conference call 4q11

Additional Note

The following financial and operational information, except where otherwise indicated, is presented g p , p , p

according to the IFRS (International Financial Reporting Standards) and in Reais (R$), pursuant to

B ili C t L Brazilian Corporate Law.

The comparison analysis refers to TIM stand-alone basis, excluding the effects of TIM Fibers’

acquisitions in Nov/11 - except when otherwise indicate

1

Agenda

Main Achievements - Luca Luciani

Operational Performance - Lorenzo Lindner

éMarketing Activities - Roger Solé

Fi i l Highlight Cl di ZFinancials Highlights - Claudio Zezza

Conclusion & Outlook Luca LucianiConclusion & Outlook– Luca Luciani

2

Main Achievements

Accelerating # 2 Player in Value and Volume (26.5% of market share on # lines, +130 Bps YoY)Customer Base +25 6% YoY ending 2011 at 64 1 million linesAccelerating

GrowthCustomer Base +25.6% YoY, ending 2011 at 64.1 million linesLeader in Incremental Market Share (33%) for the 2nd consecutive yearFastest growing mobile operator: Top line: +18% YoY and Service Revenues: +13%YoY

Improving Cash and Profitability

EBITDA: R$4.6Bln FY2011 (+10.4% YoY)EBITDA Margin: 27.1%EBIT: R$2.1 Bln FY2011 (+72.1% YoY)y

Voice revenues continue to grow at double digit, both in local and long distance calls

( )EBITDA-CAPEX: R$1.6Bln FY2011

“Voice is Good” &Data Take-Up

MOU at 129 min. in 2011 (+10.8% YoY)Data revenues fast accelerating: +41.3% FY2011 and +49.2% in Q4Web/Smartphone penetration at 27% of total lines (vs. 10% Dec’10)

Streghthening N t k

Increased 2G Capacity by 43% in 1 Year (+157k TRX installed)Coverage 3G at 67% urban population: 488 cities (502 at ending of January)Roll out of own transmission: 25k long distance back bone and 12k microwaves installed

3

Network Roll-out of own transmission: 25k long distance back-bone and 12k microwaves installedCapex at R$3.0bn – Reduced commercial investments and more allocation on network

Three Years in Few: Accelerating Growth and Profitability

13 1+18% Fastest

growing

Customer Base Expansion Revenues growth

R$ billionMillion lines

3X

64.151 0

17.114 5

4.79.9

13.1

0%+5%Net Revenues

Growth YoY

growing Company

Net Adds

20102009

+56%

CustomerBase

2011

51.041.1

2011

+25%

2009

Total Net Revenues

14.5

2010

13.7

Market share EBITDA , EBIT , EBITDA-CAPEX

R$ billion% of lines

20%

34% 33%

Incremental market

share26.5%

1.2

2.1

EBIT

4.1X

Leading growth for the

2nd year

1 641 36

R$ billion% of lines

0.5

Back to #2

Market

23.6%

25.1%

2009 2010 2011

0.80 2X

1.64

EBITDA-CAPEX

1.36

4

share

2009 2010 2011 EBITDA 4.64.23.5

Two Markets, One approach: Simplicity

“Internet for All”

Total Voice Traffic Volume(Billion of minutes)

Example: Infinity Web(Daily Internet unique users-Pre paid (Mln)) >15mln of

“Voice is Good”

Pushing the fixed mobile

2.7

9X62.5

86.7

2X 38.1

>15mln of unique users

per month(Pre+Pos)

fixed-mobile substitution

Dez 11Aug 10

0.3

2009 2010 2011

Voice Outgoing Gross Revenues(R$ Billion)

Gross Data Revenues +49%YoY data

Voice Revenues Data Revenues“Ride the simplicity”

+34%

13.4

11.3

10.0

(R$ Billion)

2.21.9 +67%

3.2(R$ Billion) growth in 4Q11

2009 2010 2011

10.0

2009 2010 2011

5

Leading the Voice Market with just 2 concepts: • Infinity (Pre): price per call; local and LD• Liberty (Pos): unlimited call; local and LD

Fast growing in VAS with just 2 concepts: • Infinity (Pre): unlimited browsing/messaging, per day• Liberty (Pos): unlimited browsing/messaging, per month

Network Evolution

2G CapacityTRX Total Brazil – installed in 2011Activations accumulative, 2011 Total TRX, ‘000

