Margin 12.4% 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 income 479,015 451,391 327,949 Income before taxes 2,153,480 2,136,153 1,052,258 Income tax and social contribution (704,592) (630,539) (314,512) Net Income 1,448,888 1,505,614 737,746 Adjusted Net Income 1,500,143 1,525,845 737,746
HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS
ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA HISTORICAL DATA & OTHERS 37
eaDescription 2012 2013 2014
Brazilian Wireless Subscriber Base (000`s) 261,808 271,100 275,707Estimated Total Penetration 132.8% 136.45% 136.1%Municipalities Served (GSM) 3,383 3,404 3,427Market Share 26.88% 27.09% 26.91%Total Lines (000's) 70,376 73,431 74,203Pre-paid Lines (000's) 59,658 61,146 61,963Post-paid Lines (000's) 10,718 12,285 12,239Gross Additions (000's) 38,408 39,627 18,612Net Additions (000's) 6,293 3,055 772Churn 47.5% 50.9% 24.2%Total ARPU 19.1 18.6 17.6Total MOU 136 148 139SAC 29 28 29 Handsets Sold (000's) 10,227 12,511 5,400CAPEX (R$ Mn) 3,765 3,871 1,472Employees 11,650 12,167 12,225
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 38
-10%
00%
10%
20%
30%
40%
50%
60%
TIMP3 Ibovespa TSU
Cofins PIS/ PASEP ICMS Fistel Fust/FUNTEL
TotalTotal Fust/ FUNTEL
PIS/ PASEP
ICMS Cofins Fistel
2007 2012
2007 2012
% Gross Revenues
TELCOS’ TAX BURDEN & HIGH INVESTMENTS
3% ~1%
28%
~5% 1,5% ~39% 16.3
27.2
6.5
10.1 20% of
Revenues
+70%
Taxation represents almost 40% of companies gross revenues.
Tax Burden Composition Mobile Industry Tax Payments (R$ Bln)
Mobile Industry Investments (R$ Bln)
+60%
HISTORICAL DATA & OTHERS 39
Investor Relations Team
Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ E-mail: [email protected]
Rogério Tostes
E-mail: [email protected] Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: [email protected] Phone: +55 21 4109-3360
Leonardo Wanderley
E-mail: [email protected] Phone: +55 21 4109-4017
Rodrigo Godoy
E-mail: [email protected] Phone: +55 21 4109-3446
Luiza Chaves
E-mail: [email protected] 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 40