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Meeting with Investors - April 2015

The document provides an overview and analysis of TIM Brasil's 2014 results. Some key highlights include: - TIM Brasil achieved solid financial results in 2014, with customer base growth to 75.7 million, revenue growth of 4.8%, and EBITDA growth of 6.4%. - Data usage continued to accelerate, becoming the main driver of revenues and growth. Data revenues increased 49% year-over-year. - Profitability improved through cost optimization efforts and a focus on higher-margin businesses like smartphones, data, and fixed broadband. EBITDA margin expanded 5.2 percentage points for the full year. - However, regulatory mobile termination rate cuts continued to negatively impact revenues

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Company’s Presentation TIM BRASIL April, 2015
Visit our website and IR app: www.tim.com.br/ir AGENDA  Market Overview and TIM Positioning................ 4  2014 Results……………………………..………..……………..8  Network & Quality Evolution……..………………..…..17  Fixed Business…………………………….……………....…...21  Business Outlook………….….….…………………….……..24  Regulatory Update……….….….…………………….………29  Appendix..............................................................32 TIM IR app (English) TIM RI app (Portuguese)
 Statutory Audit Committee: • Report to Board of Directors • Oversight Financial reporting • Analyze anonymous complaints 20 25 28 30 29 2010 2011 2012 2013 2014 51 64 70 73 76 2010 2011 2012 2013 2014 CAGR +10% KNOWING TIM 3 KNOWING TIM BETTER 15,000 km fiber optical backbone 5,500 km fiber optical backhauling Growth Via Acquisition TIM: A Huge Brazilian Company  75.7 million customers (27% Share)  More than 465,000 points of sales  More than 170 own stores  15 Customer Care Centers (16k attendants)  ~14,000 Antennas  3,433 cities covered  54,160 km of optical fiber network  23,000 indirect jobs  ~R$3.9 billion invested in FY2014 (ex-licenses) GROWTH STRUCTUE Gross Revenues (R$ bln) Customer Base EoP (mln customers) EBITDA (R$ bln) 4.2 4.7 5.0 5.2 5.5 2010 2011 2012 2013 2014 CAGR +9% CAGR +7%  Presence in Brazil since 1998  16th largest Private Company in Brazil (source: Exame Magazine - 2013)  Approximately R$32 billion of Market Capitalization Brazilian Law “Nível” 1 “Nível” 2 Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders  100% Tag Along  Equal dividends rights  One single class of shares  Strict disclosure policy Unique Telco company listed on the Novo Mercado CORPORATE GOVERNANCE 2nd Player Market & Revenue Share 95% of urban pop. covered ~13k employees
Market Overview and TIM Positioning
TIM represents 30% of the industry mobile revenue2 while has 27% of the market share TIM Source: Anatel and Players balance sheet Vivo Claro Oi Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 74,721 657 153 n.a. 76,531 Market share 4Q14 27.0% 1.4% 0.5% n.a. --- Net Adds 12M (000´s) 2,289 25 64 n.a. 2,378 Net Revs FY14 (R$ Mln) 18,919 579 19,498 ARPU 4Q14 18.0 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 79,938 10,939 4,102 770 95,749 Market share 4Q14 28.5% 23.9% 17.1% 3.9% --- Net Adds 12M (000´s) 2,693 502 -205 176 2,665 Net Revs FY14 (R$ Mln) 23,740 11,260 35,000 ARPU 4Q14 24.6 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 71,107 11,519 7,523 10,182 100,331 Market share 4Q14 25.3% 25.2% 31.4% 52.0% --- Net Adds 12M (000´s) 2,403 1,463 941 525 3,868 Net Revs FY14 (R$ Mln) 13,078 22,525 35,603 ARPU 4Q14 15.3 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 50,918 16,692 6,554 1,303 75,467 Market share 4Q14 18.1% 36.5% 27.3% 6.7% --- Net Adds 12M (000´s) 702 -1,742 20 474 1,196 Net Revs FY14 (R$ Mln) 9,290 19,132 28,422 ARPU 4Q14 17.4 n.a. n.a. n.a. --- The mobile segment represents 78% of the industry access growth 1 - Fixed Access numbers refers to 3Q14 Fixed / Mobile Fixed BB Fixed voice & BB / TVMobile Fixed BB/ TV Fixed Mobile BRAZILIAN TELCOS X-RAY Fixed / Mobile / 2 - Mobile revenue considers only the 4 major players MARKET OVERVIEW AND TIM POSITIONING 5
Revenue Mix Revenue Mix 27% Mobile Market Revenues Evolution (Mobile Service Net Revenues; %) • Most households without internet access • Mobile better suited to break price barrier 9.5 2.6 Jan-13 Nov-14 0.34 0.30 0.23 0.16 0.10 0.06 0.03 0.02 2012 2013 2014 2015 2016 2017 2018 2019 57% 4% 12% 1% 37% 2% MTR Cut (R$) Voice Incoming Voice Outgoing SMS Internet 60% • Maturing market: Customer base growth slowdown • Consumption migrating from voice to data 2010 2020 SMS Traffic Sharp Decrease (billions of SMS sent) Mobile Internet is the growth driver and will be the largest mobile market, although Voice remains important Voice Decline Internet Opportunities STRATEGIC POSITIONING Internet Market Evolution MARKET OVERVIEW AND TIM POSITIONING 6
105% 90% 79% 72% 66% 63% • Huge gap between Brazil and developed markets • Lack of infrastructure: low quality and speed • Affordability issues (high prices, combos) • Smaller gap between Brazil and developed markets • Additional drivers for growth: days of use, data consumption • Affordable prices 90% 83% 73% 73% 55% 32% Fixed (% households) Mobile (% population) Content & Usage Offer Pure Connectivity Offer Developed markets avg: 75% Developed markets avg: 82% Connectivity Proximity & MPayment Connected Home & In Cars RichCom OTT Telco COOL TRUST QoE* and Caring Fra UK USA Jap Rus Bra Jap USA UK Ita Fra Bra Δ: 43 p.p. Δ: 19 p.p. * Quality of Experience DATA: CONNECTIVITY AND BEYOND Getting People Connected: Broadband Penetration Entering in the Content World MARKET OVERVIEW AND TIM POSITIONING 7 Apps Social Video Music Gaming Digital Identity & Security A B C D/E Voice Centric World Data Centric World Data DataVoiceVoice Focus on voice for B/C classes Focus on data for B/C classes Targeting the “Big Middle” Source: OVUM / INEGI
2014 Results
RESULTS HIGHLIGHTS: A SOLID QTR TO CLOSE A SOLID YEAR 2014 RESULTS 9 33% 42% 49% 56% 28.0% 27.9% 27.4% 30.1% 61.1 63.2 20% 30% P1 26.7% 26.1% 28.4% -22.9% -20.5% -2.9% 2.6% 1Q14 2Q14 3Q14 4Q14 Innovative offers generating value: • Charging per day Infinity “dia” • Controle WhatsApp • Shared Data plans MTR cut impact still significant: ~R$372 million on EBITDA in 2014 75.7 million customers Customer Base 34 Data Acceleration 30% Improving Profitability Fixed Turnaround on EBITDA Margin business million users (+26% YoY) Strong reduction of SMS business (-26% YoY in revenues) Tougher macro environment: • GDP: +0.15%* • Inflation: 6.4% in 2014 2014 Year Recap New infrastructure approach: data centric 4G LTE auction: assured future positioning Fixed corporate business turnaround completed Live TIM: best in class fixed broadband 21 Dec/13 Dec/14 Prepaid (mln customers) Control Plans (mln customers) +3.4% YoY Dec/13 Dec/14 +13.8% YoY 2Q13 4Q14 4G Market Share (%) TIM Gross Data Revenue Yearly Growth (ex-SMS) (% YoY) 1Q14 2Q14 3Q14 4Q14 EBITDA Margin (%) 1Q14 2Q14 3Q14 4Q14 2012 2013 2014 Net Revenues (Δ% YoY) Source: Company and Anatel P2 P3 *Central Bank consensus +25 p.p Solid financial results:  Growth on EBITDA / EBIT / Net Income Consistent growth on Business Generated revenues +6.3% (YoY) EBITDA Growth: 4Q14 x 4Q13: +4.0% 2014 x 2013: +6.4%
KEEPING THE FOCUS ON THE EXECUTION 2014 RESULTS 10 2013 2014 2013 2014 -31% Network & Interconnection Savings Interconnection Cost (R$; % YoY) Leased Lines Cost (R$; % YoY)  Relevant cost savings amid total data traffic growth of 39% in 2014 when compared to 2013  Regulatory price reductions and substitution of leased lines by own infrastructure -10% 3.2 3.4 4Q13 4Q14 Equipping Customer Base Handsets Sold (mln units) % of smartphone sales among players in 4Q  +6.3% YoY Growth  +6.1% QoQ Growth Source: Company and GFK Group TIM 48% P1 14% P3 29% P4 9%  Leading player in handset sales  Up 16 p.p. in 4Q14 vs. 4Q13 0.6% 0.5% 4Q13 4Q14 Operational Efficiency Fixed Business Progress SAC (Subscriber Acquisition Cost) (R$; % YoY) Bad Debt (% Bad debt over gross revenues) SAC/ ARPU 24 21 4Q13 4Q14 -15% 1.3x 1.1x -16% Corporate Solutions New Sales (R$; % YoY) Live TIM Ultra Broadband (customer base in thousand) 4Q13 4Q14 +39% 60 130 4Q13 4Q14 +2.2x Solid Performance in Net Adds Pre paid  1st in prepaid market share  + 2.1 million clients in 2014 Post paid  25% of net share in December (ex M2M and broadband)  Control plans bases rose 14% YoY
