3. 4Q06: Impressive Growth and Strong
Financial Performance
% of postpaid: +3 p.p. vs. competitors’ average
GSM Clients: 36.3% of GSM market
Business segment: 30 % leading market share
ARPU: +21% vs. 1° player and +32% vs. 3rd player
Strong EBITDA growth and margin acceleration
positive net profit achieved
Our results top the best performance in the industry
3
4. 2006: Value Share and Profitability Growth
26.0% YoY growth of total client base vs. 15.9% Brazilian market expansion
Substantial Leader in net additions, achieving 38.2% of incremental share by the year-end
value client 25.4% of market share: narrowing the gap to 1st Player to 3.7p.p. vs 11.1 p.p. in
growth 2005
Leader in business segment
31.5% YoY growth in net service revenue and 51.7% VAS revenue increase
Strong 8.2% reduction in subscriber acquisition cost
financial 67.8% EBITDA growth, representing a 24.6% margin (+6.8 p.p. vs 2005)
results
Net income positive in the 4Q06
Brand TIM: “Top of Mind 2006”
awareness Leader in client satisfaction & the most recommended company among clients
& Improved CRM and segmentation tools enabling acquisition cost reduction
True Care Segmented customer caring focused on loyalty and retention
4
5. 2006: Improving the Corporate Structure
Structure at the beginning of 2006 Structure at the end of 2006
TIMTIM Brasil
Participações
TIM Brasil
70%
100% 20% TIM Participações
TIM Celular TIM Part. 100.0%
TIM Celular
100% 100% 100%
100.0%
TIM Maxitel
TIM Maxitel TIM Sul TIM Nordeste
TIM Nordeste
Transaction approved on March 16th by the
Creation of a simpler organizational and operational Shareholders Meeting, with no contrary vote
structure No shareholders exercised the withdrawal rights
More transparency for the market
Increased focus on reaching high-value customers
The largest Brazilian mobile network operator in terms of market capitalization
Improved tax efficiency
Nota: Participation (%) in total capital. 5
7. Continued Market Growth
Lines and penetration trend Market share
Growth
YoY
51.2% 53.2% +5.9p.p.
48.1% 49.2%
47.3% First
99.9 34,5% 33,7%
91.8 95.9 +16% Player 31,1%
89.4 30,0% 29,1%
86.2
- 11.1 pp
-3.7pp
23,4% 23,5% 24,3% 25,1% 25,4%
22,8% 23,1% 23,9%
Third 21,6% 21,8%
Player
16.5 17.4 17.9 18.5 19.4 +17%
4Q05 1Q06 2Q06 3Q06 4Q06 4Q05 1Q06 2Q06 3Q06 4Q06
Postpaid lines (Million) Penetration (%) Narrowing the gap to 1st player
Penetration continued to grow, although Increasing market share with continued focus
at a decreasing rate on value customers
51.8% of incremental share in postpaid in the quarter
Increased focus on postpaid segment
Leader in business segment: 30% market share
Source: ANATEL.
7
8. Outperforming Market Growth and Improving Value
Anticipation of year-end client base target
TIM lines (Mln) Net adds market share – 2006
YoY
-5.2% Vivo
25.4 +26.0%
21% + 33.4%
20.2 Others 28.9%
20%
Postpaid Claro 38.1%
Prepaid 80% 79% +24.1%
38.2%
2005 2006
Maintenance of Leadership in Net Additions:
Market Share 23.4% 25.4%
38.2% in 2006 vs. 32.0% in 2005
Constantly outperforming market growth: + 13 p.p. vs. competitors’ average
Continuous customer mix improvement: 21.3% postpaid lines vs 20.1% one year ago
Leader in GSM: market share of 36.3%
Source: ANATEL. 8
10. A Successful Commercial Strategy
Segmented approach: building up a strong competitive portfolio
National Tariff Plan for multi-regional
companies
Flexible Bundles
TIM Web Móvel (Data-only Offer)
INTEGRATED SOLUTIONS
Business
HU HU TIM Casa
TIM Brasil Plans: voice+ SMS Postpaid Prepaid TIM + 25
+ Data + Roaming TIM Chip Only
TIM Família LU LU
Pre Paid international
07 Centavos Postpaid Prepaid
roaming
COMMUNITY & CONVENIENCE INNOVATIVE APPROACH
10
11. Leader in Business Segment
Innovation targeting market needs
Complete solution on corporate portfolio
Leader in business segment: 30% market share: + 3 p.p. in 2006 vs. 2005
YoY large accounts customer base growth : + ~ 130% in 2006 vs. 2005
Total postpaid net adds in TIM 2006 lines growth Business market share *
2006: 1.4 million per segment
39% 30%
Business segment: +51%
Consumer 61%
Business Competitors
Base total: +26%
%
* Source: Ericsson Research – 2006.
