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TIM - Meeting with Investors, August 19

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TIM - Meeting with Investors, August 19

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TIM - Meeting with Investors, August 19

  1. 1. TIM Brasil Company Presentation August, 2019 TIM. READY FOR THE FUTURE.
  2. 2. 2 This presentation contains declarations that constitute forward looking statements regarding the intent, belief or current expectations of the customer base, estimates regarding future financial results and other aspects of the activities. Analysts and investors are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. TIM Part undertakes no obligation to release publicly the results of any revisions to these forward looking statements. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected as a result of various factors. Financial results are presented considering impacts from IFRS 9 & IFRS 15 adoption, disconsidering impacts from IFRS 16 adoption, in “2Q19 results” section and presented on Pro Forma basis in “Strategic Plan 2019-21” section. Disclaimer TIM Brasil | Meeting with Investors Investor Relations
  3. 3. 3 Agenda TIM Brasil | Meeting with Investors Investor Relations About Us …………………………………………………………………………………………………...……4 Market Overview and TIM Positioning ……………………………………………………………………. 9 Regulatory Updates ……………………………………………………………………………………....... 36 2Q19 Results ……………………………………………………………………………………………….....15 Strategic Plan 2019-21 …………………………………………………………….................................... 26 Appendix …………………………………………………………………………………………………....... 40
  4. 4. 4 ABOUT US TIM Brasil | Meeting with Investors Investor Relations
  5. 5. 5 Solid Execution in 2018 The company in a nutshell TIM Brasil | Meeting with Investors Investor Relations Live Revs +38.4% YoY All Time High EBITDA2 R$ 6.6B EBITDA2 Growth +10.3% YoY Net Serv Rev +4.7% YoY Operating FCF¹ +2.9B YoY All Time High EBITDA MARGIN2 38.5% Presence in Brazil since 1998 #2 in Mobile Net Services Revenues Strong legacy in prepaid Introduced the first plan focus on data for smartphones >90k km of fiber optical network throughout the country #2 in mobile human postpaid (ex-data only) ISE member for 11 years R$29,1 billion of Enterprise Value Telecom Italia subsidiary (67% of shares) (1) Ex-licenses, (2) Normalized, (3) Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption. 5 Best and Wider 4G Coverage (1) Enterprise Value on 30 July.
  6. 6. 6 (1) Normalized Figures. (2) Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption. EBITDA¹ Margin (%) 33.5% 36.6% 38.5% 2016 2017 2018 Solid results with sustainable growth above market average TIM Brasil | Meeting with Investors Investor Relations 728 1,801 2,585 2016 2017 2018 EBITDA¹ - CAPEX (R$ MM) Net Service Revenues (Δ YoY) 1.7% 2.0% -0.9%-0.6% -0.3% 0.5% -4.3% -6.5% -7.1% -4.3% 5.1% 4.7% 2016 2017 2018 TIM P3 P1 P4 EBITDA¹ (R$ MM) 5,230 5,949 6,563 2016 2017 2018 +10.3% +13.7%
  7. 7. 7 SUSTAINABILITY IN BUSINESS Incentive in renewable energy sources, approximately 29% of the company's electricity consumption performed in 1Q19. • Self-generation: • 6 Hydroelectric Generating Centers (5 in Minas Gerais and 1 in São Paulo); • 1 Biogas Power Plant (Methane burning from landfill). • Energy purchase: Free energy market.PRINCIPLES AND STRATEGIES + than 700,000 people involved Partnership with 3 Ministries: MINC, MEC e MCTIC Present in ~ 500 cities and 26 states (+DF) 500,00 students, 4,000 Public Schools and 16,000 teachers Corporate Social Responsibility TIM Brasil | Meeting with Investors Investor Relations Joined UN Global Compact in 2008 Member of ISE (Corporate Sustainability Index) for 11 consecutive years ISO 14001 Environmental Certification for Management and Operation Network process (1st Brazilian telco) and ISO 9001 Quality Certification for Billing and Management Network processes Member of ICO2 (Carbon Efficient Index) for 7 years Member of CDP (Carbon Disclosure Project), responding Investor and Supply Chain questionnaires, since 2010 2018 Sustainability Report based on GRI Standard GHG Inventory verified by 3rd Part: Gold Stamp Founded in 2013 To create and strengthen resources and strategies for the democratization of science, technology and innovation that promote human development in Brazil, with mobile technology as one of its main enablers. MISSION GARATEA-ISS BOLSAS INSTITUTO TIM-OBMEP ACADEMIC WORKING CAPITAL MAIN PROJECTS GRI 302-1 Standard
  8. 8. 8 Unique Telco company listed on the Novo Mercado: Highest level of Corporate Governance Committees to Reinforce and Guarantee Solid Corporate Governance 10 members (4 independents) 3 members (3 independents) 3 members (3 independents) 3 members 5 members (2 independents) 7 members  Equal rights: vote, dividends and tag along  Higher liquidity • Single class of share (ordinary shares)  Greater independence of Board of Directors (at least 20%)  Strict disclosure policy Corporate Governance TIM Brasil | Meeting with Investors Investor Relations Corporate Governance Form1  40% of independent members: 2x of required  20% of female representation: 3x B3-Novo Mercado average 82% 8% 10% Adopted Partially adopted Not adopted (1) Not considering 5 items not applicable to TIM. (2) According to EY 2018 report. vs 65% on average2
  9. 9. 9 MARKET OVERVIEW AND TIM POSITIONING TIM Brasil | Meeting with Investors Investor Relations
  10. 10. 10 Brazilian Telcos: Revenues X-Ray TIM Brasil | Meeting with Investors Investor Relations Total Services Net Revenues (R$ MM) Total Services Net Revenues | Share Mobile Service Net Revenue | Share Mobile Service Net Revenue (R$ MM) 119,279 118,509 116,876 28,649 2016 2017 2018 1Q19 60,724 61,809 62,796 15,674 2016 2017 2018 1Q19 2.8% 2.3% 1.9% 1.9% 20.9% 19.7% 18.5% 17.6% 29.3% 29.4% 30.0% 30.2% 34.6% 35.6% 35.7% 36.2% 12.3% 13.1% 13.9% 14.0% 2016 2017 2018 1Q19 5.5% 4.4% 3.5% 3.5% 13.8% 13.0% 12.0% 11.6% 17.6% 17.8% 19.2% 19.3% 40.1% 41.1% 40.9% 41.4% 23.0% 23.8% 24.4% 24.2% 2016 2017 2018 1Q19 Nextel TIM Oi Claro Vivo All: on pro-forma basis (2014-18) TIM, Vivo and Oi: IFRS 9 and 15 (2019) AMX: IFRS 9, 15 and 16 (2019)
  11. 11. 11 40% Social media Others MTR Cuts Changing Customer Base Mix Total base in mln customers R$ Prepaid Total Postpaid New Customer Profile 0.41 0.42 0.42 0.42 0.42 0.36 0.32 0.24 0.16 0.10 0.06 0.03 0.02 07 08 09 10 11 12 13 14 15 16 17 18 19 Stabilization Expansion Consolidation 121 262 229 98 211 130 23 51 100 07 08 09 10 11 12 13 14 15 16 17 18 49% 47% Only computer Only mobile Both -2 p.p. YoY +6 p.p. YoY 96% 49% of Brazil's digital population uses only mobile device Internet users by device (2017 | % of internet users) Time spent per day on internet 9h 14min per day1 In Brazil, 40% of the digital time is spent on social network 3º Note: 1) Rank of internet time spent and social media users based on a list of 40 countries. Source: TIC Indivíduos (CETIC), Digital in 2018 (We are social). Brazil is ranked 6th position on social media time spent1 6º Change in Customer Profile and Mix TIM Brasil | Meeting with Investors Investor Relations
  12. 12. 12 Evolving proposition for consistent and sustainable growth TIM Brasil | Meeting with Investors Investor Relations Quality Price 2017- Today 2016 Today 2016-2018 Turnaround Strategy Quality Price 2017- Today 2016 2019-21 2019-2021 2019-21 Consolidation Strategy 2008 2012 Quality Price 2008-2016 Accelerate the Digital Transformation and increase Customer Experience with better Quality and Value Proposition, leveraging on 2nd wave of Mobile Upselling, FTTH and other sources of revenues (e.g. B2B, digital services).
