Company`s Presentation TIM Brasil

TIM Brasil
Company’s Presentation
Agenda
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
Available at:
o
Website: www.tim.com.br/ir
o
TIM IR App:
English
Portuguese
KNOWING TIM BETTER
TIM: A Huge Brazilian Company
GROWTH STRUCTURE
Gross Revenues
(R$ Bln)
Organic
Growth
1998
Growth
Via
Acquisition
29.6
Customer base
EoP (Million)
2013
1998
15,000 km fiber
optical backbone
73.9
 Presence in Brazil since 1998.
 16th largest Private Company in Brazil (source: Exame
Magazine - 2013).
1Q14
5,500 km fiber
optical backhauling
CORPORATE GOVERNANCE
 Approximately R$30 billion of Market Capitalization.
Sales
Highest level of
Requirement of
Corporate
protection for
Governance
minority
Demand for
transparency and shareholders
Legal
disclosures
Requirements
Network
Brazilian
Law
“Nível” 2
“Nível” 1
Unique Telco company listed on the Novo Mercado
 100% Tag Along
 Statutory Audit Committee:
 Equal dividends rights
•
Report to Board of Directors
 One single class of shares
•
Oversight Financial reporting
 Strict disclosure policy
•
Analyze anonymous complaints
Social
&
Economic

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$3.9 billion invested in 2013
KNOWING TIM
4
Macro & Industry Overview
MACRO SCENARIO OUTLOOK
Real GPD Forecast
Inflation Forecast
(% YoY Growth)
(IPCA: % YoY Growth)
3,20
2013a
6,25
5,90
6.3%
2,20
2.3%
2013a
5,40
1,80
2014e
2015e
2016e
2014e
11.9
8.2%
2013a
10.0
2014e
Source: BaCen
2015e
2016e
2.2
2,40
• Telecom industry has shown
resilience, specially in the
mobile side, but it is not
completely immune.
• Mobile sector will continue
to benefit from fixed-mobile
substitution, now also strong
on data.
(R$/U$ - year average)
(% Selic Target p.y. – year average)
10.9
2016e
FX Rate Forecast
Interest Rate Forecast
2013a
2015e
• Market consensus shows a
much softer growth.
2,50
2,20
2014e
2015e
2016e
MACRO & INDUSTRY OVERVIEW
6
BRAZILIAN TELCOS X-RAY
Oi
Vivo
Fixed
Fixed BB/TV
Mobile
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%
363
-
91
-1
Net Adds 1Q14 (000´s)
Net Revs (R$ Mln)
FY13
Net Revs (R$ Mln)
1Q14
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%
---
453
Net Adds 1Q14 (000´s)
Net Revs (R$ Mln)
FY13
Net Revs (R$ Mln)
1Q14
1.220
78
-4
3
1.297
9,290
19,132
28,422
---
---
---
Claro
Fixed
Fixed / Mobile
23,002
11,720
34,722
5,759
2,853
8,612
TIM
Mobile
Fixed / Mobile
Fixed BB/TV
Fixed BB
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers(000´s)
68.748
10.641
6.718
9.875
95.982
Customers (000´s)
73.916
Market share
25.1%
23.7%
30.4%
53.6%
---
Market share
27.0%
45
-
226
218
489
Net Adds 1Q14 (000´s)
Net Revs (R$ Mln)
FY13
Net Revs (R$ Mln)
1Q14
486
-
Net Adds 1Q14 (000´s)
Net Revs (R$ Mln)
FY13
Net Revs (R$ Mln)
1Q14
Source: Companies Releases
12,773
20,424
33,197
3,178
5,385
8,563
Mobile
Fixed
Fixed BB
Pay-TV
Group
662
75
n.d
74.653
1.5%
0.3%
n.d
---
15
n.d
501
19,264
657
4,561
141
19,921
MACRO & INDUSTRY OVERVIEW
7
MARKET STRUCTURE CHANGING TOWARDS
DATA USAGE
Re-visiting Market Structure
Households with internet connection and breakdown for
households without internet connection:
Households profile
With Telephone
57 mln
Only mobile phone
32 mln
Mobile and fixed phone
23 mln
Fixed phone only
2 mln
61.3 Mln
91%
51%
40%
24.5 mln
Possess
Internet
connection
37%
3%
53% of active connection base
has currently a speed below
2Mbps
(40%)
32%
11.8 mln
Purchase power
Salaries up to R$1.2k
81 mln
Salaries up to R$3.1k
106 mln
Other
53% of pop.
70% of pop.
Consumption
People that access
83 mln
Internet (10 years or +)
60%
36.8 mln
Does NOT
Possess
Internet
connection
Lack of
(60%)
coverage
Too
Expensive
49% of pop.
Total Households
Households with internet connection
24%
8.8 mln
44%
16.2 mln
Households which does NOT
possess
(%; CETIC jun’13)
Fixed
No
60%
Yes
40%
Mobile
74%
21%
24.3 mln of households
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Market Data Revenues Growth 2016 vs. 2012:

