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Company’s Presentation
TIM Brasil
January, 2015
Visit our website and IR app:
www.tim.com.br/ir
AGENDA Industry Overview.........................5
Recent Results……………..……….…..10
Network Evolution……………….…...18
Regulatory Update…………….……..22
Fixed Business……………………..…...26
Business Outlook………….….….…..29
Historical Data & Others…….….…33
TIM IR app
(English) TIM RI app
(Portuguese)
KNOWING TIM 3
KNOWING TIM BETTER
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$32 billion of Market Capitalization
74.7 million customers (27% Share)
The 2nd Player - Market and rev. share
More than 465,000 points of sales
More than 166 own stores
15 Customer Care Centers (16k attendants)
~13,500 Antennas
3,432 cities covered
95% of urban pop. covered
51,700 km of optical fiber network
~12,520 employees
23,000 indirect jobs
R$10.4 billion in taxes payments in 2013
~R$3.8 billion expected to be invested in FY2014
Sales
Network
Social &
Economic
GROWTH STRUCTURE
Gross Revenues (R$ bln)
Customer Base EoP (mln customers)
19 20
25 28
30
2009 2010 2011 2012 2013
3.5
4.2 4.7
5.0 5.2
2009 2010 2011 2012 2013
41 51
64 70 73
2009 2010 2011 2012 2013
EBITDA (R$ bln)
CAGR+16%
CAGR+12%
CAGR+10%
Industry Overview
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 3Q14 (000´s) 74,877 657 145 n.a. 75,679
Market share 3Q14 26.9% 1.4% 0.6% n.a. ---
Net Adds 12M (000´s) 1,985 25 76 n.a. 2,086
Net Revs FY13 (R$ Mln) 19,264 657 19,921
ARPU 3Q14 17.4 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q14 (000´s) 79,823 10,939 4,287 727 95,776
Market share 3Q14 28.7% 23.9% 18.1% 3.7% ---
Net Adds 12M (000´s) 3,209 502 89 174 3,974
Net Revs FY13 (R$ Mln) 23,002 11,720 34,722
ARPU 3Q14 23.6 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q14 (000´s) 69,636 11,519 7,297 10,343 98,795
Market share 3Q14 25.0% 25.2% 30.8% 53.2% ---
Net Adds 12M (000´s) 2,204 1,463 903 930 5,500
Net Revs FY13 (R$ Mln) 12,773 20,424 33,197
ARPU 3Q14 15.0 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q14 (000´s) 51,427 16,692 6,545 1,032 75,696
Market share 3Q14 18.5% 36.5% 27.6% 5.3% ---
Net Adds 12M (000´s) 1,414 -1,742 -63 121 -270
Net Revs FY13 (R$ Mln) 9,290 19,132 28,422
ARPU 3Q14 17.4 n.a. n.a. n.a. ---
The mobile segment represents 78% of the industry access growth
*Mobile revenue considers only the 4 major players
Fixed / Mobile Fixed BB Fixed voice & BB / TV Mobile
Fixed BB/ TV Fixed Mobile
BRAZILIAN TELCOS X-RAY
Fixed / Mobile
MACRO & INDUSTRY OVERVIEW 5
56% 35.2 mi
43% 27.0 mi
62.8 mi
Possess Internet connection
Does NOT Possess Internet connection
Total Households
38% High cost
43% of total active connections have speed below 2Mbs
3%
37%
51%
91%
MARKET STRUCTURE CHANGING TOWARDS DATA USAGE
Households with internet connection (%)
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
Average Cost