2014 RESULTS 11 OFFER STRATEGY EVOLUTION CONTINUES Data Customer Base (as % of total base) Smartphone Penetration (% of smartphones over customer base) 14.9% 29.4% 49.5% 2012 2013 2014  Smartphone sales over 80% in 4Q14 Data ARPU (% YoY Growth) 18% 20% 21% 25% 1Q14 2Q14 3Q14 4Q14 Beyond Connectivity on Data Controle WhatsApp  Data centric offer with no voice obligations  Data Package and WhatsaApp included in monthly fee  Differentiation among peers, with positive impact on postpaid performance Data Revenues Penetration (% Gross VAS Revs / Gross Mobile Service Revs ) 25.2% 27.2% 28.7% 30.9% 1Q14 2Q14 3Q14 4Q14 INFINITY TURBO 7 INFINITY “DIA” +7.2 p.p Protecting Core Revenue +35 p.p. R$ 0.75 DAILY OFFER SHARED INTERNET PLANS Offer Innovation Strong Data Progress  Leveraging on simplicity, transparency and convenience 30.3% 36.4% 44.6% 2012 2013 2014
2014 RESULTS 12 1Q14 2Q14 3Q14 4Q14 RESHAPING THE BUSINESS Different Revenue Profile Improving Profitability Mobile Service Net Revenues (% YoY) Mix of Gross Data Revenues (% YoY) 2013 2014 SMS Web Content & Others +29% +39% +45% +80% +33% +72% +47% +82% 1,500 1,578 1,677 1,862 Mobile First Margin* (Δ YoY) Service EBITDA (R$ mln; % YoY) Service EBITDA Margin (% YoY) 35% 38% 4Q13 4Q14 +2.8 p.p. 1,534 1,598 4Q13 4Q14 +4.2% 4Q13 4Q14 +4.5 p.p. FY 2014 growth: +5.2 p.p. FY 2014 growth: +3.0 p.p.FY 2014 growth: +6.9% +1.2% -19%-8.2% -24% (Voice & Other) (Data & SMS) (Incoming MTR + SMS) Gross Data Revenues Growth (% YoY of growth) 20% 22% 23% 28% 1Q14 2Q14 3Q14 4Q14 Excluding handset business * Mobile First Margin = Business Generated less costs related to the service. Business Received Business Generated -30% +6.3% 2014 +4.8% -34% 2014 4Q14 4Q14 -R$1.1 billion
2014 RESULTS 13 5,168 167 Thousands 1,558 97 1,499 123 -64 1,558 Thousands 5,183 5,168157 -307 4 132 Thousands +13.5% FINANCIAL RESULTS ANALYSIS (1/3) MTR Exposure 1,655 28.9% 35.3% 30.1% 38.1% EBITDA Margin Service EBITDA Margin EBITDA (R$ mln; % YoY) Reported EBITDA 4Q13 Reported EBITDA 4Q14 Δ Opex/ Others Traffic/Data Δ Contribution Margin ‘Pro forma’ EBITDA in 4Q14 +10.4% +4.0% Ex-MTR MTR Impact +3.5% +3.1%ΔYoY Revenue Exposure (as % of net service revenues) EBITDA Exposure (as % of EBITDA) ~ 25% ~ 12% 4Q10 4Q11 4Q12 4Q13 4Q14 ~ 32% ~18% 4Q10 4Q11 4Q12 4Q13 4Q14 Reported Revenue 4Q13 Reported Revenue 4Q14 ‘Pro forma’ Revenue 4Q14 Δ OthersΔ Business Received Δ Business Generated Δ Products Revenue 5,335 +2.9% - 0.3% Ex-MTR Δ % YoY +4.8% -33.9% +2.6% +16% MTR Impact 5,207 5,538 5,910 2013 2014 372 +6.4% MTR Impact 660 2013 2014 16,325 MTR Impact -2.3% Net Revenues Net Service Revenues (R$ mln, % YoY) 16,98516,701 +1.7% (R$ mln, % YoY)
13,216 2,530 579 3,173 19,498 3,991 4,318 3,340 2,311 5,538 EBITDA From Revenue to EBITDA in 2014 (R$ mln; %ΔYoY) Business generated Products Selling & marketing Network & interconnection Net Revenues Business incoming Fixed business COGS Others ΔYoY +6.3% -30.0% -11.9% -1.5% -2.1% +1.3% -18.7% -0.3% +9.3% +6.4% From EBITDA to Net Income in 2014 (R$ mln; %ΔYoY) EBITDA +6.4%ΔYoY Depreciation +11.3% Amortization +9.0% 5,538 -1,673 -1,380 2,486 -293 -646 1,546 Net Income +2.7% Tax and Social Contribution Net Financial Result -3.3% EBIT +2.5%+1.9% FINANCIAL RESULTS ANALYSIS (2/3) 2014 RESULTS 14
2014 RESULTS 15 700MHz Acquisition Capex 1,274 Thousands 306 372 386 366 315 348 499 460 2013 2014 FINANCIAL RESULTS ANALYSIS (3/3) Net Income Evolution (R$ mln; % YoY) Net Debt (R$ mln) EBITDA 2014 Debt Cash Net cash 2013 2014 Debt Cash Net debt Cash Flow - 12 months (R$ mln; R$ YoY) Net debt/EBITDA 12M: 0.23x Organic CAPEX Organic Δ WC Organic OFCF 2014 Reported OFCF 2014 LT Amazonas Leasing 6,507 5,233 2Q 1Q +10.6% % YoY 3Q 1,506 1,546 +21.6% -5.2% -7.7%4Q Considering R$1.7 bln 4G pymt *Organic figures excludes the 700MHz frequency acquisition and LT Amazonas leasing effect 700MHz Acquisition Effect on Δ WC +2.7%FY 4,867 5,288 -421 Cash Flow - 12 months (R$ mln; R$ YoY) Composed by: + NPV of the 700MHz clean up cost + Warranty Insurance + Monetary Adjustments 5,538 -2,923 -3,928 -96 1,514 182 1,181 -45
BNDES 58% BB 6% BEI 19% BofA ML 5% KFW 4% Cisco 4% Others 5%  Higher cash yield and debt cost due to CDI increase in the period  Bigger gap between cash yield and debt cost due to smaller cost of new loans Δ: 62 bps 4,279 4,867 6,507 2,000 2012 2013 2014 NET FINANCIAL POSITION DETAILS Cash & Debt Evolution Cash Yield vs. Debt Cost (% per year) Net Financial Position (R$ mln) BNDES new disbursements Short term debt  Better Profile: Less Short Term Debt Debt by Lender in 2014 end (% of total loans) Debt Position (R$ mln; % of total debt in short term) Cash Position (R$ mln) 4,431 5,288 1,742 2012 2013 2014 4G payment 5,233  Improved group liquidity margin 9.58% 7.69% 8.58% 9.78% 10.20% 7.09% 9.50% 11.25% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Δ: 147 bps Cash yield Debt cost Excluding 4G payment-151 -421 1,274 -468 Net debt/ EBITDA 12M 0.23x-0.08x-0.03x 2012 2013 2014 20%21%21% 2014 RESULTS 16
Network & Quality Evolution
NETWORK & QUALITY EVOLUTION 18 3,093 3,013 2,930 2,845 TIM P4 P3 P1 QUALITY IMPROVEMENT UNDESCORED BY… Source: Anatel Source: Company’s survey of national satisfaction TIM P1 P3 P4 Customers Satisfaction ¹ Voice Network (repair and call completion) ² Data Network: Estimated by TIM and composed by a subset group of Additional Services complaint Total Demands at Consumer’s Protection Agency (Procon) (Per economic group, in thousands) Source: SENACON/MJ 10.6 14.0 23.6 27.2 42.2 46.3 21.4 28.0 4Q13 1Q14 2Q14 3Q14 4Q14 TIM P1 P3 P4 Data Evolution Data Accessibility Ranking (3G) in SP 4G Sites in State Capital Cities Anatel Average Satisfaction with Coverage and Quality of Calls (score assigned by the customer) Least claimed company at Procon 7.80 7.80 Nov-12 May-13 Nov-13 May-14 Nov-14 Network Complaints (number of complaints) Voice network¹ Data network² 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Voice network 2014 vs. 2013 -27% Data network 2014 vs. 2013 -11% Anatel Metrics Customers Demands Source: Anatel Access Anatel Access Access Access Access 99.24% 98.93% 99.20% 99.57% 98.88%
2.5 GHz 2.1 GHz 1.8 GHz 850 MHz 700 MHz radius (km) 0.458 0.61 INFRASTRUCTURE (R)EVOLUTION Innovative Coverage Investment Profile Site Densification Cell coverage characteristics (Urban coverage simulation) Capital allocation on innovative services: Fiber (metropolitan + LD): expansion to ~55k Km in 2014 2G (voice) 3G+4G (data) Number of 4G Sites Number of 3G Sites 4Q13 4Q14 1.9k 3.7k 4Q13 4Q14 9.1k 10.4k Indoor coverage deployment  DAS (Distributed Antenna Systems) Solution  Femto Cells (corporate)  Wifi (consumers) +92% +14% R$3.9 bln Organic Capex + R$2.9 bln (4G License & Clean up) = R$6.85 billion in 2014 Deployment in: 0.363 1.413 1.685  Rio de Janeiro  Curitiba  Brasília  Manaus  Natal  São Luís 51% 87% 49% 13% 2013 2014 Band 850 MHz 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz Possible Technologies 2G/3G 2G/3G 2G/4G 3G 4G 4G Efficient Use of Spectrum Portfolio Wifi and Small Cells  > 100% YoY  Fistel exemption approved in Jan/15 Mobile Broadband Evolution (cities) The 125 cities of the MBB project represent 50% of the total network traffic 39 53 66 83 125 4Q13 1Q14 2Q14 3Q14 4Q14 NETWORK & QUALITY EVOLUTION 19
2014 Actual 2015 Bdg 2016 Plan 2017 Plan MBB Project Geographic Area Small Cells New Macro Sites WiFi / Femto / DAS • 3,000 WiFi in 2015 • >150 DAS in 2015 1,137 cities prioritized due to business relevance, based on IRR and Payback HetNet % of Urban Covered Population 2G 3G 4G 2014a 2015e 2016e 2017e MBB program is addressing >70% of TIM's business, and is the key investment program in 2015-2017 High business concentration in few cities allows for a focused infrastructure enhancement program 1.9k 3.7k >15k 2013a 2014a 2015e 2016e 2017e Number of 4G Sites 9.1k 10.4k >14k 2013a 2014a 2015e 2016e 2017e Number of 3G Sites 0.7k 1.5k 5k 2013a 2014a 2015e 2016e 2017e Number of Wifi & Small Cells 2G 3G 4G 95% 95% 78% 79% 27% 86% 2013a 2014a 2015e 2016e 2017e STATE OF ART CAPEX ALLOCATION: QUALITY TO INCREASE RETURNS Network Rollout New Coverage Strategy Technology Capex Allocation TIM LD Backbone NETWORK & QUALITY EVOLUTION 20 1.4k 3.9k 2015e 2017e New Small Cells 0.8k 3.5k 2015 2017 +2.8x +4.3x 2009 2017 ~60,000 Km ~15,000 Km
Fixed Business
FIXED BUSINESS 22 2013 2014 3.4 3.3 2.9 Live TIM GVT NET 4Q13 4Q14 ACCELERATING FIXED BUSINESS PERFORMANCE 2014 business remodeling recap:  Customer base management  Multiservice network launch  Sales team reorganization  Brand repositioning  Re-designed service portfolio  Fixed + mobile integration for corporate clients 2013 2014 +3.5x EBITDANet Revenues (with intercompany) Revenues from New Sales (YoY) Outstanding product performance… (ISP speed ranking - Mbps) …with solid operational and financial results 60 130 4Q13 4Q14 Customer Base (000 users) +2.2x ARPU (R$; YoY%) +24% New Line Payback (months) 21 14 4Q13 4Q14 1 15.9 8.9 8.8 Live TIM NET GVT 37 21 Download Upload 1 1,490 2,194 1,069 1,503 4Q13 4Q14 Coverage (000 Households) +41% Addressable Households Homes passed +1.0% 2013 2014 +2.7x -33%
