Tim meeting with investors - sep 2012

TIM Brasil - Meeting with Investors

September, 2012TIM Brasil - Meeting with Investors

September, 2012

3+

Strategy

23

27

28

31

37

64

77

92

114

126

246*

332

894

986

2008 2009 2010 2011 2012*

Mobile Business is GDP-plus phenomenon

*Market Expectations as of August, 03rd(Focus BC) *Expected (ML Matrix)

-0.3%

+7.5%

+2.7%+1.9%

AboveR$4,808

30

46

93

From R$1,115 to R$4,808

From R$768to R$1,115

From zero to R$768

40

113

31

49

47

66

A/B

C

D

E

2003 2008 2014

Mln of people

13 20

16

Class

Demographic

improvements

Global Mobile Markets

Subscribers 2011

4o

Mobile will

continue to

take great part

of growth

Global Mobile Markets

Annual Service Revenues 2011

US$ Bln

173

108

82

Source: BofA ML Global Wireless Matrix 2Q12; Teleco; IBGE * Including Nextel

46,050,2

55,062,0

68,8

2008 2009 2010 2011 2012*

+9.1%

+9.6%+12.7%

+11.0%

Brazilian real GDP growth Mobile Serv. Revenue growth

R$ Billion

4

Mln Subs

4o

2845

53

Mobile

Fixed

Continuous Reshaping of the Brazilian TLC Market

(44%) (52%) (56%) (60%)

(56%) (48%) (44%) (40%)

2009 2011 2014 2016

106 117 126 134

Market Transformation

R$ Billion

Voice is Good (Push the FMS)

R$ Billion

Internet for All

R$ Billion

2016

82

2009

96

Fixed

Mobile10

Mobile

2016

52

Fixed

51 2924

28

2009

Mobile Internet

competitive vs

<2 Mbps wireline

BB accesses

5

Mobile over

Fixed”:

towards 60/40

split

Force Fixed-

Mobile

substitution

(voice)

FMS Secular Trend Remains on Play

-23%

2Q121Q124Q113Q112Q111Q11

Fixed Tariff Premium over Mobile

ARPM (R$/min)

Leading Traffic to a Sharp Increase

(Bln Minutes)

Leadership in LD Market Share

(% Minutes)

Mobile Outgoing price (% YoY)

Lines in Service

(D% yoy)

Fixed Revenue

(D% yoy)

6.7%28.3% 42.0%

49.8%

47.8% 47.7% 48.1%

88.2%66.5%

53.3%

45.8%

48.5% 48.3% 49.7%

jun/11dec/10 dec/11jun/10 mar/12jun/09

Incumbents*TIM

* Telemar, Brasil Telecom, Telesp e Embratel.

2006 2007 2008 2009 2010 2011 2012

Mobile

Fixed

3Q11

1Q12

4Q11

23.8

-14%

22.621.820.118.417.5

Source: Companies results and Teleco.

40% mobile

discount

Fixed to Mobile Substitution… …impacting Fixed Incumbents

2Q12

jun/10

Lines

(D% yoy)

Mobile Revenue

(D% yoy)

… benefiting Mobile Segment

3Q11

1Q12

4Q11

2Q12

-8.0%

-7.0%

-7.6%

-4.9%

-4.0%

-4.5%

-3.4%

+18.0%

+18.6%

+18.6%

+17.6%

3Q11

1Q12

4Q11

2Q12

3Q11

1Q12

4Q11

2Q12

+11.5%

+14.5%

+12.4%

+7.9%-8.5%

6

Integrated EBITDA

(D% yoy)

-7,0%

-6.2%

-5.9%

-10.0%

-0.6%

3Q11

1Q12

4Q11

2Q12

Mobile EBITDA**

(D% yoy)

Category 1

Category 2

Category 3

Category 43Q11

1Q12

4Q11

2Q12

+11.7%

+12.7%

+9.6%

+6.0%

**Represented by TIM

Integrated Players Loosing Revenues for FMS...

**From 4Q11 to 2Q12, Mobile Revenues are represented by Personal Mobility.

***YoY for Mobile Rev. represented by Pers. Mob. and Fixed Rev. by others ex. Pers. Mob.*Intercompany eliminations were estimated

+7%

YoY

+7%

+1%

YoY YoY

YoY***

-0.2%

+8%

-12%

-6%

+7%

-2%+4%

+17%

+5%

-4%

TIM

(R$ Billion)

Vivo

(R$ Billion)

América Móvil – Brazil*

(R$ Billion)

Oi**

(R$ Billion)

-

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

3.6 3.73.9 3.8

4.34.7

4.5 4.54.4

94% 94% 94% 94% 94% 95% 95% 94% 94%

6% 6% 6% 6% 6% 5% 5% 6% 6%

3.6 3.73.9 3.8

4.34.7

4.5 4.54.4

94% 94% 94% 94% 94% 95% 95% 94% 94%

4,3 4,5 4,8 4,7 4,7 4,9 5,3 5,1 5,1

-

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

7.9 8.2 8.08.3 8.6

8.37.8

8.3 8.2

56% 57% 58% 58% 57% 59% 61% 61% 62%

44% 43% 42% 42% 43% 41% 39% 39% 38%

2,5 2,6 2,7 2,7 2,8 2,8 2,9 2,8 2,7

42% 41% 41% 40% 40% 39% 40% 41% 40%

19% 20% 20% 22% 22% 23% 23% 23% 24%

-

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

Fixed Mobile NET

6.4 6.77.0 7.0

7.7 7.57.47.27.7

39% 39% 38% 39% 39% 38% 38% 36% 36%

24% 25% 26% 25% 28% 28% 31% 31% 32%

-

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

7.3 7.3 6.9 7.1 7.06.97.4

6.8 6.9

56% 57% 58% 58% 57% 59% 61% 61% 62%

76% 75% 74% 75% 72% 72% 69% 69% 68%

7

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

3. TIM Fiber

Selective attack of the Adsl incumbents via

Naked VDSL ultra BB powered by the

5,300km Optical Fiber in RJ/SP.

