TIM Brasil Company's Presentation July, 2018
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TIM Brasil
Company’s Presentation
July, 2018
TIM Participações - Investor Relations
Meeting with Investors
Disclaimer
This presentation contains
Statements that constitute Such forward looking statements are not
forward looking statements regarding guarantees of future performance and
the intent, belief or current expectations involve risks and uncertainties, and actual
of the customer base, estimates regarding results may differ materially from those
future financial results and other aspects projected as a result of various factors.
of the activities.
Analysts and investors are cautioned not Financial results are presented on Pro
to place undue reliance on those forward
looking statements, which speak only as of Forma basis, disconsidering impacts
the date of this presentation. TIM Part from IFRS 15 adoption.
undertakes no obligation to release publicly
the results of any revisions to these forward
looking statements.
TIM Participações - Investor Relations
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Meeting with Investors
Agenda
About Us ………………………………………………………………………………………………………4
Market Overview and TIM Positioning ……………………………………………………………………..9
2Q18 Results ……………………………………………………………………………………………......18
Strategic Plan 2018-20 ……………………………………………………………................................. 29
Regulatory Update ……………………………………………………………………………………….....36
Appendix ………………………………………………………………………………………………….... 40
TIM IR app TIM RI app
(English) (Portuguese)
Visit our website and download our IR app:
www.tim.com.br/ir
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Meeting with Investors
ABOUT US
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Meeting with Investors
TIM's Turnaround consolidated: from Recovery to Consistent and Sustainable Growth"
Introduced the #2 in Mobile #2 in postpaid Net Service Revenues
first plan focus Net Services users %
5.1%
Presence in on data for (excluding
Revenues
Brazil smartphones M2M) 2.5%
since 1998
>85k km of
Best and Wider fiber optical
#1 in
4G network prepaid -3.0%
Network throughout users -4.3%
the country -5.8%
2013 2014 2015 2016 2017
New Brand and Offers Positioning EBITDA¹ Margin
%
36.6%
33.5%
31.5%
28.4%
26.6%
2013 2014 2015 2016 2017
¹ Normalized Figures. TIM Participações - Investor Relations
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Meeting with InvestorsStrategic Pillars
Improved Customer Experience due to advances in
6 all other pillars
6 Customer Experience
4G expansion in 700MHz
4 Coverage > 90% of urban population
Integrated channel approach for sales and
Selective expansion of FTTx network 5 customer service
More flexible operator to lead market evolution
Offer based on customer interactions
3 Residential ultra broadband through 4G
network
3 4 5
Convergent offers and multimedia
services Offer Infrastructure Efficiency Digital transformation
2 Creation of a Digital marketplace,
connecting customers and
Digitalization 2 partnerships
Accountability and
1 efficiency as part of
Culture 1 culture
Redesign the Customer Experience of our customers to become the best value for money player leveraging our leadership
position as an Ultra-Broadband player and our disruptive Offer proposition. Shift internal Culture from “excusability” to
Accountability, redesign Platforms and Processes from analogue to Digital to allow a full Digital Transformation.
TIM Participações - Investor Relations
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Meeting with InvestorsCorporate Social Responsibility
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
Founded in July, 2013 mobile technology as one of the main facilitators.
PRINCIPLES AND STRATEGIES Applications Education Inclusion & Work
1. Education
Every child and young person has the right to a ZUP – Zeladoria Urbana Participativa Círculo da Matemática do Brasil
science and mathematics education that
represents the advances in knowledge gained in Academic Working Capital
these areas.
Agentes da Transformação Support to Science and
2. Applications Technology Museums and
Technological innovation should serve human Centers
development TIM Tec
Mapas Culturais TIM Faz Ciência
3. Work
Technological innovations are the basis for a new
way of working.
Busca Ativa Escolar TIM + Brazilian Public School
4. Inclusion TIM + Unicef Math Olympics (OBMEP)
People have the right to learn about new
information and communication technologies and
how they influence their everyday decisions.
