3. Key Achievements
Improving the Corporate Structure
Status of Corporate Restructuring
On March 16th the shareholders meeting approved the TIM Celular merger with no contrary vote.
No shareholders exercise the withdrawal rights that ended on April 19th.
On May 4th. the Board approved a further step of our reorganization.
Current Structure Proposed Structure
TIM Participações
TIM Participações TIM Participações
100%
100% 100% 100%
TIM Celular
TIM Celular TIMNordeste TIM Sul
+ TIM Sul
100%
100%
TIM Maxitel
TIM Maxitel + TIM Nordeste
This transaction, that is being submitted to the Anatel approval will:
optimize even more the company’ structure allowing costs reduction related to the maintenance
of two separated legal entities; and,
accelerate the right to use the net operating losses accumulated in the merging companies,
which amounted to R$ 5.5 billion at the end of 1Q06.
We expect to close the transaction during the 3Q06.
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4. Key Achievements
TIM: Profitable growth in a highly competitive market
Solid Growth Strong Financial Performance (YoY)
44% YoY growth in total customer base
vs. 30% of the Brazilian market 21% growth in net service revenue
The highest % of postpaid vs. peers: 45% VAS revenue increase
20.6% vs. 19.5% of the market
21% reduction in subscriber acquisition
Leader in postpaid net additions in the cost
quarter (30.2%) achieving 24,8% on
share by the period end Stable bad debt rate over total gross
revenue: 3.1%
Leader in Innovative technology: 37% of
GSM Market 58% growth in EBITDA achieving 24,3%
margin (+6.2 p.p. compared to 1Q05)
Successful client retention: churn rate
stable
On track to the break even: 34% net
Improved CRM and segmentation tools losses reduction
enabling acquisition cost reduction
4
6. Continuing mobile market growth in the first quarter
National Market and Penetration
YoY Lines growth Over the last 12 months TIM´s
48.5% 43.5%
client base grew by 43.5%,
TIM 60.6% 60.8% 56.4%
strongly above the market
Market 39.7% 39.8% 37.6% 31.4% 30.3%
average (+30.3%)
48.1%
47.3%
44.0% 89,4 Slowing market growth rate, but
41.6% 86,2
continuing to outperform
38.0% 80,0
75,5
expectations: 3.7% QoQ and
30.3% YoY
68,6
More rational market with some
strong subsidy focused on
postpaid and low-end handsets
1Q05 2Q05 3Q05 4Q05 1Q06
Total market lines (mln) National Penetration
Source: Anatel’s data base. 6
7. Market share performance
Market share TIM market share gap vs. main Competitors
YOY growth Vs. First Player Vs. Third Player
39.3%
First 37.7% 36.1%
Player 34.5%
33.7% ~ +1.2 p.p. YoY
~ - 6 pp 1.8
1Q05 2Q05 3Q05 4Q05 1Q06 0.5
22.2% 22.9% 23.4% 23.5%
21.3% 1Q05 2Q05 3Q05 4Q05 1Q06
TIM ~ + 2 pp
21.6% 21.8%
Third 20.8% 21.5% 21.8%
~ + 1 pp
Player -10.2
1Q05 2Q05 3Q05 4Q05 1Q06 oY
-18.0
7p . p. Y
.
~ -7
Sound market results achieved in São Paulo capital:
25.9% market share (+ 7.4 pp YoY), achieving 2nd
position in region.
Narrowing the gap vs. 1st Player and widening the
distance from the 3rd Player
7
8. Customer base: combining growth and improved mix
TIM Lines (mln) Postpaid mix
YoY QoQ
GSM lines
21.0 + 43%
21.1% + 0.5 pp
14.6 20.6%
20.3%
19.9% 20.1%
19.7% + 0.3 pp
19.5%
85% + 75% 18.9%
19.2%
18.9%
19.4% 19.2% + 0.3 pp
69%
18.9%
18.0% 18.6%
1Q05 1Q06 1Q05 2Q05 3Q05 4Q05 1Q06
Market Share (%) 21.3% 23.5%
TIM Market Competitors
Leader in postpaid net additions in the quarter
Strong quality of the base: 20.6% postpaid lines vs. 19.1% 1st Player
and 16.4% 3rd Player
Source: Anatel’s data base. 8
9. Growing with optimized retention and acquisition cost
R$ 23.8%
19.7%
-21%
Successful value & loyalty strategy
SAC
190 150
1Q05 1Q06 Record gross additions with tight
% postpaid gross adds acquisition cost control
SAC/ARPU
5.3X Rational client acquisition strategy:
5.0X improved mix of gross additions
1Q05 1Q06 Reduced churn in the corporate
segmented churn: -1.4 p.p., and
Churn broadly stable stable overall rate.