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%)
1
2
57 mln
3
83 mi
~R$40
~R$100 Fixed: Voice and Broadband Entry level plan
Mobile: Voice and Data PTIM’s entry level plan
4 Access Growth (users in mln)
Fixed
Mobile
Reasons for not having Internet:
12% Lack of coverage
…with room to grow
MACRO & INDUSTRY OVERVIEW 6
128.0
23.5
2009 2010 2011 2012 2013 Ago/14
+ 5,5x
Aug/14
Widespread use of Social Media (Social Network Users in Brazil 2011-2017)
BRAZILIAN INTERNET USAGE BOOM Internet Penetration in South America (Internet users per 100 inhabitants)
Strong adoption of Instant Messaging (WhatApp mln users)
High Penetration of E-commerce (E-commerce revenues in Bln US$)
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 7
465 mln worldwide users
List of selected countries as of
Feb/14
53% 64% 79%
90%
2006 2007 2008 2009
4% 12% 11%
52%
2011 2014
Tablet
Smartphone
56% 48% 42%
34% 27% 27% 23%
• Incoming calls only device
Mobile Penetration (% over population)
DATA GROWTH IS THE NEW CHALLENGE
Data Penetration (% of data over total revenues in 3Q13)
248 212
166 162 140 139 91
MOU in 2008 (minutes)
• Still a lot of phones without data access • Wi-Fi only devices
PCs, Notebooks, Feature Phones
MACRO & INDUSTRY OVERVIEW 8
...was similar to the challenge in data growth now
Challenge in voice growth in 2009…
Goal: increase voice usage Challenge: deliver the best
experience in mobile internet
Source: Anatel and IBGE
Source: Global Matrix
High Growth
“Fear” to use
Low Usage
Handset Sales Share
2006 2007 2008 2009
2011 2014 Source: IDC
Recent Results
3Q13 3Q14
+6%
3rd QUARTER IN FEW: RESULTS OVERVIEW Financial Highlights
Operational Highlights
Business generated revenues at a good pace
1
Net Mobile Revenues
(ex-incoming)
3Q13 3Q14
+5%
EBITDA at a solid performance 2
EBITDA reached
R$1,332 mln in Q3
1 New offers
2 Bad debt under control
Bad debt as % of gross revenues
Increasing data penetration 3
% of data users over total base
4 Strong performance in 4G market share
4G Market Share
0.7% 0.6%
1.1% 1.1% 0.8%
3Q13 4Q13 1Q14 2Q14 3Q14
-22.3% -21.9% -22.9% -20.5%
-2.9%
3Q13 4Q13 1Q14 2Q14 3Q14
Improving fixed business (fixed business net revenues Δ% YoY) 5
+19 p.p.
Strong cost control (total opex Δ% YoY) 4
8.8% 2.3%
-2.9% -7.2% -8.1%
3Q13 4Q13 1Q14 2Q14 3Q14
33%
39% 43%
3Q13 2Q14 3Q14
Net Income 3
Net Income totaled
R$348 mln in Q3
3Q13 3Q14
+11% +6.4%
+10 p.p.
Source: Anatel
26%
30%
Jul/13 Jul/14
+4 p.p.
3Q RESULTS 10
1,283
1,378
3Q13 3Q14
Service EBITDA (ex-handset business) (R$ mln; %YoY)
BUSINESS FUNDAMENTALS Core Business Evolution…
…Overcoming Challenges
Mobile Service Net Revenues (% YoY)
Service EBITDA Margin (ex-handset business) (% YoY)
(Local + LD + VAS
+ Others)
Business Received
3Q13 3Q14
Business Generated
1 MTR cut impact on revenues (YoY performance)
(Incoming Voice + SMS)
+7.4%
30% 34%
3Q13 3Q14
+3.6 p.p.
