press release 4 t07 en
TRANSCRIPT
1March 5th, 2008
TIM Participações S.A.
4Q07 and 2007’s Results
2
Highlights
Market Overview
Commercial Strategy
Financial Performances
3
TIM in 2007
…with a National Footprint…
and Drive to Create New Opportunities… …ensuring Sustainable Growth
“Top of Mind”: most remembered mobile
operator for 5th year
First mobile choice according to all recent key
independent surveys
“Most Admired Company” for 3rd consecutive
time
Strong Organic Results
A Recognized Brand…
Achievement of all 2007 targets
ARPU above market average
Positive net income in 4Q07 and in full year
Positive net cash flow in 4Q and in full year
Mobile: first to be consolidated as a national
player
Fixed: national licence acquisition in May „07
Broadband: frequency acquisitions in Dec ‟07
enabling future national roll-out
Mobile: renewing community concept,
strengthening loyalty and expanding customer
base through operational efficiency
Convergence: development in fixed and
internet markets
Innovative business model to target
underpenetrated low-income segments
Preparing for the Future
4
Highlights
Market Overview
Commercial Strategy
Financial Performances
5Source: ANATEL and company´s data.
Keep outperforming Market Growth
Total Lines (Mln) and Penetration Rate
TIMPenetration Rate
Credit expansion and purchase power improvement
Aggressive competitive environment driven by GSM
technology
Increased penetration in lower income classes
YoYGrowth
+10.3 p.p.
+21.1%
+20.4%
Competitors
+23.0%
Market Share Performance
First
Player
Third
Player
-1.9 pp
-2.2 mln lines
-3.7 pp
-3.7 mln lines
Postpaid Market Share of 29%
Postpaid mix higher than competitors‟ average: 21.7%
vs 18.5%
25.4 26.3 27.5 29.2 31.3
99.9 102.2 106.7 112.8121.0
53.2% 54.2% 56.4%59.4%
63.5%
4Q06 1Q07 2Q07 3Q07 4Q07+0.8 pp
+1.0 mln lines+1.5 pp
+1.5 mln lines
29.1%
27.7%
25.4%
23.9%25.0%
25.8%
4Q06 1Q07 2Q07 3Q07 4Q07
6
Highlights
Market Overview
Commercial Strategy
Financial Performances
Confirming the Leadership in Market's Surveys
Top of Mind *
Sources:
TIM Brand: Leveraging on Leading National Brand Power
► Nationally recognized as a reliable and appealing brand
► Enhancing the loyalty amid brand empowerment
► Winner of all recent key independent surveys:
TIM is the first operator choice
Prefered operator
Leader in average client satisfaction
* Instituto Synovate - October/November/2007
** Interscience - October/2007
3rd Player1st Player
Consumer Preference (%) * Consumer Satisfaction **
17
2627
17
2528 8.62
8.36 8.36
3rd Player1st Player 3rd Player1st Player
7
TIM Strategic Objectives
Market evidence Strategic goals
Core Business
To enhance value on the core business
To consolidate our positioning
To increase profitabilityMo
bile
Residual market in lower
income segment ~60 mln
Lo
w-A
RP
U
Potencial market revenue:
~R$50bln
Co
nv
erg
en
ce
To capture fixed and broadband
revenue share
To ensure profitability of low-end
segment
8
Strategy 4Q073Q072Q071Q07
VASMobile office &
connectivity
Multimedia &
Infotainement
M-finance
Java
Games
Mega TIM Mensagens
TIM Music Store
Mega TIM Wap
BlackBerry unlimited
(1st free month)
Smartphone
Offer
BlackBerry
subscription zero
Microsoft PartnershipHP Partnership
AirLine Tickets and Check-in
TIM Studio
GPS Navigation
Garmin
Pre paid loyalty
offers
“On-net community”
offers
Low acquisition cost
offers (TIM chip-only)
Seu TIM Chip vale Mais
Quem tem TIM tem Mais
TIM +60 Tarifa Zero
7 centavos
Receba o valor do seu Chip de volta
Mobile
TIM Offers: Maintaining Strategic Goals
9
Strategy 4Q073Q072Q07
Plano 1: Micro recharge
TIM Mais completo
TIM Casa Flex TIM Web
Expanding the addressable market and maintaining
