1Q11 ResultsP iPresentation

TIM Brasil

1Q11 Results Presentation

Investor RelationsSão Paulo, May 3rd 2011

Agenda

1Q2011: Main Achievements 1Q2011: Main Achievements

1Q2011: Financial ResultsQ

Full Year 2011: Business Outlook

1

What’s TIM Brasil?

"Voice is Good"

Infinity breakthrough

Q1 Results

Innovation is in our DNA… …consistent value creation

• Customer Base

• Top Line

Infinity breakthrough- Local as Long Distance- Price per call concept

+25% YoY

+14% YoYTop Line

• Service Revenues

Infinity Mais (Off-net M2F): 3x traffic growth in 5 months

Liberty (postpaid): 2x MOU; churn below 2% per month

14% YoY

+9% YoY

• EBITDA

Liberty (postpaid): 2x MOU; churn below 2% per month

"New Data Approach"

4 t h ld i “ b id ”

Profitability

+9% YoY

• EBITDA (excluding subsidy capitalization)

• EBIT

4x smartphones sold in a “zero-subsidy” approach

Unlimited even for data concepts

+23% YoY

+109% YoY

• EBITDA-CAPEX

• Net Income

p

- Prepaid: pay per day . Infinity Web/SMS take-up

+186% YoY

+291% YoY

2

et co e

• Net Debt- Postpaid: on/off payment concept per month

. Liberty Web (smartphone, tablet, modem) -35% YoY

Acceleration of Growth: Customer Base and Revenues

5,58,5 Mln R$

Revenues

Mln clients, Base EoP

Customer Base

Gross Adds +55%

1,25 1,823.752

3.296

3.4633.176

T t l

+9,0%Service

Revenues

Gross Adds

42,452,8

Net Adds

+55%

+45%

+25%

Δ% YoY

7,7 +16%

Q1'10 Q1'11 Q1'10 Q1'11

TotalRevenuesCB +13,8%

Pre-paid

Post-paid

+26%35,8 45,16,6

7,7 +16%

Gross Adds Net Adds Total Revenues Service Revenues

45%

45%Pre

Tot.

6,6%

5,6%

Q2'10

Q1'10

+1,3%

+3,1%

Q2'10

Q1'10

Q1 YoY

+55%

+63%Pre

Tot.

Q1 YoY Q1 YoY Q1 YoY

20%

+265%Post Web

Post Voce-2%

6,0%

6,4%

Q4'10

Q3'10+6,1%

+9,9%

,

Q4'10

Q3'10

+256%Post Web

Post Voce

3

+265%Post Web9,0%Q1'11+13,8%Q1'11

256%Post Web

Drivers of Revenues Acceleration

Mobile - Voice InMobile - Voice OutYoY growth YoY growth

14,0%

13,8%

12,3%

Q3'10

Q2'10

Q1'10

-7,2%

-7,8%

-11,3%

Q3'10

Q2'10

Q1'10

Local: +16.3%LD: +21.0%

17,3%

11,0%

Q1'11

Q4'10

-2,4%

-6,2%

Q1'11

Q4'10

"Talking more" "Lower erosion"Talking more Lower erosion

Intelig Revenues*Mobile - Data Revenues

YoY growth YoY growth

14,0%

13,9%

12,7%

Q3'10

Q2'10

Q1'10

29,0%

26,0%

15,0%

Q3'10

Q2'10

Q1'10

g g

32,3%

31,4%

14,0%

Q1'11

Q4'10

Q3 10

30,6%

37,0%

Q1'11

Q4'10

"Data take up" "Intelig on track"

4

Data take-up Intelig on track

* Net revenues

Prepaid (Infinity): Enlarging TIM Community

Market Share LDCustomer Base Pre MoU Out

Mln Min

48,3%

20 6%

27,7%

33,8%+40%

TotalCB

+26%

11,5% 17,0%

20,6%

11,5%

17,2%

InfinityCB (60%)