TIM Stands out in
Sustainability
Member of ISE (Sustainability ISO 14001 certified since 2010, 1st
Joined UN Global Compact Brazilian telco and ISO9001 Quality
in 2008
Index) for 10 consecutive Certification for Billing and Networking Sustainability
years processes
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Meeting with InvestorsCorporate Governance
Committees to Reinforce and Guarantee Solid Corporate Governance
Unique Telco company listed on the Novo Mercado
Highest level of 10 members 3 members
(3 independents) (3 independents)
Corporate
Requirement of
Governance
protection for
minority
Demand for shareholders
transparency and
3 members
disclosures (3 independents)
Legal
Requirements
3 members
(1 independent)
5 members
Brazilian Law (2 independents)
“Lei das S.A”
8 members
Equal rights: vote, dividends and tag along
Higher liquidity Statutory Audit Committee:
• Single class of share (ordinary shares) • Report to Board of Directors
Greater independence of Board of Directors (at least 20%) • Oversight Financial reporting
Strict disclosure policy • Analyze anonymous complaints
Compensation Board and Internal Control and Risk Board operate
indefinitely and act independently
Whistleblower channel website
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Meeting with InvestorsMARKET OVERVIEW and TIM
POSITIONING
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Meeting with InvestorsBrazilian Telcos: Financial X-Ray 2Q
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Meeting with InvestorsBrazilian Telcos: Financial X-Ray 1H
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Meeting with InvestorsBrazilian Telcos: Operational X-Ray 1Q
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Meeting with InvestorsBrazilian Telcos: Revenues X-Ray
Total Services Net Revenues Mobile Service Net Revenue
R$ mln R$ mln
120,999 62,659
62,112
119,286 61,798
118,460
118,143
60,724
2015 2016 2017 LTM12
2015 2016 2017 LTM12
Total Services Net Revenues - Share Mobile Service Net Revenue - Share
% %
3.1% 2.8% 2.3% 1.9%
Nextel Nextel 6.0% 5.5% 4.4% 3.6%
TIM 12.7% 12.3% 13.1% 13.6% 14.1% 13.8% 13.0% 12.2%
Oi
20.9% 19.7% 19.0% 17.8% 19.0%
Oi 21.5% Claro 18.7% 17.6%
Claro 29.1% 29.3% 29.4% 29.8% TIM 23.5% 23.0% 23.8% 24.2%
Vivo 33.6% 34.6% 35.6% 35.7% Vivo 37.7% 40.1% 41.1% 41.1%
2015 2016 2017 1Q18
2015 2016 2017 1Q18
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Meeting with InvestorsChange in Customer Profile and Mix
Changing Customer Base Mix New Customer Profile
Total base in mln customers
Mobile Global Research¹
Consolidation
Stabilization 89% of Brazilians' digital time in mobile is spent on apps
262
Expansion 236
30% of Brazil's digital population uses only mobile device
211
Total 121 149
Prepaid 98 In Brazil, 33% of the digital time is spent on social network and
23
88 instant messaging apps
Postpaid 51
07 08 09 10 11 12 13 14 15 16 17
Brazil “Anatomy of the Consumer”²
c50% of the time is spent watching video and to
communicating with voice
MTR Cuts
R$ Text messaging (SMS) accounts now for only c10% of text
communications
0.41 0.42 0.42 0.42 0.42
0.36
0.32 Usage: Apps x Traditional Services
0.24
0.16 Netflix /
0.10 Whatsapp / Youtube /
0.06 Skype etc
0.03 0.02
Telephone 50% 50% Live TV 50% 50%
07 08 09 10 11 12 13 14 15 16 17e 18e 19e voice calls
¹ Source: comScore
²Source: HSBC TIM Participações - Investor Relations
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Meeting with InvestorsTIM Brasil: Growth Waves
1 Consumer Mobile (“the Controle wave”)
• Growth mostly based on a «Pure Mobile»
~8% approach with Residential BB opportunity
geographically limited.
~5% • TIM exploits the benefits of its 4G
FTTH/WTTX & acceleration.
Revenues Growth
Convergence
1 2 2 Business Segment (SMB and Top)
Consumer Mobile 3 Market
• Opportunity to gain Market Share and
B2B support a Top Line rebound leveraging on:
& TIM Live (FTTC) Consolidation
Fixed & Mobile
• Brand repositioning and New
Complexity/Timing Portfolio;
• More Convergent approach;
Mobile Market Revenues BB Market Revenues • CEx centric philosophy.
(R$ mln) (R$ mln)
3 FTTH/WTTX & Convergence
CAGR
• Accelerated Fiber deployment (backbone,
CAGR
>3% >6% backhaul and FTTH).
• Additional revenues growth and Convergent
CB expansion thanks to FTTH Service.