the offer profitability:
Plano 1: Micro prepaid recharge
Capturing additional revenues from fixed and
broadband markets
TIM Web: Internet access through USB Modem for
laptops and desktops
TIM Mais Completo: Full communication
package bundling Mobile Calls + Home Fixed Calls
+ Internet access
TIM Casa Flex: The best of mobile telephony with
the fixed telephony convenience
TIM Offers: Exploring New Opportunities
Reducing the cost of monthly ownership
Higher traffic margins
Special tariff for 3 pre-selected TIM or
fixed numbers (R$0.20)
10
Co
nv
erg
en
ce
Lo
w-A
RP
U
► According to Abinee**, the PC market in Brazil will grow 16.8% in 2008 and will reach 11.8
million units, of which 67.8% desktops and 32.2% laptops
► At the end of 2007 Brazil still had 23 million users of Internet Dial Up
3G license acquisition: enlarging capacity
11
Improve TIM convergent offers through wireless broadband
Capture new revenue opportunities
Protect TIM Customer base
TIM Web,
GPRS / EDGE
Speed up to 200 Kbps
The largest data network
3G license
acquisition*
2008 / 2009 2007
TIM Data offering evolution
Total amount: R$ 1.3 bln
National Coverage
Spectrum capacity expasion
15+15 MHz in São Paulo‟s
metropolitan area
Competitive Plans for broadband
Opportunities on areas with lack of Internet offer
Encouraging use of VAS acquisition
* Acquired through Anatel´s auction in Dec07
** Brazilian Electric and Electronic Industry Association
TIM Broadband: Preparing for the future
Offers Evolution: Speed up to 7,2 Mbps
Subsidy strategy oriented to maintain the competitiveness
and value customers acquisition and retention
Low SAC offer
Focus on “TIM Chip Only” strategy: > 60% of total gross in 2007
Comission based on value
Also stimulating convergent offers
Improving channels productivity and efficiency
Points of sales grew 7% vs 25% of gross adds in 2007 (17%
of productivity increase in the year)
Increased electronic recharge revenue breakdown: 55% in
2007 vs 41% in 2006
Co
ns
um
er
Point Of Sales: ………….. 8.600 PoS
Retail
Dealers
Own store / franchise
65%
26%
9%
2.010
262k
Co
rpo
rate
Small & Medium Business Sellers
Key Account Managers
580
150
Largest point of sales capillarity in Brazil
Recharge Points
Tele-sales and Personal
SAC Performance:(R$)
Optimization of Sales Channels and SAC Reduction
TIM Commercial Approach: Focused on Efficiency
40%
36%
64%60%
145
118
2006 2007
-18%
Indirect cost
- Commission
- Subsidy
- Anatel‟s fee on net
adds
Direct cost
- Comodato
- Advertising
- Others
35%38%
62%65%66%
34%
120129
110
4Q06 3Q07 4Q07
- 8%
12
13
Highlights
Market Overview
Commercial Strategy
Financial Performances
Net Service Revenue Performance*
Total Net Revenue Performance
1st operator in Net Service Revenue
Revenue growth driven by valuable
customer base increase
3rd Player
1st Player
* Source: based on companies 4Q07 reports
** Pro forma: Bill & Keep elimination starting on January 1st 2006.
1Q07 4Q072Q07 3Q07
R$ Bln
Confirming Leadership in Value
R$ Bln YoY Growth
+10%
+13%
-20%
Net service revenue Net handsets revenue
11% 8%
89% 92%
4Q06 4Q07
3.43.1
4Q06
2,7 2,72,8 2,9
3,1
R$ Bln Restated Pro forma**
YoY Growth
+23% +15%
+28%
-14%
Net Service Revenue Net Handsets revenue
12% 8%
88%92%
2006 2007
12.4
10.1
+18%
Target: >10%
14
*Innovative VAS = Total VAS excluding SMS P2P
R$ Mln
VAS Performance (% on Gross Service Revenue)
% Innovative share on VAS Revenue*43% 52%49% 63%
2006 2007
886
1,217
7.5% 7.9%
+37%
4Q06 4Q07
251
375
7.1%9.0%
+50%
15
ARPU and VAS Performance
R$
Keeping up Premium ARPU in 4Q07ARPU Performance
2831
34
Proforma: considering Bill&Keep elimination starting on Jan 2006.
