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Meeting with Investors - June 2015
This document provides an overview and agenda for TIM Brasil's presentation covering the following topics: recent results including growth in 4G adoption and data revenues; network and quality evolution including expansion of TIM's 4G network; the fixed business; business outlook; and regulatory updates. The presentation highlights TIM's position as the second largest mobile operator in Brazil by customers with 75.7 million subscribers, its focus on innovation and efficiency, and its continued investment in infrastructure to support further growth.
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Meeting with Investors - June 2015
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- 2. 2 Visit our websiteand IR app: www.tim.com.br/ir AGENDA Market Overview and TIM Positioning................ 4 Recent Results……………………………..………..………….8 Network & Quality Evolution……..………………..…..16 Fixed Business…………………………….……………....…...21 Business Outlook………….….….…………………….……..24 Regulatory Update……….….….…………………….………29 Appendix.................................................................33 TIM IR app (English) TIM RI app (Portuguese)
- 3. 3 Statutory AuditCommittee: • Report to Board of Directors • Oversight Financial reporting • Analyze anonymous complaints 20 25 28 30 29 2010 2011 2012 2013 2014 51 64 70 73 76 2010 2011 2012 2013 2014 CAGR +10% 15,000 km fiber optical backbone 5,500 km fiber optical backhauling Growth Via Acquisition TIM: A Huge Brazilian Company 75.7 million customers (27% Share) More than 465,000 points of sales 175 own stores 15 Customer Care Centers (16k attendants) ~14,000 Antennas 3,439 cities covered 55,900 km of optical fiber network 23,000 indirect jobs ~R$3.9 billion invested in FY2014 (ex-licenses) GROWTH STRUCTUE Gross Revenues (R$ bln) Customer Base EoP (mln customers) EBITDA (R$ bln) 4,2 4,7 5,0 5,2 5,5 2010 2011 2012 2013 2014 CAGR +9% CAGR +7% Presence in Brazil since 1998 16th largest Private Company in Brazil (source: Exame Magazine - 2013) Approximately R$32 billion of Market Capitalization Brazilian Law “Nível” 1 “Nível” 2 Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders 100% Tag Along Equal dividends rights One single class of shares Strict disclosure policy Unique Telco company listed on the Novo Mercado CORPORATE GOVERNANCE 2nd Player Market & Revenue Share 95% of urban pop. covered ~13k employees KNOWING TIM BETTER
- 4. Market Overview andTIM Positioning
- 5. 5 The industry mobilerevenue represented 56% of the total industry revenues in 2014 Source: Anatel and Players balance sheet Mobile Fixed1 Fixed BB1 Pay-TV Group Customers 1Q15 (000´s) 75,749 555 171 n.a. 76,475 Market share 1Q15 26.7% 1.2% 0.7% n.a. --- Net Adds 12M (000´s) 1.832 53 69 n.a. 1.954 Net Revs 1Q15 (R$ Mln) 4.388 158 4.547 ARPU 1Q15 16,7 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB1 Pay-TV Group Customers 1Q15 (000´s) 81.879 10.538 4.088 790 97.295 Market share 1Q15 28,9% 23,4% 16,7% 4,0% --- Net Adds 12M (000´s) 3.314 -195 -245 145 3.019 Net Revs 4Q14 (R$ Mln) 6.243 2.740 8.983 ARPU 4Q14 24,3 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB1 Pay-TV Group Customers 1Q15 (000´s) 71.942 11.733 7.731 10.266 101.672 Market share 1Q15 25,4% 26,1% 31,6% 51,9% --- Net Adds 12M (000´s) 3.193 718 907 391 5.209 Net Revs 1Q15 (R$ Mln) 3.035 5.978 9.013 ARPU 1Q15 13,0 