Monthly Churn
+ 0.1 p.p.
rate
2.3% 2.4%
1Q05 1Q06
9
10. Key competitive advantages
Building up a total customer caring leadership
TIM Current differentials Main Growth Drivers
Mobility, convenience and cutting-edge VAS
Plug-in’s for high users
Post-Paid
Deeper segmentation of offer
International Roaming
Focus on “TIM Brasil” plans
Community (family offer)
(8 all-inclusive bundles)
Subsidy focused on high- end segment
Pre-Paid Deeper segmentation (new pre-paid plans “TIM +”)
Launch of exclusive “TIM + 25” Low acquisition cost: SIM Card + Traffic offer
and “TIM + 5” high user
pre-paid plan Subsidy reduction
Business
Blackberry / Nokia communicator/
Treo EDGE Strong innovation drive & launch of exclusive offer
Long distance and international Volume discount for nationwide contracts
roaming offers
VAS
SMS/MMS “Carta Servizi” as Evolution of VAS from an attribute of positioning
a service
Re vamp the wap portal to revenue driver
10
11. Successful marketing activities
Deeper segmentation of Offer: Consumer market
Offers Results
TIM “Chip Only”
Bonuses for recharging Significant Increase in
recharge made in 48
made in 48 hours
Prepaid
hours after the activation
“TIM + 25” Double ARPU compared to the average
for the segment
& “TIM + 5”
Rewarding outgoing traffic Strong participation in the gross addition
for the segment in the period
“TIM Mais 40” “TIM Conta Fixa”: 33% of postpaid
& “TIM Conta Fixa” consumer gross adds
Focus on convenience:
Postpaid
“TIM Light”: 24% of postpaid
Control of expenses consumer gross adds
“TIM Brasil Plans” Boosting postpaid gross
Complete and differentiated additions: +70% growth from
offers combining voice and launch
data service
11
12. Business segment
Strong innovation drive & Launch of exclusive offers
National Corporate Market Share 1 Blackberry: Enlarging the portfolio of services
First in Brazil to offer: > 1 year exclusive
National coverage
International roaming
29% Most advanced handsets portfolio
New offer “Blackberry Professional”
Competitors
All functionalities in a easy and cheap way
SME market share: 30.4%
New plan combining volume and convenience
(monitoring expenses)
TIM 1Q06 Line growth per segment
“Plan Company Control”
Business Segment +70%yoy International Roaming
Total Lines +43%yoy
Focus on capturing heavy users
Local rate promotion
%
1 Source: Pesquisa - Dimensionamento do Mercado Corporativo 12
Brasileiro de Telefonia Celular - Ericsson Business Consulting;
Estudo Pyramid e estimativas marketing.
13. VAS True Care: Easy & Useful Innovation
Increase of services Segmentation evolution:
SMS Boost
penetration community concept
• Data transmission on EDGE • Re launch of the WAP portal • Launch of the ”carta servizi”
• Push e-mail: Blackberry • Strategic contents SMS+MMS
• VAS enable handset portfolio partnership • Stimulate premium SMS
Blackberry Professional: competitive & innovative solution
SMS promotional for weekends
7,6%
Regional approach (contents and offers)
Easy configurations for SMS, MMS and Data
New site WAP and enhanced contents
13
14. Leveraging on customer care
Size: more than 30 million contacts in the quarter
-9%
Efficiency: reduction in average
attending time
1Q05 1Q06
+6%
Effectiveness: increase % of
answered call
1Q05 1Q06
Complains per 1,000 clients
Result: best positioned in complains
rate among major Players
3rd 1st 4th TIM
player player player
Source: Anatel CRC – April 06 Other Players
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16. Strong Growth Revenue and Share in the Market
Gross Revenue Gross Revenues Analysis
1Q06 YoY
R$ mln YoY
Voice (R$ mln) 2,285 + 23%
2,378.4 2,889.0 +21% Traffic Volume (Bln min.) 5.1 + 33%
