Tim 2Q09 Webcast (Eng)

0

TIM Participações S.AWebcasting - 2Q09 Results

August 4th, 2009

2Q09

1

TIM PARTICIPAÇÕES S.A. | Investor Relations

Agenda

Re-launch Plan: Key Actions and Results L. Luciani

2nd Quarter Results C. Zezza

Build a Solid Platform for the Future L. Luciani

2


Re-launch Plan: Key Actions

Build a Solid Growth Platform for 2010

React to 2008’s inertia on revenues:

- minimizing impact on 2009…

- …and preserving profitability

Caring

Brand

Offering

Sales Force

Network

Efficiency

Selectivity and Multi-channelingServices improvement: better flow over demand Caring model evolution: service level vs. client value

Actions in CourseRepositioning

Share of voice increaseNew format to increase recall and brand linkageCoherence and brand recognition

Distinctiveness and InnovationInfinity pre and post“Azul” (DDD = local)

“Back to Sales”Grow again on post-paid and on pre-paidSales Force development (rationalization / productivity) Value-based Commissioning

Focus on 2G Service Quality :2G: excellence on voice quality3G: “right on spot”

Structural RethinkingRevision of go-to-market models and processes Renegotiation with suppliersGrowth financing and sustain profitability

Shock offering: “Recarga Imperdível”“TIM Único”

1

4

5

3

2

6

7

3


46

76 78

18

87

32

Brand: Share of Voice Increase; Growth of Recall, Appreciation and Brand Linkage

... with Good Campaign Results

2006 2007 2008

3º 3º 4ºRanking

TIM

-6 -13 -14

Greater Efforts in Communication...

TIMPlayer 1

Δ p.p.

1

20

Target% share of investment

7075

Manifesto Da Marca(Mar)

TIM TerraAzul (May)

Recall Appreciation Brand LinkageΔpp

vs. leader

Player 2Player 3

Source: Ibope Monitor/GRP, Data Folha, Synovate’s Image Research

Brand

30%32%

15% 16%

30%

24% 19%

17%

29%

31%

26%28% 28%

21%

16%

18%

5%

10%

15%

20%

25%

30%

35%

40%

0

1H‘09

1º

4


Network: Improvement of Service and Network Quality2008 FY – Overall Service Quality Jan-Jun 2009 – Overall Service Quality

# 6 # 24Q ‘08: 90.2%

98.7% in June

Network Service Quality

% target achieved in overall service quality, TIM vs. competitors

Jan/09 Jun/09 Delta (p.p.)

TIM 84.1% 100.0% +15.9

Player 1 100.0% 100.0% 0.0

Player 2 95.7% 98.6% +2.9

Player 3 53.8% 50.0% -3.8

Main mobile operators

2

Source: Anatel

Network

% target achieved in overall service quality, TIM vs. competitors

% target achieved in network quality , TIM vs. competitors % target achieved in TIM network quality

99.5% 98.0% 97.7% 95.1% 93.4% 91.6%83.9%

Player 1 Player 2 Player 4 Player 5 Player 6 TIM Player 3

99.9% 97.3% 97.0% 96.0% 93.4% 90.7%

76.9%

Player 1 TIM Player 5 Player 6 Player 4 Player 2 Player 3

96.7% 99.5% 99.5% 98.9% 100.0%

84.6% 84.1%84.1%

80,00%

82,00%

84,00%

86,00%

88,00%

90,00%

92,00%

94,00%

96,00%

98,00%

100,00%

nov/08 dec/08 jan/09 feb/09 mar/09 apr/09 may/09 jun/09

5


Caring: Improvement in Customer Satisfaction

7,6

7,8

8

8,2

8,4

8,6

mai/06 ju l/06 set/06 nov /0 jan/07 mar/07 mai/07 ju l/07 set/07 nov /0 jan/08 mar/08 mai/08 ju l/08 set/08 nov /0 jan/09 mar/09 mai/09