60k 130k >500k 2013a 2014a 2015e 2016e 2017e 2013a 2014a 2015e 2016e 2017e Customer Base (thousands customers) EBITDARevenues from New Sales (R$; YoY) 2013a 2014a 2015e 2016e 2017e FIXED MOBILE CONVERGED SOLUTIONS 2015-2017 Drivers: • Revenue and EBITDA rebound • Sales team resizing and training • Customer care unification (F+M) • Improvement on service level • Fine tuning mobile portfolio • Launch of new convergent solutions +9x Investments (R$; YoY) 2013a 2014a 2015e 2016e 2017e +3x +9x From option value to reality: • Accelerate growth through incremental investment • Focus on keeping customer experience leadership • Introduction of new services (Voice and Bluebox) • Support the discussion on “Banda Larga Para Todos” program Corporate Solutions as a Sustainable Business Live TIM Plan: Accelerating Growth FIXED CORPORATE SOLUTIONS & LIVE TIM POSITIVE TRENDS FIXED BUSINESS 23
Business Outlook
32.0% 34.9% 2012 2013 2014 2015e  Delivering important operational and financial results  Strong market positioning for growth  Renewed culture of innovation, quality and caring  Staying power and commitment with long term, with recognized institutional leadership  Best governance in the industry: Novo Mercado MBB (cities) 2014 CONCLUSION Changing Business Profile Focus on Execution Improving Profitability Infrastructure Leveraging Growth  Revenue profile changing  Pre-paid data as key source of growth  TIM strategically well positioned with data focus on “big middle” Business Generated Net Revenues  Keeping costs under control, amid macroeconomic pressure  Keeping innovative offers: • Infinity Day, Data Shared Plans, Controle Whatsapp plan, TIMmusic by Deezer, TIM Multibank (2015), Blue Box (2015)  Fixed turnaround completed: back to growth in 2015  Live TIM: from optionality to reality TIM: A Solid Player Building the Future  Tower sale  Big data analysis for Capex allocation Investing Efficiently  4G LTE in 700MHz and 1,800MHz  EBITDA growth in 2014: +6.4% YoY  Margins expansion through opex savings and new revenues sources (Voice & Other) (Data & SMS) Service EBITDA Margin (%; YoY) +3.0 p.p. 2013 2014 39 125  Mobile broadband project +86 2013 2014 74% 69% 64% 26% 31% 36% BUSINESS OUTLOOK 25
2014a 2017e Leased Lines Cost (R$) SAC (Subscriber Acquisition Cost) (R$) Bad Debt (R$) EBITDA Evolution (R$ without intercompany) EBITDA - Capex 2013a 2014a 2015e 2016e 2017e Data Traffic Expectation 3G Data Traffic LTE Data Traffic (in petabytes) Mobile Customer Base (mln customers) 73.4 75.7 2013a 2014a 2015e 2016e 2017e 2014a 2017e 2014a 2017e 2014a 2015e 2016e 2017e Business Growth 2014a 2017e COST EFFICIENCY Operational Efficiency Fixed Business Progress BUSINESS OUTLOOK 26 MTR Path (R$) 0.34 0.02 2012 2014 2016 2018 SMS Market Revenues (R$) 2014a 2017e Network & Interconnection Savings
18.8 19.9 19.5 2012A 2013A 2014A 2015e 2016e 2017e 5.0 5.2 5.5 2012A 2013A 2014A 2015e 2016e 2017e 0.6 0.4 2.9 3.1 3.5 3.9 2012A 2013A 2014A 2015e 2016e 2017e Organic Others/ Licenses 3.8 3.9 6.9 Continued Growth Continued Growth, improving margin CAPEX 2015-2017: >R$14 billion Net Revenues EBITDA CAPEX 48% 40% 37% 35% 52% 60% 63% 65% 2014a 2015e 2016e 2017e Innovative Traditional Innovative and Traditional Investments (R$; %) (R$ billion) (R$ billion) (R$ billion) 2015-2017 Guidance MTR Impact Analysis (R$; %) Mobile Net Revenues Analysis (R$; %) A Close Look at Business Performance 24% 12% 31% 18% 2010 2011 2012 2013 2014 2015e 2016e 2017e -15% -11% -25% Net Services Revenues Exposure EBITDA Exposure -33%MTR Cut (% YoY) 2013a 2014a 2017e Innovative: Traditional: Data Content Other Voice Incoming SMS +48% -11% % YoY Near mid- single -35% -44% ~5 bln ~9 bln 2012a 2013a 2014a 2012a 2013a 2014a 2012a 2013a 2014a PERSPECTIVES BUSINESS OUTLOOK 27
TOWER SALE TO AMERICAN TOWER Transaction Value BUSINESS OUTLOOK 28  The effective cash in will happen according to the tower transfer process, that can take up to 18 months in different installments  No FX volatility since the deal was closed based on the Brazilian currency  The contract guarantees more usage space on the tower than industry standards  The deal foresees the lease back of the sold towers by American Tower to TIM for a term of 20 years Operational Advantages Built to Suit Roll Out  The transaction foresees the construction of built to suit towers guaranteeing TIM’s coverage expansion necessity  The construction of the towers is forecasted to happen between 2016 and 2018 6,481 telecommunication towers to be transferred to American Tower Approved The Brazilian anti-trust authority (CADE) has approved the deal ~R$3 bln is the estimated value of the deal (~R$2.4 bln net of tax)
Regulatory update
Spectrum Market Cap Availability SPECTRUM COMPARISONSpectrum Caps and Distribution 25 25 0 24 19 0 9 16 25 25 0 25 10 5 5 5 5 5 2 5 5 5 2 5 5 5 5 5 5 5 5 5 20 20 30 45 21 21 26 39 40 40 29 20 25 25 25 40 21 21 42 36 30 30 20 20 22 30 25 22 23 30 27 20 20 20 30 30 30 30 20 20 0 10 20 30 40 50 60 70 80 Northeast South North Southeast Midwest 0 1,800 MHz 900 MHz 850 MHz 2,100 MHz 0 0 0 0 0 Band 850 MHz 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz Possible Technologies 2G/3G 2G/4G 3G 4G 4G (FDD Cap) (12,5+12,5) MHz (2.5+2.5) MHz (25+25) MHz (15+15) MHz (30+30) MHz (20+20) MHz Total FDD Regulated Cap: 80 + 60 + 40 = 180 MHz Global Cap of 80 MHz Specific Cap 6 25 15 REGULATORY UPDATE 30
1st Round (10+10) MHz cap Block 4 (10+10) MHz Block 5 (10+10) MHz Block 6 (10+10) MHz Block 2 (10+10) MHz Block 3 (10+10) MHz Block 1 (10+10) MHz Total R$ mln Regional National Minimum Price 1,893 30 5 1,928 1,928 1,928 7,712 Winning Bid Unsold 30 Unsold 1,947 1,928 1,947 5,852 Premium - 0.02% - 0.99% 0.00% 1.00% 38 Final Public Price (Anatel) - 26 - 1,739 1,720 1,739 5,224 EAD 887.59 13.86 2.48 903.93 903.93 903.93 3,616 EAD w/ unsold blocks obligations - 18.9 - 1,119 1,119 1,119 3,616 Clean-up Cost Road Map* LTE AUCTION DETAILS700MHz Auction Results Auction totaled R$5.85 billion, 24% lower then the R$7.7 billion expected for minimum prices for all blocks EAD Contribution of R$890.1 million related to unsold blocks will be distributed proportionately among the participants and will be discounted of the Public Price 0.52 0.78 0.83 1.07 1.13 1.18 1.22 1.28 1.29 1.29 1.48 2.58 DEN NZL Spain Brazil GER PORT EUA Taiwan Italy France AUS Canada Average = 1.22 Oi and Sercomtel did not participate in the auction Spectrum acquisition at fair price (Price in USD/MHz/Pop. adjusted for GDP) UPLINK Central Band TV Channels Guard Band Private Limited Service 4 2 3 1 Central Band5 6 REGULATORY UPDATE 31 30% in April 2015 30% in January 2016 30% in January 2017 10% in January 2018 R$1,199 million ~R$360 million ~R$360 million ~R$360 million ~R$120 million Total Amount: * Values will be adjusted by the IGP-DI index.
MAIN REGULATORY TOPICS FOR 2015 REGULATORY UPDATE 32 Internet “Marco Civil da Internet” (Brazilian Civil Rights Framework for the Internet): Law nº. 12,965 provides Decrees/Regulations on topics such as net neutrality and privacy. Public Consultations will be launched involving the Comitê Gestor da Internet (CGI), MinCom and ANATEL Broadband “Programa Banda Larga para Todos” (Broadband for All) and review of PGMU (Universal Service goals): The President Dilma intends to launch a universal broadband program, with 90% of households connected at 25Mbps. Licensing “PL das Antenas” (SCD 293): Approved by the House of Representatives. Still needs to be voted in the Senate. Main points: simplification of licensing in environmental bodies and municipal governments; 60 days “positive silence”; right of passage in public lands. Exemptions Fistel (Law nº. 13.097/2014): Enacted on 20.01, by President Dilma Rousseff. FISTEL full exemption for Small Cells with power <5W and reduction to 10% with power <10W. REPNBL: Regulates tax exemption for Telecommunications Network Deployment. Update approved by Minicom on 01.14.2015, reducing the % of national technology. Regulatory evolution “Revisão do modelo de Concessão de STFC”: Asset reversibility and duration, Universal Service (Presidential Decree nº. 7.512/2011): possibly relieving voice universal service goals, changes in Law nº. 9.472/1997 (General Telecommunication Law), extending the concession beyond 2025. Spectrum 1,800 MHz Renewal: Anatel approved the renewal process for the 1,800 MHz band for an additional period of 15 years.