(90%)90%

Infinity TorpedoInfinity ‘Mais’

2007 2008 2009 Jun/10 Dec/101Q'10 1Q'11

8,5

Off-net TIM-Fixed Traffic

Mln minutes/day

Customer Base

Millions

Volume of SMS sent

35,040,0

lions

Volume: X 5

3X

0 05,010,015,020,025,030,0

Mill

5

Oct/10 Mar/11 Oct/10 Mar/11

0,0

01/01/2011

05/01/2011

09/01/2011

13/01/2011

17/01/2011

21/01/2011

25/01/2011

29/01/2011

02/02/2011

06/02/2011

10/02/2011

14/02/2011

18/02/2011

22/02/2011

26/02/2011

02/03/2011

06/03/2011

10/03/2011

14/03/2011

18/03/2011

22/03/2011

26/03/2011

30/03/2011

03/04/2011

07/04/2011

11/04/2011

Liberty: Driving Postpaid Growth

Mln lines, EoP

Customer Base Post Churn Reduction

GrowthChurn Voice Consumer

Gross adds

Net adds

% YoY

+16%

Churn Voice Consumer

1 2

% monthly

6,6

7,7

Total CB

2,5

Liberty

Total churn rate

3,1%

2 7%

2010

2011

% monthly

-1,2 pp

+600%Liberty CB

(90%)-0,4p.p.

32%8%

MoU Post Liberty: driving MoU increase

Liberty Success

2,7%2011

Min/month, Outgoing only Min/month

230

+36%

~

~8 x

230

Total Post Infinity controle Old Plans LibertyQ1'10 Q1'11

6

Q Q

Smartphone Sales: boost Data take-up

Mln R$, ‘000 handsets, R$

Handsets/Smartphones Sales Pre-Paid: Infinity Web success

Unique users, Average, mln clients

29%3

5x>1.3

2,312%

2

3

ProductRevenues

+ 142%

+64%

0,28

Aug/10 Sep/10 Oct/10 Nov/10 Dec/10 Jan/11 Feb/11 Mar/114x more smartphones

1,2

1,41,4

1

2

Total Volume

Post-Paid: New Offering

smartphones sold in a “Zero

Handsets Subsidy” rule

approach,

0,2

0,9

0

1

Q1'10 Q1'11

Smartphone/ Webphone

x4

Q1 10 Q1 11

Unit price +48%

16% 40%% Smart-Webphone

on Total

7

Unit price(mix effect) 87 128+48%

KPI’s evolution

Minutes per line per month

MoU

126+27%

SAC & SAC/ARPU

SAC/ARPU

Out112

100

82 +37%

Total

75

3,1

1,8-44%

(monthly)

SAC Unitary(R$)

1418In

Q1 11Q1 10

-22%

Volume (Bln Out

12,410 2

19,717 5

+58%+71%

Total

36

Q1 11Q1 10

-51%

Bad Debt ARPU

(Blnminutes) In

Out 10,22,2

17,52,2

+71%-3%

Q1 11Q1 10SAC Total (Mln R$) 408 309-24%

93

2,0%0,8%-1,2pp

R$ Mln, % Gross Revenues

20 824,0

-14%

R$• Out: -13%

• In: -21%

Pré: Estável

Pós: -11%

42

93

-55%

20,8

8

Q1 11Q1 10Q1 11Q1 10

Intelig “on track”

Net Revenues Major Commercial Achievements

R$ Mln

+31%

Key & Large

Focused Approach

Intelig

31%

RJ Government RJ City Hall SP GovernmentGovernment

Q1'10 Q1'11

...of which...

SME Top Clients

Military games

Success in the main Government bids

+26%

SME

+39%

Top Clients

MVNO First Mover in Brazil

Q1'10 Q1'11 Q1'10 Q1'11 d P t hi i

9

Q1'10 Q1'11 Q1'10 Q1'11 ... and more new Partnerships in progress...

