results presentation 1 q14 eng
TRANSCRIPT
-22.5%
1Q13 1Q14
1ST QUARTER HIGHLIGHTS Financial Results
Mobile Net Services Revenues (Δ% YoY)
Business Generated
Business Received
(MTR mpact)
Consolidated EBITDA (Δ% YoY) Consolidated Net Income (Δ% YoY)
1Q13 1Q14
1,317 372
Incoming
Outgoing (Long Distance
+ Usage)
VAS
60.3 61.7
10.9 12.2 Postpaid
1Q13 1Q14
%YoY
+11.9%
+2.3% Prepaid
Customer Base (mln; Δ% YoY)
Mobile Data Users Growth (mln; Δ% YoY)
1Q13 1Q14
Mobile Payback Ratio (SAC/ARPU in months)
1.6x 1.6x
306 1,224
Operational Results
2
+7.6% +21.6%
+1.4%
+8.9%
26.0% 28.0% EBITDA Margin
71.2 73.9 +3.8%
22 27
1Q13 1Q14
+20.1%
0.13 0.15 EPS (R$)
714
1,764
2013 2014e
1Q13 1Q14
~11,000
~14,000
2013 2014e
2G
3G
4G
NETWORK EVOLUTION Investments
Fiber Infrastructure
~19,700 Km ~37,600 Km
Backbone Metro-Areas
3
R$3.8 Billion in FY14e
R$613 mln in 1Q14
>94% in infrastructure
This image cannot currently be displayed.
57,300 Km in Fiber + =
1Q13 1Q14
2G
3G
4G
R$613 mln
R$470 mln
Average throughput analysis where MBB is completed *
From To ~ 800 Kbps ~ 2.1 Mbps
Number of sites with fiber optic
Cities with mobile BB project
Number of 3G & 4G Sites Number of Wi-Fi & Small Cell
Network Additions in the 1Q14
3G sites: + 111 in Q1 (total 9,185)
4G sites: + 208 in Q1 (total 2,133)
WiFi hotspots: +190 in Q1 (total 904)
MBB cities: + 14 in Q1
+ 30% YoY
39
100
2013 2014e
+16x
*According to TIM independent analysis of the NetMetrics Reports provided by Speedtest.net
0.37 0.31
0.42 0.42
1Q13 1Q14
0.05 0.03 15.0
10.3 12.1
26.8
25.5
44.4 45.5
1Q13 1Q14
QUALITY IMPROVEMENTS
320 cities under the company’s quality
plan project in 1Q14
53% of 2014 target achieved in the first
quarter
Claims at Consumer’s Protection Agency (Procon) (in thds)
TIM: Claims at Anatel over 1,000 lines
Source: ANATEL Source: SINDEC-Procon
TIM other
TIM’s Quality Plan (#cities)
Note: Per economic group
25.9
The least claimed within telcos
Consistent performance in PROCON
Reducing Anatel complaints in all fronts
Network showing remarkable
improvements
320
213
1Q14 Targetfor 1Q14
Source: Company
4
Total Complaints Network Complaints
Avg. Market Complaints
2014e
(Target for 2014) 599 cities
53%
4Q13
1Q13 1Q14
74.8 76.0 78.5
67.2 71.2 73.9
61.6 66.3 68.7
46.5 49.5
50.6
5
CUSTOMER BASE EVOLUTION Customer Base (mln)
Leading market growth
#1 player in prepaid
#2 player in voice postpaid
Austere disconnection policy
Prepaid Recharge (R$; YoY)
1Q12 1Q13
TIM
+3.3%
+3.8%
+3.7%
+2.2%
Source: ANATEL
Source: Company
1Q14
1Q14 x 1Q13
+10%
1Q13 1Q14
15.3%
16.5%
Mix of Postpaid over total base
Distribution Channel (YoY)
1Q13 1Q14
+22%
Source: Company
1Q13 1Q14
+28% # Points of Sales: Mass Channel (retail)
# of Own Stores
Vivo
Claro
Oi
Source: Company
+121bps
% of Customer Base
1Q12 1Q13 1Q14
+20.1%
1Q12 1Q13 1Q14
5.5
5.8 5.9
Mobile Data users
6
DATA SERVICES AT A SOLID PACE Revenues (R$ bln)
18%
21%
25%
% of Gross Services Revenues 26%
31% 36%
Users (# mln users)