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB1 Pay-TV Group Customers 1Q15 (000´s) 50.388 16.113 6.488 1.232 74.221 Market share 1Q15 17,8% 35,8% 26,6% 6,2% --- Net Adds 12M (000´s) -191 -1.145 -75 404 -1.007 Net Revs 1Q15 (R$ Mln) 2.259 4.582 6.841 ARPU 1Q15 17,7 n.a. n.a. n.a. --- TIM represents 26% of the industry mobile revenue2 1 – Fixed voice and Broadband Access numbers refers to 4Q14 2 - Mobile revenue considers only the 5 major players Mobile Revenues Share 30,2% 30,6% 31,8% 33,1% 24,9% 25,5% 26,6% 26,4% 19,0% 17,5% 17,6% 18,0% 12,6% 13,0% 12,8% 12,6% 8,9% 8,1% 6,5% 6,1% 2011 2012 2013 2014 Nextel Oi Claro TIM Vivo BRAZILIAN TELCOS X-RAY
- 6. 6 Revenue Mix Revenue Mix 27% MobileMarket Revenues Evolution (Mobile Service Net Revenues; %) • Most households without internet access • Mobile better suited to break price barrier 9.5 2.6 Jan-13 Nov-14 0.34 0.30 0.23 0.16 0.10 0.06 0.03 0.02 2012 2013 2014 2015 2016 2017 2018 2019 57% 4% 12% 1% 37% 2% MTR Cut (R$) Voice Incoming Voice Outgoing SMS Internet 60% • Maturing market: Customer base growth slowdown • Consumption migrating from voice to data 2010 2020 SMS Traffic Sharp Decrease (billions of SMS sent) Mobile Internet is the growth driver and will be the largest mobile market, although Voice remains important Voice Decline Internet Opportunities Internet Market Evolution STRATEGIC POSITIONING
- 7. 7 105% 90% 79% 72% 66% 63% • Hugegap between Brazil and developed markets • Lack of infrastructure: low quality and speed • Affordability issues (high prices, combos) • Smaller gap between Brazil and developed markets • Additional drivers for growth: days of use, data consumption • Affordable prices 90% 83% 73% 73% 55% 32% Fixed (% households) Mobile (% population) Content & Usage Offer Pure Connectivity Offer Developed markets avg: 75% Developed markets avg: 82% Connectivity Proximity & MPayment Connected Home & In Cars RichCom OTT Telco COOL TRUST QoE* and Caring Fra UK USA Jap Rus Bra Jap USA UK Ita Fra Bra Δ: 43 p.p. Δ: 19 p.p. * Quality of Experience Getting People Connected: Broadband Penetration Entering in the Content World Apps Social Video Music Gaming Digital Identity & Security A B C D/E Voice Centric World Data Centric World Data DataVoiceVoice Focus on voice for B/C classes Focus on data for B/C classes Targeting the “Big Middle” Source: OVUM / INEGI DATA: CONNECTIVITY AND BEYOND
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- 9. 9 +23% YoY FIRST QUARTER HIGHLIGHTS •Good performance in postpaid segment, in particular Control Plans • Resuming market share growth and share of net adds based on quality and offer EBITDA +1.7% YoY EBITDA Margin 29.5% -5.3% YoY +46%YoY • Fast growth in 4G adoption and market share • Largest 4G network on state capitals according to Anatel 4.5x YoY +6.4% YoYPostpaid performance 4G Performance Data Revenues performance Efficient Operation Control Plan Users • Accelerating growth on innovative services • Total VAS revenues already account for 32% of mobile service revenues • Strong focus on efficiency continues, with opex savings in multiple areas: leased lines, S&M and G&A in particular • Resilient performance amid short term headwinds • Margin on services grew to 35% Web+Content (% YoY) user base StrategicOperationalFinancial user base 16% 33% 46% 1Q13 1Q14 1Q15 opex 1Q14 1Q15