Agenda

1Q2011: Main Achievements 1Q2011: Main Achievements

1Q2011: Financial ResultsQ

Full Year 2011: Business Outlook

10

EBITDA analysis: Q1 2011 YoY

R$ Mln

Q1’11Q1’10Revenues2011289

2010120

ΔYoY+169

Fistel: -R$50 MMCRC R$29 MM

Subsidies analysis

300

350

300

350 8341

251

Considering Subsidies

Capitalization

R$ Mln R$ Mln

+9.0%

RevenuesCOGSNet at P&L

289(333)(44)

120(136)(16)

+169(197)(28)

CRC: -R$29 MMRecharge: -R$28 MM

289333

100

150

200

250

120 136100

150

200

250

Capitalization

115

947

+2411.033

(22)(106)

(1)8

(28)

0

50

Prod rev. COGS

120

0

50

Prod rev. COGS

115

Reported at P&L Capitalized Costs

Handsets sold (Mln)

2,31,4 +64%

+23%

Subsidy per handset (R$)

,,

+14 8% +13 4%-2 5% +0 0%% YoY +9 0%+171 8%

EBITDA 1Q10

EBITDA 1Q11

Business Generated (Outgoing

– ITX costs)

Business Received

(incoming)

Commercial expenses

Others expenses*

ProductContribution

(Rev. – COGS)

11

2395 -76%

* Personnel, Network, G&A , Bad Debt and Other Expenses

+14.8% +13.4%-2.5% +0.0%% YoY +9.0%+171.8%

Impact of “Zero Handset Subsidy” on Financial Results

EBITDA Margin

R$ Mln, %

YoY

Margin w/o subsidy capitalization

Subsidy

EBITDA +9%EBITDA

EBITDA w/o subsidy

capitalization

+23%Capitalized

Cash Generation

9471 033EBITDA

-107 Mln of subsidy included on P&L and CAPEX

EBIT 167

350

9,3%5,1%

+109%

+420bp% of Revenues

YoY

689297

1.033

Q1'10 Q1'11

EBITDA

CAPEX

167

Q1'10 Q1'11

+109%EBITDA - CAPEX

Absolute

% of sales

258

7,8%

736

19,6%+11,8 p.p.

+186%

Net Income 55

213

5,7%1,7%

+291%

+400bp% of Revenues

YoY

12

55

Q1'10 Q1'11

Net Debt Evolution

Net Debt 1Q 2011 Net Debt Profile

R$ Mln

Seasonality: 4Q CAPEX payment

and yearly Fistel (March) (688) 1.671

Gross Debt: R$ 3.26 bln (of which 70% in the long term)~23% of debt is denominated in foreign currency (100% hedged)Average Annual Cost: 10.6% in the 1Q’11 vs. 9.9% in the 1Q’10 and10.1% in the 4Q’10

428

963

984

6%

100%

28%

12%

30%

1.671

876 3.2591.587

991

Net Debt 1Q 2010

1 684 (874) 2 558

NFP 4Q10 1Q'11 NET CASHFLOW NFP 1Q'11

30%

Cash <12M 12<36M 36<60M +60M TotalDebt

NFPChange in Debt 1Q 2011 vs Q1 10

1.684 (874) 2.558

(700) +187 (887)

From Operating to Net Cash Flow 1Q

(549) (2) (687)(136)

OperFCF Interest & taxes Others Net Cash Flow

Q1 11

13

(718) (43) (874)(113)Q1 10

+169 +41 +187(23)Vs YA

Agenda

1Q2011: Main Achievements 1Q2011: Main Achievements

1Q2011: Financial Results

Full Year 2011: Business Outlook

14

Outlook

TIM Strategy

Mobile over Fixed: acceleration of FMS trend

Market Scenario

No legacy in FMS: “The largest pure mobile in B il”

MTR cut glide path as of H2

Intensification of Mobile competition (still

Brasil”

