TIM Brasil Company's Presentation May, 2018
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TIM Brasil
Company’s Presentation
May, 2018
TIM Participações - Investor Relations
Meeting with Investors
Disclaimer
This presentation contains statements Such forward looking statements are not
that constitute forward looking guarantees of future performance and
statements regarding the intent, belief or involve risks and uncertainties, and actual
current expectations of the customer base, results may differ materially from those
estimates regarding future financial results projected as a result of various factors.
and other aspects 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
1Q18 Results ……………………………………………………………………………………………......15
Strategic Plan 2018-20 ……………………………………………………………................................. 26
Regulatory Update ……………………………………………………………………………………….....33
Appendix ………………………………………………………………………………………………….... 37
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
Meeting with Investors
Strategic 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
Meeting with Investors
Corporate 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 Investors
Corporate 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 Investors
MARKET OVERVIEW and TIM
POSITIONING
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Meeting with Investors
Brazilian Telcos X-Ray
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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' 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 time is spent on social network and instant
23
88 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
TIM Participações - Investor Relations
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$) Mobile Service Revenues Share¹ (%)
Pure
Postpaid Upsell >26%
24.5% 23.8%
Control Loyalty 23.1% 22.7%
Postpaid Upgrade
Upsell CAGR
High Single Digit
Prepaid Upgrade
Recurring Upsell
Prepaid Upgrade
Non-Recurring Upsell
2017A 2018 2019 2020 2014A 2015A 2016A 2017E 2018 2019 2020
(1) TOP 5 market includes SMP+SME
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Meeting with InvestorsOpportunity for Residential Broadband solutions to be captured
Residential Broadband Penetration Fixed Broadband Market Customers
(mln users)
0 – 20%
40% – 60%
20% - 40%
> 60%
• Broadband Penetration 42%
• Ultra-BB Penetration 6%
• 96% of cities (~50% population) has very low BB
penetration (~20%) CAGR
>6%
• 23% of BB connections have speeds < 2Mpbs
Relevant opportunity to capture a strong
unserved demand for Residential 2017E 2018 2019 2020
Broadband and Ultra-BB connectivity
1 FTTH 2 FTTC 3 WTTX
• Increase of capacity on already saturated areas • Simple and smart solution (plug n play, value for
• Best overall performance (capacity, speed and
money)
stability)
• Refocus with dedicated offer to high income • Focus on customers with limited broadband
• Focus on high value customers and high
areas with historical low sales performance services (suburbs and smaller cities) offers
customer experience standards
• Fast time-to-market to attack new regions
• Smart strategy coverage launching in new cities • Higher speeds (VDSL2+) and ARPU over the
(incremental revenues)
• Leverage in fiber infra already built for mobile existing coverage
• Optimize investments: use of 4G network
• Partnership with content providers • Partnership with content providers (700Mhz) spare capacity
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Meeting with Investors1Q18 RESULTS
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Meeting with InvestorsNet Service Revenues
Quarter Highlights
(R$ bn)
+6.4% 4.0
+3.5% 3.7
3.6 MSR Live Revs
+6.0 % +43.4 %
Consistent Service YoY YoY
Revenues Expansion
1Q16 1Q17 1Q18
Solid Customer Base EBITDA¹ – Capex (R$ bn)
Growth in Mobile Postpaid 0.8
and Fixed Broadband EBITDA¹ EBITDA Margin¹ 0.6
+38.9%
+31.3%
0.5
+16.4 % 35.5 %
Operating Profitability with YoY (+3.6 p.p YoY)
Strong and Further
1Q16 1Q17 1Q18
Improving Performance
Network Evolution
Mobile ARPU 12M Postpaid Live ARPU4 12M UBB Net 700 Mhz cities FTTH³ HH
