TIM - 3Q14 Results Presentation

2. 3Q13
3Q14
+6%
3rd QUARTER IN FEW: RESULTS OVERVIEW
2
Financial Highlights
Operational Highlights
Business generated revenues at a good pace
1
Net Mobile Revenues (ex-incoming)
3Q13
3Q14
+5%
EBITDA at a solid performance
2
EBITDA reached R$1,332 mln in Q3
1
New offers
2
Bad debt under control
Bad debt as % of gross revenues
Increasing data penetration
3
% of data users over total base
4
Strong performance in 4G market share
4G Market Share
0.7%
0.6%
1.1%
1.1%
0.8%
3Q13
4Q13
1Q14
2Q14
3Q14
-22.3%
-21.9%
-22.9%
-20.5%
-2.9%
3Q13
4Q13
1Q14
2Q14
3Q14
Improving fixed business (fixed business net revenues Δ% YoY)
5
+19 p.p.
Strong cost control (total opex Δ% YoY)
4
8.8%
2.3%
-2.9%
-7.2%
-8.1%
3Q13
4Q13
1Q14
2Q14
3Q14
33%
39%
43%
3Q13
2Q14
3Q14
Net Income
3
Net Income totaled R$348 mln in Q3
3Q13
3Q14
+11%
+6.4%
+10 p.p.
Source: Anatel
26%
30%
Jul/13
Jul/14
+4 p.p.

3. 1,283
1,378
3Q13
3Q14
Service EBITDA (ex-handset business) (R$ mln; %YoY)
BUSINESS FUNDAMENTALS
3
Core Business Evolution…
…Overcoming Challenges
Mobile Service Net Revenues (% YoY)
Service EBITDA Margin (ex-handset business) (% YoY)
(Local + LD + VAS + Others)
Business Received
3Q13
3Q14
Business Generated
1
MTR cut impact on revenues (YoY performance)
(Incoming Voice + SMS)
+7.4%
30%
34%
3Q13
3Q14
+3.6 p.p.
2
SMS Outgoing Revenues (YoY performance)
-18%
-28%
-27%
1Q14
2Q14
3Q14
Net revenues from MTR
3
Macro Environment
Brazilian GDP Growth (%YoY)
Source: IBGE; CNC
Indebted Households (% of total)
1S13
1S14
2.7%
0.5%
A market trend
Greater potential for data growth usage
1.2%
-8.2%
-19.4%
1Q14
2Q14
3Q14
+5%
-34%
Operating margin improvement
61%
63%
3Q13
3Q14
1H14
1H13

4. 45%
39%
26%
30%
17%
20%
12%
10%
DRIVEN BY INNOVATION
4
Customer Base (mln users)
PREPAID MOBILE ACCOUNT/ MONEY
oPartnership: TIM, Mastercard and Caixa Econômica Federal
oFocus on unbanked population ( >50% of prepaid base)
NEW MUSIC PLATFORM
oPartnership TIM and Deezer (top global streaming platform)
oMore than 35 million music available for download
oMaintaining leadership position in the mobile music industry in Brazil
Aug/12
Aug/13
TIM
Source: ANATEL
Aug/14
P1
P3
P4
Jul/13
Jul/14
3G Market Share (%; mln users)
4G Market Share (%; thd users)
30.1
31.4
42.7
16.8
123 mln
Jul/13
Jul/14
TIM
1,437
1,101
735
364
3.7 mln
TIM
Source: ANATEL
Source: ANATEL
INTERNET SHARING PLANS
oUp to 4 devices
oNo additional charges
WEEKLY SERVICE PACKAGE
oVoice + Data + SMS
oR$ 7 per week
NEW M2M PLANS
oNew data packages launched for M2M services
R$ 0.75 DAILY OFFER
oExpansion to new regions: PR, SC, MA, RJ
oCovering most of the country
Adding Value Through Innovation
NEW APP FOR LANGUAGE COURSES
oGames and quizzes help students developing English skills
blah COMMUNICATION APP
oIntegrated communication (VOIP, IM, SMS) App
oFirst ad campaign
76.5
77.1
79.7
69.4
72.9
74.7
63.2
67.1
69.3
48.0
50.0
51.3
23%
25%
25%
26%
40%
35%
11%
14%

