2. TIM PARTICIPAÇÕES S.A. | Investor Relations
Main phases of TIM Brasil’s Re-launch Plan
2008 1st half 2008 2nd half – 2009 1st quarter 2009 2nd quarter – 2009 2nd half
Phase 0: Current Phase 1:
Difficulty Restructuring Position Re-Launch Plan
Volume driven New management Loss of Top of Brand
strategy team Mind/Preference repositioning
Falling ARPM Strict financial Drop in volume New portfolio of
Rising bad debt discipline share and value offerings
Offering strategy Launch of Fixed- Issue in post-paid Converging
is lacking Mobile substitution segment approach
offer
Loss of
Lower Profitability Defend % EBITDA Growth in Value
Revenue Share
1
3. TIM PARTICIPAÇÕES S.A. | Investor Relations
Agenda
Phase 0: Current
Difficulty Phase 1: Re-Launch
Restructuring Position Plan
Claudio Zezza Luca Luciani
2
4. TIM PARTICIPAÇÕES S.A. | Investor Relations
4Q08 / 2008 Achievements
..Lights.. …shadows..
EBITDA margin 4Q08 at 26.2% and 22.2% FY 2008: Drop in market share (below guidance ~26%)
meeting company's guidance 24.2% of market share in 2008 vs. 25.8% in 2007
ARPM increase to R$0.35 (R$/min) in 4Q08 Net service revenue FY08 at 5.1% growth, below
expectations (guidance >7%):
Bad debt 4Q08 at 4.1% of net service revenues:
Discipline and stricter credit control (meeting Lower Postpaid customer base (-200K lines YoY)
expected FY ~6%) Low incidence of post-paid on total gross adds in
4Q08 (13%)
SAC reduction: selectivity and efficiency on
High churn of post-paid (10% in 4Q08)
acquisition
Mix post-paid at 18.1% 4Q08 (vs. 21.7% in 4Q07)
Slowdown of ARPU erosion in 4Q08: R$29.9 in 4Q08
vs. R$29.7 in 3Q MOU reduction in 4Q08 (-19% YoY) as consequence of
lower push on promotions
VAS: +25.5% 4Q08 YoY, reaching 11% of gross service
revenues
3
6. TIM PARTICIPAÇÕES S.A. | Investor Relations
Solid KPI’s
Slowdown of ARPU erosion VAS (success in innovative services)
% of gross service revenue
R$
R$ Million 10.8%
9.7%
34.5 9.0%
29.7 29.9
∆ YoY ∆ YoY
-13.1% 25.5%
∆ QoQ 471.3 ∆ QoQ
375.4 402.9
+1.0% 17.0%
4Q07 3Q08 4Q08
4Q07 3Q08 4Q08
TIM FIXO* (fresh market) TIM WEB (boosting VAS)
Million accesses Million accesses
+25% +70%
~0.20 ~0.5
~0.16 ~0.3
~0.01 ~0.2
2007 1H08 2008 2007 1H08 2008
* Including TIM Casa Flex 5
7. TIM PARTICIPAÇÕES S.A. | Investor Relations
Customer Base Profile
TIM: Market Share Erosion TIM: more pre-paid Customer Base
Million lines Million lines
140.8 150.6
125.8 133.2 36.4
121.0 +24.5% 33.8 35.2
Mobile 31.3 32.5
Market ∆ YoY
31.3 32.5 33.8 35.2 36.4
TIM +16.5% 27.0 28.4 29.8 +22%
24.5 25.8
∆ YoY ∆ YoY
4Q07 1Q08 2Q08 3Q08 4Q08 6.8 6.8 6.8 6.8 6.6 -3%
4Q07 1Q08 2Q08 3Q08 4Q08 ∆ YoY
TIM Market share 25.8 25.9 25.4 25.0 24.2
Post-paid Pre-paid
TIM Incr. share 25.5 26.5 17.4 18.3 12.1
% Pos / Total 21.7 20.8 20.2 19.4 18.1
TIM erosion in market share:
Market continues to grow at a very strong pace (+24.5% in lines)
TIM reduce its market share to 24.2%
Incremental market share down to 12.1% in 4Q08
Mix change towards pre-paid (volume):
TIM Customer Base grew-up to 36.4 Mln lines mainly on pre-paid (+22%)
Post-paid lines down to 6.6 Mln (-200K lines YoY), representing 18.1% of total Customer Base 6
8. TIM PARTICIPAÇÕES S.A. | Investor Relations
Revenue Performance
Net Revenue TIM Service Revenue Share
R$ Million
3,544 YoY %
3,376 3,186 3,358
2,993
29.6% 27.5% 27.3%