Customer Satisfaction Evolution

May06

Oct06

May07

Oct07

May08

Oct08

May09

8.4

8.18.1

8.0

8.6

7.87.8

8.0

Post-paid

Post-paid Heavy User

Pre-paid

- -

Evidences:Number / frequency of problems reductionStrong recovery in historically critical areas: SP countryside, RJ and Mid-West

Supporting Actions to the result: Offering: - Competitiveness in handset- Media presence- Infinity pre-paid plan

CRM: - Pro-active replacement of

handset based on value- Expansion of Premium cell

Coverage: focus on areas with high concentration of high-value clients

+0.4

+0.1 - +0.3

- - +0.3

TIMPlayer 1

Player 2Player 3

May/08 Oct/08 May/09May 2009

+0.9

+0.8

+0.4

Source: Customer Satisfaction Monitoring (Bridge Research)

3Caring

May/08 Oct/08 May/09

May/08 Oct/08 May/09

TIM: recovery of client satisfaction after a negative 2008

Player 1 Player 2 Player 3



7.2

7.88.1

7.8

7.1

7.67.8

7.5

8.0

7.67.8 7.9

6,5

7,5

8,5

7.5

7.98.2

7.8

7.3

7.77.9

7.78.1

7.87.9 8.0

6,5

7,5

8,5

8.38.1 8.1 8.28.1 8.1 8.2

7.8

8.58.1 8.2 8.1

6,5

7,5

8,5

6


Offering: Inversion of Market Share Erosion Trend4Offering

TIM Net Adds and Net Share TIM Market Share

000’s lines, %

Clean-up:

~1Mln lines

2008 2009

2008 2009

Mln lines

27.0 27.3 27.8 28.4 29.0 29.3 29.8 30.1 29.5 29.9 30.3 30.9Pre

Post 6.8 6.9 6.9 6.8 6.8 6.8 6.6 6.4 6.2 6.2 6.2 6.2

TIM Customer Base

2300%

2350%

2400%

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

31.6

6.2

Jun

% of market share

Rankingin net share

2Q 2Q

2008 2009

1,282

1,729

0

500

1.000

1.500

2.000

29.1%

NetAdds

% NetShare

17.4%

2300%

2350%

2400%

Apr09

May09

Jun09

Net share%

#1 #2 #1

37.7% 24.1% 32.2%

0

0

0

0

0

0

33.8 34.2 34.7 35.2 35.8 36.1 36.4 36.535.7 36.1 36.4

37.1 37.8

32

33

34

35

36

37

38

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

24.724.5

24.224.0

23.4 23.5 23.6 23.623.7

25.425.2

25.1 25.0

QoQ Speed up:

•Net addtion: 1.7mi 2Q vs. 0.7*mi in 1Q09

•ARPU: R$26.6 2Q vs. R$26.0 in 1Q09

*excluding clean-up base

7


Infinity

Other plans

Offering: Infinity Offer Results4Offering

2009 Infinity pre-paid base (000’s lines)

Pre

Post

Infinity

100%

34%

66%

~0%

May Jun

% Infinity in gross post voice consumer

5

~2.500

~1.600

~650

Mar Apr May Jun

8


000’s lines, 2009

Apr May

Gross adds

Churn

Net AddsReported

- + ++

NetAdds

- - - +Net Adds

+ + ++

Gross Adds

Churn

2009

2009

Jun

++

+

++

5

Churn

Gross Adds

1Q*

1Q*

1Q*

Sales Force: Stop-loss of Value Customers Base (Post-paid)

Excluding ~1Mln lines clean-up

Total Base

“Back to Sales”

Post-paidPost-paid Sales

Re-launch

Pre-paid

Pre-paid Growth Speed

up

Excluding ~0,3Mln lines clean-up

Excluding ~0,7Mln lines clean-up

* monthly average in 1Q

Sales Force

Apr May Jun

Apr May Jun

1Q Apr Mag Giu

Q1 Apr Mag Giu previa fechamento

Q1 Apr Mag Giu

9


Gross Adds Post-paid (voice)