- 10. 10 1Q14 1Q15 CORE BUSINESSPERFORMANCE EBITDA & EBITDA Margin (R$ bln; % YoY) Mobile Serv. Net Rev. (% YoY) 1.22 1.32 1.34 26.0% 28.0% 29.5% 1Q13 1Q14 1Q15 Data as a catalyst to business generated growth Strong and disciplined efficiency approach Business Generated (Voice, Data, SMS & Others) Business Received (MTR + SMS) -38.7% +3.5% Customer Base Evolution (mln customers; % YoY) New round of MTR cuts Macroeconomic scenario impacting consumer spending -56 10 5 263 507 1Q14 2Q14 3Q14 4Q14 1Q15 61.7 62.7 12.2 13.0 1Q14 1Q15 Postpaid Prepaid 73.9 75.7 +6.4% +1.7% +2.5% Postpaid net adds (in thousand) Stringent disconnection policy on prepaid Sharp reduction of SMS business Data revenues compensating decline on traditional revenues Reshape of the business driving profitability
- 11. 11 1Q13 1Q14 1Q15 DATAGROWTH CONTINUES, FUELED BY 4G VAS Gross Revenues Growth (R$ bln; % YoY) Data ARPU (R$; % YoY) Data Users (mln; % YoY) % of gross revenues 21% 25% 32% +20% +22% 1Q14 1Q15 +29% +27% SMS Data (Web & Content) +33% +46% -28%+1% market share in 4G millions 4G users vs. 1Q14 Source: Anatel & GfK Report 1.2 1.8 1.5 1Q14 1Q15 market share of smartphones sales 1Q14 1Q15 +14% Data Traffic (Bytes of Use) % of total base 37% 44% *Feb * * * *
- 12. 12 RELEVANT INNOVATION GENERATINGRESULTS Liberty Controle Gross Adds and Migration (# of postpaid customers) 1Q14 1Q15 Controle WhatsApp Liberty Controle Voice TIM Multibank 1.0 mln users 5.0 mln users Other Innovative Services (# of active users) Infinity Day (% of infinity day users in the prepaid base) Mobile money in partnership with Mastercard and Caixa Econômica bank 4% 38% Aug/14 1Q15 TIM Protect TIM Protect Backup R$0.75 daily offer Adding new sources of revenues Mitigating community effect Mitigating voice MOU reduction +23% YoY 2% 14% Feb/14 Feb/15 % of prepaid users on 30/100 MB plans Increasing data adoption and ARPU 1Q14 1Q15***Feb
- 13. 13 1Q14 2Q14 3Q144Q14 1Q15 4.547 158 4,702 4,547111 17 5 -289 REVENUES HIGHLIGHT: SOLID CORE BUSINESS Net Revenues Profile (R$ mln; % YoY) 4,705 +0.1% -3.3% Reported Revenues 1Q14 Reported Revenues 1Q15 Ex-MTR Revenues 1Q15 Δ Fixed Services Δ Business Received (MTR+SMS) Δ Business Generated Δ Products Revenues Ex-MTR cut Δ % YoY +3.5% -38.7%+12.4% +0.8% MTR incidence over Service Revenues (as % of net service revenues) 1Q15 1Q10 ~27% ~10% Fixed Business Repositioned Net Revenues (% YoY) Business Generated (Serv. Rev. ex incoming) (R$ mln; % YoY) 1Q14 1Q15 Thousands 3,213 3,324 +3.5% +12.4% -22.9% 1Q13 1Q15
- 14. 14 1Q13 1Q14 1Q15 EFFICIENCYAPPROACH ON COSTS CONTINUES Opex Evolution (% YoY) +5.9% -2.9% -5.3% 1Q13 1Q14 1Q15 29 30 31 1Q13 1Q14 1Q15 2013 2014 1Q15 -6.0% -9.8% -10.1% Leased Lines costs (% YoY) SAC/Gross Adds (R$) Bad Debt as % of Gross Revenues Stable SAC/ARPU Strong cost efficiency despite solid growth on data users and traffic Efficiency in the transport network Subscriber Acquisition Cost under control G&A costs (R$ mln) 1.0% 1.1% 0.8% 1Q13 1Q14 1Q15 159 150 143 1Q13 1Q14 1Q15 -4.4% YoY Lowest industry level
- 15. 15 1.340 951,317 59 -371,340 FOCUS ON PROFITABILITY Reported EBITDA 1Q14 Reported EBITDA 1Q15 Δ Opex/ Others Traffic/Data Δ Contribution Margin Ex-MTR EBITDA 1Q15 1,434 +8.9% +1.7% EBITDA Margin Service EBITDA Margin 29.5%28.0% 35.3%33.2% Ex-MTR cut +1.7% +1.8%Δ % YoY 1Q15 1Q10 ~44% ~14% MTR incidence over EBITDA (as % of EBITDA) Net Debt (R$ mln) Net Income (R$ mln; % YoY) Cash Flow (R$ mln; % YoY) 372 313 1Q14 1Q15 Thousands -16% 1Q14 1Q15 -1,571 -1,577 Thousands 6,669 3,550 3,119 Debt Cash Net debt +0.4% EBITDA Profile (R$ mln; % YoY) 4G payment: ~ -R$1.7 bi Ex-4G payment: ~R$1.4 bi