Supporting Great Operating Net Adds² Adds
+13.8 % +12.5% 975 +202 (000)
Momentum +3.0 Mln +88k
YoY YoY +59 vs. 4Q17 vs. 4Q17
¹Normalized figures
²Postpaid Net Adds Ex-M2M
³Addressable households ready to sel
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4 UBB + VOIP Meeting with InvestorsMobile Operations: Focus on High Value Customers to Accelerate
Growth
Mobile Base¹ Mix Shift (% of users)
Loyalty
Offers with Lock-In to
reduce Churn
2G
25% Postpaid 32% 25% 20%
Users
13% Recurring Recurrence
3G
Prepaid 29%
29% 43% Users Weekly and Monthly Offers for
Prepaid, Control, Pure Post
62% Non Recurring
Prepaid 39% 4G 51%
32% Users
Data/Content Centric
1Q17 1Q18 1Q17 1Q18 New Partnerships boosting
usage and guaranteeing
differentiation through
ARPU per Segment (R$) BOU per Technology (MB)
innovation
Prepaid Postpaid 3G 4G Value
602
11.4
40.0 2,215 More for More
+1.6% +3.4% +12.6%
11.2 38.7 +84.3%
535
1,202
Voice Only Users
Management of 2G
Customers
1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18
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¹Source: Company; Anatel 17
Meeting with InvestorsNew Portfolio to Tackle Key Customers Demands
Communication Impact on Prepaid Controle Postpaid
APPs Penetration Motivation
Data
Instant communication Usage Daily Recurrence Light Low Mid-High Low Mid-High
apps with EXCLUSIVE
benefit of unlimited calling Communication
• Offload 2G/3G
Medium High Network +R$1.5/day
• ITX Reduction
Mobility
Mobility apps as a Mobility
convenience differential: Low Medium Differentiation
navigation and taxi
Social
Differentiation +R$10/week +R$10/week
Social Networks High High and Monetization +R$20/month +R$20/month
Most relevant social apps on the
market included in TIM Black B Video
and as plugin for Control and
Prepaid High High Differentiation
Video
YouTube as an additional
benefit of TIM Black
boosting video
Proposition and offer
differentiation
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Meeting with InvestorsTIM Live: Solid Delivery While Preparing for a New Wave
UBB Customer Base (000) TIM Live Revenues (R$ mln, %YoY) Residential Broadband Portfolio Evolution
+27.4%
Fixed
ULTRA FIBER INTERNET
33.2% 41.5%
Revs Mix
411
100 Mega to 2 Giga
85 40 Mega to 150 Mega 2 Mega to 4 Mega
(FTTH)
322
(FTTC) (WTTX)
59 +43.4% TIM’s ultra broadband with
TIM’s residential broadband Plug and play home internet.
optical fiber high speeds
awarded the best of Brazil Neither wires or installation
bringing the future
cost
Inside your home
VALUE ADDED SERVICES
1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 1Q18
VIDEO E-MAGAZINES SECURITY EDUCATION
Connection Speeds (% users) TIM Live ARPU (R$, %YoY)
Other Services
5% 2% OTT Video Partners
70.8
35Mbps +12.5%
TIM Banca Virtual TIM Ensina
40/50 Mbps
62.9
36% 70 Mbps
57%
≥ 90 Mbps TIM Live Protect POWER WI-FI
1Q17 1Q18
TIM Fixo
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Meeting with InvestorsSolid Mobile and Largest 4G Coverage (# cities, # sites) Mobile Network Usage (% of traffic)
Fixed Network 3,110
2,667
1,504
Cities¹
61%
65%
Progress Supporting 284
Business
TIM P1 P3 P4
39%
35%
Acceleration 16,3
12,9
Sites² (000)
11,7
7,9 1Q17 2Q17 3Q17 4Q17 1Q18
4G 2G + 3G
1st to cover all São Paulo TIM P3 P1 P4
state with 4G
FTTH Coverage (# areas, # HH) WTTX Coverage (# cities)
92% of Brazil’s urban GPON areas
population covered 42
7
975 cities using 700MHz, 67 4Q17 1Q18 2Q18e
ready for WTTX Addressable HH (000)
203 1Q18 2Q18 3Q18 4Q18 Total
FTTH launched in Mauá, SP. 50
4Q17 1Q18 2Q18e TIM Participações - Investor Relations
¹ Source: Teleco website 20
² Source: Anatel Meeting with InvestorsCustomer Solid Improvements in Anatel’s Satisfaction Survey (points)
Postpaid Prepaid Fixed Broadband (2017)
Experience a Driver 7.2 6.8 6.8
for Differentiation
7.0 6.7 TIM 7.5
6.8 P1 6.4
6.5 P6 6.4
6.4
P2 6.4
P3 5.7
2015 2016 2017 Market 2015 2016 2017 Market P5 5.4
Expansion in all YoY metrics
of Anatel’s Satisfaction
Survey¹ OpenSignal: “LTE availability (…) is extremely important. After all, fast 4G downloads aren’t
very useful if you can only find them a small portion of the time.”