3,100 3,066 3,223 +4.0%
2,838 2,971
276 155 215 292 321 +16.5%
4Q07 1Q08 2Q08 3Q08 4Q08 4Q07 3Q08 4Q08*
∆ YoY +5,3% +4,1% +6,1% +5,0%
Net Service Revenue Net Handsets Revenue * Includes net service revenue from Vivo, Claro, TIM, Telemig, Amazônia, Oi and Brt
Revenue Growth at 5.1% on a FY basis (below guidance >7%) due to:
lower than expected post-paid growth (post-paid Gross Adds at only 13% of Total in 4Q08)
high churn on post-paid (10% in 4Q08)
MOU reduction in 4Q08 as consequence of lower push on promotions
7
9. TIM PARTICIPAÇÕES S.A. | Investor Relations
Revenues KPI evolution
MOU
95
R$ 86
26
Incoming 25
ARPU
Outgoing 62 70 The 2008 objective was:
R$
4Q08 FY08 Price increase and to contain the
∆ YoY: Total -19% -1%
ARPU dilution
29.9 29.7
Incoming -18% -21% Greater discipline towards the
Outgoing -19% +9% pre-paid promotions that
4Q08 FY08
resulted in pre-paid ARPU
ARPM increase
∆ YoY -13% -13%
R$
Total ARPU performance mirrors
the mix deteoration
0.35
0.31
4Q08 FY08
∆ YoY +7% -13%
8
10. TIM PARTICIPAÇÕES S.A. | Investor Relations
EBITDA YoY performance
45.6 (61.4)
R$ Million
11.8 (65.9)
(32.7) 16.7
123.0
• Increase due to
Higher handset sale Largely impacted by
higher commercial
volume (+14% YoY) strong credit
activities, advertising
exp. and collection effort in
commissions 4Q07
890.4 927.6
EBITDA 4Q07 Service Handsets Selling Network COGS Bad Debt *Other EBITDA 4Q08
Revenue Revenue Expenses Expenses Expenses
Change
+4.0% +16.5% +9.5% -1.1% +17.6% +33.5% -5.5%
% YoY
EBITDA Margin 26.4% 26.2%
* Other Expenses include: G&A, Personnel and Net Other Operating Expenses/Revenues 9
11. TIM PARTICIPAÇÕES S.A. | Investor Relations
From EBITDA to bottom line – 4Q08
EBITDA Depreciation Net Financial Taxes and
EBIT Net Income
4Q08 Amortization Expenses Others
R$ Million
(622.2) Growth fueled by higher
cost of debt and 3G NPV
Tax loss carry forward
927.6 R$160.2Mn
(141.4) 135.6
305.4 299.6
Change YoY +4.2% +3.3% +5.9% +153.0% n.m. +65.8%
10
12. TIM PARTICIPAÇÕES S.A. | Investor Relations
Net financial position and FCF – 4Q08
Net Debt Operating Free Cash Flow
R$ Million R$ Million
3Q08 OpFCF Non 4Q08 1,084 (782)
OpFCF
Positive
Net Cash Flow 1,229
+1,072 928
(157) (1,670)
(2,743) 1,229 EBITDA ΔWkC Capex OpFCF
3Q07 and (1,788) 928 (92) (952) 4Q07 890 1,044 (1,007) 928
4Q07 figures figures
R$ 3.2 billion (of which 60% long term)
Gross Debt ~28% of total debt is denominated in foreign currency (fully hedged)
Average annual cost 12.1% in 2008 vs. 11.4% in 2007 (13.2% in 4Q08 vs. 10.9% in 4Q07)
Debt ratio 0.58x - Net debt over 2008 EBITDA
11
13. TIM PARTICIPAÇÕES S.A. | Investor Relations
Paving a sustainable growth
TIM became part of Bovespa’ s Corporate Sustainability Index (ISE)
On December 1st of 2008, TIM became part of the new portfolio of Bovespa’s
Corporate Sustainability Index (ISE)
ISE is composed by 30 companies out of 394 traded at Bovespa,
comprising only the companies with a strong commitment to sustainability and social responsibility
ISE is based on the international concept of the Triple Bottom Line (TBL), which makes an integrated assessment of companies’
social, environmental and financial elements
Underlining TIM’s commitment on a constant relationship improvement among all its stakeholders and strengthening its
environmental indicators performance