Download: 35 Mbps

Upload: 20 Mbps

30%

Fixed

Mobile

Price per minute

<2 Mpbs

nominal speed

> 2 Mbps

nominal speed

Limited BB capabilities from incumbents create 3 opportunities for TIM

22.5% 7.5%75%

25%

BBVoice onlyTotal wireline

market accesses

~70%

100%

% of fixed accesses

1. FMS Voice

2Q12

13,844

2Q11

9,141

2. FMS Data

(Prepaid Internet monthly unique users; „000 clients)

15% 35%Smartphone

penetration +1,980Bps

+51%

8

9+

2Q12 Results

Var. % YoYVar. % YoY

+12.6%

+14.7%

+9.2%

+12.4%

+56.4%

+7.0%

+9.8%

+6.0%

+10.2%

+45.9%

2Q12 1H122Q11

4,2524,547

4,668

1,214

1,262

1,057

9,016

9,180

2,383

2,453

1,600

Q2 Financials Highlight

Total Revenue (reported)

Total Revenue (MTR adjusted)

EBITDA (reported)

EBITDA (MTR adjusted)

CAPEX

Guidance

>10%

P Confirmed

>10%

P Confirmed

~R$3 bln

P Confirmed

(+R$0.5 Mln licenses)

R$ mln

1,145

724

Anticipation

focused on

Network

10

Main

Achievements

Quarter

Impact

Leadership in Prepaid segment

Fastest data growth (+40%YoY) and

smartphone at 35.2% of total base

TIM Fiber started-up (Live TIM brand)

MTR cut (-R$121mln rev; -R$48 mln

EBITDA)

Macro-economic and competitive

environment

TIM Fiber start-up costs (~R$11 mln)

P Macro economic scenario slowdown in 1H12 vs. 1H11 (i.e.:

level of indebtedness; high commitment of income to debt

payment; GDP lower growth)

P Short term competition aggressiveness

-28%

Effects on Q2: MTR and Macro Environment

Total Net Revenues

(R$ billion)

EBITDA

(R$ billion)

MTR Macro Environment

4.5

2Q11 2Q12

0.1

4.3 +7%

+10%

1.1 1.2

2Q122Q11

0.1

+6%

+10%

P -R$121 mln impact on net

service revenues and -

R$48 mln on EBITDA

P Still no elasticity coming on

and traffic reshape to offset

MTR impact

P FMS will lead to lower

dependency on MTR

143%

2Q122Q11

11%

83%

2Q11 2Q12

D YoY

Net Revenues Volume

Drivers to softening these

impactsKeeping the Innovative

approach

EILD regulatory

framework

Macro scenario

improvement

Intelig/ TIM Fiber

(leased lines swap)

4Q12

4.7

1.3

2Q12

Revenues Costs

4,2%3,3%

2,1%1,4%

0,8% 0,7%

2,2%

3,1%3,9%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12e 3Q12e 4Q12e 1Q13e

Source: BCB, Bradesco Corretora and Company’s estimates

GDP Quarterly Growth (YoY)

Handset Sale

11

Operational Growth Remains Strong

Customer Base

(million lines)

Total Market Share Growth

(% of total lines)

9.7+2.7

+3.7+4.9

+3.1+1.7

68.9

10.0

Pre

Paid

Post

Paid

2Q11

55.5

8.0

1Q11

52.8

7.7

3Q11 4Q11 1Q12 2Q12

59.264.1

67.2

8.79.3

Net Adds

(000)

Post Paid

Pre Paid

223 632317 655 348

1,598 3,0532,359 4,219 2,786

348

1,308

D YoY

2Q

+2.0

+11.3

+25%

+24%

D%

Oi

Claro

Vivo

18% 20% 18% 17% 15% 14% 16% 19% 20% 18%

17% 17% 19% 24% 25% 25% 26% 26% 27% 24%

15% 16% 15% 16% 17% 18% 18% 17% 15% 13%

15% 10% 7% 9% 13% 12% 15% 16% 12% 15%

Vivo

TIM

Claro

Oi

3Q112Q111Q11 2Q124Q11

25.5%25.4%

1Q10

25.4%

2Q10

25.3% 25.4%

4Q103Q10

29.5% 29.5%

24.0%

25.5%

29.5%29.5% 29.8%

26.0%

19.5%

25.1%

29.7%

26.8%26.5%

19.4% 19.7% 19.1% 18.8% 18.8% 18.5%

30.1%30.2% 30.1%

24.6%25.3%

20.1%

25.5%24.9%

20.4%

29.6%

18.7%

24.6%

26.9%

1Q12

23.7%24.5%

25.1%

34,6% 34,2% 33,9%32,9% 32,2% 31,8% 31,7% 31,4% 31,1%

30,8%

23,5% 23,5%

24,8% 25,2% 25,3%26,4% 27,6% 29,1% 30,9%

31,7%

25,4%24,6%

24,0% 23,0% 22,5% 22,2%21,6%

20,6% 19,7% 19,7%

16,4%17,7% 17,3%

18,8%19,9% 19,6% 19,1% 19,0% 18,3% 17,8%

57.6 58.947.545.1

50.6 54.8

3Q112Q111Q11 2Q124Q111Q10 2Q10 4Q103Q10 1Q12

SP City Market Share Growth

(% of total lines)