2017E 2018 2019 2020 2017E 2018 2019 2020
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Meeting with InvestorsMobile Growth Levers
BEST LOYALTY GO-TO-MARKET &
OFFER PORTFOLIO (CHURN MANAGEMENT) CB MANAGEMENT CEX & DIGITAL
POSITIONING
• Recurring offer and Naked SIM
• Simple and segmented • Better acquisition quality • 1-2-1 management with RTD • Naked SIM to improve simplify and improve the
PREPAID offers • Big Data Analytics to (UP-SELL and RETENTION) acquisition quality and go- customer experience
improve churn prediction to-market flexibility • Continued evolution of digital
channels
• Best offer using “more for • 1-2-1 management (UP-SELL • Best value for money, • Focus on convenience and digital
• Targeted handsets and payment
CONTROLE more” services lock-in offers
and RETENTION) with convenience and control
• Innovation: OTT segmented and dedicated • Push Meu TIM App w/ new
partnerships offers (Mass Market) features (self-caring, up-sell)
• Innovation: dedicated data • Services lock-in offers • 1-2-1 management (UP-SELL • Enhance TIM Black • Focus on convenience and
• Handsets with lock-in as key and RETENTION) with positioning to accelerate the digital payment
PURE package and OTT partnerships
element of proposition for segmented and dedicated recovery of high end • Push Meu TIM App w/ new
POSTPAID for 3P offers
• Convergence in FTTX/WTTX the high end segment offers (Mass Market) customer perception features (self-caring, up-sell)
Monetizing Customer Base Total ARPU Trajectory (R$) Mobile Service Revenues Share¹ (%)
Pure
Postpaid Upsell >26%
24.5% 23.8%
Control Loyalty 23.1% 22.7%
Postpaid Upgrade
Upsell CAGR
High Single Digit
Prepaid Upgrade
Recurring Upsell
Prepaid Upgrade
Non-Recurring Upsell
2017A 2018 2019 2020 2014A 2015A 2016A 2017E 2018 2019 2020
(1) TOP 5 market includes SMP+SME
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Meeting with InvestorsOpportunity for Residential Broadband solutions to be captured
Residential Broadband Penetration Fixed Broadband Market Customers
(mln users)
0 – 20%
40% – 60%
20% - 40%
> 60%
• Broadband Penetration 42%
• Ultra-BB Penetration 6%
• 96% of cities (~50% population) has very low BB
penetration (~20%) CAGR
>6%
• 23% of BB connections have speeds < 2Mpbs
Relevant opportunity to capture a strong
unserved demand for Residential 2017E 2018 2019 2020
Broadband and Ultra-BB connectivity
1 FTTH 2 FTTC 3 WTTX
• Increase of capacity on already saturated areas • Simple and smart solution (plug n play, value for
• Best overall performance (capacity, speed and
money)
stability)
• Refocus with dedicated offer to high income • Focus on customers with limited broadband
• Focus on high value customers and high
areas with historical low sales performance services (suburbs and smaller cities) offers
customer experience standards
• Fast time-to-market to attack new regions
• Smart strategy coverage launching in new cities • Higher speeds (VDSL2+) and ARPU over the
(incremental revenues)
• Leverage in fiber infra already built for mobile existing coverage
• Optimize investments: use of 4G network
• Partnership with content providers • Partnership with content providers (700Mhz) spare capacity
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Meeting with Investors2Q18 RESULTS
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Meeting with InvestorsQuarter Highlights Net Service Revenues (R$ bln)
Total Net Revs.
4.0
R$ 4.2 bln +5.8% +5.0%
3.8 +5.7%
3.6
YoY
Solid results amid worsening MSR Live Revs.
macro and temporary +5.7 % +41.0 %
impacts. YoY YoY 2Q16 2Q17 2Q18
Reshaped user base profile
increases resilience, reducing
EBITDA¹ EBITDA Margin¹ Capex Net Income
prepaid volatility exposure
(~R$ 15 mln impact in MSR +12.7 % 37.6 % 1.02 bln +53.2 %
YoY +2.3 p.p YoY +25.8% YoY YoY
from extraordinary events).
2018 efficiency target at 86%,
supporting EBITDA Margin 12M Postpaid 12M UBB Net 700 Mhz cities FTTH³ HH
expansion. Net Adds² Adds 1,131 +519 (000)
+3.0 mln +75k +215 vs. 4Q17 vs. 4Q17
Operational and Network
metrics remain strong.
¹Normalized figures TIM Participações - Investor Relations
²Postpaid Net Adds Ex-M2M, Source: Company 19
³Addressable households ready to sell Meeting with InvestorsMobile Operations: Managing the Customer Base Through Advanced
Real-Time Analytics
Mobile Base¹ Mix Shift (% of users) Mobile Strategy: upsell based on profiling to increase ARPU
ARPU growth
per segment
(% YoY)
26% Postpaid Pure-Pure Post
34%
paid +0.9%
Control-Pure (pure)
16%
Recurring
Prepaid Total
33% Control-Control
Control +7.8%
ARPU
Non +13%
58% Recurring Pre-Control (YoY)
Prepaid 33%
Daily-Weekly-Monthy Prepaid +0.5%
2Q17 2Q18
Zooming-In Prepaid Dynamics
Improving Acquisition Quality Increasing Recurrence Prepaid 4G Base²
(% Prepaid Gross Adds) (mln of users)
+5.9p.p
Despite Disconnections +27.1p.p
67% 14
+69.0%
Prepaid Base Quality is Gross Adds 40% 8
Improving w/ Recharge M+1
(% Gross Total)
2Q17 2Q18 2Q17 2Q18 2Q17 may/18
¹Source: Company; Anatel
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²Base of May Meeting with InvestorsTIM Live Operations: Focusing on Execution
TIM Live arrives in
Salvador-BA
Sustaining solid revenue growth...
