Meeting with Investors - February 2016

1

TIM Brasil Investor Relations

TIM Brasil Company’s Presentation February, 2016

2



Visit our website and download our IR app:

www.tim.com.br/ir

Agenda

About Us ......................................................................................3

Market Overview and TIM Positioning ......................................7

4Q15 & FY15 Results ……………..………………….…..…..…..….………..15

Quality & Network Evolution ……..……..…….…………………....…….27

Regulatory Update……….….….….………….………………………………...30

Industrial Plan 2015-17 ..….….….…………………..……………….………33

Appendix …….............................................................................41

TIM IR app

(English)

TIM RI app

(Portuguese)

http://www.tim.com.br/ir

3



5%

27% 29% 35%

45% 48%

2010 2011 2012 2013 2014 2015

4.2 4.7 5.1 5.2 5.5 5.4

2010 2011 2012 2013 2014 2015

20.3 24.8

27.8 29.7 29.0 25.8

2010 2011 2012 2013 2014 2015

66.2 million customers (26% Share)

More than 458,000 points of sales

184 own stores

15 Customer Care Centers (16k attendants)

~15,000 Antennas

3,448 cities covered

~70,000 km of optical fiber network

23,000 indirect jobs

~R$4.7 billion invested in FY2015 (ex-licenses)

Presence in Brazil since 1998

18th largest Private Company in Brazil*

Approximately R$16 billion of Market Capitalization

TIM: A Solid Path

Growth Via Acquisition

Gross Revenues (R$ bln)

Data Penetration (over customer base)

EBITDA (R$ bln)

CAGR+5%

Urban Population Covered: 82% in 3G and 59% in 4G

~13k employees

*Source: Exame Magazine - 2015

2nd in Market & Revenue Share

CAGR+5%

4


TIM Brasil Investor Relations Corporate Social Responsibility

Joined UN Global Compact in 2008

Member of ICO2 (Efficient Carbon Index) for 6 consecutive years

ISO 14001 certified since 2010, 1st Brazilian telco

Sustainability Member of ISE

(Sustainability Index) for 8 consecutive years

TIM Stands out in Sustainability

Founded in July, 2013

MISSION: We are committed to creating and strengthening resources and strategies for the democratization

of science and innovation that promote human development in Brazil, with mobile technology as one of the

main facilitators.

In public schools

185,000 children and 6,300 professors

In museums and science and technology centers

More than 70,000 people

R$2.5 million in funding

In public administration

Participatory Urban Caretaker

o 4 municipalities

Cultural maps

o 7 municipalities and RS & CE government

In the federal institutions of professional and technological education

TIM Tec

o MOOC platform

Partnership with 5 federal institutes

Commitment with the 2014-16 Social Investment Plan: R$45 million

5



Statutory Audit Committee:

• Report to Board of Directors

• Oversight Financial reporting

• Analyze anonymous complaints

Compensation Board and Internal Control and Risk

Board operate indefinitely and act independently

Whistleblower channel website:

www.tim.com.br/canal-denuncia

Corporate Governance

Brazilian Law “Lei das S.A”

Legal Requirements

Demand for transparency

and disclosures

Highest level of Corporate

Governance Requirement of protection for

minority shareholders

Unique Telco company listed on the Novo Mercado

Committees to Reinforce and Guarantee Solid Corporate Governance

10 members (3 independents)

3 members (1 independent)


3 members


7 members

Equal rights: vote, dividends and tag along

Higher liquidity

• Single class of share (ordinary shares)

Greater independence of Board of Directors (at least 30%)

Strict disclosure policy

http://www.tim.com.br/canal-denuncia/?origin=RI&language=en



Market Overview and TIM Positioning

7



The industry mobile revenue represented 54% of the total industry

revenues in 9M15

Mobile Fixed Fixed BB Pay-TV Group

Customers 2015FY (000´s) 66,234 592 252 n.a. 67,079

Market share 2015FY 25.7% 1.4% 1.0% n.a. ---

Net Adds 12M (000´s) -9,486 190 99 n.a. -9,197

Net Revs 2015FY (R$ Mln) 14,723 660 15,384

ARPU 2015FY 16.7 n.a. n.a. n.a. ---


Customers 2015FY (000´s) 73,268 14,868 7,396 1,788 97,320

Market share 2015FY 28.4% 34.1% 28.9% 9.4% ---

Net Adds 12M (000´s) -6,669 -331 347 136 -6,517

Net Revs 3Q15 (R$ Mln) 6,286 4,295 10,581

ARPU 3Q15 24.3 n.a. n.a. n.a. ---


Customers 2015FY (000´s) 65,978 11,624 8,110 9,897 95,609

Market share 2015FY 25.6% 26.7% 31.7% 52.0% ---

Net Adds 12M (000´s) -5,129 -10 587 -274 -4,826

Net Revs 2015FY (R$ Mln) 10,803 24,352 35,155

ARPU 2015FY 13.0 n.a. n.a. n.a. ---


Customers 2015FY (000´s) 48,061 15,105 6,372 1,169 70,707

Market share 2015FY 18,6% 34.7% 24.9% 6.1% ---

Net Adds 12M (000´s) -2,857 -1,324 -181 -134 -4,496

Net Revs 3Q15 (R$ Mln) 2,048 4,779 6,827

ARPU 3Q15 16.7 n.a. n.a. n.a. ---

TIM represents 24.4% of the industry mobile revenue1

1 - Mobile revenue considers only the 5 major players. Oi numbers are adjusted to include corporate mobile