Appendix
34 MOBILE BASE ANALYSIS Mobile Base 26.5% 26.9% 27.1% 27.0% 24.9% 24.9% 25.3% 25.3% 29.5% 29.1% 28.5% 28.5% 18.8% 18.8% 18.5% 18.1% 17.0% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% 4Q11 4Q12 4Q13 4Q14 27.6% 28.3% 28.9% 29.7% 24.1% 24.7% 25.7% 26.0% 28.0% 27.2% 25.3% 24.2% 20.1% 19.5% 19.7% 19.6% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% 4Q11 4Q12 4Q13 4Q14 21.1% 21.0% 20.6% 18.4% 28.8% 25.7% 24.1% 23.1% 36.6% 36.9% 39.8% 41.8% 13.0% 15.8% 14.2% 13.5% 0.5% 2.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 4Q11 4Q12 4Q13 4Q14 21.4% 23.4% 24.9% 25.9% 42.0% 41.3% 38.6% 34.3%33.1% 25.8% 23.5% 25.0% 3.4% 8.9% 12.2% 13.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 4Q11 4Q12 4Q13 4Q14 30.9% 32.3% 17.0% 19.7% 41.1% 38.9% 11.0% 8.0%0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 4Q13 4Q14 3G Mkt. Share 4G Mkt. Share Source: Anatel 22.3% 20.7% 18.6% 2.7% 29.6% 5.8% 16.5% 42.5% 39.3% 57.9% 57.5% 5.5% 34.2% 5.0% 8.5%3.8% 14.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 2011 2012 2013 2014 36.1% 38.6% 34.9% 65.7% 20.3% 35.3% 52.0% 33.9% 25.0% 15.0% 18.5% 11.2% 13.1% 0.5%0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 2011 2012 2013 2014 33.2% 32.3% 34.2% 24.7%22.3% 24.9% 38.8% 25.9%28.7% 23.5% 12.4% 29.0% 15.8% 19.3% 11.0% 7.6% 3.6% 12.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2011 2012 2013 2014 Net Share Net Share Net Share Prepaid Postpaid Share per Technology 83% 65% 78% 82% 76% 17% 35% 22% 18% 24% TIM Vivo Oi Claro Industry Pre Post Mobile Customer Base in 2014
1Q14 2Q14 3Q14 4Q14 Jan-Feb/15 TIM • Increase of SMS and internet offer from R$0.50 to R$0.60/day each • Increase on the monthly charge of TIM Liberty plans • Increase on the monthly charge of Liberty Controle plans • Infinity Turbo 7 launch • SMS + Data for R$12/month available to Liberty Controle plans • Infinity Day launch • Increase of Web+SMS package to from R$0.75 to R$0.99/day • Increase on SMS and data services to R$0.75/day each • Increase of R$1 on Liberty Torpedo • Internet sharing plans with up to 4 devices • Controle Whatsapp launch • Price up in the prepaid plan: from R$0.25 to R$0.30 per unlimited on-net and LD calls (using 41) in several regions • Internet access blocked when the limit hired is reached (in prepaid and Controle plans in some regions) Vivo • Vivo Tudo: weekly charge of R$6.90 for voice, SMS and data • Increase of R$2 on monthly charge of Controle plans • Increase of monthly package ‘Vivo Sempre Internet’ from R$9.90 to R$11.90 • Increase on ‘Vivo Sempre’ tariff from R$0.05 to R$0.06 • Obligation to contract data package on postpaid plans • 4G available on ‘Vivo Tudo’ and prepaid packages • New ‘SmartVivo pós’ plans • Internet access blocked when the limit hired is reached (in prepaid and Controle plans nationally and in ‘Vivo Tudo’ plan in most regions) Claro • Unlimited prepaid: increase of on-net calls tariff from R$0.21 to R$0.25 • Increase of SMS and internet offers to R$0.60/day each • Unlimited Controle plan: on net calls increased from R$0.21 to R$0.25 • Free on net local calls M-M in the main code areas • SMS + Data package per R$0.99/day • Promo 6 launch: recharge of R$6 with voice, SMS and data benefits • New offer to SP with voice, SMS and internet benefits for R$0.99/day • Increase on M-F off-net calls to R$0.70/call • Increase of SMS and Web services to R$0.75/day each • Internet access blocked when the limit hired is reached (in prepaid plans nationally) Oi • Increase of internet and SMS offers to R$0.60/day each • Increase on daily tariff of internet to R$0.60/day • New package with SMS+ Data + Wi-Fi for R$0.75/day • Obligation to contract data package on postpaid plans • Increase of M-M and M-F on-net calls to R$0.25/day, local M-F off-net to R$0.70/day and SMS + Web + Wi-Fi to R$0.99/day • Increase bonus, internet limit and download speed on prepaid plans OFFERS: RECENT MAIN CHANGES APPENDIX 35
B 167 mln 119 mln 59 36 26 74 96 95 45 56 72 9 9 10 2006 2010 2014 188 196 203 Income Profile BRAZIL’S SPECIFICS % of Population in Urban Areas Population by Social Class (million people) C A DE 0 +1 +11 +22 -23 +16 -1 -10  Middle class development MEN WOMEN Age 2020: 213 mln2010: 196 mln 0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 to 89 >90 10 105 50 Million +13 mln Minimum Wage in Brazil (minimum wage; % of the pop.) More than 90% % of pop. in urban areas Less than 70% 80% to 70% 90% to 80% 2% 15% 83% More than 10 (>R$7,888) 2 to 10 ( R$1,576 - R$7,888) Up to 2 (<R$1,576)  30 mln people still live in the rural areas  5.8% of the cities accounts for 75% of GDP  Brazil is in the 7th position in terms of GDP  Minimum wage in 2015: R$788 Age Pyramid (million people) Education Profile (% of the population)  8.5% of Brazilian above 15 years are illiterate Years of study 11.9% 29.90% 36.3% 21.8% More than 15 years 11 - 15 years 4 - 10 years 0 - 3 years Source: Census 2010 (IBGE) Source: Census 2010 (IBGE) and IPC Target 2014 Source: IBGE as of 2013 Source: IBGE APPENDIX 36
MACRO SCENARIO OUTLOOK (1/2) • Market consensus shows a softer growth in GDP • Consensus expects a deterioration in overall macroeconomic scenario on the short term • Market expects government to push inflation above the center of the target • With inflation and FX Rate going up, SELIC is expected to grow, specially after the recent decision to rise the rate to 12.25% p.y GDP Forecast (% YoY growth) Inflation Forecast (IPCA: 12 months) Interest Rate Forecast FX Rate Forecast (R$/U$ - end of period)(% Selic Target p.y. – year end) Source: IBGE for actual figures and Central Bank Focus Report of February 6th, 2015 for estimated figures 6.20 6.30 7.20 5.60 4.50 2013a 2014a 2015e 2016e 10.00 11.75 12.50 11.50 2013a 2014a 2015e 2016e 2.36 2.66 2.80 2.90 2013a 2014 2015e 2016e 2.49 0.15 0 1.50 0.50 0.80 2.00 2013a 2014e 2015e 2016e Government’s Target Government projection Market Consensus Government projection Market Consensus APPENDIX 37
MACRO SCENARIO OUTLOOK (2/2) • Market expects the unemployment rate to decrease in 2015, although jobs creation remains very low • Indebted households and families in default figures has been decreasing, despite the fact that the unemployment rate has been continuously increasing Unemployment (%) Formal Jobs Creation* (in thousand) Indebted Households* Families on Default (% of total)(% of total) Source: Central Bank/Bloomberg 59.6 59.6 62.5 59.6 4Q11 4Q12 4Q13 4Q14 -307 303 189 237 -147 4Q13 1Q14 2Q14 3Q14 4Q14 20.8 21.0 21.2 18.1 4Q11 4Q12 4Q13 4Q14 * Families that declared to have debts on the categories of: credit card, stores bills, personal loans, car loans and insurance and postdated check * Families that declared to have debts overdue for more than three months *Number of job positions with the complete registration of the employee APPENDIX 38 6.90 6.20 6.50 6.80 5.70 6.10 4Q12 4Q13 4Q14 2014a 2015e 2016e
Cofins PIS/ PASEP ICMS Fistel Fust/ FUNTEL TotalTotalFust/ FUNTEL PIS/ PASEP ICMSCofins Fistel % Gross Revenues TELCOS’ TAX BURDEN 3% ~1% 28% ~5% 1.5% ~39% Taxation represents almost 40% of companies gross revenues Tax Burden Composition Telecom Industry Tax Payments1 (R$ Bln) Source: players Balance Sheet 1 Considers TIM, Telefonica, Oi and AMX 45.7 46.0 2012 2013 APPENDIX 39
Short term BALANCE SHEET ANALYSIS Debt Composition P/B Price/Book Value Source: Bloomberg *Estimated 58.9% 60.1% 56.0% 52.5% 1Q 2Q 3Q 4Q 2014 2013 2012 Long Term P/E Price/Earnings Turnover in Days Accounts Receivable Turnover 43.0 46.6 43.4 41.4 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2.1 1.9 1.4 1.2 0.9 0.2* 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 20.7 18.5 7.7 10.7 6.2 0.9* 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 APPENDIX 40 118.2 128.5 149.7 158.5Payable Turnover 12.8% 13.4% 11.9% 10.3% 8.7% 8.5% 10.5% 10.7% 8.4% 2012 2013 2014 10.8% 10.6% 10.3%10.1% 8.5% 11.2% 5.5% 9.9% 6.6% 2012 2013 2014 7.8% 7.4% 6.8%6.8% 5.6% 5.6% 4.6% 5.3% 4.6% 2012 2013 2014 TIM VIVO OIBR Market Average ROE Net Income/Shrd. Equity ROE NOPAT/Total Asset ROIC NOPAT/Invested Capital
QUARTERLY HISTORICAL DATA (R$ THOUSAND) APPENDIX 41
ANNUAL HISTORICAL DATA (R$ THOUSAND) APPENDIX 42
HISTORICAL DATA: OPERATIONAL APPENDIX 43
Stock Performance (base 100)* STRUCTURE AND STOCK PERFORMANCE *Last price as of 12/31/2014 Source: Bloomberg 130 120 110 100 90 80 70 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 APPENDIX 44
Investor Relations Team Avenida das Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ E-mail: ri@timbrasil.com.br Rogério Tostes E-mail: rtostes@timbrasil.com.br Phone: +55 21 4109-3742 Vicente Ferreira E-mail: vdferreira@timbrasil.com.br Phone: +55 21 4109-3360 Leonardo Wanderley E-mail: lwanderley@timbrasil.com.br Phone: +55 21 4109-4017 Rodrigo Godoy E-mail: rcgodoy@timbrasil.com.br Phone: +55 21 4109-3446 Luiza Chaves E-mail: luchaves@timbrasil.com.br Phone: +55 21 4109-3751 Visit our Website www.tim.com.br/ir Safe Harbor Statements 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 AND IR CONTACTS SAFE HARBOR & IR CONTACT 45

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Meeting with Investors - April 2015

  • 1.
  • 2.
