Download - Meeting with investors of november 2013
Meeting With Investors TIM Participações S.A.
November 2013
15th Listing Anniversary
TIM: A Huge Brazilian Company
Presence in Brazil since 1998.
13th largest Private Company in Brazil (source: Exame
Magazine - 2013).
Approximately R$22 billion of Market Capitalization.
Brazilian Law
“Lei das S.A”
“Nível” 1 “Nível” 2
Legal
Requirements
Demand for
transparency and
disclosures
Highest level of
Corporate
Governance
Requirement of
protection for
minority
shareholders
2
Corporate Governance
Knowing TIM Better
Unique Telco company listed on the Novo Mercado:
. 100% Tag Along and equal dividend rights
. One single class of shares
. Independent Board members
. Strict disclosure policy
• 72.9 million customers (27.2% Share)
• The 2nd Player - Market and Rev. Share.
• More than 400,000 points of sales.
• More than 130 own stores.
• 11 Customer Care Centers (14k attendants)
Sales
• More than 12,000 Antennas.
• ~3,400 cities covered.
• 95% of urban pop. covered.
• ~46,000 km of optical fiber network.
Network
• 11,800 employees.
• 23,000 indirect jobs.
• R$9.1 billion in taxes payments in 2012.
• R$3.8 billion invested in 2012.
Social
&
Economic
27.8
1998
Gross Revenues
(R$ Bln)
Customer base
EoP (Million)
2012 1998
70.3
2012
15,000 km fiber
optical backbone 5,500 km fiber
optical backhauling
Organic
Growth
Growth
Via
Acquisition
Real GDP Forecast
(%YoY Growth; Source: BaCen)
Macro Scenario: A Different Outlook
3
3,3
3.8 3.6
2,4 2,3 2,4 2,4
2013 2014 2015 2016
Old Scenario
New Scenario
Inflation Forecast
(IPCA - %YoY Growth; Source: BaCen)
5.5 5.5
5.0
5.8 6.0
5.5 5.4
2013 2014 2015 2016
Old Scenario
New Scenario
Interest Rate Forecast
(%Selic Target p.y. - Year average; Source: BaCen)
7.3 8.7 9.0 8.8
8.4
10.3 10.3 10.0
2013 2014 2015 2016
Market Consensus on Oct/12
Market Consensus on Oct/13
FX Rate Forecast
( R$/US$ - Year average; Source: BaCen)
2.0 2.0 2.0 2.1
2.2 2.3 2.4 2.4
2013 2014 2015 2016
Market Consensus on Oct/12
Market Consensus on Oct/13
• Market consensus shows
now a softer growth.
• 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.
Industry Overview & TIM Business Opportunity
TIM
(2S13)
Vivo
(2S13)
América Móvil Brazil
(2S13)
Oi
(2S13)
Fixed Mobile
Fixed Mobile Fixed BB/TV Fixed / Mobile
Brazil Telcos X-Ray
5
Fixed BB/TV Fixed / Mobile
Mobile Fixed Fixed
BB
TV TOTAL
Customers (‘000) 49,708 18,330 5,911 890 ND
Market Share 18.7% 41.1% 29.2% 5.2% ND
Net Rev. (R$ Mln) 4,571 9,543 14,114
Mobile Fixed Fixed
BB
TV TOTAL
Customers (‘000) 66,472 10,516 5,945 8,985 ND
Market Share 25.0% 22.7% 29.4% 53.0% ND
Net Rev. (R$ Mln) 6,121 9,914 16,035
Mobile Fixed Fixed
BB
TV TOTAL
Customers (‘000) 76,200 10,416 3,837 537 ND
Market Share 28.7% 23.3% 18.9% 3.2% ND
Net Rev. (R$ Mln) 11,177 5,870 17,047
Mobile Fixed Fixed
BB
TV TOTAL
Customers (‘000) 72,195 492 26 - ND
Market Share 27.2% 1.1% 0.1% - ND
Net Rev. (R$ Mln)* - - - - 9,699
Fixed BB
*Organic Revenue
Voice Revenues R$ Bln
Data Revenues
(R$ bln; Source: TIM)
Str
ate
gy/
Ob
jective
s
Very large voice market, although declining.