Source: Anatel and players’ financial statements

Mobile Revenues Share

Nextel Oi Claro TIM Vivo

Brazilian Telcos X-Ray

30.1% 30.5% 31.7% 33.2% 36.5%

24.9% 25.6% 26.6% 26.5% 24.4%

19.1% 17.5% 17.7% 17.5% 17.6%

17.0% 18.3% 17.4% 16.6% 15.5%

8.9% 8.1% 6.6% 6.1% 5.9%

2011 2012 2013 2014 9M 2015

8



26.6%

47.9%

18.2%

4.9%

2.3% 4.8

10.0

98.2

54.6

37.3

Household Income Threshold (E)

Brazilian Mobile Market is Reaching Maturity

Population by Social Class & Income Profile

A

B1

C

D/E

B2

Note: New criteria from Abep adopted after 2014 Source: IPC Maps 2015; Exchange Rate: 4.00 BRL/USD

Total of Individuals (E)

(MM)

Household Distribution by

Social Class

R$15,000 (US$3,750)

R$3,536 (US$844)

R$1,064 (US$266)

R$7,996 (US$1,999)

Unique Users Penetration by Social Class

83% 85%

67%

78%

54%

72%

41%

65%

31%

56%

2009 2011 2013 2015

AB

C1

C2

D/E

Pop >10yrs

48% 58% 65% 68% Brazil

Size (Mln)

Total (Mln)

174.5 205.2

40.8 52.2

34.3 47.4

33.4 50.9

30.9 54.6

e

Average Brazilian Household Income: R$2,794 (US$699)

Household Penetration per Income

Note: MW = minimum wage Source: Teleco (PNAD 2014 - IBGE)

90.4% 98.8% 99.6%

32.9%

76.0% 85.7%

Up to 10 MW 10 to 20 MW More than 20 MW

Mobile

Fixed

9



98

210

07 08 09 10 11 12 13 14 15e 16e 17e 18e

0.41 0.42 0.42 0.42 0.42 0.36 0.32

0.24 0.16

0.10 0.06 0.03 0.02

07 08 09 10 11 12 13 14 15e 16e 17e 18e 19e 64

602

14 15e 16e 17e 18e 19e

Community Era

MTR

Stabilization

Reality Check: Transition Phase

Market

conditions

require a new

STRATEGY

Industry Evolution Path

Multiple SIM cycle

Prepaid segment to follow SIM card cycle

Data traffic booming

Data overcoming voice revenues by 2016

Expansion Consolidation

07 08 09 10 11 12 13 14 15 16 e 17e 18e 11 12 13 14 15e 16e 17e

Brazil Mobile Traffic (PB)

Mln customers

82 min

07 08 09 10 11 12 13 14 15e16e

Voice slowdown Avg Market MOU(min)

Source: Internal estimates and BofA ML Global Matrix

< 117 min

Data Era Transition

R$

https://www.google.com.br/url?url=https://logodownload.org/whatsapp-logo/&rct=j&frm=1&q=&esrc=s&sa=U&ei=RmuIVcKsKpD9sATun5WwDA&ved=0CBYQ9QEwAA&usg=AFQjCNGysfTGR2e0nWfVTUbt5Qcj_qA1_w

10


TIM Brasil Investor Relations Commercial Strategy Evolution

o Volume Driven (market share)

o Base of Pyramid

o Offer Based on Community

o Handset leadership (focus on volume)

o Mass Channels

o Mobile + B2C

o Value Driven (value share)

o Big Middle of Pyramid + Value Clients

o Bundle of Voice + Data + Off-net

o Handset Support (focus on value)

o Value Channels

o Mobile + B2C + B2B + selective convergence

15 16 17 18 19

OLD go2market

NEW go2market

NEW PORTFOLIO

MODEL

Voice + data bundles

On-net + off-net voice

Recurring billing

Customer spending concentration

Protection of data value

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TIM Brasil Investor Relations New Offer Details on Pre and Control: Throw 2nd SIM Away

SIM card consolidation leveraging on off-net offering

“Fair value” on data offer

Coherent with customers current total spending

Only ONE SIM Card

100 min to all operators - Local & LD

150 MB of data

SMS to all operators

R$7.00 7 days

500 min to all operators - Local & LD


1GB of data

New Control Plan New Prepaid Plan

R$50.00 month

Higher value alternative at R$10 (300 MB) Additional price points at R$35 (500 MB) and R$70 (1.5 GB)

12


TIM Brasil Investor Relations New Offer Details on Postpaid: Tackling High Value Game

Freedom to use On & Off net calls

Best value for money postpaid offer in Brazil

1,000 min to all operators - Local & LD


R$99.00 month

New Postpaid Plan

Preserving data value and monetization (rightsizing data price points)

Higher value alternatives at R$139 (4GB) and R$169 (6GB)