> 13 bln Reais on Mobile (+100%)

>7 bln Reais on Fixed (+35%)
MACRO & INDUSTRY OVERVIEW
8
BRAZILIAN INTERNET USAGE BOOM
Widespread use of Social Media
Internet Penetration in South America
(Internet users per 100 inhabitants)
66%
60%
59%
83 mln Internet users –
Brazil is the 5th largest
nation in the world of
internet users
56%
46%
Arg
Col
Chi
Uru
Bra
44%
Ecu
41%
Vem
37%
Per
32%
Guy
32%
Sur
30%
Bol
(Social Network Users in Brazil 2011-2017)
#2 in
Facebook
active users
(76mln) only
after US
22%
18%
18%
#2 in Twitter
users (41mln)
only after US
7%
104.2
56.1
2nd largest
market
outside US
2011
6%
110.0
88.3
78.3
66.2
24%
2012
2013
2014
2015
2016
2017
Par
High Penetration of E-commerce
Social media users
Strong adoption of Instant Messaging
(E-commerce revenues in Bln US$)
(WhatApp mln users)
465 mln in the
world
17.0
8.4
2012
France
Russia
Argentina
Amazon lauched
operations in Brazil
in Dec/12
11.0
2011
11%
97.8
% Growth YoY
2010
13%
UK
Spain
28% of mobile
users in Brazil use
Instant Messaging
apps
Germany
Mexico
Brazil
3
11
13
17
List of selected
selected
countries as of
Fev/14
25
31
32
38
India
40
Source: SocialBakers, e-Marketer, Semiocast, G1.com, Folha de São Paulo
MACRO & INDUSTRY OVERVIEW
9
LEVERAGING ON PURE MOBILE COMPETITIVE
ADVANTAGE
Customer Base Evolution
(Market Share)
1Q14 x 1Q11
Prepaid Leader
29.1% Market Share
-0.8 p.p
29.7%
Vivo 29.5%
Claro 25.4%
TIM
25.1%
Oi
19.7%
28.7%
26.8%
27.0%
25.1%
24.5%
18.5%
18.7%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
+1.9 p.p
2nd Overall
73.9 million customers
-0.3 p.p
-1.2 p.p
Long Distance Leader
50% Market Share
1Q14
Source: ANATEL
Voice FMS: TIM, with no legacies, can only gain on the trend
Entering in Data World Via Mobile
(R$ billion, Net Revenue per Group 2013)
(mln users)
Revenue Share
Total
34.7
Fixed+Data
11.7
+Pay Tv
Mobile
33.2
20.4
28.4
4.8
4.9
94.8
4% 4%
+23x
28%
16%
19.1
23.0
12.8
19.9
FMS
Focus
0.7
23%
4.8
33.1
26%
19,3
9,3
52.5
Mobile
Fixed
4.9
Vivo
Claro
Oi
TIM
GVT
Nextel
11.4
4.1
14.6
16.3
19.1
20.9
+83%
13.8
2009
2010
2011
2012
2013
Source: Companies Releases, TIM estimates; CETIC jun’13; Akamai ; PNAD - IBGE
A pure mobile approach is the most suitable strategy to capture both opportunities
MACRO & INDUSTRY OVERVIEW
10
PURE MOBILE STRATEGY PAYING OFF
Users’ Preference for Mobile
Low Fixed Broadband Quality
(%Households w/ mobile phones only)
(Brazil’s Average Speed; Source: Akamai)
49.7%
51.0%
4Q13
41.1%
2009
2011
2.7 Mbps
ANATEL: >78% of fixed broadband
connections are below 4Mbps
2012
Brazil Ranks 83th in Average
Speed per Country
Source: PNAD 2012
EBITDA
Net Revenues (% YoY)
(% YoY; Not including assets sales; Mobile as TIM)
Fixed
Incumbents
1,98%
-2,26%
-4,20%
Fixed
Incumbents
-2,03%
-8,93%
1Q12
1Q13
-9,68%
1Q12
1Q14
1Q13
13,26%
11,82%
Mobile
Mobile
1Q12
1Q14
3,64%
2,96%
1Q13
1Q14
7,64%
4,12%
1Q12
1Q13
1Q14
MACRO & INDUSTRY OVERVIEW
11
Recent Results: 1Q14
1ST QUARTER HIGHLIGHTS
Financial Results
Mobile Net Services Revenues (Δ% YoY)
Consolidated EBITDA (Δ% YoY)
Consolidated Net Income (Δ% YoY)
+1.4%
Business
Generated
Business
Received
+7.6%
+21.6%
372
1,317
(MTR mpact)
306
1,224
Incoming
VAS
Outgoing
(Long Distance
+ Usage)
EBITDA
Margin
1Q13
1Q14
26.0%
28.0%
EPS (R$)
1Q13
1Q14
0.13
0.15
-22.5%
+8.9%
Operational Results
%YoY
Customer Base
(mln; Δ% YoY)
Mobile Data Users Growth
(mln; Δ% YoY)
Mobile Payback Ratio
(SAC/ARPU in months)
+3.8%
Postpaid
71.2
10.9
73.9
12.2
+11.9%
27
Prepaid
60.3
61.7
1Q13
1Q14
+2.3%
22
1Q13
1.6x
1.6x
1Q13
1Q14
+20.1%
1Q14
RECENT RESULTS: 1Q14
13
QUALITY IMPROVEMENTS
Claims at Consumer’s
Protection Agency (Procon)
TIM: Claims at Anatel
over 1,000 lines
(in thds)
44.4
(#cities)
Total Complaints
Network Complaints
Avg. Market Complaints
TIM
other
45.5
TIM’s Quality Plan
0.42
599 cities
(Target for 2014)
0.42
320
26.8
25.9
0.37
213
0.31
25.5
15.0
12.1
10.3
0.05
53%
0.03
1Q14
1Q13
Source: SINDEC-Procon
1Q14
Note: Per economic group
 The least claimed within telcos
 Consistent performance in PROCON
1Q13
4Q13
1Q14
Source: ANATEL
 Reducing Anatel complaints in all fronts
 Network showing remarkable
improvements
Target
for 1Q14
2014e
Source: Company
 320 cities under the company’s quality
plan project in 1Q14
 53% of 2014 target achieved in the first
quarter
RECENT RESULTS: 1Q14
14
CUSTOMER BASE EVOLUTION
Customer Base
(mln)
1Q14 x 1Q13
76.0
Vivo 74.8
TIM
71.2
67.2
66.3
78.5
+3.3%
73.9
+3.8%