Source: Anatel Source: Anatel

640

bps

270

bps

Oi

Claro

Vivo

3Q112Q111Q11 2Q124Q111Q10 2Q10 4Q103Q10 1Q12

Customer Base Growth

(%YoY)1st in yearly growth for 8

consecutive quarters

12

Growth Backed by Efficiency Approach

13

Customer Base Growth

(% YoY)

SAC and SAC/ARPU

(R$)

Handset Subsidy

(R$ million)

Bad Debt Trend

(as % of Gross Revenues)

18,5%

26,8%

23,9%

11,7%

15,3%

24,7%

2Q122Q10 2Q11

Prepaid

+830Bps-210Bps

63

3526

2.6

1.4

2Q112Q10 2Q12

1.6

85

0 0

2Q10 2Q11 2Q12 2Q12

0.92%

2Q11

1.08%

2Q10

1.83%

P Continuous growth on pre-paid

and acceleration on postpaid

P But with a rational approach:

o significant subscriber

acquisition cost drop

o continuous bad debt

downward trend

Sustainable business model

o Low bad debt

o No subsidies

o Freedom to customers

SAC/

ARPU

SAC

(R$) -44% -26%

Capitalized

Subsidy

Postpaid+360Bps

+860Bps

Innovation Platform Generating Value

14

Pre Paid – Customer Base

(000 lines)

Post Paid – Customer Base

(000 lines)

MOU and Post paid Churn

(Minutes, % of lines)

58,873

47,506

2Q12

37,469

2Q112Q10

2Q112Q10 2Q12

2Q122Q11

10,001

2Q10

6,9568,019

Churn

MOU

+24%+3%

-80Bps -50Bps

+27%

+24%+15%

+25%

Volume of Top Up growth

(Mln recharges)

2Q112Q10 2Q12

+42%

+18%

Combining volume and

value throughout a complete

and unlimited platform of

services (local and LD calls,

SMS and data)

Pre-paid consistent growth

Post-paid taking-up with

increasing traffic and lower

disconnections…

..even with no handset

subsidy policy and no loyalty

Internet Take-Up Supported by Best Handset and Offering

15

Smart/Web phone Penetration

(% smartphones/total CB (lines)

31.1%

1Q121Q11 3Q11

26.6%

35.2%

15.4%

2Q124Q11

12.6%

19.5%

2Q11

Data Revenues

(% of Gross Mobile Service Revenues)

14.6%

16.7%

3Q111Q11

13.8%

2Q11

15.7%

18.7%

1Q12

18.1%

2Q124Q11

+490Bps

SMS unique users growth

(daily unique users)

2Q121Q124Q113Q112Q111Q11

~3X

May 12

18,907

2Q11

12,391

Data users

(monthly unique users)

57% 68%

3G coverage

(% of urban

pop.)+1,100Bps

79%

% sold

77%70%71%54%48%

Value Added Services Revenues

(R$ billion)

0.73

2Q11 2Q12

1.03+40%

+53%

EBIT Net

Financial

Result

Net

Income

2Q12

Taxes

and

Others

550

1,214

Depreciation/

Amortization

347

EBITDA

2Q12

-64

ΔYoY +6.0% +7.8% +3.9% +44.6% +3.2% -0.9%

-664

-140

1,145

EBITDA

2Q11

EBITDA

2Q12

-172

Marketing

and Sales

1,214

Personnel

G&A and

others

expenses

+27

Handset

Margin

-38

Network

and ITX

+12

Services

Revenues

26.9% 26.7%EBITDA Margin

Service EBITDA Margin32.7% 32.2%

+240

Handsets Rev.:

COGS:

+55

-43

Consistent EBITDA and Net Income Growth

EBITDA Evolution

(R$ Mln)

From EBITDA to Net Income

(R$ Mln)

R$54 mln one

off event due to

mark to market

hedge position

-2.8% +8.7%-14.4% +15.1%+6.4%ΔYoY

16

230

339 305

Net Debt

(R$ Mln)

OFCF

(R$ Mln)

D Working Capital

(R$ Mln)

436

7241.057

2Q122Q10 2Q11

-260

-82

2Q10 2Q12

147

2Q11

2Q122Q112Q10

2Q12

2,278

2Q11

1,998

2Q10

2,520

Net DEBT/

EBITDA

(trailing 12m)0.68x 0.45x 0.47x

2Q11 2Q12 Var

Network 61% 67% 600 Bps

IT 22% 28% 600 Bps

Others 17% 5% -1,200 Bps

Cash Position Analysis

Capex

(R$ Mln)