TIM Live ARPU (000) UBB Customer Base (000) TIM Live Revenues (R$ mln)
+12.7% 72,1 +21.5% 423 +41.0% 90
348 64
64,0
2Q17 2Q18 2Q17 2Q18 2Q17 2Q18
… while transitioning focus from FTTC to FTTH
New Customers ARPU¹ (R$ mln; %QoQ) Sales Mix Evolution (% Gross Adds) Net Adds & Available Ports (000)
January 2018 Net
FTTC FTTH Adds
35Mbps June 2018
34%
+19.0% 97.2 ≥ 100 Mbps 40 Mbps
17% 1Q18 2Q18 3Q18e 4Q18e
+7.6% 81.1 34%
75.4 81.7
FTTH
≥ 50 Mbps
66% FTTC
60 Mbps
1Q18 2Q18 1Q18 2Q18
49%
1Q18 2Q18 3Q18e 4Q18e
New portfolio drives ARPU up Higher speed as FTTH offers are introduced Phase-in FTTH, Phase-out FTTC
¹Broadband ARPU
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Meeting with Investors4G at The Core of Mobile Network Strategy
Mobile and Fixed
Coverage Sites
Networks Evolving (Cities)
3,138
(‘000)
17.2
to Support
2,823 14.7
12.5 Mobile Network Usage
(% of data traffic)
4G¹
1,626 8.0
Business Expansion 834 68%
and CEX
55%
TIM P1 P3 P4 TIM P3 P1 P4
1,131
700 MHz available in major 4.3 45% 32%
700 MHz²
869 3.5
capitals helping to close 440
2.3
2Q17 3Q17 4Q17 1Q18 2Q18
indoor coverage gap. 4G 2G + 3G
- -
TIM P1 P3 P4 TIM P1 P3 P4
~40% of urban pop. covered
FTTH Rollout Acceleration
with LTE 700 MHz.
Addressable HH³ Gpon Areas New Cities with FTTH
(‘000) (# areas)
4G enabled devices already 569 68
Salvador – BA (02/Aug)
accounts for 87% of data 42 Suzano – SP (07/Aug)
São Gonçalo – RJ (07/Aug)
traffic. 203
50 7 Nilópolis – RJ (07/Aug)
4Q17 1Q18 2Q18 4Q17 1Q18 2Q18
Mauá – SP
FTTH outside Rio and SP,
based on FTTS project. (1) Number of 4G cities based on Teleco website as of Jun/18. 4G sites extracted from Anatel’s Siec system as of Jun/18
(2) Number of 700Mhz cities and sites in 700 MHz extracted from Anatel’s Mosaico system as of Jun/18. Cities with 700MHz = at least TIM Participações - Investor Relations
one site using this frequency. Number of 700 MHz sites based on sites licensed by Anatel which may include non-active sites. 22
(3) Addressable households ready to sell Meeting with InvestorsVoLTE & Refarming VoLTE Evolution Refarming Strategy Moving on to 2.1 GHz: Teresina Case
Enhancing 4G Throughput Downlink²
(Mbps)
5 mln +14%
Customer Clients¹
using VoLTE
+3%
22
Experience State
Capitals with
-57% VoLTE -44%
in drop in call setup 3Q17 4Q17 1Q18 apr/18 may/18 jun/18
VoLTE (HD calls) is available calls
1,559
time
Before 2.1 GHz After 2.1 GHz
for more than 10 mln Cities with refarming refarming
VoLTE
devices in Brazil.
