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TIM ‐ Acquisition of AES Atimus
Investor Relations - São Paulo. July 8th, 2011
Safe HarborSafe Harbor
Safe Harbor Statements
Statements in this presentation, as well as oral statements made by the managementof TIM Participações S.A. (the “Company”, or “TIM”), that are not historical factconstitute “forward looking statements” that involve factors that could cause theconstitute forward looking statements that involve factors that could cause theactual results of the Company to differ materially from historical results or from anyresults expressed or implied by such forward looking statements. The Companycautions users of this presentation not to place undue reliance on forward lookingcautions users of this presentation not to place undue reliance on forward lookingstatements, which may be based on assumptions and anticipated events that do notmaterialize.
TIM Strategy: 3 waves of growth
Q1 ‘10R$ Mln %YoYQ1 ‘11
Operating Results
growth
Total Revenues
Services
3.296
3.176
Ebitda 947
14%
9%
9%
3.752
3.463
1.033
1 2 3 DataFMS Voice
Community Expansion
Infinity Web / Smartphones3
Ebitda‐CapEx 258 185%736
Customer Base1 Revenue Voice Out / MoU2
Mln users
5x
Daily Unique users, Mln clients
1,7
Infinity Web users (Pre‐Paid)
R$ Bln Min
1.941.78
Mln users
Smartphone penetration
MarFebJanDecNovOctSepAug
0,3
MayApr2010 2011
Jun
42,452,8
R$ Bln, Min
Revenues(Voice Out)
+46% +24%
1.561.78 p p
% Webphone+smartphone penetration on Customer Base36,1
MoU 8%10%
12%
>18%
70100 126
Q1 11Q1 09 Q1 10Q1 09 Q1 10 Q1 11
2010 September 2010 Year End 2010 March 2011 Year End 1
Supported by a consistent Network Expansion
TIM Brasil CapEx – Organic growth* Development area
R$ Bln
Network Expansion
C
D
E
AA
R$ Bln
14Bln
R$ 14 Bl i 5
Backbone Backhauling Access
B
'09 '10 '11 '12 '13
R$ 14 Bln in 5 yearsR$ 8.5 Bln 2011‐2013
SwapsConsorthia
MicrowavesFTTS
2G capacity3G coverage
*Excludes spectrum licenses and acquisitions
AnnualCapEx 2.7 2.8 2.9
2G Network Capacity (voice)
# ‘000 TRX installed
20 7
Backbone
000 km
Backhauling (MW/FTTS)
>80%
Access 3G
% of urban population covered% of sites connected with own backhauling
28,0202 >80%
7,0
16,0 20,7
20%
80
115142 55%
2x
25x
'09 '10 '11 ’13’12’11’09 ’10
> 80% of Brazilian major cities connected via fiber by 2013
’13’10’09’08 ’13’10
2
Acquisition of Intelig was key for TIM’s Evolution and Business Transformation
#1 carrier in long distance services (accelerating FMS)#1 in voice arena (size; ARPU, growth)
Market Mobile → Long Distance → Fixed
Evolution and Business Transformation
Fast growing presence in Government / Top CustomersSegment Consumer → Corporate
Infinity web now exceeds 8 million unique users/month (6% of Brazilian browsers) in just 6 months
Product Voice → Data (small screen)
Totaling 28,000km of backbone15 000 km from InteligNetwork
#1 in historical areasFast growing in São Paulo (#2 back) and Rio (close to Oi)
Geography
50/50% from own /rented To infrastructured
South; Northeast → São Paulo; Rio de Janeiro
.15,000 km from Intelig
. Active in swap capacity market / government PNBLNetwork 50/50% from own /rented → To infrastructured
Starting Business TransformationLD Market Share% of LDN minutes
48 3%
Backbone (Km of fiber)‘000 R$Bln
11,5%
48,3%
20,6%17,0%
27,7%
11 5%
33,8%
17,2%
Player 1Player 2
Player 30.6
>1.0
>2 .0
15 0
~6.5
~22.5 ~5.7
~28.2Network strenghtening Intelig
Revenues
11,5% 11,5%
2007 2008 2009 Jun/10 Dez/10 '10 '11 '13
1.015.0
YE 2009 Inteligcontribution
Swap ofcapacity
Today TotalUnderConstruction Powering up voice
mobile growth3
One of the best backbone in the country
Intelig/TIM
Optic fiber network
backbone in the country
Backbone:
16,000 Km
+
Boa Vista
Macapá
Belém
Fortaleza
Fiber SWAP in 2010:
~6,500 Km
Brazilian Data Activation
Manaus
Porto Velho
ú
M
M
Conjoint Building Network 2012:
+PNBLCuiabá
Brasília
Goiania
Aracajú
Salvador
M
M
~3,800 Km
Backbone LD Belém