17% 15% Value Added Service (R$ mln) 181 + 45%
Strong push on
Handsets Revenue (R$ mln) 423 + 7% chip sales (“Chip
83% 85%
Only”), as a low
Handset Sold (thousands) 1,110 -7% acquisition cost
6.3% 7.3% strategy
Average handset prices (R$) 359.7 + 15%
% of mid-high handset sold 40% + 17pp
1Q05 1Q06
Total Net Revenues 2,132 +18%
Service Handsets sales
VAS revenue over Service Net Service Revenues 1,847 +21%
Net Services Revenue share top 3 players Sustainable Growth
TIM
31% 34% ~ +3 pp Confirming outperformance for net
3rd player 22% service revenues growth:
24% ~ +2 pp
1st player 47% 42% ~ -5 pp +21% YoY vs. -1% 1st player and
19% 3rd player
1Q05 1Q06
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17. ARPU Performance
ARPU Analysis Speeding-up VAS
ARPU (R$) TIM
Peer avg.*
VAS Revenue YoY
+23% +24% +23%
181.0 +45%
33.6
32.8 30.0 124.4
26.7 27.0 24.5
7.3%
6.3%
3Q 05 4Q 05 1Q 06 1Q05 1Q06
VAS Revenues (R$ Mln)
Keeping strong gap in ARPU vs. market
% over Gross Services Revenues
Trend impacted by constant market build-up
and strong seasonality:
Data & Growth YoY
Interactive
Seasonal ARPU trend in the Market Users
service
SMS P2P + 58%
36% MMS P2P + 83%
-10% Data + 239%
-8% -9%/10%
64% Usage
SMS P2P + 54%
4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 SMS/MMS MMS P2P + 52%
P2P Data + 336%
*Weighted average 1st and 3rd player
** Estimated 17
18. EBITDA Performance
EBITDA Weight on EBITDA Margin 1
High entry prices
R$ Mln A) Variable costs 1Q06 handsets with
YoY positive impact
Interconnection -0.7 pp on subsidies level
Handsets Cost -3.9 pp
518.2 +58%
- 4.6 pp
327.3
+6.2 p.p. B) Fixed & Commercial 1Q06 Headcount growth
lead by: CRM’s
Commercial expenses -1.0 pp improvements, and
24.3% G&A and Others -0.4 pp pre and post-sale
18.1% supporting
Labor cost +0.3 pp
Industrial cost -0.5 pp
1Q05 1Q06
EBITDA Margin over Total Net Revenue -1.6 pp
(A) + (B) -6.2 pp
1 Calculated as YoY change of the OPEX weight on total revenues
18
19. From EBITDA to Bottom Line
∆ YoY
% +58% +25% -74% +29% 6% -100% +35%
(R$ mln) 191.0 -108.7 82.3 -19.6 -2.1 19.4 80.0
(R$ Million)
R$ Mln
R$ Mln
On track to the
break-even point
518.2 (547.0)
(28.7) (86.5) (151.8)
(36.5)
EBITDA Depreciation EBIT Net Taxes and Minorities Net Losses
Amortization Financial Others
Income
19
20. Net Financial Position
+349 R$ Mln Net Financial Position
(QoQ Analysis)
1Q05 4Q05 1Q06
CAPEX 4Q05: (1,089)
(97) FISTEL fee on FY05: (302) (97)
Handsets acquired 4Q05: (516)
EBITDA: +518 Other changes: +309
CAPEX: (169)
Net Financial Results: (87)
Others: (9)
(1,386)
(1,536)
(1,598)
Operating (96) (37) Historically significant cash
Free Cash Flow: 1,250
(56) (1,536) generation in the forthcoming
Net Financial EBITDA Operating Other non Income Dividends Net Financial quarters
Position -CAPEX Working operating Taxes Position
Dec05 Capital 1Q06
Impact of strong working capital seasonality:
43% of 2005 capex was accounted in the 4Q05, and disbursements made in the 1Q06
30.3% of the 2005 handsets were acquired in the 4Q05 and disbursements made in the 1Q06
Fistel fee on FY05 customer base paid in one installment on March 06
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21. “Safe Harbor” Statements
Statements in this presentation, as well as oral statements made by the management of
TIM Participações S.A. (the “Company”, or “TSU”), 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
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca Visit our Website:
22640-102 Rio de Janeiro, RJ http://www.timpartri.com.br
Phone: +55 21 4009-3742 / 4009-3751/8113-0571
Fax: + 55 41 4009-3990
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