No roaming charges

2GB of data

13


TIM Brasil Investor Relations New Positioning for a New Reality

Strategic Goals

Adjusting to Challenges

o Infrastructure as key enabler to resume growth

o Recover innovation and disruptive positioning (first mover advantage)

o Defend voice & maintain data acceleration to rebound revenues

o Better data monetization

o Leverage on Opex efficiency to sustain EBITDA and expand margin

Situation Recap

o Mobile market reaching maturity

o Community effect slowdown

o SIM Card consolidation (massive prepaid disconnection)

o MOU sharp reduction

o Voice revenues decline overcoming data growth

o Getting near the final stage of MTR relevant impact

Actions to Date

o Repositioning in Network Quality

o Liberty Top

o 50MB/day allowance

Actions Moving Forward NOW!

o New Portfolio

R$7.00/week

R$50.00/month

R$99.00/month

4Q15 & FY15 Results


15

A Tough Scenario in 2015

GDP Growth Estimates for 2015 (%YoY)

Inflation Estimates for 2015 (%)

Cut investment program Maintenance of appropriate infrastructure investment

Stick to existing offers A completely new portfolio for all segments

Conventional Course of Action

FX Rate Estimates for 2015 (R$/US$ at year end)

Market Deterioration TIM’s Approach

Defend value of community business model

First mover on SIM Card consolidation with disruptive off-net offers

Jan/15

-23 mln

Dec/15

Mobile Market Users

Cut costs across the board Structural yet selective efficiency program

0.6%

-1.0% -1.5%

-2.8% -3.7%

Dec/14 Mar/15 Jun/15 Sep/15 Dec/15

6.5% 8.1% 9.0% 9.5%

10.7%


2.80 3.20 3.20 3.95 3.90


Source: BCB Focus Report; Anatel


16

5.54 5.40

2014 2015

2015 Highlights

Total Net Service Revenues (R$bln; %YoY)

EBITDA (R$bln; %YoY; ex-towers sale)

16.3 15.4

2014 2015

-2.6%

Despite a challenging year...

…sustaining a long term strategy…

Efficient approach defended EBITDA

performance

Capex (R$bln; %YoY; ex-license)

Capex intensity bearing fruits

OPEX ex-COGS: -7% YoY

…and repositioning marketing approach with focus on value

SIM card consolidation Quality & Image Focus on 1st SIM

New strategic

positioning

Eliminating dependency from community effect

Focusing on the evolving “Big Middle”

Source: IPC of 2015

Class A

Classes B + C

2%

27%

71%

-0.9 mln

-0.1 mln

Defending EBITDA

4G Coverage

Leadership

+19%

3.9 4.7 -5.8%

Traditional

Innovative

2014 2015

+40%


17

Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

17% 21%

84%

-10.6 +1.1

79%

2014 PrepaidNet Adds

PostpaidNet Adds

2015

Old Portfolio New Portfolio

Customer Base Analysis

Prepaid

Postpaid

TIM’s Customer Base (Million users)

76

66

Prepaid Disconnection Analysis (Million users)

May-15 Jul-15 Sep-15 Nov-15

Defending position on 1st SIM users (user base of 1st SIMs, estimated by usage profile)

• A better representation of Customer Base

• Prepaid Net Adds TIM -10.6mln (Market -28.4mln)

• Focus on efficiency and profitability

• Maintained leadership on prepaid share and regained #2 on postpaid human*

“pay as you go”

Recurring payment

New View of Voice Customer Base (average users per period)

+19%

-15%

Jan-Oct/15 Nov-Dec/15

Organic Churn

Cleanup

2.7 1.1 1.0 1.0 -0.5

P1 TIM P3 P5 P4

Net adds Post

New Offer *Ex-M2M/Modems


18

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

ARPU Outgoing

First Take on New Offers

R$7.00 7 days

R$50.00 month

R$99.00 month

Mobile Number Portability (thousand users)

Total Postpaid (net port-in/out)

Traffic Indicators (total base)

120 120

1Q15 2Q15 3Q15 4Q15

340 475

Bytes of Use (MB)

Minutes of Use

+2% Prepaid Recharges

(mln users) ARPU Outgoing

+43% Control Gross

Additions (mln users)

Base New Offer

+46% Postpaid Gross

Additions (mln users)

Base New OfferBase New Offer

ARPU Outgoing

Estimated Actual

Voice traffic mix: cost impact within expected range* (mix of minutes for prepaid users)

Off-net Fixed

On-net

9% 20%

+% Double Digit

+% Double Digit

+% Single Digit

%Port-in/Gross Additions

New Portfolio launch

*Illustrative


19

36%

45%

Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15

Data: Building the Path for Long Term Growth

Data Penetration on Base (% of customer base)

3G & 4G Users (mln users)

VAS Gross Revenues (R$ mln)

70%

76% 73%

78%

37.5 37.5

2.0 7.1

Dec/14 Dec/15

3G+4G % over Base

52% 67%

6.62

7.74

2014 2015

% Mobile Serv Revenues

28% 35%

75.7 66.2

Others (2G, M2M etc)