+25.4% +20.4% +24.6% 1.0 1.2 1.5 18 22 27 Data Gross
Revenues
67.2 71.2
73.9
4G Market Share (%; thd users)
3G Market Share (%; mln users)
23% 24%
23% 25%
42%
37%
10% 13%
1Q13 2Q13 3Q13 4Q13 1Q14
25.4
26.6
38.7
13.5
Source: ANATEL
TIM
47% 41%
20%
33%
21% 15%
12% 11%
2Q13 3Q13 4Q13
TIM
858
676
321
223
Source: ANATEL
1Q14
Source: Company Source: Company
+ 39% YoY Other VAS
services
105 mln 2.1 mln
LEVERAGING ON THE LARGEST COMMUNITY Access via Mobile
Notebook sales FY2014e: 8.5 mln
Tablet sales FY2014e: 11.1 mln
Smartphone sales FY2014e: 46.7 mln
Device sales profile
Broadband Willingness to Pay (% of Households)
7
Source: CETIC 2012
5% of HH: Up to R$150/month
24% of HH: Up to R$70/month
59% of HH: Up to R$30/month
Huge data opportunity in-house
27 mln data users
Handset market share (Mar/14)
TIM’s Customer Base Snapshot
Source: IDC
Source: GFK Group Source: Company
The newest communication app by TIM
Provides a new user interface far all
communication
TIM Protect
TIM Chip for soccer fans: free content of soccer
teams
Ensures safety of customer’s devices and
information
Simple and reliable platform
Brazil’s largest digital music provider
>32 mln songs downloaded
TIM
P1
P2
P3 10%
25%
29%
36%
53% Open
Market
Operators
Innovative Services
Prepaid Postpaid
Data Offers
73.9 million users
+31 mln untapped market
46mln potential data users
+15 mln with data handset 36%
21%
42%
FIXED BROADBAND: LIVE TIM
8
Accelerating Deployment Addressable HH (000 HH)
609
1,138
1Q13 2Q13 3Q13 4Q13 1Q14
sep/12 mar/14
Customer Base (000 users) 75
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Customer Base ARPU (R$; CAGR %)
+15% General Satisfaction
Offer
Billing
Call Center
6.0 7.0 8.0 9.0 10.0
TIM P2 P1
Market Performance
Customer Satisfaction Survey* (Source: TNS Institute Research)
1.5
100 neighborhoods:
41 neighborhoods in SP
59 neighborhoods in RJ
* From Dec/13 to Jan/14
8.7
9.0
8.9
9.0
8.3
7.1
8.8
7.6
7.5
5.3
7.5
7.4
8.1
8.0
7.4
TIM Fiber
39.9% Others 61.1%
UBB Market Share (SP + RJ) (connections >34Mbps)
Source: Anatel
Gross Adds (000 users)
7.6
18.3
1Q13 1Q14
+141%
Conection Quality
Source: TNS Institute Research) Feb/14
INTELIG, NOW POSITIONED AS “TIM SOLUÇÕES CORPORATIVAS”
9
The Opportunity Ahead
Market re-positioning
2013 2012
-
2014
Geographic expansion
Source: IDC Brazil ICT Business Service Database
TIM’s Addressable market (Net service revenues of total addressable market*; R$ bln)
Better financial performance
M 2014
Expansion:
2014: 7 new cities
2015: 12 new cities
Intelig now positioned as “TIM
Soluções Corporativas”
Re-structuring of sales force: multi
channel approach
Re-designed service portfolio
CAGR 11-14
8.8 9.2 9.8 10.9
7.7 7.6 7.7 7.8
2011 2012 2013e
VAS
Voice
22.7
2014e
4.3
24.4
5.2 4.7 5.7
Data
20.8 21.5 Total 5.7%
0.4%
7.4%
9.9%
…with considerable room to increase revenue share (% of fixed corporate market)
1 2 3
Business Remodeling Path
*Companies with more than 100 employees
2%
P2 14%