- 16. Network and QualityEvolution
- 17. 17 INFRASTRUCTURE: PROJECT TURBOROLL-OUT 470 613 924 1Q13 1Q14 1Q15 Quarterly Capex Evolution (R$ mln; % YoY) New Capex Plan 2015-17 (R$ bln; % YoY) ~11.0 >14.0 2014 Plan (3 yrs) 2015 Plan (3 yrs) 2G 3G/4G +27% +51% Small Cells & Wi-fi (% YoY) Number of 3G Sites (% YoY) BackBone (000 Km; YoY) Availability Capacity Coverage Number of 4G Sites (% YoY) 1Q14 1Q15 1Q14 1Q15 +16%+88% 1Q14 1Q15 +79% 1Q14 1Q15 +7.1
- 18. 18 EFFICIENT CAPEX ALLOCATIONPLAN IN EXECUTION 2013a 2014a 2015e 2016e 2017e Indoor coverage increase in cities already covered with LTE % of urban population covered with 4G 4G with 1.8 4G with 2.5 only +6 p.p. +7 p.p. Refarming to be applied in other cities Tower Sale: Largely supporting capex increase Possible Technologies 850 MHz Band 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz 2G 3G 2G 3G 2G 4G 3G 4G 4G Efficient use of spectrum portfolio to… Towers sold Asset optimization Estimated value of the deal Towers to be transferred to American Tower 1st Closing (April, 29) Cash in from tower sale Remaining towers to be sold in the coming months From… Refarming 1,800MHz
- 19. 19 15 32 33 47 TIM P3P1 P4 29% 28% 22% 16% TIM P1 P3 P4 IMPROVING QUALITY PERCEPTION Customer Satisfaction: (Provokers Research) Ranking for Preference TIM Postpaid Rejection 17% 14% Nov/12 Nov/14 Demands at Consumer’s Protection Agency (Procon) in 1Q15 (2) Total per economic group, in thousands. Source: SENACON/MJ 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 2Q14 3Q14 4Q14 1Q15 Speed Test: (Ookla)¹ Throughput (Kbps) Latency (ms) Consumer Complaints² (downlink in 2G/3G Network) (in 2G/3G Network) Market Average TIM (1) The report was generated and created from TIM's analysis over the NetMetrics Reports provided by Speedtest.net Public commitment for improvement of communication and education on mobile internet
- 20. 20 ANATEL QUALITY METRICS TIM Market Avg. Voice Accessibility* 3GData Accessibility* 99.4% 99.7% 97.7% 98.9% Data Drop – 3G Data Accessibility – 3G #1 #1 * As of Feb/15. Market Average weighted by number of users for top 4 players (ex-TIM) Source: Anatel 89% 93% Feb-14 Feb-15 89% 100% Feb-14 Feb-15 # of States within Target (%) % of Metrics within Anatel’s Target Player Jul/14 Feb/15 Change P3 P1 P4 93.1% 86.1% 83.5% 78.1% 93.7% 90.1% 83.8% 86.1% 0.6% 4.0% 0.3% 8.0% Anatel’s Quality Plan Results (End of Quality Plan 2012-2014) "5.196. (...) há clara percepção de melhora nos resultados ao longo do tempo. 5.197. É de se ressaltar, também, a redução de reclamações de rede alcançada pela operadora no período e a disponibilidade do corpo técnico da operadora para as discussões de qualidade com a Agência. Observa-se que a operadora, que teve um aumento expressivo de usuários em decorrência da sua agressividade comercial, dá sinais claros de investimento em qualidade, com a realização de investimentos em patamar muito superior ao previsto inicialmente, com a melhoria contínua nos resultados e na redução de reclamações". “clear signs of quality investment... Continuous improvements in the results and in the reduction of complaints” Anatel’s Opinion on TIM (End of Quality Plan 2012-2014) Improvement case: São Paulo