4G

3G

73% 85%

27% 15%

2014 2015

Innovative Revenues (% of VAS Gross Revenues)

SMS

Innovative

+39% Data connectivity

(YoY)

+17%

Postpaid

Control

Prepaid

x3.5 YoY Mkt Share: 28%

+35% (YoY)

Flat YoY Mkt Share: 25%


20

Fixed Business Performance

130

232

4Q14 1Q15 2Q15 3Q15 4Q15

Live TIM Base (thd of clients)

Fixed Net Revenues Performance (R$ mln; %YoY)

579 660

x2 +5%

Fixed Revenues2014

ResidentialServices

CorporateServices

Fixed Revenues2015

+14.1%

Live TIM - Market Share of Net Adds (SP and RJ >34Mbps)

+10% ARPU YoY

TIM Fixo: Fixed Voice Service (w/ wireless technology)

Corporate Sales (%YoY)

2014 2015

43.9% 50.2%

6.8% 14.7%

48.0%

34.1%

0.5% 0.5% 4Q14 4Q15

Live TIM

P3

P1

P4

1%

34%

2014 2015

Share of Net Adds

Mkt Share 0.9% 1.4%

+25% +78%


21

P3 8%

P2 30.2%

TIM 46.9%

P1 14.5%

19,498 17,139

0% -40% -45%

+14%

24% 30%

38%

76% 70%

62%

2013 2014 2015 2016

13.2 13.2

2.5 1.5

2014 2015

Reducing MTR Impact (Revenues from MTR; R$ mln)

Financials: Changing Revenue Pattern Continues

-12.1%

Total Net Revenues Breakdown (R$ mln; %YoY)

2014 2015 Mobile Business

Generated

Fixed Incoming Handsets

Data Transformation (% over net service revenues)

Mobile Service Net Rev. (R$ bln; %YoY)

Voice

Data

~800

~300

Tho

usa

nd

s 1Q12

Resilient “Business Generated” amid a tough year

…in spite of a difficult macro and competitive environment;

…change in handset business strategy led to a sizable reduction of product sales without negatively impacting on margin.

4Q15

>20% <8%

15.7

14.7

Flat: 0%

~R$1Bln

% of service revenues

incoming

outgoing

ARPU and data users growth

Market Share of Smartphones (among operators in 2015)


22

Financials: Structural Efficiency Program

Opex Performance (ex-COGS and towers sale) (% YoY)

Efficiency Across the Board (% YoY; Δ R$mln YoY)

-44%

-11%

-9%

-7%

-6%

8%

1%

Selling & Marketing

Bad Debt

G&A

ITX & Network

COGS

Personnel Expenses

Others

2013

2014 2015 4Q13 4Q14 4Q15

2014FY: R$13,960

2015FY: R$11,744

-16%

Annual View Quarter View

3 year Efficiency Plan Update

Jan/15 Dec/17

R$ 1 bln

Dec/15

2%

-7% -7%

-2%

-8%

-4%

-7%

Ex- COGS

~ 35%

10.6 9.9

Opex 2014 Growth Inflation Regulatory(ITX)

Efficiency Plan Opex 2015

Opex Evolution (ex-COGS and towers sale) (R$bln; % YoY)

Recurring

-7%


23

1,546

2,071

2014 2015

5,538 5,395

1,211

28% 31%

2014 2015

2014 2015

Financials: Margin Expansion

EBITDA & Margin (R$ mln; % YoY)

Reducing MTR Impact (EBITDA from MTR; R$ mln)

1Q12 4Q15

>25% <10%

Net Income

(R$ mln; %YoY)

0.86 EPS 0.64

First Margin Gain due to Business Reshape (%)

Business anchored by a solid balance sheet

~300

~150

Net Debt (R$ bln) 1.7

1.3

0.23x 0.32x Net Debt/ EBITDA

R$468.6mln

Dividends Proposal

% of EBITDA

Service Margin 35% 36%

-2.6%

Towers Sale

Margin ex-towers

sale

+34% R$839 mln of Towers

Sale

80%

84%

2014 2015

Recurring: -20% YoY


24

On human* postpaid base

New Portfolio

Conclusion & Perspectives

Maintaining the focus on business development

“Perfect storm” scenario in 2015

Economy deterioration MTR cut impact Voice to Data migration

Strong fundamentals and focus on the long term helped to reduce impacts

Continuous adaptation to new market conditions

Pay as you go Voice centric Market share Community

Recurring Data centric Revenue Share CB management

From…

...to:

48%

Data Users (% over base)

(+2.6 pp YoY)

31.5%

EBITDA Margin (in FY2015)

(+3 pp YoY)

+35%

Innovative Rev (in FY2015)

YoY

68%

Smartphones (% over base)

(+18 pp YoY)

#1 4G Coverage

>70,000 Fiber Network(Km)

2016…

2016-2018 Industrial plan

Update

Infrastructure evolution Efficiency

plan on track

#1 On prepaid base

#2

*Total postpaid ex of M2M / modems


25

BNDES 55%

Leasing¹ 17%

BEI 15%

Others 15%

-152.0 -421.0

1,274

1,733

2012 2013 2014 2015

12.23%

14.33%

2011 2012 2013 2014 2015

Net financial position details - Cash & Debt Evolution

Short term debt

Better Profile: Less Short Term Debt

Debt by Lender in 4Q15 (% of gross debt; post hedge)