  13. 13. 13 POSTPAID Complete Portfolio to Address Customer Desires TIM Brasil | Meeting with Investors Investor RelationsNote: 1) Core offer for three users. ENTERTAINMENT HUB FOR THE FAMILY Communication Services TIM banca virtual Trial +R$ 15/mo after unlimited calls TIM Controle TIM Black TIM Black Família from 2GB Social unlimited calls from 5GB unlimited calls from 8GB unlimited calls from 60GB1 Entertainment international roaming 1x GB GB bonus for portability shared benefits (monthly fee included) TIM Pré Top Increase CEX with better Quality and Value Proposition GB bonus for portability ≥R$ 20.00/two weeks ≥R$ 49.99/mo ≥R$ 119.99/mo ≥R$ 269.99/mo
  14. 14. 14 Antenna tested on the 3.5GHz frequency TIM Ready for The Future: Successfuly Performing a Pioneer 5G Test in Brazil TIM Brasil | Meeting with Investors Investor Relations Campina Grande - PB Santa Rita do Sapucaí - MG Florianópolis - SC Download speeds above 1Gbps The goal of the project is to develop a 5G reference center focused on applications, products and services to promote technology and new business models.
  15. 15. 15 2Q19 RESULTS TIM Brasil | Meeting with Investors Investor Relations Financial results are presented considering impacts from IFRS 9 & IFRS 15 adoption, disconsidering impacts from IFRS 16 adoption. The normalized numbers reported in this presentation are adjusted by the effects listed below. Operating Costs and EBITDA normalized by adjustments to the sale-leaseback contract of towers (+R$ 11 thousand in 2Q19, +R$ 1.5 million in 1Q19, R$ 1.1 million in 2Q18 and R$ 220 thousand in 1Q18), tax credit due to the exclusion of ICMS from the calculation basis of PIS/COFINS (-R$ 1,720 million in 2Q19), non-recurring expenses with legal services connected to the PIS/COFINS court decision (+R$ 3.5 million in 2Q19), loss forecast revision for internal labor, taxes and civil contingencies (+R$ 222 million in 2Q19). Net Financial Results adjusted by monetary correction over tax credits and labor, taxes and civil contingencies (-R$ 1,051 million in 2Q19). Net Income normalized by the tax credit and other effects (+R$ 865 million in 2Q19) and deferred taxes (+R$ 30.3 million in 1Q19).
  16. 16. 16 Developing the network towards 5G Driven by innovative and rational market approach Highlights 2Q19: Strong Execution to Overcome External Challenges Solid results Service Revenues Growth Reacceleration Solid EBITDA¹ growth Over delivery on cost¹ control +2.4% YoY +1.0% QoQ +6.2% YoY +0.2% YoY Consistent Margin¹ expansion 37.9% +1.4p.p. YoY TIM Black Família as an entertainment hub Refarming sustaining our network capacity and quality Rational and selective prepaid offers to increase acquisition rate 500k clients milestone in TIM Live with 5 new cities Exploring new business opportunities in IoT Network sharing with Vivo Preparing for 5G with live network pilots Best 4G network quality: leadership² in coverage availability and latency (1) OPEX and EBITDA normalized for the effects detailed in slide 2. (2) According to Tecnoblog News, Jul-19. TIM Brasil | Meeting with Investors Investor Relations
  17. 17. 17 Regaining Time-to-Market in B2C segment 17.2 18.1 2Q18 2Q19 Postpaid Base ex-M2M (mln) +4.8% Pure Postpaid → TIM Black Família launch: Increasing presence in high-end segment → Entertainment Hub: 1st in Brazil to include Netflix monthly fee Control → New Campaign: Consistent presence in media → Portability bonus of 1GB → Adjusting migration strategy prioritizing customer base quality Prepaid → New offer: TIM Chip Top (Chip + R$ 10 / two weeks) → New TIM Ads: Sponsored Data for prepaid customers → WhatsApp as a caring channel: Top up, check data usage and account balance 11.2 11.6 2Q18 2Q19 Prepaid ARPU (R$/mo) +2.9%43.7 42.8 2Q18 2Q19 Postpaid ex-M2M ARPU (R$/mo) -1.9% 21.9 23.2 2Q18 2Q19 Mobile ARPU (R$/mo) +5.8% 2Q18 2Q19 Prepaid Data Users (mln) +21.8% TIM Brasil | Meeting with Investors Investor Relations
  18. 18. 18 TIM Black Família: Entertainment Hub Creating Opportunities Not to Compete on Price and to Improve Upselling  Completing postpaid portfolio  Price point starting from R$ 269.99/mo1  1st and unique in Brazil to include Netflix monthly fee  Management of shared data package  Special caring (new app interface and specialized human attendant) unlimited calls international roaming package (WhatsApp + voice calls) data rollover Communication Services (monthly fee included) Social networks Entertainment Pure Postpaid Gross Adds (Jul-19 | % over Total) TIM Black Família Others Data Packages (main line + dependents) TIM Black Família 30GB (2 users) 100GB (4 users) 180GB (6 users) 60GB (3 users) Core offer (1) Core offer for three users.. TIM Brasil | Meeting with Investors Investor Relations
  19. 19. 19 Another Consistent Quarter on TIM Live TIM Live ARPU (R$) 72.3 78.0 2Q18 2Q19 +7.8% UBB Customer Base (000 Clients) 423.3 506.6 2Q18 2Q19 +19.7% TIM Live Revenues (R$ mln) 87.9 114.8 2Q18 2Q19 +30.6% Strong and consistent revenue growth → >30% revenue growth for 10 quarters → TIM Live represents ~50% of fixed revenues Continuous Efforts to Maintain High Growth Rates → 2H19 to show acceleration in adds and revenues after network catch-up → 5 new cities1 with FTTH: totaling 17 cities with fiber technology → ~27% of sales come from outside RJ and SP Larger coverage, more opportunity to grow → Important milestone: >500k clients with ~20% in FTTH → FTTH coverage reached over 1,560k households in the quarter High value portfolio driving ARPU upward → >55% of sales above 100 Mbps → FTTH ARPU 18% higher than FTTC Jan-19 Apr-19 Jul-19 Oct-19 Budget Act New plan OLTs installed (# of units) (1) Duque de Caxias (RJ), Francisco Morato (SP), Franco da Rocha (SP), Camaçari (SP) and Anápolis (GO). TIM Brasil | Meeting with Investors Investor Relations