2 SMS Outgoing Revenues (YoY performance)
-18%
-28% -27%
1Q14 2Q14 3Q14
Net revenues from MTR
3 Macro Environment
Brazilian GDP Growth (%YoY)
Source: IBGE; CNC
Indebted Households (% of total)
1S13 1S14
2.7%
0.5%
A market trend
Greater potential for data growth usage
1.2%
-8.2%
-19.4%
1Q14 2Q14 3Q14
+5%
-34%
Operating margin
improvement
61% 63%
3Q13 3Q141H14 1H13
3Q RESULTS 11
DRIVEN BY INNOVATION
Customer Base (mln users)
PREPAID MOBILE ACCOUNT/ MONEY
o Partnership: TIM, Mastercard and Caixa Econômica Federal
o Focus on unbanked population ( >50% of prepaid base)
NEW MUSIC PLATFORM
o Partnership TIM and Deezer (top global streaming platform)
o More than 35 million music available for download
o Maintaining leadership position in the mobile music industry in Brazil
Source: ANATEL
3G Market Share (%; mln users)
4G Market Share (%; thd users)
Source: ANATEL Source: ANATEL
INTERNET SHARING PLANS
o Up to 4 devices
o No additional charges
WEEKLY SERVICE PACKAGE o Voice + Data + SMS o R$ 7 per week
NEW M2M PLANS o New data packages
launched for M2M services
R$ 0.75 DAILY OFFER
o Expansion to new regions: PR, SC, MA, RJ
o Covering most of the country
Adding Value Through Innovation
NEW APP FOR LANGUAGE COURSES o Games and quizzes help
students developing English skills
blah COMMUNICATION APP
o Integrated communication (VOIP, IM, SMS) App
o First ad campaign
3Q RESULTS 12
44%
39%
29% 29%
15%
21%
12%
10%
23% 25%
25% 26%
39%
34%
12% 14%
76.8 76.6 79.8
69.4 72.9
74.9
63.4
67.4 69.6
48.4 50.0
51.4
3Q12 3Q13
TIM
3Q14
P1
P3
P4
Aug/13 Aug/14
31.4
32.7
44.0
18.2
128 mln
Aug/13 Aug/14
TIM
1,605
1,219
857
411
4.2 mln
TIM
67% 77%
3Q13 3Q14
3Q13 3Q14Jul - Aug/13 Jul - Aug/14
24
32
3Q13 3Q14
MAINTAINING STRONG DATA PACE
Data Adoption
Increasing Data Penetration
Smartphone Penetration Over Customer Base (%; ∆ YoY)
Smartphones Share over New Sales (%; ∆ YoY)
Data Users (mln users; % YoY)
+32%
BOU: Bytes of Use (megabytes)
Days of Use
+40% +22%
43 mln to go!
28 mln untapped market
15 mln with data handset
Data Opportunity over Customer Base
32 mln data users
1Q14 2Q14 3Q14
25% 27% 29%
% over total gross mobile service
revenues
Mix of Data Gross Revenues (R$ mln; %YoY)
SMS
Web
1,500
+29% +39%
+45% +80%
∆ %YoY growth
1,578
Content & Others
1,677
+33%
+72%
74.7 mln customer base
+23% +20% +22%
+10 p.p. New Data World
Usage Increase
Penetration Increase
25%
44%
3Q13 3Q14
+20 p.p.
3Q RESULTS 13
3Q13 3Q14
~0.7% ~0.8%
3Q13 3Q14
4,045
180
Tho
usa
nd
s
4,207 4,045 +149
Tho
usa
nd
s
+0.4%
FINANCIAL RESULTS ANALYSIS (1/3) Service Net Revenues (R$ mln; % YoY)
Reported Revenue
3Q13
Reported Revenue
3Q14
MTR Impact
-3.8%
4,225
‘Pro forma’ Revenue in 3Q14
-306 -4.5
ΔYoY +4.7% -34.5% -2.9%
Δ Others Δ Business Incoming
Δ Business Generated
Ex-MTR
1,332
109
Tho
usa
nd
s
EBITDA (R$ mln; % YoY)
1,252
Reported EBITDA 3Q13
Reported EBITDA 3Q14
+151 -71
Δ Opex/ Others
Traffic/Data Δ Contribution
Margin
24.6%
30.5%
1,332
27.4%
34.1%
EBITDA Margin
Service EBITDA Margin
+4.5% +3.4%
MTR Impact
+15.1%
+6.4%
1,441
‘Pro forma’ EBITDA in 3Q14
ΔYoY
Ex-MTR
Efficient Cost Control
Interconnection Cost (Δ% YoY)
Leased Lines Cost (Δ% YoY)
Bad Debt/Sales (% over gross revenues)
stable
3Q13 3Q14
-36.2%
3Q13 3Q14
-1.8%
Mobile First Margin Analysis (% YoY)
+6 p.p. Strong first margin
expansion showing core business improvement
Margin expansion driven by data and VAS (content & others)
3Q RESULTS 14
306 372
386 366
315 348
9M13 9M14
50%
88%
50%
12%
9M13 9M14
1,446
4,781 3,335
Tho
usa
nd
s
791
4,470 3,679
1,749 1,749
+30%
FINANCIAL RESULTS ANALYSIS (2/3) Net Income Evolution (R$ mln; % YoY)
Net Debt (R$ mln; % YoY)
Debt Cash Net debt
Sep/13 Sep/14
Debt Cash Net debt
+63% -45%
Infrastructure Investment Mix (as % of capex)
YoY
Net debt/EBITDA 12M: 0.14x
BNDES Loan
6,219 5,428
2G
3G + 4G +38 p.p.