33.1
34.4
2006 2007
- 4%
35.837.0
34.0 34.5
4Q06 3Q07 4Q073rd Player1st Player
+1%11%
23%R$-7%
Solid Base Growth with High Value Clients and profitability
Continuous organic EBITDA margin expansion
EBITDA and EBITDA Margin (%)
* Bill & Keep elimination starting on January 1st 2006
27.1%
25.6%
787915
4Q06 4Q07
R$ Mln
Restated
2,4372,870
2006 2007
Pro forma*
24.0%
23.1%
22.4%+18%
YoY Growth YoY Growth
16
+16%
-13.7%
17
Pro forma
Delivering 2007 EBITDA margin
EBITDA and EBITDA Margin Performance
R$ Mln
Change
% YoY
+0.7pp YoY on a comparable basis
24.0% 23.1%
2,436.5
(162.0)
2,465.4 (1,174.5)
(338.5)(262.6)
(26.7)
2,869.9
(67.7)
Restated
EBITDA 2006
HandsetsRevenue
ServiceRevenue
NetworkExpenses
SellingExpenses
Bad Debt COGS *OtherExpenses
EBITDA2007
+31.9%
+17.8% YoY, +433.4
Excluding exceptional write-off of receivables
22.4%
EBITDA Mg
Reported
* Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues
** Considering Bill & Keep elimination starting on January 2006.
+27.5% +43.7% +15.6% +58.1% +1.9% +6.9%
+18.1%** +13.4%**
EBITDA Mg
Restated
18
From EBITDA to Bottom Line
* Other non-operating expenses/revenues
R$ Mln
2,869.9
546.2
(2,323.7)
(278.9)
(191.3) 76.1
EBITDA 2007 Depreciation
Amortization
EBIT Net Financial
Expenses
Taxes and
Others*
2,869.9
546.2
(2,323.7)
(278.9)
(191.3) 76.1
EBITDA 2007 Depreciation
Amortization
EBIT Net Financial
Expenses
Taxes and
Others*
Net Income
Net Income
76.1
(285.5)
2006 2007
135183
4Q06 4Q07
+36%
Annual Positive
Net Income
Positive Net Income
+433.4 (89.2) +344.1 +8.2 +9.3 +361.6
Change YoY
R$ mln
19
Net Financial PositionNet Debt QoQ Trend
Gross Debt: R$2.1 billion (of which 63% long term )
Average annual cost: 11.4% in 2007 versus 13.0% in 2006 (10.9% in the 4Q07 versus 13.1% in the 4Q06)
OpFCF
2006
(973)(708)
R$ Mln
NonOpFCF
2007
(1,027) 76
2
EBITDA +2,870CAPEX (1,933)D Oper. WC (175)
Net Debt YoY Trend
OpFCF3Q07
R$ Mln
NonOpFCF
4Q07
EBITDA +915CAPEX (1,007)D Oper. WC +1,008
Positive Net
Cash Flow
(1,788) 916 (101) (973)
+815+54 Positive Net
Cash Flow
20
2007 Fully achieved Targets
2007
Actual
31.3
25.8%
14.6%
23.1%
1.9
762
Customer Portfolio
(Mln SIM)
M/S TIM Brazil on SIM
Total Net Revenues Growth*
EBITDA Margin - Organic
CAPEX (bln R$)
Op. Free Cash Flow
(mln R$)
2007
Targets
~29
~26%
>10%
>23%
> 2**
Break Even 2007
* Adjusted considering Bill and Keep Elimination starting from Jan 2006.
** Including 3G and Wi-Max licenses
21
Backup
EBITDA Margin
Net Revenues 10,116.1
2,492.5
(R$ mln)
24.6%
EBITDA
10,138.2
2,436.5
24.0%
Accounting changes to 2006 figures: Recap
2006
(reported in 4Q06)
2006
(restated) Revenue impact +R$22 mln
Reported vs Restated
Reclassification of Other Operating
Revenues into reduction of taxes on
service revenues referred to a favorable
court decision on PIS and COFINS
- R$ 30 mln reclassification of Other
Operating Revenues into financial
revenues referred to a favorable court
decision on PIS and COFINS
- R$ 26 mln reclassification from financial
expenses to cost of goods sold
22* Considering Bill & Keep elimination as of Jan, 2006
22.4% Pro forma Bill & Keep*
EBITDA impact -R$56 mln
EBITDA Margin
Net Revenues 2,918.0
797.5
(R$ mln)
27.3%
EBITDA
3,077.8
787.2
25.6%
Accounting changes to 4Q06 figures: Recap
4Q06
(reported in 4Q06)
4Q06
(restated)Revenue impact +R$160 mln
Reported vs Restated
EBITDA impact -R$10 mln
Handset discounts are fully booked as
discounts on handset revenue, instead of
being partially allocated to selling
expenses and cost of good sold as before
Reclassification from financial expenses
to cost of goods sold
23
24
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” Statements
Investor Relations
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
Phone: +55 21 4009-4017 / 4009-3751 / 4009-3446 / 8113-0790 / 8113-0547 / 8113-0024
Fax: + 55 21 4009-3990
Visit our Website:
http://www.timpartri.com.br