High price umbrella in Fixed services.
Customer migration to higher plans / hybrid and
postpaid.
Emerging data/internet user population.
Large unserved Internet demand.
Old Fixed networks legacy + bundle requirement.
Mobile as the natural vehicle for inclusion.
A. Continue to Explore Voice FMS B. Lead the Data/Internet Wave
Ma
rke
t
Mobile
Fixed
Voice Revenues R$ Bln
C. Manage Existing Customer Base
2.7 4.0 5.8 8.0
10.5
13.3 16.7
13.4 15.1 16.7 17.9 19.2 20.4 21.7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
… Massive Mobile Internet Access
Customer
Base
Expansion
Internet and
Data
For All FMS Customer Base Growth
* Excluded non recurrent and non-operational revenues (e.g.: towers sell)
The Opportunity in Brazil and TIM’s Strategic Positioning
Voice Revenues
(R$ bln; Source: TIM)
33.8 39.7
41.1 42.8 45.7 46.8 46.0*
39.9 41.2
40.4 38.4 36.4 34.1 32.3
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mobile
Fixed
6
-3%
-7%
+6%
+18%
Long Distance Leader
50% Market Share
2nd Overall
72.9 million customers
Prepaid Leader
28.8% Market Share
Leveraging on Pure Mobile Competitive Advantage
Voice FMS: Mobile is more convenient than Fixed…
(R$/minute, % over households with phones.)
7
2006 2007 2008 2009 2010 2011 2012
50% mobile
discount
Voice FMS: …TIM, with no legacies, can only gain on the trend
(R$ billion, Net Revenue per Group (2012))
Source: Company estimates; CETIC jun’13; Akamai ; PNAD - IBGE
Mobile 21.4
12.2 9.1 17.9
Fixed + Data + Pay TV
12.5
18.5 19.0
0.9
4.3
Total 33.9 30.7 28.1 18.8 4.3
Vivo Claro Oi TIM GVT
FMS
Focus
A pure mobile approach is the most suitable strategy to capture both opportunities
29.5%
Rev. Share
Customer Base Evolution
(Market Share, Source: Anatel)
30,1% 28,6%
24,5%
27,2% 25,5%
25,1%
19,5% 18,6%
3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
Oi
Claro
Vivo
+2.7p.p.
-1.6 p.p.
-0.3 p.p.
-0.9 p.p.
3Q13 x 3Q10
TIM
48,9% 56,3%
2009 2012
% of households w/
mobile phones only
Fixed Broadband Average Speed
(% Customers)
Brazilian Internet Opportunities
75% 72% 60% 67% 66%
24% 26% 38% 31% 31%
1% 1% 1% 2% 3%
2Q12 3Q12 4Q12 1Q13 2Q13
> 12Mbps
>2 Mbps até 12Mbps
≤ 2 Mbps
88% 84% 80% 78% 76%
8% 10% 14% 16% 17%
5% 6% 6% 6% 7%
2Q12 3Q12 4Q12 1Q13 2Q13
> 12Mbps
>2 Mbps até 12Mbps
≤ 2 Mbps
49% 44% 41% 38% 35%
49% 53% 56% 59% 62%
3% 3% 3% 3% 3%
2Q12 3Q12 4Q12 1Q13 2Q13
> 12Mbps
>2 Mbps até 12Mbps
≤ 2 Mbps 1% 1% 1% 1% 1%
59% 57% 55% 52% 49%
40% 42% 44% 47% 50%
2Q12 3Q12 4Q12 1Q13 2Q13
> 12Mbps
>2 Mbps até 12Mbps
≤ 2 Mbps
8
TIM`s services portfolio is ready to capture
opportunities in all broadband segments,
going mobile or going through its fixed ultra
broadband.
