1. ENCONTRO COM A TIM São Paulo - 04/08/2014
ENCONTRO COM A TIM
São Paulo - 04/08/2014
MEETING WITH TIM
Brasília - 08/19/2014
2. GLOBAL OVERVIEW
Source: Merrill Lynch - Global Wireless Matrix 2Q14 (data refers to 1Q14) | Top 5 + Brazil
The Brazilian market is becoming mature but there is still room for monetazing user and the main opportunity is in data.
Customer Base Ranking (Mln)
Service Revenues Ranking (U$ Bln)
1,254
905
339
278
268
China
India
EUA
Brasil
Indonésia
188
141
67
28
25
EUA
China
Japão
Brasil
Reino Unido
54
50
46
43
41
8
Canadá
EUA
Suiça
Noruega
Japão
Brasil
68%
63%
56%
48%
47%
29%
Japão
Coréia
Austrália
Austria
Argentina
Brasil
179%
170%
159%
158%
156%
140%
Finlândia
Rússia
Portugal
Austria
Singapura
Brasil
76%
75%
74%
70%
69%
27%
Finlândia
Coréia
Dinamarca
Japão
Noruega
Brasil
4th
4th
Data / ARPU Ranking
(%)
30th
Mobile Penetration Ranking
(%)
13th
ARPU Ranking (U$)
35th
Smartphone Penetration Ranking
(%)
29th
2
US
Brazil
Indonesia
US
Japan
Brazil
UK
China
Japan
Korea
Australia
Argentina
Brazil
Finland
Russia
Brazil
Singapore
Canada
US
Switzerland
Norway
Japan
Brazil
Finland
Korea
Japan
Norway
Brazil
3. TIM
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
74,203
665
121
n.d.
74,989
Market share 2Q14
26.9%
1.5%
0.5%
n.d.
---
Net Adds 2Q14 (000´s)
286
-
19
n.d.
305
Net Adds 12M (000´s)
2,008
31
61
n.d.
2,100
Net Revs FY13 (R$ Mln)
19,264
657
19,921
Fixed / Mobile
Fixed BB
Vivo
Fixed BB/TV
Fixed / Mobile
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
79,357
11,035
4,370
688
95,450
Market share 2Q14
28.8%
24.1%
18.8%
3.6%
---
Net Adds 2Q14 (000´s)
892
333
36
91
1,352
Net Adds 12M (000´s)
3,158
619
345
175
4,297
Net Revs FY13 (R$ Mln)
23,002
11,720
34,722
Fixed
Mobile
Fixed BB/TV
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
68,776
11,289
7,045
10,106
97,216
Market share 2Q14
24.9%
24.7%
30.3%
53.3%
---
Net Adds 2Q14 (000´s)
27
189
220
230
666
Net Adds 12M (000´s)
2,303
1,133
905
1,121
5,462
Net Revs FY13 (R$ Mln)
12,773
20,424
33,197
Fixed
Mobile
Mobile
Fixed
Fixed BB
Pay-TV
Group
Customers 2Q14 (000´s)
51,081
17,023
6,567
867
75,538
Market share 2Q14
18.5%
37.2%
28.3%
4.7%
---
Net Adds 2Q14 (000´s)
502
-240
3
39
304
Net Adds 12M (000´s)
1,373
-1,307
17
- 35
48
Net Revs FY13 (R$ Mln)
9,290
19,132
28,422
Claro
Oi
BRAZILIAN TELCOS X-RAY
Source: Companies Releases and Anatel
3
4. MARKET STRUCTURE CHANGING TOWARDS DATA USAGE
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
Total Households
Households which does NOT possess
Households with internet connection and breakdown for households without internet connection:
3%
37%
51%
91%
With Telephone
Only mobile phone
Mobile and fixed phone
Households profile
Fixed phone only
Purchase power
Salaries up to R$1.2k
Salaries up to R$3.1k
Consumption
People that access
Internet (10 years or +)
57 mln
32 mln
2 mln
81 mln
106 mln
23 mln
Households with internet connection
(%; CETIC jun’13)
53% of pop.