DOFCF R$-34mln YoY

DEBITDA-CAPEX = -R$261mln

D WC R$230mln

D Other –R$3mln

Including TIM Fiber

net debt = R$87 mln

D WC: R$230 mln

YoY

+46%

17

Conclusions and 2H12 Outlook

18

• Focus on network development, quality improvement and

communication to defend post-paid segment and reverse the bad

perception from Anatel ban

• Insist on FMS trend with an innovative approach

• Support data revenues growth through smartphone penetration and

network strengthening

• Launching TIM Fiber (Live TIM)

Ou

tlo

ok

• TIM managed to maintain its solid operational improvements amid

tough 1H12 (macro-economic and competitive scenario)

• Data services continued at a solid pace

• Leadership in market share of net addition for 8th consecutive

quarter is a clear signal how TIM’s offer is indeed the best value option

• Operational efficiency set the tone, with significant subscriber

acquisition cost (SAC) and bad debt reduction

Co

nclu

sio

ns

19+

Network & Quality

2Q11 2Q12

TIM is Not the Worst in Quality!

=> Network KPIs

=> Commitment on Quality Improvement

SMP 5 – Originated Calls Completion

(% of completed calls)

SMP 7 – Drop Calls

(% of drop calls)

Anatel Ranking of Complains

(SMP Compl./ Lines in Service * 1000)

Procon Ranking of Complaints

(Compl. of Integrated System of Procon)

TIM Call Center Index of Complaints

(Points)

Player A TIM Player B Player C

Apr-11 Apr-12


Apr - 11 Apr - 12


Mar-11 Mar-12


Jun-11 Jun-12

-30%

Source: Anatel, Procon and Company 20

Capex Allocation 2012-2014

R$ Million 2012 2013 2014 2012-2014

Total Infrastructure - Capex 2,764 2,733 2,776 8,184

Licenses 473 473

Others - Capex 351 248 266 865

TOTAL Capex 3,498 2,981 3,042 9,521

21

In 2012, due to the injunction, TIM

redistributed its Capex, allocating R$451 Mln

for projects related to Quality Improvements.

National and Metropolitan Fiber NetworkOTN: Expansion Plan (w/Swap, w/ AES)

2012-’14

Building + Swap + AES

KM 24,068

LONG DISTANCE METRO TOTAL

KM 21,364

KM 27,973

KM 36,540

KM 41,308

KM 9,705

KM 10,666

KM 11,656

2011

2012

2013

2014

KM 7,532

KM 37,678

KM 47,206

KM 52,964

KM 28,896

FTTS: Construction of 14 MAN (Metropolitan Rings) by YE2012

National Plan: Fiber Network

Manaus

Cuiabá

Florianópolis

São Paulo

Macapá

Boa Vista

P. Velho

Salvador

Curitiba

Maceió

Recife

Fortaleza

Brasília

Rio de Janeiro

Porto Alegre

Goiânia

Belém

BHE

Aracaju

São Luis

Natal

João Pessoa

Palmas

Vitoria

Teresina

Rio Branco

Campo Grande Campos

Tucuruí

Petrolina

Maringa

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

MMM

M

MM

M

M

M

M

M

M

M

M

MM

M

M

M

22

Improvement Plan Outlook

=> Commitment on Network Development

=> Commitment on Quality Improvement

157 181

205 241

271

# TRX

(„000)

+75% 139

250 328

517

741

2933

38

4753

+84%

76% 82% 87% 92% 96% 97% 100% 100%93% 98% 100% 100%

2011 1H12

4.3x

+1,600Bps+400Bps

+700Bps

2H12 2013 2014

# Data Channel Elements

(„000)

Km of Fiber

(„000 km)

2011 1H12 2H12 2013 2014 2011 1H12 2H12 2013 2014

SMP 5 – Call Completion

(% of cluster above target)

SMP 7 – Drop Call


SMP 9 – Drop of Data Connections


1H12 2H12 2013 20141H12 2H12 2013 2014 1H12 2H12 2013 2014

23

24+

TIM Fiber Update

What is TIM Fiber

SP

RJ

Oi-Telemar

1,650

9%

91%

Telefonica

1,500

100%

AES

5,316

50%

50%

P Mission:

Build the strongest network in Brazil

P Rational:

1) Increase of capacity and

capillarity:

a. Backhauling: additional 5,300

km in top 2 cities

b. Most valuable asset to swap

with other operators

2) Network cost structure

transformation

a. Opex (leased lines)

b. Capex avoidance (eg. FTTS)

3) Prevent OPEX increase from

leased lines in the case other

operator buys the company

(AES prices are ~50% lower

than Telefonica)

Network Scale-up

Infrastructure

in SP

Complementary

Capillarities

Backbone Backhauling Access

Mobile

Fixed

(last mile)

TIM/Intelig

AES

B

C

D

E

AA

A unique

Network

AES: widespread network in SP and RJ (urban area)

(Km)

25

Fonte: BofA Merrill Lynch 2011 Global Wireline Matrix, Teleco, Nielsen and State of the Internet Q1 2012 (Akamai)

Brazilian Broadband Market: Low Performance

Market Share Speed Share

<2M

2-12M

>12MAltern.

