Turnaround on Track: Virtuous Cycle on the Rise

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2 Turnaround on Track: Virtuous Cycle on the Rise 4G Network Expansion (# 4G sites e-nodeb) Human Postpaid Net Additions () (Excluding M2M and modem; in thd lines) % #1 in Net Adds Operational TIM P1 P3 P4 Network Financial Source: Anatel Normalized¹ EBITDA CAPEX (R$ million) Mobile Service Net Revenues Cash 3.7% % YoY -9.2% 12% 15% % over Net Revenues ¹ Normalized for towers sale and other transformation impacts 2

3 Customer Base Transformation: Postpaid Better quality improves acquisition and loyalty Gross Adds and Migration (Postpaid; %YoY) Net Mobile Number Portability (Postpaid) Churn & Downgrade (Postpaid) +16% >2x -12%... while more for more strategy and price-ups improves ARPU Postpaid Base Evolution (mln users; % of Postpaid over CB) Acquisition ARPU (Postpaid gross adds; R$/month) Customer Base ARPU (Postpaid customers; R$/month) % Postpaid +8% Controle +17% 2Q16 3Q16 4Q16 20% 25% 3

4 Customer Base Transformation: Prepaid Focusing on recurring offers Daily packages Weekly packages Recurring Prepaid Base (Quarterly average) 2X R$0.99 R$10 50MB +WhatsApp + R$0.99 Unlimited voice on-net R$9 1GB min + Deezer +WhatsApp 1GB + unlimited on-net + Deezer +WhatsApp Prepaid Customer Profile ARPU % Data utilization 2x >70% x <50% Recurring offers successfully attracting higher value prepaid subs. 4

5 Data Services Revenues Over 50% of MSR Changing Customer Base profile All plans with digital services embedded. Improving loyalty and acquisition 4G users over CB (%) 14% 32% Mobile Service Net Revs Mix (%) Yielding data revenues VAS ARPU (R$; %YoY) Traditional 66% 57% 52% 34% 9.8 Data 43% 48% % 1Q15 2Q16 3Q16 4Q16 5

6 Residential Solutions: TIM Live Consistency and New Opportunities Efficient Customer base increase #1 on Netflix ISP Speed Index TIM Live ARPU Expansion Homes Passed (mln) Customer base (thd) +9% % % 322 TIM Live Net Revenues (R$ bln; %YoY) +38% WTTx Solution Trials: TIM Casa Internet +8.9% Runs over LTE (700MHz, 1.8GHz and 2.6GHz); Available offers: 2Mbps (50GB) and 4Mbps (80GB); TV PC Mobile Target markets: Residential; Self-installed CPE (comodato with lock-in contract) IDU TIM Live on Fixed Revs. 2Q16 3Q16 4Q16 >20% >30% First Results: City: Rio Verde (GO) High satisfaction levels (>9.6/10) Average data consumption: ~70GB/month >80% clients did not have broadband 6

7 4G Fast Rollout Supporting Data Strategy 4G >90% of sites fastest deployment 66% of data traffic through 4G devices with proprietary backhaul 4G Cities Coverage Evolution (# of cities) Dec-13 Dec-14 Dec-15 Dec-16 Mar-17 Source: Teleco website (other players) 700MHz rollout started in Goiás and Brasília 1,322 (TIM) (P3) (P1) (P4) Doubling 4G Capacity in Key Areas Trough 1.8GHz Refarming from (1Q15) 10MHz Rio de Janeiro Porto Alegre Distrito Federal São Paulo Curitiba to () 20MHz With additional 10MHz from 700MHz still to come Quality Perception Surveys TIM s Annual Evolution (2016 ANATEL s Perception Survey) Problem Resolution Customer Care Offerings Voice 3G/4G Availability Customer Satisfaction Index¹ (Postpaid general satisfaction) Already #1 in Controle P1 TIM P3 P4 Billing 3G/4G Speed 3G/4G Connection Stability Q15 4Q16 Source: CSI Model by CFI Group. From October to December,

8 Turnaround Milestone: Revenues Back to Positive Data Growth Acceleration (R$ mln; %YoY) %YoY +14% +25% Reshaping Revenues (VAS over MSR %) 52% Business Generated (Mobile Services Net Revenues ex-incoming ; %YoY) 6.3% Total VAS 1,480 SMS -27% 1,849 43% 0.9% Innovative +31% 34% -0.3% -4.0% -5.7% 1Q15 2Q16 3Q16 4Q16 Mobile Service Net Revenues Total Net Revenues Breakdown (R$ mln; %YoY) 7.0% 3.7% 3, % -12.0% 3,951 Ex MTR impact -5.4% +2.5% Reported -9.2% 2Q16 3Q16 4Q16 Services Revenues Handsets 8

9 Solid EBITDA Growth With Opex Control and Margin Expansion Normalized 1 OPEX (R$ bln; %YoY) Stable Opex despite Revenues growth and 4.6% 12M inflation Normalized¹ EBITDA Growth 8.7% EBITDA Exposure to MTR (%) 8.2% % % 2Q16 3Q16 4Q16 1.9% Margin 30.2% 32.0% Service Margin 32.6% 33.6% 2Q16 3Q16 4Q16 Normalized 1 EBITDA-Capex (R$ mln; %YoY) Net Financial Position Evolution (R$ mln, %) 594 +R$964 mln improvement vs , % 2, ,651 NFP Dec/16 OFCF exlicense 700MHz Clean Up Net Financial Expenses Cash Taxes Other Movements NFP Mar/17 ¹ Normalized for towers sale and other transformation impacts 9

10 Key Messages & Outlook Operational and financial turnaround already bearing results Customer Base Mix Prepaid 80% 75% Pospaid 20% 25% Network Traffic Mix (Data traffic through 4G devices) 66% Value approach in both segments 36% (2019e) TURNAROUND IN PROGRESS Revenues at a different pace Net Revenues -15.3% -12.4% -5.3% Normalized EBITDA 0,5% -1.7% 5,8% 2.5% 8,7% 40% 2Q16 3Q16 4Q16 4G leadership reshaping traffic Normalized EBITDA acceleration -13,5% -6,5% Recovery trend should continue going forward Network & Quality: Offers: Network quality to be perceived as a differentiation factor and VoLTE to be launched in 2Q17 helping voice quality New offers continue to reshape customer base and usage profile Cities Covered with 4G (EoP) 1,255 >2K Financials: Revenues and EBITDA positive growth in every quarter FCF growth to be continued 2016a 2017e 10