  20. 20. 20 Not Only B2C: Evolving from Connectivity to Value-Added Service and Solutions Provider Porto Seguro Conecta → New M2M customer base: vehicle/fleet tracking and financial services (POS); → New SIM card management platform: upselling opportunity for value-added services. ConectarAGRO → New farm covered: Amagg; → Partnership to promote 700MHz 4G in countryside; → Implemented solutions: Connected Car → Development of agreements with car manufacturers; → Connected sensors to monitor, protect, and maintain the car; → Management using new e-SIM platform; → Upselling opportunity for human lines and VAS. 2.5 0.8 1.8 3.3 2Q18 2Q19 M2M Base (mln) +77.3% TIM Brasil | Meeting with Investors Investor Relations Porto Conecta
  21. 21. 21 72.5 69.6 62.7 60.9 P4 P1 P3 TIM 0.9 2.5 3.1 3.3 P4 P3 P1 TIM Thousands 61.4 71.9 72.1 82.4 P4 P3 P1 TIM Infrastructure Evolution to Digital Transformation 4G in 700 MHz (# Cities | % of Urban Pop.) 4G Coverage and Capacity Expansions 1,172 1,426 1,471 1,548 56.2% 64.8% 65.7% 68.0% 3Q18 4Q18 1Q19 2Q19 Fiber Expansion: Transport and FTTH Spectrum Refarming Evolution (# Cities) 95 1,393 183 2,135 276 2,264 2.1 GHz 1.8 GHz 2Q19 2Q18 2Q17 IT supporting business developments and building the future Backhaul (% Sites w/ High Capacity) FTTH Coverage (mln Households) 63% 68% 2Q18 2Q19 +5 pts 0.4 1.6 2Q18 2Q19 3.8x → New IoT Platform → Migration of M2M management system from Porto Conecta → Network virtualization: new contract to implement 37 data centers until 2021 → New charging and billing capabilities to support marketing actions (family plan) and customer care Once again leading network user experience KPIs 4G Availability1 (% of Time) Latency1 (ms) 1st 1st 4G Coverage (000 of Cities) 1st >57% of urban population with 4.5G (1) According to Tecnoblog News, Jul-19. TIM Brasil | Meeting with Investors Investor Relations
  22. 22. 22 New Network Initiatives 5G: Steps towards commercial launch → 5G tests on real network in the 3.5GHz frequency → Registered download speeds greater than FTTH (>1Gbps) with more efficient capacity distribution between users → Edge computing (decentralization) and core virtualization for better service responsiveness Future Increasing assets efficiency → MOU with Vivo to discuss sharing opportunities aiming quality improvement and CAPEX / OPEX efficiency  2G network in a single grid model  4G network infrastructure in 700Mhz band – cities with <30.000 inh. (could be expanded)  Other frequencies and technologies  Efficiency and cost reduction regarding Network Operations and Maintenance → Use of 5G technologies to improve 4G capacity: massive MIMO  Greater spectrum capacity: 2 to 3x improvement in live tests  4th operator in the world to deploy this approach Today TIM Brasil | Meeting with Investors Investor Relations
  23. 23. 23 Digitalization Initiatives Together with Strong Execution Help Maintaining OPEX Under Control (1) OPEX normalized for the effects detailed in slide 2. 2,698 2,694 2,641 2,646 2018 2019 Accumulated Savings in 1st Half Normalized OPEX¹ ~R$ 330 mln +0.2% -0.2% 2Q 1Q Bad Debt is still the challenge. OPEX ex-Bad Debt would have decreased 2.2% YoY in 1H19 Flat OPEX 2019 TIM Brasil’s 2019-21 Industrial Plan estimates savings up to R$ 1.2 bln for the 3-year period >35% Penetration of E- Recharges +71% Recharges via App +31% E-Payment amount +66% E-Bills (Penetration of ~60%) -10% # Human interactions +33% Meu TIM unique users (11.1 mln) Caring Billing & Payment Acquisition (YoY) +40% Control E-Sales +55% Postpaid E-Sales Recharges TIM Brasil | Meeting with Investors Investor Relations
  24. 24. 24 1.52 1.62 36.6% 37.9% 2Q18 2Q19 EBITDA1 EBITDA1 Margin +6.2% EBITDA1 & Margin1 Evolution (%; R$ bln, %YoY) 541 671 2Q18 2Q19 13% 16% +24.1% % Net Revenues Strong EBITDA1 – CAPEX (R$ mln) 6M19 EBITDA1 +5.8% YoY YTD Margin 36.8% (+1.4 p.p YoY) (1) EBITDA and Net Income normalized for the effects detailed in slide 2. (2) Pro-forma excludes the effects of the adoption of IFRS 9, 15 and 16. Financial Summary Total Net Revenues (R$ mln) TIM Live grew 30.6% YoY, driving FSR up by 11.3% YoY Mobile ARPU up by 5.8% YoY, pushing MSR increase to 1.9% YoY +2.4% 336 423 2Q18 2Q19 +26.0% Net Income1 Expansion (R$ mln, %YoY) 6M19 Net Income1: +16.0% YoY Pro-forma2 Margin1 Evolution (%) 29.5% 31.5% 35.3% 37.6% 38.6% 2Q15 2Q16 2Q17 2Q18 2Q19 TIM Brasil | Meeting with Investors Investor Relations
  25. 25. 25 Looking for Opportunities Ahead to Accelerate Value Creation Accelerate TIM Live with large cities and renewed focus in quality; Development of new verticals (IoT, M2M) and FWA to provide UBB through 5G; Customer satisfaction improvement; Consistent Delivery with Focus on Annual Targets Continuous deployment of digitalization, automation and advanced analytics; Back to the basics to achieve solid and precision execution; Closing 1st Half and Preparing to Accelerate Growth Pension reform approval should unlock a positive macroeconomic agenda; More rationality expected in mobile competitive environment going forward. Withdrawals of R$42bn from FGTS could support a short term repair in the GDP growth expectation; Expectations of a positive external environment by the end of 2019 (1) Of which R$3.2bln already booked (R$ 353mln in 4Q18 and R$ 2,876mln in 2Q19). A new Brazilian proposal for tax reform is evolving, which is extremely important for country’s development; Exploring advertising as a new source of revenues. TIM Brasil | Meeting with Investors Investor Relations Focus on Efficiency: Flat Opex in 1H19 Consistent EBITDA Growth: +5.8% in 1H19 Strong Cash Generation: 18.0% (EBITDA- Capex over revenues) in 1H19 Tax Efficiency: PIS/COFINS Disputes Concluded (R$3.4bn1 in credits) IOE Distribution (~R$ 369mn in July + ~R$630mn for the rest of 2019) Restore Go-to-Market Approach
  26. 26. 26 STRATEGIC PLAN 2019-21 TIM Brasil | Meeting with Investors Investor Relations Financial KPIs are presented on Pro Forma basis, disconsidering impacts from new IFRS adoption.