47,14750.000

157

11088 +43%

3G - Coverage

32%54%

67%

488

% urban population

coverage Of which TRX North and Northeast Brazil North and

010.00020.00030.00040.000 88

EoP 2010EoP 2009 EoP 2011

+25%

+43%

502 in jan’12

DecNovOctSepAugJulJunMayAprMarFebJan

# cities 57

210

Activations accumulative, 2011

57% 43%

Northeast

Rest ofBrazil

20,565

05.000

10.00015.00020.00025.000

2009 2010 2011

3G OverlayNode B – installed in 2011Activations accumulative, 2011

0

Total NodeB 6, 476

4 676

CAPEX


1,800

0

500

1,000

1,500

2,000


4,676

2,142

EoP 2011EoP 2010EoP 2009

+118%

+38%

As % ofNet sales

R$ Bln19.6

17.5

19.4

Radio transmission (MW)Total MW

12, 090

9,44116,000

24,800

Long Distance Fiber Backbonekm

Invest.

2.7 2.8 3.0

Invest. commercial

6

4,605

EoP 2011EoP 2010EoP 2009

+105%

+28%15.000,

201120102009

network

2010 20112009

Agenda






7

Customer Base Evolution

2011 vs. 2010Mln lines

8,79,3

51,0 52,855,5

59,2

64,1

+2 1+2.5

+4.1+1.8

+2.7+3.7

+4.9 +13.1

+1.8

6,2 6,2 6,3 6,5 6,67,0

7,27,5 7,7

8,0

36,1 37,8 39,6 41,1 42,444,4

46,9+1.7 +1.8 +1.5 +1.3 +2.1

P

29,9 31,6 33,3 34,7 35,8 37,5 39,743,6 45,1 47,5 50,6

54,8

,

Pre

Pos

+11.2

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Net AddsPre-paid

(000)

Net AddsPost-paid

87 1,687 1,687 1,354 1,103 1,716 2,242 3,838 1,598 3,0532,359 4,219

-393 41 86 149 150 341 280 243 223 632317 655

8

(000)

Market Share Improvements

Mln of linesMkt Share

Dec’1171 6

Total Mobile Market Post-paid Net Adds - Trailing 12 months

Mln of lines

29.5%

26.5%

24.9%60.3

61.3 62.6 64.0 66.2

68.6 71.6

55.5 58.2 60.2

64.1

51 6 52.9 53.9 56 8

58.4 60.4

Vivo

Claro

2.9

3.5

1.81.6

2.4

51.0 52.2 53.7

51.6 55.5 56.8

39.3 40.4 41.6 41.5 42.1 43.7 45.5

Claro

Oi

1.0

0.00.5

Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

18.8%

Dec/10 Feb/11 Apr/11 Jun/11 Aug/11 Oct/11 Dec/11

Net Market Share – Dec’11 Pre-paid Net Adds - Trailing 12 months

Vivo TIM Claro Oi

% of net adds

Vivo Claro Oi

Mln of lines

7.68.9

10.5

Dec’1126%43% 19% 13%

5.7

5.76.1

3.2

5.8

Vivo Claro Oi

FY2011

Dec 11

9

Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Vivo TIM Claro Oi

FY201129%33% 22% 16%

Postpaid growth: A sustainable business model

0 3

0.6 0.7Mln lines % Gross revenues,

2 00%

Customer Base Post-Paid Bad Debt and SAC/ARPU

0.20.3 0.3 0.2 0.2

0.3

6 96 7 24 7 48 7.70 8.02 8.65 9.31

Net Addition

Bad debt/Gross Rev

2.00% 1.83%1.34% 1.04% 0.77% 1.08% 0.95% 0.92%

3,12,6 2,3

CustomerBase

6.62 6.96 7.24 7.48 7.70

+24.4%YoY

SAC/ARPU

1,5 1,8 1,6 1,71,3

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q111Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

R$ Mln

Product Revenues and Capitalized SubsidyComplains/1.000 Bills

Anatel’s SMP 11 Indicator*$

380424 468 433

732 712664

GrossProductRevenues

p /

1.61

1 53

1.55

1 47

1.85

1.69

1.91

1.63 1.17 1.11

2011 Average: 1.45

286

115 8564 26 8 0 0 0

CapitalizedSubsidy

1.53 1.47

1.10

0.76

10

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11Jan'11 May'11 Sep'11 Dec’11

*Care relative to billing problems on 1,000 bills issued.

