Results presentation 1 q13

Results PresentationTIM Participações S.A.

1st QTR2013

Agenda

Strategic Priorities - Rodrigo Abreu

Q1 Discussions:

Q1 in Few - Rodrigo Abreu

Network and Infrastructure - Rodrigo Abreu

Operations - Lorenzo Lindner

Marketing - Roger Sole

Live TIM - Rogério Takayanagi

Financials - Cláudio Zezza

Conclusions - Rodrigo Abreu

2

Strategic Priorities

Network Quality

& Infrastructure1

Strategy &

Offer Evolution2

Institutional

Relationships3

People &

Organization4

First Impressions Key Strategic Pillars

Fundamentals are strong:

→ Constant innovation approach.

→ Unique market positioning and long term

strategy.

→ Solid and expanding customer base.

→ Team with strong execution track record.

→ Large and efficient sales channel.

→ Rapid deployment of network

infrastructure with own fiber.

And challenges being addressed:

→ Renewed commitment to quality

improvement.

→ Keeping competitive edge with mobile

focus.

3

Improving voice & data capacity.

Mobile data as the center of network strategy.

Q1 in Few: Main Highlights

4

3.3%4.1%

Solid VAS revenue growth.

Improving LD performance.

Overcoming operation start-up challenges.

Growing coverage.

Community strength intact.

Great response to new concepts (Liberty Controle).

181

209

Customer

Confidence

Constant Network

EvolutionReaccelerating

growth

Accelerating Live

TIM Services

1.0

1.2

4Q12 1Q13

Net Mobile Serv. Rev.

Growth (%YoY)

1Q131Q12

Gross VAS Rev.

(R$ Mln)

+25% +16%

Voice Capacity

(TRX Units 000)

1Q131H12

250

414

+66%

Data Capacity

(Channel Elements units 000)

1Q131H12

- 29%

Time to install (days)

Jan/13 Mar/13

112

609

5.4X

Addressable Market (HH 000)

2Q12 1Q13

67

71

+6%

Customer Base (lines mln)

1Q12 1Q13

Managing competition effects.

Good cost control

269

306

1Q131Q12

+14%

Net Income

(R$ Mln)

Speeding up FTTS deployment.

Strong costumer response.

126

145

+15%

MOU (minutes)

1Q12 1Q13

Offer attractiveness.

Network and Infrastructure

Development of Infrastructure

6

Optical Fiber Network Evolution

(km of fiber)

28,89138,951 40,649

47,000

2011 2012 Mar/13 Dec/13*

*According to Anatel Network Plan

FTTS Project Status - 14 Brazilian Main Cities (Stage1)

Manaus

Florianópolis

São Paulo

Macapá

Salvador

Curitiba

MaceioRecife

Fortaleza

Brasília

Rio de Janeiro

Porto Alegre

Belém

Aracaju

São Luis

Palmas

Vitoria

Teresina

Belo Horizonte

Campo Grande

Imperatriz

GoiâniaCuiaba

Natal

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

M

MJ.Pessoa

M

M

M

M

M

MM

M

M

M

M M

M

M

M

MM

MM

1st phase: Connecting sites with own fiber. Almost 85% of sites in

the 14 main Brazilian cities are connected with own fiber.

3rd phase: Expanding

and fine tuning. Recife

is the first city to reach

this stage.

2nd phase: Light up the fiber and shift data traffic to own lines.

2nd phase is

expected to

be completed

by 4Q13

M Cities of Stage 1

M Cities (additional 30) of Stage 2

Own Network to Support Traffic Growth

(% of total transport network)

52%

80%

48%

20%

2009 2012

Owned

Third Parties

Main Benefits:

• Increasing customer experience (throughput 50x faster than

previous leased links on copper, 2/8Mbps)

• Reduce network congestion

• 4G (LTE) ready

Metro Ring

Own Fiber

(300 Mbps)

Copper

(2-8Mbps)

After FTTSBefore FTTS

• Reducing leased lines costs

11,607

12,029

Jun/12 Mar/13

Network Commitments

7

Network Elements Expansion…

(units. Source: Company)

…Driving Quality Improvements

(% of success; % of call/data connection drop; Source: Company preview and Anatel)

181

209

Jun/12 Mar/13

250

414

Jun/12 Mar/13

BTS TRX

(Voice Capacity; 000)

Channel Elements

(Data Capacity; 000)

94.8%

97.5%

95%

Jul/12 Mar/13

2.0%

1.7%

2%

Jul/12 Mar/13

92.5%

98.5% 98%

Jul/12 Mar/13

SMP5 - Traffic channel

allocation rate (voice)

SMP7 - Call Drop Rate SMP8 - Data Connection

Rate

8.3%

3.5%

5%

Jul/12 Mar/13

SMP9 - Data Connection

Drop Rate

+4%+16%

+66%

Target agreed w/ Anatel

Operations: Sales Force and Customer Service, the Machinery Behind the Business

Engine is Running at Strong Pace and Efficiently

Market Share Evolution

(% of total lines; Source: Anatel)

132

79

65

Mass

Channel

(SIM and

recharge

sales)

Own

Stores

Focus on Efficiency

(R$; months)