Leading market growth
+3.7%

#1 player in prepaid

#2 player in voice postpaid

Austere disconnection policy
68.7
Claro 61.6
+2.2%
49.5
Oi
50.6
46.5
1Q12
1Q13
1Q14
Source: ANATEL
Prepaid Recharge
Distribution Channel
(R$; YoY)
(YoY)
# Points of Sales:
Mass Channel
(retail)
Mix of Postpaid over
total base
+28%
16.5%
15.3%
+10%
1Q13
# of Own
Stores
1Q13
1Q14
+22%
1Q13
1Q14
1Q13
Source: Company
+121bps
Source: Company
1Q14
1Q14
Source: Company
RECENT RESULTS: 1Q14
15
DATA SERVICES AT A SOLID PACE
Users
Revenues
(R$ bln)
(# mln users)
25%
36%
21%
% of Gross Services
Revenues
% of Customer
Base
5.9
18%
31%
26%
73.9
5.8
71.2
5.5
Data Gross
Revenues
1.0
67.2
+24.6%
1Q12
1.2
+20.4%
1Q13
1.5
+ 39% YoY
Other VAS
services
Mobile
Data users
18
1Q14
Source: Company
Source: Company
+20.1%
22
1Q12
1Q13
27
1Q14
4G Market Share
3G Market Share
(%; mln users)
105 mln
42%
(%; thd users)
2.1 mln
47%
37%
41%
38.7
TIM
25%
23%
24%
23%
TIM
33%
26.6
25.4
858
676
21%
20%
15%
321
11%
223
12%
10%
13%
1Q13
+25.4%
2Q13
Source: ANATEL
3Q13
4Q13
1Q14
13.5
2Q13
3Q13
4Q13
1Q14
Source: ANATEL
RECENT RESULTS: 1Q14
16
LEVERAGING ON THE LARGEST COMMUNITY
Access via Mobile
TIM’s Customer Base Snapshot
Broadband Willingness to Pay
Huge data opportunity in-house
(% of Households)
Handset market share
(Mar/14)
73.9 million users
Open
Market
59% of HH: Up to
R$30/month
53%
36%
24% of HH: Up to
R$70/month
27 mln data users
36%
46mln potential data users
5% of HH: Up to
R$150/month
+31 mln untapped
market
Source: GFK Group
Innovative Services
Source: CETIC 2012
Device sales profile
P3
10%
Data Offers
Prepaid
P2
25%
42%
Source: Company
P1
29%
Operators
+15 mln with
data handset
21%
TIM
Postpaid
 Brazil’s largest digital music provider
 >32 mln songs downloaded
 TIM Chip for soccer fans: free content of soccer
 Notebook sales FY2014e: 8.5 mln
 Tablet sales FY2014e: 11.1 mln
 Smartphone sales FY2014e: 46.7 mln
teams
 Ensures safety of customer’s devices and
information
TIM Protect  Simple and reliable platform
 The newest communication app by TIM
 Provides
a
new
user
interface
far
all
communication
Source: IDC
RECENT RESULTS: 1Q14
17
MTR IMPACT ANALYSIS
MTR Cut Path
MTR Exposure
Avg. MTR
Price (R$)
-10%
2012
Net Services Revenues
EBITDA
~ 40%
0.36
~ 27%
-11%
2013
0.32
~ 20%
~ 14%
-25%
-33%
2014
0.24
2015e
0.16
1Q10
1Q11
1Q12
1Q13
1Q10
1Q14
1Q11
1Q12
1Q13
1Q14
MTR Impact
EBITDA
Mobile Service Net Revenues
+5.0%
Impact of