+Active in capacity SWAPPartnership with Telebrás
CampoGrande
Rio de Janeiro
Vitória
BeloHorizonte
Uberlândia
São PauloNew swap network
National Backbone
Backbone LD Belém– Macapá ‐Manaus:
~2,000 km
with Telebrásfor PNBL expansion
Porto Alegre
Florianópolis
CuritibaMM
New Conjoint Building NtWk
New Network Manaus
M Metro Swap Agreements
TIM + Intelig: ~28.000 KmIntelig enables capacity to swap network
4
Rationales for AES acquisition
A Unique Network For the Best Choice
Backbone Backhauling Access
acquisition
B
C
D
E
AA
Mobile
Fixed(last mile)
TIM/Intelig
AES3G, WiFi, LTE, 100 Mbps, FTTH
~5.500 km of fiber in SP/RJ
T S t M i M bil D t E i A d Ch ll g th Fi d M k t
2
3
R$ Bln, Revenues
To Support Massive Mobile Data Expansion And Challenge the Fixed Market
Brazilian TLC Market
111
140
1
1
2
at Home
at Office
1140
Voice
Broadband
100100
InteligRevenues
0
'10 '11 '12 '132010 2020
5
A unique network
AES: widespread network in SP and RJ (urban area) Network Scale-up
A unique network
~3.0 Mission:
Build the strongest network in Km
~2.5Twice as
much fixed Build the strongest network in
Brazil
Rational:Infrastructure
SP RJ
much fixed incumbent
backhauling in SP and RJ
1) Increase of capacity and
capillarity:
a. Additional 5.500 km in top
MAP
2 cities
b. Most valuable asset to
swap with other operators
ADSL
VDSL2) Network cost structure
transformation
a. Opex savings (leased lines)
b Capex avoidance (eg FTTS)100 Mbps
Cable
FTTHb. Capex avoidance (eg. FTTS)
1 GbFTTO
6
Best choice in Top 2 Towns (SP/RJ) – R$ 30 Bln market
GDPValue Proposition
R$ Bln, Revenues
(SP/RJ) R$ 30 Bln marketSP and RJ: Macroeconomics
RJ+SP R$1.3TlnArgentina R$0.85 Tln
PopulationRJ+SP = 57Mln
Consumer/SoHo
Best‐of‐breed connectivity(3G 4G Wi Fi FTTH)
Other States
InnerArea
SP and
110
50
60
50 30
Urban
Mobile
30
20
18
12
RJ+SP
SP/RJ St t R$50Bl (45% f B il)
TLC Market
Italy =60Mln (3G, 4G, Wi‐Fi, FTTH)
Seamless experience
Bundling broadband
RJ States 50 Area Fixed30 18
30 Bln addressable market,
Brazil TLCMarket
TLC MarketSP/RJ States
SP and RJ Metro Area
Widespread AES in SP and RJ: Addressable market
SP/RJ States: R$50Bln (45% of Brazil)Metro Areas: R$30Bln (26% of Brazil)
Bundling broadband capability off‐the‐shelf
largely prospect
~30 Mln peopleCorporate / SME
Best corporate connectivity8 Mln households
Mobile PC
4,5 Mln households class A and B
@ Homeconnectivity
Clouding
Voice/data/services
8 Mln households
@ Hot spot
550.000 companies
/ /
7
AES Atimus – Acquisitiondetails
TimingPrice
1 6R$ Bln
details
0,5
1,6
1,1Signing Closing Start-upEV
TotalRJSP
Km of Fiber ~3.0 ~2.5 ~5.5 Approvals Integration
08/07 Q4’11 Q1’12
13x 7x 11xEV/2011E
pp g
St 1Network sinergies
OPEX/CAPEX
4 steps
Step 1
Step 2
g(link swap; FTTS)
Mobile Data Accelaration
OPEX/CAPEX
Mobile revenues
integrationStep 3
Step 4
Corporate Data Solutions
At home
Fixedrevenues
Step 4 At home
8
Benefits for TIM shareholders
Mobile AccelerationOPEX/CAPEX Saving
R$ 250 mln in 2012 TIM 2013
shareholders
D
E
R$ 250 mln in 2012R$ 1 bn in 3 years
13%
29%>34%
TIM 2013
DataFMS Voice
Community ExpansionBackbone Backhauling Access
B
C
AA
USAEUBrazil
Replicating Intelig Value CreationSP/RJ metro – telecom market size
Backbone Backhauling Access
0,2
2,9
0,8
3x
9Fixed
•R$ 30 Bln TLC Market
•27% of Brazilian GDP
R$Bln Current TIM Revenue
3 Mobile
0,9 1,0
Cost Market FixedMobile Total
189Fixed
Additional
PeersUntapped
Costsaving
Market value at dec’09
RevenueRevenueota
Value
Topping fixed broadband market9
Takeaways
Acquisition for R$ 1 6 bln of 5 500 km of best fiber in SP and RJ
Takeaways
Acquisition for R$ 1.6 bln of 5,500 km of best fiber in SP and RJ
Closing expected by Q4
Integration completed by Q1 2012
Shareholders value creation by
− OPEX/CAPEX saving (250 mln in 2012; 1 bln in 3 years)OPEX/CAPEX saving (250 mln in 2012; 1 bln in 3 years)
− Mobile revenues acceleration
− Fixed line business expansionFixed line business expansion
Replicating Intelig’s value creation exercise
10