Pure Mobile Strategy Paying Off
9
Users’ Preference for Mobile
(%Households w/ mobile phones only)
Net Revenues
(% YoY)
EBITDA
(% YoY; Not including assets sales; Mobile as TIM)
Low Fixed Broadband Quality
( Brazil’s Average Speed; Source: Akamai)
Entering in Data World Via Mobile
(Mln users; Source: Anatel)
Fixed
Incumbents
Mobile
48,9% 56,3%
2009 2012
2Q13 2.4 Mbps
ANATEL: >50% of fixed broadband
connections are below 2Mbps
Mobile
Fixed 4,1
14,6
33,2
52,5
77,9
11,4
13,8
16,3 19 20,2
2009 2010 2011 2012 Aug/13
+18x
+77%
-7,0% -6,1%
-2,6%
3Q11 3Q12 3Q13
-6,2% -4,3%
-14,1%
3Q11 3Q12 3Q13
11,6%
7,1% 6,9%
3Q11 3Q12 3Q13
11,7%
3,9% 4,2%
3Q11 3Q12 3Q13
Fixed
Incumbents
Mobile
TIM’s Strategic Priorities
10
Network Quality
& Infrastructure 1
Strategy &
Offer Evolution 2
Institutional
Relationships 3
People &
Organization 4
Solid Capex investment program.
Significant coverage and capacity improvement through
extensive own fiber infrastructure.
Network Quality War Room approach.
Efficient 4G Investment with RAN sharing.
Continuous evolution of our offer platforms
(transparency, simplicity, convenience, micro-
segmentation).
Promoting data usage with handset strategy, new VAS
offers (e.g. TIMmusic) and 4G launch.
Expanding postpaid and business user base.
Developing option value of Live TIM ultra-broadband
services.
External Positioning: Innovation, Quality, Transparency.
“Portas Abertas” customer portal for increased
transparency and network quality evolution.
Focus on regulatory and institutional dialogue.
People Focus – highly skilled, highly motivated, right
organization.
Best Place to Work initiatives.
Renewing Sense of Pride and Belonging – One of
Brazil’s Top 15 Companies.
Recent Results: 3Q13 in Few
A Quarter in Few
12
Operational
Total Revenues
− Service
− VAS*
− Handset
EBITDA
CAPEX
3Q13 YoY 6M13 YoY
5,083 7.6% 9,655 7.1%
4,207 2.6% 8,152 1.9%
876 40.9% 1,503 47.9%
1,252 4.2% 2,456 3.0%
R$ Million
3Q13 YoY 6M13 YoY
Postpaid (mln users)
MOU (min)
ARPU
11.9 16.4% 11.4 13.9%
150 8.4% 146 15.1%
R$ 18.6 -1.6% R$ 18.3 -2.2%
Financial
1,175 52.3% 1,593 -0.4%
1,362 21.5% 2,377 25.0%
*Mobile Gross Revenue
4G Update…
(Lines; Market Share; Source: Anatel)
Customer Base Evolution
(Million lines; Source: Anatel; TIM)
Operational Performance (1/2): Base Evolution & Quality Indicators
13
59.1 59.6 60.3 60.8 61.0
10.3 10.7 10.9 11.4 11.9
Pre
Paid
Post
Paid
4Q12
70.3
3Q12
69.4
1Q13 2Q13 3Q13
71.2 72.2 72.9
D% YoY
+16%
+3%
+5%
May/13 Jun/13 Jul/13 Aug/13
Prudent strategy in the auction &
efficient roll-out paying-off
2,961
4,518
2,722
3,801
7,192 7,075
4,176
6,692
3Q12 4Q12 1Q13 2Q13 3Q13
P1 P3 P4 TIM
94.9
93.0
76.1
62.6
Jun-12 Oct-12 Feb-13 Jun-13
Anatel IDA - Index of Caring Performance Claims at Consumer’s Protection
Agency (SINDEC - Procon)
Customer Care Performance
(Points; Complaints over 1000 lines; Average monthly claims. Source: Anatel (last reported); SINDEC)
0.2
0.3
0.2 0.3
0.3
0.4 0.5
0.7
Jun-12 Oct-12 Feb-13 Jun-13
Anatel Complaints
Mix of Post Paid
(%; Source: Anatel)
14.8%
16.4%
3Q12
3Q13
99.9
98.0
92.8
84.9
23% 20%
26%
29%
Market Share
29%
SAC* & SAC/ARPU
(R$/gross adds; months)
Operational Performance (2/2): Strong Efficiency
14
Gross Additions
(Million lines; Source: TIM)
8.7
10.2
3Q12 3Q13
+17%
Bad Debt
(R$ Million; % of Gross Revs.)
