TIM Participações S.A. 2Q06 s Results. July 24 th, PDF

TIM Participações S.A. 2Q06 s Results July 24 th, Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 2 Key Achievements Delivering continuous and profitable growth

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TIM Participações S.A. 2Q06 s Results July 24 th, Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 2 Key Achievements Delivering continuous and profitable growth Strong Subscriber growth Full pipeline of innovative services continuously stimulating usage Successful performance on services top-line Over 1.3 million net adds 22.3 million clients base 24.3% of market share Promotions focused on usage and on net traffic First and unique to offer international roaming (VAS + Voice) for GSM prepaid customers First to offer BlackBerry to business and consumer Leader in the business segment Net service revenues: + 20% YoY ARPU marked trend improvement QoQ and YoY Growing momentum of VAS revenue: + 62% YoY (8.9% of total service revenues) Consistent focus on Profitability EBITDA of R$500 million: 73.4% higher YoY 21.5% Margin EBITDA (+7.6 p.p. YoY) 3 Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 4 Continuing outperforming market growth National Market and Penetration Market share YoY Lines growth TIM 60.8% 56.4% Market 39.8% 37.6% 44.0% 41.6% 80,0 75,5 48.5% 43.5% 33.3% First 31.4% 30.3% 21.3% Player 49.2% 37.7% 47.3% 48.1% 89,4 91,8 36.1% 34.5% 86,2 TIM 22.2% 22.9% 23.4% 33.7% 23.5% YoY change 31.1% -6.6 pp 24.3% pp 2Q05 3Q05 4Q05 1Q06 2Q06 2Q05 3Q05 4Q05 1Q06 2Q06 Narrowing the gap vs. 1st. Player Total market lines (mln) National Penetration Source: Anatel s data base. 5 Customer base: combining growth and quality TIM Lines (mln) Strong Quality Base 85% Postpaid Prepaid % 80% % 79% YoY +33.3% +35.1% % Strong postpaid gross additions in the quarter (21.6% share of total gross vs. 17.5% in 2Q05) Continuous customer mix improvement: 21% postpaid lines vs 20% one year ago Leader in GSM market Market Share (%) 2Q05 2Q % 24.3% 87% of our lines are GSM, an increase of +12 pp YoY GSM base grew by 54% YoY 6 Leveraging on Corporate Market Leader in Business Segment Acquisition Leadership in mobile office solutions Long Distance and International roaming aggressive offer Volume discount for national contracts Retention Segmented management through customer profiling (evolution from retention to relationship) One on one Retention offers Implementation of dedicated account for top SME clients Main driver of TIM postpaid base growth: 70% of the total net additions YTD Increasing share of churn market from competitors Powerful and growing large account portfolio First to offer BlackBerry Leader in the business segment with almost 2 million lines 7 Promotions focused on usage and on-net traffic Segmented Consumer Offer Tarifa Zero Zero Tariff on net Bonuses for on net call Regional approach Reduced aggressiveness in prepaid subsidy Leveraging on TIM community concept Boosting sales in regions with lower market share growth TIM +25 & TIM + 5 TIM Chip Only Push on recharge Focus on prepaid high user Reward outgoing traffic Important acquisition and retention tool Bonuses for recharge made in 48 hours Low SAC strategy Quality acquisitions: new clients show 15% higher ARPU than the average prepaid base Proactive retention : 1 of 5 prepaid current lines already moved to TIM + 25 or TIM +5 Push on TIM Chip Only pays off: users recharge 3x average 8 Roaming all over the world Focus on corporate segment, but not only Leader in International GSM/GPRS/EDGE/MMS/SMS roaming First and only to offer Voice/VAS prepaid international roaming TIM s roaming services are based on : Convenience: one handset and one number worldwide Coverage: the largest international GSM network available for customers Promotional bundle offer: positive effects on outbound traffic (stimulating the usage) Virtual Home Environment (intelligent network) Roaming Alianza (one rate offer) 9 Bringing technology to the low and mid user Industry trend: Improved handsets mix at a more accessible cost LOW (entry price = R$399) 15 models 100% colour display 90% GPRS WAP 80% with speaker phone MED ( R$400 = R$999) 16 models 100% color display, GPRS/ WAP and MMS 93% embedded camera 56% infrared (data connection) HIGH ( R$999) 9 models 100% with Video Play Back 100% Bluetooth and embedded camera 67% with EDGE features Customers are searching for more sophisticated handsets 2Q05 Monochromatic Monophonic No Camera No GPRS and WAP Features of the most sold handsets Colour Display Polyphonic, MP3 Camera GPRS and WAP EDGE Infrared 2Q06 Enabling handsets base 2Q06 55% 37% 26% WAP GPRS MMS 10 Pushing on VAS usage: Try and Buy Increasing service penetration Evolving