Results presentation 3 q14 eng

3Q13 3Q14

+6%

3rd QUARTER IN FEW: RESULTS OVERVIEW

2

Financial Highlights

Operational Highlights

Business generated revenues at a good pace

1

Net Mobile Revenues

(ex-incoming)

3Q13 3Q14

+5%

EBITDA at a solid performance 2

EBITDA reached

R$1,332 mln in Q3

1 New offers

2 Bad debt under control

Bad debt as % of gross revenues

Increasing data penetration 3

% of data users over total base

4 Strong performance in 4G market share

4G Market Share

0.7% 0.6%

1.1% 1.1% 0.8%

3Q13 4Q13 1Q14 2Q14 3Q14

-22.3% -21.9% -22.9% -20.5%

-2.9%

3Q13 4Q13 1Q14 2Q14 3Q14

Improving fixed business (fixed business net revenues Δ% YoY) 5

+19 p.p.

Strong cost control (total opex Δ% YoY) 4

8.8% 2.3%

-2.9% -7.2% -8.1%

3Q13 4Q13 1Q14 2Q14 3Q14

33%

39% 43%

3Q13 2Q14 3Q14

Net Income 3

Net Income totaled

R$348 mln in Q3

3Q13 3Q14

+11% +6.4%

+10 p.p.

Source: Anatel

26%

30%

Jul/13 Jul/14

+4 p.p.

1,283

1,378

3Q13 3Q14

Service EBITDA (ex-handset business) (R$ mln; %YoY)

BUSINESS FUNDAMENTALS

3

Core Business Evolution…

…Overcoming Challenges

Mobile Service Net Revenues (% YoY)

Service EBITDA Margin (ex-handset business) (% YoY)

(Local + LD + VAS

+ Others)

Business Received

3Q13 3Q14

Business Generated

1 MTR cut impact on revenues (YoY performance)

(Incoming Voice + SMS)

+7.4%

30% 34%

3Q13 3Q14

+3.6 p.p.

2 SMS Outgoing Revenues (YoY performance)

-18%

-28% -27%

1Q14 2Q14 3Q14

Net revenues from MTR

3 Macro Environment

Brazilian GDP Growth (%YoY)

Source: IBGE; CNC

Indebted Households (% of total)

1S13 1S14

2.7%

0.5%

A market trend

Greater potential for data growth usage

1.2%

-8.2%

-19.4%

1Q14 2Q14 3Q14

+5%

-34%

Operating margin

improvement

61% 63%

3Q13 3Q141H14 1H13

45%

39%

26% 30%

17% 20%

12% 10%

DRIVEN BY INNOVATION

4

Customer Base (mln users)

PREPAID MOBILE ACCOUNT/ MONEY

o Partnership: TIM, Mastercard and Caixa Econômica Federal

o Focus on unbanked population ( >50% of prepaid base)

NEW MUSIC PLATFORM

o Partnership TIM and Deezer (top global streaming platform)

o More than 35 million music available for download

o Maintaining leadership position in the mobile music industry in Brazil

Aug/12 Aug/13

TIM

Source: ANATEL

Aug/14

P1

P3

P4

Jul/13 Jul/14

3G Market Share (%; mln users)

4G Market Share (%; thd users)

30.1

31.4

42.7

16.8

123 mln

Jul/13 Jul/14

TIM

1,437

1,101

735

364

3.7 mln

TIM

Source: ANATEL Source: ANATEL

INTERNET SHARING PLANS

o Up to 4 devices

o No additional charges

WEEKLY SERVICE PACKAGE o Voice + Data + SMS o R$ 7 per week

NEW M2M PLANS o New data packages

launched for M2M services

R$ 0.75 DAILY OFFER

o Expansion to new regions: PR, SC, MA, RJ

o Covering most of the country

Adding Value Through Innovation

NEW APP FOR LANGUAGE COURSES o Games and quizzes help

students developing English skills

blah COMMUNICATION APP

o Integrated communication (VOIP, IM, SMS) App

o First ad campaign

76.5 77.1 79.7

69.4 72.9

74.7

63.2

67.1 69.3

48.0 50.0 51.3

23% 25%

25% 26%

40%

35%

11% 14%

67% 77%

3Q13 3Q14

3Q13 3Q14Jul - Aug/13 Jul - Aug/14

24

32

3Q13 3Q14

MAINTAINING STRONG DATA PACE

5

Data Adoption

Increasing Data Penetration

Smartphone Penetration Over Customer Base (%; ∆ YoY)

Smartphones Share over New Sales (%; ∆ YoY)

Data Users (mln users; % YoY)

+32%

BOU: Bytes of Use (megabytes)

Days of Use

+40% +22%

43 mln to go!