3632

29

1.8

1.6

1Q121Q11 1Q13

1.7SAC/

ARPU

SAC

-12% -11%

1Q13

1Q12

1Q11

1Q12

1Q13

19.54% 19.45%

24.75% 25.02%

27.20% 26.71%

28.27% 28.53%

4Q12

+26 Bps

-48 Bps

+28 Bps

-9 Bps

#1 Prepaid: 60.3 mln users #2 Voice Postpaid: 9.0 mln users

Bad Debt Resilience

(as % of Gross Revenues)

1Q13

1.1%

2Q12

0.9%

1Q12

0.9%

+103%

9

1Q13

16.72% 17.03%

21.04% 20.73%

38.38% 38.36%

23.22% 23.25%

4Q12

+3 Bps

-1 Bps

-31 Bps

+31 Bps

1Q13

Showing strength in both:

Pre and Post-paid

Sales channel as a key

factor:

Effectiveness

Efficiency

Resilience

Quality driven

Sales Force

(Points of sale EoP; Points of Sales)

TIMP1 P3 P4

0.7%

1.0%

3Q12 4Q12

+22%

Improving Caring Services to Recover Customer Satisfaction

IDA – Index of Caring Performance (last reported)

(Points - the higher the better; Source Anatel)

99.9

96.2 95.298.2

98.0

88.0 89.4

93.3

92.8

73.3

84.0

91.1

84.9

72.7 73.1

84.4

Jun-12 Aug-12 Oct-12 Dec-12

Claims at Consumer’s Protection Agency (Procon)

(# Claims - the lower the better; Source: SINDEC database)

7,6938,882 8,913

10,047

6,533 7,6488,745 8,979

18,558

21,61819,838 19,728

10,510

12,567

14,73715,820

Anatel Ranking of Complains (last reported)

(Index of Complains under 1,000 access - the lower the better;

Source: Anatel)

0.20

0.28 0.300.24

0.24

0.440.41

0.34

0.34

0.50 0.47

0.38

0.50

0.64 0.63

0.51

Jun-12 Aug-12 Oct-12 Dec-12

4Q123Q122Q12 1Q13

6.00

6.50

7.00

7.50

8.00

TIM PRE POS CORP

10

Customer Care Satisfaction Survey

(Points; Source: Company)

Changing caring approach to meet different

segments needs

Taking transparency and convenience to the

next level

P3

P4

P1

TIM

P3

P4

P1

TIM

P3

P4

P1

TIM

Marketing: Innovation to Support Sustainable Growth

ARPU Performance

(%YoY; R$)

Postpaid Growth Helping ARPU and MOU Improvements

Voice Postpaid Customer Base

(000 lines; Source: Company and Anatel)

MOU Performance

(minutes)

1Q12 2Q12 4Q123Q12

12

7,168

7,638

8,184

8,703 8,956

+25%

1Q12 2Q12 4Q123Q12 1Q13

1Q13

126 127

150

139

145

Outgoing

Incoming

1Q12 2Q12 4Q123Q12 1Q13

19.1 18.3 19.918.9 18.5

VAS

Voice

-8.0%

-15.3%

-11.0%-9.5%

-3.6%Liberty Controle taking up: managing

the large pool of Infinity customer

base.

Express Option (pay by credit card)

might boost adoption of Liberty and

Liberty Controle plans.

+69%

Apr/12 Mar/13

+15%

Controle Plans

Customer

Base

31% 35% 39% 43% 46%

Mobile Broadband and SMS Remain at High Speed Growth

SMS growth

(Days / Million Monthly unique users)

Data users

(Million monthly unique users)

66% 72%3G coverage

(% of urban

pop.)

VAS

(% of Gross Mobile Services Revenues; R$ Million)

640

1,000

1,245

1Q131Q11 1Q12

Web/smartphones sales already

represents 70% of total sales

Handset Sales Market Share Jan-Fev/13

(% of handset revenues; Source: Company)

21%

44%

25%

10%

TIMP1 P3 P4

59%

41%

Open Market

Operators

Smart/Web phone Penetration

(% over total base of lines)

1Q12 2Q12 3Q12 4Q12

1.5x

13.8%18.1%

21.4%

~18~22

1Q12 2Q12 3Q12 4Q12 1Q13

13

Enabling customers to use it… … and they are responding.

+25%

1Q13

20.523.1

Feb/12 Feb/13

+19%

+13%

Days of

Use

SMS

Users

Gross

Revs

VAS/Revs

+94%+24%

…But Mobile Internet Wave is Still in the Early Stages

14

Brazilian Device Market

(Million Units. Source: IDC)

7.5 6.65.5

8.4 8.9 8.8

1.1

3.1

5.8

Desktop Notebook Tablet

Tablet Offers

New Offer

2013e2011 2012

56% of Brazilians listen music at least

once a week in their mobile phone

Legal access

All musics

Unlimited download

Pay when you use

Work in offline mode

Smart Pipe:

Entering in the

OTT world as a

main actor.

4G Launch

15

Fixed to Mobile Substitution will accelerate further with 4G

Release on April, 30th.

FTTS project as the foundation for LTE.

