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Company’s Presentation TIM Brasil
Agenda
Available at:
o Website: www.tim.com.br/ir
o TIM IR App:
English
AGENDA Macro & Industry Overview........6
Recent Results: 1Q14……………… 13
Network Evolution…………………. 21
4G Update……………………….….…. 25
Fixed Business…………………….…..28
Business Outlook…………….….…. 31
Historical Data & Others…….……35
Portuguese
KNOWING TIM 4
KNOWING TIM BETTER
Gross Revenues (R$ Bln)
Customer base EoP (Million)
1998 2013 1998 1Q14
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.
73.9 million customers (27% Share)
The 2nd Player - Market and rev. share
More than 430,000 points of sales
More than 160 own stores
15 Customer Care Centers (16k attendants)
~14,000 Antennas
3,404 cities covered
95% of urban pop. covered
49,000 km of optical fiber network
~12,225 employees
23,000 indirect jobs
R$10.4 billion in taxes payments in 2013
R$3.9 billion invested in 2013
Sales
Network
Social &
Economic
73.9
29.6
GROWTH STRUCTURE
Macro & Industry Overview
MACRO & INDUSTRY OVERVIEW 6
MACRO SCENARIO OUTLOOK
• Market consensus shows a much softer growth.
• Telecom industry has shown resilience, specially in the mobile side, but it is not completely immune.
• Mobile sector will continue to benefit from fixed-mobile substitution, now also strong on data.
Real GPD Forecast (% YoY Growth)
Inflation Forecast (IPCA: % YoY Growth)
Interest Rate Forecast FX Rate Forecast (R$/U$ - year average) (% Selic Target p.y. – year average)
Source: BaCen
6,25 5,90
5,40
2014e 2015e 2016e
10.9 11.9
10.0
2014e 2015e 2016e
2,40 2,50
2,20
2014e 2015e 2016e
2.2
2013a
8.2%
2013a
6.3%
2013a
2.3%
2013a
1,80 2,20
3,20
2014e 2015e 2016e
MACRO & INDUSTRY OVERVIEW 7
BRAZILIAN TELCOS X-RAY
Fixed Mobile
Fixed Mobile Fixed BB/TV Fixed / Mobile
Fixed BB/TV Fixed / Mobile
Fixed BB
Oi Vivo
Claro TIM
Mobile Fixed Fixed BB Pay-TV Group
Customers (000´s) 73.916 662 75 n.d 74.653
Market share 27.0% 1.5% 0.3% n.d ---
Net Adds 1Q14 (000´s) 486 - 15 n.d 501
Net Revs (R$ Mln) FY13
19,264 657 19,921
Net Revs (R$ Mln) 1Q14
4,561 141
Mobile Fixed Fixed BB Pay-TV Group
Customers(000´s) 78.465 10.312 4.320 597 93.694
Market share 28.7% 23.0% 19.5% 3.2% ---
Net Adds 1Q14 (000´s) 1.220 78 - 4 3 1.297
Net Revs (R$ Mln) FY13
23,002 11,720 34,722
Net Revs (R$ Mln) 1Q14
5,759 2,853 8,612
Mobile Fixed Fixed BB Pay-TV Group
Customers (000´s) 50.580 17.775 6.329 828 75.512
Market share 18.5% 39.6% 28.6% 4.5% ---
Net Adds 1Q14 (000´s) 363 - 91 - 1 453
Net Revs (R$ Mln) FY13
9,290 19,132 28,422
Net Revs (R$ Mln) 1Q14
--- --- ---
Mobile Fixed Fixed BB Pay-TV Group
Customers(000´s) 68.748 10.641 6.718 9.875 95.982
Market share 25.1% 23.7% 30.4% 53.6% ---
Net Adds 1Q14 (000´s) 45 - 226 218 489
Net Revs (R$ Mln) FY13
12,773 20,424 33,197
Net Revs (R$ Mln) 1Q14
3,178 5,385 8,563
Source: Companies Releases
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 8
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
22% 18% 18% 13% 11% 7% 6%
% Growth YoY Social media users
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 9
465 mln in the world
List of selected selected
countries as of Fev/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