~ R$ 140 mln
+13.4%

MTR cut impact should be reduced
following lower exposure
1.22
+1.4%
1.39
+7.6%
1.32

Business generated (outgoing &
data) should offset MTR impact
1Q13
1Q14
1Q13
1Q14
Source: Company
RECENT RESULTS: 1Q14
18
FINANCIAL RESULTS ANALYSIS
Net Revenues
(R$ mln; % YoY)
EBITDA
Business Generated: +8.9% YoY
Business Received: -22.5% YoY
(+)Mobile: Efficiency
(-)Fixed: Repositioning/new brand
+8%
Thousands
0%
Service
Handset
+55
4,711
-42
-21
+0.3%
4,087
(R$ mln; % YoY)
4,702
4,100
+223
-12
-117
1,317
1,224
26.0%
EBITDA Margin
28.0%
30.7%
Service EBITDA Margin
33.2%
-3.4%
624
603
Revenue
1Q13
ΔYoY
Δ Mobile
Services
Δ Fixed
Services
+1.4%
-22.9%
Δ Handset
Revenue
1Q14
EBITDA
1Q13
-3.4%
Traffic/Data
ΔHandsets
ΔContribution Margin
ΔYoY
+7.0%
ΔOpex
EBITDA
1Q14
+6.1%
+37.0%
Net Income
Cash Flow & NFP
(R$ mln; % YoY)
(R$ mln)
1Q12
1Q13
1Q14
372
+21.6%
269
+13.9%
306
OFCF
-1,374
-1,571
Non OFCF
1Q13
1Q14
-265
-332
-230
-164
-1,458
-1,706
-1,735
(+) NFP BoP
-441
+151
+421
(=) NFP EoP
-1,899
-1,555
-1,314
Net Cash Flow
1Q12
-1,193
Δ Fistel
RECENT RESULTS: 1Q14
19
Network Evolution
STRATEGY: INFRASTRUCTURE EVOLUTION
Backhauling
Evolution
Increased Coverage and Access Capacity
(# new elements)
Fiber to the site / Mobile Broadband
Project Key to Data Growth
#NodeB / eNodeB
(3G + 4G)
 Targeting 38 cities in 2013,+100 cities till 2016.
 From 2-8 to +100 Mbps.
POP MW
POP MW
BSC-RNC Site
 LTE Ready.
95% urban
population
# BTS
(2G)
2013
POP MW
 Macro coverage fine tuning.
82% urban
population
2014
2015
2016
Capex Evolution Towards Data
POP MW POP MW
(% of total Capex)
 Focus on IP infrastructure, caching, peering.
Fiber base
Infrastructure
2013
INTELIG
2009
ACQUISITION
2013
FIBER TO THE
AMAZON
2016
MASSIVE LD
BACKBONE
2014
LTE*
2015
3G
2016
2G
Small Cell Approach
(# new elements)
INTELIG 15,000KM
46,000 KM OF FIBER
BY YE13
65,000 KM OF FIBER
New Sites
Including
Small Cell.
2012
2013
2014e
2015e
2016e
 New backbone routes- Increasing resilience.
NETWORK EVOLUTION
21
NETWORK IMPROVEMENTS
Investments
Average throughput analysis
where MBB is completed *
To
~ 2.1 Mbps
From
~ 800 Kbps
R$613 mln
Network Additions in the 1Q14
R$470 mln
 3G sites: + 111 in Q1 (total 9,185)
+ 30% YoY
 4G sites: + 208 in Q1 (total 2,133)
3G
 WiFi hotspots: +190 in Q1 (total 904)
2G
 MBB cities: + 14 in Q1
3G
1Q13
1,764
Number of Wi-Fi &
Small Cell
Number of 3G & 4G Sites
~14,000
714
~11,000
2G
4G
4G
1Q14