∆ YoY Technology
2Q
1Q
+10.6%
% YoY
3Q
1,007 1,086
+21.6%
-5.2%
+7.9%
2013 2014
3,980 -2,614*
- 1,274
182 275 +438
mln
EBITDA
Cash Flow - 9 months (R$ mln; R$ YoY)
CAPEX Δ WC OFCF 9M14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF 9M13
LT Amazonas Leasing
1H14 3Q14
512
-1,786
3Q RESULTS 15
-163
9,766
1,932
431 2,201
14,330
3,029
3,270
2,328
1,723
3,980
Total EBITDA
From Revenue to EBITDA in 9M14 (absolute value in 9M14 in R$ mln; %ΔYoY)
Business generated
Products Selling & marketing
Network & interconnection
Total Net Revenues
3Q RESULTS 16
Business incoming
Fixed business
COGS Others
ΔYoY +6.9% -28.7% -16.0% -7.5% -2.8% +2.5% -18.6% -5.9% +8.9% +7.3%
1,685
5,479 - 3,656*
399 122 2,345 +660 mln
EBITDA
Cash Flow - LTM from 3Q14 (R$ mln; R$ YoY)
CAPEX Δ WC OFCF LTM14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF LTM13
LT Amazonas Leasing
FINANCIAL RESULTS ANALYSIS (3/3)
Network Evolution
INFRASTRUCTURE (R)EVOLUTION (1/3)
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 18
39
81
2013
1Q14
2Q14
3Q14
900 Mhz rollout according to plan (above 600 sites using the new frequency)
Expanding backhauling
INFRASTRUCTURE (R)EVOLUTION (2/3) Mobile Broadband Update
Cities Covered with MBB project
% of urban population covered
Quick incident resolution: from 56% to 76% within 8h
Reacting faster to network problems - faults opened within the target time: from 85% to 94%
Network Hiring + Insource Project
Innovative Coverage Expansion Improving Quality and 4G Services (e.g.: SP)
Reduction in dropped call rates and better overall performance
Higher average throughput rates
Improvement in indoor coverage
Increase in data and voice traffics
Expanding # of people in the Network team
From third party TO insource Network Control Center
30%
31%
32%
Source: ANATEL app
36%
Investing Efficiently
Big Data analysis for capex allocation;
Antenna level return analyses (IRR and payback)
Voice Access # Antennas
NETWORK EVOLUTION 19
Small cells in gas stations: agreement with a tower company to install more than 150 small cells inside Totem
BioSite: sustainable coverage, bringing harmony between environment and technology
After
Before
INFRASTRUCTURE (R)EVOLUTION (3/3) Network in Numbers
4G Sites in state capitals
Ran Sharing
Smart Approach
Source: ANATEL – Dez/14
Number of WIFI & Small Cells
Source: Company
714
1,105
4Q13 1Q14 2Q14 3Q14
Number of 3G Sites
9.3% growth in 9M
Coverage: 79.1% of urban population
Source: Company
9,074
9,920
4Q13 1Q14 2Q14 3Q14
NETWORK EVOLUTION 20
3,871
3,386
2,983 2,836
2013201220112010