  27. 27. 27 1 Mobile Post Paid Consumer (“the Controle wave”) • Growth based on a «Mobile Challenger» approach pushing migration from prepaid and upselling • Leverage the benefits of 4G coverage leadership • Customer long term relationship driven by loyalty initiatives 3 B2B & Residential BB • Fiber deployment acceleration (backbone, backhaul and FTTH), with FTTH offer in selected regions • Opportunity to gain relevance in overall business Revenues leveraging on: o Revision of Value Proposition o More Convergent approach offering E2E solutions o Increase in efficiency and sales productivity 2 4 Digital Provider • New revenue streams: Enable innovative services that meet customers needs • Customer Experience: Digitalization of customer care process • Time to Market: Support current business model with digital capabilities Mobile Pre Paid • Offer simplification to improve customer experience with continued evolution of digital channels Revenues B2B & Residential BB 2 3 Mobile Post Paid 4 Digital Provider Timing Market Consolidation Illustrative Graph. 1 Mobile Pre Paid Opportunities: TIM Brasil Growth Waves TIM Brasil | Meeting with Investors Investor Relations
  28. 28. 28 B2C Mobile: managing client base focusing on upselling and churn dynamics Pure post Control Prepaid Daily – Multi-day packages Pre - Control Control - Pure Control - Control Pure - Pure New Offers: • New TIM Pre Offer1 • New VAS revenues • Family Plan • International roaming • Digital Plan Strategic Guidelines to Reduce Churn Mix Pre vs Total Postpaid Blended ARPU (R$/month) 70% <50% 30% >50% Prepaid Postpaid 20182017 2021e2020e2019e 20.2 22.4 TARGET: Double digit decrease • More selective migration from Prepaid will reduce early churn • Stimulate loyalty and digital payment methods (credit card, digital invoice, automatic debit) • Proactive lock in of customer base (churn high propensity), with Handset as a retention tool • Dedicated retention operation • Quality War Rooms² focused on eliminating dissatisfaction and key pain points 20182017 2019e 2020e 2021e Mid to High single digit growth (CAGR) Upselling 2nd Wave: Upselling between and within segments based on profiling TIM Brasil | Meeting with Investors Investor Relations 1 TIM Pré Top and TIM Pré Top Mais 2 Collection; Consumer Customer Care; Plans and Offers Information; Voice and Data Service; Billing and Allowance Complaints
  29. 29. 29 B2B (mobile + fixed): penetrate clients through added value solutions, becoming a business partner TIM Brasil | Meeting with Investors Investor Relations • Increase B2B investment to turnaround results over the next three years • Increase efficiency/productivity – Revise back office and support functions processes – Review client caring model (digital) Vision for B2B segment (Revenue Growth) Top Enterprise SMB • Complement top clients offer and portfolio • Increase sales force productivity and size • Increase penetration on Brazilian Top Companies • Explore new opportunities to sell more aggregated value solutions (e.g: IoT/Agro) • Recover growth in Fixed segment Levers Implications • Specify value proposition for Enterprise segment • Define go-to-market, addressing channel mix (direct vs indirect) optimization • Explore convergence opportunities • Optimized geographic approach to maximize productivity • Revise value proposition of SMB segment • Focus commercial effort in fixed products and uplift in sales force • Increase digital channels on sales mix 2018 2021e 25% • Market share • Share of wallet • Market share • Share of wallet • Market share • Share of wallet
  30. 30. 30 New revenue streams: Enable innovative services that meets customers needs Customer Experience: Improve digital customer service, acquiring capabilities, customer attendance and internal processes and systems Time to Market: Support current business model with digital capabilities • New revenues opportunity from being a Platform provider (analytics, BD, mobile advertising, etc.) • Content offer aggregation to support Mobile + Fixed service revenue growth • Increased role in IoT growing ecosystem (beyond connectivity) ~1 Addressable market by 2021 >30bln Reais mln lines Digital: key strategic pillars to improve customer experience and exploit new revenue streams TIM Brasil | Meeting with Investors Investor Relations PARTNERSHSIP ACCELERATION Open Innovation. API based development. DIGITAL FIRST Works across all digital devices and all channels CUSTOMER ORIENTED Continuous Customer Feedback (closed loop) AGILE DRIVEN Agile methods and practices integrated into the platform COGNITIVE Data-driven architecture providing actionable information and automation ANALYTICS DRIVEN Customers personalized experience, marketing, campaign, NBA DIGITAL CHANNELS Evolve platforms and encourage usage with offer benefits TRADITIONAL CHANNELS Improve IVR retention with evolved platform
  31. 31. 31 Infrastructure: capitalizing on existing infrastructure and expanding FTTH TIM Brasil | Meeting with Investors Investor Relations Residential Broadband Penetration - Brazil • Broadband Penetration at 45% of HH; Ultra- BB Penetration only 12% of HH • 96% of cities (~50% pop.) have very low BB penetration (~25%) • 16% of BB connections have speeds < 2Mbps Relevant opportunity to capture a strong unserved demand for Residential Broadband and Ultra-BB connectivity 0-20% 40-60% >60% 20-40% Main trends • ~3x participation on total revenue Capitalize current assets Expansion • Focus on execution excellence • Optimize go-to-market, exploiting existing infrastructure • Leverage fiber coverage from mobile network (FTTS – fiber to the site) • Shift in product mix (growth coming from FTTH) leading to a bigger ARPU Levers • Expand FTTH to several new cities in the next 3 years using cluster approach 76,0 2018 2019e 2020e 2021e FTTX Customer Base (‘000) TIM Live ARPU (R$/month) Geographic Expansion: 19 active municipalities Manaus – Oct-18 Salvador – Jul-18 Lauro de Freitas – Fev-19 Goiânia – Aug-18 Aparecida de Goiânia – Oct-18 Anápolis – Jun-19 Rio de Janeiro – Oct-12 (FTTC) Nov-17 (FTTH) São Gonçalo – Jun-18 Nilópolis – Aug-18 Duque de Caxias – Nov-12 * Jun-19 Nova Iguaçu – May-14 (FTTC only) São João de Meriti – Aug-15 (FTTC only) São Paulo – May-12 (FTTC) Nov-17 (FTTH) Mauá – Apr-18 Poá – Aug-18 Suzano – Jul-18 +3 – Jun-19 0 400 800 1200 2018 2019 2020 2021 FTTC FTTH High-single to Low-Double digit growth (CAGR) • ~2.5x customer base growth NOTE: Ultra BB: > 34 Mbps / very low BB penetration: < 34Mbps. SOURCE: Anatel December 2018, IPC Maps 2018.
  32. 32. 32 TRANSPORT INFRASTRUCTURE Capillarity to support Mobile and Fixed Services (B2C and B2B) 4G EVOLUTION Spectrum Mix Usage 68% ~82% 601 cities >1.5k cities 2018 NEW plan! (2021) High Capacity Backhaul (%) FTTH Coverage FTTH Coverage FTTX Coverage UBB COVERAGE BOOST Focus on FTTH and FTTC 11 >40cities 1.1 >4 HH (MM) 4.3 >7HH (MM) 2018 NEW plan! (2021) 90k Km ~115k Km Backbone Additional capacity : 1.8/2.1 GHz refarming and 700 MHz deployment 48% 64% 72% 80% 80% 2017 2018 2019 2020 2021 4G 3G+2G Infrastructure development focusing on mobile capacity and fiber expansion FTTCity TIM Brasil | Meeting with Investors Investor Relations
  33. 33. 33 Leverage on Efficiency Plan to maintain OPEX below inflation1 throughout the plan period TIM Brasil | Meeting with Investors Investor Relations Caring (Digital Interactions) E-Billing (% on total invoice) 2021e2018 +12MM 2018 2021e +22p.p. Digital Top Up (% on Total Top Ups) 2018 2021e +12p.p. 2018 2021e +31p.p. E-Payment (% on total payments) Accelerate Digital Transformation Initiatives • Customer facing: digital interactions, e-billing, e-payment, customer acquisition, recharges, IVR • Internal process and systems: automation of support processes, upgrade and strengthen IT Architecture • Accelerate the adoption of automatic debit in stores Sustain and Develop Traditional Initiatives Description – Plan 2019-21 Risk/PDD • Create new credit models • Implement new fraud model and collection channels Legal • Re-structure multi-functional team to mitigate entries of new lawsuits • Introduce variable incentives scheme for the external offices HR • Assess internalization vs. outsourcing Purchasing • Review purchasing practices for key categories Energy • Cleaner electricity matrix and less exposed to the regulated market movements and regulations • Put in operation the first biogas power plant of solid urban residue Efficiency Plan 2019-21: ~R$ 1.2 bln (Full plan 2017-21 R$ 2.2 bln) ¹Inflation from BACEN Focus 18th January 2019.