Leader in general
satisfaction¹: Postpaid in 14
Best 4G Coverage in Brazil Attested by All Major Network Analytics Providers
states and Prepaid in 7 states (% of tests, % of time)
Technology Usage Tests per Technology 4G Availability
Leader in fixed broadband (Mar/18) (Mar/18) (Jan/18)
general satisfaction¹ for the 3G 35% 46% 57%
20% 28% 35% 36%
60%
past 3 years 80% 72%
72%
62% 58%
4G 65% 54% 65% 64% 54%
43% 40%
TIM Live #1 in Netflix Ranking TIM P3 P4 P1 TIM P3 P4 P1 TIM P1 P3 P4
in 33 out of 36 months Best Mobile Network Experience #1 4G Test Ranking 4G Availability Award
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¹2017 Anatel’s Perceived Quality and Satisfaction Survey released in March/18 21
Meeting with InvestorsTotal Net Revenues Breakdown (R$ mln, %YoY)
Consistent
Revenues
+6.6% -0.1% +14.7% -24.7% 4,139
3,951
Improvement
+4.8%
Closing the gap between
Gross and Net Revenues
Mobile Bundle (voice + Serv. Revs. Evolution: Gross x Net (%YoY) Mobile Revenues Mix: Bundled Offers (%)
data) Offers Revenues
growing at >40% (YoY)
6.1% 6.4% 100%
5.9%
5.0%
Fixed Revenues Recovery 3.5%
5.9% 80%
No-Bundle
Net
Tim Live +43% (YoY) 2.0% 2.3% 60%
40%
Others¹ +1% (YoY) -1.0%
Bundle 74%
20%
-2.1%
Gross
0%
1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18
TIM Participações - Investor Relations
¹Corporate, wholesale and others 22
Meeting with InvestorsNormalized Opex Breakdown (R$ mln, %YoY)
OPEX X-Ray
2,688 -10.8% -3.8% +1.8% +5.1% 2,669
Solid cost control, despite
volume growth impact
-0.7%
Efficiency Plan continues to
play an important role: 58% 1 2 3 4
Completion
1 COGS: 3 Market:
o Lower average sales price (-17.6% YoY) as a consequence of o Higher postpaid Customer Base and Sales drive to an increase in
Digital interactions¹ rose supplier strategy change: higher quality handsets at a more customer acquisition and management opex (SAC, customer care,
affordable price. billing and collection) partially offset by digital efficiencies;
>40% YoY and Digital caring o Lower Fistel expenses;
penetration improved 6 p.p o Higher Bad Debt explained by temporary effects (i) wholesale bad
debt positive impact in 1Q17 due to settlement with other
2 Traffic:
YoY o Network: Leased lines tariff reduction and Zero Leased Lines
operators, (ii) delay on invoice issuance and delivery (postal strike)
and by a continued expansion of our postpaid base (+20.5% YoY)
Project partially offset by higher network sharing costs ; and billed revenues.
o Stable content provider cost with improved mix from marketing
4 Process:
Postpaid² sales in digital perspective (bundle vs pay per use);
o Increase in labor cost driven by higher variable components and
o ITX: lower cost after MTR (VU-M) reduction.
channels rose ~20% YoY inflation impacts (IPCA +2.68%);
o Lower FUST/FUNTEL expenses.