Debt Position (R$ mln; % of total debt in short term)

Cash Position (R$ mln)

5,233

Comfortable liquidity margin 18% 21% 21% 27%

Higher cash yield and debt cost due to CDI increase in the period Bigger gap between cash yield and debt cost due to smaller cost of

new loans

Δ: 120 bps

Cash Yield vs. Debt Cost (% per year)

Net Financial Position (R$ mln)

Δ: 114 bps Cash yield

Debt cost

Net debt/

EBITDA 12M 0.23x -0.08x -0.03x 0.32x

4G: -477 Towers: +1,254 Net effect: -777

¹ Leasing from Tower Sale + LT Amazonas

4,431 5,288 5,233

6,700

2012 2013 2014 2015

4,279 4,867

6,507

8,432

2012 2013 2014 2015

Quality and Network Evolution


27

A Year of Infrastructure: TIM 4G Leadership

24 45

411

2013 2014 2015

Cities Covered (4G)2

(# of cities)

Urban Population Covered (4G) (% of urban population)

27% 36%

59%

2013 2014 2015

+32pp

CAPEX per Technology (R$ mln)

2014 2015

4G

2G

3G

Number of Sites (4G) (in thousand)

+133% YoY

-22% YoY

+6% YoY

+387 cities

1.9 3.7 7.7

2013 2014 2015

+4k 4G

Refarming 1,800 Mhz

~65% connected with fiber (1)

13.3 15.0

12.5

Despite the FX headwinds, TIM managed to expand infrastructure above target with

the same Capex plan

Total Pop. Covered2: TIM: 52% P1: 47% P3: 48% P4: 46%

(1) Fiber and other high capacity backhaul (2) Source: Teleco / ANATEL

(+32% YoY)

(+22% YoY) Fiber Backhaul

Fiber Backbone

>70,000 km Total Optical Fiber Network

P1: 193 P3: 164 P4: 83

>70% of Data traffic Carried by high capacity backhaul


28

Quality Improvements

SpeedTest in 2G/3G Network (By Ookla)¹

1,488

3,586

4Q14 4Q15

538

1,014

4Q14 4Q15

(1) Quarterly average; generated from TIM’s analysis over Ookla Speedtest results. 4Q15 until November, last data available (2) Last data available; Source: Anatel. (3) Total per economic group. Source: SENACON/MJ and Anatel. Broadband customer base as of Nov/15 (last data available).

206

142

4Q14 4Q15

Throughput Downlink (Kbps)

Throughput Uplink (Kbps)

Latency (ms)

Number of states within Anatel’s performance Targets (%)² 2015 Consumer Complaints (Demands at Consumer’s Protection Agency - Procon per 1,000 customers)³

100% 100%

Dec-14 Oct-15

85%

100% 96%

Dec-14 Oct-15

3G

4G

100% 100%

Dec-14 Oct-15

3G

4G

Drop Voice and Accessibility

Data Accessibility 3G/4G

Data Drop 3G/4G

2.8 2.1

1.7

1.1

P4 P3 P1 TIM

Regulatory Update

30


TIM Brasil Investor Relations Spectrum – Caps and Distribution

25

25

0

24

19

0

9

16

25

25

0

25

10

5

5

5

5

5

2

5

5

5

2

5

5

5

5

5

5

5

5

5

20

20

30

45

21

21

26

39

40

40

29

20

25

25

25

40

21

21

42

36

30

30

20

20

22

30

25

22

23

30

27

20

20

20

30

30

30

30

20

20

20

40

40

20

20

40

40

20

20

40

40

20

20

40

40

20

20

40

40

20

0

20

20

20

0

20

20

20

0

20

20

20

0

20

20

20

0

20

20

20

0 20 40 60 80 100 120 140

Northeast

South

North

Southeast

Midwest

135

138

69

110

140

140

75

140

113

88

70

110

137

135

140

115

76

116 0

137

140

1,800 MHz

900 MHz

850 MHz

2,500 MHz

2,100 MHz

0

0

0

0

0

700 MHz

6

25

15

Band 850 MHz 900 MHz 1.800 MHz 2.100 MHz 2.500 MHz 700 MHz

Regulated Spectrum Cap (FDD Applications)

(12.5+12.5) MHz

(2.5+2.5) MHz

(25+25) MHz

(15+15) MHz

(30+30) MHz

(20+20) MHz

Global Cap of 80 MHz < Σ of Sub-Caps Specific Caps

Current cap

20

11

Brazil average weighted

by 10 areas of SMC

31


TIM Brasil Investor Relations Main Regulatory Topics for 2016

1Q16

February March

New regulatory framework • Minister of

Communications closed on Jan 15th the Public consultation.

Net Neutrality • Minister of Justice

launched a new Public Consultation on Jan 27th.

Digital TV • New Analog TV

Switch Off Schedule Approval

• Approval of EAD’s 2nd Payment 1-year postponement to 1/31/2017.

