ENCONTRO COM A TIM São Paulo - 04/08/2014 ENCONTRO COM A TIM São Paulo - 04/08/2014

MEETING WITH TIM Brasília - 08/19/2014

GLOBAL OVERVIEW

Source: Merrill Lynch - Global Wireless Matrix 2Q14 (data refers to 1Q14) | Top 5 + Brazil

The Brazilian market is becoming mature but there is still room for monetazing user and the main opportunity is in data.

Customer Base Ranking (Mln)

Service Revenues Ranking (U$ Bln)

1,254

905

339

278

268

China

India

EUA

Brasil

Indonésia

188

141

67

28

25

EUA

China

Japão

Brasil

Reino Unido

54

50

46

43

41

8

Canadá

EUA

Suiça

Noruega

Japão

Brasil

68%

63%

56%

48%

47%

29%

Japão

Coréia

Austrália

Austria

Argentina

Brasil

179%

170%

159%

158%

156%

140%

Finlândia

Rússia

Portugal

Austria

Singapura

Brasil

76%

75%

74%

70%

69%

27%

Finlândia

Coréia

Dinamarca

Japão

Noruega

Brasil

4th 4th

Data / ARPU Ranking (%)

30th

Mobile Penetration Ranking (%)

13th

ARPU Ranking (U$)

35th

Smartphone Penetration Ranking (%)

29th

2

US

Brazil

Indonesia

US

Japan

Brazil

UK

China

Japan

Korea

Australia

Austria

Argentina

Brazil

Finland

Russia

Brazil

Singapore

Canada

US

Switzerland

Norway

Japan

Brazil

Finland

Korea

Japan

Norway

Brazil

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 31 61 n.d. 2,100

Net Revs FY13 (R$ Mln) 19,264 657 19,921

Fixed / Mobile Fixed BB

Vivo

Fixed BB/TV Fixed / Mobile

Mobile Fixed Fixed BB Pay-TV Group

Customers 2Q14 (000´s) 79,357 11,035 4,370 688 95,450

Market share 2Q14 28.8% 24.1% 18.8% 3.6% ---

Net Adds 2Q14 (000´s) 892 333 36 91 1,352

Net Adds 12M (000´s) 3,158 619 345 175 4,297

Net Revs FY13 (R$ Mln) 23,002 11,720 34,722

Fixed Mobile Fixed BB/TV

Mobile Fixed Fixed BB Pay-TV Group

Customers 2Q14 (000´s) 68,776 11,289 7,045 10,106 97,216

Market share 2Q14 24.9% 24.7% 30.3% 53.3% ---

Net Adds 2Q14 (000´s) 27 189 220 230 666

Net Adds 12M (000´s) 2,303 1,133 905 1,121 5,462

Net Revs FY13 (R$ Mln) 12,773 20,424 33,197

Fixed Mobile

Mobile Fixed Fixed BB Pay-TV Group

Customers 2Q14 (000´s) 51,081 17,023 6,567 867 75,538

Market share 2Q14 18.5% 37.2% 28.3% 4.7% ---

Net Adds 2Q14 (000´s) 502 -240 3 39 304

Net Adds 12M (000´s) 1,373 -1,307 17 - 35 48

Net Revs FY13 (R$ Mln) 9,290 19,132 28,422

Claro Oi

BRAZILIAN TELCOS X-RAY

Source: Companies Releases and Anatel

3

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:

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%)

4

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$27 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

5

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

6

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

7

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

8

# 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

v v

GO TO MARKET PROGRESS

9

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

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

10

# 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

2Q13 2Q14

o Brasília o Curitiba o Rio de Janeiro

4Q13 2Q14

4Q13 1Q14 2Q14

INFRASTRUCTURE FOCUSED IN DATA

11

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:

2Q13 3Q13 4Q13 1Q14 2Q14

TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2

12

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

13

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%

13

26k

100k

Jul/14 Jun/13

Market average

4,065

Tho

usa

nd

s

2Q13 2Q14

3,985

170 Tho

usa

nd

s

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

14

-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)

15

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

Tho

usa

nd

s

Debt Cash Net debt

Jun/13

Jun/14

1,031

6,356 5,325

1,749 1,749

Tho

usa

nd

s

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

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

16

New Positioning

DATA CENTRIC APPROACH

Coverage

1

2

3

Capacity

Availability