Refarming pilot started in mid-April improving 4G
throughput and availability in Teresina city
2.1GHz refarming, starting a
Continuous Improvement in LTE Indicators³ Countrywide
new wave after a successful
implementation of LTE 4G Throughput Downlink 4G Throughput Uplink 4G Latency
@1.8GHz. (Mbps) (Mbps) (ms)
+14% -26%
+19%
TIM continues to lead 4G
availability in Open Signal
Report (Jun/18). 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18
(1) Number refers to the first week of July/18
(2) Based on analysis by Ookla® of Speedtest Intelligence® data for Q3 2017–June 2018. Ookla trademarks used under license and
reprinted with permission. TIM Participações - Investor Relations
(3) Based on analysis by Ookla® of Speedtest Intelligence® data for Q1 2017–Q2 2018. Ookla trademarks used under license and reprinted 23
with permission. Meeting with InvestorsSALES
Digital E-Recharges
(Prepaid recharge mix)
Sales in Digital Channels
(Pure postpaid+ control)
Sales in Digital Channels
(Recurring prepaid)
Transformation at
Prepaid recharge mix
+5.3 p.p 1.5x changing driven by
~2x
e-channels.
Full Speed E-sales is a key driver for
TIM’s upselling strategy.
Understanding clients’ needs 2Q17 2Q18 2Q17 2Q18 2Q17 2Q18
to improve customer journey. CARING
Meu TIM Unique Users Caring
(App+Web Users) (Human interactions) Focus on Customer
Re-engineering of processes to -6% Experience supported by
+62%
self-caring.
address clients’ pain points.
Mobile App and
modernized IVR are key in
this approach.
“Meu TIM” App Experience: 2Q17 2Q18 2Q17 2Q18
+4p.p IVR retention
BILLING & COLLECTION
E-Billing E-Payment
(# e-bills delivered) (# clients paying by e-methods)
Best app rating Adjusting incentives and
+28.4% pushing e-billing and
in the Apple +35.8%
e-payment through the
Store among right channels are driving
adoption
Telcos.
2Q17 2Q18 2Q17 2Q18
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Meeting with InvestorsA More Resilient Total Net Revenues Breakdown (R$ mln, %YoY)
Revenue Expansion 3,942 +6.1% +1.4% +5.6% +7.5% 4,171
6M18 Net Service Revenues +5.8%
growing at 6.0% YoY, and MSR
at 5.8% YoY.
Reduction in working days¹ in
Mobile Revenues Mix: Bundled Offers (%) Mobile ARPU (R$,%YoY)
2Q impacted prepaid revenues
due to lower recharge level 21.9
(~0.4% of MSR). No-Bundle
+13.0%
19.4
Mobile Recurring Bundled 76%
Offers Revenues growing at Bundle
34.9% YoY in 2Q18.
2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 2Q18
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¹Number of full workings days was affected by truck drivers’ strike and Brazil’s National soccer matches in FIFA World Cup. 25
Meeting with InvestorsOpex X-Ray: Efficiency Continues to Be a Key Driver
Normalized Opex Breakdown (R$ mln, %YoY) 2Q Trends Explained
+2.1%
Costs remain under control, growing under inflation and in line with
guidance. Low FX exposure reduce macro risks.
2,552 2,604
1 Selling & Marketing (+0.3% YoY):
232 221 902
COGS
Since 2Q17 costs remain practically stable, 869 869 854 869 871
despite a higher commercial pressure from
901 acquisition mix.
Traffic 924
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
(Network & Interconnection)
2 Bad Debt (+56% YoY) :
Despite expansion, remains under control (~2% of Gross Revenues). Performance is
mainly explained by the larger revenue base exposed to payment default (up by ~50% in
Market 1,001 the case of Control). To a smaller extent non-recurring items also affected the trend.
952
(Selling & Mkt + Bad Debt)
3 Others (+61% YoY):
Process Explained by non-recurring events, that impacted both 2Q18 and the annual comparison,
444 481
(G&A + Personnel + Others) related to tax ( 2013 and 2014) and civil contingencies.
2Q17 2Q18
Efficiency Plan Recap Efficiency Plan Completion
(R$ bln) 1.7 (R$ mln)
0.4
1.3 86% Completion of 2018
1.0
P18-20 Target, in June
0.7
FY17
Plan Additional New Plan
2017-2019 2020 2018-2020 JAN-18 APR-18 JUL-18 OCT-18
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Meeting with InvestorsSolid Execution Consistent Evolution for Normalized EBITDA & Margin (%; R$ bln, %YoY)
Translated Into 35.3%
37.6% 4,50
33.6%
36.5%
Higher Profitability
31.5% 4,00 35,0%
29.5% +2.3 p.p. 35,0% +2.9 p.p.