P3 25% P1
3%
P4 21%
P5 35%
TIM
+
M
M
M
M
M
M
M
Segment EBITDA-CAPEX
Source: Company A Actual
A A
Net Revenues (with intercompany)
2013 2014
1.22 1.32
1.39
1Q13 1Q141Q13 1Q14
MTR IMPACT ANALYSIS
MTR Impact
MTR Cut Path
-33%
-25%
-11%
-10%
Avg. MTR Price (R$)
Mobile Service Net Revenues EBITDA
MTR Exposure
Net Services Revenues EBITDA
0.32
0.24
0.16
0.36
+5.0%
2012
2013
2014
2015e
10
~ 27%
~ 14%
1Q10 1Q11 1Q12 1Q13 1Q14
~ 40%
~ 20%
1Q10 1Q11 1Q12 1Q13 1Q14
Source: Company
+1.4%
+13.4%
+7.6%
MTR cut impact should be reduced
following lower exposure
Business generated (outgoing &
data) should offset MTR impact
Impact of ~ R$ 140 mln
FINANCIAL RESULTS ANALYSIS Net Revenues (R$ mln; % YoY)
EBITDA (R$ mln; % YoY)
Net Income (R$ mln; % YoY)
624 603
4,087 4,100
Revenue 1Q13
Δ Handset Δ Fixed Services
Revenue 1Q14
Δ Mobile Services
-21 -42 +55
Service
Handset
4,711
ΔYoY
4,702
+1.4% -22.9% -3.4%
+0.3%
0%
-3.4%
269 306
372
1Q12 1Q13 1Q14
+13.9%
+21.6%
11
1,224
EBITDA 1Q13
EBITDA 1Q14
ΔHandsets
+223 -117
ΔOpex
-12
Traffic/Data ΔContribution Margin
26.0%
30.7%
1,317
28.0%
33.2%
EBITDA Margin
Service EBITDA Margin
+8%
ΔYoY +7.0% +37.0% +6.1%
Business Generated: +8.9% YoY Business Received: -22.5% YoY
(+)Mobile: Efficiency (-)Fixed: Repositioning/new brand
Cash Flow & NFP (R$ mln)
-1,193 -1,374 -1,571
-265 -332
1Q12 1Q13 1Q14
OFCF
Non OFCF
Net Cash Flow -164
-1,458 -1,706 -1,735 NFP BoP
NFP EoP
-441
-1,899 -1,555 -1,314
(+)
(=)
+151 +421
-230 Δ Fistel
CONCLUSIONS AND PERSPECTIVES
12
Offer Innovation
Slower macroeconomic growth requires evolution of industry approach
Competitive landscape remains intense
Regulatory environment:
o Upcoming 4G Auction
o New consumer regulation framework
World Cup games: airports and stadiums coverage
o Wi-fi off loading at Maracanã: in recent test 25% of data traffic were off-loaded
Financial Services:
o Initial commercial launch of a “prepaid mobile account” / “mobile money”
o A partnership between TIM, “Caixa Econômica Federal” (federal bank) and Mastercard
o Focus on “unbanked” population (50% of prepaid base.)
New data offers: more options of data cap for prepaid (10 & 30Mb)
Infinity Turbo 7 launch: services package of R$7 per 7 days all in:
o Voice + Web + SMS
4G included in all data package
TIMmusic included in postpaid packages
Live TIM Extreme: new 1Gbps offer
“TIM Soluções Corporativas” / “TIM Empresas” as renewed
positioning of fixed and mobile corporate solutions
Business Generated: +8.9% YoY
EBITDA: +7.6% YoY
EBITDA Margin: +200 bps YoY
Net income: +21.6% YoY
Solid results in 1Q14
Macro environment highlights
Continued infrastructure focus
Coverage densification: macro and micro coverage enlargement
Resilience and network availability
Network control (NOC) internalization completed:
o Monitored elements - more than: 12,000 sites, 70,000 km of fiber, 900 IP network elements, 6,700 transmission equipment and 1,300 MSANs
Towers: analyzing opportunities to unlock hidden value