19% 17% 20%
% over sales
18%
Copper
(2-8Mbps)
Before FTTS After FTTS
Metro Ring
From Copper
To Fiber based
Fiber to the site expansion to ~100 cities
CAPEX Analysis
CAGR
11%
2G
3G
4G
R$2,983 ~R$3,800
2G
3G
Capex per Technology (R$ mln)
2011 2014e
Capex Evolution (R$ mln)
3,153 3,114
3,069 3,066
TIM P3 P1 P4
Regulatory Update
1st Round (10+10) MHz cap
Block 4 (10+10) MHz
Block 5 (10+10) MHz
Block 6 (10+10) MHz
Block 2 (10+10) MHz
Block 3 (10+10) MHz
Block 1 (10+10) MHz Total
R$ mln Regional National
Minimum Price 1,893 30 5 1,928 1,928 1,928 7,712
Winning Bid Unsold 30 Unsold 1,947 1,928 1,947 5,852
Premium - 0.02% - 0.99% 0.00% 1.00% 38
Final Public Price (Anatel) - 26 - 1,739 1,720 1,739 5,224
EAD 887.59 13.86 2.48 903.93 903.93 903.93 3,616
EAD w/ unsold blocks obligations
- 18.9 - 1,119 1,119 1,119 3,616
Better Coverage (Indoor and Rural)
REGULATORY UPDATE (1/2)
REGULATORY UPDATE 22
700MHz Auction Results
Auction totaled R$5.85 billion, 24% lower then the R$7.7 billion expected for minimum prices for all blocks
EAD Contribution of R$890.1 million related to unsold blocks will be distributed proportionately among the participants and will be discounted of the Public Price
5800 Mhz
2100 Mhz 850 Mhz
700 Mhz < 700 Mhz
0 2 4 6 8 10
Number of BTS
20 15 10 7 5 2
BTS Range (km)
0.52 0.78 0.83 1.07 1.13 1.18 1.22 1.28 1.29 1.29 1.48
2.58
DEN NZL Spain Brazil GER PORT EUA Taiwan Italy France AUS Canada
Average = 1.22
Oi and Sercomtel did not participate in the auction
Spectrum acquisition at fair price (Price in USD/MHz/Pop. adjusted for GDP)
UPLINK Central Band
TV Channels Guard Band Private Limited Service
4 2 3 1
Central Band 5
6
3rd week • Return of
the MHz Bond
Estimated 700 MHz Auction Roadmap
Aug/6 • TCU’s
precautionary measure preventing the auction rules publication
Jul/17 • Approval of
auction terms and interference rules
• Definition of Analog TV switch-off dates
Aug/21 • Auction publication
Aug/16 • ANATEL’s
auction rules revision
2nd week • Authorization
extracts published in DOU
Oct/16 • Counterarguments
by TIM
4th week • EAD constitution
4th week • GIRED institution (One TIM representative)
4th week • EAD’s 1st 30%
payment
July/14
Set/12 • Clarification
from ANATEL • Bid bond issuing
Sep/1 • Clarifications
request • Administrativ
e Appeal
Aug/20 • TCU
approval
Oct/13 • Nor TV’s
appeal (MMDS operator) against CEL
3rd week • Call for
Authorization signature
4th week • Performance
Bond (EAD) issuing
Oct/7 • Auction Special
Commission; Classification and Award decision published in D.O.U.