EBITDA
2,00
Margin 3,50 30,0%
30,0% 3.04
1.57
& Bottom Line
3,00 2.65 25,0%
1,50 1.39 25,0%
1.29 1.20 2,50
20,0% 20,0%
2,00
1,00
EBITDA +12.7%
15,0% 15,0%
1,50 +14.5%
10,0% 10,0%
0,50 1,00
5,0%
0,50 5,0%
Once again record high 0,00 0,0%
0,00 0,0%
2Q15 2Q16 2Q17 2Q18 6M17 6M18
EBITDA and Margin for a
2nd Quarter
Reported Net Income (R$ mln, %YoY) Capex Acceleration (R$ bln, %YoY)
Net Income boosted to 585 +12.5%
1.66
1.48
~R$ 0.6 bln in 6M18 +66.7%
335 1.02
351 0.81
2Q
Network Capex 2Q 219 +53.2% +25.8%
250
acceleration to anticipate 1Q 132 1Q 0.67 0.65
availability of incremental 6M17 6M18
6M17 6M18
capacity. New IOC distribution %Network 61% 65%
R$ 240 mln to be paid Nov/18
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Meeting with InvestorsCash Flow And NFP Dynamics
Operating Free Cash Flow Ex-License (R$ mln)
Exposure to FX
313
2 Capex
6M18 EBITDA- -186 244
~20%
CAPEX up 16.9% 383
YoY
6M18 OFCF (130)
expanded R$443
mln
OFCF Δ EBTIDA Δ CAPEX Δ WC Δ Non-Recurring OFCF Fx Bands to further reduce
6M17 (YoY) (YoY) (YoY) Items (YoY) 6M18 potential impacts.
Net Financial Position (R$ mln)
Debt
10%
-158 -151 3,231
2,697 313 -437 -101
100% Full Hedged
NFP OFCF 6M18 Net Financial Cash Dividends Paid License NFP
Dec/17 (ex-license) Expenses Taxes +Tower Sales Jun/18
+Other
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Meeting with InvestorsKey Messages & Outlook
Macro recovery decelerating, expectations deteriorating
Focus Survey Estimates for 2018
2018 Targets checkpoint
GDP Growth Inflation FX Rate (BRL-USD)
4.2%
Internal 3.38 Guidance Short Term
Estimates 2.0% 6M18 Results Status
(Plan 18-20) Metrics Targets (2018)
2.7% 4.0% 3.9% 3.32 3.63
1.8%
1) Service 5 – 7% 6%
Revenues
Jan-18 Jun-18 Jan-18 Jun-18 Jan-18 Jun-18
2) EBITDA Growth Doublet Digit 14.5%
Slow and unbalanced economic recovery requires even (YoY)
more focus in execution 3) EBITDA – Capex 13% 16.5%
on Revenues
2H18 actions: 4) IOC Distribution R$ 800 – 900 R$ 470 mln
mln
Accelerate FTTH rollout adjusting phase-in/phase-out with FTTC 5 ) CAPEX ~ R$ 4 bln R$ 1.66 bln
Maintain focus in our own customer base: upsell + migrations to
continuously improve ARPU
Accelerate 700 MHz deployments + 2.1 GHZ refarming to improve
quality and CEX 2018 YE GUIDANCE
B2B (mobile and fixed) turnaround refocused to accelerate results
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Meeting with InvestorsSTRATEGIC PLAN 2018-20
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Meeting with InvestorsExecutive Summary:
More Postpaid and Broadband to support Revenue Growth and Expand Cash Generation
Strategic actions Impact by 2020
• Continued expansion of the best fixed and mobile >4K Cities covered by 4G (96% of Urban
Best in class infrastructure (4G, FTTX) to differentiate experience Population)
customer >2X growth of e-bill and e-pay penetration
• Improve Customer engagement through increased penetration
engagement of Digital interactions ~5X growth in My-TIM App users
• Acceleration of Mobile growth targeting more affluent Mobile CB Mix (%)
segments (e.g., controle, post-paid)
Prepaid >22
Sustain • Growth of Residential BB contribution to top-line 15,8
leadership • Step-change growth in SMB segment leveraging new Postpaid 30% ~50%
position Organization, go-to-market and value proposition
2017 2020
• Development of new and innovative revenue streams (e.g., IoT, 4X growth of residential BB CB ( FTTX +
mobile adv, etc.) WTTx)
• Improvement of Cash Generation ability through “smart” ≥40% EBITDA margin in 2020