Recognized as one of the national companies more committed to management transparency and which contributes to the
development of a fair social system, environmentally balanced and economically prosperous
12
14. TIM PARTICIPAÇÕES S.A. | Investor Relations
Agenda
Phase 0: Current
Difficulty Phase 1: Re-launch
Restructuring Position Plan
Claudio Zezza Luca Luciani
13
15. TIM PARTICIPAÇÕES S.A. | Investor Relations
A Large and Competitive Market
Customer Base Service Revenue
Million lines Billion R$
25% 14%
Double-digit 121 151 38
44
market growth
2007 2008 2007 2008
Penetration 64% 78%
Gross Adds Churn
Million lines Million lines
35%
32%
75
Churn market... 56
35 46
2007 2008 2007 2008
Churn 32% 34%
TIM Player 1 Player 2
R$, R$/min R$, R$/min R$, R$/min ARPU
… suffering ARPM Competition increases with
0.39 Mobile Number Portability in
strong 0.36
0.31 -13% 0.34 -15% 0.35 -23%
2009:
competitive 0.27
17% of population covered in
34.4 29.6 -3%
29.7 -13% 30.3 27.3 25.5 -7%
pressure Sep-08 100% by Mar-09
2007 2008 2007 2008 2007 2008
14
16. TIM PARTICIPAÇÕES S.A. | Investor Relations
Loss of TIM Brasil’s competitiveness
Top of Mind Preference
Oct-08 Oct-08 25%
26% 27% 22% 21% 21%
Top of Mind and 20% 18%
Preference
Player 2 Player 3 Player 4 Player 2 Player 3 Player 4
Revenue Share Market share
%* %
Market Share 25.8%
29.4% 29.6% 25.4% 24.2%
27.7%
(value and volume)
2006 2007 2008 2006 2007 2008
% Post-paid/Base % Post-paid/Base
High-Value Base
20.8% 20.2%
(Post-paid) 21.3% 21.7%
18.1% 19.4% 18.1%
Churn: 10% in 4Q08
Gross Adds: 13% post-
paid/total in 4Q08 2006 2007 2008 1Q08 2Q08 3Q08 4Q08
MNP
Mobile Number 46%
%, Sept-Dec 2008
Portability
11%
Increasing competitive
pressure in 2009 IN OUT
Source: Synovate Image Survey Sept-Oct 08
15
* Includes net service revenue from Vivo, Claro, TIM, Telemig, Amazônia, Oi and Brt
17. TIM PARTICIPAÇÕES S.A. | Investor Relations
TIM Brasil’s strong fundamentals
1 Network: leadership in coverage and quality
• voice (coverage and quality)
• data (Edge/ 3G)
2 High-Value Customer Base (ARPU ~30R$) with Operating as a
proven innovation attitude (VAS 10.8% Gross Service “Pure Mobile”
Revenue in 4Q08) company, with solid
fundamentals…
3 Unique “Pure Mobile” convergence offering … in line with our DNA
• TIM Web: strong growth (+2.5x of base YoY)
• TIM Fixo: high satisfaction among early adopters
16
18. TIM PARTICIPAÇÕES S.A. | Investor Relations
Network: leadership in voice and data coverage
Voice Data
Population covered by GSM* Largest data network = Edge / UMTS
93%
Player 2 90%
3G Data Only high quality
“Right on spot”
Player 3 88%
Player 4 88%
Native 3.5G (HSDPA) high performance
Recovery of Service Quality
Congestion % cells with Grade of Service > 2%
10
59% of high-value customer base covered by 3G
8
(Jan-09) 78% by Dec-09
6
4
2
0
Jan Feb March April May June July Aug Sept Oct Nov Dec Jan Jan
W1 W2
* Urban population covered (Jan-09) 17
19. TIM PARTICIPAÇÕES S.A. | Investor Relations
High-Value Customer Base with proven innovation attitude
ARPU VAS/ Gross Service Revenue Data Revenue Growth
Monthly ARPU, R$ % Gross Service Revenue 4Q07 vs. 4Q08
10.8%
34.5 SMS/
29.5 29.8 29.7 29.9 9.8% 9.7% 4%
MMS
9.0%
8.4%
VAS-i 38%
4Q07 1Q08 2Q08 3Q08 4Q08 4Q07 1Q08 2Q08 3Q08 4Q08
Reversal of ARPU ... with push in
Increase in VAS...