11
12. Optimized Multi-Channel Sales Network
Increased focus on efficiency
~ 8,500 PoS
63% Retail
Largest distribution network in Brasil
~29% Dealers
Consumer
~8% •Own stores
•Franchising Sales workforce strengthening and high-value customer
focus
~ 1,600
Tele-sales & Postpaid acquisition incentives
Personal Commissioning based on value
> 255,000 points Qualified large account sales staff ( + 60% YoY
growth)
Recharge
~ 660 Improving channels productivity and efficiency (+75% YoY
Business
TBP tele-sales growth)
~ 150
KAM
Note: KAM (Key Account Manager) 12
TBP (TIM Business Promoter)
13. Reducing Acquisition Cost
SAC performance
R$ Declining SAC level despite improved
132 customer and handset mix:
120 33.3% YoY growth in postpaid gross
adds
Commission increasing sales of mid-range and
65% 66% Subsidy high-end handsets
Anatel’s fee on
net adds Significant reduction in prepaid handsets
subsidies has positive impact on direct cost
Comodato
35% 34% Advertising Focus on “TIM Chip Only” strategy for
Others SAC reduction
4Q05 4Q06
Acquisition cost pay-back of 3.6 months in
Direct cost Indirect cost the 4Q06 vs 4.4 months in the 4Q05
13
14. Continued Focus on Customer Satisfaction
Leveraging on leading brand power
Average satisfaction index evolution *
8.63
8.23
8,02 3rd. Player
7,84
7.81 7,98 1st. Player 2006 Top of Mind
TIM Brand is
Award winner***
recognized as
Jul/04 Nov/04 Apr/05 Aug/05 Nov/05 Apr/06 Oct/06
reliable and
appealing, Consumer preference (%)**
representative of TIM: The 1st
market values 28 28 operator choice**
27
and dreams
st
24 1 . Player
16 17 3rd. Player
Nov/04 Apr/05 Aug/05 Apr/06 Oct/06
True care experience through all contact points!
Sources: * Interscience - Oct/2006 14
** Instituto Synovate - Oct/2006
*** Pesquisa Data Folha, Brasil - 2006
15. Consumer Market Campaigns
Focus on fostering intra-network traffic
► Feliz 0,07 (“Happy 0.07”) ► Strengthening community concept:
On-net local calls for just R$ 0.07
On-net traffic promotion is a TIM attribute
until July/07 for postpaid and
prepaid TIM’s clients ► Boosting overall sales
Record gross adds in the 4Q06 (3.5 million lines)
► TIM Família (“TIM Family”) ► Complete telephony solution for
Includes up to 9 dependents with a the whole family
maximum of 2,500 minutes 5% of the postpaid sales in November and
December
► TIM Casa (“Home Zone”) ► The first option at home or on-the-go
Enhancing TIM Plans (fixed and > 250 thousands clients at year-end 2006
local calls)
► Stimulating Recharge ► Differentiated and creative ways for
Motivating recharge through stimulating recharge
Recarga Fácil (“Easy Recharge”) 1.5% increase in average revenue recharge, even
and TIM Visa considering 24.2% YoY growth in prepaid base
15
17. Becoming market leader on Net Service Revenues
Best trend in net service revenue
Net Service Revenue Performance*
2.7 Continuous growth in service revenue
R$ Bln 2.5
2.3
2.2 2.6 Vivo
2.4 Combination of top quality ARPU & customer growth
Claro
2.0 1.9
1.8 1.7
Effective high user churn ratio away from 1st. player
1.3 1.5
1Q06 2Q06 3Q06 4Q06
Total net revenue growth
YoY Growth YoY Growth
R$ Bln Reported Organic** R$ Bln Reported Organic**
10.8 +21% +14% 2.9 +21% +7%
9.5 2.7
89% +31% +22% 94% +43% +22%
83% 82% • focus on “TIM
Chip Only”
• lower weight of
handset sales, in
17% 11% -25% -25% 18% -63% -63% view of subsidies
6% reduction
2005* 2006* 4Q05* 4Q06
Net service revenue Net handsets revenue Net service revenue Net handsets revenue