28 mln untapped market

15 mln with data handset

Data Opportunity over Customer Base

32 mln data users

1Q14 2Q14 3Q14

25% 27% 29%

% over total gross mobile service

revenues

Mix of Data Gross Revenues (R$ mln; %YoY)

SMS

Web

1,500

+29% +39%

+45% +80%

∆ %YoY growth

1,578

Content & Others

1,677

+33%

+72%

74.7 mln customer base

+23% +20% +22%

+10 p.p. New Data World

Usage Increase

Penetration Increase

25%

44%

3Q13 3Q14

+20 p.p.

39

81

2013

1Q14

2Q14

3Q14

900 Mhz rollout according to plan (above 600 sites using the new frequency)

Expanding backhauling

INFRASTRUCTURE (R)EVOLUTION (1/2)

6

Mobile Broadband Update

Cities Covered with MBB project

% of urban population covered

Quick incident resolution: from 56% to 76% within 8h

Reacting faster to network problems - faults opened within the target time: from 85% to 94%

Agreement with a tower company

Project to install more than 150 small cells in gas stations in 3 cities

Small cell installed inside Totem

Network Hiring + Insource Project

Innovative Coverage Expansion Improving Quality and 4G Services (e.g.: SP)

Reduction in dropped call rates and better overall performance

Higher average throughput rates

Improvement in indoor coverage

Increase in data and voice traffics

Expanding # of people in the Network team

From third party TO insource Network Control Center

30%

31%

32%

Source: ANATEL app

36%

Investing Efficiently

Big Data analysis for capex allocation;

Antenna level return analyses (IRR and payback)

99.0%

97.95%

97.53%

98.36%

Voice Access # Antennas

3,153 3,106 3,085

3,055

TIM P2 P3 P1

INFRASTRUCTURE (R)EVOLUTION (2/2)

7

Network in Numbers 4G at 700MHz: Seeding Future Growth

Better Coverage (Indoor and Rural)

Relevant Spectrum acquisition at fair price (10+10 MHz; ~R$ 2.9 Bln, 1% premium) (Price in USD/MHz/Pop. adjusted for GDP)

Spectrum Acquired

4G Sites in state capitals

Ran Sharing

Smart Approach 5800 Mhz

2100 Mhz 850 Mhz

700 Mhz < 700 Mhz

0 2 4 6 8 10

Number of BTS

20 15 10 7 5 2

*2 – TIM 4 & 6 – No bidders

70

8M

Hz

71

8M

Hz

72

8M

Hz

73

8M

Hz

74

8M

Hz

76

3M

Hz

77

3M

Hz

78

3M

Hz

79

3M

Hz

80

3M

Hz

BTS Range (km)

0.52 0.78 0.83 1.07 1.13 1.18 1.22 1.28 1.29 1.29 1.48

2.58

1.22

DEN NZL Spain Brazil GER PORT EUA Taiwan Italy France AUS Canada

Average

Uplink Downlink

Source: ANATEL

Number of WIFI & Small Cells

Source: Company

714

1,105

4Q13 1Q14 2Q14 3Q14

Number of 3G Sites

9.3% growth in 9M

Coverage: 79.1% of urban population

Source: Company

9,074

9,920

4Q13 1Q14 2Q14 3Q14

Source: Company and Anatel

1 3 2 4

5

6 6

1 3 2 4

5

6 6

USA

3Q13 4Q13 1Q14 2Q14 3Q14

TIM SOLUÇÕES CORPORATIVAS: BUSINESS REBOUND

8

Turnaround on fixed business in place

2013 2012

-

2014

+

EBITDA-CAPEX Net Revenues (with intercompany)

2013 2014

1Q14 2Q14

o New business unit

organization

o IT renewal plan

o Multiservice

network launch

o New branding

o New offers and

product launch

o Restructured sales

force

4Q14

o Sales and customer

service improvement

3Q14

Financial Performance

o Sales multi-channel

Improvement

o New offers and

product launch

o MTR reduction

Revenues from New Sales (R$; YoY)

Revenue rebound Sales growth Market repositioning Infrastructure reinforcement

Governance / Efficiency Business Priorities: Business development Quality and Process

+5x

Organization restructuring

Dedicated B.U. to all

business customer Fixed + mobile

integration

36.7

38.2

3Q13 3Q1421

13

3Q13 3Q14

Accelerating Operational Performance…

LIVE TIM: SPEEDING UP GROWTH

9

43

120

3Q13 3Q14

Customer Base (000 users)