Auction • Resuming Auction of

remaining 1,800, 1,900 and 2,500 MHz spectrum, with local blocks.

Digital TV • Feb 15th targeted as

due date to Rio Verde’s Analog Switch Off.

Condecine • The Justice granted

preliminary suspension Condecine tax for companies affiliated SinditeleBrasil.

January

4Q15

November December October

Condecine • 28.5% increase

according to Law 13,202/2015.

New regulatory framework • Minister of

Communications Public Consultation on telecom services model.

Auction • Auction of remaining

1,800, 1,900 and 2,500 MHz spectrum.

Infrastructure Sharing Agreements (regulatory/antitrust approval) • 4G (TIM-Oi-Vivo) • Indoor Sharing (TIM-Oi-

Vivo-Claro) • RAN Sharing in rural

areas (TIM-Vivo).

New regulatory framework • First report to be

presented by Minister of Communications.

Industrial Plan 2016-18

33


TIM Brasil Investor Relations Brazil 2016-18: Meeting the Challenges

1.8% 2.7% 0.1%

-3.5% -3.8%

0.0% 1.7%

2012 2013 2014 2015E 2016E 2017E 2018E

5.8% 5.9% 6.4%

10.7%

7.0% 5.4% 5.0%

2012 2013 2014 2015 2016E 2017E 2018E

2.04 2.34 2.66 3.90 4.25 4.30 4.31

2012 2013 2014 2015 2016E 2017E 2018E

Source: latest IMF estimates for GDP; Internal Estimates for Exchange Rates forecast, Inflation, MTR Value, SIM/user and market revenues trend

Protecting results in a tougher Macroeconomic Scenario…

…and adapting fast to capture opportunities in a reshaped industry context

0.34 0.30 0.23

0.16 0.10 0.06 0.03 0.02

2012 2013 2014 2015 2016 2017 2018 2019

1.65 1.72

1.81 1.89

2.03 2.00 1.96 1.94

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2018e

2.7 10.5 24.2

39.7 33.8

45.7 37.5

25.1 36.5

56.2 61.7 64.8

0

10

20

30

40

50

60

70

2007 2011 2015e

Voice

Data

Real GDP Growth (% YoY)

Inflation Rate (% YoY)

Exchange Rate (R$/USD)

MTR Glide Path (R$/min)

SIM / Unique User

Mobile Market Revenues (R$ bln)

34


TIM Brasil Investor Relations Highlights of the 2016-18 Plan

Telecom industry transformation from Voice to Data

Market maturity and user behavior change impacting Customer Base and Positioning

Challenging Macroeconomic Scenario

Infrastructure requirements evolving with Data and 4G

Context Changes Key Strategic Priorities

Reset positioning: Network Quality / Offer Innovation / Customer Experience

Protect value of Prepaid base: From Market Share to Revenue Share

Increase share of Mid/High Value customers: focus on higher value

Stabilize Corporate Business: accelerate Top /Enterprise and turnaround SMB

Sustain Network Investment with prioritized approach and focus on 4G

Focus on Efficiency: as a structural element

I

II

III

IV

V

VI

35



Market Dynamics Leading to Slower Growth in Customer Base with Better Quality and ARPU

Changing customer profile: increasing value

61.1 63.2

52.7

12.3 12.5 13.6

2013 2014 2015 2016e 2017e 2018e

Customer Base (mln users)

Prepaid

Postpaid

Recurring/Bundles

22.4% >40%

66.2 >60

Total ARPU (R$/month)

18.6 17.7 16.7

2013 2014 2015 2016e 2017e 2018e

Data (%) 24% 30% 37% 46% 54% 61%

Focus on recurring clients, decoupling method of payment and value

Smaller Prepaid base, but higher ARPU and better quality profile

Controle as key source of value generation, as users concentrate spending on TIM

Postpaid stabilization and growth as a result of new offers and business turnaround

Constant revenue share growth during plan period

Mobile Service Revenues Share (%)

~23%

2015e 2016e 2017e 2018e

36


TIM Brasil Investor Relations Enlarging our Data Opportunity

BOU (MB) 164 234 306 394

4G Total Population Coverage1

52% 48% 47% 46%

5%

TIMP1P3P4P5

27% 36% 59%

2013 2014 2015

Urban population

3G & 4G Users Evolution

17% 33%

52% 67%

4G

3G

% 3G+4G user/base

12.3 23.6

37.5 37.5 0.0

0.4

2.0 7.1

2012 2013 2014 2015

x3.5 YoY Mkt Share 28% (#2)

Flat YoY Mkt Share 25% (#2)

4G coverage leadership

Data adoption drives change of revenue profile

49% 55% 59% 63%

68%

45% 45% 43% 43% 48%

2014 1Q15 2Q15 3Q15 4Q15 2016e 2017e 2018e

% Smartphone/Base

% Data Users/Base

26% 42%

50%

74% 58%

50%

2012 2013 2014 2015 2016e 2017e 2018e

Voice

Data2

Data Penetration (on TIM Brasil’s User base)

Data Penetration (on TIM Brasil’s Generated Revenues)