73.9 million customers
Prepaid Leader
29.1% 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% 29.7%
28.7%
25.1%
26.8% 27.0% 25.4%
24.5% 25.1%
19.7%
18.7% 18.5%
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
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)
1Q14 x 1Q11
-0.8 p.p
+1.9 p.p
-0.3 p.p
-1.2 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 10
Users’ Preference for Mobile (%Households w/ mobile phones only)
EBITDA (% YoY; Not including assets sales; Mobile as TIM)
Low Fixed Broadband Quality (Brazil’s Average Speed; Source: Akamai)
Fixed Incumbents
Mobile
41.1% 49.7%
51.0%
2009 2011 2012
4Q13 2.7 Mbps
ANATEL: >78% of fixed broadband connections are below 4Mbps
-4,20%
-8,93%
-2,26%
1Q12 1Q13 1Q14
-2,03%
1,98%
-9,68%
1Q12 1Q13 1Q14
11,82%
3,64% 2,96%
1Q12 1Q13 1Q14
13,26%
4,12% 7,64%
1Q12 1Q13 1Q14
Fixed Incumbents
Mobile
Source: PNAD 2012
Net Revenues (% YoY)
MACRO & INDUSTRY OVERVIEW 11
Brazil Ranks 83th in Average Speed per Country
PURE MOBILE STRATEGY PAYING OFF
Recent Results: 1Q14
-22.5%
1Q13 1Q14
Financial Results Mobile Net Services Revenues (Δ% YoY)
Business Generated
Business Received
(MTR mpact)
Consolidated EBITDA (Δ% YoY) Consolidated Net Income (Δ% YoY)
1Q13 1Q14
1,317 372
Incoming
Outgoing (Long Distance
+ Usage)
VAS
60.3 61.7
10.9 12.2 Postpaid
1Q13 1Q14
%YoY
+11.9%
+2.3% Prepaid
Customer Base (mln; Δ% YoY)
Mobile Data Users Growth (mln; Δ% YoY)
1Q13 1Q14
Mobile Payback Ratio (SAC/ARPU in months)
1.6x 1.6x
306 1,224
Operational Results
1ST QUARTER HIGHLIGHTS
+7.6% +21.6%
+1.4%
+8.9%
26.0% 28.0% EBITDA Margin
71.2 73.9
+3.8%
22
27
1Q13 1Q14
+20.1%
0.13 0.15 EPS (R$)
RECENT RESULTS: 1Q14 13
0.37 0.31
0.42 0.42
1Q13 1Q14
0.05 0.03 15.0
10.3 12.1
26.8
25.5
44.4 45.5
1Q13 1Q14
320 cities under the company’s quality
plan project in 1Q14
53% of 2014 target achieved in the first
quarter
Claims at Consumer’s Protection Agency (Procon) (in thds)
TIM: Claims at Anatel over 1,000 lines
Source: ANATEL Source: SINDEC-Procon
TIM other
TIM’s Quality Plan (#cities)
Note: Per economic group
25.9
The least claimed within telcos
Consistent performance in PROCON
Reducing Anatel complaints in all fronts
Network showing remarkable
improvements
320
213
1Q14 Targetfor 1Q14
Source: Company
QUALITY IMPROVEMENTS
Total Complaints
Network Complaints
Avg. Market Complaints
2014e
(Target for 2014)
599 cities
53%
4Q13
RECENT RESULTS: 1Q14 14
1Q13 1Q14
74.8 76.0 78.5
67.2 71.2 73.9
61.6
66.3 68.7
46.5
49.5 50.6
CUSTOMER BASE EVOLUTION Customer Base (mln)
Leading market growth
#1 player in prepaid
#2 player in voice postpaid
Austere disconnection policy
Prepaid Recharge (R$; YoY)
1Q12 1Q13
TIM
+3.3%
+3.8%
+3.7%
+2.2%
Source: ANATEL
Source: Company
1Q14
1Q14 x 1Q13
+10%
1Q13 1Q14
15.3%
16.5%
Mix of Postpaid over total base
Distribution Channel (YoY)
1Q13 1Q14
+22%
Source: Company
1Q13 1Q14
+28% # Points of Sales: Mass Channel (retail)
# of Own Stores
Vivo
Claro
Oi
Source: Company
+121bps
RECENT RESULTS: 1Q14 15
% of Customer Base
1Q12 1Q13 1Q14
+20.1%
1Q12 1Q13 1Q14
5.5
5.8
5.9
Mobile Data users
DATA SERVICES AT A SOLID PACE Revenues (R$ bln)
18%
21%
25%
% of Gross Services Revenues 26%