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- 22. 22 LIVE TIM: MAINTAININGPERFORMANCE TRACK RECORD Customer Base (thousands subscribers) MSAN’s Homes Passed Net Adds Customer Base MSAN e Homes Passed (thousands; millions homes) 7.8 14.0 19.1 17.5 74.2 149.5 1Q13 1Q14 1Q15 ARPU (R$; % YoY) 1Q14 1Q15 +20% +80% +37% 0.7 1.6 2.3 0.8 1.3 2.0 1Q13 1Q14 1Q15
- 23. 23 1,8% 5,3% 13,8% 15,2% 48,6% Rede TV Band TV Record SBT Globo 1,9% 13,3% 84,8% AudienceBreakdown Digital TV switch off roll out Free to AirOTT (TV series, documentary, films, kids) Need linear Sports and News) • Anatel started the countdown to switch off analog TV in Brazil. The roll out will start in November / 15 and will last until the end of 2018 2016 2017 2018 20192015 start SP RJ SSA DF BH Fort.POA Recife Manaus Blue Box – Set it up your way TV DIGITAL • Only relevant content for the user is exhibited • Free to air channels on the solution • Direct access to YouTube and Netflix content on the platform BRAZILIAN PAY TV DYNAMIC AND LIVE TIM BLUE BOX
- 24. 24 CORPORATE SEGMENT: MOREFOCUS, IMPROVING RESULTS 1Q14 1Q15 1Q14 1Q15 1Q14 1Q15 1Q14 1Q15 1Q14 1Q15 1Q14 1Q15 Activations (R$; % YoY) Gross Adds (% YoY) Margin of Projects Sold (R$; % YoY) Churn (% YoY) +144% +106% -2% +16% +26% +13% Smartphones Lines (% YoY) Data only (% YoY) Fixed Solutions 1Q14 1Q15 +124% Sales (R$; % YoY) Mobile Solutions
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- 26. 26 1Q15 CONCLUSIONS + GrowingEBITDA and EBITDA margin + Growing outgoing revenues + Accelerating on data - Macro / inflation / consumer spending - MTR reduction - SMS / voice trends Q1 with headwinds but positive performance Data ARPU growth Outgoing revenues growth EBITDA margin increase Solid progress on infrastructure plan Demonstrating innovative DNA in data + Project turbo roll-out + Quality metrics + 4G take up / growth + WhatsApp availability in all plans bringing differentiation + Recovering performance in postpaid + Increasing data plans on prepaid Data revenues growth Data users growth % of base as data users All key strategic metrics checked 1 2 3
- 27. 27 2014a 2017e 2013a 2014a2015e 2016e 2017e 3G Data Traffic LTE Data Traffic 73.4 75.7 2013a 2014a 2015e 2016e 2017e 2014a 2017e 2014a 2017e COST EFFICIENCY 0.34 0.02 2012 2014 2016 2018 2014a 2017e Mobile Customer Base (mln customers) Data Traffic Expectation (in petabytes) SAC (Subscriber Acquisition Cost; R$) Bad Debt (R$) Leased Lines Cost (R$) MTR Path (R$) SMS Market Revenues (R$) Business Growth Network & Interconnection Savings1 Operational Efficiency2 Strong cost efficiency despite solid growth of data users and traffic
- 28. 28 48% 40% 37% 35% 52% 60%63% 65% 2014a 2015e 2016e 2017e Innovative Traditional (R$; %) 24% 12% 31% 18% 2010 2011 2012 2013 2014 2015e 2016e 2017e Net Services Revenues Exposure EBITDA Exposure MTR Cut (% YoY) 2013a 2014a 2017e Innovative: Data Content Other Traditional: Voice Incoming SMS +48% -11% % YoY Near mid- single -44% ~5 bln ~9 bln BUSINESS TRANSFORMATION -35%-33%-25%-11%-15% MTR Impact Analysis Mobile Net Revenues Analysis (R$; % YoY) Innovative and Traditional Investments (R$; % YoY)
- 29. 29 EBITDA Evolution (R$; withoutintercompany) EBITDA – Capex (R$; without intercompany) 2014a 2015e 2016e 2017e 2014a 2017e 2015-2017 GUIDANCE (FIXED BUSINESS) 2013a 2014a 2015e 2016e 2017e Revenues from New Sales (R$; YoY) Customer Base (thousands customers) 60k 130k >500k 2013a 2014a 2015e 2016e 2017e Revenue and EBITDA rebound Customer care unification (F+M) Launch of new convergent solutions Accelerate growth through incremental investment Focus on keeping customer experience leadership Fixed Business Performance
