2Q Main Highlights: Accelerated Recovering Path

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Transcription:

2Q Main Highlights: Accelerated Recovering Path Mobile Net Service Revenues (%YoY) Postpaid Net Adds in New Rhythm (Thd lines) 5.0% 445 509 3.7% 211 +12 pp -1.5% -3.0% -6.8% -33 1Q16 1Q17 5x 1H Net Adds 178K 954K Source: Anatel EBITDA¹ Growth (%YoY) 15.5% 4G Coverage Leadership Enhancement (Cities covered with LTE) 1,850 80% Coverage in June 5.8% 8.7% 3x +22 pp 579 0.5% -6.5% ¹ Normalized for towers sale and other items 2

Portfolio Evolution: More Focus on Postpaid and Changing Prepaid Profile Pure Postpaid Launched in June, 2017 No price change (same as 2016) Reinforce communication with postpaid users: back to top brand awareness ranking after 18 months Gathering all benefits into one plan Prepaid Weekly plan focus : 40% of gross additions in 2Q (> 50% in July) Top-up incentives campaigns Facebook partnership: dedicated monthly package for R$ 9.90 Offering Service + Handset with lock-in Unlimited Calls Smartphone with 12m retention and no subsidy 500 minutes 2 GB of internet Partnering to produce content, shows, festivals and singers Additional features for the music platform differential 3

Customer Base Evolution: Focus on Value vs Volume Postpaid Gaining Traction User Base and Acquisition Dynamics (Net MNP 000; base mln lines; EoP) Gross Adds + Migrations (Pre-Post) (lines; % YoY) ARPU Breakdown (%) MNP 2x 15.8 + 15% YoY +32% +20% gross adds after TIM Black launch Postpaid Controle New Portfolio Old +25% Base 13.8 Postpaid Pure New Portfolio Old +11% Positive MNP balance against all players in every region Pre to Post migrations remain strong Prepaid Value vs Volume User Base Evolution (mln lines; EoP) -10% Market: -10% Recurring Offers Over Gross Adds (%) 40% >50% in July Recharge by Segment (%) TIM Infinity 50.2 49.0 48.5 46.5 45.0 25% Young 28% TIM Pre¹+Turbo 43% Jun/16 Jun/17 Strict disconnection policy Avoiding one-off effects Source: user base data from Anatel ¹TIM Pre recurring 4

Network Evolution: 4G Fastest Roll Out 4G Cities Coverage Evolution (# of cities) # 1 coverage 4G Traffic Evolution (% of traffic generated by 4G devices) 1,850 528 new cities in 2Q 80% of urban pop. covered 71% 1,276 1,291 1,322 1,360 1,465 >90% sites w/ proprietary backhaul 48% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Enhancing Capacity and Efficiency with 1,800 MHz & 700MHz (bandwidth serving 4G) Carrier Aggregation Strategy 2,600 MHz 1x 1,800 MHz 2x 700 MHz >4x Coverage in km Larger spectrum availability for 4G Client is limited to a fraction of 4G network capacity Client is able to access full 4G network capacity Utilizing multiple bandwidth strategy to promote capacity increase and higher speed experience 5

Network: Speeding Up 4G Under 700 MHz Before x After 700 MHz Signal Propagation Effect 10 states capitals activated with 700 MHz Sites with 2.6 MHz Sites with 1.8 MHz Sites with 700 MHz 4G traffic increased 65% in Brasilia after the full speed operation of 700 MHz Continues Refarming of 1800 MHz Reaching Rio de Janeiro State and São Paulo interior (from 10 MHz to 15 MHz) SpeedTest 4G 1,800 MHz Download rate (Mbps) Download speed enhanced 60% 10 MHz 15 MHz 6/1/17 6/8/17 6/15/17 6/22/17 6/29/17 7/6/17 7/13/17 HD Voice (VoLTE) Launched in cities with 700 MHz availability For The Customer 100% service transparency Improved voice quality Faster Call Setup Optimization of the battery life Improved indoor coverage For New Revenues and Costs Optimization IMS platform available for new services Increase the voice coverage area: WiFi + LTE 700 MHz VoLTE spectrum efficiency Simplified the network architecture Infrastructure reutilization for VoLTE, WiFi Calling and other services 6