Incumbent

3%

22%

75%

80%

Developed

Countries

Brazil

20%

80%

20%< 2km

> 2km

61%

10%

UK

36%

43%

73%

13%

<2MB

US

21%

>5MB

2-5MB

Italy

14%

29%

Share by speed Central distance

BR

65%

31%

4%

• Current incumbents’ base has low performance…

• ...situation should not change in the near term due to the high distance

between clients and the central through the existing cooper network

Incumbents Internet speed Distance: Performance vs average distance from the central

26

45% 55%

Marginal CAPEX required to connect customers

Metropolitan

Network

Street

EquipmentInstallation

Internal

Network

~500

Investment per active household (R$)

~250 ~125 ~200+ + +

Modem

~125+~1,700

Aerial

network

Underground

nertwork

~2400

~500

• AES Acquisition:

fully exploiting

existing fiber

network with high

capillarity (5,500

Km in SP/RJ). “i.e.

drop instead of

last mile”

• Power Node

(MSAN) + premises

access: high

flexibility. time to

market and costs

efficiency

(standardized

solution)

• Installation. using

existing building

infrastructure

(jumper. DDF)

• Not Necessary:

already existing

connection

belonging to

the building

• VDSL Modem:

cost efficient

solutions with

high standardized

products

27

TIM Fiber: Accessing value creation perspective

• Sites directly connected with fiber:

- Reducing leased lines OPEX

- Avoiding future CAPEX and OPEX

• Increasing sites capacity for speeds 4G like

Savings in Transport CAPEX and OPEX

+ TIM Fiber

Mobile Data Acceleration

• Higher speeds in mobile access

• High transport capacity. eliminating bottlenecks

• Possibility to accelerate FMS also through modems

+ TIM Fiber

• SP and RJ metropolitan areas represent 35% of the

national corporate market

• Intelig with ~4% of SME market share

• Capillary access network allows quick installation

and fast growth

+ TIM Fiber

Launch of the Residential Broadband

• Market in strong growth. with potential to grow ~R$

2 Bln over the next 4-5 years

• Residential market underserved by incumbents.

which present low performance due to old copper

networks

TIM Fiber

Total

R$4.8 Bln

R$1.1 Bln

R$0.8 Bln R$2.5 Bln

Corporate Segment AccelerationR$0.4 Bln

28

Market Demand

(Units)

Quality of Service

(Mbps)

Buildings authorized

5,700

Building’s accessed

2,100

MSANs installed

214

NetworkConstruction

Homes

Passed Ready

to Sell

220k1

Opticalnetwork

MSANs

Backbone

Network and Marketing Highlights

2

3

Activation 1k

Website

Registration63k

Market

Demand and

Quality of

Service

Download

Speed

Upload

Speed

1,8

35

Market Average Live TIM

0,420

Market Average Live TIM

29

Speed

Naked

Price

Fixed

Bundle

(+ Basic TV)

35 Mbps

Unlimited

(+ R$39.90)

R$179.70

Bundle

(BB + Fixed)

R$129.80

50 Mbps

R$89.90 R$119.90

30 Mbps

R$119.11

R$174.01

Suspended

Sales

Unlimited Fixed on-net

(+ R$54.90)

1 Mbps

R$ 84.70

(R$ 29.80 w/

fixed)

R$84.70

R$144.60

Unlimited

local + LD

(+ 69.90)

15 Mbps

R$149.80

R$199.70R$209.70

R$159.80

50 Mbps

R$362.80

(R$299.90 w/

fixed)

R$368.80

Fixed 10k min local + 25

min mobile + 25 LD

(+ R$68.90)

R$428.70

35 Mbps

R$162.80

(R$ 99.90 w/

fixed)

R$168.80

R$218.70

10 Mbps

R$129.90

(R$59.90 w/

TV)

Unlimited local + LD

(+49.90)

20 Mbps

R$179.90

(R$99.90 w/

TV)

R$229.80

R$224.70

Don’t Offer

(R$ 79.90 w/

fixed)

-13%

Discount: TIM Fiber 35Mbps vs others

Discount: TIM Fiber 50Mbps vs. others

TIM Fiber vs. Peers

-23% -56%

R$179.80

R$184.70

-7%

-25%

-25%

Offering: Live TIM

30

31+

Appendix

4151

64

2009 2010 2011 2012 2013 2014

2012-14 Drivers of Growth

Community Expansion FMS (Voice) Internet for All

90

mln lines200 mou

Services

Revenues

Total

Revenue

13.6

2009

12.8

2014201320122011

15.3

2010

Mobile

Fixed

13.8 14.517.1

Double digit

growth

Double digit

growth

25% VAS

Incidence

90

3 Ways of Growth Revenue Growth

R$ billion

12.912.214.5

0.70.6

0.8

CAGR 11-14

Mobile Customer Base

Million of lines

Double digit

growth

FMS – Voice (MOU)

Minutes of usage per line

Outgoing Voice Revenues

11% 12%14%

2009 2010 2011 2012 2013 2014

~25%

Double digit

growth

Internet for All (Mobile Data)

Data as % of Service Revenue

Data Revenues

83

116129

~200

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014

32

2014Swap +

built out2011

42 Cities

50%

157

271

2011 2014

64%

20142011

>80%

20142012

14 Cities

Network Continuous Evolution

53.0

24.1

28.9

TIM Fiber

TIM Fiber: a “no Capex intensive”

approach to offer Residential Ultra BB in

SP/RJ

2G (TRX Installed)