- 30. 30 18.8 19.9 19.5 2012A2013A 2014A 2015e 2016e 2017e 5.0 5.2 5.5 2012A 2013A 2014A 2015e 2016e 2017e 0.6 0.4 2.9 3.1 3.5 3.9 2012A 2013A 2014A 2015e 2016e 2017e Organic Others/ Licenses 3.8 3.9 6.9 Continued Growth Continued Growth, improving margin CAPEX 2015-2017: >R$14 billion 2012a 2013a 2014a 2012a 2013a 2014a 2012a 2013a 2014a 2015-2017 GUIDANCE Net Revenues (R$ billion) EBITDA (R$ billion) CAPEX (R$ billion)
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- 32. 32 SPECTRUM COMPARISON 25 25 24 19 9 16 25 25 25 10 5 5 5 5 5 2 5 5 5 2 5 5 5 5 5 5 5 5 5 20 20 30 45 21 21 26 39 40 40 29 20 25 25 25 40 21 21 42 36 30 30 20 20 22 30 25 22 23 30 27 20 20 20 30 30 30 30 20 20 0 1020 30 40 50 60 70 80 Northeast South North Southeast Midwest 1,800 MHz 900 MHz 850 MHz 2,100 MHz Band 850 MHz 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz Possible Technologies 2G/3G 2G/4G 3G 4G 4G (FDD Cap) (12,5+12,5) MHz (2.5+2.5) MHz (25+25) MHz (15+15) MHz (30+30) MHz (20+20) MHz Total FDD Regulated Cap: 80 + 60 + 40 = 180 MHz Global Cap of 80 MHz Specific Cap 6 25 15 Spectrum Caps and Distribution Spectrum Market Cap Availability
- 33. 33 1st Round (10+10) MHz cap Block4 (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 LTE AUCTION DETAILS 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 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 UPLINK Central Band TV Channels Guard Band Private Limited Service 4 2 3 1 Central Band5 6 30% in April 2015 30% in January 2016 30% in January 2017 10% in January 2018 R$1,199 million ~R$360 million ~R$360 million ~R$360 million ~R$120 million Total Amount: * Values will be adjusted by the IGP-DI index. 700MHz Auction Results Spectrum acquisition at fair price (Price in USD/MHz/Pop. adjusted for GDP) Clean-up Cost Road Map*
- 34. 34 MAIN REGULATORY TOPICSFOR 2015 Internet “Marco Civil da Internet” (Brazilian Civil Rights Framework for the Internet): Law nº. 12,965 provides Decrees/Regulations on topics such as net neutrality and privacy. Public Consultations will be launched involving the Comitê Gestor da Internet (CGI), MinCom and ANATEL Broadband “Programa Banda Larga para Todos” (Broadband for All) and review of PGMU (Universal Service goals): The President Dilma intends to launch a universal broadband program, with 90% of households connected at 25Mbps. Licensing “PL das Antenas” (SCD 293): Approved by the House of Representatives. Main points: simplification of licensing in environmental bodies and municipal governments; 60 days “positive silence”; right of passage in public lands. Exemptions Fistel (Law nº. 13.097/2014): Enacted on 20.01, by President Dilma Rousseff. FISTEL full exemption for Small Cells with power <5W and reduction to 10% with power <10W. REPNBL: Regulates tax exemption for Telecommunications Network Deployment. Update approved by Minicom on 01.14.2015, reducing the % of national technology. Regulatory evolution “Revisão do modelo de Concessão de STFC”: Asset reversibility and duration, Universal Service (Presidential Decree nº. 7.512/2011): possibly relieving voice universal service goals, changes in Law nº. 9.472/1997 (General Telecommunication Law), extending the concession beyond 2025. Spectrum 1,800 MHz Renewal: Anatel approved the renewal process for the 1,800 MHz band for an additional period of 15 years.