Low MTR cut exposure:

Intensification of Mobile competition (still rational):- More chip-only, less handset subsidy- New services (long distance via mobile SMS)

30% 23%42%

Q1'09 Q1'10 Q1'11

(Incoming –ITX)/ Ebitda

(%)

- New services (long distance via mobile, SMS)

Fast Data take-up (#3 worldwide in growth rate), while voice market still expanding

Focus on value (#2 in Revenue Share)- The largest community (Infinity >41MM)- MOU Accretion: outgoing Revenues at double digit p g g g ggrowth

- Zero-subsidy strategy on handsets- Data take-up via smartphone penetration (4x)

Brazilian mobile market attractiveness •Innovation in go-to-market…

15

Brazilian mobile market attractiveness

(large and fast growing)…Enhancing shareholder value

Drivers of Growth

Now Full Competitive in the 3 waves

FMS(MoU)

CommunityExpansion (CB)

Internet(Data)

Speed-up small screen data Revenues through Smartphone

penetration

Double digit Customer Base growth

Double digit outgoing voice Revenues growth

16

Smartphone penetration take-up in a zero subsidy approach

Smartphone penetration* in the World

North America

2011E vs 2010

+12 8 p p44%

% of customer base

With a zero subsidy approach

North America

Europe

+12,8 p.p.

+8,3 p.p.32%

24%

44%

32%

Impact on accounts115

85

With a zero subsidy approachAvg. World

Central and Latin Ameica

+3,3 p.p.

+3,7 p.p.

2%

10%7%

7%

12%15%

11%9%

64

25

8

Less advantage on P&L in contrast to a

lower CAPEX-107

2007 2008 2009 2010 2011 “Catch up the Best”

Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11

Smartphone penetration* in TIM Brasil% of customer base

+8 p.p.

12%

18%2011E vs 2010

12%10%

8%

17*Smartphone penetration as % of total mobile subscriber reported (dongle x M2M excluded)Source: Global Wireless Matrix (28° april 2011); BofA Merrill Lynch

2010September

2010 Year End 2010 March 2011 Year End

A better Capital Allocation(benefits of zero-subsidy approach)

322 689 297

1Q 2011 CAPEX evolution Full Year 2011 CAPEX expected

R$ Bln,R$ Bln,• 2011 CAPEX Guidance : R$2 9 Bln

2 7 2 875% 85%

51%25% 15%

322

Commercial

689 297

T l

• 2011 CAPEX Guidance : R$2,9 Bln• Better mix

% of Total Revenues

19,6%19,7%

2.7 2.849%

75% 85%

Q1 09 Q1 10 Q1 11

Infrastructure

Total Commercial

Commercial

Infrastructure

Total33% 19% <10%

81% >90%67%

2009 2010 2011Subsidy

Comodato

80 115 8

87 62 35

Increase network capacity to support voice (2G)

Drivers% of sites connected with own backhauling

Backhauling

20 7

26,5 28,3

Backbone000 km More Make, Less Buy

20%Buy

Full coverage prospective (3G)Fiber to the antenna’s in main citiesDevelop Wi-fi hot spots

20%

20,7

7,0

16,0

35%

65%

65%80%

20%

35%

18

complementary to 3G '09 10 11 12 13

'09 10 11 12 13

Make35%

2009 2011 2013> 80% of Brazilian major cities connected via fiber by 2013

Conclusions – Take-aways from 1Q

Operations: acceleration of growth in terms of customer base, services,

smartphone penetration and usage of voice

Economics: "double-digit top line", "triple-digit bottom line" Economics: double digit top line , triple digit bottom line

Profitability: High single digit EBITDA growth, double digit normalized (+23%)

for the "zero subsidy approach"for the zero-subsidy approach

Cash generation, better CAPEX allocation

The 3 drivers of growth strategy is now in place:

- Community expansion

- FMS on voice

- Small screen mobile data, via fast smartphone penetration

19