4th week • Proof of good
standing documentation filing
• GO/NO GO Decision: Additional Commitments
… March/15 April/15
Sep/30 • Auction
Sep/23 • Documentation • Bid bond; and • First bid filing
September/14 October/14 December/14
REGULATORY UPDATE (2/2)
August/14
REGULATORY UPDATE 23
2nd week • ANATEL’s
Board Award approval
1st week • Authorization
signature • Public Price
payment
November/14
QUALITY Voice Metrics
3G Data Metrics
1.13%
1.17% 1.20%
0.75%
0.57%
jan/13 mar/13 mai/13 jul/13 set/13 nov/13 jan/14 mar/14 mai/14 jul/14 set/14
97.80%
98.49%
96.84%
98.05%
95.96%
jan/13 mar/13 mai/13 jul/13 set/13 nov/13 jan/14 mar/14 mai/14 jul/14 set/14
TIM VIVO CLARO OI
Voice Access Voice Drop
3G Data Access 3G Data Drop
3.07%
1.44%
1.83%
2.35%
0.93%
jan/13 mar/13 mai/13 jul/13 set/13 nov/13 jan/14 mar/14 mai/14 jul/14 set/14
99.37% 99.02%
99.13%
99.20%
92.92%
jan/13 mar/13 mai/13 jul/13 set/13 nov/13 jan/14 mar/14 mai/14 jul/14 set/14
TIM VIVO CLARO OI
95%
2%
98%
95%
industry goal
industry goal
P1 P2 P4
P1 P2 P4
REGULATORY UPDATE 24
Fixed Business
3Q13 4Q13 1Q14 2Q14 3Q14
TIM SOLUÇÕES CORPORATIVAS: BUSINESS REBOUND Turnaround on fixed business in place
2013 2012
-
2014
+
EBITDA-CAPEX Net Revenues (with intercompany)
2013 2014
1Q14 2Q14
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
4Q14
o Sales and customer
service improvement
3Q14
Financial Performance
o Sales multi-channel
Improvement
o New offers and
product launch
o MTR reduction
Revenues from New Sales (R$; YoY)
Revenue rebound Sales growth Market repositioning Infrastructure reinforcement
Governance / Efficiency Business Priorities: Business development Quality and Process
+5x
Organization restructuring
Dedicated B.U. to all
business customer Fixed + mobile
integration
FIXED BUSINESS 26
36.7
38.2
3Q13 3Q1421
13
3Q13 3Q14
Accelerating Operational Performance…
LIVE TIM: SPEEDING UP GROWTH
43
120
3Q13 3Q14
Customer Base (000 users)
Source: Anatel
881
1,366
3Q13 3Q14
Netflix Broadband Ranking (average streaming speed representation)
3Q13 3Q14
ARPU (R$; YoY%)
… with Support of Quality Experience
Addressable Households (000 HH)
Source: Company
+2.8x +55%
+32%
New Line Payback (months)
-38%
Gross Adds (000 users)
18
31
3Q13 3Q14
+74%
Live TIM Net Adds Share (% of SP and RJ market additions)
Average Speed of New Sales (mbps)
+4.1%
16%
31%
Aug/13 Aug/14
Source: Company
FIXED BUSINESS 27
Business Outlook
CONCLUSION Q3 Conclusions: A good balance between objectives
Perspectives: Moving the plan forward
Strategic… Financial… Operational…
EBITDA
Net Income
+6.4% YoY
+5% YoY
+11% YoY
MBB in 81 cities
OPEX Control
Prepaid leadership
Infrastructure growth
Evolving revenue profile Renewed Mission/ Purpose/Values
New 3-year plan
“To connect and take care
of every customer, so
everyone can do more”
o Industry leadership
o Long term commitment
o 4G license 700MHz
o Tower sale supporting investment plan
Quality
Business Generated
TIM Protagonist
• VOICE
• SMS
• MTR
• DATA
• DIGITAL SERVICES
o Data and digital services leadership
o Infrastructure
o Customer base value
o Customer experience
o One TIM initiative
Data Users (mln users)
Data + VAS (ex-SMS)
Smartphones (over total base)
32 mln 32% YoY
44% +19 p.p. YoY
R$1.3 billion +49% YoY
BUSINESS OUTLOOK 29
21.3
27.5
2012 2013 2016e 2012 2013 2016e
+xx%
OFFER EVOLUTION
136 148
>170
2012 2013 2016e
18% 21%
>40%
VAS Gross Revs.
