Results presentation 4Q15

TIM Brasil Investor Relations

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A Tough Scenario in 2015

GDP Growth Estimates for 2015 (%YoY)

Inflation Estimates for 2015 (%)

Cut investment program Maintenance of appropriate infrastructure investment

Stick to existing offers A completely new portfolio for all segments

Conventional Course of Action

FX Rate Estimates for 2015 (R$/US$ at year end)

Market Deterioration TIM’s Approach

Defend value of community business model

First mover on SIM Card consolidation with disruptive off-net offers

Jan/15

-23 mln

Dec/15

Mobile Market Users

Cut costs across the board Structural yet selective efficiency program

0.6%

-1.0% -1.5%

-2.8% -3.7%

Dec/14 Mar/15 Jun/15 Sep/15 Dec/15

6.5% 8.1% 9.0% 9.5%

10.7%


2.80 3.20 3.20 3.95 3.90


Source: BCB Focus Report; Anatel


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5.54 5.40

2014 2015

2015 Highlights

Total Net Service Revenues (R$bln; %YoY)

EBITDA (R$bln; %YoY; ex-towers sale)

16.3 15.4

2014 2015

-2.6%

Despite a challenging year...

…sustaining a long term strategy…

Efficient approach defended EBITDA

performance

Capex (R$bln; %YoY; ex-license)

Capex intensity bearing fruits

OPEX ex-COGS: -7% YoY

…and repositioning marketing approach with focus on value

SIM card consolidation Quality & Image Focus on 1st SIM

New strategic

positioning

Eliminating dependency from community effect

Focusing on the evolving “Big Middle”

Source: IPC of 2015

Class A

Classes B + C

2%

27%

71%

-0.9 mln

-0.1 mln

Defending EBITDA

4G Coverage

Leadership

+19%

3.9 4.7 -5.8%

Traditional

Innovative

2014 2015

+40%


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Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

17% 21%

84%

-10.6 +1.1

79%

2014 PrepaidNet Adds

PostpaidNet Adds

2015

Old Portfolio New Portfolio

Customer Base Analysis

Prepaid

Postpaid

TIM’s Customer Base (Million users)

76

66

Prepaid Disconnection Analysis (Million users)

May-15 Jul-15 Sep-15 Nov-15

Defending position on 1st SIM users (user base of 1st SIMs, estimated by usage profile)

A better representation of Customer Base

Prepaid Net Adds TIM -10.6mln (Market -28.4mln)

Focus on efficiency and profitability

Maintained leadership on prepaid share and regained #2 on postpaid human*

“pay as you go”

Recurring payment

New View of Voice Customer Base (average users per period)

+19%

-15%

Jan-Oct/15 Nov-Dec/15

Organic Churn

Cleanup

2.7 1.1 1.0 1.0 -0.5

P1 TIM P3 P5 P4

Net adds Post

New Offer *Ex-M2M/Modems


5

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

ARPU Outgoing

First Take on New Offers

R$7.00 7 days

R$50.00 month

R$99.00 month

Mobile Number Portability (thousand users)

Total Postpaid (net port-in/out)

Traffic Indicators (total base)

120 120

1Q15 2Q15 3Q15 4Q15

340 475

Bytes of Use (MB)

Minutes of Use

+2% Prepaid Recharges

(mln users) ARPU Outgoing

+43% Control Gross

Additions (mln users)

Base New Offer

+46% Postpaid Gross

Additions (mln users)

Base New OfferBase New Offer

ARPU Outgoing

Estimated Actual

Voice traffic mix: cost impact within expected range* (mix of minutes for prepaid users)

Off-net Fixed

On-net

9% 20%

+% Double Digit

+% Double Digit

+% Single Digit

%Port-in/Gross Additions

New Portfolio launch

*Illustrative


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36%

45%

Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15

Data: Building the Path for Long Term Growth

Data Penetration on Base (% of customer base)

3G & 4G Users (mln users)

VAS Gross Revenues (R$ mln)

70%

76% 73%

78%

37.5 37.5

2.0 7.1

Dec/14 Dec/15

3G+4G % over Base

52% 67%

6.62

7.74

2014 2015

% Mobile Serv Revenues

28% 35%

75.7 66.2

Others (2G, M2M etc)

4G

3G

73% 85%

27% 15%

2014 2015

Innovative Revenues (% of VAS Gross Revenues)

SMS

Innovative

+39% Data connectivity

(YoY)

+17%

Postpaid

Control

Prepaid

x3.5 YoY Mkt Share: 28%

+35% (YoY)

Flat YoY Mkt Share: 25%


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A Year of Infrastructure: TIM 4G Leadership

24 45

411

2013 2014 2015

Cities Covered (4G)2

(# of cities)

Urban Population Covered (4G) (% of urban population)

27% 36%

59%

2013 2014 2015

+32pp

CAPEX per Technology (R$ mln)

2014 2015

4G

2G

3G

Number of Sites (4G) (in thousand)

+133% YoY

-22% YoY

+6% YoY

+387 cities

1.9 3.7 7.7

2013 2014 2015

+4k 4G

Refarming 1,800 Mhz

~65% connected with fiber (1)

13.3 15.0

12.5

Despite the FX headwinds, TIM managed to expand infrastructure above target with

the same Capex plan

Total Pop. Covered2: TIM: 52% P1: 47% P3: 48% P4: 46%

(1) Fiber and other high capacity backhaul (2) Source: Teleco / ANATEL

(+32% YoY)

(+22% YoY) Fiber Backhaul

Fiber Backbone

>70,000 km Total Optical Fiber Network

P1: 193 P3: 164 P4: 83

>70% of Data traffic Carried by high capacity backhaul


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Quality Improvements

SpeedTest in 2G/3G Network (By Ookla)¹

1,488

3,586

4Q14 4Q15

538

1,014

4Q14 4Q15

(1) Quarterly average; generated from TIM’s analysis over Ookla Speedtest results. 4Q15 until November, last data available (2) Last data available; Source: Anatel. (3) Total per economic group. Source: SENACON/MJ and Anatel. Broadband customer base as of Nov/15 (last data available).