31%
36%
Users (# mln users)
+25.4% +20.4% +24.6% 1.0 1.2 1.5
18 22 27 Data Gross Revenues
67.2 71.2
73.9
4G Market Share (%; thd users)
3G Market Share (%; mln users)
23% 24%
23% 25%
42%
37%
10% 13%
1Q13 2Q13 3Q13 4Q13 1Q14
25.4
26.6
38.7
13.5
Source: ANATEL
TIM
47% 41%
20%
33%
21% 15%
12%
11%
2Q13 3Q13 4Q13
TIM
858
676
321
223
Source: ANATEL
1Q14
Source: Company Source: Company
+ 39% YoY Other VAS
services
105 mln 2.1 mln
RECENT RESULTS: 1Q14 16
Access via Mobile
Notebook sales FY2014e: 8.5 mln
Tablet sales FY2014e: 11.1 mln
Smartphone sales FY2014e: 46.7 mln
Device sales profile
Broadband Willingness to Pay (% of Households)
Source: CETIC 2012
5% of HH: Up to R$150/month
24% of HH: Up to R$70/month
59% of HH: Up to R$30/month
Huge data opportunity in-house
27 mln data users
Handset market share (Mar/14)
TIM’s Customer Base Snapshot
Source: IDC
Source: GFK Group Source: Company
The newest communication app by TIM
Provides a new user interface far all
communication
TIM Protect
TIM Chip for soccer fans: free content of soccer
teams
Ensures safety of customer’s devices and
information
Simple and reliable platform
Brazil’s largest digital music provider
>32 mln songs downloaded
TIM
P1
P2
P3 10%
25%
29%
36%
53% Open
Market
Operators
Innovative Services
Prepaid Postpaid
Data Offers
73.9 million users
+31 mln untapped market
46mln potential data users
+15 mln with data handset 36%
21%
42%
LEVERAGING ON THE LARGEST COMMUNITY
RECENT RESULTS: 1Q14 17
1.22 1.32
1.39
1Q13 1Q141Q13 1Q14
MTR Impact
MTR Cut Path
-33%
-25%
-11%
-10%
Avg. MTR Price (R$)
Mobile Service Net Revenues EBITDA
MTR Exposure
Net Services Revenues EBITDA
0.32
0.24
0.16
0.36
+5.0%
2012
2013
2014
2015e
MTR IMPACT ANALYSIS
~ 27%
~ 14%
1Q10 1Q11 1Q12 1Q13 1Q14
~ 40%
~ 20%
1Q10 1Q11 1Q12 1Q13 1Q14
Source: Company
+1.4%
+13.4%
+7.6%
MTR cut impact should be reduced
following lower exposure
Business generated (outgoing &
data) should offset MTR impact
Impact of ~ R$ 140 mln
RECENT RESULTS: 1Q14 18
Net Revenues (R$ mln; % YoY)
EBITDA (R$ mln; % YoY)
Net Income (R$ mln; % YoY)
624 603
4,087 4,100
Tho
usa
nd
s
Revenue 1Q13
Δ Handset Δ Fixed Services
Revenue 1Q14
Δ Mobile Services
-21 -42 +55
Service
Handset
4,711
ΔYoY
4,702
+1.4% -22.9% -3.4%
+0.3%
0%
-3.4%
269
306
372
1Q12 1Q13 1Q14
+13.9%
+21.6%
FINANCIAL RESULTS ANALYSIS
1,224
EBITDA 1Q13
EBITDA 1Q14
ΔHandsets
+223 -117
ΔOpex
-12
Traffic/Data ΔContribution Margin
26.0%
30.7%
1,317
28.0%
33.2%
EBITDA Margin
Service EBITDA Margin
+8%
ΔYoY +7.0% +37.0% +6.1%
Business Generated: +8.9% YoY Business Received: -22.5% YoY
(+)Mobile: Efficiency (-)Fixed: Repositioning/new brand
Cash Flow & NFP (R$ mln)
-1,193 -1,374
-1,571
-265
-332
1Q12 1Q13 1Q14
OFCF
Non OFCF
Net Cash Flow
-164
-1,458 -1,706 -1,735
NFP BoP
NFP EoP
-441
-1,899 -1,555 -1,314
(+)
(=)
+151 +421
-230 Δ Fistel
RECENT RESULTS: 1Q14 19
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 21
714
1,764
2013 2014e
1Q13 1Q14
~11,000
~14,000
2013 2014e
2G
3G
4G
Investments
Fiber Infrastructure
~19,700 Km ~37,600 Km
Backbone Metro-Areas
NETWORK IMPROVEMENTS
R$3.8 Billion in FY14e
R$613 mln in 1Q14
>94% in infrastructure
57,300 Km in Fiber + =
1Q13 1Q14
2G
3G
4G
