3q14 results presentation
DESCRIPTION
TIM - 3Q14 Results PresentationTRANSCRIPT
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