dilution data and content
18
20. TIM PARTICIPAÇÕES S.A. | Investor Relations
Agenda
Phase 0: Current Phase 1: Re-launch
Difficulty Restructuring Position Plan
Claudio Zezza Luca Luciani
19
21. TIM PARTICIPAÇÕES S.A. | Investor Relations
Three markets, one approach: “Pure Mobile”
Attractiveness Main Dynamics Key Success Factors
Net revenue, Billion R$
112 “Innovation”
5 Mbps
96 ~50% Fresh market
11 Always on
Mobile 1 ~10%
BB
Fixed 8
46 “Convenience”
~2%
Fixed 43 F-M substitution Value for money
Ready to go
“Positioning”
~5% 50 Churn market Brand
Mobile 44 Segmentation
2008 2011
To become the #1 alternative among
High-Value Customers
20
23. TIM PARTICIPAÇÕES S.A. | Investor Relations
2 Offering portfolio: distinctiveness
TV
Web
Fixed
Mobile
Convergence
Internet From F-M
Conver-
gence Fixed substitution to
multiple play
Quick wins New offer portfolio
Consumer: Business:
Customer Social-demographic Segmented convergent Segmented
loyalty
Mobile Push Post-
segmentation
Innovative tariff schemes
offering for:
• SOHO
approach
paid Gross (less promotion) • SME “Custom” offer
Adds Integration with devices • LA
and VAS
Jan March May … 22
24. TIM PARTICIPAÇÕES S.A. | Investor Relations
3 Caring: selectivity
Customer Care: Key Points
Actions:
Current caring model (ex: Consumer)
POST-PAID PRE-PAID
Quick wins in High Value: personal
+
Premium A agent
Customer Value
High value B
Service differentiation
Outsourcer
Post-low C-E
Outsourcer Specialization of call centers
- F/New
Multi-channel vs. Human Touch
MNP Management
New management model based on
access/ value Customer loyalty and development
Strict regulations increase structural of existing clients (CRM)
costs (and keeps service leverage flat)
23
25. TIM PARTICIPAÇÕES S.A. | Investor Relations
4 Sales Force: leveraged footprint and higher productivity
Customer
Points of Sale (PoS)
Value
# 000 PoS, Dec 2008
Own Education/
Own 9.4 8.5 9.0 Businesses caring
Businesses* 7.1
Dealers Ponto TIM Pro-activity
GDO
Dealers
Service
Player Player Player
2 3 4 GDO
Volume
Alternative
PoS Productivity by Region
Value channel, Gross Adds/PoS/month Dedicated Time
300
200 Average
Larger footprint vs. competitors
Variance and
100 Metric Push convergence offerings
0 Product/offering needs (store traffic)
R1 R2 R3 R4 R5 R6 R7 R8
Differentiation (multi-channel)
Control (productivity)
24
* Including Ponto TIM
26. TIM PARTICIPAÇÕES S.A. | Investor Relations
5 Network: quality and efficiency…
2G Quality Efficient Cost Structure 3G Roll-out
Rationalization of costs and contract 3G for data
renegotiations
Higher 2G (leased lines, energy, ...)