Efficient cost approach with RAN Sharing.

Still a limited handset portfolio.

Developing a next stage of mobile internet

experience.

LTE Opportunity

80%

20%

2G 3G2G 3G 4G LTE

Average

Speed

(Mbps)

CB

Penetration

5x

10x

Live TIM: A Business Opportunity is Emerging

77.7%

22.3%

1Q12 2Q12 3Q12 4Q12 1Q13

A Full Operating Business Deployed in Less Than a Year

17

First CustomerAward Frost

Launch RJ

AES Atimus

Acquisition

Nov11 May12 Jul12 Sep12 Oct12 Nov12 Dec12 Mar13

Alpha Test

Development OSS/BSS

Launch SP

10,000

Sales

16K

Customers

41% Net

Share

Network Construction

(MSAN and HH Addressable)

Market share (MSAN occupation)

(after 5 months; Source: company estimates)

MSANs

(Cabinet)

Households

Addressable

609k

770

11%

13%

1H12 2H12

8.2%

91.8%

All Speeds Above

34 Mb

Net Share RJ/SP (Jan-Feb’13)

(Source: Anatel and company estimates)

240k

Website

Registration

Live TIM

Live TIMOthers

Others

Solving Operational Start-up Difficulties to Gain Customer Satisfaction

Time to Install

(# days)

jan/13 feb/13 mar/13

Driving the Market to a New Speed Level

(Average Download Speed in Mbps)

1.3 1.7 1.8 2.3

35.5

2009 2010 2011 3Q12 Live TIM(delivered)

43% 42%26%

51% 52%

38%

6% 6%

36%

Telecom Fixed Broadband

Live TIM

Delighted Satisfied Unsatisfied

Customer Satisfaction Index

(Source: Study of Bridge of Research Aug/12 and TIM)

Live TIM has 6x

more delighted

customers than

market average.

Capturing Clients Through High Speed Packages

(Source: Informa Telecom & media)

18

15x

Market Average

- 29%

02468

101214

15 20 25 35 50

R$/M

bps

Download Speed (Mbps)

Live TIM

P1

P2

P3

Financials: Growing with Discipline

EBITDA & Net Income Analysis

1,174

EBITDA

1Q12

EBITDA

1Q13

-57

Δ Marketing

and SalesΔ Pers./G&A

and others

+69

Δ Handset

Margin

-86

Δ Network

and ITX

+49

Δ Services

Revenues

26.3% 25.9%EBITDA Margin

Service EBITDA Margin31.2% 30.6%

+71

-6.8% +19.1%-60.8% +4.4%+1.8%ΔYoY

1,220

20

EBITDA Evolution

(R$ Million)

350502 541

1Q11 1Q12

EBIT

(R$ Million, % CAGR)

1Q13

EBIT Net Financial

Result

Net Income

1Q13

Taxes and

Others

Depreciation/

Amortization

EBITDA

1Q13

+1.1% +7.8% +60.2% -12.4% +13.9%

From EBITDA to Net Income

(R$ Million)

1,220 -679

541 -68-167

306

213 269 306

1Q11 1Q12

Net Income

(R$ Million, % CAGR, R$/stock)

1Q13

+8%+24%

+14%

+20%

+4%

EPS 0.130.110.09

21

Cash Generation

Dividend Approved: R$743 Mln (R$0.31/share)

two payments: June 12th and Sept 12th

OFCFCAPEX Δ WCEBITDA

1,220 -470

-2,127

-1,377

YoY + 4% -13% -17%

Abs

YoY+46 -72 -302 -183

-15%

R$1.2 Bln EBITDA in 1Q13

Capex at R$470 Mln in 1Q13

Operational Free Cash Flow

(R$ Mln)

Net Debt

(R$ Mln, % CAGR)

1,671 1,899

1,555

-18%

-4%

1Q12 1Q131Q11

Net Debt/

EBITDA

L12M0.39x 0.40x 0.31x

1Q12 1,174 -543 -1,825 -1,194

Conclusions

Ready to Go: 4 Steps to Resume Growth

23

Solid Capex investment program.

Significant coverage and capacity improvement through extensive own fiber

infrastructure.

Network Quality War Room approach.

Efficient 4G Investment with RAN sharing.

Continuous evolution of our offer platforms (transparency, simplicity, convenience,

micro-segmentation).

Promoting data usage with handset strategy, new VAS offers (e.g. TIMmusic) and 4G

launch.

Expanding postpaid and business user base.

Developing option value of Live TIM ultra-broadband services.

External Positioning: Innovation, Quality, Transparency.

“Portas Abertas” customer portal for increased transparency and network quality evolution.

Focus on regulatory and institutional dialogue.

People Focus – highly skilled, highly motivated, right organization.

Best Place to Work initiatives.

Renewing Sense of Pride and Belonging – One of Brazil’s Top 15 Companies.

Network Quality

& Infrastructure1

Strategy &

Offer Evolution2

Institutional

Relationships3

People &

Organization4

Solid user base and market positioning, coupled with clear strategic priorities,

strong execution capability and significant investments present the right mix for

TIM Brasil to move to a new growth phase.