-46%-34% +2% +13%

+42%

’08 vs. ’09“The Turnaround”

-62%-47%

-20% +12%+41%

Consumer (voice)

Value, not volume

-24%-13% +26% +14% +43%

Business (voice)

+29%

+27%+32%

5

2

4

Sales Force: Speed up in Acquisition Dynamics with Focus on Value (Post-paid voice)

SalesForce

Jan Feb Mar Apr JunMay

Jan Feb Mar Apr JunMay Jan Feb Mar Apr JunMay

10


46%

62%44%

69%

107%

24%

25%14%

113%

145%

56%

22%

120%

78%

55%

26%

23%

40%

5%

25%

45%

65%

85%

105%

125%

145%

Sales Force: Positive Balance on Post-Paid MNP

Gap MNP Post-paid

Jan Feb Mar Apr Jun

1Q09Jun ‘09% MNP Port In/ Port Out

Business

Post-paid

Consumer

4Q08Focus: São Paulo

Positive balance : Northeast, Mid-West, RJ and South

Speed up in East

Positive Balance on Consumer and Businesssegments

“Zero balance”

+

1

Regional Evolution

May

2

3

Note: Mobile NP

5SalesForce

104%115%

95%

127%

262%

210%

35%

120%

0,00%

TSP TSL TLE TRJ TNE TCO TNO TBR

11


Efficiency: Self-financing Brand Repositioning Plan and Commercial Re-launch6

Total Cost

1Q

2Q

YTD

Advertising &Promotions

Commercial*

Bad Debt

1Q

2Q

YTD

Leased Lines

Intercon-nection

1Q

2Q

YTD

Personnel

G&A

Δ% 09 vs. 08, BRGAAP

Breakdown Costs

+14%

+

+

+

-

+

Com-mercial

Indus-trial

HR, ITand G&A

Bad Debt Evolution

% Net Services Revenue, BR GAAP

Improvement in acquisition quality

Efficiency

1Q

YTD

Note: Excludes non organic effects: Embratel dispute agreement: - R$64 Mln (Mar/09); São Paulo inventories stolen : -R$21Mln (2Q09)*Includes COGS, Selling, CRM and Marketing Expenses

-10%

-14%

-6%

-20%

-48%

26%

41%

-5%

-2%

2Q~0

-18%

-6%

8%

15%

1%

-5,00% 0,00% 5,00% 10,00% 15,00% 20,00%

-10%

-10%

-9%

-100,00% -50,00% 0,00%

6.8%

4.1% 4.8%3.6%

4.7%

9.6%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

12


237

228

243

Net Services Revenues

15%

16%

14%

1Q

2Q

1H

Net Total Revenues

EBITDA Growth EBITDA and EBITDA Margin

1Q

2Q

1H

1Q

2Q

1H

Δ% 09 vs. 08, BR GAAP

Δ% 09 vs. 08, BR GAAP Δ basis points 09 vs. 08, BR GAAP

1Q

2Q

1H

Δ% 09 vs. 08, BR GAAP

+

+

+

+

+

+

Financials: Flat Revenues with Structural Increase of Profitability7

22.3%20.0%

2008 2009

Economics

-0.8%

-1.2%

-0.5%

-5,00%

Issue: neutralize 2008 negative

waves (post and pre-paid)

+ 230 Basis points YoY

0.6%

3.7%

2.2%

0,00%

13


25.3

8Mln

6Mln

4MlnJun-08 Jun-09

6.86.2

30%

25%

15%

27%

21%2008

Post-paidRevenues

- 800K

7

25%

20%

15%

20%

16%

29.0Total market

Loss of active voice post-paid lines:

R$100ARPU/

post-paid active voice

lines:

~ R$ 1 Bln

Delta base

2009 Inertial

Post-paidRevenues

Impact on Total Post-paid Revenues(FY 2009)

Economics

x

-6pp

-4pp

1st Wave 2008: Loss of Post-paid Voice Base

TIM Post-paid Base

(lines)

TIM Post-paid Mix(%)