  34. 34. 34 1.1% 1.3% 5.1% 4.7% 17 18 19 20 21 Net Service Revenues (% YoY) EBITDA - CAPEX (R$ bin; %) CAPEX (R$ bin) EBITDA and Margin Expansion (R$ bln; %) MKT 5.7 6.3 35.5% 37.2% 2017 2018 2021e2019e EBITDA Margin EBITDA ≥ 39% 2020e2017 2018 2021e2019e 2020e % over Net Revenues Increasing Profitability and Cash Generation EBITDA Capex Mid-single digit growth (CAGR) +2% (CAGR) ~12.0 (∑‘19-’21) 11.1% 15.2% ≥ 20% 2017 2018 2019e 2020e 2021e 4.0 3.8 2017 2018 2019 2020 2021 TIM Brasil | Meeting with Investors Investor Relations
  35. 35. 35 LONG TERM TARGETS SHORT TERM (2019) TARGETS Capex on Revenues: Low 20’s Capex: ~R$ 12,0 bln (∑‘19-’21) • Increase cash flow from operations • Continue with debt and tax rate optimization • Accelerate digitalization efficiencies • Maintain zero-based approach and traditional initiatives • Improve risk management models • Further improve mobile ARPU • Expand Residential BB Revenues contribution • Tap B2B opportunity GOALS DRIVERS Revenue Growth Sustainability Expand Cash Generation Improve Profitability EBITDA Margin: ≥39% in 2020 EBITDA-Capex on Revenues: ≥20% em 2021 Service Revenues Growth: Mid single digit (CAGR ‘18-’21) EBITDA Growth: Mid to High single digit growth (YoY) EBITDA-Capex on Revenues: >15% Service Revenues Growth: 3% – 5% (YoY) • Additional Capex to grow fiber and improve mobile capacity Infrastructure Development TIM Brasil 2019-’21 Targets TIM Brasil | Meeting with Investors Investor Relations
  36. 36. 36 REGULATORY UPDATES TIM Brasil | Meeting with Investors Investor Relations
  37. 37. 37 Spectrum Distribution - Average MHz/Pop 14 MHz 90 MHz 80 MHz 20 MHz 150 MHz 135 MHz 100 MHz 190 MHz 450 MHz 700 MHz 850 MHz 900 MHz 1.800 MHz 2.100 MHz 2.300 MHz 2.500 MHz <1 GHz = Coverage [35%l----l40%] >1 GHz <3 GHz = Capacity [30%l----l40%] Total Mobile MHz 1.800 MHz (2G/4G) 40 40 20 20 29 25 22 24 20 26 29 35 43 14 5 21 18 11 14 20 20 700 MHz (4G) 800 MHz (2G/3G) 900 MHz (2G/3G) 1.900/2.100 MHz (3G/4G) 2.500/2.600 MHz (4G) 136 48 20 3 139 4 5 20 113 92 Trunking 5 Note: Does not include 450 MHz (14 MHz regional) and 2.500 MHz P Band (10 MHz local) Brazilian Spectrum - Caps and Distribution TIM Brasil | Meeting with Investors Investor Relations
  38. 38. 38 Public Consultation for new frequency auctions in September 2019. New spectrum bands under discussion that could be auctioned in 1H20 TIM Brasil | Meeting with Investors Investor Relations Frequency 700 MHz 2.3 GHz 3.5 GHz 26 GHz 10+10 MHz (FDD) Spectrum 90 MHz (TDD) 300 MHz (TDD) 3,2 GHz (TDD) 1x 10+10 MHz Lot proposal 1x 50 MHz (nationwide) + 1x 40 MHz (regional) 3x 80 MHz (nationwide) + 1x 60 MHz (regional) or 3x 20 MHz (regional) 8x 400 MHz (nationwide) Comments Left over from 2014 auction - Potential clean-up could be needed to solve coexistence w/ satellite TV - The second option for regional lots could be acquired by the winners of the national blocks Up to 16x 200 MHz National (if the 400MHz lots are unsold) There is a 10 MHz guard band at the end of band Overview of Anatel Attorney's Office legal opinion on auction rules
  39. 39. 39 Main Regulatory Topics TIM Brasil | Meeting with Investors Investor Relations 2Q19 May JuneApril Public Consultation • “S-band” (Allocation of RF) • “L-Band“ (Destination of RF) • Technical requirements and test procedures – AAS (Active Antenna System) for 5G • Spectrum for Radio Links Public Consultation • Human exposure to electromagnetic field (Act update) • Update of the list of projects to be concluded in TAC Call for Subsidies • Regulatory Monitoring (Anatel Ombudsman) Public Consultation • Femtocells • PDFF 2019 (Attribution of radio communication services in Brazil according to Global Conferences) Call for Subsidies • Legality of offers of programmed audiovisual content at the internet (sVOD) Approved Resolutions • Destination of RF and use conditions – 3.5 GHz • Destination of RF and use conditions – 2.3 GHz • Sector Data Collection 3Q19 August SeptemberJuly Public Consultation • 5G Brazilian Strategy (MCTIC) • Opening of databases • Anatel Internal Regiment (one-off change) Call for Subsidies • Infrastructure sharing – Poles (ombudsman) Approved Resolutions • Separation and Allocation of Accounts Public Hearing • IoT/M2M Public Consultation • IoT/M2M • Reversible assets (expected) Expectation of Approval • RQUAL Public Consultation • 5G Auction (expected) • Operationalization of universalization goals
  40. 40. 40 APPENDIX TIM Brasil | Meeting with Investors Investor Relations