33.6
30.5
3Q12 3Q13
-9% 80
56
3Q12 3Q13
-31%
1.1% 0.7%
Commercial
Network
SAC
(R$)
SAC/
ARPU
(months)
Total Traffic
(Bln minutes)
28.7
32.8
3Q12 3Q13
+14%
1.8 1.6
Leased Lines Costs
(R$ million)
3Q12 3Q13
0%
*Subscriber Acquisition Cost
% of
Gross
Revs.
Bad
Debt
Marketing: Keeping the Innovative Approach
Chip Torcedor
TIM SIM blister for each
team.
Increase Stickiness
14 Teams alread
sponsored
15
Liberty Controle Express
Pushing on Postpaid migration
Payment via credit card
jan/13 sep/13
~7x
+56%
sep/12 sep/13
Young
Young segment positioning
Member get member through
social network since 2010.
Nonstop
Innovation
Recent
Past
VOICE DATA
Recarga Troco International LD Infinity Web + SMS TIM Music
Talk unlimited on-net for
R$2 for 2 days.
Capture extra “charge”.
Leveraging on micro
recharge on physical
PoS.
Up selling approach,
targeting only customer
base.
US:R$0,20/min.
+ 8 countries: R$0,50/min
FMS initiative.
Capturing the unexplored
mobile international calls
market.
Market attended Today
through fixed carries.
Internet + unlimited SMS
on/off-net.
Pay per day.
Combining Web and
SMS offers.
Cross selling WEB and
SMS .
Unlimited download.
Pay R$0.50/day.
Over the top service.
Increase customer
stickiness.
Network friendly.
13 million songs already
downloaded.
1,122
1,362
3Q12 3Q13
39% 43%
46% 50%
52%
3Q12 4Q12 1Q13 2Q13 Jul 13
Marketing: Smartphone Supporting Data Growth
Data Users
(% of Data Users in CB; million users)
VAS Revenue Growth
(% of Mobile Services Gross Revenues; R$ Million)
Smartphone Sales
(% total handset sale)
19% 23%
Smart/Web phone Penetration
(% over total base of lines)
VAS
Gross
Revs.
VAS/Revs.
67%
57%
46%
46%
42%
13%
21%
24%
19%
30%
21%
22%
30%
35%
28%
3Q13
2Q13
1Q13
4Q12
3Q12
Smartphone Webphone Essencial
+22%
16
Smartphone approach to support
data usage growth.
EBITDA neutral. No subsidy Policy!
Leadership position in market of
handset (3Q13)
39% market share of
smartphones sold
19.9 24.5
3Q12 3Q13
29% 34%
+23%
Launching entry-level 3G tablet
46% Notebook
36% Tablets
17% Desktop
44%
56%
2010 2012 2014 2016
Devices Share at Sales
Financials: Evolution Analysis
1,201
EBITDA
3Q12
EBITDA
3Q13
+10
ΔMkt
and Sales
ΔPers./G&A
and others
-97
ΔHandset
Margin
-6
ΔNetwork
and ITX
+38
ΔServ.