    Visit our websiteand IR app: www.tim.com.br/ir AGENDA  Market Overview and TIM Positioning................ 4  2014 Results……………………………..………..……………..8  Network & Quality Evolution……..………………..…..17  Fixed Business…………………………….……………....…...21  Business Outlook………….….….…………………….……..24  Regulatory Update……….….….…………………….………29  Appendix..............................................................32 TIM IR app (English) TIM RI app (Portuguese)
  • 3.
     Statutory AuditCommittee: • Report to Board of Directors • Oversight Financial reporting • Analyze anonymous complaints 20 25 28 30 29 2010 2011 2012 2013 2014 51 64 70 73 76 2010 2011 2012 2013 2014 CAGR +10% KNOWING TIM 3 KNOWING TIM BETTER 15,000 km fiber optical backbone 5,500 km fiber optical backhauling Growth Via Acquisition TIM: A Huge Brazilian Company  75.7 million customers (27% Share)  More than 465,000 points of sales  More than 170 own stores  15 Customer Care Centers (16k attendants)  ~14,000 Antennas  3,433 cities covered  54,160 km of optical fiber network  23,000 indirect jobs  ~R$3.9 billion invested in FY2014 (ex-licenses) GROWTH STRUCTUE Gross Revenues (R$ bln) Customer Base EoP (mln customers) EBITDA (R$ bln) 4.2 4.7 5.0 5.2 5.5 2010 2011 2012 2013 2014 CAGR +9% CAGR +7%  Presence in Brazil since 1998  16th largest Private Company in Brazil (source: Exame Magazine - 2013)  Approximately R$32 billion of Market Capitalization Brazilian Law “Nível” 1 “Nível” 2 Legal Requirements Demand for transparency and disclosures Highest level of Corporate Governance Requirement of protection for minority shareholders  100% Tag Along  Equal dividends rights  One single class of shares  Strict disclosure policy Unique Telco company listed on the Novo Mercado CORPORATE GOVERNANCE 2nd Player Market & Revenue Share 95% of urban pop. covered ~13k employees
  • 4.
    Market Overview andTIM Positioning
  • 5.
    TIM represents 30%of the industry mobile revenue2 while has 27% of the market share TIM Source: Anatel and Players balance sheet Vivo Claro Oi Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 74,721 657 153 n.a. 76,531 Market share 4Q14 27.0% 1.4% 0.5% n.a. --- Net Adds 12M (000´s) 2,289 25 64 n.a. 2,378 Net Revs FY14 (R$ Mln) 18,919 579 19,498 ARPU 4Q14 18.0 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 79,938 10,939 4,102 770 95,749 Market share 4Q14 28.5% 23.9% 17.1% 3.9% --- Net Adds 12M (000´s) 2,693 502 -205 176 2,665 Net Revs FY14 (R$ Mln) 23,740 11,260 35,000 ARPU 4Q14 24.6 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 71,107 11,519 7,523 10,182 100,331 Market share 4Q14 25.3% 25.2% 31.4% 52.0% --- Net Adds 12M (000´s) 2,403 1,463 941 525 3,868 Net Revs FY14 (R$ Mln) 13,078 22,525 35,603 ARPU 4Q14 15.3 n.a. n.a. n.a. --- Mobile Fixed1 Fixed BB Pay-TV Group Customers 4Q14 (000´s) 50,918 16,692 6,554 1,303 75,467 Market share 4Q14 18.1% 36.5% 27.3% 6.7% --- Net Adds 12M (000´s) 702 -1,742 20 474 1,196 Net Revs FY14 (R$ Mln) 9,290 19,132 28,422 ARPU 4Q14 17.4 n.a. n.a. n.a. --- The mobile segment represents 78% of the industry access growth 1 - Fixed Access numbers refers to 3Q14 Fixed / Mobile Fixed BB Fixed voice & BB / TVMobile Fixed BB/ TV Fixed Mobile BRAZILIAN TELCOS X-RAY Fixed / Mobile / 2 - Mobile revenue considers only the 4 major players MARKET OVERVIEW AND TIM POSITIONING 5
  • 6.
    Revenue Mix Revenue Mix 27% MobileMarket Revenues Evolution (Mobile Service Net Revenues; %) • Most households without internet access • Mobile better suited to break price barrier 9.5 2.6 Jan-13 Nov-14 0.34 0.30 0.23 0.16 0.10 0.06 0.03 0.02 2012 2013 2014 2015 2016 2017 2018 2019 57% 4% 12% 1% 37% 2% MTR Cut (R$) Voice Incoming Voice Outgoing SMS Internet 60% • Maturing market: Customer base growth slowdown • Consumption migrating from voice to data 2010 2020 SMS Traffic Sharp Decrease (billions of SMS sent) Mobile Internet is the growth driver and will be the largest mobile market, although Voice remains important Voice Decline Internet Opportunities STRATEGIC POSITIONING Internet Market Evolution MARKET OVERVIEW AND TIM POSITIONING 6
  • 7.
    105% 90% 79% 72% 66% 63% • Hugegap between Brazil and developed markets • Lack of infrastructure: low quality and speed • Affordability issues (high prices, combos) • Smaller gap between Brazil and developed markets • Additional drivers for growth: days of use, data consumption • Affordable prices 90% 83% 73% 73% 55% 32% Fixed (% households) Mobile (% population) Content & Usage Offer Pure Connectivity Offer Developed markets avg: 75% Developed markets avg: 82% Connectivity Proximity & MPayment Connected Home & In Cars RichCom OTT Telco COOL TRUST QoE* and Caring Fra UK USA Jap Rus Bra Jap USA UK Ita Fra Bra Δ: 43 p.p. Δ: 19 p.p. * Quality of Experience DATA: CONNECTIVITY AND BEYOND Getting People Connected: Broadband Penetration Entering in the Content World MARKET OVERVIEW AND TIM POSITIONING 7 Apps Social Video Music Gaming Digital Identity & Security A B C D/E Voice Centric World Data Centric World Data DataVoiceVoice Focus on voice for B/C classes Focus on data for B/C classes Targeting the “Big Middle” Source: OVUM / INEGI
  • 8.
  • 9.
    RESULTS HIGHLIGHTS: ASOLID QTR TO CLOSE A SOLID YEAR 2014 RESULTS 9 33% 42% 49% 56% 28.0% 27.9% 27.4% 30.1% 61.1 63.2 20% 30% P1 26.7% 26.1% 28.4% -22.9% -20.5% -2.9% 2.6% 1Q14 2Q14 3Q14 4Q14 Innovative offers generating value: • Charging per day Infinity “dia” • Controle WhatsApp • Shared Data plans MTR cut impact still significant: ~R$372 million on EBITDA in 2014 75.7 million customers Customer Base 34 Data Acceleration 30% Improving Profitability Fixed Turnaround on EBITDA Margin business million users (+26% YoY) Strong reduction of SMS business (-26% YoY in revenues) Tougher macro environment: • GDP: +0.15%* • Inflation: 6.4% in 2014 2014 Year Recap New infrastructure approach: data centric 4G LTE auction: assured future positioning Fixed corporate business turnaround completed Live TIM: best in class fixed broadband 21 Dec/13 Dec/14 Prepaid (mln customers) Control Plans (mln customers) +3.4% YoY Dec/13 Dec/14 +13.8% YoY 2Q13 4Q14 4G Market Share (%) TIM Gross Data Revenue Yearly Growth (ex-SMS) (% YoY) 1Q14 2Q14 3Q14 4Q14 EBITDA Margin (%) 1Q14 2Q14 3Q14 4Q14 2012 2013 2014 Net Revenues (Δ% YoY) Source: Company and Anatel P2 P3 *Central Bank consensus +25 p.p Solid financial results:  Growth on EBITDA / EBIT / Net Income Consistent growth on Business Generated revenues +6.3% (YoY) EBITDA Growth: 4Q14 x 4Q13: +4.0% 2014 x 2013: +6.4%
  • 10.
    KEEPING THE FOCUSON THE EXECUTION 2014 RESULTS 10 2013 2014 2013 2014 -31% Network & Interconnection Savings Interconnection Cost (R$; % YoY) Leased Lines Cost (R$; % YoY)  Relevant cost savings amid total data traffic growth of 39% in 2014 when compared to 2013  Regulatory price reductions and substitution of leased lines by own infrastructure -10% 3.2 3.4 4Q13 4Q14 Equipping Customer Base Handsets Sold (mln units) % of smartphone sales among players in 4Q  +6.3% YoY Growth  +6.1% QoQ Growth Source: Company and GFK Group TIM 48% P1 14% P3 29% P4 9%  Leading player in handset sales  Up 16 p.p. in 4Q14 vs. 4Q13 0.6% 0.5% 4Q13 4Q14 Operational Efficiency Fixed Business Progress SAC (Subscriber Acquisition Cost) (R$; % YoY) Bad Debt (% Bad debt over gross revenues) SAC/ ARPU 24 21 4Q13 4Q14 -15% 1.3x 1.1x -16% Corporate Solutions New Sales (R$; % YoY) Live TIM Ultra Broadband (customer base in thousand) 4Q13 4Q14 +39% 60 130 4Q13 4Q14 +2.2x Solid Performance in Net Adds Pre paid  1st in prepaid market share  + 2.1 million clients in 2014 Post paid  25% of net share in December (ex M2M and broadband)  Control plans bases rose 14% YoY
  • 11.
    2014 RESULTS 11 OFFERSTRATEGY EVOLUTION CONTINUES Data Customer Base (as % of total base) Smartphone Penetration (% of smartphones over customer base) 14.9% 29.4% 49.5% 2012 2013 2014  Smartphone sales over 80% in 4Q14 Data ARPU (% YoY Growth) 18% 20% 21% 25% 1Q14 2Q14 3Q14 4Q14 Beyond Connectivity on Data Controle WhatsApp  Data centric offer with no voice obligations  Data Package and WhatsaApp included in monthly fee  Differentiation among peers, with positive impact on postpaid performance Data Revenues Penetration (% Gross VAS Revs / Gross Mobile Service Revs ) 25.2% 27.2% 28.7% 30.9% 1Q14 2Q14 3Q14 4Q14 INFINITY TURBO 7 INFINITY “DIA” +7.2 p.p Protecting Core Revenue +35 p.p. R$ 0.75 DAILY OFFER SHARED INTERNET PLANS Offer Innovation Strong Data Progress  Leveraging on simplicity, transparency and convenience 30.3% 36.4% 44.6% 2012 2013 2014
  • 12.