VAS/Revs. 30% 37% >50%
43%
55%
>75%
2012 2013 2016
+xx% +29%
+22%
Smart/Web phone Penetration (% over total base of lines)
Voice MOU (minutes)
Data Users (% of Data Users in CB; million users)
VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln)
BUSINESS OUTLOOK 30
2012 2013 2016e 2012 2013 2016e
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$11 billion*
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK 31
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS 33
QUARTERLY HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS 34
ANNUAL HISTORICAL DATA (R$ THOUSAND)
HISTORICAL DATA & OTHERS 35
HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS
ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA
HISTORICAL DATA & OTHERS 36
8.0% 7.7% 7.6%
2012 2013 9M14
Short term
2.1 2.0
1.4 1.2
0.9 0.6
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
BALANCE SHEET ANALYSIS Debt Composition
P/B Market Cap/Book Value
Source: Company/Bloomberg
54.3%
59.4%
58.9% 60.1%
56.0%
50.4%
1Q 2Q 3Q 4Q
2014 2013 2012
Long Term
20.7
19.7
7.7 11.1
6.2 2.7
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
P/E Market Cap/Earnings
Net Profit Margin
43.0 46.3
48.2 46.6
48.6
48.3
47.3
43.4
44.9 44.9 43.9
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Accounts Receivable Turnover (days)
118.2 103.2
114.4 128.5 132.1
105.0 123.5
149.7
170.9
151.7 147.5
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Payable Turnover (days)
HISTORICAL DATA & OTHERS 37
TIM P4 P1 TIM P4 P1
Appendix
MACRO SCENARIO OUTLOOK (1/2)
• Market consensus shows a softer growth in GDP.
• Consensus expects a deterioration in overall macroeconomic scenario on the medium term.
• Market expects that the government is unlikely pushing inflation towards the center of the target.
• With inflation and FX Rate going up, SELIC is expected to grow, specially after the recent decision to rise the rate to 11.25% p.y.
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: Central Bank report of December 2014/Bloomberg
5.9 6.4 6.5
5.9
4.5
2013a 2014e 2015e 2016e
10.0 11.0
12.5 12.3
2013a 2014e 2015e 2016e
2.2
2.4
2.7 2.8
2013a 2014e 2015e 2016e
2.3
0.1
0.6
2.0
0.5 0.8
2.0
2013a 2014e 2015e 2016e
Government’s Target
Government projection Market Consensus
Government projection Market Consensus
APPENDIX 39
MACRO SCENARIO OUTLOOK (2/2)
• Market expects the unemployment rate to increase in 2015, as jobs creation remains low.
• Even with a high number of indebted families, families in default figure has been decreasing, probably guided by the constant reduction of unemployment and real income gains, specially on classes C and D.