Revs
25.4% 25.3%
31.0% 31.5%
+107
+10.4% +1.2% -55.2% -0.7% +2.6% ΔYoY
+4.2%
622 876
4,100 4,207
Tho
usa
nd
s
Revenue
3Q12
Δ Handset Δ Fixed
Services
Revenue
3Q13
Δ Mobile
Services
+254 -45 +151
Service
Handset
4,722
-22.3% +3.9% ΔYoY
5,083
1,252
24.6%
30.5%
17
+40.9%
+2.6% EBITDA Margin
Service EBITDA Margin
EBIT Net Financial
Result
Net Income
9M13
Taxes and
Others
Depreciation/
Amortization
EBITDA
9M13
From EBITDA to Net Income
(R$ Million)
ΔYoY +2.2% +4.9% +48% -1.9% +2.1%
3,708 -2,045
1,663 -202 -454
1,007
Net Revenue Evolution
(R$ Million, % YoY)
EBITDA Analysis
(R$ Million)
+7.6%
+40.9%
+3.4%
3Q13:
R$315 mln
-15.6% YoY
624
843
1,314
Financial Position
Capex
(R$ Mln)
D Working Capital
(R$ Mln)
853 772
1,175
252
923
3Q11 3Q12 3Q13
320 413
3Q11 3Q12 3Q13
987
18
OFCF
(R$ Mln)
Net Debt
(R$ Mln)
3Q11 3Q12 3Q13
3Q11 3Q12 3Q13
Net DEBT /
EBITDA
(trailing 12m)
0.32 0.29 0.28
D OFCF YoY: +R$471
~94% in
infrastructure
+29%
+139%
+52%
-10%
+35%
+56%
1,458 1,550
252 LT Amazonas
1,446
1,194
LT Amazonas
Network and Infrastructure
Network Check Point: Mobile BB Plan & Backhauling
20
POP MW
POP MW POP MW
POP MW
BSC-RNC Site
POP MW
Key Steps for Improvement: MBB/FTTS Project
Own fiber reaching ~85% of antennas at major
cities.
Targeting 38 main cities till year end.
FTTS: From 2-8 Mbps link to +100 Mbps.
Caching, Peering, Web Acceleration.
Macro coverage fine tuning for mobile
broadband.
574
2,394
979
1,660
Apr/13 Sep/13
4x
Downlink throughput (Kbps)
TIM
Market Average
Backhauling
Evolution
Results for Recife
Our 1st out of 38 cities
Source: TIM MBB (HSPA+ DC) 3G (HSPA)
Q2 Q3
MBB Coverage
Network Check Point: Backbone Evolution
21
2016 MASSIVE LD
BACKBONE
65,000 KM of FIBER
2013 FIBER TO THE
AMAZON
46,000 KM of FIBER
By YE13
2011 ATIMUS ACQUISITION
RJ & SP
20,500 KM of FIBER
2009 INTELIG
ACQUISITION
+ 15,000 KM of FIBER
98-08 PURE MOBILE
INFRASTRUCTURE
0 KM of FIBER
Fiber
Timeline
HLR
Resiliency
Macapá
Tucuruí Manaus
Jurupari Fortaleza
Maceió
Salvador
Vitória
Rio de Janeiro São Paulo
Florianópolis
Porto Alegre Santa Maria
Curitiba Umuarama
Campo Grande
Cuiabá Brasília
Rib. Preto
Porto Velho
Boa Vista
Belém
Goiânia Rondonópolis
Belo Horizonte
Existing network
Network in construction
LT Amazonas network
~R$200 million
27 cities
1,757 km
Capacity:
75 x 100 Gbps
Project Details:
Amazon Fiber
Backbone
Increasing
number of HLR
Centrals.
From 3 to 8.
11.607
12.120
Jun/12 Jun/13
Network Commitments
22
Network Elements Expansion…
(units. Source: Company)
…Driving Quality Improvements
(% of success; % of call/data connection drop; Source: Anatel)
181
215
Jun/12 Jun/13
250
464
Jun/12 Jun/13
BTS TRX
(Voice Capacity; 000)
Channel Elements
(Data Capacity; 000)
95,7%
97,1%
Aug/12 Apr/13
Voice Network Access Rate Voice Network Drop Rate Data Network Access Rate Data Network Disconnection Rate
+4% +19% +86%
Target agreed w/ Anatel
1,3% 1,1%
Aug/12 Apr/13
95,9% 96,0%
Aug/12 Apr/13
1,5% 1,7%
Aug/12 Apr/13
95%
2%
98%
5%
Capex Analysis
23
Organic Capex (ex-4G licenses)
(Capex/Sales; Mix of Investments; R$ bln)
9,5 8,3
7,2 5,5
0.4
TIM Claro Vivo Oi
Benchmark: Anatel Plan for 2012-2014
(R$ Bln)
Owned Network Deployment….