70% of pop.
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Yes
No
24.3 mln of households
83 mln
49% of pop.
Fixed
Mobile
21%
74%
40%
60%
Re-visiting Market Structure
Market Data Revenues Growth 2016 vs. 2012:
> 13 bln Reais on Mobile (+100%)
>7 bln Reais on Fixed (+35%)
4
5. KNOWING TIM BETTER
Gross Revenues
(R$ Bln)
Customer base
EoP (Million)
1998
2013
1998
2Q14
15,000 km fiber
optical backbone
5,500 km fiber
optical backhauling
Organic
Growth
Growth
Via Acquisition
Brazilian Law
“Nível” 1
“Nível” 2
Legal Requirements
Demand for transparency and disclosures
Highest level of Corporate Governance
Requirement of protection for minority shareholders
100% Tag Along
Equal dividends rights
One single class of shares
Strict disclosure policy
Statutory Audit Committee:
•Report to Board of Directors
•Oversight Financial reporting
•Analyze anonymous complaints
Unique Telco company listed on the Novo Mercado
Corporate Governance
TIM: A Huge Brazilian Company
Presence in Brazil since 1998.
16th largest Private Company in Brazil (source: Exame Magazine - 2013).
Approximately R$27 billion of Market Capitalization.
74.2 million customers (27% Share)
The 2nd Player - Market and rev. share
More than 383,000 points of sales
More than 165 own stores
15 Customer Care Centers (16k attendants)
~13,100 Antennas
3,429 cities covered
95% of urban pop. covered
50,000 km of optical fiber network
~12,480 employees
23,000 indirect jobs
R$10.4 billion in taxes payments in 2013
R$3.9 billion invested in 2013
Sales
Network
Social
& Economic
74.2
29.6
Growth Structure
5
6. 26k
100k
Postpaid segment grew by 7% and postpaid mix over customer base reached 16.5%, while SAC/ARPU remained below 2 months
19%
22%
27%
2Q12
2Q13
2Q14
2nd QUARTER HIGHLIGHTS
6
Operational
2Q13
2Q14
+7% YoY
Data as % of revenues
Net Revenues: Usage (local + long distance) + VAS
Total OPEX (Δ% YoY)
11%
9%
2%
-3%
-7%
EBITDA Margin
27%
25%
28%
2Q12
2Q13
2Q14
% of total customer base
15.8%
16.5%
2Q13
2Q14
Mix of postpaid over total base
World Cup Figures (in the Stadiums)
Live TIM customer base
Financial
Gross Data Revenue growth at solid pace: R$1.6 bln in 2Q14
Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY
Strong cost control: total opex dropped 7% YoY
EBITDA grew 8% YoY with margin gain
28%
32%
39%
Data users reached 29 mln lines
Live TIM crossed 100 thousand customers milestone
+3 p.p.
+5 p.p.
2Q13
3Q13
4Q13
1Q14
2Q14
Jul/14
Jun/13
2Q12
2Q13
2Q14
•Photos sent: 50 mln
•Outgoing calls: 5 mln
•Data traffic: 26.7 TB
Maracanã Stadium
7. CORE BUSINESS ANALYSIS & PERFORMANCE
MTR cut full impact in 2Q
Handset sales at a healthy level although reduced growth
World Cup impact on commercial activities
Mobile Service Net Revenues Analysis (% YoY)
EBITDA Performance (mln; %YoY)
June
2013
June
2014
No Holidays
1 National holiday
3 Brazil’s games (1/2 day holiday)
Up to 2 municipal holidays in main cities hosting games
Net revenues
from MTR
-18%
-28%
2.4
3.1
2.7
2Q12
2Q13
2Q14
Total units sold (mln)
(Local + LD + VAS)
Business
Received
