Download - Meeting with TIM in Brasilia
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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
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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$)
35th
Smartphone Penetration Ranking (%)
29th
2
US
Brazil
Indonesia
US
Japan
Brazil
UK
China
Japan
Korea
Australia
Austria
Argentina
Brazil
Finland
Russia
Brazil
Singapore
Canada
US
Switzerland
Norway
Japan
Brazil
Finland
Korea
Japan
Norway
Brazil
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TIM
Mobile Fixed Fixed BB Pay-TV Group
Customers 2Q14 (000´s) 74,203 665 121 n.d. 74,989
Market share 2Q14 26.9% 1.5% 0.5% n.d. ---
Net Adds 2Q14 (000´s) 286 - 19 n.d. 305
Net Adds 12M (000´s) 2,008 31 61 n.d. 2,100
Net Revs FY13 (R$ 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
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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$3.1k
Consumption
People that access Internet (10 years or +)
57 mln
32 mln
2 mln
81 mln
106 mln
23 mln
Households with internet connection (%; CETIC jun’13)
53% of pop.
70% of pop.
Source: PNAD 2012, CETIC.br ‘ TIC Domicílios 2013, Company estimates
Yes
No
24.3 mln of households
83 mln 49% of pop.
Fixed
Mobile 21%
74%
40%
60%
Re-visiting Market Structure
Market Data Revenues Growth 2016 vs. 2012:
> 13 bln Reais on Mobile (+100%)
>7 bln Reais on Fixed (+35%)
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KNOWING TIM BETTER
Gross Revenues (R$ 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
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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$1.6 bln in 2Q14
Net Revenues “Business Generated” (ex – incoming) grew by 7% YoY
Strong cost control: total opex dropped 7% YoY
EBITDA grew 8% YoY with margin gain
28% 32%
39%
Data users reached 29 mln lines
Live TIM crossed 100 thousand customers milestone
+3 p.p. +5 p.p.
2Q13 3Q13 4Q13 1Q14 2Q14
Jul/14 Jun/13
2Q12 2Q13 2Q14
• Photos sent: 50 mln
• Outgoing calls: 5 mln
• Data traffic: 26.7 TB Maracanã Stadium
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CORE BUSINESS ANALYSIS & PERFORMANCE
MTR cut full impact in 2Q
Handset sales at a healthy level although reduced growth
World Cup impact on commercial activities
Mobile Service Net Revenues Analysis (% YoY)
EBITDA Performance (mln; %YoY)
June
2013
June
2014
No Holidays 1 National holiday
3 Brazil’s games (1/2 day holiday)
Up to 2 municipal holidays in main cities hosting games
Net revenues from MTR -18%
-28%
2.4
3.1 2.7
2Q12 2Q13 2Q14
Total units sold (mln)
(Local + LD + VAS)
Business Received
2Q13 2Q14
1,232
2Q13 2Q14
ReportedEBITDA Margin
1
2
3
+7%
24.9% 27.9%
EBITDA
7
1Q14 2Q14
-30%
Business Generated
+3% -1%
*MTR Impact
+16% +8%
1,331
Total
6 months (YoY)
+8%
-26%
+4% 0%
(Incoming MTR + SMS)
Ex-MTR Ex-MTR
*MTR Impact
Ex-MTR
~170 mln*
~96 mln*
1,427
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118.5
23.2
2009 2010 2011 2012 2013 Jun/14
2Q13 2Q142Q13 2Q14
READY FOR DATA OPPORTUNITY
8
# Access Growth (users in mln)
Brazilian Broadband: Low Average Speed (Mbps)
WSJ: “Brazil - The Social Media Capital of the Universe”
Fixed
Data Experience is Mobile Capturing Data Opportunity
Mobile
2.7 2.6
4Q13 1Q14
#2 in Facebook
#2 in Twitter
2nd largest market
#2 in WhatsApp
10.5
13.7 3.6 2.5
Sources: SocialBakers, e-Marketer, Semiocast, G1.com, Newspaper ‘Folha de São Paulo’
Sources: Anatel, Akamai - State of Internet
Source: IDC Tracker
Source: Anatel
# Total Market Equipment Sold (units in mln)
Smartphone & Tablet
Notebook & PC
1Q14 2Q14
SMS
Web
Content & Other
1,500
Data Gross Revenues Mix (R$ 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
∆ %YoY ∆ %YoY
+20% 1,578
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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
o Reduce churn on postpaid o Attract dual SIM card users traffic o Renewed focus on corporate customers