  41. 41. 41 Historical Data: P&L (ex-IFRS 16 effects) TIM Brasil | Meeting with Investors Investor Relations R$ Thousand Description 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 2Q19 vs. 2Q18 (% YoY) YTD 2018 YTD 2019 2019 vs. 2018 (% YoY) Gross Revenues 5.824.357 5.920.301 6.062.608 6.425.139 24.232.405 6.104.071 6.264.065 5,8% 11.744.659 12.368.136 5,3% Service Gross Revenues 5.592.108 5.620.368 5.788.386 6.064.787 23.065.648 5.833.801 5.930.275 5,5% 11.212.476 11.764.076 4,9% Mobile Service Gross Revenues 5.244.855 5.258.842 5.385.284 5.642.798 21.531.779 5.437.748 5.518.044 4,9% 10.503.697 10.955.793 4,3% Gross Revenue Fixed Services 347.253 361.526 403.101 421.989 1.533.869 396.053 412.230 14,0% 708.779 808.283 14,0% Product Gross Revenues 232.249 299.933 274.222 360.352 1.166.756 270.269 333.790 11,3% 532.183 604.059 13,5% Taxes and Discounts (1.704.505) (1.757.735) (1.821.019) (1.967.817) (7.251.076) (1.913.244) (2.001.324) 13,9% (3.462.240) (3.914.568) 13,1% Taxes and discounts on services (1.605.787) (1.652.429) (1.757.777) (1.843.418) (6.859.411) (1.809.384) (1.866.890) 13,0% (3.258.216) (3.676.274) 12,8% Taxes and discounts on product sales (98.717) (105.306) (63.243) (124.399) (391.665) (103.860) (134.433) 27,7% (204.024) (238.294) 16,8% Total Net Revenues 4.119.853 4.162.566 4.241.589 4.457.321 16.981.329 4.190.826 4.262.741 2,4% 8.282.419 8.453.568 2,1% Net Revenues Services 3.986.320 3.967.939 4.030.609 4.221.369 16.206.238 4.024.417 4.063.385 2,4% 7.954.260 8.087.802 1,7% Mobile Service 3.780.967 3.761.419 3.812.945 3.998.639 15.353.970 3.795.195 3.833.492 1,9% 7.542.386 7.628.687 1,1% Client generated 3.426.292 3.460.434 3.507.877 3.648.921 14.043.524 3.506.024 3.503.994 1,3% 6.886.726 7.010.018 1,8% Interconnection 197.689 162.443 163.455 188.607 712.194 138.551 105.002 -35,4% 360.132 243.553 -32,4% Other Revenues 156.985 138.542 141.613 161.111 598.252 150.620 224.495 62,0% 295.528 375.115 26,9% Fixed Service 205.354 206.520 217.664 222.730 852.268 229.222 229.893 11,3% 411.874 459.115 11,5% of which TIM Live 82.904 87.858 96.319 108.610 375.691 111.848 114.750 30,6% 170.762 226.598 32,7% Net Revenues Products 133.532 194.627 210.979 235.952 775.091 166.409 199.357 2,4% 328.159 365.766 11,5% Operating Expenses (Normalized) (2.698.372) (2.640.655) (2.634.048) (2.637.252) (10.610.327) (2.694.080) (2.646.403) 0,2% (5.339.027) (5.340.483) 0,0% Personnel expenses (239.929) (234.288) (261.178) (258.778) (994.172) (249.027) (254.237) 8,5% (474.217) (503.265) 6,1% Selling & marketing expenses (898.616) (906.455) (917.595) (903.252) (3.625.918) (906.097) (856.046) -5,6% (1.805.071) (1.762.143) -2,4% Network & interconnection (1.011.029) (901.293) (862.107) (886.609) (3.661.037) (920.706) (874.538) -3,0% (1.912.321) (1.795.244) -6,1% General & administrative (144.222) (134.188) (146.159) (154.310) (578.878) (146.084) (148.869) 10,9% (278.409) (294.952) 5,9% Cost Of Goods Sold (180.306) (221.431) (214.661) (267.514) (883.912) (198.633) (240.429) 8,6% (401.737) (439.061) 9,3% Bad Debt (115.715) (130.503) (149.293) (149.370) (544.881) (172.610) (188.234) 44,2% (246.218) (360.844) 46,6% Other operational revenues (expenses) (108.556) (112.498) (83.056) (17.419) (321.528) (100.924) (84.050) -25,3% (221.054) (184.974) -16,3% EBITDA (Normalized) 1.421.480 1.521.912 1.607.540 1.820.070 6.371.002 1.496.746 1.616.339 6,2% 2.943.392 3.113.085 5,8% EBITDA Margin (Normalized) 34,5% 36,6% 37,9% 40,8% 37,5% 35,7% 37,9% 1,4 p.p. 71,1% 73,6% 2,6 p.p. Depreciation & Amortization (901.472) (1.004.025) (1.031.003) (1.017.821) (3.954.321) (1.037.082) (975.099) -2,9% (1.905.497) (2.012.181) 5,6% Depreciation (519.052) (562.646) (571.288) (597.240) (2.250.226) (565.972) (557.469) -0,9% (1.081.698) (1.123.441) 3,9% Amortization (382.420) (441.380) (459.715) (420.581) (1.704.095) (471.110) (417.630) -5,4% (823.799) (888.740) 7,9% EBIT (Normalized) 520.008 517.886 576.537 802.249 2.416.681 459.664 641.240 23,8% 1.037.895 1.100.904 6,1% EBIT Margin (Normalized) 12,6% 12,4% 13,6% 18,0% 14,2% 11,0% 15,0% 2,6 p.p. 25,1% 26,0% 0,9 p.p. Net Financial Results (Normalized) (170.260) (181.457) (127.672) (124.119) (603.507) (121.221) (120.232) -33,7% (351.717) (241.452) -31,4% Financial expenses (243.443) (242.181) (187.936) (150.180) (823.740) (175.550) (164.882) -31,9% (485.624) (340.432) -29,9% Net exchange variance (237) 3.031 (659) (763) 1.373 526 (3.092) n.a. 2.794 (2.566) n.a. Financial income 73.420 57.693 60.923 26.824 218.860 53.803 47.743 -17,2% 131.113 101.546 -22,6% Income Before Taxes (Normalized) 349.749 336.429 448.866 678.131 1.813.174 338.443 521.008 54,9% 686.177 859.452 25,3% Income Tax and Social Contribution (Normalized) (104.399) (828) (65.561) (90.878) (261.666) (87.081) (98.285) 11766,9% (105.227) (185.366) 76,2% Net Income (Normalized) 245.350 335.600 383.305 587.253 1.551.508 251.362 422.723 26,0% 580.951 674.086 16,0% Reported Figures 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 2Q19 vs. 2Q18 (% YoY) YTD 2018 YTD 2019 2Q19 vs. 2Q18 (% YoY) Operating Expenses (2.698.592) (2.641.718) (2.634.048) (2.635.128) (10.609.486) (2.695.552) (1.151.912) -56,4% (5.340.310) (3.847.464) -28,0% EBITDA 1.421.261 1.520.848 1.607.540 1.822.194 6.371.843 1.495.274 3.110.830 104,5% 2.942.109 4.606.104 56,6% EBIT 519.789 516.823 576.537 804.373 2.417.522 458.192 2.135.731 313,2% 1.036.612 2.593.923 150,2% Net Financial Results (170.260) (181.457) (127.672) (57.944) (537.333) (121.221) 930.512 n.a. (351.717) 809.291 n.a. Net Income 245.130 334.537 1.333.250 632.183 2.545.101 219.605 2.102.575 528,5% 579.668 2.322.179 300,6%