2Q13
2Q14
1,232
2Q13
2Q14
ReportedEBITDA Margin
1
2
3
+7%
24.9%
27.9%
EBITDA
7
1Q14
2Q14
-30%
Business
Generated
+3%
-1%
*MTR Impact
+16%
+8%
1,331
Total
6 months (YoY)
+8%
-26%
+4%
0%
(Incoming MTR + SMS)
Ex-MTR
Ex-MTR
*MTR Impact
Ex-MTR
~170 mln*
~96 mln*
1,427
8. 118.5
23.2
2009
2010
2011
2012
2013
Jun/14
2Q13
2Q14
2Q13
2Q14
READY FOR DATA OPPORTUNITY
8
# Access Growth (users in mln)
Brazilian Broadband: Low Average Speed (Mbps)
WSJ: “Brazil - The Social Media Capital of the Universe”
Fixed
Data Experience is Mobile
Capturing Data Opportunity
Mobile
2.7
2.6
4Q13
1Q14
#2 in Facebook
#2 in Twitter
2nd largest market
#2 in WhatsApp
10.5
13.7
3.6
2.5
Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper ‘Folha de São Paulo’
Sources: Anatel, Akamai - State of Internet
Source: IDC Tracker
Source: Anatel
# Total Market Equipment Sold (units in mln)
Smartphone & Tablet
Notebook & PC
1Q14
2Q14
SMS
Web
Content & Other
1,500
Data Gross Revenues Mix
(R$ mln; %YoY)
+22%
+1%
-8%
+29%
+33%
+45%
+72%
BOU: Bytes of Use
(Megabytes)
Days of Use
Data Users (# mln users)
23
29
2Q13
2Q14
+24%
2Q13
2Q14
2Q13
2Q14
+40%
+30%
In May, >45% connections in Brazil were < 2Mbps
+ 5X
Δ %YoY
Δ %YoY
+20%
1,578
9. v
v
GO TO MARKET PROGRESS
9
Equipping Customer Base
% of smartphone sales among players in 2Q14
% of smart + webphone on TIM’s base in 2Q14
% of smartphone over new sales in 2Q14
Postpaid
oReduce churn on postpaid
oAttract dual SIM card users traffic
oRenewed focus on corporate customers
o Leveraging on “pure mobile” distinctiveness
oExpanding daily tariff scheme to new regions
oSimplicity / Transparency
R$ 7 weekly service package
R$ 0.75 daily offer
Prepaid
35%
50%
62%
2Q12
2Q13
2Q14
39%
57%
71%
2Q12
2Q13
2Q14
41%
23%
28%
9%
P3
P2
P1
TIM
Managing customer base…
To Infinity and beyond…
Penetration of smart + webphones drives data usage growth
Source: GFK Group
Source: Company
Source: Company
10. 75.7
76.2
79.4
68.9
72.2
74.2
63.0
66.5
68.8
47.8
49.7
51.1
47%
39%
20%
30%
21%
20%
12%
10%
2Q13
2Q14
23%
24%
24%
26%
40%
35%
11%
14%
2Q13
2Q14
2Q13
2Q14
CUSTOMER BASE EVOLUTION
10
# 1 player in prepaid
Strong growth in ‘Controle’ postpaid base
Austere disconnection policy
2Q12
2Q13
TIM
Source: ANATEL
2Q14
Vivo
Claro
Oi
4G Market Share (%; thd users)
3G Market Share
(%; mln users)
28.9
30.2
41.5
16.2
Source: ANATEL
TIM
TIM
1,281
990
655
334
Customer Base (mln)
Source: ANATEL
+8.4%
Source: Company
Prepaid Recharge
(R$; % YoY)
118 mln
3.3 mln
11. 2Q13
2Q14
o Brasília
o Curitiba
o Rio de Janeiro
4Q13
2Q14
4Q13
1Q14
2Q14
INFRASTRUCTURE FOCUSED IN DATA
11
COVERAGE
Homogeneous
Access Upgrade
In all relevant areas
Site densification
Small cell / Wi-Fi
CAPACITY
Higher speed
4G roll out
Mobile broadband project acceleration
Backhauling infrastructure
AVAILABILITY
Always available
Fine tunning
Fiber rings / redundance
Resilience
DATA CENTRIC APPROACH
TIM’s Infrastructure Strategy
Network in Numbers
Number of 3G & 4G Sites
Number of Wi-Fi & Small Cell
~11.3
~11.0
~13.1
Number of sites with fiber (FTTS)