o Leveraging on “pure mobile” distinctiveness o Expanding daily tariff scheme to new regions o Simplicity / 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
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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 2Q142Q13 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$; % YoY)
118 mln 3.3 mln
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2Q13 2Q14
o Brasília o Curitiba o Rio de Janeiro
4Q13 2Q14
4Q13 1Q14 2Q14
INFRASTRUCTURE FOCUSED IN DATA
11
COVERAGE
Homogeneous Access Upgrade In all relevant areas Site densification Small cell / Wi-Fi
CAPACITY
Higher speed 4G roll out Mobile broadband
project acceleration Backhauling
infrastructure
AVAILABILITY
Always available Fine tunning Fiber rings /
redundance Resilience
DATA CENTRIC
APPROACH
TIM’s Infrastructure Strategy Network in Numbers
Number of 3G & 4G Sites
Number of Wi-Fi & Small Cell
~11.3 ~11.0
~13.1
Number of sites with fiber (FTTS)
Cities in mobile BB project
+3.5x 53 66
1Q14 2Q14
+13 cities
BioSite: New approach to coverage
Patent pending
+47%
1
2
3
After
Before
o New frequency at 900 MHz in SP
o Better indoor coverage
o Addressing capacity requirement
Completed actions
Initiating in:
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2Q13 3Q13 4Q13 1Q14 2Q14
TIM SOLUÇÕES CORPORATIVAS: PLAN MOVING FORWARD IN Q2
12
Turnaround Plan on Fixed Business
2013 2012
-
2014
New sales revenues (R$; 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
o Positive EBITDA
o Cost efficiency
o Customer base
management
o New business unit
organization
o IT renewal plan
o Multiservice network
launch
o New branding
o New offers and
product launch
o Restructured sales
force
2H14
Showing results
o Sales growth
o Revenue
rebound
Business remodeling driving stable fixed revenues QoQ
+19x
2Q13 2Q14
-80%
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+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
o Live TIM Extreme 1Gbps for R$1,999.90
o Live TIM Blue Box release: optional TV approach
Jul/2014
New speed: 70Mbps for R$119.90
Source: Netflix July 2014
Netflix Broadband Ranking (Average streaming speed representation)
31%
Positive Neutral Negative
Internet buzz
FIXED BROADBAND: LIVE TIM
New Offers
126 neighborhoods:
43 neighborhoods in SP
83 neighborhoods in RJ
Quality Experience
609
804
1,069 1,138
1,220
2Q13 3Q13 4Q13 1Q14 2Q14
8%
31%
21%
51%
72%
18% 2nd
3rd
4th
5th
6th
1st
Source: Gauge 1Q14
Source: Company
+113%
13
26k
100k
Jul/14 Jun/13
Market average
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4,065
Tho
usa
nd
s
2Q13 2Q14
3,985
170 Tho
usa
nd
s
96
2Q13 2Q14
+2.2%
FINANCIAL RESULTS ANALYSIS (1/2) Service Net Revenues (R$ mln; % YoY)
EBITDA (R$ mln; % YoY)
Reported Revenue
2Q13
Reported Revenue
2Q14
3,985 1,232
Reported EBITDA 2Q13
Reported EBITDA 2Q14
+186 -87
Δ Opex/ Others
Traffic/Data Δ Contribution Margin
24.9%
31.1%
1,331
27.9%
34.4%
EBITDA Margin
Service EBITDA Margin
+5.8% +4.4%
Efficient Cost Control
Interconnection (Δ% YoY)
Leased Lines Cost (Δ% YoY)
% Bad Debt/Sales (% over gross revenues)
Net Services Revenues Exposure
EBITDA Exposure
MTR Impact
-2.0%
~ 25%
~ 12%
2Q10 2Q11 2Q12 2Q13 2Q14
~ 35%
~18%
2Q10 2Q11 2Q12 2Q13 2Q14
MTR Impact
+15.8%
+8.0%
-31.3%
-10%
~1% ~1%
2Q13 2Q14
MTR Exposure
1,427
‘Pro forma’ EBITDA in 2Q14
4,155
‘Pro forma’ Revenue in 2Q14
stable
+208 -253 -36
ΔYoY +6.9% -29.6% -20.5%
Δ Others Δ Business Incoming
Δ Business Generated
ΔYoY
14
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-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$1,593 mln
2G
3G
4G 2G
3G
4G
1,984
4,521
2,537
Tho
usa
nd
s
Debt Cash Net debt
Jun/13
Jun/14
1,031
6,356 5,325
1,749 1,749
Tho
usa
nd
s
4,607 3,576
Debt Cash Net debt
+110% -48%
Investments
Cash Flow - 6 months (R$ 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
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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
o Consumer
o Corporate
o Residential
• 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