R$613 mln
R$470 mln
Average throughput analysis where MBB is completed *
From To
~ 800 Kbps ~ 2.1 Mbps
Number of sites with fiber optic
Cities with mobile BB project
Number of 3G & 4G Sites Number of Wi-Fi & Small Cell
Network Additions in the 1Q14
3G sites: + 111 in Q1 (total 9,185)
4G sites: + 208 in Q1 (total 2,133)
WiFi hotspots: +190 in Q1 (total 904)
MBB cities: + 14 in Q1
+ 30% YoY
39
100
2013 2014e
+16x
*According to TIM independent analysis of the NetMetrics Reports provided by Speedtest.net
NETWORK EVOLUTION 22
Capex Evolution (R$ 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$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 23
4G Update
Vivo
Claro
Oi
TIM
Source: ANATEL
4G Market Share on 2500Mhz (%; thd users)
858
676
321
223
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
47% 41%
20%
33%
21% 15%
12%
11%
2Q13 3Q13 4Q13 1Q14
2.1 mln
4G DETAILS
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.
73
3 M
Hz
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
70
8 M
Hz
71
8 M
Hz
72
8 M
Hz
73
8 M
Hz
74
8 M
Hz
4
5 6
2 3 1
76
3 M
Hz
77
3 M
Hz
78
3 M
Hz
79
3 M
Hz
80
3 M
Hz
9
71
3 M
Hz
71
8 M
Hz
72
3 M
Hz
72
8 M
Hz
73
8 M
Hz
70
8 M
Hz
74
3 M
Hz
74
8 M
Hz
78
8 M
Hz
76
8 M
Hz
77
3 M
Hz
77
8 M
Hz
78
3 M
Hz
79
3 M
Hz
76
3 M
Hz
79
8 M
Hz
80
3 M
Hz
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 +0.5% 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 26
Fixed Business
FIXED BROADBAND: LIVE TIM Accelerating Deployment
Addressable HH (000 HH)
609
1,138
1Q13 2Q13 3Q13 4Q13 1Q14
sep/12 mar/14
Customer Base (000 users) 75
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Customer Base ARPU (R$; CAGR %)
+15%
General Satisfaction
Offer
Billing
Call Center
6.0 7.0 8.0 9.0 10.0
TIM P2 P1
Market Performance
Customer Satisfaction Survey* (Source: TNS Institute Research)
1.5
100 neighborhoods:
41 neighborhoods in SP
59 neighborhoods in RJ
* From Dec/13 to Jan/14
8.7
9.0
8.9
9.0
8.3
7.1
8.8
7.6
7.5
5.3
7.5
7.4
8.1
8.0
7.4
TIM Fiber
39.9% Others 61.1%
UBB Market Share (SP + RJ) (connections >34Mbps)
Source: Anatel
Gross Adds (000 users)
7.6
18.3
1Q13 1Q14
+141%
Conection Quality
Source: TNS Institute Research) Feb/14
FIXED BUSINESS 28
INTELIG, NOW POSITIONED AS “TIM SOLUÇÕES CORPORATIVAS” The Opportunity Ahead
Market re-positioning
2013 2012
-
2014
Geographic expansion
Source: IDC Brazil ICT Business Service Database
TIM’s Addressable market (Net service revenues of total addressable market*; R$ bln)
Better financial performance
M 2014
Expansion:
2014: 7 new cities
2015: 12 new cities
Intelig now positioned as “TIM
Soluções Corporativas”
Re-structuring of sales force: multi
channel approach
Re-designed service portfolio
CAGR 11-14
8.8 9.2 9.8 10.9
7.7 7.6 7.7
7.8
2011 2012 2013e
VAS
Voice
22.7
2014e
4.3
24.4
5.2 4.7 5.7
Data
20.8 21.5 Total
5.7%
0.4%
7.4%
9.9%
…with considerable room to increase revenue share
(% of fixed corporate market)
1 2 3
Business Remodeling Path
*Companies with more than 100 employees
2%
P2 14%
P3 25% P1
3%
P4 21%
P5 35%
TIM
+
M
M
M
M
M
M
M
Segment EBITDA-CAPEX
Source: Company A Actual
A A
Net Revenues (with intercompany)
2013 2014
FIXED BUSINESS 29
Business Outlook