000 TRX

3G roll out

Pop %

FTTS

% of total traffic

Fiber Network

000 km

2G Managing the growth

3GSpeed up the toll out in

HSPA mode

WiFi>10,000 hot spots by

YE2012

FTTS Deployment in Top 42 cities

FTTH ~1 Mln households by 2015

Efficiency >50,000 km in fiber optic

Network roadmap

33

New

Old

201220112010 20142013

17.1

14.5

14.515.5

1yr in advance

2.8 3.0 3.0 3.0 3.0

nds

CAPEX

Take-aways on main TIM Brasil trends

201220112010 20142013

MTR glide path (-20% real term) as of feb‟12

impacts approx. 250 bp in Revenues and

EBITDA

Growth resulting from further CB, voice MOU

and internet browsing

For 2012, revenues growth at >10% YoY (vs.

R$17.1Bln in 2011)

Revenues

Network synergies from AES Integration

Continuous efficiency in Go2Market (no

subsidy, SAC/bad debt)

Absorbing MTR cut and TIM Fiber start-up

For 2012, Ebitda growth at >10% YoY (vs.

R$4.6Bln in 2011)

Ebitda

Capex

Expanding 2G capacity and 3G coverage

Accelerate FTTS in Top 42 Cities and Wi-fi

offloading

Tim Fiber start-up

CAPEX flat at 3 bln/year; R$9bn in 3 Years

excluding 4G spectrum license (R$ 382.2 mln)

Revenues (New vs Old Plan)

R$ Billion

Organic Capex

% of Revenues; R$ billion

19,617,5

10

15

20

34

Offering (1/2): Prepaid & “Controle”

INFINITY Pré: prepaid plan

Base tariff: R$ 0.25/call (TIM to TIM local

and LD)

INFINITY Mais: R$ 0.50/call (TIM to fixed)

INFINITY Web (data): R$ 0.50/day

(unlimited usage)

INFINITY Torpedo (sms): R$ 0.50/day

(unlimited texting)

No membership fee

No minimum recharge required

Liberty Controle: monthly fee R$ 27 (R$10 to

use as wanted)

Base tariff: unlimited local and LD calls TIM to

TIM

INFINITY Mais: R$ 0.50/call (TIM to fixed)

INFINITY Web (data): R$ 0.50/day (unlimited

usage)

INFINITY Torpedo (sms): R$ 0.50/day

(unlimited texting)

INFINITY WEB MODEM: Daily

internet for smartphones‟ heavy users

(>10MB/day), tablets and dongles in a

prepaid concept.

Base tariff: R$ 1.99 per day

Speed Cap: 80MB per day, after cap

speed is limited to 50 Kbps.

No membership fee

35

Offering (2/2): Postpaid

TIM LIBERTY: postpaid plan with monthly fees from R$39 to R$269

depending on the package of minutes for other operators (50 to 800

min)

Base tariff: unlimited local and LD calls TIM to TIM

LIBERTY Torpedo (sms): R$ 9.90/month (unlimited texting)

LIBERTY Viagem (national roaming): R$ 9.90/month (unlimited usage

for incoming calls when roaming)

LIBERTY Rádios (TIM-radio): R$ 9.90/month (unlimited local and LD

calls to radios)

LIBERTY WEB Smart:

R$ 29.9/month (speed cap 300 MB)

LIBERTY WEB Light:


LIBERTY WEB Tablet:


LIBERTY WEB Modem:

R$ 69.9/month (speed cap 3GB + Dongle*)

LIBERTY WEB Modem Plus:

R$ 109.9/month (speed cap 5GB + Dongle*)

*12 x R$8.90 – no fine appliance nor contract

LIBERTY WEB: postpaid unlimited

data plans for Smartphones, Tablets

and Dongles

LIBERTY PASSPORT VOZ (Americas

and Europe) - R$29.9/day: unlimited

incoming calls and 50 minutes of outgoing

calls (local roaming calls and calls to TIM

fixed and mobile numbers in Brazil)

LIBERTY PASSPORT WEB (Americas) -

R$29.9/day: unlimited data / Europe -

R$39.9/day

More than 50 countries among 5

continents are eligible to the offers

LIBERTY PASSPORT: Voice and data

postpaid offers for international

roaming in a daily charge concept

BEFORE:

Roaming Offer: (US$/min)

Americas :

Outgoing: Local – 1.99 / Home – 3.99

Incoming: 2.69

Data – R$ 33.0/MB

Rest of World:

Outgoing: Local - 2.39 / Home – 4.99

Incoming: 2.39

Data – R$ 33.0/MB36

Historical Data: Financials (R$ Thousand)

37

Description 2Q10 2Q11 3Q11 4Q11 1Q12 2Q12 2Q12 %YoY

Net Revenues 3,558,982 4,251,758 4,371,388 4,710,566 4,468,319 4,547,332 7.0%

Net Revenues on Services 3,349,985 3,743,998 3,886,617 4,259,425 4,015,418 3,984,174 6.4%

Net Revenues on Products 208,997 507,760 484,771 451,141 452,900 563,158 10.9%

Operating Expenses (2,548,906) (3,106,497) (3,214,681) (3,393,790) (3,299,666) (3,332,928) 7.3%