(% of total transport network)
9.9 2012 Extra
Capex over
Anatel Plan +20% +39%
2012-2014 Capex
… Driving Network Opex Savings
(% YoY)
+81%
14,0%
5.0% 0,0%
Total Traffic Customer Base Leased LinesCosts
Q3 2013
52% 48%
Owned Rented
80%
20%
2009 2012
0.5 0.3 0.2
2.3 2.7 3.1
2010 2011 2012 2013e
19,6% 18,0% 18,0%
Infra
Invest.
As % of Net Revs.
Other
Invest.
2.8 3.0
3.4 3.6
Voice
Postpaid
+23% YoY
Live TIM
Live TIM: Maintaining the High Speed Mode
257
522
609
804 881
3Q12 4Q12 1Q13 2Q13 3Q13
Network Evolution
(000 Addressable Households ; Source: TIM)
Net Adds
(000 Clients; Source: TIM)
1Q13 2Q13
Customer Base
(000 Clients; Source: Anatel)
1.6
9.7
16.3
26.4
42.6
4Q12 1Q13 2Q13
Market Share SP+RJ (August)
(UBB >34MB ; Source: Anatel)
25
38 neighborhoods in SP
34 neighborhoods in Rio
3Q13 3Q12 3Q13 3Q12 4Q12
Accelerating sales and
improving ARPU;
Taking the lead as #1
challenger in Rio and São Paulo;
Reference as UBB service
provider ( >50% net share).
LIVE TIM
48.5%
OI 7.8%
NET 8.9%
VIVO 22.0%
GVT 7.1%
OTHER5.6%
Clients highly satisfied
13.3x
1.2
8.1 6.6
10.1
16.2
8,3
9,0
9,1
8,7
7,7
6,9
7,2
8,0
7,5
6,6
7,3
7,5
8,0
7,9
6,9
General Satisfaction
Bill
Conection Quality
Phone Attending
Offer
Clients highly satisfied
Source: TNS Market Research
6.0 7.0 8.0 9.0 10.0
P1 P2 TIM
Business Outlook
Where We Are: TIM 2013 Year-to-Date Results
27
Operational
Total Revenues
− Service
− VAS*
− Handset
EBITDA
CAPEX
9M13 YoY
14,738 7.3%
12,359 2.1%
2,379 45.2%
3,708 3.4%
R$ Million
9M13 YoY
Postpaid (mln users)
MOU (min)
ARPU
11.9 16.4%
147 12.7%
R$ 18.4 -2.0%
Financial
2,769 +16.8%
3,899 23.7%
• Consistent financial and operational
results even amidst a different macro
scenario
• Continuous growth/acceleration on
postpaid, improving customer base
mix, ARPU evolution.
• Maintaining data services at double
digit growth, underscored by
smartphone sales and innovative
offers.
• Solid improvement on Network and
Quality indicators.
• Executing Fiber-to-the-Site (FTTS)
project and 3G/4G roll-out,
guaranteeing mobile broadband
acceleration.
• Strong efficiency: Industry benchmark
for SAC and bad debt.
• Strong savings on leased lines costs,
even with traffic double digit growth.
Reported figures for TIM Part.
*Gross Mobile Revenues
Strategy: Infrastructure Evolution
28
2016 MASSIVE LD
BACKBONE
65,000 KM OF FIBER
2013 FIBER TO THE
AMAZON
46,000 KM OF FIBER
BY YE13
Fiber to the site / Mobile Broadband
Project Key to Data Growth
Targeting 38 cities in 2013,+100 cities till 2016.
From 2-8 to +100 Mbps.
LTE Ready.
Macro coverage fine tuning.
Focus on IP infrastructure, caching, peering.
Backhauling
Evolution
Fiber base
Infrastructure
INTELIG 15,000KM
2009 INTELIG
ACQUISITION
New backbone routes- Increasing resilience.
Increased Coverage and Access Capacity
# new elements
82% urban
population
2013 2014 2015 2016
95% urban
population
#NodeB / eNodeB
(3G + 4G)
# BTS
(2G)
2012 2013e 2014e 2015e 2016e
Small Cell Approach
# new elements
New Sites.