5. 67%
77%
3Q13
3Q14
3Q13
3Q14
Jul - Aug/13
Jul - Aug/14
24
32
3Q13
3Q14
MAINTAINING STRONG DATA PACE
5
Data Adoption
Increasing Data Penetration
Smartphone Penetration Over Customer Base (%; Δ YoY)
Smartphones Share over New Sales (%; Δ YoY)
Data Users (mln users; % YoY)
+32%
BOU: Bytes of Use (megabytes)
Days of Use
+40%
+22%
43 mln to go!
28 mln untapped market
15 mln with data handset
Data Opportunity over Customer Base
32 mln data users
1Q14
2Q14
3Q14
25%
27%
29%
% over total gross mobile service revenues
Mix of Data Gross Revenues (R$ mln; %YoY)
SMS
Web
1,500
+29%
+39%
+45%
+80%
Δ %YoY growth
1,578
Content & Others
1,677
+33%
+72%
74.7 mln customer base
+23%
+20%
+22%
+10 p.p.
New Data World
Usage Increase
Penetration Increase
25%
44%
3Q13
3Q14
+20 p.p.

6. 39
81
2013
1Q14
2Q14
3Q14
900 Mhz rollout according to plan (above 600 sites using the new frequency)
Expanding backhauling
INFRASTRUCTURE (R)EVOLUTION (1/2)
6
Mobile Broadband Update
Cities Covered with MBB project
% of urban population covered
Quick incident resolution: from 56% to 76% within 8h
Reacting faster to network problems - faults opened within the target time: from 85% to 94%
Agreement with a tower company
Project to install more than 150 small cells in gas stations in 3 cities
Small cell installed inside Totem
Network Hiring + Insource Project
Innovative Coverage Expansion
Improving Quality and 4G Services (e.g.: SP)
Reduction in dropped call rates and better overall performance
Higher average throughput rates
Improvement in indoor coverage
Increase in data and voice traffics
Expanding # of people in the Network team
From third party TO insource Network Control Center
30%
31%
32%
Source: ANATEL app
36%
Investing Efficiently
Big Data analysis for capex allocation;
Antenna level return analyses (IRR and payback)
99.0%
97.95%
97.53%
98.36%
Voice Access
# Antennas

7. 3,153
3,106
3,085
3,055
TIM
P2
P3
P1
INFRASTRUCTURE (R)EVOLUTION (2/2)
7
Network in Numbers
4G at 700MHz: Seeding Future Growth
Better Coverage (Indoor and Rural)
Relevant Spectrum acquisition at fair price (10+10 MHz; ~R$ 2.9 Bln, 1% premium) (Price in USD/MHz/Pop. adjusted for GDP)
Spectrum Acquired
4G Sites in state capitals
Ran Sharing
Smart Approach
5800 Mhz
2100 Mhz
850 Mhz
700 Mhz
< 700 Mhz
0
2
4
6
8
10
Number of BTS
20
15
10
7
5
2
*2 – TIM 4 & 6 – No bidders
708MHz
718MHz
728MHz
738MHz
748MHz
763MHz
773MHz
783MHz
793MHz
803MHz
BTS Range (km)
0.52
0.78
0.83
1.07
1.13
1.18
1.22
1.28
1.29
1.29
1.48
2.58
1.22
DEN
NZL
Spain
Brazil
GER
PORT
EUA
Taiwan
Italy
France
AUS
Canada
Average
Uplink
Downlink
Source: ANATEL
Number of WIFI & Small Cells
Source: Company
714
1,105
4Q13
1Q14
2Q14
3Q14
Number of 3G Sites
9.3% growth in 9M
Coverage: 79.1% of urban population
Source: Company
9,074
9,920
4Q13
1Q14
2Q14
3Q14
Source: Company and Anatel
1
3
2
4
5
6
6
1
3
2
4
5
6
6
USA

8. 3Q13
4Q13
1Q14
2Q14
3Q14
TIM SOLUÇÕES CORPORATIVAS: BUSINESS REBOUND
8
Turnaround on fixed business in place
2013
2012
-
2014
+
EBITDA-CAPEX
Net Revenues (with intercompany)
2013
2014
1Q14
2Q14
oNew business unit organization
oIT renewal plan
oMultiservice network launch
oNew branding
oNew offers and product launch
oRestructured sales force
4Q14
oSales and customer service improvement
3Q14
Financial Performance
oSales multi-channel Improvement
oNew offers and product launch
oMTR reduction
Revenues from New Sales
(R$; YoY)
Revenue rebound
Sales growth
Market repositioning
Infrastructure reinforcement
Governance / Efficiency
Business Priorities:
Business development
Quality and Process
+5x
Organization restructuring
Dedicated B.U. to all business customer
Fixed + mobile integration