Personnel expenses (147,520) (156,381) (158,351) (164,652) (175,997) (186,441) 19.2%

Selling & marketing expenses (854,498) (946,894) (1,010,953) (1,079,699) (1,015,274) (920,101) -2.8%

Network & interconnection (1,044,935) (1,140,126) (1,198,558) (1,281,199) (1,301,199) (1,311,753) 15.1%

General & administrative (125,981) (134,326) (110,262) (133,745) (132,180) (126,452) -5.9%

Cost Of Goods Sold (231,867) (587,588) (597,708) (544,674) (533,460) (631,464) 7.5%

Bad Debt (90,458) (66,274) (60,825) (62,451) (56,640) (62,050) -6.4%

Other operational revenues (expenses) (53,647) (74,909) (78,024) (127,370) (84,917) (94,667) 26.4%

EBITDA 1,010,076 1,145,262 1,156,707 1,316,776 1,168,652 1,214,403 6.0%

EBITDA Margin 28.4% 26.9% 26.5% 28.0% 26.2% 26.7% -23 Bps

Depreciation & amortization (771,445) (615,889) (643,829) (641,338) (656,629) (664,233) 7.8%

EBIT 238,631 529,373 512,878 675,438 512,024 550,171 3.9%

Net Financial Results (58,911) (43,974) (61,450) (100,817) (42,178) (63,588) 44.6%

Income before taxes 179,720 485,398 451,429 574,621 469,845 486,583 0.2%

Income tax and social contribution (53,757) (135,417) (134,796) (173,463) (193,407) (139,796) 3.2%

Net Income 125,964 349,981 316,632 401,158 276,439 346,787 -0.9%

Description 2010 2011 YTD 2012

Net Revenues 14,457,450 17,085,976 9,015,650

Net Revenues on Services 13,571,626 15,353,228 7,999,593

Net Revenues on Products 885,824 1,732,748 1,016,058

Operating Expenses (10,263,854) (12,429,883) (6,632,595)

Personnel expenses (586,722) (632,828) (362,438)

Selling & marketing expenses (3,483,164) (3,933,753) (1,935,375)

Network & interconnection (4,227,042) (4,724,475) (2,612,952)

General & administrative (484,609) (502,640) (258,632)

Cost Of Goods Sold (1,026,091) (2,062,552) (1,164,924)

Bad Debt (310,498) (231,529) (118,690)

Other operational revenues (expenses) (145,728) (342,105) (179,584)

EBITDA 4,193,596 4,656,093 2,383,056

EBITDA Margin 29.0% 27.3% 26.4%

Depreciation & amortization (2,993,461) (2,588,651) (1,320,861)

EBIT 1,200,135 2,067,442 1,062,194

Net Financial Results (245,457) (238,857) (105,766)

Income before taxes 954,678 1,828,584 956,429

Income tax and social contribution 1,257,038 (547,357) (333,202)

Net Income 2,211,716 1,281,228 623,226

Historical Data: Financials (US$ Thousand)

38


Net Revenues 1,985,297 2,663,600 2,672,520 2,615,277 2,524,263 2,315,258 -13.1%

Net Revenues on Services 1,868,713 2,345,503 2,376,148 2,364,807 2,268,409 2,028,529 -13.5%

Net Revenues on Products 116,584 318,097 296,373 250,470 255,855 286,730 -9.9%

Operating Expenses (1,421,849) (1,946,128) (1,965,349) (1,884,211) (1,864,063) (1,696,949) -12.8%

Personnel expenses (82,291) (97,968) (96,811) (91,414) (99,425) (94,926) -3.1%

Selling & marketing expenses (476,662) (593,201) (618,063) (599,442) (573,553) (468,466) -21.0%

Network & interconnection (582,893) (714,255) (732,758) (711,314) (735,079) (667,874) -6.5%

General & administrative (70,275) (84,151) (67,411) (74,255) (74,672) (64,383) -23.5%

Cost Of Goods Sold (129,342) (368,106) (365,419) (302,399) (301,365) (321,508) -12.7%

Bad Debt (50,460) (41,519) (37,186) (34,672) (31,997) (31,593) -23.9%

Other operational revenues (expenses) (29,926) (46,928) (47,701) (70,715) (47,972) (48,199) 2.7%

EBITDA 563,448 717,472 707,172 731,066 660,201 618,309 -13.8%

EBITDA Margin 28.4% 26.9% 26.5% 28.0% 26.2% 26.7% -23 Bps

Depreciation & amortization (430,333) (385,836) (393,615) (356,067) (370,946) (338,192) -12.3%

EBIT 133,115 331,636 313,557 374,999 289,255 280,118 -15.5%

Net Financial Results (32,862) (27,549) (37,568) (55,973) (23,828) (32,375) 17.5%

Income before taxes 100,253 304,087 275,988 319,026 265,427 247,742 -18.5%

Income tax and social contribution (29,987) (84,835) (82,410) (96,305) (109,260) (71,177) -16.1%

Net Income 70,266 219,253 193,579 222,721 156,167 176,566 -19.5%

Description 2010 2011 YTD 2012

Net Revenues 8,231,230 10,201,868 4,839,522

Net Revenues on Services 7,724,407 9,163,550 4,296,937

Net Revenues on Products 506,823 1,038,317 542,584

Operating Expenses (5,842,070) (7,423,994) (3,561,012)