TIM Post-paid MarketShare

Jun-08 Jun-09

Jun-08 Jun-09

∆ Jan 09 vs. Jan 08

-R$0.5 bn in 1H

14


Promo Non-Promo

ARPU

ARPU Promo base vs. Non-Promo base

2008’sAverage

2008’s Average

- +

Bln R$

7Economics

Mar2009

Mar2009

2nd Wave 2008: Reduction in Pre-paid Base with Promos

Promo Active BaseNon-PromoActive Base

Mln lines Mln lines

PromoΔ Base

2008Pre-paid Revenue

Non-PromoΔ Base

2009Inertial

Pre-paid Revenue

Impact on Total Pre-paid Revenues (FY 2009)

- +- +

Mainly in 2Q

15


ARPU

Back to growth…

7Economics

+2%

26.026.6

1Q09 2Q09

Net Adds

+150%

+0.7*+1.7

1Q09 2Q09

Service RevenueRevenues

3.03.3

1Q09 2Q09

+10%

R$ Bln R$ Bln

2.82.9

1Q09 2Q09

+4%

Mln R$

EBITDA

+21%

609736

1Q09 2Q09

EBITDA Margin

%

20.222.3

1Q09 2Q09

R$ Mln

…while improving profitability

* Net of clean-up

+210bps

Conclusions: First Signs of Gradual Improvement on Metrics

16


Agenda




17


Subscribers base: quarterly growth of +4.8%, following a better gross addition (share of net adds of 29%)

Net Revenue growth: R$ 3,304 Mln, +3.7% YoY; Net Service Revenue -1.2% YoY, following the post-paid base reduction and the mix deterioration in the last 12 months

• On a quarterly basis, Total Net Revenue up +9.7%, and Net Service Revenue +4.0%

• Gross VAS revenues: +12.5% QoQ e +21.7% YoY

• Stop ARPU and MOU erosion on a quarterly basis

Structural efficient growth: to finance the repositioning

• Bad Debt strong improvement: -47.9% YoY, accounting for 3.6% of Net Services Revenue

• Interconnection & Network: -14.1% YoY

• Personnel and G&A: -9.0% YoY and Commercial: +24.6% YoY

Profitability improvement: EBITDA of R$ 736 Mln, +15.5% YoY, Margin of 22.3% +230 bps YoY (and +210bps QoQ)

EBIT improvement: R$ 88.6 Mln, +117% YoY and Net Loss reduction: -R$ 15 Mln vs. -R$144 Mln in 1Q09 and -R$66 Mln in 2Q08

Positive Operating Free Cash Flow: R$ 407 Mln, +10% YoY…

… with an improvement in the Net Financial Position: R$ 2,900 Mln, -R$117 Mln vs. 1Q09

2Q09’s Main Results

18


Net Adds(000’s)

Stop Market Share Erosion…

2Q08 1Q09 2Q09

Customer Base

CB YoY Growth (%)

Million lines

Pre-paid

23.1% 11.0%

Post-paid

11.9%

… through Revamp in Net Additions

2Q08 1Q09 2Q09

6.8 6.2 6.2

27.0 29.9 31.6

25.4%

23.5% 23.7%

1,282

1,729

(306)

17.4% 17.2*%

29.1%

~700*

Net Share (%)

6.2

* Excluding the impact of ~1MM clean-up

∆ Net Adds YoY: +35%QoQ: +149%*

Market Share (%)

+17.1%

-8.9%

+5.6%

+0,7%

ΔY/Y ΔQ/Q33.8 36.1 37.8

19


Revenues & KPI’s

2Q08 1Q09 2Q09

Net Revenues

R$ Mln

215 189 368

2,9362,971 2,823

3,186 3,0123,304 +3.7%

-1.2%

+70.8%

Service Revenue KPI’s

ARPU

2Q08 1Q09 2Q09

29.8 26.0 26.6

R$

-13.8% -11.7% -11.0%YoY %

+1.2% -13.1% +2.1%QoQ %

∆ YoY ∆ QoQ

-27.1% +4.4%

ARPM

2Q08 1Q09 2Q09

10070 73

0.300.360.37

0,15

0,20

0,25

0,30

0,35

0,40

R$

MOU

∆ YoY

22.2%

∆ QoQ

-2.2%

Min.