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- 36. 36 MOBILE BASE ANALYSIS 21.4% 23.4% 24.9%25.9% 42.0% 41.3% 38.6% 34.3%33.1% 25.8% 23.5% 25.0% 3.4% 8.9% 12.2% 13.4% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 4Q11 4Q12 4Q13 4Q14 30.9% 32.3% 17.0% 19.7% 41.1% 38.9% 11.0% 8.0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0% 4Q13 4Q14 Source: Anatel (most recent data available) 83% 65% 78% 82% 76% 17% 35% 22% 18% 24% TIM Vivo Oi Claro Industry Pre Post 3G 4G Market Share Net Adds Share Mobile Customer Base In 2014 Market Share per Technology 26.8% 26.7% 24.6% 25.4% 29.8% 28.9% 18.5% 17.8% 17,0% 19,0% 21,0% 23,0% 25,0% 27,0% 29,0% 1Q12 1Q13 1Q14 1Q15 Nextel Oi Claro TIM Vivo 36.6% 0.9% 14.2% 26.8% 37.7% 62.4% 11.5% 9.9% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 1Q12 1Q13 1Q14 1Q15
- 37. 37 MOBILE BASE BREAKDOWN PrepaidPostpaid Net Adds Share Net Adds Share 28,0% 28,5% 29,1% 29,3% 23,7% 25,0% 25,5% 26,2% 28,3% 26,7% 25,2% 24,8% 19,6% 19,4% 19,8% 19,3% 19,0% 21,0% 23,0% 25,0% 27,0% 29,0% 1Q12 1Q13 1Q14 1Q15 21,2% 20,7% 19,9% 18,7% 28,2% 25,5% 23,8% 22,9% 36,5% 37,1% 40,6% 41,6% 13,5% 15,9% 13,9% 13,2% 1,1% 2,6%0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 1Q12 1Q13 1Q14 1Q15 39,5% 47,3% 65,7% 14,5% 30,0%38,6% 70,0% 7,3% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 1Q12 1Q13 1Q14 1Q15 23,0% 12,3% 30,8% 12,8% 14,6% 33,3% 33,6% 30,9% 2,2% 18,8% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 1Q12 1Q13 1Q14 1Q15 Nextel Oi Claro TIM Vivo
- 38. 38 2Q14 3Q14 4Q141Q15 2Q15 WEB or SMS: R$ 0.60 > R$ 0.75 OFFER COMPETITIVE EVOLUTION Prepaid Postpaid Turbo 7: on- net calls + SMS + WEB Infinity Dia: R$ 0.75/day WEB + SMS: R$ 0.75>R$ 0.99/day Data Blockage Infinity per call: R$ 0.25 > R$ 0.30 Increase aggressiveness On-net minute tariff and SMS (R$ 0.06) Data Blockage (MG, RS) Data Blockage 0 cents local call SMS + WEB: R$ 0.99/day Claro Promo 3,6&7: on-net+ SMS+ WEB On-net + WEB + SMS R$ 0.99/day (SP) WEB or SMS: R$0.60 > R$0.75 Data Blockage Increase data allowance On-net calls: R$ 0.30/call On-net R$ 0.25/day SMS + WEB + Wi-Fi: R$0.99 or R$0.75 each On-net : R$0.50/day Data Blockage Bonus up to 300min/day and WEB to 10MB Liberty Express +40 and +120 with WEB and SMS WEB + SMS for R$ 12/mo for Controle Controle Whatsapp Plans with data and SMS included Plans with data included Increase monthly fees (+5%) Unlimited SMS off-net New plans with voice, WEB, SMS and LD Increase data allowance Controle monthly fees Increase data allowance Plans with LDN included Controle monthly fee and data allowance WEB or SMS: R$ 0.60 > R$ 0.75 each Data included New plans with data and SMS Increase data allowance 1,000 minutes M-F off-net local calls Web w/ Whatsapp Liberty Express W/ Whatsapp Liberty Express Fee: R$ 69.9 > R$ 74.9 mo Liberty W/ Whatsapp Controle Monthly fees Post Paid SMS: R$12 > R$20 Mo Price up
- 39. 39 59 36 26 74 96 95 45 5672 9 9 10 2006 2010 2014 188 196 203 167 mln119 mln BRAZIL’S SPECIFICS A D/E +1 +11 +22 -23 +16 -1 -10 MEN WOMEN Age 2020: 213 mln2010: 196 mln 0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 to 89 >90 10 105 50 Million +13 mln 2% 15% 83% More than 10 (>R$7,888) 2 to 10 ( R$1,576 - R$7,888) Up to 2 (<R$1,576) Minimum wage in 2015: R$788 Source: Census 2010 (IBGE) and IPC Target 2014 Source: IBGE Income Profile Population by Social Class (million people) B C Minimum Wage in Brazil (minimum wage; % of the pop.) Age Pyramid (million people) Brazil Facts 8.5% of Brazilian above 15 years are illiterate 30 mln people still live in the rural areas 5.8% of the cities accounts for 75% of GDP Brazil is in the 7th position in terms of GDP