segmentation to community concept Boosting SMS New TIM WAP site MMS Promotion New site to facilitate access to the WAP content: segmented layout to low, med and high users. Provide community place, strategic content, real time Brazilian and Int.l editorial, Entertainment and music. Mega TIM SMS special bundle sold electronically (IVR) and through recharge cards during short periods to pull customer usage. Promotional price on MMS for all customers during a month to reduce the entry barrier and improve service penetration. TV Globo World Cup Promotion Cross-operator innovation initiative the user can subscribe a World Cup channel per week and win 2006 prizes (boost revenue in June) 11 Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 12 Growing in Value Gross Revenues Gross Revenues Analysis R$ mln 2Q06 YoY YoY TOTAL GROSS REVENUE (R$ mln) 3, % 2,753 3, % Voice (R$ mln) 2, % 22% 17% Traffic Volume (Bln min.) % 78% 6.8% 83% 8.9% Value Added Service (R$ mln) % Handsets Revenue (R$ mln) 547-8% 2Q05 2Q06 Service Handsets sales VAS revenue over total service revenue TOTAL NET REVENUE (R$ mln) 2, % Net Service Revenues (R$ mln) 1, % Net Handset Revenues (R$ mln) % 13 ARPU Performance ARPU Analysis VAS Revenues (R$ mln) ARPU (R$) 2Q05 2Q Q Q % 41% 237 marked improvements in ARPU dynamics over time Traditional Innovative Improving ARPU trends Growth YoY Growth YoY QoQ -3.3% +0.7% positive inversion Users SMS P2P: + 38% MMS P2P: + 148% Data: + 223% Usage MMS P2P: + 156% Data: + 345% 2Q05 2Q06 14 EBITDA Performance EBITDA Weight on EBITDA Margin 1 YoY R$ Mln p.p. 21.5% 13.9% 2Q05 2Q06 +73% EBITDA Margin over Total Net Revenue Speeding up YoY margin growth: 7.6 p.p. in the 2Q06 vs 6.2 p.p. in the 1Q06 A) Variable costs 2Q06 Interconnection -0.1 pp Handsets Cost -1.9 pp pp B) Fixed & Commercial 2Q06 Commercial expenses -3.6 pp G&A and Others -2.8 pp Labor cost +0.4 pp Industrial cost -1.8 pp Bad debt +2.2 pp -5.6 pp (A) + (B) -7.6 pp Headcount growth lead by: CRM s improvements pre and post-sale supporting Change in the provision methodology in 2Q05. % on revenues in line QoQ 1 Calculated as YoY change of the OPEX weight on total revenues 15 SAC Performance SAC R$ % 58% 41% 42% 2Q05 2Q06 Commission Subsidy Anatel s fee on net adds Comodato Advertising Others Declining SAC level despite: increased % postpaid on gross adds focus on corporate clients progressively increases weight of comodato Higher entry price handsets has positive impact on direct cost Direct cost Indirect cost 16 From EBITDA to Bottom Line YoY (R$ mln) (R$ R$ Million) Mln 25% reduction in the Net Losses (562.9) Include 75 mln non recurring provision related to deferred tax asset* EBITDA Depreciation Amortization (62.9) EBIT (85.8) Net Financial Expenses (100.2) Taxes and Others Minorities (249.0) Net Losses * Deferred tax asset booked in the incorporated companies, TIM Sul and TIM Nordeste, before the merger occured. 17 Net Financial Position Net Financial Position Operating Free Cash Flow R$ Mln 1Q06 Operating FCF Non Operating FCF 2Q06 On track to break-even R$ Mln 1Q06 2Q06 +1,211 (39) (1,536) (39) (247) (1,822) (1,250) EBITDA +500 CAPEX (351) Oper. WC (188) Of which Dividends (58) Impact of strong working capital seasonality: 4Q05 CAPEX paid out in 1Q06 significant handset stock paid for in 1Q06 Fistel on FY05 base paid in one installment in March 06 Gross Debt: R$2.9 billion (of which ~90% long term / average cost of 14.9% in 2Q06) Financial Assets: R$1.1 billion Net Financial Position: R$1.8 billion 18 Key Achievements Market Performance Financial Performance Key Regulatory Outcomes 19 Key Regulatory Outcomes End of Bill & Keep (Effective from July 14 th 2006) Anatel s resolution excluded the partial bill & keep regime, which means that mobile company will now have to pay termination charges on each local call to other mobile company Introduction of peak and off peak time for LD calls The same resolution established to the mobile companies the obligation to apply 30% discount between peak and off peak interconnection rates to Long Distance calls FAC (Full Allocated Cost) Implementation date to be defined. The cost have to be defined for each group in 3 different regions, according to the PGO Plano Geral de Outorgas 3G Licenses (Public Consultation) 5 band in the frequency 1.9/2.1 GHz Auction criteria and prices to be defined Licenses assignment expected for 1H07 20 Safe Harbor Statements Statements in this presentation, as well as oral statements made by the management of TIM Participações S.A. (the Company, or TSU ), 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, Bloco 01 6 andar Barra da Tijuca Rio de Janeiro, RJ Phone: / / Fax: Visit our Website: 21
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