Including
Small Cell.
POP MW
POP MW POP MW
POP MW
BSC-RNC Site
POP MW
Capex Evolution Towards Data
% of total Capex
2013 2014 2015 2016
LTE* 3G 2G
*Includes 2.5GHz RAN Sharing.
Offer Evolution
43%
52%
>75%
2012 Jul 13 2016e
Smart/Web phone Penetration
(% over total base of lines)
136 150
>170
2012 3Q13 2016e
Voice MOU
(Minutes)
2012 2013e 2016e
Data Users
(% of Data Users in CB; million users)
VAS Revenue Growth
(% of Mobile Services Gross Revenues; R$ Million)
21% 23%
>40%
VAS
Gross
Revs.
VAS/Revs.
+XX% 21.3
24.5
2012 3Q13 2016e
29% 34% >50%
+15% XX%
+XX%
Innovative
Offers Driving
Growth and
Differentiation
29
2012 2013e 2014e 2015e 2016e
LIVE TIM 48.5%
OI 7.8%
NET 8.9%
VIVO 22.0%
GVT 7.1% OTHER5.6%
INT
EL
IG
BU
SIN
ES
S S
TA
BIL
IZA
TIO
N
AN
D R
EC
OV
ER
Y
Fixed Business Evolution
• Focus on value, selecting high margin
customers.
• Selective approach focused on high potential
verticals: Finance, ISP (data), Call Center
(voice).
• Network ready to retake sales.
• Increasing addressable market with mobile
synergy approach.
• Optimize investment leveraging on multi
service networks.
• Leading the market share for speed above
34Mbps (ultra BB offers).
• Leveraging fiber assets in SP and RJ with
reduced investment and efficient approach.
• Good potential at SME segment.
• Strong support to mobile business w/ small cell
backhauling.
TIM
FIB
ER
S
usta
inab
le G
row
th M
od
e
EBITDA: Inflection Point
Top Line: Recovery Path
2012 2013e 2014e 2015e 2016e
30
522 881
2012 3Q13 2016
Addressable Households ´000
UBB Market Share RJ/SP (Aug13) >34 Mbps download speed
TIM Part: 2014-2016 Guidance
31
Total Net Revenues
EBITDA
CAPEX
18,8
2012 2013e 2014e 2015e 2016e
5
2012 2013e 2014e 2015e 2016e
R$ billion
R$ billion
0,5
3,2
2012 2013e 2014e 2015e 2016e
R$ billion
Infrastructure
Others/Licenses
3.8
Guidance
2013-2016 CAGR:
Mid Single Digit Growth
2013-2016 CAGR:
Mid Single Digit Growth
Total CAPEX 2014-2016:
~R$11 billion*
*Does not consider 4G licenses (700Mhz).
Appendix
Total Customer Base
(% Market Share)
Market Share Evolution
33
29,7% 28,6%
26,8% 27,2%
24,5% 25,1%
18,7% 18,6%
P3
P4
P1
TIM
2012 Mobile Net Revenue Share
(% 2012Total Net Revenue)
Total Voice Postpaid Customer Base
(% Market Share)
38,4% 39,8%
22,8%
24,1% 22,0%
20,0%
16,1% 16,0%
P3
P4
P1
TIM
Total Prepaid Customer Base
(% Market Share)
28,0%
25,8% 28,1%
28,8%
24,1% 25,3%
19,5% 19,7%
P3
P4
P1
TIM
Size: 268,270 thousand
Penetration rate: 135.3%
20,2%
29,5% 35,3%
15,0% P3
P4
P1 TIM
Internet Users Penetration: large room for growth...