transmission
quality
Value driven
New transportation Choices
coverage: ~80%
model make vs. buy
Higher capacity of value base in
(load) 2009
Rationalization of investments
(right-engineering vs. over-engineering)
“Right on spot”
Investment in 2G quality
Network cost efficiency to support aggressive 3G roll-out
25
27. TIM PARTICIPAÇÕES S.A. | Investor Relations
5 …less buy, more make in transmission
Network Costs
Million R$
21%
15%
Leased 30%
Lines
2007 2008
Logic considers
transmission
network:
• Make, not buy
• Partnerships
26
28. TIM PARTICIPAÇÕES S.A. | Investor Relations
6 Organization and team: new, marketing-driven and rapid…
Reporting to CEO:
1 Marketing driven 11
End-to-end
Presence at client CEO
2 Lean
Staff simplification (from 12 to 7)
Marketing Operations Technology
Fewer levels (no GD, no regional
coordination)
Efficiency
3 Plug and Play End-to-end National Efficient
Revenue Presence Performance
4 Change management and motivation
State of the art
Young (average age: 42 years)
27
29. TIM PARTICIPAÇÕES S.A. | Investor Relations
6 ...with a new customer-oriented sales structure
Sales Structure: 2nd half 2008 Sales Structure: January 2009
CEO
# Number of
regional
# Number of
regional
operations CEO operations
GM
COO
COO
Regional
Business Consumer Top clients Business Consumer
Coord.
Regions
7 Regions Regions Regions
2 4 6
Business Consumer
5 levels between CEO and regional channels 3 levels between CEO and regional channel
Sales structure for each region Sales structure for each client segment
“Think globally, Act locally”
28
30. TIM PARTICIPAÇÕES S.A. | Investor Relations
The re-launch phases
1Q09 2Q09 3Q09 4Q09
New strategy assessment New Offering: Network optimization
• Consumer
Organization and Team • Corporate New Caring Model
• Convergent
Advertising: new format Push on Commercial
Convergence: multiple
Actions Push on the points of play strategy
Push on existing Offers:
sale
• TIM Fixo
• TIM Web
• Existing post-paid
offer
High Churn: Post-paid Subscribers:
Results “back on track” Back to Revenue Growth
“Clean” our prepaid and
postpaid customer base
29
31. TIM PARTICIPAÇÕES S.A. | Investor Relations
Summary …
To capture the excellent opportunities in the Brazilian market …
… operating as a Pure Mobile company, competing aggressively in
the entire telecommunications market: mobile, internet and
fixed…
… in order to become the # 1 alternative among high-value
customers, through:
• Brand: repositioning
• Offering Portfolio: uniqueness
• Caring: selectivity
• Sales Team: footprint and productivity
• Network: quality and efficiency
• Organization and team: new, marketing-driven and rapid
30
32. TIM PARTICIPAÇÕES S.A. | Investor Relations
… and commitments for 2009
Top of Mind
Strengthening
Preference
the Position
ARPU
Growth
in Value Revenue Growth
Back to
double digit in 2H
Service Revenue Share Maintain #2
Operating cash flow
Positive
(EBITDA – CAPEX)
31
33. TIM PARTICIPAÇÕES S.A. | Investor Relations
“Safe Harbor” Statements
Statements in this presentation, as well as oral statements made by the management of TIM
Participações S.A. (the “Company”, or “TIM”), that are not historical fact constitute “forward
looking statements” that involve factors that could cause the actual results of the Company to
differ materially from historical results or from any results expressed or implied by such forward
looking statements. The Company cautions users of this presentation not to place undue
reliance on forward looking statements, which may be based on assumptions and anticipated
events that do not materialize.
Investor Relations Visit our Website
Avenida das Américas, 3434 - Bloco 01 http://www.timpartri.com.br
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
Phone: +55 21 4009-3742 / 4009-3446 / 4009-4017
Fax: +55 21 4009-3990
32