¹Interactions using mobile app and website TIM Participações - Investor Relations
²Postpaid = Pure postpaid + Control 23
Meeting with InvestorsNormalized EBITDA & Normalized Margin EBITDA (R$ mln, %YoY)
Profitability & Cash
Generation:
1,470
1,344 +3.6 p.p
1,263 +1.8 p.p
1,162 +0.6 p.p
35.5%
32.0%
29.5% 30.2%
EBITDA & Margin EBTIDA
best performance in 1st
1Q15 1Q16 1Q17 1Q18 1Q15 1Q16 1Q17 1Q18
yoy +0.9% -13.5% +8.7% +16.4%
quarter
Capex focused on Capex (R$ mln, %YoY) Reported Net Income (R$ mln, R$)
infrastructure and -3.5%
669
digitalization Licenses
646
250
& Others ~2x
IT
EBITDA-Capex over sales at 132
87%
20%
78%
Network
Solid Net Income expansion 1Q17 1Q18 1Q17 1Q18
Capex/
17% 16% 0.05
Sales EPS 0.10
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Meeting with InvestorsKey Messages & Outlook
FINANCIAL & OPERATIONAL TURNAROUND JUST LAUNCHED OR STILL TO COME IN 2018...
FULLY CONSOLIDATED
New portfolio for mobile (Consumer + SMB) “content
1 Gross Service Revenues: +5.9% YoY focused”.
Convergent offer for Consumer and SMB in 2H18.
2 Leader in Postpaid Net Adds (ex-M2M) LTM 1 city per month in FTTH and strong expansion of WTTx
3.0
2.3 2.1 coverage in 2H18.
0.3 New positioning in SMB (“Business Partner”) with
TIM P1 P3 P5 P4 differentiated regional approach.
-0.3
3 7 quarters of positive EBITDA growth and margin
above 35% Announcing now R$230 Between R$800
mln in IOE to be paid in mln and R$900 mln
4 August as part of in IOC distribution
Leadership in 4G coverage: Largest & Best Customer
Experience distribution plan. expected for FY18
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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 27Network: 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) Public Consultation
• >4.000 cities • New Telecom • Pubilc Consultantion • Quality • João Pessoa • Reversible asset
GIRED for LTE services framework (Conclude in 04/08) • Natal
following for more New PPDUR • Maceió AIR
700 MHz (Switch Off) studies. • Public consultation of TAC (TEF) • Manaus • Pubilc Emergency
• Curitiba radiofrequency public • Rejected by • Teresina Services
PERT price (auction, ANATEL • Aracaju • Network Security
CP “Fator X” • Ongoing ANATEL secondary use and
• Contribution in Telecom Network postponement) under PLC 79/2016 New RGC
01/22 Plan discussion discussion yet • Senate CCT • Initial debate – Pre
CP
700 MHz (Switch Off) 700 MHz (Switch Off)
• Florianópolis • Porto Alegre, São Luis Consulta Pública
e São Paulo Interior • Área de Tarifação
do STFC
• Coleta de Dados
Setoriais
• Indicadores
Estratégicos
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 InvestorsTotal Mobile Base Overview
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Meeting with InvestorsTotal Postpaid Base Overview
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Meeting with InvestorsTotal Prepaid Base Overview
TIM Participações - Investor Relations
40
Meeting with InvestorsTotal Voice & Data (modem + M2M) Postpaid Base Overview
TIM Participações - Investor Relations
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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
TIM Participações - Investor Relations
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Meeting with InvestorsHistorical Data: Cash Flow
TIM Participações - Investor Relations
44
Meeting with InvestorsFor Further Information:
Investor Relations
Avenida João Cabral de Melo Neto, n 850, South Tower – Barra da Tijuca
22775-057 Rio de Janeiro, RJ
E-mail: ri@timbrasil.com.br
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Meeting with InvestorsYou can also read