TIM Live: Another Great Quarter For the Ultra Broadband Business Growth Value Offer Customer Experience User Base ( 000) +23% #1 net adds in SP & Rio (Apr/May) User Base Mix (>=50Mb) (Volume 000) +11% ANATEL Satisfaction Survey (2016, General Satisfaction in points; 0-10) TIM Rio de Janeiro 7.8 TIM São Paulo 7.4 284 348 P3 P1 7.1 6.9 P7 P3 6.8 6.6 P8 6.8 P6 6.3 P4 5.3 P1 5.9 Net Revenues (R$ mln) ARPU (R$) +32% +11% Netflix ISP Speed Index (Jun/17, Mbps) 3.2 Leader 23x in the last 26 months P1 P3 P6 P4 3.1 2.9 2.4 2.1 Strong revenue performance backed by solid user base expansion. High value customer mix is boosting ARPU levels. Investments in customer experience and network quality are perceived by the clients. 7

Continuous Revenue Recovery: New Trajectory Confirmed Net Service Revenues (%YoY) Data on Mobile Net Service Revenues (% of VAS Revenues over MSR) 3,570 +5.0% +6.6% 3,750 60% 45% +5.0% Mobile Fixed Business Generated (excl. incoming rev.) (%YoY) MTR Exposure (% VU-M/Service Revenues) ARPU (R$) 7.5% 5.8% 19.38 +7.5% YoY - 210 bps 3.7% +12.6% YoY 17.22-4.0% +15.5% YoY ARPU outgoing 8

Opex: Second Quarter in Details Normalized Opex Breakdown Analysis (R$ mln; %YoY) COGS Traffic (Network + ITX) Marketing (Selling & Market + Bad Debt) 2,616-2% 2,552 273 232 966 924 922 952-15% -4% +3% COGS Trend following reduction in prepaid handset sales and targeted lock-in contracts expansion. Traffic ITX: lower cost after MTR (VU-M) cut partially offset by off-net traffic growth and negative one-off impact of TU-RL dispute*. Rental & Power: growth driven by network expansion. Network: positive one-off impact of 639 resolution* (already booked starting from 4Q16) and structural lower leased line costs (EILD). Market Stronger postpaid sales (+32%) driving SAC increase. Higher postpaid CB (+15%) generating increase in customer management opex (customer care, billing and collection, baddebt), partially offset by efficiencies. Positive impact from recharge channels revision Process Process (Personnel + G&A + Other) 456 444-3% Lower process driven costs mainly due to third party services contracts renegotiation, FUST/FUNTTEL reduction partially offset by higher personnel costs Efficiency Plan Recap (R$ bln) 1.7-1.2 "Original" Plan 2016-18 Realized until 2016 0.5 Residual Savings 0.6 Additional 2017-19 1.1 New Plan 2017-19 Efficiency Plan Completion (%) R$0 ~60% 2017 2018 2019 R$1.1 bln Main Actions Digitalization of business and administrative processes Sales channels redesign Project zero leased lines IT and Network vendors rationalization Zero based budget * The one-off events offset each other with no impact on EBITDA 9

EBITDA and Profitability: Cash Generation Normalized EBITDA¹ (R$ mln) Normalized EBITDA¹ yearly Evolution (%YoY) 15.5% 5.8% 8.7% Normalized EBITDA¹ CAPEX as % of Revenues (R$ mln; %) 1,204 1,391 0.5% 35% -6.5% Margin 32% 6 p.p 14 p.p. CAPEX over Rev 26% 21% Normalized EBIT¹ Margin (R$ mln; %) Reported Net Income (R$ mln) EBIT Margin 6.6% 10.1% ~3 x EBITDA - CAPEX ~2.5x 229 582 399 219 EBIT 253 74 EPS 0.03 0.09 ¹ Normalized for tower sales and other items 10

Main Takeaways: Business Progressing Across the Board Network Infrastructure Advances Improved Revenue Mix (MSR excl. incoming) Customer Experience Acceleration in 4G coverage (YTD) 2,000 cities covered by end of July Cities with 700 MHz Launch of VoLTE 62 Cities o/w 10 Capitals 58% Bundle Offers* 70% Jun/16 Pay per use Young new proposition for high value segment Jun/17 Speed up of digital transformation initiatives Dedicated caring for high value customers Big Data analyses driving marketing and network decisions TIM Live remains as #1 fixed ultra broadband quality of services July 2017 All you can eat bundle Revenues at new frontier EBITDA Margin Improvement and High FCF Yield Turnaround Progressing - + EBITDA % FCF Yield From High 20s Low Single Dig. To mid 30s Low Double Dig. * Bundle offers = postpaid + weekly prepaid bundle 11