  42. 42. 42 TIM Brasil | Meeting with Investors Investor Relations Historical Data: Cash-Flow (ex-IFRS 16 effects) R$ Million Description 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 2Q19 vs. 2Q18 (% YoY) YTD 2018 YTD 2019 2019 vs. 2018 (% YoY) Initial Net Financial Position 2.697 2.819 3.231 2.776 2.697 1.465 2.231 -20,9% 2.697 1.465 -45,7% EBITDA Normalized 1.421 1.522 1.608 1.820 6.371 1.497 1.616 6,2% 2.943 3.113 5,8% Capex (613) (981) (866) (1.371) (3.831) (650) (945) -3,7% (1.594) (1.595) 0,1% EBITDA Normalized - Capex 808 541 742 449 2.540 847 671 24,1% 1.349 1.518 12,5% Δ Working Capital (501) (535) 167 1.272 403 (1.486) (3.426) 540,4% (1.036) (4.912) 374,2% Non recurring operating items (0) (1) - 2 1 (1) 1.494 n.a. (1) 1.493 n.a. Operating Free Cash Flow Ex-licenses 307 5 908 1.723 2.944 (641) (1.260) n.a. 312 (1.901) n.a. Clean UP 700MHZ (143) - - - (143) - - n.a. (143) - n.a. Operating Free Cash Flow Reported 164 5 908 1.723 2.801 (641) (1.260) n.a. 169 (1.901) -1223,6% Financial investments - - - - - - - n.a. - - n.a. Asset disposal - 1 - 1 2 - 1 n.a. 1 1 -12,0% Net impact of financial interests (215) (222) (162) (90) (689) (145) 919 n.a. (437) 774 -277,1% Taxes Payments (73) (85) (5) (50) (213) (45) (37) -56,5% (158) (82) -48,1% Others impacts (1) (15) (27) (42) (86) 407 18 -95,5% (16) 425 n.a. Net Cash Flow before dividends and change in equity (125) (316) 714 1.542 1.815 (424) (359) 13,6% (441) (783) 77,6% Dividends - (101) (259) (228) (588) (343) - -100,0% (101) (343) 239,6% Change in Equity 3 5 - (3) 5 1 - -100,0% 8 1 -87,5% Net Cash Flow (122) (412) 455 1.311 1.232 (766) (359) -12,9% (534) (1.125) 110,7% Final Net Financial Position 2.819 3.231 2.776 1.465 1.465 2.231 2.590 -19,8% 3.231 2.590 -19,8%
  43. 43. 43 TIM Brasil | Meeting with Investors Investor Relations Historical Data: Financial Indicators (ex-IFRS 16 effects) Description 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 2Q19 vs. 2Q18 (% YoY) YTD 2018 YTD 2019 2019 vs. 2018 (% YoY) Mobile ARPU (R$/mo) 21,7 21,9 22,6 23,7 22,5 22,8 23,2 5,8% 21,8 23,0 5,5% Prepaid 11,4 11,2 11,6 12,0 11,5 11,6 11,6 2,9% 11,3 11,6 2,3% Postpaid 40,0 39,7 39,7 39,9 39,8 38,2 37,1 -6,5% 39,8 37,6 -5,5% Postpaid (ex-M2M) 43,9 43,7 43,7 44,2 43,9 42,6 42,8 -1,9% 43,8 42,7 -2,4% SAC/Gross Adds (R$) 56,6 57,1 51,4 52,9 54,5 62,9 51,1 -10,6% 56,9 56,7 -0,3% TIM Live ARPU (R$/mo) 71,1 72,3 75,3 80,2 74,9 79,6 78,0 7,8% 71,7 78,8 9,9% CAPEX (R$ Mln) 613 981 866 1.371 3.831 650 945 -3,7% 1.594 1.595 0,1% CAPEX ex-licenses (R$ Mln) 613 981 866 1.371 3.831 650 945 -3,7% 1.594 1.595 0,0%
  44. 44. 44 Description 1Q18 2Q18 3Q18 4Q18 2018 1Q19 2Q19 2Q19 vs. 2Q18 (% YoY) YTD 2018 YTD 2019 2019 vs. 2018 (% YoY) Brazilian Wireless Subscriber Base (million) 235,8 235,1 234,3 229,2 229,2 228,9 228,4 -2,7% 235,1 228,4 -2,9% Estimated Total Penetration 112,98% 112,68% 111,84% 109,90% 109,90% 108,89% 108,47% -3,6 p.p. 112,68% 108,47% -4,2 p.p. Mobile Customer Base ('000) 57.894 56.554 56.241 55.923 55.923 55.083 54.972 -2,8% 56.554 54.972 -2,8% Prepaid 39.426 37.477 36.604 35.694 35.694 34.504 33.644 -10,2% 37.477 33.644 -10,2% Postpaid 18.468 19.077 19.637 20.229 20.229 20.579 21.327 11,8% 19.077 21.327 11,8% Postpaid ex-M2M 16.711 17.238 17.668 18.054 18.054 18.210 18.062 4,8% 17.238 18.062 4,8% M2M 1.757 1.842 1.969 2.175 2.175 2.368 3.265 77,3% 1.842 3.265 77,3% 4G Users ('000) 29.546 31.313 33.112 34.488 34.488 35.580 36.333 16,0% 31.313 36.333 16,0% Market Share 24,55% 24,06% 24,01% 24,40% 24,40% 24,07% 24,07% 0,5 p.p. 24,06% 24,07% 0,0 p.p. Prepaid 27,16% 26,40% 26,45% 27,54% 27,54% 27,25% 27,16% 3,2 p.p. 26,40% 27,16% 0,8 p.p. Postpaid 20,38% 20,49% 20,48% 20,31% 20,31% 20,13% 20,40% 0,1 p.p. 20,49% 20,40% -0,1 p.p. Gross Additions (000's) 6.140 5.885 6.069 6.083 24.177 5.626 6.213 5,6% 12.025 11.839 -1,5% Net Additions (000's) -740 -1.340 -312 -319 -2.712 -840 -111 -91,7% -2.080 -951 -54,3% Monthly Churn (%) 3,9% 4,2% 3,8% 3,8% 3,9% 3,9% 3,8% -9,5 p.p. 4,2% 3,8% -0,4 p.p. Fixed Telephopny Customer Base ('000) 739 785 840 897 897 946 1.006 28,1% 785 1.006 28,1% TIM Live Customer Base ('000) 411 423 449 467 467 486 507 19,7% 423 507 19,7% Handsets sold ('000) 265 275 256 284 1.081 246 244 -11,3% 540 490 -9,3% Smartphone Penetration (%) 82,1% 83,9% 83,0% 85,0% 83,9% 85,7% 86,8% 3,5 p.p. 83,9% 86,8% 2,9 p.p. BOU 1.787 2.066 2.297 2.585 2.184 2.660 2.808 35,9% 1.926 2.734 41,9% MOU 115 122 129 127 123 124 124 1,2% 119 124 4,2% Employees 9.681 9.621 9.537 9.661 9.661 9.411 9.414 -2,2% 9.621 9.414 -2,2% TIM Brasil | Meeting with Investors Investor Relations Historical Data: Operational Indicators
