3. Main Messages
Exceptional customer growth improving value mix
Cutting edge in innovation with 1st “home zone offer” in Brazil
1st Choice for high value customers also in the corporate segment
Improving customer mix combined with acquisition cost efficiency
Combining strong growth with revenue and margin expansion
Delivering positive cash flow
3
5. Continuing Market Growth
Lines and penetration trend Market share
Growth First 36.1%
34.5% 33.7%
YoY Player
31.1%
30.0% -6.1pp
51.2% +7.2p.p.
49.2% - 13.2 pp - 4.9 pp
47.3% 48.1%
44.0% 24.3% 25.1% +2.2pp
22.9% 23.4% 23.5%
95.9 +20%
89.4 91.8 22.8% 23.1% +1.3pp
86.2 21.8% 21.6% 21.8%
80.0 Third
Player
3Q05 4Q05 1Q06 2Q06 3Q06
+22% Outperforming the market especially in the post
15.1 16.5 17.4 17.9 18.5
paid segment
3Q05 4Q05 1Q06 2Q06 3Q06
Postpaid market share of 26.8%
Postpaid lines (Million) Penetration (%)
Narrowing the gap from 1st Player on:
• Total market: 4.9 p.p. vs. 13.2 p.p.
• Postpaid segment: 1.6 p.p. vs 13.2 p.p.
Source: ANATEL.
5
6. Exceptional Customer Growth Improving Value
Anticipating the year end target
TIM lines (Mln) Net adds market share – 3Q06
YoY
24.1 +31.3%
Others
OTHERS
23%
21% + 35.4%
18.3 42%
20%
Claro
Postpaid
80% 79% +30.3%
30% Vivo
Prepaid 5%
Leadership in Net Additions
3Q05 3Q06 42% in the 3Q06
52% in September
Market Share 22.9% 25.1% 40% in August (“Father’s Day”)
56.6% of incremental share in postpaid in the quarter
Continuous customer mix improvement: 21% postpaid lines vs 20% one year ago
Leader in GSM: market share of 37%
89% of the lines are GSM, an increase of +10 pp YoY
Source: ANATEL. 6
8. Front-runner in Innovation
First to launch a home zone:
All-in-one offer for mobile at home and elsewhere
TIM Casa (“TIM Home”) TIM Família (“TIM Family”)
New “Family” Plan
Mobile: the first option at home or for consumers
on-the-go!
TIM exclusive plan
Enhancing TIM Plans (Fixed local call) Shared bundles of voice, VAS & LD
Postpaid: 200 minutes per R$ 29.90/month for up to 5 Postpaid customers
Prepaid: 100 minutes per R$ 19.90/month
Up to 5 Prepaid customers can join
Families: Shared bundles up to 2.000 min in for free calls with the family as well
Free calls between members
Savings up to 50%
and 25% for prepaid Automatic monthly recharge for
prepaid customers: R$25, R$50,
and postpaid users in
R$75 and R$100
their home zones
A complete telephony solution for the
whole family:
free family calls anywhere
big savings on local fixed calls from home 8
9. Leveraging on Corporate Market
Leader in Business Segment
Strong innovation drive
TIM 3Q06 lines growth per segment
Business segment +54%
Consistent focus on high value customers
Wide mobile office solution portfolio Base total +31%
%
Leader in business segment: 30% market share
Powerful and growing large account portfolio Business market share *
27.3% 30.0%
Data solution Voice Mobility
July/05 July/06
* Source: Ericsson Research – July 2006
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10. Promoting On-net Traffic
Consumer: strongly pushing community and usage through promotions
A single commercial strategy tuned to different levels of intensity
Tarifa Zero (“Zero Tariff”) Boosting overall sales
Free on net call for users on record gross adds in the 3Q06
regions with lower market share (3.5 million lines)
and high potential of growth.
Promoting incremental market
3 Prediletos (“3 Favorites”)
Free on-net calls to TIM 3 special share in high potential Regions
numbers Tarifa Zero 3 Prediletos São Paulo (state): 56.7%
Rio Grande do Sul: 62.0%
Strengthening the community: on-net traffic promotion has become a TIM attribute
Leveraging regional opportunities: two different and simultaneous offers on Father’s Day*
Reaping cost benefits in new regulatory scenario: on-net traffic does not generate mobile
interconnection charges
* the second annual most important retail festive date 10
11. Driving the VAS Usage Stimulation
Increasing service Community concept Boosting chat
penetration & GPRS
Mega TIM Wap TIM Spot
Promotion that offered unlimited Provides free SMS subscriber
access for TIM WAP channels, sponsored by an
FAST, during at 30 days with a advertisement. Users receive a
R$9.90 per month. message with news and spots.
