ApresentaçãO Bank Of America & Merrill Lynch Annual Gem Conference
1. TIM PARTICIPAÇÕES S.A.
Bank of America & Merrill Lynch
13th Annual Global Emerging Markets Conference
June 2009
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2. TIM PARTICIPAÇÕES S.A. | Investor Relations
Update on Brazilian Competitive landscape
Recapping Q1 Results
TIM’s Fundamentals
TIM’s Re-launch Revisit
Market Facts and Historical Data
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3. TIM PARTICIPAÇÕES S.A. | Investor Relations
Brazilian competitive landscape
TIM Telefonica/Vivo (1) Embratel /Claro Oi (2)/Brasil Telecom
Player Footprint
National fixed
Long distance
license acquired in
incumbent
may / 07
Subscriber Base (3)
Mobile 36.1 MM 45.7 MM 39.6 MM 31.8 MM
Fixed 0.3 MM 11.6 MM 5.8 MM 21.8 MM
Broadband 0.5 MM 2.7 MM 2.4 MM 3.9 MM
Mobile + Fixed Incumbent
(1) Including Telemig Celular
Mobile (2) Including Amazonia Celular
(3) 1Q09 figures
Source: company reports and Anatel 2
4. TIM PARTICIPAÇÕES S.A. | Investor Relations
Update on Brazilian Competitive landscape
Recapping Q1 Results
TIM’s Fundamentals
TIM’s Re-launch Revisit
Market Facts and Historical Data
3
5. TIM PARTICIPAÇÕES S.A. | Investor Relations
Customer Base Evolution
TIM Mobile Base Evolution Clean-up Base
Million lines Post-paid Clean-up Base
Mln lines
Market Share
25.9% 25.4% 25.0% 24.2% 23.5%
-0.4
6.6 6.2
∆ YoY
33.8 35.2 36.4 36.1 +11%
15,00%
32.5
6.8 6.6 6.2 Dez-08 Gross Churn Mar-09
6.8 6.8
25.8 27.0 28.4 29.8 29.9 Pre-paid Clean-up Base
Mln lines
1Q08 2Q08 3Q08 4Q08 1Q09
Post-paid Pre-paid
∆ YoY +0.1
29.8 29.9
% Post-paid
on Total 20.8% 20.2% 19.4% 18.1% 17.1% -3.6p.p.
Dez-08 Gross Churn Mar-09
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6. TIM PARTICIPAÇÕES S.A. | Investor Relations
Revenues Break-down
Total Gross Revenues VAS REVENUES
(as a % of Gross Serv. Rev.)
Total Net Revenues
11.2%
8.4%
R$ Million R$ Million
1Q08 1Q09
(76) 56
(34) 103 3,544 ΔYoY
(55) 2,993 3,012
+0.6%
4,212 3,223
4,219 2,838 2,823 -0.5%
+21.5%
155 321 189
1Q08 Outgoing Long Incoming VAS Product 1Q09 1Q08 4Q08 1Q09
Distance
ΔYoY -3.8% -6.9% -5.0% +31.4% +17.3% Net Service Revenues
Net Product Revenues
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7. TIM PARTICIPAÇÕES S.A. | Investor Relations
Efficiency Sustains EBITDA Margin
Interconnection & Network Costs
R$ Million ∆ YoY
-5.7%
1,045 1,048 985
∆ QoQ EBITDA
-6.1%
1Q08 4Q08 1Q09
% of Net R$ Million ∆ YoY
Revenues 34.9% 29.6% 32.7%
+14.4%
Personnel and G&A Costs** Normalized
95(1) 64(2)
R$ Million ∆ YoY 931 +7.3%
533 609
-8.7% ∆ QoQ
286 283 261
∆ QoQ -27.7%
-7.6%
1Q08 4Q08 1Q09 1Q08 4Q08 1Q09
% of Net
Revenues 9.6% 8.0% 8.7% Margin
Reported 17.8% 26.3% 20.2%
Bad debt
Normalized 20.9% 26.3% 22.4%
R$ Million ∆ YoY
-51%
272 (1) Telesales Impact (2) Embratel’s dispute expenses
Normalized*
131 134 -23.9%
% of 1Q08 4Q08 1Q09 ∆ QoQ
Net Service
Revenues
6.2%* 4.1% 4.8% +3.0%
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* Excluding Telesales additional impact of R$ 95 Mn (9.6% including impact) **includes IT costs
8. TIM PARTICIPAÇÕES S.A. | Investor Relations
EBITDA – Improving Resources Allocation
R$ Million
33.0 64.0**
137.2
95* (14.7) 33.4 (111.0)
(61.2) 59.9
609.4
532.8 Investments Savings
+14%
EBITDA Service Handsets Advertising Network Other EBITDA
COGS Bad Debt
1Q08 Revenues Revenues & Sales Expenses Revenues*** 1Q09
Δ YoY -0.5% +21.5% +18.6% +23.3% -5.7% -50.5% -11.7%
Reported 17.8% 20.2% +240 bps
Normalized 20.9% 22.4% +140 bps
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* Telesales Impact ** Embratel’s dispute *** Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues
9. TIM PARTICIPAÇÕES S.A. | Investor Relations
Update on Brazilian Competitive landscape
Recapping Q1 Results
TIM’s Fundamentals
TIM’s Re-launch Revisit
Market Facts and Historical Data
8
10. TIM PARTICIPAÇÕES S.A. | Investor Relations
1 Network: leadership in coverage and quality
• voice (coverage and quality)
• data (Edge/ 3G)
2 High-Value Customer Base with proven innovative
attitude (VAS 11.2% of gross service revenue in 1Q09) Operating as a
“Pure Mobile” company,
3 Unique “Pure Mobile” convergence offering
with solid fundamentals…
• TIM Web: strong growth (+2x of base YoY) … in line with our DNA
• TIM Fixo: high satisfaction among early adopters
4 Brand association to attributes of innovation, change
and evolution
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11. TIM PARTICIPAÇÕES S.A. | Investor Relations
Network: Improving Overall Service Quality
2008 FY – Overall Service Quality Feb-Mar/09 – Overall Service Quality
% achievement of overall service quality targets, TIM vs. competitors % achievement of overall service quality targets, TIM vs. competitors
99% in March
4Q08: 90.2% #6 #2
99.5% 99.9% 98.4% 97.8% 97.0%
98.0% 97.7% 95.5%
95.1% 93.4% 91.6%
83.9% 85.5%
61.4%
Player 1 Player 2 Player 3 Player 4 Player 5 TIM Player 7 Player 1 TIM Player 4 Player 5 Player 3 Player 2 Player 7
Network Service Quality
% achievement of network service quality targets % achievement of network service quality targets
Nov/08 Mar/09 Delta (p.p.) 99.5%
96.7%
TIM 84.6% 99.5% 14.8
Main mobile Player 1 99.0% 100.0% 1.0 84.6% 84.1% 84.1%
operators
Player 2 95.7% 93.1% -2.7
Player 3 73.1% 46.2% -26.9
Source: Anatel ´Nov/08 'Dec/08 ´Jan/09 'Feb/09 'Mar/09 10
12. TIM PARTICIPAÇÕES S.A. | Investor Relations
Unique “Pure Mobile” convergence offering
Mobile Broadband: Strong growth
Million (Mn) TIM Web ARPU grew > 50% since 3G launch (May’08)
+122% The fastest mobile broadband offer in the market: up to 7.2
0,5 Mbps and robust 3G backhaul
Unattended ADSL demand: Over 50% of TIM Web users has
0,2 a fixed location
Mar/08 Mar/09 Over 70% of TIM Web users are satisfied*
Fixed: Assessing TIM Fixo satisfaction*
Subscriber base reached 0.3Mn users
Market average 7.63
Strong customer satisfaction on TIM Fixo
TIM Fixo 8.52 Over 25% of TIM’s clients came from other fixed players
Fresh-market: 40% of TIM Fixo users were previously
Fixed Mkt Avg TIM Fixo
Region I 7.99 8.44 unattended
Region II 7.85 8.82
Region III 7.07 8.44 Customer loyalty far above the average market
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*source: TNS Intersience Survey Dez2008
13. TIM PARTICIPAÇÕES S.A. | Investor Relations
Brand: Repositioning
3 steps Strategy Top of Mind
Sao Paulo and Rio de Janeiro, %
33
30
30
30 30%
29
Customer
22
proximity 20%
19 18
Feb
10%
Week 16/03 Week 30/03
TIM Player 1 Player 2 Player 3
New Slogan
Advertising Campaign Evaluation
Mar % Excellent and good grades
Better evaluation vs. competitors and association
to attributes as change, revolution, innovation
88%
77%
Products 69%
Campaigns
Apr/May Player 2 Player 3
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14. TIM PARTICIPAÇÕES S.A. | Investor Relations
Update on Brazilian Competitive landscape
Recapping Q1 Results
TIM’s Fundamentals
TIM’s Re-launch Revisit
Market Facts and Historical Data
13
15. TIM PARTICIPAÇÕES S.A. | Investor Relations
TIM Re-launch Revisit
Pressure
Priorities
Restructuring on
Top Line 2Q09
• Strategy and Organization • Flat revenues: • Focus on Value:
• Brand repositioning - Customer base erosion on - Push on Post-paid
• Customer Base clean-up post-paid (long tail) - Reduce Portability Gap
• Network Service Quality - pre-paid MOU decline - Reinvest Pre-paid ARPM to
improvement - Weak 2008 Christmas inflate usage
• Embratel’s dispute resolution campaign • Speed-up Efficiency plan and
• Efficiency Plan on going and Intelig integration
improved Capital Allocation
• Signing of Intelig deal
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16. TIM PARTICIPAÇÕES S.A. | Investor Relations
Restructuring Phase Completed
Pressure Priorities
Restructuring on
Top Line 2Q09
Strategy and Organization: completed
Brand Repositioning: doubled share of voice, Top of Mind improved (#2 in SP and RJ Panel),
phase 1 of offering portfolio re-launch
Customer Base: back to growth as of March, after 1 mln inactive lines clean-up in February
Back to #2 in Overall Service Quality (vs. # 6 in 2008) according to Anatel’s ranking (99%
achievement in March) driven by network reliability (+14.9 p.p. in 5 months)
Resolution of Embratel’s dispute: positive cash impact of R$ 90 mln; one-time shot cost of
R$ 64 mln, booked in 1Q09
Efficiency Plan on going and improved Capital Allocation (-5% in HR, G&A and Others,
-13% IT, -51% in Bad Debt)
Signing of Intelig acquisition: ready to capture relevant synergies
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17. TIM PARTICIPAÇÕES S.A. | Investor Relations
Pressure on Top Line
Pressure Priorities
Restructuring on
Top Line 2Q09
Pos-paid long tail
Post-paid customer base erosion along last 12 months Churn
• Lower focus on gross adds and increasing churn in 100
second half 2008 Gross
• Post-paid mix down to 17.1% on total customer base (-
3.7 p.p. vs 1Q08) 1Q08 2Q08 3Q08 4Q08 1Q09
Incremental market share
Deceleration of growth of pre-paid revenue, due to lower
promotional aggressiveness, especially in the campaign 14% 13%
10%
26%
for Christmas
12% oct/08 nov/08 dec/08
• Pre-paid ARPM increase (+53% YoY)
Loss of competitiveness
• MOU outgoing decrease (-31% YoY) 4Q07 4Q08 in dec/08
ARPU (R$)
ARPU dilution mainly due to worse customer base mix:
28.5 29.8 29.7 29.9
• Pre-paid outgoing ARPU increase (+6% YoY) 26.0
• Post-paid outgoing ARPU decrease (-4% YoY)
• Blended outgoing ARPU decrease (-12% YoY) 1Q08 2Q08 3Q08 4Q08 1Q09
YoY -14% -14% -12% -13% -12% 16
18. TIM PARTICIPAÇÕES S.A. | Investor Relations
Priorities
Pressure Priorities
Restructuring on
Top Line 2Q09
Growth with Profitability
Invert current trend Efficiency Plan Integration of Intelig
Post-paid
450
EBITDA and Operating Efficiency on Network
40
350
0
Gross
Free Cash Flow defense
300
Business development (Long
250
20
150
0
Churn
100
Financing the growth Distance, Top Clients)
50
0
1Q Apr-Dec
2009 2009
Market Share Incremental SAC G&A e RH Bad debts
+15%
38%
-5% -51%
29%
17%
10%
Avg. Dec Mar Abr 1Q08 1Q09 1Q08 1Q09 1Q08 1Q09
2008 ‘08 ‘09 ‘09
Speed-up of commercial KPIs in 2Q Improve efficiency to sustain growth 17
19. TIM PARTICIPAÇÕES S.A. | Investor Relations
Invert current trend – Sales growth
Net Adds Revamp… …And Better Net Share
1) Sales Convention (April 2nd) - NET ADDS NET SHARE
“The Turnaroud” Lines (000’s)
Clean-up 38%
1MM handsets sold (~1,0 Mn lines) 29%
379 17%
348
Focus on post-paid 138 1st
2nd
New commissioning
-10%
-823
2) Portability: Jan/09 Feb/09 Mar/09 Apr/09 2008 1Q09 Mar/09 Abr/09
Avg
Sales incentives
Mobile NP revamp Positive balance in the Consumer
Improving trend in post paid and corporate
Positive balance in the NE and Mid West regions
+ Consumer
Company repositioning: Zero balance