397 430 483Gross VAS Rev.

9.8% 11.2% 12.3%% VAS/ Service Rev.

+9.7%

+4.0%

+95.0%

+21.7% +12.5%

+2.5pp +1.1pp

ΔY/Y ΔQ/Q

ΔY/Y ΔQ/Q

Increased penetration of micro-browsing over total

customers base

Net Service RevenueNet Handset Revenue

20


Commercial Efforts Maintained…

R$ Mln

COGS

R$ Mln

Selling Expenses

2Q08 1Q09 2Q09

325 324

467

+43.7%+43.9%

Margin %

R$ Mln

20.2%

1Q09

609

20.0%

2Q08

637

22.3%

2Q09

EBITDA

.. delivering EBITDA Growth…While Efficiency Plan Gets Traction...

2Q08 1Q09 2Q09

2Q08 1Q09 2Q09

2Q08

134

1Q09

106

2Q09

277 261 252

1,073 985 921

143

60*

Bad Debt

Personnel and G&A Costs

-47.9%-21.2%

-9.0%-3.7%

-6.5%

6.8%* 4.8% 3.6%

% ofNet Serv.Revenues

Interconnection & Network Costs

736R$ Mln

R$ Mln

R$ Mln

99

-14.1%

+20.8%+15.5%

2Q08 1Q09 2Q09

666 709 829+16.9%

+24.6%

Advertising =1.4 x84 115 119

∆ YoY

Gross AddsYoY: +20%QoQ: +27%

* Telesales Impact

21


R$ Mln

Δ YoY -1.2% +70.8% +24.6% -14.1% -47.9% -13.1%

* Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues

EBITDA2Q08

ServiceRevenues

HandsetsRevenues

Advertising & Sales

NetworkExpenses

+43.7%

COGS Bad Debt OtherExpenses*

EBITDA2Q09

EBITDA Structurally Improve – Financing the Growth and the Repositioning

22.3%20.0%Margin %

637.2

(34.4)

152.6

(163.4)

(141.9)

151.7

97.4 36.9

736.0

+15.5%

Investments on Growth

Savings

~300 (~10% Serv. Rev.)

~290(~10% Serv. Rev.)

+R$99 Mln

22


EBITDA 2Q09

Depreciation & Amortization EBIT Net Financial

ExpensesTaxes and

OthersNet

Result

EBIT and Net Result – 2Q09R$ Mln

736.0

88.6 (65.9)(15.2)(38.0)

(647.5)

+15.5% +8.6% +116.9% -27.9% +141.1% -77.0%YOY %

2Q08 637.2 (596.3) 40.8 (91.4) (15.7) (66.3)

1.2x 2.2x 0.2x2Q09 vs. 2Q08

23


Gross DebtR$ 3.67 billion (of which 68% long term)~33% of total debt is denominated in foreign currency (fully hedged)

Average annual cost 10.95% in 2Q09 vs.11.64% in 2Q08 (and 12.47% in 1Q09)

Net Financial Position and Operating Free Cash Flow – 2Q09

R$ Million

Net DebtR$ Million

Operating Free Cash Flow

* Excluding 3G license

Operating FCF

R$ Million

EBITDA ΔWork. Cap.