R$3.8 Billion in FY14e

R$613 mln in 1Q14

>94% in infrastructure
Fiber Infrastructure
2013
2014e
2013
2014e
~19,700 Km
~37,600 Km
Cities with mobile BB project
Number of sites with
fiber optic
100
=
+
+16x
39
Metro-Areas
1Q13
57,300 Km
in Fiber
1Q14
2013
Backbone
2014e
*According to TIM independent analysis of the NetMetrics Reports provided by Speedtest.net
NETWORK EVOLUTION
22
CAPEX ANALYSIS
Capex Evolution
Capex per Technology
(R$ mln)
(R$ mln)
2011
% over sales
4G
19%
3,871
2013
2014e
3G
2012
3,386
2011
18%
CAGR
11%
2,983
2010
3G
3G
17%
2G
20%
2,836
2G
Total
Capex
~R$3,800
R$2,983
Fiber to the site expansion to ~100 cities
Benchmark: Anatel Plan for 2012-2014
(R$ bln)
 Wi-Fi small cell approach
10.9
+31%
To Fiber based
From Copper
After FTTS
Own Fiber
(300 Mbps)
+98%
8.3
5.0
Before FTTS
+52%
7.2
3.5
2.6
5.5
3.4
5.9
4.8
4.6
Metro Ring
2.1
TIM
Copper
(2-8Mbps)
Claro
Actual from 2012 to Oct/13
Source:
5th monitoring
Vivo
Oi
Forecasted to Nov/13 until 2014 end
cycle of mobile telecom improvements plan released by Anatel on Feb/14
NETWORK EVOLUTION
23
4G Update
2500 MHZ
auction results
4G DETAILS
2500 MHZ rural coverage
obligations
4G Market Share on 2500Mhz
(%; thd users)
2.1 mln
47%
Paid ~R$0.3 bln
TIM
41%
V1 band
33%
Oi
Claro
Vivo
Paid ~R$0.3 bln
V2 band
W band
Paid ~R$0.8 bln
X band
Paid ~R$1 bln
21%
20%
Band W
15%
858
676
321
12%
11%
Band X
223
Band V1
2Q13
Band V2
4Q13
1Q14
Source: ANATEL
Spectrum
Characteristics
Roadmap
Presidential Decree Nº
5820/06
< 700 Mhz
Ordinance Nº 14/13
Premises to 700 Mhz
destination on the SMP
Rules to the Digital TV
migration
2006
3Q13
2012
2013
700 Mhz
850 Mhz
2015
2018
2100 Mhz
5800 Mhz
BTS Range (km)
ANATEL’s Resolution
Creation of a study group to
define the future and the
atribution of the band
2
0
4
8
6
10
Shutting down
Period
Feb/Apr 2013 - Subrange Atribution CP
Nov/13 Res. Nº 625/2013 – Atribution of the
Subrange
Numbers of BTS
20
15
10
7
5
2
4G UPDATE
25
700MHZ AUCTION
Auction Public Consultation
Res. Anatel 625/13
Nov/13
Bid notice
Interference Resolution
Digitalization Plan
Public consultation
bid and interference
Band allocation
Jan
Feb
Mar
Apr
May
Jun
Jul
Conclusion of the
Digitalization Plan
Aug
Sep
2018
2015