  45. 45. 45 Brazilian Telcos: Financial X-Ray 2Q19 TIM Brasil | Meeting with Investors Investor Relations TIM, Vivo and Oi: IFRS 9 and 15 AMX: IFRS 16 (2019) and IFRS 9 and 15 (2018) To be disclosed. 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY 1Q19 1Q18 % YoY 1Q19 1Q18 % YoY 4.263 4.163 2,4% 10.870 10.823 0,4% 8.982 8.880 1,1% 5.086 5.619 -9,5% 554 587 -5,7% 4.063 3.968 2,4% 10.239 10.345 -1,0% 8.702 8.591 1,3% 5.040 5.572 -9,6% 551 570 -3,5% Mobile Service Revenues 3.833 3.761 1,9% 6.341 6.338 0,1% 3.093 2.841 8,9% 1.820 1.903 -4,4% 551 570 -3,5% Fixed Service Revenues 230 207 11,3% 3.897 4.008 -2,8% 5.609 5.751 -2,5% 3.220 3.669 -12,2% - - - 199 195 2,4% 631 478 31,9% 269 278 -3,2% 46 47 -2,3% 3 16 -81,7% 1.616 1.522 6,2% 3.791 3.753 1,0% 2.981 2.846 4,7% 1.251 1.561 -19,9% 57 -5 n.a. 37,9% 36,6% 1,4 p.p. 34,9% 34,7% 0,2 p.p. 33,1% 32,0% 1,1 p.p. 24,6% 27,8% -3,2 p.p. 10,2% -0,8% 11,1 p.p. 945 981 -3,7% 2.360 2.139 10,3% n.a. n.a. - 1.718 1.124 52,8% 26 26 1,8% Capex/Net Revenues 22,2% 23,6% -1,4 p.p. 21,7% 19,8% 1,9 p.p. - - - 33,8% 20,0% 13,8 p.p. 5% 4% 0,4 p.p. 671 540 24,4% 1.431 3.065 -53,3% n.a. n.a. - 520 437 19,0% 30 -31 n.a. 2.590 3.231 -19,8% -610 1.503 -140,5% n.a. n.a. - 10.107 7.309 38,3% n.a. n.a. - Net Debt / EBITDA 12M 0,40 0,52 -23,5% -0,04 0,20 -119,5% n.a. n.a. - 1,9 1,2 50,6% n.a. n.a. - 23,2 21,9 5,8% 28,7 28,3 1,3% 18,0 16,0 13,8% 16,1 16,3 -1,3% 53,0 55,1 -3,8% EBITDA - Capex Net Debt ARPU Oi Nextel Capex TIM Vivo Claro Total Net Revenues Service Revenues Products Revenues Organic EBITDA Organic EBITDA Margin
  46. 46. 46 Brazilian Telcos: Operational X-Ray Source: Anatel. TIM Brasil | Meeting with Investors Investor Relations 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY 2Q19 2Q18 % YoY Mobile Customer Base (MM) 55,0 56,6 -2,8% 73,7 75,3 -2,0% 56,4 59,0 -4,4% 37,5 38,9 -3,5% 3,5 3,1 13,5% Market Share 24,1% 24,1% 0,0 p.p. 32,3% 32,0% 0,3 p.p. 24,7% 25,1% -0,4 p.p. 16,4% 16,5% -0,1 p.p. 1,5% 1,3% 0,2 p.p. Human Postpaid Customer Base ex-M2M (MM) 18,1 17,2 4,8% 32,6 31,3 4,0% 18,4 16,3 12,9% 9,4 7,9 19,0% 3,4 3,0 16,2% Market Share 21,9% 22,6% -0,7 p.p. 39,6% 41,1% -1,5 p.p. 22,3% 21,3% 1,0 p.p. 11,4% 10,4% 1,0 p.p. 4,2% 3,9% 0,3 p.p. Mix Postpaid 32,9% 30,5% 2,4 p.p. 44,2% 41,6% 2,6 p.p. 32,5% 27,6% 5,0 p.p. 25,0% 20,3% 4,7 p.p. 98,5% 96,2% 2,3 p.p. 4G Customer Base (MM) 36,3 31,3 16,0% 44,6 38,8 14,9% 32,1 27,3 17,5% 23,5 19,5 20,2% 3,4 1,2 172,0% Market Share 25,9% 26,4% -0,5 p.p. 31,8% 32,8% -1,0 p.p. 22,9% 23,0% -0,2 p.p. 16,8% 16,5% 0,3 p.p. 2,4% 1,0% 1,4 p.p. Mix 4G 66% 55% 10,7 p.p. 61% 52% 8,9 p.p. 57% 46% 10,6 p.p. 63% 50% 12,3 p.p. 96% 40% 56,0 p.p. NextelTIM Vivo Claro Oi
  47. 47. 47 Market share analysis for the whole country can be misleading BRAZIL YoY p.p. SP Cap RJ/ES MG BA/SE NE NO CO PR/SC RS SP IntPop: 23,0 Pen: 148% Pop: 21,8 Pen: 129% Pop: 20,6 Pen: 126% Pop: 21,0 Pen: 111% Pop: 17,5 Pen: 101% Pop: 20,5 Pen: 88% Pop: 19,8 Pen: 128% Pop: 11,3 Pen: 126% Pop: 18,1 Pen: 121% Pop: 32,4 Pen: 109% 34,6% 24,5% 21,7% 19,2% 0,0% 37,9% 34,4% 15,5% 11,7% -0,2% 41,2% 21,5% 20,5% 11,4% -0,8% 32,9% 30,1% 26,2% 10,8% 0,1% 36,9% 22,9% 20,8% 19,3% -2,2% 52,5% 20,0% 17,2% 9,8% -0,8% 36,2% 28,2% 15,7% 13,7% 1,1% 47,1% 31,2% 13,2% 8,2% -0,4% 39,1% 25,6% 19,2% 10,2% -1,7% 33,8% 32,2% 22,7% 8,4% 3,2% 32,3% 24,7% 24,1% 16,4% 0,0% Mobile Market Share TIM: Leader 2nd 3rd 4th Source: Anatel. TIM Brasil | Meeting with Investors Investor Relations June-19
  48. 48. 48 (“Juros sobre Capital Próprio”) • Payment via IoE generating tax efficiency to bring Effective Tax Rate down. Shareholder Remuneration (Announced R$ mln; YoY) ~R$ 1 bln in IOE Distribution for 2019 Efficiency Across the Board: Tax Credits and Distributions (IoE) TIM Brasil | Meeting with Investors Investor Relations Project: Corporate Structure Reorganization • Designed to create a more efficient process structure to capture operational and financial synergies; • In 3Q18, TIM booked a total deferred tax asset of R$ 952.4 million¹ arising from the reorganization. Corporate Structure Simplification R$ 952.4 million¹ Distribution of Interest on Equity ¹ Tax credits of R$ 702.6 million plus a negative effect at Social Contribution on Profits base in the amount of R$ 249.7 million. ² More details see Note 9 in Company’s Quarterly Financial Statements (ITR). 850 369 2018 2019 ~R$ 1,000
  49. 49. 49 Recoverable Tax over PIS/COFINS: R$ 3.4 bln from three lawsuits TIM Brasil | Meeting with Investors Investor Relations In 2017 Brazilian Supreme Court stated that ICMS (State Tax) can not be included in the calculation basis of PIS and COFINS (Federal Tax). PIS/COFINS are levied on revenues and the Supreme Court stated that ICMS can not be considered a revenue. Any tax credit generated by this decision when booked incurs in payment of income tax (IR/CSLL). APR/2017 Leading Case: Favorable decision Booked after final court decision: TIM NE 4Q18 2Q19 R$ 353mn R$ 2.876 mn Final court decision. To be booked: TIM S.A R$ 189mn Booked after final court decision: TIM CEL 3Q19 Gross Tax credits of: R$ 3,418 mln1 To be used in ~3/4 years2 (1) Monetary correction recognition will increase until the compensation of the tax credits. (2) In 2018, Company paid ~R$880mn of PIS/Cofins.
  50. 50. 50 TIM. READY FOR THE FUTURE. For further information | Investor Relations Vicente Ferreira E-mail: vdferreira@timbrasil.com.br Phone: +55 21 98113-1400 Bernardo Guttmann E-mail: bguttmann@timbrasil.com.br Phone: +55 21 98113-1408 Camila Assano E-mail: cacruz@timbrasil.com.br Phone: +55 21 98113-4236 Lucas Carneiro E-mail: lmcarneiro@timbrasil.com.br Phone: +55 21 98113-1141 Guilherme Kopke E-mail: gknascimento@timbrasil.com.br Phone: +55 21 98113-0583 Visit our Website ri.tim.com.br E-mail: ri@timbrasil.com.br 850 João Cabral de Melo Neto Avenue – South Tower - 12th floor Barra da Tijuca – 22775-057 – Rio de Janeiro, RJ

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