Source: Anatel

881

1,366

3Q13 3Q14

Netflix Broadband Ranking (average streaming speed representation)

3Q13 3Q14

ARPU (R$; YoY%)

… with Support of Quality Experience

Addressable Households (000 HH)

Source: Company

+2.8x +55%

+32%

New Line Payback (months)

-38%

Gross Adds (000 users)

18

31

3Q13 3Q14

+74%

Live TIM Net Adds Share (% of SP and RJ market additions)

Average Speed of New Sales (mbps)

+4.1%

16%

31%

Aug/13 Aug/14

Source: Company

3Q13 3Q14

~0.7% ~0.8%

3Q13 3Q14

4,045

180

Tho

usa

nd

s

4,207 4,045 +149

Tho

usa

nd

s

+0.4%

FINANCIAL RESULTS ANALYSIS (1/2) Service Net Revenues (R$ mln; % YoY)

Reported Revenue

3Q13

Reported Revenue

3Q14

MTR Impact

-3.8%

4,225

‘Pro forma’ Revenue in 3Q14

-306 -4.5

ΔYoY +4.7% -34.5% -2.9%

Δ Others Δ Business Incoming

Δ Business Generated

10

Ex-MTR

1,332

109

Tho

usa

nd

s

EBITDA (R$ mln; % YoY)

1,252

Reported EBITDA 3Q13

Reported EBITDA 3Q14

+151 -71

Δ Opex/ Others

Traffic/Data Δ Contribution

Margin

24.6%

30.5%

1,332

27.4%

34.1%

EBITDA Margin

Service EBITDA Margin

+4.5% +3.4%

MTR Impact

+15.1%

+6.4%

1,441

‘Pro forma’ EBITDA in 3Q14

ΔYoY

Ex-MTR

Efficient Cost Control

Interconnection Cost (Δ% YoY)

Leased Lines Cost (Δ% YoY)

Bad Debt/Sales (% over gross revenues)

stable

3Q13 3Q14

-36.2%

3Q13 3Q14

-1.8%

Mobile First Margin Analysis (% YoY)

+6 p.p. Strong first margin

expansion showing core business improvement

Margin expansion driven by data and VAS (content & others)

306 372

386 366

315 348

9M13 9M14

3,980 -2,614*

- 1,274

182 275

50%

88%

50%

12%

9M13 9M14

1,446

4,781 3,335

Tho

usa

nd

s

791

4,470 3,679

1,749 1,749

-163

+438 mln

+30%

FINANCIAL RESULTS ANALYSIS (2/2) Net Income Evolution (R$ mln; % YoY)

Net Debt (R$ mln; % YoY)

11

EBITDA

Debt Cash Net debt

Sep/13 Sep/14

Debt Cash Net debt

+63% -45%

Infrastructure Investment Mix (as % of capex)

Cash Flow - 9 months (R$ mln; R$ YoY)

YoY

Net debt/EBITDA 12M: 0.14x

BNDES Loan

CAPEX Δ WC OFCF 9M14

*Considering R$3 mln of LT Amazonas leasing adjustment

OFCF 9M13

LT Amazonas Leasing

6,219 5,428

2G

3G + 4G +38 p.p.

∆ YoY Technology

2Q

1Q

+10.6%

% YoY

3Q

1,007 1,086

+21.6%

-5.2%

+7.9%

1H14 3Q14

512

-1,786

2013 2014

CONCLUSION

12

Q3 Conclusions: A good balance between objectives

Perspectives: Moving the plan forward

Strategic… Financial… Operational…

EBITDA

Net Income

+6.4% YoY

+5% YoY

+11% YoY

MBB in 81 cities

OPEX Control

Prepaid leadership

Infrastructure growth

Evolving revenue profile Renewed Mission/ Purpose/Values

New 3-year plan

“To connect and take care

of every customer, so

everyone can do more”

o Industry leadership

o Long term commitment

o 4G license 700MHz

o Tower sale supporting investment plan

Quality

Business Generated

TIM Protagonist

• VOICE

• SMS

• MTR

• DATA

• DIGITAL SERVICES

o Data and digital services leadership

o Infrastructure

o Customer base value

o Customer experience

o One TIM initiative

Data Users (mln users)

Data + VAS (ex-SMS)

Smartphones (over total base)

32 mln 32% YoY

44% +19 p.p. YoY

R$1.3 billion +49% YoY