Cash-flow Capex and Debt/Tax optimization
generation ≥20% EBITDA-CAPEX on revenues in
• Capture of digitalization efficiency potential 2020
• “Zero-based” approach on traditional efficiency levers
TIM Participações - Investor Relations
Meeting with Investors 31Network: Expansion in Mobile Access and Fiber
FIXED UBB BOOST 4G EVOLUTION
Focus on FTTH and FTTC Capacity Expansion and Coverage Evolution
2017 NEW plan! (2020)
96% urban
13
>4,200 population
FTTH
Coverage
2 cities
>3,000
3.0
4G Cities
FTTH Covered
Coverage
0.1 HH (MM)
1,255 LTE 700MHz
Cities Covered
FTTX
Coverage
3.2 5.9 HH (MM)
411 916
2015 2016 2017 2018 2019 2020
TRANSPORT INFRASTRUCTURE
Capillarity to support Mobile and Residential Services
FTTSITE FTTCITY
2017 NEW plan! (2020)
High Capacity
BackhauL (%)
60% ~80% 450
2017
1,200
2020
~+600 vs Old Plan
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Meeting with InvestorsDigitalization will sustain our CEx improvement while supporting Efficiencies
Customer Management: Simplification of Customer Journey Customer Acquisition: Channel Mix Improvement
Sales in Digital Channels Sales in Digital Channels
Digital Interactions E-Billing E-Payment
(Control+Pure Postpaid) (Live)
(Total) (#users) (#users)
>80%
2x 2017 3x 2017
2X ~2X ~2x vs. 2016
vs. 2016 ~3x
2017 2020 2017 2020 2017 2020 2017 2020 2017 2020
R$0.5 bln
in savings
in 2020
Prepaid Recharges: Experience and Profitability Support Processes & Systems: Upgraded and
Strengthened IT Architecture
Recharge Commission (ex. Process Enhancement
Digital Prepaid Recharge Mix Efficiency Oriented
(% Digital sobre Total)
volume effect)
(R$ mln)
Asset Inventory Compliance Tax:
Management: Clean up: Increase in fiscal credits
-14% RFID tagging process Reduction in WBS utilization (R$ 100 mln/year)
+7p.p. for assets: safe and (>85%) and invoices
reliable tracing (>25%) by 2H18 with A.I
and Bots
Legal Process Optimiz.: Sales & VAS Commiss.:
System automation and Vendor Portal: Automation of the charge
2017 2020 2017 2020 integration of legal processes > 11k invoices/month creation process and VAS
with A.I and Bots already automatized revenue share calculation
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Meeting with InvestorsOpex Evolution: over-executing the Efficiency Plan thanks to Digitalization
initiatives
Opex Evolution Efficiency Plan Highlights
R$ Bln
2018-2020 Plan • Expected OPEX growth below inflation.
2018-2020 except additional cost of TIM Live & WTTx acceleration CAGR
< 4% • Excluding additional acceleration in WTTx and Live business,
Opex should grow bellow 2%.
10.3 < 2%
• Network and postpaid customers structural growth continues
10.2
to impact costs considering the expected acceleration in
commercial activity.
2017 2018 2019 2020
Efficiency Plan Evolution
R$ Bln ~50% from Digitalization
Additional Savings 0.4 1.7 (1.0) ~11.5
Achieved in 2017 10.3
1.3 50% Market Driven
1.1 1.0
P18-20 50% Process Driven Post Paid CB: ~+60%1
Residential BB CB2: 4X Growth1; ~+3M HH passed
Network: Sites ~+30%1; Energy MWh >25%1
0.7 FTTCity Coverage: ~+800 Cities
FY17
Old Plan New Plan Additional New Plan 2017FY Volume & Inflation Savings 2020FY
2017-2019 2017-2019 2020 2017-2020 Structural
Growth
¹ 2020 vs 2017
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Meeting with InvestorsIncreasing Profitability and Cash Generation
EBITDA and Margin Expansion
R$ Bln; % EBITDA - Capex
R$ Bln
>40%
36.6% 5.9
EBITDA 33.5% EBITDA 5.2
Margin
CAPEX 4.5 4.1
5.9
5.2
CAGR 2017-20
Low Double Digit
2016A 2017A 2018 2019 2020
EBITDA
% on Tot.