    2014 RESULTS 12 1Q142Q14 3Q14 4Q14 RESHAPING THE BUSINESS Different Revenue Profile Improving Profitability Mobile Service Net Revenues (% YoY) Mix of Gross Data Revenues (% YoY) 2013 2014 SMS Web Content & Others +29% +39% +45% +80% +33% +72% +47% +82% 1,500 1,578 1,677 1,862 Mobile First Margin* (Δ YoY) Service EBITDA (R$ mln; % YoY) Service EBITDA Margin (% YoY) 35% 38% 4Q13 4Q14 +2.8 p.p. 1,534 1,598 4Q13 4Q14 +4.2% 4Q13 4Q14 +4.5 p.p. FY 2014 growth: +5.2 p.p. FY 2014 growth: +3.0 p.p.FY 2014 growth: +6.9% +1.2% -19%-8.2% -24% (Voice & Other) (Data & SMS) (Incoming MTR + SMS) Gross Data Revenues Growth (% YoY of growth) 20% 22% 23% 28% 1Q14 2Q14 3Q14 4Q14 Excluding handset business * Mobile First Margin = Business Generated less costs related to the service. Business Received Business Generated -30% +6.3% 2014 +4.8% -34% 2014 4Q14 4Q14 -R$1.1 billion
  • 13.
    2014 RESULTS 13 5,168 167 Thousands 1,558 97 1,499123 -64 1,558 Thousands 5,183 5,168157 -307 4 132 Thousands +13.5% FINANCIAL RESULTS ANALYSIS (1/3) MTR Exposure 1,655 28.9% 35.3% 30.1% 38.1% EBITDA Margin Service EBITDA Margin EBITDA (R$ mln; % YoY) Reported EBITDA 4Q13 Reported EBITDA 4Q14 Δ Opex/ Others Traffic/Data Δ Contribution Margin ‘Pro forma’ EBITDA in 4Q14 +10.4% +4.0% Ex-MTR MTR Impact +3.5% +3.1%ΔYoY Revenue Exposure (as % of net service revenues) EBITDA Exposure (as % of EBITDA) ~ 25% ~ 12% 4Q10 4Q11 4Q12 4Q13 4Q14 ~ 32% ~18% 4Q10 4Q11 4Q12 4Q13 4Q14 Reported Revenue 4Q13 Reported Revenue 4Q14 ‘Pro forma’ Revenue 4Q14 Δ OthersΔ Business Received Δ Business Generated Δ Products Revenue 5,335 +2.9% - 0.3% Ex-MTR Δ % YoY +4.8% -33.9% +2.6% +16% MTR Impact 5,207 5,538 5,910 2013 2014 372 +6.4% MTR Impact 660 2013 2014 16,325 MTR Impact -2.3% Net Revenues Net Service Revenues (R$ mln, % YoY) 16,98516,701 +1.7% (R$ mln, % YoY)
  • 14.
    13,216 2,530 579 3,173 19,498 3,991 4,318 3,340 2,311 5,538 EBITDA From Revenueto EBITDA in 2014 (R$ mln; %ΔYoY) Business generated Products Selling & marketing Network & interconnection Net Revenues Business incoming Fixed business COGS Others ΔYoY +6.3% -30.0% -11.9% -1.5% -2.1% +1.3% -18.7% -0.3% +9.3% +6.4% From EBITDA to Net Income in 2014 (R$ mln; %ΔYoY) EBITDA +6.4%ΔYoY Depreciation +11.3% Amortization +9.0% 5,538 -1,673 -1,380 2,486 -293 -646 1,546 Net Income +2.7% Tax and Social Contribution Net Financial Result -3.3% EBIT +2.5%+1.9% FINANCIAL RESULTS ANALYSIS (2/3) 2014 RESULTS 14
  • 15.
    2014 RESULTS 15 700MHz AcquisitionCapex 1,274 Thousands 306 372 386 366 315 348 499 460 2013 2014 FINANCIAL RESULTS ANALYSIS (3/3) Net Income Evolution (R$ mln; % YoY) Net Debt (R$ mln) EBITDA 2014 Debt Cash Net cash 2013 2014 Debt Cash Net debt Cash Flow - 12 months (R$ mln; R$ YoY) Net debt/EBITDA 12M: 0.23x Organic CAPEX Organic Δ WC Organic OFCF 2014 Reported OFCF 2014 LT Amazonas Leasing 6,507 5,233 2Q 1Q +10.6% % YoY 3Q 1,506 1,546 +21.6% -5.2% -7.7%4Q Considering R$1.7 bln 4G pymt *Organic figures excludes the 700MHz frequency acquisition and LT Amazonas leasing effect 700MHz Acquisition Effect on Δ WC +2.7%FY 4,867 5,288 -421 Cash Flow - 12 months (R$ mln; R$ YoY) Composed by: + NPV of the 700MHz clean up cost + Warranty Insurance + Monetary Adjustments 5,538 -2,923 -3,928 -96 1,514 182 1,181 -45
  • 16.
    BNDES 58% BB 6% BEI 19% BofA ML 5% KFW 4% Cisco 4% Others 5%  Highercash yield and debt cost due to CDI increase in the period  Bigger gap between cash yield and debt cost due to smaller cost of new loans Δ: 62 bps 4,279 4,867 6,507 2,000 2012 2013 2014 NET FINANCIAL POSITION DETAILS Cash & Debt Evolution Cash Yield vs. Debt Cost (% per year) Net Financial Position (R$ mln) BNDES new disbursements Short term debt  Better Profile: Less Short Term Debt Debt by Lender in 2014 end (% of total loans) Debt Position (R$ mln; % of total debt in short term) Cash Position (R$ mln) 4,431 5,288 1,742 2012 2013 2014 4G payment 5,233  Improved group liquidity margin 9.58% 7.69% 8.58% 9.78% 10.20% 7.09% 9.50% 11.25% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Δ: 147 bps Cash yield Debt cost Excluding 4G payment-151 -421 1,274 -468 Net debt/ EBITDA 12M 0.23x-0.08x-0.03x 2012 2013 2014 20%21%21% 2014 RESULTS 16
  • 17.
  • 18.
    NETWORK & QUALITYEVOLUTION 18 3,093 3,013 2,930 2,845 TIM P4 P3 P1 QUALITY IMPROVEMENT UNDESCORED BY… Source: Anatel Source: Company’s survey of national satisfaction TIM P1 P3 P4 Customers Satisfaction ¹ Voice Network (repair and call completion) ² Data Network: Estimated by TIM and composed by a subset group of Additional Services complaint Total Demands at Consumer’s Protection Agency (Procon) (Per economic group, in thousands) Source: SENACON/MJ 10.6 14.0 23.6 27.2 42.2 46.3 21.4 28.0 4Q13 1Q14 2Q14 3Q14 4Q14 TIM P1 P3 P4 Data Evolution Data Accessibility Ranking (3G) in SP 4G Sites in State Capital Cities Anatel Average Satisfaction with Coverage and Quality of Calls (score assigned by the customer) Least claimed company at Procon 7.80 7.80 Nov-12 May-13 Nov-13 May-14 Nov-14 Network Complaints (number of complaints) Voice network¹ Data network² 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Voice network 2014 vs. 2013 -27% Data network 2014 vs. 2013 -11% Anatel Metrics Customers Demands Source: Anatel Access Anatel Access Access Access Access 99.24% 98.93% 99.20% 99.57% 98.88%
  • 19.
    2.5 GHz 2.1 GHz 1.8GHz 850 MHz 700 MHz radius (km) 0.458 0.61 INFRASTRUCTURE (R)EVOLUTION Innovative Coverage Investment Profile Site Densification Cell coverage characteristics (Urban coverage simulation) Capital allocation on innovative services: Fiber (metropolitan + LD): expansion to ~55k Km in 2014 2G (voice) 3G+4G (data) Number of 4G Sites Number of 3G Sites 4Q13 4Q14 1.9k 3.7k 4Q13 4Q14 9.1k 10.4k Indoor coverage deployment  DAS (Distributed Antenna Systems) Solution  Femto Cells (corporate)  Wifi (consumers) +92% +14% R$3.9 bln Organic Capex + R$2.9 bln (4G License & Clean up) = R$6.85 billion in 2014 Deployment in: 0.363 1.413 1.685  Rio de Janeiro  Curitiba  Brasília  Manaus  Natal  São Luís 51% 87% 49% 13% 2013 2014 Band 850 MHz 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz Possible Technologies 2G/3G 2G/3G 2G/4G 3G 4G 4G Efficient Use of Spectrum Portfolio Wifi and Small Cells  > 100% YoY  Fistel exemption approved in Jan/15 Mobile Broadband Evolution (cities) The 125 cities of the MBB project represent 50% of the total network traffic 39 53 66 83 125 4Q13 1Q14 2Q14 3Q14 4Q14 NETWORK & QUALITY EVOLUTION 19
  • 20.
    2014 Actual 2015Bdg 2016 Plan 2017 Plan MBB Project Geographic Area Small Cells New Macro Sites WiFi / Femto / DAS • 3,000 WiFi in 2015 • >150 DAS in 2015 1,137 cities prioritized due to business relevance, based on IRR and Payback HetNet % of Urban Covered Population 2G 3G 4G 2014a 2015e 2016e 2017e MBB program is addressing >70% of TIM's business, and is the key investment program in 2015-2017 High business concentration in few cities allows for a focused infrastructure enhancement program 1.9k 3.7k >15k 2013a 2014a 2015e 2016e 2017e Number of 4G Sites 9.1k 10.4k >14k 2013a 2014a 2015e 2016e 2017e Number of 3G Sites 0.7k 1.5k 5k 2013a 2014a 2015e 2016e 2017e Number of Wifi & Small Cells 2G 3G 4G 95% 95% 78% 79% 27% 86% 2013a 2014a 2015e 2016e 2017e STATE OF ART CAPEX ALLOCATION: QUALITY TO INCREASE RETURNS Network Rollout New Coverage Strategy Technology Capex Allocation TIM LD Backbone NETWORK & QUALITY EVOLUTION 20 1.4k 3.9k 2015e 2017e New Small Cells 0.8k 3.5k 2015 2017 +2.8x +4.3x 2009 2017 ~60,000 Km ~15,000 Km
  • 21.
  • 22.
    FIXED BUSINESS 22 20132014 3.4 3.3 2.9 Live TIM GVT NET 4Q13 4Q14 ACCELERATING FIXED BUSINESS PERFORMANCE 2014 business remodeling recap:  Customer base management  Multiservice network launch  Sales team reorganization  Brand repositioning  Re-designed service portfolio  Fixed + mobile integration for corporate clients 2013 2014 +3.5x EBITDANet Revenues (with intercompany) Revenues from New Sales (YoY) Outstanding product performance… (ISP speed ranking - Mbps) …with solid operational and financial results 60 130 4Q13 4Q14 Customer Base (000 users) +2.2x ARPU (R$; YoY%) +24% New Line Payback (months) 21 14 4Q13 4Q14 1 15.9 8.9 8.8 Live TIM NET GVT 37 21 Download Upload 1 1,490 2,194 1,069 1,503 4Q13 4Q14 Coverage (000 Households) +41% Addressable Households Homes passed +1.0% 2013 2014 +2.7x -33%
  • 23.