CAPEX Operating FCF

2Q091Q09 NonOp. FCF

73693 (422)

407

(3,017) (289)407 (2,900)

~R$ 168 Mlnof dividends

-117

2Q08

371 *

+10%

% total revenues

12.3% 11.6%

24


Agenda




25


Build a Solid Growth Platform


React to 2008’s inertia on revenues:

- minimizing impact on 2009…

- …and preserving profitability

Caring

Brand

Offering

Sales Force

Network

Efficiency

Selectivity and Multi-channelingServices improvement: better flow over demand Caring model evolution: service level vs. client value

Actions in CourseRepositioning

Share of voice increaseNew format to increase recall and brand linkageCoherence and brand recognition

Distinctiveness and InnovationInfinity pre and post“Azul” (DDD = local)

“Back to Sales”Grow again on post-paid and on pre-paidSales Force development (rationalization / productivity) Value-based Commissioning

Focus on 2G Service Quality :2G: excellence on voice quality3G: “right on spot”

Structural RethinkingRevision of go-to-market models and processes Renegotiation with suppliersGrowth financing and sustain profitability

Shock offering: “Recarga Imperdível”“TIM Único”

1

4

5

3

2

6

7

26


2008 2009

Posiziona-mento mark

Market Share

Economics

R$ Bln R$ Bln

Keep growing in revenue and profitability

Source: TIM internal data

Reshaping TIM Brasil: Build a Solid Growth Platform

Brand Positioning

Loss of Preference (-7 pp) and Top of Mind (-1 pp)

Ranking #6 in Quality (Anatel)

Customer Satisfaction Index decrease (ranking #3)

Recovery in - Preference- Top of Mind - Quality of Services (ranking Anatel)- Customer Satisfaction

MS Total

Net adds pre

Net adds post voice

Net TotalRevenues

EBITDA Margin

- 6 pp only at post24.2%25.0%25.4%25.9%

1Q08 2Q08 3Q08 4Q08

-20,00%

-10,00%

0,00%

10,00%

20,00%

30,00%

18%20%

24%26%

1Q08 2Q08 3Q08 4Q08

20%22%

1Q09 2Q09 3Q09 E 4Q09 E

23.5% 23.7%

1Q09 2Q09 3Q09 E 4Q09 E

-20,00%

0,00%

20,00%

30,00%

Reversal post-paid base erosion trend (value base)

10,00%

+6% +5% +6% +10%

27


The Path for 20091Q09 2Q09 3Q09 4Q09

+ ++

--

Target: restructure the company, recovering strong positioning, sustaining profitability and cash flow

Network and Brand recover Back to Sale Back to Talk Back to Growth

Net ServicesRevenue Δ YoY

Strategy: Pure Mobile

Organization: new

management Team

Advertising: new format

and greater presence in

media

Network Quality

New portfolio Offers:

- April (Infinity Pre, Da Vinci)

- June (Infinity Post, “Único”)

Sales channels Push :- Back-to Post-paid- MNP Focus

Recovery of Customer Satisfaction

Usage stimulus, MOU growth. Ex:- “Recarga Imperdível”- LD Infinity

Market share Increase :- Post-paid Voice (BU/CO)- Infinity Pre-paid Push

New Offers (July)- 4 in 1- New “Imperdível”

Commercial Push on New

Offer

Closing Intelig and

capturing early synergies

Recovery of Top of Mind

and Preference

28


* 2009 Estimate

Improving Structural Efficiency of the Company2009, BRGAAP

Commer-cial

HR, IT and G&A

Industrial (Network)

08 vs 07 09* vs 08

08 vs 07 09* vs 08

Δ YoY

% Net Service Revenue

Δ YoY

Δ YoY ITX Leased Lines

08 vs 07

09* vs 08

Δ YoY+

+

++

-

+

+

+ +

-

-

Strict Rigor in Bad Debt

Industrial Costs Variation

2008

2009

We do not sacrifice growth to increase profitabilityWe do not “buy" growth by destroying value

08 vs 07 09* vs 08

Intelig

4%5%

10%

7%

3.6%

4.8%

1Q 2Q 3Q* 4Q*

29


Repositioning on track:

• Brand

• Quality

• Satisfaction

Growth of net additions with ARPU increase

Profitability preserve through efficiency

QoQ improvement in all metrics

2Q Achievements

Main Takeaways

•Stimulate Usage (MOU)

3Q Priorities

• Positioning

•Profitability and cash generation

•Post-paid


News & Politics

Tim 2Q09 Webcast (Eng)