Personnel expenses (333,456) (378,222) (194,351)

Selling & marketing expenses (1,982,451) (2,348,218) (1,042,020)

Network & interconnection (2,404,499) (2,820,821) (1,402,954)

General & administrative (275,650) (300,371) (139,054)

Cost Of Goods Sold (587,945) (1,235,395) (622,872)

Bad Debt (175,766) (138,555) (63,590)

Other operational revenues (expenses) (82,302) (202,411) (96,171)

EBITDA 2,389,160 2,777,874 1,278,510

EBITDA Margin 29.0% 27.2% 26.4%

Depreciation & amortization (1,700,012) (1,547,913) (709,137)

EBIT 689,148 1,229,961 569,372

Net Financial Results (139,353) (140,652) (56,203)

Income before taxes 549,795 1,089,309 513,169

Income tax and social contribution 745,372 (325,734) (180,437)

Net Income 1,295,167 763,575 332,733

Historical Data: Operational

39


Brazilian Wireless Subscriber Base (000`s) 185,135 217,346 227,352 242,232 250,826 256,131 17.8%

Estimated Total Penetration 95.9% 111.6% 116.5% 123.87% 128.00% 130.44% 1,882 Bps

Municipalities Served (GSM) 3,198 3,233 3,259 3,294 3,305 3,312 2.4%

Market Share 24.00% 25.55% 26.04% 26.46% 26.80% 26.89% 26.89%

Total Lines (000's) 44,425 55,525 59,210 64,083 67,217 68,874 24.0%

Pre-paid Lines (000's) 37,469 47,506 50,559 54,778 57,564 58,873 23.9%

Post-paid Lines (000's) 6,956 8,019 8,651 9,305 9,653 10,001 24.7%

Gross Additions (000's) 6,366 9,257 10,186 11,836 9,880 9,814 6.0%

Net Additions (000's) 2,057 2,676 3,685 4,873 3,134 1,656 -38.1%

Churn 10.1% 12.3% 11.6% 11.7% 10.5% 12.1% -22 Bps

Total ARPU 24.2 21.6 21.2 21.9 19.1 18.3 -15.4%

Total MOU 110 127 130 131 126 127 0.2%

SAC 63 35 36 28 32 26 -25.7%

Handsets Sold (000's) 1,915 3,507 3,164 2,847 2,284 2,511 -28.4%

CAPEX (R$ Mln) 520 724 852 1,150 543 1,057 45.9%

CAPEX (US$ Mln) 290 454 521 639 307 538 18.6%

Employees 9,007 10,034 10,248 10,562 10,761 10,948 9.1%

25,00%

3,80% 3,65%

1,35%

ICMS* FISTEL PIS/COFINS FUST / FUNTTEL

Mexico

15%

Argentina

25%

Bolivia

13%

Brazil

40%

Paraguay

10%

Venezuela

14%

Chile

19%

Peru

19%

Ecuador

27%

Colombia

20%

Nicaragua

15%

Taxation Over Telecom in Brazil

Source: UIT, Deloitte and Acel* From 25% to 35%

Source: Teleco website, Telebrasil; Company

LatAm Average

20%

In 2011, considering the abovementioned taxes in addition to others local taxes such as the income tax, TIM paid a total amount of R$7.3 billion or 42.5% of total net revenues.

Telecom Tax Aliquots in Brazil

% of Gross Revenues

Telecom Tax Aliquots in Brazil

% of Net Revenues

40

Amount paid

only by TIM

(R$ Mln)

4,451 1,051 940 224

12,5%

3,1%

6,5%5,0%

2002 2006 2011 2012*

23,3%

13,3%11,0%

7,3%

2002 2006 2011 2012*

24,0%30,8%

47,2%

2002 2006 2011

0,6

2,4

4,7

2002 2006 2011

1.569

193 218

2002 2006 2011

3,52

2,12 1,88 2,00

2002 2006 2011 2012*

51,4%45,1%

36,5%

2002 2006 2011

37 67

335

2002 2006 2011

Brazil: Becoming a more solid Economy

* Source: Median of Market Expectations (BaCen) – 08/08/2012

Country Risk (EMBI+ Brazil)

(Bps)

FX Rate (EoP)

(R$/US$)

Public Debt as % of GDP

(Avg%)

International Reserves

(Avg Billion US$)

Inflation Rate (IPCA)

(%)

Interest rates (SELIC – EoP)

(%)

Bank Credit as % of GDP

(%)

Bovespa’s Trading Volume

(Avg R$ Billion)

41

Shareholders Structure and Stock performance

Stock Performance (base 100)

TIM Celular S.A. Intelig

100%

TIM Brasil Serv. e Part. S.A. Minorities

Telecom Italia International N.V.

Telecom Italia

100%

TIM Participações S.A.

(1,611,969,946) Total: 67% Total: 33% (805,662,701)

100%100%

TIM Fiber RJ TIM Fiber SP

99% 100%

0

20

40

60

80

100

120

140

TIMP3 Ibovespa TSU

42

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

Gustavo Valente


Phone: +55 21 4109-3446

Luiza Chaves


Phone: +55 21 4109-3751

Visit our Website

www.tim.com.br/ir

Safe Harbor and IR Contacts

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.

43

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

Tim meeting with investors - sep 2012

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