206

142

4Q14 4Q15

Throughput Downlink (Kbps)

Throughput Uplink (Kbps)

Latency (ms)

Number of states within Anatel’s performance Targets (%)² 2015 Consumer Complaints (Demands at Consumer’s Protection Agency - Procon per 1,000 customers)³

100% 100%

Dec-14 Oct-15

85%

100% 96%

Dec-14 Oct-15

3G

4G

100% 100%

Dec-14 Oct-15

3G

4G

Drop Voice and Accessibility

Data Accessibility 3G/4G

Data Drop 3G/4G

2.8 2.1

1.7

1.1

P4 P3 P1 TIM


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Fixed Business Performance

130

232

4Q14 1Q15 2Q15 3Q15 4Q15

Live TIM Base (mln of clients)

Fixed Net Revenues Performance (R$ mln; %YoY)

579 660

x2 +5%

Fixed Revenues2014

ResidentialServices

CorporateServices

Fixed Revenues2015

+14.1%

Live TIM - Market Share of Net Adds (SP and RJ >34Mbps)

+10% ARPU YoY

TIM Fixo: Fixed Voice Service (w/ wireless technology)

Corporate Sales (%YoY)

2014 2015

43.9% 50.2%

6.8% 14.7%

48.0%

34.1%

0.5% 0.5% 4Q14 4Q15

Live TIM

P3

P1

P4

1%

34%

2014 2015

Share of Net Adds

Mkt Share 0.9% 1.4%

+25% +78%


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P3 8%

P2 30.2%

TIM 46.9%

P1 14.5%

19,498 17,139

0% -40% -45%

+14%

24% 30%

38%

76% 70%

62%

2013 2014 2015 2016

13.2 13.2

2.5 1.5

2014 2015

Reducing MTR Impact (R$ mln)

Financials: Changing Revenue Pattern Continues

-12.1%

Total Net Revenues Breakdown (R$ mln; %YoY)

2014 2015 Mobile Business

Generated

Fixed Incoming Handsets

Data Transformation (% over net service revenues)

Mobile Service Net Rev. (R$ bln; %YoY)

Voice

Data

~800

~300

Tho

usa

nd

s 1Q12

Resilient “Business Generated” amid a tough year

…in spite of a difficult macro and competitive environment;

…change in handset business strategy led to a sizable reduction of product sales without negatively impacting on margin.

4Q15

>20% <8%

15.7

14.7

Flat: 0%

~R$1Bln

% of revenues

incoming

outgoing

ARPU and data users growth

Market Share of Smartphones (among operators in 2015)


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Financials: Structural Efficiency Program

Opex Performance (ex-COGS and towers sale) (% YoY)

Efficiency Across the Board (% YoY; Δ R$mln YoY)

-44%

-11%

-9%

-7%

-6%

8%

1%

Selling & Marketing

Bad Debt

G&A

ITX & Network

COGS

Personnel Expenses

Others

2013

2014 2015 4Q13 4Q14 4Q15

2014FY: R$13,960

2015FY: R$11,744

-16%

Annual View Quarter View

3 year Efficiency Plan Update

Jan/15 Dec/17

R$ 1 bln

Dec/15

2%

-7% -7%

-2%

-8%

-4%

-7%

Ex- COGS

~ 35%

10.6 9.9

Opex 2014 Growth Inflation Regulatory(ITX)

Efficiency Plan Opex 2015

Opex Evolution (ex-COGS and towers sale) (R$bln; % YoY)

Recurring

-7%


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1,546

2,071

2014 2015

5,538 5,395

1,211

28% 31%

2014 2015

2014 2015

Financials: Margin Expansion

EBITDA & Margin (R$ mln; % YoY)

Reducing MTR Impact (R$ mln)

1Q12 4Q15

>25% <10%

Net Income

(R$ mln; %YoY)

0.86 EPS 0.64

First Margin Gain due to Business Reshape (%)

Business anchored by a solid balance sheet

~300

~150

Net Debt (R$ bln) 1.7

1.3

0.23x 0.32x Net Debt/ EBITDA

R$468.6mln

Dividends Proposal

% of EBITDA

Service Margin 35% 36%

-2.6%

Towers Sale

Margin ex-towers

sale

+34% R$839 mln of Towers

Sale

80%

84%

2014 2015

Recurring: -20% YoY


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On human* postpaid base

New Portfolio

Conclusion & Perspectives

Maintaining the focus on business development

“Perfect storm” scenario in 2015

Economy deterioration MTR cut impact Voice to Data migration

Strong fundamentals and focus on the long term helped to reduce impacts

Continuous adaptation to new market conditions

Pay as you go Voice centric Market share Community

Recurring Data centric Revenue Share CB management

From…

...to:

48%

Data Users (% over base)

(+2.6 pp YoY)

31.5%

EBITDA Margin (in FY2015)

(+3 pp YoY)

+35%

Innovative Rev (in FY2015)

YoY

68%

Smartphones (% over base)

(+18 pp YoY)

#1 4G Coverage

>70,000 Fiber Network(Km)

2016…

2016-2018 Industrial plan update to be presented on

February 16, 2016

Infrastructure evolution Efficiency

plan on track

#1 On prepaid base

#2

*Total postpaid ex of M2M / modems

Results presentation 4Q15

Presentations & Public Speaking

Transcript of Results presentation 4Q15