1 Coverage calculated by Teleco website (www.teleco.com.br) 2 Data = Data connectivity, Content, Other VAS, SMS

+32pp

37


TIM Brasil Investor Relations Capex Cycle: Accelerating 3G and 4G Data Coverage

3.9

4.7

2014 2015 2016e 2017e 2018e

After the 2015-16 cycle, Capex intensity* to gradually decline

4G coverage to overtake 3G

*Excluding Spectrum

• Fast transition from 3G to 4G: better quality and more efficient

• FTTS to support 4G reaching >80% of total traffic

Urban Population Covered

Capex per Technology

>14 bln

<14 bln

2014

2015

2016e

2017e

2018e

4G 3G 2G

• Leadership in 4G Coverage and match 3G coverage in 2 years

• Competitive 3G coverage in all states

• Refarming of 1.8 GHz as a short-term competitive advantage

Number of Sites (000)

36%

59%

79% 82% ~90%

2014 2015 2016e 2017e 2018e

4G

3G

Capex Plan (R$)

4G

Total Sites

12.5 13.3 15.0

16.4 17.7

19.5

2013 2014 2015 2016e 2017e 2018e

Other

38


TIM Brasil Investor Relations Growing Support from Cost Efficiency

Efficiency Drivers Im

pac

t /

Co

mp

lexi

ty

- Optimization /

Control

Strategic Sourcing

Organization/ Rightsizing and

Efficiency

Process Improvement

Business Model Changes

2015-17 Efficiency Plan + Network Efficiencies

Jan/15

> R$1 bln

Dec/15

~ 35%

Dec/17

1. Zero Leased Lines Project

2. Rental & Power

3. In/Outsourcing and HR projects

4. Sales & Marketing initiatives

5. Process rationalization & automation

6. Zero Based Budget

7. Strict disconnection policy

Improving EBITDA Margin and FCF

26.1%

28.4%

31.5%

2013 2104 2015 2016e 2017e 2018e

EBITDA Margin (% over Net Revenues)

• Cost efficiencies defend EBITDA performance

• Long term margin expansion as revenues mix turns to data

• FCF will improve as pressures on EBITDA and Capex reduce +

39


TIM Brasil Investor Relations Guidance Summary

Targets reaffirm commitment to long term value creation for all shareholders

KPIs Targets

> R$1 bln in savings between 2015-17 Opex

Margin expansion for every year between 2016-18 EBITDA Margin

< R$14 bln between 2016-18 Capex*

Data as main revenue component from 2016, focus on Revenue Share Service Revenues

*Excluding Spectrum

Appendix

41



79% 58%

75% 82% 72%

21% 42%

25% 18% 28%

TIM Vivo Claro Oi Industry

Prepaid Postpaid

Mobile Base Analysis

Source: Anatel

3G 4G

Market Share Mobile Customer Base (in 2015)

Nextel Oi Claro TIM Vivo

26.9% 25.7%

24.9% 25.6%

29.1% 28.4%

18.8% 18.6%

17. 0%

19. 0%

21. 0%

23. 0%

25. 0%

27. 0%

29. 0%

2012 2013 2014 2015

Market Share per Technology

25.8% 24.1% 23.4%

25.1%

41.3%

31.9%

8.9%

17.0%

2012 2013 2014 2015

44.0% 40.6%

32.2% 28.1%

11.3% 12.5% 12.5% 16.6%

2013 2014 2015

42


TIM Brasil Investor Relations Mobile Number Portability in Details

Source: Company

Port-in (thds lines)

10

20

30

40

50

60

70

Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15

Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15

TIM’s Net of Port-in/out for Postpaid (thds lines)

43


TIM Brasil Investor Relations Brazil’s Specifics

Source: Teleco (TIC Households, 2014)

Household Penetration Users per Age Group

Brazil Facts

8.5% of Brazilian above 15 years are illiterate

30 mln people still live in the rural areas

5.8% of the cities accounts for 75% of GDP

Brazil is in the 7th

position in terms of GDP

Source: PNAD – 2014 (IBGE)

94.5% 97.1%

67.7%

91.1% 88.1%

72.1%

20.2%

42.1% 45.4%

37.1%

2007 2008 2009 2010 2011 2012 2013 2014

Average brazilian age: 32 years

13 mln brazilian between 30 and 60 years

TV

Mobile Phone

Radio

Computer w/ internet

Fixed Phone

Mobile Phone

Internet

82%

64% 74%

15%

10-15 yrs 16-24 yrs 25-34 yrs 35-44 yrs 45-59 yrs 60 yrs ormore

44



• A longer then expected process of fiscal adjustments and a greater level of uncertainties in politics continues to trim economic activity

• Government and market consensus have postponed a resume in GDP growth to 2017

• Considering interest rates (SELIC) and FX at current levels, government base case suggests inflation should being to converge to target in 2017

Source: IBGE and Central Bank Inflation report (as of Feb/15) for Government Estimates

GDP Forecast (% YoY growth)

Inflation Forecast (IPCA: 12 months)

Interest Rate Forecast (% Selic Target p.y. - year end)

FX Rate Forecast (R$/U$ - end of period)

Macro Scenario Outlook

Market Consensus

Government Estimates

(3.6)

(1.9)