Agenda






11

ARPU stabilized quarterly

Post-paid

ARPU +4.7% -3.9%

QoQ%+1.0%

16.5 17.0 16.4 16.7

ARPM and ARPU

StabilizedARPM

R$ cents

Post paid

ARPU Pre and Post

stable+2.8% +0.8%QoQ%

+2.7%

20.8 21.6 21.2StabilizedR$ cents

ARPU

Generated*

21.9Pre-paid

1Q11 2Q11 4Q113Q11

Mix & EffectARPU1Q11 2Q11 3Q11

Received*

4Q11

Incoming Outgoing VAS

17%

13%

CB Mix:85% Pre 15% Post~5X

-10.9% -9.5%-13.5%YoY% -5.8%

ARPU stabilized on a quarterly basis12% 12%

Post Pre

Improving customer base mix1Q11 2Q11 4Q113Q11

ARPU stabilized on a quarterly basis

ARPU dilution limited to Post vs. Pre subscriber mix

FMS on voice and data growth contrast ARPU dilution

12*Generated: Voice Out Services & VAS; Received: Incoming Services

Net adds Post-paid/Total net adds

“Voice is Good”: Fixed-Mobile Substitution Accelerates

24 1

R$ cents/min

ARPM“Voice is Good”

Bln Minutes; Minutes

19.720.6

24.1

24.122.0

19.0 18.116.5 17.0 16.4 16.7

15

20

25

30Reshaping Portfolio… …Portfolio ReshapedTotal traffic

volume

126130

+5%+9%

127 131

22.4 +8%

0

5

10

Favorable seasonality

MOU In

MOU Out

14 14 13 13

112 113 117 119

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Post-paid Pre-paid

1Q11 2Q11 3Q11 4Q11

+3 1+4.2MoU

Liberty

MoUoutgoing

Infinity

+5% -1% +2%+3%+1%

Minutes; ‘000 Minutes; mln

+223 +317

+632+655

+1.6

+2.4

+3.1MoUoutgoing

Net Adds

Net Adds

+7%

13

1Q11 2Q11 3Q11 4Q11 1Q11 2Q11 3Q11 4Q11

Data solid take-up

Mln clients

Monthly unique users

Smartphone penetration and Infinity Web17.5+83%

% of handsets over total CB (lines); mln Pre paid users

0.6

2.7

Dec’11Jan’11

9.6

Daily internet

15%20%

27%

Post paid Pre paid

Handset sold - volume

Dec 11Jan 11a y te etunique users

8% 10%13% 15%

Sep'10 Dec'10 Mar'11 Jun'11 Sep'11 Dec'11 +64%

+83%

3,507

000 units, handset sales

+49% +10%

3 164

Smartphone/webphone

penetration

Web/Smart-

52%

1,915

28%

2,262

46%

1,383

69%

30%

2,8472,5893,164

2,125

68%

40%

14

Smart-phone

28%

1Q11

46%

1Q10

19% 30%

2Q112Q10 3Q113Q10 4Q114Q10

40%

Agenda






15

3 waves of growth

4 14.9

DataVoiceCustomer Base

129 131

Mln users Min, Billion minutes, Gross Revenue R$ Bln %, Gross Mobile Revenue, R$ Mln

1 7%

4Q % YoY 4Q % YoY 4Q % YoY

1.5

4.1

41.1

51.0

64.111.2

13.6

16.7

99

129 131

12.0

18.924.1

MoU

Net Adds 958

642

% Data Rev./Service Rev.

+19% +1.7%+310Bps

Total

+28%

3.13.7

2.8

GrossRevenues

(Voice

Customer Base

642489

Gross Data Revenues

(mobile)

+26% +49%+18%

Traffic

+11% +31%+24%

4Q09 4Q10 4Q11

Revenues

Q411Q410Q409Out)

Q411Q410Q409

+% 4Q YoY

Total Net Revenues

R$ Mln

3,571 3,926

4,688

4,237

+19.4%

+% 4Q YoY

+10%

4Q % YoY

Net Service Revenues

3,6273,4224,237

+16.8%DataTotal Traffic

Customer Base

+26% +28% +49%

+6%

16

Q409 Q411Q410

+26% +28% +49%

Community Expansion

Fixed-Mobile substitution

(Voice)

Internet for allStrategy

EBITDA and Efficiency

Commercial Activities & OthersEBITDA

R$ Mln R$ Mln; 4Q YoY %30.4 30.6 27 8 Reported: +8.7%

Taxes Impact (net adds +19%)

Volume and change in mix (Handsets net revenue +51%)

COGS +41.8%

Fistel +22.6%27.8

EBITDAMargin %

1,30526

145

1,0861,201

Excl. Subs. +11.0%

Q409 Q411Q410

Volume and change in mix (gross adds +27%)

Other Expenses

+416.1%

Commissioning +18.5%

Past years Tax expenses

EBITDA 9401.176

Full Year (R$ Bln)FY YoY

Bad DebtTraffic Profitability

R$ Mln %R$ Mln

Expenses (one time event 70 mln R$)EBITDA 3.5 4.2 4.6EBIT 0.5 1.2 2.1

( )+10.4%+72.1%

1.04%0.77%

1.08% 0.95% 0.92%

3 105 3 0613,294 3,435

3,655

R$ Mln, %

Gross Revenues

+17.7%

4Q % YoYR$ Mln

% Bad Debt/ Gross Rev.