Post-paid
sales KPIs growth starting from 2Q09 85%
- Corporate
25%
Jan/09 Feb/09 Mar/09 Apr/09 May/09
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* Portability results until Apr 26th 1st 2 weeks
20. TIM PARTICIPAÇÕES S.A. | Investor Relations
Invert current trend – New offers portfolio (2Q09)
Launched offers Next launches
Single invoice
for business New offer
customers Business
Post High New post-paid offer
Mother’s Day (free LD)
Post
Pre Portability
Customer’s Base Infinity: ~1,5 Mn
(lines)
Company repositioning:
April May
revenues growth from 2H09
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21. TIM PARTICIPAÇÕES S.A. | Investor Relations
Efficiency Plan
Quick wins Improvement Re-thinking Efficiency
identified
Bad debt Commercial: channel costs Network: Intelig integration until now:
IT: contracts
rationalization
Customer care: revision of ~R$0.8 Bln
renegotiation Network: contracts caring model Opex +
G&A: costs optimization
renegotiation
New sourcing models (revenue Capex
IT: demand rationalization sharing, risk sharing, etc)
Finance company growth
Defend profitability and cash generation (EBITDA margin and Operating Cash Flow) against
exchange rate and business risks
~50% of
efficiency
SAC Customer Care reinvested on
+XX% +YY% business
growth
2008 2009 2008 2009
FY FY FY FY 20
22. TIM PARTICIPAÇÕES S.A. | Investor Relations
Integration of Intelig
100% leased lines 14.500 km of own
Transport network use (backbone
Network and optical fiber
and metropolitan) for TIM Brasil Optical fiber MAN* 800 Km in MAN*
transport traffic under development rings
Business clients (‘000) Accelerate
integration to
Data Cross/upsell of TIM mobile 300 capture
solutions for solutions for Intelig customer 200
synergies: ~2%
Business base and Intelig data solutions 100
for TIM customers of EBITDA
margin
LD Net Revenues (R$ Bln) (18 months)
Extension of the LD business to
Long
non-TIM customers 1.0
Distance +
*Metropolitan area network 21
23. TIM PARTICIPAÇÕES S.A. | Investor Relations
Update on Brazilian Competitive landscape
Recapping Q1 Results
TIM’s Fundamentals
TIM’s Re-launch Revisit
Market Facts and Historical Data
22
24. TIM PARTICIPAÇÕES S.A. | Investor Relations
Market Facts
Stock Performance Shareholders Structure
TCLS4 TCSL3 IBOV
TIM Part. Total (%) Control (%) Free float (%)
Common 799,924,805 34% 650,537,118 40% 149,387,687 21%
Preferred 1,548,522,231 66% 990,098,811 60% 558,423,420 79%
Total 2,348,447,036 100% 1,640,635,929 100% 707,811,107 100%
*in May 11, 2009
Telecom Italia
100%
May08 Jun08 Jul08 Aug08 Sep08 Oct08 Nov08 Dec08 Jan09 Feb09 Mar09 Apr09 May09
TIM Brasil
ON: 81%
Market Panel* PN: 64%
Total: 70%
Market Capitalization: R$ 11.46 Billion Market Capitalization: US$ 5.37 Billion
TIM Participações
Stock Exchange: BOVESPA Stock Exchange: BOVESPA Stock Exchange: NYSE 100%
Ticker Symbol: TCSL4 (Preferred) Ticker Symbol: TCSL3 (Common) Ticker Symbol: TSU (ADR)
Price: R$ 3.79 Price: R$ 6.99 Price: US$ 17.61 TIM Celular
52 Week Price Range: 52 Week Price Range: 52 Week Price Range: 100%
High – R$ 5.70 High – R$ 7.75 High – US$ 34.34
Low – R$ 2.42 Low – R$ 4.49 Low – US$ 11.44
TIM Nordeste
*All Market Panel data refer to May 5th, 2009 23
27. TIM PARTICIPAÇÕES S.A. | Investor Relations
“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 Visit our Website
Avenida das Américas, 3434 - Bloco 01 http://www.timpartri.com.br
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
Phone: +55 21 4009-3742 / 4009-3446 / 4009-4017
Fax: +55 21 4009-3990
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