2016A 2017A 2018 2019 2020 3.9% 11.1% ≥13% ≥20%
Revenues
CAPEX Net Cash Flow Bef. Dividends
R$ Bln New Plan ‘18-’20 R$ Bln
New Plan ‘18-’20
4.5
4.1
Old Plan ‘17-’19
0.4
Old Plan ‘17-’19
∑ ‘18-’20: ~12 bln
-0.5 -0.6
2016A 2017A 2018 2019 2020 2016A 2017A 2018 2019 2020
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Meeting with InvestorsTIM Brasil 2018-’20 Targets SHORT TERM LONG TERM
GOALS DRIVERS TARGETS / KPIs TARGETS / KPIs
Sustain
• Further improve Mobile Service
Service Revenues
Growth:
Service Revenues
Growth:
Revenue Share
Top Line
Growth • Expand Residential BB Revenues 5-7% in 2018 Mid to High Single
contribution
Digit CAGR ‘17-’20
• “Zero-based” approach on EBITDA: EBITDA Margin:
Improve traditional efficiency levers
Profitability • Capture digitalization efficiency Double Digit ≥40% in 2020
potential growth in 2018
• Smart Capex “More with less”
Ebitda-Capex on
Ebitda-Capex on
Revenues:
approach
Expand Cash Revenues: ≥20% in 2020
Generation • Optimize Tax Rate Capex:
• Optimize Debt and Shareholders’ ≥13% in 2018 ~12B R$ in ‘18-’20
Remuneration (~20% on Rev. in 2020)
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Meeting with InvestorsRegulatory Updates
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Meeting with InvestorsBrazilian Spectrum - Caps and Distribution
Spectrum Distribution
Vivo 21 3 26 29 40 20
Nextel 14 14 20
Claro 18 4 29 25 40 20
TIM 11 5 35 22 20 20
Oi 5 43 24 20
0 20 40 60 80 100 120 140
850 MHz 900 MHz 1.800 MHz 2.100 MHz 2.500 MHz 700 MHz
Caps
Band 850 MHz 900 MHz 1.800 MHz 2.100 MHz 2.500 MHz 700 MHz
Regulated Spectrum Cap (12.5+12.5) (2.5+2.5) (25+25) (15+15) (30+30) (20+20)
(FDD Applications) MHz MHz MHz MHz MHz MHz
Global Cap of 80 MHz < Σ of Sub-Caps Specific Caps
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Meeting with InvestorsMain Regulatory Topics 2018
1Q18 2Q18
January February March April May June
700 MHz (Available) PLC 79/2016 Spectrum Management Public Consultation 700 MHz (Switch Off) Grant of Subsidies
• >4.000 cities • New Telecom • Pubilc Consultantion • Quality • João Pessoa • New RGC (Pre PC)
GIRED for LTE services framework (Conclude in 04/08) • Natal
following for more New PPDUR • Maceió Public Consultation
700 MHz (Switch Off) studies. • Public consultation of TAC (TEF) • Manaus • Sectorial data
• Curitiba radiofrequency public • Rejected by • Teresina collection
PERT price (auction, ANATEL • Aracaju
CP “Fator X” • Ongoing ANATEL secondary use and • Belém
• Contribution in Telecom Network postponement) under PLC 79/2016
01/22 Plan discussion discussion yet • Senate CCT Public Consultation
• Área de Tarifação
700 MHz (Switch Off) 700 MHz (Switch Off) do STFC
• Florianópolis • Porto Alegre, São Luis • Strategic Indicators
e São Paulo Interior • New Spectrum Cap
PLC 79/2016
• Public audience in
Senate
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Meeting with Investors700 Mhz and 3,5 GHz Auction
Available LTE TIM, #cities
916 cities
> 1700 cities,
of which: 20 capitals
2016 1Q18 included all capitals 2019E
700 MHz
2 cities 2017 + 975 cities 2018E
> 3500 cities
of which: 21 capital
• Rio de Janeiro
• São Paulo • Florianópolis
Capitals Availabity • Belo Horizonte
• Curitiba • Porto Alegre
2018E
Jun. Jul. Set.
TIM field trials confirm ANATEL studies C
TCU suspends Band vs. IMT coexistence
2002 Auction 2011 2017
3,5 GHz
2005 / 2006 Auction
2015 2018
Blocks of 1,75 MHz Auction proposed, not • TIM coordinates tests w/ ANATEL+Telcos
cancelled
(Auction 003/2002) started
Interference C • 3,5 GHz Public Consultation
Band vs. WiMax Harmonized for IMT (WRC- Further tests
15) Usage Conditions
Interference management
Macro Cell applications
3,5 GHz Auction (award 2019)
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Meeting with InvestorsAPPENDIX
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Meeting with InvestorsHistorical Data: P&L Pro-Forma
TIM Participações - Investor Relations
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Meeting with InvestorsHistorical Data: Operational
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Meeting with InvestorsHistorical Data: Cash Flow
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Meeting with InvestorsFor Further Information:
Investor Relations
Avenida João Cabral de Melo Neto, n 850, South Tower,
12th floor – Barra da Tijuca
22775-057 Rio de Janeiro, RJ
E-mail: ri@timbrasil.com.br
Vicente Ferreira
E-mail: vdferreira@timbrasil.com.br
Phone: +55 21 98113-1400
Pedro Yagelovic
E-mail: pybsantos@timbrasil.com.br
Phone: +55 21 98113-1881
Rafaela Gunzburger
E-mail: rgunzburger@timbrasil.com.br
Phone: +55 21 98113-1808
Luiza Macedo
E-mail: ldcmacedo@timbrasil.com.br
Phone: +55 21 98113-6312
Visit our Website
www.tim.com.br/ir
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