    60k 130k >500k 2013a 2014a 2015e2016e 2017e 2013a 2014a 2015e 2016e 2017e Customer Base (thousands customers) EBITDARevenues from New Sales (R$; YoY) 2013a 2014a 2015e 2016e 2017e FIXED MOBILE CONVERGED SOLUTIONS 2015-2017 Drivers: • Revenue and EBITDA rebound • Sales team resizing and training • Customer care unification (F+M) • Improvement on service level • Fine tuning mobile portfolio • Launch of new convergent solutions +9x Investments (R$; YoY) 2013a 2014a 2015e 2016e 2017e +3x +9x From option value to reality: • Accelerate growth through incremental investment • Focus on keeping customer experience leadership • Introduction of new services (Voice and Bluebox) • Support the discussion on “Banda Larga Para Todos” program Corporate Solutions as a Sustainable Business Live TIM Plan: Accelerating Growth FIXED CORPORATE SOLUTIONS & LIVE TIM POSITIVE TRENDS FIXED BUSINESS 23
  • 24.
  • 25.
    32.0% 34.9% 2012 2013 20142015e  Delivering important operational and financial results  Strong market positioning for growth  Renewed culture of innovation, quality and caring  Staying power and commitment with long term, with recognized institutional leadership  Best governance in the industry: Novo Mercado MBB (cities) 2014 CONCLUSION Changing Business Profile Focus on Execution Improving Profitability Infrastructure Leveraging Growth  Revenue profile changing  Pre-paid data as key source of growth  TIM strategically well positioned with data focus on “big middle” Business Generated Net Revenues  Keeping costs under control, amid macroeconomic pressure  Keeping innovative offers: • Infinity Day, Data Shared Plans, Controle Whatsapp plan, TIMmusic by Deezer, TIM Multibank (2015), Blue Box (2015)  Fixed turnaround completed: back to growth in 2015  Live TIM: from optionality to reality TIM: A Solid Player Building the Future  Tower sale  Big data analysis for Capex allocation Investing Efficiently  4G LTE in 700MHz and 1,800MHz  EBITDA growth in 2014: +6.4% YoY  Margins expansion through opex savings and new revenues sources (Voice & Other) (Data & SMS) Service EBITDA Margin (%; YoY) +3.0 p.p. 2013 2014 39 125  Mobile broadband project +86 2013 2014 74% 69% 64% 26% 31% 36% BUSINESS OUTLOOK 25
  • 26.
    2014a 2017e Leased LinesCost (R$) SAC (Subscriber Acquisition Cost) (R$) Bad Debt (R$) EBITDA Evolution (R$ without intercompany) EBITDA - Capex 2013a 2014a 2015e 2016e 2017e Data Traffic Expectation 3G Data Traffic LTE Data Traffic (in petabytes) Mobile Customer Base (mln customers) 73.4 75.7 2013a 2014a 2015e 2016e 2017e 2014a 2017e 2014a 2017e 2014a 2015e 2016e 2017e Business Growth 2014a 2017e COST EFFICIENCY Operational Efficiency Fixed Business Progress BUSINESS OUTLOOK 26 MTR Path (R$) 0.34 0.02 2012 2014 2016 2018 SMS Market Revenues (R$) 2014a 2017e Network & Interconnection Savings
  • 27.
    18.8 19.9 19.5 2012A2013A 2014A 2015e 2016e 2017e 5.0 5.2 5.5 2012A 2013A 2014A 2015e 2016e 2017e 0.6 0.4 2.9 3.1 3.5 3.9 2012A 2013A 2014A 2015e 2016e 2017e Organic Others/ Licenses 3.8 3.9 6.9 Continued Growth Continued Growth, improving margin CAPEX 2015-2017: >R$14 billion Net Revenues EBITDA CAPEX 48% 40% 37% 35% 52% 60% 63% 65% 2014a 2015e 2016e 2017e Innovative Traditional Innovative and Traditional Investments (R$; %) (R$ billion) (R$ billion) (R$ billion) 2015-2017 Guidance MTR Impact Analysis (R$; %) Mobile Net Revenues Analysis (R$; %) A Close Look at Business Performance 24% 12% 31% 18% 2010 2011 2012 2013 2014 2015e 2016e 2017e -15% -11% -25% Net Services Revenues Exposure EBITDA Exposure -33%MTR Cut (% YoY) 2013a 2014a 2017e Innovative: Traditional: Data Content Other Voice Incoming SMS +48% -11% % YoY Near mid- single -35% -44% ~5 bln ~9 bln 2012a 2013a 2014a 2012a 2013a 2014a 2012a 2013a 2014a PERSPECTIVES BUSINESS OUTLOOK 27
  • 28.
    TOWER SALE TOAMERICAN TOWER Transaction Value BUSINESS OUTLOOK 28  The effective cash in will happen according to the tower transfer process, that can take up to 18 months in different installments  No FX volatility since the deal was closed based on the Brazilian currency  The contract guarantees more usage space on the tower than industry standards  The deal foresees the lease back of the sold towers by American Tower to TIM for a term of 20 years Operational Advantages Built to Suit Roll Out  The transaction foresees the construction of built to suit towers guaranteeing TIM’s coverage expansion necessity  The construction of the towers is forecasted to happen between 2016 and 2018 6,481 telecommunication towers to be transferred to American Tower Approved The Brazilian anti-trust authority (CADE) has approved the deal ~R$3 bln is the estimated value of the deal (~R$2.4 bln net of tax)
  • 29.
  • 30.
    Spectrum Market CapAvailability SPECTRUM COMPARISONSpectrum Caps and Distribution 25 25 0 24 19 0 9 16 25 25 0 25 10 5 5 5 5 5 2 5 5 5 2 5 5 5 5 5 5 5 5 5 20 20 30 45 21 21 26 39 40 40 29 20 25 25 25 40 21 21 42 36 30 30 20 20 22 30 25 22 23 30 27 20 20 20 30 30 30 30 20 20 0 10 20 30 40 50 60 70 80 Northeast South North Southeast Midwest 0 1,800 MHz 900 MHz 850 MHz 2,100 MHz 0 0 0 0 0 Band 850 MHz 900 MHz 1800 MHz 2100 MHz 2500 MHz 700 MHz Possible Technologies 2G/3G 2G/4G 3G 4G 4G (FDD Cap) (12,5+12,5) MHz (2.5+2.5) MHz (25+25) MHz (15+15) MHz (30+30) MHz (20+20) MHz Total FDD Regulated Cap: 80 + 60 + 40 = 180 MHz Global Cap of 80 MHz Specific Cap 6 25 15 REGULATORY UPDATE 30
  • 31.
    1st Round (10+10) MHz cap Block4 (10+10) MHz Block 5 (10+10) MHz Block 6 (10+10) MHz Block 2 (10+10) MHz Block 3 (10+10) MHz Block 1 (10+10) MHz Total R$ mln Regional National Minimum Price 1,893 30 5 1,928 1,928 1,928 7,712 Winning Bid Unsold 30 Unsold 1,947 1,928 1,947 5,852 Premium - 0.02% - 0.99% 0.00% 1.00% 38 Final Public Price (Anatel) - 26 - 1,739 1,720 1,739 5,224 EAD 887.59 13.86 2.48 903.93 903.93 903.93 3,616 EAD w/ unsold blocks obligations - 18.9 - 1,119 1,119 1,119 3,616 Clean-up Cost Road Map* LTE AUCTION DETAILS700MHz Auction Results Auction totaled R$5.85 billion, 24% lower then the R$7.7 billion expected for minimum prices for all blocks EAD Contribution of R$890.1 million related to unsold blocks will be distributed proportionately among the participants and will be discounted of the Public Price 0.52 0.78 0.83 1.07 1.13 1.18 1.22 1.28 1.29 1.29 1.48 2.58 DEN NZL Spain Brazil GER PORT EUA Taiwan Italy France AUS Canada Average = 1.22 Oi and Sercomtel did not participate in the auction Spectrum acquisition at fair price (Price in USD/MHz/Pop. adjusted for GDP) UPLINK Central Band TV Channels Guard Band Private Limited Service 4 2 3 1 Central Band5 6 REGULATORY UPDATE 31 30% in April 2015 30% in January 2016 30% in January 2017 10% in January 2018 R$1,199 million ~R$360 million ~R$360 million ~R$360 million ~R$120 million Total Amount: * Values will be adjusted by the IGP-DI index.
  • 32.
    MAIN REGULATORY TOPICSFOR 2015 REGULATORY UPDATE 32 Internet “Marco Civil da Internet” (Brazilian Civil Rights Framework for the Internet): Law nº. 12,965 provides Decrees/Regulations on topics such as net neutrality and privacy. Public Consultations will be launched involving the Comitê Gestor da Internet (CGI), MinCom and ANATEL Broadband “Programa Banda Larga para Todos” (Broadband for All) and review of PGMU (Universal Service goals): The President Dilma intends to launch a universal broadband program, with 90% of households connected at 25Mbps. Licensing “PL das Antenas” (SCD 293): Approved by the House of Representatives. Still needs to be voted in the Senate. Main points: simplification of licensing in environmental bodies and municipal governments; 60 days “positive silence”; right of passage in public lands. Exemptions Fistel (Law nº. 13.097/2014): Enacted on 20.01, by President Dilma Rousseff. FISTEL full exemption for Small Cells with power <5W and reduction to 10% with power <10W. REPNBL: Regulates tax exemption for Telecommunications Network Deployment. Update approved by Minicom on 01.14.2015, reducing the % of national technology. Regulatory evolution “Revisão do modelo de Concessão de STFC”: Asset reversibility and duration, Universal Service (Presidential Decree nº. 7.512/2011): possibly relieving voice universal service goals, changes in Law nº. 9.472/1997 (General Telecommunication Law), extending the concession beyond 2025. Spectrum 1,800 MHz Renewal: Anatel approved the renewal process for the 1,800 MHz band for an additional period of 15 years.
  • 33.
  • 34.