PERSPECTIVES Offer Innovation
Slower macroeconomic growth requires evolution of industry approach
Competitive landscape remains intense
Regulatory environment:
o Upcoming 4G Auction
o New consumer regulation framework
World Cup games: airports and stadiums coverage
o Wi-fi off loading at Maracanã: in recent test 25% of data traffic were off-loaded
Financial Services:
o Initial commercial launch of a “prepaid mobile account” / “mobile money”
o A partnership between TIM, “Caixa Econômica Federal” (federal bank) and Mastercard
o Focus on “unbanked” population (50% of prepaid base.)
New data offers: more options of data cap for prepaid (10 & 30Mb)
Infinity Turbo 7 launch: services package of R$7 per 7 days all in:
o Voice + Web + SMS
4G included in all data package
TIMmusic included in postpaid packages
Live TIM Extreme: new 1Gbps offer
“TIM Soluções Corporativas” / “TIM Empresas” as renewed
positioning of fixed and mobile corporate solutions
Business Generated: +8.9% YoY
EBITDA: +7.6% YoY
EBITDA Margin: +200 bps YoY
Net income: +21.6% YoY
Solid results in 1Q14
Macro environment highlights
Continued infrastructure focus
Coverage densification: macro and micro coverage enlargement
Resilience and network availability
Network control (NOC) internalization completed:
o Monitored elements - more than: 12,000 sites, 70,000 km of fiber, 900 IP network elements, 6,700 transmission equipment and 1,300 MSANs
Towers: analyzing opportunities to unlock hidden value
BUSINESS OUTLOOK 31
OFFER EVOLUTION
136 148
>170
2012 2013 2016e
2012 2013 2016e
18% 21%
>40%
VAS Gross Revs.
VAS/Revs.
21.3
27.5
2012 2013 2016e
30% 37% >50%
43%
55%
>75%
2012 2013 2016
+xx% +29%
+22% +xx%
Smart/Web phone Penetration (% over total base of lines)
Voice MOU (minutes)
Data Users (% of Data Users in CB; million users)
VAS Revenue Growth (% of Mobile Services Gross Revenues; R$ mln)
BUSINESS OUTLOOK 32
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$11 billion*
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK 33
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS 35
HISTORICAL DATA: FINANCIALS (R$ THOUSAND)
HISTORICAL DATA & OTHERS 36
HISTORICAL DATA: FINANCIALS (US$ THOUSAND)
HISTORICAL DATA & OTHERS 37
HISTORICAL DATA: OPERATIONAL & FINANCIAL RATIOS
ROA: NOPLAT/Avg. Total Assets. Calculation considers organic Net Income and EBITDA
HISTORICAL DATA & OTHERS 38
Stock Performance (base 100)*
TIM Celular S.A. Intelig
100%
TIM Brasil Serv. e Part. S.A. Minorities
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% 0
20
40
60
80
100
120
140
160
180
TIMP3 Ibovespa
STRUCTURE AND STOCK PERFORMANCE
*Last price as of 02/14/2014 HISTORICAL DATA 39
HISTORICAL DATA & OTHERS 39
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 40
Investor Relations Team
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
E-mail: [email protected]
Leonardo Wanderley
E-mail: [email protected]
Phone: +55 21 4109-4017
Luiza Chaves
E-mail: [email protected]
Phone: +55 21 4109-3751
Rogério Tostes
E-mail: [email protected]
Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: [email protected]
Phone: +55 21 4109-3360
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