Total Traffic (min)+27.6% YoY

-12 Bps

4Q % YoY

1,085 1,109 1,147 1,203 1,287

3,105 3,061Voice Out

Network costs

+18.7%

Bad Debt 58

42

66 61 62 +7.3%

17

4Q10 1Q11 2Q11 3Q11 4Q11 4Q10 1Q11 2Q11 3Q11 4Q11

Consistent EBITDA growth

EBITDA Evolution

+1 305

R$ MlnR$ Mln

From EBITDA to Net Income

+673

+1,305Net Revenue: +762 OPEX: - 658

+1,201

-202

+1,305

-176

-280

+66

-632+696

+673

+405

-96

,

30.6% 27.8%Ebitda Margin

Service Ebitda Margin35.5% 33.0%

-172

EBIT NetFinancialExpenses

Net Income 4Q11

Taxes andOthers

Depreciation/Amortization

EBITDA4Q11

ΔYoY

Ebitda 4Q10

Ebitda 4Q11

Δ Commercial

Expenses

Δ G&A + Other

Expenses

Δ Business Received

Δ NetworkΔ Business Generated + Handsets

ΔYoY +23.6% +6.8% +19.5% +18.7% +38.0% +8.7% ΔYoY +8.7% -7.9% +30.8% +69.0% -112.0% -78.5%

R$ Mln

Dividend Net incomeR$ Mln 2 212

6 2

1,435

1,285

$

Tax creditIntelig FxGain

Tax credit

+502%

+66%

$

+161%204497

5332,212

801

18

672

2009

129

2010 2011

1,285776

2010 20112009

Organic

Cash Generation

Net Debt – TIM + Nov-Dec TIM FiberOperational Free Cash Flow – TIM + Nov-Dec TIM Fiber

R$ Mln Ebitda +1,314Δ WC +1,012 Capex - 1,150

R$ Mln

1,458

Income TAX : - 94Financial Result: - 101Others : +37

+1,175

-1,150+1,012

+1,314+1,175

-158

441

Non-Oper FCFOper. FCF3Q11Net

Debt

4Q11Net

Debt

4Q11OFCF

CAPEXΔ WC4Q11 EBITDA

1.02 bln of Cash generation in 4Q11

Debt Debt% Net Revenue

27.9% 21.5% 24.4% 25.0%

% YoY +9.4% - 12.1% +4.5% + 6.1%

19

Agenda




Fi i l Highlight Cl di ZFinancials Highlights - Claudio Zezzaa

Conclusion & Outlook Luca LucianiConclusion & Outlook – Luca Luciani

20

2011 - Delivery on Promises

Q4 Results

Waves of Growth

+% 4Q YoY +16.8% YoYNet Serv. Rev.

DataTotal TrafficCustomer

Base

CB Expansion

+28% +49%

Community Expansion FMS (Voice) Internet for everybody

+26%

2011Guidance 2011 - 13

>25%

CB ExpansionMln lines

51.0 64.1

Total Net Serv Rev : +13%

26.5%Market

Share

Revenue

EBITDA 2011 > R$4.5bn

High Single Digit (+7/8%)

MOU increase

129 131Min/month

dec/10 dec/11Total Net Serv. Rev.: +13%

Total Net Revenues: +18%

> R$ 4.6bn

growth %

Profitability

(EBITDA)

3 Years CAPEX R$ 8.5bnSmartphone Penetrationdec/10 dec/11

~27%Smartphone, % CB

~ R$ 3.0bn in 2011CAPEX

21

OFCF: > R$ 6bn (’11-13)

10%

dec/10 dec/11

R$ 1.6bn in 2011EBITDA - CAPEX

Conclusions & Perspectives

Marketing repositioning accomplished

Fastest growing companyFastest growing company

Building a solid infrastructure

I i fil

2009-2011Conclusions Improving company profile:

− Acquisition of Intelig and Atimus

Hi h i i h i C G (N M d )

Conclusions

High commitment with superior Corporate Governance (Novo Mercado)

Brazil: big and attractive market

2012-2014

Mobile and Fixed: continuous reshaping of Telecom market (Voice FMS;

Mobile Internet take-up)

Perspectives Continuous growth pace (Customer Base, Revenues and Profitability)

Network evolution towards FTTS and advanced data architecture

22

Additional value creation: confirming the R$4.8bn from TIM Fiber