    34 MOBILE BASE ANALYSIS MobileBase 26.5% 26.9% 27.1% 27.0% 24.9% 24.9% 25.3% 25.3% 29.5% 29.1% 28.5% 28.5% 18.8% 18.8% 18.5% 18.1% 17.0% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% 4Q11 4Q12 4Q13 4Q14 27.6% 28.3% 28.9% 29.7% 24.1% 24.7% 25.7% 26.0% 28.0% 27.2% 25.3% 24.2% 20.1% 19.5% 19.7% 19.6% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% 4Q11 4Q12 4Q13 4Q14 21.1% 21.0% 20.6% 18.4% 28.8% 25.7% 24.1% 23.1% 36.6% 36.9% 39.8% 41.8% 13.0% 15.8% 14.2% 13.5% 0.5% 2.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 4Q11 4Q12 4Q13 4Q14 21.4% 23.4% 24.9% 25.9% 42.0% 41.3% 38.6% 34.3%33.1% 25.8% 23.5% 25.0% 3.4% 8.9% 12.2% 13.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 4Q11 4Q12 4Q13 4Q14 30.9% 32.3% 17.0% 19.7% 41.1% 38.9% 11.0% 8.0%0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 4Q13 4Q14 3G Mkt. Share 4G Mkt. Share Source: Anatel 22.3% 20.7% 18.6% 2.7% 29.6% 5.8% 16.5% 42.5% 39.3% 57.9% 57.5% 5.5% 34.2% 5.0% 8.5%3.8% 14.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 2011 2012 2013 2014 36.1% 38.6% 34.9% 65.7% 20.3% 35.3% 52.0% 33.9% 25.0% 15.0% 18.5% 11.2% 13.1% 0.5%0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 2011 2012 2013 2014 33.2% 32.3% 34.2% 24.7%22.3% 24.9% 38.8% 25.9%28.7% 23.5% 12.4% 29.0% 15.8% 19.3% 11.0% 7.6% 3.6% 12.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2011 2012 2013 2014 Net Share Net Share Net Share Prepaid Postpaid Share per Technology 83% 65% 78% 82% 76% 17% 35% 22% 18% 24% TIM Vivo Oi Claro Industry Pre Post Mobile Customer Base in 2014
  • 35.
    1Q14 2Q14 3Q144Q14 Jan-Feb/15 TIM • Increase of SMS and internet offer from R$0.50 to R$0.60/day each • Increase on the monthly charge of TIM Liberty plans • Increase on the monthly charge of Liberty Controle plans • Infinity Turbo 7 launch • SMS + Data for R$12/month available to Liberty Controle plans • Infinity Day launch • Increase of Web+SMS package to from R$0.75 to R$0.99/day • Increase on SMS and data services to R$0.75/day each • Increase of R$1 on Liberty Torpedo • Internet sharing plans with up to 4 devices • Controle Whatsapp launch • Price up in the prepaid plan: from R$0.25 to R$0.30 per unlimited on-net and LD calls (using 41) in several regions • Internet access blocked when the limit hired is reached (in prepaid and Controle plans in some regions) Vivo • Vivo Tudo: weekly charge of R$6.90 for voice, SMS and data • Increase of R$2 on monthly charge of Controle plans • Increase of monthly package ‘Vivo Sempre Internet’ from R$9.90 to R$11.90 • Increase on ‘Vivo Sempre’ tariff from R$0.05 to R$0.06 • Obligation to contract data package on postpaid plans • 4G available on ‘Vivo Tudo’ and prepaid packages • New ‘SmartVivo pós’ plans • Internet access blocked when the limit hired is reached (in prepaid and Controle plans nationally and in ‘Vivo Tudo’ plan in most regions) Claro • Unlimited prepaid: increase of on-net calls tariff from R$0.21 to R$0.25 • Increase of SMS and internet offers to R$0.60/day each • Unlimited Controle plan: on net calls increased from R$0.21 to R$0.25 • Free on net local calls M-M in the main code areas • SMS + Data package per R$0.99/day • Promo 6 launch: recharge of R$6 with voice, SMS and data benefits • New offer to SP with voice, SMS and internet benefits for R$0.99/day • Increase on M-F off-net calls to R$0.70/call • Increase of SMS and Web services to R$0.75/day each • Internet access blocked when the limit hired is reached (in prepaid plans nationally) Oi • Increase of internet and SMS offers to R$0.60/day each • Increase on daily tariff of internet to R$0.60/day • New package with SMS+ Data + Wi-Fi for R$0.75/day • Obligation to contract data package on postpaid plans • Increase of M-M and M-F on-net calls to R$0.25/day, local M-F off-net to R$0.70/day and SMS + Web + Wi-Fi to R$0.99/day • Increase bonus, internet limit and download speed on prepaid plans OFFERS: RECENT MAIN CHANGES APPENDIX 35
  • 36.
    B 167 mln 119 mln 59 3626 74 96 95 45 56 72 9 9 10 2006 2010 2014 188 196 203 Income Profile BRAZIL’S SPECIFICS % of Population in Urban Areas Population by Social Class (million people) C A DE 0 +1 +11 +22 -23 +16 -1 -10  Middle class development MEN WOMEN Age 2020: 213 mln2010: 196 mln 0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 to 89 >90 10 105 50 Million +13 mln Minimum Wage in Brazil (minimum wage; % of the pop.) More than 90% % of pop. in urban areas Less than 70% 80% to 70% 90% to 80% 2% 15% 83% More than 10 (>R$7,888) 2 to 10 ( R$1,576 - R$7,888) Up to 2 (<R$1,576)  30 mln people still live in the rural areas  5.8% of the cities accounts for 75% of GDP  Brazil is in the 7th position in terms of GDP  Minimum wage in 2015: R$788 Age Pyramid (million people) Education Profile (% of the population)  8.5% of Brazilian above 15 years are illiterate Years of study 11.9% 29.90% 36.3% 21.8% More than 15 years 11 - 15 years 4 - 10 years 0 - 3 years Source: Census 2010 (IBGE) Source: Census 2010 (IBGE) and IPC Target 2014 Source: IBGE as of 2013 Source: IBGE APPENDIX 36
  • 37.
    MACRO SCENARIO OUTLOOK(1/2) • Market consensus shows a softer growth in GDP • Consensus expects a deterioration in overall macroeconomic scenario on the short term • Market expects government to push inflation above the center of the target • With inflation and FX Rate going up, SELIC is expected to grow, specially after the recent decision to rise the rate to 12.25% p.y GDP Forecast (% YoY growth) Inflation Forecast (IPCA: 12 months) Interest Rate Forecast FX Rate Forecast (R$/U$ - end of period)(% Selic Target p.y. – year end) Source: IBGE for actual figures and Central Bank Focus Report of February 6th, 2015 for estimated figures 6.20 6.30 7.20 5.60 4.50 2013a 2014a 2015e 2016e 10.00 11.75 12.50 11.50 2013a 2014a 2015e 2016e 2.36 2.66 2.80 2.90 2013a 2014 2015e 2016e 2.49 0.15 0 1.50 0.50 0.80 2.00 2013a 2014e 2015e 2016e Government’s Target Government projection Market Consensus Government projection Market Consensus APPENDIX 37
  • 38.
    MACRO SCENARIO OUTLOOK(2/2) • Market expects the unemployment rate to decrease in 2015, although jobs creation remains very low • Indebted households and families in default figures has been decreasing, despite the fact that the unemployment rate has been continuously increasing Unemployment (%) Formal Jobs Creation* (in thousand) Indebted Households* Families on Default (% of total)(% of total) Source: Central Bank/Bloomberg 59.6 59.6 62.5 59.6 4Q11 4Q12 4Q13 4Q14 -307 303 189 237 -147 4Q13 1Q14 2Q14 3Q14 4Q14 20.8 21.0 21.2 18.1 4Q11 4Q12 4Q13 4Q14 * Families that declared to have debts on the categories of: credit card, stores bills, personal loans, car loans and insurance and postdated check * Families that declared to have debts overdue for more than three months *Number of job positions with the complete registration of the employee APPENDIX 38 6.90 6.20 6.50 6.80 5.70 6.10 4Q12 4Q13 4Q14 2014a 2015e 2016e
  • 39.
    Cofins PIS/ PASEPICMS Fistel Fust/ FUNTEL TotalTotalFust/ FUNTEL PIS/ PASEP ICMSCofins Fistel % Gross Revenues TELCOS’ TAX BURDEN 3% ~1% 28% ~5% 1.5% ~39% Taxation represents almost 40% of companies gross revenues Tax Burden Composition Telecom Industry Tax Payments1 (R$ Bln) Source: players Balance Sheet 1 Considers TIM, Telefonica, Oi and AMX 45.7 46.0 2012 2013 APPENDIX 39
  • 40.
    Short term BALANCE SHEETANALYSIS Debt Composition P/B Price/Book Value Source: Bloomberg *Estimated 58.9% 60.1% 56.0% 52.5% 1Q 2Q 3Q 4Q 2014 2013 2012 Long Term P/E Price/Earnings Turnover in Days Accounts Receivable Turnover 43.0 46.6 43.4 41.4 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2.1 1.9 1.4 1.2 0.9 0.2* 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 20.7 18.5 7.7 10.7 6.2 0.9* 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 APPENDIX 40 118.2 128.5 149.7 158.5Payable Turnover 12.8% 13.4% 11.9% 10.3% 8.7% 8.5% 10.5% 10.7% 8.4% 2012 2013 2014 10.8% 10.6% 10.3%10.1% 8.5% 11.2% 5.5% 9.9% 6.6% 2012 2013 2014 7.8% 7.4% 6.8%6.8% 5.6% 5.6% 4.6% 5.3% 4.6% 2012 2013 2014 TIM VIVO OIBR Market Average ROE Net Income/Shrd. Equity ROE NOPAT/Total Asset ROIC NOPAT/Invested Capital
  • 41.
    QUARTERLY HISTORICAL DATA(R$ THOUSAND) APPENDIX 41
  • 42.
    ANNUAL HISTORICAL DATA(R$ THOUSAND) APPENDIX 42
  • 43.
  • 44.
    Stock Performance (base100)* STRUCTURE AND STOCK PERFORMANCE *Last price as of 12/31/2014 Source: Bloomberg 130 120 110 100 90 80 70 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 APPENDIX 44
  • 45.
    Investor Relations Team Avenidadas Américas, 3434 - Bloco 01 6° andar – Barra da Tijuca 22640-102 Rio de Janeiro, RJ E-mail: [email protected] Rogério Tostes E-mail: [email protected] Phone: +55 21 4109-3742 Vicente Ferreira E-mail: [email protected] Phone: +55 21 4109-3360 Leonardo Wanderley E-mail: [email protected] Phone: +55 21 4109-4017 Rodrigo Godoy E-mail: [email protected] Phone: +55 21 4109-3446 Luiza Chaves E-mail: [email protected] Phone: +55 21 4109-3751 Visit our Website www.tim.com.br/ir Safe Harbor Statements 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 AND IR CONTACTS SAFE HARBOR & IR CONTACT 45