1.0

2.8

0.2

(3.5) (3.2

0.6

2013a 2014a 2015e 2016e 2017e

10.8

6.5

4.8

6.2 6.3 9.0 7.6

6.0

2013a 2014a 2015e 2016e 2017e

14.25 14.25

10.00

11.75

14.25

14.25

12.50

2013a 2014a 2015a 2016e 2017e

3.9 3.9

2.4 2.7

4.0 4.4 4.4

2013a 2014a 2015a 2016e 2017e

45



Tax Burden Composition (% Gross Revenues)

Cofins PIS/ PASEP ICMS Fistel Fust/

FUNTEL

TotalTotal Fust/ FUNTEL

PIS/ PASEP

ICMS Cofins Fistel

3% ~1%

28%

~5% 1.5% ~39%

Taxation represents almost 40% of companies gross revenues

Source: players Balance Sheet

2 Considers TIM, Telefonica, Oi and AMX

45.7 46.0

2012 2013

Tax Burden

Telecom Industry Tax Payments2

(R$ bln)

Tax Burden over Net Revenues (over mobile phone services - voice)

Source Teleco study of July 2014

46


TIM Brasil Investor Relations Fistel in Details – Customer Base Dynamics

TFF is calculated over the number of lines on 31/Dec plus the block of credit generated by negative net adds in the TFI mechanic. It is due by 31/Mar of every year. For TFF an operator pays 50% of a TFI (R$13,412) per line.

Maintenance

Fee (TFF)

TFI is paid over every net addition and it is due every month. In case of negative net additions the operator holds a credit that never expires against Anatel and can be used for future positive net adds (balance account for TFI credits). For TFI an operator pays R$26,83 per line.

Installation

Fee (TFI)

Fistel was created by Law 5070/66, and subsequently amended by the General Telecom Law. It is a fund that is intended to cover the costs incurred by the Federal Government in exercising oversight of telecommunications, and to fund the development of new tools and techniques for the exercise of surveillance. Fistel is composed of two fees: TFI (Taxa de Fiscalização de Instalação – Installation fee) and TFF (Taxa de Fiscalização de Funcionamento – Maintenance Fee). The fees are paid over the number of telecommunication stations (active lines1, BTS, etc) installed and in operation.

50

56

50 1 1 1 1 1 1 -1 -1 -1 -1 -1 -1

BOP jan feb mar apr may jun 1H jul aug sep oct nov dec EOP

50

44

50 -1 -1 -1 -1 -1 -1 1 1 1 1 1 1


50 50 50 -1 1 -1 1 -1 1 -1 1 -1 1 -1 1


50 50 50 1 -1 1 -1 1 -1 1 -1 1 -1 1 -1


Net adds 12M = 0 Credit = 6mln lines TFF base= 50 + 6 = 56 mln

Net adds 12M = 0 Credit = 0 mln lines TFF base= 50 + 0 = 50 mln



EXA

MP

LE 1

EXA

MP

LE 2

EXA

MP

LE 3

EXA

MP

LE 4

1M2M lines have a separate recording

2R$13,41 is the sum of TFF + CFRP + Condecine

47


TIM Brasil Investor Relations Balance Sheet Analysis

Short term

TIM’s Debt Composition

Price/Book Value

Source: Bloomberg

2015 2014 2013

Long Term

Price/Earnings

Accounts Receivable Turnover (days)

Payable Turnover (days)

TIM

VIVO

OIBR

Market Average

ROE (Net Income/Shrd. Equity) ROA (NOPAT/Total Assets) ROIC (NOPAT/Invested Capital)

1Q 2Q 3Q 4Q

149 158 181

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

43 41

43

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

1.9

1.0 1.2

1.0 0.5

0.1

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

19.0

13.3

4.0

13.6 12.2

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

13.4% 11.9%

7.9% 8.7%

8.5% 10.7%

8.4%

2013 2014 2015

10.7% 10.3%

7.6% 8.5%

11.2%

9.9%

6.6%

2013 2014 2015

7.4% 6.7%

4.9% 5.6% 5.6%

5.3% 4.6%

2013 2014 2015

48


TIM Brasil Investor Relations Quarterly Historical Data

49


TIM Brasil Investor Relations Annual Historical Data

50


TIM Brasil Investor Relations Historical Data: Operational

51



Stock Performance (base 100)*

*Last price as of 01/31/2016 Source: Bloomberg

Structure and Stock Performance

Shareholders Structure

Treasury Shares: 795,888 (0.03%) Total Shares: 2,421,032,479

30

55

80

105

130

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16

Ibovespa -13.9%

TSU -64.2%

TIMP3 -46.2%

52



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


Phone: +55 21 4109-3742

Vicente Ferreira


Phone: +55 21 4109-3360

Leonardo Wanderley


Phone: +55 21 4109-4017

Rodrigo Godoy


Phone: +55 21 4109-3446

Luiza Chaves


Phone: +55 21 4109-3751

Visit our Website

www.tim.com.br/ir

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.

Safe Harbor and IR Contacts

Safe Harbor Statements

http://www.tim.com.br/ir

53


Meeting with Investors - February 2016

Investor Relations

Transcript of Meeting with Investors - February 2016