- 40. 40 • Consensus expectsa deterioration in overall macroeconomic scenario on the short term • Market consensus shows a GDP recovery only in 2016 • Market expects government to push inflation above the upper limit of the inflation band • With inflation and FX Rate going up, SELIC is expected to keep at current levels and starts to drop only by 2016 Source: IBGE for actual figures and Central Bank Focus Report of February 6th, 2015 for estimated figures 6.20 6.30 8.00 5.80 4.50 2013a 2014a 2015e 2016e 10.00 11.75 13.25 11.50 2013a 2014a 2015a 2016e 2.36 2.66 3.25 3.30 2013a 2014 2015e 2016e 2.8 0.2 -1.0 1.2 -0.5 2013a 2014a 2015e 2016e Government’s Target Government projection Market Consensus GDP Forecast (% YoY growth) Inflation Forecast (IPCA: 12 months) Interest Rate Forecast (% Selic Target p.y. – year end) FX Rate Forecast (R$/U$ - end of period) MACRO SCENARIO OUTLOOK
- 41. 41 Cofins PIS/ PASEPICMS Fistel Fust/ FUNTEL TotalTotalFust/ FUNTEL PIS/ PASEP ICMSCofins Fistel 3% ~1% 28% ~5% 1.5% ~39% Taxation represents almost 40% of companies gross revenues Source: players Balance Sheet 1 Considers TIM, Telefonica, Oi and AMX 45.7 46.0 2012 2013 TAX BURDEN Tax Burden Composition % Gross Revenues Telecom Industry Tax Payments¹ (R$ bln)
- 42. 42 Short term TIM’s DebtComposition Price/Book Value Source: Bloomberg *Estimated 54.3% 59.4% 46.2% 1Q 2Q 3Q 4Q 2015 2014 2013 Long Term Price/Earnings Accounts Receivable Turnover (days) Payable Turnover (days) 12.8% 13.4% 11.9% 10.3% 8.7% 8.5% 10.5% 10.7% 8.4% 2012 2013 2014 10.8% 10.6% 10.3%10.1% 8.5% 11.2% 5.5% 9.9% 6.6% 2012 2013 2014 7.8% 7.4% 6.8%6.8% 5.6% 5.6% 4.6% 5.3% 4.6% 2012 2013 2014 TIM VIVO OIBR Market Average ROE (Net Income/Shrd. Equity) ROE (NOPAT/Total Asset)ROIC (NOPAT/Invested Capital) 49 45 45 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 1.5 1.4 1.4 1.2 1.1 0.2 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 13.5 14.6 7.1 14.1 13.9 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 132 171 193 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 BALANCE SHEET ANALYSIS
- 43. 43 QUARTERLY HISTORICAL DATA(R$ THOUSAND)
- 44. 44 ANNUAL HISTORICAL DATA(R$ THOUSAND)
- 45. 45 HISTORICAL DATA: OPERATIONAL Description2012 2013 2014 2015 (YTD) Brazilian Wireless Subscriber Base (000`s) 261,808 271,100 280,732 283,400 Estimated Total Penetration 132.8% 134.36% 138.0% 139.0% Municipalities Served (GSM) 3,383 3,404 3,433 3,439 Market Share 26.88% 27.09% 26.97% 26.73% Total Lines (000's) 70,376 73,431 75,721 75,749 Pre-paid Lines (000's) 59,658 61,146 63,212 62,735 Post-paid Lines (000's) 10,718 12,285 12,508 13,015 Gross Additions (000's) 38,408 39,627 39,097 9,350 Net Additions (000's) 6,293 3,055 2,289 29 Churn 47.5% 50.9% 49.6% -12.3% Total ARPU 19.1 18.6 17.7 16.7 Total MOU 136 148 136 120 SAC 29 28 27 31 Handsets Sold (000's) 10,227 12,511 11,951 1,968 CAPEX (R$ Mln) 3,765 3,871 6,854 924 Organic Capex¹ 3,400 3,871 3,932 924 Employees 11,650 12,167 12,860 12,785 ¹ Excludes license acquisiton
- 46. 46 Stock Performance (base100)* *Last price as of 03/31/2015 Source: Bloomberg STRUCTURE AND STOCK PERFORMANCE Shareholders Structure Treasury Shares: 795,888 (0.03%) Total Shares: 2,421,032,479
- 47. 47 Investor Relations Team Avenidadas 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 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 Statements