9. 36.7
38.2
3Q13
3Q14
21
13
3Q13
3Q14
Accelerating Operational Performance…
LIVE TIM: SPEEDING UP GROWTH
9
43
120
3Q13
3Q14
Customer Base (000 users)
Source: Anatel
881
1,366
3Q13
3Q14
Netflix Broadband Ranking (average streaming speed representation)
3Q13
3Q14
ARPU
(R$; YoY%)
… with Support of Quality Experience
Addressable Households
(000 HH)
Source: Company
+2.8x
+55%
+32%
New Line Payback (months)
-38%
Gross Adds (000 users)
18
31
3Q13
3Q14
+74%
Live TIM Net Adds Share (% of SP and RJ market additions)
Average Speed of New Sales (mbps)
+4.1%
16%
31%
Aug/13
Aug/14
Source: Company

10. 3Q13
3Q14
~0.7%
~0.8%
3Q13
3Q14
4,045
180
Thousands
4,207
4,045
+149
Thousands
+0.4%
FINANCIAL RESULTS ANALYSIS (1/2)
Service Net Revenues (R$ mln; % YoY)
Reported Revenue 3Q13
Reported Revenue 3Q14
MTR Impact
-3.8%
4,225
‘Pro forma’ Revenue in 3Q14
-306
-4.5
ΔYoY
+4.7%
-34.5%
-2.9%
Δ Others
Δ Business Incoming
Δ Business Generated
10
Ex-MTR
1,332
109
Thousands
EBITDA
(R$ mln; % YoY)
1,252
Reported EBITDA 3Q13
Reported EBITDA 3Q14
+151
-71
Δ Opex/ Others
Traffic/Data Δ Contribution Margin
24.6%
30.5%
1,332
27.4%
34.1%
EBITDA Margin
Service EBITDA Margin
+4.5%
+3.4%
MTR Impact
+15.1%
+6.4%
1,441
‘Pro forma’ EBITDA in 3Q14
ΔYoY
Ex-MTR
Efficient Cost Control
Interconnection Cost (Δ% YoY)
Leased Lines Cost (Δ% YoY)
Bad Debt/Sales (% over gross revenues)
stable
3Q13
3Q14
-36.2%
3Q13
3Q14
-1.8%
Mobile First Margin Analysis (% YoY)
+6 p.p.
Strong first margin expansion showing core business improvement
Margin expansion driven by data and VAS (content & others)

11. 306
372
386
366
315
348
9M13
9M14
3,980
-2,614*
- 1,274
182
275
50%
88%
50%
12%
9M13
9M14
1,446
4,781
3,335
Thousands
791
4,470
3,679
1,749
1,749
-163
+438 mln
+30%
FINANCIAL RESULTS ANALYSIS (2/2)
Net Income Evolution (R$ mln; % YoY)
Net Debt (R$ mln; % YoY)
11
EBITDA
Debt
Cash
Net debt
Sep/13
Sep/14
Debt
Cash
Net debt
+63%
-45%
Infrastructure Investment Mix (as % of capex)
Cash Flow - 9 months
(R$ mln; R$ YoY)
YoY
Net debt/EBITDA 12M: 0.14x
BNDES Loan
CAPEX
Δ WC
OFCF
9M14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF 9M13
LT Amazonas Leasing
6,219
5,428
2G
3G + 4G
+38 p.p.
Δ YoY
Technology
2Q
1Q
+10.6%
% YoY
3Q
1,007
1,086
+21.6%
-5.2%
+7.9%
1H14
3Q14
512
-1,786
2013
2014

12. CONCLUSION
12
Q3 Conclusions: A good balance between objectives
Perspectives: Moving the plan forward
Strategic…
Financial…
Operational…
EBITDA
Net Income
+6.4% YoY
+5% YoY
+11% YoY
MBB in 81 cities
OPEX Control
Prepaid leadership
Infrastructure growth
Evolving revenue profile
Renewed Mission/ Purpose/Values
New 3-year plan
“To connect and take care of every customer, so everyone can do more”
oIndustry leadership
oLong term commitment
o4G license 700MHz
oTower sale supporting investment plan
Quality
Business Generated
TIM Protagonist
•VOICE
•SMS
•MTR
•DATA
•DIGITAL SERVICES
oData and digital services leadership
oInfrastructure
oCustomer base value
oCustomer experience
oOne TIM initiative
Data Users (mln users)
Data + VAS (ex-SMS)
Smartphones
(over total base)
32 mln 32% YoY
44%
+19 p.p. YoY
R$1.3 billion +49% YoY