be auctioned in four blocks of 10 MHz + 10 MHz;
Expected date
for the Auction

Analog TV
switch off period
Interference tests
5
6
3
4
1
2
5
6
3
803 MHz
793 MHz
783 MHz
773 MHz
763 MHz
748 MHz
backhaul requirements;
738 MHz
728 MHz
718 MHz
708 MHz
2

Costs & Payment method
1

11
7
8
803 MHz
788 MHz
12
798 MHz
10
793 MHz
9
783 MHz
14
778 MHz
13
773 MHz
768 MHz
8
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;
Regional Blocks:
o Block 4 or 13 and 14
Represents 98% of the population, equals to national
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
License payment in up to six installments (36, 48, 60,
72, 84 and 96 months) preceded by a 10% down
763 MHz
7
748 MHz
743 MHz
12
738 MHz
18
11
733 MHz
718 MHz
17
10
728 MHz
713 MHz
9
723 MHz
708 MHz
14
16
Authorization for spectrum sharing in cities with pop.
<100k.
2nd Round: Cap of 20 + 20 MHz (in case of no bidders)
13
15
No additional obligations (“naked auction”), synergies
with 2.5GHz auction obligations will be subject to
1st Round: Cap of 10 + 10 MHz
4
Auction details
Format indicates soft competition: the spectrum will

Channel repositioning, filters, TV converter, and other
mitigation techniques will be subject to
reimbursement.
4G UPDATE
26
Fixed Business
FIXED BROADBAND: LIVE TIM
Accelerating Deployment
Addressable HH
Gross Adds
(000 HH)
(000 users)
Customer Base
(000 users)
75
1,138
+141%
609
18.3
7.6
1.5
sep/12
mar/14
100 neighborhoods:
1Q13
2Q13
3Q13
4Q13
1Q14
1Q13
1Q14