(% population who has used internet within the last 3 months)
Mobile Internet and Its Great Business Opportunity
FMS on Data
(% over households with internet connection)
34
89 86 81 80 74
1 3 10
17 21
2008 2009 2010 2011 2012
Mobile Devices are also increasing its presence…
(% Presence over households)
Source: CETIC jun’13; Data Market
Fixed*
Mobile
*Includes dial-up connection
10 14
23
41
50
2 4
2008 2009 2010 2011 2012
34 39 41
46 49
2008 2009 2010 2011 2012
A: 94%
B: 80%
C: 47%
DE: 14%
68 mln
people
never used
internet
…and usage is 4 years behind
(% internet users within the last 3 months)
53 58 60
67 69
35 30 30
24 23
10 9 9 7 7
2008 2009 2010 2011 2012
Everyday/Almost Everyday
At least once a week
At least once a month
Euro Area data in
2008:
Everyday: 70%
Once a Week: 20%
Once a Month: 7%
Social Class Split
Notebooks
Tablets
Market Data Revenues Growth 2016 vs. 2012:
>13 bln Reais on Mobile (+100%)
>7 bln Reais on Fixed (+35%)
Source: CETIC´13
Still Increasing Internet Penetration and Data Market
60% 36.8 mln
40% 24.5 mln
44% 16.2 mln
24% 8.8 mln
32% 11.8 mln
(40%)
(60%)
61.3 Mln
Possess
Internet
connection
Does NOT
Possess
Internet
connection
Other
Lack of
coverage
Too
Expensive
53% of active connection
base has currently a
speed below 2Mbps
71%
65%
59%
48%
39%
24%
18%
12%
5%
2%
1%
1%
R$ 10
R$ 20
R$ 30
R$ 40
R$ 50
R$ 70
R$ 80
R$ 100
R$ 150
R$ 200
R$ 250
> R$ 250
Willingness to pay (% of Households)
Total Households Households which does
NOT possess
CA
BL
E
FT
TH
AD
SL
VD
SL
M
BB
35
Understanding Internet Usage Trends
Going deeper into wireless penetration in Brazil
(%)
36
79 91
105
124 133
56 63 67
76 80
2008 2009 2010 2011 2012
Our current portfolio reflects consumer’s behavior
(Activities over mobile phone; % users who have used mobile within the last 3 months)
Source: CETIC jun’13; Data Market; Anatel
22
31
47
5
18
24
49
57 64
2010 2011 2012
Wireless
Penetration
Real
Penetration
# SIM Cards
Social
Class 0 1 2 3+
A 3% 67% 24% 6%
B 7% 63% 24% 5%
C 17% 62% 17% 3%
DE 41% 47% 10% 1%
Total 20% 59% 17% 3%
Send SMS
Listen Music
Internet
Historical Data: Financials (R$ Thousand)
37
Historical Data: Financials (US$ Thousand)
38
Historical Data: Operational & Financial Ratios
39
ROA: NOPLAT/Avg. Total Assets.
Calculation considers organic Net Income and EBITDA
2013e: Consensus and dividend yield from approved 2012 dividends of R$743 mln.
2013e Multiples related to 2014YE estimates..
3%
Tax Relief - 1º Step: M2M Fistel to drop and Smartphones tax exemption (Law 12,715/2012)
Total
~34%
Fust/
FUNTEL
PIS/
PASEP
1.5%
0.65%
ICMS Cofins
~28%
Tax reduction Reduction in the
price to
consumer
Increase of
Penetration
Social
Impacts
Economic
Impact
Possibility of
higher
investment in
network
Better
Quality
Tax Composition
40
In 2012, TIM paid R$9.1
bln in taxes, fees and
contributions (~48% of
total net revenues).
• R$1 bln in Fistel.
• R$8.1 bln in taxes,
contributions and
others fees.
% of Gross
Revenues
Taxation Over Telecom in Brazil
Shareholders Structure and Stock performance
Stock Performance (base 100)*
0
20
40
60
80
100
120
140
160
180
TIMP3 Ibovespa TSU
41 *Last price as of 11/01/2013
TIM Celular S.A. Intelig
100%
TIM Brasil Serv. e Part. S.A. Minorities
Telecom Italia International N.V.
Telecom Italia
100%
TIM Participações S.A.
ON: 33% (805,662,701) ON: 67% (1,611,969,946)
100% 100%
Investor Relations Team
Avenida das 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
Gustavo Valente
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
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.
42