Cities in mobile BB project
+3.5x
53
66
1Q14
2Q14
+13 cities
BioSite: New approach to coverage
Patent pending
+47%
1
2
3
After
Before
o New frequency at 900 MHz in SP
o Better indoor coverage
o Addressing capacity requirement
Completed actions
Initiating in:
12. 2Q13
3Q13
4Q13
1Q14
2Q14
TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2
12
Turnaround Plan on Fixed Business
2013
2012
-
2014
New sales revenues (R$; YoY)
Financial performance
Governance / Efficiency
Business development
Quality and Process
Activation time (days)
Operational Improvements Paying Off
+
Segment EBITDA-CAPEX
Source: Company
Net Revenues (with intercompany)
2013
2014
Business Priorities
4Q13
1Q14
2Q14
Plan
Phases
Highlights
Financial sanitization
Infrastructure reinforcement
Market repositioning
oPositive EBITDA
oCost efficiency
oCustomer base management
oNew business unit organization
oIT renewal plan
oMultiservice network launch
oNew branding
oNew offers and product launch
oRestructured sales force
2H14
Showing results
oSales growth
oRevenue rebound
Business remodeling driving stable fixed revenues QoQ
+19x
2Q13
2Q14
-80%
13. +34%
11.5
18.3
24.5
2Q13
0
1Q14
2Q14
13
Gaining more traction
Addressable HH (000 HH)
Gross Adds (000 users)
Customer Base (000 users)
May/2014
oLive TIM Extreme 1Gbps for R$1,999.90
oLive TIM Blue Box release: optional TV approach
Jul/2014 New speed: 70Mbps for R$119.90
Source: Netflix July 2014
Netflix Broadband Ranking (Average streaming speed representation)
31%
Positive
Neutral
Negative
Internet buzz
FIXED BROADBAND: LIVE TIM
New Offers
126 neighborhoods:
43 neighborhoods in SP
83 neighborhoods in RJ
Quality Experience
609
804
1,069
1,138
1,220
2Q13
3Q13
4Q13
1Q14
2Q14
8%
31%
21%
51%
72%
18%
2nd
3rd
4th
5th
6th
1st
Source: Gauge 1Q14
Source: Company
+113%
13
26k
100k
Jul/14
Jun/13
Market average
15. -1,227
2,648
-609
-1,654*
-1,786
182
+41%
FINANCIAL RESULTS ANALYSIS (2/2)
Net Income - 6 months (R$ mln; % YoY)
Net Debt (R$ mln; % YoY)
15
EBITDA
692
738
6M13
6M14
+6.7%
>94% towards infrastructure
6M13
6M14
R$1,657 mln
R$1,593 mln
2G
3G
4G
2G
3G
4G
1,984
4,521
2,537
Thousands
Debt
Cash
Net debt
Jun/13
Jun/14
1,031
6,356
5,325
1,749
1,749
Thousands
4,607
3,576
Debt
Cash
Net debt
+110%
-48%
Investments
Cash Flow - 6 months (R$ mln; R$ YoY)
YoY
Net debt/EBITDA 12M: 0.19x
New BNDES Loan
CAPEX
Δ WC
OFCF 6M14
*Considering R$3 mln of LT Amazonas leasing adjustment
OFCF 6M13
LT Amazonas Leasing
+618 mln
16. Accelerated Network Evolution for Data
KEEPING THE STRATEGIC FOCUS ON THE 2nd HALF
Consolidating Recent Offers & Innovative Services
Strong Institutional Position
“Porta Azul” (Blue Door)
Evolving the Structure for the New Challenges
•Streamlining organization
•Adding new talent
•Stronger segment focus
oConsumer
oCorporate
oResidential
•4G auction participation
•Leadership position
•Presence in dialogue with relevant institutions
4G 700MHz
Small Cells
BioSite
Mobile
Fixed
VAS
TIM Protect
CONTENT
16
New Positioning
DATA CENTRIC APPROACH
Coverage
1
2
3
Capacity
Availability