41 neighborhoods in SP

59 neighborhoods in RJ
Market Performance
Customer Satisfaction Survey*
Customer Base ARPU
UBB Market Share (SP + RJ)
(Source: TNS Institute Research)
(R$; CAGR %)
(connections >34Mbps)
P2
P1
General Satisfaction
7.1
TIM
8.7
7.5
+15%
Offer
Billing
7.6
Conection Quality
9.0
8.8
7.4
7.5
Others
61.1%
8.9
8.1
TIM
Fiber
39.9%
9.0
8.0
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Call Center
5.3
6.0
* From Dec/13 to Jan/14
7.4
7.0
8.0
8.3
9.0
Source: TNS Institute Research)
10.0
Feb/14
Source: Anatel
FIXED BUSINESS
28
INTELIG, NOW POSITIONED AS “TIM
SOLUÇÕES CORPORATIVAS”
The Opportunity Ahead
TIM’s Addressable market
Total
Voice
Data
VAS
20.8
7.7
7.6
8.8
9.2
24.4
22.7
21.5
7.8
7.7
10.9
9.8
4.3
4.7
5.2
5.7
2011
2012
2013e
2014e
Source: IDC Brazil ICT Business Service Database
…with considerable room to increase revenue share
CAGR 11-14
(Net service revenues of total addressable market*; R$ bln)
(% of fixed corporate market)
5.7%
TIM 2%
P5
35%
0.4%
7.4%
P2
14%
P4
21%
9.9%
P3
25%
P1
3%
*Companies with more than 100 employees
Business Remodeling Path
1
Market re-positioning
2
3
Geographic expansion
Net Revenues (with intercompany)
M
 Intelig now positioned as “TIM
Better financial performance
M
2014
2013
M
M
Soluções Corporativas”
M
 Re-structuring of sales force: multi
channel approach
 Re-designed service portfolio
Segment EBITDA-CAPEX
Expansion:
M
 2014: 7 new cities
A
+
A
-
 2015: 12 new cities
M
Source: Company
A
Actual
M
2014
2012
2013
2014
FIXED BUSINESS
29
Business Outlook
PERSPECTIVES
Solid results in 1Q14
Offer Innovation
 Business Generated: +8.9% YoY  EBITDA Margin: +200 bps YoY
 EBITDA: +7.6% YoY
 Net income: +21.6% YoY
Macro environment highlights
 Slower macroeconomic growth requires evolution of industry
approach
 Competitive landscape remains intense
 Regulatory environment:
 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$7 per 7 days all in:
o Upcoming 4G Auction
o New consumer regulation framework
 World Cup games: airports and stadiums coverage
o Wi-fi off loading at Maracanã: in recent test 25% of data
traffic were off-loaded
o Voice +
Web +
SMS
 4G included in all data package
Continued infrastructure focus
 Coverage densification: macro and micro coverage enlargement
 TIMmusic included in postpaid packages
 Resilience and network availability
 Network control (NOC) internalization completed:
o Monitored elements - more than: 12,000 sites, 70,000 km of
fiber, 900 IP network elements, 6,700 transmission
equipment and 1,300 MSANs
 Towers: analyzing opportunities to unlock hidden value
 Live TIM Extreme: new 1Gbps offer
 “TIM Soluções Corporativas” / “TIM Empresas” as renewed
positioning of fixed and mobile corporate solutions
BUSINESS OUTLOOK
31
OFFER EVOLUTION
Smart/Web phone Penetration
Voice MOU
(% over total base of lines)
(minutes)
>75%
>170
148
136
55%
43%
2012
2013
2012
2016
2013
2016e
Data Users
VAS Revenue Growth
(% of Data Users in CB; million users)
(% of Mobile Services Gross Revenues; R$ mln)
>50%
37%
30%
VAS/Revs.
18%
27.5
21.3
+xx%
+29%
+xx%
VAS
Gross
Revs.
2012
>40%
21%
2013
2016e
+22%
2012
2013
2016e
BUSINESS OUTLOOK
32
TIM PART: 2014-2016 GUIDANCE
Guidance
R$ million
18,764
19,921
2013-2016 CAGR:
Mid Single Digit Growth
Total Net Revenues
2012
2013
2014e
2015e
2016e
R$ million
5,012
EBITDA
2012
5,207
2013
2013-2016 CAGR:
Mid Single Digit Growth
2014e
2015e
2016e
R$ million
CAPEX
3,765
3,871
Infrastructure
3,139
3,487
Others/Licenses
626
384
2012
2013
Total CAPEX 2014-2016:
~R$11 billion*
2014e
2015e
2016e
*Does not consider 4G licenses (700Mhz).
BUSINESS OUTLOOK
33
Historical Data & Others
RECENT TOWERS DEALS
HISTORICAL DATA & OTHERS
35
HISTORICAL DATA: FINANCIALS (R$ 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
STRUCTURE AND STOCK PERFORMANCE
Telecom Italia
Stock Performance (base 100)*
100%
Telecom Italia International N.V.
100%
TIM Brasil Serv. e Part. S.A.
180
160
Minorities
ON: 33% (805,662,701)
ON: 67% (1,611,969,946)
140
120
100
80
60
40
TIM Participações S.A.
100%
TIM Celular S.A.
20
100%
0
Intelig
TIMP3
Ibovespa
HISTORICAL DATA & OTHERS
39
TELCOS’ TAX BURDEN & HIGH INVESTMENTS
Mobile Industry Tax Payments
Tax Burden Composition
(R$ Bln)
27.2
+70%
~5%
1,5%
~39%
16.3
28%
% Gross Revenues
2007
2012
Mobile Industry Investments
3%
~1%
Cofins
Cofins
PIS/PIS/
PASEP
PASEP
(R$ Bln)
ICMS
ICMS
Fistel
Fistel
Fust/
Fust/
FUNTEL
FUNTEL
Total
Total
10.1
20% of
Revenues
+60%
6.5
Taxation represents almost 40% of companies gross
revenues.
2007
2012
HISTORICAL DATA & OTHERS
40
SAFE HARBOR AND IR CONTACTS
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.
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 & IR CONTACT
41