Podcast Blah! Chat
It´s a new concept to download The users that sent more messages
news by videos and audio files. to blah! chat, during the promotion,
Users have journalistic and sports got a cell phone (Nokia 7250i with
files that change regularly. camera).
TIM point of sales: a
VAS sales channels
11
13. Continued Growth of Service Revenue
Total net revenues performance
R$ Mln
Growth YoY Focus on Service Revenues
3Q06 Reported Organic* R$ Mln 2.394
Total Net Revenues 2,746 +30% +16% +38% B&K
306
impact
Net Services Revenues 2,394 +38% +21%
Net Handset Revenues 351 -6% -6%
1.729 +21% 2.088
• Focus on services revenues through push on “TIM
Chip Only”
• Lowering weight of handset revenues with decreased
prepaid subsidies
* Excluding Bill & Keep elimination impact
3Q05 3Q06
Service revenue share vs. first player
Net Service Revenue Share
st
Narrowing the gap vs. 1 Player YoY
Revenue
41.8% 49.2% +7.4 p.p. gap of R$
Combination of top quality ARPU & customer growth
73 Mln
vs. 1st
Continuous service revenue growth 1st Player 58.2% 50.8% -7.4 p.p. player
in the
3Q06
3Q05 3Q06
13
14. ARPU Performance
ARPU analysis VAS revenues (R$ Mln)
(R$) 34.4 Gross VAS Revenues YoY
B&K
217.0 +58.5%
136.9
30.0 30.2 30.0
4.8 5.9
1Q06 2Q06 3Q06
Stable ARPU QoQ (excluding the impact of the 3Q05 3Q06
B&K elimination) % of gross revenues
Keeping ARPU gap vs. Market
3Q06
Growth YoY
(R$) Superior ARPU – 3Q06
Usage
34.4 MMS P2P: + 408%
28.7 Data: + 482%
27.0 61%
39% Users
SMS P2P: + 34%
MMS P2P: + 287%
Data: + 173%
1st player 3rd player
Traditional Innovative
14
15. EBITDA and Margin Performance
Combining strong top-line growth with healthy margin expansion
EBITDA (R$ Mln) EBITDA Margin (%)
135.9 676.7
11.2
552.0
+57% 24.6%
351.1 22.6%
19.7%
16.7%
3Q05 3Q06 Deferral of B&K 3Q06 3Q05 3Q06
Adjusted Subsidy Impact Reported
EBITDA Margin Reported
EBITDA Margin Adjusted (Excluding deferral of
handset subsidies and effect of B&K elimination)
EBITDA margin excluding the deferral of subsidies
EBITDA continues to demonstrate a profitable growth, Speeding up QoQ margin growth:
even excluding the non-recurring effect 3.3 pp in the 3Q06 vs 2.8 pp in the 3Q05
15
16. Reducing Acquisition Cost
SAC performance
R$ Declining SAC level despite improved
customer mix:
154 146
increased % of postpaid on
gross adds
focus on corporate clients
Commission progressively increases weight of
63% 58% Subsidy comodato
Anatel’s fee on
net adds Significant reduction in prepaid handsets
subsidies has positive impact on direct cost
Comodato
37% 42% Advertising
Leveraging “TIM Chip Only” strategy for
Others
SAC reduction
3Q05 3Q06
Acquisition cost pay-back of 4.9 months in
Direct cost Indirect cost
the 3Q06 vs 5.1 months in the 3Q05
16
17. From EBITDA to Bottom Line
Δ YoY
(R$ mln) + 325.6 - 89.8 + 235.8 + 45.8 + 47.1 + 328.8
(R$ Million)
R$ Mln
135.9
Deferral of
handsets
subsidies
577.8
540.8 Positive
Bottom
Line!
98.9 79.9 1.3 20.3
EBITDA Depreciation EBIT Net Taxes and Net Income
Amortization Financial Others
Expenses
17
18. Net Financial Position
Net financial position Operating free cash flow
R$ Mln Non
Operating Operating
2Q06 FCF FCF
3Q06 R$ Mln
147
+186
2Q06
3Q06
(39)
(1,822) 147 (112) (1,787)
EBITDA +677 Positive cash generation
CAPEX (374)
Δ Oper. WC (155)
Gross Debt: R$2.9 billion (of which ~68% long term / average annual cost of 13.9% in 3Q06)
Financial Assets: R$1.1 billion
Net Financial Position: R$1.8 billion
18
19. “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
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