* Source: based on companies reports
** Proforma: Bill & Keep elimination starting on January 1st 2005 (not audited).
17
18. ARPU Performance
ARPU improvement Focus on VAS usage stimulation
R$ +8% 51.7% YoY growth in VAS revenues
34.4 37.0 Integrated service packages (voice, LD, VAS and data)
2.2 2.5 Increased content offers and new partnerships
MMS and SMS promotions
New subscription plans
New TIM WAP site
VAS ARPU
3Q06 4Q06
High quality clients acquired in the quarter combined
with a positive seasonality in the period
Keeping ARPU gap vs. market in the 4Q06 2006 VAS breakdown
37 Growth YoY
R$ 31 Usage
28 63% MMS P2P: + 22%
37% Data: + 307%
Users
SMS P2P: + 20%
Innovative Traditional* MMS P2P: + 275%
Vivo Claro
Data: + 104%
*VAS Traditional= SMS P2P and Voice Mail
18
19. Delivering Strong EBITDA and Margin
Solid base growth with high quality clients and profitability
EBITDA Continuous
R$ Mln R$ Mln EBITDA and
+45% +68%
margin
improvement
797.5 1,485.9 2,492.5
550.3 Higher efficiency
and cost
4Q05 4Q06 2005 2006
expansion control
EBITDA Margin (%)
Improved
24.6%
27.3% competitive
23.0% environment: no
17.8%
22.9% 21.5%
15.7% (excluding negative impact
20.1% deferral of
handsets
subsidies)
from Christmas’
4Q05 4Q06 2005 2006
campaigns
EBITDA Margin Reported
EBITDA Margin Adjusted (Excluding the effect of B&K elimination starting on Jan 1st, 2005)
19
20. From EBITDA to Bottom Line
∆ YoY
(R$ mln) + 247.2 - 68.4 + 178.8 + 16.8 - 0.8 +194.8
(R$ Million)
R$ Mln
797.6 (597.2)
Break-even!
(90.8) (30.9)
200.3
78.7
EBITDA Depreciation EBIT Net Taxes and Net Income
4Q06 Amortization Financial Others
Expenses Net loss reduction
∆ 2006 vs. 2005
(R$ Mln) +1,006.6 (370.0) +636.6 +29.7 +21.6 +687.9
20
21. Financial Discipline well Preserved
Improved net financial position Increasing dividends distribution
R$ Mln Non R$ Mln
Operating Operating 450.8
3Q06 FCF FCF 4Q06
~ 4x
122.0
2005 2006
(1,787) 873 (113) (1,027) R$ per 1,000
0.1387 0.1933
shares
EBITDA +798
CAPEX (693) 1.3870 1.9330
∆ Oper. WC +769 R$ per ADR
Seasonal increase in purchase related to CAPEX and Partial realization of the expansion reserve and
handsets distribution to shareholders as dividends
Gross Debt: R$2.2 billion (of which 85% long term / average annual cost of 13% in 4Q06)
Cash and equivalents: R$1.2 billion
Net Debt: (R$1.0) billion
21
22. “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
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca Visit our Website:
22640-102 Rio de Janeiro, RJ http://www.timpartri.com.br
Phone: +55 21 4009-3742 / 4009-3751/8113-0571
Fax: + 55 41 4009-3314
22