Unemployment (%)
Formal Jobs Creation* (In Thousand)
Indebted Households* Families on Default (% of total) (% of total)
Source: Central Bank report of December 2014/Bloomberg/CNC
61.6 58.9 61.4 63.2
3Q11 3Q12 3Q13 3Q14
-307
303
189 237
4Q13 1Q14 2Q14 3Q14
24.3
19.1 20.6
19.1
3Q11 3Q12 3Q13 3Q14
6.0
5.4 5.4
4.9 5.0
5.5 5.7
3Q11 3Q12 3Q13 3Q14 2014e 2015e 2016e
* Families that declared to have debts on the categories of: credit card, stores bills, personal loans, car loans and insurance and postdated check
* Families that declared to have debts overdue for more than three months
*Number of job positions with the complete registration of the employee
APPENDIX 40
Cofins PIS/ PASEP ICMS Fistel Fust/
FUNTEL
TotalTotal Fust/
FUNTEL PIS/
PASEP
ICMS Cofins Fistel
% Gross Revenues
TELCOS’ TAX BURDEN
3% ~1%
28%
~5% 1.5% ~39%
Taxation represents almost 40% of companies gross revenues
Tax Burden Composition Telecom Industry Tax Payments1
(R$ Bln)
Source: players Balance Sheet
1 Considers TIM, Telefonica, Oi and AMX
45.7 46.0
2012 2013
APPENDIX 41
1Q14 2Q14 3Q14 4Q14
TIM
• Increase of SMS and internet offer
from R$0.50 to R$0.60/day each
• Increase on the monthly charge of
TIM Liberty plans
• Increase on the monthly charge of
Liberty Controle plans
• Infinity Turbo 7 launch
• SMS + Data for R$12/month
available to Liberty Controle plans
• Infinity Day launch
• Increase of Web+SMS package to
from R$0.75 to R$0.99/day
• Increase on SMS and data
services to R$0.75/day each
• Increase of R$1 on Liberty
Torpedo
• Internet sharing with up to 4
devices
• Controle Whatsapp launch
Vivo
• Vivo Tudo: weekly charge of R$6.90
including voice, SMS and data
• Increase of R$2 on monthly charge
of Controle plans
• Increase of monthly package
‘Vivo Sempre Internet’ from
R$9.90 to R$11.90
• Increase on ‘Vivo Sempre’ tariff
from R$0.05 to R$0.06
• Obligation to contract data
package on postpaid plans
• 4G available on ‘Vivo Tudo’ and
prepaid packages
• New ‘SmartVivo pós’ plans
Claro
• Unlimited prepaid: increase of on-
net calls tariff from R$0.21 to
R$0.25
• Increase of SMS and internet offers
to R$0.60/day each
• Unlimited Controle plan: on net calls
increased from R$0.21 to R$0.25
• Free on net local calls M-M in the
main code areas
• SMS + Data package per
R$0.99/day
• Promo 6 launch: recharge of R$6
with voice, SMS and data
benefits
• New offer to SP with voice, SMS
and internet benefits for
R$0.99/day
• Increase on M-F off-net calls to
R$0.70/call
• Increase of SMS and Web
services to R$0.75/day each
Oi • Increase of internet and SMS offers
to R$0.60/day each
• Increase on daily tariff of internet
to R$0.60/day
• New package with SMS+ Data +
Wi-Fi for R$0.75/day
• Obligation to contract data
package on postpaid plans
• Increase of M-M and M-F on-net
calls to R$0.25/day, local M-F off-
net to R$0.70/day and SMS +
Web + Wi-Fi to R$0.99/day
OFFERS: 2014 MAIN CHANGES
APPENDIX 42
MOBILE MARKET SHARE
APPENDIX 43
Mobile Market Share
29,8% 29,6% 29,7% 29,1% 28,8% 28,7% 28,6% 28,5% 28,7% 28,8% 28,7%
26,8% 26,9% 26,8% 26,9% 27,0% 27,2% 27,2% 27,1% 27,0% 26,9% 26,9%
24,6% 24,6% 24,5% 24,9% 25,1% 25,0% 25,1% 25,3% 25,1% 24,9% 25,0%
18,5% 18,7% 18,7% 18,8% 18,7% 18,7% 18,6% 18,5% 18,5% 18,5% 18,5%
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
P1 TIM P3 P4
32.7% 34.1%
35.4% 36.5%
24.9% 25.7% 25.8% 25.2%
13.8% 14.1% 13.7% 12.8%
19.4% 17.9% 18.6% 19.0%
R$ 0,1
R$ 0,1
R$ 0,2
R$ 0,2
R$ 0,3
R$ 0,3
R$ 0,4
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
P1 TIM P4 P3
Mobile Service Revenue Share
STRUCTURE AND STOCK PERFORMANCE
*Last price as of 02/14/2014 HISTORICAL DATA 44
HISTORICAL DATA & OTHERS 44
TSU -15.9%
TIMP3 -4.3%
Ibovespa -2.7%
80
90
100
110
120
130
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Stock Performance (base 100)*
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 45
